STATUS OF SEED SECTOR PRIVATIZATION IN TURKEY A REVIEW
Prepared by Dr. Mehmet Uyanık
Consultant,
May 2008
INTRODUCTION
This is the revised draft of Turkey’s Seed Sector Privatization. This study describes Turkey’s seed regulatory reforms and concurrent economic actions taken by government aiming at increasing private sector role in seed production and trade. The pre-reform situations as well as post reform developments were analyzed and the impacts of privatization on the seed sector and crop agriculture were evaluated. This review starts with brief information regarding Turkish agriculture and analysis the seed situation prior to 1980, the reformation process, post-reform developments and finally, the major constraints blocking the privatization. Due to lack of sufficient information and data with regard to seed sector and various government implementations which expanded to a long period it was not possible to provide detailed analyses in some subjects.
OBJECTIVES
The objectives of the study were;
To provide some background information about Turkish seed sector and its status and capacity before the 1980s,
To analyze the limitations and defects of the pre-reform seed provision system,
To describe the reformation process and give details of actions taken,
To provide available data regarding private enterprises and their operations,
To describe the government supports of all kind with the purpose of encouraging the change process,
To describe the types and activities of the private enterprises,
To review the operations of private seed companies with respect to genetic material, variety provision, seed production and marketing,
To summarize positive consequences of the reforms which had an impact on both agriculture and seed sector developments,
To identify the major constraints to the privatization process.
EXECUTIVE SUMMARY
1. AGRICULTURE IN TURKEY 1.1. Crop Farming
1.2. Crop Production and Input Use 1.3. Seed Requirement and Supply
2. SITUATION PRIOR TO PRIVATIZATION 2.1. Historical Background of the Seed Industry 2.2. Seed Legislation
2.3. General Economic Structure and Seed Sector Policies 2.4. Seed Programs
2.4. 1. Seed Supply 2.4. 2. Available Varieties
2.5. Problem and Quests for Solutions
3. REFORMATION OF THE SEED SECTOR 3.1. Purpose
3.2. Strategy and Scope 3.3. Regulatory Reforms
3.3.1. Easing the Variety Registration-Release System 3.3.2. Liberalization of Seed Prices and Trade
3.4. Incentives, Exemptions and Subsidies 3.4.1. Incentives
3.4.2. Tax Exemptions 3.4.3.. Subsidies
4. POST-REFORM PERIOD 4.1. Progress in the Seed Sector
4.2. Changes in the Organization and Structure of the Industry 4.2.1. Market Size
4.2.2. The Structure of the Industry
4.2.3. Increase in the Number of Private Seed Companies
4.2.4. The Size, Capital Structure and Employment in Private Companies 4.2.5. Vertical Integration
4.2.6. Product Portfolios
4.2.7. Market Share and Competition
4.2.8. Genetic Material and Source Seed Supply 4.2.9. Horizontal Diversification
4.2.10. The Role of Private Companies in Seed Provision and Sale 4.3. State of the Industry and Some Trends
4.3.1. Variety Registration and Release 4.3.2. Seed Supply and Usage
4.3.3. Seed Production 4.3.4. Foreign Seed Trade 4.3.4.1. Seed Imports 4.3.4.2. Seed Exports
4.3.4.3. Export/Import Balance 4.3.5. Changes in the Seed Sector
4.3.5.1. Improvements in Legislation and Regulations
4.3.5.2.Institutional, Organizational and Structural Changes
4.4.1. Effects of the Reforms on Crop Yields, Output and Farmers’ Income 5.1. Limitations in the Path of Privatization
EXECUTIVE SUMMARY
Turkey is a major producer of many field crops and vegetables. It has a growing private seed industry that produces and markets considerable amount of certified or quality seeds each year both to domestic and foreign markets. On the other hand, a private seed industry is rather a new phenomenon in Turkey. Though the country launched its first crop breeding activities in as early as the 1930s and organized the first seed production programs in the 1950s, it
depended solely on public seed provision for long years without making use of private seed sector. Yet a great many of the public seed programs implemented between 1950 and 1980 were mostly unsuccesful in delivering the expected results.
As a consequence, the most limiting factor in Turkey’s crop agriculture by 1980 was the inadequacy of quality planting seeds in many crop species. Because of the ineffective public variety development efforts in several crops and inefficient public seed programs, the domestically produced seeds were usually inadequate. On the other hand basic and
commercial seeds imports were usually remained limited with respect to needs. Consequently, the coverage ratios of quality seed supply to the seed requirement were usually rather low in many crops. Thus, in spite of its large resource potential, Turkey underutilized its crop production capacity for long time simply because of inadequate seed supply.
Turkey determined to make significant changes in its seed policies in the early 80’s. The primary objective then was to ensure that farmers could access to sufficient quantity of the quality seeds at right time and place with reasonable prices. The main strategy pursued by the government in this regard was to re-structure and transform the seed sector through private investments so that international capital, know-how and technology could be brought to the country in short time.
The privatization process was principally carried into effect on the two bases. These were regulatory reforms and the economic incentives and subsidies. While the former series of actions aimed at minimizing the obstructive and complicated provisions in the government regulations, the latter attempted to make the seed sector more attractive from the viewpoint of private entrepreneurs and investments.
As a first step, the variety registration and release procedures for seed producers were eased and simplified. The immediate objectives of the variety registration reforms on one hand was to ensure that the country could benefit timely from the plant breeding advances made in other countries and to accelerate the variety registration process. The resulting rapid variety release mechanism and accompanying truthfully labelled seed procedure in vegetables speeded up the variety transfer, release and commercial seed provision. Liberalization of the seed prices and foreign seed trade was another area of the regulatory changes which were implemented at the very beginning of seed policy reforms.
This was followed by a series of economic/financial interventions made by government such
as investment incentives, low cost loans, customs tariff immunities, tax exemptions and input
subsidies for the benefit of private firms. Along with the regulatory reforms, these financial
and economic measures made substantial impacts on the establishment and afterward progress
of a young private seed industry in Turkey. However, the privatization process did not involve
any ownership transfer from the state owned seed enterprises to private companies.
Through the instrumentality of an effective privatization continuing since then, the country has ben able to put into practice a succesfull seed provision system which bases largely on private entrepreneurship with the exception of a few crop species. Significant developments have taken place in the seed sector ever since the start of privatization process. The
institutions, organizations, structure, production, products, trade and governance in the seed sector all underwent remarkable changes. In consequence, many of the largely unsuccesfull public seed production and distribution programs fell into disuse.
