Science, industry and Technology Minister Nihat Ergün has said the Turkish government will allocate more funding to research and development (R&D) projects to stimulate innovation, technology and know-how so that Turkish companies will become more competitive in the global economy.
In an exclusive interview with Today’s Zaman, Ergün said the share of funds allocated from Turkey’s gross domestic product (GDP) to R&D investments has climbed from 0.5 percent in 2002 to 1 percent last year, adding that the government is planning to reach a 3 percent contribution of GDP by 2023, the year Turkey will celebrate the centennial of the establishment of the republic. He estimates 3 percent of GDP will equate to $60 billion in 2023.
He added: “Thanks to these incentives allocated by the ministry, a groundwork that encourages companies to develop new technologies has been formed. When investors see that developing new technologies is a very profitable business, they will continue to invest in this field even if the ministry stops allocating incentives. This sector will continue to grow because many talented young people will enter this business.”
Ergün stated that the government has changed the ministry’s name and restructured it in order to boost the interaction between science and industry. He said: “In this way, science will produce technology. Establishing a strong relationship between science and industry is essential for a stable, strong industry and Turkey has made good progress in this direction.”
Ergün stated that “although the 28-month upward trend in export volume has seen a reversal with a decline, I still believe that Turkey will break a record in 2012 with an export figure of $150 billion.” Ergün also feels the role of Turkey’s current account deficit (cad) is being overstated by those who want to portray the Turkish economy in a negative light and that international credit rating agencies exaggerate the role of Turkey’s CAD in order to conceal their double standards. He underlined that the ministry sees the CAD as an opportunity rather than a source of problems.
We spoke with Ergün about R&D in Turkey and the projects being undertaken by his ministry.
Your government has started to implement the Industry Strategy Document and Action Plan to cover the 2011-2014 period. There has been criticism that the work is going slowly on this front.
We prepared this paper, which sets important targets for Turkish industry, with the participation of the relevant institutions. We welcome all criticism and consider this contributive so long as it is not ill-intentioned.
All is going according to plan. There are important policies and projects. The progress made with respect to targets set in the Industry Strategy Document has been followed up on at regular meetings. The status of the projects is known and project directors have been appointed. Our vision for 2023 aims to achieve $500 billion in exports and $2 trillion in production. How do you plan to market these products, and what energy sources will you use to achieve this production target? The document answers all these questions.
The name of your ministry has been changed and the ministry itself has been restructured. What has changed in the past year?
Our ministry has been restructured in parallel with the Industry Strategy Document, which provides a detailed picture of Turkish industry and draws a road map [for progress]. Although its name was only changed last year, we started taking steps towards achieving the targets defined in the paper a long time ago. Within this framework, the Industry and Commerce Ministry has been restructured as the Science, Industry and Technology Ministry. Science should interact with industry and touch to people’s lives by producing technology. Industry should take the maximum advantage from science. We have set up the mechanisms [to make this possible].
What are these mechanisms?
For example, the Industry Theses Project [SANTEZ] covers 75 percent of the research costs of academics and Ph.D. students and paves the way for the creation of new technology as well as cooperation between universities and industry. Through technoparks, universities have started to encourage their students to enter this industry. The number of technoparks established by universities has increased rapidly. The Scientific and Technological Research Council of Turkey [TÜBİTAK] has been restructured. In the future, we will see projects will quickly pass into the commercialization stage.
Turkey has dropped to 74th place on the 2012 Global Innovation Index [GII] from 65th place last year. What accounts for this drop?
I do not know what criteria were used when the report was prepared. However, according to UNESCO’s 2010 report, Turkey is listed among the countries rising in science. Both Turkey’s national income and ratio of national R&D resources to national income have increased several times over compared to 2002. Until three years ago, techno-entrepreneurs came from only two or three universities. Now, techno-entrepreneurs from 40 different universities are applying for the ministry’s incentives. In the last two years, techno-entrepreneurs from developed countries including Germany and the US have started to come to Turkey.
Do you think you will reach 3 percent of GDP funding for R&D by 2023?
I have no doubt! In 2002, the percentage of the national income allocated to R&D was only 0.5, which corresponded to $1 billion. In the past decade, the country’s GDP has expanded and the percentage of financial resources allocated to R&D has doubled. In other words, the share of funds allocated from Turkey’s GDP to R&D investment has reached $8 billion, which is 1 percent of the country’s GDP. We doubled the rate of financial resources allocated to R&D and increased our national income three-fold.
In 2023, the rate of financial resources allocated to R&D will be 3 percent, which will correspond to $60 billion because Turkey will reach its 2023 goal of $2 trillion in GDP. In other words, the share of funds allocated from the GDP to R&D investment will reach $60 billion.
