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INVEST IN GERMANY NEWSLETTER
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climate news, investor success stories and sector reports.
Source: Invest in Germany
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Invest inGermany August 2004 Volume 1/1
magazine
Major Investment Decisions

General Electric, AMD, Dow
Spotlight
American Investors
in Germany
Why do Chinese
Companies
Invest in Germany?
Sector Reports
Biotech
ICT
Welcome to Germany 3
CO N T E N T S
I NTERVI EW Dow Chemical Expands Operations in

“Germany has a wide range of strengths” Eastern Germany
Interview with the three commissioners The leading science and technology
for foreign investment in Germany . . . . . . . . .3 company is among the“Top 50 Best-
Employers” of Germany . . . . . . . . . . . . . . . . . . .15
F O R E I G N D I R E C T I N V E STM E N T
Foreign Direct Investment Trends S P OT L I G H T
Germany: Stability in a sea of change . . . . . .4 U.S. Companies Taking off
American investors like Germany . . . . . . . . . .12
W H AT G E R M A N P O L I T I C S D O E S
Reforming the Domestic Economy Why Do Chinese Companies Invest
8 Italian Investor A compact survey of the German in Germany?
government’s “Agenda 2010” program . . . . . .6 Germany is the new gateway to Europe
for Chinese businesses . . . . . . . . . . . . . . . . . . . .16
The Innovation Initiative
One of the major initiatives of the Bubbling German Beer Market
“Agenda 2010” . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Foreign breweries buy major German
competitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
S U CC E S S STO RY
The Right Chemistry for Italian Investor S E C TO R R E P O RT
The Italian pharmaceuticals group Menarini Growth for the Biotech Sector
has been succesful in Berlin for 12 years . . . .8 Germany’s pipeline is full of promising
biotech products . . . . . . . . . . . . . . . . . . . . . . . . .20
M A J O R I N V E STM E N T D E C I S I O N S
18 German Beer Market Choosing Germany for R&D Good News in the German ICT-Market
General Electric opened its Global The market has not reached its full
Research Center Europe in Bavaria . . . . . . . .10 potential and there is still considerable
room to expand . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Putting New Ideas to Work
Thomas P. Limberger, CEO & national PIONEERS
executive of General Electric Germany “A no brainer and risk-free deal “
about Germany as a research location . . . . . .11 US Investor Haim Saban took over the
biggest private German broadcasting
AMD Invests in Europe’s “Silicon Valley” group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
The world`s second largest chipmaker
Advanced Micro Devices (AMD) continues EQUITY MARKETS
investments in Saxony . . . . . . . . . . . . . . . . . . . .14 Rebounding Germany
22 Biotech Sector Trends in private equity investment . . . . . . .25
On the cover: Chancellor Schröder with the Federal Minister of Economics and Labor on the 4th of July 2003 in the chancellor’s office with the former and new
commissioners for foreign investment in Germany. From the left: Wolfgang Clement, federal minister of economics and labor; Dr. Jürgen Weber, commissioner for
foreign investment in Germany; German Chancellor Gerhard Schröder; Hilmar Kopper, former commissioner for foreign investment in Germany (in office 1998–2003);
Dr. Klaus Mangold, commissioner for foreign investment in Germany; Dr. Heinrich v. Pierer, commissioner for foreign investment in Germany.
M A ST H E A D
Publisher: Writers: Christopher Cordy, Clive Freeman, No reprints may be made without the prior consent of the
editors. They reserve the right to publish or shorten readers’
Invest in Germany GmbH Terry Martin, Ed Meza, Ed Ward, Rhea Wessel
letters. The publication is based on information accessible to
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Phone: +49 30 206 570 Design and production: they assume no liability for the accuracy of such information.
The articles published under names do not necessarily reflect
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the opinion of the editors.
E-Mail: office@fdin.de Hansaring 55, D-50670 Köln
Internet: www.invest-in-germany.com Art directors: Bodo Brandes, Michael Kemmerling
Managing Directors: Dr. Urda Martens-Jeebe, Art design: Christian Bernauer
Gerhart Maier Cover photo: Bundespressearchiv
Editor: Eva Forinyak Litho: Berger Grafikpartner, Cologne
Consultant Editor: Kevin Cote Print: Sieprath Druckservice, Aachen
2 Invest in Germany magazine August 2004

I NTERVI EW
Dr. Klaus Mangold Dr. Heinrich v. Pierer Dr. Jürgen Weber
“Germany has a wide range of strengths”

Last July German Chancellor Gerhard Schröder appointed three tors can benefit from an efficient and close-
knit infrastructure stretching from Flensburg
new commissioners for foreign investment in Germany: Dr. Klaus
in the north to Constance in the south. But
Mangold, executive advisor to the Chairman of DaimlerChrysler for our greatest advantage is our people. I con-
Central and Eastern Europe and Central Asia; Dr. Heinrich v. Pierer, stantly hear German workers praised for
their dependability, their discipline and their
CEO of Siemens; and Dr. Jürgen Weber, Chairman of the Supervisory
efficiency. German specialists have an out-
Board of the Lufthansa AG. Invest in Germany Magazine asked them standing reputation. Our dual vocational train-
about their motivations, experiences and plans. ing system is a model for the entire world.
And we have access to excellent research
institutes, many of which work closely with
Why did you volunteer to be Commissioner and partners all over the globe. Business ties business. This is one reason why Germany
for Foreign Investment? are particularly important for Germany who- has a higher concentration of innovative
Photos: Berlin-Chemie, Gesellschaft für Öffentlichkeitsarbeit der Deutschen Brauwirtschaft e.V, Invest in Germany
se economy is strongly export oriented. I’m companies than any other European coun-
Dr. Mangold: Germany is a better business proud to assist in deepening these connec- try. We definitely have key advantages that
location than many people think. Although tions. we can capitalize on. We just have to focus
some criticism is justified, we in Germany our efforts to exploit and expand them.
tend to see ourselves too negatively. What do you think are Germany’s most Dr.Weber: Market, people and infrastructure is
Through my voluntary commitment I hope important advantages for foreign investors? a favorite threesome that US investors often
to assist the government and the country in cite. And they’re right. Germany is at the heart
searching for investors who will help Dr. Mangold: Among the important ones: a of the enlarged European Union. Twenty-two
Germany create attractive jobs, cultivate high level of education in all sectors; close percent of the total EU population live here,
markets and do good business. cooperation between universities and and generate 24 percent of Europe's total GDP.
Dr. v. Pierer: My work focuses on Asia. The industry, which facilitates rapid innovation; Frankfurt and Munich are two of the conti-
continent is developing at an incredible pace excellent location in proximity to the new nent’s most important air hubs with travel
and is one of the fastest growing economic members of the EU; good infrastructure times of 60 to 90 minutes to all major indus-
regions in the world. I want to help ensure with top international standards. trial areas in a single market of 25 nations. The
that cooperation between Germany and Asia Dr. v. Pierer: Germany has a wide range of road and rail network is dense and fast. But
is successful. For this reason, I have served strengths. When I’m outside the country, I our biggest asset is skilled people. The Ger-
for over ten years as President of the Ger- am often reminded that stable political and man workforce is well trained, disciplined and
man-Asia Pacific Business Association. My economic conditions cannot be taken for highly flexible. So, these are strong reasons
work for Invest in Germany is a good fit. granted everywhere. Germany offers maxi- that investors should and do find attractive.
Dr. Weber: Having served the airline industry mum legal security, reliability and transpa-
for over 36 years I know how important it is rency. These are the basic prerequisites for
for a country to be connected with markets entrepreneurial success. In addition, inves- continued on page 26
Invest in Germany magazine August 2004 3

F O R E I G N D I R E C T I N V E STM E N T
Foreign Direct Investment

Trends in Germany
Foreign Direct Investment (FDI) in Germany largely mirrors the
ebb and flow of the global economy.
W hen global business confidence wea-

kens – as it did in 2003 – investment
drops. When optimism rises, so does FDI.
competitive world of international business,
few things remain equal. Indeed, the German
central bank, the Bundesbank, has docu-
ny is being sustained by long-term funda-
mentals pertaining to location, infrastructure,
market access and labor productivity.
That pattern is consistent with Germany’s mented considerable fluctuation in FDI flows Perhaps the best-informed observer of
status as a mature, benchmark economy – to Germany over the past few years. But that foreign investment flows to Germany in
the world’s third largest and second only fluctuation says more about the dynamic recent years is Hilmar Kopper. Appointed by
to the United States in terms of trading nature of global markets than it does about the government in 1998 as Germany’s very
volume. Germany itself; the factors that make Ger- first “Foreign Investment Commissioner,”
All things being equal, investment pat- many attractive to foreign investors are stri- Kopper traveled the globe talking to current
terns repeat themselves. But in the hyper- kingly constant. Investor interest in Germa- and potential investors from the whole
industrial spectrum. It was in Kopper’s first
year as commissioner that FDI flows to Ger-
Foreign Direct Investment in Germany 1991–2003 in E billion many really began to gain momentum,
doubling the previous year’s volume to reach
215,20* an unprecedented level of E22.2 billion.
* incl. Vodafone-Mannesmann-Takeover
52,63 The factors that make Germany
attractive to foreign investors
are strikingly constant
38,26 Kopper notes that throughout the first half

