Hamburg is booming as an old rival withers: Unification of Germany has consigned two of its northern ports to very different fates, writes John Eisenhammer

A SHORT lift ride is all you need to appreciate what has happened to Hamburg. Six years ago, the flat skyline wrapping round your vantage point on the upper floor of any city centre building would have been defined by the church towers. Today, they are easily missed amid a phalanx of cranes that swing and lunge past one another as if in furious combat over choice property sites.

Over the last three years, some 600,000 square metres of new office space has been added to boomtown Hamburg, and more than half that figure is expected to be built in 1993.

Once the laggard among the big cities of West Germany, and mocked as the 'low-tech hole in the North' by Munich and Stuttgart, its high-tech southern rivals, Hamburg has turned the tables. 'We are now Europe's No 1 business address,' said Senator Thomas Mirow, head of Chancellery in the city-state government.

In Rostock, the story could hardly be more different. The only cluster of cranes is down in the port. But there is no furious aerial combat, just the occasional languid swing of a lone metal arm.

In the latter part of the 1980s, before unification, some 30 ships a day would steam into the busy quays, with countless others waiting on the Baltic horizon for a berth in East Germany's only deep-water harbour. Now the port is lucky to see five or six vessels a day. The 21 million tons of goods handled in Rostock harbour in 1989 was down last year to seven million - and this year will be no better.

The bitter truth is that trade has collapsed. In the space of three years, East Germany's once-proud 'Gateway to the World' has gone from communist boom to capitalist bust. The legacy is unemployment and growing social unrest in the form of savage race riots.

The tale of these two Hanseatic cities, both northern German ports, is a powerful example of how the course of unification has defied the optimistic predictions of government, bankers and industrialists, and of just how long and difficult a task it is proving to be. It is a tale of how the rich got richer, and the poor, poorer.

Hamburg offers an object lesson in how a city can transform its corporate identity. 'In the Seventies and early Eighties we had an image problem, of a city with a business-unfriendly climate,' says Urda Martens-Jeebe, a director of Hamburg's Business Development Corporation (HWF). The city struggled with its dependency on declining industries such as shipbuilding and the processing of imported raw goods. Hamburg lay consistently below the national growth average.

It was a city with a fine 800-year-old seafaring and commercial tradition and an uncertain future. In 1983, the head of the Hamburg Senate, Klaus von Dohnanyi, made a speech to the Overseas Club, calling for the city to 'get away from the water'.

It has done just that. The Business Development Corporation was founded in 1985 as part of the campaign to stop a haemorrhage of firms from Hamburg and to attract new investors. The city government took only a minority stake, leaving the remainder in the hands of private enterprise.

Exploiting the city's international and commercial traditions, the HWF, along with the Chamber of Commerce, developed the strategy of Eurogate Hamburg, persuading foreign firms that if they intended setting up in Europe, then Hamburg was the place. It has had considerable success in attracting Scandinavian and North American firms, and especially businesses from the Asia-Pacific region such as Panasonic, Citizen and Hitachi.

'Hamburg now earns more from the music business than from its shipyards,' says Heiko Tornow, spokesman at the economics ministry. 'We are no longer a port city, but a city which also has a port.'

The number of people in harbour-related activities has remained at over 100,000, but the apparent stability hides a profound transformation from low-tech to high-tech jobs. The service sector now accounts for 75 per cent of Hamburg's growth, the port about 15 per cent.

Fifty of Germany's 500 biggest companies have their headquarters in Hamburg - more than any other city. It is the country's second biggest banking centre after Frankfurt, its biggest insurance centre, and Germany's undisputed capital for the media and advertising. Turnover in this sector grew by 50 per cent in the latter half of the 1980s.

The city has become one of Germany's aerospace centres, home to Lufthansa's massive overhaul complex and Deutsche Airbus as well as burgeoning sectors in pharmaceuticals, medical technology, computer chips and software.

'The face of Hamburg business has changed, and the city with it,' said Claus Muller, head of the HWF. 'The place feels confident, successful.'

German unification has placed a 'heavy coat of icing on top of an already rich cake', in the words of Mrs Martens-Jeebe.

Earlier this year, Burkhard Genge, the head of Mobil Oil in Germany, said of Hamburg: 'The city has moved from being at the edge, next to the Iron Curtain, back to the centre of a vast European economic area, which is of increased interest to us.'

Fifty per cent of all imports into eastern Germany come through Hamburg. The total quantity of goods handled in the port in 1991 was a record 66 million tonnes, up 7 per cent on the previous year.

Between 1987 - when unemployment peaked in Hamburg at 13 per cent - and 1992, about 80,000 jobs were created.

'We no longer feel on the losing side. The equilibrium in Germany is shifting away from the South. Germany has become more northern, Protestant and eastern, and Hamburg stands for all of that,' said Senator Mirow.

But none of this shift has helped Rostock. Asked whether Rostock will emulate Hamburg and get away from the water, Manfred Kilimann, the city's mayor, looks horrified.

'Right now we are desperately trying just to get back to the water,' he said.

Rostock could hardly have been less prepared for the shock of unification in 1990 and overnight exposure to open markets. The city was built up from a modest regional harbour into an international, deep-sea port because communist East Germany needed its own gateway to the world.

Scarce financial resources were poured by East Berlin into this pride of the state-planned economy: a mono-industrial maritime centre. A new motorway was even built to the harbour's door.

The vast fisheries Kombinat on Rostock's outskirts had 50 vessels trawling as far afield as southern Africa and Newfoundland. By East German standards, Rostock was privileged, a communist boom town.

With the fall of the Wall, the rationale disappeared. Few vessels choose to sail as far east as Rostock when they can unload at the more efficient and cheaper Hamburg terminals. The once vital trade with Comecom to the east has all but vanished.

'Firms are still struggling to stay alive with the crudest barter deals with the East, swapping flower pots for raw materials. This is hardly the basis for a successful commercial strategy,' said a spokesman for the chamber of commerce in Rostock.

The Rostock fishing fleet has been decimated, with just seven trawlers still active. Of the 13,000 people formerly in fishing and processing, about 1,000 are still in work. The once significant shipyards have fared somewhat better, but only at huge expense to the western German taxpayer.

The Norwegian firm Kvaerner bought Rostock's Warnow yard recently for the sum of DM1m (pounds 409,000) - the price of a decent downtown villa. But that was only after the Treuhand privatisation agency agreed to take over 76 per cent of the planned DM575m initial investments and guaranteed to cover losses up to DM500m. Kvaerner has been the only big foreign investor to date.

Unemployment in Rostock, if one includes those hidden by special training, job creation and maintenance schemes, lies between 30 and 40 per cent.

Despite massive public works, especially in areas such as telecommunications - Mayor Kilimann speaks of DM250m invested overall since 1990 - there is little sign of new business making up for the industrial devastation that has occurred. The air of bitterness and frustration that clings to the city had much to do with the explosion of xenophobic hatred that propelled Rostock into the world's headlines in late August.

The heads of Rostock's chamber of commerce have few tools with which to fight the decline. They wish they just had a precise idea, with facts and figures, of what is happening to their city's economy. Instead, they continue to rely on guesswork.

One solution is for remaining firms to try to make some headway in European Community markets.

'There is a serious mental block, however,' says Dieter Pfliegensdorfer, the chamber's EC representative. 'Most businessmen here simply believe the Community is closed to them. To change that requires a radical shift in thinking which will demand time.'

But time, fears the Mayor, is something once-proud Rostock may not have in abundance. 'We are sitting here on social dynamite, and the longer the economic recovery takes, the shorter is the fuse.'

(Photographs omitted)