AUSTRIA: EUROPE’S CHOICE BUSINESS LOCATION.

Austria has emerged as one of Europe’s top business locations. In the period 1991-2000, the total outstanding stock of foreign investment in Austria more than doubled to reach a level of close to EUR 30 billion.

Austria’s position as the pre-eminent business gateway to Central and Eastern Europe, a geographic location in the heart of Europe, a thriving high-tech economy, economic and social stability, EU membership, a highly-qualified and motivated work force as well as low tax and inflation rates represent bottom-line advantages to foreign investors. In addition, the nation’s commitment to quality, first-rate technology and a state-of-the-art infrastructure ensure foreign companies high-performance business operations and a solid return on their investments.

Favourable European Comparison

A close look reveals that Austria ranks favourably in European comparison:

·         The most cost-effective business location in continental Europe

·         A corporate tax rate of 34%, but an effective corporate tax burden of 17.67%, the second lowest in continental Europe

·         One of the highest growth rates for industrial production and productivity in the EU over the last decade

·         Ranked tops in the world in terms of the availability of highly-educated and skilled labour, and among the top three in the EU for the quality of its educational system

·         Global leader in quality of life, tops in the EU in terms of the confidence of people that they and their property are protected

·         Among the top three in the EU in terms of innovation

·         The world’s seventh and EU’s second richest nation in per capita income

Most Cost-Effective Location in Continental Europe

A comparative analysis conducted among the G7 countries plus Austria by international consulting firm KPMG ranked Austria as the most cost-effective business location in continental Europe. The study, encompassing 64 cities and nine criteria such as taxes, real-estate prices, energy and transportation costs, revealed that ongoing annual location-sensitive costs in Austria are notably lower than in neighbouring Germany or in France and Italy. Austria has the lowest corporate tax burden of all eight countries.

According to a study published by international real estate company CB Richard Ellis in the year 2000, comparing office rental costs in the European Union and in Central/Eastern Europe, Austria’s capital city of Vienna has the second lowest annual office rental costs (EUR 325 per square meter). Vienna is less expensive than all EU and CEE cities, with the exception of Brussels.

Tax Haven

Companies can retain a higher percentage of their profits in Austria than in many EU countries, with the standard corporate tax rate for companies set at 34%. According to a study by Holland’s Ministry of Finance and the University of Maastricht, Austria has an effective corporate tax burden of 17.67%, the second lowest in continental Europe and well below the EU average of 26.86%. In addition to EU subsidies, Austria also offers an extensive program of subsidies for small and mid-sized enterprises, research and development, company start-ups, investment and new technologies. Investment income is not subject to standard income tax, whereas trade or wealth taxes do not exist. Tax regulations provide numerous ways to reduce taxable income or minimise tax liabilities. More than 40 double taxation agreements create a highly competitive base, especially for holding companies.

Global/European Competence Centres

Numerous multinationals have set up their European headquarters, competence centers or major production hubs in Austria. For example, the only Chrysler production facility on the continent and Sony’s largest CD factory are in Austria. Austria is also home to the international centre for engines and transmissions up to 1.6 litres for General Motors/Opel; the largest BMW engine plant and global competence centers for diesel technology and connecting rods; the European headquarters and research center for automotive supplier Magna International, and world-wide or European competence centres for firms such as Alcatel, Baxter, Boehringer Ingelheim, Ericsson, IBM, Philips and Unisys.

Major Multinational Investments

In the last year, prominent multinationals have announced new investments amounting to EUR 1 billion aimed at expanding their Austrian production or R&D facilities. These include Siemens (to expand chip production), German truck producer MAN (to transfer the production of light trucks from Germany), Canadian engine manufacturer Bombardier-Rotax (to develop a new generation of four-cylinder engines), DSM (for a new chemical production facility) and Magna International (for a new transmission facility and to increase four-wheel drive production).

BMW will invest to boost diesel engine and connecting rod production as well as expand diesel technology development, along with DaimlerChrysler (to manufacture the new “PT Cruiser”), Sony (to expand DVD production), the General Motors subsidiary Opel (to increase production capacity for engines and transmissions), Boehringer Ingelheim (for the company’s oncology headquarters), Philips (in new computer monitor production lines), and Gefinex -Jackson (for a new heat insultating material production facility).

Western Multinationals Set Up CEE Headquarters

More than 1,000 international companies have selected Austria over other EU and CEE locations as the base for their CEE business operations, including Alcatel, Chrysler, Coca-Cola, Henkel, Hewlett Packard, IBM, Master Foods, McDonalds, and Siemens.

The latest additions include automotive giant Ford and the top U.S. natural gas provider UGI Corp, pharmaceutical multinationals Eli Lilly and Quintiles, IT/Internet specialists Pixelpark and BroadVision, the French St. Gobain Group, a top global supplier of glass and construction materials, Germany’s special chemicals market leader Degussa-Hьls, and cosmetics firm Beiersdorf.

According to “Austria: Base for U.S Business in New Eastern Europe,” a study published by the American Chamber of Commerce, Austria’s importance in East-West trade has increased over the last ten years and will continue to increase. 200 out of a total of 400 U.S. subsidiaries in Austria operate in the CEE region. 80 of these companies have set up their Central and East European headquarters in Austria.

