Mag. Georg Kapsch: A strong location thanks to strong industry

The story of Austria’s development since 1945 is one of success. As a small eco­­nomy, we have succeeded in becoming one of the world’s wealthiest states. This would not have been possible without our industrial base. Despite structural changes, the role of industry in the econ­omy is becoming ever more important. As a consequence of the global economic crisis, during which it was shown that in­­dus­­trialised countries recover faster than others, the European Union recognised this and is therefore focusing on a re-in­­dustrialisation programme. A change in thinking is also being seen in the USA and UK. Today, hardly anyone talks about “de-industrialisation” through service so­­­­cieties. Instead, new services are emerging around the industrial centre .It is this servo-industrial sector which directly and indirectly secures 2.4 million jobs in Austria and generates around 60 per cent of domestic value creation. Yesterday’s state-owned companies have become today’s prosperous, interna­tion­ally-­­focused companies which are prov­­ing themselves in global competition, have successfully found their niches in the market and in many cases have even developed into world market leaders in their sectors.

Industry as an engine of productivity. In an age of globalisation, industry under­­stood the importance of seeing structural change as an opportunity for growth bet­­­ter than any other sector. As the sector ex­­­­posed to the toughest international com­­­­petition, industry recognised in good time that the only way to safeguard their competitiveness is through increases in productivity through product and pro­­cess in­­novations, constantly progressing auto­ma­­tion and an efficient distribution of work.

While the development of Austrian in­­dus­­trial productivity is among the best in the EU, productivity in the service sector has traditionally been more of a problem, in particular due to the large public sector. In no other economy is industry’s con­­tribution to the growth in productivity as high as it is in Austria.
A comparison of the development in improved in the service sector with that of the production sector (industry) over the past 30 years makes industry’s driving function clear. While the productivity (real value creation per employee) in the service sector rose by only 29 per cent in the 30 years before the financial and economic crisis, in the production sector it almost tripled, with a rise of 323 per cent.


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Industry as an engine for innovation. Edu­­cation and training, research and innovation are a significant factor in securing the competitiveness of an economy for the future. 60 per cent of spending on re­­­­search and development come from the private sector (before the crisis, in 2007, it was actually two thirds or 66.6 per cent of total expenditure), and over 70 per cent of this comes from industrial companies, thus making up 46 per cent of total re­­search spending. Just 150 leading com­­panies in Austria, who generate 18 per cent of domestic value creation and make 18 per cent of all gross investments, con­­tribute 37 per cent of total domestic R&D spending. Industry thus plays a huge role in ensuring that our wealth will remain into the future.

Industry as the engine behind wages and purchasing power. A few other numbers also speak for themselves. On average, wages in industry are eight per cent higher than those in the service sector. A full time employee in the production sector receives an average gross hourly wage (median) of 14.20 euros. In the service sector it is just 13.60 euros (source: Statistik Austria). The average gross hourly wage in material goods production is as high as 14.52 euros, while in energy supply – both are consid­e­red part of the production sector – it is as high as 21.56 euros.
The Vienna Institute for International Eco­­no­­mic Studies (wiiw) has calculated that ex­­­­porting companies in Austria – which are predominantly industrial companies – pay 23 per cent higher wages and display 66 per cent higher productivity and 72 per cent higher investment intensity than non-­­exporting companies. This is a con­­sider­able “export bounty” and benefits not just the companies, but also their employees.

Industry as a key driver of energy efficiency. Industry is also the driving force when it comes to energy efficiency and en­­vironmental protection. In the last 30 years, energy consumption in industry has risen only half as much as value creation. This has led to a decrease in energy in­­tensity and an increase in energy efficiency of 48 per cent – more than in almost any other sector. While the energy intensity of the economy as a whole has hardly im­­pro­­ved over the last 30 years in real terms, i.e. adjusted for price, in industry it has fallen significantly from 9.4 terajoules per million euros value creation in 1976 to 4.8 terajoules in 2008, thus significantly increasing energy efficiency. Today, in­­dus­­try actually has a lower energy intensity than the economy as a whole, as well as playing a pioneering role in the de-car­­bonisation of energy. After all, the weight of the energy sources in industry has im­­proved more than in almost any other sector from an environmental point of view. The proportions of coal and oil in final energy consumption have sunk by 35 per cent and 28 per cent respectively since 1990 while, in contrast, the proportion of renewable energies has increased by 24 per cent.

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Industry as the powerhouse of regional clusters. When a region specialises in a particular sector or technology and has built up the appropriate infrastructure for this, synergies grow up in these local asso­­ciations or “clusters” which would not be achievable through national or international business relations. This balling of competencies between science, industry, suppliers and service providers close to industry always forms around an industrial core. These clusters see the development of valuable spill-­­over and networ­king effects; a special pool of experts and important regional competence centres is formed. Examples of this include the Autocluster in the Graz area, the Rail Tech­no­­logy Cluster Austria (RTCA) in Vienna and the environmental technology cluster in Upper Austria.

Industry is carrying the recovery. The deep-rooted international economic crisis and now the budget crisis have once again clearly shown how important a healthy and stable industrial base is for the economy of a country. Industry is again acting as the engine of economic recovery. Three-quarters of the upturn seen since 2009 can be attri­­buted to industry and the service sector close to industry.

Carried by industry, Austrian foreign trade will continue to diversify geogra­phi­­­cally. The proportion of export mar­kets outside the OECD in Austria’s total exports will rise from 18 per cent in 2008 to 24 per cent by 2020. Following the first great wave of internationalisation when the Eastern states were open­ed in the year 1989, the next growth markets are now being speci­­fically targeted. This generates growth and jobs in our coun­­try.

36-print300-KopieThe author (born in 1959) studied Busi­­ness Economics at Vienna University of Eco­no­mics and Business. He has been president of the Federation of Austrian Industries (IV) since 2012. Before this, he had been president of the IV state group for Vienna. Mag. Kapsch has been CEO of the Kapsch Group since 2001.