Budapest Business Journal 19/23

Q&A: Hungarian-American enterpreneur George F. Hemingway talks about Hungarian soccer, economic policy and his days alongside Martin Scorsese 〉PAGE 20

BBJ

Budapest Business Journal

VOL. 19, NUMBER 23

I DEC 16, 2011 – JAN 12, 2012

54,000 borrowers repaid their FX mortgages in the first two months of VOL. 18, NUMBER 01 I JAN 15, 2010 – JAN 28, 2010 early repayment scheme 〉PAGE 4

HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WW H WWW.BBJ.HU WW W..BB .B J.HU

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BUSINESS

DEALS OF THE YEAR

HEINRICH SCHALLER CO-CEO, WIENER BÖRSE

“Another clearing house could be active on the Hungarian market.” 〉PAGES 10-11

BUSINESS Anti-money laundering compliance bogs down banks The compliance departments of banks are struggling with the challenges of the enormous pressure to reduce costs and the need to fully meet regulatory requirements on combating money laundering. 〉PAGES 10-11

In Hungary’s rather untransparent and sluggish economy, big deals are few and far between. Thus it especially important for us to call attention to the mergers, acquisitions, investments, bond and stockmarket deals that do take place – and give hope for 2012, a year that is expected to be perhaps even more difficult than this one.

Check out the largest private capital placements, the largest Budapest-based regional deals and others.

LIFE Good causes to support The holiday season usually makes people more sensitive towards the needy. But good causes are out there all year long, so the BBJ would like to draw your attention to some that we think are worthy of 〉PAGES 16-17 your support.

TRENDS Changed ability counts less Recent research by Kelly Services Kft into the job-seeking habits of people with changed working abilities found that skills, knowledge and willingness to study actually affect the job search more than changed abilities. 〉PAGE 4

〉PAGES 14-15 BUSINESS

MARKET ANALYSES AND LISTS

A slow step into the cloud The number of companies adopting cloud computing is fairly low, worldwide and in Hungary. However, the fast-paced growth of this sector points to dynamic expansion in the near future. 〉PAGE 8

-1% +2.5%

COMMERCIAL BANKS Hungarian banks have suffered from bank levy and early repayment scheme 〉MARKET ANALYSIS AND LIST PAGE 12

INSURANCE FIRMS Economic uncertainty and budget cuts have resulted in falling revenues in the insurance sector 〉MARKET ANALYSIS AND LIST PAGE 13

2 NEWS

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NEWS FOR THIS PAGE IS FROM THE BUDAPEST BUSINESS JOURNAL’S DAILY BRIEFING, HUNGARY A.M.

NEWS in brief

4-DAY STICKERS TO BE SCRAPPED

ECONOMY Govt deficit to meet target Hungary had a cash flow-based overall government surplus, excluding local councils, of HUF 79.9 billion in November, bringing the January-November deficit to HUF 1.25 trillion, or 82.3% of the modified full-year target, the National Economy Ministry said in a preliminary report. The ministry projects the full-year deficit to be in line with the modified target of HUF 1.52 trillion. The projection translates into a December deficit of HUF 269 billion. The ministry said HUF 219.2 billion in realized revenue from the Pension Reform and Debt Reduction Fund contributed in significant measure to the surplus in November.

Govt to modify 2012 budget Hungary’s government could make small corrections to the expenditure and revenue sides of the 2012 budget, but it will continue to target a 2.5%-ofGDP fiscal deficit, National Economy Minister György Matolcsy said. The changes would be necessary because the government now puts GDP growth between 0.5% and 1% next year, under the earlier 1.5% projection on which the budget bill is based, Matolcsy said. A planned agreement with the IMF is not intended to support growth, but to provide a safety net so Hungary can continue to finance itself from the markets.

Industrial output down in Oct Hungary’s industrial output rose 3% year-on-year in October according to both unadjusted and workdayadjusted figures but was down a seasonally- and workday-adjusted 0.9% from September, the Central Statistical

Budapest Business Journal | Dec 16 – Jan 12

US-based investment firm Franklin Templeton holds more than HUF 1 trillion, or over 10%, of Hungary’s forint- and foreign-currency-denominated debt, the business daily Napi Gazdaság reported.

Hungary will scrap its four-day motorway permit for passenger cars from January 1, 2012, the National Development Ministry said. The ten-day permit will now be the shortest validity for category D1 vehicles from the start of next year. The change brings Hungary in line with permit systems in neighboring countries. The shortest motorway permit is ten days in Austria and seven days in both Slovakia and Slovenia.

Office (KSH) said in a first reading.

The pace of 12-month output growth was unchanged from September. The monthly drop came after a sharp 3.9% monthly increase. Industrial output was up 5.8% in January-October from the same period a year earlier. Hungary’s industrial output rose 10.6% in 2010 after a 17.8% contraction in 2009.

The 3% increase in Hungary’s industrial output in October from the same period a year earlier was bigger than expected, analysts said. In a month-onmonth comparison, industrial output dropped 0.9% in October after climbing 3.9% in September.

Int’l reserves fall in Nov Hungary’s international reserves stood at €35.774 billion at the end of November, down €1.1 billion from a month earlier, preliminary data published by the National Bank of Hungary (MNB) shows. International reserves were up €2.1 billion from the end of 2010 and up €2.36 billion from 12 months earlier. The data shows that foreign exchange reserves fell €865 million in a month to €33.55 billion at the end of November and other reserve assets fell €220 million to €1.36 billion. In dollars, the international reserves stood at $47.50 billion at the end of November, down from $52.28 billion one month earlier but up from $43.46 billion 12 months earlier. The main factor reducing the reserves in November could be the first €2 billion principal repayment Hungary had to make on its IMF-EU loan. Another factor is the early mortgage repayment scheme, with the MNB selling banks euros for forints from its international reserves to help banks acquire the necessary FX liquidity during the scheme.

NUMBERS

in the news

28% of Hungary’s leading companies were victim of economic crime in the past year, a recent PwC study reveals.

54,000 borrowers repaid their FX mortgages in first two months of the early forex mortgage repayment scheme, data from financial watchdog PSzÁF shows.

Mobile subscriptions fall in Q3 Mobile subscriptions numbered 11.66 million at the end of Q3 in Hungary, the smallest in three years, or 1.4% less yr/yr, the Central Statistical Office (KSH) said. The decline is 0.3% from the 11.704 million at the end of Q2. The yr/yr decline was 0.1% in Q1, and 1.3% in Q2. The number of fixed line calls fell 7%, and their duration increased 4% yr/yr, while the number of fixed line subscriptions declined by 2.3% yr/yr to 2.884 million. Their number fell 0.07% from 2.886 million at the end of Q2. It decreased 0.7% yr/ yr in Q1, and by 1% in Q2. Internet subscriptions grew by 26.5% yr/yr to more than 3.984 million in Q3 after adding 19.6% yr/yr in Q1, and 23.2% in Q2. Internet providers numbered 401, two less than a year ago.

POLITICS Gyurcsány blamed for public debt A parliamentary subcommittee assessing the reasons for public debt growth in the period between 2002 and 2010 has proposed a criminal investigation into the responsibility of Ferenc Gyurcsány’s government (2004-2009). Deputy chairman of the committee András Cser-Palkovics, of the ruling Fidesz party, said that the Gyurcsány government had falsified budget figures which raises the suspicion of violating the budget bill and regulations on public information, misconduct and negligence, as well as the violation of rules on the use of EU funds. Péter Medgyessy’s government (2002-2004) and Gordon Bajnai’s government (2009-2010) made economic policy mistakes but these do not raise the suspicion of criminal responsibility, he added.

Civil org law approved Parliament has approved a bill on the right of association as well as the operation of and support for civil organizations. The law introduces a new organizational form, the civil association, and simplifies the rules pertaining to the financial management of civil organizations. The new law defines the right of association as a fundamental right, declaring that every individual is entitled to set up organizations and communities or join them. That does not extend to armed organizations, however, nor can the exercise of this right restrict others’ rights and liberties.

Military able men to be listed Parliament has decided to establish a list of citizens who could be conscripted in case of emergency, news portal Origo reported. All adult male residents of Hungary with Hungarian citizenship will be on the list. The Defense Ministry will acquire the required data from the residential registry. According to Defense Minister Csaba Hende, Parliament has the right to decide anytime on relaunching mandatory military service, Origo said.

DOMESTIC Govt steps for simpler state The government’s “Simple State Program”, which aims to reduce the amount companies spend on bureaucracy by HUF 500 billion, has been launched. National Economy Ministry state secretary Zoltán Cséfalvay said the cost of official administration for businesses exceeds 10% of GDP. The program is expected to cut the annual average cost of bureaucracy from HUF 3 million to HUF 500,000 per business, he added.

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Budapest Business Journal | Dec 16 – Jan 12

NEWS FOR THIS PAGE IS FROM THE BUDAPEST BUSINESS JOURNAL’S DAILY BRIEFING, HUNGARY A.M.

COMPANY news ERSTE INVESTMENT HAS BEST BÉT PERFORMANCE

The Budapest Stock Exchange recognized the bourse’s top performers in 2011. Based on statistical data, Erste Investment took the top prize for best trader on the spot market, Raiffeisen Bank on the derivatives market and Agrokont Brókerház on the commodities market. OTP Bank was the issuer with the biggest turnover, and FHB Mortgage Bank took the “Best debt security issuer of the year” award. Equilor Investment took the award for best debt security issue organizer.

The BSE named Bloomberg data service provider of the year.

The Exchange Media Award was presented to Jazzy Radio’s “Millions for Breakfast” show.

NEWS 3

Hungary’s National Media and Infocommunications Authority (NMHH) said six registered to participate in the auction for frequency blocks in the 900 MHz band. The bidders include the three mobile companies operating in Hungary: Norway’s Telenor ASA, the UK’s Vodafone Group PLC and Magyar Telekom Nyrt.

KEMPINSKI TO OPEN NEW HOTEL IN VIENNA, PLANS TO RENOVATE BUDAPEST PROPERTY International hotel chain Kempinski plans to open its hotel in Vienna at the end of 2012, the company announced at the beginning of December. The opening in the Austrian capital might result in increasing turnover at the Kempinski Hotel Corvinus Budapest, said Duncan O’Rourke, CEO of the Kempinski chain.

O’Rourke arrived in Budapest for a meeting of the board of directors of Kempinski Hotel Corvinus Budapest, where among the issues discussed was how to renovate the hotel without closing it down for the duration of the works.

The Kempinski chain plans to increase the number of its hotels to 120 from the current 66 by 2015. “Kempinski is highly dedicated to luxury services so we won’t let the company grow above a certain size,” O’Rourke emphasized. He added that the majority of hotels wishing to join the Kempinski chain are turned down, and only the very best can win admission. Conditions include high-quality and at least three years of successful operation, he said.

Venture capital fund manager Primus Capital invested HUF 400 million in medical technology company BBS Nanotechnology.

The company, from Debrecen (eastern Hungary), has created a new nanotechnology-based technique for formulating active ingredients that presents a breakthrough in the area of cancer treatment, Primus Capital said. The investment is the fifth by the company’s Primus II venture capital fund. Earlier, the fund invested in Blueprint Entertainment, software developer IVM, call center operator Comforce and marketing company Adfit. Primus Capital is one of a number of venture capital fund managers that won a tender called by the National Development Agency (NFU) to manage about HUF 45 billion in funds under the New Hungary Venture Capital Program.

American contract electronics manufacturer Jabil Circuit will start operating an electronics products servicing center in Pécs (southwest Hungary) from the end of January, making about 400 new hires, many from an Elcoteq plant in the city that went bust in the fall.

China’s Xanga group has topped out a 5,000 sqm building at a HUF 600 million cargo base it is establishing at the Debrecen airport in eastern Hungary. Xanga group won a HUF 150 million grant for the investment. There are ongoing talks as a result of which ten Chinese companies are expected establish units in Debrecen in the first half of 2012.

Nestlé Hungária, the Hungarian unit of Swiss food giant Nestlé had profit of HUF 1.9 billion on revenue of HUF 83.5 billion in 2010, down from HUF 3.8 billion and HUF 84.6 billion, respectively, in the previous year.

Generali Alapkezelő, the Hungarian fund manager unit of Generali and two of its investment funds raised their combined voting rights to 5.2% in Hungarian vehicle and vehicle parts maker Rába, the company said on the website of the Budapest Stock Exchange.

Generali and its funds purchased 179,580 Rába shares on December 2, raising their holding to 653,663.

Hungarian building materials company Masterplast’s net income climbed 136% to €2.3 million in Q1-Q3 from the same period a year earlier as sales margins widened, the company’s consolidated IFRS report shows. Revenue fell 5% to €64.2 million during the period, but the direct costs of sales dropped 9% to €50.6 million, lifting operating profit by 40% to €3.8 million.

Duncan O’Rourke, CEO of the Kempinski chain.

Swiss-owned building materials maker Holcim Hungária has postponed indefinitely the construction of a cement distribution base in Dabas, near Budapest, because of the prolonged recession. Local residents had earlier protested the plan to build the base in Dabas because of environmental concerns.

Paratech Hungary has tested technology for converting toxic bauxite residue into harmless building materials at the plant of alumina maker

MAL in Ajka (northwest Hungary). The company is in the process of obtaining permits for the process and clearing the resulting material, dubbed stabilized bauxite residue, with the accreditation bodies.

US-based extruded aluminum can maker Exal Corporation will acquire troubled Hungarian peer Szenna Pack for €14 million and pay off some of its debts. Family-owned Szenna Pack filed for bankruptcy protection in July. Exal Corporation will take care of unpaid wages and bills, and repay 50-75% of loans backed by collateral and 10% of loans without collateral. The American company wants to continue production at Szenna Pack and keep the 120 workers.

Hungarian telco Nordtelekom will launch a HUF 600 million corporate bond program. Nordtelekom plans to sell the bonds, which could have fixed and floating rates, over a period of 12 months. The company could float the shares on the Budapest Stock Exchange.

Nordtelekom’s shareholders approved a corporate bond program up to HUF 900 million in October. The program was designed to fund further business developments.

FB Airport, the operator of Fly Balaton airport, a regional airport in the west of Hungary, has been put under liquidation by order of the court.

FB Airport owes the state-owned Hungarian Development Bank (MFB) more than HUF 1 billion in loans. FB Airport owner Aviation Group earlier went under liquidation.

Telenor Magyarország has finished building its next-generation mobile telecommunications network. The high-speed network offers coverage to 71% of Hungary’s population. Telenor Magyarország signed a five-year contract worth €200 million at list prices on the construction of the LTE (Long Term Evolution) network with China’s ZTE in the summer of 2010.

CIG Pannónia Life Insurance said it had boosted its stake in funeral services company PI-ETA from 60% to 100%. CIG Pannónia did not reveal the price of the transaction.

4 TRENDS

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Budapest Business Journal | Dec 16 – Jan 12

CHRISTMAS SPENDING

LABOR

EMPLOYMENT

AIR TRAVEL

Gifts within means

Changed job-ability

Overqualified migrants

Flying high

Foreign workers in Hungary are less likely to be poor.

