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UNCLAS VIENNA 000462 
 
SIPDIS 
 
C O R R E C T E D  C O P Y (Text in FDI tables) 
 
SIPDIS 
 
STATE FOR EB/IFD/OIA, EUR/ERA AND EUR/AGS 
USDOC ALSO FOR 4212/MAC/EUR/OWE/PDACHER 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ELAB ETRD PGOV KTDB OPIC USTR AU
SUBJECT: 2006 INVESTMENT CLIMATE STATEMENT FOR AUSTRIA 
 
REF:  05 STATE 202943 
 
¶1.  Following is 2006 Investment Climate Statement for 
Austria, keyed to reftel instructions: 
 
 
2006 INVESTMENT CLIMATE STATEMENT -- AUSTRIA 
-------------------------------------------- 
 
Introduction 
------------ 
With the European Union's (EU) enlargement in May 2004, 
Austria's location became central in the EU.  As an 
investment location, Austria, and Vienna in particular, 
faces growing competition from its Eastern neighbors, all 
of which are now EU members.  Budapest, Prague and 
Bratislava are competing directly with Vienna for foreign 
investors.  Many have pointed out that direct 
transportation links among Austria's Eastern neighbors 
are in some places better than those running through 
Austria.  The Austrian Government has long-term plans to 
address these infrastructure gaps, but progress seems 
slow and many view the current state of transport links 
as a missed opportunity.  The government's 2005 corporate 
tax cut was a major step towards remaining competitive 
vis--vis Austria's Eastern EU neighbors and has already 
attracted firms to open regional headquarters in Vienna. 
Some 370 U.S. companies have invested in Austria and most 
have expanded their original investment over time. 
 
Austria continues to offer some advantages, but also some 
challenges to foreign investors.  We have sought to 
describe both below in candid terms for the benefit of 
potential investors. 
 
 
Openness to Foreign Investment 
------------------------------ 
Government attitude toward foreign private investment: 
The second Schuessel government -- a coalition between 
the Austrian People's Party (OVP) and the Freedom Party 
(FPO) spin-off, "Alliance Future Austria" (BZO) -- has 
continued the comprehensive economic reform program 
Chancellor Schuessel began in 2000.  The government's aim 
is to streamline government, create a more competitive 
business environment, and further strengthen Austria's 
attractiveness as a location for investment.  According 
to many observers, in comparison to other EU member 
states, Austria has made a major policy shift in recent 
years by pursuing a balanced budget; pension system 
reform; privatization; creating financial market 
supervision and competition policy bodies; and 
implementing a corporate tax cut in 2005.  The policy 
shift addressed long-standing imbalances and should 
improve the Austrian economy's long-term growth 
potential.  Structural reforms, which the economy still 
needs, include downsizing the public sector, streamlining 
the social welfare system, reforming the health care 
system, raising the labor participation rate, introducing 
more flexible work hours, liberalizing services markets, 
and pursuing policies to address the problems associated 
with an ageing society.  In accordance with the EMU's 
Stability and Growth Pact, balancing the consolidated 
public sector budget remains a medium-term goal. 
 
The government is not likely to implement further major 
reforms before the end of the legislative period in fall 
¶2006.  Even though continuation of the current coalition 
government after the fall elections to Parliament seems 
unlikely, observers do not expect Austria's basic 
policies and openness toward foreign direct investment to 
change in coming years under any new government, 
regardless of its composition.  However, a government of 
the Social Democratic Party (SPO) or an SPO-Green 
coalition would likely have a different stance on reform. 
The SPO appears poised to reverse the group taxation 
regulation of the 2005 corporate tax reform and to raise 
health insurance contributions.  An SPO government would 
not likely cut non-wage costs or further streamline the 
vast social entitlements system. 
 
Austria has been virtually a strike-free country, except 
for two politically motivated strikes in 2003 against the 
government's pension and railroad reforms. 
 
Liberalization and deregulation in the energy and telecom 
sectors have lowered prices for businesses.  However, 
continuing barriers to entry and to competition have 
resulted in only partial liberalization.  In some areas, 
charges, such as electrical network tariffs, have 
remained above average, according to the International 
Energy Agency. 
 
Austria welcomes foreign direct investment that does not 
have a negative impact on the environment.  Austria 
particularly welcomes those investments that create new 
jobs in high technology, promote capital-intensive 
industries, and have links to R&D activities, for which 
special tax incentives are available.  Austria is a high- 
tax country, but is becoming increasingly attractive for 
companies and headquarters.  A major tax cut in 2005 
reduced the corporate tax rate to 25% from 34%.  Because 
of tax base adjustments, experts estimated the effective 
corporate tax burden at 22%.  A highly favorable new 
provision for group taxation, unique in Europe, allows 
offsetting profits and losses of group operations 
(requiring direct or indirect participation of more than 
50%, but no other financial, economic or organizational 
integration) in Austria and abroad.  This group taxation 
system offers interesting opportunities for U.S. 
investors, in particular joint-venture structures, M&A 
transactions, headquarter companies and simple holding 
companies without active business, which can also 
participate in the tax group.  The corporate tax cut and 
group taxation aim to keep Austria competitive vis--vis 
the neighboring new EU members with their low corporate 
tax rates. 
 
