Doing business in Germany
Germany is one of the most rule-bound countries in the world. The bureaucracy and the language can be quite daunting to a newcomer. Just ask some of the recently arrived refugees from Syria.
German media reported that refugees were surprised by the long waits in line and approvals needed to get housing, health care and a bank account. One was quoted saying he didn’t know what he was signing because the application for a subsidized apartment was in German.
A group of enterprising Syrian refugees enrolled in a coding class decided to do something about it, according to one story. They came up with a concept for a mobile app that could offer downloads of required documents, map the locations of relevant offices and translate official documents into Arabic and English. They named the app “Bureaucrazy.”
Businesses can relate to the refugees’ experience. Workplace regulations once included rules on where to put light switches and on the shape of garbage bins. Things have gotten better because the government realized you could strangle the economy with too much red tape.
In 2004, for example, it took an average of 45 days to register a new firm in Germany, according to a World Bank study. In 2018: 10.5 days. That’s great progress, as many of the applications and submissions are now electronic. But compared with Britain and the United States, where the process takes four to four and a half days, Germany continues to lag.
Even 10.5 days is optimistic in some circles. Small businesses may be set up in such a short amount of time, but for larger companies entering the market the process is more complicated. It is advisable to have a local partner to make sure you have all the right documents, right powers of attorney and right notarizations and verifications in order not to endanger your business endeavors.
To help accelerate the process, shelf companies are available. They are ideal for international businesses or entrepreneurs who need to close a deal urgently, need to sign an important contract, want to invoice a German customer on time or want to avoid external delays. Shelf companies come ready to launch, with a corporate bank account and a legal registered address.
Though Germany is bound up in formal ways of business, the laws and regulations have protected other interests, such as labor, consumers and the environment. Strong and well-established trade unions and workers’ councils have achieved several benefits for employees, from high wages to generous retirement benefits to strict health and safety regulations. Germany introduced a nationwide minimum wage in 2015 to help boost personal consumption.
Advocates of unregulated market railed against the minimum wage, arguing that it would lead to job losses and limit the flexibility of employers. But those fears have not materialized. More than three years in, overall unemployment has dropped, from 4.9 percent in December 2014 to 3.5 percent in February 2018. Consumer spending also has increased. Last year it rose by 3.6 percent, the biggest increase since 1994.
Despite the administrative and regulatory burdens, Germany is the strongest and biggest economy in the EU. Our reputation for quality and efficiency is illustrated in trade statistics. Germany’s total share of world merchandise exports was 8.17 percent in 2017, good for third place behind China and the US, according to the World Trade Organization. Manufactured goods make up more than 85 percent of Germany’s exports. For businesses and entrepreneurs looking to enter Germany, free resources like this country profile guide are available.
Germany’s trade surplus with the US also is a symbol of the country’s competitiveness. German-made cars, medical equipment and machinery are in high demand in the US Unfortunately, the trade imbalance has become a political issue in America, and there are concerns if President Trump follows through on a threat to impose tariffs on car imports.
The government’s long-time support for research and development has played a big role in German’s industrial might. It’s also reflected in the burgeoning tech start-up scene, where science- and manufacturing-led firms are attracting investment dollars. Berlin is becoming one of the two biggest start-up hubs in Europe thanks to reasonable rents, low wages and imported skills.
To meet the demand for tech savvy workers, a Berlin nonprofit is teaching asylum seekers like the Syrians who came up with Bureaucrazy how to code, a good illustration of the new spirit of innovation infusing Germany.
Ursula Rutovitz set up TMF Group in Frankfurt, Germany in 2001 as country managing director. She helps international clients operate in Germany, making sure they are properly set up for business operations. Ursula was previously legal counsel to one of the major international management consulting firms in Germany.