Thesis Bulut Can Effects of FDI in ICT on the Host Country The … Can... · ! 3! ITALIANABSTRACT)...
Transcript of Thesis Bulut Can Effects of FDI in ICT on the Host Country The … Can... · ! 3! ITALIANABSTRACT)...
POLITECNICO DI MILANO DEPARTMENT OF MANAGEMENT
ENGINEERING
The Effects of Foreign Direct Investment in ICT Industry on the Host Country: The Case of Turkey
Supervisor : Prof. Lucia Tajoli
Submitted by : Bulut Can -‐ 816206
April 2015
Como
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ABSTRACT
Several studies have been carried out in the recent years to analyze the
effects of foreign direct investments in both developed and developing countries.
The Information and Communication Technologies (ICT) sector has dramatically
become more popular in the 21st century with continuously advanced ever-‐evolving
technologies around the world. In order to make a profitable investment the
location plays a significant role. Turkey as one of the largest growing economies in
the developing countries has become popular for foreigners to make investments in
many sectors including ICT sector.
There are various effects that the FDI in ICT sector brings into the host
country mainly such as technology know-‐how, human resources capabilities and
increased competitiveness between the firms in the sector.
In this study, the analysis has been made based on the ICT Development
Index, which is determined by the International Telecommunication Union every
year. This ICT Index has three categories, which enables to calculate a country’s
development level in terms of ICT such as ICT Skills, ICT Access and ICT Use. Each
cluster has several different indicators that help calculating the index such as the
percentage of households with connection to internet, mobile broadband width,
mobile subscription rate, secondary school enrollment rate and so on.
Thanks to the indicators mentioned above, an analysis has been made to
show how Turkey has changed over the time with the help of FDI in ICT sector.
Keywords: Foreign Direct Investment; ICT; Information and Communication
Technologies; Turkey
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ITALIAN ABSTRACT
Negli ultimi anni sono stati condotti numerosi studi con lo scopo di analizzare
gli effetti degli investimenti diretti esteri sia in paesi sviluppati che in quelli in via di
sviluppo.
Il settore delle tecnologie dell’informazione e della comunicazione (ICT) ha
raggiunto nel ventunesimo secolo un livello di popolarità importante grazie alla
continua e costante evoluzione delle tecnologie in tutto il mondo. Per far sì che
l’investimento sia profittevole, la scelta del luogo è di cruciale importanza. La
Turchia, che vanta una delle più grandi economie in crescita nei paesi in via di
sviluppo, è diventata famosa per tra gli investitori esteri in molti settori, tra i quali
anche l’ICT.
Gli effetti che gli investimenti esteri diretti nel settore dell’ICT portano al
paese che li accoglie, sono diversi e numerosi: know-‐how in campo tecnologico,
competenze di risorse umane e un aumento della competitività tra le aziende nello
stesso settore.
L’analisi condotta in questo studio è stata costruita sulla base dell’indice di
sviluppo del settore ICT che viene determinato ogni anno dall’International
Telecommunication Union. Questo indice si compone di tre parametri che
permettono di stimare il livello di sviluppo di una nazione nell’ICT: abilità, accesso e
uso. Ogni parametro comprende numerosi e diversi indicatori che concorrono al
calcolo dell’indice, quali per esempio la percentuale di case con connessione a
internet, l’ampiezza della banda larga mobile, il tasso di abbonamenti alla telefonia
mobile, il tasso d’iscrizione al livello d’istruzione secondaria e così via.
Grazie a tutti questi indicatori, è stata effettuata un’analisi che mostra come
la Turchia sia cambiata nel tempo anche grazie all’aiuto degli investimenti diretti
esteri nel settore dell’ICT.
Keywords: Investimento; Tecnologie dell’Informazione e della Comunicazione;
Turchia
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List of Figures Figure 1 FDI inflows, global and by group of economies between 1995 and 2014, and projections 2014-‐2016 (billions of dollars) .......................................................................................... 8 Figure 2 FDI inflows in Developed Countries, 2007 -‐ 2013 .......................................................... 10 Figure 3 FDI inflows between the EU, the US and intra-‐EU against global flows, 2004-‐2012 ....................................................................................................................................................................... 11 Figure 4 Cumulative FDI in the United States by country, 2012 ................................................. 11 Figure 5 Comparison of FDI inflows in Developing Countries, 2010-‐2012 (billion $) ...... 12 Figure 6 FDI inflow of Developing Asia, 2012-‐2013 (billion $) ................................................... 13 Figure 7 FDI inflows Top 5 Countries Asia, 2012-‐2013 .................................................................. 13 Figure 8 FDI inflows to Turkey, 2005-‐2014 (millions of dollars) ............................................... 14 Figure 9 GDP % annual, Turkey and Developing Countries, 2012-‐2017 ................................ 17 Figure 10 Share of Total Incentives Granted for ICT Industry in Turkey ................................ 20 Figure 11 ICT Development Index Conceptual Framework .......................................................... 21 Figure 12 ICT Development Indicators and Weights ....................................................................... 23 Figure 13 Share of Internet Users in the total population ............................................................. 25 Figure 14 Internet users by age and by development level, 2011 ............................................. 26 Figure 15 Home ICT Access, 2011 ............................................................................................................ 27 Figure 16 Mobile Subscriptions, 2006-‐2011 ....................................................................................... 27 Figure 17 International Internet bandwidth (bit/s), per Internet user, 2011 ...................... 28 Figure 18 FDI inflows to Turkey in ICT Sector, 2007-‐2012 .......................................................... 29 Figure 19 ICT Expenditure in Turkey (billions of $) ........................................................................ 30 Figure 20 ICT Spending 2012-‐2017 (forecasted CAGR) ................................................................. 30 Figure 21 Number of computers used in Turkey, 2009-‐2017 ..................................................... 31 Figure 22 Development of Internet Subscriptions, 2010-‐2017 ................................................. 31 Figure 23 Percentage of young people (15-‐24) in populations, 2011 ...................................... 32 Figure 24 Percentage of R&D centers in Turkey, by fields of activity ....................................... 38 Figure 25 The percentage of Internet users in Turkey, 2006-‐2013 .......................................... 40 Figure 26 Percentage of Fixed Broadband Internet Subscribers in Turkey, 2006-‐2013 . 41 Figure 27 Mobile Cellular Subscriptions in Turkey, 2006-‐2013 ................................................. 41 Figure 28 Unemployment, total % of the labor force in Turkey, 2005-‐2013 ........................ 44 Figure 29 Employment in ICT Sector in Turkey, 2012-‐2013 (thousands) ............................. 44 Figure 30 Employment Increase in Information Technology Sector and Defense, Software and Services Sector in Turkey, 2012-‐2013 (thousands) ............................................. 45 Figure 31 Adult Literacy Rate in Turkey, 2005-‐2013 (% of population aged over 15) .... 46 Figure 32 Secondary School Enrollment Rate in Turkey, 2005-‐2012 (%net) ...................... 47 Figure 33 Tertiary School Enrollment Rate, 2005-‐2013 (%net) ................................................ 47 Figure 34 Analysis of ICT Related Higher Education in Turkey, 2012 ..................................... 48 Figure 35 Researchers in Turkey, 2005-‐2011 (per million people) .......................................... 49 Figure 36 Technicians in R&D in Turkey, 2005-‐2011 (per million people) ........................... 50
List of Tables Table 1 FDI inflows by Region, 2011-‐2013 ............................................................................................ 9 Table 2 FDI inflows in Turkey by industry, 2001-‐2010 (millions of dollars) ........................ 15 Table 3 FDI inflows in Turkey, by geographical origin, 2001-‐2010 (millions of $) ............ 16 Table 4 Incentive Systems in Turkey ...................................................................................................... 19 Table 5 ICT Development Index Ranking, 2012-‐2013 ..................................................................... 24
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Table of Contents
1. Introduction ..................................................................................................................................... 6 2. Foreign Direct Investment Trends ......................................................................................... 6 2.1 Global Trends ........................................................................................................................... 7 2.2 Regional Trends ...................................................................................................................... 8 2.2.1 Developed Countries .................................................................................................... 9 2.2.2 Developing Countries ................................................................................................ 12
3. FDI in Turkey ................................................................................................................................ 14 3.1 Overview of FDI Trends in Turkey ............................................................................... 14 3.2 Investment Incentive Systems ....................................................................................... 17 3.2.1 Incentive Systems in Turkey .................................................................................. 18 3.2.2 Incentive programs to support the ICT Industry in Turkey ..................... 19
4. Outlook of Information and Communication Industry ............................................... 20 4.1 How to measure the ICT Level of a Country: ICT Development Index (IDI) ............................................................................................................................................................. 20 4.1.1 Definition and Objectives ........................................................................................ 20 4.1.2 Methodology ................................................................................................................. 21
4.1.3 How different countries compete and rank in terms of ICT Development Index ................................................................................................................................................. 23 4.2 ICT in the Globe .................................................................................................................... 25 4.3 Information and Communication Industry in Turkey ......................................... 29
5. The effects of FDI in ICT industry ........................................................................................ 32 5.1 How do FDI and ICT affect each other: The correlation between FDI and ICT ...................................................................................................................................................... 34 5.2 Technology Transfer and Know-‐How ......................................................................... 36 5.2.1 Turkey’s situation in “Technology Transfer and Know-‐How” by ICT .. 37 5.2.1.1 Increasing ICT Research Centers in Turkey ............................................ 38 5.2.1.2 Increase in ICT Infrastructure and Usage ................................................ 39
5.3 Human Resources Capabilities ...................................................................................... 42 5.3.1 Turkey’s situation in “Human Resources Capabilities” by ICT ............... 42 5.3.1.1 Employment in the ICT Sector ...................................................................... 43 5.3.1.2 Skill Development and Improving the Capabilities ............................. 45
5.4 Increased Competition between local firms ............................................................ 50 5.4.1 Turkey’s situation in “Increased Competition between Firms” by ICT 51
6. Conclusion ...................................................................................................................................... 52
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1. Introduction
In today’s globalized world, information and communication technologies has
become an essential part of several dynamics as well as in economics. One of the
most common ways to transfer a technology to another country or to make
researches in another geographical area is the foreign direct investment.
Foreign Direct Investment bringing an advanced technology is already a
common fact that has been studied often. However, especially an investment in
Information and Communication Sector does not only bring the advanced
technology to the country, but also it becomes a technologic tool that can be utilized
by other different sectors in the host country such as finance, banking, government,
trade and so on.
The Information and Communication Technology can be used in many forms
in the host country as a database system in a firm’s data structure. Furthermore,
more commonly firms tend to adapt ERP systems. In addition, the improvements in
the telecommunication sector in the host country enable the firms to reach and have
an access to a broader audience.
Another essential way to use the ICT investment is to make investments in
the research centers in the host country.
In this study, we will start explaining the FDI trends in the globe by narrowing
it down to developing countries and Turkey finally. As the next chapter, an outlook
to ICT sector will be deeply analyzed for both the world and Turkey as well as
identifying how to measure the ICT Development Index. Finally, various effects of FDI
in ICT sector in Turkey will be illustrated in-‐depth level by using several indicators
determined by the International Telecommunication Union.
2. Foreign Direct Investment Trends
OECD defines Foreign direct investment enterprise as an enterprise
(institutional unit) in the financial or non-‐financial corporate sectors of the economy
in which a non-‐resident investor owns 10 per cent or more of the voting power of an
incorporated enterprise or has the equivalent ownership in an enterprise operating
under another legal structure.
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Each year more than $1 trillion in FDI flows into countries around the world,
but the distribution is far from equal (UNCTAD). There are several factors that makes
a host country desirable for a FDI such as natural resources development, financial
business services, GDP level, political situation, economic liberalization policies and
so on. All these factors contribute several changes on the trends which shape the FDI
flows.
2.1 Global Trends As it is shown in the Figure 1, the contribution of developed countries in FDI
inflows were higher respectively until 2009, where developing economies became
more popular for FDI. Global FDI has shown a growth in 2013 with inflows reaching 9
per cent to $1.45 trillion. As it is illustrated in the Figure 1 , an increase to $1.6
trillion in 2014, $1.7 trillion in 2015 and $1.8 trillion in 2016 has been projected by
UNCTAD. (UNCTAD, World Investment Report 2014). This projection is estimated
due to the fact that global economic growth gains momentum, which might
encourages investors to turn their cash holdings into new investments. Nonetheless,
uneven levels of growth, fragility and unpredictability in a number of economies, and
risks related to the tapering of quantitative easing could dampen the FDI recovery
(Al-‐Sadig, IMF Working Paper, 2013). Relatively a larger part of this growth is due to
the increase inflow in the developed countries since the FDI inflows in developing
countries seems stable in the projection area between 2014 and 2016. This stability
in FDI could be related to the instability in the political and economical issues in
emerging countries.
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Figure 1 FDI inflows, global and by group of economies between 1995 and 2014, and projections 2014-‐2016 (billions of dollars)
Source: UNCTAD, World Investment Report 2014
2.2 Regional Trends The analysis of the FDI trends by regions can be accomplished by
subcategorizing the regions in two main clusters such as Developed Countries, and
Developing Countries.
According to Table 1 by UNCTAD, FDI-‐TNC-‐GVC Information System, FDI/TNC
database, concerning the developing countries’ role in FDI flows, it reached $778
billion which accounts for 54 per cent of global inflows. Among the developing
countries in the world, the majority share of the FDI inflows counts for Developing
Asia with $426 billion in 2013, which is followed by Latin America and the Caribbean
with $292 billion, Africa with $57 billions.
On the other hand, FDI flow to the developed economies has seen a sharp
slump in 2012 from $880 billions to $517 billions. However they have recovered
their selves after the decrease in 2012, and reached to contribute the 39% share of
the total FDI inflows, which is considered as a low share comparing to the developing
countries. Therefore, developing countries has protected their lead over the
developed countries in the share of FDI inflows with a margin of $212 billions in
2013.
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Table 1 FDI inflows by Region, 2011-‐2013
Source: UNCTAD, FDI-‐TNC-‐GVC Information System, FDI/TNC database
2.2.1 Developed Countries
The FDI inflows to developed countries have seen a sharp decrease in 2012,
with a global share from 51.8% to 38.8% respectively. Comparing to its level of FDI
inflow in 2007, they showed almost a half level with 39% of total inflows in the
world.
Even though there was an overall increase in inflows, this recovery after 2012
has been concentrated on some part of all developed countries: only 15 out of 39
developed countries has shown an increase in inflows (WIR, 2014).
xiv World Investment Report 2014: Investing in the SDGs: An Action Plan
Although FDI to developed economies resumed its recovery after the sharp fall in 2012, it remained at a historically low share of total global FDI !ows (39 per cent), and still 57 per cent below its peak in 2007. Thus, developing countries maintained their lead over developed countries by a margin of more than $200 billion for the second year running.
Developing countries and transition economies now also constitute half of the top 20 economies ranked by FDI in!ows ("gure 2). Mexico moved into tenth place. China recorded its largest ever in!ows and maintained its position as the second largest recipient in the world.
FDI by transnational corporations (TNCs) from developing countries reached $454 billion – another record high. Together with transition economies, they accounted for 39 per cent of global FDI out!ows, compared with only 12 per cent at the beginning of the 2000s. Six developing and transition economies ranked among the 20 largest investors in the world in 2013 ("gure 3). Increasingly, developing-country TNCs are acquiring foreign af"liates of developed-country TNCs in the developing world.
Megaregional groupings shape global FDI
The share of APEC countries in global in!ows increased from 37 per cent before the crisis to 54 per cent in 2013 ("gure 4). Although their shares are smaller, FDI in!ows to ASEAN and the Common Market of the South (MERCOSUR) in 2013 were at double their pre-crisis level, as were in!ows to the BRICS (Brazil, the Russian Federation, India, China and South Africa).