Since the mid eighties, a great many of new domestic private companies have entered into the seed sector. In addition to the direct investments made by some multinationals, several foreign companies became also involved in the Turkish seed sector through various forms of
partnerships with the local firms. The total number of companies operating in the seed sector increased and the number of staff employed by them multiplied. Private seed companies became largely dominant soon in the sector where prior to 1980 the public entities prevailed entirely.
In course of time, the significant increases were also observed in total number of crop species and varieties which were included in the national seed programs. Newer and better crop varieties were consistently introduced into the agriculture and the variety renewal period in many crop species was considerably shortened. Most of all, both the development of a sizable domestic seed production capacity and an increasing foreign seed trade made possible for many farmers to have better varieties and higher quality seeds with reasonable prices.
One of the most significant outcomes of the privatization process has been the increase in consumer satisfaction. Farmers are no longer without alternative and they are not compelled to use those varieties that they don’t want and the seeds that they don’t prefer. Both genetic and technical qualities of crop seeds have risen to higher levels of standards almost in all crops. Importantly, an internal quality control concept in private sector was developed and correspondingly many of the companies have established their own quality control
laboratories. The employments of well trained personnel as well as use of newest seed testing equipments and techniques in these laboratories are increasing.
Reforms allowed new channels for technology transfer to be established. Thus seed supply sources have diversified and the access of local seed companies to the world seed
technologies has increased. Alongside the production, supply and marketing activities in seeds; some local private seed companies initiated their own plant breeding and variety development operations. When conditions surrounding the public research were changed, some changes in the management and functioning of the public agricultural research system also occurred. Similarly, some changes were also observed in the business management and conduct of the major public seed producing organization. Though it still maintains its key feature as the biggest seed company of Turkey in terms of total production, its share in its traditional product portfolio, i.e. winter cereals and forages, is declining.
After reforms the technical, commercial and legislative contacts of the domestic seed sector
with the outside world increased and diversified. The sector was restructured in a way that
private companies dominated the industry and assumed a pivotal role in the governance of the
sector. Possibilites and mode of cooperation among the public and private seed related
organizations have also expanded. Right after the reforms, a national seed association was
founded in 1986 which served until very recently as an interaction forum between the industry
and governmental authorities having a seed sector mandate.
During the privatization process, Turkey intensified its relationships with the international seed organizations. Presently, the country follows closely the international or regional developments in seed sector codes and standards and tries to bring into line with them.
Together with the privatization process, many new varieties have been introduced into the Turkish agriculture and the number of varieties and amount of certified/labelled seed used in the country has substantially increased. The continual and unrestricted supply of new crop varieties and quality seeds that satisfies farmers’ needs have resulted in yield and quality increases in many crops. After reforms, the significant yield increases were observed especially in vegetables, maize, sunflower, cotton, potatoes and sugar beet; and parallel to this, the farmers’ income has also rose.
The establishment of close industrial, commercial, technical and professional relations with the international seed sector during the post reform period assisted greatly in diagnosing the limitations or bottlenecks of the new implementation and legislation which needed further improvements. As a result, the required institutional and organizational advancements were brought up through by some comprehensive legal changes. In this context, the two major seed related laws passed the between 2004 and 2006. These were the Plant Breeders Rights Law and the new basic Seed Law. After the PBR Law, Turkey applied for UPOV membership and became a member in November 2007.
The new basic Seed Law requires that all the active professional groups working in seed and plant propagation industries come together and form an organization (Association for Turkish Seed Related Professions). This apex organization would serve as a consultative body in the governance of the seed sector and could be delegated over time an authority in order to carry out some seed related services. On the other side, Turkey also continues to harmonize its seed legislation with the regional organizations such as EU.
The privatization efforts in Turkey were principally successful and they brought about noteworthy outcomes in the seed sector. However, there are still some problems to solve or barriers to overcome in progressing further the incomplete seed sector privatization. These setbacks could mainly be discussed in two categories. The first type of limitations, which block furthering the privatization process, stems largely from the structural problems of the Turkey’s agricultural sector. The second category of hindrances which impede the
privatization process is largely related to the political and bureaucratic choices.
One of the structural problems is related to the small farm size and low level crop
intensification especially in risk prone marginal production environments. Another problem in the seed sector privatization is related to the low level private plant breeding and variety development capacity. Because of small company size and insufficient financial means, many of the domestic private seed companies have a rather limited investment possibility for research and development except for carrying some adaptation and evaluation trials.
There are currently some administrative and bureaucratic constraints too with a varying
importance some of which have rather negative implications for privatization process. A lack
of effective consultation and collaboration between the public authorities and private sector
representatives in preparation of the seed related regulations is one of them.
In this regard newly established Union of Seed Related Professions is expected to play a vital role in the future in order to help develop effective interactions between various stakeholders including the government, farmers and even consumers. Among the administrative type shortcomings which hinder the privatization is also a lack of effective and extensive seed marketing control system being enforced throughout the Country? This matter is
acknowledged by many -involved in the sector- as one of the major drawbacks for the seed industry.
A common and enduring dissatisfaction with the existing phyto-sanitary measures is
frequently expressed by many seed companies. Especially the delay to timely introduction of seeds and genetic material into the Country is still considered by some as a real obstacle blocking the privatization process. A science-based and trade facilitating speedy phyto- sanitary system is needed for the quick movement of seeds and all plant propagation material.
Though it seems somewhat paradoxical with the privatization, many people from the private
seed industry believe also that the public research system in Turkey should be reconsidered. A
well prioritized, focussed and effectively performed public research would be very helpful in
supplying enhanced genetic material, finished crop varieties and training services to private
companies lacking a research capacity.
