ANB, Vienna exchange help promote CESEE investment region
A group of Austria’s most prominent corporations, which together comprise more than half of the total market cap of the Vienna Stock Exchange, have launched an initiative to encourage Austrian firms to put their money into central and eastern Europe.
The region, labelled CESEE – Central, Eastern and South-Eastern Europe – consists of 23 countries, including Russia, large global players such as Turkey and Poland, and smaller states such as Albania, Macedonia and Moldova.
The initiative, dubbed 21st Austria, is driven by 20 prominent Austrian public companies, together with the Austrian National Bank and the Vienna Stock Exchange. Its aim is to promote investment by Austrian companies into the CESEE regions.
In the view of the firms involved in the enterprise, the European Union is not helping to improve investor sentiment towards the region in the light of the debt crisis. Austria, on the other hand, is well positioned to take on this task, because more than half of its foreign direct investment heads to CESEE countries.
A key destination is Turkey, where Austria has already established itself as the largest investor. From 2000 to 2010, it injected €3.4bn into Turkey’s economy. Another 15% of the country’s FDI flows into Russia.
One of the most attractive attributes of the CESEE region is its growth potential compared to its developed peers. In the next four years, the growth rate is forecasted to reach 20%. This is more than double the expected figure in continental Europe (8%) and well above the 15% expected in the US.
As the region grows, living standards can be expected to increase, creating more spending power among the 420 million population. Again, this number outstrips both the eurozone and the US, which are home to 330 million and 310 million people, respectively.
These factors will, in turn, drive consumption and spending power, boosting demand for goods and services, and the local retail markets. The effect will be felt in various industries, not least the real estate space.
Austria’s property investment firm Immofinanz Group, one of the key participants in 21st Austria, is already capitalising on these growth expectations. It holds 48.8% of its assets in eastern Europe, and expects this proportion to grow in the coming years. Chief executive Eduard Zehetner (pictured) expects investments in eastern Europe to increase to 60% in the next five to ten years. He says: “Our own market is simply not big enough. We need this economic growth [of eastern Europe].”
Before the onset of the 2008 financial crisis, Austrian companies showed a great interest in investing in the CESEE region. Since the collapse of the Lehman Brothers, however, interest in the region has diminished.
Zehetner explains it with a lack of understanding about eastern Europe and the risk it entails. If the promise of superior returns was previously enough for investors, corporates have now become more cautious with their money. The aim of 21st Austria is to rekindle this appetite. Zehetner said: “Small and mid cap companies in Austria need us to share our knowledge to help re-establish the investment sentiment towards the CESEE region. Perception needs to be improved, as negative perception impacts liquidity.”
The range of industries involved in the initiative is highly diverse, underpinning the breadth of investment options available in the region. The list includes Austrian banks such as Raiffeisen, one of the most prominent foreign banks in eastern Europe; insurance companies, such as Uniqa; electricity companies such as Verbund, with a strong presence in Turkey; and construction firms, such as Strabag.
To promote investment in eastern Europe across various industries and to establish Austria’s role in the development of the CESEE region, 21st Austria is holding regular events and road shows, both in and outside Austria.
Aspiring to better standards: 420 million customers in CESEE: