Turkish Tax News
Diyadin YAKUT
25 April 2016Diyadin YAKUT

The evolution of KOSGEB and its investment benefits

Traditionally, small and medium sized enterprises have come to be known as the backbone of the national economies and their vital significance for a sustainable and viable economic development never faded away.

Since the advent of Industrial Revolution, a period that was dramatically marked by the abrupt transition from artisanship, craftsmanship and small-production units to mass-production enterprises, small and medium-sized enterprises have played a crucial, and to some extent an indispensable role in spreading the novel dynamics of the so-called ‘industrialization’ through national economies.

Some of these enterprises even played the role of some sort of mid-wife for the emergence of many globally well-known economic giants.

The current welfare economics that is largely based on the interaction between mass production, limitless choices in products and ever-accelerating lust for consumption by an all-time highest global population could emerge only after aforementioned process.

All these became possible under strict supervision of governments which have persistently taken the role of constructing proper institutional frameworks, maintain rule of law, fine tune direct and indirect incentives and most importantly supports within the context of their wider efforts to improve industrialization through benefits offered by various public bodies established and financed by respective governments to support small and medium sized enterprises.

The Turkish part of that global trend-despite sporadic and sometimes major setbacks, structural flaws and occasional delays-can be easily traced back to as early as the first half of the 19th century.

But the first genuine public body that aimed solely to give technical and management support to small and medium sized enterprises was formed under the auspices of United Nations Industrial Development Organization (BM Sınai Kalkınma Teşkilatı) right after a bilateral agreement was inked between Turkish Government and aforementioned international institution in 1973.

To that end, Gaziantep Province was picked as the ‘pilot region’ for the initial supportive operations of that novel public institution with respect to its activities such as establishing ‘common facilitator workshops’ to aid small industrial establishments within the context of the finalized international agreement. These supportive activities were carried out by the Small Sized Industrial Enterprises Development Center (with its Turkish abbreviation as KÜSGEM) which was established within the organizational structure of the Ministry of Industry and Commerce as was envisaged by the said international agreement.

Based on the general assessment done by the relevant authorities regarding the pros and cons of the activities carried out and benefits offered to a number of businesses of various stripes by KÜSGEM over a decade or so, this organization was effectively transformed into a more comprehensive one with far better financial resources and wider range of benefits and incentives named Small and Medium Sized Industrial Enterprises Development Center immediately after the promulgation of the Governmental Resolution numbered 83/6744 in 1983.

Different from KÜSGEM, the new organization was designed to provide small and medium enterprises with technical consultancy services and help them gain modern managerial principles and abilities together with contemporary quality standards to be able to reach a desirable level of technological production and employment capacity.

As this latest version also fell short of genuinely delivering on the needs and expectations due its capacity restrictions stemming from its project-based and short-lived supports and local nature, legislative and organizational preparations were started to draft a more comprehensive and capable public body with nationwide organizational abilities that would enable constant delivery of support services through the country.

As a fruit of these preparations to replace the more local and restricted supporting body with a national and more comprehensive one, ‘Draft Law on the Establishment of the Presidency of Administration of Small and Medium Sized Industrial Enterprises’ was submitted to the Plan and Budget Commission in the Parliament in 15/11/1989 and following some alterations with respect to its designed organization and potential benefits to be offered to enterprises, was eventually accepted into law in 12/04/1989.

With the enactment of the aforementioned law, the Presidency of Administration of Small and Medium Sized Industrial Enterprises(KOSGEB as its Turkish abbreviations) was effectively established and was entrusted the challenging task of helping industrial enterprises to produce products with more valued added, increase their competitiveness compared to their international peers, gain a better share in international markets and more importantly force them to gain a sense of urgency to develop industrial brands accepted according to international best practices and standards.

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