Fitch praises Turkey’s new incentive scheme

ISTANBUL - Anatolia News Agency

A file photo shows the entrance to the Fitch Ratings agency in Paris. Fitch says it will take time before the full effect of Turkey’s incentive system becomes evident. AFP photo

International credit rating agency Fitch Ratings said yesterday that the Turkish government’s recently announced investment incentive scheme would be beneficial for strategic and large scale investments in Turkey for local and foreign groups.

The new incentive system differed from previous programs by aiming to reduce Turkey’s dependency on imports, rather than providing financial support based solely on a geographical basis aiming to support under-developed regions in the country, according to Fitch.

 “It will focus mainly on sectors like energy, mining, automotives, and tourism, which are considered the main sources of Turkey’s wide current account deficit. As intermediate goods imports constitute 43 percent of Turkey’s total production, the government is aiming to provide Turkish manufacturers with a competitive edge to reduce the portion of imports,” Fitch said.

Noting that the scheme would provide further impetus for new or delayed investment plans in the slowing economic environment, Fitch said it would take time before the full effect of the new system on the competitiveness of Turkish corporations becomes evident.

Fitch said the government would provide strategic support through value added tax (VAT) exemption, export tax exemption, tax deduction, employment insurance support, interest rate support and VAT refunds, and that the incentives could enhance some Turkish corporations’ competitive advantage by providing lower labor and financing costs.

“Fitch believes the new incentive system could provide some support to petro-chemical companies, which are on the verge of making new investments … Petkim Petrokimya Holdings could be one of the companies that utilize the new incentive system, as its management is planning to increase the capacity of its ethylene and PTA facilities capacity. The incentives could also support Turkish company Aka’s new carbon fiber investments, which are planned to reach $1billion in the long term,” the agency said.