What specific FDI opportunities exist in Germany and how can they be leveraged by investors?

Recent studies show that Germany is the most attractive business location in continental Europe. According to the German federal economic development agency (GTAI) Germany attracted more than 3,600 foreign direct investment (FDI) projects in 2016, mainly new settlements, corporate expansions and relocations, which is a new record. More than 1,700 FDI projects in 2016 were mergers or acquisitions. The most popular sector for investments in 2016 was corporate and financial services, followed by information and communications technology and software.

There are various business location factors that are exceptionally strong in Germany. These include infrastructure (telecommunications and logistics), Germany’s location in the centre of the European market, workforce qualification and a strong domestic market.

According to the OECD, Germany is also one of least restrictive major business location worldwide in terms of foreign equity restrictions, discriminatory screening or approval mechanisms, restrictions on key foreign personnel and operational restrictions.

Incentive programs in Germany are available through different public funding instruments and for different funding purposes. Funding requirements can include investment projects, research and development activities, personnel recruitment, working capital needs or other specific purposes. The different incentives instruments including grants, loans and guarantees are generally available for all funding purposes and can ordinarily be combined; thus matching the different business activity needs at different development stages.

All incentives programs define eligible economic activities as well as the kind of support available. Public funding depends on project-specific factors such as the planned investment, investment location plus the investment size and structure.

Production site set-up or service location development is supported by investment incentives programs providing support in the form of cash grants. The most important grant program for investments is the ‘Joint Task Improving Regional Economic Structures’ (Gemeinschaftsaufgabe “Verbesserung der regionalen Wirtschaftsstruktur”).

Labour-related incentives play a significant role in reducing the operational costs incurred by new businesses. Germany’s Federal Employment Agency and the German Federal states offer a range of labour-related incentive programs designed to fit the different company needs when building a workforce.

Public loans occupy an important position in the German funding system – at Federal (KfW Group), Federal state (state development banks) and EU (European Investment Bank) levels. Long credit periods, attractive interest rates and repayment-free periods are the most important features of this funding instrument. Small and medium-sized enterprises in particular are often entitled to preferential conditions. A further advantage exists for investors through the possibility of combining public loans with other forms of incentives such as grants for investments, R&D projects or personnel.

Istvan collaborated with other IR Global members for The FDI Age Virtual Series.