Germany – Europe’s leading economic nation – remains one of the most important markets for sales and investment. Around 80 million consumers live here, with a combined purchasing power of EUR 1.3737bn. Germany accounts for 20 percent of Europe’s total economic output – more than any other European country and more than the total GDP of all the eastern European countries put together. Such a market environment offers interesting investment opportunities. The state of North Rhine-Westphalia (NRW) provides a good platform for unlocking this potential.
With more than 18 million people, the most densely populated German state contains two of Europe’s largest metropolitan regions: one of these is the Ruhr region, in which 5.4 million people live. The region between Dortmund, Essen and Duisburg was once dominated by the coal and steel industries; today, numerous highly capable companies from the service and high-tech sectors determine its economic structure. Bonn, Cologne and Düsseldorf form a metropolitan area in the Rhineland which has a population of 3.5 million. Manufacturers from the automotive and chemical industries in particular are domiciled here, as well as major service providers in the logistics, advertising, media, and consulting sectors. The former coal and steel region has developed into one of the densest research landscapes in Europe.
Besides its economic diversity and central proximity to the neighbouring countries of Belgium and the Netherlands, North Rhine-Westphalia also offers a highly interesting sales market for consumer products. Almost 150 million people live within about a 500km radius of the state capital, Düsseldorf. This represents a third of all consumers and 45 percent of the purchasing power in the EU. The inhabitants of NRW alone spend EUR 316bn on private consumption every year. North Rhine-Westphalia paints an impressive picture.
Pulling power
In a comparison of the economic locations of northern Europe, North Rhine-Westphalia competes with metropolitan regions such as Ile de France, Randstad or Greater London. However, in a direct comparison, Germany’s most westerly state is doing increasingly well with regard to key indicators. Labour costs, for example, have become competitive in nearly all sectors of the economy. Office rents and commercial site prices are considerably lower than in other European metropolitan regions.
Besides hard decision-making factors, other aspects naturally also influence companies deciding on a location. To determine the satisfaction and the needs of foreign companies, NRW Invest GmbH conducts regular surveys of different foreign investor groups in North Rhine-Westphalia. Generally speaking, what investors value most highly is the region’s central location in Europe, its proximity to the sales markets and its good transport infrastructure. This is evidenced, for example, by a survey of 1,000 foreign firms in North Rhine-Westphalia. Companies from 14 countries of origin (China, Denmark, Finland, France, India, Japan, Korea, the Netherlands, Norway, Sweden, Taiwan, Turkey, the UK and the USA) commented on their choice of location: over 37 percent of the foreign companies in NRW name the central location as the most important reason for locating here, followed by the proximity to the sales markets (33.9 percent) and the good transport infrastructure (29.6 percent).
In this respect, North Rhine-Westphalia scores points not only with its transport infrastructure, but also with its highly developed logistics services. The state possesses a dense transport route network and is one of Europe’s central transport hubs. The highly developed logistics industry in the region handles an above-average logistical volume of national and international traffic flows. The logistics industry is one of the leading growth sectors in North Rhine-Westphalia. With 21,600 companies employing 270,000 people, it is one of the largest industries in the state. If we also count the employees with logistical tasks in industrial and commercial enterprises, there are then over 600,000 people working in the logistics sector. Well-known players in the industry based in North Rhine-Westphalia are Deutsche Post DHL, FedEx, Fiege, Rhenus, UPS, Schenker, Wincanton and NYK Logistics.
Economic diversity
North Rhine-Westphalia attracts companies from both Germany and abroad, with 24 of the 50 largest German companies based in Germany’s most westerly federal state. These include leading German corporations such as E.ON, Deutsche Telekom, Deutsche Post DHL, Metro, ThyssenKrupp, Deutsche BP, Bayer, Bertelsmann, RWE and Rewe Gruppe.
The fact that NRW attracts so many companies from different industries is also due to the state’s wide-ranging industry structure. The factors critical to the success of a business settlement include infrastructure and market accessibility.
The economic structure of North Rhine-Westphalia is characterised by a balanced mixture of traditional industries, innovative economic sectors and services. The spectrum of industries ranges from waste disposal to future energies, and the variety of products from gingerbread cookies to cyanogenic compounds.
Anyone investing in North Rhine-Westphalia will find practically all raw materials, intermediate products and B2B services on the procurement side, and have access to industrial and private customers with high purchasing power on the sale side.
At the same time, the economy in the state is particularly strong in certain areas: in the chemical industry, metal production and processing, the manufacture of metal products, the rubber and plastics industry, mechanical engineering, logistics, energy supply, the ITC industry and the health care industry. In terms of their economic strength, their degree of specialisation, and their employment development, these segments are above average when compared on both a European and German scale. This is the reason why these and other sectors of industry are of particular importance in North Rhine-Westphalia.
Receiving special support from the state government, existing economic clusters are bundled here. The industry-specific networks generate projects which would not have been possible without the cumulative competencies of the companies and the specialised research institutes involved. In this way, cooperations form between firms along the value added chain and research institutes with the objective of developing innovation and growth potential. Just how seriously this is taken is demonstrated by the example of the Japanese Hitachi Corporation. The company is investing EUR 30m at RWTH Aachen University and at the universities of Bochum and Dortmund in order to jointly develop modern power plant technology with the research scientists. The industry clusters are also open to foreign companies headquartered in North Rhine-Westphalia.
Global attraction
With 27.7 percent (EUR 175.6bn), North Rhine-Westphalia recorded by far the highest direct investment share in Germany of all 16 federal states. A long way behind are Hesse with 18 percent and Bavaria with 16.1 percent. Around 11,500 foreign companies from the leading economic nations control their German or European activities from North Rhine-Westphalia. This means that almost a quarter of the foreign companies in Germany are domiciled in North Rhine-Westphalia. These include international global players such as 3M, BP, Ericsson, Ford, LG Electronics, QVC, Sony, Renault, Toyota and Vodafone. The foreign firms employ over a half million people. Although their business activities range from pure production to sophisticated services, around two thirds of the firms concern themselves mainly with sales and services.
Numerous foreign companies control their German business operations or even their European activities from their base in NRW. A clear trend is emerging: companies from Asia and North America work the European market more frequently from North Rhine-Westphalia than is the case, for example, with European investors. Furthermore, for smaller companies the NRW branch is often also the European head office at the same time.
This strong national involvement comes as no surprise because North Rhine-Westphalia is Europe’s largest sales and procurement market. 17.3 percent of German export goods are “Made in North Rhine-Westphalia” (EUR 172 bn). As an independent export country, the state would rank 19th in the world – almost level with Spain and Taiwan. 23 percent of German imports go to North Rhine-Westphalia (EUR 189.5bn). The total volume of trade is EUR 361.6bn. North Rhine-Westphalia is home to large, world-ranking industrial corporations, as well as to dozens of smaller companies which are leaders in their respective business fields. Industrial sales in North Rhine-Westphalia once again increased in 2008: up by 3.4 percent to EUR 366.3bn – equivalent to 21.1 percent of total industrial sales in Germany. 19.6 percent of the employees in North Rhine-Westphalia work in the industrial sector and 18 of the 50 largest German trading companies are based here, including such well-known names as Metro, Aldi and Rewe.
For more information tel: +49 (0) 211-130 000; email: nrw@nrwinvest.com; www.nrwinvest.com
