RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/TUR/14
15 May 2000
(00-1970)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Questions Posed by the UNITED STATES1
Regarding the Updating Notification of TURKEY2
The following communication, dated 10 May 2000, has been received from the Permanent
Mission of Turkey.
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I. CREDIT PROGRAMMES
Under section 1:  Title of the Subsidy Programme:
Q1. Under the explanation of short-term expo rt credits in “Credit Programmes”, please
explain whether the short-term export credits offered by the commercial banks are offered on
the same terms as those offered by the Türk Eximbank.
Reply
Short-Term Export Credits are extended both directly by Türk Eximbank and indirectly using
selected Turkish commercial banks as intermediaries.  In using commercial banks Türk Eximbank is
able to transfer both the buyer's risk and a proport ion of the operational burden, thereby increasing the
volume of business it can process.
In 1998, 65 per cent of Short-Term Credits offered by Türk Eximbank have been extended via
intermediary Turkish commercial banks, which ar e allocated credit lines following an evaluation
process.  These commercial banks are responsible for the default risk of the borrowers.  The Bank
therefore assumes bank risk rather than that of the exporter or manufacturer.  Commercial banks
selected must be financially sound and deemed to be active in the foreign trade business according to
Türk Eximbank's standards.
Türk Eximbank determines interest rates based on money market rates, loan repayment
periods and the cost of funding.  Commercial banks can add interest spreads to these rates offered by
Türk Eximbank.  As mentioned above there are also credits extended directly by Türk Eximbank
whose terms are different than the credits extended via commercial banks.
Q2. In the explanation for the “Islamic Development Bank (IDB) Export Financing Scheme”
under “Credit Programmes - Medium and Long-Term Export Credits,” it appears in the first
                                                     
1 G/SCM/Q2/TUR/13
2 G/SCM/N/48/TURG/SCM/Q2/TUR/14
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paragraph as though the IDB has approval auth orization for credit.  However, in the second
paragraph, it says that the Türk Ex imbank has credit approval authorization.
(a) Please explain the loan application and approval process under the ‘Export
Financing Scheme’.
(b) Does the credit approval authorization of the Eximbank apply only to limiting
the amount of funds available?  In that case, would it be accurate to say that the
Eximbank, instead of the IDB, essentially has control over the credit approval?
Reply
Türk Eximbank acts as an intermediary agency for the Export Financing Scheme (formerly
known as Longer-Term Trade Financing Scheme) of the Islamic Development Bank (IDB), in
accordance with the agreement signed in 1988 betw een the two parties.  This programme entails
financing on buyer credit basis, and provides credit facilities to importers that reside not only in
member countries of the Organization of Islamic C onference, but also in member countries of the
OECD for their imports from Turkey.  Credits are extended in terms of USD, GBP, FFr, DM and JPY,
in addition to Islamic Dinars under this programme.  The mark-up rate is LIBOR+spread per annum
where spread is determined on transaction basis.  The IDB has the credit approval authorization and
the buyer's (importer's) risk for the transactions mediated by Türk Eximbank is borne by the IDB.
The exporter should submit their application for financing through Türk Eximbank as
designated National Agency of the IDB in Turkey.  Applications are reviewed by Türk Eximbank and
if it is found suitable to the Export Financing Sche me, it is forwarded to the IDB to provide financial
support.  If the amount of application is over 3 million Islamic Dinars, it is submitted to the approval
of the IDB's Board of Directors.  After the appr oval of application by the IDB, Türk Eximbank
prepares the required contracts and due to the opening of letters of credit, disbursements are made to
exporters and at these disbursement dates importers are debited to their commitments as to determined
due dates.
This scheme also entails a limit amounting to Islamic Dinars 20 million (approximately
US$29 million) provided by the IDB.  Under this revolving credit line allocated to Türk Eximbank by
the IDB (an exception to general practice), the buyer's risk is borne by Türk Eximbank.  The terms ofthe credits used by the importers are in line with the terms applied by the IDB.  Türk Eximbank has
the credit approval authorization since the buyer's risk is borne by Türk Eximbank.  The credibility of
the importer's country or the credibility of the ba nk provided guarantee were taken into account in
credit applications which are evaluated on a transaction basis.
Under this line, the applications are subm itted to Türk Eximbank, reviewed by Türk
Eximbank and after the approval of both IDB and the Board of Directors of Türk Eximbank, the letter
of credit is opened and disbursements are made to exporters by the IDB.
Q3. Regarding the explanation of the “Overseas Contractors’ Services Insurance
Programme” under the “Medium- and Long-Term Insurance Facilities”, please explain why the
programme is currently under review, and whether this means the programme is going to be
phased-out.
Reply
This programme is not going to be phased-out.  Technical studies still continue in order to
diversify the risk so that the Turkish contractors can benefit most.  Besides these technical studies,
negotiations on policy conditions are still going on with the representatives of the sector.G/SCM/Q2/TUR/14
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Additionally, Türk Eximbank is searching for the po ssible reinsurance alternatives in order to cede
part of its risk.
Q4. Regarding the explanation of the “Overseas Investment Insurance Programme” under
the “Medium- and Long-Term Insurance Facilities ”, you state that the “programme is planned
to be implemented in 1999”.  Please explain whether or not this programme was implemented
and whether it is expected that it will have any trade effects.
Reply
The Overseas Investment Insurance Programme has still not been implemented.  The
groundwork for this programme has been laid out in  coordination with the Multilateral Investment
Guarantee Agency (MIGA).  In this context, a "Cooperation Agreement" has been signed with MIGA
in October 1999.  This programme is planned to be implemented in year-2000 according to the annual
programme of Türk Eximbank.