Liszt Ferenc Airport expects record number of passengers.

Consumers expected to spend less in the run-up to Christmas.

It is the willingness to learn that counts.

80% 51% 1 in 3 8% of shoppers still pay in cash for X-mas gifts

of challenged workers did not send out a CV

migrants at risk of poverty or exclusion

increase in passenger traffic in Budapest

According to recently published research conducted by GfK Hungária, Hungarians are being more moderate in their preChristmas spending this year than last.

Budapest Bank, which commissioned the survey, revealed that Hungarians plan to spend HUF 3,000 less on average on Christmas presents this year.

Respondents said they would spend a total amount of HUF 45,000 for gifts, which breaks down to an average of HUF 6,000 for one person’s gifts. As the latter figure has remained nearly unchanged from last year, people are likely to narrow the circle they will give gifts to this year.

Those asked also said that they had already started saving up for the holiday season and only a small portion (4%) of the respondents said they wanted to take out loans for Christmas gifts. The bank, based on previous experience, does, however, expect some increase in credit card spending and the amount of consumer loans in the coming weeks until the holidays.

The majority of people do not plan to exceed their available resources: 72% said they would use their current financial budget to buy presents, and 41% plan to use their savings. But Budapest Bank says clients who already have a credit card usually spend about 20-25% more in November and December than they do in the rest of the year.

Although the bank expects an increase in the volume of consumer loans, this will not reach last years’ figures.

The bank said that the reason for the moderate interest in taking out new consumer loans is that people plan to buy fewer presents that are eligible for loans.

The study reveals that the popularity of these products is lower than other types of gift. Clothing articles, books and cosmetics are expected to be the most popular presents this year. PF

It takes an average of one and a half years for disabled people living on a disability pension to find a job. Those who manage to land a job usually work part-time to supplement the provision they receive from the state, according to a recent study by Kelly Services Kft on the job-seeking habits of people with changed working ability.

According to this, it is the willingness to study that counts most in job search success.

Almost half of those who participated in some kind of training managed to find a job within one-six months. People who didn’t are apparently at a disadvantage: a quarter of them took one-three years to secure a job.

(The ratio is 19% for those with training.)

Skilled workers are also more likely to find a position faster: the average length was onesix months for 42%, with only 10% having to search for more than three years. For people with secondary school degrees only, this takes slightly longer, while more than a quarter of those with only elementary school education needed more than three years.

Of those polled, 92% work part time (41% less than four hours, 22% six hours, 21% seven hours) and 6% full time.

Most job seekers with changed ability turn to NGOs and employment offices for help but there is a high number (16.4%) who don’t consult with either.

In all, there is no significant difference in the time needed to find a job between people with changed work abilities and average job seekers: 17 months as opposed to 17.9 months (data by KSH).

“The findings of the survey show that, except for highly disabled people, it is not the working ability but skills, knowledge and time spent outside employment that affects the chances of finding a job. By enhancing their existing skills or acquiring a new one, they can improve their chances a great deal,” said László Oláh, head of the research. ZSV

In 2010, foreign-born persons accounted for 9.4% of the EU27 population. Their socioeconomic situation was in general less favorable than that of native-born people. Yet migrants to Hungary are better off.

In 2008, the unemployment rate of foreign-born persons aged 25-54 was higher than for those born abroad (10% compared with 6%), according to Eurostat data. When employed, they often have more difficulty in finding a job corresponding to their education level. This can be measured using an over-qualification rate, which refers to the percentage of persons with a high level of education with a job that does not require it.

In the EU27 in 2008, foreign-born persons aged 25-54 registered a significantly higher over-qualification rate than native-born persons (34% compared with 19%). Back then, the unemployment rate of foreign-born persons aged 25-54 was higher than for nativeborn persons in this age group in all member states for which data are available, except Greece and Hungary. As regards employment, foreign-born persons registered a significantly higher over-qualification rate.

In 2008 in the EU27, 31% of the foreignborn were assessed to be at risk of poverty or social exclusion, following the criteria set by the Europe 2020 strategy. Foreign-born persons are also in a less favorable situation with regard to housing conditions. In 2008, foreign-born persons were more likely to live in overcrowded dwellings.

Hungary seems to be an exception to these trends in many respects: there is no significant difference between unemployment rates of migrants and Hungarianborn, while over-qualification rates are likewise similar (14% and 11% respectively).

In fact, migrants in Hungary are less at the risk of poverty than Hungarian born people. The most visible disadvantage they suffer is that they are more likely to live in overcrowded dwellings. MTD

The Liszt Ferenc International Airport Budapest is about to close a recordbreaking year in terms of passenger numbers, the latest report by operator Budapest Airport forecasts.

The number of passengers came to 646,171 for November, 8% more than in the same month a year earlier. The year-to-date cumulative figure already exceeds the 8.19 million total for the full year in 2010.

The airport, however, has seen some decline in passenger turnover on a monthly comparison: traffic in October exceeded 800,000 passengers for the first time ever, which was a 9.2% year-onyear increase.

The airport handled nearly 8.3 million passengers from January to November, which is also the best result yet during this period, and exceeds last year’s performance by more than 600,000 passengers.

Forecasts suggest that the rising trend will continue during the final weeks of the year, and all the conditions are given to fulfill Budapest Airport’s expectation of traffic reaching 8.7 million by the end of the year.

Hungary’s national airline Malév was the main driver of the good results, the report shows. Malév registered a high number of transfer passengers in November, some 30,000 more than in October.

Traffic on long-haul flights continued to increase dynamically in November, after an 80% monthly rise in October.

This is mainly because of the daily American Airlines flight to New York and the Qatar Airways flight to Doha, operating on a daily basis since September. All this has not come as a surprise, as the only long-haul flight a year ago was the Budapest-Peking link.

Traffic of discount airlines dropped 3.4%, while traditional airlines saw a 1.2% increase in November. PF

WORKING HOURS

RELATIVELY RICH

PASSENGER LIST

HOLIDAY FEVER

I save up for 3-4 months before X-mas I’ll cut back on spending after the holidays I don’t have to tighten my belt because of X-mas

How do you prepare for your X-mas shopping?

Source: GfK Hungária/Budapest Bank

Share of people with changed working ability working flexi-time (%) Source: Kelly Services

Living conditions of native-born and foreign born people aged 25-54 in 2008 in Hungary (%) Source: Eurostat

Passenger traffic at Liszt Ferenc Airport Budapest (mln) Source: Budapest Airport

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DOMESTIC 5

Budapest Business Journal | Dec 16 – Jan 12

Homelessness has become an even more complex issue recently in Hungary. Politicians say they are committed to solving the problem, but have come forward with controversial methods.

BBJ BBJ ANALYSIS

Two new homeless shelters, part of a new HUF 490 million project allowing accommodation for 450 people, were opened in Budapest last week.

The opening could have been a celebration, but it was spoilt by a group of protesters that included radical social workers and neighborhood locals, who come out to express their fear about the new shelters and their “dangerous residents”.

Negative public sentiment about recently passed homeless legislation may account for locals’ behavior. In May 2011, the government agreed to make living in public places punishable by incarceration or HUF 150,000 in fines in the case of repeat offenders. The measure has attracted the attention of several human rights and civil organizations, both inside the country and abroad. The Brussels-based European Federation of National Organizations Working with the Homeless expressed its objection to this law several times.

“This is against basic rights as well as human dignity,” Bea Borza, head of the Investigation Office at the Parliamentary Commissioner for Civil Rights (ombudsman), told the Budapest Business Journal. Her office has already turned twice to the Constitutional Court asking it to strike down this legislation.

“The government made a mistake of enforcing a law without offering a feasible alternative to those who can’t comply,” said Zoltán Aknai, head of Menhely Alapítvány, an organization helping the homeless. There have been instances, most recently in Csepel, where officials started to clear areas occupied by homeless without providing them with housing alternatives.

“It is not homelessness that we have criminalized, but the violation of property. I think this is a legal debate. I am confident that we can fix the previous system’s mistakes, which lead to a dead end and made homelessness a lifestyle,” District 8 mayor Máté Kocsis told the BBJ. His local government has possibly come into focus for implementing a new policy of insisting on order versus the former, more liberal approach. “To my knowledge, no homeless in the district have actually been fined for living in the streets, all violation processes were closed with a warning. Those who committed other violations, for example, drinking or dumpster-diving, were fined,” noted Aknai.

Miklós Vecsei, vice president on the Hungarian Maltese Charity Service, responsible for 200 places and more than 1,000 employees sees potential in the project. “I think the new direction in Budapest is very promising and can be effective in the capital, especially now in the winter.”

At the same time, he finds Kocsi’s “back to the original home” strategy problematic, and agrees with the statement of the national ombudsman.

Repatriating homeless people back to where they come from would create both a logistical and a financial problem. At the end of November, three Fidesz politicians submitted amendments to existing legislation. District 8 mayor Kocsis proposed putting homeless care under the jurisdiction of local governments, while the mayors of districts 2, Zsolt Láng, and 16, Péter Kovács, would rather see it belong to the Budapest municipality.

Involving both parties might be the best solution, but the answer depends on a comprehensive strategy. Currently there is no such thing on the table. One that was compiled in 2008, applying some of the recommendations of professional organizations, is still to be discussed. It is more cuts, of both national and homeless budgets, that define the future. ■

LÉLEK PROGRAM

A demonstration against the amendment of the law in November.

Protesters are holding signs saying “homes instead of prison”.

HOMELESSNESS IN NUMBERS Estimated number of homeless people in Hungary:

VIOLATION OF PROPERTY The media has focused mostly on fines, violation processes and the part of legislation which says the homeless are entitled to get help from the local municipality they originally belonged to. Barely did it mention the new HUF 61 million Lélek project, launched this fall, which allocated 60 times more money than previous annual budget.

20,000-25,000

7,500-9,000, 70% of them hiding in the suburbs, many in forests 5,500 Capacity of shelters in countryside cities: 4,500–5,000 In the Budapest area:

Capacity of shelters in Budapest:

Two types of accommodation in Budapest shelters: (a) (b)

27 night shelters (1,800 people, 5-50 beds in one space, only for one night, no fee) 26 temporary hostel-shelters (2,500 people, 5-50 beds in one space, 1-3 months, HUF

5,000-15,000/month rent)

WE WISH ALL OUR PARTNERS A MERRY CHRISTMAS AND A PROSPEROUS NEW YEAR!

The project is taking a new approach to the homeless question by offering a complex solution. It plans to create a local multifunctional (rehabilitation, public employment, rent support) solution for homelessness where individual districts or cities would be responsible for local homeless people. If it works well, it could serve as a model program for other districts as well. The amount is 60 times more than previous annual budget allocated for homeless issues. It will cover the establishment of accommodation for 34 persons, the salary of social workers, the cost of housing, rents and wages of homeless people taking part in the project and the establishment of a coordination office

MTI / Zsolt Szigetváry

Left on the edge of society

6 POLITICS

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Budapest Business Journal | Dec 16 – Jan 12

Orbán says: yes, no, maybe The eurozone debt crisis and Hungary’s own debt-financing problems roll on with more bad news seemingly every day. Here is a quick summary of the past few weeks’ events to keep you up-to-date.

BBJ SUMMARY

The EU looks for integration Seventeen members of the eurozone have reached a deal for a new intergovernmental treaty to deepen the integration of national budgets. At the meeting, member governments agreed to raise the amount that could be used by the International Monetary Fund to aid indebted European governments to €200 billion. The European Central Bank will manage the eurozone’s two bailout funds, the European Stability Mechanism and the European Financial Stability Facility.

Participants also moved up the date that a European rescue fund would come into operation. The new plan, which leaders are aiming to have ready by March, did not get the backing of the UK. British Prime Minister David Cameron has come under fire for his decision not to agree to closer fiscal union to preserve the euro.

Instead he insisted on putting Britain’s interests first by exercising a veto to avoid signing up to a new European economic treaty.

Sweden, Hungary, Denmark and the Czech Republic did not say an outright yes either, but have decided to put the issue before their parliaments, leaving the UK on its own. In fact, a new intergovernmental treaty could be easier to ratify than a change to existing treaties, said Herman Van Rompuy, president of the European Council.

The new disciplinary rules may help ensure that there will not be another euro crisis, but they may not be sufficient to fix the current problems and calm market fears that Europe and the European Central Bank are not doing enough to back vulnerable nations. The new deal also raises concerns over the EU turning into a two-tier system, with some countries pursuing deeper integration than others.

The eurozone has to refinance a lot of debt early next year. Eurozone governments have to repay more than €1.1 trillion of long- and shortterm debt, with about €519 billion of Italian, French and German debt maturing in the first half of 2012 alone.

Hungary negotiates with the IMF Hungary’s government is aiming for a €10-15 billion package from the IMF and the EU to stabilize its economy, preferably with lighter terms, but would be also willing to accept a stricter deal, bank analysts said after meeting with government, central bank, debt agency and IMF officials in Budapest, Reuters reported.

Hungary, which must roll over €4.7 billion in external debt next year, turned to the IMF and the EU for renewed assistance after the forint hit a record weak point last month, caused by a distressed market and investor mistrust in the government’s unorthodox policies.

According to Citi analysts, the country would prefer a credit type called a precautionary and liquidity line, imposing relatively light constraints on policy. However, it said government officials believed it “would not be a tragedy” if the talks resulted in a precautionary standby arrangement – a credit type with tougher conditions and regular monitoring.

The details of any agreement would be discussed during talks expected to start in January as this issue is in a preparatory stage, State Secretary Zoltán Kovács said.

A team of IMF/EU delegates was expected to visit Budapest between December 13 and 16 for informal discussions to prepare for official talks.

The IMF’s representative in Hungary, Iryna Ivaschenko, said the talks would also touch upon recent budget developments.

Hungary’s decision to turn to the IMF surprised many and seemed to reverse a year and a half of policy when the government vocally rejected IMF help and pursued measures such as windfall taxes on banks, rechanneling money from a privatized pension scheme back to the state, and a plan to let households repay foreign currency mortgages at favorable exchange rates.

Still, the move failed to avert a one-notch ratings cut by Moody’s to ‘junk’ status, which cemented a rise in bond yields above 8% and pushed official interest rates to a two-year high.

Rival rating agencies Fitch and Standard & Poor’s, both of which rate Hungary on the brink of ‘junk’ status with a negative outlook, have said their assessment of the country depended to a large degree on the outcome of its talks with the international lenders.

With the economy probably failing to meet predicted growth and funding costs getting high, the government said only a safety net IMF/EU deal could ensure it has access to market funding.

A CHRONOLOGY OF CONFUSION: DECEMBER 9TH 5.30 a.m.: NO (based on the announcements of Nicolas Sarkozy and Herman Van Rompuy and BBC) 9.30 a.m.: MAYBE (Viktor Orbán’s press conference in Brussels) 13.00: YES (Enikő Győri’s comment to BBC) 13.30 : NO IDEA (Ministry of Foreign Affairs) 14.15: MAYBE (BBC based on the comments of the Hungarian government) 14.45: MAYBE YES (EU announcement, Van Rompuy’s press conference) 20.30: Perhaps, perhaps, perhaps (Orbán interview at MTV, Dec 12th)

QUOTES

〉

FROM NEXT MORNING

〉UK JUMPED INTO ROWING BOAT WITH HUNGARY NEXT TO 25 NATION SUPERTANKERS. THAT IS WEAKNESS NOT STRENGTH.

