COMPETITIVENESS AND INNOVATION SECTOR OPERATIONAL … · COMPETITIVENESS AND INNOVATION SECTOR OPERATIONAL PROGRAMM E Amendment No 1 ... Annex 5-List of Participants of the Operational

C O M P E T I T I V E N E S S A N D I N N O V A T I O N S E C T O R O P E R A T I O N A L P R O G R A M M E

Amendment No 1

Table of Contents

1 Sector analysis................................................................................................................................. 1

1.1 National Policy and Socio-economic Context ......................................................................... 1 1.1.1 Socio-economic Context ................................................................................................. 1 1.1.2 Policy Context ................................................................................................................. 2

1.2 Socio-economic analysis ......................................................................................................... 4 1.2.1 Macroeconomic Conditions ............................................................................................ 4 1.2.2 Regulatory Framework and Ease of Doing Business ....................................................... 4 1.2.3 Access to Public and Private Financial Resources ........................................................... 5 1.2.4 Business Skills, Capabilities and Culture ......................................................................... 6 1.2.5 Innovation (Formation and Dissemination of Knowledge) and Creativity ..................... 7 1.2.6 Business Infrastructure ................................................................................................... 7

2 Scope for a Sector Approach......................................................................................................... 11

2.1 National sector policies /strategies ...................................................................................... 11 2.2 Institutional setting, leadership and capacity ....................................................................... 12 2.3 Sector and donor coordination ............................................................................................. 13 2.4 Mid-term budgetary perspectives ........................................................................................ 14 2.5 Performance assessment framework ................................................................................... 14 2.6 Public finance management ................................................................................................. 15 2.7 Macro-economic framework ................................................................................................ 17 2.8 Overall Assessment ............................................................................................................... 18

3 Objective(s) of the IPA sector support .......................................................................................... 19

4 Operational features of the programme ...................................................................................... 20

4.1 Geographic and thematic concentration .............................................................................. 20 4.2 Interaction of the programme with IPA II programmes in other sectors ............................. 24 4.3 Complementarity of IPA II assistance in the sector with other donors ................................ 25 4.4 Equal Opportunities and Gender Mainstreaming ................................................................. 26 4.5 Climate Action and Sustainable Development ..................................................................... 26 4.6 Programme Strategy ............................................................................................................. 27 4.7 Action 1: Private Sector Development (PSD) ........................................................................ 28 4.8 Activity 1.1: Manufacturing Industry .................................................................................... 33 4.9 Activity 1.2: Services & Creative Industries .......................................................................... 37 4.10 Overview Table - Action 1 ..................................................................................................... 40 4.11 Action 2: Science, Technology and Innovation (STI) ............................................................. 43 4.12 Activity 2.1: Research and Development .............................................................................. 46 4.13 Activity 2.2: Technology Transfer and Commercialization ................................................... 49 4.14 Overview Table: Action 2 ...................................................................................................... 52 4.15 Action 3: Capacity Building (CB) ............................................................................................ 55 4.16 Activity 3.1: Technical Assistance for System Operators and Publicity of the CISOP ........... 58 4.17 Activity 3.2: Acquis and Sector Approach related Institution Building Activities ................. 61 4.18 Overview table Action 3 ........................................................................................................ 65

5 Financial table by action and year including co-financing rates if applicable............................... 67

6 Overview of the consultation process .......................................................................................... 70

7 Implementation arrangements ..................................................................................................... 71


Amendment No 1

7.1 Structures and authorities for the management and control of the programme ................ 71 7.1.1 Bodies and authorities .................................................................................................. 71

7.2 Monitoring arrangements ..................................................................................................... 71 7.3 Evaluation arrangements ...................................................................................................... 72

8 ANNEXES ....................................................................................................................................... 74


Amendment No 1

Annexes Annex 1-Projects Deferred to IPA II Period 74 Annex 2-Regional Classifications (BGUS) 79

Annex 3-Data on Business Infrastructure 80 Annex 4-List of Participants of the Strategy Papers 82 Annex 5-List of Participants of the Operational Programme Preparatory Workshop 84

Figures Figure 1: Interaction between the three Actions of the CISOP 27

Figure 2: Classification of Regions, based on Income Levels (Source: BGUS, 2nd Draft) 80

Tables Table 1: Composition of the Economic Activities 1

Table 2: Select policy-level objectives from the NDP10 3

Table 3: Select policy-level objectives from the NDP10 (Regional Development) 4

Table 4: Public Financing to the SMEs 6

Table 5: SWOT 9

Table 6: GVA per capita by NUTS II Regions (2009-2011, $) 21

Table 7: Prioritised Activities for regions 24

Table 8: Interaction with IPA II Programmes in other Sectors 25

Table 9: Targets and Indicators of PSD Action 32

Table 10: Targets and Indicators of PSD Action – Activity 1.1 37

Table 11: Targets and Indicators of PSD Action – Activity 1.2 39

Table 12: Overview of PSD Action 40

Table 13: Targets and Indicators of STI Action 45

Table 14: Targets and Indicators of STI Action – Activity 2.1 49

Table 15: Targets and Indicators of STI Action – Activity 2.2 52

Table 16: Overview of STI Action 52

Table 17: Targets and Indicators of CB Action 57

Table 18: Overview of Activity 3.1 58

Table 19: Targets and Indicators of Capacity Building Action – Activity 3.1 60

Table 20: Overview of Activity 3.2 62

Table 21: Targets and Indicators of Capacity Building Action – Activity 3.2 63

Table 22: Overview of CB Action 65

Table 23: Classification of Regions, based on Income Levels 80


Amendment No 1

Acronyms

BDDK Banking Regulation and Supervision Agency

BGUS National Strategy for Regional Development

BROs Business Representative Organizations

BTYK The Supreme Council for Science and Technology

CB Capacity Building

CEB Council of Europe Development Bank

CHU Central Harmonization Units

CISOP Competitiveness and Innovation Sector Operational Programme

CPI Consumer Price Index

COSME Competitiveness of Enterprises and SMEs

CSO Civil Society Organization

DA Development Agencies

DG Directorate General

EA External Audit

EBRD European Bank for Reconstruction and Development

EC European Commission

EEN Enterprise Europe Network

EIB European Investment Bank

EIF European Investment Fund

EPC European Patent Convention

ERA End Recipient of Assistance

ESFRI European Strategy Forum on Research Infrastructures

EU European Union

FED Federal Reserve Bank

FP7 EU Research Framework Programme

FTE Fulltime Equivalent

FZ Free Zone

GCR Global Competitiveness Report

GDP Gross Domestic Product

GERD Gross Domestic Expenditure on R&D

GVA Gross Value Added


Amendment No 1

HR Human Resource

HRD OP Human Resource Development Operational Programme

IACB Internal Audit Coordination Board

ICT Information and Communication Technologies

IFI International Financial Institution

IMD International Institute for Management Development

INTOSAI International Organization of Supreme Audit Institutions

IOs International Organizations

IPA Instrument for Pre-Accession Assistance

IPR Intellectual Property Rights

IZ Industrial Zone

İKV Economic Development Foundation

İŞGEM Business Development Centre

KfW Kreditanstalt für Wiederaufbau (Reconstruction Credit Institute)

KOSGEB Small and Medium Enterprises Development Organization

KSEP SME Strategy and Action Plan

METU Middle East Technical University

MoIT Ministry of Industry and Technology

MTFP Medium-Term Financial Plan

MTP Medium Term Program

MÜSİAD Independent Industrialists and Businessmen's Association

NACE Nomenclature générale des Activités économiques dans les Communautés Européennes (Statistical Classification of Economic Activities in the European Community)

NDP National Development Plan

NDP10 10th National Development Plan

NGOs Non-governmental Organizations

NUTS II Nomenclature of Territorial Units for Statistics

OIZ Organized Industrial Zone

OP Operational Programme

OS Operating Structure

PCT Patent Cooperation Treaty


Amendment No 1

PFMC Public Financial Management and Control Law

PE Private Equity

PIFC Public Internal Fınancial Control

PPP Purchasing Power Parity

PSD Private Sector Development

PTP NDP10 Priority Transformation Programmes

R&D Research and Development

RCOP Regional Competitiveness Operational Programme

RD OP Rural Development Operational Programme

RE&EE Renewable Energy & Energy Efficiency

ROI Return on Investment

S&T Science & Technology

SAN-TEZ Industry Theses Program

SBA Small Business Act

SDU Strategy Development Units

SEDEFED Federation of Industrial Associations

SIS Small Industrial Site

SME Small and Medium Sized Enterprises

SOP Sector Operational Programme

STI Science, Technology and Innovation

SWOT Strengths, Weaknesses, Opportunities, Threats

TBMM Turkish Grand National Assembly

TCA Turkish Court of Accounts

TCMB Central Bank of the Republic of Turkey

TDCs Technology Development Centres

TDZ Technology Development Zone

TEKMER Technology Centre

TESK Confederation of Turkish Tradesmen and Craftsmen

TİM Turkish Exporters Assembly

TEYDEB Technology and Innovation Funding Programs Directorate

TFP Total Factor Productivity

TIP Turkish Investment Programme


Amendment No 1

TİSK Turkey Employer Union Confederation

TOBB Turkish Union of Chambers and Commodity Exchanges

ToR Terms of Reference

TPE Turkish Patent Institute

TRY Turkish Lira

TS Technical Specifications

TTGV Technology Development Foundation of the Turkey

TÜBİTAK The Scientific and Technological Research Council of Turkey

TÜİK Turkish Statistical Institute

TÜRK-İŞ Confederation of Turkish Trade Unions

TÜSİAD Turkish Industrialists' and Businessmen's Association

UBTYS National Science, Technology and Innovation Strategy

US United States

VC Venture Capital

WB World Bank

WCY World Competitiveness Yearbook

WEF World Economic Forum

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1 SECTOR ANALYSIS

1.1 National Policy and Socio-economic Context

1.1.1 Socio-economic Context

Turkey is the 16th largest economy of the world1 with a Gross Domestic Product (GDP) of US$820 billion (2013). The GDP per capita has passed the US$10.000 threshold and reached US$10,782 in 2013. Turkey’s foreign trade volume has reached US$403.4 billion in 2013, with exports accounting for 37.4% of the foreign trade volume. Despite some improvements, the current account deficit is still very high at 7.9% of the GDP (2013), driven mostly by energy imports. The domestic savings rate is very low at 12.6% of the GDP (2012); hence the need for considerable amount of external financing to finance growth continues.

After hitting 14% in 2009, headline unemployment rate came down to single digits in 2011 (9.8%), and remained so in 2012 (9.2%). The labour force participation rate has increased from 46.3% in 2006 to 50% in 2012. Women’s labour force participation rate and youth unemployment rate have general hovered around 30% and 20%, respectively.

According to the World Economic Forum’s (WEF) most recent (2013-2014) Global Competitiveness Report (GCR), Turkey ranks 44 among 148 countries. Based on GDP per capita at market exchange rates, GCR considers Turkey an economy that is transitioning from an “efficiency-driven” to an “innovation-driven” state. Although such a characterization may hold true for the economy in general, there are two important issues that should be taken into account to contextualize the GCR’s findings: First, regional disparities make it impossible to argue that all regions in Turkey can be characterized in the same way; and second, Turkey’s competitive advantage in international markets is still mainly based on favourable factor endowments rather than unique products and processes. Turkey’s ranks 87/148 in the GCR’s “nature of competitive advantage” index. Turkey is categorized as a “modest innovator” in the European Commission's Innovation Union Scoreboard. The share of R&D expenditure in GDP is rather low with 0.87%.

The Turkish economy is dominated largely by SMEs, which accounted for 99.9% of all companies and 76% of total employment in 2012. Compared to their undisputable dominance in the economy, SMEs’ total value added has traditionally been quite modest at 53.3% of the total value added (at factor costs) in 2011, signalling a very low level productivity.

The services sector dominates the national economy by all measures i.e. employment, contribution to the GDP, and number of companies. The shares of the manufacturing and agriculture sectors have been declining. Manufacturing industry’s share in GDP declined from 23% in late 1990s to 15.3% in 2013.

Table 1: Composition of the Economic Activities

2006 2007 2008 2009 2010 2011 2012 2013

Share in GDP2

Agriculture 8.3% 7.6% 7.6% 8.3% 8.4% 8.0% 7.9% 7.4%

Man. Industry 17.1% 16.7% 16.0% 15.1% 15.5% 16.1% 15.5% 15.3%

Services 61.6% 63.9% 64.8% 65.9% 63.8% 63.1% 64.3% 64.5%

Employment

1 Based on GDP at Purchasing Power Parity 2 Based on Current Prices; does not add up to 100%, as the sectors covered do not include mining and quarrying, indirectly measured financial intermediation services and taxes and subsidies.

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2006 2007 2008 2009 2010 2011 2012 2013

Agriculture 24 % 23.5 % 23.7 % 24.6 % 25.2 % 25.5 % 23.1 % 23.6 %

Man. Industry 21 % 20.8 % 20.9 % 19.2 % 19.9 % 19.5 % 20 % 19.4 %

Construction 5.9 % 5.9 % 5.9 % 6.1 % 6.3 % 7 % 6.1 % 7 %

Services 49.1 % 49.8 % 49.5 % 50.1 % 48.6 % 48.1 % 50,9 % 50 %

Source: TÜİK.

The regional Gini coefficients have decreased from 0.24 in early 2000s to 0.21 in 2010. Despite considerable improvement in the last decade, regional disparities still exist. Labour force participation rates demonstrate a significant variability, going as low as 38% in some regions and higher than 60% in some others. During the early 1980s and over the ensuing three decades, Turkey’s average annual urban growth rate of 4% placed Turkey as one of the fastest urbanizing countries in the world; however the rate of urbanization has lately declined.

1.1.2 Policy Context

The 10th National Development Plan (NDP10), approved by the Parliament in 2013, sets forth the main priorities and policies to be followed in the 5-year period between 2014 and 2018. Under the second development axis, titled “Innovative Production, High and Stable Growth”, the Plan underlines the importance of boosting total factor productivity (TFP) in Turkey to ensure high and stable growth. The Plan further indicates that “Productivity growth throughout the economy occurs through two main channels. The first channel is that each economic sector becomes more productive, in other words, within-industry productivity level increases. The second channel is the increase in employment share of the sectors with relatively higher productivity levels, and movement of higher portion of the labour force to these sectors. Manufacturing industry has special importance in terms of both channels.”, and also underlines that innovation increases the productivity of the economic sectors and makes them more competitive; whereas supporting high-growth and high-impact entrepreneurs increases the share of more productive economic sectors in total employment.

The science, technology and innovation policies of the Plan are generally geared towards improving the collaboration between government, academia and industry and boosting R&D and innovation in globally competitive and high value-added sectors. The Plan emphasizes the central role of clustering and entrepreneurship in the innovation ecosystems, and underlines the need for a more coherent innovation ecosystem, in which research centres, incubators, technology transfer and innovation centres and technology development zones operate in an integrated manner by having a clear focus.

Industrial transformation is another area that the Plan sets forth as a key policy area, related to competitiveness and innovation. The industrial transformation policies are based on the value chain approach, setting forth policies that increases the competitiveness of the national value chains through stronger inter-sectoral and inter-regional integration. One of the key policies in this particular area is to use the massive urbanization and urban transformation programme to facilitate industrial transformation. The plan also includes sector-specific policies. In textile and clothing and furniture sectors higher value added is expected to be achieved by improving design and branding capacities of these sectors. In other sectors such as ceramics, metals, electronics, machinery, automotive, specific policies are usually geared towards supporting innovation and R&D activities. Another important policy in this particular area concerns improving national capacity to develop and produce renewable energy technologies.

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Table 2: Select policy-level objectives from the NDP10

2006 2013 2018

GERD to GDP (%) 0.60 0.92 1.80

Private sector’s share in GERD (%) 37.0 46.0 60.0

Private sector’s share in R&D Employment (%) 33.1 52.0 60.0

Manufacturing / GDP (Current, %) 17.2 15.5 16.5

TFP increase in manufacturing (%) 1.2 -0.8 1.9

High-tech exports share in total manufacturing exports (%) 5.6 3.7 5.5

Mid-tech exports share in total manufacturing exports (%) 30.8 31.4 32.1

Number of start-ups (1000s) 53 50 75

Share of SMEs (50-249 employees) in total (%) 1.7 3.0 4.0

SME Exports (Billion USD) 50 100 150

Number of exporting SMEs (1000s) 44 52 60

Source: NDP10

In the area of entrepreneurship and SMEs, the Plan’s policy-level objectives include (a) increasing the share of small- and medium-sized enterprises in the total number of enterprises in Turkey, signalling a policy-level preference to grow micro-enterprises into small- and medium-sized enterprises, and (b) increasing the number of start-ups3. The Plan also indicates that the public support schemes to be provided to the entrepreneurs and SMEs will prioritize innovation, productivity, employment creation, growth and collaboration, in addition to women, youth and social entrepreneurship.

As far as the services sector is concerned, the NDP10 recognises the important role that services sector plays “in sustaining and improving competitiveness of the economy in tradable activities”, and identifies “transformation of critical service sectors, such as transportation and logistics” as a priority. In terms of the tourism industry, the Plan’s policy-level emphasis is on diversification of tourism activities, destination management through a holistic approach, sustainability of environment and the cultural assets and quality of both the tourism infrastructure and labour force, with a view to enhance tourism revenues. The Plan indicates that “The tourism market will be diversified by improving the infrastructure necessary for congress tourism, winter tourism, cruise tourism, golf tourism, cultural tourism and especially health tourism” to support development of alternative tourism types.

The regional development and regional competitiveness policies fall into the third development axis of the NDP10 - Liveable Places and Sustainable Environment. The Plan makes a strong reference to the National Strategy for Regional Development (BGUS), second draft of which was open for public opinion as of writing of the present OP in March 2014. The Plan as well as the draft BGUS recognize that although regional disparities are generally decreasing, there are still notable regional disparities that call for crafting policies and strategies, tailored in accordance with the specific needs of the regions.

3 The share of companies employing 20-249 employees in the total number of enterprises is expected to increase from 3% in 2013 to 4% in 2018. Number of start-ups p.a. is expected to increase from 50.000 in 2013 to 75.000 in 2018. (Source: NDP10, Table 21)

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Table 3: Select policy-level objectives from the NDP10 (Regional Development)

2006 2012 2018

Highest/Lowest Income Region (income per capita, based on GVA) 4.4 4.3 <4

The lowest share of industry and services in a regional economy (%) 72.0 75.4 >80

Persons with tertiary education degrees (lowest 5 regions, %) --- 6.3 >12

Investments with investment certificates in the 5th / 6th regions (%) in total

7.8 16* >20

# of start-ups (Avg. of the lowest 5 regions, per million inhabitants) 252 570* >850

# of start-ups (Avg. of the highest 5 regions, per million inhabitants) 1216 2250* >2900

Source: NDP10, *2013 forecasts.

In line with the overall approach of the NDP10, the BGUS introduces a regional classification, based on the GVA per capita income levels (PPP, in the last 3 years).

1.2 Socio-economic analysis

1.2.1 Macroeconomic Conditions

Turkey is the world’s 16th largest economy and has a large domestic market. Although the economic growth has been impressive by many measures, the Turkish economy has a number of structural problems. First, despite recent improvements, the current account deficit is still very high (7.9% of GDP, 2013), driven mostly by energy imports. Second, the domestic savings rate is very low (12.6% of the GDP 2012); hence the need for considerable amount of external financing to finance growth continues. Third, the headline unemployment rate has generally been under 10%; however growth did not produce as many jobs as expected. The labour force participation rate of women remained very low hovering around 30%, while unemployment among youth remained very high around 20%4, suggesting that Turkey cannot adequately benefit from the dividends of its demographic window, which will start closing in 2020s.

1.2.2 Regulatory Framework and Ease of Doing Business

Despite significant efforts 5 towards (a) creation of a more enabling regulatory framework for the businesses and (b) easing the burden on doing business, Turkey still ranks unfavourably in the World Bank’s Doing Business Report when compared to many EU countries. Turkey ranks 69 in the Ease of Doing Business Index, higher from only five EU countries (Croatia, Czech Republic, Greece, Malta and Romania). As far as “Resolving Insolvency” is concerned, Turkey ranks 130 globally, lower than all the EU members. Resolving insolvency takes on average 3.3 years in Turkey, and lenders can only recover on average 22.3% of their receivables from the insolvent enterprises, compared, for instance to 1.2 years and 82.9% recovery rate in Germany and 1 year and 88.6% recovery rate in the UK. In accordance with the methodology that the WB Doing Business Index, “Starting a Business” in Turkey is not easy either, where Turkey ranks 90 globally and lower than 20 EU members. However the room for improvement in this field relates more to

4 Headline unemployment rate was 9.9%, women’s labour force participation rate was 30.4% and youth unemployment rate was 19.3% in November 2013 (Source: TÜİK News Bulletin, 16004, 17.12.2014, Household Labour Statistics) 5 Including but not limited to the new Turkish Trade Code.

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the cost of registering a business and the amount of minimum paid-in capital than the number of procedures or the number of days that it takes to complete the procedures.

Although the new Trade Code included provisions that eased establishing businesses, the provisions, related to the amount of paid-in capital increased the cost of establishing a business. Incorporation of provisions that facilitate flexible working arrangements into the labour laws improved ease of doing business. Moreover, introduction of the e-invoice mechanism was another factor that facilitates doing business; however only a few SMEs can presently benefit from the system. The regulatory framework for supporting social enterprises as well as social innovation is non-existent.

1.2.3 Access to Public and Private Financial Resources

Bank loans is the most frequently used external financing mechanism for the SMEs in Turkey. Turkey ranks 86/189 in the WB Doing Business (2014) “Getting Credit” index, and 52/148 in the WEF/GCR (2013-2014) “Access to Loans” index. The most frequently voiced difficulty in access to bank loans is the heavy collaterals, required by the banking sector before extending loans. Banking regulations protect the overall health and soundness of the banking industry, but at the expense of easing access to loans. This relates mostly to the overall macroeconomic policies of the country and is not easily changeable. Credit guarantee facilities exist yet the amount of funding available and the conditions to obtain loan guarantees would not allow a transformational change in this particular area. SMEs, which constitute 99% of the companies in Turkey, use approximately 25% of the loans (271.4 billion TRY as of end of 2013, BDDK).

Neither the private equity nor the venture capital market can be considered developed or real alternate means of external financing for entrepreneurs and/or SMEs in Turkey. Legislative arrangements for establishment of “Fund of Funds” and “Angel Investor Networks” have been made6. Recently TÜBİTAK operationalised a fund of funds scheme. Through this early stage capital program, TÜBİTAK started to provide seed and start-up financing via open calls. Even if Turkey had the best VC legislation, the likelihood of achieving higher levels of VC in Turkey would still hinge on the existence of a sufficiently large pool of start-ups. More than anything else VC is a portfolio and pipeline business. In the absence of a sufficiently large portfolio, composed of investments, losses from some of which can be offset by the gains from the others, VC interest will be low. Turkey needs to expand its pool of entrepreneurs (start-ups), through means such as “accelerators7” which are becoming widespread in the EU and as well as in the US, proving in some cases a more effective way than conventional incubators in terms of supporting entrepreneurs.

Public financial resources, available to the SMEs and entrepreneurs, include various financial support schemes provides provided by KOSGEB, Ministry of Industry and Technology (Techno-entrepreneurs, SAN-TEZ), and TÜBİTAK (TEYDEB). In addition to these, the development agencies also extend grants to the SMEs in their regions, through calls for proposals. The following table demonstrates the amount of public financing, made available to the SMEs.

6 Regulation on Individual Equity Participation, O.J. dated 15 Feb. 2013: 28560 7 There are several accelerators in Turkey, most of which are attached to or associated with universities.

