İSTANBUL INTERNATIONAL FINANCIAL CENTER THE VISION OF

İSTANBUL INTERNATIONAL FINANCIAL CENTER

AND BORSA İSTANBUL

The capital of civilizations, empires… The city where shopping, culture and arts and monuments of belief summit… A metropolis that is home to millions of young, dynamic, and enterprising people… İstanbul is now on the scene as an international economic and commercial center. Criteria for an 2 3 International Financial Center A set of criteria must be fulfilled in order to be an “International Financial Center”, and to offer a globally competitive business environment. Actually, İstanbul is a global city that satisfies all of these criteria…

Access to International Financial Centers Access to Clients

İstanbul’s proximity to both the East and the West is a As a bridge that unites Asia and Europe, İstanbul’s central remarkable advantage. As a geopolitically important center location allows a passenger to fly to 56 different countries that unites London in the West with Singapore in the East, and the other financial centers in the region in less than 4 İstanbul is located at a spot that has the highest potential of hours. With flights, it is possible to access bringing together investors and financial companies within more than 150 international routes directly. In addition to the the triangle of Central and Eastern Europe, the Middle East, two airports in the city, the construction of a third airport, and Central Asia. Thanks to this location, İstanbul has a time which is larger than both, has started. difference of maximum two hours with European, Eurasian Thanks to the modern urban life, both the number of İstanbul International Financial Center and MENA countries. Its proximity to centers including international conferences and other activities organized in (IFC İstanbul) Project was included in London, Frankfurt and Zurich in terms of physical location İstanbul as well as foreign participation in these events have Following the global crisis, at a time and time zone is a significant facility for financial institutions the Ninth Development Plan covering increased. In addition to the congress and convention centers when international investments fell and that plan to open branches in İstanbul. The city’s convenient the 2007-2013 period, and started to in the city, new congress centers with a capacity of 10,000 the search for a new financial structure location in terms of time zone makes it easier for it to work be implemented in accordance with the persons will be completed by 2014. Furthermore, the meeting is in progress, it is very important with the world exchanges. Medium Term Program for the halls of five-star hotels offer high-capacity meeting facilities. for İstanbul to come forward with a 2010-2012 period. The Project is There are 50,000 hotel rooms in the city, and most of the competitive structure. In consideration hotels belong to international chains. Making İstanbul a implemented in line with the Strategy of ’s strong presence in terms of and Action Plan, under the coordination İstanbul is the most crowded city of Turkey, and hosts large financial center is economic and financial development in of the Turkish Ministry of Development. companies operating in a variety of sectors. the basic building Eastern Europe, Middle East and Central Asia, it is possible to say that İstanbul stone in the vision has the potential to become a regional, of the Turkish and then global financial center. The global business cycle and Turkey’s financial sector for recent performance clearly show that making İstanbul an international the upcoming financial center with the joint efforts of development the financial sector is a realistic vision. period. Turkish Airlines has one of the world’s largest flight network Qualified Labor Force The new Turkish Commercial Code, on the other hand, went in force on July 1, 2012. As a country in EU-accession process, Turkey has a labor force of advancing education level. 40 Turkey has already taken a long way with respect to the percent of Turkey’s population of 74 million is younger than harmonization of the Turkish capital markets regulation with 18. 50 percent of İstanbul’s 13 million population is under 30. the EU acquis. New bilateral agreements that encourage The financial sector employs a total of 180,000 people led by cross-border investments and that prevent double-taxation banks, employing 150,000. The target of establishing at least are signed every day. The target is to harmonize tax, legal one university in every city led the number of universities in infrastructure, transparency and information mechanisms the country to more than double in the last couple of years, as well as financial sector regulations with international increasing to 175. With 40 universities, İstanbul is the leader in arrangements and practices, especially the EU acquis. terms of the number of higher education institutions.

The new target is to add to the qualified labor force for Business Infrastructure Facilities IFC İstanbul. Towards this purpose, universities are Business infrastructure is the synthesis of a business plan encouraged to train finance experts through post graduate and a business process. It consists of human resources, programs. Also, effort is made to attract highly qualified labor business process and operational infrastructure. As part force from abroad. of IFC İstanbul strategy, the living quality, and transportation facilities in İstanbul will be improved, and 30 the physical conditions that will satisfy the infrastructure 25,6 requirements of financial institutions will be provided. New 25 investments are made continuously in order to strengthen

20 Turkey’s technology and communication infrastructure;

17,0 17,2 offering fast, reliable, uninterrupted and low-cost electronic 15 13,8 communication facilities. 11,4