of the 90s foreign investment in Germany
was relatively modest. “Back then,” he obser-
ves, “investors were thinking about their
22,19 23,62 home markets before they would consider
expansion.” In 1993 net FDI inflows into
Germany amounted to just E0.3 billion. The
10,61 11,40 year before that the figure was actually in
8,61
5,78 4,94 negative territory. (German investors were
3,92
apparently more outgoing.) But radical chan-
1992 0,30
ge was on the way.
1991 -1,63 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Driven by rapid technological progress,
Source: Deutsche Bundesbank
investors began pouring billions into foreign
markets in the mid-1990s, giving expression

put it in their March report: “Interest in cross-
Countries with the Largest Stock of Direct Investment in Germany 2002 border commitments diminished sharply.”
Market Volume: E 301 bn According to the Bundesbank, most of
the foreign investment that entered Germa-
ny in 2003 came from the US and France.
Others E 48,3 bn USA E 56,2 bn That’s not surprising, given that the two are
among Germany’s most important trading
partners. The year before it was the Nether-
Japan E 9,9 bn lands (another of Germany’s big commerci-
Spain E 10,9 bn al partners) that topped the list of countries
investing in Germany. Before that Belgium
headed the list, preceded in 2002 by Luxem-
Switzerland E 20,3bn Netherlands E 54,2 bn bourg. France was the big spender in 1999.
Of course in this age of transnational
corporations a company’s legal address isn’t
United Kingdom E 23,3 bn
always an accurate indication of an investo-
r’s national identity. The British telecommu-
Luxembourg E 49,1 bn
nications giant Vodafone, for example, exe-
France E 28,8bn
cuted its takeover of Mannesmann via
Source: Deutsche Bundesbank Luxembourg. It’s safe to say, however, that
American, French and Dutch companies are
among the most avid investors in Germany.
to the phenomenon we now call globaliza- what happened in the following year. In Asian investors are also gaining prominen-
tion. By 1997 the amount of FDI streaming 2002 foreign investment in Germany shot up ce, especially the Chinese.
into Germany broke the 10 billion barrier for by more than 60 percent to E38.3 billion.
the first time. That made Germany the envy of its econo-
mic rivals, including the US. For the first time Terry Martin
That made Germany the envy of ever, Germany attracted more foreign
its economic rivals investment than the United States of Ameri-
ca. Referring to global appeal of German
Investment volume would continue leaping firms in the eyes of foreign investors, Focus-
forward in staggeringly huge amounts over Money magazine wrote a feature article
the next three years. Between 1996 and 1999 about them titled “Beautiful Brides.” Largest Foreign Investors in Germany
the figure more than doubled each year. Germany’s FDI achievement in 2002 is Balances 2003 in E bn
Then in 2000, inflated by skyrocketing tech particularly impressive considering what was
stocks, Germany’s inward FDI hit the stra- happening with foreign investment in the France 10,2
tospheric altitude of E215 billion. (Vodafo- rest of the world. Investment flows into the
ne’s takeover of Mannesmann accounted for United States, for example, declined by near- Bahamas 7,2
the lion’s share of that.) Needless to say, this ly 80 percent that year. Britain saw a 60 per-
momentum could not be sustained. cent decline to $25 billion during the same Netherlands 7,2
The bursting of the new economy bub- period. All together, FDI fell in 108 countries.
ble brought foreign investment down to Ranked fourth in Deutsche Bank’s list of USA 4,8
earth. Yet, remarkably, Germany survived most attractive investment locations overall,
the crash with little more than a few bruises. Germany bucked the worldwide trend in a Switzerland 4,03
And that says a lot about Germany’s funda- big way.
mental strengths. In the year 2001 Germany Unfortunately, that enthusiasm didn’t Belgium 3,2
posted a very respectable FDI figure of E23.6 carry over into 2003. Last year net FDI flows
billion, its third best result ever. into Germany dropped back to E11.4 billion. Source: Deutsche Bundesbank
Even more remarkable, however, is As economists at Germany’s Bundesbank

W H AT G E R M A N P O L I T I C S D O E S
Inside the German Cabinet: (from left to right) Hans Eichel-Federal Minister of Finance; Wolfgang Clement – Federal Minister of Economics and Labour; Brigitte Zypries – Federal
Minister of Justice; Edelgard Bulmahn – Federal Minister of Education and Research; Heidemarie Wieczorek-Zeul – Federal Minister for Economic Cooperation and Development.
Reforming the Domestic Economy

Germany recently passed a series of new laws to jump-start its will be freed from tax on a gradual basis.
Furthermore, the government has allowed
economy. The reform process – called “Agenda 2010” – was the the level of pension contributions to the
consequence of the country’s critical look at itself in the face of state-funded scheme to be held steady at
increasing global competition. 19.5 percent of gross income for 2004 in
order to stabilize non-wage labor costs.
A genda 2010 aims at maintaining Ger-

many’s position as an attractive location
for investment and is designed to help Ger-
search for regular employment, and they mer-
ge the systems of unemployment assistance
and welfare assistance. Special grants have
Tax Reform: Germany is the world’s lead-
ing exporter, but domestic demand is lag-
ging. To stimulate the domestic market, the
many stay competitive. It contains funda- been made available for unemployed persons government has lowered taxes for citizens
mental structural reforms to boost employ- interested in starting their own business. and business alike to the tune of E15 bil-
ment and economic growth. Labor market reforms also include the lion.
The reform process is geared to remo- comprehensive overhaul of the Federal Starting in January 2005, further tax cuts
ving barriers to investment, reducing bu- Employment Agency, which is based in of E6.5 billion will enter into force. The
reaucracy and modernizing labor laws and Nuremberg and was formerly called the main beneficiaries of the tax relief are
local employment agencies. Investing in Federal Employment Office. The agency is employees, families with low and average
education, research and technology is also already transforming itself into a modern incomes, and small and medium-sized
part of the Agenda 2010 scheme. Some of service provider designed to assist job see- businesses.
the new laws went into effect at the outset kers in finding work and help businesses in
of the years 2003 and 2004; others will be finding suitable staff. It operates its own Moving Forward: The government is con-
phased in gradually in the further course of Internet job sites and helps retrain workers fident that Agenda 2010 has placed the coun-
this year. in emerging fields. try on the road to reform. This path will
The following is an outline of the three return Germany to leadership in sectors such
major areas of reform: Pension Reform: Like many European as research, science and technology. Struc-
countries, Germany is experiencing a declin- tural reforms will foster growth and employ-
Labor Market Reform: The key element ing birth rate and increasing life span which ment. “It is now a question of whether
of the labor market reforms are the so-call- threatens its pension system. To meet this we will be able to utilize the opportunities
ed Hartz-Laws, which open the door to new challenge, the country has passed several offered by this renewal,” in the words of
Photos: Bundespressearchiv
employment opportunities and seek to laws to promote private pension schemes Wolfgang Clement, Germany’s Minister of
increase flexibility on the labor markets. Per- that are intended as a supplement to the Economics and Labor. “We must and we will
sonnel Service Agencies and Job Centers state-funded retirement system. In 2002, the concentrate on once again making Germa-
have been created to speed up the place- so-called “Riester Pension” was introduced ny into one of the world’s most innovative
ment process. The measures provide incen- to encourage private investment in pension and productive economies.”
tives for older and less qualified people to schemes. In addition, pension contributions

The day of the voting about “Agenda 2010” in the Bundestag, the German Parliament.
The Innovation Initiative

As a country with relatively few natural resources, Germany tradi- private venture capital funds. Furthermore,
tionally focuses on innovative products and production processes. since hardly any private venture capital is
presently available for seed investment, the
And our export rates show that the German economy is still quite federal government and some large private
sucessfull in this area. Nevertheless, government and business companies intend to create a new seed-capi-
leaders are well aware that further innovation is required for the tal fund for start-ups. And the German Minis-
try of Economics and Labor seeks to assist
country to maintain its leading edge. micro-firms in networking their R&D efforts.
With these measures the federal govern-
T hat’s why one major follow-on elements

of the Agenda 2010 bears the title “Inno-
vation Initiative.” Germany’s Innovation Initi-
tics, business and science. An innovation
office has been set up to support and coor-
dinate brainstorming sessions, where high-
ment will mobilize venture capital of more
than E2 billion in a joint effort with private
venture-donors. The money is to be inves-
ative comprises additional investments in level entrepreneurs, scientists and adminis- ted in new high-tech companies within the
universities and research institutes as well as trators meet to identify the key innovation next five years.
measures to improve the framework condi- requirements. The goal is for Germany not
tions for innovation. This includes promoting only to participate in the markets of tomor- Promoting excellence in the
the development of Germany into a know- row but also to take its place among the lead- educational sector
ledge-based society, where not only a solid ers. By mid 2005 the members of the initi-
education but also a process of lifetime ative will provide a catalogue of new pro- As a further important aspect, the Innovation
learning becomes commonplace. posals for enhancing innovation. Initiative aims at promoting excellence in the
A first step has already been taken with educational sector. To achieve this objec-
Promoting the development the federal government’s “High-Tech Master tive, universities and research institutes com-
of Germany into a knowledge- Plan.” The plan makes additional funding pete for federal funding to establish centers of
based society available for young technology companies excellence in their respective areas of exper-
and innovative start-ups. The German tise. German policymakers hope that world-
It also includes reviving the public’s interest government has allotted E500 million for class students and scientists from around the
in technology and technological processes investments in private venture capital funds globe will be attracted to Germany.
and making people more receptive to change and for assistance to young companies and The federal government aims at sup-
in general. The vision behind the Initiative is start-ups in sectors such as biotechnology, plying E1.9 billion in extra funds for the win-
to create an innovation-friendly climate, information and communication and nano- ners of this contest in the coming years.
where well-trained and motivated individuals technology. Half of the amount is financed These steps taken together should en-
can implement ideas and determine their own by the European Investment Fund. sure that Germany remains a competitive
personal and professional paths. There will be an additional fund of E250 and innovative business location where
The federal government cannot do this million for direct investment in these com- knowledge and skills are used to their best
alone. Cooperation is needed between poli- panies in the form of co-investments with advantage.

