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VOL. 20, NUMBER 14

I JULY 13, 2012 – JULY 26, 2012

Budapest Business Journal

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THE FRENCH CONNECTION

French companies significantly contribute to the Hungarian economy and thus to the economic development of the country, but they have also suffered as a result of the government’s unorthodox economic policies PAGES 14-21

BUSINESS

Q&A

BUSINESS

Free pass for services

Behavior changes faster during a crisis

Up for a future?

When the idea of a single European market first became tangible for 12 countries, the aims were clear: to allow people and businesses to move and trade freely across borders.

Indeed, a cross-border service sector could ease the woes of recessionstricken Europe – but the practice does not life up to the theory PAGE 11

The crisis has helped to change the behavior of Hungarians towards energy savings. And this could also help Hungary to reduce its dependency on foreign fossil resources, says Gérard Bourland, chairman-CEO of energy provider Dalkia Energia Zrt PAGE 18

Almost half a year has passed since the troubled Malév grounded its flights and there are still no signs of a new national airline getting airborne. Is the lack of progress harmful? And does Hungary need a national carrier at all?

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IMF, EU joint mission to arrive to Hungary Banks shut down 94 branches in H1

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From tinted glass to a single patent

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

FROM VENICE WITH LOVE – HUNGARY’S JUDICIAL REFORM In a possible end to the loudly expressed fears about Hungary’s new constitution and jurisdictional reform diverting Hungary from the path of democracy that have made the headlines periodically in the past six months, the government finally agreed to heed the criticisms of the Venice Commission, the Council of Europe’s advisory body on constitutional matters, and has now passed amendments to the controversial law.

The judicial reform has been widely criticized. Most of the negative comments made by the local and international press, arm-inarm with civil organizations, were attracted by the great power of the head of the newly established National Judicial Office (OBH).

The head of the body, Tünde Handó (the wife of prominent Fidesz member and EP representative József Szájer), has the right to pick judges and transfer judges or their cases to other courts. Moreover, Handó was appointed for nine years and even after her mandate expires, she can stay in office unless a successor can command a twothirds majority in the Parliament.

These fears reached the Venice Commission quite quickly. In its March report, the body stated in advance that the concentration of power in the hands of the president of the National Judicial Office lacked “sufficient democratic accountability” and the court overhaul “as a whole threatens the independence of the judiciary”. The body’s official report on the Hungarian judicial reform was published on June 19, strongly recommending several modifications.

In response to the remarks of the Commission, Hungarian Parliament on July 2 passed the amendments of the laws on courts.

According to the amendments, the president must leave office after serving the nine-year term and the bill will shift powers to the National Council of Judges (OBT) when it comes to naming or reprimanding justices. Also, the OBH president’s privilege of ordering fast-track extraordinary procedures in certain cases will be handed over to the OBT. The OBH will be able to transfer cases to another court only if by doing so the court will be shorter. Handó will also have to consult judges over the judicial system’s annual budget.

The amendments now approved also provide an appeal procedure against the results of job applications invited for judicial posts; applicants may submit an appeal to the court of public administration and labor, whereupon this court verifies the fulfillment of the conditions of appointment and job application conditions.

However, there is one measure the government has left unchanged even though it has very much been condemned by European officials. The law still calls for an immediate drop in the retirement age of judges from 70 to 62. The critics see this measure as Fidesz’s attempt to get rid of bothersome judges and replace them with close allies of the Fidesz party.

While media outlets close to the government have not commented on the amendments so far, the opposition press was happy to find another said-to-be-undemocratic bone to chew. And while the international press is now more interested in the euro crisis than the most recent legal amendments in Hungary, there have been some noteworthy pieces published previously, when the Venice Commission first raised concerns back in March.

THE VENICE COMMISSION HAS BASICALLY GIVEN AN ULTIMATUM TO THE HUNGARIAN GOVERNMENT NÉPSZABADSÁG

July 3, 2012 Opposition daily Népszava in its article headlined “Against Europe once again” admits that the Parliament did a lot to reduce the overwhelming power of the OBH, but it quickly adds that the most crucial questions, such as the judges’ obligatory retirement at the age of 62, remained unchanged. “The president of the Judicial Office still has too much power, in practice it will be hard to delimit her decisions,” the author says while adding that the amendments have been delayed for months.

The article sets out some of the amendments that it accepts as positive but calls the OBH head Mrs. Szájer, referring to the fact that Tünde Handó, as the wife of Szájer, is a close friend of Prime Minister Viktor Orbán.

Finally, it adds that the Venice Commission will probably not be fully satisfied with the amendments, as for an office to have the privilege to decide which courts should deal with which case is against the rights of citizens, regardless of whether it makes the procedure faster or not.

June 20, 2012 Opposition daily Népszabadság has not published

its opinion about the final vote on the amendments so far, but its article written after the Venice Commission made its opinion public and the Hungarian government presented the planned modifications casts an interestingly ironic light on the case. Under the headline of “From Áder to Áder: President has to amend laws”, Hungary’s President János Áder gets into the focus. Áder, appointed as President in May, was one of those involved in the preparation of Hungary’s judicial reform package, which now he, as President, has to sign to be amended.

“The laws approved last year limit judicial independence to such a huge degree that the Venice Commission has basically given an ultimatum to the Hungarian government,” the ar-

ticle says, referring to the fact that Hungary has had to harmonize a pile of its regulations with EU laws and principles in order to get a date for the negotiations about a precautionary financial package from the IMF and the EU. “This practically means that the government admits the failure of Áder’s judicial reform, as almost all of the Venice Commission’s recommendations will appear in the amendments,” it says.

March 19, 2012 “Another European rejection for Hungary” is the headline of the article published in French conservative daily Le Figaro after the Venice Commission revealed its opin-

ion for the first time. JeanJacques Mevel, the paper’s Brussels correspondent, calls the opinion “one of the most strict of all time” and says that “it draws attention to the huge gap between the Hungarian law and European practice”, while it also “widens the distance between the well-sounding words of Viktor Orbán and the European partners’ increasing concerns”. It finally adds that “eight years after Hungary became an EU member, Viktor Orbán gets similar criticism to Aljaksandr Lukasenka of Belarus”.

March 19, 2012 The article headlined “Ground getting hot for Hungary” in Austrian conservative daily Die Presse recalls European Commission vice-president Vivien Reding’s statement about the EU being “centimeters close” to involving the European Court to the case.

It emphasizes, “The Venice Commission strongly criticizes the judicial reform”. ■

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bi-weekly

QUOTE OF THE WEEK

I don’t want to scare anyone, but National Economy Minister György Matolcsy has a few more ideas in his desk drawer VIKTOR ORBÁN, PRIME MINISTER IN AN INTERVIEW WITH RADIO CHANNEL MR1-KOSSUTH ON JULY 6, 2012

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

French manufacturer Alstom has delivered the first subway train for Budapest’s Metro 2 line.

Alstom chairman and CEO Patrick Kron presented the keys of the trains to Budapest Mayor István Tarlós at an official ceremony on July 10. Budapest is buying 22 trains from Alstom, with five cars per train, each 100 meters long and air-conditioned.

ECONOMY PARLIAMENT PASSES AMENDMENTS TO CENTRAL BANK ACT Parliament has passed amendments to the central bank law, paving the way for the start of official talks with the IMF and EU on financial assistance.

The amendments adopted were submitted to Parliament on June 21, based on several weeks of five-party consultations with experts from the European Commission, the IMF, the European Central Bank, and the National Bank of Hungary (MNB). An original bill of amendments submitted to Parliament in April was withdrawn earlier in June. The new amendments relate to the tasks and scope of authority of the MNB’s Monetary Council and to authority over publishing information related to international reserves. They also repeat and, in the case of provisions on the dismissal of Monetary Council members, clarify points in the original amendments that were withdrawn.

IMF, EU JOINT MISSION TO ARRIVE TO HUNGARY ON JULY 17 A joint mission of the Euro-

pean Commission and the IMF is scheduled to arrive for talks to Budapest on July 17 to start talks on financial assistance, EC spokesman Olivier Bailly said in Brussels. He said the two institutions would start talks on a precautionary program after the Hungarian Parliament adopted amendments to the central bank act on July 6.

Once the amendments are fully adopted and come into force, the European Commission is ready to proceed with the closure the infringement procedure it launched against Hungary regarding central bank independence in January, the spokesman said, noting that closing the procedure will now be a matter of formality.

