Budapest Business Journal 20/12

BBJ HUF 1250 | €10 | $15 | £7.5

VOL. 20, NUMBER 12

I JUNE 15, 2012 – JUNE 28, 2012

Budapest Business Journal

HUF

83,941

WAS THE MONTHLY SUBSISTENCE LEVEL IN 2011 SEE NEWS

04

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

PICKING UP THE PIECES Although the numbers employed has grown, statistics show, the amount is nearly equivalent to the number of people participating in the government’s public employment scheme, mainly in seasonal jobs. It raises questions about any real improvement in employment. 10-11

NEWS

The unorthodox economy at halftime The government is under pressure both from a weak global economic environment and the difficult legacy of preceding governments; but Fidesz has exacerbated existing problems through mistakes of its own.

09

SPECIAL REPORT

Swiss-Hungarian bilateral business relations Aside from the top quality Swiss products available on Hungarian shelves, the little Alpine country plays a sizable role in Hungary’s economy. How does Hungary benefit from Switzerland, and how much of the stereotype of Swiss thoroughness is true?

16-18

NEWS

Banks’ forint liquidity Forint liquidity in Hungary’s banking sector rose in May from the previous month. Higher liquidity was also reflected in increases in credit institutions’ deposits and holdings of two-week MNB bills.

05

TRENDS

Fewer industrial deals

13

WWW.BBJ.HU

02

Budapest Business Journal | June 15 – June 28

SUBSCRIPTIONS Call +36 1 398-0344, or email circulation@bbj.hu BUDAPEST BUSINESS JOURNAL 1 year HUF 27,500+VAT 6 months HUF 13,750+VAT 3 months HUF 6,875+VAT Newsletters HUNGARY A.M., ENERGY TODAY, REGIONAL TODAY 1 year HUF 179,000+VAT 6 months HUF 104,900+VAT 3 months HUF 58,900+VAT BOOK OF LISTS 2011-2012 BOOK OF LISTS 2011-2012 CD

Tag cloud NEWS

SPECIAL REPORT

BUSINESS

HUF 19,120+VAT HUF 55,900+VAT

MANAGING EDITOR:

Patricia Fischer COPYEDITOR:

Ádám Bartos PROOFREADING:

Robin Marshall EDITORIAL STAFF:

Anikó Jóri-Molnár, Krisztián Kummer, Ádám Mónus, Ágnes Vinkovits, Dániel Csordás (graphic artist) ADVISOR:

András Rác LISTS: BBJ

Research (research@bbj.hu)

NEWS AND PRESS RELEASES: news@bbj.hu DESIGN:

Absolut Design Stúdió (production@bbj.hu) ART DIRECTOR:

Tamás Tárczy CEO:

Tamás Botka (publisher@bbj.hu) OPERATIONS DIRECTOR:

Balázs Román ADVERTISING:

Absolut Media Zrt (hirdetes@amedia.hu) SALES: sales@bbj.hu CIRCULATION AND SUBSCRIPTIONS:

Vanda Taletovics-Vedres (circulation@bbj.hu) PRINTING:

Absolut Print Kft MEDIA REPRESENTATION: Absolut

Media Zrt Address: Madách Trade Center 1075 Budapest, Madách Imre út 13-14., Building A, 8th floor Telephone +36 (1) 398-0344, Fax +36 (1) 398-0345, www.bbj.hu BBJ-PARTNERS

Netherlands Hungarian Chamber of Commerce

What We Stand For: The Budapest Business Journal aspires to be the most trusted newspaper in Hungary. We believe that managers should work on behalf of their shareholders. We believe that among the most important contributions a government can make to society is improving the business and investment climate so that its citizens may realize their full potential.

The Budapest Business Journal, HU ISSN 1216-7304, is published bi-weekly on Friday, registration No. 0109069462.

It is distributed by HungaroPress. Reproduction or use without permission of editorial or graphic content in any manner is prohibited. ©2011 BUSINESS MEDIA SERVICES LLC with all rights reserved.

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

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

03

1 News

BBJ

Hungary at forefront of democratic decline?

07

Six startups come out in the limelight

08

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

FACTS, NUMBERS, SIDES Although well-known sayings state that facts are stubborn things and that numbers don’t lie, it has also been said that there are “lies, damned lies and statistics”, and it is remarkable how many ways the same data can be interpreted. As the afterlife of the latest party preference poll from Medián proves, the number of possibilities only depends on the width of the political spectrum.

Still, there are some numbers that cannot be gainsaid.

The poll of 1,200 voting-age adults carried out between May 18 and 22 and published in weekly magazine HVG on June 7 showed that, across the whole sample, 22% said they would vote for the ruling Fidesz-KDNP parties, down from 26% a month earlier. Support of the socialist MSzP stayed at 16%. Backing for the far-right Jobbik declined from 12% to 11% while green-liberal LMP slipped one point to 5%.

The ruling party alliance has lost over half of its voter base since the government entered office two years ago.

The Medián poll found that a fifth of former Fidesz voters have shifted to other parties while more than a quarter are now fence-sitters. No surprise then that 43% of those asked had no party preference while the electorate willing to cast their ballots has dropped to 38%, reaching a 20-year low record.

The same survey found that brand-new President János Áder is by far the country’s most popular politician with 41 points out of 100. Minister without portfolio responsible for the negotiations between Hungary and the IMF, Mihály Varga, and LMP deputy parliamentary leader Gergely Karácsony, who is quite active in parliament and often takes the floor attacking pro-Fidesz financial oligarchs, came a distant second with 32 points.

Prime Minister Viktor Orbán and MSzP leader Attila Esterhazy each scored 30 points while Speaker László Kövér tallied 20 points and Ferenc Gyurcsány, the former socialist Prime Minister who currently heads the weakly evolving opposition force Democratic Coalition (DK) got 15 points.

Some 76% of those polled believed that Hungary was on the wrong path, and even 38% of Fidesz supporters shared this view.

ORBÁN’S UNCONVENTIONAL POLICIES HAVE CONTRIBUTED TO A RISE IN BORROWING COSTS Népszabadság

June 7, 2012 The government-friendly daily Magyar Nemzet completely ignores the fact that the governing party alliance has lost more than half of its supporters since entering power, and only emphasizes the point that, due to fragmentation of the opposition, Fidesz-KDNP is still more popular than any other political force.

Its article headlined “Fidesz with a confident advantage, Gyurcsány party under parliamentary threshold” also points out that all the pollsters agree that the governing forces top the popularity list. While noting that since Hungary became a democracy two decades ago, none of its successive governments managed to be the most popular force in the middle of the parliamentary period, the author also adds that the country’s current leaders have a good chance to renew their mandates at the elections in 2014. However, “many things can happen in two years”, the article admits at the end.

June 7, 2012 “Closing scissors between Fidesz and MSzP” is the title of an article published in leftwing daily Népszabadság, and the headline tells a lot about the tone of the report.

While pointing out that Fidesz has lost half of its supporters in two years, unlike other papers which stated

that opposition forces could hardly benefit from the government’s falling popularity, Népszabadság emphasizes that most of those discouraged by the FideszKDNP’s way of doing politics now favor the far-right Jobbik instead.

June 7, 2012 In a refreshing exception, online financial portal Portfolio.hu focuses on the facts without favoring any political side. The article takes the average of recent data provided by the three major polling companies, namely Medián, Tárki and Ipsos, as the basis of its analysis on the evolution of public opinion tendencies since Fidesz-KDNP won its two-third majority in Hungary’s Parliament two years ago.

The results of this synthesis are laid out right at the very beginning, in the lead of the article: pollsters show no clear trends, and the only thing that seems certain is that the governing coalition “has suffered a massive loss of popularity and that the camp of undecided voters has grown considerably”.

The portal’s conclusion is that the reason for the lessening popularity of the government is the government itself.

While concurring that “the opposition parties have reaped almost no benefit” of the government’s decreasing popularity, Portfolio. hu takes a look at the combined approval rating of two

left-wing opposition parties – considering them under pressure to team up due to the new single-round election system that the government launched recently – the socialist MSzP and the green LMP, and points out that support for the two parties has exceeded that of Fidesz for the first time.

However, regarding the popularity of any possible election alliance, the article admits that, “The interpretation of this particular finding is limited since ‘cross-rejection’ between the three main parties is high, and it is therefore hard to see how alliances could be forged.” What Portfolio.hu means by this is that a huge percentage of LMP voters are probably not only against Orbán and his cabinet but also oppose the MSzP, the party which had practically two parliamentary cycles to lead Hungary onto the path of economic upturn but produced

decidedly mixed results.

Still, the article says that “the key question of the near future may be if those who have grown disappointed in the cabinet will pick a new favorite or return to the bosom of Fidesz.”

June 7, 2012 News agency Reuters remains more or less unbiased in its report.

However, after introducing the results of Medián’s latest survey and briefly translating the numbers to words, saying that even with the huge drop, the “conservative Fidesz-KDNP alliance remained the most popular political force in Hungary,” the author adds a comment about Prime Minister Viktor Orbán’s sharply decreasing number of supporters.

“Orbán’s unconventional policies have contributed to a rise in borrowing costs, the Hungarian forint is vulnerable to shocks from the euro zone crisis, and the economy is headed into another downturn following a steep recession in 2009.” ■

FOR RENT!

In XII. district, Hangya utca, with full Budapest panorama 63 sqm 1 bed room apartment.

Terrace, sauna, garage, lift, garden. Eco house.

Rent: 700€/month.

Call: 70 452 1260 at any time

04 1 News BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

bi-weekly

QUOTE OF THE WEEK

The crisis is over.

NATIONAL ECONOMY MINISTER GYÖRGY MATOLCSY IN AN INTERVIEW PUBLISHED ON CNN’S WEBSITE

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

So far 155 Hungarian athletes have qualified for the 2012 London Olympic Games (pictured, shot-putter Anikó Márton trains in the southern Hungarian city of Szeged). Zsolt Borkai, the head of the Hungarian Olympic Committee (MOB), has said he hopes Hungary can do at least as well as at Beijing (10 medals in total three gold, five silver and two bronze), while returning from London with more than three golden medals would make him very happy. The MOB is managing a budget of more than HUF 2.1 billion this year.

ECONOMY GDP FELL 0.7% YR/YR IN Q1 Hungary’s GDP fell 0.7% yr/yr in Q1 2012 according to unadjusted figures and was down a seasonally and calendaradjusted 1.2% from the fourth quarter last year, the Central Statistics Office (KSH) said in a second reading. The unadjusted yr/yr was the same and the quarter-on-quarter drop was revised down from

1.3% in a first reading released on May 15. Q1 GDP fell 1.2% from a year earlier according to workday-adjusted figures, slightly less than the preliminary 1.3% decline. In a quarterly comparison, GDP showed no growth now for the fourth quarter in a row, with a 0.2% drop in Q2 2011, and no change both in Q3 and Q4 last year, the fresh revisions show.

The Q1 yr/yr contraction followed an unadjusted 1.4% and a workday-adjusted 1.5% increase in Q4 last year. Q1

saw the first yr/yr GDP contraction since Q4 2009, which ended five quarters of decline.

Hungary’s GDP growth rose 1.7% in 2011.

TRADE SURPLUS NARROWS Hungary had a €396.3 million trade surplus in April, down from €635.9 million in March and down from €424.8 million in April 2011, preliminary figures published by the Central Statistics Office (KSH) show.

In euro terms exports dropped for the third month in a row

CPI SLOWS TO 5.3% IN MAY

analysts had put May CPI at 5.8%. Hungarian analysts estimated a headline figure of 5.6%. The headline figure was lifted by a 7.7% increase in prices of “other goods” which includes vehicle fuel and a 6.9% rise in household energy prices. Alcohol and tobacco prices were also up a sharp 13.2%. Food prices rose 4.1% and service prices were up 3.8%, but consumer durable prices edged down 1.3%. In a month-on-month comparison, consumer prices fell 0.2% on a sharp 1.4% fall in prices for the category that includes vehicle fuel and a 0.3% decline in consumer durable prices.

Food prices were up 0.3% and household energy prices rose 0.1% but service prices dipped 0.1%. Year-on-year core inflation, which excludes volatile food and fuel prices, was 4.8% in May. The index was 3.1% excluding the effect of tax changes and 5.1% calculated using a spending basket for pensioners. CPI harmonized for better comparison with other European Union members was 5.4%.

Central Statistics Office (KSH) show. The subsistence level for households with two adults between the ages of 15 and 74 and two children was HUF 243,429 per month. The subsistence level for a two-pensioner household was HUF 130,109.

The level for a pensioner living alone was HUF 75,547. All of the subsistence levels were up 6.6% from the previous year.

The 2011 sample represented 501,000 households with 1.140 million people and HUF 77.33 billion consumer spending a month, KSH said. About 31% of the expenditures of households in the sample go toward food, and about the same is used for living costs, of which energy costs make up almost 60%. Transport costs account for 8% of expenditures, healthcare and sanitary costs for 7% and telecommunications for 6%. Clothing and education spending each account for a little less than 3% of the total and entertainment makes up less than 4%. Spending on food did not change compared to 2010, implying cuts in spending on other items.

Consumer prices in Hungary rose 5.3% year-on-year in May, slowing from a 5.7% increase in April, the Central Statistics Office (KSH) said. London

SUBSISTENCE LEVEL CLIMBS IN 2011

GEN GOV’T DEFICIT AT HUF 344.1 BLN

The subsistence level in Hungary rose to HUF 83,941 per month in 2011, data from the

Hungary’s cash flow-based general government deficit, excluding local councils, reached

and imports dropped for the second consecutive month.

Exports fell 3.9% in euro terms from 12 months earlier to €6.11 billion in April after a 3.1% drop in March. April imports reached €5.71 billion, dropping 3.6% in 12 months after edging down 0.4% in March. The trade surplus for January-April came to €2.142 billion, down from €2.554 billion a year earlier. Four-month exports fell 1.5% to €26.08 billion and imports were unchanged at €23.94 billion. In 2011 Hungary’s exports rose 11.8% and imports rose 10.8% from 2010. The drops in euroterm exports and imports came against double-digit growth experienced until May 2011. Euro term trade growth slowed considerably later last year. Exports fell in December 2011 for the first time in two years. The import drop in February was the first yr/yr decline registered since December 2009. KSH will publish a second reading of the April trade figures on July 3.

Photo: MTI / Tibor Rosta

Optimism but moderate hopes for Hungary in 2012 London

1 News 05

BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

HUF 344.1 billion at the end of May, or 59.7% of the full-year target, the National Economy Ministry said. The general government ran a HUF 115.9 billion deficit in the month of May. The central budget gap came to HUF 132.6 billion and the separate state funds had a HUF 7.4 billion deficit, but the social insurance funds had a HUF 9.3 billion surplus last month. Adjusted for oneoff items, the ministry said the deficit came to HUF 345.8 billion at the end of May, or 37.7% of the full-year target. In the five months to the end of May, the central budget deficit reached HUF 403.6 billion and the gap in the social funds came to HUF 2.3 billion, but the separate state funds had a surplus of HUF 61.8 billion.

The central budget deficit widened by more than HUF 90 billion in May from a year earlier as central budget revenues rose almost HUF 97 billion and central budget expenditure rose nearly HUF 190 billion yr/ yr. The revenue rise mainly reflected rising tax revenues, the ministry said, citing increased revenues from corporate tax, the tax on company cars, VAT, and excise duties and personal income tax. Tax hikes explain part of the rise.

MNB bills, it added. The swap claims fell HUF 154.2 billion to HUF 11.8 billion in May

EXCESSIVE DEFICIT PROCEDURE EXPECTED TO BE LIFTED NEXT YEAR

STATE TREADS CAUTIOUSLY IN TAKING DIVIDENDS

The European Union’s excessive deficit procedure against Hungary could be lifted in the spring of next year, the representative of the European Commission in Hungary Tamás Szűcs told a parliamentary committee. National Economy Ministry state secretary Zoltán Cséfalvay told the meeting of Parliament’s European Affairs Committee that Hungary would “technically” meet the criteria for the procedure to be lifted this year, but the procedure can be formally ended only after an assessment of a closed fiscal year.

Parliament is expected to vote on the key figures of next year’s budget before the summer recess, which will support the process, he added.

The state was highly selective when taking decisions on withdrawing dividends from state-owned companies this year, business daily Világgazdaság wrote. The state took HUF 10 billion from the HUF 46 billion after-tax profit of the Hungarian Electricity Works Zrt (MVM), less than the HUF 12.5 billion it took last year, the paper said noting that MVM itself took out almost all the profit as a dividend from its own units. The state pocketed all of the HUF 7.6 billion profit of state-owned lottery company Szerencsejáték Zrt. As a 24.6% shareholder the state of Hungary is also due about HUF 11 billion from Hungarian oil and gas company MOL Nyrt’s HUF 45 billion dividends. The state bought a 21.2% stake in MOL from Russian peer Surgutneftegas in July 2011 for €1.88 billion or about HUF 560 billion. Among the bigger stateowned companies the state left the unusual profit earned by state-owned railway company MÁV Zrt in the company and it took no profit from GySEV Zrt, owned jointly with the Austrian state. Neither did it take a dividend from Magyar Posta Zrt or the regional Volán bus companies.

BUSINESS BANKS FORINT LIQUIDITY RISES Forint liquidity of Hungary’s banking sector rose in May from the previous month as a result of the significant decline in central bank swap claims on lenders, the National Bank of Hungary said in a preliminary statistical balance. The increase in liquidity was partly offset by a rise in Treasury items, the MNB said. Higher liquidity was also reflected in increases in credit institutions’ deposits and holdings of two-week

BANK LEVY TO PHASE OUT NEXT JAN Hungary’s extraordinary bank levy could be completely phased out in 2013, earlier than planned, Prime Minister Viktor Orbán told business leaders in answer to a question by a Raiffeisen Bank official in Vienna. It could easily happen that the extraordinary levy will be phased out not only partially but completely on January 1, 2013, and a duty on financial transactions will be introduced instead, the Prime Minister said, adding that details of the transaction duty are still being discussed.

The extraordinary bank levy is scheduled to be halved next year under a December agreement between the Hungarian government and banks. The levy was introduced as a temporary measure in 2010. Responding to the bank official’s critical remark, Orbán agreed that the size of the tax was brutal. The financial transaction duty is expected to generate large revenue that, if it materializes, will be spent to cut income and social taxes, to improve competitiveness, Orbán said.

ABOUT HALF OF LAID OFF NOKIA WORKERS FIND NEW JOBS About half of the 1,200 peo-

ple recently laid off at Finnish handset maker Nokia’s plant in the Hungarian city of Komárom have found new work, regional daily Kisalföld reported. The chairman of the plant’s labor council Zoltán László said workers had found jobs at German carmaker Audi’s plant in nearby Győr and at a chemicals plant in Tatabánya. A number also went to work for Austrian automotive industry suppliers, he added. Nokia laid off the 1,200 workers as the first phase of a headcount reduction that will affect 2,300 people. Nokia announced the layoffs earlier as part of a capacity relocation to Asia.

