INVESTMENT ADVISORY COUNCIL FOR TURKEY … 2009 Report_son.pdf · YATIRIM DANIÞMA KONSEYÝ ÝLERLEME RAPORU ... 4 INVESTMENT ADVISORY COUNCIL FOR TURKEY PROGRESS REPORT 2009

INVESTMENT ADVISORY COUNCIL FOR TURKEY

PROGRESS REPORT

2008

TÜRKÝYEYATIRIM DANIÞMA KONSEYÝ

ÝLERLEME RAPORU

2009

INVESTMENT ADVISORY COUNCIL

FOR TURKEY

PROGRESS REPORT

2009

3Contents

CONTENTS

FOREWORD 9INTRODUCTION 10EXECUTIVE SUMMARY 13

INVESTMENT ADVISORY COUNCIL FIFTH MEETING RECOMMENDATIONS

1. Improving education and training, particularly foreign language skills and technical education based on public-private cooperation, geared to private sector needs 21

2. Enhancing dialogue between industry and universities to promote entrepreneurship, leadership and management skills 28

3. Accelerating energy sector reforms, including automatic cost recovery pricing, diversification, deregulation and privatization 30

4. Improving infrastructure, particularly transportation and information/communication technology as well as appropriate contractual and legal framework for PPP/BOT 36

5. Moving forward with labor market reforms that further enhance flexibility while protecting workers 49

6. Further strengthening the implementation of legislation on intellectual property rights in accordance with international standards 51

7. Improving customs procedures 55

8. Improving public administration practices by enhancing transparency, predictability and efficiency 59

9. Strengthening measures to reduce informality, including fighting against tax evasion 61

10. Encouraging the growth of SMEs to drive employment and expand their role in the formal economy 64

11. Enacting and implementing the new Commercial Code to improve corporate governance and accounting standards 67

OTHER IMPROVEMENTS IN THE INVESTMENT ENVIRONMENT OF TURKEY

1. Accelerating the reduction of administrative barriers ........................................................................... 69

2. Increasing the efficiency of judicial process ......................................................................................... 74

3. Ensuring the proper functioning of the foreign exchange market and vigilant implementation of the inflation targeting regime ......................................................................................................... 77

4. Further progress in fiscal consolidation and strengthening efforts to restructure expenditures ............. 84

5. Deepening financial market development .......................................................................................... 90

6. Supporting R&D and innovation activities .......................................................................................... 94

7. Improving the image of the country ................................................................................................ 103

8. Strengthening efforts in land planning and management ................................................................ 106

9. Continuing with privatization and deregulation to improve competition .......................................... 107

10. Social Security Reform ..................................................................................................................... 109

Chapter

Chapter

1

2

4 INVESTMENT ADVISORY COUNCIL FOR TURKEY PROGRESS REPORT 2009

TABLES

Table 1: Applicants to the SAN-TEZ Program 29Table 2: Distribution of Motorway Construction 36Table 3: Motorways Planned to be Financed via BOT Model 37Table 4: North-South Highway Corridors to be Improved Physically and Geometrically 39Table 5: Number of Airports Managed by General Directorate of Airports Authority 42Table 6: Air Passenger Traffic 42Table 7: Investment Expenditures 2004-2008 43Table 8: Projects Generated by General Directorate of Airports Authority within BOT Model 43Table 9: Number of Licensed Operators 46Table 10: Market Size of Information and Telecommunication Technologies 48Table 11: Number of Broadband Internet and Mobile Phone Subscribers 48Table 12: The Number of Operations for Avoiding Piracy of Intellectual Property Rights and Total

Materials Retrieved 53Table 13: The Customs Clearance Registered Electronically 55Table 14: Prevalence Rate of the EDI System and the Ratio of Customs Declaration Registered via EDI

to the Total Declarations 55Table 15: Risk Analysis Project Summary Results 61Table 16: Comparison of the Payments Received by the Banks According to VEDOP 62Table 17: KOSGEB Supports Allocated for SMEs 64Table 18: New Support Instruments of KOSGEB 65Table 19: KGF Guarantees and the Credit Volume 66Table 20: Development Agencies Established in NUTS-2 Regions 70Table 21: The CBRT’s Net Foreign Exchange Purchases and Sales (USD million) 79Table 22: The Inflation Targets and Realizations during the Implicit Inflation Targeting Period

(2002-2005) 80Table 23: The Inflation Targets and Realizations during the Explicit Inflation Targeting Period

(2006-2009) 80Table 24: Revised Inflation Targets for 2009-2011 81Table 25: Monetary Policy Committee Meetings and Policy Decisions in 2008 82Table 26: Central Government Budget Targets and Realizations for 2008 84Table 27: Budget Targets and Estimated Expenditures for 2009 85Table 28: Gross and Net Debt Stock in 2007-2009 85Table 29: Public Sector Fixed Capital Investments in Turkey 87Table 30: Total Fixed Capital Investments 88Table 31: R & D Expenditures of Countries (2002-2007) 95Table 32: Shares of R&D Expenditures in GDP 95Table 33: Full-Time R&D Human Resources 96Table 34: Amount of Incentives Granted and Number of Subcribers for R&D Supports 97Table 35: TUBITAK TRA Budget 97Table 36: Funds Received by Turkish Partners in EU 7th Framework Program 98Table 37: TEYDEP Supports 99Table 38: SAN-TEZ Program Project Applications Annually 100Table 39: The Technology Development and Innovation Supports by KOSGEB 101Table 40: Supports by TTGV (2006-2009) 102Table 41: Mid 2008 - 2009 Media Campaigns 103Table 42: Number of Leased Agricultural Enterprises by TIGEM 106Table 43: Major Privatization Implementations in 2008 107Table 44: Major Privatization Implementations in 2009 108

5Contents

GRAPHICS

Graphic 1: Production of Energy in the Last Five Years 30

Graphic 2: Supply and Demand Structure of Electricity 32

Graphic 3: Electricity Production in 2008- Distribution by Source 32

Graphic 4: Length of Divided Highways 38

Graphic 5: The Distribution of Patent Applications and Registrations 51

Graphic 6: Distribution of Utility Model Applications and Registrations 52

Graphic 7: The Comparison of Patent Application and Registered Patents Statistics in Turkey with EPO Member Countries 52

Graphic 8: Custom Clearance via EDI 56

Graphic 9: The Ratio of Export-Import Registration via EVD-WEB 56

Graphic 10: Foreign Exchange Developments 77

Graphic 11: CPI and Core CPI (Annual Percentage Change) 81

Graphic 12: The Comparison of ISE with World Markets (August 2007- September 2009) 90

Graphic 13: Stock Market Traded Value Rank 91

Graphic 14: Turnover Ratio 91

Graphic 15: GDP and R&D Expenditures Annually 94

Graphic 16: R&D Expenditures by the Source of Finance 96

Graphic 17: Researchers Benefited from the Return Program to Europe 98

FIGURES

Figure 1: PRODIS Flow Chart 73


ABBREVIATIONS

ADÜAŞAnkara Natural Electricity Production and Distribution Co.

GNP Gross National Product

BDC Business Development Centers IAC Investment Advisory Council

BILGE Customs Automation System ICEX Spain Foreign Trade Institute

BOT Build-Operate-Transfer ICTAInformation and Communication Technologies Authority

BRSABanking Regulation and Supervision Agency

IDFWorld Bank- Institutional Development Fund

BTC Baku-Tbilisi-Ceyhan Crude Oil Project

ILO International Labor Organization

BTEThe Baku-Tbilisi-Erzurum Natural Gas Pipeline

IPAInstrument for Pre-Accession Assistance

CBRTCentral Bank of the Republic of Turkey

ISE Istanbul Stock Exchange

CMB Capital Markets Board of Turkey ISPAT Investment Support and Promotion Agency of Turkey

CPI Consumer Price Index ISO Investment Support Office

DHMIGeneral Directorate of State Airports Authority

ISKUR The Turkish Employment Agency

DMS Document Management System ITGI Turkey-Greece-Italy Natural Gas Pipeline

DTMUndersecretariat of Prime Ministry for Foreign Trade

KADIMThe Project of Fight Against the Unregistered Employment

EDI Electronic Data Interchange KGF Credit Guarantee Fund

EES European Employment Strategy KOSGEBSmall and Medium Enterprises Development Organization

EIA Environmental Impact Assessment LNG Liquefied Natural Gas

EMRA Energy Market Regulatory Authority

MCAPModernization of Customs Administration Project

EP Environmental Programs MOLSSMinistry of Labor and Social Security

EPO European Patent Office MONE Ministry of National Education

EPRFTEconomic Policy Research Foundation of Turkey

MPC Monetary Policy Committee

EU European Union NABUCCOTurkey-Bulgaria-Romania-Hungary-Austria Natural Gas Pipeline

GAP South-Eastern Anatolia Project NVQINational Vocational Qualifications Institution

GDAAGeneral Directorate of Airports Authority

OECDOrganisation for Economic Cooperation and Development

GDAE General Directorate of Agricultural Enterprises

OIZ Organized Industrial Zone

GDH General Directorate of Highways PA Privatization Administration

GDP Gross Domestic Product PCT Patent Cooperation Treaty

7Abbreviations

ABBREVIATIONS

PEMS Project Evaluation and Monitoring System

TEKMER Technology Development Center

PETKİM Petrokimya Holding Corporation TEKNOGİRİŞİM Technology and Innovation-Oriented Initiatives Support Program

PHC Privatization High Council TEYDEBThe Presidency of Technology and Innovation Support Programs

PRAPresidency of Revenue Administration

TKADProject of Supporting the Quality Infrastructure of Turkey

PRODISProject Assessment and Monitoring System

TLT Trademark Law Treaty

R&D Research and Development TOETerm Transactions and Options Exchange

San-Tez Industry Thesis TPC Turkey Petroleum Corporation

SCSTSupreme Council for Science and Technology

TPI Turkish Patent Institute

SEC Supreme Education Council TRA Turkish Research Area

SII Social Insurance Institution TSI Turkish Standards Institution

SMARTAir Traffic Management Resources Systematic Modernization of Turkey

TTGVTechnology Development Foundation of Turkey

SME Small and Medium Enterprises TUBITAKThe Scientific and Technological Research Council of Turkey

SOE State Owned Enterprises TURKAK Turkish Accreditation Agency

SPO State Planning Organization TurkDEX Turkish Derivatives Exchange

SSCS Small Scale Consulting Support TURKSTAT Turkish Statistical Institute

SSI Social Security Institution TURKTELEKOM Turkish Telecommunication Corporation

SVETStrengthening Vocational Education and Training System

UOC Universitat Oberta de Catalonia

TAKBISLand Registry and Cadastre Information System Project

UYAPThe National Judiciary Network Project

TASB Turkish Accounting Standards Board

VAT Value Added Tax

TBMMThe Grand National Assembly of Turkey

VEDOP Tax Authorities Automation Project

TCDD Turkish State Railways VERIAData Storage and Administration Project

TDZ Technology Development Zone WIPOWorld Intellectual Property Organization

TEDAŞ Turkey Electiricity Disribution A.Ş. YOIKKCoordination Council for the Improvement of the Investment Environment

TEKELCigarette Industry Enterprise and Trade Corporation

YOK Council of Higher Education


9Foreword

FOREWORD

I have the honour to present the fifth volume of the Investment Advisory Council Progress Report. The report was prepared with the related institutions’ contribution to provide progress on each of the recommendations of the members of the Investment Advisory Council which was established in 2004 to bring an international perspective to investment climate reform studies.

At the fifth meeting of the Investment Advisory Council, which was held on June 18, 2008 under the chair of the Prime Minister Mr. Recep Tayyip Erdoğan, the Council members expressed that record high level FDI inflows over the last couple of years were prominent success. They also highlighted that progressive reforms in R&D, social security, insurance and employment were noteworthy.

Turkey became more resilient to the effects of global financial crisis as a result of her stability oriented macroeconomic policies and structural reforms. The prudent fiscal discipline, banking sector reform, the achievements in the privatization, deregulation of main sectors and floating exchange rate regime increased the flexibility and resilience of the economy.

Global FDI flows shrinked by 14% in 2008 as a consequence of negative effects of the global financial crisis on developed countries. However, Turkey maintained to be 20th in the globe and 9th among developing countries in terms of attracting FDI with the inflows of USD 18.2 billion in 2008.

The global financial crisis has underlined the importance of structural reforms. Our Government has been decisively continuing implementing the structural refoms on strengthening the functions of regulatory and supervisory bodies, facilitating R&D and innovation activities, improving transportation and energy network, which are also in line with the recommendations of the Council.

It’s a great pleasure for me to share this report on 2008 and 2009’s progress along with the Council recommendations that were closely monitored by YOIKK platform. I sincerely believe that the sixth Council meeting this year will give guidance to the works for strengthening Turkey’s position as an attractive investment destination.

Ali BABACAN

Deputy Prime Minister


INTRODUCTION

Under the chair of the Prime Minister Mr. Recep Tayyip Erdoğan, top level executives of 19 multinational companies, the managing directors of IMF, World Bank and the chairmen of four leading business associations along with the Cabinet members and related senior government officials, discussed Turkey’s progress in the previous year at the fifth meeting of Investment Advisory Council meeting on June 18, 2008.

The Council members emphasized the importance of 2008’s reforms in the areas of strengthening R&D, social security, regulating insurance sector and increasing the flexibility of labor market. Conforming the belief that alignment with the EU Acquis will provide a strong anchor for the investors, the members also stressed the need for going ahead with macroeconomic policies that will limit inflationary pressures and reduce current account deficit in the following term.

In the Declaration of Outcomes document, which was publicized at the end of the fifth meeting, Council members summarized their recommendations under 12 main headings:

¡ Improve education and training, particularly foreign language skills and technical education based on public-private cooperation, geared to private sector needs

¡ Enhance dialogue between industry and universities to promote entrepreneurship, leadership and management skills

¡ Accelerate energy sector reforms, including automatic cost recovery pricing, diversification, deregulation and privatization

¡ Move forward with labor market reforms that further enhance flexibility while protecting workers

¡ Improve infrastructure, particularly transportation and information/communication technology as well as appropriate contractual and legal framework for PPP/BOT

¡ Further strengthen the implementation of legislation on intellectual property rights in accordance with international standards

¡ Reduce barriers to further penetration of broadband internet and PC adoption

¡ Improve customs procedures

¡ Improve public administration practices by enhancing transparency, predictability and efficiency

¡ Strengthen measures to reduce informality, including fighting against tax evasion

¡ Encourage the growth of SMEs to drive employment and expand their role in the formal economy

¡ Enact and implement the new commercial code to improve corporate governance and accounting standards

The recommendations raised by the Council members since 2004 can be grouped under 21 main headings. Special priority is given to the Council recommendations by the institutions throughout their decision period on reform agenda regarding the improvement of investment climate. These recommendations are also considered in the process of formation of the YOIKK Technical Committee Action Plans.

11Introduction

As a result of YOIKK studies, the image of Turkey as an attractive investment destination has improved in the major investment climate indices. Turkey ranked 41st in the “Best Countries to Do Business Index” published by Forbes in both 2008 and 2009; whereas Turkey ranked 48th in 2007 and 61st in 2006. Also, in Economic Freedom Index, published by Heritage Foundation and the Wall Street Institution, measuring economic freedom level of the countries, Turkey ranked 75th among 183 countries in 2009. In Global Competitiveness Report published by WEF in 2009, Turkey ranked 61st among 133 countries.

This Progress Report relies on the data compiled from 60 various institutions. The first section summarizes the progress achieved on the issues that were raised during the fifth meeting of the Investment Advisory Council in 2008 and 2009 specifically. The second section provides data on the progress achieved on the remaining recommendations of the previous meetings since 2004.


13Executive Summary

EXECUTIVE SUMMARY

I. INVESTMENT ADVISORY COUNCIL FIFTH MEETING RECOMMENDATIONS

Improving education and training, particularly foreign language skills and technical education based on public-private cooperation, geared to private sector needs

¡ The number of students attending vocational and technical secondary education within the whole secondary education increased in 2008-2009 compared to the previous school year.

¡ “Vocational and Technical Education Action Plan”, which aims to promote, encourage, disseminate and increase the quality of vocational and technical education, came into effect in July 2008.

¡ The execution of the “Human Resources Development Through Vocational Education Project”, which is carried out in partnership with the European Union and the Ministry of Education, has been launched. Furthermore, within the context of the “Human Resources Development Operational Program”, which has been conducted under the Instrument for Pre-Accession Assistance provided by the European Union, “Operational Program Concerning the Improvement of the Context and the Qualification of Vocational Education”, in which the Ministry of Education is the beneficiary institution, will be enforced.

¡ Active labor programs, job and profession consultancy services and training activities which are carried out by the Turkish Employment Agency have continued to increase.

¡ Works on secondary legislation that will ensure effective operation of the National Vocational Qualifications Institution were completed.

Enhancing dialogue between industry and universities to promote entrepreneurship, leadership and management skills

¡ “Program on Supporting Business Enterprises Focused on Technology and Innovation” has been initiated by The Scientific and Technological Research Council of Turkey to promote entrepreneurship in business initiatives and to convert scientific knowledge into value added products.

¡ Under the coordination of State Planning Organization, measures to enrich human capital, encourage entrepreneurship, fasten local employment and capital accumulation will be taken in low developed regions.

¡ ISKUR leads education programs on teaching labor force, developing job searching strategies, prompting entrepreneurship, heading profession, vocational training, adaptation to working life, technical consultancy and employment guaranteed guidance within the context of active labor force policies.


Accelerating energy sector reforms, including automatic cost recovery pricing, diversification, deregulation and privatization

¡ In November 2002 - October 2009, 186 licences, 60 of which were distribution licences, were granted by the Energy Market Regulatory Authority regarding the natural gas market activities.

¡ The intergovernmental agreement for the project of Turkey-Bulgaria-Romania-Hungary-Austria Natural Gas Pipeline aiming to transport Middle East and Caspian natural gas reserves to Europe was signed on July 13, 2009.

¡ The State Owned Enterprises in the energy sector have been implementing automatic cost recovery pricing since July 1, 2008.

Improving infrastructure especially in transportation and information technologies with an appropriate agreement and legal infrastructure for public and private partnership/build-operate-transfer projects; reducing the burdens on increasing the rate of broadband internet and personal computer use

Improving transportation infrastructure

Highway Transportation

¡ Total length of highways reached 64,253 km as of November 15, 2009; 17,222 km of which are divided ways.

¡ The tender for Istanbul Strait Highway Passage Tunnel which was due to connect Asia and Europe continents by land and planned to be financed by BOT Model was held on June 30, 2008.

Railway Transportation

¡ Ankara-Eskisehir part of the Ankara-İstanbul High Speed Train Project which aims to increase the share of railways in passenger transportation from 10% to 78% by reducing the travel duration to 3 hours from 6 hours has been completed.

¡ Construction phase of the part to be built by Turkey within Turkey-Georgia-Azerbaijan Railway (Kars-Ahılkelek-Tbilisi-Baku) Project which was developed to connect Europe to Caucasus and Central Asian Republics over Turkey began in July 2008.

Maritime Transportation

¡ Tenders for “Transportation Coastal Buildings Master Plan Study” and “Tourism Coastal Buildings Master Plan Study” were finalized in January 2009. These studies aim to determine infrastructural facilities and additional capacities to be constructed in coastal regions effectively, while increasing the efficiency of location and time planning.

¡ Within the works conducted to provide the necessary infrastructure for maritime transportation and yacht tourism through private sector dynamics and BOT model, Didim Yacht Port was opened and construction works of Çeşme, Sığacık, Kaş, Alanya, Yalova and Mersin Yacht Ports are ongoing.

15Executive Summary

Air Transportation

¡ The number of airports managed by the General Directorate of Airports Authority, 27 of which are in international status, has reached 40.

¡ In 2008, international flights passenger traffic reached 43 million, a 13% increase; domestic flights passenger traffic reached 35.8 million, a 12% increase and total passenger traffic reached 79.4 million, a 12.6% increase.

Improving infrastructure in information technologies and reducing the burdens on increasing the rate of broadband internet and personal computer use

¡ The Electronic Communication Law on simplification and streamlining of the necessity, cost and timing of permits and licences on information and communication technologies was enacted in November 2008.

¡ Regulatory amendment regarding fixed phone lines which aimed to liberalize local calls was enacted in May 2009.

¡ The number of broadband internet subscribers has reached 5.9 million, as of June 2009 from the level of 122,559 subscribers in 2003. The number of mobile phone subscribers which was 28 million in 2003 has increased to 64 million as of August 2009.

Moving forward with labor market reforms that further enhance flexibility while protecting workers

¡ Within the scope of the Law on Social Insurances and General Health Insurance, those working on part-time basis or on-call or in domestic service for less than 30 days in a month were also included under insurance coverage.

¡ With the introduction of the Employment Package, the measures enhancing the flexibility of the labor market came into effect.

¡ The conditions for eligibility to benefit from short-term employment were facilitated.

¡ Within the context of the “Human Resources Development Operational Program”; “Women’s Employment Support Operation”, “Youth Employment Support Operation” and “Social Integration and Development of Employability of the Disadvantaged Operation” are conducted by the Turkish Employment Agency under the administration of the Ministry of Labor and Social Security.

Further strengthen the implementation of legislation on intellectual property rights in accordance with international standards

¡ The patent applications and utility model applications have increased by 519% and 144% respectively since 2003, while the registered patents and registered utility models have increased by 312% and 159% respectively in the same period.

¡ The negotiation on Intellectual Property Law Chapter within the context of EU membership process was started in 2008.

¡ According to the National Action Plan for Turkey, which was finalized as of January 2008, 6 projects with the financial size of Euro 1.71 million will be implemented in 2007-2010 with collaboration of European Patent Office.


¡ The Technology Transfer Office, which was established at Gazi University within the scope of the pilot project of “Establishing Technology Transfer Offices at the Universities” directed by European Patent Office, started its activities in October 2008.

Improving customs procedures

¡ The ratio of the customs clearance procedure registered electronically and via Electronic Data Interchange was 99.9% and 87.4% respectively in 2009.

¡ Since 2008, a clearance has been able to be filed via internet from offices of investors who do not have required software.

¡ In the second half of 2009, the new general rates of red line which define the control of the documents together with physical examination of goods in the BILGE System were reduced to at most 25% and 8% for import and export respectively.

Improving public administration practices by enhancing transparency, predictability and efficiency

¡ The Law on The Right to Information has been enacted in 2003 to facilitate a democratic and transparent administration enabling citizens to reach the information gathered and produced by the public institutions.

¡ The Council of Ethics of Public Servants has been established in order to identify the attitude principles of public servants such as respecting public safety.

¡ The Law on the allocation of public resources to the public services having priority, providing the effective and economic usage of these resources and increasing the authorizations of public administrations during the budgeting periods came into force.

¡ Strategic Paper of Information Society and Action Plan (2006-2010) came into force in the context of e-Transformation Project of Turkey.

¡ e-State Gate (www.turkiye.gov.tr) has been launched to facilitate the common presentation of all public services from one single point and provide fast and secure access to electronic information by citizens.

Strengthening measures to reduce informality, including fighting against tax evasion

¡ The Action Plan of the Strategy on Fighting Against the Informal Economy (2008-2010) came into force on July 1, 2008 in order to execute a decisive fight.

¡ The Project of Risk Analysis and Control executed by the Tax Revenue Administration serves for the fight against the informal economy.

¡ Upon the Law enforced in February 2009, the authority of unifying the withholding tax return (given to the Tax Revenue Administration) and insurance premium report (given to the Social Security Institution) is given to Ministry of Finance in order to strengthen the formal economy.

¡ “The Project on Fighting Against the Unregistered Employment (KADİM)”, which was started by the Ministry of Labor, was completed in September 2008.

17Executive Summary

Encourage the growth of SMEs to drive employment and expand their role in the formal economy

¡ 38,826 SMEs have benefited from the supports of TL 256 million provided by KOSGEB in the last five years.

¡ TL 216.65 million was allocated to 56,052 SMEs through the new 5 SME support instruments of KOSGEB which was started to be implemented in 2008 and 2009.

¡ Legislative works initiated in 2007 to enlarge the scope of KOSGEB supports in order to cover different sectors besides manufacturing, were completed in 2009. After this amendment KOSGEB is now able to reach 3 million SMEs, 10 times of the previous target level.

Enacting and implementing the new Commercial Code to improve corporate governance and accounting standards

¡ The draft Turkish Commercial Law is expected to bring important measures to strenghten corporate governance in Turkey.

II. OTHER IMPROVEMENTS IN THE INVESTMENT ENVIRONMENT OF TURKEY

Accelerating the reduction of administrative barriers

Licensing requirements

¡ In 2010, new investment support offices are planned to be opened within the provinces of the 24 development agencies which were established in 2008 and 2009.

¡ In order to solve the problems of investors with public institutions and agencies at the local level, “One Step Investment Offices” were established within the governorships in June 2008.

¡ The secondary legislation aiming to submit only one application for environmental permits electronically, was adopted on April 29, 2009.

R&D approval process

¡ With the application of Project Assessment and Monitoring System, only online submission of all project applications for Industrial R&D Projects Support Program, SME R&D Start-up Support Program and International Industrial R&D Projects Support Program were started on July 1, 2008.

¡ Due to amendment entered into force on April 1, 2009, the implementation of electronic signature and online numeric information transfer were regulated.


Increasing the efficiency of judicial process

¡ Amendments in the Law on Functions of Court of Conflicts and Law on Supreme Board of Judges and Prosecutors became effective in August 2008.

¡ The construction of the district courts of justice for Ankara, Erzurum and Diyarbakır was completed in 2008.

¡ All the transactions throughout the country can be currently performed by UYAP that has been initiated in order to conclude cases in the cheapest and shortest way via communication and information technology.

Ensuring the proper functioning of the foreign exchange market and vigilant implementation of the inflation targeting regime

¡ The amount bought through foreign exchange buying and selling auctions totaled a net of USD 7.48 billion in 2008 and USD 1.49 billion as of October 20, 2009.

¡ The Central Bank of the Republic of Turkey (CBRT) has taken some policy measures to cushion the stability of the financial system in Turkey in 2008 and in the first half of 2009.

