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Hungary’s share in Europe’s VCPE market The EU’s Jeremie program gave a boost to Hungary’s venture capital market. Now VC funds are looking to Jeremie II, which will also make seed funding available for earlystage enterprises..

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SOCIALITE

Something old, something new It is hard to tell the extent to which the circles of the collectors of classical and contemporary arts overlap. Both eras have their own fans, but recently more and more artists are switching from the classical to the contemporary. 23

TRENDS

Eat the same and pay more The volume of food retail sales was unchanged between February 2011 and January 2012 compared to the same period in the preceding year, but the value of consumption increased by 5%, according to a report by market information provider Nielsen. The annual turnover of the 90 food product groups examined was more than HUF 1,350 billion.

19 Food sales growth (%)

Spending habits, mall strategies, the ‘plaza stop’ act and local alternatives to top brands.

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Contents NEWS

SOCIALITE

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EDITOR-IN-CHIEF:

András Rác a.rac@bbj.hu COPYEDITOR:

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NEWS

digest

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NEWS

bi-weekly

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MARKET WATCH

Energy

Tamás Deme PROOFREADING:

Robin Marshall

FOCUS

EDITORIAL STAFF:

An oversupply of national liberators

Patricia Fischer, Anikó Jóri-Molnár, Gabriella Lovas, András Szarvasi, Ági Vinkovits, Zsófia Végh, Dániel Csordás (graphic artist) LISTS: BBJ

23 7

Something old, something new

Research (research@bbj.hu)

NEWS AND PRESS RELEASES: news@bbj.hu

The national celebration to commemorate the revolution of 1848 was an excellent display of how disunited Hungarians are.

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SPECIAL REPORT

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Hungarians think twice before spending

SPECIAL REPORT

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Retailers hope that Hungarian consumers will go shopping more often and spend more once the early mortgage repayment period ends.

After four years of decline, the volume of retail sales stagnated at HUF 7.9 tln in 2011.

Your first address if you like to start business in Slovakia! cegekalapitasa.hu

A good strategy can save a shopping center The current difficult economic conditions clearly do not favor the non-food retail market. How is declining purchasing power rearranging the shopping center market and what can malls do to survive?

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Fico victory may rearrange Slovak-Hungarian relations

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An oversupply of national liberators

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digest

It occurred to me that nothing is more interesting than opinion when opinion is interesting HERBERT BAYARD SWOPE, THE NEW YORK EVENING WORLD, 1921

“IN MOST COUNTRIES THIS WOULD BE AN OCCASION FOR NATIONAL UNITY...”

DISUNITED IN DIVERSITY March 15, the anniversary of the start of the 1848 revolution against the Habsburg monarchy, is celebrated across Hungary every year.

People recall the “young heroes” who stood up against foreign tyranny; an ad hoc group of university students, poets and writers who were brave enough to raise their voices and demand rights for their nation.

Although the revolution and the following war of independence were defeated in 1849, the memory of them has remained an important part of the Hungarian national identity.

In recent decades, however, March 15 has become a marketing vehicle for the various parties, with the major political actors trying to present their patriotism in the loudest possible form. Some 164 years after that momentous day, the diversity of the reports on the celebration of the national holiday shows the fractures in today’s Hungarian society.

The Economist

MARCH 15, 2012 Eastern Approaches, the Eastern European-focused blog of UK weekly The Economist, takes a highly critical and outspoken view on Hungary’s government, and especially Prime Minister Viktor Orbán.

“Just another ordinary week for Orbán,” the headline says with heavy sarcasm that carries on through the entire article and even affects the illustrating picture. Here we see Parliament, nicely decorated for the national day, but the focus, instead of on the glorious building, is on three public workers dressed in orange overalls, trying to clean up the square where the official celebrations will be held. The message is obvious: Hungary is full of dirt, and even if it is clean for one day, it will not make a difference in the long run.

“In most countries this would be an occasion for national unity [...]. Not in Hungary,” the article says before detailing the three gatherings where the different parties expected crowds to support their own policies under the banner of the national celebration.

The article, published in the early hours of March 15 and so able only to predict the events of the day, refers to “Orbán’s beleaguered right-wing government” and predicts the premier’s speech will be rich with Euroskepticism.

The author considers Orbán’s concerns about the EU’s legiti-

macy untimely, given the negotiations to attain a €20 billion deal, which the post deems to be more important.

Listing different news sources, the article mentions international reports that consider Hungary’s new constitution to be “highly controversial”. It also cites German weekly Der Spiegel as saying that the reform of the judicial system “threatens the independence of the judiciary”.

MARCH 15, 2012 In the Emerging Europe section of the website of The Wall Street Journal, the author puts the divisions among the political opposition into focus. “No Unity in Sight Among Hungary’s Political Opposition,” the headline says.

The opposition hopes “to grab power in 2014 from Viktor Orban’s Fidesz party, which now has a commanding majority in parliament,” the article says.

The vision of the leader of the Socialist MSzP, saying that “in 2014, the people will oust this government” is doubtful, the author says, highlighting the fact that “no opposition force has come in shooting distance of Fidesz”.

Later, the article emphasizes that, as all the opposition hope to win over undecided voters while building their political communication on defining themselves against other parties, any alliance between them is unlikely.

questions. “Who are the people that escaped destruction? [...]

Are we all going to stay in that boiling water, those who are not profiteers of the Orbán regime?

Are only the frog king and his circle able to escape from the hot water?” Finally, it wonders whether Orbán’s supporters are hoping for a miracle if they kiss the frog king,

MARCH 16, 2012

MARCH 16, 2012

Népszava, Hungary’s traditionally left-wing daily, usually takes a position of strident opposition to whatever the right-wing government does, and saw no reason to change its habits on this occasion. In a short article, the author ridicules Prime Minister Orbán and his well-built speeches. The headline “The frog king” refers to Orbán’s speech at the official National Day ceremony, where he said that Hungary is like a frog, being boiled on a slow fire, at first feeling good, and only realizing its circumstance at the last minute, and hopping out of the pot. Turning his metaphor against Orbán himself, the author says that “this is how we became viable frogs again”.

The article raises rhetorical

The traditionally right-wing daily Magyar Nemzet takes the government point of view when reporting on the National Day events. The article is simply headlined “Celebration”.

Csaba Lukács, the author, introduces his own personal experience of the day, detailing his impressions as he walked through the three big gatherings of the various political parties. Everyone was free to do what he or she wanted, he noted, including the opposition.

Following the advice of “leftwing French intellectuals” published in French paper Libération, Lukács started his day at the demonstration of civilian opposition force Milla (One Million for the Freedom of Press in Hun-

gary). Attendees here reminded Lukács of the “useful idiots” who used to sing hymns praising the Soviet regime and communism.

Although it is supposedly a dictatorship, policemen took their duties seriously and protected the anti-government protesters from those who wanted to disturb their demonstration, Lukács says ironically.

Then he continues with his impressions of the Orbán speech at the government’s official ceremony. The crowd there, according to the author, was inspired by the premier’s words while “forests of flags” were raised in the air. According to the report, the PM saying that “we will be no colony” was the high point of the event.

Lukács says that at the far-right Jobbik party gathering he was told that “we are indeed a colony, moreover, slaves”.

In the closing lines the author emphasizes that all participants went home in peace, except for some minor disruptions easily handled by police.

“This was the national celebration this year [...] the only thing we need is to get out of national debt, provide enough workplaces, welfare and happiness. This could be a revolution, if we succeed in this,” Lukács concludes. ■

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Hungarians refused to be a colony in 1848 and they refuse again in 2012.

PRIME MINISTER VIKTOR ORBÁN AT THE OFFICIAL CEREMONY ON MARCH 15

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Fico victory may rearrange Slovak-Hungarian relations

ECONOMY ECOFIN APPROVES EC RECOMMENDATION FOR PARTIAL FUNDING SUSPENSION European Union finance ministers on March 13 approved a European Commission proposal to suspend part of the Cohesion Fund allocations for Hungary for 2013 because of the country’s failure to address its excessive deficit, Commission Vice President Olli Rehn said. Ecofin recommended that Hungary make fiscal adjustments equivalent to 0.5% of GDP this year and further measures in 2013 to keep the general government deficit under the 3% of GDP threshold, Rehn said. Ecofin will take a decision on whether to lift the suspension of €495 million in Cohesion Fund commitments from January 1, 2013 based on an assessment of measures that Hungary has taken at a meeting on June 22, he said.

Rehn reiterated that Ecofin’s decision as well as the Commission’s recommendation should be seen as a “constructive incentive” for Hungary to meet targets. Margrethe Vestager, the finance minister of Denmark, which holds

the rotating Presidency of the Council of the European Union, stressed that the partial suspension of Hungary’s Cohesion Fund allocation would be lifted “without delay” if the country takes the necessary corrective action by the council meeting on June 22.

FEWER JOBSEEKERS REGISTERED IN FEBRUARY In February, 52 companies dismissed 2,600 employees, the latest data published by the National Labor Office (NMH) show. The number of dismissed employees is lower than a month ago but increased from a year before, the office said. At the same time, employers registered demand for 95,000 new workplaces. The manufacturing and construction industries offered the highest number of open positions, mostly for unqualified workers, NMH spokesperson András Gedeon said. Employers did not apply for subsidies for 11.5% of the new positions, while 88.5% of the new jobs were offered in the framework of some sort of subsidy scheme. Last February, these numbers were 29.5% and 70.5%, respectively.

The number of registered jobseekers was 646,700 at the

Photo: Eric Vidal / REUTERS

Direction – Social Democracy (Smer), the party of former Prime Minister Robert Fico, won an absolute majority in the Slovakian Parliament at the general elections on March 10. Smer’s victory might lead to a deterioration of relations between Hungary and its northern neighbor, since Fico, as PM between 2006 and 2010, was keen to reduce the rights of the Hungarian minority living in his country. Fico had to hand over the premier’s seat just two months after Hungary’s current prime minister, Viktor Orbán, returned to power in the spring of 2010, so the two politicians have not had the chance to hold a meeting. Although the Slovakian and the Hungarian leaders are not likely to share opinions on several diplomatic issues, Fico’s government will not now include the openly anti-Hungarian Slovak National Party (SNS), as it had previously. Jan Slota, who in one of his speeches urged Slovakia to level Budapest with tanks, leads the SNS, but it failed to reach the 5% threshold necessary for representation in parliament.

end of February, 4% less than a year ago, Gedeon said. On a monthly basis, the number of registered jobseekers fell 0.3%.

ONE-SIXTH OF HUNGARIAN COMPANIES PLAN LAYOFFS IN Q2 About one in every six Hungarian companies (17% of the total) plan layoffs in the second quarter of 2012, while 14% plan new hires, the latest survey by staffing company Manpower shows. The threepercentage-point difference between the two figures is well under the 14-percentagepoint record in the previous quarter, Manpower said. The representative survey of more than 770 companies shows 66% of employers plan no changes to headcount in Q2.

MNB SELLS LENDERS €2.5 BLN TO SUPPORT EARLY FX REPAYMENT Lenders made €2.489 billion worth of euro purchases from the National Bank of Hungary (MNB) to cover early repayments of foreign currency-denominated mortgages during a government scheme that wound up at the end of February, fresh data from the central bank shows. Lenders made €921 million of euro purchases in February alone.

At the beginning of October,

MNB started selling banks euros for forints in a series of weekly tenders aiming to give lenders the necessary FX liquidity for the scheme, which allowed early full repayment of forex retail mortgages at discounted exchange rates.

The euro purchases accounted for €2.5 billion of the €4 billion reduction in the MNB’s international reserves between the launch of the scheme, on September 29, and the end of February. Reserves fell to a 12-month low of €34.77 billion at the end of February.

In that month alone, reserves declined by €2.5 billion.

VOLUNTARY PENSION FUNDS YIELD JUST LESS THAN 1% IN 2011 Mandatory private pension funds in Hungary had a negative yield last year, while the average yield for voluntary pension funds was just less than 1%, financial market watchdog PSzÁF said on March 14. Mandatory pension funds averaged a yield of -2.87% in 2011 and voluntary pension funds’ net average yield was 0.98%. Nearly all members of Hungarian mandatory private pension funds opted to return to the state pillar, together with their pension assets, last year.

ANALYSTS BLAME FOOD PRICES FOR HIGHER THAN EXPECTED FEB CPI Analysts blamed food prices for higher than expected inflation in February. Consumer prices in Hungary rose 5.9% year-on-year in February, accelerating from a 5.5% increase in January, the Central Statistical Office (KSH) said on March 13. Takarékbank’s Gergely Suppan said the extent of the food price increase in February came as a surprise, while fuel prices rose at a slower rate than expected. He added that higher egg and poultry prices, pushed up by new European Union regulations on hen cages, would keep food prices high in the coming months. He said CPI would probably stay above 5.5% until mid-year, but fall to 4.5-5% by yearend. He put average annual inflation at 5.3-5.4%. Orsolya Nyeste of Erste Bank said that EU regulations on poultry farmers had been expected to raise prices, but added that the increase showed up in a broader range of food prices. Nyeste put CPI a little over 5% in the coming months, but said it would fall under 5% in the last months of the year.

BUSINESS CONSUMER PROTECTION FINES MIGHT BE INCREASED DRAMATICALLY From September, producers and distributors can be subject to consumer protection fines five times higher than before if a new law on market supervision is passed. The draft law is based on a principle saying that producers are obliged to make their products safe, and distributors cannot sell unsafe products.

If caught breaching the law, fines up to HUF 500 million can be imposed on them, the draft law says. The proposal applies to goods produced and sold in Hungary.

BUDAPEST AIRPORT TEMPORARILY CLOSES TERMINAL 1, POSTPONES CARGO CITY INVESTMENT Liszt Ferenc International Airport operator Budapest Airport said on March 14 it will temporarily close Terminal 1 of the airport and postpone the planned construction of the air cargo reloading center Cargo City following the bankruptcy of national carrier Malév. Budapest Airport expects to start

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PHILIPS TO LAY OFF ONE-THIRD OF EMPLOYEES IN HUNGARY Dutch electronics maker Philips has announced the layoff of 230 workers at its Székesfehérvár plant in western Hungary. The downsizing is part of a strategic decision announced last year to set up a joint venture with computer monitor maker TPV in a bid to beef up Philips’s television production. Philips Hungary communications director Péter Blazsevácz said there was no final decision yet on how many employees the Székesfehérvár plant will have on its permanent staff. The plant currently employs 750. TPV later said it will hire 600 Philips workers.

