GERMANY, POTSDAM See BELOW>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
First of all, let me welcome you very much indeed here in Potsdam, the former
residence of the Prussian kings and today's capital of the State of
Brandenburg. For
us, it is a great honour and pleasure to host this year's seminar of your
distinguished Association and I hope you will not regret having come here. I know
that you will be the victims of a great barage of speeches and lectures and that you
will hear many experts in their field. It is the privilege of Ministers to be general
and to be brief, so let me give you the big picture...
So, what are investment conditions like in the new L„nder? What are they like in
Brandenburg in specific?
Let us start with the downside of the "Build-up East" since 1990: After unification
we in east Germany have had to shoulder the structural changes west Germany has
undergone in a time span of 40 years. Intiatially, our industries had to lay off 80%
of their personnel. Agriculture was equally hard hit. The average unemployment
today is at 15-16%, in some parts higher. Adding to this figure the numbers of
early retirees, those in re-training schemes and public works projects - what we call
the "second labor market" - you easily reach 30-35% "under"employment.
The social burden is heavy but the people generally accept the necessary
restructuring and its implications. Positively speaking, the high rate of
unemployment means that there are quite a few skilled workers on the market.
At the same time, there has been a boom in small and medium-sized businesses,
creating more than 150,000 new jobs in the crafts, services, trades and industry in
our State alone. Also, we were able to attract large investors such as
Mercedes-Benz, BMW/Rolls-Royce, Heidelberger Printing Machines, the
British
company Readymix, the Canadian Horsham Group, the Belgian Cockerill
Sambre,
the Italian RIVA Group, the French Compagnie G‚neral des Eaux, BASF and
VEBA chemical industries and others.
The largest 120 investors alone - those investing more than 50 million DM
each
-have pledged to invest more than 24 DM billion. Of the 1,650 former
state-owned
companies more than 1,000 could be privatized - thereby safeguarding 280,000
jobs
and combining a pledge of over 31 billion DM investments.
Since 1993, we have had consistent growth of our gross domestic product. Last
year, the deflated figure was plus 6.6 % - albeit from a rather low base.
Much of this growth can be attributed to government intervention. On the one hand
this is good news, on the other hand this is bad news.
It is bad news, because investment grants, tax allowances and public infrastructure
development cost money. Even an economy as strong as the west German one is
serverely tested whithstanding the additional costs of having to restructure a
formerly bancrupt socialist country.
It is not such much the direct burden on company taxes or social security payments
which are beginning to have a dampening effect. It is more the extent of the public
debt which the federal government and the states have had to incur which now
weighs heavily on the economy. Public debt means less leeway for incentives, means
slower and fewer infrastructure projects and ultimately means higher taxes and fees
for everyone.
In a way, this is the state of things we have reached right now.
The good news about state intervention during the last 5 and-a-half years of
economic build-up in the east is that it, quite simply, is a success story in
terms of
turning around a bancrupt society and giving almost everyone the chance to
improve his or her economic lot - not to speak of personal freedom and
political
democracy.
In brief, while Hamlet said there's something rotten in the state of Denmark, I
assure you, not all's bad in the state of Brandenburg.
Ladies, and Gentleman,
Why then should anyone invest in eastern Germany? Let me give you five reasons:
1.In adopting the well proven West-German legal and economic framework,
eastern Germany has a stable political, social and legal environment. The
integration into the European Union from day one lent additional stability
and economic opportunities.
2.The new German l„nder's infrastructure is among the most modern in all of
Europe. In Brandenburg, for instance, we are going to build a new
International airport and we will soon be connected to the great port of
Hamburg via the superfast magnetic glider "Transrapid".
3.Despite the need for public debt reduction, federal and state grants and
other
financial incentives for private investments are still higher than anywhere
else in Europe. Adding all up, any foreign or domestic investor may receive
almost 50% of required capital from the state.
4.Firms in eastern Germany are used to improvising and they show a great
capacity for flexibility and inventiveness. The work-ethic is perhaps
old-fashioned, but that means: it's very strong. I should also mention that
industrial relations are governed by a pragmatism and a flexibility which can
hardly be found anywhere else in Germany.
5.Eastern Germany has a 40-years' history of dealing and trading with central-
and eastern Europe. Brandenburg, for instance, can be an ideal starting point
and a safe haven from which to venture into Poland.
Let me add another point - something which does not show up in corporate balance
sheets but which contributes to the happiness of your employees and therefore
ultimately translates into better business figures: the socalled "soft locational
factors":
In Brandenburg, more than 3,000 lakes, hundreds of old manor-houses, churches
and fine buildings as well as extensive nature reserves, teeming with wild-life
contribute to an outstanding environment for life as well as work. Amongst the
many jewels are
the city of Potsdam with its palaces and park at Sanssouci,
Prince Pckler's pyramide and manor in the Park of Branitz near Cottbus,
Germany's northernmost baroque monastery in Neuzelle
and the birdwatchers' and huntsmen's paradise of the Schorfheide.
