Germany Ups Trade with Eastern Neighbors

In the beginning, it was just an idea, but after his first trip through Poland, German entrepreneur Karl-Heinz Knoop could see what opportunities for him and his company Eastern Europe had to offer.

In Riesenbeck, northwest of Münster, Knoop's medium-sized firm builds drying and storage systems for grains and animal feed. At the end of the 1990s, RIELA Getreidetechnik employed 70 people, and in the face of Germany's shrinking agricultural industry, the search for new markets was a matter of survival. Knoop found them. First in Poland, and later in Romania, Russia, and Ukraine.

"There are problems, just as here in Germany, mostly with payment behavior," he said. "And then there are problems with corruption, but in comparison, those are small things. Working in these countries is more fun than working in Germany. It's not such a struggle. We try to advise our customers well, and through that, we get our share of orders."

German consulates assisting

The company relied on German politicians to initially open the door to the East. As part of a delegation to Poland from the Federal Economics Ministry, Knoop took advantage of the offers of assistance, made several good contacts, and exported the first grain silos eastwards.

Later, he founded a local joint-venture company, and today, he has subsidiaries in five eastern European countries. The local German consulates helped him on his way. In the embassy circles he found economic experts who not only initiated business contacts, but who also knew their way around local laws and tax regulations.

Knoop's experience is typical of what a lot of German companies are now witnessing. Low tax rates, low wage costs, good growth prospects and a great need of investment are attracting more and more companies, said Jürgen Chrobog (photo), State Secretary in the German Foreign Office.

"There's one thing all the countries in this region have in common -- they each orientate themselves in the direction of the European Union, they strive for political stability and economic development, they're developing themselves in terms of tax structures and legal frameworks that fit with EU guidelines, and to a large extent, have nothing to dread when it comes to comparisons with other EU states," Chrobog said.

Surpassing US trade

Axel Bauer, the head of the Eastern Europe Association, stresses that a growing number of German jobs depend on trade with the region, which has even surpassed trade volume with the US.

"For years now, German trade with the East has been growing, spurred on above all by our exports," Bauer said. "For the year that's just ended, we reached a new all-time high of €170 billion ($224 billion). Who would have thought at the end of the 1990s, that today we'd have a trade revenues with, for example, Romania, of almost €8 billion, or that the growth rate of our trade with Bulgaria would find itself in the high double digits?"

Karl-Heinz Knoop now commutes an average of 200 days a year between his eastern European subsidiaries. In Germany, he employs 25 people. In the East, he employs 250. Knoop established his newest subsidiary in Belarus, and he's already got an order for 20 large drying facilities. According to Knoop, he's minimized the risks associated with doing business in Belarus. You just have to carry out sound research, and have exact calculations of what the business can handle, and what would be too much, he says.

"There are also special credit programs available, and there, you need to be careful that you've got those in your pocket, not that you have to take a fall and determine that you've spent too much money after all," he said.