German business is tangled in red tape

WHEN Markus Wingens created the position of “energy manager” for the metal heat-treatment company he runs in south-western Germany, his idea was to increase energy efficiency and attract customers interested in sustainability.

But the job has become as much a task of filling out paperwork and studying seemingly ever-changing laws as it is ensuring that the firm, Technotherm Heat Treatment Group, is meeting energy requirements.

Last year, four new laws and 14 amendments to existing ones governing energy use took effect, each bringing fresh demands for data to be reported and forms to be submitted — in many cases to prove the same standards that the company has already been certified as reaching since 2012, Wingens said.

“We have the Renewable Energy Act, we have the Energy Efficiency Act, we have the Energy Financing Act, and each comes with an administrative burden,” he said. “It’s madness.”

Freedom from red tape has been a rallying cry for farmers from Poland to Portugal at recent protests against European Union laws and policies. Indeed, the burden of bureaucracy is a general complaint of corporate executives across the globe.

But nowhere is the issue more pressing than in Germany, Europe’s largest economy, which is facing anemic growth of no more than 0.2 per cent this year. In a report last month, the International Monetary Fund called “too much red tape” one of the major impediments to reviving the German economy.

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For example, it takes 120 days to obtain a business license in Germany — more than double the average in other Western economies.

Germany also lags behind the rest of the European Union in the digitisation of government services, still requiring written forms for certain tax refunds and building permits.

“We now have such a high workload that we need more and more people to master the bureaucracy,” said Claus Paal, president of the Stuttgart Chamber of Commerce and Industry, who runs a packaging company.

“But these are qualified people who would actually be much better off in production than writing reports or filling out statistics,” he added.

German companies spend 64 million hours every year filling out forms to feed the country’s 375 official databases, according to industry estimates. When the Stuttgart chamber of commerce asked its 175,000 members to name their biggest challenges, red tape topped the list.

Even German Chancellor Olaf Scholz has publicly acknowledged that the demands have become too much. “We have reached a situation where, in many places, no one can carry out all of the laws that we have created,” Scholz said last month.

His government has proposed paperwork-reduction legislation that it claims would save companies and citizens an estimated 3 billion euros each year.

Among other things, it would trim the time that companies must retain official documents by two years and end a requirement that Germans staying at hotels in the country complete registration forms.

The red tape drain on time and resources is felt especially by small and midsize firms — those with fewer than 500 employees and annual revenue below 50 million euros (about S$73.5 million) — that are the backbone of the German economy.

These businesses often lack in-house legal departments dedicated to filing audits, recording statistics and deciphering which information is wanted by which authorities — the European, federal, state and local governments.

For Andreas Schweikardt, a general manager at Gebauer, a chain of seven upscale supermarkets in the south-western state of Baden-Wurttemberg, the bureaucracy burden generates menial tasks and increased food waste.

For example, deli workers would take cold cuts that were nearing their expiration dates and use them in sandwiches for quick sale, until a regulation that required detailed lists of all ingredients in all items sold took effect. Now, instead of making new sandwiches — and lists — every day based on what is about to expire, they have a more limited sandwich offering and throw away more meat.

At the seafood counter, fishmongers must now ensure that each variety of fish is labeled in both German and Latin. They also must take the temperature of every fish or fillet, as well as the overall temperature inside refrigerator cases, twice a day.

“At least there is an app where things can be logged, but it would make more sense if the thermometers of the refrigerators were calibrated to report the temperature directly,” Schweikardt said.

Even the digitisation of government services is bogged down by bureaucracy, said Michael Wirkner, who founded an advertising agency in Goppingen nearly two decades ago.

To set up an online registration system for 20 school districts, his firm needed the approval of five regional data protection officers. Each had a separate interpretation of the EU’s data security regulations; one told Wirkner that he could use a Google tool, while another insisted it was not allowed.

“So we end up spending time discussing things with hundreds of different people,” Wirkner said.

After Paal of the Stuttgart chamber realised how the onslaught of forms was bogging down businesses, his team invited members to send examples of their bureaucratic woes.

The chamber asked for detailed information about what companies were being asked to report, from workers’ driver’s licenses to how they use energy and where they source it.

They have created a database of responses, along with the 60,000 pages of laws governing Baden-Wurttemberg. Using artificial intelligence, the chamber has created clusters of themes to help companies avoid filing duplicate information.

“With this tool, we can now search through all the laws and say, ‘Name me all the reporting requirements,’ and it comes up with a spreadsheet that lists all the laws that require a company to submit a report to an authority,” said Andreas Kiontke, a lawyer who works with the chamber of commerce.

The tool can also suggest ways to alleviate bureaucracy, which they hope German policymakers will take to heart.

“I think that in other countries, companies are not so concerned about some issues because they simply know that nobody cares that much,” Kiontke said.

He noted that German regulators had imposed the EU’s sweeping data privacy law on rules governing even professional etiquette. “In Germany, we have regulations about handing over business cards at business meetings and whether it’s still allowed,” he said.

“It’s unbelievable,” he added. “We’ve somehow lost the compass for what still makes sense.” NYTIMES