Turkey unveils new incentive scheme to cut foreign trade deficit

On April 5, Turkish Prime Minister Tayyip Erdogan announced his government's awaited incentive package for investments to increase domestic production of heavily import-dependent products, with the aim of thereby reducing Turkey's foreign trade deficit.
 
The package, effective as of January 1, 2012, will provide investors with incentives including VAT exceptions, customs tax exemptions, tax reductions, cuts in employers' social security contributions, allocations of sites for investments, and VAT refunds.
 
Within the incentive package, investments exceeding $5 million for the production of products of which supplies are 50 percent or above dependent on imports are defined as ‘strategic investments'. For these investments, incentives will be provided such as customs duty reductions, VAT cuts for machinery supply, insurance premium cuts for machinery, allocations of sites for investments, and VAT refunds.
 
Talking to SteelOrbis, Turkish Iron and Steel Producers Association (DCUD) general secretary Dr. Veysel Yayan said that the application of this new incentive scheme in terms of the iron and steel industry still remains to be seen. Nevertheless, Dr. Yayan said he believed that the new package will play an import role in accelerating the Turkish economy and overcoming regional differences within Turkey in the development of domestic industry. Recalling the agreement between Turkey and the European Union (EU) prohibiting direct subsidiaries for the iron and steel industry, Dr. Yayan said that the conditions of the scheme should be further discussed, adding that some articles of the scheme may be elaborated as tax incentives. In addition, the DCUD general secretary stated that he believed the inclusion of the mining industry within the fifth group (ranked in terms of priority of incentives) will provide support for new iron ore and ferroalloy investments.
 
Commenting on the incentive scheme, Turkish Steel Exporters Association president Namik Ekinci said he was satisfied with the comprehensive package, which meets most expectations, adding that some cost reduction measures applicable to the steel industry are also included in the scheme. However, Mr. Ekinci went on to say that they are expecting the new package to also include measures against artificial burdens on costs for industry.