Looking to India

In the nearly 20 years since the fall of the Berlin Wall, the five formerly communist states in eastern Germany -- the so-called "new" states -- have struggled to gain an economic footing and to rebuild an industrial base.

Though the area offers a large pool of skilled employees as well as considerably lower labor costs compared with other western countries, unemployment rates there remain much higher than in western Germany.

German Transport Minister Wolfgang Tiefensee hopes Indian investors can turn that around. Last week, Tiefensee released a report entitled "East Germany as a place for direct Indian investment," compiled by accounting house KPMG.

"Promoting investment in India is worth the effort," the minister told journalists. "The Indian economy is booming and Germany's eastern states are appearing increasingly attractive to Indian companies," said Tiefensee.

India's growing investment industry

While it may seem strange to outsiders that a developed nation like Germany would be looking for investment from a developing country, authors of the report paint a difference picture.

"While India has been developing into a key destination for foreign investment, foreign direct investment by Indian companies already overtook investment flowing into India in 2007," the report said.

Tiefensee agreed. "Indian investors, who are interested in the European market, have given priority to industry branches which Eastern Germany offers particular advantages as a place to invest."

This includes the IT sector as well as the chemical industry along with the automotive sector and mechanical engineering industries. It also includes the booming renewable energy sector, which has grown exponentially in eastern Germany over the last decade

"These are the industries of the future," Tiefensee said.

An ideal dynamic for investment

Eastern Germany's location between western and eastern Europe likewise makes it an ideal place for foreign investors to gain a foothold on the European market. Apart from a recently built ultra-modern infrastructure, the area also comes with a state investment aid program.

"We are using this dynamic to help win investors for East Germany," Tiefensee, who is also the German minister responsible for overseeing the development of eastern Germany, said. The time looks to be ripe for foreign investment in the former Communist east.

Now all that's left is finding the right investors. Essentially, this involves drawing up a clear and comprehensive presentation to help Indian companies see eastern Germany as an ideal place to invest, according to the report.

And Tiefensee seems to agree. He's sending delegates from his ministry to investment events in New Delhi and Mumbai in the coming weeks.