Law No. 5084, passed in 2004 and extended until the end of 2009 from its original end date of the end of 2008, brought 49 low-income provinces -- including Aksaray, Ordu, Kars and Erzurum -- tax, energy, land and insurance incentives for potential investors. Whether or not it will be extended to cope with the transition into the 2010 recovery is uncertain, as there does not seem to be a consensus in the business world about whether the package should be extended.
“5084 helped us increase the number of factories in our organized industrial zone [OSB] from 20 to 110 in three years,” said İsmet Çağlar, director of the Aksaray OSB, speaking to Today’s Zaman. “We think that a year’s extension to the law would definitely help Aksaray and similar low-income provinces cope with the transition to the 2010 recovery.”
A new incentive law (no. 15199) passed in July is looking to transform the way incentives are doled out by basing the target of the incentives on regions and sectors rather than provinces. Whether this will satisfy the needs of businessmen in provinces previously qualifying for 5084 is uncertain, though it seems there is a demand for an extension to the provincial-level incentive scheme in order to cope with the transition. “Those who stood to benefit from 5084 have already made their investments, and new investors have already chosen the locations of their investments according to the new incentive scheme,” said Business Life Cooperation Institution (İŞHAD) President Recep Ekşi. “If this law can be extended for about half a year, businessmen who have already made their investments in the related provinces will be more confident about the new year. For those looking to make new investments, I think the expiration of 5084 will not affect them much as they’ve already selected their investment regions based on the new incentive scheme.”
Other business organizations, however, viewed the expiration of 5084 as beneficial to the country, noting that it created unfair competition between neighboring provinces. İstanbul Chamber of Industry (ISO) Chairman Tanıl Küçük stated in a written explanation to Today’s Zaman that “in the six-year period of 5084, it hasn’t provided what is needed.” He added that the narrow scope of the law, which was directed toward 49 of Turkey’s 81 provinces, created “unfair competition between neighbors. There are many examples where one province is within the scope of the law, but its neighboring province isn’t.
This has led to the creation of income differences between two neighboring provinces… We hold the view that the old 5084 incentive law should not be extended.” While backing the new 15199 law, he noted that 15199 included most of the incentives that were covered under 5084.
Ekşi added that the government is currently focused on short-term strategies to deal with the more than $40 billion budget deficit and that the cost of any incentive package implemented will eventually be extracted in full from other sectors. “Right now the government is saying, ‘If I reveal an incentive package, I will make sure to cover the costs through other means’,” said Ekşi. “It should be noted that Turkish companies are opening up operations abroad. We should support this, but also make sure that our investment climate is competitive during this recovery period so they are not forced to close down their operations in Turkey.”
