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Business

Foreign Investment: Is the Glass Half Full or Half Empty?

The slump in the global economy has led to a drastic reduction in foreign investment in Germany.

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Automobile giants Ford and General Motors are still among the most important foreign investors in Germany.

Hilmar Kopper was the bearer of bad news this week. You might also say it was good news, however, depending on your perspective.

Hilmar Kopper is in charge of promoting foreign investment in Germany. The figures he's just released show that foreign companies invested significantly less in Germany during the first nine months of 2001 than in the same period of 2000.

But compare the 2001 figures to the average amount for the 1990s, and Kopper's news all of a sudden doesn't look bad at all.

  • 1990s 26 billion euro (avg.)
  • 2000 218 billion euro
  • 2001 43 billion euro

    During the first nine months of 2001, foreign investment totaled 43 billion euro ($ 38 billion).

    That's almost twice as much as foreign companies invested in Germany during the years 1990 to 1999, when the average sum was 26 billion euro ($ 23 billion).

    But if you compare the 2001 data to the figures for 2000, the drop in investment is striking: it's down to a fifth.

    Promoting foreign investment

    In 1998, the German government appointed Kopper, the former chairman of Deutsche Bank, to promote foreign investment in Germany. His job is to keep tabs on Germany’s strengths and weaknesses as a business location.

    There are twenty thousand foreign companies operating in Germany, accounting for some two million jobs. So Kopper's success in attracting foreign investors is vital for the economy.

    Even though economic growth has slowed down considerably in Germany, the country is still the world's third largest economy, accounting for nearly one fourth of economic output in the European Union.

    And with a population of over 82 million consumers and high levels of domestic investment spending, the German market remains an important target destination for foreign products and services.

    "When your firm is ready to set-up operations in Germany, it should contact my office, where an experienced staff can accommodate all questions," Kopper told DW-TV in an interview.

    More inquiries in 2001

    Despite the economic slump in Germany, the number of inquiries reaching Kopper's office has increased. Half of all inquiries have come from within Europe, mainly from Britain, the Netherlands and France. A quarter were from the United States, 18 percent from Asia.

    "We have an interesting geographic position in Europe, exactly in the middle," said Kopper. "We are the cornerstone of the new eastern Europe, which will one day belong to the EU. There are some excellent advantages such as good infrastructure, and intelligent, willing and productive people."

    Increasing investment in 2002

    Still, many foreign investors are put off by the over-regulation of the German labor market. High taxes and wage costs are also a deterrent for some foreign companies.

    Kopper expects foreign investment to increase in 2002. He thinks the thing that will spur investment is the government's tax reform, which brought lower corporate tax and allows corporations to divest shareholdings tax-free.

    "We need integration with international developments," said Kopper. "And in addition, inward investment is a pat on the back for us. It's a sign that this country, this location, Germany, is a good location. Otherwise foreigners wouldn't come here."

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