10 The most important feature of a financial center is bringing 7,8 together supply and demand at a common spot. Financial 5 4,4 products and services play a key role in this respect. Strategy 2,8 and Action Plan for IFC İstanbul envisages that the necessary % infrastructure be established for financial products and 0-14 15-24 25-54 35-44 45-54 55-64 65-74 +75 Age Group services, which have not yet been offered or have not reached adequate trading volumes in Turkish markets, that Regulatory Environment have high growth potential and that could make İstanbul an In order to position İstanbul as an international financial attractive financial center. center, novelties and improvements were planned in many fields, and a significant part of these have been already realized. The new Capital Markets Law is one of the most important steps taken in this respect. Corporate Tax Regime

The government is working towards making both the tax regulations and secondary legislation simple, comprehensible, predictable, and sustainable in order to;

· encourage financial transactions in Turkey,

· establish a sustainable and stable tax regime suitable for the macroeconomic conditions,

· clearly define legal arrangements to secure the certainty and predictability of law, A Fair Business Environment · decrease the of indirect taxes in total tax revenues and to make the financial sector free from unfair competition Efforts are in progress to establish an independent and due to unregistered operations, autonomous “arbitration center” in İstanbul. Such arbitration center will be internationally competitive with respect to · put in place an efficient taxation policy cost, speed, and finalization process of decisions. Parties Tax advantages are applied for angel investors, with tax will be allowed to select arbitrators of their choice, including discounts of up to 75% of their investments. Withholding those that are not included in the list of arbitrators accepted tax will be discounted for long term investments while for by the Arbitration Center. Provisions on arbitration in the investment funds 75% of whose assets are invested in Code of Civil Procedure and those of the International shareholders’ equity, no withholding tax is applied. Corporate Arbitration Law will be combined and a single set of tax in Turkey stands at 20%, which is quite reasonable arbitration regulations will be prepared. Mediation system compared with international practices. will also be improved so as to settle disputes in a short time, without referring to the court. The arbitration center will Individual Tax Regime also offer corporate mediation. These draft regulations are expected to contribute to the IFC İstanbul project, and effort Individual tax rates are up to 35% of salaries, while 50% of is made in order to accelerate their enactment. dividend income is taxable. For İstanbul to become a financial center, the taxation regime must be simple, comprehensible, Turkey’s current taxation system, which is quite complicated, consistent, practical and measurable. Currently, the taxation requires consultation services. However, the government is regime is undergoing a change. The Strategy and Action Plan planning to put various regulations in force. Large companies for IFC İstanbul project, prepared by the Turkish Ministry are highly ethical taxation-wise. In general, Turkey acts within of Development, envisages a simple and efficient taxation the framework suggested by the OECD. Effort is made in system. Revisions are planned in the arrangements for foreign order to eliminate the discrepancies in implementing the laws. investors, and improving the taxation system as a whole is Market participants suggest specialized courts. envisaged.. 9

