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Cablegate: New R&D Law Gives More Incentives for Private

VZCZCXYZ0009
RR RUEHWEB

DE RUEHAK #0542 0801429
ZNR UUUUU ZZH
R 201429Z MAR 08
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 5650
INFO RUEHIT/AMCONSUL ISTANBUL 4024

UNCLAS ANKARA 000542

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: TU EIND TPHY TNGD
SUBJECT: NEW R&D LAW GIVES MORE INCENTIVES FOR PRIVATE
RESEARCH

1. (SBU) Summary: We met with Dr. Omer Anlagan, Vice
President of the Scientific and Technological Research
Council of Turkey (TUBITAK), to discuss the current state of
research and development (R&D) in Turkey, and TUBITAK's
expectations for the new R&D law, which passed on February
28. Turkey already encourages R&D by giving income and
employment tax exemptions for small firms working in the
country's "Technoparks," through research grants and loans
provided by TUBITAK, and by giving research companies full
intellectual property rights to the results of applied
research they fund. The new law substantially increases
TUBITAK's funding for research, and allows large research
firms to obtain tax benefits with or without locating in a
technopark. Anlagan said that foreign firms that establish a
Turkish subsidiary would be able to benefit, although there
will be a requirement to have a majority of Turkish
employees. The combination of research grants and tax
exemptions may be a powerful tool to attract applied research
work to Turkey. However, without changes in the rigid work
permit system for foreign workers, even these incentives may
not be able to entice the high-tech companies the GOT hopes
to attract. End Summary.

2. (U) Anlagan said TUBITAK distributes research funding on
behalf of the Turkish government. In 2005, the Turkish
government decided to increase its R&D spending in order to
improve productivity and reduce the trade deficit. To do
this, the government set a target of two percent of GDP (USD
424 billion) for R&D funding. The GOT hopes to exceed one
percent of GDP in 2008, and reach the two percent mark by
2015.

3. (U) TUBITAK provides research grants to both academics and
the private sector. The academic grants are limited to USD
300,000. In return, TUBITAK expects the grant recipients to
publish academic papers on their research. Private sector
recipients can receive grants of up to half of their R&D
operating costs for applied research. In order to get these
grants, the project must involve applied science and aim to
increase productivity in business in Turkey. After the
research is completed, the company retains all intellectual
property rights, even if TUBITAK funded 50% of the research.
TUBITAK sees this as a way to improve Turkish companies'
efficiency, competitiveness, and to reduce the trade deficit.

4 (U) The GOT also provides tax incentives for companies who
engage in R&D in one of several "technoparks" designated for
R&D, usually located near universities. Companies working in
these technoparks pay neither corporate income tax nor
payroll taxes for employees. This led larger companies, who
had existing research facilities outside of the technoparks,
to lobby for the same benefits. Anlagan said that the new
R&D law passed on February 28th extends these tax benefits to
outside companies, provided that they have more than 50
employees in their R&D departments. Anlagan said that
foreign companies that set up Turkish subsidiaries were
already eligible for TUBITAK research grants. Under the new
law, foreign companies that set up Turkish subsidiary
research companies can qualify for the tax exemptions.
Anlagan noted, however, that the law will require that 60% of
the employees be Turkish nationals.

5. (SBU) Comment: The combination of generous tax exemptions,
letting companies keep 100% of intellectual property rights
and more research grants to for-profit companies for applied
research in Turkey may prove to be a powerful incentive for
foreign companies. The GOT hopes to attract foreign
high-tech companies to Turkey and, for some, these incentives
will be very attractive. However, one of the major
complaints of foreign companies operating in Turkey is the
onerous and difficult system of obtaining work permits for
foreign workers, even for highly paid essential technical
experts. This restriction will greatly reduce the
attractiveness of the R&D incentives to foreign companies,
who generally want their own experts conducting applied
research. End Comment.

Visit Ankara's Classified Web Site at
http://www.intelink.sgov.gov/wiki/Portal:Turk ey

WILSON

© Scoop Media

 
 
 
 
 
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