WHY INNOVATION IS CRUCIAL FOR TURKEY'S GROWTH

There is a great chance for Turkey's future to be taken, and it has to be used in the most efficient way.

AFTER A SHAKY Q2 AND Q3 in 2016; Turkey has started the year in a promising way while pushing away the uncertainties. According to the annual growth figures, Turkey has become the fastest growing economy last year, among the G20 countries, with 7.4% growth rate.

However, the focus should be concentrated upon the structural reforms and new investments if Turkey is to achieve further growth in the upcoming years. Capacity utilization rate has reached 78% this year. Proving that Turkey needs to diversify its product range via new investments and innovate new paths in new sectors and markets to reach further growth. Export price per kilogram was $1.37, and Turkey's share in global trade was 0.89% in 2017 indicating a necessity to produce more value-added products and enter more markets in the world to improve its share in global trade.

The importance of value-addedproduction becomes clearer when the sectoral differences are inspected; the defense and aerospace sector with $39.7 and apparel sector with $14.9 per kilograms are the two of the leading sectors in price. This is a concrete evidence that a product gains more value according to the amount of R&D and design investment poured into the final product.

According to TURKSTAT figures Turkey has been increasing its R&D investments in the last decade from $4.3 billion in 2006 to $24 billion in 2016. Also the share of R&D expenditure in GDP was 0.56% back in 2006. Now the share equals to 0.9%. Yet, there is still much more to be done. This ratio is 4.3% in Israel, 4.2% in South Korea, 3.4% in Switzerland, 3.3% in Japan, and 3.3% in Sweden. These economies reached these levels with years of investment and specialization strategies, which Turkey should consider as strong examples while planning our road map.

Even though R&D investments are crucial for development,increasing the savings for an R&D project or for a new investment might put a firm between rock and a hard place. Especially firms operating in a fast serving competitive market, and the ones working with deferred payments find it next to impossible to save the extra budget for innovative projects even they have the idea. Rewards of a new product development process are usually a long term gain. Therefore, the SME's, who consist almost 90% of Turkish economy, are reluctant to invest in such projects. Hence, governments have to support the efforts of private sector for new product development projects.

 

At this point, Turkish Exporters' Assembly (TİM) conducts several projects which were launched in order to support

these efforts, and encourage exporters to innovate new products and build new facilities to expand their production.

The projects are mainly divided in five categories; research and development, innovation, design, branding and entrepreneurship. Since 2012, TİM has been organizing the event “Turkey Innovation Week” in Istanbul. In 2017, the event's name transformed to “Turkey Innovation and Entrepreneurship” with a motive to get entrepreneurs,investors and product developers under same roof. The idea is to create Global Born Companies which could bring fresh blood to Turkey's economy. To serve this purpose, Born Global Istanbul stayed in as a unique organization within Turkey Innovation and Entrepreneurship Week, which hosted around 80,000 people with sessions on entrepreneurship, B2B negotiations, and pitching sessions. With Turkish Economy Bank, TİM launched another project called “TİMTEB Entrepreneurship Houses” aiming to create several hubs around Turkey.

 

This “houses” operate as incubation and acceleration centers, and with their local structure, they are first of their kind in the world. For now, there are ten entrepreneurship houses which keep on searching for new skills, new projects, and new entrepreneurs in İzmir, İstanbul, Gaziantep, Denizli, Bursa, Mersin, Edirne, Konya, Trabzon and Erzurum. Moreover, the outcomes of the project are already beyond our expectations. The amount of individual entrepreneurs has reached 572 under the “entrepreneurship houses” in three years.

The perspective of integrating innovative know-how and higher value-added production, has settled in as an idea for a considerable amount of Turkish companies. However, these companies have to be more dedicated in their attempts on the integration of innovation and R&D into their business, and be patient about getting the desired results. For instance, Turkey witnessed a tremendous growth in defense industry since 2012, and with the realization of the products, the industry have started to produce results from the beginning of 2017. R&D is a long journey, what companies should do in order to succeed is to adapt quickly to new trends and be innovative in setting new ones. Especially in digitalization, early implementers of the new technology will become the flagships of the global economy. The Industry 4.0 is knocking the door, and Turkey has to act rapidly and create a political framework which can ease firms' transformation.

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