Download The Vienna season has started again

Report 1/2009
The Vienna season has started again
Meeting ambitious goals with intelligence, charm and strategy
Walter Pudschedl / [email protected]
Following geopolitical changes on the European continent,
Vienna has succeeded in changing its image from a patina
glazed city with an illustrious past but not so bright future
prospects, into a modern economic region offering a high
quality of life driven by an open mind and forward-looking
approach, which now has new growth opportunities in an
improved environment.
with over two million inhabitants had come into being, and as a
bastion of culture and an economic and political heavyweight,
Vienna played a decisive role in shaping European history. The
city's significance diminished following the political collapse of the
monarchy and the disintegration of the multi-ethnic state. After the
Second World War, despite its peripheral position in westernoriented Europe, Vienna regained political significance which
extended beyond Austria's national borders. In keeping with the
tradition of the Congress of Vienna, Austria frequently assumed the
role of intermediary in international politics (SALT II Treaty, Middle
East conflict), something which received new impetus as from
1979, when Vienna became one of the United Nations' headquarters.
As the capital of the second-largest European country in terms of
area and the heart of the Danube monarchy, which, with a population of over 50 million at the beginning of the 20th century, was
the continent's third most densely populated nation, Vienna became a vibrant metropolis. One of Europe's largest conurbations
Table 1: S(trengths) W(eaknesses) O(pportunities) T(hreats)
Strenghts
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Favourable central position in Europe, close to the Eastern
European growth markets
High, broadly-based economic standard and diversified urban
economic structure
Strengths in segments with strong innovative capacity, strong
commitment in growth segments and ICT, and high-level funding for R&D (Barcelona target already exceeded)
Efficient infrastructure with high-quality public transport services
Qualified workforce potential, high standard of public education
due to a broad education infrastructure
High quality of life and leisure time: cultural diversity, highgrade, affordable housing
Weaknesses
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Opportunities
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
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
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Using the favourable geopolitical location in Centrope, the Central European region, for leadership in the new growth markets,
with a focus on stronger cooperation
Acceleration of the internationalisation of the economy and
society
Enhancing the competence focus in technology-oriented growth
segments and strengthening of clusters
Using the potential of flexible SMEs and knowledge-based
service providers
Strong growth of population through immigration
Using free space for developing business locations also from an
ecological perspective (short distances, public transport, efficient use of energy, etc.)
1 April 2009
Divergent inner-urban development, concentration and segregation tendencies
Significance of industry-based small businesses is gradually
waning, strong focus on consumer goods industries with weak export activity
Insufficient cooperation between the economy and research sector, low involvement of the strong SME segment in research
Traffic congestion tendencies and growing environmental pollution
(noise, harmful products)
High unemployment, education system without sufficient openings
for socially disadvantaged persons, exacerbated by immigration
problems
Unfavourable cost structure within Austria, but adequate in a
European comparison
Threats





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Increasing competition from neighbouring regions primarily on
account of existing cost structures (wage levels, real estate prices)
Growing communication and acceptance problems as a result of
immigration. Danger of social conflict rises with possible tension
on the labour market
Crowding-out of cost-intensive industries also due to the absence
of areas for expansion and loss of local suppliers through migration to the periphery of towns/surrounding areas
Growing proportion of SMEs with low level of R&D activities
Overageing population
Increase in environmental problems and adverse impact on the
quality of life through strong development activity both within cities
and in urban expansion areas
Bank Austria Economics & Market Analysis
Report 1/2009
Back to the future
Twenty years after the collapse of the Iron Curtain Vienna's location at the edge of Western Europe, which was a substantial burden for the economy and significantly limited the city's economic
scope for manoeuvre, is a thing of the past. Because with the
opening of Eastern Europe, the economic opportunities for Vienna
changed at a stroke. Vienna became the centre of a new, now
borderless, economic area. For the former capital of the Danube
monarchy this development opened a door "back to the future",
paving the way for an economically successful period.