¡ The monetary policy has been implemented in accordance with the inflation targeting regime and the operational framework of the policy has been maintained in 2008 and 2009.

¡ In June 2008, CBRT revised its inflation forecasts for 2009-2011 upwards, as a result of the supply shocks and the fluctuations in global markets which have been observed in the economy since 2006.

¡ In 2008, CBRT pursued a cautious and tight monetary policy; however the policy interest rates were cut in the last quarter of 2008 and 2009. 825 basis points decrease has been issued on the policy interest rates in the first 10 months of 2009.

Further progress in fiscal consolidation and strengthening efforts to restructure expenditures

¡ Significant improvements have been observed in recent years in terms of fiscal consolidation. The central government debt stock to gross domestic product (GDP) ratio, which was 69.2% at the end of 2002, declined to 40% by the end of 2008. Also, the public net debt stock/GDP ratio declined to 28.2% in 2008 from 61.4% in 2002.

¡ The central government budget deficit, based on EU definition, to GDP ratio was 2.2% in 2008, below the Maastricht criteria of 3%.

¡ As a result of the policies for reducing the liquidity risk, the average maturity of domestic borrowing was increased from 9 months to 34 months in 2002-September 2009. For the same term, the exchange rate risk of debt stock was reduced by the decline on the share of foreign currency denominated debt from 58% to 30%. On the other hand, the share of fixed rate debt in domestic debt stock has increased from 36% to 47%, reducing the interest rate risk of domestic debt stock.

¡ 2,759 public investment projects with a total value of TL 219 billion were implemented in 2008; while 2,332 public investment projects with a total value of TL 245.8 billion were implemented in 2009.

¡ In 2010, public sector and private sector fixed capital investments are expected to increase by 10.3% and 7% respectively, as a result of the expected economic recovery.

19Executive Summary

Deepening financial market development

¡ In line with the shrinking global financial economies, a partial decline was observed in Istanbul Stock Exchanges (ISE) in 2008. However as a result of the recovery started to be observed in global economies in 2009, the stock exchanges market has started to show an upward trend from the trough level in March 2009.

¡ In the first 9 months of 2009, 81.32% increase was observed in ISE, not only more than the increases in the developing countries but even more than the increases in the developed countries and ISE has been the third among whole stock exchanges markets by this increase.

¡ ISE has also been the sixth among whole stock exchanges markets by the 6.6% decline, in August 1, 2007-September 2009.

¡ The scope of venture capital companies was extended and the resource transfer procedures to these firms were facilitated by a new legislation. As a result of these developments the venture capital system in Turkey is expected to become prevalent.

¡ Turkish Derivatives Exchange (TurkDEX) moved 10 steps upwards in the first 50 derivatives exchanges of the world ranking of Futures Industry Association in 2008 and has been 22th by moving 6 more steps in the first 6 months of 2009.

¡ Turkish banking sector has remained strong in 2008 and 2009 especially when compared to global financial situation. The volume of total loans in the banking sector reached TL 404.1 billion as of October 2009, a 4.6% increase compared to 2008. The volume of total loans to GDP ratio has reached 42.1% in the first half of 2009 from 36.1% level by the end of 2007.

Supporting R&D and innovation activities

¡ With regard to the increasing rate in the R&D expenditures in 2002-2007, Turkey was the second in the world ranking with a 119% increase, after China.

¡ According to the ranking of the countries regarding their share of R&D expenditures in GDP, Turkey has been 35th with 0.71% in 2007, while she was 38th with 0.53% in 2002. Considering the increasing rate of the share of the R&D expenditures, Turkey was 4th in the world ranking.

¡ Both in 2007 and 2008, the share of the private sector has left behind the public share in R&D expenditure based on source of finance, for the first time.

¡ In 2002-2007, Turkey was second after Mexico according to the rate of increase in the number of full-time R&D personnel assigned only for this job.

¡ The number of Technology Development Centers (TEKMER) - the application centers for receiving KOSGEB supports for R&D projects - reached 20 in 2008. The actualization rate in the total budget assigned to TEKMER’s is 57%. As of 2008, the number of projects supported is 292.

¡ The Project on the Innovation and Industrial R&D Portal has been started by the Ministry of Industry and Trade in order to create an electronic center to follow up all industrial R&D supports, keep records on statistical data and receive electronic applications.

Improving the image of the country

¡ The steps to be taken to make Istanbul firstly regional, then global financial center, have been determined via Istanbul Financial Center Strategy and Action Plan which was approved on September 29, 2009.

¡ Special activities on the national and international front are being organized to promote Istanbul in the context of “Istanbul 2010: European Capital of Culture”.


Strengthening efforts in land planning and management

¡ In the context of privatization of state owned agricultural lands by Directorate of Agricultural Enterprises (TIGEM), 14 enterprises were leased for 30 years. By the end of 2008, TL 158 million of investment committments of TL 176 million was completed and employment opportunities were generated for 1,500.

¡ In the framework of Organized Industrial Zones (OIZ) implementation of Ministry of Industry and Trade since 1962, 259 OIZs became operational across Turkey.

Continuing with privatization and deregulation to improve competition

¡ USD 2,292 million was generated from the privatizations held by the Privatization High Council in 1985-1994. The revenue generated from privatization was USD 5,704 million in 1995-2002 and USD 30.6 billion in 2003-November 2009.

Social Security Reform

¡ With the enactment of the Law on Amending The Law on Social Insurances and General Health Insurance Law and other relevant legislation in May 2008, the Social Security Reform has been substantially activated.

¡ There is an ongoing work on the draft Law on Social Benefits and Non-Contributory Payments.

¡ The secondary legislation aiming for the effective implementation of the Social Security Reform and the Social Security Institution has been mostly completed.

21Improving Education and Training

1. Improving Education and Training, Particularly Foreign Language Skills and Technical Education Based on Public-Private Cooperation, Geared to Private Sector Needs

Improvement of education, particularly vocational and technical education, to a degree that will meet the demands of the labor market, is one of the topics that the Council members focus on. Within this context, important steps have been taken in the last five years to make vocational and technical education as well as training more widespread and effective:

¡ The number of students attending vocational and technical secondary education was 1,428,985 in the school year of 2008-2009, 46% more than the school year of 2002-2003.The share of vocational and technical secondary education within the whole secondary education increased to 45% in 2008-2009, from 32% in 2002-2003. During the same period, 595 new vocational and technical education schools were opened. Furthermore, 5,402 new educational areas and 11,357 new educational branches were introduced for implementation in these schools.

¡ Within the scope of the “Strengthening the Vocational Education and Training System (SVET) Project” carried out in partnership with the European Union (EU), a modular structure was adopted in vocational and technical education, and the new curriculum formulated within this framework was started to be implemented as of the school year of 2006-2007.

¡ For the purpose of making vocational and technical education more effective and widespread, many projects have been carried out by the Ministry of National Education (MONE) in cooperation with social partners, such as SVET, Modernization of Vocational Education and Training in Turkey, Capacity Building Support for the MONE, Support to Basic Education Program and the Project to Identify Educational Needs in Vocational and Technical Education.

¡ In order to ensure rational identification and measurement of the demand for labor and labor skills, the Turkish Employment Agency (ISKUR) has started to conduct regular labor market analyses on annual basis since 2007. It is foreseen that the results of these analyses will be used in formulating the national education policy.

¡ In order to establish and operate a national vocational qualifications system, the National Vocational Qualifications Institution (NVQI) was set up in 2006 and became operational by the enforcement of the relevant secondary legislation in 2007 and 2008.

In the fifth meeting of the Investment Advisory Council (IAC), the members pointed at the necessity to develop education and training, mainly with regard to foreign language skills as well as vocational and technical education, in conformity with the demands of the labor market and emphasized that public-private partnership methodologies could be used to this end. In this context;

¡ In 2008, the number of students attending vocational and technical secondary education increased by around 22% compared to the previous year and its share within the whole secondary education increased by around 3%.

INVESTMENT ADVISORY COUNCIL FIFTH MEETING RECOMMENDATIONS

Chapter 1

The number of students attending vocational and technical secondary education increased by 46% in the last 5 years.


¡ To ensure an effective education-employment relation, 34 cooperation protocols on vocational education and training programs were signed between the MONE and public and private sector institutions in 2008 and 2009, while the durations of 6 protocols that had expired were extended. Hence, in the last five years, 172 cooperation protocols have been signed by 109 institutions. Within the scope of these protocols, the studies on;

¡ Developing vocational programs,

¡ Training workshop and laboratory instructors,

¡ Providing students with hands-on vocational training at enterprises and

¡ Equipping vocational and technical secondary education institutions with new technologies.

have been carried out.

¡ In the 60th Government Program-Action Plan, the schooling rate of vocational and technical secondary education within the whole secondary education is aimed to increase from 38% to 50% by 2012. In this framework, the year 2008 was declared as the “Vocational Education Year” and the MONE, with the participation of social stakeholders, prepared the “Vocational and Technical Education Action Plan”. The Action Plan came into effect in July 2008. Within the scope of the Plan, 22 separate actions were identified to promote, encourage, disseminate and increase the quality of vocational and technical education, as well as legal, administrative and structural measures oriented to surmount the relevant problems.

¡ The “Human Resources Development Through Vocational Education Project” was launched to ensure an employment-centered unity between the labor market and vocational education and to modernize and increase the quality of the vocational training via the lifelong learning approach. Within the scope of the Project which is carried out in partnership with the EU and the MONE and which is covering 8 provinces1 in the Eastern and Southeastern Anatolia, vocational education and training curriculum development and vocational equipment purchasing activities will be conducted in the identified pilot sectors2. Furthermore, public relations and promotional activities will be carried out. The Project, which was started in August 2008, is foreseen to be completed in June 2010.

¡ The “Employment Package”3 that came into effect in 2008 has conglomerated the “Provincial Employment” and “Provincial Vocational Education and Training Councils”, which previously operated separately on provincial basis, under one name: “Provincial Employment and Vocational Education and Training Councils”. These Councils are the decisive bodies of the active labor force training programs which are performed by ISKUR at the provincial level. With this arrangement, the membership structure, number of the members, duties, organs, working procedures and financial resources of the Councils were redesigned. In this new framework, the Provincial Employment and Vocational Education and Training Councils work on;

¡ Formulation of employment and vocational education policies,

¡ Determination of measures to protect and develop employment, prevent unemployment,

¡ Identification of the active labor programs to be implemented,

¡ Monitoring and assessment of employment activities and vocational education implementations.

1 Diyarbakır, Elazığ, Erzurum, Gaziantep, Kahramanmaraş, Malatya, Şanlıurfa, Van.2 Information technologies, electrics-electronics, food, mechanics and machinery, metalwork, automotive, textile and

tourism.3 Law no. 5763 on Amendment of the Labor Law and Some Other Laws (Official Gazette 05.26.2008/26887).

“Vocational and Technical Education Action Plan” came into effect in July 2008.

The application of the “Human Resources Development Operational Programme” has been launched in cooperation with the EU.


The Regulation on the working procedures and principles of the Councils came into effect in 20084.

¡ The Employment Package also introduced the provision that workers who have not received vocational education and training regarding the job in which they work can not be employed in heavy and dangerous works5. With this provision, it is aimed to ensure that, those working in heavy and dangerous jobs have the necessary qualifications sought by employers, through receiving the appropriate training, taking into consideration the serious consequences that might otherwise arise both for the employee and the employer. In this framework, the Provincial Directorates of ISKUR are authorized to conduct programs aiming at training and certifying this group of workers. The Communique regulating the relevant procedures and principles was put into effect in 20096.

¡ In order to ensure a more effective and widespread vocational and technical secondary education following its re-structuralization under a modular program basis, extensive changes were made in the “Vocational and Technical Education and Training Regulation” that came into force in 20027.

¡ The “Secondary Education Project” was launched in 2006 in partnership with the World Bank for the purpose of:

¡ restructuring the general, vocational and technical secondary education system in Turkey,

¡ increasing its quality, developing its programs,

¡ training secondary education teachers in line with the redesigned programs and

¡ equipping the educational environments.

Within the scope of this project, education programs for 50 areas and 224 branches were developed in 2008 and came into effect after approved by the MONE. The Project also ensured the development of 96 textbooks and educational tools on gradual basis for 25 educational programs.

¡ In 2008, the MONE prepared bilateral vocational education and training framework programs in 12 areas and 75 branches and works are continuing on developing bilateral vocational education and training framework programs in further 8 areas.

¡ In line with the demands of the sector, vocational English courses were started in the Area/Branch Courses Block at Anatolian Technical High Schools and Anatolian Vocational High Schools in 2008. Furthermore, taking into consideration the rapid developments and expectations in trade and tourism sectors with China and Russia, the MONE decided to teach Russian and Chinese in addition to the existing foreign languages in trade and tourism schools. The application has been launched in 20 pilot schools. In parallel to this, “Chinese Educational Program” has been put into effect for the 9th and 10th grades within the context of the “Secondary Education Project”.

4 Regulation on the Working Procedures and Principles of Provincial Employment and Vocational Education and Training Councils (Official Gazette 10.21.2008/27031).

5 Law no. 5763 on Amendment of the Labor law and Some Other Laws, art.5 (Official Gazette 05.26.2008/26887). 6 The Communique Concerning the Vocational Training of Workers in Heavy and Dangerous Works (Official Gazette

05.31.2009/27244).7 Regulation on Amendment of the Vocational and Technical Education and Training Regulation (Official Gazette

09.20.2008/27003).


¡ “Employing the Graduates of the Tourism Training Centers and Training of the Tourism Sector Employees Project”, which is developed by the Turkish Union of Travel Agents, Turkish Hotels Federation and the MONE collectively, has become operational. Within the context of the Project, it is aimed to employ 2,000 tourism training centers’ graduates for training 10,000 tourism sector employees. In this framework, 2,000 employees have been trained and certified while 531 graduates have been employed in 2008 and 2009.

¡ In line with the technological developments taking place in the areas developed under SVET, revisions were carried out in 7 areas and the new curriculum was put into implementation as of the school year of 2008-2009. In order to be implemented in these programs, 6,902 types of modules have been developed as of 2009. Among these modules;

¡ 3,411 modules have been published on the internet.

¡ There is an ongoing work to edit the content of 1,781 modules.

¡ The studies on 327 modules are continuing.

¡ The studies on 1,383 modules will be started, soon.

Furthermore, in parallel to the modular programs prepared in the vocational area and branches within the context of SVET, 712 certificate programs have been developed in 30 areas. These programs have become operational since the beginning of the school year of 2009-2010. The studies on the programs in other vocational branches are continuing.

¡ With the introduction of the modular vocational training structure, a competency based system; taking into consideration the technological developments, the needs of the labor market, socio-economic requirements, vocational standards and lifelong learning principles; enabling a wide based area and branch education; flexible and compatible to rapid changes, has been established. The system in question comprises 57 areas and 223 branches as of the 2009-2010 education year. Moreover, the assessment studies concerning the implementation of the mentioned areas and branches are continuing. The updating work on the framework education programs will be maintained within the context of the technological developments, new vocational standards and formal education.

¡ The vocational and technical programs in higher education will be harmonized with this modular system. In this context, the continuity and integrity of the programs between the vocational tertiary and secondary schools will be ensured. Furthermore, inter-service training programs will be enhanced in order to facilitate the adaptation of the teachers to the renewed modules8.

¡ Works continued in 2008 and 2009 to develop education programs for the industrial glass-working branch in the area of ceramics and glass technologies and in the areas of harbour agency, industrial shoe technologies, fire-fighting and fire safety, meat and meat products branch in the area of food technologies and the civil aviation branch. The works on the framework educational program in the fire-fighting and fire safety areas have been completed.

¡ Within the scope of the Instrument for Pre-Accession Assistance (IPA) provided by the EU to contribute in human resource development efforts in Turkey, a “Human Resources Development Operational Program”, has been conducted by the Ministry of Labor and Social Security (MOLSS). Within this Program, the “Operation Concerning the Improvement of the Context and the Qualification of the Vocational Education” in which the MONE is

8 2010 Annual Program (Official Gazette 10.17.2009/27379), p. 186.


the beneficiary institution, will be conducted in 12 NUTS II regions9. In this framework, the following will be supported:

¡ Reviewing the curriculum of vocational secondary and tertiary schools, in cooperation with the private sector and social partners, in accordance with the vocational standards and assessed competency needs;

¡ Increasing the equipment capacities of vocational tertiary schools,

¡ Establishing a monitoring system for graduates,

¡ Increasing the efficiency of vocational and career guidance activities,

¡ Signing the protocols with the private sector concerning the apprenticeship,

¡ Organizing the “career days” enabling the students of the vocational tertiary schools to meet with the private sector representatives.

The budget of the Operation, which is planned to be implemented between 2010- 2012, is Euro 20 million.

¡ For the constant training of the teachers, MONE developed and implemented the “special competencies” in 16 areas for the primary school teachers in addition to the “general competencies for teachers”. Within this context, the studies regarding the determination of the individual and institutional performance management process have been ongoing. Furthermore, the practical training of the teachers employed in the vocational and technical secondary education schools has been accelerated.

¡ Within the scope of the labor market analyses carried out annually by ISKUR in order to identify the demands of the labor market and guide employment and education policies; surveys were conducted at more than 70,000 workplaces in 81 provinces in 2008. The evaluation process of survey results is ongoing.

¡ In order to increase employment and meet labor market’s demand for qualified workforce, ISKUR opened 7,820 labor training programs as of October 2009 under the active labor force programs and 175,056 people participated in these programs. The programs involve employment oriented trainings for the disadvantaged and trainings for the job placement, job replacement/relocation, vocational development and entrepreneurship as well as the advisory services. The studies allowing the monitoring of the efficiency and the effectiveness of those programs regularly on the basis of programs and provinces will be completed in 2010. The following active labor force programs will be designed by taking into account the results of these studies10.

¡ Within the context of the “Entrepreneurship Training Programs” which have been operational as of the last quarter of 2009, it is planned to train 10,000 people in 2009-2010 period in cooperation with the Small and Medium Enterprises Development Organization (KOSGEB). “The Support for the New Entrepreneurs” which is provided by KOSGEB will be available for the participants, starting up their own business after the completion of the program.

¡ The job and profession consultancy services of ISKUR have continued effectively in 2008 and 2009. Within this scope, 11,583 workplaces were visited as of September 2009. Furthermore, a significant increase was achieved in 2008 in the number of surveyed vocational and training facilities, offered job consultancy services and the number of students worked with, compared to 2007. Number of surveyed vocational and training facilities increased from

9 12 NUTS II Regions: Ağrı, Kars, Iğdır, Ardahan, Van, Muş, Bitlis, Hakkâri, Mardin, Batman, Şırnak, Siirt, Erzurum, Erzincan, Bayburt, Şanlıurfa, Diyarbakır, Gaziantep, Adıyaman, Kilis, Kayseri, Sivas, Yozgat, Trabzon, Ordu, Rize, Giresun, Artvin, Gümüşhane, Malatya, Elazığ, Bingöl, Tunceli, Kastamonu, Çankırı, Sinop, Samsun, Tokat, Çorum, Amasya, Hatay, Kahramanmaraş, Osmaniye.

10 2010 Annual Program (Official Gazette 10.17.2009/27379), p.188.


38 to 187; job consultancy services increased from 1,502 interviews to 3,235 interviews; and students worked with increased from 90,015 to 110,445 as of 2008 compared to the previous year. As of the end of September, 2009, the number of students worked with reached 89,059. Within the context of the job consultancy services, 919 individuals were interviewed in 2008, while this number has reached 1,098, as of September 2009. The activities of the Job Information Centers, which provide information resources on jobs, vocational education facilities and the working life, were actively continued within 2008 and 2009. As of September 2009, 26,070 students, 2,134 trainers and 4,868 applicants have benefited from these centers.

¡ Training seminars conducted by ISKUR at enterprises which aim to increase the productivity of employed workforce, increase employee awareness on quality and work safety and develop managerial and training capabilities of the first and middle-level managers, continued in 2008. In this scope, ISKUR delivered 556 seminars in the January-December 2009 period, in which 12,736 employees participated.

¡ A new Regulation on Labor Force Adaptation Services11 which has been prepared by ISKUR for the purpose of ensuring more effective delivery of labor force adaptation services of ISKUR, increasing the quality of the labor, delivering vocational training to the unemployed and increasing their employability in areas needed by the labor market, as well as ensuring employment and training of unemployed through short-term programs, came into force in 2008.

¡ In order to ensure more effective implementation of ISKUR’s classical labor education and training activities, job and profession consultancy services and community work programs in the provinces12 covered under the South-Eastern Anatolia Project (GAP) Regional Development Program, ISKUR has launched the “GAP-2 Project” for the 2008-2012 period in participation with the relevant social partners. The aim of the Project is to ensure that all unemployed, registered to ISKUR and resident in the region, get the maximum benefit from the training and consultancy services of the Institution and thereby contribute in increasing the employment in the region. Within the context of the Project, 795 unemployed have benefited from the services using the financial resources of TL 312,926 as of 2008. On the other hand, as of October 2009, 11,951 unemployed attended the programs by taking advantage of the wider budget opportunities, TL 23,449,612.

¡ In order to provide the effective implementation of active labor force programs and to ensure an increased quality of services offered by ISKUR, the physical and employment needs of the provincial directorates of the Institution will be met in 201013.

¡ The “Vetcar Project” was launched by ISKUR in cooperation with participants from Turkey and abroad for the purpose of developing and disseminating career consciousness in graduates of vocational and technical education. The Project that incorporates the young people, prospective graduates and fresh graduates is foreseen to be implemented in 2008-2010 term.

¡ Works on secondary legislation that will ensure effective operation of the National Vocational Qualifications Institution (NVQI) were completed in 2008. In this scope, the “Regulation on Vocational Qualifications, Tests and Certifications”14 was put into effect in 2008. In the Regulation, the national vocational qualifications system is defined in a way that covers development and implementation of technical and vocational education standards and competencies based on national and international vocational standards, as well as the

11 Regulation on Labor Force Adaptation Services (Official Gazette 12.31.2008/27097, 6th repeated edition).12 Adıyaman, Batman, Diyarbakır, Gaziantep, Kilis, Mardin, Siirt, Şanlıurfa and Şırnak. 13 2010 Annual Programme (Official Gazette 10.17.2009/27379), p. 189.14 Regulation on Vocational Qualifications, Tests and Certifications (Official Gazette 12.30.2008/27096).


rules and activities related to relevant accreditation, designation, inspection, measurement, evaluation and certification processes. The cooperation protocols were signed between the NVQI and 18 institutions/organisations to prepare vocational standards in priority sectors. Within the context of these protocols, 74 draft vocational standards have been developed, while draft standards development activities are continuing in a coordinated manner. The gradual works towards the signing of the protocols in other sectors are in progress. Furhermore, 23 national standards in natural gas, automotive and construction sectors have been published in the Official Gazette. In order to examine and evaluate the draft vocational standards in 11 sectors, Sectoral Committees, composed of the representatives of the MOLLS, MONE, Council of Higher Education (YOK), the representatives of workers, employers and professional organizations, have been set up under the NVQI. Vocational standards are being prepared in cooperation with the interested parties. Moreover, the competency development activities based on the published national vocational standards and national proficiency certification services have been initiated.

¡ The Procurement Agreement of the “Strengthening the National Vocational Qualifications Institution and Turkey’s National Qualifications System Project”, which was prepared under IPA with the aim of strengthening national qualifications system, supporting lifelong learning, strengthening education-employment relations and facilitating harmonization with the European Qualifications Framework, has been signed. The Project will be activated following the completion of the bidding process for the grant and service components in 2010.


2. Enhancing Dialogue Between Industry and Universities to Promote Entrepreneurship, Leadership and Management Skills

Supporting entrepreneurship and increasing the cooperative acting capability of universities with industry have been one of the most important components of the investment environment providing competitive advantage. In this context, several public institutions are executing projects on enhancing entrepreneurship, leadership and management skills of labor force through strengthening the industry-university dialogue.

¡ According to the 2010 Annual Program;

¡ ISKUR leads education programs on teaching labor force, developing job searching strategies, prompting entrepreneurship, supporting professionalization, vocational training, adaptation to working life, technical consultancy and employment guaranteed guidance within the context of active labor force policies.

¡ Under the coordination of State Planning Organization (SPO), measures to enrich human capital, encourage entrepreneurship, fasten local employment and capital accumulation will be taken in order to support domestic job specialization especially in low developed regions.

¡ “Program on Supporting Business Enterprises Focused on Technology and Innovation” has been started by The Scientific and Technological Research Council of Turkey (TUBITAK) to promote entrepreneurship in business initiatives which are technology and innovation oriented and to convert scientific knowledge and researches of undergraduates, graduates, and doctoral students into commercial and value added products15. Under the scheme of the program, 75% of the project expenses -at most TL 100,000 and 1 year duration- will be granted. In 2008, 112 young entrepreneurs applied to the first phase of the program with 119 new ideas. The evaluation process of 107 business ideas has been completed and 12 of them have been selected as eligible to be supported. As of December 12, 2008, 46 projects have been going on, 25 of the project owners have started up their businesses.

¡ Technology Transfer Office has been established at the Gazi University in Ankara, within the pilot project started by the Europe Patent Office among 8 universities in Europe. The office was opened in October 2008 as part of the Patent Support Division of The Turkish Patent Institute (TPI). The main aim of the Office is to maintain that universities take the advantage of industrial property rights which pave the way for the linkage between universities and the industry cooperation and to strengthen the transfer of knowledge and technology from universities to the industry. Additionally, Gazi University will develop policy and strategy on industrial property in the upcoming months with the contribution of the Technology Transfer Office.

¡ In the context of the incentives granted by the KOSGEB for enhancing entrepreneurship, entrepreneurs are granted part of the investment project (up to 60%-80%), according to the regional development index. 125 entrepreneurs have benefited from the total supports of TL 982,458 in 2008 and and 36 entrepreneurs have benefited from the total supports of TL 148,000 in the first half of 2009.