Table 1. FDI flows, by region, 2011–2013(Billions of dollars and per cent)
Region FDI in!ows FDI out!ows2011 2012 2013 2011 2012 2013
World 1 700 1 330 1 452 1 712 1 347 1 411Developed economies 880 517 566 1 216 853 857
European Union 490 216 246 585 238 250North America 263 204 250 439 422 381
Developing economies 725 729 778 423 440 454Africa 48 55 57 7 12 12Asia 431 415 426 304 302 326
East and South-East Asia 333 334 347 270 274 293South Asia 44 32 36 13 9 2West Asia 53 48 44 22 19 31
Latin America and the Caribbean 244 256 292 111 124 115Oceania 2 3 3 1 2 1
Transition economies 95 84 108 73 54 99Structurally weak, vulnerable and small economiesa 58 58 57 12 10 9
LDCs 22 24 28 4 4 5LLDCs 36 34 30 6 3 4SIDS 6 7 6 2 2 1
Memorandum: percentage share in world FDI !owsDeveloped economies 51.8 38.8 39.0 71.0 63.3 60.8
European Union 28.8 16.2 17.0 34.2 17.7 17.8North America 15.5 15.3 17.2 25.6 31.4 27.0
Developing economies 42.6 54.8 53.6 24.7 32.7 32.2Africa 2.8 4.1 3.9 0.4 0.9 0.9Asia 25.3 31.2 29.4 17.8 22.4 23.1
East and South-East Asia 19.6 25.1 23.9 15.8 20.3 20.7South Asia 2.6 2.4 2.4 0.8 0.7 0.2West Asia 3.1 3.6 3.0 1.3 1.4 2.2
Latin America and the Caribbean 14.3 19.2 20.1 6.5 9.2 8.1Oceania 0.1 0.2 0.2 0.1 0.1 0.1
Transition economies 5.6 6.3 7.4 4.3 4.0 7.0Structurally weak, vulnerable and small economiesa 3.4 4.4 3.9 0.7 0.7 0.7
LDCs 1.3 1.8 1.9 0.3 0.3 0.3LLDCs 2.1 2.5 2.0 0.4 0.2 0.3SIDS 0.4 0.5 0.4 0.1 0.2 0.1
Source: UNCTAD, FDI-TNC-GVC Information System, FDI/TNC database (www.unctad.org/fdistatistics). aWithout double counting.
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Figure 2 FDI inflows in Developed Countries, 2007 -‐ 2013
Source: UNCTAD, Bilateral FDI Statistics (http://unctad.org/en/Pages/DIAE/FDI%20Statistics/FDI-‐Statistics-‐Bilateral. aspx)
There were various overall trends in EU zone among major European
countries. Germany took the lead with an increase in FDI inflows from $12 billions in
2012 to $27 billions in 2013 (WIR, 2014). On the other hand, there was a big
correlation in the FDI flows between the United States and European Union between
2004 and 2012 as it can be seen in figure 3 below. The most significant FDI flows can
be seen in Intra-‐EU FDI in the figure 3. Between 2004-‐2012 on average 63% of the
EU’s FDI inflows come from the other EU countries. The majority of this intra-‐EU FDI
flows are done by the top investors in the EU such as the United Kingdom, Germany
and France. FDI inflows between the EU, the US and intra-‐EU against global flows,
2004-‐2012
CHAPTER II Regional Investment Trends 77
5. Developed countries
Figure A. FDI !ows, top 5 host and home economies, 2012–2013(Billions of dollars)
Fig. FID !ows - Developed
(Host) (Home)
0 50 100 150 200
United Kingdom
Spain
Australia
Canada
United States
0 50 100 150 200 250 300 350 400
Canada
Germany
Switzerland
Japan
United States
2013 2012 2013 2012
Figure C. FDI outflows, 2007–2013(Billions of dollars)
Figure B. FDI inflows, 2007–2013(Billions of dollars)
Fig. B - DevelopedFDI in!ows
Fig. C - DevelopedFDI out!ows
Share in world total
66.1 56.8 50.6 49.5 51.8 38.8 39.0 83.3 80.0 72.3 67.4 71.0 63.3 60.8
0
300
600
900
1 200
1 500
2007 2008 2009 2010 2011 2012 2013 0
400
800
1 200
1 600
2 000
2007 2008 2009 2010 2011 2012 2013
North America Other developed Europe Other developed countries European Union
North America Other developed Europe Other developed countries European Union
Table A. Distribution of FDI flows among economies, by range,a 2013
Range In!ows Out!owsAbove $100 billion United States United States and Japan
$50 to $99 billion Canada Switzerland and Germany
$10 to $49 billion
Australia, Spain, United Kingdom, Ireland, Luxembourg, Germany, Netherlands, Italy, Israel and Austria
Canada, Netherlands, Sweden, Italy, Spain, Ireland, Luxembourg, United Kingdom, Norway and Austria
$1 to $9 billion
Norway, Sweden, Czech Republic, France, Romania, Portugal, Hungary, Greece, Japan, Denmark and Bulgaria
Denmark, Australia, Israel, Finland, Czech Republic, Hungary and Portugal
Below $1 billion
New Zealand, Estonia, Latvia, Slovakia, Croatia, Cyprus, Lithuania, Iceland, Gibraltar, Bermuda, Slovenia, Finland, Malta, Belgium, Switzerland and Poland
New Zealand, Iceland, Estonia, Latvia, Cyprus, Bulgaria, Romania, Lithuania, Slovenia, Bermuda, Malta, Croatia, Slovakia, Greece, France, Poland and Belgium
a Economies are listed according to the magnitude of their FDI flows.
Table B. Cross-border M&As by industry, 2012–2013(Millions of dollars)
Sector/industry Sales Purchases2012 2013 2012 2013
Total 268 652 239 606 183 914 151 752Primary 50 161 39 346 -10 406 -41 903
Mining, quarrying and petroleum 43 032 37 906 -10 411 -42 154Manufacturing 109 481 86 617 117 068 79 993
Food, beverages and tobacco 20 616 19 708 24 945 25 231Chemicals and chemical products 16 411 21 132 19 705 4 822Pharmaceuticals, medicinal chem. & botanical prod. 11 638 742 17 951 20 443Computer, electronic optical prod. & electrical equipt. 22 061 10 776 23 909 11 808
Services 109 010 113 643 77 252 113 662Trade 12 581 7 406 19 537 -2 067Information and communications 22 395 29 374 9 372 22 476Financial and insurance activities 9 905 9 081 27 461 64 741Business services 31 406 35 965 16 865 22 220
Table C. Cross-border M&As by region/country, 2012–2013(Millions of dollars)
Region/country Sales Purchases2012 2013 2012 2013
World 268 652 239 606 183 914 151 752Developed economies 175 408 165 650 175 408 165 650
Europe 45 246 34 225 93 865 112 545North America 103 729 85 138 67 732 40 618Other developed countries 26 432 45 287 13 811 12 487
Japan 32 276 44 872 -1 548 2 576Developing economies 79 982 65 035 3 760 -6 307
Africa 635 2 288 -3 500 -8 953Latin America and the Caribbean 17 146 7 274 1 699 -7 188Asia and Oceania 62 201 55 473 5 561 9 833
China 27 009 37 405 3 251 6 201Singapore -1 039 2 745 6 004 4 386
Transition economies 4 848 1 682 4 746 -7 591
Table D. Greenfield FDI projects by industry, 2012–2013(Millions of dollars)
Sector/industryDeveloped countries
as destinationDeveloped countries
as investors2012 2013 2012 2013
Total 224 604 215 018 413 541 458 336Primary 9 222 1 687 16 979 17 878
Mining, quarrying and petroleum 9 220 1 683 16 977 15 712Manufacturing 88 712 92 748 186 278 197 086
Textiles, clothing and leather 6 579 13 711 10 080 18 269Chemicals and chemical products 13 165 15 615 26 090 32 542Electrical and electronic equipment 10 604 13 853 15 108 20 716Motor vehicles and other transport equipment 21 423 15 944 52 736 49 247
Services 126 670 120 584 210 285 243 372Electricity, gas and water 27 023 25 463 41 758 69 487Transport, storage & communications 17 070 19 436 40 067 41 630Finance 11 120 10 260 23 106 21 309Business services 31 316 33 689 50 188 56 767
Table E. Greenfield FDI projects by region/country, 2012–2013(Millions of dollars)
Partner region/economyDeveloped countries
as destinationDeveloped countries
as investors2012 2013 2012 2013
World 224 604 215 018 413 541 458 336Developed economies 170 919 184 887 170 919 184 887
Europe 107 093 112 784 109 572 107 921North America 47 082 54 615 45 010 57 582Other developed countries 16 744 17 488 16 337 19 383
Japan 9 818 11 212 4 317 7 920Developing economies 50 625 27 804 213 530 253 816
Africa 1 802 2 080 17 541 27 254Asia and Oceania 46 650 24 475 139 280 146 140
China 6 232 9 171 50 451 48 894India 8 553 3 530 21 249 13 571
Latin America and the Caribbean 2 172 1 249 56 709 80 421Transition economies 3 060 2 327 29 092 19 633
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Figure 3 FDI inflows between the EU, the US and intra-‐EU against global flows, 2004-‐2012
Source: UNCTAD, based on data from Eurostat
FDI inflows between the EU, the United States and intra-‐EU against global
flows, 2004-‐2012 Furthermore, concerning the United States side, the importance
of the EU as a destination for the United States is highly significant with its share in
flows ranging from 41 per cent to 59 per cent over 2004–2012 (Figure 4). While
around 10 countries account for most foreign direct investment inflows of the
United States, the largest share is contributed by the United Kingdom with $487B in
2012 as the largest investor in the US’s economy (Figure 4). Cumulative FDI in the
United States by country, 2012
Figure 4 Cumulative FDI in the United States by country, 2012
Source: Bureau of Economic Analysis – Organization for International Investment
CHAPTER II Regional Investment Trends 79
The EU and the United States together constitute more than 45 per cent of global GDP. FDI !ows within the TTIP bloc accounted for, on average, half of global FDI !ows over the period 2004–2012 ("gure II.19). Intra-EU FDI has tended to be volatile, but FDI !ows between the EU and the United States have remained relatively stable in recent years.
Viewed from the United States, the EU economies make up about 30 per cent of the outside world in terms of GDP. The EU’s importance as a destination for United States FDI has been much more signi"cant, with its share in !ows ranging from 41 per cent to 59 per cent over 2004–2012, and its share in outward stocks at over 50 per cent by the end of that period.61 In contrast, the EU’s share in United States exports averaged only 25 per cent over the same period. Major host countries of United States FDI are listed in table II.7.
The industry breakdown shows that about four "fths of United States FDI stock in the EU is in services, in which “Holding Companies (nonbank)” account for 60 per cent and “Finance (except depository institutions) and insurance” for another 20 per cent. Manufacturing takes up 12 per cent.
From the EU’s perspective, much of the in!ows to EU countries arrive from other EU countries. Over the period 2004–2012, on average, 63 per cent of FDI !ows to the region came from other EU
Source: UNCTAD, based on data from Eurostat.
Figure II.19. FDI in!ows between the EU and the United States and intra-EU against global !ows,
2004–2012(Billions of dollars)
500
1 000
1 500
2 000
2 500
2004 2005 2006 2007 2008 2009 2010 2011 2012
Rest
Intra-EU
From the United States to the EU
From the EU to the United States
Table II.7. United States FDI stock abroad, by major recipient economies, 2012
Destination FDI stock($ million)
Share(%)
Netherlands 645 098 14.5 United Kingdom 597 813 13.4 Luxembourg 383 603 8.6 Canada 351 460 7.9 Ireland 203 779 4.6 Singapore 138 603 3.1 Japan 133 967 3.0 Australia 132 825 3.0 Switzerland 130 315 2.9 Germany 121 184 2.7 European Union 2 239 580 50.3 All countries total 4 453 307 100.0
Source: UNCTAD, Bilateral FDI Statistics (http://unctad.org/en/Pages/DIAE/FDI%20Statistics/FDI-Statistics-Bilateral.aspx).
Note: Excludes Bermuda and United Kingdom Caribbean islands (British Antilles, British Virgin Islands, Cayman Islands, Montserrat).
countries and 15 per cent from the United States. The combined share of the EU and the United States in FDI stock in the EU at the end of 2012 was 76 per cent. Considering the EU as a single block, the United States was the largest investment partner, accounting for one third of all investment !ows from outside the EU.
For the United States, the share of the EU in its
in!ows ranged from 45 per cent to 75 per cent over the period 2004–2012. In terms of FDI stock, the EU’s share was 62 per cent at the end of 2012 (table II.8). The top investors include the larger economies in the EU, such as France and Germany, along with the United Kingdom. Luxembourg and the Netherlands rank high as source countries of FDI in the United States, too. One explanation for the high share of these economies is that they have become preferred locations for incorporating global companies. The merger between two of the largest suppliers of chip-making equipment, Applied Materials (United States) and Tokyo Electron (Japan), in 2013 illustrates the case. To implement the merger, the two companies set up a holding company in the Netherlands. The existing companies became United States and Japanese af"liates of the Dutch holding company through share swaps.
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2.2.2 Developing Countries
According to Figure 5, FDI flows to developing economies reached a peak
with $778 billion, accounting for 52% of global FDI inflows in 2013. As the largest
host region in FDI inflow in the world, Developing Asia followed a similar trend as it
did in 2012 with 55% of all FDI inflows in developing countries, while Latin America
and the Caribbean accounts for the 37% of all FDI inflows in developing countries. A
graphical illustration of the details above is also compiled from the UCTAD Statistics
website as shown below.
Figure 5 Comparison of FDI inflows in Developing Countries, 2010-‐2012 (billion $)
Source: UNCTAD Statistics
Asia maintained its position as the world’s largest recipient region for FDI in
2013 with $426 billion, which is 3% higher than its value in 2012. There were various
trends in different sub-‐regions in Asia. West Asia was the only sub-‐region that
showed a decrease in 2013 with 9% to $38 billion, while South Asia saw a rise of 3%
and reached to $33 billion. South-‐East Asia saw an rise by 3% and reached to $116
billions, while East Asia saw a rise by 4% and reached to $219 billions with the
highest share of total FDI inflows in the developing Asia region.
13
Figure 6 FDI inflow of Developing Asia, 2012-‐2013 (billion $)
Source: UNCTAD FDI-‐TNC-‐GVC Information System, FDI/TNC database (www.unctad.org/fdistatistics).
China has maintained its position as the second largest recipient country in
FDI inflow in the world with $127 billion, which makes it closer to the FDI inflow level
of the United States comparing to 2012. In the South Asia, India has shown a rise of
17% and reached to $28 billions as the biggest recipient in the South Asia sub-‐region.
The trend seems to be increasing in the next years in South-‐East and Eastern Asia
especially infrastructure, finance and manufacturing (OECD).
West Asia, however, is the only country that saw a decline in FDI inflows in
2013 by experiencing a total FDI inflow of $38 billions.
Figure 7 FDI inflows Top 5 Countries Asia, 2012-‐2013
Source: UNCTAD FDI-‐TNC-‐GVC Information System (www.unctad.org/fdistatistics)
CHAPTER II Regional Investment Trends 57
c. West Asia
Figure A. FDI !ows, top 5 host and home economies, 2012–2013(Billions of dollars)
Figure C. FDI outflows, 2007–2013(Billions of dollars)
Figure B. FDI inflows, 2007–2013(Billions of dollars)
Fig. B - West AsiaFDI in!ows
Fig. C - West AsiaFDI out!ows
Other West Asia Turkey Other West Asia Turkey Gulf Cooperation Council (GCC)
Share in world total
4.0 5.1 5.9 4.3 3.1 3.6 3.0 1.5 1.9 1.5 1.1 1.3 1.4 2.2
0
20
40
60
80
100
2007 2008 2009 2010 2011 2012 2013 0
10
20
30
40
2007 2008 2009 2010 2011 2012 2013
Gulf Cooperation Council (GCC)
Fig. FID flows - West Asia
(Host) (Home)
Lebanon
Iraq
Saudi Arabia
United Arab Emirates
Turkey
United Arab Emirates
Turkey
Saudi Arabia
Qatar
Kuwait
2013 2012 2013 2012
0 2 4 6 8 10 12 14 0 2 4 6 8 10
Table A. Distribution of FDI flows among economies, by range,a 2013
Range In!ows Out!ows
Above $10 billion Turkey and United Arab Emirates ..
$5.0 to $9.9 billion Saudi Arabia Kuwait and Qatar
$1.0 to $4.9 billion
Iraq, Lebanon, Kuwait, Jordan and Oman
Saudi Arabia, Turkey, United Arab Emirates, Oman and Bahrain
Below $1.0 billion
Bahrain, State of Palestine, Yemen and Qatar
Lebanon, Iraq, Yemen, Jordan and State of Palestine
a Economies are listed according to the magnitude of their FDI flows.
