Time For A Fresh Look At The World's Oldest Crossroads
At its peak, the Ottoman Empire included most of Southeast Europe, North Africa, the Arabian Peninsula, and the Middle East. At least 39 modern states make up the territory the empire encompassed over its more than 600-year history. Controlling the crossroads between Europe, Asia, and Africa, the empire and its capital, Istanbul, flourished.
After the final dismantling of the Ottoman Empire after World War I, modern-day Turkey emerged, and its founder, Mustafa Kemal Atatürk (Atatürk meaning “father of the Turks” and formally granted by parliament as his last name in 1934), took to creating a modern state that would survive in a Western world.
Among other things, Atatürk replaced Islamic canon law with secular civic and penal codes modeled after European nations. He also Westernized the Turkish alphabet into a Latin-based alphabet and granted women full political rights. Thanks to this Westernization, Turkey has been able to straddle Europe and Asia both physically (having lands on both continents) and figuratively (serving as a political intermediary between the West and the Middle East).
Historically, Istanbul was a major trade center, allowing it to grow to be the largest city in the world at one point. The central location of the country and its capital remains important both politically and economically, as Turkey controls the Straight of Bosphorus.
Today, some still would consider Turkey a developing economy; however, its per-capita GDP is in the same neighborhood as that of Mexico, Brazil, and Russia and in the top third of all countries. Specifically, Turkey’s GDP ranks 18th in the world. Its economy has grown at an average rate of more than 5% per year for the last 10 years, with the only negative-growth year being 2009, a tough year for much of the world.
By 2050, this country of 77.6 million people is expected to move up to 15th position on the world GDP list and to be the sixth-largest economy in the EU (if it is admitted to the EU).
One reason for the expected continued growth is that half the country’s population is younger than 30. Officially, unemployment is relatively high (at around 10%); however, the informal economy and the self-employed probably reduce that figure. In addition to the young population and an expanding middle class, Turkey is also benefiting from reforms of the last 20 years to reduce restrictions on foreign investment, its central location in the middle of 1.5 billion potential consumers, and aggressive investments in infrastructure. Given all this, it’s not hard to believe the growth projections.
Turkey has my attention because it offers several flag planting opportunities and options to diversify your life, primarily to do with investing and business. This country is not a top choice for residency or banking.
Part of the reforms to make it easier for foreigners to invest in Turkey include allowing companies to have a single shareholder. This helps both foreign companies that want to open a local branch and foreign individuals who want to set up their own companies. Before 2012, corporations had to have a minimum of five shareholders.
Today, an individual can set up his corporation with just himself as the sole shareholder, and, on average, a corporation can be set up in six days. That is close to half the average time for neighboring countries in Europe and the Middle East of a bit more than 12 days. Doing business in Turkey can make great sense if you have a business that can serve the growing middle class in the country or a business that can benefit from the relatively low cost of labor and the centralized location for manufacturing and exporting in the region.
Tapping into the large domestic market is an opportunity to build a business in front of what will be a large middle-class market. Turkey’s total population is close to Germany’s total population, but Germany’s under-30 population is less than one-third of the total population. Growth and size of the local market favors Turkey over every other country in the region, with perhaps the exception of Russia.
Between 2002 and 2013, mobile phone subscribers went from 23 million people to almost 70 million… more than 90% of the population of the country. Credit card users went from 16 million to 57 million in the same period, indicating both a more relaxed credit scenario and more people spending.
Turkey has free-trade agreements in place with 20 countries, mostly in Europe, North Africa, and the Middle East, and is working on more. The country is also in ongoing discussions to join the EU. However, that timeline is likely to drag on due to concerns ranging from voting rights to the possibility of an influx of immigrants from Turkey to Western Europe.
Entry into the EU is not certain; however, the expectation is that, regardless, the country will enjoy privileged access to EU markets.
Turkey’s geography is one reason it’s being considered for ascension into the EU. Three percent of Turkey’s land area is in Europe. The country is a literal crossroads between Europe and Asia, with Istanbul sitting on the corner of Europe and spilling over the Bosphorus into Asia.
“Lief, I have an important question for you. If one has a self-directed IRA and buys land in foreign countries, is the IRA rule about required withdrawals still in effect? If so, how does one take money out of the IRA if the IRA owns land and nothing else?
“Thank you very much for your newsletters and valuable information.”
Yes, minimum required withdrawals at age 70.5 still apply, even if the IRA owns property (overseas or otherwise). This means you need to have some cash in your IRA, either just sitting there or being generated from rental income. Otherwise, you’ll have to liquidate some of your real estate holdings to meet the withdrawal requirements.