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Table 4: Public Financing to the SMEs

Numbers in 1.000.000 TRL 2007 2008 2009 2010 2011 2012

MoIT (KOSGEB) 17.4 43.1 27.9 48.4 177.5 294.5

MoIT (KOSGEB – Loan Subsidies) 164 165 147 146 170 106

MoIT (TÜBİTAK) 102 110 138 110 126 130

MoIT ( SANTEZ) 6.2 9.9 13.5 18.7 43.8 50

MoIT Techno-Entrepreneurs - - - - 30 50

Total 328 326,4 323,1 547,3 630,5

Source: Ministry of Industry and Technology, KOSGEB and TÜBİTAK.

During IPA-1 Period the amount of public financing, made available to the SMEs has increased substantially, and new/revised financial support schemes has been introduced by the Government of Turkey. Information on efficiency, effectiveness and impact of such financial support mechanisms has not yet been made publicly available.

1.2.4 Business Skills, Capabilities and Culture

The business skills and capabilities of the Turkish SMEs demonstrate significant variability, depending on the size of the enterprises, as well as across regions, often positively correlated with the level of development of the regions, in which the enterprises operate. Most SMEs, especially micro-enterprises and small-sized businesses are family-owned, with little or no delegation of authority to professional management cadres, and very limited willingness to engage in formalized partnerships with non-family persons.

Various financial support schemes geared towards improvement of business skills and capabilities are available, yet their impact is not known, aside from mostly anecdotal success stories. However, in consideration of the limited impact of the standalone business support services (e.g. training, consultancy etc.), KOSGEB has shifted most of its financial resources from standalone business development services to “project-based” support services with a legislative arrangement, made in 2010.

Ranking third out of 59 countries in IMD/WCY’s “Adaptability of Companies” index (2012), Turkish companies are usually considered highly adaptive to changing business environment and requirements. Turkish SMEs acquire business skills and capabilities not in anticipation but in time of need. This is best exemplified by the SMEs that are integrated into supply chains of large-scale corporations. Such SMEs develop and deploy business skills quickly as required by their buyers. The stronger the SMEs are integrated into national supply chains, the easier they develop their business skills and capabilities.

Flash Euro barometer 354 on “Entrepreneurship in the EU and beyond” indicates that the share of respondents who favour self-employment in Turkey (84%) is far higher than the EU average (37%). Every year ca. 50 thousand enterprises are established in Turkey.

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1.2.5 Innovation (Formation and Dissemination of Knowledge) and Creativity

There are 52 Technology Development Zones, 39 of which are operational. As of end of 2013, there were 2508 companies in the TDZs, employing 26,500 R&D personnel. Between 2003 and 2013 the Government of Turkey invested TRL2.91 billion (in 2013 prices) for improvement of research infrastructure at the public and higher education institutions. In due course, 108 thematic research centres projects have become operational, with another 65 to become operational soon. Number of FTE R&D personnel has increase from 63.4 thousand in 2007 to 92.8 thousand in 2011. The share of private sector in total FTE R&D personnel increased from 38.3% in 2007 to 48.9% in 2011.

Despite a significant improvement in most R&D indicators, there are still some structural problems that need to be addressed in order to improve the innovative and entrepreneurial capacity of the economy. First of all, there is a need to provide better protection for intellectual property rights. Turkey presently ranks 74 among 148 countries in the WEF/GCR’s IPR protection index. Secondly, although number of research centres at the universities has increased, there is still a significant room for improvement of university-industry collaboration. Most university research centres still focus on fundamental research rather than applied research, which has a better potential for short-term commercialization. Turkey’s ranks 52/148 in WEF/GCR University-industry Collaboration Index. Thirdly, although public funding is available for R&D, such funding is very limited for commercialization, without which most SMEs would find it very hard to market, improve and provide after-sale services for their innovative products.

Clustering is considered a strong means that strengthens the triple helix in regional economies and hence the innovative capacity. A strong awareness of clusters and benefits of clustering exists. In addition to some cluster-friendly support mechanisms, the Ministry of Industry and Technology has launched the National Cluster Support Programme in 2013. Turkey ranks 30/148 in WEF/GCR’s “State of Cluster Development” index.

Turkey is eager to integrate its research infrastructures with the EU. In this regard, Turkey follows the European Strategy Forum on Research Infrastructures (ESFRI) process and establishment of European Research Infrastructure Consortium (ERIC). Turkey became observer in one ERIC in 2013. Participation to 5 new ERICs in 2014 is being evaluated.

The positive impact of the creative industries on economic and social development is widely recognized. Although there has been considerable debate on the definition of creative industries8, such industries are mainly concerned with the creation and provision of marketable outputs (goods, services and activities) that depend on creative and cultural inputs for their value. Turkey’s fashion industry has grown rapidly. Efforts towards channelling creativity to other manufacturing industries exist. Turkey’s movie and TV shows industry has also grown over the last decade, exports of Turkish TV shows to Balkan and Middle East countries has boomed.

1.2.6 Business Infrastructure

There are some 276 Organized Industrial Zones (OIZs) in Turkey with a total capacity to host 70.6 thousand enterprises, employing 1.3 million people, in a total area of 78.4 thousand hectares, of which almost 70% is already allocated. In addition to the OIZs, there are 453 Small Industrial Sites (SISs), designed mainly for

8 As per Regulation (EU) No 1295/2013 of the European Parliament and of the Council of 11 December 2013, establishing the Creative Europe Programme (2014 to 2020) and repealing Decisions No 1718/2006/EC, No 1855/2006/EC and No 1041/2009/EC “The cultural and creative sectors include inter alia architecture, archives, libraries and museums, artistic crafts, audio-visual (including film, television, video games and multimedia), tangible and intangible cultural heritage, design, festivals, music, literature, performing arts, publishing, radio and visual arts”

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micro-enterprises. SISs host 93.4 thousand enterprises, employing 467.5 thousand people. The Free Zones (FZs) are less common; there are 19 FZs, hosting 3.2 thousand companies.

As far as the start-ups are concerned İŞGEMs and TEKMERs are the main elements of the business infrastructure. There are presently 16 operational İŞGEMs, with another 3 expected to become operational soon, and there are 42 TEKMERs, located in universities.

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Table 5: SWOT

Strengths Weaknesses Opportunities Threats Macroeconomic conditions

Large and young domestic market,

Despite modestly, a growing economy,

Diversity of economic activities,

Regulatory Framework

Political commitment to creating an enabling environment for businesses,

The new Trade Code’s articles, facilitating establishing of businesses, improving transparency etc.

Access to Finance

Soundness of the banking system,

Availability of public financing mechanisms,

Business Skills & Performance

Presence of SMEs, highly adaptable to changing business environment and requirements,

Strong entrepreneurial spirit,

R&D and Innovation

Existence of public funding for R&D and innovation,

Macroeconomic conditions

Consumption-driven economic growth,

Large current account deficit, driven by energy imports,

High amount of external financing, needed for economic growth,

High rate of youth unemployment

Low level of women’s labour force participation rate

Low total factor productivity

Decreasing share of manufacturing industries in the national economy

Existence of informal economy,

Existence of regional disparities Regulatory Framework

Insolvency regulations,

The new Trade Code’s articles, increasing cost of establishing businesses

Lack of legislative arrangements, facilitating social enterprises and social innovation,

Access to Finance

Heavy loan collateral requirements,

Limited availability of VC,

Limited availability of angel investor networks,

Limited availability of credit guarantee schemes

No funding for entrepreneurs before establishment of legal entity


Low level of professional management cadres in SMEs,

Limited understanding of the notion of feasible “business models”,

Limited availability equity capital (especially SMEs) to invest in business skills and capabilities, conducive to innovation

Low level of SME productivity,


Strong growth potential,

Emergence of global middle-class,

Access to Finance

Increasing interest of VC and PE funds,

Incentive schemes that prioritizes investments in less developed regions,


Integration of SMEs into supply chains of large companies,

Energy efficiency technologies may decrease operating costs of SMEs and make them more profitable,

R&D and Innovation

Increased access and presence in international R&D circles (framework programmes),

Attracting R&D facilities from developed countries,

Political commitment to supporting clusters,

Affordable energy efficiency technologies,

Young population’s interest for innovative products,


Closing demographic window,

Spill-over effects of the crisis in Syria, especially on provinces bordering Syria

Over-reliance on imported energy,

Slower economic growth, combined with US FED tapering,

Gloomy outlook of European economies,

Access to Finance

Emerging economies creating opportunities for global VC and PE funds


Limited availability of domestically produced RE and EE solutions may decrease government appetite to facilitate SME investments in RE&EE.

pg. 10

Strengths Weaknesses Opportunities Threats Existence of research

centres at universities,

Existence of technology development zones,

Strong political commitment to increasing R&D,

Low R&D costs, compared to developed countries,

Strong entrepreneurial spirit,

Business Infrastructure

OIZs and SISs, providing industrial infrastructure at affordable costs,

Existence of TEKMERs and ISGEMs, providing physical space for start-ups,

Tourism and Creative Industries

High number of tourists arrival

Existence of significant number of cultural, historical and tourism assets

Richness and diversity of tangible and intangible cultural assets and heritage.

High input costs (especially energy),

Limited number of “accelerators”, R&D and Innovation

Low level of sectoral prioritization in R&D and innovation policies,

Low level of university-industry collaboration,

Limited use of public procurement to encourage innovation,

Limited number of regional innovation strategies,

Limited support for commercialization,

Low level of sophistication of domestic demand,

Low level of applied R&D at the universities, Business Infrastructure

Weak port and freight railway infrastructure,

With few exceptions, OIZ and TDZ managing companies are more of real estate management companies,


Relatively low level of tourism revenues (compared to high number of tourists arrival)

Lack of holistic tourism governance approach (i.e destination management)

Limited number of historical centres transformed to the culture and art centres of towns

Limited infrastructure for alternative tourism forms

Low level of service quality in tourism sector

Lack of special incubation mechanisms/centres for designers or creative industries

Limited level of support to entrepreneurs in the fields of design and creative industries

Lack of infrastructure for creative industries

Increasing importance attached to creative industries

Political openness for using public procurement to trigger innovation,

Innovative opportunities that the urbanization and urban transformation programmes will create


Increasing number of tourists

Political commitment to supporting tourism sector and different alternative tourism forms,

Growing creative industries

Increasing importance attached to creative industries.

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2 SCOPE FOR A SECTOR APPROACH

2.1 National sector policies /strategies

The NDP10 sets out Turkey’s goals with a holistic approach for the 5-year period between 2014 and 2018 in various themes and policies including, but not limited to, competitiveness, innovation, R&D, entrepreneurship, SME development, tourism, and industrial transformation. Turkey’s “Industrial Strategy and Action Plan”, which was prepared by the MoIT as a closing criterion for chapter 20, has been put into action for the period of 2011-2014, in compliance with 9th Development Plan. Furthermore, National Science Technology and Innovation Strategy (UBTYS) 2011-2016, prepared by TÜBİTAK, and SME Strategy and Action Plan (KSEP) 2011-2013, prepared by KOSGEB, were also implemented in the related policy areas. These strategy documents have been prepared with active participation of various stakeholders, both from public and CSOs.

Within the context of NDP10, “Innovative Production, High and Stable Growth” policy underlines the importance of boosting total factor productivity (TFP) in Turkey to ensure high and stable growth and indicates that economy-wide productivity gains can be achieved through (a) increasing the productivity of the economic sectors and/or (b) increasing the share of more productive economic sectors in employment. Also, the science, technology and innovation policies of the Plan are generally geared towards improving the collaboration between government, academia and industry and boosting R&D and innovation in globally competitive and high value-added sectors.

General objective of the Industrial Strategy and Action Plan (2011-2014) is to increase the competitiveness and efficiency of Turkish Industry and to accelerate the transformation to an industry structure which has more share in world exports, where high-tech products with high added value are produced, which has qualified labour, and which at the same time is sensitive to the environment and the society.

In order to improve the competitiveness and entrepreneurship culture of SMEs and to increase the share of SMEs in the economic and social development, policies and interventions have been specified under the KSEP.

UBTYS (2011-2016) prioritises nine research areas: automotive, manufacture of machinery, ICT, energy, food, water, health, space and defence. Furthermore, for fostering specialization, technology roadmaps are being prepared under the coordination of TÜBİTAK.

Moreover, these national strategies are complemented with several sectoral strategies such as textile, machinery, electronics, automotive, iron and steel, medicine, chemistry, which are prepared under the coordination of MoIT and also energy, food, water, R&D and innovation strategies are prepared under the coordination of TÜBİTAK.

Strategic planning in Turkish administrative system is ensured by the law No: 5018 “Public Financial Management and Control Law”. According to Article 9 of the said Law, “Public administrations are to prepare strategic plans in collaboration with related institutions, to set missions and visions within the framework of development plans, programs, relevant legislation and basic principles adopted; to determine strategic goals and measurable objectives; to measure their performances according to predetermined indicators, and to monitor and evaluate this overall process.” In line with this Law each public administration prepares annual strategic plans for all their activities.

To realize the above mentioned strategic goals, main public institutions dealing with these policy areas have a wide variety of support schemes and programmes, ranging from fundamental research to commercialization of products and services, and from aiding conventional SMEs to innovative clusters. The extension process of the implementation period of the strategy papers, are going on in tandem by the

pg. 12

responsible authorities, in line with the NDP10 goals. Furthermore Turkey’s targets have become aligned with EU’s 2020 strategy in Science, Innovation and Industry policy fields. The national innovation and entrepreneurship system targets have been renewed and targets have been set for the year 2023 with the objective of being one of the top 10 economies in the world by 2023. The 2023 targets for the national innovation and entrepreneurship system of Turkey are, to increase R&D intensity to 3%, to increase business R&D intensity to 2%, to raise the number of full-time equivalent (FTE) researchers to 300,000 of which researchers in business to 180,000.

On the other hand, sector policy is closely linked with accession agenda. Chapter 20-Industry and Enterprise Policy and Chapter 25-Science and Technology are directly linked with the subject sector. These sectors are led by the Ministry of Industry and Technology. Furthermore, Turkey has been working on the operational process of assessment for the Small Business Act (SBA) together with the Western Balkans, under the leadership of KOSGEB.

2.2 Institutional setting, leadership and capacity

Ministry of Industry and Technology is the lead Ministry of the sector with seven operational DGs:

DG for Industry,

DG for Science and Technology,

DG for Industrial Zones,

DG for Industrial Product Safety and Inspection,

DG for Metrology and Standardization,

DG for R & D

DG for Implementation and Foreign Investment

DG for Development AgenciesDG for EU and Foreign Affairs.

The MoIT is responsible for development and implementation of (1) industrial, (2) science, technology and innovation, (3) metrology, (4) product safety and control and (5) industrial productivity policies and strategies in Turkey. The MoIT is also responsible for planning, establishment, and operationalisation of organized industrial zones, industrial zones, and small industrial sites, as well as clusters. Hence, by virtue of its mandate and function, the MoIT plays a key role in improving Turkey’s industrial and technological infrastructure, and boosting university-industry collaboration.

The MoIT has two main related institutions and one affiliated institution. These institutions are;

TÜBİTAK: The Scientific and Technological Research Council of TURKEY

KOSGEB: Small and Medium Enterprises Development Organization

TPE: Turkish Patent Institute

TÜBİTAK: The Scientific and Technological Research Council of Turkey is the agency for management, funding and conduct of research in Turkey. It conducts research and support Turkish researchers. TÜBİTAK is responsible for promoting, developing, organizing, conducting and coordinating research and development in line with national targets and priorities. TÜBİTAK acts as an advisory agency to the Turkish Government on science and research issues, and is the secretariat of the Supreme Council for Science and Technology (BTYK), the highest S&T policy making body in Turkey. There are six types of funds in TÜBİTAK: academic, business/Industry, public Institutions, entrepreneurship, scientific events and science & society.

pg. 13

KOSGEB: KOSGEB (Republic of Turkey Small and Medium Enterprises Development Organization) aims that increase SME’s share in economic and social development by offering quality service and support towards developing SME’s power of competition and spreading culture of entrepreneurship.

TPE: Institute, deals with industrial property issues in Turkey for effective protection of patents, trademarks, industrial designs and other industrial property rights.

Main stakeholders of the sector have comprehensive experience in implementing policies through programmes. MoIT has ca. 1400 personnel and operates 7 different programmes. TÜBİTAK has ca. 4525 personnel and operates 63 different programmes. KOSGEB has ca. 1000 personnel and operates 7 different programmes.

2.3 Sector and donor coordination

The Supreme Council for Science and Technology (BTYK) is the highest authority and coordinating body related with science, technology and innovation policy in Turkey. The Council convenes every six months, under the chairmanship of Prime Minister himself, with the decision-making power for national S&T and innovation policy. The Council consists of seventeen permanent members including nine Ministers and several other senior officials from public and non-public institutions and a member to be appointed by a university to be designated by the Council of Higher Education. Depending on the agenda of the Council meetings, stakeholders from public, private sector, non-public institutions and academia are invited also to join the meetings. As the secretariat body, TÜBİTAK coordinates the BTYK meetings and UBTYS 2011-2016 strategy.

In addition to this, Public-University-Industry Cooperation Initiative was started by MoIT aiming to create a better governance model on this issue. Consequently, there are several horizontal cross cutting themes every institution follows its own agenda.

On the other hand, Civil Society is represented by Technology Development Foundation of the Turkey (TTGV) within this sector. TTGV is a non-profit organization which consists of members of 24 private sectors, 5 public institutions, 11 umbrella organizations and 15 individuals.

In Turkey, relatively few international donors providing grant support are active. However, IFIs such as EIB, EIF, EBRD, CEB, KfW and WB are active with extensive loan programmes, in particular in sectors such as environment, energy, private sector development and transport.

In Regional Competitiveness Operational Programme (RCOP 2007-2013) a specific measure was dedicated to financial instruments and several operations were implemented by MoIT in collaboration with IFIs. It is also envisaged to develop new financial instruments within this Sector Operational Programme. In this respect, as the first step, MoIT took the initiative to discuss new financial instrument project ideas with EBRD that will make contributions and coincide with the goals and ambitions of the 2014-2020 programme. Moreover within the period of 2015 and onwards Sector Operational Programme will seek cooperation opportunities with International organizations such as United Nations Development Programme (UNDP), United Nations Industrial Development Organisation (UNIDO), World Bank Etc. Further consultation with IOs and IFIs will be carried out once the Operational Programme is adopted by the EU Commission.

If the Turkish authorities and the EC agree to set up Turkish Investment Programme (TIP), inclusion of the Competitiveness and Innovation sector to the TIP can be considered to increase financing capacity for investments in the sector through establishing finance facilities for venture capital (innovation and expansion stages), credit guarantee schemes, and loan programmes.

pg. 14

2.4 Mid-term budgetary perspectives

As a sub-national development plan document, the Medium Term Program (MTP) is prepared by Ministry of Development for 3 consecutive years. Related with the MTP, Medium-Term Financial Plan (MTFP) is prepared by the Ministry of Finance and approved by Council of Ministers. MTFP mostly includes macroeconomic forecasts such as balance of income and expenses and financing of current account deficit. Medium-Term Financial Plan includes a fiscal breakdown according to ministries (prime ministry and presidency), universities and other public bodies/institution. These breakdowns items can be subsumed as personnel, interest, capital expenditures and capital transfer, reserve allowance which makes the budget as a whole and shows the expenses for the next three years. Thus the sector budget cannot be easily and directly identified in the state budget in the MTFP. However, 5018 Public Financial Management and Control Law (Adopted by the Parliament on 10.12.2003) stipulates Performance-based Budgeting System is actively in effect since 2006. The law obligates the public institutions to prepare an in-house strategy document that should include medium term fiscal planning for each expenditure item including the nationally funded schemes and programmes. Thus, each public institution can easily draw medium term expenditure goals from each in-house strategy documents. According to the Ministry of finance database, the cumulative budget reserved for the nationally funded programmes and schemes have increased 1.9 times from 2.4 Billion TRY in 2008 to 4.5 Billion TRY in 2012. During 2014-2018 period government will spend 10.4 Billion TRY, according to the NDP10.

2.5 Performance assessment framework

In accordance with the law no 5018 “Public Finance Management and Control Law”, strategic planning and performance-based budgeting concept has been put into practice in Turkey since 2006. Within this scope besides strategic plans, public administrations also prepare annual performance programmes and activity reports and present to the related Ministries as Ministry of Development, Ministry of Finance, Turkish Court of Accounts and the Grand National Assembly of Turkey. Ministries have established Strategic Development Directorates which is functionally active since 01.01.2006 in order to prepare and coordinate strategic planning process and monitor the performance on a quarterly basis and report to the all relevant sides. In this context, even though there is need for further elaboration, it can be assessed that Turkey has a national monitoring system based on performance criteria exist regarding the strategic planning and performance-based budgeting concept.

With the aim of monitoring and ensuring coordination of “Turkey’s Industrial Strategy and Action Plan”, under its auspices, the Ministry of Industry and Technology has established a Monitoring and Steering Committee in which all stakeholders participated and formed initiatives with the involvement of public organizations.

For the industrial strategy, a monitoring and evaluation report has been prepared every six months. Monitoring and Steering Committee is in-cooperation with various dialog mechanisms existing between the private sector and public sector. Also, the issues which are subject to discussion between the public and private sector at the Monitoring and Steering Committee are submitted to Economy Coordination Council by the MoIT, and it will be ensured that decision making political authority is informed and actuated. Monitoring and implementation of sectoral strategies (e.g. textile, machinery, electronics, automotive etc.) and action plans are also similar with the monitoring of industrial strategy and action plan. In this context, under its auspices, MoIT has established Steering Committees in order to provide effective monitoring and implementation of these strategies, which will hold meetings on six monthly bases. Responsible institutions of actions provide information and data six monthly basis to the secretariat of MoIT. Within this scope, MoIT prepares and publishes implementation, monitoring and evaluation reports in order to submit Steering Committees.

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“National Science, Innovation and Technology Strategy 2011 - 2016” is governed through annual action plans and achievements of actions are monitored throughout the year at six monthly basis. Within this context, responsible and relevant stakeholders of the actions provide information and data regarding the progress of actions to The Scientific and Technological Research Council of Turkey (TÜBİTAK) as the secretariat of the Supreme Council for Science and Technology (BTYK). As the secretariat, TÜBİTAK reports the progress of actions to the BTYK meetings within the scope of collected data from all stakeholders.

With the aim of monitoring and ensuring coordination of “SME Strategy and Action Plan (KSEP)”, under its auspices, KOSGEB has established a Steering Committee in terms of management, monitoring and evaluation of the strategy, and a Technical Committee for carrying out the technical studies. Responsible institutions of actions and projects prepare Target Progress Reports and submit these reports to KOSGEB every six months. In this scope KOSGEB consolidates Target Progress Reports and submit them to the members of Steering Committee at the meetings which are organized semi-annually. When the need arises, Steering Committee can establish sub-monitoring committees or working groups.

CISOP will have its own monitoring system within the scope of EU funds management; but it will also provide information regularly regarding its contributions to the all aforementioned strategies in terms of targets and performance indicators.

In the light of all these information, within the context of CISOP providing quality improvement support regarding monitoring system of aforementioned strategies and increasing the capacity building assistance to the evaluation of the strategies will create added value in the sector in terms of strengthening its performance and increasing its effectiveness and efficiency.

2.6 Public finance management

Since 2000 Turkey has pursued a broad program of public expenditure and financial management reforms to improve the quality of public service delivery while maintaining fiscal discipline. PFM forms a core component of the 9th Development Plan (2007-2013), which sets transparency, accountability, participation, efficiency and citizen satisfaction as the main performance criteria in the provision of public services. The NDP10 aims at successful implementation of the core PFM reforms, the challenge for Turkey now is to move forward with in depth implementation, ultimately resulting on enhanced quality in public sector management.

Public expenditure and financial accountability system is implemented according to the Law No. 5018 on Public Financial Management and Control (PFMC) in Turkey. The Law’s aim is to prepare and implement public financial management body, prepare and implement public budgets, reporting and accounting of all financial processes and supervising financial control in order to ensure accountability and financial transparency and effective use of public resources in line with policies and targets of development plans and programs. To this aim, essential instruments have been defined as strategic planning, internal control, internal audit and external audit to be conducted by the Court of Accounts.

