invest in eastern Germany?

Monday 22 June, 2009

The German American Chamber of Commerce of the Midwest hosted this  event How Far East? Eastern Germany – The No. 1 Location for US Investment Success Links to the presentations that were given should be there-consult them for the content of the program.

Peter Alltschekow of Germany Trade & Invest informed us that the US is the biggest investor in both green- & brownfield investments in eastern Germany, which has grown to a GDP of 400B Euros in 2008, which would make it the 7th largest economy in the European Union.  Here are 10 reasons to invest in eastern Germany:

  1. it’s part of the biggest market in Europe
  2. they are champion exporters
  3. productivity is consistently high
  4. workforce is well-trained
  5. ranked #2 in innovation
  6. infrastructure is well-developed
  7. incentives contribute to 50% of costs
  8. tax reform will help
  9. stability
  10. quality of life


While Despatch has only 270 employees, they’ve generated significant revenues by work with partners who employ 1500.  Despatch doesn’t like nanotech because it doesn’t generate any heat.  There are differences in skill sets of employees & government support between Russia & eastern Europe.

To resolve past differences between eastern & western Germany:

  • the levels of education are the same
  • there are now former westerners living in the east
  • wages are still 10-15% less in eastern Germany
  • language skills differ-the easterners speak better Russian
  • differences between north & south are as large/small as between east & west
  • there is still a small hardcore group of opposition to reunification

Nordex is looking for North American partners & suppliers because  transportation costs for components in this industry as so high, but they must be able to work in the metric system like the rest of the world.

I actually went to interview with Price Waterhouse (they hadn’t merged with Coopers & Lybrand yet) for a position to work with the Treuhandanstalt, the agency responsible for privatizing the former communist eastern Germany.  It didn’t work out due to transportation snafus.  I sometimes wonder what would have happened if…

I also went to Rostock a year or 2 after the wall fell to exhibit in a boating/marine show for a few clients.  At the time, the city, like many others, was still a “schaufenster”-show window, in other words, the shops downtown all looked good, but when you peeked behind the facades, all was not as beautiful as it seemed.  I’m sure it’s much improved now.

I think eastern Germany is still probably a pretty good place to base European operations.  You get many of the benefits of working in ultra-efficient Germany, all at a discount.  There are cheaper places to go farther east, but you lose the German advantage.  I would bet there are still a few differences between working in the east vs. the west, but again, you get much of the same @ 10-15% less.  That’s a pretty good deal.


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