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Hungary, Short Economic News, April 2010 Politics
Landslide victory of Fidesz
In the second round of general elections on April 25 Hungary’s centre-right Fidesz won a
two-thirds legislative majority with 262 mandates in the 386-seat Parliament. Fidesz failed to
win in only three of the remaining 57 individual districts. With nearly 98% of the votes
processed far-right Jobbik seems to have secured 47 seats, while the Socialist Party (MSZP)
will have 59 in the next parliament. Green party LMP ('Politics Can Be Different’) added 11
more mandates to the five it secured in the first round no 11 April. The Hungarian Democratic
Forum (MDF) and the liberal Free Democrats (SZDSZ), two parties that had assumed a major
role in the change of regime, have dropped out.
No single party has won such a majority since the change of regime in Hungary, but the twothirds
Fidesz has represents a power that is unique even in Europe. The majority Fidesz-
KDNP has means there is no legal obstacle for the party (or alliance if you will) to pass any
legislation, except for creating a new constitution. Two-thirds majority is required in 49
issues, according to the Constitution, 17 of which require voting by two-thirds of the MPs,
while any modification to the rest needs no more than a concurring vote by two-thirds of
those present at the vote.
The 'supermajority’ will allow Fidesz to adopt sweeping structural reform, for example
suppress part of the 3,200 local governments to save money, amend the media law, grant
citizenships to Hungarians living abroad (this may raise tensions with neighbouring
countries).
The financial markets greeted the results, the domestic currency firmed somewhat on the
election news. Morgan Stanley’s analysts said that the issue it found by far the most
controversy around was the fiscal deficit picture after Fidesz gets into office and implements a
fiscal audit. "For that reason, any upside revision to this year’s deficit target (3.8% of GDP)
will be the outcome of a negotiation with the Fund. Essentially, Fidesz will deliver reform
plans in return for a deficit target which is less detrimental to the growth outlook. This is very
different from outright fiscal easing," the analysts added. As a result of the aforementioned,
Morgan Stanley sees a "high probability" that later this year Fidesz will choose to revise the
deficit target up to around 5% of GDP . The International Monetary Fund (IMF) and financial
markets would likely tolerate if Hungary’s new government revised the 2010 budget deficit
target to no more than 6.0% of GDP from the 3.8% current target, The Wall Street Journal
cited economists as saying. In an article headlined 'Orbán Talks Tough on Debt’ the paper
addressed Fidesz President Viktor Orbán’s press conference held the following morning after
the party secured an unprecedented two-thirds majority in Parliament.
Unemployment
Unemployment historic high
Hungary’s rate of unemployment ticked further up to a record high of 11.8% in the first
quarter of 2010 from 11.4% in the previous three-month period, the Central Statistics Office
(KSH) has reported. The rate of employment has also continued to drop and reached a 12-year
low. The three-month moving average seldom jumps as dramatically from one month to
another as it did in December 2009-February 2010 (to 11.4% from 10.8%), but the 0.4% rise
is almost as bad. Interestingly enough, an even sharper increase (0.6%) was observed in the
very same period a year ago, as well. The Q1 print is up 1.3% from Q4 2009, which is
considered a staggering increase even though we are aware that season factors could be
responsible for this jump.
There is hardly any information available as to why the jump took place. The KSH's
preliminary report fails to provide an explanation for the U-rate rising to levels last seen
around the change of regime. What is evident, though is that no matter how strong a start the
industry had this year, domestic demand remains feeble, so we still have to wait for
favourable processes to kick off on the labour market. Over the past two years, 130,000-
140,000 people lost their job in Hungary. The number of unemployed was 497,800 in
January-March, some 95,000 more than in the same period of 2009 and about 170,000 more
than at the onset of the economic crisis.
There were 3.72mn people employed in the first quarter in the population aged 15-74, about
45,000 less than in the same period of 2009, but nearly 200,000 less than three years earlier.
The employment rate is currently at 1998 levels.
The number of those economically inactive totalled 3.47 million, down by some 60,000 yearyear.
The participation rate rose to 54.9% in the first quarter from 54.7% in December -
February and also up from 54.1% in the first quarter 2009. The rise in the U-rate is faster than
the market expected. If what the analysts project becomes a reality, the peak in Hungary’s
jobless rate will be reached in the second or third quarter at a figure well over 12%. The good
news is that those losing their job do not leave the market altogether, i.e. they do not flee into
inactivity as before. The activity rate in Hungary has even ticked up over the past year.
Fiscal policy
2009 deficit overshoot
Hungary has missed its budget deficit target in 2009, the Central Statistics Office (KSH)
revealed what the Finance Ministry was awfully shy to accept, but what the central bank has
already said in its quarterly Inflation Report. The shortfall came to 4.0% of GDP, against the
3.9% target. You may call this difference negligible and you may be right, but it’s awkward
since the preliminary data implied even a possible undershoot of the goal. Basically, it was a
HUF 20bn overshoot in the deficit of local governments that caused the larger-than-targeted
shortfall. But we have to give it to the government that it has managed to keep budget
processes in check despite a massive economic contraction. And let’s not forget that the
primary balance showed a 0.7% of GDP surplus, against the 0.5% plan.
Hungary’s general government had a deficit of HUF 1,035bn in 2009, which corresponds to
4.0% of gross domestic product. Compared to 2008, the gap is HUF 30bn or 0.2ppt of GDP
wider than in 2008. The larger deficit can be attributed to the fact that revenues dropped more
than expenditure.
According to ESA-95 methodology, general government revenues totalled HUF 11,949.5bn,
spending came to HUF 12,984.5bn, so the balance was HUF -1,035 bn. Following a 3% rise
in 2008, government spending eased by 0.6% yr/yr in 2009. There was a dynamic increase in
interest expenses (10.4%) and intermediate consumption (4.1%), while gross fixed capital
formation and compensation of employees declined by 7.7% and 4.9%, respectively. Social
benefits (other than social transfers in kind) decreased only slightly.