In accordance with the principle of financial transparency, it is envisaged to inform the public opinion in time during the acquisition and use of public resources. For this purpose, processes of reporting, development of financial statistics, activity reports and their publication are carried out in order to ensure financial transparency.

Besides, Law No. 5018 generated an accounting unity covering all of the public institutions under the centralized management and extended to accruals accounting on the basis of recording and reporting of all financial operations. Hence, financial reports and statistical data are recorded and presented to the public allowing international comparisons.

pg. 16

In the Law No. 5018, one of the instruments which will ensure financial transparency is the requirement of informing the public opinion in the first month of every fiscal year on the objectives, strategies, assets, obligations and annual performance programs under the obligation of accountability attributed to the ministers. Thus, all revenues and expenditures of public institutions are identified in the budget and audit capacity of the public opinion is enhanced in generation of revenues and their uses.

Regarding Public Internal Financial Control (PIFC) and External Audit (EA), there is no Community legislation requiring transposition into national law, it is expected to adopt international control and internal audit standards and EU best practices by Turkey.

The basic legal framework of the Public Internal Financial Control (PIFC) system in Turkey is regulated by the Constitution and the PFMC Law and the actors in the current PIFC system are the Turkish Grand National Assembly (TBMM), Court of Accounts, Ministry of Finance, Ministry of Interior, Ministry of Development, Undersecretariat of Treasury, Internal Audit Coordination Board (IACB) and the strategy development as well as internal audit units in the public administrations. Central harmonization role within the PIFC system is assumed by the MoF in the area of financial management and control (FMC) and by the IACB attached to the MoF in the area of internal audit.

The PIFC system covers the general government including the central government, social security institutions and local administrations, with the exception of the regulatory and supervisory agencies.

In PIFC system political accountability lies with the Minister. Its elements are defined and operate within the framework of the methods and standards set out by the central harmonization units (CHU), under the supervision of the highest ranking manager, with the support and coordination of the strategy development units (SDU). Spending units are entrusted for implementation and assurance as well as advisory functions are provided by internal audit units.

Regarding the external audit, The Law No. 6085 on Turkish Court of Accounts (TCA) was enacted in 2010. The Law was prepared on the basis of INTOSAI auditing standards and the EU best practices. The audit by TCA shall cover regularity audit and performance audit.

The TCA performs the external audits of the financial operations, decisions and transactions, and the evaluation of effective, economic, efficient and legal usage of public resources of the public administrations within the scope of the general government as well as the other administrations which, according to the laws, are subject to the audit of the TCA. It issues a final judgment on their financial transactions and accounts.

As part of regularity audit, it evaluates the financial management and internal control systems of the public administrations. As part of performance audit it evaluates the activity results related to the objectives and indicators determined by administrations within the framework of accountability. It identifies the procedures and principles related to external audit and it is independent during the planning, execution and reporting stages of audit.

TCA prepares entity reports for each public administration as a result of audits and examinations. These reports are sent to the related public administrations and announced to the public. The TCA submits the External Audit General Evaluation Report to the TBMM which was consolidated in respect of administrations’ regularity and performance audit results. The Court of Accounts also gives a general conformity statement related to the draft final accounts law to the TBMM. This statement is a document showing the level of compliance of the yearly budget execution results of the government, with the budget law adopted by the TBMM.

pg. 17

The PFMC Law assigns the Court of Accounts to submit to the TBMM certain reports together with its opinions reached on the basis of the results of external audits. These reports are the individual accountability reports of the public administrations within the scope of general government, General Accountability Report and the Local Administrations General Accountability Report. The Court of Accounts also evaluates the financial statistics pertaining to one year, in March of the following year, in terms of their preparation, publication, accuracy, reliability and compliance with standards. The financial statistics evaluation report to be issued following the evaluation is submitted to the TBMM and the MoF.

The Court of Accounts itself is audited on a yearly basis by a committee of auditors with necessary professional competencies, acting on behalf of the TBMM and assigned by the Bureau of the Assembly of the TBMM.

2.7 Macro-economic framework

In the aftermath of the global economic crisis the growth pace of Turkish economy and its trade partners have diverged significantly; domestic demand recovered rapidly contrary to sluggish external demand. In this process, current account deficit increased to unprecedented levels and the necessity to rebalance the economy became evident. Starting from last quarter of 2011 macro-prudential measures were put into implementation to establish a more balanced economic structure. With these policies growth has settled to a more moderate path, external demand has been the main source of growth in 2012 and current account deficit to GDP ratio decreased to 6.1 percent. In 2013 external demand remained stagnant, domestic demand revived and current account deficit increased again. With 7.9 percent (MoD), current account deficit to GDP ratio in 2013 was realized higher than the Medium-term Program (2014-2016) and Pre-Accession Economic Program (PEP) (2014-2016) estimate which was 7.1 percent.

Main objectives of the macroeconomic policy in the forthcoming period are on one hand to reduce current account deficit gradually, on the other hand to increase the growth rate through minimizing the effects of global uncertainty on Turkish economy. Within this context, real GDP growth which is estimated to realize around 3.6 percent in 2013, is expected to increase to 4 percent in 2014 and converge towards the potential growth rate of 5 percent in 2015 and 2016 (PEP 2014-2016). While converging gradually towards potential growth, with the effect of macro-prudential measures implemented, macroeconomic policies target decreasing current account deficit to GDP ratio gradually to 6.4 percent in 2014, 5.9 percent in 2015 and 5.5 percent in 2016 (PEP 2014-2016).

Simultaneous decline of total investments and savings in recent years has increased the need for structural policies in this area. Effects of changes in US monetary policy since May 2013 have highlighted this need. Accordingly, increasing domestic savings, directing resources to productive areas, raising productivity level of the economy, increasing employment, reducing inflation will be among main macroeconomic targets (PEP 2014-2016). In this framework, with the acceleration in GDP growth, unemployment rate is expected to gradually decline from its 9.7 percent level in 2013 to 8.9 percent in 2016 (PEP 2014-2016). The Central Bank of Republic of Turkey (TCMB) will continue inflation targeting regime in compliance with the main objective of achieving price stability. The TCMB targets decreasing the inflation rate (end-year CPI inflation) gradually from its 7.4 percent level at end-2013, to 5 percent at end-2016. The ultimate target is to decrease inflation rate to levels complying with the Maastricht criteria, while taking into account financial stability issues into consideration (PEP 2014-2016).

The strong stance in public finance will be maintained in the medium term, fiscal policies will be supportive for the goals of strengthening economic and financial stability, for keeping current account deficit under control through increasing domestic savings and raising growth potential of the economy. Sustainability of public finances will be pursued by keeping public sector borrowing requirement at reasonable levels, and achievements in public finances in the past will be continued as well. Accordingly, general government deficit, which is estimated to realize around 1 percent of GDP in 2013, is estimated to decrease to 0.5

pg. 18

percent of GDP in 2016 (PEP 2014-2016). With this successful performance in public finances and sustaining of growth in the economy, general government debt stock to GDP ratio is forecasted to decrease from 35 percent in 2013 to 30 percent in 2016 (PEP 2014-2016).

Moreover, transformation of the existing production structure is targeted via reducing import dependency and increasing innovation capacity of the economy. The structural policies towards these areas will contribute to increase in potential growth rate and reduction in the saving-investment gap through enhancing competitiveness of the economy in the medium term. Thereby, important progress will be ensured towards achieving the long-term development goal of the Tenth Development Plan that is to upgrade the global position of Turkey and enhance welfare of people.

2.8 Overall Assessment

Turkey attaches great importance to support to innovation and competitiveness in economic development and sees these policies as driving forces of the country to become one of the tenth economies of the world. Thus Ministry of Industry and Trade has been evolved to Ministry of Industry and Technology. Ministry has assumed the leadership in innovation, industry, technological development and SMEs policies with 3 affiliated bodies, namely TÜBİTAK, KOSGEB and TPE. MoIT and affiliated bodies are managing more than 30 programmes in different intervention levels. In 2007-2013 period Turkey has spent 2.4 billion TRY public resources and that amount will be quadrupled in 2014-2018 period. NDP10, complemented with Industry Strategy Paper and sub-sectorial papers, UBTYS, KSEP, BGUS sets out the priorities and goals to manage and focus this huge support in a strategic and efficient fashion in the most required themes and geographies. Since the competitiveness and innovation sector has a huge array of stakeholders in different levels of the public sector there are some policy areas shared with more than one institution.

pg. 19

3 OBJECTIVE(S) OF THE IPA SECTOR SUPPORT

The overall objective of the IPA sector support, as articulated in the Country Strategy Paper, is “to improve the business environment and strengthening research, technologic development and innovation”.

The IPA sector support has four expected results:

Improved functioning of the business sector, especially for SMEs and entrepreneurs;

Improved access to finance for SMEs;

Increased clustering, networking and SME internationalization; and

Increased quality and quantity of public and private research and innovation in support of economic development.

pg. 20

4 OPERATIONAL FEATURES OF THE PROGRAMME

4.1 Geographic and thematic concentration

Thematic concentration

The CISOP covers a very large sector: Competiveness and Innovation. Drawing from the lessons learned during the implementation of the RCOP under IPA I, the CISOP is open to all regions in Turkey.

The overarching strategy of the CISOP is rooted in the NDP10’s growth strategy: “Developing an export-oriented, private sector-led competitive production structure by increasing productivity and accelerating industrialization” (NDP10, Figure 1). More specifically, CISOP’s main strategy is to contribute to the transformation of the manufacturing industry in order to help the national manufacturing industry move up the value chains.

In accordance with this overarching strategy, the strategic choice of the CISOP is to concentrate on the “manufacturing industry” with the overarching objectives to improve total factor productivity (TFP) in Turkey, and to reduce Turkey’s current account deficit. Both of these objectives are essential for improving resilience of Turkey’s economy and securing high and stable growth. These strategic choices will be operationalized through two strategic selection criteria, which will ensure strategic coherence of the interventions to be supported within the scope of the CISOP. These strategic selection criteria are:

Contribution to improvement of the total factor productivity of the national economy: The interventions to be supported under the CISOP are expected to enhance the total factor productivity of the national economy through (a) improving productivity of the sectors that they target and/or (b) increasing the share of comparatively more productive sectors in the economy. Manufacturing industry carries a special importance for both purposes. Thus interventions that (a) increase domestic value added; (b) facilitate sustainable production with advanced technologies; (c) enable moving up the global value chains; (d) help create innovative ecosystems or improve the capacity of the already existing ones; (e) foster entrepreneurship and high quality jobs will be of particular importance to pursue the strategic choices of the CISOP. This particular strategic selection criterion recognizes the vital importance of innovation as one of the main means that boost total factor productivity of an economy. The CISOP operationalises the notion of innovation in a rather comprehensive fashion, including technological as well as non-technological innovations.

Contribution to decreasing the current account deficit of Turkey: The interventions to be supported under this SOP are expected to have directly or indirectly a positive impact on Turkey’s current account. Such contribution may be made through increasing exports (including international tourism revenues) or reducing imports. Additionally, since imported energy is an important component of the current account deficit, interventions that improve energy efficiency in industry, facilitate better utilization of renewable energies for the industry or improve resource efficiency will also be considered as interventions that contribute to reducing current account deficit of Turkey.

Geographic concentration

In order to maximize the impact of the IPA II funds in the area of economic, social, territorial development, a thematic and geographic concentration is of paramount importance. Therefore, CISOP allocates a certain part of funds to the priority NUTS II regions.

Geographical concentration principle will be applied to only some specific actions/activities of CISOP. Considering the content of the OP, eligible interventions, potential final beneficiaries, regional needs and

pg. 21

project-generation capacities of priority regions, following action/activity is determined eligible and funds allocated for geographical concentration are as follows:

Action Activities Total Budget

Allocated (2014-2016)

Indicative Rate of Funds Allocated for Priority NUTS II Regions

1. Private sector development

1.1 Manufacturing Industry

62,9 MEUR 45 %

In principle, geographical concentration approach will cover 12 NUTS II regions having Gross Value Added (GVA) per capita below 75% of the national average (last three years 2009-2011). Among these 12 regions, by taking into account coherence and complementarity among the priorities of regional plans and the SOPs, and absorption capacity of the regions, four regions have been prioritized for the concentration in the period of 2014-2016:

(1) TRB1 (Malatya, Elazığ, Bingöl, Tunceli) (2) TRB2 (Van, Muş, Bitlis, Hakkari) (3) TRC2 (Şanlıurfa, Diyarbakır) (4) TRC3 (Mardin, Batman, Şırnak, Siirt)

The below table shows GVA (Gross Value Added) per capita levels at NUTS II level in the light of latest available statistical data:

Table 6: GVA per capita by NUTS II Regions (2009-2011, $)

NUTS II Regions 2009 2010 2011

TR10 (İstanbul) 11.848 13.416 13.865

TR21 (Tekirdağ, Edirne, Kırklareli) 9.699 11.511 12.029

TR22 (Balıkesir, Çanakkale) 7.596 8.651 8.954

TR31 (İzmir) 9.372 10.783 11.443

TR32 (Aydın, Denizli, Muğla) 7.496 8.524 8.668

TR33 (Manisa, Afyon, Kütahya, Uşak) 6.988 8.012 8.283

TR41 (Bursa, Eskişehir, Bilecik) 10.319 11.528 12.126

TR42 (Kocaeli, Sakarya, Düzce, Bolu, Yalova) 10.641 12.128 13.138

TR51 (Ankara) 10.699 11.990 12.259

TR52 (Konya, Karaman) 6.125 6.771 7.118

TR61 (Antalya, Isparta, Burdur) 8.672 10.094 10.122

TR62 (Adana, Mersin) 6.125 7.147 7.232

TR63 (Hatay, Kahramanmaraş, Osmaniye) 4.902 5.724 5.904

TR71 (Kırıkkale, Aksaray, Niğde, Nevşehir) 5.737 6.673 7.087

TR72 (Kayseri, Sivas, Yozgat) 5.750 6.639 6.675

TR81 (Zonguldak, Karabük, Bartın) 7.153 7.952 8.536

TR82 (Kastamonu, Çankırı, Sinop) 5.670 6.612 6.594

TR83 (Samsun, Tokat, Çorum, Amasya) 5.598 6.444 6.762

TR90 (Trabzon, Ordu, Giresun, Rize, Artvin, Gümüşhane) 5.816 6.765 6.652

TRA1 (Erzurum, Erzincan, Bayburt) 4.990 5.815 5.901

TRA2 (Ağrı, Kars, Iğdır, Ardahan) 3.254 4.055 4.001

TRB1 (Malatya, Elazığ, Bingöl, Tunceli) 4.910 5.638 5.820

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TRB2 (Van, Muş, Bitlis, Hakkari) 3.137 3.712 3.515

TRC1 (Gaziantep, Adıyaman, Kilis) 3.925 4.909 4.952

TRC2 (Şanlıurfa, Diyarbakır) 3.380 4.165 4.282

TRC3 (Mardin, Batman, Şırnak, Siirt) 3.549 4.531 4.689

Source: TURKSTAT

The table indicates the NUTS II regions below 75% of the national average GVA per capita and priority regions. The lagging behind regions mostly stand in the eastern part of the country. Given the size of the country, disparities among the regions, and the need to set up a balance between efficiency and effectiveness aims with limited IPA funds, the prioritization will be given to the following regions with a lowest GVA per capita as indicated below:

TRB1 (Malatya, Elazığ, Bingöl, Tunceli)

TRB2 (Van, Muş, Bitlis, Hakkari)

TRC2 (Şanlıurfa, Diyarbakır)

TRC3 (Mardin, Batman, Şırnak, Siirt)

These regions are prioritized with respect to the following factors:

Sufficient absorption capacities of the regions in relevant sectors (e.g. industrial base for

competitiveness and innovation sector operational programme)

Experiences on project generation and implementation gained from national and IPA funded

programmes

The need for convergence to other regions both within Turkey and the EU

More visible IPA implementation by focusing on limited number of regions

Map: GVA per capita, by NUTS II Regions (% of national avarage, national avarage=100)

With regard to the CISOP, the priorities and needs of target regions, which are defined in their regional development plans, are in compliance with the actions/activities envisaged under CISOP.

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Activity 1.1, manufacturing industry, is the only activity of CISOP under which a certain part of budget will be earmarked for the geographical concentration. This activity targets the manufacturing sectors and aims at strengthening SMEs’ integration into manufacturing value chains. SMEs’ integration into value chains will be facilitated by operations that will (a) increase awareness and understanding of the structure and dynamics of value chains by SMEs, (b) help SMEs identify and act on their competitive strengths within value chains, (c) boost their productivity, (d) improve compliance with product quality standards required for participation in value chains, and (e) help SMEs take up larger and more complex sets of tasks within value chains.

In order to assist economic development of lagging behind regions, business environment must be improved, investments need to be encouraged, SMEs are to be supported and their productivity has to be raised. The target regions have prepared their regional development plans covering 2014-2023 period taking these prerequisites into account. The plans were formulated through a participatory process involving public institutions, private sector and civil society organizations and are expected to be approved by end 2014. Draft plans have priorities and measures, which directly target activity 1.1 of CISOP, specified below;

TRB2 aims at boosting competitiveness of manufacturing industry

TRC2 aims at supporting industrial development and transition to a higher value-added production

composition

TRC3 aims at boosting higher value-added production and development of industrial

infrastructure

TRB1 aims at strengthening industrial production and development of industrial infrastructure

services

Activity 1.1 of CISOP clearly matches the development plans’ priorities of respective regions which will guide the socio-economic activities in the regions for the next ten years. Consequently, national resources and IPA funds will complement each other to boost competitiveness of the regions, and help reduce disparities among regions.

SOPs of “environment” and “employment, education and social policies” also apply geographical concentration principle in 2014-16 period. These SOPs will target the same priority regions in order to generate a combined and more visible impact of IPA II funds. Thereby, this approach will create synergy among various interventions of SOPs.In addition, remaining 8 regions having GVA per capita below 75% of the national average but not prioritized for the geographical concentration in terms of fund allocation follow:

TR90 (Trabzon, Ordu, Giresun, Rize, Artvin, Gümüşhane)

TR72 (Kayseri, Sivas, Yozgat)

TR82 (Kastamonu, Çankırı, Sinop)

TR83 (Samsun, Tokat, Çorum, Amasya)

TR63 (Hatay, Kahramanmaraş, Osmaniye)

TRA1 (Erzurum, Erzincan, Bayburt)

TRC1 (Gaziantep, Adıyaman, Kilis)

TRA2 (Ağrı, Kars, Iğdır, Ardahan)

These regions will be prioritised for Activity 1.1 during project selection process by granting additional scores to projects generated in these regions during evaluation process.

The second dimension of the CISOP geographical concentration strategy is prioritization of regions for certain activities according to their income level as classified in BGUS.

The below table presents the prioritized activities in terms of regional classification:

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Table 7: Prioritised Activities for regions

Regional Classification 1.1 1.2 2.1 2.2

High Income Level * * *

Middle-High Income Level * * *

Middle-Low Income Level * *

Low Income Level * *

This concentration approach does not preclude the implementation of the prioritised activities in other regions. (e.g. High income level NUTS II regions can also submit project proposals for Activity 1.1.)

Activity 1.2 covers tourism and creative industry interventions. In the field of tourism, priority will be given to middle-low and low income regions, while creative industry interventions will be prioritized for high and middle-high income regions during project selection process.

4.2 Interaction of the programme with IPA II programmes in other sectors

The Present SOP will interact with the following IPA II programmes in other sectors. The table-8 below summarizes potential interaction areas. Overlapping avoidance and complementarities of interventions between the CISOP and other OPs are essential in ensuring coherence and efficiency in the management of financial assistance to be given under the CISOP. In this context, CISOP foresees some cooperation and complementarity areas especially with the OP for Human Resources and Rural Development OP. Within this scope, coordination mechanisms will be established among the aforementioned OPs and Operational Programmes will impress and support each other mutually both for the programming and implementation periods.

Creating a synergy and ensuring close coordination with the Human Resources Development OP (HRD OP) and Rural Development OP (RD OP) will be sought particularly in the areas of skills training and business support in order to increase the effectiveness of the interventions of the CISOP.

During the programming phase of the OPs, regular dialogue and exchange of information on the interventions of the Programmes will be ensured through ad-hoc committees. Moreover in the project generation process, joint operations can be developed and its different phases can be financed under several programmes in order to increase the impact of the EU assistance in relevant sectors.

During the implementation phase of the OPs, coordination among different Operational Programmes will be ensured through the Sectoral Monitoring Committees to ensure regular dialogue. Sectoral Monitoring Committee for the CISOP will include representation from the Operating Structures responsible for the Human Resources Development and Rural Development. Moreover MoIT will be a member of the Sectoral Monitoring Committee of these Operational Programmes. IPA Monitoring Committees covering all the actors of IPA policy areas will be also used as another coordination tool.

Major areas, which will ensure the complementarity and synergy between the CISOP and other OPs are given below:

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Table 8: Interaction with IPA II Programmes in other Sectors

CISOP Other Operational Programmes

Action 1: Private Sector Development

In order to provide necessary trainings on the development of entrepreneurial knowledge and skills of SMEs particularly at start up and development stages by the Human Resources Development OP, training and education infrastructure for SMEs will be established, improved and refurbished and consultancy support provided under Action 1 of the CISOP in close coordination with HRD OP. Furthermore, the HRD OP will promote women and young entrepreneurship and CISOP will take care of this horizontal issue in the project generation phase.

Rural Development OP will provide supports for the diversification of the rural economy which focus on micro and small enterprises, with special emphasis on rural tourism and to develop micro and small enterprises and entrepreneurship based on local knowledge and experience possessed in the context of local products (food and non-food), crafts and handicrafts. Also farm diversification and aquaculture investments will be supported by Rural Development OP. Moreover animal husbandry (milk, meat and poultry production) and food processing individual investments (milk, meat, fruit and vegetables, fishery product) are supported under Rural Development OP. On the other hand, revitalising and landscaping, promotion and marketing of the tourism attraction sites, which are not in the rural settlements and establishment of the Tourism Information Centres, will be supported by the CISOP within the scope of tourism sector support activities. Moreover, the food industry including meat, milk, fruit and vegetable and fishery sectors will be supported by the CISOP in the fields of training and business support.

Action 2: Science, Technology and Innovation

Within the scope of Activity 2.1 and 2.2 of the CISOP, training services and business support in the field of R&D and innovation will be provided and this will contribute the employment and labour market action of Human Resources Development OP.

Food industry will be supported under Activity 2.1 and 2.2 of the CISOP in order to establish more innovative and effective industry which will ensure complementarity and create synergy with the Rural Development OP.

4.3 Complementarity of IPA II assistance in the sector with other donors

In order to broaden the impacts of CISOP, complementarity mechanisms with HORIZON2020 and IPA resources can be sought. “EU’s new Research and Innovation Framework Programme Horizon 2020 with a nearly 80 million Euros budget is the most critical tool for the EU to achieve its European Research Area and Innovation Union goals and develop global competitiveness through science, innovation and technology. Turkey’s participation to Horizon 2020 is also crucial in increasing quality and quantity of public and private research and innovation in support of economic development. It has the potential to provide opportunities to Turkish STI actors to join international networking activities, to access newest scientific knowledge produced and latest technological trends, pave the way for knowledge and technology transfer and build skills and capabilities. Therefore so as to take full advantage of the opportunities provided by the Horizon 2020 and to achieve greater impact and efficiency, maximum synergies have to be ensured between the assistance under this sector and Horizon 2020 through joint or coordinated efforts during the programming and implementation phases of the sector operational programme.” Projects aiming to increase participation rate of enterprises, research institutions and academia from Horizon 2020 will have a priority during project appraisal and selection phases. Mechanisms providing special rules to Horizon 2020 projects during project appraisal and selection will be established during the implementation of the CISOP.