Former British foreign secretary David Miliband to David Cameron on Twitter

〉HUNGARY HAS NO REASON TO RUSH AHEAD, NO REASON TO JOIN SOMETHING THAT’S NOT WELL THOUGHT THROUGH. THAT WOULD BE ADVENTURISM.

Hungarian Prime Minister Viktor Orbán at his press conference in Brussels

〉HUNGARY’S APPROVAL OF THE DEAL CONTAINS

ISSUES THAT EFFECTS DEEPLY NATIONAL SOVEREIGNTY. IN SUCH ISSUES, IN HUNGARY, ONLY PARLIAMENT CAN TO DECIDE. Péter Szijjártó, spokesperson for the Hungarian PM to MTI from Brussels

〉THE COUNTRIES OF THE EUROZONE HAVE

REACHED A DECISION THAT SIGNIFICANTLY RESTRICTS NATIONAL SOVEREIGNTY AND THE JURISDICTION OF THE REPRESENTATIVES OF THE COUNTRY. I CANNOT AND DO NOT WANT TO GIVE UP THIS SOVEREIGNTY WITHOUT BEING ENTITLED TO DO SO BY THE PARLIAMENT. Hungarian Prime Minister Viktor Orbán in a television interview (Dec 12)

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BUSINESS 7

Budapest Business Journal | Dec 16 – Jan 12

A basket for CBA and Coop?

An act banning all new shopping mall developments has industry experts scratching their heads as to what the true motive and goal of such legislation could be.

BBJ ANDRÁS ZSÁMBOKI

With its 30,000 inhabitants, Szekszárd has always been considered a pretty Transdanubian town.

Until two years ago, its main street was teeming with strolling town-dwellers, but nowadays hardly anyone can be seen downtown.

Since the new Tesco hypermarket opened at the edge of town last year, just about everybody goes there to do their shopping: food, toys, clothes, even flowers are bought there. It is, in fact, about more than just shopping: people pay their bills at the post office on Tesco’s premises, and they sit down for a drink or a slice of pizza there. The historic city center has lost more than its role as a commercial center; it has lost its forum function too, urban planners say.

Such stories can be heard by the dozen in real estate expert circles. The “shopping mall problem” is a real challenge for urban planners, not to mention politicians, all over Hungary. It is still a question, however, whether the legislation recently accepted by Parliament could help solve any of these community problems. Does it make any sense to categorically ban the development of shopping centers, or would a more complex policy supporting the revitalization of historic city centers have been better for locals?

Since Hungary is already full with plazas today, any sort of legislative prohibition seems overdue. Passionate reactions pro and con, however, prove the opposite: the law does matter even under recent economic conditions.

LEX LIDL OR LEX LÁZÁR? The original plaza bill of the opposition green party LMP would have tailored the size of shopping malls to the size of their cities. “Big city – big mall, small city, small mall,” claimed Rebeka Szabó of LMP. The governing Fidesz party, however, has long argued against plazas and for protecting domestic retailers. Since small plazas could be just as much competition for Hungarian shopkeepers as big ones, the act bans building even small shopping malls in big cities.

“The 300 sqm parameter is far stricter than that real estate professionals use for shopping malls,” Szabolcs Koroknai, associate director of

1

TESCOGLOBAL

2

SPAR

REVENUE

584

AUCHAN

REVENUE

337

PROFIT

6

3

METRO

REVENUE

227

PROFIT

-26

4

REVENUE

180

PROFIT

-8

5

LIDL REVENUE

176

PROFIT

-1

PROFIT

-10

Revenue data is net revenue in 2010, profit is earnings before tax and dividends. Both are in HUF billions. The arrows show the direction of change in the data compared to the previous year.

property agency Colliers International told the BBJ. “The size prescribed for bigger towns is the minimum scale for supermarkets, while the size limit for smaller towns can easily be surpassed even by drug stores,” he noted. In international real estate, 5,000 sqm is the minimum floor space for shopping malls, not including traffic area.

“There are serious restrictions on the size of retail shops in Denmark, too. The Danish upper limit, however, is 3,000 sqm which is ten times bigger than the Hungarian one,” György Vámos, the chief secretary of national alliance of trade OKSz told the BBJ. This raises the question whether the shopping mall law is about shopping malls at all. According to several critically minded journalists (among them the staff of Portfolio.hu and Hírszerző. hu), lawmakers’ intent was not to put an end to the plaza building rush, as this is already past.

Instead, the regulation is likely aimed at multinational discount store chains.

“As far as net income is concerned, Lidl ranked seventh, Penny Market ninth, and Aldi 12th among Hungarian retailers in 2010. Moreover, the two German-owned chains [Lidl and Aldi] were able to increase their net profit despite the crisis,” Porfolio.hu wrote. The chief beneficiaries of such a ban, the news portal argued, would be Hungarian-owned supermarket chains CBA and Coop. “Not only because they mostly open retail units smaller than what would be prescribed in the act, but because they have already built their retail network all over Hungary,” it noted.

Whether retail chain CBA is a beneficiary of the shopping mall act is still a question. Liberal weekly Magyar Narancs learned that timing of the act had seriously undermined the bargaining position of the Lázár brothers, Fidesz-friendly owners of CBA while negotiating about buying the French-owned chain complex Cora/Match/ Profi. Old shop units used to be difficult to sell as new, energy efficient ones could be raised from the scratch. From 2012, however, the only way

PEUGEOT WISHES YOU A MERRY CHRISTMAS AND A HAPPY NEW YEAR

retail chains will be able to expand in Hungary is to buy existing units of other chains. Now, the Delhaize Group, the owner of Cora can ask a lot more for than half a year ago. “CBA’s bid could reach HUF 50 billion,” Magyar Narancs wrote.

The act in question also has a widely debated paragraph that aims to centralize any decision concerning shopping centers above the pre-set size limit. The original bill submitted by opposition party LMP intended to strengthen the bargaining position of municipal leaders against developers, so that the final decision about plazas would remain at the local level. Fidesz, however, has instead decided to establish a “national retail bureau” which will be filled up with delegates of ministries.

According to a real estate expert who asked not to be named, such a super-authority could supervise so-called public development contracts.

As part of the public development contract, the developer involved in a larger project usually takes over minor urban development tasks from the local government in question.

“Such agreements have always smacked of a certain sort of reverse profiteering,” he added.

REVENUES OF THE LARGEST FOOD RETAIL CHAINS

“It’s as if the local government said, ‘I will only grant you a construction permit if you agree to share some minor tasks with me’.” The farther the public development project is located from the would-be shopping mall, the more obvious the trade-off would appear to be.

The law in fact seems to create the possibility of country-wide trade-off mechanisms by centralizing the bargaining process. “In order to build a shopping mall in the Transdanubia region, one could be forced to complete a public development project in eastern Hungary,” the expert told the BBJ. Rebeka Szabó of LMP, who proposed the original bill, said her parliamentary group withdrew its original proposal exactly because they disagreed with Fidesz’s concept of a “national retail bureau”.

The law could also catch the attention of the EU competition authority, as some think it protectionist, clashing against the freedom of enterprise and the freedom of providing services. “The detailed European regulations exclude that the establishment of an enterprise be banned due to any market situations,” György Vámos told the BBJ. ■

8 BUSINESS

WWW.BBJ.HU

Budapest Business Journal | Dec 16 – Jan 12

Step into the cloud For all the benefits cloud computing offers, the transition it is still far off for most Hungarian companies. Among the reasons given for this are a stalling economy and security concerns.

Pablo Troyon Rama, Vice President, STG Sales, CEE GMT, IBM Q: How big is cloud computing?

A: The interest in it is big. In terms of how big the market where people are actually putting money in is, the cloud is not yet that big. But once interest translates into money, it will be big.

BBJ ZSÓFIA VÉGH

Q: Although giants like HP, Oracle and IBM control 95% of the IT market, the future winners of cloud computing are said to be Google, Amazon and Microsoft, who emphasize the user-friendly, fun side of cloud services.

A: The IBM approach is not dogmatic.

We don’t see that one technology or solution fits everybody. Some clients have closed architectures and are not flexible at all. Others have fragmented architectures at multiple locations. So depending on your starting point, the answer is one or the other. In some cases, you have staff and you just need a bit of software, services and consulting to optimize what you have. In other cases that is not enough and you need to find a way to modernize your infrastructure that is not expensive. The other guys are trying to sell a product; we are trying to solve a problem.

firm no. “With the sensitivity of the data [medical records] we handle, we don’t even consider this option.”

László Dávid Papp, head of contact center operator Comforce Zrt, disagrees. He claims that cloud technology allows for a more transparent security system. Comforce did not even attempt to establish a traditional call center in Hungary; it controls operations via a cloud application.

“By operating a virtual contact center, we are able to reach people living in the countryside. In fact, that was our aim: to decentralize Budapest’s monopoly,” said Papp. The company now has 400 employees within and outside the country’s borders.

WE WISH ALL OUR PARTNERS A MERRY CHRISTMAS AND A PROSPEROUS NEW YEAR!

CA Immo Hungary Kft. 1074 Rákóczi út 70-72.

Tel: +36 (1) 501 28 00 office@caimmo.hu www.caimmo.hu

Geographic expansion also allows them to get better-qualified workers.

Cost cutting is a sound a reason too. The system resembles that of pre-paid phone cards; consumers are charged for what they have consumed, there are no multiple-year contracts, no loyalty clauses. These no-commitment deals are the biggest appeal of clouds. Pay-as-you-go schemes make it possible for firms to adjust to workload changes. Call centers can employ more workers during busier times of the day, and fewer during downtime. They don’t need to maintain and pay for server storage or extra salaries for idle employees.

Still, the flexibility of the cloud might win firms over eventually. ■

Q: From a marketing point of view, isn’t it more effective to excel in one field? If you are active in so many fields, how will you differentiate yourself from your competitors?

A: Business models vary by company. On the one hand, we have much technology down to the processor, we have a big software stack and also hundreds of thousands of people in service delivery.

Because we have all that, we are able to have an ‘a la carte’ approach. We don’t go with a fast-food approach, this is the hamburger or the nuggets – we offer a menu. We are an enterprise-oriented company, we do not push any specific product.

Infopark Building A, Ottó Vincze’s installation (titled: Pioneer progress)

Winter is the season of predictions in the business world and the IT industry is no exception. IT specialist Gartner predicts 2012 will see top technologies, including cloud computing, evolving further. In some parts of the world, like the US, this means leaving behind basic cloud applications such as dropbox. Elsewhere, including much of Central and Eastern Europe, evolution will mostly consist of adopting the technology itself.

The number of users of cloud computing – the use of online servers for information storage and remote access – is fairly low in Hungary. The number of firms using private clouds or placing all the infrastructure in the cloud is also low, but this a worldwide trend. Even those who transfer a certain service – mostly CRM or messaging systems – into the cloud number less than 50.

Classifying them based on size or profile is also impossible. There are multinationals, of course, and SMEs as well. (Although SMEs Europewide are not embracing this technology as much as their bigger counterparts, a survey by ACCA shows.)

So what is all the buzz about cloud technology? The pressure from the supplyside is significant but that in itself does not account for much development. “No sector of the IT market has expanded in the past like cloud computing,” said Gábor Balicza, an analyst at IDC Hungary and author of the Hungary Cloud Services Market 2011– 2015 Forecast. “True, it is easy to produce impressive growth from a small base, but the dynamics of this technology are far beyond supply-side pressure,” he added.

For all the benefits the cloud can offer, the pace of approving this technology is moderate. Even if companies are relieved of implementing physical infrastructure, many won’t use it because of security concerns. Asked whether they have used any cloud computing service, Péter Adravecz, head of the IT department of Semmelweis University, for example, answered with a

QUICK Q&A

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BUSINESS 9

Budapest Business Journal | Dec 16 – Jan 12

ENERGY NEWS TOP ENERGY NEWS NEWS

2011

HUNGARIAN ENERGY STRATEGY PASSES PARLIAMENT After one and a half years of preparation and debate, the new energy strategy for Hungary was finally accepted by Parliament in early October. Hungary’s government approved the strategy to ensure the security, sustainability and economic competitiveness of the country’s long-term energy supply in July. According to the strategy, Hungary must reduce its dependence on energy imports, in part through diversifying supply routes, it must strengthen the role of the state, cut down the amount of household income that goes toward energy bills and offer incentives to energy companies to make domestic developments. It seeks to increase use of renewable energy resources, maintain the current capacity to generate nuclear energy, develop regional energy infrastructure, establish new systems for energy institutions and promote energy efficiency and energy savings.

MOL-CEZ JV SIGNS CONTRACT ON CONSTRUCTION OF €600 MLN POWER PLANT MOL-CEZ European Power Hungary, the joint venture of Hungarian oil and gas company MOL and Czech peer CEZ, signed a contract with Tecnicas Reunidas on the construction of a €600 million combined cycle gas turbine power plant (CCGT) at MOL’s refinery in Százhalombatta, MOL announced at the end of October. The JV also signed a long-term service agreement for the 860 megawatt plant, south of Budapest, with Siemens. MOL-CEZ European Power Hungary has all of the necessary permits to start construction of the plant. The first phase of the investment started in October, while the second phase is expected to begin at the end of the first half of 2012. The plant is expected to start commercial operations in Q1 2015.

GOVT DECLARES HUNGARY-SLOVAKIA GAS INTERCONNECTOR A PRIORITY MATTER Hungary’s government declared investments related to the construction and operation of an interconnector between the gas networks of Hungary and Slovakia a priority matter at

2012

a cabinet meeting in early November. Gas deliveries through the interconnector will start in January 2015. The 20km of the pipeline in Slovakia will cost about €20 million to build and the 95km on the Hungarian side will cost about €100 million, Econews reported in January, when the inter-government agreement on its construction was signed. Interconnectors already operate between gas networks in Hungary and Romania and Croatia.

GAS FIELD DISCOVERED AT HUNGARIAN-SLOVAKIAN BORDER British Ascent Resources announced at the beginning of December the discovery of a gas field that stores some 11.7 billion cubic meters of natural gas in Petesháza, near the HungarianSlovenian border. According to Ascent Resources, the 200 sqm area is probably the most efficiently exploitable natural gas field in Europe. Further test drills will be carried out in February, and exploitation may start in mid-2012, the company said. Ascent Resources holds a 75% share in the project, the rest is owned by two subsidiaries of oil company Nafta, according to a local paper.

The 11.7 billion sqm capacity is equal to Hungary’s yearly gas consumption.

