X-Mailer: ELM [version 2.3 PL11]
Newsgroups: bit.listserv.mideur-l
Date:         Fri, 14 Aug 1992 17:22:24 -0400
From:         George Frajkor <gfrajkor@CCS.CARLETON.CA>
Subject:      Investment
X-To:         Mideur-L <Mideur-L@ubvm.BITNET>, Slovak-L <Slovak-L@ubvm.BITNET>

Cross post from the CERRO-L list

--------------------------------------------------

              <CERRO-L@AEARN.BITNET>
From: "Dr. Gunther Maier" <maier@WU-WIEN.AC.AT>
Subject:      Reform in the East - New Opportunities for the West?

Andreas Woergoetter, Institute for Advanced Studies, Vienna Austria, has
analyzed the effects of Central European Restructuring on Austria. He has
reported his results in a short article published in "Bank Austria -
Report", Nr. 3, 1992, pp. 8 - 11. Here is a short summary (if you are
interested in the whole article, please write to
  Bank Austria
  Publications Department
  Am Hof
  A-1010 Vienna
  Austria/Europe):

When comparing Austria's economic growth with that of the other European
OECD countries, one can see that up to 1988 there is a very close
relationship between the figures. Since then, Austrian economic growth was
considerably stronger: between 1988 and 1991 Austria has accumulated about
4.8 percentage points more growth than OECD Europe. It has led to an
extended boom period, which could be enjoyed without the cost of increased
inflation. Also in relation to other small European countries, Austria
showed a relatively strong economic performance over this period.
Particularly interesting is the comparison to Finland, which was in a
similar peripheral position as Austria. It had negative growth of 0.6% and
an inflation of 16.3% over the three year period. Woergoetter attributes
this to "Perestroika-Rhetorics" in the x-USSR as compared to real economic
reforms in Austria's neighboring states. Also for the coming years
Woergoetter expects - based on the OECD prognosis - a similar positive
development. He is talking about a second "Gruenderzeit" that the Austrian
economy is currently experiencing ("Gruenderzeit" was a period in the
second half of the 19th century, when the Austrian economy and Vienna in
particular was booming over many years).

As far as sectors are concerned, construction and services are the clear
winners. Agriculture, mining, energy and water show stagnating production
and declining employment. In manufacturing, output increased at stagnating
employment and stagnating or even declining prices. These trends are in
accordance with the expectations: The service sector was severely
underdeveloped in the socialist economies, allowing more efficient Austrian
firms to gain rapidly in this market. The construction sector gained from
the fact that Austria moved from a peripheral to a much more central
location in the European Economy, with corresponding demand for new
construction. Another factor is the involvment of Austrian construction
companies in Eastern infrastructure projects as well as in Austrian
projects that take into account the changed conditions.
Manufacturing of standardized products came under increased preassure, as
did agriculture and mining. Some of the most recent discussions made this
quite clear (see my recent postings).

>From a regional perspective Woergoetter argues that the restructuring is
about to eliminate the traditional distinction between the western and
eastern part of Austria (the western parts being more prosperous). Between
1988 and 1991 the eastern states of "Lower Austria" and "Burgenland"
displayed the largest percent increase in Gross Regional Product of all
Austrian states. Woergoetter argues that the border areas in the east are
becoming economically more attractive and that the population experiences a
welfare gain with expanded opportunities for shopping and recreation.

One of the forces behind this development is Austrian foreign trade with
the post-socialist countries. Since 1988 it has developed strongly,
particularly the Austrian exports. The share of the post-socialist
countries (except GDR) on Austrian exports has increased from 9.7% (1988)
to 11.0% (1991). The import share rose only from 6.9% to 7.0%. Development
was particularly dynamic with the nearby countries CSFR, Poland, Hungary.

Another important transmission mechanism is the labor market, where
foreigners seem to have carried the burden of fluctuations. While
employment of Austrians rose by 2.7% between 1988 and 1991, the number of
foreigners almost doubled (increased by 76.6%). At the same time, the
number of unemployed foreigners rose by 105.1%, as compared to 10.7% for
Austrians. Woegoetter interprets this that labor market segments with
strongly fluctuating employment are increasingly occupied by foreigners.

In general, with the restructuring in Central Europe Austria loses most of
its traditional comparative advantage (relatively low wages) in exchange
for the chance to become an investor in foreign countries. Austrian
companies have a chance now to become multinationals, a development that
had been lacking (e.g., as compared to Switzerland).

Woergoetter concludes his analysis by saying that Central European
Restructuring has increased possibilities for all parts of Austrian
society. How well these chances are utilized will depend upon the
flexibility and entrepreneurial skills of the Austrian economy and society.
**********************************************************************
Dr. Gunther Maier, Interdisziplinaeres Institut fuer Raumordnung,
Stadt- und Regionalentwicklung, Wirtschaftsuniversitaet Wien
**********************************************************************
Newsgroups: bit.listserv.mideur-l