Access to Professional Service Quality of Life The living cost in İstanbul is appropriate Providers for financial sector employees.There are İstanbul is a prominent metropolitan numerous hotels and congress centers. Consultancy and support services city that has served as the capital İstanbul has hosted many important by professionals are required for of Roman, Byzantine and Ottoman events so far, and construction of financial centers and participants. Empires. People of many different new congress centers in the city is in Such professionals include lawyers, cultures have been living in the city progress. accountants, tax consultants, advisors, for centuries. Turkey’s education According to a survey by Financial arbitrators, and information technology system is making a rapid progress. The Times in 2011, İstanbul ranks first among teams. Numerous international government offers many education livable cities. The survey takes into companies prefer İstanbul for their facilities in addition to numerous high- consideration cities’ current potential regional administration offices since it is quality private schools. The health and improvement level, and İstanbul one of the most suitable cities of East system comprises public and private left behind New York and London. With Europe, Middle East and Central Asia in institutions, with 42% of a total of an annual number of visitors in excess terms of access to professional services. 1,200 hospitals belonging to universities of 10 million, İstanbul was elected as and 250 to the private sector. “the coolest city” by Newsweek. The number of service providers for the financial sector is increasing With its 57 museums, 145 theatre halls, Bus and underground are popular in rapidly. Turkish information technology and 124 art galleries, İstanbul was mass transportation. Efforts to improve provides services worldwide. On the designated as a Capital of Culture by mass transportation are in progress. other hand, there are improvements in the European Union in 2010. The city Construction of a new railway system the accounting services. The legal sector offers vast shopping opportunities between Europe and Asia is in progress. is enhancing. An increasing number of while beaches are an hour drive way, The underground network is growing graduates of high quality universities and ski centers are 2-3 hours away from rapidly. Construction of a third airport join the legal sector. the city. İstanbul has a vivid night life as well as a third bridge between the with 900 restaurants and 1,840 bars. two continents is under way. High speed There are also four golf courses at train between the capital and international standards. İstanbul as well as Marmaray, which is a railway system to run between the two continents under the Bosphorous, will be in service on October 29, 2013. 9 Opportunities and Quality of private sector offices, hotels, residences Culture and Language Commercial Real Estate and social facilities. İstanbul hosts numerous international Turkish real estate sector is growing Operational Costs festivals, biennials, concerts, exhibitions rapidly. According to Sunday Times, and all kinds of artistic activities in its Turkey is the 5th most attractive In consideration of the current economic museums, art galleries, halls and cultural country for investment. Foreigners are conditions, operational costs, including centers. now attracted to the metropolitan area real estate and labor force costs, may rather than tourism areas. High-quality influence finance companies’ decisions Education reforms are adopted to residential and office areas are offered. on location. facilitate foreign language education. Demand is rising rapidly; the occupancy Foreign language curriculum rate for high quality office buildings As the costs in financial centers located in primary education is improved. stands at 88%. As a result of the legal in developed countries are higher in An intensive education of English, revisions, citizens of foreign countries general, financial centers in some German and French is offered in both are no more subject to limitations in emerging countries may offer more public and private schools, which acquisition of residential buildings. competitive conditions. multiply every day. Construction technologies that will minimize earthquake and security In spite of the fact that Turkey does risks will be used in regions where not rank in higher echelons in terms of financial institutions will be operating ease of doing business, its investment and employees will be residing, so circle is expanding rapidly. Domestic that the required office and residence and foreign investors are subject to the will be provided, and real estate same legislation. investments applying new technology will contribute to the city’s quality of The government applies incentives life. on investment, which are valid for both Turkish and foreign investors. Construction of the complex in Ataşehir, Incentives include facilitating company which will host the headquarters of incorporation, getting loans, and doing gigantic public banks such as Ziraat, business with international companies. , and Vakıfbank currently based in Ankara, as well as those of Banking Regulation and Supervision Agency, Savings Deposit Insurance Fund and Capital Markets Board is in progress, and expected to be completed in 2015. This complex includes skyscrapers for • William Howarth – IFC İstanbul Chief • EBRD Managing Director – Olivier ( Transformation of Turkey as a What Operational Strategist (6th Istanbul Descamps ( Transformation of Turkey Business and Investment Hub Panel Fashion Conference) as a Business and Investment Hub Panel at EBRD Annual Meeting and Business did they say? at EBRD Annual Meeting and Business Forum) 12 ‘I think Istanbul has tremendous Forum) advantages in terms of location, in About the advantages of Istanbul to be the Gulf region, Central Asia, and North terms of the ability of the civility First Turkey is and Istanbul are on the a financial center: Africa.” and the democracy and the way the radar screen quite a lot of investors in With the fact that Turkey is a large academy is developed in terms of the the World. Number two overall story economic player, has a diversified “İstanbul would be an ideal center. It partnership with the government. And I where Turkey is going is a very good one economy, it is located strategicly • Martin Spurling, chief executive of would be wise to work on growth and think the financial system is very strong in the global context.Three you do have from the geographic stand point,but HSBC Bank in Turkey, (said at a finance improving participation banking.” today. It evolved from the point where I think a culture of entreneurship. The specifically it bridges a cultural gap conference on June 13 in Istanbul.) it is. It is well regulated and sound. So I banking system which is robust. These between East and West in many ways. • Deloitte Senior Manager Tom Shave think there’s a fantastic foundation that are good advantages. That can play its role as an international “I had no idea how big Istanbul was until (said at “Bridging East and West - Istanbul and Turkey can build on making financial center. It can easily look at I was appointed here. I was shocked. In İstanbul as an International Financial Istanbul a financial center. That’s a great • Carlos Bronzatto – Executive Director more products or offerings that are terms of its location, history, culture, Centre” panel which organized by City start.’ WAIPA (The World Association of more of a modern finance standpoint. • Mark Devlin, a lawyer from the law human potential and hospitality, UK on April 23.) Investment Promotion Agencies) That can culturally draw back Islamic firm Baker McKenzie (said at a workshop Istanbul’s a great candidate to be an finance. which is organized by Main Finance international finance center. We have to “İstanbul satisfies the majority of the Association on July 12, 2012 in Frankfurt) explain it to the world a little better.” criteria of a financial center”.