HUNGARY’S MVM BUYS OUT PARTNER’S STAKE IN BAKONYI POWER PLANT The state-owned Hungarian Electricity Works (MVM) completed the buyout of its partner’s stake in power plant Bakonyi Villamos Művek Termelő (BVMT) in October. MVM bought the 49.5% stake from Euroinvest, owned by construction magnate Sándor Demján. MVM did not reveal the price of the transaction but said it was established on the basis of an assessment by independent international experts. MVM’s and Euroinvest’s joint venture took out a €63 million loan to build the plant, Econews reported earlier. The loan covered about 80% of the cost of the plant with two 58MW blocks.

IBERDROLA CONTROLS 50% OF HUNGARY’S WIND POWER MARKET WITH NEW FARMS Iberdrola Renovable SA, the clean-power unit of Iberdrola SA, completed three wind farms in Hungary at the beginning of the year, expanding to about half of the market in the country. The Spanish company installed the 36-megawatt Scott plant outside the town of

Season’s Greetings!

Nagyigmánd, along with the 26-megawatt Amundsen and 8- megawatt Csoma II plants both in Ikervár, western Hungary. That adds to the 50-megawatt Kisigmánd and 38-megawatt Csoma I parks. Iberdrola, the world’s largest wind power company, now produces 158 megawatts of landlocked Hungary’s 330 megawatts of installed wind power. It is developing another 100 megawatts of capacity in Hungary, which aims to obtain 14.65% of its energy consumption from low carbon-emitting sources by 2020.

LOCAL COUNCIL APPROVES AGREEMENT ON BIOETHANOL PLANT IN MOHÁCS, HUNGARY The local council of Mohács, southwest Hungary, approved an agreement on the construction of a HUF 50 billion ($226 million) bioethanol plant, Europe’s biggest, at a meeting at the beginning of October. The plant is to be built by January 2014, creating 75 jobs and another 1,000 indirectly, the paper said. Pannonia Ethanol is a joint venture of Minnesota-based Fagen and Ireland’s Ethanol Europe. The JV is building a $200 million bioethanol plant in Dunaföldvár, central Hungary, that it expects to complete by the spring of 2012, Econews reported earlier.

DALKIA UNIT BUILDING HUF 24 BLN BIOMASS BLOCK IN PÉCS, HUNGARY The district heating plant of the city of Pécs (south Hungary), owned by a unit of Dalkia, will put a HUF 24 billion ($113.3 million) biomassfueled block at is building into operation at the end of 2012, Pannonpower Holding told MTI in November. The 35-megawatt block will be the biggest straw-fuelled block in Hungary, burning 240,000 tons a year. The power plant also has a 50MW wood-fueled block. When the strawfueled block is completed, the plant will power down its two gas-fueled blocks, using them only as a reserve source of heat.

BIOENERGIE INAUGURATES HUNGARY’S BIGGEST BIOGAS PLANT Germany’s Bioenergie in mid-September inaugurated a HUF 4.5 billion biogas plant in Szarvas (southeast Hungary), the country’s biggest. The plant has capacity to generate 4.17MW of electricity, enough to power 18,00020,000 homes. It has capacity to process more than 40,000 tons of “problematic” biomass a year. At another nearby base in Szarvas, an annual 12.5 million cubic meters of biogas will be

TOGETHER FOR ART

Dear Partner, We would like to thank for your cooperation with ING Commercial Banking Hungary during 2011. We would also like to wish you Happy Holidays and a prosperous new year, hoping to be part of your business success in 2012.

István Salgó CEO

Tibor Bodor Head of Clients

TOGETHER FOR ART: ING Group companies in Hungary are the exclusive corporate sponsors of the 2012 Cézanne exhibition: ”Cézanne and the Past. Tradition and Creative Force” in the Museum of Fine Arts in the framework of a four years sponsorship program

Paul Cézanne: Harlequin 1888-1890 Collection of Mr. and Mrs. Paul Mellon Image Courtesy of National Gallery, Washington

BROUGHT TO YOU BY

produced from an annual 53,000 tons of manure.

Construction of the plant was supported by HUF 500m in EU funding.

MOL PLANS HRK 20BN CAPEX AT INA IN 2011-2015 Hungarian oil and gas company MOL plans to make HRK 20 billion (€2.7bn) of investments at its Croatian unit INA by 2015, “subject to the available financing sources”, the company announced at the beginning of December.

About two-thirds of the investments will be made in Croatia, MOL said. In the exploration and production segment, INA plans to pursue an exploration-led growth strategy by developing existing projects and through potential inorganic steps. INA targets a reserve replacement of 100% and wants to maintain production levels at least 70,000 boepd.

MOL PLANS TO SPEND €10 MLN ON EXPANSION IN SLOVENIA Hungarian oil and gas company MOL plans to spend almost €10 million next year to expand its presence in Slovenia, the company announced at the end of November, after opening its newest rebranded petrol station in the country. MOL aims to get at least 10% of Slovenia’s retail fuel market. MOL entered the market in Slovenia as a wholesaler in 1996. It started its own network of petrol stations in the country in 1998. With the acquisition of TUS’s 19 petrol stations in 2011, MOL’s network became the third-biggest in Slovenia. MOL has 37 petrol stations in the country, giving it 7.2% market share. Six of the TUS stations have been rebranded and the process is expected to be completed at the rest by the end of the year.

HUNGARY CLOSES MOL STAKE BUY Hungary on July 6 closed the acquisition of a 21.2% stake in MOL from Russian peer Surgutneftegas. The transaction raised the state’s direct and indirect stake in MOL to 23.82% including 2.6% it acquired in a recent transfer of private pension fund assets of former members to the state. Voting rights in MOL are limited to 10% per shareholder or shareholders’ group.

The Hungarian government announced on May 24 that the state of Hungary will buy a 21.2% stake in oil and gas company MOL from Russia’s Surgutneftegas for €1.88 billion. Three weeks later, state secretary of the Prime Minister’s Office Mihály Varga said that Hungary’s government may sell part of the 21.2% stake if needed.

10 FINANCE

WWW.BBJ.HU

Budapest Business Journal | Dec 16 – Jan 12

Anti-money laundering compliance b Almost all reports related to transactions indicating money-laundering activities originate from financial service providers.

HOW THEY DO IT Money laundering usually consists of three steps: placement, layering, and integration.

1) Placement: money is deposited in financial institutions or converted into negotiable instruments. This is the most difficult step.

BBJ GABRIELLA LOVAS

The compliance divisions of banks spend a great deal of time and effort on implementing the various regulations and discovering riskbased approaches related to the detection and avoidance of money laundering, the financing of terrorism and corporate fraud. And with good reason: László Sors, criminal deputy chairman of the National Tax and Customs Office (NAV), has previously said the extent of money laundering in Hungary could reach about $15 billion.

“Banks spend billions on the prevention of money laundering in line with international requirements,” OTP Bank director Zsolt Wieland explains. But these efforts do not always bring the expected results, according to a country report by Moneyval, the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism. In Hungary, the main concern of Moneyval evaluators was the low number of convictions for money laundering offenses compared to the large number of convictions for proceeds-generating offenses.

In the first half of 2011, NAV’s Hungarian Financial Intelligence Unit received 3,144 reports related to transactions indicating money laundering and terrorist financing. The HFIU sent 420 reports to initiate new crimi-

2) Layering: the money is transferred through a series of accounts in an attempt to hide its origins. This often means transferring funds to countries without strict AML laws. Once deposited in a foreign bank, the funds can be moved through the accounts of “shell” corporations, which exist solely for laundering. The high daily volume of wire transfers makes it difficult to trace these transactions.

3) Integration involves the movement of layered funds, which are no longer traceable to their criminal origin, into the financial world.

Source: Tonbeller

nal investigations and 632 reports to support ongoing cases. A total of 13 reports were sent to initiate court proceedings, and 738 reports to support ongoing court cases. There were 21 transactions suspended along with the launching of a report.

“The financial sector faces very serious legal requirements and is under continuous state supervision,” OTP Bank senior manager Gábor Kanyó says. According to the HFIU, almost all reports originate from financial service providers, leaving only a minor part, alto-

gether nine reports in the first half of 2011, to non-financial service providers.

As in the past few years, bank reports constitute the majority of reports, with over 86% of the total. A significant number of reports were received from money exchange bureaus, savings banks and insurance companies.

COUNTRY RISKS Moneyval points out that as a consequence of its strategic location in Central Europe, a

cash-based economy and a well-developed financial services industry, money laundering in Hungary is related to criminal activities such as drug-trafficking, prostitution, trafficking in persons, fraud and organized crime. Other economic and financial crimes include official corruption, tax evasion, real estate fraud and identity theft. However, Moneyval estimates the risk of the country being used as a base for terrorism or for the financing of terrorism as being low.

The core elements of Hungary’s Anti-Money

The Wiener Börse still sees itself in Heinrich Schaller, co-CEO of the Wiener Börse and the CEE Stock Exchange Group, sees big potential in regional capital markets, including Hungary, where it owns 50% of the Budapest Stock Exchange (BSE). He believes that the negative trends will turn around in the long run, as most companies are in much better shape than they were in 2008. While businesses “learned their lessons well” after the global crisis, he thinks that it will be hard work on the Hungarian capital market until the economic framework improves.

The Budapest Business Journal talked to Schaller at a financial conference organized by tax audit advisory LeitnerLeitner and the Austrian Embassy.

Q: There are signs that the Wiener Börse wants to speed up consolidation in Hungary and the region. Is this true?

A: Yes, of course. We want to speed up the process not only in Hungary, but in other countries as well, in order to boost further development of the group’s capital markets. We are very interested in creating a regional capital market, because in our opinion, both foreign institutional investors and traders would prefer that to small local markets.

First of all, we have to find the right solution for the trading system. As we have agreed with the participants of the Hungarian market, we will use the same system the Deutsche Börse will introduce. At the moment, it is not quite clear which system that will be, as talks on the merger with New York are still underway.

Q: Were you surprised at the reaction of Hungarian brokers to the introduction of the Xetra trading system?

A: Their main concern was that Xetra would not be the final system. As long as that possibility exists, we agreed that we would not implement the Xetra system in Hungary and wait for the Germans, so we have solved this emotional issue.

Q: Are you considering taking over the Budapest Stock Exchange in the long run?

A: Completely? We are not thinking about that at the moment, but you never know what the future may bring. We believe that local exchanges in the various countries should exist. Everything behind them, including the technical side, should be the same for all exchanges. However, the people who work on the technical side could be Austrians, Czechs or Hungarians.

Q: What about the plans for a central clearinghouse for the whole group?

A: I can’t comment on that because we are in the middle of quite intensive discussions about the issue. There is a clearing possibility in Hungary and it would not be changed, but another clearinghouse could be active on the Hungarian market as well. I am not saying that it will be an Austrian one, it could be an English or a German house.

Q: What is your outlook for the BSE? A: The situation is really not great at the moment, but not only in Budapest. It is very similar in Austria and in many other European countries. First of all, we have to reestablish the confidence of markets, investors and traders. This is a political issue, not a market issue. As soon as confidence is restored, I am certain that we will see new IPOs, increasing trading volume and the return of foreign investors. Raising taxes, and I do not mean only the bank tax, but taxes on the entire corporate sector, is not the best idea at times when companies need support and not higher taxes.

Q: Why do you think the BSE had only technical listings and no IPOs in 2011?

A: Technical listings can be very useful, as all the preparations are done for carrying out the fundraising very fast later on. That could be a way, for instance, for a fast capital increase for a specific goal. A listing could and should also be a marketing instrument, of course.

Heinrich Schaller is not thinking about buying the rest of BSE

Q: I fear that Austria’s reaction to recent measures introduced in Hungary could be highly negative.

A: I fear that, too. I have heard, for example, from some companies that if certain Eastern European markets become more complicated to do business in, they will leave. They have not made that decision yet, but it is already on their mind.

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FINANCE 11

Budapest Business Journal | Dec 16 – Jan 12

e bogs down banks NUMBER OF REPORTS ON THE FINANCING OF MONEY LAUNDERING AND TERRORISM BY SERVICE PROVIDERS

2716 130 124 112 27 18 9 8

Banks Change bureaux Savings associations Insurance service providers Other financial service providers Investment service providers Non-financial providers Other financial service providers

Source: Hungarian Financial Intelligence Unit

Laundering regime are established in the Hungarian Criminal Code and the Act on the Prevention and Combating of Money Laundering and Terrorist Financing. The act was introduced in 2007, when Hungary implemented the third EU AML Directive into national law, as well as introducing the financing of terrorism into preventive legislation.

AML SOLUTIONS To prevent financial crimes like money laundering, terrorist financing or fraud, finan-

cial institutions use specialized software. AML software monitors customer transactions using institute-specific research scenarios, historical information and peer group profiles to identify money-laundering activities. Several banks use their own software, while smaller market players monitor suspicious transactions manually. OTP Bank uses the software of market leader Detica NetReveal (formerly Norkom Technologies).

“Most Hungarian banks either remotely use the solution bought by their parent bank or have even more limited access to only some parts of the entire system,” SIA Central Europe CEO Fabrizio Canedoli says.

Based on its own SIA Eagle software module structure and the Siron AML solution of its strategic partner Tonbeller, SIA Central Europe offers AML solutions for smaller organizations or for those who are just starting to take the first steps for monitoring and preventing dangerous activities.

“Due to the fact that these systems are key elements of daily operations at the risk departments, banks choose solutions for a longer period, most likely for five-six years,” Canedoli says. “Considering the usefulness and effectiveness of AML systems, they should be integrated into any key processes related to customer accounts and money transactions,” he adds.

The cost of operating a compliance and AML system is not a key driver for change, according to Canedoli. Most likely it is the lack of extending system functionality or integration flexibility that can force a decision to look for another solution in the market, he notes. ■

n the running in CEE Q: The BBJ recently talked to Ludwik Sobolewski, the CEO of the Warsaw Stock Exchange. He said that when turnover of the WSE is more than twice that of the Vienna exchange, the competition between you is not his problem, but yours.

A: You can assume that my opinion is not the same. Poland is in a special position in the region, as the Polish capital market enjoys significant support from the government. Nev-

ertheless, the CEESEG group has many more international market participants. So, as soon as confidence in the member markets is restored, I am convinced that the performance of our group will be much better. I know that they have more IPOs, but you have to look at the volume of each IPO. For example, Warsaw had around 70-100 IPOs this year with an average volume of €4 million. At the same time, we had one IPO, but the volume of that single transaction reached €450 million. GL

ABOUT XETRA The cash market of the Vienna Stock Exchange has been running on the Xetra platform since November 1999. Since December 2009, the Central European Gas Hub has also been operating on Xetra, under a license agreement with the Vienna Stock Exchange.

Xetra was implemented on the Ljubljana Stock Exchange in December 2010, and Prague and Budapest are expected to follow suit. The four stock exchanges of Vienna, Budapest, Ljubljana and Prague were integrated as subsidiaries into the holding company, CEESEG AG, in January 2010.

The Vienna bourse claims that having a common trading platform instead of four different systems would lead to cost savings and higher revenue. Hungarian investment service providers, on the other hand, reasoned that the ongoing merger between Deutsche Börse and the NYSE-Euronext could require the BSE to adopt another new trading system as soon as the end of 2013. The Deutsche Börse uses the Xetra system at present, but the Euronext platform is likely to be adopted when the merger is completed, thus they would like to hold off on the introduction of Xetra until the merger is completed.

