Turkey - Technology Development Project

 ICRR 10356 Report Number : ICRR10356 ICR Review Operations Evaluation Department 1. Project Data : OEDID : OEDID: L3296 Project ID : P009058 Project Name : Technology Development Project Country : Turkey Sector : Other Industry L/C Number : L3296-TU Partners involved : Japan Grant Facility Prepared by : Michael R. Lav Reviewed by : John Johnson Group Manager : Ruben Lamdany Date Posted : 06/23/1999 2. Project Objectives, Financing, Costs and Components : Project Objectives : (a) to develop the metrology, standards, testing and quality system to international standards by capacity building in the key public sector institutions and by establishing a framework for greater private sector participation in the system; (b) to make research and development market driven by financing projects on a matching basis with the private sector; and (c) to foster the growth of a venture capital industry by introducing a supportive legal and regulatory framework, by rationalizing the tax environment and by establishing a role model company. During implementation, the objective to establish a role model company (with IFC participation) was dropped. Project Financing : IBRD $97.0 million, Government of Turkey, $10.8 million, Private Sector, $45.3 million, TSE (Turkish Standards Institute ) $17.7 million, Bilateral Donors, $3.4 million. Project Costs and Components : Metrology, Standards, Testing, and Quality System (MSTQ),$89.2 million, Research and Development subprojects, $84.9 million, and Undersecretariat of Foreign Trade, $ 0.1 million. Total Costs $174.2 million. 3. Achievement of Relevant Objectives : The project achieved most of its objectives, with the exception of the dropped venture capital role model firm (see below). The National Metrology Institute was set up in 1992 and by 1998 had 25 laboratories capable of meeting about 40 percent of Turkish needs for bringing metrology to international standards . The Institute conducts R&D into measurement facilities, disseminates information through articles, newsletters, etc . and now earns 15 percent of its revenues from the private sector (industry standards in Europe and elsewhere suggest that 20-30 percent is a maximum). The Turkish Standards Institute was upgraded and strengthened, though not fully in line with project objectives (see below). The legal and regulatory framework for venture capital was improved . 4. Significant Achievements : Improving the regulatory and legal framework for venture capital should be an important benefit for Turkey over time, as is the initiation of commercially oriented R&D . Metrology to EC standards was substantially increased and now covers 40 percent of Turkey's needs . 5. Significant Shortcomings : The project's third objective was to foster the growth of venture capital . While the legal/regulatory system was improved, the venture capital component had to be substantially modified since a dispute between the IFC which wanted an off-shore company and the Government, which wanted an on -shore company, could not be resolved . Although two venture capital companies were launched, they were both very small . Another shortcoming is that the TSE needs to become even more accustomed to working with the private sector and eliciting feedback for its work to become more commercially relevant. The project auditors were tardy and the work of poor quality so that the audits were less useful than they should have been . The ICR complains of delays in receiving government approval for imports. It is not clear whether this refers to constraints imposed by the trade regime, in which case the problem would have a wide impact, or is simply related to project implementation, in which case the problem is still serious but with a much narrower impact on development . Studies financed were not considered relevant and had little impact. The national Accreditation Council was not established, hampering the emergence of private testing companies. 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev .: Partial Modest Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Exemplary 7. Lessons of Broad Applicability : Proactive measures to stimulate enterprise R&D require development of special skills . Skill development requires a focus on technical assistance, study tours, training, sustained over a period of time . Hands-on supervision, at an intensive level, is essential to ensure progress . Change needs to permeate all levels of institutions (not simply its leadership) if objectives are to be met. Design of technology projects needs to be kept as simple and as flexible as possible, since useful methodologies will vary from country to country depending on local conditions and opportunities. 8. Audit Recommended? Yes No 9. Comments on Quality of ICR : The ICR is fully satisfactory and the section of future operations with its operational guidance should prove to be very useful. The ICR covers material thoroughly and presents convincing evidence . The Borrowers' contributions are excellent. The lessons of experience are thoughtfully formulated and clearly presented .