Table B. Cross-border M&As by industry, 2012–2013(Millions of dollars)
Sector/industry Sales Purchases2012 2013 2012 2013
Total 8 219 2 065 11 390 8 077Primary 233 357 21 476
Mining, quarrying and petroleum 233 344 21 466Manufacturing 2 568 451 1 668 61
Food, beverages and tobacco 1 019 186 1 605 -Pharmaceuticals, medicinal chem. & botanical prod. 700 40 27 -
Services 5 419 1 257 9 700 7 540Electricity, gas and water 284 140 - 1 908Construction 125 14 1 126 -47Transportation and storage 874 55 -132 483Information and communications 3 357 21 2 803 1 137Financial and insurance activities - 298 465 6 543 3 972Business services 1 039 371 73 184
Table C. Cross-border M&As by region/country, 2012–2013(Millions of dollars)
Region/country Sales Purchases2012 2013 2012 2013
World 8 219 2 065 11 390 8 077Developed economies -1 083 406 5 223 2 739
European Union -3 007 714 5 319 1 312Germany 72 3 456 -584 -654United Kingdom -214 390 1 318 1 527
United States 1 700 -573 -244 67Developing economies 4 228 1 160 4 585 4 913
Egypt - - 9 3 150West Asia 3 855 1 039 3 855 1 039
Iraq -14 - 1 503 630Qatar 3 357 449 - -
Transition economies 4 023 3 1 582 425 Russian Federation 3 873 3 1 582 425
Table D. Green"eld FDI projects by industry, 2012–2013(Millions of dollars)
Sector/industry West Asia as destination West Asia as investors2012 2013 2012 2013
Total 44 668 56 527 35 069 39 240Primary 2 5 990 37 1 701
Mining, quarrying and petroleum 2 5 990 37 1 701Manufacturing 20 249 18 692 12 401 17 880
Coke, petroleum products and nuclear fuel 5 002 3 769 5 768 9 666Chemicals and chemical products 6 181 4 178 103 202Motor vehicles and other transport equipment 1 019 5 750 130 111
Services 24 417 31 845 22 630 19 659Electricity, gas and water 2 608 13 761 601 1 777Construction 6 693 3 253 5 105 4 313Hotels and restaurants 3 809 3 555 3 302 3 142Finance 2 226 1 641 3 993 2 305Business services 2 038 6 155 588 3 953
Table E. Green"eld FDI projects by region/country, 2012–2013(Millions of dollars)
Partner region/economy West Asia as destination West Asia as investors2012 2013 2012 2013
World 44 668 56 527 35 069 39 240Developed economies 15 652 27 253 2 054 4 572
Europe 9 883 15 801 1 640 2 509North America 5 102 10 009 342 1 976
Developing economies 25 860 16 496 30 874 31 016North Africa 1 047 109 10 511 3 906
Egypt 1 047 86 7 403 1 552East Asia 4 901 1 058 820 500South-East Asia 2 827 984 427 9 678South Asia 4 100 1 367 4 972 2 293West Asia 12 746 12 729 12 746 12 729
Transition economies 3 156 12 779 2 140 3 653 Russian Federation 122 12 710 313 1 345
CHAPTER II Regional Investment Trends 45
Asia continues to be the world’s top FDI spot, accounting for nearly 30 per cent of global FDI in!ows. Thanks to a signi"cant increase in cross-border M&As, total in!ows to the region as a whole amounted to $426 billion in 2013, 3 per cent higher than in 2012. The growth rates of FDI in!ows to the East, South-East and South Asia subregions ranged between 2 and 10 per cent, while in!ows to West Asia declined by 9 per cent ("gure II.7). FDI out!ows from subregions showed more diverging trends: out!ows from East and South-East Asia experienced growth of 7 and 5 per cent, respectively; out!ows from West Asia increased
by about two thirds; and those from South Asia plummeted to a negligible level ("gure II.7).
For some low-income countries in the region, weak infrastructure has long been a major challenge in attracting FDI and promoting industrial development. Today, rising intraregional FDI in infrastructure industries, driven by regional integration efforts (section a) and enhanced connectivity through the establishment of corridors between subregions (section b), is likely to accelerate infrastructure build-up, improve the investment climate and promote economic development.
Figure II.7. FDI in and out of developing Asia, by subregion, 2012–2013(Billions of dollars)
Source: UNCTAD FDI-TNC-GVC Information System, FDI/TNC database (www.unctad.org/fdistatistics).
0
50
100
150
200
250
East Asia South-East Asia South Asia West Asia
FDI in!ows
0
50
100
150
200
250
East Asia South-East Asia South Asia West Asia
2012 2013
2012 2013
FDI out!ows
2. Asia
14
As shown in Figure 7, in West Asia Turkey has received the majority of the
FDIs in 2013 with around $13 billions, which is slightly close to its level in 2012. In
West Asia region, there are mainly two different categories such as Turkey and Gulf
Cooperation Council (GCC) that have different trends that are mainly shaped by oil
related activities and petro-‐chemical industry.
3. FDI in Turkey
3.1 Overview of FDI Trends in Turkey Turkey has experienced a sharp increase in FDI inflows to the country in 2006
after a long period of low growth. Due to the global economic crisis it has shown a
low FDI inflow in the country in 2009 with $8.3 millions. However it has recovered its
instability and the FDI levels reached a peak in 2011 with $18.1 millions after the
economic crisis. FDI inflows have shown a decline of 14 % after 2012 by decreasing
to $13.2 billions in 2013. This decline can be attributed to the high volatility in
financial markets, unstable macroeconomic conditions and euro crisis (Ernst &
Young, 2013). After 2013 Turkey has experienced a slightly close level of FDI inflows
around $12.5 billions in 2014.
The recent trend of FDI inflows to Turkey is due to the increased privatization
in several sectors such as energy, telecommunications and banking (UNCTAD
Investment Country Profiles, 2013). Furthermore, the strong economic growth has
played a crucial role in this trend.
Figure 8 FDI inflows to Turkey, 2005-‐2014 (millions of dollars)
Source: UNCTAD, FDI/TNC database based on data from the Central Bank of Turkey
15
The majority of the FDI inflows has been counted for the Services sector with
69% of the total FDI inflow in 2010. Among the services sector, financial services was
taking the lead with 25% of the overall as $1582 millions (Table 2). Apart from the
service sector, manufacturing is the leading industry, accounting for 27 percent of all
inflows.
Table 2 FDI inflows in Turkey by industry, 2001-‐2010 (millions of dollars)
Source: UNCTAD, FDI/TNC database based on data from the Central Bank of Turkey.
As an emerging and developing market, Turkey has received the majority of
the FDI inflows from the developed countries with around 87% of the total FDI
inflows. Therefore, Turkey’s economy is manly driven by the developed country’s
economic conditions in terms of FDI. It has been recorded that 63 percent of the
capital, almost $3.8 billion, came from the European Union (World Bank, 2014).
Foreign capital inflow is of great importance for Turkey as its savings ratio would not
be adequate to meet its GDP growth target of 5% (Ozbekci, N. 2014). As it is seen
from the Table 3, the financial uncertainties in the United States have caused a
significant decline in flows of FDI to Turkey after 2006.
Table 5. FDI flows in the host economy, by industry, 2001–2010
(Millions of dollars)
Sector / industry 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Total 3 374 571 696 1 190 8 535 17 639 19 137 14 747 6 252 6 294
Primary - 2 14 79 47 128 346 192 138 279Agriculture, hunting, forestry and fishing - - 1 6 7 6 9 41 49 82
Agriculture and hunting - - 1 4 5 5 6 23 48 77Forestry and fishing - - - 2 2 1 3 18 1 5
Mining, quarrying and petroleum - 2 13 73 40 122 337 151 89 197Mining and quarrying - 2 13 73 40 122 337 151 89 197
Manufacturing 932 95 440 190 785 1 866 4 211 3 955 1 565 890Food, beverages and tobacco - 14 249 78 68 608 766 1 252 196 123Textiles, clothing and leather - 5 2 9 184 26 232 189 77 92Wood and wood products - - - 11 23 - - - - 20
Paper and paper products - - - 11 23 - - - - 19Coke, petroleum products and nuclear fuel - - 2 - - - - - - 5Chemicals and chemical products - 8 9 38 174 601 1 109 200 336 103Rubber and plastic products - 1 10 12 8 - - - - 8Non-metallic mineral products - - - 1 53 - - - - 54Metal and metal products - 18 1 6 139 - - - - 194Machinery and equipment - 13 16 6 13 54 48 226 220 64Electrical and electronic equipment - 2 4 2 13 53 117 236 59 178Motor vehicles and other transport equipment - 34 145 27 106 63 70 77 225 38Other manufacturing - - 2 - 4 461 1 869 1 775 452 11
Services 2 439 474 242 921 7 703 15 645 14 580 10 600 4 549 5 125Electricity, gas and water - 68 86 66 4 112 568 1 068 2 126 1 814Construction - - 8 3 80 222 285 336 208 328Trade - 75 58 72 68 1 166 165 2 085 389 425Hotels and restaurants - - 4 1 42 23 33 24 54 113Transport, storage and communications - 1 1 639 3 285 6 696 1 117 170 391 212Finance - 246 51 69 4 018 6 957 11 662 6 069 666 1 583Business activities - - 3 3 29 99 560 641 560 409Education - - - - 17 - - - - 17Health and social services - 4 21 35 74 265 177 149 106 111Community, social and personal service activities - 80 10 33 86 105 13 58 49 113
Unspecified 3 - - - - - - - - -
Source : UNCTAD, FDI/TNC database based on data from the Central Bank of Turkey.Note : Data refer to equity capital only and do not cover disinvestments and real estate.
Turkey______________________________________________________________________________________________________7
______________________________________________________________________________________________________
16
Table 3 FDI inflows in Turkey, by geographical origin, 2001-‐2010 (millions of $)
Source: UNCTAD, FDI/TNC database based on data from the Central Bank of Turkey.
Recently, it seems certain that political and financial instability cause a
decline in FDI inflows in the country, and directly to the economic growth of the
country as it can be seen in the GDP growth chart extracted from the World Bank
site. Turkey has been following a privatization policy to meet its growth rate target
Table 6. FDI flows in the host economy, by geographical origin, 2001–2010(Millions of dollars)
Region / economy 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010World 3 374 571 696 1 190 8 535 17 639 19 137 14 747 6 252 6 294
Developed economies 2 640 540 692 1 136 5 195 15 762 17 213 12 282 5 580 5 652Europe 2 640 468 576 1 033 5 047 14 567 12 864 11 278 5 209 4 920
European Union 2 640 455 565 1 027 5 006 14 489 12 601 11 076 4 928 4 724Austria - - - 1 9 1 108 370 586 1 019 1 584Belgium - 5 54 25 1 090 3 435 358 571 201 49Bulgaria - - 8 - 9 3 6 - - 2Denmark - 14 23 - 7 7 15 164 12 13Finland - - - 142 - 110 36 26 4 1France - 22 121 34 2 107 439 367 679 617 621Germany - 86 142 73 391 357 954 1 237 498 593Greece - - 24 38 11 2 791 2 360 775 59 436Hungary - - - - 2 - - 10 3 -Ireland - - - - 21 2 21 - 8 -Italy - 241 1 14 692 189 74 249 314 25Lithuania - - - - 1 - 2 15 - -Luxembourg - - - - 39 251 583 3 140 493 287Netherlands - 72 51 568 383 5 069 5 442 1 343 718 505Portugal - - - - 1 24 701 32 - 1Romania - - - 3 3 8 1 - 1 -Spain - 5 - 3 66 53 583 838 145 202Sweden - 2 - - 8 1 21 55 6 39United Kingdom - 8 141 126 166 628 703 1 335 350 245
Other developed Europe - 13 11 6 41 78 263 202 281 196Norway - - - - 8 2 5 1 106 19Switzerland - 9 11 6 33 73 257 201 163 122
North America - 9 58 97 114 969 4 223 891 312 371Canada - 7 6 61 26 121 11 23 52 55United States - 2 52 36 88 848 4 212 868 260 316
Other developed countries - 63 58 6 34 226 126 113 59 361Australia - - - - 1 108 26 2 12 5Israel - - - - 1 112 98 100 44 9Japan - 63 58 6 32 1 2 11 3 347
Developing economies - 7 1 50 1 689 1 862 1 181 2 357 558 560Africa - - - - 3 21 5 82 2 -
North Africa - - - - 3 13 - 82 1 -Libyan Arab Jamahiriya - - - - 3 12 - 82 1 -
Latin America and the Caribbean - - - - 8 28 494 60 19 7Central America - - - - 4 - - - 3 -
Panama - - - - 4 - - - 3 -Caribbean - - - - 4 27 27 8 9 -
Bahamas - - - - 1 10 2 - 2 -British Virgin Islands - - - - 3 1 10 5 - -
Asia - 7 1 50 1 678 1 813 682 2 215 537 553West Asia - 5 - 50 1 675 1 785 497 2 041 218 417
Bahrain - 4 - - 24 89 36 47 96 -Iraq - - - - 4 1 5 - - -Kuwait - - - 38 20 123 77 330 73 193Lebanon - - - 7 - 2 84 34 9 29Saudi Arabia - - - 5 2 22 10 1 312 34 39United Arab Emirates - 1 - - 1 625 1 548 183 148 6 104
South, East and South-East Asia - 2 1 - 3 28 185 174 319 136China - - - - 2 3 1 - 1 -Korea, Republic of - 2 1 - 1 3 74 57 169 20
South-East Europe and CIS - - 1 4 1 650 8 731 108 105 82CIS - - 1 4 1 650 8 731 90 101 79
Azerbaijan - - 1 4 2 1 10 18 69 12Kazakhstan - - - - 43 - 613 1 20 2Russian Federation - - - - 1 605 7 108 71 12 60
Unspecified 734 24 2 - 1 7 12 - 9 -
Source : UNCTAD, FDI/TNC database based on data from the Central Bank of Turkey.Note : Data refer to equity capital only and do not cover disinvestments and real estate.
Turkey______________________________________________________________________________________________________8
______________________________________________________________________________________________________
17
and stable its economy (YASED Report, 2014).
Figure 9 GDP % annual, Turkey and Developing Countries, 2012-‐2017
Source: Worldbank http://www.worldbank.org/en/publication/global-‐economic-‐prospects/data?region=ECA
As estimated by the World Bank, Turkey’s GDP growth rate seems to follow a
lower level than the developing country’s average, and a slightly higher than the
Europe& Central Asia level with 3.8% in 2014. In order to meet the target GDP rates,
Turkey will need to attract more foreign investors in the country and improve its
economic growth.
3.2 Investment Incentive Systems Over the last decade many countries -‐ no matter they are developed or
developing – have been actively promoting their countries and attracting more
investment from abroad in order to reach their development goals by transferring
the advanced technologies, know-‐how, highly skilled labor, and economic growth.
They do so by increasing the FDI inflows to their home countries as host country.
The main channels and methods to attract higher FDI inflow are liberalizing the
laws and regulations, providing guarantees for investments and profits, and tax
incentives.
18
The incentive systems in promoting FDIs may have both positive and negative
effects depending on the context, and the scope. According to UNCTAD’s report on
Tax Incentives and Foreign Direct Investment (2000), foreign investor’s action plan
on investing have two phases. The first phase is the fundamental determinants such
as the market size, labor force, access to raw materials. These are the primary
determinants, which affect investor’s decision on FDI. For those countries, which
pass this first step, the further criteria are the variety of incentives, tax rates and
grants. This is where incentive systems play an important role.
The incentive systems may be clustered depending on regional investment,
sectorial investment, performance enhancement, transfer of technology, and
variable tax rates (UNCTAD, 2000).
3.2.1 Incentive Systems in Turkey
The degree and content of incentive systems have been changing depending on
the country’s economic targets and strategies. The objective of the latest investment
incentive systems in Turkey has been aimed at reducing the dependency on the
imports on intermediary goods in the strategic sectors.
The prior objectives of the latest investment incentive programs can be listed
as following (Turkey Investment Support Agency):
• Reducing the current account deficit
• Improving investment support for lesser developed regions
• Increasing the level of support instruments
• Promoting the clustering activities
• Focusing more on the sectors that will generate technology transfer
According to the Investment Incentive System Report by the Ministry of
Economy (January 1, 2012), the new systems has four different schemes such as
General Investment Incentive Scheme, Regional Investment Incentive Scheme,
Large-‐Scale Investment Incentive Scheme, and Strategic Investment Incentive
Scheme.
Different supporting tools has been shown in the below table 4.
19
Table 4 Incentive Systems in Turkey
Source: The Republic of Turkey, Investment Support Agency, www.invest.gov.tr
3.2.2 Incentive programs to support the ICT Industry in Turkey
As it is previously mentioned, Turkey offers a wide variety of ease and
advantages for foreigners to invest in the Turkish market. When it comes to the
incentive supports especially in ICT industry, the number is increasing
inevitably.
There are five main incentive and regulation programs in Turkey apart from
the general incentive programs mentioned previously. As it can be seen in the Figure
10, the largest share is contributed by TUBITAK-‐TEYBED Program with 25%, which is
followed closely by TUBITAK Industry R&D Projects and Law No.4691 on Technology
Development Zones with 22.7% each.
