2013 Investment Climate Statement
Bureau of Economic and Business Affairs
February 2013
Report

Openness to Foreign Investment

Economic conditions in Austria -- particularly those relevant to foreign investors – continue to remain favorable. As a small and highly internationalized economy, Austria was affected by the global economic downturn in 2009, but recovered swiftly in 2010 - 2011. In 2012 Austria’s economy grew only 0.6%, due mainly to economic problems in the eurozone. For 2013 and 2014, gradual revival with growth of about 1.0% and 1.8%, respectively, are expected. In line with its EU neighbors, Austria's economy generally is on a lower growth path than before the 2008-2009 financial/economic crisis. The Austrian government’s crisis response led to an increase in public debt, but helped maintain employment during the downturn. While Austria’s fiscal position still compares favorably to that of other eurozone members, fiscal vulnerabilities remain and require consolidation.

Austria continues to offer a stable, advantageous climate for foreign investors, albeit one with challenges. Some 340 U.S. companies have invested in Austria; many have expanded their original investment over time. European Union (EU) enlargements in 2004 and 2007 strengthened Austria's attractiveness as an investment location by increasing access to markets in Eastern Europe, but expansion also bolstered Austria's competitors in that region, most of which are now EU members. Border controls between Austria and all of its eight neighboring countries were lifted under the EU's Schengen area agreement. Due to their proximity, Budapest, Prague, and Bratislava now compete directly with Vienna for foreign investors. To maintain long-term competitiveness, Austria is working to enhance its role as a hub for business in Central, Eastern, and Southeastern Europe (CESEE), further improve inadequate transport links to CESEE neighbors, ease regulatory red tape, and promote language capabilities.

Government attitude towards foreign private investment: The grand coalition of the center-left Social Democratic Party (SPO) and the center-right People's Party (OVP), which has been in power for five years and faces national elections in late 2013, has generally pursued policies designed to attract investors, including foreign investors. Observers do not expect Austria's openness to foreign direct investment to change under any new government.

To restore Austria’s economy to pre-crisis growth levels, the government will need to continue fiscal consolidation efforts. It will also need to consider additional structural reforms, particularly in the areas of pension and health systems, school and university education, inter-governmental fiscal relations, streamlining bureaucracy, and tax reform. The OECD has suggested that Austria abolish self-imposed regulations and licensing requirements in the service sector. Fiscal consolidation was initiated in 2012 and will be an economic policy priority for the next several years. Austerity measures are not expected to have a negative impact on the climate for foreign investors, because they primarily affect the pension and health care systems, state-owned enterprises and provincial budgets; tax measures focus on real estate transactions, financial transactions, and high incomes. As a result of the 2012-2016 austerity package and a legal debt cap (which is designed to limit Austria's federal budget deficit to 0.35% of GDP by 2017), the 2013 total public sector deficit is predicted to be 2.3% of GDP (down from 3.1% in 2012). The 2013 total public sector debt ratio of 75.4% of GDP is expected to start declining in 2014. A series of elections in 2013, including national elections in the fall, will test the government’s adherence to the austerity path and its seriousness about budget consolidation.

Taxes: Austria welcomes foreign direct investment that does not have a negative impact on the environment. Austrian authorities particularly welcome investments that create new jobs in high technology fields, promote capital-intensive industries, and have links to R&D activities, for which special tax incentives are available. Austria remains a high-tax country with a heavy personal income tax burden, however a relatively low 25% corporate tax rate makes Austria attractive as a business headquarters location. Because of tax base adjustments, experts estimate the effective corporate tax burden at no more than 22%. Austria also offers a highly favorable framework for group taxation, unique in Europe, which allows business to offset profits and losses of group operations (requiring direct or indirect participation of more than 50%, but no other financial, economic, or organizational integration) in Austria and abroad. This group taxation system offers interesting opportunities for U.S. investors, in particular joint-venture structures, M&A transactions, headquarter companies, and simple holding companies without active business, which can also benefit from group taxation. Austria's corporate tax rate and group taxation rules make it competitive vis-à-vis its EU neighbors. Austria currently has no wealth tax, net worth tax, trade tax, nor inheritance/gift tax (only a reporting requirement). The center-left Social Democratic Party (SPO) has supported property and inheritance taxes.