ANALYSTS PUT ANNUAL INDUSTRIAL OUTPUT GROWTH BETWEEN 1-3% Although industrial output declined 0.4% yr/yr in May, the month-on-month 3.2% increase already reflects the impact of the new Daimler plant, which started production at the end of March in Kecskemét, analysts interviewed by MTI said, predicting annual industrial output growth between 1-3% for 2012. Zoltán Árokszállási

of Erste Bank said the 3.2% month-on-month growth was a positive surprise as the analysts’ consensus forecast was a 0.5% decline. Árokszállási forecast industrial output growth of 1-2% for the entire 2012. Gergely Suppán of TakarékBank also said the m/m 3.2% growth was remarkable, although it had been predicted by new orders and order stock data as well as procurement manager indices. He said the May industrial output growth figures already reflect the impact of the new Daimler plant, where production will increase gradually, with a second shift of production starting in July, thus, industrial output growth could accelerate further in the coming months, he added. Suppán predicted industrial output growth of 2.5-3% for the entire year 2012.

INTERNATIONAL RESERVES FLAT AT €35.6 BLN IN JUNE Hungary’s international reserves stood at €35.575 bln at the end of June, remaining practically unchanged from €35.555 bln a month earlier, fresh data published by the National Bank of Hungary (MNB) shows. The international reserves were down

€2.20 bln from the end of last year and were €1.43 bln under their level at the end of June 2011. There were no major sovereign foreign currency repayments due in June. The next large expiry – this year’s first foreign bond expiry – will be a JPY 45 bln bond due in July 12. There will another foreign bond maturity, of a €1 bln bond, on November 2. The foreign exchange expiries ahead include the remaining two of this year’s four installment payments, worth about SDR 790 mln each, and due in August and November, on a loan the country took out from the International Monetary Fund under an agreement signed late 2008, at the height of the financial crisis.

So far this year Hungary had made two fx repayments, of about a combined €1.2 bln, on the IMF loan, financing both of them from forints.

Another factor reducing the reserves early this year was the MNB’s euro sales to banks related to a government-initiated foreign currency-denominated mortgage repayment scheme. The MNB sold about €1.6 bln to banks under the scheme in January-February.

UP TO MNB WHETHER TO PASS ON THE TRANSACTION DUTY, ORBÁN SAYS The government will not participate in the dispute over extending the planned new financial transaction duty to the central bank, as it is up to the central bank how to proceed with the duty, Prime Minister Viktor Orbán said in a radio interview. Orbán said he still expects to see a lot of dispute over the extension of the duty to the National Bank of Hungary (MNB), adding that the extension is one of the resources financing the government’s jobsaving action plan. The government will not, however, participate in this dispute as the central bank is independent and it will act on its own considerations, Orbán said.

“Whether [the MNB] passes [the duty] here or there, puts the burden on the banks or pays it itself – the government cannot participate in this dispute,” the PM said. He stressed, however, that everyone will pay the transaction duty, and the MNB cannot be an exemption.

SIX-MONTH GEN GOV’T DEFICIT REACHES 89.8% OF FULL-YEAR TARGET

Hungary’s cash flow-based general government deficit, excluding local councils, reached HUF 517.7 bln by the end of June, or 89.8% of the full-year target, the National Economy Ministry said in a first reading. The general government ran a deficit of HUF 173.6 bln in the month of June, well down from HUF 310.4 bln in June 2011. The central budget gap came to HUF 188.6 bln in June, the national social insurance funds had a deficit of less than HUF 1 bln and the separate state funds had a HUF 16.0 bln surplus last month, the ministry said. In the first six months of 2012, the central budget deficit reached HUF 592.3 bln or 99.7% of the respective fullyear target. The social insurance funds recorded a sixmonth deficit of HUF 3.3 bln, just 9.3% of the annual plan.

And the separate state funds had a surplus of HUF 77.9 bln in January-May, surpassing their targeted annual surplus by almost 50%.

PPI ACCELERATES TO 7.8% IN MAY Industrial producer prices in Hungary rose 7.8% in May from the same period a year earlier, accelerating from a

Photo: Zoltán Máthé / MTI

Alstom subway train arrives in Budapest

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to elaborate, however, adding only that there had been discussions earlier on other possible sites. Audi received six bids for a tender invited to build the logistics part, and the majority of the applicants preferred Győr as a site.

The logistics park is planned to support an almost €1 bln investment Audi recently announced at its base in Győr.

The investment is planned to go on line in the second half of 2013. Reports earlier this year said the government was in talks with the company on building logistics capacity for the expansion at the nearby port of Gönyű, on the Danube, rather than at the base in Győr. Hungary could forfeit EU support used for earlier development at the port if its utilization does not start soon.

BUSINESS

TVK TO BUILD HUF 30 BLN PLANT IN HUNGARY, NOT SLOVAKIA

AUDI TO BUILD LOGISTICS PARK IN GYŐR German carmaker Audi will build a planned logistics park in Győr, northwest Hungary, town mayor Zsolt Borkai said, confirming press reports. Borka did not wish

Hungarian chemicals company TVK Nyrt, a unit of oil and gas company MOL Nyrt, has decided to build a butadiene extraction plant at its base in Tiszaújváros (northeast Hungary), rather than in Bratislava, the city’s MP, Roland Mengyi, told MTI. TVK CEO Zsoltt Pethő

said in the company’s Q1 report in May that the HUF 30 bln plant would have an annual capacity of 130,000 tons. Expected to go online at the end of 2014, it will boost annual profit by HUF 8-15 bln, he added.

NO SANOFI LAY-OFFS TO AFFECT HUNGARY UNIT Lay-offs reportedly expected at French pharmaceutical company Sanofi will not affect its Hungarian unit Chinoin Zrt, communications manager Iván Rózsa told MTI. He said Chinoin had no official information on the plans, which French daily Figaro reported, without identifying its sources. Rózsa said that Chinoin reduced the number of employees only by about 20 instead of an expected 160 when it eliminated initial-phase R&D activity at the unit. Many of those affected by the move found jobs within the company, he said, noting that Chinoin continued to conduct later-phase R&D activity in the country.

The move was completed by the end of June, and was part of global restructuring of R&D activities within the Sanofi group announced last November.

talk of the town EXTREMELY STRICT VERDICT AGAINST SELF-DEFENDING ROMA On March 13, 2009, not long after a 28-year-old Roma man and his five-yearold son were shot while their house was being burnt down, members of the Roma community in the eastern Hungarian city of Miskolc were on alert. “We were frightened and not without reason,” a woman from the Miskolc Roma community said, adding that they had been warned that the Hungarian Guard (Magyar Gárda), a far-right paramilitary movement, and a group of skinheads would come that night.

At 1:30 am, when a dark car slowly cruising in the neighborhood drove into their street again, the Roma men attacked the car, pushing it and throwing stones at it.

The court later priced the damage to the car at HUF 109,000, which is not particularly high and might suggest how intense the attack was, but in October 2010 the 11 defendants were sentenced to a total of 41 years in prison. The reasoning behind the surprisingly strict verdict was that the attack was considered as violence against members of a community, based on a stick one of the Roma

attackers was carrying that had “Death to Hungarians” written on it.

Even though this ruling was later annulled due to serious faults in the court procedure, the defendants are not in a much better situation now, after a new verdict was announced on June 2. They received a total of 34 years, as the court found it obvious that all 11 Roma men were against Hungarians in general. The social environment, namely the huge threat the then-recent murders had imposed on all Roma living in Hungary at that time, was not taken into consideration by the court.

As a result of that “negligence”, Tamás Fazekas, a lawyer representing one of the defendants, since the message that is sent is that the Roma cannot protect themselves, or their families, from non-Roma, even if they feel reasonably threatened, because they will be labeled as racists. “This is outrageous,” he said.

The series of murders and brutal attacks against Roma people was most recently interpreted in an artistic way by director Bence Fliegauf, whose unsettling movie “Just the wind” won a Silver Bear at the 2012 Cannes Film Festival.

Photo: Zsolt Szigetváry / MTI

7.1% increase in the previous month, data published by the Central Statistics Office (KSH) show. In a month-onmonth comparison, producer prices rose 0.8% in May after edging up 0.3% in April.

Domestic producer prices rose 7.4% yr/yr in May, the increase picked up from 7% rise in April. They rose 0.6% from a month earlier after a monthly 0.4% rise in April.

