Export incentives

TIM outlines 10 critical steps leveraging exports in Turkey following slow growth

Dunya Executive - - FRONT PAGE - DR. HALİL BADER ARSLAN SECRETARY GENERAL TURKİSH EXPORTERS ASSEMBLY (TIM)

What are the two basic components of global economic performance? My answer to such a question would be growth and trade. Probably most of you would come up with these as well.

This pace of growth of the the global economy last year was 2.4 percent, falling short of expectations and its potential. Slow growth has has affected global trade both in nominal terms and in volume. World trade had its lowest growth last year after the global economic crisis.

Did you know that the dollar value of global exports in 2016 was almost as the same as that of 2008? Awkward but true. After eight years, the gauge shows $16 trillion again.

According to World Trade Organisation data, among the 70 countries respresenting 90% of global trade, 26 countries’ exports increased while 44 substantially decreased. European Union exports decreased by 0.3 percent, the United States by 3.2 percent, China by 7.7 percent, Russia by 17.5 percent and Turkey by 0.8 percent.

For Turkey, 2016 was a tough year. Syria and Iraq, two of its top export markets, were in political and humanitarian trouble. Political tension with Russia hit exports as well. Low oil prices pulled demand down in the Gulf region. These three factors cost Turkish exports more than $10 billion. The failed coup attempt is an impos- sibly difficult event to describe in numbers, but it was a critical obstacle the economy has now overcome. Despite all of that, we have shown a better performance than other countries.

Turkey’s total exports were $142.6 billion last year. Regarding the last three years, some may see it as if exports have come to a standstill. But its market share is growing steadily.

In 2016, Turkey’s

• Share of global exports beat a

record with 0.89 percent. • Share of EU imports reached an

all-time high of 1.28 percent. • Share of U.S. imports reached

an all-time high of 0.29 percent.

How did our exporters manage all of this, despite the recession in global trade, slump in oil revenue and commodities, security risks posed by conflicts in nearby countries, course of euro-dollar parity and failed coup attempt? The success is due to firms that work extremely hard. Investment promotion and export incentives, which were introduced beginning in the second quarter of 2016, have also supported them. In the last few months, most of the ongoing problems and demands from the private sector have been resolved, and brand new incentives were launched by the goverment, effects of which will be witnessed this year. Let’s take a quick tour.

10 CRİTİCAL STEPS TO SUPPORT EXPORTS

1- Export support in budget:

In order to strengthen the export trends of firms in the global market, the amount of support in the 2017 budget has been increased to 3 billion lira from from 1 billion lira. The new allocation will be spent under two headlines: new support and higher limits in current support programs.

2- New Credit Guarantee Fund scheme:

The 20-year-old Credit Guarantee Fund has been reformed to support exporters. The total balance of sureties that can be provided by credit guarantee institutions were raised to 250 billion lira in order to facilitate the access of firms to funds and accelerate the credit process. Furthermore, the cash resources transferred to credit guarantee institutions, which are loan guarantees, were increased to 25 billion lira for the efficient operation of the credit system. With the same arrangement, the description of the beneficiary company changed, so that all businesses that are not small and medium-sized enterprises, especially exporters, are allowed to benefit from the surety of the Credit Guarantee Fund.

3- Turk Eximbank programs:

Considering the demand from exporters, the Central Bank increased the rediscount limits to$17 billion. Within the scope of the cooperation between Turk Eximbank and the Credit Guarantee Fund, which is aimed at reducing the costs, the fund has been able to provide all exporters collateral at 100 percent through Eximbank.

4- “Super incentive” system:

The Economy Ministry has started implementing a new model, dubbed the “super incentive” System, to attract investors. The cabi- net of ministers has been granted the authority to extend comprehensive incentives to investments to be decided on a project basis. In determining the projects to be supported within this scope, attention will also be paid to whether these investments meet the current or future requirements of the economy, in line with the targets set in development plans and annual programs, or if they ensure continued supply, reduce dependence on foreign sources, achieve technologic transition, are innovative and add value, as well as being focused on research and development.