S U CC E S S STO RY
The Right Chemistry for Italian Investor

When Menarini, the giant Italian pharmaceuticals group, bought
Berlin-Chemie from Germany’s privatization agency in 1992, there B ut it’s a fact. Berlin-Chemie Menarini
increased its sales by 25 percent to E503
million in 2003. In the process, it took on 650
were few who would have dared believe the Adlershof-based new employees, bringing the total number
concern would, in little more than a decade, become one of the of staff to 3,227 – exceeding the number it
fastest growing companies in Europe. had even in the overstaffed years. The year
before, turnover rose 24.3 percent to E404
million.
This year, turnover is again predicted to
increase, this time by more than E100 mil-
lion. The company is currently enlarging its
Adlershof production facilities. “We have to
increase our capacity threefold in the coming
years,” explains Reinhard Uppenkamp, the
Photos: Berlin-Chemie
company’s chief executive.

A sales target of E600 million has been
set by the management this year. An addi-
tional 600 employees will be hired, a third

One of the fastest growing companies in Europe. An additional 600 employees will be hired.
of them in Berlin. “We’re growing at a dou- pany with a E1.8 billion turnover and a staff regions are today the markets driving the
ble digit rate,” says Uppenkamp. Among of more than 10,000 workers. One of Ber- company´s spectacular growth revival. From
German pharmaceutical concerns, Berlin- lin-Chemie´s biggest assets was the distri- Albania to Belarus, from Bulgaria to Estonia,
Chemie Menarini ranks 19th in size. But fol- the company has restored its customer base.
lowing seven years of rapid growth, Uppen- Menarini´s policy of re-investing profits
kamp reckons it might soon be in the top also helped restore stability to Berlin-Che-
ten bracket. mie. “Not a single euro from Berlin flowed
back to Italy, not even in the form of divi-
“We have to increase our capacity dends,” claims Uppenkamp, who succeeded
threefold in the coming years” Nelde as the company´s chief executive in
2002.
Back in the l980s Berlin-Chemie had 3000 Berlin-Chemie´s results are impressive.
workers, and relied on the Soviet Union and With a focus on cardiovascular medicines
the Eastern Bloc countries for most of its and drugs for diabetics, it also markets pro-
sales of pharmaceutical products and pills. ducts made by other firms. Co-licensing part-
But when the Communist world imploded, ners include many global players. The bulk
many of its once “safe” markets were no lon- of its sales come from Germany, Russia,
ger there. Hansjürgen Nelde, who had head- Reinhard Uppenkamp, CEO Berlin-Chemie Menarini. Poland, Ukraine, the Czech Republic and the
ed the company for twenty years, was left Baltics. Business in China and India has
with no option but to slash his Berlin staff bution network it had built up during years already started.
after the company became privatized. of marketing activity in Eastern Europe.
Coming to the floundering company’s During trying times in the 1990s, it remained
rescue was the Florence-based Menarini patient with customers in Russia. The stra-
Group, Italy´s largest pharmaceutical com- tegy paid off. Some of these once neglected Clive Freeman

The new GE Global Research Center Europe in

Garching, Bavaria.
focus will be on European products and

markets. “We are taking advantage of the
core areas of competence of each region,”
says Thomas Limberger, chairman of Gene-
ral Electric Germany. ”We are bringing top
talent from all over Europe to Garching.”
“We asked ourselves where the most
important technology center s in Europe
were,” says GE’s European research direc-
tor Armin Pfoh, a nuclear physicist who has
held a number of Stateside positions with
GE and now heads the Garching center.
Germany clearly has not one center but
several: Berlin, Stuttgart and Aachen also
have strong research bases. As Pfoh says, the
country is “Europe’s technological motor.”
But, in the end, the sheer density of rese-
arch facilities, including several big names
such as the Max Planck and Frauenhofer
Institutes, gave Munich the edge.
Choosing Germany The staff might not be cheap,

but they do fantastic work
for R&D Germany’s high labor costs are often seen

as a problem, but this has not affected GE’s
attitude. “The staff might not be cheap,”
says GE CEO Jeffrey Immelt, “but they do
The opening of General Electric’s $52 million research center in fantastic work.” Pfoh agrees, noting that
Bavaria is big news. Announcing the decision in October 2002, German researchers aren’t any more expen-
sive than those in the United States. “We
Jeffrey Immelt, the company’s chairman and CEO said,“Germany want really top people,” he says. “They have
is a world class source of intellectual capital, home to over 8,000 to be well-paid anywhere in the world.”
GE employees and hundreds of our most valued customers. It is a The cost of individual projects will be
shared between GE and clients from the
logical choice to be the site of our first technology center in Europe.” medical and manufacturing sectors. Tho-
mas Limberger puts the time from the start
of basic research to a market-ready product
eneral Electric is a global conglomera- medical technology, are all part of GE Ger- at five years. The center itself, however, will
G te with over 300,000 employees world-
wide and a highly diversified range of pro-
many’s huge product palette.
The new 10,000-square-metre research
have to expand faster than originally plan-
ned: the first researchers started working in
ducts and interests. Its German subsidiary, and development center is located at Munich temporary premises last October, and the
which also has divisions in Switzerland and Technical University’s Garching campus, on need to increase the facility’s capacity was
Austria, is well established and employs the outskirts of the city. Some 150 scientists clear even before it became fully operatio-
several thousand people in 11 production from all over Europe will carry out basic nal. The number of research staff could now
locations. Financial services (which include research into medical technology, with an double by the end of 2006. “Plans for the
Photos: General Electric
reinsurance and consumer credit and cur- emphasis on diagnostic imaging methods, as second phase are already firming up,” Lim-
rently account for around half the company’s well as synthetic materials and renewable berger says. “2004 and 2005 will be impor-
turnover), renewable energy sources inclu- energy sources. Garching complements the tant years.”
ding wind energy, security systems for eve- company’s three other R&D centers in the
rything from private homes to airports, and United States, India and China, but its main Christopher Cordy

GERMANY AS A RESEARCH LOCATION
Putting new ideas to work by Thomas Limberger
other 15 years it will only employ 10 percent of the country’s work-

force, it is still reliant on highly-qualified knowledge workers.
As far as new academic blood is concerned, the latest figures
for the winter semester 2003/2004 are very encouraging: for the first
time ever, more than 2 million people are in higher education in
Germany. But it is not only the figures that are convincing, but also
the academic standards.
The rapid establishment and expansion of internationally com-
parable courses of study leading to Bachelor’s or Master’s degrees
have made a huge contribution to the quality and efficiency of tea-
ching. Highly motivated students are taking part in 854 Bachelor’s
and 1.044 Master’s courses (as of winter semester 2003/2004). Becau-
se of their compatibility with international academic qualifications,
these will make them of much greater interest to companies that are
Thomas P. Limberger, CEO & National Executive of General Electric Germany, operating globally. In this respect, Germany is now certainly catching
Austria and Switzerland. up with its neighbors, where the internationalization of higher edu-
cation and qualifications started much earlier.
When it comes to advanced research, however, it is a different
Taken within the context of Europe as a whole, Germany has always picture entirely. Here, Germany has always been part of the crème
been an ideal business location, and that is still the case today. How- de la crème. If you were to measure the international reputation of
ever, with our European research center at Garching near Munich, German researchers by the frequency of their publications, you
the first Women’s Health Care Centre in Göttingen, and our heavy would clearly see a trend towards expansion at the top end of the
involvement in the field of wind energy, we are not only sending scale. During the 1990s, the share of worldwide publications by Ger-
out a message of confidence in Germany as location for business man researchers grew by one and a half percent to its current level
but also as a location for research. of roughly nine percent, an above-average amount of which ap-
As far as research and innovation is concerned, the sheer pears in periodicals with an international readership.
scope and concentration of what Germany can offer potential clients International awards are another indicator of the excellence of
in both domestic and international markets still put it in a leading German research. Taking the highly prestigious and high profile
position worldwide. What generally determines whether a research Nobel Prize alone, 84 Germans have received it for their work in the
location is attractive or not? What are Germany’s advantages? natural sciences, including 32 for chemistry, 29 for physics and 22
A research location has to have an environment that allows for medicine or physiology.
creativity to develop. Germany, the “land of poets and thinkers,” has Ideas and people: both are prerequisites for innovation and tech-
always been a good place for creative work. Every day, millions of nological competence and together they provide its driving force.
inquisitive and innovative people demonstrate how much they know Taken together, too, they determine whether a location is suitable
and what they can do. From young university graduates and both only for research or for research and development as well. Germa-
locally based and globally active entrepreneurs to the “high poten- ny doesn’t need to hide behind the big players in this respect,
tials” from abroad who have come to Germany for professional either. Measured by their share of real net output, currently around
reasons, they all contribute to what we - to avoid using terms such 30 percent, knowledge- or technology-intensive services have the
as “human capital” or “human resources” – might term a creative same significance in Germany as they do in the United States.
“talent pool”. Worldwide patent registrations provide another good indicator
More than 17 million people (out of a total German workforce of the transfer of knowledge from pure research to application-orien-
that currently numbers approximately 38 million) work in an office, ted development. In this area, Germany has been in the top three
which as a rule implies that they are involved in some form of men- since the end of the 1990s. In fact, it has recently not only main-
tal activity. Knowledge workers in the narrower sense currently make tained its position as a net exporter of technology but has even over-
up 25 percent of the whole workforce; that number is expected to taken Japan.
far exceed 50 percent by the year 2020. This is capital that Germa-
ny lives off – and not only as far as the service sector is concerned. Excerpt from “Made in Germany ‘21 - Innovations for a Just Future” published
Although forecasts for the manufacturing sector indicate that in an- by Hoffmann und Campe Verlag GmbH, Hamburg, 2004

