January 2000

Turkey Update Memo

The following report outlines new developments in the past three months and the state of on-going developments.

Main regulatory developments of this period include a draft law concerning the operations of Capital Market Council in electronic medium, a draft law concerning the licensing procedures in communication services, a draft law concerning the establishment of National Information Security Council, a draft law concerning Higher Council of Banking, and a government decision concerning consumer protection against the Y2K problem.

1. Key legislative measures

2. Privacy, data protection, consumer protection

A decision was made by the Ministry of Industry and Trade to protect consumers against the Y2K problem. The decision considers the Y2K problem as a defect in goods and holds the manufacturers responsible for any loss or damage caused by the Y2K problem. Analysts say that the scope of this decision is for goods produced after 1.1.1998 since the consumer protection law protects consumers for a two year period starting from the date of purchase.

3. Electronic protection, legal protection and security (encryption, electronic commerce)

Two draft laws are under preparation (see paragraph II-2.2), one involving the establishment of a National Information Security Organisation, and the other involving the enlargement of the responsibilities of Capital Market Council (Sermaye Piyasasi Kurulu) to the electronic medium.

4. New laws and measures under preparation

An important daft law was prepared by the Ministry of Transportation in this period concerning general telecommunication regulation. The draft law changes the present regulation (by changing some articles of Law number 406, Law number 3348 and Law number 2813, and by adding some articles to these laws) to liberalise the telecommunication regulation. The draft law establishes a telecommunication organisation as the main body of regulation, as an organisation independent from the Ministry of transportation. The draft law ends the monopoly status of Turk Telekom by the year 2004. It clarifies many issues concerning telecom regulation and limits the rights of Turk Telecom in some aspects. It also eliminates the requirement that any license to be granted by the Ministry should first be approved by Turk Telekom. With this change, those who apply for a license will directly apply to the Ministry, and the approval of Turk Telekom will no longer be required.

Another very important law prepared by the Ministry of Defence involves the establishment of National Information Security Organisation under the Ministry of Defence. The scope of the Organisation includes both the military and the civil world. The Organisation is composed of the Higher Council of National Information Security and some technical units such as a cryptology unit, an information security unit, etc. The purpose of the draft law is to protect information related to national security, improve information security activities, produce and determine the necessary policies, prepare short and long term plans, determine criteria and standards, etc.

Another draft law was prepared by Ministry of State to expand the operation and the responsibilities and rights of the Capital Market Council (Sermaye Piyasasi Kurulu) to the electronic medium. The draft law requires the record keeping of the Council be computerised and establishes the Council as the authority in all transactions and activities done in the electronic medium. The Council is the authority in stock market operations.

Another draft law prepared by the Ministry of State concerns Higher Council of Banking. The draft law prohibits the members of the Council be shareholders of banks. The draft law also changes the authority to permit the establishment of new banks from the Cabinet of Ministers to Banking Regulation and Audit Council. The draft law also makes some changes in regulations concerning bank mergers and acquisitions.

Another draft law has been prepared to prohibit accepting gifts and money in international commercial transactions in accordance with the agreement made with OECD.

5. Media and telecommunication markets: privatisations, foreign investments, mergers and acquisitions, etc.

The new Internet backbone of Turk Telekom, TTNet, is now under operation. TTNet replaces the previous backbone Turnet, thus increasing the communication capacity, connectivity and the quality of service considerably. One of the most of important features of TTNet is its Dial Internet service, which makes it possible to connect to TTNet from ordinary telephone units by dialing the number 145 or 146. Dial Internet service is intended mostly for remote areas where no ISP provides Internet service. Another important practice with the introduction of TTNet is that Turk Telekom itself is to provide ISP services. These two services are being criticised heavily in the ISP market.