Investors prefer new EU states to Germany

16th March 2005, Comments 0 comments

16 March 2005, BERLIN - The high cost of German labour, red tape and sluggish domestic growth means that companies are sidestepping Europe's biggest economy and expanding their investments in the new European Union member states in Central and Eastern Europe.

16 March 2005

BERLIN - The high cost of German labour, red tape and sluggish domestic growth means that companies are sidestepping Europe's biggest economy and expanding their investments in the new European Union member states in Central and Eastern Europe.

While Germany's Social Democrat-led government is putting the finishing touches on a new package of measures aimed at underpinning growth and boosting jobs in the country, business surveys point to both foreign and German companies preferring to expand their investments among the EU's newcomers rather than Germany.

A survey released this week by the nation's Chamber of Industry and Commerce (DIHK) showed German companies gearing up to make record foreign investments and in particular to try to cash in on Central Europe's low tax regimes as well as the region's cheaper and highly skilled labour force.

The survey said that 42 percent of the 7,500 companies surveyed planned to increase their overseas investment this year, largely in Central and Eastern Europe.

Of the companies surveyed, 46 percent said they planned more investment this year in the EU newcomer states. China came in second with 41 percent.

This followed a survey of 70 big US companies active in Germany which found that the American firms prefer to set up factories in Poland, the Czech Republic or Slovakia instead of Germany.

Most said that labour costs were lower to the east and there was less red tape to deal with. Fred Irwin, president of the American Chamber of Commerce in Germany which co-sponsored the study, said the former communist nations had a can-do, optimistic attitude.

"We had that in Germany too in the 1950s and 1960s," he said. "But we've lost it."

The study, conducted with Boston Consulting Group (BCG), found 29 percent of surveyed US companies planned to reduce employment this year at their German units.

The companies said Germany was the ideal location for sales, marketing and research and development operations while Britain was the ideal location for European administrative headquarters.

BCG's chief executive for Germany, Dieter Heuskel, said US companies were generally satisfied with their German presences, with 58 percent of the companies able to increase sales last year.

DPA

Subject: German news

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