Visas: Effective July 1, 2011, Austria introduced a new points based immigration scheme to attract skilled workers and specialists in individual sectors. The annual quota for managerial positions has been replaced with a more open system designed to react flexibly to rising demand in different occupations. Under the new “Red-White-Red” (RWR) model, managers and key personnel/professionals are assessed on a points system based on qualification, education, age, and language skills. The RWR program is available to highly qualified individuals, qualified specialists/craftsmen in certain understaffed professions (qualified labor and registered nurse jobs), and key personnel/professionals. Applicants must have an offer of employment to apply for the RWR program. Highly qualified individuals have an additional requirement to apply locally, in Austria. Because of this, highly qualified applicants may first apply for a six-month job seeker visa at the competent Austrian Embassy/Consulate abroad. This visa ensures they will have adequate time to complete the in person RWR card application (a three-month ’visa-waived” stay in Austria may not be enough). While principal applicants are exempt from any language requirement, family members must submit proof of basic language proficiency when first applying for residence permits. Austrian immigration law requires those applying for resident permits to take German language courses, but exempts university-degree holders.

U.S. citizens comprised the fourth-largest group of non-EU nationals qualifying for the program.

Global Benchmarks: Investor surveys and international rankings consistently award Austria high marks for political stability, quality of life (Mercer’s 2012 Quality of Living Index continues to rank Vienna the top location to reside in the world), and personal security (incidents of violent crime are low in Austria and Vienna, but property crime remains an issue). Surveys also praise business, trade, investment, and financial freedoms, as well as the rule of law, social security and health infrastructure, the skills and motivation of Austrian labor, and its productivity and quality. Austria receives lower marks for economic growth, taxes, a high cost of living, the lack of risk capital financing, low innovation dynamics, the size of the public sector, and regulatory red tape (particularly when starting a business).

The 2012 Index of Economic Freedom of The Heritage Foundation/Wall Street Journal ranks Austria twenty-eighth worldwide and fourteenth among the 43 European countries – down several ranks from 2011 because of rising government spending and the absence of major regulatory reforms. The World Bank’s Ease of Doing Business Index 2013 ranks Austria twenty-ninth (by comparison, the United States was fourth), up three spots from 2012. The International Institute for Management Development’s (IMD) 2012 World Competitiveness Scoreboard ranks Austria number twenty-one. The Swiss Economic Institute (KOF) Index of Globalization ranks Austria fourth out of 208 countries, reflecting Austria's high degree of economic, social, and political integration within the European Union and with non-EU countries in Eastern Europe.

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Measure

Year

Ranking

Transparency International Corruption Index

2012

25

Heritage Economic Freedom

2012

28

World Bank Doing Business

2013

29

IMD World Competitiveness Scoreboard

2012

21

KOF’s Globalization Index

2012

4

WEF’s Global Competitiveness Index

2012-2013

16

WEF’S Availability of Latest Technologies Index

2012-2013

13

Currency Conversion and Capital Transfers

Austria has no restrictions on cross-border capital transactions, including the repatriation of profits and proceeds from the sale of an investment, for non-residents and residents. The Euro, a freely convertible currency and the only legal tender in Austria and 16 other Eurozone member countries, shields investors from exchange rate risks within the Eurozone.

Expropriation and Compensation

Expropriation of private property in Austria is rare and may proceed only on the basis of special legal authorization. The government can initiate it only in the absence of any other alternative to satisfy the public interest; when the action is exclusively in the public interest; and when the owner receives just compensation. The expropriation process is fully transparent and non-discriminatory toward foreign firms.

Dispute Settlement

The Austrian legal system provides an effective means for protecting property and contractual rights of nationals and foreigners. Austria's civil courts enforce property and contractual rights and do not discriminate against foreign investors. Austrian courts, like those in many other countries, operate slowly and a losing party can delay execution of a judgment by appealing.

Austria is a member of the International Center for the Settlement of Investment Disputes (ICSID). The 1958 New York Convention (UNCITRAL) also grants enforcement of foreign arbitration awards in Austria.

Performance Requirements

There are virtually no restrictions on foreign investment in Austria and foreign investors receive national treatment in general, however, the Austrian government may impose performance requirements when foreign investors seek financial or other assistance from the government. Such cases are subject to government review; screening ensures compliance with EU regulations, There are no performance requirements to gain access to tax incentives. Although there is no requirement for participation by Austrian citizens in ownership or management, at least one manager must meet residence and other legal requirements. Non-residents must appoint a representative in Austria. There is no requirement that nationals hold shares in foreign investments or for technology transfer.

