When will the Infosys Mohali Campus start operating?
pwc: Innovations October 06 The magazine for pioneers
1 October 06 pwc: The magazine for forward thinkers CFOs Guide in the regulatory jungle Auto suppliers New pressure and new opportunities Nature conservation Sustainable financing channels Innovations How successful companies think ahead (and what this box has to do with it)
2 pwc: Content pwc: Editoral Title Markets Knowledge Solutions Hans Wagener is Chairman of the Board of PricewaterhouseCoopers AG Dear Readers, Cover picture: Corbis / Matthias Kulka; Photos: Laif / Henrik Spohler, Corbis / Zefa / Hugh Silton; Getty Images / The Image Bank / Jeffrey Coolidge; Enver Hirsch; PwC / Uwe Sickinger This issue of pwc is a thoroughly innovative magazine: It started with the magazine itself, which is no longer what it was for four years. We have modernized pwc: and want to better inform you, the decision-makers and pioneers in companies and the public sector, about the challenges of tomorrow. Although we auditors are perhaps more associated with yesterday than with the future, our business has long been shaped more by the outlook than the retrospective. We think by thinking ahead, whether it is about tax breaks in India, survival in the disclosure jungle, the advantages and disadvantages of converting to IFRS in SMEs or generating returns through nature conservation: topics you can read about in this issue. Our industry supports you in weighing up risks and opportunities in core business areas and in anticipating future developments. Innovations They are a key success factor in every industry. But a PwC study found: German service companies have deficits in innovation management. Page 4 Interview Keith Ulrich about technology and innovation management at Deutsche Post World Net AG. Page 10 Trends Page 12 Auto suppliers The industry is caught in a bind between rising costs and price pressure from manufacturers. How to get out of it. Page 14 The world in 2050 PwC study on the global economic perspective. Page 18 Real estate sales More and more German companies are trying to mobilize their real estate capital. Page 20 India From 2009, there will be attractive tax breaks for investments in special economic zones. Page 24 Quo vadis, CFO? Pre-printed from Cedric Read's new book Creating Value in a Regulated World. Page 28 Corporate Compliance How the integration of compliance requirements can increase company value. Page 32 IFRS for SMEs Slimmed-down IFRS are intended to meet the needs of medium-sized companies. What the first draft will bring and what, unfortunately, will not. Page 34 Relocation of a company A restrictive position by the tax authorities on relocations abroad is on the horizon. Page 38 Nature conservation financing How investments in ecological projects can be made profitable in the long term. Page 44 Regulatory jungle Interview with PwC board member Georg Kütter on the reporting requirements in the financial sector. Page 48 Digital tax auditing The IDEA software is used across the board. But many companies are not yet sufficiently prepared for this. Page 52 and to shape and manage the future of your company in a sustainable manner. With our new magazine, we want to live up to this claim, which is already a reality for us, and have therefore completely redesigned it. The word renewal, which can also be translated as innovation, makes it clear that we are building on something that already exists. That seems to me to be at the core of many innovations, the management of which our cover story deals with. Because an invention often only becomes an innovation when it is combined with something that already exists or through its systematic further development. When the freight forwarder Malcom McLean invented the container in 1937, hardly anyone would have probably least suspected that this box would one day revolutionize world trade. Ultimately, however, it paved the way for globalization. Long after McLean's invention. Publications Page 40 Events Page 41 Page 42 I wish you stimulating read, Imprint Page 43 Hans Wagener _pwc: October 2006 _pwc: October 2006
3 pwc: Title Above: Tim Berners-Lee: In 1989, the computer scientist in Geneva invented hypertext and thus laid the foundation for the Internet. Below: Malcom McLean: In 1937 the freight forwarder in the port of Hoboken came up with the idea of building the container. He became a pioneer of globalization. Kombilohn innovation is the be-all and end-all of entrepreneurial success. But it does not arise from quick flashes of inspiration, but from the right combination and implementation of inventions. German companies still have deficits in this regard. By Detlef Gürtler The stuff dreams are made of. A glittering, great fabric that creative people weave on in quiet rooms, think tanks and laboratories. This is how you imagine innovations. And that's completely wrong. Because the innovation is far less dazzling than usually assumed. Which is simply because when we innovate, we always think about the invention, the Eureka! of Archimedes and the lightbulb by Thomas Alva Edison. But one has practically nothing to do with the other. Invention is engineering thinking, says Martin Scholich, board member of PricewaterhouseCoopers (PwC) and head of Advisory. You always see Daniel Düsentrieb right away. Innovation is different. It's not about inventing, it's about finding. Because the invention has to prove itself to the patent office and the innovation to the market. The Austrian economist Joseph Schumpeter, who in 1911 was the first to describe the decisive role of innovations in the dynamism of the economy, even went so far that he only awarded the title entrepreneur to those who act innovatively, i.e. combine existing elements into new combinations and combine them Bringing the market: We call a company the implementation of new combinations, entrepreneurs the economic subjects whose function is the implementation of new combinations. And here, too, Schumpeter did not focus on the new, but on enforcement: the entrepreneur as such is not the intellectual creator of the new combinations, the inventor as such is not an entrepreneur. The term innovation itself is, albeit unintentionally, an example of the difference that can exist between invention and implementation. Because although Schumpeter first published his groundbreaking considerations in German 95 years ago, the term innovation did not spread until 1961, eleven years after his death, in _pwc: october 2006 _pwc: october 2006
4 pwc: Titel Deutschland aus Then his Theory of Innovation, published in 1939, appeared for the first time in German translation. Especially in the case of the great inventions that are said to have changed the world, it was usually not the invention itself that brought about this change - it was a multitude of innovations from a multitude of companies that gave rise to whole new worlds. The latest such innovation cascade The PwC study, for example, is gushing out of the Internet. The fact that an existing network infrastructure called Arpanet was able to transform itself into this new world goes back to an invention called Hypertext, which Tim Berners-Lee came up with in 1989 at the Geneva research institute CERN. Without hypertext, commonly called a link in today's parlance, it would have been The Innovation Performance Study The Success Secret of Innovative Service Providers was carried out by PwC together with the German Aerospace Center (DLR) and EBS Oestrich-Winkel. 141 companies from all major service sectors took part. The 64-page summary can be ordered free of charge from PwC or downloaded. Order address: Innovation potential wasted Study on the success effects of customer involvement in service innovations in the phases of the innovation process, scale from 1 (very low) to 5 (very high) Importance of the phase in the innovation process 4.51 2.86 Definition of the innovation 4.31 3.36 Analysis of the requirement 4.05 2.91 Conception of the innovation Degree of customer involvement 3.96 3.49 Realization of the innovation Source: European Business School, German Aerospace Center, PricewaterhouseCoopers 4.26 3.81 4.27 3, 52 Preparing for the market launch Market launch and controlling cannot provide the Internet, but this invention alone was not enough. It took the Amazons, Ebays and Googles to achieve the triumphant advance of the Internet. While Carl Benz and Gottlieb Daimler are celebrated as inventors of the automobile, although a dozen inventors around the world had certainly already invented something like this in the decades before them, some of the greatest inventors are largely unknown in the sense of making innovation cascades possible. Like Malcom McLean, like John Wesley Hyatt, like Frederick Winslow Taylor. Malcom McLean was an American freight forwarder who, like all other freight forwarders, was annoyed