ALBACOMP FILES FOR BANKRUPTCY PROTECTION Hungarian IT company Albacomp IT Informatikai filed for bankruptcy protection on March 9, the official company gazette Cégközlöny said. Albacomp told MTI that its financing bank had not extended an expiring loan contract, but added that it aimed to reach an agreement with its suppliers and creditors and continue operating as a property management company. The procedure does not affect the operation of Albacomp RI Systems Integrator, which is independent of Albacomp.

SWISS INVESTMENT GROUP TO INVEST HUF 1 BLN IN EST MEDIA Swiss investment group Global Emerging Markets Limited (GEM) will invest HUF 1 billion in Hungarian listed media company Est Media over the next three years and will be authorized to subscribe three million Est Media shares within five years at an issue price of HUF 280 per share, Est Media said on March 13. GEM Global Yield Fund

Limited and GEM Investments America LLC signed the related contract with Est Media on the same day. The investor will receive shares for its cash investment. The shares will be issued at 90% of the share’s average closing price on the Budapest Stock Exchange in the preceding 15 days. Est Media is traded in category B of the Budapest Stock Exchange.

Its portfolio includes several print and online publications and it is the largest owner of festival organizer Sziget. With Sziget revenue consolidated, Est Media had more than HUF 8 billion revenue in 2010.

MKB BANK SUES BUDAPEST FOR €25 MLN OVER STALLED CULTURE CENTER MKB Bank said it is sueing the Budapest local council for €25 million plus interest over a contract on the construction of a cultural center. MKB Bank said it filed the suit with the Budapest Municipal Court on the basis of a contract signed with the council and Porto Investment Hungary, which won a contract to build and operate a cultural center in an old warehouse district on the banks of the Danube in a public-private partnership several years ago.

Porto Investment Hungary took out a €28.4 million loan from MKB Bank for the €30.8 million investment. The cultural center, dubbed “CET”, was to have been inaugurated in the summer of 2010, but construction was halted before it was completed. The local council established in a review that the PPP project was not to the capital’s advantage and it also took issue with the quality of the investment. The council mandated the mayor last year to seek damages from the city’s partner in the project.

POLITICS PM DEFENDS GOV’T POLICIES AT MARCH 15 RALLY Speaking to a crowd estimated at 100,000 people by Hungarian media and at 250,000 by state newswire MTI, Prime Minister Viktor Orbán defended his government’s policies and demanded fair treatment from the EU in front of Parliament at a celebration of Hungary’s national holiday on March 15, marking the 164th anniversary of the outbreak of the 1848 revolution and war of independence against Habsburg rule. “We won’t be a colony,” Orbán said. “Hungarians won’t live according to the commands of foreign powers, they won’t give up their independence or their freedom.” Several thousand Poles also attended

Fidesz’s March 15 celebrations at Kossuth tér; Polish conservative weekly Gazeta Polska promoted their trip. In another part of Budapest, an opposition protest drew tens of thousands of Hungarians angry with Orbán and his Fidesz party’s legislative agenda.

The group One Million for the Hungarian Freedom of the Press (Milla) organized the demonstration. Speakers called on the government to guarantee media freedom and observe EU norms. Several thousand people attended the Socialist party’s official event, held in Esztergom (north of Budapest). Speakers at the radical Jobbik party’s rally, held at Deák tér, advocated leaving the EU.

HUNGARIAN PREMIER LACKS UNDERSTANDING OF DEMOCRACY, EU SAYS Hungarian Prime Minister Viktor Orbán demonstrated a “complete lack of understanding of democracy” for drawing a comparison between the European Union and the Soviet Union, an EU official said, quoted by Bloomberg. “They also fail to understand the important contribution of all those who have defended and fought for freedom and democracy,” European Commission spokeswoman Pia Ahrenkilde Hansen told a daily press briefing in Brussels.

Hungarians will refuse the “unsolicited help of foreigners” and will write their own Constitution, Orbán had said. “We are more than familiar with the character of unsolicited comradely assistance, even if it comes wearing a finely tailored suit and not a uniform with shoulder patches,” Orbán said.

CULTURE NEW COUNTRY NAME REQUIRES NEW COINS The National Bank of Hungary’s (MNB) Logistics Center has started minting HUF 5, HUF 10 and HUF 20 coins bearing the inscription “Magyarország” (Hungary). The old coins bearing the inscription “Magyar Köztársaság” (Republic of Hungary) will continue to function as legal tender and will only be withdrawn from circulation as they wear out, MNB communications chief András Simon told journalists. MNB will have 10 million pieces made of each denomination coin. The cost of producing the new line of coins will be a little more than HUF 5 million, an insignificant amount compared to the annual cost of coin production, amounting to around HUF 1 billion, Simon said. ■

[ EXPERT OPINION ]

Flexible work arrangements to be introduced by new Labour Code

Non-standard forms of employment DR. EMESE SIMON Attorney at law NOERR & PARTNERS LAW OFFICE

The new Labor Code coming into force on 1 July 2012 will introduce a number of new work arrangements expected to benefit employers and stimulate employment.

The new forms of employment to be introduced by the new Labor Code are aimed at assisting employers in rationalizing their work structures and making employment more cost-effective through taking advantage of new opportunities.

For example, the introduction of a special form of part-time work, called on-call work, will provide employers with a great deal of flexibility. Under oncall arrangements, employees perform their duties as and when required. Such arrangements are better aligned with the needs of employers as arising from time to time, and thus potentially allow for significant cost savings. Employees will have to be given three days’ notice of their work schedule. On-call work arrangements require employment contracts specifically made for such a legal relationship, and on-call workers may not be required to work for more than six hours per day. The term of working time frame may not exceed four months under such arrangements.

Job sharing will be another new form of employment. Under such arrangements the employer engages several employees under the same employment contract for the same position. The employees share work according to a schedule determined among themselves and, unless agreed otherwise, receive an equal share of pay. If any employee is unable to work (e.g. due to illness) another employee sharing the same employment contract must act as a substitute. For employers, such an arrangement can offer stability in positions where it is not so relevant who actually does the work. There is no need to arrange for substitutes for employees on sick leave or holiday, i.e. work is not interrupted for any reason. In such arrangements, work schedules are governed by the rules applicable to jobs with no set working hours.

In job sharing arrangements, regardless of the fact that the employees sign the same employment contract, it will be possible to terminate each employee separately, e.g. when the employer is only dissatisfied with the performance of one particular employee. Employment established under a job sharing arrangement is automatically terminated if, for any reason, the number of employees participating is reduced to one. In such cases, the last remaining employee must receive payments for periods of absence and severance pay as would be applicable in the case of termination by the employer.

The introduction of employment by multiple employers (shared employment) could offer a realistic alternative for small- and medium-sized enterprises and corporate groups. Under a shared employment arrangement, the same employee is employed by two or more employers for the same job. Frequently, several businesses (located at the same site or building) or companies belonging to the same corporate group would jointly employ the same receptionist, cleaner or administrative personnel. In the absence of applicable regulations, managing such arrangements often gives rise to problems and ambiguous situations for both the businesses and the employees. Under the new Labor Code, employment contracts concluded with two or more employers will have to stipulate which employer is obliged to pay the employee’s salary (and withhold, file and pay taxes and contributions). It is suggested that employers agree among themselves how to share payroll wage and tax expenses, as the law does not regulate this area. The new Labor Code provides that the employers are jointly and severally liable for labor law claims brought by a shared employee. Unless agreed otherwise, any of the employers or the employee may terminate the employment relationship. Such employment is also terminated if the number of employers is reduced to one. (x)

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the Cargo City project two years from now, it said in a statement. It plans to carry on with other planned development projects, including the construction of an airport hotel with the involvement of an outside investor next door to Terminal 2, “if administrative obstacles to the investment can be eliminated in the near future”. The company said it was compelled to take immediate steps to keep operational. This year’s plans had to be amended because of Malév’s collapse. Malév used the newer Terminal 2 and its demise freed up considerable reserve capacity there. Meanwhile, Terminal 1, which serves mainly low-fare airlines, is close to the limits of its passenger service capacity during peak hours.

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WILDHORSE ENERGY READIES PRE-FEASIBILITY FOR HUNGARY GAS PROJECT Australia’s Wildhorse Energy expects to publish a pre-feasibility study on its Mecsek Hills underground coal gasification (UCG) project in Hungary later this month. The fi nal two drill holes at the Váralja exploration target at Mecsek Hills are expected to be completed shortly, the company added. A 3D seismic program at Mecsek Hills has been already completed to help identify prospective coal blocks in Váralja as part of the final site selection process.

Wildhorse said that after completing the drilling program and assessment of geological structure, coal suitability, local infra-

structure and mining layout, the fi nal site will be selected. Wildhorse also has a major uranium resource at Mecsek Hills and last month signed a co-operation agreement with stateowned groups Mecsek-Öko and Mecsekérc ahead of a possible restart of uranium mining on the site.

CITY IN SOUTHERN HUNGARY PLANS BIOMASS PLANT The town of Kalocsa, south Hungary, is planning to build a HUF 1.5 billion (€5.2 million) biomass plant, Mayor Ferenc Török announced.

Kalocsa-Távhő Szolgáltató, a project company set up for the investment, has won HUF 700 million on procurement tenders for the construction of the plant. The local council holds 50% of Kalocsa-Távhő Szol-

gáltató. The output of the plant will replace 2.5 million cubic meters of gas used for heating.

Heat generated by the plant will be used to provide heating for several local council buildings, as well as schools and a women’s prison, Török said.

INTERNATIONAL DELEGATION AFFIRMS PAKS STRESS TEST RESULTS An international delegation has affirmed the assessment of stress tests carried out earlier on the Paks Nuclear Power Plant, Hungary’s sole source of commercial atomic energy, communications director István Mittler told MTI on March 13. Hungary’s National Atomic Energy Agency (OAH) established earlier in a National Report on the stress tests submitted to the European Commission that the plant is safe and no immediate measures

are required, OAH deputy director Gyula Fichtinger said in January. Safety levels can always be raised further, but there is no need for immediate intervention, he added. The stress tests were carried out on all European nuclear power plants on the directive of the European Council. The EU’s assessment of the report is expected in April.

ROMANIA GOV’T OKS POWER MARKET LIBERALIZATION Romania centrist coalition government has approved a draft law on the schedule for liberalizing power prices for industrial consumers and households, as pledged to the International Monetary Fund and the European Union.

Regulated electricity prices for companies will be phased out by the end of 2013, start-

project, Prime Minister Boiko Borisov said. Instead, it plans to pay for a ready-built 1,000 megawatt nuclear reactor and will try to install it at its operational 2,000MW Kozloduy nuclear power plant. In October 2011, Bulgaria and Russia’s Atomstroyexport reached an agreement to extend the negotiations over Belene project by the end of March 2012, amidst continuing haggling over its price and feasibility. Borisov said that a final decision on Belene NPP had yet to be taken as the Balkan country has already spent BGN 1.4 billion ($935 million) on the project.

Brussels and Washington have long expressed concerns that a new Russian-made nuclear plant will increase Bulgaria’s dependence on Russia which may use its energy might for political influence. ■

ing on September 1 this year; those for households will be withdrawn by the end of 2017, starting in July next year, said Dan Plaveti, who heads ANRE, the energy regulator. Parliament must vote on the bill for it to take effect.

The commission and foreign investors such as Germany’s E.ON, Italy’s Enel and Czech ČEZ – which own local gas and power distributors – have repeatedly criticized Romania’s energy price caps for hurting competition and discouraging investment.

BULGARIA DELAYS BELENE NUCLEAR PROJECT Bulgaria will abandon plans to build a 2,000 megawatt nuclear power plant on the Danube River if it cannot attract sufficient Western funding for the €8 billion ($10.5 billion)

BSE wraps up another weak earnings season BBJ GABRIELLA LOVAS

The performance of most leading companies listed on the Budapest Stock Exchange was weak in a challenging macroeconomic and regulatory environment in 2011. Their outlook for this year is still surrounded by uncertainties due to unpredictable economic policy, the volatility of the forint as well as the risks in the global economic environment.

lion, while the profit of foreign businesses rose to HUF 51 billion from HUF 17 billion. The share of total adjusted earnings of the bank’s foreign units rose to 32% in 2011, from 10% in the previous year. The stock of client loans, adjusted for foreign exchange movements, fell 2% to HUF 8,109 billion. The stock of client deposits was up 1% at HUF 6,399 billion.

Deputy CEO László Bencsik expects an increase in the consolidated loan book in 2012 as well as a slowdown in the deterioration of the lending portfolio. Doubledigit growth in consumer loans is foreseen in Russia and Ukraine, and the bank projects a significant rise in

TOTAL REVENUES 2011 (HUF MILLION)

OTP BANK OTP Bank’s consolidated aftertax profit was HUF 83.8 billion in 2011, down 29% from the previous year. Excluding the effect of the extraordinary bank levy, the early FX loan repayment scheme and goodwill write-offs related to the bank’s Croatian, Montenegrin and Serbian operations, profits were flat at HUF 161.4 billion.

Both net interest income without one-offs and net fees and commissions were up 5% to a respective HUF 630.9 billion and HUF 143.3 billion.

The contribution of the Hungarian business to group profits fell 24% to HUF 110 bil-

net income, up 46% from 2010 as a combined effect of “stable operating performance and improving financial line”. While the operating profit level was maintained despite external and internal challenges, implementation of net investment hedge accounting led to a significant improvement on the financial line, said the company.

MOL spent HUF 274 billion on investments in 2011, down 18% from the previous year. In the upstream segment, the company focused on the CEE region, Russia and the Kurdistan region of Iraq. Major projects included a renovation TOTAL REVENUES 2010 (HUF MILLION)

CHANGE (%)

811,592

783,895

5,341,314

4,298,709

Magyar Telekom

597,617

609,579

-2

Richter

309,339

275,312

12.4

OTP Bank MOL

corporate loans in Hungary.

Operating costs are expected to rise by a nominal 5% at group level, similar to previous years, primarily due to a pickup in consumer lending in Russian and Ukraine.

