Turkey's goal for 2023 is to be among the world's top 10 economies and to increase its level of exports to $500 billion.
Many point to what has been labeled as the “middle-income trap,” or the failure to raise the per capita income above a certain level, as the greatest barrier ahead of this goal. Countries that cannot produce high added-value goods consume natural resources. These countries do not have any sustainable income. Looking at things from an environmental angle, excessive amounts of energy and raw materials are consumed, which pollutes the environment.
When one factors in both environmental and health costs to the general calculations for a country like Turkey, it means that consumption also occurs during production. The way to break this vicious cycle is through research and development (R&D) activities which result in the production of products that are both light in weight and load but expensive in terms of pricing. At the same time, branding, patenting, design and innovation need to be given the status they deserve. And though there is much talk about the importance of R&D, the fact is that almost anyone in Turkey who tries to make progress in this area encounters serious barriers.
Even though Turkey's progress in the last few years has been very rapid in comparison to even just 10 years ago, it still lags far behind in the R&D area compared to developed countries. For example, despite the fact that South Korea's national income was only half of Turkey's during the 1960s, today it is twice that of Turkey. Turkey can learn a lot about how to boost exports from South Korean company Samsung, which was single-handedly responsible for $150 billion in exports in 2010.
One of the many goals Turkey has for 2023 is to raise the percentage of its gross domestic product (GDP) spent on R&D activities to 3 percent. When the subject of innovative projects arises, factors such as R&D, innovation and production-development are frequently mentioned. In its most basic sense, R&D is often defined as the transformation of money into knowledge and of innovation into knowledge, which is then transformed into money. As for production and development, it is defined as developing the characteristics and qualities of a product which has already been produced.
Great support is given to R&D and innovation activities. And while R&D used to be viewed as the domain of only larger companies in the past, it is now seen as something that smaller companies can and should be engaged in as well. And while some companies boast of R&D departments in their production lines, it is generally accepted that production takes place within R&D. Companies are only able to make their productions sustainable through R&D. As a result, companies' brand values are reaching levels that are so high, they can no longer be compared to real assets (like real estate, machines, products, etc.).
More R&D centers
According to data supplied by the Turkish Union of Chambers and Commodity Exchanges (TOBB) and the Ministry of Industry, there are around 1.2 million trading companies and more than 85,000 industrial companies in Turkey. At the same time, more than 700,000 engineers who graduated from a variety of engineering departments are employed in Turkey.
While there were only 19 R&D centers in Turkey in 2008, this figure grew to 134 by 2013. These centers, located in the private sector, work to develop new products. Companies with R&D activities not only take advantage of support granted by laws but also make these R&D activities an official part of their structures. There are nearly 15,000 personnel employed in R&D centers in Turkey.
One important aspect of R&D is technoparks. There are now 32 technoparks in Turkey; these locations bring together industry, research and universities. There are 13 technoparks in Turkey which are currently not operational at the moment and whose infrastructures are being worked on. There are more than 2,000 companies that work in technoparks employing more than 20,000 people. The projects in such technoparks tend to be related to design, nanotechnology, biotechnology, automotive, medicine and renewable energy. The contribution of these technoparks to exports has surpassed $600 million and 301 patents have been acquired through these places.
A program which started in 2009, the Techno Entrepreneur Capital Support Program, provides support to young entrepreneurs who will be graduating from universities in one year or to those who have graduated not more than five years ago. The support lasts for 12 months and offers TL 100,000 in grants without collateral. While there were 3,500 applications for this support, contracts with up to 800 entrepreneurs were signed.
Cendeniz Uysal is one such young entrepreneur who formed his own company through the support offered and who has experienced how difficult it is for companies that conduct R&D to stay on their feet. Uysal noted that his work took a long time and that when it was completed, he only had a prototype. As Uysal sees it, the financial support offered is not enough to cover the costs that came up during the project. Companies carrying out R&D turn towards routine work to meet their financial needs, which means the company gets caught between regular daily work and R&D work. For smaller companies, when the money given for support is turned over after the work has been done, it can be a great handicap.
