The background to the establishment of Turkey’s KOSGEB

DİYADİN YAKUT

Traditionally, small and medium-sized enterprises (SMEs) are known as the backbone of national economies and their vital significance for sustainable and viable economic development has never faded.

Since the advent of Industrial Revolution, a period that was marked by the dramatic and abrupt transition from artisanship, craftsmanship and small-production units to mass-production enterprises, small and medium-sized enterprises have played a crucial - and to some extent indispensable - role in spreading the novel dynamics of so-called “industrialization” through national economies. Some of these enterprises even played the role of a kind of midwife for the emergence of many globally well-known economic giants.

The current welfare economics that is largely based on the interaction between mass production, limitless choices in products, and ever-accelerating lust for consumption by an all-time highest global population could only emerge after this process.

It became possible due to the strict supervision of governments, which have constructed proper institutional frameworks, maintaining the rule of law, fine tuning direct and indirect incentives and - most importantly - providing support through wider efforts to improve industrialization via public bodies established and financed to support SMEs. 

The Turkish part of that global story - despite sporadic and sometimes major setbacks, structural flaws and occasional delays - can be traced back to as early as the first half of the 19th century. But the first genuine public body that aimed solely to give technical and management support to SMEs was formed under the auspices of the United Nations Industrial Development Organization, after it signed a bilateral agreement with the Turkish government. 

To that end, the southeastern province of Gaziantep was picked as a “pilot region” for the first supportive operations of that innovative public institution with respect to its activities, such as establishing “common facilitator workshops” to aid small industrial establishments within the context of the finalized international agreement. These supportive activities were carried out by the Small Sized Industrial Enterprises Development Center (KÜSGEM), which was established within the organizational structure of the Ministry of Industry and Commerce, as was envisaged by the said international agreement.

After a general assessment conducted by the relevant authorities regarding the pros and cons of activities carried out by KÜSGEM, the organization was effectively transformed into a more comprehensive one with far better financial resources and a wider range of benefits and incentives named the Small and Medium-Sized Industrial Enterprises Development Center, immediately after the passing of government resolution 83/6744 in 1983.

Different from KÜSGEM, this new organization was designed to provide SMEs with technical consultancy services to help them achieve modern managerial principles and abilities, together with contemporary quality standards, to be able to reach a desirable level of technological production and employment capacity.

As this latest version also fell short of genuinely delivering on the needs and expectations due to capacity restrictions stemming from its project-based and short-lived support and local nature, legislative and organizational preparations were started to draft a more comprehensive and capable public body with nationwide organizational abilities that would enable the constant delivery of support services throughout the country.

As a fruit of these preparations to replace the more local and restricted supporting body with a more comprehensive national one, the Draft Law on the Establishment of the Presidency of Administration of Small and Medium Sized Industrial Enterprises was submitted to the Plan and Budget Commission in parliament in November 1989. Following alterations to its designed organization and potential benefits for enterprises, it was eventually accepted into law in April 1989.

With the enactment of that law, the Presidency of Administration of Small and Medium Sized Industrial Enterprises (KOSGEB) was established and was entrusted with the task of helping industrial enterprises make products with more added value, increased international competitiveness, and to motivate them to develop industrial brands accepted according to international best practices and standards.