GANZ ENGINEERING ORDER STOCK JUMPS TO $50 MLN The stock of orders of Hungary’s Ganz Engineering Kft has risen by a factor of seven in the past half year and now reaches about $50 million, managing director Attila Szitár-Csanádi said. About $30 million of the order stock is from partners in Russia, but the company hopes to get some big orders in Hungary too, he said, noting the possibility of participating in the construction of smaller hydroelectric plants and the planned expansion of the Paks nuclear power plant.

Order stock was boosted significantly by the acquisition of a 51% stake in the company

by Atomenergomash, a unit of Russia’s Rosatom, in 2008.

TWO BID FOR MALÉV FLIGHT RIGHTS Hungary’s Air Travel Authority has received two offers for former national carrier Malév Zrt’s flight rights to destinations outside of the European Union, the authority’s homepage shows. The authority has received one offer for Malév’s rights to operate flights between Hungary and Israel and another for rights to operate flights between Hungary and Ukraine. The authority is accepting applications for the rights to the Israel flights until July 6 and for the rights to the Ukraine flights until July 4. Malév’s commercial flights were grounded at the end of February when it went bust.

OTP TO EXPAND IN SERBIA Hungary’s OTP Bank Nyrt is preparing to expand its activities in Serbia and make an acquisition, news agency Tanjug reported deputy CEO László Wolf as saying. Wolf said talks on the acquisition of a Serbian bank were underway, but declined to reveal the name of the target. He added that OTP Bank wants to buy a Serbian bank in which there is no state-owned stake. The liquidity of OTP Bank’s Serbian unit has been raised recently, and this year the focus will be

on getting new clients with attractive products, he said. He added that the unit faces many challenges, such as a 12% weakening of the dinar since the start of the year. Lending growth is expected to be limited as Serbia’s GDP is not seen expanding this year and investments are likely to be flat.

The Greek crisis could have a negative effect on Serbia, Wolf added. OTP Bank Serbia deputy-chairman Ivan Radojcic said the bank would focus on financing for SMEs in the coming period, but the farm sector also offers potential to increase its market share. OTP bank entered the Serbian market with the purchase of Niska Bank in 2005. It acquired Zepter Bank and Kulska Bank in 2006. The units were merged into OTP Bank Serbia in 2007. It racked up a HUF 6.3 billion loss in 2011.

MOL PAYS DIVIDEND Hungarian oil and gas company MOL Nyrt said the dividend due shareholders on 2011 profit comes to HUF 454.54 per share. Shareholders approved a proposal to pay a HUF 45 billion dividend from 2011 profit at an annual general meeting in April.

MOL last paid a dividend on 2007 profits. The dividend is in line with MOL’s earlier announced policy of paying shareholders 40% of earnings, excluding one-off effects.

Shareholders at the AGM approved MOL’s consolidated IFRS report showing net income of HUF 154 billion and total assets of HUF 4,993 billion. Calculated under Hungarian Accounting Standards, the company had net income of HUF 150 billion and total assets of HUF 3,168 billion.

LUK SAVARIA SIGNS GRANT CONTRACT FOR INVESTMENT LuK Savaria Kft, the Hungarian unit of German automotive industry supplier Schaeffler Group, has signed a contract for a HUF 1 billion grant from the New Széchenyi Plan to support a HUF 15 billion investment at its plant in Szombathely. LuK Savaria is building a 20,000sqm production hall and will move in new equipment by the end of 2013, said managing director Michael Reining. The company plans to make 200 new hires in 2012 and another 500 by the end of 2014. It is looking for lathe workers, tool makers and metal workers this year, but will also hire mechanical engineers, Reining said.

HB REAVIS DEVELOPS IN BUDAPEST Slovakian property developer HB Reavis Group has announced the start of a €33 million development in Buda-

pest, to be completed in 2014.

The new building will have 19,000sqm of office space, 700sqm of ground floor commercial space, with a 900sqm restaurant and café. The underground garage will have space for 353 cars. The portfolio of HB Reavis Group now includes 19 completed properties. It has invested €800 million in the region since it was founded in 1993.

POLITICS NEW AMENDMENTS TO CENTRAL BANK ACT Hungary’s government will probably withdraw a bill on amendments to the central bank act and submit a new one, parliamentary group leader of governing party Fidesz Antal Rogán said in daily Népszabadság. If the government redrafts the bill, Parliament could vote on it as soon as next week or the week after that, Rogán told the paper. The amendments and their perceived effect on the independence of the National Bank of Hungary have been a key issue in preparations for negotiations on precautionary financial assistance Hungary is seeking from the International Monetary Fund and the European Union. Mihály Varga, Hungary’s chief negotiator for the financial assistance told Népszabadság that the government could even accept the European Central Bank’s concerns voiced over the amendments to the central bank act.

He added that talks with the ECB on the use of central bank reserves are ongoing.

NEW LAND ACT DISCUSSIONS IN THE FALL Parliamentary debate of a farm ministry proposal on a new Land Act is now expected to be delayed until Parliament’s fall session from the end of June as originally scheduled, as the government has extended the time for consultations on the draft proposal. A key element of the draft is the government’s intention to protect farm land from domestic and foreign speculators, Minister for Rural Development Sán-

dor Fazekas told journalists at a press briefing. Changes in farm land ownership will have to be approved by the authorities, which will give the Hungarian state a major role on the domestic market for farm land, as similarly happens in other EU member states, Fazekas said. Under the proposal, farms will be classified based on the size of the land, with varying rules. Licensed traditional small-scale farmers will farm on an area of less than 50 hectares, family farms on land between 50-500 hectares and large farms on an area of more than 500 hectares. The upper limit for the area of land that can be leased is to remain 1,200 hectares. In order to prevent bogus contracts, there will be a law allowing land owners to declare the area of land they own by a specified deadline. Those who fail to make the declaration could have their land taken into state ownership, and criminal prosecution of fraud cases would also be possible.

DOMESTIC GOV’T COULD CHANGE VOUCHER CARD RULES BASED ON PROPOSALS The government will prepare changes to regulations on the issue and use of SzÉP cards, a government-initiated catering and recreation voucher system, after reviewing proposals submitted so far this year, National Economy Minister György Matolcsy said in a written answer to a question posted on the website of Parliament. The government is considering allowing cardholders to pay tourism tax with the card, Matolcsy said. The 1.5% commission on the electronic cards is well under that of the commission on the vacation vouchers they replace, he said.

The system is being fine-tuned to bring out its advantages, he added. About 530,000 SzÉP cards were issued by the end of April, topped up with more than HUF 28 billion. The cards, issued by three companies, are accepted at about 23,000 locations. ■

EXCEPTIONAL OPPORTUNITY – FLAT FACING THE CENTRAL MARKET HALL FOR SALE! Recently renovated 110 sqm flat at Csarnok tér (to be reconstructed in the near future) is for sale by owner. Central location, in the proximity of Váci and Ráday utca, three universities nearby, excellent travel services!The flat is of high standards and suitable for living, office or investment. Rooms are light and sunny with large windows overlooking the square. Moving in is possible on short notice.

GUIDE PRICE: HUF 34.9 MILLION

INQUIRIES AT +36 30 520 5340

06 1 News BBJ

energy

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

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

RUSSIAN ENERGY MINISTRY MAY PROPOSE CHANGES TO GAS TAX Russia’s Energy Ministry may propose a new formula to calculate the natural-gas extraction tax that would take into account the fuel’s market price and the complexity of the fields, RBC Daily reported on June 10, citing an unidentified gas industry official. The government is reviewing a planned jump in the extraction tax for Russia’s gas-export monopoly OAO Gazprom and independent producers that was announced in May, Deputy Prime Minister Arkady Dvorkovich said last month.

ROMANIA SHALE GAS, MINE PROJECTS ON HOLD IN 2012, PM SAYS Romania wants to put shale gas exploration and goldmining projects on hold until after a general election this year as it balances improving environmental rules with energy needs, Prime Minister Victor Ponta said. Ponta’s government, backed by a coalition of Social Democrats and Liberals, will attempt to assess environmental conditions and go over Chevron Corp’s plan to explore

regional LOCKHEED, ICCO TO INVEST IN ROMANIA Lockheed Martin Corp, the world’s largest defense company, plans to invest about $15 mln with a Romanian company in a renewable energy project, Mediafax reported.

The two companies want to install photovoltaic panels in an industrial park in the city of Brasov and create the country’s “first smart grid” private project, the Bucharest-based news service said, citing Calin Costan, chairman of ICCO Group, the Romanian company involved in the project.

EU STATES PREPARE RULES FOR SUSPENDING VISA-FREE TRAVEL European Union governments would be able to suspend passport-free travel in parts of Europe for as long as two years under regulations proposed to address concerns over large-scale immigration. At a meeting in Luxembourg, EU home affairs ministers agreed on new rules that would allow countries to reintroduce border controls if one state persistently failed to stop illegal migrants from entering Europe’s Schengen zone. Such a decision would have to follow

for shale gas in the country should it win elections, said Ponta. “I want to seriously discuss this issue next year, while keeping environment protection in mind, on the one hand, and Romania’s interest in ensuring additional energy resources, on the other hand,” Ponta said in a June 6 interview. Romania’s month-old government called for an immediate moratorium on shale-gas extraction in its governing program until European studies show the impact of hydraulic fracturing on the environment.

POLAND TO DISCUSS U.S. LIQUEFIED GAS EXPORTS Poland, which is building a liquefied natural-gas terminal to lower dependence on fuel from Russia, is interested in shipments from the United States, according to Ilona Antoniszyn-Klik, the nation’s deputy economy minister. U.S. energy producers plan to sell gas overseas after advances such as horizontal drilling and hydraulic fracturing led to record production and a supply glut. Poland buys about two-thirds of its gas from Russia’s OAO Gaz-

prom, and an LNG terminal built on the Baltic Sea coast should be ready by 2014. “We consider all sources of energy, because we want to have an energy mix which consists of different suppliers,” Antoniszyn-Klik told Bloomberg in an interview on June 6.

GAZPROM TO ADVANCE UKRAINE $2 BLN FOR GAS TRANSIT Russia’s gas monopoly Gazprom has agreed to pay $2 bln in advance to Ukraine in order to finance purchases of gas and secure its transit to Europe for the coming winter, Reuters reported. Previous disputes over gas prices between Kiev and Moscow have led to Russian gas supply stoppages to Europe. “Without a doubt, this agreement is very important to secure the pumping of gas into underground storages in Ukraine in necessary volumes in order to meet peak demand in 2012/2013,” Gazprom’s CEO Alexei Miller was quoted by Reuters. Russian gas transit through Ukraine to Europe rose to 104 bcm in 2011 from 95.4 bcm in 2010, but it has been falling this year due to lower demand and as Rus-

sia redirects some flows via the 27.5-bcm-a-year Nord Stream pipeline on the bed of the Baltic Sea.

AZERBAIJAN STILL BACKS TANAP AFTER NABUCCO REPORT, TURKEY SAYS Turkey, pushing the planned Trans-Anatolia Pipeline to carry Caspian natural gas to Europe, said Azerbaijan remains supportive of the project even after reports that alternative routes were still being considered. “President Ilham Aliyev and our prime minister, Tayyip Erdogan, have the political will to implement the project,” Turkish Deputy Energy Minister Murat Mercan told reporters in Baku, on June 6. Mercan said he hoped talks would be completed by the end of the month. Azerbaijan and Turkey signed a memorandum of understanding to build the 2,000km (1,240 mile) link in December. Even so, the proposed Nabucco project, an alternative pipeline via Turkey, remains an option, the deputy head of the Azeri state oil company, Elshad Nasirov, told Die Presse newspaper in May. The State Oil Co of Azerbaijan (SOCAR) holds

80% of the TANAP project, estimated to cost $5-7 bln.

Turkish state pipeline company BOTAS and energy producer Turkiye Petrolleri AO hold the remaining shares.

RUSSIA’S ROSATOM EYES HUNGARY NUCLEAR PLANT TENDER Russian state-owned nuclear company Rosatom is keen to expand Hungary’s Paks nuclear power plant, including construction and financing of new power blocks, a top Rosatom official was quoted as saying in the business daily Napi Gazdaság. Rosatom would be willing to fully finance the new construction, which is expected to cost about HUF 3 tln ($12.4 bln), the paper cited Rosatom Deputy Director General Kirill Komarov as saying. Hungary needs big new electric plants to augment an aging fleet of power stations and the government is expected to issue the construction tender this year for up to 3,000 megawatts in new nuclear power capacity at the Paks site. The current plant at Paks uses four Russian-made VVER reactors for a total capacity of 2,000MW and produces

about 40% of the country’s electricity. Paks CEO István Hamvas told news agency MTI that he expected at least five participants at the upcoming tender, including Rosatom, as well as Areva, Westinghouse Electric and Japanese and South Korean competitors.

ITALY REVIEWS OFFSHORE DRILLING BAN Italy is expected to annul a ban on offshore oil and natural gas drilling enacted in the wake of the 2010 oil spill in the Gulf of Mexico, an official said on June 4. Before the Deepwater Horizon tragedy in 2010, the Italian government allowed international oil companies to drill off the country’s coast.

Senator Francesco Ferrante told the Platts news service that the plans were risky.

“Not only are they not particularly beneficial economically speaking, but they also pose significant environmental risk,” he was quoted as saying. Ferrante explained that lifting the ban would give drillers permission to operate in environmentally protected areas. ■

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

careful monitoring of the external borders for at least three months that revealed a “serious threat to public policy or internal security” in the EU. Checks between the country failing to meet standards and other EU states could be put in place for six months at a time, with possible extensions up to two years. Other EU states would have to agree before passport controls could be brought in.

The EU’s border agency Frontex says it recorded more than 60,000 migrants crossing into Greece last year illegally, mostly people from Afghanistan, Pakistan and Bangladesh.

EASTERN EUROPE TO SEE DECLINE IN FDI IN 2012, INSTITUTE SAYS Inflows of foreign direct investment to the 22 countries of Eastern Europe will fall this year as growth slows in Western Europe, according to the Vienna Institute for International Economic Studies. “On average, FDI flows are forecast to be 3% lower than in 2011,” the institute said in a report on June 6. “Expectations are supported by plummeting first-quarter FDI flows and greenfield projects.” While the

euro region narrowly avoided recession in Q1, latest data suggest its economy is shrinking again. The projected decline in FDI in Eastern Europe this year comes after investment rose 26% in 2011 to €96 billion ($120 billion), which was still below the peak years for the region of 2006-2008, the institute said. “Large countries like Russia, Turkey and Kazakhstan received the major part of the recent FDI boom, though Hungary, Serbia and Slovakia also significantly improved their positions,” according to the report. Financial flows that are used for tax optimization have become a major part of investment, the institute said.

FOREIGN BANKS WITHDRAW MONEY FROM POLAND In the last three quarters, the value of funds held by the Polish arms of foreign banks has dropped by PLN 15 bln (€3.48 bln), according to Polish daily Puls Biznesu. That figure represents 8.6% of the total foreign involvement in the Polish banking sector. Although not a mass withdrawal, the Polish Financial Supervision Authority (KNF) is reportedly

troubled by the trend. If not for the KNF’s actions, the foreign owners would probably have withdrawn even more from Poland, the daily wrote.

CZECH GOV’T PLANS TO OVERHAUL OF PUBLIC SECTOR TO SAVE MONEY The Czech government is planning an overhaul of the public sector, which would save state coffers up to CZK 12 bln (472.25 mln) in 2014 and close to CZK 25 bln the year after, Radio Praha reported on June 6. Individual ministries have until mid-July to revise their expenses and say where money could be saved. A merging of ministerial agendas is not being ruled out. Deputy Prime Minister Karolina Peake has been commissioned with drafting a proposal for the respective changes by the fall.

ITALIANS BUY CROATIAN SISAK STEEL MILL Italian company Acciaierie Bertoli Safau (ABS), a division of the large industrial holding company Danieli, is the new owner of the troubled Sisak steel mill in Croatia after signing a contract in Zagreb on June 4, it was announced on

the website of former owner American Commercial Metals Company (CMC) website.

CMC has announced that Danieli purchased the steel mill for $30.4 million, but it did not buy the complete steel mill.

Specific parts were removed for sale and CMC is still seeking a buyer for them. CMC stated that the conditions offered by ABS were better than competing bids from Slovak company Podbrezove CIOS and Croatian businessman Peter Pripuz.

STALLED ROSIA MONTANA GOLD-MINE PROJECT MAY START THIS YEAR Romania’s economy minister is convinced that Gabriel Resources’ stalled Rosia Montana gold-mine project will start this year, Mediafax reported.

Daniel Chitoiu told reporters that a political decision on the project might be taken by the end of this year, adding that mining will continue throughout Romania in an efficient manner, without causing losses to the state, Mediafax quoted Chitoiu. A court ruling in May against zoning plans submitted by the firm may further delay the process. Following that ruling, Gabriel Resources said it

was willing to secure economic benefits to the tune of $30 bln for Romania if it approves the gold mine project. The Canadian firm, which owns 80% of Rosia Montana Gold Corporation, with the Romanian state holding the balance, plans to extract some 300 tons of gold and 1,600 tons of silver over 16 years. Investment is expected to total $1.7 bln.

POLISH PRESIDENT SIGNS CONTROVERSIAL PENSION REFORM INTO LAW President Bronislaw Komorowski has signed into law a controversial bill on increasing the age at which Poles retire to 67, despite massive public opposition to the reform and a string of protests by trade unionists. Increasing the age at which Poles retire is a policy priority for Prime Minister Donald Tusk, who has argued the country cannot afford the current system and needs to cut state debt and maintain investor confidence.

The new law would see the retirement age gradually rise to 67, by 2020 for men and by 2040 for women. Until now, women have been able to retire at 60 and men at 65. ■

1 News 07

BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

Hungary at forefront of democratic decline?

Transparency International issued its report on corruption risks in Europe on June 6, in which the organization draws attention to worrisome tendencies. The report warns that the business sector can significantly influence governments’ operations, thus undermining Europe’s economic stability. Hungary did not escape criticism.

GOVERNMENT’S REACTION In a prompt reaction to the TI report, the Public Administration and Justice Ministry said that Hungarian governments in the past 20 years have not done as much in preventing and reducing corruption as the government currently in office has in the past two years.

“It would have been far more justifiable to express concern about the state of corruption in Hungary during the period between 2002 and 2010 when a series of high-profile corruption cases involving the effective assistance and participation of senior government officials and

Investments in Serbia - a new opportunity?

It may seem strange to write about Serbia in the Budapest Business Journal, but we believe that the Hungarian capital will have an important role to play in the region, in the same way that the Budapest office acts as the regional ‘hub’ for the international law firm Gide Loyrette Nouel. As we keep a close eye on important economic and political events in the region and their impact on the legal and business climate, we take a closer look at Serbia and the general and presidential elections held in May that attracted the attention of the business community. Below is how we understand the country at this turning point.

François Ana Maric PARTNER d’Ornano MARIĆ – MALIŠIĆ – DOSTANIĆ O.A.D.

BBJ BBJ

A press release by Transparency International (TI) states that the report is in line with the organization’s previous study on Hungary’s national integrity. Both the recent and the previous study claim that Hungary’s political and economic crises are symptoms of a structural weakening of the country’s checks and balances. The reports warn that the inability of oversight institutions to limit the power of the government could allow private interests to prevail over public interests, with new forms of corruption compromising key functions of the state.

