EUROPEAN CHARTER FOR SMALL ENTERPRISES 2004 TURKEY REPORT

EUROPEAN CHARTER FOR SMALL ENTERPRISES 2004 TURKEY REPORT 1

IDENTIFICATION OF GOOD PRACTICES 1. EDUCATION AND TRAINING FOR ENTREPRENEURSHIP 1.1. How would you assess the situation in your country and the progress in this area? An examination of the number of people per 100 adults who have established a business as used in the international entrepreneurship index would reveal that there are fewer entrepreneurs in Turkey than 29 countries. While the number of people establishing a business per 100 adults is 4,6 in Turkey, it is 12 in Ireland and 11,7 in the USA. In spite of increases and decreases, self-employed women is around 10% of the total self-employed. (www.vicebusiness.com/makale4.php) Measures taken and support provided to encourage entrepreneurial initiatives by the youth is restricted to a limited amount of credits made available to young entrepreneurs. However, Turkey continues to encourage the inclusion of the topic of entrepreneurship in basic curriculum also under a compulsion imposed by the global economy, but the efforts made in this respect have to be more systematic and planned. (Berkan TOROS, Meral SAYIN, tel: +90 312 442 23 24, fax: +90 312 440 13 84, email: btoros@gidem.org, msayin@gidem.org, web: www.gap.gov.tr, South Eastern Anatolia Project Regional Development Administration) Together with the increasing awareness in recent years of the importance of entrepreneurship and the contribution it makes to the economy in Turkey, support provided to entrepreneurs is also on the rise. In this context, course programmes on the importance of entrepreneurship are being developed at the engineering and administrative sciences departments of universities so that young people may acquire more entrepreneurial skills. (Mustafa ÖZENÇ, tel: +90 222 236 03 60, fax: +90 222 236 00 41, email: mustafa@eso.org.tr, web: www.eso.org.tr, Eskişehir Chamber of Industry) Vocational Training Centers have been established with a view to support particularly tradesmen, artisans and small industrial enterprises. These Centers provide vocational training to young people employed at small size enterprises, in an effort to render them more qualified. (Süleyman MAT, tel: +90 312 468 15 25, fax: +90 312 58 97, email: suleymanmat@meksa.org.tr, web: www.meksa.org.tr, Vocational Training and Small Industry Development Foundation) 1.2. Please describe significant initiatives taken in this area in general and with a view to the 2003 recommendations in particular. The Programme for the Development of Young Entrepreneurs carried out by KOSGEB s (Small and Medium Industry Development Organization) Entrepreneurship Development Center was implemented within 27 universities in the 2003-2004 academic year. At the stage reached in these programmes, 586 students who are continuing with their activities have reached a stage where they may formulate Business Plans. Besides, programs such as entrepreneurship trainings and activities directing to prisoners, specific business trainings for a wide range of society have been carrying out in order to inform every single man on related areas. (Necla HALİLOĞLU, tel: +90 312 368 95 00, fax: +90 312 368 07 15, email: nhaliloglu@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Entrepreneurship Development Center) The legal framework for the establishment of an Entrepreneurship Center within Atatürk University in Erzurum has been completed and the Center will start its activities on the approval of the University Senate followed by the approval of the Higher Education Board of TURKEY (YÖK). Entrepreneurship courses will also be offered as an elective course at the Faculty of Economic and Administrative Sciences within Atatürk University starting from the 2004-2005 academic year. (Assoc.Prof. Osman DEMİRDÖĞEN, tel: +90 442 231 21 07, fax: +90 442 236 10 14, e-posta: odemir@atauni.edu.tr, web: www.atauni.edu.tr, Erzurum ATATÜRK Üniversitesi; Semra ÖZTÜRK, tel: +90 442 327 32 14, fax: +90 442 327 09 65, email: sozturk@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Erzurum Business Development Center) This Project is offered as a must course at Özel Çağ University for the students of the Management Department in their final year, under the programme implemented in Mersin. Entrepreneurship has been included in the curriculum as an elective course in Mersin University and training was provided to the lecturers who will teach this course. (Görkem GÜRBÜZ, tel: +90 324 235 21 57, fax: +90 324 235 12 04, email: ggurbuz@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Mersin Business Development Center) A high number of university students have become aware of the entrepreneurial potential within themselves thanks to these programmes which is an important factor in the development of an entrepreneurship culture in the University. The success of programmes is also revealed by the establishment of Entrepreneurship Clubs in a short time at the universities where such programmes are implemented. (Mustafa ÇANAKÇI, tel: +90 232 343 44 00/58 fax: +90 232 343 44 00, email: mcanakci@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB EGE University Technology Development Center) 2

KOSGEB provides 2.000 as operating capital (grant) / 8.000 as machinery and equipment loan (to be repaid) in training programmes offered to entrepreneurs and individuals who have become redundant after privatization, under a World Bank Loan and the Privatization Social Support Project, in support of projects including successful business ideas. In this context, a tender was launched and finalized for a training programme envisaged to be organized in the province of Nevşehir and the programme will be implemented in the second half of 2004. (Ersin İNAN, tel: +90 384 212 86 01, fax: +90 384 213 86 72, email: einan@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Nevşehir Business Development Center) The III rd OECD Conference on Women Entrepreneurs was organized in İstanbul between 5 7 June 2004 in line with the 2004 OECD Ministerial Conference, with a view to promote women entrepreneurs. The issues of how Non-Governmental Organizations (NGOs) could establish fund mechanisms for women entrepreneurs and what is required for lobbying for women entrepreneurs were brought up for discussion throughout the activity, and implementations in Canada, United Kingdom, Sweden and EU were explained. (Mehmet AKKAYA, tel: +90 312 368 95 00, fax: +90 312 368 07 15, email: makkaya@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Entrepreneurship Development Center) Programmes are launched to address different groups such as entrepreneurial activities directed at convicts and special programmes for specific professions and every community member is informed of the subject. Leonardo Da Vinci Vocational Training Programme, one of EU s Youth and Training Programme, has been carrying out under the coordination of State Planning Organization and in the meantime awareness and information efforts have been continuing in order to make Turkish SMEs benefit from the programme. In this context, 10 KOSGEB experts were sent to various countries in 2004. (Ömer Çağrı ÖZDEMİR, tel: +90 312 212 81 90, fax: +90 312 212 25 08, email: ocozdemir@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Foreign Relations Department) A Project entitled Mini Companies in Secondary Education is being carried out under the EU 4 th Multi-Annual Programme (MAP). The Project is being carried out by the Ministry of National Education, the Department of Research and Development on behalf of Turkey. Turkey has, for a long time, been making efforts to improve the vocational training system in order to render the labour force more qualified and to increase employment opportunities in all sectors of the economy. This effort becomes more meaningful in the context of Turkey s competitiveness among leading economies of the world and accession to the European Union. A decision was taken for MEDA funds to be made available to Turkey at the EU Helsinki Summit in 1999 with a view to support Turkey s efforts in this respect. As a result of this, Turkey developed several project ideas to close the gap between the labour force needs of its economy and the output of vocational and technical schools. As a first step to this end, an agreement (DG1A-D/MEDTQ/04-98) was signed on 4 July 2000 between the Government of the Republic of Turkey and the European Union on the Project for the Strengthening of Vocational Training and Education System in Turkey (MEGEP). The Technical Assistance Team began its activities on 30 September 2002 under the Project. The term of the project (www.megep.meb.gov.tr) is five years; the first six months is the initial period and the remaining 4,5 years is the implementation period. The total budget of the Project is 58,2 million, of which 51 million is the grant provided by the EU and the remaining 7,2 million is the contribution of the Government of Turkey. (Ali GÜRSEL, tel: +90 312 230 36 44, fax: +90 312 231 55 43, email: agursel@meb.gov.tr, web: www.meb.gov.tr, Ministry of National Education) Guidance was provided for the establishment of an Entrepreneurship Center in Dicle University under the Project for Centers to Support Entrepreneurship. Entrepreneurship courses are offered within this center to students in the 3rd grade. According to the envisaged plan, students in the 3rd grade will attend this course, receive practical training in summer months and will then, in the final grade, prepare a business plan on the field of business they contemplate to establish. In addition to this, training seminars were organized in the provinces of Şanlıurfa, Adıyaman, Diyarbakır, Mardin, Batman and Şırnak to improve entrepreneurship skills. These training seminars will continue in the future. (Berkan TOROS, Meral SAYIN, tel: +90 312 442 23 24, fax: +90 312 440 13 84, email: btoros@gidem.org, msayin@gidem.org, web: www.gap.gov.tr, South Eastern Anatolia Project Regional Development Administration ) The Entrepreneurship Training provided to small business managers at Vocational Training and Small Industry Development Foundation (MEKSA) Training Centers supported by the Government of Switzerland is regarded as a project. Training will be provided under this Project between 2003 2016 to improve the skills of workers and to train personnel needed in business life in the provinces of Diyarbakır, Erzurum, Şanlıurfa, Van and Gaziantep. (Süleyman MAT, tel: +90 312 468 15 25, fax: +90 312 58 97, email: suleymanmat@meksa.org.tr, web: www.meksa.org.tr, Vocational Training and Small Industry Development Foundation) 3

The Ministry of Labour and Social Security organizes vocational training courses directed at those who will establish their own business and to unemployed people registered with the Ministry who have no vocational skills and knowledge, in order to ensure that they pursue income generating activities. These courses are mostly planned taking into account the characteristics of the region. As of May 2004, 111 labour force training courses were organized directed at those who will establish their own business. 1957 people participated in the courses in the last five years. (The figure reached 263 in January May 2004) (Celal POLAT, tel: +90 312 296 64 81, fax: +90 312 212 11 48, email: cpolat@csgb.gov.tr, web: www.csgb.gov.tr, Ministry of Labour and Social Security) The Export Promotion Center of TURKEY (EPC) has been holding a Youth Congress for Foreign Trade since 1988 to raise awareness among university students of exports and to encourage creative ideas directed at Turkish exports, on the understanding that the promotion of and raising competitive power in exports would be possible only by the existence of trained manpower from all segments of the society. An announcement was made for the Congress to be held in 2004 inviting representatives from 81 faculties of 72 universities. One-to-one counselling services began to be provided as of the end of 2003 primarily to Small and Medium Size Enterprises (SMEs) and to production and exportation firms within the framework of the Foreign Trade Advisors and Trainers, Training Project carried out jointly by EPC and ITC (International Trade Center) in 2000. In this context, a pilot implementation was launched primarily in Ankara, İstanbul and İzmir. Counselling services are currently being provided to 5 firms about operation, operation management and strategy. The counselling services in question consist of two stages, namely diagnosis and treatment. (Ebru GÜLSOY, tel: +90 312 417 22 23, fax: +90 312 417 22 33, email: ebrug@igeme.gov.tr, web: www.igeme.gov.tr, Export Promotion Center of TURKEY) The Ankara Chamber of Industry organized training and seminar programmes under the following headings to promote entrepreneurship; modern sales techniques, persuasion psychology in sales and planning, the establishment and exercising of rights in the fields of trade marks, patents, beneficial models, industrial design, legal remedies to be applied in the case of tortuous use of rights. The Ankara Chamber of Industry has, in the same period, assigned 300 practical training quotas to University students receiving Vocational and Technical Education at member work places. (Nil KISAKÜREK, tel: +90 312 417 12 00, fax: +90 312 417 52 05, email: nil.kisakurek@aso.org.tr, web: www.aso.org.tr, Ankara Chamber of Industry ) 1.3. What progress has been made on the project aiming at inserting modules related to entrepreneurship into the curriculum of Secondary schools and High schools? Training was provided on business ideas to students in the 14-17 age group by making active contributions to the training given on how to establish a company directed at the students of primary education, with the cooperation of KOSGEB Mersin Business Development Center and the Mersin Unit of the Education Volunteers Foundation of Turkey. (Görkem GÜRBÜZ, tel: +90 324 235 21 57, fax: +90 324 235 12 04, email: ggurbuz@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Mersin Business Development Center) 4

