Budapest Business Journal 19/15

Q&A: MKIK chairman László Parragh, creator of the skilled worker trainee system, reveals details on practical implementation of the program

BBJ

Vol. 19, number 15

I Aug 5, 2011 – sept 1, 2011

53%

Budapest Business Journal

HUF 1250 | €10 | $15 | £7.5

〉page 5

of Hungarian households shop at Vol. 18, number 01 I jan 15, 2010 – Jan 28, 2010 discount stores 〉page 4

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PENSION GIFT EGG Hungarians who returned to the state-run pension system are a bit more excited about the postman’s arrival these days, as the yields from the transfer are about to arrive.

While the economic impact is expected to be major, just how the public will spend the extra is still a mystery. 〉pages 6-7

business

conference tourism focus Conference tourism, especially in Budapest, is well on its way to becoming a decisive niche in its industry

〉pages 12-17

BUSINESS

Tougher law on labor Hungary’s planned new Labor Code, presented to the public on July 22 and expected to pass Parliament this fall, has triggered controversial reactions. While the government says that it will foster job creation and employers’ associations welcome most changes, labor unions have heavily criticized the draft. 〉page 5, editorial page 23

LIFE

Breivik a friend of Gypsies?

The rampage of Anders Behring Breivik has shocked the world. However, the Norwegian mass murderer’s manifesto could in particular upset Hungarians – even kindred souls. The shooter has confessed to not only committing his crimes, but also revealed himself to be a fan of Hungarian history. Furthermore, Breivik professed himself a supporter of the Roma. 〉page 20

TRENDS

More old-timers The population of Earth will soon reach seven billion, and in addition to the rise in population figures, there will be a significant change in longevity as well. Not surprisingly, the countries where centenarians will become ordinary are Japan and Switzerland. 〉page 4

life

The ghosts of retail

Festivals at full capacity

Chinese markets, like the rest of the retail industry, are going through rough times.

Being double-pressured by changing consumer habits and long-term market developments, retailers are feeling increasingly pessimistic about their future. 〉page 10

Sziget, Hungary’s largest music festival will only open at the beginning of August, but it has already been a good season for organizers – and festivalgoers. Volt, Hegyalja, and basically all the bigger events broke attendance records and had days when full capacity was reached. It seems that troubled as the economy may be, Hungarians are still devoted to partying. 〉pages 18-19

2 news

News for this page is from the Budapest Business Journal’s daily briefing, Hungary A.M.

NEWS in brief Hungary keeps key rate on hold at 6%

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Budapest Business Journal | Aug 5 – Sept 1

Hungary could have a trade surplus of €6–8 billion this year, Foreign Minister János Mar-

tonyi said. Hungary’s trade balance turned into a surplus in 2009 with the deepening of the economic crisis, and the country registered a €5.5 billion surplus in 2010 and a preliminary surplus of €3.1 billion in the first five months of 2011.

Changes in the forint base rate

Hungary’s central bank MNB kept the country’s key rate on hold at 6% at a rate-setting meeting on July 26 and said that it may be necessary to maintain interest rates at their current level over a sustained period. The rate decision was in line with market expectations and, according to central bank governor András Simor, it was unanimous. Rate-setters left the key rate unchanged for the sixth month in a row following a tightening cycle that started last November and lasted until January. At the previous meeting held on June 20, council members voted unanimously to keep the rate on hold and agreed that it might be necessary to continue the policy for a longer period to ensure the central bank’s 3% “price stability” target is met by the end of 2012. In the council’s judgment, the Hungarian economy is likely to continue to pick up slowly over the next two years; however, the level of output will remain below its potential throughout the period. Domestic demand is expected to recover only gradually. Consequently, inflation may fall back to 3% by the end of 2012 even without policy tightening, despite the cost shocks hitting the economy, the MNB said, explaining its rate decision.

Source: MNB

Economy Further public sector cutbacks Hungary’s government aims to keep to its 2012 budget deficit target of 2.5% of GDP as announced in the Széll Kálmán Plan, and expects ministries to further cut staff and material spending next year. The government expects gross wages to increase 4.4% and inflation to be 3.5% next year, according to a recent budget working document. The draft foresees 3.1% growth in 2012.

The document says that in the coming weeks the ministries will have to rethink their tasks and adjust them to budget resources. Ministers will no longer be allowed to transfer funds within their own budget from 2012. The ministries’ own revenues will also be curbed.

Budget bill coming in September The cabinet will submit next year’s budget bill to parliament on September 30. Parliament will approve the bill on December 19–20 and the Budget Act will be published on December 28, according to the National Economy Ministry’s budget schedule.

After consultations among ministries regarding the 2012 budget, the government will approve the draft bill on August 31. Hungary targets a 2.5% ESA95 general government deficit in 2012 under its convergence plan updated in the spring. The ministry noted that the government’s economic policy is based on a strong commitment to cutting state debt and reinstating budget equilibrium while fostering growth and competitiveness.

Therefore, it is necessary to create the conditions and means in the 2012 budget to protect Hungary’s economy from the risks stemming from global developments, it added.

Gov’t may sell part of MOL stake The government may sell part of the 21.2% stake in Hungarian oil and gas group MOL it acquired earlier this year, state secretary at the Prime Minister’s Office Mihály Varga said. “The thought that the government could either sell a portion of this stake or begin to gradually sell it must not be excluded, since it is impossible for us to foresee what is going to take place with regard to foreign-currency financing or on the foreign-currency market,” Varga said. The official noted he could imagine a situation in which safe financing at the beginning of 2012 required the sale of part of the state share packet. At the same time, he stressed it was important for the government to have a view on the country’s most strategically important company.

EC ruling on VAT has ‘no impact’ Hungary is sticking to its 2011 and 2012 budget deficit targets and a European Court ruling on value added tax (VAT) refunds has no impact on the budget goals, a spokespersons for the National Economy Ministry said. The Luxembourg-based court said in a ruling dated July 28 that Hungary’s regulations on certain VAT refunds were not in line with European Union laws.

politics Hungary dismisses US criticism Nobody is in a position to criticize the Hungarian government’s mandate from its voters to renew and restructure the country, the prime minister’s spokesman told reporters in response to criticism from US Deputy Assistant Secretary of State Thomas Melia. The American official told the US House Subcommittee on Europe and Eur-

NUMBERS

in the news

2,015

businesses with debts of more than HUF 100 million each at the end of June, up 0.8% from the end of 2010, and 3,473 private individuals and self-employed individuals with debts of more than HUF 10 million overdue for more than 180 days, up 23%, according to tax authority NAV’s latest records. The lists of debtors owing more than HUF 100 million in the case of companies and HUF 10 million in the case of private debtors, that are overdue for more than 180 days, is published every quarter.

HUF 1.39 tln

Hungary’s 2012 healthcare budget, reduced from this year’s HUF 1.46 trillion (€5.44 billion), a government decree revealed.

Further cuts are envisioned in 2013, when health care spending would be reduced to HUF 1.367 trillion.

asia that Hungary’s drafting of a new constitution, the situation of its public media and the law on churches, give cause for concern. Zoltán Kovács, the state secretary in charge of government communications, said in a statement that the government considers Melia’s remarks to be rooted in a “lack of information and malicious distortions.” Commenting on the statements of the American human rights expert, Tamás Deutsch, a Fidesz MEP, said on his Twitter profile: “Who the f*** is Thomas Melia?”

Fidesz still unopposed The governing Fidesz party has increased its advantage over opposition party MSzP in July, as indicated by data from pollster Tárki. The governing party has a 33-point lead among those who would certainly vote for a party if the elections were held now. While Fidesz’s approval rating has remained the same in the past month and is at 53%, MSzP has lost 4% and is at 20%, Tárki said. Green-liberal opposition party LMP also advanced and is currently at 10%, while Jobbik’s popularity has virtually remained the same at 15%.

Basescu rejects Orbán comments Reacting to a statement by Hungarian Prime Minister Viktor Orbán’s statement, Romanian President Traian Basescu said that the time when Hungary can chip in on Romania’s administration or home affairs will never come. Orbán said at the Transylvanian Tusnádfürdő student camp that it is not yet the time to talk about the administrative-territorial realignment of the Hungarian-populated Romanian areas. Speaking on Romanian public television TVR, Basescu said that Hungary has its own problems that it should focus on. “Any

statement on this [the administrativeterritorial realignment] is not welcome,” Basescu said.

MSzP backs dual citizenship The socialist MSzP party backs government policy to ensure easy citizenship access for ethnic Hungarians, but would not consider granting voting rights “an integral part” of the process, party deputy president András Balogh said. Balogh said that the government’s efforts to seek closer ties with Hungarians in neighboring countries and reunite the nation should also involve reducing differences within the country’s borders. MSzP said it was unacceptable that the government should differentiate between ethnic Hungarian organizations and grant more benefits to some than to others. As for voting rights, Balogh said that those should be granted with respect to residence and participation in bearing the pubic burden.

He added that extending voting rights to ethnic Hungarian communities would generate political tension, which could harm Hungarians living abroad.

domestic Stricter gambling rules coming János Lázár, the leader of Fidesz’s parliamentary group, asked PM Viktor Orbán to increase taxes on gambling machines to “save the families affected by gambling addiction.” According to Lázár, the government has already taken steps to work out a new gambling strategy and regulation. Gambling machine operators said, however, that stricter regulation might push the sector into a grey area.

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News for this page is from the Budapest Business Journal’s daily briefing, Hungary A.M.

COMPANY news RTL to raise stake in Hungarian arm Luxembourg-based European media conglomerate RTL Group will raise its stake in Hungarian commercial TV station RTL Klub to 98% through the purchase of an additional 31% of the Hungarian station’s shares, RTL Group and RTL Klub announced. RTL Klub said that the RTL group would also purchase seven of its cable-television stations – Cool, Film+, Film+2, Sorozat+, Reflector, Prizma and Muzsika TV. The seller of the 31% stake in Hungary’s RTL Klub and 100% of the seven-strong cabletelevision portfolio is IKO Media Group, owned by Hungarian businessman Tamás Rákosi.

The remaining 2% stake in RTL Klub is held by bank Sal. Oppenheim, RTL said. The partners in the transaction did not reveal the price of the deal.

RTL Klub noted that Hungary’s media and competition authorities still need to approve the deal.

news 3

After becoming a member of the Warsaw Stock Exchange in the spring, Hungary’s Equilor Investment Kft is now extending its international activity further and has become the first remote member of the Prague Stock Exchange. The company intends to bring new liquidity from its client base to the Czech capital market.

MOL’s acquisition of a minority stake in oil group INA was in line with Croatian laws, the country’s competition authority has said. Hungarian oil and gas group MOL owns 47.16% of INA, while the Croatian government holds a 44.84% stake. The statement comes after four government-appointed supervisory board members of INA asked the regulator to review its resolution of 2009 that concluded MOL’s acquisition of INA was lawful.

The competition watchdog said reviewing its previous decision on MOL’s ownership was not legally possible.

ergy only required in the event of a breakdown or long-term extra capacity requirements, so the energy generated will be entirely “green energy,” the managing director said.

UniCredit is planning to open an initial 30 new branches in 2013 throughout Hungary as part of its expansion in the country. UniCredit, Italy’s largest bank by assets, said it had evaluated the recent positive turn in Hungary’s economy, including stronger investor confidence based on fiscal prudence, as well as the potential for accelerating growth. The bank added that the expansion will continue past 2013 and strategies will be revised annually from 2014.

Hungary’s Energy Office (MEH) announced that two Hungarian regional power distributing units of Germany’s E.ON must decrease their distribution fee by 1% between July and December 31 for failing to fulfill the minimum quality requirements of services. The two units are E.ON Tiszántúli Áramhálózati, operating east of the Tisza River, and E.ON Észak-dunántúli Áramhálózati, servicing the Northern Transdanubia region. MEH has been evaluating the level of services provided by power distributors annually since 2003. The office is authorized to levy a fine on distributors failing to meet minimum quality requirements, such as the average number and length of outages, based on average performance in the last three years. The office’s figures show 1.45 outages per year and customer, of an average duration of 102 minutes last year.

US-based billionaire of Hungarian origin György Soros has decided to close his Quantum Fund, the most successful hedge fund in the world, which had been running with an average 20% yield per year but has failed to bring in the same numbers over the past two years. After his retirement, Soros will only handle his own family wealth, amounting to up to $15 billion.

Chemical company Nitrogénművek announced that its net profit increased to HUF 4.1 billion in 2010 from HUF 1.6 billion a year before.

Nitrogénművek had revenue of HUF 64.7 billion in 2010, up 50% from HUF 42.98 billion in 2009. The company sold 1 million tons of fertilizer in 2010, the largest amount in the company’s 80 years of operation.

Test operation has started at the cement plant completed in Királyegyháza

by Lafarge and Strabag through an investment of €270 million. Lafarge country manager Frederic Aubet said that the plant is operational, construction work has been completed, and only the landscaping has yet to be done before the September 15 inauguration.

Hungarian fashion retailer Jeans Club has gone bankrupt in the Czech Republic. Jeans Club, which sells inexpensive men’s and women’s clothing, closed its last store in Prague after its other shops in the country were closed down a week earlier. Jeans Club’s Czech website shut down as well.

The Hungarian company entered the European market in 1994 and once employed more than 1,500 people.

KBC Banking & Insurance, a Belgian financial group with operations in retail and private banking and insurance, has opened two new data centers in Hungary, built in partnership with data center supplier Minkels and system integrator Simac. The data centers have floor areas of 2,000 sqm per building, with the option of expansion to 3,000 sqm each and are on two separate sites in the Budapest region.

Holding company Finext, the capital-investment arm of Hungarian property developer Futureal, posted after-tax profit of HUF 302.9 million in the first half of 2011, down from after-tax profit of HUF 829.8 million in H1 2010. Finext had net assets of HUF 872 million on June 30 of this year, compared to net assets of HUF 1.39 billion on June 30 of last year.

VT KEP Kft, a Videoton-owned assembly company based in Marcali, is supplying battery packs to Japanese companies such as Sanyo and FKD Corporation, business development CEO Mihály Tunkli said. The products are used in gardening equipment, tools, cordless telephones and electric bicycles. The plant was set up by Videoton in 2008, based on the site of an earlier clothing factory, and employs 200 workers.

Biogas-Miskolc Kft will build a biogas plant at a cost of HUF 2.2 billion that will use the sewage sludge of Miskolc and its agglomeration as a renewable energy source, the company’s managing director Imre Mehn said.

As a result of the development, the sewage treatment plant will be based on a fully self-sustaining system in terms of energy supply, with external en-

The Bük thermal bath in western Hungary has unveiled a HUF 2 billion expansion, which includes a sauna, restaurant, waterslides, a children’s pool and a wellness section. The project received HUF 525,000 in European Union support through the Western Transdanubia Regional Operative Program. Bonds worth HUF 1.2 billion were sold to cover the cost of the project.

IT Services Hungary (ITSH)says it currently has 300 job openings, mostly for people skilled in the English and German languages. ITSH is a subsidiary of T-Systems International. It employs 2,500 people.

Hungary’s OTP Bank has called upon Croatian food company Podravka to pay €11.58 million after it sold its company shares to Croatian pension funds. OTP sold 576,880 Podravka shares for 312.87 Croatian kuna (€42) each to Croatian pension funds, which have now increased their stake in the company to 29.6% from 21.7%. The shares sold functioned as collateral for the debt and the contract stipulates that Podravka will pay any difference between the purchase and sale price of the shares.

