The effect of financial incentives applied in Turkey on investment decisions: Case of Sakarya province

As the world became more globalized, the development level, which is measured by industrialization and technological advances, have increased its influence on global economies. States apply various economic interventions in order to compete with other countries and to direct the investments which will increase their development level. Incentives are financial policy instruments which aim to encourage investments. Incentives which are applied based on the desired results both can be financial and government spending which can be applied in the form of locational location, insurance premium supports and energy supports etc. Turkish incentive system which underwent a radical change and which was brought together under a single legislation in 2012 was arranged according to 2023 targets of the government, and various practices were introduced according to the development level of the regions. Incentive measures were foreseen which would reduce regional differences and as a result which would increase employment and production, protect environmental and cultural assets, reduce dependency on importation, and increase the production of high technology products with added value, and facilitate clustering in industry. The existing incentive system has been organized on a regional basis, and the provinces in Turkey have been categorized into 6 different regions regardless of their geographical locations. Most developed provinces were grouped in Region 1 where as the most under developed provinces were grouped in Region6. Region 1 is where the least amount of incentives will be offered whereas Region 6 will receive the highest amount. This thesis explores the effects of financial incentives applied in Turkey on investment decisions based on the Sakarya Province grouped in Region 2. The effect of incentives on investment decisions was analyzed with regards to selection of industry, selection of region, and decision to make new investments. The following statements are found after interviews which are realized with interview method and secondary data; - Investments which are applied in Sakarya province in the 2nd region does not influence investor's decisions about selection of sector, provincial selection to do make a new investment and taking investment decisions. - Investment incentives can influence the decisions of investors in terms of timing. - Investment incentives effects the preference of Industrial Zone and TECHNOCITY of the investor's in investment location choice. - According to investors, project-based supports are considered as more efficient than incentive certificates ones.