WWW.BBJ.HU

12 FINANCE

Budapest Business Journal | Dec 16 – Jan 12

Bank levy, early repayment eat into bank profits

Rank

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

1

BBJ

COMMERCIAL BANKS Ranked by total assets in 2010

Company Website

OTP Bank Nyrt www.otpbank.hu

Total assets in 2010 (HUF bln)[1]

Pre-tax Equity profit capital in 2010 (HUF mln)[1] (HUF mln)[1]

No. of bank branches in Hungary on Sept, 2011

Ownership (%) Hungarian Non-Hungarian

Top local executive Finance director Marketing director

Address Phone Fax Email

9,781

194,313

1,308,928

–

Domestic investors (28.60), Hungarian State (0.50) Foreign investors (70.90)

Sándor Csányi – –

1051 Budapest, Nádor utca 16.

(1) 473-5000 (1) 473-5955 otpbank@otpbank.hu

3,213

35,007

117,208

235

– KBC Bank N.V. (100)

Hendrik Scheerlinck – –

1051 Budapest, Vigadó tér 1.

(1) 328-9000 (1) 328-9696 bank@kh.hu

2,986

4,148

139,208

184

– EGB Ceps Holding GmbH (100)

Jelasity Radován – –

1138 Budapest, Népfürdő utca 24–26.

(40) 555-444 (1) 373-2499 uszolg@erste.hu

2,750

–112,812

140,400

88

– Bayerische Landesbank (89.89), other (10.11)

Tamás Erdei – –

1056 Budapest, Váci utca 38.

(1) 327-8600 (1) 327-8700 mkb@mkb.hu

2,368

–181

140,858

141

– Raiffeisen-RBHU Holding GmbH (100)

Heinz Wiedner Krisztina Horváth Zsófia Fischer Gonda

1054 Budapest, Akadémia utca 6.

(40) 484-4400 (40) 484-4444 marketing@raiffeisen.hu

1,547

15,983

135,362

133

– UniCredit Bank Austria AG (100)

Mihály Patai – –

1054 Budapest, Szabadság tér 5–6.

(1) 301-1271 (1) 353-4959 info@unicreditgroup.hu

911

9,376

108,035

101

Individuals (0.27) GE Capital International Financing Corp. (99.73)

György Zolnai Edit Malárik Pálcza Ferenc Rolek

1138 Budapest, Váci út 193.

(1) 450-6000 (1) 450-6001 info@budapestbank.hu

629

13,010

77,145

26

– Citibank Holdings Ireland Ltd. (75), Citibank Overseas Investment Corporation (15), Citibank A.S. (10)

Batara Sianturi Antonio Martino Veronika Yalcinkaya

1051 Budapest, Szabadság tér 7.

(1) 374-5000 (1) 374-5100 –

560

5,459

20,329

1

– BNP Paribas S.A (100)

Laurent Poiron Jean-Michel Congost –

1051 Budapest, Széchenyi István tér 7–8.

(1) 374-6300 (1) 269-6967 info.hu@bnpparibas.com

550

–9182

15,928

–

– AXA Holding S.A (100)

Jacques Maire – –

1138 Budapest, Váci út 135–139.

(1) 465-6565 (1) 465-6599 info.axa@axa.hu

503

–1516

42,908

62

– Volksbank International AG (95.43), Türkiye Halk Bankasi (2.65), other (1.90)

László Balázs – –

1088 Budapest, Rákóczi út 7.

(1) 328-6666 (1) 328-6660 volksbank@volksbank.hu

István Salgó Gyula Réthy Zoltán Igaz

1068 Budapest, Dózsa György út 84/B (1) 235-8700 (1) 322-2288 communications@ ingcommercialbanking.hu

COMMERCIAL BANKS

-1%

2

3

4

CHANGE IN TOTAL ASSETS OF LISTED BANKS IN 2010 5

Banks operating as shareholding companies posted losses in the third quarter of 2011 after recording profits in the previous quarters, largely due to a deterioration in portfolio quality as well as risk provisions accumulated for projected losses resulting from the government’s early FX mortgage repayment scheme.

The latest data from financial market watchdog PSzÁF showed that the 13 local credit institutions operating as branch offices of their foreign parents increased their profits dynamically, up 57% yr/ yr in Q1-Q3, largely due to their moderate level of net impairment and risk provisions. Cooperative credit institutions, however, suffered a major decline in earnings.

The Erste group generated €531.7 million net losses in Hungary in the first nine months against an €9 million loss one year earlier. Most recently, Erste Bank Hungary announced it would lay off around 15% of its staff, or approximately 400-450 people, in the early months of 2012 and plans to close down 43 branches. Raiffeisen booked a €286 million loss in Hungary in Q1-Q3. Losses in Hungary are expected to reach €320 million for the full year. In the first nine months of the year, OTP Bank had consolidated after-tax profit of HUF 109.6 billion, up 9% from the same period a year earlier. The bank booked a HUF 1.9 billion loss during the period on the government early repayment scheme , but added that the scheme could generate a total loss of about HUF 39.5 billion.

Considering their income prospects, it is unfavorable that in spite of the increase in net provisioning, provisioning in Q1-Q3 as a whole did not keep pace with portfolio quality deterioration, therefore the sector’s coverage ratio (accumulated impairment/projected losses) was far lower in September 2011 than a year earlier.

However, PSzÁF head Károly Szász insisted that Hungary’s banking system is stable and will remain so after the early repayment scheme runs out at the end of the year, adding that banks’ losses because of the scheme will depend on how many borrowers take advantage of it.

National Bank of Hungary governor András Simor, on the other hand, has urged that the bank levy be scrapped, or at least reduced to levels more in line with the EU average to improving banks’ competitiveness and boosting corporate lending.

7

8

+1 +1 +1 -2

LARGEST CHANGES IN THE LIST

www.khbank.hu

Erste Bank Hungary Zrt www.erste.hu

MKB Bank Zrt www.mkb.hu

Raiffeisen Bank Zrt www.raiffeisen.hu

UniCredit Bank Hungary Zrt www.unicredit.hu

Budapest Bank Nyrt www.budapestbank.hu

Citibank Europe Plc. representation office www.citibank.hu

9

BNP Paribas Hungarian Branch Office www.bnpparibas.hu

10

AXA Bank Europe S.A. representation office www.axabank.hu

11

Volksbank Hungary Zrt www.volksbank.hu

ING Bank N.V. Hungarian representation office 12

www.ingcommercialbanking.hu

408

6,744

43,645

–

– ING Bank N.V. (100)

13

Magyar Takarékszövetkezeti Bank Zrt

380

716

14,289

–

Savings cooperatives (61.54) DZ Bank AG (38.46)

Péter Csicsáky – –

1122 Budapest, Pethényi köz 10.

(1) 202-3777 (1) 356-2649 info@tbank.hu

268

–116

52,526

–

FHB Jelzálogbank Nyrt.

(70.30) FHB subsidiaries (29.70)

László Harmati – Gábor Demeter

1082 Budapest, Üllői út 48.

(40) 344-344 (1) 329-0992 info@fhb.hu

262

–131

22,254

7

– Commerzbank Auslandsbanken Holding AG (100)

András Kozma – Zsuzsanna Elek

1054 Budapest, Széchenyi rakpart 8.

(1) 374-8100 (1) 269-4732 info.budapest@commerzbank.com

144

1,084

1,084

–

– Crédit Agricole Corporate and Investment Bank SA (100)

Molontay Tamás – –

1051 Budapest, József nádor tér 7.

(1) 327-9100 (1) 327-9150 info.hungary@ca-cib.com

139

1,310

25,809

8

– Korea Development Bank (100)

Kim Sung Ryong József Kurunczi Ágnes Sütő

1054 Budapest, Bajcsy-Zsilinszky út 42–46.

(40) 532-532 (1) 328-5454 kdbkontakt@kdb.hu

97

346

6,918

20

– Hypo-Bank Burgenland AG (100)

Thomas Radil Gyuláné Szakács Regina Huber

9400 Sopron, Kossuth L. utca 19.

(99) 513-000 (99) 513-038 sopronbank@sopronbank.hu

86

4,062

17,409

1

Domestic resident (0.02) BNPP Personal Finance S.A. (99.97)

Emmanuel Bourg – –

1062 Budapest, Teréz körút 55–57.

(1) 458-6081 (1) 458-6091 cetelem@cetelem.hu

76

1,272

11,579

–

– Deutsche Bank AG (100)

Zoltán Kurali – –

1054 Budapest, Hold utca 27.

(1) 301-3700 (1) 269-3239 db.rt@db.com

56

729

4,000

–

Domestic residents and companies (70) Caja Navarra (30)

János Salamon – –

1062 Budapest, Andrássy út 62.

(1) 428-8888 (1) 428-8889 info@magnetbank.hu

49

–15

6,551

10

– Banco Popolare Societá Cooperativa (100)

Vincenzo Fasano Ildikó Simon –

1088 Budapest, Rákóczi út 1–3.

(40) 200-515 (1) 266-6815 bancopopolare@bancopopolare.hu

44

–499

–2397

–

– Oberbank AG (100)

Friedrich Ofenauer – –

1062 Budapest, Váci út 1–3.

(1) 298-2900 (1) 298-2975 bp@oberbank.hu

www.takarekbank.hu

14

15

16

FHB Kereskedelmi Bank Zrt www.fhb.hu

Commerzbank Zrt www.commerzbank.com

Crédit Agricole Corporate and Investment Bank magyarországi fióktelepe www.ca-cib.com

17

18

19

20

21

MOVING ON Budapest Bank Citibank Raiffeisen MKB

6

K&H Bank Zrt

22

KDB Bank (Hungary) Zrt www.kdb.hu

Sopron Bank Burgenland Zrt www.sopronbank.hu

Magyar Cetelem Bank Zrt www.cetelem.hu

Deutsche Bank Zrt www.db.com

MagNet Bank Zrt www.magnetbank.hu

Banco Popolare Hungary Bank Zrt www.bancopopolare.hu

23

Oberbank AG representation office www.oberbank.hu

NOTES: (1) From the database of Hungarian Financial Supervisory Authority.

WWW.BBJ.HU

FINANCE 13

Budapest Business Journal | Dec 16 – Jan 12

Ranked by gross premium income in 2010

Company Website

Breakdown of gross amount of claims paid in 2010 (HUF mln)[2]

In all

Gross premium income (HUF mln)[1] in 2010 H1, 2011

Non-life

BBJ

INSURANCE FIRMS

Life

The Hungarian market: not a life insurance policy

Rank

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

54,666

63,777

118,443

Pre-tax profit in 2010 (HUF thsnd)[2]

Market share in 2010 (%)[1]

Ownership (%) Hungarian NonHungarian

Top local executive Finance director Marketing director

Address Phone Fax Email

–4,559,697

19.8

– Allianz New Europe Holding GmbH (99.99) Allianz SE (0.01)

Péter Kisbenedek Gábor Bognár Anikó Lenkei Negyeliczky

1054 Budapest, Bajcsy-Zsilinszky út 52.

(1) 301-6565 (1) 301-6100 ugyfelszolgalat@allianz.hu

Mihály Erdős Anna Hegedűs Dániel Sarkadi

1066 Budapest, Teréz körút 42–44.

(1) 301-7100 (1) 452-3505 generali@generali.hu

INSURANCE FIRMS

+2.5% CHANGE IN GROSS PREMIUM INCOME OF LISTED FIRMS IN 2010

Economic uncertainty and budget cuts have caused insurance-based investment and sector revenues to drop.

Insurance companies in Hungary have experienced changes that are clearly the result of a struggling economy and a double-dip recession.

Investment-linked insurances seem to dominate the market: companies have collected 68% of life insurance revenues from this type of insurance. This also reflects the fact that in a shaky situation such as the present crisis, people favor investments over protection. However, the abolition of tax rebates for life insurance policies has prompted many people to instead invest in private pension funds. Companies that are strong in life insurance are also suffering from uncertainty due the government’s FX loan repayment scheme.

The non-life insurance segment registered a HUF 14 billion, or 5%, decrease in the third quarter, as a result of declining casco and mandatory third-party liability insurance revenues.

Not only households have been cautious with investments: companies have needed to tighten their belts as well. Firms have taken fewer and less comprehensive insurance policies, thus revenues from corporate property insurance has also dropped. The fact that multinational corporations are insured through their parent companies – creating income for insurers based abroad – and that Hungarian SMEs have limited financial possibilities have not helped either.

The prospects for the future are not good in general, but there are some signs of growth.

According to a recent government ruling, accident and health insurance will be exempt from tax if the employer deducts them. The popularity of this new ‘cafeteria element’ obviously depends on the support of companies.

In terms of the players on the insurance market, no significant changes have taken place. The market shares of major companies in all segments are likely to remain unchanged, with Allianz, Generali-Providencia and Groupama leading both the life and the non-life segment. Only one new player entered the market this year: CIG Pannónia, a life insurance company founded in 2007, which has began selling non-life products, too. ZsV

MOVING ON ING Signal Ahico Aviva

+10 places -5 places -4 places -3 places

LARGEST CHANGES IN THE LIST

1

2

Allianz Hungária Biztosító Zrt www.allianz.hu

167,074 88,897

Generali-Providencia Biztosító Zrt

126,756 62,292

36,610

29,382

65,992

3,569,216

15

– Generali PPF Holding B.V. (100)

91,303 46,358

31,830

22,445

54,275

3,825,085

10.80

– Groupama S.A. (100)

Yann Ménétrier Mihály Bácsfalvi István Csonka

1051 Budapest, Október 6. utca 20.

(1) 373-7500 (1) 373-7549 info@groupamagarancia.hu

8,137,817

10.1

– Aegon Hungary Holding B.V. (25), Aegon Gemengd Bedrijf B.V. (25), Aegert B.V. (25), Aegon Woningen Olaf B.V. (25)

Péter Zatykó Gyula Horváth –

1091 Budapest, Üllői út 1.

(1) 476-5765 (1) 476-5838 ugyfelszolg@aegon.hu

–2,128,099

17.4 (life insurance market)

– ING Continental Europe Holdings B.V. (100)

Zsolt Kovács Gábor Borza Ágnes Somfai Kóti

1068 Budapest, Dózsa György út 84/B (40) 464-464 (1) 267-9093 biztosito@ing.hu

6.6

– Uniqa International Beteiligungs- Verwaltungs GmbH (84.92), EBRD (15), Uniqa International VersicherungsHolding GmbH (0.08)

Othmar Michl Sándor Kőszegi Ildikó Mihók

1134 Budapest, Róbert Károly körút 76–78.

(1) 238-6000 (1) 238-6060 info@uniqa.hu

Anett Pandurics Ferenc Pap Péter Mester

1022 Budapest, Bég utca 3–5.

(1) 423-4200 (1) 423-4210 info@mpb.hu

www.generali.hu

3

4

Groupama Garancia Insurance Zrt www.groupamagarancia.hu

Aegon Hungary General Insurance Zrt

85,451 41,973

www.aegon.hu

43,736

23,844

67,580

ING Insurance Zrt www.ing.hu

77,008 34,596

5

6

7

Uniqa Insurance Zrt

9

10

11

12

13

14

15

–

–

www.uniqa.hu

55,639 28,591

Magyar Posta Insurance/Magyar Posta Life Insurance Zrt

36,699 22,843

–

–

–

–3377

4.3

Magyar Posta Zrt. (33.07) Talanx International AG (66.93)

