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. . . But Foreign Firms Are Slow to Invest in the East (cf: Germany's Treuhand Woos Western Buyers)


THE Treuhand is trying to attract more foreign investors to east Germany, but its record so far is poor. Of more than 4,000 concerns privatized, only 176 deals have been done with non-German firms.Wolfgang Vehse, director of International Relations for the Treuhand, says this official number is too low and the actual number of sales to foreigners is about 250. He points out that some major investors - such as Opel, owned by General Motors - are not counted as foreign because they are German-based subsidiaries. Even with these considerations, west German firms still dominate the market. "We don't have as many foreign investors as we would like," Mr. Vehse admits. In its first year, the Treuhand did not have sufficient data on its own firms and was only handling unsolicited inquiries, according to Vehse. But since May this year, the Treuhand has actively sought foreign buyers. As part of the new marketing push, the Treuhand instituted some simple but essential changes. It hired English-speaking operators for its switchboard. It produced a multilingual guide to its firms in French, English, Spanish, and Italian, and put it on computer disks available at German embassies. Treuhand president Birgit Breuel will officially open a branch office in New York this week, and a Tokyo outpost will open in December. In Europe, the Treuhand is getting well-known business "personalities" from Vienna, Paris, Milan, and London to promote investment in east Germany.

Foothold in the EC East Germany should be attractive for several reasons, Vehse says. Investors will receive financial incentives (regional government will absorb up to 35 percent of investment costs) and get a foothold in the European Community (which he believes will become a more closed market after 1992). Since the marketing push began, foreign interest in east Germany has "markedly increased," according to Vehse. But it is still an uphill battle. The British are fighting recession. The Italians still think of Germany as "far away, on the other side of the Alps," Vehse says. The Japanese would rather build new factories than invest in old ones; they may become more visible next year as the Treuhand steps up land sales. Americans send over investment bankers with deep pockets, but Vehse says: "We want to see a client involved here. We want their management skills and their presence, not just their money."

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French eye Eastern Europe Only the French, who account for 27 percent of the foreign sales so far, show a strong interest. They want to crack the German market, explains Vehse, and beat other competitors to eastern Europe. Potential foreign buyers have accused the Treuhand of favoring German firms. But the Treuhand maintains that considerations are the same for all buyers. Vehse says west German firms have a natural advantage in the common language and knowledge of the market. After the Berlin Wall came down, he says, "the west Germans just got in their cars and drove here." They already knew which firms they wanted because of years of trading with the East Germans. The Treuhand wants foreign firms, not only for their know-how, but to stimulate competition. Several east German communities, for instance, are now trying to undo Treuhand deals which resulted in west German monopolies in the energy sector.

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