There are no sectoral or geographic restrictions on foreign investment. However, resistance to investment in the industrial sector may arise from environmental concerns. Potential U.S. investors need to factor Austria's strict environmental regulations into their decision-making process. Many industries also fall under the greenhouse-gas Emissions Trading System, part of the EU's implementation of the Kyoto Protocol. Strict liability regulations and co-existence rules sharply restrict any research, cultivation, marketing, or distribution of biotechnology crops.

Incentives

Austria offers an attractive incentive system for research and development (R&D) activities -- including those undertaken by foreign-owned enterprises -- with pre-seed and seed financing options for start-ups and cash grants up to 80% for later-stage companies. In some regions, the government offers special facilities and services ("cluster packages") to foreign investors. For example, these can include incentives for automotive producers and manufacturers of integrated circuits, silicon, other high-tech products and environmental technologies.

Austrian federal, state, and local governments offer financial and tax incentives (within EU competition policy limits) to firms undertaking projects in economically underdeveloped areas on Austria's eastern and southern borders. In most of these areas, eligibility for co-financing subsidies under various EU structural and cohesion programs (primarily regional competitiveness and employment programs) has declined under the EU's 2007-2013 financial framework, from €2 billion to €1.3 billion and are expected to be further reduced as of 2014. Incentives are equally available to domestic and foreign investors, and include tax incentives, preferential loans, loan guarantees, and grants. Most of these incentives are available only if the investment meets specified criteria including employment creation and use of high technology. Tax allowances for advanced employee training and R&D expenditures are also available. Expatriates are allowed to deduct certain expenses (costs associated with moving, maintaining a double residence, education of children) from Austrian-earned income. Austria Wirtschaftsservice is the government's provider of financial incentives. Further information on targeted investment incentives (German language only) is available at http://www.awsg.at.

Right to Private Ownership and Establishment

Foreign and domestic private enterprises are free to establish, acquire, and dispose of interests in business enterprises, except for some infrastructure and utilities.

National Security Screening: A law requires all third-country nationals or companies with their seat in a third country (not a member state of the European Economic Area or Switzerland) to obtain approval by the Federal Minister of Economy, Family, and Youth for any investment of 25% or more in a company headquartered in Austria and active in sectors relevant for domestic and foreign security, public order, or crisis precaution. This affects investment in defense equipment producers, security services, hospitals, fire brigades, disaster control and rescue services, telecom companies, railroads, air and ship transportation, federal roads, universities, schools and child care facilities, as well as electricity, gas, and water providers.

Licensing requirements: such as those in the banking and insurance sectors, apply equally to domestic and foreign investors. In most business activities, the law permits 100% foreign ownership, with the exception that by law, federal and state governments maintain at least a 51% share in all electricity providers. Entrenched political interests may make it more difficult to challenge quasi-monopolies in some sectors where they still exist. However, U.S. investors have had some success, especially when they have used local partners and contacted the U.S. Embassy at an early stage.

Protection of Property Rights

Real Estate: The Austrian legal system protects secured interests in property. For any real estate agreement to be effective, owners must register with the electronic land registry. In case of rededication of land, approval of the land transfer commission or the office of the state governor is required. The land registry, overhauled in 2012 to speed up registration procedures and reduce costs, is a reliable system for recording interests in property. Access to the registry is public.

IPR: Austria has effective laws to protect intellectual property rights, including patent and trademark laws, a law protecting industrial designs and models, and a copyright law. Austria is a party to the World Intellectual Property Organization (WIPO) and several international property conventions, including the European Patent Convention, and the Universal Copyright Convention. Since both the United States and Austria are members of the "Paris Union" International Convention for the Protection of Industrial Property, American investors are entitled to the same protection under Austrian patent legislation as are Austrian nationals.

Copyright: Austria's Copyright Act is in conformity with EU directives on intellectual property rights and grants the author the exclusive rights to publish, distribute, copy, adapt, translate, and broadcast his/her work. The law also regulates copyrights of digital media (restrictions to private copies), works on the Internet, protection of computer programs, and related damage compensation. Infringement proceedings, however, can be time-consuming and costly. Film and music industry representatives are in a legal dispute with Internet providers to block access to pirated audiovisual products over the Internet. In line with EU requirements, Austria also has a law against trade in counterfeit articles. In 2011, Austrian customs authorities confiscated pirated goods worth €5.3 million (USD 6.8 million).

