Austria has a well-developed market economy that welcomes foreign direct investment, particularly in technology and R&D. The country benefits from a skilled labor force, and a high standard of living, with its capital, Vienna, consistently placing at the top of global quality-of-life rankings.
With more than 50 percent of its GDP derived from exports, Austria’s economy is closely tied to other EU economies, especially that of Germany, its largest trading partner. The United States is one of Austria’s top two-way trading partners, ranking fifth in overall trade according to provisional data from 2021. The economy features a large service sector and an advanced industrial sector specialized in high-quality component parts, especially for vehicles. The agricultural sector is small but highly developed.
The COVID-19 crisis deeply affected Austria’s economy, contributing to a GDP decrease of 6.7% in 2020 with the unemployment rate increasing to a peak of 5.4% at the end of 2020. Austria’s economy rebounded with 4.5% GDP growth in 2021 and unemployment lower than before the onset of the pandemic, but forecasters recently lowered expectations to 3.8% growth for 2022 due to instability stemming from Russia’s invasion of Ukraine. At the same time, Austria is experiencing a record number of vacancies, largely stemming from a shortage of skilled labor.
The country’s location between Western European industrialized nations and growth markets in Central, Eastern, and Southeastern Europe (CESEE) has led to a high degree of economic, social, and political integration with fellow European Union (EU) member states and the CESEE.
Some 220 U.S. companies have investments in Austria, represented by around 300 subsidiaries, and many have expanded their original investment over time. U.S. Foreign Direct Investment into Austria totaled approximately EUR 11.6 billion (USD 13.7 billion) in 2020, according to the Austrian National Bank, and U.S. companies support over 16,500 jobs in Austria. Austria offers a stable and attractive climate for foreign investors.
The most positive aspects of Austria’s investment climate include:
- Relatively high political stability;
- Harmonious labor-management relations and low incidence of labor unrest;
- Highly skilled workforce;
- High levels of productivity and international competitiveness;
- Excellent quality of life for employees and high-quality health, telecommunications, and energy infrastructure.
Negative aspects of Austria’s investment climate include:
- A high overall tax burden;
- A large public sector and a complex regulatory system with extensive bureaucracy;
- Low-to-moderate innovation dynamics;
- Low levels of digitalization;
- Low levels of private venture capital.
Key sectors that have historically attracted significant investment in Austria:
- ICT and Electronics;
Key issues to watch:
- Due to a strong reliance on Russian natural gas and the third-highest banking exposure to Russia among EU Member States, Austria could be one of the hardest countries hit by sanctions against Russia. Russia’s invasion of Ukraine and sanctions are expected to cause a 0.4-0.5% decrease in Austria’s GDP. However, the impact is likely to be greater if natural gas supplies are disrupted. Austria relies on Russian imports for approximately 80% of its natural gas demand.
- At the same time, Austria’s export-oriented economy makes it particularly sensitive to events affecting trade, which could include potential setbacks in the pandemic, particularly during the winter months. The tourism sector, which, together with hotels and restaurants, accounts for 15 percent of the country’s GDP is still struggling, currently operating at two-thirds of its pre-crisis output levels. Many companies are also struggling to find skilled labor, which is hindering the economy from reaching its full output potential.
|TI Corruption Perceptions Index||2021||13 of 175||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2021||18 of 132||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2020||USD 4.95||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2020||USD 48,350||https://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
3. Legal Regime
4. Industrial Policies
5. Protection of Property Rights
6. Financial Sector
7. State-Owned Enterprises
Austria has two major wholly state-owned enterprises (SOEs): The OeBB (Austrian Federal Railways) and Asfinag (highway financing, building, maintenance, and administration). Other government industry holding companies are bundled in the government holding company OeBAG (http://www.oebag.gv.at)
The government has direct representation in the supervisory boards of its companies (commensurate with its ownership stake), and OeBAG has the authority to buy and sell company shares, as well as purchase minority stakes in strategically relevant companies. Such purchases are subject to approval from an audit committee consisting of government-nominated independent economic experts.
OeBAG holds a 53 percent stake in the Post Office, 51 percent in energy company Verbund, 33 percent in the gambling group Casinos Austria, 31.5 percent in the energy company OMV, 28 percent in the Telekom Austria Group, as well as a handful of smaller ventures. Local governments own most utilities, the Vienna International Airport, and more than half of Austria’s 270 hospitals and clinics.
Private enterprises in Austria can generally compete with public enterprises under the same terms and conditions with respect to market access, credit, and other such business operations as licenses and supplies. While most SOEs must finance themselves under terms similar to private enterprises, some large SOEs (such as OeBB) benefit from state-subsidized pension systems. As a member of the EU, Austria is also a party to the Government Procurement Agreement (GPA) of the WTO, which indirectly also covers the SOEs (since they are entities monitored by the Austrian Court of Auditors).
The five major OeBAG-controlled companies (Postal Service, Verbund AG, Casinos Austria, OMV, Telekom Austria), are listed on the Vienna Stock Exchange. Senior managers in these companies do not directly report to a minister, but to an oversight board. However, the government often appoints management and board members, who usually have strong political affiliations.
8. Responsible Business Conduct
Austrian Responsible Business Conduct (RBC)/Corporate Social Responsibility (CSR) standards are laid out in the Austrian Corporate Governance Codex, which is based on the EU Commission’s 2011 “Strategy for Corporate Social Responsibility.” The Austrian Standards Institute’s ONR 192500 acts as the main guidance for CSR and is based on the EU Commission’s published Strategy, which is also compliant with UN guidelines. 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.
Austria adheres to the OECD’s Guidelines for Multinational Enterprises. The Ministry for Labor, Social Affairs, Health, and Consumer Protection is represented in national and international CSR-relevant associations and supports CSR initiatives while working closely together with the Austrian Standards Institute.
The Austrian export credit agency promotes information on CSR issues, principles and standards, including the OECD Guidelines, on its website.
Austria is a signatory to the Montreaux Document on Private Military and Security Companies, which it ratified in 2008.
Austria is a member of the Council of Europe’s Group of States against Corruption (GRECO) and also ratified the UN Convention against Corruption (UNCAC) and the OECD Anti-Bribery Convention. As part of the UNCAC ratification process, Austria has implemented a national anti-corruption strategy. Central elements of the strategy are promoting transparency in public sector decisions and raising awareness of corruption. Austria ranked 13th (out of 180 countries) in Transparency International’s latest Corruption Perceptions Index. Despite this ranking, the Group of States Against Corruption (GRECO) February 2021 report criticized Austria for only fully implementing two of 19 recommendations since the last report was issued in 2017. The criticism largely focused on a lack of transparency on lobbying, receipt of donations, and the income of Members of Parliament.
Bribery of public officials, their family members and political parties, is covered under the Austrian Criminal Code, and corruption does not significantly affect business in Austria. However, the public’s belief in the integrity of the political system was shaken by the 2019 Ibiza scandal, when a 2017 video surfaced in which Vice Chancellor and chair of the right populist Freedom Party (FPOe) Heinz Christian Strache and the FPOe floor leader in Parliament Johann Gudenus were filmed discussing providing government contracts in exchange for favors and political party donations with a woman posing as the niece of a Russian oligarch. This was compounded by further revelations in 2019 that the FPOe had allegedly promised gambling licenses to Casinos Austria in exchange for placing a party loyalist on the company’s executive board. Strache was convicted of corruption and bribery by the Vienna District Court in August 2021 following a separate health care fraud investigation. In October 2021, then-Chancellor Sebastian Kurz of the center-right People’s Party (OeVP) announced his resignation amid allegations that, while he was Foreign Minister in 2016, his inner circle paid newspapers to publish falsified opinion polls in his favor; that investigation by anti-corruption prosecutors is still ongoing. Finance Minister Bluemel (OeVP) also resigned, and prosecutors continue to investigate allegations that he may have facilitated political party donations by Casinos Austria subsidiary Novomatic, in exchange for government assistance with the company’s tax problems.
Anti-corruption cases are often characterized by slow-moving investigations and trials that drag on for years. The trial of former Finance Minister Grasser, which started in 2017, concluded in late 2020, with Grasser receiving a sentence of eight years in prison from the trial court judge. The official verdict was published in January 2022, and Grasser is expected to appeal the sentence.
Bribing members of Parliament is considered a criminal offense, and accepting a bribe is a punishable offense with the sentence varying depending on the amount of the bribe. The 2018 Austrian Federal Contracts Act implements EU guidelines prohibiting participating in public procurement contracts if there is a potential conflict of interest and requires measures to be put in place to detect and prevent such conflicts of interest. This required public authorities to set up compliance management systems or amend their existing structures accordingly. Virtually all Austrian companies have internal codes of conduct governing bribery and potential conflicts of interest.
Corruption provisions in Austria’s Criminal Code cover managers of Austrian public enterprises, civil servants, and other officials (with functions in legislation, administration, or justice on behalf of Austria, in a foreign country, or an international organization), representatives of public companies, members of parliament, government members, and mayors. The term “corruption” includes the following in the Austrian interpretation: active and passive bribery; illicit intervention; and abuse of office. Corruption can sometimes include a private manager’s fraud, embezzlement, or breach of trust.
