Germany has improved as a business location in recent years and has long been better than its reputation. This is the result of a study by Allianz Dresdner Economic Research Unit, which was presented on Wednesday in Berlin.
"Macro-economic facts show that Germany is not doing as badly as its longstanding image would suggest", said Michael Heise, Chief Economist of Allianz SE and Dresdner Bank AG. Germany ranks eighth internationally.
According to the study, the best business locations are Sweden, followed by the Netherlands and the UK. However, the analysis also reveals that Germany has a number of weaknesses. "We have to improve the investment ratio, education and public sector debt", said Heise. In these areas, the Federal Republic only ranks in the middle range. "There is no room for complacency."
Germany's quality as a business location improves
Improvement needed in capital expenditure and education / Sweden in first place / Netherlands and UK joint second / India tops growth ranking
Germany as a business location is better than its reputation (Photo: Frankfurt skyline)
Michael Heise: "If everyone is good, we have to be better"
Analysis based on quantitative criteria
The location analysis produced by the Allianz and Dresdner Bank economists is based exclusively on quantitative criteria. This distinguishes it from other international comparisons of competitiveness and location quality, which frequently draw heavily on survey results. This can often lead opinion makers to exaggerate actual development. In addition, the study covers the key industrialized nations as well as the BRIC countries (Brazil, Russia, India and China).
According to Heise, the main reason for Germany’s improved position is that the sub-indicators for economic growth rebounded significantly in 2006 after a relatively long period of weakness. Nevertheless, structural problems are impacting potential growth and still need to be addressed. "Germany cannot be satisfied with its position in the middle range," said Heise. The high overall scores recorded by the smaller EU states and the emerging markets’ dominance in the "economic growth" sub-ranking are particularly noteworthy.
The study by Allianz Dresdner Economic Research Unit is based on 17 indicators that are assigned to the four following sub-rankings: economic performance, economic growth, availability of capital, labor and technological knowledge (economic potential) and sustainability of fiscal and ecological development.
The 18 countries examined in the analysis account in the aggregate for around 80 percent of global value added. Heise: "Our location indicator focuses on the idea of competitiveness: if everyone is good, we have to be better."
According to Heise, the main reason for Germany’s improved position is that the sub-indicators for economic growth rebounded significantly in 2006 after a relatively long period of weakness. Nevertheless, structural problems are impacting potential growth and still need to be addressed. "Germany cannot be satisfied with its position in the middle range," said Heise. The high overall scores recorded by the smaller EU states and the emerging markets’ dominance in the "economic growth" sub-ranking are particularly noteworthy.
The study by Allianz Dresdner Economic Research Unit is based on 17 indicators that are assigned to the four following sub-rankings: economic performance, economic growth, availability of capital, labor and technological knowledge (economic potential) and sustainability of fiscal and ecological development.
The 18 countries examined in the analysis account in the aggregate for around 80 percent of global value added. Heise: "Our location indicator focuses on the idea of competitiveness: if everyone is good, we have to be better."
Sub-rankings show varying results
The "economic performance" sub-ranking solely comprises structural indicators. As a result, the ranking is relatively stable over time and is dominated by the industrialized nations. The Netherlands came out top in this area, followed by Sweden and Austria. Germany has ranked squarely in the middle range since 2000. One striking finding is that the Federal Republic has clearly lost ground against the European average in terms of its standard of living.
The "economic growth" category is substantially more volatile, with the emerging markets clearly leading the field. India came top in this category followed by Poland and China. Germany has seen a roller coaster performance over time, coming tenth in 2000 before dropping to seventeenth place in 2003, only to bounce back to rank eighth last year. The improvement in labor productivity was particularly marked, with Germany advancing six places in this category.
Criteria examined in the "availability of capital, labor and technological knowledge" sub-ranking are the investment ratio, research and development expenditure and standards of education. Germany only ranks in the middle range when it comes to the economic potential indicator. "Competition in the area of innovation has become fiercer. Germany has to do more to ensure it is fit for the future. In particular, it must create human capital to safeguard its position as a location", said Heise. Canada takes first place in terms of economic potential, followed by Sweden and the United States.
The group of indicators relating to the sustainability of economic development reveals imbalances that represent a mortgage on the future. In addition to sustainable public finances, this category examines the current account balance, energy consumption and CO2 emissions. The scores recorded by the industrialized nations for this group of indicators vary widely. Sweden and Austria lead the field, with Germany in ninth place. Canada (15) and the United States (17) trail the field for this sub-indicator.
The "economic growth" category is substantially more volatile, with the emerging markets clearly leading the field. India came top in this category followed by Poland and China. Germany has seen a roller coaster performance over time, coming tenth in 2000 before dropping to seventeenth place in 2003, only to bounce back to rank eighth last year. The improvement in labor productivity was particularly marked, with Germany advancing six places in this category.
Criteria examined in the "availability of capital, labor and technological knowledge" sub-ranking are the investment ratio, research and development expenditure and standards of education. Germany only ranks in the middle range when it comes to the economic potential indicator. "Competition in the area of innovation has become fiercer. Germany has to do more to ensure it is fit for the future. In particular, it must create human capital to safeguard its position as a location", said Heise. Canada takes first place in terms of economic potential, followed by Sweden and the United States.
The group of indicators relating to the sustainability of economic development reveals imbalances that represent a mortgage on the future. In addition to sustainable public finances, this category examines the current account balance, energy consumption and CO2 emissions. The scores recorded by the industrialized nations for this group of indicators vary widely. Sweden and Austria lead the field, with Germany in ninth place. Canada (15) and the United States (17) trail the field for this sub-indicator.
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