Erste Bank has purchased 50% of the shares of Magyar Factor Zrt, thus becoming a leading factoring player in Hungary with a 22% market share.

The acquisition is a result of Erste Bank der oesterreichischen Sparkassen AG having acquired a 88.6% stake in Intermarket Bank AG, the largest factoring bank in Austria, taking over, among others, the 56.2% stake of Polis BRE Bank in Intermarket Bank.

MOL ranks 468th on global Fortune 500 list

537

Hungary’s largest firm, MOL Nyrt, has been ranked number 468 in Fortune magazine’s latest Global 500 list.

MOL’s total 2010 revenue of $20.8 billion ranked it one position lower than American company Fluor and one position higher than France’s Sodexo. MOL previously made it to the list in 2009, when it recorded revenues of $20.64 billion for the year 2008. However, it lost the spot in 2010 when MOL’s revenues fell to around $16.63 billion. The last company on the 2010 list, Japan’s Dai Nippon Printing, recorded $17 billion revenue.

4 trends

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Budapest Business Journal | Aug 5 – Sept 1

Demography

Energy

Food

Economy

More old-timers

Nuke comes cheapest

Discount sales

Gloomy outlooks

Discount food chains gained market share during the crisis

Financial experts still worry about Hungary’s economic outlook

More than 7 bln people will live on the Earth by this October

3.2

Nuclear energy is still the best lowcarbon alternative to fossils.

mln

£100

people are expected to turn 100 in 2050

the cost of a MWh of nuclear energy

of Hungarian households shop at discount stores

of financial experts think economy is in good state

In line with the trends of the past few years, the overall population of the globe is set to hit a new record. The forecasts published for World Population Day – founded by the Governing Council of the United Nations Development Program – show that by the end of this October, there will be more than 7 billion people living on the Earth. Each year, nearly 80 million people are added to the planet, often in countries that are already struggling to provide for their current populations.

China remains the most populous country with 1,339,724,852 inhabitants.

It has a population growth rate of 19.33% per year. India came in a close second with 1,224,614,000 and the United States a distant third with 310,384,000, UN figures show. Hungary is in the mid to lower parts of the global ranking with 9.98 million, preceded by Haiti and followed by Guinea with roughly similar figures.

The rise in population figures also comes with a significant change in longevity. According to the UN, the number of people aged 90 years and older will increase six-fold by the middle of the century. In 2050, more than 71 million people are expected to be 90 and older worldwide. Around 3.2 million of them will have already celebrated their 100th birthday. There are also expectations of extreme lifespan figures of 110 years becoming an everyday thing.

Unsurprisingly, such distinguished ages are predicted to become common in the more developed countries of the world, where citizens have access to better physical and mental health services and healthier conditions of life. Accordingly, it is Europe and Asia, with Japan and Switzerland typically where centenarians will become ordinary. GR

Even with anti-nuclear sentiment still at a high following the disaster in Japan’s Fukushima power plant, the technology remains the cheapest and most efficient source of energy.

A report released by global financial consultancy KPMG states that the world’s rising energy demand will primarily be covered through the use of fossil fuels.

However, if governments are serious about reducing harmful emissions, they will have to look into other sources, too.

Technologies for producing sustainable energy are, however, lacking in efficiency and are also highly expensive. In contrast, nuclear remains the best lowcarbon solution.

As the company’s study points out modern nuclear units have a lifespan of 60-80 years and only use 20% of their operating expenses for the procurement of fuels opposed to the 80% rate common for conventional plants.

This leads to the expense side of nuclear power coming to €60 to €115 for a megawatt hour of electricity. For offshore wind, the sum comes to €150 to €230. The figures only reflect prices at the power station gates and do not include expenses stemming from network operation.

The document also highlights the additional disadvantages linked to green technologies. Solar panels usually operate with an efficiency of 10% but even with the more expensive and sophisticated varieties, the total only goes as high as 20%.

In the case of wind, even though the fuel as such is free, the initial expenses are very high due to changing wind speeds and fluctuation in output. Biomass is unable to produce the necessary amount of electricity, especially in poorer countries, where food supplies can be jeopardized by energy crops. GR

In spite of the approximately 10% rise in foodstuff prices in the first five months of the year, compared to the same period of last year, total spending of Hungarians on daily consumer goods remained about level, at HUF 1,100 billion.

Hungarian households spent significantly more in discount food stores in January–May than they did in the same period a year ago, a recent study conducted by GfK Hungaria shows. This tendency is not surprising at all, the study said, noting that the financial difficulties Hungarians faced over the last two years and rapidly rising food inflation this year are likely to impose further burdens on households’ budgets.

Of the four discount food chains operating in Hungary (Lidl, Penny Market, Aldi and Profi), two posted double-digit growth in their market shares.

One of the reasons for rising market shares is the increase in the number of shoppers: while 50% of Hungarian households did their shopping in discount chains in May 2010, their share now reached 53%, GfK said.

As for location, discount stores in the countryside have a higher market share than their peers in the capital (17% and 15%, respectively). This is mainly due to the lower concentration of retail stores in such regions, but the average purchasing power of households outside the central region is also weaker.

Data from market researcher Nielsen also show that discount chains have indeed gained ground in the last few years. According to Nielsen’s estimates, Lidl realized annual turnover of HUF 221 billion in 2010, up 15% from HUF 191.2 billion a year before. Meanwhile, Aldi’s turnover grew 7% to HUF 52.6 billion last year, from HUF 49.1 billion in 2009. PF

The outlook of the Hungarian economy was not perceived better in July than a month ago by financial experts, the latest Financial Market Report CEE jointly conducted by Germany’s Centres for European Economic Research (ZEW) and Erste Group shows.

Only 5.5% of the questioned financial market experts said the current state of the Hungarian economy was good, and 38.9% thought it was bad. Such results put Hungary at the top of the list of the worst economies in the region, the study claims.

Investors’ sentiment about the performance outlook of the Hungarian Stock Exchange deteriorated again in July.

While more than 61% of financial market experts said in June that they expected an increase in the index of the Budapest bourse in six months time, only 46.9% of them said the same in July. The proportion of those expecting a lower BUX index went up to 25.6% in July, from 19.4% in June. Thus the bull/bear quotient – which shows how the number of those who think the BUX will go up relates to the group believing it will decrease – fell to 1.8 from its earlier 3.15 rate.

According to daily Napi Gazdaság, which reports on the survey, the quotient has not been this low since January. Back then, anticipation preceding the announcement of the Széll Kálmán Plan and the renationalization of private pension funds worried investors, the daily wrote.

An increasing number of surveyed financial experts think that the Hungarian currency will gain momentum versus the euro during the course of the next six months. More than 36% of respondents anticipate a stronger forint – representing an 8.1% increase from last month. Meanwhile, the percentage of those awaiting a weaker forint course also grew on a monthly basis, to 25% from 19.4%. Only 38.9% of financial experts – down from 52.8% in June – think that there will be no change in the exchange rate of the forint. PF

Approaching capacity

Green nuclear

discounts rule

forint forecasts

World population estimates milestones (bln) Source: Wikipedia

Share of nuclear in electricity production (2009) Source: Nuclear Energy Agency

53%

Market share of discount stores based on household spending Source: GfK Hungária, Consumer Tracking

5.5%

Respondants’ anticipation for the forint course in the next six months Source: Erste Group

politics 5

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Budapest Business Journal | Aug 5 – Sept 1

Raising skilled workforce As a result of a half-year long negotiation between the government and the Hungarian Chamber of Commerce and Industry (MKIK), Hungary introduces a new skilled worker trainee system in 2011 September. The program is to contribute to Fidesz’s election promise of creating one million new workplaces by the end of the period and aims to strengthen young skilled workers’ job market opportunities by providing them with more practical knowledge. MKIK president László Parragh, one of the creators of the new system, talks about how he envisions it in practice.

How many children will be affected by the new trainee system?

The implementation of the new trainee system is voluntary this year, therefore it is hard to estimate how many schools will join the program. We think, approximately 6,000-

How are businesses receiving the changes?

Businesses obviously see the huge opportunities in the trainee system. Some big companies such as Mercedes or Bosch already employ 80% of the trainees in a particular profession.

According to a recent MKIK statement, 9,000 businesses are participating in the program at the moment, which has to be increased to 20,000 in order for the system to run smoothly. How will you gain the remaining 11,000 companies?

Well, it is easy to see that businesses run a risk by letting inexperienced people work with machines that are often worth hundreds of thousands of forints. If we want them to give trainees a try, the state has to make sure they have a stake in doing so.

7,000 trainees will join the new system this year, which translates to one fourth of all children in secondary education. This proportion will reach up to 35% by 2012, when all technical high schools will be obliged to implement the new system.

What benefits can you offer them?

They already get expedited amortization allowances for certain instruments, and can apply for grants for tools used especially by the trainees. The companies also receive some money after each trainee, which basically covers their wage. However, there is no doubt that the circle of these benefits

has to be extended. We have to find the path which works for both for the state and the business sector.

How fast will the business sector react to the new opportunity?

The system works in a three-year cycle. By the time the first class taking up secondary studies in the new system leaves school, we will have the necessary 20,000 companies.

Although skilled workers in some particular professions can already reach relatively high salaries, especially in the western region, the prestige of manual work is still very low.

Will the new trainee system be able to change this?

The prestige of a profession is primarily the question of wages. A good turner or a mason already earns more than a teacher but, at the same time, vocational work has been devaluated in the past decades.

This trend, however, already seems to have turned around. The Prime Minister declares in his speeches how important he finds it to revive the recognition of manual work and people have started to realize that human hands are always needed in order to create real value. ÁV

A tough new world emerging for employees The planned labor law is full of holes, opponents say. It will greatly contribute to job creation, the government says. One thing is sure: the proposal has received a very divisive reception.

BBJ patricia fischer

A proposal on the new Labor Code was made available to the public on July 22, and is to be presented to Parliament in September. The planned changes have many opponents, with experts saying that the proposed law is full of vague and intangible regulations. National trade union associations called the draft “unacceptable” because its regulations make employees utterly vulnerable.

One such issue revolves around the possible legal consequences of employees failing to fulfill their duties. For such cases, the draft would allow employers to impose sanctions. Among others, this could be executed in the form of withholding wages – up to an employee’s sixmonth base salary.

The new code would require employees to “behave in an expected way” even outside of working hours. It would also weaken employees’ ability to represent their own interests by “attacking and reducing” the system of collective contracts.

Fewer days off The new rules also include a reduction in mandatory severance pay, holiday pay and overtime pay. The bill would cut severance pay from the present three months’ salary to just one month after more than five years of employment, two

months after 15 years of work, and three months for more than 25 years. There would no longer be severance payment for retirees who are working.

In line with the proposed changes, employers would be able to lay off mothers more easily after their three-year subsidized child benefit period has ended. The proposed changes would also apply to those on prolonged sick leave and those approaching retirement age.

Extra vacation days would increase with age at a more gradual rate. The bill also cuts the compulsory overtime premium for night shifts by 15%.

Under the bill, an extra 50% of wages would be paid for Sunday work and there would be double pay for those who work on national holidays.

Those who like it Employers’ associations have welcomed the proposal. Ferenc Rolek, vice president of the Confederation of Hungarian Employers and Industrialists, noted that the new legislation would be more flexible than that existing. He emphasized that it allows contracts between employers and employees to be written according to local circumstances.

Ferenc Dávid, head of employers association VOSz, said the draft Labor Code helps to make labor more flexible, as it includes fewer regulations and gives more opportunities for agreement between employers and employees for their mutual benefit.

Péter Szijjártó, spokesman to the prime minister, said in response to opposition criticism that the draft does not include existing protection against dismissal for employees above the age of 55, insisted that that the code would maintain this protection. He cited a questionnaire sent out to households earlier, in which 91.2% of respondents said the protection of those in the years before retirement is necessary. Szijjártó also claimed that

the new code would help increase employment in Hungary.

Voices of objection Minority government party KDNP has also raised worries about the planned changes. Caucus leader Péter Harrach said that it is contradictory with the proposal the party has drafted on family protection rights, citing the parts referring to mothers on maternity leave and their return to the labor market.

The association of Hungarian labor unions MSzOSz has found faults in sections which reduce wages and holidays and increase working hours.

The association of independent labor unions is also protesting the proposal, saying that it leaves employees unprotected and rules are one-sided and represent only the interest of employers.

Referring to the parts imposing sanctions on employees for failing to fulfill their obligations, Hungarian business weekly HVG com-

pared the draft bill to legislations applied to labor-related issues during Hungary’s socialist era, calling the new rules even more ruthless, as they “leave too much elbow room for employers in sanctioning issues.”

Already passed While the fully modified Labor Code will be discussed by Parliament this fall, several labor-related pieces of legislation have already been passed. These include a rule on extended working hours, changes in the wage system for extra hours, extending the time of probation, and reducing the period during which one can receive unemployment allowance to 90 days from the previous 180.

The current proposal will be discussed in Parliament at the fall session. The government expects to save HUF 312 billion during the next three years with the changes to be implemented in Hungary’s labor market. n

6 business

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Budapest Business Journal | Aug 5 – Sept 1

Money in the mail Hungarians who returned to the state-run pension system from the private pillar are set to receive the yields of their savings at the end of August. Optimistic scenarios say that the extra spending money could give a tangible boost to the economy.

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Depending on whether private pension fund members made statements on how they want to receive payment, the real yields – the amount generated exceeding inflation – will arrive via bank transfer or post by the end of the last summer month.

Prime Minister Viktor Orbán announced last October that the wealth accumulated in private pension funds would be taken over by the state, converting Hungary’s pension scheme into a two-pillar variety (the second pillar is voluntary pension savings).

At the time, the Stabilitás fund association decried the effort as clear nationalization and noted that some three million Hungarians had amassed around HUF 1 million in savings each over the dozen years the funds were in operation.

Accordingly, Stabilitás said that the aggregate amount of savings in the private funds amounted to HUF 3,162 billion at the end of March. Once all that is taken over by the state, the group reckons HUF 260 billion of the total will be returned to individuals in the form of yields. The group’s president Julianna Bába said that on average, those returning to the system will get HUF 80,000 each.

What to expect Some funds have already made public the amounts their former members may expect.

ING’s fund is to transfer a total of HUF 40.5 billion. The first group of refund recipients – those that have been with the company since private funds were established in 1998 – are to receive HUF 101,544 each on average. The Életút fund announced that it has

already completed transfer of the HUF 413 million in real yields to its members. Here, the average per capita amount in reimbursements was HUF 170,000. The funds that have not yet released average forint sums offer their members calculators on their websites where members may find out how much they are likely to get.

According to data released by financial market regulator PSzÁF, 11 of the 17 private pension funds achieved a positive yield over the past 13 years, while the remaining six were in the negative. As such, the majority of former members may expect payment.

Regarding those who did not explicitly state they want the money transferred to their bank accounts, there are now capacity concerns envisioning delays in postal delivery. But recipients should also stay aware.

If the postman cannot deliver the money, because the person they are looking for is unavailable – e.g. they’re at work – he will leave a notification on which post office they can pick up their cash. For those eligible for more than HUF 150,000, this is the standard case, since delivery workers may not handle amounts exceeding this. However, if the amount in question is not picked up by September 16, several years of waiting will ensue, since the post will transfer unclaimed refunds to the treasury where they will be rolled into state pension accounts.

