TURKEY TOURISM SECTOR REPORT

Prepared by: Taclan Topal British Embassy, Ankara Economic and Commercial Department Sehit Ersan Caddesi 46/A 06680 Cankaya, Ankara Tel: +90 312 455 3337 Fax: +90 312 455 3351 E-mail: Taclan.Topal@fco.gov.uk October 2002

TURKEY TOURISM SECTOR REPORT

PROFILE 1. Overview 2. General Background to the Sector 3. Characteristics of the Market

3.1 Size of Market 3.2 Market Share 3.3 Constraints

OPPORTUNITIES 1. Trends and Opportunities

1.1.1 Thermal Tourism 1.1.2 Winter Tourism 1.1.3 Yacht Tourism 1.1.4 Golf Tourism 1.1.5 Fishing and Hunting 1.1.6 Privatisation of State and Military Training Facilities

2. Expectations in the Sector CONCLUSION ANNEXES Annex-1 Institutional Structure and Useful Contacts Annex-2 TOURISM LICENSING 1. Procedures for Tourism Licensing 2. The Site Selection Permit 3. The Tourism Investment Certificate 4. The Environment Impact Assessment 5. Construction Permit 6. The Occupancy Permit 7. The Tourism Operating Certificate and Star Classification Annex-3 Why Invest in Turkey? Annex-4 Selected Tourism Indicators Annex-5 Average Spending And Income Generated By Tourists From Selected Countries

PROFILE 1. Overview The tourism sector is one of the leading sectors in the Turkish economy. Turkey was the world's seventh most visited country in 2000 according to World Tourism Organisation statistics. Turkey's potential has been increasing significantly in the last few years. Constant depreciation of Turkish Lira against foreign currencies has placed Turkey amongst the most affordable holiday destinations in the Mediterranean. Therefore the tourism sector continued its upward trend despite the 2001 economic downturn. The Ministry of Tourism launched a one-year promotional campaign worth USD 40 million in 2000 as a part of a planned strategy to attract more tourists to Turkey. As a result of this campaign, tourist arrivals increased by 11% reaching 11,5 million tourists in 2001. The increasing importance of alternative tourism activities such as winter sports, trekking, scuba diving, golfing, horse back riding, cultural tours, spa tourism, convention and congress tourism etc., created more opportunities. Foreign companies are active in the sector through establishing, running and managing hotels and tourism agencies or supplying goods in the specified sub sectors. According to the World Travel and Tourism Council, Turkey is expected to have the highest growth in tourism for any country in the world over the next ten years about 10,2 % annually, compared with a global average of 4,5 %. 2. General Background to the sector Turkey is a country endowed with rich tourism resources; a long coastline bordering the Mediterranean, Aegean and Black Seas; extensive mountain ranges; and cultural historic sites such as Istanbul and Ephesus. The tourism industry has played an important role in the economy, particularly in terms of foreign exchange earnings and job creation. The share of the sector in GNP was about 10% by 2001. Over one million people are directly employed in the sector. In 1999, following the earthquake, the sector suffered from a dramatic drop of the number of tourist arrivals. However, in 2000, the sector started to recover, with total earnings exceeding US$7.6 billion. In the 1970s, the tourism sector faced many problems, mainly concerning the lack of funds allocated to the sector, insufficient domestic and foreign investment, insufficient infrastructure network, and unstable political atmosphere. Being aware of this fact, tourism plans were given specific importance in this period and put into the Five-Year Development Plan of that time. Positive results were only obtained in the early 80's with the general improvement in Turkish economy. The main characteristic of the Turkish economy in the early 80's was based on liberalisation. Introduction of a free market economy, privatisation, liberal exchange rate policy applications, etc provided a better investment atmosphere in Turkey, thus positively affecting sectors like tourism. These new developments were followed by the introduction of new legislation. Tourism Encouragement Law No:2634 was a significant example of this legislation, introducing new tourism incentives such as government land allocation to private tourism investors, encouragement premiums, investment allowance, etc. This led to a significant increase in tourism investments and infrastructure which resulted in high occupancy rates and high tourism revenues.