26,642 18,321

17,022

9,239

26,261

1,066,717

3.1

– KBC Insurance N.V. (100)

Luc Cools Gyula Barna –

1068 Budapest, Benczúr utca 47.

(1) 461-5200 (1) 461-5276 biztosito@kh.hu

25,807 –

–

–

–

–4,880,324

3

» »

Béla Horváth, Csaba Gaál Zsolt Kelemen –

1033 Budapest, Flórián tér 1.

(1) 244-5858 (1) 247-2021 info@cig.eu

János Bartók – Ivett Vancsik

1138 Budapest, Népfürdő utca 22.

(1) 391-1300 (1) 391-1660 info@aviva.hu

www.postabiztosito.hu

8

63,688

K&H Insurance Zrt www.khbiztosito.hu

CIG Pannónia Életbiztosító Nyrt www.cig.eu

Aviva Life Insurance Zrt www.aviva.hu

Union Vienna Insurance Group Zrt www.unionbiztosito.hu

AXA Biztosító Zrt www.axa.hu

16,514

10,242

26,756

536,925

25,680 10,555

23,496

–

23,496

–75,741

3

– Aviva Life & Pensions Europe S.E. (100)

24,631 12,586

9,217

1,055

10,272

265,540

2.9

– Vienna Insurance Group Wiener Städtische Versicherung AG (100)

Gábor Lehel – –

1082 Budapest, Baross utca 1.

(1) 486-4343 (1) 486-4390 info@unionbiztosito.hu

17,147 9,042

–

196

–

–489,974

2

– Société Beaujon (100)

Zoltán Kósa – –

1138 Budapest, Váci út 135-139.

(1) 465-6565 (1) 413-5101 info.axa@axa.hu

Zsolt Raveczky – –

1138 Budapest, Népfürdő utca 24-26.

(1) 484-1700 (1) 484-1799 –

12,475 5,100

6,615

–

–

2,130

1.5

– Vienna Insurance Group (100)

www.signal.hu

12,349 6,383

5,875

2,544

8,419

–21,694

1.5

– Signal Iduna Allgemeine Versicherung AG (100)

Tamás Kálózdi Dénes Csata Katalin Érdi

1123 Budapest, Alkotás utca 50.

(40) 405-405 (1) 458-4260 info@signal.hu

Ahico First American-Hungarian Insurance Zrt

7,957 3,588

0.9

– MetLife Inc. (100)

Ferenc Boda Zoltán Krizbai Krisztián Dallos

1083 Budapest, Szigetvári utca 7.

(1) 459-7500 (1) 303-8280 ahico@ahico.hu

Erste Vienna Biztosító Zrt www.erstebiztosito.hu

Signal Insurance Zrt

www.metlife.hu

5,114

101

5,215

1,306,427

NOTES: [1] Az adatok a Magyar Biztosítók Szövetségének adatbázisából származnak [2] From the database of Hungarian Financial Supervisory Authority.

»= would not disclose, NR = not ranked, NA = not applicable

This list was compiled from responses to questionnaires received by Dec 14, 2011 and publicly available data. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of press time. While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, Madách Imre út 13–14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

BBJ DEALS OF THE Y AND THE WINNERS ARE....

Hungary’s transaction market had a disappointing 2011 after a temporary upturn in 2010, according to most market players. On the positive side, the Jeremie funds ensured a solid base of small transactions and liquidity on the market. In addition, as M&A advisors pointed out, not every deal comes to light and thus only a portion of actual transactions become known.

The weak performance throughout the year is attributed to uncertainties in the business environment globally and particularly in Europe, deteriorating macroeconomic indicators, and a worsening economic outlook in Hungary. Although increasing government activity in almost every sector contributed to deal flow, a series of unorthodox new policies introduced by the cabinet hurt the domestic investment climate, multinational investors said.

LARGEST PRIVATE EQUITY DEAL Mid Europa Partners – Waberer’s

€12 mln

Experts described this as a “healthy transaction” without any negative associations in a promising sector. Waberer’s is the largest road transport company in Hungary and CAPITAL INCREASE FOR A 49% STAKE one of the largest road freight transport companies in Europe, operating a fleet of 2,300 trucks, while the investor is a leading private equity firm.

Mid Europa Partners acquired a 49.05% stake in Waberer’s in May 2011. Following a €12 million capital increase in Waberer’s Holding, Mid Europa holds a 57.5% stake in the company through the acquisition of shares from Waberer’s founder and CEO György Wáberer, who holds the remaining shares. Wáberer has an option to increase his ownership to the same level as Mid Europa.

According to Mid Europa, the company is well positioned to benefit from the strong WHAT TO EXPECT IN 2012? growth potential of the European road freight market as a result of its modern fleet, regional coverage, low cost base and track record as a reliable partner for international blue chip comIn 2012, deal flow could be fueled by the panies and freight forwarders. The capital injection allows the company to take out new local impact of increasing global activity. Pri- loans to finance acquisitions in the CEE region. vate equity, for instance, has been waiting for favorable investment opportunities in Hungary for years, but deals thus far have failed because Hungarian entrepreneurs have postponed the sale of their businesses in the hope of getting a better price later on. This attitude seems to be Wanhua – BorsodChem changing now, as they come to terms with the prolongation of the crisis. Increased workout China’s Wanhua Industrial Group raised its activity in the Hungarian banking sector may also contribute to boosting deal flow. stake to 96% from the previous 38% in HunThe launch next year of two venture capital garian chemical company BorsodChem in programs using EU Jeremie funding for SMEs, a €1.23 billion transaction in February. The worth HUF 20 billion, is also a promising develcompany’s creditors own the remaining 4% FOR A FURTHER 58% OF BCHEM opment. One program will offer up to €150,000 of BorsodChem’s shares. in seed funding for SMEs established within the Wanhua acquired a 38% stake in Borsodpast three years with annual revenues of a max- Chem together with an option to purchase further stakes from the previous majority shareholdimum of HUF 200 million. The other will offer ers, Permira/Vienna Capital Partners, in June 2010. Wanhua paid back part of BorsodChem’s €1 a maximum of €1.5 million for SMEs estab- billion stock of debt and restructured the rest. lished within the past five years with annual Wanhua has said that it plans to make BorsodChem responsible for the operations of the revenues of up to HUF 5 billion. Funding for Wanhua group in Europe, the Middle East and Africa. With BorsodChem becoming a full the first program will be disbursed in one sum, member of the group, Wanhua will become the world’s third-biggest isocyanate producer, while that for the second can be drawn in four the company said earlier. The Chinese giant plans to sell BorsodChem’s isocyanate products installments until the end of 2015. to its European clients and will help BorsodChem’s TDI sales on Asian markets.

LARGEST M&A AND FDI

€1.2 bln

METHODOLOGY Every year, the Budapest Business Journal attempts to present the most significant deals of the past 12 months. However, since only a fraction are made public, and of the few that are only a minority disclose transaction value, a task which we initially thought would be easy has become a real challenge. During our numerous consultations with experts, our survey sometimes unintentionally provoked emotional responses. We believe that this reflects the lack of transparency and reliable data on the transactions market. Thus, the results are based not only on publically available facts, but also on experts’ opinion and subjective judgments.

We would like to thank the following experts for their contribution to this article: Deloitte managing partner Béla Seres; Ernst&Young partner Balázs Tüske; KPMG director Tamás Simonyi; PwC director Ervin Apáthy

MOST PROMINENT BUDAPEST-HEADQUARTERED REGIONAL M&A Advent – Provimi

€188 mln

Advent International bought Budapestheadquartered Provimi Pet Food from Permira for €188 million, with plans to back the company’s growth across Europe. Provimi FOR THE COMPANY is the third largest producer of private-label wet and dry pet food in Europe, supplying approximately 280 customers, including major grocery retailers, in the 27 markets in which it operates. The company, which has eight production sites in Europe, reported total sales of €236 million in 2010.

The company is part of the Provimi Group, which will now focus on its key animal nutrition business, which has already been substantially expanded through acquisitions in Colombia and Mexico and organic growth in Brazil, Russia and Asia. Advent International has been investing in the retail and consumer sector since 1984.

WWW.BBJ.HU

15

Budapest Business Journal | June 4 – June 17

LARGEST TELECOM SECTOR DEAL

E YEAR

HUF

Invitel – FiberNet

BBS Nanotechnology

€1.5 mln

CAPITAL INCREASE FOR A 49% STAKE

The upper limit a Jeremie fund can invest in one company in a year is €1.5 million. From the around 30 Jeremie deals so far, several reached this limit in 2011. Picking medical technology BBS Nanotechnology from the other equally attractive and promising transactions was a subjective choice made by the author of this article. If you’ve ever seen a cancer patient after a round of chemotherapy treatment, you might understand why. But only the future can tell which of these transactions will be successful.

BBS Nanotechnology, based in Debrecen (eastern Hungary), has created a new nanotechnology-based technique for formulating active ingredients that presents a breakthrough in the area of cancer treatment by decreasing the side effects of oncology treatments.

The eight Hungarian venture capital fund managers that won EU funds through the Jeremie program are Biggeorge’s-NV, DBH Investment, Central Fund, Euroventures, Finext Startup, Morando, PortfoLion and Primus.

MOST PROMISING TECHNICAL LISTING

LARGEST FINANCIAL SECTOR DEAL Erste Bank – Magyar Factor

100 bln

HUF

JEREMIE DEALS OF THE YEAR

9 bln

Invitel subsidiary Magyar Telecom, not to be confused with Magyar Telekom, signed a sale and purchase agreement with FN Cable Holdings to acquire all of the issued share capital of TURNOVER OF FIBERNET IN 2010 Fibernet Hungary in November 2010. Magyar Telecom has also entered into an asset purchase agreement with UPC Magyarország on selling approximately one-third of FiberNet’s network assets in order to comply with anti-monopoly rules. The transaction was completed in February 2011 after receiving the approval of the Hungarian competition office GVH. “The acquisition of FiberNet Zrt was part of the overall company strategy which aims at expanding the geographical area where we have our own infrastructure and where we are able to provide TV, high-speed internet and voice services,” Invitel, which is 100% owned by Mid Europa Partners, said. Invitel has 750,000 retail and 14,000 business customers.

Erste Bank Hungary bought a 50% stake in factoring company Magyar Factor in July and the remaining 50% in September. The merger of Erste Faktor and Magyar Factor is underway.

TURNOVER OF MAGYAR FAKTOR IN 2010 With the acquisition, Erste has become Hungary’s second biggest factoring service provider with close to 22% market share. Erste Faktor was the fourth-biggest factoring company with a turnover of almost HUF 91 billion in 2010, while Magyar Factor was the third with HUF 100.5 billion.

HIGHEST FDI OUTFLOW MOL

€1.9 bln

The Hungarian government bought a 21.2% stake in oil company MOL Nyrt for €1.88 billion from Russia’s fourth-largest oil producer Surgutneftegas, with the government paying around FOR A 21% STAKE OF MOL HUF 22,400 per share for the stake. MOL shares are currently trading at a price of around HUF 18,000. Surgut bought the 21.2% stake from Austria’s OMV in 2009 and said it wanted to be a strategic investor. However, MOL had always regarded the purchase as an unfriendly move.

Masterplast Kft

EBIT OF THE FIRM IN 2010

There weren’t any actual IPOs on the Budapest Stock Exchange in 2011, but there were six technical listings, with the most promising one in our view being that of building materials firm Masterplast. The remaining listings were that of health care firm Biomedical Computer Technologies, asset management firm Plotinus, KEG’s feed unit Visonka, mineral water company FuturAqua and IT firm Optisoft.

Three-year fixed-rate MOL bonds

10 bln

HUF

€2.2 mln

LARGEST CORPORATE BOND ISSUE Hungarian oil and gas company MOL publicly offered HUF 10 billion in three-year fixed-rate bonds at an auction in April. Even with a relatively low fixed rate of 7%, MOL AMOUNT OF BONDS OFFERED received and accepted orders in the value of HUF 11 billion. The bonds will expire on April 18, 2014. The sale was the second issue under MOL’s 2010-2011 bond program, which is capped at HUF 100 billion and was launched in the summer of 2010.

MOL sold HUF 5.05 billion of bonds in the first offering of the program, which was also MOL’s first retail forint bond offering, in October 2010.

SECTORS WHERE WE EXPECTED MORE

Compiled by Gabriella Lovas

MEDIA

FINANCIAL SERVICES

RENEWABLE ENERGY

After seeing the highest number of deals in 2010, the market was quite optimistic at the beginning of 2011. However, there were only a number of small transactions in the sector this year. The only sizable deals – the acquisition of a minority stake in RTL Klub by RTL International from IKO, and the acquisition of seven small broadcasting stations – are still awaiting anti-monopoly clearance.

There was only a few big deals closed, including the merger of two savings associations and the acquisition of Cashline Securities by Buda-Cash Brokerage. There are however several transactions in the pipeline for the near future. “Half of the Hungarian banks are for sale, the problem is that nobody wants to buy them,” said one investment banker. Global and regional transactions will also have an impact on the impending consolidation of the Hungarian banking system.

Although there are several transactions in the pipeline in this sector, too, market players are awaiting the new renewable electricity subsidy scheme. According to the latest reports, a new subsidy program for power generators using renewable energy sources will be introduced as of July 1, 2012, six months later than previously planned, to replace the current system of green subsidies.

LIFE

PEOPLE Q&A with George F. Hemingway, businessman and owner of Honvéd

▶ PAGE 20

THE BBJ’S SUBJECTIVE SEL People in need and good causes to support are with us all year long, but people’s mood for he charity and goodwill usually increases as the e holiday season approaches. Although there y are no statistics available for charity activity ntly in the months preceding Christmas, a recently published survey highlights that people, in general, are generous at this time in much of the ng Western world. Causes are different, ranging nd from children’s charities to poverty issues and pecial healthcare donations. Child welfare has a special significance in Central and Eastern Europe, the rnal study, commissioned by the Wall Street Journal eveals.

Europe and conducted by the GfK Group, reveals. d While the ratio of those who support a child welfare organization is 39% in Europe, it is 75% in the CEE region (and 64% in Hungary).

Germans are the least generous nation in Europe: oney to only 20% of them said that they donate money urope’s charitable causes every year, which puts Europe’s e economic powerhouse at the bottom of the ations. rankings when it comes to monetary donations.

Hungarians are more involved with good causes: her time 27% of those queried said they donate either oth or money (25% give money and 2% give both time and money). gary However, every second respondent in Hungary said they would not donate because they could not afford it, and 10% confessed that they are not interested in charity at all. pirit is Whatever the motivation is, the holiday spirit a good reason even for non-charity types. The jective Budapest Business Journal’s very own subjective selection of good causes is here to help.

