Austria

Austria As A Business Location in Europe
Austria – Company Formation

On January 1, 1995, jointly with Sweden and Finland, Austria became a new member of the European Union (EU). For foreign investors this opens up new and even more attractive perspectives and provides an additional incentive for choosing Austria as a business location. Since the opening up of Central and Eastern Europe in 1989, Austria has played an increasingly important role in the development of the area. EU membership will serve to further expand the country’s overall economic activities and provide fresh impetus for virtually every sector of the economy.

With its good, and by international comparison stable, economic fundamentals, numerous interesting possibilities for setting up companies, technology centres, business and industrial parks offering tailor-made solutions for a variety of investment problems, favourable national subsidies and readily available EU-assisted support programs, as well as its strategic position in the centre of Europe, Austria combines unique opportunities as a European business location.

Numerous multinational corporations which have long since become established in Austria have already recognized and successfully utilized the advantages offered. Examples of such companies are the American groups Packard Electric, Masterfood and Pioneer Seeds, the Japanese zip manufacturer Yoshida, SONY Japan, together with the compact and laser disc producer DADC Austria, Alcatel Bull, General Motors, Chrysler, Hewlett Packard, Honda, IBM, Philips, Siemens, Yamaha and many others.

International companies wishing to set up in Austria have mainly focused their attention on Vienna and have frequently chosen the Austrian capital as the centre from which to monitor their subsidiaries in Eastern Europe. Of the more than 300 American companies which have become resident in Austria almost 80 per cent have made Vienna their headquarters. Around 90 per cent of the Japanese and nearly two-thirds of the German firms in Austria have also established themselves in Vienna.

In the future, the Austrian federal province of Burgenland stands to have better chances of selection as a business location, partly because of its favoured status for EU financing projects and partly due to its proximity to the reform countries. Other regions are also making full use of Austria’s geographical location cross border business parks are increasingly being set up, for example in Gmünd-Ceske Velenice (Austria/Czech Republic) and along the Austro-German border in Salzburg/Bavaria. They offer international companies unique opportunities and are therefore arousing ever greater interest.

Upgrading of Locations

The speed with which foreign investors reacted to the European integration of Austria became apparent after the positive referendum of June 1994 concerning Austria’s entry into the European Union. The majority of the investments that had been postponed pending the outcome were quickly effected and new investors -mainly from the U.S. -intensified their exploratory activities in Austria.

In 1994 alone, the corporate development company ”ICD Austria,” which helps firms to get established in Austria, brought ten international corporations to the country, among them the American groups Johnson Controls (car seats), Goulds Pumps and the sugar confectionary Sunmark Inc., the British axle manufacturer Spicer Europe, the Canadian firm Collins & Aikman (car mats), the French firm Primagaz (liquefied petroleum gas) and the German company Promatis Informatik (software).

The total investments generated by these companies amounted to nearly AS 400 million (one $ equals approximately AS 10.00). It also led to the creation of some 360 new jobs.

EU Area is The Biggest Investor

Broken down by region, the European Union was again the biggest direct investor in Austria in 1994 with a total volume of AS 93.2 billion. In terms of the major European countries of origin, Germany took the lead with AS 56.9 billion, followed by Switzerland and Liechtenstein with AS 24.1 billion. The U.S. and Canada came third with investments totalling AS 17.9 billion followed by other countries with 14.6 billion. At the end of 1994, Eastern European investments reached AS 1.8 billion, Hungary heading the list with AS 0.8 billion.

Representation in Every Branch

According to the Österreichische Nationalbank, foreign companies in Austria with capital participation from Switzerland, Liechtenstein and Germany are represented in virtually every branch of the economy. Firms with American influence concentrate in the industrial sector on metals/vehicles and petroleum/chemicals and in the non-industrial sector mainly on trade. Dutch-influenced companies in Austria are predominantly found in the petroleum/chemicals and in the paper/wood industries. They were also well represented in trade, in addition to banks and insurance companies. According to the Österreichische Nationalbank survey, cooperation agreements with Japan and Japanese branch offices exist almost exclusively in the metals and vehicles sector, as well as in trade and tourism.