¡ The SAN-TEZ Program, which is implemented by the Ministry of Industry and Trade, has been in operation since 2006 to institutionalize university-industry-public cooperation, to encourage SME’s to produce technological based production methods by supporting the

15 Started on March 16, 2007.

“Program on Supporting Business Enterprises Focused on Technology and Innovation” has been started by TUBITAK.

29Enhancing Dialogue Between Industry and Universities

production of high value added products and to industrialize the academic knowledge. The program has become a significant mechanism leading SME’s to gain R&D and technology culture and to orient themselves into cooperative manner with universities. Until the end of 2009, 522 project applications were made to the SAN-TEZ Program, 197 of which have been supported. The number of the total project applications and the supported ones are given in the table below.

Table 1: Applicants to the SAN-TEZ Program

2006-II 2007 2008 2009 TOTAL

Number of Project Applications

42 183 120 177 522

Number of Supported Projects 17 68 45 67 197

Source: The Ministry of Industry and Finance


3. Accelerating Energy Sector Reforms, Including Automatic Cost Recovery Pricing, Diversification, Deregulation and Privatization

Turkey, which is an important hub in international energy corridor, has displayed a significant progress over the last five years in terms of energy market deregulation:

¡ Within this regard, the electricity energy consumption has increased by 43% while the primary energy consumption has increased by 35%. When the total energy production figures are concerned, the total energy production has increased by 53% since 2002.

Graphic 1: Production of Energy in the Last Five Years

Source: Ministry of Energy and Natural Resources

¡ In April 2007, North Marmara Underground Storage Facility with a capacity of 1.6 billion m3 gas, was put into operation by Turkish Petroleum Corporation (TPAO), in order to meet seasonal demand changes. On the other hand, the project on Salt Lake Underground Storage Facility with a capacity of 1 billion m3 gas, is ongoing.

¡ In the period of November 2002- October 2009, regarding the natural gas market activities, 186 licences were granted by the Energy Market Regulatory Authority (EMRA), 60 of which were distribution licences.

¡ Manufacturing companies with facilities of cogeneration, micro cogeneration and maximum renewable energy capacity of 500 kWh are exempt from company establishment and licensing procedures16. The studies on the regulation regarding the technical and financial aspects of supplying these companies’ excess capacity to the distribution system are ongoing.

16 Law no. 4628 on Electricity Market (Official Gazette 03.03.2001/24335).

0 50000 100000 150000 200000 250000

Coal

Hydro

Turkey Total

2002 2003 2004 2005 2006 2007 2008

In the period of November 2002- October 2009, 186 licences were granted.

31Accelerating Energy Sector Reforms

¡ From June 2003 tilll the end of 2008, more than TL 1.25 billion worth of investments were made and more than 36,500 people were employed. The number of household subscribers has reached approximately 1.26 million and 55 tenders were held on natural gas distribution, 53 of which were granted licences.

¡ Turkey-Greece Natural Gas Pipeline, which is an important project for Turkey, to become a strategic hub, was inaugurated on November 18, 2007. With this project, an important step has been taken to become the fourth main artery of natural gas by including an EU country to the grid.

¡ Ceyhan, which is to be an international energy center, was declared as a Special Energy Industrial Zone by a Decree17 on October 17, 2007. Refineries, petrochemical sites, LNG terminals, petroleum and natural gas storage facilities along with ports and shipyards are planned to be built in the region.

¡ The next phase of South European Gas Ring Project, which is an addendum to Turkey- Greece Natural Gas Pipeline over the Adriatic Sea to Italy, is projected to carry 3.6 billion m3 gas to Greece and 8 billion m3 gas to Italy from Caspian Natural Gas sources. Turkey signed the intergovernmental agreement on the construction of Greece- Italy line of Turkey-Greece-Italy Pipeline Project on July 26, 2007. The work on the renewal of the agreement to include Azerbaijan is ongoing.

¡ The Baku-Tbilisi- Erzurum (BTE) Natural Gas Pipeline, which aims to transfer Azeri gas to Turkey over Georgia became operational in July 2007.

¡ In order to prevent unfair competition arising from illegal traffic in the distribution of fuel products, National Marker Implementation was adopted as of January 1, 2007 as a result of the legislation on petroleum market, enacted in February 200718.

¡ Price, one of main parameters in the petroleum market, has been set according to the free market conditions since January 1, 2005.

¡ The Baku- Tbilisi- Ceyhan Crude Oil Pipeline Project with a capacity of 50 million ton per annum, which is a major step for making Ceyhan an important international energy center, became operational in June 2006.

In the 2008-2009 term, significant developments have been achieved:

I. Electricity Market

¡ The total electricity production was 198.3 billion kWh in 2008, while domestic electricity demand (in gross figures) was 198 billion kWh.

17 Council of Ministers Decree on Declaration of Ceyhan as a Special Energy Industry Zone (Official Gazette 10.17.2007/26673). 18 Amendment Law in Petroleum Market Law (Official Gazette 02.13.2007/26433).


Graphic 2: Supply and Demand Structure of Electricity (billion kWh)

Source: TEİAS

¡ Between 2004-2008, the share of coal and natural gas was increased in the production of electricity while the share of renewable energies has shrinked. The distribution of sources of electricity in 2008 also proves the increased role of natural gas.

Graphic 3: Electricity Production in 2008- Distribution by Source

Source: EMRA

Fuel-Oil Motorin Coal Imported CoalLignite Natural Gas Geothermal LPGNafta Bio Energy Other HydroWind


Deregulation Activities

¡ Within the privatization activities of electricity distribution, Başkent and Sakarya Electricity Distribution Companies were privatized:

¡ 100% shares of Baskent Electricity Distribution Company (Baskent EDAS) were transferred to Hacı Ömer Sabancı Holding AS, Österreichische Elektrizitatswirtschafts-Aktiengesellschaft (Verbund) and Enerjisa Electricity Production AS Consortium with a value of USD 1,225 million.

¡ 100% shares of Sakarya Electricity Distribution Company (Sakarya EDAS) were transferred to Akcez Consortium with a value of USD 600 million.

The agreements on the sale were concluded on January 28, 2009 and on February 11, 2009 respectively.

¡ The tenders for the privatization of Meram EDAS and Aras EDAS were finalized as of September 25, 2008. The highest bid for Meram EDAS was given by Alsim Alarko Sanayi Tesisleri ve Ticaret AS with a value of USD 440 million. The agreement on sale was concluded on October 30, 2009.

¡ The transfer of operating rights of electricity distribution network consisting of Denizli, Aydın and Muğla was given to AYDEM Electricity Distribution AS which is the current contractor of Ministry of Energy and Natural Resources. The company has been given the license of distribution and retail sales and its tariff has been approved.

¡ Kayseri ve Civarı Electricity Turkish AS has been given the license of distribution and retail sales and its tariff has been approved as well.

¡ Negotiations were concluded on November 6, 2009 for the tenders of the privatization of Çoruh Electricity Distribution AS, Yeşilırmak Electricity Distribution AS and Osmangazi Electricity Distribution AS and tenders processes are continuing.

¡ Tender process for privatization of Çamlıbel Electricity Distribution AS, Uludağ Electricity Distribution AS, Fırat Electricity Distribution AS and Vangölü Electricity Distribution AS was initiated. The deadline for bidding is February 12, 2010.

¡ Under Privatization High Council Decision dated July 2, 2009, 80% shares of Başkent Doğalgaz company were transferred to Privazitation Administration.

¡ For privatization of production, 6 portfolio production groups were created and the efforts in this area are continuing in the framework of the Electric Energy Market and Supply Safety Strategy Document for 2009.

¡ Regulation on the Balance and Settlement of Electricity Market came into force19 in order to regulate the procedures and principles for both the balance of the supply&demand and settlement of active electrical energy in the electricity market, as prescribed by Electricity Market Law20.

19 Regulation on the Balance and Settlement of Electricity Market (Official Gazette 04.14.2009/27200).20 Electricity Market Law no. 4628 (Official Gazette 03.03.2001/24335).


Energy Efficiency

¡ In order to improve the energy efficiency throughout the whole process from production to consumption, 2008 was declared as the Energy Efficiency Year by the Law21 and related legislation22. As a result of all the public campaign to increase the energy efficiency, it’s aimed to generate an energy saving of TL 7.5 billion.

Renewable Energy

¡ Energy Market Regulatory Authority has approved the secondary regulation that was prepared by TEIAS with the aim of regulating the procedures and principles for competition that will be held among license applications to establish a production facility based on wind energy and sent to TEIAS as prescribed by Law no. 4628.

¡ The criteria regarding the network connection of wind power facilities are set according to the best practices in Europe. It’s aimed to provide a barrier to entry for the out-dated technologies which have an adverse effect on the network.

II. Natural Gas Market

¡ As of 2008, the natural gas consumption level of subscribers reached 2.7 billion m3. 1.2 billion m3 of this amount was consumed by unbound consumers and the total amount of natural gas transfer was 5.4 billion m3. In 2008, the total natural gas consumption was around 36.8 billion m3 while the total amount of import was around 37.3 billion m3.

¡ By the end of 2008, the total length of steel pipelines constructed by BOTAŞ has reached 11,130 km.

¡ The State Owned Enterprises (SOE) in the energy sector have been implementing automatic cost recovery pricing since July 1, 200823.

¡ The regulation prepared for liquefied natural gas storage entered into force in May 200924. With the mentioned regulation, the procedures and principles of basic usage for the facility of liquefied natural gas storage are determined. Besides, it is stated that storage companies need to provide services in an open, impartial and equitable manner.

Turkey: A Stragic Hub for Energy Transfer

¡ It’s aimed to transport Middle East and Caspian natural gas reserves to Western Europe by making use of the Austria’s important hub location with the project of Turkey- Bulgaria- Romania- Hungary-Austria Natural Gas Pipeline (NABUCCO). NABUCCO will become operational by 2013, with a capacity of 25.5-31 billion m3 per annum and 3,300 km in length. Project is still in the engineering phase and the intergovernmental agreement was signed on July 13, 2009.

¡ Half of the Syrian part of the Arab Natural Gas Pipeline Project, which is projected to transport Egyptian and Syrian natural gas reserves to Europe over Turkey, has been completed.

21 Law no. 5627 Energy Efficiency (Official Gazette 05.02.2007/26510).22 The Regulation on Improving the Efficiency in the usage of Energy and Energy Sources (Official Gazette 10.25.2008/27035).23 Decree no. 2008/T-5 of Higher Planning Council on 02.14.2008.24 Regulation on Procedures and Principles of Basic Usage for the Facility of Liquefied Natural Gas Storage (Official Gazette

05.16.2009/27230).

The intergovernmental agreement was signed for the project of NABUCCO.

SOEs in the energy sector have been implementing automatic cost recovery pricing.


¡ In order to transport Iraqi natural gas to world markets over Turkey, BOTAS- TPAO- SHELL consortium is continuing its works in the context of the memorandum of understanding, which was signed on November 20, 2008,

III. Petroleum Market

¡ The regulation on storage and distribution facilities which was published in October 200825, has aimed to create transparency in the price setting procedures.

¡ The permits on importing the petroleum products other than fuel were abolished since March 31, 2009 and the works of Undersecretariat of Customs and EMRA on reducing the duration of imports of fuel have been ongoing.

¡ The Caspian region oil has been transported to the world markets over Ceyhan. In 2008, 245 million barrels of crude oil was loaded on the Baku- Tbilisi- Ceyhan Crude Oil Pipeline.

25 The Regulation on Pricing in Petroleum Market (Official Gazette 10.14.2008/27024).


4. Improving Infrastructure Especially in Transportation and Information Technologies with an Appropriate Agreement and Legal Infrastructure for Public and Private Partnership/Build-Operate-Transfer Projects; Reducing the Burdens on Increasing the Rate of Broadband Internet and Personal Computer Use

Improving the infrastructure in transportation and information technologies in Turkey has been stressed by the Council members since the first meeting. In this regard, studies continued in 2008 and 2009 as well as the previous years to strengthen the infrastructure in transportation and information technologies and develop legal base and implementation infrastructure to benefit more from public private partnership methods.

Improving transportation infrastructure

Upgrading highway, railway, maritime and air transportation with the aim to improve infrastructure in domestic and international passenger and freight transportation as well as strengthening the position of Turkey as a strategic transportation hub have maintained its priority in the last five years.

Highway transportation

¡ Total length of highways which was 63,899 km in the beginning of 2008 has reached 64,253 as of November 15, 200926.

¡ USD 18.5 billion worth of investment has been made by General Directorate of Highways and 2,584 km long motorway has been opened to the traffic up to date. Construction works are ongoing in 229 km long motorway and conjunction ways.

Table 2: Distribution of Motorway Construction

Year Motorway (Km)

Before 2003 1,775

2003 57

2004 26

2005 5

2006 241

2007 -

2008 23

2009 90

Total 2,217

Note: 117 km highway has been transfered to Istanbul Municipality. Source: General Directorate of Highways- Department of Motorways

26 General Directorate of Highways.

37Improving Infrastructures in Transportation and Information Technologies

¡ Within the context of the ongoing motorway projects, 166 km of 170 km long İzmir-Aydın Motorway, 45 km of 56 km long İzmir-Urla-Çeşme Motorway, 187 km of 226 km long Gaziantep-Şanlıurfa Motorway, 65 km of 86 km long Bursa ring road were completed. 66 km long part of 121 km long Kemerhisar-Pozantı Motorway between Ereğli-Pozantı junction was opened to traffic on March 13, 2009.

¡ Within the framework of the motorway projects which are planned to be financed by BOT model;

¡ Tender for Gebze-İzmir Motorway was made and the contract was submitted to the approval of the Supreme Planning Council in July 2009.

¡ Preliminary feasibility works of North Marmara Motorway (including 3rd passage from the Straits) based on corridor determination were completed. Following the decision of the Supreme Planning Council, declaration of assignment is aimed to be made.

¡ Tender works for Ankara-Delice part of Ankara-Samsun Motorway were completed in 2008 and consequent works are ongoing.

¡ Tenders for Ankara-İzmir Motorway and Tekirdağ-Çanakkale-Balıkesir Motorway were finalised in August 2009 and tender processes are ongoing.

¡ Tenders related to feasibility, corridor studies and pre-project works for Afyon-Antalya, Şanlıurfa-Habur, Sivrihisar-Bursa Motorways, Gerede-Merzifon part of Gerede-Gürbulak Motorway and Delice-Samsun part of Ankara-Samsun Motorway projects are envisaged to be completed in 2010.

¡ Implementation projects for Ankara-Niğde Motorway and Aydın – Denizli part of the Aydın - Denizli – Antalya Motorway were prepared. Besides, tenders related to feasibility, corridor studies and pre-project works for Sivrihisar-Bursa Motorway, Merzifon-Gürbulak part of Gerede-Gürbulak Motorway, Şanlıurfa-Diyarbakır Motorway and Denizli-Antalya part of Aydın-Denizli-Antalya Motorway are planned to be completed in the following years.

Table 3: Motorways Planned to be Financed via BOT Model

Motorway Length (km)

Gebze–İzmir Motorway 421

North Marmara Motorway 361

Ankara –Samsun Motorway 370

Ankara – İzmir Motorway 549

Afyon–Antalya Motorway 345

Sivrihisar–Bursa Motorway 202

Tekirdağ-Çanakkale-Balıkesir Motorway 433

Şanlıurfa-Habur Motorway 360

Aydın-Denizli-Antalya Motorway 335

Gerede-Gürbulak Motorway 950

Şanlıurfa-Diyarbakır Motorway 160

Ankara-Niğde Motorway 287

Total 4,773

Source: General Directorate of Highways- Department of Motorways

Works continued to improve transportation infrastructure via public and private partnership.


¡ 11,121 km long divided highways have been constructed in 2003-2009 term. And total length of divided highways has reached 17,222 km as of November 15, 2009. The length of divided highways is planned to reach 22,500 km at the end of 2012.

¡ In 2009, within the framework of divided highway construction, 262 km long Afyon-Antalya Highway, 323 km long Bursa-Balıkesir-İzmir Highway, 367 km long Şanlıurfa-Habur Highway, 134 km long Adapazarı-Mekece-Bozüyük Highway and 569 km long Ankara-Afyon-İzmir Highway were opened to traffic. 232 km of 245 long Bursa–Eskişehir-Sivrihisar Highway has been completed.

Graphic 4: Length of Divided Highways

Source: General Directorate of Highways

¡ “North-South Axis Study” has been initiated by General Directorate of Highways with the aim to increase competitiveness of Turkey in transportation by improving the comfort and security of highways located in North-South axis. The purpose of the study is to rise the standart of transportation corridors connecting Mediterranian and North Sea ports to border gates and to each other; and corridors connecting Central Anatolia to South East Anatolia.

6.101

11.121

17.222

22.500

0

5.000

10.000

15.000

20.000

25.000

Before 2003 2003-2009 2009 2012 Target

km


Table 4: North-South Highway Corridors to be Improved Physically and Geometrically

Length (km)

Edirne-Muğla 1,015

Aziziye Border Gate-Antalya 846

Karasu-Antalya 624

Afyon-Silifke 465

Zonguldak-Mersin 608

Bartın-Gerede 169

İnebolu-Manavgat 774

Kırıkkale-Mersin 328

Sinop-Mersin 639

Samsun-Kırıkkale 336

Ünye-Adana-Karataş 642

Ordu-Sivas-İskenderun 830

Giresun-Kilis 1,012

Trabzon-Mardin 1,026

Rize-Mardin 534

Artvin-Erzurum 530

Ağrı-Şırnak 399

Ardahan-Van-Hakkari 717

Total 11,492

Note: 6,265 km of 11,492 km long North-South Axis have been completed and construction works for 3,920 km part of the remaining 5,227 km; tender works for 1,307 km are ongoing.Source: General Directorate of Highways

Railway Transportation

Significant studies have been conducted with a view to increase the share of railways in freight and passenger transportation in the last five years.

¡ Ankara-İstanbul High Speed Train Project which aims to increase the share of railways in transportation from 10% to 78% by reducing the travel duration to 3 hours from 6 hours and 30 minutes is one of these studies. Ankara-Eskisehir part of the Project has been completed and construction works are ongoing in Eskisehir-Istanbul part.

¡ Infra and superstructure works for Ankara-Konya High Speed Train Project are ongoing. The aim of the Project is to reduce Ankara-Konya travel duration to 1 hour and 15 minutes.

¡ Infrastructure works for Yerköy-Sivas part of Ankara-Sivas High Standart Railway Project have been initiated.

¡ Another significant study conducted within the last five years is Marmaray Project which aims to provide uninterrupted railway connection between Asia and Europe. The Project was initiated in 2004 and construction works are ongoing.


A variety of studies have been conducted in 2008 and 2009 with the aim to increase the share of railways in transportation and develop the necessary infrastructure.

¡ Construction phase of the part to be built by Turkey within Turkey-Georgia-Azerbaijan Railway (Kars-Ahılkelek-Tbilisi-Baku) Project which was developed with the aim to connect Europe to Caucasus and Central Asian republics over Turkey began in July 2008. The project is aimed to be completed in 2012.

¡ The tender for Istanbul Strait Highway Passage Tunnel which aims to connect Asia and Europe continents by land and planned to be financed by BOT Model was made on June 30, 2008.

¡ Project works of new railway between Ankara-İzmir which aims to decrease travel duration from 14 hours to 3 hours and 30 minutes have been completed.

¡ Studies are conducted with the aim to develop combined transportation and increase the share of railways in transportation. In this context,

¡ Works are in progress to build modern logistics centers in 12 points which are close to OIZs and have high freight potential - Ispartakule, Halkalı (İstanbul), Köseköy (İzmit), Gelemen (Samsun), Hasanbey (Eskişehir), Bozüyük (Bilecik), Boğazköprü (Kayseri), Balıkesir (Gökköy), Palandöken (Erzurum), Uşak, Konya (Kayacık) and Yenice (Mersin). Gelemen (Samsun) logistic center was established in 2007, while Hasanbey (Eskişehir) and Köseköy (İzmit) logistic centers were established in 2009. The centers are planned to be built and/or operated by 2013 via public-private partnership.

¡ Works are in progress in Kemalpaşa OIZ Railway Connection Project.

¡ Works are in progress in Atatürk and Sabiha Gökçen Airports Connection Project which aims to provide railway connection to airports.

¡ Works are ongoing in Sivas-Kars, Bandırma-İzmir, Bursa-Bandırma-Osmaneli, Kayseri-Şefaatli, Eskişehir-Antalya, Konya-Mersin Railway projects which aim to improve the quality of railway network located in East-West and North-South axis.

A list of projects is planned to be developed by public-private partnership model with the aim to meet the increased transportation need; improve current railway network and services through efficient use of private sector resources, management and implementation skills; generalize the use of railways in freight and passenger transportation. In this context;

¡ New railway routes are envisaged to be constructed and/or railway services are envisaged to be provided via public-private partnership model between Bandırma-Bursa-Osmaneli, Ankara-İzmir, Yerköy-Kayseri, Eskişehir-Burdur-Antalya and Konya-Karaman-Mersin.

¡ There is an aim to provide modernisation, construction and management of suburban train networks in metropolitan areas by metropolitan municipalities via public-private partnership models and/or private sector. BAŞKENTRAY (Ankara) is among the projects developed in line with this aim.

¡ Works have been initiated to construct Ankara High Speed Train Station via BOT model.

Maritime Transportation

Within the framework of the studies conducted in 2008 and 2009;

¡ Tenders for Transportation Coastal Buildings Master Plan Study and Tourism Coastal Buildings Master Plan Study were finalized in January 2009 and studies have been initiated. The studies aim to effectively determine infrastructural facilities and additional capacities to be constructed in coastal regions in order to serve the needs of transportation, tourism and fishery sectors and to increase the efficiency of location and time planning. Tender


for Fisheries’ Coastal Buildings Diagnostics Study was made in July 2009 and contract was signed in August 2009.

¡ Works for feasibility study revision, environmental impact assessment and zone plans continued in 2009 for Mersin Container Port, Candarli Port, Zonguldak Filyos Port and Derince Container Terminal projects. Connecting all main ports to highways and railways through public private partnership models in order to upgrade ports to logistic centers, where combined transportation can be conducted is the aim of these studies.

¡ Within the studies conducted to develop the necessary infrastructure for maritime transportation and yacht tourism via BOT model and private sector dynamics;

¡ Didim Yacht Port was opened to service, following Turgutreis Yacht Port which was opened in 2003.

¡ Construction works of Çeşme, Sığacık, Kaş, Alanya, Yalova and Mersin Yacht Ports are ongoing.

¡ Tenders for Kumkuyu, Gazipaşa and Muğla Ören Yacht Ports were made and related processes are ongoing.

¡ Contracts were signed in Dalaman Yacht Port and sea bus board, as well as Datça Yacht Port Project. Land delivery processes are ongoing.

¡ Works are in continue for tendering Karaburun, Yeni Foça, Avşa Türkeli, Silivri, Trabzon, Seferihisar Ürkmez, Çeşme-Şifne, Tekirdağ and Burhaniye Yacht port projects via BOT model.

¡ Works are underway regarding Aydın-Güllük Port Connection, Adapazarı, Karasu, Ereğli, Filyos, Zonguldak and Bartın Port connections in line with providing hinterland transportation of ports priorily by railways.

¡ Construction works of Tekirdağ-Muratlı Railway Project which aims to ease the traffic of Derince and İstanbul Ports via connecting Tekirdag Port to railway network, to reduce the distance between Aegean and Europe by 600 km and to ease the traffic in straits continued in 2008. Project is planned to be completed in 2009.

Air Transportation

There was a significant progress in the numbers of airline passengers and airports as a consequence of the new construction, modernisation and additional capacity studies conducted to improve the infrastructure of airway transportation in the last five years. As a result of the quality improvement in air transportation, Turkish Airlines has been accepted to Star Alliance in December 2006, the biggest airline alliance in the world, and increased its flight opportunities.

¡ The number of airports managed by General Directorate of Airports Authority (GDAA), 27 of which are in international status, has reached 40. In addition, with Antalya Gazipaşa and Zonguldak Çaycuma Airports under the responsibility of GDAA; Batman Airport managed by Batman provincial administration; Eskisehir Anadolu Airport managed by Anadolu University and Istanbul Sabiha Gokcen Airport managed under the responsibility of Undersecretariat for Defence Industry, total number of airports open to civil aviation is 45.


Table 5: Number of Airports Managed by General Directorate of Airports Authority

Number of Airports Managed by General

Directorate of Airports Authority (total)

Number of Airports in International Status

2003 34 20

2004 34 20

2005 34 20

2006 36 20

2007 38 26

2008 40 27

Source: General Directorate of Airports Authority

¡ A competitive market has been formed in domestic flights passenger transportation through Regional Aviation project which was initiated in 2003 and significant amount of increase has been observed in domestic flights passenger traffic due to decreasing flight fares. In 2008, international flights passenger traffic reached 43 million, a 13% increase; domestic flights passenger traffic reached 35.8 million, a 12% increase and total passenger traffic has reached 79.4 million, a 12.6% increase.

Table 6: Air Passenger Traffic

Domestic Flights Passenger Traffic

International Flights Passenger Traffic

Total Passenger Traffic

2003 9,146,681 25,290,797 34,437,478

2004 14,460,617 30,585,622 45,046,239

2005 20,518,636 35,030,782 55,549,418

2006 28,774,857 34,977,156 63,752,013

2007 31,949,341 38,347,191 70,296,532

2008 35,832,776 43,605,513 79,438,289



Table 7: Investment Expenditures 2004-2008

Years Expenditure (TL)

2004 137,042,889

2005 128,980,920

2006 182,664,000

2007 247,872,237

2008 230,454,667

Note: The figures were given as current year values as TL in the table. Source: General Directorate of Airports Authority

¡ Within the context of superstructure works conducted to improve airway transportation;

¡ in December 2007, Hatay Airport,

¡ in April 2008, new civil facilities of Denizli Cardak Airport,

¡ in June 2008, civil facilities of Merzifon Airport,

¡ in November 2008, domestic flights terminal building and parking lot of Trabzon Airport

were opened.