2. CHEAPER AND FASTER START-UP 2.1. How would you assess the situation in your country and the progress in this area? Law No. 5174 on the Union of Chambers and Commodity Exchanges of Turkey (TOBB) which entered into force after being published in the Official Gazette dated 1 June 2004 decreased the cost of establishing a business and facilitated the establishment formalities which in turn facilitated the operation of relevant chambers. This law is considered to be positive by Chambers. (Aytaç COŞKUN, tel: +90 224 243 15 00, fax: +90 224 242 85 12, email: aytacc@btso@org.tr, web: www.btso.org.tr, Bursa Chamber of Commerce and Industry) Up to the law on Law which allows corrections on laws, firm establishment procedures are transferred to Commercial Registry Offices which are under Chambers of Commerce or Industry in order to ease firm establishment. In accordance with this regulation, the establishment process can be completed in a day which was in 7-30 days before. Also, Preparation of Commercial Registry Automation project has been started by TOBB. (Mustafa ÖZCAN, tel: +90 312 413 80 00, fax: +90 312 418 32 68, email: ozcanm@tobb.org.tr, web: www.tobb.org.tr, The Union of Chambers and Commodity Exchanges) The nature of Incentive Law No. 5084 that encourages entrepreneurship and investments affects the psychology of entrepreneurs in a positive way. However, as this Law neglects previously made investments, it causes an inconvenience for existing investors. (Berkan TOROS, Meral SAYIN, tel: +90 312 442 23 24, fax: +90 312 440 13 84, email: btoros@gidem.org, msayin@gidem.org, web: www.gap.gov.tr, South Eastern Anatolia Project Regional Development Administration) Formalities will continue to be made easier for foreign investors. For example, while previously a company with foreign capital had to obtain an approval from the Treasury first, it now applies directly to the Ministry of Industry and Trade. (Nil KISAKÜREK, tel: +90 312 417 12 00, fax: +90 312 417 52 05, email: nil.kisakurek@aso.org.tr, web: www.aso.org.tr, Ankara Chamber of Industry) A tradesman or an artisan is required to fulfil the following requirements to establish a business pursuant to the Tradesmen and Artisans Law in force in Turkey; To receive a tax number to become a taxpayer as the 1st step. To receive a licence from the Municipality to establish a work place as the 2nd step. (In the mean time, to file an application presenting a master workman s certificate in 113 trades certified by the Ministry of National Education according to the level of education; and to fill in the printed forms and submit them for being examined). To register with the Tradesmen and Artisans Register as the 3rd step. Tradesmen and artisans are required to make an application to the register within 30 days from the date on which they start operating. It is incumbent on tradesmen and artisans to enrol in the Register in order to carry out professional activities and to register with the Professional Chamber. To register with the Professional Chamber as the 4th step. The Board of Directors of the Chamber examines the situation of any member who files an application with the Chamber and makes a decision no later than within one month. (Cevat AKGÖNÜLLÜ, tel: +90 312 286 03 65, fax: +90 312 285 40 28, email: cevatak@sanayi.gov.tr, web: www.csgb.gov.tr, Ministry of Industry and Trade) 2.2. Please describe significant initiatives taken in this area in general and with a view to the 2003 recommendations in particular. The preparations for Trade Register Automation Project have been initiated by The Union of Chambers and Commodity Exchanges (TOBB). This Project will ensure integration between primarily tax departments and institutions involved in the establishment of companies. (Mustafa ÖZCAN, tel: +90 312 413 80 00, fax: +90 312 418 32 68, email: ozcanm@tobb.org.tr, web: www.tobb.org.tr, The Union of Chambers and Commodity Exchanges) Although an on-line registration opportunity has not yet been offered to tradesmen and artisans, all tradesmen will have the opportunity to register on-line upon the implementation of e-tradesmen Project launched by the Ministry of Industry and Trade under e-state Project. An on-line connection will also be established between the Ministry of Industry and Trade, Turkish Tradesmen and Artisans Confederation (TESK), Halkbank, Tradesmen and Artisans Registration Offices and Professional Chambers. (Görgül GÜNER, tel: +90 312 418 32 69, fax: +90 312 425 75 06, email: disismd@tesk.org.tr, Turkish Artisans and Craftsmen Confederation; Cevat AKGÖNÜLLÜ, tel: +90 312 286 03 65, fax: +90 312 285 40 28, email: cevatak@sanayi.gov.tr, web: www.sanayi.gov.tr, Ministry of Industry and Trade) 2.3. The total costs involved in passing the formal approval procedures for creation of a new company has found to be 750 in Turkey. Could this high amount be reduced? The number of authorities the approval of which is sought during establishment procedures may be reduced (given that particularly notarial costs are very high, the elimination of notarial procedures and 5

authorizing the trade register to carry out necessary registration formalities will reduce costs). The cost of establishing a business may further be reduced by decreasing the amount deposited with the Consumer Protection Fund which is one-thousandth of capital, the fees charged for registration with a chamber, certification costs of books, service fees collected by Chambers and fees charged for announcements, and by lifting the charges collected, thereby providing financial support, however small it may be, to entrepreneurs in establishing their business. (Mustafa ÖZENÇ, tel: +90 222 236 03 60, fax: +90 222 236 00 41, email: mustafa@eso.org.tr, web: www.eso.org.tr, Eskişehir Chamber of Industry; Mustafa ÖZCAN, tel: +90 312 413 80 00, fax: +90 312 418 32 68, email: ozcanm@tobb.org.tr, web: www.tobb.org.tr, Union of Chambers and Commodity Exchanges; Nil KISAKÜREK, tel: +90 312 417 12 00, fax: +90 312 417 52 05, email: nil.kisakurek@aso.org.tr, web: www.aso.org.tr, Ankara Chamber of Industry) No change has been made for reducing the total cost of establishing a new enterprise by a tradesman. The fees charged by professional chambers and tradesmen s and artisans register while a new enterprise is established by a tradesman or artisan are indexed to minimum wages. As a result of this, these fees are increased when minimum wages are raised. (Görgül GÜNER, tel: +90 312 418 32 69, fax: +90 312 425 75 06, email: disismd@tesk.org.tr, web: www.tesk.org.tr, Turkish Artisans and Craftsmen Confederation) It is impossible to reduce this fee for the time being for professional organizations of tradesmen and artisans to continue with their activities. (Cevat AKGÖNÜLLÜ, tel: +90 312 286 03 65, fax: +90 312 285 40 28, web: www.sanayi.gov.tr, email: cevatak@sanayi.gov.tr, Ministry of Industry and Trade) 6

3. BETTER LEGISLATION AND REGULATION 3.1. How would you assess the situation in your country and the progress in this area? The Coordination Board for the Improvement of Investment Environment has made some progress in the works and it continues to perform. Although these works are far from being adequate for improvements in this context, they are expected to be more effective in the future, as a process involving also the business world. In the event that this Board works more effectively, there will be a substantial increase in foreign and domestic investments in Turkey. (Mustafa ÖZENÇ, tel: +90 222 236 03 60, fax: +90 222 236 00 41, email: mustafa@eso.org.tr, web: www.eso.org.tr, Eskişehir Chamber of Industry; Mustafa ÖZCAN, tel: +90 312 413 80 00, fax: +90 312 418 32 68, email: ozcanm@tobb.org.tr, web: www.tobb.org.tr, Union of Chambers and Commodity Exchanges) Considerable progress was made in 2003 in the efforts directed at creating capital markets where SMEs may raise funds within the framework of Capital Market Law. The legal infrastructure was established to this end upon the issuance of the Regulation on the Establishment and Operation Rules of Securities Markets Organized Outside Stock Exchanges which entered into force after being published in the Official Gazette No. 25052 dated 18.03.2003. The purpose of this Regulation is to lay down the rules that will govern the establishment and operation of organized markets which will allow primarily small and medium size enterprises and those enterprises in all sectors which have a potential for development and growth to raise funds in capital markets. According to the Capital Market Law (CML), companies the total assets and gross sale proceeds of which is less than the amount specified by the Capital Markets Board (CMB) may be exempted by the CMB in whole or in part from their obligations arising from their being subject to CML. Main exemptions by 2004 figures are as follows: - Publicly held companies, the total assets of which is less than TL 4.38 trillion and the shares of which are not traded at the stock exchange may, upon their request, be exempted by the Board from the obligation of being subject to independent auditing. - Publicly held companies, the number of shareholders of which is below 200 for two consecutive years, the total assets of which is less than TL 172 billion and the shares of which are not traded at the stock exchange may, upon their request, be deleted from the Board s register by the Board. Similarly, the Communique on Exemptions lays down the rules governing the exemption from profit distribution that may be granted to publicly held companies and the exemption from the announcement of financial statements that may be granted to other issuers. In addition to this, the amendments made to the Communique in order to grant an exemption to companies from the obligation to issue a prospectus during the registration process wer published in the Official Gazette in July 2004, to ensure the harmonization of Capital Market Legislation with EU Legislation. On the other hand, those publicly held joint stock companies the shares of which are traded at the Stock Exchange (including small and medium size enterprises) which are deemed appropriate by the Board are allowed to use shelf registration system in the issue of shares. In this system, the prospectus includes information about the shares to be issued; and the detailed document about partnerships is continuously published on the web page of the stock exchange and is revised at least once annually. This enables the enterprises to complete issue transactions in a shorter time. (Tuba ALTUN, tel: +90 312 292 88 81, fax: +90 312 292 90 00, email: taltun@spk.gov.tr, web: www.spk.gov.tr, Capital Markets Board of TURKEY) 3.2. Please describe significant initiatives taken in this area in general and with a view to the 2003 recommendations in particular. There is a need to establish a Founder Company which will organize, establish the infrastructure of and operate the market directed at SMEs, within the framework of the Regulation on the establishment and operation procedures of security markets organized outside stock exchanges. A meeting was held in May on the Establishment of a Market organized outside stock exchanges for SMEs with the participation of top level representatives of all parties concerned (KOSGEB, the Industrialists and Businessmen Association of Turkey (TUSİAD), the Independent Industrialists and Businessmen Association (MÜSİAD), banks, dealer institutions, etc), which was presided over by the Ministry of Industry and Trade. Upon the completion of works on this subject in a short time, SMEs will have the opportunity to receive long term and cheap credits, the depositors will seize new investment opportunities and the country s economy will secure a considerable amount of sources including particularly idle savings kept under cushion. (Tuba ALTUN, tel: +90 312 292 88 81, fax: +90 312 292 90 00, email: taltun@spk.gov.tr, web: www.spk.gov.tr, Capital Markets Board of TURKEY) Law No. 5084 on the Encouragement of Investments and Employment and on Amendments to be made to Certain Laws entered into force after being published in the Official Gazette No. 25365 dated 6 7