The dynamic development trend in the 80's slowed down by the end of 90's. The sector was also affected negatively in the late 90's by two devastating earthquakes in Izmit and Bursa. Devaluation of the Greek Drachma, reduction of airport and VAT taxes in Spain reduced the cost of travelling to these countries, thus directing demand to these destinations and reducing Turkey's competitiveness. A significant increase in tourist number and tourism revenues was experienced in 2000. The total number of tourists increased by 35,6% to 10,4 million compared to previous year. Tourism revenues also increased by 50,3% to USD 7,636 million in 2000 and reached USD 8,090 million in 2001. The Ministry of Tourism allocated USD 40 million for international promotion campaigns, targeting 12 million tourists in 2001. Developments such as the devaluation of Turkish Lira together with the natural growth of demand in the sector placed Turkey amongst the favourite Mediterranean destinations for the summer of 2001. This upward trend has continued in 2002, placing Turkey as the fourth mostly visited country in the Mediterranean after France, Spain, and Italy. * Tourist arrivals increased by 10% to 10,6 million as of August 2002, compared to the figures of last year. *Source: World Tourism Organisation 3. Characteristics of Market 3.1 Size of Market Turkish tourism sector has been demonstrating a significant growth in the last few years. Some figures concerning the size of the market are as follows; Turkey's Tourism Figures Years Income Expenditure Number of Tourists (1000 USD) (1000 USD) 1970 51,597 47,738 724,784 1980 326,654 114,738 1,288,060 1990 3,225,000 520,000 5,389,308 1999 5,203,000 1,471,000 7,487,285 2000 7,636,000 1,711,000 10,428,153 2001 8,090,000 1,738,000 11,569,950 This growth is due to the planned tourism strategy of the government fostering tourism investments, more budget allocation for tourism promotion, promotion of niche tourism sectors such as golf, winter tourism, yachting, etc. With its significant growth potential, Turkey ranks 11th in the World Tourism Organisation’s list of “World’s Top Ten Tourism Earners”, following Spain, France, Italy, UK and Greece. 3.2 Market Share Turkey ranks fifth amongst the Mediterranean countries in terms of market share. As of 2001 market shares of other Mediterranean countries in the world tourism market are as follows; Spain 7,1%, France 6,4%, Italy 5,6%, Greece 2,0% and Turkey 1,9 %. International tourism receipts of these countries for 2001 are ; Spain USD 32,9 million, France USD 29,6 million, Italy USD 25,9 million, Greece USD 9,2 million and Turkey USD 8,9 million.* *Source: World Tourism Organisation

3.3 Constraints Though the potential of the sector was highly respected by the politicians and other public authorities, several bottlenecks have been experienced. The scarcity of the budget allocations and capital investments to the sector has been the main physical obstacle to development. The overly centralised systems of control by the Ministry of Tourism causes some serious delays. All projects across the country have to be evaluated, inspected and approved by the relevant authorities in Ankara, while the local offices of Ministry of Tourism play no role other than forwarding the papers. This not only causes delays of inspections and approvals but also the question of maintaining effective control. Overlapping responsibilities and functions between the Ministry of Tourism and other relevant ministries also slow down the project approval and operational stages in investments. Environmental and cultural concerns play an increasing role in steering tourism development. Dramatic climate changes, air and noise pollution, uncontrolled use of land, excessive energy consumption and solid waste production are some of the many environmental problems facing Turkey. Another obstacle is the lack of know-how and proper training in the sector. Training opportunities provided in the sector are limited to the programmes of some private organisations and the Ministry of Tourism. The competition with other leading tourist destinations such as Spain, Greece made the "quality race" inevitable. However, inadequate marketing strategies and too much concentration on the volume end of the package market are potential handicaps for Turkey. With the promotion of package tourism activities, there has been a significant increase in the tourist arrival figures. However visitor spending did not increase in the same amount. This is partly due to the composition of visitors, where an increasing number of tourists from Middle East and CIS countries visited Turkey creating less value added revenues for the sector as a whole. Alternative tourism activities, gambling in particular, had once generated tax revenues of USD 75-85 million annually. However the casinos were shut down in 1998 after money laundering and other scandals, thus resulting a decrease in tourist revenues. Currently there is no plan to reopen, though there are calls from some members of the tourism industry for their reopening to foreigners only.

OPPORTUNITIES 1. Trends and Opportunities The main opportunities in the market arise from alternative tourism activities due to increasing demand in areas like cultural tourism, spa tourism, golf tourism, congress tourism, mountain tourism, winter tourism, yachting and alternative sports (trekking, scuba diving, parachuting, cave exploration etc.). Ministry of Tourism provides significant incentives for the development of niche sectors in tourism. While attempting to protect Turkey from the depredations of intense high season tourist volumes, the Ministry of Tourism has also sought to attract year-round tourism, an area it views as its greatest opportunity for growth. The growing number of well-off and leisured retired people within the EU is seen as a potential target market. Amongst the many alternative opportunities for foreign and local investors, ecotourism is one of the most important ones. Protection of natural and cultural heritage brings along the need for experienced environmental consultants in the Turkish market. With Turkey’s EU candidacy being on the agenda, issues such as environment evaluation, pollution, protection of tourism resources, implementation and harmonisation of environmental standards are very likely to be on the tourism investors’ agenda. Turkish government is keen to promote tourism investments and infrastructure development in different parts of Turkey. Quality and project management services for the prospective investors also appear as an important opportunity in the sector. The most promising areas for tourism infrastructure development include expansion of thermal spas, ski resorts, marinas, golf courses and projects related to infrastructure leading from major urban areas to the tourist centres. There are good opportunities for suppliers of a wide range of services. Amongst these are hotel management and hotel equipment including textiles, catering, food and beverage, and IT systems. 1.1 Thermal Tourism The investments in the area of thermal tourism in Turkey, particularly the integration of thermal hotels and cure centres are regarded as profitable investments which can pay themselves back within 3-4 years. Providing viability all year round and with treatment periods of at least 2-3 weeks, and capability of integrating with other tourism types, thermal tourism provides the opportunity for creation of employment and equity between regions. Calculations based on the potential of Turkey's 40 major spas show that Turkey has an investment potential of over 450 ,000 beds. Thermal centres and mineral springs as natural therapy centres have a traditional importance in Turkey. Therefore, this tradition points to a great potential demand in the area of domestic tourism as well as foreign tourism. Despite the characteristics of the market, only 5% of Turkey's thermal water potential is currently used. As a result , there is a significant gap between thermal water potential and the bed capacity. Local and foreign capital ventures for the construction of thermal facilities are supported with concessionary incentives.