Monetary policy
Rate cut continues
The Monetary Council has reviewed the latest economic and financial developments, voting
to reduce the Central Bank base rate by 25 basis points from 5.5% to 5.25% with effect from
April 27, 2010. In the Monetary Council's judgment, Hungarian growth is likely to resume
this year as the economy recovers from the sharp downturn of 2009. Inflation is expected to
fall below the Central Bank's target next year, reflecting the effect of weak domestic demand.
There remains considerable uncertainty about future conditions in global financial markets.
Even though justified by the outlook for inflation and the economy, interest rates may only be
reduced further if changes in perceptions about the risks associated with the economy allow it.
Hungary is always five year away from adopting Euro
As to the consensus forecast for Hungary’s EMU entry prepared by economic portal Portfolio,
it came to 2015 against 2014 previously for the second month in a row. The median forecast
for ERM-2 membership remains 2012.
With this result Portfolio arrives at the old conclusion that said Hungary is always five years
away from the adoption of the single European currency. This phenomenon came to an end in
2006 when the market turned disappointed enough to put the likely date of euro zone
accession from 2010 right to 2013-14. From then onward the estimate has been stable for a
long time, but now that the five-year distance would have shortened, the median prognosis
rose to 2015. In any event the Economic Minister elect, György Matolcsy said that Hungary
could set a credible euro zone accession date only by the end of next year.
Competitiveness
AmCham on the energy sector regulation
The independence of the Hungarian Energy Office (MEH), the country’s energy sector
watchdog, should be increased or a public utility regulator should be set up to increase the
country's competitiveness, the American Chamber of Commerce (AmCham) said. "Hungary
does not have a consistent energy policy evaluation framework that would enable
policymakers and investors to correctly establish priorities and create a roadmap towards
energy security," the AmCham said in a position brief.
In the current situation, Hungarians on average, both consumer and industrial, pay relatively
more for their energy while using it less efficiently than their Western European counterparts.
"This weakens Hungary’s national competitiveness while simultaneously lowering consumer
spending on non-energy categories," the AmCham noted. Hungary spends 16% more energy
to produce a single euro of GDP than the European average, close to double the amount
needed by European competitiveness champions such as Denmark and Ireland. Germany uses
less than half the amount of energy. "The Hungarian government can take a number of
actions in the domestic economy to improve this situation, as well as initiate better cooperation
regionally," the AmCham said suggesting that:
1) "there must be clear, consistent, transparent and independent regulation, fully separated
from the execution of social policy and independent of the political process. This would
attract investment in Hungary’s energy value chain by levelling the playing field by ensuring
fair competition."
2) "energy efficiency must be promoted at the industrial, consumer, and government levels.
This would benefit the energy sector as well as public and private energy consumers. [...]
Predictable and enforceable EU and post- Copenhagen climate policies should be applied,
with a comprehensive quota allocation process that gives tangible incentives for energy
efficiency."
3) "the government must enthusiastically embrace renewable and nuclear energy through
bold, unchangeable and sustainable energy policy. Hungarian targets should be adjusted to
meet or exceed those of Europe. Tax incentives should be increased to focus on R&D and
investments, especially in potential Hungarian champions such as closed-loop biomass and
geothermal."
German chamber on the economic conditions
Economic conditions have improved in Hungary, but there is a lot to do to cut red tape, fight
corruption and make public procurement more transparent, the German-Hungarian Chamber
of Commerce (DUIHK) announced.
The DUIHK has conducted its annual business confidence survey for the 16th time, with the
participation of 174 companies. Most of the respondents were German-owned companies, but
French, Austrian and other foreign-owned companies took part in it, as well. The confidence
of German-owned (and other foreign-owned) companies shows a great improvement
following last year’s dramatic decline, but it the DUIHK’s confidence index, DISI, has not
swung back to the positive side. The investor sentiment index rose to -2.5 points from -29.5 in
2009, but remains far even from the already low +7.9 figure of 2008. In 2005, the DISI index
was still as high as 17.9%.
Nearly two-thirds of the companies in the survey continue to consider the state of the
economy as bad, and only every sixth respondents project improvement in 2010, while 28%
of them expect things to turn for the worse.
There was no major change compared to the 2009 poll in regard to how the companies assess
their own line of business, with 27% of them still saying conditions in their sector are bad (vs.
32% last year), but more of them deemed their business environment good (20% vs. 16%).
The respondents’ investment and employment plans clearly reflect the level of confidence,
with 35% of the companies in the poll saying they would cut back investments this year. Only
19% of them plan to spend more than in 2009. Only 21% of the respondents said they had
plans to expand staff, while 24% said layoffs lie ahead for them.
It is worrying though, that exactly those areas failed to be improved that investors have been
naming as the most critical ones for years, the DUIHK said. Moreover, the companies have
observed deterioration in certain cases. The companies continued to urge authorities to cut
bureaucracy, step up the battle against corruption and make the system of public procurement
more transparent. The economic policy areas receiving the harshest criticism remained the tax
regime and the excessive tax burdens.
More importantly, as in 2009, 80% of the respondents said they would still choose Hungary
for their investment if they had to decide today. This is also the average figure for the past 13
years. This result confirms what the DUIHK believes is one of the key messages of the
survey, namely that German investors in Hungary think long term, and short-term negative
implications on their business do not change their original intentions.
Business environment
Hungarian M&A market to grow in 2010
The market of mergers and acquisitions in Hungary could expand at a rate of 10- 20% in 2010
after a slump last year, the Hungarian unit of international consultancy BDO International
said. Venture capital investment in Hungary fell from EUR 491mn in 2007 and EUR 488mn
in 2008, but it could grow this year, in parallel with a decrease in bank finance and the
emergence of attractive targets with depressed prices in several branches of the region,
according to BDO Magyarország.
Expectations improving
Eurozone recovery gained further momentum in April, with both the services and the
manufacturing purchasing manager indices up from the respective March prints. Both
indicators came in higher than expected. The Markit Flash Eurozone Composite Output
Index, based on around 85% of normal monthly survey replies, rose to 57.3 from 55.9 in
March, indicating the largest increase in private sector output since August 2007 and the ninth
successive monthly improvement. Germany’s manufacturing PMI has risen to a never-beforeseen
high, which is splendid news for economies in CEE, among them Hungary, the key
export market of which is Germany.