February 2004. The objective of this Law is to encourage investments and employment in 36 provinces where GNP is below $1500 by granting certain tax exemptions. The law is also aimed at the establishment of manufacturing basins in Anatolia by ready-made clothing industry which by its nature is labour-intensive and consists of SMEs. This Law which grants certain exemptions to SMEs is also covered by Action No. 7 of the Survey. (Ülkem Genç YAMAN, tel: +90 212 639 76 56, fax: +90 212 451 61 13, email: ulkem@tgsd.org.tr, web: www.tgsd.org.tr, Clothing Industrialists Association of TURKEY) Bureaucratic formalities have been decreased to the extent allowed by the Banking Law and pertinent legislation for those enterprises which make use of Export Credit Bank of TURKEY (Eximbank) services. There has also been a shift from official certification to an application system based on declarations made by firms. (Berna İLDOĞAN, tel: +90 312 417 13 00, fax: +90 312 425 89 18, email: bisseven@eximbank.gov.tr, web: www.eximbank.gov.tr, Export Credit Bank of TURKEY) Law No. 4817 on Work Permits of Foreigners began to be implemented on 6 September 2003. This Law introduced such arrangements which will ensure the fulfilment of international commitments of Turkey to prevent unfair competition, unemployment and unrecorded earnings and to combat clandestine employment taking into consideration the labour market and the current economic situation of the country, and authorized a single Center to be in charge. The New Labour Law No. 4857 introduced new forms of work such as part time work, on call work, temporary employment relation (borrowed), compensating work, work for a definite period, subemployers and short term work. The monthly insurance premium declaration, the quarterly insurance premium payroll and the monthly social security supporting premium payroll issued by employers for insured employees has been reduced to a single document entitled Monthly Premium and Service Certificate under the Regulation on Social Security Procedures which was published in the Official Gazette No. 25348 dated 16.01.2004 and entered into force on 01.05.2004. (Celal POLAT, tel: +90 312 296 64 81, fax: +90 312 212 11 48, email: cpolat@csgb.gov.tr, web: www.csgb.gov.tr, Ministry of Labour and Social Security) The number of application documents required of enterprises wishing to receive KOSGEB support was reduced from 49 to 5 under the restructuring process of KOSGEB in 2003. (Abdullah TAŞKIN, tel: +90 312 212 81 90, fax: +90 312 212 25 08, email: ataskin@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Foreign Relations Department) 3.3. What progress has been made on the project to establish the Investment Promotion Agency? Although the Law on Direct Foreign Investments entered into force on 17.06.2003, the legislation on the establishment of an Investment Promotion Agency based on legislation proposals made within the Coordination Board for the Improvement of Investment Environment (CBIIE) has not yet been enacted. The Draft Law on the establishment of an Investment Promotion Agency is yet to be signed by the Council of Ministers. (Burçin DEĞİRMENCİOĞLU, tel: +90 212 252 29 00, fax: +90 212 249 50 07, email: bdegirmencioglu@kosgeb.gov.tr, Istanbul Chamber of Industry; Mustafa ÖZCAN, tel: +90 312 413 80 00, fax: +90 312 418 32 68, email: ozcanm@tobb.org.tr, web: www.tobb.org.tr, Union of Chambers and Commodity Exchanges) 3.4. Is it foreseen to assess Turkey s legislation on the business environment, in particular for small enterprises? Yes. The Investment Climate Assessment Project to be carried out jointly by TOBB and the World Bank will be launched soon covering also the issue of efficiency. (Mustafa ÖZCAN, tel: +90 312 413 80 00, fax: +90 312 418 32 68, email: ozcanm@tobb.org.tr, web: www.tobb.org.tr, Union of Chambers and Commodity Exchanges) Basic arrangements relating to market organized outside stock markets Directed at SMEs planned to be established have been completed. More detailed arrangements relating to transactions and clearing rules upon the establishment of the company which will operate the market have also been drafted. (Tuba ALTUN, tel: +90 312 292 88 81, fax: +90 312 292 90 00, email: taltun@spk.gov.tr, web: www.spk.gov.tr, Capital Markets Board of TURKEY) 8

4. AVAILABILITY OF SKILLS 4.1. How would you assess the situation in your country and the progress in this area? The lack of qualified personnel is considered to be a major problem for Vocational and Technical Education in Turkey. The process of harmonization with the EU and international competition that has rapidly been placing pressure on enterprises in the recent years caused some progress to be made in this field. A considerable number of training programmes have been organized in recent years by public enterprises, an increasing number of private sector organizations and professional organizations to address training needs as one of the most basic problems of enterprises. (Mustafa ÖZENÇ, tel: +90 222 236 03 60, fax: +90 222 236 00 41, email: mustafa@eso.org.tr, web: www.eso.org.tr, Eskişehir Chamber of Industry; Görgül GÜNER, tel: +90 312 418 32 69, fax: +90 312 425 75 06, email: disismd@tesk.org.tr, web: www.tesk.org.tr, Turkish Artisans and Craftsmen Confederation; Nil KISAKÜREK, tel: +90 312 417 12 00, fax: +90 312 417 52 05, email: nil.kisakurek@aso.org.tr, web: www.aso.org.tr, Ankara Chamber of Industry) Small size enterprises are not able to carry out training programmes by themselves. However, various institutions and organizations often organize training programmes needed by small enterprises with a view to raise awareness in this respect and to ensure that small size enterprises make maximum use of this training. A Training and Counselling Center was established within KOSGEB in June 2003 in the restructuring process, in order to increase the contributions by and effectiveness of small and medium size industrial enterprises in meeting the country s economic and social requirements. (Gülser ROL, tel: +90 312 368 95 00, fax. +90 312 368 07 15, email: grol@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Training and Consultancy Center) Moreover; Entrepreneur Support Centres of South Eastern Anatolia Project Regional Development Administration may be cited as an example which organizes training according to their annual plans, taking into account local needs under the regional development strategy. (Berkan TOROS, Meral SAYIN, tel: +90 312 442 23 24, fax: +90 312 440 13 84, email: btoros@gidem.org, msayin@gidem.org, web: www.gap.gov.tr, South Eastern Anatolia Project Regional Development Administration ) Export Promotion Center of TURKEY has been organizing Foreign Trade Training Programmes in various provinces nationwide with a view to contribute to SME s opening up to foreign markets. (M.Ali KILIÇKAYA, tel: +90 312 204 76 36, fax: +90 312 212 88 81, email: kilickayam@dtm.gov.tr, web: www.dtm.gov.tr, Undersecretariat of Foreign Trade) The Law on TOBB which was published on 01.06.2004 authorizes TOBB to issue certificates in those trades which are not included in Vocational Training Law No. 3308. However, the necessary legislation should be adopted in order to introduce this application. (Mustafa ÖZCAN, tel: +90 312 413 80 00, fax: +90 312 418 32 68, email: ozcanm@tobb.org.tr, web: www.tobb.org.tr, Union of Chambers and Commodity Exchanges) The MEKSA Foundation attributes importance to the training of labour force and skills development courses for employees in the areas required by enterprises, expressing that the Foundation fulfils important tasks for the adoption of continuous education. (Süleyman MAT, tel: +90 312 468 15 25, fax: +90 312 468 58 97, email: suleymanmat@meksa.org.tr, web: www.meksa.org.tr, Vocational Training and Small Industry Development Foundation) 4.2. Please describe significant initiatives taken in this area in general and with a view to the 2003 recommendations in particular. Export Promotion Center of TURKEY is the head of the Working Group established within the framework of the objective entitled Raising Public Awareness of Exports and Training of the parties on Exportation as one of the strategic aims of the Strategic Plan for Exports 2004-2006. (Ebru GÜLSOY, tel: +90 312 417 22 23, fax: +90 312 417 22 33, email: ebrug@igeme.gov.tr, web: www.igeme.gov.tr, Export Promotion Center of TURKEY) The activities carried out by MEKSA Foundation in the 2003-2004 academic year are presented under 4 headings; - 1.811 individuals engaged in 16 trades received training at the supra-enterprise training center for professions directed at provision of services; - 1.441 individuals participated in 94 vocational development training courses for 4.230 hours offered to adults; -1.342 individuals participated in 52 courses for 31.784 hours in 9 provinces under the Privatization Social Support Project (PSSP) carried out by İŞKUR (Turkish Employment Organization). More than 50% of the trainees who completed their training with success have been employed. 9

- The organization of 12 courses through MOBILE TRAINING in the provinces of Mardin, Bingöl, Adıyaman, Kilis and Kahramanmaraş has been included in the work programme where 180 individuals will acquire vocational skills. (Süleyman MAT, tel: +90 312 468 15 25, fax: +90 312 58 97, email: suleymanmat@meksa.org.tr, web: www.meksa.org.tr, Vocational Training and Small Industry Development Foundation) A training course was organized for 203 soldiers on construction and painting techniques, computer processing, auto engines and welding under the protocol drawn up between the Chamber of Industry of Ankara and the General Command of Gendarmerie, and efforts are made to employ in respective trades the soldiers who prove to be successful in these courses following their discharge. (Nil KISAKÜREK, tel: +90 312 417 12 00, fax: +90 312 417 52 05, email: nil.kisakurek@aso.org.tr, web: www.aso.org.tr, Ankara Chamber of Industry) Seminars were organized under the heading Beyond Frontiers from 81 Provinces in 81 provinces of Turkey between 01 March- 4 June 2004 with the cooperation of EPSC Export Promotion Study Center, Exporters Unions, EXIMBANK Export Credit Bank JSC of Turkey, which were coordinated by the Undersecretariat for Foreign Trade, with a view to train personnel qualified in foreign trade, to inform the firms operating in the foreign trade sector of the current legal implementations and to increase the exports of the country. Around 5 thousand firms participated in the training activity. (M.Ali KILIÇKAYA, tel: +90 312 204 76 36, fax: +90 312 212 88 81, email: kilickayam@dtm.gov.tr, web: www.dtm.gov.tr, Undersecretariat of Foreign Trade) Counselling Support was given to 456 firms from July 2003 to March 2004 by the Training and Counselling Center of KOSGEB. Training support continues to be provided to enterprises through KOSGEB s General Training Programmes and Training Support models that allow target enterprises to receive training in the fields they require. This support is expected to reach 3,5 trillion in 2004. (Gülser ROL, tel: +90 312 368 95 00, fax. +90 312 368 07 15, email: grol@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Training and Consultancy Center) The Chamber of Industry of İstanbul plans to implement a training programme in 2004 with a view to contribute through training to small and medium size enterprises so that they take a systematic approach in new business development activities. (Burçin DEĞİRMENCİOĞLU, tel: +90 212 252 29 00, fax: +90 212 249 50 07, email: bdegirmencioglu@kosgeb.gov.tr, web: www.iso.org.tr, Istanbul Chamber of Industry) 10