1. AGRICULTURE IN TURKEY
1.1. Crop Farming
Turkey hosts vast agricultural lands and diverse climates. The great variability of agricultural ecologies and production systems within the country brings it to an important position
worldwide in crop agriculture. The major crops having significance in Turkey’s agriculture are winter cereals, pulses, industrial crops, forages, vegetables and fruits. Whereas 87% (26.6 M ha) of the total agricultural land is annually set aside for field crop farming, only about 3%
is used up for vegetable production and some 9.5 for fruit growing. Cereals and pulses are grown mainly in the Central and South Eastern part of the Country where precipitation is mostly insufficient. On the other hand cotton, maize, sugar beet, sunflower, potatoes and vegetables are mainly grown on irrigated lands. Approximately 22 % of the total arable land is irrigated. Vegetable production is practiced under both open-field and protected growing conditions
1.2. Crop Production and Input Use
Agricultural operations in Turkey are mostly small and fragmented. Geographical location, agricultural infrastructure and the farm type altogether determine the intensiveness of the crop production systems. High quality seeds of improved varieties and advanced crop husbandry techniques are used in those agricultural areas where irrigation water is available and commercial farming prevails. On the contrary, in dry-farming zones where winter cereals, pulses and forages are mainly cultivated, the use of farm saved seed is widespread and fertilizer and pesticide application is rather limited. As a result, the demand for improved varieties and high quality seeds varies in accordance with the geographical regions and the cropping systems. In those crop production systems where environmental conditions are either suitable or largely controlled by farmers, high quality seeds are always in demand.
1.3. Seed Requirement and Supply
Use of certified seed is well established for those crops such as sunflower, sugar beet, cotton, maize (excluding home gardens) and potatoes as well as for many of the vegetable species.
Quite the reverse, use of farm-saved seed is prevalent in agricultural holdings or crop
production areas where dry farming is practiced. In particular, use of open pollinated and or
local varieties as well as farm saved seed is considerably higher in some particular crops such
as wheat, barley, pulses, rice and also forages to a degree. It is estimated that about 1/3 of the
total volume of annual agricultural seeds which is currently used in the Country is supplied
through the organized seed system (Table 1.)
Table 1. The amount of certified/labelled seed distributed, seed requirement and coverage ratio by major crops. (Ministry of Agriculture and Rural Affairs, MARA).
Crop (s)
Estimated Average Annual
Seed Requirement,
M Tons
Amount of Certified Seed
Distributed, M Tons (Average of 2005-06-07)
Coverage Ratio (Distributed Seed/ Required
Seed) (2007) (%)
Wheat 566 000 183 652 31
Barley 243 000 23 081 9
Maize (Hybrid) 16 800 15 833 86
Rice 9 910 1 826 25
Chick peas 12 585 9 1
Sunflower (Hybrid) 2 342 2 356 100
Potatoes 239 000 60 063 26
Cotton (Delinted) 11 815 10 249 79
Forages 12 300 7 400 50
Vegetables - 2 409 -
Sugar Beet (Hybrid) 1 302 1 707 100
2. SITUATION PRIOR TO PRIVATIZATION
2.1. Historical Background of the Seed Industry
The earliest crop improvement stations of Turkey were established in 1926. Following the development of the first improved wheat and barley varieties, some of these stations were tasked with seed production. However the seeds distributed in this way were mostly within the surrounding region of the stations and rather small in quantity. The duty of seed
production was later entrusted purely to the Directorate General of newly established State Production Farms (1950). This has been the first and the largest specialized seed organization of the Country which was transformed later into a public seed company (abbrev. TIGEM).
Following the establishment of a public seed producing organization, in the late fifties the public services responsible for the certification and control of seeds were also set up (Kün and Akbay 1985, 32-43).
The development of seed industry in Turkey could be examined historically in three periods.
During the first phase (1925-1950), the seed production had been limited only to a few crops i.e. sugar beet, wheat and barley. However, the amount of quality seeds produced and
distributed during this phase was not significant (Kün 1988, 152-187). Between the years 1950 and 1980, many public seed programs were launched for the other major crops. Among these were maize and sunflower (1960), cotton 1965), potatoes, vegetables, forages and rice (1970), pulses (1975) and soybeans (1980). In spite of this, many of the seed programs which were implemented during this period were not succesfull in satisfying the needs of the farmers either in quantity and quality. In this period, uncertified and uncontrolled seed sales
-especially in vegetables- and frequent seed shortages were a rather common occurence. On
the other hand the seed programs of cotton, sugar beet, barley and wheat to a certain degree
were comparatively succesfull.
The third era in Turkey’s seed provision system started in mid 1980s. During this process the long lasting seed policies of the country fell largely into disuse and various regulatory, legistative, structural and institutional changes came through one after another. These changes brought about remarkable consequences for the seed sector. Until the mid 80s, the supply and marketing of all the agricultural and a great many of the vegetable seeds in Turkey were virtually under the control of public entities. Upon the easing and simplification of the rules and procedures regulating the seed sector –especially variety release and seed
marketing- the private business activities increased steadily and the structure of the seed industry changed immensely. Today the seed provision in many vegetables and field crops is carried out almost entirely by private companies. Nevertheless, the privatization process of the seed sector still continues. The certifed seed supply and distribution of some crops such as pulses, winter cereals and forages is controlled with a varying degree by public entities.
However, the present seed policies and regulations in Turkey presently provide a suitable environment for the private seed enterprise establishment and development.
2.2. Seed Legislation
In order to set up a legal framework for the domestic seed production and trade, Turkey put into practice its first Seed Certification Directive in 1956. This text was further developed and transferred consequently into the Seed Control and Certification Directive in 1961 (Kün and Akbay, 1985, 32-43). Before long, as an evolvement of the previous regulations, the first basic Seed Law of the country (Law No: 308) was passed in 1963 and it stayed in force until 2006. This law empowered the Ministry of Agriculture and assigned to it some specific duties in seed sector functions and services; such as variety registration, seed certification, marketing control as well as seed production, distribution and trade.
2.3. General Economic Structure and Seed Sector Policies
Through the 60s and the 70s, the main economic development strategy of Turkey was based on import-substitution policies. In parallel with the general economic programs implemented then, the seed production policies were also formulated with an inward looking approach with the purpose of meeting the seed demand through domestic seed provision (Tuncer 1990, 2- 27). The seed provision strategies during these times always gave priorities to the public organizations. Though the task of variety development and source seed production were completely assigned to the universities and agricultural research institutes, the production of certified seeds was principally entrusted to TIGEM which was a parastatal. Consecutively, the distribution and/or marketing of the certified seeds were handed over to the various public agencies.
