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Turkey Innovation Opportunities

by: Tatjana Guznajeva, Technopolis Group

 

Why should I read this document? 

 

When confronted with the differences between your own market and the market of Turkey you will likely feel that you have to adapt your product/service significantly to make it fit the preferences and expendable income of local people. While many may see this as a challenge this can also proof to be a great opportunity for your company! Adapting to a new market, like Turkey, will allow your company to innovate. Not only will operating in Turkey lead to new insights to be more successful in Turkey, you will most likely also pick up on ideas to be more successful in your home market. 

 

This document provides a short overview of innovation aspects, business opportunities and challenges in Turkey. It will also give advice on best practices for starting and developing an innovative business venture, considering Turkey’s country context. May it help you to explore Turkey and lead you to innovation and success.

 


Opportunities and tips for innovation and doing business in Turkey

 

  • Turkey is the 16th largest economy in the world, with a big consumer market (75.6 million population), mature private sector, fast and stable economic growth, and active technology users (36.4 million Internet users).
  • Due to a solid manufacturing base and high consumer demand, the following industries are expected to be the next promising sectors for Turkey: automotive, construction, electronics, basic metals, non-metallic minerals, financial services, ICT and machinery. In addition, the tourism sector is likely to attract more travellers from neighbouring, emerging markets.
  • Considering that the median age of the population in Turkey is 30 years old, there is a high demand of modern technologies and personal electronic devices
  • Turkey has a very convenient geographic location, having access to the Central Asian, Eastern European, Russian, Middle Eastern, North African markets, and it has signed advantageous trade agreements with many neighbouring countries. As a result, Turkey is a good place for international trade, business to business cooperation, technology transfer and development of transport and logistics enterprises.
  • Together with rising average income and increasing urbanisation, Turkish population is increasing its consumption of pre-packaged food and drinks, and it wishes to diversify its diet. Hence, there is a great demand of foreign types of food and flavours. In addition, the consumption of Halal food is also growing. During the next 5 years the food retail industry is predicted to grow at minimum 8%.
  • Turkey’s organic food sector is gradually expanding, due to growing demand both domestically and internationally, in particular, in Europe.
  • Several years ago, Turkey has started to shift from traditional to alternative energy resources. Increasing investment and development of green energy sector may transform Turkey into a major green energy exporter to the EU. Turkey currently lacks energy-related technologies, therefore production of new technologies or their trade could be a lucrative business.
  • Turkey is one of the world leaders in the shipbuilding industry. The demand in commercial, cargo and private ships is expected to grow in the future. Thus, Turkey is a good place for the development of shipbuilding enterprises or related services
  • In 2012 the government launched the new SMEs programme with the aim to fund projects which develop innovative products within the sectors of IT, biotechnology, environment-related technologies and advanced materials. Hence, you can get financial support if you are developing innovative products within listed sectors.
  • The current Turkish generation chooses convenience over tradition, therefore supermarkets, large stores are preferred over small shops. The retail market is steadily expanding, due to growing shopping mall investment, therefore it is considered a good area for business in Turkey.
  • Turkish government tries to attract foreign companies and their capital, therefore the Chamber of Commerce may provide useful information and help to get into a good business network.

 

On Level 2 you can find information about innovation climate in Turkey, while Level 3 will tell you more about business activities in Turkey.

 

 

This page will tell you about innovation ecosystem, major technology sectors, innovation and business practices in Turkey.

 

Innovation ecosystem

 

The Turkish government has set the priority to move towards high-technology industries. However, Turkey’s science, innovation and technology sectors remain relatively underdeveloped for this, due to lack of investment, technologies and human resources. Most technology and innovation public grants have been given to automotive (28%), defence (16%), informatics (15%), machinery and manufacture (10%) and electric-electronics (9%) sectors. Thus, these sectors have a higher potential for advanced technological development

 

Turkey’s research output has grown considerably in recent years, bringing the country to the world top 20 countries by the number of academic articles. Currently, Turkey’s major scientific strengths are within the areas of medicine and chemistry. Due to government agencies, such as Scientific and Technological Research Council of Turkey or the Turkish Academy of Sciences, there is a strong cooperation between research institutes and business. However, Turkey has not succeeded in building strong international scientific collaboration yet. 

 

Turkey has a good infrastructure and market for the development, trade and testing of online-related innovations, as the country has the 6th largest number of internet users in the world.

 


Innovation sectors and technology

 

Tukey’s technologies are most developed in automotive, machinery and ICT sectors.  Among the most notable inventions is the production of the first flying car and a number of robots for industrial sector. The energy-related technologies are still lagging behind Western and Asian competitors, therefore Turkish industries shifted the focus towards the design of nanotechnologies and biotechnologies, building on available medium-high tech manufacturing. At the moment, the number of technologies and innovative products developed in the bio- and nano-technology sectors are few, while environment-related technologies and ICT are gradually catching up with the European level. 