¡ Airport passenger terminal projects are the projects for which BOT model is commonly used in Turkey. The projects realised through BOT model are listed in the table:

Table 8: Projects Generated by General Directorate of Airports Authority within BOT Model

l

Terminal Building Investment Cost (USD million)

Atatürk Airport International Flights Terminal Building 506.5

Antalya Airport I. and II. International Flights Terminal Building 161.2

Dalaman Airport New International Flights Terminal Building 91. 9

Esenboğa Airport Domestic and International Flights Terminal Buildings 348.7

Adnan Menderes Airport New International Flights Terminal Building 193.7

Milas-Bodrum Airport New International Flights Terminal Building 117 .8

Total 1,420



¡ Domestic and foreign flights terminals, multi storey parking lot and general aviation terminal of Atatürk Airport, 1st and 2nd foreign flights terminals, CIP and domestic flights terminals of Antalya Airport, Zonguldak (Çaycuma) and Antalya-Gazipaşa Airports were leased to private sector through leasing model by GDAA.

¡ The studies being conducted within 2009 investment program of the GDAA and planned to be conducted in 2010 are listed below:

¡ Air Traffic Center of Esenboğa Airport was constructed within the context of SMART (Modernization of Air Traffic Management) Project.

¡ Construction of new domestic and international flights terminal buildings of Sivas Airport which was initiated in December 2008 is planned to be completed in November 2010.

¡ Construction of terminal building of Batman Airport which was initiated in January 2009 is planned to be completed in June 2010.

¡ Construction of new terminal building of Hatay Airport which was initiated in May 2009 is planned to be completed in 2010.

¡ Construction works of domestic flights terminal building of Kayseri Airport which were initiated in May 2009 are planned to be completed in August 2010.

¡ Runway restoration and extension project of Atatürk Airport which was initiated in August 2009 is planned to be finalised in February 2011.

¡ Airports Master Plan Study was initiated in 2009. The study aims to enable prioritization and evaluation in air transportation sector after making a diagnostic study of infrastructural conditions of the airports in Turkey and thus guide medium and long term investments. In this regards, master plan studies for Atatürk, Dalaman, Esenboğa Airports are ongoing and master plan studies for Adana and Trabzon Airports are planned to be initiated. Master plan studies for Adnan-Menderes, Antalya, Milas-Bodrum, Süleyman-Demirel, Nevşehir-Kapadokya, Gaziantep and Erzurum Airports will be conducted in 2010 and studies for the remaining airports will be carried out in 2011-2012.

¡ Total passenger traffic is estimated to reach 350 million in 2023 as a result of all these studies27.

¡ Within the context of the studies conducted in 2008 and 2009 in aviation sector by Directorate General for Construction of Railways, Ports and Airports;

¡ Tender for runway development work of Balıkesir Körfez Airport was made on August 5, 2008.

¡ Tender for runway development work of Eskişehir Airport was made on November 28, 2008.

¡ New runway of the Elazığ Airport was opened in March 15, 2009.

¡ Tender for infrastructure works of Hakkari (Yüksekova) Airport was made on July 29, 2009 and land delivery is planned to be made in December 2009.

¡ Tender for infrastructure works of Iğdır Airport was made on August 25, 2009.

¡ Tender for infrastructure works of Bingöl Airport was made on August 27, 2009 and tender process is ongoing.

¡ Tender for infrastructure works of Şırnak Airport was made on September 9, 2009 and tender process is ongoing.

27 10th Transportation Council.


¡ Works are in progress for constructing a regional airport (Çukurova Regional Airport) in international standarts between Adana and Mersin.

¡ Within the context of the studies planned to be conducted by Directorate General for Construction of Railways, Ports and Airports in 2010;

¡ Tender for construction of terminal building for Elazığ Airport is planned to be made. ¡ Infra and superstructure construction works of Balıkesir Körfez Airport are planned to

be completed. ¡ Infrastructure construction works of Eskişehir Airport are planned to be continued. ¡ Infrastructure construction works of Ağrı Airport are planned to be completed. ¡ Infra and superstructure construction works of Iğdır, Hakkari, Şırnak and Bingöl Airports

are planned to be continued. ¡ Infra and superstructure construction works of Çukurova Regional Airport are planned

to be tendered via BOT model.

Improving infrastructure in information technologies and reducing the burdens on increasing the rate of broadband internet and personal computer use

Significant regulations have been adopted in the last five years regarding improving information and communication technologies infrastructure.

¡ The Law no. 5369 which entered into force on May 25, 2005 regarding provision of universal service is one of the most significant regulations in terms of improving information and communication technologies28. In accordance with this Law, some electronic communication services including basic internet access have been defined as universal services which every citizen can benefit without any discrimination between regions and places. In this regards, clauses were set for realization of these universal services which have the status of public service within the framework of universal services determined by this Law in case that they can not be realized by businesses due to financial constraints.

Studies have been conducted in 2008 and 2009 to strengthen infrastructure in information and communication technologies, thus increasing rate of broadband internet and personal computer usage.

¡ Electronic Communication Law no. 5809 on simplification and streamlining of the necessity, cost and timing of permits and licences was enacted in November 200829. With the secondary regulation studies, a step was taken forward to facilitate entry to the market through simplifying the processes of authorization of the companies demanding to provide telecommunication services and eliminating high license fees paid in entry by regulating the fees regarding use of frequency and number sources.

¡ The regulation on authorisation of capital companies demanding to provide telecommunication service and/or build and operate telecommunication capacity or infrastructure, in line with the Law no 5809 on Electronic Communication, entered into force in May 200930. With the decision taken by Information and Communication Technologies Authority in accordance with the regulation, clauses regarding definition, content and timing regarding electronic communication service, network and infrastructure have been specified. In addition, clauses regarding internet service provision, broadband fixed wireless access service, IMT-2000/UMTS, virtual mobile network, infrastructure management, fixed phone service types have been determined. Thus, investment opportunities have been enlarged by enabling provision of new services in the sector.

28 Law no. 5369 on Provision of Universal Service (Official Gazette 06.25. 2005/25856).29 Law no. 5809 on Electronic Communication (Official Gazette 11.10. 2008/27050). 30 Authorisation Regulation on Telecommunication Service and Infrastructure (Official Gazette 05.28. 2009/27241).


¡ With the same regulation, amendment was made regarding fixed phone lines for liberalizing local calls.

¡ Significant regulations have been adopted regarding internet service provision which play a vital role in increasing the use of broadband internet and personal computer. In this context, with the Authorisation Regulation on Electronic Communication Sector, which entered into force in May 2009 and with the regulation approved via the decision of the Information and Communication Technologies Authority no 2009/DK-08/230 on regulation of internet service provision, operators became eligible to provide wireless internet access to internet users in outside areas via establishing and operating WLAN (Wi-Fi) systems.

¡ 1 infrastructure service, 1 GMPCS31 mobile phone service, 11 internet service and 3 guide service operators have entered the market in 2008. As of October 2009, total number of operators has reached 325 with 3 new 3G service operators, 44 new infrastructure operators, 98 new internet service operators, 75 new fixed phone operators, 56 new shared broad band fixed wireless access service and 9 new virtual mobile network operators. Cheaper and more qualified service has begun to be provided to the public, thanks to increasing number of operators and new authorisations. Most of the licensed operators are operating in internet sector due to market structure and investment variables.

Table 9: Number of Licensed Operators

Operators 2007* 2008* 2009*

Operators who Signed Task Agreement 2 1 1

Operators who Signed Concession Agreement 4 4 7

Satellite Platform Management 2 2 2

Satellite Telecommunications Services Management 20 20 20

GMPCS Mobile Phone Management 4 5 5

Data Transmission Service Via Land Lines 25 25 Canceled

Infrastructure Management Services 15 16 44

Internet Service Provision 76 87 98

Long Distance Phone Service Management Fixed Phone Service Management 32 32 Canceled

Cable Platform Management 5 5 75

Guidance Service Management 7 8 8

Joint Use Wireless Services Management 52 51 56

Virtual mobile network Service Management 0 0 9

TOTAL 244 256 325

* As of December 2007, December 2008 and October 2009. Source: Information and Communication Technologies Authority

31 Global Mobile Personal Communications by Satellite/Services (GMPCS) is personal mobile communication over satellite.


¡ The tender for authorisation of new generation mobile telecommunication services (3G) was made on November 2008. Accordingly, 3G services were begun to be provided in the second half of 2009.

¡ Legislative studies regarding authorisation of virtual mobile network suppliers were completed. The authorisations aim at enabling entry of new suppliers to the market which will provide their services by using the infrastructure of current mobile suppliers and increasing competition in the market.

¡ Legislative works for authorisation of broadband wireless access services which will increase competition in broadband access market by enabling wireless broadband access services were completed. Works are ongoing for determination of the minimum value and tender preparation.

¡ The number of broadband internet users reached 22.2 million as of the end of 2008 whereas the number of personal computer users reached 27.2 million32. The following developments have contributed to this increase alongside the steps taken to develop legal and implementation infrastructure;

¡ Private communication tax concerning wired, wireless and mobile internet services was decreased to 5% from the level of 15% as a result of the amended tax regulations33.

¡ VAT rate on computers was reduced to 8% with Council of Ministers Decree dated March 25, 200934.

¡ According to the figures in 2004-2008 period, market size of information and communication technologies reached USD 23.8 billion in 2008, from USD 11.9 billion in 2004. Market size is envisaged to decline to USD 21.8 billion in 2009 with the effect of the global crisis. 69% of this size is estimated to be market size for telecommunication sector and the rest is estimated to be the size of information technologies market35.

32 State Planning Organisation. 33 Law no. 5838 (Official Gazette 02.18. 2009/27155). 34 Decision Appendix to the Decree dated 03.25.2009/14812.35 9th Development Plan, 2010 Annual Program.

Number of broadband internet users reached 22.2 million while number of personal computer users reached 27.2 million as of the end of 2008.


Table 10: Market Size of Information and Telecommunication Technologies

Billion USD

2004 2005 2006 2007 2008 2009*

Telecommunications 9.6 11.5 13.8 17 16.7 15

Information Technologies 2.3 3.0 4.1 4.7 7.1 6.8

Market Size of Information and Communication Technologies 11.9 14.5 17.9 21.7 23.8 21.8

* Estimation (SPO)Source: 9th Development Plan, 2010 Annual Program.

¡ The number of broadband internet and mobile phone subscribers has displayed a significant increase since 2003. Number of broadband internet subscribers increased to 5.7 million in 2008; and reached 5.9 million as of June 2009, from 122,559 in 2003. Number of mobile phone subscribers increased to 66 million in 2008, from 28 billion in 2003; but declined to 64 million as of August 2009.

Table 11: Number of Broadband Internet and Mobile Phone Subscribers

2003 2004 2005 2006 2007 2008 2009*

Number of Broadband Internet Subscribers (unit)

122,559 526,452 1,639,768 2,873,685 4,753,757 5,749,891 5,940,907

Mobile Phone Subscribers (unit)

27,887,535 34,707,549 43,608,965 52,662,709 61.975.807 65.824.110 63,691,495

* Number of broadband internet subscribers is as of June 2009; number of mobile phone subscribers is as of August 2009. Source: Information and Communication Technologies Authority

¡ Studies for Information Valley Project are ongoing. The project aims to qualify Turkey as production and operation center for international companies operating in information technologies and facilitate access of small firms to abroad by using regional networks of international companies36.

36 9th Development Plan, 2010 Annual Program.

49Moving Forward with Labor Market Reforms

5. Moving forward with labor market reforms that further enhance flexibility while protecting workers

Ensuring that the labor market gains a flexible structure is of great importance in view of increasing the adaptation of enterprises and employees to the economic and technological changes led by globalization. In this framework, the need to introduce flexicurity in the Turkish labor market was one of the topics voiced in previous meetings by the Council members.

Major progress has been observed in increasing flexibility of the labor market in the last 5-year period: The Labor Law no. 1475, which is the basic law regulating employee-employer relations, was superseded with the Labor Law no. 4857, which entered into force in 200337. With this Law, flexible working hours and flexible forms of working were specified. In addition, YOIKK-Employment Technical Committee carries out activities to evaluate the provisions of the Law concerning flexibility and security in the labor market within the framework of the encountered problems and changing needs. The Committee also organizes meetings aiming at increasing the awareness of relevant public institutions, organizations and social partners related to the issue.

In the fifth meeting, the Council members emphasized the need to continue labor market reforms with an approach that will further enhance flexibility in the labor market and at the same time protect labor. In this scope, important progress was made in 2008 and 2009 with regard to the improvement of the Turkish labor market through the flexicurity approach:

¡ Within the scope of the Law no. 5510 on Social Insurances and General Health Insurance, those working on part-time basis or on-call or in domestic service for less than 30 days in a month were also included under insurance coverage. It was also foreseen to include these employees under general health insurance coverage.

¡ After the amendments in the Labor Law conducted by the introduction of the Employment Package38, it has been made possible to outsource workplace health and safety services from common health and safety units, for workplaces employing more than 50 employees. In this framework, health and safety units to be established in investment areas such as OIZs and small industrial sites are offered to the common use of investors. This development both ensures effectiveness of services and creates a significant cost advantage for employers. The relevant Regulation entered into force in 200939.

¡ In order to reduce labor costs within the scope of the Employment Package, the following measures have been taken:

¡ Providing payment of the social security premiums of newly employed women and unemployed young people in the 18-29 age range from the Unemployment Insurance Fund, subject to incremental reduction of premiums over a 5-year period;

¡ Lifting the obligation of the private sector to employ terrorism victims and ex-convicts;

¡ Providing payment of the social security premiums of disabled people for whom there are employment obligations, by the Treasury;

¡ Providing payment of the portion corresponding to 5 points of the employer’s share in the incapacity, old-age and death insurance premiums of insured employees working in the private sector, again by the Treasury.

37 Labor Law no. 4857 (Official Gazette 06.10.2003/25134).38 Law No: 5763, Article 4.39 Regulation Concerning the Workplace Health and Safety Units and Joint Health and Safety Units (Official Gazette

08.15.2009/27320).

Several measures were put into effect for enhancing the flexibility of the labor market.


The Package also enabled the fulfilment of the employers’ obligation to set up nursing rooms and child care centers by outsourcing.

¡ In order to stop layoffs and reduce wage-related cost of employment on the employer under the prevailing crisis conditions, the Law no. 583840 facilitated the conditions for eligibility to benefit from short-term employment appropriation. In this scope, the duration of short term appropriation, paid to workers from the Unemployment Insurance Fund for the duration that they do not work, has been extended and the amount has been increased, yet exclusively for applications made in 2008 and 2009, in cases where the employer temporarily decreases the weekly work hours significantly at the workplace or temporarily stops the work activity completely or partially at the workplace due to general economic crisis or force majeure.

¡ Law no. 592141 envisages some incentives to support additional employment. Within this context;

¡ In case of a person benefiting from the Unemployment Fund being employed as additional employment, the workers’ and employers’ share of insurance premiums and general health insurance premiums provided that it amounts to 1% of the short term insurance premium,

¡ The employer’s share of the insurance premiums of the worker who began working as additional employment as of April 2009 and registered as a non-insured worker within three months prior to the date of initiation of the work,

are envisaged to be paid from the Unemployment Insurance Fund, during the remaining period of the unemployment benefit and for 6 months, respectively.

¡ “Human Resources Development Operational Programme” comprises activities concerning the target groups which remain outside the labor market and encounter obstacles in access to the labor market. Within this context;

¡ “Women’s Employment Support Operation” has been conducted in 12 NUTS II regions in order to increase the participation of women in the labor market. The Operation encourages the activities aiming at developing the employability of women, including the ones in agriculture, supporting their entrepreneurship and eliminating the cultural and other types of obstacles which reduce the participation of women in the labor market.

¡ In order to encourage the integration of young people to the labor market, “Youth Employment Support Operation” is carried out. In this framework, it is aimed to increase the youth employment through the effective use of the active employment policies.

¡ In addition, “Social Integration and Development of Employability of the Disadvantaged Operation” will be carried out for increasing the employment and labor force participation rates of the disadvantaged person and for facilitating their access to labor market by eliminating the barriers that impede labor market entrance. The Operation has a budget of approximately Euro 30 million.

40 Law no. 5838 on Amendment of Some Laws (Official Gazette 02.28.2009/27155 repeated).41 Law no. 5921 on Amendment of the Unemployment Insurance Law and Social Insurance and General Health Insurance

Law (Official Gazette 08.18.2009/27323).

The conditions for eligibility to benefit from short-term employment appropriation were facilitated.

51Further Strengthen the Implementation of Legislation on Intellectual Property Rights

6. Further Strengthen the Implementation of Legislation on Intellectual Property Rights in Accordance with International Standards

Protecting the intellectual property rights has been a leading recommendation mentioned by the Council Members since the first Meeting.

The activities towards harmonizing the intellectual property rights legislation with the international standards were accelerated in the last five years and significant improvements were observed in these areas.

¡ Substantial increases on both the number of patent applications and the registered patents were seen in recent years. The patent applications have increased by 519% since 2003, while the registered patents have increased by 312% in the same period42. 68% of the patent applications were registered in 2008.

Graphic 5: The Distribution of Patent Applications and Registrations*

*2009 data are as of August 2009Source: TPI

¡ The utility model applications have increased by 144% since 2003, while the registered utility models have increased by 159%. 62% of the utility model applications were registered in 2008.

42 The related comparison is conducted by the end of year 2008.

The registered patents have increased by 312% since 2003.

01.0002.0003.0004.0005.0006.0007.0008.000

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Patent Applications Patent Registration


Graphic 6: Distribution of Utility Model Applications and Registrations*

* 2009 data are as of August 2009Source: TPI

¡ Comparing the patent applications and registered patents by the European Patent Office (EPO) member countries; Turkey has been 6th in 2007, among 29 EPO member countries with 6,189 patent applications and 5th among 26 EPO member countries with 4,790 registered patents43.

Graphic 7: The Comparison of Patent Application and Registered Patents Statistics in Turkey with EPO Member Countries

Source: WIPO, TPI

43 Although there are 35 EPO member countries, the patent application statistics are available in only 29 member countries, while the registered patent statistics are available in 26 member countries.

0

500

1000

1500

2000

2500

3000

3500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Utility Model Applications Utility Model Registration

0 2500 5000 7500 10000 12500 15000 17500 20000 22500 25000

EnglandFrance

ItalyNorwayTurkey

GreecSpain

SwedenPolond

HollandSwitzerland

FinlandDenmark

IrelandCzech Republic

RumaniaHungaryBelgium

CrotiaSloveniaSlovakiaPortugalBulgaria

IcelandEstonia

MaltaCyprus

MonakoAustriaLatvia

MacedoniaLihtenstayn

LithuaniaLuxemburg

Number of Patent Applications Number of Registered Patents

The patent application statistics are not available in Austria, Latvia, Macedonia, Lihtenstayn, Lithuania and Luxemburg. The registered patent statistics are not available in Austria, Cyprus, Finland, Latvia, Slovenia, Macedonia, Lihtenstayn, Lithuania and Luxemburg. The statistics for Germany are available, although they are not shown on the graphic: the patent applications for Germany are 60,992, while registered patents are 17,739.

The patent application statistics are not available in Austria, Latvia, Macedonia, Lihtenstayn, Lithuania and Luxemburg. The registered patent statistics are not available in Austria, Cyprus, Finland, Latvia, Slovenia, Macedonia, Lihtenstayn, Lithuania and Luxemburg. The statistics for Germany are available, although they are not shown on the graphic: the patent applications for Germany are 60,992, while registered patents are 17,739.

53Further Strengthen the Implementation of Legislation on Intellectual Property Rights

¡ Patent applications in the context of the “Program for Encouraging and Supporting the Patent Applications”, which was initiated by TUBITAK in 2006, were threefold in 2008 in comparison to previous year and 85% of these applications were approved44.

¡ In terms of the activities for avoiding the piracy of intellectual property rights and imitation, 3,142 and 2,487 operations were undertaken in 2008 and 2009 respectively. Although the number of operations have been approximately same in recent years, the pirated materials kept away from the market have declined. This proves that the rising awareness of the society and the intense activities of public institutions have positive implications in this area.

Table 12: The Number of Operations for Avoiding Piracy of Intellectual Property Rights and Total Materials Retrieved

2006 2007 2008 2009

The number of operations 4,146 3,877 3,142 2,487

The number of captured person 5,289 4,269 3,359 2,684

Total materialsretrieved 144,432,469 11,730,412 29,579,855 16,891,785

Source: Ministry of Internal Affairs

¡ The Coordination Council for the Intellectual and Industrial Property Rights was established in May 2008, in order to define short, medium and long term strategies for intellectual and industrial property rights, and to sustain the effective application of these strategies by coordinating and cooperating with the related institutions45. The Council also aims to increase the institutional capacity in terms of intellectual and industrial property rights in Turkey.

¡ Harmonizing the intellectual and industrial property rights legislation with the international standards is a critical issue in terms of EU membership process of Turkey. A new Twinning Project was initiated in 2008 for this aim46. The Twinning Project named “The Support for the Usage and Enforcement of the Industrial Property Rights in Turkey” will be carried in cooperation with Germany in May 2010. Enhancing the public awareness in terms of industrial property rights is the expected result of the project.

¡ Also the negotiation on Intellectual Property Law Chapter within the context of EU membership process was started in 2008. The closing criteria for this chapter are determined as;

¡ Building a successful dialogue between Turkey and EU on the areas related to intellectual property,

¡ Sustaining the necessary administrative capacity on the activities towards avoiding the piracy of intellectual property rights and imitation,

44 1,155 of 1,347 applications were approved. 45 The Prime Ministry Circular on the Coordination Council of Intellectual Property Rights (Official Gazette 05.21.2008/26882).46 The information on the Twinning Project of “Strenghening Turkey’s Harmonization on Fighting with Piracy”, which is

introduced on May 4, 2006 and completed in November 2007, can be found in the 2008 IAC Progress Report.

The negotiation on Intellectual Property Law Chapter was started in 2008.


¡ Achieving a significant decline in the number of the pirated and imitation product exported to EU,

¡ Depletion of Turkey’s rights on the Community level and the finalization of harmonization with the enforcement of additional preservation certificates and ensure the enforcement of these rights with the full membership.

¡ Turkey has started the activities in order to meet these criterias. The Coordination Council for the Intellectual and Industrial Property Rights is the related authority following the studies in this area.

¡ A Twinning Project for supporting Turkish security was carried out, in order to minimize the implication problems towards industrial and intellectual property rights. The project was completed on March 27, 200947.

¡ The contracting countries of European Patent Agreement are supposed to prepare an Action Plan in order to determine the projects which will be implemented with collaboration of EPO. The studies towards preparing the National Action Plan for Turkey were started in June 2007 and were finalized in January 2008. Within the Action Plan, covering 2007-2010, 14 sub projects will be implemented in the context of 6 main projects. The financial size of these projects is expected to be Euro 1,71 million and EPO is expected to add about Euro 1,21 million for these projects.

¡ The Hezarfen Project which was first initiated at OSTIM OIZ in 2007, and continued at Ankara Chamber of Industry Sincan 1st OIZ, was started in Konya on March 2, 2009 with collaboration of KOSGEB. The Hezarfen Project aims to improve the innovative structure of Turkish SME’s and to increase the usage of industrial property rights for innovation48.

¡ The Technology Transfer Office, which was established at Gazi University within the scope of the pilot project of EPO titled “Establishing Technology Transfer Offices at the Universities”, has started its activities in October 2008. Moreover the first stage of the training towards the Office employees was completed by EPO.

¡ Some legislative studies were carried in 2008, to increase the protection of intellectual property rights.

¡ The regulation rearranging the necessary documents in the registration process of computer games49 and

¡ The Prime Ministry circular aiming to avoid the usage of uncertified software by the public institutions50

were enacted in 2008.

¡ With a view to improve the legal system in the field of intellectual property rights, Legal Consulting Group on Intellectual Property Rights was formed. The Group held its first meeting on November 28, 2008.

47 The Project was carried out in cooperation with The Ministry of Internal Affairs of Turkey and Denmark Patent and Brand Office and Hungary Police Department.

48 The information on Hezarfen Project for 2007 and 2008 were covered in IAC Reports 2007 and 2008. For more information about the project, please visit http://hezarfen.tpe.gov.tr

49 The Regulation on the Amendment of the Regulation on the registration of intellectual property rights (Official Gazette 10.28.2008/27038).

50 The Comminiqué no. 2008/17 (Official Gazette 07.16.2008/26038).

6 projects with the financial size of Euro 1,71 million will be implemented in 2007-2010 in collaboration with EPO.

55Improving Customs Procedures

7. Improving Customs Procedures

The Modernization of Customs Administration Project (GIMOP) which is at the center of the efforts on improving customs procedures was completed in 2008. The progress that has been achieved in the previous years was also continued in 2008 and 2009 to increase the effectiveness of the efforts in customs relating to both import and export procedures and the related licensing process:

¡ The ratio of customs declaration registered through Electronic Data Interchange (EDI) to the total declarations and the ratio of declarations registered electronically to the total declarations were 87.4% and 99.9% respectively, in 2008.

Table 13: The Customs Clearance Registered Electronically

Year Number of the Registered Export Declaration

Number of the Registered Import Declaration

2006 2,053,219 1,757,993

2007 2,251,442 1,917,570

2008 2,256,125 1,861,510

2009* 1,723,763 1,029,276

*January-October Provisional Source: The Undersecretariat of Customs

Table 14: Prevalence Rate of the EDI System and the Ratio of Customs Declaration Registered via EDI to the Total Declarations

Year

The Ratio of customs declaration registered through

EDI to the total declarations (%)

The ratio of declarations registered electronically to the

total declarations (%)

2006 77.8 98

2007 84.0 99.7

2008 86.5 99.9

2009* 87.4 99.9

* January-October ProvisionalSource: The Undersecretariat of Customs

¡ Customs brokers as well as import and export companies are allowed to submit customs clearance either via Computerized Customs Activities (BILGE) in the Data Entering Room that has been established in the customs service building or via EDI that is accessible with an internet connection.

The ratio of the customs clearance registered electronically was 99.9%.


Graphic 8: Custom Clearance via EDI

Source: The Undersecretariat of Customs

¡ Since 2008, a clearance has been able to be filed via internet at investors offices which do not have software. Customs brokers, import&export companies can transfer their clearances to the customs computer system over internet thanks to EDI-WEB implementation.

