Business Integrity Country Agenda – Turkey (BICA Turkey)

200 Pages·2017·1.28 MB·English

BUSINESS INTEGRITY
COUNTRY AGENDA
TURKEY

BUSINESS INTEGRITY COUNTRY AGENDA-TURKEY
Transparency International is the global civil society organization leading the fight against corruption.
Through more than 100 chapters worldwide and an international secretariat in Berlin, we raise awareness
of the damaging effects of corruption and work with partners in government, business and civil society to
develop and implement effective measures to tackle it.
TI-Turkey (Uluslararası Şeffaflık Derneği) was founded in 2008 by voluntary efforts. The association aims
to set the rule of transparency, integrity and accountability principles in all segments of the society for the
democratic, social, and economic development of the country. TI-Turkey predicates on collaboration of
public sector, businesses, unions, universities, professional chambers, and non-governmental organizati-
ons in the scope of its anti-corruption efforts. It expects legibility, integrity, legal conformity, accountabi-
lity, and traceability from all individuals and institutions in society who constitutes the social structure and/
or holds public power, and conducts its activities within the frame of these principles.
Authors
Dr. Asuman Sönmez Country Context, Private Sector Assessment
Dr. İmren Borsuk Public Sector Assessment
Yalın Hatipoğlu Civil Society Assessment
Editors
E. Oya Özarslan
Yalın Hatipoğlu
Advisory Committee
Bülent Tarhan
Mete Demirci
TI-Turkey extends thanks and appreciation toDr. Leyla Ateş, Dr. Murat Önok, Dr. Habibe Akşit, Kayra Uçer,
Fikret Sebilcioğlu, Sevi Fırat, and Olgu Kama to for their contributions to the research.
Design: Kurtuluş Karaşın
This publication has been prepared within the context of the “Business Integrity Country Agenda:
Strengthening the transparency of business sector in Turkey” project with the support of the UK Prosperity
Fund. Transparency International Turkey is responsible from the content of this document”
Every effort has been made to verify the accuracy of the information contained in this report. All informa-
tion is believed to be correct as of February 2017. Nevertheless, Transparency International Turkey cannot
accept responsibility for the consequences of its use for other purposes or in other contexts.
© 2017 Uluslararası Şeffaflık Derneği. All rights reserved.
ISBN 978-605-82771-2-0
www.seffaflik.org
CONTENTS
List of Tables, List of Graphics, List of Figures ........................................................................................5
Abbreviations ............................................................................................................................................6
Methodology of Business Integrity Country Agenda (BICA) ...................................................................8
1 The Role of Business Integrity in Fighting Corruption ...................................................................................8
2 Why A New Business Assessment Tool? ......................................................................................................9
3 BICA - Turkey ..........................................................................................................................................10
4 Methodology ...........................................................................................................................................11
5 Structure of the Report ............................................................................................................................14
Executive Summary ................................................................................................................................15
BUSINESS INTEGRITY COUNTRY AGENDA TURKEY
COUNTRY CONTEXT .................................................................................................................................26
1 PUBLIC SECTOR ASSESSMENT .........................................................................................................49
1.1 Prohibiting bribery of public officials .......................................................................................49
1.1.1 Laws prohibiting bribery of public officials ...........................................................................49
1.1.2 Enforcement of laws prohibiting bribery of public officials .....................................................51
1.1.3 Capacities to enforce laws prohibiting bribery of public officials ............................................57
1.2 Prohibiting commercial bribery ................................................................................................61
1.2.1 Laws prohibiting commercial bribery ................................................................................... 61
1.2.2 Enforcement of laws prohibiting commercial bribery .............................................................63
1.2.3 Capacities to enforce laws prohibiting commercial bribery .....................................................63
1.3 Prohibiting laundering of proceeds of crime .............................................................................64
1.3.1 Laws prohibiting laundering of proceeds of crime ................................................................64
1.3.2 Enforcement of laws prohibiting laundering of proceeds of crime ..........................................68
1.3.3 Capacities to enforce laws prohibiting laundering of proceeds of crime .................................70
1.4 Prohibiting collusion .................................................................................................................73
1.4.1 Laws prohibiting collusion ..................................................................................................73
1.4.2 Enforcement of laws prohibiting collusion ............................................................................74
1.4.3 Capacities to enforce laws prohibiting collusion ...................................................................74
1.5 Whistleblowing .........................................................................................................................75
1.5.1 Whistleblower laws ............................................................................................................75
