THE REPUBLIC OF TURKEY PRIME MINISTRY Investment Support and - PowerPoint PPT Presentation

THE REPUBLIC OF TURKEY PRIME MINISTRY Investment Support and Promotion Agency of Turkey (ISPAT) The Investment Climate and the Mining Sector in Turkey M. İlker Aycı, President of ISPAT March 4, 2013 PDAC, Canada

The Republic of Turkey Prime Ministry Investment Support and Promotion Agency Attached to the Prime Ministry and • Reports directly to the Prime Minister • 2 offices (Ankara – Istanbul) • Established in 2007 • Private sector approach • Multi-lingual, professional and • dedicated project directors, International representatives network worldwide Guidance on: Laws, Regulations, Site • Selection, Sectoral Reports, Local Market Players, Potential Partners Confidential, Free of Charge • ISTANBUL ANKARA 2

ISPAT The International Network 3

Why invest in Turkey? Dynamic, Stable & Attractive Economy Strong Domestic Market International Hub to Access Multiple Markets Investment Friendly Business Environment 4

Why invest in Turkey? Booming economy reaching $774 billion in 2011 up from $230 billion in 2002 800 774 2011 GDP (Current Prices, Average Annual Real GDP Growth (%) $Billion) 2002-2011 700 6 600 5,2 514 4,8 4,7 4,6 4,5 5 500 448 408 3,9 3,8 3,7 3,6 3,5 4 400 3,4 279 300 3 248 239 215 2,3 190 200 165 140 2 96 1,5 100 54 1 0 5 Source: IMF World Economic Outlook, April 2012;

Why invest in Turkey? Fastest growing economy in Europe 10 Annual Real GDP Growth (%) 9,2 9 8,5 8 7,5 7 6,5 6,3 2010 2011 6,2 6 5,5 5 4,4 4,3 4,3 4,2 4,0 3,9 3,6 4 3,3 2,7 2,7 3 1,7 1,7 1,7 2 1,3 1 0,4 0 Turkey Brazil Korea Indones Mexico Russia Slovakia Poland Czech Hungary Bulgaria Rep. ia 6 Source: IMF World Economic Outlook, April 2012

Why invest in Turkey? Turkey will be the fastest growing economy among the OECD countries in the near future 6,0 5,2 Average Annual Real GDP Growth (%) Forecast in the OECD Countries 2012-2017 4,8 5,0 4,0 3,6 3,6 3,5 3,4 3,3 3,3 2,9 2,8 2,8 2,8 3,0 2,7 2,6 2,6 2,5 2,5 2,4 2,3 2,3 2,2 2,2 2,1 2,1 2,1 2,0 1,9 1,9 1,8 1,8 2,0 1,7 1,7 1,6 1,4 1,2 1,0 0,0 Turkey Chile Australia Norway Mexico Korea Slovak Rep. Estonia Iceland Luxembourg Poland Israel US Ireland Sweden Czech Rep. Austria OECD Spain New Zealand Hungary Canada Finland Switzerland Denmark Netherlands UK Italy Belgium France Greece Slovenia Germany Portugal Japan 7 Source: OECD Economic Outlook No.91, June 2012

Why invest in Turkey? Strong Domestic Market and an International Hub 4 h

Why invest in Turkey? Investment Friendly Business Environment with Structural Reforms National Treatment Guarantee Access to Real of Transfers Estate = International Arbitration Employment of Freedom to Expatriates Invest Corporate The New Protection Against Income Tax Commercial Code Expropriation 9

Why invest in Turkey? Structural Reforms: Yielding Results & Increasing Competitiveness Global Competitiveness Index Turkey’s Number of Turkey’s Year Rank Countries Rank (Percentile) 2004 104 66 63,5 2005 117 66 56,4 2006 125 59 47,2 2007 131 54 41,2 2008 134 63 47,0 2009 133 61 45,9 2010 139 61 43,9 2011 142 59 41,5 2012 144 43 29,8 Source: WEF

