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Greater Munich CORRIDORS AND TECH REGIONS: INTERNATIONAL CASE STUDIES GREATER MUNICH GREATER MUNICH: GERMANY’S LEADING SCIENCE, TECHNOLOGY AND MANUFACTURING REGION Munich is Germany’s most productive urban centre and is a In the 1980s and 1990s, Munich and Bavaria pioneered new leading German metropolitan region for high-tech activity, innovation and technology policies. A number of valuable with a powerful innovation system. Like Silicon Valley, the programmes sought to build its high-tech sector strength by microelectronics industry was stimulated by defence spending supplying specific R&D, training and infrastructure for the life and technology. sciences, ICT and mechatronics sectors among others. Over time, Munich’s economic development has spread Industrial diversity is one of Munich’s greatest strengths. across a wider region, with the city itself no longer able to High-tech industries and knowledge-intensive services sit concentrate all major functions. Rising land costs in the urban alongside traditional production. core led to a ‘metropolitanisation’ of development. Munich’s inherited infrastructure platform is very strong, both High ranking for quality of life and performance. Munich in terms of public transport and international connectivity. ranked fourth in the ‘Mercer Quality of Living Ranking 2014’, The city is rated in the world’s top five for electricity, water, was ranked the seventh best performing European city on AT transport and telecommunication systems, and these play a Kearney’s ‘human capital’ benchmark, and seventh globally part in sustaining high quality of life. The re-development of for innovation. Munich’s airport has allowed it to become Lufthansa’s second most important hub after Frankfurt. GREATER MUNICH: INTERNATIONAL CASE STUDY 1 GREATER MUNICH INTRODUCTION Munich is a leading German metropolitan region for high-tech activity, with a powerful innovation sector. Its economy grew rapidly in the post-World War II period and is now, arguably, Germany’s ‘Silicon Valley’, with dominant positions in electronics and advanced manufacturing. Despite the lack of a formal tier of regional metropolitan government, much of Munich’s success in innovation and high-tech industries has been attributed to close working between state-level and city-level government and active state policies. However, several issues are increasingly demonstrating the need for better intra-regional collaboration to ensure that Munich retains its competitive advantage. Greater Munich is one of eleven metropolitan regions in Germany, consisting of the agglomeration areas of Munich, Augsburg, Ingolstadt, Landshut, Rosenheim and Landsberg am Lech. It is located within the state of Bavaria, in southeast Germany, and is Germany's fifth most populous metropolitan region. The city of Munich dominates the metropolitan region both in terms of population and economic strength: it accounts for approximately two per cent of the land area but around 30 per cent of the population and 40 per cent of employment. Home to around 1.5 million people, the city of Munich is Germany’s third largest city after Berlin (3.5 million) and Hamburg (1.8 million). Munich is Germany’s most productive urban centre and is a leading German metropolitan region for high-tech activity, with a powerful innovation system. Much like Silicon Valley, Greater Munich evolved rapidly from an agrarian to high-tech economy in the decades following World War II. Soon after WWII, Munich received an influx of skilled refugees, federal research agencies and large firms from Berlin and Eastern Germany, with companies such as Siemens relocating to Munich, partly as a result of high war reparations imposed in the Soviet sector. This catalysed the formation of a critical mass of banking, insurance, media and manufacturing firms – including BMW and Allianz – and helped build technological capacity and shape in a city that had ample land to grow. Munich soon acquired a reputation as a consummate automotive/aerospace centre and insurance provider. In subsequent decades, as with Silicon Valley, a great deal of Federal defence spending was directed towards the Munich metropolitan region, laying the foundations for the microelectronics industry. West Germany’s commitment in the 1960s to technologically-oriented armed forces saw a rise in investment in weapons research and development, and Munich was chosen to host one of only two federal research universities tied to the army. As the city became a magnet for talent, it forged international expertise in electronics and advanced manufacturing, producing a host of globally successful products for export. During the 1960s and 1970s, Franz Josef Strauss (chairman of the Christian Social Union, member of the federal cabinet in different