Budapest Business Journal 20/10

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VOL. 20, NUMBER 10

I MAY 18, 2012 – MAY 31, 2012

Budapest Business Journal

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

Full steam back

The future of the Nabucco pipeline looks gloomy after Hungary’s MOL decided to quit the project. The problem of reducing the country’s dependency on Russian gas remains.

PAGES 12-13

SPECIAL REPORT

SPECIAL REPORT

NEWS

EU law harmonization

VC: Gearing up for the next round

Richest Hungarians

While Hungary has been quite successful in synchronizing its laws with EU regulations, the headlines most recently are about government initiatives conflicting with Union rules.

We takes a look at the reasons behind this. PAGE 18

The latest figures show that venture capital funds have increased their activity again, as well as their intentions to diversify their portfolios. But Jeremie II tenders are still nowhere on the horizon. PAGE 24

A crisis always threatens at least the possibility of disturbing the life of those with huge financial interests.

The 2012 rich list of the wealthiest Hungarians shows how the past 12 months rearranged the top 100. PAGE 07

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New tax bills introduced Orbán reshuffles government Canoeist’s world record questioned

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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

COPY-PASTE? The Hungarian public hardly had time to digest the disgrace that engulfed former president Pál Schmitt after it turned out that he plagiarized most of his doctoral thesis in 1992 – an incident that finally resulted in Schmitt’s resignation and the inauguration of new president János Áder – before the local and international press had found a new Hungarian plagiarism scandal to focus on.

The Socialist prime minister from 2004-2009, Ferenc Gyurcsány is still the most powerful opposition figure and recently established the new left-wing force Democratic Coalition (DK). He became the next politician to have to explain himself after the right-leaning television news channel HírTV reported that his 1984 thesis might have been plagiarized.

It is a fact that the title of Gyurcsány’s thesis, The Viticulture and Oenology of the Balaton Highlands, was identical to one his former brother-in-law Szabolcs Rozs wrote in 1980, precisely four years before Gyurcsány. Although the contents of the theses, both submitted to the Pécs teacher training college, cannot be properly compared since they have mysteriously disappeared from the archives of the college, the detailed thesis evaluations show that the two works had the same mistakes and shortcomings on exactly the same pages. It also turned out that a copy of Rozs’s work was stored in the family house where Gyurcsány was a frequent guest at the time.

When asked about these remarkable coincidences, Gyurcsány at first could not really remember if he was aware of the fact that the topic of his thesis was exactly the same as that of his one-time in-law. Later, however, he admitted that he had “probably” read Rozs’s work and, as such, he had “obviously” used it as a source. Also, he added that his own copy of his dissertation was packed away in boxes somewhere but he would make it public as soon as possible.

Soon after he gave up the search and considered the case closed. Not so the press, sections of which envision the end of Gyurcsány’s political career.

However, most recently the ex-prime minister has changed his tone on the issue, from playing the matter down to becoming much more pugnacious: on May 5 he announced that he would sue those who accuse him of plagiarism.

Gyurcsány already has experience in trying to talk his way out of tough spots. His notorious Őszöd speech, which he gave at a private Socialist party assembly in Balatonőszöd, revealing that he and his party “lied night and day” in order to win the 2006 elections, not only caused him uncomfortable moments in television studios but eventually discredited him and his government in such a fatal measure that he resigned in 2009.

[GYURCSÁNY] IS NOT LIKELY TO SIMPLY BLUSH AND RUN OUT OF WORDS Die Welt about the possible consequences of Gyurcsány’s plagiarism scandal

April 30, 2012 Conservative German daily Die Welt made place on its cover for Gyurcsány’s plagiarism scandal. ‘The Next Swindler’ was the headline of the article, written by Boris Kálnoky, who noted that “plagiarism accusations have an open season” now in Hungary: Kálnoky recalled Schmitt’s recent resignation, which came after the “opposition paper HVG uncovered” that he copied most of his essay. “The other side of the political spectrum took revenge immediately,” Kálnoky added.

After introducing the exact details of the case, the author noted, “The ex-communist [Gyurcsány] is a contradictory figure who played a big role in deepening the gap between the political sides.”

Kálnoky concluded that Gyurcsány “is not likely to simply blush and run out of words”.

May 2, 2012 The article on the online edition of the weekly HVG entitled ‘Orbán-cult, Gyurcsány-cult’, considers the

Gyurcsány plagiarism scandal as a reply to Schmitt’s recent struggle and uses the current case to point out the similarities between Gyurcsány and current prime minister Viktor Orbán. In the name of objectivity, none of the two politicians appear in a positive light in the article but their failures and false communication come to the fore.

“Obsequiousness and infantile, mass, uncritical adoration have two outstanding targets in today’s public life,” the article said in the very beginning before detailing the similarities between Gyurcsány and Orbán, who both have followers that support them blindly.

However, according to the author, “both leaders failed as prime ministers and their supporters have to heavily reduce their intellectual expectations to be able to follow the tunes that communicate failures as successes and always place the blame on someone else”. Also, both Gyurcsány and Orbán lost half of their supporters as prime ministers.

“Viktor Orbán’s government is as big a failure as that of Ferenc Gyurcsány was. The distance between his promises and his actions is as huge as it was” in the case of Gyurcsány, the article noted.

On the current case, the author said that “The plagiarism scandals clearly show what the cult of personality is about: the accused figures say exactly the same, the downplaying and smokescreen arguments are the same.”

The article finally notes that the current situation makes it obvious that Gyurcsány will not be able to return into power and reform the country. “The Őszöd speech stated a very true and very strong demand that was represented by Hungary’s most powerful politician at that time. It wanted to eliminate everything that provides the topic of this article: the battle between the sides that is based solely on faith, without any thought.”

May 2, 2012 The article in the traditionally left-wing Népszava does not hold any big surprises: dressed up as an objective report, it presents the case, but with a short comment saying that “neither Gyurcsány’s, nor his ex-brotherin-law’s essay are available, both of them have disappeared, and so the accusation against the DK president is based only on the evaluations of the theses,” making the paper’s political

preferences clear. By delicately emphasizing given aspects, the article underlines the coincidence that Beatrix Rozs, who is Gyurcsány’s ex-wife and the sister of Szabolcs Rozs, currently works at the Fidesz-led Municipality of Pécs.

May 2, 2012 Although Magyar Narancs is a liberal weekly, the paper has always been quite critical when it comes to the most significant figure of the Hungarian left, Ferenc Gyurcsány. This approach continues in the article about the politician’s speech held at a Democratic Coalition event on International Worker’s Day, May 1.

“Finally, here we are!” said the author of the opinionated report greeting Gyurcsány’s reaction to the plagiarism accusations, which in the May 1 speech was prefaced by lengthy sentences about the outrageous crimes of the Fidesz government.

After highlighting some points of Gyurcsány’s pleading, such as a right-wing conspiracy that aims to discredit the DK president (which “might be true” but, according to the author, is “ totally irrelevant”), the article points out that the politician’s only duty is to present a thesis that he cannot.

Still, Gyurcsány’s heated speech managed to satisfy his supporters. The author gives in his conclusion a clear suggestion that this is a politician who has seen better days. Referring to Gyurcsány’s Őszöd speech, the article ends by saying: “Gyurcsány held the second best speech of his life, maybe it would be better to stop now.” ■

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bi-weekly

QUOTE OF THE WEEK

If we could successfully get the banks and multinationals to share the public burden once, then why wouldn’t this be successful in the following period too?

NEWS FOR THESE PAGES IS TAKEN FROM THE BUDAPEST BUSINESS JOURNAL’S DAILY BRIEFING, HUNGARY A.M.

PRIME MINISTER VIKTOR ORBÁN ABOUT THE FINANCIAL TRANSACTION TAX IN AN INTERVIEW WITH PUBLIC RADIO MR1

Small but high quality cellar inaugurates HUF 120 mln investment

Family-owned Szöllősi Cellars has inaugurated a HUF 120 million bottling plant and cellars in Neszmély (northwest Hungary). The development was supported with HUF 51 million in grant money from the New Hungary Rural Development Program. Szöllősi Cellars own 35 hectares of vineyards and purchases grapes from a further 40 hectares to produce 2,500 hectoliters of wine a year. The company has annual revenue of HUF 100 million.

ECONOMY HUNGARY GDP DROPS YR/YR AND ON QUARTER IN Q1, 1ST READING SHOWS Hungary’s GDP fell 0.7% yr/ yr in Q1 2012 according to unadjusted figures and fell 1.3% on workday-adjusted figures, the Central Statistics Office (KSH) said in a first reading on May 15.

First-quarter GDP was down 1.3% from the fourth quarter last year, after a downward revised no-change in the previous quarter, seasonallyand calendar year-adjusted data shows. The figures were below expectations, with London analysts expecting a quarterly contraction between 0.3-0.8% and a stagnation yr/yr. KSH said half of the economic branches stagnated yr /yr in the first quarter of the year, with a rise in the IT and communication branch and a significant contraction in the construction sector. The yr/ yr drop in Q1 followed an unadjusted 1.4% and a workday-adjusted 1.5% increase in Q4 last year. It was the first yr/yr GDP contraction since Q4 2009, which was the last of five quarters of decline.

HUNGARY STATE DEBT COULD FALL UNDER MAASTRICHT THRESHOLD IN 15 YEARS, MNB SAYS Hungary’s gross state debt could fall to 59.4% of GDP by 2026 from 80.6% at the end of 2011, if fiscal policy remains unchanged, according to a technical projection published by the National Bank of Hungary (MNB) on May 15. The analysis, presented by central bank governor András Simor at a conference organized by the State Audit Office (PSzÁF), shows state debt could fall under the 60% Maastricht threshold by 2026 but would still exceed the 50% target stipulated in the Constitution. Meeting that target would require higher sustained levels of growth, government actions aimed at strengthening investor confidence and reducing the cost of financing debt, or further improvements in the fiscal balance, according to the analysis. Simor said the projection for the general government primary balance shows a trend improvement and stabilizes around 2% of GDP in the long-term. The projection is based on a long-term growth rate of 2.5%, which the cost of debt servicing exceeds by 0.8%.

GOVERNMENT INTRODUCES TAX BILLS The Ministry of National Economy introduced three tax bills to parliament on May 11, concerning telecommunications, financial transaction, and insurance taxes. If voted through parliament, telecommunications companies should pay a HUF 2 tax per minute of voice calls and text messages from July 1 this year.

The financial transaction tax will be levied at a rate of 0.1% on transfers between accounts (except between accounts owned by the same person at the same bank), cash withdrawals, cash transfers and cheque redemptions from January 1 next year. The insurance tax will be 30% on mandatory vehicle insurance premiums, 15% on CASCO-type vehicle insurance premiums, and 10% on property and accident policies from January 1 next year.

MNB TO DIVERSIFY RESERVES WITH USD, GBP AND JPY-BASED INVESTMENTS The MNB has started diversifying investment of its international reserves, shifting to some extent to USD, GBP and JPY-based investments from euro-based ones, central bank governor András Simor said on Monday. Speaking during the presentation of the MNB’s

2011 annual report, Simor said the decision, made by the Monetary Council, was taken because the ratings of several European sovereign issuers had been knocked down from AAA. The MNB’s international reserves rose by HUF 4.1 bln to HUF 37.8 bln in the year to the end of 2011.

BUSINESS MKIK COMPANY SENTIMENT INDEX IMPROVES IN APRIL The Hungarian Chamber of Commerce and Industry (MKIK) Economy and Enterprise Research Institute’s index of company sentiment in Hungary rose to +8.7 in April from +1.3 in October, MKIK announced on May 15. MKIK polled more than 2,558 businesses for the index. Sub-indices still show the impact of the economy crisis, with the usage of capacities in the construction industry falling to 64.4%.

MKIK said small businesses have the worst outlook, with company sentiment remaining at -30, with all other indices for businesses improving.

About 44% of the companies polled expect no change in investment activity, 36% ex-

pect growth and 20% expect a slump, MKIK said.

MINISTRY SAYS TELCOS’ TAX POSITION TO IMPROVE FROM 2013 The National Economy Ministry on May 14 acknowledged that telecommunications companies would have to pay both a sectorial “crisis tax” as well as a tax on telephone calls in the second half of 2012, but it noted that telcos’ tax position would improve from 2013, when the crisis tax is phased out. The ministry issued the statement after Hungary’s three biggest telcos, Magyar Telekom, Telenor and Vodafone, expressed their “shock” over the planned tax on telephone calls and messages in a joint statement. The companies complained that the government had promised many times in the past months to phase out the crisis taxes introduced in 2010, but would now practically double the burden of the telecommunications sector. The HUF 2-per-minute tax on telephone calls, payable by service providers, will be introduced on July 1, if approved

by Parliament

WAGE COMPENSATION SUBSIDY APPLICATIONS JUST UNDER HUF 6 BLN More than 4,500 applications were submitted by Hungarian

companies for HUF 5 bln in wage compensation subsidies by the deadline, state secretary for employment Sándor Czomba told MTI on May 15.

Czomba noted that, in spite of the crisis, the applications were for far less than the HUF 21 bln allocated for the subsidies from the National Employment Fund. The subsidies were available to companies struggling to implement a 5% wage increase.

GOVT BREAKS PROMISE MADE IN AGREEMENT WITH NEW TAX, BANKING ASSOCIATION SAYS The financial transaction tax announced by the national economy minister is contrary to the agreement concluded last December between the government and the Banking Association, the latter said.

The statement notes that the government made a commitment in the agreement last December that the extent and the base of the special bank levy will remain unchanged in 2012 compared to the effective regulation, decreasing by 50% in 2013 and only a bank levy complying with that adopted by the European Union would be imposed or one not exceeding the average rate of the bank levies applied by European Union member states in 2014.

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MOL PROGAM TARGETS $500 MLN550 MLN EBITDA IMPROVEMENT Hungarian oil and gas company MOL announced a comprehensive program designed to increase the profitability of its downstream segment. It aims to achieve a $500-550 mln improvement in EBITDA by 2014. The program covers all elements of the downstream value chain, from feedstock selection through refining and petrochemical production to wholesale and retail activities, MOL said. The company aims to boost revenue by increasing its captive market in the CEE region with a special focus on countries in the south. Streamlined petrochemical product portfolio and supply chain management driven actions are also seen lifting revenue.

On May 15, the company presented its consolidated IFRS report which showed that MOL’s first-quarter net income fell 20% to HUF 73.7 bln from the same period a year earlier on narrowing margins and financial losses.

OTP Q1 PROFIT FALLS 66% ON BANK LEVY, FX REPAYMENTS OTP Bank’s first-quarter net income fell 66% to HUF 12.6 bln from the same period a year earlier as the bank levy and write-offs from an early foreign currency-denominated mortgage repayment scheme weighed, the bank’s consolidated IFRS report for the pe-

riod shows. After-tax profit dropped 66% to HUF 12.8 bln, but was over the HUF 10.8 bln estimate in a poll of analysts by Portfolio.hu. Diluted earnings per share were HUF 47 compared to HUF 139 in the base period. OTP Bank booked HUF 30.9 bln in “adjustments” in Q1. These included the full amount of the bank levy it must pay for the whole year as well as a HUF 1.8 bln loss on the government-initiated early repayment scheme, which allowed borrowers to repay their forex mortgages in full, at discounted exchange rates, with lenders covering the difference.

OTP Bank said its losses on the entire scheme, which ran from the end of September until the end of February, came to HUF 33.4 bln.

MAGYAR TELEKOM Q1 PROFIT FALLS 16% Magyar Telekom’s first-quarter after-tax profit slipped 16.4% to HUF 14.9 bln from the same period a year earlier as margins narrowed, its consolidated IFRS report for the period shows. Revenue rose 2.9% to HUF 146.6 bln, but direct cost of sales grew at a faster rate, climbing 15.7% to HUF 43 bln. Total operating costs were up 5% at HUF 121.2 bln.

Pre-tax profit was down 10.3% at HUF 18.7 bln. Earnings per share fell 14.2% to HUF 12.5.

Chairman-CEO Christopher Mattheisen attributed the rise mpany s in revenue at the company’s

Hungarian business to positive trends in customer numbers, a price rise at the start of the year and the launch of energy resale services.

EGIS Q2 PROFIT RISES 42% ON RISING TURNOVER, IMPROVED MARGIN Hungarian drug maker Egis posted net profit of HUF 6.45 bln in the second quarter of the company’s business year, up 42.2% yr/yr on increasing profit and improved gross profit margin, the company announced in its consolidated, unaudited IFRS report. The company’s second-quarter net profit exceeded the consensus forecast of HUF 5.61 bln in a Portfolio.hu poll. Egis generated turnover of HUF 33.51 billion in the second quarter of 2012, up 6.1% yr/yr. The company’s cost of sales was HUF 13.9 bln in the second quarter of 2012, up 4.6% yr/yr.

Egis, which is majority owned

by France’s Servier, is an Acategory issuer at the Budapest Stock Exchange.

FRASERS BUDAPEST PROPERTY STARTS WITH A RECORD FIRST YEAR Frasers Hospitality, the Singaporean serviced apartment operator, has announced a solid start to business at its Budapest property. Fraser Residence Budapest has recorded an average 70% occupancy level throughout its first year of operation, which the company claims to be well in front of the gene general

talk of the town OCEAN CANOEIST RAKONCZAY’S WORLD RECORD QUESTIONED Hungary’s Gábor Rakonczay has become the first person to paddle across the Atlantic Ocean from Europe to the Caribbean. However, many now question his achievement. The lack of a satellite tracking system which would have sent data of his location already raised doubts in many minds, which only increased after Rakonczay’s canoe called Vitéz, disappeared last week.

Rakonczay, who is an architect away from the water, began his adventure in Lagos, Portugal, on December 21, and, having stopped for several days in the Canary Islands for rest and supplies, reached Antigua on March 25. When his 7.5-meter canoe capsized at sea, the adventurer said he managed to save it but his communications equipment was damaged and he

had not been in contact with anyone for 48 days and, due to the lack of a proper tracking system, his location was unknown and so could not even hope for a rescue team to come.

“The supplier raised the price at the last minute and I decided to leave without one because it was not possible to postpone the trip,” the 30-year-old explained. During the nearly seven weeks he was out of reach, Viktoria, his wife, gave no indications that she was anything but totally sure that her husband was alive and that only equipment failure was to blame for their lack of communication. The uniqueness of Rakonczay’s crossing was confirmed by the London-based Ocean Rowing Society International, which adjudicates such feats for the Guinness World Records.

hotel scene in the Hungarian capital. “In extremely tough economic conditions we have exceeded all expectations here in Budapest. We are currently at an 80% occupancy level for the last months (70% year round) when the city is struggling to make 60%,” general manager Alain Goetschel said.

The success of Fraser Residence Budapest is the mix of clientele.

As well as providing for the short-, long- and mid-term client on business assignments, the popularity of Budapest as a short break destination has given the opportunity to target the leisure market as well.

S IMMO HUNGARY: FAVORABLE RESULT DURING HARD TIMES Real estate investment company S IMMO Hungary’s 2011 final financial results were favorable despite the difficult environment. EBITDA was increased up to €11.1 mln from last year’s €10.8 mln. Revenues are €27.3 mln, which is higher by €1.7 mln than in 2010. Rental income decreased to €8 mln compared to €8.1 mln in 2010.

“Although there is a slight decrease regarding the rental income, we closed a successful year as the occupancy rate was increased from 87% to 91.2%, and we extended numerous contracts with existing tenants. We are very happy that our tenants appreciate our efforts and decided to continue our partnership,” said Katalin Sermer, managing director of S IMMO Hungary. The positive tendency in the hotel industry in Budapest was also presented in the performance of S IMMO’s hotel, the Budapest Marriott Hotel.

ST PETERSBURG CANCELS PROPERTY DEVELOPMENT CONTRACT WITH TRIGRANIT The St Petersburg mayor’s office has terminated a contract signed last year with Hungarian real estate developer TriGranit under which the group was to build a cultural center in the Russian city. News agency RosBalt and news portal BaltInfo.ru said the city plans to pay no compensation for the cancellation of the project, estimated to be worth $600 mln.

György Kézdy, deputy head for the Demján group, which controls TriGranit, on May 14 said that the St Petersburg municipality had rejected not the project, but the PPP structure, as it has done before in the case of other infrastructure projects.

AUDI TOPS OUT €900 MLN EXPANSION IN HUNGARY German carmaker Audi on May 4 held a topping-out ceremony at the €900 mln expansion at its base in Győr (west Hungary). “Construction work is proceeding at a rapid pace.

We are confident of being able to complete the automo-

bile plant on time,” said Audi Hungária managing director Thomas Faustmann. “In its quest for utmost quality and precision, Audi Hungária has long since become a strong member of the Audi family and makes an enormous contribution to our growth,” said Audi board member for production Frank Dreves. The expansion is to raise output at the base in Győr to 125,000 cars a year from 2013.

POLITICS VISEGRÁD 4 COUNTRIES SIGN AGREEMENT OVER MILITARY COOPERATION The defense ministers of the Visegrád 4 group’s countries met on May 4 in the Czech city of Litomerice, where they signed an agreement over cooperation in matters of military defense within the framework of the European Union. The group – the Czech Republic, Hungary, Poland and Slovakia – are planning to form a defense unit with some 3,000 members by 2016. Under the new cooperation, soldiers from the countries would train together and the four nations would combine funds to buy military equipment. Czech Defense Minister Alexandr Vondra said that this step was an important signal that Central European nations are capable of addressing military tasks together.

