An Austrian diplomat on the opportunities and prospects of cooperation between Austria and Russia in the sphere of construction
Commercial Counsellor at the Embassy of the Republic of Austria in the Russian Federation, Mr Rudolf LUKAVSKY, answers the questions of the “Construction.RU” online journal
— Mr Lukavsky, could you please tell us about the participation of the OMV Austrian oil company in Nord Stream-2 construction. What opportunities and prospects does this project provide for Austria? Is there assistance at the governmental level in Austria?
— The Austrian company OMV is highly interested in participating in the Nord Stream-2 project. The interested Western European Partners (ENGIE, OMV, Shell, Uniper, and Wintershall) have further analysed alternatives to individually contribute to the Nord Stream 2 project. Progress has been made and the partners are optimistic about succeeding in the development of a common understanding for a feasible solution which, if implemented, will be in line with all applicable laws and regulations.
The Austrian OMV group has formed a consortium with Gazprom, BASF, E.ON, ENGIE, OMV and Shell, and will itself invest considerable funds to implement the project. Diversification of the gas supply is of great relevance for Austria. But this project is not only important to OMV, it also provides opportunities in pipeline planning and construction to offer their expertise and technology. Just to name a few, Strabag, Porr and Habau are among the leading in pipeline construction in Europe. Also, the recent statements of the Austrian Economics Minister Reinhold Mitterlehner have underlined the support of the Austrian government and interest in the Nord Stream 2 project.
— Construction.RU repeatedly published pieces of news about the participation of Austrian companies in construction projects in Russia, such as the construction of medical cluster in Caucasian Spas or building an eco-friendly leather manufacture. Are Austrian companies ready to build their own production facilities in Russia? What priorities would you highlight?
— Austrian companies have invested about 5bn Euro in various sectors in Russia with state-of-the-art and modern technologies and are of course ready to localise their production in Russia. Austrian companies are particularly active in the fields of wood-processing, paper mills, the energy sector, construction materials, and automotive and food industries, as well as the field of construction and engineering. Austrian companies active in Russia don’t only serve the domestic Russian market, but also export their products.
— Russian-Austrian economic relations are developing in quite an unfavourable environment. First of all, there is the matter concerning sanctions. How do these circumstances affect the operation of Austrian companies in Russia?
— The bilateral trade between Russia and Austria has suffered severely since 2014. Austrian exports have fallen by nearly 50% over the past three years. In 2013 Austrian exports to Russia amounted to 3.5 bn Euro, and in 2016 they reached only 1.9 bn. Also, Russian exports to Austria have declined from 4,1 bn in 2012 to 2.3 bn. In 2016 sanctions from both sides and the connected bureaucratic burdens have affected our bilateral trade. Sanctions are, however, only partly the reason for the deterioration of bilateral trade. The decline of the Russian economy, the sharp devaluation of the Russian rouble, which made imported products more expensive, and the considerable decrease in investment and consumption lowered the demand for imported products from Austria. This trend might change in 2017, when we expect an increase of our bilateral trade.
— Production of construction materials is among the main targets for Austrian investments in Russia. What attracts Austrian investors in this field? What hurdles do they face?
— The Russian construction industry is very dynamic and has a very large potential in infrastructure, domestic and industrial construction, and therefore offers excellent prospects for Austrian companies who invest in these fields. Renowned Austrian companies like Egger, Kronospan, Hasslacher, Voestalpine, Wienerberger and Lasselsberger are very active in the whole CEE-region and produce goods such as bricks, ceramics, complex steel constructions, wooden panels and many other products.
— In your opinion, which measures encouraging Austrian businesses to invest in Russia would be realistic today?
— Austrian investors invest in Russia because of a favourable tax regime, and also lower production costs in the face of the lower exchange rate. The main reason for Austrian companies to invest is to be close to the Russian market. For those companies which are not producing locally it becomes more and more difficult to participate in large infrastructure and industrial projects because of the preferential treatment of local manufacturers in public tenders. However, a more liberalised, transparent and predictable market would bring more foreign investors than under the current more protectionist system.
Large and important projects such as the FIFA World Cup in 2018 or the space mission launch centre in Vostochni are of particular interest. Austrian companies successfully contributed with their expertise and technology at the Sochi Olympics and can offer their expertise on all from stadium security infrastructure and construction materials to grass pitches.
— Russian Sberbank and Austrian Swarco signed a memorandum of understanding envisaging cooperation in the field of modernisation of the transport infrastructure management system in Russian regions. Could you please tell us about joint infrastructure projects planned or being currently realised by the Russian and Austrian parties.
— Many projects are under discussion and negotiation, but it would be premature to highlight those projects. Also, many projects are on hold or delayed because of budget restraints and adjusted investment plans due to the changed economic conditions. Austrian companies see realistic opportunities not only in the already mentioned pipeline and road projects, but the Russian railway might also be a very important partner for Austria. Especially the two key projects regarding the broad gauge track with a connection to Austria and the high-speed expansion of the Russian railway, whereby Austrian companies can provide both expertise and technology.
— What has been the volume and dynamics of turnover in the construction sector between Russia and Austria during recent years?
— The volume of bilateral projects in the construction sector has varied strongly over recent years, and declined particularly in the last two, but we hope to see a recovery in the coming years. Austrian construction companies have been involved in Russia for many years. For example, STRABAG is one of the leading foreign construction companies in Russia and has implemented numerous projects for more than 20 years. Amongst the former are prestigious landmarks such as the Olympic village in Sochi and the office complex “Severnaya bashnya” in Moscow-City, to name a few.
Austrian companies also occupy niche areas. This is mainly the case of steel construction, where companies such as Unger Steel, Waagner Biro, Haslinger Stahlbau, PEM and Wolf Systembau are amongst those which are active in the market. Despite the decline of the construction sector Austrian companies have nevertheless been able to secure some special and interesting commissions. For example, Waagner-Biro equipped the Lakhta Center in Saint Petersburg with a modern steel-glass construction and Haslinger Stahlbau was awarded a contract for steel construction at the top of Europe`s tallest skyscraper, the Federation Tower, to name a few highlights.
But the importance of the market for building technology and architectural services in Russia shouldn't be forgotten, where Austrian companies have been working constantly over the last few years and excel due to their outstanding expertise.
— Are there plans for joint Russian-Austrian projects in the field of construction, housing and utilities in third world countries? For example, last year, proposals to run joint projects in BRICS states were made at a Russian-Austrian business forum.
— Of course, there are good opportunities for activities in third world markets, in the CEE-region and in Western Europe, but also overseas. Here the possibilities are enormous, from large infrastructure projects in Africa and Asia to mega sports events. Austrian companies are very active in BRICS countries; for example, Austrian companies successfully contributed to large-scale sport events in Brazil, the Olympic Games and FIFA World Cup, and in South Africa.
— How do you spend leisure time in Moscow?
Moscow is a very beautiful city with very attractive offers for leisure, whether it for cultural or sporting activities. Russian theatres, museums and parks offer everything I could expect from a city. I enjoy this a lot. Now in winter ice-skating is a wonderful activity or just walking in the various parks around the city. And when I want to escape the busy city, Russia offers many interesting destinations, from cities to mountains and recreational resorts.