“Slovenia and Austria are world champions!”, says Mr. Peter Hasslacher, Director of the ADVANTAGE AUSTRIA Slovenia, Albania & Kosovo. Bilateral trade between the two countries amounts to 5,5 Bn. EUR, which corresponds to roughly 2.700 EUR per capita regarding Slovenia’s population – an absolute top result by international comparison. What’s more, growth in exports on both sides grew substantially over the last years and projections remain promising. At the same time, investments by Austrian companies are also growing. More than 1000 subsidiaries and an investment volume of EUR 3.5 billion – this is a share of roughly ¼ of all FDI – make Austria by far the largest foreign investor in Slovenia.
What features of the Slovenian economy Austrian investors prefer the most and where they see a space for improvement?
The enormous importance of the Slovenian market for the Austrian export economy cannot be stressed enough. The biggest assets of Slovenia, which always come up when we talk to investors, is people and culture. If you visit Austrian subsidiaries in the country, you will find that only very few of them actually have Austrian managers or seconded staff. This means, investors have great trust in their Slovenian management and workforce. Communication in English or German is easy to maintain and there is common ground as far as the professional and managerial approach is concerned. Mentality and culture are very similar, also based on a long joint history as well as a sort of common understanding of “alpine heritage”.
To gain better insights of opportunities and challenges from the perspective of Austrian investors, our office in Ljubljana conducts an annual “investment climate” survey. Good news is: an overwhelming 90% of respondents say that they would invest again in Slovenia. The survey of 2019 showed – as already mentioned before – that Austrian companies appreciate the good labor productivity and quality of the Slovenian labor force, which compensates the higher wage level compared to other EU member states in Southeast Europe like Bulgaria or Croatia. In total, Austrian companies employ about 20,000 people in Slovenia with an upward trend. In addition, the Slovenian economy has been showing very solid growth rates between 4-5 % in the last years – great news for every investor but also very attractive for newcomers to Slovenia.
How will the expected slowdown of the European economy affect Austrian operations in Slovenia?
While the slowdown of European economy affects most of the countries in the EU, the Slovenian economic growth is still rising. Slovenia’s economic growth forecast for 2019 is at 2,8% – still among the strongest in the Euro zone. Austria’s economic growth is not unaffected by the current international downturn. After a long period of upsurge, the Austrian industry faces as decline, triggered mainly by a drop in exports. Nevertheless, household consumption continues to rise robustly, supported by constant employment and wage growth. Overall, economic growth in Austria is expected to slow to an annual average of 1.7% in 2019 (2018 + 2.7%) and to stabilize at 1.5% in 2020.
Austrian companies are still very competitive, but they are not spared by negative international developments. If sales fall, companies need to find a way to reduce their costs. However, before reducing their workforce, companies should consider other measures. There are no immediate signs of a global recession comparable to the 2008 economic crisis. When the next upswing comes, companies will need their highly trained and experienced employees again. It will also remain crucial to explore new ideas and foreign markets, which still show growth potential. ADVANTAGE AUSTRIA, Austria’s trade promotion and innovation agency, helps identifying new exporting markets and finding reliable business partners all over the world.
Having in mind that the two economies have strong ties, how do you estimate the opportunities for new ventures, business deals and opportunities to cooperate? Where are the uncovered potentials?
In Slovenia, there are several uncovered potentials for the next years. We see deepening business partnerships in the logistic sector, in railway infrastructure, in environmental issues, in the energy sector and in tourism. As a neighbouring country and a hub into Southeast Europe, more and more companies are pursuing the strategy of considering Slovenia as a location to do business in this region. In addition to its proximity to Austria, Slovenia has further geographical and infrastructural advantages, such as its well-connected port of Koper. Did you know, for example, that Koper is Austria’s most important gate into the world, accumulating more flow of goods in and out of the Austrian market than the commercial ports Rotterdam and Amsterdam together?