ORBÁN RESHUFFLES GOVERNMENT Prime Minister Viktor Orbán on May 11 announced long-predicted changes in his government. Mihály Varga, currently the Vice president of Fidesz and State Secretary at the Prime Minister’s Office, will replace Tamás Fellegi as Hungary’s chief negotiator with the IMF/EU. János Lázár, who currently leads the Fidesz parliamentary group, will replace Varga at the Prime Minister’s Office, while Antal Rogán, Mayor of Budapest’s fifth district and chairman of the Parliamentary Committee on Economic Affairs, will replace Lázár as the leader of the 226-strong Fidesz parliamentary group.

Zoltán Balog, who has been State Secretary for Social Inclusion, becomes the new Human Resources Minister.

CULTURE SETTLEMENT REACHED IN DEADLY PHILLY DUCK BOAT CRASH The families of the two Hungarian students killed in 2010 on the Delaware River when a tugboat-guided barge slammed into and sank their amphibious sightseeing boat

will split $15 mln after a settlement was reached on May 9, just days into a federal wrongful-death trial that had been expected to last a month. The families of the two victims, Szabolcs Prém, 20, and Dóra Schwendtner, 16, filed wrongful-death lawsuits against K-Sea Transportation, which operated the tugboat guiding the barge upriver, and Ride the Ducks, which operated the tour boat. Before the wrongful-death case could proceed, however, United States District Judge O’Neill was due to determine whether a limit should be set on the financial liability of the two boat owners. Finally, the settlement was reached after two days of testimonies and negotiations.

According to the deal, eighteen surviving passengers will share another $2 mln.

HUF 500 MLN FOR METRO LINE REPAIRS The Budapest city council will ensure HUF 500 mln this year for repairs needed on the capital’s third underground line, mayor István Tarlós said.

Tarlós said measures would be taken this year to ensure the operation of the line, with passenger safety put first. He added that the line was in poor shape but could not undergo a full renovation until 2013.

LESS TOXIC TOYS IN EUROPE Europe last year saw its first drop in the number of toxic toys and skin-irritating textiles stacked on its supermarket shelves, more than half of them made in China. Thanks to better policing and improved cooperation with China and others, the number of unsafe products banned, withdrawn, or recalled from consumers, dropped 20% in 2011 to 1,803 items compared with a 13% increase the previous year, said Health Commissioner John Dalli on presenting the European Union’s latest report on efforts to enforce product safety. Removing life-threatening goods from the EU is achieved under a 2004 rapid alert system known as RAPEX, enabling information on dangerous products to circulate swiftly across the 27-nation bloc, plus Iceland, Liechtenstein and Norway. While more than half the items reported as potentially dangerous came from China, notifications on Chinese items too dropped, representing 54% of all notifications in 2011 against 58% the previous year. The most frequently reported dangerous goods were clothing, textile and fashion items, accounting for 27%, followed by toys at 21% and motor vehicles at 11%. A total 16 countries reported fewer dangerous products last year, but five nations accounted for 47% of all reports to RAPEX

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NEWS FOR THIS SECTION IS TAKEN FROM THE BUDAPEST BUSINESS JOURNAL’S DAILY BRIEFING, ENERGY TODAY NEWSLETTER AT WWW.BBJ.HU/STORE/NEWSLETTER-PACKAGE

OMV SAYS CONSTRUCTION OF NABUCCO PIPE MAY START IN 2015 OMV AG said construction of the Nabucco natural gas pipeline to transport gas from the Caspian region to Europe might start in 2015. Should the owners of the BP Plc-led Shah Deniz field in Azerbaijan make a decision on whom to award its gas to next year, construction could start in 2015 and be completed in 2018, OMV’s gas head Hans-Peter Floren told shareholders at the company’s annual shareholder meeting in Vienna on May 8.

Nabucco, which is a joint venture of OMV, Germany’s RWE AG, Hungary’s MOL Nyrt, Bulgargaz EAD, Romania’s Transgaz SA and Turkish BOTAS, has faced repeated delays after struggling to secure fuel sources. CEO Gerhard Roiss told OMV’s shareholders on May 10 that Nabucco is “more important than ever” as it’s needed to transport gas from the OMV-Exxon Mobil Corp gas found in the Black Sea.

E.ON SAID TO SELECT MACQUARIE AS BUYER OF $4 BLN GAS GRID E.ON AG, Germany’s largest utility, selected a group led by Macquarie Group Ltd to buy

regional POLISH PUBLIC DEBT GROWTH EXPECTED TO BE AT RECORD LOW THIS YEAR, MINISTRY SAYS Poland’s Finance Ministry predicts that this year will represent a record-low when it comes to growth in Polish public debt. The nominal value of the public debt is predicted to go up only by PLN 7.3 billion (€1.68 billion), the smallest increase in 17 years. It is expected to decrease from 56.3% of GDP in 2011 to 53.7% in 2012, Rzeczpospolita reported. The ministry expects the debt to be lower because public investments are planned to be PLN 5 billion smaller than last year and salaries in the public sector won’t be going up.

BLACK MARKET LABOR UP IN ROMANIA There are more than 2.3 million people working ‘black’ for cash in hand in Romania, up around 900,000 compared to 2008, and representing more than a third of working people in Romania, local media reported citing data from the country’s Fiscal Council. Evasion on social contributions, VAT and income tax stood at 10.3% of the country’s GDP

a network of natural-gas pipelines in the country, Bloomberg reported citing a person with knowledge of the matter. The sale of the Open Grid Europe distribution network may garner about €3.1 billion ($4 billion), the source said, declining to be named before the agreement is completed. Dow Jones reported earlier on May 11 that E.ON had selected a Macquarie-led group that also includes the Abu Dhabi Investment Authority and German reinsurer Munich Re as the buyer. E.ON is seeking to raise cash through a €15 billion asset-sales program after the Fukushima disaster in Japan prompted German Chancellor Angela Merkel to call for the permanent halt of all the country’s nuclear reactors by 2022. Open Grid Europe operates about 12,000 kilometers (7,450 miles) of gas transmission pipes in Germany, according to its website.

BULGARIA-GREECE GAS LINK READY BY 2015, CEO SAYS Bulgaria and Greece plan to complete the construction of a €200 million ($258 million) pipeline connecting their natural gas grids by 2015, said Elio

Ruggeri, chief executive officer of IGI Poseidon SA. Poseidon SA is a venture between Greece’s natural-gas supplier Depa and Italy’s Edison SpA, which has an agreement with the Bulgarian Energy Holding EAD to develop the pipeline.

The 180 kilometer (112 mile) link will run from Komotini in Greece to Stara Zagora in Bulgaria and will be open to ship gas from the Caspian, the Mediterranean, or from a liquefied natural gas terminal in Turkey, Ruggeri said on May 11. Its initial annual carrying capacity will be 3 billion to 5 billion cubic meters.

HUNGARY ENERGY SECTOR TAX WILL BE 30% Hungary’s government said energy companies would have a 30% total tax rate amid increased concern that Europe’s debt crisis will deepen.

“Nineteen percent is the corporate tax rate and 11% is the Robin Hood tax, which makes up the 30%,” Economy Ministry Deputy State Secretary Ádám Balogh told reporters on May 9. The Robin Hood tax was launched years ago, but its rate has been increased from 8%.

MVM TO ESTABLISH NEW UNIT FOR NPP EXPANSION The state-owned Hungarian Electricity Works (MVM) will establish a new subsidiary to prepare the planned expansion of Hungary’s Paks Nuclear Power Plant, MVM told MTI. The decision was taken at a meeting where shareholders approved the company’s financial report with consolidated sales revenue of HUF 650 billion ($2.9 billion), up HUF 100 billion from a year earlier, and with pre-tax profit of HUF 61 billion, up two-thirds from a year earlier. After-tax profit more than doubled to HUF 45.9 billion. Shareholders also approved a proposal to pay dividends of HUF 400 (some $1.78) per share, or a combined HUF 10.02 billion, contributing this amount to central budget revenues. The remaining part of after-tax profit will be placed into profit reserves.

SAUDI SAYS PRODUCERS PUMPING ENOUGH TO DEAL WITH IRAN SANCTIONS Saudi Oil Minister Ali alNaimi has said oil markets would remain well supplied even after fresh international sanctions against Iran take effect. US and European Union

sanctions on Iran’s oil exports take effect in June and July, and are aimed at stemming the flow of petrodollars to Tehran to force it to halt a nuclear program the West suspects is intended to produce weapons.

Iran exports about 2.2 million barrels per day, mostly to Asia, in a global market of around 89 million bpd. Naimi said he does not see oil supplies tightening in coming months as global sanctions against Iran come into effect, adding that today there is about 1.3 to 1.5 million barrels per day of extra supply over demand.

SOLAR BECOMES EUROPE’S MOST-INSTALLED POWER SOURCE Solar power became the mostinstalled energy source in Europe last year for the first time as subsidies drove investment to records, the European Photovoltaic Industry Association said. Installations of photovoltaic panels in the region surged 63% to 21.9 gigawatts, surpassing all new wind and gas-fired power capacity combined, a recent report shows. Wind and gas plants connected in 2011 amounted to about 9.5 GW each. European countries installed 75%

of global capacity, benefitting from lower panel prices and guaranteed premiums for the energy. Italy and Germany accounted for 60% of this market with 9.3 GW and 7.5 GW, respectively. Solar panels installed in Europe last year generated almost 30% of the electricity produced by all new power plants in the region, the report shows. They generated about 26 terawatt-hours, at the same level of gas plants, which have higher efficiency.

OETTINGER WILLING TO BACK MEASURES TO BOOST EU CO2 PRICE EU’s Energy Commissioner Guenther Oettinger said he’s willing to support measures aimed at boosting carbon prices in the bloc’s market to €10 ($13) or more to boost investment in clean technologies. “With €6 to 8 there’s no relevant signal to investors in the market,” he was quoted by Bloomberg. The 27-nation bloc is considering options to improve the world’s biggest capand-trade carbon market after the recession cut industrial output and prices in the emissions trading system slumped to a record low of €5.99 last month on oversupply. ■

NEWS FOR THIS SECTION IS TAKEN FROM THE BUDAPEST BUSINESS JOURNAL’S DAILY BRIEFING, REGIONAL TODAY NEWSLETTER AT WWW.BBJ.HU/STORE/NEWSLETTER-PACKAGE

in 2010, the Council’s data reveals. There were an estimated 6.6 million Romanians working in the economy in 2011, but employers reported only 4.2 million employees. Romania’s black market labor went from 1.7 million people in 2006, to 1.4 million in 2008, only to lift to 1.8 million in 2009 and 2.2 million in 2010. The weight of employees working black advanced from 22.5% in 2008 to 35.3% in 2011, the report said.

POLAND’S LAWMAKERS APPROVE RETIREMENT AGE HIKE Poland’s lawmakers have approved a controversial government plan to raise the retirement age to 67 for most Poles, media reported. Following a heated debate, the lower chamber of parliament voted by a margin of 268 to 185 with two abstentions to approve changes sought by the pro-business government of Prime Minister Donald Tusk. Until now, women were allowed to retire at age 60 and men at 65. Tusk’s government argues that delayed retirement will help Poles build up larger pensions and reduce state spending. It says that in the decades to come, the

aging society will not be able to maintain its remarkable economic growth of recent years and also support the growing number of retirees.

SLOVENIAN LEGISLATORS ADOPT AUSTERITY BILL The Slovenian National Assembly has passed an omnibus bill introducing sweeping public spending cuts in a bid to curb a national financial crisis.

The adoption of the controversial bill makes it possible for the Slovenian coalition government headed by Prime Minister Janez Jansa to secure €500 million ($660 million) in savings this year and €750 million in 2013. Forty eight lawmakers in the 90-seat parliament backed the revised budget, while the austerity law for balancing public finances went through by 49 votes.

GREECE FACES ANOTHER ROUND OF ELECTIONS Greece’s political deadlock looked set to continue as the President failed to secure agreement on a unity government on May 13. Leaders of the three biggest parties, each of whom had failed to form a

government in the week following the inconclusive May 6 election, convened at the presidential mansion, where President Karolos Papoulias had a last opportunity to implore them to form a coalition before he must call another election, probably in mid-June. Greece’s biggest anti-bailout party, Syriza, defied overtures to join the government deepening the impasse. Syriza’s leader Alexis Tsipras gave the other leaders an ultimatum to renounce support for the EU-led rescue as his party’s price for entering the government. EU officials warn that will mean the end of loans Athens needs to stave off bankruptcy. European Commission President Jose Manuel Barroso has warned Greece that it should leave the euro if it fails to respect the strict rules it agreed to in exchange for a bailout from its euro zone partners.

CZECHS ARE UNHAPPY WITH CURRENT POLITICAL SITUATION Some 90% of Czechs are deeply unhappy with the current political situation in their country, according to a fresh poll released by the STEM agency.

Only one percent of those polled said that they were satisfied with the country’s status quo. When asked how they rate the future development of the nation, more than half of the respondents replied with “very bad”, while only 8% said they believed the country was going in the right direction.

The result is the worst in 17 years, STEM agency staff said.

CZECH REPUBLIC Q1 AUTO PRODUCTION UP 14% The car production in the Czech Republic grew almost by 14% to 349,026 units in the first quarter of the year, the country’s Automotive Industry Association said. According to the association, Skoda Auto contributed to the record rise in production with 13% growth to 196,225 units and Hyundai production was up by 46% to 83,217 units, while Toyota Peugeot Citroen Automobile production dropped 8% to 69,584 units. There was increased Asian demand for Czech-manufactured cars, while domestic demand remained steady in Q1, the association said. Because of the economic crisis, consumers

are looking for mid-range and economy models, the association said, but added that the SUV segment had also grown on the back of lowered prices.

GERMANS SLAM UKRAINE AS TYMOSHENKO CASE DRAGS German Chancellor Angela Merkel has said Ukraine is a “dictatorship” and likened it to Belarus, one of Europe’s most isolated countries.

Merkel has been an outspoken critic of Ukrainian President Viktor Yanukovich for his treatment of jailed opposition leader Yulia Tymoshenko.

“Today, we in Germany and the European Union live in peace and freedom,” Merkel told the Bundestag, the lower house of Germany’s parliament, noting that May 8 was the anniversary of the end of World War II. “Unfortunately, not all of Europe is, because in Ukraine and Belarus people are still suffering under dictatorship and repression,” she was quoted as saying. Tymoshenko is serving a sevenyear jail sentence on an abuseof-office conviction, after a trial denounced by the West as politically motivated. ■

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Budapest Business Journal | May 18 – may 31

Up and down - the wealthiest Hungarians Despite the ongoing crisis that, in theory, threatens to disturb the life of those with huge financial interests, the past year did not rearrange Hungary’s top 100 significantly, according to business daily Napi Gazdaság’s annual list of the wealthiest Hungarians.

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Sándor Csányi, the chairman and CEO of the country’s largest lender, OTP Bank, is again the country’s richest person, with assets of HUF 135 billion, albeit down from HUF 155 billion in 2011.

Csányi, who is also the president of football federation MLSz and is devoted to char-

Extreme Digital co-founded his garage company in 2001 and has doubled its revenues every year. Extreme Digital now covers 10% of Hungarian online trading, a segment with an estimated turnover of HUF 170 billion in 2011.

Women, however, are quite underrepresented amongst Hungary’s wealthiest. Erika Kósa, the co-founder of market-leading financial advisory

Fotex-owner Gábor Várszegi, whose assets are estimated to reach up to HUF 120 billion, and László Bige, owner of chemical company Bige Holding and with assets worth HUF 110 billion, up from HUF 76 billion, have overtaken Demján.

Among the top 100, György Gattyán booked the most spectacular increase. His IT company, Docler Holding,

György Wáberer, 10th, + HUF 6 bln

Gábor Széles, 9th, + HUF 4 bln

itable causes such as the support of socially disadvantaged children, previously lead the list in 2005 and 2006. When he returned to the top last year, he dethroned real estate mogul Sándor Demján.

About Ft 35 billion in value was wiped off Demján’s wealth from 2011 to 2012; it now totals HUF 105 billion, pushing him back to fourth place of the list. Both

Sándor Csányi, 1st, – HUF 20 bln

purchased several Hungarian businesses in a very few months, meaning the value of Gattyán’s assets grew from HUF 33 billion in 2011 to HUF 98 billion, enough to push him into fifth place of the list.

There were 12 debutants this year. Noteworthy among them is Balázs Várkonyi, 33, currently placed at 99 with assets of HUF 5.3 billion. The owner of electronics retailer

Róbert Láng, 72th, + HUF 0.5 bln

Sándor Demján, 4th, – HUF 35 bln

group Brokernet is the only woman in the top 100. Her assets, totaled at HUF 34 billion, were enough to place her at 15 in what certainly seems to be a rich man’s world.

However, as the editors of the publication noted, the list may be incomplete as it does not include the unapproachable, businessmen close to government such as Lajos Simicska and Zsolt Nyerges. ■

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Redeeming or destroying?

Affiliate marketing has been received ambiguously on the domestic advertising market.

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“No way,” a chief media sales worker at a big online publisher answered emphatically when asked by the Budapest Business Journal under what conditions they would provide space to affiliate advertisements. “We would rather publish bare content than burn our inventory in such a humiliating way,” he added. But what is the problem with affiliate marketing if it works so well with all other actors of the market?

According to the latest advertisement manuals, affiliate marketing is a working relationship whereby an online merchant – the advertiser – attracts consumers to its own products by adverts placed on an affiliate website. If a consumer visiting the affiliate’s site clicks on an advertisement and goes on to make a purchase (or at least registers for a marketing database) on the advertiser’s site, then the affiliate receives a commission.

VIRTUAL SHELF RENTERS Even dry legal terminology reflects that being an affiliate of a retailer involves a much more intimate commitment than simply providing space to online ads. “It is as if the content providers in question turned into sort of merchants themselves, and rented out a shelf to other merchants,” Balázs Dárdai, sales manager of Affliate. hu told the BBJ. Collecting the rent in question is based on commissions, i.e. a pre-agreed percentage of the products sold, the tracking of which is simple in real life, but is rather difficult in the case of virtual shelves.

“In affiliate business there is a separate agent who operates the computer platform that measures the advertisement campaigns, manages the deals between publishers and merchants as well as visitors and merchants, while the software also tracks the clearing process between them. It is called the affiliate network operator,” Péter Agárdi, managing director of TradeTracker Hungary, a member of TradeTracker International, said in clarifying his company’s role.

“Affiliate networks do the best job when they stimulate mutual collaboration between publishers and merchants,” he added. “TradeTracker’s software platform is constructed in a way that publishers have a choice regarding which ad campaign they wish to give space to. Merchants, however, have the possibility either to accept or refuse this. If they accept it, publishers still have the right to decide about what sort of ads they would provide space for, so that they can influence the efficiency of sales activity on their sites,” Agárdi added.

The main beneficiaries of the three-agent affiliate market are small content providers. “A blogger would never have enough time, let alone the expertise, to organize ad campaigns for his site himself,” Zsolt Reményi, chief information officer of Hungarian-American network operator PressFlex told the BBJ. “With the help of a network like ours, however, his only duty is to sign a contract and collect the commission his site has earned for him.” PressFlex has great experience in filling blog inventories with advertisements as they provide client and IT services to BlogAds, a network operator that boasts America’s biggest portfolio of independent bloggers. “As for civil content providers, they

take commissions as financial windfalls,” he added.

NO WINDFALL This is not the case with major online publishers: owners of frequented websites do not take commissions as windfalls at all. They consider affiliate marketing to be an unfavorable financial model, and moreover, the latest and less appealing development of an advertising sales trend. “In the very beginning, Cost per

affiliate marketing; they insist that it is totally unfair. “What if the pay-per-click system were extended to billboard advertisements as well? Would advertisers only pay if the driver stops and jots down the phone number on the board?” asked Balázs Román, editor-in-chief of Kreatív, the Hungarian advertising industry’s leading magazine. “Going one step further, affiliate marketing would mean that only billboards that make drivers change their minds

BY REDUCING ADVERTISING ‘NOISE’ WE MAKE OUR EXISTING ADVERTISEMENT CAPACITIES MORE VALUABLE Thousand Impressions was the only way of collecting advertisement fees. Advertisers used to prepay for each loading of their messages (sold on a thousand basis) and when it ran out, we simply took their banner off,” the sales manager of a major publisher recalled.

“Then advertisers switched to the pay-per-click system, so they only paid for users that clicked on their banner. Of course, only a very small portion of visitors clicks on banners, even if they are curious about the advertised product.

As for affiliate marketing, settling accounts this way is even less advantageous for publishers than the pay-per-click system was. Clicking is not enough anymore, visitors have to purchase the product right then and there, otherwise advertisers do not pay anything,” the media expert told the BBJ. Online publishing professionals do not simply dislike

and induce them to go immediately to the retailer would earn money for their owners,” Román added, taking the thought to its absurd extreme.

“Affiliate marketing is based on two novelties,” Péter Novák, the Hungarian president of the International Advertising Bureau (IAB) told the BBJ. “On the one hand, part of the sales risk is shifted to publishers; on the other, commission is paid for successful acquisitions. The latter should compensate publishers for the former.”

As far as risk assumption is

concerned, small content providers are more exposed to risk. No matter what percentage they get as a commission, since they have relatively few visitors, it is unpredictable what sort of turnover they will generate from month to month.

