Austrian investors bemoan local red tape and lack of transparency

Rudolf Lukavsky (in picture), commercial counselor for Romania and Moldova at the Austrian Embassy, says that unpredictable political decisions affecting the business environment and the lack of transparency spark mistrust in the ranks of the Austrian business community, which is the second biggest foreign investor in Romania.

By Ovidiu Posirca

What issues are raised by Austrian investors doing business in Romania, and what are their recommendations for improving the local business environment?

Issued raised frequently by Austrian investors are transparency and the overwhelming bureaucracy. Political stability and the predictability of political decisions concerning the investment environment are other key concerns for foreign investors. In this regard, the good reputation of Romania as a business location has suffered recently in particular. Furthermore, extensive unregistered labor and tax evasion make it difficult for international corporations to compete in a fair manner. The lack of skilled workers in Romania is also becoming a growing issue that concerns virtually every Austrian investor.

The Austrian system of dual education could serve as a role model in this regard. This system has two major benefits: it gives businesses the chance to interact with educational institutions, and offers apprentices highly practical and attractive training, giving them the best chance on the job market. This dual-education system is the main reason for the comparably low youth unemployment rate in Austria. A co-operation with the Romanian Ministry of Education has already been established and Austria is very much looking forward to assisting Romania in introducing a similar system, giving local people the best prospects.

To what extent have the changes in the renewable incentives system impacted Austrian companies that have developed projects locally? Are investors still interested in Romania’s renewable sector?

The changes in the renewable incentive system have come as a big setback for Romania as a business and investment location, besides the direct impact on alternative energy projects. The impact of these measures and particularly the way they have been implemented goes far beyond the renewable energy sector. A stable political and economic environment and legal certainty are preconditions for long-term engagement in a market. By drastically reducing the support scheme for renewable energy in Romania, even for existing projects, Romania has suffered a big loss of trust from international investors.

What was the level of Austrian investments in Romania in 2012 compared to the previous year and what are the estimates for 2013? Have FDI inflows been impacted by the Euro zone woes?

Austrian investments in Romania have been very stable, even during the years of economic crisis. Overall investments in 2012 were close to EUR 10 billion, that is 18 percent of overall FDI. This makes Austria the second largest investor in Romania. The trend of stable and lasting growth will continue in 2013.

Recent growth has come particularly from established investors aiming to enlarge their presence in Romania. Schweighofer, for instance, one of the largest Austrian investors in Romania, is investing EUR 150 million in a new sawmill in Covasna.

How does Romania stand in CEE in terms of investment attractiveness for Austrian companies? What are its strong points?

Romania is the largest market in South-East Europe, a region where Austrian investors are particularly strong. The two largest foreign investments ever made by Austrian companies are both in Romania: OMV/Petrom and Erste/BCR. These and several other large investments have also opened up opportunities for smaller Austrian suppliers to successfully access the market. The “Austria” brand stands for quality and reliability.

Romania is particularly attractive to Austrian businesses due to a longstanding tradition of strong economic ties, close cultural ties and compatibility and an abundance of opportunities.

What are the biggest Austrian investments in Romania? How many companies with Austrian capital are currently operating in Romania?

The two biggest investments are OMV/Petrom and Erste/BCR. However there are several other large-scale investments, from Raiffeisen, Vienna Insurance Group, Egger, Schweighofer, Kronospan, Strabag, Porr, Voestalpine, Novomatic, Billa and Verbund, to name but a few. Currently there are over 6,500 Romanian companies with Austrian capital in Romania. About 100,000 jobs in Romania are directly secured through Austrian investments.

What sectors stand out for Austrian investors, given that they have opened businesses in a wide array of fields?

Austrian investors are particularly strong in the sectors of banking and insurance, oil and gas, renewable energy, wood processing, packaging, construction materials and services, environmental technology and services, transport and logistics, and retail. The booming automotive sector in Romania, particularly due to Dacia’s great success on the European market, opens up new opportunities in this sector, where Austria has a number of renowned automotive suppliers.

How did trade relations between Austria and Romania fare last year and what is your forecast for this year?

Austrian exports to Romania increased by 4.7 percent in 2012 to almost EUR 2 billion. Romanian exports to Austria were stable at the record level of EUR 1.1 billion. It is very interesting to observe that Romanian exports to Austria surpassed pre-crisis level as early as 2010. This is evidence of an increasingly strong local economy that is not only persisting but succeeding on the highly competitive European market. The results for 2013, as far as they are available, reflect this trend of growing slowly but steadily.

Does the Austrian Embassy conduct any CSR programs in Romania?

Corporate and social responsibility and sustainable economic growth are key elements for our activities in Romania. The Commercial Section of the Austrian Embassy organized seminars on compliance and CSR and we will continue to inform Austrian investors about how they can implement their CSR programs most effectively.

What is the economic strategy of the Austrian Embassy in Romania?

We have a rather sector specific approach, identifying and highlighting industries were we see particular chances for Austrian businesses. Among these sectors are currently food and beverage, automotive industry, pharmaceuticals, infrastructure, particularly for tourism und ICT. The great majority of Austrian businesses are small or medium sized companies. We regard it as one of our core task to open doors, connect them with local businesses and authorities and provide service essential for market access, where otherwise smaller businesses would find it difficult to get a presence on the local market.

ovidiu.posirca@business-review.ro

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