What is the picture of private funding for R&D in Turkey?
Today, public institutions contribute two-thirds of all R&D investment; according to our 2023 vision, this figure will be reversed. In other words, the private sector will contribute two-thirds of all R&D investment. And this will correspond to $40 billion in 2013.
I am sure this rate will change because the groundwork that encourages companies to develop new technology is being laid. A generation keen to carry out research is in the making and, as the government, we encourage them to do so. Those who taste the benefits of developing new technology will continue to do this even if the government stops allocating funds.
SANTEZ covers up to 75 percent of the research costs of academics and Ph.D. students. If there are $1 million worth of projects, the state allocates $750,000. No [other] country provides this kind of opportunity to its techno-entrepreneurs. We aim to develop a research culture. This is why we want to see universities employ more researchers at their institutions.
How many applications you have received for SANTEZ projects?
The number of applications has increased considerably. In 2009, we announced that the ministry would provide financial and logistic support to 100 projects and we have received 98 applications. For next year, we have increased the number of projects that will be supported by the ministry to 300, and 280 of the applications have been granted state incentives. As the number of application has increased, we increased the number of projects that will be granted state incentives. Last year, with a record increase, we received 2,000 applications.
After a detailed assessment, 280 of them have been granted state incentives. We are supporting projects that will have implications in society or have a commercial potential. As the ministry, we have opportunity to support 500 projects every year. We want to see more young entrepreneurs who develop new projects. After they see that developing new technologies is a very profitable business, younger entrepreneurs will enter this business.
Could you give us some examples?
There are many good projects. For example, there is an interesting project on the braking systems of cars. Another project is about surgical instruments.
These projects will have implications both in society and have commercial potential. This is real innovation. The act of introducing something new, if the product is not something new, is called improvement not innovation. Of course, our current situation is not enough. But, we have made a good start and we need time to see the results of our efforts.
We consider CAD an opportunity rather than a source of problems
The current account deficit (CAD) has started to shrink. Is this a temporary situation or will it continue?
Since the reason for the CAD is clear, we have never considered it as a risk. On the contrary, we consider it an opportunity. With government incentives, we are allocating state incentives to the sectors which are most responsible for the country’s growing CAD. In this way, we will make the products we cannot produce in Turkey.
As long as you finance the CAD, it will not cause a problem. Until now, it had not created a problem. During the periods when the country was struggling with high inflation and interest rates, no one mentioned the CAD as a threat because, unlike high inflation and interest rates, it does not pose a threat to the economy.
International credit rating agencies mention the CAD as big problem for the Turkish economy on their scorecards.
It is not only the credit rating agencies, but also those who want to malign the Turkish economy overstate the role of Turkey’s CAD. They said that although many economic indicators are positive, the CAD is high.
Now, the CAD has started to reduce. We can significantly reduce the CAD within a very short time, but we do not need this. How can we say to businessmen who import goods for production that they cannot import these items? The important thing is to increase production.
The credit rating agencies will understand that they are making a mistake by increasing the credit ratings of some countries that do not deserve this.
What is your evaluation of the reversal in July of the previously upwards trend in export volume?
As a result of the debt crisis in the eurozone and social and political troubles in our region, the economy has been adversely affected. It’s true that our export volume has dropped according to the same month last year, but I still believe that at the end of 2012, Turkey will break a record with an export figure of $150 billion. Turkey has had a growth trend in exports in terms of market and product diversification. I do not consider the decline in export volume caused by market contraction as a problem.
Government supports SMEs
What do you do to support small and medium-sized enterprises (SMEs)?
We attach great importance to SMEs. SMEs and big industrial corporations complete each others. We also attach great importance to SMEs which have the potential to grow.
Through the Small and Medium Industry Development Organization (KOSGEB), we provide SMEs with services that they cannot receive through their own means.
KOSGEB is an institution that provides information to SMEs by following developments in the world and Turkey. It provides loans, consultancy and training services to SMEs and encourages them to go on business trips.
It is not actually a new institution.
No, it is not a new institution. However, it has performed well since the amendment to the KOSGEB Law. Now, KOSGEB is able to receive and respond to 100,000 requests from SMEs at the same time.
What is the number of SMEs that have applied to KOSGEB for incentives?
After the amendment of the law, the definition of SMEs able to benefit from KOSGEB incentives has changed and the scope has been expanded. Before the amendment of the law, there were nearly 40,000 enterprises registered on KOSGEB’s database, but now this number is close to 700,000.
KOSGEB provides these enterprises with services that they cannot receive through their own means. Thanks to KOSGEB, SMEs can obtain loans with low interest rates. It offers support to SMEs in order to reinforce their competitiveness; we encourage them to expand their business overseas by proving translators and covering their travel expenses.