The Austrian Government assesses the business profits of 
non-corporations at half the income tax rate to which 
they would be subject based on income alone.  Austria has 
no wealth or net worth tax, and no trade tax 
(Gewerbesteuer), unlike neighboring Germany.  The 
government's goal of reducing the share of taxes in GDP 
further from around 41% in 2005/06 to 40% by 2010 will 
require additional cuts in budget expenditures. 
 
There are no formal sectoral or geographic restrictions 
on foreign investment.  In some regions, Austria offers 
special facilities and services ("cluster packages") to 
foreign investors.  For example, these can include 
automotive producers or manufacturers of chips, silicon, 
and high-tech products.  Austria offers financial and tax 
incentives within EU parameters to firms undertaking 
projects in economically depressed and underdeveloped 
areas on Austria's eastern and southern borders.  For 
some of these areas, eligibility for subsidies under EU 
regional and cross-border programs will decline under the 
EU's 2007/13 financial framework.  The only instances of 
local opposition to investment in the manufacturing 
sector have arisen out of environmental concerns. 
 
Potential U.S. investors need to factor Austria's strict 
environmental laws into their decision-making process. 
Austria has imposed marketing bans on some agricultural 
biotechnology seeds despite existing EU approvals.  The 
European Commission has not yet taken steps to overturn 
the bans, despite the fact that the EU's Scientific 
Committee has found no justification for the bans and the 
EU Moratorium on new approvals has ended.  For future 
varieties, new EU legislation on the deliberate release 
of genetically modified organisms and on traceability and 
labeling requires Austria to allow GMO seeds in the 
fields and in the stores.  However, strict liability 
regulations for research, production, and distribution of 
GMOs still apply.  U.S. investors considering production 
facilities emitting CO2 in Austria should be aware that 
Austria, under the Kyoto Protocol, has made a commitment 
to cut its CO2 emissions by 13% from the 1990 level. 
Austria also began implementation of the EU's regulatory 
framework on greenhouse gas emissions and trading, which 
entered into force in 2005. 
 
In investor surveys and international rankings, Austria 
consistently earns high marks for political stability, 
personal security, quality of life, rule of law, skill 
and motivation of labor, health infrastructure, and 
mobile phone costs.  However, Austria receives low marks 
for economic growth, tax burden, rigid labor practices 
and work hours, lack of risk capital financing, low 
innovation dynamics, restrictive immigration laws, size 
of the public sector, and regulatory red tape.  With the 
2005 corporate tax cut, the government addressed one 
major investmentdisincentive.  Surveys show that Austria 
faces siffer competition from Central and Eastern 
Europan (CEE) markets, as well as from the ten new EU members, 
especially the four that border Austria.  This 
competition is especially noticeable in sectors where 
wage costs are decisive. 
 
Acquisitions, mergers, takeovers, cartels:  A new Anti- 
Trust Act, in effect since January 1, 2006, harmonizes 
Austrian anti-trust regulations with European competition 
law.  The independent Federal Competition Authority (FCA) 
and the Federal Cartel Prosecutor (FCP) are responsible 
for administering anti-trust laws.  The FCA has not been 
particularly pro-active, reportedly due to personnel 
shortages. 
The Austrian Anti-Trust Act prohibits cartels, any 
competitive restrictions, and the misuse of a dominant 
market position.  Companies must inform the FCA about 
mergers and acquisitions (M&A) concerning domestic 
enterprises, if combined worldwide sales exceed Euro 300 
million ($375 million at the current exchange rate of 
$1.00 per Euro 0.80), domestic sales exceed Euro 30 
million ($37.5 million), or if two of the firms involved 
each have worldwide sales exceeding Euro 5.0 million 
($6.3 million).  Special regulations apply to M&As of 
media enterprises.  The cartel court is competent to 
decide on any M&A notification from the FCA or the FCP. 
For violations of anti-trust regulations, the cartel 
court can impose fines of up to the equivalent of 10% of 
a company's annual worldwide sales.  An independent 
energy regulatory authority separately examines antitrust 
concerns in the energy sector, but also has to submit any 
cases to the cartel court. 
 
European Community anti-trust regulations continue to 
apply and take priority over national regulations in 
cases of trade between Austria and other EU member 
states. 
 