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On the other hand, CISOP will focus to enhance the financial environment through supporting credit guarantee funds, micro-loan funds and equity finance mechanisms like venture capital funds including seed and start-up capital and other new forms of financial instruments serving the enterprises. Moreover, it will support the enterprises’ business development projects and level of investment through increasing their access to financial resources and modernize the production infrastructure of enterprises through increased utilization of financial mechanisms. Within this scope, support of donor institutions as International Financing Institutions or International Organizations may be used in the field of financial instruments within the scope of CISOP in IPA II period. As is known, under the 1.2 Measure “Creation and Development of Financing Instruments” of RCOP in 2007-2013 period, three projects were carried out in cooperation with European Investment Fund.

4.4 Equal Opportunities and Gender Mainstreaming

In principle CISOP will seek to ensure that the interventions to be supported thereunder create equal opportunities for the target groups of the interventions. This will be secured by encouraging the prospective end recipients of assistance to develop intervention proposal through a participatory and inclusive approach, demonstrating how each intervention will ensure that it provides equal opportunities for target groups in participating to and benefiting from the interventions. Additionally, IPA funds are expected to serve as an instrument, through a dual approach, in which the horizontal mainstreaming of equal opportunities will be combined with specific measures in favour of gender equality.

In due course, incentives will be introduced, into the CISOP, aiming at increasing the perception and importance of gender dimension. Specific objectives and targets will be set to promote gender equality in particular in "non-traditional" domains such as information society, research and technological development, communication technologies, entrepreneurship, etc.

Dissemination of information and awareness-raising on gender dimension and possibility of financing equality initiatives is expected to encourage applicants to put forward proposals aiming at reducing gender inequalities.

Incorporation of equal opportunities objectives at the programming, implementation, monitoring and evaluation stages will also help the Operating Structure to assess the impact of the activities. Hence, mid-term evaluation(s) will establish: the extent to which the objective of equal opportunities has been taken into account; the extent to which this objective has been achieved; which financial resources are allocated to specific equal opportunities measures; and whether resources have been put to appropriate use. On the basis of these evaluations, it will be possible to make any necessary amendments to the Programme for the remainder of the programming period.

4.5 Climate Action and Sustainable Development

The fight against climate change is being reflected in an increasing number of complementary policy areas. To further advance this "mainstreaming" process (1), the EU has agreed that at least 20% of its budget for the 2014-2020 periods should be spent on climate change-related action.

With regard to this specific SOP following activities will be promoted:

Under Action 1, SMEs who produce environmentally better products and provide (or make a substantial use of green technologies (e.g. environmental industries (e.g. waste and water treatment equipment, products, technologies, etc.), energy-efficient building materials, energy and environment labelling products and services, intelligent heating and cooling systems, eco-friendly products, etc.) may receive business support and benefit from provision of specific financial instruments.

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Under Action 2, research and innovation on energy-efficient building materials and environmental technologies may be supported through strengthening research capabilities (e.g. establishing research centres/ accredited laboratories/upgrading university capacities, etc.), support for commercialization of R&D and innovation, supporting university-industry cooperation and promoting technology transfers.

Under Action 2, R&D and innovation activities on industrial symbiosis may be supported.

Under Action 3, researchers and SMEs may benefit from support to participate in relevant areas of the COSME and Horizon 2020 programmes.

4.6 Programme Strategy

The CISOP is composed of three actions: (1) Private Sector Development (PSD), (2) Science, Technology and Innovation (STI) and (3) Capacity Building (CB). PSD and STI actions complement each other, with the earlier focusing on “efficiency” and the latter concentrating on “innovation”, and thereby collectively addressing the two most critical pillars of competitiveness, and helping enterprises move up the value chains through manufacturing/rendering products/services with higher value added. Capacity Building Action on the other hand reinforces the first two actions by supporting programme and project implementation processes and increasing the institutional capacity for the proper implementation of the relevant Acquis that aim to enhance the innovative capacity of companies and promoting their competitiveness. Following diagram summarizes the interaction between the actions.

Figure 1: Interaction between the three Actions of the CISOP

Moreover, supporting entrepreneurship (particularly the high growth start-ups) and facilitating access to finance (i.e. financial instruments) are considered elements that cut across the first and second actions. With regards to the timing and sequencing of these actions; the Technical Assistance (TA) under Activity 3 shall be prioritized. Operation development and tendering and contracting studies for technical assistance projects will be launched immediately after the adoption of the programme with a view to ensure that they become operational when other activities begin. Tendering and contracting of the deferred projects from IPA I will also be a priority during the first 3 years of implementation period (i.e. by the end of 2016). Project selection and development activities will also be launched for new project ideas in the period of 2014-2016.

Projects deferred from IPA I period are broadly consistent with the strategy and objective of the CISOP and serve to the achievement of the targets of the CISOP. List of projects to be deferred from IPA I period and assessment on their compliance and contribution to Programme’s objectives is annexed to CISOP.

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4.7 Action 1: Private Sector Development (PSD)

Aim

PSD Action aims at improvement of the total factor productivity of the national economy with a specific emphasis on transforming the manufacturing industry, and increasing its competitiveness.

Specific Objectives

The specific objectives that will contribute to the achievement of the PSD Action’s aim are:

Transformation of the manufacturing industry through increasing of the competitiveness of manufacturing value chains in Turkey, and by facilitating and strengthening integration of SMEs into value chains through establishment and operationalisation of common-use structures/facilities.

Increasing the value added created in service sectors (including the creative industries), by improving the productive infrastructure for such sectors, establishing and operationalising common-use facilities, and improving the integration of service sectors with the manufacturing industry.

Boosting entrepreneurship through facilitating establishment or improvement of capacities and capabilities of existing incubators, accelerators etc.

Increasing entrepreneurs’ (start-ups’) and SMEs’ access to financial resources, by expanding use of the financial instruments, based on equity partnership models, and facilitating access to specialized loan programmes.

To support SMEs in meeting business opportunities that the transition to a green economy offers.

Rationale

The composition of economic activities in Turkey has changed, over the last several years, in favour of services, with more resources dedicated to “untraded” sectors rather than “traded” sectors. This trend places a significant burden on Turkey’s medium- and long-term growth prospects, as indicated in the NDP10. Accordingly; this Action targets the manufacturing value chains that encompass “traded” sectors. The NDP10 places a very strong emphasis also on the need for transforming the manufacturing industry, and highlights that the value added-to-production ratio was around 19% in 2010. The NDP10 further states that although labour productivity has increased between 2007 and 2013, the productivity gap between the large-scale enterprises and SMEs has widened.

Value chain approach: As far as the manufacturing industry is concerned, the intervention modality of the Action is based on the value chain9 approach, and aims at facilitating and strengthening integration of SMEs into “traded” value chains. Depending on the characteristics of the value chains in question, the factors that prevent SMEs’ integration into “traded value chains” demonstrate significant variability across regions as well as manufacturing sectors/sub-sectors. Accordingly, rather than concentrating on generic interventions, this Action is expected to finance value chain-driven operations, designed and implemented by taking into the specific characteristics of the value chains, and aiming to eliminate the barriers that

9 The notion of value chain refers to the full range of activities that enterprises of various sizes fulfil to bring a product from its conception to its end use and beyond. The chain of activities includes design, production, marketing, distribution and support to the final consumer. Although the activities that comprise a value chain can be contained within a single firm, this is rarely the case. Usually value chain activities are divided among different firms of various sizes, skills, located within a single geographical location or spread over wider areas.

pg. 29

prevent SMEs’ stronger integration into such value chains. The value chain approach, due to its holistic nature, is also considered a strong means to contribute to transformation in manufacturing industry.

Higher value-added services: The changing nature of the global value chains clearly demonstrates that new business models, which link manufacturing closer to services, are emerging10. The value-chain driven approach of the PSD action will help improve linkages between the manufacturing and services sectors. From this perspective creative industries may play a unique role in enhancing competitiveness and increasing the value-added that manufacturing industry creates, and hence will be supported by the CISOP. As far as creative industries are concerned priority will be given to the regions where the existing human capital, as measured by per capita income, number of people with tertiary education etc., provides a strong basis, on which the operations that the Action will finance can capitalize.

Although strengthening the linkages between manufacturing industry and services sectors is a key priority for the PSD action, operations which target services sectors but do not have immediate and/or direct impact on manufacturing sector will also be supported by taking into account the broad economic development benefits that such operations would spur. This may, for instance, be the case for tourism development projects to be implemented in lower-middle and low income regions.

Access to Finance: Although the SMEs absorb ca. 25% of the outstanding loans in Turkey, they still experience difficulties in accessing financial resources. However, overcoming the problems that concern access to conventional financial resources (e.g. bank loans) is considered beyond the scope of this SOP. As such, priority will be given to expansion of the alternate SME financing tools, such as venture capital, angel investments, private equity etc., for which legislative infrastructure has also improved in the recent years, and in which the present SOP can play a role to bridge the gap between supply and demand. Additionally, the present Action will support SMEs’ access to specialized loan packages and programmes, geared, for instance, towards energy efficiency, renewable energies, sustainable production etc.

Entrepreneurship: Entrepreneurs are considered economic agents that have the motivation to transform an economy. Transformation of the manufacturing industry and moving towards higher value added services would create opportunities, into which entrepreneurs can tap, provided that there is a strong ecosystem that fosters entrepreneurship. The PSD action will help create more enabling ecosystems by facilitating establishment or improvement of capacities and capabilities of existing incubators, accelerators etc.

The Action is composed of activities that prioritize operations, which would have direct and positive potential impact on reducing Turkey’s current account deficit, and increasing private sector savings rates, both of which pose significant risks on the overall stability and health of the national economy.

Description

The action is composed of two activities: (a) transformation of the manufacturing industry, and (b) services and creative industries.

Manufacturing Industry: This activity targets the manufacturing sectors (NACE Rev. 2, Section C), covering also where relevant the service sectors (e.g. renewable energy generation, computerized services, engineering services, design services, logistics etc.) that contribute to the competitiveness of the manufacturing sectors. The type of interventions will be in the form of works (including supervision),

10 This is also highlighted in the Commission Staff Working Document that accompanies the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions” dated 10.10.2012 (No: 582).

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supply and technical assistance services. The main objective is to strengthen SMEs’ integration into value chains, and help them move up the value chains.

In high income regions priority will be given to the value chains that have prospects for global competitiveness. In Upper-middle income regions priority will be given to the value chains that have prospects for international competitiveness. In lower-middle and low income regions priority will be given to the regionally dominant value chains that possess the potential to create national-level impact and/or internationalise, and to investments that improve the overall business environment, possess the potential to maximize synergetic relations with the National Investment Encouragement Scheme, and build on possible support to be provided within the scope of the HR SOP.

Services and Creative Industries: This particular activity targets mainly, but not exclusively, the tourism sector and the creative industries.

As far as tourism sector is concerned, the CISOP will follow the approaches (i.e. destination management rather than standalone efforts), and contribute to the policies (i.e. diversification of tourism activities, sustainable tourism) and the priorities (i.e. congress tourism, winter tourism, cruise tourism, golf tourism, cultural tourism and especially health tourism) that the NDP10 sets forth.

Tourism development activities will be supported by taking into account their contribution to the regional economy, and their forward and backward linkages with other service sectors and particularly with the manufacturing industry. As a result of the state of the composition of economic activities in some regions (in particular lower-middle and low income regions), it is anticipated that some of the tourism-development projects will have limited forward/backward linkages with the manufacturing industry, for such interventions spill-over effects on the regional economies will be of particular importance.

Interventions, geared towards improvement of the tourism infrastructure will build on the progress that has been achieved in the IPA 1 period during the execution of the Regional Competitiveness OP, and hence capitalize on the matured interventions, readiness of which for IPA support is considerably high. Due to limited amount of funding, interventions towards tourism infrastructure development (with the exception of those which matured during the IPA 1 period) will be made available only in exceptional cases and preferably to address infrastructural needs with advanced technologies that can be showcased and replicated for the unique value added they provide.

Creative industries will be supported to channel creativity into competitiveness in service and manufacturing sectors. Due to the strong human capital requirements of the creative industries, support to the creative industries will focus on high and upper-middle income regions where the CISOP can leverage the existing advanced human capital stock.

In order to capitalise on the synergies between the creative industries and services sectors (in particular the tourism sector) these two areas are going to be supported under a single Activity. This will ensure that proposals that capitalize on the synergies between two areas have better chance of being financed by the CISOP.

The Action will include operations (e.g. financial instruments) that will facilitate SMEs’ access to finance. The activity will help expand the financing schemes that involve equity partnerships (venture capital, angel investment networks, and private equity) and ease access to specialized loans (e.g. energy efficiency).

Delivery

The main approach in delivery of the two activities under this Action leverages their interconnected nature, anchored strongly in sustainable competitiveness, as measured by increased total factor

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productivity and resource efficiency (especially natural resources). The manufacturing industry and higher value added services are at the core of the Action, and hence drive the intervention logic of Activities thereunder.

The delivery approach is driven by the value chain approach. The value chain approach is appropriate for several reasons. First, value chains are not defined as restrictively as the statistically identified sectors; providing the Operating Structure as well as the Final Beneficiaries with a healthy level of flexibility during implementation of the Action. Second, the value chain approach, when used as an analytical tool to craft Operations to be supported under the Action, provides the opportunity to measure an Operation’s possible contribution to achievement of the SOP’s goals, and facilitates monitoring and evaluation. Third, value chain approach facilitates exploitation of the inter-Action and inter-Activity synergies.

The activities under this action will be implemented through;

- Direct negotiation with National Public Bodies and call for project proposal for procurement contracts (works, supply, service),

- Calls for proposals (including for grants), - Grants awarded to international organisations and national public bodies and - Financial instruments.

As far as creative industries are concerned, a framework/TA contract that will help the OS map11 and design specific delivery mechanisms12 will precede CISOP’s direct support to creative industries. The outcome of these analyses will shed further light on the most feasible and viable means (1) to channel CISOP support to the creative industries in Turkey, (2) to exploit synergies between creative industries and other sectors of the economy (manufacturing, tourism etc.), (3) to boost entrepreneurship and employment in creative industries and (4) to identify public/private investment needed in the creative industries field.

Preference and priority will be given to the operations that are based on a sound value chain approach, and establish linkages with and complement the NDP10 Priority Transformation Programmes (PTPs), such as:

PTP#01-Increasing Productivity in Manufacturing,

PTP#02-Decreasing Reliance on Imports,

PTP#13-Energy Generation based on Domestic Resources,

PTP#14-Increasing Energy Efficiency (industry component),

PTP#17-Development of Health Tourism,

PTP#18-Transformation from Transportation to Logistics.

As far as operations that facilitate “Access to Finance” are concerned, the type of interventions may include deployment of financial instruments. However the delivery approach also include technical

11 The UK, one of the forerunners of public support to the creative industries, started their work on this particular industry by producing the Creative Industries Mapping Document (November 1998), which was the first ever attempt to measure the economic contribution of these industries to the UK, and to identify the opportunities and threats they faced. The Mapping Document also helped set a blueprint for action for both Government and the industries. 12 Recognizing the peculiarities of the creative industries, a similar approach has been adopted by the EU to identify and model the types of successful partnerships and practices, including their positive impacts. The European Council mandated Open Method of Coordination Working Group on Promotion of Creative Partnerships. http://ec.europa.eu/culture/library/reports/creative-partnerships_en.pdf

http://ec.europa.eu/culture/library/reports/creative-partnerships_en.pdf

http://ec.europa.eu/culture/library/reports/creative-partnerships_en.pdf

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assistance, especially geared towards facilitating SMEs’ access to specialized loan programmes on energy efficiency, sustainable production etc.

The SOP-level geographic and strategic selection criteria will apply. The Action-level selection criteria to be used during identification of the operations to be supported under this particular action are listed below (selection criteria to be used to identify operations to be supported under specific activities are listed below under the relevant sub-section of each activity).

Maturity of the physical infrastructure in/on which the common-use facilities and structures will be established13.

Relevance and potential contribution to one of the priority transformational programmes of the NDP10, as named above, will be considered a strong asset.

Soundness of the financial and institutional sustainability plan to be substantiated by the potential End Recipients of Assistance, through evidence-based market research (particularly, but not limited to, investment and operational costs, and revenues), and demonstration of sufficient number of assigned personnel with necessary experience/skills, allocation of financial resources, and high level of institutional ownership.

Operations that facilitate “Access to Finance” can be implemented under each activity and/or in a cross-cutting manner. Action-level selection criteria for operations that facilitate “Access to finance” will include:

Proposed amount of matching funds to be mobilized (leverage ratio),

Number of start-ups to benefit from the financial instruments and number of employment opportunities,

Number of SMEs to benefit from the financial instruments and number of employment opportunities,

Estimated amount of financial resources to be accessed by the SMEs (for specialized loan programmes)

Targets and indicators

The following table lists the indicators that will be monitored to measure progress towards Action’s objectives.

Table 9: Targets and Indicators of PSD Action

Result Indicators of PSD Action Baseline 2017 2020 Target

(by 2026)

R.1 Number of SMEs, which reduced their input costs (including energy)

N/A 0 200 1250

R.2 Number of SMEs, which increased their sales and/or exports

N/A 0 160 375

13 CISOP is not considered an SOP where improvement of the physical infrastructure should be the main driver of or the main motivation behind the operations to be proposed and/or financed. Without prejudice to this overall approach and principle, the CISOP does not exclude the possibility of supporting operations which may involve civil works (including supervision). However maturity of physical infrastructure on/in which CISOP-supported structured will be established is a selection criterion. More specifically, the more the civil works (including supervision) budget of an Operation, the less mature the physical infrastructure will be considered. The Operations to be deferred from the RCOP (IPA1) to CISOP (IPA2) will be exceptions of this particular criterion. The civil works components of the operations consume considerable amount of time and resources to design and develop. Implementation costs are significantly higher than the comparable civil works projects funded merely by national resources.

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Result Indicators of PSD Action Baseline 2017 2020 Target

(by 2026)

R.3 Number of start-ups and SMEs benefited from equity financing and debt mechanisms established/supported

N/A 0 0 950

R.4 Number of new enterprises created N/A 0 0 125

R.5 Number of jobs created in supported entities/enterprises

N/A 0 150 375

R.6 Number of tourist arrivals to the touristic destinations supported

33,500,000 (2013)

0 500,000 1,250,000 (additional)

R.7 Increase in the per tourist revenue in the tourism destinations to be supported

N/A % 0 % 5 %30

R.8 Number of SMEs which introduced green investments/solutions

N/A 0 7 20

Note: For targets, progress towards which cannot be estimated and calculated by using official statistical data, the end recipients of assistance will be required to indicate a credible baseline in their proposals and to follow and report progress, based on credible evidence.

4.8 Activity 1.1: Manufacturing Industry

This activity targets the manufacturing sectors (NACE Rev. 2, Section C), covering also where relevant the service sectors (e.g. renewable energy generation, computerized services, engineering services, design services, logistics etc.) that contribute to the competitiveness of the manufacturing sectors.

Specific objectives

The overarching objective of the Activity 1.1 is to help transform manufacturing industry and move up the global value chains; the specific objectives are:

Enhancement of the global, international and/or regional competitiveness of the value chains, depending on the spatial classification of the province in which the interventions will be implemented.

Strengthening SMEs’ integration into manufacturing value chains.

Enhancement of SMEs’ access to specialized loan packages that promote sustainable production,

Expansion of the equity financing mechanisms and enhancement of start-ups’ and SMEs’ access to such mechanisms.

Improving resource efficiency of SMEs, supporting green entrepreneurship and facilitating market access for green SMEs

Rationale

The sector analysis demonstrates that the SMEs are less productive than the large-scale enterprises14. The challenges faced by the SMEs are known by the relevant Turkish authorities, and several support schemes, which aim at improving SMEs’ competitiveness, have already been put in place (most notably those offered

14 Although manufacturing SMEs accounted for 99.5% of all the enterprises operating in the manufacturing industry, they created only 42.3% of the value added at factor costs (2011). The level of value added decreases as the enterprise size gets smaller: Manufacturing SMEs that employ less than 20 employees accounted for 92.6% of all manufacturing enterprises, whereas their contribution to value added at factor costs was limited to 8.6% (2011).

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by KOSGEB). In order to avoid from possible duplications and redundancies, the present activity targets value chains rather than individual SMEs. The value chain-based targeting strategy builds on but differs from the more generic SME development infrastructure that previous programmes funded or co-funded by the EU have established (e.g. EU Business Centres, non-specialized incubation centres etc.) in Turkey.

The sector analysis points out that managerial, operational and financial skills and capabilities of most of the SMEs (especially micro- and small-sized enterprises) are rather weak; however also underlines SMEs’ agility and adaptation skills as strengths on which the present SOP can capitalize. More specifically, the sector analysis underlines that the SMEs are more likely to invest in acquiring new skills and capabilities when they see the need to do so. Thus, the intervention logic of the present activity is based on “pulling” demand from SMEs for advanced managerial, operational and financial skills and capabilities, rather than “pushing” the supply of such skills and capabilities.

The emphasis of the activity is on manufacturing industry to contribute to reversing the trend of declining share of manufacturing industry (traded sectors) in the total value added in Turkey. The said trend has been identified in the NDP10 as a risk that limits Turkey’s high and stable growth prospects in the medium- and long-term. However, the service sectors which contribute directly to the competitiveness of manufacturing sectors also fall into the scope of the activity.

Although commercial banks as a group are the main source of external finance for SMEs, SME loans constitute ca. 25% of the total bank loans in Turkey. SMEs often voice high collateral requirements as the main barrier for accessing bank loans, whereas the banking sector’s main concern is the high level of risk, associated with financing SMEs. SME balance sheets are usually characterized by a very high level of volatility in profitability and earnings. Low profit margins make it harder for the SMEs to repay debt. The opacity of the SME balance sheets is another factor, limiting SMEs’ access to bank loans. Although the bank loans will most likely continue to be the main sources of external finance for SMEs, the progress that can be achieved with the support of the present SOP in improving SMEs’ access to bank loans is considered limited. Interest rate subsidies are attractive but in no way sustainable. Loan guarantee schemes are useful but create limited impact unless substantial amount of financing is provided to the guarantee fund. However there are specialized loan packages, designed to support for instance energy efficiency investments of SMEs. The problems that prevent SMEs from accessing such specialized loan packages are different from those of the conventional investment and/or working capital loans. Problems in this “niche” market relate more to lack of awareness both on the supply and demand side. The present activity may contribute to bridging the gap between supply and demand for these specialized loan packages, through provision of technical assistance services that prepare SMEs for obtaining such loans.

In addition to debt products, in the recent years, alternate means of financing SMEs and entrepreneurs have become stronger in Turkey. These include equity financing schemes such as venture capital, private equity, and angel investments. In addition to these, Emerging Companies Market has been established within Borsa Istanbul as yet another means of equity financing. As far as equity financing schemes are concerned there are problems mainly on the demand side. Equity financiers’ business model, and ROI expectations and model are fundamentally different from those of the banking sector. The banking sector is highly risk averse i.e. reluctant to accept risk with an uncertain pay-off; this is not the case for equity financiers. As such, the risk-related collateral problems do not exist in the equity financing schemes. However; target groups of the equity financiers’ are the entrepreneurs and the SMEs with high growth potential. Equity financiers need a sufficiently large portfolio and pipeline of investments to run their business model effectively, efficiently and profitably. Presently this is not the case in Turkey. The equity financiers find it hard to identify a sufficiently large pool of promising entrepreneurs and SMEs, in which they can invest. The present activity will support expansion of the equity financing market in Turkey by concentrating both on the supply and demand side. The supply side interventions on venture capital will, to the extent possible, capitalize on and/or complement the “Fund of Funds”, as regulated in Law No: 4749. Regarding the supply side of the angel investments, technical assistance will be available to

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strengthening and promotion of angel investor networks. On the demand side the activity will concentrate on interventions that will enlarge the pool of early stage or mezzanine investment opportunities.