MOL Oil and gas company MOL reported HUF 152 billion

about half of the total. In the downstream division, revenues rose 16% to HUF 4,805.8 billion, while EBITDA fell 44% to HUF 84.2 billion as Ural and Brent prices rose a respective 39% and 40%. Revenues in the upstream division, the main profit driver of the group, increased 12% to HUF 794.8 billion. EBITDA there climbed 31% to HUF 476.8 billion.

MOL expects its hydrocarbon production to reach 135,000 barrels of oil equivalent per day (boepd) in 2012 in a “business as usual environment”. MOL’s hydrocarbon output averaged 147,400 boepd in 2011, up 3% from 2010. The company intends to maintain AFTER TAX PROFIT 2011

2010. The company blamed the loss on one-off items, such as provisions related to a settlement on the investigations by the United States Securities and Exchange Commission and the Department of Justice, impairment at its Macedonian unit as well as higher corporate tax due to changes to Hungarian tax law.

Chairman-CEO Christopher Mattheisen foresees a 0-2% drop in revenues in 2012 because of “expectations for a deteriorating economic environment potentially leading to a recession, together with fears over the level of declines in disposable income.” Underlying EBITDA is expected to drop by 4-6% in 2012.

AFTER TAX PROFIT 2010

CHANGE (%)

4

83,800

118,126

-29.1

-24.3

180,968

108,717

66.5

3,179

77,371

-95.9

49,264

64,640

-23.8

of a thermal power plant at MOL’s refinery in Bratislava and the modernization of the company’s refinery in Rijeka. MOL targets up to $2 billion in capital expenditures in 2012-2014, which it intends to finance from operational cash flow.

Investments in the upstream segment will account for

its strong financial position, and said that there was “no pressure” for additional external financing in 2012 because of the company’s diversified maturity profile.

MAGYAR TELEKOM Magyar Telekom reported a HUF 7.5 billion loss, compared to a HUF 64.4 billion profit in

RICHTER Revenues of pharmaceutical producer Richter were up 12.4% to HUF 309.3 billion.

Gross profit increased 15.7% to HUF 194.5 billion. Richter attributed the improvement in its margin to the performance of the Grünenthal portfolio. The company noted that sales of Grü-

Source: Companies’ earning reports

The Hungarian capital market saw another weak earnings season in the fourth quarter of 2011.

nenthal oral contraceptives in the EU-15 accounted for €64.5 million of the €88.3 million of total female health care sales in the region last year. Richter acquired the oral contraceptives portfolio of German drug maker Grünenthal in 2010.

In a regional breakdown, domestic sales rose 5.5% to HUF 35.6 billion, making Richter the fourth-biggest player with a 5.8% market share. Sales in Poland were up 7.4% to HUF 19.5 billion, but in Romania they dropped 4.2% to HUF 36.3 billion.

Sales in the CIS increased 22% to HUF 125.9 billion, but were down 31.2% to HUF 20.5 billion in the United States.

Richter CEO Erik Bogsch called 2011 a “successful” year in spite of difficulties, noting that revenues climbed over the €1 billion mark for the first time and operating profit was level, despite a fall in after-tax profit.

Bogsch foresees flat sales in 2012 with an expected 15-20% drop in domestic sales. He believes that there could be unforeseeable developments resulting from government measures. He noted that the government’s health care measures would cause irreparable damage to the company’s operation in Hungary and have an extraordinarily negative effect on the economy. ■

1 NewsFocus

BBJ

07

Anoversupplyof national liberators

march 15.

The national celebration to commemorate the revolution of 1848 was an excellent display of how disunited Hungarians are. Political events took place all across Budapest, most of which had little to do with 1848 and much more connection with current affairs. Of the campaign events, the most successful were Fidesz’s peace march and Milla’s civil demonstration. PM Viktor Orbán and Jobbik leader Gábor Vona gave the most memorable speeches, however, in trying to demonize the EU, both appear to be vying for similar constituencies.

While Orbán is trying to make up with the EU and the IMF, he is simultaneously making sure that Hungarians are told that these institutions and their hostility towards Hungary are to blame for many of the country’s problems. Ultimately, this approach might yield precisely what Orbán seeks – money from abroad and recognition for his tough stance at home.

BBJ POLICY SOLUTIONS

Though some media critical of the government were at pains to point out how much smaller the crowd was at the March 15 Peace March in support of the government than at the previous, January version of the same event, the fact is that it was still plenty big enough, officially estimated at about 250,000. In light of the excellent weather and Fidesz’ full embrace of the event, the somewhat smaller turnout may have been disappointing to some, but there are good explanations. The general mood is mellower now than it was a few weeks ago, when state default appeared a real risk and there seemed no end to the stream of bad news. In light of the less dire atmosphere, even many right-wing citizens might have felt that a long weekend with good weather is a great time to get away. Those that stayed arguably got more to see, however, with Prime Minister Viktor Orbán and MEP József Szájer – famous for writing at least part of the new constitution on his iPad – addressing the crowd.

Not far away, in what is by now its traditional location, Milla held its third successful mass event, with tens of thousands, by some estimates 80,000 participants. Close by were Jobbik, LMP and Ferenc Gyurcsány’s DK, with several thousand, 80, and several thousand participants respectively.

THE USUAL FARE PM Viktor Orbán gave an extraordinarily combative speech, even by his standards.

He likened Hungary to an unwilling colony that nebu-

lous foreign powers sought to dominate. These powers need to be fought off and the struggle for independence must continue as it did in 1848. Just as in 1848, the program today is still to ensure that Hungary does not become a colony. The colony idea, or rather the rejection thereof, was the recurrent theme of the speech.

Orbán said that, “We ourselves decide what is important and what is not. We do it from a Hungarian angle, with a Hungarian mindset, following the rhythm of the Hungarian heart. …[W]e do not want the unsolicited help of strangers who wish to control us.”

Later he added that, “modern age colonizers patiently stalk their target, sedate it, and gradually exhaust the targeted nation’s vital instincts and resistance.” He carried on in much the same vein, with warnings against the encroachments of some murky enemy that includes speculators and finance, and also shot off several broadsides aimed at Brussels, its anti-Hungarian attitude, and so on. The crowd applauded and chanted “Viktor, Viktor!”

SEPARATED AT BIRTH? Anyone could be forgiven for confusing Orbán’s speech with that of far-right Jobbik leader Vona, given that many of the themes they touched upon – especially colonization – were the same. In large parts Orbán’s speech could have been one delivered by Vona. Vona himself was even more radical than usual, perhaps in reaction to the recent rightward shift in Orbán’s rhetoric. It appears that both leaders are vying for the same demographic, and as the challenger Vona cannot get by saying basically the same as Orbán, quibbling only over minor details.

Thus if Fidesz’ communication is increasingly committed to rhetoric that is anti-EU and anti-foreign institutions and business, then that is no longer sufficient for Jobbik. Consequently, Vona threatens some sort of militant activism if foreigners are permitted to buy even a sliver of land in Hungary, though as always the fiercest pronouncements are hazy enough to allow for any real outcome or none at all.

We have previously (Weeks 2011/16, 2011/40) offered in these pages an analysis of Vona’s fundamental strategic dilemma: hold fast to its radical rhetoric and secure the extreme right but give up on more moderate voters, or try to expand Jobbik’s voter base by appealing to citizens who might sympathize with Jobbik but disdain its extremism. Though far

from a definite response, Vona’s recent speech is an important data point in a long-term analysis of the issue.

A COMPLEX APPROACH What to make of the prime minister’s speech in that context, however? In terms of identifying any steady course in his communication, he is even harder to pinpoint than Vona. This is apparent even in the Budapest Business Journal’s own analyses over the past few months. We have praised the government’s reasonability when it decided to seek the IMF’s help, and wrote about his conciliatory approach towards some of the international players he has offended since taking office. Then – sometimes stunned – we noted how the government once again backtracked and re-embraced its confrontational style.

It appears that we are back to square one, though the most recent aggressiveness, too, is likely to be only an outburst or a brief phase. There is no constancy at all to Orbán’s rhetoric, and at least to a certain degree that may be intentional. Orbán clearly wishes that the two worlds, one in which he seeks to curry favor with the EU, IMF, etc., and one in which he deplores them, can coexist peacefully.

In this world of his own creation his voters admire him for standing up to international pressure while he simultaneously secures loans from the IMF and keeps the EU happy with his policies, using the latter’s subsidies to bolster laggardly Hungarian growth. Though his crass comments last Thursday might make the contrast especially striking, this is not a new approach.

THE END OF DOUBLE TALK? For years, Orbán’s strategy was to employ a completely different phraseology and conceptual framework in his domestic speeches and those aimed at an international audience. Because of his famous dictum of “heed what I do and not what I say”, and because Hungary is plainly not a major factor in the international arena, this has worked rather well. The EU was probably not apprised in comprehensive detail about Orbán’s and Fidesz’s rhetoric because Brussels has more important concerns. Still, it was in all likelihood aware of the gist, but remained unconcerned as long as the rhetoric had no or little bearing on reality at the policy level.

Several things have changed, however. For one, in crucial respects there is now a connection between rhetoric and reality, starting with the

harsh levies and other costly measures imposed on MNCs. Second, because of its controversial policies – especially in the context of democracy and the rule of law – in virtually all policy areas and the recurring threat of a state default, the international media and public is more conscious of the goings-on in Hungary than previously. The level of scrutiny is therefore higher.

A year ago to date the parallel Orbán drew between Moscow and Brussels was a lot more explicit than his comment last Thursday, and yet there was hardly any reaction, in spite – or maybe because – of the fact that Hungary held the rotating presidency of the EU. This time there was intense international coverage, and through a spokesperson European Commission President José Manuel Barroso said that such comments evince “a complete lack of understanding of what democracy is and show a lack of respect for those who have fought for freedom and democracy”.

FAR FROM OVER Barroso’s harsh and highly unusual reaction may indicate that the European Commission has lost patience with Orbán. That need not concern the prime minister, however. He does not need to poll well in Brussels, he just needs to keep the money flowing.

The current perception is that he can do that by making a few substantive concessions that will nevertheless leave the political superstructure that he has established intact.

The government will probably have to impose some more austerity measures, which might have some impact on Fidesz’ already battered popularity. But in the process it will retain the political benefits of its course, both in terms of the institutional changes it has enacted and in terms of polishing Orbán’s image as a tough fighter for national interests.

With the international pressure rising, Orbán appears most concerned with Jobbik emerging as the most determined representative of national interests. In an ideal scenario for Fidesz, Orbán manages to sell himself to the international actors as a moderate if somewhat awkward bulwark against the far-right, while his own voters will accept him as the realpolitik version of Vona, who has for now publicly eschewed the possibility that he might become a mellower version of himself. The only players who haven’t placed any bids in this game are the IMF and the EU. But based on previous experience, Orbán need not fear much on those fronts. ■

www.policysolutions.hu

DEÁK TÉR DEÁK SQUARE PARLAMENT ÉS KOSSUTH TÉR (1) PARLIAMENT AND KOSSUTH SQUARE

THEN

The square was named for Lajos Kossuth, the leader of the revolution and war for independence in 1848-1849.

Kossuth dethroned the Hapsburgs to form the first sovereign government, but it eventually fell under the pressure of the allied Austrian-Russian forces. Kossuth, persona non grata for Austria but a role model for freedom fighters, left the country.

In 1867 the dualist AustrianHungarian Monarchy emerged from the Compromise of political negotiations and historical necessities. Hungary finally had its own legislation. Its home, the Parliament building, opened before it was even completed in 1902, but the square earned its name only after the turn of the century – a huge ideological sacrifice on behalf of the Hapsburgs.

Its ecosystem of symbols – consisting mostly of statues – is rejuvenated from time-to-time, mostly by moving/removing monuments.

THEN

During the years of the continental blockade of the Napoleonic war the Danube turned into the most important trans-European trade corridor. Pest leveraged to a European trade hub and markets were organized around the medieval wall. The area of today’s Deák tér welcomed thousands of merchants from the Balkans and West Europe, Jewish, Serbian, Turkish, German and many other nations. No surprise that the bureaucratic and financial center of the town was born here.

After WWII the central police headquarters towered above the Deák tér. In the 1956 revolution rebels attacked the building, lynched and hung the officers.

The clashes between the police and the angry mob on October 23 2006 staged on Deák tér, Erzsébet tér and Madách tér, all located in the proximity. The tear gas clouds, the attack of the riot police and even a moving tank made news around the world.

The legacy of aggressive riots turned the area to one of the most favorite locations of the extreme right Jobbik party. Its rally (2) with a few thousand participants promised (again and again) retaliations for the conspiratory attacks against the nation from the EU, IMF and the banking sector.

2

NOW

SZABADSÁG TÉR (3) FREEDOM SQUARE

THEN

NOW Recently a ferment debate has emerged from a government plan, which intends to make a strong political statement by restoring the 1930s’ status of the square. The aristocratic liberal Duke Károlyi, who ran the post-WWI government, would be removed. The statue is desecrated from time to time by right wing extremists who, according to their interpretation of history, blame Károlyi for accepting the mutilation of Greater Hungary under the Trianon Treaty. The statue of the communist poet, Attila József, would share a similar fate to that of Károlyi. (The József bronze sculpture replaced a statue of Duke Andrássy in 1948.)

This is the environment for PM Viktor Orbán, when he is governing. He gathered his supporters here in April 2002 when the Fidesz government was about to loose the general elections. He met his supporters here when his party victoriously swept across the country during the 2006 municipal elections, and thus built a second power center opposite the Socialist central government. And he recited his anti-EU speech at Kossuth Square this year, a location that represents the independence of the national executive and legislative powers.

5

6

The feared Neugebäude (New Building), the headquarters of the occupying Austrian military, took over the open sandy flatland. In 1848 the rebellious youth freed Mihály Stantics from his prison here and carried him around the town.

3

4

NOW The name of the square is an antonym for its previous role. On September 17 2006 an extremist mob, infuriated by the Öszöd speech, attacked the National TV (4) building on the western side, demanding to have their petition read. On the northern side a Soviet monument (5) is standing – some see it as a desecration of the square as it commemorates the occupying forces of 1945, others believe that it salutes the liberators from the Nazi regime. Today’s uninvited colonizers, according to an extreme right wing worldview, are represented by the Bank Center (6) located on the southeastern side. A handful of troublemakers entered the building and created a little turmoil this year.