Geographical proximity and traditional business ties, an historically matured climate of mutual interests, intimacy and trust, an understanding of CEE languages, culture and business practices, an advanced infrastructure, unmatched transportation connections and network of financial institutions and consultants make Austria the undisputed leader for business outreach to the Central and Eastern European region. The end of 2000 marked the launch of the New Europe Exchange (NEWEX) for Central and Eastern European shares in Vienna. Austria is the leading foreign investor in Central and Eastern Europe on a per capita basis and fifth overall, with approx. EUR 8.5 billion in investments in the region.
 

Liberalised Regulations

Austria has implemented far-reaching reform measures in recent years:

·         1997: companies in Austria enjoy the right to set up flexible working time models to boost their international competitiveness. Labour reforms have boosted flexibility in allowing seven day shifts, extended weekly or daily working hours and round the clock operations under specified conditions.

·         1998: telecommunications liberalisation process begins, opening up the telecom market to leading domestic and international providers.

·         1999: Austria opens up approx. 30% of its electricity sector to private utilities, enabling large users to freely choose their providers.

·         2000: Government passes energy liberalisation law, providing for 100% liberalisation of the electricity sector by October 2001 and 100% liberalisation of natural gas market by October 2002, enabling all users to freely choose their providers.

The Austrian government has announced an additional EUR 500 million in investments for research and development until 2003, as part of a national drive to boost overall R&D expenditures to 2.5 per cent of the country’s gross national product. Additional measures planned to boost the country’s competitiveness include an EUR 1.1 billion reduction in incidental wage costs, an extensive privatisation program, increased flexibility in regards to employee working time and shop opening hours, and the launch of the “one-stop-shop” to simplify licensing procedures.

Telecommunications Boom

The liberalisation of Austria’s telecommunications sector, one of Europe’s most dynamic, has opened the fixed line and mobile phone market to international providers such as Deutsche Telecom, European Telecom International, Mannesmann, MCI WorldCom, RSL Communications, Telecom Italia, and UTA/Swisscom.

In the last three years, about 160 licenses have been granted for fixed lines, switching technologies, mobile telephony and paging systems. At the end of 2000, six licenses for the new Universal Mobile Telecommunications System (UMTS) wireless access network were granted, which is expected to be launched in Austria in 2002. Licenses will be awarded in 2001 for WLL (wireless local loop) systems.

Liberalisation has led to extensive price reductions, and mobile telephone rates are the lowest in the EU. The number of mobile telephone users has topped 5.5 million, giving Austria a penetration rate surpassing 70%, the second highest in the EU behind Italy. Interconnection fees – the transfer costs from the postal telecommunications lines to alternative networks – rank among the most favourable in Europe

State-of-the-Art Infrastructure

Austria’s advanced transportation infrastructure ensures quick, effective access to major international and European hubs via a well-developed network of highways, railways with advanced freight handling technology and international flight connections. One example: Vienna’s airport serves 35 East European destinations, more than any other European airport. Leading edge technology and industrial parks complement 2,000 high-tech R&D institutes, innovation and higher-education centers. In Austria, more than 300 high-tech industrial networks in such fields as aerospace, airport development, automotive, bio-energy, biotechnology, environmental protection, micro-electronics, plastics and telecommunications have been set up or are being established.

Highly-Skilled/Productive Employees, Low Labor Costs

Austria’s educational system, recognised as one of the best in the world, features vocational and specialised schools and practical training in post-secondary vocational institutes, providing a steady inflow of qualified, motivated employees with extensive practical training and foreign language competence. More than two thirds of Austrians complete a higher general secondary, technical or vocational college education, one of the highest levels in Europe. The World Competitiveness Yearbook 2000 ranked Austria as number one in the world in the availability of highly-educated, skilled labour, number five in terms of qualified engineers and among the top three in the EU in terms of the quality of its educational system.

In a separate study published by the American Chamber of Commerce in mid-2000, about 70% of the companies operating in Austria said they were highly satisfied or satisfied with the ability of their Austrian employees to meet workplace requirements.

A recent analysis by the Austrian Institute of Economic Research concluded that Austrian industrial production climbed 43% in the period 1990-2000 or an average 3.6%, the fourth highest in the EU behind Sweden, Finland and Ireland. Industrial productivity in Austria rose 5.1% annually over the last decade, the fourth highest rate in the EU and well above the EU average of 3.2%, whereas Austrian unit labor costs declined significantly.

Stability and Low Risk

Austria is a low-risk country ensuring solid future perspectives. The country’s high level of economic and political stability provides the basis for the ongoing implementation of reforms and moderate wage policies. Austria is a stable democracy, with the second lowest strike time in the European Union. Steady economic growth and interest rates, one of the EU’s lowest inflation rates, participation in the European Monetary Union and reliability in just-in-time delivery allow for accurate, long-range planning. In Euromoney’s Country Risk Rating published in early 2000, Austria moved up from 9th to 7th place world-wide.

Austrian Business Agency

The Austrian Business Agency (ABA), the national investment promotion company providing comprehensive know-how, services and professional consulting to foreign investors free of charge, is headquartered in Vienna with offices in New York, Tokyo and Taipei.

A dynamic team of 25 experienced business location consultants serve as the liaison for potential investors, to all necessary contacts in Austria, making available both general and specialised information on Austria as a business location, specific sectors, technologies, and market developments, and on political and economic conditions. ABA also provides assistance on personnel and tax matters, suppliers, sales opportunities, available incentives, site approvals, real estate prices and numerous other concerns.

ABA posted record annual results in the year 2000. It provided professional consulting and support services to 132 foreign companies locating their business operations in Austria, with investments doubling to EUR 554 million compared to 1999. At present, ABA is consulting approx. 430 companies which are potentially interested in investing in Austria.

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