Economic impact PM Orbán announced that HUF 1,345 billion of the pension takings will go directly to reducing state debt. Through the move, the country will be able to reduce what it owes to 77% of GDP from 81% in a single move, something he labeled a “world record.” The political opposition questioned his claims of success, since the reduction is achieved through a one-off move, the legitimacy of which is still widely contested. In fact, the Constitutional Court is set to address the issue after the summer recess.

On a smaller scale, citizens getting the yields of their savings in cash is also expected to offer a slight boost to the economy in general due to the simple fact that people will have a little extra money to spend. These expectations are

underlined by a Takarékbank forecast, which predicts annual GDP growth of 3% this year.

The bank pointed out that for the time being, expansion is fueled almost exclusively by exports, with domestic consumption contributing little to nothing. With the extra funds people are left with, this could take a change for the better. Portfolio.hu analyst István Madár was also optimistic, telling InfoRádió that the refunds could fuel retail turnover by 2% in the second half of the year.

However, these projections were made before Europe became heavily preoccupied with its ongoing debt crisis. The Swiss franc, the currency used in a wide array of mortgage loans, has been breaking new records. Therefore, it is far more likely that debtors will try to use the moderate sums they are to receive to pay back loans or simply make their monthly scheduled mortgage payments. It could be that the returned yields will generate very little additional consumption.

Future problems As an additional concern, even though the government now claims that the pension system has been “saved” and has become sustainable, experts say this assumption is far from true. An OECD directive that is also accepted by the EU declared that citizens of member states need to receive at least 70% of the respective country’s average earnings as their pensions in order to have acceptable sustenance when they retire. It is generally accepted that a solely state-run pension system will not be able to cover the gap.

Calculations released by insurance company Aviva show that the gap between what is now put aside and what would be necessary to reach the benchmark for those retiring between 2011 to 2051 is HUF 532,000 on average per year. Even though the company noted that Hungarians reacted to crisis conditions by cutting back on consumption and accumulating savings, they are generally still very far from that level. n

Bankers concerned about new limi Hungarian banks have until August 31 to implement new remuneration policies that place tough restrictions on bankers’ bonuses, financial watchdog Pszáf told the Budapest Business Journal.

In addition to bonuses for 2011, bonuses from last year that are to be paid after the August deadline also fall under the new regulations, in line with an amendment to the Act on Credit Institutions, Pszáf said. In addition, credit institutions with a minimum 5% market share in terms of total assets are required to set up an independent committee to oversee remuneration policies.

The global crisis put financial institutions’ wage and bonus policies into the spotlight, the Pszáf

said. Global experiences show that previous remuneration policies did not put a limit on excessive risk-taking and encouraged employees to focus on short-term performance only. The new regulation is expected to help reduce the volume of high-risk transactions.

The European Parliament approved curbs on bank bonuses on July 7, 2010 as part of wider efforts to limit risks in the banking sector. The new regulation took effect from the beginning of this year.

Target unclear The amendment targets staff whose professional activities “have a material impact on the risk profile of the bank or investment firm.” These are

business 7

www.bbj.hu

Budapest Business Journal | Aug 5 – Sept 1

Banks look to lure pension money Several banks are launching new products in August to try to attract at least some of the extra income Hungarians are getting from the real yield payments made by pension funds following their quasi-nationalization.

BBJ gabriella lovas

Although self-provision is gaining ground in Hungary, repayment of the increased installments of foreign-currency denominated loans will account for the lion’s share of the HUF 233 billion real yields to be reimbursed in August.

Banks foresee higher savings only where real yields reach at least a few hundred thousand forints per person. Extra savings are expected to be invested in vehicles such as long-term investment accounts (TBSz), retirement savings accounts (NyESz) and voluntary pension funds.

OTP Bank deputy CEO Antal Kovács said at a press conference that more than 50% of those receiving refunds are expected to consider saving the extra income. In August, the bank is launching two new products for these customers, including a bank deposit with special interest rates as well as a long-term investment product. As 63% of OTP Private Pension Fund’s former clients have already stated that they want the money in their bank accounts, Kovács hopes that most of the repaid funds will stay in the bank.

K&H Bank is recommending two new closed investment funds with a minimum HUF 100,000 subscription amount to those seeking a suitable vehicle to invest the extra money. Through the longer maturities, the bank aims to promote self-provision and the opening of investment and retirement savings accounts. The state still provides a 20% tax refund for funds deposited in NyESz accounts in 2011, K&H noted.

Budapest Bank will not offer any new products, but it will call its customers’ attention to the importance of self-provision and to its various savings products, especially some regular savings options in August, the bank told the Budapest Business Journal. The bank believes that its most successful investment funds as well as the recently launched Franklin Templeton Selections Fund of Funds will continue to be popular.

Current and planned savings

Current (%)

Planned (%)

savings for unexpected expenses 28 21 life insurance 30

6 savings for retirement 14 14 investments for retirement 13 13 non-wage income 11 14 bank deposit 20

4 voluntary pension fund 19

3 voluntary health fund 12 10 home buyer’s savings account 13

6 permanent sickness insurance 10

5 savings account 10

3 retirement savings account

7

5 unemployment insurance 4

4 long-term investment account 5

3 voluntary mutual aid fund 5

2 bond, government securities 3

2 START account 4

1 investment fund 2

2 stocks 2

2 Source: OTP

Self-provision index disappoints Hungarians’ attitude towards self-provision leaves plenty of room for improvement, to put it mildly, OTP’s recently launched self-provision index shows, which stood at 36 points at the end of June, on a scale of 0–100. Besides financial issues, the index also incorporates attitudes in the fields of health and environmental protection.

The most shocking finding of the survey was that although respondents were aware that their retirement income will not be enough to maintain an acceptable standard of living, 66% still believe that the government should provide for them after they retire. In addition, 6% of the respondents have a firmly negative attitude towards self-provision, indicating that many still nurse a “stubborn anger” towards savings.

Asked about their reasons for saving, most respondents cited precaution, with 28% saying that they already save and 21% plan to save for unexpected expenses. While 58% prepare a monthly financial plan, only 26% plan ahead and 8% have plans on a 5–10 year time horizon.

OTP’s index will be published every six months to understand what Hungarians think about selfprovision and savings. The index was compiled by research company Ipsos from a sample of 1,000 bank account holders between the ages of 18 and 70. n

tations on bonuses the employees who make decisions that may affect the level of risk assumed by the institution. Banks enjoy some flexibility as to how the principles are applied in a way that is appropriate to their size, internal organization and the nature, scope and complexity of their activities.

“As this is a pretty subjective approach, most banks took their time identifying those who meet the criteria set by the new law,” an executive told the BBJ. While top management certainly falls under the scope of the new regulations, some mid-managers such as, for instance, the heads of treasury departments or risk and compliance managers are also affected.

Bank managers asked by the BBJ complained that bonuses have already been sig-

nificantly cut since 2008. Their main problem is that the compensation system has been unpredictable and non-transparent since the crisis. On the other hand, they admit that banks still pay well, much better than any other sector. Private interests aside, they also accept the necessity of linking bonuses to the banks’ overall performance. Bankers’ bonuses typically amount to around three to six months of wages.

Less cash According to the amendment, the assessment of performance will be set in a multi-year framework of three to five years in order to ensure that the assess-

ment process is based on longer-term performance. Thus, the actual payment of performance-based components of remuneration is spread over the business cycle of the firm.

The guidelines require that a minimum of 50% of bonuses consist of shares of the institution or similar instruments rather than cash. At least 40% of bonuses must be deferred for three to five years. If a bonus is considered particularly significant in size, a minimum of 60% must be withheld.

Bonuses may be paid only if they are consistent with the financial situation of the institution and are considered reasonable in relation to both the bank’s results and the employee’s performance. GL

8 business

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Budapest Business Journal | Aug 5 – Sept 1

Swiss franc lands on new peak. Really?

Hungarian debtors are anxiously watching as the Swiss franc, having become a haven currency amid the Greek crisis and additional pressure from the US debt ceiling debate.

Its exchange rate is being boosted to extreme highs.

Switzerland’s national currency continues to soar on international money markets, as jittery investors keep buying it up en masse, looking for sanctuary for their valuables. The series of aggravating events hints that there is no end in sight to the process for the time being.

The Greek economy is still widely expected to default even though EU countries agreed on two bailout packages of €110 billion and an additional €109 billion. Greece has amassed €350 billion in debts or 150% of its national output, making it the “worst offender” among the unflatteringly referenced PIGS countries (Portugal, Italy, Greece, Spain), that are close to folding.

Investors were not impressed by the lifeline and their worries have only continued to get worse. The latest stress test conducted by the European Banking Authority (EBA) on the continent’s finance system found eight of the 91 businesses under scrutiny failed the test. Five of these came from Spain, two from Greece and one from Austria. The EBA also warned that a further 16 European banks were in danger of failing the next stress test unless they took steps to bolster their liquidity.

Although the tests indicated that the European finance system is stable, the results actually produced reverse effects.

Analysts believed that the probing scheme had lost its credibility and were “too easy” in the last round at the end of 2010, when an Irish bank, that was found to have passed, shortly had to be bailed out.

Dems vs GOP playing chicken If all that wasn’t bad enough, markets suddenly had an even bigger concern, namely the specter of the United States defaulting. The outcome was eventually averted in the final hour after a debate that lasted for months between Democrats and Republicans on raising the country’s debt ceiling.

Although it was generally believed that a compromise would be reached (the final August 2 deadline was determined after repeatedly rescheduling the “ultimate deadline” and the US has raised its borrowing threshold numerous times over its history), markets were anything but calm.

The US dollar is also suffering against the Swiss franc and the partisan bickering – which is surely rooted in the fact that the 2012 election campaign is already kicking off – greatly damaged the country’s international image in the eyes of investors.

Furthermore, even though a deal was finally reached, it failed to shore up economic expectations. Even though the American debt limit was raised, it doesn’t change the fact that its economy is performing poorly and unemployment is high.

Therefore, concerns of rating agencies downgrading the country abound, driving investors even more to the Swiss franc.

Desperate debtors The trouble that the euro and the dollar are in does not bode well for the Hungarian public either. The Hungarian press has hardly had to change its headlines over the past months since “Swiss franc hits new record” sufficed perfectly, almost on a daily basis.

Even though news of the US compromise reached markets, the franc peaked at over 251 against the forint in next day’s trading, another all-time record.

Source: Portfolio.hu

This is bad news indeed for Hungarians who have loans in Swiss francs and there are many of them. Data published by the National Bank of Hungary (MNB) showed that 64% of all mortgages and 54% of all corporate loans are in foreign currencies, mainly in Swiss franc. Overdue payments on Swiss franc-based loans affected more than 90,000 homes at the end of last year, about a quarter more than the number of homes that were bought and sold during the year.

The government has introduced a temporary relief scheme for troubled borrowers. Installments may be paid at fixed exchange rates for a period of 36 months but no longer than the end of 2014. The rate for Swiss franc-denominated loans is set at HUF 180 forints to the franc. The rate for euro-denominated loans is set at HUF 250 to the euro, and HUF 200 to ¥100.

This is not a free pass, however, since the amounts from the gap between market conditions and the fixed rate are accumulated and will have to be repaid with interest. As such, those taking advantage run the risk of only putting off the problem to then see it hit even harder later.

In the longer-run, given that there is no indication of the franc significantly weakening anytime soon, the situation could impact economic growth in general. Household spending has already been reduced due to cutbacks in consumption: the population prefers to pay off debts or accumulate savings. Accordingly, even the extra left in people’s pockets (benefits from single-bracket personal income taxation and a one-off from the real yields of private pension funds) are likely to fall short of the anticipated consumption boost. PF-GR

Recovery calls for different management Crisis managers ruled in 2010, as many companies tried to align their corporate culture to changing circumstances by changing their leaders.

Thus the role of “crisis managers” has become increasingly appreciated over the last few years.

A crisis leader must be confident, decisive, a strategic thinker, able to communicate effectively, and recognize what is important when potentially surrounded by confusion and chaos.

Changes in the economic environment caused by the global crisis over the past few years have forced companies to rethink their strategies, and in many cases, to turn to a more cost-efficient mode of operation.

Increasing efficiency and exploiting existing reserves have become the most important tasks of managers. And since such activities usually require a different management culture, these companies had no choice other than to implement big changes in who does their management. This, naturally, could not be executed without conflict: in many cases, executives chose to leave their posts voluntarily, while others were made redundant and replaced.

Vanishing bonuses The crisis had an impact on executives’ salaries and bonuses. These days, an executive can expect less money for a position than before the recession. In line with less appealing offers, executives’ expectations have also been lowered. They quickly adapted to the changed circumstances and now settle for less in wage negotiations.

Bonus payments are based on a company’s financial performance. Therefore, even if basic salaries were not reduced, bonuses in many cases were withdrawn, decreasing the overall income of executives. The range of fringe benefits has also been redefined at many companies.

Locals vs expats

Interim gathers pace

While still more than half of the top 200 companies in Hungary are headed by expat CEOs, and replacements during the first half of the year mostly involved other expats instead of Hungarian professionals, delegating foreign company leaders to Hungarian subsidiaries has become somewhat less common practice for multinational companies by mid-year. This can also be attributed to the crisis: in a small market, global companies cannot afford to pay expats exceptionally high salaries, not to mention all the extra costs that need to be covered (such as education expenses for their children, accommodation, travel expenses, etc.).

But in spite of the fact that companies send fewer expats to Hungary, Hungarian managers are not likely to take over expat positions in large numbers for at least another four or five years, experts say.

As a result of massive management changes, a large number of highly qualified and experienced executives have been on the job market, in some cases for more than a year. For them, interim management might offer new opportunities. The profession, however, is still in its infancy in Hungary, and besides supply just picking up at present, demand has also only started to rise for interim managers.

A study conducted jointly by Interim Management Resourcing and the Budapest Business Journal at the beginning of the year reveals that while a few years ago there were only about 100 registered interim managers in the country, today there are more than 1,000. However, of those, only about 250–300 are actually ready to jump into a certain position – approximately 30–40 in each area. The rest of them probably considered this only as an alternative option during their job-seeking process. PF (The full article will be published in the 2011 edition of the BBJ’s Business Who is Who.)

business 9

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Budapest Business Journal | Aug 5 – Sept 1

Property investors slowly return to Budapest Investments in Hungary’s commercial property market in the first half of 2011 has already surpassed last year’s aggregate, and consultancies see hope that investment will near 2008 levels by the end of the year.

BBJ gergő rácz

Europe’s real estate investment market responded acutely to the developing debt crisis by contracting significantly as investors became wary of the risks. Overall, the second quarter of this year brought €25 billion in investments on the continent, a fresh report from property consultant CB Richard Ellis revealed.

Hungary, on the other hand, has improved on its volume within the CEE region with the first six months of the year, actually doubling its share. DTZ, another major real estate consultancy, recorded €230 million worth of investments in the first half of 2011, already beating the €188 million invested in the whole preceding year.

As Tim O’ Sullivan, CBRE’s head of capital markets explained, the Budapest market holds significant opportunities given the conditions.

With the European economy changing, investors are now looking for top-level products on the market. “Due to the lack of available supply, some investors are now being priced out of the Polish market and are once again exploring other CEE countries,” O’Sullivan said.