Photo: REUTERS/Leonhard Foeger

1

THE UNIVERSE OF REVOLUTIONARY SYMBOLS AROUND THE TOWN

Genius Loci

On March 15 1848, Pest was a second ranked power center in the Hapsburg Empire. It had emerged from its rustic peripheral state to become a middle-sized trading hub of Europe at the beginning of the century thanks to the Napoleonic wars and the continental blockade, when the role of the Danube leveraged its growth. The swampy flatland around the modest Leopold-

stadt, today’s city of Budapest, hosted ever more traders around its borders.

The city spread rapidly and, following the well-known historical pattern, politicians and thinkers followed the merchants. Mid-century Pest was populated by the progressive youth at universities, tax paying business people without representation and a growing semi-agricultural, semi-urban mob.

NEMZETI MÚZEUM (10) NATIONAL MUSEUM

THEN

SZABADSAJTÓ ÚT, MÁRCIUS 15. TÉR FREE PRESS ROAD, MARCH 15 SQUARE

The National District has also built on the periphery of the old Leopoldstadt, just like the government district. The National Theater, the National Mews, the National Gymnasium… all opened in today’s inner 8th district. The March Youth with Petőfi turned up in the Museum Gardens to address the broader public. His character was favored by the Soviet era as the essence for the intellectual rising from poverty, so the iconography of Petőfi often used the scene where he is giving a tirade to the mob.

The revolution inspired the trash too, who used the turmoil of the day to attack the small Jewish population. Not far from the museum, a Calvinist church opened its gate to offer refuge from the pogrom, and its priest stood in its gate with a sword in his hand.

The official state ceremony always takes place on the steps and in the gardens of the National Museum – but not this year. PM Orbán moved events to Kossuth Square (see opposite page) and instead the mayor of Budapest, István Tarlós, gave his pro-government speech to the audience here.

THEN

The Youth of the Revolution spent most of March 15 1848 in this area, a trading and university hub. To publish and distribute their 12 points, a brief and sharp summary of their national and democratic demands, they occupied the print house of Hackenest and Landerer. (7) The area has a truly strong spirit guarded by the (8) statue of the poet-revolutionary Sándor Petőfi, a member of the Youth. Duri ng World War II and the following Soviet era, liberals and reformers gathered around the statue. After the 1990 political changes the liberal Szabad Demokraták Szövetsége (SzDSz) and the Budapest mayor, Gábor Demszky, celebrated the anniversary of the 1848 revolution at this spot.

In 2002, when right-of-center Fidesz government lost the elections, a self-made rebel, László Budaházy, and his peers blockaded the Erzsébet Bridge next to Március 15. tér (9). On 23 October 2006, on the 50th anniversary of the 1956 revolution, riots spread across the town and the bridge was blockaded once again.

From the next year on, the thenopposition leader Viktor Orbán chose this location to address his voters.

Since the inauguration of the Fidesz government in 2010, the opposition civilian movement named One Million for the Freedom of Press (Millások), has taken control of the location and filled the area with tens of thousands of demonstrators. The movement lacks political firepower without the proper support of the opposition parties, its agenda is hardly known – which makes the value of the crowd even bigger: protestors informed via social media gather without any well-underpinned political ideology and program.

NOW

NOW

10

11

EGYETEM TÉR, JOGI KAR (11) UNIVERSITY SQUARE, FACULTY OF LAW

7

THEN

The hotbed of all urban revolutions is in the university. Petőfi and his circle met the students personally early in the morning and they joined the rally.

NOW A feeble 200 visitors turned up at the event organized by Demokratikus Koalíció, a party founded by former PM Ferenc Gyurcsány. The number of his supporters did not even reach 0.3 % of the volume of Millások.

8

9

In the eyes of the sophisticated Hapsburgs, Pest did not deserve the respect of a metropolis but the locals felt differently. Leading up to March 15, they had been receiving news from Paris, Berlin, northern Italy and Vienna, where the European Holy Alliance of the feudalistic rulers had cracked and revolutionary movements grabbed power.

Social dissatisfaction joined with national pride, the Vienna court was clearly seen as

an alien occupier and oppressor. The spirit of Budapest and March 15 always evoked social-national sentiments. The dramaturgical role of Vienna has been played by the Nazi Germany and its fascist Hungarian Arrow Cross ally, by the Soviet Union and today by the European Union (according to right wingers), and the Hungarian government itself (according to liberals, leftists and civil movements).

So, where can you go if you were a genuine demonstrator of the good cause? 1.

You can gather your mates on a big, ideally symbolic square so that you can show off the size of your mob, saddling the incumbent decision makers with the weight of the crowd. 2. You can also march to the bureaucratic centers, as representatives of the oppressors, to raise hell, and possibly occupy their HQs. 3. You need to visit the

media. 4. Give a speech at any of the historically representative spots to evoke your ideological ancestors.

Please note: as with everything else in this country, the patterns and ideology behind the anniversaries have changed thanks to the leaked May 2006 Öszöd speech of former PM Ferenc Gyurcsány when he admitted that his administration lied about the true state of the country. AR

2 Business

BBJ

SPECIAL REPORT

Enterprise

TRENDS

Hungarians think twice before spending The effects of the plaza ban Local products compete with imports

12 16 17

Hungary’s share in Europe’s VCPE market

BBJ PATRICIA FISCHER

The answer is yes and no: while the Hungarian venture capital and private equity market has seen increased activity in the past few years, it struggles with local characteristics such as the low number of startup companies able to attract venture capital, the fact that business owners are often uninformed about the possibilities and the lack of liquidity in the Hungarian stock market.

On the positive side, statistics reveals that about $3.7 billion of venture capital and private equity was invested in 420 transactions in Hungary between 1989 and 2010. The significance of the venture capital and private equity market in Hungary is underlined by the fact that the ratio of PE and VC investments in Hungary-based companies compared to the size of the econ-

omy ranks Hungary favorably not only within the region but also within the European Union during that period.

As a percentage of GDP, the ratio of these investments exceeded the ratio in the region between 2002 and 2009, according to Judit Karsai, president of the statistical committee of the Hungarian Venture Capital Association.

But the recent global economic downturn had a negative effect on this market as well. The small size of the country, its indebtedness, the drying up of privatization opportunities, the slow increase in domestic demand and the low liquidity level of the Budapest Stock Exchange all make potential investors uncertain.

JEREMIE TURNS TREND However, the venture capital market in Hungary received new impetus in 2010. After PE and VC investments nearly halved in 2009 from the previous year (12 transactions to the tune of €214 million in 2009, down from 25 transactions worth €477 million in 2008), the market got a boost from the EU’s Joint European Resources for Micro to

Medium Enterprises (Jeremie). The program offers EU member states the possibility to invest some of their EU structural funds allocation in revolving funds and so recycle financial resources in order to enhance and accelerate investments in enterprises.

Inevitably, the Hungarian VC market was mainly driven by the eight Jeremie funds (Biggeorge’s-NV Equity, Central Fund, DBH Investment, Euroventures, Finext Startup, Morando, PortfoLion and Primus Capital) in 2011.

“Never before did so many innovative enterprises have access to capital,” Péter Tánczos, board member of the Hungarian Venture Capital Association, and head of the Euroventures Jeremie fund, told the Budapest Business Journal. “Both in terms of volume and the number of investments, last year was a success story.” The eight funds allocated HUF 12.2 billion in 45 target companies between Q2 2010 and Q4 2011.

The market, both investors and enterprises, are now excited about new possibilities. Another HUF 28.5 billion in capital will soon be made available to small, inno-

NEVER BEFORE DID SO MANY INNOVATIVE ENTERPRISES HAVE ACCESS TO CAPITAL. vative Hungarian companies within the framework of the Jeremie II program. This new program will, for the first time, also include seed capital investments, but funds will still have the opportunity to invest capital in companies in their growth phase.

The first round of the Jeremie program attracted vast interest in 2009, when 18 companies participated in the bidding process, and market insiders expect the second round to be a big success as well.

STARTING CAPITAL While the Hungarian VC

Venture capital and private equity market, 2002-2009 (investments, EUR bln)

Source: EVCA, HVCA,

Facebook, Starbucks, FedEx, Cisco, Google – what do these companies share?

No, the answer this time is not that they are all billion-dollar global businesses, or that they are among the most widelyknown brands in the world. A hint: it has to do with how they started out. Yes, all of these companies were originally founded with venture capital. Is the Hungarian venture capital market at all a promising area?

market has shown a significant increase in the past couple of years, seed capital in an organized form had been unavailable until the end of last year, when the first institutional business angel fund was launched. The founders of Day One Capital include former Minister of Economy and Transport Csaba Kákosy, Elek Straub, former CEO of Magyar Telekom, György Simó, ex-CEO of T-Online, who also held executive positions at Magyar Telekom, and András Molnár, investment director of PortfoLion, the venture capital arm of the OTP Group. Day One Capital aims to invest primarily in businesses in the IT, telecommunications, energy, biotech and finance sectors.

The fund aims to invest HUF 30 - 70 million in promising startups. Upon the announcement of the fund last June, the owners said they planned to invest in 5-10 businesses in the coming year.

“We are looking for teams rather than lone wolves, who are open and willing to cooperate with us,” Simó said.

The first investment, an IT security startup, was at an advanced stage at the time when fundraising was closed last year, but the deal was eventually abandoned. “The

company was in talks with several investment funds and others offered them more capital. We didn’t want to take part in a price competition,” Simó told the BBJ. Although the fund has several investments in the preparation phase at the moment, it seems to be having a harder than expected time finding target companies. “The biggest difference between venture capital investments and seed capital investments is that in the latter case, the target company does not have a track record of operation, which naturally means an even bigger risk for investors,” Simó explained.

In addition, seed capital investors usually take a more prominent role in a startup’s operation than VC investors, and owners in many cases have difficulties accepting this.

But then, what makes a good target for seed capital investments? According to Simó, there are several factors: the investor has to have faith in the company and the team and it has to consider the climate in the given industry where the startup wants to do business. But in many cases, a good decision relies on instincts and projections, Simó said. ■

WWW.BBJ.HU

11

Budapest Business Journal | Mar 23 – Apr 7

There’s more to funding a startup than getting a lot of money: different types of nonfinancial support add up to the creation of a viable ecosystem.

BBJ ANIKÓ JÓRI-MOLNÁR

Small, senses in 3D, damageproof, and there’s not one like it in the world – these are the attributes of the Optoforce team’s super-sensor that won the first startup contest of the year, StartUp Underground in Budapest. Optoforce is a highsensibility tactile sensor capable of measuring a three-axial directional component in a cheap, 20-cent robust silica structure. Apparently, its features and price make it competitive with the products of the largest multinationals. With the help of HUF 6 million seed investment, the prototype has been manufactured and is preparing for mass production. “We’ve set up two scenarios: either give production licenses or manufacture it on our own,” said Ákos Tar, one of the people behind the product. Whether all this is motivation enough for venture capitalists to invest HUF 70-150 million will be seen in the next few months. Until then, the spinoff company of Pázmány Péter University has already got hold of a bunch of offerings from the sponsors of the event that add up to an average seed investment.

In fact, in-kind support has gained momentum, as many from the startup ecosystem realized that the groundwork has to be laid to produce a selection of companies fit to receive venture capital funding. “I can’t say anything for sure about a future investment, however, about 10-15 startups could be ready for further talks,” said Zsolt Makra, CEO of Docler Investments and one of the organizers of SUU. “The activity of the startups is outstanding though with the 63 applications of this year, they are getting more and more professional and making competition harder for investors as well,” he

added. Docler currently has five investments worth HUF 1 billion, as has an average budget of HUF 100-300 million for funding a startup.

MAKING NEW CONTACTS The most notable feature of every place is the spontaneous or conscious presentation of new contacts. The founders of one recent success story, Noispot, met in the Colabs coworking office, and one and a half years later they have an investor (BNV Equities), some HUF 100 million to spend and the big task of establishing themselves on the international market. Apparently, having an international outlook has become a default expectation of startups, and this year’s events are serving them.

Meeting influential people directly from Silicon Valley or ‘just’ well-known experts from the European market at the same time is priceless and can result in real money in the long run. Startups and organizers asked by the Budapest Business Journal were unanimous that these opportunities should be sought out rather than waiting for a future investor to introduce them to the international market, as it is otherwise an essential feature of a VC in the Valley.

A valuable network can be built on the local scene through organizations like the Startup Flyer of the Colabs crew or the Mobility and Multimedia Cluster. Startup Flyer lets its users introduce themselves through an online database and go to regular meet ups by “applying in advance” for the persons they want to contact. MMCluster, on the other hand, gives beginners instant access to the expertise of several big players on the Hungarian scene with a member mix of 20% startups and 80% SMEs and multinationals, that can also join as partners, e.g. for an EU tender.

SOMETHING NEW TO LEARN The groundwork for a viable scene starts at the educational level, explored by specialized events and courses.

Contests have seen several startups hit the path of success: Intellisense’s WebCam Laboratory project, winner of the 2010 SUU competition, got HUF 200 million in VC funding from Finext; the company

partnered with Intel in February this year to integrate the webcam-based natural science exploration tool into its presetup collection for Intel powered Classmate PCs. Another project called Pocket Guide, by GPS City Guide, won the Barcamp startup competition and the Elevator Pitch Competition in 2010 and then got funding, again from Finext, to the value of €1.5 million. A year later, the startup finished in the top three at Startup Week in Vienna, earning a Silicon Valley tour to look for further investment.

In a more traditional way of learning, universities are taking up courses about startups and startup funding. In October last year, Colabs organized a whole weekend about startups for the students of three universities. This semester, BME has launched a new course on digital media theory and practice, with a special focus on startups from the end of March – this time powered by expertise from Kitchen Budapest.

The Central European University (CEU) Business School ran a two-month joint program with the European Entrepreneurship Foundation called Startup Accelerator in March-May 2011. Its predecessor, Venture Accelerator, has helped speedup Hungarian startups such as Gravity, now in its second round of VC funding of $2 million.

Beefed up with international speakers, Silicon Valley incubator Founder Institute will launch its first course in the region in a couple of weeks in Budapest, aimed at technology-intensive startups. The successful students will gain access to the international network of FI and the investor ecosystem of the Valley.