To the extent possible the interventions to be supported under this activity will be guided to capitalize on the outputs and results to be produced or intended to be produced within the second Action of the present SOP.

This activities focus on the high growth SMEs and entrepreneurs serves the overarching objective of the Action towards increasing total factor productivity in Turkey. Although this particular target group account for a small share of all SMEs in Turkey, they have the potential to yield disproportionately high benefits in creating new employment and introducing cutting-edge technology into the economy.

Description and indicative interventions

This activity will be delivered through the grants and procurement of service, supply and works contracts and financial instruments. Under this activity, grants can also be awarded to national public bodies and international organisations. Furthermore, limited part of allocations provided to this activity can be used for support programmes of public institutions in line with the sector's objectives.

The operations to be supported within the scope of this activity will typically be geared towards strengthening integration of SMEs into manufacturing value chains that encompasses “traded” sectors. SMEs’ integration into value chains will be facilitated by operations that will (a) increase awareness and understanding of the structure and dynamics of value chains by SMEs, (b) help SMEs identify and act on their competitive strengths within value chains, (c) boost their productivity, (d) improve compliance with product quality standards required for participation in value chains, and (e) help SMEs take up larger and more complex sets of tasks within value chains. These will be achieved through, among others, establishment and operationalization of common-use15 facilities and platforms. The interventions may benefit from and/or based on a cluster development approach and/or formalized in the form of cluster initiatives.

The operations to be supported under this activity will also facilitate venture capital investments and will also include provision of technical assistance and procurement of supply.

Indicative interventions are:

Establishment and operationalization of common-use facilities, designed to render knowledge intensive services (including branding) to SMEs towards upgrading16 processes/products, improving access to markets (including internationalisation), enhancing human capital and increasing labour productivity, and improvement of the institutional capacities of the organizations owning or co-owning such facilities, and professional capacities of the management and staff of such facilities.

Establishment and operationalization of common-use facilitates, designed to decrease input costs (including but not limited to energy costs) or improves the value-for-money17 of the inputs, used in manufacturing processes, through joint procurement and other means (e.g. establishment of renewable energy generation systems etc.), and improvement of the institutional capacities of the

15 The notion of “common-use” refers to facilities, platforms (including online), machinery, equipment, services, utilization of which is open to the SMEs. 16 Process upgrading is achieved when firms can undertake tasks with significantly greater efficiency and lower defect rates, and process more complex orders than rivals. Product upgrading is achieved when firms can supply higher value-added products than rivals owing to their superior technological sophistication and quality and also introduce novel products faster than rivals. 17 Initiatives geared towards improvement of the value-for-money of inputs, used in manufacturing processes by the SMEs, may include, but not limited to, initiatives that (a) lower input costs, (b) improve quality of the inputs, (c) ensure more favourable lead times as a source of competitive advantage, and (d) use of renewable energies etc.

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organizations owning or co-owning such facilities, and professional capacities of the management and staff of such facilities.

Establishment and operationalization of common-use facilities and infrastructure, designed to boost logistical competitiveness, through decreasing storage and warehousing costs, improving storage and warehousing quality, facilitating trade, and improvement of the institutional capacities of the organizations owning or co-owning such facilities, and professional capacities of the management and staff of such facilities.

Needs assessments and other forms of analytical studies (e.g. value chain analysis, cluster mapping) that identify competitive strengths and weaknesses of the value chains, as well as opportunities and threats facing value chains, development of value chain-based competitiveness strategies, roadmaps etc.

Needs assessments and other forms of analytical studies that identify areas of improvement in industrial ecology for higher resource efficiency, and industrial symbiosis projects.

Establishment and operationalization of clusters and cluster support structures, including those promoting and/or improving the clustering-related skills and capabilities.

Establishment (where necessary) and/or contribution of capital to equity finance mechanisms like venture capital funds including seed and start-up capital and other forms of financial instruments.

Support, including but not limited to establishment and operationalization, to accelerators, owned or co-owned by and operated by the universities.

Where necessary, promotion of financing mechanisms through publicity instruments and awareness-raising campaigns as to facilitate access to the funds to be supported.

Where appropriate, delivery of advisory services to the beneficiaries, publicity and networking.

Where appropriate, organization of equity investment fairs, entrepreneurship camps, roadshows.

Support (technical assistance) to establishment of venture capital funds.

The types of operations, which will be eligible for support, include grants, technical assistance, supply, and civil works (including supervision) and use of financial instruments.

Selection criteria

The OP-level strategic and geographic selection criteria, as well as the Action-level selection criteria will apply. Activity-level selection criteria will include:

Estimated number of SMEs that may directly or indirectly benefit from the capacities to be established by the proposed Operation.

Contribution to sustainable production, improvement of industrial ecology.

Contribution to creation of an enabling environment for women’s and youth’s participation to and benefit from the manufacturing value chains.

Contribution to development/competitiveness of services sectors that contribute to the competitiveness of the manufacturing sectors.

Final Beneficiaries

The final beneficiaries are public institutions (including development agencies), universities, quasigovernmental and not-for-profit business representative organizations (BROs), such as TOBB, TİM, General Secretariats of Exporters’ Unions, OIZ Managements, TDZ managements etc. and SMEs. As far as financial instruments are concerned, final beneficiaries include IFIs, IOs, universities, not-for-profit business representative organizations, public organizations.

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Monitoring indicators

The monitoring indicators are identified in the following table, along with targets.

Table 9: Targets and Indicators of PSD Action – Activity 1.1

Output Indicators of Activity 1.1 Baseline 2017 2020 Target

(by 2026)

O.1 Number of common-use facilities established/supported

N/A 0 5 10

O.2 Number of SMEs benefited from common-use facilities established/supported

N/A 0 300 1,000

O.3 Number of SMEs, start-ups, entrepreneurs receiving consultancy, trainings, guidance, counselling etc. support

N/A 0 750 1500

O.4 Number of clusters established/supported N/A 0 3 10

O.5 Number of equity financing and debt mechanisms established/supported

N/A 0 0 1

4.9 Activity 1.2: Services & Creative Industries

This Activity targets the service sector (in particular but not limited to the tourism sector) and creative industries.

Aim

The purpose of activity is to improve the competitiveness of the service sector, in general and tourism sector and creative industries in particular.

Specific Objectives

The specific objectives of the activity are:

Facilitating transformation to higher value added service sector with a view to enhance competitiveness of the “tradable” sectors,

Enhancement of competitiveness of the tourism sector and increasing diversity of the tourism activities, through strengthening the national/regional capacity for destination management as well as promoting sustainable tourism.

Increasing competitiveness and enhancing contribution of the creative industries into the national economy by strengthening creative industries’ linkages with the tourism sector and the manufacturing industry.

Rationale

This Activity targets service sector, in general and the tourism sector and creative industries in particular. In order to exploit the synergies between the service sector and the creative industries, in general, and between the tourism sector and creative industries, in particular, the Activity is designed in a holistic

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manner. This approach makes CISOP’s emphasis on higher value added services more pronounced, and enables it to pursue this objective in a more coherent and consistent manner.

As far as the tourism sector is concerned the overarching national policy is to (1) become an international brand by improving the quality of tourism services, and (2) to target higher-income groups by diversifying the tourism products and services. The NDP10 clearly prioritises the tourism projects that are designed, developed and executed by following a holistic destination management approach.

During the IPA 1 period, several initiatives that aim at improving tourism infrastructure with a view to improve quality of tourism services and diversify tourism products have been designed and reached a very mature state for possible funding. These initiatives are targeting regions, average per capita GVA of which are lower than 75% of the national average. The needs of the tourism sector in higher-income regions of Turkey differ considerably from those in the lower-income regions. In higher-income regions tourism infrastructure is more developed. Touristic facilities (hosting) are more accessible, widespread and diversified in terms of the type of experience offered. In such regions, tourism’s value added to the national economy can be enhanced by building stronger linkages with the creative industries and/or the manufacturing industry. The NDP10 identifies health tourism as an opportunity on which Turkey can capitalize. The present SOP can help tap into this important potential by strengthening linkages between the tourism industry and certain sub-sectors of the manufacturing industry (such as manufacture of precision equipment, medical equipment, pharmaceuticals). Additionally, health tourism, as a sub-sector, can become more competitive, if it is connected more strongly with the creative industries (e.g. software development, advertisement and publishing, architecture etc.). Flourishing creative industries may also help other forms of touristic activities improve their competitiveness, by enriching the tourism experience that Turkey offers, especially international tourists in higher income levels.

The creative industries play an increasingly important role in Turkey. Although creative industries have globally recognized as a major source of competitiveness, such industries have found only limited support from public resources. This activity intends also to channel creativity into competitiveness by strengthening the backward and forward linkages between the creative industries and the manufacturing and service sectors, and by providing support to creation of a more enabling environment in which creative industries can flourish. However taking into account the limited amount of national experience in this particular area, this Activity will initially finance a framework/TA contract that will map out the creative industries and help the OS design specific delivery mechanisms for supporting to creative industries.


This activity will be delivered through the grants, procurement of service, supply and works contracts. Under this activity, grants can also be awarded to national public bodies and international organisations. Furthermore, limited part of allocations provided to this activity can be used for support programmes of public institutions in line with the sector's objectives.


Needs assessments, surveys, and other forms of analytical activities that help identify needs of the service sectors and creative industries, and facilitate development of strategies, roadmaps, action plans etc.

Support to improvement of the physical infrastructure and facilities of the touristic sites (exceptionally for Operations to be deferred from RCOP to CISOP, and in accordance with the Action-level selection criterion on maturity of infrastructure and as long as destination management approach is followed),

Support to establishment and operationalization of creative industry labs (incubators, accelerators etc.) that host creative entrepreneurs/companies and/or offer common-use facilities such as software platforms, advanced computing systems, 3D printers etc. for creative entrepreneurs/companies

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Promotional activities, design competitions.

Support to capacity building for improvement of service quality, designing and implementing sustainable destination management strategies/action plans, and marketing, promotion and regional branding for tourism development.

Selection criteria


The potential of an operation to address both the tourism sector and creative industries.

For tourism development projects, the degree to which operation adopts a holistic destination management approach, promotes sustainable tourism, and possesses the potential to attract high-income tourists.

For tourism infrastructure development interventions, readiness18 of the intervention for IPA funding.

Spill-over effects on high quality job creation.

Number of creative SMEs and start-ups to be supported.

Potential for replicability across the country, and scalability at the national level.

Contribution to the competitiveness of the manufacturing industry and/or service sector.

Final Beneficiaries

The final beneficiaries are public institutions (including development agencies), universities (accelerators), incubation centres, quasigovernmental and not-for-profit business representative organizations (BROs), such as TOBB, TIM, General Secretariats of Exporters’ Unions, OIZ Managements, TDZ managements etc. and SMEs.



Table 10: Targets and Indicators of PSD Action – Activity 1.2


(by 2026)

O.1 Number of touristic sites with improved infrastructure

N/A 0 0 2

O.2 Number of creative industry products supported

N/A 0 4 10

18 Based on the lessons learned from the implementation of the tourism development operations under the RCOP, the CISOP attaches utmost importance to the readiness of the operation proposals geared towards tourism infrastructure development. Readiness criterion include but is not limited to existence of updated, approved and officialised plans at relevant scales, existence of permissions from authorized bodies, especially in cases of operations targeting naturally, historically protected sites.

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4.10 Overview Table - Action 1

The following table provides an overview of PSD Action:

Table 11: Overview of PSD Action

Action title Private Sector Development (PSD)

Specific objective Transformation of the manufacturing industry through increasing of the competitiveness of manufacturing value chains in Turkey, and by facilitating and strengthening integration of SMEs into value chains through establishment and operationalisation of common-use structures/facilities.

Increasing the value added created in service sectors (including the creative industries), by improving the productive infrastructure for such sectors, establishing and operationalising common-use facilities, and improving the integration of service sectors with the manufacturing industry.

Boosting entrepreneurship through facilitating establishment or improvement of capacities and capabilities of existing incubators, accelerators etc.

Increasing entrepreneurs’ (start-ups’) and SMEs’ access to financial resources, by expanding use of the financial instruments, based on equity partnership models, and facilitating access to specialized loan programmes.

Action results Competitiveness of manufacturing value chains in Turkey enhanced.

SMEs’ stronger integration into value chains facilitated.

Value added, created in service sectors (in particular the tourism sector and the creative industries), increased.

Productive infrastructure higher value added segments of the service sectors improved.

Linkages between the service sector (including creative industries) and manufacturing industry strengthened,

Entrepreneurial ecosystem strengthened.

Improving resource efficiency of SMEs, supporting green entrepreneurship and facilitating market access for green SMEs

Activities Activity 1.1: Manufacturing Industry

Activity 1.2: Services & Creative Industries

Indicative list of major projects

-

Implementation arrangements

Ministry of Industry and Technology in charge of management; delivery via procurement contracts (works, service and supply), grant contracts, grants awarded to International Organisations and National Public Bodies and Financial Instruments.

Performance indicators

Number of SMEs, which reduced their input costs (including energy),

Number of SMEs, which increased their sales and/or exports,

Number of start-ups and SMEs benefited from equity financing and debt mechanisms established/supported

Number of new enterprises created,

Number of jobs created in entities/enterprises,

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Number of tourist arrivals to the touristic destinations to be supported

Increase in the per tourist revenue in the tourism destinations to be supported

Number of SMEs which introduced green investments/solutions.

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4.11 Action 2: Science, Technology and Innovation (STI)

Aim

The aim of Action 2 (STI Action) is to improve the functionality of the national innovation ecosystem by boosting industry engagement in STI through public private partnerships (including but not limited to university-industry collaboration) and improving SMEs’ innovation management capacity.

Specific objectives

The specific objectives of the STI Action are:

Enhancement of the functionality of the existing public and private research infrastructure in Turkey; and an increase in the number and improvement of university-industry collaboration;

Increasing awareness on social innovation and strengthening the social innovation support skills and capabilities.

Acceleration of commercialization of innovative products, by bridging the financing gap between the innovative ideas and equity investors.

Improvement of the functionality of the structures/facilities that incubate innovative start-ups and SMEs,

Expansion of the equity financing mechanisms and enhancement of start-ups’ and SMEs’ access to such mechanisms.

To promote the development and market uptake of innovative green products, processes and services

Rationale

The Government of Turkey has invested TRY2.4 billion between 2007 and 2013 for improvement of research infrastructure in public institutions and universities. Within the same period total investments on technological research have amounted to TRY6.9 billion; with another TRY10.4 billion of public fixed capital investment planned to be realized in the 5-year period between 2014 and 2018 (Source: NDP10). The sector analysis recognizes the considerable amount of public investments that has been made to improve Turkey’s STI infrastructure. This is the rationale behind the emphasis of the first specific objective (above) of the STI Action on enhancement of the functionality of the “existing” public and private research infrastructure.

Thus, the STI Action will contribute to address the needs of the manufacturing sector by capitalizing on the already established research and innovation infrastructure in Turkey, through boosting university-industry collaboration on applied research and commercialization, improving efficiency and effectiveness of innovation hot beds and enablers, such as technology transfer centres, research centres, technology development zones, technology centres (TEKMERs), accelerators etc.

The sector analysis underlines low level of “commercialization” as a major weakness. First, commercialization stage is the most resource-intensive stage of the innovation process and calls for substantial investments in marketing. However, SMEs usually do not possess the financial resources to finance this costly stage of the innovation process. Second, introducing an innovative product to the market is a challenging process that requires not only a lot of persuasion (marketing), but also upfront investment in certification, after-sale, services etc. Third, the level of public financial support to the commercialization stage of the innovation process is much lower when compared to those available for earlier stages.

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Activity 2.2 is designed both to capitalize on the products to be prototyped within the scope of Activity 2.1, as well as leverage the already existing portfolio of product that have been successfully prototyped mostly but not exclusively through public financial support schemes, run by Ministry of Industry and Technology, TÜBİTAK and KOSGEB.

This particular Activity is designed to support commercialization process through improvement of capabilities of the commercialization enablers such as technology transfer offices, managements of technology development zones, technology centres, incubation centres and accelerators, and bridging the gap between the innovative entrepreneurs/SMEs and equity investors (e.g. venture capital companies, private equity companies etc.) as well as large-scale companies that can facilitate commercialization of innovation through equity investments and acquisitions.

Social innovation has become one of the major topics on the European research agenda, and is gaining increasing attention and importance also in Turkey. Although the types of societal challenges, faced by the European countries and Turkey differ, it is clear that new ideas and approaches are needed to tackle the severe problems with which contemporary societies are struggling, such as climate change, social vulnerability, long-term unemployment and ageing, disasters etc. There are still many barriers to social innovation. Barriers range from regulations, organizational rigidities and scarce resources, to prevailing conventional discourses and practices, to low level of awareness. Accordingly, many good ideas end up unrealized. This action will include interventions that would raise R&D interest in social innovation, as well as supporting, through an earmarked budget, R&D on and commercialization of products that generate sustainable social good.

In terms of access to finance, the issues and problems, summarized for PSD Action above, are relevant for this particular action as well.

Description

The STI Action is composed of two activities which target industry-driven R&D and innovation. The first activity concentrates on the early stages of the innovation cycle, which culminates in development of product prototypes; and the second one focusing on the close-to-market stages of the innovation cycle with a specific emphasis on technology transfer and commercialization. The first activity is expected to create a solid pipeline of patentable, licensable, innovative product prototypes, which can later benefit from the support to be provided under activity 2 towards commercialization. The second activity, which focuses on technology transfer and commercialization, will benefit not only from the product pipeline that the first activity will produce, but also from the portfolio of product prototypes that have been produced through national R&D and entrepreneurship support schemes as well as through other efforts.

Delivery

The delivery approach of the Action is based on the innovation cycle. The first activity of the Action focuses on research and development stage which culminates in innovative product prototypes, whereas the second activity concentrates on close-to-market stages of the innovation cycle (i.e. facilitation of technology transfer and commercialization). The investment in civil works will be kept at a minimum amount, in order to capitalize on the already established R&D infrastructure in Turkey. Social innovation is mainstreamed into these two activities.

The activities under this action will be implemented through;

- Direct negotiation with National Public Bodies and call for project proposal for procurement contracts (works, supply, service),

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- Calls for proposals (including for grants), - Grants awarded to international organisations and national public bodies and - Financial instruments.

Priority will be given to operations that establish linkages with and complement the NDP10 Priority Transformation Programmes (PTP), such as:

PTP#11-Commercialization in Priority Technology Areas,

PTP#20-Attraction Centre for Qualified Human Capital,

PTP#21-Healthy Living and Mobility (especially from the social innovation perspective),

PTP#24-Urban Transformation that Enhances Competitiveness and Social Cohesion (including the social innovation perspective).

As far as operations that facilitate “Access to Finance” are concerned, the type of interventions may include deployment of financial instruments. However, the delivery approach also include technical assistance, especially geared towards facilitating SMEs’ access to specialized loan programmes on energy efficiency, sustainable production etc.

The SOP-level geographic and strategic selection criteria will apply. The Action-level selection criteria to be used during identification of the operations to be supported under this particular action are listed below (selection criteria to be used to identify operations to be supported under specific activities are listed below under the relevant sub-section of each activity).

Maturity of the physical infrastructure in/on which the common-use facilities and structures will be established.

Relevance and potential contribution to one of the priority transformational programmes of the NDP10, as named above, will be considered a strong asset.

Soundness of the financial and institutional sustainability plan to be substantiated by the potential End Recipients of Assistance, through evidence-based market research (particularly, but not limited to, investment and operational costs, and revenues), and demonstration of sufficient number of assigned personnel with necessary experience/skills, allocation of financial resources, and high level of institutional ownership.

Operations that facilitate “Access to Finance” can be implemented under each activity and/or in a cross-cutting manner. Action-level selection criteria for operations that facilitate “Access to finance” will include:

Proposed amount of matching funds to be mobilized (leverage ratio),

Number of start-ups to benefit from the financial instruments and number of employment opportunities,

Number of SMEs to benefit from the financial instruments and number of employment opportunities,

Estimated amount of financial resources to be accessed by the SMEs (for specialized loan programmes).


The following table presents the result-level indicators and targets for STI Action.

Table 12: Targets and Indicators of STI Action

Result Indicators of STI Action Baseline 2017 2020 Target (by 2026)

R.1 Number of national patents obtained N/A 0 0 30*

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Result Indicators of STI Action Baseline 2017 2020 Target (by 2026)

R.2 Number of international and regional approved patents (PCT + EPC)

N/A 0 0 7**

R.3 Number of products, including eco-innovative products, successfully commercialized

N/A 0 0 12

R.4 Number of innovative enterprises created N/A 0 0 50

R.5 Number of research job created in supported entities/enterprises

N/A 0 0 150

R.6 Number of innovative entrepreneurs/SMEs benefited from equity financing mechanisms

N/A 0 0 35

Notes: * 50% of number of applications ** 20% of number of applications

4.12 Activity 2.1: Research and Development

The activity will support early stages of the innovation cycle by concentrating on the development of new and innovative products that possess the potential for commercialization.

Specific objectives

The specific objectives of Activity 2.1 are:

Enhancement of the functionality of the existing or developing, public and private research infrastructure in Turkey;

Improvement of university-industry collaboration;


Rationale

The social, economic and SWOT analysis on the sector underlines several difficulties that limits SMEs’ R&D and innovation capacity. First, the analysis concludes that SMEs do not possess in-house human capital (e.g. engineering capacity) and physical infrastructure, required for R&D or innovation. Such human capital and capabilities are present only in a few large companies. Activity 2.1 (Support to R&D) addresses this weakness through promoting collaborative product development (R&D) processes through public private partnerships that capitalize on Turkey’s research infrastructure, which the sector analysis identifies as a strength to leverage.

Second, the SMEs usually do not possess (a) the resources to finance outsourced product development processes and (b) the patience (and working capital) to wait for collecting the returns on their R&D investments. Activity 2.1 addresses this problem through promoting affordable research partnerships.

Third, the analysis also demonstrates that the interest of the public research institutions, including universities, in collaborating with the industry is limited. This can be overcome by piloting and promoting

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innovative partnership modalities, through which public institutions actual costs can be recovered and additional motivation (including financial motivation) can be created through patent/license partnerships19.

Social innovation has become one of the major topics on the European research agenda, and is gaining increasing attention and importance also in Turkey. Although the types of societal challenges, faced by the European countries and Turkey differ, it is clear that new ideas and approaches are needed to tackle the severe problems with which contemporary societies are struggling, such as climate change, social vulnerability, long-term unemployment and ageing, disasters etc. There are still many barriers to social innovation. Barriers range from regulations, organizational rigidities and scarce resources, to prevailing conventional discourses and practices, to low level of awareness. Accordingly, many good ideas end up unrealized. This activity will include interventions that would raise R&D interest in social innovation, as well as supporting through an earmarked budget on R&D of products that generate sustainable social good. In order to support social innovation, initially a framework/TA contract will be implemented to analyse the state of the play in the area of social innovation in Turkey as well as to identify the most feasible and viable means of CISOP support to social innovation. Based on this assessment, the CISOP may (a) finance establishment and operationalization of a social innovation centre (preferably within an existing technology development zone or techno-park), focusing on social innovation that addresses the most imminent and pressing needs in this area; and (b) support joint projects of social innovators.


This activity will be delivered through the grants and procurement of service, supply and works contracts and financial instruments. Under this activity, grants can also be awarded to national public bodies and international organisations. Furthermore, limited part of allocations provided to this activity can be used for support programmes of public institutions in line with the sector's objectives. The interventions may benefit from and/or based on a cluster development approach and/or formalized in the form of cluster initiatives.