S P OT L I G H T
U.S. Companies Taking off

American companies have long been a vital part of the German
economy, with subsidiaries here making substantial contributions
to their parent’s global income. No wonder recent surveys suggest
that U.S.-based multinationals continue to be optimistic about
their German operations.
G ermans often have a hard time living

down their reputation for pessimism,
and Americans are almost automatically
Boston Consulting Group, found that Amer-
icans doing business in Germany indeed see
the glass as half full, not half empty. AmCha-
The study examined 1,800 German sub-
sidiaries of U.S. companies that represent
around 800,000 jobs and generate $580 bil-
expected to be optimistic. Two recent m’s primary mission is to promote business lion in annual revenue in Germany. Most of
studies have found that these stereotypes relations between Germany and America. these companies were in the automotive,
may still hold true. Americans are more high-tech and oil, gas and energy sectors.
optimistic about investment opportunities Benchmarking Germany Some of the biggest U.S. companies with
in Germany than Germans themselves. subsidiaries in Germany are Ford, General
The first, entitled “Benchmarking Ger- The “Benchmarking Germany 2003” report Motors, and Exxon Mobil Corp.
many 2003,” was published by the Ameri- came up with a list of how-tos for Ameri- Some of the results of the survey: About
can Chamber of Commerce in Germany and can companies eager to do business in 35 percent of German subsidiaries of U.S.
Droege & Comp. It concludes that acquisi- Germany. Recommendations include companies say they operate “very success-
tions often lead to the quickest business spending six to 12 months planning a mar- fully” in Germany. These firms generate at
results for new American entrants. The ket entry, buying a German player (or com- least 10 percent of their company’s world-
second, “Germany as an Investment Location petitor) to gain a platform, avoiding price wide revenues in Germany, capture a mar-
from a U.S. Perspective,” also produced by competition, focusing on innovation and ket share of more than 22 percent and have
the American Chamber of Commerce in Ger- service and maintaining an American busi- booked earnings before interest and taxes of
many but this time in conjunction with the ness culture. more than 10.5 percent of sales. Almost half
of the companies in this category started by
acquiring a competitor. Some 70 percent
Market Entry Strategies Chosen by US Companies in Germany planned their market entry thoroughly, and
the majority of successful firms did so with
Very successful companies % of surveyed companies a lead time of between six and 12 months,
the study found.
Greenfield 56 % Though German consumers have be-
come highly price sensitive, U.S. companies
Strategic Alliance 6% operating in Germany which have traditio-
Best Practice
nally focused on price have usually met with
Photo: Invest in Germany
Joint Venture 7% less success than those which have focused

on quality and service.
Acquisition 31 % Finally, the study suggests it pays off to
maintain some elements of the American
Source: American Chamber of Commerce in Germany (AmCham)
business culture, since this culture shows a

strong correlation to success in Germany. Executives said Germany was particularly the business outlook is improving. Some 69
The sales force, however, should operate on appealing because the location offers access percent of American companies in Germa-
the same cultural wavelength as its cus- to German customers and employees have ny anticipated solid revenue growth and
tomers. high skill levels. In addition, the quality of more than a quarter of companies operating
Andreas Back of Droege & Comp. said German innovations and German supply in Germany planned to increase their invest-
in a press interview that he was surprised to networks make the location attractive. ments this year.
find that companies which apply their U.S. The study acknowledges that Germany
marketing strategy to the German market has room for improvement, but it found that Rhea Wessel
without major adaptations say they are high-
ly successful. This finding goes against con-
ventional wisdom which says that an aggres-
sive American strategy has no place in Eu- Which location factors played a role in your decision to expand your
rope’s cozy business environment. business in Germany? (1= very important; 6 = not important)
The qualities that help American com- Access to Germany's market and the quality of employees are the main rea-
panies compete in Germany include short sons for U.S. business activity in Germany.
management lines, quick decision making,
limited bureaucracy and target and profit- Access to the German Market 1.7
oriented management styles, said Back.
Quality of Employees 2.4
Germany as an Investment
Location from a U.S. Perspective Quality of German Innovation 3.7
For investors wishing to set up a manage- Quality of Germany's Distribution and 3.8
ment holding company in Europe, Germa- Supplier Network
ny is the best bet, according to the other stu-
dy by the American Chamber of Commerce M&A Possibilities 3.9
in Germany and the Boston Consulting
Group. The survey polled executives at Ger- Cost-effective Production Possibilities 3.9
many’s top 100 subsidiaries of U.S.-owned
firms. It concludes that Germany offers bet-
(Further factors mentioned: central logistic position; stable legal system; innovation
ter conditions for management holdings than incentives)
any of its European rivals including the U.K. Source: American Chamber of Commerce in Germany (AmCham) Business Questionnaire 2003
and Switzerland.

Main entrance of the AMD premises

in Dresden.
AMD Invests in Europe’s

“Silicon Valley”
Speed plays a role in Dresden. Barely six months after AMD (Advanced
Micro Devices) announced plans to invest in another chip plant in the city,
builders celebrated the completion of the main part of the premises, at the
company's sprawling 120-acre site on the city outskirts.
T he speed with which the $2.4 billion

project has progressed has astonished
experts. Signs are the facility will be ready
an international company, a world compa-
ny, can be very successful in Saxony. Initial-
ly there were a lot of prejudices about a for-
A parliamentary budgetary committee had
approved a E336 million state guarantee for
the financing of the second plant, allowing
well ahead of schedule in early 2006. mer socialist region, and the work ethic. the American company to take up investment
Impressed, German Chancellor Gerhard When people asked, we said, ‘Sure people loans up to E700 million.
Schröder and Georg Milbradt, Saxony’s work hard here!’ So that’s really helped us to This latest investment confirms the
prime minister, participated in its “topping” sell the attractiveness of Silicon Saxony, as a region’s leading position as a center for high-
ceremony in May. region for international investment world- tech settlements. Eager to create more jobs
The world’s second largest chipmaker wide.” for its highly-skilled workers, Saxony has
after Intel, AMD already has one manufac- been generous with subsidies ever since
turing plant and a development center in Saxony is nowadays dubbed 1990. Around 760 companies in the micro-
Dresden. It plans state-of-the-art micropro- “Silicon Valley” electronics, IT and communications techno-
cessors at the new premises. The American logy fields are located in Dresden. In semi-
firm says the first “test” 300 mm wafers will Gillo says AMD is not alone. “We have over conductor production alone, 7,800 people
be produced there by the middle of next 70 U.S. firms that manufacture here, employ- work in the state capital area – at AMD, Infi-
year. Then in 2006, production of around ing over 10,000 people. We do very good neon, AMTC, ZMD and Photronics.
20,000 wafers a month will begin. business with the United States and are AMD’s latest plant will provide jobs for
Dr. Martin Gillo, Saxony’s economics proud of it. It demonstrates that Saxony is more than 1,000 people directly, and create
minister, spent 20 years in Sunnyvale, Cali- very open to international labor, internatio- another 1,700 jobs indirectly. Two thousand
fornia, as a director of AMD earlier in his nal experts, managers, and people from are already employed at the AMD plant in
career. He is the man chiefly credited with around the world who want to work here.” Dresden which was built eight years ago.
persuading his former employer to invest in Dresden’s reputation in the high-tech Hardly surprising, then, that Saxony – the
Dresden. “Of course I know everybody here. world was illustrated last year when AMD most prosperous of the five states in eastern
I once worked with them,” he says cheerily, chose to build another plant there – over East Germany – is nowadays dubbed “Silicon
when standing at the entrance to AMD’s Fishkill in New York State, where IBM is loca- Saxony.”
glossy Dresden premises. “But now I’m a ted, and other interested locations in Austin,
Photo: AMD
politician!” When asked about AMD invest- Texas, and Singapore. AMD was helped in its
ment, Gillo says: “It’s proof to the world that decision by generous German grants. Clive Freeman