As he noted, the Czech market had already started capitalizing on this trend in 2010 and Budapest is expected to follow suit this year with increased investment volume.

However, as Balázs Czifra, managing director of DTZ noted, Budapest is somewhat lacking in such top-tier, so-called prime real estate assets that could be easily marketable. There are nonetheless buildings that are in good locations even though they do not meet level-A criteria, and in such cases seller and buyer interests are easier to coordinate.

DTZ believes institutional investors are predominantly looking for excellent retail assets and quality offices with extant longterm rental contracts. Of the investment volume that will follow this year, the consultancy believes these two categories will carry the greatest significance.

By and large this blends in with the overall European trend. As a report by Cushman & Wakefield points out, the second quarter of 2011 saw a renaissance in the office sector, which saw its share of activity rise from 36% in Q1 to 46% in Q2, with trading 10% up compared to falls of 35% for retail and 46% for industrial.

Mixed risk factors Perception of Hungary is showing a mixed picture. It is now believed that the fundamentals of Hungary’s economy have strengthened to a reliable state. This is underlined by the fact that the central bank base rate has been stable for a prolonged period and MNB governor András Simor himself expressed strong confidence in the country’s outlooks. This also

Source: DTZ

applies to the financial system, which he said stood fast during the so-called stress-tests conducted throughout the sector and added that the banks could withstand even more extreme outside conditions.

Accordingly, as CBRE’s O’Sullivan explained, rents on the property market have stabilized and 2012 will see a compression in yields. Thus, those who want to buy can now do so at a discount compared to what’s coming as well as in comparison to the popular Polish market.

Still, the overall perception of Hungary’s risk is in the negatives. “Investors on the ground understand what is going on and are now far more willing to invest,” O’Sullivan said. However, those that have yet to enter the country and are gathering information from the media or their respective companies’ research departments are still nervous and will be difficult to convince, he added.

Cushman & Wakefield also noted that investors are now mostly looking at core European markets namely the UK, Germany and France, which maintained their market share at 64% with Germany the strongest, France stable and the UK down a little. The Nordics did particularly well; with volumes up to €4.4billion in quarter two from €2.4billion in Q1, it said.

Improving outlook Overall, even if the improvement will not be spectacular, 2011 investment volumes will be notably better than the previ-

ous year’s figures in Hungary and the entire region. “Transaction activity is expected to accelerate further in Q3 and Q4 with investment volumes in all markets expected to outperform 2010 levels by some margin,” said Charles Taylor, partner at Cushman & Wakefield on the outlook for CEE Europe’s property market.

Specifically in Hungary, DTZ predicts an annual investment volume of around €350 million. If that were the case, the annual total

would be almost double what was registered in 2010. “According to our expectations, even if the change is slow, investment volume could surpass the total for 2009,” Czifra said.

These expectations are underlined by CBRE. Following the two big deals of the year to date (Europolis and Árkád, which together added up €183.8 million of the H1 total), there could be others on the cards that are already in the process of due diligence. “We know of several assets that are in this stage,” O’Sullivan said. n

10 business

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Budapest Business Journal | Aug 5 – Sept 1

The ghosts of retail China is seen as a trade giant all over the world. However, in Hungary, hawkers of cheap “Made in China” goods are losing ground in the crisis.

the Chinese economy in the CEE region ever since the neighboring countries opened up,” Éva Nagymáté, president of the Edictum Foundation for integration of foreigners pointed out. Countries like Poland, Romania and the Ukraine now have their own Chinese suppliers, thus there is no need for enterpreneurs to come to Hungary to buy in bulk (and then sell at home for double the purchase price). This has hurt Far Eastern sellers in Hungary, as they make most profit in wholesale.

With economic difficulties piling up, retailers at the Chinese markets find themselves pessimistic about future prospects. n

BBJ saida Ayupova

The Hong Kong of Europe Photo: zsoolt / flickr

At 9:30 on a Wednesday morning at the Four Tigers market in Budapest’s Józsefváros the stalls are already open, despite the fact that there are few shoppers. There is usually little activity at this hour, but shops open early to serve bulk buyers who take T-shirts, purses, shoes and clothing accessories and sell them downtown. It looks like business as usual, but people’s expression are sour and there is a lot of sighing when the BBJ asks them questions.

Business is bad. Retailers in Hungary are suffering in general, and so-called Far Eastern markets seem to be hurting even more than the others. According to a recent study

by GfK Hungária, a Hungarian market research firm, people interested in buying clothes are increasingly favoring hypermarkets and discount stores over Far Eastern markets. Interestingly, instead of going for the cheapest goods – which we would expect in such an uncertain recovery – they are even willing to pay more, as long as it is better quality. Meanwhile, the least well-off consumer segments have probably stopped shopping for non-essentials altogether.

This leaves Far Eastern merchants in dire straits. “If I lower my prices any more, I will end up paying the difference from my own pocket,” a Vietnamese man in his 40s selling sandals, sneackers and flip-flops at Four Tigers complained. Still, people expect lower and lower prices, he adds.

Falling sales usually also mean lower wages for most workers in the market, as these are calculated based on turnover. “I can no longer tell whether I will be earning HUF 60,000 or HUF 100,000,” a Romanian woman selling summer

dresses told the BBJ. She has been working there since 1996, when the market was at its peak.

There was such a high demand for stalls that they had to take over the factory buildings across the street, too. But those days seem gone forever.

“For the last five years, each year has become worse than the last,” she added.

The silence of the tigers Far Eastern markets such as Four Tigers, present an important and, by now inseparable part of the city’s landscape. With millions or, perhaps, even billions of goods that originate at such markets circulating within and outside of Hungary, they act as separate micro economies with strong transnational links. Yet, they are sensitive to international and domestic fluctuations as their existence is shaped by the same rules of supply

and demand. This is why the financial crisis and Hungary’s slow recovery have had a significant negative effect on the Far Eastern retail industry.

Exactly how bad they are doing is difficult to gauge. First of all, some of the activity in the market is probably illegal, and does not even appear in tax statistics, Gergely Salát, assistant professor at the department of Chinese Studies at ELTE University, explained to the BBJ. Also, neither the management of the market nor the traders share information on market turnover, volume or individual income.

Little(r) China One thing is sure: it is not just the crisis that is working against Far Eastern shops in Hungary, but more long-term trends, too. “Hungary has been losing its position as a hub for

A wave of Chinese immigrants to Hungary started in 1989, when it became the first European country to abolish visa requirements for Chinese citizens.

Hungarian businesses quickly grasped the potential profits these traders could generate. In 1994, an investor leased 3.5 hectares of land next to Józsefváros railway station, where the market named ‘Four Tigers’ was built.

The market quickly assumed a central position in Eastern Europe’s Chinese economy. In the mid-1990s, due to the overwhelming demand for stands at the market, former factory buildings across the road were adapted to accommodate hundreds of additional stalls. Although commonly referred to as the ‘Chinese Market’, Four Tigers attracts Mongolians, Vietnamese, Armenians, Ukrainians, Romanians, Egyptians and retailers of other ethnicities in addition to Chinese migrants.

Hungary to outlaw state debt – literally Amid widespread European struggle against state debt, Hungary could become the first and only country in the EU where anyone instrumental in increasing public debt would be held criminally accountable. Naturally, the ruling Fidesz party is hoping to make its political adversaries the first target.

BBJ Ágnes Vinkovits

The parliamentary panel – the budget committee’s subcommittee – in charge of investigating the rise in Hungary’s state debt between 2002 and 2010 found that the socialist MSzP governments of the period committed a “crime” by growing the debt such a huge magnitude.

“Accountability” for the actual or presumed transgressions of the previous cabinets was one of the main campaign promises made by Prime Minister Viktor Orbán in 2010 and remains a key issue for his party’s most devoted voter base.

As such, Fidesz will now propose that authorities examine whether existing laws allow for enforcing legal consequences, in addition to political ones, in the cases of former MSzP premiers Péter Medgyessy, Ferenc Gyurcsány and Gordon Bajnai. If this is not possible at the moment, then Fidesz will take the necessary steps, the party said.

EU debt hunt State debt features prominently on the European agenda these days, with the future existence of the entire European Union and the eurozone put into question as a result of the arrears some of its member states have piled up. It is also a fact that Hungary’s state debt increased from the 2002 level of 55.6% of GDP to 80.2% by the end of the second socialist term in 2010. This also means that the country has been unable to meet the EU’s Maastricht criteria (a prerequisite of adopting the euro) of keeping state debt under 60% since it joined the community in 2004.

The global economic crisis that broke out in late 2008 has also left a strong mark

on Western economies. Germany, for example, had state debt of 66.3% in 2008, which increased to 73.5% in a single year and today reaches 82.4%, which translates to €2,100 billion. Together with Hungary, ten other EU members had their state debt exceed the Maastricht limit, with some even higher than Hungary’s level. These include not only the troubled PIGS (Portugal, Italy, Greece, Spain) but also frontrunner economies of the bloc such as France, Belgium and Germany.

Still, there have been no reports of these countries considering any legal consequences for politicians that reigned during the periods of rising debt, meaning that such an accusation would be a uniquely Hungarian invention. No such initiatives have been seen even in Greece, a country that had been forging budget figures for years and pushed the entire European Union to the near-calamitous situation it is in now.

Selective memories However, Fidesz has not always been this obsessed with state debt. After winning the

elections last spring, the government did not exclude the possibility of even increasing Hungary’s debt in order to boost the economy – until Brussels answered such plans with a definitive “no.” This February, state debt suddenly became a core point in the communication of the Hungarian government, which even laid out a 50% ceiling to state debt in the country’s new constitution and has also established the committee that is now meant to identify and punish those responsible for the past.

The subcommittee – which has six members representing the governing party alliance, accompanied by a current and an ex-representative of the far-right Jobbik, while lacking MPs from both the socialist party and green-liberal LMP – went about its task. It found that the significant increase in Hungary’s state debt cannot be led back to global economic trends but to the socialists’ bad decisions.

If they make good on their promises, state debt could be the issue that will grant the governing party one of its greatest wishes: seeing former MSzP prime ministers, especially controversial left-wing political figure Ferenc Gyurcsány, behind bars. n

EU 11

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Budapest Business Journal | Aug 5 – Sept 1

Why is the EU not liked?

The European Commission has approved a proposal to reduce matching-funds contribution to EU development programs by more than $4 billion for six troubled countries, including Hungary. According to the plan, Hungary, Ireland, Greece, Romania, Portugal and Latvia can apply to pay only 5% in matching funds as opposed to the current 15% minimum. Since workertraining programs and infrastructure projects are prioritized, the goal is to encourage economic growth and reduce unemployment.

Zsombor Pál As a project, the EU has been fairly successful, although as a brand, it is an utter failure. What is the reason for this contradiction?

The much-debated Hungarian Prime Minister Viktor Orbán was surely right. Ironically enough, not exactly the way he wanted to be. When evaluating the EU presidency of Hungary, he stated that for the opposition Socialists, the European Union is “a matter of belief,” but for the governing Fidesz, it’s simply “a matter of reason.” Orbán would most probably be offended if he was called a great branding expert, but still, he nailed it. He highlighted a sad fact: so far the EU is a much better product than brand.

As a project, the EU has been fairly successful.

For more than half a century, it has prevented leaders from slaughtering their own people or raiding their neighbors. It also gave us freedom to travel with just ID cards in our pockets and the possibility to import vast amounts of cheap Slovakian milk. All in all, it does quite well what it was originally designed for.

Neutral emotions But however great the product, so far the EU as a brand is an utter failure. The general public feels very little, if anything, towards it. Every proper brand elicits some kind of emotion, even if they are only as functional as washing powder. But when it comes to the EU, even hatred is rare, not to speak of love.

Recent official data show that seven out of 10 EU citizens know “nothing or very little” about this behemoth. “This is not a sound basis for public engagement,” as a commissioner of the previous Barroso Commission put it once, understating how little anyone cares. The EU is about as interesting as the health care system’s computer network. We know it exists, we know it does things and we know that’s all we want to know.

There are a number of ways to change this, all of which are carefully avoided. The obvious one would be giving the union a face. The position was allegedly created last year by the Lisbon Treaty, but even hardcore news junkies would be in trouble if they had

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to name the EU (Council) president, and not only because the name of Herman Van Rompuy is hard to pronounce.

Another option would be to authorize EU bodies to decide directly over more things that affect citizens’ everyday lives – to do things that can be described to the average housewife in an eight-second TV sound bite.

The third way to go would probably be the most realistic one – keep all EU operations as they are now, but move at least a finger when it comes to communicating it to citizens. No one will make the effort to dig up reasons to like the EU until it starts coming up with them itself.

I don’t mean painfully direct ways and blunt propaganda. I especially don’t mean TV ads of Czech and Portuguese children holding hands and running together towards a better future in the sand. TV ads have the tendency to cost a crazy sum of money and leave decision makers with the feeling that engaging citizens is taken care of for another decade.

But I do mean press releases that honestly explain a decision’s relevance. I mean hiring spokespeople who don’t look like they were born in filing cabinets. Commissioners leaving their Brussels fortresses and turning up in national parliaments, so at least we knew they actually exist. Finding a voice to talk to citizens.

I also mean highlighting progress and proudly taking credit for it. And I do mean uploading the budget in my own language, because making it available in English only is an insult.

Honest communication

The first Barroso administration in 2004 seemed to set about this task. It created the Communication strategy portfolio and appointed Margot Wallström to handle it.

She became the first of five vice-presidents, which tells something about the original ambitions. She hoped to have visible results in a second term, but in 2010, the portfolio was dropped instead. Communication now belongs to the thrillingly sounding InterInstitutional Relations and Administration Commissioner’s duties, and any plans have as yet remained a secret.

EU-critical groups already urged a halt when Wallström still claimed she hadn’t even started properly yet. A think-tank estimated that the EU’s PR machine burned €2.4 billion in 2007 alone, outspending Coca-Cola on a global scale.

These groups called for transparency and honest debates instead. They were right in their premise: there are a lot of things the EU does wrong as a result of ill-advised plans and flawed compromises. But the point that they have missed was that closing the EU’s mouth shut doesn’t help with the change they stand for – it only conserves the lack of public interest. Wrapping everything in blue every five years before the European Parliament elections, hoping that maybe at least 40% of the electorate turns up to vote seems not to be very efficient.

If it continues like this, your mother will never like the EU because the EU doesn’t want to be liked at all. Unfortunately, it is happy in its gray, bureaucratic and sometimes non-transparent own.

Of course, this can and will still be considered by some as propaganda. But lacking a widereaching European media, national elites don’t want the EU to seem as strong as it actually is.

Zsombor Pál is a former journalist and copywriter, currently working for a multinational company.