One of the particular concerns of the European report of TI is that in some countries of Central and Eastern Europe – particularly the Czech Republic, Hungary and Slovakia – there has been a rolling back of positive progress on anti-corruption since accession to the EU. The European study also highlights that there are serious deficiencies in party financing systems in half of the countries examined, including Hungary.

Rules on campaign financing do not ensure transparency and accountability, with the result that political parties finance their operations though funding obtained from opaque, nonidentified sources, TI says.

In the business sector, the economic crisis and the fast paced legislative process have created an even more chaotic environment for companies than that was earlier the case; companies face a heavy regulatory burden and unpredictable state interventions. High corruption risks are present in common business transactions such as bankruptcy, liquidation, procurements, and obtaining official permits.

On a positive note, however, Hungary is mentioned as one of the six countries in Europe that have dedicated whistleblower legislation (only the Netherlands, Norway, Romania, Switzerland and the UK have also introduced such legislation).

[ EXPERT OPINION ]

RESIDENT PARTNER GIDE LOYRETTE NOUEL BUDAPEST

local political leaders brought shame to the country,” the ministry claimed in its written response.

The ministry also said that the current administration has implemented the “most intensive series of anti-corruption measures of the past 20 years”, citing that the government has made the law on public procurements more stringent.

ANTI-DEMOCRATIC TRENDS But the TI report was not the only one recently that led to the government raising its voice. The United States’ Freedom House come out with a press release saying negative developments in Hungary (and Ukraine) is at the forefront of an antidemocratic trend in Central and Eastern Europe that raises serious questions about the durability of the European Union’s young democracies, as well as prospects for aspiring members. The report warns of rising antidemocratic trends in Hungary and Ukraine that have potential to take root elsewhere in the region.

“Hungarian Prime Minister Viktor Orbán and Ukrainian president Viktor Yanukovych, under the pretext of so-called reforms, have been systematically breaking down critical checks and balances,” said David J. Kramer, president of Freedom House. “They appear to be pursuing the ‘Putinization’ of their countries, which is ironic, given that in Russia itself Putinism has been largely discredited over the past year, as ordinary Russians increasingly seek guarantees of government accountability and transparency.”

The report notes Hungary’s year-on-year performance as the most glaring example of democratic decline among the newer European Union members, where the combination of weak traditions of democratic practice, resilient networks of corruption and clientelism, low levels of public trust, and shaky economic conditions have hampered the achievement of indelible democratic reforms. Five other EU member states in the region – Bulgaria, the Czech Republic, Lithuania, Romania, and Slovakia – have also experienced net declines over the past five years, it said. ■

2012 is often said to be a very important year for Serbia. It should show whether the pace along Serbia’s EU path will be stepped up or slowed down, whether the newly elected President, Tomislav Nikolic will continue reforms or decide to turn the country in a different direction, whether the Kosovo issue be settled or escalated. With such important topics on the table, some may stop to argue the merits of these dilemmas, while others are entering this market, or further investing in it, without hesitation.

In the past decade, Serbia has taken many steps towards the modernization and reform of its economic and political system. It was the last country to break loose from its excommunist manacles and it therefore does not come as a surprise that the serious difficulties of transitory times are yet to be overcome. Questions such as judiciary and fiscal reform, administrative efficiency and corruption remain in the spotlight.

And yet, with the recovery of Serbia’s international reputation and its strong commitment to establishing economic links with its neighboring countries and the EU (Stabilization and Association Agreement signed, status of EU candidate country granted), Serbia remains a reasonable point of entry into the Balkans region.

Many successful reforms have been implemented. Those of note have taken place in the financial sector (banking, insurance and securities market), now governed by sound policies and the professionalism of the central bank, bringing stability and peace of mind to many investors. The day-to-day operation of companies in Serbia has been greatly simplified with a new set of company-related legislation properly implemented and many registries now available online (company, pledge and leasing registry etc.). The real estate cadastre, which canvasses the entire country, is being finalized and will be available online shortly. Another success story is that of debt recovery and execution of court and arbitral awards, with the recent introduction of a new set of laws in bankruptcy, liqui-

EXCLUSIVE CORRESPONDENT LAW FIRM OF GIDE LOYRETTE NOUEL

dation and execution procedures, including the introduction of notaries and professional executors. With these changes, the timeline of debt recovery should be slashed from years to weeks, which will strengthen the position of creditors and change the system – after many decades – from a debtor-friendly to a creditor-friendly environment.

All these structural reforms should lead to a more stable and reliable business environment and reduce the gap between reality and the expectations of the business community. It should ultimately attract further foreign investment, which is absolutely necessary if Serbia is to preserve macroeconomic stability and its current industrial and GDP growth rate.

With this in mind, big projects and infrastructure investments are currently in the spotlight. They should bring important foreign investments into the country and modernize its outdated infrastructure: motorways connecting to Hungary, Bulgaria, and Montenegro are currently being built or tendered; the inner country road and rail map is undergoing serious change, with a metro system being built in Belgrade with the assistance of the French government; a Danube rehabilitation project is underway; and renewable energy sources are seeing a significant inflow of investment. Another asset is certainly the possibility of Serbia obtaining EU pre-accession funds, with many projects being considered with this in mind such as logistic centers, ports, energy facilities, and irrigation projects in the Vojvodina province.

It remains to be seen whether this opportunity will be seized to its full extent.

www.gide.com

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

08 1 News BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

Six startups come out in the limelight From an overwhelming 125 applicants, six got the chance to present their projects at Colabs’ Demo Day on May 30, showing off the many sides of the startup ecosystem.

By the time the presenters stepped on the podium, they had also gathered a total of HUF 100 million in seed capital.

BBJ ANIKÓ JÓRI-MOLNÁR

mobile apps to manufacturing, 125 startups applied, six of which were selected for further elaboration of their projects. Colabs took upon itself the money hunting and selection process, provided the seven mentors for the 15-week seed program and the seven investors to pitch the projects to on Demo Day. “We stood for value creation, a mediator between companies and investors, before a commitment – this is a new model on the Hungarian market,” Zoltán Kovács of Kirowski, one of the mentors, said in his opening speech.

So here are the six; watch for a success story in the near future.

The closing event of the Colabs seed incubation program, Demo Day aimed to present what can be achieved in three months with a bunch of enthusiastic people and their ideas waiting to become a reality. From

BANDALIZER Founded by developer and musician Péter Fabók, Bandalizer brings Google-like analytics to the masses of startup bands. Fabók started out wishing his favorite online music promoting and vendor site, Bandcamp,

INTERNFISH Tamás Schleer and his team target a field that has been abandoned by the youth of today: future planning.

While talent hunting is getting more and more serious every day and in some sectors even freshmen are fought over, students are usually lost among the opportunities or not aware of the full spectrum. Google

[ EXPERT OPINION ]

Early-stage strategies to establish growth: globalization vs. localization NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

speaking countries.

MIKLÓS BÁN ceo espell translation and localization

As a successful developer you must be familiar with co-working and information exchange among peers from all around the world. The lingua franca is typically English. At a certain point, however, you have to decide whether speaking your users’ language is simply a communication issue or part of your product itself. When talking about the key drivers of their success, many start-up companies emphasize the importance of launching their service in local languages as a way of standing out from the competition.

In many cases choosing globalization - that is launching your software product in a single language like English - is the most cost-effective strategy. It can allow you to focus on your business idea and on great execution. What is more, you can construct convenient user interfaces and establish attractive communication and excellent support. Opting for English-only is a safe decision when developing B2B applications and targeting educated users and regions where English is widely used. Naturally it is not limited to English-

That said, the same concept does not automatically apply to products that are designed simply for entertainment. Consumer applications including social media, games, web and mobile applications (e.g. in the fields of travel, sport and cooking) work best when their functions can be understood by everyday users without any extra effort. The user experience should not be jeopardized by requiring advanced language skills. You can gain a competitive advantage by making your service available in the local languages of your users.

It often gets forgotten that the main geographical target areas and key milestones are not the only things that need to be considered when entering foreign markets – localization requirements also need to be borne in mind. That means making an early decision about how and what kind of content will be generated and made available for translation at a later stage. Internationalization focuses on enabling software applications to be made readily available in other languages, while localization is the process of adapting such software to various languages and regions. Both require clever localization infrastructure on the technical side and a deep understanding of the cultural background of consumers. In other words, the task goes far beyond simple translation.

www.espell.com

team with a textile designer.

With xwabe, users can upload photos of their wardrobes (or the items they want to make available) and friends can sort, borrow or even buy them through the social space. What many people don’t realize is that they have on average HUF 500,000 to HUF 3 million worth of clothes in their closets, and many of these are not even worn, while auction sites are too crowded and confusing when trying to find or sell outfits. Xwabe has just launched its Facebook page and the beta version of its website. It started with the borrowing features but plans adding a marketplace, where it would charge sellers a 6-10% fee, in about six months.

could provide statistics in a format that created an actual user experience – and ended up developing it himself.

Bandalizer, which creates easy-to-handle analytics of visitors and purchases for the more than 500,000 users of Bandcamp, has already won $10,000 in seed funding from Colabs in February 2011. The application has gathered more than 1,000 users itself and hopes to reach 30,000 users in the year to come, mainly by adding more channels (like YouTube and Soundcloud) and more services.

searches don’t provide specific answers and future employers are often too busy with fire fighting and push communication to be really interactive. Internfish, on the other hand, gives room for early planning by starting out with a one-minute survey and sketching up a dashboard of individual desires and preferences. “We are always there to give crutches to students,” Schleer said. The site currently operates in a freemium model and in English, but there are plans to adapt to local languages soon, and iPhone and iPad apps are also said to be in the pipeline.

KACHEENG! A connection that brings more business opportunities than a “like button” – this is the essence of Kacheeng and its Deal button. In Kacheeng’s model, online vendors of any products can embed a Deal button next to products that visitors can click on and share with friends. This way, a buying group is created where those who share their shopping receive discounts, while vendors are selling things people actually need – unlike social shopping sites.

The Kacheeng team believes that in these hard economic times, sellers should focus on getting closer to customers, but without having to spend a lot on social media experts.

While they need to channel in new groups of costumers, they also need to focus on building their own brands and not the agents’.

PROTOBLOX One of the most refreshing and tangible projects of the day, Protoblox presented a system of circuit modules, interconnects, and backplane systems that allows manufacturers to quickly and reliably prototype new plastic tool designs at half the cost and in a fraction of the time. Instead of a usual eight-week process, Protoblox can present a prototype in only two days by using the fact that most models have repetitive features. The three members of the team have combined experience of 25 years in plastic manufacturing, and have already tested their idea in actual production at a Swedish bus manufacturer’s plant. Protoblox targets industrial giants where many plastic parts are needed and production processes should be shortened. It is competing with traditional toolmakers in speed, and with new ventures on selection of materials. Protoblox is looking for investments to the tune of HUF 100 million in order to increase the number of available blocks to 10,000 from the current 1,000, CEO Gergely Lipóczi told the Budapest Business Journal.

XWABE The Extended Wardrobe (abbreviated xwabe) offers a solution to a typically, but not exclusively, female problem: the wardrobe that never includes the outfit most suitable for the day. In fact, the idea of xwabe was born in the minds of two men, who then complemented the

ZINEMATH Zinemath is a combined hardware and software solution supporting postproduction tool for video experts. With the opening of a new recording channel on the cameras, 3D spatial data is recorded besides the regular 2D pictures and that is easy to retrieve hereinafter from any software managing digital objects. The solution opens new opportunities for the film industry, the company claims, by cutting down on time and work on the usual postproduction processes.

AGENTBIRD Demo Day also featured the winner of the Startup Weekend two months ago, which presented at the recent SeedCamp Berlin event. Agentbird is working on a mobile app for real estate agents, currently in the very last phase of development before reallife testing. The team discovered that agents are still using paper notes and outdated CRM applications to register property data, and that the market has only moved due to current CRM developers trying to adapt to mobiles. Agentbird decided to go the other way round, starting from the mobile perspective and creating an application that keeps the mobile workflow in focus. The soon-to-be launched service will work in a freemium model and will reportedly charge €30 per agent a month. ■

1 News 9

BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

The unorthodox economy at halftime Fidesz has reached the middle of its four-year term, and its goal of quickly boosting growth and adding jobs has failed spectacularly.

The Orbán government is unfortunate of course, being under pressure both from a weak international economic environment and the difficult legacy of preceding governments; but Fidesz has exacerbated existing problems through mistakes of its own.

Moreover, its approach towards making the budget more balanced is arousing popular ire. Though there are various criticisms of the government’s policies, there is no clear alternative on offer that a coalition of opposition parties could agree on after 2014. Until then, Fidesz has two years to make good on the only remaining promise of its policies: that in spite of all the setbacks, it is laying the foundations for future growth.

BBJ POLICY SOLUTIONS

Judging by the numbers, Fidesz’ economic policy has not exactly been a smash hit.

The no-longer-new government is exactly at the halfway point of its term, but nothing is discernible of the great leap forward that the Hungarian economy should have taken had it developed according to the government’s ambitious plans. Of the one million jobs PM Viktor Orbán promised by 2020, a mere 50,000 have been “created” thus far, and a large part of the improvement stems from workfare programs.

The latest numbers as tabulated by the German-Hungarian Chamber of Industry

and Commerce show problems on nearly all fronts. At 11.7%, unemployment is the highest since the 1990s when the country was reeling from the mass closure of state enterprises. Quarterly growth is at –1.5%, and it appears likely that this year Hungary won’t be able to maintain even the low growth status it had attained since the country’s disastrous meltdown in 2009.

Construction, which was supposed to be one of the focal areas of growth, is in a freefall. Inflation is higher than at any time since 2008. As of this writing, the forint has once again taken a dive and is well above the 300 per euro mark as Hungary’s CDS is growing

the numbers downwards towards the end of last year, he still spoke of 1.5% growth.

Now, in April, he said that the economy must not be allowed to slide into recession. Alas, it appears it’s too late.

The government’s projections of revenue and expenditure streams have proved similarly reliable, necessitating a slew of tax hikes and new taxes, as well as some painful expenditure cuts. Fidesz campaigned with the promise of tax reductions as its core issue, but is now assessing taxes left and right to balance a budget that was based on wildly optimistic assumptions about the state of the economy. Though Brussels’ punitive actions may

taxes have nothing to do with austerity, it appears that many citizens are no longer inclined to buy this.

With the economy hitting rock bottom this year, so is Fidesz’ popularity, which Tárki recently measured around 16% in the population at large, barely ahead of the Socialists (15%). Even if Tárki’s numbers prove to be the outliers of the month, they do not appear far off and the declining trend of support is obvious.

COULD IT HAVE BEEN BETTER? Even the clear failures of the government’s policies do not imply, however, that anyone else would necessarily have done a better job or that there

› THOUGH THE GOVERNMENT MAY

INSIST THAT ITS PLETHORA OF TAX HIKES AND NEW TAXES HAVE NOTHING TO DO WITH AUSTERITY, IT APPEARS THAT MANY CITIZENS ARE NO LONGER INCLINED TO BUY THIS

amidst market tremors.

Exports and the current account surplus are among the few bright lights on the horizon. Exports exceeded the pre-crisis 2008 levels already last year, and 2012 could be another good year for exporters boosted by the weak forint. Robust exports are the only indication thus far that the government’s rosy assessment of Hungary as a future economic powerhouse holds any water.

CONTINUOUSLY DELAYED GRATIFICATION This is a far cry from what the government imagined.

In last April’s convergence plan the government’s “conservative” growth estimate for 2012 was a robust 3% (the optimistic version was 3.6%).

When Orbán announced that the government had revised

be avoided thanks to extra revenue raised from taxing mobile phone calls and financial transactions (an internet tax was planned but apparently dropped), among other things, it appears that these measures don’t go down well with the public, large portions of which saw their disposable income shrink even before facing a variety of new taxes on their remaining net income.

UNHAPPY VOTERS Hungarian voters don’t care much about macro-indicators as long as they don’t manifest in their pocketbooks (cf. the 2006 elections), but these numbers clearly influence citizens’ daily lives, with real income declining by roughly 5% on average. Though the government may insist that its plethora of tax hikes and new

is an obvious alternative to the current route. There are only very thin lines of agreement among economists and politicians who view the government critically. Virtually everyone outside Fidesz circles, including right-wing economists, would get rid of the flat tax, for example. Even those who think it’s a great idea in theory concede that the toxic mix of recession and suffocating debt was not the right time to forfeit hundreds of billions in revenue. Moreover, even some of the former supporters admit the obvious: the tax cut has done nothing for growth, unless someone wishes to argue that the Hungarian economy would be in worse shape still but for lowering taxes on those with high incomes.

Another – more unexpected

– area of a broader agreement appears to be that the EU’s strict budget requirements are overdrawn and should be softened at times of crisis. This agreement naturally extends to the government as well, which has been far from consistent on the issue but certainly wishes that it had more budgetary latitude to shape its economic policy. Nevertheless, this agreement does not mean much, for if one were to delve into the details it would emerge that the various actors have vastly different ideas of how much Brussels’ budget standards should be relaxed and how the extra money at the government’s disposal ought to be spent.

AN OPPOSITION OF THATCHERITES AND KEYNESIANS Very broadly speaking, there are two lines of criticism against the economic policies pursued by the Orbán-Matolcsy duo. The majority of critical economists believes in classical conservative solutions and is disappointed in the Orbán government’s failure to comprehensively reform the welfare state, its unpredictable tax policies (and generally unpredictable economic approach) and its punitive attitude towards multinational corporations, a policy that critics believe will deter foreign – and potentially any – investment.

Though those attacking the government from the “right” range from dedicated Thatcherites to moderate liberal-conservatives (the latter include quite a few economists who are considered left-wing in the warped Hungarian political taxonomy), they are generally textbook economists who believe that Hungarian competitiveness can be best improved by a smaller state, lower real wages and more room for entrepreneurship.

Those on the left, in the meanwhile, would want a Keynesian approach towards crisis management, with the state taking an active role in jumpstarting growth and creating jobs. While this may bear a superficial resemblance to the government’s ideas on the subject – at this point the only increase in employment is from public works programs – it is never-

theless drastically different: leftist economists have serious issues with the government’s curbing of workers’ rights and its stricter welfare policies, which in turn mesh better with right-wing prescriptions. Incidentally, these divisions among the government’s critics also augur ill for any consistent economic policy in case of an unlikely opposition victory in 2014.

DOOMED TO STRUGGLE The point is that there is no obvious cure-all for a vulnerable economy plagued by problems stemming from decades-old mismanagement and a sluggish world economy. An expansionary fiscal policy would harbor immense risks in an environment in which a whole series of European economies teeter on the verge of a default. A neoclassical economic approach might work in laying the ground for long-term growth, but it would come at a high price in terms of inequality, and there is no certainty at all that it would have produced better macro-economic indicators already.

In other words, whichever alternative course a government would have pursued, it would likely battle similar problems right now, though arguably its long-term prospects could be better.