The arrangement brought significant tax exceptions. No tax (except the investment contribution rate) will be levied oin an investment project when an incentive certificate is given for 10 years. Properties of the Treasury can be used directly in these investments without paying any fee. Wage subsidies will be in force for qualified employees.

5- Registry forgiveness:

A procedure has been launched to delete firms’ negative records related to past payment performance, in the case of repayment of all debts borrowed as cash and non-cash loans or in the case of restructuring.

6- Special passports to exporters:

One of the major problems voiced by exporters was long and difficult visa procedures they were subjected to. İn early March, approximately 10,000 companies were given permisision to apply to special passports, giving them visa-free entry to 127 countries.

One to five passports will be giv-

en to members of boards or managers of companies who have been exporting more than $1 million on average and have had exports for all of the last three years. The applications will be accepted by the exporters’ association, with which the company is affiliated, with the form to be determined by the Interior and Economy Ministries.

7- Attraction area program:

Covering 23 provinces in Turkey’s eastern and southeastern regions, the Attraction Area Program is aimed to support industrial, callcenter and data-storage-center investments.

The program includes investment and production support and the industrial production facility relocation areas. Advisory services, investment site land allocation, building construction, interest-free investment loans and operational loan supports with lower interest rates will be given to entrepreneurs. Priority on support allocation for companies will be given to projects that promise high employment, produce imported products, have export potential, affect secondary sectors, innovate, use local machinery and equipment and are realized in organized industrial zones.

8- New support for R&D, innovation and design:

Significant arrangements have been made with regard to tax exemption and employee subsidiaries in the scope of R&D, innovation and design activities, which are indispensable criteria for the growth of Turkey’s economy and exports. Companies are being encouraged to open R&D centers and design centers with lower costs.

9-Fast global market access:

Considerable improvements to improve access to new markets and facilitate participation in international fairs were put into force by the Economy Ministry in order to support the settlement and branding of exporters in foreign markets.

10- E-commerce:

The Turkish Exporters’ Assembly (TIM) took the first step following the decision of Economy Ministry to provide support to group mem- bership of e-commerce websites through related non-governmental organizations. Three agreements were signed between TIM, Compass, Alibaba and Turkish-Exporter that will assist exporters to gain access to new markets through the internet.

Efforts to support exports are not limited to those listed above. We, as the Turkish Exporters’ Assembly, have special programs and projects too. Representing 67,000 exporters employing 3.1 million workers, TIM is working hard to ensure a permanent and sustainable increase in exports to reach 1.5 percent of the global share by 2023.

TIM is conducting 48 trade delegations worldwide this year. Inosuit is one of our favourite projects. Started in late 2016, it supports companies individually to enhance their inovation capabilities. The fourth Inovalig competition process was launched in February, targeting 1,000 applications. In late May, we will organize the first and the largest national brand conference. We are planning to develop an e-learning platform for all exporters in Au- gust. By the end of the year, around 20 target market briefing programs will be completed. Meanwhile, Innovation Week, Inova-TIM, TIM-Academy, TIM-TEB Entrepreneurship House, 500 Largest Services Exporters Competition, Export Summit Turkey and Turkey Design Week will be in this year’s events. Finally, we opened Turkish Trade Centers worldwide, started with Iran, Chicago and Dubai and will continue with openings in New York and London soon.

This year appears to be a positive year for global trade, and Turkey, as a key partner in the global economy, is showing a bright performance in recent months. We have started the year with a large increase in exports. In March, the growth in exports reached 14 percent, and we estimate 8 percent annual growth.

Surely, the supports and incentives mentioned above are not enough if they are not accompanied by the motivation of human capital. But what we are sure to have is the courage and the appetite of companies to invest, produce and export more.

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