German Philosophy for Export

25.05.2009 — Analysis

High quality and innovations remain the key driver for the promotion of German companies' products - also in the Urals region. In the conditions of crisis and increasing import customs duties in Russia, the demand for German equipment is expected to drop significantly. However, in the long-term outlook the cooperation will only grow stronger - this is what Dr. Renate Schimkoreit, Consul General of Germany in Ekaterinburg, stated in a RusBusinessNews interview.

- Dr. Schimkoreit, Germany is one of the leaders in terms of foreign economic cooperation with the Russian Federation's constituent entities in the Urals and West Siberia. How hard it is to carry such a leadership status in the conditions of the global crisis?

- The economic relations between Germany and the Urals Federal District, and the Sverdlovsk Oblast in particular, are very intensive. This is relevant for the trading turnover and the German investment, as well as the establishment of joint ventures in your region. However, we are in a very difficult situation now due to the global economy crisis. The crisis has substantially impacted such sectors as machine-building and metallurgy, which are so important for the Urals. Respectively, this has a direct impact on the German export figures. The Sverdlovsk companies that work closely with German partners have reduced their orders for purchasing the equipment from Germany. Some of the companies are simply acting careful; however, in many cases they simply don't have the liquidity.

This is the situation of today. I wouldn't dare suppose when the rise begins, since there are many opinions on that. However, the cooperation will go on since it doesn't only depend on the trade turnover level. The cooperation has a long history, and has been very close over many years. It cannot be stopped the same way you push the OFF button. The Russian partners retain a high level of interest to purchasing new German technologies. In the past few weeks, several German business delegations visited the Sverdlovsk Oblast, and we expect more of them later this year. For example, there will be a business delegation from Nordrhein-Westfalen, and a group of German companies that are interested in supplying medical equipment to the Sverdlovsk Oblast.

- How substantial was the drop in the trade turnover between Russia and Germany in the beginning of 2009?

- So far, one cannot say that the economic crisis has in any way impacted the trade between our countries. This is connected with the fact that large purchases were made back in 2008. Russia takes action to overcome the crisis; inter alia, it has increased import customs duties on equipment. This will undoubtedly impact the trade turnover between Russia and Germany. I can say that e.g. the total volume of domestic and export orders in our automotive industry has dropped by 40% due to the crisis.

- Which constituent entities of the Federation in the Urals region have the highest priority, and which sectors of economy are the most important, for the business of German companies?

- In the Sverdlovsk Oblast, our priority areas for cooperation are machine-building and modern technologies (in the automotive and aircraft industries in particular). In the recent time, energy saving becomes an important focus for cooperation. A couple of weeks ago, the Russian-German Energy Agency has been established; this is a sister of the German Energy Agency DENA (solves the issues of the future energy sector development in Germany). This is connected with the Russian Government's aspiration for the development of cooperation with Germany in the sphere of power supply and reduction of energy consumption. The Sverdlovsk Obalst and Ekaterinburg have become the pilot territory. In the next few days we will have first dedicated meetings. On the German side, the parties to the discussions are representatives of Siemens and BASF; the opportunity for medium and small businesses to participate in the cooperation is also being considered. This is due to the fact that German small and medium businesses are the most creative and innovative players in the energy efficiency sector.

Other regions of our interest are the Khanty-Mansiysk Autonomous Okrug and the Tyumen Oblast. These are the areas of oil production and processing. There are plants in Tyumen that produce oilfield service equipment. We also see a lot of interest for cooperation in the sector of medical equipment supplies and building materials production in many constituent entities of the Russian Federation.

- Do German companies feel the competition from other European equipment manufacturers that are also actively operating in the Urals?

- The fact that other countries are also interested in the cooperation with the Urals region is absolutely normal. I would be very surprised if it were not the case. This would mean that other foreign companies have slept something away. I think that the Urals companies are very interested in receiving offers from different countries. However, we are absolutely sure of the quality of German products in many sectors. I am in a very good position when I meet Russian partners; I always see their positive attitude and the will to work with Germans.

Germany is a global leader in the development of new technologies in the sphere of energy saving, environmental protection, and nanotechnologies. These are the areas of active scientific cooperation between German and Russian universities and R&D institutes. Therefore, I believe that there are very good prerequisites for maintaining the cooperation and a good level.

- Does Germany use any special methods in promoting their products and technologies to Russia and the Urals? E.g. Czech companies often use loans from Czech Export Bank to finance the supplies of their equipment.

- We also have the opportunity of lending against the German equipment supplies. However, we are not so much focused on financing our export as on its insurance - in particular, that involves Euler Hermes Kreditversicherungs-AG, the leading credit insurance company in Germany. Other large projects are financed by the European Bank for Reconstruction and Development.

As it pertains to financing such projects in general, German companies within Germany do criticize their government for a small number of such offers. However, since Germany is a country that is fairly successful in exporting its products, we believe that German companies can win markets by the high quality of their goods.

German export is based on certain principles. Our companies do not simply sell a certain product; they also offer a warranty for its reliability over a certain period of time. This is a whole philosophy that is focused on quality and innovation of the commodity. We sell state-of-the-art developments, not the past generation technologies.

- Will the economic crisis change the methods of promoting German products and technologies in the Urals?

- In our opinion, the German export to the Urals is not a problem at all. The supply is there. However, the Urals companies' demand for these products may decrease. And, even if the demand is there, the situation with the increase of import customs duties in Russia may render the German products hardly accessible. However, if we consider the long-term outlook on the Russian-German cooperation, the situation will undoubtedly change for the better.

- Direct contacts between business people are an important indicator of the economic cooperation between Germany and Russia. What are the dynamics of business visa issuance in the German Consulate General?

- Following the results of 2008, and the first months of the current year, the number of business visas that we issue has not decreased. However, summer is the main season for travelling to Germany. Therefore, the dynamics can only be traced after the end of the summer season.

The interview has been prepared by Pavel Kober