Turkey - Second Industrial Technology Development Project

Report No. PID6414 Project name Turkey-Industrial Technology Project Region Europe and Central Asia Sector PSD Project ID TRPE9073 Borrower Government of Turkey Implementing agency Technology Development Foundation Ataturk Bulvari, #221, Kavaklidere 06100, Ankara Marmara Research Center National Metrology Institute Turkish Patent Institute Date this PID prepared May 5, 1998 Projected appraisal date December 1998 Projected Board date May 1999 Country and Sector Background 1. Turkish industry is in the process of making a transition from being a producer of low-cost and low-skill products towards higher value added goods and services. This transition will require an increase in their competitive which means that the underlying supporting infrastructures will have to be upgraded. One such key supporting infrastructure is the technology infrastructure. The government is keen on making investments in upgrading the technological capabilities of Turkish industry and the increase in competition, in export as well as domestic markets in light of the recent ECU accession, has brought these issues to the forefront. 2. Some efforts in the improvement of the technology infrastructure and services were commenced under Bank supported Technology Development I Project (TDP-I) with investments in the Turkish Standards Institute (TSI) to upgrade the standards and certification services, and the National Metrology Institute (NMI) to provide metrology services for industry. The project also supported the establishment of the Technology Development Foundation (TDF) which provided technology finance to firms and started a culture of research and technology upgrading among private firms. Finally, the project also supported revision of the legal and regulatory framework for the introduction of venture capital. The Government has requested the World Bank support for a follow-up industrial technology development project. Project Objectives 3. The major objective of the proposed project is to improve the competitiveness of Turkish industry through assistance in the upgrading of the technology infrastructure to bring harmonization with international standards, and in the creation of an environment that is conducive to the strengthening of industry's technological capabilities in order to fully reap the benefits of economic integration with the European Customs Union (ECU). Project Description 4. The project would strengthen the Measurement, Standards, Testing, Quality (MSTQ), and Intellectual Property Rights (IPRs) infrastructure. This would entail investment in civil works for the Turkish Patent Institute (TPI) facility expansion, investment in laboratory equipment for the National Metrology Institute, and technical assistance and training support to the TPI, NMI, TSI, and the National Accreditation Council (NAC). The training would be for updating the technical skills of the institution's staff on IPR enforcement issues for enabling judges, attorneys, and patent agents to cope with the new regime, as well as information dissemination and awareness raising on each of the respective components through seminars and workshops for Turkish industry. The project would also support private sector participation in technology development by supporting new and small firms in undertaking technology upgrading with seed capital and venture capital type of technology finance. In an effort to bring industry and institutions closer together the project would also support the restructuring of R&D institutes under the Tubitak's Marmara Research Center (MRC) system ----- becoming contractual research organization. This would entail investments in upgrading their facilities and laboratory equipment in order to meet the demands from industry, as well as training of staff in adopting an industry-serving approach to R&D activities. As part of this effort of bridging the gap between research and industry, the project would also explore pilot investments in establishing technoparks on a phased and cost sharing basis with industry and the institutions. Finally, the project would support awareness raising, information dissemination, and matchmaking exercises between firms, as well as between firms and scientific institutions. Project Financing 5. The total cost of the project is estimated to be around US$400 million. The Bank is expected to finance between US$150-180 million, and the remaining funds to be provided by the respective agencies, Government, and the private sector. Project Implementation 6. NMI and NAC would be responsible for the implementation of the physical investments as well as training needs in the areas of metrology and accreditation standards, respectively. The TPI would be responsible for implementing the facility upgrading as well as awareness raising and technical training for the IPR component. The TDF would implement the technology finance component with a strong private sector participation in design and cost sharing. The TDF will also be the coordinating agency for the implementation of the information dissemination and match-making roles for industry in close collaboration with the Istanbul Chamber of Industry (ISO). The MRC would be responsible for implementing the investment and training needs for restructuring the network of R&D institutions. Project Sustainability 7 The project has been designed with strong private sector participation, not just in the demand for these services but also in the design and cost sharing of their delivery. This private-sector focus of the project would promote the - 2 - sustainability of technology support services and resources in Turkey. Individual institutions that are being restructured are being assisted in becoming more industry-oriented and thus revenue-generating and self- sustainable to a large extent in the long run. Key Lessons Learned from Past Operations in the Country/Sector 8. This project recognizes that market deficiencies that hold back technological effort can be overcome by careful market friendly interventions, especially when timed with a liberalization effort that creates the incentives for undertaking such efforts. The project, therefore, places a major thrust on private sector participation ensuring a demand driven and cost sharing approach. The project builds upon the successes of the first project with careful attention being paid to the training and technical assistance needs of agencies in order to build stronger and sustainable institutions. Poverty Category 9. Not Applicable. Environmental aspects 10. Category C. Contact Point: The InfoShop The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Telephone No. (202)458 5454 Fax No. (202) 522 1500 Note: This is information on an evolving project. Certain activities and/or components may not be included in the final project. Processed by the InfoShop week ending May 22, 1998. - 3 -