Export prices, calculated in forint terms, rose 8.1% in the 12 months to May after rising 7.1% in April. May export prices rose 0.9% in a month, also more than the 0.2% April increase. The forint weakened 10% to the euro and weakened 23.4% to the U.S. dollar in the 12 months to May 2012. Compared to April it firmed 0.7% to the euro and slipped 2.1% to the U.S. dollar.

HUNGARIAN CRICKET GOES GLOBAL At the International Cricket Council’s (ICC) Annual General Meeting in Kuala Lumpur in June, Hungary was accepted as the organization’s 106th member. The Hungarian renaissance of the world’s second most popular sport started in 2006. Hungary now has a full-size dedicated cricket ground, successful men’s and women’s national teams, two leagues and a cup competition involving a healthy mix of expats, Hungarian nationals, women and juniors.

PRAKTIKER WON’T CLOSE STORES IN HUNGARY A decision made by German do-it-yourself chain Praktiker to close stores as part of a planned restructuring will not immediately affect stores in Hungary, spokesman Harald Gunter told MTI. He said that Praktiker was currently planning to reshuffle its German chain to secure financing for the whole company. The decision has no affect for the meantime on the chain in Hungary, Gunter said, adding they hope business in Hungary will operate as before. Praktiker has 19 stores in Hungary.

KÖZGÉP SELLS STAKE IN ZSOLNAY FOR HUF 1 The city of Pécs has accepted an offer to purchase the stake of construction company KÖZGÉP Zrt in porcelain maker Zsolnay, one of Hungary’s most famous porcelain makers, for a symbolic HUF 1, the mayor’s office told MTI. KÖZGÉP, which has spent HUF 400 mln over the years to save Zsolnay, bought Manufaktúra Befektető, which holds a 49% stake in Zsolnay, from Gellért Jászai, a property developer, last spring for a price of HUF 230 mln and a promise to inject a further HUF 500 mln into the company by the end of 2011. The porcelain maker closed last year with a loss of HUF 282 mln, down from a HUF 18 mln profit in 2010.

EST MEDIA TO SELL HOLDING IN SZIGET Entertainment guide publisher and event organizer Est Media Nyrt will have to sell its holding in festival organizer Sziget Kft as its attempt to issue convertible bonds, aimed to repay its debt of almost HUF 900 mln, has proved unsuc-

cessful, business daily Napi Gazdaság said, as it failed to collect sufficient preliminary letters of intent for the bond subscription. The paper said the holding will be most likely bought by the other owners of Sziget Kft. Est Media will thus shrink almost to the size it originally had when it acquired entertainment guide Pesti Est, however, it will divest itself of its loans, the paper said.

INDOTEK TO BUILD BICYCLE ÍSHOPPING CENTER Property developer Indotek Group will build a 10,000sqm shopping center geared towards cyclists, called Pedal Market, in south Budapest for HUF 1.1 bln, business daily Vilaggazdaság wrote. Indotek will start construction at the site of the former Csepel Metal Works in 2013 and plans to complete it in 2014. Pedal Market will feature 6,000sqm of commercial area available for rent.

The plan is to finance 60% of project costs from selling the plots in advance and finance the remainder with its own money.

BANKS SHUT DOWN 94 BRANCHES IN H1 Major Hungarian banks shut down 94 branches in the first half of 2012 after closing 60 last year, a survey carried out by the financial daily Világgazdaság showed. None of the 14 commercial banks covered by the survey added to its network in H1. The combined number of their branches fell by 185 from a peak reached at the end of 2009. Erste Bank alone closed down 40 branches since the start of 2012, cutting its network to 143.

Unicredit reduced the number by 12, to 120. AXA

Bank reduced the number of its branches by 10 in H1, CIB and FHB by nine each, MKB by eight, K&H by five and OTP by one. OTP continued to have the largest network in Hungary with 396 branches at the end of June. K+H came as second with 231 branches, down five from the end of 2011, and was followed by Erste. Raiffeisen had 132 branches, CIB had 119 and Budapest Bank had 102 branches at the end of June 2012, Világgazdaság said.

MANDATORY LIQUIDATIONS UP 30% H1 The number of mandatory liquidation procedures initiated against Hungarian companies came to 12,355 in the first half of the year, up 30% from a year earlier, company information provider Opten Kft told MTI. The number of mandatory liquidations in June, 2,418, was an all-time record.

The increase is a result of debt chains among companies exacerbated by the economic crises, and more serious surveillance by the tax authorities, Opten quoted analysts’ opinion.

The number of voluntary liquidations jumped to 19,198 in the first half of this year, up 60% on the same period last year, Opten said. The number of new companies set up in the second quarter sank to a six year low, as a result of the tightening of regulations on setting up companies. There are more than 600,000 companies and almost 500,000 individual entrepreneurs operating in Hungary, which is too much, ref lected in that only 11% of all registered companies have net annual revenues of more than HUF 50 mln, Opten said. ■

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EU OKS THREE STATES TO KEEP FREE CO2 PERMITS The European Commission has approved the requests of Bulgaria, Czech Republic and Romania for a continued free allocation of EU Emissions Trading System (EU ETS) allowances to their power sectors beyond 2012. According to an EC press office statement, the Commission has taken these decisions under provisions that allow certain Member States exemptions from the general rule that, from 2013 onward, the power sector must buy all its allowances at auctions or in the market. The EU has already granted similar exemptions to power generators in Cyprus, Estonia and Lithuania, and the Commission said it would decide on requests from Hungary and Poland soon. More than 268 million allowances will be allocated for free to power plants in the six countries from 2013 to 2019, with Czech Republic getting the most at a little more than 107 million.

year to shed more light on the country’s gas potential. The Polish Environment Ministry, which has granted 111 rights to drill for shale gas to companies including Chevron and Exxon Mobil, also said there were “a few tens” of new requests for exploration licenses awaiting approval. Analysts have said that to get a clear picture of the size and quality of shale gas reserves in Poland at least 100 wells must be drilled. Poland has pegged its recoverable shale gas reserves at 346-768 billion cubic meters, below an earlier estimate of 5.3 trillion by the US Energy Information Association. Poland’s dominant gas distributor PGNiG, and state-controlled utilities PGE SA, Tauron Polska Energia SA and Enea SA, as well as copper producer KGHM Polska Miedz SA, signed a cooperation deal to spend PLN 1.72 billion ($515 mln) by 2016 to search for the gas locked in shale rock formations, media reported on June 4.

POLAND SEES AT LEAST 41 MORE SHALE GAS WELLS IN 2012

ITALY SIGNS RENEWABLE POWER DECREES

Poland, Europe’s shale gas pioneer, expects companies to drill at least 41 more wells this

Italy signed has signed longawaited decrees on new support schemes for solar and

regional PURCHASING POWER IN V4 REGION According to the Austrian economic research institute RegioData, the average purchasing power in the Visegrád Four countries Czech Republic, Poland, Slovakia and Hungary amounts to €5,400 per capita per year. This corresponds to approximately 30% of the Austrian level, the institute says, adding that the gap between the western and eastern part of Central Europe could not be closed in the last years. Among the V4 countries, Czech Republic has the highest purchasing power. The research shows enormous regional imbalance. In Poland, the lowest purchasing power is observed in eastern Poland.

In Czech Republic, Slovakia and Hungary, the tendency is the same. The highest purchasing power is recorded in the capitals Prague, Bratislava and Budapest. Bratislava has the highest regional purchasing power (€10,000).

According to RegioData, the average purchasing power in Germany, Switzerland and Austria is €19,300 per capita, per year.

other renewable energy aiming to bring incentives in line with falling costs and ease the burden on consumers. Under the solar power decree, photovoltaic (PV) plants with capacity from 12 to 20 kilowatts could be exempt from having to log on to a register if they opt for a 20% cut in incentives, the Industry Ministry said in a statement. Concentrated PV power plants, innovative plants as well as those realized by public bodies would be also exempt from having to go through a register. The new incentive scheme for PV plants will begin in 45 days, while other renewable energy generation will switch to new regime from January 1, 2013 with a four-month transition period, it said.