The 1999 takeover law applies to both friendly and 
unsolicited takeovers of corporations headquartered in 
 
Austria and listed on the Vienna Stock Exchange.  It 
protects investors against unfair practices, since any 
shareholder obtaining a controlling stake in a 
corporation (30% or more of all shares) must offer to buy 
out smaller shareholders at a defined "fair market" 
price.  An independent takeover commission at the Vienna 
Stock Exchange oversees compliance. 
 
Screening mechanisms:  Only those foreign investments 
with Austrian Government financial assistance are subject 
to government overview.  Screening is to ensure 
compliance with EU regulations, which limit such 
assistance to disadvantaged geographic areas. 
 
Privatization:  In the ongoing privatization of public 
enterprises, foreign and domestic investors receive equal 
treatment.  Despite the government's expressed preference 
for an Austrian core shareholding, foreign investors have 
been successful in obtaining shares in important Austrian 
industry sectors, including the telecom sector; Austria's 
largest bank, Bank Austria; the Austrian Tobacco Company; 
Voest-Alpine (VA), a major steel producer; and VA Tech, a 
metallurgy, power generation and infrastructure 
conglomerate.  In 2005, the government sold its 34.7% 
stake in VA, in which U.S. institutional investors now 
hold a 19% share.  In mid-2005, Siemens, which held a 
16.5% share in VA Tech, made a successful public takeover 
bid, as the government sold its 14.7% share in VA Tech to 
Siemens.  The government plans to privatize 49% of the 
postal service through an IPO during the first half of 
¶2006.  The government postponed plans to sell off its 
remaining 30.2% share in Telekom Austria (TA), but is 
considering a separate privatization of TA's 100%-owned 
mobile phone subsidiary, Mobilkom.  Provincial 
governments and communities also plan to privatize 
various entities. 
 
Treatment of foreign investors:  There is no 
discrimination against foreign investors, but they are 
required to follow a number of regulations.  Although 
there is no requirement for participation by Austrian 
citizens in ownership or management, at least one manager 
must meet residence and other legal requirements. 
Non-residents must appoint a representative in Austria. 
Expatriates are allowed to deduct certain expenses (costs 
associated with moving, maintaining a double residence, 
education of children) from Austrian-earned income.  A 
2003 amendment of the Austrian immigration law that 
required permanent legal residents to take German 
language and civics courses has been eased.  A 2006 
amendment of the Austrian immigration law exempts 
applicants for residence permits who hold a college 
degree from the German language course requirement. 
 
Investment incentives:  Starting in 2007, a smaller share 
of Austria's land area (41% at the moment) will be 
eligible for support under various EU structural fund 
programs.  The Austrian federal, provincial, and local 
governments also provide financial incentives within EU 
guidelines to promote investments in Austria.  Incentives 
under these programs are equally available to domestic 
and foreign investors, and range from tax incentives to 
preferential loans, guarantees and grants.  Most of these 
incentives are available only if the planned investment 
meets specified criteria (e.g., implementation of new 
technology, reducing unemployment, etc.).  Tax allowances 
for advanced employee training and R&D expenditures are 
available.  The government has merged various 
institutions providing financial incentives into a "one- 
stop shop" at the Austria Wirtschaftsservice (further 
information, in German language only, is available under 
http://www.awsg.at and http://www.foerderportal.at). 
 
 
Conversion and Transfer Policies 
-------------------------------- 
In Austria, there are no restriction on cross-border 
capital transactions, including the repatriation of 
profits and proceeds from the sale of an investment, for 
non-residents and residents.  The Euro, a freely 
convertible currency and the only legal tender in Austria 
and eleven other Euro-zone member countries, shields 
investors from exchange rate risk in the entire Euro- 
zone. 
 
 
Expropriation and Compensation 
------------------------------ 
Expropriation of private property in Austria is rare and 
may proceed only on the basis of special legal 
authorization.  The government can initiate it only when 
no other alternative for satisfying the public interest 
exists; when the action is exclusively in the public 
interest; and when the owner receives just compensation. 
The expropriation process is fully transparent and non- 
discriminatory towards foreign firms. 
 
 
Dispute Settlement 
------------------ 
The Austrian legal system provides an effective means for 
protecting property and contractual rights of nationals 
and foreigners.  Additionally, Austria is a member of the 
International Center for the Settlement of Investment 
Disputes.  The 1958 New York Convention also grants 
enforcement of foreign arbitration awards in Austria. 
There have been no recent reports of bilateral investment 
disputes. 
 
