German industry is turning its back on its own country and investing in research and development abroad, according to a federal government report on the state of German science.

The report says companies' investments in research abroad have increased by 40 per cent since 1991. Science minister Jurgen Ruttgers said Germany needed to develop more international research institutes to keep pace with competition from abroad.

He said: "We must strengthen Germany's research standing in the face of international competition. But if research goes abroad, then sooner or later jobs will follow.

"Foreign scientists must be able to find optimum working conditions in Germany. Our universities must open themselves up internationally in order to become attractive to the new generation of academics."

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He criticised German industry for reducing its contribution to research and development spending in recent years. The report shows that last year 20.8 per cent of research funding came from the federal government, 18.9 per cent from the state and 60.3 per cent from private industry. But in 1989 industry contributed 63.7 per cent.

According to the report, 90 per cent of research spending is provided by three sectors: mechanical engineering, electronic engineering and chemicals.

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Federal research policy is to target spending on small and medium-sized companies. Spending on young new technology companies has already increased by nearly one third over the past four years.

Federal money is concentrated on key areas such as multimedia, biosciences, environmental and energy research.

Earlier this month a report by German research association DFB claimed that laws and regulations are suffocating scientific research and encouraging researchers to work abroad. Dr Ruttgers has made it a key policy issue to promote new technology research in cooperation with industry.