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The world watches

NEWS

Moody’s leaves us with ‘junk’ status The government saw plenty of reasons to be upbeat, but Moody’s once again declined to upgrade Hungary’s sovereign debt. Analysts have high hopes for the next review, in November. 3

SPECIAL REPORT

What the EU audit reforms mean here EY’s top expert in the field visits Budapest and explains why new regulations, which force auditors to tender for their job every few years, probably will not achieve the intended market diversity. 18

NEWS

Gov’t surplus a first since communism

Photo: Mátyás Pödőr

Hungarian TV content has a good reputation globally, but according to Tímea Tompa of NuMuvee, it’s hard to transcend tested formats. 11 BUSINESS

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BUSINESS

The government budget was actually HUF 11 billion in the black in Q1, thanks to higher-than-anticipated revenues, which were the result of a boom in employment, according to an analyst. 7

SPECIAL REPORT

Spurring innovation in Hungary’s 2nd city

H1 real estate deals exceed 2015 total

Little guys finding their market niche

Startup incubator Singularity University has opened a chapter in Debrecen, helping fuel that city’s drive toward a more tech-oriented economy that is better connected with the world at large. 12

The €910 million in recorded transactions was three times the volume of property investment in the first half of last year, JLL reports.

By year’s end, analysts say, Hungary could see €2 billion in deals. 15

It’s not just about the Big Four when it comes to financial consulting.

Smaller firms say they curry loyalty by offering personalized services and by taking a proactive approach to customer service. 23

2016. 07. 13. 20:25

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Budapest Business Journal | July 15 – July 28, 2016

3Special

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SPECIAL REPORT:

Financial consultants A critical look at

EU audit reforms

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Report Little guys can still

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Four  23

FINANCIAL CONSULTANTS

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BUSINESS JOURNAL provide a range they are ready to in Hungary say advice. And when Financial consultants to offering strategic risk assessments anticpate a lot of with taxes, they of services, from work of helping it comes to the classic business this year.

BUDAPEST

VOL. 24. NUMBER 14

JULY 15, 2016 – JULY 28, 2016

HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BBJ.HU

HUF 1,250 | €5 | $6 | £3.5

The world watches

NEWS

Moody’s leaves us with ‘junk’ status The government saw plenty of reasons to be upbeat, but Moody’s once again declined to upgrade Hungary’s sovereign debt. Analysts have high hopes for the next review, in November. 3

What the EU audit reforms mean here

NEWS

Gov’t surplus a first since communism

Photo: Mátyás Pödőr

BUSINESS

BUSINESS

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SPECIAL REPORT

EY’s top expert in the field visits Budapest and explains why new regulations, which force auditors to tender for their job every few years, probably will not achieve the intended market diversity. 18

Hungarian TV content has a good reputation globally, but according to Tímea Tompa of NuMuvee, it’s hard to transcend tested formats. 11

Call +36 1 398-0344, or email circulation@bbj.hu

The government budget was actually HUF 11 billion in the black in Q1, thanks to higher-than-anticipated revenues, which were the result of a boom in employment, according to an analyst. 7

SPECIAL REPORT

Spurring innovation in Hungary’s 2nd city

H1 real estate deals exceed 2015 total

Little guys finding their market niche

Startup incubator Singularity University has opened a chapter in Debrecen, helping fuel that city’s drive toward a more tech-oriented economy that is better connected with the world at large. 12

The €910 million in recorded transactions was three times the volume of property investment in the first half of last year, JLL reports.

By year’s end, analysts say, Hungary could see €2 billion in deals. 15

It’s not just about the Big Four when it comes to financial consulting.

Smaller firms say they curry loyalty by offering personalized services and by taking a proactive approach to customer service. 23

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THE EDITOR SAYS

Fear of refugees is something to fear In the face of a labor shortage, Hungary should consider bringing in qualified workers from countries outside of the European Union, according to a sensible proposal offered by the Confederation of Hungarian Employers (MGYOSZ) and endorsed by National Economy Minister Mihály Varga on July 6. But it seems this plan faces a lot of opposition, and not only from the current anti-migrant government.

The left-leaning Socialists and far-right Jobbik both have their problems with migrant workers, and the Hungarian people seem to have their own qualms. If people in this country cannot get over fear of outsiders, we run real risks of damaging the economy and throwing away the cultural and social benefits of diversity.

The idea of bringing in foreign workers is logical: Hungary has an ageing population, and many of its younger workers have left to go to other parts of the European Union, where pay is often several times as high as in Hungary.

As a result, Hungary has a serious shortage of labor in key industries, including in the areas of manufacturing and information technology. One of the reasons for firms to invest in Hungary is that it is a place where workers can be sourced cheaply. If the labor supply runs out, Hungary’s attractiveness for investors will wane, and then jobs could actually start to leave.

To solve the problem, some have suggested bringing in Ukrainians, who are eager to leave a country where war has ravaged the economy. And yet there is a huge supply of non-EU workers on the border with Serbia – refugees, from places like Syria, who are desperate to enter the EU and are camped on the far side of the border fence.

Germans have already seen the logic of integrating the recent waves of refugees from Syria, and elsewhere in Asia and Africa, to rebuild their own ageing workforce. But Hungarians are apparently not very open to refugees. A referendum set for October 2 will give voters a chance to

say they oppose Brussels’ plan to ask Hungary to shelter a certain quota of refugees. Prime Minister Viktor Orbán, the man behind the referendum, has explained that he does not think a Christian place like Hungary should be forced to take in Muslims. Since Orbán started saying things like this, his poll numbers have been rising, apparently because a lot of Hungarians share his sentiments.

A survey published July 11 by the Washington-based Pew Research Institute found that, out of ten European countries, a greater proportion of Hungarians – a full 76% – believe that “Refugees will increase the likelihood of terrorism in our country”. In France, where there are many more refugees and immigrants, and there have already been terror attacks, only 46% of the populace linked refugees and terror. When asked to assess the statement “Refugees in our country are more to blame for crime than other groups”, 43% of Hungarians said yes. Only Italy had a higher “yes” response, at 46%, but Italy is seeing many more refugees than Hungary.

It is possible that that fear and loathing of refugees has been increased due to constant harping on the issue by this government, but the message has apparently reached a ready audience.

As for the plan to bring in workers from outside the EU, the opposition left say they fear Hungarians will lose their jobs and the opposition right say they don’t want immigrants here. Varga quickly back-pedaled, saying he was only referring to very specific workers who are hard to source.

It seems this logical plan is already on the rocks due to fear of outsiders. Given that nothing inspires fear more than the unknown, it is not surprising that the country with the fewest outsiders is the one that is most afraid of them.

But perhaps we should start to be afraid of how much our fears can really cost us.

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Then and now

At left, festival-goers party at this year’s tenth Balaton Sound lakeside festival in Zamárdi, which attracted a record number of 157,000 visitors during the weekend. Above, on the same beach, a family gathers for a summer vacation in 1940.

The Budapest Business Journal’s print run is audited by MATESZ, 1034 Budapest, Bécsi út 122-124, a member of IFABC.

MTI/Zoltán Balogh

2016. 07. 13. 20:26

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macroscope

NEWS

Uber says it is leaving Hungary

5

NEWS

Employment fuels surprise budget surplus  7

Still no upgrade from Moody’s The ratings agency does not share the government’s optimism, and the Brexit vote probably didn’t help.

ZSÓFIA CZIFRA

Moody’s Investors Service declined to upgrade Hungary’s sovereign debt rating at the beginning of July, meaning the country is still at investment grade with only one of the three main credit ratings agencies. Analysts were disappointed, but they unanimously expect an upgrade from Moody’s during its next assessment in November.

Hungary’s industrial output declined again on a monthly basis in May, following a one-time jump in April. According to second estimates published by the Central Statistics Office on July 13, industrial output grew an unadjusted 9.2% in May compared to the same period of last year, but as there were two more working days in May 2016 than in the same month a year earlier, the calendar-adjusted figure came to 4.2%.

On a month-on-month basis, output once again declined, this time by 0.7%.

Except for April, when a 5.4% jump was measured, industrial output has kept falling month by month since the beginning of the year: The biggest slump, 1.1% was registered in March, while there was a 0.8% and 0.1% setback in February and January, respectively. All this indicates that the jump reported in April was only a temporary one, and the slowing economies in Western Europe, especially Germany, are affecting Hungary as well.

The slowing data in May is also due to the fact that recent changes to production structures, such as temporary downtime due to product upgrades, and a planned slowdown in production, still influence Hungary’s industrial performance.

Output in the manufacturing sector was up by 9.7% in May, final and detailed figures show. “The fact that output increases ranged between 6.2% and 17.2% in 12 out of the altogether 13 branches indicates balanced growth,” the government commented on the numbers. Output in motor vehicle manufacturing was 6.9% compared to May 2015. Output in road vehicle components was also up by 14.4% in the same period. Data further showed a 10.8% year-on-year growth in the rubber products manufacturing sector, a key supplier of the car industry.

The manufacturing of electrical products recorded output growth of 17.2%. Within this sub sector, all divisions

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An Audi TT Roadster gets finished at the factory in Győr. Motor vehicle manufacturing output was up 6.9% in May, year-on-year.

“The fact that output increases ranged between 6.2% and 17.2% in 12 out of the altogether 13 branches indicates balanced growth,” the government said. saw expansion. Output in the third largest sub sector, the manufacturing of food, beverages and tobacco products, increased by 6.3% y.o.y.

Brexit not included in data The aggregate data in the first five months of the year is 3% higher than the corresponding 2015 data. The latest figures do not show the worsening market sentiment that followed the U.K.’s vote to leave the European Union at the end of May. Putting things in a wider perspective, the Hungarian government emphasized in a note on the kormany.hu website that industrial output has grown by 32% since the change of government in 2010, and attributes the y.o.y. growth to the output growth in the metal and rubber product manufacturing sectors. The 5.7% y.o.y. growth in the volume of new orders signals further expansion, the

government said. A month earlier, the volume of new orders grew by 6.8%.

However, not everyone shares the government’s optimism. In spite of previous expectations, Moody’s Investors Service did not change Hungary’s Ba1 sovereign debt rating on July 8, meaning Hungary is at investment grade only with Fitch Ratings.

Brexit has created significant uncertainties, therefore it is not clearly seen yet which direction the markets might take and what sentiment will be like in the global economy, and all these can be reasons for Moody’s not taking action regarding Hungary’s upgrade, wrote the National Economy Ministry in a press release.

Analysts were disappointed by the rating institutions’ decision too. portfolio.hu cites Gergely Ürmössy, head analyst at Erste Bank as saying that there is a chance for a November upgrade from Moody’s (that is when the rating institution’s next review for Hungary is scheduled). The analyst added that if the poor GDP data of the first quarter does not improve, Hungary might be stuck in the “junk” category for quite a while. However, he expects the growth rate of the Hungarian economy to stabilize in the next quarters, so that it will reach 2% this year. He doesn’t see significant impacts caused by Brexit, and also expects the budget deficit to remain low in the upcoming period.

Numbers to watch in the coming weeks On July 15, the Central Statistics Office will publish the May performance figures for the construction sector. On July 20, we’ll find out how much money Hungarians made in the JanuaryMay period, and five days later, when retail trade data for May is released, we’ll find out how much they spent.

Mariann Trippon, head analyst at CIB Bank was not surprised by the decision of Moody’s. As she reminded, it usually takes a year from improving outlooks to actual upgrade, and Moody’s only improved outlooks for Hungary last November. She also mentioned Brexit as a possible driver behind the decision.

Péter Virovácz, head analyst at ING Bank agreed, mentioning that Moody’s postponed the upgrade decision in spite of macro data that suggested an upgrade, such as the massive surplus in the current account, decreasing debt ratio, and a strict budget. If the situation following the U.K. vote settles and the Hungarian economy faces no negative shock, Moody’s is very likely to lift Hungary to investment grade status at its next review in November, the analyst said.

2016. 07. 13. 20:26

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04 News

Budapest Business Journal | July 15 – July 28, 2016

NEWS IN BRIEF OECD: Hungarians worked fewer hours last year

Szijjártó: Hungary committed to strong ties with U.K.

The average number of hours Hungarians worked in a year fell from 1,858 in 2014 to 1,749 last year, an alltime low, according to a report by the OECD, the online news portal mfor. hu said on July 11. Hungarians worked roughly 2.5 weeks less in 2015 than in the previous year, which puts the country in the middle of the field regionally and at the bottom of the Visegrad Four countries, the portal said. Slovaks clocked an average of 1,754 working hours, the Czechs averaged 1,779 hours and the Poles 1,963 hours last year. The number of hours worked in Hungary has not been this low since 1995, when the OECD first published the data. A high peak was recorded in 1999, when Hungarians worked 2,040 hours a year, the OECD said

Hungary is committed to maintaining close economic ties between the United Kingdom and the European Union, and opposes the EU’s pressure for U.K. to formally declare its plan to exit the Union as soon as possible, Hungary’s Minister of Foreign Affairs and Trade Péter Szijjártó said on July 9. Following talks with his British counterpart Philip Hammond in the framework of a NATO summit in Warsaw, Szijjártó said the Hungarian government respects the decision of British citizens to leave the EU and was against speedy proceedings, Hungarian news agency MTI reported.

Hungary will strive to maintain the closest economic ties possible between the U.K. and the EU throughout negotiations of the Brexit, Szijjártó said. He also stressed that Hungary will defend the rights and interests of Hungarian nationals working in the U.K., MTI reported. The Hungarian government said it greatly appreciated the close ties between Hungary and the U.K. in the past and will strive to maintain these in future, a statement by the ministry noted, according to MTI.

KPMG: Hungary does a great job of using EU funding

In the 2007-2015 financial cycle, Hungary’s performance in terms of calling down European Union funds stands out in the CEE region, according to a report published on July 11 by KPMG. In terms of contracted grants, Hungary finished second highest in the region, with 117%, while in terms of paid grants, Hungary finished first with 111% of the available grants, KPMG’s annual “EU Funds in Central and Eastern Europe” report shows. According to KPMG, Hungary contracted €29.2 billion of grants and got paid €27.7 bln out of the available €24.9 bln in the 2007-2015 period. A total of €21.6 bln was certified by the European Commission, the KPMG report added.

The KPMG report pointed out that, when the 2015 close of the previous funding period approached, the Hungarian government put a great deal of emphasis on its efforts to accelerate payments. The payment ratio in 2013 rose by 20 percentage points to 62%, and it further rose by 25 pp in 2014 to 87%, finally reaching 110% in 2015 after an approximately 23 pp rise, KPMG said. KPMG notes that Hungary’s focus on absorption is apparently paying off, and loss of funding will not take place. “Although the conclusions of the 2007-2013 period have yet to be drawn, according to the cohesion policy, decision-maker supported projects should see improvements in quality in the next programming period,” the report says.

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Savings coop oversight board dissolved in reorganization All members of the management and supervisory boards of savings cooperative integrator SZHISZ announced their resignations at a general meeting on July 8 as part of a reorganization of the savings cooperatives of Hungary required by legislation passed on June 9, according to reports. Economy Minister Mihály Varga said the bill allows more efficient oversight of the savings cooperative system by the Hungarian National Bank (MNB), and that the central bank is now authorized to intervene and conduct probes into savings cooperatives. MNB has the power to initiate penalties, suspensions and revocation of licenses under the rules, Varga said. The Hungarian government announced that it had decided to make improvements to the country’s savings cooperatives sector, including eliminating limits on the joint liability of integrated coops, as a way to contribute to banking sector stability and to level the playing field, according to reports. SZHISZ had until mid-July to comply with the amendment. The board members who resigned will remain in their positions until a general meeting on July 18 can

Lázár blasts ‘brand of democracy practiced in Brussels’ The European Union’s current policies lead to the Brexit and the crisis in the union, and the ‘the brand of democracy practiced in Brussels’ is to be blamed, Hungary’s Cabinet Chief János Lázár (pictured) said on June 30. ‘National sovereignty needs to be strengthened’, the minister stressed during his regular weekly press conference. Echoing the opinion of Hungary’s Prime Minister Viktor Orbán, Lázár said that British citizens may have voted to exit the EU because of its migration policy. (Photo: kormany.hu/Gergely Botár) elect replacements, SZHISZ said. The integrator’s members approved changes to their charter to bring it in line with amended legislation, Hungarian news agency MTI reported. Acting on a proposal by the board, a rule was written into the charter requiring a representative of the central bank to be invited to all board meetings and participate with advice.