positions and long-time minister-president of the state of Bavaria) helped rebuild Munich’s GREATER MUNICH: INTERNATIONAL CASE STUDY 2 universities, and secured the long-term presence of key public research institutes. In 1972, Munich also hosted the Olympic Games, which triggered significant physical development in the city. In the 1980s and 1990s, Munich and Bavaria were pioneers of new innovation and technology policies. A number of valuable programmes sought to build its high-tech sector strength by supplying specific R&D, training and infrastructure for the life sciences, ICT and mechatronics sectors among others. The Bavarian Innovation Programme and Bavarian Technology Introduction Programme helped with technology transfer, and were followed by the €3 billion Future Bavaria Initiative (1994-1999) and the €1.4 billion High Tech Initiative (1999-2006) which deployed money from the sale of public utilities. Cumulatively these schemes built a prodigious array of research facilities, start up centres and university spin offs. However, Munich’s economy also faced a series of economic shocks during the 1990s: Reunification in 1990: there was concern that the industries and organisations that had moved from Berlin might return to the new capital and that Germany’s axis of development might shift from North-South to East-West, from Berlin to the Ruhr, bypassing Bavaria. End of the Cold War: during the Cold War period, Bavaria invested heavily in developing defence and aerospace industries, many of which were concentrated in and around Munich. After 1989, these industries experienced a severe drop in demand (later adjusting to take advantage of the peace dividend). Economic downturn 1993-94: this dealt a further heavy blow to the export-orientated industries at the heart of the Bavarian economy: the automotive industry, and electronic and mechanical engineering, with a measurable increase in unemployment during these years. Gross Value Added (GVA) per capita and patenting rates fell in the region during the early 1990s. However, these challenges presented opportunities to refresh the metropolitan region’s economic basis, and to engage with emerging ideas and technologies – in particular, staying ahead on innovation and using the innovation ecosystem to restructure the economy and secure long-term growth. This meant: Promoting innovation, and through this, long term economic growth; Growing a new economy by pushing innovation, and identifying and promoting ‘future winners’; Growing a greener economy – promoting innovation in green goods and services, and developing markets at metropolitan region level. Over time, Munich’s economic development has spread across a wider region, with the city itself no longer able to concentrate all major functions. Rising land costs in the urban core led to a ‘metropolitanisation’ of development, e.g. the German Aerospace Centre, Oberpfaffenhofen, and Society for Radiology both expanded into suburban neighbourhoods. And a new urban and regional rail system (opening in 1971, in time for the Games) and an expanded, relocated airport (opening in 1992) provided the infrastructure for the metropolitan region’s outward push. GREATER MUNICH: INTERNATIONAL CASE STUDY 3 THE ECONOMY AND RATIONALE FOR SPATIAL INTEGRATION Strong economic performance Munich has one of the strongest-performing economies in Germany. In 2012, Munich city produced €83.5 billion in GDP while the wider region produced €247.8 billion (equivalent to 52.3 per cent of Bavaria state’s GDP and 9.4 per cent of Germany’s GDP). Productivity rates are high. In 2012, GDP per employed person totalled €82,700 in Munich city and €82,100 in the Munich region, compared to €68,100 across Bavaria. In 2014, per capita purchasing power totalled €29,900 in Munich, compared to the national average of €21,400. Munich is the second-largest employment centre in Germany and has the highest employment rate of all German cities with 500,000 or more inhabitants. Munich ranked first of 69 large German cities on IW Consult’s ‘City Rankings 2014’, which is based on economic and structural indicators to assess the level and dynamism of economic development and prosperity. The administrative district of Munich ranked first of 402 administrative districts in Germany in ‘Prognos Future Atlas 2013 – Germany’s Regions Compete for the Future’, which assessed the economic situation and development in rural and urban administrative districts in terms of demographics, the labour market, competition, innovation, prosperity and social conditions. The City of Munich also ranks highly in comparison to other international cities. Munich ranked sixth in the ‘European Regional Economic Growth Index 2014’ (LaSalle Investment Management), which assessed 294 regions in 32
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