Commuting to OSTİM

(Justin) My commute to Kifas is a large part of most of my week, worth writing about.

Kifas is located in the İvedik Organize Sanayi Bölgeleri of OSTİM, which is considered to be one of the largest industrial parks in the Middle East (the name is an acronym: Middle East Industry and Trade Center). There are 5,000 firms in the area, most of which are factories producing every small to medium-sized piece of equipment that you can think of. Everything from nuts and bolts to tractor parts to building materials to wheelchairs. You don't wear a suit and tie to OSTİM unless you work for the government or are trying to land a contract. This is a place you roll up your sleeves. 


If it's not peak rush hour, it takes a little over an hour for me to get across town to Kifas including a metro (subway) ride and two buses. When you emerge from the metro at OSTİM, you are in a sea of hundreds of rough-looking men. If you approach by car or bus you can see hitchhikers trying to find rides in. You also start to hear languages other than Turkish, namely Arabic and Farsi. This is because many low-skilled immigrants work here, most of whom are probably doing so illegally. The cheap cellphone I'm using here doesn't leave me a good way to get pictures and I don't want to be the guy in the crowd of commuters taking pictures. The OSTİM Facebook page has some great pictures of workers.

OSTİM is quite different from the rest of Ankara. The layout was centrally planned, the buildings all look identical, and it reminds me of the former USSR. There is nothing fancy here. It is about 90% men and always noisy, dusty, grimy, busy, and somewhat dangerous. The jobs people are doing are hazardous, without all the Western safety precautions taken. Last February, a factory across from Kifas that housed canisters of various flammable gases exploded, killing over a dozen people and destroying several shops. This is what I can look out the window and see every day, it still looks like this. 

This is a picture of Kifas after the explosion, the top floor was completely destroyed. No workers were at Kifas at the time, but the clean-up and emotional blow linger to this day. The "Has Emek" means "Pure Labor," which is the area of OSTİM the factory is located in.

Most of the businesses either contract with local restaurants to cater food to their buildings or to serve their workers lunch. The business next door to Kifas has hired a woman to cook their meals in-house. Every business has tea breaks, that's a welcome part of the day as well. On Fridays, there is usually a fairly large procession to the local mosque for Friday prayers. That's also something you don't see as much of in the rest of Ankara.

I need to put some pictures up of the daily work at Kifas, those will come soon. On a busy day, there is welding, metal-bending, grinding, upholstering, assembling, packing, and more. It's quite a bit different than any factory I've worked in and a world away from the sterile classroom environment I've worked in the last few years. I enjoy the commute.

Doing Business in Turkey - payroll taxes

(Justin) One of the best overviews I've seen on doing business in Turkey is guide written by Price Waterhouse Coopers entitled "Doing Business in Turkey in a Nutshell." While published in 2008, it is still very relevant and gives you a sense of the ever-changing tax codes and regulatory environment. As Turkey moves closer in line with OECD and EU standards, business will become easier. But for 2011 the World Bank ranks Turkey as only #71 in ease of doing business (behind Belarus and Kyrgyzstan) and #61 in starting a business. It doesn't fit the image of what you'd expect with the #16 size economy in the world and one of the currently fastest-growing.

One difficulty business owners face is a high payroll tax for Social Security. In the U.S. the employer pays 6.2% of a person's salary up $110,100. In Turkey, the statutory rate for Social Security and unemployment totals to about 18.8% of gross salary. (Employers I've talked to quote a percentage well beyond 50% for this, it's one thing I'm trying to figure out.) Additionally, businesses are required to provide several weeks of severance pay to employees who have worked longer than a month. Employees who have been terminated have a right to get paid a certain number of hours a day while they seek new employment (you can read the labor law here). This makes it more costly for businesses to fire employees, makes it cost-prohibitive to hire replacements, and makes a business hesitant to hire a person in the first place.

To reduce the tax burden, businesses will under-report the salaries they are paying workers and then pay the workers the difference off-the-books. This creates a dilemma for business owners who want to do everything above-board and on-the-books.  I'm told that even the smallest businesses here have to hire someone to keep track of their taxes. 

One business we've been talking to here has been suffering that burden. To be above-board meant to be unprofitable and unable to hire the necessary workers to run the business. The government allows deferral of payroll taxes but with something like a 5% penalty per month.

The labor and tax laws are something we're learning more about as we talk to businesses here and seek possible employment or to start a business of our own. Every country has its challenges and hurdles to business; the cost of legal labor might be Turkey's biggest.