Germany aims to overtake Austria in Croatia

Germany is challenging Austria’s position as a top investor in Croatia.

Figures presented by the Croatian National Bank (HNB) today (Fri) reveal that German companies spent 131.8 million Euros in the country in the first quarter of this year, more than any other country. German firms only spent 90.4 million Euros in the same time span of 2010.

Businesses based in Austria have invested more than firms from any other state in the world in the Southeast European country between 1993 and 2009 with 6.2 billion Euros. This sum meant more than one in five Euros spent on endeavours in Croatia came from Austria. The Netherlands were in second with 4.4 billion Euros. Trade officials from Germany, which came in third (2.7 billion Euros), said at a business event in Croatia in July 2010 they aimed to outdo other countries in the coming years.

Croatia experienced a stark decline in investments in 2009. After 4.2 billion Euros were spent by foreign firms in 2008, only 1.87 billion Euros were channelled into projects in the country – which aims to join the European Union (EU) in 2013 – in 2009.

Austrian entrepreneurs criticised the state of things considering business activities only last month. Reinhard Schweifer of Eisenstadt-based energy sector company BEWAG – one of 750 Austrian companies represented in Croatia – labelled the circumstances to invest and expand in Croatia as “difficult.” He said: “You have to carefully observe the environment in which you intend to do business.”

Burgenland Economy Chamber President Peter Nemeth said after meeting business leaders in Croatia in June that the country’s political system “has not arrived in the present yet” due to bureaucratic barriers for entrepreneurs interested in investing in the country. He added that he considered the risks of expanding into Croatia as “substantial.”

Asked in which regards Croatia must do better, Austrian Social Democratic (SPÖ) Chancellor Werner Faymann said in 2010: “The legal system must be adapted to EU standards. I’ve heard many complaints from Austrian businessmen.”

Meanwhile, Statistik Austria said Austrian firms’ import activities soared by one fifth in the first four months of this year compared to the same period of 2010. They acquired goods worth 41.59 billion Euros, according to the agency. Exports rose by one fifth as well to 39.52 billion Euros.

The value of exports carried out by Austrian firms jumped by 16.5 per cent to 109.2 billion Euros last year compared to 2009. Companies based in the country engaged in imports worth 113.5 billion Euros last year. This figure means the value of their purchases abroad rose by 16.3 per cent.

People’s Party (ÖVP) Economy Minister Reinhold Mitterlehner claimed in May Austrian firms should increase their focus on emerging markets in Asia and South Africa if they wanted to remain competitive. Mitterlehner said he backed any kind of attempt by domestic businesses to become more active in up-and-coming economies overseas.

He explained his goal was to increase the value of exports to markets outside Europe by 13 per cent to 30 per cent until 2020. The ÖVP deputy chairman presented a package of measures including higher subsidies for small and medium-sized enterprises (SME) to reach this target.