Turgut Şenol, General Manager, Teknopark Istanbul: Interview

Interview: Turgut Şenol

How do current incentives for companies located in technoparks foster innovation, and what additional incentives are needed?

TURGUT ŞENOL: There are a number of incentives for companies located in technoparks. They do not have to pay income taxes, all research-based production is exempt from corporate taxes and, finally, software companies do not have to pay value-added tax. This third condition is very important, but somewhat dangerous. While software firms are an integral part of the economy, there is a tendency, because of this last incentive, to fill parks with them at the expense of other types of businesses. In fact, software companies currently account for 80% of firms in technoparks. Operators need to work towards diversifying this mix.

That said, it is misleading to think that incentives are the only ingredients needed in creating effective and successful technoparks. In my opinion, there are already enough incentives. Instead, we should be thinking about how to create the best possible environment for collaboration and innovation so that companies can get the maximum value-added results from participating.

How do you do this? You become very precise with respect to the types of companies that you admit. For instance, you must look to attract different industries that may benefit from increased contact with each other, or try to find specific sectors that may gain knowledge from the park’s academic partnerships. Above all, the companies must be able to conduct research, be interested in innovative practices and products, and know how to collaborate with other businesses.

Turkey’s technoparks also need to focus on creating links with parks abroad so that domestic synergies can turn into international ones. Parks across East Asia, specifically China, have shown interest in working with Turkish institutions. All this is to say that, while incentives are important and can open up opportunities for companies, good technoparks should not rely solely on providing more incentives. The primary goal should be to create the necessary environment for collaboration.

What is the importance of increasing research and development (R&D) for the Turkish economy?

ŞENOL: R&D spending as a percentage of GDP is around 0.8%. This is much lower than in many EU countries; for example, Germany spends almost 3% of its GDP on innovation-related activities. If Turkey wants to move out of the middle-income set of countries, it must increase its R&D spending. Our goal is to reach 3% of GDP by 2023, which is still too low. In 10 years, the bar will have been raised significantly and the more developed countries will not be waiting for us to catch up.

While increasing this percent is important for many reasons, the primary one is that the Turkish economy needs to move up the value chain. We are a country of more than 75m people with the potential to develop world-class industries. Unfortunately, however, many of the sectors in which we could have a competitive advantage are far less developed than in our Western European neighbours, such as Germany. For instance, our automotive manufacturing industry is highly developed, but we still do not have a brand of our own. If we were to invest in R&D and develop the capacity to build a Turkish car, we would have immediate and preferential access to a huge consumer population.

The white goods sector is another one in which we are very strong, but need to make improvements. Our star brands are leaders abroad, but we must import a substantial amount of intermediate goods from lower-income countries. If Turkey were to focus on the supply chains of these companies, more of the income from the sales of final products would stay in-country.

These are not the only industries that would gain from more R&D spending. Turkey needs to develop industries across the board, from aerospace and engineering to life sciences and energy. We need to develop our own industrial capabilities, changing the nature of production to favour higher-margin products and real, exportable Turkish brands. This will have a positive impact on the balance of trade and will help the country to move into the high-income bracket of countries.