1.2 Winter Tourism About half of Turkey's surface area (55%) is covered by mountainous areas with an altitude of 1500 to 3000 metres. That offers a great potential for both winter and mountain tourism. Winter sports tourism in Turkey is mainly driven by domestic tourists and attracts 150,000 tourists annually, only 9,000 of which are foreign tourists. Existing winter resorts generate a bed capacity of 7500 in Turkey, whereas this figure is high as 1 million beds in Austria. Therefore inadequate bed capacity appears as one of the main obstacles in the winter tourism. One of the main opportunities in the sector arises in areas where snowfall is not homogenous throughout the year. Artificial snow machines, and etc, could be considered as alternative solutions to meet the increasing demand. With the establishment of high quality winter tourism facilities complying with international standards, more foreign tourists could be attracted. Turkey has been mainly considered as a summer tourism location, which put the winter tourism as an alternative tourism activity. This general perception could be seen as a bottleneck in the underdevelopment of winter tourism infrastructure. Winter Tourism in Turkey and some European Countries Skiing

Resorts Bed Capacity

Number of Ski lifts

Foreign Visitors (1999-2000)

Domestic Foreign Visitors

Turkey 17 7,122 55 9,000 160,000 Austria 70 1,100,000 1200 13,5 million Switzerland 67 500,000 1500 1,000,000 2,5 million France 72 3789 Main Winter Tourism Resorts in Turkey* Antalya –Saklikent Bolu –Kartalkaya Bursa – Uludag Erzurum- Palandoken Kars- Sarikamis Kayseri- Erciyes Source: Ministry of Tourism

1.3 Yacht Tourism Though a relatively expensive hobby, yachting is developing as an important branch of tourism. The importance of yacht tourism can be better appreciated considering that yacht maintenance and repair is a major source of income for many countries and that yacht owners are people who spend more money on average. Surrounded by three seas, Turkey is in a very advantageous position in terms of its potential in the area of yacht tourism. It is known that there is congestion and high mooring charges in marinas in the Western and Central Mediterranean. Wishing to avoid this intense traffic and to see different places, yachtsmen tend to shift to the Eastern Mediterranean. The development of yacht tourism in Turkey is judicially supported by the Law for the Encouragement of Tourism enacted in 1982, and has witnessed considerable development in terms of its marinas and its yachting capacity. "Yacht Tourism Master Plan" envisages that the total berthing capacity in the existing marinas and fishermen's shelters should be increased to 24,095 by 2003. Marina investment areas are regularly announced by the Ministry of Tourism. Marinas in Turkey Yacht Marinas registered by the Ministry of Tourism

Yacht Ports with Tourism Administration Certificate Capacity

City Type Port Name On shore On sea Antalya Secondary Yacht Port Setur Antalya Marina 169 290 Antalya/Kaleici Docking Place for Yachts Kaleici Yacht Port 90 - Antalya/Kemer Secondary Yacht Port Akdeniz Kemer Marina 150 150 Aydin/Kusadasi Main Yacht Port Setur Kusadasi Yacht Port 310 - Balikesir/Ayvalik Yacht Slipway Facility Cekek Yeri Ayvalik Yacht Slipway Facility - 140 Balikesir/Ayvalik Secondary Yacht Port Ayvalik Marina 100 - Istanbul/Atakoy Secondary Yacht Port Atakoy Yacht Port 700 40 Istanbul/Fenerbahce Secondary Yacht Port Amiral Fahri Koruturk

Yacht Port 558 -

Izmir/Cesme Secondary Yacht Harbour Altinyunus Yacht Port 90 60 Kocaeli/Gebze Yacht Slipway Facility Atabay Turizm Yacht Slipway Facility - 60 Mugla/Gocek Docking Place for Yachts Club Marina 121 - Mugla/Marmaris Yacht Slipway Facility Albatros Yacht Slipway Facility 40 48 Mugla/Marmaris Docking Places for Yachts Kumlubuku Yacht Club 10 - Mugla/Marmaris Principal Yacht Port Marmaris Yacht Port 676 122 Mugla/Marmaris Yacht Slipway Facility Sun Marina Yacht Slipway Facility - 100