about the long waiting times when unloading the vehicles in the port of Hoboken in 1937 and then invented a box. As a container, it conquered the world, revolutionized world trade, and made globalization possible in the first place. So do the Chinese have to thank Malcom McLean for the fact that the whole world is now producing in China? No, because from the box of 1937 to today's globalization, the path led through several hundred thousand other innovations; and only a handful, if any, of it came from Malcom McLean. John Wesley Hyatt opened the door to a new age, the plastic age, in 1870. The celluloid that he brought onto the market at the time was the first thermoplastic and thus the mother of all plastics. The first area of application, the production of billiard balls, was followed by countless variations of the material, countless new plastics, countless new areas of application, i.e. countless innovations. By far the greatest change in the world was brought about by Frederick Winslow Taylor, at least still familiar to business administrators as the inventor of Taylorism. He began almost 100 years ago to analyze the work processes himself in order to achieve better performance by optimizing them. Without the resulting increase in labor productivity, there would be no leeway for wage stiff- Frederick Winslow Taylor: The engineer and management consultant claimed in 1911 that one could improve performance by analyzing the work process. With his system later called Taylorism, he paved the way for modern industrial society. struggled, no mass purchasing power, no social market economy and possibly no market economy at all, because the increasing prosperity took away the desire for the class struggle of the industrial workers. Taylor made Neckermann possible and the world revolution impossible. Instead of living in a world of permanent revolution, we therefore live in a world of permanent innovation. Everyone is talking about it, everyone is doing it, and the TV commercials are showing us the results. But precisely where innovation should be omnipresent, it is not: in companies. This was the result of a study on innovation management in service companies that PwC carried out together with the German Aerospace Society and the European Business School (EBS) Oestrich-Winkel. Only one of the 141 companies surveyed stated that they did not generate any sales from innovations introduced in the past three years. But at least 26 percent of the companies did not dare to estimate how high the turnover share of their innovations was. Even 57 percent of the respondents stated that they did not have an explicit innovation strategy, 66 percent of the companies did not systematically measure the success of their innovation activities and, according to PwC board member Martin Scholich, only 20 percent of the companies we surveyed had systematic innovation management. Some of these deficits are certainly due to the fact that innovations are traditionally more associated with the manufacturing sectors than with the service sectors; In industry, innovative products are literally more tangible than immaterial service innovations. Roland Gleich, Professor of Industrial Management at EBS Oestrich-Winkel, states that there is a real knowledge gap here: as diverse and profound as the knowledge on innovation and development management is available for and in the manufacturing industry, there is little in the way of secure knowledge for the service sector. These knowledge deficits can be discovered in science and practice. In view of the overwhelming economic importance of the service industries both nationally and internationally, it is high time to reduce this deficit, both in research and in the companies themselves. Scholich: Today, service companies, like product companies, compete for the best Solution. The early identification of trends, market conditions and customer needs plays a crucial role. The ability to innovate thus becomes an essential competitive factor. The steadily growing importance of innovations for companies is in stark contrast to their consideration in company balance sheets. In accounting according to the German Commercial Code (HGB), it is even explicitly forbidden to capitalize a significant item of development costs in the balance sheet, namely the expenses for internally generated intangible assets. Accounting according to International Financial Reporting Standards (IFRS) turns the tables, at least formally. According to IAS 38, development costs must be capitalized if certain recognition criteria are met. While the HGB tends to follow the principle of caution here, the IFRS focus more on the idea of information, says Uwe Herre, partner at PwC and member of the International Reporting Group. In many cases, according to Herre, even accounting according to IFRS does not show a clear picture of the innovative strength of a group: pharmaceutical companies, for example, often do not capitalize the development costs of a drug according to IFRS, since market approval is not considered sufficiently certain. Two of the most important components of innovative companies are not to be found on the balance sheets at all: research costs and the human capital of the employees. Both according to IFRS and HGB 6_pwc: october _pwc: october 2006
5 pwc: titles they are excluded from activation. Research expenditure because at this point in time the existence of an intangible asset cannot be demonstrated. That only changes when the research is aimed directly at a product, but then it is no longer called research, but development. The human capital of the workforce cannot be activated because, according to the current state of the discussion, the companies do not have control over this resource. Every employee can leave the company overnight and take their knowledge with them. Uwe Herre does not rule out that this state of discussion will one day change: One could make analogies here to the accounting treatment of customer relationships. Theoretically, every customer could end their relationship with the company overnight, so that there is no control over the resource here either; In fact, however, customer behavior is different. Therefore, assumptions can be made about the strength of customer loyalty and the speed of customer churn. Why shouldn't it be possible to do this with employees? Tax haven for innovation John Wesley Hyatt: The inventor and entrepreneur was looking for a material for billiard balls in 1870, the use of ivory had just been banned. He found celluloid, the first thermoplastic material. This started the plastic age. At present, however, the accounting guidelines do not provide any leeway here. Which is why essential components of the company's value are not recognized as intangible assets when taking over innovative companies. Innovations do not necessarily have to be located where they are conceived or implemented. Purely for tax purposes, at least. As soon as they come to a phase in their life cycle in which they are viewed as an intangible asset, for example a patent or a trademark, they can be relocated abroad to reduce the corporate tax rate. One way that is often considered here is to transfer ownership of such assets to a group company in a low-tax country, which then issues licenses to other companies inside or outside the group. Depending on the specific situation, these can be sales, production or brand licenses. The higher the license price, the lower the corporate tax rate. Lorenz Bernhardt, Transfer Pricing Partner at PwC, believes that it is essential, in addition to the transfer mode, to check the valuation methods for tax purposes in advance and to document them in detail. Recently, consideration could also be given to obtaining legal certainty ex ante for the assessment through advance pricing agreements. The analogy between innovative potential and customer relationships is also useful for another reason: the crucial role that customers play in all stages of the innovation process. It is difficult to develop inventions together with the customer, after all, there are still no customers for completely new products or services.But most innovations are developed from already existing products and it is obvious that those who have been using a product so far have fairly clear ideas about what could be done better about it. This is also confirmed by the PwC study on innovation management in service companies. There, the top managers surveyed described their customers as the most important source of ideas for innovations. On a scale from 1 (not important) to 5 (very important), customer requirements achieved a value of 4.4 and were ahead of suggestions from sales (4.0) or from our own employees (3.9) and on par Suggestions from the management. But when it comes to the question of involving customers in innovation development