5. IMPROVING ON-LINE ACCESS 5.1. How would you assess the situation in your country and the progress in this area? All public institutions and NGOs providing services to Small Size Enterprises promote their services on Internet. In addition to this, some official processes and services have recently been presented on Internet under the e-state project. (Abdullah TAŞKIN, tel: +90 312 212 81 90, fax: +90 312 212 25 08, email: ataskin@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Foreign Relations Department) Particularly the following headings are taken into account while addressing how SMEs may make use of the yields of the data communication age, and efforts are made for the solution of problems in connection with this issue. - Lack of technical knowledge and experience (lack of trained personnel with technical knowledge) - The cost of having access to information about the market and potential partners (Private web sites offer commercial information at a certain price which may be difficult for SMEs to afford) - One of the main and outstanding problems encountered by the enterprises in Anatolia in shifting to E-Trade is; around 80% of small and large enterprises in Anatolia are organized on family basis. Professional managers are rarely used. Traditional business attitudes continue to dominate the work processes of these enterprises. On the other hand, the nature of information technologies necessitates trained individuals skilled at abstract thinking. A personnel qualification called Cognitive literacy is an essential characteristic of human resources that firms should acquire in shifting to e-trade. (Nil KISAKÜREK, tel: +90 312 417 12 00, fax: +90 312 417 52 05, email: nil.kisakurek@aso.org.tr, web: www.aso.org.tr, Ankara Chamber of Industry) Updated information on subjects such as Export Legislation, Import Legislation, Fairs Organized Abroad, State Grants Directed at Exports, Foreign Import Demands is provided on the web pages of the Undersecretariat of Foreign Trade (www.dtm.gov.tr) and EPSC (www.igeme.gov.tr) for the purpose of directing SMEs to exportation. (M.Ali KILIÇKAYA, tel. +90 312 204 76 36, fax: +90 312 212 88 81, email: kilickayam@dtm.gov.tr, web: www.dtm.gov.tr, Undersecretariat of Foreign Trade) Thanks to the web page introduced in 1999 by the General Directorate of Revenues (www.gelirler.gov.tr) for the purpose of establishing a better and more sound communication with tax-payers and to minimize costs and time for both the administration and the tax-payers, SMEs are now able to learn current changes in legislation and applications, have access to certain tax declarations and statements on the internet in the same way as tax-payers. They are also able to ask questions about their problems by e- mail which are replied in the shortest time. In this way, they receive replies to their questions without having to go to the tax department and save on time The tax-payers registered with tax departments which have adopted an automation system and where loads of tax accrual and collection transactions are executed, may, through the Internet Tax Department, have access to their accounts in the tax department by receiving a cipher, follow up information about their payments and debts and thus have access to this information in a practical and expeditious manner at no additional cost, under the Tax Department Automation Project (VEDOP I) launched in 1998 and VEDOP II launched on 15.04.2004. The Ministry of Finance continues to work on legislation and infrastructure to ensure that tax declarations are presented through all kinds of electronic information and communication means and media including internet. By the law 5228, VEDOP II project has been started in order to enable taxpayers carry out their processes regarding tax on electronic platform. (Mehmet ASLAN, tel: +90 312 415 34 76, fax: +90 312 415 28 23, email: mhmtaslan@yahoo.com, web: www.maliye.gov.tr, www.gelirler.gov.tr, General Directorate of Revenues, Ministry of Finance) 5.2. Please describe significant initiatives taken in this area in general and with a view to the 2003 recommendations in particular. The Ministry of Industry and Trade and TOBB continue to work on the establishment of a web site within the framework of the works performed by the Coordination Board for Improving the Investment Environment, SME Committee. (Mustafa ÖZCAN, tel: +90 312 413 80 00, fax: +90 312 418 32 68, email: ozcanm@tobb.org.tr, web: www.tobb.org.tr, Union of Chambers and Commodity Exchanges) The e-tradesmen Project carried out by the Ministry of Industry and Trade in order to encourage tradesmen and artisans to make more use of electronic communication means, to execute most of their transactions online, to receive their views online and to enable them to obtain information has made great progress. Information about tradesmen and artisans throughout the country, chambers, unions, federations and Confederation of tradesmen and artisans will be recorded under the e-tradesmen 11

Project. (Cevat AKGÖNÜLLÜ, tel: +90 312 286 03 65, fax: +90 312 285 40 28, email: cevatak@sanayi.gov.tr, web: www.sanayi.gov.tr, Ministry of Industry and Trade) The tax-payers will be able to submit their declarations and additional statements on the internet under the e-declaration project within the framework of the VEDOP II Project that was launched on 15.04.2004. Currently, 56% of tax-payers pay their taxes through the banking system (branch or internet banking) without having to go to tax departments. In addition to this, tax-payers may, apart from tax departments, deposit their taxes in an easier and expeditious manner in national banks authorized by the Ministry of Finance to collect taxes. These payments are recorded online and may be checked by the taxpayers through the Internet Tax Department. (Mehmet ASLAN, tel: +90 312 415 34 76, fax: +90 312 415 28 23, email: mhmtaslan@yahoo.com, web: www.maliye.gov.tr, www.gelirler.gov.tr, General Directorate of Revenues, Ministry of Finance) The Turkish Eximbank made substantial investments to data processing technologies. The infrastructure that may promptly respond to demands of exporters / insured firms was established particularly as a result of the Document Management and Work Flow System that was introduced. (Berna İLDOĞAN, tel: +90 312 417 13 00, fax: +90312 425 89 18, email: bisseven@eximbank.gov.tr, web: www.eximbank.gov.tr, Export Credit Bank of TURKEY) The E-Declaration project to be launched within the Ministry of Labour and Social Security aims to ensure that declarations are presented in a sound and safe manner at such time and place as desired, and those employers save on time and labour. The E-Declaration Project will also provide the opportunity to follow up information on the accrual and collection transactions of the work place. The provision added by Law No. 5073 to Article 79 of Social Insurance Law No. 506 provides to opportunity to deliver the Monthly Premium and Service Certificates (See 3.2) to the Institution on internet and via electronic and similar media. The Monthly Premium and Service Certificate for May 2004 and for subsequent months may be forwarded to the Social Security Institution according to the instructions contained in the Guidebook for the Use of e-declaration that may be found at www.ssk.gov.tr. (Celal POLAT, tel: +90 312 296 64 81, fax: +90 312 212 11 48, email: cpolat@csgb.gov.tr, web: www.csgb.gov.tr, Ministry of Labour and Social Security) The E-Union (E-Birlik) project which is built on the agreement reached between the Undersecretariat for Foreign Trade, the Undersecretariat for the Customs and the Union of Exporters and which allows the firms to fill in Customs Declaration Forms and execute Union approval/registration transactions in electronic media in their office was introduced on 01 October 2003 to serve those concerned. (M.Ali KILIÇKAYA, tel. +90 312 204 76 36, fax: +90 312 212 88 81, email: kilickayam@dtm.gov.tr, web: www.dtm.gov.tr, Undersecretariat of Foreign Trade) The Foreign Trade and Investment Legislation prepared by the Export Promotion Center of TURKEY (EPC) and a publication entitled Exporter s Guidebook that includes basic information for guiding small enterprises engaged or intending to be engaged in foreign trade were published at the organization s web site (www.igeme.gov.tr) in 2003 and June 2004 respectively. The Trade Information and Guidance Services Unit (tbrh@igeme.gov.tr); known as One Stop Shop which started to operate within the EPC s library in May 2004 aims to provide information to exporters in an expeditious, updated, systematic and standard manner from a single point and to ensure coordination between firms and EPC s specialized personnel by concentrating on three main activities, namely Library, Electronic Data Sources and Guidance Services. The basis of coordination is guidance services. On the other hand, the working group for establishing Information Centers for Exporters as one of the Strategic Objectives of the Strategic Export Plan 2004-2006 is operating under EPSC. (Ebru GÜLSOY, tel: +90 312 417 22 23, fax: +90 312 417 22 33, email: ebrug@igeme.gov.tr, web: www.igeme.gov.tr, Export Promotion Center of TURKEY) The Industrial Development Bank of Turkey (IDBT) was involved in the extension to other banks of the second portion of the Export Finance Intermediary Loan (EFIL), a World Bank loan. The IDBT which assumed the task of an intermediary bank rather than a bank that directly causes the loan to be used in the second portion of the EFIL, developed an online access package to ensure that the documents issued and sent to it by the banks that extend the loan are evaluated expeditiously and completely. (Refik AKINCI, tel: +90 212 334 52 67, fax. +90 212 243 29 75, email: akincir@tskb.com.tr, web: www.tskb.com.tr, Industrial Development Bank of TURKEY) The audio response system used by the Chamber of Industry and Commerce of Bursa enables the members to learn, without the intervention of any intermediary, their debts for 24 hours by listening to the system after entering their chamber registration number without having to go to the Chamber and 12

without keeping the personnel busy. The members may also leave their facsimile number and receive a detailed list of their debts by fax. (Aytaç COŞKUN, tel: +90 224 243 15 00, fax: +90 224 242 85 12, email: aytacc@btso.org.tr, web: www.btso.org.tr, Bursa Chamber of Commerce and Industry) 5.3. Has the law on electronic signature been adopted? The Law on electronic signatures was adopted on 15.01.2004 and the Electronic Signature Law No. 5070 was published in the Official Gazette No. 25355 dated 23 January 2004. The Law which will enter into force on 15.07.2004 will be effective upon the issuance of a regulation within six months from the date of entry into force. (Görgül GÜNER, tel: +90 312 418 32 69, fax: +90 312 425 75 06, email: disismd@tesk.org.tr, web: www.tesk.org.tr, Turkish Artisans and Craftsmen Confederation) The first practice to be introduced in Turkey in connection with electronic signatures is the Public Enlightment Platform developed by the Capital Market Board, İstanbul Stock Exchange and The Scientific and Technical Research Council of Turkey. This practice will enable the companies registered with the stock exchange and intermediary organizations to deliver their financial statements and explanations about private situations to the Capital Market Board safely on the internet by using the electronic signature technology and this information will promptly be published on an internet site. (Tuba ALTUN, tel: +90 312 292 88 81, fax: +90 312 292 90 00, email: taltun@spk.gov.tr, web: www.spk.gov.tr, Capital Markets Board of TURKEY) 13