Dow Chemical Expands

Operations in Eastern Germany
The Dow Chemical Company of the U.S. continues to expand its plastics maker, RP Compounds - have reac-
operations in the eastern part of Germany. ted by boosting their company capacity at the
Dow ValuePark in Schkopau.
Dow's 5,000 workers in Germany gene-
C onstruction on a Dow Chemical plant in

Schkopau in Saxony Anhalt for manu-
facturing Polyethylene Terephthalate (PET),
In western Germany Dow has been active
since 1959. It operates in several towns,
among them Stade and Wesseling, near
rate sales worth more than E3billion annu-
ally - a fact not lost on the company’s exec-
utives. Asked about the group's German
was begun in June last year. Now the first Cologne, Hamburg, Speyer, and Munich, production facilities, a New York company
phase of building is complete. In February where its agro-science products are mar- spokesman replies, that they are “often the
2004 workers at the site assembled for the keted for plant protection. global benchmark within Dow.”
building's traditional “topping ceremony.” But it was the demise of the Berlin Wall
The synthetics production facility is and German unification that led to Dow's Dow is a leading science and technology
expected to create new jobs once fully oper- foothold in eastern Germany. In 1995, after company that provides innovative chemical,
ational. Marcel Brobbel, the building fore- protracted negotiations with the Treuhand, plastic and agricultural products and ser-
man, speaks of pipeline installations 30 kilo- Germany’s privatization agency, Dow bought vices to many essential consumer markets.
meters long, and cables 250 kilometers long several plants there, which were soon trans- With annual sales of $33 billion, Dow serves
being used in the Schkopau project. formed into modern production sites. Now customers in more than 180 countries.
Dow Chemical, the only chemical com- Dow’s further expansion plans are having a
pany to gain a place in a recent ‘Top 50’ knock-on effect in the region. The Italian film
best-employer poll conducted in Germany, manufacturer Manuli Stretch and the Belgian Clive Freeman
has four production outlets in the eastern
states of Saxony and Saxony Anhalt where
the U.S. parent company now considers
other investments.
Often the global benchmark

within Dow
Dow has already invested more than E2.7

billion in the eastern half of Germany since
1995 at plants in Schkopau, Leuna, Boehlen
and Teutschenthal. One of the latest invest-
ments was the new 390-kilometer olefins
pipeline connecting Dow’s sites in central
Germany with its Stade site in northern Ger-
many. By again showing confidence, the
chemical giant appears to anticipate a sharp
rise in demand for plastics products within
the European Union following the enlarge-
ment in May.
Eastern Germany’s proximity to central
Europe makes it a strategic location for
“growing markets” in Hungary, Poland and
the Czech Republic – three crucial new EU
Photo: Dow Chemical
members.
The Schkopau site is the largest location of Dow in

central Germany.

S P OT L I G H T
Why Do Chinese
Companies
Invest in Germany?
“The Chinese need know-how and market access to make the
most of their strengths, and Germany can offer them that in
spades.”
T
rade between Germany and China has
often seemed a bit of a one way street:
high-profile blue chip German companies
mittee of German Business in Berlin that
Germany is Beijing’s most important Euro-
pean trading partner. Wen said that Ger-
such as Volkswagen, DaimlerChrysler, Sie- many had 3,578 direct investment projects in
mens, Bayer, and Infineon are either alre- China at the beginning of 2004, and that
ady investing heavily in the enormous nearly 600 Chinese enterprises, just under
Chinese market or planning to. With a total ten percent of the global total, were inves-
investment in China of more than E8 bil- ting in Germany. However, the growth in
lion, Germany is by far China´s largest overseas investment is expected to outstrip
European trading partner and ranks sixth gross domestic product over the next dec-
amongst China´s trading partners overall. ade and experts think it could hit E65 bil-
The economy of the world’s most popu- lion a year – nine times its present level –
lous country (1.3 billion people) has been by 2015. Around three percent of that would
expanding at some eight percent per year, be in Germany.
with growth of 20 percent and more in the
industrial sector. This enormous potential is A Sino-German joint venture doesn’t
not only attracting foreign investors to Chi- necessarily have to be based in China
na but also radically transforming Sino-Ger-
man commercial relations as a whole. The A recent survey carried by the global
volume of trade between the two countries management consultancy Bain and Company
has increased from the equivalent of E225 showed that access to markets – and, in par-
million in the early 1970s, when they had ticular, market size and proximity to custo-
established new diplomatic ties, to nearly mers – was the most important consideration
E35 billion last year. for 75 percent of Chinese companies cur-
rently or planning to invest in Europe. Good
Now major investment is starting infrastructure and distribution are also impor-
to flow in the other direction tant in this respect. These are all areas where
Germany is in the European front rank.
German exports to China are still showing Buying up or investing in European
healthy growth rates, but Germany´s trade companies allows Chinese enterprises to
deficit with China has been between E6.6 capitalize on low production costs at home
billion and nearly E10 billion for many years. while acquiring established local name
Now major investment is starting to flow in brands and distribution channels. The new
Photo: Bundespressearchiv
the other direction as Chinese companies European subsidiary will normally provide
seek out for suitable candidates for take-over a certain, and often limited, “local content”
or joint ventures abroad. such as final assembly or research and devel-
Visiting Germany on the first leg of his opment.
recent European tour, Chinese Premier Wen When German Chancellor Gerhard
Jiabao told members of the Asia-Pacific Com- Schröder visited China earlier this year, the

No fear of contact – on either sides.
Chancellor Schröder in China.
Chairman of the Standing Committee of the pany’s 30 percent share of the domestic mar-
National People´s Congress, Wu Bangguo, ket. Production at Welz’s plants has been
told him that Germany’s advanced techno- stepped-up to minimize excess capacity and
logical and management experience also do away with long delivery times – around
made it attractive to Chinese investors. Pre- four weeks from China itself.
mier Wen also says German partners would Highly competitive and fragmented
also benefit Chinese enterprises through domestic markets are another reason for
management and technology transfer. The Chinese enterprises to look for ways to
majority of the companies surveyed by Bain capitalize on production strengths. The
also identified management know-how, country’s largest textile company, Chinatex,
which has had a European subsidiary in
“We are looking to buy up brands Hamburg since 1987, is using local designers
and marketing specialists to develop its own
in Germany, because
fashion lines using materials brought in from
Germany has fantastic design China. “We’re looking to buy up brands in
and progressive management.” Germany, because Germany has fantastic
Zhao Boya, CEO of Chinatex design and progressive management,” said
CEO Zhao Boya. Once again, Zhao also
especially in marketing and distribution, as emphasizes the advantages of market pro-
an important factor in selecting business ximity and good infrastructure.
locations. Fewer companies saw develop- The Chinese premier pointed to the
ment of existing product as a priority. future when he said a joint mechanism was
The search for this sort of synergy has needed not only to enhance consultations
driven a number of recent high-profile deals on major international issues but also to
in Germany, including the E8.2 million pur- strengthen trade and technological ex-
chase of a German household name, Schnei- change. His promise of government help
der Electronics, by TCL, China´s second-big- with loans, subsidies, insurance and foreign
gest maker of televisions and cellular exchange shows that Beijing is ready to ac-
phones. Others include Huapeng’s purcha- tively promote investment in Germany. The
se of the insolvent pressurized cylinder Chinese need know-how and market access
manufacturer Welz in Brandenburg. to make the most of their strengths, and
“A Sino-German joint venture doesn’t Germany can offer them that in spades. By
necessarily have to be based in China,” says 2015, the reward could be an annual E3
Jiang Zhou, who manages Huapeng’s Ham- billion Euro shot in the arm for the German
burg-based subsidiary together with Johan- economy, which would translate into as
nes Storz, formerly head of Air Liquide in many as 10,000 new jobs a year. That real-
Germany. Huapeng is the market leader for ly is a joint venture in its truest sense.
pressurized cylinders in China. The purchase
of Welz gives it access to the German com- Chris Cordy

Bubbling German the trouble was an old-fashioned inability on
the part of the brewing concerns to face con-
temporary business realities. Breweries were
Beer Market usually owned by families or groups of fami-

lies, and, just as the Reinheitsgebot dictated
that “beer” was defined as a beverage made
from water, malt, yeast, and hops and
Beer and Germany: what could be more obvious? But like most nothing else, the company that made it was
stereotypes, it’s a far more complicated tale than it seems. usually presided over by the latest descen-
dant of a family that had founded it, some-
times centuries earlier.
G oing by the image alone, it’s hard to

imagine a serious crisis in the German
beer industry, let alone that Germans them-
Suddenly, traditional German
firms were ripe for investment,
selves are drinking less and less of the and the investors came
beverage that is so deeply associated with Photos: Gesellschaft für Öffentlichkeitsarbeit der Deutschen Brauwirtschaft e.V
them in the public imagination. Both, In 1987, the EU Commission broached the
however, are part of the recent history of Reinheitsgebot: foreign beers containing addi-
German brewing. tional ingredients were no longer illegal, as
The crisis had its roots in more than the long as those ingredients were listed. But the
slowly declining consumption of beer, a trend new era also meant that the breweries them-
which has been manifesting itself for at least selves were on a changed playing field, one
five years, and which has left Germans the where they could export their products more
third-largest percapita consumers of brew in easily, but where they were also competing
Europe – just below the Czechs and the Irish. with imports. Brands like Heineken and Carls-
The more serious problem lay with the very berg appeared for the first time, and although
thing that makes German beer a synonym of they didn’t make a huge hit with consumers
quality around the world: tradition. whose preferences were also formed by tra-
The most famous German beer tradition dition, their more streamlined business prac-
remains the Reinheitsgebot, or Purity Law, tices should have alerted German brewing
enacted in 1516. But the tradition that made concerns that times had changed.