2.4. Seed Programs
Between 1950 and 1980, all the activities and operations involving the seed provisions were
largely performed by the public organizations/agencies. A National Seed Advisory Group
(NSAG), founded in 1951, guided the Country’s seed policies until the late 1970s. NSAG had
a very large membership structure including about a total of one hundred representatives
coming mainly from the various general directorates, divisions and sections of the Ministry of
Agriculture and also from the other agricultural public organizations. There were only a few
private seed sector representatives who participated in it. This Group (NSAG) was supported
by a set of crop specific sub-committees which were responsible for controlling and
coordinating the seed activities of the organizations that contributed to the implementation of official seed programs. The Group reviewed the seed supply conditions of the country each year and made recommendations to the Ministry of Agriculture on various aspects including variety introduction, registration and release, seed production plan, production target
allocation among various agencies, regional seed quotas, and credit requirements and also import needs. The recommendations of the National Group were enforced after approval by the Minister of Agriculture. Decisions which involved actions by more than one ministry were referred to a high level Inter-Ministerial coordination group (Anonymous, 1980).
By 1981, there were eight separate Directorate-Generals, a great number of public
agencies/organizations which were accountable for the planning and implementation of the seed programs (Anonymous, 1980; McMullen 1987, 196-198). Among these were
universities, government agricultural research stations, nurseries and seed production stations, state production farms, vocational agricultural schools, provincial extension agencies,
agricultural input supply and distribution organizations, state affiliated cooperatives, chambers of agriculture and also some agencies which were even linked to the other ministries. On the contrary, there were only two fully private seed companies in the whole country and their role in the seed supply system was limited to some vegetables and forage crops only. In addition to this, as of 1956, sugar beet seeds were produced and distributed under the responsibility of a semi-private company which was a joint enterprise between the D.G. of Sugar Factories and a foreign company.
2.4.1. Seed Supply in Practice
Prior to 1980, the most limiting factor in Turkey’s agriculture was a shortage of quality sowing seeds for many crops. The actual seed supply was extremely low when compared to the required seeds and it was yet extremely arduous if not impossible for farmers to obtain certified/quality seeds of available varieties. While the situation in some crops such as cotton and sugar beet were relatively satisfactory, farmers were always complaining of bad quality seeds even in wheat and barley. High value vegetable seeds, smuggled into Turkey from neighbouring countries, were sold on the black-market. Illegal and uncontrolled seed sales at times resulted frequently in undesirable consequences for the farmers.
A great portion of the seeds used by farmers were saved from the previous year’s crop.
According to some estimations made at that time, the coverage ratio of certified seed supply when compared to the seed requirement of the various crops were as follows: 1% for
vegetables, pulses and maize; 4% for forages; 5% for rice, 11% for sunflower (synthetic varieties), 20% for wheat and barley and 100% for cotton and sugar beet (synthetic variety) (ANONYMOUS, 1980, HARMANSAH, F., 1987). Yet more, the seed supply in general was unstable and unreliable in many of the cases and farmers had no idea of which seeds would be available for the next year’s crop (Mc Mullen, 1987, 196-198). The domestic seed production in general was far from meeting the needs of large and diversified crop agriculture and the seed import quotas which were allocated to no more than a few crops were significantly low.
Moreover, the restrictions on available varieties made even the seed importations extremely difficult.
2.4.2. Available Varieties
If wheat, cotton and sugar beet were excluded, there were only a limited number of improved
varieties available before 1980s in many of the crop species which had large acreages and
diverse growing conditions. For several decades, the public plant breeding and variety development efforts were mostly ineffectual in delivering adequate number of improved varieties to farmers. Nevertheless, the variety renewal rates in wheat, cotton and sugar beet in comparison with the other crops were relatively acceptable. The shortages of domestically produced certified seed and difficulties in seed importations in many crops compelled farmers to use local varieties and farm saved seeds for decades. It was almost a concession at that time that the country was not getting use of new plant varieties which were available in certain other countries.
Between 1963 and 1980, a total number of 274 plant varieties in 42 crop species were available in the country. Remarkably, a great fraction of these (approximately 85%) were belong to a few crop species such as wheat, sugar beet, tobacco, maize and cotton. By 1980, the total number of cultivars which were released in the whole range of the forage species was about 12 and there were only 2 varieties registered in sunflower (E. Kün 1988, 152-187). In some other crops -such as alfalfa, lettuce, cucumber, water melon, melon and squash- there was only one variety registered for each. The number of registered varieties was 2 in soybeans and carrot, 3 in peppers and eggplant and 4 in potatoes. Such that the inadequacy of released improved varieties especially in vegetables and forages compelled authorities to allow the official seed production and marketing of some unregistered varieties or even populations in these crops (ANONYMOUS, 1980). Though there were comparatively more registered varieties in some crops, the quality of the varieties available were not often satisfactory from the farmers’ point of view.
Before 1980, the hybrid seed use in both vegetables and field crops were virtually unknown in the country. Consequently, a great number of varieties which were included in the seed certification schemes were non-hybrid type. There were only two hybrid maize and cucumber varieties which were registered prior to 1980. On the other hand, the majority (93%) of the total released varieties then had been registered by the public research organizations and universities and private sector contribution to this total was only 7 percent.
2.5. Problem and Quests
By the 1970s, the seed supply problem frequently occupied the agenda at relevant ministerial meetings. Many were of the opinion that a seed industry model with a strong private
enterprise base would be effectual in overcoming the existing drawbacks. (Demir 1988, 34-45
TUNCER 1990, 2-27). In spite of the several attempts made until then, little progress was
made in overcoming this persistent “seed problem”. Different alternative project proposals to
that effect continued to be prepared until the early 80s. Finally the Ministry of Agriculture
prepared a new public seed production and distribution project which was not different from
the previous ones in almost every respect (Ölez 1985, 11-16). In a draft seed project prepared
by an international mission in 1980, recommendations were made for the establishment of a
new semi-private seed company which will work merely on maize, vegetables and forage
crops (ANONYMOUS, 1980). However, neither of these proposals had a chance of
implementation. After evaluation of a report prepared by an international consultation
company, the government made a series of strategic decisions both to ensure broader private
sector participation and take advantage of international seed technology and capital with the
purpose of increasing Turkey’s seed production (Gisselquist and Pray, 1999).