1.5.2 Enforcement of whistleblower laws .....................................................................................77
1.6 Accounting, auditing and disclosure ........................................................................................78
1.6.1 Accounting and auditing standards .....................................................................................78
1.6.2 Enforcement of accounting and auditing standards ..............................................................81
1.6.3 Professional service providers .............................................................................................84
1.6.4 Beneficial ownership ..........................................................................................................85
1.7 Prohibiting undue influence .....................................................................................................87
1.7.1 Laws on political contributions ............................................................................................87
1.7.2 Enforcement and public disclosure on political contributions ..................................................93
1.7.3 Laws on lobbying ...............................................................................................................96
1.7.4 Enforcement and public disclosure on lobbying ....................................................................96
Business Integrity Country Agenda-Turkey
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1.7.5 Laws on other conflicts of interest .......................................................................................97
1.7.6 Enforcement and public disclosure of other conflicts of interest ...........................................100
1.8 Public Procurement ................................................................................................................102
1.8.1 Operating environment .....................................................................................................102
1.8.2 Integrity of contracting authorities .....................................................................................105
1.8.3 External safeguards .........................................................................................................109
1.8.4 Regulations for the private sector ......................................................................................110
1.9 Taxes and customs .................................................................................................................112
1.9.1 Operating environment .....................................................................................................112
1.9.2 Integrity of tax administration authorities ...........................................................................114
1.9.3 External safeguards .........................................................................................................115
1.10 Open data ................................................................................................................................118
1.10.1 Data ecosystem ..............................................................................................................118
2 PRIVATE SECTOR ASSESSMENT .....................................................................................................121
2.1 Integrity management ............................................................................................................130
2.1.1 Provision of policies .........................................................................................................131
2.1.2 Implementation of practices ..............................................................................................135
2.1.3 Whistle blowing ...............................................................................................................137
2.1.4 Business partner management .........................................................................................139
2.2 Auditing and assurance ..........................................................................................................140
2.2.1 Internal control and monitoring structures...........................................................................140
2.2.2 External audit ..................................................................................................................144
2.2.3 Independent assurance ....................................................................................................150
2.3 Transparency and disclosure ..................................................................................................152
2.3.1 Disclosure of anti-corruption programs ...............................................................................152
2.3.2 Disclosure on organizational structures .............................................................................155
2.3.3 Disclosure on country-by-country operations .....................................................................156
2.3.4 Additional disclosure ........................................................................................................157
2.4 Stakeholder engagement .......................................................................................................158
2.4.1 Stakeholder relations .......................................................................................................158
2.4.2 Business-driven anti-corruption initiatives ..........................................................................158
2.4.3 Business associations ......................................................................................................159
2.5 Board of Directors ..................................................................................................................160
2.5.1 Oversight ........................................................................................................................160
2.5.2 Executive remuneration ....................................................................................................162
2.5.3 Conflicts of interest ..........................................................................................................163