 

Investment in nanotechnologies has resulted in invention of several new products, such as odour filtering hygienic refrigerator, electrically conductive plastics and nanofiber production equipment. 

 

In 2011 the Turkish government has approved the creation of the first agriculture “technopark”, which specialises in development of high-technology in the food processing sector, seeks to improve soil condition and greenhouse systems. As a result, a number of food processing equipment has been introduced to Turkish and international markets. 

 


Innovation culture and practices

 

During the Ottoman Empire, Turkish people have introduced several vital innovations for Europe and the entire world. However, traditionally, Turkish society is risk-averse and prefers safe investment, therefore businessmen introduced only minor low-cost innovations, realised practically-oriented ideas which facilitate daily operations, and, sometimes, imitated popular foreign goods. Realising that such approach will not make Turkish economy progressive and inventive, during the last two/three decades entrepreneurship and innovation have been promoted by the government through various research institutes, media and education. The spirit of entrepreneurship is being cultivated in schools; students and young professionals are encouraged to participate in scientific conferences and seminars. Business cooperatives or associations play the central role in connecting different stakeholders, such as the government, research institutes, business and customers. 

 

The change in mindset is evident - in early 2000s most start-up enterprises had been testing the benefits of the e-commerce, nowadays the range of sectors occupied by young companies is very wide. Many SMEs work on the design of new products and technologies, hoping to find customers in domestic and international markets.

 

 

This page highlights major economic sectors and iconic products, shows business trends and explains how easy it is to do business in Turkey. In addition, you will find the list of websites, which provide some hands-on information. 

 


What is the country known for?

 

Sectors
The biggest sectors are: textile, automotive, shipbuilding, petrochemical, machinery, electronics, home appliances, tourism, business services, mining, metals, food processing, real estate, transportation and logistics, ICT, energy and renewables.

 

The service sector accounts for around 65.5% of the GDP in 2016, while industrial sector represents 28.5% and agricultural 6.1% of the GDP. 

 

Iconic products
Vehicles, ships, electrical machinery, transport equipment, ceramics, textiles, clothing, olives, tobacco, hazelnuts, dried fruits, gems, precious metals, iron, leather goods, steel.

 


How easy is it to do business in Turkey? 

 

Based on the World Bank ranking:

 

  Turkey EU Average Emerging Markets Average
Overall – ease of doing business 69 30 83

 

Turkey is a good location for business. The country has a developed legal system, therefore it can offer legal protection to investors and effectively enforce contracts. It is relatively easy to get electricity and register a property in Turkey. However, the Turkish tax system is among the most complex in the world, as there is a large number of interconnected legal tax articles, everything should be reported in Turkish language and in Turkish Lira. The obtaining of construction permits require a number of licenses before, during and after the completion of the construction project. In addition, municipality may have a strong influence on the progress of construction, as they have the authority over the planning of infrastructural objects in the regions. Among other complicated bureaucratic procedures are getting credit and resolving insolvency.

 

The political and social instability, caused by dissatisfaction with the political regime or separatist attacks, has not significantly affected economy and business until now. However, the effort of the Turkish political elite to secure power results in populist spending and intervention into major, strategic economic sectors, which may disturb private sector development and lead to a growing inflation.

 

The trade between the EU and Turkey is facilitated, due to Turkey’s joining to the EU Customs Union in 1995. Turkey strongly depends on external investment inflows, due to low level of domestic savings and large current account deficit, therefore economy might experience some short instabilities.

 


Business trends in Turkey

 

Even before the emergence of e-commerce, the cooperation within the value chain has been common and relatively developed in Turkey, due to considerable size of the economy and healthy, competitive environment. The chemical, textile, transport and metal sectors, wholesale/retail trade and telecommunication services have most developed value chain networks in Turkey. Due to e-commerce, Turkish companies have become more integrated into local and global supply chain networks. However, B2C (business to consumer) represents the bigger share of the e-commerce, as modern Turkish consumers find it convenient to buy goods online, while most Turkish SMEs do not collaborate with other enterprises very intensively.

 

Many European companies are trying the Turkish market by opening local branch offices to service Turkish consumers. Many young people drive the demand of “Western-type” products and technologies. However, traditional Turkish products, such as local food or clothing, are still preferred to imported goods. In the future, the consumption of alcoholic beverages and tobacco, health and education, housing and transport is expected to rise the most. The spending on new technologies, software programs, IT and telecommunication services is expected to reach $30 billion by 2017. As a result, the ICT sector will make $160 billion and will grow, on average, at 15% annually until 2023.

 


More hands-on info

 

 


Bibliography

 

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Level 2:
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Level 3:
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