Number of new firms grows y.o.y. in H1 The number of companies established in Hungary grew by 5.9% to 13,338 in the first half of the year as compared to the same period a year earlier, according to a survey published by Bisnode on July 8. The growth puts an end to a trend of negative year-onyear growth in company creation that has been going on since 2011, Bisnode said. Nonetheless, the number of companies closing operations is still greater than the number of new firms being created, according to Bisnode. In the first half of the year, approximately 26,000 companies were terminated, which is a large number, but still better than the first half of the preceding year, when the number of companies being shuttered was more than 52,000, according to Bisnode. At this point, Bisnode noted, more than 522,000 companies are active in the country, well above the approximately 480,000 firms active before the financial crisis.

József Keleti, Country Manager of Bisnode, said he expects the tendency to stay in the positive territory this year, and probably in 2017 also. As a result, Keleti said, stable companies should outnumber unstable companies by the end of the year, as the trend continues to improve.

HIPA assists €1.33 bln worth of investment in H1 In the first half of the year the Hungarian Investment Promotion Agency (HIPA) was involved in the launch of 38 investments in Hungary, with a combined value of €1.33 billion, state secretary Levente Magyar announced on July 8 at a press conference. The investment projects realized in the first half this year created a total of 8,529 new jobs in the country, HIPA chairman Róbert Ésik said. The majority of investments in the country, eight in all, were made by U.S.-based companies, according to HIPA. The United State was closely followed by Germany, with seven companies investing here. Ésik noted that, broken down by sector, the automotive and vehicle manufacturing industries still dominate in terms of the number of foreign investments made, as well as in terms of the value of the capital invested. HIPA is expecting to conduct talks in the second half of the year with 169 companies, who are planning to invest a total of €5 bln of capital in the country, Ésik said. Out of the 38 projects realized in the first half of the year, 25 were supported based on individual government decisions, and the government funding in those cases covered 16% of investment costs on average, Ésik said, according to Hungarian news agency MTI.

Central bank says it will hold base rate, consider ‘unconventional’ tools

Rate-setters of the Monetary Policy Council (MPC) of the National Bank of Hungary (MNB) voiced commitment to keeping the central bank’s base rate on hold, and suggested they

2016. 07. 13. 20:26

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Budapest Business Journal | July 15 – July 28, 2016

could still decide to apply so-called “unconventional” monetary policy tools in the future if needed, according to July 7’s release of the minutes from their June 21 meeting. “If the assumptions underlying the [MNBʼs] projections held, the current level of the base rate and maintaining loose monetary conditions for an extended period were consistent with the medium-term achievement of the inflation target and a corresponding degree of support to the economy,” the minutes say according to Hungarian news agency MTI. “If the Monetary Council assessed it necessary in the future, it might also decide to use unconventional tools.” The MPC added that a “watchful approach” to monetary policy is still justified because of uncertainty in the global financial environment. It had clearly signaled the end of its easing cycle in May, and no macro data or financial market development has altered the big picture over the last month, MTI reported.

Ministry deems job preservation program a success Due to the Hungarian government’s job preservation program, launched three years ago, businesses received more than HUF 400 billion in tax preferences, enabling them to keep 900,000 people a year on their payrolls, Péter Cseresnyés, state secretary responsible for labor market and training at the National Economy Ministry, said on July 5, according to Hungarian news agency MTI. The program so far has helped keep 338,000 people over the age of 55 in their workplaces, the state secretary said, adding that the program similarly helped more than 160,000 careerstarters and approximately 40,000 mothers with small children, according to MTI. The program has supported the employment of 290,000 Hungarians with low skills and education, 30,000 long-term unemployed and 20,000 in the farming sector, MTI reported. The state secretary noted that the program is set to continue next year with a budget allocation of HUF 130 bln-140 bln.

Lázár: The EU needs to be fixed The U.K.ʼs June 23 Brexit vote is the fault of Brussels, and is an indication that there are serious problems with the European Union that it needs to address, Hungary’s Cabinet Chief János Lázár said on July 7 during his weekly press conference. “I am pessimistic about whether the institutional system of the European Union can be fixed,” Lázár said, stressing that “Europe does not equal the EU and Brussels”.

According to Lázár the processes in Brussels lead to “bureaucracy, troubles and hardship”, Hungarian online daily index.hu reported. “We must not give up working on fixing the EU,” Lázár emphasized. He went on to complain about Hungarian news coverage of the U.K. referendum. “It is pathetic how some outlets of the Hungarian media campaign against those people who voted for the Brexit, and how they are tagged as provincial idiots,” he said.

Lázár said that the U.K. is one of the most successful nations of the last 300 years. “Their exiting from the bloc is the result of the wrong policies of the EU, it is the failure of Brussels,” Lázár said.

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Opposition fears referendum may trigger Hunxit Hungarian opposition parties on July 5 expressed concerns that the wrong result in Hungary’s October 2 referendum on the EC’s refugee quota policy could pave the way for the country’s exit of the European Union, according to reports. The referendum will ask Hungarian voters to say “yes” or “no” to the following question: “Do you want to allow the European Union to mandate the resettlement of non-Hungarian citizens to Hungary without the approval of Parliament?”

The referendum was initiated by the Hungarian government, which has been critical of the European Commission’s proposal to make EU member states accept a certain quota of refugees. Hungarian President János Áder scheduled the referendum for October 2. While the government has said that Brussel’s refugee policy is the main reason that U.K. citizens voted to leave the EU in their June 23 referendum, Hungarian opposition parties expressed the fear that this country’s quota referendum could lead to Hungary following suit. Opposition Socialist deputy president Zoltán Gőgös urged Hungarian citizens to “stay at home, so we [Hungary] can remain in the European Union” during a press conference. Under the Hungarian law, a referendum in the country is valid if more than half of the citizens eligible to vote participate, and if more than half of the voters pick the same answer. The opposition Democratic Coalition (DK) said the referendum was “the beginning of Hungary leaving the EU”. saba Molnár of DK told MTI yesterday that the referendum could set the groundwork for Hungary exiting the Union, and therefore he urged DK supporters not to vote.

Pew: Hungarians remain concerned over refugees Hungarians harbor more concerns over security threats and economic repercussions from refugees than residents of any other country surveyed in the European Union, according to a report published by the Pew Research Center on July 11. Of Hungarian respondents, 82% said that refugees are a burden on the country because they take jobs and social benefits away from locals, while 76% believed that refugees will increase the likelihood of terrorism within the country, more than in any of the nine other countries surveyed, said the Pew Research Center. At 43%, Hungary had the third highest amount of respondents who said that refugees in the country are more to blame for crime than other groups, after Italy and Sweden, which respectively took first and second place. Overall, 72% of Hungarians said they had an unfavorable view of Muslims in the country, more than any other country in the survey, the report noted. Most Hungarians, a total of 76% of the sample, also said that they believe that Muslims in the country do not want to adopt the local customs and way of life and that they would prefer to remain separated from society, putting the country in second place after Greece, the report noted.

Uber gives up fight, quits Hungary

Uber’s Chief Operating Officer Zoltán Fekete gives a July 13 press conference in Budapest. (Photo: MTI/Zoltán Balogh)

The U.S.-based ridesharing service says new laws, created to appease taxi drivers, make it impossible for it to operate here.

CHRISTIAN KESZTHELYI

U.S.-based ride-sharing service Uber said on July 13 that it is leaving the Hungarian market after months of demonstrations by taxi drivers led the Hungarian government to introduce tough new laws regulating drivers for hire. If the regulatory environment changes in the future, Uber said it would resume its service.

Uber said in a statement that the new law taking effect on July 24 makes it possible for “Uber drivers to lose their licenses or the license plates of their cars, despite the fact that they have all the necessary licenses and pay the required taxes”.

The company said it does not wish to expose drivers to these risks.

Uber had negotiated with the government in an effort to find legislation that would protect taxi drivers while letting the ride-sharing service operate, but the law finally passed seems to make it impossible for Uber to work in Hungary.

Hungary’s National Development Ministry alleged in its own announcement on July 13 that Uber would rather leave the country than engage in lawful operations, enter fair market competition with taxi drivers and pay taxes appropriately, according to Hungarian news agency MTI. The ride-sharing service said the new legislation made it impossible to operate and alleged that the change is putting 1,200 people out of work, making it hard for them to take care of their families or to take advantage of modern technology.

Uber said the new law taking effect on July 24 makes it possible for “Uber drivers to lose their licenses or the license plates of their cars, despite the fact that they have all the necessary licenses and pay the required taxes”.

Uber said it believes the Hungarian government’s decision opposes the European Commission’s policies as well as the attitudes of other European countries. It listed Estonia, Latvia, Lithuania, Poland, Spain, Ukraine, and the United Kingdom as countries that “decided to aim to regulate the sharing economy to be forerunners in the digital economy”.

The ride-sharing service currently operates in 480 cities globally. It says that the Hungarian law that blocks its operations is “unique in the world, and Budapest is this way becoming the only big city in the region that will not be offering the services of Uber”, the statement noted.

Uber had 160,000 users in Budapest, around 39-40% of Uber trips were ordered by foreigners, and most of their clients were between 20 and 35-years-old, Zoltán Fekete, the operative director for Uberʼs business in Hungary said, according to Hungarian news agency MTI. The Hungarian operations of Uber received greater attention from the government here after taxi drivers conducted almost a dozen protests this year alone. The demonstrators complained that Uber drivers do not follow the same regulations as taxi drivers, and they could offer lower fares by essentially operating unlawfully.

The government, pressured by the taxi drivers, adopted changes that all but turned Uber cars into taxis.

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2016. 07. 13. 20:26

News 07

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Budapest Business Journal | July 15 – July 28, 2016

Division of cabinet said to let PM get strategic There will be two cabinets, one focusing on finance and the other on strategy, apparently because Orbán himself wants to concentrate on campaigning and other vital issues.

CHRISTIAN KESZTHELYI

Prime Minister Viktor Orbán’s plan to establish two cabinets, one for strategic issues and another for economic is expected to help him achieve a goal he has mentioned several times in the past months; to pull back slightly and concentrate more on strategic issues of governance, including campaigning for the 2018 election, according to a political analyst who spoke to the Budapest Business Journal.

As Cabinet Chief János Lázár, the minister responsible for the Prime Minister’s Office, mentioned on July 7 during his regular weekly press conference, the Hungarian government is planning to establish two cabinets.

Although according to some reports he might be involved in both (he seemed to suggest as much at his press conference), speculation in the Hungarian media was that one of the cabinets might be headed by him, while National Economy Minister Mihály Varga could head the other. Lázár said the changes are needed to make the work of the government more effective and efficient. Meanwhile, Orbán would be

Hungary’s Prime Minister Viktor Orbán, right, and Turkish President Recep Tayyip Erdogan meet at the July 9 NATO summit in Warsaw. By dividing his cabinet in two, Orbán can spend more time on strategic issues. (Photo: MTI/ Gergely Botár) able to concentrate on the strategic issues of his government.

“Practically, this means that probably he [Orbán] does not want to personally run or control the implementation of certain policy measures, he rather wants to overlook and lead the strategic planning: how the education system shall be reformed, what issues shall the government focus on until the next general elections in 2018, what should the strategy be until 2018, how should EU funds be spent until 2020 (practically until 2018),” Bulcsú Hunyadi, an analyst at Political Capital, told the BBJ. According to Hunyadi, the reason behind the restructuring in all likelihood is that the prime minister is “concerned with the performance of the government and might be missing clear policy lines and measures”. The analyst said

that while the Hungarian government “concentrates all its efforts to keep the topic of migration on the top of the public agenda, public discontent might increase if other policy areas would be neglected (e.g., education, health care) and the opposition succeeds in focusing on the topic of corruption.”

Hunyadi believes this is reflected in the explanation Lázár gave for the restructuring. “According to Lázár the main aim of the restructuring is to provide more time for preparing decisions, to improve the government’s effectiveness and the quality of governing. According to Hunyadi, in PM Orbán’s view cabinet meetings have become fragmented when issues were discussed in-depth, which require more time but not the presence of all government members (e.g., reform of the education system),” Hunyadi said.

Given that not too many details have been published about the restructuring yet, it is not entirely clear how the two cabinets will operate, or whether Orbán will attend all meetings. However, “the importance of the ministry structure might decrease since it will be topics, and not ministries, that are going to be integrated into the cabinets.

What topics will be included in which cabinet might be decided at the government meeting on July 20,” the analyst noted.

“Varga’s role in economic governance might gain significance, as he is going to chair the economic cabinet, according to Heti Válasz,” Hunyadi noted, adding that this might decrease the influence of National Bank of Hungary Governor György Matolcsy. “Varga, who is in charge of the economic stimulus package, aimed at bolstering economic growth, may have a larger input on economic governance in the future. That might decrease the informal influence of Matolcsy,” Hunyadi said.

The analyst says that the restructuring might not necessarily undermine Lázár’s position; indeed, it could very well be strengthened. “Lázár’s position has not been weakened, as he will be involved in both of the cabinets. Plus, according to Heti Válasz, he is going to chair the strategic cabinet, but, his influence on day-to-day issues might decrease,” the analyst added.

Hunyadi believes the “restructuring again shows how Orbán likes to have his men compete with each other. He moves them around in positions and grants and takes away their competences to establish a relationship with his subordinates based on their dependence on him, and to prevent them from creating an overly stable situation for themselves,” Hunyadi added.

Analyst: Employment fuels surprise budget surplus The government budget had its best quarter since the end of communism.

LEVENTE HÖRÖMPÖLI-TÓTH

Tightening employment and improving wages helped the government end the first quarter with a budget surplus, an unprecedented event in post-communist era Hungary, according to analysts.

The positive figure, announced on July 5, is apparently the result of declining expenditures and a simultaneous increase in revenues.

The HUF 11 billion government surplus, equivalent to 0.1% of GDP and reported on July 5 by the Central Statistical Office, can be attributed to an elevated amount of income taxes paid by businesses, according to Péter Virovácz, lead analyst at ING. He explained that this increase has a lot to do with a surge in demand for labor.

“The labor market has seen such an upswing recently that its impact is here to stay. Employment figures are breaking

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records and unemployment is also at a record low of 5.5%, and, at the same time, wages have been on the rise as well. This is what caused income-bound taxes to go up significantly,” Virovácz said.

In fact, these figures are far rosier than anything the government dared to predict.

At first glance, a surplus of HUF 11 bln may not seem an awful lot, but considering that, in the past four-tofive years, the quarterly deficit was up to hundreds of billions, this is a very positive development, experts noted.

The government managed to achieve this feat even while salaries in the public sector are up by 7%. Meanwhile, promises of even greater wage increases have been made for the staff of statefunded entities.

“The pressure is there, indeed, to raise wages even faster, but it can be kept under control. The main reason lies in the fact that EU funds have slowed down,” Virovácz explained. “That means less revenues, but it is also a relief for the budget, since the government doesn’t need to produce its own share in order to comply with the co-financing requirement of using EU funds.”

The government budget deficit – and surplus – as a percentage of GDP. (Source: Central Statistical Office) Should economic processes continue as they are now, the government will gain extra room to maneuver as it seeks to reach its deficit goal, set at 2% for 2016.

“As long as the labor market does so

well and it provides the necessary tax revenues, I see no reason to worry about any risk that fiscal discipline is disrupted, and the markets should feel the same,” Virovácz said.

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COMPANY NEWS

Universal tobacco shuts plant in Hungary, moves to Italy

U.S.-based tobacco firm Universal Corporation announced on July 11 that it would move its processing plant from Nyíregyháza to Italy, according to Hungarian news agency MTI. The move is effective immediately, the company said, and it is necessary to “further increase supply chain efficiencies in the European leaf tobacco market”, MTI reported.

Universal Leaf Tobacco Hungary, the local division of the company, reportedly said the move is in line with the company’s strategy to “efficiently adapt its operations to changing market conditions”. According to the Richmond Times-Dispatch, the decision was made “in part because of declining demand for Hungarian-produced tobacco”. The company’s announcement said that the Hungarian subsidiary’s management was able to reach an agreement with the affected employees at the plant in northeast Hungary. While it was not immediately clear how many people would be laid off, the settlements will cost roughly $1 mln, the Richmond TimesDispatch reported. “Universal continues to be committed to the production and purchasing of Virginia flue-cured and burley tobaccos grown in Hungary and intends to maintain its traditionally strong market presence in the country,” the statement added, according to MTI. ADVERTISEMENT

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Porcelain war: Court rejects Ledina Kerámia registration A court rejected the registration of Ledina Kerámia, a company established by porcelain manufacturer Zsolnay’s minority owner, the local council of Pécs, for the takeover of the company from a private investor, Gertrud Matusik, Ledina’s spokesperson, told Hungarian news agency MTI on July 11. The registration was rejected after a request from Zsolnay, which argued that two of its supervisory board members are tied to the company under establishment, which is a conflict of interest, the spokesperson said. She added that although the two members had resigned, Zsolnay “refuses to let them go”, MTI added. She stressed that the local council will appeal the court decision. The Pécs city council placed a lien on Zsolnay’s bank account at the end of June, at the same time that the registration of Ledina Kerámia was temporarily suspended. Around 130 employees departed from Zsolnay en masse to work at Ledina Kerámia in early June, amidst concerns over the firm’s potential liquidation. Zsolnay majority owner, Syrian businessman Bachar Najari, said at a June 14 press conference that the company has “come under attack by a group lobbying to take over business” in EU-supported building renovations.

