Editor’s Note: In a bid to develop the right growth model for Nigeria and Africa, the author examines some selected emerging and developed economies. Today, he takes a look at the Germany economy .

The Germany Economy

“The financial and economic crisis is presenting Germany with enormous challenges. To emerge from this crisis even stronger than before, we will have to make immense joint efforts. In addition to managing the crisis in the short term, we will have to commit ourselves to a path of growth and economic success. Investments in education, science and research are the right way to make such a commitment” (BMBF, 2009).

This was the foreword presented by Prof. Dr. Annette Schavan, a member of the German Bundestag, Federal Minister of Education and Research on the publication titled “Research and Innovation for Germany, Results and Outlook” in the year 2009. Research and innovation are indispensable for highly developed, resources-poor countries such as Germany. Innovative goods and services keep the economy moving, creating jobs and high incomes. Production, value creation and employment grow far more strongly in highly innovative companies than they do in weakly innovative ones. The prosperity of the country, and of its citizens, depends on research and innovation, as does the country’s ability to provide for its citizens’ futures and their quality of life (BMBF, 2009).

In Germany, the proportion of value-added products and services based on research is higher than in any other industrialized country (BMBF, 2010). The export of technological goods makes up one fifth of the country’s economic output. Hence, research and development are very important to the economic power and economic growth in Germany (BMBF, 2010). Since 2005, the German central government expenditure on research has risen by 21 percent; private sector investment in research has increased by 19 percent (BMBF, 2010). This puts Germany in the leading group among European countries (BMBF, 2010). They have also steadily increased the number of scientific publications and patents.

The Federal Report on Research and Innovation underlines the key findings of the report on research, innovations and technological performance (Gutachten zu Forschung, Innovationen und technologischer Leistungsfähigkeit) compiled by the Expert Commission on Research and Innovation (Expertenkommission Forschung und Innovation). The report showed that Germany has a powerful and internationally recognised scientific system and a high proportion of innovative enterprises (BMBF, 2010).

Worldwide, research and innovation systems are in a process of strong growth and transformation hence global expenditure on research and development (R&D) has doubled since 1997(BMBF, 2010). In total, more than 5.7 million people work in research and development compared to just below four million in 1995 (BMBF, 2010). Many industrial and emerging countries are increasingly investing in education, research and innovation. For Germany, it is a question of asserting itself in this competitive environment with the appropriate emphasis. The German economy needs new prospects for growth (BMBF, 2010). In a leading industrial nation like Germany, research and development activities based on the latest findings from research and development in particular form an essential basis for new and sustainable growth. New, because it is based on the latest findings from research and development and sustainable because it is derived from proactive and courageous decisions for promising products, processes and services.  

In recent years, the German Federal Government has moved research and innovation closer to the core of its growth policy. It has consistently given priority to education, research and innovation. The German Federal Government’s research and innovation policy measures were re-initiated and bundled together to form the High-Tech Strategy (BMBF, 2010). The central and local government reform initiatives the Excellence Initiative (Exzellenzinitiative), the Higher Education Pact (Hochschulpakt) and the Joint Initiative for Research and Innovation (Pakt für Forschung und Innovation) have strengthened the performance capability of the German science system and made Germany even more attractive as a scientific location (BMBF, 2010). This High-Tech Strategy, the reform initiatives and the strategy for the internationalization of science and research complement each other perfectly.

The following data and facts show that the chosen path is the correct one (BMBF, 2010; BMBF, 2009):

• In 2007, absolute expenditure on R&D in Germany was higher than in any other country in Europe. Compared internationally, only the USA, Japan and China spent more on R&D.
• According to preliminary calculations by the Federal Ministry of Education and Research (BMBF), expenditure on R&D as a percentage of GDP rose to about 2.64% in 2008. This is the highest level since German reunification and a further step towards the 3% targeted of the Lisbon Strategy.
• In absolute terms, total expenditure on R&D (government, industry and others) between 2005 and 2007 increased from 55.7 billion euros to 61.5 billion euros. This corresponds to an increase of approximately 10%. A further increase to over 65 billion euros was expected in 2008.
• Central government expenditure on R&D increased from 9 billion euros in 2005 to 10.9 billion euros in 2008, a rise of around 21%. In 2009, central government expenditure on R&D increased further to 12.1 billion euros (target), a rise to 12.7 billion euros is planned for 2010.
• Despite the uncertainty caused by the financial and economic crisis in 2008, German companies have increased internal expenditure on R&D, compared to the previous year, by 7% (to 46.1 billion euros). As a result, enterprises in Germany increased their annual R&D investments between 2005 and 2008 by around 19% (7.4 billion euros). Increases were recorded by large, small and medium-sized enterprises.
• Never before have so many people in Germany been employed in R&D: in 2008, the number of researchers, laboratory technicians and engineers employed in industry rose to 333, 000 (measured in full-time equivalents). Compared to 2005, this is an increase of almost 30 000 people.
• The proportion of research-intensive products and services providing added value is more than 45% in Germany higher than in any other industrialized country. The USA, which was ahead in 2000, has now been surpassed. The German economy is excellently positioned in the global technology markets. The creativity and technological performance of those companies impressively demonstrates how new ideas can open up future markets and top international positions.
• Statistics have proven that, by the end of 2008, there was a positive innovation climate: around 31% of companies can trace their innovation behavior back to central government’s improved research and innovation policies.

The sum total of all the scientific, economic and political initiatives has had considerable impact: Germany has taken significant steps forward in research, development and innovation, as confirmed by the German Council of Economic Expertsand the Expert Commission on Research and Innovation (BMBF, 2010).

Key technologies, such as biotechnology and nanotechnology, optical technologies, microsystem, materials and production technologies, aeronautics technology, as well as information and communication technology (which all depend on embedded system designs) are the drivers of innovation and form the foundation for new products, processes and services (BMBF, 2010). They are essential in solving global challenges in the demand fields. Its benefits will depend critically on how successfully they can be converted into industrial applications. In Germany, key technologies’ funding will therefore focus more on fields of application.

P.S. The references are being auto-populated and we will update.