Germany Steps Up Effort to Attract More American Investors

MANY foreign officials visit Boston, hoping to drum up investments by the city's high-tech companies in their home states. But it is unusual for Germans to be beating the bushes for investment. However, with Germany strapped for capital because of the economic demands of reunification, delegates from 16 German states have just finished making a pitch for investment here and in several other United States cities.

``There's virgin territory in eastern Europe,'' says Kenneth Brater, president of HTI Voice Solutions in Southborough, Mass. ``There's a high level of demand in East Germany that they can't provide [for] domestically.'' Mr. Brater hopes to expand his speech recognition and interactive voice response business to Germany next year.

States are offering investors subsidies of up to 20 percent, says delegate Elke Pratley. Some tax incentives are also available, particularly in the five eastern states.

Boston-based Gillette Company has long invested in Germany, says spokesman David Fausch. Its subsidiary, Braun, is well-known as a producer of appliances. Robert Murray, a Gillette vice president, emphasizes the ``need to use capital investments around the clock.''

Germany's skilled but expensive work force may become more affordable to US investors. In September, unemployment in the west was 7.4 percent, and in the east 15.2 percent. Labor is becoming ``plentiful and cheap,'' says Karlheinz Zahn, managing director of the Hessen Investment Bank for Economic Development.

Employers in Germany's two largest industrial sectors, metalworking and electronics, recently announced they will cancel some labor contracts as a way to reduce costs. At stake are certain fringe benefits, including lengthy vacations. But Ingo Vogelsang, a Boston University economics professor, says he is cautious about expecting contract changes. ``I've never seen labor in Germany give up on something they've achieved,'' he says. ``It would be a first.''

Although gross domestic product is predicted to decline 2.3 percent in west Germany this year, growth in the former East Germany is expected to reach 6.5 percent, according to the US Commerce department. Analysts project next year's overall growth at 1 percent.

Orders for German industrial goods rose 0.5 percent in July and August compared with May and June, notes Carl Weinberg, international economist with High Frequency Economics in New York. While orders are down from last year, he sees a bottoming out of the current recession.

Despite Germany's slight economic upturn and traditional solidity, some analysts are wary of investment prospects. ``The Germans are having to examine their own competitiveness,'' a Commerce Department spokesman says. He cites the decisions of Mercedes and BMW to locate auto plants in the US.

But some businesses are finding that globalization makes expansion into Germany unavoidable, says Merja Lehtinen, editor-in-chief at Kruger, McCarthy & Lehtinen International, publishers of high-technology magazines in Colchester, Conn. Ms. Lehtinen is exploring investment opportunities in Germany. ``It's the key center for industrial development,'' she says.

``Germany is a springboard to 450 million consumers,'' says Peter Weichardt, president of the Berlin Economic Development Corporation.

As businesses expand into Eastern Europe, access, location, and familiarity are crucial, he says.