20
Figure 10 Share of Total Incentives Granted for ICT Industry in Turkey
Source: Ministry of Science, Industry and Technology Turkey
Apart from these main incentives and support programs, some other
incentives are granted for TDZ Investors such as income tax gain exemption,
corporate tax gain exemption, income tax exemption for researchers, developers
and R&D personnel, social security premium support, and value added tax
exemption (Turkey Investment Support and Promotion Agency, 2013).
4. Outlook of Information and Communication Industry
The Information and Communication (ICT) Industry, and ICT-‐enabled
technologies and their usage in other sectors highly contribute country’s economic
growth in many aspects. In this section, we will be focusing on more what the ICT
Industry is, the main actors in the globe in ICT sector, what are its determinants, and
why it is important on the world’s economy. Afterwards, a further analysis will be
done for Turkey’s ICT Sector.
ICT is a highly general term that comprises any communication device or
application, the integration of telecommunications such as telephone lines and
wireless signals, radio, television, computer, network hardware and software,
satellite systems and many various service systems associated with these.
4.1 How to measure the ICT Level of a Country: ICT Development Index (IDI)
4.1.1 Definition and Objectives
The ICT Development Index (IDI) is an index aimed at measuring, monitoring,
and making comparisons between country’s ICT developments by using 11 indicators
Investment Support and Promotion Agency of Turkey ©2014 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited
There are different incentive programs to support the industry
39
• In 2012, 50% of ICT companies benefited from these incentives. The TÜBITAK-TEYDEB Program’s incentives have the largest total share.
25.0%
22.7% 22.7%
15.9%
9.1%
TÜBİTAK-TEYDEB Programme
TUBİTAK Industry R&D ProjectsSupport ProgrammeLaw No. 4691 on TechnologyDevelopment ZonesLaw No. 5746 on SupportingR&D ActivitiesEntrepreneur Supports(TÜBİTAK / KOSGEB)
• In addition to the New Investment Incentive Program, ICT sector investments and initiatives are supported through several regulations and incentive programs.
TÜBITAK-TEYDEB Program
TÜBITAK Industry R&D Projects Support Program
Law No. 4691 on Technology Development Zones
Law No. 5746 on Supporting R&D Activities
Entrepreneur Support (TÜBITAK / KOSGEB)
Figure 22: Share of Total Incentives Granted
Figure 23: Total Amount of Support and Exemptions Provided to Companies in TDZs from 2001 to March 2012
Source: Ministry of Science, Industry and Technology
Income and Corporate Tax Exemption TL 448.87 million
VAT Exemption TL 365.26 million
Employee Income Tax Exemption TL 482.09 million
Social Security Premium Support TL 95.30 million
Total TL 1.44 billion
• Companies in Technology Development Zones (TDZs) are granted various supports and exemptions totaling TL 1.4 billion.
• Income tax gain exemption
• Corporation tax gain exemption
• Income tax exemption for researchers, developers and R&D personnel
• Social security premium support
• Value added tax exemption
Some Incentives for TDZ Investors
21
which are grouped under three main clusters. The IDI was developed by ITU in 2008
and first presented in the 2009 edition of Measuring the Information Society (ITU,
2009a).
ICT Development Index has been published yearly by ranking the countries in
the world. The primary aims of using such an index are to see the level and
improvement of development of ICT in various countries, to see how they differ in
developed and developing countries since it is a global index, the digital divide (as it
was initiated by ICT4D mentioned previously), and to foresee the development
potential of ICT in several countries.
4.1.2 Methodology
The methodology has 11 indicators with three main stages applied as previously
mentioned such as ICT Readiness, ICT Intensity, ICT Impact.
Figure 11 ICT Development Index Conceptual Framework
Source: International Telecommunication Union (ITU)
These three stages and their application depend on three different factors such as
the access and the availability of the ICT infrastructure, a high level of usage ,and the
capability to use this ICT infrastructure effectively (ITU Geneva, 2010). ICT Access
and ICT Use can be accomplished through the first two stages. However, in order to
go further to the final stage, it is crucial to optimize using the ICT Skills. These ICT
Capability and Skills play an important role to maximize the effectiveness of this use.
16
Chapter 2. The ICT Development Index (IDI)
their bene!ts. Therefore, the IDI includes a measure of the capability to use ICTs e"ectively.
A single indicator cannot track progress in all three components (access, usage and skills) of the ICT development process, thus requiring the construction of a composite index such as the IDI. The IDI aims to capture the evolution of the information society as it goes through its di"erent stages of development, taking into consideration technology convergence and the emergence of new technologies.
Based on this conceptual framework, the IDI is divided into the following three sub-indices:
Access sub-index: This sub-index captures ICT readiness, and includes !ve infrastructure and access indicators (!xed-telephone subscriptions, mobile-cellular telephone subscriptions, international Internet bandwidth per Internet user, percentage of households with a computer, and percentage of households with Internet access).
Use sub-index: This sub-index captures ICT intensity, and includes three ICT intensity and usage indicators (percentage of Internet users, fixed (wired)-broadband subscriptions, and active mobile-broadband subscriptions).2
&ŝŐƵƌĞϮϭdŚƌĞĞƐƚĂŐĞƐŝŶƚŚĞĞǀŽůƵƟŽŶƚŽǁĂƌĚƐĂŶŝŶĨŽƌŵĂƟŽŶƐŽĐŝĞƚLJ
^ŽƵƌĐĞ/dh
ICT Development Index
ICT Readiness (infrastructure,
access)
ICT Impact
(outcomes)ICT Use
(intensity)
ICT Capability
(skills)
Skills sub-index: This sub-index captures ICT capability or skills as indispensable input indicators. It includes three proxy indicators (adult literacy, gross secondary enrolment and gross tertiary enrolment), and therefore is given less weight in the computation of the IDI compared with the other two sub-indices.3
The choice of indicators included in the sub-indices reflects the corresponding stage of transformation to the information society. Therefore, the indicators in each sub-index may change over time to re#ect technological developments related to ICTs, and as more and better data become available. For example, what was considered basic infrastructure in the past – such as !xed-telephone lines – is fast becoming less relevant in the light of increasing !xed-mobile substitution. Similarly, broadband is currently considered an advanced technology, characterizing intense Internet use, and is therefore included in stage 2 (as an indicator in the use sub-index). However, in the future it may become essential and be moved to stage 1 (as an indicator in the access sub-index), while another, new technology may appear in stage 2.
DĞƚŚŽĚŽůŽŐLJ
The IDI includes 11 indicators (Figure 2.2). A detailed de!nition of each indicator is provided in Annex 1.
22
Country’s capability to exploit its technological capabilities, and skills in order
to reach a maximum outcome depends also on its economy and its potential. If a
given country fails to exploits using its full potential, then it will not have a
maximized outcome, which will result in a lower measure and lower IDI.
Considering the overall impact of every single indicator, the 11 indicators
have been categorized under three main categories:
• ICT Access: This category corresponds to the ICT Readiness previously
mentioned, and comprise five indicators such as fixed telephone
subscriptions, mobile-‐cellular telephone subscriptions, international internet
bandwidth per user, percentage of households with a computer, percentage
of household with an internet access. As it can be seen, all these indicators
have been showed in global trends in the previous section by making a brief
and general comparison between several countries.
• ICT Use: This category corresponds to the ICT Intensity, and comprises three
indicators such as percentage of internet users, fixed-‐broadband
subscriptions, active mobile broadband subscriptions.
• ICT Skills: This category corresponds to ICT capability, and comprises three
indicators. The indicators in this category strictly depend on the socio-‐cultural
level of country. The indicators are adult literacy, gross secondary
enrollment, and gross tertiary enrollment.
23
Figure 12 ICT Development Indicators and Weights
Source: International Telecommunication Union (ITU)
These three categories have different weights contributing to the final ICT
Development Index. ICT Access and ICT Use count fro 40% each, while ICT Skills
count for 30% to the final index. Among each category, the indicators count equal.
The methodology followed to determine and calculate a country’s ICT Development
Index starts with collecting and preparing the complete date sets, then normalizing
them into the same unit measure, rescaling the data and counting the weights for
each indicator and category.
4.1.3 How different countries compete and rank in terms of ICT Development Index
By following the IDI methodology explained previously, each year the ICT
Development Index of each country has been calculated and published in ITU World
Telecommunication Report annually. Below table shows the ranking of countries in
2012 in terms of ICT Development Index.
18
Chapter 2. The ICT Development Index (IDI)
The access and use sub-indices were given equal weight (40 per cent each). The skills sub-index was given less weight (20 per cent), since it is based on proxy indicators.
This chapter presents the IDI results for 2011 in comparison with 2010. It should be noted that the 2010 IDI values have changed from those published in the previous edition of this report as a result of:
Country data revisions. As more accurate data become available, countries provide ITU with revised statistics for previous years, which have been taken into consideration. This also allows ITU to identify inconsistencies and revise previous estimates. For this edition, in particular,
ICT access Ref. value (%)
1. Fixed-telephone lines per 100 inhabitants
2. Mobile-cellular telephone subscriptions per 100 inhabitants
3. International Internet bandwidth (bit/s) per Internet user
4. Percentage of households with a computer
5. Percentage of households with Internet access
60
180
408’813*
100
100
20
20
20
20
20
ICT use Ref. value (%)
6. Percentage of individuals using the Internet
7. Fixed (wired)-broadband Internet subscriptions per 100 inhab.
8. Active mobile-broadband subscriptions per 100 inhab.
100
60
100