3. REFORMATION OF THE SEED SECTOR
3.1. Purpose:
The primary objective of the government then was to ensure that farmers could access to sufficient quantity of the high quality seeds at right time and place with reasonable price ( Doğan 2008, Demir 1988, 34-45).The government, in this respect, was cognizant of the two realities: that establishment of an effective seed supply and delivery system was absolutely necessary for further agricultural productivity increases and that it would not be possible to bring a solution to the lasting seed problem of the agriculture simply by way of betterments in the current public seed provision system which itself had many defects to work up and many complications to overcome.
Consequently, the government decided to follow a completely new path which would not only call for a series of new measures but also a political determination from the very beginning.
Thus in the mid 1980s, Turkey adopted a development strategy that viewed the private sector as the main engine of growth in seed sector and a series of economic, legislative and
institutional reforms were initiated (Gisselquist and Pray, 1999).
3.2. Strategy and Scope:
The main strategy pursued by the government then was to re-structure and transform the seed sector through private investments and help bring international capital, know-how and
technology to the country. Considering the natural and structural peculiarities of the Turkey’s agriculture, many thought that it would not be possible and realistic to have commercial seed provision expanded to the every major crop species, at least in the short run. Thus, the public seed supply system would continue to be operational for a while especially in winter cereals, pulses and in some forage crops. Therefore, priority in privatization was given to high margin crop species such as vegetables, maize, sunflower, potatoes and soybean.
Before 1980, the major seed suppliers of the country consisted of the State Farms (TIGEM), several public organizations/agencies, various agricultural cooperatives and also Turkish Sugar Factories. With the exception of TIGEM, all of these entities took part in seed supply systems as a minor activity. However, the government’s main strategy in privatization was not the property transfer of public entities to private seed enterprises. Quite the contrary, it was decided then to transform the D.G. of State Farms into a State Owned Enterprise (TIGEM) with an autonomous management. Though it was not apparent when then, this seemingly contradictory route followed by government, constituted over time a different aspect of the seed sector restructuring.
The privatization process of the seed sector in Turkey was principally carried into effect on two bases. These were regulatory reforms and the economic incentives and subsidies for the mostly starting seed companies. The former series of actions aimed at minimizing the obstructive and complicated provisions in the government regulations while the latter
attempted to make the seed sector more attractive from the viewpoint of private entrepreneurs and investments.
Under the seed regulations prevailing before 1980s; the fulfilments of variety introduction,
testing, registration and seed importation functions were extremely formidable for private
companies. Similarly, seed productions as well as marketing by private seed companies were
not free from difficulties and even the prices of commercially sold seeds were then fixed principally by government officers after consultation with the representatives of seed producers.
3.3. Regulatory Reforms:
Until recently, Turkey’s seed regulations -covering all aspects of the variety registration and release, seed certification, pricing, seed marketing control, imports and exports- took their authorization from the basic Seed Law dated 1963. While the wording of the law in essence provided sufficient authorization to the Ministry of Agriculture in order to facilitate the private seed operations; the regulations prepared and implemented over time were usually discouraged for private enterprises.
There exist many obstacles in front of the private companies especially for introduction, registration and release of new crop varieties. Therefore, the proposed regulatory reforms ought to encompass these areas and bring more favourable conditions for private company operations. So that the private seed enterprises could accomplish without difficulty and delay the development, transfer, registration and release of new crop varieties and seed
importations. The major policy changes and actions employed by the government for this purpose were as follows:
- Making the necessary changes in the existing variety registration procedure which was then a standard and obligatory practice for all crops,
- Adopting different registration-release criteria and procedures for different species, - Allowing private seed companies to carry out their own variety adaptation trials and to
import genetic and stock material for research and multiplication purposes,
- Liberalizing of seed prices and facilitating seed trade in general so that private companies can easily import and export seeds for sowing.
3.3.1. Easing the Variety Registration-Release System
Even though the numbers of available improved varieties for many crop species were not adequate for domestic agriculture, the prevalence of a merit based compulsory registration system for many crops of interest to the seed companies constituted indeed of an insuperable obstacle for variety transfer. The variety registration and release procedures were so lengthy and complicated that the introduction and release of new crop varieties were considerably difficult to achieve even for the public research institutes and universities.
Through a government decision in 1982, the all-embracing obligatory variety registration- release system was modified and the required time periods for variety trials as well as the numbers were reduced (Akar and Duman 1987, Karma, 1985, 631-639). Meantime, an alternative category of variety registration mechanism “production permits”, which was enabled through a ministerial directive based on the existing Seed Law, was put into effect in order to speed up variety registration processes.
The main objective of the variety registration reforms was to ensure that Turkey could benefit
from the advances made in the international plant breeding field. Thus private seed companies
were initially allowed to import seeds of foreign-bred varieties for testing on the land parcels
of the public research institutes (Gisselquist and Pray, 1999) with the purpose of identifying
the most promising ones. The second aim was to get the regular variety registration trials be
performed and completed in the shortest time possible. Thus the planned regulatory changes envisaged the technology transfer without avoidable delay so as to furnish better crop varieties to the local agriculture.
Following the reductions in duration of performance tests, the entry of foreign and private new varieties into the country were accelerated (Gisselquist and Pray, 1999). Several of newly established private companies started to introduce into the Country many number of private varieties especially hybrids which were bred in other countries and make them tested under various local growing conditions. During this introduction and testing processes some conceptual changes -with regard to the value of new genetics and possible contribution of private seed enterprises to the agriculture of the Country- were observed throughout the whole public research and extension system.
However, even under this new registration scheme it was difficult for private companies to introduce especially new vegetable varieties into the domestic market in a reasonable time.
Therefore, as a continuation of the modification attempts in the old variety registration system, the merit based variety release procedure for vegetables fell into disuse in 1991.
Accordingly, the private companies were allowed to transfer registered vegetable varieties from some other countries and submit the results of a single season officially confirmed DUS trials to a Committee of the officers for registration. After approval by the Committee, the seeds of that particular variety could be imported, produced and marketed provided that it is labelled as “Standard Seed” (Ministerial Instruction, 1991).
Similarly a Standard Seed labelling system for vegetables became an alternative to the long lasting regular vegetable seed certification. Upon this, the importations of standard seeds of vegetables from some other countries were allowed. However, the official seed certification procedures for local vegetable seed productions continued as an alternative procedure. The resulting rapid variety release mechanism and optional seed certification procedure in vegetables accelerated variety introduction and seed provision.
