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Business

German Outsourcers Head to New EU States, China

Nokia is not alone: One in five large German firms is moving abroad. Most of them are headed to low-cost areas in eastern Europe or China, according to a new study.

Call center

Labor is particularly expensive in Germany

Eighteen percent of German companies with more than 100 workers have relocated part of their activities to foreign countries between 2001 and 2006 or planned to do so in the near future, according to a study from the German Statistics Office released Thursday, Feb. 7.

Accounting, call centers and production were departments commonly shifted outside of Germany.

Some 60 percent of those firms had chosen one of the 12 eastern European countries that have recently joined the European Union. Thirty-six percent had moved to China, while another 30 percent said they had transferred to other EU countries. Some of the 20,000 companies that participated in the study named more than one relocation destination.

In a highly publicized move, Finnish mobile phone maker Nokia announced last month that it would close a plant in western Germany by mid-2008. The world's largest mobile phone manufacturer said it would move much of the plant's production to a new factory in Romania, one of the EU's newest members. While the move is expected to cost over 2,300 jobs in Bochum, most other companies don't make such deep slashes.

Going abroad boosts business at home

Sign in Jucu, Romania

Nokia is building a factory in central Romania

Outsourcing led to the loss of 188,000 jobs in Germany between 2001 and 2006, according to the study, but the same companies who shifted positions abroad also created 105,000 jobs in Germany.

The high-tech sector has been most affected by outsourcing, with one third of high-tech companies in Germany reportedly relocating parts of their business abroad. The number was lower (19 percent) in the service sector, which includes the software development and consulting branches.

Outsourcing proved to be a positive endeavor for most of the firms in the study. Three quarters said it made them more competitive. Lower labor costs and better access to new markets were also mentioned as advantages.

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