33
33
33
ICT skills Ref. value (%)
9. Adult literacy rate
10. Secondary gross enrolment ratio
11. Tertiary gross enrolment ratio
100
100
100
33
33
33
ICT
Development
Index
40
40
20
Figure 2.2: ICT Development Index: indicators and weights
^ŽƵƌĐĞ/dhEŽƚĞ ΎdŚŝƐĐŽƌƌĞƐƉŽŶĚƐƚŽĂůŽŐǀĂůƵĞŽĨϱϲϭǁŚŝĐŚǁĂƐƵƐĞĚŝŶƚŚĞŶŽƌŵĂůŝnjĂƟŽŶƐƚĞƉ
many countries have updated the 2010 values for the indicator “active mobile-broadband subscriptions”.8
Di!erences among countries included in the IDI. Since the IDI is a relative measure, the calculation of the IDI value depends on the values of the other countries included. In each new edition, some countries are excluded and others added based on data availability. Overall, this version of the IDI includes 155 countries/economies as compared with 152 in last year’s edition.
The remainder of the chapter is structured as follows. Section 2.2 presents the IDI results at the global level. It highlights some of the top performers, as well as the most dynamic
24
Table 5 ICT Development Index Ranking, 2012-‐2013
Source: ITU World Telecommunication/ICT Indicators database
The ICT Development Index report has been made for 157 economies in
2012. As it is illustrated in the Table 5, the Korean Republic and the Nordic Countries
maintain their position in top 5 again in 2012. For those countries with high ICT
Development Index did not show a significant change in the ranking, while
developing countries with respectively lower ICT Development Indexes experienced
ϳ
DĞĂƐƵƌŝŶŐƚŚĞ/ŶĨŽƌŵĂƟŽŶ^ŽĐŝĞƚLJ 2013
EŽƚĞ ΎdŚĞ'E/ƉĞƌĐĂƉŝƚĂŝƐďĂƐĞĚŽŶƚŚĞtŽƌůĚĂŶŬƐƚůĂƐDĞƚŚŽĚSource: ITU.
dĂďůĞϮϭ/dĞǀĞůŽƉŵĞŶƚ/ŶĚĞdž;//ͿϮϬϭϭĂŶĚϮϬϭϮ
ĐŽŶŽŵLJ ZĂŶŬϮϬϭϮ //ϮϬϭϮ ZĂŶŬϮϬϭϭ //ϮϬϭϭ ĐŽŶŽŵLJ ZĂŶŬϮϬϭϮ //ϮϬϭϮ ZĂŶŬϮϬϭϭ //ϮϬϭϭ<ŽƌĞĂ;ZĞƉͿ 1 ϴϱϳ 1 ϴϱϭ ůďĂŶŝĂ ϴϬ ϰϭϭ ϴϬ ϯϴϬ^ǁĞĚĞŶ 2 ϴϰϱ 2 ϴϰϭ ĐƵĂĚŽƌ ϴϭ ϰϬϴ ϴϯ ϯϳϯ/ĐĞůĂŶĚ 3 ϴϯϲ ϰ ϴϭϮ Fiji ϴϮ ϯϵϵ ϴϭ ϯϳϵĞŶŵĂƌŬ ϰ ϴϯϱ 3 ϴϭϴ Mexico ϴϯ ϯϵϱ ϴϮ ϯϳϴ&ŝŶůĂŶĚ 5 ϴϮϰ 5 ϳϵϵ ^ŽƵƚŚĨƌŝĐĂ ϴϰ ϯϵϱ ϴϱ ϯϲϳEŽƌǁĂLJ ϲ ϴϭϯ ϲ ϳϵϳ DŽŶŐŽůŝĂ ϴϱ ϯϵϮ ϵϬ ϯϱϵEĞƚŚĞƌůĂŶĚƐ ϳ ϴϬϬ ϳ ϳϴϱ ŐLJƉƚ ϴϲ ϯϴϱ ϴϳ ϯϲϱhŶŝƚĞĚ<ŝŶŐĚŽŵ ϴ ϳϵϴ 11 ϳϲϯ ^ƵƌŝŶĂŵĞ ϴϳ ϯϴϰ ϴϰ ϯϳϯ>ƵdžĞŵďŽƵƌŐ ϵ ϳϵϯ ϵ ϳϳϲ sŝĞƚEĂŵ ϴϴ ϯϴϬ ϴϲ ϯϲϱ,ŽŶŐ<ŽŶŐŚŝŶĂ ϭϬ ϳϵϮ ϭϬ ϳϲϲ Morocco ϴϵ ϯϳϵ ϴϵ ϯϱϵƵƐƚƌĂůŝĂ 11 ϳϵϬ 15 ϳϱϰ /ƌĂŶ;/ZͿ ϵϬ ϯϳϵ ϴϴ ϯϲϭ:ĂƉĂŶ 12 ϳϴϮ ϴ ϳϳϳ dƵŶŝƐŝĂ ϵϭ ϯϳϬ ϵϮ ϯϱϴ^ǁŝƚnjĞƌůĂŶĚ 13 ϳϳϴ 12 ϳϲϮ WĞƌƵ ϵϮ ϯϲϴ ϵϭ ϯϱϴDĂĐĂŽŚŝŶĂ ϭϰ ϳϲϱ 13 ϳϱϳ :ĂŵĂŝĐĂ ϵϯ ϯϲϴ ϵϯ ϯϱϰ^ŝŶŐĂƉŽƌĞ 15 ϳϲϱ ϭϰ ϳϱϱ ŽŵŝŶŝĐĂŶZĞƉ ϵϰ ϯϱϴ ϵϱ ϯϯϲEĞǁĞĂůĂŶĚ ϭϲ ϳϲϰ ϭϴ ϳϯϭ dŚĂŝůĂŶĚ ϵϱ ϯϱϰ ϵϰ ϯϰϮhŶŝƚĞĚ^ƚĂƚĞƐ ϭϳ ϳϱϯ ϭϲ ϳϯϱ ĂƉĞsĞƌĚĞ ϵϲ ϯϱϯ ϵϲ ϯϭϴ&ƌĂŶĐĞ ϭϴ ϳϱϯ ϭϵ ϳϮϲ /ŶĚŽŶĞƐŝĂ ϵϳ ϯϰϯ ϵϳ ϯϭϰ'ĞƌŵĂŶLJ ϭϵ ϳϰϲ ϭϳ ϳϯϯ WŚŝůŝƉƉŝŶĞƐ ϵϴ ϯϯϰ ϵϴ ϯϭϰĂŶĂĚĂ ϮϬ ϳϯϴ ϮϬ ϳϭϰ ŽůŝǀŝĂ ϵϵ ϯϮϴ ϭϬϮ ϯϬϴƵƐƚƌŝĂ 21 ϳϯϲ 21 ϳϭϬ ů^ĂůǀĂĚŽƌ ϭϬϬ ϯϮϱ ϭϬϯ ϯϬϲƐƚŽŶŝĂ 22 ϳϮϴ 25 ϲϳϰ dŽŶŐĂ ϭϬϭ ϯϮϯ ϭϬϭ ϯϬϵ/ƌĞůĂŶĚ 23 ϳϮϱ 22 ϳϭϬ ^LJƌŝĂ ϭϬϮ ϯϮϮ ϵϵ ϯϭϯDĂůƚĂ Ϯϰ ϳϮϱ Ϯϰ ϲϴϱ WĂƌĂŐƵĂLJ ϭϬϯ ϯϮϭ ϭϬϬ ϯϭϬĞůŐŝƵŵ 25 ϳϭϲ 23 ϲϴϱ hnjďĞŬŝƐƚĂŶ ϭϬϰ ϯϭϮ ϭϬϰ ϯϬϮ/ƐƌĂĞů Ϯϲ ϳϭϭ Ϯϲ ϲϳϬ 'ƵLJĂŶĂ ϭϬϱ ϯϬϴ ϭϬϲ Ϯϵϲ^ƉĂŝŶ Ϯϳ ϲϴϵ Ϯϳ ϲϲϱ ůŐĞƌŝĂ ϭϬϲ ϯϬϳ ϭϬϱ Ϯϵϴ^ůŽǀĞŶŝĂ Ϯϴ ϲϳϲ Ϯϴ ϲϲϬ ^ƌŝ>ĂŶŬĂ ϭϬϳ ϯϬϲ ϭϬϳ ϮϵϮĂƌďĂĚŽƐ Ϯϵ ϲϲϱ ϯϲ ϲϬϭ ŽƚƐǁĂŶĂ ϭϬϴ ϯϬϬ ϭϬϴ Ϯϴϯ/ƚĂůLJ ϯϬ ϲϱϳ Ϯϵ ϲϰϯ EĂŵŝďŝĂ ϭϬϵ Ϯϴϱ 111 ϮϲϬYĂƚĂƌ 31 ϲϱϰ ϯϬ ϲϰϭ ,ŽŶĚƵƌĂƐ ϭϭϬ Ϯϳϰ ϭϬϵ ϮϳϬ'ƌĞĞĐĞ 32 ϲϰϱ 33 ϲϮϭ ƵďĂ 111 ϮϳϮ ϭϭϬ ϮϲϲhŶŝƚĞĚƌĂďŵŝƌĂƚĞƐ 33 ϲϰϭ ϰϱ ϱϲϴ 'ĂďŽŶ 112 Ϯϲϭ 112 ϮϰϲnjĞĐŚZĞƉƵďůŝĐ ϯϰ ϲϰϬ 31 ϲϯϬ 'ŚĂŶĂ 113 ϮϲϬ ϭϭϰ ϮϯϬ>ĂƚǀŝĂ 35 ϲϯϲ ϯϳ ϲϬϬ EŝĐĂƌĂŐƵĂ ϭϭϰ Ϯϱϰ 113 ϮϯϵWŽƌƚƵŐĂů ϯϲ ϲϯϮ 35 ϲϬϳ ŝŵďĂďǁĞ 115 ϮϱϮ ϭϭϵ ϮϭϲWŽůĂŶĚ ϯϳ ϲϯϭ 32 ϲϮϮ <ĞŶLJĂ ϭϭϲ Ϯϰϲ ϭϭϲ ϮϮϯƌŽĂƟĂ ϯϴ ϲϯϭ ϯϰ ϲϭϰ ^ǁĂnjŝůĂŶĚ ϭϭϳ Ϯϰϰ 115 ϮϮϳĂŚƌĂŝŶ ϯϵ ϲϯϬ ϰϮ ϱϳϵ ŚƵƚĂŶ ϭϭϴ ϮϰϬ ϭϭϳ ϮϭϵZƵƐƐŝĂŶ&ĞĚĞƌĂƟŽŶ ϰϬ ϲϭϵ ϯϴ ϱϵϰ ^ƵĚĂŶ ϭϭϵ Ϯϯϯ ϭϭϴ ϮϭϵĞůĂƌƵƐ ϰϭ ϲϭϭ ϰϲ ϱϱϳ ĂŵďŽĚŝĂ ϭϮϬ ϮϯϬ 121 ϮϬϱ,ƵŶŐĂƌLJ ϰϮ ϲϭϬ ϯϵ ϱϵϭ /ŶĚŝĂ 121 ϮϮϭ ϭϮϬ Ϯϭϯ^ůŽǀĂŬŝĂ ϰϯ ϲϬϱ ϰϬ ϱϴϱ EŝŐĞƌŝĂ 122 Ϯϭϴ 123 ϭϵϲ>ŝƚŚƵĂŶŝĂ ϰϰ ϱϴϴ ϰϭ ϱϳϵ >ĂŽWZ 123 ϮϭϬ 122 ϭϵϵLJƉƌƵƐ ϰϱ ϱϴϲ ϰϯ ϱϳϭ ^ĞŶĞŐĂů ϭϮϰ ϮϬϮ 125 ϭϴϴƵůŐĂƌŝĂ ϰϲ ϱϴϯ ϰϳ ϱϱϬ ^ŽůŽŵŽŶ/ƐůĂŶĚƐ 125 ϭϵϳ ϭϮϰ ϭϵϭhƌƵŐƵĂLJ ϰϳ ϱϳϲ ϱϬ ϱϯϴ >ĞƐŽƚŚŽ ϭϮϲ ϭϵϱ ϭϮϲ ϭϴϰ<ĂnjĂŬŚƐƚĂŶ ϰϴ ϱϳϰ ϰϵ ϱϰϭ zĞŵĞŶ ϭϮϳ ϭϴϵ ϭϮϵ ϭϳϲŶƟŐƵĂΘĂƌďƵĚĂ ϰϵ ϱϳϰ ϰϰ ϱϳϬ 'ĂŵďŝĂ ϭϮϴ ϭϴϴ ϭϮϳ ϭϳϵ^ĂƵĚŝƌĂďŝĂ ϱϬ ϱϲϵ ϰϴ ϱϰϲ WĂŬŝƐƚĂŶ ϭϮϵ ϭϴϯ ϭϮϴ ϭϳϴŚŝůĞ 51 ϱϰϲ 52 ϱϬϴ hŐĂŶĚĂ ϭϯϬ ϭϴϭ ϭϯϬ ϭϳϮ>ĞďĂŶŽŶ 52 ϱϯϳ ϲϭ ϰϲϮ ũŝďŽƵƟ 131 ϭϳϳ 131 ϭϳϭƌŐĞŶƟŶĂ 53 ϱϯϲ 53 ϱϬϲ ĂŵďŝĂ 132 ϭϳϳ ϭϯϳ ϭϲϰKŵĂŶ ϱϰ ϱϯϲ ϱϴ ϰϴϬ DĂƵƌŝƚĂŶŝĂ 133 ϭϳϲ 133 ϭϳϬZŽŵĂŶŝĂ 55 ϱϯϱ ϱϰ ϱϬϱ DLJĂŶŵĂƌ ϭϯϰ ϭϳϰ 132 ϭϳϬ^ĞƌďŝĂ ϱϲ ϱϯϰ 51 ϱϯϴ ĂŶŐůĂĚĞƐŚ 135 ϭϳϯ ϭϯϵ ϭϲϮd&zZDĂĐĞĚŽŶŝĂ ϱϳ ϱϭϵ 55 ϰϵϯ ĂŵĞƌŽŽŶ ϭϯϲ ϭϳϮ ϭϯϲ ϭϲϲƌƵŶĞŝĂƌƵƐƐĂůĂŵ ϱϴ ϱϬϲ ϱϲ ϰϵϯ ƀƚĞĚΖ/ǀŽŝƌĞ ϭϯϳ ϭϳϬ 135 ϭϲϲDĂůĂLJƐŝĂ ϱϵ ϱϬϰ ϱϳ ϰϴϭ ŽŵŽƌŽƐ ϭϯϴ ϭϳϬ ϭϯϰ ϭϲϴŽƐƚĂZŝĐĂ ϲϬ ϱϬϯ ϲϱ ϰϰϳ ŶŐŽůĂ ϭϯϵ ϭϲϴ ϭϯϴ ϭϲϯnjĞƌďĂŝũĂŶ ϲϭ ϱϬϭ ϲϬ ϰϲϮ ŽŶŐŽ ϭϰϬ ϭϲϲ ϭϰϬ ϭϱϴƌĂnjŝů ϲϮ ϱϬϬ ϲϮ ϰϱϵ ZǁĂŶĚĂ ϭϰϭ ϭϲϲ ϭϰϯ ϭϱϰ^ƚsŝŶĐĞŶƚĂŶĚƚŚĞ'ƌ ϲϯ ϰϴϭ ϱϵ ϰϳϭ dĂŶnjĂŶŝĂ ϭϰϮ ϭϲϱ ϭϰϭ ϭϱϳ^ĞLJĐŚĞůůĞƐ ϲϰ ϰϳϱ ϳϬ ϰϯϲ ĞŶŝŶ ϭϰϯ ϭϲϬ ϭϰϮ ϭϱϳDŽůĚŽǀĂ ϲϱ ϰϳϰ ϲϳ ϰϰϲ DĂůŝ ϭϰϰ ϭϱϰ ϭϰϰ ϭϰϯdƌŝŶŝĚĂĚΘdŽďĂŐŽ ϲϲ ϰϳϯ ϲϯ ϰϱϰ DĂůĂǁŝ ϭϰϱ ϭϰϯ ϭϰϱ ϭϰϭŽƐŶŝĂĂŶĚ,ĞƌnjĞŐŽǀŝŶĂ ϲϳ ϰϳϭ ϲϰ ϰϰϵ >ŝďĞƌŝĂ ϭϰϲ ϭϯϵ ϭϰϴ ϭϮϳhŬƌĂŝŶĞ ϲϴ ϰϲϰ ϲϵ ϰϯϴ ŽŶŐŽ;ĞŵZĞƉͿ ϭϰϳ ϭϯϭ ϭϰϲ ϭϯϬdƵƌŬĞLJ ϲϵ ϰϲϰ ϲϲ ϰϰϳ DŽnjĂŵďŝƋƵĞ ϭϰϴ ϭϯϭ ϭϰϵ ϭϮϲWĂŶĂŵĂ ϳϬ ϰϲϭ ϲϴ ϰϯϴ DĂĚĂŐĂƐĐĂƌ ϭϰϵ ϭϮϴ ϭϰϳ ϭϮϴ'ĞŽƌŐŝĂ ϳϭ ϰϱϵ ϳϯ ϰϮϰ 'ƵŝŶĞĂͲŝƐƐĂƵ ϭϱϬ ϭϮϲ 152 ϭϭϵDĂƵƌŝƟƵƐ ϳϮ ϰϱϱ ϳϰ ϰϮϯ ƚŚŝŽƉŝĂ 151 ϭϮϰ ϭϱϬ ϭϮϮDĂůĚŝǀĞƐ ϳϯ ϰϱϯ ϳϭ ϰϯϭ 'ƵŝŶĞĂ 152 ϭϮϯ 151 ϭϮϬƌŵĞŶŝĂ ϳϰ ϰϰϱ ϳϱ ϰϭϴ ƌŝƚƌĞĂ 153 ϭϮϬ 153 ϭϭϱ^ĂŝŶƚ>ƵĐŝĂ ϳϱ ϰϰϯ ϳϮ ϰϮϴ ƵƌŬŝŶĂ&ĂƐŽ ϭϱϰ ϭϭϴ ϭϱϰ ϭϭϭ:ŽƌĚĂŶ ϳϲ ϰϮϮ ϳϳ ϯϵϬ ŚĂĚ 155 ϭϬϭ ϭϱϲ ϬϵϰŽůŽŵďŝĂ ϳϳ ϰϮϬ ϳϴ ϯϴϵ ĞŶƚƌĂůĨƌŝĐĂŶZĞƉ ϭϱϲ ϭϬϬ 155 ϭϬϬŚŝŶĂ ϳϴ ϰϭϴ ϳϵ ϯϴϲ EŝŐĞƌ ϭϱϳ Ϭϵϵ ϭϱϳ ϬϵϯsĞŶĞnjƵĞůĂ ϳϵ ϰϭϳ ϳϲ ϰϬϬ
^ŽƵƌĐĞ/dh
25
more dramatic changes in the rankings. Developing countries on the other hand
catching the ICT Use index since the internet usage, mobile phone penetration and
the access keep increasing these countries.
It is evident to see that the ICT Development Index is increasing throughout
the world with both technological infrastructure improvements, and ICT capabilities.
The digital divide seems not to change a lot in the period since it takes time to catch
the developed economies in terms of IDI. The average IDI of developed countries are
twice as those developing countries also in 2012 as similar to 2011.
With a focus on the low ICT Development Index countries, around 2.4 billion
people, which is a third of the whole world population, live in the least connected
countries in terms of ICT development (ITU, 2013).
4.2 ICT in the Globe
According to European Commission (2004), the importance of the ICT is not
only the technology itself, but also the easy access to many areas that ICT creates. It
has been lately focused more on the access that it creates to the areas with no ICT
coverage in the world, mainly developing countries. United Nations have initiated
ICT4D in order to fill the gap between the “have” and “have not” technology regions
aimed at bridging the digital distance. As one of its primary objectives, ICT4D is
aimed at assisting the economic development by ensuring access to up-‐to-‐date
communication technologies (Kleine, 2015).
Figure 13 Share of Internet Users in the total population
Source: ITU World Telecommunication/ICT Indicators database
The World in
2011 ICT FaCTs and FIgures
One third of the world’s population is online 45% of Internet users below the age of 25
Share of Internet users in the total population
Not using Internet: 82%
Users, developed
China:28%
India: 6%
Other developing
countries: 66%
Developed
Developing
Users
China: 37%
Otherdeveloping
countries: 53%
India: 10%
Not using Internet: 65%
Developing
Developed
Total population: 6.5 billion Total population: 7 billion
Note: * Estimate Source: ITU World Telecommunication/ICT Indicators database
The world is home to 7 billion people, one third of which are using the Internet. 45% of the world’s Internet users are below the age of 25.
2YHUWKHODVWÀYH\HDUVGHYHORSLQJFRXQWULHVKDYHLQFUHDVHGWKHLUVKDUHRIWKHZRUOG·VWRWDOQXPEHURI,QWHUQHWXVHUVIURPLQWRLQ7RGD\,QWHUQHWXVHUVLQ&KLQDUHSUHVHQWDOPRVWRIthe world’s total Internet users and 37% of the developing countries’ Internet users.
Internet users by age and by development level, 2011*
77%71% 30% 23%
36%34%
23%
29%
70%77%
64%
66 %
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Under 25 Over 25 Under 25 Over 25 Under 25 Over 25
Developed Developing World
Note: * Estimate Source: ITU World Telecommunication/ICT Indicators database
2006 2011*
Not using Internet
Using Internet
Billi
ons
of p
eopl
e
Using Internet: 18%
Using Internet: 35%
Younger people tend to be more online than older people, in both developed and developing countries.
In developing countries, 30% of those under the age of 25 use the Internet, compared to RIWKRVH\HDUVDQGROGHU
$W WKHVDPHWLPHRI WKHXQGHU\HDUolds — a total of 1.9 billion — are not online \HW D KXJH SRWHQWLDO LI GHYHORSLQJ FRXQWULHVcan connect schools and increase school enrolment rates.
26
The world has been showing a dramatic increase in the number of people
who use internet by mainly due to the access to ICT technologies. As it is illustrated
in Figure 12, internet users have increased to 35% in 2011, while it was only 18% in
2006. What is more significant is that the majority of this increase is attributed to the
increased usage in developing countries as it is increased to 62% in 2011 from 44% in
2006. China has the biggest share in total internet usage with 25% of the all
population who use the internet.
Figure 14 Internet users by age and by development level, 2011
Source: ITU World Telecommunication/ICT Indicators database)
A further research has been done for the age interval of internet users in
different cluster of countries such as developed and developing compared with the
global trend. It can be seen that younger people (aged under 25) are more active on
Internet in both developed and developing countries, and 45% of all internet users
are under 25. Furthermore, in developing countries 30% of the population that use
internet is under 25, while 23% of those is over 25. On the other hand, in developed
countries the majority of of the internet users are over 25. There is great potential in
developing countries for young people to increase the internet usage since 70% of
them are not using internet yet.
The World in
2011 ICT FaCTs and FIgures
One third of the world’s population is online 45% of Internet users below the age of 25
Share of Internet users in the total population
Not using Internet: 82%
Users, developed
China:28%
India: 6%
Other developing
countries: 66%
Developed
Developing
Users
China: 37%
Otherdeveloping
countries: 53%
India: 10%
Not using Internet: 65%
Developing
Developed
Total population: 6.5 billion Total population: 7 billion
Note: * Estimate Source: ITU World Telecommunication/ICT Indicators database
The world is home to 7 billion people, one third of which are using the Internet. 45% of the world’s Internet users are below the age of 25.
2YHUWKHODVWÀYH\HDUVGHYHORSLQJFRXQWULHVKDYHLQFUHDVHGWKHLUVKDUHRIWKHZRUOG·VWRWDOQXPEHURI,QWHUQHWXVHUVIURPLQWRLQ7RGD\,QWHUQHWXVHUVLQ&KLQDUHSUHVHQWDOPRVWRIthe world’s total Internet users and 37% of the developing countries’ Internet users.