3 CIVIL SOCIETY ASSESSMENT .........................................................................................................169
3.1 Broader checks and balances ................................................................................................171
3.1.1 Independent media ..........................................................................................................171
3.1.2 Civil society engagement on business integrity ..................................................................173
3.1.3 Civil Society monitoring of business integrity ......................................................................174
CONCLUSION, RECOMMENDATIONS AND ACTION PLAN.................................................................177
ANNEXES
ANNEX 1 Questionnaires ...................................................................................................................191
ANNEX 2 Evaluation of Companies and Their Points ............................................................................193
Uluslararası Şeffaflık Derneği
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LIST OF TABLES
Table 1 Definition of SME in Turkey ....................................................................................................39
Table 2 The Size of Informal Economy in Turkey ..................................................................................44
Table 3 Ranks of Turkey in Selected Indices .......................................................................................48
Table 4 Administrative Fees for Violations of Liabilities between 2014-2017 ........................................67
Table 5 Average of Companies Listed on BIST – 50 Index and BIST Sustainability Index ......................129
Table 6 The Companies Which Are Subject to Independent Audit .......................................................146
LIST OF GRAPHICS
Graphic 1 Growth Rates of Turkish Economy ..........................................................................................28
Graphic 2 Inflation Rates on Turkey Between 2006 and 2016 .................................................................29
Graphic 3 Changes in Euro and US$ Between 1990 and 2016 and Important Events ...............................29
Graphic 4 Development of Foreign Trade in Turkish Economy ..................................................................30
Graphic 5 Changes in Current Account and Related Items ......................................................................32
Graphic 6 Total Public Gross Foreign Debt Stock Amount of Turkey and Its Composition ............................33
Graphic 7 Development of Gross Foreign Direct Investments ...................................................................34
Graphic 8 Income from Privatization in Turkey (billion US$) ......................................................................37
Graphic 9 Distribution of Employees According to Sectors (000 employee) ...............................................38
Graphic 10 Breakdown of Number of Enterprises, Employees and Turnover According to Sectors (%) ..........40
Graphic 11 Share of the Companies According to Their Sizes (%) ..............................................................40
Graphic 12 Share of the Sectors (2015) ..................................................................................................42
Graphic 13 Breakdown of the Companies in Turkey According to Their Legal Status .................................121
Graphic 14 Average Scores of the Companies Listed on BIST – 50 Index and BIST Sustainability Index
According to Their Anti-corruption Program .........................................................................130
Graphic 15 The Companies Listed on BIST – 50 Index and BIST Sustainability Index According to Their Anti-
corruption Program ............................................................................................................133
Graphic 16 Compliance to Anti-Corruption Programs in the Relations with Partners and Third-Parties .......139
Graphic 17 Audit of Anti-corruption Programs ........................................................................................152
Graphic 18 Assessment of the Companies Listed on BIST 50 Index and BIST Sustainability Index for Reporting
on Anti-corruption Program .................................................................................................154
Graphic 19 Organizational Transparency ................................................................................................156
Graphic 20 Country-by-Country Reporting .............................................................................................157
Graphic 21 Anti-corruption Trainings and Participation of Executives in the Companies Listed on BIST 50
Index and BIST Sustainability Index ......................................................................................161
LIST OF FIGURES
Figure 1 Intersecting Circles of Family Business .................................................................................122
Figure 2 Size and Structure of the Companies in Turkey .....................................................................123
Figure 3 The Companies Listed on BIST 50 Index and BIST Sustainability Index ...................................128
Figure 4 The Companies Listed on BIST Corporate Governance Index and BIST Sustainability Index ......136
Uluslararası Şeffaflık Derneği Business Integrity Country Agenda-Turkey
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ABBREVIATIONS
EU European Union
AGIT Organization for Security and Co-Operation in Europe
AKP Justice and Development Party
BDDK Banking Regulation and Supervision Agency
BEDK Right to Information Assessment Board
BIMER Prime Ministry Communications Center
BIST Istanbul Stock Exchange
BM United Nations
BTK The Information and Communication Technologies Authority
CDP Carbon Disclosure Project
CHP Republican People’s Party
CMB Capital Market Board
CMK Turkish Criminal Procedure Code
WB World Bank
FDI Foreign Direct Investment
EBRD European Bank for Reconstruction and Development
ECM Emerging Companies Market
EIRIS Ethical Investment Research Services Limited