Criminal penalties for corruption include imprisonment ranging from six months to ten years, depending on the severity of the offence. Jurisdiction for corruption investigations rests with the Austrian Federal Bureau of Anti-Corruption and covers corruption taking place both within and outside the country. The Lobbying Act of 2013 introduced binding rules of conduct for lobbying. It requires domestic and foreign organizations to register with the Austrian Ministry of Justice. Financing of political parties requires disclosure of donations exceeding EUR 2,500 (USD 2,950). No donor is allowed to give more than EUR 7,500 (USD 8,850) and total donations to one political party may not exceed EUR 750,000 (USD 885,000) in a single year. Foreigners are prohibited from making donations to political parties. Private companies are subject to the Austrian Act on Corporate Criminal Liability, which makes companies liable for active and passive criminal offences. Penalties include fines up to EUR 1.8 million (USD 2.1 million).
To date, U.S. companies have not reported any instances of corruption inhibiting FDI.
10. Political and Security Environment
Generally, civil disturbances are rare and the overall security environment in the country is considered to be safe. There have been no incidents of politically motivated damage to foreign businesses. Austria suffered a terrorist attack on November 2, 2020, when a gunman shot and killed four civilians and injured 23 in the center of Vienna.
11. Labor Policies and Practices
Austria has a well-educated and productive labor force of 4.3 million, of whom 3.8 million are employees and 500,000 are self-employed or farmers. In line with EU regulations, the free movement of labor from all member states is allowed.
The COVID-19 crisis has led to an increase in unemployment, which reached 5.4 percent in 2020, but has since returned to near-pre-crisis levels. As of February 2022, the unemployment rate was 4.9 percent, compared to 4.5 percent in 2019. At the same time, the number of people unemployed for longer than 12 months has increased by 23 percent since the start of the pandemic. The Labor Ministry is developing initiatives to reintegrate long-term unemployed in the job market and combat the current shortage of skilled labor. To combat the effects of lockdown-related business closures, the government implemented a subsidized reduced hours work program, enabling employers to reduce employees’ hours by up to 90 percent, with assistance to cover up to 80-90 percent of regular pay, which was in place until March 2022 and helped keep the unemployment rate under control.
Foreigners account for almost one-quarter of Austria’s labor force; around 840,000 foreign workers are employed in Austria. Migrant workers come largely from the CEE region, but there are also many workers who arrived during the Syrian refugee crisis who have entered the labor market. Migrant workers often occupy lower-paying jobs and make up a large percentage of workers in the tourism and healthcare sectors.
Youth unemployment is relatively low, compared to European reference countries. Austria’s successful dual-education apprenticeship system, combining on-the-job training with classroom instruction in vocational schools, has helped bring youth into the labor market. The program includes guaranteed placement by the Public Employment Service for those 15–24-year-olds who cannot find an apprenticeship. Austria and the United States signed a Memorandum of Understanding to foster cooperation on apprenticeships and workforce development in April 2022. Austria has a well-balanced labor market but, like many of its neighbors, suffers from a shortage of skilled IT personnel, particularly in the banking and financial sector. Social insurance is compulsory in Austria and 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, dismissal, and an option for part-time work for parents with children under the age of seven. Problematic areas include increased deficits in the pension and health insurance systems, the shortage of healthcare personnel to care for the increasing number of elderly, and escalating costs for retirement and long-term care. Due to its generous social welfare system, Austria has a high rate of employer non-wage labor costs, amounting to approximately 30 percent of gross wages. Labor laws are commonly adhered to and strictly enforced.
Labor-management relations are relatively harmonious in Austria, which traditionally enjoys a low incidence of industrial unrest. Strikes are uncommon with only two notable incidents over the past decades (2011, 2018). Additionally, all employees are automatically members of the Austrian Labor Chamber.
Collective bargaining revolves mainly around wages and fringe benefits. Approximately 90 percent of the labor force works under a collective bargaining agreement. In 2017, Austria implemented a national minimum wage of EUR 1,500 (approx. USD 1,770) per month, with monthly wages paid 14 times per year. This equates to an hourly wage of EUR 10.09 (approx. USD 11.91), placing Austria in the upper tier among European countries with a minimum wage, ahead of France, Germany and the UK.
Austrian law stipulates a 40-hour maximum workweek limit, but collective bargaining agreements also allow for a workweek of 38 or 38.5 hours per week. Firms may increase the maximum regular hours from 40 to 60 per week in special cases, with no more than 12 hours in a single day. Responsibility for agreements on flextime or reduced workweeks is at the company level. Overtime is paid at an additional 50 percent of the employee’s salary, and, in some cases, such as work on public holidays, 100 percent. 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.
14. Contact for More Information
U.S. Embassy Vienna, Vienna 1090, Boltzmanngasse 16
+43 1 31339-2387