Read the Conversation
EF: When was it most challenging to attract investments during this time, and why?
AH: Knowing that an energy transition would occur was one of our most challenging moments. There are two sides to the challenge. The first is incurred business costs. The demand for renewable energy for many businesses during the energy transition is reflected by significant changes in the cost structure. The other side of the challenge is required investments, the clear need to invest in future technology. Without renewable energies and the corresponding technology, businesses will become less attractive to partners, suppliers and clients. We had to communicate new perspectives for businesses and change our objectives and communication style based on these new paradigms to attract companies to Germany's new opportunities. Executing these changes in our strategy effectively was the most challenging part. Devising strategic industry areas like Energy & Resources, Electronic & Automation, Digitalization | Future cities, Mobility & Logistics and Health economy was a successful way of achieving the desired traction.
Germany Trade & Invest is a neutral organization. We consult the investing company and recommend regions for foreign direct investments according to the demand profile provided by the investor. At the same time, we have the remit to communicate the advantages of regions in Germany that are undergoing high degrees of structural transformation. Ultimately, our clients always receive unbiased information based on empirical facts so that they can make informed decisions. And of course, as a government agency, we offer all our services free of charge,
EF: As the chair of the OECD network of investment promotion agencies, what trends do you see in terms of atrophic investments and strategies coming forward for the future?
AH: Renewable energy, new mobility, digitalization, the availability of resources and the circular economy are the most important sectors for FDI in many economies becoming carbon neutral. OECD countries tend to gear investment promotion activities towards these sectors. Economic digitalization is also a major factor to increase sustainability, national resilience and greater structural autonomy.
As the countries within the OECD are similarly structured economically, these similarities make it easier for investment promotion agencies of the network to share knowledge and best practices amongst themselves. The OECD network of investment promotion agencies strives to share the best practices and benefits of sustainability in Foreign Direct Investments. We develop methods to improve the chances for success of and benefits derived from foreign direct investment for nations.
EF: What factors keep Germany at the forefront of innovation in the sectors that promote investment?
AH: Investors are interested in areas with developmental potential and a large existing market. Companies across a variety of industries are using business models in Germany that tap the huge opportunities within Germany’s more than 3 million companies base of small to medium-sized enterprises.
Germany also sports a unique public-private research structure with a vast number of scientific institutions working on practical applications on behalf of and together with the industries. Companies that create innovations can immediately do empirical tests and find out whether their products fit their service and value chains. Some of Germany’s main selling points are a highly skilled workforce, process and innovation excellence as well as large client bases in b2b and b2c markets. The diversification within Germany’s industries is huge also a large chunk of companies belong to the manufacturing segment, giving the German economy high stability and resilience. 30% of our gross domestic product is created by the manufacturing industry – some three times more than most other European countries. These are all factors that continually expand the potential for successful long-term business investments.
Many industries, including the pharmaceutical industry, use German R&D capabilities to achieve success in the German and European markets.
EF: How do you attract long-term investments and how do you distinguish between long-term and short-term investments? What type of initiatives are needed to elicit long-term investments?
AH: Service industries move with their client demands globally. For long-term investments, we have to offer long-term perspectives. Long-term perspectives require less market volatility, fewer short-term risks and more long-term benefits. Companies see risk diversification in an economy as crucial. In Germany’s case this is obtained by offering stable political and juridical systems, large market sizes in almost any business segment and a.o. also by the number of enterprises. The risk in Germany is lower with over three million diverse companies. The same goes for the diversification of age and demand structure within the population maintaining a comparably high buying power, especially for b2c markets. For the healthcare sector particularly, the world-class research and development facilities as well as the high buying power and demographics allow positive business expectations.
Often, disrupting innovations need significant upfront investments before the respective business models become profitable. Germany through its subnational economic structure is offering companies a great variety of incentive programmes based on national and/or European Union frameworks. For example, when we attract semiconductor companies like Intel or battery producers like Northvolt or CATL, those firms benefit from investments by the European Union that allow member states to bind companies long-term.
EF: What are GTAI's role and impact in attracting business investments to Germany, specifically in the healthcare sector?
AH: One of GTAI’s greatest benefits for foreign companies is reducing the complexity to enter the German market. Investors need just-in-time clarity for sound decision-making if or if not to engage in an international business. Germany is globally known for accuracy, precision and quality. These qualities extend also to its administrative and regulatory processes. We cut through bureaucracy and simplify expansion to Germany.GTAI helps foreign investors understand their situation, for instance, by providing information on specific markets and industries in the healthcare sector, EU medical-device regulations, certifications for special tools and devices, the latest technological developments, public subsidies and the healthcare reimbursement system in Germany. We also keep international businesses updated on the changes within Germany, for instance, juridical and regulatory developments or hospital budget reforms. Investors value our information and advice as they are reflecting changes in Germany as their target market in real-time.
GTAI also consults political decision-makers on how telemedicine applications, data, and data security affect the market and where the market opportunities will be. This helps companies decide when to enter the market. We also provide information on how projects can be financed. We have a database for medical project partners. We are the only agency in Germany with a complete overview of EU and German grants at national, subnational, regional and local levels.
Conversely, when laws change on the reimbursement process, we receive direct feedback from businesses, which we can directly communicate to policymakers. In this sense, we are the voice of foreign business investors in Germany.
EF: What advice would you give to a company considering investing in healthcare and Germany?
AH: First, contact Germany Trade and Invest and get support. To create a business plan, multinational companies have to research the legal, economic, social, political, ecological, technological and commercial aspects of the country they want to invest in. Business investors must use standard frameworks to assess the markets. However, it might be challenging for a small and medium sized companies to do this sufficiently on their own. This is where we come in. We help companies address all the relevant categories. We provide advice and information, all free of charge, tailor-made to the specific situation of a company to fill in the blanks in the business plan and allow the company to make better decisions.
Businesses are organized differently in different countries. Germany has a lot of industry associations that play a major role in creating policies and building platforms to develop business. For an accelerated market entry, we can offer to connect companies with the right associations and multipliers, whereas direct seller-buyer matchmaking is not part of our services.
EF: In what way has digitalization and sustainability in healthcare been improving investment and promoting business in Germany?
AH: Quality of life and the provision of medical services are becoming increasingly central issues mainly because of an increased purchasing power and an ageing population. Digital services and healthcare have become a market unto themselves because regulators have adapted regulation to new services based on digitalization. Digital business models in healthcare are getting traction because certified services are eligible to be reimbursed by health insurance. Process optimization in the medical device production industry is significantly driven by innovation in the deployment of digital technologies and can raise quality and lower costs. These aspects are also incentives for foreign business expansions in the healthcare segment since they entail opportunities to participate and profit from the increase in digitalization and telemedicine in Germany.
EF: What are some of the things you have been most proud of in GTAI's work attracting investment in the last couple of years, and what do you look forward to in the future?
AH: I am very proud of my worldwide team. In the last five years, we doubled the number of companies pursuing foreign direct greenfield investments in Germany. In the last three years, the demand for large multinational companies for our services has skyrocketed and led to some of the largest investments in Germany for the last 60 years. These are tremendous accomplishments. Germany’s economy throughout the crisis remains attractive to investors. Although we have become a service partner for several multinational companies, the majority of our clients remain small and medium-sized businesses, creating most of the economic value in Germany. We are proud that for international companies and Germany, our investor consulting makes a difference regardless of business size.