Austrian Trade, Joint Ventures Surge Eastward

AUSTRIA is rapidly reclaiming its once pivotal trading role in Eastern Europe, a market stifled by four decades of communist rule. "Eastern Europe is a natural sphere of interest for us," says Manfred Wimmer, a senior manager at Creditanstalt, Austria's largest bank.

With the collapse of East bloc communism in 1989 and the subsequent development of fledgling market economies in neighboring Czechoslovakia, Hungary, and Yugoslavia, Austria was well-positioned to regain its centuries-old trading influence in the region.

"Just look at the map," Mr. Wimmer says. "Many of these places fall within a 300-kilometer [180-mile] radius of Vienna."

Before World War I and the demise of the Hapsburg empire, Vienna was the hub of a self-sufficient, transnational economy based around the Danube basin.

Although no one in Vienna suggests that Austria should re-establish its former political dominance in the region, trade figures and other economic indicators show substantial and growing economic involvement there.

Eastern Europe, including Yugoslavia, has grown to become Austria's second-largest export market after Germany, according to figures released recently by Vienna's Economics Chamber.

Exports to Czechoslovakia, after a modest 6.8 percent increase in 1989, shot up 72 percent last year, to a total of 8.6 billion schillings (US$716 million). Trade with Hungary also surged last year. That country bought Austrian goods and services totaling 10 billion schillings, up 20 percent from 1989. Trade with Yugoslavia, particularly the northern republics of Slovenia and Croatia, jumped 35 percent last year, bringing Austria more than 12 billion schillings.

Austrian new investment in the region spiraled to nearly $450 million last year, a five-fold increase over 1989 levels.

Although there is no government policy specifically encouraging Austrian industry to head East, Vienna and Rome have forged links with Prague, Budapest, and Belgrade to create the Pentagonale - a regional forum for economic, environmental, and infrastructure development.

Austria has also established itself as a leader in joint ventures. In Hungary, Austrian firms were involved in 1,400, or 35 percent, of 4,000 joint ventures founded last year. In Czechoslovakia, Austrian firms were involved in 612 of the 2,124 mixed-capital companies formed after the fall of the communist regime, a presence second only to Germany.

Austria is also an important lender. Eastern European nations owe about $16 billion. Austrian investment in East Europe so far remains concentrated in construction, tourism, communications, and consumer goods, sectors where industry officials see the greatest potential for profits.

"Now is the time to take chances," says Wolfgang Sima, head of mergers and acquisitions for Palmers, Austria's leading lingerie company. With 103 stores and 176 franchises in Austria, Palmers' domestic market was all but saturated. Managers turned East, opening a store last fall in Bratislava, Czechoslovakia, then a franchise in Prague.

VIENNA itself has seen the the number of foreign companies locating East European operations there double since 1989, from 500 to 1,000.

Meanwhile, Austria formally applied for European Community membership last year and is likely to be one of the first new members when the alliance forms a single market after 1992.

Herbert Krejci, head of the Federation of Austrian Industrialists, says the resurgence of interest in the former Hapsburg lands stems in part from nostalgia.

"The EC must remain our top priority," he says. "The idea of some sort of new Danube confederation is romantic and an illusion. Our empire died in 1918 of its own weaknesses."

But geography remains an advantage. At Creditanstalt's massive Vienna headquarters, built at the height of the Hapsburg empire in 1855, bronze portals still boast of branches in the monarchy's financial centers, including Prague, Budapest, and Trieste. "We want to get back to where we once were," Wimmer says. "The goal is to become an active part of local finance there. We don't want to be viewed as just another foreign bank."