The investment challenge
Investments are a precondition of future sustainable growth. However, investments are not just about competitiveness, but about maintaining our quality of life. As Germany currently shows, good economic numbers are a necessary, but far from sufficient, precondition of strong investment activity. On the one hand, we expect economic output to rise by an annual average of 1.8% in real terms in both 2015 and 2016. At the same time, despite a recent upward trend, public-sector investment–which often helps to pave the way for private-sector investment–is still growing relatively slowly. There is also scope for more dynamism in many key areas of private-sector investment.
Against this background, the German government is aiming to improve the environment for more innovation and competitiveness in the economy, and to boost investment. We want our investment rate to exceed the OECD average. To achieve this, we have taken wide-ranging measures to stimulate investment activity and have set priorities, which are gaining recognition around the world.
In a federal state like Germany, regional and municipal investment are of crucial importance. The local state agencies need to be empowered to undertake sufficient investment in forward-looking areas like childcare, schools, colleges and modern urban development. Other investment priorities include developing efficient supra-regional transport routes, promoting a more efficient use of energy and combating climate change. It is also particularly important for Germany to invest much more in research and development than it has done in the past.
As in many other economies, the lion’s share of investment is undertaken by the private sector. For this reason, the federal government has not only allocated additional funding for public-sector investment, but has also taken further steps to put a pro-growth investment climate in place. For example, we have improved the rules governing our energy transition and the ongoing expansion of renewables, while making energy prices more predictable. We are working hard on our Digital Agenda so that more people can participate in the digital world and make even better use of its innovative potential. We are offering new funding opportunities to boost the number of start-ups in Germany.
But money alone cannot tackle all the impediments to investment. Rather, we need new approaches to economic policy. For this reason, in the summer of 2014 I asked an independent commission of experts consisting of academics and representatives of businesses, trade union and associations to come up with additional innovative ideas. One important question was how to involve more private-sector investors in public-sector infrastructure projects. The OECD has drawn up key principles for improving the rules governing long-term investment in infrastructure. The commission’s findings confirm that it is vital to have the right institutional structures in place both to boost mutual trust and to assure a timely and efficient provision of public infrastructure.
We discussed the commission’s findings at an international conference in Berlin in April, attended by OECD Secretary-General Angel Gurría; we wish to continue such important dialogue with our European partners. I therefore welcome the new European Commission’s comprehensive investment campaign. The European Fund for Strategic Investments, which is to involve a total of up to 315 billion, can boost growth and employment. Europe needs tangible prospects to work towards. Our aim must be to bring together our efforts at national and European level to create an effective investment and reform drive for Europe’s industrial renewal and modernisation.
Finally, we must also consider investment in the wider international context. As OECD analysis shows, in many industrial countries investment in terms of GDP still remains well below pre-crisis levels and earlier average trends. Clearly, we need to make further effort to ensure a good investment climate in other countries too. This requires appropriate rules for foreign direct investment, favourable financing conditions for companies, and efficient procurement and financing of public infrastructure. And to facilitate our work, we can all reap the benefits of international co-operation and share experiences and approaches to policymaking within the OECD.