R&D project “marketplaces” are organizations where people working in this field can meet up and exchange ideas. There have been nearly 50 of these held since 2002. In developed countries, such markets can be found every day of the year. In Turkey though, these markets occur only a few days a year, which is why they don't really achieve the desired aims. These markets are aimed at bringing together academics or entrepreneurs with special ideas and people or companies that can offer financial support. In Turkey, these potential partners meet up at these markets, but it generally does not go much further than that.
For the past two years, the Turkish Exporters Assembly (TİM) has held the Turkey Innovation Week. In September, there is the Chemical Materials and Goods Fair, in October the Iron and Iron Clad Metals Exporters Union R&D market.
At the end of November every year is a large event held by the umbrella group, TİM. These activities are attended by professionals from Turkey and all over the world, as well as industrialists, academics and students. In addition, there is the Innovation Turkey Fair held with the support of the Scientific and Technological Research Council of Turkey (TÜBİTAK) and the Turkish Patent Institute (TPE) in İstanbul every September. At this trade fair, many new projects presented by individual entrepreneurs are publically introduced for the first time.
TİM President Mehmet Büyükekşi notes that while there is no lack of new ideas in Turkey, there is a technology deficiency which does not allow these new ideas to be applied. Büyükekşi also has complaints about the low levels of university-industry cooperation, as seen at Innovation Week. “The work going on at technoparks is generally focused on information technology. But this is insufficient. The industrial side to this work is being neglected. We need to be doing more with industry, especially in terms of R&D and design. Some companies are working in this direction. But the technoparks that are part of universities need to do this as well. The universities and industries of Turkey seem to be completely unaware of one another. As Turkish industrialists, we need to bring these two sides together,” he said. Büyükekşi also believes that universities need to develop their areas of specialty according to the economies of the regions in which they are located.
While there are many positive things happening in Turkey, it is also clear that when the country is compared to the rest of the world, there is still quite a long way to go. Turkey increased the number of national patents in 2012 by 10 percent, to 4,362, compared to the previous year, while the number of national utility models went up 17 percent to reach 3,722. When one looks at the total number of national patents acquired in Turkey in 2012, it is fewer than the number of patents coming from American company IBM in the same year. To put it another way, the more than 100,000 factories, 170 universities and more than 700,000 engineers in Turkey did not produce as many patents as just IBM did in one year. The patent for the Edison light bulb (patent No. 223898) in the US was acquired on Jan. 27, 1880. Also in the US, the 1 millionth patent was granted in 1911. Today, the US has more than 12 million patents granted. But let's look at Turkey: Since the Patent Law first came out in 1879, around 12,000 patent applications have been submitted. While the annual number of applications was around 414 in 2002, this rose to 4,543 in 2012. But when one considers that there were more than 200,000 patent applications in South Korea alone in 2009, then clearly, we are not working at capacity in Turkey on this topic!
We talked about the main reasons for this situation with some of the main actors in the various sectors we've been looking at. The most difficult aspect for small and medium-sized enterprises (SMEs) when it comes to R&D is that the support processes and application methods are very different from each other and quite complicated.
The fact that support for R&D projects comes from many different directions causes a lot of confusion. Applicants for support are unable to make healthy and definite pre-analyses of the situation. Companies are unable to carry out an adequate analysis of whether support programs fit their own makeup and structure. And while some projects might come to a literal end, sometimes the goals and targets set out by support programs are not actually achieved. In order to understand the differences between the various support programs, there needs to be a whole-scale comparison and review of the conditions set forth by these programs. This situation calls for a high level of expertise and also a lot of time.
The most prominent institutions and support programs are as follows: TÜBİTAK, the Technology and Innovation Funding Programs Directorate's (TEYDEB) R&D support, the Ministry of Science and Industry and Technology's R&D support program, the Small and Medium Industry Development Organization (KOSGEB) R&D program and the Innovation and Industrial Application support program.
When Research and Development Law No. 5746 is applied properly, financial support and incentive are provided in the form of R&D discounts, income tax waivers, insurance payment support and stamp tax exceptions.