 
Performance Requirements/Incentives 
----------------------------------- 
Austria is in compliance with the World Trade 
Organization's Trade Related Investment Measures (TRIMS) 
agreement.  There are virtually no restrictions on 
foreign investment in Austria and foreign investors 
receive national treatment in the main.  However, some 
requirements exist.  For example, at least one manager 
must meet residency and other legal qualifications.  Non- 
residents must appoint a representative in Austria. 
 
The Austrian Government may impose performance 
requirements when foreign investors seek financial or 
other assistance from the government, although there are 
no performance requirements to gain access to tax 
incentives.  There is no requirement that nationals hold 
shares in foreign investments or that there be a 
technology transfer. 
 
The U.S. and Austria are signatories to the 1931 Treaty 
of Friendship, Commerce, and Consular Rights.  The 
Austrian Immigration Law restricts the overall number of 
visas, but a few non-immigrant business visa 
classifications, including intra-company 
transferees/rotational workers and employees on temporary 
duty, are eligible for visas with no numerical 
limitations.  Recruitment of long-term overseas 
specialists or those with managerial duties is under quota controls. 
The 2002 Amendment of the Austrian 
Immigration Law more clearly defined employment-based 
immigrants as multinational executives/managers or 
similar professionals who are self-employed, and 
streamlined procedures for obtaining visas and work 
authorization.  The 2002 integration policy requiring 
immigrants to attain a minimum level of competence in the 
German language has been eased; previous education 
(college degree) will automatically fulfill the 
integration requirement.  Austria will cut annual 
immigration quotas for 2006 from 7,500 to 7,000.  These 
cuts will likely take place for executives or managers, a 
visa category that is apparently undersubscribed. 
 
 
Right to Private Ownership and Establishment 
-------------------------------------------- 
Foreign and domestic private enterprises are free to 
establish, acquire, and dispose of interests in business 
enterprises, with the exception of some infrastructure 
and utilities, and a few state monopolies, such as 
gambling.  As the government continues to pursue 
privatization, it is gradually opening up some of these 
industries to private investment as well.  For example, 
in past years, the Austrian Government implemented legal 
changes to allow private radio and private terrestrial 
TV, dismantled the postal monopoly for wire-transmitted 
voice telephony and infrastructure, and liberalized the 
electricity and gas markets.  However, by law, federal 
and provincial governments maintain at least 51% majority 
shares in all electricity providers.  In line with EU 
regulations, the government is working to liberalize the 
postal monopoly and will partially privatize the postal 
company in 2006.  In most business activities, the law 
permits 100% foreign ownership.  Foreign direct 
investment is restricted only when competing with 
monopolies and utilities.  License requirements, such as 
those in the banking and insurance sectors, apply equally 
to domestic and foreign investors. 
 
 
Protection of Property Rights 
----------------------------- 
The Austrian legal system protects secured interests in 
property.  The law recognizes mortgages, if recorded in 
the land register and the underlying contracts are valid. 
For any real estate agreement to be effective, owners 
must register with the land registry, which requires 
approval of the land transfer commission or the office of 
the provincial governor.  The land registry is a reliable 
system for recording interests in property, and any 
interested party has access to it. 
 
Austria has effective laws to protect intellectual 
property rights, including patent and trademark laws; a 
law protecting industrial designs and models; and a 
copyright law.  Legislation also protects three- 
dimensional semiconductor chip layout design.  In line 
with EU requirements, Austria has a law against product 
piracy to prevent trade in counterfeits.  Austria is a 
party to the World Intellectual Property Organization 
(WIPO) and several international property conventions, 
including the European Patent Convention, the Patent 
Cooperation Treaty, the Universal Copyright Convention, 
and the Geneva Treaty on the International Registration 
of Audiovisual Works.  Since both the United States and 
Austria are members of the "Paris Union" International 
Convention for the Protection of Industrial Property, 
American investors are entitled to the same kind of 
protection under Austrian patent legislation as are 
Austrian nationals.  A 2005 amendment to the Austrian 
Patent Act strengthened protection of patents from 
innovative enterprises, particularly through more 
efficient implementation procedures.  One can file 
objections only after authorities have granted the 
patent. 
 
Austria's copyright law is in conformity with EU 
directives on intellectual property rights and grants the 
author the exclusive rights to publish, distribute, copy, 
adapt, translate, and broadcast his/her work. 
Infringement proceedings, however, can be time consuming 
and complicated.  The Austrian Copyright Act also 
regulates copyrights of works on the Internet, protection 
of computer programs, and related damage compensation. 
 
 
Transparency of the Regulatory System 
Austria's legal, regulatory, and accounting systems are 
transparent and consistent with international norms.  The 
government usually publishes proposals for new laws and 
regulations in draft form for public comment. 
 
