Austria's Business Climate: Internationally Favorable?

Austria has a well-developed market economy that welcomes foreign direct investment, particularly in technology and R&D. The country benefits from a skilled labour force, a high standard of living, and a stable political climate. Its capital, Vienna, consistently ranks highly in global quality-of-life rankings.

Austria's economy is heavily reliant on exports, with over 50% of its GDP derived from this area. As such, it is closely tied to other EU economies, particularly Germany, its largest trading partner. The US is also one of Austria's top two-way trading partners. The economy features a large service sector and an advanced industrial sector, with a focus on high-quality vehicle components. The agricultural sector is small but highly developed.

Austria's economy is forecast to stagnate in 2023, with a projected growth rate of just 0.3%. This is due to the global economic downturn and high energy prices. Inflation is also a concern, reaching 8.5% in 2022, and businesses list high energy prices and skilled labour shortages among their main challenges.

Despite these challenges, Austria offers a stable and attractive climate for foreign investors. Its positives include political stability, harmonious labour-management relations, a highly skilled workforce, high productivity and international competitiveness, and excellent quality of life for employees.

However, there are also some negatives to Austria's investment climate. These include a high tax burden, rising energy costs, a large public sector, complex regulations, low innovation dynamics, low levels of private venture capital, and skilled labour shortages.

Key sectors that have attracted significant investment include ICT and electronics. Austria's location between Western Europe and higher-growth markets in Central, Eastern and Southeastern Europe has led to a high degree of economic, social and political integration with fellow EU member states.

Austria's digital administration

Austria is considered a pioneer in the field of digital administration and digital justice, with various successful projects implemented and recognised across Europe.

The Federal Legal Information System (RIS), introduced in 1998, is a useful tool that indexes all federal and provincial laws and supreme court decisions back to 1980. This facilitates access to justice and is in line with the UN Sustainable Development Goals.

Another success story is webERV, an electronic communication option with courts and authorities, introduced in 2006. It is now mandatory for lawyers, notaries, banks, and insurance companies to use webERV for all submissions to courts and authorities.

Austria has also successfully implemented the EU Digitization Directive, which requires member states to enable the digital formation of limited liability companies. Austria has taken this further by creating the possibility of digitally drawing up almost all notarial deeds.

Austria excels in the area of financial administration digitisation, with 83% of tax returns submitted electronically, and 88% willing to do so. 72% of Austrians regularly use e-governance services, far surpassing neighbouring countries like Germany and Switzerland.

However, there are areas where Austria lags, particularly when compared to the USA and China. For example, setting up a company in Austria is a lengthy, expensive, and laborious process compared to the streamlined digital processes in other countries.

Austria's Business Climate

Austria has a well-developed market economy and is open to foreign direct investment, particularly in technology and R&D. The country has a skilled labour force and a high standard of living, with its capital, Vienna, consistently ranking highly for quality of life.

Austria's economy is heavily dependent on exports, with over 50% of its GDP derived from trade with other EU countries, especially Germany. The US is also one of Austria's top trading partners. The economy features a large service sector and a specialised industrial sector that produces high-quality component parts, particularly for vehicles.

Austria's economy is closely tied to global demands and has experienced downturns due to the COVID-19 pandemic, the Russia-Ukraine conflict, and high energy prices. Inflation and energy costs are key challenges, and businesses also cite the labour market as a significant concern, with high labour costs and a shortage of skilled labour.

Other drawbacks include a complex regulatory and bureaucratic system, relatively high taxes, and low levels of private venture capital.

Despite these challenges, Austria remains an attractive destination for foreign investors due to its political stability, harmonious labour relations, highly skilled workforce, and excellent quality of life.

Austria's stability and safety

Austria is a politically stable country with a skilled workforce and a high standard of living. Its capital, Vienna, consistently ranks highly on global quality-of-life indices. The country has a well-developed market economy that welcomes foreign direct investment, particularly in technology and R&D.

Austria's economy is closely tied to other European Union (EU) economies, especially Germany, its largest trading partner. The United States is also one of Austria's top trading partners. Austria's economy is heavily dependent on exports, with over 50% of its GDP derived from this.

Austria has a strong services sector and an advanced industrial sector, particularly in vehicle component manufacturing. The agricultural sector is small but highly developed.

The country has a high degree of economic, social, and political integration with fellow EU member states and Central, Eastern, and Southeastern European (CESEE) countries.

Political Stability

Austria enjoys relatively high political stability. Civil disturbances are rare, and the overall security environment is considered safe. There have been no incidents of politically motivated damage to foreign businesses.

Labour Relations

Labour-management relations are harmonious, with a low incidence of labour unrest. All employees are automatically members of the Austrian Labour Chamber. The country has a well-balanced labour market but suffers from a shortage of skilled IT personnel, particularly in the banking and financial sectors.

Taxation and Regulatory System

Austria has a high overall tax burden and a complex regulatory system with extensive bureaucracy. The country has lengthy environmental impact assessment procedures, and certain sectors, such as energy, agriculture, mining, and transportation, are heavily regulated.

Energy Security

Austria has been working to reduce its reliance on Russian natural gas, which previously accounted for about 80% of its annual demand. The country is diversifying its energy sources and increasing storage levels to ensure a stable supply of electricity and energy.

Digital Administration

Austria has a highly digitalised administration, with many procedures taking place online. The country is a top performer in Europe regarding its electronic administration, with 76% of Austrian internet users interacting with public authorities online.

Social Partnership

Austria's system of "social partnership" involves close collaboration between employers' and employees' associations, which helps prevent strikes and promotes reliability and long-term planning for businesses.

