Structural Change = Creative Solutions
Structural change in Germany offers foreign investors a myriad of opportunities. Marco Wanderwitz, the Federal Government Commissioner for the New Federal States, explains how the state supports foreign direct investment.
Mr. Wanderwitz, Germany was reunited 30 years ago. After the event, the eastern federal states were confronted with massive structural change. Looking back on this process, was it a success?
Much progress has been made since 1989 on Germany’s integration into a unified nation and on bringing standards of living into line. One manifestation of this is that in recent years – for the first time since World War II – more people have moved from western to eastern Germany than the other way around. In addition, the situation on the labor market has fundamentally improved. Whilst none of the 30 largest German stock corporations are headquartered in the eastern states, the region has developed an economy driven by high-tech small and medium-sized companies.
Today, many regions in the western federal states are also affected by structural change. Is structural change now a phenomenon throughout Germany?
Structural change is an ever-present phenomenon, but its speed and extent vary from region to region. There are always two sides to structural change. On the one hand, it is a challenge for companies and employees. On the other, regions experiencing rapid structural change show that they can adapt to new business fields and technologies in good time and develop new prospects. This is also the case in the new federal states.
Marco Wanderwitz is Parliamentary State Secretary at the German Federal Ministry for Economic Affairs and Energy. As the Federal Government Commissioner for the New Federal States, one of his tasks is to ensure that the specific interests of the population of eastern Germany are adequately taken into account in all decisions and measures taken by the Federal Government. © www.wanderwitz.de
Do the regions in which structural change is taking place have anything in common? Or are the causes too disparate to draw parallels?
Important drivers of structural change are innovations and new technologies, increasing globalization, but also changing consumer preferences within the population as a result of increasing prosperity and demographic development. Added to this is a constantly shifting political and societal environment. The challenges differ greatly from region to region. The common feature of successful regions is that they adapt early and decisively to new opportunities.
What effect is digitalization having on structural change?
The digital revolution is having a profound influence on structural change in Germany. Technology is advancing rapidly and bringing about changes in almost all areas of life. Digitalization isn’t just something for IT companies: It affects companies across the board. New and alternative business models are emerging. But industry is also changing: Industrie 4.0 is the buzzword. We should view these changes as an opportunity for greater prosperity and a better quality of life. The German Federal Ministry for Economic Affairs and Energy contributes to this by creating a favorable environment for business and by giving companies targeted support.
An aerial view of the roughly 6km long Saale- Elster Viaduct near Halle, Saxony-Anhalt, which is the longest railway bridge in Germany. This section is part of the new ICE Munich–Berlin line, the largest railway infrastructure project to be realized since German reunification. © Jochen Eckel, SZ Photo, laif
Which sectors are particularly affected by structural change in Germany?
Currently, the automotive industry is probably one of the most affected, as the sector moves to electric mobility. Then there is the energy industry, as we shift our energy supply to renewable sources. However, structural change affects all regions and industries. German economic policy provides broad-based support across all sectors, the aim being to foster a smooth transition.
Change is often a difficult process, but it also opens up opportunities. Against this background, what openings are there for foreign investors in Germany?
We need innovative solutions to help us manage structural change. The affected regions harbor scope for a proactive role for both German and foreign companies. Ideally, the changes that take place will also modernize the region. Since reunification, for example, massive investments have been made in infrastructure, especially in the new federal states. State-of-the-art publicly funded research institutions offer companies numerous opportunities for cooperation. Higher education institutions are a source of highly qualified young professionals. Last but not least, attractive funding programs are available at national and regional level in regions undergoing structural change.
How does the Federal Government support foreign investors who want to invest in regions affected by structural change?
Such investments are supported by grants. Depending on the size of the company, foreign commercial investors can expect subsidies of up to 30 percent of the eligible costs. In addition, there are other promotional instruments, such as the loan programs of the state bank KfW, which can be combined with the investment grants. Another good example is Germany Trade & Invest, which works on behalf of the Federal Ministry for Economic Affairs and Energy to offer foreign investors advice on how to expand their business to Germany.
Facts & Figures
of eligible costs: the maximum subsidy available to overseas investors, depending on company size and multiple criteria
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