6. GETTING MORE OUT OF THE SINGLE MARKET 6.1. How would you briefly assess your country s progress in getting more out of the single market? Turkey has been adhering to single market principles and is in the process of completing legal and administrative arrangements in this respect. It is true that enterprises and entrepreneurs in Turkey do not make adequate use of the opportunities offered by the single market. Turkey s foreign trade with the EU appears to have made great progress after the Customs Union. However, it is only institutionalized firms that benefit from this progress and new entrepreneurs and SMEs do not make adequate use of the opportunities offered by the single market. (Mustafa ÖZENÇ, tel: +90 222 236 03 60, fax: +90 222 236 00 41, email: mustafa@eso.org.tr, web: www.eso.org.tr, Eskişehir Chamber of Industry; Necla OFLAZ, tel: +90 232 484 80 46, fax: +90 312 489 07 90, email: noflaz@ege.ebso.com.tr, web: www.ebso.org.tr, Aegean Region Chamber of Industry) The Quality and System Certification Department operating in the field of TS EN ISO 9001:2000 Quality Management Systems, TS EN ISO 14000 Environment Management Systems which play an important role in the structural developments of particularly small enterprises, made regional visits on sectoral basis according to a plan it has formulated for 2003 and 2004. (Alpay Ergin İĞREK, tel: +90 312 417 83 30, fax: +90 312 417 35 78, email: aigrek@tse.org.tr, web: www.tse.org.tr, Turkish Standards Institution) The scope of Foreign Stores Investment Loan provided by Eximbank to instill the Made in Turkey image and to create world trade marks was broadened to provide support to store / shopping Center investments and investments made to create fashion and to instill Turkish trade marks. In this context, the amount of fixed installation investments abroad which had to be at least US$ 500.000 as determined by the Turkish Eximbank for projects to which a loan would be extended was reduced to US$ 200.000. (Berna İLDOĞAN, tel: +90 312 417 13 00, fax: +90 312 425 89 18, email: bisseven@eximbank.gov.tr, web: www.eximbank.gov.tr, Export Credit Bank of TURKEY) A programme was drawn up by DTM for a Trade Delegation to visit Japan, Turkmenistan, Iran, Pakistan, Czech Republic, India, Russian Federation, Kazakhstan, Ukraine, Greece and Georgia in 2003 and in the first half of 2004. A programme will also be prepared for a Trade Delegation to visit Bulgaria, Romania, Denmark, Egypt, Poland, UAE, Croatia and Russian Federation in the second half of 2004. A Working Group was also organized with the participation of representatives from public and private sector institutions such as the Treasury, State Planning Organization, the Undersecretariat for Customs, KOSGEB, Halkbank, TOBB, Exporters Assembly of TURKEY and Turkish Foundation For Small and Medium Business headed by the General Directorate of Exports of DTM to attain the objective of Developing Support Mechanisms to Increase the Competitive Power of SMEs under the Strategic Export Plan 2004-2006 formulated by DTM. (M.Ali KILIÇKAYA, tel: +90 312 204 76 36, fax: +90 312 212 88 81, email: kilickayam@dtm.gov.tr, web: www.dtm.gov.tr, Undersecretariat of Foreign Trade) One of the most important developments in this respect is that 9 European Information Centers (EIC) have begun to operate. After Commission s evaluation and approval period of the tenders given by various organizations in order to establish new Turkish EICs under EU MAP, 9 Turkish EICs, located in Ankara, İstanbul-Asia, İstanbul- Europe, Gaziantep, Konya, Bursa, Samsun, Adana, Denizli, have started to serve for SMEs as members of commission s EICs chain. (Ümit ÇAKAR, tel: +90 312 212 81 90, fax: +90 312 212 25 08, email: ucakar@kosgeb.gov.tr, web: www.kosgeb.gov.tr, www.map.kosgeb.gov.tr, KOSGEB Foreign Relations Department) The European Information Center for SMEs in Denizli began to operate in 2003 in cooperation with the Chambers of Industry and Trade of Denizli to ensure that the SMEs in Denizli and in the surrounding areas are informed about EU Policies, activities, programmes, foreign markets and investment environments, and that similarly foreign enterprises obtain information on business circles in Turkey. Under the same frame, Euro Info Center established within Bursa Chamber of Commerce and Industry, informative services have been started to be given towards the members. (Cennet TEFENLİLİ, tel: +90 258 265 5667, fax: +90 258 263 81 25, email: tefenlili@denizlis.tobb.org.tr, web: www.denizliso.tobb.org.tr, Denizli Chamber of Industry, (Aytaç COŞKUN, tel: +90 224 243 15 00, fax: +90 224 242 85 12, email: aytacc@btso@org.tr, web: www.btso.org.tr, Bursa Chamber of Commerce and Industry) Various supports are provided such as the Programme for Export Oriented Business Trips Abroad (EOBT), Support for Creating and Promoting Trade Marks, Support for Market Research Abroad and Continuous Support for Participating in Exhibitions (Show-Room) Abroad to attain the main objective of increasing the shares of KOSGEB and SMEs in the total exports of Turkey. (Abdullah TAŞKIN, tel: +90 312 212 81 90, fax: +90 312 212 25 08, email: ataskin@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Foreign Relations Department) 14

7. TAXATION AND FINANCIAL MATTERS 7.1. How would you assess the situation in your country and the progress in this area? In the field of Finance; The Credit Guarantee Cooperatives of Tradesmen and Artisans which extend credits to their partners or which stand surety in receiving credits and bank letters of guarantee are organized as unions on regional basis (there are 32 Regional Unions). All these unions have gathered under the umbrella of the Central Union of Credit Guarantee Cooperatives of Tradesmen and Artisans of Turkey. Halkbank extends credits to tradesmen and artisans against the guarantee of the Credit Guarantee Cooperatives of Tradesmen and Artisans. (Cevat AKGÖNÜLLÜ, tel: +90 312 286 03 65, fax: +90 312 285 40 28, email: cevatak@sanayi.gov.tr, web: www.sanayi.gov.tr, Ministry of Industry and Trade) One of the barriers to SMEs access to credits and to their acceptance in the banking system is the problem of guarantee. (Gülden ÇETİNER, tel: +90 312 435 64 26, fax: +90 312 434 48 89, email: gulden@kgf.com.tr, web: www.kgf.com.tr, Credit Guarantee Fund) Small and medium size enterprises are the outstanding and productive segment of the country s economy. SMEs account for 90% - 95% of all enterprises in Turkey. Efforts made to revitalize the economic life which has been stagnant due to the disturbance of macro economic balances in recent years seem to concentrate mostly on small and medium size enterprises. (Murat Kadir EMNİYET, tel: +90 312 289 28 01, fax: +90 312 289 28 75, email: memniyet@halkbank.com.tr, web: www.halkbank.com.tr, Halkbank of TURKEY) For example, the existing credit programmes of the Turkish Eximbank include specific applications directed at SMEs. There is a specific application for SMEs under Export Credits Prior to Shipment which have a share of around 60-65% in Short Term Export Credits of Turkish Eximbank. Intermediary banks are obliged to extend the above mentioned amont of their limits to SMEs. Failure to do so results in the blocking of 30% by the Turkish Eximbank. Another application under the Programme for Export Credits Prior to Shipment is a 2% reduction in interest rates in the case of firms located in Priority Development Regions. Moreover, the Export Preparation Credit Programme for SMEs was introduced on 21.04.2003, which credit has a maturity term of one year and interest is payable semi-annually. The amount of bank letters of credit has been established at 50% of the credit risk for SMEs taking into account the problems encountered by SMEs in providing guarantee, under this programme which envisages to provide direct financial support to SMEs. (Berna İLDOĞAN, tel: +90 312 417 13 00, fax: +90 312 425 89 18, email: bisseven@eximbank.gov.tr, web: www.eximbank.gov.tr, Export Credit Bank of TURKEY) In the field of taxing; The tax rates are very high in Turkey and this promotes underground economy. Tax revenues do not increase. Giving weight to indirect taxes rather than direct taxes is of importance for public acceptance of taxes and for tax equity. (Berkan TOROS, Meral SAYIN, tel: +90 312 442 23 24, fax: +90 312 440 13 84, email: btoros@gidem.org, msayin@gidem.org, web: www.gap.gov.tr, South Eastern Anatolia Project Regional Development Administration) A classification according to EU norms of one-man businesses, one-man businesses established as a partnership, one-man companies and capital companies in Turkey would reveal that these are micro enterprises and small and medium size enterprises. SMEs are subject to taxes according to the taxation system and the conditions for benefiting from tax incentives are imposed accordingly. Earnings of companies established as a one-man business are subject to Income Tax as commercial earnings. These are taxed on either real basis or simple basis. The commercial earnings of those taxed on real basis are determined either by balance sheet method or operation account method. Tax-payers have an option to select taxation on simple basis. The earnings of those established as a capital company are subject to Corporation Tax as corporation earnings. The following tax incentives are offered which are not specifically targeted at small and medium size enterprises, but which these enterprises may benefit from. Investment Reduction Exception in Commercial and Agricultural Earnings: Tax payers (including ordinary partnerships, unlimited companies, limited partnerships and tax payers subject to corporation tax) whose commercial and agricultural earnings are determined by balance sheet method, including those subject to limited liability may, in the determination of their tax base, reduce as investment reduction exception from 15

