Structure and objectives of Austria's foreign direct investment in the four adjacent Central and Eastern European countries Hungary, the Czech Republic, Slovenia and Slovakia



Outward FDI to the CEECs started from a ATS 1.4 billion low (4.4% of total FDI) in 1989 and increased
to a ATS 33.7 billion high in 1995 (28.6% of total FDI). This huge increase was accompanied by gaining
big shares of the overall investment in the CEECs. Although Austria’s financial capabilities are not very
large by international standards its FDI-stock-share has reached 23.6% in Slovenia, 21.4% in Slovakia
and 19.6% in Hungary. Measured by this share Austria is ranked first in Slovenia and Slovakia and only
second (behind Germany) in Hungary (UN/ECE, 1996).

As well known from the theoretical and empirical literature FDI - like trade patterns - is strongly
influenced by the geographical as well as the cultural and historical proximity to countries (DUNNING,
1993, 41; PETRAKOS, 1996). All four CEECs that are shown in Fig.1 are adjacent to Austria.
Furthermore it is not surprising that neither Austria's trade nor investment relations with Poland -
although a relatively well developed CEEC - are of any significance.8

The small decrease in the share of outward FDI to the CEECs in 1995 which continued even into 1996
(see HUNYA and STANKOVSKY, 1997) can be explained by two reasons. Firstly, due to Austria's
accession to the EU its outward FDI to this region (mainly Germany) increased quite significantly in
1995 and 1996. Secondly, the boost in Austria's outward FDI to the CEECs seems to be slowing down
after a few tough initial years of business which were characterised by specific FMAs. This is supported
by the fact that most of the current privatisation’s (i.e. large state-owned enterprises and former public
industries such as telecommunications, energy, etc.) require huge amounts of capital which is sparsely
available for most Austrian enterprises - mainly due to their small size and weak financial capacity. E.g.,
in 1995 in Hungary only US $ 1 billion of the total FDI of US $ 3.5 billion was non-privatisation related
FDI. The remaining part of FDI was the result of large utility and telecommunication sell-offs. Likewise,
some 60% of the Czech Republic's inflow of 1995 was related to the privatisation of the
telecommunications company, SPT Telecom, and a major oil refinery (UNCTAD, 1996, p.66 f.).
Furthermore, NEUDORFER (1997) argues that more and more multinational firms have started to invest
directly in countries which used to be entered via the bridgehead Austria during the early 1990s.

Table 1: Structure and Financial Capabilities of Austrian Affiliates in the CEECs, 1995

Distribution of Austrian Affiliates in the CEECs, 1995 (in %)

Firm Size1)
(number of employees)

Hungary

Czech

Republic

Slovakia

Slovenia

other

CEECs

Total

CEECs

Others

Total

1 to 19

45.7

32.1

37.1

19.0

32.7

39.2

36.9

38.0

20 to 49

6.3

5.9

4.8

4.8

7.3

6.1

7.2

6.7

50 to 99

8.7

9.6

4.8

19.0

6.4

8.8

5.4

7.0

100 to 499

22.3

27.8

25.8

28.6

31.8

25.3

22.9

24.1

500 to 999

5.2

5.9

3.2

9.5

7.3

5.7

9.9

7.9

1000+

11.9

18.7

24.2

19.0

14.5

14.9

17.8

16.4

Total

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Number of affiliates2)

462

187

62

42

110

863

933

1796

Total Capital per Investment, 1995 (in ATS million)

Firm Size1)

Hungary

Czech

Slovakia

Slovenia

other

Total

Others

Total



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