Elmű-Émász buys theft-proof transformer from ABB Hungarian electricity service provider Elmű-Émász has purchased theft-proof ‘PoleDryʼ transformers from the Hungarian subsidiary of international ABB to increase protection of outdoor infrastructure, according to a press release issued on July 12. The company expects the recently purchased solution to contribute to more secure and more efficient operations, ABB said in the press statement. “ABB’s pole transformers have several advantages that lead to significant cost savings and more efficient operations by electricity providers,” Dénes Domonkos of ABB said, adding that currently this is the only product on the market that is considered theft proof.

Continental Hungary starts ECU production in Budapest

Richter closes Finox Holding acquisition

The manufacturing of an electronic control unit (ECU) for brakes to be used in the Alfa Romeo Giulia was launched for the first time in the world on July 11, and it is exclusively taking place in Budapest, automotive firm Continental Hungary announced in a press statement. Engineers in Budapest and Veszprém reportedly contributed to the development of the system. The ECU is manufactured in Continental Hungary’s plant in Budapest, the press release noted. Continental said the MK C1 brake system is a high efficiency system, with smoother braking and a smaller braking distance as compared to traditional brake systems. “We are especially proud that we can supply MK C1 for a vehicle such as the Alfa Romeo Giulia,” Róbert Keszte, CEO of Continental Automotive Hungary Kft. and director of Continental’s Budapest plant, said.

Hungarian drugmaker Gedeon Richter said it closed on July 8 the acquisition of Swiss fertility treatment company Finox Holding in a disclosure posted on the website of the Budapest Stock Exchange, Hungarian news agency MTI reported. Richter announced on June 30 that it was acquiring Finox Holding for CHF 190 million. With the acquisition, Richter has obtained global rights for Bemfola, Finoxʼs biosimilar therapy used for the treatment of infertility.

The product, a recombinant-human Follicle Stimulating Hormone (r-hFSH) developed as a biosimilar to GONAL-f, is currently sold in the European Union, Israel, the Middle East and Australia.

Bemfola has “gained significant market share” since its introduction in Q2 2014, Richter noted. The rights for distribution of a product containing r-hFSH in the United States were excluded from the transaction and remain under

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the ownership of Finoxʼs founder and majority owner Willy Michel, it added. “Finox represents an important strategic opportunity for Richter in our core therapeutic area and will expand our Women’s Healthcare portfolio,” said Richter CEO Erik Bogsch. Richter put the value of the global gonadotrophin market at €1.5 billion, excluding the United States, and said it is growing at about 4% a year. There are relatively few competitors and new entrants on the market for these products, which stimulate follicular growth, and the market is highly concentrated in a few in vitro fertilization centers in each country. This situation allows for small and specialized sales forces with a comparatively low cost base compared to other therapeutic areas, Richter said.

Veolia Energy Hungary buys biomass plant

Hungarian energy firm Veolia Energia Magyarország Zrt. has purchased its peer Bioenergia Művek Energiatermelő Zrt. (DBM), which operates Hungary’s fourth biggest biomass energy plant in Szakoly, according to a press release issued on July 11. The Hungarian Competition Authority has reportedly approved the transaction. Veolia aims to make the plant sustainable in the long-term, saying that by achieving a 19.8 MW performance, the facility could effectively contribute to Hungary’s energy targets, the press statement said. The plant, which was built in 2009, currently employs a staff of 55. Annually 140,000-150,000 tons of wooden pellets are burnt, and the energy created is passed into the country-wide energy network, the press release said. “Veolia Energia Magyarország Zrt. has been in the lead of Hungary’s renewable energy production… and now can further strengthen its position in the Central Hungarian region as well,” said György Palkó, Veolia Chairman-CEO.

New Hungrana feed pellet plant opened in Szabadegyháza A new feed pellet plant was opened in Szabadegyháza by Austro-Americanowned Hungrana on July 6 through a HUF 3 billion investment, according to Hungarian news agency MTI. The owners of the firm have invested €230 million in Szabadegyháza over the last ten years, said Kálmán Kelemen, the managing director of the Hungarian branch of the company. The Szabadegyháza plant’s corn-processing capacity is currently around 3,500 tons a day, up from 400 tons a day in the mid-’90s, MTI reported.

It is the largest corn-processing plant in Europe, creating one-third of the EU’s isoglucose, and the company employs 320 workers, MTI noted. Hungrana has been a major corn-processing company in Hungary for more than 100 years, and processed more than one million tons of locally produced corn, according to MTI.

Lidl promises HIPA it will use more Hungarian suppliers The Hungarian Investment Promotion Agency (HIPA) and the Hungarian subsidiary of Austrian supermarket chain Lidl signed an agreement on July 6, under which Lidl will include as many Hungarian businesses in its supplier

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UTair re-launches Moscow-Hévíz flight A jet from Russian airlines UTair leaves the Hévíz-Balaton Airport in Sármellék on July 10, on its way to Moscow. UTair re-launched its scheduled flight between Moscow and the Balaton airport, after the route was canceled for one-and-an-half years, Hungarian news agency MTI reported. The airline said the route can now be re-instated as Russian tourism is picking up following an economic slowdown in the country.

(Photo: MTI/György Varga) network as possible, according to a press release issued on July 6. Hungarian Minister of Foreign Affairs and Trade Péter Szijjártó said that, currently, the Lidl chain in Hungary cooperates with more than 400 Hungarian suppliers. He added that last year Lidl Magyarország purchased goods worth HUF 98 billion from Hungarian suppliers, which were not only sold in Hungary but also in its European network. Lidl Magyarország operates 164 stores and three logistic bases in the country, employing approximately 3,800 people, Hungarian news agency MTI reported. It had revenue of HUF 283 bln last year, MTI added.

Somapak plans HUF 370 mln expansion Hungarian-owned packaging machine maker Somapak is undertaking a HUF 370 million expansion at its base in Pécs, Hungarian news agency MTI reported on July 11. Somapak, which employs a staff of 35, is planning to buy new machinery and install 50 kW of solar panels. The company had a profit of HUF 155 mln on revenue of HUF 678 mln last year, public records show.

Solarpark-Babony inaugurates solar plant A solar power station commissioned by Solarpark-Babony and built

by Newergies was inaugurated in Hungary’s Sajóbabony on July 6, according to reports. The HUF 200 million investment is expected to produce 550,000-580,000 kWh of electricity a year, equal to the annual

consumption of 200 family homes, Hungarian news agency MTI reported.

Solarpark-Babony financed the project from its own sources and from bank credit, according to the news agency.

Hungary plans to use non-EU workers to ease labor shortage National Economy Minister Mihály Varga agreed on July 6 with a proposal put forward by national business association MGYOSZ to ease labor shortages in some sectors of the country by inviting foreign workers from outside of the European Union, according to reports. Varga stressed that Hungarians should not be worried about losing out on job opportunities, as the proposal affects professions where there are not enough qualified human resources in the country to fill the positions. Noting there are labor shortages in the country, Varga said that one-quarter of Hungarian businesses say they cannot fill positions.

Changes to related regulations would be made soon, the minister said, according to Hungarian news agency MTI.

Opel Hungary to roll out 650,000 engines this year German car manufacturer Opel plans to turn out 650,000 engines at its base in Szentgotthárd this year, the local unit’s CEO, Grzegorz Buchal, said at a press conference in Budapest on July 6, according to Hungarian news agency MTI. The plant is operating at near full capacity and production could still rise next year, Buchal said. Last year, 511,000 engines were made at the plant, which supplies 60%-70% of Opel engines

for the European market. Buchal said head count at the plant could rise from 1,600 at present. The number reportedly includes about 300 contracted laborers.

Opel sales in Hungary came to 5,266 in the first half of the year, giving the brand a 9.4% market share to put it in the number-two position, the firm said.

However, in terms of non-corporate sales, it had 35% market share, making it market leader. This year, Opel sales in Hungary could reach 11,000, said Opel Magyarország managing director Gábor Koncz. Last year sales at Opel brand dealers came to 10,200.

MVN NET to build HUF 1.5 bln broadband network with EU, state funds

Hungarian state-owned telecommunications company MVM NET will construct a HUF 1.5 billion nextgeneration broadband network in the Pápa municipal district of northwest Hungary using European Union and state funding, according to a resolution in the latest issue of the official government gazette, Magyar Közlöny, Hungarian news agency MTI reported.

Data transfer speeds of at least 30 Mbps will be available to local communities in the region following the completion of the project, the resolution said. MVN NET, controlled by the state-owned Hungarian Electricity Works (MVM), purchased a block in the 450MHz frequency band in the spring of 2014, MTI said. MVM NET’s network will be used primarily for government oriented telecommunications needs and will help improve the development of digital public services in Hungary, MTI noted.

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Budapest Business Journal | July 15 – July 28, 2016

Media execs tune in to TV market in Budapest

At the annual gathering of buyers and sellers of TV content for CEE, Hungarian-made films and series are attracting a growing audience of potential customers.

LEVENTE HÖRÖMPÖLI-TÓTH

The Saudis came because they are experiencing a boom in the movie business now that the country has changed its strict entertainment laws to allow the construction of cinemas.

“People had to go to Bahrain or Dubai to a movie theater. Now it’s all going to change,” Waeel Almardoud, technical manager at Scene VisualMedia, said.

Like the rest of the 414 buyers and 123 sellers from 54 countries, Almardoud had come to Budapest’s June 27-30 NATPE convention at the InterContinental to take part in what is the biggest annual event in Central and Eastern Europe for people looking to exchange TV content, including movies and mini-series.

The CEE conference is a spinoff of NATPE in the United States, where it has been a major annual event in the television business for more than 50 years. Based in Budapest from 1991, when it was called Discop, the CEE version of NATPE moved to Prague in 2014 and 2015, but this year returned to Budapest, in many ways the leader of the TV and movie industry in the region.

While Hungary is generally a net buyer of entertainment at the event, Hungarians were also selling, with state-owned MTVA promoting television films and the Hungarian National Film Fund (MNF) marketing feature pictures.

Hungarian TV shows like “Aranyélet” (Golden Life, the story of a longtime shady operator attempting to legitimize his business) have drawn a lot of interest.

So have films: Klaudia Androsovits, responsible for domestic and international sales at the MNF, said she had a packed, pre-booked schedule for the conference.

“The fact that ‘Son of Saul’ received the Academy Awards for Best Foreign Language Film at the Oscars clearly does make a difference. It drew attention to our film industry big time,” Androsovits said. “Now pieces such as ‘Hurokʼ (Loop), ‘Tiszta szívvelʼ (Wholeheartedly) or ‘Liza, a rókatündérʼ (Liza, the fox fairy) are part of the hype; they all sell well. Regional partners were reluctant to buy Hungarian productions until about a year ago; now demand has been up for the past 12 months in the CEE.”

Poles tun to Hungarian shows Trade shows in Berlin and Cannes are more important markets for the global sales of MNF, but NATPE is crucial for CEE relationships, Androsovits added.

For example, among the possible buyers of Hungarian productions are Polish media executives, who are constantly on the look out for exciting new material to bring to their audiences.

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Panelists at a discussion of HBO Hungary during the NAPTE Budapest conference are, from left, Nico Franks, senior reporter, C21, U.K.; Judit Stalter, series producer, Laokoon Films; Anna Zavorszky, production executive, HBO Hungary; and Gabor Krigler, creative executive, HBO Hungary.

Marta Nowakowska, manager for TV and VOD licenses with Kino Swiat, confirmed that it has bought “Hurok” and “Liza, a rókatündér” because “they are special and will surely be embraced

by Polish audiences”. She rejected the assertion that shows like these land on her shopping list only because they are cheaper than American counterparts.

“Production from CEE does not necessarily cost less, as America produces a lot more and can often offer a better price,” Nowakowska said at the conference. She speaks with experience, having been present at the dawn of the local television market in the early ʼ90s.

“At the time almost no local production existed and there were two Polish TV channels. Now we have more than 100.

A mature market like ours means bigger competition, but also higher prices,” Nowakowska said.

Asked whether any CEE production could make it big in the West, she immediately emphasized what might be called the subtitle effect. “Central Eastern European creators can make great films, but language is a problem; in the West people don’t want to watch stuff in foreign languages. And it’s also crucial to have well-known cast members.”

HBO Hungary strikes ‘gold’ One of the first regional shows with the potential for an international breakthrough is the earlier mentioned “Golden Life” produced by HBO Hungary. The first season proved to be a smash hit and season two is scheduled to air in the fall.

“It was important to come up with our own production,” said Gábor Krigler, creative executive at HBO Hungary.

“Defining and distinguishing our brand on the market is what most determines a channel’s image. In fact, ‘Aranyéletʼ is our third original series.”

Life looks golden for HBO Hungary with the success of ‘Aranyéletʼ.

Krigler said the development of “Aranyélet” was part of his company’s strategy at NATPE, where the show was the theme of a lengthy panel discussion.

The lead character is a person who has been supporting his family through shady business deals for 20 years. One day he decides to start playing by the rules.

But his family had become accustomed to living the comforts of a “golden life”, even if they never really knew where all the money came from. As the story shows, suddenly becoming legitimate is not always that easy.

The idea was to create something with local relevance, using Hungarian actors and creators. “The purpose was to tackle themes that have a social relevance.

‘Aranyéletʼ analyzes how hard it is in today’s Hungary to make a living while complying with the rules. Part of it is your attitude, whether you accept any goods or services without receiving an invoice,” Krigler said. “It is dark; indeed, it may be a bit too depressing. But there was no reason to sugarcoat it. As we are getting more mature, we can start

addressing themes with broader appeal.

For now, we focus on Hungarian angles and storylines.”

The everyday reality of the script was apparent while the first season was airing, as news stories broke several times concerning issues dealt with in the show – such as corrupt border guards caught red handed letting illegal shipments slip through customs.

“The production received an unprecedented number of reviews, not only at home but also in the region. This is a great sign. We sincerely hope that in the not too distant future we can make it big with the show overseas,” Krigler said.

The odds that such a success could happen are shortening, as HBO plans to have seven or eight projects in the development phase in Hungary at all times. The idea is to double the number of local productions from 2017 onwards.

And the ultimate goal has also been set: Apart from releasing a new season of an ongoing series every year, a brand new series should also hit the airwaves simultaneously.

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Local producer finds new concepts a tough sell

Hungarian broadcasters prefer local versions of proven formats and storylines, but the head of NuMuvee says her studio still tries to push beyond the frontiers of the familiar.

A: Cooperation might be cost-effective, because these markets are relatively small, but we wouldn’t say that such cooperation is typical. NuMuvee Hungary Ltd. has years of experience in producing international content, so we’ve worked out our practices to help such cooperation.

That’s why we are looking for either scripted or non-scripted content that will work for two or more broadcasters in the region, and of course, we always try to convince broadcasters to cooperate. This is not an easy negotiation, due to different needs and notions in different countries, but even if this journey takes time, it can be worth the time and effort we put into it.

LEVENTE HÖRÖMPÖLI-TÓTH

Started in the 1960s, the familiar TV game show format in which people from different towns compete in silly physical challenges is known as “Intervilles”, and a variation called “It’s a Knockout” was long popular in the U.K. In Hungary, the show is known as “Játék határok nélkül” (“Games Without Frontiers”) and a local production company called NuMuvee Hungary Ltd. brings it to Hungarian TVs. Despite the popularity of the Hungarian version, the producer finds it hard to break out of familiar formulas and find investment for content that is based on new ideas.

Tímea Tompa, executive producer at NuMuvee, spoke to the Budapest Business Journal during the NATPE conference for TV content about the possibilities for Hungarian production firms.

Q

What type of media content is typically sought for by buyers in Hungary at the moment?

A: There are no big differences between Hungary and other European markets.

Locally produced fiction is in the spotlight.