Compiled by Patricia Fischer and Robert V. Wallenstein

Secret Santa Hungary’s largest Christmas charity gift collection campaign, the Mikulásgyár (Santa Claus Factory), was established in 2005. This is a gigantic Christmas gift distribution center that offers show shows an nd entertainment programs while receiving gifts fr and from pe eople to immediately forward them to the needy w people with the e involvement of the Hungarian Red Cross. The MikulásMik gyár áárr does not collect money, but receives donations such su as foods stuffs, kids’ toys, books, sweets and cleaning and h foodstuffs, hygienic goods. s In 2010, the non-profit organization helped 161,000 161,0 children aand nd adults who live in poverty with donations adding add up to H UF 500 million. Organizers hope to help even more, mor tarHUF geti t ng some 200,000 people in need this year. At an eevent geting tent n on the Felvonulási tér and in 14 plazas in the cap capital, M Mi kulásgyár will take gifts between December 9 and 21 Mikulásgyár tthis his year. Those living outside of Budapest also hav have a chance to help: they can take their donation to the nearest post office and the Hungarian Post will transfer them to the Hungarian Red Cross.

Give trees a chance Although connected neither with children nor Christmas, the charitable work WWF and fleet management company ALD Automotive have jointly undertaken will affect our children’s future in the long-term. Their joint program, founded in 2010, is to compensate the harmful CO2 emission of ALD’s fleet by planting forests. An average car emits 2.5 kilograms of CO2 in burning just one liter of fuel, while one hectare of forest can bind some 420 tons of CO2. The first trees – mainly oak, maple, ash tree, and birch – will be planted in the Duna-Dráva National Park. The cost of planting the first hectare in the spring of 2012 will be financed by ALD. It will promote this good cause among its partners and, according to its calculations, for only 2% of the entire fuel cost, fleet operators can contribute to the binding of their total CO2 emission.

LIFE 17

OPINION It is time for the government to be honest about its long-term plans. This includes making a decision on whether it wants to stick to its unorthodox policies or join the efforts for a stronger union ▶ EDITORIAL, PAGE 23

L ECTION OF GOOD CAUSES Rolling workshops The Rehabilitation Center for Physically Disabled People (MEREK) launched its national “Rolling Workshop” (Guruló) project in 2008 with the aim of integrating an increasing number of handicapped into the labor market. According to surveys, there are half a million disabled people and 50,000 physically challenged people in Hungary, drawing annual state support of around HUF 40 billion.

About HUF 15 billion of the total sum goes directly to tools for the physically disabled (wheel chairs, canes, walkers, etc). MEREK thought it could try something more efficient and less expensive: it developed the Guruló Project as a national network in seven regions across the last three years in order to reach out to as many people living with disabilities as possible. They offer servicing assistive tools and special sports equipments. Repair and individual development of these tools are carried out locally. The annual budget for Guruló’s network is less than HUF 200 million, and it helped more than 3,000 people last year. Some of the employees in the workshops are disabled: about 25 people, 95% of technical engineers employed in the project are handicapped. To further raise awareness, celebrities have made special installations of giant wheel chairs that can be seen at various exhibitions.

Wining up This is something that the BBJ would support all year long: the advent wine campaign of the Agricultural Marketing Centrum and the Közösségi Bormarketing Foundation. The campaign, lasting from December 1 until the end of the year, focuses on quality Hungarian wine. Although Hungarian wines are yet to conquer international markets, their domestic dominance is inarguable. But still, Hungarian winemakers are in an increasingly difficult situation due to the strong international competition. Hungarian trends are in line with international tendencies when it comes to wine consuming habits: cheaper wine consumption has fallen back while demand for quality wine has increased. The campaign aims to further promote quality Hungarian products, and part of the selection promoted in the campaign comes from emerging Hungarian cellars. Some 116 Auchan, Metro, Spar and Tesco stores have joined the campaign, with wine tasting promotions and discount offers.

Trick or treat?

Love local A couple of politically and economically independent young people have created a group that promotes Hungarian products. As they testify on their Facebook site, they are not against foreign products and foreign-owned shops, they just want to put interesting, unique and good quality Hungarian products and services into the limelight. They want to spread the word about local products, give tips where they can be bought and help with promotion for local handicraft people or manufacturers. On the Magyar Termék fan page, one can find numerous Hungarian innovations from technology to fashion. There are collections from young Hungarian designers, there’s a workshop store where one can choose a recycled material from which accessories can be made, and there is a makeover offer from renowned Hungarian stylists as well. So the selection is wide, and in their holiday “Give Hungarian products” campaign, the fan page urges you to put Hungarian products under the Christmas tree this year.

The BBJ has taken this one with a grain of salt: the case of a bunch of politicians who travelled to the Azeri islands for an assembly and whose trip was funded by state money. At the end of November, the heads of the general assemblies in 12 Hungarian counties, all Fidesz politicians, took a trip to the Azeri islands to visit the yearly Assembly of European Regions. The county municipalities, most of them greatly indebted, financed the trips. After the media leaked information about the trip, Fidesz caucus leader János Lázár expressed his disapproval. The travelling politicians were quick to react by saying that they would donate the cost of their travel, some HUF 200,000 per capita, to child welfare institutions operating in their counties. In the end, the children benefited from the case, but the moral question remains: would they have received this amount if it weren’t for all the media fuss?

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RELAXING

WATER & CULTURE Hidden away in the capital’s Fő utca, the Király fürdő is probably one of Hungary’s smallest, and most run-down spas. But looks are deceiving. Under its dirt and rust-stained Turkish dome, it has a portfolio of spa facilities as wide as the more famous Rudas: there are two saunas, a herbal steam bath, and four pools of hot thermal water with temperatures between 26 and 40 degrees Celsius.

The Király is also one of Hungary’s oldest spas. It was established in 1565, not long after the Turks occupied Buda. At the time, Buda (which later merged with Pest to form Budapest) was not that big a city: in typically medieval style it mostly stood of the walled castle area surrounded by residential and commercial areas. The Király was built in this outer perimeter so the occupiers could be sure that their baths would be available even if there were once again military action in the area. Its water was pumped from the nearby Lukács fürdő – it does not have its own spring.

Now, however, this historic spa has also become a very contemporary scene of Budapest’s humming alternative night life: it hosts Vízraktér, a spin-off of cult underground party place Tűzraktér. Vízraktér’s productions turn many of the spa’s spaces into unlikely stages. A garden door suddenly opens into a circus tent, where young jugglers demonstrate their talent. A narrow courtyard is covered, a few tables thrown in, et voilá, you have a small stage for a rock band while a bar provides the beer.

KIRÁLY GYÓGYFÜRDŐ 1027 Budapest, Fő u. 84.

Phone: +36-1-202-3688

RELAXING

New year’s eve in Budapest , 2012

If you spend New Year’s Eve, or Szilveszter as we call it in Hungarian, in Budapest you will not be bored. Whatever your plans are, make sure you reserve your place for the party well in advance.

Most hotels provide special packages, but they are pricey and you will probably have to stay for at least three nights. The party will include a gala dinner, drinks and entertainment. Traditional Hungarian food including stuffed cabbage and grilled sausage will be served after midnight, with lentils for luck with money.

If you are looking for a romantic night out, you could spend the last evening of the year on a ship on the Danube that will take you on a night cruise on the river. You will get the chance to admire the splendid view of illuminated Budapest while dining and sipping champagne.

If you are with a group of friends, definitely head for one of Budapest’s trendy restaurants, bars or cafés. The most popular places are in Andrássy út, Ráday utca and Kazinczy utca.

There are also free outdoor festivities in the streets. These are centered around

Vörösmarty Square, where live bands from different countries will perform. Or you could let yourself be entertained by Hungarian pop rock banks in Nyugati Square. At Oktogon there will be a disco till dawn with popular Hungarian DJs. If you have kids, stay at home and watch TV. With kids in tow, I would not walk around the streets of Budapest, which are packed with firecrackers – even though they are explicitly banned. Another option is a mini break in one of Hungary’s numerous wellness hotels, as they often provide entertainment for kids, too.

FINE RESTAURANTS

Bock in Copenhagen The Bock Bistro has become a staple of Hungarian fine dining since its opening in 2004. Since October, it is also on its way to acquainting the Danish public with modern Hungarian cuisine – it has been franchised by a group of Danish investors who searched for the perfect partner for a year, before finally settling on the bistro. The BBJ’s annual restaurant encyclopedia, Fine Restaurants (new edition is out now!) interviewed Bistro head Lajos Bíró, excerpted below.

The Copenhagen restaurant’s menu is different from the Budapest outlet, but most of the Danish menu can be tried here, too.

Since you entered the Hungarian culinary mainstream, you have been known for doing crazy things.

That’s true, but how did I make it?

With a Chinese restaurant, which, at that time, was pretty unusual. That was followed by the Museum Café, where we did some other things out of the ordinary. Bock Bisztró followed the same pattern, meaning we were at the right place at the beginning and had the right idea. It feels like I am always one step ahead. Of course, in the end, the others always catch up.

How did you decide to combine beef with octopus?

There are always some global trends.

One of them is to serve meat with

fish or other seafood. It’s a great idea with a twist. First I prepared roast ribs. I coat the meat with a mixture of yoghurt, garlic and pepper, and put in the oven with a dash of olive oil, some tomatoes or maybe even green peppers. The octopus is cooked at a constant low temperature with onions, bay leaves, garlic and salt until it is completely tender, and then just like poached bacon, it is dipped into a mixture of paprika, garlic and olive oil.

Aren’t you tired of having to make up new things all the time?

The truth is, creativity can be learned, though after a certain level you obviously need gift and affinity

as well. After that, you just can’t stop it. But having ideas is not enough, you need to give them shape and content. This is something I am very particular about. I can still cope with the expectations about me. In fact, I can take them much better than some young people. I spent my life trying to prove that I’m the best.

A lot of people find it irritating, but that’s how I am. And of course I am playing a game that I have a chance of winning, meaning that I am not having a go at, for example, molecular gastronomy, because it would require too much effort. I think you should do something that you’re good at, which you can succeed in more quickly.

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FOODIE TIP

FOODIE TIP

In the circle of trust

CHOCOLATE BY DESIGN

The rule of thumb is that a typical restaurant launches at its best, and runs out of inspiration in about two years. Old favorites are left on the menu but lose their sparkle, and few new ones emerge as the staff becomes bored and entrepreneurship in general fades. So it is always inspiring to find a true long-distance runner among all the impatient sprinters.

Café Kör (circle, also used to designate hearts in cards in Hungarian), which has consistently been one of Budapest’s best restaurants since 1995 is certainly one of the great exceptions to the rule of restaurant fatigue. In its almost 20 years of existence, it has always presented Hungarian cuisine at its best: traditional dishes done exceptionally well, with a few modern touches that enhance but do not distract. No wonder it is a long-time favorite of cautious executives and bankers from the 5th district business area.

If you are looking for a light lunch, there is almost always fish on the menu, but for a true experience of the Hungarian culinary CAFÉ KÖR ÉTTEREM Address: 1051 Budapest, Sas u. 17. psyche, try the various goose and duck Tel: +36 (1) 311-0053 dishes on the winter menu. But make sure you have plenty of time to recover before going back to work – or not at all.

Chocolate is certainly one of the great pleasures of life, but it is seldom a great adventure. Not so with what is perhaps Hungary’s most famous chocolate manufacturer, Rózsavölgyi Csokoládé, a small family business that makes its own chocolate base from Venezuelan cocoa beans.

The small shop near Liszt Ferenc tér in Budapest has an assortment of bonbons and truffles, as well as special designs that are fanciful chocolate art. A toolbox full of chocolate wrenches, a shiny brown Mac Book with the signature white apple, a cube with figures playing with the dimensions.

Even the bars of chocolate are pressed into playful moulds with vines twining around its bite-sized triangles and squares, a creative world that is also apparent on the packaging of the bars and bonbons. Some of these have won awards: the Hungarian Design Award in 2008 and several prizes from the London Academy of Chocolate.

But mostly, you should visit to try the chocolate: lemon-oil and caramel bonbons, chili truffles, and, most of all, the rich bars of 73% Carenero and Ocumare.

RÓZSAVÖLGYI CHOCOLATE Address: 1053 Budapest, Királyi Pál u. 6.

Tel: +36 30 814 8929

FASHION ISSUE

ART & CULTURE

CHARACTER, STYLE, LUXURY

EXHIBITIONS AND CONCERTS

The middle of winter is usually a great time to go shopping – in December, you have the dizzying dash for gifts, and in January, you get the big discounts.

This year, when you search for a truly cosmopolitan, yet quintessentially Hungarian gift for your loved ones abroad (or yourself), try to wander into shop that sells Vietnamese-Hungarian designer Luu Anh Tuan’s work.

This is what we wrote about him in our annual Fashion Issue: He is a real artist, every apparel and bag he designs has character and style and displays a natural, obvious elegance characteristic of Tuan. He is a multiple Fashion Awards Hungary winner, but he has also presented his work abroad.

He arrived in Hungary at the age of nine before the change of regime. As a child of diplomats, he encountered different cultures, but as a boy, in the phase of his life when he was most receptive, he lived in the Far Eastern yet European hazy and misty world of Hanoi and Saigon. He decided at that time that he wanted to become an artist, he learned Hungarian and the way of life in Hungary and became a Hungarian fashion designer.

East of Eden The photorealist painting of the ’60s and ’70s was just as present in Eastern Europe as in America or the western half of the continent. However, realist imagery had entirely different traditions – it had to comply with demands from on high and contend with contrasting everyday circumstances. The exhibition in the Ludwig Museum, Photo realism: Versions on reality, makes an attempt to show these parallel phenomena side by side and capture a snapshot of both the capitalist consumer society and the socialist economy of scarcity.

Until January 15, 2012 Ludwig Museum, Bp, Dist. 9, Komor Marcell u. 1.

From El Greco to Rippl-Rónai The collection of famous Hungarian art collector Marcell Jánoshalmi Nemes is on display in the Museum of Fine Arts, accompanied by works by the emblematic figures of Hungarian fine arts in the 19th and 20th centuries, such as Mihály Munkácsy, Károly Ferenczy, József Rippl-

Rónai, Pál Szinyei Merse, Béla Uitz, Károly Kernstok and János Vaszary, among others. After Nemes’ death, the world famous pictures now enrich the materials of various museums, including the Orangerie in Paris, the Gemäldegalerie in Berlin and the Tate in London.

Until February 19, 2012 Museum of Fine Arts, Bp. Dist. 14, Hősök tere.

Christmas concert A little haven in the holiday rush, the pre-Christmas concert of Hungarian folk singer Bea Palya promises relaxation and a fiery atmosphere at the same time for an audience of all ages. She takes the stage in the Teátrum at Millenáris, and also has a present for her audience: she has invited violin virtuosi Félix Lajkó and Antal Brasnyó to perform along with her.

The concert will also feature musicians András Dés, József Barcza Horváth, and Dávid Lamm.

December 21, 8 p.m.

