WORLD TRADE  
ORGANIZATION  G/SCM/Q2/TUR/21 
1 April 2008 
 (08-1440) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
  
SUBSIDIES 
 
Replies to Questions Posed by the UNITED STATES
1 Regarding  
the New and Full Notification of TURKEY2 
   The following communication, dated 31 March 2008, is being circulated at the request of the Delegation of Turkey.   
 
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1 G/SCM/Q2/TUR/19.   
2 G/SCM/N/155/TUR.   G/SCM/Q2/TUR/21 
Page 2  
 
  I. INVESTMENT ENCOURAGEMENT IN TURKEY 
 
A. E
NCOURAGING INVESTMENTS IN TURKEY  
The Investment Encouragement Programme (I EP);  Application Procedure to Obtain 
an Investment Encouragement Certificate 
 
 According to the notification, IEP investo rs must first apply for and qualify to receive 
an investment encouragement certificate, and a re granted the certificate after an evaluation and 
analysis of each project proposal.  Other than the administrative requirements described in the notification, what criteria or conditions must the investor meet in order to qualify for the 
certificate?  Please confirm that eligibility is not contingent upon exportation or use of domestic 
inputs?   
 
Reply
 
 
As mentioned in the document including the Re plies to Questions of the United States 
(G/SCM/Q2/TUR/18), the project proposals are evalua ted in both financial and technical terms.   
  While technical evaluation is made on the basis of information submitted in the investment application form regarding investment project 's production flow diagram and machinery and 
equipments to be used in the production process in terms of their suitability and compatibility, 
financial evaluation is made on the basis of project's total cost and the financing plan in terms of its 
feasibility.     In the end, investment project proposals with in the objectives and the scope of the program 
are in principle granted an investment enc ouragement certificate upon the evaluation made in 
financial and technical terms.  The aim of these t ypes of evaluations is to give guidance to the 
investors.     Last but not the least, as can be verified through the examination of the program provided in the notification itself, neither the program nor the encouragement measures has a provision pointing 
out contingency upon exportation or u se of domestic goods over imports.   
 
II. EXPORT SUBSIDY PROGRAMME FOR AGRICULTURAL PRODUCTS  
 
 According to the notification, this is an export subsidy program to develop Turkey's 
export potential in processed agricultural pro ducts.  Producers/exporters receive a deduction of 
debts to public corporations (taxes, social  insurance premium costs, energy costs, 
telecommunication costs) from their subsidy entitl ement, calculated on the basis of fixed amount 
per unit.  What are the specific export perfor mance requirements that producers must meet to 
receive benefits under this program?     According to the Report of the Secretariat on the recent Trade Policy Review of Turkey 
(WT/TPR/S/192, 5 November 2007) ("TPR Report"), at section III(3)(v), pp.61-62, paras. 101-
106, there are various types of incentives available to companies operating in Turkey's 20 free 
zones.  These include, inter alia , exemptions from income, corporate and value-added taxes, and 
exemptions from customs duties and fees, as well as attractive terms for rental of facilities.  
Furthermore, the TPR Report at section III(4)(i),  p.63, para.112, notes that Turkey has nine 
state aid programs, some of which are only for SMEs, that may be contingent upon exportation.   
  Please explain the eligibility criteria for receiving benefits under these programs, why 
the programs were not notified and how they ar e consistent with Turkey's Subsidy Agreement 
obligations?    G/SCM/Q2/TUR/21 
 Page 3 
 
 
  According to the TPR Report at section III(4)(i), p.63, paras.113-114, Turkey has 
numerous organized industrial zones and sma ll-scale industrial estates which enjoy various 
incentives such as subsidized credit.  Furthermor e, the TPR Report at section III(4)(i), p.65, 
para.116, indicates that Turkey provides certain other incentives under the Technology 
Development Zones Law (No. 4691), which promote the use of high/advanced technologies and 
the development/production of technology or software.  Among the in centives are income and 
corporation tax exemptions.   
 
Reply  
 
 First of all, the subsidies under this program are available to all of the producer/exporters or 
exporters of the products, regardless of their expor t performance in the preceding years.  The program 
comprises of deduction of their debts to the public corporations from their subsidy entitlement, which 
is calculated on the basis of fixed amount per unit.    
 Secondly, products must leave Customs territory  of Turkey within the implementation period 
of Communiqué, which is published annually  or for a specific time period.   
  Finally, the subsidies provided under this pr ogram are in full conformity with Turkey's 
commitments under the World Trade Organization.  The legislation regulating the program, the 
Decree 2007/1 of the Money-Credit and Coordination Council, clearly spells out that the level of the 
subsidy shall be determined taki ng into account the provisions of the Agreement on Agriculture of the 
World Trade Organization.     Turkey has been making notifications concerning her subsidy programs pursuant to the provisions of the Article 25 of the SCM Agreement.   
 
 As mentioned in the Report of the Secretaria t on the recent Trade Policy Review of Turkey 
(WT/TPR/S/192, 5 November 2007), Turkey has 20 free z ones in her territory.  Free zones have been 
established in all of the seven geographical regions  of Turkey.  The establishment of free zones has 
contributed to the growth, development end employment in Turkey.    
 All companies are eligible to receive benefits  provided in free zones.  Within the framework 
of the Article 2 of the SCM Agreement and Artic le XVI:1 of the GATT 1994, these benefits are not 
specific in the sense that they ar e available to all companies regardless of regional specification or 
industrial designation.  Besides, there are no export  performance requirements for these incentives.   
 
 As stated in the Trade Policy Review Report of Turkey prepared by the Secretariat, the nine 
state aid programs are regulated by the Ministerial Council Resolution on State Aids Related to Exports (No. 6401 of 27 December  1994).  All companies are eligible to receive benefits under the 
abovementioned Resolution.  On the other hand, in practice, the major beneficiary of the program is 
SMEs since the great majority of enterprises (98 per cent) operating in Turkey fall within the SME 
definition.   
 
 There are no export performance requirement s for these programmes.  Pursuant to the 
provisions of Article 25 of the Agreement on Subsidies and Countervailing Measures and 
Article XVI:1 of the GATT 1994, the programmes ar e not specific in the sense that all companies, 
regardless of regional specification or industria l designation, may receive benefits under the 
Resolution regulating the programmes.   
  Besides, the Regulation clearly spells out that all the programs will be implemented without prejudice to the international obligations of Turkey, including the WTO Obligations.   
 
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