Q Tímea Tompa: ‘Hungary is not a pioneer market.’ (Photo: Mátyás Pödőr)

Q

The CEE is doing well in terms of locally produced material, but what are the chances that these productions can make it big in foreign markets?

A: In the short term, it is not likely to happen, and this is partially because Hungarian broadcasters like to choose programs that have already proven to be successful in other European markets. New formats are rarely chosen for broadcast. Fiction adaptation is very popular, and this confirms the fact that – unfortunately – Hungary is not a pioneer market, but follows international trends. There are exceptions, as always.

Hungarian professionals do have the experience to produce content that sells internationally, as lots of TV series and Hollywood blockbusters are produced in Hungary.

Q

Hungary is described as a mature market; how is it different from developing markets?

A: Broadcasters have their own creative staff, meaning that they usually outsource production services only. Production offices provide professional production services, but there are no traditional studios producing content from scratch. NuMuvee decided to gather professionals to cover all the relevant knowledge and competence. By covering the full spectrum of development and production, we are able to serve more broadcasters in a country and more countries in the region in parallel.

Q

Serving more countries in CEE also implies regional cooperation at some level. Is this your experience?

How do Hungarian buyers react to the fragmentation of content, which is becoming available on multiple platforms such as on-demand schemes, streaming, etc.?

A: Even if these solutions are available in Hungary, they are at their very beginning. Linear television is still in good shape. NuMuvee is monitoring other markets, especially the American market, to see the changes in trends, and we also develop and look for content for different platforms, and analyze the opportunities ahead.

Q

Does this mean you are looking into producing online content as well?

A: We are seriously thinking of producing on-line content, but the Hungarian on-line market is too small and it is still developing and not yet profitable, so we would rather produce content for international markets, including Netflix, Hulu, and Amazon, but there are many possibilities using Vimeo or YouTube as well. On top of that, we see opportunities in future cooperation with over-the-top content providers.

Conference chief praises vibrant content of Hungary, CEE

The head of the NATPE conference for TV movies, series and shows describes Budapest as a regional content capital.

LEVENTE HÖRÖMPÖLI-TÓTH

J.P. Bommel is managing director of the TV content swap meet known as NATPE, which has American and Central and Eastern European events. Interviewed during the June 27-30 CEE version of NATPE in Budapest, Bommel explains why Hungary plays a crucial role in the region’s content production business.

Q

NATPE is back in Budapest after a two-year detour in Prague. Does the decision to bring the trade show back here seem to be paying off?

A: Budapest has been the center of media; it’s the perfect destination for us.

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As you must have seen in the morning sessions with RTL and HBO, there is so much material coming out here, not only scripted, but also [original] formats, that the Hungarian capital’s significance is beyond any doubt.

Q

One panel discussion here featured HBO Hungary representatives hailing their own productions, particularly “Aranyélet”. Did the show arouse your interest?

A: I haven’t seen the series yet, but I’m excited about it. It has great international potential. We want to make sure there is always fresh content to show from CEE. I have seen some great pieces during our time here already.

Q

So Hungary and the region are definitely on the map now?

A: We’ve just witnessed a deal about dubbing between a Hungarian and Chinese partner at NATPE, which is another indication that players in the industry take Hungary seriously. What we have seen is that there is great

demand for scripted [formats] in the region. But we even had a Pitch&Play contest at this event as well, where CEE productions were competing for the best format. Since the region is very vibrant in terms of creating formats, we wanted one to be honored. We are working with local media companies on this and the winner gets a development meeting with a leading company, and this gives them the ultimate chance to go global with their production.

Q

Where do you think the media content industry is headed?

A: It’s such an exciting time for creators.

We have 410 scripted shows in the United States compared to 200 from two years ago. Demand is surging because of the new channels, the digital networks, and the new avenues to distribute content.

People want to enjoy content on different devices. Now every screen is a television.

Brands want to create their own content in order to reach out to their audience and they want to do so in different ways.

They want to bond with them. We’ve also got the digital influencers, the YouTubers

J.P. Bommel: ‘Every screen is a television.’ from the United States, the U.K. and Latin America, and now we devote whole segments to them. Content is without a passport and at NATPE our job is to connect the dots between the countries.

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Budapest Business Journal | July 15 – July 28, 2016

Debrecen dreams of an innovative future

Singularity University recently opened a local branch of its international incubator in Hungary’s second city, and organizers have hopes of promoting growth in the blossoming startup culture there.

CLAUDIA PATRICOLO

It is wonderful to dream, but what if you could make sure you only have good dreams? A Polish inventor has developed an app that can help people with posttraumatic stress disorder (PTSD) avoid nightmares, so that they can sleep better.

The inventor, Lukasz Mlodyszewski, was rewarded for his invention with support from another group of dreamers, the people behind Singularity University (SU), an organization named after the dream that someday robots will help us live forever.

SU is a startup incubator that is helping creative people turn their ideas into reality. Based in California, in the Moffet Federal Airfield owned by the NASA Ames Research Center, it has been holding competition finals in Budapest since 2012. As of April 29 of this year, SU has a chapter in Hungary’s second largest city, Debrecen, where it plans to rebroadcast conferences held elsewhere around the world and to hold its own conferences for startups. Future plans include the kind of contests that earned Mlodyszewski support, and of course, matchmaking between investors and startups – especially those in eastern Hungary.

“Two years ago, if someone asked what is a startup?, no one knew. But now things are different, things are changing,” says Nándor Nagy, a 25-year-old startup entrepreneur and co-creator of SU Debrecen.

In the last few years, Nagy noted proudly, Debrecen has developed a young innovative community with a startup campus, TedX conferences and co-working offices. Debrecen’s young mayor, László Papp, took part in the inauguration of the SU office, calling it a great opportunity for the city to increase its business and economic growth.

We could live forever Since Americans Peter Diamandis and Ray Kurzweil founded it in 2008, Singularity University’s main goal has been to persuade people to be more original and more dynamic – and thus more impactful – in the use of exponential developments in technology and science. According to its website, it is a “startup accelerator to help individuals, businesses, institutions, investors, NGOs and governments understand cuttingedge technologies, and how to utilize

BBJ_2414_biz.indd 12

A presentation taking place at Singularity University in Debrecen.

INNOVATION

these technologies to positively impact billions of people”.

The name “singularity” describes the concept that some day humanity will figure out how to put our consciousness inside machinery, so that we can essentially live forever.

“Maybe in the future we will be able to find out why God created humankind,” says István Herdon, a co-creator of the SU Debrecen Chapter. “Thanks to exponential technology, robotic, artificial intelligence and informatics that exceed the limits of our imagination, it is possible to prolong life, to heal different diseases, to erase hunger and poverty. Thanks to democratization and the use of new technologies, quality of life will change deeply. We are living in an exponential technology revolution.”

While it may seem odd that that the SU did not open up in the capital of Budapest, Nagy explained that Debrecen was simply the place where there was the right energy and the right collection of people.

Thanks to SU, the youngsters of Debrecen have the chance to improve themselves, to take part in networking and to enjoy interactive presentations.

For example, a conference on exponential manufacturing held in Boston in May was recorded and will be presented in the Debrecen chapter, which will also offer the opportunity to discuss the topic with experts.

“This is a chance for us to join the globalized world, to become a regional long-term growth center,” says Herdon.

In the future, Debrecen hopes to hold competitions, like the Global Impact

“Cities where innovative companies are established are able to be part of a global market, to increase their economy, to ensure more jobs and international knowledge of their products.”

Challenge backed by SU and described by its website as “annual competitions held in partnership with sponsor organizations worldwide and organized by geography and theme”. The main goal of these competitions is to find ideas that can impact the lives of at least one million people. The winner is invited to attend SUʼs Global Solutions Program in California free of charge, and is also provided with a team and potential investors to make their idea come true.

The finals of the CEE version of the GIC have been held in Budapest since their launch in 2012. The 2016 event, the fifth such, took place on April 14.

Last year’s winner was Mlodyszewski, who worked with doctors to invent DreamJay, the dream app for PTSD patients. DreamJay users pick a theme and watch a two-to-three minute video, and then fall asleep to music. While a person sleeps, the app plays very short specific sounds at various moments during the sleep cycle. The sounds are designed to improve the user’s sleep and prevent him or her from having nightmares.

“I had the pleasure to take part in a competition like that,” said Herdon, “and we are looking to organize one in Debrecen.”

Big hopes for Debrecen Hedron said he sees efforts like this as the best way to help develop his city. “The most important possibility, and maybe the only one, for economic development is that international innovative enterprises open branches in Debrecen,” he said, adding that this can be encouraged “Through infrastructure development, new human resources, new logistics equipment, a good international airport

and a high level of university education.”

A reputation for innovation can help connect Debrecen to the world, expanding possibilities, Hedron said.

“Cities where innovative companies are established are able to be part of a global market, to increase their economy, to ensure more jobs and international knowledge of their products,” he said, adding that these are the goals of SU Debrecen. More young people will have the chance to test themselves and their limits.

Nagyʼs example is quite interesting.

He was born in eastern Hungary, studied at the university of Debrecen and after that at an economics school. Now he is a co-creator of the SU Debrecen Chapter, he has a marketing enterprise and a newborn startup called OneMinOrder, focused on web development and marketing for restaurants.

Created by just three people (one web programmer, one designer and one marketing expert), OneMinOrder makes it possible to order food online in various restaurants for free. The idea is to provide restaurants with a website, an application, communication staff, and social network profiles. According to their website, they “offer a solution for restaurants, saving people work and getting professional online surfaces without prior investment”. The app is free but OneMinOrder receives a commission for every order on the app. As of early summer there were five partners, with more expected to join.

Nagy maintains that it is simple idea, but one with a lot of potential to grow, just like SU itself. Organizers say that SU should have a big impact on Debrecen, and probably the rest of Hungary, and there is a chance that the next chapter opens in Budapest.

2016. 07. 13. 20:15

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Budapest Business Journal | July 15 – July 28, 2016

INNOVATION

13

sponsored by

Insight

Sourcing talent in the digital age Telenor launches Hungary’s first corporate accelerator program At the Smartphone Academy on June 15 Telenor Hungary announced the launch of its start-up accelerator program, the first local corporate accelerator programme in Hungary. The goal of the new entity is to help Hungarian startups gain appropriate market traction by offering them access to top mentors, senior managers, funds, investors and the international customer and partner base of the Telenor Group.

The home page for korhazsuli.hu.

Hungarian invention lets kids study in hospital

‘KórházSuliʼ makes it easier to develop lessons so that children can keep pace with the rest of their class.

LEVENTE HÖRÖMPÖLI-TÓTH

One challenge for educators is figuring out how to help sick children receiving hospital treatment keep up with their classmates, so that they can rejoin to their friends once the lengthy treatment is over.

A Hungarian pilot program, “KórházSuli” (“Hospital School”) allows these kids to use tailor-made e-learning applications designed specifically for them by secondary school students via an easy-to-use web platform called E-STUDYGROUP. The mastermind behind the program is international edublogger Tibor Prievera, who also prides himself on being a Microsoft Expert Educator.

“On our global edutainment platform anyone, without coding skills, can build and monetize gamification based e-learning solutions in real time,” Prievera tells the Budapest Business Journal. “Everybody can learn this. Kids need 35 minutes to get familiar with it, whereas parents can be brought up to speed within an hour. You can create assignments with a swipe of a finger.”

In Hungary, there are around 50 hospital pedagogues and up to 2,500 school-aged children to teach. As all the children have different backgrounds, needs, subjects and goals, it is impossible for any one teacher to cater to these needs in an effective and meaningful manner. KórházSuli aims at helping both the students, the pedagogues and the children’s parents to better cope with these challenges, Prievera says.

Ready materials are sent to the children in hospital care via the internet, and they can be provided with a tablet if needed. The e-learning content can also be complemented with personal tutoring. “The popularity of

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communication via Skype is clearly on the rise,” Prievera notes.

The program has been on-going for almost a whole school year in Hungary.

“We have nearly 1,000 volunteers, of whom around 300 are truly active. There have been some 200 content development projects benefiting around 100 hospitalized children,” the founder says.

“We believe that we have now set up a system that is workable, with all the components in place. Furthermore, we have piloted and tested the training materials that provide a careful and thorough preparation for participants,” adds committed social investor and quasi-CEO Tamás Záhorszky.

KórházSuli seems to be on the right track to gather support. It has caught the attention of Telenor, which provides electronic devices and unlimited highspeed mobile internet for the project.

Apart from the telco giant, Rotary Club, the European Parents Association and the Association of Hungarian Hospital Teachers have all endorsed the initiative.

There are several developments under way that can make the concept even more sophisticated. Under a Learning Management System (LMS) teachers can set up groups that get tailor-made material sent to them. Instructors are then notified who completed tasks, when and with what results.

“We have tried to automate the formative assessment process, which is the Holy Grail of curriculum development,” Prievera says. “What users are expected to like most though are the gamification-based assessment criteria. Scores are awarded for every completed curriculum phase and they are recorded continuously. Individual assignments such as reading extra books or holding a presentation would be eligible for additional points.”

Key to future success is to find the right finance. Relief on that front is hoped for from EU funds. “Our goal now is to make the program global and the platform financially self-sustainable to the biggest possible extent. As for me, I will not rest until every hospitalized child in Hungary gets access to our methodology. Then Europe is next.”

were created later to try alternative methods to recruitment.

Peter Kovacs CEO and Co-Founder at xLaboratories, Co-Founder and Head of Friendships at Global Startup Awards and Co-Founder and Chief Social Evangelist at IseeQ. The internet may connect people around the world at near instantaneous speeds, but the overwhelming torrent of information online requires professional help to navigate, according to Péter Kovács, the co-founder of IseeQ, a recruitment-focused startup based in Hungary that has spun-off several other new business ventures, which also have a human-resources bent.

“It has always been our slogan, the noise is too loud in the digital world,” said Kovács, regarding the market necessity of IseeQ and its spinoff companies, xLaboratories (xLabs) and the Global Startup Awards. While “you can so easily get in touch with people” online, the personal touch that a company like IseeQ provides can make a big difference in successfully making the right connections, he explained.

IseeQ, xLabs, and the Global Startup Awards were designed with the intention to make networking and recruitment in the tech sector as transparent as possible, to connect all players in the market together, and to “give value to everyone who might be affected”, said Kovács.

“There are a lot of synergies” between the companies, as the varied services they offer are all intended to provide solutions to the same market problems, namely the “lack of skills and competencies” and the absence of specialized workforces to meet certain business needs, said Kovács. While IseeQ has been active in the local startup ecosystem since 2012, xLabs and the Global Startup Awards

xLabs fills competency gaps in the workplace through three primary methods, including community building, education, and ‘business matchmaking’.

Community building events run by xLabs such as International Geek Together and Startup Safari are opportunities for the company to build stronger ties between entrepreneurs, startups, and talented professionals. When employers need to expand the skillset of their workers without making additional hires, they can also bring in xLabs for training modules.

“Traditional education cannot serve the needs of the technology sector anymore,” said Kovacs, instead offering that skilled professionals in areas such as user experience design should be brought in to teach their knowledge to employees through xLabs’ training modules.

‘Business matchmaking’ is a third xLabs service which connects startups with prospective investors, or companies in need of specialized skills to those who have them.

The Global Startup Awards is another business intended to fill a gap in international startup culture, that most startups are oriented towards main international hubs such as the San Fransisco Bay Area, London, or Singapore, while they may be ignoring their regional peers in neighbor countries. The Awards program selects national winners within its targeted areas, and then those companies compete for a regional title. Regional winners and finalists are encourage to network with each other and with their peers in other awards regions. Currently, awards competitions are held in Nordic countries, Southeast Asia, Central and Eastern Europe, and India. In the future, startup awards competitions will also be held in the United Kingdom, South Europe, the Baltic countries, and the Middle East.

2016. 07. 13. 20:15

14

REAL ESTATE NEWS

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Budapest Business Journal | July 15 – July 28, 2016

Report sees region attracting more FDI

A group of local actors in the property market have put together a report detailing impressive investment in CEE. GARY J. MORRELL

The Central European region is continuing to provide significant investment opportunities, with Poland and Czech Republic attracting the majority of investment, according to “CEE Investment Report 2016: Mission to Outperform”, a study put together by international developer Skanska, property consultancy JLL, and the multinational law firm Dentons, in cooperation with the Association of Business Leaders in Poland (ABSL).

Despite the good news, uncertainties remain in the markets.

According to the report, Poland led the region in 2015 with €4.1 billion or 46% of the total real estate investment volume.