For big content providers, uneven cash flow should not be a source of risk, since they have enough visitors to bring a steady flow of revenues.

“Nonetheless, they may still be unsatisfied with commission revenues, but we have to be aware of the fact that their problem with affiliate marketing is not a theoretical one, they are simply discontent with what they earned from a particular campaign,” a network operator told the BBJ. ESCAPE HATCH OR DEAD END? However, the underlying problem of big content providers seems to be a structural one.

Quality content is getting costlier to produce while its financing is increasingly difficult.

“Subscription is still not a viable business model; ad revenues, however, cannot be increased any further,” Román said. “Publishers’ idle inventory [unused spaces] has been growing since the beginning of the crisis, and media sales people are struggling to sell it to advertisers,” he added.

“Affiliate marketing could offer an ideal solution to this problem. Or an escape hatch at least,” TradeTracker’s Agárdi said. “Leaving the inventory idle is senseless any-

how; why not sell it on an affiliate basis? Whatever publishers earned from commissions, it would exceed what they earn from their inventory now,” he argued. Most publishers, however, think that such a deal would lead them into a deadend. “We would contribute to downgrading our spaces irreversibly. It is still better if we temporarily cut back our ad space. By reducing advertising ‘noise’ we make our existing advertisement capacities more valuable,” Román argued.

Advocates of affiliate marketing still think this kind of argument is only a pretext.

Big publishers are thought to be disguising the fact that the sales-boosting capacity of their sites commonly falls short of advertisers’ expectations, especially if a small publisher’s specialized sites are taken into account. “If a banner of antinail biting lotion is put on a blog site about nail biting, its click/sales ratio will surely surpass that of a frequented big site,” argued Agárdi.

Bargaining between big publishers and network operators is apparently in progress. “Affiliate marketing is still something very new, market agents have to learn how to use it as a mutually advantageous way of advertising,” insists Novák. “Affiliate marketing has to find its place on the ad market. It will not replace image advertisements, but it can still have an important complementary role,” said Román. ■

LOTTERY APPEALING TO ALL – A CASE STUDY As an advertiser, make-up retailer TeSminked launched an affiliate marketing campaign on the fashion website WoW: no click-per-view fee for the ads. Additionally, however, it was combined with a lottery for a set of make-up products offered by TeSminked. In order to enter the competition, visitors had to list three brand names distributed by TeSminked. In order to find out these names, visitors had to click on the link leading them to the home page of TeSminked, which was monitored by TradeTracker as an affiliate network operator.

When a visitor clicked on the link and bought something from TeSminked’s web shop, WoW earned a commission.

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Budapest Business Journal | May 18 – may 31

Financial sector at watershed Crisis management, an unfavorable market environment, strengthening regulatory background, fastchanging technologyand client needs: these are the most important things on financial executives’ minds these days, both globally and in Hungary. But there are some Hungarian characteristics: while financial executives worldwide worry, in addition to the above mentioned factors, about the shift in geographical markets (from north and west towards south and east), Hungarians think worsening profitability, uncertain economic outlooks, unpredictable regulations, tax burdens and the fear of foreign exchange volatility are the biggest challenges.

The financial services industry is at a watershed: PwC’s Project Blue research, published in April, reveals that financial executives have seen political instability growing to six from four on a scale of 1-10 in the last three years. Increased uncertainty on the market is forcing players to amend their operating model and organizational structure. Financial pressure further increases financial instability. As a result, financial markets have become instable both globally and in Hungary in the last few years.

The financial status and liquidity of banks have deteriorated, while government measures and new taxes have worsened growth and profit outlooks in the sector.

Hungarian financial executives basically see the same challenges as their international colleagues, but in Hungary, the problems are

seen as being deeper and the expected recovery period longer. According to the PwC survey, the financial sector is the one that suffers the most from the crisis.

The same applies to future perspectives: while in other industries there was a 50-50 split of respondents about whether they were optimistic or pessimistic concerning growth prospects in the next 12 months, fully 75% of financial executives said they were pessimistic and only 6% of them were definitely optimistic.

The situation is much better in the longer run: 80% of financial executives said they were optimistic about the outlook over the next three years.

However, still less than 50% marked their answer as “definitely optimistic”.

Managers in the financial services sector, compared to other sectors’ executives, feel that they are under-informed and the financial background of their company is less stable. While more than 80% of executives in other sectors said they fully understand their company’s financial position, and gather enough information on market changes, 40% of financial executives think that they need more information on both their own market and the position of their company.

Furthermore, two-thirds of executives in other industries feel their company’s financial position stable, and only half of those in the financial sector think the same.

When it comes to human resources, the financial sector inevitable shows the signs of recovery: globally, 50% of queried financial executives said they expected a rise in staff numbers in the next year, and 25% of them said they saw an expansion of more than 25%.

But the situation is somewhat different in Hungary.

Market players in the financial services sector still expect layoffs. More than 70% of them said they had decreased their staff in the past year, and they project the same in the following years as well.

COMPANY STRATEGIES Financial services firms are traditionally good at strategic planning. This hasn’t changed in the past few years, but the strategies banks and insur-

ance firms choose these days are often defensive.

Also, company strategies are not as time-proof as they used to be in the financial sector. Of 16 respondents, only one had a strategy for more than five years. In addition, nearly 40% of them think that they do not have access to the information necessary to adjust their strategies.

However, the financial sector is likely to see restructuring activity in the near future.

All respondents said they planned some restructuring of the company’s activities in the next year – and some of them have already done so.

Taking all sectors into consideration, nearly four-fifths of companies have introduced cost-reducing measures. But financial companies typically voted for reorganizing their economic ties and strategic alliances.

Expectations for the next 12 months differ in various sectors. While only 40-45% of retail and telecommunications companies plan further cost-cutting measures, financial companies intend to introduce further steps to reduce costs.

BUSINESS ENVIRONMENT When it comes to growth potential, there a significant difference between financial industry players and those from other industries. In general, 23% see the future in developing new services and products, and another 23% think growth potential lies in increasing their market shares. But the financial sector is different: 25% of them see the future in mergers and acquisitions, and 13% of them said that there is big potential in establishing strategic alliances and joint companies.

Interestingly, these were not mentioned as options in other industry executives’ answers.

The view on government politics is, however, quite unanimous across all industries. Some 86% of all respondents said the motivation behind the government economic-policy measures is difficult to oversee, and 81% of the queried financial executives said the same.

Executives in general think that the government, in addition to paying attention to three main areas, such as creating a balance in the state budget, introducing a new tax policy and preparing lawmaking processes, should have focused on measures that boost the economy and improve employment conditions. Furthermore, financial executives think that the government should treat development policy as a priority.

HUMAN RESOURCES The PwC research reveals that due to the continuing global recession, finding well-trained employees has become easier for financial services companies in Hungary.

Compared to other sectors, hiring adequate staff members is a relatively small problem in the financial area. While 60% of CEOs in the production and automotive industry think that finding the right personnel is more difficult now than it was a year ago, more than half of financial executives observed the opposite. They also think that they will be able to find the right people in the next three years. ■ Péter Chornitzer, Senior Manager at PwC Hungary, contributed to this article, which is based on PwC’s 15th Annual Global CEO Survey and Project Blue study.

10 2 Business BBJ

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Budapest Business Journal | May 18 – may 31

The ‘yellow check’: a commonplace Hungaricum Post offices all over the world accept money orders from individuals, companies and institutions as a prepaid payment order for a pre-specified amount. It is similar to a certified check but simpler and safer to use.

BBJ ANDRÁS SZARVASI

No matter how popular it is worldwide, expatriates moving to Hungary find the “yellow check”, as it is commonly known, a bit strange initially. It is not simply the striking color that may cause astonishment, not even the fact that the “yellow check” is just yellow, and not a check at all, but rather its ubiquitous use: that almost all

kinds of utility bills, insurance fees, newspaper subscriptions, charities, etc. may (often must) be paid via this “postal in-payment money order”, as the official translation reads in a study of the National Bank of Hungary.

In 2008, there had already been about 282 million transactions: mostly utility bills, telephone bills, consumer loan installments, insurance premiums, etc. and an average Hungarian household initiated 74 postal money orders annually, for a total of HUF 811,000, as Dr. Anikó Turján’s survey reveals.

Today, about two-thirds of retail money transfers take place via yellow checks.

The system is simple: you tear off the yellow check attached to your telephone bill, walk to a post office and pay the cash in exchange for a receipt. The Post Office then transfers the money to its Settlement Center, which, at the end of the day, will total up all the daily money trans-

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actions with the bank of the telephone company and settle the net difference. Finally, the bank will credit your payment to the telephone company’s account.

A dominant payment method up to recent times, the yellow check’s incredible popularity began in the communist era after traditional bank checks, together with their issuing houses and owners – epitomizing the detested capitalist exploiters – had been eradicated. The Hungarian Post Office, however, which had been providing money transfer services since its foundation in 1867 (mostly through its saving bank network), was allowed to retain this function even during communism.

The yellow check system reached its height during the 1970s with the introduction of electronic data processing.

Cautious social and economic reforms by the Hungarian communist leader János Kádár lead to the import and

installation of up-to-date code readers, sorting and scanning tools. By the end of the 1970s, transaction turnover had doubled and reached 80 million transfers.

The collapse of the communist regime in 1989 offered an opportunity for commercial banks to reintroduce bank drafts. By then, however, credit and debit cards dominated the market and bank checks could not regain their pre-war status. Meanwhile, the yellow postal order continued its illustrious career.

In spite of frequent queues at Post Offices, it is still a very convenient way to settle bills, as customers do not have to back up payments with a bank account.

Magyar Posta, at the same time, can bag huge revenues, partly by producing and selling yellow check stationary to end-users (i.e. public utilities, insurance companies, etc.), and partly by collecting a service fee from the credit institutions that man-

age the end-user accounts.

Additionally, the Post Office can also benefit from the two-day time gap between receiving and forwarding payments, through shortterm placements.

Unlike the Post Office, though, end-users find the system less advantageous.

Some, including Magyar Telekom, have already

announced they will impose a charge on yellow checks to compensate increasing costs. Though the idea met strong resistance from the public, particularly pensioners and other low-income social groups, the surcharge may easily lead to the gradual phasing out of this colorful Hungarian peculiarity. ■

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Budapest Business Journal | May 18 – may 31

Consolidation watch Consolidation is one of the buzzwords in Fidesz’s current communication. While its precise meaning is unclear, the various pronouncements suggest that Fidesz wishes to move from a phase of major reforms and intense conflicts to a more relaxed period that allows for fixing some of the mistakes in the hastily crafted major laws adopted last year. The absence of highly controversial new legislation and the fact that credit talks with the IMF may finally commence may be indications that the notion of consolidation is genuine, though it is too early to judge. In either case, consolidation is not a major concession from Fidesz: with its vastly expanded powers, consolidating its current positions represents an ideal situation for the governing party.

Whatever specific shape this process takes, the opposition has little incentive to cooperate.

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The big mystery these days is whether Fidesz will indeed halt the uncanny pace of its reforms – and especially its most controversial aspects, those pertaining to democracy and the rule of law – or whether it will continue churning out new legislation at record speed. The prospect that Fidesz may lay back for a while and enjoy the spoils of its labor was held out by party spokespersons themselves.

THE OPPOSITION HAS AN INTEREST IN KEEPING DIVISIVE ISSUES ON THE AGENDA, ENSURING THAT FIDESZ HAS NO ALTERNATIVE BUT TO BARE ITS TEETH. ment is still hyperactive, even though there are signs that the pace of change is finally slowing and Fidesz may indeed turn toward “consolidation”.

A PROMISE OF CONSOLIDATION Most recently it was Deputy Prime Minister Tibor Navracsics who said that in the Hungarian public administration, “2012 will be the year of consolidation and preparation, after the period of activism ended in 2011.” His remarks echoed several similar statements since Prime Minister Viktor Orbán introduced the notion of consolidation early in 2012. The inaugural address by the new president, János Áder, is also seen by some as indicating Fidesz’s new course.

Though the speech certainly meshes with the theme of consolidation, it was probably more of a reflection of Áder’s own ideas rather than a note from Fidesz’s new playbook.

Regardless: in Fidesz circles, consolidation remains the buzzword of the day.

Is it here yet, though? To some degree the heated international conflicts that the government was embroiled in on account of its previously adopted policies made it difficult to ascertain where recent legislative changes were leading. Since many of the current complaints by international organizations – particularly the European Commission and the Venice Commission – pertain to laws adopted during the legislative frenzy last December, their continued dominance in international and some domestic reporting on Hungary certainly creates the impression that the govern-

BEHIND THE SCENES Of course, the phase of consolidation is inherently as much defined by things not done – i.e. controversial acts – as it is by specific actions. And with respect to new legislation, things have indeed been fairly quiet over the past weeks. An even more important sign is the unexpected movement in the talks with the EU and the IMF. For months, Orbán claimed to be begging the IMF to begin credit talks, and complained that the international institutions were dragging their heels to make recalcitrant Hungary toe the line.

The surprising green light to negotiations has led many analysts to speculate that the government made secret concessions to the international players, maybe promising to scale back some of the more drastic changes pertaining to the judiciary and the central bank, for instance. After all, even Fidesz representatives have acknowledged that some of the hastily adopted reforms need revisions, thereby laying the rhetorical groundwork for enacting the changes required by the EU and/or IMF. We only have indirect indicators as to whether the most recent development in the protracted back and forth between the Hungarian government and the EU/IMF is indeed more promising than previous phases of apparent accommodation. But the fact that

the forint is rallying to highs unseen in many months, coupled with the images of Tamás Fellegi going to conduct actual credit talks, inspire hope that the process of consolidation will involve a stabilization of Hungary’s risky debt situation. Though some experts have recently cast doubt on the professional consensus that an IMF loan is needed, in light of the current exorbitant interest rates, low-interest financing would save the budget considerable money. The reduced cost of servicing debt would be the first tangible benefit of “consolidation”.

REFITTING THE STEAMROLLER For the political opposition as well as for those non-partisan observers who are critical of the Orbán government’s activities, both the lofty pronouncements and the temporary lull in controversial reforms are not necessarily a reliable indication that no more major changes will be enacted until 2014. The suspicion is that if Fidesz feels that further major changes are necessary to buttress its power, then this need will always trump whatever advantages a period of calm may yield.

Still, those advantages may be substantial. Fidesz probably recognized that constant all-round confrontation ultimately hurts its popular standing. In fact, in all probability the plan right from the start was to get the controversial legislation out of the way quickly and to then revert to a more peaceful style of governance. Though it retains a commanding lead among the shrinking base of likely vot-

www.policysolutions.hu Political Research and Consultancy Institute

ers, Fidesz’s popularity has plummeted in the electorate at large. While economic hardships are the primary cause, Fidesz’s reputation for showing no inhibition in the exercise of its constitutional power has also alienated some voters, especially since they see few benefits to counterbalance the aggressive style of governance.

KEEPING THE BENEFITS Moreover, at this point a phase of consolidation is a small concession from Fidesz, assuming that its statements are more than a mere rhetorical ploy.

After all, what is being consolidated is a structure of government with massively expanded powers for the ruling party and a personnel selection that will ensure that Fidesz will retain significant influence over the affairs of the state even if it were to lose the next election, which is still rather unlikely. Despite potential (probably minor) concessions to the international institutions, there is no indication that scaling back previous reforms will be a major part of consolidation.

Consolidation could fizzle out as soon as Fidesz runs into issues that it believes require unilateral action. Short of that, however, the opposition has an interest now in keeping divisive issues on the agenda, ensuring that Fidesz has no alternative but to bare its teeth.

NO COOPERATION Early on, when many of the key questions of the new constitutional order were decided, the opposition might have benefited from being involved in major decisions, and it is no accident that it was left out then. As the elections move closer and the opposition parties hustle to improve their relative standing among voters, they have no interest in giving Fidesz any legitimacy by cooperating with it.

In other words, even if the phase of consolidation were to involve some genuine reaching out, it is unlikely that the opposition will reciprocate by cooperating. Hence the best chance for a slight calm in the troubled water of Hungarian politics stems not from the government’s presumed intentions but from the opposition’s persistent inability to set the agenda. ■

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Budapest Business Journal | May 18 – may 31

MOL to quit Nabucco, wha The future looks uncertain for the decade-old Nabucco gas pipeline project, after Hungarian oil and gas company MOL Nyrt decided not to approve the 2012 project budget and is considering selling its 16.7% stake.

But how will Hungary decrease its dependency on Russian gas?

BBJ KRISZTIÁN KUMMER

MOL has voiced doubts several times during the past years, but this time, it stepped to a new level, deciding not to accept the 2012 project budget. “MOL Group has indicated towards NIC shareholders, and to the Hungarian Government that it does not consider the further financing of Nabucco International Company sustainable and therefore it did not approve the 2012 annual budget of NIC,” it said in a statement on April 24.

“We have signaled that we are ready to sell our shares if necessary [...] we merely had

to send a very strong signal now that we are not willing to finance this any longer,” MOL CEO-Chairman Zsolt Hernádi said, after MOL’s annual shareholder meeting on April 26. Hernádi also criticized the management of the Nabucco International Company (NIC) which is preparing the planned pipeline, pointing out that it has already cost the MOL group about €20 million and there are still no decisions on important questions over gas suppliers, costs, terms and conditions of shipping, etc.

Mol Nyrt’s 100% subsidiary, Földgázszállító Zrt (FGSz) is one of six partner companies forming the Nabucco-consortium, along with OMV, Transgaz, Bulgargaz, BOTAŞ and RWE. This latter is also considering quitting the project due to supply uncertainties and constantly growing construction cost plans. “RWE is examining whether its ‘commercial requirements’ are still met by Nabucco,” the company said in a statement on Monday, May 14.

Nabucco, as the flagship of the Southern Gas Corridor initiative of the European Commission, is strongly backed by the EU and the

FEBRUARY 2002 Preparation of Nabucco, first talks between Austrian OMV and Turkish BOTAŞ

United States and designed to lower the Union’s dependence on Russian gas. If built, the almost 4,000 km long pipeline would carry 31 billion cubic meters of natural gas per year mainly from the Caspian: Iraq, Azerbaijan and Turkmenistan. But the construction of the project was delayed several times, as contracts with potential suppliers are still missing, and the original project budget of €7.9 billion has almost doubled throughout the last 10 years due to the rising steel prices.

But leaving the project is not as easy as it may seem.

First of all, if MOL was to sell the stake in Nabucco, it must find a buyer, which is a hard task after drawing so much criticism. And even if MOL could sell its stake in Nabucco, Hungary – as well as Austria, Bulgaria, Romania and Turkey – signed an agreement in 2009, which states that the “parties shall lend their full political support for, and undertake to promote, support and facilitate the measures necessary for the realization of the Nabucco project and the Transportation thereby of Natural Gas in and across their Territories.” The scope of the interstate agreement

is 50 years, although it is clearly stated, “Nothing in the Agreement obliges the States Parties to finance the Nabucco project or to accept financial liabilities in regard to the Nabucco project.”

That means, even if MOL quits the project, Hungary must ensure the smooth construction of the pipeline through the country.

Hungary’s dependence of Russian gas is not an overstatement: the country imports about 80% of its annual natural gas consumption from Russia’s Gazprom. Hungary has always been committed to broaden and diversify its natural gas sources to diminish this dependence.

So Hungarian Prime Minister Viktor Orbán’s statement surprised everybody on April 24 in Brussels. He not only affirmed that MOL could quit Nabucco project, but also announced that rival pipeline project South Stream, backed by Gazprom, is gaining momentum.

Orbán’s comments came less than a week after the Hungarian leader met with Gazprom Chief Executive Officer Alexey Miller in Budapest to discuss South Stream, which according to Gazprom “meets the strate-

JUNE 2002

JUNE 28, 2005

JUNE 26, 2006

Five companies (OMV, MOL Group, Bulgargaz of Bulgaria, Transgaz of Romania and BOTAŞ) sign a protocol of intention to construct the Nabucco pipeline. The name is taken from the famous opera

by Giuseppe Verdi that the original five partners had listened to at the Vienna State Opera after this meeting.

Joint venture agreement is signed by the five Nabucco partners

The ministerial statement on the Nabucco pipeline is signed in Vienna.

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Budapest Business Journal | May 18 – may 31

hat’s up next? gic interests” of both countries. With its €15 billion budget, South Stream is relatively expensive, but it is clear that – according to the Hungarian government – it is better to be on board than left out.

Also, last year Hungary signed an agreement to join Azeri-Romanian AGRI, a mixed LNG-gas pipeline project that aspires to deliver up to 8 billion cubic meter of gas from Azerbaijan Hungary’s long-term Russian gas supply contract expires at the end of 2014 and it is clear that the country is trying to find any method it can to decrease the price of gas for the new period. According to former Hungarian Development Minister Tamás Fellegi, the Hungarian cabinet wished to open negotiations on the gas agreement in 2012, the middle of the current government term.

But Russian officials were strict about the timeline of re-negotiation, stating that it should not start before the year of expiration of the current contract.

Meanwhile, the 28.6% stated-owned MOL has also started to find substitute projects for Nabucco, even it doesn’t admit as

much. “MOL Group does not comment on information about any negotiations. MOL Group’s FGSz, as always, is investigating all viable gas pipeline projects that have business rational and contributes to the energy supply diversification of Europe,” the gas company stated. What is certain is that MOL is examining possible methods to join the South-East Europe Pipeline (SEEP) being marketed by British Petroleum (BP). As BP formally confirmed to Hungarian newspaper Népszabadság, joint work groups were formed to consider possibilities for construction of the Hungarian section. SEEP, made public only a year ago, is regarded as one of the most viable competitors of Nabucco.