Millenáris Teátrum, Bp. Dist. 2, Kis Rókus u. 16-20.

WINE IN HUNGARY

Southern wine and comfort in Szekszárd

The slow weeks in the second part of December are an ideal time to take off and cruise Hungary’s red wine regions. Heavyweight Villány is perhaps the most well-known, but Szekszárd is also a great southern pleasure.

Excerpted below is a brief description of the region from the BBJ’s annual wine publication, Wine in Hungary.

True to their traditions, local multigeneration viticulturists primarily age red wines in their cellars carved in loess and built with bricks.

In 1845 a sarcophagus from weighing 11 tons was found and one of the sides was decorated with a yielding vine-plant growing from a dual chalice. The sarcophagus also contained a bottle of wine from the 3rd century AD. The label on the sacrificial chalice written in Ancient Greek described the benefits of the wine: “Sacrifice to the shepherd, drink and you shall live!”

During Turkish times, vine growers escaping to the north from the Szerémség (Sirmium) region and the Balkans brought Kadarka

grapes with them as well as the culture of red wine. Even though in 1541 the city was made a sangiac seat, wine making continued to flourish and Muslims owned some vineyards.

In the 18th century several waves of German settlers arrived in the region.

The combination of the old and the new continued to shape vine growing and winemaking in the region. Szekszárd wine had become popular in the Germanspeaking world, not least through the connections of the Swabs living in the region.

PEOPLE A HUNGARIAN HEMINGWAY 〉IN HUNGARY, THERE IS A HUGE LACK OF REAL SPONSORSHIP. (A LACK OF...)

FIRMS WHO USE THE MEDIUM (CLUBS) TO REACH CONSUMERS

Q: How is your mood after the news provided by the Moody’s downgrade?

A: I am not shocked as others might be, but I am disappointed at the unjustified, unfair analysis that will hurt the country’s interest. I think Moody’s and other international players of the market would like to punish the present Hungarian government for its courageous stand against some international practices. I doubt that Moody’s would have come out with a similar statement on any other European country.

Q: Why would an independent institution discriminate against Hungary?

A: Well, this government took over a bankrupt country. Their methodology of getting out of this would have worked if the global crisis had not affected the financial environment in negative ways. This government is trying desperately, using both conventional and unconventional means, to solve the problems, but their actions are devalued and not recognized because of the whole international crisis.

Q: Looking at the league table, in which Honvéd is in the top five, you are the most successful Budapest-based football club owner. How can someone who has spent billions, without a cent of profit, be successful?

A: Obviously I am not successful if I am not making money. Your business model defines success in a business venture. I am

BACKGROUND George F. Hemingway, the American-Hungarian businessman who owns Honvéd soccer club, talks about how he reined in football hooliganism and what the missing link to becoming a successful club owner could be.

A: When I came here, the first thing I said was: without order and discipline no enterprise can prosper. The first thing I did was to tell everybody what the rules are. It took two-three difficult years to make Bozsik Stadion a peaceful island. I suffered a lot by confronting some of our own fans, but my actions and sanctions to expel some were a must. As you may know, ours is the only stadium where there are no fences around the field. There has been no problem at all since taking them down three years ago. You can only eliminate hooliganism if you act, not just talk about the problem.

also a supportive attitude from your side when Prime Minister Orbán said a few weeks ago that he is planning to establish a Puskás Museum in Felcsút?

Many football fans were outraged.

A: Unlike most people who read about what’s going to happen in Felcsút, I actually heard what Orbán said: the Puskás Academy Foundation rescued these things from Spain and they would be put in a museum in Budapest. I fully support that. I do not have hundreds of millions of forints to build a nice museum at Kispest. Orbán did not say that the actual exhibition of Puskás would be in Felcsút, but in the new Puskás Stadium in Budapest.

Q: How does your five-year-old Hungarian Football Academy differ from similar academies in Hungary?

A: Let’s separate the MTK academy from all the others. They were the first in this country, with more than ten years of history. There are more than 50 graduates from this place in the Hungarian premier league, and several dozen more abroad. I think this is a great result. About our school: our oldest students are 19 years old – they can become full pros in the next two-three years. I see at least 20-25 (one quarter of the total) of our academy kids as potential players in Hungary or abroad. I think most of our players will be in our first team from the academy four-five years from now. We also think of the future of those who won’t make it as professional players.

In our academy, we provide and emphasize English and computer science studies added to the middle school curriculum. From this year, we want to attract talented kids by offering them university diplomas. That’s why we have made an agreement with Szent István University.

Q: You are very active not just in sports circles, but also as a blogger and as an op-ed writer in various daily papers. You teach at Corvinus University. About your personal life, you are very private. Are you ashamed to look back to when you were competing with Martin Scorsese in New York on a film course?

George F. Hemingway studied film and A: I believe that you have to deal with the preslaw at New York University. He flirted with ent and the future. From the past you can only Q: How do you finance Honvéd and the becoming a film director, but succeeded learn. The past belongs to us. It’s private. Just like Academy? in California as a corporate litigation lawyer.

A: We are not a public company, so as a prifamily issues.

His first company, The Hemingway Group vate business owner I keep this information (THG) was launched in 1983 and dealt in real Q: When you write about the Roma private. What I can say is that we are in real estate. THG entered the Hungarian market question or about the IMF vs. the gov- estate, restaurants, the senior home-building in 1991 with Bonbon Hemingway and its ernment’s policy, I as a reader would business and we do consulting as well. Obvilove to know more about you in order ously we are trying to make the football busigourmet candies, and also introduced Pizza to check the credibility of the person ness profitable, too.

Hut and Kentucky Fried Chicken to locals. writing the articles. How do you want Hemingway, who bought the Budapest Q: As national football is going into people to understand you if you hide Honvéd soccer club five years ago, is head your cards? a winter break, you arrived at a very of the multitasking international company A: My CV is not a secret; my life in the US is an unique step: you have the two most that he runs with his sons. open book. I ran my laps and learned from them, wanted forwards (the league’s top but I am not advertising how many bad mov- goal scorer Danilo and Hungarian not Mother Teresa. My model for a success- ies I made or how it was studying at NYU with national player Torghelle) whom you ful sports club is still in progress. A business geniuses like Scorsese. You have to keep in mind can sell for big bucks. model involves conventional income sources. that until I bought Honvéd [in 2006] I was very A: Well, I have no chance to make money on In Hungary, there is a huge lack of real spon- much out of the limelight. I had been working Torghelle because he is a free agent. On a comsorship. I do not mean someone who gives in Hungary from the early 1990s, but with foot- mercial basis, we could not keep him for the you money, but firms who use the medium ball, your life opens on a different scale. I never spring season if he gets an offer from abroad. (clubs) to reach consumers. As long as this open fronts, I respond to things that I consider With Danilo, there is tremendous interelement is missing, nobody will be successful unacceptable. My opinions are just responses to est already from various countries. I would things I hear and agree or disagree with. in Hungarian football. be shocked if he would still be with Honvéd in January. I know you need figures, but the Q: You have achieved real progress in Q: From your op-ed articles it is clear only thing I can say is his price will be as high taming football hooliganism – at least at that you fully backed the present gov- as that of a top Hungarian player (around Honvéd’s home field, Bozsik Stadion. ernment’s economic policies. Was there €250,000-500,000 – the editor). RVW

CURRICULUM VITAE

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WHO'S NEWS

Name Martin Pytlik Current company/position Raiffeisen Bank/chief risk officer Previous company/position Tatra Bank/chief risk officer

Name Ferenc Turcsán Current company/position HUMANsoft Kft/sales and marketing director Previous company/position Aquis Informatika Zrt/sales and marketing director

Pytlik joined the management board of Raiffeisen Bank Zrt at the beginning of December. He joined Raiffeisen International five years ago and had been CRO board member at Tatra Bank, the Slovakian member of Austria’s Raiffeisen Zentralbank. The 49 year old started his career at Bayerische Vereinsbank, was appointed to various managerial positions in the Czech Vereinsbank, later at HypoVereinsbank Slovakia and Germany, and joined Tatra Bank in 2006.

The CEO of Freesoft Nyrt named Turcsán as sales and marketing director of HUMANsoft Kft at the beginning of December. Turcsán previously worked at HUMANsoft between 2005 and 2007 as director of public administration services.

Before that, he also worked at Matáv Rt, Invitel Zrt and is:energy Kft. He graduated from the Kandó Kálmán Technical College in 1992 and obtained his economics degree from the College of Finance and Accounting in 1997.

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Name Balázs Magyar Current company/position CBRE/director of real estate investments Previous company/position ING REIM/senior asset manager

Name Javier Gonzalez Pareja Current company/position Bosch/regional head Previous company/position -/-

CBRE Global Investors EMEA has named Magyar to head the real estate business of the company’s Hungarian operations. Magyar arrived at CBRE from ING REIM, where he worked as senior asset manager from 2010. Before that, he held various positions with ECE, DTZ and Multidevelopment in Hungary, Germany, the Czech Republic, Poland and Ukraine.

Pareja has been appointed to head the Hungarian, Slovenian, Croatian, Serbian, Montenegrin and BosnianHercegovinian units of German engineering company Bosch.

Pareja, who has worked for Bosch since 1994, joined the company as an interim in Madrid. He succeeds Thomas E. Beyer, who will continue his career as chairman of Bosch’s businesses in ten countries in the Adria region.

SPONSORED BY

Name Richárd Schmidt Current company/position Bónusz Brigád/commercial director Previous company/position Out Of Home Media/ sales director

Name András Hemberger Current company/position MasterCard Budapest/ office head Previous company/position MasterCard Vienna/ office head

Schmidt joined the team of social shopping site Bónusz Brigád in December. He is responsible for extending the company’s national network and exploring new directions for the firm.

Previously, Schmidt was sales director at Est Media Group, and was also head of the direct sales team at Danubius Radio.

Hemberger has been named to head the Budapest office of MasterCard. His tasks include the supervision and management of the Hungarian, Slovakian and Slovenian markets. He joined MasterCard in 2007, and was transferred to take over the leadership in the company’s Vienna office in 2010. He graduated from the University of Economics in Vienna and started his career at Hungarian and international consulting companies.

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Budapest Business Journal | Dec 16 – Jan 12

AMCHAM ANNUAL GENERAL ASSEMBLY AND BOARD ELECTIONS 2011 László Drajkó, Norbert Fogarasi, David G. Young, William Benkő, Andrea Jádi Németh, ex officio member Robert Peaslee, AmCham President István Havas, Frank Klaus III, AmCham CEO Péter Dávid, László György, Péter Fáth

December 1, 2011 Budapest Marriott Hotel The new AmCham board

BCCH BUSINESS SEMINAR The British Chamber of Commerce in Hungary, the British Embassy in Budapest and Réti, Antall & Partners PwC Legal held a Business Seminar on the UK Bribery Act and its implications and relevance for operations in Hungary.

October 27, 2011 British Embassy

CCCH LOBSTER DINNER

December 3, 2011 Hotel Intercontinental Budapest

AMCHAM THANKSGIVING DINNER 2011 Ferenc Snétberger and students from the Snétberger Music Talent Center entertained guests at the dinner party.

November 22, 2011 Budapest Marriott Hotel

DUIHK CHARITY SANTA CLAUS PARTY AND FAIR

December 6, 2011 Német-Magyar Gazdaság Háza

OPINION GREAT

〉

QUOTES

〉WE WILL USE THE CRISIS AS A CHANCE FOR A NEW BEGINNING

German Chancellor Angela Merkel talking after the EU summit talks on December 9

〉THANK YOU, DAVID CAMERON Headline on the daily Magyar Nemzet, after the December 9 EU summit. The gratitude was due to what the commentator saw as the British prime minister’s bravery in standing up to the French-German axis, and thereby winning the nine non-eurozone countries, minus Britain, time to think about whether they want to sign up to the new fiscal deal accepted by the 17 countries that already use the euro, BBC News wrote

〉THE FEDERATION WAS HORRIFIED THAT

PUBLIC TELEVISION CHANNELS THAT SHOULD RESPECT HIGH ETHICAL STANDARDS ARE IN FACT DELIBERATELY MANIPULATING NEWS REPORTS AND THREATENING JOURNALISTS WHO SPEAK UP FOR THEIR RIGHTS

Arne Konig, president of the European Federation of Journalists, reacting to a recent news program on public television stations M1 and Duna TV where the image of former Supreme Court head Zoltán Lomnici was blurred out in a report

〉THE ONGOING WAR AGAINST THE WORLD AND

SOBRIETY IS ABOUT TO SLOWLY COME TO AN END Democratic Coalition head Ferenc Gyurcsány, speaking after PM Orbán announced the necessity of modifying next year’s budget

[ EDITORIAL ]

Garbled message ecember 10th was an important date for the EU, which came one step closer to a deeper integration. And it was also an important day for Hungary’s communication, which came closer to disintegrating. What exactly happened in the morning after the EU summit on December 10?

It started with a surprising no. After the summit, French president Nicolas Sarkozy said that Hungary was among the four countries that would not participate in drawing up a new inter-government treaty on which 23 of the 27 leaders agreed. The Hungarian delegation would not talk to the press, be it foreign or Hungarian. A few hours later Orbán finally spoke. His stance had softened a lot: he would be referring the issue to parliament because the “country’s sovereignty is on the line”.

The timing of this unfortunate behavior was just perfect, when talks with the IMF about a discretionary credit line were about to start. This will surely improve our chances to reach a favorable agreement.

This was not the first, and probably not the last, communication fiasco of the Fidesz government, which debuted causing a mini panic in June 2010 when Fidesz vice president Lajos Kósa said that Hungary had a “a slim chance” of avoiding fiscal and debt troubles similar to Greece’s.

The result? The government lost credibility. Then there were the communication blunders around the renationalization of private pensions. Has anyone stopped worrying about his or her retirement income since the prime minister appointed a commissioner for pension protection?

Declaring a financial war of independence also sounded a little pathetic. Promising to achieve 2011 deficit targets without austerity measures deceived no one. Who believes the government when it calls the planned IMF agreement “a new type of cooperation”, which would increase Hungary’s financial and economic independence instead of hindering it?

How could this be changed? First of all, the government should stop communicating one thing to foreign investors and another for internal consumption. It is also time to be honest about its longterm plans, or the lack of them. This includes making a decision on whether it wants to stick to its unorthodox policies or join the efforts for a stronger union, which means that the country would eventually turn over more national sovereignty to Brussels. Otherwise, Hungary will never become a flexible, cosmopolitan country that is willing and able to cooperate with others.

D

〉THE INDEPENDENT HUNGARIAN ECONOMIC POLICY IS PRACTICALLY OVER

Raiffeisen analyst Zoltán Török, commenting on the ongoing negotiations between the Hungarian government and the IMF

〉MUCH HAPPINESS! Repeatedly shouted by a woman to passersby on the streets of Dunaújváros.

The woman was taken to hospital after eyewitnesses reported on her confused behavior

Your first address if you like to start business in Slovakia! cegekalapitasa.hu BBJ-PARTNERS Netherlands - Hungarian Chamber of Commerce

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