Indicative interventions will include:

Support to improvement of capabilities of existing R&D facilities for conducting applied R&D projects that have solid potential of commercialisation,

Support to operationalization of R&D facilities at public institutions, and universities20,

Research and development activities, geared towards producing product prototypes, including innovative products that generates social good,

Testing and certification services for the prototyped products,

Support projects that encourage joint research efforts of the university and the industry,

Market research, surveys and other forms of analytical studies to identify scope for commercialization,

Partnerships with European R&D institutions and centres,

Training and other forms of capacity building activities for the management, R&D personnel, researchers and business development managers of the R&D facilities,

19 Recovering actual costs of the public research institutions will ensure financial self-sustainability of such institutions. License/patent partnerships are schemes, through which the public research institutions acquire a certain (usually very modest) percentage of the intellectual property rights of the products, which they develop in partnership with the private sector. If the products are successfully commercialized and/or patents and licenses are sold, the public research institutions (and the researchers involved in product development) claim a certain part of the financial proceedings. Through such schemes, the private sector eliminates all the downside risk at an affordable cost (only recovery of actual costs) and share a modest portion of the upside potential with the partner research institution. 20 Support for establishment of R&D facilities at public institutions, and universities will only be provided for operations which have been matured during the IPA1 period and which demonstrate sound sustainability plans (including number and experience/skills of assigned personnel, allocated financial resources, commercialization potential, etc.)

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Training and other forms of capacity building activities for the entrepreneurs and SMEs,

Needs assessments, research and other forms of analytical activities; generation of policy proposals for regulatory improvements (including simplification) that would strengthen industry-university collaboration,

Awareness raising and capacity building activities specifically on social innovation, where applicable targeting also the large-scale enterprises which can improve the social impact of their products/services, and the public agencies (including local administrations) that can improve social impact of their services through innovative means.

Financial instruments.

Selection criteria


The scope for developing patentable and/or licensable product prototypes, to be substantiated by the potential End Recipients of Assistance, through evidence-based research on the patents and licensing arrangements for competing and comparable products.

The scope for commercialization, as measured by the potential market size, to be substantiated by the potential End Recipients of Assistance, through evidence-based market research.

The scope for contribution to environmentally sustainable production and consumption, to be estimated by the potential End Recipients of Assistance in terms, such as, reduction of carbon emissions, prevention of pollution etc.

The scope for contribution to decreasing the current account deficit of Turkey, to be substantiated by the potential End Recipients of Assistance, in terms of the contribution to the products to be developed to decreasing national industry’s reliance on imports (including imported energy) and increasing exports.

The extent to which social good is expected from the innovative products/services.

(For social innovation in public services) The scope for replicability and scalability of the socially innovative services, and the potential number of socially disadvantaged people to benefit from such services,

Level of involvement of women R&D engineers and/or researchers in product development,

Extent to which the R&D processes leverage the existing research and development infrastructure, as measured by the ratio of physical investments (i.e. supply, and civil works, including supervision) to the total cost of the operation (i.e. the lower the this ratio, the higher the extent to which the R&D processes leverage the existing research and development infrastructure).

Final Beneficiaries

The final beneficiaries are the SMEs (in case of grants and competitions) and/or their public and private21 research partners, such as universities, technology transfer offices, technology development zones, technology centres, research centres, incubators, accelerators etc.

21 Private research partners include research facilities that are owned and/or operated by private sector companies, including large-scale corporations, foundations etc. in Turkey. The objective of making private research partners as eligible is twofold: (a) to increase research partnerships between SMEs and large-scale enterprises, which may indirectly help increase “intrapreneurship” and spin-offs, and (b) to leverage the non-public research infrastructure.

pg. 49



Table 13: Targets and Indicators of STI Action – Activity 2.1

Output Indicators of Activity 2.1 Baseline 2017 2020 Target (by 2026)

O.1 Number of research partnerships initiated for development of new and innovative products

N/A 0 4 10 research partnerships

O.2 Number of new and innovative products developed and prototyped

N/A 0 0 60 prototyped products

O.3 Number of national patent applications N/A 0 5 60 patent applications

O.4 Number of international and regional patent applications originated from Turkey (PCT + EPC)

N/A 0 2 12 patents applications

O.5 Number of women researchers (engineers, technicians etc.) involved in R&D projects

N/A 0 20 At least 45 women researchers

4.13 Activity 2.2: Technology Transfer and Commercialization

This activity concentrates on the close-to-market stages of the innovation process and thus is geared mainly towards supporting commercialization activities.

Specific objectives

The specific objectives of Activity 2.2 are:

Support the establishment and operationalization of innovative start-ups/entrepreneurs in the country,

Acceleration of commercialization of innovative products,

Bridging the financing gap between the innovative ideas and equity investors.

Rationale

The sector analysis underlines low level of “commercialization” as a major weakness. First, commercialization stage is the most resource-intensive stage of the innovation process and calls for substantial investments in marketing. However, SMEs usually do not possess the financial resources to finance this costly stage of the innovation process. Second, introducing an innovative product to the market is a challenging process that requires not only a lot of persuasion (marketing), but also upfront investment in certification, after-sale, services etc. Third, the level of public financial support to the commercialization stage of the innovation process is much lower when compared to those available for earlier stages.

Moreover, the types of expertise, required for commercialization are fundamentally different from those required for product development (R&D). The R&D stage is mainly about meeting the technical

pg. 50

requirements that meet the needs of the market; whereas commercialization is also about lowering cost of production, ensuring usability, reaching economies of scale and market access etc.22

Although equity partnerships schemes such as VC and lower-band PE play an important role in the commercialization stage of the innovation process in many developed economies, such mechanisms are not well-developed in Turkey. While the general perception of low level of availability of such financial resources is a valid concern on the supply side, equity partnership companies indicate that there are problems on the demand side as well. First, equity partnership companies underline the need for a stronger investment pipeline in Turkey. Second, the awareness of the innovators on equity partnerships is generally low.

This particular Activity is designed to support commercialization process through improvement of capabilities of the commercialization enablers such as technology transfer offices, managements of technology development zones, technology centres, incubation centres and accelerators, and bridging the gap between the innovative entrepreneurs/SMEs and equity investors (e.g. venture capital companies, private equity companies etc.) as well as large-scale companies that can facilitate commercialization of innovation through equity investments and acquisitions.

Activity 2.2 is designed both to capitalize on the products to be prototyped within the scope of Activity 2.1, as well as leverage the already existing portfolio of product that have been successfully prototyped mostly but not exclusively through public financial support schemes, run by Ministry of Industry and Technology, TÜBİTAK and KOSGEB.


This activity will be delivered through the grants, procurement of service (including organisation of national or international competitions), supply and works contracts and financial instruments. Under this activity, grants can also be awarded to individuals, national public bodies and international organisations. Furthermore, limited part of allocations provided to this activity can be used for support programmes of public institutions in line with the sector's objectives.


Support to improvement of efficiency of technology transfer offices, and other structures such as technology development zones, accelerators, incubators, R&D centres which may help entrepreneurs and SMEs commercialize their innovative products,

Organisation and financing of reputable national and/or international competitions, boot camps and events for innovative young entrepreneurs, social innovators and/or start-ups

Support establishment and operationalization of technology transfer offices, and other structures such as technology development zones, accelerators, incubators, R&D centres which may help entrepreneurs and SMEs commercialize their innovative products,

Supporting development and implementation of incubation strategies and/or plans of the technology development zones, technology transfer offices.

Supporting international networking of technology development zones.

Support preparation of zoning plans/architectural designs for technology development zones

Testing and certification services for the innovative products to be commercialized,

22 There is an increasingly more visible trend in the “division of labour” concerning R&D and commercialization. While large companies find it harder to innovate when compared to small-scale, as for innovative companies and entrepreneurs, their financial resources, strong market access and reputation make it easier for them to commercialize the innovations of entrepreneurs and small-scale companies.

pg. 51

Market research, surveys, usability tests, and other forms of analytical studies to identify scope for commercialization,

Training and other forms of capacity building activities for the management, R&D personnel, researchers and business development managers of the technology transfer offices, and other structures such as technology development zones, accelerators, incubators, R&D centres which may help entrepreneurs and SMEs commercialize their innovative products,

Training and other forms of capacity building activities for the entrepreneurs and SMEs.

Needs assessments, research and other forms of analytical activities; generation of policy proposals for regulatory improvements (including simplification) that would strengthen industry-university collaboration in the field of commercialization.

Organization of and/or participation to investment promotion roadshows, equity investment fairs, “matchmaking” activities, mentorship events.

Financial instruments.

Selection criteria


Existence of patents (national, regional or international) for the products to be commercialized,

The scope for commercialization, as measured by the potential market size, to be substantiated by the potential End Recipients of Assistance, through evidence-based market research.

The scope for contribution to environmentally sustainable production and consumption, to be estimated by the potential End Recipients of Assistance in terms, such as, reduction of carbon emissions, prevention of pollution etc.

The scope for contribution to decreasing the current account deficit of Turkey, to be substantiated by the potential End Recipients of Assistance, in terms of the contribution to the products to be developed to decreasing national industry’s reliance on imports (including imported energy) and increasing exports.

Level of involvement of women R&D engineers and/or researchers in product development,

The scope for generating jobs, as measured by number of potential new jobs or start-up to be established

(For competitions, boots camps, events) the scope for attracting national/international interest

The scope for collaborative manufacturing possibilities (e.g. licensed manufacturing) that capitalize on regional manufacturing capacities.

Final Beneficiaries

The final beneficiaries of Activity 2.2 are the SMEs, young entrepreneurs, innovators (including social innovators) and start-ups (in the case of grants and competitions) and/or their public and private commercialization partners, such as technology transfer offices, technology development zones, technology centres, research centres, incubators, accelerators etc.



pg. 52

Table 14: Targets and Indicators of STI Action – Activity 2.2


(by 2026)

O.1

Number of technology transfer offices and other structures (technology development zones, accelerators, incubators, R&D centres etc.) established/supported

N/A 0 10 45

O.2

Number of SMEs and start-ups benefited from technology transfer offices and other structures (technology development zones, accelerators, incubators, R&D centres etc.) established/supported

N/A 0 100 600

4.14 Overview Table: Action 2

The following table provides an overview of STI Action:

Table 15: Overview of STI Action

Action title Science, Technology and Innovation (STI)

Specific objective

Enhancement of the functionality of the existing public and private research infrastructure in Turkey; an increase in the number and improvement of university-industry collaboration;


Acceleration of commercialization of innovative products, by bridging the financing gap between the innovative ideas and equity investors.

Improvement of the functionality of the structures/facilities that incubate innovative start-ups and SMEs,

Expansion of the equity financing mechanisms and enhancement of start-ups’ and SMEs’ access to such mechanisms

To promote the development and market uptake of innovative green products, processes and services

Action results Functionality of the existing public and private research infrastructure enhanced;

University-industry collaboration improved.

Awareness on social innovation increased and social innovation support skills and capabilities increased.

Awareness and capacities for eco-innovation increased

Commercialization of innovative products accelerated, by bridging the financing gap between the innovative ideas and equity investors.

Functionality of the structures/facilities that incubate innovative start-ups and SMEs improved.

Equity financing mechanisms expanded, and start-ups’ and SMEs’ access to such mechanisms enhanced.

Activities Activity 2.1: Research and Development Activity 2.2: Technology Transfer and Commercialization

pg. 53


-


Ministry of, Industry and Technology in charge of management; delivery via procurement contracts (works, service and supply), grant contracts, grants awarded to International Organisations and National Public Bodies and Financial Instruments.


Number of national patents obtained,

Number of international and regional approved patents (PCT + EPC),

Number of products successfully commercialized,

Number of innovative enterprises created,

Number of research job created,

Number of SMEs benefited from equity financing mechanisms.

Number of women researchers involved in R&D projects.

pg. 54

pg. 55

4.15 Action 3: Capacity Building (CB)

Aim

The main aim of this Action is twofold: first, to support the successful implementation of the CISOP in line with the programme objectives and the IPA II legislation and secondly to increase the institutional capacity for the proper implementation of the relevant Acquis and for the adoption of fully-fledged sector approach.

EU legislation

Activities to be carried out under this Action will directly contribute to the implementation of the Acquis on “Enterprise and Industrial Policy” and “Science and Research”.

Specific objectives

The specific objectives of the action are;

1. To improve the capacity of the Operating Structure and end-recipients to manage and implement the CISOP and projects.

2. To prepare a mature project pipeline both for the current and the next programming period. 3. To publicise the CISOP. 4. To increase the institutional capacity for the proper implementation of the Acquis on “Enterprise and

Industrial Policy” and “Science and Research” in synergy with Horizon 2020. 5. To improve the business environment, though interventions, which reduce the administrative burden

of the regulatory framework on businesses (especially small businesses), and to improve efficiency of administrative procedures.

6. To ensure greater ownership of national authorities over the CISOP and to increase its impact by supporting the implementation of sector approach.

7. To enhance the capacity of SME support organisations. 8. To support SMEs’ participation to Union Programmes.

Rationale

As indicated in the sector analysis, the regulatory framework in Turkey has substantially improved over the last decade with the facilitation of permanent inter-ministerial mechanisms such as coordination committee for the improvement of the investment environment. However there is room of improvement in several areas, such as enforcement of contracts, insolvency regulations etc. A particular area of concern is the administrative burden on small-scale enterprises. Improvements in these areas may ease doing business in Turkey not only for national, but also for international companies.

The Action will support technical assistance projects geared towards (a) identification of areas where Turkey can achieve further progress in improving the overall business environment, and (b) generation of policy options that would contribute sustained impact of such improvements. Operations that will serve this particular purpose may also contribute to or benefit from the results to be achieved within the STI Action on social innovation.

Strong institutional capacity and development of mature project pipeline are the key factors in the successful programme implementation. Capacity of the institutions in charge of the programme preparation, management, implementation, monitoring, evaluation and control needs to be enhanced to

pg. 56

ensure effective implementation of the CISOP. Furthermore, in order to achieve the objectives of the CISOP and to ensure the full absorption of the funds allocated to the CISOP, a solid pipeline of projects has to be developed in the early phase of the programming.

On the other hand, increasing the institutional capacity for the proper implementation of the Acquis on “Enterprise and Industrial Policy” and “Science and Research” and for the full adoption of sector approach is also significant for the fulfilment of sector objectives. The implementation of enterprise and industrial policy and science and research and the adoption of sector approach require adequate administrative capacity at the national, regional and local level, including efficient consultation and cooperation mechanisms for a quality and effective policy formulation and implementation.

Furthermore, EU enterprise and industrial policy seeks to promote industrial strategies enhancing competitiveness by speeding up adjustment to structural change, encouraging an environment favourable to business creation and growth as well as domestic and foreign investments. It also aims to improve the overall business environment in which SMEs operate. In brief, it aims to promote an EU environment which favours initiative, the creation and development of enterprises (particularly SMEs) and industrial cooperation, and which exploits the industrial potential of policies in the fields of innovation, research and technological development. In this respect, further improvement of the business environment and regulatory framework is significant in reaching the main objectives of the EU Enterprise and Industrial Policy.

Within this framework, under this action, the existing management, implementation, monitoring, control and evaluation systems of the CISOP will be strengthened, a mature project pipeline will be developed, extensive support will be provided to increase institutional capacity for the implementation of the relevant Acquis and sector approach and areas where Turkey can achieve further progress in improving the overall business environment will be identified and necessary supports including generation of policy options that would contribute sustained impact of such improvements will be provided.

Description

This action is consists of two activities and three types of interventions: (a) improvement of the systems necessary for the management, implementation, monitoring, controlling, evaluation and publicity of the CISOP and provision of training, consultancy and expertise; (b) development of solid pipeline of projects; (c) capacity building actions for the full implementation of the sector approach and the acquis including provision of support to national institutions implementing SME support programmes and enhancing participation of SMEs, entrepreneurs, academia in Union programmes.

Activity 3.1: Technical Assistance for System Operators and Publicity of the CISOP

Activity 3.2: Acquis and Sector Approach related Institution Building Activities.

Delivery

This action will be delivered through the provision of training, consultancy, expertise and capacity building actions for the Operating Structure and the other institutions involved in the Programme implementation as well as the institutions having a key role in the identification and implementation of sector objectives, expert support for thematic selection and evaluation of applications, financing the activities of the Monitoring and Project Selection Committees and carrying out information and promotion activities.


The following table lists the targets and indicators.

pg. 57

Table 16: Targets and Indicators of CB Action

Indicators Baseline (2013)

2017 2020 OP Target

(by 2026)

Source

Output Indicators

Number of Monitoring Committee Meetings assisted

6 1 7 19 MIS

Number of trainings held for OS and ERAs

49 0 40 70 MIS

Number of TS/ToR reviewed 60 0 35 50 MIS

Number of publicity events (seminars, conferences, meetings, workshop etc.)

2 0 15 20 MIS

Number of SMEs/entrepreneurs receiving training and consultancy supports on Union Programmes

N/A 0 3,000 4,500 MIS

Number of sectoral strategies and action plans prepared and/or revised

N/A 0 1 2 MIS

Number of SME support organisations whose capacity strengthened

N/A 0 2 3 MIS

Result Indicators

Decrease in rejection rate for submission of tender dossier and calls for proposals

61,7% 58% 50% 40% EDIS Roadmap

Number of media coverage on OP and funded projects

N/A 250 500

1,875 Progress

Reports, MIS

Number of visitors to website N/A

45,000 67,500 82,500

OS website, MIS

Number of SMEs participated in Horizon 2020 and in Horizon Europe

N/A 650 900 N/A MIS

Number of SMEs participated in Financial Instruments and Projects under COSME and in the next framework programmes

N/A 32,500 100,000 N/A MIS

pg. 58

4.16 Activity 3.1: Technical Assistance for System Operators and Publicity of the CISOP

Specific objectives

The specific objective of this activity is to contribute to the achievement of programme objectives and to ensure the correct and full absorption of the funds available under the programme by supporting the implementation, monitoring, control and evaluation processes of the CISOP and by developing a concrete project pipeline. This activity will also promote the CISOP and increase awareness of potential beneficiaries about the funding opportunities provided under the programme.

Rationale

The first programming exercise has clearly showed that effective programme design, management, implementation, monitoring and evaluation requires an adequate administrative capacity both at the level of the Operating Structure and the other institutions involved in the programme implementation. Therefore, administrative capacity of the Operating Structure and relevant institutions needs to be strengthened further in order to speed up the programme implementation process, improve delivery quality and avoid loss of funds. Another bottleneck encountered during the first programming period was the late delivery of support for the development of mature project pipeline. In this regard, identification and formulation of a solid pipeline of projects will be a priority in the early phase of the programme implementation.

On the other hand, in order to make the public more aware about the assistance given under the programme, information about the programme should be disseminated to the all interested parties and effective information distribution channels should be established by the Operating Structure.


Within the framework of this activity, comprehensive support with regard to the management, implementation, monitoring, control and evaluation of the CISOP will be provided particularly focusing on the strengthening administrative, technical and human resources capacity of the Operating Structure and other institutions involved in the implementation of the CISOP and potential beneficiaries of the programme will be informed about the content, selection criteria and eligibility rules of the assistance offered by the CISOP.

This activity can be delivered through the procurement of service (technical assistance, framework and supervision) and supply contracts, direct procurement (single tender), twinning and direct financing of expenditures. Types of operations which will be eligible for support and undertaken under this activity are provided below:

Table 17: Overview of Activity 3.1

Project Selection and Assessment

Providing assistance for the development of detailed project selection criteria and call for project proposal guideline.

Providing trainings to the members of the Project Selection Committee(s).

Covering expenditures related with assessment and selection (if necessary by external assessors) of projects.

pg. 59

Project pipeline development23

Providing trainings and consultancy services to end recipients in the field of project formulation and development.

Preparation/improvement of project documents including operation identification sheets and tender dossiers.

Providing assistance in the management, procurement and implementation process

Supporting the revision and quality control of tender dossiers.

Supporting the tender evaluation process including the work of Tender Evaluation Committees.

Providing legal advice to the OS.

Performing on-the-spot checks and monitoring visits for operations.

Provision of supervision services for works contracts.

Exchange of experience for the staff involved in OP management through study visits and internships.

Participation to national/international conferences, seminars, national/international certificate programmes for staff of the Operating Structure.

Monitoring and evaluation Expenditures of the Monitoring Committee meetings (and, if relevant, its subcommittees or working groups), including costs for translation and interpretation. This expenditure may also include the costs of experts and other participants in such committees.

Providing expertise on improving the effectiveness of the monitoring system.

Preparation of the CISOP implementation reports by the Operating Structure.

Collecting data from monitoring sources.

Supporting the preparation and implementation of evaluation plan.

Costs related to the evaluations carried out by external evaluators.

Carrying out researches, studies, surveys etc.

Carrying out research, studies and surveys etc. with link to the strategic priorities of the CISOP to support the implementation process of the CISOP.

Maintenance and further improvement of MIS

Maintenance and further improvement of MIS

Publicity of the CISOP Design, development and distribution of online and offline communication, promotion and information materials and tools.

Establishing structures for communication and developing and maintaining communication systems including networking opportunities.

Organisation of public events, launch activities, fairs, exhibitions, conferences, seminars, meetings, open days, networking events etc.

23 If some major projects are developed under the CISOP, possibility to use Jaspers assistance to support both the OS and end recipients in conception and development of major projects can be considered as well as to provide capacity building supports targeting several technical/economic aspects, organisational and procedural aspects.

pg. 60

Implementation of public relations and promotional campaigns including digital, social media, audio-visual and face to face.

Implementing capacity building activities such as training, on-the-job training, job shadowing, study visits, job inductions, team building activities, away days, info days etc.

Running research activities to understand audience needs and preferences or for analysing operational environment

Final Beneficiaries

Final beneficiaries of the Action include,

Operating Structure Sectoral Monitoring Committee Project Selection Committees Tender Evaluation Committees MoIT Other institutions involved in the implementation of the CISOP Development Agencies Public Institutions Universities Local and regional authorities Chambers of Commerce and Industry OIZs, SISs, TDZs, TDCs etc. NGOs Sectoral Associations SMEs Media General public


The following table lists the monitoring indicators.

Table 18: Targets and Indicators of Capacity Building Action – Activity 3.1

Indicators Baseline

(2013)

2017 2020 OP Target

(by 2026) Source

Output Indicators

Number of Monitoring Committee Meetings assisted

6 1 7 19 MIS

Number of trainings held for OS and ERAs

49 0 40 70 MIS

Number of TS/ToR reviewed 60 0 35 50 MIS

pg. 61

Indicators Baseline

(2013)

2017 2020 OP Target

(by 2026) Source

Number of publicity events (seminars, conferences, meetings, workshop etc.)

2 0 15 20 MIS

Result Indicators


61,7% 58% 50% 40% EDIS Roadmap


N/A 250 500 1,875 Progress Reports, MIS

Number of visitors to website N/A

45,000 67,500 82,500

OS website, MIS

4.17 Activity 3.2: Acquis and Sector Approach related Institution Building Activities

Specific objectives

The main aims of this activity are (a) to increase the institutional capacity for the proper implementation of the Acquis on “Enterprise and Industrial Policy” and “Science and Research” that would contribute to improvement and simplification of the business environment in Turkey”; (b) to enhance the participation of SMEs, entrepreneurs and academia in Union Programmes; (c) to carry out capacity-building actions for national institutions who implements SME support programmes; (d) to support the transition from sector oriented programming approach to fully-fledged sector approach.

Rationale

The Acquis in the Enterprise and Industrial Policy and Science and Research mainly does not require transposition of EU rules into the national legislation, however it requires the Candidate Countries to ensure the necessary implementing capacities to pursue the EU objectives and activities in the fields of competitiveness enhancing enterprise policies and industrial strategies and research and technological development, including adequate staffing. The Candidate Countries also need to adhere to and to implement specific objectives and activities. The most important actions which the Candidate Countries have to implement are participation in relevant Union Programmes, a more targeted analysis of the competitiveness of specific sectors and integration into the European Research Area.