All in one, plus a little money Seed programs, absent from the Hungarian startup scene for so long, are the next evolutionary step to grow the new generation of startups for VC funding. Investors are searching for the next Prezi, LogMeIn or Ustream (all Hungarian ventures that have seen global success) and fortunately for them, great ideas don’t stop there, nor does

Photo: Optoforce

Paving a new way to VC funding

SUU FINALISTS RECEIVE HUF 1 million worth of agile programming training from Digital Natives incubation and co-working at Colabs (HUF 300,000) and MyCorporation (HUF 1.1 million) office, management, innovation services at Talentis (?) consulting from Compleo (HUF 150,000), Megoldás.most (approx. HUF 270,000) workshop from Microsoft (?), V-Csoport (HUF 500,000), marketing and PR tools from Mobinga (HUF 200,000) and Adverticum (HUF 1.2 million) BarCamp Web 2.0 Symposium finalists receive: advertisement from origo (HUF 2 million) and mandiner.hu (HUF 1 million) incubation and co-working from MyCorporation (HUF 1.1 million) and Colabs (HUF 300,000) PR services from JustCreative (HUF 300,000) consulting from Megoldás.most (HUF 270,000)

the desire of startups to take action. For the first time, Colabs started a seed program this year to support product and startup company development through mentoring and an average of HUF 3 million in financing.

At the end of the program, the teams can make a presentation in front of several investors and hopefully raise second-round funding. This year, six teams, out of more than 125 applicants, will have the chance to dedicate themselves to their dreams for three months.

The other initiate of this kind is of Kitchen Budapest (KiBu), a well-known hub for startups, sponsored by incumbent telco Magyar Telekom. KIBU offers HUF 4-6 million to cover the costs of human work for 26 weeks, plus office space (if needed), a line of mentors and consulting with lawyers, designers, business experts and even a psychologist. It has about 80 applicants and “will have the capacity to manage 6-8 projects a year”, said Bence Bogár, head of startup at KiBU. ■

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Budapest Business Journal | Mar 23 – Apr 7

SpecialReport

Hungarians think twice befo Hungarian consumers are still looking for cheaper options and special offers when shopping.

BBJ GABRIELLA LOVAS

The performance of the retail sector this year depends on purchasing power, household income and businesses’ ability to make payroll, according to the National Trade Association (OKSz). While the consumer market is seen as shrinking slightly in the first half of the year, how it does in the long run will depend on Hungary’s overall economic performance.

“Turnover in the first couple of months of 2012 was low, but this period is traditionally weak in the retail sector,” Attila Fodor, head of communications at Hungarian supermarket chain CBA told the Budapest Business Journal. “Consumers think twice before spending and they are looking for the cheaper options and special offers.

Thus, we have to closely follow other chains’ offers, deals and discounts.”

OKSz too noted that price continues to be the main factor in buying habits, as consumers still prefer cheaper products.

Another decisive factor is inflation, especially the increase in fuel and food prices, according to the association.

QUALITY MATTERS At the same time, quality matters, too, with consumers looking for the highest possible value for money, according to Fodor. “For instance, they want to buy real chocolate bunnies for Easter rather than the cheaper fake chocolate option.” ”In 2012, we would like to maintain our top position after Tesco on the list of retail companies, but it is too early to provide an accurate annual revenue forecast in March, as in retail, the last two months of the

UPS HUF 400 bln extra income as a result of the change in the personal income tax rate HUF 260 bln payment of real yields on private pension fund assets transferred to the state gross wages were up 5.2% and net wages increased by 6.4% on average

DOWNS households’ burden of foreign currency denominated loans the sum of FX loans’ monthly payments exceeded HUF 400 bln in 2011, estimated to be at least twice as much as it was before the jump in forint rates the volume of early repayments reached HUF 620 bln in the last quarter of 2011 higher than average increase in fuel and food prices due to a 15% increase in fuel prices, Hungarians paid HUF 160 bln more for 5% less fuel due to an average 7% increase in food prices, Hungarians spent an extra HUF 200 bln on only 0.3% more food Source: National Trade Association (OKSz)

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Budapest Business Journal | Mar 23 – Apr 7

Books and other consumer goods

%

Textiles, clothing, footwear

13,2%

0,8

%

Furniture and electric goods

Mail orders

44,5%

18,1%

Food, beverages and tobacco

Automotive fuel year matter most,” Fodor said.

“We hope that when the period of the early repayments of FX mortgage loans is over, both the frequency of shopping and the amount spent on one occasion will start to grow.”

Revenues at CBA reached HUF 565 billion in 2011, up 1.8% from the previous year’s HUF 555 billion.

The OKSz agrees that retail sales are strongly affected by what happens to FX loan holders, as these loans represent the greatest burden in Hungary’s consumer market. The market will also be influenced by the outcome of the talks on an international loan to Hungary.

While the impact of a potential agreement cannot be estimated without knowing the details, it could strengthen Hungary’s consumer market through changes in the forint rates, both directly and indirectly. OKSz notes that an improvement in the international economic

4,9

environment could also be beneficial for the market.

As to consumer confidence, while views on the current state of affairs have hardly improved, the outlook on the future was noticeably better in February, according to economic think tank GKI. Breaking a trend of almost continuous decline during the last 18 months, GKI’s consumer confidence index rose in February, reaching a value slightly above its level in December 2011. The pessimism of households abated in almost every respect, GKI said, including their expected financial situations and saving ability, as well as the possibility of purchasing high-value durables.

PLAZA BAN AND NEW TAXES A recently introduced act placing a moratorium on new shopping mall and hypermar-

ket developments will limit CBA’s room for maneuver, Fodor said. The act banned the construction of new outlets of more than 300 sqm of retail space or the equivalent expansion from January 1, 2012. The group has more than 3,300 shops, but had to close about 200 smaller units last year. Within the total, there are 103 high-end CBA Prima shops, and a handful of shops under CBA’s discount brand Cent.

The retail segment has also been strongly affected by the introduction of new taxes and an increase in existing ones, Roland Kanyó, the PR manager of drugstore chain dm drogerie markt Kft told the BBJ. He pointed out that this has inevitably led to price increases. The most painful tax changes in the retail sector are the introduction of the so-called ‘chips

RETAIL TURNOVER STAGNANT After four consecutive years decreasing in value, the volume of retail sales stagnated at HUF 7.9 trillion in 2011, according to the figures of the Central Statistical Office.

During the year, there was a slight increase in year-on-year sales in seven months and a drop in four months.

In terms of volume, sales have fluctuated at around the level of 2005 since mid2009. Although consumers spent HUF 420 billion more

2006 2007 2008 2009 2010 2011

Volume indices adjusted for calendar effects (previous year=100%)

7,077 7,272 7,558 7,282 7,479 7,899

105.1 98.2 98.2 94.9 97.7 100.2

Shop type

Change in the volume of retail sales in 2011 (%)

Food, beverages and tobacco Automotive fuel Furniture and electric goods Books and other consumer goods Pharmaceutical and medical goods Textiles, clothing, footwear Mail orders

in 2011 than in the previous year, inflation ate away the majority of the difference, said the National Trade Association in its comment on the 2011 figures.

In 2011, non-specialized and specialized food, beverages and tobacco stores had the highest market share with 44.5%, followed by petrol stations (18.1%) and furniture and electrical goods stores (13.2%), while the remaining stores had a combined market share of 24.2%.

0,4 -2,3 -1 4,7 0,7 -3,8 32,2

In December, traditionally the month with the greatest sales volume in the retail sector, sales accounted for HUF 823 billion, 1.5% more than in the same month of the previous year and equal to 10.4% of total annual turnover. In 2011, the most dynamic increase was seen in the network of mail order houses, which accounted for a small proportion of all sales, the KSH said, attributing this to the fast expansion in online sales. ■

CONSUMER CONFIDENCE INDEX

Source: GKI

Pharmaceutical and medical goods

Source: KSH

9,1%

6%

Retail sales at current prices (billion HUF)

Source: KSH

tax’, a levy on unhealthy food, higher excise taxes, a raise in the standard VAT rate to 27%, as well as an increase in environmental product fees.

Dm foresees a 4% increase in turnover in its 2011/2012 business year following a 3.4% increase in the previous year ended on September 30, Kanyó said. The number of shops is expected to reach 260 by the end of the financial year.

The business aims to further strengthen consumer relations and intensify communication with its customers, Kanyó said. The number of registered users of the company’s ‘active beauty program’ exceeded one million last year. Dm has 22 private brands, of which the Balea label line is the biggest with 400 different items. In line with changing consumer habits, the drugstore chain now offers a wider range of organic food products.

MARKET SHARE IN TERMS OF RETAIL SALES (%)

Source: KSH

o re spending

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Budapest Business Journal | Mar 23 – Apr 7

A good strategy can save a shopping center The current difficult economic conditions obviously do not favor the non-food retail market. How is declining purchasing power rearranging the shopping center market and what can plazas do to survive?

BBJ ÁGNES VINKOVITS

As a result of the developments of the past 15 years, one can hardly take a 15-minute drive without running into at least one shopping center in Budapest.

This in itself might be a problem for plaza operators in the Hungarian capital, but at present the situation is made even more difficult by the continuing financial crisis, which has led to a fall in consumers’ purchasing power.

“Unfortunately, Hungary is not a ‘hot spot’ for international retailers at present because of the difficult economic situation and the state of the general retail market,” said Erika Pál, head of retail at Jones Lang LaSalle, which is the letting agency for Budapest shopping centers Allee and Corvin. As such, major expansions are on hold at present for a period of 6-12 months, to wait and see how the market will develop. “In the meantime, we try to keep these retailers up-to-date with all the relevant information and get them ready for the time when they get the green light to enter the market,” she added.

In such circumstances, market players have to work hard to stand out from the crowd and find a way to survive. “Shopping center operators must realize the real needs their building should meet and then define the plaza’s profile according to

these needs,” Adorján Salamon, president-CEO of real estate brokerage Eston International, told the Budapest Business Journal.

BEYOND GOOD LOCATION Besides general attributes, such as location and accessibility, the success of a shopping center might depend on something more. Mammut, located next to Széll Kálmán tér, does not need to make any extra effort to attract the wealthy consumers living in districts 2 and 12, and the huge WestEnd City Center at Nyugati tér is also the obvious shopping destination for the thousands of people around the city center and those in the outer districts that can get there easily via metro. However, plazas on Buda’s Rozsadomb, for example, have had to scale down their ambitions to a more local, narrower range of needs.

“Regarding the shopping habits of Budapest residents,

buyers prefer to organize as many things as possible under one roof, which is otherwise easily accessible by car or public transport,” Pál told the BBJ. Both the Rozsadomb Center and Rozsakert are practically service houses that put daily needs in focus. A large and high-quality grocery store, some shops for organic food and services such as a post office or currency exchange locations appeal to enough people to keep the shopping centers running.

At the same time, Europeum is in an enviable good position not only due to its great location on Blaha Lujza tér in Budapest´s 8th district, but also because it was able to define its profile to fit demand. “Since there are 250,000-300,000 people crossing Blaha Lujza tér on a daily basis, our major aim is to take advantage of this traffic. We have built our profile around daily shopping needs,” Adrienn Lovro, General Manager of ABLON Kft, which developed and manages Europeum, told the

BBJ. Europeum also managed to attract well-sounding brands such as H&M or Yves Rocher as tenants.

MOM Park is another example for finding a good profile. This shopping center on the 12th district’s Alkotás út, threateningly close to the popular Mammut, has successfully positioned itself as a “lifestyle center” and, to accompany its high-quality services, it has recently managed to contract brands such as Gerry Weber, Pinko and Calvin Klein as tenants.

Campona in Budafok has to face a more difficult situation. Since the 2009 opening of the huge Allee near Móricz Zsigmond körtér, which with its great accessibility attracts most bigspending customers such as the young and the middleclass, Campona has struggled to build a proper profile and attracts great brands.

The Tropicarium, which is the largest sea aquarium in the CEE region, might seem at first sight as a good starting point for Campona to build on. However, although

the unique fish species, the alligators and the sharks on display offer a quality experience and attract a lot of people, these people are rather one-time visitors and rarely become frequent shoppers at Campona.

TIME TO WORK “Shopping centers with low occupancy rate will not perform better from one day to another without any extra effort or major changes in their profile,” noted Eston’s Salamon, emphasizing that plaza operators cannot sit back and relax.

A positive economic environment is also not something that market players can rely on. None of the shopping center operators surveyed by the BBJ expects increased business in 2012. They also predict that retail rental fees will stagnate. “The major aim remains the same this year: to keep good tenants and reliable business partners even at the cost of compromises,” Pál said. “Finding new tenants for an empty space is always much more difficult.” ■

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Budapest Business Journal | Mar 23 – Apr 7

State rolling up a monopoly on tobacco Hungary’s tobacco industry, worth an estimated HUF 500 billion in 2011, would shrink to one-third of its current size if the retail sale of tobacco in the country became a state monopoly, as the governing Fidesz party has proposed in a bill submitted at the end of last year.

BBJ PATRICIA FISCHER

The proposal is in line with the governing party’s ambitions to intervene in all segments of the economy.

The planned legislation in question follows the government’s moves toward centralization on an institutional level, such as the buyin into oil and gas company MOL, and later Rába, as well

as the construction ban on new shopping centers –to name but a few examples.

With the indisputably noble aim of reducing smoking among young people in particular, and the entire population in general, the proposal stipulates that the number of tobacco sales points be reduced to approximately 6,000 from the current 42,000.

Towns with a population of less than 2,000 would be allowed one “national tobacco shop” only, with one for every 2,000 inhabitants in larger towns. The state would hold a monopoly on the product itself and establish the national tobacco shops as concessions.

The final vote on the proposal has been delayed, as the government decided in February to send it for review to the European Commission.

According to János Lázár, head of the Fidesz parliamentary group, the EC is expected to issue an opinion on the matter in May.

ALL FIRED UP The planned legislation has stirred up the industry. One of the main worries is that the tobacco monopoly might increase the share of the black economy in the sector.

Gergely Mikola, one of the founders of the Hungarian Association of Tobacco Industry Investors (DBMSz) and corporate communications director at tobacco firm BAT, has warned the changes to retail tobacco sales could raise the market share of illegal tobacco sales from 3-6% to as much as 15%, which would result in an HUF 80 billion fallout in taxes for the state.