Yacht Ports with Tourism Investment Certificate Capacity City Type Port Name On sea On shoreMUGLA/Bodrum Pr Bodrum Yalikavak Yacht Port 336 100 MUGLA/Bodrum Secondary Yacht Port Kalkedon Marina 200 200 MUGLA/Bodrum Secondary Yacht Port Karada Marina Bodrum 144 50 MUGLA/Datca Secondary Yacht Port Meersea Kormen Yacht Port 246 56 MUGLA/Gocek Docking Place for Yachts Il-tur Tourism and Yachting Administration JSC 80 - MUGLA/Marmaris Yacht Slipway Facility Marmarin Yacht Slipway Facility - 200 MUGLA/Marmaris Secondary Yacht Port Marti Marina and Yachting Administration JSC 301 70 MUGLA/Marmaris Yacht Slipway Facility Yacht Slipway Facility - 100 MUGLA/Turgutreis Secondary Yacht Port Alacatur Tourist Facilities Yacht Port 40 12 MUGLA/Turgutreis Principal Yacht Port Turgutreis Yacht Port 455 100 1.4 Golf Tourism Golf has recently begun to spread and to be popular across the world. The availability of large spaces suitable for golf and temperate climate of the Mediterranean and Aegean costs create a great potential for golf tourism in Turkey. The golf courses are mostly in the vicinity of the resort facilities near shorelines. Studies show that there are approximately 37 million golfers in the world. Considering that many golfers tend to visit the golf courses on other countries, Turkey is very likely to attract increasing amounts of golfers every year. Golf course development received a boost through the 6th. Five-Year Development Plan on 22 May 1989. The Ministry of Tourism provided the assignment of golf courses in Antalya and Izmir in 1990. The Ministry of Tourism still runs the land allocation and planning studies for suitable golf areas. The first professional golf course in Turkey, Istanbul Klassis Golf Country opened in 1994, followed by Kemer Country Club. Four courses have also been built in the south coast in Antalya region. Golf Courses with Operation Licenses from the Ministry Of Tourism;* Gloria Golf Resort -18 hole golf course located in Belek, Antalya Nobilis Golf Otel -18 hole golf course located in Belek, Antalya Klassis Golf and Country -18 +9 hole golf course located Silivri, Istanbul Kemer Golf Country Club -18 hole golf course located Kemerburgaz, Istanbul National Golf Club -18 hole golf course located Belek, Antalya Tat Golf -18 hole golf course located Belek, Antalya Golf Courses with Investment Certificates from the Ministry of Tourism* Kaya Belek, Antalya Akdeniz Golf Club, Antalya Koprucay Golf, Antalya Kemerburgaz Golf, Istanbul MIR Country Club, Istanbul Pine Bay Sarigerme Golf Resort, Mugla Kizilcahamam Golf, Ankara World of Wonders White House, Antalya • See Annex-1 for the Ministry of Tourism certificates

1.5 Fishing and Hunting Some Europeans, central Europeans in particular, are taking advantage of fishing and hunting seasons in Turkey's mountainous regions. The mountains above the beaches and hotels of Antalya (South Anatolia) are particularly very popular. Five hunting areas have been earmarked for development with incentives offered by the Ministry of Tourism. 1.6 Privatisation of State and Military Training Facilities In Turkey, state and military training camps are also used as recreational facilities for the personnel. Privatisation of these facilities are on the government's agenda to maintain a better resource management and increase the profitability. Though a definite deadline or method hasn't been decided for the privatisation, this area is expected to create new opportunities for potential investors. State owned hotels are also being privatised. For example the transfer of management rights of Emek Group of Hotels (6 hotels in Istanbul, Ankara, Izmir and Bursa) owned by Civil Servants' Pension Fund has been concluded through an international tender. Among the successful bidders were British Millenium& Copthorne Chains. 2. Expectations in the Sector The tourism sector in Turkey is expected to generate income worth USD 25 billion by the year 2010. The existing annual 6,2% growth in the sector is expected to reach 7,5% between 2000-2010 period, thus placing the tourism sector at the top in the "fastest growing sectors" classification. The table below gives a projection of the sector in 2010 in comparison with 2000 figures. Turkish Tourism in 2010 (Billion USD): Estimate 2000 2010 Total Travel Expenditures 13,1 28,9 Business Trip Expenditures 0,8 1,9 Tourism Investments 4,7 10,2 Tourism Income 8,6 24,9 Employment (direct and indirect) 1,959,000 3,186,000 Source: Ministry of Tourism