The latter is certainly not a trivial difference; at present, presumed long-term trends would be the best way to distinguish incompetent economic governance from a successful one. But extrapolating the long-term trends allows for a fairly significant degree of subjective interpretation, and the government’s argument is naturally that the actual trends, too, will deliver high levels of future growth. While we would argue that the government’s policies offer much of the pain neoclassical crisis economics visits on society’s underprivileged classes without the promise of real growth, our assessment regarding future growth is merely a projection. And we hope that the facts will prove us wrong two years hence. ■

www.policysolutions.hu Political Research and Consultancy Institute

2 Business

BBJ

Enterprise

TRENDS SPECIAL REPORT

Hiring on hold

13

16 More than chocolate Swiss franc remains firm if crisis goes on 19 20 Creating a two-way street

Seasonal workers to the rescue?

Hungary’s employment rate is on a slow rise, but the unemployment rate is still well over both the EU average and the psychological limit of 10%. Large companies have closed factories or relocated abroad, although big automotive companies are still creating jobs despite the crisis. And summer is coming, when seasonal jobs, mostly agricultural in nature, should shore up the disappointing employment figures for a while.

BBJ KRISZTIÁN KUMMER

According to figures from the Hungarian statistics office KSH, the unemployment rate has practically stagnated in the past year at 11.5%, despite the fact that the rate of activity increased significantly among the working-age population. In the period of Feb-

ruary-April 2012, the labor market consisted of altogether 4.3 million people; labor market participants were 67,000 more than one year before.

The number of jobless was 496,000, which signals stagnation in comparison to the previous year. The rate of unemployment was 11.5%, 1 percentage point higher than the EU average, according to Eurostat figures.

SEASONAL JOBS: STUDENT THREAT? Despite the slowly growing number of employees in Hungary, unemployment is still very high at 11.5% as of May. However, the period for seasonal work in the agriculture and tourism industries is looming, providing income opportunities for hundreds of thousands of job seekers.

According to figures from the Ministry of National Economics (NGM), seasonal work is increasingly popular; in July 2011, 512,000 employees were registered as seasonal or occasional workers, twice as many as one year earlier. The popularity of seasonal work might rise further this year, due to the simplified administration to facilitate employment rules from August 1, 2011. As the NGM explained, employers could

52,000 MORE PEOPLE IN WORK THAN A YEAR AGO – ONLY PUBLIC EMPLOYMENT EFFECT? In February-April 2012, the number of employed people was 3.8 million, 52,000 more than a year earlier, according to the latest figures of the Central Statistics Office (KSH). The growth is almost equivalent to the number of participants in the government’s workfare program in Q1, raising questions about the actual improvement in employment.

(The Hungarian government set aside HUF 164 billion in 2012 for providing public employment for up to 200,000 unemployed people.) The labor market position of men and women improved at the same rate. In the observed period, the number of employed exceeded the level in the corresponding period of the previous year by 1.4% (growth was higher than the sampling error limit).

WWW.BBJ.HU

11

Budapest Business Journal | June 15 – June 28

report their new workers to public offices by phone or via the internet. Paperwork was also reduced: no attendance sheet has to be recorded, and written employment contracts have to be provided only if the employee so requests. Public burdens also became unified: in the case of seasonal work HUF 500 per person per day has to be paid, and HUF 1,000 in the case of occasional employment.

However, seasonal work opportunities can be highly affected by weather, which has not been too gracious to farmers this year. Harsh winter frosts in February and freezing temperatures in April have blighted grapes, cherries and watermelons.

And the stormy weather could thin out more than just yields: with less produce to harvest, fewer hands will be needed, says Ferenc Kurdi, chairman of Pannon-Work Student Coop.

Young seasonal workers from student coops represent serious competition to those who are looking for summer jobs. Recruiting student workers means absolutely no administrative burdens to businesses as the employee of the student is the coop itself, and it also makes it easier to hire workers legally from one day to the next, said Ferenc Kozma, chairman of Pensum Student Coop. Students – like workers – have to be paid at least the minimum wage, which is HUF 535 an hour.

However, the 16% advance income tax is deducted from this wage, so the net minimum wage is HUF 449 per hour. Higher wages can be paid if the student has some special ability required for the job (language or communication skills, technical knowledge, etc.) The most a student, or seasonal worker, could earn is around HUF 800 per hour according to Kurdi.

PERMANENT JOBS ARE HARD TO FIND During the past year, three companies (Elcoteq, Nokia, Malév) that employed large numbers of people either shut down or relocated abroad. As a consequence, altogether more than 6,000 jobs were terminated. On the flip side, the two leading automotive factories, Audi and Mercedes, are hiring in great numbers. Direct hiring opened up almost 2,500 new jobs at Audi: staff payroll according to statistics was 5,688 on May 31, 2010 and 8,151 on May 31, 2012, an increase of 2,463. Once construction work has been completed, the number of jobs at suppliers could reach up to 15,000. According to information from the regional government office provided by the NGM, the impact on employment growth of the Mercedes investment in Kecskemét, including payroll increases at suppliers, will be about 5,000 new jobs by the end of the year. Of that figure, the number of employees at the Mercedes plant itself will be about 3,000.

Job seeking shows seasonal patterns: the numbers grow between January to March and also in September-October, while interest slows down in the summer and early winter periods.

The reason for this phenomenon is that around 60% of job seekers look for new opportunities from the office, and also that the recruitment

Unemployment rate between Q1 2007-”Q1 2012 (%)

Source: KSH

side is much more active in the above months. In general, the number of online job searches grew in the last year, partly due to migration from offline to online methods, says Krisztián Zsédely, sales manager of Profession.hu, the most visited online job-seeking site in Hungary.

Compared to last year, demand for specified skills has increased in the engineering and IT sectors, and in certain positions in finance.

More specifically, demand for production support engineers and controllers have grown most. On the other hand, the number of jobs requiring lower degrees is decreasing, in some sectors almost all the way to zero. “If I were a student right now, facing career choices, I would choose engineering or programming. But prospects for marketing professionals and office administrators are not good nowadays,” Zsédely says. Regarding the blue-collar areas, warehouse workers, construction site managers and shop assistants are most sought after. ■

Groups with a higher-than-average inclination to migration

Source: Tárki

HALF OF HUNGARIANS UNDER 30 WOULD LEAVE THE COUNTRY A survey made early in 2012 found that 13% of the adult population has plans to go abroad for a few weeks or months, 16% would leave for a few years, and 7% of them are thinking of full emigration. The migration rate based on the potential cumulative value of these three numbers is 19%, the highest ever recorded. The migration intention is not consistent amongst the various social groups: it is highest among the young and those in adverse socio-economic status groups (e.g. unemployed, minorities, etc.). The survey

by Tárki Institute found that nearly half of the 18-29 age bracket plans to move abroad.

However, migration tendencies are unchanged according to the NGM. The latest available employment figures do not support theories of increasing emigration, even if shortterm willingness to take up jobs abroad is increasing.

Number of employees by region (February-April 2012)

2011 CENTRAL HUNGARY

2012

Change 1,000s of people

Change %

1,234.0

1,265.8

31.8

102.6

CENTRAL TRANSDANUBIA

443.5

438.7

-4.8

98.9

WESTERN TRANSDANUBIA

404.9

411.8

6.9

101.7

SOUTHERN TRANSDANUBIA

330.3

321.7

-8.6

97.4

NORTHERN HUNGARY

378.5

383.5

5.0

101.3

NORTHERN GREAT PLAINS

490.9

513.8

22.9

104.7

SOUTHERN GREAT PLAINS

476.6

475.9

-0.8

99.8

3,758.9

3,811.2

52.3

101.4

TOTAL Source: KSH

12 2 Business BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

Learning more about yourself through tests People enjoy learning more about themselves – that is why tests are so popular nowadays.

Simple tests on the internet are offered in great numbers and variety; these are great fun to take, and the results can be thought provoking. But how much can we trust in them?

fixed, or can I do something about this?” Most questionnaires provide insight into what the person is like, and offer an opportunity for them to adjust their behavior.

Often participants see psychometric results as the one and only truth. In fact, the results often reflect the time and circumstances of the test or the feelings of the person when the questionnaire was completed. Results may be slightly different 12 months later.

BBJ JUDIT ÁBRI

If you plan to “measure” a person’s real personality, and to base your decisions on the results, it is best if you turn to proven methods of psychometric assessment.

Measuring through psychometric tools or, as they are more widely known, personality or ability tests, can be useful when it comes to personnel selection for certain jobs, or for identifying top talent as well as needs and gaps across the organization.

As a business coach, it essential for me to know about these tests, but only professionals trained in their application and interpretation should use them.

Psychometric tools are widely used not just for selection but also for personal development; personality questionnaires are popular for feedback and can provide starting points for discussions in coaching. The tests help people take on roles best suited to their strengths, and can help illustrate the different styles and behaviors that can be adopted.

PSYCHOMETRICS OR COMPETENCES? There is often a choice between using a psychometric questionnaire or an inhouse 360-degree competence framework. The latter is designed to meet the specific needs of the organization and is based on the competencies which the HR team or psychologist found to be necessary for success in that role.

Personality questionnaires, unlike 360-degree tests, focus on a wider set of traits. They are based upon detailed research with validity and reliability factors provided, with large sample sizes available and, in case of the best ones, built-in safeguards against gender and racial bias. By using sector norm groups, comparisons can be made with those fulfilling similar roles in other organizations.

WHICH PSYCHOMETRIC TOOL? Training is essential for selecting the right questionnaire for the task at hand. For example, one manager in a retail organization I was working with as a business coach had been referred for coaching

as he was constantly in conflict with co-workers in his team and was seen as insensitive. The emotional intelligence questionnaire helped highlight these traits in a non-threatening way and to develop an action plan. This

INSTRUMENT

raised his level of self-awareness and gave a start on helping him develop new behaviors that would improve his relationships.

One question that often arises after evaluating the test results is: “Are the results

WHAT DOES IT MEASURE?

DISC

behavioral style , communication style

MBTI/GPOP

personal attitude

Predictive Index® (PI®)

leadership/sales style, motivation needs

Professsional Learning Indicator (PLI)

general cognitive ability: visual, verbal, abstract

The Motives, Values, Preferences Inventory (MVPI)

person’s core values, goals and interests

VIA

character strengths

Emotional Intelligence tests

emotional self-awereness

Selling Skills Assessment Tool (SSAT)

sales people’s strengths, skills and specific areas that need improvement

OFFER A PLAN By themselves, the results from these questionnaires often leave people with more questions than answers. The HR manager needs to spend some time exploring the implications.

Are the results substantiated by what the participant has said during the discussion or job interview? Secondly, does the individual want to do something about this?

For my client, the retail manager mentioned above, one session would not be enough to produce a lasting and sustained change.

Feedback in itself is rarely enough to bring changes in behavior. Instead, it requires a personal plan, and support such as coaching over a period of time, to reach lasting change.

Psychometrics costs money.

However, they cannot be substituted by free internet downloads (except for VIA). A scientifically approved test can support us in our decisions when we need to hire, fire or promote, which are all costly exercises, or it can help us coaches identify the area that we need to work on in less time.

Wrong decisions and wasted time are more expensive then well-selected professional tests.

So I say let’s go for them – for the sake of professionalism. ■

Judit Ábri von Bartheld ACC, International Coach Federation accredited executive coach, organiser “Coaching Without Borders” www.coachinghataroknelkul.hu, and “Leadership Excellence Forum” abri.judit@executivecoach.co.hu www.executivecoach.co.hu

2 Business 13

BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

Football

Hiring on hold

Good news from league markets

Hungarian hiring expected to remain weak in third quarter

€

8.6bln

As the curtain falls on the annual club season and the European Football Championship provides a good excuse to keep Europeans occupied watching matches and not worrying about the euro-crisis, it seems timely to take a look at football finance data, which shows that the Old Continent’s soccer market continues to show resistance to wider economic pressures and grew by 4% to €16.9 billion in the 2010-2011 season. Clubs have transformed their stadiums into state-of-theart venues, and are appealing to a growing fan base, completing a circle of growth.

As Deloitte’s latest review of football finances shows, combined revenues of the big five leagues (the English Premier League, France’s Ligue 1, Germany’s Bundesliga, Spain’s La Liga, and Italy’s Serie A) grew by 2% to €8.6 billion. The Premier League is still by far the highest revenue generating one at €2.5 billion in 2010-2011. At the same time, the depreciation of the British pound against the euro meant that the gap to the second highest revenue generator, the Bundesliga, narrowed slightly and reached €769 million.

La Liga grew 5% to €1,718 million, Serie A’s revenues increased by 1% to €1,553 million, while Ligue 1 saw revenues drop to €1.04 million, mainly as a result of weaker Champions League performances in the 2010-2011 season.

Cost control remains football’s greatest business challenge.

Wages in the “big five” leagues increased by more than €104 million The next biggest top-tier and exceeded €5.6 billion revenue generating leagues in 2010/2011. Although are Russia with €614 million, this was somewhat Turkey with €515 million and the less than the revenue Netherlands with €431 million. growth, restraints will be England’s Football League necessary at some clubs in Championship is the world’s highest revenue generating order to comply with the second-tier league, with European governing body revenues of €468 million.

UEFA’s financial fair play regulations. ÁV

€468 mln

Top football clubs in Europe in 2010/11 ranked by attendances

FC Barcelona Borussia Dortmund Manchester United Real Madrid Bayern München source: footballaconomy

13%

WAS THE REVENUE OF THE “BIG FIVE LEAGUES” IN 2010/2011

40%

OF EMPLOYERS FORECAST A DECREASE IN HIRING IN Q3

According to the Manpower Employment Outlook Survey, the hiring intentions of Hungarian employers have hardly changed from the previous quarter.

Hungarian employers reported subdued hiring plans for Q3 2012: 11% of employers expect to increase staffing levels, 13% forecast a decrease, and 71% anticipate no change. Net Employment Outlook stands at -2%.

“Most Hungarian employers are still keeping hiring on hold. Even where vacancies are published, employers are taking their time, and the selection and decision-making processes take longer than ever,” Manpower country manager Judit Kiss noted.

Employers in six of the eight regions forecast negative headcount growth in Q3 2012. The weakest hiring prospects were seen in the southern Great Plain and southern Transdanubia, where Net Employment Outlooks stand at -9% and -8%, respectively.

Muted labor markets are also anticipated in central Transdanubia, with an outlook of -5%, and northern Hungary, where the outlook is -4%. Meanwhile, employers in two regions forecast payroll gains, most notably in western Transdanubia where the Outlook is at +12%.

Employers in four of the nine industry sectors expect to increase staffing levels during the course of Q3 2012. The strongest hiring prospects are in the transport, storage and communication, and in the wholesale and retail trade sectors, with Net Employment Outlooks of +6% each. Employers The Manpower research shows in four sectors anticipate varying degrees of positive hiring negative headcount activity in 33 of 41 countries, with growth, including the the strongest Q3 forecasts coming construction sector with from employers in India, Taiwan, an outlook of -22%. Weak Brazil, Turkey and Singapore. hiring plans are also evident Compared to Q2 hiring activity is expected to be relatively stable in the public and social or improved in 32 labor markets sector and the electricity, and to weaken in 16. Globally, gas and water supply sector, employer-hiring expectations are with outlooks of -5% and weakest in Greece, Ireland, Spain, -4%, respectively. PF Italy and Hungary.

33 of 41

Regional outlooks (year-on-year)

79,200 79,100 75,110 71,300 69,000

European industrial real estate investment pauses in Q1

Most European industrial investment markets recorded a quiet start to the year following a flurry of activity in the final quarter of 2011, the latest data by Jones Lang LaSalle show.

Notable exceptions were Germany and Poland, with the sales of two logistics portfolios sold by Prologis (comprising six properties and two logistics parks in Germany and four properties in Poland) boosting results in these two markets. As a result, volumes rose 12% on the equivalent quarter last year in Germany and by 37% in Poland in the same comparison.

Across Europe, total volumes invested in industrial assets in Q1 2012 reached €1.5 bln, down 40% on the same period last year while dropping to less than half if compared with the buoyant final quarter of 2011.

Notable transactions included the sale of the Prologis portfolio in Germany (€138 mln), the sale of the Polish Prologis portfolio (€100 mln), the purchase of a distribution warehouse in Werl, Germany on behalf of Rockspring (€17 mln), and the sale of the La Poste distribution unit in Lyon, France (€22 mln) and the Iceland Distribution Center in Enfield, Greater London (€42 mln). “Falling activity was the result of a lack of prime investment opportunities and sustained economic pressures continuing to restrict the availability of debt finance,” Penny Hacking, director, Jones Lang LaSalle European In Q1 2012, no major real estate Logistics and Industrial transaction was concluded in Capital Markets, said.

Hungary, so the lack of liquidity “On a positive note, we is not limited to the logistics/ continue to see increasing industrial segment, said Benjamin demand from a growing Perez-Ellischewitz, head of range of investors. capital markets at Jones Lang LaSalle Hungary. “ I hope that by Therefore we expect year-end we will see significant full-year 2012 industrial activity, as more than €100 mln of transaction volumes to logistics and industrial assets are remain consistent with under exclusivity or marketing,” 2011,” she added. PF he added.

€100 mln

Take-up by countries (%)

Net Employment Outlook (%) 2012 Q3 (2011 Q3) Source: Manpower

YR/YR FALL IN INVESTMENT VOLUME IN Q1

Source: Jones Lang LaSalle

14 2 Business BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

Hungarian payment moral: strategy to overcome trust?

Healthy distrust is no longer an option but a necessity for Hungarian businesses, according to Balázs Vanek, head of the Hungarian branch of Atradius Credit Insurance N.V.; following fresh international data published in the Atradius Payment Practices Barometer, he thinks it is not only geography that puts Hungary in the middle between northern and southern Europe.

BBJ ÁGNES VINKOVITS

Q: HOW WOULD YOU DESCRIBE PAYMENT MORAL IN HUNGARY AT THE MOMENT? A: Unfortunately, but not surprisingly, we see worsening tendencies. Although our survey last year showed that we were somewhat more pessimistic than the real circumstances justified, this year we clearly see that the situation has become more difficult as companies have less money. Now even most of the creditworthy debtors tend to delay a month at a 30-day prompt. The main reason behind this is the phase-outs of capital from the country, which resulted in the strengthening of supplier financing. But of course unexpected bankruptcies also do not help the situation.

Q: SO THE REASON IS NOT INCREASED PESSIMISM? A: There must be negative sentiment indeed but at the moment I find it reasonable.

Q: BUT THEN HOW COME THAT OTHER SURVEYS SUGGEST THAT PROMPTS HAVE SLIGHTLY IMPROVED FROM 29.4 DAYS IN 2010 TO 29.3 IN 2011, WHILE PAYMENT DISCIPLINE HAS

ALSO BEEN RAISED SOMEWHAT? A: The supposed contradiction comes from the fact that companies do not have the money to finance supplier loans and, as a result, they have become more prudent and place more emphasis on debt management.

But this in itself I do not consider to be an improvement in payment moral.

Q: AND WHERE DOES HUNGARY STAND IN EUROPEAN COMPARISON? A: Interestingly, if we take Germany and Italy as the two opposite poles, we have to say that the Hungarian attitude is closer to the German one. Companies have learned a lot and, at the end of the day, debt management is itself only part of learning capitalism. Most businesses are already past the first slap in their faces, which makes them want to avoid the next one. However, if we look at the proportion of loans over 90 days past due, we see that in Greece this figure reaches almost 20%, it is around 2% in Germany and in Sweden, and the European average is around 6%. As it is also around 5-6% in Hungary, it is obvious that there is still room for improvement. The problems of southern Europe are evident: while in the east, Russia has been performing very well recently; in Romania we see some worrisome signs when it comes to payment moral. I strongly recommend everyone in exports take a good look at the target country from this point of view as well.