At the very beginning of the privatization process, while private companies were only allowed to have their variety evaluation trials carried out in research institutes, they were later
permitted to conduct or have conducted their preliminary and official registration trials in their own or third party facilities. Thus private companies could develop or transfer new crop varieties, carry out or have carried out variety evaluation and/or adaptation trials, have their varieties registered under their name and perform also maintenance breeding and produce source seeds (Anonymous 1987, 39-48).
3.3.2 Liberalization of Seed Prices and Trade
Since, the production and distribution of planting seeds were under the responsibility of
public entities for a long time, the Ministry of Agriculture fixed seed prices annually for
individual crops until the early 1980s. In order to ensure at that time that the seed sector was
integrated with the greater economy which was operating according to free market rules, a
decision was taken in December 1983 by the government so that the private and public seed
entities could fix the seed prices on their own. As a result of this resolution, the certified seed
produced and distributed in the country by the individual private companies would be priced
according to free market economy (Tuncer 1990, 2-27).
Another remarkable regulatory change in the seed sector was the easement of commercial seed importations by private enterprises. Until that time, certified seed importation was not a frequently used option in seed provision. Though limited by the number of varieties as well as seed quantities, it was almost a privilege for the seed related public agencies. Through a government decision made in 1984, the importation of such seeds, which could not be
produced domestically in sufficient quantity and quality, was permitted. This Resolution gave authorization to the Ministry of Agriculture for a final decision regarding to details of
importation i.e. species, varieties and the quantity. In granting of seed import licenses, the Resolution gave also priority to those agencies that were specialized in production and marketing of seeds as well as some food and feed companies, farmer organizations and cooperatives. (Akar and Duman, 1987; Tuncer 1990, 2-27).
3.4. Incentives, Exemptions and Subsidies
Following the regulatory changes, a series of economic/financial interventions made also by government -such as investment incentives, concessional loans, customs tariff immunities, tax exemptions and input subsidies- helped in creation and development of a young private seed industry which started almost from scratch. Though some of these economic supports were implemented for rather short periods of time, still some others have continued uninterruptedly or at intervals until present.
3.4.1. Incentives
Prior to 1980 there were only a total number of 3 private companies active in the Turkey’s seed sector. The demand for effective commercial seed in many crops was too low for new seed companies to enter into the seed market. According to the prevailing belief in the local business circles at that juncture, the profitability of seed business was low and it was a risky.
Because of this, government came to a decision for providing incentives for the seed
companies so that the regulatory reforms could bring the desired results. Thus the private seed enterprises were encouraged and supported by government through a series of means.
Yet it was not exclusively designed for the seed sector, by a Decree dated 1980, the foreign capital transfer was also encouraged for making direct and joint venture investments. This measure could be considered as the first incentive directed to foreign seed companies.
Another Resolution which passed in 1985 provided a concessional loan opportunity for all seed companies which would make investments in the seed production and processing areas (Akar and Duman, 1987). Within the scope of this Resolution, some 40 private seed
companies benefited in a period of time from the concessional loans on the condition that they had a government approved seed business development plan. The loans were given for both investment and operational purposes and beside the private seed companies were also allowed to use some general purpose government incentives which were granted to all agricultural investments.
3.4.2. Tax Exemptions
One more economic incentive made available for private companies within the scope of the
seed industry support policies was the elimination of the customs tariffs and levies which
were then applied to seed importations. Through a different Resolution which passed in 1988,
the Ministry of Agriculture was authorized to decide which crop seeds would be exempted
from the taxes and levies. Until recently, the planting seed of the many crop species were
included in the list of custom duty exempted goods. Currently, all planting seeds are included in the list of the tax privileged crops. On the other hand, minimum levels of value added taxes for several crop species constituted another type of seed sector support which continued a long time. The government through a very recent Resolution (2008) reduced the VAT rates of planting seeds in all field crops to 1% except the vegetables. The VAT level for vegetable seeds is currently 8%.
3.4.3. Subsidies:
Since 1986, Turkey has subsidized certified seed use in some field crops. One of the
expectations from these subsidies was that the introduction and dissemination of new varieties especially hybrids could be increased and certified seed usage could be expanded. The major crops which benefited from the seed subsidies were corn, sunflower, potatoes, cotton, canola, soybeans, forages, and recently wheat and barley. No subsidy payments were applied to the vegetable seeds and the crops and corresponding subsidy rates were decided on again each year. The first seed subsidies given for maize and sunflower from 1985 to 1994 were phased out over time and totally abandoned after a while (Gisselquist and Pray, 1999). Soybean, forages, cotton (delinted seed only) and potato are those crop species which received seed subsidies for a relatively longer period of time. The certified seed use subsidy payments in winter cereals is a very recent development.
4. POST-REFORM PERIOD
4.1. Progress in the Seed Sector
Significant developments have taken place in the seed sector ever since the start of
privatization process. Following the regulatory changes and other government interventions, the institutions, organizations, structure, products, trade and governance of the seed sector all underwent remarkable changes. In course of time, the increases were observed in the total number of crop species and varieties which were included in the seed programs. Similarly, the total quantity of seeds produced, supplied and marketed domestically as well as foreign seed trade rose. The new and better crop varieties were consistently introduced into the local agriculture and the variety renewal period in many crop species were considerably shortened.
The number of companies operating in the seed sector and the number of staff employed by them also increased. Private seed companies became dominant in the sector where the public entities prevailed almost completely prior to 1980.
The international relations intensified and recognition of the seed sector increased worldwide.
In addition to the direct investments made by multinationals, many foreign companies also
became involved in the Turkish seed sector through various types of partnerships. Most of all,
the development of a sizable domestic seed industry capacity and foreign seed trade made it
possible for many farmers to have frequently better varieties and higher quality seeds with
reasonable prices. This in turn resulted with an increased crop output for the Country and
additional farmers’ income. The new seed policies and new seeds also brought about new
legislations, regulations, institutions and organizations to the agriculture sector.
4.2. Changes in the Organization and Structure of the Industry 4.2.1. Market Size
Following the regulatory changes made in early 1980s, the size of the Turkish seed market expanded and its total commercial turnover increased considerably. The encouraging government seed policies in one hand and the increasing crop intensification and
commercialization of agriculture in some regions on the other contributed significantly to this enlargement. In many crops, especially in vegetables and certain field crops, a great number of farmers shifted permanently to high yielding hybrids or improved crop varieties and though not being familiar with the commercial seeds previously many of them acquired the habit of using purchased seed frequently. Turkey’s total annual turnover of commercial planting seeds is estimated to be around 350-400 million USD currently and it is gradually increasing. This total is almost divided evenly among the three groupings of crops; i.e. winter cereals,
vegetables and the other field crops.
