The companies need to step forward with quality besides price within competitiveness. How can quality and economy come together? Are there any incentives provided by the government? If yes, what are they? How can we make use of these incentives? We have looked for the answers as Tekstil Business.
R&D, Design and Innovation
Three words are most commonly mentioned in many mediums from conferences to press releases: R&D, Design and Innovation… In addition to talking these words, it is also essential to apply them. In order to put quality forward, those three words need to obtain their deserved position in business. The most important components to boost companies’ strength in global competitiveness and in value added export increase system are R&D, design and innovation. As Tekstil Business we have investigated “Design Centers”.
Minister of Commerce, Pekcan: As Ministry, we support our exporters …!
Ruhsar Pekcan, Minister of Commerce speaking at the “Turkey’s Entrepreneurs Award Ceremony” where best entrepreneurs were rewarded by the Turkey Exporters Council and Turkish Economy Bank that asked the entrepreneurs to focus on export-oriented thinking skills, branding and design and noted: “ We provide incentives as ministry of commerce in terms of market research, branding and design activities so that our entrepreneurs can become exporters,” he said. As it can be understood from these comments, the Ministry of Commerce works precisely about exports. The indispensable components of export are R&D, Innovation and Design.
Minister of Industry, Varank: An Added Value of 100 liras out of a raw material of 1 lira
The Minister of Industry, Mustafa Varank has recently made an important speech regarding the importance of R&D and design, and noted that they wish that the number of R&D and Design Center increases and added: “Some countries gets the raw material valuing 1 lira from us and then manufacture with an added value of 100 liras. Design is the most fundamental component of branding and growth.” The Ministry of Industry too is sensible as the Ministry of Commerce… The Ministry is not only sensible, but it also works hard to do what it takes on his behalf.
The Number of Design Center increased by 272
Briefly, a great success was achieved at the 11th edition of Istanbul Fashion Conference organized by Turkish Clothing Industrialists’ Association (TGSD) acting with the reality that the path of entrepreneurship passes from R&D, design and innovation, and an additional turnover of 150 million dollars for the domestic and 250 million dollars in exports were realized via B2B meetings.
What kinds of facilities are provided in Design Centers?
1. Tax discount (The whole of design expenses)
2. Insurance Premium Incentive (Half of the employer’s share is covered by the Ministry of Finance till 2023)
3. Income Tax Withholding Incentive
4. Stamp Duty Exemption
5. Investment with Customs Tax Exception
As listed above, crucial incentives are provided by the government for design centers. Design centers provide important contributions to the Turkish economy, exports and consequently employment. The business world gains awareness on this issue day by day and add more to its competitiveness strength with investments. And this is done with a quick transition…
Textile and Raw Materials Constitutes 57%, Apparel and Ready Wear 7%
As of 2018, there were 246 Design Centers in Turkey and after a short period like a month, there are now 272 Design Centers and the number of design centers increased by 9%. 57% of these design centers belongs to textile and raw materials while 7% belongs to apparel and ready wear industries. There are 33 Design Centers in manufacturing industry and the number of employment in Turkey is more than 5 600. The number of projects continuing is 1 800 now. The number of completed projects are 2 350.
Textile and Ready Wear Targets the World’s Top 5 with its Design Attack
The reason why the unit price per kilogram is 6 times higher in exports for textile and ready wear industries, which is the locomotive industry of Turkish economy, is the importance given to designing and branding. The fact that 25% of the Design Centers in Turkey are constituted of companies dealing in textile industry reflects the reality that the industry’s target is to have higher added valued exports. Turkey being the world’s 8th largest and European Union’s 2nd largest supplier in textile and ready wear industries target being among the world’s top 5 with its design attack. Turkey is a nominee to prove its success with its European modern mills, qualified employment and fast supply chain capacity in textile and ready wear industries along with Design Centers having the strong infrastructure of Turkish textile industry.
What are the İncentives and Supports within the law numbered 5746?
Let’s have a look at the Design Centers increasing in terms of numbers every month within the scope of design activities. Several regulations were put into practice to improve our country’s R&D and innovative ecosystem with the law numbered 5746 regarding the Law to Support of Research, Development and Design activities, in compliance with the R&D Reform Package published at the Official Gazette on 26 February 2016. It was projected to include design activities within the R&D activities, too with those regulations. Thus, the production of technological products with higher added value was targeted and it is possible to state that this target was achieved. Again, within the scope of this law, the term “Design Centers” were included in the legislation and a lot of incentives were put forward for Design Centers. Private Sectoral Design Centers were founded in compliance with the law numbered 5746 as part of the investment in design, technology, human resources technological development rate, high competency power and high welfare level and they continue to operate.
Incentives and Support
The main question is the following: What are the incentives and supports provided within the law numbered 5746? We are going to answer this question briefly:
1. R&D Discount: R&D and Design Centers can deduct the expenses made in terms of project activities out of their Corporate Taxes by 100%.
2. Income Tax Stoppage Incentive: Wages earned by the R&D and back-up personnel recruited in the following enterprises personnel and projects in consideration of their activities shall be cancelled from income tax, accounted after applying minimum living discount, at a rate of %90 for personnel with PhD degrees, and at a rate of %80 for the other personnel, by deducting from the tax accounted over withholding.
3. Insurance Premium Incentive: For the R&D and design personnel, one half of the insurance premium of the employer which is calculated over the wages of the R&D and back-up staff gained in the scope of the R&D and innovation activities is funded by a budget of the Ministry of Finance.
4. Stamp Duty Exemption: All documents drawn up in connection of all types of R&D and innovation activities pursuant to Law Numbered 5746 have been exempted from stamp duty.
5. Customs Tax Exemption: All goods imported in connection of all types of R&D and innovation activities, and design activities have been exempted from stamp duty
6. Fundamental Sciences Incentives: The amount equivalent to a monthly gross salary of a minimum wage applied for the mentioned year can be funded by the Ministry for 2 years’ time for the R&D centers recruiting R&D personnel having a minimum university degree in fundamental sciences
Requirements for Design Centers
It is essential to fulfill certain requirements for a center to become a Design Center and for companies to inaugurate Design Centers and make use of these incentives. It is possible to list those requirements as follows:
1. Having minimum 10 full time or equivalent design personnel to work as designer or technician at the Design Center
2. Having design projects at the Design Center
3. Having mechanisms to inspect the operation of design and support personnel physically
4. Performing design activities locally
5. Having the Design Centers as a separate unit and at a single campus or physical environment
1 out of 4 Design Centers is from Textile
57% of the Design Centers belongs to textile and raw materials industry. 1 out of 4 design centers is from textile industry. The number of employments in Turkey is more than 5 600. The number of projects continuing is 1 800 now. The number of completed project are 2 350.