Q: APART FROM THE CURRENT ECONOMIC CIRCUMSTANCES, WHAT OTHER REASONS MIGHT BE BEHIND BAD PAYMENT MORAL? CULTURAL TRADITIONS? A: In terms of how much we like juggling with someone else’s money, and what would people around us think about it? Good question. Not to insult any countries by naming them, but I really think Hungarians are more the northern type than Mediterranean.

food retailers also face hard times.

Q: DOES THIS INCREASING CAUTION CHANGE INVOICING HABITS? FOR EXAMPLE, HOW WOULD PARTNERS REACT IF A COMPANY DECIDED TO ISSUE ONLY CASH BILLS? A: Yes, it has a strong effect, one that we incidentally welcome very warmly. While it is already an established practice in Western Europe to require cash when doing business with someone for the first time, this trend is only now evolving in Hungary. Not to mention the precrisis times when Hungarian businesses were often so much impressed by, for example, the huge and nice headquarters of their new business partner that they were ready to hand over entire containers of products based on trust and in hopes of being paid one day. Nowadays they already know that there is a good chance that a bank has mortgaged the headquarters, and so they take a better look at the real financial situation of potential partners.

CURRICULUM VITAE 37-year-old Balázs Vanek studied trading at college, which he later supplemented with a university degree in business economics. Before becoming the head of the Hungarian branch of Atradius Credit Insurance N.V. in 2005, he gained experience as a broker sales manager at insurance company AHICO and as regional manager at credit insurance company HERMES, besides other positions in the insurance industry. He is the father of two daughters and in his little free time he enjoys playing basketball and running.

Q: WHICH SECTORS ARE MOST AFFECTED IN HUNGARY? A: Industries with tight price competition, those suffering from the biggest drop in consumption, or those with scarce opportunities for

export production are in the toughest situation. The construction sector is in particularly deep trouble as it has been in recession for almost three years and there is not even a sign of improvement, but the textile industry and

Q: THIS TENDENCY MUST FAVOR CREDIT INSURERS. A: It does. It is not only that we offer fresher, interim data about companies than their officially available balance sheets but, more importantly, we can tell if a company has unpaid bills more than 30, 60 or 90 days overdue. This is the most up-to-date indicator of a company’s situation and, as such, this information is extremely valuable. At the same time, as credit insurers, we provide a HUF 500 billion credit to cover the risks, which is enough for approximately 10,000 Hungarian businesses.

The stability they gain by getting insured by us means that even at times when they are not able to grow, at least they will not shrink or collapse as a result of bad debts.

Q: AND HOW COULD CHAIN DEBTS BE ELIMINATED? A: More professional receivable management would be a system-level solution, but if I

could have a wish list, a new bankruptcy law would top it. The amendments failed to push companies towards reorganization instead of liquidation, and brand new regulations would probably be more effective at this than patching the existing ones.

Western Europe already follows the trend where lenders, and not the owners, decide the future or the liquidation of a company in trouble. If there is still some potential in it, they choose reorganization, but it if there is no hope to make money from the business, they wind it up. On the absolute contrary, here in Hungary owners can decide themselves and say that okay guys, now this company is gone but I have already established a new one. This is why there are still more companies being founded than there are closing down.

Q: HOW BIG IS THE ROLE OF BAD DEBT IN BANKRUPTCIES? A: To see the domino effect of non-paid suppliers, it is enough to think about the HUF 120 billion that Malév left unpaid, which is now causing trouble for travel agencies and dozens of other companies in several sectors. However, bad debts or, as I said earlier, intentional bankruptcies are only two of the reasons. There are several others and a lot of them are specific to the country or at least the region.

Q: FOR EXAMPLE? A: Hungarian entrepreneurs are often emotionally tied to their businesses so strongly that when, for example, they should close down one of its underperforming units, they refuse to do so, which later on can easily result in the collapse of the entire company. But I could also mention ambitions of grandiosity. Many businesses rent a building much bigger than their real needs would require. We are already on the right path, but Hungary still has to learn how to be an ant instead of a cricket. ■

2 Business 15

BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

First worse, then better Late payments remain an issue for businesses throughout Western Europe, and this is clearly shown by the latest Payment Practices Barometer, a survey conducted by credit management giant Atradius polling 11 Western European countries, along with Sweden from the north and Turkey and Greece from the southeast.

BBJ ÁGNES VINKOVITS

As for the future, current indications drawn from the survey are that it will get worse before it gets better, and to a large extent this is ref lected in 33% of respondents expecting credit risk to increase in the coming months. This is still somewhat lower than the ratio of those who expect credit risk to remain at current levels, as 54% reportedly have such confidence. However, the survey warns, credit risk levels are already high in many countries.

As a whopping 31% of domestic and 27% of foreign payments for purchases of goods or ser-

vices in the 14 countries involved in the survey were late, businesses need to stay on top of their receivables portfolios to limit the amount of uncollectible receivables.

DOWN SOUTH When taking a look at the various regions, the unsurprising fact is clearly shown that excessively late invoices accounted for 6% of domestic and 5.3% of foreign receivables, and were a particular problem in Southern Europe where the value of domestic invoices more than 90 days past due exceeded 10% of the value of domestic sales, the survey found. The biggest worries were reported in Greece, where this number climbed to almost 19%.

The longest average credit terms for domestic B2B customers were extended by small- and medium-sized enterprises with 42.4 days and 41.8 days, respectively. At the same time, the shortest terms for payment of invoices was given to B2B customers by micro-enterprises averaging 34.9 days in domestic and 27.4 days in foreign trading.

When businesses were asked about the main reasons for payment delays from customers, liquidity constraints were the most frequently cited.

As an obvious sign of increasing circumspection, the survey showed that nearly half of respon-

dents in Western Europe anticipate checking the buyers’ creditworthiness more thoroughly over the next six months.

At the same time, positive behavior is awarded: more than 30% of respondents in Western Europe offered discounts for early payment of invoices. Italy was the most active in this respect, but discounts were most frequently taken advantage of by the B2B customers of French respondents.

REDUCE THE RISK The survey found that an average 3.9% of the total value of domestic B2B receivables in both the wholesale/retail/distribution and financial services sectors were written off as uncollectible. This makes the financial sector the most affected, as it is involved in both domestic and international trade.

The survey concluded that the predominant issue for businesses trying to collect outstanding invoices is the lack of available funds for their customers, regardless of whether these customers are domestic or foreign.

As the evolving recessionary environment and the deep economic difficulties in several countries also do not help the situation, the majority of respondents plan on increasing their credit management activities whether they expect trade credit risk to rise or to remain level. ■

THE MAIN REASONS WHY WESTERN EUROPEAN COMPANIES GRANT TRADE CREDIT TO THEIR DOMESTIC B2B CUSTOMERS To establish long lasting trade relations with customers

46,50%

To allow customers time to allow the quality of the product before paying

18,80%

As a sales promotion tool

19,50%

As a source of short term finance

15,50%

16 2 Business BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

SpecialReport

THIS SPECIAL REPORT IS SUPPORTED BY THE EMBASSY OF SWITZERLAND IN BUDAPEST AND THE SWISS-HUNGARIAN CHAMBER OF COMMERCE

More than chocolate – Swiss-Hungarian bilate r Aside from the top quality Swiss products available on Hungarian shelves, the little Alpine country plays a sizable role in Hungary’s economy. How does Hungary benefit from Switzerland, and how much of the stereotype of Swiss thoroughness is true?

BBJ BBJ

Considering that the Hungarian government’s election promises included not only maintaining the number of workplaces but also increasing employment by one million jobs in ten

years’ time, Hungary can have no complaints about Swiss contributions. There are 300 companies with Swiss interests operating in Hungary, employing a combined 35,078 people at the end of 2010.

According to the Swiss National Bank, this number could increase slightly by 1,590 from a year earlier, an achievement that seems remarkable in the light of global economic circumstances that have only been growing worse for years.

Hungary has 1.3% of all the jobs that Swiss companies have created in foreign countries worldwide, and although wood industry company Interspan, owned by the Swiss Krono Group, has closed down production in Hungary, the list of leading Swissowned businesses operating in Hungary remains

impressive and still includes publishing giant Ringier, food companies Kündig, Delimpex and Nestlé, pharmaceutical groups Roche and Novartis, cement and aggregates supplier Holcim, automation and energetic solution provider ABB, train manufacturer StadlerRail, and logistics company Gondrand.

STRONG AND PATIENT When it comes to friendly stereotypes, reliability is probably the first thing that comes to mind about anything Swiss-made.

When it comes to trust in Swiss companies, this is more than just a stereotype as the reasons for it are laid down in the balance sheets. Moreover, the strong Swiss currency – still 30% firmer than in 2008, despite the Swiss central bank hav-

SWISS EXPORTS TO HUNGARY chemical products

39,10%

CHF 369.5 mln

machines, machine fascilities

23,60%

CHF 222.6 mln

vehicles

6,20%

CHF 58.5 mln

precision instruments, watches, jewelry

4,50%

CHF 42.9 mln

textile products

3,50%

CHF 33 mln

plastic products

3,30%

CHF 31.2 mln

food products

3,10%

CHF 28.8 mln

HUNGARIAN EXPORTS TO SWITZERLAND machines, machine fascilities

41,10%

CHF 350,2 mln

vehicles

11,60%

CHF 98.5 mln

11%

CHF 93.8 mln

7,30%

CHF 61.8 mln

7%

CHF 59.3 mln

textile products

6,20%

CHF 52.9 mln

precision instruments, watches, jewelry

3,30%

CHF 28.4 mln

food products metal products chemical products

ing imposed a cap of CHF 1.2 per euro in September 2011 to halt the threat of the soaring currency hurting exports and tipping the country into reces-

sion – could enhance the acquisitions made by several major Swiss players. Roche, Novartis, Nestlé and ABB have all made remarkable pur-

chases in the past years.

Mirroring the solid footing of their parent companies, the subsidies run in Hungary surveyed by the Budapest Business Jour-

WWW.BBJ.HU

17

Budapest Business Journal | June 15 – June 28

[ EXPERT OPINION ]

e ral business relations

Transfer pricing in focus of tax audits Due to increasing cross border activities between affiliated companies, tax authorities are focusing more on the prices applied by affiliates in their transactions in order to ensure the appropriate allocation of profits and losses, and thereby to avoid tax circumventions. Throughout the last few years Hungarian tax authorities have been increasingly concentrating their attention on this issue, and as from January 2012 legal regulations concerning the documentation requirements have been amended.

DR. MELINDA IMRE ATTORNEY-AT-LAW (H) RÖDL & PARTNER RECHTSANWÄLTE

CORPORATION TAX ISSUES The Hungarian tax law also acknowledges the arm’s length principle. Therefore, the Hungarian Act on Corporation Tax (LXXXI/1996, hereinafter referred to as the: “Act”) prescribes, that in case the pricing applied between affiliated companies differs from the fair market price – i.e. it is not at arm’s length – taxpayers shall adjust their pre-tax profit according to the difference between the applied transfer price and the market price.

The Act provides for the methods, which may be used to determine the market price.

These methods are the three standard methods (comparable uncontrolled price method, resale price method and cost plus method), and in addition as from January 2011 the transactional net margin method and the transactional profit split method may also be applied. Since no ranking between these methods is provided by the Act, the most appropriate method to the particular case shall be applicable. In case the market price cannot be determined by any of these methods, the Act allows applying any other method; however, the taxpayer shall be able to prove the inappropriateness of the above mentioned methods.

Subjects covered by the regulations above are according to the Act ‘contracts and agreements’ between affiliated companies, furthermore the Act highlights issues being also subject thereof, such as – among others – capital contributions in kind, capital increases and decreases made in kind, or dividends paid in kind.

It should be noted that the provisions above shall, contrary to certain regulations (such as e.g. the German transfer pricing provisions), apply not only to cross border transactions but also to transactions between domestic affiliated companies.

Since 2007, the filing of a request for an advance pricing agreement (APA) with the Hungarian tax authorities has been possible, as the result of which the tax authorities determine the market price (or pricing range) of a future transaction, which is then binding for the tax authorities.

nal reported strong confidence from both business partners and customers.

The key to the former was, in most cases, attributed to transparency that mate-

rializes in a sound financial basis, clear and simple rules, and famously high business ethics standards.

Additionally, the typically low degree of centraliza-

tion among Swiss companies provides opportunities for local management to act according to local needs. When asked about their satisfaction with the

TRANSFER PRICING DOCUMENTATION ISSUES Enterprises are required to prepare transfer pricing documentations concerning the transactions made with their affiliate companies.

Besides the statutory provisions above the documentation requirements had been

regulated at the level of a ministerial decree (Decree of the Ministry of Finance 22/2009, hereinafter referred to as the: “Decree”).

Exemptions from the documentation obligation have been extended as from January 2012, so, among others enterprises qualified as micro or small enterprises, transactions below a certain value threshold, transactions concerning which the transfer price has been determined by the tax authority within the framework of APA, etc, are exempt.

The Decree defines the formal requirements of the transfer pricing documentation in detail.

These are, e.g. the date of preparation of the documentation, data of the contractual affiliates, detailed description of the transaction, description of the risks borne, functions fulfilled by the contractual parties, market study, description of the applied transfer pricing method, price analysis, etc. The taxpayer shall consider those data in the course of the preparation of the documentation, which were available to it until the fulfillment of the transaction.

As from 2012 – affecting the documentation requirements concerning the tax year 2011 – simplified documentation requirements may be applicable for low value adding intra group routine services listed by the Decree in case of fulfillment of certain conditions.

In this case the mark-up determined by the cost plus method is considered as the market price if it is between 3% and 7 %.

The deadline to prepare transfer pricing documentation is determined by the Act; however, the documentation shall not be filed with the tax authorities, but it shall be prepared until the filing of the tax returns, and must be available in case the tax authorities request it in the course of a tax audit.

TRANSFER PRICING RISKS In case of a tax base adjustment made by the tax authorities, not only the tax liability of the taxpayer is affected, but the taxpayer may be subject to a tax penalty of 50% as well as to default interest due to late payment of the tax.

In case of failure or default of preparation of the documentation, a penalty amounting to HUF 2 million (approx. EUR 6,500), and in case of repeated default HUF 4 million, may be levied by the tax authorities.

Rödl & Partner provides legal and tax advice in Hungary since 20 years.

www.roedl.com

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

18 2 BusinessSpecialReport BBJ

UNEMPLOYMENT RATE IN SWITZERLAND (IN PERCENTAGE) 2012

May

3

2011

December

3.3

2011

June

3

2010

December

3.5

2010

June

3.9

2009

December

4.2

2009

June

3.8

2008

December

2.8

Hungarian economic and regulatory environment, businesses, unsurprisingly, were more muted in their praise. It is widely accepted that the Hungarian government – like all its European counterparts – has a difficult task in tackling the combined aims of deficit reduction while also boosting the economy, which can sometimes result in ad-hoc regulations and budget cuts that have, for example, hit pharmaceuticals particularly hard.

Still, Swiss-owned companies tend to remain patient and non-committal. “As always, the glass is either half full or half empty: a lot has been done, a lot still remains to be done,” Richard Skene, president and director of Holcim Hungária, told the BBJ. “In times such as these, what companies typically need most is transparency, a reliable basis for planning, and unbureaucratic processes in public administration,” he added referring to the

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

challenges inherent in the European, and thus also the Hungarian, crisis.

HEALTHY ENVIRONMENT On the Hungarian side, the most significant investment in Switzerland so far has been Hungarian pharmaceutical Richter Gedeon’s acquisition of Swiss-based PregLem Holding to the value of CHF 445 million.

According to Swisscham Hungary, Hungarian companies operating in the construction, food, agriculture, and service sectors are the most keen to secure Swiss orders or find Swiss partners, which might not be surprising considering that both the construction and the food industries have had to battle declines in Hungary recently.

Simultaneously, Hungary can benefit from Swiss health tourism, especially in the field of dentistry and wellness.

As dental services are not included in state social insurance in Switzerland, Swiss people are coming to Hungary in increasing numbers as they find quality service for a reasonable price here, Swisscham said. ■

CONDITIONAL OPENNESS – WORK RESTRICTIONS IN SWITZERLAND

Although citizens from EU countries, as well as from Norway, Iceland and Lichtenstein, have the right to entry, residence and employment in the Schengen area-member Switzerland, nationals from EU member states such as Hungary, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Slovakia and Slovenia seeking work in the Alpine country will meet certain restrictions.

It is not only that there is an annual quota of 2,000 for residence permits for people coming from the above countries, but also that those who want to work in the construction, hospitality, household and maintenance, security service sectors or enter Switzerland for trading purposes have to pre-register their activity eight days in advance. To somewhat ease the restrictions, those who work for more than one employer at the same time have to register themselves only once. However, those employed in the specific sectors are allowed to work only a total of 90 days per year.

As several Hungarian companies aim to extend their activity into Switzerland or look for business partners in the above industries, the restrictions are not particularly popular in Hungary. Several EU-member states and regional cooperatives have raised the matter with the European Union, but without any positive results thus far.

The Visegrád Group (V4), including Poland, the Czech Republic, Slovakia and Hungary, labeled the restrictions as “discriminative”, while Catherine Ashton, vice-president of the European Commission also warned that laying such conditions for a labor market does not comply with agreements between the European Union and Switzerland.

Swisscham Hungary adds that high initial costs makes it unviable for most Hungarian companies to relocate in Switzerland to benefit from lower taxes and the more predictable economic circumstances the country can otherwise offer.

SWISS ECONOMIC NEWS KOF UPGRADES 2012 GDP GROWTH FORECAST Zürich’s economic institute, the Konjunkturforschungsstelle der ETH Zürich (KOF) in spring realized that Switzerland’s near future might be brighter than was earlier expected: KOF on April 10 raised its forecast for Swiss gross domestic product growth in 2012, with most of the momentum coming towards the end of the year, though the strong franc is likely to continue weighing on exports. As such, KOF’s estimate for the economy expanding is now 0.8%, up from the previous forecast of 0.2%, compared with GDP growth of 1.9% in 2011.

The institute also added in its comment that the Swiss central bank is likely to keep its key interest rate near zero until 2013 at the earliest.

SWISS GEM INVESTS HUF 1 BILLION IN HUNGARY’S EST MEDIA Hungary’s listed media corporation Est Media has attracted a whopping HUF 1 billion investment over the next three years from Swiss investor group Global Emerging Markets Limited, the Hungarian company announced in late March. As a result, GEM will be authorized to subscribe to three million shares at a price of HUF 280 per share in the upcoming three years.

In the short-term, Est Media wants to use the funds to refinance; in the medium-term it plans to expand its presence geographically.

THOMAS JORDAN IS THE NEW HEAD OF SNB Three months after Philipp Hildebrand, the head of Swiss National Bank (SNB), was forced

to step down following a controversial currency trade by his wife last year, the Swiss cabinet on April 18 confirmed the appointment of Thomas Jordan as the new head of the institution. Speaking about the Hildebrand affair Jordan said, “We lost a very good colleague. In future we will do everything in terms of compliance-organization to define the processes so that there will be no more problems.”