EKAP Electronic Public Procurement Platform
EPDK Energy Community Regulatory Board
IHDI Inequality-adjusted Human Development Index
FATF Financial Action Task Force
FDI Foreign Direct Investment
GRECO The Group of States Against Corruption
GDP Gross Domestic Product
HDP Democratic Party of the Peoples
HDR Human Development Report
HSYK The Supreme Board of Judges and Prosecutors
ICC The International Chamber of Commerce
IFF The Institute of International Finance
IIA The Institute of Internal Auditors
ISO Istanbul Chamber of Industry
KAP Public Disclosure Platform
KGK Public Oversight Accounting and Auditing Standards Authority
KOSGEB Small and Medium Sized Industry Development Organization
KOI Public Private Partnership
KOM Turkish National Police Anti-Smuggling and Organized Crime Department
LPG Liquefied Petroleum Gases
MASAK The Financial Crime Investigation Board
MEDEL Magistrats Européens pour la Démocratie et les Libertés
MERSIS Central Registration System
MHP Nationalist Movement Party
MKK Central Securities Depository of Turkey
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MUSIAD Independent Industrialists’ and Businessmen’s Association
OECD Organization for Economic Co-operation and Development
OECD SIGMA Support for Improvement in Governance and Management
OHAL State of Emergency
OTV Special Consumption Tax
RTÜK Radio and Television Supreme Council
SELDI South East Leadership and Development Initiative
SME Micro, Small and Medium-sized Enterprise
SMMM Independent Accountant and Financial Advisor
STK Non Governmental Organization (NGO)
T.C. Turkish Republic
TBB The Bank Association of Turkey
TBMM The Grand National Assembly of Turkey
TCC Turkish Commercial Code
TCK Turkish Criminal Code
TCMB The Central Bank of the Republic of Turkish
TEID Ethics and Reputation Society
TEPAV The Economic Policy Research Foundation of Turkey
TESEV Turkish Economic and Social Studies Foundation
TFRS Turkish Financial Reporting Standards
TKYD Turkish Institutional Investment Managers’ Associations
TMS Turkish Accounting Standards
TOBB The Union of Chambers and Commodity Exchange of Turkish
TOKI The Housing Development Administration
TOU Pre-assessment Reconciliations
TRL Turkish Lira
TRT Turkish Radio and Television Corporation
TSPB Turkish Capital Market Associations
TSO Chamber of Commerce and Industry
TUFE Consumer Price Index
TURKSTAT Turkish Statistical Institute
TURMOB Union of Chambers of Certified Public Accountants Turkey
TUSIAD Turkish Industry and Business Association
TYSAP Strengthening Anti-Corruption Practices in Turkey
UFRS International Financial Reporting Standards
UNCAC The United Nations Convention Against Corruption
UNDP United Nations Development Program
UFE Production Price Index
VAT Value Added Tax
VIMER Tax Communication Center
WEF World Economic Forum
YARSAV The Association of Judges and Prosecutors
YEEP National Renewable Energy Action Plan for Turkey
YKTS Registration of Liable and Tracking System
YMM Certified Public Accounted
YSK Supreme Election Board
Uluslararası Şeffaflık Derneği Business Integrity Country Agenda-Turkey
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METHODOLOGY OF BUSINESS
INTEGRITY COUNTRY AGENDA (BICA)
1 THE ROLE OF BUSINESS INTEGRITY IN FIGHTING CORRUPTION
Companies are often seen as the supply side of the corruption equation, using corrupt pay-
ments to gain undue advantages (e.g. in public tenders). But companies can also be victims; vic-
tims of weak governance in countries where doing business with integrity may result in losing
contracts to corrupt competitors, and victims of extortion requests by corrupt public officials
or other business partners. Thus, countering corruption in and from the business sector must
target both perspectives: the demand side (i.e. public sector) but also the supply side (i.e. busi-
ness sector).
These two perspectives are also often captured in definitions of business integrity. For exam-
ple, Transparency International defines business integrity as “adherence to globally - recognized
ethical standards, compliance with both the spirit and letter of the law and regulations, and pro-
motion of responsible core values (e.g. honesty, fairness and trustworthiness).”1 This shows that
business integrity, in the broadest sense, encompasses the full range of good business prac-
tices commonly associated with corporate social responsibility. More narrowly, it reflects a
commitment to abide by minimum legal requirements and norms of ethical business conduct.
Organizations that act with integrity follow the law and ethical norms, treat their employees,
customers, and business partners fairly and respectfully, abide by their commitments, and gen-
erally conduct their affairs in a socially responsible manner.
In an anti - corruption context, business integrity means conducting business in a manner that
avoids bribery and other corrupt acts that undermine the operation of and public confidence in
the marketplace.2
For this reason, the various influencing factors need to be understood first.
Addressing the demand side, there are two aspects that should be considered:
• the environment that is set by the public sector for companies to do business, as well as
• the public sector’s interactions with the business sector.
First, it is important to assess which (corruption - related) laws and regulations are provided by
the public sector and how they are enforced. Second, companies also engage with the public
sector in their day-to-day operations, such as obtaining operating licenses and other public ser-
vices (e.g. electricity, communication), paying taxes, enforcing contracts, etc. These processes
provide risks for business integrity as well. For example, high discretionary power in granting
operating licenses to companies can result in extortion requests by public servants.
In addition, businesses (i.e. supply side) have their own responsibility to act with integrity. Fol-
lowing the notion of corporate social responsibility, companies do not only need to comply
1
Transparency International, Policy Position, Building Corporate Integrity Systems to Address Corruption Risks,
#4/2009.
2
Adopted from United Nations Office on Drugs and Crime, A Resource Guide on State Measures for Strengthening
Corporate Integrity, 2013
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