The Austrian Government has made some progress in 
streamlining its complex and cumbersome permit and 
paperwork requirements for business licenses and permits. 
The government maintains that it has reduced the time 
needed to obtain necessary permits to about three months, 
except for large projects requiring an environmental 
impact assessment.  The 2002 reform of the Business Code 
implemented a "one-stop shop" for a business permit. 
However, this does not include plant and building 
permits.  Another reform in 2005 provides for further 
accelerating permit procedures by expanding possibilities 
for simplified procedures.  However, "unpredictable and 
inflexible bureaucratic rules" could still be a problem. 
 
The government applies tax and labor laws uniformly, as 
well as health and safety standards, and thus do not 
influence the sectoral allocation of investments.  The 
Austrian investment climate has become more conducive for 
business since Austria became a member of the EU. 
However, inflexible shop-opening hours and working times 
remain a major concern for many businesses.  The 
government plans to implement more flexible working time 
regulations, including at the company level, and more 
liberal regulations for shop-opening hours.  However, 
virtually all shops will remain closed on Sundays. 
 
 
Efficient Capital Markets and Portfolio Investment 
--------------------------------------------- ----- 
Austria has modern and sophisticated financial markets. 
All financial instruments are available.  Foreign 
investors have access to the local market without 
restrictions and are free to use foreign credit markets 
as well.  Austria has a highly developed banking system 
with worldwide correspondent banks, and representative 
offices and branches in the United States and other major 
financial centers.  Large Austrian banks also have a huge 
network in many of the ten new EU members and other 
countries in Central and Eastern Europe (CEE) and in 
Southeastern Europe (SEE).  Austrian banking groups 
dominate CEE/SEE banking markets.  Six out of the seven 
largest Austrian banks hold sizeable investments in 
CEE/SEE; three of them are among the five largest banking 
groups in the area.  Total assets of Austria's five 
largest banking groups (Bank Austria Creditanstalt (BA- 
CA), Erste Bank, Raiffeisen Zentralbank (RZB), Bank fuer 
Arbeit und Wirtschaft und Oesterreichische Postsparkasse 
(BAWAG PSK), and Oesterreichische Volksbanken) amounted 
to about Euro 444 billion ($555 billion) in 2004, 
representing 68% of Austria's total bank assets 
 
The Vienna Stock Exchange (VSE) is connected to Xetra, 
Frankfurt's electronic trading system, sotraders 
worldwide have on-screen information anddirect access to 
all stocks listed in Vienna.  I March 2005, a consortium 
of Austrian and Hungaran investors, led by VSE, acquired 
a majority shae in the Budapest Stock Exchange (BSE) 
with the oal of establishing a broader "Central European 
tock Exchange" alliance, including several other stock 
exchanges in CEE/SEE. 
 
Austria's venture capital market is underdeveloped. 
After significant expansion in the late 1990s, it peaked 
in 2000, but has been flat since then.  The volume of 
private equity and venture capital raised in Austria 
during 1995-2004 was Euro 1.2 billion ($1.5 billion), 
according to the Austrian Private Equity and Venture 
Capital Organization (AVCO).  In 2004, fund raising 
slowed to Euro 122 million ($152 million). 
 
Listed companies must publish quarterly reports. 
Criminal penalties for insider trading are in place.  The 
Austrian Financial Market Authority (FMA), similar to the 
U.S. Securities and Exchange Commission, is responsible 
for policing irregularities on the stock exchange and, 
with support from the Austrian National Bank, for 
supervising banks, insurance companies, securities 
markets, and pension funds. 
 
The legal, regulatory, and accounting systems are 
transparent and consistent with international norms. 
Austrian regulations governing accounting standards will 
provide U.S. investors with improved and internationally 
standardized financial information.  Listed companies 
must use the International Financial Reporting Standards 
(IFRS) set by the International Accounting Standards 
Board (IASB) and approved by the European Commission. 
All other firms can use IFRS or the regulations pursuant 
to the Austrian Business Code.  A new Code of Corporate 
Governance came into effect on January 1, 2006.  Listed 
companies are required to comply or explain why they are 
not following it. 
 
 
Political Violence 
------------------ 
There have been no incidents of politically motivated 
damage to foreign businesses.  Civil disturbances are 
extremely rare. 
 
 
Corruption 
---------- 
The Austrian Criminal Code contains penalties for 
bribery, including a fine of up to Euro 500 ($625) per 
day for up to 360 days or up to two years imprisonment 
for the payer of a bribe.  The recipient of a bribe faces 
up to five years imprisonment.  Under the Criminal Code, 
any person who bribes a civil servant, a foreign 
official, or a manager of an Austrian public enterprise 
is subject to criminal penalties.  Austria has ratified 
the OECD Anti-Bribery Convention, which entered into 
force in July 1999.  Corresponding criminal code 
legislation has been in place since summer 1998, and 
including prohibiting tax deductibility for bribes.  A 
new Law on Responsibility of Associations entered into 
force January 1, 2006 and introduced criminal 
responsibility for legal entities and partnerships.  The 
law covers all criminal offences punishable by court, 
including corruption, money laundering, and serious tax 
offences that are subject to the Tax Offences Act.  Fines 
pursuant to the new law can rise to as much as 180 daily 
rates, with one daily rate equal to one-360th of yearly 
proceeds, but not less than Euro 50 ($63) and not more 
than Euro 10,000 ($12,500). 
 