Patent Prosecution Highway: In September 2010, the United States and Austria signed a "Patent Prosecution Highway" (PPH) agreement on a trial basis. PPH allows filing of streamlined applications for inventions determined to be patentable in other participating countries. The program, which is based on information sharing between national patent offices and standardized application and examination procedures, should reduce costs, processing time, and encourage greater use of the patent system.

Transparency of the Regulatory System

Austria's legal, regulatory, and accounting systems are transparent and consistent with international norms. Ministries generally publish draft laws and regulations for expert comment prior to their adoption by Austria's cabinet (Ministerrat) and/or Parliament. The government applies tax and labor laws uniformly, as well as health and safety standards. The government does not influence the allocation of investments among sectors.

Streamlining: The government has made progress in streamlining its complex and cumbersome requirements for business licenses and permits. It claims to have reduced the processing time for permits to less than three months, except for large projects requiring an environmental impact assessment. The government's "one-stop shop" for business permits does not include plant and building permits. All licensed businesses in Austria (including foreign-owned enterprises) must be members of Austria's Economic Chamber and pay compulsory dues. The Chamber plays an administrative role in some areas, including retailing, tourism, and certification of skilled labor.

Deregulation: Liberalization in the telecom sector has resulted in low prices for business services, particularly for mobile telephony and broadband services. Likewise, liberalization and deregulation in the energy sector has lowered business costs. However, remaining barriers to entry in utility markets have resulted in only limited competition. Such barriers include the requirement that federal or local governments own at least 50% of energy distribution companies, the market shares of incumbent providers (the three largest suppliers have two-thirds of the retail market), and an unwillingness of consumers to switch providers.

Capital Markets and Portfolio Investment

Financial Markets: Austria has modern and sophisticated financial markets. All financial instruments are available. Foreign investors have access to the Austrian market without restrictions. Austria has a highly developed banking system with worldwide correspondent banks, and representative offices and branches in the United States and other major financial centers. Large Austrian banks also have extensive networks in Central, Eastern, and Southeastern Europe (CESEE) countries and the countries of the former Soviet Union. Due to U.S. tax reporting requirements, some private banks do not accept personal accounts from U.S. citizens, though locally incorporated businesses belonging to U.S. investors have not reported problems in this regard.

Assets of Austria's five largest banking groups (Erste Group, Bank Austria, Raiffeisen Zentralbank with Raiffeisen Bank International, BAWAG P.S.K. Bank, and Raiffeisen-landesbank Oberoesterreich) totaled approximately €662 billion (USD 848 billion) in 2012, representing 66% of Austria's banking sector assets. All five banks are considered "system-relevant" ("too big to fail"). Several banks are currently restructuring and downsizing.

Regulators and criminal investigators have dealt with several major financial sector fraud and mismanagement cases in the past five years, the largest of which resulted in the nationalization of Kommunalkredit bank in 2008 and the Hypo Group Alpe Adria banking group in 2009, and partial nationalization of Volksbanken AG in 2012. Austria's bank supervision system provides for dual-oversight with supervisory roles for both the Austrian National Bank (OeNB) and the Financial Market Authority (FMA). Eight Austrian banks with assets in excess of €30 billion (USD 38.4 billion) will be subject to the Euro-zone’s new single supervisory mechanism.

Stock Exchange: The Vienna Stock Exchange (VSE) is a small exchange of regional importance. Since the market has few listings, little liquidity, and is dominated by a few blue chips, the VSE tends to overreact to international trends. In past years, VSE activity has languished due to the delisting of several prominent companies and a lack of IPOs. The VSE (like the exchanges of Budapest, Ljubljana, and Prague) is a subsidiary of the Vienna-based CEE Stock Exchange Group (CEESEG AG). The group accounts for half of total market capitalization and two-thirds of equity trading volume in CESEE, making it the largest stock exchange group in the region.

Criminal penalties apply to insider trading, money laundering (including self-laundering), and terrorist financing. The FMA (similar to the U.S. Securities and Exchange Commission) and the OeNB are responsible for policing irregularities on the stock exchange and for supervising banks, insurance companies, securities markets, and pension funds. Austria's Anti-Money Laundering/Combating Terrorist Financing (AML/CTF) regime is generally in line with Financial Action Task Force standards. The Stock Corporation Act no longer allows bearer shares for companies listed on a recognized stock exchange.

Austria's venture capital market is small and underdeveloped. In 2011, funds raised dropped 7% to €249 million ($319 million). The volume of private equity and venture capital raised in Austria during 2002-2011 was €2.5 billion ($3.2 billion).