HUNGARY PLANS TO BOOST NUCLEAR ENERGY, MINISTER SAYS Hungary wants to increase the share of its nuclear energy to 60% of electricity supplies by 2030 from the current 40%, the minister of national development told a conference on July 2. Zsuzsanna Németh said the government treats plans to set up a new nuclear power block at the

Paks nuclear power plant as a priority project serving the interest of heightened energy security. State-owned Hungarian Electricity Works (MVM) will set up a project company for the investment of which it will be a sole owner. A government committee has also been set up to examine strategic issues in connection with the expansion of the nuclear plant, Németh said. The new blocks could be ready to go online in 20252030, she added.

RUSSIA TO EXTEND NORD STREAM PIPELINE TO BRITAIN Russian gas monopoly Gazprom has decided in principle to extend its Nord Stream pipeline project to reach Great Britain, CEO Alexei Miller said on June 31. “BP has shown an interest,” Miller said, adding however there were no specific agreements, as cited

by RIA Novosti. Speaking at a televised press conference Miller said that a decision on the construction of the third and fourth lines of the Nord Stream might be reached by the end of 2012. Nord Stream ferries Russian gas through the Baltic Sea to Germany.

The first of the project’s two lines was opened in November 2012, with an annual capacity of 27.5 billion cubic meters. Its structure will stay the same apart from the possible addition of partners for a UK line, Miller said.

GAZPROM TO RETURN $600 MLN TO EU GAS BUYERS ON DISCOUNTS OAO Gazprom will return at least RUB 20 bln ($600 mln) this year to European buyers under agreements to award retroactive discounts, chief accountant Elena Vasilieva said. Italy’s ENI SpA will receive “a lion’s share” of the payments, Bloomberg reported citing Vasilieva, who’s also a deputy chief executive officer, as telling reporters on June 30 in Moscow. Customers in Europe, Gazprom’s biggest market by revenue, have sought changes to their purchasing contracts with Gazprom after the 2008 recession cut demand, dragging spot prices below the long-term contract levels. At the start of the year, Gazprom agreed with a group of European customers including ENI to cut gas prices by about 10%.

Contract talks are taking

place now only with E.ON Ruhrgas, RWE AG’s Czech unit and Polskie Gornictwo Naftowe i Gazownictwo SA, where decisions are expected soon, Deputy CEO Alexander Medvedev said on June 20.

SHAH DENIZ GROUP PICKS NABUCCO WEST BP Plc and its partners in the Shah Deniz gas field in the Caspian Sea have selected the Nabucco West pipeline as a potential export route to Europe, with a final decision due next year. “The greater maturity of Nabucco West gave the consortium confidence that this project could be developed and delivered on the same timeline” as stage two of Shah Deniz, the State Oil Co of Azerbaijan said in a statement on June 30. Nabucco West would transport gas from the Turkey-Bulgaria border to the Baumgarten gas hub in Austria via Bulgaria, Romania and Hungary. It’s a shorter version of a pipeline that initially would also have crossed Turkey. Nabucco West would have an initial capacity of 10 billion cubic meters a year and can be scaled up to 23 bcm if there’s enough demand, according to Nabucco. ■

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

ROMANIAN GOV’T SUSPENDS PRESIDENT BASESCU Romania’s Parliament suspended President Traian Basescu on July 6 ruling he had overstepped his powers, setting the stage for an impeachment referendum. In a vote that tightened the leftist government’s grip on power, 256 of the bicameral parliament’s 372 deputies who were present voted to suspend Basescu, the final count showed. The vote was part of a wider political row that has paralyzed lawmaking, hit the leu, and raised doubts about Romania’s ability to stick to its €5 bln IMF-led aid deal, hurting asset values.

The president is in charge of the country’s foreign policy and nominates the prime minister. Crin Antonescu, co-leader of the ruling leftist Social Liberal Union, whose party initiated the vote, will now serve as president during Basescu’s 30-day suspension until a referendum decides if he is to be impeached.

EUROPEAN PARLIAMENT THROWS OUT ONLINE PIRACY PACT The European Parliament has thrown out a contro-

versial global pact to battle counterfeiting and online piracy, quashing any EU ratification and possibly killing it for good. Twentytwo of the 27 EU states, as well as countries including the United States and Japan, had signed the Anti-Counterfeiting Trade Agreement (ACTA) in January but the treaty has yet to be ratified anywhere amid protests that it would curtail Internet freedom. The Parliament ignored European Commission pleas that the treaty was needed to protect the economic interests of companies hit by counterfeiting and online piracy.

Members voted by 478 to 39 against the pact, with 165 abstentions, ignoring a lastminute call by conservatives for them to wait until the European Court rules on its conformity with European Union law.

GREEK DEPOSITS UP BY €5 BLN Cash has been flowing back into Greek banks at a steady pace since the June 17 elections, and bank officials say that no less than €5 bln has

returned to the country’s credit system in the last couple of weeks, in a full reversal of the trend observed ahead of the national polls, the newspaper Kathimerini reported. This has more than offset the withdrawal of between €4 and €5 bln in the first two weeks of June, after an €8.5 bln drop in deposits in May, the worst monthly performance in decades. The paper said Bank of Greece data showed a deposit balance of €157.44 bln at the end of May, down from €165.95 bln at the end of April.

JOB PORTAL REVEALS CROATIA’S MOST-DEMANDED CAREERS The professions in most demand in Croatia in the first half of this year were waiters, shop assistants, programmers, sales reps, drivers, call center staff and hairdressers, according to leading job portal MojPosao. Nearly half of all the adverts placed on the website in the first six months came in the tourism, service and sales sector.

More than 55% of all vacancies placed were for full time

positions, 12% fewer than the same period last year, it said. There were also 166 jobs advertised outside of Croatia, a 5% drop compared to last year. Most overseas jobs were in the IT industry, metro-portal.hr reported.

KOSOVO TO GET FULL SOVEREIGNTY IN SEPTEMBER, ISG SAYS Kosovo will acquire full sovereignty in September, the 25-nation International Steering Group (ISG) overseeing the territory’s independence announced on June 2, after a meeting in Vienna, AFP reported. The group said Kosovo, which broke away from Serbia in 2008, had fulfi lled its commitments, “thereby setting the scene for ending supervised independence after the ISG’s meeting scheduled for September 2012”. In a statement, the ISG welcomed “the passing of the laws and amendments to implement the Comprehensive Settlement Proposal (CSP) package, including laws on cultural and religious heritage, community rights and decentralization”. The 25-na-

tion ISG includes several EU states, as well as Turkey and the United States.

BULGARIA AND ROMANIA’S SHADOW ECONOMIES HIGHEST IN EU Bulgaria topped the EU shadow economy charts with 32.3% accounted for by the underground economy, with Romania second highest with 29.6%, according to latest estimates. The majority (around two thirds) of a shadow economy is made up of undeclared, or cash in hand work, but companies fiddling figures to avoid tax also account for a large slice, around a third. The EU average for 2011 was 18.4%. Czech Republic, Slovenia and Slovakia all better then the EU average with 16.4, 16 and 16% respectively. These figures suggest that their shadow economies are smaller than those of Belgium (17.1%), Spain (19.2%) and Italy (21.6%). Austria has the EU’s smallest percentage of shadow economy, with 7.9%, just behind its non-EU Alpine neighbor, Switzerland, where the shadow economy is estimated to account for 7.8% of the total. ■

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Budapest Business Journal | july 13 – july 26

From tinted glass to a single patent After four decades of dispute, European Union leaders have finally approved a single European patent law with a new Unified Patent Court based in Paris.

The unitary patent system will help cut costs and red tape and is expected to restore competitiveness against rivals such as the US. BBJ ZSÓFIA VÉGH

Italians have always known about success. Coffee, leather boots, luxury sports cars: these are all best made in Italy. No country will surpass them in these departments. That is because they have always played it safe,

safeguarding the tools of their trade as much as possible.

Six hundred years ago in Venice, where the most beautiful tinted glass was made, craftsmen faced a succession-planning problem. Fearing competition, they had kept their secrets to themselves, resulting in a shortage of a new generation of glassmakers. To ensure a constant supply of glass, the people of Venice promised protection to the craftsmen unwilling to pass knowledge down to apprentices. Patents were systematically granted in Venice as of 1450, mostly in the field of glassmaking. As Venetians emigrated, they sought similar patent protection in their new homes. This led to the diffusion of patent systems to other countries. The protection lasted for 20 years, enough to train a new generation of craftsmen.

Today, patents are still granted for 20 years. Either the European Patent Office or individual countries granted them until the end

of this June in Europe. This had meant that anyone looking to get protection all over Europe had to pay roughly €30,000 to get a bundle of national patents to cover all 27 member states, about 15 times the cost of a typical US patent. No wonder that much intellectual property was sold to the US: it paid off much better for universities and scientists. But not for Europe.

