However, the analysis also reveals that Germany has a number of weaknesses. Investment ratio, education and public sector debt must be improved. In these areas, the Federal Republic only ranks in the middle range. There is no room for complacency.
Germany as a Business Location – An International Comparison
The location analysis 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). The 18 countries examined in the analysis account in the aggregate for around 80 % of global value added. The location indicator focuses on the idea of competitiveness: if everyone is good, Germany has to be better.
The main reason for Germany’s improved position is that the subindicators 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. The high overall scores recorded by the smaller EU states and the emerging markets’ dominance in the “economic growth” subranking are particularly noteworthy.
The study is based on 17 indicators that are assigned to the four following subrankings: ·Economic performance·Economic growth·Availability of capital, labor and technological knowledge (economic potential)·Sustainability of fiscal and ecological development
The “economic performance” subranking 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” subranking 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. 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 subindicator.