Johann Niggl, Invest in Bavaria
Release Date: 2009-03-06
You have identified 19 key industry sectors to focus on in the cluster initiative; could you tell us how those sectors were chosen and what it is about Bavaria that makes it an attractive place for investment?Bavarian economic policy focuses on 19 clusters, which highlight the top industries in Bavaria. The region belongs to the same league as the leading countries in the world with respect to R&D and production. Government policy analysts along with industry partners identified those 19 clusters, ranging from industrial fields like aerospace to financial, film, and audiovisual. Bavaria sees itself as the central gateway to Europe. When countries look to invest in Europe, they see Bavaria as a hub located in the geographical center of the continent with easy access to any point therein, with top quality infrastructure including a leading European airport serving 200 destinations worldwide. Bavaria is therefore one of the most attractive business locations in Europe.
Nineteen clusters is a huge number, encompassing a wide range of industries. What does it mean exactly to be a cluster?
The cluster initiative has two main objectives. The first goal is to bridge R&D and production. Normally there are certain gaps between research and development and industrial production. Bringing these two areas closer together provides a significant advantage to small and medium sized companies, which normally don’t have elaborate R&D departments. The cluster initiative enables them to use universities and other research institutions’ facilities all across Bavaria. The second goal is to accelerate the whole process from innovation and invention to market-ready products. Thus, the overall goals of the initiative are bridging and acceleration.
In the aerospace cluster for example, the cluster initiative facilitates firms to emphasize networking within the community of relevant companies and industries. The cluster initiatives have a formal management structure tasked with coordinating and promoting the cluster process. They organize the platform for networking and building relationships between R&D and production organizations as well as cross-industry dialogue for sectors that don’t normally interact. An example in the aerospace industry is bringing together propulsion technologies with the relevant ICT and processing technologies to create new products and accelerate relevant processes.
Minister Zeil recently quoted Bill Gates in calling Bavaria “Europe’s High Tech Mecca.” He also pointed to €154bn in exports in 2007, much of that to the world’s leading economies, many of which are currently facing the recession that is gripping the global economy. Just yesterday the Wall Street Journal reported record lows in consumer confidence and German export numbers; given Bavaria’s reliance on a strong export economy, how has the region weathered the economic crisis?
Around 50 % of Bavaria’s GDP is accounted for by exports. This is a very high number, which is an advantage in stable economic environments. In times of economic turmoil this particular export orientation may cause some difficulties. We are currently seeing a decline in business activity as is the case in many other countries. Nevertheless, Bavarian industry is among the world’s strongest, and thus may not decline as severely as in other states. We must also make distinctions between different industries. For example, the aerospace industry is remaining relatively stable.
In times of crisis, countries tend to become increasingly protectionist. Russia recently placed a 30% tariff on automotive imports. Last month at the World Economic Forum in Switzerland, Chinese PM Wen Jiabao spoke on the importance of keeping free trade flowing. What do you see as the crisis’ impact on free trade?
Free trade is essential for all countries. The Minister of Economic Affairs Martin Zeil therefore emphasizes the fundamental need to promote free trade worldwide. Protectionism at any time would be a very shortsighted approach, even for countries with small export economies. Globalization and the division of labor are so intensive that any form of restriction on free trade would serve to increase the severity of the economic crisis. Therefore we are very optimistic that reasonable decisions in respect to maintaining free trade will take place. Nevertheless, we have some signals as to slight protectionism, but we believe decision makers will be reasonable and maintain free trade.
When choosing to invest in a new location, regional competition is intense. In the aerospace industry there are the well-known hubs of Toulouse, Hamburg, and Seattle. What distinguishes Munich and the Bavarian region from these other areas in terms of its attractiveness as an aerospace cluster?
In Bavaria we have global players combined with small and medium sized companies. These smaller players are very innovative, sometimes even more innovative than the global players. We also have an excellent R&D environment including a dozen universities engaged in aerospace research and around eight major research projects. We believe that these elements combined with the cluster initiative’s networking platform make Bavaria extremely competitive compared to the other aerospace hubs.
Prime Minister Wen Jiabao and Chancellor Merkel met in late February in the context of his European tour. Chinese Minister of Commerce Chen Deming was also in Berlin signing €11bn worth of contracts. China is also Bavaria’s largest Asian trading partner. What does China mean to Bavaria?