S P OT L I G H T
Biggest Breweries in Germany

Output 2002 in Thousand Hectoliter
Interbrew Deutschland
15,775
Bitburger Gruppe
9,336
Radeberger Group
8,545
Carlsberg Deutschland
8,400
Brau und Brunnen

7,240
Krombacher Brauerei
5,440*
* output 2003
Source: Bierreport; Der Tagesspiegel
.....just as the “Reinheitsgebot” dictated....
Suddenly, traditional German firms were ripe tionally – including in the United States, with the American firm Anheuser-Busch.
for investment, and the investors came. The where upmarket beers have become quite This admission, by Germany’s largest inde-
Belgian concern Interbrew, an aggressive trendy – and the businesses could be made pendent brewer, shocked the beer business,
acquirer of brands, snapped up Beck’s and much more profitable. but the fact was that its leadership position
Diebels, and the Dutch Heineken concern Naturally, there was resistance on the had already been usurped by Interbrew, and
bought 50 percent of Munich’s Schörghuber- part of the beer barons, but change was Holsten desperately needed money to invest.
Gruppe, owners of Paulaner, Hacker-Schorr, inevitable. The Hamburg brewery Holsten is One after another suitor called, and finally
and Kulmbacher, both in 2001. Far from a case in point. In July, 2002, the firm publi- in January 2004, the Danish Carlsberg group
being a tragedy, this meant that suddenly cly announced that they were seeking a came to the rescue, and the brewery’s stock
these brands were widely available interna- strong investor, and had engaged in talks took a sharp tick upwards.
Six months later, it has doubtless come
to the attention of the beer barons that the
Apocalypse has yet to occur and that Ger-
mans are still drinking German beers – but
so are new customers in other countries. And
although Interbrew, Heineken, Carlsberg
and the German food giant Oetker-Gruppe
(which owns two brewing groups, Rade-
berger-Gruppe and Brau & Brunnen) con-
trol some of the largest brands in the coun-
try, if Germany’s Federal Statistics Office is
to be believed, there are still 1,228 brewe-
ries these four giants don’t control. It’s pro-
bably safe to say that not all of them are
making as much money as they’d like to, and
that perhaps they’d like a piece of the Ame-
rican niche market or a presence elsewhere
in Europe, too.
....breweries themselves were on a changed playing field... Ed Ward

Growth for the Biotech Sector
What do modern medicine and the biotech sector in Germany
have in common? Both are full of promise, according to a new
report by Ernst & Young.
Photo: Invest in Germany

S E C TO R R E P O RT
T he outlook in the German biotech sec-

tor is looking brighter. That’s according
to a report from consultants Ernst & Young
capital and simplify Germany’s tax system to
make it internationally competitive. Already,
Germany generates the most venture capi-
tional 16,400 had jobs in biotech and bio-
chemistry. In the same year, some 2,400 2
young biologists and 2,600 2 chemists gra-
entitled, “Per Aspera Ad Astra 2004,” Latin for tal deals for the biotech sector in Europe. duated from technical colleges. Another
“The Rocky Path to the Stars.” The number The action plan also includes initiatives 4,600 2 students of biology and 2,500 2
of promising projects in the development to create a segment on the stock exchange students of chemistry graduated in the same
pipeline is on the rise, while the number of for young, high-tech firms, to give incentives year.
floundering biotech startups has declined, for spin-offs within universities, to integrate Germany’s research institutes play a
according to the E&Y report. young firms into research networks and to large role in preparing the work force
Perhaps the brightest star in the sector promote management training. through training programs and research
is MediGene AG, a Martinsried-based com- opportunities. Scattered in multiple locations
pany. MediGene was the first German bio- across Germany, the main resources are: the
Top 10 Reasons to Locate R&D in Germany
tech company to gain approval for Eligard Max-Planck Institute, the Frauenhofer
in Germany. Eligard is a medicine for advan- 1. Renowned scientific know-how in Institute, the Helmholtz Institute, the
ced prostate cancer, and it has become the the life sciences. Gottfried Wilhelm Leibniz Institute and fede-
German poster child for the biotech sector. 2. Largest number of biotech compa- ral research projects.
Together with Japanese partner Yamanouchi, nies in Europe. Finally, a federal program called Bio-
the company developed the drug and gain- 3. Leading producer and exporter Future 3 will invest E75 million by 2010 to
ed regulatory approval to sell it. The appro- of pharmaceutical and chemical fund 50 junior scientists to head their own
val has brought international attention to the products. teams that will provide new impulses for
German biotech sector. 4. Central location with access to basic research in biosciences. Germany
Other positive indicators for the bud- both established and emerging generates a significant number of biotech
ding sector are no increase in the number of European markets. related patents. In 2003, the number was
5. Well-developed collaboration
insolvencies in 2003 compared to 2004, and 1,369, a growth of about 30 percent compa-
between universities, institutes
a rise in service revenues for German bio- red to 2002 4.
and private industry.
tech firms.
6. Over E1.3 billion allocated to
Some 2,000 1 companies are active in Looking Forward
support German biotech innovation
Europe’s biotech industry, about the same
through 2010.
number as in North America. More than one 7. Large, productive, and qualified
As the Ernst & Young report noted, Germa-
quarter of these firms are located in Germa- workforce. ny´s pipeline is full of promising biotech
ny – they employ 11,535 people, have reve- 8. Start-up incubators are found in products. The largest share of the products
nues of E960 Mio and spent about E966 Mio 25 regional bio-clusters. in the pipeline, some 34 percent, are small
on research and development in 2003. The 9. Mature venture capital and seed molecule drugs, and some 20 percent are
number of companies recorded in Germany financing sectors. recombinant proteins.
last year is double the number recorded just 10. Strong commitment to maintaining This pipeline, ongoing structural
four years ago. And 13 of them are publicly an attractive international business reforms, the highly educated workforce and
listed. environment. synergies with Germany’s mature pharma-
Germany’s biotech sector is character- ceutical and chemical industries combine to
ized by small, flexible companies. More than make Germany the ideal place to invest
80 percent of the firms operating in biotech Germany also offers what are known as for R&D.
have less than 50 employees. The industry Bio-Area Initiatives to support companies in According to management consultants
is also diverse, with companies operating in all development phases. These programs AT Kearney, sales and profits for the sector
all major fields including pharmaceuticals coordinate the industry’s development regio- in Germany are set to rise by up to 20 per
(the largest), diagnostics, service suppliers, nally, offer public and private financing and cent by 2006, promising cancer drugs are
contact production, DNA analysis, and bio steer companies toward business incubators in the pipeline, and at least 14 biotech com-
informatics. or clustered office parks. The idea is to trans- panies are looking to list on the exchan-
fer biotech know-how into products, pro- ge. That’s modern medicine full of
Germany as a Biotech Capital cesses and services, to exchange information promise.
between the scientific and the business com-
The metropolitan areas of Munich and Ber- munities and to promote parallel fields such Rhea Wessel
lin are home to Germany’s largest biotech as licensing, financing, management and
clusters, but all of the federal states are bene- marketing.
ficiaries of a national program to promote the German universities churn out thou- Sources:
sector. Under the government’s so-called sands of chemists and biologist every year. 1. ISB – Biotechnology Information Office
2. Federal Statistical Office Germany
High-Tech Master Plan, reforms have been In 2002, some 462,000 2 people were 3. Federal Ministry of Education and Research
implemented to improve access to venture employed in the chemistry sector. An addi- 4. European Patent Office

