Open menu Close menu Open Search Close search Open sharebox Close sharebox
. . Support our Sponsor

. . Flags of the World Maps of All Countries
geographic.org Home Page Countries Index

Germany Foreign Aid
https://photius.com/countries/germany/economy/germany_economy_foreign_aid.html
Sources: The Library of Congress Country Studies; CIA World Factbook
    << Back to Germany Economy

    Before unification, West Germany had been a principal exporter of capital. This status was indicative of the capital surplus the country's firms and banks held abroad as a result of export earnings, but it was also a sign of the growing disparity between production costs in West Germany and abroad. Many West German manufacturers preferred to produce in other countries where lower costs might give them a greater competitive edge than they might have operating from a West German base. Therefore, during most of the years between 1960 and 1989, and especially during the 1980s, the amount of West German investment abroad exceeded the level of foreign investment in West Germany.

    West German and later German direct investment abroad remained high even around the time of unification, totaling DM37.4 billion in 1990, DM37.1 billion in 1991, and DM28.1 billion in 1992. During those years, foreign direct investment in West Germany or unified Germany never exceeded DM6.2 billion per year.

    The nature of West Germany's investment abroad was different from foreign investment in West Germany. About one-fourth to one-third, and sometimes as much as one-half, of West German investment abroad during the 1970s and 1980s represented direct investment in production facilities, the remainder being investment in various forms of long-term credits such as equities, bonds, and long-term bank deposits. However, relatively little foreign investment in West Germany during that period was in production facilities, with the annual share ranging from about one-twentieth to one-sixth of all foreign investment. Instead, the dominant form of investment in West Germany was in West German equities and bonds.

    Foreign investment in German stocks and bonds was especially heavy during the early 1990s. During 1991 that investment amounted to DM37.4 billion; in 1992 it rose to DM62.0 billion. Both amounts were far higher than foreign investment in German securities during any earlier year. As a result, Germany had a long-term capital surplus of DM46.6 billion during 1992, the highest amount West Germany or unified Germany had ever recorded and a striking departure from West Germany's chronic capital deficit.

    According to Bundesbank statistics, one-fifth of all German securities at the end of 1990 belonged to foreigners, and one-half of all German publicly offered obligations between 1986 and 1990 had been bought by foreigners. Much of the investment appears to have been motivated by the expectation that the deutsche mark would appreciate and that investment in German funds would thus produce an exchange profit as well as regular income. Much of it may also have reflected the sense that German long-term interest rates would decline as the burdens of unification eased.

    Because of the large amount of German direct investment abroad, German income from foreign investments exceeds income of foreigners investing in Germany. Bundesbank statistics showed that the net return on West German capital abroad had risen to almost DM25 billion by 1989. If Germans were going abroad to invest, they were drawing a significant return income.

    In 1988, of West German foreign investment, 52 percent was in Europe (with 41 percent in EC countries), 40 percent was in the Americas (with 28 percent in the United States), and only 6 percent was in Asia (with 2 percent in Japan). The favorite sites for West German foreign investment were France and Britain. A fast-growing amount was going to Eastern Europe. A survey conducted by a German economic institute showed that more than twice as much new German investment at the end of 1993 was going to the states of Central Europe and Eastern Europe as to West European states, with the largest amount by far going to the Czech Republic.

    The structural problems of German production were compelling German investors to abandon production in Germany--including eastern Germany--and were making locations in other countries more competitive. Even before unification, many German industrialists and investors had been moving German production facilities to other EC states, especially Spain and Portugal, or to the United States or other countries where labor costs were lower. German efficiency, thoroughness, and quality control could only compensate up to a point for the cost advantage that producers in other countries increasingly enjoyed. The combination of high labor costs, a high level of subsidization, and a strong currency was putting German producers at a growing disadvantage at precisely the moment when the costs of unification were becoming particularly burdensome.

    Foreign Aid

    Although Germany is a leader in foreign trade, it has never been generous with foreign aid. West German official developmental assistance between 1976 and 1989 ranged between 0.40 and 0.47 percent of German GDP, well below the 0.70 standard proposed by the United Nations (UN). German aid sank to 0.36 percent of GDP in 1993 as the costs of unification reinforced the reluctance of the German government to grant assistance. But German private contributions to international causes, especially for humanitarian purposes, are consistently high. During 1992 those contributions matched the level of official assistance.

    Because Germany was not involved in the wave of decolonization that followed World War II, it has not had the special links to former colonies that have helped to motivate and channel aid by such former colonial powers as France and Britain. The largest portion of West German aid, over 40 percent, went to Africa during the 1980s. Earlier, West Germany had sent more aid to Asia, but that portion fell to 30 percent during the 1980s because the Asian economic boom made aid less necessary. Relatively little aid went to the Americas.

    *          *          *

    The literature on German external economic relations is as limited as the general literature on the German economy. The most comprehensive current books in English are The German Economy by W.R. Smyser and The German Economy by Eric Owen Smith. An annual economic survey of Germany published by the Organisation for Economic Co-operation and Development (OECD) contains current information on German external economic relations, as does the OECD biannual, OECD Economic Outlook . The Bundesbank publishes a monthly statistical compilation on German trade, current account, and foreign investment balances, but only in German.

    Two books about the specific German role in European economics are The Federal Republic of Germany and the European Community by Simon Bulmer and William Paterson and Germany's International Monetary Policy and the European Monetary System by Hugo M. Kaufmann. A work that offers discussion of the competitive weaknesses of the German economy is Die japanisch-amerikanische Herausforderung by Konrad Seitz. Several books on the European economy and the EU offer some information about Germany's role in European economics. These include The National Economies of Europe , edited by David A. Dyker, The Economics of European Integration by Willem Molle, and Euro-Politics , edited by Alberta M. Sbragia. Books of this kind appear regularly and provide a continuing picture of the growing German role in European economics. (For further information and complete citations, see Bibliography.)

    Data as of August 1995


    NOTE: The information regarding Germany on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Germany Foreign Aid information contained here. All suggestions for corrections of any errors about Germany Foreign Aid should be addressed to the Library of Congress and the CIA.

Support Our Sponsor

Support Our Sponsor

Please put this page in your BOOKMARKS - - - - -



https://photius.com/countries/germany/economy/germany_economy_foreign_aid.html

Revised 11-Nov-04
Copyright © 2004-2020 Photius Coutsoukis (all rights reserved)