Industrial giant combines connectivity with technology to achieve robust growth

03 May Industrial giant combines connectivity with technology to achieve robust growth

Germany’s Hessen State is home to 6.3 million people and has climbed dramatically in importance over the last few decades, specifically through industrial growth in Frankfurt, with its sights now set on fresh success in many sectors, as Tarek Al-Wazir, State Minister of Economics, Energy, Transport and Housing, explains:

The digital revolution has had a huge impact on the region and has accelerated as a result of the pandemic. How would you sum up the essence of Hessen and its people? What strengths differentiate the state from other regions in Germany and the world?

First, we are in the heart of Germany; at its very center, which also lands us in the heart of Europe. Of course, Frankfurt airport is known as not only the biggest German airport, but one of the largest European and global airports. From the Frankfurt area, you can reach any capital of the European Union in the morning and be back in time for dinner. There are few places in Europe that can offer that.
Second, Frankfurt is the financial center of Germany, hosting the central German Bundesbank and, of course, the European Central Bank. Essentially, we are also the place to be if you are related to the financial sector. The whole industry is changing and we have about 200 banks in the form of branches or representative offices here in Frankfurt from Germany, Europe and the world. In fact, after Brexit, we have the biggest financial sector of any of the remaining European Union states.
Connectivity, not only by plane but also by train, is extremely agile. Frankfurt is three hours by train to Brussels, three hours to Amsterdam and four hours to Paris. Of course, the German Autobahn system is also well known around the world, and Frankfurt is the place where all these different travel modalities converge. Whether you travel by car, train, or plane, we are at the center of all the routes. If you are a globally interested company that is looking for a place to set up an office in Europe, Frankfurt just makes sense.
The region is quite diverse and international and it is easy to find people that are fluent in English. There is hardly any nationality that is not represented in the Frankfurt Rhine-Main area. We have the biggest Korean expat community, for example, and a huge Japanese community, to name just a couple.
Additionally, our financial industry was the first to become digitalized decades ago. The biggest European internet hub in the CIX, the Commercial Internet eXchange is in Frankfurt. Hence, if you are looking for opportunities to set up a company that depends on excellent connection, this is also a space where the Frankfurt Rhine-Main area is exceptional. In terms of the development of digital infrastructure, we are not only top in Germany but also in Europe. Regarding fintechs and the future of financial technology, we founded the Green and Sustainable Finance Cluster of Germany here in Frankfurt, because it is our firm conviction that in the transition into decarbonization and climate neutrality, there is a huge need for investment, which is not something that governments and states alone can cover. We also need private investors, private capital, and to guide investments. This is one of the main issues of the future of financing and the financial industry. If even in countries like Norway, who have made their wealth from oil and gas, is setting up funds for decarbonization, it is clear that this is the future.
We started working on our energy transition 20 years ago with our coining of the term, Energiewende, German for energy turnaround, which has now become a word used as much as kindergarten or weltanschauung (worldview) in the realm of energy transition and renewable energies. My party, the Green Party, returned to the federal government recently after 16 years in the opposition. The goal that the German federal government has of 80 percent of electricity production being renewable by 2030 is quite ambitious. In Hessen, we have been working on this for years. In 2020 we reached 54 percent, so more than half of the electricity production in our state is renewable. We continue to work on it by using solar, wind, and technologies to save energy first and produce the rest of it renewable. We are also, of course, thinking about the future of the aviation industry, as we now know that it can no longer rely on jet fuel. In that vein, we also founded an entity that is looking for solutions to make aviation climate friendly.
In term of our unemployment figures and FDI in Hessen, we are also tremendously attractive. Once we overcome this pandemic that has really been too long, I am sure that people will still want to meet. Obviously, it is great that we have the possibility to meet via videoconferencing, but, in the end, it is much better to see each other face-to-face. I am confident that Frankfurt, the greater Frankfurt area, and the state of Hessen will show again how we do our best to bring people together. The Frankfurt Fair, and anything that happens on the fairgrounds in Frankfurt for that matter, has a long and cherished history of bringing people together.