To highlighten the importance of this well-established logistics ecosystem, we just co-hosted a big business conference on this topic, together with the renowned Slovenian newspaper Finance, called “Moving Slovenia 3.0”. Warehousing, intralogistics, “last mile delivery” – many areas to further develop this important industry.
However, I would like to stress one more point: looking at the deep cooperation between Slovenia and Austria, there is almost no industry where companies are not active. Having said that, our offices explores, uncovers and promotes various industries, which are potentially interesting for Austrian companies. For 2020, we planned a wide portfolio of events and delegations in the following sectors: automotive, medical technology, logistics, recruiting, tourism, software, organic foods, green tech and many others. Partners and interested companies are always welcome – check out our website www.advantageaustria.org/si for more up-to-date information.
Having in mind that both Austrian and Slovenian economies are shifting toward digital economy, are there new venues for cooperation in
that field?
New technologies play a key role to stay competitive in a global market. More and more “traditional” companies are realizing that the speed of change in their respective industries can be mind-blowing. Lately, we see more and more interest from IT companies to expand into Slovenia and Austria – the demand is definitely growing and the “digital markets” are basically border less. There are already some success stories in this field, for example, the collaboration of the Slovenian software firm Epilog and Austria’s warehouse specialist Knapp. A recent visit to one of the leading Slovenian IT firms Comtrade also showed many current touch points with Austrian companies. I am sure this is just the beginning.
We are aware that this topic will stay crucial for the further development of the region. This is why we are planning to increase the cooperation by offering more formats with respect to digitalization. We started earlier this year with a top-level manager’s conference called “AUSTRIA CONNECT Southeast Europe 4.0”. In November 2019 we will lead a Slovenian company delegation to visit the microelectronics cluster in Carinthia, with leading companies like Infineon, Lam Research and the Lakeside Park Klagenfurt. We are also planning to build platforms for cross-border activities in the field of startups, Industry 4.0 and IT services. One crucial challenge both Austrian and Slovenian companies will have to tackle is to find, train and maintain well qualified IT engineers and software designers.
How the shortage of the skilled force in Slovenia and the region could be addressed?
The shortage of skilled workers has increased due to economic growth. This phenomenon can be seen all over the world. Most of the professions in demand require training, and not a university degree. Medium-skilled occupations like these represent 40% of the jobs covered by the OECD – and demand is rising steadily. Together with Slovenian and Austrian partners, our office is very much involved in the Dual Vocational Training. The special feature of this type of training is that besides school based learning, about half or even more of the training takes place in companies, where the apprentices gain first practical experiences and become a valuable part of the team.
The necessity for projects like this is obvious. Although there are several vocational schools in Slovenia offering vocational education, for example welders, there have only been three applications for welding classes all over Slovenia in the past two years. Through the EU-funded project INNOVET, this school year started with a first class of 14 students. This has been achieved through promotional activities aiming to increase the attractiveness for so-called “blue collar” jobs.
The region need to connect and share knowledge
We are proud to have organized the International Business Conference Austria Connect Southeast Europe 4.0 a unique conference for managers and business partners of Austrian companies, which took place in May 2019 for the first time in Slovenia. Together with the IEDC – Bled School of Management, one of the most renowned educational institutions for executive education in Southeast Europe, we looked at the challenge of digitization and the role that decision-makers play in transforming companies. Under the motto Digitalization – Competence – Transformation we explored exactly the issues mentioned previously. How will digital change affect future products and services? Which skills will top executives need to tackle transformation in business and society? What are the business models driving success in the future? In various panels and workshops, top experts from IEDC and successful CEOs in the region put a spotlight on necessary strategies to be part of the change. Some of the main take-away messages stressed the fact that companies in the region need to connect and share knowledge. It is important to understand that digital transformation is about people, not so much about technology. This means human resources and the role of leadership is critical. Also, in order to adapt business models to the digital age, companies need to go back to the roots and explore their unique value proposition. In the end, it is a question of corporate culture and up to which extend digitalization will be embraced by employees and the management.