Today, Vienna is one of Europe's most prosperous cities. It is
Austria's key services centre, with the tertiary sector accounting
for over 80% of GDP. Of particular relevance are services requiring
high qualifications in the area of business-related services (e.g.
financial services, marketing, legal advisory services etc.), but city
and conference tourism is also an important pillar. The industry is
undergoing a process of profound change which commenced a
number of years ago. The relocation of businesses to surrounding
areas is reducing employment in the production segment, a phenomenon which is typical for large cities. Only 9% of the workforce
is employed in the manufacturing industry, but over one-fifth of
this 9% is active in high-tech industries.
This makes Vienna Austria's high-tech centre; it for example accounts for about 70% of Austria's IT exports. Vienna's economy is
to be boosted in the longer term by focusing on four key high-tech
segments. To this end, competing businesses have established a
network of partnership structures as part of classical clusters
which can significantly help toward strengthening innovative capacity and improving their market position amongst global competitors. In this way, Vienna seeks to better exploit the economic
potential available to it as player in the market for modern technology and information and telecommunications industry services.
Vienna moreover also focuses on the life sciences, automotive and
reative industries segments.
The idea of networking and partnership-based cooperation to the
benefit of all involved has been further developed for application
within the promising Centrope (Central European) region. The
objective is to create a closely integrated economic area based on
mutual coordination, comprising the border regions of Austria, the
Czech Republic, Slovakia and Hungary. By taking advantage of
local competence through the optimal assignment of responsibilities, the area is to develop into one of Europe's leading business
locations.
In this context, the purpose is also to strengthen Vienna's function
as the intersection between the "old" and the "new" Europe and as
bridgehead to the new growth markets, which draw on their common roots. Over 300 multinational companies have set up their
group headquarters in Vienna for their business operations in the
region. Vienna offers ideal conditions through its geographical and
mental proximity to its target markets, reinforced by a strong influx
of immigrants from the region who have specific language skills
2 April 2009
and a functioning network in their previous home country. Vienna's
location is in particular enhanced through a functioning logistical
system based on a future-oriented infrastructure with efficient
transport systems. All European destinations are no more than
three hours away by air, and Vienna Airport boasts the largest
number of direct connections to the region worldwide. The Danube
port of Vienna is moreover now Central Europe's largest inland
waterways container terminal. Principal trunk roads to Slovakia,
Hungary, the Czech Republic and Slovenia either already exist or
are under construction. Although the central location in the midst
of a borderless economic area and the economy's strong focus on
the region in economically challenging times can also involve a
higher risk, the cross-regional integration is the obvious choice for
Vienna's economy and a reliable source of enormous development
potential.
In addition to its efficient infrastructure, Vienna as a business
location offers a high degree of safety, social stability, a transparent administrative system, a moderate cost structure in an international comparison and a highly-qualified workforce due to six
universities and a number of specialist colleges which are at the
top of a diverse range of educational facilities. The research ratio
of over 3% of GDP and close interaction between the economy and
the research sector are in the process of making Vienna a Central
European research and innovation centre – it uses the advantages
of its geographic proximity to the dynamic reform countries to
commend itself as a particularly attractive business location offering a very high quality of life.
Vienna has in the last few years succeeded in enhancing its
strengths and reducing its weaknesses, while creating new opportunities and limiting risk (see the SWOT analysis below).
Ambitions pursued along diverse lines
Vienna's economy successfully adjusted to the new geopolitical
conditions following Austria's accession to the EU and the opening
of the East. To date, the city has however only partly exploited the
available potential, a fact which is reflected in the relatively moderate growth rate and lacklustre performance of the labour market.
But comprehensive measures to strengthen entrepreneurship and
the knowledge-based urban economy reflect the implementation of
a strategy aimed at creating many more opportunities for growth
and employment. In terms of business location quality and structural conditions, Vienna performs well in an international comparison. The possibilities for Vienna to take a role as leader of a borderless Central European economic area are increasing. The strategy that is being pursued in this connection is designed to
strengthen the business location by improving the conditions for
research and innovation whilst concentrating on key segments with
long-term potential, such as the life sciences. Vienna's many
advantages as a business location over other urban economies in
surrounding areas in many respects put Vienna in a superior position to other business locations and create an environment that
provides excellent opportunities for Vienna's economy to use future
challenges for sustained, favourable development.
Bank Austria Economics & Market Analysis