Turkish Mining Industry Mining reserves in Turkey (as a percentage of world reserves) 0,03% Iron 0,29% Copper 0,57% Phosphate 0,67% Gold Turkey is one of the richest 1,06% countries in the world in terms Silver of minerals. 1,44% Chromium 4,73% Barite It possesses the largest 4,81% Diatomite reserves of several minerals. 8,70% Perlite 9,74% Pumice 13,40% Bentonite 19,14% Na-Feldspar 40,00% Marble 72,00% Boron Salts SOURCE: General Directorate of Mineral Research and Exploration 11

Turkish Mining Industry Turkey’s share of world production 12 SOURCE: Ministry of Energy, USGS

Turkish Mining Industry Foreign trade of major commodities (2011) Turkey is strong in exports of ▪ Gold jewelry ▪ Natural stones and cement Major trade imbalances in ▪ Coal ▪ Copper ▪ Aluminum

Turkish Mining Industry Turkey is an investment friendly destination for mining companies Policy potential index for mining (score out of 100 in 2012) PPI is a composite index that measures the effects of 70 government policies on the 65 70 investment attractiveness. 60 50 50 38 35 40 28 30 23 21 20 13 10 0 Canada Australia Turkey Brazil South Russia Kazakhtan India Zimbabwe Africa SOURCE: Fraser Institute

Turkish Mining Industry Comparison of Turkish and South African CIF China cost base for comparable mines * 2010 cost comparison 2020 cost comparison USD per metric tonne (real 2011) USD per metric tonne (real 2011) 241 Other 2 Sea freight 194 52 Other 2 172 158 4 Sea freight 47 3 Inland transport 66 34 31 Inland transport 55 Royalties 10 41 34 Processing costs Royalties 36 5 4 6 18 21 25 Processing costs Mining costs 75 70 Mining costs 64 59 ▪ Low sea freight rates in Turkey supported due to availability of excess container capacity on the Turkey – China route ▪ Overall processing cost increase in SA driven by power tariffs * Underground mines with ~1 million metric tonne SOURCE: Nithia Capital Resources

Turkish Mining Industry Turkey wants to see more companies investing in exploration, exploitation, and refining facilities Number of Companies with Foreign Capital in Mining 687 627 537 478 409 318 236 188 138 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Ministry of Economy

The New Incentive Scheme NEW INCENTIVE SYSTEM 3. Incentives for 4. Incentives for 2. Regional 1. General Incentives Strategic Investments Incentives large-scale Investments  VAT Exemption  VAT Exemption  VAT Exemption  VAT Exemption  Custom Duty Exemption  Custom Duty Exemption  Custom Duty Exemption  Custom Duty Exemption  Tax Deduction  Tax Deduction  Tax Deduction  Employer’s share for  Employer’s share for  Employer’s share for insurance premium insurance premium insurance premium payment payment payment  Land provision  Land provision  Land provision  Interest Support (except  Interest Support 1 st and 2 nd regions)  VAT Refund In the 6 th Region: income withholding tax and employee’s share for insurance premium payment 17

The New Incentive Scheme Land Allocation V.A.T. Exemption (for the imported and • • Interest Support domestically provided Machinery and Equipment) • Income Tax Withholding Allowance Customs Duty Exemption (for the imported • • VAT Refund for Construction Expenses Machinery and Equipment) • Rates of instruments determined in a Reduced Corporate Income Tax (C.I.T. between • • descending rate in 6 regions scaled from %2 - %10) the most developed to the least developed Social Security Premium Support ( Both Employer’s • regions and Employee’s Share, for 2 – 12 years) 18

The New Incentive Scheme “ Specific Priority Investments ” Incentives for Mining Investments in the mining sector can enjoy special privileges , and will be supported by the more attractive instruments of Region V regardless of their location. Strategic Incentives Mining investments can also benefit from stronger supports than other incentives under the “Strategic Incentives” scheme, regardless of the region, provided that they meet the below criteria: to be made for the production of intermediate and finished • goods with high import dependency and of these goods more than 50% are supplied by imports to have a minimum investment amount of TRY 50 million • to create a minimum added-value of 40% • to possess an import value of at least USD 50 million during the • past one year, for goods to be produced 19

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