The association therefore has suggested drawing the line at a population of 1,100-1,200 per tobacco shop instead of the proposed 2,000. This way, DBMSz argues, there would be about 10,000 license shops The association, however, agrees with proposals that would make it more difficult for Hungarians under the age of 18 to have access to tobacco

products as well as those that would create more jobs.

But a recent study published by economic research company GfK took a different view on job-creation issues.

In fact, the study claims that the legislation will not create more jobs; on the contrary, it would elimination many of them. The study predicts the closing of 2,500-3,500 small shops, which might result, with two employees on average, in the dismissal of a minimum of 5,000-10,000 people.

Taking other sales points into consideration, such as gas stations, newspaper stands and restaurants and bars, GfK projects another 2,000 job cuts. And together with those working in the distribution and logistics segment, the final number of jobs at stake comes to 10,00015,000, the study claims.

FAVORING SOME? But that is not all. Hungarian daily Népszabadság has written that Lázár and János

Sánta, head of tobacco company Continental and of DBMSz, had worked together in drafting the new legislation from the beginning.

According to the paper, the bill had been designed to help Continental, a company in full Hungarian ownership, gain a better position on the domestic tobacco market, which is currently controlled up to 85-90% by multinationals such as Philip Morris, BAT and Imperial Tobacco.

“Indeed, one can read between the lines that the

planned legislation favors the Hungarian player on the market,” Péter Biczó, head of the retail and FMCG group at PwC Hungary told the Budapest Business Journal. “And while it imposes greater control over tobacco sales, which might help to reduce smoking, in order to be acceptable to society as well as all market players, the procedures awarding concessions to the tobacco shops need to be very transparent.” ■

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Budapest Business Journal | Mar 23 – Apr 7

BIG FISH, SMALL FISH:

The effects of the plaza ban Hungary’s new “plaza stop” act, which bans the construction of retail spaces larger than 300sqm, was created to help smaller retailers against the larger market players. Is there any room for rearranging Hungarian consumer habits, and how will the ban affect the already struggling construction industry?

BBJ ÁGNES VINKOVITS

Last year, Hungary’s parliament approved a ban on the construction of retail spaces of more than 300sqm. The law came into force on January 1, 2012 and will be in place until the end of 2014. The idea had been originally aired by the green-liberal LMP party last spring and, to the surprise of the opposition parties who had grown used to the rejection of their every policy suggestion, was later taken up by the governing Fidesz-KDNP party alliance.

The main idea is to somewhat rearrange Hungarian consumer habits and make smaller, Hungarian-owned retailers preferred over the multinational shopping centers. In terms of environmental benefits, it is also an aim to reduce the number of greenfield developments, as it is mainly former agricultural land that is used for larger retail developments.

Given the in-depth demographic surveys that retail developers carry out before deciding to build a new store, the necessity of the current ban is hardly supported. If there were not any consumer demand for a new shopping center or hypermarket, investors would hardly spend billions of forints on new developments.

“The aim to regulate the retail market is something to be professionally welcome,” Adorján Salamon, the president-CEO of real estate advisory company Eston International told the Budapest

Business Journal. However, consumer habits have already evolved and shopping centers and hypermarkets are the leading suppliers of everyday life, he added. “Such a regulation would have been more appropriate 20 years ago.”

CONTROVERSIAL EFFECTS In order to favor smaller, Hungarian-owned retailers against multinationals, the government had previously planned to introduce a law that would have mandated that large stores and shopping centers stay closed on Sundays. According to the idea, small retailers would have been able to receive exemptions from this, which would have helped them to regain customers from the giants.

However, since several industry organizations stated that it was already too late to rearrange Hungarian shop-

ping habits, and trade unions also raised their voices against the massive layoffs that such an obligation would cause at hypermarkets, the government finally decided to shelve the proposal.

But the plaza ban has also received its fair share of criticism. According to employer and manufacturer association MGyOSz, construction industry association ÉVOSz, shopping center association MBSz and property developer association IFK, the current ban carries the risk of hurting Hungary’s economic growth, may increase unemployment and push the already struggling construction industry even deeper into recession.

The latest data of central statistical office KSH shows that volume in the construction industry dropped by more than 10% in 2011.

According to ÉVOSz, the ban

would lead to a further HUF 250 billion loss for the sector.

It is also a fact that an average shopping center provides approximately 1,000 people with jobs and a hypermarket has 400-500 employees. As such, hindering or at least postponing huge retail developments is hardly in tune with meeting the government’s promise of creating one million new jobs over ten years.

Reducing the administrative burden on Hungarian SMEs or supporting their growth ambitions with state subsidies could be more effective, the professional organizations have suggested.

Also, while from a developer’s point of view the ban is only an extra administrative difficulty, for property owners it might mean a huge risk. Those who earlier bought a property with the aim of building a successful

shopping center on it now have to swallow the bitter pill of the significant devaluation of their property.

CLASSIFIED REQUIREMENTS Although a committee – whose members are delegated by the National Economy Ministry and the Rural Development Ministry –may grant developments exemptions from the ban, according to the industry this opportunity might only serve to make the market even more unpredictable. “The major problem is that the criteria on which the committee decides whether to grant an exemption are not clear at all,” noted Salamon.

His opinion seems to be supported by the latest decision of the committee.

According to the daily Népszabadság, after reviewing 23 requests, the committee

has granted an exemption in seven cases, but without revealing the basis on which it has taken those decisions.

The only detail that has been leaked about the selected shopping centers is that all of them are smaller than 5,000sqm.

Still, the ban in itself is not likely to prevent any huge retail developments in the long-term. Retail chains that already have stores in Hungary might get an exemption from the ban or, in the worst case, will postpone their expansion ambitions.

“The chains that have not appeared in Hungary so far might rather go to another country anyway,” Salamon said, referring to the sector taxes that already pose a huge burden on the retail market and to the current unpredictable economic and regulatory environment in Hungary. ■

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Budapest Business Journal | Mar 23 – Apr 7

HOMEMADE VS. FOREIGN:

Local products compete with imports Are ther e Hungarian products that can compete with global brands?

BBJ ZSÓFIA VÉGH

ZWACK: THE NEXT BEST THING Anyone well-acquainted with the drinking habits of the young knows how popular shots are.

These pre-, during, and afterparty drinks also include herbal bitters. Unicum and Jagermeister are found most often over the counter. The latter has a strong reputation outside Hungary too: it is the drink that put Californian party animals “in the zone”. So it is not by chance that Zwack set out to win over youngsters overseas with Unicum and Zwack (Unicum Next outside the US market), a more party-friendly version of big brother Unicum. Zwack is a thinner-bodied drink with a more prominent citrus flavor. It is already among the offerings of many US bars, which will probably give a push to Hungarian sales as well.

GOODBYE KITTY, HELLO BUNNY! In the past, Teddy bears ruled (huge thanks to Elvis). The present is all about cats, or kittens, to be more precise. Hello Kitty, the most famous cat in the world, has been featured on literally anything that can be sold – even on condom key chains (check eBay).

But what this cute little kitten used to represent is now largely gone because of cheap Chinese knockoffs. So the next wave is... Bunnies! The Hungarian toy products of Nyúlgyár (Bunny Factory - BF), stand a pretty good chance of knocking out Asian cats – at least on the Hungarian market. Each is handmade and one of a kind, with a real personality that makes it easier to connect with. They already have a solid XY fan base on Facebook.

Their owners post photos about their vacations together or Bunnies sleeping with kids. If you are a parent, give them a try: there is a strong likelihood that the products of BF will be your kids’ BFFs.

TOMMY VERSUS TISZA Both are trendy. Both go well with jeans. But only one is Hungarian. It is not just so, it is the landmark sports shoe brand of the 1970s and ’80s (partly due to the fact that it did not really have any competitors). And of the 2000s. Its resurrection is similar to the birth of Campeón, a Spanish shoe brand, which has been one of the most recognizable Spanish brands abroad.

Besides being Hungarian, the advantage of Tisza over Tommy Hillfiger is that it absolutely gives jobs to Hungarian workers and not, as some claim, third-world child labor.

SZENTKIRÁLYI, THE AWARD-HOARDER Evian may be the favorite mineral water of celebrities, but Szentkirályi is a celebrity itself.

In 2004, Szentkirályi won the best foreign still mineral water award at the AquaExpo in Paris (the Oscars for mineral waters). Ever since, its star has been rising. In 2005, it earned the best-flavored mineral water title at the same event.

A year later, it won at Mondial SPA & Beauty in the category of best foreign sparkling mineral water. In fact, for every year there was a prominent international award (or two).

Most recently, it received an award for the most innovative bottle design and marketing in the Water Innovation Award in Rio de Janeiro. With so much appreciation, the water cannot be bad. Coming from Hungary – the land of spas – its healthy properties are unquestionable too.

But it shows off its competitive edge when prices are concerned: while a bottle of Evian costs HUF 569, the Hungarian award winner sells for HUF 99 (source: GRoby retail chain), winning against its French rival hands down.

CRACKED CAREER? When served in high-class tableware, even bad food tastes better.

Hungarian porcelain makers knew that and managed to establish a strong reputation worldwide. Unfortunately, Hungarian porcelain is well past its heyday, as several of its world-famous factories have struggled to stay afloat. Not long ago, porcelain manufacturer Herendi nearly when bust, but was eventually saved by local stakeholders. The famous Zsolnay factory was announced as being up for sale at one point, but it proved unsuccessful and production was resumed. Production at Hollóházi stopped last year when a liquidation process was launched against the company. It is really sad, especially in light of the fact that all (important) restaurants order from Rosenthal. Why? Because Hungarian porcelain manufacturers haven’t come up with such innovative tableware as Rosenthal did, explained Viktor Segal, top chef. Hopefully, they will recognize this opportunity soon and people will return to Hungarian products.

CHEESELAND AT KAPUVÁR Are you sure you can handle what’s on your plate?

All those additives, preservatives, emulsifiers, coagulants all hidden in cheeselike products? They sure are cheaper but grated pizza toppings and smoked chunks are clearly not good for you.

Switch. If you don’t do it for your health, do it to support Hungarian products. Those of Cserpes Sajtműhely, for instance. On their website, you will find a section on what Cserpes cheeses DON’T contain. “Less is more” applies here, too. They are less affordable to many, but at least are accessible in several retail chains, so it doesn’t take extra time to find them. (In international comparison, they fare much better pricewise with similar quality cheeses.)

THE POSTMAN’S FRIEND Spring is officially here. The urge to get out and spend time outdoors is stronger than at any other time of the year. Saddle up your two-wheeler and go for a ride. You don’t have one?

Resist the temptation to get on the ‘I have a fancy foreign bike’ bandwagon. Opt for a Hungarian make instead. Get a bicycle from the recently opened Neuzer factory. Neuzer bicycles are designed and produced by a Hungarian engineer. And they come with a strong résumé, having been tested by staff at Mercedes and Hungarian postal workers. Neuzer is the official means of transport of Hungarian letter carriers. Still longing for those handsome Treks and Canondales? Here are some cons: they are way more expensive, and are regularly on offer at stolen-bicycle markets. ■

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Budapest Business Journal | Mar 23 – Apr 7

Largest shopping centers in Budapest Ranked by net retail space SERVICES

–

–

Jones Lang LaSalle Kft 1051 Budapest, Széchenyi István tér 7-8.

(1) 489-0202, (1) 489-0203 www.joneslanglasalle.hu

59,000

7,000 200,000

150 3 190

Mammut Szolgáltató Zrt 1024 Budapest, Lövőház u. 2–6.

(1) 345-8000, (1) 345-8005 www.mammut.hu

56,000

»

330 7 1,200

WestEnd Ingatlanhasznosító és Üzemeltető Kft 1062 Budapest, Váci út 1–3.

(1) 374-6573 www.westend.hu

50,000

16,218 200,000

400 4 1,500

–

–

–

Cushman & Wakefield Kft 1052 Budapest, Deák Ferenc u. 15.

(1) 268-1288, (1) 268-1289 www.cushmanwakefield.com

48,700

– 58,700

220 1 2,500

–

–

Lurdy-Ház Kft 1097 Budapest, Könyves Kálmán körút 12–14.

(1) 456-1200, (1) 456-1209 www.lurdyhaz.hu

47,500

47,500 95,000

100 4 1,350

–

–

3

MAMMUT SHOPPING AND ENTERTAINMENT CENTRE www.mammut.hu

4

WESTEND CITY CENTER www.westend.hu

5

PÓLUS CENTER www.polus.hu

6

LURDY HÁZ BEVÁSÁRLÓ- ÉS IRODACENTRUM www.lurdyhaz.hu

SCM Shopping Center Management Kft 2060 Bicske, Spar út

47,000

ECE Projektmanagement Budapest Kft. 1106 Budapest, Örs vezér tere 25/a (1) 434 8200, (1) 434 8201 www.ece.hu

45,200

7

ALLEE SHOPPING CENTER www.allee.hu

8

ÁRKÁD ÖRS VEZÉR TERE SHOPPING CENTER www.arkadbudapest.hu

9

SAVOYA PARK www.savoyapark.hu

CEGIS Hungary Kft 1117 Budapest, Hunyadi János út 19.

(1) 887-1330, (1) 209-9071 www.cegis.fr

45,000

10

DUNA PLAZA www.dunaplaza.hu

Ségécé Magyarország Kft 1138 Budapest, Váci út 178.

(1) 577-1100, (1) 577-1101 www.segece.hu

43,470

11

CORVIN PLAZA www.corvinplaza.hu

Ségécé Magyarország Kft 1138 Budapest, Váci út 178.

(1) 577-1100, (1) 577-1101 www.segece.hu

12

MOM PARK SHOPPING CENTER www.mompark.hu

BNP Paribas Real Estate Zrt 1123 Budapest, Alkotás u. 53.

