growth prospects in turkey’s ict sector · growth prospects in turkey’s ict ... ict represents...

Growth Prospects in Turkey’s ICT Sector 34th Annual US-Turkey Relations Conference

Stephen Ezell Vice President, Global Innovation Policy Information Technology and Innovation Foundation

September 29, 2015

ITIF: Who We Are

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The Information Technology and Innovation Foundation is a think tank at the cutting edge of designing innovation policies and exploring how innovation boosts growth and competitiveness. ITIF focuses on:

•  Innovation processes, policy, and metrics; •  Internet, big data, and ICT policy; •  ICT and economic productivity; •  Science and tech policy; and •  Innovation and trade policy.

Today’s Presentation

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2 ICT Enabling Conditions

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Barriers to Greater Levels of Growth 4

The ICT Sector in Turkey

ICT Drives Productivity/Economic Growth

5 Getting ICT Policy Right

§ The ICT industry accounts for 6 percent of global GDP.

§  ICT represents “super capital” having an impact on productivity 3 to 7 times greater than other forms of capital.

§  In large U.S. firms, $1 dollar of IT capital is associated with $25

of market value; $1 of non-IT capital associated with $1 of value. § A 10% increase in a country’s IT capital stock adds approximately

0.45 percentage points to its GDP.

ICT Drives Productivity & Economic Growth

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Where Does Productivity Come From?: Better Tools

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Today’s Better Tools Are ICT Tools

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•  Over 80% of the benefits from ICT in the U.S. are related to its use by organizations, rather than its production by the ICT industry.

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Both ICT Production and Consumption Matter


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Key ICT Enabling Conditions

§ ICT Infrastructure § ICT Skills § ICT Investments § ICT Incentives

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ICT Infrastructure

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Source: Turkey Information and Communications Technology Authority (September 2014)/UK Trade and Investment

ICT Skills

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Source: IMD World Competitiveness Yearbook, 2014

Availability of ICT Skills, 2014

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ICT Investment by Government

Source: Turkish Ministry of Development

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ICT Incentives

§ Revenues derived from software development and R&D are exempt from income & corporate taxes until end-2023.

§ Expanded R&D tax credits for collaborative research activities.

§ Salaries of R&D and support personnel exempt from all taxes.

§ CapEx deductions of 20 to 50% (by region) from corporate taxes.

§ Technology upgrading: 40% of imported machinery and equipment is funded for small, 30% for medium, and 10% for large-scale companies.


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ICT Sector Increasingly Important to Turkey’s Economy

Source: “Turkish ICT Sector” (Technology, the Way to Prosperity), UK Trade and Investment Council

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Turkey’s ICT Market

Source: “ICT Industry in Turkey” (FM Consulting)

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An Attractive Investment Environment

Source: OECD FDI Restrictiveness Index

0.00

0.50

1.00

1.50

2.00

2.50

3.00

South Africa

Chile Turkey Brazil Korea Russia Mexico India Indonesia China

Score on OECD FDI Regulatory Restrictiveness Index, 2013

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An Attractive Investment Environment

Source: CBRT, Ministry of Economy

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Increasingly Entrepreneurial High-Tech Sector

Source: Deloitte

# Companies in EMEA’s 500-Fastest Growing Companies


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Labor Productivity Per Person (as % U.S. levels, 2013)

An Opportunity to Boost Productivity Growth

Source: The Conference Board, Total Economy Database

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Taiwan Israel Greece Korea Poland Turkey Chile Mexico China India

The Gap Between the Most Productive Firms and the Rest is Growing

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Map of countries by total taxes and tariffs for business-use ICT products

Source: ITIF, Digital Drag: Ranking 125 Nations by Taxes and Tariffs on ICT Goods and Services

Taxes on ICT Products add Considerably to their Cost

Taxes on ICT Products add Considerably to their Cost

Country Total Taxes & Tariffs on ICT

Products Base Tax Extra ICT Taxes ICT Tariffs

Brazil 42.7% 25% 5.1% 11.6%

Turkey 38.2% 23% 15% 0.2%

Poland 23.6% 23% 0% 0.6%

United Kingdom 20.8% 20% 0% 0.8%

Germany 19.6% 19% 0% 0.6%

United States 11.1% 8.7% 2.3% 0.1%

Australia 10.2% 10% 0% 0.2%

Singapore 7.0% 7% 0% 0%

Malaysia 6.0% 6% 0% 0%

Saudi Arabia 0% 0% 0% 0%

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Source: Ernst & Young, 2014

Thereby Thwarting Economic Growth

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Source: ITIF, Digital Drag: Ranking 125 Nations by Taxes and Tariffs on ICT Goods and Services

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NTBs also Raise the Costs of ICTs

§ Price advantages of up to 15 percent in government procurement of advanced technology products.

§ Potential personal data protection laws that would bar e-

payment services if they do not localize personal data banks in Turkey.

§ Potential application of Turkey’s “Internet Law” may harm digital enterprises.


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§  Increasing Turkish GDP to $2 trillion, positioning Turkey as one of world’s 10 largest economies.

§ Boost Turkish exports to $500 billion annually. §  Increase the ICT sector’s share of economy from 2.9% to 8%,

increasing the sector’s output to $160 billion.

§ Reach 120M mobile subscribers/connect 14M households @1GB.

§  Increase “national R&D intensity” from 0.85% to 3%, while increasing private sector R&D expenditure to 2% of GDP.

Turkey 2023 Vision

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ICT Policy Implications for Turkey •  Keep prices low (tariffs, taxes, refrain from IT localization

tax incentives) •  Limit non-tariff barriers on ICTs •  Regulatory burdens on IT (e.g., overly onerous privacy

regulations) •  Embrace smart PPPs (e.g., smart cities, health IT, digital

IDs, etc.) •  Embrace open data policies •  Use ICT to transform all levels of government, especially to

drive productivity •  Support IT skills, especially computer science and electrical

engineering •  Support digital transformation of key sectors (e.g., smart

transportation, health IT, smart grids, etc.) 29

Twitter: @sjezell Facebook: facebook.com/innovationpolicy Blog: www.innovationpolicy.org Website: www.itif.org

Follow ITIF:

Thank You Stephen Ezell [email protected]

growth prospects in turkey’s ict sector · growth prospects in turkey’s ict ... ict represents...

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