With regards to the Enterprise and Industrial Policy, Turkey has a satisfactory capacity to formulate adequate enterprise policy measures in specific sectors. However, its capacity to assess the competitiveness of individual sectors and evaluate the results and impact of policy measures which should be the basis for future policy design needs to be improved. Furthermore, the implementation and follow-up of the relevant policy documents should be strengthened and industrial strategy and SME strategy documents, which are the key elements for the accession negotiations in this chapter, have to be updated. The framework that regulates private sector’s operations in Turkey also needs to be further improved, in particular in areas, such as enforcement of contracts, insolvency regulations. Improvements in such areas may ease doing business in Turkey not only for national, but also for international companies.

In the field of Science and Research, good progress has been made. Steps were taken to further reinforce Turkey’s capacity. Integration into the European Research Area is well on track. Turkey’s participation in

pg. 62

the EU Research Framework Programme (FP7) and its success rate has increased, but further efforts are needed in particular to increase participation in the scientific excellence programmes and collaboration projects.

The second important aspect of this activity is to support the adoption of sector approach which aims to strengthen ownership and impact of IPA funds by focusing assistance on the achievement of national sector policy objectives and results which are relevant for accession. The key issue in the implementation of sector approach is to further build up the capacities at national level for the 5 pillars underpinning the Sector Approach.

Description and eligible interventions

Within the framework of this activity, three types of interventions will be implemented: (a) capacity building actions for the implementation of the Acquis including improvement of the regulatory framework with a view to decrease administrative burden on businesses and provision of support to national institutions implementing SME support programmes; (b) enhancing participation of SMEs, entrepreneurs, academia in Union programmes; (c) supporting the implementation of sector approach.

This activity can be delivered through the procurement of technical assistance, supply and framework contracts and twinning. Types of operations which will be eligible for support and undertaken under this activity are provided below:

Table 19: Overview of Activity 3.2

Carrying out Acquis related capacity building actions:

Identification of areas of improvement with regard to improvement and simplification of the business environment, including legislative reviews, benchmarking etc. for a specific sector in particular as well as for the overall economy in general, including those which will create a more enabling environment for creative industries (activity 1.2).

Fulfilment of needs assessment studies, surveys, regulatory impact assessments (ex-ante or ex-post).

Design and development of new online systems and/or improvement of existing systems that facilitate business by simplifying the administrative procedures.

Providing support to the national and sectoral policy and strategy formulation, implementation, monitoring and evaluation.

Improving the capacity to evaluate the results and impact of policy measures.

Increasing capacity to assess the competitiveness of industrial sectors.

Providing support to the preparation/ revision, implementation, monitoring and evaluation of sectoral strategies and action plans such as Industrial Strategy and Action Plan and KSEP.

Supporting Turkey’s further integration into the European Research Area.

Increasing the participation of SMEs, entrepreneurs and academia in relevant Union

Providing consultancy supports and trainings towards potential applicants in the field of project design and management.

pg. 63

Programmes and their success rate:

Carrying out promotional activities to better inform the target groups about the programmes.

Dissemination of information about the success stories to encourage the participation of target groups.

Improving the cooperation between university-university and university-industry to create a collaboration culture in the field of R&D.

Strengthening the capacity of Enterprise Europe Network (EEN) consortiums in Turkey to provide better services for SMEs.

Supporting the implementation of sector approach

Carrying out institution building activities to improve all the Sector criteria, with the aim of developing a fully-fledged Sector Approach.

Selection criteria

For Institution Building interventions neither the strategic selection criteria nor the geographic selection criteria will apply.

Final Beneficiaries

Operating Structure MoIT MoIT’s affiliated and related bodies Chambers of Commerce and Industry Universities Development Agencies Local and regional authorities Business Incubation Centres, TDZs, TDCs OIZs, SISs, etc. NGOs Sectoral Associations Enterprise Europe Network (EEN) consortiums SMEs


Monitoring indicators are listed in the following table:

Table 20: Targets and Indicators of Capacity Building Action – Activity 3.2

Indicators 2017 2020 OP Target

(by 2026) Source

Output Indicators

Number of SMEs receiving training and consultancy supports on Union Programmes

0 3,000 4,500 MIS

Number of sectoral strategies and action plans prepared and/or revised

0 1 2 MIS

pg. 64

Indicators 2017 2020 OP Target

(by 2026) Source

Number of SME support organisations whose capacity strengthened

0 2 3 MIS

Result Indicators


650 900 N/A MIS

Number of SMEs participated in Financial Instruments and Projects under COSME

and in the next framework programmes 32,500 100,000 N/A MIS

pg. 65

4.18 Overview table Action 3

The following table provides an overview of CB Action:

Table 21: Overview of CB Action

Action title Capacity Building

Specific objective to improve the capacity of the Operating Structure and end-recipients to manage and implement the CISOP and projects;

to prepare a mature project pipeline both for the current and the next programming period;

to publicise the CISOP;

to increase the institutional capacity for the proper implementation of the Acquis on “Enterprise and Industrial Policy” and “Science and Research”;

to support the transition from sector oriented programming approach to fully-fledged sector approach;

to enhance the capacity of SME support organisations;

to support SMEs’ participation to Union Programmes.

Action results Successful and adequate implementation of CISOP in line with the programme objectives.

Increased administrative capacity including efficient consultation and cooperation mechanisms for a quality and effective policy formulation, implementation, monitoring and evaluation for the proper implementation of the acquis and sector approach.

Increased rate of success of SMEs, entrepreneurs and academia in Union Programmes.

Activities Activity 3.1: Technical Assistance for System Operators and Publicity of the CISOP Activity 3.2: Acquis and Sector Approach related Institution Building Activities


-


Ministry of Industry and Technology in charge of management; delivery via service contracts, direct procurement (single tender), direct financing of expenditures and twinning




Number of visitors to website


Number of SMEs participated in Financial Instruments and Projects under COSME and in the next framework programmes

pg. 66

pg. 67

5 FINANCIAL TABLE BY ACTION AND YEAR INCLUDING CO-FINANCING RATES IF APPLICABLE

2014 - 2018 Total Cost

Total Public Eligible Cost

Community Contribution (IPA)

(€)

National Public Contribution (IPA)

(€)

Private (indicative)

IPA co-financing

rate (%)

For Information (IFI , TIP etc.)

Action 1 136.811.765 136.811.765 116.290.000 20.521.765 - 85,00%

Activity 1.1. 102.314.706 102.314.706 86.967.500 15.347.206 - 85,00%

Activity 1.2. 34.497.059 34.497.059 29.322.500 5.174.559 - 85,00%

Action 2 98.858.824 98.858.824 84.030.000 14.828.824 - 85,00%

Activity 2.1. 44.011.765 44.011.765 37.410.000 6.601.765 - 85,00%

Activity 2.2. 54.847.059 54.847.059 46.620.000 8.227.059 - 85,00%

Action 3 24.447.059 24.447.059 20.780.000 3.667.059 - 85,00%

Activity 3.1. 15.537.647 15.537.647 13.207.000 2.330.647 - 85,00%

Activity 3.2. 8.909.412 8.909.412 7.573.000 1.336.412 - 85,00%

Total 2014-2018 260.117.648 260.117.648 221.100.000 39.017.647 - 85,00%

2014 Total Cost



(€)


(€)


IPA co-financing

rate (%)

For Information (IFI , TIP etc.)

Action 1 24.200.000 24.200.000 20.570.000 3.630.000 - 85,00%

Activity 1.1. 18.150.000 18.150.000 15.427.500 2.722.500 - 85,00%

Activity 1.2. 6.050.000 6.050.000 5.142.500 907.500 - 85,00%

Action 2 15.400.000 15.400.000 13.090.000 2.310.000 - 85,00%

Activity 2.1. 5.133.333 5.133.333 4.363.333 770.000 - 85,00%

Activity 2.2. 10.266.667 10.266.667 8.726.667 1.540.000 - 85,00%

Action 3 4.400.000 4.400.000 3.740.000 660.000 - 85,00%

Activity 3.1. 2.860.000 2.860.000 2.431.000 429.000 - 85,00%

Activity 3.2. 1.540.000 1.540.000 1.309.000 231.000 - 85,00%

Total 2014 44.000.000 44.000.000 37.400.000 6.600.000 - 85,00%

pg. 68

2015 Total Cost



(€)


(€)


IPA co-financing

rate (%)

Action 1 29.894.118 29.894.118 25.410.000 4.484.118 - 85,00%

Activity 1.1. 22.420.588 22.420.588 19.057.500 3.363.088 - 85,00%

Activity 1.2. 7.473.529 7.473.529 6.352.500 1.121.029 - 85,00%

Action 2 19.023.529 19.023.529 16.170.000 2.853.529 - 85,00%

Activity 2.1. 6.341.176 6.341.176 5.390.000 951.176 - 85,00%

Activity 2.2. 12.682.353 12.682.353 10.780.000 1.902.353 - 85,00%

Action 3 5.435.294 5.435.294 4.620.000 815.294 - 85,00%

Activity 3.1. 3.532.941 3.532.941 3.003.000 529.941 - 85,00%

Activity 3.2. 1.902.353 1.902.353 1.617.000 285.353 - 85,00%

Total 2015 54.352.941 54.352.941 46.200.000 8.152.941 - 85,00%

2016 Total Cost



(€)


(€)


IPA co-financing

rate (%)

Action 1 29.894.118 29.894.118 25.410.000 4.484.118 - 85,00%

Activity 1.1. 22.420.588 22.420.588 19.057.500 3.363.088 - 85,00%

Activity 1.2. 7.473.529 7.473.529 6.352.500 1.121.029 - 85,00%

Action 2 19.023.529 19.023.529 16.170.000 2.853.529 - 85,00%

Activity 2.1. 6.341.176 6.341.176 5.390.000 951.176 - 85,00%

Activity 2.2. 12.682.353 12.682.353 10.780.000 1.902.353 - 85,00%

Action 3 5.435.294 5.435.294 4.620.000 815.294 - 85,00%

Activity 3.1. 3.532.941 3.532.941 3.003.000 529.941 - 85,00%

Activity 3.2. 1.902.353 1.902.353 1.617.000 285.353 - 85,00%

Total 2016 54.352.941 54.352.941 46.200.000 8.152.941 - 85,00%

pg. 69

2017 Total Cost



(€)


(€)


IPA co-financing

rate (%)

Action 1 37.529.412 37.529.412 31.900.000 5.629.412 - 85,00%

Activity 1.1. 28.147.059 28.147.059 23.925.000 4.222.059 - 85,00%

Activity 1.2. 9.382.353 9.382.353 7.975.000 1.407.353 - 85,00%

Action 2 23.882.353 23.882.353 20.300.000 3.582.353 - 85,00%

Activity 2.1. 7.960.784 7.960.784 6.766.667 1.194.118 - 85,00%

Activity 2.2. 15.921.569 15.921.569 13.533.333 2.388.235 - 85,00%

Action 3 6.823.529 6.823.529 5.800.000 1.023.529 - 85,00%

Activity 3.1. 4.435.294 4.435.294 3.770.000 665.294 - 85,00%

Activity 3.2. 2.388.235 2.388.235 2.030.000 358.235 - 85,00%

Total 2017 68.235.294 68.235.294 58.000.000 10.235.294 - 85,00%

2018 Total Cost



(€)


(€)


IPA co-financing

rate (%)

Action 1 15.294.118 15.294.118 13.000.000 2.294.118 - 85,00%

Activity 1.1. 11.176.471 11.176.471 9.500.000 1.676.471 - 85,00%

Activity 1.2. 4.117.647 4.117.647 3.500.000 617.647 - 85,00%

Action 2 21.529.412 21.529.412 18.300.000 3.229.412 - 85,00%

Activity 2.1. 18.235.294 18.235.294 15.500.000 2.735.294 - 85,00%

Activity 2.2. 3.294.118 3.294.118 2.800.000 494.118 - 85,00%

Action 3 2.352.941 2.352.941 2.000.000 352.941 - 85,00%

Activity 3.1. 1.176.471 1.176.471 1.000.000 176.471 - 85,00%

Activity 3.2. 1.176.471 1.176.471 1.000.000 176.471 - 85,00%

Total 2018 39.176.471 39.176.471 33.300.000 5.876.471 - 85,00%

pg. 70

6 OVERVIEW OF THE CONSULTATION PROCESS

During the preparation process of the competitiveness and innovation sector operational programme a broad participation of the stakeholders has been sought. Thus a workshop was organized to receive contributions of relevant stakeholders about The Competitiveness and Innovation Sector Operational Programme. The workshop was designed to cover the whole country 24 . At central level public institutions/organizations were invited. At regional level, organizations/ institutions, including municipalities, universities, governorships, trade and industry chambers and development agencies considering 26 Nuts-2 Regions were invited to involve local participation. Workshop was moderated in gallery methodology25 consultations with all relevant stakeholders.

Four sessions were carried out during the one day workshop. For each session, three hypotheses were tested in each session. Verified hypotheses, actions and activities to the operational programme are kept to include into the operational programme

These sessions were;

1. Strengthening Industrial Infrastructure and Supporting SMEs Services and Creative Industries, 2. Access to Finance and Diversification of Financial Instruments, 3. R & D, Innovation, Entrepreneurship and Clustering, 4. Capacity Building.

Comments and recommendations of related stakeholders were reflected to the operational programme to meet the stakeholders’ needs in various themes.

24 See Annex-5- for the list of participant institutions 25 The Gallery method is a mixture of physical and mental activity whilst generating ideas. The participants move past the ideas (as

in an art gallery) rather than the ideas moving past the participants.

pg. 71

7 IMPLEMENTATION ARRANGEMENTS

7.1 Structures and authorities for the management and control of the programme

7.1.1 Bodies and authorities

In accordance with the Council Regulation on the Instrument for Pre-Accession Assistance (IPA II) and the Rules of Application for Pre-Accession Assistance (IPA II RAP), the Prime Ministry Circular No … designates the main structures and authorities responsible for IPA management and implementation tasks for the IPA II (2014-2020) period.

Under the management and control provisions of this Regulation, the following individuals / bodies are designated / established:

National IPA Coordinator

National Authorising Officer

National Fund

Audit Authority

Operating Structures: For each IPA policy area or programme, an operating structure is established to deal with the management and implementation of assistance under the IPA Regulation. In this context, the Ministry of Industry and Technology has been designated as the Operating Structure and Contacting Authority for the CISOP.

Development agencies (DA) located in priority NUTS II regions for the geographical concentration will undertake specific roles in the context of Competitiveness and Innovation SOP.

Principally, with regard to operation/project to be implemented in priority NUTS II regions, the respective DA will support the Operating Structure (OS) in developing mature projects.

DAs will follow the direct negotiation approach to submit project ideas to Operating Structure on behalf of potential end recipients of assistance. As the first step, DAs will identify and prioritise the projects among the regional stakeholders and as the second step, they will submit the prioritised projects to the Ministry for further assessment. Once project/operation is selected by the Ministry in consultation with DAs, DAs will provide assistance to the beneficiary to develop mature project/operation. DAs will support the OSs in monitoring activities in the implementation process.

Detailed tasks and functions to be delegated to the DAs by the Ministry of Industry and Technology will be agreed and specified by a cooperation (delegation) agreement between the respective DA and the Ministry.

7.2 Monitoring arrangements

The Head of the Operating Structure for the CISOP will establish a Sectoral Monitoring Committee no later than six months after the entry into force of the first financing agreement related to the programme, according to what is stated in the Article 19 of the Commission Implementing Regulation on the specific rules for implementing the IPA II Regulation.

The Sectoral Monitoring Committee will be co-chaired by General Director of DG for EU and Foreign Affairs of Ministry of Industry and Technology as Head of the Operating Structure for the CISOP and a representative of the Commission.

Its member will include:

pg. 72

- A representative of the National IPA Coordinator;

- A representative of the National Authorising Officer;

- A representative of the National Fund;

- Representatives of each body of the Operating Structure for the programme;

- Representatives from the civil society and socio-economic partners, regional or national organizations with an interest in and contribution to make to the effective implementation of the programme. These are:

Ministry of Development Ministry of Culture and Tourism Ministry of Economy Ministry of Finance Relevant DGs of MoIT Small and Medium Enterprises Development Organisation (KOSGEB) The Scientific and Technological Research Council of Turkey (TÜBİTAK) The Council of Higher Education The Union of Chambers and Commodity Exchanges of Turkey (TOBB) Turkish Artisans and Craftsmen Confederation (TESK) Turkish Technology Development Foundation (TTGV) SEDEFED TÜSİAD MÜSİAD TÜRK-İŞ TİSK

The composition of the Sectoral Monitoring Committee can be reviewed and extended by the Head of the Operating Structure in agreement with the Commission in order to guarantee sufficient representation and membership.

The Sectoral Monitoring Committee will be assisted by a permanent secretariat provided by the Operating Structure for the preparation of papers for discussion by the committee or for clearance by written procedure. Monitoring and Evaluation Department of the MoIT IPA is responsible to manage the secretariat of the Monitoring Committee for CISOP in IPA II period as it is the case under IPA I period.

The Sectoral Monitoring Committee will meet at least twice a year and upon request by the Commission. Intermediate meetings may also be convened as required.

7.3 Evaluation arrangements

The Head of the Operating Structure is responsible for ensuring that adequate evaluations of the operational programme are carried out. The evaluations will be carried out by experts or bodies, internal or external, functionally independent from the management and control system.

A separate department for the evaluation, functionally independent from the management and control structures has been set up under the MoIT IPA OS. Under the responsibility of MoIT IPA OS, 1 ex-ante evaluation and 2 interim evaluations were carried out for RCOP by independent experts in 2007-2013 programming period. In this context, MoIT IPA OS increased its evaluation capacity learning by doing. Moreover within the scope of “Technical Assistance on Institutional Building for the Implementation of

pg. 73

RCOP in Turkey” operation, several training programmes regarding evaluations and evaluation methods were organised, internships and study visits were carried out and on the job support was provided to the Monitoring and Evaluation Department. To sum up, Ministry established and substantially increased its monitoring and evaluation capacity in the IPA I period in order to provide inputs and maintain this capacity for the IPA II period.

When taken into account possible monitoring structure (result oriented monitoring) of the CISOP and newly recruited staff of the Monitoring and Evaluation Department, it is needed to continue capacity building activities.

Functions of the Monitoring and Evaluation Department regarding the evaluation are given below:

Ensuring the evaluations of the CISOP,

Co-ordination of activities related to evaluation of performance and achievements of the CISOP,

Provide inputs to next programming, identification and formulation phases on the basis of lesson learned during the implementation of evaluation exercises.

Evaluation Committee

SMC for CISOP will designate an ad-hoc committee to assist the Operating Structure in its evaluation activities. The Committee members will be experts in evaluation.

The Committee will provide guidance and assistance to the Evaluation Team of the Operating Structure. The assistance will take place at all stages of the evaluation (guidance, planning, implementation, communication of results). Relevant stakeholders will also be able to contribute.

Indicative Evaluation Activities Timing

Interim Evaluation of the CISOP 2019

Ex-Post Evaluation of the CISOP Not later than three years after the end of the programming period.

pg. 74

8 ANNEXES

ANNEX 1-PROJECTS DEFERRED TO IPA II PERIOD

A prioritization study for the projects to be deferred (hereinafter PtbD) to IPA II period is made

based on certain criteria namely the maturity of the projects, capacity of ERA and time needed to fully

finalize the implementation period. As the result of this study 7 projects with a budget of ca. 90 Million

euro volume are foreseen to be deferred as a mature project pipeline to CISOP 2014-2020. A more

elaborated linkage has been provided for (PtbD) in the table and the following project by project

explanations below.

The deferral plan should not be necessarily inferred as PtbD will deplete all the resources allocated

to CISOP 2014-2020 period. Implementation of deferred projects within the first three years will not

prevent the selection, development and implementation of new projects as the CISOP will be implemented

under multi-annual programming approach. Since CISOP will be a 7 year programme it can be argued that

the total budget of PtbD will account for the %28 of the total budget allocated to CISOP 2014-2020.

According to the final disbursement forecasts for the PtbD, it can be observed that the PtbD will end after

2014-2016 period. In other words some %60-70 of the total budget of PtbD will be spent in 2014-2016

period and the rest can be disbursed for brand new projects to be generated under CISOP. An indicative

(may subject to change in the implementation period) sequencing has been made and presented below

for PtbD considering the procurement plan (also presented in detail), capacity of ERA and expected impact

for the region.

Table 22: Indicative Implementation Plan for PtbD in order of precedence

PROJECTS TO BE DEFFERED TO IPA II PERIOD

No Project Title Total Budget (€)

Measure of RCOP Activity of CISOP

1 Establishment of Common Use

Ateliers in TRB2 Region 10.387.205 1.1 1.1

2 Revitalisation of the Tourism

Sector in Adıyaman 7.764.771 1.4 1.2

3 Kars City with Its Own Historical

Identity 10.616.378 1.4 1.2

4

Activation of Dairy Products Cluster in TRA2 Region, and

Establishment and Operationalization of a Whey Processing Plant (WPP) in Kars

11.167.805 1.1 1.1

5 Increasing the Competitiveness

of Main Sectors in Sinop 10.387.326 1.1 1.1

6 Malatya Dried Apricot Licensed

Warehouse and Exchange 13.643.178 1.1 1.1

7 Development of Research and

Innovation Facilities for 26.972.597 1.3 2.1

pg. 75

PROJECTS TO BE DEFFERED TO IPA II PERIOD

No Project Title Total Budget (€)

Measure of RCOP Activity of CISOP

Improving the Regional Competitiveness of Food Industry

Total Budget

90.939.260

1. Establishment of Common Use Ateliers in TRB2 Region

This Project will be planned to implement in four provinces of TRB2 Region (Muş, Van, Bitlis, Hakkari). 95

% of the artisans and SMEs, in the region’s SSIEs, are mainly concentrated in three sectors; Automotive,

Metal processing and Carpentry & Furniture Making. The competitiveness of these sectors is severely

constrained by (i) non-existence of critical technology, (ii) low institutional and managerial capacities and

(iii) lack of skilled workforce. Project aims to increase the industrial infrastructure of the least developed

region in Turkey and covers four provinces constituting TRB2 region which is also one of four priority

regions of CISOP. The project contains works, supply and service components basically aiming

establishment and operationalization of common-use facilities to decrease input costs which is directly

related to the activity 1.1 of CISOP. Due to the implementation of the project in different provinces, and

the disbursement plans shows that the finalization of the project can not to be done in IPA I period.

2. Malatya Dried Apricot Licensed Warehouse and Exchange

Turkey is the world’s largest apricot producer, accounting roughly for 20% of the global apricot produce.

Thus the apricot produced in Malatya, accounts roughly for 15% of global apricot produce, making Malatya

the undisputed world leader. Local apricot industry enjoys certain competitive advantages that are mostly

related to the sheer volume of production, there are also significant weaknesses in apricot’s long and

complicated value chain. There are a number of problems in apricot industry: insufficient cold storage

capacity, expensive energy cost for cold storage, poor processing, unhygienic drying practice, poor quality

assurance infrastructure and finally, there are weaknesses with regard to marketing and promotion of

apricot. The project aims to increase the competitiveness of apricot industry in Malatya province by the

establishment of cold storage units for dried and fresh apricot -main trade product of the province- and

common-use processing, classification facilities, aiming to extent supply period of product to market

Moreover project will also facilitate the establishment of an apricot cluster initiative where it will

complement the physical infrastructure to be built. These two pillars will make an added value to the

apricot and in turn increase the income of the producers in every step of the apricot value chain. These

overarching objectives, projects interim goals and implementation methodology are directly related to the

activity 1.1 of CISOP. The project contains works, supply and service components. As a result of the

project’s complex structure, tender dossier preparation and therefore the implementation processes and

in relation with the implementation disbursements will be delayed and exceed the 31.12.2017 deadline.

