Austria is probably most famous for giving the world Wolfgang Mozart, Sigmund Freud, wheat beer and Arnold Schwarzenegger.
But this moderately-sized, landlocked country — still one of the world’s wealthiest — also has a powerful economic muscle to flex throughout Europe, including in Ukraine.
With advanced, modern infrastructure that reaches across its land borders, pumping goods such as cars, chemicals and computer parts into eight bordering European countries, Austria is perfectly-placed as both an exporter and transit hub.
And as Ukraine also strives to become an important trade corridor that bridges east, west and south, it looks to Austria for examples in how this can be done: Austria has been a vital transit and logistics corridor for centuries.
From Vienna, the former seat of power and imperial capital of the Austro-Hungarian Empire, Austrian businesses are still outward-looking, risk-taking and entrepreneurial — and what’s more, they’re keeping a close eye on opportunities in Ukraine.
Ukrainian President Petro Poroshenko and his Austrian counterpart Alexander Van der Bellen (R) walk in front of the honor guard in Kyiv on March 14, 2018. (Mikhail Palinchak)
Connection remains
Exactly 100 years ago, the Austro-Hungarian Empire reached from Vienna to western Ukraine — then called Eastern Galicia — and with it, came Austrian trade, taxation, cuisine and culture.
When Austria-Hungary dissolved at the end of World War I, Austria and Germany were the first major powers to recognize Ukrainian independence, even if decades of struggle against Russian imperialism and Soviet domination would follow, preventing Ukraine from regaining its place in the European family.
Even still, a century later, Austrian influence remains in Ukraine, especially in its western regions, and while the Austrian-built concert halls of Lviv still host the symphonies of Mozart, nowhere is Austrian influence more obvious than throughout the business sphere.
“More than 170 Austrian companies have a subsidiary in the Ukrainian market,” said Gabriele Haselsberger, the new Austrian commercial counselor at the country’s embassy in Kyiv.
Speaking to the Kyiv Post from Vienna on Dec. 5, where she was about to participate in an event with the current Austrian presidential administration of the European Union, as well as more than 30 delegates and visitors from Ukraine, Haselsberger is confident and energetic when she speaks about business ties between Ukraine and her country.
“Austrian companies have been investing large sums here and haven’t left the country during difficult times, because they are committed to Ukraine and have a long-term perspective,” she said.
Haselsberger says that Ukraine is “almost a neighboring country” with Austria, and, indeed the country is well-connected to Ukraine via high-speed rail and motorways through Slovakia and Hungary, not to mention frequent flights: Austrian Airlines flies direct to Kyiv, from Vienna, at least once a day now, plus additional flights to Lviv, Odesa and Kharkiv throughout the week.
“Ukraine has a growing economy and strengthening domestic demand,” says Haselsberger. “And thanks to the close proximity, transport and transfer costs are rather low which makes the exchange of goods and services very attractive. This is reflected in our growing trade figures — in 2017, we increased exports by 16 percent while imports from Ukraine rose by 33 percent,” she said.
Total bilateral trade turnover between the two countries grew by 18.5 percent in 2017, as Austria became the sixth largest investor in Ukraine according to Ukrainian official figures.
Haselsberger will also, during her time in Ukraine, seek to bring more production-focused Austrian companies to Ukraine, where she says they can benefit from strong, comparative advantages, a highly-skilled workforce and easy access to European markets.
“More Austrian companies are looking for Ukrainian partners for their digitization and innovation projects, as the production of the future will be mainly automated,” she said. “Here in Ukraine we can find brilliant partners for R&D projects and we try to foster such partnerships,” she added.
Facing challenges
Geopolitics and business often collide these days, and today, both countries face some similar foreign and domestic challenges: energy independence, tricky neighbors, resurgent far-right movements, political populism and external Russian interference.
Businesses in both countries regard such things as a significant threat to stability, but they can work together to mitigate the risk, some experts think.
Alfred Praus, an Austrian businessman in Kyiv since 2006 and president of the 30-member Ukrainian-Austrian Association, says there are shared challenges that can be faced together too.
“For a long time, Austria has been a strong investor in Ukraine, especially in banking, insurance, trade and industry — but without a doubt, there is continuous caution from Austrian companies in doing business in Ukraine, mainly due to the risk associated with its unfriendly neighbour (Russia).”
According to Praus — a champion for Ukraine’s potential but also a pragmatist when it comes to highlighting challenges — predictability and stability in Ukraine is often lacking, not least due to war in the Donbas and what he calls Russia’s effective blockade of Ukrainian ports on the Azov Sea.
He says that “Russian aggression” is playing a dominant role in Western hesitance to invest in Ukraine and is, therefore, fulfilling its primary purpose.
To counter this, he suggests EU lawmakers to strengthen their involvement in the country’s ongoing political reforms.
“The Ukrainian government has achieved a lot of progress in the past years under certainly very difficult framework conditions,” he says. “This has to be continued, in order to further improve the business environment and to create trust.”
Broadly speaking, Praus advocates for Austrian and other European businesses to be mindful of the risks, but to wake up and smell the opportunity of investing in Ukraine: and he’s not alone in saying this.
“During the first weeks in my new role, I have talked to many Austrian companies about doing business in Ukraine,” says Haselsberger.
“The feedback was very good, with an optimistic outlook for the future. Existing subsidiaries here plan to expand their operations and new investors are evaluating Ukraine,” she said.
“Most of our companies are fully aware of the great potential of this country,” she added. “And the others, well — I’m going to inform them about it.”