This blog delivers opinions and interpretations on current events about the economy in the context of the EU, Hungary and Central and Eastern Europe. We live in turbulent times; the financial crisis affects all of us and has changed some economic rules and paradigms, as well as those of European integration. Here, you will read intellectually inspiring pieces – you do not necessarily have to agree with every post, but you will probably have your own opinion concerning their topics. Our goal is to make you think about what is happening in the European economy. Hungarians and expats from various backgrounds living in Hungary will be asked to contribute: businesspeople, managers, researchers, journalists, representatives of NGOs, those who have special knowledge in this field. Politicians? We will see. Party propaganda – no thanks; policy issues – why not? If you feel like writing a post, do not hesitate to contact me: martin.jozsef.peter@gmail.com

The euro area seasonally-adjusted unemployment rate was 9.9% in June 2011, identical to May. It was 10.2% in June 2010. Among the Member States, the lowest unemployment rates were recorded in Austria (4%), the Netherlands (4.1%) and Luxembourg (4.5%), and the highest in Spain (21%), Lithuania (16.3% in the first quarter of 2011) and Latvia (16.2% in the first quarter of 2011). The largest falls were observed in Estonia (18.8% to 13.8%), Latvia (19.9% to 16.2%) and Hungary (11.3% to 9.9%).

The Economic Sentiment Indicator (ESI) for the EU and the euro area declined in July but remains above its long-term average. It fell, by 2.2 points respectively, to 102.4 in the EU and to 103.2 in the euro area. In the EU, confidence declined notably in industry, retail trade and among consumers, with marginal falls in services and an improvement in the construction sector. Hungary recorded a 3.6-point drop in sentiment.

The Council adopted its position on the 2012 budget of the European Union. It reduces the expenditure increase of 4.9% proposed by the Commission to 2.02% compared to 2011.

With an expected inflation rate of 2%, this amounts to a budget freeze in real terms. After thorough examination of past budget implementation, the Council decreased payments by a total of €3.65 billion. To set a good example, the Council wants to limit increases in total EU administrative spending to 0.5%. At the same time, the Council cut its own administrative expenditure by 5.45% compared to the current financial year.

Total EU administrative expenditure represents about 6 % of the EU budget.

BBJ tourism conference

focus

Conference tourism

Hungary’s six-month EU presidency has given a much-needed boost to conference tourism, and market players expect the upswing to continue for the rest of the year and beyond.

Unless you’re an expert on biochemistry, the title “high performance liquid phase separations” might not sound like a mind-blowing topic for a conference. But this international event attracted nearly 1,000 participants to the Budapest Congress and World Trade Center in June – only a fraction of the more than 17,000 who visited conferences in Hungary in the first three months of the year.

Conference tourism is an important segment of Hungary’s inbound tourism. About 10% of foreigners visiting Hungary arrive for conferences and congresses and they spend twice as much on average compared with a leisure tourist. Conference tourism can serve to extend the summer season and generates notable tax revenues, while business visitors often return to the country as leisure tourists.

The latest statistics show that conference tourism has been doing quite well after years

of decline. Four and five-star hotels with conference facilities registered a 15% increase in the number of guests participating in conferences between January and May of 2011 from a year earlier, the Central Statistical Office (KSH) said. Also, organizers and conference venues reported an increase in the number of conferences and seminars in the first half of the year.

One obvious reason for conference tourism getting back on an upward path is Hungary’s half-year turn at the EU presidency in January–June this year, but the market already showed some improvement already last year, after touching bottom in 2009.

According to data from Hungarian Tourism, 2010 saw a nearly 50% increase from the previous year in the number of international conferences, and the number of participants showed 53% growth on a year-on-year basis.

The international conference market grew further over pre-crisis levels in the first quarter of 2011: there were 90 international conferences organized in Hungary in Q1, with a total of more than 17,000 participants. Both figures are higher compared to Q1 2010 as well as to Q1 2008 (66 and 80 events, respectively, with 17,000 and 16,000 participants).

The number of events grew gradually in January-March, and the total length of conferences was 294 days during the period.

Shorter events are getting more popular.

While the number of events is on the rise, their duration has decreased a little. In the first three months of last year, the average duration of a conference was 4.8 days, falling back to an average of 3.3 days in the same period of this year.

As for venues, two-thirds of international conferences were held in Budapest in Q1. In the countryside, mainly due to Hungary’s EU

presidency in the first half of the year, Gödöllő was the most popular location (nearly 18% of the events took place there), followed by Szeged and Pécs.

Hotels are still the most popular locations for conferences, but their share fell back some 20% from last year, in line with the increasing role of other locations such as scientific institutions and universities.

More than half of the conferences saw visitor numbers between 100 and 300, and 10% of the events were attended by 1,000 people. Only two conferences hosted more than 1,000 participants in the first months of the year.

Statistics show that international conferences mainly attract foreigners: 84% of the visitors arrived from abroad. Of the 90 events organized in Q1, 13 were visited by foreigners only. PF

focus 13

www.bbj.hu

Budapest Business Journal | June 4 – June 17

▶▶ Conferences with upped marketing ▶▶ Signs of recovery on conference market ▶▶ LIST: Conference centers in Budapest ▶▶ LIST: Conference centers outside Budapest

〉page 14 〉page 15 〉page 16 〉page 17

gets new impetus

State hopes lakeside conferences set sail The country’s conference tourism industry has high hopes for the area surrounding Lake Balaton, but locals are not as optimistic.

The latest statistics show that conference tourism on a national level is recovering strongly. Lake Balaton, with its tourism services built to accommodate holidaymakers, is – on paper – one of the areas of the country that could benefit most from the trend. However, regardless of the high hopes Hungary’s central tourism agency has for the region, a blossoming conference industry on the shores of the lake is still far from being a reality.

The promotion agency Magyar Turizmus (MT) Zrt announced in March that the overall number of international conferences in Hungary increased by 50% in 2010.

Unfortunately for operators around Balaton, the lakeside area could not substantially capitalize on the trend, as it accounted for only 2.6% of the national total.

Even in Balatonfüred, the best-known conference and congress location in the Balaton region, the number of events is on the decrease. “The crisis has left a strong mark on the sector meaning that conference attendance fees pose a huge burden for companies,” said Ágnes Dobrossy-Vászolyi, events organizer and deputy chair of the town’s tourism association BTE. In her experience, in the fewer gatherings that are held, demands are typically aimed at cost reduction, for instance through ordering only moderate catering services. “Competition is very intense,” she added, noting that venues are constantly inclined to offer discounts to their guests rather than risk losing them.

Poised for the upswing MT on the other hand holds great hopes for rural locations – thus Balaton – to counter the dominance of Budapest on the market. Especially so given the advances made in the region in promoting active

tourism and the broad range of gastronomy available to visitors. These and their combination into various packages are where Krisztina Benkő, acting head of MT’s regional marketing division, sees the best opportunities for the area.

Furthermore, she highlighted the prospects in the air marketing fund (LMA), which allowed MT and Hungarian airport operators to make joint marketing efforts that led to talks starting with 20 airlines.

Among the destinations featured on the promo agenda is Sármellék, where the FlyBalaton airport has long been considered a major expected boost to tourism in general in the region.

Benkő likewise stressed that numerous developments were launched in the region in recent years, with new hotels making conference rooms a given in their initial designs.

With hospitality businesses having realized the potential in organizing conferences, not only the capacity, but the technologies needed for successful events are also readily available, she added.

Ungrounded expectations Locally, the situation does not look as promising. For instance, legal changes are set to impact one of the biggest conference customers of Balatonföldvár: the medical profession. The city – for reasons not even Dobrossy-Vászolyi could explain – has become the accepted venue for congresses attended by cardiologists, anesthesiologists, respiratory specialist as well as other practitioners of medicine. However, new regulations affecting the pharmaceutical industry are expected to reduce the number of events, leading the BTE official to see the future as “not bright.”

At the same time, the local tourism group is in the closing stages of hammering out a new strategy, something Dobrossy-Vászolyi declined to discuss until it is completed. She also commended MT for its intense promotion efforts made in the field of conference tourism.

Although a campaign launched in April highlights Budapest as opposed to other regional cities, the Balaton area could still benefit from the “trickle-down” effects, she noted. GR

14 focus

www.bbj.hu

Budapest Business Journal | Aug 5 – Sept 1

Conferences with upped marketing State tourism agency Magyar Turizmus Zrt has launched a marketing plan for 2011 with the aim of boosting conference tourism.

In the meantime, the Hungarian Convention Bureau (HCB) has also kicked off a MICE campaign that will intensify cooperation between market players and the bureau, and increase their footfall.

BBJ Anna Szaniszló

HCB director Anikó Ferenczy told the Budapest Business Journal that they have achieved positive results with the conference and sports ambassador programs that were included in the 2011 marketing plan of the state tourism office.

Ferenczy said they carried out intensive research regarding events, and have already secured a few prestigious sports events to be held in 2014 thanks to the activity of the sport ambassador program and sports associations. As a result, the European Women’s Handball Championship, the European Water Polo Championship, the European Sectorball Championship and the Veteran Indoor Athletics World Championship will all be held in Hungary in 2014. She added that HCB is awaiting the results of some

other pitches equally important sports events that she declined to name at present.

The conference ambassador program has also brought some good results. The European Meeting & Events Conference (EMEC) of Meeting Professionals International (MPI) will be held in Budapest in 2012. This event is the yearly conference of an international association comprising major event organizers worldwide. “Winning this was a major success. This will be a big opportunity for Hungary to present a reference work for top event organizing agencies,” Ferenczy said.

Furthermore, HCB laucnhed a MICE (meetings, incentives, conferences, events) sales promotion campaign in April that will last until July 2012. There are 24 Budapest-based four and five-star hotels taking part in the program, each of which can provide a minimum of 100 rooms and 60 sqm of conference room space.

The campaign’s main element is that participating service providers make available the venues of gala dinners and banquets free of charge for international events, with at least 50 participants reserving at least two nights, and renting a conference room for a minimum of half a day. The client also has to involve at least one domestic partner in the organization of the event. Among the participants are the Szabó Ervin Library, the royal castle in Gödöllő, the Budapest History Museum, the Gellért Baths and the Museum of Fine Arts.

Hungary enjoys a very good position in the field of international congresses, thanks

The Royal Palace in Gödöllő

to the central location of the city in the CEE region, the excellent level of service, and not least to the fact that Hungary offers competitive prices compared not only to, let’s say, Paris, but also to Prague, for example. “This is a great opportunity for clients to have a

good deal and service providers to increase their footfall,” Ferenczy said.

Participants in the program cannot agree more, and have high hopes regarding the beneficial effects of the campaign. Tamás Ujváry, deputy director of the Gödöllői Királyi Kastély (Gödöllő Royal Palace), a participant in the MICE campaign, told the BBJ that he expects the HCB sales promotion campaign to turn around the downward trend in footfall at the Gödöllő Palace.

The palace has seen decreasing traffic since 2008. While it had 180,000 paying visitors for its permanent exhibitions in 2007, this fell to 143,000 in 2010.

Ujváry expects that 2011 could be a year of positive change, thanks in part to Hungary’s EU presidency in the first half of the year. “The palace was literally fully booked from the first of January until the end of June,” Ujváry explained. Therefore he was not really in a position to gauge the beneficial effects of the MICE campaign. However, he hopes that the EU presidency and the campaign will finally bring a growth in the number of visitors, which he expects to exceed 150,000 this year.

“I very much hope that the HCB campaign will bring in a large number of actual new customers – as well as revenues,” Ujváry said. He expects that the campaign, in addition to the EU presidency, will have a positive effect on results not only this year, but also in the long-term. n

[ promotional feature ]

The office market seems to reward the efforts made by Lurdy Office Centre OBI Hungary Retail Kft. is moving to Lurdy Ház It was close to two years ago when the owner of the Lurdy Ház complex decided to replace its entire management body. As a result, Lurdy Ház has recently undergone a clear image transition.

Communication about the renewal of Lurdy House is not just a marketing slogan but a series of specific, real changes implemented as a result of a common decision of the owner and the management, which respond to market challenges and provide first-hand benefits for tenants and visitors alike.

The ground floor of the building now houses a spacious central area that creates a real, organic link between the Passage and the cinema hall as well as between the ground level service area and the new line of booths. After the complete replacement of the flooring, the remodelling of the ground-floor passage and the full shape-up of the facade of the main entrance, Lurdy Ház launched a large-scale IT investment project.

Those who benefit most from these investments are the tenants of shops as well as those of office spaces.

Lurdy Ház is generally considered only a shopping center. Few people know that in addition to the shopping center stretching some 30,000 sqm, the 5-story building is home to an office center of almost the same size.

Its favorable logistical position, the proximity of the River Danube, the Csepel free port, the airport and M5 motorway as well as on-site warehousing and basically unlimited parking facility, the outstanding IT background, the number of services available in the plaza environment and, last but not least, competitive prices make Lurdy Ház an appealing choice for any international corporation looking for an office.

Most recently OBI Hungary Retail Kft. signed a long-term office rental contract with Lurdy Ház, as a result of which the entire Hungarian management team of OBI is relocating to the new 1,900 sqm building in Lurdy Ház. Hungarian country manager of OBI Christoph Wackerbauer had this to say about their selection of Lurdy Ház as their new location: “In our opinion the two key elements of rational business operation are to provide employees with good conditions and to allow them to work as efficiently as they can. When we were shopping for an office for the HQ of OBI Hungary, we had two primary requirements in mind. Lurdy Irodaház appears to be a good choice in all respects as we get all relevant services under very favorable conditions. Easy access, a wide

range of basic and wellness services available locally or nearby, the well-known address and the relatively short distance to our previous office all decided in favor of Lurdy Ház. We trust that after the move,

as we settle down and get down to business, our hopes come true and we find a real “home” here in the long-run.”

OBI has until late September to move into its new office in Lurdy Ház.

focus 15

www.bbj.hu

Budapest Business Journal | Aug 5 – Sept 1

Signs of recovery on conference market Conference centers started showing signs of a turnaround in the second half of last year, and now most are optimistic, hoping to continue on the road to recovery this year.

BBJ Anna Szaniszló

Conference and event facilities have started to leave behind the worst years of the crisis, and now hope to post figures similar to pre-crisis level. With conference tourism on the rise again, they have good reason to be optimistic.

The conference tourism sector suffered a major downturn during the crisis when companies tightened their belts and postponed or simply cancelled most conferences in order to

cut costs. However, last year brought a longawaited revival.

Conference tourism showed 53.1% growth in 2010 compared to 2009. There were 537 international conferences organized in Hungary, and the number of participants exceeded 125,000, according to data published by national tourism agency Magyar Turizmus Zrt. Novotel Budapest Congress & World Trade Center, for example, has seen a 40% rise in revenues so far in 2011 compared to the same period of last year. The company thus has managed to mostly compensate the setbacks sustained in the crisis. Novotel Congress suffered turnover declines of around 10–15% in 2009 and 20% in 2010.

Conference centers are not taking anything for granted though. Despite their optimism, the growth expectations for this year were far from being fulfilled as of the end of the first half.

Therefore, some facilities are trying to attract

events with special offers and discount packages in order to secure increased revenues.

Zsófia Pirczinger of Vista Rendezvényközpont explained to the Budapest Business Journal that it is trying to lure conferences and weddings with special offers. In the case of conferences, instead of asking a fixed rate for the conference room, Vista charges a per capita fee.

With weddings, Vista charges a fixed rate for the room, and imposes no closing time for the event. Customers can also choose whether they want to order drinks from Vista or bring it in themselves, and the same goes for the wedding cake, while Vista staff is available to serve free of charge during the event. However, the company cannot afford to focus only on selected target groups, and has to try to attract the widest possible audience, Pirczinger added.

Other companies seem to be a bit more confident with some market players achieving remarkable growth in the first half of the year.