Czech Republic came second with €2.65 bln or 30% of total volume, followed by Hungary with €790 million or 9% of the total. Further down the table, Romania accounted for 7.7% at €650 mln, followed

by Slovakia with 4.5% (€412 mln).

“CEE offers 24 million sqm of modern office space; yields are higher than in Western Europe and therefore a combination of attractive riskadjusted pricing and the availability of institutional quality product delivered by experienced developers provides multiple investment opportunities,” said Tomasz Trzóslo, managing director of JLL Poland.

JLL predicts more than €1.5 bln in investment volume for Hungary for 2016, after €900 mln in investment transactions were concluded in the first half year. This breaks down into approximately 40% for retail, 30% for office and 20% for logistics/ industrial. Around €150 mln-200 mln was invested by local funds.

“More institutional investment money is returning to Hungary from such countries as Germany, the U.S. and the U.K.,” commented Benjamin PerezEllischewitz, director of capital markets at JLL Hungary.

The CEE report analyzes the region as an investment location, focusing on Czech Republic, Hungary, Poland, Romania, and Slovakia. The region is attracting an increasing number of institutional investors based in Europe in addition to those from North America, South Africa and the Far East. In general, CEE is regarded as “an attractive and safe region with sustained improvements in the business environment”. Report contributor Skanska was one of the first international developers in the region and has developed and sold on several office developments in all the countries covered. It is set to complete the two phases of the 26,200 sqm LEED “Gold” accredited Nordic Light project on Váci út in May and September respectively.

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UNICEF’s new SSC offices in Budapest.

The office market in select cities around CEE Location

Office stock (sqm), Q1

Gross take-up 2015 (sqm) (*=estimate)

Vacancy rate, Q1 (*=estimate)

Offices under construction (sqm), Q1

Prime headline rents, EUR/sqm/ month, Q1

Prime yield forecast (end 2016)

Warsaw

4,751,350

834,000

14.1%

662,000

21-23 Central; 11-18 Non-Central

5.00%

Kraków

800,750

226,200

5.7%

284,000

13.60-14.50

6%

Wroclaw

724,750

127,600

7.3%

170,000

14-14.50

6%

Tricity

622,200

107,500

14%

92,600

12.75-13.50

7%

Katowice

394,400

62,500

17.4%

47,000

12.50-13.50

7.50%

Poznaƒ

388,500

64,900

14.4%

45,000

14-14.50

7.%

Lódź

323,900

70,000

7.7%

106,000

11.50-12.90

7.50%

Budapest

3,295,150

538,050

11.3%

195,000

22

6.75%

Bucharest

2,348,700

248,800

13.30%

360,000

18.50

7.50%

Cluj-Napoca

205,000

5,630

*10-12%

20,000

13-13.50

8.50%

Iasi

150,000

23,050

*8-10%

22,500

13-14.00

8.50%

Timisoara

120,000

12,800

*5-7%

18,000

13

8.50%

Prague

3,217,450

449,511

13.9%

161,910

19.50

5.25%

Brno

487,600

57,567

13.7%

69,584

13

7.50%

Ostrava

208,400

20,916

22.7%

11,000

11.50

8.%

Bratislava

1,541,900

219,037

7.9%

154,433

15

6.75%

Kosice

202,300

*20,000

*8%

12,000

11

7.50%

Source: CEE Investment Report 2016 Mission to Outperform

Galloping GDP growth CEE GDP growth was 3.1% last year, almost double that of the euro area at 1.3%, and the long-term GDP outlook appears to be similarly positive. Around 3.5% is expected for Poland for 2016, compared to 3.2% for Slovakia and 2.1% for Hungary.

“CEE is one of the safest parts of the world in terms of business and operational risk – threats common in emerging economies, such as geopolitical and social risks, are not present in the region,” said the report.

CEE is described as “one of the growth engines of the EU economy” with FDI being one of its strongest growth engines.

Recent investments include $1.6 bln invested into Slovakia in the world’s first hyperloop railway that will connect Bratislava and Vienna in 20 minutes.

In Kecskemét, Daimler (maker of the Mercedes Benz auto brand) is developing a $660 mln car plant. The automotive sector

employs more than 100,000 people in Hungary and is regarded as a key driver of economic growth and investment in the country.

CEE is increasingly strong with regard to attracting shared services centers (SSCs) and business process outsourcing (BPO) operations. UNICEF established its global SSC in Budapest due to the highly qualified workforce and relatively low cost of doing business, according to the report. The business services sector is seen as the main driver of employment growth in Hungary, as labor costs are around one-third of those in the U.K., for example. According to ABSL, the SSC sector employs 430,000 people across CEE, with 200,000 in Poland alone.

Regional employment forecasts indicate that the CEE total will rise to 500,000. To date, more than 1,300 centers have been established across the region.

“More institutional investment money is returning to Hungary from such countries as Germany, the U.S. and the U.K.” The possible negative or positive consequences for CEE markets of the withdrawal of the U.K. from the EU remain to be seen. A fresh Conservative government began taking shape in Great Britain in mid-July under a new Prime Minister in Theresa May, and at some point this year is expected to initiate Article 50 of the Treaty on the European Union, triggering an unprecedented two-year period of exit negotiations.

“CEE could see more interest from fund managers that are concerned over Brexit,” said Miroslav Barnas, managing director of JLL Slovakia. He regards Bratislava as being in competition with secondary Czech cities for the attention of investors.

The biggest fear for Slovakia is a lack of liquidity in a small market with limited investment grade product. The limited supply of assets is regarded as a potential problem for the Budapest office market too, although the low pipeline combined with increasing competition among buyers is putting upward pressure on rents.

Both Czech Republic and Poland have established office markets in secondary cities where product is being traded, a process that has yet to occur in Hungary.

Perez-Ellischewitz of JLL Hungary puts yields for Hungary at 7% for office, 6.75% for shopping centers and 8-8.5% for logistics. This translates into a 100-125 basis point differentiation between the Czech and Hungarian office markets and a 175 basis point differentiation between the respective retail markets. “More investors are considering the Budapest market above Warsaw as pricing is sharpening in Warsaw and there is a huge office pipeline,” he concluded. “However, in the long run, it is one of the major office markets in Europe.

A further issue is that new government policies in Poland are not regarded as being very business-friendly. Hungary and Romania are again attracting international investors, although in the case of Romania these tend to be more opportunistic.”

2016. 07. 13. 20:15

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Property deals in H1 exceed last year’s total

The

value of transactions in the first half of the year exceeded €910 million, which is triple the pace of the same period in 2015. A year-end total of €2 bln is expected.

GARY J. MORRELL

The value of commercial real estate transactions in Hungary during the first half of this year tripled compared to the same period in 2015, exceeding €910 million, which is more than last year’s total, according to a press release issued

by JLL on July 13.

Of the total amount, investment deals accounted for roughly €830 mln, with retail assets representing the main share of this volume (at 39%) followed by offices (34%), logistics (26%) and hotels (1%), JLL said. The balance of €80 mln consists of plots and vacant buildings.

The main transactions included large ticket, standalone buildings and portfolios, according to JLL. Blackstone acquired the Immofinanz logistics platform across the CEE region (and Germany) with more than 100,000 sqm located in Hungary. Diófa Real Estate Fund was the most active buyer across the office and retail segment, with the acquisition of the Infopark G office building, Europark shopping center and Zala Park. CTP was also active in building up its Hungarian portfolio during the period with more than 200,000 sqm now owned in the country, JLL added.

Zeus Capital Management purchased Váci Corner from HB Reavis.

New investors also entered the market in H1, JLL noted. In March, Zeus Capital Management completed its purchase of the newly delivered Váci Corner from HB Reavis, while in June KGAL acquired Eiffel Square from Europa Capital and its JV partners. Other entrants on the market are currently negotiating in exclusivity on a number of office deals.

The underlying factors supporting the trend remain at play, and JLL said it foresees no change in the coming months.

JLL expects market fundamentals to remain robust, with solid occupier demand, declining vacancy rates and recovering development activity. In parallel, the increasing pool of equity

targeting Budapest and the greater appetite of banks to finance deals is dramatically raising liquidity, the press release notes. Moreover, the yield spread with Western European and other leading CEE destinations guarantees the attraction of the market, according to JLL. Finally, as anticipated, Fitch upgraded its sovereign debt rating of Hungary from junk level to investment grade (BBB-) in March 2016 and a similar move is anticipated from Moody’s later in the year, JLL commented.

“Prime yields have fallen to 7% for offices, 6.75% for shopping centers and 8.5% for logistics. On a relative basis and bearing in mind that some core Western markets are now getting close to 3% yields,

this appears reasonable,” Benjamin Perez-Ellischewitz, head of capital markets at JLL Hungary said. “Further compression is expected over the next 12 months. Domestic buyers – e.g. local real estate funds and the National Bank of Hungary – and international investors will drive the activity and liquidity should remain high in every asset class. [...] We expect further portfolios as well as landmark buildings to be sold in H2, which will push the 2016 volumes towards the €2 billion level. The strong pipeline we have built over 2015 is now transforming in transactions and the momentum remains very strong across all asset classes and all lot sizes.”

If you build it, industrial tenants will come

With demand high and vacancies low, developers are increasingly feeling confident about speculative investments in logistics centers.

GARY J. MORRELL

As elsewhere in CEE, speculative industrial development is on the rise in Hungary amid increasing demand and falling vacancy.

Inter Cars Hungária, the largest passenger and truck parts dealer in CEE, has signed a lease with Prologis for 4,800 sqm at its DC7 building, now under construction at Prologis Park BudapestSziget. The 21,000 sqm facility is now 23% pre-let two months after breaking ground. “The demand for modern

BBJ_2414_biz.indd 15

logistics properties has been increasing recently, giving us the confidence to carry out this speculative development,” commented László Kemenes, country manager at Prologis Hungary.

“We came to a significant milestone and felt that a new logistics center was the best way to serve the increased demands of customers even more effectively,” said Csaba Baan, CEO of Inter Cars Hungária Kft. The Prologis project was the first speculative logistics building in the Hungarian market since 2008; the facility is scheduled for completion in the third-quarter. Prologis Park BudapestSziget currently comprises six buildings totaling 128,000 sqm of industrial and logistics space with the capacity for 15,000 sqm of additional development.

The complex is located in an industrial zone at Szigetszentmiklós, close to Budapest, which provides direct access to the M0 Budapest ring road.

Elsewhere, the European industrial developer Goodman has concluded an approximately 5,000 sqm letting at the 22,000 sqm speculative development

at Goodman Gyál Logistics Center, located at the junction of the M0 and M5 highways, 15 km from the Ferihegy airport.

More speculation expected Cushman & Wakefield anticipates that more speculative deals will be concluded this year; vacancy currently stands at 8.6%, the lowest level in years, and demand is increasing. “With regard to vacancy there has been a marked recovery in the Hungarian industrial market, driven by a combination of the active occupational market and limited development activity.

Vacancy for Central Europe (Czech Republic, Hungary, Poland, Slovakia, and Romania) stood at 5.7% at the turn of the year,” said Cushman & Wakefield.

A growing number of speculative developments are underway in CEE as developers diversify their strategies and there is growing confidence that developments will be let quickly. Take-up is outperforming development with the resulting fall in vacancy, as developers are land banking as they strive to keep up

with demand. Prologis CEE undertook the development of 200,000 sqm of space in ten developments in 2015, 46% of which was built-to-suit and 54% speculative. Most of the delivery was in existing logistics parks.

Poland remains the dominant industrial market with several large industrial zones: Panattoni has just concluded a 45,000 sqm built-to-suit deal in Bydgoszcz. According to Cushman & Wakefield, 780,000 sqm of industrial space is under construction in Poland. “More space is being built on a speculative basis, which can be justified in a market where demand is currently outstripping supply,” commented Tom Listowski, head of industrial at Cushman & Wakefield Poland.

More speculative development is predicted in Hungary in well located parks with high or full occupancy as a further drop in vacancy is expected.

Rising demand is mainly driven by the industrial/automotive sector. However, fast moving consumer goods and 3PLs (companies that work with shippers to manage their logistics operations) are also playing a more important role as retail consumption continues to grow.

2016. 07. 13. 20:15

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SAP Hungary has new leader for Hybris branch János Arany was appointed leader of the Hungarian SAP’s new Hybris branch, and he will be responsible for that office, which is part of the Hungarian subsidiary of the international company, according to a press release issued on July 5. The new branch aims to support Hungarian businesses in the field of new generation marketing automation, client data and relationship management, commerce and customer services applications, the press statement added. Arany previously worked for Google, Oracle and TEN Media as well, gaining professional experience in customer relationship management, digital marketing and commerce, according to the statement.

“The marketing and e-commerce solutions of SAP Hybris offer exciting opportunities for businesses… the digital transformation in the field of marketing and customer relationship management is bringing a new era, in which the technologies of SAP Hybris can offer effective help,” Arany was quoted as saying.

TriGranit announces new asset management chief Beata Kokeli was appointed head of asset management of TriGranit Corporation, as part of the restructuring of the company after the TPG acquisition at the end of 2015, according to a press release issued on July 6. In her new position, Kokeli will be part of the management team, and will be responsible for TriGranit’s portfolio strategy, asset and property management and leasing activities. Beyond the classic asset management tasks of overseeing the whole TriGranit portfolio, consisting of office and retail projects, she will also support the acquisition and development processes of new assets, the company said. Kokeli has more than 18 years of experience in the real estate sector, working at both development companies and at real-estate agencies, the company said. Between 2001-2008, at the Danish TK Development Group, she was responsible for development, leasing and marketing activities; and between 2008-2012 at the Polish Centrum Development & Investments, as chief commercial officer, she coordinated the

BBJ_2414_biz.indd 16

development and implementation of marketing and commercial strategies for existing and future investment projects.

Prior to joining TriGranit, Kokeli spent four years at CBRE, where she focused on developing retail services and also contributed to retail platform activities.

“Taking on a management position is a huge recognition and a big responsibility as well. Beata’s deep knowledge and expertise in the real estate sector will help us drive the company’s business growth further in the upcoming years,” said Árpád Török, TriGranit CEO.

Deloitte adds new partner with sustainability focus Ákos Lukács joined Deloitte Hungary as a leading consultant with a focus on sustainability and climate protection, filling the position as of June, a press release issued on July 6 said.

Lukács, who has more than ten years of experience in the field of climate change and sustainability, worked at the German Emissions Trading Authority - DEHSt; led the Hungarian organization of Knowledge and Innovation Communities (KICs), which operates under the umbrella organization of European Institute of Innovation and technology; and was among the founders of Climate Office Network, according to the press statement. In the past four years Lukács has been responsible for managing domestic, EU and international climate policies on a governmental level, the statement noted. With the recruitment of the professional, Deloitte Hungary expects to further strengthen its sustainability and climate change team.

Deloitte names new marketing leader Csanád Bánhegyi was appointed marketing leader at Deloitte Hungary as of June, according to a press release issued by Deloitte on July 7.

Bánhegyi, who has been working in the field for more than ten years, has experience in digital solutions for communication tasks. According to the press release, he was among the first people in Hungary to start working in search marketing in 2006 with yield-focus solutions.

He previously worked for Procter and Gamble, Coca Cola and Magyar Telekom.

Árpád Török named CEO of the year by Finance Monthly Árpád Török, chief executive officer of TriGranit, was named CEO of the Year 2016 by Finance Monthly, a global publication for the corporate sector that distributes the award annually, according to a press release issued on July 4. ‘I am honored and happy to be recognized as the CEO of the Year. For me, winning this award proves that TriGranit is on the right track to reach the main aim, to be the leading real-estate platform in the CE region,’ said Török.

TriGranit said it considers Török to have been the ‘initiator and a dominant player in one of the largest real estate transactions in 2015 in Central Europe – the acquisition of TriGranit by TPG Real Estate, the real estate arm of global private investment firm TPG. Török coordinated the one-yearplus transaction process, which involved retail and office assets in Poland, Hungary, Slovakia and Croatia – with 250,000 sqm GLA and additional development plots valued at more than €600 million – and also restructured the company,’ TriGranit noted. Török has been the CEO since 2009.

Deloitte said it expects the recruitment of the professional to further strengthen the company’s commitments for innovative solutions.

Wizz Air appoints new chief flight operations officer József Ujhelyi was appointed chief flight operations officer at Hungarian low-fare airline Wizz Air, and will report directly to Chief Operations Officer Diederik Pen, according to a press statement issued on July 1. Ujhelyi joined Wizz Air in 2004 as head of purchasing and commercial partners, and has since headed various commercial departments in the organization over the past 12 years, achieving the position of head of airport development in 2012, according to the statement. Prior to joining Wizz Air, Ujhelyi, gained commercial and management career experience at former national carrier Malév Hungarian Airlines and at Procter & Gamble.

