Foreign investment

Germany: Foreign investment

FDI in Figures

Germany is considered to be an attractive country for foreign direct investment (FDI), but the global recession and subsequent Eurozone crisis in 2012 have hampered the influx of FDI in recent years. In 2015, FDI reached USD 31.7 billion, an important hike but still inferior compared to its pre-crisis levels. Germany is the eleventh highest receiver of FDI influx in the world, and the fifth privileged destination for transnational companies for 2016-2018 (UNCTAD, 2016 Global Investment Report). In terms of FDI stock, Germany is the fifth destination for FDI in the world and one of the leading investor countries.

Among the country’s strengths are a highly powerful industrial network, a highly skilled workforce with a good command of English, reliable infrastructure, a favourable social climate, a stable legal framework and a location in the heart of Europe. Its main weakness is a high tax rate (for both individuals and businesses) and rather inflexible labour laws.

Foreign Direct Investment	2014	2015	2016
FDI Inward Flow (million USD)	3,954	33,312	9,528
FDI Stock (million USD)	849,982	786,940	771,011
Number of Greenfield Investments***	933	1,231	568
FDI Inwards (in % of GFCF****)	0.5	5.0	1.4
FDI Stock (in % of GDP)	21.9	23.4	22.2

Source: UNCTAD, Latest available data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

FDI INFLOWS BY COUNTRY AND INDUSTRY

Main Investing Countries	2014, in %
The Netherlands	23.0
Luxembourg	17.0
United Kingdom	10.0
United States	9.0
France	8.0
Switzerland	8.0
Italy	5.0

Main Invested Sectors	2014, in %
Professional, Scientific and Technical Services	82.0
Information and Communication	13.0
Manufacturing Sector	2.0
Administrative Activities	1.0
Construction	1.0
Real Estate	1.0

Source: Deutsche Bundesbank - Latest available data.

Form of Company Preferred By Foreign Investors: GmbH
Form of Establishment Preferred By Foreign Investors: Distributors, commercial agents.
Main Foreign Companies: Ford , General Motors, Exxon Mobil, Sony, Toshiba (German), Total.
Sources of Statistics: German statistics office

Why You Should Choose to Invest in Germany

Strong Points: Strengths include:
- A strategic location at the centre of Europe
- The largest population of the European Union
- Infrastructure among the most developed in the European Union
- Advanced technology and expertise
- Highly qualified work force
- Competitive taxation
Weak Points: Weaknesses include:

- Public finances are structurally highly in deficit
- Eastern part of the Germany is struggling to catch up with the western part in many fields
- Ageing population weighs heavily on growth
Government Measures to Motivate or Restrict FDI: The German Government is implementing measures aimed at encouraging investments in the country, including:

- Financing by the European Union and/or by German federal entities
- Aid aimed specifically at the initial investment phase but also at the operational phase of the project
- Favourable incentives for investments into research and development

In 2013, the Capital Investment Code replaced the German Foreign Investment Act. The Foreign Trade and Payments Act and Ordinance were also amended.

Protection of Foreign Investment

Bilateral investment conventions signed by Germany: Germany has signed bilateral agreements with numerous countries. To see a list of participating countries, consult UNCTAD website.
International Controversies Registered By UNCTAD: Germany is in a controversy situation with India because of the Ashok Sancheti, with the Czech Republic in the of the forest and with Ukraine for an oil tanker litigation.
Organizations Offering Their Assistance in Case of Disagreement: ICCWBO , International court of arbitration, International chamber of commerce
ICSID , International Center for settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency: Germany is a signatory to the Convention of the MIGA.

Country Comparison For the Protection of Investors

	Germany	OECD	United States
Index of Transaction Transparency*	5.0	6.0	7.0
Index of Manager’s Responsibility**	5.0	5.0	9.0
Index of Shareholders’ Power***	8.0	7.0	4.0
Index of Investor Protection****	6.0	6.5	6.5

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Procedures Relative to Foreign Investment

Freedom of Establishment: Yes. The German Government and industry organisations actively encourage foreign investment in Germany. Moreover, German laws provide foreign investors national treatment.
Acquisition of Holdings: Foreign investors may have a majority holding in the capital of a local company.
The Foreign Economic Law contains restrictions on private direct investment for reasons of foreign policy, foreign exchange, national security, public order. Restrictions also concern armaments and cryptographic equipment.
Obligation to Declare: Germany Trade & Invest (the agency responsible for the promotion of foreign investment) provides information about necessary authorisations or declarations.
Competent Organisation For the Declaration: Federal Office of Economics and Export Control
Requests For Specific Authorisations: Investments must be governed by the policies and the procedures specific to the sector. For more information refer to the Federal Office for Economic Affairs and Export Control (BAFA).

Investors that are not from EU or European Free Trade Association must specify if they are involved in the development of war weapons or armaments, or the production of cryptographic equipment.

Office Real Estate and Land Ownership

Possible Temporary Solutions: The property ownership regulation first and foremost comes from State responsibility.
The Possibility of Buying Land and Industrial and Commercial Buildings: Yes
Risk of Expropriation: According to German law, for public purposes only and in a non-discriminatory manner, private property can be expropriated. The process must be transparent, and victims must receive prompt, adequate and effective compensation.

Investment Aid

Forms of Aid: Foreign investors should contact the Invest in Germany agency and the Federal Commissioner for Foreign Investment in Germany for further information about aid for setting up in Germany.
Privileged Domains: Subsidies, low interest rate loans, financial incentives and other financial measures are financed by the European Union, the Federal Government and various Länders (administrative units). For more information, refer to the German investment promotion agency.
Privileged Geographical Zones: The most important incentives concern operations carried out in the 5 new Lander in the East of the country. Companies can benefit from subsidies for equipment, structures for research and development (see the Ministry of the Economy and Technology' website). They can also obtain preferential loans and guarantees, for example when they create autonomous structures in these Lander or when they acquire a holding in a company established in these same Lander. In 2013, a focus was made on four sectors: Renewable energy and resources, chemicals and health technologies, mechanical and electronic technologies and services.
Free Zones: The eastern part of Germany. There are five free trade zones established under EU law: Bremerhaven, Cuxhaven, Deggendorf, Duisburg and Hamburg.

Investment Opportunities

The Key Sectors of the National Economy: Consumer goods, since the number of inhabitants is the highest in Europe. Subcontracted goods, as Germany is the machine tool champion. High technology products and the renewable energies.
High Potential Sectors: Services to consumers, high-tech, multimedia and electronic sectors.
Privatization Programmes: There is no privatization program ongoing. As a matter of principle, Germany treats foreigners equally in privatizations.
Tenders, Projects and Public Procurement: Bundesausschreibungsblatt, Tenders official body (in German)
Tenders Info, Tenders in Germany
Ted - Tenders Electronic daily, Business opportunities in EU
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: Education. State-owned enterprises are mainly in charge of supplying municipal water, energy and national rail transportation.
Sectors in Decline: Wood, steel and iron industries.

Finding Assistance For Further Information

Investment Aid Agency: Invest in Germany
Doing Business Guides: Deloitte "International Tax and Business Guide 2016" to Germany

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