Graphic 9: The ratio of export-import registration via EVD-WEB

Source: The Undersecretariat of Customs

0

20

40

60

80

100%

Export Import

2006 2007 2008 2009 Jan

0

0,05

0,1

0,15

0,2

0,25

%

2008 2009 Jan

Export Import

A clearance can be filed via internet.

57Improving Customs Procedures

¡ Risk Management and Strategic Assessment Unit was established in the Undersecretariat of Customs in March 2008 with the aim of preventing customs smuggling and violations as well as managing all the risky works by concentrating on high risky processes. Since the results of risk analysis completed by this unit is transferred to BILGE, risky areas are now more intensively controlled in the customs administrations.

¡ The new implementation regarding general rates of red line51 which specifies the control of the documents together with physical examination of goods in the BILGE System came into force in the second half of 2009. After this implementation, the general rates of red line are reduced to at most 25% and 8% for import and export, respectively.

¡ With the Customs General Communiqué5253that entered into force in August 2008, a regulatory and explanatory arrangement on approved declerations of exporters and suppliers has been introduced. This regulation speeded up the transactions by increasing the number of beneficiaries who are subject to simplified customs transactions for issuing certificates of both export and country of origin.

¡ The secondary legislation that has been prepared to determine procedures and principles of ex-post control came into effect in October 200853. The purpose of the regulation is to decrease the burden on customs administration, diminish the cost of foreign trade arising from customs implementations, ease the conditions, fight against illegal trade and informality more effectively and develop the current ex-post control system. As of 2009, a planned and systematic ex-post control system based on risk analysis has been started. In this framework, the Ex-Post Control Program for 2009 was prepared and 370 investors, determined according to risk criteria, were audited. After this program, the control of high-risky transactions is performed at the customs gate while the control of non-risky or less risky transactions is performed on site.

¡ After the regulation54 that came into force in April 2008, the imported goods that are subject to any permission or certificate of conformity by relevant institutions are started to be controlled before customs clearance registration. Accordingly, the inspections of goods can be done upon completion of customs procedures while they are still in the area of customs control. As a consequence of this regulation, the goods can be kept for maximum 3 days, following the completion of customs legislation obligations, in order to enable the related institutions to control these goods.

51 Yellow line: It represents low risk. Declaration control is done by just examining documents.Red line : It represents high risk. Declaration control is done by examining both documents and goods physically. Blue line: Permission document of simplified procedure is given to the big and trusted firms on condition that they

have some qualifications. Declaration control of the firms in the mentioned framework is done by examining documents following goods leave the customs.

52 7 serial-numbered Customs General Communiqué (International Agreements) (Official Gazette 04.10.2008/26843).53 Regulation on Ex-post Control and Control of Risky Transactions (Official Gazette 10.27.2008/27037). 54 Regulation on the Amendment in the Customs Regulation (Official Gazette 04.16.2008/26849). In the framework of

the said Regulation two communiqués entered into force. 8 serial-numbered Customs General Communiqué (Entering Free Movement) (Official Gazette 05.15.2008/26877) and 10 serial-numbered Communiqué (Entering Free Movement) (Official Gazette 12.26.2008/27092).

The new general rates of red line were reduced to at most 25% and 8% for import and export respectively.


¡ Customs Law was amended55 so as to reduce the cost of customs procedures. Accordingly, the overtime payment received from the applicants at the customs has been reduced by 25%56. With the same amendment, cost and duration of customs procedures have been reduced by making possible completion of the entire customs transactions electronically via e-clearance. In this respect, the works on secondary regulation were completed. Under the same amendment “the required special conditions for approved person status” was simplified57.

¡ Customs General Communiqué was amended58 in order to simplify the export procedures on the authority of regulation of A. TR movement certificate59 and visa that are used to export to EU.

55 Law no. 5911 Made Amendments in Customs Law and Some Other Laws and Decree Laws (Official Gazette 07.07.2009/27281).

56 Council of Ministers Decision dated 09.29.2009 numbered 2009/15481 concerning Implementation of Some Articles of Customs Law numbered 4458 (Official Gazette 10.07.2009/27369).

57 Customs Regulation (Official Gazette 10.07.2009/27369-Repeated Edition).58 Customs General Communiqué (Simplified Procedures) (Serial Number:2 ) (Official Gazette 06.30.2009/27274).59 A.TR Movement Certificate is issued in order to provide that the goods exported from our country to the members of

Union can take advantage of duty exemptions according to Additional Protocol signed between European Union and Turkey.

59Improving Public Administration Practices

8. Improving Public Administration Practices by Enhancing Transparency, Predictability and Efficiency

Economic and social development process of the centralized public administration requires a systematic approach. It is a necessity that public administration services should be citizen oriented, qualified and fast serving; in addition to presenting flexible, transparent, participating, accountable and predictable manner resulting in a modern vision and structure. In this context, significant measures have been taken in the previous years.

¡ As a necessity for a democratic and transparent administration; principles of equality, objectiveness and openness require that the citizens should be able to reach information gathered and produced by the public institutions. In this sense, the Law on The Right to Information has been enacted in 200360.

¡ In order to identify the attitude principles of public servants such as respecting public safe and to supervise the implementation of these principles, The Council of Ethics of Public Servants was established with the Law enacted in 200461.

¡ The Law on the allocation of public resources to the prioritized public services, providing the effective and economic usage of these resources and increasing the authorizations of public administrations during the budgeting periods, came into force in 200362. Additionally, with the enactment of several secondary legislation relating to the local administrations, the consistency with the principles of this Law has been secured.

¡ “The Project of the Determination of Public Service Standards” has been started by the Prime Ministry in 2008 with the aim of increasing the quality of public services, defining the service standards and improving the quality of services in line with the citizens demands. In this context, Regulation on Procedures and Principles on Presenting Public Services entered into force in July 200963. According to this Regulation, all public administrations are obliged to identify their own service standarts. This project will allow citizens to know required application materials, the duration of the completion of several public services and centers for complaint without going to the public institutions beforehand.

e-Transformation Project of Turkey

The tendency of using information and communication technologies and e-government infrastructure during the interactions of citizens and businesses with the public institutions has been gaining importance continuously. Parallel to this trend, works on transformation of citizens into an information society in Turkey have been accelerated since 2000. Turkey has become party to the e-Europe Initiative which is designed for candidate countries in 2001. Accordingly, e-Transformation Project of Turkey has been launched in 2003. As a result, all works related with this aim have been gathered under this project64.

¡ e-Transformation Project of Turkey, which aims to sustain harmony and integrity among the works for transformation process into an information society, is coordinated by the State Planning Organization. Strategic Paper of Information Society and Action Plan (2006-

60 Law no. 4982 on The Right to Information (Official Gazette 10.24.2003/25269).61 Law no. 5176 on The Establishment of The Council of Ethics of Public Servants and the Amendments of Some Other Laws

(Official Gazette 06.08.2004/25486).62 Law no. 5018 on The Public Financial Administration and Control (Official Gazette 12.24.2003/25326).63 Regulation on Procedures and Principles on Presenting Public Services (Official Gazette 07.31.2009/27305).64 Circular of Prime Ministry on the Institutional Restructuring of e-Transformation Project of Turkey (Official Gazette

04.03.2007/26482).

The Law on The Right to Information was enacted.

The Law on Public Management and Fiscal Control came into force.


2010) came into force in July 200665. In this paper, the current situation of information and communication infrastructure and Turkey’s potential as an information society in 2010 has been analyzed. According to the strategic prerequisites determined in the paper, targets and necessary goals have been identified for 2010.

¡ Another important step taken on the way of transforming into an information society is launching the e-State Gate (www.turkiye.gov.tr) on December 18, 2008. This Portal facilitates the common presentation of all public services from one single point and provides fast and secure access to electronic information by citizens66.

¡ As part of the e-State Gate Initiative, the completion of the first reform package of e-State, accomplishment of 11 preferential projects67 and establishment of e-State Legislation Commission is planned. By the establishment of e-State Legislation Commission, all legislative and administrative regulations will be in parallel with the aim of transforming into an information society68.

¡ Encouraging the use of information and communication technologies by the companies while filing forms, informing the public institutions and applying for any kind of services, will certainly minimize the operational costs and decrease the total time spent for such works. As a result of the automation in public services, effectiveness of public services will be increased and the administrative burden on companies steming from legislative requirements will be reduced.

¡ In this regard, e-State Gate Project will increase the total economic and social benefit through diminishing the cost of time and expenses spent by citizens and companies.

¡ In Turkey, 12 of the 20 basic public services, which were selected by the EU within its member countries, are provided electronically.

65 Strategic Paper of Information Society and Action Plan (2006-2010) was approved by the Higher Council of Planning Decree no.2006/38 on November 11, 2006; and published by the Official Gazette on July 28, 2006, numbered 26242.

66 Decree no. 2006/10316 of The Board of Ministers (Official Gazette 04.20.2006/26145).67 Preferential 11 projects which will improve the investment environment are as follows: online company establishment,

online vehicle registration, e-trade, e-tender, e-environmental impact assessment permission, consumer’s portal, e-tax on municipalities, e-record of previous convictions, online case options, e-appointment for health, culture portal.

68 www.bilgitoplumu.gov.tr

Strategic Paper of Information Society and Action Plan (2006-2010) came into force in the context of e-Transformation Project of Turkey.

61Strengthening Measures to Reduce Informality

9. Strengthening Measures to Reduce Informality, Including Fighting Against Tax Evasion

Fighting against informal economy is one of the priority items in the Government agenda. One of the highlighted policies and measures listed in the 2008 Program of the Government is “Preparation of the Strategy to Fight against the Informal Economy with the Participation of All Relevant Parties”.

¡ The Action Plan of the Strategy to Fight against the Informal Economy (2008-2010) was prepared by the Tax Revenue Administration and entered into force on July 1, 200869.

¡ According to the Plan, a detailed analysis was completed which stated the causes, results and size of informal economy at the end of March 2008. Necessary actions were also determined together with the committed performance indicators within the framework of a scheduled plan at the end of June 2008. All actions will be taken between July 2008-December 2010. Progress in each action will be reported to the Tax Revenue Administration quarterly by the coordinator institutions.

¡ The Project of Risk Analysis and Control carried out by the Tax Revenue Administration with a view to fight against the informal economy. The project aims at identification of informal transactions by providing control on the consistency of the declarations of taxpayers. Also, this system helps to encourage taxpayers who are inclined to operate informally to declare their revenues accurately on their own will.

Table 15: Risk Analysis Project Summary Results as of March 2009

Voluntary Compliance Data

Number of Taxpayers Joined by Voluntary Compliance 6,600

Increased Tax Base Difference (TL) 493,282,604

Increased Tax Difference (TL) 53,477,069

Inspection Data

Number of Taxpayers Inspected 4,702

Tax Base Difference (TL) 413,878,765

Tax Difference(TL) 41,611,719

Amount of Punishment for Wrong Tax Declaration (TL) 85,301,943

Amount of Punishment for Infraction of Rules (TL) 11,318,170

Overview of Project Results

Total Tax Base Difference (TL) 907,161,369

Total Tax Difference (TL) 95,088,789

Total Amount of Punishment for Wrong Tax Declaration (TL) 85,301,943

Total Amount of Punishment for Infraction of Rules (TL) 11,318,170

Total Tax and Punishments (TL) 191,708,901

Source: Tax Revenue Administration

69 Circular of Prime Ministry no. 2009/3 (Official Gazette 02.05.2009/27132).

The Action Plan of the Strategy to Fight against the Informal Economy (2008-2010) entered into force on July 1, 2008.


¡ As a result of the widespread implementation of electronic tax payments through The Automation Project of Tax Administrations (VEDOP), the rate of taxpayers using electronic system increased from 40% in 2007 to 63% in 2008.

Table 16: Comparison of the Payments Received by the Banks According to VEDOP

2003 2004 2005 2006 2007 2008

The Share of Payments Received by the Banks Among the Total Tax Payments (%)

55 61 65 58 40 63

Source: Tax Revenue Administration

¡ A new Law enacted in November 2008 with the purpose of strengthening the capital adequacy of the companies. The Law enables to register money, foreign exchange, gold, stock, real estates and other kinds of capital instruments owned by real and legal persons. By this enactment, assets owned in Turkey but not included in the equity capital of companies were enabled to be included in economic activity70. According to the Law, 2% tax rate is applied to the declared assets which are outside of the country and 5% tax rate is applied to declared assets which are inside the country. Recently the deadlines for notification and declaration periods have been extended until December 31, 200971.

¡ The Law enacted in February 2009 has introduced new measures to prevent informality in the economy72:

¡ In order to strengthen the formal economy, the authority of unifying the withholding tax return (given to the Tax Revenue Administration) and insurance premium report (given to the Social Security Institution) is transferred to Ministry of Finance by the amendment made in the Law on Income Tax. Additionally, when the electronic unification of both declaration forms will be available, stamp duty tax will only be paid for withholding tax return by the amendment in the Law on Stamp Duty.

¡ By the amendment in the Charges Law, charge declarations regarding the type revisions have been abolished. In this sense, the financial burden on taxpayers during the process of type revisions will be decreased. This is an important step for encouraging registration of real estates. In parallel, this amendment will also reduce the red tape and bureaucracy in tax offices.

¡ All income resulted from the mergers of SME’s until the end of 2009, will be exempted from the Corporate Tax73.

70 Law no. 5811 on Gaining Some Assets as National Economy (Official Gazette 11.22.2008/27062).71 Decision of Council of Ministers No. 2009/15456 (Official Gazette 09.30.2009/27362).72 Law no. 5838 on Making Amendments in Some Other Laws (Official Gazette 02.28.2009/27155).73 Law no. 5904 on Making Amendments in Some Other Laws (Official Gazette 07.03.2009/27277).

63Strengthening Measures to Reduce Informality

¡ “The Project on Fighting against the Unregistered Employment (KADIM)” was completed in September 200874. Providing a synergy in society to support works on creating a formal economy, preventing the employment of unregistered workers and encouraging registration of employees were the main challenges of this project.

¡ KADIM Project has been recognized as the most comprehensive and leading project by the International Labor Organization (ILO) and EU. With the enactment of this project, the negative effect of unregistered employment in formal economy has been recognized by society and all public/private institutions in depth and employees became extensively conscious regarding the importance of insurance.

¡ Additionally, the fight against the informal employment has been officially assigned to Social Security Institution as a task .

¡ The year of 2008 has been declared as the year for fight against the informal economy by the Ministry of Labor. In this context, the following activities were conducted:

¡ The number of inspected businesses and employees were 97,971 and 188,023 respectively in 2008. As a result of these inspections, it was confirmed that 7,024 employees were unregistered, 137 of which were illegal.

¡ 20,093 people were educated within the scope of the project.

¡ Employment Package entered into force in 2008 which was composed of regulatory changes concerning the notification of identity, decreasing the rate of insurance premiums and burden on the employers75.

¡ A call center service which is called “The Line 170” for informing unregistered employees has been put into practice.

¡ Wages and salaries are required to be paid through the banking system76.

¡ By the enactment of the Law no. 5510 on October 1, 2008, the liability of controlling the insurance aspect of all employees during their operations has become compulsory for the banks and all public institutions. They also have to inform Social Security Institution in any case of informality77.

¡ “The Operation on Encouraging the Formal Economy by Innovative Measures”, which was financed by the EU funds, has been directed by the Social Security Institution. The project aimed at increasing the capacities of the Social Security Institution, Ministry of Labor and other relevant institutions, determining a road map for sustaining the formal economy and raising awareness of the society. With an operational budget of Euro 15 million, the project facilitated promotion campaigns in 15 cities.

74 Circular of Prime Ministry no. 2006/28 (Official Gazette 10.04.2006/26309).75 The Law no.5763 on the Amendments Made in the Labor Law and in Some Other Laws (Official Gazette 05.26.2008/26887).76 The Law no.5754 on the Amendments Made in the Law on Social Insurances and General Health Insurance and in Some

Other Laws (Official Gazette 05.08.2008/26870).77 The Law no.5510 on Social Insurances and General Health Insurance (Official Gazette 06.16.2006/26200).

“The Project on Fighting against the Unregistered Employment (KADİM)”, was completed in September 2008.


10. Encourage the Growth of SMEs to Drive Employment and Expand Their Role in the Formal Economy

Continuing the supportive policies towards SMEs has been an emphasized issue by the Council Members since 2004.

¡ The share of SMEs, in the total export and import is 56.3% and 40% respectively, while the share of R&D expenditures of SMEs is 42.8% in the total R&D expenditures in Turkey according to 2007 data78.

¡ In the last 5 years, substantial improvements were observed in terms of enhancing the growth of SMEs. The number of SMEs which was 2,000,770 in 2004 reached 3,172,212 in 2007, with an increase of 58.55%.

¡ 38,826 SMEs have benefited from the total supports of TL 256 million in the last five years79 provided by KOSGEB and 143% increase was observed on the KOSGEB supports in 2008 compared to previous year.

Table 17: KOSGEB Supports Allocated for SMEs

Source: KOSGEB

¡ KOSGEB has added some new SME support instruments to its portfolio in 2008:

¡ The interest support credit for the machinery and equipment investments of SMEs (named as 1000+1000 SME Machinery and Equipment Credit Support) which has been in implementation since June 9, 2008,

78 TURKSTAT.79 For the term 2004- September 2009.

Support Instruments 2004 2005 2006 2007 2008 2009

Consultancy and Training 9,786,604 5,720,501 1,588,763 934,897 141,036 447,116

Information Technology 33,936,328 507,948 1,778,947 1,054,721 543,701 290,321

Technology Improvement and Innovation 19,516,745 12,483,852 5,457,501 4,418,588 6,819,782 4,121,082

Quality Improvement 829,526 574,161 243,459 348,558 507,057 476,042

Market Research and Export Enhancement 17,482,927 3,551,425 2,551,933 2,529,504 5,072,667 6,427,416

Development of the International Collaboration 116,735 44,728 22,043 23,024 21,691 14,784

Regional Development 20,916,264 18,274,982 5,715,913 5,406,457 5,983,925 4,731,298

Entrepreneurship 958,947 1,960,823 644,374 398,995 982,458 353,454

Other (Affiliates- Projects- National/International Relations)

3,867,666 1,217,222 5,816,309 2,628,408 23,097,753 2,704,472

TOTAL 107,411,742 44,335,642 23,819,242 17,743,152 43,170,070 19,565,985

38,826 SMEs have benefited from the total supports of TL 256 million in the last five years, provided by KOSGEB.

65Encourage the Growth of SMEs

¡ The zero-interest business credit support for manufacturers, which has been in implementation since August 19, 2008,

¡ The zero-interest export credit support for SMEs, which has been in implementation since September 12, 2008 and

¡ The zero-interest employment credit support for SMEs and manufacturers, which is in implementation since November 25 2008.

Through these new instruments TL 183.3 million was allocated to 22,137 SMEs since 2008.

¡ TL 33.3 million support was distributed to 33,915 SMEs in 2009, through the export finance support credit of KOSGEB, which has been in implementation since February 27, 2009.

Table 18: New Support Instruments of KOSGEB

Support Instruments Number of Enterprises

Total Support Amount

(TL Million)

“1000+1000” SME Machinery and Equipment Credit Support(06.09.2008-12.31.2008) 941 44.8

Business Credit Support for Manufacturers (08.19.2008-01.31.2009) 5,108 29.25

Export Credit Support for SMEs (09.12.2008-01.31.2009) 3,191 14.5

Employment Credit Support for Manufacturers and SME’s(11.26.2008-05.15.2009) 12,897 94.8

Export Finance Credit Support for SMEs(02.27.2009-…)* 33,915 33.30

TOTAL 56,052 216.65

* Since the process is continuing, employment credit support for SMEs amounts are provided approximately.Source: KOSGEB

¡ Moreover, the instruments for supporting the internationalization of SMEs were continued in 2008 and 2009. In this context the following 7 instruments have been employed for this aim:

¡ The participation support for international fairs with national participation level,

¡ The participation support for international fairs without national participation,

¡ The participation support for domestic industrial fairs,

¡ Introduction supports,

¡ Supports for creating a brand,

¡ Supports for international business trips aiming at increasing exports,

¡ Supports for twinning projects.

¡ In 2008, introductory seminars were held in 11 different cities in order to inform the SMEs on exporting procedures and enhance the dialogue between the public authorities and SMEs. Encouraging SME exports and increasing their economic value added correspondingly were targeted by these seminars80.

80 The introductory seminars were held in Malatya, Elazığ, Antalya, Denizli, Diyarbakır, Mardin, Şanlıurfa, Gaziantep, Kahramanmaraş, Samsun and Amasya.


¡ Legislative works, initiated 2007, to enhance the scope of KOSGEB supports in order to cover different sectors besides manufacturing, were completed in 200981. After this amendment KOSGEB is now able to reach 3 million SMEs, 10 times of the previous target level.

¡ Finance problem is one of the most important factors blocking the growth of SMEs. The capital of the Credit Guarantee Fund (KGF), which aims to ease the finance conditions of SMEs by providing guarantee, was increased to TL 240 million in 2009 from TL 60 million. Also the number of the branches of KGF has reached 18 in 2009. These improvements have induced significant increases both on the number of supported businesses and on the credit volume created by KGF guarantees.

Table 19: KGF Guarantees and the Credit Volume (Million TL)

2005 2006 2007 2008 2009*

# of Guarantees 298 317 305 1,138 1,837

Amount of Guarantees 37.3 46.9 53 284.6 352

Credit Volume 56.7 74.9 75.4 402.6 492

*As of June 2009Source: 2010 Annual Program

¡ Moreover legal arrangements enabling Turkish Treasury to support the KGF and other credit guarantee companies up to TL 1 billion, was enacted in June 2009. This amendment aims to diminish the negative effects of the financial crisis on SMEs and strengthen the credit guarantee system82.

¡ The studies towards clustering and creating cluster maps of the enterprises in Turkey were initiated, as a result of the rising importance of this issue on the international platforms. Beside the studies towards determining the National Clustering Policy, coordinated by Undersecretariat of Foreign Trade, the SME Cluster Maps were determined by KOSGEB. Also a “Draft Support Model for Enhancing the Clusters” was prepared aiming to provide more supports for the enterprises in the determined clusters.

¡ In 2008, several studies were carried out to promote entrepreneurship in Turkey:

¡ 14 “Small Scale Consultancy Support” programs which aim to provide training and consultancy for the potential entrepreneurs were initiated in 13 different districts in 2008. As a result of the program which was completed on June 30, 2009, 210 of 1,536 participants have started their businesses.

¡ New Business Development Centers were opened in 4 regions in order to enhance the woman entrepreneurship. Supports for the development of small businesses through management consultancy, access to the financial instruments, business locations, common office equipment and office services are provided by these centers.

¡ Moreover, 20 entrepreneurship seminars were held in 16 regions and 1,585 potential entrepreneurs attended to these seminars.

81 The Law Amending the Establishment Law of Small and Medium Enterprises Development Organization (Official Gazette 05.05.2009/27219). Ministers Board Decree No: 2009/15431 (Official Gazette 09.18.2009/27353).

82 Law no. 5909 Amending the Law on Regulating Public Finance and Debt Management (Official Gazette 06.24.2009/27268).

Legislative studies to enlarge the scope of KOSGEB supports in order to cover different sectors besides manufacturing were completed in 2009.

67Enacting and Implementing the New Commercial Code

11. Enacting and Implementing the New Commercial Code to Improve Corporate Governance and Accounting Standards

Adoption and implementation of corporate governance principles is important in terms of ensuring that companies continue their activities more effectively with a transparent management approach and benefit from international funding resources more easily at a lower cost. In this framework, important developments have been achieved in implementing corporate governance principles in Turkey:

¡ Corporate Governance Principles were prepared on the basis of the OECD principles and published by the Capital Markets Board of Turkey (CMB) in 2003. Afterwards, the legal infrastructure for the implementation of these principles was established.

¡ It has become a general requirement for companies listed on the Istanbul Stock Exchange (ISE) to prepare Corporate Governance Reports within the scope of their annual activity reports and announce them on the company’s web page, if available. These reports are also accessible from the official web site of CMB.

¡ Turkish Accounting Standards Board has put into effect Turkish Accounting Standards and Turkish Financial Reporting Standards, all fully harmonized with the International Accounting Standards and International Financial Reporting Standards. Furthermore, in order to eliminate any hesitations that may arise in the implementation of the standards, Comments on Turkish Accounting Standards and on Turkish Financial Reporting Standards have been published in the Official Gazette. Implementation of International Financial Reporting Standards has been made compulsory for companies listed on the stock exchange, as of 2005.

¡ The Public Enlightenment Platform that aims to set up the infrastructure that will enable companies owning securities traded on ISE make their announcements securely on the Internet, became active.

¡ The Communiqué that aims to make it mandatory to have a valuation by an independent organization with regard to transactions over a certain amount carried out by companies owning shares traded on the ISE with persons or companies having direct or indirect capital, management or auditing relations with the company, came into force on March 19, 200883. Thanks to this improvement aiming to protect investor rights, Turkey moved to the 53th place on the ranking list of “Investor Protection” indicator in the World Bank 2009 Doing Business Report, leaping 13 ranks ahead.

¡ The draft Turkish Commerce Law, when enacted, is expected to strengthen corporate governance in Turkey. The draft Law adopts the approach of making Corporate Governance Principles applicable for all companies to establish a reliable environment for investors and support sustainable development of companies.

83 Serial No:IV, No:41, Communiqué on Principles Applicable for Incorporated Partnerships Subject to Capital Market Law (Official Gazette 03.19.2008/26821).

The draft Turkish Commercial Law is expected to bring important novelties to strenghten corporate governance in Turkey.


69Accelerating the Reduction of Administrative Barriers

Chapter 21. Accelerating the Reduction of Administrative Barriers

Accelerating the reduction of administrative barriers has been one of the issues followed by the Council members since the first meeting. Significant improvements have been achieved in this area up to date:

¡ New regulations on opening a business and work license have reduced the required number of documents from 52 to 6 for licensing of sanitary business places and from 43 to 7 for licensing of non-sanitary business places84.

