Austria opens the door to Southeast Europe

With a population of 48 million consumers and a reservoir of highly skilled workers, as well as low costs and impressive growth rates, Southeast Europe (SEE) offers a wealth of opportunity for Canadian exporters and investors.

Yet approaching this region of tiny countries, with their different languages and cultures, complex regulations and varying trade environments, can be daunting for small and medium-sized businesses. Canadian companies are discovering that Austria offers an effective gateway to SEE, with its historic and commercial ties, helpful resources and geographical proximity to the region.

The Canadian Trade Commissioner Service in Vienna, in co-operation with Canadian embassies in the region, has started a campaign encouraging Canadian SMEs to leverage connections with Austrian companies in order to explore the many possibilities in SEE, bringing greater access and netting vast rewards.

"We'd like to take the good trade relationship between Canada and Austria a step further," says Verena Wasenegger, a trade commissioner in Vienna who is involved in the new SEE initiative. "It's such a growing market, we don't want Canadian companies to miss out on it."

She says the countries in the SEE initiative comprise Romania, Bulgaria, Serbia, Bosnia & Herzegovina, Croatia, Macedonia, Slovenia and Montenegro. Many are countries that were part of the former Yugoslavia.

Austria is an "ideal starting point" for doing business there, she explains, as a wealthy OECD country with among the largest GDP per capita in the EU. Austria is also a large investor in SEE, and its companies have a significant presence there. Approximately 2000 Austrian companies are selling to or have subsidiaries in the region, Wasenegger notes, suggesting that Canadian companies can expand in SEE by using their established networks and resources.

Hans Nagl, director of the Austrian Business Agency, notes that more than 300 international companies use Austria as their headquarters for Central and Eastern urope markets. Over the last two decades, companies that were concentrated in Britain and Western Europe have moved their focus east, especially as the EU has expanded there. And many Eastern European companies use Austria as a "springboard" to the EU.

Southeast Europe at a glance

Southeast Europe offers dynamic markets, access to the EU, favourable tax rates for corporations and incentives for foreign companies. The individual countries in the region have a number of important attributes for Canada's SMEs, especially in collaboration with Austrian partners:

Slovenia is the wealthiest state among the eight, with well-developed ICT, infrastructure and transportation systems and a skilled labour force.

Serbia has several subsidiaries of active Canadian companies. It also boasts skilled engineers and free trade zones.

Romania has world-class cyber security platforms and applications, as well as a steady growth rate.

Montenegro has technically skilled and specialized workers with strong English language skills.

Macedonia has a large number of ore deposits, opening vast opportunities in mining. It serves as a link between Greece and the region.

Croatia has a highly developed road, air and communications infrastructure. With its accession into the EU, it is subject to reduced barriers and tariffs.

Bulgaria is experiencing stable economic growth. Due to EU subsidies, there are numerous opportunities coming up, including in the industry sector.

Bosnia & Herzegovina is a major player in the telecom sector. Austria is one of its most important foreign investors.

Source: The Canadian Trade Commissioner Service, Embassy of Canada to Austria

"Austria is a bridge between East and West," he says, adding that it historically has close ties to its neighbours and has a large population of immigrants, including from the ex-Yugoslavian countries, which gives it important language and cultural links to SEE. "We have very good connections."

Redknee Solutions Inc., a Mississauga, Ont., company that makes business support systems such as billing technology for mobile operators, uses Austria as a base for its growing operations in SEE, says Gordana Gavrilović, a sales director for the company there.

Redknee has operations in more than 90 countries and over 200 customers in total, she says. In addition to the giant Telekom Austria Group, the company has a strong local presence among mobile telecom operators in SEE, with customers in Croatia, Serbia, Macedonia, Bulgaria and Bosnia & Herzegovina. While it has large operations in Germany and Poland, she notes, it's looking to regions such as SEE to expand its market share among utility companies and to produce some of its software components, for example.

"Austria is an excellent base" to accomplish this, Gavrilović points out, because it's just a short flight away, with good people and facilities and an understanding of the markets and mentalities of the region. "The competencies you can find in Austria are excellent."

Redknee is one of the companies profiled in a study recently commissioned by Canada's embassy in Vienna, which provides Canadian businesses with helpful information about entering SEE markets and partnering with Austrian companies to do it. The study, titled Corporate and Market Structure Assessment: Austrian companies operating in eight selected Southeast European Countries, was produced by the Vienna University of Economics and Business and is based on interviews with Austrian companies and other sources.

A market report resulting from the study notes that SEE offers lucrative opportunities for Canadian companies. Four industries within the region were particularly analyzed: automotive, machinery and equipment, ICT and renewable energies.

"Austria has the capability and expertise to act as an intermediary between Canada and SEE," the report concludes, suggesting that "Canadian companies may find it beneficial to go through Austrian firms to sell their products in the region."

In addition to providing regional data on the different markets, the study explains the market entry process and identifies successfully established Austrian and Canadian companies in different SEE countries.

Nagl says that Austria offers important travel connections to such markets, as well as good infrastructure and an excellent banking system, and it has established tax agreements with countries in SEE. He says that Austrians are "culturally aware" of Eastern European attitudes and mindsets toward business, which are often relationship-centric.

Austria itself has an excellent quality of life, top-notch education and medical systems, good transportation networks and is a good test-market for products, he notes. He says that Austria and Canada share "a lot of common ground," for example each has an economic powerhouse country for a neighbour.

Wasenegger says that while Canada exported $646 million in goods and services to Austria in 2013, the SEE region represents a relatively small portion of Canada's total exports. Canada exported slightly more than $112 million to the region in total in 2013. Bulgaria and Romania as well as Slovenia have the largest share of imports from Canada, while our exports to Montenegro and Bosnia & Herzegovina are quite low.

The TCS in Vienna can help introduce Canadian companies to Austrian counterparts who have SEE connections, Wasenegger says, and can inform Austrian companies about what Canadian firms have to offer. She notes that Canadian companies can also receive assistance from trade commissioners responsible for each of the SEE countries, and they can provide detailed information on individual markets.

Wasenegger says that it's important for Canadians to learn about cultural sensitivities there when doing business, especially as laws, rules and customs can vary across the region.

The market report notes that Canadian companies consider competition in the SEE region to be "rather intense," although that can vary by industry. Competition in the automotive industry is high, it says, with all of the big international players present there.

For more information, contact the Canadian Trade Commissioner Service in Vienna.