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Topic - Promotion of Foreign Trade and Investment

Promotion of foreign trade and investment

Introduction

The Federal Government backs the attempts by German firms to develop and secure foreign markets with a wide range of instruments to promote foreign trade and investment.

The German system of promotion of foreign trade and investment is characterised by a division of responsibilities between the state and the private sector. Various institutions, such as German chambers of commerce abroad, foreign missions, and Germany Trade and Invest (GTAI), work closely together to deliver the best possible backing for German firms.

Export initiatives and market development programme

The Economic Affairs Ministry’s export promotion services help small and medium-sized enterprises to develop new markets abroad. The programme caters to forward looking industries such as energy, environmental technology, healthcare and civil security, but also to more traditional industries. Coordinated modules enable companies to choose the right measures for them. The market development programme is targeted at SMEs in all sectors; the export initiatives (for energy, environmental technology, healthcare, civil security technologies) focus on specific industries.

Foreign trade-fair programme

The Federal Republic of Germany participates in selected trade fairs and exhibitions abroad in order to promote foreign trade. The participation mainly takes the form of information stands and joint company exhibitions. With regard to the joint company exhibitions, the Federation pays for the costs of a uniform general display and usually also for part of the exhibition space. The intention is that small and medium-sized enterprises in particular should be helped to attend trade fairs abroad and to develop new export markets. Without this comprehensive support, many SMEs would find it virtually impossible to cope with the organisational and technical issues of participating in a trade fair abroad. In cooperation with the Association of the German Trade Fair Industry (AUMA), the Economic Affairs Ministry decides in the first half of each year which foreign trade fairs and exhibitions will be covered in the following year. Each year, the ministry participates in around 300 trade fairs abroad.

Export credit guarantees (“Hermes insurance”)

The Federal Government supports German exporters by providing insurance for their claims to payments abroad. German companies use export credit guarantees to insure export transactions against economic and political risks.

Bilateral chambers of industry and commerce

Germany’s bilateral chambers, delegations and representative offices have 130 branches in 90 countries to support the activities of German firms on foreign markets. These institutions work in the interest of the economies of both Germany and the host country and provide wide-ranging services to foster business in both directions. They are thus also acting in the public interest by taking responsibility for a major aspect of the promotion of German foreign trade and investment.

Germany Trade and Invest (GTAI)

Against the background of increasing global competition to attract investors, it is important to market Germany as a base for business and technology. Germany Trade and Invest is responsible for promoting Germany’s foreign trade and investment and for marketing the country to potential investors. The company provides information about the world’s markets, and its comprehensive information service offers smaller firms in particular a competent and reliable foundation on which to take the right decisions about how to access these markets. It has a network of personnel stationed around the world to research information about foreign markets on the spot. Learn more

Facts and figures on promotion of foreign trade and investment

90
Symbolicon für Unternehmen in Deutschland

foreign countries
host a German chamber of commerce

11
Symbolicon für Dampfer

per cent of German firms
export products and services; 97 % of these are SMEs

25.8
Symbolicon für Geldscheine

billion euros
of exports were covered by Federal export credit guarantees in 2015

39.9
Symbolicon für Wachstumskurve

per cent higher sales abroad
have been achieved by SMEs since 2000

Economic Affairs Ministry in dialogue

Strengthening bilateral economic relations

The Federal Ministry for Economic Affairs and Energy is engaged in a regular dialogue with institutions in Germany and abroad which work on issues of foreign trade and investment. This dialogue aims not only to foster bilateral economic relations but also to promote the activities of German firms abroad.

Important instruments of bilateral economic relations include the joint economic commissions and cooperation councils, and the working groups on commerce and energy of the binational commissions agreed on by the governments of the partner countries. In this context, “joint” signifies that representatives both of the governments and of the business community (business associations, companies) participate in the regular events. The bodies work to promote trade in goods between the economic partners, to intensify mutual investment relations, and to boost technology transfer.

Business councils and business forums

In addition to the joint economic commissions and cooperation councils agreed between the governments, there are also many bodies organised independently by the business community. Many of these take the form of business councils or business forums (cf. Federation of German Industries).

