AUSTRIA and Slovakia have not escaped the impacts of the global economic slow-down, but Patrick Sagmeister, the Austrian Commercial Counsellor in Bratislava, regards the downturn as having provided a stimulus for Austrian companies to take more interest in Slovakia. He thinks that is the high quality on offer which prompts many Austrian firms to come to Slovakia.
The Slovak Spectator spoke with Patrick Sagmeister who also heads Advantage Austria, the official Austrian Foreign Trade Promotion Organisation in Slovakia, about current bilateral economic cooperation between the countries, the impacts of the global economic crisis on trade, and about what he currently sees as good business opportunities in Slovakia.
TSS: How would you describe the current economic cooperation between Austria and Slovakia, especially in light of the economic crisis?
PS: Economic cooperation and the relationship between the two countries are extremely good. If you look at the level of development over the years it has been an incredible, even though it decreased in 2009 obviously due to the crisis. But generally speaking, Slovakia is one of the most important business partners for Austria. There is a trade flow of €4 billion each year and the nice thing is that it is very balanced: it is about €2 billion in each direction and what is also very nice is that in spite of the drop in 2009, the figures are improving now in 2010 From January to May 2010 Slovakia’s exports to Austria increased by 43 percent when compared to the previous year and Austria’s exports to Slovakia have grown by almost 20 percent. So we are getting back on a very good track.
But our cooperation is not based only on mutual trade but also in terms of Austrian direct investments, even though we see fewer companies coming from Slovakia into Austria. Austria is officially the second biggest investor in Slovakia, according to the Slovak Statistics Office. There are about 1,600 Austrian companies in Slovakia and total Austrian investments in Slovakia are about €4.3 billion. The latest available figures show that this is not decreasing; these investments are stable with an upward trend.
Slovakia and Austria have a very good relationship. Compared to the Czech Republic and Hungary, our relations are neither over-nostalgic, nor burdened with history. With Slovakia we have a good, reasonable, and pragmatic relationship which is a very good working basis. I think that it is due to mentality and that Austrians and Slovaks are the most alike in this region. You are our favourite business partner and the figures show it.
And it is one of my prime tasks here to bring more Austrian companies to Slovakia and help them to succeed and make the region of central Europe, Centrope, to grow together and to see that it is really one market. And I have to say that more and more companies have started to view it this way, as one market.
TSS: Do you think that impacts of the economic crisis have faded away from Austrian-Slovak business relations?
PS: The crisis was of a global character and it had an effect on bilateral relations, indeed, but the figures are reporting that it is over. However, from our point of view it was never a real crisis. It was really the opposite because the slow-down in the world economy, metaphorically speaking, actually forced a lot of medium and small-sized Austrian companies to look just over their fences to Slovakia and try to do business here, especially in the Bratislava region and western Slovakia. Maybe we do not see complete results yet, but many of them are trying to start businesses here and this usually does not progress so quickly. But actually, the crisis was a good stimulus for more Austrian interest in Slovakia.
TSS: Which new areas of cooperation do you see as prospective?
PS: Since there are already 1,600 Austrian companies here, it’s a safe guess that their interests are very broad. But our organisation, Advantage Austria, tries to be active in fields which provide above-average opportunities. These fields are obviously renewable energy, since there is new legislation and new opportunities here, infrastructure, and the service industry. Austrian companies are already very strong in banking, tax advisory, legal services, cleaning companies, the automotive industry and others.
TSS: How do you see the situation in Slovakia with regards to renewable energies since Slovak state organisations do not seem very supportive and the legislative environment has also changed a bit recently?
PS: What I try to do is promote Slovakia and show Austrian companies what business opportunities are here. Things like the originally proposed changes in the law on renewable energies, which fortunately were not adopted in their planned scope, would have been very negative. So I believe that if we can keep the stable environment which the adopted law on renewable energies created, then the situation will be very good.
We are not happy about the limits placed on some sectors which are very strong in Austria, for instance, photovoltaic – which is not so much a priority of the Slovak government – as well as wind energy. But since Austria is generally very strong in renewable energy and covers the entire spectrum, Austrian companies can participate in the boom in biomass. Austrian companies are also very active in biogas.
We hope there will be more photovoltaic projects. It is understandable that Slovakia’s electrical grid cannot take fluctuations that are too large, but maybe there is a little bit more that can be done in this direction.
TSS: What do Austrian businesses see as the primary advantages to investing in Slovakia?