‘The fiscal conditions in Turkey are • INCIEF Chairman & CEO Daud • Fraser Howie - a former managing excellent for a financial center and Vicary Abdullah (said at “Islamic director in the derivatives unit at CLSA, even have advantages compared to the Finance Instruments: Prospects and is the co-author of two books on China, German tax system.’ Opportunities for Turkey” meeting on Red Capitalism and Privatizing China. June 21) (ForumIstanbul) The fiscal conditions in Turkey are excellent for a financial center and “In a historical perspective, İstanbul is ‘Istanbul is a financial center of a large even have advantages compared to the an important commercial center due to country. There are 75 million Turks. It’s German tax system. The only hurdle its location and it’s the capital of the a large domestice base which is always that makes investing in Turkey difficult , so the roots of Islamic important if you are trying to be a for foreign investors is the application finance lie here. Today, the economies financial center. It has great location for a tax identification number, which of İstanbul and Turkey are very strong, fort he time wise between Asia, Europe makes it unnecessarily complicated and also Turkey has close commercial and America. There’s no reason, Istanbul for potential investors to access the relations with the region. It would be can not be a bigger financial center and Turkish capital market. reasonable for the city to extend to bigger in global role at all.’ offering trading of all capital markets instruments, Borsa İstanbul ensures immediate information flow to the İstanbul International Financial Center employing a technological infrastructure at international public through its update web sites, while the conferences standards, and ensuring operational efficiency. and other activities it hosts contribute to its feature as a and the Capital Markets financial center. 14 In the upcoming period, upon the launch of the energy and commodity markets, these markets will be integrated with Borsa İstanbul attaches great importance to research and financial markets. development activities for new financial products, and is working jointly with the World Bank on establishing an The brand value of Borsa İstanbul also plays an important Islamic financial research center to work on the increasingly role in İstanbul’s identity as a financial center. Aware of the popular Islamic products. Furthermore, efforts to establish place of İstanbul in the global financial sector’s perception, another research institute that will work in cooperation with Borsa İstanbul rapidly updates its market regulations, and universities as a technology park are in progress. introduces new markets, products and technologies in an attempt to catch up with the international standards in the Contribution of İstanbul International Financial Center to sector. Within this framework, Borsa İstanbul signed a pre- Borsa İstanbul agreement for strategic partnership with Nasdaq OMX Group on July 3, 2013, which will contribute to İstanbul’s target to Borsa İstanbul is an important factor for İstanbul Financial become an international financial center and also to Borsa Center project. In consideration of this, investments made İstanbul’s target to become a global exchange. With this as part of this project may be viewed as those made in the partnership, Nasdaq OMX’s information technology will be future of Borsa İstanbul. Borsa İstanbul will become a center Borsa İstanbul’s Place in İstanbul International available for use by Borsa İstanbul for all financial contracts. of attraction that offers trading of all the financial assets Financial Center This partnership is more than a mere technology partnership, traded in the global markets. including joint investment projects in the Euro-Asian region. Borsa İstanbul’s contributions to İstanbul’s position as a On the other hand, making İstanbul an international financial financial center may be listed under five headings; liquidity, center will bring additional liquidity and depth to Borsa In order to position İstanbul as an international financial product diversity, a fund center for international investors, İstanbul, while encouraging the listing of foreign companies. center, novelties and improvements were planned in many technology development, and brand value. High liquidity fields, and a significant part of these have been already and ensuring healthy price discovery play a key role in “Turkey is a country whose success is recognized globally, and is an inspiration for realized. A major step taken in this respect is the new Capital international investors’ financial center preferences. Within many countries thanks to its political and economic reforms.” Markets Law. As required by the Law, which re-structures this framework, Borsa İstanbul is the region’s leading market our capital markets and institutions as efficient, competitive with its high liquidity, and offers a great potential. Borsa and capable of responding to the developments in the İstanbul’s traded value and show that international markets, İMKB, İstanbul Gold Exchange and the Borsa İstanbul is the “market of the region”. Borsa İstanbul Turkish Derivatives Exchange (TURKDEX) merged under the was established in line with the developments in the roof of “Borsa İstanbul”. Therefore, Borsa İstanbul offers a international securities exchange business, and partly through single platform for trading all capital markets instruments, the regional and global connectivity, it targets to become one and has a very important mission in the IFC İstanbul project. of the leading exchanges of the world, as a platform Borsa İstanbul’s According to the traded value equals During the Global Financial Centers With a return of US$ 348 billion 2002-2012 period, Index (GFCI) published in as of end-2012. Euro zone’s March 2013, % Borsa İstanbul ranks eighth among emerging markets general public debt stock/GDP 52 ratio increased from İstanbul Borsa İstanbul, in terms of traded value, standing at US$ 234 billion 68% to 93%, ranks eighth was the as of June 2013. second best while that of Turkey fell from among promising financial cities. performing exchange 74% to 36% of 2012. in the same period.

Borsa İstanbul Debt Securities Index ranks fourth fourth among organized markets in terms of traded value. Europe’s Borsa İstanbul’s 6th market capitalization stands at Borsa İstanbul As of end-June 2013, biggest economy Equity Market World’s US$ 290 billion 414 companies as of end-June 2013. ranks 2nd are traded on th among world exchanges 16 in terms of share turnover the Equity Market. biggest economy velocity as of June 2013.