Chemical Industry in the European Union

The chemicals, rubber and plastic industries are one of the largest and dynamic industrial sectors in the European Union. Around 3.2 million people work in more than 6,000 enterprises in this sector, and the total chemical sales accounted to €537 billion in year 2007, which was 30% of the worldwide chemical sales.  Since, chemical sector has always been associated with global environmental concerns, EU members believe in high quality of legislation, proper implementation and correct enforcement to achieve environmental objective without losing the competitiveness.

Products that comply with human health and environment objectives are allowed to freely circulate within the internal market. EU chemical industry is a perfect example of ability to improve living standards, generate wealth and employment with constant innovation and development that is achieved through efficient   EU economic system. The chemical industries in EU have unique international competitiveness dimension.

Today EU produces around 32% of global chemical production thus making it the biggest chemical producing region in the world. Around 27,000 companies are part of EU chemical sector producing 70% of the total chemical sales. 12 leading chemical companies out of 25 have their headquarters located in Europe thus representing a significant part of global sales. 

Trends:

With a number of chemicals used in modern societies increasing, there is huge scope for growth for chemical sector in EU.  Around 10,000 different chemicals are used for different purposes in daily life for eating, cleaning, and manufacturing. EU chemical sector is experiencing boom as the industries manufacture products that are environmentally and human friendly. The chemical sector is also likely to benefit from the growth of biotechnology sector in EU. Also growth in pharmaceutical sectors will also benefit the chemical sector in a major way.

Growth and FDI figures:

The output of chemical sector has shown a small but consistent rise in past decade.  The chemical sector grew at an average rate of 2.8% from year 1996 to 2001. Thereafter the chemical sector showed a slight growth of 2.9% as pharmaceuticals sector in Europe grew at an average 5.5% annual in those years.  The chemical sector export is in surplus which is major indicator of it strong growth. The chemical industry in EU members such as Austria is predicted to grow by 6 % in year 2010.
The chemical sector of Europe has registered good amount of foreign investments in specialty chemicals. European SME’s are also looking for investments into specialty chemicals. The chemical sector registered a good number of foreign investments in EU member countries.

Key Players:

Austria: Austria has a significant number of chemical companies around 3000 and they account for approximate 11% of total production value.  Thus Chemical sector is one of the leading sectors in Austria’s economy significantly contributing to GDP and employment (employs 43,300 people).  A majority of the total production (around 2/3rd’s) is exported worldwide thus earning a good amount of foreign exchange for Austria.

The plastics clusters in Austria also have favorable growth conditions due to the cross border activity and new members joining the EU. Austria’s central location and addition of members in European Union has helped Austria in several ways.  Several foreign owned chemical companies coordinate their eastern and central European activities from Austria.  Foreign investors can benefit from the attractive business environment in Austria and easy access of Eastern Europe markets.

Germany: The German chemical sector is likely to maintain a sustainable growth and maintain its competitiveness due to the overall industrial policy strategy adopted by government.  Government has assured of affordable and secured energy supply that is needed for realization of big projects. Government maintains a viewpoint that development of this sector is essential for employment and growth of country.   With many CEE (Central and Eastern Europe) countries in the process of joining EU, FDI investments are likely to increase multinational companies set up manufacturing units to specifically serve the local population.

Investment Policy:

Austria has many research institutions that work with the private sector to carry out business oriented research projects for the plastics and chemical industry.  The Austrian Government has implemented one investment policy for all sectors, which also includes the Chemicals and Plastics sector: “Research more, Pay Less”. The Government is providing various grants and subsidies to companies that are investing heavily in R&D.

The German Government has enacted several reforms that have reduced the tax burden on corporations. Tax Neutrality is established by Government which treats corporations and partnerships equal when it comes to taxation issues.

Investment Incentives:

The Austrian Government provides tax exempt research allowance to companies that are involved in research. The 25% tax exemption for R&D expenditures provided by the Government is also available for companies that are involved in contract research. The companies can also gain from 8% research premium which is refunded in cash.

The Government has varied VAT tax rates fro different commodities. Hence, chemical industries that manufacture products that are used in daily lives of citizens enjoy a rate of special reduced rate of 7% percent.  Investors have an option of carry back or carry forward of losses if they meet specific conditions.

Resources:

The Invest in Austria is a central agency that promotes investment in Austria in different sectors and regions which also include Chemical and Plastics. The agency provides comprehensive information about investment policies, subsidies and various grants available to investors.
Germany Trade and Invest Agency is a central agency that provides all the assistance required by investors. Besides, providing information on laws, tax provision, it helps the investor to identify good business opportunities available in each sector.

 

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