¡ The affirmative Environmental Impact Assessment Certificate replaced the required site selection and facility establishment report.

¡ The number of documents required to obtain a business opening license and a operating certificate has been reduced from 18 to only 285 in 2004 and the necessity of obtaining a business opening license was removed in 200886.

¡ The law enabling the establishment of investment support agencies (ISA), within the development agencies, which will provide coordination and assist investors in obtaining necessary licenses and permits, has entered into force and pilot ISAs were established87.

Licensing Requirements

The efforts executed to solve the problems faced during obtaining permits, certificates or licenses continued in 2008 and 2009.

¡ 26 development agencies were established in NUTS-II regions since 2006, 24 of which were established in 2008 and 200988. New ISAs are planned to be opened within the provinces of new development agencies in 2010, following the institutionalization process of development agencies.

84 Law No. 5393 on Municipality (Official Gazette 07.13.2005/25874); Law No. 5302 on Special Provincial Administration (Official Gazette 03.04.2005/25745); Law No. 5216 on Metropolitan Municipality (Official Gazette 07.23.2004/25531); Regulation on Opening a Business and Work License (Official Gazette 08.10.2005/25902).

85 Regulation on Obtaining Permission to Start a Business and Obtaining Operating Certificate (Official Gazette 12.17.2004/25673).

86 Law No. 5763 on Amendment in Business Law and Other Some Laws (Official Gazette 05.26.2008/26887).87 Law No. 5449 on Establishment, Coordination and Functions of Development Agencies (Official Gazette 02.08.2006/

26074); Decision Concerning the Establishment of Development Agencies in Some Level II Regions (Official Gazette 07.06.2006/26220).

88 Decision Concerning the Establishment of Development Agencies in Some NUTS-II Regions numbered 2008/14306 (Official Gazette 11.22.2008/27062); Decision Concerning the Establishment of Development Agencies in Some NUTS-II Regions numbered 2009/15236 (Official Gazette 07.25.2009/27299).

OTHER IMPROVEMENTS IN THE INVESTMENT ENVIRONMENT OF TURKEY

26 development agencies have been established since 2006.


Table 20: Development Agencies Established in NUTS-II Regions

Name Provinces Covered Center of Agency

Date of Establishment

İzmir İzmir İzmir 2006

Çukurova Adana, Mersin Adana 2006

Mevlana Karaman, Konya Konya 2008

Orta Karadeniz Amasya, Çorum, Samsun, Tokat Samsun 2008

Doğu Anadolu Bitlis, Hakkâri, Muş, Van Van 2008

İpekyolu Adıyaman, Gaziantep, Kilis Gaziantep 2008

Dicle Batman, Mardin, Şırnak, Siirt Mardin 2008

TR10 İstanbul İstanbul 2008

TRC2 Diyarbakır, Şanlıurfa Diyarbakır 2008

TRA1 Bayburt, Erzincan, Erzurum Erzurum 2008

TR21 Edirne, Kırklareli, Tekirdağ Tekirdağ 2009

TR22 Balıkesir, Çanakkale Balıkesir 2009

TR32 Aydın, Denizli, Muğla Denizli 2009

TR33 Afyonkarahisar, Kütahya, Manisa, Uşak Kütahya 2009

TR41 Bilecik, Bursa, Eskişehir Bursa 2009

TR42 Bolu, Düzce, Kocaeli, Sakarya, Yalova Kocaeli 2009

TR51 Ankara Ankara 2009

TR61 Antalya, Burdur, Isparta Isparta 2009

Doğu Akdeniz Hatay, Kahramanmaraş, Osmaniye Hatay 2009

Ahiler Aksaray, Kırıkkale, Kırşehir, Nevşehir, Niğde Nevşehir 2009

TR72 Kayseri, Sivas, Yozgat Kayseri 2009

TR81 Bartın, Karabük, Zonguldak Zonguldak 2009

Kuzey Anadolu Çankırı, Kastamonu, Sinop Kastamonu 2009

TR90 Artvin, Giresun, Gümüşhane, Ordu, Rize, Trabzon Trabzon 2009

TRA2 Ağrı, Ardahan, Iğdır, Kars Kars 2009

TRB1 Bingöl, Elazığ, Malatya, Tunceli Malatya 2009

Source: Official Gazette 07.06.2006/26220, 11.22.2008/27062 and 07.25.2009/27299.

¡ Within the context of MATRA Pre-accession Project Program, a project on “Introducing Standard Cost Model to the Turkish Public Sector” which is used for measuring, comparing and decreasing administrative burdens and providing numeric figures on administrative burdens had been executed by Administration Development Unit under Prime Ministry. Two pilot projects had been carried out within this project and the conclusion&assessment meeting was held on January 28, 2009.


¡ For reducing bureaucracy; the requirement of submitting a birth record copy for the transactions of public institutions and agencies was removed89. Also, in order to solve the problems of industrial establishments with public institutions and agencies at the local level, “One Step Investment Offices” were created within governorships90.

¡ According to amendment in the Law on Social Security and General Health Insurance91, only SSI will be notified on starting or leaving work and establishing a business place, instead of three different public institutions92.

¡ So as to simplify processes for gathering medical permits, certificates or licenses, the formal internet web site of the General Directorate of Medicine and Pharmacy (www://www.iegm.gov.tr) was renewed. In this regard;

¡ Price lists are updated weekly since 2007,

¡ Utilization instructions and brief product informations of licensed products are published regularly since 2008 and

¡ Any applications for the licensed products and prescription applications for both extraindication and non-licensed products have been able to be submitted online since June 2008.

¡ Following developments are provided in 2008 and 2009 by the amendments in the regulation on private hospitals93:

¡ Re-planning is not required, in the case of re-application for a license by the hospitals for which licenses have been already issued following the preliminary authorization.

¡ Re-employment of certain qualified doctors who worked abroad for at least two years is exempt from planning provisions.

¡ To increase the quality and efficiency of private hospitals, certain qualified hospitals are exempt from planning provisions.

¡ The requirement for notarization of some documents including copies of trade registry gazette, ambulance contract&license and responsible manager or assistant responsible manager contracts was removed.

¡ Declaration of responsible manager and assistant responsible manager replaced the previous judicial record requirement.

89 Presidency Communiqué numbered 2008/8 (Official Gazette 05.21.2008/26882).90 Presidency Communiqué numbered 2008/10 (Official Gazette 06.03.2008/26895).91 Law No. 5838 on Amendment in Some Laws (Official Gazette 02.28.2009/27155 Duplicated).92 MLSS, SSI and ISKUR.93 Amendments in Regulation on Private Hospitals (Official Gazette 07.23.2008/26945, Official Gazette.10.17.2008/27072

and Official Gazette 03.11.2009/27166).

One Step Investment Offices were established within governorships.


¡ After the amendments in the regulation on private health institutions which came into force in 2008 and 200994, following issues have been accepted;

¡ Re-employment of certain qualified doctors who worked abroad for at least two years is exempt from planning provisions.

¡ To increase the quality and efficiency of private hospitals, certain qualified hospitals are exempt from planning provisions.

¡ Also, the following improvements are aimed with the amendment in the regulation for authorization of human medical products95:

¡ Removal of certain sale permits,

¡ Simplification of transfer procedures of licenses and

¡ Shortening of the renewal period of licenses

¡ In order to reduce red tape in the environmental legislation,

¡ The secondary legislation aiming to submit only one application electronically, instead of various environmental permits, was adopted on April 29, 200996.

¡ With the secondary legislation97 on packaging waste control, the direct application requirement to the Ministry of Environment and Forestry is removed by devolution of power to the provincial directorates.

¡ Three regulations entered into force in July 2009, to solve the conflicts between producers regarding carrying waste oils and the problems arising from emergency states and other conflicts regarding recycling plants98.

R&D Approval Process

Significant developments have been achieved as a consequence of the efforts conducted in 2008 and 2009 to simplify the processes for both R&D supports program application&approval and provide new benefits.

¡ Electronic project applications for Support Programs were enabled in September 2007. With the application of Project Assessment and Monitoring System (PRODIS), only online submission of all the project applications for Industrial R&D Projects Support Program, SME R&D Start-up Support Program and International Industrial R&D Projects Support Program were enabled on July 1, 2008. In addition, online evaluation and decision-making processes are started to be carried out through PRODIS. In 2009, electronic transfer monitoring process of the supported projects has also been enabled. Besides, electronic signature implementation studies for the computerized monitoring process were started in 2009. All the efforts are expected to be finalized in 2010.

94 Amendments in Regulation on Outpatient’s Private Health Institutions (Official Gazette 07.23.2008/26945 and Official Gazette 03.11.2009/27166).

95 Amendment in Regulation on Authorization of Human Medical Products (Official Gazette 04.22.2009/27208).96 Regulation on Permissions and Licenses Required According to Environmental Law (Official Gazette.04.29.2009/27214).97 Amendment in Regulation on Control of Packaging Waste (Official Gazette 11.06.2008/27046).98 Amendments in Regulation on Control of Waste Oils, Regulation on Control of Waste Battery and Accumulator and

Regulation on Control of Waste Vegetable Oil (Official Gazette 07.31.2009/27305).

Only online submission of project applications for various support programs were enabled.


Figure 1:PRODIS Flow Chart

Source: TUBITAK

¡ Amendments in the legislation on implementation principles of TUBITAK Industrial R&D Projects Support Program, SME R&D Start-up Support Program, TEKNOGIRISIM Support Program and International Industrial R&D Projects Support Program99 came into force on April 1, 2009. Within this amendment, the implementation of electronic signature and online numeric information transfer were regulated. Besides, with the amendment in the implementation principles of TEKNOGIRISIM Support Program the following improvements were targeted;

¡ Accepting program applications with a call for project proposals,

¡ Providing electronic application and

¡ Shortening the assessment period by reducing two-step R&D application, including Program Initiative Proposal and Initiative Plan, to one-step titled Initiative Plan.

99 For Amendments in the Implementation Principles of TUBITAK Industrial R&D Projects Support Program, TUBITAK SME R&D Startup Support Program, TUBITAK Support Program of Initiatives Focused on Technology and Innovative and TUBITAK International Industrial R&D Projects Support Program please see www//teydeb.tubitak.gov.tr.

The implementation of electronic signature and online numeric information transfer were regulated.

Online Application (e-application)

Assessment Process by Arbiter

Process of Improving Process and Amendments

in Legislation

Monitoring (e-monitoring)

Meeting Committee


2. Increasing the Efficiency of Judicial Process

Increasing the efficiency of judicial process was one of the main topics discussed in the first three Council meetings. In this context, significant steps have been taken recently to have a more effective, faster and predictable judicial process.

¡ The implementation of the National Judiciary Network Project (UYAP), aiming to increase the productivity and efficiency of judicial system as one of the most comprehensive information systems in the world, has been a significant reform. UYAP was awarded with gold medal, having the honor of Elite in Computer World Honors Program, in which innovative computing projects with outstanding performance are rewarded. Also, UYAP was the unique e-Justice project within the best five finalist e-government projects for 21st century. Besides, UYAP was awarded with e-TR in 2004, 2005 and 2008. In 2008, UYAP was also selected as the second among EU countries in the Crystal Scales of Justice Prize at which England was ranked as the first. Moreover, UYAP was one of the 15 projects which were awarded in the competition of the most environmentalist projects and undertakings held by Oracle in 2009.

¡ New Penal Code100 replaced the former one which was in force for 78 years.

¡ The courts of first instance was restructured and legal arrangement was enacted so as to establish district courts of appeal as second degree courts of law101.

¡ The Turkish Commercial Draft Code that brings radical changes in the Turkish commercial life and Turkish Obligations Draft Code which meets the changes and developments around the world and Turkey were started to be negotiated in the TBMM102.

¡ To equip the judicial buildings with modern instruments, devices and technologies, the infrastructure of 113 courts of justice has been completely updated since 2003.

¡ The success of these efforts reflected in “the Doing Business Report” published by the World Bank. Turkey ranked 34th in the “Enforcing Contracts” indicator of the 2008 Report, with a 36 step rise103.

100 Law no. 5237 on Turkish Penal Code (Official Gazette 10.12.2004/2561).101 Law no. 5235 on Establishment, Function and Jurisdiction of Courts of First Instance and District Courts of Law (Official

Gazette.10. 07.2004/25606).102 See www.tbmm.gov.tr for detail.103 Turkey ranked 26th in Report for 2009 and 27th Report for 2010.

75Increasing the Efficiency of Judicial Process

The efforts to improve judicial process continued in 2008 and 2009 as well:

¡ Amendments in Law on functions of Court of Conflicts and Law on Supreme Board of Judges and Prosecutors became effective in August 2008104. In this regard;

¡ Election of members for Court of Conflicts,

¡ Management&representation of courts and standing proxy for president judges,

¡ Determination of the office durations for members,

¡ Identification of the necessary documents to be sent when appeal for jurisdiction is rejected,

¡ Rejection of request for conflict in the event that time limit is over,

¡ Determination of the process to be followed by the courts in both positive or negative jurisdiction conflicts,

¡ Extending the period which coincide with the judiciary holiday and

¡ Transactions to be held by the courts that resort to the Court of Conflicts

were determined.

¡ In order to improve the judges and prosecutors in law, social sciences and information system areas, 3,807 judges and prosecutors participated in domestic training programs while 28 judges and prosecutors participated in overseas training in 2008. Besides, 5,158 other personnel took service training, whereas 3,170 personnel took UYAP technical course. 2,000 judges and prosecutors joined in service training in 2009. Moreover, 3,086 justice personnel took service training seminars.

¡ The construction of the district courts of justice for Ankara, Erzurum and Diyarbakır was completed in 2008 while the construction of İstanbul, İzmir, Bursa and Samsun is planned to be completed by 2010.

¡ The studies conducted to improve UYAP are as follows:

¡ All the transactions throughout the country can be currently performed by UYAP that has been initiated in order to conclude cases in the cheapest and shortest way by using computer technology. Thanks to the system, it is now possible to exercise any judicial and administrative activity electronically. In this framework, 134 high criminal courts, 587 courts of justice, 25 district courts of justice, 439 criminal execution institutions, 65 units of forensic medicine institutions and all the controlled freedom units have been incorporated to UYAP.

¡ Central System and Emergency Center was set up within UYAP to provide services for more than 40,000 users in the Ministry of Justice as well as 40,000 lawyers and citizens.

¡ To accelerate decision-making process, prevent repeated decisions and, material&procedural mistakes, Decision Support (warning) System has been established.

¡ Integration between UYAP and the information systems of some institutions and agencies including General Directorate of Judicial Records and Statistics, General Directorate of Population and Citizenship Affairs (MERNIS, Address Register System), Security General Directorate (POLNET, KIHBİ [Head of Anti-Smuggling Intelligence Operation and Information Collection] and Vehicle Registration System), General Directorate of Register and Cadastre (TAKBIS), CBRT, High Election Council (SECSIS), Court of Appeal, Constitutional Court and PTT has been enabled. Integration efforts with some other institutions and agencies are ongoing.

104 Law no. 5791 on Establishment and Functions of Court of Conflicts and Law on Supreme Board of Judges and Prosecutors (Official Gazette 08.06.2008/26959).

Amendments in Law on functions of Court of Conflicts and Law on Supreme Board of Judges and Prosecutors became effective.

The construction of the district courts of justice for Ankara, Erzurum and Diyarbakır was completed.

All the transactions throughout the country can be currently performed by UYAP.


¡ Document Management System (DMS) was put in practice in 2001 to keep domestic and outside formal correspondences of the Ministry of Justice in a correct, fast and secure manner and to save time, effort and money. DMS was begun to be used both in the central and provincial level as a result of development and extension of the system between 2007-2009. In this context, for correspondences of the Ministry, e-signatures were started to be used.

¡ A protocol was signed with GSM companies in April 2008, to increase the speed and efficiency of notification process by using current technologies and to inform people about the cases via SMS. It is now possible to file a suit, initiate an enforcement proceeding and learn about a hearing date through SMS information system that is mobile leg of UYAP system. As of November 4, 2009, number of subscriptions is more than 100,000 and about 1,006,200 SMS have been sent since the initiation of the system. UYAP SMS Information System ranked first in 2008 in the category of e-Services from Public to Citizens of e-TR Awards competition, held by the TUSIAD and Turkey Information Foundation (TBV).

¡ Thanks to Judicial Record Information System Project which aims to collect, protect and save judicial records, about 62,000 inquiries are held electronically per day via 705 judicial record centers.

77Ensuring the Proper Functioning of the Foreign Exchange Market and Vigilant

Implementation of the Inflation Targeting Regime

3. Ensuring the Proper Functioning of the Foreign Exchange Market and Vigilant Implementation of the Inflation Targeting Regime

The importance of continuity of the floating exchange rate regime and the vigilant implementation of the inflation targeting regime for sustaining the improvements observed in the Turkish economy in the recent years has been first mentioned on the fourth IAC Meeting by the Council Members.

Ensuring the Proper Functioning of the Foreign Exchange Market through the Continuation of the Floating Exchange Rate Policy

The floating exchange rate regime which has been implemented as a precondition for inflation targeting regime since 2001 and had significant contributions to Turkish economy has continued in 2008 and 2009.

Under the floating exchange rate regime, the exchange rate is neither a target nor a policy tool and is determined by the supply and demand conditions in the market. Nonetheless, closely monitoring the exchange rate developments, the Central Bank of the Republic of Turkey (CBRT) could directly intervene to the markets in case of speculative transactions leading to unhealthy price formation in the foreign exchange market due to decrease in its depth.

¡ Although the Consumer Price Index (CPI) based real effective exchange rate indicated that the Turkish Lira had been in medium and long term appreciation trend, TL began to depreciate both in nominal and real terms in the third quarter of 2008 due to mounting problems in the global economy. The magnitude of deprecation reached its peak at the end of the first quarter of 2009. After gaining some strength, TL kept its real value until the end of the third quarter of 2009.

Graphic 10: Foreign Exchange Developments

* As of October 16, 2009Source: CBRT

1.00

1.20

1.40

1.60

1.80

2.00

2.20

2.40

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Dollar/TL Euro/TL Euro/Dollar


¡ The foreign exchange buying auctions with pre-announced terms and conditions has been continued by CBRT in 2008 and 2009 as in the previous years, in order to have a strong foreign exchange reserve. As a result of the increased expectations of a possible stagnation in developed economies, the daily foreign exchange buying auction amount of USD 90 million with USD 30 million for the auction amount and USD 60 million for the optional selling amount has been cut by half to maximum USD 45 million amount with 15 million for the auction amount and USD 30 million for the optional selling amount as of March 10, 2008.

¡ In 2008, in order to abate potential problems in the Turkish financial markets that may arise from global developments and to strengthen the foreign exchange liquidity position of the Turkish banking system, several measures were taken. Within this framework;

¡ As of October 16, 2008, with the aim of keeping the liquidity in the system, which is permanently withdrawn from the foreign exchange market through the auctions, foreign exchange buying auctions were suspended.

¡ As unhealthy price formations were witnessed due to a decrease in the depth of the foreign exchange market, CBRT started to inject foreign exchange liquidity into the market through foreign exchange selling auctions as of October 24, 2008. The daily selling amount was set at USD 50 million which would be subject to be raised if necessary.

¡ After the auctions were held two working days, the foreign exchange selling auctions were suspended on October 30, 2008 as a result of easing concerns pertaining to the depth of the foreign exchange market, which was also facilitated by favorable conditions in global markets.

¡ Also, the CBRT has taken additional policy measures in 2008 to ensure the efficient functioning of the foreign exchange market and to strengthen foreign exchange liquidity in the banking system in case of liquidity problems. With this aim;

¡ On October 9, 2008, the CBRT’s intermediation role in its Foreign Exchange Deposit Market has been resumed.

¡ On October 14, 2008, the transaction limits of banks in the Foreign Exchange Deposit Market were revised and on October 24, 2008, limits were doubled for each bank to reach a total of USD 10.8 billion.

¡ On November 21, 2008, the maturity of USD and Euro deposits borrowed within borrowing limits by the banks from Foreign Exchange Deposit Markets was extended from 1 week to 1 month.

¡ The lending rate that had been previously set as 10% in the Foreign Exchange Deposit Markets was reduced to 7% for USD and to 9% for Euro.

¡ On 5 December, 2008, the foreign exchange reserve requirements were cut by 2 points from 11% and an additional foreign exchange liquidity amounting to USD 2.5 billion was provided to the banking system.

¡ The CBRT has been taking various measures throughout 2009 as well, in order to eliminate the adverse effects of the problems in global financial markets on the stability of the financial system in Turkey and to ensure orderly functioning of the foreign exchange markets. With this aim;

79

¡ On February 20, 2009, the CBRT extended the maturity of the foreign exchange deposit borrowed within the predetermined borrowing limits by banks from the Foreign Exchange Deposit Markets in terms of USD and Euro from 1 month to 3 months.

¡ Accordingly, the CBRT extended the maturity of matched interbank transactions in the Foreign Exchange Deposit Markets from maximum 1 month to 3 months.

¡ The lending rates for transactions, which CBRT is a party, has been reduced from 7% to 5.5% for USD and from 9% to 6.5% for Euro.

¡ In response to the unhealthy price formation due to a decrease in the depth of the foreign exchange market, CBRT resumed foreign exchange selling auctions beginning from March 10, 2009 to ensure smooth operation of the market through supporting liquidity. From the aforementioned date, USD 50 million daily auctions were held until April 2, 2009, when concerns about the depth of foreign exchange market declined due to the positive developments in global markets. In this period USD 900 million was sold in total 18 auctions held.

¡ In the beginning of August 2009, it was observed that as a result of the positive expectations related to the global economy, the liquidity and risk appetite have regained strength. This situation caused an increase in the capital inflows to Turkey along with the other emerging markets and the foreign exchange market became relatively stable. As a result of the fact that this process has contributed to a suitable environment for the CBRT to build up foreign exchange reserves, it was decided to resume the foreign exchange buying auctions as of August 4, 2009. The maximum daily amount to be purchased in auctions was determined as USD 60 million, with USD 30 million of auction amount and USD 30 million of optional selling amount. As of October 20, 2009, USD 2,389 million has been bought through foreign exchange buying auctions.

The total amounts of foreign exchange purchased and sold by the CBRT since 2002 onwards are shown on a yearly basis in the Table below:

Table 21: The CBRT’s Net Foreign Exchange Purchases and Sales (USD million)

2002 2003 2004 2005 2006 2007 2008 2009* TOPLAM

Foreign Exchange Buying Auctions 795 5,652 4,104 7,442 4,296 9,906 7,584 2,390 42,169

Foreign Exchange Selling Auctions - - - - 1,000 - 100 900 2,000

Foreign Exchange Buying Interventions 16 4,229 1,283 14,565 5,441 - - 25,534

Foreign Exchange Selling Interventions 12 - 9 - 2,105 - - 2,126

Total Net Foreign Exchange Buying 799 9,881 5,378 22,007 6,632 9,906 7,484 1,490 63,577

* As of October 20, 2009Source: CBRT

Ensuring the Proper Functioning of the Foreign Exchange Market and Vigilant Implementation of the Inflation Targeting Regime

The amount bought through foreign exchange buying and selling auctions totaled a net of USD 7.5 billion in 2008.


Vigilant Implementation of the Inflation Targeting Regime

The explicit inflation targeting policy has been in implementation in Turkey since 2006. The policy was launched after the implicit inflation targeting policy which was implemented in 2002-2005 within the context of the Transition Program for Strengthening the Turkish Economy. The main instruments of the policy are short-term interest rates in Interbank Money Market and the ISE Repo-Reverse Repo Market rates.

Within this perspective, the monetary policy has been implemented in accordance with the inflation targeting regime and the operational framework of the policy has been maintained in 2008 and 2009.

¡ During the implicit inflation targeting regime which implemented as transition phase in 2002-2005, to satisfy the preconditions for the success of explicit inflation targeting regime, such as maintaining institutional and technical infrastructure, fiscal discipline and financial stability;

¡ all the inflation targets have been achieved; the consumer inflation, which was approximately 70% at the beginning of 2002, declined below 8% by the end of 2005,

¡ confidence in Turkey’s monetary policy and in the TL was boosted,

¡ predictable and transparent decision processes were ensured.

Table 22: The Inflation Targets and Realizations during the Implicit Inflation Targeting Period (2002-2005) (%)

2002 2003 2004 2005

Target 35 20 12 8

Realization 29.7 18.4 9.3 7.7

Source: CBRT

¡ After 2006, when inflation targeting regime was launched, Turkish economy has faced a series of supply shocks, which has become evident during 2007 and 2008 with the sharp increases in food, oil and other commodity prices. In addition, unfavorable changes in the global liquidity conditions for developing countries during May-June 2006 period and worsening global credit markets conditions beginning from 2007 have affected country risk premium and exchange rates adversely. The inflation rates breached the announced targets due to all abovementioned factors, which were beyond the control of the monetary policy.

Table 23: The Inflation Targets and Realizations during the Explicit Inflation Targeting Period (2006-2009) (%)

2006 2007 2008 2009

Target 5 4 4 7,5

Realization 9.7 8.4 10.06 5.27*

* As of September, 2009.Source: CBRT

81

¡ In June 2008, the inflation targets were revised upwards for 2009-2011, since it was conceived that supply shocks would not be temporary and global markets would continue to tumble, resulting in second-round effects. The simultaneous implementation of target revision and monetary tightening helped to restrain inflation expectations in the following period.

Table 24: Revised Inflation Targets for 2009-2011 (%)

2009 2010 2011

The previous inflation target level 4 4 -

Revised inflation target level 7.5 6.5 5.5

Source: CBRT

¡ Some developments observed since August 2008 have put downward pressure on inflation, especially in the last quarter of 2008. These developments are;

¡ Decreasing impact of food prices on annual inflation rate, as a result of the slowdown in food prices due to improved supply conditions and lower import prices,

¡ The slump in the crude oil prices and

¡ The contraction in demand due to the deepening global economic unrest and the decline in commodity prices.

¡ In fact, the slowdown in inflation that started towards the end of 2008 continued in the first nine months of 2009, bringing annual inflation down to 5.27% as of September.