CONCLUSION Given the importance of tourism to the Turkish economy, efforts are being made to facilitate private investment in the sector. The review of the system and practice today suggest two issues that deserve some special attention. First, providing land desirable and suitable to tourism development is essential to the sector. The strategy pursued by the government since the 1980s to designate focused areas for tourism development appears to be sensible. This approach served three purposes: making land appropriate for tourism development readily available to investors, encouraging focused infrastructure development, and relieving the investors, to some extent, from the bureaucratic hassles that typically impeded the projects outside designated zones. The long-term lease regime designed to transfer land from the State to private investors also appears reasonable. This transfer is inevitable as private land appropriate for developing greenfield tourism projects is already highly saturated. The regime is reasonable in that the duration of the lease is sufficient (49 years and renewable); the lease title is transferable and it can be used as a mortgage; sub-lease is allowed; auctions and market price index are used to determine the lease fees; etc. However, the process of developing tourism zones and allocating state land to investors through long-term leases has been seriously hurt by corruption scandals. Because of this, both investors and the government have become extremely cautious in recent years, and this has slowed down the development of new tourism projects. Despite the Ministry’s lack of coordination in the zoning plan strategy, there are promising developments aiming to promote active participation of the private sector and coordinating all the key ministries including those responsible for tourism, land, environment, infrastructure, etc, to determine a master plan and long-term development objectives for the tourism sector. The second issue is related to the various approvals, certifications, inspections and the monitoring system. Licensing for tourist hotel and restaurant operation is not unusual around the world, as it serves the purpose of quality control and standard compliance. Also, the construction of large tourist hotels and resorts often has major implications for environment, infrastructure support, and demographic impact on the local communities, and thus certain screening and approvals are justifiable. In the example of Turkey, despite certain bureaucratic impediments, both the monitoring and the licensing procedure works quite efficiently. The recent studies aim to increase the collaboration between the Ministry and the regional offices, and thus increase the technical competency and implementing capacity of the Ministry. As a result the licensing procedure will be simplified to attract more investors to the market.

ANNEX-1 INSTITUTIONAL STRUCTURE AND USEFUL CONTACTS 1. Ministry of Tourism Ministry of Tourism is the main government authority responsible for assisting, guiding, and coordinating public sector involvement in tourism and for supervising and encouraging private sector involvement. Its responsibilities include; co-ordinating the activities of relevant units, creating suitable environment for tourism investments, inspecting tourist facilities, issuing investment incentive certificates, allocating public land for tourism investment purposes in accordance with laws, licensing tourism investments, promoting Turkish tourism sector, etc. The Ministry sets out policy measures and determines priorities both for the incentives and for encouragement of private enterprise as well as for public sector investments. Ministry of Tourism is also responsible for the training of personnel and tourist guides. Contact details: Turkiye Cumhuriyeti Turizm Bakanligi (Ministry of Tourism of Turkish Republic) Ismet Inonu Bulvari No: 5 Bahcelievler 06100 Ankara / Turkey Tel : 90 312 212 8300 Fax : 90 312 213 6887 Web: www.turizm.gov.tr 2. Association of Turkish Travel Agencies (TURSAB) TURSAB is a non-profit organisation representing the travel agencies in Turkey. All the travel agencies in Turkey are obliged to obtain a certificate from The Ministry of Tourism and be registered with TURSAB. Contact details: Turkiye Seyahat Acentalari Birligi (Association of Turkish Travel Agencies) Dikilitas Mahallesi Asik Kerem Sokak No: 48-50 80690 Besiktas Istanbul / Turkey Tel : 90 212 259 8404 Fax : 90 212 259 0656 90 212 236 3978 e-mail : tursab@sim.net.tr Web: www.tursab.org.tr 3. Turkish Tourism Investors Association (TYD) Established in 1988 by the main investors in the tourism industry, TYD's main aim is to bring together foreign and domestic companies investing in Turkey and assisting them develop tourism projects. As of end-2000, it had 183 members with a combined capacity of 200,000 beds, mostly 4 or 5 star hotels and holiday villages. TYD is a Business Council Member of World Tourism Organisation. Contact details: Turkiye Turizm Yatirimcilari Dernegi ( Turkey Tourism Investors Association)

