Foreword by Andrew Chilvers
The Middle East and North Africa (MENA) region is a hugely diverse cultural and geographical mix that stretches from Morocco in northwest Africa to Iran in Southwest Asia.
The region is home to a range of economies with vastly different levels of openness to international trade and investment. But with the help of international organisations such as the OECD and IMF, along with local and foreign investment, much of the region has started to make giant strides in economic development in recent years.
Despite the Covid-19 pandemic that resulted in negative growth of 3.8% for 2020, most analysts agree the region continues to offer ideal opportunities for businesses and investors going forward. Indeed, with the pandemic starting to ease, an estimated $4.1 trillion of projects are planned or underway in many countries across the region as they continue to diversify and expand their economies.
Moreover, to ease the stress on local companies while offering incentives to foreign investors, most MENA countries recently announced a series of fiscal stimulus packages including tax payment reductions and loan guarantees for businesses. These moves have been popular inside and outside the region for encouraging investment and many analysts predict growth increasing to as much as 3.1% for the region in 2021.
Nevertheless, this uptick in economic growth depends on several factors including the ongoing success of the Covid-19 vaccine rollout across the region and the stabilising of oil and gas prices. Furthermore, if geopolitical tensions continue to stabilise, many believe oil exports will recover to 1.8% for 2021 and this will be supported by the resumption of large-scale capital investment projects that were largely put on hold during 2020.
Starting a business in/out of MENA: How easy is it for entrepreneurs and businesses in/out of MENA to start a business in your jurisdiction? How can you help smooth the process for your clients and overcome common pitfalls?
Since the mid-2000s Turkey has taken very positive steps to improve the legislation and reduce the bureaucracy, wetting the appetite of foreign investors and enabling foreign direct investment to come into the country.
The main change really came in 2012 when the commercial code, which governs how one incorporates a business in Turkey, was amended to make it more investment friendly. This, among other legislative and bureaucratic changes, paved the way for Turkey to become an attractive marketplace for foreign funds and investors. Consequently, starting a business in Turkey is now an uncomplicated and speedy process, taking no more than just a few weeks. The legal business structures are all open to foreigners and they can establish private limited companies, collective companies, joint-stock companies, commandite companies, liaison offices, and branches. Setting up a private limited company requires at least one shareholder and minimum share capital of 10,000 TL and a joint stock company requires at least one shareholder and minimum share capital of 50,000 TL.
Turkish commercial law and contract law are in line with the global standards applied in developed countries and the foreign direct investments law provides for robust protection and incentives for foreign investors, including the principles of equal treatment and the free expatriation of proceeds.
We can offer our clients top notch service with our vastly experienced team. They know the ins and outs of the potential obstacles and pitfalls and how to tackle them in the shortest possible time. Because they deal with the key personnel at the various authorities regularly, they are able to complete the formalities and resolve problems that may arise very quickly.
What are the key recent developments your clients should be aware of when investing in/out of the MENA region to your jurisdiction? What grants and incentives are available to overseas investors?
The biggest change taking place in recent years has been the focus on digitising the country. This has been a government objective during the past five to 10 years. For instance, there was no electronic registry system where you could set up a company online until recently. These days incorporation and the corporate secretarial work is largely done on electronic systems, although there is still some paperwork to be filed.
In terms of government incentives, we have a lot here. There are general investment incentives that include significant tax benefits such as customs duty exemption, corporate tax reduction, social security premium support, cash supports for employment, and personnel training programs. There are also regional incentives that reward investments in less developed regions of Turkey and incentives for specific sectors that we will touch on this next question; this involves software development and the digital economy.
What are the latest trends shaping business growth and creating opportunities in MENA for clients in your jurisdiction? What markets offer the most stability and growth and where would you advise your clients to invest?
The most important sectors in Turkey for business growth and opportunities are in software development and gaming. There are a lot of start-ups and many Turkish gaming companies and mobile game developers who have been acquired in recent years. For instance, the first Turkish unicorn was a mobile game development company, which was acquired by Zynga, the American game developer company, for $1.8 billion. And now we are seeing similar deals, maybe not in size, but many Turkish game developer companies are growing amazingly fast and en route to being acquired.
This industry has grown up around Turkey’s very big youth population; gaming is huge among young people in Turkey. So that fits in well. It’s a very young demographic. The entrepreneurs starting up and running these companies are generally below 30 years old. And it’s really interesting. We were recently talking with a gaming company that was only established in 2017 and now they’re one of the top gaming companies in the world by downloads in the app stores. It’s incredible.
Again, government incentives are more than helpful for these start-ups as there are incredibly significant incentives for them, particularly under export grants. Of course, these software and gaming companies have a global footprint. Essentially, all these companies are considered as “exporting” their products.
These export grants include cash support for trademark protection, market research reports, consultancy services, advertising, store commissions, localization and web design, licensing of software, and employee salaries. To put this into perspective, let’s say a game development company spends $700,000 advertising a mobile game. This business will receive $400,000 in grants. This is really huge. 60% of the advertising cost can be retrieved from the government. This company could spend $3 million on supported costs in a year and could retrieve almost $1.6 million in grants. Turkey is encouraging this – it’s a real growth area.