Austrian accounting regulations provide U.S. investors with improved and internationally standardized financial information. In line with pertinent EU regulations, listed companies must prepare their consolidated financial statements according to the International Financial Reporting Standards (IAS/IFRS) system.

Acquisitions, mergers, takeovers, cartels: Austria's Anti-Trust Act is in line with European Community antitrust regulations, which take precedence over national regulations in cases spanning Austria and other EU member states. The Austrian Anti-Trust Act prohibits cartels, any competitive restrictions, and abuse of a dominant market position. The independent Federal Competition Authority (FCA) and the Federal Cartel Prosecutor (FCP) are responsible for administering antitrust laws. The FCA has limited resources and has not been overly active in recent years. Companies must inform the FCA about mergers and acquisitions (M&A). Special M&A regulations apply to media enterprises. The cartel court is competent to decide M&A notifications from the FCA or the FCP. For violations of antitrust regulations, the cartel court can impose fines of up to the equivalent of 10% of a company's annual worldwide sales. An independent energy regulator separately examines antitrust concerns in the energy sector, but must also submit cases to the cartel court. A recent Anti-Trust Act amendment will sharpen oversight of enterprises with a dominant market position and facilitate action damage claims.

Austria's Takeover Law applies to both friendly and hostile takeovers of corporations headquartered in Austria and listed on the Vienna Stock Exchange. It protects investors against unfair practices, since any shareholder obtaining a controlling stake in a corporation (30% or more in direct or indirect control of a company's voting shares) must offer to buy out smaller shareholders at a defined "fair market" price. The law also includes provisions for shareholders who passively obtain a controlling stake in a company, i.e., not by buying additional shares, but through the reduction of shares held by another large shareholder. The law prohibits defensive action to counter bids. Austria has not implemented the EU's Takeover Directive's breakthrough regulations, but does allow individual companies to address these in company bylaws. The Shareholder Exclusion Act allows a primary shareholder with at least 90% of capital stock to "squeeze out" minority shareholders. An independent takeover commission at the Vienna Stock Exchange oversees compliance with these laws.

State-Owned Enterprises

Private enterprises in Austria can compete with public enterprises under the same terms and conditions with respect to access to markets, credit, and other business operations, such as licenses and supplies. After many successful privatizations in previous years, public enterprises are mainly active in the area of state monopolies (e.g., gambling) and entities with a “public function” such as utilities, hospitals, social insurance, infrastructure, and related sectors. In many of these sectors (e.g., hospitals, utilities) private companies compete successfully; however, public enterprises occasionally use political ties to prolong dispute resolution and appeal procedures and/or delay implementation of remedies, which in some markets can lead to significant uncertainties. While most state-owned enterprises (SOEs) must finance themselves under similar terms to private enterprises, the largest SOEs (such as the Federal Railways) do not have a hard budget constraint and some benefit from state-subsidized pension systems and other public funding.

Corporate Governance: Since many public enterprises are outsourced and organized as stock corporations, senior management usually does not report directly to a minister but to a board. However, the government often appoints management and board members, who usually have strong political affiliations.

Privatizations: The government has not privatized any state-owned enterprises (SOEs) since 2007, except for the sale of the indebted Austrian Airlines to German Lufthansa. Austrian public opinion remains skeptical towards privatization, and the senior coalition partner (the Social Democratic SPOe) is on record opposing additional privatizations. The current government program does not identify any SOEs for privatization, a commitment that is unlikely to change significantly during the next government. In past privatizations, foreign and domestic investors received equal treatment. Despite a historical government preference for having domestic shareholders retain a blocking minority, foreign investors have successfully gained full control of enterprises in strategic sectors of the Austrian economy, including telecoms, banking, power generation, and infrastructure.

Austria does not have a sovereign wealth fund.

Corporate Social Responsibility

In past years, awareness of corporate social responsibility (CSR) has risen among Austrian producers and consumers. Major Austrian companies follow generally accepted CSR principles and publish a CSR chapter in their annual reports. Many also provide information on their health, safety, security, and environmental activities. CSR Europe (the leading European business network for CSR) has a local partner organization, “respACT" (short for "responsible action"), founded in 2005 to promote CSR in Austria.

Political Violence

There have been no reported incidents of politically motivated damage to foreign businesses. Civil disturbances are extremely rare.

Corruption

Transparency International's (TI) 2012 Corruption Perceptions Index ranked Austria 25th - down nine positions from 2011. Several prominent new cases involving government and business corruption were made public and investigated in the past year. Nevertheless, U.S. firms have not identified corruption as an impediment to investment in Austria.

