Indian companies today wish to invest directly where their customers are based as they now compete directly with international corporations in the European and North American markets. Doing so, they increase their competitiveness and gain access to new technologies and expertise. With 240 Indian-owned companies already in Germany, its eastern region is now wooing Indian multinationals by highlighting its location benefits. These observations have emanated from the report released today by KPMG titled, ‘Eastern Germany as a location for Indian Direct Investment’.

“When making their investment decisions, investors frequently look at the eastern and western European market separately, and often overlook the fact that, with its strategically favorable position, eastern Germany is an exceptional investment location for serving both markets from a single site”, said Dr. Engelbert Luetke Daldrup, Deputy Minister, German Federal Ministry of Transport, Building and Urban Affairs, while releasing the report by KPMG.

According to some sources, outbound FDI by Indian companies exceeded foreign direct investment into India in 2007. Indian companies invest significantly more abroad than companies from the other BRIC countries (Brazil, Russia, India and China), and have set up remarkable local presence at breakneck speed all over the world. Initially majority of Indian foreign direct investment (FDI) was focused on the USA and the UK. Other markets have since grown more attractive for Indian FDI, especially in the industrial countries of Western Europe.

Mr. Andreas Dressler, Director- Advisory Services, KPMG in Germany said, “The rapid international growth of Indian companies means that they will need to expand their physical presence to support new business in different countries and regions. Europe is becoming a critical market for Indian companies from a range of industries and Germany in particular is one of the most lucrative sources of potential business. Finding the right location in Europe is one of the key challenges Indian companies face.”

Advantage East Germany: KPMG

- The number of skilled manpower in eastern Germany is increasing

-Compared with most western European countries, eastern Germany has surprisingly low labor costs

- Eastern German locations are ahead of their competitors in Eastern Europe in terms of patent applications, scientific publications and total R&D expenditure

- A modern infrastructure, which includes transport connections, power supply and the availability of commercial real estate

- Indian investors can benefit from the favorable state investment regulations and funding opportunities

- BMW, Porsche, Rolls-Royce, Amazon, Dell, Dow, GlaxoSmithKline and MTV are some international companies present in East Germany

- Suzlon, Wockhardt, Voltas, Bharat Forge and the Viraj Group are some Indian companies in the region

India’s exports to Germany rose in 2006 by 22.9% to € 4.2 billion. Approximately € 2.4 billion – an increase of 13% over the previous year – was shipped to Germany in the first six months of 2007 alone. In addition to traditional export goods such as textiles, leather goods, shoes and foodstuffs, exports to Germany also included chemical products, iron and motor vehicles. Customer requirements have also risen in Indo-German trade, with the result that Indian companies are increasingly investing directly where their German customers are, to take further advantage of the European market.

Eastern German industries with investment potential for Indian companies include the automotive supplier industry, mechanical engineering, engineering services, microelectronics, renewable energies, biotechnology, chemicals and pharma, and service centers. Various regional focal points for the individual growth industries have developed in eastern Germany.

“India is currently developing into a global economic power, with its businesses displaying great entrepreneurial spirit and dynamism. As they head for Europe, they will find that the federal states of eastern Germany present attractive arguments for selecting a location at the heart of the European Union”, added Dr. Engelbert Luetke Daldrup.

Germany’s reunification gave fresh impetus to the economy of this region in the heart of Europe. India itself began its successful race to catch up as an emerging market in the global economy at

more or less the same time, in the early 1990s. This common experience can serve as a connective element to provide Indian companies with an attractive investment alternative in the center of Europe.

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About KPMG:

KPMG is the global network of professional services firms of KPMG International. KPMG member firms provide audit, tax and advisory services through industry focused, talented professionals, who deliver value for the benefit of their clients and communities.

KPMG in India has offices in Mumbai, Delhi, Bangalore, Chennai, Hyderabad, Kolkata and Pune and services over 2,000 international and national clients. The firms in India have access to more than 900 Indian and expatriate professionals.