4.2.2. The Structure of the Industry
The seed industry is not uniform with regard to type and size of its constituent elements.
There are various types of “licensed seed establishments” such as specialized fully private seed companies, a large public seed company (TIGEM), several food processing and canning firms, various types of agricultural cooperatives, the Turkish Sugar Company (seed
enterprise), the Turkish Grain Board (only poppy seed) and also a number of public research organizations which produce and distribute very limited amount of certified seeds in some particular crops.
The total number of registered enterprises/organizations engaged lately in seed provision and marketing is about 215. A large part of this total (186 in number) is composed of privately owned and operated seed firms which are usually active in one or more operations of the seed business such as seed production, processing, marketing, variety development and testing.
The emergence and development of private seed business in Turkey took place largely within the last two decades. The number of food processing firms, canneries and agricultural
cooperatives which are involved in certified seed supply is not more than a dozen and their contribution to the total supply is very limited. The agricultural cooperatives, the Public Sugar Company and the Turkish Grain Board make inputs, with a varying degree, to the seed provisions in only a few crop species.
The seed units of the farmers’ cooperatives work up to meet the certified class seed needs of their member and they are mainly engaged in the production and distribution of some specific crops such as wheat, potatoes and cotton to a smaller extent. Though they are many in
numbers, the contribution made by 16 public research entities to the certified class seed production is very small. While some public research organizations also produce and
distribute small amounts of certified seeds in particular crops, their main obligation is source seeds production in wheat, barley and also in some open pollinated vegetable species. The bulk of the total certified or labelled seed supply comes from the fully private companies and TIGEM which underwent noteworthy changes with regard to its organization and
management after the reforms.
Table 2. Structure of the Turkey’s Seed Industry (Source MARA)
Type of Seed Organization
Product Portfolio Total Number
Specialized Public Seed company (TIGEM)
Cereals, Forages 1
Specialized Private Seed
Companies All Crops 186
Food Processing and
Canneries Vegetables 3
Farmers’ Cooperatives Wheat, Cotton, Potates, 7 Public Sugar Factories
Company
Sugar Beet 1
Turkish Grain Board Poppy 1
Public Reserach Organizations
Barley, Wheat, Vegetables, Cotton
16
Total 215
4.2.3. Increase in Number of Private Seed Companies
Before 1980, the two of the existing three private seed companies operating in Turkey worked mainly on vegetables and the third one -being a government-foreign partnership- dealt largely with sugar beet seed production and distribution. After the reforms, both local entrepreneurs and foreign seed companies showed an increasing interest in the local seed sector. Such that in a couple of years following the regulatory changes of early 1980’s, several new private seed companies came into existence. By 1987 there were 9 new seed companies some of which were joint domestic-foreign ventures (Anonymous 1987, pp 39-48).
The total number of private seed enterprises since then has multiplied, despite the fact that some of them disappeared over time. The total number is still in increase and the figure of 3 in 1980 climbed up to 12 in 1984, 53 in 1992, 90 in 2000 and 186 in 2008. Though the number almost doubled during the last decade, the greater part of it is mostly small local enterprises which deal predominantly with the seed marketing and production operations only. Many of the foreign companies and specifically multinationals were established in the very early years of the privatization process. Yet a few new foreign companies also joined the seed industry later.
4.2.4. The Size, Capital Structure and Employment in Private Companies
The private seed companies vary greatly in size, capital structure, product portfolio and level
of vertical integration. A small fragment of these 186 private enterprises are the local
branches of multinational corporations. There are also a group of local-foreign partnerships of various types while the rest is mostly locally owned companies. If the 6 multi-national
corporations which operate currently in Turkey are excluded, the remaining private seed companies could be classified into three major groups as large, medium and small with regard to their size. Among these there are about a dozen of large companies, some 50 or so medium scale companies and the rest is an either small or very small enterprise even by local
standards.
Many of the smaller seed companies operate at a regional level and have a rather limited product portfolio. These companies usually work in marketing and/or production levels and focus mostly on vegetables, potatoes, forages, rice, maize and winter cereals. However, their aggregate market share within the total commercial seed turnover is rather insignificant.
While some companies produce and sell mainly the seeds of publicly-bred open pollinated varieties, usually vegetables and winter cereals, the others do marketing no more than in a few crop species and serve to rather narrow geographical areas.
According to an estimation made in 2003, while a quarter of the total companies in the country hires less than 5 persons, another one-fifth employs approximately 30-100 workers per enterprise (Bilici, 2003).The total number of permanent staff working in private seed companies is estimated to be around a few thousand. When compared with the pre-reform period, this is a significant development in employment opportunity for the agricultural graduates and professionals.
4.2.5. Vertical Integration
If the multinationals are not counted, there are only a few domestic companies which integrate several seed industry operations into their own company structure such as variety
development, seed production, processing and marketing. On the other hand, the number of enterprises which carries out seed production besides marketing is around 80. Many of these companies concentrated on vegetable seeds (Pezikoğlu et. al., 2005, 24-31).
Although many of the seed companies are involved in variety development and evaluation works yet most of them carry out only simple adaptation and performance trials for the promising finished varieties sourced from other countries through some sort of licensing agreements. The number of private companies which conduct their own variety development work is not more than 20 including the multinationals. Many of the multinationals obtain their candidate varieties directly from the sister company breeding programs abroad. In a parallel way, a significant number of domestic companies acquire their finished varieties from the foreign plant breeding companies too. Recently, some multinationals have set up local research stations and initiated special breeding programs in some crops such as sunflower and vegetables. Many of the private companies do not have enough financial means for allocating resources for research and development purposes. However, the number of firms which invested in local plant breeding and variety development works especially in vegetables increased recently (Velioğlu et. al., 2005, 5-15.).
A significant portion of the private seed companies and TIGEM have adequate physical
capacity for processing, packaging and storing of various crop seeds. Two out of every three
companies which work on vegetables process and package their seeds. Similarly there are
many seed conditioning facilities with a large capacity that work in agricultural seeds. Many
of these seed plants condition maize, sunflower, cotton (delinted) and sugar beet seeds.