Yildiz Posta Caddesi Dedeman Ticaret Merkezi No: 52 Kat: 6 80700 Esentepe Istanbul / Turkey Tel : 90 212 347 2135 (15 Lines) Fax : 90 212 347 2146 e-mail : tyd@iris.com.tr

nkoruyan@superonline.com Web: www.ttyd.org.tr 4. Turkish Hotel Association (TUROB) TUROB is the leading association of Hotel and accommodation industry in Turkey. Contact details: Turkiye Otelciler Birligi (Turkish Hotel Association) Yildiz Posta Caddesi Dedeman Ticaret Merkezi No: 52 Kat: 6 80700 Esentepe Istanbul / Turkey Tel : 90 212 275 0550 90 212 275 3353 Fax : 90 212 275 4454 e-mail : turkishhotels@sim.net.tr USEFUL CONTACTS: 1. Tourist Guest House Development Association (TUREVS) Turistik Ev Pansiyonculugunu Gelistirme Dernegi Cumhuriyet Bulvari Elbir Ishani No: 84/404 Alsancak - Izmir / Turkey Tel : 90 232 421 4295 90 232 421 5728 Fax : 90 232 425 7273 2. Turkish Camp and Caravan Association Turkiye Kamp ve Karavan Dernegi Bestekar Sokak 62/12 06680 Kavaklidere - Ankara / Turkey Tel : 90 312 466 1997 Fax : 90 312 426 8583 90 312 346 5824 3. Tourist Guides' Association (TUREB) Turist Rehberleri Birligi Cumhuriyet Caddesi No: 87/7 80230 Elmadag - Istanbul / Turkey Tel : 90 212 240 2523

90 212 233 4952 Fax : 90 212 233 4942 e-mail : rehberler@turkishguides.org

tureb@turkishguides.org Web: www.turkishguides.org/tureb 4. Yacht Enterprises Association Yat Isletmecileri Dernegi Eski Cesme Mahallesi Firkateyn Sokak No: 19 48400 Bodrum Mugla / Turkey Tel : 90 252 316 2398 90 252 316 4790 Fax : 90 252 316 1601 5. Marina Investments And Enterprices Association (MARYAT) Marina Yatirimcilari ve Isletmecileri Birligi Ministry of Tourism, Republic of Turkey Sector Representative Inonu Bulvari No: 5 Bahcelievler, 06100 Ankara / Turkey Tel : 90 312 212 2184 Fax : 90 312 212 2184 6. Promotion Foundation of Turkey (TUTAV) Turk Tanitma Vakfi Ugur Mumcu Caddesi No: 24 G.O.P. Ankara / Turkey Tel : 90 312 437 5166 90 312 437 4576 Fax : 90 312 447 4133 e-mail : bilgi@tutav.org.tr Web: www.tutav.org.tr 7. Tourism Development and Education Foundation (TUGEV) Aims to research existing tourism education programmes and makes recommendations for the development of curricula for vocational and higher level tourism education units in order to upgrade the qualities of man power in Turkish tourism industry. Turizm Gelistirme ve Egitim Vakfi Mesrutiyet Caddesi No: 57/4 Beyoglu 80050 Istanbul , Turkey Tel : 90 212 293 3950 (2 Line) Fax : 90 212 252 3183 e-mail : info@tugev.org (for info)

ozen.dalli@tugev.org (for enquiries) Web: www.tugev.org

8. Touring and Automobile Association of Turkey (TURING) Turkiye Turing ve Otomobil Kurumu Oto Sanayi Sitesi Yani Camlik Caddesi 4. Levent 80660 Istanbul / Turkey Tel : 90 212 282 8140 (6 Lines) Fax : 90 212 282 8042 e-mail : turing@turing.org.tr Web: www.turing.org.tr 9. Turkish Skiing Federation Youth and Sport General Directorate, Kayak Federation Management (Genclik ve Spor Genel Mudurlugu Kayak Federasyonu Baskanligi) Ulus Ishani 4.Kat, No: 406 Ulus - Ankara. Tel: (312) 311 0764, 310 3960 Fax: (312) 311-0764. 10. Turkish Golf Federation Akaretler Suleyman Seba Cad. Besiktas Plaza, A Blok Kat:1 Daire:4 Tel: 90 212 258 0718 Fax: 90 212 236 8304 11. Interactive Museum of Turkey Online virtual art galleries of famous Turkish museums, Information about Turkish art news http://interactive.m2.org

ANNEX-2 TOURISM LICENSING The tourism industry has played an important role in the economy, particularly in terms of foreign exchange earnings and job creation. Sites most suitable for tourism development are mostly in the domain of state land today. 1. Procedures for Tourism Licensing Tourist hotel projects involve a multi-staged approval procedure. Figure I indicates three basic stages of the process.

Figure I: Tourism Hotel Licensing

Investor

Provincial Dir. Of Tourism (Optional) –Application can be made directly to Ankara

Ministry of Tourism, Ankara

D. G. Operations

Issue InvestmentCertificate

Evaluation team • Revised prop.• Site visit (if needed)• Question• Suggestion

Municipality

Municipality

Investor

(construction period)

Provincial Dir. Of Tourism (Optional)

Ministry of Tourism, Ankara

D. G. Operation

Investor

Stage III: Trial Operating Certificate and Final Operating Certificate

Stage I: Investment Certificate

Stage II: Construction Permit and Occupancy Permit

(Apply for ConstructionPermit to start construction)

(Apply for OccupancyPermit at the completionof the construction)

Site Inspection 1

If satisfied, issue the Trial Operating Certificate, valid 3-6 months

Site Inspection 2

Issue final Operating Certificate and Star Ranking

2. The Site Selection Permit (SSP) If an investment project is not located in a designated tourism zone, the investor must apply to the Governor’s Office for an SSP. The procedures s/he must follow are similar to those followed by investors of other sectors applying for an SSP. A myriad of licenses, permits, and approvals is required in the process involving multiple ministries and authorities at both the state and local government levels.