Photos: Laif / Henrik Spohler; Corbis / Henry Horenstein; Getty Images / Time & Life Pictures / Margaret Bourke-White; Laif / Joerg Modrow; Laif / Thorsten Futh; Ullstein / Granger Collection; Agency Focus / Philippe Psaila revealed a noticeable discrepancy (see graphic on page 6). PwC board member Scholich: No phase of development is considered to be as important for the success of an innovation as the first, the definition phase. In this phase, however, the customers are least involved in the innovation development. In the other two early phases, the requirements analysis and the conception, this deficit is clearly evident in the involvement of customers. Only in the late phases of the innovation development does the difference between the presumed success effect and the actual customer involvement decrease. But then, according to the conclusion of the study, it can be too late: In the phase of preparation for the market launch, the customer is shown particular interest and efforts to integrate. However, if the innovation was developed past its needs in the early phases due to a lack of customer integration, these belated efforts are unlikely to be crowned with success. PwC Board Member Scholich has also identified optimization potential in-house after the experience with the innovation study: We are, probably due to the industry, strongly attached to project thinking. But to anchor innovative thinking and acting, we have to move from project thinking to day-to-day business. Innovation must become an integral part of the company's life. Four-pillar strategy Core elements of high innovation performance The survey results of the innovation study by PwC, DLR and EBS revealed four central pillars of an innovation-oriented company structure. Those of the companies examined that have established all of these pillars (the professionals) score significantly better both in terms of innovation performance and, in general, in terms of corporate success than those companies that only have some of them (the performers). The results of the service providers who did not set up any or only very narrow pillars (the beginners) are even worse. With 58 percent, they made up the majority of the companies participating in the study, 18 percent of the professionals and 24 percent of the performers. These four pillars of innovation-oriented company design are: Innovation strategy. This includes all strategic statements for and in connection with the development and marketing of new products and processes. It provides the orientation for all innovation activities. Innovative ability is a decisive competitive factor. In many companies, however, innovation management and, in particular, the involvement of customers in the innovation process leaves much to be desired. in the company, from which concrete innovation goals are ultimately derived. Innovation management system. This includes a complex of strategic, tactical and operational tasks for planning, organizing and controlling innovation processes as well as creating the necessary internal or using the existing external framework conditions. The innovation management system thus provides the framework for the successful implementation of innovations. Corporate culture conducive to innovation. It gives the company an innovation-oriented identity and creates an internal atmosphere that motivates everyone involved in the company to contribute to the creation and implementation of innovations. Systematic success measurement of innovation activities. The emergence of innovations requires innovation controlling that controls and measures all innovation activities with the help of various methods, tools and indicators. Such a systematic success measurement ultimately serves to ensure the efficiency and effectiveness of all innovation efforts in the company. Contact Tel Tel Tel _pwc: october _pwc: october 2006
6 pwc: Title Postmodernism Swiss Post innovative? Of course, says their top technology and innovation manager, Keith Ulrich. pwc: Mr. Ulrich, you are in charge of a division, Corporate Technology & Innovation Management, that the good old post would not have been expected to be capable of. Ulrich: Deutsche Post World Net (DPWN) is not just good old post. The development from Deutsche Post with its conversion to a global logistics service provider through to the last acquisition of the logistics company Exel has made us number one worldwide. DPWN currently has employees in the four divisions Mail (Mail Germany and DHL Global Mail), Express (DHL Express and Freight), Logistics (DHL Exel Supply Chain and Global Forwarding) and Financial Services (Postbank) in 220 countries. And technology and innovation management are part of the good new post? The group claims to be the technology and innovation leader in the industry. The Corporate Technology & Innovation Management (TIM) division has existed since the middle of last year. We are part of Frank Appel's board of directors, Global Business Services. We are currently 15 employees and the trend is growing. Our task is to generate innovations also with the help of technologies and to evaluate potentials from them under the global focus of the group. How do you combine technology and innovation management? First of all, we are a service company and not a technology group. We use new technologies to inspire our customers in our service processes and with new solutions. To be more precise: We try to discover innovations that, on the one hand, bring and secure competitive advantages for us and, on the other hand, open up potential for cost savings and differentiation. And where do you find it? We operate proactive technology scouting, with which we examine the potential for the group from internal and external knowledge. We rely on scientific or technical solutions from research activities and from the dialogue with the company divisions. We maintain partnerships along the entire value chain. Also with customers and suppliers? Naturally. One example is our offensive to develop innovative, efficiency-increasing logistics solutions with our strategic partners IBM, Intel, Philips and SAP. The aim is to advance new technological developments in logistics and make them ready for use. The increased linkage of information and goods flows is intended to increase efficiency within the supply chain. In order to achieve this, the partners will in future bundle their logistics, technology and IT know-how; this turns technologies into innovations. Does basic research also play a role for you? Yes. We maintain partnerships, for example, with MIT in Boston or with the Fraunhofer companies in Germany in order to incorporate modern university knowledge and academic research results into our daily work. Customers, suppliers, universities - these are all external impulses. Which does not mean that no impulses come from within. An elementary component of generating innovations is the knowledge of the Group's employees, which must be bundled in an initial phase. The employees with daily customer contact or many years of experience in logistics bring many new ideas to a group. We also take care of patent management, with which we protect the innovations we have generated. Are there any innovations that move the entire group? One example of this is the Low Emission Transports innovation offensive. The starting point was the Kyoto Protocol for the worldwide reduction of greenhouse gas emissions. According to this, in 2012 we have to be at least five percent below the total emissions from 1990, which requires a drastic reduction in greenhouse gases from us despite increasing transport activities worldwide. For us, almost all over the world. Photo: Matthias Jung, vehicles that make a significant contribution to the Group's CO ² emissions. The group has developed a strategy here to significantly reduce its greenhouse gas emissions. And how do you intend to achieve this ambitious goal? We are addressing three points: 1. Alternative vehicles and fuels Here we have started a hybrid cooperation program, we are currently testing the second generation of biofuels and have completed a business concept for the use of gas technology. 2. Carbon Management we set up internal CO ² trading, which enables us to issue emission certificates. 