Legislation
Civil code on Business secret
The new Civil Code provisions on personal rights define what qualifies as a business secret,
on the basis of well-established practices. Under these provisions, a business secret may
consist of any facts or data or, as has now been added to the definition, a compilation of
information, used in one’s business. Such information will only be protected from
misappropriation if it gives its holder an economic advantage over competitors who do not
know or use it, and if it is subject to reasonable efforts to maintain its secrecy. Data stored in
an unsafe manner may not qualify as a business secret, and therefore businesses will need to
periodically check and update the systems they use to safeguard sensitive business
information.
In addition to the above, information related to the allocation of public funds and public goods
may not be classified as secret, because transparency must take precedence over business
confidentiality in certain qualified cases (e.g. data relating to the use of European Community
subsidies). Companies that maintain business relationships with public bodies receiving
funding from state and local government finances must bear in mind that they cannot deny
requests for information about their activities. For instance, the information requested may not
be withheld on account of business confidentiality or by claiming that the public body in
question has not consented to the disclosure.
Contrary to the earlier provisions, the new Civil Code ensures the protection of know-how
(i.e. proprietary information in the form of technical, economic or procedural knowledge,
together with accumulated skills and experience) as a special type of business secret, provided
that it is not known to the general public, has economic value, and reasonable measures are
taken to protect it. In addition to the right to compensation, in the event that a business secret
(including know-how) is breached, the injured party will also be entitled to request the courts
to issue a cease-and desist order to the offending party requiring it to halt any further use of
the business information concerned, to destroy any assets created as a result of the breach, or
to confer any resulting pecuniary advantage to the injured party. However, the new
regulations will continue to bar the holders of know-how from taking legal action against
those who have acquired the same knowledge independently and in good faith or have
developed it on their own. Therefore, the legal protection afforded to know-how is still below
the level of protection given under copyright law.
EU funds
MAPI, assistance in tendering.
The Hungarian Grant Agency (MAPI) is the leading grant management consulting companies
in Hungary. MAPI delivers full-scale grant consultancy services to corporations and local
governments in order to achieve their investment and development targets. The key goal of
MAPI is to help the client utilize the best fitting grant within the shortest period of time.
MAPI’s key services: grant consultancy, project development, grant application, grant
monitoring, aftercare services, financial reporting, grant project management, handling
development related tax allowance and projects based on special government decisions,
feasibility studies and cost-benefit analyses. To date, MAPI ‘s services lead to EUR 300mn
granted, 1.000 consigners, 80% repeat customer and a 95% success rate.
New priority developments announced
The Hungarian government has decided to fund 39 more priority projects, among them 7
tourism developments. These include the renovation of the Royal Castle of Gödöllő, the
tourism and visitor centre in Eger’s Castle and Bishop’s Palace, eco-tourism developments in
Diósgyőr and Lillafüred and in the Aggtelek Nature Park; Tihany also received support for
the Legend Project.
EU funding for tourism developments in Máriapócs and Nyírbátor
The priority project bearing the title "Faith and Health - cooperation between Máriapócs and
Nyírbátor for developing religious tourism" costing a total of nearly HUF 3.4bn to complete
will be implemented with the help of EU funding amounting to HUF 2.4bn under the New
Hungary Development Plan. This project, implemented in several phases, is aimed at carrying
out complex religious and health tourism developments in these two settlements and
preserving the region's cultural, architectural and historic heritage. The thermal complex in
Nyírbátor, which was constructed within the framework of this project, offers various pools
for swimmers and bathers, a wellness centre with saunas, aromatherapy, infrasauna, salt-cave
and massages and a special section dedicated to therapeutic treatments.
Dutch presence in Hungary
De Lage Landen signs cooperation agreement with DAF Trucks Hungary
De Lage Landen International B.V., a global provider of high-quality asset-based financing
products to manufacturers, distributors and resellers of capital goods, and Hungarotruck Kft.,
representing DAF Trucks in Hungary, have entered into a local cooperation agreement. The
conclusion of the cooperation agreement is a true sign of partnership; by partnering together
De Lage Landen and DAF both became market leader last year in the heavy transport
segment.
Managing Director of Hungarotruck Kft. Jozsef Pais: “We are pleased to start the
cooperation with De Lage Landen; their financing services will support Hungarotruck and its
customers to a great extent. We have achieved a market leading position in 2009 – already
with the support and participation of De Lage Landen and we look forward to repeat or even
exceed that performance in the coming years. In the current market conditions it is essential
to have a financing partner for our customers who strategically approaches Hungary in a
way De Lage Landen does.”
Emiel van Onzenoort, Country Service Unit Manager Hungary and Attila Illes, Country Sales
Manager Hungary: “The cooperation with DAF supported De Lage Landen in creating a
sustainable footprint in the Hungarian market. The cooperation also evidenced that
partnership adds sustainability in business. We are therefore very pleased to have closed
together 2009 successfully and are convinced that the cooperation will be developed even
more successfully in the coming years.” De Lage Landen is a global provider of high-quality
asset-based financing products. Headquartered in Eindhoven (the Netherlands), De Lage
Landen is 100% owned by Rabobank. This Dutch bank is Triple-A rated by the major rating
agencies Moody’s and Standard & Poor’s.
Metadat Kft. (http://www.v-tfiltergroup.com/en/frames/company.htm)
In April, the Royal Netherlands Embassy visited the machine and water filter company
Metadat Kft located in Nagykörös, South-East of Budapest. The company is 100% owned by
the Dutch V&T Group, specialized in self-cleaning filter devices. With more than 15 years of
experience in handling liquid purification, the companies of the group employ a number of
filter-specialists. V&T Group has its own production facilities and manufactures. V&T
designs filters under ISO 9001.
Active in the following markets:
- Agro Industry
- Automobile Industry
- Chemical & Petrochemical Industry
- Food Process Technology & Drinks Industry
- General Industrie
- Civil Installations
- Paper
- Power Plants
- Sugar Industry.
Zorge Kft.
In April, the Royal Netherlands Embassy visited the rubber producing Zorge Kft, located in
Nagykörös, South-East of Budapest. A Dutch family business, Zorge has been supplying
customer-specified precision components for high-tech equipment and systems since 1952.
More than 55 years of unrivalled know-how and experience in the production of sealing,
gaskets, bellows, dampers, membranes, grommets, valves and other products in rubber and
plastic. From production facilities in the Netherlands and Hungary, they supply much more
than just rubber: www.zorge.com.
Developments on the Dutch market
Significant Dutch innovation in forensic investigation
A number of leading knowledge institutes and high-tech companies in the Netherlands are
working on project CSI The Hague to improve forensic science. Partners in the consortium
are the Netherlands Forensic Institute, Philips, TNO, TU Delft, AMC, Capgemini, E-Semble,
Forensic Technical Solutions, Thales, Noldus Information Technology, Chess, Eagle Vision,
the Technology Investment Group and The Hague University of Applied Sciences. The
project, which is unique in the international forensic world, is receiving considerable attention
from abroad. With the help of techniques being developed within CSI The Hague, future
professionals will be trained in a virtual environment, based on realistic cases. For example,
the project has developed a special helmet equipped with sensors to digitally survey and
record a crime scene, enabling the investigators to search later for clues that may have been
missed initially. Being able to store the scene digitally offers valuable possibilities for the
forensic investigation. These latest developments also provide the opportunity to improve
training in investigation techniques and protocols.
Six reasons to invest in the Netherlands
Read more about the strategic location of the Netherlands in Europe, our international
business environment, superior logistics and technology infrastructure, favourable Dutch
fiscal climate, our highly educated, multilingual and flexible workforce and the quality of
Dutch life on www.nfia.nl
Industry
The processing industry is slowly recovering
The Global Purchasing Index in March broke a 70-month-record in Hungary by growing to
55.4 points up from 53 in February, while Bloomberg analysts in general counted with 54.
This is good news for the Hungarian processing industry. Within the main data, in terms of
the sub-indexes, employment index is also giving reason to optimism - since December 2007,
it was in March that it got closest to the crucial 50 points. On the list prepared by JP Morgan,
Hungary is showing a mixed performance - looking at the change since March, the rate of
expansion in the processing industry has slowed, but the 54.4 points is a good value on a
global scale, even going against the world economy trends. All in all, the market analyst
institute says that the sector's outlook is positive.
Air Liquide building EUR 6mn facility
Industrial gas manufacturer Air Liquide is investing EUR 6mn to build a new bottling facility
in Felsőpakony, Pest county. The project will raise capacity to 600-650 bottles daily within
five years, said sales director Gábor Hamsik. The company also exports to Slovakia and
Romania. Air Liquide revenues fell 4.8% in 2009 from HUF 4.4bn in 2008, because largescale
manufacturing declined in Hungary, he said. That is why Air Liquide is now targeting
smaller companies, Hamsik added. He sees potential breakthroughs in sales for gas used in
welding and in food packaging. Air Liquide had an 8% share of the HUF 52bn Hungarian gas
market, but supplies 50% of industrial gases used in the electricity sector.
Sanyo expands further
Japan’s Sanyo Electric Co Ltd. has started to install machinery in the third production hall at
its Hungarian plant in Dorog. Investment costs totalled HUF 4.5bn (EUR 16.97mn), of which
the European Union and the Hungarian government financed HUF 900 million, which Sanyo
won in an EU tender, the company has announced. By adding "SOLAR III" to production,
Sanyo Hungary will be able to manufacture solar panels of 315 megawatts annually by
January 2011, administrative director Csaba Horváth told a press conference. The new facility
will boost the company’s export capacity by 30%. The first production line will be fired up by
the end of September and the second phase of the launch will take place by December. Sanyo
Hungary is to hire 200 people in each phase. The Solar III unit was set up in an existing
production hall on 9,000 square metres. The technological development consumed HUF 3.7bn
of the HUF 4.5bn budget. Sanyo built its first plant in the country in the Dorog Industrial Park
in 1999, where it manufactured air conditioners, mobile handsets, batteries for hand tools and
rechargeable batteries. By 2007 it boosted its headcount to 1,350.
Sanyo began manufacturing solar modules in Hungary in 2005 and mass production in its
second photovoltaic module plant started in 2007. Cumulative production of HIT solar cells
topped 100 million units in that year. HIT (Heterojunction with Intrinsic Thin-layer) hybrid
solar cells are created by combining amorphous silicon and crystalline silicon and using an
intrinsic semiconductor. The current expansion will increase Sanyo Hungary’s staff to its
previous size and it will be the biggest solar module assembly unit within the Sanyo group.
Sanyo was ranked as the 10th or 11th biggest solar module producer in the world in 2007 and
aspires to propel itself to the top four by 2012.
Automotive
Federal Mogul expects rising revenues
Car parts maker Federal Mogul Hungary expects revenue to rise to HUF 13-14bn this year,
based on the 30% year-on-year growth in first-quarter sales. Revenue was HUF 12bn last
year, down from HUF 15.4bn in 2008, said Gyula Ferenczi, director of the factory in
Kunsziget, Győr-Sopron-Moson county. The factory exports 95% of its output. Domestic
sales go to Audi in Győr and Opel in Szentgotthárd. Federal Mogul produces ball bearings,
windscreen sweepers and gaskets.
Gestamp relocates work to Hungary
Spanish car parts maker Gestamp Automoción is moving more production from Western
Europe to its factory in Mór, Napi Gazdaság reports. Gestamp started to move production to
Mór after acquiring Germany’s Edscha Group last autumn. An additional 50 workers were
hired to produce metal parts for chassis and other components at the Mór facility. Gestamp
recently announced a EUR 6mn development project in Hungary, including a new 5,000m2
painting facility. The company aims to increase revenues by 40% this year to a net EUR
35mn.
Bus makers form a business cluster
A total of nineteen bus makers and suppliers have formed a business cluster to enhance cooperation
and increase their competitive positions on the market. The government oversaw the
creation of the loose alliance, which aims to bring different parties together in order to help
revive Hungary’s ailing bus manufacturing sector.
There are five bus companies in Hungary, win a combined annual manufacturing capacity is
1,500 units, but in recent years they have received orders for only a few hundred buses,
government commissioner István Fórian said. Companies need to join forces and co-ordinate
their research and development to produce a competitive products, he added.
In all half of the capacities of Hungarian bus makers could be taken up by state orders, as state
coach company Volán and Budapest transport company BKV will be replacing their old
vehicles. Cluster members say they feel discriminated against in public procurement tenders,
Népszabadság writes. Székesfehérvár Alfabusz is on the verge of bankruptcy after the Public
Procurement Arbitration Court rejected its appeal to reverse a tender ruling by Volánbusz to
supply at least 130 buses.
Ikarusbus, Rába plan new model bus
Ikarusbus and auto parts maker Rába have joined forces with Auto-Rad Controlle to
manufacture a new line of Ikarus buses, it was announced yesterday, one week after bus
makers and suppliers formed a business cluster. The new venture will produce a new, modern
family of buses by the end of the year, Ikarusbus CEO Ferenc Princz told reporters. The
companies will manufacture low-floor urban and suburban buses in the disused Ikarus factory
in Budapest’s 16th District and possibly in Miskolc, Népszabadság writes.
Annual capacity is 350 units, and Ikarusbus aims to put 300 buses on the roads by 2011, based
on expected orders from the BKV and state coach company Volánbusz. Test runs of the new
models, which conform to the toughest EU environmental standards, will begin soon on BKV
and Volánbusz routes. The buses will be 30-40% cheaper than their Western European rivals,
but will cost 20-30% more than the Chinese models introduced in Hungary. The company is
also looking for external markets and will begin talks with the city of Moscow soon.
Samyang constructs EUR 11mn plant in Hungary
Korea's Samyang is spending EUR 11mn to build a plant in the Hungarian city of Jászberény,
which will make plastic parts for the electronics and automotive industries, deputy-CEO
Chong Yeol Lee said in Budapest. The plant, scheduled to start test operations in December,
will produce 10,000 tons in parts each year. Consumer electronics company Samsung will be
among its business partners. The operation, run by Samyang's chemical business offshoot,
will also compound its own engineering resins. The plant will start production in December.
Samyang Corp., based in Seoul, has subsidiaries which make food, animal feed,
pharmaceuticals, medical devices and industrial fibres.
Construction/Infrastructure
Construction down by 10% in February
In February 2010, the volume of construction activity decreased by 10% compared to
February 2009. In the first two months, output of construction went down by 11.7% on
January-February 2009. According to seasonally adjusted indices, production - after a fall of
11pct in January - was 6% higher in February than in the previous month. The volume of new
orders in February was 38% higher than in February 2009. Within this, new contracts for
building construction grew by 15.4%, and new orders for civil engineering works expanded
by 61%. These significant growths derive from the high-value contracts signed for the
construction of educational and sport buildings, hotels, tram lines in provincial towns, public
utilities, highway and road construction. In January-February, the volume of new orders was
29.8% higher than one year ago.
A total of 145 new kilometres are handed over on motorways 6 and 60
The town of Pécs in the South of the Transdanubian region can be reached by motorway from
now on, as the M6 motorway passage from Dunaújváros to Bóly and the M60 passage from
Bóly to Pécs, an altogether 145 km-long road, are handed over on the 31st of March.
Hungarian motorways will grow to 1098 kilometres with this investment. On the new
motorway passage four tunnels, totalling 81 kilometres, have been built. The longest is 1331
meter-long. There is a 24-hour camera system installed monitoring the traffic, and fire alarms.
They have also built temperature, speedometer and traffic counter appliances inside the road
surface.
Operators will have good access to intervene in case of emergencies, and via the public
address system they can give orders to those in trouble. The construction of the M6 motorway
lasted two years and cost more than HUF 270bn. The economic department calculates
approximately HUF 1bn per month for the second phase of M6 and HUF 1bn in total for the
third phase.
Services
New centres would create 2,000 jobs
There is significant growth potential in customer service centres in Hungary, as 80% of the 82
companies operating in Hungary are in an expansion phase, according to a study by global
consulting firm PriceWaterhouseCoopers. A further 10-12 such centres are planned for
Hungary, which would create more than 2,000 jobs in two years. Hungary is the number two
location in the region after Poland for setting up customer service centres, the report said,
adding that the sector employs 30,000 here. The sector is typically anti-cyclical, which means
that it benefits from recessions, when companies are more inclined to outsource services, Napi
Gazdaság observes.
Financial services
Banks profits up but credit still tight
The profitability of Hungarian banks remained strong last year, despite the economic crisis, as
pre-tax profits in the sector were up 5% to HUF 309bn, the National Bank (MNB) reveals in
its stability report. Banks managed to increase net interest revenues last year despite falling
interest rates, while high yields on bond markets also boosted their bottom lines. As bond
yields have dropped in 2010, banks can preserve current profit levels only by maintaining
high interest-rate margins or increasing lending activity, the MNB said. Interest rate margins
continued to rise this year, which poses risks to economic growth.
Corporate lending is restrained by low investment activity and a slow rise in production, the
MNB said. The banking sector’s loan-to-deposit ratio declined in 2009. The sector’s financial
risks subsided somewhat last year, but the high percentage of foreign-currency debts and high
interest rates remain concerns.
Loan portfolio quality deteriorated last year, as non-performing loans shot up to 10% for
companies and 8% for households. Losses from bad loans were up 2.5% for both segments
combined. The stress test of the sector shows that both the liquidity and capital position of
banks improved last year. The high rate of foreign-currency loans, means that banks may need
HUF 40-50bn of fresh capital if the economic crisis deepens.
Banks expanded in February
Total assets of the Hungarian banking sector grew by more than HUF 250bn to HUF
29,263bn from January to February, the financial supervisory Pszáf announced. However,
total assets of banks operating as shareholders companies were down 3.2% year-on-year.
Total loans fell by HUF 100bn in February to HUF 18,179bn.
Credigen pulls out of Hungary Hungary's consumer finance market will shrink to four major
competitors as Credigen Bank yesterday announced its withdrawal from Hungary. Credigen
was the second largest player in the market. The company, a unit of Sofinco, owned by
France’s Credit Agricole, cited the overhaul of its strategy in emerging markets for the move,
as losses and risks rose in some countries. The financial supervisory has not yet been formally
notified of the move. Credigen will stop lending but all contracts will be honoured, as the
bank will wind up its operations gradually. Credigen has total outstanding loans of HUF 20bn
to 170,000 customers. The company started an aggressive expansion at the end of 2008,
offering credit at zero percent interest. During the last two years, it doubled its clientele and
saw interest margins rise during the financial crisis. However, commission fees also went up
sharply, reducing profits. Rivals OTP, Budapest Bank, and Magyar Cetelem are set to vie for
Credigen clients. HSBC announced last year that it would cease consumer lending operations
in Hungary and that it would pull out of the country by 2012.
Aegon sees growth potential in region
The Central Eastern European insurance market still has extraordinary growth potential, as
insurance penetration in Eastern Europe is only 2-3% of GDP, compared to 6-8% in Western
Europe, Aegon regional director Gábor Kepecs said. The markets are concentrated and
multinational companies hold all the cards, Kepecs added. The Hungarian subsidiary of
Aegon will set up affiliates in the Czech Republic and Slovakia in the first half, initially
selling home insurance, Kepecs added.
Insurance market concentration
Retail
Shop numbers drop, total retail area up
The number of retail units in Hungary did not fall significantly from 2008 to 2009, market
researcher Nielsen found. The combined retail area of the 19,900 units totalled about 3
million m2, up 4% year-on-year, Nielsen calculated. Although there was a slight fall in the
total area of smaller shops, this was more than offset by the expansion of larger ones.
Hungarian food retailers doing well
Hungary’s food retail sector is unusual in Central Europe in that two of the top three chains
are domestically owned, market researcher Nielsen reports. British-owned Tesco tops the list,
followed by Hungarian-owned CBA and Coop. The three reported combined turnover of HUF
1,700bn last year. Such a good performance by local companies in the retail sector is
outstanding in East Europe, according to Nielsen. The two Hungarian chains have over 8,300
outlets between them, more than two-thirds of all units operated by the 15 biggest chains.
Fifth-placed Reál is also owned by Hungarians.
Household cosmetics market in Hungary up by 2% in 2009
Sales of household cosmetics and chemical products increased by 2% in value terms and
declined by 1% in terms of volume in Hungary in January-February 2010 compared to the
same period a year earlier, and amounted to HUF 46bn (€170m), according to Nielsen data
based on sales monitoring of 60 household chemicals and cosmetic products. Sales of toilet
paper, toothpaste, soap and face cream have increased both in terms of volume and value year
on year over the period.
As far as the different retail channels are concerned, hypermarkets took 38% of the market
during the period in question, a level unchanged compared to the first two months of 2009.
The market share of drugstores and specialised chemical products’ stores increased from 25%
in January-February 2009 to 26% in 2010. Supermarkets and discount stores have maintained
their 18% market share, while the share of small traditional stores dropped by one percentage
point in January-February 2010 in contrast with the same period a year earlier. Sales of the
household chemicals and cosmetics products in question amounted up to HUF 300bn (€1.1bn)
during March 2009-February 2010, increasing by 1% in value terms and shrinking 3% in
terms of volume compared to the same period a year earlier.
Sales of brown and white goods down 23% in Hungary
In 2009 sales of brown and white goods in Hungary amounted to HUF 244bn (€0.9bn) –
down 23.5% compared to 2008, according to GfK Hungary. In value terms, the most dramatic
decline was recorded for sales of digital photo and video cameras (-29.9%), followed by video
game consoles (-26.8%) and goods in the IT and printing (-25.9%) categories. Sales of
smaller kitchen appliances dropped by 13% in terms of volume and were down 11% in value
terms. The market share accounted for by built-in white goods grew last year. Sales of the
built-in appliances declined by 6% last year, while those of freestanding white goods
plummeted by 20% year on year.
Research/Innovation
Gedeon Richter teams up with Astron Research for drug development
Gedeon Richter, the Hungarian drug manufacturer, announced the signing of a development
collaboration agreement with Astron Research, a research unit of Intas Pharmaceuticals, the
Indian pharma firm. Under the agreement, the companies will jointly develop several generic
products (to be identified by Gedeon Richter), sharing development costs, and will market
them independently on specific markets (including Russia, where Gedeon Richter will have
exclusive rights).
Erik Bogsch, managing director of Gedeon Richter said that the agreement will help it expand
its product portfolio while concentrating its development capacities on those products offering
high added value.At the same time Gedeon Richter announced also an unprecedented
dividend pay-out of HUF 770 (€3) per share. This means that will return 28% of its 2009
profit to shareholders, broadly in line with its dividend policy in recent years.
Teva opens factory in Debrecen
Drug manufacturer Teva Gyógyszergyár opened a new pill making factory in Debrecen in
April. The HUF 3bn factory and research centre received HUF 460mn in EU and Hungarian
subsidies. The expansion created 55-60 jobs. Teva has produced ten million pills a year in
Debrecen so far: further development projects aim to double that capacity, CEO Lajos
Hegedűs said. By developing its technology industry Debrecen is aiming to become
Hungary’s capital of innovation, Debrecen mayor Lajos Kósa said.
BD invested EUR 100mn in Hungary so far
Health and life sciences industry giant Becton, Dickinson and Company (BD) has invested
EUR 100mn since 2008 when the foundations of its new syringe factory plant were laid. BD
is number one global supplier of biotechnological and health industry actors thanks to its
safety syringes which will be produced in Hungary from 2010. Claude Dartiguelongue, CEO
of BD Medical - Pharmaceutical Systems has pointed out that Hungary was chosen thanks to
the expertise and labour skills of locals. BD also intends to operate a plant with environmental
responsibility and efficient green energy utilization.
Telecommunication
TvNetWork to get rid of cable units
Dutch company Carose has increased its stake in TvNetWork to 32.99% after buying 13% of
all shares from System Info, the Hungarian cable television and internet service provider
announced. TvNetWork has agreed to sell five of its cable networks for HUF 1.2bn to cable
television provider Digi, which has a 33% stake in the company. Digi planned to make a
public offer for all remaining TvNetWork shares at HUF 300 by the end of February, but talks
have stalled. TvNetWork intends to sell its entire cable network by the end of the year and
become an investment company, board member Attila Nemes told Napi Gazdaság.
Transport
Wizz Air increases number of flights to Eindhoven
Wizz Air is to adding a fourth Airbus A320 aircraft to its Budapest base, starting on 24 July
2010. Further changes serving to reach its goal include:
London Luton will be served three times a day versus the current double daily operation.
Services to Brussels Charleroi and Eindhoven will be increased to 11 times a week from
daily, each. Frequencies to Malmo-Copenhagen, Turku and Bourgas will also be increased.
Wizz Air will re-start the Budapest - Frankfurt Hahn route three times a week and launch
Budapest-Bari twice a week initially.
With the new capacity Wizz Air offers a network of 22 routes from and to Budapest.
"Recently we have been experiencing a strong shift of customer preference towards Wizz Air
in Hungary resulting from our own expansion in a declining market as well as the weaknesses
of competing airlines. Building on this momentum we aim at achieving over 20% passenger
traffic growth in Budapest in 2010," CEO József Váradi said in a statement.
Malév saga continues
Hungary’s national airline Malév was granted a HUF 2.1bn (EUR 7.97mn) shareholder loan
to ease its liquidity woes, the National Asset Management Company (MNV) has announced.
The HUF 2.1bn tranche decided on by the National Asset Management Council with finance
ministry approval is part of HUF 8.1bn three-year facility bearing an interest of 9.97%. The
objective of the shareholder loan is to create funds to ensure the airline’s short-term financing
need. The MNV decision is in line with Malév’s restructuring plan, the statement said. Malév
will have access to the funds as soon as Russia’s Vneshekonombank approves.
Malév introduced an extremely aggressive pricing policy so that it would not lose market.
That goal was achieved, as the carrier increased passenger numbers in 2009, while most of its
rivals lost passengers. Some believe Malév’s losses would have been no more than HUF 10-
12bn if the airline had not been so adamant on retaining passenger numbers at all costs, the
paper said. Others, however, claim it was the carrier’s very low ticket prices that kept Malév
in the air during the winter. The European Commission is currently looking into the
renationalization of Malév and its ruling will determine the fate of the company. If Brussels
deems the transaction unlawful or that it was against EU regulation, Malév may find itself
between a rock and a hard place, since it will be obliged to repay the capital injection to the
state. If Malév wants the EU to nod on the deal, however, it needs to prove that being stateowned
does not distort competition, but for that it cannot pursue such an aggressive pricing
policy and should carry out an appropriate reorganization programme, as well.
Logistics
Coloplast opens packaging, distribution centre in Tata
Denmark-based medical-aid manufacturer Coloplast has opened a distribution centre in a
rented facility in Tata, north Hungary. The opening of the facility created more room for
production in the company's manufacturing plants in Nyírbátor and Tatabánya. Coloplast is
also planning to increase staff. The distribution centre is spread over 4,200 square metres and
employs nearly 100 people. Coloplast opened its first plant in Hungary in Tatabánya in 2002.
This unit was later expanded in two stages, and had a 900-strong staff by 2006. The second
Hungarian plant was inaugurated in September 2007 in Nyírbátor. The 20,000 sqm facility
employs 600 people. The HUF 15bn investment received HUF 5bn in state aid.
Energy
Mavir to Complete Three Power-Line Investments over Next Year
Hungarian state-owned transmission-system operator Mavir will complete the construction of
three power lines over the next year, the business daily Világgazdaság reported.
Mavir CEO Gábor Tari told the newspaper that the company will complete 400kV power
lines from Szombathely (W Hungary) to Vienna in early May, and Pécs (S Hungary) to
Ernestinovo, Croatia, during the first half of 2010 as well as power lines close to Budapest
between Bicske and Martonvásár at the end of the year and from a power plant that E.ON is
building in Gönyű (NW Hungary) this summer.
Surgut on MOL acquisition
The CEO of the oil company Surgut, Mr Bogdanov told the press that he had not expected to
be rebuffed by MOL after paying EUR 1.4bn for a 21.2% stake in the Hungarian company
last year, but added that "things were now moving in the right direction" after the election of a
new government in Hungary, and he still hoped to "build a partnership" with MOL.
Hungary’s financial markets regulator (PSZÁF) said this week it would take no action over
Surgut’s acquisition of the stake from Austria’s OMV, but its decision has come too late for
the Russian company to register its holding for the AGM. An investigation by the Hungarian
Energy Office into the stake sale to Surgut is still ongoing. Concerns over Surgut are centred
on its ownership, which is largely unknown - not only in Hungary but also in Russia. Under
Russian law, holdings of less than 5% do not have to disclose their ultimate ownership, and
the only Surgut shareholder above that threshold is the Bank of New York, the FT reminded.
"Mr Bogdanov is a close ally of Vladimir Putin, the Russian prime minister, but the company
says "to the best of our knowledge" no senior government officials hold any shares in Surgut,"
the FT added. While MOL’s chief Zsolt Hernádi said Surgut’s acquisition was "not friendly"
and rejected talks about co-operation on grounds that the Russian company’s intentions are
not clear, Bogdanov said he had been open about his plans.
