The incentive issue

Dunya Executive - - COMMENTARY - Taner BERKSOY Columnist

The stimulus package announced last week is nothing new. The package has an approach supporting all private sector manufacturing actors as a whole. But there is something different this time around. For the first time in a long time, incentives will take a more selective approach.

The more generic nature of previous implementations was overwhelming. Incentives were organized to distribute in a certain area, for example agriculture, industry, and construction in general. There was no distinction between producers and actors in the field of production that was encouraged in this framework. Whichever field or area was selected, all actors producing in this area would benefit from the prescribed stimulus. Up to recent years, incentives were usually directed to production. Technological innovation, production priorities and so on were not taken into consideration. With the introduction of development plans, this aspect of business has begun to be taken into consideration, but there has been no fundamental change in our incentive logic.

I think that the distinguishing feature and characteristic of the incentive package announced last week is abandoning the “generic allocation” approach we saw in previous incentive programs. The incentives envisaged in the new version are allocat- ed to nominated individual firms. The number of companies is limited to 19. As a first impression, it seems manufacturing activity will be emphasized rather than the company and its owners. I don’t know what you think, but it seems to me that this is an important approach.

Certainly there are clear sides open for criticism in this new incentive package. For example, the fact that a considerable amount of resources were allocated to a small number of companies in the first stage was interpreted and criticized for potentially favoring supporters of political power. There may be truth in this. If so, then the result of the incentives won’t be positive. This means that scarce resources will be wasted.

On the other hand, the economy is experiencing a period of rapid risk increases, voluminous resource outflows, expenditure delays, and therefore weaker overall demand, which is already weak. There is a criticism that states that in such conditions, rather than supporting production, demand and expenditure must be supported. The accuracy of this criticism seems to be strong. The fact is the new incentive program, which seems to be more accurate and stronger in character than the last one, remains ineffective due to a mere timing error. That means an important opportunity has been wasted. It would be a shame.

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