3. Green Products climate-neutral products with which the customer can achieve climate-neutral transport of his goods; the package pilot projects are now starting in Germany and Great Britain, further products are in preparation. So not just a savings program, but also product development? Exactly. Since the introduction of these products this summer, we have been able to pass on certified emissions savings to our customers. We were driven by legislative requirements, customer demands, rising fuel prices, the availability of alternative technologies and increasing cost pressure in the industry, and from this we have shaped an innovation that offers customers added value and gives us a clear competitive advantage. What are the biggest challenges in your industry right now? Determining topics for us are globalization, the use of global infrastructure and of course technical requirements, such as the use of satellite technology. The greatest challenge for us is linking the flow of goods and information. In addition to the transport of goods, the most modern technologies also enable the transport of information for the customer. This results in numerous new business ideas. Does that currently mean dealing with the use of RFID technology? Like all competitors, we are working on using RFID Radio Frequency Identification to improve logistics services and processes. We work here together with partners and for different customer groups such as pharmaceuticals, fashion or electronics. In addition, there is the Smart Box project, a reusable all-purpose box with numerous technology modules such as RFID, GPS, sensors and others. And do you already know what will come after RFID? But it's still a little early. However, we are already investigating the potential of future technologies such as sensors or mesh networks, which may be of great interest to us. But innovation doesn't always have to mean high technology. You can see this, for example, at the Packstation, a solution for parcel customers in Germany that has already been installed in many German cities. So that with all the good new post, the good old post is not completely forgotten ... And when the DHL Innovation Center near Cologne-Bonn Airport opens at the end of 2006, you will find the innovative competence of the entire group bundled there. This center pursues two objectives: On the one hand, current logistical innovations and visions of the group are presented in a showroom. The corporate divisions have the opportunity to demonstrate to their customers the performance areas of the group, combined with new technologies and innovations. The other part is intended as a research area, test and prototype room for the employees of the company departments. Here we research new technologies and innovations together with our partners. Keith Ulrich is Head of Corporate Technology & Innovation Management at Deutsche Post World Net AG in Bonn. 10_pwc: october _pwc: october 2006
7 pwc: Trends 90 percent tax rate The tax burden on the German economy should actually decrease with the next corporate tax reform. But Norbert Winkeljohann, board member of PricewaterhouseCoopers (PwC), has identified a group of companies for which the reform planned by Federal Finance Minister Peer Steinbrück (SPD) would lead to a massive increase in the tax burden: corporations with high interest costs. According to the plans currently being discussed in the ministry, the proposed halving of the corporate income tax rate to 12.5 percent is to be financed by adding interest: 50 percent of all interest, rents, leases, leasing installments and licenses would be integrated into the assessment base for corporate income tax and trade tax. As a consequence, however, this means a tax burden for companies with high interest expenses, as it previously seemed conceivable at best in communist-ruled countries. For corporations that have to pay 80 percent of their operating profit as interest, the PwC calculations would have an effective tax rate of 88 percent for reinvestment and 90 percent for distribution of the profits generated. This would particularly affect companies that are already operating in difficult financial circumstances. A tax reform in the form now discussed would probably bring many to their knees for good. PwC board member Winkeljohann: The instrument of adding interest is destructive and often leads to excessive taxation in medium-sized companies with a weak equity base in times of low income, which is likely to be unconstitutional. Effective tax burden before and after the corporate tax reform Figures in percent Today 2008 Interest expense ratio Partnership Seal of approval for social services Capital company Reinvestment Full distribution Source: PricewaterhouseCoopers World premiere in Bargteheide: As the first social service company, Alsterdorf Assistenz Umland GmbH has a report on ecological, economic and social sustainability according to UN Guidelines created. The certification was preceded by a one-year process in which the company and its processes were checked for sustainability by PwC. Alsterdorfer Assistenz Umland GmbH operates ecological agriculture and currently employs 30 people with intellectual disabilities. Schleswig-Holstein's Agriculture Minister Christian von Boetticher praised the company's new, future-oriented path when presenting the report: We will continue along this path together. 0 percent 30 percent 50 percent 80 percent More corruption in the chemical industry Bribery and corruption are increasingly becoming a problem in the chemical industry. According to the Global Economic Crime Survey Chemicals Industry recently published by PwC, these crimes account for 28 percent of all white-collar crimes in the chemical industry two years earlier it was only 13 percent. On the other hand, the reported cases of embezzlement and fraud have declined in proportion. A total of 168 chemical companies from 30 countries were surveyed by PwC for this study. Frightening: 73 percent of all identified perpetrators come from the companies concerned, a sixth of them even from top management. Photos: Getty Images / Iconica / Elena Segatini; Getty Images / Stone / Bruce Forster; Corbis / William Whitehurst; PR / Young Americans; PwC / Uwe Sickinger Casinos on the advance The gaming industry will grow by 8.8 percent annually through 2010 to a turnover of 125 billion dollars worldwide. That is what the PwC study Global Entertainment Outlook predicts. The largest increases are to be expected in the Asia-Pacific region and especially in the city-state of Macao, which the People's Republic of China is expanding into an important casino location. In Europe, online gaming in particular is likely to grow. For the German market, even 17 percent growth is expected in this segment. Per year. Calculated in absolute terms, Germany ranks below further ran: PwC estimates the turnover from online gambling in 2010 to be the equivalent of 764 million US dollars for the gambling-mad Great Britain, the five-fold forecast. 64% of the companies that were among the 300 largest listed companies in Germany in 1996 could no longer be found in the top 300 ten years later. That was the result of a study by PricewaterhouseCoopers. 36 percent were taken over, 14 percent were no longer big enough for the top 300, 9 percent went bankrupt, and 5 percent have gone public. Showtime in Germany with the Young Americans The Americans are coming. To be more precise: The Young Americans, a student group from Los Angeles that organizes musical workshops for high school students. This autumn they will be offering four three-day workshops in Germany for 150 to 300 children each. This series of events is also intended to address young people who otherwise stay away from culture. By participating in the workshop, you can develop confidence in your own creative abilities. The 45 or so Young Americans have all completed professional training in the musical genre and have broad socio-educational experience. All costs for the workshops are borne by the PwC Foundation for Youth Education and Culture.Three questions for Dieter Endres about the new version of the German-American double taxation agreement pwc: What does the new supplementary protocol to the double taxation agreement bring? Endres: Above all, good news for companies: The capital gains tax of 5 percent on dividends between companies from a minimum participation of 80 percent will no longer apply. Pension institutions even save dividend capital gains tax regardless of the participation quota. Is there any bad news too? Americans are adamant when it comes to abuse of the agreement. Therefore, more stringent tests are provided for any perk. So conflicts with the tax authorities are still to be expected? However, cross-border tax disputes between the tax authorities are no longer to the detriment of the taxpayer: the supplementary protocol for the first time provides for a mandatory arbitration procedure for the USA. Dieter Endres, PwC board member responsible for taxation 12_pwc: october _pwc: october 2006