their respective earnings 40% of the cost price of economic assets which they have purchased or manufactured to use in their operations and which are subject to depreciation, provided that they adhere to the rules and procedures laid down in Article 19 of Income Tax Law (ITL). The machinery and equipment delivered to tax-payers having an investment incentive certificate, which machinery and equipment are included in such certificate are exempt from Value Added Tax, (VAT Law, Article 13/d). Tax Deferment in the case of Splitting, Transfer or Conversion of Shares: The profits made will not be taxed in the event of death of the enterprise owner and transfer of the balance sheet to inheritors; transfer of the balance sheet of an individual enterprise which is subject to balance sheet method totally to a capital company; and conversion of an unlimited company and a limited partnership to a capital company (ITL, Article 81). Profits arising from the transfer in whole of an enterprise, the legal or business head office of which is located in Turkey to another enterprise in Turkey, profits arising from the splitting of an enterprise which is in liquidation due to such splitting, and profits made from the conversion of shares will not be taxed (Corporation Tax Law, Articles 37-38). These transactions are also exempt from Value Added Tax, Banking and Insurance Transactions Tax and Stamp Duty. Tax Reductions and Exceptions Aimed at Increasing Employment: The Law on the Encouragement of Investments and Employment and on Amendments to Several Laws 5084) which aims to promote regional development and to increase employment and investments entered into force after it had been published in the Official Gazette No. 25365 dated 6.2.2004. The law in question aims to increase investments and employment opportunities by granting tax and insurance premium incentives, providing energy support and allocating land at no cost to investments. Exceptions Made For R& D Activities: According to Interim Article 2 of the Law on Technology Development Zones, the earnings of management companies under this Law and the earnings derived from software and R&D activities exclusively in these zones by payers of income and corporation tax which operate in these zones will be exempt from income and corporation taxes until 31.12.2013. The salaries paid to researchers, to those specialized in software, and R&D personnel in connection with these tasks will be exempt from all taxes until end of 2013. Regulation, which allows tax payers to reduce the expenses on R&D particularly towards new technology and information search within their enterprise, has been accepted by the law 5228. Real Estate and Risk Capital Earnings Exception: According to Article 8/4(c) of the Corporation Tax Law, the earnings of risk capital investment funds or partnerships and according to sub-paragraph (d), real estate investment funds or partnerships are exempt from Corporation Tax. Exceptions Made For Tax Payers Subject to Taxation on Simple Basis: According to Article 17/4, paragraph (a) of the Value Added Tax Law, the deliveries and services of tax payers taxed on simple basis are exempt from VAT. Tradesman s Exemption: Those that perform mostly labour intensive works itinerantly without being employed at any work place, the turnover of whom is very low may benefit from tradesman s exemption in which case they will not be subject to Income Tax and Value Added Tax provided that they meet certain conditions stipulated by the Law. Their only obligation is to keep documents indicating their revenues and expenses. Corporation Tax Exemption Granted to Organizations Providing Credit Guarantee: Article 7, paragraph 24 of the Corporation Tax Law provides that institutions established exclusively to provide credit guarantee to small and medium size enterprises within the framework of financial and technical cooperation agreements concluded with foreign countries or international finance institutions, which add the earnings from these activities to guarantee liability funds and invest these funds in banks and institutions that extend loans to small and medium size enterprises, without distributing these funds, should be exempt from Corporation Tax. The documents issued in connection with these transactions are exempt from Stamp Duty. (Mehmet ASLAN, tel: +90 312 415 34 76, fax: +90 312 415 28 23, email: mhmtaslan@yahoo.com, web: www.maliye.gov.tr, www.gelirler.gov.tr, General Directorate of Revenues, Ministry of Finance) A Second National Market has been established in the Stock Exchange for SMEs which are unable to meet the requirements of the National Market, in order to ensure that SMEs may raise funds in the Capital Market. The requirements to be fulfilled in order to trade in the Second National Market are more flexible than those to be satisfied in order to trade in the National Market. (Mert SÜZGEN, tel: +90 212 298 21 30, fax: +90 212 298 25 00, email: mert.suzgen@imkb.gov.tr, web: www.imkb.gov.tr, İstanbul Stock Exchange) 16

7.2. Please describe significant initiatives taken in this area in general and with a view to the 2003 recommendations in particular. Law No. 5084 aims to increase investments and employment opportunities by applying tax and insurance premium incentives, providing energy support and providing land for investments at no cost in order to promote regional development and in this context to increase employment and investments (See 7.1; Exemptions granted to R&D activities). (Mehmet ASLAN, tel: +90 312 415 34 76, fax: +90 312 415 28 23, email: mhmtaslan@yahoo.com, web: www.maliye.gov.tr, www.gelirler.gov.tr, General Directorate of Revenues, Ministry of Finance) In response to a letter by the Ministry of Industry and Trade on 15.08.2003, the Council of Ministers decided on 22.03.2004 that the Decree on the Provision of Financial Support Under Appropriate Conditions by KOSGEB with a view to Develop and Promote Small and Medium Size Enterprises should be put into force, in accordance with Article 33 of Law No. 6802 dated 13.07.1956, and Interim Article of Law No. 4684 dated 20.06.2001. KOSGEB has established new credit mechanisms in cooperation with banks and made these available to SMEs. In this context; 1- A KOSGEB VAKIFBANK SME Supporting Credit Protocol was drawn up between KOSGEB and T. Vakıflar Bankası on 23.05.2003 and as of June 2004, 484 SMEs received around TL 45 trillion ( 26 million) as a repayable loan with low interest rates. 2 A KOSGEB HALKBANK Express SME Supporting Credit Protocol was drawn up on 12.11.2003 and as of June 2004, 1143 SMEs received TL 75 trillion ( 44 million) as a repayable loan with low interest rates under the funds transferred to the bank by KOSGEB. Moreover, as of end of June 2004, KOSGEB fund amounting to TL 50 Trillion ( 30 million) has started to transfer to 3 public banks and to be extend around TL 2,5 quadrillion ( 2 Billion) as Export Loan with 0 rate of interest. (Semih ÇEYİZ, tel: +90 312 368 95 00, fax: +90 312 368 07 15, email: sceyiz@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Finance Center) Halkbank which was founded for the purpose of collecting deposits and to extend these funds to tradesmen, artisans and SMEs as loans, has since 1993, been extending credits to women and young entrepreneurs by a decision of the Council of Ministers, which credit is referred to as Women and Young Entrepreneurs Loan. In this context, loans were made available to homemakers, female and male entrepreneurs. An amendment was made to the loan in 2003 and funds were made available to male and female entrepreneurs who have not completed 35 years of age, who will produce goods and services for the first time, who intend to establish a business to engage in commercial activities or to be selfemployed, and who have a valid certificate or knowledge of and experience in the business to be conducted. Halkbank will play a key role in offering loans and providing savings deposits services in the market with its broad network of branches in the years to come. (Murat Kadir EMNİYET, tel: +90 312 289 28 01, fax: +90 312 289 28 75, email: memniyet@halkbank.com.tr, web: www.halkbank.com.tr, Halkbank of TURKEY) A goal was set in February 2004 to increase investments and employment opportunities by applying tax and insurance premium incentives in relatively less developed provinces, providing energy support and allocating land to investments free of charge, by Law No. 5084 on the Promotion of Investments and Employment and Making Amendments to Several Laws. However, as the Law provides that at least 10 workers should be employed in order to receive investment and employment support in this context, particularly micro enterprises do not fall within the scope of this incentive. (Görgül GÜNER, tel: +90 312 418 32 69, fax: +90 312 425 75 06, email: disismd@tesk.org.tr, web: www.tesk.org.tr, Turkish Artisans and Craftsmen Confederation) In addition to legal arrangements, the solution of the problem of unrecorded economy appears to be of great importance in order to achieve the results expected of the Market organized outside stock exchanges directed at SMEs. In this context, proposals on regulations were submitted to the Ministry of Finance by the Capital Market Board. The Ministry of Finance made it compulsory for tax payers to substantiate payments made and amounts collected in connection with transactions exceeding TL 5 billion by documents issued by banks or private finance institutions, as from 01.08.2003. This limit was then raised to TL 10 billion and certain exceptions were made. (Tuba ALTUN, tel: +90 312 292 88 81, fax: +90 312 292 90 00, email: taltun@spk.gov.tr, web: www.spk.gov.tr, Capital Markets Board of TURKEY) Taking into account the payments made by firms for the services provided by the Turkish Standards Institute (TSI), the Board of Directors made a decision to stipulate appropriate payment terms (payment 17

in instalments) for enterprises that have difficulties in payment. It is also planned to make a reduction of 25% in fees charged by TSI for certification services relating to Quality Systems, for SMEs making use of KOSGEB services. (Alpay Ergin İĞREK, tel: +90 312 417 83 30, fax: +90 312 417 35 78, email: aigrek@tse.org.tr, web: www.tse.org.tr, Turkish Standards Institution) Based on the fact that exporters and particularly SMEs had great difficulties in receiving letters of guarantee after the February 2001 crisis and with a view to alleviate this problem, loans are being made available to those firms which satisfy certain financial and ethical criteria in the determination of credibility where the amount of the guarantee sought was decreased instead of the previous application where a reduction was made in the guarantee based on performance. In this way, more firms will have the opportunity to benefit from the credit facility directly. In addition to this, while previously SMEs which failed to fulfil the minimum performance requirement did not have the opportunity to receive credits directly, the maximum limit of US$ 100.000 imposed has provided them with the opportunity to use Export Preparation Loans. SMEs are given priority under both Short Term Export Credit Programmes and Special Medium and Long Term Credit Programmes. It is envisaged to extend loans to SMEs in an amount of US$ 1,3 billion (TL 2,1 quadrillion) in 2004. (Berna İLDOĞAN, tel: +90 312 417 13 00, fax: +90 312 425 89 18, email: bisseven@eximbank.gov.tr, web: www.eximbank.gov.tr, Export Credit Bank of TURKEY) 7.3. Has progress been made towards the introduction of non traditional financial instruments (venture capital, business angels, etc) in Turkey? Venture capital will become widespread subject to a change in mentality. Promotion and training are essential for financial instruments such as venture capital to become widespread as can be seen from the success of family type enterprises and on the other hand failure of other kinds of partnerships to achieve a similar success. (Refik AKINCI, tel: +90 212 334 52 67, fax: +90 212 243 29 75, email: akincir@tskb.com.tr, web: www.tskb.com.tr, Industrial Development Bank of TURKEY) SME Venture Capital Investment Partnership JSC (KOBİ Girişim Sermayesi Yatırım Ortaklığı AŞ) led by TOBB, where KOSGEB is also a partner in, is planned to employ its professional staff and begin operating by the end 2004. (Mustafa ÖZCAN, tel: +90 312 413 80 00, fax: +90 312 418 32 68, email: ozcanm@tobb.org.tr, web: www.tobb.org.tr, Union of Chambers and Commodity Exchanges) An important progress made in the field of venture capital is the establishment of the Venture Capital Association of Turkey (www.turkvca.org) which has as its objective the development of solution suggestions by addressing the problems of the venture capital sector in 2004, the exchange of views with authorities concerned and the strengthening of cooperation between the participants operating in the sector. The inflow of funds is expected to be $ 500 million annually in the event of reaching the European average in the venture capital sector. (Euromoney Venture Capital and Private Equity Yearbook 2003/04). On the other hand, venture capital investment partnerships supported by tax incentives became more flexible and compatible with the practices in the world as a result of a change made in legislation in 2003 and this has been the most important progress made in this field. Following the issuance of a new regulation, a new venture capital investment partnership was established and an application was made to the Capital Market Board for the establishment of another one. The legislation in question continues to be revised according to the needs observed in implementation. (Tuba ALTUN, tel: +90 312 292 88 81, fax: +90 312 292 90 00, email: taltun@spk.gov.tr, web: www.spk.gov.tr, Capital Markets Board of TURKEY) A Draft Law on Microfinance Institutions was prepared by the Banking Regulation and Supervision Authority (BDDK) to allow a new type of banking institution focused on microfinance services to enter the market, in order to provide microfinance from non-traditional financial instruments. This draft law lays down the rules that will govern the establishment, management, operation, liquidation and supervision of microfinance institutions to be established for the purpose of providing finance to micro entrepreneurs. The concept of microfinance has recently been placed on the agenda in Turkey. Although microfinance has recently been perceived as a sub-sector within the financial system, loans have been extended to small enterprises for years by Halk Bankası particularly directed at the trade and services sector and by Ziraat Bankası directed at the agricultural sector. These banks are currently the most effective institutions in the market. (Murat Kadir EMNİYET, tel: +90 312 289 28 01, fax: +90 312 289 28 75, email: memniyet@halkbank.com.tr, web: www.halkbank.com.tr, Halkbank of TURKEY) The recent situation in this field is that there is a venture capital investment partnership (Vakıf Risk Sermayesi Yat. Ort. A.Ş.), the shares of which have been offered to the public and are traded in the 18