 
Bilateral Investment Agreements 
------------------------------- 
Austria has bilateral investment agreements in force with 
Albania, Algeria, Argentina, Armenia, Azerbaijan, 
Bangladesh, Belarus, Belize, Bolivia, Bosnia-Herzegovina, 
Bulgaria, Cape Verde, Chile, China, Croatia, Cuba, Egypt, 
Estonia, Ethiopia, Georgia, Hong Kong, Hungary, India, 
Iran, Jordan, Kuwait, Latvia, Lebanon, Libya, Lithuania, 
Macedonia, Malaysia, Malta, Mexico, Moldova, Mongolia, 
Morocco, Oman, Paraguay, Philippines, Poland, Romania, 
Saudi Arabia, Slovenia, South Korea, South Africa, 
Tunisia, Turkey, Ukraine, United Arab Emirates, 
Uzbekistan, Vietnam, Yemen, and Serbia and Montenegro. 
 
Austria has signed agreements with Cambodia, Namibia and 
Zimbabwe, but the agreements have not yet entered into 
effect.  An agreement with North Korea is in initial 
stages of discussion.  Until new agreements take effect, 
the existing agreements with the former Czechoslovakia 
continue to apply to the Czech Republic and Slovakia, and 
that with the former Soviet Union to Russia and 
Tajikistan.  Austria and Russia are negotiating a new 
agreement.  Under all these agreements, if parties cannot 
amicably settle investment disputes, a claimant submits 
the dispute to the International Center for Settlement of 
Investment Disputes or an arbitration court according to 
the UNCITRAL arbitration regulations. 
 
The U.S. and Austria are parties to a bilateral double 
taxation treaty covering income and corporate taxes, 
which went into effect on February 1, 1998.  Another 
bilateral double taxation treaty covering estates, 
inheritances, gifts and generation-skipping transfers has 
been in effect since 1982. 
 
 
OPIC and Other Investment Insurance Programs 
-------------------------------------------- 
OPIC programs are not available for Austria.  Austria is 
a member of the Multilateral Investment Guarantee Agency 
(MIGA). 
Labor 
----- 
Austria has a highly educated and productive labor force 
of about four million people, of which 3.5 million are 
employees and 500,000 are self-employed or farmers. 
Austria's labor market is more rigid than that of the 
U.S., but more flexible than markets in some other EU 
members.  Depending on labor demand, government policies 
limit the number of foreign workers to between 8-10% of 
the salaried workforce.  In 2005, the number of guest 
workers, predominantly from the former Yugoslavia and 
Turkey, averaged 374,000.  As part of the 2004 EU 
enlargement, Austria adopted a 7-year transition period 
vis--vis eight of the ten new EU members (except Cyprus 
and Malta) before fully allowing free movement of labor. 
On May 1, 2006, the Austrian Government will likely 
extend the restrictions for another three years, after 
which the EU Commission can approve a further extension 
for two years. 
 
Compared to other EU countries, Austria had a relatively 
low unemployment rate of 5.2% in 2005.  The 2006 forecast 
is for an unemployment rate of 5.2-5.3%, assuming real 
economic growth of 2.3-2.4%.  Forecasts call for no 
change in 2007, projecting economic growth of only 2.0- 
2.2%.  Analysts expect no potential labor market shortage 
in the medium term.  While demographic trends indicate 
little growth in the labor force over the next few years, 
other factors, such as expected moderate economic growth, 
productivity gains, industrial restructuring, federal 
employment incentives for women and older employees, the 
gradual phase-out of early retirement, and government 
efforts to reduce civil service employment will likely 
offset the expected slow growth in the labor market. 
Moreover, net gains from migration will easily outpace 
the effect of low birth rates on the overall labor 
supply.  Long-term population estimates indicated an 
increase in the working age population (15-60 years) to 
5.26 million by 2014, up from 5.06 million in 2004. 
After 2014, the working population should slowly decrease 
to about 4.88 million by 2030.  However, the government's 
measures to promote participation in the labor force 
should help mitigate any potential shortage. 
 