8 pwc: Markets for automotive suppliers in a tight spot On the one hand, costs are rising and, on the other, manufacturers are under pressure on prices. Innovations offer a way out of this dilemma. By Jonas Viering It looks good. When the taillights of the automotive supplier Hella flare up red, it looks great. Visually and economically. It shines as if from dozens of small light-emitting diodes, as they are currently in fashion. But the diode effect is created by a very common incandescent lamp. The customer has a nice look and that for less money. Reduction as an innovation is what Michael Borgmann, one of the automotive experts at PricewaterhouseCoopers (PwC) calls it. Less is more. Then it looks good, also for the suppliers. These are under new pressure. You are still squeezed between the demands of the auto companies and your own costs. In the face of fierce competition, end manufacturers are demanding ever more complex components at ever lower prices, while suppliers' spending on steel and energy increases. What is new, however, is the dynamic between insourcing and outsourcing. There is currently a lot of discussion about the relocation of production steps to the corporations, for example at VW, where a convertible previously manufactured by Karmann is to be built in its own Portuguese plant or at General Motors (GM). But the PwC study Innovations: The German automotive industry's path to success comes to the conclusion that this will only be a temporary effect. Regardless of the current insourcing activities, manufacturers are still forced to reduce their vertical range of manufacture, says Karl Gadesmann, head of the automotive sector at PwC Germany. In the past two decades, the vertical integration of automakers has sunk from 35 to 25 percent. Attempts are currently being made to bring competence back into the company, especially when it comes to electronics: VW has decided on an electronic strategy. This should also reduce image-damaging quality problems, such as those that occurred at Mercedes due to faulty Bosch brake systems. In addition, due to current sales problems, production capacities are not fully utilized in many places, which is why insourcing should save costs in the short term. In the long run, however, the corporations have to adjust their capacities. And then the trend is back to outsourcing. In fact, even the vacillating giant GM announced in June that it wanted to expand its collaboration with Bosch. These are normal cycles, explains Ferdinand Dudenhöffer, professor for the automotive industry at the Gelsenkirchen University of Applied Sciences. Anyone who insourcing will quickly notice that their costs are rising. The suppliers would still have to adjust to fluctuating cycles. Karmann, for example, did not use sufficiently flexible working time accounts and temporary work, which is why the company is now in crisis. It may be laid off a fifth of its workforce. Incidentally, suppliers can learn from the corporations: By outsourcing more and relying on suppliers. It is clear that the suppliers are facing a process of consolidation - a brutal struggle for survival. The car companies want to reduce the number of their suppliers from the current perhaps to perhaps a third in order to simplify their processes. The size of the supplier is a factor here. Size enables lower costs through higher quantities and also a global network. Of course, the suppliers have to keep cutting their costs. Continental can serve as a model here, says Dudenhöffer. The traditional tire company from Hanover, which has long been manufacturing chassis components, consistently relocates production to low-wage countries and it has better returns than the car companies. The decisive factor is the suppliers' ability to innovate, agree almost all experts. It is completely wrong when some suppliers try to save on research and development, says Steffen Kinkel from the Fraunhofer Institute for Systems and Innovation Research. You have to do more here and I would even say: You may. Because despite all the difficulties, the markets are growing. The analysts at the Automotive Institute at PwC see additional sales potential of 120 billion euros worldwide by 2012. For suppliers, this could even bring growth of 45 percent to 600 billion euros annually. The supplier's chance is to take the initiative. In the past, manufacturers thought about what they wanted for the car and then placed orders, explains PwC expert Borgmann. 14_pwc: october _pwc: october 2006
9 pwc: Markets Don't be afraid of private equity Financial investors can also be a sensible option for suppliers. Today it's a bit like the weekly market: You look around to see what's on offer and then buy it. The suppliers have to orient their offers to the end customer, to the car buyer. This is not a completely new idea, but the suppliers have worked differently up to now, says Borgmann. PwC has developed a system of which innovation paths lead where. The fact that design, for example, can be decisive does not only apply to Hella. Orientation towards the end customer is by no means easy. The manufacturers' development departments are often too ambitious to distinguish themselves technically, says Dudenhöffer. But it is not the engineer who buys the car, but Lieschen Müller. As an example, he cites the steering rear axle on the Golf 4. It drove up costs, and only Michael Schumacher would really notice anything of it. Only perceptible improvements in utility justify the higher price for the buyer. This could be seat cooling systems, for example, which are immediately noticeable on the summer test drive, explains Borgmann. Or, given the aging of society, getting into the vehicle comfortably. Research must therefore also include market research for suppliers in the future. According to Borgmann, the lead user concept of the seat heating manufacturer Webasto is already going in exactly this direction: towards the end customer. As the opportunities grow, so do the risks. The suppliers are increasingly bearing the cost risk of new developments. In some cases, the manufacturers even pass on the production risk: With pay-on-production, for example, the supplier receives a development cost surcharge for each part produced. If the car then flops, the supplier pays for it. That is why a clear innovation management with strict controlling is necessary. It can't be about tinkering for tinkering's sake, says Borgmann. If developments are in trouble, they have to be stopped consistently in favor of promising projects. The German suppliers have to take on the innovation leadership; this is the only way they can survive against price pressure and the market power of the car manufacturers. But they also have to be innovative when it comes to increasing their efficiency. Successful suppliers invest significantly above average in modern production processes, says Fraunhofer expert Kinkel. Process innovation can affect the organization as well as the technology of production. Standardization and excellence - that sounds boringly familiar. And yet, with some suppliers, productivity jumps of 15 percent are possible every two to three years, Kinkel still claims. Engineering is important. But cost control and customer focus are more important. PwC study: How suppliers face up to the challenges With a survey of 120 German companies in the automotive supplier industry, the PwC Automotive Center determined where the size differed: While smaller companies had stronger programs. However, the weighting falls depending on the corporate groups currently see the opportunities and risks for their industry, rely on the development of new sales areas, who prefer and what measures they take to meet the current challenges Larger production in low-wage countries. Meet the PwC study. The clear result: growth and innovation strategies are pursued far more frequently than pure cost-cutting available free of charge under Innovations The German automotive industry's path to success is Photos: Burkhard Schittny; PwC The automotive supply industry is extremely attractive to financial investors. On the one hand, they want to participate in the increasing share of the supply industry in the automotive value chain, because high growth potential is one of the central criteria of their investment decision. Second, private equity investors are interested in driving the industry consolidation caused by ongoing cost pressures. The market for it is there: after 241 M&A transactions in the automotive industry with a total volume of 20.3 billion euros were recorded in 2004, 2005 saw as many as 297 transactions with a volume of 31.7 billion euros. For the near future, I am assuming a further increase in the volume of transactions and a further increase in the proportion of pure financial investors who are now also able to handle transactions worth billions. There is no reason for companies in the sector to fear private equity investors. The locust picture is not only completely overdrawn here, it is simply wrong. All studies on this topic show that financial investors create more jobs in the acquired companies than would otherwise have been created. Cost cutting alone is not enough to achieve the return targets. Classic buy-out investors realize their