With MOL and RWE possibly leaving Nabucco, it is highly possible that the project will be scaled back to Nabucco West, a link that would take gas from Azerbaijan’s Shah Deniz field to the proposed Trans-Anatolia Pipeline, known as Tanap.

But even the construction of this one depends of the natural gas auction of the BPled Shah Deniz-consortium due on May 16. ■

FEBRUARY 2008 German RWE became a shareholder in the consortium.

APRIL 24, 2012

Intergovernmental agreement between Turkey, Romania, Bulgaria, Hungary and Austria is signed by five prime ministers in Ankara.

(Source: Wikipedia)

JULY 13, 2009

MOL decides not to approve the project’s 2012 budget. On the same day Hungarian Prime Minister Viktor Orbán affirms that MOL might sell its stake in the project.

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Budapest Business Journal | May 18 – may 31

The Hedgehog and Coca-Cola Would you say that the hedgehog and Coca-Cola have anything in common?

Well, they do: a strong brand they are both famous for.

BBJ JUDIT ÁBRI

We can all visualize a hedgehog rolling up into a ball, its quills becoming an impenetrable barrier against an attacker. The hedgehog is known for its defensive capabilities. That is its brand, its unique distinguishing feature.

Another strong brand is Coca-Cola, with its taste, red-colored label, and oldfashioned, retro glass bottle. The name Coca-Cola inspires a taste, the red color on the label from its days of origin brings back memories; not just ours, but those of our grandparents as well.

A brand is a promise kept – in this case, from many decades ago. We identify a product by and with its brand. Branding is perception. Brands manifest themselves in colors, shapes, smells and tastes.

Brands are how we perceive things from the outside, the way we categorize them; they can be both positive and negative. A brand is associated with an idea, an emotion, a standard of quality, or a unique concept.

In many ways, brands are like people; they have personalities, qualities and attributes. Building a product brand and building a selfbrand require similar strategies. Our goal is to create a positive attitude in the minds of other people. If you are aware of all this, you can influence it.

“Do you want to be something grey in something big or something colorful in a powerful niche?” asked Jos Velthuis of Krauthammer International at a recent Personal Branding workshop.

“You can create your own Blue Ocean strategy.”

BRANDING IN CAREER Whether you are an accountant or a cook or a sales person, whether you work for a company or for yourself, whether you are looking for

a job, want to change your job or are just after a promotion, branding is an issue you have to be aware of.

“In the ideal case, your brand becomes the vehicle of your most authentic self. It will distinguish you from others in similar jobs, affirm your true identity, highlight your talent and establish your reputation. It brings you the advantage of visibility,” noted Ágnes Galambos, a branding expert from Krauthammer Hungary.

Branding is there to help you find your ideal job and to keep it. You have to build demand for your unique offerings. But first highlight them. Career management and brand building go hand in hand. “In a way, personal branding is helping professionals with their ‘coming out’. An expert is a well branded person,” summed up Velthuis.

“How do I find my brand?

How do I build it?” you may ask. It is simple: be aware that you already have a brand. Just dare to go and ask around.

Whatever people think and say of you is your brand.

Whether you like or not, it exists, even if you decide to ignore it. The good news is that with patient, consistent, hard work you can shape it and change it. If you work on it, it will yield results.

You must be a brand builder if you want to succeed in today’s dynamic and challenging marketplace. Branding yourself means that you create the right kind of – meaning your kind of – emotional response you want people to have when they hear your name, see you online or meet you in person.

So go ahead and ask yourself: What is unique about me?

What does everybody already know about me?

What is one thing I can do better?

Internal values are the basics to building you brand. Find what you are the best at, what fills you with passion, what gives you the “flow” feeling.

Being in your strength is being in your “flow”. We love what we are good at.

A Gallup survey of 200,000 interviews showed that when employees focus and use their strengths on a daily basis, their business units have 50% higher employee retention, 44% higher client satisfaction and 38% higher productivity compared to those who don’t use their strengths on a regular basis.

The message is simple and obvious, but not always practiced: do more of what you love to do and what you are really good at. Performance is the brand builder.

If you still don’t know your brand, here are some more questions for your self-branding exercise to continue: What would you show if you were to shoot the video of your perfect day?

With only a certain period left to live, what would you do? How would you spend it?

In the midst of your brand-

ing process, the “3 Cs” defined by branding experts must be kept in mind: clarity, consistency, and constancy.

As said before, values are the cornerstone to the brand.

On the corporate level, this means that you must be crystal clear about the value you bring to the organization or specific project.

The “first 100 days plan” once applied only to CEOs (and to governments), now it is a must for all new staff members, even at the lowest level of the hierarchy: if you want to keep your job, show your unique features.

What if I physically don’t work in the office, yet I want to be valued by my company?

It is a fact that more and more people work away from the office, so this is another strong argument to build your personal brand in such a way that it is powerful enough to impact managers and colleagues even when you are physically not in the

office. The task is to shape your brand environment by building and strengthening your professional network through social and professional media even when you are away from the office crowd. Nowadays this is a common practice, since the internet conveys our message and professional image all the time and all the way.

Your strong brand will have its reward in terms of getting paid what you are worth, landing the promotion you deserve or launching a startup venture – if that is your choice – that lasts.

My final argument and last call: “If you don’t brand yourself, someone else will.” It would be a shame to leave this opportunity to someone else. ■ Judit Ábri von Bartheld Executive coach and communication advisor ICF accredited coach Organizer of the international event series “Coaching Without Borders”

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Budapest Business Journal | May 18 – may 31

Civil suits

Corporate lending

Young consumers

Domestic affairs lead legal list

No spring thaw

Financial decisions based on ads

47%

In 2011, local courts handled more than 161,000 legal cases – meaning a lawsuit for one in every 62 people. Moreover, almost half of them were of a domestic nature involving families, according to a fresh report by Ügyvédbróker.hu, a site providing support in finding a lawyer.

Domestic lawsuits have been leading the list of civil suits for about two years now and the website explored what types of legal cases dominated the field of family law in Budapest and various counties in 2011. They gathered data from local court registries (where lawsuits are filed) and from the site’s own collection, allowing a peak into the trends of some subcategories.

According to data from the local courts, cases concerning marriage, child support, child custody and guardianship were the most common, representing more than 90%.

This is confirmed by the data of the lawyerfinding site, where most of the searches were related to the topics of child support, custody, contact, divorce and asset sharing.

Contrary to the ratios of the more extensive civil suit category, which put the capital, Baranya and Tolna counties in the lead (with lawsuits for every 40th, 54th and 61st person), domestic lawsuits show a different kind of distribution.

Cases regarding guardianship are most frequent in Szabolcs and Vas counties, while Veszprém and Pest counties have far fewer such cases. Married Most people were looking for a couples are most likely to lawyer specialized in family law turn to the courts in Borsod on the website in 2011, followed and Heves counties. Child by real estate, corporate and custody cases are initiated finances. The last two categories most often in Komáromshowed growth in the third Esztergom, Tolna and quarter, when together they reached 25%, up from 13% at the Somogy, while Budapest beginning of the year. Intellectual and Pest, Győr-Mosonproperty experts were the least Sopron and Hajdú-Bihar sought last year, representing counties are at the end of only 1% of the searches. the list. AJM

25%

Ratio of searches for family law specialists 2011

-0.7%

OF ALL CIVIL SUITS CONCERN FAMILIES

Ratio of searches for corporate and financial law specialists, 2011

IS THE LATEST CORPORATE LENDING SENTIMENT INDEX

According to senior bank officers, there has been a downward trend on the corporate lending market and future prospects are not bright either, resulting in a -0.7 point index on a scale ranging from +10 to -10, the latest spring report from KPMG indicates.

The Hungarian banking sector was significantly affected by negative external and internal factors over the last few months: the eurozone crisis, regulatory changes and imposed extraordinary burdens, among others.

The change of the index reflected a gradually deteriorating sentiment in the previous year, falling from 1.5 points in June 2011 to 0.1 in October 2011, before turning negative in spring 2012, while an increasing number of respondents also forecast that lending conditions will remain unchanged.

At the sector level, a significant decrease is expected, while officials considered their own banks’ lending performance as stagnating.

Nonetheless, most banks perceived increasing demand for corporate loan products and are open to corporate lending in general. Rejections were mostly triggered by companies’ negative future business prospects, past economic performance, former credit history and debt levels.

While banks are not so eager to finance operating loans, this purpose remained the most popular among clients.

Regarding the industries applying for loans, real estate, construction and the financial services sectors are In the years between 2008 and seen as the least attractive.

2010, the volume of corporate Manufacturing, agriculture loans decreased by HUF 939 and food are, on the other billion to HUF 6,008 billion, while hand, at the top of the list. lending standards tightened.

Altogether, respondents The starting value of the index in were unanimous regarding June 2011 was +1.45, a moderately optimistic figure indicating that their expectations for no breakthrough was expected in a slightly decreasing the coming months. corporate loan portfolio in the banking sector over the coming year. AJM

+1.45

Banks willing to finance companies in principal, June, 2011

Banks willing to finance companies in principal, May, 2012

1 in 10

Although they have been raised in a consumer society and are therefore considered educated and conscious about consumer decisions, members of the so-called Y-generation are not aware of their finances, the results of a recent MasterCard survey show.

MasterCard asked 1,500 Hungarian university and college students about their financial decisions, and found that most make them based on TV, billboard or radio ads, followed by advice from family and friends, while only 20% of them look for information on the internet.

Their parents often select their first bank for them (usually when the students are 18-22) and even if it is not their preferred one, they don’t get their own way. Youngsters also seem very loyal: only one in every ten people has switched financial providers.

No wonder: only a mere 25% said they were aware of other banks’ conditions, while 52% of respondents didn’t know how much their account cost in a month and 72% couldn’t say anything about deposit interest rates, even though the average amounts they handle are relatively low, between HUF 20,000 and HUF 200,000, with an average of HUF 60-70,000 in monthly spending.

Students don’t know much about bankcards either, and there is a popular perception of card payments costing money, the survey shows.

Consequently, 83% of respondents use their bankcards to withdraw cash and 40% for topping up their mobile accounts, while only 66% use it for shopping.

Compared to this, there are a relatively high number of users signed up for online banking services: 31%, with a further 15% planning to sign up in the near future. Touch-free technologies, such as PayPass, are familiar to 15% of respondents. AJM

Lack of financial knowledge Don’t know about other banks’ conditions Don’t know about deposit interest rates

Completely With minor limitations With significant limitations In exceptional cases No willingness Source: Ügyvédbróker.hu

Source: KPMG

YOUNG PEOPLE HAVE SWITCHED BANKS

Don’t know about account fees

Source: MasterCard-Xallis Consulting

75% 72% 52%

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SpecialReport

Legal market sees more challenges ahead The Hungarian legal market is considered to be relatively stable despite some significant exits by some prestigious law firms prior to the crisis, market players say. But the sector will continue to face challenges in the upcoming years both in Hungary and worldwide.

BBJ PATRICIA FISCHER

“The Hungarian legal market is – and has been for some time – complex,” Ines K Radmilovic, partner at Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Law Firm told the Budapest Business Journal. “It is saturated by both strong local firms, of various sizes and of various degrees of international ties; and international firms of various types, including those that are truly global and full-service, and those that are niche players (with regard to geography or practice specialty).”

But the global economic climate has not left the market untouched. “As on other European legal markets, the Hungarian legal community is facing the challenge of changing client needs. Meeting those needs requires flexibility and creativity,” Radmilovic said.

However, those firms that have managed to build up a mixed practice have enjoyed more crisis-proof operations.

“We have seen an increase in litigation and restructuring work and as always, tax and labor attorneys, banking regulatory and competition experts were busy,” Gabriella Ormai, managing partner at CMS Cameron McKenna LLP’s Hungarian office, said.

“Furthermore, there is a growing demand from clients for sector-specific expertise and CMS being one of the international law firms having a strong sector specialization, we are able to service such needs, which enable us

to provide business-oriented solutions when facing a legal issue,” Ormai noted. “We also experienced that with the fullservice offer we can attract the best talent, as they find more potential and more opportunities in such a practice. At the same time, parallel to further specialization during these years, we had to have more flexibility in using our resources to be able to retain all the best professionals.”

Although several international law firms have exited the Hungarian market in recent years, some believes that such changes will restructure the market only in the long run. “Ultimately, the changes occurring in the legal market are driven more by the ability of firms in the market to meet client demands – which are increasingly uniform and complex, internationally – and less by the supply of law firms on the market,” Radmilovic said.

BIG FISH, SMALL FISH Despite the fact that some international law firms left the country or restructured their form of collaboration with Hungarian partner firms, the key players of the international legal markets have remained active in Hungary, with some new firms even appearing in the last few months, according to François d’Ornano, resident partner of Gide Loyrette Nouel Budapest.

In the meantime, the market saw the strengthening of some Hungarian (boutique) law firms. “Some of them are the beneficiaries of last year’s state contracts, which are impacted by the fact that the provision of legal services does not fall under the scope of the Public Procurement Act anymore,” d’Ornano told the BBJ. “In some cases we can see a bidding war between law firms. But on the other hand, special knowledge in niche areas is more appreciated and clients are willing to pay a higher price for a premium legal service.”

However, large international firms still enjoy a certain competitive edge. “An international firm is a onestop shop, which can meet a range of the client’s sub-

stantive legal needs in Hungary and abroad,” said Radmilovic from Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie. “When working with an international law firm, the client benefits from building a relationship with a firm in Hungary that knows and understands the client’s business, making it much easier for that law firm to advise the client on other legal issues and in other countries.”

On the other hand, smaller firms might be more flexible in changing their financial models to adjust to the current economic challenges, she added.

An international law firm always has the opportunity to work on cross-border transactions or in collaboration with neighboring countries’ part-

ner law firms on high-profile projects, d’Ornano of Gide Loyrette Nouel said. “Another advantage is the specialized lawyer-team with multi-lingual legal services that can be attractive to multinational companies, which remain keen on the international standards of work quality of these firms,” he said.

Smaller Hungarian law firms, he added, have an advantage with their lower hourly rates and wider range of practice areas. This includes criminal law, a practice area in which none of the international law firms operate. There are also some Hungarian boutique law firms that specialize in niche areas of law.

HARD TIMES, STILL After the tough crisis years,

law firms see some livening on the market, but the trend is not definite yet. “After a slow 2009-2010, the second half of 2011 and the beginning of 2012 was more active on the M&A side and we have seen transactions both in the TMT and the manufacturing sector; however, from the second quarter of 2012, we are experiencing again a decrease in activity,” Ormai said.

“In our practice, greenfield investments mainly happen in the renewable energy industry and in the automotive sector. The fact that Europe is on the brink of recession and many countries are still fighting to achieve stability is enough in itself to hold back investments in the region.” But she also expressed optimism.

“Nevertheless, in 2012 Hungary stands a good chance of restoring its financial stability, and business in Europe is predicted to slowly pick up in the second half of the year, which may put Hungary back on investors’ map in the near future.”

Others are realistic, such as Radmilovic of Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie. “In the past in Hungary, each transaction that was started was completed. Since the start of the challenges in the worldwide economy, it is far less certain that a transaction will be completed. Buyers are much more cautious about the possible risks in transactions.”

Gide Loyrette Nouel’s d’Ornano also sees the market as a rather difficult one at the moment. “The volume has decreased significantly; we can only name a few major outstanding projects in the country in the recent years.

The best case scenario is when an investor puts the project on hold or reschedules the implementation of the project. Sadly, some of them are leaving and placing projects in other countries, mostly in the region,” he said.

Obviously, a prosperous economy could greatly contribute to the well-being and the development of a given country’s legal market. But there are other factors that could help boost the sector.

“Those law firms that are

able to continue to provide high-quality legal advice combined with a high quality of service and who advise clients based on their understanding of the client’s business will be perceived by their clients as adding value to their business.

As a result, the client will continue to mandate such a law firm for more assignments,” Radmilovic explained.

Also, the economic downturn does not mean that clients have fewer legal issues, but that the nature of the legal issues they face is different.

“This fact also provides opportunities to those law firms that can expand their practice to cover the specific advice needed by clients in this economic environment,” said Radmilovic. “Larger law firms with lawyers representing a range of practice specialties are very well suited to providing such services to clients, because international law firms can readily draw on the experience of their other offices in other countries to enable practical solutions to client issues.”

The biggest negative impact was the collapse of the real estate market in Hungary, d’Ornano believes. If the market recovers again and developers invest in the area, then leasing, sale and purchase transactions could give a boost to this practice area as well. “The most needed impact to reboot and improve the projects is to create and maintain a clear and stable legal background that can attract investors,” he noted.

According to market players, the legal sector will continue to face challenges in Hungary, as well as in Europe and worldwide. “Even after the economic crisis resolves in due course, it is possible that the legal market will be more formed by the changing demands and requirements of clients than by economics alone,” warns Radmilovic.

But others believe that international law firms will consolidate their position in the country. “We can assume an increasing volume of compliance-related work and mandates thanks to the exit of some of the multinationals with related M&A activities,” d’Ornano opined. ■

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Budapest Business Journal | May 18 – may 31

Go East, junior partner!

Most Budapest law offices see huge potential in counseling Chinese investors. So far, there have been only a few completed transactions, but strategies to exploit them seem to be numerous.

BBJ ANDRÁS ZSÁMBOKI

Sometimes it just happens as it is written in books of business school students: The Chinese investor applies for a loan at a Hungarian bank, which in turn requests legal assistance from a Budapest-based international law firm. “As Dessewffy, Dávid and Partners”, the law firm in question, “has solid expertise in investment counseling, we took the commitment with pleasure,” Zsolt Ujfalussy, partner of the law firm told the Budapest Business Journal.

The “trick” resides in Des-

sewfy, Dávid and Partners’ acclaimed expertise in bank law, something the firm has been working on for more than two decades. “We have worked hard on our international relations, too,” Ujfalussy added, mentioning the law firm’s membership in the Londonbased MSI Global Alliance.

This international network of independent legal and accounting firms comprises more than 250 offices present in more than 100 countries, and it enables its members to recommend each other to clients all over the world. “Chinese orientation has been one of our priorities. That is why we have become the members of the Hungarian-Chinese Department of the Hungarian Chamber of Commerce and Industry,” he added.

Yingke Várnai is ahead of other Hungarian law firms in getting prepared for the arrival of Chinese investors. “Since 2010, we have been acting as a Hungarian outpost of Yingke, which is the second biggest

international law firm in the People’s Republic of China (PRC). What is more, we are the regional coordinators of Yingke,” Zsolt Zamostny, managing partner of Yingke Várnai Law Firm said proudly.

Success as it, the real fruits of representing Yingke in Europe will only ripen in the forthcoming years. “No one should think that the European appearance of Yingke, a major PRC law firm, was a whimsical decision of its stakeholders,” an expert in Chinese direct investments unwilling to be named told the BBJ. “It must have happened in coordination with, if not on the initiative of, the Beijing government that a law firm employing more than 1,400 lawyers started up a Budapest outpost,” he added.

Before the 2000s, the Chinese government strictly prohibited any sort of outward direct investments (ODI) – including crediting export and financial sector investments, let alone trans-border mergers and acquisitions. In 2002, however, PRC leaders announced

exactly the opposite ODI policy. »Go global«: Beijing showed domestic corporations the way to follow. Since then an elaborate plan of strategic acquisitions has been unveiled, international business think tanks say. Even a new central government agency, the State Assets Supervision and Administration Commission (SASAC) has been set up to coordinate the forays of strategic state-owned enterprises abroad.

“Even now, Europe plays a marginal role in Chinese acquisition policy. However, the more Chinese executives are aiming to acquire corporations owning ‘big brands’ and highend technologies, the more they are turning their eyes on European corporations,” the BBJ learned from an informant unwilling to be named.

As big Chinese acquisitions in Europe are expected in the near future, law firms are doing their best to be ready for it. “We foster close relationship with strategically important investment promotion agencies pres-

ent in Hungary, such as CIPA, and constantly meet Chinastakeholders that can further business deals within and beyond Hungary’s borders,” explains Zsolt Zamostny.

This does not mean that lawyers in the Budapest office have spent their time twiddling their thumbs. “We have been active launching other European subsidiaries of Yingke,” Nora Achkar, marketing and PR manager of Yingke Várnai Law Firm told the BBJ. As Yingke’s first European outpost, the Hungarian law firm helped link up the Beijing headquarters with the Verona firm Luzi Crivellini & Associati. The firm’s Warsaw base, established this February, will be the Chinese giant’s third European outpost, employing 25 full-time lawyers. The Istanbul outpost is Yingke’s first Chinese foray into the Eurasian region.

“As Yingke’s regional coordinators, we are responsible for organizing the daily work-flow as well as for sharing best practices with the new

headquarters,” Achkar commented. “Aggressively growing as Yingke is, it is still only the second in China,” a source commented on the issue. By lawyer headcount, the number one law firm in the PRC is Dacheng, which, according to market rumors, is also active in the European M&A business. “They follow a totally different strategy from Yingke; Dacheng’s European partners change from transaction to transaction.”

According to the latest market gossip, Dacheng has signed a strategic cooperation agreement with Budapest law firm Mészáros, Kelemen, Sándor & Partners and is working on a major investment project comparable to Wanhua’s takeover of BorsodChem.