As Jordan had already taken over in an acting capacity, his ideas about SNB policy should hold few surprises. “I stand for continuity. The minimum limit for the Swiss franc against the euro is absolutely necessary in this economy. The entire board is fully committed to this exchange rate floor,” Jordan said on the day of the cabinet’s confirmation, adding that the bank would

defend this minimum limit regardless of what happened on the financial markets.

UBS LOSES $350 MLN IN FACEBOOK FLOAT, NOW CONSIDERS ACTION AGAINST NASDAQ Swiss banking giant UBS may have lost as much as $350 million due to technical glitches on the NASDAQ stock exchange the day Facebook went public on May 18. Almost a month later, on June 11, CNBC and The Wall Street Journal reported that UBS is considering legal action against the NASDAQ as a result. According to UBS spokeswoman Karina Byrne, the bank has not taken legal actions but is weighing its options for recovering its losses.

Facebook’s initial public stock offering was one of the most widely anticipated market debuts

in years, but quickly turned chaotic. The opening was delayed by half an hour. The technical problems kept many investors from buying shares in the morning, or selling them later in the day, or even knowing whether their orders went through. Some investors complained they were left holding shares they didn’t want. According to CNBC and WSJ, UBS placed an order for 1 million shares but did not receive confirmations and repeated the order several times.

So it ended up with much more stock than intended.

Facebook’s stock originally priced at $38 and closed that first day at $US38.23, disappointing those hoping for a first-day surge.

NASDAQ has said it was embarrassed by the glitches but that they didn’t contribute to the underwhelming returns.

SWITZERLAND’S PHOENIX MECANO BUILDS NEW LOGISTICS CENTER IN KECSKEMÉT Swiss-owned Phoenix Mecano Group in February announced it will build a HUF 2.1 billion logistics center in Kecskemét (central Hungary), to replace its logistics base in Germany.

The 4,600sqm center, due to be finished by the end of the year, will distribute finished products manufactured in Hungary, Romania and China to European customers. In addition to the construction of the logistics center, new competences will be relocated from the parent company, Dewert/ Okin, to the Kecskemét site, too. The most important includes the establishment of a new R&D center. The combined logistics center and the R&D department will create 50 new workplaces in Kecskemét, raising the number of employees in Hungary to 1,500 after the investment.

2 BusinessSpecialReport 19

BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

Swiss franc remains firm if crisis goes on It’s not the Swiss franc’s strength that made it so attractive amongst asset managers and investors, but the weakness and vulnerability of other currencies and countries. As long as Europe, the U.S. or Japan can’t find a visible and sustainable way out of the crisis, the Swiss franc will stay the number one safe-haven currency, László Szabó, Chairman of the Board of fund management company Concorde Befektetési Alapkezelő Zrt says.

Q: THE SWISS FRANC IS TRADITIONALLY REGARDED AS A SAFE HAVEN FOR INVESTORS, BUT NOWADAYS IT SEEMS IT IS THE LAST STAND ON THE CURRENCY MARKET. WHAT MADE THE SWISS FRANC SO ATTRACTIVE, AND HOW FAR COULD THE FRENZY GET? A: Switzerland has become a safe haven for multiple reasons. Over the centuries, the neutrality of the country and the legendary Swiss bank secrecy has attracted clients from all over the world, and the safety and anonymity of bank vaults drew in a great number of assets. Simultaneously, a well-established wealth management sector grew into being, and these factors altogether combined into a very serious ability to attract capital.

Regarding the current situation, Switzerland has a huge advantage. The country is linked to Europe in many ways culturally as well as economically, but its economic condition is far better than that of its neighbors. While Swiss GDP decreased along with most European countries’ in 2009, Switzerland managed to get back on track with a much lower unemployment rate and, more importantly, without the excessive increase of debt ratios. While the levels of fiscal stimulus and indebtedness reached unbelievable heights in Europe, Switzerland has kept its budget in balance. It’s like a bicycle race where one can keep up the pace, while everybody else around them is doping. Taking a look at the macroeconomic indicators, it is clear that Switzerland’s economy is not particularly strong, but it is much stronger than those of other European countries. Unemployment in the eurozone has reached unseen levels despite the efforts of politicians. Budget deficits of member states are decreasing but still significant, and the banking system is very vulnerable. On top of that, the fiscal policy of member states is in the hands of their own national governments, making efforts towards unified crisis management very difficult.

The situation in the United Kingdom is not better, either. The central bank is printing money to directly finance the budget, so inflation has gone up, unemployment is high, economic growth is lagging, and interest rates are already around 0%. That sounds like a worstcase scenario for a currency.

Japan has been dead for more than 10 years now; it has just come back as a zombie. The government spends 150% of its income, and the public debt is over 200% of GDP. What is worse is that no one knows how Japan will overcome its problems given the huge demographic burden of an aging society.

The United States keeps its growth rate at around 2 -2.5% at the cost of a $1-1.5 trillion budget deficit a year. Real estate prices have been falling for four years, and the trend is not changing, even though experts forecast a shift every now and then. Interest rates are also at 0%.

I learned at university that if a country prints money to fund the budget, and the interest rate is at 0%, its currency would fail in the shortterm. However, as I just mentioned, other great economies are facing the same problems, so there is no real alternative currency to change to. On the other hand, Switzerland, with its comforting and stable economic indicators, really does look like a safe haven.

Q: BUT SHORT-TERM INTEREST RATES IN SWITZERLAND TEND TOWARDS 0% TOO. A: But for an absolutely different reason. In the aforementioned countries, interest rate levels are at 0% to stimulate investments, and through that, the economy. However, in Switzerland, the 0% interest rate was introduced to slow down the incoming capital flow, driven by investors fleeing other currencies.

Q: IN LESS THAN A YEAR, THE EURO-SWISS FRANC EXCHANGE RATE WENT FROM 1.40 TO ALMOST PARITY, FORCING THE SWISS NATIONAL BANK (SNB) TO INTERVENE AND ATTEMPT TO HOLD THE RATE AT 1.20. HOW LONG CAN THIS POSITION BE HELD? A: As long as the banking crisis in the eurozone continues, the Swiss franc remains a safe haven. However, the pressure on the exchange rate is getting higher with capital still flowing into the country. Actually, the 1.20 cap on the exchange rate is like a dam closing the end of a valley while water is still flowing into the reservoir behind. The pressure is growing, and no one knows how long the dam will hold. Water will either be let out through the valves or it will break through the wall and flood the countryside. If the latter happens, the EUR/CHF exchange rate will reach 1.10 in a matter of hours. I don’t think it’s going to happen, but it can’t be ruled out.

Personally, I can imagine a scenario where the Swiss government tries to slow down the massive inflow of capital with administrative tools. With the interest rate already being at 0%, special taxes could be introduced on an investment, which has the same effect as negative interest rates, or foreign capital inflow could be limited.

Q: WHAT WOULD HAPPEN IF THE EUROPEAN BANKING SYSTEM COLLAPSED? A: If we look at the ‘Armageddon’ scenario where the European banking system fails, it is obvious that the last link in the lending process will have to take the loss. In the case of Swiss franc transactions, Swiss banks are at the end of the line, which means they would be in dire straits. But I don’t think that the European Central Bank would let the whole system collapse. Small, isolated cases of bankruptcy could turn up, causing some losses to Swiss financial institutions

CURRICULUM VITAE László Szabó (42) graduated from Révai Miklós High School in Győr, and earned a degree at the Budapest University of Economics (now Corvinus University), majoring in finance and corporate ratings.

In 1993 he joined Concorde, initially working as an advisor on privatization deals, and then became the company’s leading analyst. He participated in the founding of investment management company Concorde Befektetési Alapkezelő Zrt. as a 25% owner. After ten years leading the company, he retired from operational work in 2006 and kept the management of one investment fund only. After a few years of intensive child caring and learning kung fu, he once again became involved in asset management activities from the beginning of 2011. At the end of 2011, the Platinum Pi Fund managed by Szabó proved to have the highest yield in Hungary on a five-year basis.

as well, but I can’t imagine a wide-scale collapse. And in this case, the Swiss franc will stay as strong as it is now.

Q: HOW WOULD A COLLAPSE OF THE EUR/CHF EXCHANGE RATE AFFECT HUNGARY? A: Unfortunately, our room for maneuver is very limited. The government introduced the currency peg, where Hungarians with foreign currency debts can pay their monthly repayments at a rate of 180 forints to the Swiss franc, 250 forints to the euro, and 2 forints to the yen for five years. The difference will be kept in a different account, and no interest surcharge is counted on the “backlog”. If the exchange rate of the Swiss franc really jumps, the number of application for the currency peg will increase.

Q: HOW COULD COMPANIES DODGE THE EFFECTS OF A POSSIBLE EXCHANGE RATE HIKE? A: The stabilized EUR/CHF exchange rate cap at 1.20 has a positive side effect: options have become very cheap. To avoid a rate hike, put option contracts can be bought that work like guarantees to secure the rate through the price of the option. KK

20 2 BusinessSpecialReport BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

Creating a two-way street Swiss investors still find Hungary an attractive target country, says István Béres, chairman of the Swiss-Hungarian Chamber of Commerce. Although the unpredictable economic and business environment in Hungary can be a negative aspect, potential investors tend to rely on the experience of Swiss companies that have been present in the country for years. One of the chamber’s tasks is to provide a platform for new and existing investors to exchange their views thus improving Swiss-Hungarian business relations further.

Q: AS WAS SAID AT A RECENT BUSINESS FORUM ORGANIZED BY THE SWISSCHAM, SWITZERLAND INCREASED ITS INVESTMENTS IN HUNGARY LAST YEAR. DOES THIS MEAN THAT, UNLIKE THOSE FROM MANY OTHER COUNTRIES, SWISS INVESTORS STILL LOOK AT HUNGARY AS AN ATTRACTIVE TARGET COUNTRY? A: Yes, they do, but it is mostly true for companies that have been in Hungary for several years, and these are typically active in the manufacturing sector. Several such firms have extended, or are about to extend, their activities in the country. To mention just two examples: last year, Nestlé invested HUF 10 billion in a new unit at its Bük factory where it produces pet food, while the Phoenix Mecano group opened a 6,000sqm production hall at its Kecskemét base in 2011.

But things are different for those who do not yet have personal experience in the country. When it comes to new investors contemplating entry to the Hungarian market, I do sense a sort of wait-and-see attitude.

Q: WHAT ARE THE REASONS YOU HEAR MOST OFTEN? A: Of course, while I do know the reasons behind the decisions of companies that have already decided to settle in

Hungary, I’m not informed about the reasons for staying away from the country by those deciding to postpone or delay their market entries. These preventative forces, however, are most likely focused around two things: unpredictable economic and legal environment, and the fact that companies are unable to plan ahead under such circumstances.

If, say, the legal environment changes during the decision process, which is usually quite lengthy, a company will probably wait and see, and might even give up on its investment plans in Hungary.

The other thing that makes planning ahead quite impossible is the volatile movement of the Hungarian forint-Swiss franc exchange rate. A strong or weak forint in itself would not be a problem, but the fact that there are such big swings in the exchange rate is very challenging.

The third reason I think several companies have been moderate on investing in Hungary is the bad reputation Hungary has in the Western media.

Regardless of whether these articles are well established or not, they have already done the damage, I think.

› I HOPE THAT ONCE

FINE-TUNING CAN BEGIN, THE GOVERNMENT WILL BE OPEN TO THE SUGGESTIONS OF MARKET PLAYERS – AT LEAST, WE ARE OPEN TO COOPERATE

2 BusinessSpecialReport 21

BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

Q: THESE ARE VALID REASONS FOR INVESTORS AND COMPANIES NOT ENTERING THE COUNTRY, BUT WHAT ABOUT THOSE WHO, IN SPITE OF THESE FACTORS, STAY HERE AND CARRY OUT FURTHER EXPANSION? WHAT IS THEIR REASONING? A: Companies that have been present in Hungary for 10 or 15 years or maybe even longer tend to listen to feedback from their local manage-

Q: WHAT CAN THE CHAMBER DO IN ORDER TO PROVIDE AN OBJECTIVE PICTURE AND THUS HELP THE DECISIONS OF POTENTIAL INVESTORS OR THOSE ALREADY PRESENT IN HUNGARY? A: Our role is to put potential foreign investors in touch with those who have been here for a while. In my opinion, the personal experience of companies already operating in Hungary is a more

other. So our practice of organizing joint meetings for investors and potential investors fits perfectly with their routine.

Q: HOW WOULD YOU DESCRIBE THE PAST FEW YEARS OF SWISS-HUNGARIAN BUSINESS AND ECONOMIC RELATIONS? A: Looking at it from a Swiss perspective, Hungary is not among major investment

CURRICULUM VITAE István Béres is a founding member of the Swiss-Hungarian Chamber of Commerce and has been a board member since 1995; he was appointed chairman of the chamber in 2001. He has been the leading partner of the Dr István Béres Law Office since 1991. Between 1977 and 1991, Béres worked at a Hungarian corporation engaged in international trade as legal advisor; later he was head of an independent counseling office. He graduated from the legal faculty of the Eötvös Loránd University in 1977, and received his solicitor and counselor qualification in 1980. Two years later he also got a legal qualification in foreign trade.

ment teams and can hardly be influenced by biased newspaper reports. Also, when a company is making a decision on expansion, the numbers speak for themselves. If the Hungarian subsidiary or affiliate of a Swiss firm performs well even under the current circumstances, that is usually reason enough for a parent company to carry out further investments.

authentic source for new investors than anything else.

In fact, it is a hundred times more effective than anything the chamber could say.

Switzerland is a small country where the business elite has close ties with one another, and therefore they listen to each other. What’s more, they look for opportunities to share business experiences with each

targets. Hungary’s share in Switzerland’s foreign investments was only 0.2% at the end of 2010. However, even with this marginal status, Hungary takes third place in the region in terms of Swiss FDI inflow jointly with Romania, after Poland and Czech Republic.

However, a new tendency has emerged. Up until now, Swiss-Hun-

garian business relations were like a one-way street, with mostly Swiss companies investing in, and coming to, Hungary. But this street is slowly becoming two-way: Hungary’s Richter has acquired PregLem, a Swiss biopharmaceutical company that focuses on the development and commercialization of women’s reproductive medicine.

This is due to the narrowing possibilities in the Hungarian domestic market, and to the fact that several Hungarian small- and medium-sized companies have now reached a level when they can start thinking about exploring other markets, and I have also seen increased interest from them in possible expansion in Switzerland over the last couple of years.

Q: HOW CAN THE CHAMBER ACCELERATE THIS TENDENCY? A: As I mentioned earlier, our main role is to make it possible for new foreign investors and those who have been in Hungary for some time to meet up. Being a non-profit organization without state support, the sole revenue of the chamber

comes from membership fees. Therefore we need to operate cost-effectively and transparently, and we can’t and don’t want to offer services like other chambers with larger budgets do.

However, we have a network both in Hungary and in Switzerland that makes it possible for us to connect interested investors with the relevant state organization or companies. The same applies for Hungarian firms inquiring about business opportunities in Switzerland: we maintain good relationships with several chambers of industry and commerce, law offices, and tax consultants in Switzerland.

Just most recently we have rebuilt our website (www.swisscham. hu), making it more informative for our members and potential members alike. We also publish our newsletter regularly.

One of our future goals is to further improve communication between the chamber and its members, and also among chamber members. We are working on a platform where companies will be able to directly get in touch with

each other or with the institution or organization they are looking for.

In spite of our relatively restrained budget, we keep focusing on organizing conferences, professional forums, roundtable discussions, and business lunches, to which we invite well-known professionals and decision-makers from a given area.

Q: DOES THE CHAMBER DO ANY LOBBYING? A: No, we don’t do classic lobbying, as we have member companies from various industries, and their interests might be different in some cases. However, if you mean representing the general interest of our members regarding, say, taxation or legal issues, we occasionally do cooperate with other chambers in lobbying for such interests. But to be honest, I’m not sure if lobbying makes much sense now when the government is into law making at full speed. I hope that once it slows down and fine-tuning can begin, the government will be open to the suggestions of market players – at least, we are open to cooperate. PF

22 2 BusinessSpecialReport BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

Small Switzerland’s gigantic SWISS WATCHES

Switzerland’s most renowned products are its watches. Swiss watch making’s history dates back to the middle of the 16th century: in 1541, the reforms implemented by John Calvin as well as new laws against wearing jewelry forced goldsmiths and jewelers in Geneva to turn to a whole new craft. By the end of the century, Genevan watches were already well known for their high quality. The Watchmakers’ Guild of Geneva, created in 1601, was the first such organization to be established anywhere in the world.

The following centuries brought new inventions and special features, such as the perpetual calendar, the flyback hand, and chronographs. Increases in productivity, the interchangeability of parts, and standardization progressively led the Swiss watch industry to mass production – and eventually to world supremacy by the early 20th century. However, its now most popular product, the wristwatch, wasn’t introduced until the end of WW I. It was a Swiss company, Centre Electronique Horloger (CEH) in Neuchâtel, which developed the world’s first quartz wristwatch in 1967 – the famous Beta 21. But the appearance of quartz technologies and the economic crises of the ’70s and ’80s led to a serious contraction of the sector: the number of employees fell from some 90,000 in 1970 to a little over 30,000 in 1984.

Nowadays, the Swiss watch industry is stronger than ever: it was the leading exporter of clock and watch products in 2011, with a share of more than 50% around the world and a revenue of CHF 19.3 billion.

Over the centuries, Swiss watch making became a state-of-the-art industry possessing many world titles: the first wristwatch, the first quartz watch, the first water-resistant wristwatch, the thinnest wristwatch in the world, the smallest and the most expensive watch in the world, and so on, and so on.

SWISS ARMY KNIFE

Not too surprisingly, the Swiss army knife was originally neither more nor less that its name indicates: a standard piece of equipment for Swiss soldiers. Gaining international reputation after WW II, dozens of different types of Swiss army knives are now on sale in more than 100 countries, and the brand is one of the country’s most renowned.

During the 1880s, the Swiss Army decided to purchase a new knife, one that was suitable for opening canned food and for disassembling the Swiss service rifle, which required a screwdriver for assembly. In 1891, Karl Elsener, then owner of a small company in Ibach, set out to manufacture the knives, but Elsener was not satisfied with its first incarnation. In 1896, Elsener succeeded in attaching tools on both sides of the handle using a special spring mechanism. This invention was quite outstanding at the time, allowing Elsener to attach a second, smaller cutting edge and an indispensable corkscrew, and led the Swiss army knife to fame and glory.

He named his company Victorinox, after His mother Victoria and inox, a synonym for stainless steel. From 1893, another Swiss company, later known as Wenger after its owner, started manufacturing a similar product and subsequently also won military orders. For more than 100 years, these two companies supplied the Swiss Army and the world with knives, but in 2005 Victorinox bought Wenger to become, once again, the sole supplier of Swiss army knives. However, both companies’ products remain on the assembly line, which produces about 34,000 Swiss Army knives, 38,000 multi–tools and 30,000 household and kitchen knives each workday.