returns through the so-called Karl Gadesmann is a partner at PricewaterhouseCoopers Germany and head of the automotive sector. Exit, i.e. the sale of your stake in an automotive supplier. A distinction can be made between financial and operational value growth potential. Refinancing the purchase price with borrowed capital and the associated increase in the return on equity (leverage effect) is one of the potential for increasing financial value. However, such potential can only be realized if it is possible to use the operational potential for value growth of a company. The quality of the management is crucial for this. In contrast to a strategic, i.e. industrial investor, buy-out investors hardly have the need to directly influence the company's operational activities. The management's freedom of action is thus retained. At the same time, the financial strength of the investor strengthens the company's image with suppliers and customers. In addition, the commitment of a financial investor, always preceded by well-founded company analyzes, speaks for the quality of the business model. Trade unions and works councils have meanwhile also got used to private equity: for them, too, it is not so much the legal form or nationality of the owner that matters, but rather what perspective it offers the company and the employees. For automotive suppliers who want or need to break new ground, everything speaks in favor of including the entry of financial investors into the group of possible options. Whether this is the best option has to be decided on a case-by-case basis based on the specific situation of the company. Anyone looking for access to new technologies will usually be better off with a strategic investor; Private equity can be more suitable for growth financing or the reorganization of the group of shareholders. In any case, it is advisable to proactively incorporate such considerations into strategy development instead of waiting for investors to knock on the door. Innovations and new markets are the first choice Measures considered for current challenges Production Switch to other industries 14.6 12.5 8.3 7.6 1) as a percentage of the supplier companies surveyed, multiple answers possible, 2) as a percentage of the companies surveyed in the respective size class 75.2 73.7 86.4 82.8 Development of new sales regions 34.9 40.9 under 50 53.5 56,, 6 42, production in low-wage countries 57.1 42,, 6 88.9 over 1000 Source: PricewaterhouseCoopers The suppliers are facing a consolidation process. The best means to emerge stronger from this are flexibility, controlled innovation and orientation towards the needs of the end customer. Contact Tel Tel PwC Automotive Institute: 16_pwc: october _pwc: october 2006
10 pwc: Markets From G7 to E7 A PwC forecast is optimistic about global economic developments in the coming decades: Everything will be fine for almost everyone. By Detlef Gürtler Die Welt in 2050 USA USA Great Britain Japan Germany Russia Brazil China India Great Britain Japan Germany Russia Brazil China India GDP per capita 1) in US dollars Economic weight GDP in US dollars at market rates USA = GDP in purchasing power parities USA = 100 1) at constant prices from 2004, 2) measured by GDP per capita in purchasing power parities, 3) in purchasing power parities GDP per capita 1) in purchasing power parities in US dollars Annual growth rates 2005 to 2050 GDP 3) in percent 1.6 2.4 2 , 2 1.8 2,, 9 3,, 2 Source: PricewaterhouseCoopers Prosperity gap 2) USA = population in percent 0.6 0.3 0.3 0.1 0.5 0.7 0.1 0, GDP 3) per capita in percent 1.8 2.0 1.9 1,. 3 3.2 3.8 4.3 44 years is a very long time. Especially when it comes to predicting economic developments. And especially if the forecast should not only apply to one country or region, but to the whole world. Anyone who would have wanted to predict the state of the world 44 years ago, i.e. in 1962, would probably not have had the fall of the Wall or the collapse of the Soviet Union on their account, neither the oil price explosion nor the economic rise of China and India. And yet his prognosis would have been better than the times closer to us: Because the belief in human innovation and the blessings of progress that was widespread at the time in the middle of the economic miracle should prove to be stronger than all the catastrophes developed in the 70s and 80s. Scenarios. Had it been up to these, the world would be shortly before or shortly after the ecological or atomic disaster. Instead, the danger of a world war has been averted, life expectancy and prosperity are higher than ever, poverty and hunger are being pushed back ever further and the unknown forecaster from the early 1960s would probably have predicted something similar. The forecasts of the Economic Outlook by PricewaterhouseCoopers (PwC) are also based on belief in the ability of people and their societies to change and develop. You dare to look into the world of 2050: Without a world war and climate catastrophe, with a globalized economy and growth on all continents, in which neither the Germans will die out nor the Togolese starvation, a world in which we want to live in 2050. In this world, according to the PwC forecast, it will no longer be possible to draw the line we are used to between industrialized and developing countries. The seven largest of today's developing or emerging countries (the E-7 countries China, India, Brazil, Russia, Indonesia, Mexico and Turkey) together will generate a higher national product than the seven largest industrialized countries (the G-7 countries) and China is on par with the USA. While the G-7 countries (USA, Japan, Germany, Great Britain, France, Italy and Canada) will achieve growth rates in gross domestic product (GDP) per capita in the order of 2 percent per year (yes, Germany too!), They are recording E-7 states values between 3.3 and 4.2 percent per year. While China currently has the highest growth rates of the countries examined, the PwC experts predict that India will take on the leading role over the next decade. China's growth is primarily fueled by high savings and investment rates, and experience with Japan and other Asian tiger states suggests that this growth dynamic will not be sustained when the standard of living approaches that of the industrialized countries. The difference in the level of prosperity is getting smaller from year to year. If the standard of living in China is currently only 17 percent of the US level, by 2050 the Chinese will already be at 41 percent of the US standard of living, which has also risen sharply until then. This ratio is not measured in terms of conventional GDP per capita, but in terms of the size of GDP in purchasing power parities.This indicator reflects the individual prosperity much better than the measurement in market prices. The absolute values show this catching-up process even more clearly. According to this, the level of prosperity in China would be around The economic catch-up process of the developing countries will continue in the coming decades. Countries like China and India will reach the current level of prosperity of industrialized countries by 2050. Year 2050 with a per capita GDP in purchasing power parities of more than dollars per year and thus higher than in Germany today. The average Russian by 2050 could afford more than the average American today, and India would then have reached the current level of prosperity in Spain with just under dollars in GDP per capita per year. But the PwC study shows that even in a world of four decades of trouble-free growth, there are not all winners. In industrialized countries in particular, there are sectors and social classes whose existence is threatened by the upswing in emerging countries. Among the economically active, this mainly affects workers with a low level of education. If they are employed in industries that have to compete on the world market, this effect has a direct effect; where there is no competition from foreign companies, as in many service industries, crafts and construction, pressure is exerted by workers who immigrate from poorer countries except in the traditionally isolated societies of Japan and South Korea. For companies, manufacturers of mass consumer goods in particular are among the potential losers from globalization, regardless of whether they manufacture high- or low-tech products. The picture for the financial sector is mixed: Financial service providers who manage to establish a strong presence in the E-7 countries will participate in their growth process. Those who continue to concentrate on today's industrialized countries, on the other hand, will run into problems: Low economic growth, stagnating or even declining population figures (except in the USA) and the aging process of society will make it difficult for financial service providers to generate sustainable growth. Contact Tel .: Download of the study: 18_pwc: october _pwc: october 2006