Ujhelyi holds a diploma in Traffic and Transportation Engineering from Budapest University of Technology and Economics. “József has been with the airline since the start and over the years has gained profound expertise and knowledge of the industry,” József Váradi, Chief Executive Officer of Wizz Air, commented on the promotion. “This, once again, is a perfect example of WIZZ’s success formula where smart and hard work, commitment and dedication result in career progression into senior management,” Váradi added.

CPI announces hire of new leasing manager Gergely Kendelényi joined real estate firm CPI Hungary as a leasing manager and will be responsible for acquiring new tenants for the portfolio’s leasable areas – with a special attention to the office buildings of Gateway Office Park, BC30, BC 91 and Budaörs Office Park – according to a press release issued July 11. Kendelényi started his career at Eston International Zrt, working as an advisor, representing SMEs and bigger companies. He was involved in tendering, attended financial negotiations and closed deals for Eston, and was an exclusive representative for “A” and “B” category office buildings, the press statement added. After finishing his operations on the agency side, Kendelényi continued his career at real estate developer HB Reavis Hungary, where he participated in the leasing activity of the Váci Corner office building as leasing manager. “Kendelényi’s personality fits the CPI team well, both professionally and personally. I am convinced that with the newly formed leasing department serious results will be achieved”, said Balázs Simonyi, Leasing Director of CPI Hungary.

2016. 07. 13. 20:15

3Special Report BBJ

Financial consultants

A critical look at EU audit reforms

 18

Little guys can still compete with Big Four  23

Ready to help

Financial consultants in Hungary say they are ready to provide a range of services, from risk assessments to offering strategic advice. And when it comes to the classic work of helping with taxes, they anticpate a lot of business this year.

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Budapest Business Journal | July 15 – July 28, 2016

EU audit reforms may hurt more t

Jeremy Jennings, EY’s leader of Regulatory & Public Policy for EMEIA, discusses new European Union audit legislation, effective June 17. Despite regulators’ desire to open up the auditing market, Jennings says the new rules are likely to spark an even bigger market consolidation.

LEVENTE HÖRÖMPÖLI-TÓTH

Q

Why was it necessary to introduce the new European-level statutory audit framework?

A: The financial crisis identified shortcomings in relation to the audit process, even though a relevant legislative reform had taken place just before the recession hit. The directive dealing with the issue introduced independent oversight of the profession for the first time and it was to be adopted by June 2008. Many Member States had not met that deadline. So if that legislation had been given a chance to show its strengths, there would not have been a need for any new reform.

Q

So have the latest amendments lived up to expectations?

A: It certainly resulted in bigger transparency around audit reporting, the audit process and reporting to audit committees. Where the scheme failed is the desire to artificially structure the marketplace and to encourage smaller firms to come into the marketplace.

Also it is feared that the combination of member state options and derogations would result in a patchwork of rules across the EU, and these will be very complex to manage.

Q

How has Hungary been using those options compared to other countries?

A: Hungary shared the negative opinion of the current reform, arguing that it would be unnecessary, as there had just been a reform a few years before. Hungary was also part of a blocking minority all along that claimed the fresh set of rules could not achieve what the Commission was trying to achieve. Hungary took a liberal approach by allowing provision of tax services that could have been prohibited, however, went for rotation

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Jeremy Jennings, EY’s Regulatory & Public Policy leader for EMEIA. periods (the period in which a firm must change auditors), meaning a frequency of eight to ten years.

Q

So who is going to benefit from the scheme that just went into effect? In particular from the obligation that when a company is forced to “rotate” and hire a new auditor, that auditor must be chosen through a tender?

A: Companies are forced into doing something that they could have done voluntarily. Why would you need to change your audit firm at regular intervals if they do a great job? Costs

won’t go down, either, since if an auditing firm has 1,000-1,500 tenders every month, the cost of rotation on the market will be €16 billion. That would have to be either sucked up by the profession or passed on to companies in the form of increased fees.

Q

But would quality improve as a result at least?

A: Quality won’t go up, because senior auditors will have no choice but to use a lot of their time preparing tenders. And in terms of the marketplace, one of the objectives was to decrease concentration, as 75% of it

is audited by large networks. However, the natural dynamics of rotation has been either among these companies, or from smaller firms to the large networks. But it wouldn’t go back down. So my expectation is that, in five years’ time, the market is going to be even more concentrated than today.

Q

In what other ways will small firms be affected?

A: The infrastructure required around the independence for those auditing for a public interest entity (PIE) is quite significant. So smaller firms will simply choose not to

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e than help CV

Jeremy Jennings is EY’s regulatory & public policy leader for EMEIA. Since 1990 he has been based in Brussels, formerly as Arthur Andersen’s head of EU public affairs. From 2003 until 2011, Jennings was chairman of the European Contact Group (ECG), which represented the policy views of the six largest international accounting networks in Europe. He is chairman of Professional Accountants in Belgium, a group that represents members resident in Belgium from five of the largest U.K. and Irish professional associations. Until mid2013 he was both a member of the council and a member of the board of the Institute of Chartered Accountants in England & Wales.

audit PIEs, since it’s too expensive for them. So in five years time you will see fewer PIE auditors than today.

I can’t see how in today’s climate a mid-sized audit firm can become a real competitor in the PIE audit market. They will probably focus their efforts on the non-audit services of the marketplace, where they don’t have unlimited liability.

Q

What are the steps that stakeholders should be preparing for at this stage?

A: Only 11 out of 31 potential countries have implemented the legislation, so it is still not clear what type of a company would be a PIE in many countries. The first challenge for any group of companies is to establish whether they have any PIE somewhere in their group. Most of all, banks and insurance companies will face this. You will have parent companies having a multitude of subsidiaries across the European Union all of whom are PIEs in their own right. They will have to comply with the legislation of the member state of location. Therefore, for instance, if Hungary expects to rotate their auditors after ten years, but Croatia decides to rotate after seven years, your subsidiary in Croatia must comply with Croatian law.

Q

The framework in question is a lot to digest.

How can reliable firsthand information be accessed should anybody need assistance for interpretation?

A: You can turn to the European Commission, which has drawn up

19

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“Companies are forced into doing something that they could have done voluntarily.

Why would you need to change your audit firm at regular intervals if they do a great job? “ several FAQs, but they don’t deal with complex issues since the authors, not being auditors, don’t fully understand the implications. They also tend not to want to say things some member states might disagree with.

Q

Would you say firms are up for the challenge inherent in the new framework?

A: Many people in the corporate community are beginning to realize just now what this new legislation is going to mean for them. They need to sit down with their advisors to find out where they might have PIEs in the group. Because if you do have a PIE, you are going to have to manage your relationship with your auditor and establish audit committees. In the latter case, you will need to find people eligible for that committee, which won’t be easy at all since suddenly you have an extra 500 companies in need of such qualified persons.

Companies need to wake up to what’s coming through this legislation and start taking steps today to plan as it is going to be challenging to manage the process in the upcoming five to ten years.

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Four firms do it all in consulting

The Big Four’s offices here in Hungary offer a range of financial advisory services that go well beyond the classic consulting services of taxes and auditing.

BBJ STAFF

They may be known for their auditing services, but the Big Four are ready to do much more.

As in the rest of the world, here in Hungary four accounting firms are responsible for the lion’s share of the financial consulting business, especially in the bread-and-butter services of auditing and tax preparation.

In 2015, EY’s Ernst & Young Tanácsadó Kft., Deloitte Magyarország, KPMG Magyarország and PwC Magyarország all reported net revenue in the HUF 10-15 billion range. The nearest competitor had revenues of about a quarter of that amount, and most others were making much less, though few were complaining. (See story, page 23.)

The need for an accounting firm with the expertise, credibility and infrastructure to handle the important but complex work of auditing means that the Big Four have the opportunity to maintain their dominant position in that field worldwide. Still, the local offices of these firms, or their affiliated consultancies, advise on a broad range of related financial areas. According to representatives of these consultants, the complexities of navigating business in Hungary means that their customers turn to them for a wide range of consultancy work.

“We provide comprehensive financial advisory services to our clients,” says Dr. Polacsek Csaba, executive director of PwC Hungary. “In general consulting that means strategic consulting, efficiency improvement, benchmarking studies and feasibility studies; and in transaction related services we handle due diligence, corporate and real estate valuation, corporate M&A, real estate transactions, refinancing and restructuring advisory. Specialty areas include independent engineering services and forensic services. We cover all major industries: energy, financial institutions, transportation and logistics and technology.”

Margaret Dezse, partner, EY Hungary transaction advisory services, describes a similar range. “EY financial consultancy (TAS) advises companies on practically all aspects that relate to the companies’ capital position – on strategies to raise, invest, optimize and preserve capital. For example, we assist in the entire transaction process (acquisition, disposal, capital raising or refinancing, capital expenditure/ infrastructure projects) from strategy,

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Margaret Dezse, partner, EY Hungary transaction advisory services.

“In the financial consultancy, our business comes from a variety of foreign and a growing number of local enterprises.” preparation, execution and post transaction and also business and asset valuations, business modeling, business planning, due diligence sell-side or buy-side, restructuring and corporate debt advisory,” Dezse says. Balazs Tuske, heading up EY’s Advisory service line, confirmed that more companies are reaching out to the consutancy for operational and strategic advice, to ensure their competitive position in the market place. EY’s Advisory service portfolio includes transformational project delivery in number of sectors, deep shared service center knowledge coupled with strong IT advisory capabilities, he said.

KPMG in Hungary promotes its auditing and tax work first and foremost.

“The Hungarian practice today is a leading audit, tax and advisory firm in Hungary and employs more than 1,000 staff,” its website boasts. But KPMG

Dr. Csaba Polacsek, executive director of PwC Hungary.

also runs a shared service center in Budapest, which handles tasks such as corporate intelligence research. In addition, the firm provides a full range of advisory services in areas such as IT risk advisory, data and analytics and bookkeeping and payroll.

Similarly, Deloitte in Hungary predominantly promotes its work to provide “advisory services in audit, tax, legal and advisory to a wide range of large local and multinational companies, public institutions and dynamic growth companies”, while also claiming to range well beyond those activities. Deloitte’s other types of advisory services provided locally include consulting in strategy, legal services and M&A.

Who needs their help?

While foreigners looking to invest here may be more likely to find themselves in need of advice on the basics of doing business in Hungary, according to Dezse, being local does not preclude the need for help from a consultant.

“In the financial consultancy, our business comes from a variety of foreign and a growing number of local enterprises,” she says. “The difference in needs primarily derives not from the nationality of the company but

the position, the capital agenda of the company. It can be said that consciously choosing and working with advisers might be more to do with the size of the company/organization than its nationality.”

And when it comes to tax services, size also seems to matter most, according to Dezse’s colleague, Robert Heinczinger, partner, EY transaction tax services.

“In general, most of our clients are in international companies, many of them have foreign headquarters but some are based here in Hungary. Our biggest advantage is our international network.

This is how we are able to advise our clients and their multinational network covering the business they operate in and covering their service needs in audit, financial advising, tax and legal,” he explains.

PwC also deals with both Hungarian and foreign customers. “We have a healthy mix of international and local clients,” says Polacsek. “We can leverage on our international network connections and on our strong local presence.” If anything, multinationals may need less advice in some areas, according to Polacsek. “Both type of clients use all of our services; however, subsidiaries of multinational firms may have internal support on strategic issues,” he explains.

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Tax experts anticipate a busy year

While the new regulations may actually mean that some individuals pay less, the people who consult on taxes say the complicated tax code is sure to generate more business.

“The new tax code is not making life for tax payers simpler, but this was not the aim. What it is aiming to do is to create a level playing field for businesses by making tax evasion more difficult.”

BBJ STAFF

As business improves in Hungary, state revenues are up, and both individuals and corporations have reason to hope for tax savings next year and after that.

While the tax code for next year may mean some pay less, it is still a complex set of regulations, and navigating this maze requires the help of a professional consultant. In fact, local tax experts say they expect that corporate tax filers will need more advice than ever, and not just because of changes initiated in Hungary.

Passed on June 13, the 2017 state budget anticipates revenue of HUF 17.431 trillion, an increase on the budget for this year, which is supposed to have revenue of HUF 16.222 tln. Much of the increase in anticipated revenue is supposed to come from better earning in Hungary. The actual tax burden on each individual is supposed to drop – after all this is a pre-election budget.

But just because the plan is supposed to go easy on taxpayers, that does not mean it is easier to pay taxes. In fact, the 2017 tax code is rather complex, according to the people whose job it is to understand the regulations.

“The new tax code is not making life for tax payers simpler, but this was not the aim. What it is aiming to do is to create a level playing field for businesses by making tax evasion more difficult,” says Dr. Tamás Lőcsei, service line leader for tax advisory services at PwC. “Of course there are simplifying measures as well, e.g. the single point of filing of local tax returns if the taxpayer has multiple business locations throughout the country. Still, the ‘beer mat’ times are over. It is more important to reduce the black economy and decrease taxes with financing obtained through whitening. This seems like a more successful approach. The tax consulting business is likely to increase as there are several new rules that need interpretation and expertise, such as IFRS or new reporting requirements or new requirements of the OECD.” Robert Heinczinger, partner, EY transaction tax services says that officials writing the tax code are trying to keep things simple, but they cannot always make that their main focus.

“Whereas the rules in tax administration in some aspects get simpler, in some other aspects, they need to be more complicated. What we see is that rules are getting more complex and more tough around tax avoidance,” Heinczinger

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Robert Heinczinger, partner, EY transaction tax services.

“Whereas the rules in tax administration in some aspects get simpler, in some other aspects, they need to be more complicated. What we see is that rules are getting more complex and more tough around tax avoidance.” says. “There currently are major ‘leaks’, and the OECD is determined to cut back cross-border profit shifting. Many of these OECD recommendations are already reflected or are soon going to be reflected in the Hungarian laws, so yes, we do expect our tax business to increase because of these changes.”

Dr. Tamás Lőcsei, service line leader, tax advisory services at PwC.

noticeable as any changes in the cost of taxes. “VAT tax payers will be required to supply data to the tax authority on invoices that are issued using invoicing software and have a VAT content of at least HUF 100,000,” he notes.

Heinczinger is sure that the tax burden on business will grow. The OECDʼs BEPS initiative will be a trigger for many clients to reconsider their international operation, and starting in 2016, multinational companies will have to make detailed disclosures about their transfer pricing,” he says, noting that these complications make businesses seek accounting and legal advice.

“Parallel with these changes, we already experience much more controversy and litigation cases” says Heinczinger.

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What kind of burden to expect Asked how the new tax code will impact his customers, Lőcsei of PwC seems to think that the monetary difference will be minimal.

“The tax burden may slightly increase for businesses and decrease for private individuals in 2017, however in the long run I can see a trend for the tax burden to drop for businesses too,” he says. “The most significant changes will come in the area of VAT. Those are the VAT rate reductions on poultry, eggs and fresh milk to 5% and on internet services and on meals provided in restaurants to 18% and even further.”

In fact, Lőcsei suggests that the reporting requirements may be as

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Software that can fill in for consultants

While ApPello does not claim to be able to replace consultants, its banking software does handle a lot of brainwork once done by people.

LEVENTE HÖRÖMPÖLI-TÓTH

ApPello CEO Béla Vér.

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“Selling directly to the headquarters equals hitting the jackpot. But we have always had to start from a subsidiary.” expertise is there not only in terms of IT, but also in banking since 20% of ApPelloʼs staff has some industryrelated background.

Three packages are most sought after: “Our loan risk management solution tops our hit list, whereby banks can assess a client’s credit score and can follow through the entire life span of a loan from the moment it is granted,” Vér says. “It is crucial to find the best clients and to keep them. And in the end comes the moment of truth when it turns out whether you granted money to the right one, or chased away the wrong one.”

Also popular is a cash management tool that helps plan how much money should be deployed to ATMs, and at what intervals. “Delivery costs a lot, but running out of cash at a particular ATM costs even more,” the CEO notes.

In the future, we are told, computers will replace every type of work. A firm here in Budapest seems to be making headway with the challenge of getting machines to do a lot of the work now handled by consultants.

To be fair, ApPello Kft. does not claim to be able to entirely replace consultants, but banking software is designed to handle tasks like risk assessment, for which banks usually rely on human beings.

Working with software on a job has the potential to easily turn monotonous.