(1) 487-5501, (1) 487-5542 www.realestate.bnpparibas.hu

13

SUGÁR SHOPPING CENTER www.sugar.hu

14

CSEPEL PLAZA www.csepelplaza.hu SOROKSÁR BUY-WAY SHOPPING PARK www.buyway.hu

15

16

FAMILY CENTER KŐBÁNYA –

EUROPEUM SHOPPING CENTER www.europeum.hu 17

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

105,000

6,775

»

–

»

ADDRESS PHONE FAX EMAIL

Peek&Cloppenburg, H&M, New Yorker, Zara, Stradivarius, Pull&Bear, Bershka, Oysho, Hervis, Tesco, Libri, Saturn

1087 Budapest, Kerepesi út 9.

(1) 880-7010 (1) 880-7070 nikolett.nagy@arenaplaza.hu

Top Shop, Dormeo

1195 Budapest, Vak Bottyán út 75.

(1) 919-1300 – info@kokiterminal.hu

»

1024 Budapest, Lövőház utca 2–6.

(1) 345-8000 (1) 345-8005 mammut@mammut.hu

CinemaCity, H&M, Debenhams, Mango, Pull&Bear, Bershka, Media Markt, C&A, Match, dm, Rossmann

1062 Budapest, Váci út 1–3.

(1) 238-7777 – info@westend.hu

Tesco, H&M, C&A, Media Markt, Deichmann, Humanic, Dm, Hervis, Office Depot, Libri

1152 Budapest, Szentmihályi út 131.

(1) 415-2114 – andrea.racz@eur.cushwake.com

Mi Mozink Lurdy, Reál Élelmiszer, Game World, KIK, Háda, Unicredit Bank, Lurdy Konferencia Központ, Office Depot, Euronics

1097 Budapest, Könyves Kálmán körút 12–14.

(1) 456-1200 (1) 456-1209 titkarsag@lurdyhaz.hu 1117 Budapest, Október huszonharmadika utca 8–10.

(80) 205-046 – info@allee.hu

ENTERTAINMENT FACILITIES

KÖKI TERMINÁL www.kokiterminal.hu

MAIN TENANTS IN 2011

RESTAURANT

2

FOOD STORE

CONCIERGE

–

WELLNSS ÉS SPORT

–

PHARMACY

1

BANK

200 2 2,800

ARENA PLAZA SHOPPING CENTRE www.arenaplaza.hu

POST OFFICE

64,000

– 185,000

FACILITY MANAGER, ADDRESS, PHONE, FAX, WEBSITE

BABYSITTING

Cushman & Wakefield Kft 1052 Budapest, Deák Ferenc u. 15.

(1) 268-1288, (1) 268-1289 www.cushmanwakefield.com

COMPANY WEBSITE

ACCESS FOR DISABLED

NET OFFICE SPACE (SQM) GROSS BUILDING AREA (SQM)

RANK

NET RETAIL SPACE (SQM)

NO. OF RETAIL UNITS NO. OF LEVELS NO. OF PARKING SPACES

130 4 1,200

–

C&A, H&M, ZARA, Van Graaf, Libri, Interspar, Cinema City, Intersport, DigiDog, Mark’s & Spencer, Mango

170 3 1350

–

–

–

»

1106 Budapest, Örs vezér tere 25/A (1) 433-1400 (1) 433-1401 info@arkadbudapest.hu

75 3 2000

–

–

»

1117 Budapest, Hunyadi János út 19.

(1) 887-1330 (1) 209-9071 office@savoyapark.hu

11,166 90,270

200 4 1,600

–

Intersport, Marionnaud, Deichmann, Promod

1138 Budapest, Váci út 178.

(1) 465-1600 (1) 465-1620 dunaplaza@segece.hu

32,400

3,400 65,000

150 4 812

–

–

–

–

–

CBA Príma, Müller, Euronics, Hervis, Deichmann, H&M, New Yorker, C&A, Reserved

1082 Budapest, Futó utca 37–45.

(1) 267-8461 – zsofi@corvinbevasarlokozpont.hu

30,000

17,500 47,500

105 9 1232

–

–

Cinema City, Match, H&M, C&A, Salamander, French Connection, Benetton, Gant, Stefanel, Michael Kors, Paulaner, Vapiano, Leroy

1123 Budapest, Alkotás u. 53.

(1) 487-5501 (1) 487-5542 momparkinfo@mompark.com

Keringatlan Kft 1126 Budapest, Nagy Jenő u. 12.

(1) 487-3746, (1) 487-3749

19,000

– 35,900

100 4 400

–

–

–

–

dm, Extreme Digital, Match, Rialto, Bookline, Libri, Háda, Bambini

1148 Budapest, Örs vezér tere 24.

(1) 469-5339 (1) 469-5330 sugar@sugar.hu

Ségécé Magyarország Kft 1138 Budapest, Váci út 178.

(1) 577-1100, (1) 577-1101 www.segece.hu

13,675

– 19,803

68 2 473

–

–

–

–

–

CBA, Libri, Alexandra, Merkur Spielo, Plaza Fitness, Vision Express, mobile operators, banks

1211 Budapest, II. Rákóczi Ferenc út 154–170.

(1) 425-8004 – csepel.plaza@segece.hu

ABLON Ingatlanfejlesztő Kft 1132 Budapest, Váci út 30.

(1) 225-6600, (1) 225-6601 www.ablon-group.com

11,400

– 12,260

8 2 420

–

–

–

–

–

–

–

–

–

Office Depot, DM, Líra, Brendon

1231 Budapest, Bevásárló utca 8.

(1) 225-6600 (1) 225-6601 ablonretail@ablon.hu

»

9,322

– 9,662

1103 Budapest, Sibrik Miklós út 30.

(1) 437-4600 – info-hu@aere.com

ABLON Ingatlanfejlesztő Kft 1132 Budapest, Váci út 30.

(1) 225-6600, (1) 225-6601 www.ablon-group.com

5,000

– 6,000

1088 Budapest, József körút 5.

(1) 225-6600 (1) 225-6601 info@europeum.hu

–

»

» 1 400

16 3 300

–

–

–

–

–

–

–

Spar Magyarország Kft, dm Kft, OTP

–

–

–

–

–

–

–

–

–

H&M, Müller, Deichman, Ives Rocher, Samsonite, Tally Weijl, Bijou Brigitte, Playersroom, Triumph

This list was compiled from responses to questionnaires received by March 21, 2012 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

2 BusinessTrends 19

BBJ

WWW.BBJ.HU

Budapest Business Journal | Mar 23 – Apr 7

Car sales stagnate

Food stuff

Real estate

Company cars dominate market activity

Eat the same and pay more

Brands take advantage of low rents

73%

Mostly stagnating new car sales, smaller changes on the list of the most popular models and several changes in tax laws announced at the end of the year were the major characteristics of the car market in 2011. Company car sales took about a 73% share of the total sales of 56,500 cars and trucks, showing a two percentagepoint increase from 2010. As for the most popular brands, the top of the list was almost unchanged: Ford, Volkswagen, Opel, Renault and Skoda led the way, while the most popular models were the Ford Focus, Skoda Octavia, Renault Mégane and Opel Astra, according to data from leading fleet manager LeasePlan. Look at the manufacturers’ sales figures, and there are minor changes in the ranking, as the Volkswagen group, Renault-Nissan and General Motors sold more vehicles than the Ford group. More than 20% of total sales came from VW, while 15% represented the brands of Renault-Nissan. LeasePlan data shows that 80% of the fleet cars put in circulation in 2011 were diesels, a 10-point increase from 2010. Although the rise in excise tax on diesel was announced last September, its effects have not yet shown up in the sales figures, though they are expected to soon. “Fleet management companies can still reclaim the VAT of the vehicles’ purchase price, so the base of the rental fee calculation will still be the net price of the car. Furthermore, the ban on cutting the VAT of Within total car sales, company rental fees has ceased, so car sales increased in 2009 renting a fleet can be 27% compared to the previous year, cheaper,” LeasePlan CEO but overall sales in the sector Roelof Hansman added. dropped significantly, by almost Besides tax changes, a 50%. Most company cars are in drop in the purchasing the lower-medium category. power of the population will further increase the dominance of company cars in the new car market.

4,985 4,703 3,091 Source: HVG Cégautó

5-10%

INCREASE IN THE VALUE OF FOOD CONSUMPTION

REDUCTION IN PRIME RENTS IN 2012

AJM

The volume of food retail sales was unchanged between February 2011 and January 2012 compared to the same period in the preceding year, but the value of consumption increased by 5%, according to a report by market information provider Nielsen. The annual turnover of the 90 food product groups examined was more than HUF 1,350 billion.

A previous report from Nielsen, published in January 2012, showed that the increase in the value of food retail sales was 4% between December 2010 and November 2011, in line with the average hike in food prices. “This means that consumers bought the same amount of food than a year before,” said Ágnes Villányi, head of trade relations department at Nielsen. Among the most popular food products, sales of meat products, beer, soda, chocolate bars and ice cream increased in both value and volume. “We registered a doubledigit increase in value for sour cream, oil, margarine and ice cream,” Villányi noted.

The position of two sales channels improved over the past period: those of supermarkets and discount stores with an area of between 401-2,500sqm and small shops that have 50sqm or less of retail space. Both categories were able to increase their market share by one percentage point to 34% and 10%, respectively. The share of the largest stores (over 2,500sqm) dropped by one point to 30% while that of the 51-200sqm shops decreased to 18% from 19%.

There are also diverse trends in the different regions.

In the northwestern, Retail food sales stagnated northeastern and at a value of HUF 1,300 bln southeastern parts of the between February 2009 and country, the increases January 2010. As far as volume is in shops’ turnover were concerned, Nielsen registered a above average, at 9%, 3% decrease from the previous 8% and 6%, respectively. period. There was also a further concentration among shops: Sales in the central region, supermarkets and discount including Budapest and Pest shops increased their market County (the areas with the share from 32% to 33%. highest purchasing power), increased by only 2%. AJM

Last year saw only a handful of retail centers opening: Europeum and KÖKI Terminál in Budapest, and the Árkád Szeged brought altogether 94,000sqm of new retail space.

On the flip side, there have been numerous new brands like Debenhams and Hard Rock Café entering the market, taking advantage of relatively low rents and hoping to be in a good position to capitalize on the inevitable recovery when it comes. “Meanwhile, brands such as Müller continued their expansion in the country,” said Anita Csörgő, director of retail agency at the Hungarian office of Colliers International. Colliers’ latest market report shows that several luxury brands have opened shops on the dominant high streets of Budapest. “Prime rents on Váci utca as well as top rents in the best shopping centers which have been fairly stable in the past five years, are poised to see a moderate reduction of between 5%–10% in 2012,” commented Csörgő. Another factor that might have a negative effect on new supply is the so-called plaza ban (see more on page x), as it is likely to slow down the so far dynamic expansion of discount food stores.

Rents in Hungary remain at generally low and attractive levels, having fallen between 10% and 30% over the last two years, although the best sites (MOM, Mammut, Aréna Plaza) have been able to maintain or even increase their levels.

According to Jones Lang LaSalle’s 2011 Q4 report, typical shopping center rents range between €2050 per sqm per month, The decline in retail turnover while prime downtown that has been experienced high street rents at Váci every year since 2006 stopped utca are around €60-90. in 2010 and a recovery has Prime rents in Andrássy slowly but surely started út still vary between €40to take place. 2011 should 50, although availability is show an overall stagnation, a positive sign after five years of high. Retail park rents range continuous declines. from €6-8 while factory outlets have rents of €22-25 in Budaörs and €16 in the countryside. AJM

Brand ranking 2010

Food sales growth (%)

Food sales growth (%)

February 2010-January 2011

February 2011-January 2012

Retail shops rental fees 2010

Retail shops rental fees 2011

Shopping center €/sqm/month

Shopping center €/sqm/month

20-50

20-50

Prime downtown high street

Prime downtown high street

60-120

40-50

Retail parks

Retail parks

6-8

6-8

Factory outlets

Factory outlets

13-16

22-25

-50%

Brand ranking 2009

5%

THE PROPORTION OF COMPANY CAR SALES IN 2011 WITHIN THE TOTAL

-3%

34,728 32,692 27,097 Source: Nielsen

5 years

Source: JonesLangLasalle

3 Socialite

BBJ

ART MARKET LAUGHING MATTER WHOSE NEWS?

Something old, something new Animals in Pest jokes Levente Cseh, Daniella Rédei, Gábor Koncz

23 21 22

Venture capital: more than financing Hungary’s venture capital market received a big boost from the Jeremie I program. A total of HUF 75.2 billion was disbursed to Hungarian SMEs in Jeremie programs last year, and Jeremie II is expected to be launched in the near future – distribution funds already have great expectations about what lies ahead.

HOW DO YOU THINK CURRENT ECONOMIC ENVIRONMENT WILL SHAPE THE VENTURE CAPITAL MARKET IN HUNGARY?

ISTVÁN HAVAS

PAUL STOLK

PRESIDENT American Chamber of Commerce in Hungary

CHAIRMAN Netherlands-Hungarian Chamber of Commerce

The Jeremie program provides liquidity to the venture capital market that did not exist in the past in Hungary.

In exchange for an equity interest, VC provides funding to startups that are not eligible for bank financing, especially in today’s strict lending environment. However, venture capital is more than financing, in exchange for shared control over the project it also provides competencies in the form of management, sales, marketing and finance to grow small companies into corporations.

As it is very difficult for the Hungarian SME market to get loans from the banks, the venture capital market will be one of the few options they have if they need more money.

The VC market will invest most likely in some special segments of the market where products will be developed and produced for outside Hungary, most likely in the ICT and medical sector. As the SME segment is relatively small and immature in Hungary and access to money difficult, the venture capital market will have a relatively clear and small list to pick from.

3 Socialite 21

BBJ

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Budapest Business Journal | Mar 23 – Apr 7

THE WISDOM OF THE LITTLE BUNNY:

Animals in Pest jokes “Errare humanum est” said the hedgehog and climbed down from the scrubbing brush.

BBJ ANDRÁS SZARVASI

“Jokes are the creations of the Renaissance man,” starts Zsuzsa Bereznai her short essay “Jokes in public life: 1956”. “Jokes liberate men from taboos ingrained into their minds in the Dark Ages.” Bereznai traces back Renaissance jokes to the ancient Greeks.

Some jokes are rooted in the “Philogelos”, the oldest existing collection of jokes which may have been written down in the 4th century A.D. “Certain archetypes can resurface even after several centuries of latency – reborn and linking up with actual historical and social circumstances.” Bereznai believes the most typical examples of this “philogenesis” are animal jokes.