11 pwc: Markets Real Estate Goes Mobile More and more companies are selling their real estate. With the introduction of REITs, there would be a further exploitation option. By Roland Stimpel German companies traditionally attach great importance to their own real estate. The ownership rate is high in an international comparison: At around 65 percent, it is more than twice as high in this country as in the USA, where only 30 percent of commercial properties are owned by their users. But in Germany, too, more and more companies are discovering efficiency reserves and optimization potential in their properties. Real estate often tied up too much equity, liquidity and management capacities; they restrict flexibility and room for maneuver and lower the returns that can be achieved in the core business. According to a study by the Darmstadt Research Center for Business Real Estate Management (FBI) in 148 companies, they have already reduced their ownership rate by around 15 percent in recent years and they want to sell further properties worth around 50 billion euros. Even at the federal, state and local levels, the pressure to sell on housing associations and real estate for public use continues. And real estate investment trusts (REITs) offer completely new opportunities for commercial and government real estate. However, real estate sales are not always optimal. In some cases, the proceeds remain below those achievable on the market or are in an unfavorable relationship to the subsequent payment obligations, e.g. for rent and leasing rates. In some cases, the flexibility does not increase, as hoped, through the sale of the property, but actually decreases. Topics such as the optimization of operational processes and the minimization of the tax burden are neglected in some cases. It is necessary to integrate all of these topics. Jochen Brücken, real estate expert at PricewaterhouseCoopers (PwC): Real estate sales not only have to be professionally prepared and implemented, but also integrated into the company's overall strategy. They have to be part of a holistic view. Many of the current sales campaigns have the same starting point: the importance of real estate for corporate financing has often been reversed in recent times. In the past, equity investors often viewed them as a company's asset base that reduced its dependence on the course of its core business. Banks valued them as valuable collateral and offered correspondingly more favorable financing conditions. But the more corporate returns for equity and debt capital providers come to the fore, the clearer the disadvantages of many company-owned properties become: They lengthen the balance sheet and tie up enormous funds, but do not generate any corresponding income. Their evaluation is often not in line with the market. This in turn reduces the company's transparency, complicates its analysis and makes it less attractive for investors. Added to this are the greatly increased requirements for professional real estate management. Their construction and acquisition, their financing, management and further development have developed into highly differentiated and demanding activities that have a strong influence on the economic success of the company. Real estate is often the second largest cost item after staff costs: in the companies examined by the FBI Darmstadt, they accounted for 5 to 15 percent of total annual costs. However, real estate management is often far beyond the company's core competency. In view of their economic importance, responsibility for the company's real estate should generally lie with the manager or management level. However, it is usually located on the lower hierarchical levels, so that the topic is not adequately taken into account in strategic decisions. This is confirmed by a study by the real estate consultancy CB Richard Ellis, which is based on statements from around 100 companies. According to this, the potential for cost reduction is not used enough and real estate-related work is outsourced too seldom. According to this study, real estate management skills are inadequate for the value of their properties in 57 percent of the companies examined. Selling real estate often appears to be the simplest and most profitable solution to financing and management problems. But Jochen Brücken warns: Decision 20_pwc: october _pwc: october 2006
12 pwc: Markets decisions about a sale should not start at the load, maintenance and investment needs, development or conversion, but rather at the end of an analysis and planning process. In this process, the real estate qualities of their locations must first be determined. potential of the property right down to the values and its uses analyzed. An important role in this phase is played by. For this purpose, PwC has developed IT-based real estate without major investments only for the company itself or the BeSys evaluation system and works with interdisciplinary teams. These can also be used by third parties. Jochen Brücken: If the real estate does not deal with third-party issues such as financing, taxes and business processes, a case study is recommended: The Leo portfolio PwC not only supports private companies in the management and outsourcing of real estate portfolios, but also non-profit organizations and the public sector. In 2005, PwC and the real estate consultancy CB Richard Ellis advised the state government of Hesse on the sale and lease back of 18 previously owned properties, including the buildings of the finance and interior ministries and the Frankfurt police headquarters in Adickesallee, which was inaugurated just a few years ago (photo ). With a volume of 1.07 billion euros, the package sale was the largest portfolio transaction with office properties in Germany to date. The properties designated as the Leo portfolio after the Hessian coat of arms were first valued and analyzed. They were then presented to a large number of domestic and foreign investors. These received initial information on the basis of which the bidders could submit non-binding bids. In addition, the bidders documented their planned approach, the financing structure and their experiences with larger transactions. On the basis of this information, a group of five interested parties was selected, who then submitted binding bids. In the end, Commerz Immobilien GmbH was awarded the contract. She paid 270 million euros more for the portfolio than the state of Hesse initially estimated as revenue in its budget. Even in relation to the state's annual net rental payments of 55.3 million euros, the sales price for the Hessian state treasury is extremely low. Hesse's finance minister, Karlheinz Weimar, stated after the contract was signed: We understood how to use the competitive situation between the bidders and their financing partners as part of the structured bidding process. As a result, and thanks to the professional support of our consultants, we were able to further improve the result for the country in the end. PwC expert Jochen Brücken highlighted the exemplary nature of the transaction: Hessen is therefore very much in line with the trend. Other federal states will follow. Photos: Laif / Gaby Gerster; Artur / Barbara Staubach Sales often not. For an investor, such limited marketability means a higher risk, for which he demands compensation at a very low price or high payments for rent and leasing in the subsequent period. A very long-term rental or leasing contract also increases security for the investor. However, this can be at the expense of the seller, says Brücken: He may still be tied to a property at high costs if it no longer meets the requirements of his business. At this point, at the latest, the company's real estate sales policy must be synchronized with its overall strategy: From a purely real estate point of view, it would be optimal if the company were to part with well-marketable properties and concentrate as much of its activities as possible in properties that are difficult to market on reasonable terms . But it's not just about sales income and cost reductions, but also about business organization, finance and tax issues. Jochen Brücken: Decisions in this field can be very complex. This places high demands on consultants and service providers who work for the company. You not only have to have real estate know-how, you always have to keep an eye on the company as a whole. The latter also applies to decisions about optimal recycling. Real estate can be owned, partially or fully rented out, or initially developed for new uses. If they are sold, the previous owner can leave them or continue to use them in the long term via sale-and-lease-back. Properties can be sold individually or combined into portfolios, possibly in a separate