05 Jul An Austria for the ages
René Tritscher, Managing Director, Austrian Business Agency, has seen Austria’s business profile rise in the last decade; he aims to continue that rise.
Would you tell our readers why Austria is such an attractive place for FDI? What are its key strengths and how has the government worked to raise its attractiveness as an investment destination?
Many people see Austria primarily as a tourist destination, which is great for the tourist board, but I want to make it known that Austria is so much more than that. Tourism covers 15 percent of the Austrian gross domestic product (GDP), but industry covers almost 30 percent of the GDP. As you can see, Austria is a heavily industrialized nation. Our leading sectors are first the mechanical engineering sector, second, the electrical and vehicle industries, followed by chemical production and the food industry. Many companies in these business areas are among the top global players. We call them the hidden champions of Austria because they are not so famous. Of course, Red Bull is very famous all over the world, but other companies like Rosenbauer, Miba, Lenzing, or other industrial producers are not as famous because they are in the business-to-business space and not B2C.
Secondly, I want to point out that Austria is also an attractive research location. We are a land of research, and Austria has taken an enormous leap forward over the past two decades. In fact, we had an increase in the R&D-GDP ratio from 1.5 percent in 1994 to our current 3.2 percent. This is because of our first-class university and research centers and because we have a long tradition of strong collaboration between the universities and the corporate sector. The country ranked second among all European nations in this partnership index, surpassed only by the leader, Sweden. Close collaboration with universities is extremely attractive for international companies.
The third argument for Austria is its extremely business-oriented educational system and initiative-taking employees. In some rankings, the employee motivation in Austria is ranked second behind Denmark, and it is also reflected in high employer loyalty. The average length of service within a company is over 10 years in Austria, which is quite crucial nowadays with the shortage of skilled employees all over the world in industrial areas.
I want to also point out that we have a dual education system in Austria, which is especially distinctive. Trainees spend half of their time at school and the other half onsite at the company. This allows students to gain practical experience in real-life scenarios. This secondary level to technical and commercial schools. They are unique in the world, and they offer an education equivalent to an international bachelor’s degree.
Indeed, Austria is a traditional gateway from the east to the west, and the other way around, because Austrian companies are one of the successful investors in the Central and Eastern Europe countries. We have 380 international companies’ headquarters in Austria, and I would say that 80 percent of them are located in Vienna.
Can you give us an overview of the company’s current operations? What recent milestones has the company recently passed, and what current growth strategy is the company using to increase FDI into the country?
First, I would like to point out that we are not only an FDI agency. Although we started out that way 40 years ago to help settle international companies in Austria or expand their location, we also engage in other activities. Our second business unit, which is not as famous but very important for Austria, is FILM in AUSTRIA. Since 1997, we have been working as a film commission to attract film productions to Austria. If Tom Cruise climbs down a rope in the opera house or James Bond flies through Tyrol, we would be working to make that possible behind the scenes. These projects are not only very important for the economy but also for tourism. Then, two years ago, we started our third business unit—WORK in AUSTRIA—where we act as a one stop shop for international investors and talents at no cost.
We have two strong focuses in our new strategy, the first is talent in this new business unit WORK in AUSTRIA. Discussions with foreign investors and international companies over the last four or five years have shown that the availability of the required skilled employees and talent is a vital factor for business location projects. Approximately 50 percent of international companies ask us to help them find international talent for their business location in Austria. This is the principal reason we decided to set up WORK in AUSTRIA in September 2019. At the beginning of 2020, we also started a service center for residents and immigration services for international investors and Austrian companies.
We are a subsidiary of the Federal Ministry for Digital and Economic Affairs, which is quite an effective combination. International companies in Austria, as well as international investors, appreciate these services very much from WORK in AUSTRIA. We started to reduce the bureaucracy in getting residence permits and similar processes. We are now the solution provider for international companies, not only in legal aspects but also to find the best international talent from all over the world, facilitating relocation and integration in Austria. This is a very important step forward, and we see that other foreign direct investment agencies see us as a sort of role model.
The second step in our new strategy is to focus more on quality and not only on quantity. Mainly because of the Covid crisis, we have seen that the emphasis should be less on numbers and more on long-term value added for Austria as a business location. The only KPI in the past was the number of completed FDI projects, and now we a have set of 10 or 15 KPIs where we measure not only the number of investments but also job creation, the taxes they will pay, criteria for high value-added projects, where we measure the next three- or five-year impact. If they come from a sector which is important for Austria.
