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Sabrina Schütz-OberländerGeschäftsführerin/General Manager, Entwicklungsagentur

Kärnten GmbH/the Carinthian Business Agency,Österreich/Austria

Standortfaktoren für internationale Kooperationen und Betriebsansiedlungen Site-related Factors for international

Cooperations and Enterprise Settlement

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ACEF 2007

Regional Competition

Location factors for settlement of businesses

Sabrina Schütz-Oberländer

Entwicklungsagentur Kärnten GmbH

September 2007

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What top entrepreneurs appreciate about a business location (examples from Carinthia)

„Carinthia is very business-

friendly and the public

authorities are very

cooperative....“

Dr. Othmar Michaeler (CEO Falkensteiner

Michaeler Tourism Group)

„In Carinthia, investors are

provided with professional

unbureaucratic and quick

support....We would also

mention that we have always

personally felt very welcome

here...“

Liane Gnegeler (Managing Director, Geba

Kunststofftechnik GmbH & Co KG)

„Carinthia is a great location for young high-tech companies....“

Walter Puschl (Managing director, Sinnex Innenausbau GmbH)

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Determinants of location selection

• Political, legal and social conditions

• Market acquisition

• Production conditions

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Determinants of location selection (1)• A) Political, legal and social conditions (examples): Legal security and political stability Enviromental regulations Labour market regulation Tax burden Available subsidies

• B) Market acquisiton motives (examples): Size of the sales market Transport costs between the alternative locations and the sales market Competitive situation in the sales market Regional networks and clusters – synergy effects Proximity to universities and other research facilities

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Determinants of location selection (2)

• C) Production conditions (examples):• Infrastructure• Transport links• Means of communication (telephone, internet etc.)• Supply of energy, water etc.• Research landscape/facilities (universities, research /competence centers)

• Production factors in the narrower sense (examples) :• Labour force / Availability of qualified workforce• Raw materials and intermediate products• Availability of land / office space• Quality of life in a region

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Thesis – Findings on the importance of location factors

• Thesis 1The assessment of location factors depends, among other things, on the respective branch of industry.

• Thesis 2The assessment of location factors depends on the respective economic situation of an industry.

• Thesis 3The assessment of location factors depends on the type of decision.

• Thesis 4The assessment of location factors depends on the concrete company requirements.

• Thesis 5The assessment of location factors depends on the environment of the location and thus on personal factors.

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Importance of site factors – Interviews with experts – possible location factors (1)

Averages

• Outstanding innovation resources 4.5• Good availability of highly qualified manpower 4.5• Good transport links 4.4• Beneficial economic structures and

(knowledge-based) clusters 4.3• A flexible labour market 4.2• A high quality of life for the highly

qualified manpower 4.1• A flexible product market 3.8

5 = absolutely essential, 4 = very important, 3 = important, 2 = less important, 1 = not important

Source: BAK Basel Economics, International Benchmarking Forum 2007Workshop 3 “The Quality of Life Challenge”, Richard Kämpf (excerpt)

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Importance of site factors – Interviews with experts – possible location factors (2)

Averages

• Low rates of corporate taxes 3.7• Efficient government structures 3.6• Good availability of office space 3.4• Low rates of personal income tax 3.2• Governmental business development

programmes 2.9• Low costs of production (labour, offices…) 2.7

5 = absolutely essential, 4 = very important, 3 = important, 2 = less important, 1 = not important

Source: BAK Basel Economics, International Benchmarking Forum 2007Workshop 3 “The Quality of Life Challenge”, Richard Kämpf (excerpt)

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Examples of location factors

- The international competition

12 Source: IMD World Competitiveness Yearbook 2006

Overall productivity (PPP)(GDP per person employed, in US$ )

0 10 20 30 40 50 60 70 80 90

India

China

Bulgaria

Romania

Russia

Croatia

Slovak Rep.

Czech Republic

Hungary

Slovenia

Germany

Italy

France

Austria

USA

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Total Expenditure on R&D (% of GDP)

Source: IMD World Competitiveness Yearbook 2006

0 0,5 1 1,5 2 2,5 3

Romania

Bulgaria

Slovak Republic

India

Hungary

Italy

Russia

China

Croatia

Czech Republic

Slovenia

France

Austria

Germany

USA

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Corporate Tax Rates

Source: KPMG`s Corporate an Indirect Tax Rate Survey 2007

1 Jan 2007 1 Jan 2007

Bulgaria 10 % Austria 25 %

Hungary 16 % China 33 %

Romania 16 % France 33,33 %

Slovak Republic19 % India 33,99 %

Croatia 20 % Italy 37,25 %

Slovenia 23 % Germany 38,36 %

Czech Republic 24 % USA 40 %

Russia 24 %

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Quality of life – Ranking (1=very good)

Source: IMD World Competitiveness Yearbook 2006

1 Austria11 Germany19 USA20 France27 Czech Republic30 Italy34 Slovenia41 Hungary42 India45 Slovak Republic47 Croatia51 China57 Bulgaria58 Russia61 Romania

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Wages and supplementary benefits (in US$)

Source: IMD World Competitiveness Yearbook 2006

0 5 10 15 20 25 30 35 40

Germany

Austria

France

USA

Italy

Slovenia

Croatia

Czech Republic

Hungary

Slovak Republic

Bulgaria

Russia

China

India

Romania

Total hourly compensation for manufacturing workers

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Production – automotive supply industryBasically, automotive suppliers are driven by three motives to establish new production plants:

• (1) Market-orientated location decisions (presence in important markets, e.g China)

• (2) Cost-orientated location decisions ( relocation of production to low-wage countries, e.g. Romania)

• (3) Process / customer-orientated location decisions (settlement in the immediate vicinity of customers, e.g. supplier park)

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Services - tourismLocation factors particularly relevant for tourism:

• Basic conditions ( e.g. labour costs in the hotel industry, regional accessibility of the tourist region)

• Supply factors (e.g. accommodation offer, tourism offer, prices, tourism intensity)

• Demand factors (e.g. degree of internationalisation, seasonality of demand, length of stay)

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Effects of location decisions

• Decisions for a certain location are connected with an expansion or at least maintenance of existing jobs

• Additional earnings for the regions or local authorities from e.g. company related taxes

• New settlement decisions have an effect on the regionally settled suppliers

• Increase of local purchasing power• Time plays a more and more important role for almost all branches

of industry• Therefore, a location will only withstand national and international

competition if it has a good mix of relevant location factors in the areas of strengths that are specific to the region.

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Carinthia offers you many advantages

• 25% corporate income tax for companies as well as various possibilities of setting off items against taxable income

• Innovative economic atmosphere and an attractive funding environment in the heart of the new Europe

• Low costs for well-situated plots of land with excellent infrastructure

• Qualified workers at a favourable ratio of productivity to costs• Geographical situation: ideal location to work in the Southern

and Eastern European markets• High quality of life

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THANK YOU

FOR YOUR

ATTENTION!

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ContactEntwicklungsagentur Kärnten GmbHCenter for innovation and technology

Sabrina Schütz-Oberländer

CEO

Primoschgasse 3, A-9020 Klagenfurt

Tel: +43 (0)463 / 3875 118

Fax: +43 (0)463/ 3875 112

office@entwicklungsagentur.at

www.entwicklungsagentur.at