Internet users by age and by development level, 2011*
77%71% 30% 23%
36%34%
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29%
70%77%
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66 %
0.0
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Developed Developing World
Note: * Estimate Source: ITU World Telecommunication/ICT Indicators database
2006 2011*
Not using Internet
Using Internet
Billi
ons
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Using Internet: 35%
Younger people tend to be more online than older people, in both developed and developing countries.
In developing countries, 30% of those under the age of 25 use the Internet, compared to RIWKRVH\HDUVDQGROGHU
$W WKHVDPHWLPHRI WKHXQGHU\HDUolds — a total of 1.9 billion — are not online \HW D KXJH SRWHQWLDO LI GHYHORSLQJ FRXQWULHVcan connect schools and increase school enrolment rates.
27
Figure 15 Home ICT Access, 2011
Source: ITU World Telecommunication/ICT Indicators database
We can divide the ICT access by two clusters as home and mobile access. In
below figure CC, the home ICT access in 2011 has been illustrated. One third of the
whole world’s population – 1.8 billions -‐ has access to internet. As it can be seen, the
penetration in developed countries is sufficiently high, while the penetration in
developing countries is low which creates a potential for more investments in those
areas. 25% of homes have a computer in developing countries, and 20% of them
have internet access.
Figure 16 Mobile Subscriptions, 2006-‐2011
Source: ITU World Telecommunication/ICT Indicators database
When it comes to the mobile access, the subscriptions in many clusters have
been compared between the years 2006-‐2011 in above figure 15. The most
significant fact illustrated in the figure is that in 2011 the number of mobile
The World in 2011 — ICT Facts and Figures
Almost
6 billion mobile-cellular subscriptions
0
1
2
3
4
5
6
7
2006 2007 2008 2009 2010 2011*
Billio
ns
Active mobile -broadband subscriptions
Fixed(wired) - broadband subscriptions
Fixed -telephone lines
Internet users
Mobile-cellular telephone subscriptions
Note: * Estimate Source: ITU World Telecommunication/ICT Indicators database
Home ICT access, 2011*
Penetration developed countries
Penetration developing countries
1.8 billion households 0.7 billion households with a PC 0.6 billion households with Internet
Note: * Estimate Source: ITU World Telecommunication/ICT Indicators database
2IELOOLRQKRXVHKROGVZRUOGZLGHRQHWKLUGKDYH,QWHUQHWDFFHVVFRPSDUHGWRRQO\RQHÀIWK ÀYH\HDUVDJR
In developing countries, 25% of homes have a computer and 20% have Internet access, compared WRDQGUHVSHFWLYHO\\HDUVDJR
25
74 7471
20
With 5.9 billion mobile-cellular subscriptions, global penetration reaches 87%, and 79% in the devel-oping world.
Mobile-broadband subscriptions have JURZQ DQQXDOO\ RYHU WKH ODVWIRXU\HDUVDQGWRGD\WKHUHDUHWZLFHDVPDQ\PRELOHEURDGEDQGDVÀ[HGbroadband subscriptions.
The World in 2011 — ICT Facts and Figures
Almost
6 billion mobile-cellular subscriptions
0
1
2
3
4
5
6
7
2006 2007 2008 2009 2010 2011*
Billio
ns
Active mobile -broadband subscriptions
Fixed(wired) - broadband subscriptions
Fixed -telephone lines
Internet users
Mobile-cellular telephone subscriptions
Note: * Estimate Source: ITU World Telecommunication/ICT Indicators database
Home ICT access, 2011*
Penetration developed countries
Penetration developing countries
1.8 billion households 0.7 billion households with a PC 0.6 billion households with Internet
Note: * Estimate Source: ITU World Telecommunication/ICT Indicators database
2IELOOLRQKRXVHKROGVZRUOGZLGHRQHWKLUGKDYH,QWHUQHWDFFHVVFRPSDUHGWRRQO\RQHÀIWK ÀYH\HDUVDJR
In developing countries, 25% of homes have a computer and 20% have Internet access, compared WRDQGUHVSHFWLYHO\\HDUVDJR
25
74 7471
20
With 5.9 billion mobile-cellular subscriptions, global penetration reaches 87%, and 79% in the devel-oping world.
Mobile-broadband subscriptions have JURZQ DQQXDOO\ RYHU WKH ODVWIRXU\HDUVDQGWRGD\WKHUHDUHWZLFHDVPDQ\PRELOHEURDGEDQGDVÀ[HGbroadband subscriptions.
28
subscriptions in the whole world is around 6 billion. The penetration reached 87% in
the world, and 79% in developing countries with 5.9billions of total number of
mobile subscriptions. There is a dramatic increase in the mobile broadband
subscriptions recently with a 45% rise between 2006-‐2011. The significant increase
of the mobile broadband subscriptions can be a great potential to focus on
developing economies.
Figure 17 International Internet bandwidth (bit/s), per Internet user, 2011
Source: ITU World Telecommunication/ICT Indicators database
One of the most significant key factors defining the high-‐speed access to Internet
is the bandwidth. According to ITU World Telecommunication, the international
internet bandwidth per internet user has been increased exponentially over the last
five years and reached to 80000Gbit/s in 2011 from 11000 Gbit/s in 2006 (2011).
When it comes to the differences between various regions in the world, Europe is
taking the lead with 87396 Gbit/s by passing the world average which is around
35000 Gbit/s in 2011. The technological infrastructure can be seen easily by looking
at the graph comparing different regions. Those regions with lower international
internet bandwidth creates a great potential for investing in those areas especially
with the initiation of ICT4D which is mainly aimed at filling the gap between the
areas having and not having internet and digital access.
In most developing countries, the market for the mobile broadband is still
The World in 2011 — ICT Facts and Figures
Growth in bandwidth facilitates broadband uptake
0
10’000
20’000
30’000
40’000
50’000
60’000
70’000
80’000
90’000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*
Inte
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iona
l Int
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Bit/
s
Developed
Developing
World
Note: * Estimate
Source: ITU World Telecommunication/ICT Indicators database
,QWHUQDWLRQDO,QWHUQHWEDQGZLGWKDNH\IDFWRUIRUSURYLGLQJKLJKVSHHG,QWHUQHWDFFHVVWRDJURZLQJQXPEHURI,QWHUQHWXVHUVKDVJURZQH[SRQHQWLDOO\RYHUWKHODVWÀYH\HDUVIURP·*ELWVLQWRFORVHWR ·*ELWVLQ
Disparities between regions in terms of available Internet bandwidth per Internet user remain, with on
average almost 90’000 bit/s of bandwidth per user in Europe, compared with 2’000 bit/s per user in
Africa.
0
5’000
10’000
15’000
20’000
25’000
30’000
35’000
40’000
Africa Arab States Asia & Paci!c CIS Americas World Europe
Inte
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iona
l Int
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t ban
dwid
th (b
it/s)
per
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11*
87’395
Note: * Estimate
Source: ITU World Telecommunication/ICT Indicators database
World
Developed
Developing
,QWHUQDWLRQD
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International Internet bandw
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2011*
29
immature and open to greater opportunities. It can easily be predicted that the
market will grow and offer many opportunities for low-‐income market segments in
the near future.
4.3 Information and Communication Industry in Turkey
In this chapter, we will explain how Turkey stand out in Information and
Communication Industry by mainly analyzing the country with its ICT Development
Index criterias such as ICT Access, ICT Use, ICT Skills considering all aspects.
Furthermore, in the last chapter the effects of FDI and ICT will be analyzed in-‐depth
detail.
Turkey offers investments and business opportunities for foreign investors in
many sectors with a total FDI inflow of $12.5 billions in 2013 according to UNCTAD
(2014). On average 2.5% of total FDI inflows in Turkey was to the ICT Sector which
comprises many areas such as communication, IT Services, software and hardware.
Figure 18 FDI inflows to Turkey in ICT Sector, 2007-‐2012
Source: Central Bank of Turkey
Turkey had a peak in FDI inflows in also ICT in 2007, which is decreased with
the global crisis in 2008.
Investment Support and Promotion Agency of Turkey ©2014 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited
Turkey is expected to attract further FDI inflow in the coming years
Source: Ministry of Economy
Figure 2: FDI Inflows to Turkey
0
100
200
300
400
500
2007 2008 2009 2010 2011 2012
Manufacture of Computers, Electronic-Electrical and
Optical Equipment
Information and Communication Services
US
D M
illio
n
Figure 3: FDI Inflows to the ICT Sector in Turkey
11
• The majority of FDI inflows to Turkey have come
primarily from the EU, followed by North America and
Asia.
• Turkey had a peak in FDI inflows in 2007, following a
decrease in inward FDI in 2008 and 2009 due to the
global economic crisis. With promising
macroeconomic figures from the Central Bank and
the potential the country has shown in the past 5
years, forecasts show that FDI will steadily increase
in upcoming years.
• FDI directed to the ICT sector has been - on average
- 2.5% of the total FDI inflows to Turkey for the last
five years.
• Turkey has become an attractive destination for FDI.
Sluggish FDI inflows after 2002 experienced an
incremental increase and reached a record level of
USD 22 billion in 2007. The decrease in 2009 can be
explained by the global crisis which lowered FDI all
around the globe as well as in Turkey.
• The volume of FDI inflows directed to Turkey shows
a promising recovery. 2012 FDI inflow rose to USD
12.4 billion, compared to USD 8.4 billion in 2009.
US
D B
illio
n
Source: Central Bank of Turkey
0
5
10
15
20
25
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
30
Figure 19 ICT Expenditure in Turkey (billions of $)
Source: Gartner
Spending in ICT sector including communication, IT services, hardware and
software is expected to increase in the next years and reach $25 billions by 2016
(Yildirim, 2013). The increasing spending on IT can be explained with the growing
GDP, in other words the spending on IT will be increased parallel to the increase in
GDP in the next years. Binali Yildirim – The Minister of Transportation, Maritime
Affairs and Communication-‐ has explained this objective by “Our aim is to increase
the contribution of the ICT sector to the country’s growth, the GDP and the prosperity
of the community” (2013).
Figure 20 ICT Spending 2012-‐2017 (forecasted CAGR)
Investment Support and Promotion Agency of Turkey ©2014 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited 14
22.6 21.8
22.5 23.4 24.2
25.0
2011 2012 2013f 2014f 2015f 2016fData Center Systems
Software
IT Services
Devices
Telecommunications Services
Source: Gartner f: Forecast
US
D B
illio
n
Figure 8: ICT Expenditure in Turkey 2011-2016 • The industry grows every year as new technologies and ways to access information come to the fore.
• There is sizeable demand for various ICT sub-sectors in Turkey.
• In recent years, the number of computer and computer related product exportation has begun to increase and it will continue to do so in order to reach EU average.
• According to Gartner forecasts, the expected spending in the information and communication technology sub-sectors – namely, telecommunication services, devices, IT services, software, data center systems - is expected to be more than USD 25 billion by 2016.
• With the increasing importance of IT in business, most Turkish companies have started to invest heavily in IT to gain a competitive advantage.
Turkey is expected to have an ICT expenditure of over USD 25 billion in 2016
CAGR 2 %
Investment Support and Promotion Agency of Turkey ©2014 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited 15
7.4%
11.6%
7.6% 7.5% 6.8%
6.0% 5,5%
3.1% 3.0% 2.8%
0.1% 0,00%
2,00%
4,00%
6,00%
8,00%
10,00%
12,00%
The Middle East & Africa: 9.6%
Latin America: 6.1% World: 4.8%
Western Europe: 2.4%
Source: EIU Gartner: Emerging Market Analysis: IT, Turkey, 2013 and Beyond * IT spending in this analysis covers IT hardware spending, packaged software spending and IT services spending but excludes communication.
Figure 9: ICT Spending 2012-2017 Forecast CAGR
The expectation for growth in Turkey’s ICT spending* suggests a promising domestic market
Turkey is expected to grow faster in ICT spending than the world average. Turkey has a large domestic market with sizeable potential in the ICT sector. Future sector growth is expected at a CAGR of 7.4% between the years 2012-2017. Turkey has been moving in a similar pattern to global consumer preferences in mobile phones and PC’s. PC spending is expected to shift to mobile phones and tablets. These will become more affordable as the market continues to grow.
31
Source: Deloitte , Emerging Market Analysis: IT, Turkey, 2013 and Beyond
Turkey has a great internal market for ICT including its contribute to the
other sectors such as banking, manufacturing, communication and so on. According
to the Deloitte Emerging Market Analysis (2013), Turkey is expected to experience a
higher ICT Spending than the world average in 2012-‐2017 as it can be seen in the
above figure. Future ICT Industry growth is forecasted at a 7.4% of CAGR between
2012-‐2017.
Another important factor is the use of computers, and mobile phones in the
country. Turkey has been following a similar trend with the other developing
countries in use of technological devices.
Figure 21 Number of computers used in Turkey, 2009-‐2017
Source: EIU, Possession of Internet-‐Enabled Computers: Euromonitor
Computer usage and its sales are expected to grow in the next years, even
though people make a shift to smartphones and tablets. Since the market of
computer sales is important for the hardware spending, it is beneficial to see an
upward trend in computer sales. According to ITU (2013), half of the Turkish
households have computers with internet access, and it forecasted to increase and
reach 65% over the next four years. The possession of a computer then affect many
other sectors related to ICT at the same time such as banking, government.
Figure 22 Development of Internet Subscriptions, 2010-‐2017
Investment Support and Promotion Agency of Turkey ©2014 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited 19
Sources: PCs: EIU Possession of Internet-Enabled Computers: Euromonitor * Technology, Communications and Media: Turkey Euromonitor International
• The market for personal computers (PCs) is an important part of hardware spending and is expected to grow significantly.
• Currently, more than half of all households in Turkey have computers with internet access. The percentage of households with computers that have internet access is expected to rise to 65.6% of total households over the next 5 years.
• By 2020, this number is expected to rise to 70%. Government investment is the main reason for this growth in the market as a result of the infrastructure created in rural (underserved) areas*.
• The prevalence of internet-enabled computers offers a potential for a market in cloud computing, broadband internet and cloud computing businesses in Turkey.
15.729 17.322 18.740 20.203 21.676 23.154 24.638 26.141 27.635
0
5.000
10.000
15.000
20.000
25.000
30.000
2009 2010 2011 2012 2013f 2014f 2015f 2016f 2017f
Personal Computers
Figure 13: Development of PCs
Sales of computers are expected to increase significantly in 5 years
Nu
mb
er o
f P
Cs
(th
ousa
nd
)
Investment Support and Promotion Agency of Turkey ©2014 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited 20
0
10
20
30
40
2010 2011 2012 2013f 2014f 2015f 2016f 2017f
Broadband internet subscriptions Total internet subscriptions
Source: Turkstat (2010-2012), Information and Communications Technologies Authority, Deloitte Analysis (2013-2017) Notes: Almost 100% of the internet subscriptions are also broadband subscriptions f: forecast
• With better infrastructure, internet subscriptions are expected to increase and pave the way for more development in rural areas.
• Currently, the percentage of internet users in Turkey is around 42% and it is forecasted to rise above 47% in 2017. According to an EIU analysis, in 2017 the number of potential internet subscriptions will triple.
• According to a study in 2010, Turkish firms find 46% of new business markets and customers through the internet. It is obvious that internet subscriptions will increase with the development of businesses.
• Blogging and social networking play a significant role in internet usage. Facebook users in Turkey totaled over 40% of the population in the beginning of 2013. The average internet user is spending 32.7 hours online per month in Turkey.
• Broadband internet subscriptions, mobile internet subscriptions and internet retailing are increasing. The youthful population, increasing usage, expected spending and popularity of internet on mobile phones, tablets and/or personal computers show that the sector will continue to grow, thus making the country’s ICT sector a gold mine for investments.
Figure 14: Development of (Broadband) Internet Subscriptions
In Turkey, internet usage and its potential is increasing because of its young population and interest in social media
Mill
ion
s o
f U
sers
32
Source: Turkstat (2010-‐2012), Information and Communications Technologies Authority, Deloitte Analysis (2013-‐2017
The population plays a crucial role in the penetration of ICT technologies,
internet usage and other clusters related to ICT. As it was mentioned before in the
3rd chapter, young populations with no internet access or internet subscription might
be a great potential to invest. The percentage of internet users in Turkey is 42% and
is expected to grow significantly by mainly improving the infrastructure and reaching
an access to the rural areas of the country. Considering Turkey a young populated
country, the usage of social media, smartphones, tablet/PC, blogs increase day by
day and this is of a great potential of ICT investments.
Figure 23 Percentage of young people (15-‐24) in populations, 2011
Source: United Nations Economic Commissions for Europe
There are several major ICT companies with Turkey as a Regional
headquarters such as Microsoft, Adobe, Intel, Turkcell, HP, LG and so on. For
instance, Microsoft manages 79 countries, and 3 continents from Turkey due to its
advantageous geostrategic location and advantages in ICT sector. Microsoft mainly
focuses on the Middle East and Africa offices managed from Istanbul. On the other
hand, Adobe has its regional headquarters in Istanbul for the Balkans such as
Croatia, Albania, Macedonia, Serbia, Bosnia and Herzegovina, Kosovo and Israel.
Intel manages Middle East and Africa from Turkey since 2004.
5. The effects of FDI in ICT industry In this section, we will start with explaining how FDI affects developing
countries as host country, then we will go in deeper analysis for each cluster
Investment Support and Promotion Agency of Turkey ©2014 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited
0
5
10
15
20
25
30
2004 2005 2006 2007 2008 2009 2010 2011 2012
Mill
ion
CAGR 3%
Figure 16: Employment in Turkey, 2004-2012
Source: Turkstat
Turkey has one of the highest percentages of young people in the world and an increasing employment rate
27
0%2%4%6%8%
10%12%14%16%18%
Source: Turkstat, United Nations Economic Commission for Europe
Figure 17: Percentage of Young People (15-24) in Populations, 2012
• According to Turkstat, a total of approximately 25 million people are employed in Turkey, which is an increase of a CAGR of 3% between 2004 and 2012.
• From 2011 to 2012, 711,000 jobs were added to the Turkish economy. Even at the onset of the global crisis in 2008 there were no job cuts, in fact, there were an additional 83,000 jobs created from 2008 to 2009.
• Turkey has one of the highest percentages of young people (between the ages of 15 to 24) in the world. The population of young people is 16.8% higher than the EU-27 average.
• A high percentage of young people within a population is a crucial indicator of a country’s potential employees. As education programs continue to expand and as the economy continues to grow, Turkey provides an exceptionally well educated and highly skilled workforce to its economy.
• Domestic and foreign investments will also have a positive impact on Turkey’s employment rate.
33
considering Turkey’s ICT Industry situation and relate it with the impacts.
FDI inflows can affect host country’s economy in several ways. FDI inflows
can affect the economic welfare, growth and development of host countries in
several ways (WIR93, WIR99). The benefits of FDI concerning the capital market,
technology transfer, market access, management know-‐how, investment
opportunities and export promotion are among the factors attracting FDI inflows
from a host country perspective. However all these factors may have various impacts
depending on the specific host country receiving the FDI. These countries can be
categorized and analyzed in two main clusters such as developed and developing
countries since they have different internal and external conditions on their
economy.
From the TNC’s (Transnational Company) standpoint, FDI functions as their
local operations through affiliates. These foreign affiliates have various interactions
with the local economy. To begin with, since these foreign affiliates are the TNC’s
representatives in the host country, they physically use these production plants and
make many connections with local suppliers, distributors and sales organizations. All
these connections by stimulating the relationship between different firms create a
channel to transfer the technology from the home country. Especially for developing
countries FDI eases the transfer of technology more significantly. Technology
transfer involves the transfer of physical goods and the transfer of tacit knowledge.
This aspect is an indirect effect on the host country’s economy rather than its initial
effect by local operations.
Furthermore, these interactions may be due to building production facilities,
hiring workers, and training the workers (UNCTAD, 2006). FDI fosters economic
development in the host country by increasing its productive capacity due to the
improvement of the labor force. FDI does not only provide and generate
employment, but also strengthens the skills of workers. FDI is a tool for the adoption
of new technologies in the host country and because of this, it is necessary that the
labor force is able to use them. What happens often is the lack of this capacity,
which leads the multinationals to provide the necessary training and thus increase
capacities in the host country (Borensztein et al. 1998).
34
Additionally, the FDI has a significant effect on host country’s international
trade, which will differ, depending on its motive – whether it is efficiency-‐seeking,
market-‐ seeking, resource-‐seeking or strategic asset-‐ seeking. Output resulting from
efficiency-‐seeking FDI is typically intended for export, and therefore the impact of
such FDI is likely to be an increase in exports from the host country (Peter
Nunnenkamp and Julius Spatz, 2004). With the increased exports, domestic
enterprises may access to international markets. FDI inflows contribute host
country’s role on global economy, and enables it to open in wider markets
predominantly through the financial flows received from abroad.
According to Lee and Tcha (2004), FDI plays an important role in improving
the factors of production and accumulation of capital in the host country, due to the
competition it creates. Mainly the supply in the market increases with the entry of
the TNCs into the host economy, which has a positive impact on productivity since
the local players try to continuously catch the trends and supplies entering the
market and trying to maintain market share’s by allocating their resources more
effectively. On the other hand, this competition may cause a negative effect in the
host country by leading some local firms to closure.
The impact and extent of all the above factors may vary depending on the
technology used, the number of people employed and the training and wages
offered, the market orientation of foreign affiliates in the economy, the degree to
which the affiliates procure goods and service inputs locally, and the proportion of
profits reinvested, as well as the conditions prevailing in the host economy (World
Investment Report, 2006).
5.1 How do FDI and ICT affect each other: The correlation between FDI
and ICT
There are several factors in the literature that could be determinants of FDI
inflow to a country such as human capital, infrastructure of the host country, labor
force, economic and political instability, country’s incentives and so on. However,
one major factor which has become highly essential as a determinant of FDI is the
ICT level and development. In today’s global world, ICT and its variety use shapes the
35
world balances.
The last era is decided to call as the technology/internet era due to its high
importance and impacts on many activities, including economics. Countries
successfully adopt and use the ICT may have various comparative advantages on
overcoming the barriers on international trade, and become an important actor in
global economy (Addison and Rahman, 2002).
The wide use of internet and other communication services has enabled
many countries to access both political and economic details and information.
According to Matambalya and Wolf (2001), ICT helped reducing the majority of the
transaction costs of joining contracting and created an access to low-‐cost suppliers
thanks to the IT services especially in developing countries.
ICT has become a really important determinant of FDI in many countries.
According to a study done by Addison and Rahman (2002), they have sampled many
countries and tried to determine the factors of FDI. They have found that ICT
increases the FDI inflows in developing countries. This is mainly due to the reduced
production and operation costs, and the access to the information about several
opportunities in developing economies thanks to ICT.
According to a study done by Gholami, Lee and Hashmati (2004), they have
used time series and casualty test in order to investigate the relationship between
ICT and FDI, for 23 developed and developing countries. They have found that in
developing countries the positive effect of ICT on FDI is more significant and can be
explained by ICT indirectly attracts more foreign direct investment. The reason
behind is that already existing ICT infrastructure in the host country attracts FDI,
hence higher level of ICT investment results in higher level of FDI inflows due to the
fact that ICT enables and contributes to productivity and economic growth.
Considering that in developing countries the ICT infrastructure is poor and
low, they can not internally finance them selves. Therefore in developing countries
ICT causes FDI inflows in order to facilitate the production potential by new ICT
investments.
36
Furthermore, higher ICT knowledge results in higher coordination and
cooperation. Coordination and cooperation play an important role in commerce. ICT
and IT services enable having an access to various information regarding the goods
and prices, which helps commerce and indirectly increase the country’s economic
growth by attracting more foreign investors to invest in internal market (Gholami,
Lee, Hashmati, 2004).
Another aspect is the reducing operation and transaction costs as mentioned
previously. ICT technologies help finding new markets and reducing the transactions
costs. Hence, it increases the attractiveness of doing business and increases the
competition. This increased competition results in higher productivity and efficiency.
Telecommunications and ICT services are widely used in many other sectors such as
manufacturing, services, banking, finance and so on. Therefore, a more developed
ICT level results in increasing the other sector’s efficiency, which results in an
increase in economic competitiveness and economic growth (Addison and Heshmati,
2002).
5.2 Technology Transfer and Know-‐How
When considering the possible ways to transfer technology to developing
countries, FDI takes the lead. Technology transfer through FDI generates benefits
that are unavailable when using other modes of transfer (OECD, 2001). FDI does not
only bring the technological capabilities to the host country, but also management
experience and entrepreneurial abilities, which could be highly useful in know-‐how
and training of the current employees in the host country in order to widen their
knowledge and abilities in areas indirectly related to technology (Baldwin et al,
1999).
Since the foreign affiliates affect country by altering the existing equilibrium
and create a competitive environment, the local firms need to protect their market
share. Hence, this results in increasing the productivity in the host country for the
local firms (WTO, 1998).
According to Borensztein, the economic growth of a country can basically
depends on the implementation of the advanced technologies that it has received by
37
multinational companies (Borensztein et al., 1998). Consequently, as local firms
receive this technological transfer from the multinational companies, the costs of
R&D reduces, and the market becomes even more competitive (Berthélemy and
Démurger, 2000). The productivity of the firm, therefore, contributes in increasing
the GDP, which is a measure of economic growth in a country.
The transfer of technology can be defined in its three main characteristics
such as products, processes and practices (Bassant and Chandra, 1999). Products
basically explain how things work, their design, and fuction, whereas Processes
illustrate the knowledge how a product can be produced or changed. Practices
comprises the management of product-‐process combination and the knowledge re-‐
generation. A study has been done by OECD in 2002 shows that multinational
companies enable their local suppliers and foreign affiliates in the host country to
purchase raw materials, products and help them to improve their facilities (OECD,
2002).
As an opposite effect, the transfer of the technology may affect the host
country negatively as argues by Vissalt and Roolaht (2005). The multinational
companies may leak only the inappropriate technologies to the host country in order
to maintain their technological competitive advantage over the host country.
Furthermore, the host countries may become technologically dependent to these
multinational firms.
5.2.1 Turkey’s situation in “Technology Transfer and Know-‐How” by ICT
With high FDI inflows in Turkey in the last years, it directly enables the
country to receive many advanced technologies from foreign investors. When it
comes to ICT sector, it is highly related to the technology transfer since all FDI
inflows in ICT sector flows different technologies to the country, or enables foreign
affiliates in Turkey to invest in researches by using these technologies.
As mentioned previously ICT Development Index can be calculated by eleven
different indicators and 3 different categories. The technology transfer and know-‐
how basically determines the first two categories such as ICT Access and ICT Use.
38
Since the increase in FDI inflows increase the ICT sector, in this section we will see
how it affects the ICT infrastructure in Turkey.
5.2.1.1 Increasing ICT Research Centers in Turkey
In order to become globally competitive and innovative, it is essential for a
country to invest in research centers. Turkish government has published many
incentive and exemptions programs for foreigners to invest in R&D centers in Turkey
according to Ministry of Economics (2006).
The objective is to become globally competitive by mainly increasing the
quality of products/services, increasing the productivity, setting high standards for
manufacturing, reducing production costs and operation costs, maximizing the usage
of technical knowledge, and increasing the FDI inflows in R&D and ICT sector.
Percentage of different operating R&D centers in Turkey has been
demonstrated in Figure 23 based on different fields. As it can be seen from the
figure, 9% of the total R&D centers in Turkey is oriented to ICT field. This percentage
corresponds to 13 ICT R&D centers out of 142 centers in total.
Figure 24 Percentage of R&D centers in Turkey, by fields of activity
Source: TUBITAK
Apart from the R&D centers, Turkey has been a popular location for ICT
research centers as well. There are currently 129 important ICT research centers in
Turkey according to Ministry of Science, Industry and Technology, TUBITAK (2012).
Investment Support and Promotion Agency of Turkey ©2014 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited 40
There are more than 13 operating R&D centers established through law no. 5746
• The law no. 5746 supports and encourages development of technology for Turkish economy to become globally competitive through R&D and innovation, increasing product quality and standards, innovation in products and manufacturing, decreasing production costs, increasing productivity, commercializing technical knowledge, developing pre-competitive R&D cooperation between rival companies, increasing technology-intensive production and entrepreneurship, increasing the amount of FDI directed to R&D and innovation funding, and increasing employment for R&D personnel and qualified workforce.
• This law encompasses the support, incentives and exemptions given to R&D centers employing at least 50 R&D employees, R&D projects funded by public institutions or international funds, institutions that are in partnership with at least one R&D center (these institutions and R&D centers may operate in the same or different sectors), pre-competitive R&D collaboration projects, entrepreneurs supported by the Techno-enterprise Capital Support, and technology centers established by SME Development Administration in 12.4.1990 with the law 3624.
• The Turkish ICT sector has 13 operating R&D centers out of the total 142 in the country, all of which are based in Istanbul with the exception of one center in Ankara. The ratio of the number of ICT oriented R&D centers to the total number of R&D centers in Turkey is 9.2%.
31%
13%
9% 9%
8%
8%
7%
6% 6% 3%
AutomotiveancillaryOther industries
ICT
Durableconsumer goodsAutomotiveancillaryDefence
Electronic
Chemistry
Textile
Figure 24: Percentage of operating R&D Centers broken down by fields of activity
Source: ISPAT
39
The majority of these research centers – 32 centers -‐ are located around Istanbul
and Marmara Region.
One of the most important research centers in Turkey has been established
by Ericsson. Company’s portfolio mainly comprises mobile and fixed phone
broadband infrastructure and multimedia solutions for consumers and enterprises.
Ericsson made their first R&D investments in Turkey in 1925, and kept growing its
R&D activities over the time. In 2008, Ericsson acquired 100% a technology
company, Bizitek, and in 2012 incorporated all its R&D activities in Ericsson Research
Center for CEMA (Central Europe, Middle East and Africa Region) Region (ISPAT,
2013). The main activity areas of Ericsson Research Center are digital media,
telecommunications equipment, networks, web-‐based services and applications,
cloud computing, advanced internet technologies, digital preservation and so on
(Deloitte Investment Report, 2012). Furthermore, Ericsson invests in searching many
different areas by utilizing ICT such as health, mobile learning, energy efficiency and
smartgrids.
Another leader company in telecommunication sector is Huawei. Huawei
started its first R&D activities in Turkey in 2009 aiming mainly at software solutions,
and it has become the second largest software solution center in Europe with more
than $60millions investment (ISPAT, 2013). Other operations made in Huawei R&D
center are wireless technologies, fixed and mobile convergence technologies, new
generation networks and software products.
5.2.1.2 Increase in ICT Infrastructure and Usage
As previously mentioned, ICT Infrastructure is one of the categories – group
of indicators – that determine the ICT development index of a country. When we
analyze the ICT infrastructure of a country, several indicators that should be
investigated are the number of percentage of household with access to internet,
fixed broadband internet subscribers, percentage of household having a computer,
international broadband speed.
Increase in FDI inflows in ICT sector in Turkey helps country to improve its ICT
infrastructure directly since the foreign investors transfer their advanced technology
40
in country so that Turkey can directly apply this know-‐how.
Figure 25 The percentage of Internet users in Turkey, 2006-‐2013
Source: World Bank Data Statistics
According to the graph extracted from the World Bank, the percentage of
internet users in Turkey has increased significantly over the time period 2006-‐2013
and reached 46.3% in 2013. Even though it seems to be beyond the world average, it
is highly below the EU average, which was counted as 75.4% in 2013 mainly due to
the fact that EU is a developed economy and the internet user trend seems to follow
a steady and high average. The increase in the number of internet users in Turkey in
the last years can be attributed as the higher advanced technologies the FDI inflows
brought to country. Hence, these advanced technologies helped Turkey to improve
its ICT infrastructure and expand it to the rural areas.
Another important ICT development indicator is the fixed broadband
subscribers in the population. Fixed broadband internet subscribers are the number
of broadband subscribers with a digital subscriber line, cable modem or other high
speed technology according to the definition of ITU (International
Telecommunication Union). As it can be seen in the figure YY, the percentage of
fixed broadband internet subscribers has reached to 11.2% in Turkey in 2013, slightly
higher than the world average 9.6 %.
41
Figure 26 Percentage of Fixed Broadband Internet Subscribers in Turkey, 2006-‐2013
Source: World Bank Data Statistics
Another important indicator is the Mobile Cellular Subscription rates of the
population to determine the ICT development index. According to International
Telecommunications Union (ITU), Mobile cellular telephone subscriptions are
defined as the subscriptions to a public mobile telephone service using cellular
technology, which provide access to the public switched telephone network-‐
including both prepaid and postpaid. As it can be seen in the figure, the percentage of mobile cellular subscriptions has reached 93% in Turkey, which is equal to the
World average. On the other hand, the average in EU zone seems to pass the 100%
mainly due to the fact that people in most cases own more than one number, which
could be personal or business number.
