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Interview with Matthias Krage, President of the DSLV

Shape the future – strengthen infrastructure

As a side effect of globalization, the transport and logistics sector has for years found itself battling growing international competition. In Germany, delays to planned investment projects in transport infrastructure and the upcoming implementation of new legal requirements are both heating up the mood in the market. Road tolls for private vehicles and the minimum wage are just two issues that can be mentioned. European Business Journal spoke to Matthias Krage, President of the DSLV, Deutscher Speditions- und Logistikverband (German Association of Freight Forwarders and Logistics Specialists), about Germany’s position as a logistics location in comparison with international competitors and against the background of current political developments.

European Business Journal: Mr. Krage, how would you describe the current market situation?

Matthias Krage: The German economy is currently benefiting from rapid growth in industrial orders and strong consumer confidence. This year, economic growth is forecast to average out at between 1.5% and just less than 2%. Geopolitical instability such as the Russia/Ukraine crisis is certainly having a dampening effect on the economy. However, in this case, the absolute effect seems to be less severe than the general sense of unease. In any event, economic experts do not expect to see a fundamental shift in the economy as the performance indicators continue to point to above average growth. According to the current short term forecast for goods and passenger transports, the entire transport industry is benefiting from the general economic upturn and will grow still further by the end of the year. Growth of 3.5% and 3.2% is expected in transport movements and transport volume respectively. This means that performance in 2014 for the sector as a whole will exceed pre-crisis levels for the first time.

EBJ: What do you think of the sector’s prospects for 2015, particularly for road transports?

Matthias Krage: We also expect freight transports to continue to grow in the years to come. According to the forecast for 2015 we can expect to see an increase in transport movements of 2.6% and 3.3% growth in transport volume. The current transport integration forecast from the Federal Transport Ministry predicts an increase of 18% in transport movements and 39% in transport volumes. At the same time, the vast majority of future freight movements will be by road. A significant increase in combined transports is also being predicted whereby the modal split is expected to shift slightly in favour of rail transports.

EBJ: Does that also mean that we can expect to see an increase in turnover and jobs in the transport sector?

Matthias Krage: New information from the Federal Statistics Office and the Federal Labour Agency shows that the positive economic development in our sector is also having a beneficial effect on turnover and job figures. Contrary to expectations, the number of people employed in the transport sector increased in 2013 and has now risen to over 521,000. We expect to see turnover results for the same period of just under 80 billion EUR. Volumes are increasing far more quickly than prices; however, we hope that as a result of the positive economic climate, higher prices will become established in the future.

EBJ: How does Germany perform in international comparisons?

Matthias Krage: Taken as a whole – particularly in comparison with other European countries – the German economy is powering ahead. After record tax receipts of 570 billion EUR last year, income is expected to rise by another 3.4% this year. The new government voted into power in September last year is now in the comfortable position of being able to rain tax presents such as the mother’s pension or pension at 63 on the German people.

EBJ: What about urgently required infrastructure investment projects?

Matthias Krage: A specially formed commission operating on federal and state level identified areas where urgent action is required and made these known before the federal elections. We have taken up the baton and as early as June 2013 we demanded additional annual investment to the tune of between four and five billion EUR. Following the coalition negotiations between the CDU/CSU and SPD, a sum of five billion EUR was indeed set aside. However, this amount is intended to be spread out across this government’s whole time in office. This is a completely unsatisfactory result. The urgently needed overhaul of the entire German transport infrastructure is not even remotely assured so that Germany’s position as a logistics location is the actual election loser. In a study on the Logistics Performance Index presented in March 2014 by the World Bank, Germany had reclaimed the top spot mainly through the quality of its commercial and transport infrastructure. Their significance for the economy has clearly not yet been recognized by the coalition government or it has set itself other priorities. According to the latest transport investment report, more than 15% of German Autobahns, over 30% of A-roads and more than 10% of all bridges are in need of maintenance work in the short to medium term. At the same time, Federal Finance Minister Wolfgang Schäuble is planning to turn the solidarity tax into an income tax hike. It would make better sense to introduce a ringfenced “transport tax” like the one suggested by the Premier of Schleswig-Holstein, Torsten Albig.

EBJ: Does that mean you expect more from the federal government?

Matthias Krage: At this year’s Entrepreneur’s Day in Berlin, we chose the motto ‘Shape the future – strengthen infrastructure’. Aimed at political circles in Berlin, it should be seen as a challenge. Our message to politicians is nothing new. No conversation in the ministry for transport or at a parliamentary session ends without mention of financing for German transport infrastructure.

EBJ: Where does the DSLV stand with regard to road tolls for private passenger vehicles?

Matthias Krage: Last autumn we stated that the industry was prepared to discuss the expansion of the motorway toll for HGVs and to do its bit. However, this should not be regarded by politicians as carte blanche for them to bleed the HGV industry dry. Instead, we call on the federal government to fulfill a number of preconditions. These include making additional budget funds available for infrastructure maintenance, making all road users contribute towards financing infrastructure projects and ringfencing the monies raised from them so that the benefit goes back to those users. Moreover, the additional funds raised must be made available for infrastructure financing over the long term. The plan is to introduce the new HGV toll in three steps from 2015. The freight forwarding and transport industry will therefore be confronted with the introduction of new toll charges from 1 January 2015, the extension of the toll to cover an additional 1,000 km of A-roads from 1 July 2015 and the inclusion of HGV vehicles over 7.5 t in the toll from 1 October 2015. We believe that this staggered approach sends the wrong message to the market. It would be better to implement the changes in two steps rather than three so that the negotiation of transportation contracts is not made unreasonably complicated. On the other hand, we are very pleased that the plan to apply different toll charges to motorways and A-roads has been abandoned.

EBJ: What consequences does the introduction of a minimum wage have for the sector?

Matthias Krage: First of all, our members would like greater legal protection. The law does not just harm their ability to set their own prices, it also forces freight forwarders and logistics providers into a position of open-ended liability. Our main concern is not the introduction of the minimum wage from 1 January 2015, but the imposition of blanket liability for companies engaging third parties. It is impossible to understand why a company acting in good faith should be required to assume responsibility for the whole supply chain – in other words all of the subcontractors working at all stages in the chain – and ensure that they all pay the minimum wage. The economic risk to companies affected by this ruling is potentially overwhelming. We also struggle to understand why a clause giving companies employing third parties an opportunity to exculpate themselves was removed from the draft legislation just before it was voted on by the Federal Assembly. The DSLV and its employers’ association Spedition and Logistik Deutschland (ASL) had lobbied hard amongst members of the German parliament and the Federal Assembly for the retention of this opportunity for exculpation.

EBJ: Mr. Krage, thank you for the interview.

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