In 1993, the majority of the foreign investments made and the subsidiaries established were in Vienna (1,185 companies). There were 263 firms with foreign participation in Lower Austria. 206 firms were set up in Salzburg, 199 in Upper Austria, 91 in Vorarlberg, 88 in the Tyrol, 79 in Styria, 73 in Carinthia and 25 in Burgenland, mainly in the non-industrial sector.

Foreign Direct Investments in Austria

Both Austrian direct investments abroad and participations by foreign companies at home have expanded rapidly over the past few years. By the end of 1994, foreign direct investments in Austria had totalled AS 151.6 billion (1993: 138.5). More than a third of the total workforce in Austria is employed by companies with largely foreign ownership.

This inflow of foreign capital generates more investments in the affected regions, thus increasing their growth rates. At the same time, it also brings the advantages that multinational companies can offer, such as technical know-how and the opportunities for local employees to acquire new specialized skills and management techniques. The contribution made by these companies to the balance of trade was also substantial; the automobile firm BMW Steyr, for example, exports its entire production of around AS 14 billion (1993) and thus contributes some AS 5 billion to the balance of trade.

Over 2000 Companies With Direct Foreign Influence

According to a survey conducted by the Österreichische Nationalbank (Austrian National Bank), in 1993 there were 2,209 companies in Austria with direct foreign influence (minimum participation in nominal capital 10 per cent or at least AS 1 million.) They employed a total labour force of 264,000 of which 151,000 were working in industry.

In 1,741 of the companies reviewed, the amount of foreign investments came to 80 per cent, predominantly in the industrial sectors metals/vehicles, petroleum/chemicals and textiles. In the trade sector this was the case in 831 firms. With regard to the legal form of the companies involved, foreign investors showed preference for Private Limited Companies (1,723 firms), Public Limited Companies (225 firms) and Limited Partnerships (203 firms).

In 1993, 1499 companies in Austria were under indirect foreign influence and employed a total of 132,000 people, of whom 88,000 worked in the industrial sector.

Austrian Direct Investments Abroad

Since 1989 there has been a marked increase in Austrian direct investments abroad. Between 1989 and 1993 the number of employees who depend on Austrian capital doubled to 115,925 persons. In 1993, foreign companies which are under Austrian influence paid some AS 244 million in patent, license and management fees to domestic partners.

The Österreichische Nationalbank survey showed that Austrian direct investments abroad totalled AS 122.5 billion in 1994, which represents a fourfold increase compared to the 1989 figures. Over half of these investments -AS 65.4 billion -again went to EU countries. Investments in Germany for 1994 totalled AS 24.8 billion, next came Switzerland and Liechtenstein with AS 11.9 billion. Direct investments in the U.S. and Canada reached an overall total of AS 7.2 billion.

Eastern Europe Becomes Strong Competitor For Germany

Until 1992, Germany was the major target for Austrian entrepreneurs. From 1993 on, this trend shifted toward Central and Eastern Europe. By the end of 1993, total direct investments in Germany had amounted to AS 19.3 billion, while in Eastern Europe the figures reached AS 24.2 billion, Hungary taking the lead with AS 15.8 billion, followed by the Czech Republic (AS 4.7 billion) and the other reform countries. Since 1990 joint ventures in Eastern Europe have averaged AS 5 billion per year. In 1994, Austrian direct investments in Eastern Europe rose to a record AS 29.7 billion (Hungary AS 17.8 billion, Czech Republic AS 6.6 billion).

In terms of sectors, most of the Austrian companies invested abroad in the industrial sector, predominantly in the areas of metals/vehicles, followed by stones/ceramics/the building industry, petroleum/chemicals, paper/wood and textiles/clothing/ leather. In the non-industrial sector, participation in, or the establishment of, foreign companies mainly concentrated on trade. The business sector and banks and financing companies also proved popular areas for investment.

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