"WE ARE HOPEFUL FOR THE FUTURE"

Can you talk about the contributions of the İzmir Free Zone to the national economy?

Our production journey, which started in 1984 as the Leather Organized Industrial Zone, has continued as a free zone since 1997. Since 2011, we have been operating as the İzmir Free Zone. İZBAŞ, which is one of the most important production and export hubs in İzmir and the Aegean Region, concluded 2024 with a trade volume of 930 million dollars and exports of 363 million dollars. In addition to the contraction and slowdown in the country’s export markets, the chronic issues faced by our economy—especially inflation—reflected a relative decline in our trade volume and exports compared to 2023.

We believe that this will rise again with the control of inflation. We have full confidence in the future of our country and region. As of today, we host 207 local and foreign capital companies operating in different sectors. İZBAŞ, as the founding and operating company of our region, provides a high-quality production environment for investors and employees with all its infrastructure investments.

Due to the fact that our occupancy rate has exceeded 90% and the available land for investment is gradually decreasing, we purchased a neighboring land of 153,000 square meters in 2024. By expanding the area allocated for investments by 10%, we aim to complete its infrastructure investments and open it to production in a short time.

Moreover, as you know, we currently host the largest wind turbine blade factory in Europe. Among the steps in our future vision is becoming a clustering center for the production of renewable energy equipment.

 Can you tell us about the efforts to facilitate access to global markets from the İzmir Free Zone?

İZBAŞ is one of the best manufacturing centers in the country with the best logistics facilities, not just in İzmir. Our location, only 45 minutes from the city center of İzmir, also makes it a preferred destination for skilled labor.

We are situated 30 to 40 kilometers away from the Aliağa Nemrut and İzmir Alsancak ports. We are 16 kilometers away from the İzmir ring road and are integrated with the North Aegean Highway and the Biçerova railway logistics center. Thanks to these comparative advantages, our investor companies can manage logistics operations to their target markets in the shortest and most cost-effective manner.

What do you focus on when a company wants to set up operations in the İzmir Free Zone? What advantages does İZBAŞ offer to companies?

As I mentioned earlier, due to the limited land available for investment, we pay attention to ensuring that the investments we engage with will create high added value for both our country and the Turkish economy.

One of the major reasons companies choose us is the availability of registered buildings and land, a feature that only exists in three of the 19 free zones in Turkey.

Moreover, free zones are production sites where export-oriented companies conduct trade and production under the status of third-country manufacturing. Free zones are considered outside the customs line concerning foreign trade, tax, and customs regulations.

We provide extremely advantageous opportunities, especially for companies that focus on export-oriented production, employ a large number of people, make significant tax payments, use imported inputs in production, and have export revenues.

Our production companies can reduce their expenses on Corporate and Income Tax, Value Added Tax, Special Consumption Tax, Customs Duties, Stamp Duty, Rent Withholding Tax, KKDF, and others to virtually zero.

Moreover, companies with over 85% of their production dedicated to export do not pay Income Tax for their employees.

Can you provide examples of environmentally friendly practices in the İzmir Free Zone?

As you know, İzmir has achieved the highest level of clustering success not only in Turkey but also globally in the renewable and clean energy sector. We are one of the most important production centers in this clustering process. There are companies in our zone producing equipment for various renewable energy sources. İZBAŞ continues its operations in line with its vision of becoming a "Green Free Zone."

In this context, we have Turkey’s first and only Solar Mud Drying Facility, which is located in one of the 19 free zones in our country. This facility is preferred as one of the most cost-effective processes for disposing of waste sludge from our treatment plant. The facility reduces the water content of the sludge using solar energy, and we have halved the total volume and waste amount.

Additionally, we have installed Solar Energy Plants (GES) on the roofs of all our warehouses. Our 650 kW power plant, which covers 6,000 square meters, uses 1,740 panels. A significant portion of İZBAŞ’s self-consumption is met by this plant, and it contributes significantly to reducing our carbon footprint.

A new tax regulation affecting companies operating in free zones is set to begin in 2025. What are your thoughts on this?

As you know, starting from January 1, 2025, a new regulation will come into force, affecting over 2,000 companies operating in the 19 free zones in Turkey. According to this change, profits from sales made from free zones to the domestic market will now be subject to taxation in addition to the 0.9% fund payment.

Under the previous system, companies in the free zone paid the 0.9% fund based on the invoice value of domestic sales through the Ministry of Commerce to the Ministry of Treasury and Finance. This rate approximately corresponds to 12% of the profit figures.

The amount paid was deducted from companies' cash flow and entered the state's coffers. However, starting from January 1, 2025, companies will face an additional tax burden alongside the fund payment.

We must point out that this new regulation, which essentially represents double taxation and penalizes companies engaged in production in free zones, has caused unease among current and potential investors.

The proposal shared by the founders and operators of the free zones with the Ministry of Commerce, suggesting that the "law change only apply to companies licensed after 2025 and not affect acquired (vested) rights," was unfortunately not accepted. This regulation not only increases the financial burden on companies but also means that the law is applied retroactively, which penalizes firms that have already made investments.

There has been a decline in the transaction volumes of free zones in Turkey in 2024. How do you evaluate the 2024 results?

In 2024, the total export from free zones reached 12 billion dollars, while imports decreased by 14.8% compared to 2023, totaling 7.9 billion dollars. The 700 million dollar decline in exports compared to the previous year was not surprising for us. The fundamental factors behind this result are the issues in our national economy and the export markets.

However, the most significant issue is the widening gap between the rise in foreign exchange rates and inflation in Turkey. Think about it: in 2024, exchange rates (your export revenues) increased by 18%. On the other hand, your fixed and operating costs, especially energy and labor, increased well above the official inflation rate of 44%. The difference is being covered by the profitability of companies, but with very limited access to commercial loans, it severely affects cash flow. I believe this is the real issue. A business suffers the most not from not making profits, but from the imbalance in cash flow.