When the BBJ tried to verify the news about Dacheng’s plans in Hungary, representatives of Mészáros, Kelemen, Sándor & Partners refused to either confirm or deny any sort of cooperation with the Chinese law firm. ■

18 2 BusinessSpecialReport BBJ

WWW.BBJ.HU

Budapest Business Journal | May 18 – may 31

Worth a try? – EU law harmonization in Hungary As the crowning of a 13-year accession process, Hungary became a member of the European Union on May 1, 2004. It was not only one of the most important events in the country’s history, but also opened a new chapter in Hungarian law, which now has to be synchronized with EU regulations. How does Hungary perform when it comes to law harmonization?

BBJ ÁGNES VINKOVITS

While the Hungarian nation was united in hope and optimism on the sunny Saturday of May 1 back in 2004, the country’s lawyers were in the middle of the huge task of harmonizing local regulations to EU laws. Indeed, implementing 8,000 pages of EU law takes time and money. Hungary, while in preparation for accession, spent HUF 215 billion on law harmonization in 2002 and 2003. It was worth the money: it is widely accepted that Hungary, like the nine other countries involved in the 2004 enlargement, successfully implemented the body of EU law, referred to as the acquis communautaire, or acquis.

However successful the first section of harmonization was, the work obviously did not stop at that point.

Not only because new EU and local laws have to be continuously synchronized in all member states, but also because Hungary received temporary exemptions in some cases that would have required infrastructure background or financial sources that were not previously available. In wastewater treatment, for example, Hungary has to

fully implement EU laws by 2015 only, while the upcoming liberalization of the Hungarian postal service has to happen by 2013. Opening the Hungarian energy market has come with a delay as well.

WHY NOT? Although all the experts surveyed by the Budapest Business Journal agreed that in general, legal harmonization has never been a problem here, Hungary, like all the other member countries, does sometimes fails to fulfill its duties.

“I do not think that there is any typical behavior or intention that might cause these delays,” Ákos Kovách, EU and competition law expert from law firm Gide Loyrette Nouel told the BBJ. In most cases, delays are caused by the time-consuming nature of the local lawmaking processes or, more often, some incomprehension over the text of the EU regulation and on the lawmaking duties it imposes on the country. “EU laws should be customized to local circumstances and, in

an ideal case, social negotiations are also part of lawmaking,” Dóra Petrányi of CMS Cameron McKenna told the BBJ, adding that all these things take time.

However, the need for quick work obviously has its disadvantages as well. “Some automatisms have become part of the system,” pointed out Gide’s expert, referring to some cases when, for example, EU Directives have been implemented in Hungary word for word without integrating them in a functional way.

At the same time, there are some more complex cases where political and economic interests might also appear in the background.

The first Hungarian legislative efforts clearly conflicting with EU rules were made by the Socialist government which in 2009 wanted to adopt a law that would have forced shops and supermarkets in the country to sell at least 80% Hungarian products. Since it was obvious that the law would have caused a serious violation of the rules of the inter-

nal market and especially of the provisions concerning the free movement of goods, eventually it did not come into force.

Three years later, after the European Commission launched accelerated infringement procedures against Hungary in mid-January on concerns over the country’s new Central Bank Act, the mandatory retirement age for judges and the data protection authority, Hungary’s most recent case is the Széchenyi Recreation Card (SZÉP card), a food and recreation voucher that employers can give their employees as a benefit at an extremely low price.

The recently introduced SZÉP card, handled by Hungary’s OTP Bank, however, so far can be used only in Hungarianowned stores, which otherwise fits into clear government communication about aiming to favor local businesses.

Although previously the National Economy Ministry itself said that there might be “some debates” with the EU about the SZÉP card, the government still insisted on somewhat discriminating

against foreign companies in this crafty way. Their efforts did not remain without consequences: the Commission has launched another infringement procedure against Hungary.

MORE THINGS TO COME However, infringement procedures, which if they result in a negative verdict at the European Court of Justice can result in huge fines and the obligation to change the contested law, are much more common than it would appear when reading the worrisome press news about Hungary. In the 29 days of February alone the European Commission launched 186 infringement procedures against 21 member states.

As such, it seems that even under the threat of serious consequences, governments sometimes consider it worthwhile to play a bit in order to win time. For example, months after the launch of the infringement procedure, the European Commission on March 22 announced that it had decided to refer Hungary to the European Court

because it continues to impose a specific tax on the turnover of telecom operators in violation of EU rules.

It is noteworthy that for a very similar telecom tax, the EC had already decided in March 2011 to take Spain and France to court, which means that the future of the Hungarian tax was already quite predictable when the government still insisted on maintaining this sector tax.

“All three Member States have probably planned to prolong the case as long as possible,” Kovách said, referring to the fact that such a Court process might last up to five years, which might be enough for Europe to find the path of prosperity. During this long period of time, the countries can still collect this revenue, which in Hungary’s case is estimated to come to more than €200 million per year, while they can also decide to put an end to the court process at any minute by changing the law in question to comply with EU regulations.

It seems that for the government, this is well worth the risk now. ■

2 BusinessSpecialReport 19

BBJ

WWW.BBJ.HU

Budapest Business Journal | May 18 – may 31

[ EXPERT OPINION ]

LEGAL NEWS CMS WINS HUNGARY of the largest and most LAW FIRM OF THE complex M&A transacYEAR AWARD tions, two of the largCMS Cameron McK- est ongoing gas-fired enna LLP was named as power plant develLaw Firm of the Year for opment projects, the Hungary at the Cham- largest debt offering bers Europe Awards for and the largest shopExcellence on May 10 ping mall development. in Amsterdam. CMS was It is the third time also awarded Law Firm the Hungarian team of the Year for the Cen- has received the IFLR tral and Eastern Europe award in the 13 years of (CEE) region and won a its history. client service award in Portugal. CMS was also BRUSSELS TO short-listed as Law Firm LAUNCH INFRINGEof the Year in categories MENT PROCEDURE for Czech Republic, Ger- AGAINST THE many and Portugal. The SZÉP CARD Chambers awards honor outstanding law firms and legal professionals around the world.

TAYLOR WESSING EXPANDS IN EUROPE WITH ENWC MERGER British law firm Taylor Wessing has merged with Austrian-headquartered firm enwc, offering the UK company a means of expanding into Central and Eastern Europe via enwc’s offices in Austria, the Czech Republic, Hungary, Poland, Slovakia and Ukraine. These offices will operate under the banner of Taylor Wessing enwc Attorneys at Law. The combined firm will have a headcount of nearly 900 fee-earners across 22 offices. In keeping with Taylor Wessing’s approach to other international offices, there will be no financial integration, but the merged firm will operate with integrated systems.

KINSTELLAR NAMED HUNGARIAN LAW FIRM OF THE YEAR BY IFLR Kinstellar’s practice in Hungary, Andrékó Kinstellar, was named Law Firm of the Year in Hungary at the IFLR European Awards ceremony in London in March 2012. The award recognizes that Kinstellar has acted on the largest and most innovative transactions in Hungary over the past year, including several

European Union official in February confirmed the European Commission is investigating the SZÉP card system.

WHITE & CASE WINS MOST INNOVATIVE US FIRM IN EUROPE AT IFLR EUROPE AWARDS White & Case won two top awards at the International Financial Law Review Europe Awards, held in London on March 22, 2012, including Most Innovative US Firm in Europe and Project Finance team of the year. Separately, the Corporate practice collected the M&A Deal of the Year for its role in Colfax’s £1.5 billion acquisition of engineering business Charter while the Energy, Infrastructure, Project and Asset Finance practice picked up the Project Finance deal of the Year for its role in the Nord Stream Pipeline (Phase II), widely regarded as Europe’s flagship project for energy security in the 21st century.

IFLR’s annual European awards are based on broad research by its staff, including extensive interviews with clients and practicing lawyers, with particular National Economy attention given to legal Ministry State Secre- innovation in cross-bortary Kristóf Szatmáry der transactions. said that the European Union will launch BAKER & MCKENZIE an infringement pro- NAMED EUROPEAN cedure against Hun- LAW FIRM OF THE YEAR gary regarding the SZÉP Baker & McKenzie has card, a food and recre- won European Law Firm ation voucher system of the Year at the Chamthe country introduced bers Europe Awards at the start of the year. 2012. Baker & McKen“We will go through with zie has 27 offices and this debate,” Szatmáry approximately 4,000 said at a meeting of the lawyers and staff in association of Hungar- Europe, accounting for ian hotels and restau- in the region of 40% of rants, adding that the the firm’s annual global government will con- revenues. The firm’s tinue to distribute the newest European offices card. The state secretary are in Istanbul, opened said that “for us, this is in November 2011, and rather a compliment” Luxembourg, which because the goal of the opened in October system was to decrease 2010. The firm was also high commissions for recently named South the issuers of the vouch- East Asia Law Firm of ers and simplify accep- the Year at the Chamtance of the system. A bers Asia-Pacific Awards.

Lodgement of foreign creditors’ claims in insolvency proceedings in Hungary The number of insolvency proceedings in Hungary is continuously increasing and very often foreign business partners of Hungarian debtors face problems in connection with collecting their claims in Hungarian insolvency proceedings. This merely begins with the lodgement of claims, the basis of any participation in insolvency proceedings as creditor and of course of a successful claim enforcement.

ZOLTÁN ÁKOS TENK, Dr BAJORFI, Dr ATTORNEY-AT-LAW EUROPEAN LAW SPECIALIST

Since Hungary entered the European Union on May 1, 2004 the Council Regulation No 1346/2000 on insolvency proceedings (the “Regulation”) is directly applicable in Hungary. The Regulation aims to provide a unified background especially for cross-border insolvency proceedings. The insolvency proceedings in Hungary covered by the Regulation are bankruptcy proceedings (csődeljárás) and liquidation proceedings (felszámolási eljárás).

Foreign creditors, according to the Regulation, are those whose habitual residence, domicile or registered office is in a Member State other then the state where the insolvency proceedings were opened. Neither creditors outside the EU nor local creditors are covered by the Regulation. These creditors also have the right to lodge their claims in insolvency proceedings.

Nevertheless, creditors in other Member States are in most cases not informed about the opening of insolvency proceedings of their debtors. For this reason creditors from other Member States often run out of the 30-days period in bankruptcy proceedings and the 40-days period in liquidation proceedings, that is open for creditors in Hungary to lodge their claims in insolvency proceedings. It is unfortunate that even today this happens as the Regulation sets out that as soon as the insolvency proceedings are opened the court having jurisdiction or the liquidator appointed by it shall immediately notify those known creditors about the opening of the insolvency proceedings whose habitual residence, domicile or registered office is in other Member States. The information provided shall in particular include time limits, penalties with regard to the time limits, the body or authority empowered to accept the lodgement of claims and whether creditors whose claims are preferential or secured in rem need lodge their claims.

For the purposes of this notification a form shall be used and it shall be provided in the official language of the state in which proceedings are opened. However, the form shall bear the following heading in all the official languages of the institutions of the European Union: ’Invitation to lodge a claim. Time limits to be observed’. Further content of this notification form is established by the Member States. In Hungary it is set out in the Regulation of the Ministry for Justice No 38/2009 (VIII.31.). This Regulation of the Ministry for Justice includes separate forms for the bankruptcy and for the liquidation proceedings and both forms are available in four languages (in Hungarian, English, French and German) and include an abridged text of the Hungarian insolvency regulations.

Proper application of the above rule by Hungarian liquidators would be of great assistance for foreign creditors from other Member States. Even if it is to be noted that the notification obligation of courts and liquidators relates only to known creditors from other Member States, that is those creditors whose claims can be identified in the books and accounts of the debtor. Neither courts, nor liquidators are obliged to seek for unknown creditors.

Although the Regulation orders immediate notification of foreign creditors, the execution of this obligation is very problematic in practice. Without lodgement of claims in time in bankruptcy proceedings creditors from other Member States could not participate and exercise voting rights

ATTORNEY-AT-LAW LL.M. CORP. RESTRUC.

in connection with the bankruptcy settlement.

Therefore, creditors from other Member States may consider liability claims if the notification obligations under the Regulation are not fulfilled.

In the event of liquidation proceedings, even if the liquidator is provided with the debtor’s documents in time (that in most events is not the case) only a very short period of time would be available for the liquidator to review the books of the debtor to identify and then to notify the creditors in other Member States.

Further, after receipt of the respective notification foreign creditors should also lodge their claims within the same 40-day period, something that is almost impossible. Considering that the review and identification of foreign creditors takes an enormous amount of time, it often happens that creditors in other Member States receive the notification from the liquidator very late, in most cases only after the expiry of the 40-day period, and sometimes they do not receive any notification at all. Unfortunately, neither the Regulation nor the Hungarian Insolvency Act provides a solution for the delayed lodgement of claims of known creditors from other Member States. Because lodgement of claims after the 40-day period would result in a secondary ranking of such claims various solutions were applied by liquidators to avoid this problem and also a potential claim for liability. In this regard liquidators are likely to accept delayed lodgement of claims of creditors from other Member States provided that they can evidence the existence of their claim and especially the fact that the claim was known to the debtor.

In this event in liquidation proceedings claims even after more than one year following the announcement of liquidation opening were registered by Hungarian liquidators. Therefore, in liquidation proceedings it is always advisable to lodge claims of creditors from other Member States provided that the liquidator failed to fulfil its notification obligations.

Once a creditor from another Member State learns that a bankruptcy or liquidation proceedings has been opened in connection with one of its debtors, the foreign creditor is free to lodge its claim in the official language of its own state. However, the claim shall bear the heading “Lodgement of claim” in the official language of the state in which proceedings are opened, in Hungarian: „Követelésbejelentés”.

Though the lodgement of claim shall be deemed fulfilled by receipt of the above notification, the liquidator is entitled to request a translation into the official language of the state.

Considering the above, creditors from other Member States will have a preferential status over local and foreign creditors from outside the EU once the obligations under the Regulation are properly fulfilled by the liquidators and the courts.

What remains for local and foreign creditors from outside the EU? They have to be very careful, especially if delay in payment occurs and shall regularly review the online company database or engage a professional specialized in this.

www.noerr.com

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

20 2 BusinessPartnerWatch BBJ

WWW.BBJ.HU

Budapest Business Journal | May 18 – may 31

Law firms with international affiliations NO. OF OFFICES WORLDWIDE

NAME OF ASSOCIATE NON-HUNGARIAN LAW FIRM OR COOPERATION NETWORK WORLD HQ OF ASSOCIATE LAW FIRM OR COOPERATION NETWORK ASSOCIATE LAW FIRM'S OR COOPERATION NETWORK'S YEAR OF ESTABLISHMENT

ESTABLISHING YEAR OF HUNGARIAN OFFICE

OTHER

BUSINESS LAW

SECURITIES

ARBITRATION

PRIVATIZATION

M&A

ENVIRONMENT PROTECTION

MEDIA

EMPLOYMENT

EU

COMPETITION

ENERGY

BANKING AND FINANCE

TAX

REAL ESTATE

COMMERCIAL

LEGAL SPECIALITY AREAS NO. OF PARTNERS OF HUNGARIAN OFFICE ON MAY. 1, 2012

NO. OF TRAINEES IN HUNGARY ON MAY. 1, 2012

COMPANY WEBSITE

NO. OF ATTORNEYS (WITH LICENSE TO PRACTICE) IN HUNGARY ON MAY 1, 2012

RANK

Ranked by no. of attorneys (with license to practice) in Hungary on May 1, 2012

TOP LOCAL EXECUTIVE ADDRESS PHONE FAX EMAIL

54

Gabriella Ormai 1053 Budapest, Károlyi Mihály utca 12.

(1) 483-4800 (1) 483-4801 budapest@cms-cmck.com

77

András Posztl 1124 Budapest, Csörsz utca 49–51.

(1) 510-1100 (1) 510-1101 budapest@dlapiper.com

38

István Réczicza 1061 Budapest, Andrássy út 11.

(1) 488-5200 (1) 488-5299 –

69

Pál P. Takács 1051 Budapest, Dorottya utca 6.

(1) 302-3330 (1) 302-3331 –

27

Ulrike Rein 1053 Budapest, Károlyi Mihály utca 12.

(1) 486-2200 (1) 486-2201 office@oppenheim.hu

100 (approx.)

László Réti 1077 Budapest, Wesselényi utca 16/A (1) 461-9890 (1) 461-9106 rap.central@hu.pwclegal.com

21

David Dederick 1054 Budapest, Szabadság tér 7.

(1) 301-8900 (1) 301-8901 david.dederick@weil.com

»

András Szecskay 1055 Budapest, Kossuth Lajos tér 16–17.

(1) 472-3000 (1) 472-3001 info@szecskay.com

6

Csilla Andrékó 1054 Budapest, Széchenyi rakpart 3.

(1) 428-4400 (1) 428-4444 budapest@kinstellar.com

9

Attila Dezső 1011 Budapest, Fő utca 14-18.

(1) 457-8040 (1) 457-8041 office@chsh.hu

CMS CAMERON MCKENNA LLP HUNGARIAN OFFICE www.cms-cmck.com 1

46

19

9

CMS Cameron McKenna LLP London 1779

DLA Piper UK LLP London 2006

White&Case LLP New York 1901

Baker & McKenzie LLP Chichago 1949

Freshfields Bruckhaus Deringer LLP London 1743

PricewaterhouseCoopers Legal LLP London 1999

Weil, Gotshal & Manges LLP New York 1931

Dorda Brugger Jordis - Best Friends, World Service Group, Biolegis – –

DLA PIPER HORVÁTH AND PARTNERS LAW FIRM www.dlapiper.com/hungary 42

2

3

RÉCZICZA WHITE & CASE LLP www.whitecase.com/budapest

35

9

5

7

9

KAJTÁR TAKÁCS HEGYMEGI-BARAKONYI BAKER & MCKENZIE LAW FIRM www.bakermckenzie.com 30

4

5

11

OPPENHEIM LAW FIRM www.oppenheim.hu 29

5

6

RÉTI, ANTALL AND PARTNERS LAW FIRM www.landwellglobal.com/hu

24

10

15

13

6

–

–

WEIL, GOTSHAL & MANGES LLP www.weil.com 24

6

4

3

SZECSKAY ATTORNEYS AT LAW www.szecskay.com 23

7

8

9

ANDRÉKÓ KINSTELLAR LAW FIRM www.kinstellar.com

DEZSŐ ÉS TÁRSAI ÜGYVÉDI IRODA www.chsh.hu

6

12

–

1989

1988

1991

1987

2007

2000

1991

1992

Kinstellar 22

4

4

»

2008

2008

21

9

10

–

–

–

CHSH Vienna, Austria 1921

2004

2 BusinessPartnerWatch 21

17

3

8

10

3

2

–

–

–

–

–

–

OTHER

BUSINESS LAW

SECURITIES

ARBITRATION

PRIVATIZATION

M&A

ENVIRONMENT PROTECTION

MEDIA

EMPLOYMENT

EU

COMPETITION

ENERGY

BANKING AND FINANCE

TAX

Clifford Chance London 1987

–

Lex Mundi Houston, USA 1989

International Alliance of Law Firms London 1990

Allen & Overy LLP London 1930

KŐVÁRI TERCSÁK SALANS ATTORNEYS www.salans.com 16

13

14

BNT SZABÓ TOM BURMEISTER LAW FIRM www.bnt.eu

15

6

4

4

5

–

–

–

15

5

4

–

Salans LLP London 1978

bnt attorneys-at-law –

1991

1991

1996

1993

2006

2000

TOP LOCAL EXECUTIVE ADDRESS PHONE FAX EMAIL

31

Péter Lakatos 1075 Budapest, Madách Imre út 14.

(1) 429-1300 (1) 429-1390 mail@lakatoskoves.hu

560

Péter Berethalmi 1126 Budapest, Ugocsa utca 4/B (1) 487-8700 (1) 487-8701 Budapest_office@nt.hu

58

Tamás Szabó 1132 Budapest, Váci út 20.

(1) 288-8200 (1) 288-8299 tamas.szabo@sz-k-t.hu

39

Zoltán Lengyel 1075 Budapest, Madách Imre út 13–14.

(1) 483-2200 (1) 268-1515 budapest@allenovery.com

20

Judit Kővári, Tamás Tercsák 1062 Budapest, Váci út 1–3.

(1) 880-6100 (1) 880-6199 budapest@salans.com

10

Levente Antal Szabó 1143 Budapest, Stefánia út 101–103.

(1) 413-3400 (1) 413-3413 info@bnt.hu

12

Zoltán Faludi 1085 Budapest, Kálvin tér 12–13.

(1) 484-8800 (1) 484-8825 budapest@wolftheiss.com

19

François d’Ornano 1051 Budapest, Széchenyi István (Roosevelt) tér 7–8.

(1) 411-7400 (1) 411-7440 gln.budapest@gide.com

37

Ákos Erős 1051 Budapest, Széchenyi István tér 7–8.

(1) 428-7111 (1) 428-7100 budapest@ squiresanders.com

45

Tamás Sándor 1026 Budapest, Pasaréti út 59.

(1) 394-3121 (1) 392-4949 office@eversheds.hu

»

István Gárdos 1056 Budapest, Váci utca 81.

(1) 327-7560 (1) 327-7561 postmaster@gfmt.hu

18

Kinga Hetényi 1024 Budapest, Buday László utca 12.

