In the zone: Industrial parks provide incentives for local and foreign investors alike

With economic activity in Turkey traditionally centred on the north-western provinces around Istanbul, along with the Izmir and Ankara urban areas, successive governments have attempted to incentivise businesses to establish themselves in other, less-developed regions. Since the 1960s, a key part of this strategy has been the creation of a variety of different classes of industrial zone. These aim to create a fairer spread of wealth around the country, while also, more recently, to encourage particular industries, with dedicated parks offering more tailored packages to investors. The industrial zone strategy also offers economies of scale, reducing infrastructure costs as firms become clustered and thus able to share transport and utilities. This grouping into zones also aims to reduce the industrial footprint on the environment, while it also offers a one-stop-shop solution, with the zone administration offering the whole range of licences and permits under one roof. Over the last few years in particular, this strategy has led to strong growth in the numbers of such zones, as well as in the variety of their locations. Now, as Turkey seeks to boost its value-added industries and encourage much more local production, these zones seem set for further expansion.

VARIETIES AND NUMBERS: Turkey currently has three main categories of industrial parks, often referred to as special investment zones. The first and most common of these is the organised industrial zone (OIZ). First distinguished in 2000 by a law that was modified in 2009, these come under the regulatory oversight of the Directorate General of Industrial Zones, located within the Ministry of Science, Industry and Technology (known as the Ministry of Industry and Trade until June 2011). Some 263 OIZs are currently licensed, with 148 in operation, according to the Prime Ministry’s Investment Support and Promotion Agency. The OIZs can be found in 80 provinces across the country. These zones offer businesses zero value-added tax on land purchases; exemption from real estate duty on plants for the five years following construction; exemptions from municipal construction and usage taxes; no tax on unification or separation of plots; and lower utilities charges. These benefits are in addition to any other incentives offered as part of investment promotion. The directorate-general also oversees a number of small-scale industrial estates aimed at helping small and medium-sized enterprises in a similar fashion.

TDZS: A second variety of park is the technology development zone (TDZ). These naturally aim to provide focal points for high-tech industries and research and development (R&D), with such clusters allowing positive interactions between researchers and businesses. There are currently a total of 39 licensed TDZs, with 27 in operation. They tend to be close to existing industrial centres, with six in Ankara province, five in Istanbul and three in neighbouring Kocaeli (Izmit).

Firms locating in TDZs benefit from zero income and corporate taxes on revenue derived from R&D and software development activity until the end of 2023. Sales of apps developed in the TDZs are also VAT-exempt for the same period, while salaries of R&D and support personnel employed by companies in the zones are also tax-free. If a discovery in such a zone reaches the production stage, this too can be undertaken in the zone.

FREE ZONES: The third variety of park is the free zone (FZ). These are aimed at export industries, as they allow exemption from Customs duties, corporate tax and VAT, zero income tax for employees – provided at least 85% of production is exported – and free repatriation of profits. There are currently 20 licensed FZs, with 19 in operation. They are typically located close to borders or port areas, giving access to international trade routes.

The industrial zone strategy is not without its challenges. Businesses often stress that such areas also need to be provided with good access to markets, in terms of a better general transport infrastructure. This affects zones located in some of the less-developed areas. Yet the successful growth of the zones is also often now cited as a model for future partnership between government agencies and private sector businesses.

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The Report: Turkey 2012

Industry chapter from The Report: Turkey 2012

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