PS: Slovakia is a very dynamic market and very close to Austria. You have heard this many times, but it is really true: we have partly a common history and that helps Austrian companies to understand the situation here very well and to be successful. Of course, there is a big disadvantage in that we do not speak the Slovak language. That’s a quite big problem and I believe that when we increase our language skills we will have bigger opportunities. Thank goodness many Slovaks speak German and English so well, but as everybody knows it is a big difference when you are able to talk to people in the local language when sitting at dinner. We have to do a lot of homework in Austria to learn the Slovak language much better.
But generally, the labour force in Slovakia is very stable, it’s still available for very reasonable prices and of a very good quality; Slovaks are extremely well-educated in some fields and most people have a very good attitude towards work. We do a survey once a year together with the German-Slovak Chamber of Commerce and we can see there that 92 percent of the companies said that they are happy with their investments and that they would do so again. The main reasons are labour and also the quite low bureaucracy, which always can be improved but, when compared with other countries, it is quite manageable. Of course, many companies perceive the easy, flat-tax system in a positive way. Moreover, the labour law will be changed to be even better. I believe there is a very good environment for doing business here.
TSS: The interest of Austrian companies in regions around Bratislava and Trnava is quite
natural because they are so close to Austria. What about central and eastern Slovakia?
PS: These regions are very interesting for production. We have many Austrian companies which have production facilities there, for example investments in the automotive industry.
Recently there was an investment of €32 million into a big biomass plant in Bardejov and MK Illuminations in Prešov produces street Christmas decorations for half of Europe.
There is also Künz that produces metal processing machines in eastern Slovakia in Kechnec. This is just to name a few companies.
TSS: Slovakia was once perceived as a low-wage country but this is not true anymore. So is it still worth investing in Slovakia?
PS: I think that it is because of the good quality that many companies choose to produce in Slovakia. We still see a lot of Austrian investments into Slovakia, maybe not the biggest names even though there also are some big names screening the Slovak market, but many small companies come and want to take advantage of this dynamic environment and the still reasonable labour costs and at the same time very good quality and flexibility.
Creativity, especially in the technical fields, is really appreciated by Austrian families or businesses; they like this characteristic when a lot can be done with very little in human resources.
TSS: What about the fact that Austria’s labour market has not been fully opened for Slovaks as new members of the European Union?
PS: Well, the view of companies and industries is that this will be a big advantage for Austria next April when all restrictions will be lifted because we need qualified workers and sometimes it is impossible to find them in Austria. Of course, a lot of Slovaks already work in Austria on special permits, but we are very happy that this period will be over. This was a political issue and from the point of the Austrian economy and companies this period definitively should not have lasted so long. From our point of view it did not help us, rather the opposite, as a lot of companies could not get the qualified people they needed.
TSS: Austria performs excellently in tourism. Do you think that Slovakia can learn some lessons from Austria or are there some areas of cooperation between Slovakia and Austria in the tourism field?
PS: Tourism is a field which has huge potential in Slovakia. Because when you come to Slovakia and you travel you see that it is very beautiful country but that the offer [of good services] is not here. There is a huge potential – but we have been talking about this for a very long time.
Slovaks come to Austria and it’s very popular for skiing, wine tasting, spas and other
activities. The other way around there is still much to do because most Austrians have never been in Slovakia and if they have, 90 percent of them have not been beyond Bratislava. They go to Bratislava for the opera and to eat. I see many factors behind this, for example infrastructure. As it is getting better and as the highways are being built, it will be easier to go to the High and Low Tatras and go skiing. I have been in some Slovak ski resorts which have very good lifts but it takes quite a while to get to them. So that must be improved.
The service level is getting better and I think that Slovakia has done a very good job in a very short time. Austria had a few years more to develop tourism as it started to develop after World War II. In Slovakia you have not had that time yet. I think the development has been good but there is still some work to do.
We try to get Austrian companies to come here and show them what they can do and what opportunities there are, either for investments or cooperation. There is some cooperation between hotels and others, as well as some investments but for now they are only on a small scale.
I believe that it is important to engage in sustainable and not too-big projects. This is the structure in Austria, which consists of a lot of small pensions, restaurants and so on and I think this would work also in Slovakia.
Usually problems in Slovakia are about small things like a poor service mentality or lack of friendliness. It is going the right way, not as fast as we might wish, but it is going in the right direction. More public funds could also help the situation.
