Innovation Europe > News > Innovation EU Vol2-1 > Innovation Turkey

During the current global crisis Turkish exports fell 32.78% year-on-year in June 2009, to €5.76bn. Automotive and auto parts worth €1.13bn are still leading exports. Turkish exports had grown from €55bn in 2005 to €94bn in 2008, led by the automotive, machinery and equipment sectors.

According to the Turkish Statistical Institute (Turkstat), the main export partners of Turkey included Germany (11.2%), UK (8%), Italy (6.95%), France (5.6%), Spain (4.3%), and the US (3.88%).

The most severe impact of the crisis has been on the employment front, up from 11% in March 2008 to 15.8% in March 2009. The rate of unemployment among the young was exceptionally high, reaching 27.5% in March 2009.

The rate of foreign direct investment (FDI) has always been lower (less than 1% of GDP) in Turkey than in other emerging markets. This is mostly because of heavy bureaucratic procedures, as well as political and economic uncertainties.

However, recent large-scale acquisitions in services, particularly in telecommunications and banking, increased FDI inflows to Turkey.

Main innovation challenges

• Promoting research commercialisation from universities.
• Increasing private-sector innovation performance.
• Increasing early stage funding.

Conclusion

Business R&D expenditure in Turkey is lower than the EU average, and most R&D is performed by universities, which accounted for 48.2% of the country’s R&D expenditure in 2007. This R&D is insufficiently commercialised.

The 2006 Turkstat Innovation Survey showed only 6.4% of innovative enterprises in Turkey collaborated with universities. The report of the Audit Office of the President highlights the need for removing barriers in research commercialisation from universities and stimulating university–private sector collaboration for research and innovation.

The government has initiated a new investment incentive system which is sector based. This is an important opportunity for Turkey to allocate the funds available for R&D and innovation to schemes that are tailored for boosting innovation activities both in traditional and medium to high-tech sectors during the global downturn. In addition, the report of the Audit Office of the President recommends the creation of thematic technology development zones to increase sectoral competitive advantage.

The underdeveloped venture capital market, as well as low levels of public support for startup creation, impede the establishment and development of innovative businesses in Turkey. This prevents educated and qualified people seeing entrepreneurship as a career option. Total fund size for venture capital and private equity is estimated at around €400m, and annual investments are not more than €100m. To improve this situation, a dedicated investment programme, Istanbul Venture Capital Initiative (iVCi) (14) has been established.

This is a joint venture between the European Investment Fund (EIF), the Technology Development Foundation of Turkey (TTGV), KOSGEB and the Turkish Development Bank (TKB). In early 2009, iVCi had a total of €160m under management.

In March 2009 Garanti Bank, Turkey’s second largest private bank, joined iVCi, becoming the first private Turkish institutional investor in this programme.