Economic incentives to be announced soon in Turkey

It is not fair to accuse the government of failing to take measures against the financial crisis, said the state minister responsible for economics, foreign trade and the Treasury. All technical studies related to the new incentives system have been completed, said Mehmet Şimşek.

The incentives include three main parts, he said in Istanbul at a conference titled "Turkey, the Land of Opportunities: A Safe Haven for Investment."

"First we will contribute to new investments. Secondly, we will make some rearrangements based on industrial and regional priorities. The arrangements will put the economic potential of the cities to the forefront. The initiatives will not be the same everywhere," he said during the second day of the conference organized by the International Investors Association.

"Finally, we will provide special initiatives for big investments, which will bring in a large amount of capital," said Şimşek. The new incentives system will include customs tax exemption, reduced corporation tax, and interest, tax and property support, Şimşek said.

On International Monetary Fund

The International Monetary Fund, or IMF, is one of the factors in Turkey’s external financing search, said Şimşek, adding that the talks between Turkey and the IMF have been dragging for some time. "These talks have been prolonged because we are seeking to generate a program that will support Turkey’s economy. That is why it is taking so much time. We refrain from taking certain steps or engaging in things that could hurt us in the long run, instead of aiding us."

"For example, one of the foreseen precautions suggests hiking up the value added tax, or VAT, rate by four points in order to keep the budget deficit ratio to national income at the 2.5 percent level. A corporation tax hike has also been suggested. During this period we need to do all we can to maintain economic and financial stability," Şimşek said. "We need to provide all the support we can for our real sector in compliance with our budget and means of borrowing. We certainly need to refrain from all measures and factors that can make things worse," he said. "If a mutual agreement is reached on some of the IMF’s demands, then there would be no reason not to sign a new deal."

"Claiming that the government did not take any precautions and did nothing to revive demand and support the economy is unfair," said Şimşek, about the accusations directed at the government for failing to take measures to reduce the impact of the crisis in Turkey. "All countries, including Turkey are taking precautions based on their budget and economic structure."

"We have taken many initiatives, such as providing support for our banking sector, and then pursuing them to support real sector. We provided the liquidity they have demanded, within the calibration of the assurance provided. As the crisis deepened in September, October and November, they used to borrow in the morning and pay back in the evening. In January they had an abundance of Turkish Liras," Şimşek said.

There is currently a concern related to foreign exchange liquidity, Şimşek said. "In order to eliminate these worries and secure some confidence during the last quarter of 2008 and in 2009, we have provided a resource worth $10.8 billion from the Central Bank’s foreign exchange reserves, by taking some syndication and securitization liabilities into consideration. We have reduced the costs and prolonged the terms of maturity."

Turkey attracted direct investment worth $17.7 billion last year. Being able to lure in all that money in times of crisis showed foreign investors have confidence in Turkey, Şimşek said.

"During the past couple of years, Turkey has lured in a record amount of direct investments from around the globe. It is crucial for foreigners to have a good experience in our market. We will continue to do all that we can to ensure the foreign investor who emerges in our market posts profit, increases employment and continues to do business. We also know our deficiencies," Şimşek said.

Progress in IMF talks

Turkey has made "serious progress" in talks with the International Monetary Fund, or IMF, said Arzuhan Doğan Yalçındağ, president of the Turkish Industrialists and Businessmen’s Association, or TÜSİAD.

Speaking to reporters in Ankara after meeting with Prime Minister Recep Tayyip Erdoğan, Yalçındağ said the Association and government are "thinking similarly about their findings."

"In suggestions we are also thinking similarly, but we have to make progress. We talked about the IMF and saw that there is serious progress," said Yalçındağ. Mustafa Koç, chairman of TÜSİAD’S Supreme Advisory Board, also attended the meeting.