FOREIGN INVESTMENT
All foreign investment must be reported to the German Federal
Bank (Bundesbank), but there are no restrictions on the repatriation
of capital or profi ts. Until the 1998 deregulation of Deutsche
Telekom, telecommunications remained closed to foreign investment.
Th ere is no special treatment for foreign investors. As of
2005, incentives for investment in the former GDR deemed to be
desirable included accelerated depreciation, loans at below-market
interest rates, and cash investment grants and subsidies. Still
applicable in all of Germany as of 2005 were cash grants; tax incentives
such as capital reserve allowances and special depreciation
allowances; investment grants; and credit programs, including
low-interest loans. Foreign fi rms may also participate in government
and/or subsidized research and development programs.
Although few formal barriers exist, high labor costs have discouraged
foreign companies from setting up manufacturing plants
in Germany. Nevertheless, the German government and industry
enthusiastically encourage foreign investment in Germany. German
law provides foreign investors national treatment.
Th ere are eight free ports in Germany operated under EU Community
law. Th ese duty-free zones within the ports are open to
both domestic and foreign entities.
Across the 10-year period 1991 to 2001, total foreign direct investment
(FDI) totaled $393 billion, the third highest total in the
world. Half of this came in 2000, when FDI infl ow reached over
$195 billion. Annual FDI infl ow had been $12 billion in 1997,
rising to $24.5 billion in 1998, to $54.7 billion in 1999. With the
bursting of the dot.com bubble in 2001, FDI infl ow to Germany
fell to about $21.1 billion in 2001 and was estimated at $36.2 billion
in 2002.
According to the Bundesbank, FDI in Germany in 2003 (the latest
fi gures available) had fallen to $12.9 billion, about two-thirds
less than the 2002 high. In GDP terms, 2003 fl ows of FDI represented
0.6% of Germany’s GDP, while the total stock of FDI in
2003 equaled 26.1% of GDP.
FDI outfl ows from Germany peaked at almost $106.5 billion in
1999. FDI outfl ows were about $36.9 billion in 2001 and $8.7 billion
in 2002. German fl ows of direct investment abroad plunged
to $2.6 billion in 2003.