S E C TO R R E P O RT
Good News
in the German ICT-Market
Germany´s information and communications technology (ICT) sector is
seeing a dramatic improvement along with the rest of Western Europe.
I
ndeed, industry observers are forecasting
a sunny and fertile climate for the next two
years. The market’s recovery, which began
rise. That was still higher than the United Sta-
tes, which saw zero growth, and Japan, whe-
re the ICT sector actually shrank. In 2000,
communications. This year, the EITO expects
Germany´s ICT market to see a 3.4 per cent
increase – that's more than E4 billion – and
last year, is set to continue in 2004 with a the information technology sector in parti- even greater growth in 2005.
further improvement in 2005, according to cular suffered a dramatic drop after highs of Demand for computers, software and IT
the European Information Technology nearly 11 percent. From 2001 through 2002, services is up and as a result, the EITO reports
Observatory (EITO). it saw negative growth. Yet by the following that the European software and IT services
Photo: lnvest in Germany
The EITO forecasts growth in Western year the market began to see signs of market will grow strongly this year. The hard-
Europe's ICT market will climb more than 3% recovery and Germany´s ICT sector visibly ware sector is also recovering, but due to con-
to E611 billion this year and considerably improved. tinually falling prices, will see only a slight
more in 2005. It is a dramatic increase from The future is now looking much bright- increase. Other factors, like continuing tech-
2003, when the market saw just a minimal er for both information technology and tele- nological advancements in mobile telecom-

munications, are also contributing to greater the biggest contributors to Germany´s eco- has helped German firms stand out in the
growth in Europe’s telecommunications sec- nomy. With an overall market share of 21.2 global market.
tor, which is expecting a solid boost in 2005. percent, Germany’s ICT sector is the largest Last year private equity firm General
The introduction of UMTS technology in Europe, followed by the U.K. On a world- Atlantic Partners bought IT services firm
means broadband services are quickly wide scale, Germany accounts for a 6 per- TDS, Ad Astra Erste took over Braeer and
spreading into the third-generation mobile cent market share. Nearly 75 percent of glo- Investcorp acquired a major share in IT secu-
and wireless communications market, bal ICT revenue stems from the U.S. (32 per- rity specialist Utimaco. American IT group
providing yet more opportunities for growth cent), Europe (30 percent) and Japan (12 Novell bought Nuremberg-based Linux spe-
in the dynamic mobile telephone and percent). So Germany's ICT industry is vital cialist Suse Linux, while Canadian software
information services industry. to the European Union. The ICT sector maker Open Text purchased Hamburg´s
Europe´s information technology mar- underpins the overall competitiveness of the Gauss Interprise. Microsoft has also been
ket might not see the same level of growth EU economy, and its contribution is crucial lured by German IT companies. The U.S.
as the telecommunications sector next year, to achieving the EU’s objective to become software giant recently held discussions with
but, at least in Germany, the market has not “the most competitive economy in the world Germany´s SAP, the world's third-largest soft-
reached its full potential and there is still con- by 2010.” ware maker, about buying the company.
siderable room to expand, according to the At the moment, Western Europe's ICT Microsoft said it broke off the negotia-
German Association for Information Tech- industry is facing stiff competition from bur- tions after deciding the takeover would have
nology, Telecommunications and New geoning technology markets in Asia and been too complex. SAP has a stock market
Media (Bitkom). Eastern Europe, which have become value of more than $50 billion.
increasingly dynamic. Nevertheless, Microsoft´s interest not
The market has not reached Yet the recent slowdown in Europe has only shows just how eager it is to find new
its full potential and there is still had some positive affects on the industry: it sources of growth, it also underlines the sig-
considerable room to expand offered the perfect opportunity for foreign nificance of German and European players
investment firms and software companies to on the global stage.
Indeed, compared to the United States, the acquire dynamic IT companies in Germany.
world’s biggest technology market, Germany According to industry observers, a focus on
lags far behind in the number of individual special niche markets for software programs Ed Meza
PC owners (36 percent compared to 86 per-
cent in the U.S), Internet users (49 percent
compared to 61 percent), household broad- Developments in the German ICT-Market 2004
band connections (12 percent versus 26
percent) and cable modem connections (0.2 Turnover (in E bn) Growth Rates
per 100 households compared to 15 per 100 2001 2002 2003 2004 2005 02/01 03/02 04/03 05/04
households). That leaves plenty of room for ICT all 131,4 127,9 128,3 131,4 136,4 -2,6% 0,3% 2,5% 3,7%
growth. Software 15,2 15,1 14,9 15,2 16,0 -0,8 % -1,5% 2,5% 5,0%
Germany exceeds the U.S. in some IT-Services 27,2 26,3 26,1 26,5 27,6 -3,1% -0,7% 1,7% 3,9%
areas, namely mobile telephone usage (78 Source: BITKOM; Basis:EITO
percent versus 54 percent), DSL-equipped
households (11 percent compared to 9 per-
cent) and household ISDN connections (31 E-Commerce (B2B and B2C) 2003 in E bn
percent compared to 5 percent).
122,7
Furthermore, Germany is currently Germany
15,7
undergoing a digital revolution that will soon
make convergence an everyday reality. The
68
country´s aging cable lines are being reno- Great Britain
16,8
vated and upgraded to allow for broadband
services like more TV channels, high-speed
57,8
Internet access, video-on-demand and new France
8
telephony services. By 2006 some 38 million
households in Germany will have DSL or
46,2
cable modem connections. The number of Italy
5,9
broadband connections, currently 4.6 mil-
lion, is set to double in the next few years.
22
With annual revenues of more than Spain
2,9
E130 billion and a workforce of some Source: BITKOM; Basis:EITO
750,000 employees, the ICT sector is one of

PIONEERS
“A no-brainer and risk-free deal.”

When Haim Saban took over German broadcasting group
ProSiebenSat.1 last year, he became the first non-European player
to break into the television market in Germany.
T he Israeli-American entrepreneur effec-

tively replaced German television pio-
neer and media mogul Leo Kirch as one of
In recent months ProSiebenSat.1 has
opened a E325 million credit line with Deut-
sche Bank and J.P. Morgan Chase, issued a
the two main forces in the world’s second E150 million bond and completed a E282
largest television market more than a year million capital increase, all part of a com-
after Kirch’s vast media empire collapsed prehensive refinancing plan to lower the
under billions of euros of debt. company’s debt and raise cash for necessary
Saban sought investment in Germany investments in television programming.
after making his name in Hollywood with the
hugely successful children’s series “Power Saban stresses that he will remain
Rangers” and, in 2002, earning $1.5 billion in Germany for the long haul
from the sale of his Fox Family Worldwide
to Disney. That same year the Kirch Group ProSiebenSat.1 has five nation-wide chan-
was crushed under E6.5 billion of debt. The nels, the two main ones being ProSieben and
company’s insolvency resulted in the disso- Sat.1, which carry a mix of German and U.S.
Successful in Germany: lution of the group. Kirch’s core television films and series. Kabel 1 is dedicated to clas-
Haim Saban. division, ProSiebenSat.1, as well as the com- sic TV shows and movies; N24 is a 24-hour
pany’s vast film library, was put on the block. news station and Neun Live is an interactive
Major players and former Kirch partners channel co-owned by InterActiveCorp’s
Rupert Murdoch and Silvio Berlusconi were Home Shopping Network.
said to be interested in the assets, as was While the broadcasting group was hurt
German publishing giant Heinrich Bauer and by the advertising downturn, the Kirch bank-
Saban, who had been looking to buy into ruptcy and sinking TV ratings, Saban and an
European media companies. all new management have improved the
company’s overall health.
Saban came back two months Indeed, under Saban, who has since
later with a winning bid been appointed ProSiebenSat.1’s supervisory
board chairman, the group posted a first-
In the end, only Saban remained. Although quarter pre-tax profit E43 million, up dra-
a first attempt to buy ProSiebenSat.1 along matically from a E29 million loss in the same
with Kirch’s vast film library collapsed in period last year. In 2003, the group saw
June, Saban came back two months later annual profits rise 46 percent to E158 mil-
with a winning bid for just the broadcasting lion on revenue of E1.8 billion.
group. Saban, who is backed by equity Saban expresses confidence that the
investors Hellman & Friedman, Bain Capital German economy will turn around. “We
and Thomas H. Lee, reportedly offered E525 believe in Germany. We believe in the hard-
million for a 72 percent stake in ProSieben- working German people,” he says.
Sat.1. The company’s stock has nearly dou- Dismissing initial concerns that he
bled since then. would quickly sell the broadcaster after tur-
Photos: Argum, Invest in Germany
Saban says he was perplexed by the fact ning it around, Saban stresses that he will
that German investors did not make a great- remain in Germany for the long haul: “This
er effort to take over ProSiebenSat.1 them- opportunity is a marathon, not a sprint.”
selves. The decision to acquire ProSieben-
Sat.1 was an obvious one, he adds,
describing it as “a no-brainer” and “a risk-
free deal.” Ed Meza

EQUITY MARKETS
Skyline Frankfurt am Main.
an analyst with Sal Oppenheim in Frankfurt.

