Far-Eastern Markets: Attractive for Austria in Spite of the Crisis

Towards the end of 1997, a financial and currency crisis was precipitated in the Far East. But once the affected countries have coped with their current problems, a brisk upswing can be expected. A WIFO survey performed at the apex of the crisis found that 62 percent of the companies polled felt that exports to the Far East would rise, while 29 percent expected no change. Among direct investors, the majority considered that the situation was stable. Austria has so far not profited much from the economic upswing of the Far East. Exports to the region (excluding Japan) are a meagre 3 percent; with exports of consumer goods and commercial services particularly weak. Nevertheless, Austrian exports to Eastern Asia more than doubled between 1989 and 1997 (from ATS 10 billion to ATS 22.5 billion, a plus of 10.7 percent p.a.), while total exports rose by just 66 percent. In the first quarter of 1998, demand for imports into the affected countries remained almost unchanged (–3.0 percent). In 1996, 0.23 percent of their total imports came from Austria. Preliminary figures for 1997 show 0.17 percent, a slightly lower market share than in 1989. Austrian direct foreign investment is negligible: cumulated new investment over the six years between 1992 and 1997 was just ATS 1.0 billion. The WIFO survey pointed at a number of difficulties encountered by exporters to the Far East: for a majority of exporters (58 percent), substantial differences in the mentalities of Western Europe and Eastern Asia were a problem; high customs duties were a major barrier for 53 percent; and the considerable exchange risk was seen as a burden by 45 percent. According to the OKB business report (1998), export credit guarantees for Asia under the Export Promotion Act made up ATS 70.4 billion by the end of 1997, of which ATS 46 billion were for Far East countries. The highest guarantee commitments were for Indonesia (ATS 17.6 billion), China (ATS 17.1 billion), Thailand (ATS 6.0 billion) and Vietnam (ATS 3.0 billion). Most of the credits to the Far East covered by guarantees were financed within the scope of the OKB support scheme. The crisis in Eastern Asia should not be abused as an ex post justification for the disinterest shown by Austrian business in the region. Neglecting this market was probably more expensive in terms of potential jobs, sales and profits in Austria than any losses that might have been suffered in an (improbable) worst-case scenario. The crisis should rather be viewed as an opportunity to make up for past errors and omissions by exploiting a psychologically advantageous situation and getting in well ahead of competitors.