Manufacturing Shapes Economic Development of Upper Austria

Manufacturing is the dominant industry in Upper Austria. Having successfully coped with serious structural problems, manufacturing is again expanding steadily and at an above-average rate. The economy of Upper Austria is dominated by manufacturing which contributes about 30 percent to total gross value added. Upper Austria is a rich industrial region: gross domestic product per capita is somewhat higher (4 percent) than in the EU on average and also higher than in most intensively industrialized Austrian provinces (with the exception of Vorarlberg). Per-capita income is markedly higher in provinces with a higher share of service industries (Vienna, Salzburg); Upper Austria lags behind particularly in the area of producer-oriented services. Economic activity in Upper Austria tends to fluctuate within a relatively narrow band. In the current business cycle, the manufacturing industry in Upper Austria, first driven by the export boom in basic materials and later in components, emerged quickly from the recession. This contrasts with earlier years when economic growth in Upper Austria was dampened by structural problems in manufacturing. From 1988 to 1994, the growth rate (recalculated according to EU standards) for Upper Austria (5.5 percent p.a. in nominal terms) was the lowest of all Austrian provinces. In the transition from mass production to flexible specialization, structural problems tend to be concentrated in the basic-goods industries; in Upper Austria these industries lost some of their former locational advantages in the course of the restructuring process within the EU's Single Market. The reorganization of the nationalized industries and the take-over by foreign companies brought about a radical downsizing of Upper Austria's basic goods industries. Employment was cut by one third; nevertheless, with the exception of the region of Braunau am Inn, none of the production sites experienced a crisis. The restructuring process, which has been nearly completed in the basic-goods industries, is continuing in the apparel industry, but with only marginal effects on manufacturing output in Upper Austria. Plant closures, as a result of low-wage competition from Eastern Europe, as well as the relocation of textile plants undermine the manufacturing basis in the peripheral regions of Upper Austria; this is most noticeable in the Mühlviertel. Structural adjustment of manufacturing in Upper Austria has been facilitated by the relatively well-balanced economic structure of the strongly developed central region, which accounts for about two thirds of manufacturing employment. Some of the job losses in declining branches have been offset by gains in expanding branches. The highest growth rates were recorded by small and medium-sized enterprises in the labor-intensive branches producing components and construction materials; these firms are heavily engaged in the nearby markets of southern Germany and of Austria. Among the human-capital intensive industries, some of which are dominated by multinational companies, enterprises in the transport equipment and nonelectric machinery industries fared best, while firms producing electric equipment did badly. For future economic development it will be of crucial importance whether the improvement achieved by economic policy measures such as the promotion of research and development and the support for special development and technology centers can be sustained. Support for the formation of human capital in manufacturing and the expansion of producer-oriented services are key elements of a modernization drive in a region that is so strongly dominated by manufacturing.Industrie prägt Wirtschaftsentwicklung in Oberösterreich; Manufacturing Shapes Economic Development of Upper Austria