Sustainable Development

Austria has a joint sustainability strategy at the federal and state levels, aiming for ecological and sustainable entrepreneurship. The country is committed to creating a competitive advantage through improved resource policies, optimising supply security, and reducing its ecological footprint.

Investment Promotion

Austria's national investment promotion organisation, the Austrian Business Agency (ABA), provides comprehensive information and support for foreign companies interested in establishing operations in the country. ABA's services are free of charge.

Overall, Austria's stability and safety, underpinned by its political stability, skilled workforce, high standard of living, and favourable business environment, make it an attractive destination for foreign investors.

Austria's skilled workforce

Austria has a well-educated and productive labour force of around 4.3-4.4 million people. The country benefits from a skilled workforce, and a high standard of living, with its capital, Vienna, consistently placing at the top of global quality-of-life rankings.

Austria's economy is closely tied to other European Union (EU) economies, especially that of Germany, its largest trading partner. The United States is one of Austria's top two-way trading partners. The economy features a large service sector and an advanced industrial sector specialised in high-quality component parts, especially for vehicles. The agricultural sector is small but highly developed.

Austria's workforce is well-educated and productive. The country has a successful dual-education apprenticeship system, combining on-the-job training with classroom instruction in vocational schools. This has helped bring youth into the labour market.

Austria has a well-balanced labour market but, like many of its neighbours, suffers from a shortage of skilled IT personnel, particularly in the banking and financial sector. The country has harmonious labour-management relations and a low incidence of labour unrest. Social insurance is compulsory and includes health insurance, old-age pension insurance, unemployment insurance, and accident insurance. Austrian laws closely regulate terms of employment, including working hours, minimum vacation time, holidays, maternity leave, statutory separation notice, severance pay, dismissal, and an option for part-time work for parents with young children.

Austria offers several non-immigrant business visa classifications, including intra-company transfers and rotational workers. The country has a points-based immigration scheme to attract skilled workers and specialists in individual sectors. The Red-White-Red card (RWR) model allows firms to react flexibly to rising demand for talent in different occupations. It is available to highly qualified individuals, qualified specialists/craftsmen in certain understaffed professions, and key personnel/professionals.

Overall, Austria's skilled workforce is a positive aspect of the country's investment climate.

Austria's high quality of life

Austria has a high quality of life, with its capital, Vienna, consistently ranking at the top of global quality-of-life surveys. The country boasts a clean environment, clear lakes and rivers, and excellent air quality. It also offers a wide range of sports and cultural activities, a high degree of personal safety, a first-rate healthcare system, excellent infrastructure, high-quality housing, and an excellent education system.

In addition to its economic strengths, Austria offers an attractive standard of living. The country has a relatively high income, with an average household net-adjusted disposable income per capita of USD 37,001 per year, above the OECD average of USD 30,490. Housing is also affordable, thanks to housing subsidies, a large social and cooperative housing market, and widespread rent control. The cost of living in Vienna, for example, is significantly lower than in other European cities such as Paris, Amsterdam, and Copenhagen. Austria also has a very low crime rate and a high level of social security.

Austria's natural environment is another factor contributing to its high quality of life. The country has a diverse range of leisure and cultural activities, with numerous green spaces, and it ensures a positive symbiosis between agriculture and the environment. Austria has a very high share of organic farming compared to other European countries and is known for its forward-thinking environmental policies and ecologically compatible production technologies.

Overall, Austria's high quality of life is the result of a combination of factors, including a strong economy, a high standard of education and healthcare, an affordable cost of living, a clean and safe environment, and a diverse range of cultural and leisure activities.

Austria's natural resources and infrastructure

Natural Resources

Austria's natural resources play a vital role in its economy and society. Here are the key natural resources that contribute to Austria's prosperity:

• Arable Land: In 2015, arable land constituted 16.31% of Austria's total land area. The eastern edge of the country has the most productive farmlands due to its relatively flat terrain.
• Minerals: Austria is endowed with valuable mineral resources, including magnesite, iron ore, and lignite. Mineral deposits are scattered throughout the country, with larger deposits found in the northeastern region, especially Styria.
• Forestry: Austria's vast forested areas provide ample timber resources. The country has carefully managed its forests, and in 2016, forests covered more than 46.85% of its total area.
• Water Resources: Austria's rivers and lakes offer significant fish resources. The River Gail, Steyr River, Salza River, and Walster River are popular fishing spots.
• Scenic Beauty: Austria's breathtaking landscapes, including the Alps, contribute to its thriving tourism industry, which brought in an estimated $18.9 billion in 2007.
• Agriculture: While agriculture's contribution has declined since World War II, it still plays a role. Sugar beets, wheat, rye, fruits, and cereal crops are among the key agricultural products.

Infrastructure

Austria's infrastructure is well-developed and contributes to its attractiveness for international businesses:

• Transportation: Austria boasts one of the world's best road networks, with excellent connectivity to neighbouring countries.
• Rail Infrastructure: The country has a state-of-the-art rail system, offering fast connections and environmentally friendly train systems that contribute to sustainable mobility.
• Freight Transport: Intermodal freight transport options, including river cargo transportation via the Rhine-Main-Danube waterway, enhance Austria's logistics capabilities.
• Energy Infrastructure: Austria has a diverse energy mix, including coal, oil, natural gas, and hydroelectric power. The country is a major exporter of hydroelectric power, capitalising on its mountainous terrain.
• Digital Infrastructure: While Austria faces some challenges with low levels of digitalization, it continues to invest in digital infrastructure.
• Aviation: The aviation industry in Austria is advanced, focusing on the development of environmentally friendly and efficient air transportation systems.
• Ports: Austria has efficient connections to the NAPA ports of Trieste, Venice, Ravenna, Koper, and Rijeka, facilitating trade between Western Europe and Asia.

Frequently asked questions