While 2019 was a turbulent time for the Turkish economy, a rapid increase in Turkish exports has revealed promising figures for the future.
In recent times, the greatest news has come for the economy in terms of export figures, which appear to have brought about two new records. With a profit of $15.4 billion recorded over December, the previous year's total was exceeded by $180.5 billion – marking a new record in Turkey's export history.
Foreign imports, meanwhile, suffered a decline of 44.9%, down from $54.3 billion to $29.9 billion. Meanwhile, the imbalance of Turkey's ratio of exports to imports (one of the country's main outstanding issues) rose from 76.5% to 85.8%. Germany, Iraq and the U.K. received the highest amount of Turkish goods and services.
The Turkish provinces paving the way in terms of export goods included, respectively, Istanbul, Kocaeli, Bursa, Ankara and İzmir; however, this year, Yalova came to the fore with a five-time increase in productivity. Data from the Turkish Exporters Assembly (TİM) showed that 17,000 companies began export activities across the country, with observable increases in export numbers leading to Turkey having ranked seventh in the world in terms of activities.
Although some companies are still unaware of the incentives on offer, it is safe to say that the support provided by the Ministry of Commerce cannot be ignored. Export incentives are important in developing export markets, increasing companies' shares in world trade and increasing the competitiveness of firms opening up to international markets.
In this context, many crucial export incentives are being implemented today in Turkey, including state aid for export, inward and outward processing regimes, credit, insurance and guarantee programs provided by Türk Eximbank, sales and deliveries deemed export, export and foreign exchange earning services and activities, and VAT exemption in export.
State aids for exports
The main purpose of state aid in this regard is to support export-oriented activities, especially among small and medium-size enterprises (SME), at both the production and marketing stages, to help them to overcome the problems they face in international markets and to enable them to gain competitiveness.
In other words, the main purpose of state aid is to assist the producer, to support the development of the exporter in every aspect, and to ensure that SMEs get the share they deserve in foreign trade.
Most of state aid has been designed to address the needs of small and medium-sized companies. Enterprises do not have a direct connection with the exports they send out, or plan to send out. It is provided for limited activities over a limited time. All government grants, provided by the Support and Price Stabilization Fund, are subject to the condition that certain activities are carried out entirely by the firms themselves. It is not possible to get state aid first and then to carry out activities.
Within the scope of this support, most commonly, the expenses related to overseas market research travel carried out by industrial and/or commercial companies and companies operating in the software sector are 70% and up to $5,000 per overseas market research trip.
In order to market its products in the electronic environment abroad, membership expenses for e-commerce sites that are approved by the undersecretariat and which are not intended for the end consumer are provided with 70% support for companies and up to $10,000 per year.
Supporting exhibitions abroad
Incentives are also given by the Ministry of Economy to hold and attend international trade exhibitions abroad. In addition, KOSGEB also provides support to exhibitors on the international scene. Half of the attendance fee to be paid by companies who attend such important platforms for deals to be conducted between companies is paid to the participant, with the undersecretariat covering up to $15,000 of costs.
The purpose of this support is to improve Turkey's commercial and industrial property, while also to boost agricultural or environmental companies. Software companies are also being given a targeted boost. The support aims to ensure the harmonization of technical regulations to the health institutions in order to serve the quality of human life. Within this scope, a significant portion of expenditures related to laboratory analyses and certification of agricultural products are on the agenda and signs indicating the safety and security of goods are covered by the Support and Price Stabilization Fund (DFİF).
This includes support covering 50% of expenditure per document and/or analyses of up to a maximum of $25,000. Expenditures must be documented and obtained from the Turkish Standards Institute (TSE) or accredited institutions.
The purpose of this support is to ensure the construction of the marketing and promotion of its products in both the industrial and commercial markets. DFİF also offers services for the trading of goods abroad with trademark registration.
But what is the actual scope of all this in real terms? In terms of storage incentives, industrial/commercial or software companies receive 50% of costs back and up to $120,000 per year for rental expenses. For offices, showrooms and shops, companies are eligible for 50% of costs, valuing up to $100,000 per year. Companies and cooperation organizations benefit from support for rental expenses on each unit for a maximum period of four years. Companies are supported for a maximum of 25 overseas units.
Advertising, promotion and marketing expenses abroad by companies with outlets delivering Turkish products abroad are also eligible for 60% of their costs being covered up a maximum of $250,000 per year.
Furthermore, expenses related to the registration and protection of brands whose companies hold domestic trademark registration certificates abroad at a rate of 50%, up to $50,000 per year.
Supporting TURQUALITY
TURQUALITY is the first and only state-sponsored branding program designed for the creation and placement of Turkish goods and service images. Its overall goal is to enable companies with products with high international branding potential to become a global player on the international market. To achieve this, TURQUALITY is specifically designed to support all processes, from the production to after-sales services.
In order to be covered by TURQUALITY, it is necessary to have a domestic registration certificate, to be registered at least in one of the overseas countries and to have Level 4 (excellent management level) of TURQUALITY maturity. The perfect business model is required in order to obtain this.
TURQUALITY support is divided into two time referrals: unlimited and five-plus-five years. After the latter, a company can apply again for brand support and move to unlimited TURQUALITY.
Thanks to the efficiency of the export incentives, the export amount has accelerated from over $113 billion in 2010 to $180.5 billion in 2019 – the highest export level in the history of the republic.
Most enterprises cannot benefit from export incentives due to lack of trained personnel, however. For this reason, enterprises that cannot benefit from export incentives should receive support from a consulting firm specialized in their fields. Today, many well-known Turkish brands have their activities supported by the work of trained consultants.
However, in terms of incentives, Turkey is experiencing some extreme confusion over legislation and practices, which are not being ratified or clarified fast enough. To this end, Incentive Turkey eliminates the lack of coordination between the companies and the ministry, thereby minimizing much of the red tape that comes with current export promotion incentives. Companies are saved from a strenuous workload, as they are able to get the certifications they need without having to deal directly with all the hassle of bureaucratic requirements, legal forms, documents and application forms. The consultancy offers a time advantage by informing companies about the daily changes occurring in terms of the country' export regime.
* Founder of Incentive Turkey