(1) 345-8778 (1) 345-8777 office.hungary@ schoenherr.eu

23

Rupert Várnai, Zsolt Zamostny 1037 Budapest, Montevideo utca 10.

(1) 887-8288 (1) 887-8381 info@yingke.hu

»

FALUDI WOLF THEISS ÜGYVÉDI IRODA www.wolftheiss.com 14

NAME OF ASSOCIATE NON-HUNGARIAN LAW FIRM OR COOPERATION NETWORK WORLD HQ OF ASSOCIATE LAW FIRM OR COOPERATION NETWORK ASSOCIATE LAW FIRM'S OR COOPERATION NETWORK'S YEAR OF ESTABLISHMENT

NO. OF OFFICES WORLDWIDE

12

MORLEY ALLEN & OVERY LAW FIRM www.allenovery.com/hu

18

10

4

REAL ESTATE

11

SZABÓ, KELEMEN AND PARTNERS LAW FIRM www.sz-k-t.hu

20

5

COMMERCIAL

10

NAGY & TRÓCSÁNYI LAW FIRM www.nt.hu

21

LEGAL SPECIALITY AREAS NO. OF PARTNERS OF HUNGARIAN OFFICE ON MAY. 1, 2012

9

LAKATOS, KÖVES AND PARTNERS ÜGYVÉDI IRODA www.lakatoskoves.hu

NO. OF TRAINEES IN HUNGARY ON MAY. 1, 2012

COMPANY WEBSITE

NO. OF ATTORNEYS (WITH LICENSE TO PRACTICE) IN HUNGARY ON MAY 1, 2012

RANK

Budapest Business Journal | May 18 – may 31

ESTABLISHING YEAR OF HUNGARIAN OFFICE

BBJ

WWW.BBJ.HU

Wolf Theiss Rechtsanwälte GmbH Vienna 1957

–

Gide Loyrette Nouel A.A.R.P.I. Paris 1920

2007

GIDE LOYRETTE NOUEL BUDAPEST www.gide.com 15

14

4

1

–

ERŐS ÜGYVÉDI IRODA / SQUIRE SANDERS (US) LLP www.squiresanders.com 14

15

3

4

–

Squire Sanders Cleveland, USA 1890

Eversheds LLP London 1988

SÁNDOR SZEGEDI SZENT-IVÁNY KOMÁROMI EVERSHEDS LAW FIRM www.eversheds.hu 14

15

16

GÁRDOS, FÜREDI, MOSONYI, TOMORI ÜGYVÉDI IRODA www.gfmt.hu

13

6

3

7

7

–

–

–

–

–

–

–

SCHÖNHERR HETÉNYI LAW FIRM www.schoenherr.eu 12

17

17

YINGKE VÁRNAI LAW FIRM www.yingke.eu

12

5

5

2

2

Advoc, ELA –

1993

1991

1987 / 1999

1992

»

Schönherr Rechtsanwälte GmbH Vienna 1950

Yingke Law Firm Beijing 2001

2008

2010

22 2 BusinessPartnerWatch

19

BÁN, S. SZABÓ & PARTNERS LAW FIRM www.bansszabo.hu

11

10

2

6

2

3

4

6

–

–

–

–

–

–

–

–

–

–

20

21

9

PARTOS & NOBLET IN CO-OPERATION WITH HOGAN LOVELLS INTERNATIONAL LLP www.hoganlovells.com

BIHARY, BALASSA AND PARTNERS LAW FIRM www.biharybalassa.hu

9

8

2

5

3

4

2

3

–

–

–

8

21

GOBERT & PARTNERS / TAXAND www.gobertpartners.com

22

FORGÓ, DAMJANOVIC AND PARTNERS LAW FIRM www.fdlaw.hu

22

MOLDOVÁN & PARTNERS ATTORNEYS AT LAW www.moldovan.hu

22

PRK PARTNERS BUDAPEST / FÁBRY ÉS TÁRSAI ÜGYVÉDI IRODA www.prkpartners.com

22

WALDE, FEST ÉS TÁRSAI ÜGYVÉDI IRODA www.waldefest.hu

23

HEINZELMANN ÉS TÁRSAI LAW FIRM www.heinzelmann.hu

23

PONTES BUDAPEST POLGÁR & BEBŐK LAW FIRM www.ponteslegal.eu

8

7

7

7

7

6

6

3

5

5

2

2

1

3

2

2

3

5

2

4

5

3

2

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

Conference Bleue –

–

Noerr LLP Munich 1950

Hogan Lovells International LLP London, Washington 1899

TELFA Brussels 1989

BPV Legal – 2006

–

Taxand Paris 2002

Alfa International Chichago 1980

Mackrell International Woking, Great Britain 1987

–

PRK Partners s.r.o. advokátní kancelár Prague, Czech Republic 1993

Luther Rechtsanwaltsgesellschaft mbH Cologne 1992

Hengeler Müller, Slaughter and May, Bonelli Erede Pappalardo, Bredin Prat – 1990

TOP LOCAL EXECUTIVE ADDRESS PHONE FAX EMAIL

1990

125

Alice Dessewffy 1061 Budapest, Andrássy út 43.

(1) 413-3340 (1) 413-3341 office@dessewffy.com

2006

cooperation partner of multinational law firm networks

Kornélia Nagy-Koppány, István Varga 1051 Budapest, Vigadó utca 2.

(1) 302-9050 (1) 302-9060 knplaw@knplaw.com

7

Chrysta Bán, Péter S. Szabó 1051 Budapest, József nádor tér 5–6.

(1) 266-3522 (1) 266-3523 office@bansszabo.hu

15

Zoltán Nádasdy, Jörg Menzer 1011 Budapest, Fő utca 14–18.

(1) 224-0900 (1) 224-0495 recepcio@noerr.com

44

László Partos 1051 Budapest, Vörösmarty tér 7–8.

(1) 505-4480 (1) 505-4485 office@hoganlovells.co.hu

26

Tibor Bihary 1026 Budapest, Pasaréti út 83.

(1) 391-4491 (1) 200-8047 office@biharybalassa.hu

7

Andrea Jádi Németh 1051 Budapest, Vörösmarty tér 4.

(1) 429-4000 (1) 429-4001 budapest@bpv-jadi.com

60

Arne Gobert 1061 Budapest, Andrássy út 10.

(1) 270-9900 (1) 270-9990 arne.gobert@gfplegal.com

145

Zoltán Forgó, Gábor Damjanovic 1123 Budapest, Alkotás utca 17–19.

(1) 214-0080 (1) 214-0078 office@fdlaw.hu

110

András Moldován 1051 Budapest, Dorottya utca 1.

(1) 328-6010 (1) 328-6011 info@moldovan.hu

4

Ágnes Fábry 1024 Budapest, Fény utca 16.

(1) 336-0443 (1) 336-0444 budapest@prkpartners.com

18

Attila Fest, Zsolt Walde 1055 Budapest, Kossuth Lajos tér 13–15.

(1) 381-0000 (1) 381-0001 office@waldefest.hu

»

Virág Heinzelmann 1114 Budapest, Bartók Béla út 15/B (1) 372-7650 (1) 372-7650 heinzelmann@ heinzelmann.hu

7

Gábor Bebők 1011 Budapest, Szilágyi Dezső tér 1.

(1) 799-0140 (1) 799-0141 admin@hunlaw.hu

»

BPV JÁDI NÉMETH LAW FIRM www.bpv-jadi.com 21

MSI Global Alliance London 1990

Gleiss Lutzb Rechtsanwälte Stuttgart 1949

NOERR & PARTNERS www.noerr.com 20

NAME OF ASSOCIATE NON-HUNGARIAN LAW FIRM OR COOPERATION NETWORK WORLD HQ OF ASSOCIATE LAW FIRM OR COOPERATION NETWORK ASSOCIATE LAW FIRM'S OR COOPERATION NETWORK'S YEAR OF ESTABLISHMENT

ESTABLISHING YEAR OF HUNGARIAN OFFICE

OTHER

BUSINESS LAW

SECURITIES

ARBITRATION

PRIVATIZATION

M&A

ENVIRONMENT PROTECTION

MEDIA

EMPLOYMENT

EU

COMPETITION

ENERGY

BANKING AND FINANCE

TAX

REAL ESTATE

COMMERCIAL

LEGAL SPECIALITY AREAS

NO. OF OFFICES WORLDWIDE

18

KNP LAW NAGY KOPPANY VARGA AND PARTNERS www.knplaw.com

11

WWW.BBJ.HU

Budapest Business Journal | May 18 – may 31

NO. OF PARTNERS OF HUNGARIAN OFFICE ON MAY. 1, 2012

18

DESSEWFFY, DÁVID AND PARTNERS LAW FIRM www.dessewffy.com

NO. OF TRAINEES IN HUNGARY ON MAY. 1, 2012

COMPANY WEBSITE

NO. OF ATTORNEYS (WITH LICENSE TO PRACTICE) IN HUNGARY ON MAY 1, 2012

RANK

BBJ

Pontes –

»

1997

1990

2006

2002

2000

2002

2000

1990

2010

1999

–

2005

2 BusinessPartnerWatch 23

24

24

EÖRDÖGH BIRD & BIRD LAW FIRM www.twobirds.com

SALLÓ LAW FIRM www.decapoa.com

5

5

5

1

3

3

0

2

2

1

1

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

OTHER

BUSINESS LAW

SECURITIES

ARBITRATION

PRIVATIZATION

M&A

ENVIRONMENT PROTECTION

MEDIA

EMPLOYMENT

EU

COMPETITION

ENERGY

BANKING AND FINANCE

TAX

REAL ESTATE

NAME OF ASSOCIATE NON-HUNGARIAN LAW FIRM OR COOPERATION NETWORK WORLD HQ OF ASSOCIATE LAW FIRM OR COOPERATION NETWORK ASSOCIATE LAW FIRM'S OR COOPERATION NETWORK'S YEAR OF ESTABLISHMENT

Norton Rose LLP London 1794

TaylorWessing e|n|w|c Natlacen Walderdorff Cancola Rechtsanwälte GmbH – 2002 (1986)

Bird & Bird LLP London 1846

Studio Legale de Capoa e Associati Bologna, Italy 1986

World Link For Law Zurich, Switzerland 1980

1998

1995

2008

1986

NO. OF OFFICES WORLDWIDE

24

BÁNKI AND PARTNERS LAW FIRM IN COOPERATION WITH TAYLORWESSING E|N|W|C NATLACEN WALDERDORFF CANCOLA RECHTSANWÄLTE GMBH www.taylorwessing.com

6

COMMERCIAL

23

VARGA KÁROLY AND PARTNER LAW FIRM –

LEGAL SPECIALITY AREAS NO. OF PARTNERS OF HUNGARIAN OFFICE ON MAY. 1, 2012

COMPANY WEBSITE

NO. OF TRAINEES IN HUNGARY ON MAY. 1, 2012

RANK

NO. OF ATTORNEYS (WITH LICENSE TO PRACTICE) IN HUNGARY ON MAY 1, 2012

Budapest Business Journal | May 18 – may 31

ESTABLISHING YEAR OF HUNGARIAN OFFICE

BBJ

WWW.BBJ.HU

TOP LOCAL EXECUTIVE ADDRESS PHONE FAX EMAIL

30

Károly Varga 1065 Budapest, Bajcsy-Zsilinszky út 53. IV. em.

(1) 302-9090 (1) 302-9092 halcsi@t-online.hu

22

Orsolya Bánki 1051 Budapest, Dorottya utca 1.

(1) 327-0407 (1) 327-0410 budapest@taylorwessing.com

22

Richárd Eördögh 1013 Budapest, Pauler utca 6.

(1) 799-2000 (1) 799-2088 budapest@twobirds.com

8

Krisztina Salló 1055 Budapest, Honvéd utca 38.

(1) 312-1683 (1) 331-0311 sallo-decapoa@ mail.datanet.hu

70

Balázs Lohn 1112 Budapest, Háromszék utca 37.

(1) 769-1630 (70) 902-1288 info@lohn.hu

LOHN LAW FIRM www.lohn.hu 2

25

3

1

–

–

–

2008

[ EXPERT OPINION ]

MIKLÓS BÁN ceo espell translation and localization

Humpty Dumpty, a character from Lewis Carroll’s Through the Looking-Glass (Alice Tükörországban), famously declares to Alice that “When I use a word, it means just what I choose it to mean – neither more nor less” after Alice objects to his use of the word “glory” to mean a “knock-down argument”.

Alice expresses doubt as to whether he can actually assign arbitrary meanings to words, but Humpty Dumpty reassures her that it is a question of authority. Absurd though his attitude to language may be, legislators in fact adopted his approach long ago.

All around the world lawmakers as authorities coin terms to some extent arbitrarily and give these terms very specific content. This is no arrogance; it is a necessity as “users” of the law must know what they are permitted and not permitted to do. It follows that expressions determining legality and illegality need to be very specific to minimise ambiguity. The real problem that gives translators headaches is that every country has its unique Humpty Dumpty creating and defining his own legal terms. These, due to their very precise nature, prevent equivalence of terms in translations.

THE APPROXIMATE EQUIVALENT The more embedded a text is in a particular legal system, the greater the challenge to translate it into another language. Behind the target language lies a different legal system with its own explicitly defined legal concepts, which will not yield to the meaning of the source text. Very often translators ignore the legal character of the text and translate as usual, accepting similarities as equivalence and not researching the background of the corresponding terms carefully. This approach can work with simpler legal texts, but with more complex ones the result in the target language is very often unclear to a lawyer’s mind. Another option is the addition of definitions, footnotes, explanations etc. to the target text in order to elucidate the content of legal concepts found in the source text.

While this may seem a safe and professional approach at first glance, it is neither economical nor elegant (especially if excessive additions are made) and makes the text tricky to

follow. The most efficient method is a middleof-the-road approach, whereby the translator uses basic legal terms from the target language to describe legal concepts in the source language that do not exist in the target language. For example, private companies limited by guarantee are not recognised by Hungarian law; nonprofit gazdasági társaság and the half-abolished közös vállalat are its closest Hungarian relatives, but it would be misleading to choose either as a translation. If this particular English term has to be translated, a word-by-word translation would be incomprehensible. Providing a definition in the translation would be prudent, but not efficient if the translation is to be kept concise. However, the fact that Hungarian law regulates companies (gazdasági társaság) and guarantees (kezesség in this case) enables the translator to coin a reliable term for the purposes of the translation that looks elegant in the text (e.g. tagok kezességvállalásával alapított társaság) and that a Hungarian lawyer can understand.

Naturally, this method must be used with a high degree of caution and may not work in all cases, but if it does, it produces intelligible translations.

EU TO THE RESCUE International law has always been an excellent resource for translation thanks to the authentic parallel language versions of treaties so common in this field of law. It is a happy coincidence for legal translators that European integration has created a single European legal language in a number of areas as a byproduct of harmonisation. The Community

acquis provides authentic translations of legislation in key social and economic areas, and it has a trickle-down effect as national legislation must adapt to the rules and thus to the terminology of EU law, resulting in more equivalent terms. In addition, materials of the European Court of Justice provide another layer of resources for translators as judicial decisions often analyse national laws and therefore offer accurate translations of legal materials from the domestic law of Member States. Also, parallel corpuses are now easy to access through the Internet. Moreover, the texts of the acquis were recently converted into publicly available translation memories.

That means the corresponding language versions of EU legislation are integrated into the interface that translators use, making their work faster and more convenient.

Clearly, these developments have made the lives of legal translators easier. Nevertheless, as the world does not end at the external borders of the EU and as the effect of integration on the key area of private law is less profound, the arbitrary nature of legal terms still makes legal translation an exacting task. Fundamentals are essential: in addition to language proficiency and translation skills, legal knowledge is also indispensable in order to overcome the inherent differences in terminology between legal systems when translating legal texts.

www.espell.com

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

Legal translation: a world ruled by Humpty Dumpties

24 2 BusinessSpecialReport BBJ

WWW.BBJ.HU

Budapest Business Journal | May 18 – may 31

VC: Gearing up for the next round The latest investment announcements and several yet to be made public show that venture capital funds have increased their activity again, as well as their intentions to diversify their portfolios. Jeremie II tenders, however, are still nowhere to be seen on the horizon.

BBJ BBJ

Hungary’s venture capital industry ranks sixth in Europe in terms of the amount invested in proportion to GDP, according to the latest report by the European Venture Fund Association on the sector’s 2011 performance (see box for highlights). “This is a positive sign because previous examples show that in countries where

venture capital is more active in early-stage financing, innovation is more likely to succeed and these companies can become the engine of growth,” Levente Zsembery, CEO of the BNV-Equity fund commented.

The resources have mainly been placed within the EU’s Jeremie program, making the results of the program visible on a European level. There is a common expectation on the market that the second round of the program will keep the momentum going and complement the existing venture funds with seeding funds, the step that is still currently missing.

Although the call for the funds, expected to come out earlier this spring, has not yet been announced, market players are preparing to pounce the moment it is made public.

Docler Investments, for example, is currently in the process of acquiring permits for its new fund manager company Valor Capital Zrt, according to the Kockázati Tőke (Venture Capital) blog. While the funds await

new opportunities, Jeremie I investments must be placed, as the end of the investment period is approaching.

DIVERSITY MAKES GREAT MONEY Venture capitalists invest mostly in young, private companies that have great potential for innovation and growth, typically those in the IT, life sciences and the communications sectors. More than 60% of the investments made so far fit into these categories. In the last five years, the venture capital sector has also committed itself to investing in clean technology, which includes renewable energy, environmental and sustainable technologies, and power management.

The latest news from the industry shows a shift from fully technological companies to technology-intensive targets in other sectors, such as life sciences. DBH Investment and PortfoLion (the VC arm of OTP Bank) announced their latest investments almost at the same time last week.

FACTBOX European Private Equity and Venture Capital increases fundraising by 80% and investment by 6% in 2011 €40bn was raised in Europe last year across the industry as a whole, the highest fundraising level seen since 2008 and an 80% increase on 2010 Investments were a steady 6% up on 2010 Realized investments were up 50% on the previous 12 months and back at levels last seen in 2005-06 85%of the 4,800 companies backed were SMEs, and nearly half employed less than 20 people in 2011 Source: EVCA

The DBH fund invested HUF 200 million in Debrecen-based health care service provider Indiso International.

The company has developed an innovative tool and process that can help recreate the climate of a salt mine in an artificial environment, and is targeting both local and international markets with the service. DBH already has a health-related investment in its portfolio: it invested HUF 340 million in pharmaceutical

technology developer Nanoform, a spin-off of pharma software maker NanGenex and owner of several nano-drug patents.

PortfoLion, on the other hand, carried out a HUF 160 million capital increase in KPS Diagnostics, for a 40% stake in the molecular diagnostics company. KPS targets patients with tumors and develops new diagnostics processes that can predict the possible effects of drugs

by examining them on a molecular level. PortfoLion already has a biotech company in its portfolio, Cryo Management, which concentrates on human and animal reproduction processes in developing new products and services.

The venture fund’s other announcement last month was a more surprising one: it invested $1.6 million in Hungarian fashion brand Nanushka and is ready to provide a $1 million loan to cover further expenses arising from the brand’s new marketing strategy. PortfoLion has already appointed a new management team that will focus on production and international distribution.

With the final phase of an investment period that lasts until the end of 2013 approaching, this year will absolutely be a bumper one for venture capital, Portfolio. hu reported, with all the other fund managers preparing for major announcements in the coming weeks and months. ■

[ EXPERT OPINION ]

PÉTER OSZKÓ, DR Chairman-CEO PortfoLion Venture Capital Fund Management Private Limited Company

The Hungarian start-up ecosystem is shaping form perhaps in the hardest times, when domestic markets are contracting, recession or low growth environment becomes persistent, lending activity of the banking sector is frozen for the foreseeable future and marketing Hungarian ventures outside the country is the most difficult ever. And still, as we see from the recent EVCA survey, Hungary is in the frontline of European countries concerning venture capital investments in proportion to GDP in 2011.

Indeed for survivor type of entrepreneurs, perhaps this is the only sector where it still makes sense to invest and there are still chances for winning. In the absence of domestic demand, sales need to head to regional or global markets where novelty and competitiveness of products and services are even more critical. Thus innovation becomes the decisive factor of entrepreneurial success. At the same time, in the absence of regular lending activity provided by the banking sector, the only funding scheme available for new ventures comes from investors who have the appetite and instruments to take higher risks, namely the venture capital funds.

Lucky coincidence, then, that the so-called JEREMIE program of the European Union increased artificially the number of local VC funds to critical mass in 2010, and may extend it further if new tenders come up as promised recently by the government.

Through this program, at least the investor side of the local ecosystem has been created in an accelerated way; as a result existing and future Hungarian start-ups have a chance to involve domestic partners at the first into their ventures, making their departure much easier.

However, the success of a start-up is never evident at the departure, but emerges only years later. And while start-

ups can believe that the key element of their success is to find the cheapest and most flexible funding, which off course can be achieved by making local VC funds compete mainly in pricing and valuation, in fact know-how, business network, management support a fund manager can provide is often more valuable and necessary than the funding itself.

And what else is needed for the rise of the Hungarian start-up community?

Off course, proper role models proving that there is a way to succeed far from the state sector, public procurements or large multinational groups. That to raise a venture from the starting idea to its international success can make someone among the most recognized individuals and can also result in a fortune comparable to the richest Hungarians, as we could see recently in the case of LogMeIn and Márton Anka.

