Turkey Unveils Investment Incentives to Reduce Current Account Deficit

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Researched by Industrial Info Resources (Sugar Land, Texas)--Turkey launched a long-awaited investment incentive programme to decrease its current account deficit via increased domestic production. The current account deficit is about 10% of GDP in 2011, which has unnerved investors of its funding via short-term foreign fund flows. The Turkish economy grew 8.5% in 2011, which is third in the global growth rankings.

The incentive programme unveiled by Prime Minister Tayyip Erdogan in Ankara has five diffrerent objectives. These are:

• lower the current account deficit by increasing the level of domestic production of intermediate and finished goods that is currently imported
• support investments in under-developed regions and eliminate developmental differences between regions
• improve efficiency of incentives
• incentivize sectoral cluster formations, and
• support investments that include mid-to-high technology to increase the country's competitiveness in global trade

. The incentive program will support new investments that have started since January 2012. Investments in certain areas will be defined as strategic investments and benefit from the same investment incentives as those in underdeveloped regions.

The specified investment areas are:

• automotive
• space and defense industry test centers, wind tunnel and design
• certain pharmaceutical and defense industry investment
• primary and secondary education investments by the private sector
• maritime and railway construction
• mining
• tourism in certain region

The Turkish government introduced a new and extended group of incentives for strategic investments (in addition to existing incentives). According to Turkey's Ministry of Economy's presentation regarding incentives, these incentives includes:

• value added tax (VAT) exemption
• exemption of custom duties
• corporate tax discount (90% discount for up to 60% of the investment size
• employers' social insurance premium contribution (up to 10 years depending on the region)
• investment lot allocation
• loan interest support (for investments starting before yearend, up to 5% of investment size or 50 million Turkish Lira ($27.9 million) and
• VAT refund on building construction expenses (for investments higher than 500 million Turkish Lira ($279 million). Apart from these incentives, there is income tax support for investments in the most under-developed regions.

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