Corruption cases are routinely reported in the media. Legal proceedings in corruption cases are slow and enforcement, although improving, is still an area of intense public scrutiny. A parliamentary committee created in October 2011 to investigate corruption charges against former government officials and managers of government-affiliated companies exposed unethical behavior and collusion. The committee concluded work in October. The public prosecutor investigated corruption charges against former ministers and the chancellor. Several investigations were ongoing, and a trial against a former minister started in November. Watchdog groups such as TI are active, but play no formal role in investigations.

Corruption provisions in Austria's Criminal Code cover managers of Austrian public enterprises, civil servants and other officials (those with functions in legislation, administration, or justice on behalf of Austria, in a foreign country, or an international organization), representatives of public companies, and as of January 2013 also members of Parliament, government members, and mayors. The term "corruption" includes: active and passive bribery; illicit intervention; abuse of office; and accepting consideration. It can sometimes include a private manager's fraud, embezzlement, breach of trust, or accepting consideration. Criminal penalties for corruption include imprisonment of up to 10 years for all parties involved. By law, bribery payments are not tax deductible for companies making them. A separate law, the Law on Responsibility of Associations, deals with criminal responsibility for legal entities and partnerships. The law covers all criminal offenses, including corruption, money laundering, and serious tax offenses that are subject to the Tax Offences Act, and fines can be as much as €1.8 million (USD 2.3 million). Austria has a special public prosecutor's office with Austrian-wide authority for corruption cases. As of January 1, 2013, a new Lobbying Act introduced binding rules of conduct for lobbying and requires domestic and foreign organizations to register with the Austrian Ministry of Justice. A law on financing of political parties requires disclosure of donations exceeding €3,500 (USD 4,480).

Austria has ratified the United Nations Convention against Corruption (UNCAC), the OECD Anti-Bribery Convention, the Council of Europe's Civil Law Convention on Corruption, and has signed -- but not ratified -- the Criminal Law Convention on Corruption. Austria is a member of the Group of States against Corruption (GRECO) within the Council of Europe and hosts the International Anti-Corruption Academy (IACA).

Bilateral Investment Agreements

The United States and Austria do not share a bilateral investment treaty (BIT) but are signatories to a 1931 bilateral Treaty of Friendship, Commerce, and Consular Rights. Austria has BITs in force with: Albania, Algeria, Argentina, Armenia, Azerbaijan, Bangladesh, Belarus, Belize, Bolivia, Bosnia-Herzegovina, Bulgaria, Cape Verde, Chile, China, Croatia, Cuba, Egypt, Estonia, Ethiopia, Georgia, Guatemala, Hong Kong, Hungary, India, Iran, Jordan, Kazakhstan, Kosovo, Kuwait, Latvia, Lebanon, Libya, Lithuania, Macedonia, Malaysia, Malta, Mexico, Moldova, Mongolia, Montenegro, Morocco, Namibia, Oman, Paraguay, Philippines, Poland, Romania, Saudi Arabia, Serbia, Slovenia, South Korea, South Africa, Tajikistan, Tunisia, Turkey, Ukraine, United Arab Emirates, Uzbekistan, Vietnam, and Yemen.

Austria has signed and ratified agreements with Cambodia and Zimbabwe, but those agreements are still pending ratification by those countries and have not yet entered into force. Negotiations with Bahrain, Turkmenistan, Russia, and Nigeria are ongoing. An agreement with North Korea was initialed in 2001, but has not been signed. Until new agreements take effect, prior agreements with the former Czechoslovakia continue to apply to the Czech Republic and Slovakia, and that with the former Soviet Union to Russia and Tajikistan. Under all these agreements, if parties cannot amicably settle investment disputes, a claimant submits the dispute to ICSID or an arbitration court according to the UNCITRAL arbitration regulations.

The United States and Austria have been parties since 1998 to a bilateral double taxation convention covering income and corporate taxes. (Treaty text: http://www.irs.gov/pub/irs-trty/austria.pdf) Another bilateral double taxation convention (covering estates, inheritances, gifts and generation-skipping transfers) has been in effect since 1982.

Investment Insurance Programs

OPIC programs are not available for Austria. Austria is a member of the World Bank’s Multilateral Investment Guarantee Agency (MIGA).