From that aspect Hungary still lags behind Western European countries, since our first start-up pioneers such as Graphisoft and Kürt were born in the ‘80s but could properly grow only in the ‘90s and our sole legend from the times prior to that is Ernő Rubik. However, this century a new generation of start-ups have appeared, such as LogMeIn, Ustream, Prezi, Thales Nano, Gravity, Vatera, Solvo, Cellum,

Indextools and most recently Leonar3Do, and many of them managed to achieve already notable results. Indextools and Vatera have already found buyers or strategic investors, and while Graphisoft was acquired by Germany’s Nemetschek AG some years ago for HUF 24 billion, the shareholdings of Anka Márton in LogMeIn were recently valued at HUF 28 billion, making him the sixth richest Hungarian individual. Prezi.com could first attract Danish then American investors, Ustream piqued Japanese and Korean groups. And in parallel with the strengthening of the local VC sector, an increasing number of start-ups can get the first share of funding from domestic investors, who exponentially increase their activity that, solely from the JEREMIE funds, can achieve about HUF 50 billion investments by the end of 2013.

As Accel Partners from Silicon Valley, an investor in Prezi.com noted recently, from now on it’s only a question of time before new Hungarian success stories rise.

www.portfolion.hu

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

High tech role models

2 BusinessSpecialReport 25

BBJ

WWW.BBJ.HU

Budapest Business Journal | May 18 – may 31

Brainstorming is the region’s singularity

A Hungarian project, a social brainstorming application, has won the first regional contest staged by Silicon Valley’s Singularity University with the aim of finding a new generation of startups that solve global problems with the help of technology.

BBJ ANIKÓ JÓRI-MOLNÁR

What do hand hygiene, drug shortages, traffic congestion, food allergies, 3-D design and brainstorming have in common? According to the regional finalists of Singularity University’s (SU) Global Impact Competition, they are problems for which a breakthrough idea or solution could positively impact at least one million people in the region, with special emphasis on the use of exponential technologies. From a total of 54 applications from eight countries of the central, eastern and southern regions of Europe, these six ideas made it to the finals recently held in Budapest.

“We received surprisingly mature projects,” said SU regional ambassador Csaba Szabó. The international jury team, including leaders of SU, Cisco, GE Healthcare and Valley Connect, had indeed a hard time deciding. The priorities were the originality of the idea, the possibility of implementation, the ability of the technology to solve significant problems for humanity, and the capability to change the quality of life of millions in the short- or long-term. The judges selected a Hungarian team with their Be-novative project as the lucky winner.

A SIX-PACK OF IDEAS The project, presented by Priszcilla Várnagy, creates a platform on the model of social media portals, where brainstorming meets crowd sourcing and games. Groups from all over the world can gather on this platform and collaborate, or rather toy around with the presented problems, then get small rewards for their contributions. “These parallel sessions are synthesized by the program and we would have a collective mindset,” said Várnagy in her presentation. She and her team have already presented their project in the Silicon Valley last year. Várnagy decided to apply to this contest to be able to go back, especially to SU, “to learn from the greatest thinkers of the world and to

find contributors and investors for our project.”

Now she’ll be one of 20 students who will travel to the Valley with a $30,000 grant on a full scholarship at the university’s summer program, as well as a software license worth $10,000 from Autodesk. She might not sleep much, as CEO Rob Nail said in his introduction – the institution is commonly called “Sleepless University” because of its classes held at unusual hours. But she might also find a dream team of contacts and join the likes of previous graduates: car sharing marketplace GetAround, content application creator Appitude or space manufacturing solution Made In Space. (See box about VC investment volumes.)

GO INNOVATORS GO Innovation is indisputably becoming more and more important both globally and locally, as a key element to competitiveness, especially for the region. This is clearly shown by Várnagy’s project. But besides the innovation itself, other key areas also emerged.

Two finalist projects focused on health issues: Tamás Heidegger from Hungary represented Hand-inScan, a system that would revolutionize the objective evaluation of hand disinfection quality, by giving repeatable and immediate measurement of hand washing

problems in drug supply can cause major trouble, so she intends to create a multi-layer solution, beginning with a health map, and followed by supply chain tracking and an alert system. The latter would provide information about drugs people want to give or throw away, to give them to those in need.

The Czech Republic’s Václav Plevka, who wants to anticipate traffic congestion by connecting different traffic control and management systems, represented environmental issues. “Our society had a recent success in transport with electric and hybrid cars, but this still doesn’t give the real freedom of travel to people as they’re stuck in congestions,” said Plevka. He proposes a traffic regulator algorithm as part of an intelligent transport system.

The last applicant present was Dániel Rátai, the founder and inventor of Leonar3do, a virtual reality

project with the aim of revolutionizing education and learning. With Leonar3do, one can experience 3D virtual reality on any PC or laptop: reaching, grabbing, working or playing with objects in a 3D space.

These projects are all worth continuing, and the finalists were encouraged to discover more of the technologies even if they’re not the ones to participate in the summer course of this year, said Nail. Although the number of winners per contest very much depends on the funding partners and the population, it is possible that the region could follow the example of Mexico, where, besides the two full scholarships offered, a couple of other finalists are entitled to a part of their budgets to fund the projects, he added. One way or the other, the Global Impact Competition will return to the CEE and SEE next year. ■

[ EXPERT OPINION ]

SMILESTONES JUDIT BUDAI, DR Partner Szecskay Attorneys at Law

Although during the past four years the aftermath of the economic crisis has caused a headache for the global and national economy, innovation offers a promising way out of the crisis.

Thanks to a number of multinational and large local companies in Hungary, primarily in the IT, biotech, medical care and energy sectors, there is a need not only for the supply of existing goods and services but also for innovative engineering works and solutions which tremendously stimulate local entrepreneurship.

However, university spin-offs, seed ventures and start-ups not only need money (for facilities, for financing R&D activity and to assemble a good team for business development and management): they also need a lot of trust, which may not be expected from financial institutions and debt financing. That is why venture capital funds and venture capital funding via equity investments is a key engine of such innovative ventures.

Venture capital investors follow various financing strategies. It is widely discussed in the relevant literature that an alternative to round financing, which is more usual in Hungary, is the so-called milestone financing. In the case of round financing a financial investor makes a one-time investment, the proceeds

an alternative structure for venture capital financing

of which may be used to meet immediate financing needs by accessing the market or further markets, or for other goals. Milestone financing, however, may be more promising for both the venture and the financial investor.

Milestone financing means that the investor makes investment in stages. In making an initial smaller investment, it commits itself to further investments that will be made when certain milestones are reached by the venture, e.g. when it reaches certain development stages, such as the higher clinical phases of new drug research, or it obtains market authorization for a new drug or medical device, or it reaches certain sales milestones for a new IT technology.

Why can this be a more win-win situation for the entrepreneur and the financial investor? The entrepreneur may be sure that the investor finances the next development phase and the financial investor may be part of the promising business at a significantly lower pre-agreed price than other investors at the second or third round.

As an example, Jeremie funding, which is an available source of venture capital financing in Hungary comprised partly from EU refundable sources and partly from local and international private investors, can serve as an example of an investor which may be involved in an innovative venture through milestone financing. This is because a Jeremie investment fund manager may invest €1.5 million in an enterprise in each 12-month period, for three consecutive years.

For lawyers and other consultants, milestone financing also means a more challenging task, because a milestone-based investment program means more complex transaction structures, documentation and negotiations to try and ensure a mutual benefit to the investor and the entrepreneur.

www.szecskay.hu

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

Photo: Todoroff Lázár / Courtesy of AmCham Hungary

through UV-marked soap under non-invasive light and digital imaging.

Another contestant from Bulgaria, Bogdana Rakova, presented her Graboo project: a personal digital shopping assistant in the form of a mobile application for those suffering from food allergies. Grabova said a database of products and their ingredients, linked to a personal health profile, can safeguard people’s diets. To take it a step further, she called the attention of the audience to nutritional genomics, the field that studies how diets can also impact the behavior of genes.

In the case of a not-sohealthy individual in need of drugs, several problems emerge, concerning health as well as environmental issues.

Agnieszka Gaczkowska from Poland is trying to solve problems in the drug supply system and drug shortages. Gaczkowska believes that even if you have access to the best infrastructure and best staff,

26 2 BusinessPartnerWatch BBJ

WWW.BBJ.HU

Budapest Business Journal | May 18 – may 31

Venture capital firms Ranked by company name

1

ARX EQUITY PARTNERS KFT www.arxequity.com

2

BIGGEORGE'S-NV EQUITY KOCKÁZATI TŐKEALAPKEZELŐ ZRT http://bnv-equity.hu

»

121

3

CORVINUS KOCKÁZATI TŐKEALAP-KEZELŐ ZRT www.ckta.hu

4

DBH INVESTMENT KOCKÁZATI TŐKEALAP-KEZELŐ ZRT http://dbh-investment.com

592

5

DOCLER INVESTMENTS KFT www.doclerinvestments.hu

6

FINEXT STARTUP KOCKÁZATI TŐKEALAP-KEZELŐ ZRT www.finext.hu

7

INFORMATIKAI KOCKÁZATI TŐKEALAP-KEZELŐ ZRT www.rfh.hu

140.20

8

9

PRIMUS CAPITAL ZRT www.primuscapital.hu

10

WALLIS ASSET MANAGEMENT ZRT www.wallis.hu

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

3 64,500

» » »

4,000

1 4,000

5 100 2010

»

–

–

–

–

–

–

3 25,912

18 96 2006

MFB Magyar Fejlesztési Bank Zrt

–

–

–

–

–

–

–

–

»

50,000 Corvinus Első Innovációs Kockázati Tőkealap, Budapest, 2005; MFB Fejlesztési Tőkealap, Budapest, 2008; ELAN European Tőkealap, Budapest, 2009

» »

1 5,000

» »

» »

»

7,36 Finext Startup Kockázati Tőkealap, Budapest, 2009

» »

90.30

3,00 –

» »

171

7,000 Budapest, 2010

2 12,000

146

6,2 Primus III 2010

» »

»

» »

» »

»

» » » » » » » » » » » »

NO. OF FULL-TIME EMPLOYEES IN JAN 1, 2012

OTHER

MANUFACTURING

MEDIA

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IT

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EXPANDING COMPANIES

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TARGET INDUSTRIES

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PORTFOLION KOCKÁZATI TŐKEALAP-KEZELŐ ZRT www.portfolion.hu

INVESTORS OF MOST RECENT FUNDS

START-UP BUSINESSES

COMPANY WEBSITE

NO. OF FUNDS MANAGED VOLUME OF MANAGED ASSETS (HUF MLN)

LARGE CORPORATIONS

TOTAL NET REVENUE (HUF MLN) 2011

COMPLETED TRANSACTIONS PERCENTAGE OF PORTFOLIO INVESTED IN HUNGARY SINCE 1990 YEAR OF FIRST INVESTMENT IN HUNGARY

MEDIUM-SIZED FIRMS

RANK

TARGET COMPANIES FUNDS MANAGED IN CENTRAL AND EASTERN EUROPE ON JAN 1, 2012 (HUF MLN) CEE FUND(S) (PLACE OF REGISTRATION, YEAR ESTABLISHED)

OWNERSHIP (%) HUNGARIAN NONHUNGARIAN

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

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Béla LendvaiLintner – –

1054 Budapest, Bank Center, Szabadság tér 7.

(1) 302-9270 (1) 302-9273 budapest@ arxequity.com

7

Biggeorge (50), NV Vagyonkezelő Kft (50) –

Levente Zsembery – –

1023 Budapest, Lajos utca 28–32.

(1) 225-2525 (1) 225-2521 info@bnv-equity.hu

MFB Invest Zrt (100) –

Zoltán Várady Ildikó Tankó –

1138 Budapest, Népfürdő utca 22.

(1) 452-5780 (1) 269-5838 info@ckta.hu

4

– DBH Holland B.V. (100)

Sándor Erdei – –

1117 Budapest, Gábor Dénes (Infopark D) utca 2.

(1) 464-9500 (1) 464-9540 investment@ dbh-group.com

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WebMindLicenses Kft (95), Futuration Hungary Kft (5) –

Zsolt Makra – –

1101 Budapest, Expo tér 5–7.

(1) 432-3287 (1) 432-3229 info@ doclerinvestments.hu

8

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Iván Halász, Ferenc Lévay, Gábor Ormosy – –

1082 Budapest, Futó utca 47–53.

(1) 783-3749 (1) 783-3849 finextstartup@ finextstartup.hu

Ágota Károly – –

1085 Budapest, Baross utca 22–26.

(1) 486-3120 (1) 486-3176 ikta.dolgozoi@rfh.hu

5

6

» 2010

» 100 2009

» 100 2010

» 100 2003

8 100 2010

» 100 2010

» » »

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WebMind Licenses Kft; Futuration Hungary Kft

MV Zrt, Dr. Futó Péter and other private investors

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3

Regional Development Holding Zrt (100) –

OTP Bank Nyrt, NFÜ

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8

OTP Bank Nyrt (100) –

Péter Oszkó – –

1131 Budapest, Babér utca 9.

(1) 298-3367 (1) 298-3303 info@portfolion.hu

6

Zoltán Bruckner, István Alpek, András Szombati (90) Franz Krejs (10)

Zoltán Bruckner István Alpek András Szombati

1012 Budapest, Márvány utca 16.

(1) 225-1162 (1) 225-1163 info@primuscapital.hu

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» »

– – –

1055 Budapest, Honvéd utca 20.

(1) 899-9800 (1) 899-9801 info@wallis.hu

EU-Jeremie, AEGON Vagyonkezelő, Primus centr.

Europe Fund III LLC, USA

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» » » » » » » » » » » »

This list was compiled from responses to questionnaires received by May 16, 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

3 Socialite

BBJ

TRAVEL CHAMBER CORNER

Discovering Berlin Swiss still investing

28-29 30

LAUGHING MATTER

The Pest Cabarets III In the spring of 1945, when the Second World War ended in Budapest, people had little reason to be cheerful. After heavy allied bombings and a two-month siege between attacking Soviet and defending German troops, the capital lay in ruins, with every bridge blown up, banks, factories and shops destroyed and looted, and hundreds of thousands of people, including nearly half of Budapest’s 250,000 Jewish inhabitants, killed or deported.

BBJ ANDRÁS SZARVASI

Yet, as if a symbol of the will to survive, Pest cabarets were among the first theaters to reopen. This revival, as for the city itself, began with clearing the rubble and burying the dead. Entrances had to be cleared of debris, stages and technical equipment repaired and companies reorganized.

Hungary’s first freely elected postwar government left all theaters (except the National Theater and the Opera) in private ownership.

Adorján Stella, a popular cabaret writer, wrote in an article: “Let’s celebrate that almost all districts of Budapest have a new cabaret. This cabaret fervor is a reflection of revival.

Humor, satire and persiflage will rule forever (…) There are so many different types of cabarets – and they all operate and flourish and try to bring a

few pleasant hours to the audience which had suffered so much during the war…”

After the war, however, the Pest cabaret meant much more than simple entertainment. In the brief period before the Communist takeover in 1948-49, the Pest cabaret became a real plebeian genre: its traditional audience – upper-middle class bourgeoisie, the Pest literati, and Jewish intellectuals – was replenished with a wider range of spectators. After years of terror and oppression people were yearning for free speech and unrestricted thinking. The new cabarets offered a proper framework for the vox populi to be heard in a casual yet serious manner, with strong and dynamic interactions between the stage and the audience.

The first cabaret to reopen after the war, the Podium (today the Radnóti Theater) in Nagymező utca started regular performances in March 1945. The title of their first program (Unmuzzled) reflected the general relief felt both by the audience and the performers after years of anguish and distress during the war. Most of the pre-war cabaret stars now joined Podium’s company, and played to capacity crowds until it was forced to close down in 1949.

The re-launch of Kamara Varieté (today Játékszín Theater) on Teréz körút in July 1945 proved more durable, but only just: after the Communists came to power and brought all theaters under their ideological control in 1949, Kamara Varieté ended its operation as a cabaret, but was able to continue as an acrobatic revue.

One of the most successful pre-war entertainment venues, the legendary Arizona (for the romantic story of its owners, see the 1988 movie 'Miss Arizona', featuring Mastroianni and Schygulla), reopened in May 1945 as a short-lived literary variety

attempting (unsuccessfully) to merge poetry and cabaret.

Another Pest cabaret quickly reopened was Royal Revue (earlier the Royal Orfeum, today the Madách Theater at Erzsébet körút 31), in which, while acrobatic stunts dominated, several popular cabaret writers and actors highlighted the show.

Meanwhile, a less entertaining show took place on the stage of politics.

Although arranged under the watchful eyes of Hungary’s liberators, the Soviet Army, the elections in 1945 led to the victory of the conservative Smallholders’ Party with the Hungarian Communist Party receiving only 17% of the votes. Under Soviet pressure, the Smallholders organized a coalition government in which the Communists held some of the key posts.

In February 1947 the police began arresting leaders of the Smallholders Party, charging them with conspiracy. At the next parliamentary election in August 1947 the Communists failed again to win, but under new orders from Moscow, they decided to speed up the Communist takeover.

Opposition parties were simply declared illegal and their leaders arrested or forced into exile. Communist leader Mátyás Rákosi boasted later that he had dealt with his partners in the government, one by one, “cutting them off like slices of salami”.

These “salami tactics”, as they were later termed in the Western press, also worked in show business. Privately funded theaters were either closed down or taken under state ownership. Initially, the cabaret as a “philistine, bourgeois art form” was doomed for liquidation. The Communist-controlled Theater and Film Association declared, “There is no other art genre that would have to struggle with such a burdensome, ugly legacy than the cabaret which, for long years, was

the home entertainment of a narrow group of the upper middle class. What on earth could the masses benefit from the cabaret, except some stupid word twisting, cynical remarks and a mentality of aimless drifting?” the Association asked sarcastically.

By the early 1950s, however, ideological bigwigs of the Communist Party realized that cabaret, like other popular art forms, might be used as a powerful propaganda tool.

The cabaret deals with everyday life and everyday problems in a simple language easily understandable for those members of society that the high culture would never be able to address. “Humor and satire should not be self-contained,” warned a Party leaflet, “our satire must love our achievements, it must not be oppositional, it must not be derisive of our results.” And most of Hungary’s renowned humorous writers and performers, though reluctantly, took cognizance of the new rules of the game.

Following several years of brutal retaliation after the failed 1956 uprising, in the slightly more relaxed atmosphere of the late 1960s, there was increasingly popular demand for the lighter genres: joke magazines were sold in huge numbers and, in addition to traditional variety theaters, some drama theaters and night locales also started to offer regular cabaret programs and revues. A regular, Monday evening cabaret on State Radio attracted millions of listeners every week. (“The radio cabaret should generate cheerfulness. It should target phenomena impeding our advance, philistine morals and character faults,” declared the Communist Party’s top executive body, the Political Committee in 1959.)

The Party, which continued to exercise total control over culture and arts, realized that while the standard of life remained

under Western levels, journeys to foreign countries were restricted and political rights curtailed, tensions may build up to dangerous levels. The system needed a safety valve. The Communist Party newspaper, Népszabadság, organized a roundtable conference about Hungarian humor.

The country’s top comedic writers and theoreticians agreed that humor is important for society, as it helps to sound out useful veracities without generating “hostile emotions”. Humor in Hungary is not a safety valve, not a means of manipulation but a useful tool of good politics. “Western journalists are wrong if they interpret the flourishing of political cabaret as a sign of increasing opposition to Communism,” said János Komlós, a former state security officer, and director of the newly founded Mikroszkóp Theater, home to one of Hungary’s most popular political cabarets in the next 40 years.

Although the Pest cabarets became part of the establishment, with their authors and performers working practically as state employees, Mikroszkóp, Vidám Színpad, Kis Színpad and the others reached back to the best traditions of the Pest cabaret. Using metaphors, ambiguities, cunning scripts, double entendres and speaking “between the lines”, authors and comedians took more and more liberties and (apparently) continuously tested the tolerance of their political masters. The safety valve worked perfectly. The cabaret created the illusion of free speech and the citizens of the “happiest barrack” of the Eastern bloc (as Hungary, where dictatorship was softened by rising living standards, was often called in the Western media) happily and gratefully fell for the trick. ■

Be a

Berliner WHAT TYPE OF TRAVELLER YOU ARE?

BUSINESS Ó

JUST THE T

HOW LONG ARE YOU GOING TO STAY? A COUPLE OF DAYS

OVERNIGHT

A

n overnight business trip can give a good first taste of Berlin’s charm. It is advisable to remain in the center. Start at the Reichstag where you can take nice pictures of the Brandenburg Gate as well. Then take a walk down to Potsdamer Platz – its architecture and vivid atmosphere will empower you after the somewhat gruesome visit to the Holocaust memorial just off the Brandenburg Gate. Or, you can also take the direction of Unter den Linden for a nice walk to the Museuminsel. If you want an elegant business dinner in the center, Margaux (78 Unter den Linden) might be the best place. If your focus is on German specialties, dine out at Deponie Nr. 3 (Georgenstraße 5) - their menu will lubricate any business deal. For a beer and some German snacks go to Zollpackhof, a very elegant open-air Biergarten close to the Chancellor’s office. To keep your shopping spree short, ask the taxi driver for KaDeWe or Galeries Lafayette – both are very famous shopping centers. If you have time before the transfer back to the airport, do not miss a visit to Checkpoint Charlie, which gives you a sense of history without the bitterness of sad mementos.

