Dr. Maria Fekter: Austria is profitable for investors: innovative and economically stable

The financial and economic crisis has resulted in tremendous chal­­lenges around the world and has ruthlessly uncovered weaknesses and failures. The economic areas, due to their close ties, “infected” one another within a short period of time. In many instances, gains in prosperity were wiped out. The increasing distrust on the financial markets has also restricted the flow of capital and hampered willingness to invest. The greatest dangers had to be averted by extensive economic stimulus packages and confidence-building measures.

Off to a flying start from a solid starting point. In the aftermath of these turbulent events, the way must now be cleared for economic success. The drop in growth in Austria was limited to a short period of time thanks to the economic stimulus measures enacted, and the decline was generally mild. The situation on the labour market was stable even in the most difficult of times. Austria can boast the lowest unemployment rate within the EU, at just over four per cent. The stabilisation of the financial markets has secured the liquidity of companies, in particular domestic small and medium-sized busi­­nesses, and has succeeded in restoring confidence. Austria has already been seeing positive economic growth since the end of 2009. Looking towards the future also promises a continuing strong comeback: the growth of the gross domestic product (GDP) of nearly three per cent in real terms in 2011 is, at 1.3 percentage points, significantly above the average for the eurozone. This “eco­­nomic tailwind” will continue to be used consistently to consolidate the budget and thus guarantee security for investments. We have created the conditions for this by reforming the budget law and tightening the Austrian stability pact, which clearly defines spending limits for all levels of government.

A strong location as a source of growth. These encouraging developments provide the basis for exploiting new sources of growth. The attractiveness and innovative power of Austria as a business location are important strategic factors in our economic policies. Research, education and innovation play a vital role in this. These are the foundations of sustained economic success. We will therefore make an additional 100 million euros available annually for research funding until 2014. Part of this will be increasing research grants from eight to ten per cent of ope­­rational research and development expenditure. This way, all companies can hedge a portion of the risks associated with innovation investments in their products, processes and services. The increased corporate tax-free profit allowance implemented with the 2009 tax reform remains in force. Since well-trained employees are an important factor for growth and compe­­titiveness, annual spending on education will be increased by 160 million euros by the year 2014. Expanding all-day child­­care and infrastructure improvements for universities and universities of applied sciences represent the core of these measures. In addition, as part of the Europe 2020 strategy, Austria has obli­­gated itself to increase total spending on research and development to 3.7 per cent of GDP and to increase the share of the 30-34 age group who have successfully completed higher education to 38 per cent. Our goal is clear: Austria wants to be among the leaders in inno­­vation. This objective is emphasised in the FTI strategy, which reinforces the focuses and reforms for the coming years. In a recent survey conducted by the European Commission, Austria was already among a group of countries in pursuit of innovation, thanks to above-average performance in innovation. The innovative power of small and medium-sized busi­­nesses was cited as a particular strength.

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The advantage remains. Along with the future-oriented measures, the coming years in Austria will continue to be charac­­terised by the traditional strengths of the domestic business location. The pur­­chasing power in Austria is among the best internationally, with a per capita GDP of nearly 31,000 euros. This is in addition to a high quality of living resulting from a wide range of cultural activities and a high level of security, low office property costs in attractive locations and a high degree of social stability. An excel­­lent transport and communications infra­­structure and a high level of energy security guarantee smooth processes. In the two-tier education system and the institutions of higher technical education, prospective skilled workers receive ideal, demand-based training for their profes­­sional careers. Companies in Austria can therefore choose from a large pool of quali­­fications. The high level of legal cer­­tainty and the transparency of the laws make corporate decision making easier when enforcing contracts. According to the World Bank’s Doing Business Report 2011, Austria has secured itself a place among the top ten. An attractive taxation system with a moderate corporate tax rate of 25 per cent and the possibility of group taxation, that is cross-border profit and loss offsetting, support expansion plans and cooperation.

A competitive position at the top. Fore­­casts from the European Commission predict that the moderate increase in unit labour costs will continue. Already, labour productivity per hour of work is nearly 14 per cent above the EU average. This high degree of competitiveness is reflected in current account surpluses, which have averaged 2.2 per cent since 2002. The impressive export dynamics, with average annual growth of six per cent over the last ten years, underscores the leading position held by Austrian industry. The mechanical engineering, electronics and environmental techno­logies sectors in particular produce pro­­ducts in demand on the world market. Performances of this kind require ideal conditions. That’s why Austria is constantly working on efficient administrative and information solutions: projects such as the corporate service portal as a “one-stop-shop” for legal reporting obligations, or Finanzonline for the electronic submission of tax returns have significantly contributed to Austria’s position as a role model in e-government. From 2013, as part of the second round of the budget reform, an impact-oriented assess­­ment and evaluation of regulation initiatives will also be introduced as mandatory. With the new Red-White-Red Card, a criteria-guided immigration system has been implemented, allowing Austria to expand its labour market efficiently to include qualified skilled workers from third countries.

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Valuable partner in CEE orientation. Austria’s function as a hub and headquarters location for economic activities in the dynamic growth markets of the CEE (Central Eastern Europe) states will continue to gain importance in line with continuing European integration. Forecasts for this region for the coming years predict that it will continue to catch up and that real growth in GDP of nearly 3.5 per cent will be achieved. Austria distinguishes itself not only by its own expertise as an investor and “first mover”, but also by its historically well-established close rela­­tionships with these countries. Because of their family history, many workers in Austria
speak languages from Eastern European countries. Not without good reason, direct foreign invest­­ments in Austria – an ideal coordination hub since the major EU expansion in 2004 – have quadrupled to currently around 200 billion euros. More than 1,000 international corporations already manage their activities in Central and Eastern Europe from Austria. A large number of existing joint ventures with companies from the region documents the excellent collabo­­rative working basis. The excellent trans­­port connection provided by the Vienna International Airport is also crucial to this. The proposed membership of countries such as Croatia or Montenegro will provide addi­­tional impetus and generate opportunities.

In recent years, Austria and its companies have put themselves in the best possible position in Europe thanks to their innovative power, entrepreneurship and desire to make a difference – nothing can stand in the way of the continued red-white-red success story!

 

Portraitfoto-FBM-Dr--Maria-Fekter-KopieThe author holds a degree in law and business administration. Her prior political positions took her from the Austrian Economic League to the position of secretary of state in the Federal Ministry for Economic Affairs, all the way to the office as Federal Minister of the Interior. Dr. Maria Fekter has been the Austrian Minister of Finance since April 2011.