Foreign direct investment (FDI) in Austria

FDI in Figures

Austria has traditionally attracted a significant amount of FDI owing to its geographical location as an intersection of Eastern and Western Europe. According to UNCTAD's 2021 World Investment Report, FDI in Austria decreased to USD -17 billion in 2020, primarily due to negative reinvested earnings and the divestment of USD 4.7 billion from Mubadala Investment (United Arab Emirates). FDI stock reached USD 194 billion in the same year.
Germany, Russia, and Switzerland account for more than half of Austria's FDI stock. The U.S., Italy, the Netherlands and the UAE are other major investors. Investments are mainly oriented towards professional, technical and scientific activities, finance and insurance, trade, real estate, chemistry and pharmacy. According to the latest figures from OECD, in the first half of 2021 FDI inflows reached USD 3 billion, up from a negative inflow of USD 2 billion in the same period one year earlier.

Austria's strengths are its stable economy, its location at the centre of Europe and its skilled and highly productive workforce. In order to encourage foreign investment, Austria provides welcoming conditions for foreign companies that want to invest in capital-intensive industries and in research and development, for which considerable tax breaks are available. In 2020 the Austrian Parliament adopted a new FDI screening act (Investitionskontrollgesetz, "ICA"), following the EU Regulation (2019/452) setting a new framework for foreign investment screening. The law introduces a review of foreign investment in business activities including R&D of pharmaceuticals, vaccines, medical devices and personal protective equipment and critical infrastructure in the healthcare sector. The threshold at which government approval of the transaction is required has been lowered to 10% foreign ownership for sensitive sectors. Austria does fairly well in terms of business environment as it ranks 27th out of 190 countries in the latest World Bank's Doing Business ranking. The country stands at 19th place in the Foreign Direct Investment Confidence Index 2021.

Foreign Direct Investment	2009	2010	2011
Performance Index*, Ranking on 181 Economies	37	93	51
Potential Index**, Ranking on 177 Economies	n/a	n/a	42

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Country Comparison For the Protection of Investors	Austria	OECD	United States	Germany
Index of Transaction Transparency*	5.0	6.5	7.0	5.0
Index of Manager’s Responsibility**	5.0	5.3	9.0	5.0
Index of Shareholders’ Power***	7.0	7.3	9.0	5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

What to consider if you invest in Austria

Strong Points

Advantages for FDI in Austria:

Austria ranks 27th out of 190 economies with regard to ease of doing business in the World Bank's Doing Business 2020 ranking
Well-developed infrastructure
Skilled and competent work force and high productivity
Austria also has a significant pharmaceutical industry, thus developing a focus of biotechnological skills and attracting the big companies of this sector
Good quality of life (Vienna is in first position in the world ranking established by Mercer)
Good regional (European Union) and international integration. Austria benefits in particular from its strategic geographical location between western, central and eastern Europe
Substantial current account surplus
Austria is a desirable tourist destination
High level of public investment in R&D
Political stability and personal security are especially strong in Austria

Weak Points

Austria’s weak points for FDI are:

Rigid labour practices and complex regulations
A lack of risk taking in capital finance
Restrictive immigration laws
Trade dependence on Germany
The country is strongly dependent on central and eastern Europe, where numerous investments have been made, which has weakened the banking sector
Small domestic market

Government Measures to Motivate or Restrict FDI

Export incentives, political stability and low telecommunication costs make the Austrian business climate favourable. Generally, the Austrian government favours FDI targeting the high-tech sector. Federal, state, and local governments provide investment incentives at the same conditions to local and foreign investors, including tax incentives, preferential loans, loan guarantees, and grants. Tax incentives are available for projects in economically underdeveloped and rural areas, for job-creation and for investment in R&D. The governmental institution that provides financial incentives for businesses is the Wirtschaftsservice (AWS). Foreign investors may also claim government support measures designed for companies affected by the COVID-19 epidemic.
For further information, refer to the portal InvestInAustria.

Bilateral investment conventions signed by Austria