S

itting in an office throughout the day calls for refreshing programs in the evenings. You may invite your colleagues to Kollhoff Tower (1 Potsdamer Platz) and enjoy a drink watching the city from a height of 103 meters. When it comes to museums, your first pick should arguably be the Pergamon Museum, which matches the British Museum in richness and interior design. A neatly kept stretch of the Berlin Wall (Bernauer Str. 111) will give you an impression of, and info on, the city’s division during the Cold War. Looking for something contemporary? Sophiensaele (Sophienstraße 18) is a place ruled by dance and modern theater, with performers from all around the world. If you do not speak German, the acclaimed English theater F40 will be a good choice. Should you prefer classical music, a concert at Philharmonie (Herbert-von-Karajan Str. 1) or at the Konzerthaus Berlin (Gendarmenmarkt) is a must. If you would just like to let off stress, indulge in jazz at B-Flat club (Rosenthaler Str. 13) or at A-Trane (Bleibtreustraße 1). Have a deal to celebrate? Try one of Germany’s best restaurants, Facil (Potsdamer Str. 3), where traditional German cuisine blends with Asian traits, or the Michelin-starred Restaurant Reinstoff (Schlegelstraße 26c). If you have an extra day for sightseeing, do not miss the Reichstag.

LONG WEEKEND

A

long weekend is a perfect time frame for exploring Berlin – if you have a plan in mind. If you are open to new trends, stay at the Ellington Hotel in Western Downtown (Nürnberger Str. 50-55).

The rooms and lounges are minimalist in design, and the bar is as elegant as it is measured. The proximity of KaDeWe and the Kurfürsterdamm makes it an ideal base for shopping sprees. Beyond the top sights (East Side Gallery, Potsdamer Platz, Reichstag, Fernsehturm) it’s worth discovering Hackeschen Höfe near the Hackheschen Markt. The building houses galleries, a famous variety theater (Chamäleon), a cozy club (Sophienclub) and a lot of boutiques offering the cream of contemporary German design. Another cult location is the Admiralspalast (Friedrichstraße 101), which houses musicals, concerts, multimedia shows, theatre and standup comedy. After a long day, the stylish bistro Bandol Sur Mer (Torstraße 167) will add extra flavor to your memories: German and French cuisine, skillful chefs and excellent wines make it necessary to book well in advance. South German specialties have been on the menu at Florian (Grolmanstraße 52) for 25 years – the other tradition is booking, as the place has become a gastro-lovers delight.

TOP SIGHTS IN BERLIN

REICHSTAG

MUSEUMINSEL

The Brandenburg Gate is the symbol both of the division and the reunification of Germany. The best-known German landmark stands in the heart of Berlin, and offers a postcard-photo opportunity.

There are few things that haven’t happened to this building yet: it was burned to the ground, rebuilt, ravaged by the Red Army, rebuilt, wrapped up by Christo and Jeanne-Claude – and rebuilt again by Norman Foster. The result is one of the most amazing buildings in the world, with Russian graffiti, hundreds of pieces of contemporary art and a glass dome with a stunning view of Berlin.

Wedged between the river Spree and the Kupfergraben, Berlin’s Museuminsel boasts a bevy of top-rated museums, such as the Pergamon Museum, the Old Museum, the New Museum, the Old National Gallery and seven others. Beyond mummies, sculptures and canvases, the Museuminsel offers a nice environment for jaunts and the peace of the Berliner Dom.

Hint: You will often find concerts and other events at the Gate. Check www.visitberlin.de to see what’s going on.

Hint: Some of the plenary sessions are public. You can book a seat on the balcony of the plenary chamber.

Hint: You can enter more than 60 museums in Berlin free of charge. For details, check www.berlin.de

BRANDENBURG GATE

FERNSEHTURM Rise to 368 meters above town, and let the view take your breath away as the panorama floor turns under your feet. Round out the experience with a typical German snack in the Telecafé.

Hint: Skip the queuing by buying tickets online at www.tv-turm.de

SPONSORED BY

In the last 25 years, Berlin has staged a stunning comeback to become a top European destination. Once a symbolic front of the Cold War nightmare, the German capital has not only preserved the remnants of its past, it has also turned into a hotspot for modern arts and entertainment.

Today, Berlin is a place of restless experimentation: behind smooth walls and along well-maintained alleys, you will find smart design, subversive theater, complex flavors and stimulating vibes. Here are some ways to sample Berlin – take your pick and dare to mix-and-match.

Population: 3.5 million Area: 891.85 km2 Airports: Berlin-Brandenberg Schoenefeld, Berlin-Tegel, and Berlin Brandenberg International (to be opened in 2012) Flight time from Budapest: 1h 25min Summer weather: Temperatures range between 22-30°C, with occasional showers.

Public transport: Very developed. A Tageskarte costs €6.80 and is valid for one day in the A, B, and C zones.

Prices: Berlin is mostly cheaper than Paris or Stockholm; average prices are similar to those in Vienna and Brussels.

BACKPACKER Ó

E TWO OF US Ó ONE WEEK

M

BERLIN FACTS

ONE WEEK

LONG WEEKEND

ore time means a less packed schedule and the freedom to explore without plans. The best way to do this is to rent a bike.

Try ‘Berlin on Bike’, a city tour on two wheels – you can choose from several tours (Along the Wall, Berlin by night, etc.) held in six languages (book at +49 30 43739999). Are you a romantic? Take your loved one to the Sputnik Kino where you can sit in double seats designed for couples and watch art films and listen to live music. The ACUD club (Veteranenstraße 21) also ranks high in intimacy. Start in the art gallery, then move to the cinema room, and end the night in the bar listening to live music. For a full-on Bauhaus experience, go to the Bauhaus Archiv (Klingelhöferstraße 13-14). The building (designed by Walter Gropius) houses very rich exhibitions of furniture, sculpture, photographs and accessories created between 1919 and 1933. When planning your week in Berlin, mind the summer festivals. Some of the plentiful offerings include: Classic Open Air (early July, www.classicopenair.de), Berlin Philharmonic at the Waldbühne (candle-lit classical concert in the open air, www.berlin-philharmonic.com), Fête de la Musique (21 June), and the Young.euro.classic (two weeks in August, www.young-euro-classic.de). Use a sunny day to visit Potsdam, a charming, historical city bordering Berlin. A 30-40 minute trip and you will find yourself in the town of the 12 palaces. Don’t miss the Cecilienhof Palace where the fate of the continent was sealed after World War II. Wrap up a warm day at the Badeschiff Berlin – a ‘bathing ship’ on the river Spree, a real gem.

B

erlin is a party town; you just have to find the right places. Sample some of the key sights of the city, then try some of these places: Freischwimmer, Hafen, 103 Bar and Kaffee Burger. If you like techno music, Berlin’s most famous club is the place to go: the Berghain (Wriezener Bahnhof) uses the building of an old power station and is open non-stop from Friday to Sunday night. At Klub der Republik (Pappelallee 81) you can listen to the best local DJs in a retro-fashion environment. In the Havanna Club (Hauptstraße 30) you will see some of the 180 nationalities that populate Berlin partying – especially Latinos. The salsa nights offer great dancing and networking opportunities.

Weekend club (Alexanderstraße 5) offers different music on each floor, DJ parties and a nice view of East Berlin. To recharge your body in the morning, visit Club der Visionäre (Flutgraben). This charming little place has a terrace on the river Spree. Just across the canal, Freischwimmer will lure you with hearty breakfasts.

I

f you have a week in town, take some time to relax too. A perfect spot for this in the summer is the Prater (Kastanienallee 7-9), a place of beer, brunch and shade that attracts a lot of people. After a night out at the Berghain or at Havanna, you can idle at Schleusenkrug (Müller-Breslau-Straße), a famous bar in the Tiergarten district. If you are on a tight budget, cheap but good food is essential. Feeling peckish between two programs? Drop by at Joseph Roth Diele (Potsdamer Str. 75) where sandwiches go for €2 and daily courses for €3-5. A cheap meal comes with good company at the famous Curry 36 (Mehringdamm 36, Kreuzberg), which is overly popular with both locals and tourists. Currywurst, Bockwurst, Krakauers, and other traditional treats will refill you at very friendly prices. With your stomach full, linger in Kreuzberg to visit Soju Bar (a Korean-style bar under Skalitzerstraße 36) and Die Weinerei (Veteranenstraße 14), where you drink wine for honorary tips (do not abuse this rule). Think of Kreuzberg when choosing a hostel: at Baxpax, you can get a bed in a dorm-style setting for €8 or a double private room for €20. And a special one: Hostelboat Eastern Comfort awaits you with its cabins – the boat is anchored on the river a few meters off the East Side Gallery. But do not stay long in your cabin: instead, play softball on a shut-down airfield (Tempelhofer Park), soak up the sunshine on East Berlin’s beach (Strandbad Grünau), or try your voice on Sundays at 3 p.m. at the open-air Bearpit Karaoke (Mauerpark, Prenzlauer Berg). Back into the night, if you feel too tired to dance, try the open-air cinema (Freiluftkino) at Adalbertstraße 73.

EAST SIDE GALLERY

ZOO BERLIN

POTSDAMER PLATZ

A place where street art made history: this 1,361-meter stretch of the notorious Berlin Wall attracts tourists and artists from all around the globe with witty graffiti that depicts socialism and German reunification. Free and open for everyone.

The Berlin Zoo stands out from its league with its vast collection of species, its programs and its baby animals. The concerts and the newborn baby elephants will make your visit memorable.

Located relatively close to the Brandenburg Gate, Potsdamer Platz is a hotspot of culture and entertainment. You will find 19 cinemas, a musical theater, a flashy casino (Spielbank Berlin), several fine restaurants, cafés and boutiques.

Hint: Want to see it through the eyes of an artist? Check the 90-minute guided tours at +49302517159.

Hint: You can watch the feeding of nearly all animals. Check the daily feeding calendar: www.zoo-berlin.de/zoo/tierewissenswertes/ftterungszeiten.html

Hint: Take the elevator of the Kolhoff Tower (1 Potsdamer Platz) to enjoy beautiful scenery!

HACKESCHEN HÖFE Take variety theater, boutiques of contemporary design, restaurants and exhibition halls, and put them all into a provocative building with eight inner gardens. Add a pinch of art deco and art nouveau, and you are in Hackeschen Höfe. Summon up friends and taste the sparkling life of the art gardens.

Hint: Try a virtual tour in the building at www.hackesche-hoefe.com

30 3 Socailite BBJ

WWW.BBJ.HU

Budapest Business Journal | May 18 – may 31

Unlike many countries, Switzerland actually increased its investments in Hungary last year.

Swiss companies still recognize the country’s advantages, but the unpredictable decisions of the government are causing them some discomfort.

BBJ KRISZTIÁN KUMMER

“With €4 billion, Switzerland holds seventh place on the list of foreign investors in Hungary. That means an increase of 10% from the year before, despite the fact that investments from other countries are shrinking,” said Christian Mühlethaler, the Swiss Ambassador to Hungary, at the second Swiss Business Day organized by Swisscham Hungary.

There are some 300 Swiss companies active in Hungary with a workforce of around 35,000, and only one Swiss company decided to leave the country last year and concentrate its activities elsewhere.

According to bilateral trade figures with Switzerland, Hungary occupies third place in Central and Eastern Europe behind Poland and the Czech Republic.

Although both domestic and foreign companies are still optimistic regarding the economic upturn in Hungary, stakeholders cannot escape

the negative effects of the erratic and unpredictable decisions of the government, such as the introduction of new taxes. “Not the measures themselves may be unpleasant for the companies, but the lack of consultation, information and predictability,” said the ambassador.

Bureaucracy remains a huge burden to companies in Hungary. While funding a new company and filing tax declarations has became easier, the system is still blurry and difficult to oversee for a newcomer without legal help, said József Láng, a tax expert of ABT Treuhand.

The economic environment is very restrictive, as the structural reform plans Széll Kálmán 1.0 and 2.0 have decreased the [pharmaceutical] sector budget

by HUF 190 billion. There are no impact studies and no transparency throughout the decision making process, said Tamás Szoják of drug maker Novartis.

The amount of information required by authorities to obtain a permit or license has been growing out of hand: “It’s easier to file, but takes three times more time to collect everything that is needed,” said Gábor Briglovics of power company Alpiq Csepel. Also, the time it takes for authorities to make decisions has increased significantly, and responsible decision makers are often unavailable, he added.

HUNGARY STILL AN ATTRACTIVE COUNTRY TO INVEST IN Hungary still has its “tradi-

Photo: SwissCham Hungary

Swiss companies want predictable economic environment in Hungary

tional” advantages, such as low wage levels, high workforce quality and good logistics, said Katalin Németh, Head of the Investment Department of the Hungarian Investment and Trade Agency (HITA). Hourly labor costs are still very low at €7.6 in Hungary, compared to the eurozone average of €27.6.

The government also offers a wide range of incentives to projects settling in Hungary.

Opportunities differ from project to project depending on size and geographical location, but cash grants, development tax allowances, training and job-creation subsidies are all available.

MAY 20

MAY 23

Sport day LOCATION Vasas Pasarét Sportcentrum, 1026 Budapest, Pasaréti út 11-13.

TIME 9 a.m. – 4 p.m.

ORGANIZER Netherlands-Hungarian Chamber of Commerce together with Magyoranje Football Team

Breakfast Briefing on the new Labor Code in association with CCCH LOCATION Hotel Marriott Courtyard Budapest City Center, 1088 Budapest, József krt. 5.

TIME 9 a.m. – 11 a.m.

FEE for BCCH members free of charge, non-members: HUF 6,000 + VAT ORGANIZER British Chamber and Commerce in Hungary CONTACT www.bcch.com

“The role of foreign trade is on the rise within Hungarian economic policy, as Hungary is an ‘open economy’, depending largely on its relations with foreign countries,” said Balázs Hídvéghi, deputy state secretary of the National Economy Ministry.

Talking of long-term Hungarian plans to reinforce the constantly improving trade balance, Hídvéghi mentioned that the government would like to double the amount of Hungarian exports to €140 billion by 2020.

HOW TO DEFEND AGAINST CHF CURRENCY RISK? It is impossible to success-

fully manage a company without taking into account the financial market, László Szabó, Chairman of the Concorde Capital Management Group pointed out.

Speaking of the spectacular strengthening of the Swiss franc on the currency market, Szabó stressed that unlike most European countries, the US or Japan, unemployment is relatively low in Switzerland, the level of debt is negligible and the government needs no stimulus to maintain stable economic growth.

Due to the exceptionally good condition of the Swiss economy, the Swiss franc is

regarded as a safe haven by currency investors.

Although the currency cap of CHF 1.20 per euro set in September 2011 the by Swiss National Bank (SNB) to stop a sharp rise, caused in part by investors fleeing from the euro, has held stable for more than eight months now, a major shock to the eurozone could easily push the rate 1.10 francs in a few hours, said Szabó.

The best way to avoid huge financial losses is to purchase currency market options, which are relatively cheap now due the low volatility of cross-currency rates, the expert added. ■

MAY 23

MAY 24

Speed Business Meeting in Zalaegerszeg

AmCham panel: Mit adnak nekünk a multik? (event held in Hungarian) LOCATION Kempinski Hotel Corvinus, 1051 Budapest, Erzsébet tér 7-8.

TIME 12.30 p.m. – 2.30 p.m.

FEE for AmCham members: HUF 10,000 + VAT, non-members: HUF 25,000 + VAT ORGANIZER American Chamber of Commerce in Hungary CONTACT anita.arvai@amcham.hu

LOCATION Hotel Arany Bárány,

8900 Zalaegerszeg, Széchenyi tér 1.

TIME 2 p.m. – 4.30 p.m.

FEE HUF 1,000 + VAT/person ORGANIZER French-Hungarian Chamber of Commerce and Industry CONTACT ccifh@ccifh.hu

3 Socialite 31

BBJ

WWW.BBJ.HU

Budapest Business Journal | May 18 – may 31

WHO'S NEWS

Do you know someone on the move?

Send information to research@bbj.hu

As of May, Bózsik has become the sales and marketing director of DBH Group. The 41-year old professional studied at Eötvös Loránd University. Previously he worked for Orangeways Zrt as a strategic director for four years. Along with that, he was managing director of Turizmus Kft. Bózsik has 16 years’ experience in marketing and commerce. He had held positions with companies such as Kofola Zrt, Reckitt Benckiser, Danone Hungary and Procter & Gamble.

Vincent has taken over as offers management director at Metro Cash & Carry Hungary. Vincent started his career at Metro Hungary as senior category manager food in August 2005. He was appointed head of dry food in January 2008. In April 2010 he was made head of own brand region west/ MENA METRO AG. In May 2011 he became regional manager food region II Europe & MENA METRO AG. Former offers management director of Metro Cash & Carry Hungary Xavier Plotitza has taken over the same position at Metro Cash & Carry France.

Name András Bózsik Current company/position DBH Group/sales and marketing director Previous company/position Orangeways Zrt/strategic director, Turizmus Kft, managing director

Name Csaba Bőthe Current company/position IT Services Hungary/ managing director Previous company/position T-Systems/director of client relations and operation support

Bőthe will take over at IT Services on June 1. Previous managing director Péter Ilosvai will leave the firm in search of new challenges.

Bőthe has 15 years’ experience in executive management. He joined Magyar Telekom in 2006 as sales director of the mobile division. In his last position at the company, he was responsible for corporate client services, back office support, technical planning and operation support activities.

Name Romain Vincent Current company/position Metro Cash & Carry Hungary/offers management director Previous company/position Metro Cash & Carry food region II Europe & MENA METRO AG/ regional manager

Name Sándor Lovas Current company/position B&V Group/CEO Previous company/position -/-

Lovas succeeds Melinda Kovács, who had worked at the group since its foundation 17 years ago, as CEO. Kovács will continue to work for the group as consultant. Lovas has been in the construction development industry for 25 years He started his career in 1986 as an architect.

He worked for Strabag and Swietelsky, among others, took part in the Campona and Hermina Towers projects.

SPONSORED BY

Name Sunny Kumar Current company/position GTS Central Europe/ deputy director and business development director Previous company/position Qwest Communications/ sales director

Name Ilona Dávid Current company/position MÁV Zrt/CEO Previous company/position GYSEV Zrt/CEO

Kumar has been appointed deputy director and business development director at GTS Central Europe, where he will be responsible for developing new market channels with companies in the region.

Kumar has 14 years’ experience in telecoms. Prior to joining to GTS, he was sales director of Qwest Communications. Previously, he held positions in business development, sales and marketing at OnFiber Communications. He also worked as a strategic consultant for Ernst & Young’s telecom, media and technology department.

Dávid succeeds Ferenc Szarvas at MÁV, who left the company by mutual agreement. Currently, Dávid is also CEO of GYSEV Zrt, from which post she will resign at the company’s assembly on May 23. However, she will remain chairman of the board at GYSEV, and Szilárd Kövesdi, head of the technical and track division, will be acting CEO of GYSEV if the board supports the decision, the National Development Ministry said in a press release on May 10.

[ EXPERT OPINION ]

Hidden Faults Sunny days are here at last, we can shed a layer or two and jump into shorts and skirts. Not so fast! Apparently 20-50% of the population is not so happy about having to show more skin. Varicose veins on the calf and spider veins on the thighs are considered unsightly – and painful, if they go untreated.

Twenty percent of men and 25% of women are affected with varicose veins, but nearly half of the adult population develops some form of the more delicate spider veins to some degree.

“Worse that the condition itself,” says Dr. Zoltán Kapus, vascular surgeon specialist at Dr. Rose Private Hospital, “is the fact that only one out of four patients visits the doctor with these rather obviously visible symptoms.” One cannot overestimate the importance of treating the first signs of varicose problems. “It used to be a condition associated with old age, whereas now it is one of the most common symptoms induced by modern lifestyle,” says Kapus. It is increasingly a problem even among teenagers.

Laser treatment is considered the most effective in combating varicose veins, both in terms of curing and preventing recrudescence.

Having said that, the doctor warns against sitting on our laurels after a successful and aesthetically pleasing varicose treatment.

“Varicose veins are a telltale sign that the walls of blood vessels are somewhat weakened, which is a precursor to thrombosis and

embolism. We strongly advise a thorough check-up for our patients with varicose veins.”

Along with a physical examination, the specialists of Dr. Rose Private Hospital use the latest diagnostic techniques – Doppler, duplex ultrasound and various contrast X-ray imaging – to identify the weak spots of the venal system, to come up with a personalized treatment for each patient.

PREVENTIVE MEASURES Regular exercise does help venal circulation, and – a lesser know fact but all the more important – builds more capillaries in order to provide tissues with more oxygen, and evenly distributing the physical burden on the vascular system. On the contrary, once varicose veins have formed, heavy exercise that puts too much strain on the legs is counter-effective.

Swimming, as well as sitting and procumbent gymnastics are more sparing on troubled veins.

The age-old method of alternating hot and cold showers improves circulation, while extended periods of extreme heat – sauna and sunbathing especially – should be avoided, as

they tend to further dilate the veins.

Resting your tired feet propped up is beneficial, so is a gentle massage, moving upwards from ankle to knee, but only above the varicose knots!

Vitamin K is considered a good preventive measure, best consumed in its natural form – spinach, broccoli, kale, lettuce, avocado and kiwi. Cheese and fermented dairy products are also high in vitamin K.

www.drrose.hu