Kipcor Kft, which manages the Gólyavár Központ conference center, told the BBJ that the company remained profitable during the years of the crisis, and achieved 20% growth in the first half of 2011. However, these results are due to the fact that it is involved in diverse areas of business, and is quite strong financially, sales director Norbert Schvéd noted.

Schvéd said the company is trying to use the crisis to its advantage and carry out investments and developments while prices are still low. “Real estate prices and construction costs dropped remarkably during the crisis, and we

decided to carry out investments as long as we can do it cheaper,” he explained. Thus, it will be able to operate with an expanded facility network once the crisis ends.

Others are also optimistic. Novotel Congress expects positive figures this year, after the growth seen in the first half. However, both companies agree that the strong showing was at least partly due to Hungary’s six-month turn at the EU presidency.

Meanwhile, conference centers in the countryside are generally in a less favorable position. The top-ranked ones on the BBJ’s list of conference centers outside Budapest usually fare better than others due to their location or parent institution.

The Tokaj cultural and conference center manages to attract guests due to its proximity to the famous wine region. However, the company wants to further boost turnover with newsletters and a professional website. “We would like to increase the number of our guests with more intense marketing activity, but the resources for this are not available at the moment,” the company told the BBJ. Conference centers in universities on the other hand, use the contact network of the colleagues of the institution to find clients.

The conference center of the University of Szeged uses the widespread networks of the university faculty. “We regard the professors and researchers of the university as a priority target group,” the conference center of the university told the BBJ. n

[ case study ]

No compromise While organizing the “Healing Words” conference – which was held in May 2011 – it was a serious challenge for us to choose the right location. (The performers and the presentations fit together quite naturally, which is no wonder considering we have substantial knowledge in this field.) We formulated numerous expectations in connection with the room (often outwardly mismatching ideas).

Corrections In the Budapest Business Journal’s June 18 issue the list of Pharmaceutical companies did not correctly state the name of Bayer Hungária Kft’s managing director and finance director. The company is headed by Gerhard Waltl.

In the July 15 issue’s list of Largest Shopping Centers in Budapest some of Allee shopping center’s data were not correct. Allee’s facility manager is SCM Shopping Center Management Kft. (2060 Bicske, Spar út). The number of retail units is 150 including a wellness and sports facility, but without a post office. Further major tenants are Interspar and Zara. Allee is 50% owned by ING Real Estate Development International B.V. and 50% by Allianz Lebensversicherungs-AG and Allinaz Versicherungs-AG. The BBJ regrets the errors.

We imagined the medical communicationbased professional meeting in an environment that meets high standards but is not flamboyant. It had to be centrally located, within easy reach, but with parking. It should be technically well-equipped and people-centric. It had to be high prestige, but not bow-wow style and not luxuriously expensive. Within the bounds of possibility, it should reflect all those values which our company adheres to, the responsibility of humans and nature.

We have already been in the Kinnarps House (we organized a training there), but during the extensive preparations we reviewed possible alternatives as well. Most of them would have been suitable for the event, but there was always a compromise that had to be made. We choose Kinnarps because there was no need for compromise.

The “spirit of the place,” such as Kinnarps’s human-based thinking, supported the con-

ference’s message, the need and enhancement of understanding between people, and cooperation.

The Jarl conference room became remarkable because it went unnoticed. No questions came up in connection with the circumstances, which told us that everything was all right. It is not cold, not warm, it is not dark and the sun didn’t shine into the eyes of the audience. It is a special pleasure that all this happened not only in an environment-friendly operation, but also in the safety of the most modern technical background. The main advantage was that the participants were able to concentrate on the conference (thanks to the ergonomic Kinnarps furniture), without any pain in their backs when they stood up from the chairs after the conference’s closing.

The conference was characterized by Kinnarps House’s Scandinavian quality, simplicity, environment-conscious thinking and hospitality, and it supported our event’s success as well.

Zsolt Mészáros, Értéktrend Consulting

www.jarl-konferenciaterem.hu

. .

Budapestfocus Business Journal | March 12 – March 26 16

the lists . .1

www bbj hu

www bbjonline hu

Budapest Business Journal | Aug 5 – Sept 1

ConferenCe Centers in Budapest

The BBJ’s Book of Lists contains 100+ sector-specific listings of leading companies. The Book of Lists comes free with a BBJ subscription, or can be ordered separately by e-mailing circulation@bbj.hu

Ranked by total net conference floorinspace capacity (seats theater(sqm) style) Daily rental fee (HUF)

Accor-Pannonia Hotels Zrt. 16,109

Lurdy Rendezvény- és Konferencia Központ

2,000 1,000 50

2,500 6

Sikermix Kft. 71

Stefánia Palota és Honvéd Kulturális Központ

1,604 484 30

3,143 17

HM Bessenyei György Kulturális és Üdültetési Közhasznú nonprofit Kft. 916

Rhema Conference Center

1,500 1,000 500

1,727 2

Rhema Kft. 42

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Gólyavár Rendezvényház

1,424 650 60

1,442 8

KipCor Kft. 350

450,000

450,000

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CEU Conference Center

890 350 20

960 10

Közép–Európai Egyetem Kft. (previously Zrt.) 549

16,500–175,000

16,500–175,000

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9

Material Event Center

700 300 160

1,015 3

First Konferencia Kft. 24

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10

Európa Konferencia- és Rendezvényhajó

650 661 122

922 3

Európa Rendezvényiroda Kft. 637

156,250/h (shipping), 100,000/h (standing)

156,250/h (shipping), 100,000/h (standing)

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Corner Rendezvényközpont

240 240 60

250 2+

Corner Rendezvényközpont Kft. 71

125,000

Vista Event Center

180 180 35

240 3

Vista Utazási Irodák Kft. 543

190,000

150 125 25

200 2

www.lurdykonferencia.hu

5

www.stefania.hu

6

www.rhemacenter.hu

7

www.treffort.hu

www.ceucenter.hu

www.mecevent.hu

www.europahajo.hu

11

www.cornertermek.hu

12

www.vistaterem.hu

Event manager(s), phone

Ownership (%): Hungarian non-Hungarian

Address Phone Fax Email

Gábor Doffek, (1) 263-6061, Tibor Armbruszt, (1) 263-6433, Kornél Takács, (1) 263-6069

– GL Events (100)

1101 Budapest, Albertirsai út 10.

(1) 263-6000 (1) 263-6098 hungexpo@hungexpo.hu

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2008 1967

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2011 1990

Zoltán Gerebics, (1) 460-1102

András Szántó (49) SYMA Holding AG (51)

1146 Budapest, Dózsa György út 1.

(1) 460-1100 (1) 460-1122 szervezes@syma.hu

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2009 1982

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Accor-Pannonia Hotels Zrt. (100) –

1123 Budapest, Alkotás utca 63–67.

(1) 372-5400 (1) 466-5636 h0511@accor.com

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2011 2007

Dávid Bali, (70) 327-2599

Ÿ Ÿ

1097 Budapest, Könyves Kálmán körút 12–14.

(70) 342-0446 – info@lurdykonferencia.hu

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2011 2000

Istvánné Bagarus, (1) 273-4132, (30) 828-0534

Defense Ministry (100) –

1143 Budapest, Stefánia út 34–36.

(1) 273-4132 (1) 273-4172 bagarus.istvanne@stefania.hu

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1999

Éva Sztankó, (70) 334-5054

Rhema Kft. (100) –

1089 Budapest, Golgota utca 3–9.

(1) 210-2029 (1) 210-2026 office@rhemacenter.hu

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2007 2007

Éva Trecsek, (30) 824-7549

(100) –

1088 Budapest, Múzeum körút 6.

(1) 411-1738 (1) 411-1739 trecsek.eva@treffort.hu

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2011 1995

Zsuzsanna Szabó, (1) 327-3899

Ÿ Ÿ

1106 Budapest, Kerepesi út 87.

(1) 327-3150 (1) 327-3156 ceucenter@ceu.hu

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2010 2008

Balogh Emese, Kerek Brigitta, (1) 412-1872

Ÿ Ÿ

1134 Budapest, Róbert Károly körút 54–58.

(1) 412-1872 (1) 412-1871 info@mecevent.hu

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2010 2000

Endre Pethő, Krisztina Horváth, Brigitta Boros, Miklós Kocsis, (1) 412-1674

Attila Sztankó (50) Péter Ablonczy (50) –

1010 Budapest, Szilágyi Dezső téri kikötő (1) 412-1674 (1) 270-1040 info@europahajo.hu

Júlia Bolvári, (30) 922-0272

– (100)

1051 Budapest, Bajcsy-Zsilinszky út 12.

(1) 338-4922 (1) 235-0064 info@cornertermek.hu

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ











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























125,000

4

Year last renovated Year established





–



–











95,000

www.novotel.com

Theater performance

2,200 19

Standing reception

2,900 2,000 12

3

Party

Novotel Budapest Congress & World Trade Center

www.syma.hu

Banquet

SYMA + SD Kft. 1,178

Gala dinner

15,000 19

Concert

10,000 5,500 40

2

www.hungexpo.hu

Ball

SYMA Rendezvény és Kongresszusi Központ

1

Fashion show

Hungexpo Zrt 2,896

Exhibitions

55,000 22

Congress

Hungexpo Zrt.

15,000 9,000 250

Company Website

Low season

Name of operating company Operating company's total net revenue in 2010 (HUF mln)

High season

Net conference floor space (sqm) No. of rentable rooms

Rank

Total capacity (seats in theatre style) Largest room capacity (seats in theater style) Smallest room capacity (seats in theater style)

Events

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



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–

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–

2009 2000

Orsolya Szabó (70) 388-7238; Zsófia Princzinger (70) 322-7787

Vista Utazási Irodák Kft. (100) –

1061 Budapest, Paulay Ede utca 9.

(1) 788-7465 (1) 788-7465 info@vistaterem.hu

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2006 2006

Georgina Miseta, (1) 236-4011

Kinnarps Hungary Kft. (100) –

1133 Budapest, Váci út 92.

(1) 237-1251 (1) 237-1250 georgina.miseta@kinnarps.hu

2008

Ÿ

Jarl Konferenciaterem www.jarl-konferenciaterem.hu 13

Ÿ=

Kinnarps Hungary Kft.

Ÿ

Ÿ

Ÿ

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–

–

–

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

This list was compiled by researcher Mihály Kovács from responses to questionnaires received by Aug. 3, 2011. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of would not disclose, NR = not ranked, NA = not applicable 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. Mihály Kovács can be contacted at mihaly.kovacs@bbj.hu.

thefocus lists 17 1

www..bbjonline bbj.hu www .hu

Budapest Business Business Journal Journal | | March Aug 5 –12Sept 1 Budapest – March 26

ConferenCe Centers oUtsIDe BUDapest

The BBJ’s Book of Lists contains 100+ sector-specific listings of leading companies. The Book of Lists comes free with a BBJ subscription, or can be ordered separately by e-mailing circulation@bbj.hu

Club Tihany Zrt www.clubtihany.hu

Balaton Szabadidő és Konferencia Központ www.balatonkozpont.hu

www.kolcseykozpont.hu

Kecskeméti Kulturális és Konferencia Központ

1,480 600 10

2,168 13

Kecskeméti Kulturális és Konferencia Központ Nonprofit Kft 77

1,300 685 25

Ÿ

Szeged University NA

1,200 600 40

1,447 8

Pro Kultúra Sopron Nonprofit Kft 230

Szeged University Congress Center www.u-szeged.hu/ kongresszusikozpont

Liszt Ferenc Conference and Culture Center

15

NR

Ÿ Ÿ 

Ÿ Ÿ 

1,757 13

Művészetek Háza Nonprofit Közhasznú Kft. 141

1,200+3 ha park 180 20

400 6+park

Nemeskéri-Kiss Kúria Kft 11

850 450 30

950 12

Gödöllői Királyi Kastély Közhasznú Nonprofit Kft 252

500 300 80

700 5

Tokaj Municipality –

450 300 50

495 6

440 200 6

260 6

Walden Hotel

434 200 12

Pálma Event House

350 200 35

Nemeskéri-Kiss kúria www.nemeskerikuria.hu

Gödöllő Royal Palace www.kiralyikastely.hu

Tokaj Cultural and Conference Center

Győr International Trade Center

www. gyor-konferencia-kozpont.hu

Gastland M0 Restaurant, Hotel and Conference Center

www.waldenhotel.hu

www.palmhouse.eu

Zánka Children's and Youth Center www.zanka.hu

Ÿ

500 30

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–

Ÿ Ÿ 

–

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Address Phone Fax Email

Ÿ

András Szászi, (72) 801-706

Pécsi Rendezvényszervező Nonprofit Kft (100) –

7632 Pécs, Megyeri út 72.

(72) 518-620 (72) 518-625 info@expocenterpecs.hu

Ÿ

1985

Erika Kaufman, (87) 538-558

(87.73) (12.27)

8237 Tihany, Rév út 3.

(87) 538-564 (87) 538-516 conference@clubtihany.hu

– 1998

Ágnes Dobrosi Vászolyi, (30) 941-4433

Balatonfüred Municipality (100) –

8230 Balatonfüred, Horváth M. utca (87) 480-196 (87) 482-193 balatonkonferencia@t-online.hu

Ÿ

Andrea Cseke (70) 933-9906, Márton Kováts (70) 933-9941, Virág Lukács (70) 933-9907, Éva Rubovszky (70) 933-9908, Brigitta Tóth (30) 612-2663

Debrecen Municipality (100) –

4026 Debrecen, Hunyadi utca 1–3.

(52) 518-400 (52) 518-404 kolcsey@fonixinfo.hu



2005 2010

Roland Óber, Andrea Berei, Erika Kiss, Andrea Darabos, Erika Börönte Toókos, (76) 503-880

Kecskemét municipality (100) –

6000 Kecskemét, Deák Ferenc tér 1.

(76) 503-880 (76) 530-890 efmk@efmk.hu



Ÿ

2005

Ágnes Miskolczi, (30) 384-0933

Szeged University (100) –

6722 Szeged, Ady tér 10.

(62) 546-603 (62) 546-613 rendezveny@tik.u-szeged.hu

2002 1997

Ildikó Bruckner, (99) 517-515

Sopron Municipality (100) –

9400 Sopron, Liszt Ferenc utca 1.

(99) 517-500 (99) 517-516 konferencia@prokultura.hu



2010 1981

Margit Bátki (70) 457-6492, Judit Kiss (70) 977-2356, Anikó Honfi (70) 376-5373, Éva Gordos (70) 977-2368