The Continent is losing ground in competiveness, and cannot afford to lose more; neither can entrepreneurs or companies.

With the EU’s new unified system, they will be able to register their inventions at two-thirds of the original costs and with a different time scheme (see table on the procedure).

Protection is badly needed.

Often, the fruit of Western creativity is reaped in emerging

countries, primarily in China.

Kinga Hetényi, managing partner at the Schoenherr Hetényi law firm, the Hungarian partner of international law firm Schoennher, uses as an

example of the usual process a current case of IP infringement handled by her office.

“Our client has invented a product with new technology and a special design,” she says. Copies of the product appeared in Hungarian webshops, so the inventor chose to take a legal route. “Initially, we called for the withdrawal of the knock-offs from the shop,” Hetényi explained. “We also require data on the sold pieces, their price and compensation for the damages caused.” If the infringer (shop owner) cooperates, they can make a settlement.

If not, they will go to court where the shop owner will likely lose as it is very likely unable to prove it or the manufacturer have any rights in the given product. “The overall aim is to find the manufacturer,” Hetényi said. It is more difficult to identify and con-

tact the maker, but once the case is before a court, with a registered patent, the outcome can be anticipated in favour of client, ie the patent owner.

Patents give inventors some leeway against rivals or copycats, but that does not mean they can relax.

Keeping up protection for 20 years is not always worth it as the owner has to pay more every year, and rivals may come up with better solutions. Also, technology becomes obsolete. “Do you remember what you used 20 years ago for data protection?” asks Jeremy Philpott, manager at the Innovation Support Unit of the European Patent Academy European Patent Office in Munich, to prove his point.

“Floppy discs. Oh, please.”

Thanks to glassmakers in Venice, knowledge transfer is now possible and safe.

And with a single system covering all EU states, getting protection has become easier at last. ■

[ PROMOTIONAL FEATURE ]

Lurdy Office Centre announces new offer and promotion in the office market It is not easy to stay afloat in today’s office market.

Unless it offers the benefits of exceptional location, staying afloat – or, simply, survival – in the market is only possible if an office building is able to provide special, unique features which demonstrate that it is better than the rest. There is no single right approach. Presenting an eco-friendly option, a “green” office building with minimal emission and an intelligent building management system, may be one way to gain an advantage. Even so, the returnon-investment remains a question. Will it even be possible to recover the costs of extra investments in what is overwhelmingly a renters’ market?

Some market players believe the potential solution lies in offering high-tech IT services; these, however, are no longer really considered extras even for “category B” office buildings, and are essentially the norm for “category A” buildings. Flexible and tenant-friendly lease conditions, in addition to logistic and convenience benefits, are becoming steadily more important considerations when choosing offices.

There is increasing demand in the world of office services for so-called shared office solutions or office hotels. These options allow cost-sensitive small and medium enterprises to access office services – if necessary, even for just a couple of hours at a time – with flexible conditions.

The Lurdy Office Centre, located in the Lurdy-Ház, offers a combination of these solutions.

The recently renovated facilities offer tenants world-class IT solutions in a shopping centre setting, allowing even IT companies to feel at home.

The building is monitored around the clock and is open 24/7, houses a server hotel and offers flexible layout options making it suitable also for those interested in shared office solutions.

What else does Lurdy offer? Convenient accessibility, a recognized name and a shopping centre setting home to countless convenience services, from unlimited free parking to dry-cleaning services, shopping and entertainment options – not to mention a post office, banks and other administrative outlets, including its own carwash.

In addition, tenants are also attracted by the wide range of services offered by Lurdy Conference and Event Centre and available on site.

As a new promotion, Lurdy Office Centre is offering all new tenants use of its offices free of charge if the tenant agrees to build and furnish its own space.

According to Lurdy Office Centre’s motto, The Lurdy Office Centre slogan: Build your dream office, and enjoy it free of charge for one year!

Depending on the size of the office to be rented and the term of the rental agreement, additional special, even custom-tailored rental conditions may be available.

Lurdy Office Centre’s efforts appear to be rewarded by what is otherwise a highly saturated lessors’ market. Last autumn, OBI moved its entire management to the Lurdy Office Centre, occupying nearly 2000 square metres. Early this year, AEGON Magyarország Általános Biztosító Zrt. signed a longterm lease agreement with Lurdy Ház. Under the

agreement, the insurance company will establish its new Hungarian headquarters at the Lurdy Office Centre in two additional phases, occupying thousands of square metres of space. In May and June, two additional major tenants, the new central customer service offices of EXTERNET Nyrt and ASTRA Insurance Agency, will join Lurdy Office Centre’s tenant base.

www.lurdyhaz.hu

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FOCUS

TRENDS

Up for the future? – Hungary’s need and scope for a new national airline

12

Can you beer it?

13

Fatal flaws in Performance Appraisal Systems Although a wide variety of Performance Appraisal System (PAS) models exist, most of them rely on beliefs, perceptions, dangerous halftruths, or poor evidence. Several studies [1] identify flaws in the performance appraisal process.

Just consider a few findings from consulting firm Leadership IQ: In a survey of nearly 50,000 corporate CEOs, managers, and employees, only 13% thought their performance appraisal was effective; and only 6% of CEOs thought the process was effective.

Despite this dissatisfaction, most CEOs and HR managers are not sure how to address performance problems in the workplace, so they continue to implement sub-standard techniques. The alleged purposes of PAS are to improve employee performance and to provide data for decisions about promotions, transfers, terminations, salary increases and bonuses. [2] I see nothing constructive about an annual performance review. It’s a mainstream practice that has confused both managers and employees for years. Annual performance reviews are hammers looking for nails to pound, and hurting employee engagement, productivity, and health in the process. [3] To make my case, I offer several reasons why I find performance reviews bogus. (More to come in the next issue of the Budapest Business Journal.)

INTIMIDATION Most people are frightened of

performance reviews – even in HR. They do not necessarily take it public, they often just natter in the canteen. The oneside-accountable, boss-administered review is little more than a dysfunctional pretense, it is the main obstacle to honest interpersonal connections, and it is the primary reason for low morale. I see it as intimidation aimed at preserving the boss’ authority and power advantage.

Such intimidation is unnecessary, though: the boss has the power with or without the performance review.

DIFFERENT MINDSETS The mindsets held by the two participants in a performance review work at cross-purposes. The boss wants to discuss where performance needs to be improved, while the subordinate is focused on such small issues as compensation, job progression and career advancement. The boss is thinking about missed opportunities, skill limitations and relationships that could use enhancing, while the subordinate wants to put his or her best foot forward, believing he or she is negotiating pay. All of this puts the participants at odds, talking past each other.

The discussion most likely creates tensions that carry over to their everyday relationships.

OBJECTIVITY IS SUBJECTIVE Most performance reviews are staged as “objective” commentary, as if any two supervisors would reach the same conclusions about the merits and faults of the subordinate.

But consider that when people switch bosses, they often receive sharply different evaluations from the new boss to whom they now report.

The absurdity is even more obvious when bosses base their reviews on 360-degree feedback. The fatal flaw with 360-degree surveys is that the data generated is bad. And

since the data is bad, no matter how well intended, how insightful the feedback, how coherent the leadership model, it leads your leaders astray.

Virtually all 360s are built the same way. [4] They measure a set of competencies by breaking these competencies down into behaviors, and then various colleagues — your peers, your boss, and your direct reports — rate you on these behaviors. For example, to measure the leadership competency “vision”, your evaluators score a list of behavioral statements such as, “You set a clear vision for your team” or “You show how your team’s work fits the vision of the entire company.”

On the surface, breaking down a complex competency such as “vision” into specific behaviors and then rating you on these behaviors makes sense. But probe a little deeper and you realize that by doing so they ruin your survey, because their rating

reveals more about them than it does about you. If they rate you high on setting a clear vision for your team, all you learn is that you are clearer on that vision than they are; if they rate you low, you learn that they are clearer only relative to you. This applies to any question where they are rating your behavior. The bottom line is that, when it comes to rating your behavior, they are not objective. They are, in statistical parlance, unreliable. They give you bad data.

DISRUPTION TO TEAMWORK The team play that is most critical to ensuring that an organization runs effectively is the one-on-one relationship between a boss and each of his or her subordinates.

