Home for it zones

An increased emphasis on the importance of R&D in the Turkish economy has led to the development of specialised industrial zones aimed at integrating research and commercial production.

Industrial production in Turkey has expanded steadily over the past decade, spurred on by healthy economic growth across the country and the introduction of attractive financial and logistical incentives for foreign firms. The influx of foreign investment has had a considerable effect on the industrial sector, providing jobs and encouraging innovation and research to improve manufacturing and establish new enterprises throughout Turkey. The incentives offered by the state’s investment promotion authorities range from lower taxes to the setting up of inclusive and well-provisioned facilities designed to support individual industries. Corporate tax across the board has been reduced from 33 per cent to 20 per cent, but for companies or investors interested in establishing more advanced and research-intensive projects on Turkish soil, myriad additional deductions have been made available.

Since 2001, following the promulgation of the Technology Development Zones (TDZ) Law No. 4691, dozens of TDZs have been designated and constructed in Turkey. These areas have been mandated to provide a supportive location for high-technology and companies with a clear focus on research and development in manufacturing and industrial design. The sites were chosen depending on the industry in question, with locations close to universities, R&D centres, or other academic or scientific institutions involved in related fields selected in order to maximize efficiency. In this way, investments in the area being explored by these academic establishments were hoped to transform these innovations into commercially viable products to be sold on the domestic market or exported. Currently, 44 of 59 planned TDZs are fully functional, with the remaining locations being constructed and approaching inauguration. The immediate benefits of having such zones for Turkey are clear, with the increased efficiency and lower production costs making these complex industries more profitable and attractive. In the longer term, the transfer of technology and experience from foreign companies has a direct effect on the country’s already skilled professionals. New techniques and training in cutting-edge technology are passed on, while small and medium enterprises involved either directly or in peripheral activities to the industry gain access to new methods and technology use. The increased usage of advanced technology makes Turkish industry more competitive, and helps to add value to its exports and productive capacity. For the foreign investor, the advantages of being based in these zones are numerous, and extend beyond the proximity to high-tech universities and centres. With the renewal of the TDZ initiative, companies can enjoy complete exemption from value-added, income, and corporate tax on software produced within the zones until 2023, when the programme will potentially be renewed depending on official assessments of its success. This covers a wide range of products including mobile consumer technology, big data and systems management solutions, and military software products. In addition, wages for personnel in these zones, including support staff, will not be taxed, and social security payments are also subsidized for the first five years of operations.

Another attractive model for investors are Organized Industrial Zones (OIZ), which are similar to TDZs but lack the intense focus on technological development and advanced innovation. Strong infrastructural backbones that provide services for industrial operations including water, waste treatment, electricity, and communications are guaranteed, allowing factories to set up with a minimum of difficulty. These services are also cheaper than they would be outside the zones, and there is no value-added tax paid on land purchase. The obvious attractions of such zones have not been lost on foreign firms since first introduction, and now 80 out of Turkey’s 81 provinces host OIZs. A total of 211 of these are fully functioning at present, with 79 more to be completed in the coming years.