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Global Foreign Investor: A German Statement of Intent

31/10/2019
 

​By Tal Gelbart


Germany is one of the five largest investor nations in the world, a model nation most would do well to aspire to, investing more than $75 billion alone in 2018, and around $500 billion invested through more of nine thousand investment projects, from 2012 - 2018. Moreover, over the past eight years, German investment has created an estimated of million jobs and by doing so contributed a great deal to the global economy.

German Foreign Investment, 2012-2018, Source: FDI Markets)

This fact is also reflected at corporate level with eleven German companies ranking in the top 100 of the UNCTAD Transnationality Index. As such 40% of all German companies feature in the Index. 


RankingCompanySector
11SAP SEComputer and Data Processing
38Siemens AGIndustrial and Commercial Machinery
45Fresenius SE & Co KGaAHealth care services
49Robert Bosch GmbHMotor Vehicles
54BASF SEChemicals and Allied Products
56Deutsche Telekom AGTelecommunications
62Volkswagen GroupMotor Vehicles
63Daimler AGMotor Vehicles
65Bayer AGPharmaceuticals
67BMW AGPharmaceuticals
90RWE AGElectricity, gas and water

(Source: UNCTAD, The world's top 100 non-financial MNEs, ranked by foreign assets, 2017)


Features of German Foreign Investment

Over the six years spanning from 2012 to 2017, German foreign investments diversified to include both developed and developing nations, as featured in the table below, counting the likes of the US, UK and France, as well as the developing economies of China, India and Mexico.


In terms of manufacturing investments, the US is a primary target, trailed by China, India and Mexico, while the UK, France and Poland are denoted for their production activities. Primary foreign business investments have predominantly taken the form of logistics, supply and distribution activities, business services, manufacturing and marketing. R&D takes less of an investment precedence, nonetheless the brunt of these activities are undertaken in the US, UK, Austria, Australia, Romania, China Canada and India. Germany is a leader in the manufacture of industrial equipment and automotive components, while their dominance also extends to the software and IT services sector, and duly followed by the chemicals and business sector.

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Breakdown of German Investment by Project Type, 2012 - 2018


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(Source: FDI Markets)


As the above chart demonstrations, investments in new projects constitutes eighty percent of German expenditure between 2012 and 2018.

According to the FDI Markets database, which tracks global foreign investment, German investment is largely predicated on the potential for growth and accessibility into the local markets, human capital, as well as a foothold into the technology and innovation sectors. An Israeli study into investment motives concurred that German investments are grounded in access to local markets and their procurement options, as well as their search for technology and innovation bases.


German Investments in Israel

Despite the volume of German global investment, investment in Israel has been limited. As of CBS data (2017), the figure stood at a modest $525 million, and an average annual incoming investment of $494 million for the period between 2015 and 2017. Of the approximate 300 R&D centers in Israel, 22 are German, just over 7%, according to the below information. That equates to three in the automotive sector, four in business and financial services and the remainder in life sciences. 

According to Invest in Israel data, below, German investment in Israel, relative to their investment in the UK, France and Japan, is greater, but still lags far behind the US. 

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:German R&D Centers in Israel


CompanySector
BoschAutomotive
Daimlerchrysler Corp
Automotive
Bayerische Motoren Werke (BMW) AG Automotive
SickBusiness Services
Allianz SEBusiness Services
ADVA Optical NetworkingICT (Communication)
Deutsche Telekom AGICT (Communication)
Here Global B.V. (Company Co-Owned By German Automotive Companies Audi, BMW & Daimler)Automotive
RNTS Media (known as Fyber NV)ICT (IT & Enterprise Software)
SAP SEICT (IT & Enterprise Software)
Software AgICT (IT & Enterprise Software)
Suse Linux GmbHICT (IT & Enterprise Software)
Carl Zeiss SMS GmbHICT (Semiconductors & Hardware)
Lantiq Deutschland GmbH (*by Intel*)ICT (Semiconductors & Hardware)
Siemens AGIndustrial Goods and Services
BrainlabLife Sciences
Merck KGaA (known as "Merck Serono")Life Sciences
Rhön-Klinikum AG Life Sciences

(Source: Industrial Cooperation and Foreign Investment Authority) *This list is not exhaustive and is subject to change.


As listed in the above table, and according to a study published by researchers from the Hebrew University (under the auspices of the German-Israeli Chamber of Commerce), more than fifty percent of German FDI investments in Israel are aimed at procuring innovation, with the preponderance pointed at optometric technology, image recognition, cyber security, virtual reality (VR and AR) and social networking applications.

The study also indicates that more than half of DAX30 companies (the German blue-chip stock market index) are involved in the Israeli innovation market. Most of these non-IT businesses (such as the automotive industry) state that otherwise their businesses will lag behind technological advances and thus become irrelevant. These businesses claim that Israeli technology has an acute impact on the industry in which they operate. For this reason, entry into the Israeli market is a necessity for maintaining the company's status at the forefront of technology. This motivation is in line with the rise of Israel's status since the 1990s as a startup nation and innovation.


R&D Centers Opened by German Companies in Recent Years
Opening a $64 million Porsche Innovation Center;
Establishing the next 47 accelerator in Siemens' collaboration with TechStars.

 

Investments in Significant Companies / German Acquisitions in Recent Years
Volkswagen's $300 million investment in Gett digital transportation company;
RNTS Media acquisition of InnerActive for $46 million;
Completion of control and transition to one hundred percent holding of pharma and chemistry company Merck in nanotechnology Qlight for tens of millions of dollars;
Altana's $136 million investment in Landa Digital Printing.

 

Other Notable German Investments in Recent Years
Expansion of Lufthansa in the form a $10.7 million air station and maintenance at Ben-Gurion Highways – a first for the company outside of Europe.

 

Conclusion

Foreign investment between nations often is often perceived as a means of strengthening collaborations and relations. While Germany is recognized as a heavy industrial leader, Israel is famed for its research and innovation. According to findings, German companies are risk averse and disinclined from investing heavily in innovation. The German industry allows for optimal adaptation of existing technology and worldwide distribution of finished products. In contrast, Israel heavily invests its resources in innovations, but does not necessarily leverage the same mass-production and widespread developments. Therefore, Israeli-German cooperation makes up for those shortfalls while benefiting each respective nation.

Such a collaboration has been evidenced in the automotive industry (of whom Germany is a global leader, alongside the US and Japan), whereby the imposition of three revolutions:   autonomous automotive; the transition to electric propulsion; and the shared travel economy, have conspired to complicate their efforts. Thus the requirement to bridge between traditional industry and the technological and high-tech sector has created potential for collaborations with Israel and Germany and, is hoped, it will continues to do so.

It in this context that Invest in Israel serves its purpose in identifying lucrative investment opportunities and fast-tracking investments. We invite any interested parties to contact us and together we will ensure that your investment is the right one.   


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