Graphic 11: CPI and Core CPI (Annual Percentage Change)

Source: TURKSTAT

Ensuring the Proper Functioning of the Foreign Exchange Market and Vigilant Implementation of the Inflation Targeting Regime

In June 2008, CBRT has revised its inflation forecasts for 2009-2011 upwards.

0

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¡ In 2008, the CBRT pursued a cautious and tight monetary policy. However, the policy interest rates, which were held constant between August and October 2008, were cut in the last quarter of the year. Considering the downward trend in inflation, the Bank continued to cut its policy rate in the first 10 months of 2009. Policy interest rate cuts amounted to 825 basis points in this period.

Table 25: Monetary Policy Committee Meetings and Policy Decisions in 2008

Monetary Policy Committee Meeting Dates Policy Decisions Policy Rate

January 17, 2008 -0.25 15.50

February 14, 2008 -0.25 15.25

March 19, 2008 Constant 15.25

April 17, 2008 Constant 15.25

May 15, 2008 +0.50 15.75

June 16, 2008 +0.50 16.25

July 17, 2008 +0.50 16.75

August 14, 2008 Constant 16.75

September 18, 2008 Constant 16.75

October 22, 2008 Constant 16.75

November 19, 2008 -0.50 16.25

December 18, 2008 -1.25 15.00

January 15, 2009 -2.00 13.00

February 19, 2009 -1.50 11.50

March 19, 2009 -1.00 10.50

April 16, 2009 -0.75 9.75

May 14, 2009 -0.50 9.25

June 16, 2009 -0.50 8.75

July 16, 2009 -0.50 8.25

August 18, 2009 -0.50 7.75

September 17, 2009 -0.50 7.25

October 15, 2009 -0,50 6,75

Source: CBRT

¡ In addition to decisions on policy rate,

¡ The methods of using the Liquidity Support Facility were rearranged and announced to the public on the CBRT’s website in January 2009105.

¡ The range of firms which can use export rediscount credits was widened and credit limits were raised by the decisions dated March 20 and April 17, 2009.

¡ On June 19, 2009, repo transactions with maturities up to 3 months were started to be used in case of need, in addition to the one-week repo auctions, which are the basic funding instruments.

¡ The Turkish lira required reserve ratio was reduced from 6% to 5% as of October 16, 2009, providing a permanent liquidity that is equivalent to approximately TL 3.3 billion to the banking system.

105 The related legislation can be reached at www.tcmb.gov.tr/Banka Hakkında/Mevzuat/Piyasalar/Yönetmelikler.

825 basis points decrease was issued on the policy interest rates in the first 10 months of 2009.

83Ensuring the Proper Functioning of the Foreign Exchange Market and Vigilant

Implementation of the Inflation Targeting Regime

¡ Moreover, the currency reform that started with the “New Turkish Lira” by omitting the last six zeros in the notes in early 2005 is now complete with the further omission of the adjective “new” and with the introduction of banknotes as “Turkish Lira” at the beginning of 2009.

¡ The CBRT will sustain inflation targeting and floating exchange rate regime in the following period as well. Also the CBRT will continue to determine short-term interest rates, its main policy instrument, in view of the inflation outlook so as to maintain price stability; and when deemed necessary will continue to take additional measures prudently in order to ensure the smooth functioning of the foreign exchange market and to support foreign exchange liquidity in the upcoming periods.


4. Further Progress in Fiscal Consolidation and Strengthening Efforts to Restructure Expenditures

Significant improvements have been observed in recent years in terms of improving the fiscal consolidation and strengthening efforts to restructure expenditures in order to create more space for priority investments particularly in public infrastructure.

The central government debt stock to gross domestic product (GDP) ratio, which was 69.2% at the end of 2002, was decreased to 40% by the end of 2008. Also, the Public Net Debt Stock/GDP ratio declined to 28.2% in 2008 from 61.4% in 2002. Moreover, the policies towards decreasing the liquidity, interest rate and exchange rate risk of domestic debt stock have been continued.

¡ In 2008, within the central government budget realizations, expenditures reached TL 227,031 million, while non-interest expenditures and revenues were recorded at TL 176,369 million and TL 209,598 million, respectively. Accordingly, the budget deficit was 17,432 million in 2008, below the target budget deficit level and the primary surplus was TL 33,229 million. Moreover, the primary surplus to GDP ratio was 3.5% level in the same period.

Table 26: Central Government Budget Targets and Realizations for 2008

Budget Targets for 2008

(TL Million)

Budget Realization for 2008

(TL Million)

Central Government Budget Expenditures 222,553 227,031

Non-Interest Budget Expenditures 166,553 176,369

Central Government Budget Revenues 204,556 209,598

Budget Deficit -17,997 -17,432

Primary Surplus 38,003 33,229

Source: Ministry of Finance

¡ The central government budget expenditures in 2008 were above the target level, due to some policy decisions that were applied to maintain the economic growth and to increase the social development level:

¡ Salaries of the employees without additional payments were improved, in order to eliminate the disequilibrium between the government employees,

¡ Resources were allocated to SSI,

¡ 5% of the employer’s share of social security premiums is started to be covered by the Undersecretary of Treasury106 in the context of the Employment Package,

¡ In order to prioritize the investments in the framework of the GAP Action Plan, investments especially in economic development and social improvement areas were increased,

106 The Law Amending the Labor and Other Laws- Law no. 5763 (Official Gazette 05.26.2008/26887).

85Further Progress in Fiscal Consolidation and Strengthening Efforts to Restructure Expenditures

¡ The resources allocated to infrastructure investments especially on the highway transportation and energy sectors were increased and

¡ The resources allocated to local administrations were increased to strengthen the fiscal conditions of these administrations.

¡ Despite the budget expenditures above the targets and fluctuation in the global economy, the central government budget deficit was 5.2%, below the target level, in 2008. Therefore, the fiscal discipline was pursued in 2008. Moreover, the central government budget deficit based on EU definition to GDP ratio was 2.2% in 2008, below the Maastricht criteria of 3%, which is used as a significant indicator of fiscal discipline and financial performance in the EU.

¡ The budget targets and the estimated expenditures for the end of 2009 are provided on the following table:

Table 27: Budget Targets and Estimated Expenditures for 2009

(TL Million)

Budget TargetsYear End

Expenditures (Estimates)

Central Government Budget Expenditures 259,156 266,752

Non-Interest Budget Expenditures 201,656 211,252

Central Government Budget Revenues 248,758 203,928

Budget Deficit -10,398 -62,824

Primary Surplus 47,102 -7,324

Source: Ministry of Finance

¡ The studies towards decreasing the public net debt stock to GDP were continued in 2008 and 2009 for sustaining the fiscal consolidation. The statistics for debt stocks in 2008 and 2009 are listed in the following table:

Table 28: Gross and Net Debt Stock in 2007-2009

External Debt Stock 2007 2008 2009Q1 2009Q2

Gross External Debt Stock of Turkey (USD Billion) 249.4 278.1 266.6 268.6

Net Debt Stock 2007 2008 2009Q1 2009Q2

Public Net Debt Stock (TL Million) 248,420 267,972 287,631 284,526

Net External Debt Stock of Turkey (USD Million) 133.7 151.6 143.2 144.8

Central Government Debt Stock 2007 2008 2009*

Central Government Total Debt Stock (TL Million) 333,485 380,321 431,209

Central Government Domestic Debt Stock (TL Million) 255,310 274,827 320,630

Central Government External Debt Stock (TL Million) 78,175 105,493 110,579

*As of September 2009Source: Undersecretariat of Treasury

The central government budget deficit based on EU definition/GDP ratio was 2.2% in 2008, below the Maastricht criteria of 3%.


¡ Risk profile of the public debt stock has been improved significantly as a result of strategic benchmarks which are being implemented since 2003. The average maturity of domestic borrowing has been increased to 34 months at the end of September 2009, from the level of 9 months at the end of 2002 as a result of the policies towards reducing the liquidity risk. In the same period, the share of foreign currency denominated debt has declined from 58% to 30%, resulting in reduced exchange rate risk of debt stock. Also the share of fixed rate debt in domestic debt stock has increased from 36% to 47%. Thus the interest rate risk of domestic debt stock was reduced significantly.

¡ The total domestic debt roll-over ratio was 102.4% at the end of September 2009, while the cost of TL denominated zero-couponed bond issues was 12.6%. Moreover, the strong cash reserve held in 2002-2008 period enabled the Turkish economy to overcome the short-term fluctuations in the market.

¡ Also the bonds issued by the local administrations have become to be subject to the permission of Undersecretariat of Treasury in 2008107, which has contributed to the studies towards sustaining the fiscal discipline and consolidation.

¡ Within the public investment framework for 2008 and 2009, the investments improving economic and social infrastructure were heavily focused, while taking into account the sectoral, regional and project-scale priorities.

¡ In 2008, excluding local administration investments and labor cost, 2,759 public investment projects, total value of which is TL 219 billion, in terms of 2008 prices, were implemented. The cumulative expenditure of these investments amounts to TL 102.4 billion as of end 2007 and 2008 initial appropriation is TL 17.1 billion108.

¡ In 2009, 2,332 public investment projects, total value of which is TL 245.8 billion, in terms of 2009 prices, have been implemented. The cumulative expenditure of these investments amounts to TL 110.9 billion as of end 2008 and 2009 initial appropriation is TL 21.5 billion109. The sectoral distribution of total investments is as following;

¡ The share of transportation-communication sector is 24.2%.

¡ The share of other public services sector is 19.4%.

¡ The share of education sector is 15.9%.

¡ The share of energy sector is 13.1%.

¡ The share of agriculture sector is 12.9%.

¡ The share of health sector is 7.6%.

¡ The share of the total of mining, manufacturing, tourism and housing sectors is 7%110.

107 The Law no. 5787 Amending the Public Finance and Debt Management Law (Official Gazette 07.23.2008/26945).108 2009 Annual Program, p.23.109 2010 Annual Program, p.28.110 2010 Annual Program, p.29.

The liquidity, exhange rate and interest rate risk of debt stock was significantly reduced in 2002-September 2009.


Table 29: Public Sector Fixed Capital Investments in Turkey *

2002 2003 2004 2005 2006 2007 2008 2009

Number of Projects 4,414 3,851 3,555 2,627 2,525 2,710 2,759 2,332

Total Value of Project (Current Prices, TL Billion) 166.8 187.1 196.1 206.7 200.4 209.3 219.0 245.8

Cumulative Expenditures Before Current Year (Current Prices, TL Billion)

66.0 80.4 86.8 84.0 86.5 93.5 102.4 110.9

Total Value of Program Appropriation(Current Prices, TL Billion)

10.6 12.5 12.0 16.2 17.5 17.1 17.1 21.5

Total Program Appropriation /Total Value of Project (%) 6.3 6.7 6.1 7.8 8.7 8.2 7.8 8.7

* Excluding local administration investments, expropriation expenditures and other investments, which are not included in the investment program.Source: 2010 Annual Program

¡ In 2009, public sector fixed capital investments are expected to increase by 0.4% in real terms. In 2009, compared to the figures of 2008, the shares within public sector fixed capital investments are expected to increase for agriculture, mining, manufacturing, tourism, education and health; while that of transportation and other services is expected to fall and those of energy and housing are expected to remain at nearly the same level111.

¡ In 2009, private sector fixed capital investments are expected to decrease by 21% in real terms, as a result of the negative effects of the ongoing global crisis. Within this total, it is expected that the shares of mining, energy, transportation, housing and other services would increase, while that of agriculture, manufacturing, tourism, education and health would decrease112.

111 2010 Annual Program, p.22.112 2010 Annual Program, p.22.


Table 30: Total Fixed Capital Investments (Current Prices, TL Million)

*Labor cost included in the Central Administration Budget**Realization Estimate***Program TargetSource: 2010 Annual Program

¡ In 2010, public sector fixed capital investments are expected to increase by 10.3% in real terms. In 2010, compared to the figures of 2009, the shares within public sector fixed capital investments are expected to increase for agriculture, mining, tourism, education and other services sectors; while that of manufacturing, energy and transportation is expected to fall and those of health and housing are expected to remain at nearly the same level113.

¡ In 2010, private sector fixed capital investments are expected to increase by 7% in real terms, as a result of the expected economic recovery. Within this total, it is expected that the shares of energy and housing sectors would decrease; while that of agriculture, transportation, tourism, education and health would increase and other sectors will remain at nearly the same level114.

¡ In addition to general sectoral and regional set of priorities, ongoing projects mentioned below would be prioritised in 2010;

¡ Those projects, which would be able to be completed by the end of 2010,

¡ Projects of which physical realization rate has reached a considerable level,

¡ Out of the projects with external financing in the investment program, the ones of which physical realization rate have reached a considerable level,

113 2010 Annual Program, p.23.114 2010 Annual Program, p.23.

In 2010, public sector and private sector fixed capital investments are expected to increase by 10.3% and 7% respectively.

Sectors 2008* 2009** 2010***

Public Private Total Public Private Total Public Private Total

Agriculture 3,374 3,709 7,083 3,942 1,145 5,087 5,001 1,322 6,324

Mining 646 2,600 3,246 982 2,376 3,358 1,440 2,795 4,234

Manufacturing 358 70,700 71,058 492 53,188 53,679 504 59,756 60,260

Energy 3,598 5,826 9,424 3,517 6,825 10,343 3,805 5,017 8,822

Transportation 14,733 28,608 43,341 13,017 26,106 39,123 14,206 30,701 44,906

Tourism 148 12,161 12,309 208 9,352 9,560 255 10,802 11,057

Housing 572 12,370 12,942 561 10,637 11,198 670 10,834 11,504

Education 3,863 1,913 5,775 4,338 1,177 5,515 5,068 1,792 6,860

Health 2,179 7,689 9,867 2,204 4,293 6,497 2,518 6,311 8,828

Other Services 9,654 7,116 16,770 9,114 6,724 15,838 11,011 7,483 18,494

TOTAL 39,123 152,692 191,815 38,376 121,824 160,200 44,477 136,813 181,290


¡ The projects which are interdependent or to be implemented and completed simultaneously with the other ongoing projects,

¡ Maintenance-replacement, care-repair, rehabilitation and modernization projects for efficient utilisation and protection of capital stock,

¡ The projects directed to natural disaster mitigation and compensation for their damages,

¡ The projects which are necessary to realize the priorities and policies in relation to the EU membership process and

¡ Istanbul IT Valley Project and the projects which are in compliance with the e-Transformation Turkey Project and Turkish Information Society Strategy115.

115 2010 Annual Program, p.30.


5. Deepening Financial Market Development

Strengthening the efforts to deepen the financial market development has been first mentioned by the Council Members in the third meeting. The increases in the total and daily traded values in ISE and Turkish Derivatives Exchange (TurkDEX), the improvements in the insurance and capital markets and the legislative developments are the significant signs of the recent efforts towards deepening the financial markets.

The fluctuation in the financial markets which was started as a result of the repayment difficulties in USA mortgage credit markets at the beginning of 2007, has started to show its effect in the reel markets after September 2008, which caused a global financial crisis. Although the negative effects of the financial crisis have started to be observed in the Turkish markets in 2008 and 2009, the Turkish financial markets have continued to maintain their strong position:

¡ In line with the shrinking global financial economies, the number of companies whose shares are being traded on the ISE markets declined to 317 in 2008 from 319 in 2007, while the total market value of these companies declined to USD 119.7 million from the USD 290 million level in the previous year. Also, the market capitalization to GDP rate, at current prices, declined to 18.22% in 2008 while it was 44.13% in 2007.

¡ As a result of the recovery started to be observed in global economies in 2009, the stock exchanges market has started to show an upward trend from the trough level in March 2009.

¡ The stock exchange markets of the developing countries have shown faster improvement as a result of the expectations that the developing countries be less affected from the global crisis. In the first 9 months of 2009, 81.32% increase was observed in ISE, not only more than the increases in the exchange markets of the developing countries but even more than the increases in the exchange markets of the developed countries and ISE has been the third among whole stock exchange markets by this increase. Moreover ISE has been the sixth among whole exchange markets by the 6.6% decline, between August 1, 2007-when the financial economic crisis has started-and September 2009.

Graphic 12: The Comparison of ISE with World Markets (August 2007- September 2009)

Source: Bloomberg

ISE has been the third among whole stock exchange market in the first 9 months of 2009.

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91Deepening Financial Market Development

¡ Several indices published by World Federation of Exchanges support that the movements within ISE in 2008 and 2009 are in line with the movements in the emerging markets. Turkey has moved upwards in 2 of the 5 indices comparing the emerging markets, while she has stayed in the same rank in the remaining 3 indices compared to year 2007;

¡ ISE has moved 2 steps upwards on the traded value rank and has been 7th, while moving 1 step upwards on the turnover ratio and has been 4th.

¡ ISE has kept its ranking on the number of traded companies, traded value of bonds and bills markets and the market capitalization ratio and has been 16th, 2nd and 10th respectively.

Graphic 13: Stock Market Traded Value Rank

Source: World Federation of Exchanges

Graphic 14: Turnover Ratio

Source: World Federation of Exchanges

Turkey; 213,24

0 500 1.000 1.500 2.000 2.500 3.000 3.500 4.000

Traded Value/Billion $

MaltaBermudaMauritiusSri LankaSlovakia

GKRYA rgentina

Peruıran

JordanC olombiaPhilipines

HungaryC hile

P olondEgypt

MexicoIs rael

Malays iaIndones ia

TaylandIndia Bombay

TurkeySouth A frica

BrazilIndia National

TaiwanC hina-Shenzen

C hina Shanghay

Turkey; 145,23%

0 1 2 3 4 5

MaltaBermuda

PeruMauritiusArgentinaSlovakia

IranColombia

ChileGKRY

PhilipinesSri Lanka

India-BombayMexicoMaleziaJordan

IndonesiaIsraelEgypt

PolondSouth Africa

BrazilIndia National Market

HungaryTaylandTurkeyTaiwan

China- ShanghayChina-Shenzen


¡ Despite the problems in the global markets, both the total traded value and the daily average traded value in the ISE Stock Markets increased by about 10% in 2008. The total traded value was USD 332.61 billion in 2008 and USD 220.34 billion in the first 9 months of 2009, compared to USD 300.84 billion in 2007. The daily average traded value was USD 1.1 billion in the first 9 months of 2009 compared to USD 1.04 billion at the end of 2008.

¡ The total number of the stock exchange traded funds in the ISE Stock Market reached 10 in 2009, while the number of total traded companies was 315. Besides, the percentage of the orders realized via Remote Access (Wide Area Network) in trading reached 91.8% as of September 2009116.

¡ Market Surveillance Project studies, which were initiated in cooperation with ISE and CMB to increase the efficiency and effectiveness of market surveillance activities, were completed in 2009. The system is currently being used by ISE and CMB.

¡ Moreover, the legislation prepared by CMB in order to increase the variety of tools provided by the capital markets, entered into force in the first half of 2009117.

¡ Also, the scope of venture capital companies was extended and the resource transfer procedures to these firms were facilitated by a new legislation118. As a result of these developments, the venture capital system in Turkey is expected to become prevalent.

¡ As a result of an amendment on the Expenditure Tax Law, the cost of the intermediation on the capital markets transactions was lowered. This amendment aims to contribute to the development of institutional investments and deepening of the capital markets119.

¡ As the single market for derivatives in Turkey, the total trading volume of the TurkDEX has reached TL 273 billion as of October 2009 by 76% increase in 2008 compared to previous year and 31% increase in the first 10 months of 2009. Also, the daily average trading value of TurkDEX has passed TL 1.6 billion as of October 2009, more than twice of the 2008 value. Moreover, TurkDEX moved 10 steps upwards on the first 50 derivatives exchanges of the world ranking of Futures Industry Association in 2008 and moved 6 more steps in the first 6 months of 2009 and has been 22th in June 2009120 .

¡ Istanbul Gold Exchange is regarded as an important step in canalizing the gold within the financial system, developing gold-based investment vehicles and integrating the Turkish gold sector within the international markets. Comparing the trade volumes of the Istanbul Gold Exchange in September 2009 by 2008 volumes, the effect of the recession in the global markets and the fluctuations in the gold rates can be observed. As a result of the decrease in both internal and external gold demand and the decrease in the gold import, the traded gold volume was 194,030 kgs by October 2009, 42% less than the 2008 level.

¡ Turkish banking sector has remained strong in terms of the capital structure and profitability, despite the negative effects of the financial crisis such as the credit volume decline and the increases in the over-due receivables. The volume of total loans in the banking sector reached TL 401.4 billion as of October 2009, by 4.6% increase compared to 2008 year end level. The volume of total loans to GDP ratio has reached 42.1% in the first half of 2009 from 36.1% level by the end of 2007. Total deposits in the banking sector reached a total of TL 490 billion as of October 2009. The total loans to total deposits ratio decreased to 82.5% as of October 2009121 .

116 World Federation Exchanges data.117 The Communiqué on the Registration and Sale of Debt Instruments (Official Gazette 01.28.2009/27117); The

Communiqué on the Registration and Trading of Partnership Warrants (Official Gazette 01.28.2009/27117).118 The Communiqué on the Principals of Venture Capital Trusts (Official Gazette 01.28.2009/27117).119 Law no.5838 on Amending Some Laws (Official Gazette 02.28.2009/27155).120 www.futuresindustry.org.121 Source: BRSA.

Turkish Derivatives Exchange (TurkDEX) moved 10 steps upwards on the first 50 derivatives exchanges of the world ranking and has been 28th in June 2009.

The volume of total loans/GDP ratio has reached 42.1% in the first half of 2009 from the 2007 level of 36.1%.

93Deepening Financial Market Development

¡ The legislative studies towards strengthening the institutional capacity of banking system in Turkey also continued in 2008 and 2009. Two new legislations have entered into force in 2009, aiming to sustain the strength of banking sector despite the liquidity problems in the global markets122 .

¡ The insurance sector that has a significant role within the financial markets has maintained its 20 years growth rate in 2008 and 2009. The premium production of the insurance companies reached TL 7,353 billion as of July 2009, by 18% increase compared to July 2008. Also, the total number of participants in the private pension sector have reached 1,925,514 by 10.21% increase, while the total contributions achieved 6,561 million as of September 2009 by 19.84% increase compared to the same period of the previous year.

¡ By the Insurance Law, which entered into force in 2007, new expansions such as arbitration system for the settlement of disputes, the professional organization of the experts and agents, security account and Insurance Education Center were provided for the sector. Also, the Law has aimed to update the existing regulations to be in line with EC legislation and international standards. Moreover, the secondary legislation studies in both the insurance and private pension system were completed by 2009123 .

122 The Regulation on the Amendment of Regulation on Designation of the Characteristics of Bank Credits and Other Receivables and Related Allowances (Official Gazette 01.23.2009/27119); The Regulation on the Amendment of Regulation on Measuring Eligibility of Bank Liquidities (Official Gazette 04.05.2008/26838).

123 More than 50 secondary legislations have entered into force after 2007, when the Insurance Law entered into force.


6. Supporting R&D and Innovation Activities

The increasing rate of the usage of innovation and R&D activities is one of the most important components of a competitive economic structure. In this context, paying attention to the support of R&D and innovation activities was highlighted by the Council members in the fourth meeting.

¡ As a result of the decision made at the 17th meeting of the Supreme Council for Science and Technology, it was planned to increase the share of R&D activities in GDP in Turkey to 2% by the end of 2013124.

¡ Turkey’s R&D expenditures have been steadily increased parallel to the rise in the GDP in the last few years. Between 2002-2008, R&D expenditures raised by 3.1 times in Turkey.

Graphic 15: GDP and R&D Expenditures Annually

Source: TURKSTAT

¡ Looking at the R&D expenditures of countries between 2002-2007, the highest increase in R&D expenditures has been experienced in Turkey and China. Turkey had taken the 25th place in the world with USD 3 billion R&D expenditures in 2002 while she took 23rd place with USD 6.6 billion R&D expenditures in 2007. With regard to the increasing rate in the R&D expenditures between 2002-2007, Turkey was the second in the world ranking with a 119% increase, after China.

124 Decision no. 2008/102 by the 17th Council Meeting on May 16, 2008.

With regard to the increasing rate in the R&D expenditures in the period of 2002-2007, Turkey was the second in the world ranking with a 119% increase, after China.

010002000300040005000600070008000

2000 2001 2002 2003 2004 2005 2006 2007 20080

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95Supporting R&D and Innovation Activities

Table 31: R & D Expenditures of Countries (2002-2007) (Billion USD-PPP)

2007 Ranking Country 2007 Rate of Increase 2002-2007

Ranking for rate of increase

1 USA 371 34 28

2 Japan 147 36 26

3 China 144 266 1

23 Turkey 6.6 119 2

Source: TURKSTAT, OECD

¡ According to the ranking of the countries regarding their share of R&D expenditures in GDP, Turkey has been 35th with 0.71% in 2007 while she was 38th with 0.53% in 2002. Considering the increasing rate of the share of the R&D expenditures, Turkey was 4th in the world ranking.

Table 32: Shares of R&D Expenditures in GDP

2007 Ranking Country 2007 Rate of increase2002-2007


1 Israel 4.98 5 21

2 Sweden 3.78 -1 28

3 Japan 3.44 9 17

35 Turkey 0.71 34 4

Source: TURKSTAT, OECD

¡ As one of the targets set for 2013, it is planned to increase the share of private R&D expenditures in the total R&D expenditures to 55%. Both in 2007 and 2008, a significant success supporting this goal has been achieved and for the first time the share of the private sector has left behind the public share in R&D expenditure based on source of finance.

Both in 2007 and 2008, the share of the private sector has left behind the public share in R&D expenditure based on source of finance for the first time.


Graphic 16: R&D Expenditures by the Source of Finance

Source: TURKSTAT

¡ Another important indicator for supporting R&D activities is the number of full-time R&D personnel assigned only for this job. Turkey was 25th with 23,995 full-time R&D personnel in 2002 whereas she increased to 18th with 49,668 full-time R&D personnel in 2007. Looking at the rate of increase in the number of personnel, Turkey was second, after Mexico. In 2008, the number of full-time R&D personnel has reached to 52,811.