Unlike OMV, Surgut did not want to launch a bid for MOL, he said, but was seeking to use
some of MOL’s refining capacity to strengthen its downstream position in the European
Union. Bogdanov also said both investors and the media were closely monitoring the
situation, and he hoped the new government [to be formulated on a two-thirds majority of
centre-right Fidesz] would take decisions that "allow investors to appreciate the attractions of
Hungary for foreign investment". He added that he expected Surgut would eventually be able
to reach an agreement on co-operation with MOL.
Calamites to explore coal in Várpalota
Mining company Calamites has received exploration permission from the Veszprém Mining
Authority to search for coal in the 1,500 hectare area around Várpalota including also villages
Csór, Nádasladány and Ősi. The disused S-III mine could be reopened in five to ten years.
The coal would be used for an environmentally friendly power plant built by investors. The
last lignite mine in the region was closed down after 120 years in 1996. Calamites recently
announced that it is planning to start to mine coal in the Mecsek Hills as an open excavation
in the villages of Nagymányok, Váralja and Máza.
Environment
Outgoing government draws HUF 930mn from reserves
The cabinet decided to allocate HUF 930mn from general budget reserves for flood protection
purposes. Of that, HUF 573.3mn is designated for non-labour costs and the rest for labour.
The decision means that the government has now allocated HUF 2bn for water management
purposes so far this year. The 2010 budget has general reserves of HUF 57.2bn, of which only
40% can be spent in the first half, under the law. The amount remaining for use in the first
half has dwindled to HUF 5.6bn.
Agriculture
Agricultural producer prices stagnate
In February 2010 the producer price level of agricultural products rose by 0.2% compared to
the corresponding period of the previous year. More specifically, the price level of crops and
horticultural products was up by 2.0%, while that of live animals and animal products
decreased by 2.8%. In January-February 2010 the producer price level of agricultural products
rose by 1.6%, which resulted from the price increase of crops and horticultural products by
4.4% and the price decrease of live animals and animal products by 2.7%.
Agricultural subsidies open
The period for filing applications for agricultural subsidies began at the Agricultural and
Rural Development Office (MVH) on April 1. Last year, some 185,000 applicants filed
subsidy applications for over 5 million hectares. A similar figure is expected this year, MVH
spokesman Lajos Soproni-Horváth said. In 2009, HUF 207bn was available for area-based
subsidies, and the per hectare EU subsidy averaged at HUF 42,173, he added.
This year there are five new categories for subsidies: forests, forest environment protection,
forest reorganisation, none-production-related agricultural investments, none-productionrelated
forest investments and agricultural environment protection. The categories of energy
plants and Virginia and Burley tobaccos have been cancelled. The deadline for applications is
May 17.
Food industry
Slump takes the fizz out of beer sales
Beer sales suffered from the recession and higher excise taxes last year, falling 9% from 2008,
the Hungarian Breweries Association announced. Domestic sales fell 9%, while exports
dropped 12% to 6.3 million hectolitres. The outlook for the industry remains bleak with an
increase in excise taxes in effect from the beginning of the year. According to the Association
figures, the Dutch Heineken was still doing the best.
Zala Cool restarts work at Goldsun
Zala Cool has purchased most of the assets of bankrupt food freezing company Goldsun
Hűtőház, chairman-CEO of liquidator TM-Line Ferenc Somogyi said. The Zalaegerszegbased
factory, a member of the Carnex group, amassed total debts of HUF 3.5bn. Zala Cool
will not only freeze food but also restart pastry production. It has purchased equipment from
the crediting banks and also acquired the buildings, offsetting its claim against the company,
Somogyi added. Goldsun went bust in 1997, after which it was taken over by fellow Carnex
group member Zalabaromfi. Most of the unit was destroyed in a fire in 2004 and Zalabaromfi
went bust in June 2006.
Tourism
Hungarian Hotel Monitor: first year completed
The Hungarian Hotel Monitor, compiled by Xellum Ltd., is now available for a full-year
period, giving daily insight into the results of Hungarian hotels. According to the survey,
Budapest hotels and especially the 3-star segment have declined, while the occupancy of
provincial hotels has overtaken the capital's properties. The rates of 4-star hotels are almost
the same in countryside and Budapest properties. The study, based on data supplied by 101
hotels, also show the impact of conferences and big events on occupancy.
Record-breaking bath-complex opened
The Napfényfürdő Aquapolis wellness, thermal and amusement baths was opened in Szeged
(south Hungary). The four-season aqua-city offers more than 700 metres of slides and a huge
wellness-thermal complex at the foot of Szeged’s Belvárosi Bridge, neighbouring the 4-star
Hunguest Hotel Forrás, also to be opened soon following a massive renovation. Aquapolis is
Hungary’s largest all-year bath-complex, with the tallest slide-tower in Central Europe,
located only a few minutes walk from the historical downtown. The owners of the complex -
Hunguest Hotels and the municipality of Szeged - expect 400,000 visitors annually from the
HUF 8bn (appr. EUR 30mn) investment. Various health services and the day hospital will
open in the coming weeks and the open-air baths will also be ready for the summer season.
Hungarian theme park opens
The world’s first historical Hungarian theme park opened in Bikal, Baranya county on
Thursday. Construction of Élménybirtok cost close to HUF 2bn. Company CEO László
Kollár has built a living medieval town containing a medieval village, an old town, a stage, a
palace and a “knights’ arena”. The park was opened by Kollár, Agriculture Minister József
Gráf and Social Affairs and Labour Minister László Herczog.
Bike-rental scheme to start next year in Budapest
The downtown area of the Hungarian capital and the Buda embankment will be the first areas
locked in to the new bicycle-rental system in Budapest. According to the plans, the service
will be available from 2011. The first 30 minutes of cycle use will be free of charge although
users will have to buy an annual registration card to use the bikes at the 70-80 docks.
Events
Szeged to host canoe world championship
The International Canoe Federation has announced that the host of the 2013 Canoe Sprint
World Championship is the city of Szeged, which has already organised the prestigious event
twice.
(source: Netherlands Embassy)
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