Bavaria has close contacts with China including a partnership with the province of Shandong. Bavaria has had strong political connections with China for many years. We see that Chinese firms need knowledge in R&D as well as product development, design, and marketing. Therefore we believe that there can be synergies between Bavarian and Chinese companies.
Bavaria has its own approach to the Chinese market. Our partnerships with Shandong and other states in the US and India are on a direct basis and don’t involve the federal government. However, we cooperate with Germany Trade & Invest, which is the Federal agency responsible for promoting investment in all of Germany. The role of the Federal body is to support each of the states and promote Germany as a whole. Together with Germany Trade & Invest we foster new business and investment ties with China.
There has been a representative from Invest in Bavaria in China for over a decade. Could you please describe some highlights of the benefits of having an office in China?
The representation office has two objectives. Firstly, the office organizes delegations to China. We have formal delegations once or twice a year as well as more frequent company trips. The representative works to open doors, identify partners, and aid Bavarian companies looking to operate in China. Secondly, the representative executes Invest in Bavaria’s marketing strategy by attending trade fairs and contacting core industries to raise awareness about Bavaria to these decision makers.
Five decades ago the Bavarian region was an underdeveloped backwater and today it has become a “High Tech Mecca.” Looking to many other regions in the world that could today be called underdeveloped, what role do you see for Bavaria as these regions move to take the place currently occupied by the region?
Bavaria has a fantastic history of post World War Two transformation from an agrarian region into a high tech hub. The specific conditions after the war were quite different from those today. However, there were political decisions that could be emulated in some of the emerging countries today. For example, there was an emphasis on infrastructure. The core investments were on motorways, public transport systems, and airports. The stress on infrastructure was certainly a fundamental decision that might bring success to other states today. Secondly, a number of universities and institutes were founded in the 1960s and 1970s as part of a project to induce R&D. Thirdly, we had a very beneficial economic policy that resulted in very few strikes and motivated workers to gain high skill training. There was also a promotion of export-oriented businesses. This in particular is a strategy that countries in an earlier stage of development can use to jump-start their economies.
Germany has some of the highest operating costs worldwide. How will Bavaria keep its edge and continue to attract investment from competition with both developed and developing regions?
Bavaria does not have a cost advantage in all production sectors. This means we have to focus on R&D and on highly complex production sectors such as aerospace. We can’t compete in mass production of goods, which can be done in China, Eastern Europe, or even India. However, over the last few years a number of companies have brought back production from lower cost regions. This happened for a number of reasons. First, many firms overestimated cost savings in these countries. Second, transaction costs turned out to be rather high. Third, quality was reduced and since the market often demands a certain level of quality this often became problematic. This can be seen on the company level as well; certain companies focus on lower cost products while other companies focus on higher quality, more complex products.
During the recent 10-year anniversary of Invest in Bavaria, Minister Zeil said “For the past ten years invest in Bavaria has helped the region successfully hold our own in terms of competition for national and international projects. Since 1999 the organization has accompanied more than 750 investment and expansion projects creating more than 27,000 jobs in Bavaria.” Although you personally have not been here for much of this past decade, what is your vision for the next 10 years at Invest in Bavaria?
The vision is that Invest in Bavaria will and shall provide the best service to foreign companies that want to make direct investment in Europe. Generally speaking we want to make life as comfortable as possible for those companies looking to establish themselves in Bavaria. We want to raise awareness about Bavaria and we want to aid the settling process. We are optimistic that we will continue to be successful in this area, and be the best partner in Germany and Europe for this process.
We do have one advantage over other states in Germany – Bavaria is a brand! Everybody, everywhere knows Bavaria in terms of Oktoberfest and castles. We see that this is a positive image and we don’t want to replace it but simply to emphasize our traditional approach. We have our mascot, Max, dressed in leather trousers connoting the traditional aspect of Bavaria. Bavaria today is the combination of high tech, leading industry, fantastic, traditional countryside and above all open minded, modern people rooted in this traditional past.
What is your final message to our readers in China?
Bavaria provides the best partners for Chinese companies in terms of cooperation as well as top quality products and services for Chinese industry. Not only do we provide the best in terms of quality, but we also have highly flexible people behind these technologies who are open minded, friendly and looking to embrace new partners.
| Company: | Invest in Bavaria |
| Country: | Germany |