Some of the Swiss army knives of the 21st century include features like laser pointers, USB storage drives, and fingerprint scanners with data encryption built in. But the system is still the same old 100-year old mechanism: all the implements, from blades to data drives, are foldable or set on springs to disappear when not in use.

In recognition of the fact that the Swiss army knife is not just an everyday tool but also a fine piece of functional industrial art, the Champion, Victorinox’s flagship model prior to the introduction of the SwissChamp in 1986, is on display in the New York Museum of Modern Art’s Permanent Design Collection. The knives are used by many armies around a world, and have been to the top of Mt. Everest countless times, but the popularity of the Swiss army knife has already expanded beyond our planet, as it is also standard equipment for all NASA astronauts.

2 BusinessSpecialReport 23

BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

icons

Longevity, accuracy, luxury, and superiority are expressions commonly associated with Swiss products of all kinds. The famous and unique nine letters “Swiss made” – unlike the practice in most other countries practice where the phrase “Made in (insert appropriate country name here)” is used – have become an assurance of quality over the centuries.

SWISS PHARMACEUTICALS

The origins of the pharmaceutical industry can be traced back to chemical industries in the upper Rhine Valley of Switzerland. One of the pioneers was Johann Rudolf Geigy-Gemuseus, who began trading in 1758 in “materials, chemicals, dyes and drugs of all kinds” in Basel. Like many other industries in the region, Geigy was producing dyestuffs. When dyestuffs were found to have antiseptic properties in the late 19th century, a number of these industries turned into pharmaceutical industries as well.

The unregulated nature of medicines during this period meant that there was a far less rigid distinction between the “pharmaceutical” and “chemical” industries than nowadays. Companies around the world focused as much on insecticides, toothpaste, citric acid for soft drinks, and hair gel as on medicines. Pharmaceutical and chemical functions fit well under the same roof: Giegy introduced its first major pharmaceutical product, the anti-rheumatic Butazolidin, just a year after its researcher received the Nobel Prize for discovering the effectiveness of DDT as an insecticide for malaria-spreading bugs.

Even if pharmaceuticals have a long history in Switzerland, a small domestic market and the lack of chemical raw materials induced a focus on the production and world-wide marketing of specialized chemicals and pharmaceuticals with high added value, so it should come as no surprise that Switzerland is at the forefront of R&D. Two of Switzerland’s biggest pharmaceutical firms, Roche and Novartis (created in 1996 from the merger of the Ciba-Geigy and Sandoz Laboratories), along with the universities of Basel and Zurich and ETHZ, are backing a network to coordinate Swiss research and education in the field. Research and development for new products being the lifeblood of the Swiss pharmaceutical industry, expenditures on this field is permanently funded by today’s income. As a result, in 2011 the top 10 pharmaceutical companies’ sales exceeded CHF 146 billion, or 80% of Greece’s entire GDP.

SWISS CHOCOLATE

Christopher Columbus brought the first cocoa bean to Europe in the beginning of the 16th century, but it took several hundred years before the first chocolate bar was produced. Chocolate, the secrets of which were learned by Spanish conquistadors from the Mayans and Aztecs, first conquered Europe’s royal households in the form of a drink mixed with honey and herbs.

Knowledge of chocolate reached Switzerland only in 1697, after the mayor of Zurich, Heinrich Escher, visited Brussels. There he drank chocolate and returned home with news of the new sweet drink.

Even so, chocolate manufacture did not begin in Switzerland for more than another 100 years. In the 18th century, Italy became a center of confectionery and chocolate making, drawing practitioners from around Europe. Many chocolatiers from the Ticino (Val Blenio) and the Grisons who had learnt their crafts in Turin, Milan and Venice left home to work abroad in the 19th century, founding family-oriented manufacturing businesses in the main cultural centers in Europe such as Amsterdam, Frankfurt, Paris, London and St. Petersburg. Their know-how flowed back to Switzerland’s chocolate pioneers.

It was an “apprentice” from Italy, Francois–Louis Cailler, who opened the first Swiss chocolate factory in a former mill near Vevey in 1819. Decades later in 1876, M. Daniel Peter added milk to chocolate to produce a smoother tasting substance. After eight years of experiments to perfect the chocolate, he took his product to Henry Nestlé, the maker of evaporated milk. As Nestlé had perfected the manufacturing process of condensed milk, he and Peter hit upon the idea of mixing sweetened condensed milk with chocolate.

Thanks to Nestlé and Peter and the invention of conching (a process of refining) by Rodolphe Lindt, the Swiss chocolate industry became one of the greatest in Europe. In 2011, 176,332 tonnes of chocolate was produced, of which 60.7% was sold abroad. The quality of Swiss milk chocolate needs no better advertizing than the fact that with its average per-capita chocolate consumption of 11.9 kg, Switzerland tops the global leader board. KK

24 2 BusinessSpecialReport BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

Swiss companies in Hungary Ranked in alphabetical order

COMPANY WEBSITE

DESCRIPTION OF ACTIVITY

YEAR ESTABLISHED

TOP LOCAL EXECUTIVE

ADRESS, PHONE, FAX EMAIL

Planning, sales and installation of industrial and energetic systems

1991

Tanja Vainio

1138 Budapest, Váci út 152–156.

(1) 443-2168, (1) 443-2211 attila.mathe@ hu.abb.com

Tax consulting, auditing, accounting, payroll

1993

József Láng

1037 Budapest, Montevideo u. 3/A (1) 430-3400, (1) 430-3402 abt@abt.hu

Letting office complexes, storage and other real estate owned by the company group, operating real estate, leasing out Liebherr LTM type mobile telescopic cranes that meet special industrial requirements

2009

Győző Székelyi

1022 Budapest, Bég u. 3–5.

(1) 346-8869 info@appeninnholding.com

Textile trading

2005

Thomas Krenn

1191 Budapest, Vak Bottyán u. 75/A-C (70) 380-2140 carmen.fogarasisos@charles-voegele.com

ABB Kft www.abb.com

ABT Treuhand Group www.abt.hu

Appeninn Nyrt www.appenninn.hu

Charles Vögele Hungária Kereskedelmi Kft www.charles-voegele.hu

Emil Frey Import Kft. MM Import Kft. www.subaru.hu, www.mitsubishi.hu

Official distributor of Mitsubishi and Subaru automobiles

Gábor Mátrai

Emil Frey Magyarország Kft

Car repair, technical exams, accessories distribution, technical consultancy, insurance administration

Dezső Kiss

www.emilfrey.hu

Holcim Hungária Zrt www.holcim.hu

1149 Budapest, Mogyoródi út 34–40.

(1) 470-9010, (1) 383-0701 info@emilfrey.hu

–

Cement production and distribution, concrete production and distribution

–

Richard Skene, Irén Márta

1037 Budapest, Montevideo u. 2/C (1) 398-6000, (1) 398-6013 iren.marta@holcim.com

Production and sales of quality comestibles

1991

Andrea Zambelli

1095 Budapest, Lechner Ödön fasor 7.

(1) 224-1200, (1) 224-1214 krisztina.suhajda@hu.nestle.com

Medicine import, contact lens retail and wholesale

1991

Tamás Szolyák

1114 Budapest, Bartók Béla út 43–47.

(1) 457-6500, (1) 457-6600 infoph.hungary@novartis.com

Plasticware manufacturing

1996

Dániel Graf

8725 Iharosberény, Csurgói u. 34.

(82) 594-900, (82) 594-901 info@novoplast.hu

Watch and jewelry distribution

1991

Mariann Zombori

1062 Budapest, Andrássy út 64.

(1) 413-3740, (1) 413-3741 orexzrt.@orex.hu

Nestlé Hungária Kft www.nestle.hu

Novartis Hungária Kft www.novartis.hu

Novoplast Hungária Kft www.novoplast.hu

Orex Zrt www.orex.hu

2 BusinessPartnerWatch 25

BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

COMPANY WEBSITE

Philip Morris Magyarország Kft

DESCRIPTION OF ACTIVITY

YEAR ESTABLISHED

TOP LOCAL EXECUTIVE

ADRESS, PHONE, FAX EMAIL

Wholesale tobacco

1992

Denis Gorkun

2151 Fót, Akácos, East GateBusiness Park, D2 épület, (1) 450-4400, (1) 450-4445 edit.csakanyi@pmintl.com

Electric enclosures, terminal blocks, test probes and operating enclosures, a system of aluminum profiles, complete handling technology for mechanical engineering, drive systems and drive units for hospital beds and for furniture industry.

1993

Zoltán Nagy

6000 Kecskemét, István király körút 24.

(76) 515-500, (76) 515-516 nagyz@phoenix-mecano.hu

Magazine publishing

1993

Attila Mihók

1082 Budapest, Futó u. 35–37.

(1) 460-2500, (1) 460-2501 info@ringier.hu

Medicine production, production of medical equipments

1997

Martin Hangarter

2040 Budaörs, Edison u. 1.

(23) 446-801 martin.hangarter@roche.com

Audit, certification, consultancy, inspection, outsourcing, testing, training, verification

1991

Ladislav Papik

1124 Budapest, Sirály u. 4.

(1) 309-3300, (1) 309-3333 info.hu@sgs.com

Maintenance, services, welding and painting of aluminum car bodies for electronic and diesel multiple units

2005

Zoltán Dunai

1071 Budapest, Városligeti fasor 47–49.

(1) 327-4060, (1) 327-4068 stadler.budapest@stadlerrail.com

Transporting, logistics

2005

Bernhard Wodl

1095 Budapest, Lechner Ödön fasor 6.

(1) 411-9950 (1) 267-2638 info.hungary@swiss.com

Wealth management, research, planning, investing, business services, exclusive services

–

–

1051 Budapest, Dorottya u. 6.

(1) 268-4900, (1) 266-3600 –

Office furniture manufacturing and sale

1950

Mária Szmodis

2092 Budakeszi, Kilátó u. 1.

(20) 925-9956 maria.szmodis@artivdesign.com

Distribution of dishes, cosmetics, appliances through agents network

1991

Slobodan Matovic

1087 Budapest, Asztalos Sándor u. 9–12.

(1) 886-3140, (1) 333-1930 marketing@zepter.hu

www.pmi.com

Phoenix Mecano Kecskemét Kft www.phoenix-mecano.hu

Ringier Kiadó Kft www.ringier.com

Roche (Magyarország) Kft www.roche.hu

SGS Hungária Kft www.hu.sgs.com

Stadler Hungary www.stadlerrail.hu

Swiss International Air Lines Ltd www.swiss.com

UBS Magyarországi Bankképviselete www.ubs.com

Vitra International AG www.vitra.com

Zepter International Ungarn Kft www.zepter.hu

3 Socialite

BBJ

READING CORNER

Great by Choice Hungary between democracy and authoritarianism

30 30

Rigor, clarity and consistency form the new Penal Code One of the most important requirements regarding the new Penal Code is rigor, but clarity and consistency are important aspects as well, said Róbert Répássy, state secretary at the Justice and Administration Ministry. The new legislation is due to come into force next year.

The state secretary referred to professional criticism that the new Penal Code reduces the room for judges to use their discretion. Répássy made it clear that the decision was intentional, as the legislator is entitled to its view. As an example, he mentioned driving under the influence (of drugs or alcohol), which will be penalized by disqualification from driving with no regard to the quantity of alcohol consumed.

In his lecture to members of the conservative civil organization the National Forum, Répássy pointed out controversial points of the draft as well. “It is a matter of discussion whether one can take another’s life

NEWSLETTERS

Business and economic intelligence We all of us make better decisions if we understand our environment in depth. Although it is crucial to receive essential information promptly, we can rarely afford the luxury of wasting precious time on browsing the web, gathering and filtering news for ourselves.

The editorial staff of the Budapest Business Journal saves you time and money. We send you daily the most important news and offer in depth analysis. Our one-stopknowledge center is your musthave support for better decisions!

while defending himself if the attacker is not a direct threat to life. We believe that the defender can’t be forced to consider his actions when attacked by an armed man in the middle of the night, so the risk has to be taken by the attacker,” he said.

Under the new code, children under 14 years of age will find they can be charged for murder or violence against life. “The commandment of ‘Thou shalt not kill’ must be known at the age of 12 years as well,” Répássy said. However, after a comprehensive psychological examination, juvenile delinquents can be sentenced to a maximum of four years in a youth detention center.

Regarding the death penalty, Répássy highlighted that of the 48 countries in Europe, it was only used in Belarus – a country that had not been admitted to the Council of Europe. In addition to the prohibition of international conventions, the possibility of miscarriages of justice should also to be considered. The man wrongly accused and convicted of the robbery of a bank office in Mór in 2003 and of the killing of eight people would have been executed by now had there been a death penalty in Hungary, he pointed out. So the new proposal is not in favor of the restoration of death penalty.

A novelty in the new Penal Code would be that children

who have suffered sexual abuse could file a complaint up to the age of 23. “It won’t be easy to prove, but we don’t want to leave anyone in the belief that his child will outgrow the crimes committed against him,” Répássy said.

However, the draft of the new Penal Code has not been uniformly applauded by all the organizations familiar with its content.

From the beginning of 2012, five legal aid organizations – Amnesty International Magyarország, gay support group Háttér Társaság a Melegekért, the Hungarian Helsinki Committee, the Legal Defense Bureau for National and Ethnic Minorities (NEKI) and the

Hungarian Civil Liberties Union (TASz), have formed a non-governmental platform to take more effective public action against hate crimes. According to TASz, a serious shortcoming of the current regime is that the Penal Code does not qualify as hate crime cases when someone is threatened with death on grounds of their nationality or ethnicity. The organizations have compiled a package of detailed proposals, in which stronger – internationally recognized – legal protection for the implementation of comprehensive reforms is proposed against racist, anti-Semitic, homophobic and other biasmotivated crimes. KK

1

Hungary a.m.

2

Energy today

3

regional today

Order the package now and receive a

MASSIVE DISCOUNT

Gather expert knowledge about the status of the Hungarian economy, business trends and politics on a daily basis. Read between the lines and fi nd the most important information that will help you make safe decisions.

Does Hungary, and Central Europe in general, hold a strategic position in the Continent’s energy supply?

Does the stability of Europe depend on the energy politics and economy of the region? Focus on the market and see the forces that move prices and diplomacy.

Central and Eastern Europe has rejoined Europe, indeed, helped forge a new Europe, after decades of isolation.

The CEE nations share common features in their post-privatization economies and ex-soviet heritage.

See the big picture and the individual pieces of the mosaic at the same time.

HUF

537,000

(€1,800)

299,000

HUF

(€1,000)

PLEASE VISIT OUR WEBSTORE TO SUBSCRIBE

www.bbj.hu/store/

WWW.BBJ.HU

27

Budapest Business Journal | June 15 – June 28

Electronics industry in focus The electronics industry is widely considered as one of Hungary’s breakout points. An AmCham conference on the subject said the export-oriented sector shows resistance to the crisis and has a great potential to create jobs. However, in some cases, it still needs more support from the state.

That the American Chamber of Commerce in Hungary (AmCham) should organize a one-day conference, entitled ‘The future’s key sector – electronics industry in focus’ (held in Budapest’s Marriot on June 5), should be of no great surprise. Not only does this sector attract a lot of American investment, it also generates 3.5% of Hungary’s GDP, providing livelihoods for 100,000 families and offering business opportunities to numerous companies.

As the Hungarian electronics industry produces almost fully for export, the sector does not much depend on local economic circumstances, one of the

reasons why it is being identified as a possible tool for Hungary to finally step on the path of long-term economic growth.

According to Károly Bukvai from the Hungarian Investment and Trade Agency (HITA), the sector attracts investments continuously. This is no surprise since its aging society is likely to sharply increase demand for medical electronics devices that will be in demand in the well-running international market as well as in Hungary. Not to mention that Hungary already has a good name when it comes to consuming electronics.

László Ábrahám, the managing director of hardand software producer NI Hungary, pointed out that a major advantage of the electronics industry, that “if Hungarian market players can improve technology, we do not have to feel frightened if the work force is one cent cheaper in China”.

And yet, as AmCham president István Havas pointed out, the sector is

not mentioned in Hungary’s state development program, the New Széchenyi Plan (ÚSzT): “While the auto industry is nicely presented in the ÚSzT, there is not a single word in the document about the electronics industry,” he said.

His criticism was not an isolated one. Ábrahám also warned that the decreasing quality of science education in Hungary might result in serious workforce problems in a few years’ time. “This needs immediate state intervention,” he said.

On another crucial issue, namely recent changes in the regulations of the environmental fee, which eliminated the electronics manufacturers’ right to take care of the proper waste management instead of paying the fee, now obligatory for all manufacturers after certain products, Ádám Balog, deputy state secretary for taxation at the National Economy Ministry asked for patience from the market players, while adding that there is as yet no intention to ease the regulation. ÁV

Financial education gains popularity as a CSR activity

The financial and economic literacy of citizens has a significant and direct impact on economic performance and stability, participants of a conference organized by the British Chamber of Commerce in Hungary (BCCH). Hungarian enterprises, financial corporations, the National Bank of Hungary (MNB), and the government are equally keen on deepening the financial and economic literacy of citizens; according to statistics, Hungarians are economically undereducated and distrustful of financial institutions. According to recent GfK research data, 37% of Hungarians would rather not

have any banking relations and 22% show spitefulness towards banks.

Despite the fact that the new National Core Curriculum includes the financial education of teenagers, the lack of pre-defined educational material, mandatory courses, and competent teachers leave experts doubtful regarding the success of the initiative.

But financial corporations do realize that proper financial education has a long-term impact and makes economic growth sustainable. Participating companies Provident, ING and PricewaterhouseCoppeers (PwC) started their own education programs for

JUNE 18

JUNE 21

JUNE 22

Speed Business Meeting LOCATION Kempinski Hotel Corvinus – Ballroom, 1051 Budapest, Erzsébet tér 7-8.

TIME 6 – 9 p.m.

FEE HUF 5 000 + VAT/person ORGANIZER Canadian Chamber of Commerce in Hungary CONTACT www.ccch.hu

The 3rd Canadian BBQ LOCATION Gundel Terrace 1146 Budapest, Állatkerti út 2.

TIME 6 p.m.

FEE HUF 15,500 +VAT ORGANIZER Canadian Chamber of Commerce in Hungary CONTACT info@ccch.hu

Business Forum with Zoltán Balog, Minister of Human Resources LOCATION Budapest Marriott Hotel, 1054 Budapest, Apáczai Csere János u. 4.

TIME 12:30 – 2:15 p.m.

FEE AmCham members: HUF 10,000 + VAT; non-members: HUF 25,000 + VAT ORGANIZER American Chamber of Commerce in Hungary CONTACT ildiko.takacs-berka@amcham.hu, +36 1 428 2084

JULY 2

JULY 3

SEPT 15

Business lunch with Noémi Alexa, General Director of Transparency International LOCATION InterContinental Budapest 1052 Budapest, Apáczai Csere János u. 12-14.

TIME Noon FEE BCCH members: HUF 11,500 + VAT; non-members: HUF 15,000 + VAT ORGANIZER British Chamber of Commerce in Hungary, French-Hungarian Chamber of Commerce and Industry CONTACT www.bcch.com

AmCham Seminar & Cocktail – Leadership Resilience: Surviving and Thriving in Tough Times LOCATION Kempinski Hotel Corvinus 1051 Budapest, Erzsébet tér 7-8.

