Turkey's latest tech-driven industry program to prevent imports worth $30B

DAILY SABAH
ISTANBUL
Published 08.08.2019 00:33
Turkey eventually aims to increase the share of medium-high and high-tech products in exports in the industrial sector from 39% to 50%.
Turkey eventually aims to increase the share of medium-high and high-tech products in exports in the industrial sector from 39% to 50%.

A long-awaited end-to-end indigenization program aims to ramp up production of high-tech products and eventually their exports, significantly bringing down the current account deficit by preventing imports of around $30 billion

The Industry and Technology Ministry has launched a program to boost the manufacturing of high-tech products using domestic means. The Technology-oriented Industry Action Program, which the ministry has worked on for a long time, recently came into force with the publication of a Presidential Decree in the Official Gazette. The program promises to seriously reduce the current account gap and boost exports of high value-added goods, the ministry said yesterday. The program, also known as the end-to-end indigenization program, may reduce imports worth up to $30 billion.

Earlier last month, Parliament ratified the 11th Development Plan, which identifies the production of high value-added, medium-high and high-tech products, using domestic facilities and capabilities, as one of its main priorities.

CURRENT ACCOUNT DEFICIT TO DROP PERMANENTLY

The Technology-oriented Industry Action Program has been prepared with the vision of "National Technology, Strong Industry," and would be a critical milestone for the Turkish economy, according to Industry and Technology Minister Mustafa Varank.

Varank said the program was prepared with the aim of permanently reducing Turkey's current deficit and growing the economy by using technology. "It will be a result-oriented program based on the commercialization of research and development (R&D) products and the increase in domestic added value," he said.

"With the decrease in the ratio of imported intermediate goods in industry, our current deficit will decrease permanently. We will strengthen our hands in global competition," he added.

The minister further noted that President Recep Tayyip Erdoğan put forward Turkey's strategic vision in the field of industry with the 11th Development Plan. "In line with this vision we aim to increase the share of medium-high and high-tech products in exports in the industrial sector from 39% to 50%," he said. While the current surplus is provided in low technology products, the current deficit is given in high-technology products, the minister noted. He stressed that they aim to change this situation permanently and that R&D competence of the industry and trained workforce are capable of producing high-technology products. He further noted that data was collected, filtered and analyzed for months during the program's preparatory phase. "Approximately 400 product groups were identified, before this model, which we can call end-to-end localization, was prepared. With this program, our current deficit will decrease permanently. We will also have a stronger export basket by reducing the rate of imported intermediate goods in our industry," said Varank.

"Undoubtedly, this situation will raise our country to higher levels of global competition. In conducting the program, all departments of our ministry will focus on the same goal. During the preparatory phase of the program, we worked with other ministries, institutions and the private sector. The program, in which we will offer export and financing supports together with our stakeholders, will set an example for the effective and rapid implementation of the new government system."

STRATEGIC INVESTMENT INCENTIVE

The technological products of the future were taken into consideration while preparing the program, in which R&D, investment and production incentives will be managed from a single window.

The Scientific and Technological Research Council of Turkey (TÜBİTAK), Small and Medium Industry Development Organization (KOSGEB), industry and R&D support and investment incentives will be defined end-to-end and will be designed to spread the benefit to the whole.

The process will involve support for the product from the idea stage to the market and monitoring at every step, from R&D, investment and production to marketing. Within the scope of the program, an evaluation process, whose main criterion is added value, will be carried out with the contributions of the Industry and Technology Ministry, TÜBİTAK and KOSGEB.

The projects backed by the program will include not only investors but also buyers of the product. The manufacturers and buyers will be supported together. Purchase guarantee mechanisms will also run in the projects where the public is the buyer.

Development Agencies will play an active role in introducing the program to investors and in pairing producers and buyers. R&D work will be requested to create added value for the product.

The investments supported under the program will receive strategic investment incentives. Investments of over TL 50 million will benefit from project-based incentives. The ministry will link all projects for which a support decision has been made to the calendar, closely monitor the R&D and investment processes and enable investors to promptly overcome any problems they may encounter.

The ministry will announce product lists from the machinery, computers, electronics, optics, electrical equipment, pharmaceuticals, chemical, and transportation sectors. Investor calls for these lists will be made. The first application will start with machinery, which was selected as the pilot sector.

While creating the product list, the technological products of the future were taken into consideration and the aim was to reduce the imports of intermediate goods. Analyses were performed using big data analytical tools.

The product list was determined by considering a series of variables like, technology level, world import trend, Turkey's exports, imports and foreign trade deficit, market shares of the top three exporting countries, product complexity index, market concentration, added value potential, export competitiveness, number of enterprises in this field in Turkey and production amount, top three origins in trade and exit/departure country, product similarity location, and product forward and back ties.

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