Under section 2: Policy objective and/or purpose of the subsidy:
Q5. For “Specific Export Credit Programme”, the last programme under “Medium- and
Long-Term Export Credits”, the notification states that it “aims to meet credit demands which
cannot be fulfilled within the existing credit programmes of Türk Eximbank”.
(a) Please explain why the credit demands cannot be fulfilled under the existing
programmes.  Is it because the other credits are high-risk?
(b) Please explain more fully the aim of the programme and who is eligible for the
programme.
Reply
(a) Existing pre-shipment credit programmes are short-term standard credit programmes.
However, the Specific Export Credit Programme is designed to support Turkish
manufacturers, manufacturer-exporters and exporters in order to meet their specific
requirements by providing medium-term financing.
(b) The aim of the Specific Export Credit Programme is to support manufacturers and
exporters producing specific industrial products and constructing factories, plant and
ships by providing medium-term financing.  Specific industrial products like hi-tech
products, durable consumer goods, electronic goods, construction of complete factoryand plants and ship-building are eligible for this programme.  Eligible applicants are
Turkish manufacturers, manufacturer-exporters and exporters.  Maximum coverage is
up to 80 per cent of f.o.b. value of export commitment.  The maximum repayment
period is determined on a case-by-case basis.  Interest rates and repayment terms are
determined specifically for each project.
Q6. Under the  “Post-Shipment Export Credit  Discount Programme”, please explain what
Bank is involved.
(a) In addition, please clarify how this Bank is able to channel proportions of
commercial banks’ funds to specific purposes?
(b) Does the Bank have control over how the commercial banks allocate their
funds?G/SCM/Q2/TUR/14
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Reply
Two leading Turkish commercial banks are involved in the Post-Shipment Export Credit
Discount Programme.  These banks are T. İş Bankasi A. Ş. and Akbank T.A. Ş., since Türk Eximbank
has reached specific agreements with both of them.
(a) One of the primary objectives of Türk Eximbank on implementing such a discount
programme is to channel a proportion of the commercial banks' funds to export
financing.  In accordance with the specific conditions of the mentioned agreements,
these Turkish commercial banks would discount the endorsed bills of exchange or
assigned letters of credit provided that the relevant shipment(s) were covered underTürk Eximbank's short-term export credit insurance programme.
(b) Türk Eximbank has control over the commercial banks allocation since the
confirmation of Türk Eximbank on the validity of the export credit insurance policy
and the buyers' limit approval is required prior to the allocation process.  Any insuredexporter having a valid policy and a valid buyers' limit approval can apply to these
banks for discounting (relevant shipment has to be declared and the premium should
be charged beforehand).  It would be merely the commercial banks' decision to accept
such an application or not.  However, these banks have to get a written approval from
Türk Eximbank prior to discounting.
However, this programme is not effective, since the commercial banks are reluctant to apply
the interest rates offered by Türk Eximbank.
Under section 5: To whom and how is the subsidy provided
Q7. For the “Overseas Chain Store Investment Credit Programme”, please explain who or
what entity decides the interest rate for the projects.
Reply
Under the Overseas Chain Stores Investment Credit Programme, which is a supplier credit
facility, the interest rates are determined by the Bo ard of Directors of Türk Eximbank according to the
credit term, cost of funding and the credibility of the project exporter, on a project basis.
II. AGRICULTURAL PRODUCTS
Q8. In “Decree 98/12 of the Money-Credit and Coordination Council”, part 5, it says that
100 per cent of olive oil and 100 per cent of prepared or preserved fish is eligible for the subsidy.
Does that mean that all producers receive 100 per cent debt-reduction for these products?  Or
does this mean that only certain producers wi thin these categories receive 100 per cent debt-
reduction?
Reply
With the Decree 98/12 of the Money-Credit and Coordination Council, export subsidies were
paid to the exporters or producer/exporters for their olive oil and preserved fish exports.  For both of
these products, the quantity threshold rate (the export quantities, which are eligible to receive thesubsidy) was determined as 100 per cent.  It means all exports benefited fully from the export subsidy
rates, $200/tonne for olive oil exports and $210/tonne for preserved fish exports.  The Quantity
Threshold System is used by Turkey in order not to exceed its WTO quantity commitments.  If theG/SCM/Q2/TUR/14
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quantity commitment for a certain product is less than Turkey's last year export figure and estimated
export figure, the percentage of quantity eligible to receive the subsidy is determined below 100 per
cent and the quantity threshold rate is determin ed according to the commitment/estimates exports
figures ratio.  Hence, exporters of some products;  such as frozen fruits and dehydrated vegetables do
not benefit fully from the export subsidy rates, which were stated in Decree 98/12.  But, withArticle 14 of Decree 98/12, only olive oil exports with less than 18 kg. packages were eligible to
receive export subsides.
Q9. For all of the agricultural programmes, please explain how the rate per ton is
determined and whether the same calculation is made across all products.
Reply
The export subsidy rates per ton for all products are determined according to Turkey's WTO
commitments and internal and external market conditions.  The decisions about the export subsidy
rates and quantity threshold rates are made according to the quantity and value commitments in
comparison to last year's export figures and export figure estimates.  Furthermore, in the event that thelevel of export subsidy payments reach a level of Turkey's WTO commitments, then the Exporters
Unions which are authorized to effect export subsidy payments, stop approving new applications for
export subsidies.
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