TIME 4 – 7 p.m.

FEE Colleagues of AmCham member companies: Free of charge; Invitees of SpenglerFox: Free of charge; non-members: HUF 15,000 + VAT/person ORGANIZER American Chamber of Commerce in Hungary CONTACT ildiko.takacs-berka@amcham.hu

AmCham Family Sports Day and Annual Soccer Tournament LOCATION GLOBALL Football Park & Sporthotel, 2089 Telki, Szajkó utca 39.

FEE Registration required ORGANIZER American Chamber of Commerce in Hungary CONTACT ildiko.takacs-berka@amcham.hu

students, undereducated citizens, even social workers, through CSR projects.

“The real problem is the lack of information, not the crisis,” said Csongor Hajna, CSR Manager at Provident.

FAKT, a student organization of Corvinus University, held courses in 10 high schools to help young students understand that “competition and financial institutions are not evil”. The experiences and project ideas of companies implementing their own financial education programs are to be forwarded to the government and followed up, Gergely Mikola, chairman of the BCCH said. KK

JULY 1 Canada day DESCRIPTION Celebration of Canada’s 145th birthday LOCATION Margaret Island, meeting point at the

Centenarian Memorial FEE Free of charge but registration required ORGANIZER Canadian Chamber of Commerce in Hungary CONTACT www.doodle.com

NOV 10 Lobster Dinner LOCATION InterContinental Budapest,

1052 Budapest, Apáczai Csere János u. 12-14.

ORGANIZER Canadian Chamber of Commerce in Hungary CONTACT info@ccch.hu

Berlin! advanced

A FORAY BEYOND TOURIST GUIDES

DO

STAY

last H üt tenpa

P ropel

ler Isl and

Bread and But ter Show

r Show Bread and But te

Trabi Safari

P ropeller

S

Island

tart your unusual trip by booking at an unusual hotel. Have you ever slept in a museum? Or in a photo studio, in a bed under the floor? Or in a coffin? Have you ever tried a hotel suite with beds installed in hanging lions’ cages? If you would like to try the most unusual hotel in Europe, book into Propeller Island, a living vision of German artist Lars Stroschen. Each room is a space of contemplation that strikes you with a provocative or deliberately lulling ambiance. Slanted floors and hanging applications, a play with lights and hues as with melodies. The hotel sits in the heart of Berlin (Albrecht-Achilles Straße) just off the Ku’Damm.

Rooms won’t come cheap (prices range from €85 to €190), and not all come with a bathroom. A less extreme yet unconventional place accommodates its guests in vintage caravans. At Hüttenpalast (Hobrechtstraße 66) you can sleep in one of the caravans for €45. The wagons are parked indoors, so you won’t land in a muddy slush on a rainy morning either.

R

eady d for f ffun?? Fi First, give i the h TTrabi bi SSafari f i a chance h to rewind i d time, and sit behind the steering wheel of the legendary car of communism: a Trabant cabriolet. The car requires a special technique to steer (as communism itself did), and in the meantime, a trained guide gives you the history of all the Berlin sights. Prepare for other tourists to photograph you as you rattle along. What about a thematic sightseeing tour given by a friend?

Of course you do have a friend there! Just go to the website of Berlin Greeters and pick a perspective you would like to see Berlin from (street art, sustainable buildings, etc.). The Greeters will assign a Berliner to show you around like a friend, giving you the talk of the town, the gossip, the history. Interestingly, the whole service comes for free. If you ask a greeter about Tempelhof Airport, they will tell you why Berliners will fight real estate sharks to the last man to keep the place as it is today. The former airfield serves as a public picnic/jogging/kiting/dating hotspot where you will always find people to network with. Moreover, the gigantic central hall houses a range of programs throughout the year. The best of these is arguably Bread & Butter – one of the most unusual mass fashion shows of the world. Early July, the show attracts hundreds of thousands of visitors who share extravagant parties (with breathtaking live dance and laser performances in chic dresses) and shop in a lavish maze of top fashion brands.

SHOP

Flea market Maybachufer

Flea m arket M ayba-

Flea market Mauerpark

S

hopping takes on many faces in Berlin. The flashy dimension is all around, but do not miss the junky one either – visit the flea market in Mauerpark! The locals (i.e. people from all around the globe currently living in Prenzlauer Berg) are easygoing, so do not shy away from chatting and bargaining. Berlin insiders contend that to date, the hippest flea market is the one in Kreuzkölln (Maybachufer), the borderland between Neukölln and Kreuzberg. Every third Sunday sees a colorful bustle of sellers (home-made clothing, bio-food, fair-trade coffee, etc.) and locals.

From here, you can also take in Weserstraße and visit its secondhand shops and the hippest bars where the yukis (young urban creative internationals) hang out round the clock. By the time this piece goes to print, another couple of downtrodden shops will have turned into local designer boutiques – so much for the speed of change in Kreuzkölln. Music records have a special temple in Berlin called Gelbe Musik (Schaperstrasse 11, Wilmersdorf), where browsing makes you lose track of time: you will find mostly industrial, minimal, techno, and electronic vibes, but also stacks of rarissime CDs and music literature.

SPONSORED BY

Visiting Berlin’s top sights is a must, but by no means is it enough to fathom the versatility of the city. Rumor has it that Berlin offers a range of wonderful oddities, from outlandish hotels to glorious street art and a touch of post-communist romanticism. Ready to leave the beaten track? Then prepare for the unpredictable.

REFRESH

Badeschiff

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.

MUSE

Kunsthaus Tacheles

Hotel

DIGEST

Unsicht bar

Unsicht bar

Teufelsberg

Museum of Extraordinary Objects

L

ong shopping sprees call for refreshment. For this, visit one of the most successful baths in Berlin, one that actually floats on the Spree. Badeschiff, a former barge hull transformed into a pool, welcomes couples and businesspeople, youngsters and the elderly alike. You get everything you need: crystal-clear water, a bar, sunshine at day, and DJ’s at night. They cover the pool during the winter and add saunas to the experience. Berlin loves water anyway.

Farther from the center (in Rahnsdorf) you will find a gem called Neu Venedig (New Venice), a little settlement that uses the deltas of the Spree river as canals. Neu Venedig offers romantic boat cruises among leafy properties but despite its name, the place more resembles Bruges or some residential parts of Amsterdam. You can pick Teufelsberg as the destination for another jaunt, although it may yield a somewhat spooky experience. The Americans, who sought to monitor Russian radio traffic, built the former radio station. After the reunification of Germany, it was abandoned. If you would like to visit the sight, book a tour at http://www.berlinsightout.de/. If you long to be back in nature, hop on a bike, take your family or pets, and enjoy the view from the second-highest spot of Berlin.

BERLIN FACTS

Unsicht bar

C

an a museum be whacky? Kunsthaus Tacheles serves as a textbook example. Arguably the noisiest street-art spot in Berlin, the 9,000sqm ramshackle building houses hundreds of modern sculptures and paintings. If the ‘Sistine Chapel of Street Art’ awakes the graffiti fan in you, visit the neighborhoods around Schlesisches Tor, Görlitzer Bahnhof, Kottbusser Tor, Schlesische Straße, Skalitzer Straße, Adalbertstraße, Wrangelstraße and Mariannenstraße for the best public graffiti. You will find a very different museum-experience at Musem der Unerhörter Dinge (Museum of Extraordinary Objects), which offers strange objects – at first sight. Deeper inside, you will realize that each object stands for a remarkable human story. The Berliner Unterwelten (Berlin underground) experience leads you to the guts of the city – full of bunkers and underground labyrinths. The program’s vertical opposite is a visit to the Zeiss Planetarium, where modern technology makes stargazing even better.

B

erlin would not be Berlin without unusual restaurants. Unsicht Bar (Gormannstraße 14) for example, gives your eyes a break – in the bar, inky darkness rules, and blind waiters explain how to use the tableware to jiggle into your mouth the boned, prechopped pieces of veal, fish, beef or a vegetarian course. Make no mistake, the cuisine has a great reputation among Berliners. Nocti Vagus (Saarbrücker Straße 36-38), builds on the blind-eye concept as well, but is slightly swankier and more expensive.

30 3 SocailiteReadingCorner BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

Great by Choice Jim Collins has been called ‘the most influential management thinker alive’ (Fortune Magazine). Ten years on from the publication of the worldwide bestseller Good to Great, he returns with a book that breaks completely new ground in its analysis of excellence in times of uncertainty.

Why do some companies thrive on uncertainty, and even chaos, while others do not? This is the question that underlies Jim Collins’

groundbreaking new book, ‘Great by Choice’. Based on nine years of research, Collins and colleague Morten Hansen enumerate the principles for building a truly great enterprise in unpredictable, tumultuous, and fast-moving times.

‘Great by Choice’ distinguishes itself from Collins’ previous work by focusing not just on performance, but also on the type of unstable environments faced by leaders today. With a team of more than 20 researchers, Collins and Hansen studied companies that rose to greatness – beating their industry indexes by a minimum of ten times over 15 years – in environments characterized by big forces and rapid shifts that leaders could not predict or control. The research team then contrasted these ‘10X companies’ with a care-

A book by Jim Collins and Morten T. Hansen

fully selected set of comparison companies that failed to achieve greatness in similarly extreme environments.

The results of the study were full of surprises. The best leaders were not more risk taking, more visionary, and more creative than the comparisons; instead they were more disciplined, more empirical, and more paranoid. Innovation by itself is not the trump card in a chaotic and uncertain world; more important is the ability to scale innovation, and to blend creativity with discipline. Acting on the belief that leading in a ‘fast world’ always requires ‘fast decisions’ and ‘fast action’ is a good way to fail; the great companies changed less in reaction to a radically changing world than the comparison companies did.

‘Great by Choice’ challenges conventional wisdom with thought-provoking and supremely practical concepts. It also presents a provocative and original examination of the role of luck.

Collins and Hansen argue that the great companies and the leaders who built them were not luckier than the comparisons, but they did get a higher ‘return on luck’. Combining meticulous research with engaging stories, they show convincingly that even in a chaotic and uncertain world, greatness happens not by chance, but by choice. ■ ‘Great by Choice’, Jim Collins and Morten T. Hansen, published by Random House Business Books ISBN 9781847940889 Available to order through www.hungaropress.hu

Paul Lendvai

Hungary between democracy and authoritarianism What was life like in Hungary under János Kádár, the Hungarian who, backed by Soviet forces, crushed the 1956 uprising? Who took over from him anyway?

How did József Antall, the first freely elected prime minister, manage the country – and his fractious party – in the formative years after the fall of communism?

BBJ KESTER EDDY

Paul Lendvai, a Hungarian journalist who chose exile in Vienna to life under communism in 1957, provides answers to these questions in his latest book ‘Hungary: Between Democracy and Authoritarianism’.

Lendvai, whose long career has given him access to most

Hungarian leaders (including Kádár and Antall), paints

vivid pictures of the struggles, successes, and (all too

often) the failings of each of them from the late 1980s. Just how did Ferenc Gyurcsány, for example, rise from relative obscurity to defeat the favorite of the Socialist elite in 2004? (Answer: hard work, and mother-in-laws are not always a bad thing.)

Most subjects go through Lendvai’s fine-gauze strainer and come out badly – particularly Péter Medgyessy (PM, 2002-2004) and László Sólyom (President, 2005-2010).

But the essential theme of this volume is how Viktor Orbán, a one-time student dissident clothed in liberal orange, spotted the gap left by the demise of the center-right MDF in 1994, jettisoned previously espoused principles, and with resolute – though Lendvai prefers the word ruthless – single-mindedness, plotted his path to power.

On the way, Orbán learned lessons – such as how to ensure favorable press coverage (Answer: cultivate links with rich business leaders and have them take over media outlets).

Equally dangerous, Lendvai documents how Orbán continuously fanned the embers of nationalism, using both real and perceived injustices at home (such as ‘excessive’ foreign ownership of Hungarian businesses) and the near abroad (the ‘repression’ of ethnic Hungarian minorities) to raise emotions.

Meanwhile, Orbán, or more likely his close allies, were happy to allow, if not gently encourage, the far right to take the language (and sometimes the actions) of anti-Semitic and anti-Roma sentiment ever more strident and hateful.

Following the landslide election victory in 2010 and Orbán’s extraordinary grip on power, Lendvai paints a grim picture regarding the likelihood of any future change: “Even if a new government wins a simple majority [in the 2014 elections], basic policies instituted and key officials appointed (for terms of six to nine years!) by the Fidesz government cannot be changed,” he writes.

The book, bar the last chapter, is a translation of ‘Mein Verspieltes Land – Ungarn in Umbruch’, published in 2010.

Keith Chester, the translator, and the proofreader have done an exemplary job, with a superbly flowing English text: there is but one apparent flaw, on page 127, where surely thenPresident Sólyom (and not Péter Balázs, the foreign minister) caused outrage in Slovakia with an arrogant remark about “teaching little brothers European manners”.

Fidesz, and especially Jobbik, supporters, will surely create some form of Magyar fatwa in reaction to this volume; a better response would be a detailed and referenced riposte to the standard achieved by Lendvai.

Until then, the student seeking a crash course in modern Hungarian history need look no further. ■ ‘Hungary – Between Democracy and Authoritarianism’, Paul Lendvai, 256pp, published by Hurst, ISBN: 978-1849041966

3 Socialite 31

BBJ

WWW.BBJ.HU

Budapest Business Journal | June 15 – June 28

WHO'S NEWS

Do you know someone on the move?

Send information to research@bbj.hu

Boros resigned as sales director of Co-op Hungary on June 1. He had held the position for 13 years. He continues his career at an unnamed international IT company. Co-op will appoint a new sales director in the near future.

Báll joined CCCH on May 30 as external relations coordinator, succeeding Eva Fenichel.

Previously, Báll worked at the International Culture Center and has experience in EU project management and conference organization. At CCCH, she will be responsible for organizing chamber events, the Trade Mission, keeping touch with members and exploring new opportunities to attract new members to the chamber.

Name Bernadett Báll Current company/position Canadian Chamber of Commerce in Hungary/ external relations coordinator Previous company/position -/-

Name Péter Boros Current company/position -/Previous company/position Co-op Hungary Zrt/ sales director

Name Áron Javorniczky Current company/position Invitel Zrt/deputy CEO for strategic and key projects Previous company/position Invitel Zrt/business development director

In a newly created position at Invitel, Javorniczky is in charge of M&A and key projects, in addition to overseeing the company’s general strategic matters. He has been with Invitel for nearly eight years.

He obtained his degree from the Communications College of Budapest, studied at the University of Tampa in the U.S., and completed his executive MBA at the Central European University.

Name Gabriella Fábri Current company/position ConvergenCE Kft/head of property management Previous company/position EC Harris Hungary Kft/-

Fábri has joined ConvergenCE as head of its property management team. Previously, she worked for consultancy company EC Harris Hungary. She has 15 years of experience in real estate consultancy, development, investment and property management.

SPONSORED BY

Name Zoltán Novák Current company/position Kraft Foods Polska/ chairman of the board Previous company/position Kraft Foods Hungária Kft/ managing director

Name Zsolt Záprel Current company/position UPC Magyarország Kft/ marketing and content developer director Previous company/position McCann Erickson Kft/ managing director

Novák has been named chairman of the Polish subsidiary of Kraft Foods, effective of July 1. Novák has two decades of experience in the FMCG sector. Previously, he worked at Imperial Tobacco, Pepsi Cola International and Electrolux. He succeeds Stefan Golonka, who had headed Kraft Foods Polska for nearly 20 years.

Záprel is leaving the managing director’s post of ad agency McCann Erickson after five years to take over as director of marketing and content development at UPC Magyarország. Earlier, Záprel spent 13 years with British American Tobacco, and worked as deputy CEO in charge of marketing at T-Online.

[ PARTNER CONTENT ]

Recruitment – a sector hardly affected by the crisis Western companies are still hiring top level managers in Hungary where there are more than enough recruitment agencies to make the business competitive. Interview with Christian Zászló, executive manager at Michael Page Eastern Europe.

Q: How has the economic crisis impacted the recruitment businesses in Hungary? How viable is this sector in the current situation?

A: We have been living and recruiting in this crisis now for the past few years, and it has not been an easy market. But we have been able to grow our revenue in Hungary every year, and the prognosis is slightly positive for 2012 as well. It is mainly because our focus is on executive search and top-level management recruitment where our multinational clients (German, French, Austrian, US and UK companies) are still hiring. We have seen a decline in sales and marketing positions in the last 12 months but have seen an increase in finance positions. Even if there is a crisis, companies still need a CFO or a finance director. The sector is viable but I think it still needs some kind of correction. There

are too many recruitment companies that are mainly competing on price, and I do not think they can survive too long with such low fees.

Q: What makes for an efficient and reliable recruitment agency from the perspective of the client?

A: The main interest for the client is to receive strong candidates. Another essential element is speed. If it is not an executive search, even top-level management positions should be filled after six to eight weeks. It is very important to check the references of candidates in the process personally or by phone to avoid surprises. Having continuous contact with the client during and after the process of recruitment is essential, and so is consulting them.

Sending CVs is not enough; we have to offer solutions as well.

Q: Are there realistic chances of attracting highly skilled foreign employees to join, and increase the quality of, the Hungarian labor market?

A: This of course depends on the specifics of the positions. With the international network of Michael Page, our experience has been that many high level candidates are willing to work in Hungary. The main hurdle here is whether Hungarian language skills are required. If Hungarian language skills are not needed at the beginning, it is definitely possible to attract highly skilled foreign employees to work in Hungary. There are several EMEA or CEE headquarters in Hungary offering regional positions with a competitive salary as well. There are some blue chip Hungarian companies that, at the executive level, are open for non-Hungarian speakers and are also attractive to them. Interestingly enough, we had many ongoing regional searches in the CEE region where we were able to identify strong candidates in Eastern Europe who were as strong as, or even stronger than, their Western European counterparts.

Q: What new methodologies are practiced by competitive agencies in the changed market environment?

A: It is very important to point out that it is not only about new methodologies; you have to offer the client the right methodologies for their needs.

Advertising or doing an extensive direct search does not always make sense. It is important to identify exactly the needs of the client and then use a bundle of methodologies to approach the market. We call this the ‘multi-channel approach’.

Many agencies are now very actively using social platforms like LinkedIn or Xing, which are of

course among the channels we are using as well.

But you should always use additional channels, especially when it is about high-level positions.

C-level candidates do not always have the time to answer requests. In this case the relatively old methodology of direct search still seems to be the best. But networking is crucial and therefore social networks are ideal.

Q: What makes Michael Page unique, and what is its greatest strength in the region?

A: Michael Page Eastern Europe is dedicated to the recruitment of senior managers and executives in Central and Eastern Europe, covering 18 countries.

We can therefore offer our clients a unique database and network with top professionals from the entire region. Additionally, our clients benefit from the global network of Michael Page, with more than 150 offices worldwide, especially in the case of strong international candidates. The specialization of our consultants and their knowledge of the markets in which they operate make it possible to offer our customers a unique service, taking into account the respective uniqueness of each local market. Our consultants have great experience in the recruitment of highly qualified executives, and are mobile within Eastern Europe. This amount of knowledge and experience combined for the whole region is indeed unique.

www.michaelpageeasterneurope.com