The PAS undermines that

relationship, because the boss in the performance review thinks of himself or herself as the evaluator, and does not engage in teamwork with the subordinate. It’s not the joint performance that is at issue. It is the employee’s performance that is a problem. The performance review is a battle for the subordinate to get better rankings rather than a constructive discussion about what they could do better.

Ultimately, this leads to inauthentic behavior, destructive internal competition [5], daily deception, and a ubiquitous need for subordinates to spin all facts and viewpoints in directions they believe the boss will find pleasing.

Replace the traditional performance review structure with a more lightweight, continuous model, incorporate the constructive aspects of reviews, and establish one-on-one meetings with team members as an opportunity for feedback and coaching. Every month or each time either the boss or the subordinate has the feeling that they aren’t working well together, a meeting should be dedicated to a discussion on how the person can enhance performance and play to his or her strengths.

I will suggest some tips and ideas about how to conclude such a discussion in the next issue of the BBJ. ■

WHAT’S THE ALTERNATIVE?

Dr. Róbert Dobay, coach and change manager, author of the Menedzsmentor blog

[1] Jeffrey Pfeffer, Robert I. Sutton — Hard Facts, Dangerous Half-Truths & Total Nonsense: Profiting From Evidence Based Management, p. 126, HBS Press, 2006 [2] Patricia Buhler — Human Resources Management: All the Information You Need to Manage Your Staff and Meet Your Business Objectives, p. 93, Adams Media, 2002 [3] “Many Companies Fail to Achieve Success with Pay-for-Performance Programs”, Hewitt Associates News & Information, June 9, 2004 [4] Marcus Buckingham — The Fatal Flaw with 360 Surveys, Harward Business Review Blog, October 17, 2011 [5] Jeffrey Pfeffer, Robert I. Sutton — The Knowing-Doing Gap: How Smart Companies Turn Knowledge into Action, p. 179, HBS Press, 2000

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Budapest Business Journal | july 13 – july 26

The opposition at halftime At halftime, the opposition is in much the same awful shape as Fidesz. None of the opposition parties have seen major progress in terms of popular support, and there is no clear alternative majority emerging. While two years is plenty of time, none of the opposition parties have made an impression that would suggest they could lead a coalition against Fidesz, much less that they could replace the governing party on their own.

BBJ POLICY SOLUTIONS

Whatever remains of Fidesz’ former glory stems mostly in the opposition’s persistent weakness. Two years into the sixth term since democratic transition in 1990, the governing party – elected by an unprecedented majority – has lost its luster. But no one seems ready to claim it.

The odds are, of course, that if any player is going to replace Fidesz as the leading party in the short run, it will be one of the parliamentary opposition parties. Though the hierarchy among these has not changed over the past two years, all the existing players are unpredictable, with the potential to rise or to fade completely.

We will briefly review each of the actors to see where they are two years before the next elections.

MSZP: ON THE VERGE OF BREAKING AWAY? For two years, MSzP has tried in vain to break away from the pack of opposition parties and to re-establish its former position as Fidesz’ one and only real antagonist. Finally, over the past few weeks, some pollsters – specifically Tárki and Ipsos – saw the Socialists gain some traction, though especially among likely voters they still lag significantly

behind Fidesz and are not far ahead of Jobbik. And even the improved numbers do not mark an impressive plus over 2010.

Time is certainly working for MSzP, however: many voters determined to oust Fidesz may well opt for the Socialists as the most realistic alternative. Of course there is the memory of the dreaded eight years, which both Fidesz and the other parties incessantly emphasize in the hope of keeping the Socialists at bay. But over time the intense feeling of disappointment with the MSzP’s rule will make – or rather is gradually making – way for disenchant-

a party that has been battered but retains such sizeable support is an unavoidable force on the left.

JOBBIK: RADICALS ON THE RUN There were a few months when Jobbik seemed on the way towards the destiny that its adherents fervently desire, i.e. that of becoming the alternative to Fidesz.

But though a few polls put the far-right party slightly ahead of MSzP, it has failed to build a lead over the Socialists and appears solidly in third place, though it still commands considerable support. The f luidity of the current situa-

ing up far-right issues, just it has always done when it felt challenged on the right or when it needed to mobilize the radicals. The farcical attempt to rebury the novelist and Nazi sympathizer József Nyirő in his homeland in the ethnically Hungarian parts of Romania, the growing appreciation of wartime leader Miklós Horthy, etc., are all things Jobbik is supposed to push rather than the governing party, which is supposedly in thrall of foreign interests.

So what’s left for Jobbik is to question Fidesz’ authenticity – which it is trying to do – and to flank it by going further right still, with the risk

ment, many expected LMP to replace MSzP as the leading party on the left, but the party has thus far failed to break out of single digits in the opinion polls. This must seem frustrating to its leaders, who have successfully pushed Fidesz’ hot buttons on several occasions. LMP has been the most effective party in setting the agenda on several major issues that irk Fidesz, most recently the oligarchy question. LMP is also rather skillful in pushing issues pertaining to social justice, corruption and democracy.

Still, LMP is visibly struggling to convince the middle-aged and older genera-

LMP HAS BEEN THE MOST EFFECTIVE IN SETTING THE AGENDA ON SEVERAL MAJOR ISSUES THAT IRK FIDESZ, MOST RECENTLY THE OLIGARCHY QUESTION. IT IS ALSO RATHER SKILLFUL IN PUSHING ISSUES PERTAINING TO SOCIAL JUSTICE, CORRUPTION AND DEMOCRACY ment with Fidesz and many, especially elderly and middle-aged voters with a more superficial interest in politics, will automatically pick the most recognizable brand name, i.e. MSzP. Moreover, MSzP’s time in government over the past 20 years has been varied and complex: those with a nostalgia for government largesse can pin their hopes on a return of the 2002-2006 MSzP, just as those who long for another round of tough austerity may recall other “jollier” times of Socialists in power. The post-2014 MSzP is of course a dark horse, but one that is open to the projections of various sorts of optimists. Ultimately, András Istvánffy, leader of the new left-wing party 4K! acknowledged what MSzP’s other competitors have been loath to admit:

tion leaves many scenarios open, including Jobbik’s rise, although for now it seems to be limited by two key factors.

For one, there is an inherent limit to a radical party’s appeal, since a portion of the electorate eschews radical politics. Nevertheless, the opposition to Jobbik’s radicalism is no longer such an overwhelming attitude as to constitute a major stumbling block to Jobbik’s future rise.

Public opinion has shifted decisively to the right, and on Jobbik’s key issues – e.g. ethnic prejudice – the party is not divorced from the mainstream.

A greater challenge than voters’ reservations seems to be Fidesz, which is making it clear that it won’t let the growing radical electorate go without a fight.

On the symbolic front, Fidesz is aggressively pick-

that by going too far it might ultimately run into the real limit of the electorate’s tolerance for far-right attitudes.

Though this conundrum contributes to the persistent internal rumblings within Jobbik, thus far the party has managed to maintain its façade of stability.

Rather than a quick march to power, Jobbik’s best route to the top is that of its Austrian counterpart, the Freedom Party, whose stint in government was in coalition with the conservatives.

LMP: MAKING FIDESZ MAD, BUT WHAT FOR? Before 2010, LMP was astonishingly successful in carving out a new parliamentary party despite placing environmentalism – an issue that remains of limited interest to Hungarians – front and center.

Impressed by this achieve-

tions that it will be a better representative of their interests than MSzP. Just as for the entire opposition, however, the most potent untapped source of new voters are not the other parties, but the huge masses of nonvoters, many of whom feel completely alienated after their disappointment with both of the major parties.

Because of this huge reserve pool, it would be a mistake to write off LMP’s chance to emerge as a significant player on par at least with Jobbik. If it could add a few percents that would make it seem like a more serious contender, this might well make the masses of undecided and uncommitted voters take a second look at the green formation. Whether LMP will be at 10%, 20% or

25% in 2014, the question it won’t be able to put off forever is one that the party finds most inconvenient: align with others to defeat Orbán or insist on its rejection of other relevant parties, and thus potentially take the blame for helping Fidesz win re-election?

DK: UNCERTAINTY ABOUNDS Most polls see former PM Ferenc Gyurcsány’s party under the parliamentary threshold of 5%, but the party is close enough among likely voters to hold out hope of entering the 2014 Parliament. This can sound disappointing or impressive for DK, depending on one’s perspective.