İstanbul Stock Exchange, and that a second partnership (İş Risk Sermayesi Yat. Ort. A.Ş.) filed an application in 2004 to offer its shares to the public and to trade them in the Stock Exchange. (Mert SÜZGEN, tel: +90 212 298 21 30, fax: +90 212 298 25 00, email: mert.suzgen@imkb.gov.tr, web: www.imkb.gov.tr, İstanbul Stock Exchange) Credit Guarantee Fund JSC established to tackle the guarantee problems encountered by SMEs in using loans is continuing with its efforts in this respect. Credit Guarantee Fund is able to provide guarantee services to a higher number of SMEs through the Protocols it has drawn up with 6 banks as of 2004. Credit Guarantee Fund gives priority to giving support to young entrepreneurs, new entrepreneurs who have difficulties in benefiting from the banking system and to initiatives directed at R&D projects. The results achieved by Credit Guarantee Fund as of the end of 2003 are given below (Gülden ÇETİNER, tel: +90 312 435 64 26, fax: +90 312 434 48 89, email: gulden@kgf.com.tr, web: www.kgf.com.tr, Credit Guarantee Fund): FROM 01.07.1994 TO 31.12.2003 Number of Firms To Which A Guarantee Has Been Provided 715 Number of Guaranteed Credits 1251 Amount of Guarantee (Billion TL) 32.276 Amount of Guarantee ( ) 48.708.140 IN 2003 Number of Firms To Which A Guarantee Has Been Provided 121 Number of Guaranteed Credits 172 Amount of Guaranteed Credits (Billion TL) 19.200 Amount of Guarantee (Billion TL) 14.126 Amount of Guaranteed Credits ( ) 11.400.000 Amount of Guarantee ( ) 8.405.048 19

8. STRENGTHEN THE TECHNOLOGICAL CAPACITY OF SMALL ENTERPRISES 8.1. How would you assess the situation in your country and the progress in this area? The private sector, professional organizations and universities are working on this subject by making great efforts. Great strides have been initiated particularly under the 6th Framework Programme and other programmes of the EU. (Nil KISAKÜREK, tel: +90 312 417 12 00, fax: +90 312 417 52 05, email: nil.kisakurek@aso.org.tr, web: www.aso.org.tr, Ankara Chamber of Industry) Law No. 4691 on Technology Development Zones which entered into force on 06.07.2001 aims to encourage R&D as the main source of innovative activities for small enterprises, in Technology Development Zones where universities, research institutions and organizations and industry will work in cooperation. The Law further aims to increase the number of R&D firms. The establishment of technoparks speeded up after the law had taken effect. Currently there are 15 Technology Development Zones. Of these zones, Eskişehir and GOSB Technopark Technology Development Zones are located in the Organized Industrial Zone and university focused other Technology Development Zones have been established in university campuses. One of the priority goals of the Ministry of Industry and Trade is to render Technology Development Zones functional. (Serdar İMAMOĞLU, tel: +90 312 231 72 80, fax: +90 312 231 87 33, email: serdarim@sanayi.gov.tr, web: www.sanayi.gov.tr, Ministry of Industry and Trade) For example, such a zone was put into operation in the Eskişehir Organized Industrial Zone in 2004 and received the first application from an investing firm and issued the necessary work permissions. A goal has been set to employ 5 thousand people in 50 firms and to export state-of-the-art technology products worth US$ 500 million when the zone in question operates at full capacity. (Mustafa ÖZENÇ, tel: +90 222 236 03 60, fax: +90 222 236 00 41, email: mustafa@eso.org.tr, web: www.eso.org.tr, Eskişehir Chamber of Industry) 8.2. Please describe significant initiatives taken in this area in general and with a view to the 2003 recommendations in particular. An important progress made in this field in 2004 is the launching of the IRC-AEGEAN Project (http://irc.ege.edu.tr) (KOSGEB - Aegean University Chamber of Industry for the Aegean Region Atatürk Organized Industrial Zone in İzmir) and the IRC Anatolia Project, (www.irc-anatolia.com) (KOSGEB Chamber of Industry of Ankara Middle East Technical University Technopark JSC). Innovation Transfer Centers established under the 6th Framework Programme of the EU are accessible over the network under the same name. (Mustafa ÇANAKÇI, tel: +90 232 343 44 00/58 fax: +90 232 343 44 00, email: mcanakci@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB EGE University Technology Development Center; Ömer ÖZ, tel: +90 312 210 13 00, fax: +90 312 210 13 09, email: ooz@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Middle East Technical University Technology Development Center; Nil KISAKÜREK, tel: +90 312 417 12 00, fax: +90 312 417 52 05, email: nil.kisakurek@aso.org.tr, web: www.aso.org.tr, Ankara Chamber of Industry) An aggregation work is planned to be carried out with the International Competition Research Agency (www.urak.org) established with a view to increasing the competitive advantage of the country by carrying out aggregation works in KOSGEB and Turkey under the GİDEM (Entrepreneurship Promotion Center) project. In this context, aggregation analysis and development studies will be conducted on textiles, ecological agriculture and marble sectors. A plan is made under the GİDEM Project that a technology incubator be established by KOSGEB as the 2nd step of the Entrepreneurship Center established within Dicle University. (Berkan TOROS, Meral SAYIN, tel: +90 312 442 23 24, fax: +90 312 440 13 84, email: btoros@gidem.org, msayin@gidem.org, web: www.gap.gov.tr, South Eastern Anatolia Project Regional Development Administration ) Important initiatives taken within TİDEB, The Scientific and Technical Research Council of TURKEY (TÜBİTAK) in 2003 are as follows; - Advancement programme (Aggregation) The ADANA (Southern Anatolia Region) Joint University Industrial Study Center which has a regional structure (not specific to any sector and where mostly SMEs operate) plans to implement together with TİDEB a technology management programme directed to enterprises, in 2004. A goal has been set to increase the number of firms that carry out R&D projects in the region, to ensure that these firms share their knowledge and experience and that R&D activities become widespread in the region and to organize trainers and advisors who will ensure the continuity of these efforts, upon the completion of the programme. - ETRANET (use of information technologies in manufacturing industry) TÜBİTAK participated in the etranet project supported under the 6th Framework Programme of the EU with the R&D Assistance programme implemented by TİDEB. The objective of the Programme that was 20

launched in 2004 is to promote and increase the effectiveness of national support programmes of 13 European countries participating in the project, the use of data communication technologies (DCT) in the manufacturing industry and the research activities carried out to this end. (Ercan ORHAN, +90 312 466 13 89, fax. +90 312 427 43 05, email: ercan.orhan@tubitak.gov.tr, web: www.tideb.tubitak.gov.tr, The Scientific and Technical Research Council of TURKEY) A project entitled Strengthening of the Institutional Infrastructure of Technology Development Zones and Development of ICT Infrastructure was drawn up to be supported under the EU Bilateral Financial Cooperation, with a view to ensure that personnel employed in the management of Technology Development Zones provide better services to companies in the zone, and a counselling specification was prepared for the preliminary feasibility study of the project. A goal has been set to complete the counselling study no later than September 2004 and to present the project to the EU Commission in May 2005. The Project will commence in 2005 if approved by the EU Commission. A limited number of personnel employed in the management companies of all Technology Development Zones will receive training at the Technoparks in EU countries under the project. The personnel so trained will organize training sessions and instruction meetings for SMEs under the project to provide information about innovations, advanced technologies and R&D activities and emphasize the importance of new technologies to direct SMEs to R&D studies. A portal to be made available to all Technology Development Zones and SMEs will also be established to announce R&D studies, field studies in the field of patents, proposals for domestic and foreign partnerships. It is aimed that this portal will ensure cooperation between universities industry and R&D firms producers in the shortest way possible. (Serdar İMAMOĞLU, tel: +90 312 231 72 80, fax: +90 312 231 87 33, email: serdarim@sanayi.gov.tr, web: www.sanayi.gov.tr, Ministry of Industry and Trade) 8.3. Please describe how the above target has been met. If it has not been met, please explain why and propose measures to catch up. 2003 has been a successful year for the R&D Assistance Programme as an important component of the National Innovation System. The number of project applications filed increased by 12% as compared to the previous year. The Projects presented by SMEs account for 72% of the project proposals submitted this year. This rate was 65% last year. The rate of SMEs in the total increased from 72% to 79%. As of the year end, the enterprises where 50 or less people are employed accounted for 45% of all firms filing an application. The Project Market Supporting studies conducted in 2003 are listed below: - Supported Project Market - Information R&D Project Market - Production, Product Development, Technology Management, Industrial Information R&D Project Market - Machinery Equipment System Design and Production R&D Project Market for the Eastern Mediterranean and South eastern Anatolia Regions - Agro-industry R&D Project Market II The relations established between industrial researchers and academicians engaged in research in the process of the Sectoral Situation Assessment Study covering Main Automotive Industry led to the establishment of an Automotive Research Center in İstanbul in line with the results of this study, and became a permanent, physical R&D cooperation environment. This is a sector-focused University Industry Research Center which has among its objectives the taking of measures for the development of the automotive subcon industry consisting of SMEs. As was stated in the previous report, a goal has been set to broaden the scope of the Sectoral Situation Assessment Study to cover also the auxiliary industry in order to exhibit the dominance of technology and the level of design abilities, covering the Automotive Industry in whole. Data was collected in 2003 to this end about the technologic dominance of the auxiliary industry, its ties with the main industry and design competency. Data will be evaluated and a conclusion will be reached 2004. Preliminary studies have been completed for the METU-USAM Advanced Manufacturing Systems Research Center planned to be established at OSTİM in Ankara. The Center is currently at stage of establishment. Once established, this Center will be able to develop integrated and aggregated projects particularly in fields such as subway systems and railway transportation, maximizing the advantage of diversity in the industrial structure of OSTİM. A systematic aimed at increasing R&D abilities of firms is intended to be applied, through cooperation in aggregated projects that may carry out horizontal and vertical technology transfers. 21