High-level advice for policymakers commissioned by Economic Affairs Ministry

German advisory teams are working on behalf of the Economic Affairs Ministry in Ukraine, Moldova, Belarus and Georgia to draft specific recommendations for action by high-level decision-makers. Their primary task is to provide continuous support and guidance to economic reform processes in these countries. Their work is demand-oriented, they collaborate closely with leading national research institutions and international organisations, and they provide unbiased analyses of current economic policy problems. The main focus of the high-level advice for policymakers is on monetary and exchange rate policy, debt management and the prospects for the development of the private sector, and particularly of SMEs. Since 2007, the project’s mandate has been expanded to included targeted promotion of foreign trade and investment and wide-ranging public relations work.

Freight depot; Quelle: Getty Images/querbeet

© Getty Images/querbeet

Supporting SMEs

Export initiatives: finding new markets

The Economic Affairs Ministry’s export promotion services help small and medium-sized enterprises to develop new markets abroad. The programme caters to forward looking industries such as energy, environmental technology, healthcare and civil security, but also to more traditional industries. Coordinated modules enable companies to choose the right measures for them.

More and more SMEs are venturing abroad. They particularly want to develop and secure new markets. And the statistics show that they are successful: sales abroad by SMEs rose by 39.9% between 2000 and 2014, to €201.0 billion. Companies wishing to succeed by selling niche products abroad have particularly good prospects: Germany has 1,300 hidden champions – small and mid-sized world market leaders in the fields of electrical equipment, mechanical engineering and industrial products.

The main driving force for success on foreign markets is always the company’s own efforts. They need to be able to rely on a good product, a promising strategy and reliable financing.

A wide range of support for companies

The Federal Ministry for Economic Affairs and Energy supports German firms in a variety of ways: e.g. in the form of trade policy measures which facilitate access to foreign markets. In particular, the ministry offers services to help companies develop foreign markets along the entire chain of export business.

The market development programme is targeted at SMEs in all sectors; the export initiatives (for energy, environmental technology, healthcare, civil security technologies) focus on specific industries. These services are now better coordinated, in terms of both content and structure, and can have a more targeted impact. This combined strength can also be seen in the new brand “Mittelstand global”. It brings two approaches together: on the one hand, the horizontal SME market development programme and export initiatives in key forward looking fields like green technology, healthcare and civil security. On the other hand, the sector-specific Energy Export Initiative which promotes the market potential of German energy technologies abroad.

The right module for everyone

The Economic Affairs Ministry’s promotional measures provide SMEs with the help they need as they target foreign markets. The services include:

  • advice on the main steps to take before engaging in international business relations
  • sector-specific information on target segments abroad
  • specific contacts with international business partners
  • showcases in Germany and abroad which enable SMEs to present their goods, products and services to an expert audience.

Making foreign business possible

Financing and insurance

The Federal Government helps German firms in all sectors and banks to implement and finance international projects. This covers both financing and insurance for exports and investments.

By concluding bilateral investment treaties with developing and emerging economies, the Federal Government creates a stable environment for German foreign direct investment. The treaties furnish the investors with comprehensive legal protection for their investments under international law and make it easier for SMEs in particular to develop foreign markets. Also, they form the basic precondition for the assumption of federal guarantees for German foreign direct investment in order to provide coverage against political risks.

On 5 November 2016, the cabinet adopted key points for a new export strategy. The measures strengthen the competitiveness of German companies bidding for strategic large-scale projects abroad. As a first step, life was made easier for companies wishing to insure deliveries to projects abroad.

Export credit guarantees (“Hermes insurance”)

The Federal Government supports German exporters by providing insurance for their claims to payments abroad. The Federal Government’s export credit guarantees (known as “Hermes guarantees”) are an important element of Germany’s policy to promote exports. German companies use them to insure export transactions against economic and political risks. By providing export credit insurance, the Federal Government is operating in a field usually reserved for the private sector. However, private insurers do not provide adequate insurance for many exports, particularly to developing and emerging economies. The Federal Government is a reliable partner and closes this gap.

Investment guarantees

On application, the Federal Government provides guarantees for investments by German-based companies in developing and emerging economies and former countries in transition in order to insure them against political risks. The investment must be eligible for assistance and enjoy adequate legal protection. Commercial risks are not covered.

Guarantees for untied financial loans

Untied financial loans, for which the Federation can provide guarantees on application, are loans from financial institutions based in Germany (and also from foreign banks under certain preconditions) to foreign debtors. They serve to finance eligible projects abroad or specific commercial projects which are in the particular interest of the Federal Republic of Germany. Untied financial loans are not tied to German supplies or services. But they must not serve the release from obligations relating to domestic or foreign transactions relating to goods and services (debt rescheduling).