Clearly, Gyurcsány was hoping that he would capture a much larger segment of MSzP’s members and voters. At the same time, all previous attempts by bigname politicians to secede from large parties have failed, and DK’s standing in the polls suggests that it might become the first one to succeed. Nevertheless, a leading role on the left appears extremely unlikely, and thus the question for Gyurcsány – and the dilemma for the entire left – is how he wants to use his votes and what role he wishes to play with the amount of support that he can muster.

Ironically, given Fidesz’ intense hostility towards Gyurcsány, a voter registration requirement would probably help DK a lot: low participation generally helps smaller parties with a dedicated ideological following, and DK, too, would likely benefit in such a situation. In this respect, the plagiarism scandal might have played a paradoxical role. There is no question that it has hurt Gyurcsány among the left-wing intelligentsia, and potentially in the wider electorate as well. DK has nevertheless claimed to have experienced an uptick in membership applications, and that is not inconceivable either: Fidesz’ attacks might go a long way towards energizing Gyurcsány’s potential base. ■

www.policysolutions.hu Political Research and Consultancy Institute

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Goodwill hunting: are you fit enough for generosity?

No matter how much the recent economic crisis affects Hungarians, their willingness to donate at charity sports events remains noticeable. The only problem is the lack of information about how, where and when they can practice their generosity efficiently.

The Budapest Business Journal asked a few pioneers of this relatively new phenomenon about charity sport events in Hungary.

BBJ ROBERT V. WALLENSTEIN

To be an Olympic Torchbearer is perhaps one of the most precious dreams for anyone who loves and practices sports. Especially when the person is not a professional athlete but a devoted fundraiser who would use every limelight opportunity to raise awareness for charitable movements. Andrea Snow, founder of Csemete Alapítvány (Seedling Trust), belongs to this latter group.

She has been selected to be one of the few Hungarian “everyday heroes” invited to participate in the Olympic torch relay in Britain.

Her trust – with a focus to improve the lives of orphans and the disabled living in children’s homes in Budapest – has raised more than HUF 20 million since 2009.

It organizes children’s programs and has bought a specially equipped bus to transport children to various outdoor activities. Snow is considered the most successful fundraiser in the Hun-

garian charity sports events community, where she is also nicknamed the ambassador of charity runs.

“Besides helping children in need, I also wanted to promote charity marathons as a fundraising model in Hungary. These marathons are the pillars of a sustainable, transparent, and viable fundraising model,” Snow told the Budapest Business Journal, referring to major sports events in the world that are famous for raising huge amounts of money for good causes. The London Marathon is the largest annual fundraising event on the planet – runners have raised more than £557 million for good causes since the race began in 1981. Last year a new world record was set for a single event by collecting £51.8 million. In New York City, the annual marathon is also well known for the generous contribution of millions of U.S. dollars, noted Snow, who believes that the proven British model and her three years of work are good examples to follow. A model like the charity marathon is an important part of a thriving democratic society, since it is based not only on one individual’s ability to trigger positive change but also on the communal effort, Snow said, summarizing her vision.

HOBBY RUNNERS FOR THE BRAVES Another successful and upcoming initiative in Budapest is the Bátor Tábor Alapítvány (Camp for Courage Foundation), which was established in 2001 based on an Irish model. It offers complex therapeutic recreational programs for children with cancer, diabetes, or hemophilia, and also for their families in a superbly developed summer camp. It accommodates 700 children from all over Europe annually. As the BBJ learnt, Bátor Tábor has become a reference point through its effectiveness with charitable sport

activities for many smaller organizations. This will only be its third year since getting involved in this field, but the results are already impressive.

As program director András Nagygyörgy explained to the BBJ, so far it has recruited some 150-hobby runners who have participated in five events and collected HUF 12 million for the trust. “The methodology is very simple, very cost efficient, and at the same time mutually beneficial for all the participants,” Nagygyörgy said. “We ask companies and other supporters from the civil sector – running clubs, volunteers – if they would run for a good cause to support our mission.

This is the outreach level, one of the most challenging parts of our job. In the next step these individuals ask around their network, families and friends to support the mission they decided to run for. Eventually each individual can recruit 15-25 people to donate some money for the charity, so it ends up being a pretty simple pattern. It is just a perfect way to practice corporate social responsibility.”

As Bátor Tábor’s expert explains, for companies it is a very easy way to be active. It is only a matter of openness, since there is no need to pay a single penny, only to encourage their employees to participate as runners or sponsors.

What is also interesting is that negative preconceptions about Hungarians’ donating habits are false. “It is not true that Hungarians are not willing to contribute to a noble cause. Even during the recent crisis, donations have mainly been coming from the middle class and from elderly people. Naturally, the amounts are relatively modest and come to around HUF 1,0002,000 per individual.

“In Hungary there is no strong culture for charity events, so it takes some time to generate a more vis-

ible attention and awareness to the cause,” Nagygyörgy stated, but also added that in order to be successful, one needs creativity and imagination. “We have to conduct our messages in a brilliant way to target more potential supporters.”

Bátor Tábor works in cooperation with the Budapest Sport Iroda (BSI), the most experienced participant of the community sport event business in Hungary with a decades-long history. BSI organizes megaevents for non-professional athletes, such as fitness days with 10,000 participants and running events with 10,00015,000 people (several thousands of them foreigners) involved. “Árpád Kocsis, our CEO, celebrated his 50th birthday in 2008, and to celebrate as a runner, he organized our very first charity fundraising event,” Petra Babák, BSI’s senior marketing manager, recalled.

Since 2008, BSI has contributed to the charity fundraising processes of several trusts and other civil organizations by providing facilities for donation. It has organized dozens of various collection efforts of used sports equipment, toys and books, and also blood donations. It also has two types of fundraising methods: for some events it automatically deducts a certain amount from the ticket for charity causes, while the other one is a more direct approach, with people moving around the participants asking for on the spot donations. BSI has a special cooperation with the Piros Orr Alapítvány (Red Nose Trust), clown doctors who bring laughter and happiness into sick and old persons’ lives. Thus BSI makes a visible campaign and a dedicated commitment to society, although the largest amount raised at a BSI event through donations was less than HUF 1 million. Babák expressed

hopes that in the future BSI might be able to raise more money, since it is planning to have some kind of platform for charitable causes at all its future major events.

INNOVATION AND DEDICATION Michal Levy, representative of the European Maccabi, summarized the success of a recent fundraising event in the Jewish Quarter in downtown Budapest. “We needed innovation, community support, dedication from the developing volunteer movements, a clear message, and transparency,” he said. The international Jewish sports organization and its Hungarian supporters raised more than HUF 800,000 with approximately 500 participants at a community fun run to support 14 Jewish organizations. The entire registration fee was donated to these trusts and NGOs. “Besides building a community, we also wanted to raise awareness for charity causes, since it has not had a long tradition in Hungary,” said the Budapestbased Israeli representative.

“At our first event last year, I was a bit skeptical, knowing Hungarian pessimism, but surprisingly with our dedicated volunteers and many fresh-minded young adults we were able to meet our goals and organize a successful event.”

Maccabi’s totally civil initiative is another striking example of how much potential there is in a wellorganized and professionally and creatively orchestrated sports charity event.

Snow recalls that, “On all the marathons I have run, I saw those thousands and thousands of people wearing a sign on their shirts showing which organizations they are supporting with donations. It is an automatic thing abroad. If you participate, you ask whom you can donate to. With the running

of a marathon, you project a cool and unique image, so it is a worthwhile opportunity to be supported.” She has ran at 16 major events (including marathons in New York, London, and Madrid) and raised money mainly by herself. True, she is in a rather unique position: before she became a devoted charitable person three years ago, inspired by a very personal experience, she worked for Skanska as leasing and marketing director. As an influential real estate person, she could make use of her connections and business techniques. But her vision and passion seem to have paid off so far; she wrote a book advocating her ideas and international experiences, and organized a new initiative. Team Heart is a group of runners with a common goal to raise money for meaningful causes. Their ultimate objective is to make charity marathons a household expression in Hungary.

