There is something fundamentally wrong in Turkey

Turkey’s transformation is a success story no more. In 1980, Turkey was an economy exporting only $3 billion worth of goods, 90 percent of which were agricultural products. In 2012, we had an export level of 150 billion, 90 percent of which was made up of industrial products. This means that from 1980 until today, Turkey has switched from low-tech to mid-tech products. But we seem to be stuck there at the moment, and there is no sign yet of moving toward the hi-tech. Turkey is now a country where its own electronics giant, instead of pursuing innovation-based growth, is moving into the construction business. It is simply easier to earn money that way. Is there something fundamentally wrong in Turkey? I am afraid so. 

So what is wrong? Either our companies are doing something wrong, or there is something wrong in their habitats. Something weird is happening in their eco system. There are now 53 technology development zones, also known as technoparks, in Turkey. The government has been quite generous to the companies located in these parks, by foregoing all corporate and income taxes for almost 20 years. So far, so good. But do you know how many patents these technoparks have produced over the years? Since 2001, the patent per technopark in Turkey stands at a lousy eight. That’s like a joke. Our problem in hi-tech development is habitual.

I see two patterns. The first is that there must be something wrong in relative prices. It is possible to get rich quickly by building a shopping mall or a high rise somewhere in central Istanbul or Ankara. That is a foolproof way to a high return, especially if you have the right connections to change the zoning regulations. Then it is like manna from heaven. What earthly business of hi-tech R&D could compete with something this heavenly?

Secondly, there are direct cash benefits to new entrepreneurs, but the right institutional structure is not there. The environment is good for splashing funds, but not for real development. Imagine that you have found the best man with the best idea to come to Turkey, but there is just one small detail: s/he is not a Turkish citizen. Immigration laws require you employ five Turkish citizens per a non-Turk. That is hardly feasible for a start-up. And this is only one lousy detail in our institutional infrastructure fraught with such problems.

Turkey needs policies to create a conducive habitat for hi-tech entrepreneurs. As Siberian tigers, crocodiles, zebras need a habitat to survive, so do hi-tech entrepreneurs. Talking about this seems to be the latest fad among Ankara’s bureaucracy, but we are not there yet.