“It makes sense that investors would want
to acquire these companies at relatively
cheap prices.”
Venture capitalist companies Apax,
Goldman Sachs and Providence last year
bought up Deutsche Telekom’s six regional
cable franchises for the bargain price of E1.7
billion after Liberty Media’s E5.5 billion offer
was rejected by German antitrust authorities.
The investment resulted in the creation of
cable giant Kabel Deutschland, which is
expanding and expected to go public in the
near future.
Rebounding Germany Information and biotechnology

remain the hot fields
It has taken some time to fully recover from the collapse of Equity investment group Apollo Manage-
Frankfurt’s once high-flying technology stocks exchange, ment currently owns regional cable compa-
ny Iesy in the state of Hesse but recently
the Neuer Markt. But local and international investors are finally agreed to sell it to Kabel Deutschland. Apol-
taking another look at German equities. And they are eager lo has pursued PrimaCom, another local
to get back into the game. cable firm. Although it is operationally pro-
fitable (before interest and tax), PrimaCom
recorded a net loss last year due to conti-
I n the first quarter of 2004, Germany’s 39

leading private equity firms invested E127
million in domestic companies, according to
lion fund available to equity investors focu-
sing on high-tech start-ups in Germany.
While information and biotechnology
nuing liabilities. Apollo, along with JP Mor-
gan Chase, is offering to take over the com-
pany in lieu of its debt.
equity investment consultancy group Macke- remain the hot fields, equity investors from In a similar case, investment group Per-
wicz & Partner. That’s a far cry from the E56 abroad are increasingly jumping on German mira last year saved pay TV operator
million invested in the same period last year. media companies. Premiere from insolvency. The company,
European investment group 3i has bud- formerly part of the now bankrupt Kirch
geted E1 billion for worldwide investments The domestic equity market Group, has since seen a dramatic recovery
over the next three years. One quarter of that is consolidating and is aiming to go public next year.
sum will go to investments in Germany. Israeli-American entertainment entre-
Nevertheless, while local investment is up, the Indeed, in the last two years investors have preneur Haim Saban managed to take over
domestic equity market is consolidating, and not only taken advantage of the Neuer another Kirch company, TV broadcasting
more and more venture capitalists are crea- Markt’s disintegration, but also of the fall of group ProSiebenSat.1, last year with the
ting partnerships with international investors. Leo Kirch´s media empire and the failed bid backing of Hellman & Friedman, Bain Capi-
According to Goetz Hoyer of Mackewicz & of U.S. cable giant Liberty Media to take over tal and Thomas H. Lee. Last summer Saban
Partner, 75 percent of all German equity com- a majority of Deutsche Telekom’s cable and his equity partners obtained ProSieben-
panies depend on foreign partners. assets. Those events shook the sector to its Sat.1 for E7.50 per share; ProSiebenSat.1’s
In an effort to aid the local industry, the core and forced stock prices down, paving stock price doubled in less than a year.
EU´s European Investment Fund and the the way for equity investors.
German Federal Ministry of Economics and “Germany is one of the biggest media
Labor recently launched a special E500 mil- and ad markets worldwide,” says Jan Herbst, Ed Meza

I NTERVI EW

continued from page 3
Dr. Weber at the CeBIT America in New York, May 2004; Dr. Mangold at a Lunch Discussion in London May 2004; Dr. v. Pierer (on the left) at a Siemens-event with the vice-
mayor of Shanghai June 2004.
What special factors do you have to take into Dr. v. Pierer: My experiences have been very Dr. Weber: It is my aim to contact all impor-
account when courting investors? good. In many parts of the world, “Made in tant players and opinion leaders that matter
Germany” carries strong positive associa- in our trans-Atlantic business relations – the
Dr. Mangold: Clarity; honesty with regard to tions – particularly in Asia. It stands for community of financial investors, the auto-
strengths and weaknesses; demonstrating values like high quality, longevity and relia- motive, biotech and nanotech sectors of
the advantages of the business location but bility as well as innovative technologies and industry to cite a few.
also acknowledging the disadvantages. The production processes. These are the values
Agenda 2010 reform program and its we have to focus on and nurture in the What results would satisfy you?
potential for improving business conditions future.
is playing an increasingly important role. Dr.Weber: Americans have a positive view of Dr. Mangold: If we manage to increase our
Many investors believe that Agenda 2010 Germany as a business location. That is attractiveness and thus draw investors to
will finally get the reform process rolling. It's refreshing and in positive contrast to the Germany who then tell other investors about
important that investors recognize the sometimes despondent statements you hear their rewarding experience.
transformational trend! They also expect, amongst the German intelligentsia. It does- Dr. v. Pierer: The main task of the commis-
however, that the reforms be implemented n’t mean that in my discussions we sweep sioner for foreign investment is to help incre-
quickly. any weak points under the carpet. But my ase foreign investment in Germany. This is
Dr. v. Pierer: In Asia, I benefit from the fact partners accept that Germany is amending naturally my first priority. Above all, I want
that German entrepreneurs have an excel- existing flaws by tackling many reforms. I’ve to tap Asia’s enormous potential to streng-
lent reputation as reliable partners who found the American Chamber of Commerce then the engagement of Asian companies in
make long-term commitments. And German in Germany and the Deutsch Amerikanische our country. I am convinced that Germany
engineering continues to be highly valued. Handelskammer as well as the commercial has a lot to offer. Any other assessment
This is a very important asset because Asian services of the US consulates in Germany to would not correctly reflect the situation. We
companies are eager to measure themselves be strong strategic partners. need to underscore our country’s positive
against their partners, to expand their know- aspects more strongly. And we need to
ledge and to test new technologies. Do you have some specific plans for your time strengthen our advantages and advertise
Dr.Weber: A famous American president once in office? them aggressively.
said: ‘The business of America is business, Dr. Weber: To see mutual relations between
and the chief ideal of the American people Dr. Mangold: Of course. But we will first deci- Germany and America getting even stronger
is idealism.’ That is still true and you better de these matters internally and clear them and the curves on charts depicting invest-
observe this. Americans like a frank and with the federal government before we ments, trade figures, employment, profitabi-
open approach when discussing the bene- begin to talk about them in public lity and output of US companies in Germa-
fits of Germany as a business location. “Made Dr. v. Pierer: The job has more than one facet. ny to continue to point upwards. Our mutu-
in Germany” still strikes the right chord. The most important is to create a positive al friendship is a strong bond that warrants
Photos: Invest in Germany, Siemens AG
impression of Germany. This means active- our best efforts.

What have been your impressions abroad as ly and intensively communicating our
Commissioner for Foreign Investment? strengths to people outside the country.
Second, I want to contribute my experience
Dr. Mangold: Our export strength is appreci- to improving Germany’s attractiveness as a
ated more abroad than at home. The same business location. There are two sides to the
is true for the appealing activities of foreign coin. I want to work on both.
investment funds, which help build trust.

Invest in
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tor to success in Germany’s business considering expansion into Germany,
environment. Invest in Germany provides informa-
tion about the German business envi-
ronment and assistance in establish-
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and private sectors.
www.invest-in-germany.com
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INVEST IN GERMANY NEWSLETTER

Major Investment Decisions

I NTERVI EW Dow Chemical Expands Operations in

2 Invest in Germany magazine August 2004

Dr. Klaus Mangold Dr. Heinrich v. Pierer Dr. Jürgen Weber

“Germany has a wide range of strengths”

Invest in Germany magazine August 2004 3

Foreign Direct Investment

W hen global business confidence wea-

38,26 Kopper notes that throughout the first half

4 Invest in Germany magazine August 2004

Even more remarkable, however, is As economists at Germany’s Bundesbank

Invest in Germany magazine August 2004 5

Reforming the Domestic Economy

A genda 2010 aims at maintaining Ger-

6 Invest in Germany magazine August 2004

The Innovation Initiative

T hat’s why one major follow-on elements

Invest in Germany magazine August 2004 7

The Right Chemistry for Italian Investor

company’s chief executive.

8 Invest in Germany magazine August 2004

Invest in Germany magazine August 2004 9

The new GE Global Research Center Europe in

focus will be on European products and

Choosing Germany The staff might not be cheap,

for R&D Germany’s high labor costs are often seen

10 Invest in Germany magazine August 2004

Putting new ideas to work by Thomas Limberger

other 15 years it will only employ 10 percent of the country’s work-

Invest in Germany magazine August 2004 11

U.S. Companies Taking off

G ermans often have a hard time living

Joint Venture 7% less success than those which have focused

12 Invest in Germany magazine August 2004

Invest in Germany magazine August 2004 13

Main entrance of the AMD premises

AMD Invests in Europe’s

T he speed with which the $2.4 billion

14 Invest in Germany magazine August 2004

Dow Chemical Expands

C onstruction on a Dow Chemical plant in

Often the global benchmark

Dow has already invested more than E2.7

The Schkopau site is the largest location of Dow in

Invest in Germany magazine August 2004 15

16 Invest in Germany magazine August 2004

Invest in Germany magazine August 2004 17

Beer Market usually owned by families or groups of fami-

G oing by the image alone, it’s hard to

18 Invest in Germany magazine August 2004

Biggest Breweries in Germany

Brau und Brunnen

.....just as the “Reinheitsgebot” dictated....

....breweries themselves were on a changed playing field... Ed Ward

Invest in Germany magazine August 2004 19

Photo: Invest in Germany

20 Invest in Germany magazine August 2004

T he outlook in the German biotech sec-

Invest in Germany magazine August 2004 21

22 Invest in Germany magazine August 2004

Invest in Germany magazine August 2004 23