Gödöllő Municipality (100) –

2100 Gödöllő, Szabadság út 6.

(28) 514-130 (28) 514-100 titkarsag@muza.hu

–

2010 2004

Marianna Kocsis, (27) 345-304

Zoltán Murvai (100) –

2131 Göd, Nemeskéri utca 33.

(27) 345-304 (27) 345-304 godikuria@invitel.hu

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Ÿ

Ÿ

State (99), MaHill Mérnökiroda Kft (1) –

2100 Gödöllő, Grassalkovich kastély (28) 420-588 (28) 422-077 rendezveny@kiralyikastely.hu

Mátyás Bencsik, (47) 552-000

Tokaj Municipality (100) –

3910 Tokaj, Serház út 55.

(47) 552-000 (47) 552-000 konferencia@tokaj.hu

Theater performance

Standing reception

Party

Banquet

Gala dinner

Concert

Ball

Fashion show

Exhibitions

Congress

Low season

High season

Ÿ Ÿ 

1,200 200 20

www.gastlandm0.hu

14

Ÿ Ÿ 

850,000

13

10

Ÿ Ÿ 

850,000

Művészetek Háza Gödöllő Kulturális és Konferencia Központ

www.konferencia.tokaj.hu

12

Észak-Balatoni Regionális Konferencia Központ Kft 77

20,000–500000

11

2,000 6

Ÿ Ÿ 

20,000–500000

10

1,800 1,300 50

Főnix Rendezvényszervező Nonprofit Kft 647

www.muza.hu

7

Club Tihany Zrt 860

1,880 9

www.prokultura.hu

7

3,110 7

Ÿ Ÿ 

Ownership (%): Hungarian non Hungarian

–

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–

2006

2006

1996

160,000

7

2,350 1,500 10

1,800 750 80

Kölcsey Convention Center

www.efmk.hu

6

Pécsi Rendezvényszervező Nonprofit Kft 0

300,000

5

4,360 11

Event manager(s), phone

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2008 2006

Ÿ Ÿ

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–

–

–

–

–

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–

2010 2010

Mária Dolgos, (96) 520-257

Győr-Moson-Sopron County Chamber of Trade and Commerce (100) –

9021 Győr, Szent István utca 10/A (96) 520-200 (96) 520-294 itcgyor@gymskik.hu

Gastland M0 Vendéglátó Kft 271

Ÿ Ÿ 

–

–

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–

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–

– 2000

Réka Divinszki, (30) 606-8989

Gastland M0 Vendéglátó Kft (100) –

2310 Szigetszentmiklós, M0 autóút, 19. km.

(24) 446-484 (24) 446-485 sales@gastland.hu

492 6

Walden Hotel Kft 149

Ÿ Ÿ 

–

–

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–

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–

2009 2008

Kinga Koledits, (26) 347-681

Zsuzsanna Udvarhelyi (74) Zsolt Panyi (26) –

2098 Dobogókő, Fény utca 1.

(26) 347-681 (26) 347-633 info@waldenhotel.hu

369 4

Kristály Nonprofit Kft 53

32,000–160,000

3

3,200 1,200 75

Year last renovated Year established

32,000–160,000

3

www.expocenterpecs.hu

Name of operating Net conference company floor space (sqm) Operating company's No. of rentable total net revenue rooms in 2010 (HUF mln)

Events

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–

–

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–

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–

2007 2007

Andrea Tiba-Szőgyényi, (34) 586-553

Gasztro-Kristály Zrt (50) Rotte Kft (50) –

2890 Tata, Angolpark (34) 586-553 (34) 586-554 info@palmhouse.eu

Ÿ

Zánkai Gyermek és Ifjúsági Centrum Oktatási és Üdültetési Nonprofit Közhasznú Kft 537

16,200/hour

2

Expo Center

Daily rental fee (HUF)

16,200/hour

1

Company Website

Total capacity (seats in theater style) Largest room capacity (seats in theater style) Smallest room capacity (seats in theater style)

Rank

net conference floorinspace Ranked by total capacity (seats theater(sqm) style)

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–

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2010 1969

(87) 568-500

Zánkai Gyermek és Ifjúsági Centrum Oktatási és Üdültetési nonprofit Közhasznú Kft (100) –

8251 Zánka, Hrsz. 030/13.

(87) 568-500 (87) 568-577 sales@zanka.hu

Győr-Moson-Sopron Megyei Kereskedelmi és Iparkamarai Szolgáltató Kft

Ÿ

25

BBJ LIFE LIFE & PEOPLE

Events

Better know a CEO

Who's News

Networking events and conferences

Alessandro Fedele, The Coca-Cola Company

People on the move

▶ page 21

▶ page 22

▶ page 22

Summer festivals at full capacity Despite the lack of money and the bad state of the economy, young people are not discouraged from partying: every major festival is packed, even the expensive ones.

Hungary’s market for summer events continues to grow from year to year. This is amply reflected in the sheer number of events that are organized and held profitably, not to mention the array of acts that are now happy to do Hungarian gigs.

To date, the biggest events in the season generated an aggregate attendance of more than 254,000. That is not even counting Sziget, the biggest event on the domestic calendar, which kicks off on August 11, and is set to more than double the total even if it just comes close to repeating the 382,000 visitor total of 2010. For Sopron’s VOLT and the Hegyalja festival held in Tokaj-Rakamaz, 2011 has proven to be a very successful year, with both having days when the “house” was completely full.

Class acts For anyone keeping track of how the festival scene in Hungary has evolved over the past decade, it is notable that even the smaller (compared to the Sziget event, of course), regional venues are now able to book acts that would have never even considered performing in Hungary a few years earlier.

VOLT showcased the likes of Moby, Sum41, Pendulum and My Chemical Romance. Balaton Sound presented Snoop Dogg, Portishead and star DJ David Guetta, among others. Hegyalja featured Kosheen, Deicide, Guano Apes and US trash metal legends Slayer as the headline act. The Sziget lineup is likewise impressive, featuring The Prodigy, Interpol and Deftones, as well as a last-minute, first-ever performance in Hungary by Prince.

Hungarians lament that the top-tier stars do not come to Hungary, but play in Austria or other countries in the vicinity. In all fairness, the country’s audience has little to complain about.

No cheap thrill Depending on the number and type of festivals customers are looking for, they have to dig pretty deep into their pockets. EFOTT’s weekly passes went for HUF 18,990 on the spot, with HUF 5,990 charged for a daily ticket. For VOLT, passes were HUF 25,000, and one-day tickets at the gate cost HUF 9,990. However, these prices were shy compared to Balaton Sound, where the pass cost HUF 35,000 (VIP passes for HUF 66,000!) and daily tickets HUF 15,000. The event, originally marketed as a premium festival due to its lakeside venue and its mix of popular performers targeted at a broader audience, was nonetheless packed. Altogether 101,500 people attended.

Partying at Sziget will be no nickel-and-dime matter either. The most expensive weekly pass will go for HUF 54,000, with a daily ticket on sale for HUF 12,000 from the local cashiers. This is the main reason that the organizing company has long been criticized for asking prices that local audiences cannot afford. This aspect, not to mention the active promotion the organizers have been conducting in Western Europe, has transformed the event into one overwhelmingly visited by foreigners. Chief organizer Károly Gerendai said 80% of the weekly passes were sold abroad. In contrast, Balaton Sound with its premium price range (and these are only the tickets, there is also food and beverages to consider) had an almost fully Hungarian turnout.

Still, the expenses are not discouraging audiences from attending one or more events. A study conducted in 2010 by KutatóCentrum and Marketing & Media found that 74% of the 18–64 age group planned on attending some kind of musical, cultural or gastro festival. Unsurprisingly, the most active festivalgoers are aged 18 to 24. The study found that 45% of them visited more than one festival in 2009 – and the trend shows no signs of turning this year. GR

life 19

www.bbj.hu

Budapest Business Journal | Feb 11 – Feb 24

[ promotional feature ]

A 20-year success story: The Budapest International Wine Festival It seems as if it was only a few years ago when the Wine Festival first opened its gates on Vörösmarty Square, at that time to only a couple of hundred uncertain, yet curious locals. One could not even guess how many wine-bottlefuls of water have flowed under the bridges of the Danube in the past 20 years, but the Wine Festival has surely made millions of people like wine. It has gained a key role in the development and perfection of Hungarian wine culture, in organizing the coming together of winemakers and consumers and in enhancing the reputation of Hungarian wines.

The process that was set in motion 20 years ago continues to gain pace let’s try to keep up!

An unforgettable experience awaits you: thousands of wines, rhythms and melodies that touch your heart, excellent performances, a dazzling mixture of tastes and smells, a picturesque environment, many friends and acquaintances, people, faces and smiles.

If all this is not enough reason for you to celebrate with us, here are some more attractions you definitely cannot resist.

And why should you?

France will be the guest of honor, the star parade on the stage, the chicken oyster, gifts and surprises, photo exhibition on the past 20 years, a lot of games, wine judging training, free wifi, creative children’s corner, vintage entertainment, great birthday cake and champagne...

7-11 September 2011

20 life

www.bbj.hu

Budapest Business Journal | Aug 5 – Sept 1

Norway shooter’s manifesto: is he a friend of gypsies?

The Norwegian shooter has confessed to not only being a mass murderer, but also a fan of Hungarian history. But in strong contrast to the local parties he identified as holding kindred beliefs, Breivik professed himself a friend of the Roma.

BBJ gergô rácz

Anders Behring Breivik, the man who claims responsibility for the greatest loss of human life in Norway since World War II, pays homage to Budapest (his favorite city), and the historic figure of János Hunyadi in his manifesto of more than 1,500 words.

Breivik is charged with the murder of 76 people (a revised death toll) following a bomb attack in downtown Oslo and gunning down numerous participants at the Norwegian Labor party’s youth retreat on the island of Utoya.

In the lengthy document entitled 2083: A European Declaration of Independence, he – or Andrew Berwick as the document is signed – highlights the merits of Hunyadi, governor of Hungary and victor in fending off the historic Turkish attack on Nándorfehérvár (present day Belgrade) in 1456.

(himself earlier accused of terror crimes) actually received a letter from Breivik before his rampage commenced. In the message made public on commercial broadcaster TV2, Breivik issued a “call to European patriots”, encouraging them to join his movement.

Toroczkai said – having not yet studied the compendium – that according to his understanding, Breivik’s main grievance was with Islam, but it is not obvious whether he had other issues.

However, even a cursory review of the document does reveal that Breivik’s target is Islam, and – in his mind – the widespread political correctness and multiculturalism that allows it to propagate at the expense of Europeans.

Nonetheless – while pointing out that his was the only group in Hungary to receive the shooter’s letter – Toroczkai stressed that 64 Vármegye deeply condemns Breivik’s actions. Vona Gábor, head of Jobbik acted likewise, calling the events in Norway a “crime against humanity”. At the same time, he too stressed that Jobbik would remain adamant in its drive to revise the principles of European immigration.

“Janos (John) Hunyadi, Hungarian warrior and captain-general, is today virtually unknown outside Hungary, but he probably did more than any other individual in stemming the Turkish invasion in the 15th century,” the document reads. Accordingly, the text attributes saving Western civilization from “falling to Islam...Yet hardly anybody in West knows who he is. Our children don’t learn his name, they are only taught about the evils of Western colonialism and the dangers of Islamophobia.”

Over the first several hundred pages of the “compendium”, Breivik deals in depth with the history of Europe, especially the eastern parts and consequently Hungary. These were the areas of the continent that were regularly exposed to military conflicts with the Ottoman empire for hundreds of years, which he attributes to be the major cause of the influx of Islamic influence in Europe and the related “Cultural Marxism”.

Hungarian connection Breivik also reflects on other ties to Hungary.

Apparently, his best friend since the age of 19 is a man of Hungarian descent named Petter with whom he spent a five-day party spree in Budapest in 2009. He refers to the Hungarian capital as his favorite city with pretty women, a vibrant nightlife and a great scene for vocal elektronika, his musical genre of choice.

Friend of the Roma

More importantly, he mentions that his cause has a strong following in Hungary.

In fact, he claims that one of the handful of members who established the Knights Templar order where he holds a rank of Justiciar Knight in 2002 was Hungarian.

Unsurprisingly, Hungarian authorities also got involved in the matter. As the tabloid daily Blikk reported, the country’s counterterrorism unit began inquiries and identified the women Breivik spent time with during his excursion. The authorities divulged no more of the proceedings. In the meantime, Czech and Polish officials are also involved, since Breivik arrived in Prague in a failed attempt to procure firearms and ordered components for his bomb from a Polish website.

Searching for allies Breivik also highlighted Hungarian political sides as potential allies to the cause he represents. These include the parliamentary radical right group Jobbik, the now-marginalized MIÉP and the 64 Vármegye Ifjúsági Mozgalom (64 fort counties youth movement). The latter is of particular interest since its leader, László Toroczkai

But looking at the manifesto, it becomes clear that Breivik was somewhat misguided in his search of allegiance in Hungary. Having thought that he found prospective followers (Toroczkai’s email address probably collected from the extensive Facebook campaigns he describes in detail), the actual goals of the assailant are very far from the views pursued by radicals in Hungary.

While local groups have had clearly defined enemies, namely Jewish financial interests and “gipsy crime”, Breivik envisioned a somewhat different future. He professes himself to be a strong supporter of Jews, as well as their efforts in the Middle East. Regarding the Roma minority he writes “a Nation of Rom [sic] should be established for European gypsies.”

Still, he does not seem to be too big on the integration goals that the European Union is now pursuing. When his vision of Muslims being completely deported from Europe comes to fruition, he starts taking inventory of the “rather large unpopulated areas” that become available.

As such, the Roma-only nation envisioned would become a reality in Albania, western Anatolia or Lebanon, once the room there is “freed up.” n

The Order The Knights Templar is a Christian order established during the crusades. Most of its members were executed by King Philippe le Bel on charges of worshiping the pagan deity Baphomet. It is a widely accepted notion that the court only struck down the order to lay its hands on the immense wealth the crusaders accumulated during their travails in the Holy Land. The order became immensely wealthy during the wars despite its founding principles of poverty. Breivik claims that the order was reestablished in London in 2002. Others, mostly dismissed as conspiracy theorists claim that the order never ceased to exist and there are numerous organizations worldwide that claim direct ancestry.

life 21

www.bbj.hu

Budapest Business Journal | Aug 5 – Sept 1

Tourism in low gear

▶ International Conference on Telecommunications and Signal Processing (TSP 2011) Location Danubius Hotel Gellért Budapest, Dist. 11, Szent Gellért tér Contact Kata Szegfű, email: tsp@asszisztencia.hu Aug 26-27 ▶ Conference on Social Entrepreneurship Perspectives location Linz, Austria Fee €80 (includes evening reception and lunch) Contact www.acrn.eu

BBJ saida ayupova

Why Hungary?

Tourists go to Germany for a beer fest, to Italy for a honeymoon and to France for a romantic getaway with wine and cheese. Hungary attracts crowds for its historical sites – Parliament, the Holocaust Museum, the Castle District and others, while numerous thermal baths offer a pleasant addition to tourists’ plans.

Moreover, Hungary’s convenient geographical location resulted in 14.1 million people transiting through the country in 2010, leaving behind approximately HUF 94 billion.

Because of its location within Europe, Hungary is often one of the ‘Eurotripping’ stops among the younger generation arriving from North America, Western Europe and Asia.

Between Chain and Charles Bridges Unfortunately, Hungary’s historical richness and strategic geographic position are not unrivaled. Charles Bridge in Prague and the Karlskirche church in Vienna are equally as appealing to tourists as Budapest’s Chain Bridge and St.

Aug 31 – Sept. 1 location

Stephen’s Basilica, and these two capitals are Hungary’s main competitors. Austria and the Czech Republic are also centrally located, making them popular transit spots.

Although the Czech Republic is still slightly behind Hungary in terms of the European market share (1.3%), Austria welcomes twice as many international arrivals as Hungary. Surveys conducted by the World Economic Forum further reveal the underdevelopment of tourism in Hungary in comparison to its main competitors. The Travel and Tourism Competitiveness Index 2011, which measures the drivers of T&T competitiveness in economies around the world, rates Austria as number four in terms of the attractiveness of political and business environments for developing the sector. Czech Republic is number 31, while Hungary is number 38.

