Binder Grösswang

Austria as a Business Location. In a Tug-of-War between Future Potential and a Reform Bottleneck

 

In May 2015, another discussion in the Binder Grösswang series “impulse” took place in the conference area of the firm. The panellists Reinhold Mitterlehner, Vice Chancellor and Federal Minister of Science, Research and Economy; Thomas Fahnemann, Chairman of the Management Board of Semperit AG Holding; Alfred H. Heinzel, Chairman of the Management Board of Heinzel Holding GmbH and Moriz Piffl-Percevic, CEO of Gebrüder Stitch GmbH discussed the subject of Austria as a business location in a tug-of-war between future potential and a reform bottleneck. The discussion, attended by approx. 200 guests, was moderated by Georg Wailand, publisher of the monthly GEWINN and editor in chief of the daily newspaper “Kronen Zeitung”.

Vice Chancellor and Federal Minister of Science, Research and Economy Reinhold Mitterlehner said in his opening statement: "Austria’s economy is well positioned in terms of its basic structure. But we need reforms, and we have to get away from the attitude of the many people who call for reforms but at the same time want everything to remain as it is. This applies above all to the pension system, the labour market and the non-wage labour costs. With the tax reform and a reduction of bureaucracy, for example the elimination of start-up authorisations for smaller businesses and of mandatory authorised representatives in business enterprises, we have taken some first steps. We want to make more improvements in these areas, and to this end we are beginning a reform dialogue in June. Our intensified focus on strongly growing non-European markets in the export sector, the dual system of vocational education and training, and alternative forms of financing for start-ups as well as for small and medium-sized businesses are bringing success."

Thomas Fahnemann described Austria as a country with a particularly high quality of life and an attractive production location. "However," he qualified, "we have lost our competitive edge in unit labour costs. This is one of the reasons why industrial enterprises are currently hesitant to invest in Austria. As a result, Austria risks being drawn into a downward spiral: Less investment means a further loss of competitiveness, higher unemployment and less prosperity. When we remember that the production of goods is the heart of Austria’s gross national product, this ought to give us considerable food for thought. Even the latest tax reform is only a reform of the tax scale. We need further reform steps if we are to avoid the downward spiral that threatens us: an easing of the burden of non-wage labour costs, increased efficiency in the entire public administration and above all in the education system, and far less bureaucracy in the working world – because for creative, well-trained, highly committed young people, Austria’s backwards-oriented social bureaucracy is becoming more and more of a stumbling block."

Alfred Heinzel also expressed the opinion that Austria was, on the whole, a good location, but he, too, added that the recent tax reform would not bring the needed leeway. "The labour costs are rising, but less and less is going to the employees. The difference between gross and net for our employees remains considerable, despite the tax reform.” Heinzel would like to see more courage to embrace change and more pressure from political decision makers to realise this, "even though a serious reform course that includes certain unpopular measures is bound to involve political risk." Heinzel gave the opinion that the economy was suffering as a result of Basel III. The capital requirements, he said, were making lending difficult, and investors were unable to raise funding. Heinzel declared: "We need banks that are willing to take an entrepreneurial risk!" One advantage for Austria as a business location was foundations, he added. "Entrepreneurs need foundations in order to ensure the availability of resources for reinvestment." He believes, moreover, that education and training are immensely important and that we need to mobilise the school system and promote start-ups and gifted young persons.

Moriz Piffl-Percevic pointed out that Austria has numerous subsidies for small enterprises, but stated that in his opinion "many of them would not be necessary in the first place if the non-wage labour costs were not so high." He made the following appeal: "Reduce the subsidies and instead pump the money into the economy by reducing non-wage labour costs; this will reduce administration costs both in the public sector and in private businesses." He also criticised the numerous authorisations required by start-ups and the waiting times associated with them: "If you’re unlucky, you can wait six weeks to get a commercial register number for your start-up, four weeks for your sales tax ID number and another eight months for an authorisation to start operations. Ten months have passed, money has been wasted, and the only person who’s earned anything is the notary. Chambers, industrial law, notary costs, the duration and expenses of establishing a GmbH company – all this doesn’t even come close to being up to date. Let’s roll up our sleeves and get rid of it." An approach suggested by Piffl-Percevic is to lower labour costs and raise energy costs. "Small and medium-sized businesses and many small-scale entrepreneurs would profit from it, and so would the environment."

The main consensus among the panellists was that Austria is a good business location but in need of important reforms, as well as a positive attitude; whining about the situation is not going to help.

Michael Kutschera ended the intense and dynamic discussion by quoting Philipp Wilhelm von Hörnigk: "Österreich über alles, wenn es nur will" (Austria above all, if it only will), and invited everyone to enjoy the social gathering that followed.

Among the guests were: Alfred Fadinger (Head of Product Management, Raiffeisen Factor Bank), Stefan Brezovich (Executive Board Member, ÖRAG Österreichische Realitäten-AG), Wolfgang Layr (CEO, Volksbank Wien-Baden AG), Reinhard Karl (CEO, Raiffeisenlandesbank Niederösterreich-Wien AG), Heimo Hackel (CEO, card complete Service Bank AG), Alois Steinbichler (CEO, Kommunalkredit Austria AG), Richard König (Director, Energy & Utilities Raiffeisen CENTROBANK AG), Franz Niklesz (Executive Director, Investment Banking, Erste Bank der oesterreichischen Sparkassen AG), Franz J. Hiesinger (CFO, Mondi Packaging AG), Klaus Vukovich (Managing Director, UniCredit Group Bank Austria), Günther Tengel (Managing Partner, Amrop Jenewein), Franz Grohs (CEO, T-Systems Austria GmbH), Georg Krenkel (CEO, Helvetia Versicherungen Direktion für Österreich), Friedrich J. Neubrand (GrECo International AG), Bernhard Sagmeister (Austria Wirtschaftsservice GmbH) and many others. The discussion series BINDER GRÖSSWANG impulse focuses on current subjects and outstanding personalities and takes place twice annually in the exclusive ambience of the firm’s premises in Vienna.

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