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German Optimism: The Country Prepares for INNOPROM and a New Business Season

13 April 2018
German Optimism: The Country Prepares for INNOPROM and a New Business Season

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German companies and business associations have become regular INNOPROM visitors. Exhibition guests include first and foremost mechanical engineering companies, large, small and medium businesses, and representatives of federal states, trade chambers and industrial associations.

At INNOPROM-2017, Germany expanded its participation format by presenting its enterprises (15 companies total) at the national stand for the first time. Event participants included Maschinenfabrik Berthold Hermle (manufacturer of milling machines and cutting centers), SHW (metalworking equipment), Pilz (automation systems), etc.

Consul General of the Federal Republic of Germany in Ekaterinburg Stefan Keil points out that the federal authorities provided financial and logistic support for the organization of the national stand.

 

"German companies have been actively participating in INNOPROM since the first exhibition in 2010 and appreciate the opportunity to access Russian clients outside Moscow provided by the event. German businesses are looking forward to their participation in the exhibition,"

Stefan Keil explained.

 

Russian and German companies signed several major agreements at INNOPROM-2017. Chelyabinsk Pipe-Rolling Plant and Siemens arranged for a strategic five-year partnership. WIKA, which specializes in the production of measuring instruments, and Moscow City Government announced the signing of a special investment contract which exempts WIKA from property tax and stipulates a reduced income tax rate for 2017-24.

In turn, the company opened a new production facility at Industrial Park "Indigo" in October 2017. Ural-based Actio-Group signed a preliminary agreement with German Fortech Solutions on joint development of industrial automation software.

Challenges and Prospects

At INNOPROM-2017, the Russian-German Chamber of Commerce (AHK) and German Engineering Federation (VDMA) organized two business events under the Russia-Germany Forum: round table on Industrial Digitalization: German Experience and forum on Increased Production in Russia: Real Prospect for German Mechanical Engineering?

INNOPROM Program featured such an event for the first time. Forum participants included Head of Moscow VDMA branch Sven Flasshoff, General Director of GEA Refrigeration RUS Oliver Cescotti, General Director of Herrenknecht Russia Henning Johannis et al. VDMA, the Forum partner, praised the efficiency of the event which provided Russian and German participants with the opportunity to discuss manufacturer issues and assess cooperation prospects in mechanical engineering.

The VDMA is currently the largest industrial business association in the European Union with 3200 members. The association incorporates more than 500 affiliates in Russia, and 50 of them have their own production facilities in Russian regions. Many VDMA affiliates are opening new offices in Russia.


"For Germany, Russia definitely constitutes the largest market out of all Eurasian Economic Union members. The Russian market is complex, but it is very interesting and shows a lot of promise. German companies will not give it up no matter the circumstances. The number of firms with German participation has decreased over the past several years, but the amount of affiliated companies which are VDMA members has not dropped,"

Head of Moscow VDMA branch Sven Flasshoff emphasized.




 

 

15 companies will represent Germany at its national stand at INNOPROM-2018. Prospective 2018 visitors include Hach Lange, manufacturer of systems for water quality analysis, and Kracht GmbH, which specializes in industrial hydraulics. INNOPROM guests will also include Hauhinco Maschinenfabrik, Hydrotechnik GmbH, etc.

Russia-Germany INNOPROM cooperation prospects are looking good. In December 2017, Consul General of the Federal Republic of Germany in Ekaterinburg Stefan Keil made an important announcement that the FRG was considering the possibility of becoming the General Partner of the International Trade Fair.

Tax Talk

According to the Russian-German Chamber of Commerce, German entrepreneurs are optimistic about 2017 results. 58% of companies saw positive trends in the Russian economy which led to an increase in the willingness to invest.

In 2018, German companies would like to invest €471mln into the Russian economy. Matthias Schepp, Chairman of the Management Board of the Russian-German Chamber of Commerce, estimates this to be the highest indicator since the 2014 recession.

German investment in 2018 may even exceed the 2017 numbers. According to Deutsche Bundesbank, German companies invested €2.2bn into the Russian economy over the first three quarters of 2017.

 

Still, the global political and economic situation affected bilateral cooperation. The Russian-German Chamber of Commerce points out that the number of enterprises with German participation decreased by 5.2%. By the end of 2017, the Russian market had 4900 companies with German participation against 5200 in 2016 and 6100 in 2013.

 

"The number of German companies decreased in number, but not in quality. Our businesses are still actively investing in Russia and take advantage of the opportunities resulting from the weak ruble and better investment conditions in some industries. Under the ease of doing business ranking compiled by the World Bank, Russia moved up from the 124th place in 2011 to the 35th spot,"

Matthias Schepp pointed out.

 

 

Main factors which hamper the development of German business in Russia include the recession, volatility of the ruble, and administrative barriers.

 

"The tax regime tightened over the past year: while previously we were engaged in constructive dialog with the tax authorities, the rapport has declined dramatically, and that deters investors,"

General Director of GEA Refrigeration RUS Oliver Cescotti shared.

 

Exporting Optimism

According to the Federal Customs Service of the Russian Federation, in 2017 the trade turnover between Russia and Germany increased by 22.8% to $50bn (approximately €41bn).

FRG exports mainly include machinery, as well as mechanical engineering and chemical industry products. The export of cars from Germany to Russia grew by 18.6% from €1.022mln in 2016 to €1.211mln in 2017.

As for Russia, its export predominantly involves raw materials, and it increased by 21% over the past year. German exporters are generally optimistic.

 

"Since German exports to Russia increased by 20% in 2017, many experts expect further growth in 2018. There is still a long way to go before we match the record €80bn turnover achieved in 2012, but we are moving in the right direction,"

Wolfgang Büchele, Chair of the Committee on Eastern European Economic Relations, summed up.

 

 

At the upcoming INNOPROM-2018, guests of the Russia-Germany Industrial Forum will discuss the two countries' immediate plans on economic projects and seek new growth points. Event visitors will have the opportunity to learn about industrial products offered by FRG manufacturers. We invite your participation in the upcoming exhibition.

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