VCI presents 12-point plan to strengthen Germany’s innovation ability

New record high of research budgets in the German chemical industry

Rise in R&D budgets 2015 by 4 percent to 10.5 billion euros ++ Some 42,000 staff are engaged in research into new products and processes ++ Chemical research location Germany is under competitive pressure ++ VCI speaks for introducing fiscal incentives for research and for a better impact assessment of legislation.

© VCI/Fuest

In 2015 the German chemical-pharmaceutical industry invested more money than ever before in its research and development (R&D) activities: The R&D budgets of companies rose by 4 percent to 10.5 billion euros, or over 5 percent of the industry’s sales. In absolute terms, the number of staff increased in the past 10 years (2004 to 2014) by over 3 percent to some 42,000. Now nearly every 10th chemical industry employee works in an R&D department, so the German chemical industry association Verband der Chemischen Industrie (VCI) at its research press conference.

Thomas Wessel, chairman of the VCI Committee for Research, Science and Education, on the described development: “This makes a good basic position for the chemical-pharmaceutical industry – because in our industry, innovations are to a particularly high degree the drivers of progress that enable us to remain competitive. After all, global competition brings massive innovation pressure for our companies. Mainly the emerging markets are catching up.”

The VCI forecasts a rise in R&D spending to ca. 16.5 billion euros to 2030, with a strong focus on specialty chemicals and pharmaceuticals where the greatest growth potentials can be expected. Research budgets should remain constant in basic chemistry. The VCI assumes that Germany can defend its position as the 4th largest location for chemical research. For this, the industry needs to maintain its existing orientation to innovation.

Chemical research location Germany under competitive pressure

Germany ranks among the leading chemical research nations, after the USA, China and Japan. Irrespective of the favourable current situation, Wessel warns against a false sense of security: “Competitive pressure will become stronger – not only for companies but also for locations. Keeping up our lead in innovation is getting ever more difficult. “ Competitors do not come from industrial nations alone. China and other emerging markets are massively investing in research and development. The VCI expects that China will have a 15 percent share in global chemical research by 2030. Back in 2000, China’s share was just under 2 percent.

12-point plan to strengthen Germany’s innovation ability: Fiscal incentives for R&D and a better impact assessment of legislation

The R&D environment in other countries is heavily oriented to competition. Therefore, Wessel takes the view that Germany should set itself the ambitious goal of becoming the world champion in innovation. He substantiates this demand: “Our country has very few natural resources. Consequently, we strongly depend on technical progress. New products and processes are the only way for Germany to succeed in international competition, to create jobs and to preserve our prosperity in the long run.” This presupposes attractive framework conditions that facilitate innovations and boost Germany as a location. Against this backdrop, the VCI has elaborated a 12-point plan to strengthen Germany’s innovation ability. The plan identifies these main fields of action: Bring into focus and intensify research incentives, reduce regulatory barriers, promote culture and talent, make cooperations easier.

More concretely, the VCI proposes fiscal incentives for research additionally to project promotion. Half of the EU Member States and 27 out of 34 OECD countries use this instrument successfully. Even China grants various fiscal incentives for R&D. Wessel emphasises: “Germany has a clear location disadvantage in this respect. “ For this reason, the VCI proposes the following: Research-based companies should be allowed to deduct 10 percent of their self-financed R&D spending from their tax liability (tax credit). Tax credits should be paid out if losses are incurred. A first step towards eliminating this disadvantage for the location Germany could be fiscal incentives regarding research personnel.

Furthermore, Wessel wants an innovation check to assess the impacts of new and existing legislation on the companies‘ ability to innovate. He explains: “It is deplor-able that the German legislator currently ignores the effects of regulation on innovations and technologies.”

Wessel also notes that the interplay between industry and academia is still too rigid and bureaucratic in many cases. Here, both parties could act pragmatically by consistently using the available model contracts.

The 12-point plan also includes recommendations for a better transfer of technologies to the market. The chairman of the VCI’s research committee: “Germany needs to strengthen its start-up landscape by optimising the fiscal law rules for investors and by eliminating the fiscal obstacles to more venture capital.” Wessel calls upon the federal government to initiate, at long last, the agreed venture capital act.

In order to achieve better acceptance for new technologies and products, Wessel thinks that the benefits of technical progress should be conveyed in schools from an early stage. For this purpose, the VCI’s 12-point plan recommends this: Teaching of MINT subjects (mathematics, informatics, natural sciences, technology) throughout schooling up to the Abitur (qualification for university admission), further developing didactics, and continuous advanced education and qualification for teachers. Both schools and advanced education and qualification initiatives should also comprise topics like digitalisation and Industry 4.0.

Finally, Wessel underlines that neither politicians nor companies should ease their efforts: “We cannot rest on our laurels of the past, and we should not compare ourselves with the average. Our goal should be to outdo our strongest competitor.”

The VCI represents the politico-economic interests of over 1,650 German chemical companies and German subsidiaries of foreign businesses. For this purpose, the VCI is in contact with politicians, public authorities, other industries, science and media.The VCI stands for over 90 percent of the chemical industry in Germany. In 2015 the German chemical industry realised sales of around 189 billion euros and employed 446,000 staff.

Contact: VCI Press Dept., Phone: +49 69 2556-1496, E-Mail:

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Monika von Zedlitz