Labor

Austria has a highly educated, disciplined, and productive labor force of approximately 4.3 million, of whom 3.7 million are employees and 600,000 are self-employed or farmers. Austria's labor market is more rigid than that of the United States, but more flexible than in some other European counties. In line with EU regulations, free movement of labor from all member countries is allowed, except for labor from Bulgaria and Romania until 2014.

Austria’s labor market policy, including programs to subsidize reduced working hours during the crisis, has successfully maintained unemployment to levels among the lowest in the European Union. The unemployment rates of 4.4% in 2010, 4.2% in 2011, and 4.3% in 2012, in all three years were the lowest in the EU-27. Unemployment may increase somewhat in 2013 and 2014 because of the weak economy, but should not exceed 4.6%. Youth unemployment is less of a problem in Austria than other EU member states.

In general, skilled labor is available in sufficient numbers. However, regional shortages of highly specialized laborers in specific sectors, such as systems administration, metalworking, healthcare, and tourism, may occur. Starting in 2015, demographic factors will cause the number of domestic labor market entrants to fall short of those retiring, indicating a need for additional immigration. A medium-term issue is the growing number of low-qualified school drop-outs: 15% of Austrian 15-year olds leave school with only lower secondary education.

Compulsory Austrian social insurance is comprised of health insurance, old-age pension insurance, unemployment insurance, and accident insurance. Employers and employees contribute a percentage of total monthly earnings to a compulsory social insurance fund. Austrian laws closely regulate terms of employment including working hours, minimum vacation time, holidays, maternity leave, statutory separation notice, severance pay, protection against dismissal, and an option for part-time work for parents with children under the age of seven. Problem areas are increasing deficits in the pension and health insurance systems, the shortage of personnel to care for the increasing number of elderly, and escalating costs for long-term care.

Labor-management relations are relatively harmonious in Austria, which has a low incidence of industrial unrest. No major work stoppages have occurred since 2005. Approximately 35% of the work force belongs to a union.

Collective bargaining revolves mainly around wages and fringe benefits. Approximately 80% of the labor force works under a collective bargaining agreement. All collective bargaining agreements now provide for a minimum wage of €1,000 (USD 1,285) per month. The law provides for a maximum workweek of 40 hours, but collective bargaining agreements also give more than half of all employees 38- or 38.5-hour workweeks. Regulations to increase flexibility in work hours allow firms to increase the maximum regular time from 40 hours to 50 hours per week with overtime. In special cases work hours can be increased to a maximum of 60 hours per week, including overtime, for a maximum of 24 weeks annually. Responsibility for agreements on flextime or reduced workweeks is at the company level. Austrian employees are generally entitled to five weeks of paid vacation (and an additional week after 25 years in the workforce). The rate of absence due to illness/injury averages 13 workdays annually.

Foreign Trade Zones/Free Ports

Austria has no foreign trade zones.

Foreign Direct Investment Statistics

According to the Austrian National Bank, the value of FDI stock in Austria was approximately €118 billion (USD 151 billion) at the end of 2011 and by end-June 2012, equal to 38% of GDP.

In 2011, U.S. investment accounted for 13.0% of total FDI in Austria.

At €16 billion (USD 21 billion), new Austrian direct investment abroad in 2011 returned to pre-crisis levels. The value of Austrian direct investment stock abroad was nearly €154 billion (USD 197 billion) at the end of 2011 and an estimated €159 billion (USD 204 billion) by end-June 2012.

Note: Figures converted at the 2012 annual average exchange rate of USD 1.00 = EUR 0.78.

Austria's International Investment Position

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Year

2010

2011

2012

€ billion

$ billion

€ billion

$ billion

€ billion

$ billion

FDI in Austria

118.6

152.1

118.3

151.7

117.9

151.2

Austrian FDI Abroad

132.4

169.7

153.6

196.9

158.9

203.7

Note: 2012 figures are half-year, preliminary figures.

Source: Austrian National Bank.

FDI in Austria – Source Country Breakdown 2011

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Source Country

Share of Total

(in%)

U.S.

13.0

Germany

26.1

Italy

14.1

Switzerland/Liechtenstein

7.7

Russia

4.8

Netherlands

4.2

Middle East

4.0

France

3.7

U.K.

3.4

All other countries

19.0

Source: Austrian National Bank.

Austrian FDI Abroad – By Destination Country 2011

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Destination Country / Region

Share of Total

(in%)

U.S.

3.5

Germany

15.2

Czech Republic

7.1

Netherlands

6.2

Hungary

5.6

Romania

5.5

Russia

4.7

Croatia

4.6

Slovakia

3.6

Turkey

3.5

U.K.