subsidiary that focuses on the management and / or sale of the properties. REITs are a lively discussion option recently: real estate companies that are exempt from corporation and trade tax, but have to distribute a large part of their income, which is then taxed by the investor. In recent years, this type of company has spread from the USA to numerous countries in Europe and the Pacific region. REITs already have a global market capitalization of over 400 billion euros; the French REIT (SIIC) alone has attracted around 20 billion euros in a short period of time. The introduction in Germany was recently politically controversial. However, local companies have already announced that they want to bring properties into specially founded French, British and Australian REITs. Billions treasures Billions treasures Gross book values of real estate of Dax-30 companies in billions of euros DaimlerChrysler Allianz Telekom VW RWE Metro Eon Munich Re Siemens Source: Handelsblatt 22.4 20.5 17.1 14.2 12.9 12.3 11 , 7 10.4 9.8 The gross book values used here correspond to the information in the most recent annual report. However, due to different accounting practices, no conclusions can be drawn from this about the actual market values. REITs become particularly attractive for the outsourcing of corporate real estate if, as currently discussed, the raising of hidden reserves is tax-privileged. For many corporate real estate, the tax value is far below their market value. In an extreme example, if a property has a book value of EUR 1 million and is being sold for EUR 11 million, this can result in a corporation tax liability of EUR 3.9 million for a corporation. The net proceeds may then be in such an unfavorable relationship to future rental or leasing costs that the sale does not take place. Uwe Stoschek, real estate and tax specialist at PwC: German companies are currently being prevented by tax regulations from investing their capital tied up in real estate more profitably in their core business. According to an estimate by the private bank M.M. Warburg & Co. alone the 65 largest listed companies in Germany have hidden reserves of around 80 billion euros in their real estate. The mobilization of such immobile assets would make economic sense and, in the longer term, also fiscally profitable. PwC offers its customers an innovative support concept for the establishment and management of REITs. Together with Jochen Brücken and Eva Handrick from the Financial Services team, Uwe Stoschek has bundled PwC's knowledge of REITs. His advice: Companies should already check whether the REIT is a suitable form of bringing in real estate for them. Even before the market launch, real estate ties up capital and hinders concentration on the core business. For their optimal exploitation, it is not so much the proceeds that count, but the conformity with the corporate strategy. zept considers the entire life cycle of the REIT. This includes positioning that meets the needs of potential investors. Another part of the advisory service is comparisons between a REIT and other exploitation options, an analysis of the competitive situation, scenarios and forecasts for assessing opportunities and risks. If a REIT proves to be the optimal vehicle at the end of this exploratory phase, the implementation phase begins. The business plan may have to be adjusted and the company's real estate portfolio and its organization restructured. Markets are to be explored and potential investors addressed. Finally, the REIT IPO is prepared and implemented in cooperation with an investment bank. Once a REIT has been established, PwC supports management in balance sheet and tax issues, analyzes the opportunities and risks of disinvestments and provides advice on optimal portfolio management. PwC offers these services with around 150 qualified employees who are focused on the real estate industry. The international network of REIT experts extends beyond this national competence. This makes it possible to respond to every development of legislation and markets: REITs can be founded and established in Germany, but if necessary and sensible also as foreign companies. Contact Tel Tel _pwc: october _pwc: october 2006
13 pwc: Markets Touch Mahal India changes the rules for investment promotion. From 2009 there will be attractive tax breaks in the new special economic zones. Skyline made in Rajasthan: The Palace of the Winds, built in 1799, originally served as the residence of the harem of the Rajahs of Jaipur. 953 windows in the facade ensure constant air circulation - an air conditioning masterpiece. By Lars Lawall The riches of India have drawn people from all over the world for ages. Immigration, which began around years ago, has never really subsided. India has absorbed and assimilated every civilization and culture, so that today the 3.3 million square kilometer country with its more than one billion inhabitants can be described as a colorful patchwork of different ethnicities, religions and cultures and is much more cosmopolitan than China, for example. Although Hindi is the official language, Indians are usually fluent in English. This remnant of British colonial rule, which ended in 1947, is a huge relief today for any company looking to invest in India. India is one of the fastest growing economies in the world: In the 2005/06 business year, the gross domestic product grew by 8.1 percent. It is expected that the Indian economy will continue to grow by around 6 to 8 percent annually in the coming period, making it the third largest economy in the world after the USA and China in 2032. This economic development was initiated in 1991: When socialist India no longer had foreign currency to pay due oil bills, the then Finance Minister and now Prime Minister Manmohan Singh decided to introduce economic reforms to promote foreign business. These are still valid today and have been extremely successful.India now has foreign exchange reserves of $ 144 billion and is investing heavily in infrastructure to enable the rapid economic growth to continue. On average, 2.4 kilometers of new highways and houses are being completed every hour in India. 60 percent of the rural population are to be supplied with electricity within the next few years, and the state telephone company BSNL is to ensure an infrastructure to handle 40 million mobile phone connections within the next three years. The private companies Airtel and Hutch have the same goals. The German economy, however, has so far participated rather cautiously in the development of this gigantic market: The German foreign trade volume with India was smaller in 2005 than that with Portugal, and the investment volume exceeds the Special Economic Zones (SEZ) in India region Jamnagar region Surat region Mumbai (Bombay) region Delhi Region Cochin 500 km Source: Indian Ministry of Economic Affairs, PricewaterhouseCoopers Region Chennai (Madras) Engagement in Syria that in India. And that with a consumer market of 350 million households! This discrepancy alone shows how important the future framework conditions for direct investments will be for German companies. In addition, there are extensive deregulations that have been announced for the insurance and banking sectors (see box on p. 26). Will these measures actually be implemented Baikampady Bangalore Bhadohi Bornada F Chandigarh Dahej Ennore Faridabad GAABIAAAFC Garhi Harsaru Ghaziabad Gopalpur Greater Noida Gurgaon Hassan C Hazira Hyderabad Ichapor Jamnagar Kakinada Kakkancherry Kalamassery Kanpur Khopate Kolkata Culpi-Kzadangai-Para-Naga-Sedi-Nappa-Nappali-Nappali-Mochadi-Napparu Park A Sriperumbudur A Trivandrum A Vallarpadam I Village Vanj CH 24_pwc: october _pwc: october 2006
- Is it weird to worship death?
- What is special about Tamil Nadu
- Should I hire a professional photographer?
- How does watching movies affect you?
- Liberals ever become conservatives
- What made you learn to code?
- How strong was the Roman army
- What do airplane lights mean
- Previously depressed people, what has changed
- Where can I buy Tamil Nadu
- Sends Amazon products to Pakistan
- Who uses MailChimp
- How can diamonds get scratched
- Is Aung Suu Kyi a dictator
- What are the easiest freelance niches
- What annoys the gray wolf
- Are you straight up
- Where do zombies come from
- Why did you look at stoicism
- Wat is the home remedy for acid
- What are the dimensions of a lot
- How to cook dried chickpeas
- How do you define education
- What are the benefits of Drionic batteries
- You can overcome the space-time continuum
- What inspired the TV show Futurama
- Why do I hate the doorbell
- AOC will run for president in 2024
- What are the current health problems
- What are most of the ghetto rap songs
- Why Are American Hospitals Privately Owned?
- What happens in the Trump impeachment investigation
- When does a girl feel horny?