In general, skilled labor is available in sufficient 
numbers.  However, regional shortages of highly 
specialized laborers in specific sectors, such as systems 
administration, metalworking, health, and tourism 
services may occur.  In line with EU goals, the 
government's labor market policy aims to raise the labor 
market participation rate to 70% (currently 69.2%) by 
2010, that of women to 60% (currently 61.7%), and that of 
workers aged 55-64 to 50% (currently 30.4%).  The 
government introduced new regulations requiring 
recipients of unemployment benefits to be more flexible 
regarding which jobs they would accept.  Companies hiring 
workers age 50 and above are eligible for financial 
bonuses, but face penalties for laying off workers within 
this age group.  The government will not likely realize 
its plans to introduce more flexible working hours before 
the end of this legislation period in fall 2006. 
 
Austrian social insurance is compulsory and comprises 
health insurance, old-age pension insurance, unemployment 
insurance, and accident insurance.  Social insurance 
contributions are a percentage of total monthly earnings 
and are shared by employers and employees.  Although EU 
requirements facilitated greater job flexibility, various 
Austrian laws closely regulate terms of employment, 
including working hours, minimum vacation time (5 weeks), 
holidays, maternity leave, statutory separation notice, 
protection against dismissal, and the option for parents 
with children under the age of seven to choose part-time 
work for several years.  The new regulation only applies 
to parents working for companies with at least 20 
employees.  The severance pay system, implemented in 
2002, aims to enhance worker flexibility by providing 
employees the right to carry their accrued entitlements 
with them. 
 
Since World War II, labor-management relations have 
generally been harmonious in Austria, as reflected in 
extremely low strike figures in past decades.  Two major 
strikes in May/June 2003 were politically motivated 
strikes against the government's pension reform and did 
not reflect management-labor disputes.  No major work 
stoppages occurred in 2004/0505.  About 40% of the work 
force belongs to a union. 
 
 
Collective bargaining revolves mainly around wage 
adjustments and fringe benefits.   While existing legal 
provisions stipulate a maximum workweek of 40 hours, 
collective agreements provide for a workweek of 38 or 
38.5 hours per week for more than half of all employees. 
 
 
Foreign Trade Zones/Free Ports 
------------------------------ 
Austria has no foreign trade zones. 
 
 
Foreign Direct Investment Statistics 
------------------------------------ 
The inflow of new foreign direct investment (FDI) in 2004 
reached Euro 3.2 billion ($4.0 billion), less than the 
Euro 6.3 billion ($7.9 billion) in 2003, which was the 
third highest inflow ever.  New FDI in the first half of 
2005 amounted to Euro 3.1 billion ($3.9 billion).  The 
value of FDI stock in Austria was Euro 45.8 billion 
($57.3 billion) at the end of 2004 and about Euro 49 
billion ($68.8 billion) by mid-2005.  In 2004, U.S. firms 
invested about 10% of the total. 
 
At Euro 5.9 billion ($7.4 billion), flows of Austrian 
direct investment abroad in 2004 just missed the record 
level of Euro 6.3 billion ($7.9 billion) in 2003.  In the 
first half of 2005, FDI abroad was Euro 2.8 billion ($3.5 
billion).  This raised the value of Austrian direct 
investment stock abroad to Euro 50.2 billion ($62.7 
billion) at the end of 2004 and to Euro 53 billion ($66.2 
billion) by mid-2005. 
 
Note:  Figures converted at the 2005 annual average 
exchange rate of $1.00 for Euro 0.80. 
Source:  Austrian National Bank. 
 
 
Austria's International Investment Position (EUR billion) 
 
Year                   2003      2004 (1)  2005 (2) 
--------------------------------------------- -------- 
FDI in Austria         44.3      50.2      53.0 
Austrian FDI Abroad    42.6      45.8      48.9 
 
Footnotes: 
(1) preliminary figures; 
(2) first half year, preliminary figures. 
 
 
FDI in Austria - Source Country Breakdown 2003 
(share of total in percent) 
--------------------------------------------- - 
U.S.                        10.3 
Germany                     39.9 
U.K.                        11.2 
Switzerland/Liechtenstein    8.0 
Netherlands                  7.3 
Spain                        2.5 
Japan                        2.3 
All other countries         18.5 
 
 
FDI in Austria - Industry Breakdown 2003 (Euro million) 
--------------------------------------------- ---------- 
Mining and energy                             466 
Metals, machinery                           1,622 
Vehicles                                      434 
Electrical engineering, electronics         2,226 
Petroleum, chemicals                        2,903 
Paper, wood                                 1,173 
Building and allied trades                    678 
Trade                                      10,296 
Transport, communication                      801 
Banking, insurance, finance                 5,824 
Real estate, business, related services    15,377 
Other industries                              835 
                                           ------ 
Total                                      42,635 
 