The sportsman's needs are well catered for in the many new golf- courses and
sports facilities around Berlin - such as the spa of Bad Saarow on Lake Scharmtzel
and the race-tracks at Hoppegarten. I really do hope you have a chance of visting a
few of these sights. You are in for quite a few positive surprises!
Which business sectors promise to be a good return on investment in the New
L„nder?
For me to say this, is, of course, a claim to wisdom which no government
representative should be courageous enough to muster. How on earth should
government know, which technologies to invent, which consumer durables to
develop and which returns to be expected from a foreign trade venture?
And yet, we do our best to at least accompany the companies' decisions and to find
a basis for public grants as well as public infrastructure development. Knowing
what the future needs is also a big part of education policies, since human resource
development is our best insurance for upcoming challenges.
So the State needs to at least get a good guess at what is a promising venture and
what not.
In Brandenburg, we have, for instance, been working on a technology concept
for
more than a year and in so doing have tried to harness the best expertise and
knowledge available to us. An analysis of the state's strengths, weaknesses, options
and threats has found out that we should be concentrating on six different fields of
knowledge based developments:
microtechnology
biotechnology
new material technology
software development
production technology
and management know-how.
We have then clarified that these rather general technology fields can be applied in
specific sectors which exits in our state, and which look to have a brigth future,
among them
the media and information technologies
new methods and techniques for the construction industry
traffic technology for railways, aircraft and logistics or
food technology for the growing food processing industry in the state.
We always have to start from where we are. Therefore it hardly makes sense to
support technologies and industries which do not have a stake in the area. Of
course, pure science needs to have leeway in all directions and some technologies
can be exported without needing to be applied at home.
But what we need most is to modernize the existing industry and to enlarge the
industrial base in general. This makes sense in yet another way: anyone investing in
one of the fields just mentioned can be almost sure to be able to recruit qualified
personnel in the area.
We only have one example in which a very large company invested in Brandenburg
- a green field development - and in which this company had to bring along a large
part of their expert staff. I am refering to BMW/Rolls-Royce with their new air
engine plant at Dahlewitz, employing almost 1,000 - after only 3 years in existence.
Most others - whether in optics, electronics, construction, steel- making, plastics or
pharmaceuticals - were able to choose from a well- qualified labour pool.
I think, in clarifying where our options are, we have so far fared rather well. Let
me stress, however, that all our concepts, working groups and market observations
are not governed by the illusion of perfect planning capabilities on the side of the
state. The economy at large cannot be planned in advance. Thus, we are always
open for new suggestions.
Ladies and Gentleman,
I have promised to give you the big picture and I probably delved far too much into
specifics. Let me therefore finish by a quick look at what I consider to be the major
challenges lying ahead for the new States and, indeed, for Germany.
Despite coming a long way since 1990, despite almost complete privatisation, and
despite the enormous transfers of funds from west to east - approximately 800
billion DM in five and a half-years - ... despite all these, we are still just about half
way towards recovery.
You can easily calculate what it takes us to reach the per capita GNP of west
Germany: if we had growth rates of 7-8% each year and west Germany of about
2%, we would still need another ten to twelve years to be on a par. At present, east
Germans still only produce about 55% of what they consume. With a population
quota of 19% of Germany's total we export only 3% of all German exports.
There are three alternatives:
1.Western Germany goes on to support eastern Germany's development with
unmitigated fervour.
The consequence might be that the new L„nder soon reach a position in
which a more or less self-propelling growth is generated. The burden on
taxpayers and on the public debt will be hefty, though, and might contribute
to making Germany's economy on the whole less competitive - at least in the
short run.
2.West Germany cuts down its subsidies and other measures for east Germany
to the socalled "normal level" - namely that level of state intervention the old
states in the west are used to.
The consequence might be that Germany is able to fulfill the Maastricht
criteria for entry into the European Monetary Union, but that large parts of
the new L„nder become pockets of poverty, that especially the countryside
will depopulate and that radical parties gain the ascendency. The federal
government might have to face social costs which would have been better
spent on investing rather than fixing. And
3.the European and world economy picks up again, the DM is going to be
devalued, the Federal government saves on consumptive spending, labour
laws are made more flexible and regulations concerning innovations and
starting-up companies more ameanable.
The result would be some short-term social hardships and, possibly, some
public rows about the dangers of inflation and Manchester capitalism but also
a take-off for business and employment.
You may guess which of the alternatives I tend to adhere to. Correct: none of them
in total, but a mixture of all of them:
we need to save, but save at the right spots;
we need to devalue the DM but watch for mid-term inflationary effects;
we need to change labour laws but change not against but with the unions;
and
we need to continue a high level of public support for eastern Germany's
recovery but continue with a higher degree of efficiency and flexibility.
We Germans are a curious lot: we are a people who like "yes, but..." sentences. We
know of our strengths but we also want to incessantly improve.
Investment opportunities in east Germany are good and we are working on
making
them even better.
thanks again Rick Jamison
rocketeer1 |