3.0

Bulgaria

3.0

Switzerland/Liechtenstein

2.9

Poland

2.4

Italy

2.3

All other countries

26.9

Source: Austrian National Bank.

List of Major Foreign Investors:

Some 340 U.S. firms hold investments in Austria, which range from sales offices to major production facilities. The following is a partial list of U.S. firms holding major investments in Austria.

  • American Express Bank Ltd.
  • Baxter International Inc.
  • Capital Research and Management Company
  • Cerberus Capital Management
  • Cisco Systems, Inc.
  • Citibank Overseas Investment Corp.
  • The Coca-Cola Company
  • CSC Computer Sciences Corporation
  • Deloitte & Touche LLP
  • Eaton Corp.
  • Electronic Data Systems Corp.
  • General Electric Company
  • General Motors Corp.
  • Harman International Industries Inc.
  • Hewlett-Packard Company
  • Honeywell Inc.
  • IBM World Trade Corp.
  • ITT Fluid Technology Corp.
  • Johnson & Johnson Int.
  • Johnson Controls Inc.
  • Kraft Foods International, Inc.
  • Lear Corporation
  • Lem Dyn Amp
  • McDonald's Corporation
  • Marriott International, Inc.
  • Mars Inc.
  • MeadWestVaco Corp.
  • Merck & Co., Inc.
  • Modine USA
  • One Equity Partners
  • Otis Elevator Company.
  • Pioneer Hi-Bred International Inc.
  • PricewaterhouseCoopers LLP
  • PQ International Inc.
  • Quintiles Transnational Corp.
  • Schindler Elevator Corp.
  • Starwood Hotels and Resorts Worldwide, Inc.
  • Toys "R" Us, Inc.
  • UGI Corporation
  • United Global Com, Inc.
  • Unysis Corporation
  • Verizon Information Services Inc.
  • Western Union
  • Worthington Cylinder Corp.
  • York International
  • Xerox Corporation

The following is a brief list of firms, headquartered in countries other than the United States, holding major investments in Austria.

  • Alcatel Holding, Netherlands
  • Allianz AG, Germany
  • Amer, Finland
  • Asea Brown Boveri, Switzerland
  • Assicurazioni Generali, Italy
  • Axel Springer Verlag, Germany
  • Banco Santander, Spain
  • BASF, Germany
  • Bayer AG, Germany
  • Bayerische Motorenwerke (BMW), Germany
  • Bombardier, Canada
  • Bosch Robert AG, Germany
  • Borealis, Denmark
  • BP Amoco, UK
  • Criteria CaixaCorp., Spain
  • DaimlerChrysler, Germany
  • Detergenta Investment, Germany
  • Deutsche Lufthansa, Germany
  • Deutsche Telekom, Germany
  • DM Drogerie Markt, Germany
  • Electricite de France, France
  • Electrolux, Sweden
  • Eni/Agip, Italy
  • Epcos AG, Germany
  • Ericsson, Sweden
  • Flextronics International, Singapore
  • Fomento de Construcctiones & Contratas, Spain
  • Heineken, Netherlands
  • H&M, Netherlands
  • Infineon, Netherlands
  • Japan Tobacco, Japan
  • Kone Corp., Finland
  • Koramic, Belgium
  • Liebherr, Switzerland
  • Magna International, Canada
  • MAN, Germany
  • Metro, Germany
  • Mondi Europe, Luxembourg and UK
  • Nestle S.A., Switzerland
  • NKT Cables, Denmark
  • Novartis, Switzerland
  • Nycomed Holding, Denmark
  • Philips, Netherlands
  • Plus Warenhandel, Germany
  • RENO, Germany
  • REWE, Germany
  • RWE, Germany
  • Sanfoi-Aventis, France
  • Sappi Ltd., South Africa
  • Shell Petroleum N.V., Netherlands
  • Siemens, Germany
  • Smurfit Group, Ireland
  • Solvay et Cie, Belgium
  • Sony, Japan
  • Sueddeutscher Verlag, Germany
  • Svenska Cellulosa Ab (SCA), Sweden
  • Unibail-Rodamco, France/Netherlands
  • UniCredit Group, Italy
  • Unilever N.V., Netherlands
  • Voith, Germany
  • Westdeutsche Allgemeine Zeitung (WAZ), Germany
  • Wolong Holding Group Co. Ltd., China
  • Xi'an Aircraft Industry (Group) Company Ltd., China

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