The Ministry of Commerce of Turkey and the aviation industry giant, Boeing, jointly organized a Supply Chain Development and Export Conference in Turkey on May 10, 2019. The representative of Boeing in Turkey informed the Turkish companies on how to join Boeing’s supply chain. Besides, Minister of Trade Ruhsar Pekcan gave a speech within the context of the Conference. In her speech, she stated that the Ministry is determined to support local companies to increase export numbers in the aviation sector and to stimulate the competition. In this regard, she said they created the Global Supply Chain Support Program. With this program, the suppliers who can provide intermediate products to the global supply chain of a global company (as defined in the program), may get incentive from the Ministry to meet their needs if the activities are found eligible to be supported. Minister Pekcan explained that the aim of this program is to increase the export of high-tech products in the global supply chains of companies. She notably talked about the need to increase of high-tech exports in Turkey especially for aviation sector, and she added that currently only three companies in the aviation industry have benefitted from this support.
Global Supply Chain Support Program
Ministry of Economy has had programs to support to Turkish companies under the Turquality Program which is an extensive global level program aiming to increase Turkish brand’s awareness in foreign markets to stimulate export numbers. However, only the companies that produce products targeting the end users have been eligible for this support. There was no program to support the export activities of firms manufacturing intermediate goods or raw materials. In 2016, a new program called Global Supply Chain Incentive Program was built within the context of the support of “Access to Market Documents” of the Ministry of Economy. Under this program local suppliers may be partially funded for the equipment/instrument, software, and travel costs associated with their attempts to be part of a global supply chain.
Eligibility for the Global Supply Chain Incentive Program
Limited and Unlimited Liability Companies, Joint-Stock Companies, Limited and Cooperative Companies can apply to this incentive program. In order to benefit from the program, it is necessary not to export a group of products before to the global companies. In addition, companies that can supply a different product group to a global company with which they already have a supplier relationship, can apply to this program. In this context, there should be on going correspondence between the global scale company and the supplier for beginning sample process to any product group.
What is the amount of support within the scope of Global Supply Chain Support Program and the items to be supported?
Within the scope of the projects, the ministry may fund up to %50 of the total costs and the maximum amount available for each project is 1 Million Dollars. The maximum project duration is 2 years.
The expenses to be covered under the program are listed below;
Machinery, Equipment and Hardware: Within the scope of this support, the purchase of machinery, equipment and equipment needed by the suppliers in the global trade chain, especially in prototype and sample preparation, testing, analysis verification, quality control and measurement processes, which are not intended for serial production of the suppliers, can be evaluated within the scope of support. There is no upper limit for this expense item. It is not allowed to sell the equipment purchased within the project to another company or organization for 3 years from the date of purchase.
Software: Within the scope of this support, it may be covered the costs of purchasing new software or updating existing software that suppliers may need in their efforts to meet global company demands. There is also no upper limit for this expense item. The software received within the scope of the program cannot be sold to another company or organization for 3 years from the date of purchase.
Training, Consultancy and Customer Visits: The cost of training and consultancy services received by the suppliers in order to meet the demands of the global company is supported within the scope of this program. Besides, the transportation costs of the supplier and the global company are also supported as part of their visits to each other. Accommodation expenses can also be covered for visits to the city where the global company settled or where the supplier makes production. The upper limit of the support is set at $ 100,000.
Certification, Test / Analysis, Product Verification: Certification, test / analysis reports and product verification expenses included in the List of Market Access Documents Listed as Supported by the Ministry or which are obtained from the accredited institutions and organizations within the scope of the program or supported by the Ministry are supported. There is no upper limit for this expense item.
“Global Company” definition for the Purposes of Global Supply Chain Program
As a prerequisite for applying to this project, it is necessary to determine whether the company, which the other company will be its supplier, has a global scale or not. When making this determination, Supplier Company may look at whether or not that company is listed or has been listed in internationally accepted lists like Fortune 500. Nevertheless, overseas origin companies, whose turnover and exports are over a certain amount and its brand has global brand awareness, can be considered as a global company for the purposes of this program although they are not listed on those lists.
Prior to this support, the Ministry, which evaluates the supplier company in terms of its current production competence and product development potential, financial performance, information systems management and organization and human resources, visits the company and reviews the company in cases it deems necessary.
Things to Consider for Application Process
First of all, the supplier company must be sure that the company, for which it will provide services, is a global company as defined in the program. In addition, the cost items to be claimed under the project are not intended for mass production and the budgeting needs to be done carefully to cover the whole project. When preparing the project budget, all expenditure items should be determined. Items requested for support within the scope of the project must be purchased after the project start date. Items purchased before the start of the project are not eligible for incentives under the program.
As a result, the Ministries of Economy and Trade supports the Global Supply Chain Competency Projects helping domestic companies producing intermediate products to operate more effectively in the international supply chain and work with global-scale firms to increase their exports. This is an important step in promoting and supporting the industry by the state. While currently Global Trade Chain Support is provided only in few sectors such as aerospace and only few companies can be benefitted from this incentive. When we evaluated the approach of the Ministry on this issue, we can expect to expand further and open the way for suppliers who want to benefit from this support in other sectors.
Author: Bengisu Delibalta