It’s got to be Austria Hungary!

Admittedly, worldwide recovery trends in tourism are visible in Hungary as well. The number of visitors increased to 9.5 million international arrivals in 2010, up 5% from the previous year and shows further, albeit rocky, progress in 2011.

However, the country lags behind on many economic, social and business indicators, including infrastructure, attitude of population towards foreign visitors and quality of natural environment.

The most drastic difference is observed in the extent and effect of taxation, where Hungary is ranked number 138 – second to last – while Austria and Czech Republic occupy positions 63 and 49, respectively. The standard rate of value added tax is 25%, while reduced ones are at 18% or 5% – all higher than the EU average.

Another problem Farkas and Kovács pointed out is the lack of country marketing. In May, the

government budget allocated HUF 5.2 billion (nearly €19.5 million) of state resources to the Hungarian National Tourism Office, whose main responsibility is country branding. The amount represents a 50% increase from last year. In comparison, the total budget of the Austrian Tourist Office in 2010 was €52.2 million, 60% of which was directed towards marketing expenses, a figure which remained relatively stable despite hard economic times. Moreover, twice as many international fairs and exhibitions are organized in Austria than in Hungary.

Beyond pálinka Hungary’s weaker performance in terms of tourism in comparison to its immediate competitors does not undermine the fact that the country has just as much to offer, if not more. For example, Hungary has one world heritage natural site (shared with Slovakia) – Caves of Aggtelek Karst and Slovak Karst. Austria has none. There are eight world heritage cultural sites, the same as Austria. Hungary has around 1,000 thermal spas, 1,500 castles, palaces and manor houses and is home to the largest synagogue in Europe as well as the second largest Baroque castle in the world. Lake Balaton’s size is unmatched in Central Europe.

Average hotel rates are cheaper than in Austria or the Czech Republic as well as the cost of living. The country has something to offer tourists of all ages and interests, be it a vibrant night life or multilingual tours around castles and galleries. Perhaps, it is a matter of time before direct measures are taken to match the country’s economic and business environment to its tourism potential. n

First Hungarian made it to TEDGlobal Hungarian pianist and composer Balázs Havasi has taken part in TEDGlobal, one of the most significant scientific conferences worldwide.

Havasi is the first Hungarian invited to the conference since TEDGlobal was founded in 1984.

events Aug 18-20

Hungary’s tourism industry is slowly recovering from the economic crisis.

However, the economic, business and political environment appears not to be as ‘tourism-friendly’ as one might hope, putting Hungary in a disadvantaged position relative to its competitors.

If you type ‘travel Hungary’ in the Google search engine it will generate 136 million results. Looks impressive. Or does it? The same search produces 216 million results for Austria and 774 million for France. This small exercise is in fact quite representative of the distribution of tourism market shares across Europe. In 2010, Hungary accounted for 2% of the tourism industry in Europe based on the number of arrivals, according to the UN World Tourism Organization. Meanwhile, Austria’s share was 4.6% and France’s 16.1%.

Even in the midst of the tourist season, when Váci utca is taken over by foreigners armed to the teeth with cameras and souvenirs, industry representatives are raising concerns. Barnabás Farkas, revenue manager at Art’otel Budapest, and Pál Kovács, director of public relations at Hilton Budapest, both identify high taxes and insufficient country marketing as the main challenges for the tourism industry. These and a number of other problems prevent Hungary from utilizing its tourism potential in full.

UPCOMING

Havasi arrived in Edinburgh, where the event was held for the first time, with his fellow musician Endi Kiss at the invitation of TEDGlobal, to represent the musical category with their joint project dubbed Drum & Piano. Their presentation, aimed at providing an example that boundaries between musical genres and categories can be blurred, received a standing ovation, and the two performers were invited to Athens and India. Other pre-

senters at the event included Robert Gupta, a violinist with the Los Angeles Philharmonic Orchestra, Yang Lan, an influential member of Chinese media society, and Hollywood actress Thandie Newton, who starred in films such as Mission Impossible and 2012.

TEDGlobal aims to present innovators from the fields of science, entertainment and technology that bring changes of milestone importance to their segment. BBJ

Time fee Contact Sept. 6

▶ IT Outsourcing: 2-day seminar Novotel Budapest Centrum, Budapest, Dist. 8, Rákóczi út 43-45 9 a.m.

HUF 209,000 + VAT Tünde Takács, IIR Magyarország, email: conference@iirhungary.hu, phone: 459-7300

▶ DUIHK Jour Fixe Location Dunapark restaurant, Budapest, Dist.

13, Pozsonyi út 38 time 6 a.m. organizer German-Hungarian Chamber of Industry and Commerce Contact Marietta Németh, email: nemeth@ahkungarn.hu, phone: 345-7626 Sept. 13 ▶ AmCham Career School Series - 1st session with Lajos Mocsai, Trainer & Captain of the Men’s Handball Team Location AmCham Conference Room, Budapest, Dist. 5, Szent István tér 11 www.mate-net.hu time 2 p.m. – 3:30 p.m.

Fee HUF 30,000 + VAT/person for the entire series Organizer American Chamber of Commerce Contact in Hungary László Metzing, email: laszlo.metzing@amcham.hu, phone: 428-2082 Sept. 17 ▶ Third AmCham Family Sports Day & Annual Soccer Tournament location GLOBALL Football Park and Sporthotel, 2089 Telki, Szajkó utca 39 Time 9 a.m. – 4:30 p.m. fee AmCham members in good standings: HUF 4 000 + VAT/person; Non-members: HUF 9 000 + VAT/person Contact Anita Árvai, email: anita.arvai@amcham.hu, phone: 428-2086

The Budapest Business Journal is happy to publish news on business, social or charity events in its Calendar section.

Please submit your request at least two weeks in advance of publication date to mihaly.kovacs@bbj.hu For community events visit our partner:

22 life

www.bbj.hu

Budapest Business Journal | Aug 5 – Sept 1

WHO'S NEWS

Name Jean-Pierre Polanen Current company/position Nestlé Hungary/factory manager Szerencs & Diósgyőr factories Previous company/position Nestlé S.A. Switzerland/ global category manager, procurement

Polanen took over the position of factory manager of the Szerencs and Diósgyőr plants on August 1, 2011.

Previously he was global procurement manager at the global headquarters of Nestlé in Vevey, Switzerland. With Nestlé since 1995, he has 21 years of international experience in various engineering, production and procurement positions, in the Netherlands, Japan, Latin America, Hungary and Switzerland. He holds a chemical engineering degree and an MBA. He has a strong command of Hungarian and this is his third assignment in the country for Nestlé.

Name Andrea Dakó Current company/position MagNet Bank/sales director Previous company/position WWF Magyarország/member of fundraising team

Before joining MagNet Bank, Dakó worked with WWF Magyarország for two years, where she was involved in fundraising. She worked for WWF on a voluntary basis for ten years before that. She spent a year in 2008 with Raiffeisen Bank as deputy head of the retail division. Between 2006 and 2008, she was assigned with network development at Allianz Bank. Before that, she was with Budapest Bank for six years and reached the position of regional sales manager. Dakó holds diplomas in banking IT and international project management.

[ better know a ceo ]

Alessandro Fedele

The Coca-Cola Company marketing and operation director for center and Southern Europe

Fedele is responsible for the entire water business of Coca-Cola in Central and Southern Europe, in which role he oversees operations in 20 countries, including Hungary. He was promoted to his current post in June 2010, prior to which he worked as marketing manager for the Coca-Cola Company. He joined the firm in 2002 as new beverages manager, and later also worked as business development manager. Previously, he was with Unilever, having joined in 1996 as marketing manager assistant and worked his way up to becoming a regional marketing manager in charge of the Latin American region in 2000. Fedele holds a master’s degree in business administration from the L. Bocconi University of Milan, and is also a certified accountant. In addition to his native Italian, he speaks fluent Spanish and English and has a good knowledge of French.

He is based in Milan, but due to his regional position with the company and his responsibilities with the Hungarian brand NaturAqua, he regularly visits Budapest.

Do you know someone on the move?

Send information to whoiswho@bbj.hu

Name András Czermák Current company/position LLP Dynamics Hungary/ managing director Previous company/position Info-Consulting Zrt/commercial director

Name István Polonkai Current company/position Compliance Data Systems Kft/sales director Previous company/position -/-

Czermák has more than 16 years of experience in B2B sales. He started his career at DHL Hungary in 1994 as account manager. Between 2000 and 2005, he worked for the Hungarian subsidiary of MCI WorldCom and was in charge of sales in Central and Eastern Europe. He joined Info-Consulting Zrt in 2005.

Czermák speaks English and holds a degree in economics.

Name Gábor Lehel Current company/position Union Biztosító/chairman, CEO Previous company/position WWF Magyarország/

During his career, Polonkai has worked with several Hungarian and international IT companies. He started his professional career in 1988, and worked as sales director of NETvisor Zrt for the last few years.

Before that, he worked for IBM and Oracle in the positions of sales and business development manager.

Name Gábor Borbély Current company/position CB Richard Ellis/head of research and consulting Previous company/position CB Richard Ellis/senior analyst

Lehel has been named chairmanCEO of Union Biztosító, Vienna Insurance Group’s biggest unit in Hungary, effective July 16. Lehel has been on Union Biztosító’s board since 2008. He joined Vienna Insurance Group in 2003, and was named to head the controlling and rating department of the company in 2005. Lehel was also elected board member at Kooperativa, the Slovakian unit of Vienna Insurance Group, in 2010. Lehel holds a degree in economics and worked as an analyst and broker before joining Vienna Insurance Group.

Borbély joined CBRE’s Budapest office in 2006 as market research analyst. Four years later he was promoted to senior analyst in the CEE Research & Consulting team, part of an international group with the responsibility of coordinating research activities across 11 countries in the region. As a qualified economist, he began his analyst career in Prague.

▶ Which living person do

▶ Who is your favorite

▶ What is your most

treasured possession?

you most admire?

Diabolik: smart, cool and with sense of humor.

My Spider Alfa Romeo.

Nelson Mandela.

I still remember the first time I saw him on TV. He really touched my heart with very simple and clear thinking.

fictional hero?

What is the trait you most disapprove of in others?

I do not like people with prejudice, any kind of prejudice. People who see reality with a predefined mindset, who are not able to change their ideas.

What kind of job did you dream of when you were a child?

My dream was to be an industrial designer, I wanted to be a designer for Ferrari, Aston Martin, Bugatti . . . yes, I like cars. Alternatively, a designer of furniture and home accessories.

What is your greatest fear?

That I cannot provide for my son all the best he deserves to be happy in his life. This is not about money, this is about being really able to support him for his passions, whatever they are.

What makes you sad?

I get sad when I see people that do not believe they can change the status quo, and do not believe that their destiny is up to them.

When and where were you the happiest?

Milan, in the hospital, on February 28, 2006, at 12:09 a.m.: my son was born!

What was the most extravagant thing you’ve done in your life?

Not sure it is extravagant, but at 14 years old I was a team member of a political election campaign. It was a really unique experience.

Which living person do you most despise?

Any dictator in the world.

What three things would you take with you to a deserted island?

Water, an iPod and a picture of my family: my personal recipe for survival.

What activities help you to cope with stress?

Listening to music, biking and thinking about my next holiday.

If you were to die and come back as a person or thing, what would it be?

I would like to be an intercontinental airplane.

What is you favorite gadget?

Currently my iPad is my favorite gadget. Since we got it in my home, all the family members fight to use it first.

What does your dream dinner party look like (occasion, venue, guests, menu, music or whatever is important to you)?

On the beach, at 7 p.m., my best friends that I met around the world wherever I lived – Lecce, Milan, Barcelona, Buenos Aires –, my wife and my brothers, a live band playing acid jazz, free drinks for everybody, finger food, and 30 ºC. What is it your dream to live to see?

My dream is to see a world where people will not be judged based on their color or their religion.

What would you do with €1 million?

100K in charity, 700K for a flat in London, 150K for a sailing boat, and 50K on traveling, a lot of traveling!

What is the weirdest thing you have experienced in Hungary?

Sorry, nothing weird yet. What I have noticed since the first time I landed in Budapest is the beauty of the city, the elegance and aristocratic behavior of Hungarians, and their pride in being Hungarian!

What is your favorite Hungarian dish?

Bécsi szelet (Wiener schnitzel), but made of pork, actually not very different from the one that my Italian mother used to prepare for me.

PF

life 23

www.bbj.hu

Budapest Business Journal | Aug 5 – Sept 1

GREAT

〉

QUOTES

〉We are not seeing a new stage of

development, we are not evolving. A collapse is starting that will lead to a new start Prime Minister Viktor Orbán in his evaluation of the state of affairs in Tusnádfürdő

〉I’m not happy with it, but I’m proud of some

of the accomplishments in it. That’s why I’m voting for it Democratic House Speaker Nancy Pelosi on the debt ceiling compromise reached in America

〉Hear me out. We’re not here for the

journalist to speak but for me to speak Sociologist Zsuzsa Hegedűs, consultant to Prime Minister Viktor Orbán arguing with a reporter of the daily Népszabadság in an interview.

She prohibited publication, but the paper felt they accurately presented the conversation and went public

〉It seems that a tank is the best solution

Vilnius mayor Artūras Zuokas in a PR stunt where he uses an armored vehicle to crush an illegally parked expensive car to compel motorists to observe parking regulations

[ editorial ]

Give and take

V

acation is on everyone’s minds even though the weather lately bears little resemblance to summer. However, when work resumes in the fall, employees should prepare to live in a very different world.

The government is set to ratify revisions to the labor code that have stirred up emotions on both sides of the employment isle. Most controversially, the changes on the agenda would give employers new privileges. But these would come at the expense of the employees, who would have to live with lessened job security and drastic penalties, such as six months worth of their salaries if they are found to be grossly negligent. The simplifications are expected to invigorate the labor market and boost employment.

Employer groups applauded the drive since they believe it will make the regulation of labor more flexible. Naturally, unions were not so happy seeing their long-held rights slimmed down.

But even though the amendments come as what could be interpreted as a gesture towards businesses, the Fidesz government has a track record that discourages companies from going overboard in rejoicing.

Not too long ago, the very same government decided that imposing an extra tax on successful sectors of the industry would be the way to shore up the country’s wobbly economy. Even though the government promised that the levy would be phased out by 2012, a senior Fidesz official now envisions that is not the case and companies will continue paying. This is a change of heart that will obviously prove costly for many businesses.

But just as there was no indication the government would backtrack on its earlier promises about the tax, there is now no guarantee that it has adopted a genuine pro-business approach. As appreciative as the business sector is now for how the labor regulations are to change, we should not forget that just as it can give, this government also has a habit of taking away.

〉We played the best, ballsiest water polo

Coach Dénes Kemény after the national team’s somewhat disappointing fourth place at the Shanghai World Championship

〉Who the f… is Thomas Melia?

Fidesz MEP Tamás Deutsch on his Twitter account responding to criticism from US Deputy Assistant Secretary at the Bureau of Democracy, Human Rights, and Labor on Hungary’s new constitution

〉These decisions reached in the past have

very serious effects and consequences in the present, and it is unacceptable that everyone but those who created this situation should bear the consequences Péter Szijjártó, prime ministerial spokesperson on the drive to make raising national debt a criminal offense

BBJ-PARTNERS

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