Address Patent General Director Lawyer Ali Çavuşoğlu notes that incentives are generally offered to R&D centers that employ 50 engineers full-time. But he also notes that most of these centers do not even submit five patent applications annually. Çavuşoğlu says this is due to the lack of project work aimed at achieving patents. He says that, in fact, incentives should be given to all companies engaging in R&D work. According to Çavuşoğlu, it is because of capital conditions set forth at the beginning for the 1,000 companies doing serious R&D work that companies who do not possess this financial capacity are not receiving help from the state. “It is still the very largest companies that are receiving state support and this helps their work even more. Also, individual entrepreneurs generally don't have financial resources, which is why they are unable to produce prototypes of their discoveries and why they are later unable to explain to others how their idea works and what it is for. The ideas do not get put to work,” he said.
More than a third of all patent applications in Turkey come from Arçelik. There, General Director Levent Çakıroğlu believes the climate is right for R&D. While he feels the legal incentives are in fact sufficient, Çakıroğlu believes that the real problem lies with insufficient expenditure on R&D compared to national income levels. He underscores the necessity of an increase in these expenditures in both the private and public sectors.
Other important actors in the R&D sector are academics. At Mustafa Kemal University, Kemal Yıldızlı bemoans the lack of communication between the industrial and academic worlds in Turkey. “When an industrialist does not request something in particular, we try to pinpoint the needs that are out there and produce accordingly. Since there is no communication, by the time we complete the project, the industrialist has come out with a different product. Generally, there is no real communication between industrialists and our R&D projects.” Yıldızlı also notes that carrying out strategic product research is difficult using solely university budgets, noting that support from the private sector in this arena is in fact critical.
Individual entrepreneurs hurting
In the quest to develop new products, it is often the individual entrepreneurs who have the most difficult time. Emrullah Destegül is an entrepreneur from Sivas. He set out to produce devices unavailable in Turkey. First, he signed off on a piece of automation meant to follow up on patients. Then he succeeded in producing heart batteries possessing the same characteristics as those imported from abroad for some $3,000 apiece. Destegül notes that despite slogans such as “bring in your ideas, get some support,” which make the offers of support sound easy, individual entrepreneurs in Turkey in fact face an intense number of procedures which they have to make their way through. Destegül is also critical of certain R&D competitions. The way he views it, the juries are generally composed of academics who favor theoretical work. Destegül called for more flexibility on this and other issues such as the fact that he has to pay heavy customs taxes on pieces imported from abroad.
Farmer Osman Topuz's only source of income is his 60-hectare olive grove. In 2004, he found a cure for a blight that causes trees to dry up, Verticillium Dahlie, through special organic medicine. In 2011, he applied for a patent for this medicine but could only get it after three years. At the same time, the only support he could find for his work came from TÜBİTAK in the form of TL 480. Over the past nine years, Topuz has spent his own money on patent and university research work. He notes that while his discovery could be meaningful for the entire world, no one in Turkey seems to care. “Is it my fault that I'm only a primary school graduate and am older?” he asked.
Strategies for Turkey
1. Applications for support should be based on the characteristic of the individual or company applying. This includes large companies, SMEs, individual entrepreneurs, academics and students. Responsibilities which cannot be carried out should not be given to applicants.
2. The support offered should be brought under the aegis of as few institutions and headlines as possible. The process needs to be made clearer.
3. The juries whose duty it is to judge innovation competitions should comprise those with practical as well as theoretic skills.
4. Financial, legal and technical information needs to be easily accessible and available to those wishing to engage in R&D activities.
5. Consulting services should be offered in the form of roadmaps which include financial, legal and technical support to those engaging in R&D activities.
6. It should be made easy to develop products to be examined, analyzed, request permission for and receive licenses. Entrepreneurs who lack the financial means should be offered more support.
SMEs request for support
Between 1995 and 2012, 7,142 companies applied to TÜBİTAK for support for 16,442 projects. A total of TL 2.9 billion in assistance was granted to 9,721 projects by SMEs. Of the total number of project applications, 12,249 (75 percent) came from SMEs while 4,173 (25 percent) came from large companies.