Solutions that combine high added value efficiency with a wide range of variety and therefore tend to resonate exceptionally well with users. ApPelloʼs strategy relies on this very concept and is one of the reasons for its success at selling banking software.

“Flexibility and user experience are Hitting the jackpot the two main factors that make people choose our products. Variety is ensured Big and small banks alike are seeking by yearly design updates, while color out ApPello’s expertise. Given the themes are refreshed every quarter. How typical parent-subsidiary structure in terribly boring would it be otherwise for the field, sales can run into obstacles people who have to work with it every as the policy varies as to what liberty day?” CEO Béla Vér asks the Budapest branches enjoy. “Selling directly to the headquarters equals hitting the jackpot.

Business Journal.

He invites your correspondent But we have always had to start from a subsidiary. That’s how to take a look at the we got to the Vienna astonishing number of HQ of Volksbank, which options available for the is now Sberbank, from administrator.

Tasks “One of our Hungary, and then to displayed on the screen Erste from its Czech can be changed in no time distinguishing and filters adjusted easily. affiliates,” Vér says.

The key is to provide users features is that we The company has made major sales in with tools that allow them Croatia, Romania and to personalize content heavily invest in the Slovakia as well, and without the necessity to have programming future through R&D.” a local agent in Dubai further intensifies its assistance. sales efforts there. The “If a bank has a next immediate target is customer satisfaction survey, for instance, you can change Poland, though, with parallel focus on the content of it or you can assess the the Western European market. Beyond responses in different ways. It’s all up to the two banks already mentioned, you,” the CEO explains. Vér recalls the clientele includes CIB, K&H Hungary time when he worked for a bank where and Raiffeisen. A loan risk management software menus were light years away package for Takarékbank Group is from current structures. “Now the trend currently under construction. is to have Facebook-like messenger The future holds further promise; it is boards for bank staff where they can see a vast potential market. Vér estimates the storyline of a customer and the tasks that leading banks spend some HUF 10 that have been completed. The idea is to billion a year on IT, while maintenance focus on the working process and display and investing into upgrades have around everything accordingly.” the same weight. The plan is to keep the pace of innovation. “Our innovation center in Balatonfüred employs around Bankers on board 10% of our 90-person staff. One of What may sound easy is, in fact, a our distinguishing features is that we very complex issue. Therefore, ApPello heavily invest in the future through trains staff on the job in order to get R&D,” Vér says, offering a glimpse of them acquainted with the novelties why ApPello seems to be on the right of the software. And sector-specific track of development.

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Small firms make war with the Big Four

Mid-sized financial consultants build their edge over the major multinationals by offering highly personalized services, specialized expertise and a proactive approach.

“Representation before the tax authority is our top forte, where low fees are applied and a bigger bonus is due only in the case of success.” to proceed on the basis of the rules,” she notes. With around half of Saldo’s HUF 1 billion in turnover generated by financial consulting services, clients are courted in a number of ways.

“We have received the most positive feedback in relation to live telephone consulting, where questions are answered instantly. If the response requires further clarification, a callback service is on hand whereby the person making the inquiry is contacted as soon as the solution to their problem is found.

Clients are welcome to come by in our office as well in order to get personal consulting,” Sibinger says.

Apart from this kind of flexibility, expertise in specialty areas has an immense power of attraction. Saldo Zrt., for example, has specialized in dealing with matters falling under the competence of the tax authority.

“Representation before the tax authority is our top forte, where low fees are applied and a bigger bonus is due only in the case of success,” Sibinger points out.

Leitner + Leitner, by contrast, has gathered decades of experience in forwarding. “We learned about it in the ’90s, and it has remained one of our core areas. However, in the meantime, our portfolio has broadened to industries ranging from trade to manufacturing or services,” Siklós adds.

LEVENTE HÖRÖMPÖLI-TÓTH

Apparently there is life beyond the Big Four on the Hungarian financial consulting market. In fact, things look pretty rosy for mid-sized firms, who are able to grab their share of contracts for financial consulting services.

But what makes a business decide to allow its most sensitive financial issues to be handled by a consultancy that is not member of the flashy quartet of PwC, KPMG, EY and Deloitte?

First off, the same types of services are offered by their smaller counterparts and, more importantly, quality is kept at the highest level, Márta Siklós, partner at Leitner + Leitner Audit Kft. tells the Budapest Business Journal. “We can follow a much more personalized approach, which is truly appreciated by our clientele. It’s no wonder that, if we start working for a firm, they stick to us in the long run,” she says. In fact, many of them have been with Leitner + Leitner since it began its operation in the early ’90s. It comes to a goodbye only if a client is converted into an international concern and no partner audit company can be found to win the tender. “We are active in 13 countries, but we are competitive primarily in the CEE region,” Siklós says.

Where the Big Four have nothing to fear

It pays to stay proactive Another advantage is that the firm makes sure that the same professional always deals with a certain client’s matters − a rare, yet much valued practice. “There are many companies around here, owned by foreigners and Hungarians alike, that are run by traditional families. To them, this sort of permanence bears huge value,” Siklós explains. “What further distinguishes us from our competition is that we don’t only assess data from the past. Our intention is to become part of the corporate decision making process proactively. Therefore, should options over an investment or the company structure be on the table, we help executives reach the conclusion that’s best for the business.”

Such in-depth overview requires continuous communication between consultant and principal, so the advisor in charge maintains contact throughout the financial year, and not only at milestones that are key in the audit process.

In spite of such extraordinary services, the price range still lies below what the Big Four normally charges. Problems arise when branded family enterprises

BBJ_2414_spec_report.indd 23

Márta Siklós, partner at Leitner + Leitner Tax Kft.

“We can follow a much more personalized approach, which is truly appreciated by our clientele.” are approached by one of the Big Four firms, which in such cases are often ready to lower the entry rate pricing as such clients are of very high value. “They stand a good chance of appealing to such

enterprises if ownership and management get separated and the family withdraws to a holding company, and executives no longer find personalized consulting that important,” Siklós says.

Reasonable value for money is mentioned by Márta Sibinger, director at Saldo Zrt., as a key reason for customers choosing it over one of the Big Four. “Our flat rate schemes are also very popular.

But what makes the real difference is that our specialists are extremely practiceoriented. They don’t only research and interpret the relevant legislation, but also provide clear guidance as to how

One thing is certain: quality must be delivered at the highest level and its assurance must be maintained. “Internal audits in the group are important and we need to comply with Hungarian and international standards and those applied inside the group alike,” Siklós says.

This can also ensure that facing the challenge of the latest European legislative reform on audit services should not be a problem. One of the novelties of the regulation is that certain entities, in particular banks, insurance and stock exchange companies will need to rotate their audit firm at regular intervals. Leitner + Leitner’s Siklós says she does not think, though, that it would lead to a bigger market share for midsized audit firms. On the contrary.

“Auditing such huge entities with international operations requires a large world-wide infrastructure that mid-sized firms don’t have. To handle the complexity of those companies and the risk of them having adequate liability insurance is another bottleneck that only the Big Four can afford,” she concludes. Apparently this is one area where the financial consulting giants have nothing to fear.

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Corporate finance consultants Ranked by total net revenue in 2015

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16,968(1)

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vehicle industry, health care, real estate, state-owned companies, municipalities, food industry, technology

yeaR establisHed no. oF Full-time employees on June 1, 2016

2

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total net Revenue in 2015 (HuF mln)

seCtoRs

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top loCal exeCutive CFo maRketing diReCtoR

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1989 1000

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Robert stöllinger William Curley Miklós Scheibelhoffer

1134 Budapest, Váci út 31.

(1) 887-7100 (1) 887-7101 info@kpmg.hu

– (100)

gábor gion, andrás Fülöp Gerard Lucey Csanád Bánhegyi

1068 Budapest, Dózsa György út 84/C (1) 428-6800 (1) 428-6801 deloitteinhungary@ deloittece.com

1989 665

– PwC CEE (100)

nick kós, osztovits ádám Tamás Pál Borbála Palotai

1055 Budapest, Bajcsy-Zsilinszky út 78.

(1) 461-9100 (1) 461-9101 info@hu.pwc.com

1989 550

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botond Rencz Csaba Horváth Orsolya Ludvig

1132 Budapest, Váci út 20.

(1) 451-8100 (1) 451-8199 mailbox.ey@ hu.ey.com

2011

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1103 Budapest, Kőér utca 2/A (1) 235-3010 (1) 266-6438 office@bdo.hu

(100) –

márta sibinger Gábor Imre –

1135 Budapest, Mór utca 2–4.

(1) 237-9800 (1) 237-9811 saldo@saldo.hu

1990(6) 585(5)

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12,278(2)

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1993 67

373

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insurance

2012 6

Erika Kósa (100) –

erika kósa – –

1036 Budapest, Pacsirtamező út 17.

(1) 373-7900 (1) 240-0445 info@consequit.hu

✓

–

2007 7

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andrás lányi – –

1143 Budapest, Stefánia út 77.

(1) 766-3840 (1) 505-8370 info@ufsgroup.hu

✓

vehicle industry, health care, real estate

2004 14

Individuals (100) –

lénárd Horgos, tamás Horgos Beáta Wimme Zsuzsanna Szlávy

1115 Budapest, Bartók Béla út 105–113.

(1) 279-1979 – info@m27.hu

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7

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297

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capital involvement, company valuation, financial due dilligence, business planning, international strategy preparation, foreign markets entry

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Notes: (1) IFRS revenues of KPMG member firms in Hungary in financial year October 1, 2014 – September 30, 2015. (2) Data of business year July 1, 2014-June 30, 2015. (3) Deloitte Üzletviteli és Vezetési Tanácsadó Zrt. provides corporate finance services in Hungary. (4) Total net revenue of Deloitte Magyarország in 2015. (5) No. of Deloitte Magyarország full-time employees on June 1, 2016. (6) Year Deloitte Magyarország was established.

This list was compiled from responses to questionnaires received by July 13, 2016 and publicly available data. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of press time.

While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, Madách Imre út 13–14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

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Regular folk

Kaláka Együttes is one of the Hungarian folk music acts performing in the Valley of Arts festival, an easygoing event in the countryside that features roots, pop and more – Page 27

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Budapest Business Journal | July 15 – July 28, 2016

A first encounter with Hungarian folk The old Hungarian sounds hit some new ears and another fan is born.

DAVID HOLZER

It didn’t have to be the Racskert. We could have walked into any of the bars and restaurants on Dób utca to rest our aching feet that night.

A simple drum kit was set up at one end of the room. Next to it, a double bass rested on a spike. An old-fashioned electric guitar leant against a small amp.

I asked my Hungarian girlfriend if we could stay until the music started. She was happy sipping her rosé.

The bar began to fill up with young men and women dressed in a style I hadn’t seen before in Hungary. It was as if we’d gone back in time. The men wore trilby hats, tight jackets and enormous trousers.

Several had wispy, first growth beards.

The women went for vintage flowery dresses, billowing skirts and the kind of shoes you’d see on a teenage girl walking to the market in 1937.

A skinny guy walked in with a violin case under one arm. He was welcomed with whoops and bear hugs. Someone bought him a huge beer. His arrival was the cue for the band to start. They tuned up and launched into a frantic number that soon had a couple dancing a set of intricate steps. A boy did a mad footflicking dance by himself, urged on by rhythmic clapping and cheering. When he finished and grabbed for his beer he was saluted with a round of applause from the whole bar, me included.

“What are they playing?” I asked my girlfriend.

“Old Hungarian folk music,” she said.

“It’s fantastic,” I said.

“Uh-huh. It’s Hungarian.” What I was hearing for the first time was simply the music she’d grown up with and loved all her life.

We ended up staying for the whole set.

I heard songs that sounded not that far removed from English folk music and others that could have been Arabic. I

Bob’s uncle bought him a fiddle and he began to find out more about the Táncház (dance house) movement that had sprung up in the early 1970s. Táncház describes the spontaneous dance parties traditionally thrown by Hungarians, fuelled by music and drink. When Bob came back in 1973, he decided to “play hooky from high school and find some Roma to learn violin from”. He’s been a musician ever since.

By the end of the 1970s, Táncház had grown into something that existed independently from the communist youth orthodoxy. “Kids would buy a case of beer, grab a fiddle, head out into the woods and dance round a campfire,” Bob says.

In the 1980s the scene evolved into dozens of bands. Today, the government heavily subsidizes it. There are folk music schools and every school has a program to train people to become a professional dancer. I asked Bob how he felt about the way the government supports the music.

“To play in one of the folk dance ensembles you have to have a license.

This means that people are playing accurately but not creatively, unlike when they went down to Transylvania in the ’70s. The scene today doesn’t reflect the Béla Halmos, who died in 2013, helped start the modern Hungarian folk music fact that folk music is always changing. movement by collecting old songs back in the 1970s.

But there are still plenty of people doing good stuff.” felt like I’d stumbled into some kind of Bob is right. And there’s huge diversity strange underground happening and I Apart from the sheer quality and within Hungarian folk. The band wanted to find out more. It’s a common is a good place to start. I like diversity of the music, one of the Muzsikàs Dresch Mihaly, who plays both trad folk reaction, I’ve discovered. and avant jazz. The hauntingly pure voice most appealing things about of singer, composer and actress Márta Understanding the music Hungarian folk music is that it’s a Sebestyén sends chills down my spine.

Apart from the sheer quality and diversity (It’s her you hear on the soundtrack of the movie “The English Patient”.) of the music, one of the most appealing whole new world to explore. things about Hungarian folk music is that There are plenty of places to hear the music in Budapest. I’d start with Fonó, it’s a whole new world to explore. This is music that hasn’t really travelled outside heard the music when he came over on a which is out in Buda. They also put out a visit in 1972. He was in high school and lot of great music on their own label. of the country.

After that first night, I tried to find already playing American folk music. It Find out what’s on at Fonó Budai Zeneház out what I could about Hungarian folk was the communist era in Hungary and at www.fono.hu/en music. Luckily, a friend introduced the folk music shown on TV was mainly Read Bob Cohen’s informative and me to Budapest-based musician and ensembles singing and dancing to a rigid thoroughly entertaining blog here: http:// ethnomusicologist Bob Cohen, who was formula. But, one night, an uncle showed horinca.blogspot.hu/ able to answer some of my questions.

Bob a film of Béla Halmos and Ferenc Sebő David Holzer is a professional writer Bob was born and raised in New York playing “village-style, unchoreographed” from the U.K. who recently moved to but his mother is Hungarian. He first music. Bob was hooked.

Hungary.

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• Chocolate salon, Art gallery on chocolate boxes • ’The Chocolate Girl’ made of 78 kg of marzipan • A lively workshop – chocolate molding, making of marzipan • The Parliament and coronation jewels out of marzipan

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Valley of the Arts: Roots music and more The scenic countryside of the Káli Basin plays host to scores of Hungarian folk acts, as well as pop and world music, from July 22-31.

BBJ STAFF

An excellent opportunity to soak up Hungarian folk music – and the countryside that some of it comes from – the Valley of the Arts festival (Művészetek Völgye Fesztivál) takes place in a beautiful location just north of Lake Balaton from July 22-31.

Once mostly dedicated to folk music, the program now features a heavy dose of pop, jazz and some intriguing hybrids.

The event is officially headquartered around the village of Kapolcs, but venues are sprawled across a halfdozen or so villages in the Káli Basin, a beautiful landscape of rolling, former volcanic hills, much of it now a national park. The basin starts north of the hills that surround Lake Balaton, Hungary’s favorite summer destination. It is generally much quieter than the Balaton shore, but during this festival, things get busy, and accommodation can be harder to find, especially in the last few days before the event.

Those interested in folk music will probably want to head for the Fóno udvar stage in the village of Taliándörögd.

Among the scores of worthwhile Hungarian folk and folk-fusion acts scheduled are the traditionalist Kerekes Band, the cimbalom- (hammer dulcimer-) based Cimbaliband, sax wizard Mihály Dresch, the playful Kaláka Együttes, and the Oláh-style Roma bands Romano Drom and Parno Graszt.

Bicycle rentals are available in several locations, and cycling from one village to another is perhaps the best way to adjust

Parno Graszt rolling on a river.

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Cimbaliband pounds out a beat. All acts pictured here are playing at the Valley of the Arts. to the gentle rhythms of the Hungarian countryside and tune into the mellow festival vibe.

Along with great music at stages all over, the festival offers art installations, interesting eating options, crafts and other ways to immerse yourself in the Hungarian country feeling.

Tickets run from HUF 35,000 for ten days to HUF 3,800 for a day’s pass.

For details see: www.muveszetekvolgye.hu/en

Romano Drom hangs together.