 
Austrian FDI Abroad - Destination Country Breakdown 2003 
(share of total in percent) 
--------------------------------------------- ----------- 
U.S.                         4.4 
Germany                     16.1 
Czech Republic               8.0 
Hungary                      7.8 
Netherlands                  6.2 
Switzerland/Liechtenstein    5.1 
U.K.                         4.8 
Poland                       4.4 
Slovakia                     3.4 
Croatia                      2.7 
Slovenia                     2.3 
All other countries         34.8 
 
 
Austrian FDI Abroad - Industry Breakdown 2003 (Euro 
million) 
--------------------------------------------- ------ 
Mining and energy                           1,959 
Metals, machinery                           1,392 
Electrical engineering, electronics           856 
Petroleum, chemicals                        2,167 
Paper, wood                                   759 
Food, drink, tobacco                          462 
Building and allied trades                  2,105 
Trade                                       4,932 
Transport, communication                      984 
Banking, insurance, finance                13,749 
Real estate, business, related services    14,147 
Other industries                              797 
                                          ------- 
Total                                      44,309 
 
 
List of Major Foreign Investors: 
-------------------------------- 
Some 370 U.S. firms hold investments in Austria, which 
range from simple sales offices to major production 
facilities.  The following is a short list of U.S. firms 
holding major investments in Austria. 
 
American Express Bank Ltd. 
Baxter International Inc. 
Capital Research and Management Company 
Cisco Systems, Inc. 
Citibank Overseas Investment Corp. 
The Coca-Cola Company 
CSC Computer Sciences Corporation 
Deloitte & Touche LLP 
Electronic Data Systems Corp. 
Exxon Corporation 
General Electric Capital Corporation 
General Electric Company 
General Motors Corp. 
Harman International Industries Inc. 
Hewlett-Packard Company 
Honeywell Inc. 
IBM World Trade Corp. 
ITT Fluid Technology Corp. 
Johnson & Johnson Int. 
Johnson Controls Inc. 
Kraft Foods International, Inc. 
Lear Corporation 
Lem Dyn Amp 
McDonald's Corporation 
Marriott International, Inc. 
Mars Inc. 
MeadWestvaco Corp. 
Merck & Co., Inc. 
Modine USA 
Otis Elevator Co. 
Pioneer Hi-Bred International Inc. 
PricewaterhouseCoopers LLP 
PQ International Inc. 
Quintiles Transnational Corp. 
Schindler Elevator Corp. 
Starwood Hotels and Resorts Worldwide, Inc. 
Toys"R"Us, Inc. 
United Global Com, Inc. 
Unysis Corporation 
Verizon Information Services Inc. 
Western Union 
Worthington Cylinder Corp. 
York International 
Xerox Corporation 
 
The following is a brief list of firms headquartered in 
countries other than the U.S., holding major investments 
in Austria. 
 
Alcatel Holding, Netherlands 
Allianz AG, Germany 
Amer, Finland 
Asea Brown Boveri, Switzerland 
Assicurazioni Generali, Italy 
Aventis, Germany 
Axel Springer Verlag, Germany 
BASF, Germany 
Bayer AG, Germany 
Bayerische Motorenwerke (BMW), Germany 
Bombardier, Canada 
Bosch Robert AG, Germany 
Borealis, Denmark 
BP Amoco, UK 
DaimlerChrysler, Germany 
Detergenta Investment, Germany 
Deutsche Telekom, Germany 
DM Drogerie Markt, Germany 
Electricite de France, France 
Electrolux, Sweden 
Epcos AG, Germany 
Ericsson, Sweden 
Flextronics International, Singapore 
Gallaher, U.K. 
Heineken, Netherlands 
H&M, Netherlands 
Infineon, Netherlands 
Kone Corp., Finland 
Koramic, Belgium 
Liebherr, Switzerland 
Magna, Canada 
MAN, Germany 
Metro, Germany 
Mondi Europe, Luxembourg and UK 
Nestle S.A., Switzerland 
NKT Cables, Denmark 
Novartis, Switzerland 
Nycomed Holding, Denmark 
Philips, Netherlands 
Plus Warenhandel, Germany 
REWE, Germany 
RWE, Germany 
Sappi Ltd, South Africa 
Schlecker, Germany 
Shell Petroleum N.V., Netherlands 
Siemens, Germany 
Smurfit Group, Ireland 
Solvay Et Cie, Belgium 
Sony, Japan 
Sueddeutscher Verlag, Germany 
Svenska Cellulosa Ab (SCA), Sweden 
UniCredit Group, Italy 
Unilever N.V., Netherlands 
Voith, Germany 
Westdeutsche Allgemeine Zeitung (WAZ), Germany 
Westdeutsche Landesbank, Germany 
 
MCCAW