Boosting opportunities to compete for large-scale projects

Strategic support for projects abroad

The German instruments to promote foreign trade and investment have basically proved their worth. However, there is a growing trend that, when it comes to bidding for large-scale projects, competitors from third countries are increasingly backed by their governments and provide extensive funding packages, putting German companies at a disadvantage.

In order to improve the competitive situation of German firms bidding for major strategic projects abroad, the Federal Government adopted the Strategy Paper entitled "A fresh stimulus for tenders for major strategic international projects – improving Germany’s chances" on 5 October 2016. In particular, the key points include the following measures:

  • the political backing of projects in the strategic interest of the Federal Republic of Germany is to be better coordinated.
  • better use is to be made of the existing instruments to promote foreign trade and investment, and these instruments are to be supplemented in certain cases,
  • in individual cases, the instruments to finance strategically relevant projects are to be supplemented via large low-interest loans,
  • the international initiatives for a further development of export financing rules are to be intensified.

New office for "Strategic Projects Abroad"

By a cabinet decision of 14 December 2016, State Secretary Matthias Machnig was appointed Federal Government Coordinator for projects abroad that are of strategic interest to the Federal Republic of Germany. Since 1 January 2017, he has been assisted in this work by a new office for "Strategic Projects Abroad" in the Directorate-General for External Economic Policy of the Federal Ministry for Economic Affairs and Energy. The initiative is based on close cooperation with the relevant companies and business associations. An interministerial committee has been set up to coordinate issues relating to the strategic importance of specific projects.

Business opportunities through international organisations

Supporting German firms in international tenders

The Federal Government advises and supports German firms as they bid for contracts advertised by the United Nations, the World Bank Group, regional development banks and other international organisations.

As one of the world’s leading purchasers, the United Nations buys goods and services worth more than USD 17 billion each year. The main procurement centres are New York, Copenhagen, Rome and Geneva, and the procurement takes place decentrally by the various UN agencies.

It is divided fairly equally between goods and services. The leading goods bought by the UN are pharmaceutical products, foodstuffs and construction services, and the main services used are in the field of transport, technology and administrative services.
The bilateral chambers of commerce in New York, Copenhagen and Milan (for Rome) offer comprehensive support to German firms bidding for international contracts.

In New York and Geneva, staff at the permanent representations to the United Nations (staff seconded from the Economic Affairs Ministry) are also responsible for procurement issues. They stay in contact with the relevant UN offices and are available as a contact for German firms.

World Bank Group

The International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID) are jointly known as the World Bank Group. The International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) form the World Bank in the narrower sense. Their main task is to promote economic and social progress in developing countries in order to help people live better lives

Every year, the World Bank provides funding worth approximately USD 40 billion to projects in developing and emerging economies. Up to 100,000 contracts are concluded with the private sector every year.

The World Bank’s website provides further information about the procurement procedures. Further to this, the liaison office of the Federation of German Industries and the Association of German Chambers of Industry and Commerce in Washington, D.C. (RGIT) has published the brochure “Das Beschaffungsverfahren der Weltbank: Chancen für deutsche Unternehmen” (PDF: 680 KB, in German) on its website.

Regional development banks and other organisations

Regional development banks offer further business opportunities for German companies. Their aim is to promote economic and social development. They include the following:

  • African Development Bank (AfDB)
  • Asian Development Bank (AsDB)
  • Asian Infrastructure Investment Bank (AIIB)
  • European Bank for Reconstruction and Development (EBRD) /
  • European Investment Bank (EIB)
  • Inter-American Development Bank (IDB)
  • Caribbean Development Bank (CDB)
  • International Fund for Agricultural Development (IFAD)
  • Organisation for Economic Cooperation and Development (OECD)
  • International Atomic Energy Agency (IAEA)

Further information

  • 17/10/2017 - Press release - International Cooperation

    Press release: State Secretary Beckmeyer: “Closer cooperation with Latin America generates jobs and prosperity”

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  • 29/05/2017 - Press release - International Cooperation

    Press release: Minister Zypries meets with India's Commerce and Industry Minister

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  • 09/02/2017 - Press release - Promotion of Foreign Trade and Investment

    Press release: Promotion of foreign trade and investment: federal government provides export credit guarantees totalling more than €20 billion and investment guarantees totalling more than €4 billion

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  • 20/06/2016 - Press release - Promotion of Foreign Trade and Investment

    Press release: Hermes insurance possible for Iran again

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Worker in front of containers symbolizes Promotion of foreign trade and investment; Source: Getty Images/Yur_Arcurs