Figure 27 Mobile Cellular Subscriptions in Turkey, 2006-‐2013
Source: World Bank Data Statistics
42
5.3 Human Resources Capabilities
FDI highly affects the host country’s economy through human resources
channel such as labor force and the training. This may affect the host country’s
economy both positively and negatively.
Since FDI generates a wider employment potential in the host country, the
workers also becomes more trained by basically observing the new operations with
new technologies brought by multinational firms. This increases the productivity and
results in highly skilled workers (Loungani and Razin, 2001; Alfaro et al., 2004). Apart
from these informal trainings, since the multinationals bring new technologies, the
workers should be able to capable of using this new technology. Therefore, the
multinationals must also organize a formal training for the workers, which increases
their profile, capabilities, and skills.
As the skills and capabilities of the workers get higher, more local firms would
be interested in hiring these highly skilled workers, which increases the host
country’s economic growth (Hanson, 2001). Considering that a capable worker will
always have a chance to change their job and contribute other local firms, or even
open their own business and apply the new technologies for their own company, this
will be a long-‐term positive effect on host country’s economy.
The increasing capability of the labor force may, on the other hand, have
negative effects on host country. The advanced technologies will cause the higher
automatization in manufacturing and many sectors, which in long-‐term will result in
lower need for workers. The lower need for workers will have an important impact
on the increase of unemployment in the host country (OECD, 2002). Furthermore,
again in the long-‐term highly educated workers may want to leave the country due
to the absence of enough R&D activities in the country in which they can take part
(Vissak and Roolaht, 2005).
5.3.1 Turkey’s situation in “Human Resources Capabilities” by ICT
When talking about Human Resources Capabilities of a country, two main
clusters can describe it in an effective way such as employment generation and
43
talent/skill development. These two factors are both the positive effects of foreign
direct investment in high-‐tech industry on a host country since it generates several
opportunities in the filed it operates.
Several indicators, which are also a part of ICT Development Index will be
analyzed in the following sections in order to see the change, trends, and
development in employment, skills, adult literacy, and education related to ICT in
Turkey.
As defined by International Telecommunications Union (ITU) in 2008, the
third cluster of ICT Development Index is so called ICT Skills. ICT Skills can be
calculated by three main indicators such as Adult Literacy Rate, Percentage of
Secondary Education Enrollment and Percentage of Tertiary Education Enrollment
Rate. In this section, we will also analyze the employment in the ICT industry in
Turkey and the number of students enrolled in ICT related subjects.
5.3.1.1 Employment in the ICT Sector
Foreign Direct Investment inflow to a host country especially in ICT sector
provides with several employment generation opportunities for the host country
which could be considered both as an economic and social benefit.
Below Figure 27 shows the unemployment rate of Turkey between 2005 and
2013 as a percentage of the total labor force (World Bank Data, 2014). The total
unemployment rate has been a peak in 2009 with 14% of the total labor force mainly
due to the global economic crisis, however it has recovered itself and gradually fell.
It can be seen from the graph that the unemployment rate has been decreasing
since 2009 after the recovery of the global economic crisis thanks to the severe
investments made in Turkey, and the direct employment generation it creates.
44
Figure 28 Unemployment, total % of the labor force in Turkey, 2005-‐2013
Source: The World Bank Data
According to ICT Market Report published by TUBISAD – Turkey Information
Industry Association (2014), the employment increase in especially ICT sector can be
seen in the figure BB. Compared to 2012, in 2013 additionally 16,241 people have
been added to the workforce in ICT sector in Turkey due to the increased number of
new firms and their need of employment. Call Center and the Retail Technology
sectors are the sectors that support to the Information and Communication Sector
counting 71,203 in 2012.
Figure 29 Employment in ICT Sector in Turkey, 2012-‐2013 (thousands)
Source: TUBISAD, The ICT Market Data, 2014
Employment in the sector
12
153,849
82,646 100,518
(71,203)
1,632 16,241
Total employment in 2012
Call centers and corrections
2012 - Base employment
Employment increase in existing
companies
Incerase that comes from new
firms
2013 - Total employment
Workforce excluded from the scope in 2013
Workforce added to the scope in 2013
1
1 2,533 firms in total
45
The Information Technology and Defense Industry, Software and Services
Sector are the main subcategories of the ICT Industry that have shown a gradual
increase in the employment generation in Turkey in 2013 (TUBISAD, ICT Market
Data, 2013). As it is illustrated in the graphs below, the majority of the increase in
employment in ICT sector can be attributed to these two sectors with 61% and 54%
of increase respectively. Employment Increase in Information Tech Sector and
Defense, Software and Services Sector in Turkey, 2012-2013 (thousands)
Figure 30 Employment Increase in Information Technology Sector and Defense, Software and Services Sector in Turkey, 2012-‐2013 (thousands)
Source: TUBISAD, The ICT Market Data, 2013
According to the figures above, the ICT market in Turkey is growing both by
local and foreign investments that create new employment generation in the sector.
These investment do not only create employment generation, but also helps the
current employees to develop their skills, improve their capabilities, and finally result
in more capable, talented, and skilled workforce in the industry which make a high
quality and more competitive environment in the sector.
5.3.1.2 Skill Development and Improving the Capabilities
As previously mentioned, advanced technologies and higher investments do
not only generate employment, but also increase the capabilities of the workforce.
While the foreign investments bring the advanced technologies to the host country,
there must be an adequate amount of workforce which will be capable of applying
these technologies in the host country.
As the third cluster of the ICT Development Index so called ICT Skills, we will
analyze the three indicators in this category such as Adult Literacy Rate, Secondary
46
School Enrollment Rate and Tertiary School Enrollment Rate. Furthermore, we will
analyze the current academic situation in Turkey by analyzing the number of
students studying ICT related subjects at university, the number of researchers work
in R&D in ICT Sector and the number of technicians in ICT Sector.
To begin with, we will analyze the adult literacy rate in Turkey. UNESCO
defines adult literacy rate as the percentage of the population age 15 and above who
can, with understanding, read and write a short, simple statement on their everyday
life (2015). As it can be seen in the Figure 30, the adult literacy rate has been
gradually increasing in Turkey for the last 8 years and reached 95% in 2012 (The
World Bank Data, 2014). There are many factors affecting the adult literacy rate in
today’s globalized world. The increase in adult literacy rate also makes it possible to
access information by the citizens. Adult Literacy Rate accounts for the 33% of the
ICT Skills when calculating the ICT Development Index. Turkey seems to be
respectively low comparing to developed countries in this category, however the
increase in both youth and adult literacy rate can help estimating that this number
will soon reach the level of the developed countries, who are at their saturated level.
Figure 31 Adult Literacy Rate in Turkey, 2005-‐2013 (% of population aged over 15)
Source: The World Bank Data, 2015
Another indicator to calculate the ICT Skills is the Secondary School
Enrollment Rate. According to the graph extracted from the World Bank Data
Statistics (UNESCO Institute for Statistics), the secondary school enrollment rate has
been increased by around 8% over the last 8 years reaching 82.1% in 2012. Except
for the decrease in 2009, the secondary school enrollment rate has been followed a
47
steadily increasing trend for the last few years. This makes a big potential to invest
and work on in order to improve the ICT Development Index of the country.
Figure 32 Secondary School Enrollment Rate in Turkey, 2005-‐2012 (%net)
Source: The World Bank Data, 2015
As the last indicator, the Tertiary School Enrollment Ratio affect the ICT
Development Index of the country as a part of the ICT Skills counting for the 33% out
of it. According to UNESCO, Tertiary School Enrollment Ratio has been defined as the
total enrollment in tertiary education (ISCED 5 and 6), regardless of age, expressed
as a percentage of the total population of the five-‐year age group following on from
secondary school leaving (2014). As it can be seen in the graph extracted from the
World Bank Data (2015), the enrollment in tertiary school has been doubled in the
last 8 years by reaching 69.4% in 2012. This significant increase in the tertiary school
enrollment ratio helps growing more capable, and skilled talents in the sector.
Figure 33 Tertiary School Enrollment Rate, 2005-‐2013 (%net)
Source: The World Bank Data, 2015
48
Furthermore, it is inevitable to see the significant increase in the number of
students who study ICT related engineering fields in both bachelor’s and master’s
degrees. According to Deloitte ICT Industry Report in Turkey (2014), a large
proportion of the total students enter ICT related programs in university, which
result in a potential high quality workforce. In 2012, a total of 140,713 students have
been enrolled in ICT related associate degrees, while 115,428 students enrolled in
ICT related undergraduate programs. There is a significant increase in the number of
students in ICT related graduate programs, which has been increased by 29% in 2012
and reached 18,446. The main study fields in those graduate programs related to ICT
are Electronics & Automation, Electricity & Energy, Computer Science and
Engineering.
Figure 34 Analysis of ICT Related Higher Education in Turkey, 2012
Source: Deloitte ICT Industry Report, Turkey, 2014
Additionally, as a direct effect of the foreign direct investment on ICT sector
Investment Support and Promotion Agency of Turkey ©2014 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited 30
Associate and Undergraduate
27,750
48,774
140,713
13,612
26,945
115,528 Total
New
Graduate
Associate Degrees Related to ICT
Undergraduate Degrees Related to ICT
Graduate Graduate Students
Related to ICT New Graduate Admissions
Related to ICT
Graduate Students by Field of Study
490
3320
4784
1056
4478
150
783
1199
346
1840
0 1000 2000 3000 4000 5000
Library, Information,Archive
Engineering
Computer Science
Electricity & Energy
Electronics & Automation
DoctorateMaster
2011 2012
+29%
14,299 18,446
2011 2012
+17%
5,490 6,398
• In Turkey, the engineering fields related to the ICT sector are among the most popular choices for undergraduate and graduate studies. Every year, a significant portion of the best students in Turkey join programs related to the ICT sector, which will provide a high-quality workforce.
• In 2012, there were 115,528 students enrolled in undergraduate programs and 140,713 students enrolled in associate programs.
• The number of graduate students in ICT related departments increased by 29% in 2012 compared to 2011.
• Due to an increase in number of TDZs and research centers, the quality of engineering departments is improving as well as the quantity of students in the field.
• Besides universities, there are private education and training centers that grant certifications in coding, system & network management, database management, graphics & digital design and the like.
The best students in Turkey are choosing associate, undergraduate and graduate education related to ICT
49
in Turkey, it is inevitable to see a significant increase in the number of researchers in
R&D. Researchers in R&D can be defined as the number of professionals who work in
creation and conception of new expertise, knowledge, technology, product, process
and methods in the management of projects including the post-‐graduate PhD
students (UNESCO). As it can be seen in the graph extracted from the World Bank
Data (2015), there has been a dramatic increase in the number of researchers in
R&D in Turkey between the years 2005 and 2012, and reached 987 people per
million in 2012. Increasing tertiary school enrollment ratios affect positively this
number. Increasing number of researchers in R&D will play an important role in
applying the advanced technologies coming from abroad by foreign direct
investment, create higher technologies in the local market and result in a positive
economic growth eventually.
Figure 35 Researchers in Turkey, 2005-‐2011 (per million people)
Source: The World Bank Data Statistics, 2015
Apart from the academic aspect, the number of technicians who work in R&D
play a significant role in the ICT development. Technicians are those with main tasks
of requiring technical knowledge and expertise in engineering, physical and life
sciences. They basically perform under researchers to perform operational methods
and concepts. As it is shown in the Figure 35, the number of technicians in R&D has
shown a significant increase over the last 6 years in Turkey and reached 173.2
people per million in 2011 (The World Bank Data, 2015).
50
Figure 36 Technicians in R&D in Turkey, 2005-‐2011 (per million people)
Source: The World Bank Data, 2015
5.4 Increased Competition between local firms
According to De Mello (1999), FDI’s significantly affects the capital and the
productivity of the host country due to the increased competition between the local
firms. As mentioned previously, FDI provides a higher supply in the local market,
which results in the increase in the competition between the local firms since they
want to protect their market share and profits. This competition causes a positive
effect such as lower prices, higher productivity and a more efficient allocation of the
resources (Pessoa, 2007).
Existing firms in the host country invest more on R&D and forced to invest in
its employees and new technologies as a part of the competition (De Mello, 1997).
As the local firms get more capable of new technologies, they may even become the
supplier of the multinational firms. Consequently, the impact of this increased
competitiveness may be either positive or negative depending on the firm’s
capability to respond the competition.
On the other hand, in case the local firms are not able to respond this
competitiveness, the competition may result in closure of these local firms. With the
disappearance of some local firms, the concentration will be higher in the sector. As
a result of the strong competition from the multinationals, local firms may want to
gain share and increase their economy of scale by reducing the competition
(Loungani and Razin, 2001). Since the competition might not be equal for all firms in
51
the market, some firms may not be able to afford the higher income levels and may
not reach as high as the multinationals do. Hence, this will result in the
disappearance of those local firms in the market (Hanson, 2001).
From a human resources standpoint, multinational firms make it difficult for
local firms to attract the talents and highly skilled workers due to the fact that
multinational firms offer a better economic power and better career opportunities
(Slywester, 2005).
5.4.1 Turkey’s situation in “Increased Competition between Firms” by
ICT
Due to the various effects of FDI inflows previously mentioned, in the last
years Turkey has seen an increase in the competitiveness between the firms in the
ICT sector. There have been new firms entered in the Turkish market, as well as
M&As and closures. FDI inflows into Turkey bring advanced technology, and result in
higher quality infrastructure, which causes higher productivity. Therefore, the
existing firms try to protect their market shares and profits.
Main sub areas of ICT sectors can be listed as IT services, e-‐Business, software
and hardware market. There are three main players in the telecommunication sector
in Turkey such as Turkcell, Vodafone and Avea. All these three operators have seen
many changes over the last years, as well as merger and acquisitions. Vodafone
entered the Turkish market in 2005 by winning an auction and buying Turkey’s
second largest mobile company Telsim for $4.5billion. The total investment of
Vodafone Turkey has exceeded TRY 11 billion including acquisitions since 2006
(Deloitte ICT Industry Report, Turkey, 2014). In order to remain its position and even
increase the market share, Vodafone has invested on increasing the cable and base
station infrastructure in the country. Vodafone increased the total number of base
stations by 81% in Turkey at the end of 2009 and reached 10897 stations throughout
Turkey (Deloitte ICT Industry Report, Turkey, 2014).
On the other hand, as the largest player in the telecommunication sector in
Turkey, Turk Telekom has seen several changes in its investors in the last years. In
52
2005, 55% of Turk Telekom was privatized for $6.5 billion (Deloitte ICT Industry
Report, Turkey, 2014) by Oger Telecom owned by The United Arab Emirates.
The increased competition in the sector resulted in higher productivity, and
therefore lower prices in the communications sector. This has become an advantage
for the citizens since they are the ones benefit from the higher technology, higer
productivity with lower prices due to the competition between the largest
telecommunication firms such as Vodafone, Turk Telekom and Turkcell in the sector.
6. Conclusion
Foreign Direct Investment has always been one of the most common ways to
transfer technology to another country. Other than the technology transfer, the
human resources capabilities are the main effects in the host country since the
investments open up new job opportunities. In case of Turkey, the improving ICT
Sector offer many job positions to the job seekers, and in the recent years it helped
reducing the unemployment rate in Turkey as it was explained previously. In this
study we have analyzed the Foreign Direct Investment in ICT Sector in Turkey and its
effects. We may conclude the study with interpretation of each ICT Development
Index indicator as following.
Firstly, ICT Access is determined by readiness of ICT in the area. Increased
investments in ICT sector has resulted in better infrastructure of lines, international
broadband bandwidth and radio frequency signaling base stations. Higher quality in
the technical aspect also led to a competition between the main telecommunication
firms such as Vodafone, Turkcell and TurkTelekom. On the other hand, increased
number of research centers has resulted in better technologies such as HuaWei’s
cyber security, 4G and LTE researches. All these improvements have resulted in a
higher ICT Access rate for Turkey.
Secondly, ICT Use is determined by the ICT intensity such as percentage of
Internet users, and mobile subscription rates. Investments in ICT Sector in Turkey
have led telecommunication firms to access a broader audience and therefore the
percentage of Internet users and mobile subscriptions have been increased. In
53
addition, another reason of increasing subscription is due to the lower prices offered
by the firms, which can be attributed to the competition between the firms.
Lastly, ICT Skills are determined by how much the citizens are able to use the
technology, which is calculated by the adult literacy rate, secondary and tertiary
school enrollment rate. This was the weakest section that Turkey has been facing in
the recent years as many other developing countries. However, growing technology
help transferring the high technologies in rural areas of Turkey and therefore
increases the ICT skills in the country.
54
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