As we enter into a new year, things are remarkably different. Logistics have taken a huge swing forward in terms of reliance on digital tools and shifts in supply chains and movement of people. In terms of urban planning, we have really needed to rewrite the book. What are your top priorities for 2022? What major development projects can citizens expect in terms of infrastructure, mobility and urban redevelopments?

First of all, the COVID-19 pandemic forced the whole world to become digitalized quickly. Although we will overcome COVID-19, many things will stay because we are just used to them. We will work on strengthening our ability to make it possible to do business online, and to also work on the infrastructure that is needed for our workforce to work remotely. In fact, we are quite good at this. Other countries may be ahead of us when it comes to the digital infrastructure for households, but Hessen is quite ahead of the other German states and we want to maintain this lead.
Secondly, I am sure that the financial industry will play its role in the transition of German and European industry toward net zero. If you look at the Fit for 55 package of the European Commission, there is a crucial role for the financial industry. During the COP26 in Glasgow, it was announced that the International Sustainable Standards Board (ISSB), would be located in Frankfurt. This is also a clear sign Frankfurt is on this map as one of the leading cities of the world concerning green and sustainable finance and will play a large role in that. Of course, we want to really help the whole industry to take advantage of the many opportunities that are emerging. The transition of industry, of mobility, of the way we live and move, and heat our homes, and what have you is not only a big challenge that we are facing, but it also means the creation of opportunities and we will just have to take them.
Next, we are working on a big cluster we call Hessian AI, because we also know that Artificial Intelligence is one of the key issues for the future. We founded it together with our universities which in a very small geographical radius universities are really leading the world in these fields. At the technical university in Darmstadt, which is about 30 kilometers south of Frankfurt, there is a cluster of IT abilities with veteran companies like SAP, which is in Baden-Württemberg, but only about 10 kilometers from the border of our state. It is a massive cluster and we have about 100,000 people working in IT in our state. As I said, AI is one of the key issues for the next years and this is something on which we are focusing to leverage the many possibilities and opportunities.

Hessen is a European FDI success story. Leading up to 2019, the region alone saw 24 percent of national FDI inflows. Companies that set up to do it for the long-term, with 95 percent staying for many years. On top of that, the area has developed a vibrant logistics sector intent on utilizing Germany’s largest international airport and Europe’s densest highway and rail network. In your view, why should international investors have Hessen on their radar and what specific sectors and business opportunities do you think are the most attractive today?

If we think about what happened in the last few years concerning Brexit, in Hessen, you are in Germany and in the European Union. This means that it is easy to do business, not only in Germany but in 27 European states. It is easy to cross borders. In fact, you practically do not even notice that there are borders anymore. This is one of the key reasons companies and investors from other continents looking for a base in Europe are thinking about Frankfurt and the surrounding area. Here you are in the middle of the continent and the European Union is a success story for so many countries. A fine example is how Spain was before it became a member of the European Union after Franco’s dictatorship at the beginning of democracy and how it stabilized the country. The European Union itself is not only a great idea, but it is also a huge economic success and, of course, we house the European Central Bank, which is another important reason people are settling here.
Second, we have talent. We have an incredibly well-educated workforce in Germany in general, and not only academically educated people, but well-prepared across the spectrum of skills that you need as an investor that wants to produce or to sell. Here, they can easily find many capable people to help build their company. We are also quite attractive if you are thinking of coming to Europe as a new place to live. Expats find Hessen as a wonderful place to live. That is the third reason our state is attractive to people from abroad.

One of Germany’s top goals as the new government starts out in 2022 is to reshape its sustainability initiatives to fall in line with the Paris Agreement. The previous government’s climate action program for 2022 allocated €8 billion to emission reduction projects. While renewable energy use has grown dramatically, the country still relies on nuclear, natural gas and coal to meet its capacity. What major initiatives has Hessen State taken to lower its carbon footprint and what major developments in energy are we expecting to see in 2022 and beyond?
We had a nuclear power plant, but it was closed six weeks after the Fukushima event. Therefore, this is a transition that also already taken place here in our state, and we do not have major coal power plants anymore. The truth is that we started quite early to work on our renewable energy power. As I mentioned, we have already reached over 50 percent of renewable energy in our production, and of course we are still working on it. We know that if you try to decarbonize not only in electricity production but also in mobility and the rest; you need more electricity and more possibilities to do that.
Second, we recognize that there are major challenges ahead. If you genuinely want to meet the new German goal of reaching climate neutrality by 2045, it means that you also have to work on every building; you have to work on how production is taking place; and you have to work on different technologies, just to name a few areas. Thus, financing the whole transition is one of the key issues, and if we look at the taxonomy and the Fit for 55 goals of the European Union, we know that there are big possibilities for Frankfurt as a financial center to play a major role in it.

