Germany Pursues Better Business Ties To India

Calling Asia one of the "fastest-growing markets of the future," German Chancellor Gerhard Schröder opened Asia Pacific Weeks in Berlin earlier this week – a bi-annual, two-week celebration of Germany’s cultural and economic ties with Asia.

"Germany’s trade with ASEAN countries in Southeast Asia is already bigger than Germany’s trade with the United States. And for many Asian nations, Germany is their most important trading partner in Europe," he continued.

Exports to the Asia Pacific region account for around 12 percent of Germany's total foreign trade, according to government statistics from 2002. Germany's Economics Ministry is confident that this percentage could easily climb to 15 percent, and says a goal of 20 percent is "desirable."

Focus on India

Part trade fair, part cultural showcase, the Asia Pacific Weeks are a joint project of the German government, the city of Berlin and German business leaders that was first organized in 1997. Each time, a different country gets the spotlight -- and this year, it's India's turn.

The Chancellor admitted that trade relations with India -- Asia's second-biggest nation -- could be a lot stronger. Last year, Germany's trade volume with India totaled some €5 billion ($5.6 billion) -- less than a third of Germany's trade with China.

Upcoming workshops on co-operations in the fields of science and technology could open up more business opportunities though, especially in environmental technologies.

"India is one of the world's leading nations when it comes to using renewable energies, while Germany is offering top quality products in this particular sector of technology," Schröder said. "This is why we should work together to use this potential for co-operation - for the mutual benefit of our two countries."

Opportunities for most industries

The country also offers opportunities for more traditional German industries. This year alone, economists are forecasting six-percent growth for the Indian economy. Couple this with the fact that the Indian middle class, with the consumer potential it entails, has grown in the past decade to 200-300 million people. More than 40 million Indians have been identified as potential customers for luxury goods.

Hubert Lienhard, incoming chairman of the Asia-Pacific Economic Committee of the German industry’s Indian Economic Committee, told Deutsche Welle there are three sectors for which India should be particularly attractive: car manufacturers, road construction companies as well as facility builders. And there’s still room for more engagement on the part of German businesses. Though trade relations have traditionally been good between the two countries, German companies only made direct investments in India of €50 million – a factor Lienhard attributes to the weak state of the German economy. One year earlier, he points out, the figure was €200 million – but even that figure should have been higher.

Lienhard says bureaucracy serves as one of the greatest barriers to German companies that want to do business in India. Additionally, many German investors are concerned about rampant corruption in the developing nation and often complain about the tangle of regulations that differ from province to province. All are problems the Indian government has acknowledged and is seeking to redress.

India seeks its share of pie

Just as Germany is seeking to intensify its economic engagement with New Delhi, India is seeking to do the same through greater technology transfer to Germany.

Arun Bharat Ram, chairman of the Indian industry association CII says the main target for Indian companies is Germany’s small- to medium-sized businesses. "We export components for Mercedes-Benz, General Motors, Ford and other important global automakers," he said. "At the same time, we also urgently need to make sure that we take German mid-sized businesses by the hand in order to show them the right places and partners in India for investments."

Many would like to replicate the success of India’s IT sector, which has strong ties to Germany, in other industries. Experts predict that, by 2008, up to 20 percent of the IT budgets of Germany’s largest companies will go to contracts with IT providers in India, where costs are lower and workers highly educated, pouring a massive €14 billion a year into the Indian economy.