Foreign Direct Investment

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Germany is a very attractive location for foreign investors. Germany Trade & Invest (GTAI) and the economic development agencies of the German Federal States as well as international databases have registered record numbers of foreign direct investment projects over the last years. The number of projects – companies that want to invest in Germany – that GTAI handed over to the Federal States‘

economic development agencies was also very positive. The number of project source countries rose to 72 in 2012, up from 64 in 2011.

The economic development agencies of the German Federal States reported more than 850 new or capital-widening investments in 2012. Likewise, international foreign direct investment (FDI) databases such as the Financial Times’ ’fDi Markets’ noted all-time highs for Germany. In 2011, ’fDi Markets’

reported 853 investment projects. This beat the previous record of 777 FDI projects in 2010. Both new ’Greenfield projects’ and capital-widening investments are conside- red projects, unlike mergers & acquisitions (M&A). 2012 looks promising thus far. The all-time high could be surpassed again.

’fDi Markets’ registered a total of more than 3,500 investment projects by almost 3,500 foreign companies since 2007. This makes Germany the fith most popular location world- wide. The most important source countries for projects are the USA, Switzerland, and the UK.

The fast rise of Chinese investments in the last five years should be highlighted. Germany has become the focal point for Chinese investors.

Over the last years, Germany continuously received most of all the foreign direct investments out of China.

1 : Number of Projects in Germany by Sector (2007 – 2011)

Source: ’fDi Markets’

ICT &

Software

18 %

Business &

Financial Services

15 %

Chemicals, Plastics, Paper

8 %

Electronics &

Semiconductors

7 %

Consumer Goods (incl. Food & Beverages)

7 %

Textiles

7 %

Healthcare, Pharma, Biotechnology

5 %

Energy, Minerals, Metals

6 %

Hotel, Tourism, Entertainment

2 % Other Sectors

4 %

Transportation, Storage & Logistics

6 %

Automotive, Industrial Machinery & Equipment

15 %

Numbers of Projects:

3,550

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Due to this ever more rapid development of new investments, foreign direct investment stocks grew continuously. While they amoun- ted to EUR 292 billion in 2000, they reached the record high of EUR 549 billion in 2011.

According to Bundesbank (the German central bank) data, more than half of stocks come from countries within the European Union.

If investments by companies from the other European countries are added to this the share will rise to almost two thirds. North America, Asia, and the rest of the world follow with 23 percent, six percent, and five percent, respectively. Germany ranks seventh in the international comparison of FDI stocks according to UNCTAD, the United Nations Conference on Trade and Development.

Foreign Direct Investment Stocks Grow Continuously

The broad industry distribution of foreign investments is remarkable. They can be at- tributed to 39 different industries. ICT and software claimed the biggest share of capital invest with 18 percent. It is followed by finance & professional services and vehicle

& machinery manufacturing with 15 percent each. Mostly, sales offices were established.

Thanks to Germany’s high degree of industri- alization it attracts many production projects too. One in seven companies wants to manu- facture in Germany.

: FDI Stocks in Germany: Origin of the Investor by World Region (2011)

Source: Bundesbank 2012

Rest of the World

1 %

North America

10 %

EU2776 % Rest of

Europe 8 %

Asia5 % Latin America

1 %

549 bn €

Foreign Direct Investment

Foreign direct investment (FDI) comprises the investment in assets abroad made by domestic investors. In contrast to portfolio investment, foreign direct investment mainly aims at influencing and controlling business operations. Its distinguishing feature is a share in foreign firms of at least ten percent.

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The aforementioned direct investment of 56.3 billion euros into foreign E&E firms has been spread in almost equal shares to Europe (43 percent) and America (39 percent) in 2011.

The USA remain the most important foreign investment target with a volume of nearly 18 billion euros and a share of 32 percent, followed far behind by Austria (5.1 billion euros), China (3.9 billion euros), France (3.3 billion euros) and Switzerland (1.8 billion euros).

While the stock of German FDI in Switzerland and Italy has declined by two and ten percent in 2011, respectively, it has risen considerably, amongst others, in Austria (plus 33 percent), United Kingdom (plus 29 percent), India (plus 25 percent) and Brazil (plus 20 percent).

Stock of German Foreign Direct Investment into the E&E Industry Abroad

Top Ten Investment Targets in the Foreign E&E Industry

: Stock of German Foreign Direct Investment into the E&E Industry Abroad, Top Ten Countries 2011, bn € : Stock of German Foreign Direct Investment into the E&E Industry Abroad, bn €

Source: Deutsche Bundesbank and ZVEI‘s own calculations

Source: Deutsche Bundesbank and ZVEI‘s own calculations 1. USA

2. Austria 3. China 4. France 5. Switzerland 6. Spain 7. Brazil 8. United Kingdom 9. India 10. Italy

5,1

3,9 3,3 1,8 1,8 1,7 1,6 1,6 1,4

17,7 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

In 2011 the stock of German foreign direct investment (FDI) into the Electrical and Elec- tronic (E&E) Industry abroad has increased by six percent (year over year) to 56.3 billion euros. This value constitutes a new all-time high since the introduction of the FDI survey by the Deutsche Bundesbank in 1976. (The recent survey has been conducted according to the new WZ 2008 classification for the first time) In the last decade the sector’s FDI has more than doubled.

The 1,392 E&E firms abroad that received Ger- man FDI employed a total of 665,000 people and achieved a sales volume of 132 billion euros in 2011. Compared to 2010 the number of firms in which investments were made has dropped by four percent. Employment and sales, in contrast, have grown by two and six percent, respectively.

25,1

20,8 23,0 26,0 29,0 35,3

46,2 45,3 52,9

56,3

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By the end of 2011 foreign investors have slightly reduced their stock of direct investment into the German E&E industry by one percent (year over year) to 32.5 billion euros.

This is three billion euros below the all-time high achieved in 2008.

737 among about 4,000 E&E firms in Germany also have one or more foreign providers of FDI capital. These E&E firms employ 271,000 people and have generated sales of 100 billion euros in 2011. In the same year the number of firms with foreign direct investment contribu- tion and their employment have declined by one percent each. Their sales, however, have increased by eight percent.

The FDI stock of the German E&E industry has continued to increase in 2011, once again reaching a new record high of 57.2 billion euros. The branch’s share in total FDI of the German manufacturing industry has climbed to 19 percent by now. Compared to 2002

its stock has almost tripled. By the end of 2011 330 German E&E firms have held direct investments abroad.

The difference between the stock of German FDI into E&E firms abroad in the amount of 56.3 billion euros and the FDI stock of the German E&E industry totaling 57.2 billion euros can be explained by the fact that both the German E&E industry and other domestic industries make foreign investments not only in their own but also in other sectors at a time.

Stock of the German E&E Industry’s Foreign Direct Investment

Foreign Direct Investment into the German E&E Industry

Source: Deutsche Bundesbank and ZVEI‘s own calculations

: German E&E Industry:

Stock of Foreign Direct Investment, bn €

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 49,1

24,9 28,6

34,5

52,1 57,2

38,9 43,4 41,5

20,6

: Stock of Foreign Direct Investment into the German E&E Industry, bn €

Source: Deutsche Bundesbank and ZVEI‘s own calculations 2011

2010 2009 2008 2007 2006 2005 2004 2003 2002

28,0

35,5 29,3

28,8 25,2 23,4 23,0 22,3

32,9 32,5

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© ZVEI • August 2013 More information: www.zvei.org > Märkte & Recht > Konjunktur & Analysen

Unit 2009 2010 2011

Total German FDI bn € 980.4 1,094.9 1,144.9

Change on year earlier % 2.8 11.7 4.6

German FDI into the manufacturing sector abroad bn € 268.7 305.3 325.0

Change on year earlierr % 2.3 13.6 6.5

German FDI into the E&E industry abroad bn € 45.3 52.9 56.3

Change on year earlier % -1.9 16.8 6.4

Number of foreign E&E firms in which an investment was made Number 1,421 1,442 1,392

Change on year earlier % -1.3 1.5 -3.5

Number of employees in these firms 1,000 607 651 665

Sales volume of these firms bn € 103.9 124.2 132.1

Change on year earlierr % -12.0 19.5 6.4

Top ten target countries:

USA bn € 11.8 17.3 17.7

Austria bn € 2.4 3.9 5.1

China bn € 2.6 3.6 3.9

France bn € 3.6 3.2 3.3

Change on year earlier % 58.0 -12.2 53

Switzerland bn € 1.8 1.8 1.8

Change on year earlier % 15.6 1.0 -1.9

Spain bn € 1.0 1.2 1.8

Brazil bn € 1.2 1,4 1.7

United Kingdom bn € 0.9 1.3 1.6

India bn € 1.0 1.3 1.6

Italy bn € 1.4 1.5 1.4

German E&E industry: FDI abroad bn € 43.4 52.1 57.2

Number of German E&E firms that have invested abroad Number 314 331 330

Total FDI into Germany bn € 486.7 536.4 548.4

FDI into the German E&E industry bn € 28.0 32.9 32.5

Number of German E&E firms into which an investment was made Number 686 741 737

Change on year earlier % 12.6 8.0 -0,5

Number of employees in these firms 1,000 268 274 271

Sales volume of these firms bn € 90.4 93.0 100.4

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(German Electrical and

Electronic Manufacturers‘ Association)

Economic Policy, Business Cycles and Markets Department Lyoner Straße 9

60528 Frankfurt am Main, Germany Phone: +49 69 6302-258

Fax: +49 69 6302-326 E-mail: [email protected] www.zvei.org

Edited by:

Dr. Andreas Gontermann Jürgen Polzin

August 2013

While every care has been taken to ensure the accuracy of this document, ZVEI assumes no liability for the content.

of this publication.

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Max Milbredt

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