Old-school Kerekes.

Mihály Dresch lays down jazz with a folk feeling.

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WHAT’S

ON

Fun things to d o in Budapest for the nex t t wo weeks.

VALENTINO KHAN July 15, A38 From hip-hop club anthems to dance music hits, Khanʼs productions know no bounds. He has produced for multiplatinum and Grammy award-winning artists B.o.B., T.I., Bruno Mars, 2 Chainz, Iggy Azalea, Tyga and Kid Sister and this year he’ll be busy with a gig at Ultra Music Festival and a series of new releases. Khan’s diversity and versatility are revealed in his numerous recordings, which range from progressive house, to techno, to electro, to hardstyle and trap as a producer and

his selections as a DJ. He is also the co-producer with Diplo on the smash hit “Bubble Butt”. a38.hu ARCHIE HAMILTON July 15, Corvin Club London based DJ/producer Archie Hamilton has put out recordings on the respected underground labels Fear of Flying, Tzinah, Moral Fiber and his own imprints, Moscow Records and Moss Co. His DJ sets take listeners on a hypnotic trip through house and techno, with heavy rolling bass lines and plenty of

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16-17 November 2016 Millenáris, Budapest Hungary’s largest exhibition for Human Resource Management

Personal Hungary

Mudhoney. grooves. He’ll be at a number of festivals this year, among them Sonar, Fuse, HYTE and Sonus, making a prized stop in Budapest in between. corvinteto.hu

of Hungarian reggae band Irie Maffia, she has made the rounds in a number of Hungarian music projects, most notably her own formation. szabadter.hu

FRENCH ROOFTOP CINEMA Through to August 18, Corvin Club

SANTA DIVER July 21, Budapest Jazz Club

Every Tuesday until August 18, the Corvin Club rooftop will screen old and new gems from French cinema including “Lost in Rio” (dir. Michel Hazanavicius) on July 21, “The Names of Love” (dir. Michel Leclerc) on July 28, “Two Days in New York” (dir. Julie Delpy) on August 4 and “That Man from Rio” (dir. Philippe de Broca) on August 11. Screenings start at 8:45 p.m. and will be shown in French with English subtitles. franciaintezet.hu

Three musicians represent three very different musical styles from standard and free jazz, to folk and improv. Their sound is underpinned by a standard instrumentation of violin, bass guitar and drums but is anything but ordinary.

Playful violin sounds provide the narrative for the colorful and lyrical bass guitar solos and energetic drum lines. bjc.hu

SENA LIVE BAND July 17, Margaret Island Water Tower An original voice on the Hungarian underground music scene, Sena Dagadu, originally from Ghana, covers the gamut of sounds from funk to soul, to hip hop, to world music and beyond.

Known primarily as the frontwoman

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FESTIVAL ACADEMY July 21-24, Liszt Ferenc Academy of Music A four-day chamber Music Festival at the capital’s most renowned music academy features concerts, master classes, and workshops for lovers of classical music. This is the first year for the festival, which features international and Hungarian talent paying homage to works by Mendelssohn, Schumann, Prokofiev and Hungarian composer

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Liszt Ferenc Kamarazenekar Franz Liszt Chamber Orchestra July 25, Óbudai Társaskör The Óbudai Nyár (Summer in Óbuda) concert series, called Muzsika a kertben (Music in the Garden) at Óbudai Társaskör has been well known for over half a century, gaining world acclaim for the live orchestral performances of popular baroque compositions. They have invited young and uniquely talented soloist Tamás Pálfalvi, who is part of the young talent program of the Music Academy, and is no stranger to playing the trumpet on his knees if a modern composer so requires.

obudaitarsaskor.hu jegymester.hu

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György Kurtág. Three concerts will be held each night of the festival, as well as matinee concerts and a series of professional workshops. fesztivalakademia.hu BOBAN MARKOVIC ORKESTAR July 22, Várkert Bazár Rising to fame through the fantastical films of Serbian director Emir Kusturica, trumpet player Markovic performs with one of Serbia’s most renowned Balkan brass bands. The mix of Balkan and world music is sure to stir the crowd into a dancing frenzy. varkertbazar.hu CSABA PALOTAÏ July 23, BMC Budapest-born guitarist Csaba Palotaï has been living in Paris for more than 15 years, and has been involved in a number of jazz, rock and experimental music projects. He released three albums on BMC records with his former French quintet Grupa Palotaï between 2003 and 2007. His latest release on the label, “The Deserter”, is a solo work that comprises 11 short compositions. The recording contains lean and haunting guitar riffs and dreamlike musical fragments that span many genres: a mixture of proto-jazz, ambient, noise, pop, rockabilly, blues and folk. For the album debut two gifted Hungarian musicians – Miklós Lukács and László Fassang – join Palotaï. bmc.hu WE ARE SCIENTISTS July 24, A38 Formed on the West Coast of the United States by three California-based college students, We Are Scientists officially took flight after frontman Keith Murray, bass player Chris Cain, and drummer Michael Tapper relocated to Brooklyn and began building a small devoted following. After releasing three EPs and one independent album, the group signed with Virgin Records and released its major-label debut, “With Love and Squalor”, in early 2006. The band’s fifth studio album, “Helter Seltzer” was released in 2015 and features the singles “Buckle” and “Too Late”. a38.hu

Boban Markovic Orkestar.

KOBUCI BLUES FESTIVAL July 27-29, Kobuci Kert This weekend blues festival at the city’s premium outdoors folk, jazz and blues music venue features top players of the genre from Hungary and beyond. Ian Siegal Band, “Sir” Oliver Mally, T-99, Mr. Swagger and Suitcase Brothers are just some of the names on the play list, in addition to The Devil’s Trade, Redbreast Wilson, Little G. Weevil and Jambalaya from Hungary. Three-day festival passes are available. kobuci.hu STEVE VAI July 28, Budapest Park American guitarist, composer, singer, songwriter, and producer Steve Vai will arrive in Budapest as part of his Passion and Warfare 25th Anniversary Tour.

Three-time Grammy award winner Vai has in the past three decades become the most influential guitarist, drawing

inspiration from such rock legends as Led Zeppelin, Jimi Hendrix and Frank Zappa. His extraordinary guitar skills mean he is at home in most musical genres. He’s had the great fortune of touring with a number of notable performers, among them G3, Frank Zappa, Alcatrazz, David Lee Roth Band and Whitesnake. Vai once referred to his latest release as a meeting of Jimi Hendrix and Jesus Christ at a party hosted by Ben Hur in honor of Mel Blanc. budapestpark.hu

addition of drummer Dan Peters and bassist Matt Lukin became Mudhoney in 1988. The new foursome took the punk metal formula of Green River and the Melvins, added a dollop of ʼ60s garage rock swagger and a large portion of Fun House-era Stooges. Their first release came out on the Sub Pop label in 1988 at a time when the heavy Seattle Sound, later known as grunge was growing in popularity. The band released its 25th Anniversary blowout and ninth studio album, “Vanishing Point”, in 2013. a38.hu

MUDHONEY July 29, A38

TÁNCBAZÁR July 29-August 14, Várkert Bazár

Mudhoney began its foray into music in 1980, when a teenaged Mark Arm formed the band Mr. Epp and the Calculations in the Seattle suburb of Bellevue with a few high school friends.

After Mr. Epp disbanded, Arm and Turner went on to form Green River and later the Thrown Ups and with the

The National Dance Theater’s outdoor dance series features a colorful variety of dance styles from tango, to flamenco, to contemporary and traditional folk dance.

In addition to talents from the Hungarian scene, guest dancers will also be arriving from Costa Rica and Uruguay. nemzetitancszinhaz.hu

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Tel: +36 30 646 3841 | +36 88 656 470 I L M E R C AT O . H U

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Wine: From killer rosés to world-class sparklers Cool down with some easy-sipping vintages that taste great chilled.

ROB SMYTH

Intense summer heat can call for urgent action of the pink kind, and Hungary’s Kékfrankos variety with its thirstquenching acidity is very well equipped to bring refreshing rosé relief throughout the heady days and nights of summer. While raspberry, strawberry and cherry notes are typical of many rosés, too much overt tutti fruitiness (often ramped up using un-neutral yeast) that certain pinkies bring to the table can take away from the real assets of the Kékfrankos.

From Villány, Ruppert’s 2015 rosé is 100% Kékfrankos, has an onion skin color and the comparison to the classic Provencal rosé style – widely considered the benchmark for this type of wine – doesn’t end there. Light and airy with white rather than red strawberries, rose water and peach aromas and flavors, this glides across the palate guided by the tingling acidity to a crispy, even classy finish. Ruppert’s overall portfolio of wines is showing great consistency and the benefits of an impressive reorganization of the winery. Be sure to try Ruppert’s 2015

The basalt soils of Somló. pink offering, along with the 2015 version of Sauska’s ever impressive rosé – a blend of Kékfrankos, Merlot, Cabernet Franc, Cabernet Sauvignon, Syrah and Pinot Noir, among other pink wines – should you happen to be going to Villány’s rosé festival held in the delightful southern wine town on the weekend of July 15-16.

Káli Kövek’s 2015 rosé hails from the basalt soils of the Káli Basin on the northern shores of Balaton. It is also

from the Kékfrankos grape but has a salmon color, although is also pleasantly restrained like the Ruppert and is built on the acidity and stony-savory character typical of its region, with small red berries bringing just enough fruity action. From the neighboring region of Badacsony, Péter Váli makes his rosé from the Pinot Noir variety and a touch of Syrah (10%).

He gives it a massive two days of skin contact, when most rosés are macerated

for merely a few hours. Váli does this because he believes that much of the flavor lies immediately beneath the skins and it takes time to extract this all-important component of the wine. Válibor rosé 2015 is a deep salmon color and is full on the palate for a rosé and more in the cherry and sour cherry direction, but it also has some of that ethereal rose water going on and vibrant acidity to prevent it from being too heavy. It is great for those who

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Festival Academy Budapest The Celebration of Chamber Music

Award-winning Kreinbacher. want a bit more volume in their pink stuff, like myself, and has a nice spicy finish – likely the work of the Syrah.

Orange-ish Pinot Gris With its onion skin-cum-orange color, you could easily mistake Válibor’s Szürkebarat (Pinot Gris) 2015 for a rosé but it is in fact a white wine made with prolonged skin contact of two days, which brings out some of the color of the skins.

Pinot Gris is a mutant of Pinot Noir and produces greyish-blueish fruit but is considered a white wine grape, and is the same as Pinot Grigio. This full-bodied, round, rich Váli wine impressively expresses the grape’s intense peachy character, along with caramel and buttery touches from the oak that support the fruit, but importantly don’t override it.

Laposa Birtok is a name most associated with Badacsony but the family also has vines in the similarly basalt soils of Somló, which is about a half-hour drive away and the ancestral home of the Juhfark variety, which can make some really distinctive wines.

Laposa Juhfark 2015 is full-bodied with the high acidity so characteristic of the grape that also serves to bring out the complex flavors. It has a unique range of flinty, waxy, rhubarb and pineapple aromas and flavors. Juhfark can be aggressively austere when it doesn’t have enough fruit, but the 2015 vintage has the ideal combination of body, fruit and acidity. Another Badacsony family winery, Borbély, also had vines in Somló but has sold them to the Kreinbacher Winery. It was a pleasure to recently taste the very last bottling of Borbély Juhfark from the 2013 vintage, which is in fine nick now but will age nicely for years.

Kreinbacher claims two golds in sparkling world championships A major breakthrough was made in the world of Hungarian sparkling wine a couple of years ago when Somló’s Kreinbacher brought in French savoir faire and technology to make traditional method sparkling wines that offer both great value and real complexity. The quality of these sparklers, made with the second fermentation carried out in the bottle, has now been acknowledged on the

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Light and airy with white rather than red strawberries, rose water and peach aromas and flavors, this glides across the palate guided by the tingling acidity to a crispy, even classy finish. international stage. Two of the Kreinbacher range, Prestige Brut Furmint (aged for three years on lees) and Brut Classic Magnum 2011, bagged gold medals at the prestigious Champagne & Sparkling Wine World Championships (CSWWC) in the United Kingdom earlier this month. They are the very first such Hungarian wines to win golds in this competition. This marks considerable progress for Kreinbacher, which had previously scooped silver medals at the event.

These sparklers were made under the supervision of Christian Forget, who is the cellar master of premium champagne house Paul Bara, and utilize the best in French technology, such as the Coquard presses that prevent the kind of oxidation that blights the Hungarian sparkling movement. The yeast also comes from Champagne.

The wines conjure up the quality and thrilling tension and biscuit-brioche notes of champagne with a Hungarian twist, with the quince and pear notes of the Furmint grape shining through.

The acidity achieved by the Furmint grape grown in Somló’s volcanic soils is responsible for the kind of exciting edginess that is worthy of favorable comparisons to champagne itself, the benchmark to which all other sparkling wines are compared.

The Brut Classic NV (non-vintage) is the cheaper of the two in the regular sized bottle but is a masterwork and my go-to Magyar sparkler. A benefit of magnums is that the contents of the bottle age more slowly and complexly due to the smaller relative amount of oxygen that makes it in at the time of bottling. However, you’ll have to take my word for it with the 2011 magnum as it’s already – and unsurprisingly – sold out. The regular size is still a fine alternative.

The chamber music festival planned for 4 days at the hight of July fills a gap in the usual summer break, bringing several excellent musicians, the real stars of the genre both from Hungary and abroad to the audience of Budapest. 10 to 15 soloists come on stage in one single day, any of whom may well be the greatest star of the festival.

The people who dreamt Festival Academy Budapest up - Barnabás Kelemen and Katalin Kokas violinists – were like them once.

There are many familiar names among the artists, and this is not by chance: most of the performers are artists whom the violinist couple had regularly performed with both in Hungary and abroad. List of artists: Vilde Frang, James Boyd, Nicolas Altstaedt, László Fenyő, José Gallardo, Zoltán Kocsis, Jonathan Cohen, Anna Reinhold, Thomas Dunford, Alina Ibragimova, Gábor Homoki, Ditta Rohmann, Zsolt Fejérvári, József Lendvay, Maxim Rysanov, Péter Bársony, Dóra Kokas, Csaba Klenyán, József Balog, Gergely Ittzés, Róbert Káip, Dávid Pavlovits, András Szalai and Boris Andrianov.

“We think we have managed to win great names for the first Festival Academy which is a real curiosity on the Hungarian concert scene. The audience will not only be able to listen to the extraordinary artists and get close to special, rarely performed compositions, but will also get an insight into the background of the pieces.” - said the two art directors of the Festival. “We feel privileged that the citadel of chamber music, the Academy of Music, which was our cradle and the venue of our most memorable concerts from our childhood for both of us - opens its gates as a first and it accomodates the Festival.

The four-day programme of the Festival Academy starts on the 21st of July with master courses and the audience is welcome for the open programmes between the 22nd and the 24th. In addition to the evening concerts in the main music hall, there will be surprise concerts at noon every day and presentations about various musical subjects every afternoon in the Solti Hall. We aim to create a microworld for chamber music.

The old and beautiful main concert hall of the institution is unparalleled among concert venues, moreover the university with its numerous halls of different sizes is perfectly suitable for the Festival.

To the great pleasure of the organisers of the Festival, many musician friends thought the same and immediately said yes for the invitation. Many of them do not only perform, but give lectures, or play music with their students in ensembles formed just for this occasion.

One of the specialities of the Festival Academy is that the audience may get insight to the master courses on the basis of preliminary registration. The world famous musicians performing at the Festival will uniquely rehearse and play a movement together with their students in the Solti Hall.

Katalin Kokas says, the only question is, how much the lovers of classical music wish to know their favourite artists.

“There are two kinds of spectators: one would like to keep the beautifying distance; for others however it is an unforgettable experience to get to know, and see how the given artist smiles, talks or rehearses.”

As Barnabás Kelemen adds, there are art historians who like to see the work of Michelangelo without hearing the view of an analyst. Similarly, many may only wish to sit and let the music go through them.

Of course this is also possible by just buying a simple concert ticket.

“I think one of the most important benefits of university and master courses is that professional relations, networks and friendships get formed.

Many of the performing artists also get to teach here, moreover some of them have their own festivals back in their countries, so the days spent here may be of outstanding use” - adds Katalin Kokas, who also thinks it is important to emphasise that these meetings have a positive effect on the youngest pupils, too: the 8-10 year-old children preparing for their career as musicians usually practice several hours a day. This way they may learn how to most beautifully play a piece.

2016. 07. 13. 20:19

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2016. 07. 13. 20:19