3. Increasing the Competitiveness of Main Sectors in Sinop

Fishing and tourism are two of the main pillars of Sinop’s economy. Both sectors contribute to the labour

market extensively. The sectors provide an opportunity for further development as well. Currently, the

contribution of fisheries to local economy is from newly caught anchovy and fish flour production. Small

pg. 76

fishermen do not have any option to store frozen anchovy or to create brands of their own. The project

aims to increase the competitiveness of seafood industry in Sinop region, by the establishment of cold

storage units and common-use processing, classification, filleting facilities for seafood products. Benefits

of the establishment of physical infrastructure are threefold. Firstly supply period of seafood to market

either raw or processes will be increased and therefore price fluctuations will be decreased to an extent.

Secondly, classification, filleting facilities etc. of the common use facility will expedite the product

development processes of already established fisheries SMEs and in turn the already existing business

stock will increase. Thirdly the project will foster the entrepreneurship activities related with seafood

industry. Within the scope of the operation- in particular TA component- tourism SMEs will also be

supported by extensive technical assistance. Results to be achieved and activities to be implemented are

directly related to the activity 1.1 of CISOP. The project contains works, supply and service components.

As a result of the project’s complex structure, tender dossier preparation and therefore the

implementation processes and in relation with the implementation disbursements will be delayed and

exceed the 31.12.2017 deadline.

4. Activation of Dairy Products Cluster in TRA2 Region, and Establishment and Operationalisation of a

Whey Processing Plant (WPP) in Kars

TRA2 Region is one of the least developed regions of Turkey. Industry is almost non-existent. Therefore

the main income of the region is, husbandry, dairy products. Although cheese is one of the most important

dairy products in the TRA2 Region, recent legislative changes have also put this important sector at

jeopardy. The Ministry of Environment and Urbanisation’s Directive on “Control of Water Pollution” bans

cheese producers to dispose whey without treating it properly. In fact much of this is happening presently,

as most of the small- and medium-sized cheese producers that cannot comply with the environmental

requirements are shifting their production other dairy products (e.g. yoghurt, butter etc.). Most of the

small- and medium-sized cheese producers do not have sufficient resources to make this investment. In

order to assist to Dairy Producing SMEs to comply with the Directive and furthermore to utilize the waste

whey within the scope of the project a common-use whey processing plant will be established. The

common use infrastructure will the reverse the trend in SMEs to produce low value added products back

to high value added products and in the long run this advantage aims to increase the competitiveness of

dairy producers in TRA2 region (in particular Kars and Ardahan). Furthermore project will explore

clustering possibilities to further develop the SMEs in their sectors to become more institutionalised

making the SMEs work in close cooperation to produce high value added novel products. Therefore

intervention logic and results of the project are directly linked with the activity 1.1 of CISOP. The project

contains supply and service components. This project has a special case. Works component –along with

the supervision- will be undertaken by ERA, thus a coordinated implementation approach is needed

5. Revitalisation of the Tourism Sector in Adıyaman

Adıyaman is located in the GAP region hosting UNESCO World Heritage Site Mount Nemrut Tumulus.

Although Adıyaman draws substantial amount of tourist, she has not been able to translate the increasing

number of tourists into overnights. Between 2005 and 2011, overnights in neighbouring cities, in the GAP

Region Gaziantep and Şanlıurfa increased dramatically, whereas Adıyaman’s performance improved only

marginally. The number of visitors of sites and museums in Adıyaman increased from 28.205 in 2009 to

68.481 in 2011, in other words roughly by 150%. However; number of overnights in the province increased

only by 15% within the same period.

pg. 77

When compared to competing sites, the touristic sites in Adıyaman are less known. There are basically two

reasons behind lack of visibility of Adıyaman’s historical assets. First, with the exception of Mount Nemrut

Tumulus, none of the historical assets are promoted sufficiently. Secondly, some of the historical assets

that would help Adıyaman attract more tourists have not been sufficiently developed (i.e. renovation,

landscaping etc.) yet.

The project aims to improve the tourism capacity to increase the number of overnights for visitors in

Adıyaman by enhancing the physical infrastructure in Kommagene National Park which is one of the World

Cultural Heritage sites in Turkey and its environs. A visitor centre will be established and 11 locations in

Adıyaman will be rehabilitated. TA component of project will also be exploited to better promote the

cultural and historic assets of Adıyaman region. The project contains works, supply and service

components as far as the results and approach to destination management objective of CISOP are

concerned, project is related to the activity 1.2 of CISOP. Works activities to be built are mostly located in

archaeological protected areas, where the process will need restrictive implementation permits. Therefore

this time related risks will most likely translate into delays which will further postpone the disbursement

of the funds to the operation beyond 31.12.2017.

6. Kars City with Its Own Historical Identity

Tourism activity has been rather low too and the number of overnights with an average of 1.5 nights per

trip in Kars. Although Kars has a great potential to become a major destination in Eastern Anatolia,

tourism’s further expansion in Kars is hampered by a series of obstacles; Low level of physical

infrastructure namely, low level of lighting, and signage along the main historical routes in city centre,

deterioration of the facades of the historical buildings in the city centre, furthermore low level of human

resources and underdeveloped service sector, low level of tourism value chain and diversity in tourism

products, low level of promotion of Kars at national and international levels, , inadequate

commercialization of natural and cultural assets based within the balance of preservation and use etc. are

the outstanding underpinning issues of the Kars city in terms of tourism level.

Furthermore, Ancient Armenian City of Ani-one of the most known historical places of Kars- is a world

heritage asset with international interest. Although Ani is well known as a tourism asset, the area still lacks

some basic infrastructure and besides Ancient City of Ani has low level of presentation of the routes and

the assets.

In order to tackle above mentioned issues, the project aims to increase the tourism capacity in Kars in

particularly city centre by increasing the physical infrastructure with the renovation activities to be applied

in Ordu Street (main historic street). As the output of the renovation old part of the city centre will become

a new attraction point for the tourism sector. Along with basic promotional and training activities to SMEs

in the region, project will also facilitate the establishment of a Tourism Governance Structure and

successful Public Private Partnership models in the newly renovated part of the old city. Furthermore

project will also support physical infrastructure in ancient city of ANİ. Considering the objectives and

results to be achieved within the project, project will not only give an impetus to the SMEs in the city but

also set a good example in establishing a governance modality. Therefore achieving the objectives will

result in a fine example of destination management approach in tourism sector which is one of the

objectives of CISOP. The project contains works, supply and service components as far as the results and

approach to destination management objective of CISOP is concerned project is related to the activity 1.2

of CISOP. Works activities to be built are mostly located in archaeological protected areas, where the

pg. 78

process will need restrictive implementation permits. Moreover Kars is one of the most snow covered

regions of Turkey which limits the construction durations to max 6 months. Therefore this time related

risks will most likely translate into delays which will further postpone the disbursement of the funds to the

operation beyond 31.12.2017.

7. Development of Research and Innovation Facilities for Improving the Regional Competitiveness of

Food Industry

The aim of this project is to assist the SMEs operating in the food and beverage sector in the target region

(12 NUTS II regions having an income per capita below 75% of the Turkish average) on their way to increase

the competitiveness of the sectors in the foreign and domestic markets by improving the quality and safety

of their products and developing new value-added food products/processes as a result of R&D and

innovation.

The project will facilitate the establishment of food sector R&D base facilities in 4 different Regions namely

Gebze, Gaziantep, Giresun and Şanlıurfa. These facilities will include Laboratories, Model Process Lines,

Simulation and Testing centres, which will serve and develop the food sectors ranging from seafood to,

oily kernels, tea from to grains. Furthermore ANTEPFIN (Anatolian Technology Platform for Food

Innovation) will be developed where R&D results in 4 regions will be shared. As a result of the ANTEPFIN

more structured data will be gathered on the food industry especially in the 4 regions and by using these

results will further facilitate the generation of SMEs with new high value added novel products and

processes. The project contains works, supply and service components as far as the results and

intervention logic is concerned project is related to the activity 2.1 of CISOP. According to final

disbursement plans, the project is foreseen to be finalized late 2018, early 2019 which will be beyond

31.12.2017 final disbarment deadline.

End Recipient of Assistance is TUBITAK Marmara Research Centre (MRC) Food Institute in Gebze. TUBİTAK

MRC has extensive R&D and innovation experience in the food industry.

pg. 79

ANNEX 2-REGIONAL CLASSIFICATIONS (NSRD)

Figure 2: Classification of Regions, based on Income Levels (Source: NSRD, 2nd Draft)

Table 233: Classification of Regions, based on Income Levels

High Income Level

TR10 (İstanbul) TR42 (Kocaeli, Sakarya, Düzce, Bolu, Yalova) TR41 (Bursa, Eskişehir, Bilecik) TR51 (Ankara) TR21 (Tekirdağ, Edirne, Kırklareli) TR31 (İzmir) TR61 (Antalya, Isparta, Burdur)

GDP Per Capita > 100

Middle High Income Level

TR32 (Aydın, Denizli, Muğla) TR81 (Zonguldak, Karabük, Bartın) TR22 (Balıkesir, Çanakkale) TR33 (Manisa, Afyon, Kütahya, Uşak) TR62 (Adana, Mersin) TR52 (Konya, Karaman) TR71 (Kırıkkale, Aksaray, Niğde, Nevşehir, Kırşehir)

100>GDP Per Capita>75

Middle Low Income Level

TR90 (Trabzon, Ordu, Giresun, Rize, Artvin, Gümüşhane) TR72 (Kayseri, Sivas, Yozgat) TR82 (Kastamonu, Çankırı, Sinop) TR83 (Samsun, Tokat, Çorum, Amasya) TR63 (Hatay, Kahramanmaraş, Osmaniye) TRB1 (Malatya, Elazığ, Bingöl, Tunceli) TRA1 (Erzurum, Erzincan, Bayburt) TRC1 (Gaziantep, Adıyaman, Kilis)

75>GDP Per Capita>50

Low Income Level

TRC3 (Mardin, Batman, Şırnak, Siirt) TRC2 (Şanlıurfa, Diyarbakır) TRA2 (Ağrı, Kars, Iğdır, Ardahan) TRB2 (Van, Muş, Bitlis, Hakkâri)

50>GDP Per Capita

*Turkish Average of GDP per capita =

100r Düzeyi

pg. 80

ANNEX 2-DATA ON BUSINESS INFRASTRUCTURE

Codes Provinces OIZ Incubators R&D Centre TDZs

TR100 İstanbul 8 1 45 5 TR211 Tekirdağ 13 - 4 1 TR212 Edirne 1 - - 1 TR213 Kırklareli 4 - 1 - TR221 Balıkesir 5 - 1 - TR222 Çanakkale 2 - 1 1 TR310 İzmir 13 - 13 3 TR321 Aydın 7 - 1 - TR322 Denizli 5 - - 1 TR323 Muğla 1 - - - TR331 Manisa 7 - 7 1 TR332 Afyonkarahisar 9 - - - TR333 Kütahya 5 1 1 1 TR334 Uşak 3 - - - TR411 Bursa 13 - 22 1 TR412 Eskişehir 2 1 6 1 TR413 Bilecik 6 - 2 - TR421 Kocaeli 13 - 21 4 TR422 Sakarya 6 - 3 1 TR423 Düzce 2 - 2 1 TR424 Bolu 4 - 1 1 TR425 Yalova 2 - 1 - TR510 Ankara 10 - 17 6 TR521 Konya 9 - 1 1 TR522 Karaman 1 - - - TR611 Antalya 2 - - 1 TR612 Isparta 3 - - 1 TR613 Burdur 3 - - 1 TR621 Adana 2 1 1 1 TR622 Mersin 2 2 - 1 TR631 Hatay 5 - - - TR632 Kahramanmara

ş 3 - - 1

TR633 Osmaniye 2 - - - TR711 Kırıkkale 3 - - 1 TR712 Aksaray 1 - - - TR713 Niğde 2 - 1 1 TR714 Nevşehir 2 2 - - TR715 Kırşehir 3 - - - TR721 Kayseri 3 - - 1 TR722 Sivas 4 - 1 1 TR723 Yozgat 2 1 - 1 TR811 Zonguldak 3 2 - - TR812 Karabük 1 - - - TR813 Bartın 1 - - - TR821 Kastamonu 3 1 - -

pg. 81

TR822 Çankırı 5 - - - TR823 Sinop 2 - - - TR831 Samsun 5 1 1 1 TR832 Tokat 5 1 - 1 TR833 Çorum 2 1 - 1 TR834 Amasya 3 - - - TR901 Trabzon 4 - - 1 TR902 Ordu 3 - - - TR903 Giresun 2 - - - TR904 Rize 2 - - - TR905 Artvin - - - - TR906 Gümüşhane 1 - - - TRA11 Erzurum 3 - - 1 TRA12 Erzincan 1 - - - TRA13 Bayburt 1 - - - TRA21 Ağrı 1 - - - TRA22 Kars 1 - - - TRA23 Iğdır 1 - - - TRA24 Ardahan 1 - - - TRB11 Malatya 4 1 1 1 TRB12 Elazığ 1 1 - 1 TRB13 Bingöl 1 - - - TRB14 Tunceli 1 - - - TRB21 Van 2 1 - 1 TRB22 Muş 1 - - - TRB23 Bitlis 1 - - - TRB24 Hakkari 1 - - - TRC11 Gaziantep 3 - - 1 TRC12 Adıyaman 4 - - - TRC13 Kilis 1 - - - TRC21 Şanlıurfa 4 - - 1 TRC22 Diyarbakır 1 1 - 1 TRC31 Mardin 2 - - - TRC32 Batman 1 - - - TRC33 Şırnak 2 - - - TRC34 Siirt 1 - - -

pg. 82

ANNEX 3-LIST OF PARTICIPANTS OF THE STRATEGY PAPERS

List of Participants Industry Strategy Paper 2011-2014

1. Ministry of Industry and Trade (Ministry of Science, Industry and Technology, Ministry of Customs and Trade)

2. Undersecretariat of State Planning Organization (Ministry of Development) 3. Undersecretariat of Treasury 4. Undersecretariat of Foreign Trade (Ministry of Economy) 5. Secretariat General for European Union Affairs (Ministry of EU Affairs) 6. Ministry of Finance 7. Revenue Administration 8. Ministry of National Education 9. Ministry of Energy and Natural Resources 10. Ministry of Environment and Forestry (Ministry of Environment and Urban Planning) 11. Ministry of Labour and Social Security (Ministry of Forestry and Water Affairs) 12. Ministry of Transport (Ministry of Transportation, Maritime Affairs and Communications) 13. Republic of Turkey Prime Ministry Investment Support and Promotion Agency 14. Scientific and Technological Research Council of Turkey (TÜBİTAK) 15. Information and Communication Technologies Authority (BTK) 16. Small and Medium Enterprises Development Organization (KOSGEB) 17. Turkish Patent Institute (TPE) 18. Turkish Standards Institute (TSE) 19. Turkish Accreditation Agency (TÜRKAK) 20. Turkish Union of Chambers and Exchange Commodities (TOBB) 21. Confederation of Turkish Tradesmen and Craftsmen (TESK) 22. Turkish Industry and Business Association (TÜSİAD) 23. İstanbul Chamber of Industry 24. Gaziantep Chamber of Industry 25. Kocaeli Chamber of Industry 26. Economic Development Foundation (İKV) 27. Economic Policy Research Foundation of Turkey (TEPAV)

List of Participants KSEP

1. Ministry of Finance 2. Ministry of Industry and Trade (Ministry of Science, Industry and Technology, Ministry of Customs

and Trade) 3. Undersecretariat of State Planning Organization (Ministry of Development) 4. Undersecretariat of Treasury 5. Undersecretariat of Foreign Trade (Ministry of Economy) 6. Secretariat General for European Union Affairs (Ministry of EU Affairs) 7. Scientific and Technological Research Council of Turkey (TÜBİTAK) 8. Turkish Union of Chambers and Exchange Commodities (TOBB) 9. Confederation of Turkish Tradesmen and Craftsmen (TESK) 10. Small and Medium Enterprises Development Organization (KOSGEB) 11. Ministry of National Education 12. Ministry of Environment and Forestry (Ministry of Environment and Urban Planning) 13. Ministry of Labour and Social Security 14. Ministry of Culture and Tourism

pg. 83

15. Social Security Institution (SGK) 16. National Productivity Centre (General Directorate of Productivity) 17. Turkish Standards Institute (TSE)

National Science, Technology and Innovation Strategy

1. Prime Ministry 2. Ministry of Science, Industry and Technology 3. Ministry of Energy and Natural Resources 4. Ministry of Food, Agriculture and Livestock 5. Ministry of Customs and Trade 6. Ministry of Finance 7. Ministry of Education 8. Ministry of National Defence 9. Ministry of Health 10. Ministry of Forestry and Water Affairs 11. Higher Education Council 12. Undersecretariat for the Treasury 13. Ministry of Economy 14. Ministry of Development 15. Turkish Atomic Energy Authority 16. Scientific and Technical Research Council of Turkey 17. Turkish Union of Chambers and Exchange Commodities 18. Small and Medium Industry Development Organization 19. Technology Development Foundation of Turkey 20. Turkish Patent Institute 21. Related CSOs 22. Turkish Standards Institute 23. Regulatory Authorities 24. Technology Development Centre 25. Techno-park Management Companies 26. Private R&D Centres

pg. 84

ANNEX 5 - LIST OF PARTICIPANTS OF THE OPERATIONAL

PROGRAMME PREPARATORY WORKSHOP

Central Public Institutions

1. Turkish Statistical Institute

2. Technology Development Foundation of Turkey

3. Turkish Union of Chambers and Exchange Commodities

4. Confederation of Turkish Tradesmen and Craftsmen

5. Ministry of Culture and Tourism

6. Ministry of Economy

7. Ministry of Forestry and Water Affairs

8. Ministry of Customs and Trade

9. Ministry of Food, Agriculture and Livestock

10. Ministry of Environment and Urban Planning

11. Ministry of Transportation, Maritime Affairs and Communications

12. Ministry of Labour and Social Security

13. Undersecretariat of Treasury

14. Ministry of Development

15. Ministry of European Union

16. Turkish Academy of Sciences

17. Turkish Standards Institute

18. Turkish Patent Institute

19. Scientific and Technological Research Council of Turkey

20. Small and Medium Industry Development Organization

21. General Directorates of the Ministry of the Science, Industry and Technology

pg. 85

Regional Participants

TR71 1- Ahiler Development Agency 2- Kırıkkale University 3- Aksaray Chamber of Commerce and Industry 4- Governorship of Kırşehir 5- Municipality of Niğde 6- Nevşehir Chamber of Commerce and Industry

TR51 1- Ankara Development Agency 2- METU 3- Hacettepe University 4- Ankara Chamber of Industry 5- Governorship of Ankara 6- Metropolitan Municipality of Ankara

TR61 1- West Mediterranean Development Agency 2- Akdeniz University 3- Burdur Chamber of Commerce and Industry 4- Isparta Chamber of Commerce and Industry 5- Governorship of Burdur 6- Municipality of Isparta

TR81 1- West Black Sea Development Agency 2- Karabük University 3- Bülent Ecevit University 4- Karabük Chamber of Commerce and Industry 5- Governorship of Bartın 6- Municipality of Bartın

TR41 1- Bursa, Eskişehir, Bilecik Development Agency 2- Uludağ University 3- Anadolu University 4- Bursa Chamber of Commerce and Industry 5- Governorship of Bilecik 6- Municipality of Bilecik

TR62 1- Çukurova Development Agency 2- Çukurova University 3- Adana Chamber of Industry 4- Mersin Chamber of Commerce and Industry 5- Governorship of Mersin 6- Metropolitan Municipality of Mersin

TR63 1- Eastern Mediterranean Development Agency 2- Sütçü İmam University 3- Mustafa Kemal University 4- Kahramanmaraş Chamber of Commerce and

Industry 5- Governorship of Osmaniye 6- Municipality of Osmaniye

TR22 1- Southern Marmara Development Agency 2- Çanakkale University 3- Balıkesir University 4- Balıkesir Chamber of Industry 5- Governorship of Çanakkale 6- Municipality of Çanakkale

TRC1 1- Silkroad Development Agency 2- Gaziantep University 3- Gaziantep Chamber of Industry 4- Governorship of Adıyaman 5- Municipality of Kilis

TR10 1- İstanbul Development Agency 2- İstanbul Technical University 3- İstanbul Chamber of Industry 4- Governorship of İstanbul 5- Metropolitan Municipality of İstanbul

TR31 1- İzmir Development Agency 2- Ege University 3- Dokuz Eylül University 4- Aegean Region Chamber of Industry 5- Governorship of İzmir 6- Metropolitan Municipality of İzmir

TR82 1- Northern Anatolian Development Agency 2- Çankırı Karatekin University 3- Sinop Chamber of Commerce and Industry 4- Kastamonu Chamber of Commerce and

Industry 5- Governorship of Sinop 6- Municipality of Çankırı

TRA1 1- North-East Anatolia Development Agency 2- Atatürk University 3- Erzincan Chamber of Commerce and Industry 4- Erzurum Chamber of Commerce and Industry 5- Governorship of Erzincan 6- Municipality of Bayburt

TR33 1- Zafer Development Agency 2- Dumlupınar University 3- Afyonkarahisar Chamber of Commerce and

Industry 4- Manisa Chamber of Commerce and Industry 5- Governorship of Uşak 6- Municipality of Kütahya

pg. 86

TRB2 1- Eastern Anatolia Development Agency 2- Yüzüncü Yıl University 3- Muş Alparslan University 4- Bitlis Chamber of Commerce and Industry 5- Governorship of Hakkâri 6- Municipality of Muş

TR90 1- Eastern Black Sea Development Agency 2- Karadeniz Technical University 3- Ordu Chamber of Commerce and Industry 4- Rize Chamber of Commerce and Industry 5- Governorship of Artvin 6- Governorship of Gümüşhane 7- Municipality of Giresun

TR42 1- Eastern Marmara Development Agency 2- Sakarya University 3- Kocaeli Chamber of Industry 4- Governorship of Düzce 5- Governorship of Yalova 6- Municipality of Bolu

TRC3 1- Dicle Development Agency 2- Batman University 3- Batman Chamber of Commerce and Industry 4- Governorship of Şırnak 5- Governorship of Siirt 6- Municipality of Mardin

TRB1 1- Fırat Development Agency 2- Fırat University 3- İnönü University 4- Malatya Chamber of Commerce and Industry 5- Governorship of Tunceli 6- Municipality of Bingöl

TR32 1- Southern Aegean Development Agency 2- Pamukkale University 3- Adnan Menderes University 4- Denizli Chamber of Industry 5- Governorship of Muğla 6- Municipality of Muğla

TR52 1- Mevlana Development Agency 2- Selçuk University 3- Konya Chamber of Industry 4- Governorship of Karaman 5- Municipality of Karaman

TR72 1- Middle Anatolia Development Agency 2- Cumhuriyet University 3- Erciyes University 4- Kayseri Chamber of Industry 5- Governorship of Sivas 6- Municipality of Yozgat

TR83 1- Middle Black Sea Development Agency 2- Ondokuz Mayıs University 3- Gaziosmanpaşa University 4- Samsun Chamber of Commerce and Industry 5- Governorship of Çorum 6- Municipality of Amasya

TRA2 1- Serhat Development Agency 2- Kafkas University 3- Ağrı İbrahim Çeçen University 4- Ağrı Chamber of Commerce and Industry 5- Governorship of Iğdır 6- Municipality of Ardahan

TR21 1- Trakya Development Agency 2- Trakya University 3- Namık Kemal University 4- Tekirdağ Chamber of Commerce and Industry 5- Governorship of Edirne 6- Municipality of Kırklareli

TRC2 1- Karacadağ Development Agency 2- Dicle University 3- Harran University 4- Şanlıurfa Chamber of Commerce and Industry 5- Governorship of Şanlıurfa 6- Municipality of Şanlıurfa

Documents

COMPETITIVENESS AND INNOVATION SECTOR OPERATIONAL … · COMPETITIVENESS AND INNOVATION SECTOR OPERATIONAL PROGRAMM E Amendment No 1 ... Annex 5-List of Participants of the Operational