Though they are small in capacity, the number of private wheat seed processing companies is also increasing. A fragment of these agricultural seed plants subcontract also seed processing of other companies.
There are only a few companies which specialize exclusively in seed production and a great majority of the private enterprises do their marketing through dealership. Multinationals and a few large domestic companies have their own marketing and sales departments. Among these firms some have wide-spread and robust marketing networks reaching effectively out to the dealers or distributors. A great majority of the medium to large local seed companies produce, process and markets seeds.
4.2.6. Product Portfolios
Private companies work almost on all vegetables and field crops –except pulses- grown in the country. Nearly half of the total number of private companies operates on vegetable seeds while more than 50 of these works only and solely with vegetables. The total number of companies working in wheat amounts to 46 and this figure is equal to 29 in barley, 35 in maize and 10 in rice. There are about a total of 120 enterprises which operate on all major cereals. On the other hand, the number of companies working on turf grasses and forages is around 25 and the totality of enterprises which are active in potato and sunflower seeds add up to fifteen each. There are about almost a total of 30 companies which exclusively produce and market maize, wheat, and cotton, rice and sugar beet seeds. The general tendency for wheat seed producing companies is to engage also in barley, rice, triticale and forage seeds and carry out marketing as well. There are some companies which have concurrent operations in maize, sunflower, vegetables and also forage crop seeds.
Private companies work mostly with hybrid varieties but some of them also have open- pollinated varieties of vegetables and winter cereals in their portfolio. While the larger companies preferably work with proprietary varieties, smaller companies usually rely on publicly released varieties. The product portfolio and product types which are preferred by private companies and TIGEM are rather different. Whereas TIGEM’s product portfolio is consisted of largely by winter cereals and some forage crops, private companies operate virtually in all the other crop species. The private companies work usually with hybrids as well as open-pollinated varieties, contrary to this TIGEM works mostly with open-pollinated varieties. Hybrid seed production and use is common in vegetables, maize, sunflower, sugar beets and also in alfalfa to a smaller extent. However, nearly 80-85 % of the vegetable seeds produced by private companies is the open-pollinated type. Production and marketing of hybrid vegetable seeds is almost exclusively carried out by the private companies (Pezikoğlu et. al., 2005, 24-31).
4.2.7. Market Share and Competition
In many crops, the Turkish seed market is highly fragmented. It is difficult to make estimates
with regard to the market shares of companies concerning various crops particularly of
vegetables because of non availability of the seed trade data. The multitudes of companies
working in vegetables encourage the competition. The multinationals as well as local firms
also offer presently hybrid vegetable varieties of which many have very similar plant
characteristics. Contrary to this, in some agricultural seeds, a small number of companies
have significant market shares.
The estimations made by using official seed production and distribution figures disclosed in annually prepared government seed programs indicate that the market concentration in maize is at the lowest level where the first four companies cover approximately 60% of the market share. Contrary to this, the very same number of companies controls respectively the entire market share (i,e 100%) in sugar beet, 85% in cotton, 95% in sunflower and 75% in rice. The situation is completely different in wheat in that a total number of 8 companies hold almost 93% of the market share. Being as the most significant player in the wheat seed, the parastatal controls almost 65% of the market (Annual Seed Program,2008).
4.2.8. Genetic Material and Source Seed Supply
Turkey is situated between the same parallels as some South European and North American countries. Thus production ecologies of several crops are similar between Turkey and some other countries which have well-developed seed industries. This allows transfer of technology exceedingly possible for the domestic companies. Therefore many of the local companies, following the regulatory reforms, established business partnerships with foreign plant breeding and seed firms.
Supply of “source seeds” from other countries is usually done through licensing agreements.
As far as a particular variety is concerned, a foreign partner would normally work only with a single domestic firm. Licensing agreements that cover original seeds are usually done on the basis of varieties and they are time-bound and exclusive. According to the business agreement made between the partners, the imported variety or commercial seed would be usually
marketed through the trademark of either the domestic or foreign partner or both.
Parental seed provision through imports is common in maize, potatoes, sunflower, sugar beet, potatoes and cotton. Among the local enterprises that carry out seed production, approximately one out of every four brings in source seeds from other countries. The number of enterprises which frequently import certified/commercial seeds for immediate retail marketing is bigger in number than the source seed importers.
There are a few companies in field crops which have their own exclusive breeding programs and maintain their own germplasm pools. Contrary to this, nearly 40% of the vegetable seed companies carry out their specific variety development work and use their own germplasm.
Some of the vegetable seed companies also make use of public genetic material (Pezikoğlu et., al; 2005, 24-31).
4.2.9. Horizontal Diversification
With the exception of multinationals, there are only a few companies in Turkey which have some activities in production and/or marketing of some other agricultural inputs as well.
However on the trading side of the seed business there are many small enterprises which are also active in supplying some other crop inputs. On the other hand, some vegetable seed companies own and operate plug nurseries. The number of such establishments is increasing rapidly. The young plant industry produces both regular seedlings and grafted ones which could be suitable for either open-field production or protected culture.
4.2.10. The Role of Private Companies in Seed Provision and Sale
Before 1980, the private sector seed production was mainly limited to some vegetables, forages
and partially sugar beet. Following the reforms, the private seed production displayed a
differential growth rate for the various crops. In some species, the private sector seed
production increased notably over time though it showed relatively little progress in the others.
During the post-reform period, a stable increase in private seed productions and seed
importations were observed in many crop species. Currently, the only product line for which private sector seed companies do show almost no interest in either production or trade aspects is food legumes. However, the rate of certified seed use in these crops is very low.
Table 3. Evolution of the relative contribution of private sector to the total domestic seed supply in some crops. (MARA).
Avg. of the
Years Wheat Barley Soya Maize Sun-
flower Potatoes Cotton Vege-
tables Forages
1985-1987 0 0 43 84 97 25 0 94 15
1988-1990 3 4 76 94 100 59 1 95 21
1991-1993 7 8 88 98 99 99 1 97 13
1994-1996 5 6 98 99 99 99 2 99 20
1997-1999 5 10 96 99 100 100 9 99 39
2000-2002 11 22 97 99 100 100 22 99 46
2003-2005 7 14 98 98 100 100 70 100 28
2006-2007 27 39 100 99 100 100 87 100 41
