The Promotion of Austrian Direct Investment in Central and Eastern Europe

Austrian direct investment in Central and Eastern Europe serves to secure and expand the market position of Austria's export sector in this region. The transfer of parts of the production process to these countries lowers production costs and thus enhances the competitive position of Austrian suppliers. In view of the positive effects for the whole economy, government policy promotes direct investment abroad. The most important programs are the East-West Fund of the Finanzierungs- und Garantiegesellschaft (FGG), the internationalization program of the ERP-Fonds and the internationalization program of the Bürges. The support consists in the partial coverage of commercial risks as well as in financial assistance. By the middle of 1993, 220 projects in Central and Eastern Europe with a total investment volume of AS 10.5 billion received financial support. The investment volume supported was AS 4.3 billion. The stock of Austrian investment in Central and Eastern Europe is estimated at AS 15 ½ billion at the end of 1992, at AS 20 billion at the end of 1993. Thus, about 60 percent of Austrian direct investment abroad was aided by investment programs. 43 percent of the supported investment projects are accounted for by the ERP-Fonds, 39 percent by the Bürges, and 18 percent by the East-West Fund. The average investment project supported by the East-West Fund amounted to AS 103 million; the corresponding figures are AS 64 million for the ERP-Fonds, and 4 million for the Bürges. The overwhelming majority of the projects which benefited from the assistance programs were investment activities in the neighboring countries of Central and Eastern Europe. Hungary ranks first (with a share of 52 percent of the projects and a share of 44 percent in the investment volume). 29 percent of the projects and 37 percent of the investment volume concern the former CSFR, with the Czech Republic accounting for three fourths and the Slovak Republic for one fourth. The export promotion program of the Oesterreichische Kontrollbank (Austrian Kontrollbank) also has facilities to guarantee and finance joint ventures of Austrian enterprises abroad. A program jointly administered by the Austrian Kontrollbank and the Chamber of Commerce also provides financing for the initial phase of certain joint ventures abroad. The EU promotes direct investment in Central and Eastern Europe through JOPP (Joint Venture Phare Programme). JOPP was established for the purpose of boosting private investment in Central and Eastern Europe and supports joint ventures between firms from the EU (preferably small and medium-sized firms) and firms from Central and Eastern economies. Preference is given to those small and medium-sized firms with fewer than 50 employees and a fixed capital of at most ECU 5 million, of which no more than one third is held by a large firm. The Austrian support programs and the instruments used by JOPP differ with regard to the stage of the investment process that is being facilitated. The EU program mainly supports the search, preparation, and extension phase of the investment projects. In Austria, the assistance concerns almost exclusively the implementation phase in the East and attempts to reduce the investment risks. After Austria's accession to the EU, JOPP will also be available to Austrian enterprises.