questions & answers about Türkiye

Türkiye offers tax incentives and free zones to attract Italian investors. However, currency volatility and inflation demand effective risk mitigation strategies, says Levent Celepçi, office managing partner of Schoenherr Türkiye.

"Türkiye is undergoing an economic transition marked by a fragile yet ongoing stabilisation process," explains Levent Celepçi, office managing partner of Schoenherr Türkiye. "While challenges such as currency volatility and persistent inflation remain, recent shifts in monetary and fiscal policy reflect a clear commitment to restoring macroeconomic stability over the medium to long term. Notably, we are beginning to see early signs of improvement in inflation control and exchange rate management."

"In this context, high interest rates have become a key feature of the financial landscape," he continues. "Although introduced as an anti-inflationary measure, they have also increased the cost of credit, complicating liquidity management for companies operating in Türkiye. Businesses with significant working capital requirements or capital-intensive operations face heightened complexity in cash flow planning, particularly due to limited access to cost-efficient financing. That said, tools are available to manage these risks."

Despite these constraints, Türkiye remains an appealing destination for investors. Key sectors – notably textiles and fast fashion – retain global competitiveness through export-oriented models and deep integration in European supply chains. Alongside these traditional industries, accelerated growth is being seen in renewable energy, logistics and technology. When combined with Türkiye's robust commercial infrastructure and strategic location near key markets, these developments provide a solid foundation for sustainable, long-term commercial engagement.

Italy and Türkiye share a longstanding partnership, recently reaffirmed by Prime Minister Meloni and President Erdoğan. How would you describe the current state of bilateral economic cooperation, particularly in trade and industrial collaboration?

"Economic relations between Italy and Türkiye are stable, structured and responsive to evolving global and regional dynamics. Built on established trade ties and institutional continuity, the relationship has matured into a strong partnership backed by shared priorities and ongoing legal and political dialogue covering trade, investment and regulation."

In 2024, bilateral trade reached USD 32.2bln, making Italy Türkiye's fifth-largest export market globally and its second within the EU. This reflects not only trade volume but also the depth of industrial cooperation – particularly in the automotive, mechanical engineering, infrastructure and financial sectors. Today, more than 400 Italian companies operate in Türkiye, contributing to a long-standing industrial footprint. The Fourth Intergovernmental Summit, held in Rome on 29 April 2025, reaffirmed both sides' commitment to deeper integration. The new bilateral trade target of USD 40bln underscores a relationship that is forward-looking and aligned with shared strategic interests.

With over 400 Italian companies active in Türkiye and bilateral trade exceeding USD 32bln last year, which sectors are expected to drive growth in the coming years?

Several sectors are poised to shape the next phase of economic collaboration between Türkiye and Italy, driven by market dynamics, ongoing regulatory shifts and increasing complementarity between the two economies.

Türkiye's efforts to diversify its energy mix and reduce emissions have created tangible opportunities for cross-border cooperation. Italy contributes advanced systems and technical expertise, while Türkiye provides industrial scale and a growing investment base - a natural synergy supporting the regional energy transition.

Advanced manufacturing and automation also present strong potential. Türkiye's expanding industrial base – bolstered by its geographic location and export capabilities – aligns with Italy's strengths in precision engineering, robotics and production technologies. This convergence supports mutual advancement in fields such as Industry 4.0 and smart manufacturing systems.

Infrastructure and construction remain attractive, particularly in projects focused on urban development and climate resilience. Italian companies already active in Türkiye may find additional opportunities through well-structured public-private partnerships, especially in transport systems and sustainable construction materials.

In parallel, the agrifood and packaging sectors are gaining prominence. As European standards around sustainability, traceability and food safety continue to tighten, Türkiye's production capacity and export orientation stand to benefit from Italian expertise in processing and packaging technologies. This paves the way for high-value cooperation in a space where regulatory convergence is increasingly relevant.

Italian companies often evaluate labour costs, talent availability and regulatory predictability before entering new markets. How does Türkiye currently rank in these areas?

In terms of labour costs, Türkiye holds a clear competitive advantage within the wider European landscape. Average wage levels remain significantly lower than those in EU Member States, while productivity in key sectors – such as manufacturing, textiles and logistics – remains high.

When it comes to skills, Türkiye offers a large, young workforce with growing levels of specialisation. Recent expansion in higher education and vocational training – particularly in engineering, IT and industrial design – aligns well with the needs of Italian industries.

From a regulatory standpoint, Türkiye has made substantial progress in aligning its business environment with EU standards, particularly in trade-related areas. While bureaucratic hurdles and legal consistency may still pose challenges in some cases, existing mechanisms for dispute resolution and investment protection – many rooted in bilateral and multilateral agreements – have enhanced investor confidence.

How would you describe the regulatory landscape?

The Turkish legal environment is dynamic, with regulations often subject to rapid change. For this reason, foreign businesses benefit from internal processes that enable quick responses to legal or administrative updates.

In areas such as technology, regulatory development can lag behind EU benchmarks, occasionally creating temporary grey areas in terms of compliance. However, in day-to-day operations, Turkish ministries and sectoral authorities are generally accessible and responsive, offering practical guidance as rules evolve.

What concrete incentives are available for foreign investors?

Türkiye provides a wide range of incentives to support foreign direct investment, particularly in strategic and export-oriented sectors. These include reduced corporate income tax rates, customs duty exemptions, VAT relief on machinery purchases and employer-side social security contributions.

Italian companies can also benefit from access to organised industrial zones and free zones, offering advantages such as ready infrastructure, streamlined permitting procedures and favourable long-term lease conditions. Investors in renewable energy, high-tech manufacturing and R&D can tap into dedicated incentive schemes aligned with Türkiye's industrial priorities.

What is the current overall investment climate in Türkiye? What risks should Italian investors be aware of, and how can they best mitigate them?

Türkiye presents a dynamic investment environment, particularly for companies seeking access to regional markets, competitive production costs and a robust industrial base.

Currency volatility remains a key concern. While efforts are underway to stabilise the economy, risk should be managed through sound financial planning and contractual safeguards. Inflation, too, affects operational costs – notably through periodic wage adjustments.

From a legal and regulatory perspective, Türkiye has made notable progress in aligning with international standards. However, in sectors where legal or commercial infrastructure is still developing, clear regulatory guidance may at times be lacking. This can generate practical uncertainty, especially for investors in emerging or technically complex fields.

To mitigate these risks, companies are advised to implement strategies such as financial hedging to manage foreign exchange risk, regularly reviewing contracts and cost models, establishing reliable local partnerships and seeking timely legal support from the earliest stages of investment.

Levent Celepci | Office Managing Partner | Schoenherr Türkiye
T: +90 212 324 70 70 | E: l.celepci@schoenherr.eu

Daniele Iàcona | Head of Italian Hub | Senior Attorney at Law
T: +40 733 730 119 | E: d.iacona@schoenherr.eu