We are currently investigating an investment proposal concerning the chocolate confectionery sector, in Turkey. Specifically the analysis concerns the chocolate tablets production. Below follows an explanation of the elements of the investment decision, the general aspects of the Turkish economy and an analysis of the risks that the project could potentially face. For some decades Turkish economy was characterized by certain aspects, which worsened much more during the 90's. After the 2001 crisis, the Government outlined a new economic program to bring about a rapid turnaround in the economy. The new program goes much deeper than previous attempts in addressing the structural roots of the crisis – weak public finances and a fragile banking system – while strengthening social programs. The program also aims at bringing Turkey closer to its goal of EU accession. The establishment of the new macroeconomic settings was of key importance for improving confidence. While interest and exchange rates continue to be heavily influenced by fiscal policies due to the large public sector borrowing requirements, the Central Bank has been successful in building up credibility over time and is increasingly shaping inflation and interest rate expectations.
[...] of intervened private banks and measures to reduce connected lending, Strengthening public sector management and governance, including improvements in public expenditure management, public procurement, accounting and auditing and anti-corruption measures, Market liberalization in energy telecommunications, together with establishment of independent regulatory bodies, Privatization of state-owned enterprises, including Turk Telekom, the national airline, petroleum refineries and iron and steel companies, Continuation of agriculture sector reform to liberalize the sector and raise rural incomes, shifting from price subsidies to direct income payments to farmers, Strengthening social assistance to help people adversely affected by the crisis. [...]
[...] Cash Flows The initial investment is expected to have the following costs: Capital Expenditures (in Construction Work Land and road improvement Factory renovation Warehouse renovation Equipment Transport Insurance of cost) Other Expenditures Maintenance & Assembly fees The retail sales value for chocolate tablets in 2004 was US$111,400,000 and the total volume 13,640 tons. By dividing these two, we can see that the average value for every ton of chocolate tablets is US$8,167. We consider that for the first year of production, the company can produce 300 tons for the average value of US$8,167 per ton. [...]
[...] Under the government-initiated “Reform Program for the Improvement of the Investment Environment in Turkey”, ten inter-ministerial technical committees comprising public and private sector representatives have proposed a substantial number of amendments in a number of legislative instruments affecting the investment environment. According to the new FDI Law, entry conditions for foreign investors establishing a company in Turkey are the same as for comparable local companies. Key aspects of the Law include: Elimination of bureaucratic details with regard to screening, approval, share transfer and minimum capital requirements, Reassurance of existing guarantees to foreign investors of their rights, Redefinition of “foreign investor” and “foreign direct investor” in line with international standards, A policy shift from “control” to a “promotion and facilitation” approach, Guarantees for investor rights, Equal rights and treatment between Turkish companies and foreign companies, established in Turkey. [...]
[...] Sector performance Turkey's economic outlook has been positive with declining inflation, which is at its lowest in more than 30 years, a strong economy and productivity growth. While economic growth is expected to slow down and consumer demands reduce to more reasonable levels, forecasted growth is still strong at in 2005. Inflation fell below the government's target rate in 2004, despite strong consumption demand and rising petroleum prices, with CPI hitting its lowest level in more than three decades and stimulating expectations for interest rate cuts. [...]
[...] Adopting a “good citizen” policy, in order to accentuate the positive contribution of the company job creation, technology transferring, local development etc.- and finally avoid the afore mentioned political and social risks 9. Get close to unions, even if unions do not have much power in Turkey 10. Look for synergies 11. Adopt a “survival strategy” including interruptions of electricity, earthquake, emergency raw material supply External techniques 1. Factoring for accounts receivables 2. Turkey has signed the Convention of Settlement of Investment Disputes, so any dispute will be resolved by the agreements of the convention 3. Turkey is also a member of MIGA, which offers coverage [...]
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