Share this story
Close X
Switch to Desktop Site

Germans to Sell East's Lands to Investors Who Will Create Jobs

THE government in Bonn is trying to sweep aside one of the biggest disincentives to investors in eastern Germany: the confusion over property rights. With more than 1.2 million property claims outstanding, 10,000 of them for businesses, the property issue has become a huge bureaucratic hurdle to investors who want to set up shop in former East Germany. Investment, as a result, has been much slower than Bonn had hoped - a major problem, since Bonn is looking mainly to the private sector to rebuild eastern Germany.

Tomorrow the Bundestag is expected to pass a new government measure that gives priority to job-creating investors, rather than former owners, in claims of expropriated property. The privileged treatment will last until the end of 1992, though economists believe this deadline could be extended if results show that the new measures are crucial to an economic turnaround.

About these ads

The German Industry and Trade Association welcomed the measures, agreed on this week by the coalition government of German Chancellor Helmut Kohl. Hans Werner Hinz, legal expert at the association, says the priority treatment should eliminate a good deal of red tape for investors.

First, he said, it will no longer be necessary for investors to undergo the lengthy process of obtaining an investment permit, the granting of which can be contested in court in a process that could last three to four years. Under the new measures, the investor goes directly to the authority that is administering the property, which in most cases is either the local government or the Treuhand, the federal agency that has been set up to privatize the former country's enormous, state-owned concerns.

If there is legal action against the property sale, it is on the shoulders of the Treuhand or local government, not the investor.

``The investor is taken completely out of the argument,'' says Mr. Hinz.

The measures should also considerably ease the burden of the Treuhand, which is swamped with work. Up to now, says Hinz, the Treuhand has had to consider the old properties and see which party has legal claim. Under the new measures, the decision would simply be made in favor of the claimant who can show his investment will sustain or create jobs.

THOUSANDS of small businesses in the former East Germany were taken over by the state in 1972. Many Germans whose families lost their business in that year now want to begin where they left off. The eastern Germans will be allowed the opportunity to match the offers of outside investors. In cases where the legal owner does not want to or is not in a position to turn the property into a job creating investment, he will be compensated monetarily, says a spokesman for the Economics Ministry, which helped d esign the measures.

The measures, says Hinz, will help mostly medium-sized businesses. Big investments, like those of Volkswagen or Opel, ``have been worked out on a high, political level.''

About these ads

Hinz, however, anticipates several problems, even with the new measures. The old communists in eastern Germany are by no means gone and still have influence in local communities. They could hold up sales to outside investors, he says.

From the investor's perspective, another major disincentive is the risk of buying property whose ground has been contaminated by the previous user. Potential investors say they won't pay for expensive pollution caused by the old East German concerns. Economics Minister J"urgen M"ollemann, according to the ministry spokesman, is serious about relieving investors of this burden, although his plans in this area are not yet clear.

The new measures do not apply to property confiscated by the Soviet occupation from 1945-49. Moscow, in agreeing to German reunification, insisted that these expropriations be irreversible. The land consists mostly of large agricultural tracts over about a third of eastern Germany. These lands, now property of the federal government, can be sold but not to the original owners.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.