Barriers and Opportunities for Enhancing Capital Flows
In the COMCEC Member Countries
53
(previously the European Economic Community) dates back to 1963. Turkey was quick to take
part in the movement towards economic liberalisation in the 1980s.
Turkey has performed well in terms of its adherence to the OECD Code of Liberalisation of
Capital Movements. From 1962 to 1985, Turkey benefited from a special dispensation.
Thereafter, however, in parallel with the steps it had begun to take towards liberalising capital
movements, Turkey began to adhere to the obligation to eliminate reservations for all
measures that limit or restrict operations listed in the Code. Turkey went on rapidly to
establish full current-account convertibility and capital-account liberalisation in the 1980s,
liberalising outward direct investment and portfolio investment at the same time, and
achieving Article VIII status under the IMF’s Articles of Agreement in 1992 . Although the ebb
and flow of short-term capital inflows has contributed to economic instability on a number of
occasions, subsequent changes in legislation and regulation have been overwhelmingly in the
direction of liberalisation. 55
Turkey’s reservations regarding the OECD Code are quite limited in number. For example, with
respect to FDI, limited reservations or conditions are in force concerning mineral prospecting
rights and media companies, suggesting lingering concerns about sovereignty and security.
More generally, foreign investors in productive assets are expected to establish domestic legal
entities; then they are treated in the same way as other domestic companies. With respect to
financial investments, the few legal and regulatory limitations are mainly of a prudential
nature, affecting insurance assets and trade financing, for example, as well as domestic sales of
foreign securities.56
In recent years, Turkey has continued to take steps to liberalise capital movements – even in
the areas where it has made reservations to the OECD Code. In October 2010, new rules on the
registration of public offerings and sales of foreign securities in Turkey abolished the
requirement to conduct public offerings of foreign stocks in Turkey through depository
receipts. Since March 2011, foreigners have been permitted to own up to 50% of two media
companies, compared with 25% of one media company previously. Finally, a law of May 2012
eased various restrictions on the acquisition of real estate in Turkey by foreign individuals and
companies.57
As a candidate member of the EU, Turkey is required to adhere to the Treaty on the
Functioning of the European Union, including prohibiting restrictions on the movement of
capital. In this context, the 2013 Progress Report of the European Commission states that the
acquisition of real estate by foreigners in Turkey remains to be fully liberalised in line with the
acquis communtaire (the body of EU law), and that restrictions on foreign ownership persist in
55 “International capital flows: Structural reforms and experience with the OECD Code of Liberalisation of
Capital Movements” - Report from the OECD to the G20 Sub-Group on Capital Flow Management
June 2011
56 Turkey’s reservations are noted on pages 126-129 of the OECD Code of Capital Movements 2013 at
57 For details see ‘The OECD Freedom of Investment Process: Inventory of investment measures taken
between November 15th 2008 and February 15th 2013’ a