(Ercan ORHAN, +90 312 466 13 89, fax. +90 312 427 43 05, email: ercan.orhan@tubitak.gov.tr, web: www.tideb.tubitak.gov.tr, The Scientific and Technical Research Council of TURKEY) There is an increasing demand by innovative firms for the Zone due to supports provided and tax exemptions granted by Law No. 4691. The total number of innovative firms located in Technology Development Zones reached 166 where 1473 research and development staff is employed. Technology Development Zones which legally exist, but have not yet started operating are expected to complete their infrastructure works in the shortest time possible making use of the financial facilities to be provided in the near future. A needs assessment was made in this context by holding meetings with the Zones and an appropriation of TL 3 trillion was made in the 2004 budget of the Ministry of Industry and Trade to be allocated to the construction of infrastructure and administrative buildings at Technology Development Zones. (Serdar İMAMOĞLU, tel: +90 312 231 72 80, fax: +90 312 231 87 33, email: serdarim@sanayi.gov.tr, web: www.sanayi.gov.tr, Ministry of Industry and Trade) The Computer Software Support provided by KOSGEB is in great demand among SMEs and there is an enormous demand for this support nationwide, particularly for softwares directed at Institutional Resource Planning and manufacturing sector. This support was received by 372 SMEs in 31 provinces from July to December 2003 and by 645 SMEs in 40 provinces in 2004 where the amount of support was TL 4.396.531.900.575 ( 2.5 million) and TL 8.437.596.014.726 ( 5 million) respectively. (As of July 2004, 1074 SMES have been offered 15.1 Trillion TL. Support ( 8 million)). (Canan ÖZTURAN, Beyza TEMEL, Meltem ÇETİN tel: +90 312 368 95 00, fax: +90 312 368 07 15, email: cozturan@kosgeb.gov.tr, btemel@kosgeb.gov.tr, mcetin@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Information Systems and E-Commerce Department) 22

9. SUCCESSFUL E-BUSINESS MODELS AND TOP-CLASS SMALL BUSINESS SUPPORT 9.1. How would you assess the situation in your country and the progress in this area? Directing enterprises which have not yet strengthened their financial and administrative structures in a post-crisis environment to take new approaches seems to be difficult. Nevertheless, particularly the demands of the Market direct firms to new business models and formations. (Necla OFLAZ, tel: +90 232 484 80 46, fax: +90 312 489 07 90, email: noflaz@ege.ebso.com.tr, web: www.ebso.org.tr, Aegean Region Chamber of Industry) Financial and technical support is given to small enterprises under the Information Networks and E- business Support provided by KOSGEB at such steps described as formation of the basic infrastructure, Information Dissemination Stage, Stage of Orientation to E-trade and the Stage of E-trade Directed at Exports. In this context, support was provided at the Basic Infrastructure Stage to 44 enterprises in 14 provinces in an amount of TL 106.837.065.658 ( 63.000) from July to December in 2003 and to 15 enterprises in 11 provinces in an amount of TL 65.947.592.795 ( 39.000) in 2004. In addition to support given in national and international Markets, KOSGEB provides R&D support (850 projects), Information Network and E-Business Support to SMEs through Technology Development Centers. (Beyza TEMEL, Meltem ÇETİN tel: +90 312 368 95 00, fax: +90 312 368 07 15, email: btemel@kosgeb.gov.tr, mcetin@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Information Systems and E-Commerce Department) 9.2. Please describe significant initiatives taken in this area in general and with a view to the 2003 recommendations in particular. The SME Technical Committee established by the Board for Improving Investment Environment decided to launch a study within itself to ensure that existing services are provided in an organized and coordinated manner by Organizations. The information on the web pages of all institutions and such other information as deemed necessary will be gathered together on one web page and enterprises will be able to have access to any information they need at the stage of establishment and execution on a single web page under this study. A goal has been set to ensure that there will be a connecting link to the web page of the respective organization for those who wish to obtain more detailed information. Information about the documents required of and places where applications are to be filed by those who wish to establish a business enjoying the status of a tradesman and artisan are displayed on the web page of the Confederation of Tradesmen and Artisans of Turkey. (Görgül GÜNER, tel: +90 312 418 32 69, fax: +90 312 425 75 06, email: disismd@tesk.org.tr, web: www.tesk.org.tr, Turkish Artisans and Craftsmen Confederation) 9.3. Has progress been made in increasing the availability of business support services in Turkey? Support provided at the stages of Dissemination of Information, Orientation to E-Trade and E-Trade Directed at Exports under KOSGEB Information Networks and E-Business Support has been launched as from 2004. As of July 2004, 296 SMEs in 8 provinces have received this support until now, which in total amounts to TL 1.2 Trillion TL ( 660.000). (Canan ÖZTURAN, Beyza TEMEL, Meltem ÇETİN tel: +90 312 368 95 00, fax: +90 312 368 07 15, email: cozturan@kosgeb.gov.tr, btemel@kosgeb.gov.tr, mcetin@kosgeb.gov.tr, web: www.kosgeb.gov.tr, KOSGEB Information Systems and E-Commerce Department) 23

10. DEVELOP STRONGER, MORE EFFECTIVE REPRESENTATION OF SMALL ENTERPRISES INTERESTS AT UNION AND NATIONAL LEVEL. 10.1 How would you assess the situation in your country and the progress in this area? The Union of Chambers and Commodity Exchanges of Turkey (TOBB) and Turkish Artisans and Craftsmen Confederation (TESK) are the legal representatives of enterprises at the highest level. 1.250.000 enterprises are represented by TOBB through 178 Chambers of Industry and Trade, 60 Chambers of Trade, 11 Chambers of Industry, 112 Commodity Exchanges and 2 Chambers of Maritime Trade. On the other hand, 2.814.002 tradesmen and artisans are represented by TESK through 13 Professional Federations, 81 Unions of Chambers of Tradesmen and Artisans and 3520 Chambers of Tradesmen and Artisans. (Görgül GÜNER, tel: +90 312 418 32 69, fax: +90 312 425 75 06, email: disismd@tesk.org.tr, web: www.tesk.org.tr, Turkish Artisans and Craftsmen Confederation; Mustafa ÖZCAN, tel: +90 312 413 80 00, fax: +90 312 418 32 68, email: ozcanm@tobb.org.tr, web: www.tobb.org.tr, Union of Chambers and Commodity Exchanges) As a general approach there is a tendency to demand from the representative organizations of the parties involved and affected to present their views about the law in writing, in the process of drafting a law. For example, the Ministries send draft legislation to TOBB asking them to put forward their views and TOBB in turn presents the drafts to enterprises through Chambers and Commodity Exchanges asking them to make comments which are then forwarded back to the respective Ministries. It seems that the views expressed are not reflected by public authorities fully and as required. Nevertheless, the Government has become more sensitive to this issue. The legislation stipulates no obligation to receive the views of TOBB and TESK. (Görgül GÜNER, tel: +90 312 418 32 69, fax: +90 312 425 75 06, email: disismd@tesk.org.tr, web: www.tesk.org.tr, Turkish Artisans and Craftsmen Confederation; Mustafa ÖZCAN, tel: +90 312 413 80 00, fax: +90 312 418 32 68, email: ozcanm@tobb.org.tr, web: www.tobb.org.tr, Union of Chambers and Commodity Exchanges) 10.2. Please describe significant initiatives taken in this area in general and with a view to the 2003 recommendations in particular. The II nd OECD Ministerial Conference on SMEs on Strengthening the competitive power of SMEs in the global economy: strategies and policies organized jointly by KOSGEB and TOBB was held in İstanbul from 2 to 6 June 2004 under the auspices of the Ministry of Industry and Trade. The first Conference was held in Bologna, Italy in June 2000 under the OECD roof. Representatives from 68 countries including 30 OECD members and from 34 international organizations participated in the Conference the objective of which is to assess the impact on SMEs of new developments relating to globalization four years after the Bologna Conference; to provide an insight into issues and policies relating to entrepreneurship in the global economy and the competitive power of SMEs; to determine best practices and to prepare policy recommendations; and to strengthen political dialogue and cooperation between OECD member and non-oecd member countries / economies. A Business Symposium was organized prior to the Ministerial Conference with the participation of businessmen and their representatives. The decisions taken at the Symposium were discussed at the Ministerial Conference. Activities such as Global Market Place and Women Entrepreneurs Forum were organized at the same time with the Conference which were open to SMEs operating in the field of data communication (www.oecd-istanbul.sme2004.org). (Abdullah TAŞKIN, tel: +90 312 212 81 90, fax: +90 312 212 25 08, email: ataskin@kosgeb.gov.tr, web: www.kosgeb.gov.tr, www.oecd-istanbul.sme2004.org, KOSGEB Foreign Relations Department) The MEKSA Foundation is putting forth strenuous efforts to involve SMEs in the decision making process and implementations. Taking this into account in all its implementations, MEKSA has established its administrative structure accordingly. The Board of Directors of the Foundation includes representatives of the State, Employees and Employers taking into account the nature of vocational training. Higher professional organizations such as TOBB, TESK, The Confederation of Turkish Employers Union, The Confederation of Turkish Trade Unions and The Industrialists and Businessmen Association of Turkey, were involved in the decision making, implementation and evaluation processes as social parties in implementing the EU supported Project for the Strengthening of Vocational Training and Education System in Turkey developed by the MEKSA Foundation which is carried out jointly with the Ministry of National Education. (Süleyman MAT, tel: +90 312 468 15 25, fax: +90 312 58 97, email: suleymanmat@meksa.org.tr, web: www.meksa.org.tr, Vocational Training and Small Industry Development Foundation) 24

10.3. Is it envisaged to formalise by law the participation of the business community in the policymaking process? It would be useful to mention the following developments under this heading; An Advisory Board of a consultative nature was set up with the participation of representatives of the Government, employees, employers and public servants with a view to develop industrial relations and peace at work under the new Labour Law No. 4857, and to monitor legislation and implementations relating to working life. Law No. 4904 on Turkish Employment Organization (İŞKUR) introduced a participatory working and organization model open to social dialogue. Social parties, primarily employees and employers organizations were involved in the management. Three new boards were established. The General Assembly convened to help with the formulation of the country s national employment policy and identification of the objectives of İŞKUR according to these policies. The General Assembly is composed of 79 members including representatives of the public sector and universities, 46 of which are representatives of social parties. Unemployment Insurance Fund and the Board of Directors of İŞKUR were combined to form a single Board of Directors as the management and decision making body at the highest level, having authority and assuming responsibility. The Board of Directors is presided over by the General Director of İŞKUR and is composed of six members including the representatives of the Ministry of Labour and Social Security and the Undersecretariat for Treasury, and a member to be nominated each by the Confederation of Workers having the highest number of members, the Confederation of Employers and the Confederation of Tradesmen and Artisans. Provincial Employment Boards were established in provinces, headed by the Governors, with the participation of representatives of the public, social parties, professional organizations, universities and NGOs. The Provincial Employment Boards will develop local initiatives in regional development and formulate local employment and labour force policies. This has provided İŞKUR with the opportunity to formulate and implement policies according to the circumstances of labour markets which vary between provinces. (Celal POLAT, tel: +90 312 296 64 81, fax: +90 312 212 11 48, email: cpolat@csgb.gov.tr, web: www.csgb.gov.tr, Ministry of Labour and Social Security) 25