|  Californians are often happy to point out that if their state were to secede from the US and became an independent republic, it would still rank among the five richest countries in the world.
Bavarians could make a similar claim. Recent figures suggest Bavarian gross national product is €385bn and per capita income just over €30,000 a year, statistics that reveal this region of 12.5 million people to be wealthier than 21 of the EU’s 27 countries. Unemployment, at around 4%, is the lowest in Germany, and little wonder: Munich and its rival Nuremburg, Bavaria’s second city, positively bustle with entrepreneurial activity, with investors from Germany and further afield attracted by the buzz (as always, business attracts business). Some 50 years ago, Bavaria was one of the poorer areas of Germany, largely agricultural and in business terms well behind the rest of the country. Although bordering Bohemia and Austria, investment links with the world outside were scarce. In the 1950s all this changed. Geopolitics was one reason: the Soviet Union’s occupation of eastern Germany and part of Berlin meant that much of the country’s traditional industrial base found itself behind the Iron Curtain. Bavaria was an ideal place to start afresh, not least because its pre-war lack of development meant there was no brown belt to impede growth. Another reason was the careful nurturing of business by the local government in Munich, which – mindful of the region’s pre-war dependence on agriculture – has always been at pains to create a modern, diversified economy. In the early days, this strong pro-business approach helped attract the likes of Allianz and Siemens to Bavaria; in the years since, it has helped Bavaria become home to the lion’s share of Germany’s business start-ups and equally importantly, R&D activity. Last year, for example, Bavaria and its neighbouring region, Baden-Wuerttemberg, generated more than half the patents registered in Germany. With almost 30 universities and higher education institutes, Bavaria’s strong educational infrastructure has fed directly into the business world; no fewer than two of the three universities the federal government has selected as prestige institutions – part of an ongoing strategy to create a sort of German Ivy League – are in Munich (the third is next door in Baden-Wuerttemberg). Being home to eight DAX-listed companies (BMW, Munich Re, Siemens, Allianz, MAN, Linde, Infineon and Hypo Real Estate), it is little wonder that Munich ranks among the best places for doing business in Germany. The city is home to Germany’s second-largest stock exchange, along with 4,400 listed companies and a host of well-known financial advisers and wealth managers; Gottfried Heller, who founded Fiduka together with André Kostolany, and Dr Jens Ehrhardt are among them. But Munich has other strengths besides being a fast-growing financial centre. More than 20,000 high-tech companies are based in and around the city, many of them start-ups that have attracted international venture capital companies. Biotech, solar technology and nanosciences are among the booming sectors, backed by the local universities. This lively scene has attracted most of the international consulting companies, and all the big names can be found in Munich. Media and fashion are two other important sectors for the Munich economy. Around 150 publishing companies are headquartered in the city. The local investment agency, Invest in Bavaria, argues that the region’s proximity to the booming economy of neighbouring Austria, the Czech Republic and Baden-Wuerttemberg has also encouraged businesses to relocate here. How did Bavaria manage to build up such a diversified economy? As well as having a proactive investment policy – reflected in such programmes as the High-Tech Initiative of 2000, which sought to inculcate a world-class high-technology sector through the diversion of some €1.32bn of privatisation proceeds – Bavaria’s cluster campaign has been a major success. There are currently some 19 sector clusters, including high-tech, production-oriented clusters and cross-sector technologies; these networks bring together companies, research institutes and universities to boost development. Industries that have benefited in particular include biotechnology, medical technology, environmental technology, aerospace and information and communications technology, although more traditional manufacturing has hardly been ignored: the automotive industry, engineering, chemicals and financial services have all benefited. For investors wanting to keep an eye on costs, focusing on towns other than Munich is the best strategy – wages there are higher than in other parts of Bavaria, and income per head is one of the highest in Germany. Nuremburg has been the most successful at attracting investment, most notably in the service sector: today it leads in market research, printing and logistics. One problem some businesses have found is that the region’s business growth continues to outpace the availability of good qualified labour. Migration from other parts of Germany has been ongoing and has helped, but the high price of housing in Munich is curbing growth.
 Data file
Bavaria
Population 12.5 million
GNP €385.2bn
GDP per capita €30,993
Expected GDP growth in 2007 (national) 2.4%
Expected inflation for 2007 (national) 2.1%
Investor information www.invest-in-bavaria.com
Estimated number of days to open a business 24
Transparency International Corruption Perceptions Index position (out of 163, national) 16 |