Foreign investors' activities in the context of East German privatisation: Motivations and strategies

4. Conclusions

Privatisation in East Germany has not been a closed-shop event but has successfully set the stage for international integration of the East German economy. The degree of foreign participation, though fairly modest in the beginning, has risen considerably over the course of time. Foreign investors, who have proved to be sensitive both to market signals and to policy created incentives, will contribute a good deal to restructuring and modernising the East German economy. However, the importance of foreigners' participation has to be assessed in qualitative terms. Its main merit in privatisation has been to strengthen competition. In many cases, bidding among potential investors became more competitive when the Treuhand Agency succeeded in inviting foreigners to participate. However, investors' competition has been low in cases where maintaining old production sites was politically pre-determined. Political decisions to maintain production were motivated mainly by the need to secure employment. This policy has had a high cost which it has not been possible to shift to foreign investors — or to Germans — but which has had to be covered by the Treuhand Agency and other public bodies.