Despite the huge contraction in tourism witnessed over the past two years, the sector has shown signs of recovery at the global level and German economists are optimistic that national tourism contributions will reach 2019 levels in 2022. However, the emergence of new COVID-19 variants can create unexpected setbacks, as we have seen recently. What major initiatives is your government implementing to support the tourism sector to turn it around in the new year?
Germans call themselves Reiseweltmeister, which means world champions in travel. Of course, in the last two years, many Germans did not go abroad because it was impossible or they did not feel safe. In response, we tried to remind the Germans of the beauty of their own country. We know that was quite bad news for all the countries around the Mediterranea that were missing their German tourists, but that is the first measure we took. We wanted to show people in our state and the rest of Germany what possibilities they have in domestic tourism and it worked quite well. Previously, we had been one of the top destinations for Chinese tourists wanting to discover Europe. They would all come to Frankfurt on the first and last days of their trips to do a lot of shopping before going home. Evidently, they could not come these past two years, and it will take some time to reach prior numbers. U.S. citizens were the first group of travelers from other continents that came back to Frankfurt and also used Frankfurt as their stopover through Europe.
I have full confidence that travel will resume, and we are also trying to show that, even if it is quite difficult to meet in person, there is a possibility of holding fairs or shows, such as the recent edition of Frankfurt Fashion Week that we took over from Berlin. I am delighted to say that Frankfurt is the new place for fairs concerning fashion in Germany. Our focus is to show that we are ready. When we reach the true end of the pandemic, Frankfurt will be able to go live with their events. This is, of course, quite challenging, but also successful.

The scope of your ministry’s portfolio allows you to have a stake in some of the driving forces affecting the region’s economic development, such as the digital and green transformations, but also contributing to building an innovation-driven business environment. What are some of the flagship projects you are personally excited about in 2022 to reinforce Hessen’s position as Germany’s leading destination for FDI, sustainability and innovation?
At our Competence Center for Climate Protection and Noise Abatement in Air Traffic, for example, we are working not only theoretically but practically to open a plan that is producing e-fuels to be used in aviation. In the car industry, transformation is going on and we know that the future is electric vehicles, but in aviation, we know that it will take decades before we see battery driven passenger planes. We are sure that the biggest problem in decarbonization is in aviation. This is why we are working on that and I hope that we will make major progress in 2022 to show that it is really possible to produce climate neutral fuel for airplanes. Secondly, at the end of this year 27 hydrogen trains will start a normal daily service in our region, and also show that the transition is possible, not only in electric cars but also in environmentally friendly rail service. These are two examples which show that we are not only talking about changing things, but that it is really happening.
The third thing we want to see happening is that all our programming at the Frankfurt fair is taking place as it once did. The Frankfurt Book Fair, for example, is one of the biggest book fairs in the world. Of course, in the last two years it was not held as it used to be, and I really hope that this October everything will resume as before.
Finally, our pharmaceutical industry here in Hessen is extremely important. Few people are aware that the vaccines that are used around the world are produced in a relevant percentage here in our state. BioNTech is just over the Rhine River in Mainz, but the major production of it is in Marburg, in the middle of Hessen. Another unknown fact is that the vials that hold the vaccines are produced and filled in Frankfurt at the Sanofi plant and distributed to the world via Frankfurt airport by Lufthansa cargo. There is a real strength in our chemical and pharmaceutical industries that has shown that it is possible to develop a vaccine in record time, and that there are other possibilities, especially concerning mRNA vaccines, to fight other diseases in the future. The pandemic showed us that science can now be quick. We sometimes forget how fast we could develop a vaccine, use it and even to change it, and we have really learned a lot about what we are capable of.