Aesop’s popular fables, in which animals speak and have human characteristics, are very close to contemporary animal jokes. Although Aesop’s existence remains uncertain and no writings by him survive, numerous tales credited to him were gathered across the centuries and in many languages in a storytelling tradition that continues to this day. These tales are not only parables with didactic purposes but may express the political views of the storyteller.

Bereznai quotes examples of how Aesop’s fables may transform into modern jokes. The well known “The Fox and the Crow” tale, for example, reappeared in a (then) popular 19th-century anecdote ref lecting the traditional hostility between Hungarians and the oppressing Austrians. The bestknown opus of the legendary French fabulist, Jean de La Fontaine, has also gone through some changes to land on the lips of the people in our times:

In a field the Ant and the Cricket live next to each other. The Ant works hard in the withering heat all summer long, hoarding supplies for the winter.

The Cricket laughs and dances and plays the summer away. The Ant warned the Cricket that summer will be over soon and that the Cricket should also prepare for wintertime.

However, the Cricket did not listen to the Ant. One late autumn day the Cricket knocks on the Ant’s door.

- Listen Ant, I’m going to town for a concert.

Should I bring you anything?

- No, thank you. I have worked hard and have everything I need, replied the Ant. A few weeks later, the Cricket knocks again.

- Hello Ant! I’m going to tour the country. Do you want to come with me?

- Sorry, I can’t. I’ll have to prepare for the winter.

During the cold winter the Cricket knocks again on the door of the Ant. Poor Ant is very cold and hungry and can hardly wait for the spring.

- Hi Ant! I’m leaving for a European tour.

Should I bring you anything from abroad?

- Oh no. I would just ask you to do me a favor.

- Of course. What is it?

- Will you give a concert in Paris?

- Of course.

- Well, would you go then to the Père Lachaise Cemetery?

- Yes. And then what?

- Find La Fontaine’s grave and just spit on it, please.

László Erőss offers a classification of animal jokes in his book about Pest jokes (“A pesti vicc,” Gondolat 1982). Although every animal joke has certain anthropomorphic attributes, a horse joke obviously would

have a completely different context than a parrot-joke. “Elephant-jokes are extremely popular among children, probably because the huge and formidable-looking but clumsy and hulking super-animal personifies the higher authorities, namely the Father and the School in children’s mind.” In the elephantmouse dialogues it is usually the quick-witted rodent that outsmarts the pachyderm, a very satisfactory outcome for children who happily identify themselves with the little mouse.

Györgyi Horváth, a lecturer at the Eötvös Lóránd University, brings us closer to understanding the philosophy of animal tales in an article published in Tiszatáj, September 2009. “These stories are actually educational tales, with an obvious objective: to give a clear idea of the moral rules of living. They are simple, brief and effective with clear-cut and easy-tounderstand moral lessons.

A very simple story without additional episodes or tinged characters,” she wrote. Each character has an anthropomorphic role: the ant is hardworking, the fox is cunning, the lion is majestically presumptuous, etc.

These short fables, thus, are extremely suitable for “coded” speech, for hinting at implications and conveying contents which, explicitly, would be much more difficult to communicate. It’s no wonder then that animal jokes come very handy in politically sensitive times. And this is the very reason why, while also known and favored universally, animal jokes earned extraordinary popularity in Eastern Europe during communist times. Animal jokes are the core of Russian jokes (which draw their roots from old Slavic fairy tales) and they are present in the particular genre of Pest jokes as well, at times of severe political oppression.

In Hungary, animal jokes were used as political metaphors first after the failed Communist revolution in 1919. Boldizsár Vörös, media analyst and candidate in historical studies, quotes some of these in his study about the subject (“Even the inhabitants of the zoo have convened to elect a warden to promote their interests”, AETAS 2006, issue 2-3). The Hungarian Soviet Republic lasted for 133 days in 1919, and after its fall several jokes criticizing and attacking various aspects of the regime were born. These jokes have lived on for pos-

terity and remained in circulation in the next few decades during the rule of successive authoritarian regimes.

Similarly, several jokes were born during and after the Hungarian revolution in 1956, as Zsuzsa Bereznai’s research revealed.

“We may even say that the chronicle of the revolution was preserved in jokes, anecdotes and true stories – an unwritten tradition that is, as other forms of documentation were out of question for quite a long time to follow,” she noted.

This one became very popular after the revolution was crushed by the Soviet army and during the times of retaliation (ironically, the joke is probably of Russian origin): The little Bunny runs like crazy through a forest and meets the Wolf. The Wolf asks: “What’s the matter?

Why such haste?” “The camels there are getting caught and shot!” The Wolf says: “But you’re not a camel!” “Hey, after you are caught and shot, just you try and prove to them that you are not a camel!”

Interestingly, although the Kádár regime was the least oppressive of all Communist rules, this era produced the

most fundamental and philosophical animal jokes in Hungary. Like the next one, a perennial favorite: One day, mother mole and kid mole climb to the surface. Kid mole is amazed.

- Mother, what is this beautiful blue thing above?

- This, my son, is the blue sky.

- And what is this brilliant brightness?

- This is the sun, which brings warmth and light to the earth.

- And what are these splendid colorful things which smell so good?

- These are the flowers.

- But mother, if here we have this beautiful warm sunshine, the blue sky, and the colorful flowers, then why do we spend our entire life in the dark, cold underground?

- Because it is our homeland.

No doubt, unlike some other types of the Pest joke, the relevance of animal jokes will never fade away. The violent Wolf, the sneaky Fox, the cocky cowardly Hare, the strong, simple-minded Bear, the invincible Lion and the other characters will have to stay to remind humans of their ubiquitous frailty and fallibility. ■

22 3 Socailite BBJ

WWW.BBJ.HU

Budapest Business Journal | Mar 23 – Apr 7

WHO'S NEWS Levente Cseh is taking over the lead of the Hungarian branch of ZyXEL Communications from Gary Chen. Cseh will be responsible for the coordination and expansion of the distribution and service network for Hungary and the Southeastern European region. He joined ZyXEL in 2005 as a technical director. Prior to that, he worked at the technical department of Tech Data and then Damovo. Gary Chen will continue his career with ZyXEL in Singapore.

Name Levente Cseh Current company/position ZyXEL Communications, managing director Previous company/position ZyXEL Communications, technical and training director

Do you know someone on the move?

Send information to research@bbj.hu

Name Daniella Rédei Current company/position Avantgarde Group, managing director Previous company/position Avantgarde Group, head of business and modern consumer comm. division

Daniella Rédei has taken over as managing director at Avantgarde PR Agency this spring, having been with the company for nine years, in the business and modern consumer communications team. The 33-yearold has worked in every stage of the business communication field. Under her supervision, between 2008 and 2010, her division posted a 40% rise in revenues. Krisztina Bedy will now lead the business and modern consumer communication team.

The 39-year old expert joined the team of Avantgarde Public Affairs with ten years’ experience in media.

SPONSORED BY

Name Gábor Koncz Current company/position Opel Magyarország, managing director Previous company/position Opel Magyarország, sales director

Gábor Koncz, sales director of Opel Magyarország, succeeds Tamás Kovács as managing director of the company. Koncz started working for Opel as an undergraduate student in 1993.

After finishing his studies, he officially joined the company in 1997. He initially worked in the customer service department, later becoming a marketing director. Most recently, he was the head of sales.

[ EXPERT OPINION ]

THE SENSITIVE TOPIC OF CANCER

Figure this: over the years, each of us will be faced with at least one in every four of our relatives or acquaintances diagnosed with cancer.

The number is staggering. To the best of our knowledge, no preventive measure matches up to a wellbalanced, healthy lifestyle, and regular medical check-ups are also essentially important.

Hungarian men are the most likely to die of cancer in the whole of Europe, while women come in second worst after Denmark. Speculation on possible causes ranges from smoking through alcohol abuse to environmental pollution, but experts think differently, blaming poor prevention and a lack of regular medical check-ups.

“Man is designed to live

120 years,” says Dr. Ádám Lelbach, our head specialist in internal medicine and gastroenterology, “at least that’s what scientific research suggests. Being more conscious and cautious, registering the physical signs of our bodies, would certainly take us closer to that respectable age. The stark reality though, is that Hungarians start the life race with a major handicap:

a critically low health consciousness. Often only pain will drive people to visit the doctor, with already advanced cancer, albeit that prevention and early diagnosis are crucial to beating the disease. Despite what most people think, cancer is not necessarily a death warrant.”

According to Dr. Lelbach, the number one cause of death for 35-46 year-old women is cancer. “A heart-rending

fact that nevertheless should motivate people to take annual check-ups, genetic disposition to the disease should warrant regular medical examination even before turning 35.”

At Dr. Rose Private Hospital we make it our priority to schedule check-ups so that our patients can sesmlessly fit it into their daily to-do lists. Based on a private consultation and taking into account individual risk

factors, patients can be advised on a customized, personal checkup plan in advance.

Unpleasant and uncomfortable examinations, such as colonoscopy and gastroscopy, are possible with anesthetics at Dr. Rose Private Hospital.

cancer, while women are most at risk from breast cancer.

Colorectal cancer comes in second for both men and women, followed by prostate, oral and stomach cancer among men, lung, stomach and lymph cancer among women.

FACTS and FIGURES Men and women are both affected but in different ways.

The leading cause of cancer death among men is lung

www.drrose.hu

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

Hungary still tops the list

3 Socialite 23

BBJ

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Budapest Business Journal | Mar 23 – Apr 7

Something old, something new It is hard to tell the extent to which the circles of collectors of classical and contemporary arts overlap. Both eras have their own fans, but recently more and more artists are switching from the classical to the contemporary.

BBJ ZSÓFIA VÉGH

One of the greatest Hungarian art collectors of the first half of the 20th century, Lajos Fruchter, had a special way of promoting contemporary artists. In his villa, he put the classics on the upper floor, where the family lived everyday life, and placed contemporaries downstairs, which served as a place for social gatherings.

Fruchter came from a humble bourgeois family and became a member of the “new money” as a bank director. Initially, he collected classical painters like Károly Markó, Mihály Munkácsy and József Rippl-Rónai. Only later did he switch to then lesserknown artists such as Aurél Bernáth, József Egry and István Szőnyi. By displaying their works in the rooms where he held his banquets, he successfully encouraged fellow collectors reluctant to buy from and patron these masters.

The 21st century also has its Lajos Fruchters.

Every third art collector is an entrepreneur, CEO or company owner. Every sixth is a banker or works in the financial field. Onefifth comes from classic intellectual fields: doctors, researchers, lawyers, and professors. Another fifth of them are art professionals for whom collecting can be a professional duty.

Classifying collectors based on their social and professional background is no easy task. Due to the nature of the job, these people like to remain in the shadows. Tax authorities, security concerns

over highly valuable collections, even natural shyness may lead them to do so. Categorizing what drives them to collect is also barely possible.

The players of the domestic art market are quite a mixed assortment, according to Kata Hajdú, owner of the Abigail contemporary art gallery. The collectors of the classics mainly belong to the older generation, who began collecting 30 or 40 years ago or have been enriching a family heritage.

They are the least receptive to contemporary trends.

Others, mostly the middleaged and the young, have collections that embrace the entire 20th century and up to the present.

There is not too much overlap between the two groups that can be seen, Hajdú claimed. Those who draw from the works of several eras are motivated by passion, selection and/ or investment.

“You cannot profile a typical classics collector,” Hajdú said. Collection habits vary, both in terms of technique (graphics, oil, water, etc.) and style, periods and trends. Some collectors select strictly thematically, while others go for a mixture.

“The major sites for classic works of art are auctions.

Elsewhere one would have difficulty obtaining these works,” Hajdú noted. So collectors walk excitedly from auction to auction, often returning to a piece several times. They eagerly look for pieces missing from their collections and arrive at the auction fully prepared, after studying the trade press or consulting with a gallery.

There is no formal description of contemporary collectors either. Some visit the exhibitions or workshops of young, emerging artists exclusively and act as a patron. They regard this activity as a long-term investment.

Several well-known contemporary collectors build a collection consciously around an interesting school or artist. And then there are those who buy only with investment in mind, searching out popular works

in auctions, galleries, or directly from the artist.

Many investors are aware that a solid portfolio features gold, securities, real estate investment and artwork. In fact, internationally, art investment is shown to have a higher and more secure yield. Diversity can be observed in art investment too. Portfolios comprise everything from classical to contemporary works, as well as photography and video installations.

“Investment is not the single most important vehicle of collecting,” said Attila Ledényi, collector and head of EDGE Communication, a PR agency that has compiled a series of magazines on contemporary collectors.

“Many collectors are driven by the relationship they have with artists.” Others are simply passionate. They collect only for their own pleasure and are almost obsessed with expanding their range of works. These would not sell their collection and definitely don’t treat it as an investment.

Ledényi compares art collecting to trading stocks.

Many favor classic works of art because they are a welldefined and appraised field thus they represent less risk, just like blue-chip stocks.

“In order to collect contemporaries, one has to have more confidence toward how much a work will be worth,” and obviously be willing to take more risks but may realize higher return, he explained.

For all the risks, many collectors have put their collections of 20th-century modern classics up for sale and replaced them with contemporary pieces.

Contemporary collectors have opened up toward foreign artists, becoming part of the international circulation, monitoring the auctions abroad, the fairs, galleries and exhibitions.

“I have just returned from various art fairs in Europe and the US and exprienced thatcollectors are increasingly turning their attention from figurative to abstract,” Ledényi reported. “One of my old-time collectors sold his classics collection

and switched to geometric abstract,” Hajdú noted.

Clearly, international tendencies trickle down to this region too, so they are worth bearing in mind.

In compiling a collection, galleries have a growing role. In the West, photographs are valued as the equal of fine art. In Hungary, only recently did they

get to be appreciated, thanks to galleries like the Kieselbach Gallery and Auction House. When it opened its ‘Parisian cube’ exhibition, the Abigail Contemporary Art Gallery consciously put international contemporaries in the center. By doing so, the gallery earned these foreign masters several Hungarian fans.

Similarly, when it started ‘Hungarian prophets’, an exhibition series devoted to Hungarian masters who found success abroad, collectors followed. “Now they are looking forward to the arrival of ‘new prophets’ as well,” Hajdú noted.

That is slightly more upfront than Lajos Fruchter’s method, but it works. ■