Austria and Slovakia are linked by strong business ties

THE TIMES when the border between Slovakia and Austria was completely sealed off and heavily guarded and when only very few Slovaks with special permission could peer beyond the Iron Curtain ended more than 20 years ago. Now, with both countries holding membership in the European Union and the Schengen zone, those wishing to travel between the neighbouring countries only need to carry an ID card.

THE TIMES when the border between Slovakia and Austria was completely sealed off and heavily guarded and when only very few Slovaks with special permission could peer beyond the Iron Curtain ended more than 20 years ago. Now, with both countries holding membership in the European Union and the Schengen zone, those wishing to travel between the neighbouring countries only need to carry an ID card.

Changes have progressed so far that now a regular public bus line runs between Bratislava and Hainburg, in Austria, and Austrians and Slovaks need not worry about exchanging currencies when crossing the border since both countries use the euro. The manifold changes over two decades are reflected in thriving mutual trade between the countries and many kinds of joint business endeavours. Both Slovakia and Austria consider each other as a most important economic partner and foresee bright prospects for future mutual economic cooperation.

“Austria belongs among the most important foreign economic partners of Slovakia,” Dagmar Hlavatá from the press department of the Slovak Ministry of Economy and Construction told The Slovak Spectator. “It stays in a prominent place in terms of direct foreign investment as well as foreign trade. Regional cooperation has intensified, especially between the states of Lower Austria and Vienna and Slovakia’s regions of Bratislava and Trnava.”

According to Hlavatá, various forms of regional cooperation have intensified during the last two years. On the basis of a bilateral agreement signed in 1994, a joint Slovak-Austrian commission has now started to meet two times a year, following the first session held in March 2009.

One of the latest results of this intensified regional cooperation is the signing of a memorandum to construct two new bridges over the Morava River: a road bridge between Záhorská Ves and Angern and a bridge for cyclers and pedestrians between Devínska Nová Ves and Schlosshof (the municipality of Engelhartstetten) in Austria.

Trade and investments

The Austrian-Slovak Chamber of Commerce views bilateral business relations very optimistically, in spite of the global economic crisis.

“Between 2000 and 2008 the bilateral flow of goods increased significantly, reaching €4.7 billion in 2008, with trade flows balanced in both directions,” Josef Alternburger, the president of the Slovak-Austrian Chamber of Commerce told The Slovak Spectator.

“This ranks Austria among the biggest trading partners of Slovakia. In 2009 our bilateral trade declined by 20 percent as a consequence of a drop in demand in the USA as well as in Europe.”

According to the Slovak Economy Ministry, the global economic downturn affected Slovakia and Austria because both are primarily subcontracting countries. The decline was visible especially in the machine industry, an industry that has subcontracts with the automotive, electro-technical and wood-processing industries.

“But based on results for the first half of 2010 and estimated economic growth of between 1.5 and 3 percent, it is possible to count on growth in trade coming up to €4.2 billion,” said Alternburger.

The Slovak Economy Ministry considers the partially-restricted access by Slovaks to the Austrian labour market up to April 30, 2011 as a braking factor on certain kinds of economic cooperation. When Slovakia entered the European Union on May 1, 2004, Austria decided to apply the longest possible period in restricting access to its labour market by workers from some new EU member states – a period of seven years.

“In practice this meant that especially companies from construction, machinery, and wood-processing had problems with executing orders since it was not possible to get work permits for their assembly workers,” said Hlavatá.

Based on data from the National Bank of Slovakia (NBS), Austria’s total direct foreign investment in Slovakia amounted to €3.819 billion at the end of 2008. Austria was the second biggest investor in Slovakia and its share represented 14.2 percent of all foreign direct investment in Slovakia, according to the Slovak Economy Ministry.

According to the NBS, the inflow of Austria’s foreign direct investments to Slovakia in 2009 amounted to €81.8 million. In the Slovak banking sphere, Austria is the number one investor, with Slovakia’s biggest bank, Slovenská Sporiteľňa, being controlled by Austria's Erste Bank and another significant Slovak bank, Tatra Banka, being part of Raiffeisen, an Austrian-based bank.

There are about 1,600 Austrian companies, mostly small and medium-sized businesses, active in Slovakia. But, according to Alternburger, the exact number of people working in these companies as well as their contribution to Slovakia’s GDP cannot be precisely calculated.

“Cooperation of Austrian companies, as a consequence of existing business structures of the Austrian economy, is extensive and varied and covers almost the entire Slovak economy because, except for large concerns such as Vöest-Alpine, OMV, Strabag and others, these are primarily small and medium-sized companies operating in all economic fields,” said Alternburger.

Alternburger listed a number of successful investment projects, while omitting those most well-known. He highlighted, for example: Doka-debniace systémy which offers a wide range of wall forming systems; Miba and Pankl, as subcontractors to the automotive industry; Univolt/Dietzel, which produces parts for electrical installations; Wertheim/Schindler, making and servicing lifts and escalators; and Alas and Leier, active in the Slovak construction industry. He also noted that there are several hotel investors and operators as well as retail chains such as Baumax and Kika and transportation and logistics companies like Gebrüder Weiss. Many of these businesses are located in western Slovakia because Alternburger said the incomplete infrastructure in eastern Slovakia has thus far discouraged potential investors from that region.

The interest of Austrian companies in investing and doing business in Slovakia has not decreased, according to Alternburger, and he sees fields with future potential as those in which Austria has know-how and experience, for example the automotive industry, technologies for protection of the environment, renewable energy resources and energy-saving technologies, as well as services closely related to business, such as IT.

Austrian investors, based on a survey conducted by the Austrian-Slovak Chamber of Commerce jointly with their French and German counterparts, list Slovakia’s membership in the EU and the eurozone, high productivity and the high qualification of labour, and reasonable labour costs as among the positive features offered by Slovakia.

Austrian investors do note several barriers to doing business in Slovakia that they hope will change: ineffective state administration and bureaucracy; insufficient transparency in public tenders; difficult access by foreign firms to state and EU support mechanisms, especially for SMEs; legal uncertainties and concerns about the independence of the judiciary; and a low level of public support for education, science and research. In this last area, Slovakia ranks among the lowest states in the EU, allocating only 0.8 percent of its GDP to these purposes.

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