Table 33: Full-Time R&D Human Resources (Thousands)

2007 Order* Country 2007 Rate of increase2002-2007


1 USA 1,484 11 32

2 China 1,373 69 6

3 Japan 713 10 33

15 Mexico 64 119 1

18 Turkey 50 107 2

*Except IndiaSource: TURKSTAT, OECD

¡ Current results on the number of subscribers and the total amount of the incentives provided under the Law no. 193 on Income Tax, the Law no. 5520 on Corporate Tax and the Law no. 5746 on Supporting R&D Activities are presented below:

0

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Table 34: Amount of Incentives Granted and Number of Subcribers for R&D Supports

Number of subscribers

Total Amount (TL)

Income Tax (2008) Total R&D Deduction 65 6,688,542

Corporate Tax (2008) Total R&D Deduction 438 593,413

Income Witholding Tax (March 2009)

Doctorates 203 187,481

Others 9,736 4,145,064

Total 9,939 4,332,064

Source: TUBITAK

¡ Secondary legislation studies of the Law on Supporting the R&D Activities125 which was enacted in 2008, have been completed. Both regulation126 and communiqué127 for the implementation of the Law has entered into force in mid 2008.

Supports by TUBITAK

¡ Direct public funds which are used for R&D expenditures have been raised significantly since 2003. In this context, the achievements resulted as of the end of 2008 in the Turkish Research Area(TRA) Budget are as follows:

Table 35: TUBITAK TRA Budget* (TL Million)

BudgetActual Expenses

at the end of April 2009

Share of expenses in budget at the end of

April 2009 (%)

Academic R&D Program 120 53 44

Industry R&D Program 190 78 41

Defense Research Program 90 37 41

Public Research Program 70 54 77

Scientist Support Program 56 19 33

Science and Society Program 15 7 46

TRA Total 541 248 45

EU 7th Framework Program 74 46 62

Transferred Allowance from the Previous Year 28 - -

TOTAL 643 294 45Source:TUBITAK

125 Law no. 5746 on Supporting the R&D Activities (Official Gazette 03.12.2008/26814).126 Regulation on the Implementation and Audit of the Law on Supporting R&D Activities (Official Gazette 07.31.2008/26953).127 Communique no. 1 on the Law on Supporting R&D Activities (Official Gazette 08.06.2008/26959).


¡ EU Framework Programs (FP) are one of the multi yeared community programs which were started in 1984. Turkey joined to these FP’s which are the biggest civilian research programs for the first time during the 6th EU FP continued between 2002-2006. The 7th EU FP has been started in 2007 and will last until 2013 with an amount of fund that reaches around 53.2 Euro billion. Funds received by the Turkish partners annually are given in the table below.

Table 36: Funds Received by Turkish Partners in EU 7th Framework Program

YearFunds Received by Turkish Partners

(Million Euro)

2007 17.6

2008 17.9*

TOTAL 35.5

* Amount resulted by the completion of 30 calls. Assessment process is ongoing for additional 19 calls.Source:TUBITAK

¡ Private sector share in the successful projects reached 25% for the first time in 2008. Considering that the target of this share in EU is 15%, interest of private sector in Turkey on the EU programs attracts great attention.

¡ Turkey has been experiencing a significant success through Marie-Curie fellowship and support programs that aim reversal of brain drain. In the 7th FP, Turkey is 5th country who could benefit from these programs in the most effective way. Below, the countries that took advantage of these programs and the number of researchers who returned to their countries are given as of January 2009.

Graphic 17: Researchers Benefited from the Return Program to Europe

Source:TUBITAK

75

35 34 3227 27

16 16 14 12 9 7 7 6 6 5 5 5 4 4 4 4 3 3 3 2 2 1 10

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20

30

40

50

60

70

80

IL-Israel

UK- Unit

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om

EL-Greec

e

ES-Spa

in

TR-Turke

y

FR-Fra

nce

DE-Ger

man

y

IT-Italy

PT-Portu

gal

NL-Neth

erlan

ds

IE-Ir

eland

CH-Switz

erland

PL-Pola

nd

CZ-Cze

ch R

epub

lic

HU-Hun

gary

CY-Cyp

rus

SE-Swede

n

SK-Slova

kia

AT-Austr

ia

BE-Belg

uim

BG-B

ulgaria

FI-Finlan

d

LV-L

atvia

RO-Roman

ia

SL-Slov

enia

DK-Den

mark

İS-Ic

eland

CA-Can

ada

NO-Norw

ay


¡ The supports for R&D activities of private sector in Turkey in a project based approach are directed by the Head of the Technology and Innovation Support Programs (TEYDEP) which is part of TUBITAK. As of September 2009, 1,605 project applications were made to TEYDEP support programs by 1,211 firms, of which 739 are new companies. After the assessment period, 921 projects were approved and committed to be supported. Currently, 1,994 projects are ongoing and 641 projects are finalized. As of September 2009, total of TL 263,6 million has been provided for the supports granted by the TUBITAK and Undersecretariat of Foreign Trade to companies.

Table 37: TEYDEP Supports

2003 2004 2005 2006 2007 2008 2009

The Number of Project Applications 418 503 595 711 1,498 2,285 1,605

The Number of Firms Applied 316 360 434 481 1,052 1,679 1,211

The Number of New Firms Applied 192 230 254 290 743 1,199 739

The Number of Projects Approved 279 374 449 534 732 1,199 921

Number of Projects in force as of December 31 673 792 818 961 1,355 1,790 1,994

The Number of Projects Completed 160 204 242 298 384 583 641

Amount of Grant (TL Million) (2008 Current Prices) (TUBITAK+Undersecretariat of Foreign Trade)

68 76 163 195 267 238.8 263.6

Source: TUBITAK

¡ The number of project applications for support programs and the number of companies applied grew by 3.8 times and supports granted grew by 3.9 times between 2003-September, 2009.

Coordination Committee of Human Resources of Science and Technology

¡ In the 19th meeting of the Supreme Council for Science and Technology, the Coordination Committee of Human Resources of Science and Technology was established128.

¡ The mission of the Committee is to solve and finalize the issues faced by the researchers. Additionally, the Committee aims to overcome challenges mentioned below if they are among the scope of the institutions participating in the Committee while preparing and forwarding proposals including any changes required in the legislation to be presented to the agenda of related institutions which are not the members of the Committee:

¡ Improvement of governance,

¡ Increasing the revenues of the researchers,

¡ Increasing the funds allocated for researches,

¡ Training capable human resources,

¡ Improvement of R&D infrastructure,

128 Decision no. 2007/201 of the 19th Council Meeting.


¡ Development of R&D culture,

¡ Enhancing collaboration between university-industry.

Coordination Committee of International Researchers

¡ In the 18th meeting of the Supreme Council for Science and Technology, the Coordination Committee of International Researchers was established129.The members of the Committee are; Ministry of Foreign Affairs, Ministry of Finance, Ministry of Education, Ministry of Health, Ministry of Labor, Ministry of Industry and Trade, Higher Education Council, TUBITAK and Ministry of Internal Affairs.

¡ The mission of the Committee is to solve and finalize the issues faced by the researchers. Additionally, the Committee aims to overcome challenges mentioned below if they are among the scope of the institutions participating in the Committee while preparing and forwarding proposals including any changes required in the legislation to be presented to the agenda of related institutions which are not the members of the Committee:

¡ The process of residence and work permits, renewal of those permits,

¡ The process of work permits for the spouses of researchers,

¡ Education facilities for the children of researchers,

¡ Maintaining diploma equivalence and academic advancement,

¡ Maintaining healthcare services for researchers,

¡ Maintaining transfer of employee personal rights of researchers between borders,

¡ Additional topics which will be identified by the Committee.

Supports by the Ministry of Industry and Trade

¡ The SAN-TEZ Program, which is implemented by the Ministry of Industry and Trade, has been in operation since 2006 to institutionalize university-industry-public cooperation, to encourage SME’s -that constitutes 99,9% of the national economy but creates only 26% of the total value added- to produce technological based production methods by supporting the production of high value added products and to industrialize the academic knowledge. The program has come into a significant mechanism leading SME’s to gain R&D and technology culture and to orient themselves into cooperative manner with universities. Until the end of 2009, 522 project applications were made to the SAN-TEZ Program, 197 of which have been supported.

Table 38: SAN-TEZ Program Project Applications Annually

2006-II 2007 2008 2009 TOTAL

Number of Project Applications 42 183 120 177 522

Number of Supported Projects 17 68 45 67 197

Source: Ministry of Industry and Trade

129 Decision no. 2008/201 of the 18th Council Meeting.


¡ Following the enactment of the Regulation on Control and Implementation of R&D Law, 72 companies applied to the Ministry of Industry and Trade as of October 2009. 64 of these applications were finalized and 59 companies were entitled to receive R&D Center Certificate. The companies that received the R&D Center Certificate are committed to make an R&D expenditure of approximately USD 2.7 billion during 2 years period which is valid for the certificate. These companies employ 9,018 R&D personnel.

¡ The Project on the Innovation and Industrial R&D Portal has been started by the Ministry of Industry and Trade in order to create an electronic center to follow up all industrial R&D supports, keep records on statistical data and receive electronic applications. By the Portal, all industrial R&D supports could be provided transparently within the framework of e-government approach and all information will be kept electronically. To this end, an important step for “the establishment of national innovation network” which takes part in annual national plan and program will be completed.

¡ In the context of the Law no. 5746 on Supporting R&D, Ministry of Industry and Trade initiated Technical Entrepreneurship Capital Support including grants up to TL 100,000 in 2009. At the first glance, 159 applications were made, 78 of which have been approved and supported by the Ministry. This mechanism aims to encourage entrepreneurship, lead the production of high value added and competitive products by the entrepreneurs and gain young qualitative entrepreneurs to engage in the business life.

Supports by the Small and Medium Industry Development Organization (KOSGEB)

¡ KOSGEB provides technological R&D supports to companies/entrepreneurs who have new ideas or inventions based on science and technology to produce a new product or develop better production systems and lead those to be competitive at national and international platforms. The number of Technology Development Centers (TEKMER) –application centers for receiving KOSGEB supports for R&D projects- reached 20 in 2008. As of 2008, the actualization rate in the total budget assigned to TEKMER’s was 57% and the number of projects supported was 292.

¡ According to the strategic plan of 2008-2012 announced by the KOSGEB, R&D and innovation activities will be supported at an increasing rate. In this context, the share of the supports allocated in the total budget of KOSGEB has been rised by 47% and reached TL 25 million in 2009.

Table 39: The Technology Development and Innovation Supports by KOSGEB

Total Support (TL)

Units of Support

2003 4,679,234 405

2004 19,516,745 833

2005 12,483,852 402

2006 5,457,501 134

2007 4,418,588 142

2008 6,819,782 288

2009 Sep. 4,121,082 355

Source: KOSGEB


Supports by the Technology Development Foundation of Turkey (TTGV)

¡ In 2008, TTGV supported 116 projects with a total value of USD 82.6 million. USD 21,3

million has been directed to the investors taking part in the ongoing supported projects.

Table 40: Supports by TTGV (2006-2009)

2006 2007 2008 2009 Sep.

Number of Project Applications 128 155 238 195

Number of Projects Supported 101 88 116 81

Ratio of SMEs in the Projects Supported (%) 87 88 88 89

Amount of Commitment (Million USD) 29,7 29,5 41,3 23,2

Amount of Total Project Budgets (Million USD) 59,4 59 82,6 46,4

Amount of Disbursement (Million USD) 17,3 17,6 21,3 16,8

Number of Completed Projects 73 73 66 74

Source: TTGV 2008 Annual Report

103Improving the Image of the Country

7. Improving the Image of the Country

As a result of corporate capacity building activities on promoting Turkey’s investment opportunities, the Investment Support and Promotion Agency of Turkey (ISPAT) was established in 2006 under the Prime Ministry with a mandate to formulate and implement the investment support and promotion strategy of Turkey.

Investment Promotion Activities

¡ Since 2006, ISPAT has been dealing with corporate capacity building activities. The Agency;

¡ formed a representative network in 21 countries, including Canada, China, Germany, Spain, Gulf countries, France, India, Israel, Italy, Japan, Kazakhistan, Russia, Saudi Arabia, UK, USA and Brasil,

¡ employed qualified staff proficient in 11 different languages like German, Arabic, Chinese, French, English, Spanish, Italian, Japanese, Korean and Russian,

¡ launched a website, www.invest.gov.tr, about the investment opportunities of Turkey,

¡ designed visual promotional material and extensively use these in 50 countries and 70 different newspapers and magazines.

¡ In the period of mid 2008 and end of 2009, a media campaign was conducted on 42 different newspapers and magazines.

Table 41: Mid 2008 - 2009 Media Campaigns

1 Al Khaleej Bus. Section 22 Insight Turkey

2 Al-Seyassah 23 TD-IHK Magazine

3 AmCham 24 The Banker

4 Arab Times 25 The Economist

5 Bayan 26 The Financial Express

6 British Airways High Life Magazine 27 The Foreign Affairs

7 Businessweek 28 The Wall Street Journal

8 Challenges 29 La Republica

9 Cinco Dias 30 Le Moci

10 Economic Dialogue Turkey 31 Le Monde

11 El Pais 32 NIKKEI Nihon Keizai Shimbun

12 Emirates Open Skies Magazine 33 NRC Handelsblad

13 Eurotürk Magazine 34 OECD Observer

14 FDI Magazine 35 SDZ Sueddeutche Zeitung Week Daily

15 Financial Times 36 Paris Match

16 Forbes Magazine 37 Ubifrance

17 Franfurter Allgemeine Zeitung 38 Valeurs Actuelles

18 Globes Israel’s Business Newspaper 39 Al Jazeera TV

19 Gulf News 40 BBC WW

20 ll Sole 24 Ore (Daily) 41 CNBC Emea ve Asia

21 International Herald Tribune 42 CNN WW

Source: ISPAT


¡ The P&R campaigns of ISPAT with the large cargo companies to promote Turkey as an attractive investment destination continued in 2008 and 2009. In this framework, the number of countries contacted by DHL and UPS were 23 and 220 respectively.

¡ The brochures in 11 different languages were distributed in the domestic and international flights of Turkish Airlines and at 65 leading hotels.

¡ In order to strengthen the capacity of ISPAT which is also accountable for investor servicing, several projects were initiated:

¡ The project of “Increasing Greenfield Investment to Turkey- Designing FDI Strategies and International Benchmarking” for which a grant of USD 434,000 was generated from World Bank-Institutional Development Fund (IDF) in April 2008, in order to improve the ability of ISPAT to design and implement strategies to attract foreign direct investment to selected industries and the project of “White Book on Foreign Direct Investments” are ongoing.

¡ EU funded and the Government of Netherlands supported project on “Clustering Study on Automotive, Food and Pharmaceutical Industries: Netherlands Experience in Structuring of a Model for Turkey” is ongoing. Comparing international success stories regarding clustering in otomobile, food and logistics sectors with the potential in Turkey and thereby determining the necessary investment sites and actors is aimed with the project. Action plans were prepared for these 3 sectors and works are ongoing.

¡ Within the protocol signed with Spain Foreign Trade Institute (ICEX), Universitat Oberta de Catalonia (UOC) and Caixa d’Estalvis i Pensions de Barcelona, an initiative to participate an MBA program, for providing education on the academical perspective of international investments, is underway.

Improvement of Country’s Image

The historical, cultural, linguistic, artistic and touristic heritage of Turkey along with her natural beauties are being promoted by the relevant international and domestic institutions with the help of various organizations, such as exhibition, concerts, seminars and symposiums.

¡ Within the context of the promotion activities organized by the Ministry of Culture and Tourism, more emphasis was given on advertisement, road show and hosting activities in 2008. A budget of USD 120 million was allocated for the ad campaigns. Professional P&R companies were hired in the international arena in order to increase the effectiveness of ad campaigns.

¡ Special activities are being organized to promote Istanbul in the context of Istanbul 2010: European Capital of Culture. Special documents on Istanbul are being published, foreign press members and the editors of leading sectoral magazines are being hosted in Istanbul. Moreover, different live broadcasts are held on the major TV channels such as TV 5, BBC and NBC.

¡ Turkey was the Guest of Honor in the Frankfurt Book Fair 2008, which hosted 7,500 participants from over 100 countries and approximately 300,000 visitors. With her 2,500 m2 forum place and 600 m2 agora, Turkey had a special opportunity to promote its unique cuisine and organize cultural and artistic exhibitions, craft shows and personal exhibitions.

105Improving the Image of the Country

¡ After 2008’s declaration of Turkish Cultural Year in Russia, there were 35 different organizations including joint concerts of Red Army Choir and Ottoman Military Band and Nazım Oratorio of Fazıl Say.

¡ Between March-December 2008, several online ad campaigns were run on Expedia’s sites in Great Britain, Germany, France, Holland, USA and Italy. Expedia is one of the most popular travel sites of the world with 55 million users monthly. Another online ad campaign was conducted for Yahoo, one of the most popular search engines, between April 15-June 15 2008, targeting the users in USA, Germany, UK, France, Holland, Spain, Italy and Israel.

Finance is also one of the other areas in which studies are conducted to improve the image of the country.

¡ 9th Development Plan, 2009 Program and Medium Term Program, covering 2010-2012, support the policies of transferring Istanbul to an international financial center. With the Istanbul Financial Strategy and Action Plan which was approved on September 29, 2009 steps to be taken in legal, financial product and service variety, taxation, regulatory and supervisory framework, infrastructure, technology, organization, human resources and promotion/image building areas have been specified.

Istanbul Financial Center Strategy and Action Plan was approved on September 29, 2009.


8. Strengthening Efforts in Land Planning and Management

Since the first meeting of the Council, land planning and management has been always on the agenda. The studies on strengthening the efforts on these issues continued in 2008 and 2009.

¡ The works on finding an ideal site for investment have been carried out by the related government institutions and agencies. 95.1% of the cadastral works in Turkey has been completed, within the scope of the land registry project, which has been carried out since 2005 with an objective to solve the land property conflicts.

¡ The Land Registry and Cadastre Information System Project (TAKBIS), which has been conducted since 2000, aims at execution of 1,300 transactions in the registry offices in a reliable, accurate and quick manner. TAKBIS is being used in 411 Land Registry Offices, 30 Cadastre Directorates, 4 Cadastre Chief Offices, 22 Regional Directorates and Headquarters. Nearly half of the 6 million registry transactions were made by extensive use of TAKBIS.

¡ In the context of privatization of state owned agricultural lands by Directorate of Agricultural Enterprises (TIGEM), 14 enterprises (12 enterprises for long term, including 1 partial lease and 2 enterprises as affiliates) were leased for 30 years. As of 2008, TL 158 million of investment commitments of TL 176 million was realized and employment opportunities were generated for 1,500 people.

Table 42: Number of Leased Agricultural Enterprises by TIGEM

2003 2004 2005 2006

Number of Leased Agricultural Enterprises 1 7 5 1

Source: TIGEM

¡ In the framework of OIZs implemented by the Ministry of Industry and Trade since 1962, 259 OIZs have been established across Turkey.

Number of organised industrial zones reached 259.

107Continuing with Privatization

9. Continuing with Privatization and Deregulation to Improve Competition

There are major achievements in the privatization process since 2004 when the issue was first raised by the Council members and closely monitored annually. Total revenue generated from privatizations, held by Privatization High Council (PHC) between 1985-1994, was USD 2,292 million. Between 1995-2002, the revenue generated from privatization was USD 5,704 million and between 2003-2009(November) the total revenue was approximately USD 30.6 billion. In addition to the privitizations finalized by the Administration, USD 5,252 million was generated by the Ministry of Transportation, USD 8,347 million was generated by the Savings Deposit Insurance Fund and USD 2,640 million was generated by the Ministry of Defense from finalized privatizations.

In 2005, revenue of USD 6.55 billion was generated from the block sale of 55% of TURK TELEKOM shares. In 2006, the revenue generated from the privatization of TUPRAS, ERDEMIR and Basak Sigorta ve Emeklilik AS was USD 7.18 billion. USD 1.84 billion was the revenue from the IPO of 24.98% stake in HALKBANK’s shares.

Privatization Implementations in 2008

Among the major privatization implementations of 2008 were:

¡ The block sale of 51% shares of Petrochemical Holding AS (PETKIM),

¡ IPO of 13.34% shares of TURK TELEKOM,

¡ Transfer of operating rights of Ankara Natural Electricity Production and Distribution AS (ADUAS)’s seven hydroelectric and one jeotermal power plant and sale of one thermal power plant,

¡ Tobacco manufacturing factory and some assets of Cigarette Industry Enterprise and Trade Co. (TEKEL),

¡ The 20-year lease of Sabiha Gokcen Airport of Undersecretariat for Defence Industries.

Table 43: Major Privatization Implementations in 2008

Name Transfer Date Sale (USD million)

Block Sale

PETKİM (51%) 05.30.2008 2,040

Asset Sale

TEKEL Tobacco 06.24.2008 1,720

ADÜAŞ- 9 generation plants 09.01.2008 510

IPO

TÜRK TELEKOM (15%) 05.7-9.2008 1,911

Leasing

Sabiha Gokcen Airport (20 Years)* 2,640

TOTAL 8,703

* Undersecretariat for Defence IndustriesSource: Privatization Administration, 2008 EU Pre Accession Economic Program 2008


Privatization Implementations in 2009

¡ According to the PHC’s decision dated on September 19, 2008, an agreement on the sale of 100% of government stake in Baskent Electricity Distribution AS was signed on January 28, 2009 with Enerjisa Electricity Distribution AS, which was the highest bidder with a price of USD 1.22 billion.

¡ According to the PHC’s decision dated on September 19, 2008, an agreement was signed on February 11, 2009, regarding the sale of government stake in Sakarya Electricity Distribution AS to Akcez Consortium, which was the highest bidder with a proposal of USD 600 million.

¡ According to the PHC’s decision dated on April 30, 2009, an agreement was signed on October 30, 2009, regarding the sale of government stake in Meram Electricity Distribution AS to Alcen Energy Distribution AS, which was the highest bidder with a proposal of USD 440 million.

Table 44: Major Privatization Implementations in 2009 (Completed)

Name Transfer of Date Sale (USD million)

Total Asset Sale 2,265

Başkent EDAS 01.28.2009 1,225

Sakarya EDAS 02.11.2009 600

Meram EDAS 10.30.2009 440

Source: Privatization Administration

¡ Negotiations have been completed in the privatization process of Çoruh, Osmangazi and Yeşilırmak Electricity Distribution AS on November 6, 2009. After the required legislative works, the transfer of shares will be finalized. Revenue of USD 1.2 billion is expected from these 3 privatizations.

¡ Technical process has been completed for privatization of İzmir, Derince, Bandırma and Samsun harbours. After the required legislative works, the transfer of shares will be finalized. Revenue of USD 1.7 billion is expected from these 4 privatizations.

¡ On April 20, 2009, Council of State has made decision on stay of execution regarding the transfer of Aras Electricity Distribution A.Ş. to the Kiler Alış Veriş Hizmetleri Gıda Sanayi ve Ticaret A.Ş which offered the highest price for the privatization tender.

¡ The latest date for submitting the tender of privatization of the shares in Çamlıbel, Fırat, Uludağ ve Vangölü Electricity Distribution A.Ş. belonged to the Turkey Electricity Distribution A.Ş. is on Februrary 12, 2010. Administrative process is ongoing.

¡ Tender processes were started for sugar factories belonging to B and C portfolios of Turkey Sugar Factories A.Ş. on October 5, 2009 and September 11, 2009 respectively.

109Social Security Reform

10. Social Security Reform

Completing the Social Security Reform is one of the major components of the government’s economic program. The purpose of the Reform is to establish a social security system that is financially sustainable, easily accessible and that provides effective protection against poverty. In this framework, a comprehensive package including 3 laws was prepared and has been put into implementation to a large extent:

¡ SSI Law was put into effect in May 2006130. In this framework, all social security institutions have been gathered under the SSI which is a public legal entity with administrative and financial autonomy.

¡ The Law on Social Insurances and General Health Insurance131 was put into effect in 2006 for the purpose of overcoming the financial and structural problems of the social security system and renewing the system in line with the changing needs. The draft Law prepared following the cancellation of some of the Articles of the Law by the Constitutional Court was also codified in May 2008132. With this development, the Law on Social Insurances and General Health Insurance was put into effect with all provisions as of October 2008 and the second component of the social security reform was activated.

¡ There is an ongoing work on the draft Law on Social Benefits and Non-Contributory Payments, which foresees the establishment of a system that will consolidate social benefits and services and will be accessible by community segments in need on the basis of objective eligibility criteria.

¡ The secondary legislation aiming at the effective implementation of the reform and the SSI has been completed and all the regulations were put into effect within this scope.

¡ Furthermore, transition to automation in the computing infrastructure of the social insurance system will be completed as of the end of 2010. Thus, a social security system offering efficient, accessible and sustainable services will be created133.

¡ With a legal amendment entered into force in 2009134, the statements being made separately to the MOLLS, SSI and ISKUR for the establishment and transplant of a workplace and recruitments and dismissals are gathered into a single statement, reducing the bureaucratic burden on the employers in this area.

130 Law no. 5502 on Social Security Institution (Official Gazette 05.20.2006/26173).131 Law no. 5510 on Social Insurances and General Health Insurance (Official Gazette 06.16.2006/26200). 132 Law no. 5754 on Amendment of the Social Insurances and General Health Insurance Law and Some Laws and Decrees

Having the Force of Law (Official Gazette 05.08.2008/26870).133 2010 Annual Program (Official Gazette 10.17.2009/27379), s. 220.134 Law no. 5838 on Amendment of Some Laws (Official Gazette 02.28.2009/27155, repeated edition).

With the enactment of the Law no. 5754, the Social Security Reform has been substantially activated.

The secondary legislation aiming for the effective implementation of the reform and the Social Security Institution have been completed considerably.

Documents

INVESTMENT ADVISORY COUNCIL FOR TURKEY … 2009 Report_son.pdf · YATIRIM DANIÞMA KONSEYÝ ÝLERLEME RAPORU ... 4 INVESTMENT ADVISORY COUNCIL FOR TURKEY PROGRESS REPORT 2009