What opportunities has digitalization opened up for Austria’s investment ecosystem, and what kind of support is the digital revolution receiving from the state? What are Austria’s current shining stars in digital tech?
Digitalization is playing an important role, and it is a political priority in Austria. We have a digital master plan where we have analyzed the situation in Austria, our strengths, opportunities, where we can be better, and we have what we call a digitalization report, which is like the Bible of the Austrian Government. The eGovernment benchmark of the EU ranks Austria among the top three countries in the EU, next to Malta and Estonia. Apart from e-government, we are also highly effective in mobile government and electronic document delivery. This is also very important for Work in Austria because we host an online immigration guide where every international talent can check their possibilities of coming to Austria and exactly what tools to use to do it. Everything is digitalized and you can see all the documents you need. You can then send us an email, and we will help you get your application for a visa or other permits in a very short window.
The e-government monitor, an instrument from the European Union, has declared Austria the best-in-class in our region, over Germany and Switzerland. We also have a digital business service portal for all Austrian firms where you can use all these e-government procedures in one portal to pay taxes, for example.
Another important area of digitalization for us is our strong position in fields such as IoT and other things. The Austrian Institute of Technology’s research is an excellent driver for digitalization and the important collaborations between universities, the government and the private sector. We are seeing many advancements come out of that. We had some unicorns emerge in Austria in the last few months, which is a direct result of this driven digitalization. For example, GoStudent and other startups have done an enormous amount of investigations in the last month. These unicorns are all active in the digital business areas, so this is also a clear indication that Austria has made some giant leaps forward in this area.
What kind of investment opportunities are cropping up in Austria that are focused on sustainability, lowering carbon emissions, and creating a more circular economy?
In Austria, renewable energies are immensely important for us, accounting for 73 percent of overall electricity production, much higher than the average in the EU, which is around 30 to 32 percent. This is based on our natural resources, of course, primarily in hydro power but also wind energy and photovoltaics. Our national referendum against atomic power in the 1970s was also a reason for strong investment in this energy. The government passed the Renewable Energy Expansion Act last year, which is one of the milestones for the energy transition. It has one major aim, namely 100 percent green electricity by 2030. To achieve this, the government has invested $1.1 billion per year in increasing renewable energy capacity.
What is your assessment of the relationship between academia and R&D centers and industry in Austria, and what role does academia play in attracting FDI? What key centers for research are pushing Austria’s economic growth?
As already mentioned, Austria has a longstanding tradition in alliances between the university sector and companies. Our ecosystem here is almost unrivaled. We also have to keep in mind that Austria offers the optimal preconditions for the quick transfer of new processes, technologies and services from the university to the companies.
We have a 14 percent research tax credit for all companies doing research in Austria. This is more attractive than similar systems in Germany or in France, because there is no limit to the amount subsidized, which is very interesting for large companies. Therefore, for large companies, like Infineon or Boehringer Ingelheim, this was a very convincing narrative for them to establish and further expand their research and development in Austria, because they have a high R&D rate in their growth. We also have a 30 percent tax reduction for international talent working as scientists or researchers here. Essentially, you can come to Austria for three years and have a nice tax break, which is a great help.
What personal priorities do you have as managing director going forward? What is the future for the organization and Austria’s investment climate, and what hurdles need to be addressed to make it there?
First of all, the pandemic made politicians more sensitive to FDI in Austria. In Austria, we have the challenge that everybody knows many things about exports and imports, but FDI was only on the radar for some experts and not for the whole society. However, now that Covid exposed the discussions on international value chains, FDI is top-of-mind for politicians, and this is a great opportunity for an agency, like ours. We want to play an active role in this conversation, and we see ourselves in the future as a think tank for the government. In fact, we were happy to have been very active in creating the government’s new action plan for the next 10 years for Austria as a business location. In short, COVID highlighted the importance of FDI projects, and this is a glowing opportunity for us.
Our challenge is two-fold, to attract the best international companies and to attract the talent. We have a new task force for high value-added projects in Austria, so if there is a question from an important international company, we are the coordinator for all other institutions and organization. The potential investor gets all their information from ABA and not 10 different pieces of advice from scattered organizations in Austria. Large international companies are delighted with that because they have this one stop shop coordinating all the activities for the investor in Austria. This is a huge advantage.