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East: Austria Retains Its Pivotal East-West Role

By Michael Leidig

Vienna, 8 April 1998 (RFE/RL) -- Austria, and particularly its capital Vienna, are successfully marketing themselves as top locations for companies looking to establish headquarters for Central and Eastern European operations.

In total, some 1,000 companies now coordinate their eastern European activities from Austria. In Vienna's case, that's despite being one of the most expensive business locations in Western Europe.

A recent study by the American Chamber of Commerce and the Vienna Business Promotion Fund finds that Vienna suffers as a business location due to its high fringe employment costs, and the price of electricity and telecom services, all of which are well above the West European average. However, many companies are finding that the benefits outweigh these considerable costs.

As a business base for the Eastern European markets, Austria boasts a prime geographical location, as the country borders the Czech Republic, Slovakia, Slovenia and Hungary. In addition, the country historically has had close ties with many of the Eastern countries, and has comparatively more experience in these markets.

After the fall of the Iron Curtain, setting up headquarters in the newly-opened East was often not seen as a viable option, as the infrastructure and personnel were simply not developed enough. A decade later, doing business in the former Communist countries has become much easier, but many companies still choose to establish their headquarters in Western Europe, with Vienna cited as one of the foremost locations.

Last month, Banque Nationale de Paris (BNP) and Dresdner Bank founded a holding company in Vienna to coordinate their activities in Central and Eastern Europe. Amsterdam, London and Luxembourg were also discussed as possible locations, but Vienna's close proximity to the markets won out. The Vienna office will be the management central for BNP Dresdner Bank Holding's operations in the Czech Republic, Poland, Hungary, Russia, Bulgaria and Croatia.

Finnish metal concern Outokumpu also moved its Central Europe headquarters from Switzerland to Austria. Outokumpu employs some 14,000 people in 30 countries. In Western Europe, the concern has a market share of 14 percent, and expects to command such a market share in the East as well. From its Austrian base, Outokumpu plans to step up its market presence in the Czech Republic, Slovakia and Hungary.

According to the Austrian Business Agency, a federally-funded business consultancy which aims to attract foreign investors to Austria, the "Eastern know-how" of Austrian bankers, lawyers, tax advisors, and transport concerns is one of the prime attractions for Western firms unused to dealing with the considerable red tape and local difficulties of operating in Eastern and Central Europe.

In theory, the more the Eastern European markets develop, the less necessary it will be for companies to have their operational headquarters in a Western European country, but nevertheless Vienna's popularity is holding. In the last six months, Coca-Cola Amatil, U.S. software producer Informix, Swiss Winterthur Insurance and U.S. pharmaceutical Eli Lilly have established their Eastern European headquarters in Vienna.