3. The Tourism Investment Certificate (TIC) If the project is located in a designated tourism zone, the investor does not need to apply for an SSP, but must apply for the TIC granted by the Ministry of Tourism (MOT). TIC is optional for the other investors who will invest in regions other than the designated tourism areas or zones, however SSP is required for these investors.

As the flowchart shows, the following steps are involved: Step 1--The investor submits the application for TIC, either to the Provincial Directorate of Tourism or directly to the Director General of Operations, MOT, Ankara. The Provincial Director has no power to evaluate the project and has to forward the file to the DG Operating in Ankara. Thus, most investors apply directly to Ankara, although they may copy the application to the Provincial Director. Documents Required for Investment Certificate Application:

• Written request; • Report with information on location, type, class, capacity, financing and

marketing of the investment; • Notarized commitment letter undertaking that the investment would comply with

the MOT’s approval, development law, current development plan and other related legislation;

• Documents such as lease, title, deed, etc, and contract between the partners if the certificate would be issued for the name of one or some of them;

• Commercial Registry Gazette and the signature circulaire if the application is made by a company;

• If the investment is of specific importance in terms of kind, location, size, etc, and if required by the Ministry, a project concept description and/ or approvals by reference people and/or institutions criteria. References shall be requested by the people or institutions as determined by the Ministry of Tourism. Reference people are those with acknowledged competence in their professional or academic fields. Reference institutions can be public institutions or organizations, professional associations, societies, foundations etc.

Step 2-- The DG of Operations forms an Expert Team to evaluate the application and the attached documents. Criteria and standards for star hotels are well established in Turkey, but the determination of the appropriateness of the investment site depends on other factors such as environment. The team may question the project proposal, conduct a site visit (if deemed necessary), and suggest changes/adjustments to the investor. Step 3-- Based on the satisfaction of the evaluation, the DG Operations grants a “preliminary TIC” to the investor. Step 4-- With the preliminary TIC, the investor has six months to secure his land. During this period s/he negotiates with the State Property authority (SP) of the Treasury on the long-term lease agreement for the required land. This usually involves a public bidding process.

Step 5-- With the long-term lease agreement reached with the SP, the investor must then register his lease title with the Deed Office of the Cadastre. Step 6-- With the registered title, the investor goes back to the DG of Operations for the “final TIC.” Step 7-- The final TIC requires the investor to start construction within one year, and complete construction and start operation within four years. Step 8-- The TIC is also a pre-condition to apply at GDFI for a Foreign Investment Certificate and Tourism Investment Incentives. Investors who have obtained tourism investment incentives are obligated to report quarterly to the MOT through the Provincial Directorates of Tourism. 4. The Environment Impact Assessment (EIA) All hotel projects with a capacity of more than 200 rooms are subject to EIA approval and those with 5 to 200 rooms are subject to preliminary-EIA approval by the Ministry of Environment. The requirements and procedures involved are similar to those applied to other sectors. 5. The Construction Permit Once the investor has obtained the TIC and EIA (if applicable), he must apply for the Construction Permit from the relevant municipality, if located within the municipal boundary, or from the Provincial Office of the Ministry of Public Works (MOPW), if located outside the municipal boundary. This permit allows the investor to actually start construction work. 6. The Occupancy Permit At the completion of the construction, the investor must apply to the relevant municipality (or the Provincial Office of the MOPW) for site inspection to obtain the Occupancy Permit. 7. The Tourism Operating Certificate (TOC) and Star-Classification Before starting operations, the investor must apply for the Tourism Operating Certificate. Government regulations allow investors to choose between MOT and the relevant Municipality authority when applying for the TOC. MOT and the municipalities are required to grant the TOC based on the same requirements and standards established by the Tourism Act. Further, the regulation requires MOT or the relevant municipality – but not both – to inspect and monitor the operation of the projects to which they have respectively granted the TOC. This flexibility to allow investors to choose the relevant authority to grant TOC and inspect/monitor business operations seems to have facilitated smaller businesses, such as restaurants and tour operators. Large projects, such as hotels and resorts, have clearly preferred MOT for the TOC and are subsequently inspected and monitored by the municipalities at the operational stage. All star-hotels and star-restaurants must apply to MOT for the star classification certificate Applying for the Tourism Operating Certificate: Applying for the TOC involves several steps:

Step 1—The investor can either submit his application to the Provincial Directorate of Tourism or directly to the Director General of Operation of MOT, Ankara. Since the Provincial Director has no power to inspect and approve the project, the investor usually goes directly to Ankara. Tourism Operating Certificate Application Documentation:

For investments already holding a TIC, original or notarized photocopies of the following:

• Occupancy permit or a document confirming the purpose of use and appropriateness of the facility for that purpose in terms of public health conditions;

• A document from the relevant public administration confirming that waste water disposal will be solved in an appropriate way;

• A document from the fire department or the other related public body confirming that fire measures are appropriate;

• Upon request of MOT, a document from the relevant administrative body confirming the appropriateness of the accommodation, eating-drinking and entertainment facilities in terms of security and/or public morals. (MOT officials state that such a document is not requested at all but nevertheless, it is stated in the regulation).

For investments without holding a TIC, basically all information required for TIC and TOC are required:

• Written request; • Report with info on location, type, class, capacity, financing and marketing of the

investment; • Documents such as lease, title, deed, etc., and contract between the partners if

the certificate would be issued for the name of one or some of them; • Commercial Registry Gazette and the signature circulaire if the application is

made by a company; • If the investment is of specific importance in terms of kind, location, size, etc.

and if required by the Ministry, project concept description and/ or approvals by reference people/institutions criteria (same as above under TIC)

• Occupancy permit or a document confirming the purpose of use and appropriateness of the facility for that purpose in terms of public health conditions;

• A document from the relevant public administration confirming that waste water disposal will be solved in an appropriate way;

• A document from the fire department or the other related public body confirming that fire measures are appropriate.

Step 2—The DG of Operation conducts a site inspection by an Inspectorate Team composed of civil engineers, architects and several other experts of the businesses under concern. The team evaluates the facility in terms of the minimum standard requirements for its kind and standards of the materials used (e.g. construction materials, parking spaces, architectural specifications, etc). These standards are pre-determined in details by the MOT and are published in the regulations. The team can question or suggest improvements of the facility during the inspection.

Step 3—Based on the satisfaction of the inspection, the DG of Operation grants a “Trial TOC” to the investor, which usually lasts for three to six months.

Step 4—With the Trial TOC, the investor can start operation temporarily. During the trial period, and without application from the investor, MOT inspectorates conduct a second site inspection to evaluate the operation. Upon satisfactory inspection DG Operation grants the final TOC.

Step 5—For those projects that apply for star-classification, the DG Operation organizes a Classification Committee comprising of three inspectors of the MOT (or two MOT inspectors and one representative of the Tourism Association). The committee conducts a site inspection and determines the appropriate star-classification of the project.

ANNEX-3: WHY INVEST IN TURKEY? Why Invest in Turkey? - Turkey offers a wide variety of tourism alternatives with its mountains, caves, rivers, lakes

and hot springs. - Turkey has a fast growing tourism market with a young population. The preferences of

young population in Turkey which makes 30% of the total population is the main driving force behind the development of the tourism sector.

- Liberal import rules and a customs union with the EU make it easy to build, equip and

maintain facilities. - Operation and construction costs in Turkey are significantly lower than the rest of Europe.

Thus a convenient investment environment is provided for foreign investors. - Incentives for tourism development are at more attractive rates and under easier conditions

than for comparable investments in other industries. - Lack of tourism development in certain areas and specialities provides significant

opportunities for growth. - Public land use policies allow the use of public lands for relatively long periods such as 49

years. For many parcels infrastructural problems have already been solved.

Annex-4 SELECTED TOURISM INDICATORS SELECTED TOURISM INDICATORS (1995-2000)

Tourist Arrivals (million)

Receipts ($ million)

% Share Foreign Exchange

% Share in GNP

1995 7.7 4,978 23.0 3.3 1996 8.8 5,962 25.8 3.3 1997 9.7 7,008 28.3 4.5 1998 9.5 7,117 32.0 3.6 1999 7.4 5,193 18.0 2.2 2000 10.4 5,869 42.2 2.9 Source: Undersecretariat of Foreign Trade

Annex-5 AVERAGE SPENDING AND INCOME GENERATED BY TOURISTS FROM SELECTED COUNTRIES AVERAGE SPENDING AND INCOME GENERATED BY TOURISTS FROM SELECTED COUNTRIES (1998-1999)

Country Average Spending ($)

1998 Number of visitors

Total Income ($ '000)

Average Spending ($)

1999 Number of visitors

Total Income ($ '000)

US 1,206 429,971 518,367 1,290 394,464 508,955 UK 1,089 883,105 962,052 1,057 816,119 862,416 France 910 389,860 354,750 774 254,321 196,872 Germany 785 2,183,317 1,714,684 672 1,365,299 917,485 CIS 499 1,197,101 596,983 409 942,650 385,448 All countries 808 8,878,555 7,176,988 736 7,069,247 5,202,454

Source: Tourism Investors' Association