“We need to unite our forces and wake up civil communities. There is a lot to achieve, and we have no time to waste as long as there are people in need who could benefit from our efforts,” Snow told the BBJ. She was born into a very unhappy, modest miner’s family in the Hungarian countryside. Her personal story made Snow a dedicated fighter for charitable causes and a strong person who runs five times a week: at the age of 45 she is preparing for her fourth New York City Marathon this year. But before that she will travel to the London Olympics to promote her mission as an “everyday hero”. It is not always so difficult to become one of these heroes: there are several running events to be held in Budapest in the next few months and plenty of chances to get involved and start to move society in a better direction.■

2 Business 11

BBJ

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Budapest Business Journal | july 13 – july 26

Free pass for services in Europe A cross-border service sector could ease the woes of recessionstricken Europe but in practice hardly does it.

Regulations allowing businesses to expand abroad already exist but lack of information and pesky hurdles make it difficult for service providers to enjoy the benefits of a borderless Europe.

BBJ ZSÓFIA VÉGH

Róża Maria Gräfin von Thun und Hohenstein may well be the embodiment of European federalism. A Polish girl from Krakow, who married an Austrian count (hence the name and title ‘Gräfin’ meaning countess) and works in Brussels and Strasbourg as a member of the European Parliament, is in fact a keen supporter of unity in diversity. It is the end of June in Brussels, and Thun is sitting among European journalists summoned on the occasion of the 20th anniversary of the single market, showcasing why the system is not working.

“Not long ago, I participated in a dinner where a French businessman sat next to me. He moved to Brussels to work for a petrol company. His wife wanted to have the same curtains as she had at home. So she ordered them from the French webshop but they refused to ship it due to insurance issues.

Then, she tried to get them in Belgium, but the company’s local outlet offered it at much higher prices. Eventually, she drove back to France, bought the curtains and brought them with her to Belgium.” Her stories do not end here. She has abundant examples, from a French shoe shop unable to deliver oversize shoes to Austria because of regulations to an online fashion store whose customers are afraid of ordering in a confusing legal environment – all illustrating the deficiencies of the cross-border service market.

20 years ago, when the idea of a single European market became tangible for 12 countries – Belgium, Denmark, Germany, Ireland, Greece, Spain, France, Italy, Luxembourg, the Netherlands, Por-

FACTS AND FIGURES Services represent nearly of the EU GDP and two-thirds of employment.

75%

Cross-border services account for of EU GDP vs. coming from goods.

5% 17%

9

10

out of new jobs are created in the services industry.

8%

Only of European SMEs provide crossborder services.

The use of single points of contact could bring savings of up to million per year in the Netherlands, a study shows.

€60

The economic gains of full implementation of the Services Directive range between billion and billion, a growth potential of 0.6-1.5% of EU GDP.

€60 €140

Source: Business Europe

tugal, and the United Kingdom – the aims were clear: to allow people and businesses to move and trade freely across the borders. The benefits clearly showed in figures: from 1998 to 2008, Europe’s service sector grew by an annual average of 2.8% while EU growth averaged 2.1%. Employment in the sector increased 2% a year, compared to 1% for the economy as a whole.

Since 2004, however, trade in services has been growing faster between the EU and the rest of the world than inside Europe. Only 20% of services are provided cross-border, which account for 5% of EU GDP, as opposed to 17% for goods. And it is not fear of new challenges that makes businesses stay at home.

BUREAUCRACY: THE LESSER OF TWO THE MANY EVILS? “A Hungarian citizen will be able to establish and run a café in Vienna,” was rhetoric commonly used by proEU politicians to urge people to vote for enlargement prior to the referendum in 2004.

Though not a frequenter of the Vienna café scenery, I cannot recall a multitude of coffee shops owned by Hungarians springing up. There may also be financial reasons behind this, but the difficul-

ties of setting up businesses cross-border play a part. At the homepage of the Austrian Point of Single Contact, a place to give information and support to companies, the rules on starting a business in Austria are only provided in German.

Obviously, speaking German will not hurt someone wishing to serve coffee in Vienna, but is not mandatory. Likewise, France did not bother to have its single reference point for businesses translated into anything but French.

Neither did Poland, Liechtenstein, Romania, or Hungary, come to that. Of the 27 PSCs across Europe, 21 provide information in English. Often, though, the English page is the shortened version of the original and offers information too general to be useful. (Interestingly, some countries, such as Cyprus or Denmark, do not have a version in their own native language.)

Where the language barrier does not apply, there are other problems. “A Dutch company dealing with office cleaning wants to expand to, say, Luxembourg. To do this, just like other service providers, it needs a business permit. It is also required to pay €25 as a procedural fee.

However, after applying for

the licenses, it may have to wait up to six months to get the permission,” said Jeroen Hardenbol, adviser of Business Europe, an organization that represents small-, medium- and large-sized companies across Europe.

Needless to say, bureaucracy progresses more swiftly for Luxembourgers. Many EU officials claim that protectionism is killing the unified Europe, while others just shrug it off as a natural consequence of diversity.

Although the overall idea of PSCs is to give information, many companies are not even

TOP 5 –

aware of their existence or the benefits they offer. Budgets for their promotion have been severely cut in the past few years, and some governments have not yet put in place a PSC at all. No matter how tight things are, countries would be well advised to spend on promotion, Hardenbol suggests.

Most consumers may settle for curtains from local shops, but companies, especially after the crisis, have fewer choices. After all, the whole point of providing services abroad is to grow further or to fend off the effects of a sluggish business at home. ■

WHAT BUSINESSES REALLY WANT FROM PSCS

1. Doing it online. Is it too much to ask in the 21st century?

2. Doing it in their own languages (or in English, at least).

After all, the idea is to do business in multiple locations, not speak multiple languages.

3. Rapid response to requests, plus a helpdesk or phone service to backup the electronic portal. Considering the speed with which government offices respond to media enquiries, we can see the challenge in that one.

4. Information on practical issues such as tax and labor laws. On a webpage that is designed for that?

No comment.

5. Possibility and security of electronic signatures, since data phishers are always on alert.

12 2 Business BBJ

WWW.BBJ.HU

Budapest Business Journal | july 13 – july 26

Up for the future? – Hungary’s need and scope for a new national airline Despite several statements about already negotiating how and when to put a new Hungarian airline into the sky, it seems that not much has really happened since Malév grounded its flights on February 3. Is the lack of progress harmful?

And does Hungary need a national carrier at all.

BBJ ÁGNES VINKOVITS

Considering that five months have passed without significant steps in order to establish a new Hungary-based national airline since Malév went bankrupt in early February, one might think that it is not important to have one. In reality, it seems, it is quite the opposite.

According to a recent Ernst & Young survey, 69% of Hungarians think it important to have strategically important companies such as a state-owned national airline; the leaders of the country also communicate it as a priority. Prime Minister Viktor Orbán himself emphasized the importance of a new national carrier, calling it a national economic interest. The accessibility of a country is among the first things to consider when deciding on new investments, he pointed out. Meanwhile, tourism experts envision a downturn in tourism to Hungary, saying that although low-cost airlines have picked up 80% of Malév’s passengers former, 1.5 million travelers still have no other choice than to go to

airports in other countries, which means a great loss in the number of guest nights in Budapest.

Transportation expert Ferenc Turi shares the opinion that having a national airline is strongly in the country’s interest. As he pointed out, tens of thousands of workplaces and hundreds of Hungarian businesses are threatened as a result of losing Malév.

Similar arguments appear in the so-called White Book about Malév, published by the government in 2010, which said that the company had paid SMEs HUF 6 billion. “Malév’s disappearance would cause a significant competitive disadvantage for Hungary,” it stated, adding, “Besides other benefits, Malév operates as a responsible domestic company that carries troubled citizens home and cooperates with charity organizations.”

Malév provided 40% of the traffic at Budapest Ferenc Liszt Airport’s (BFLA) and, according to the privatization contract, if the airport’s traffic falls under a certain amount, the Hungarian state has to pay compensation to operator Budapest Airport Zrt. However, despite the seemingly obvious necessity of a national airline, it remains a fact that Malév flights are no longer in the sky; speculation about when and how to establish a new airline has become a permanent feature.

NOT WORKING While the governmentfriendly daily Magyar Hírlap in mid-June claimed that a new Hungarian airline might come as early as this year, pointing to the fact that the government has kept alive two Malév subsidiaries, Malév Ground Handling Zrt and the technological maintenance company Aeroplex of Central Europe

Kft, not much else can serve as a basis for optimism.

Sixteen of the flight rights between Hungary and nonEU countries are up for sale, and tenders for the exclusive Hungary-Israel and Hungary-Ukraine routes have already been submitted to the National Transport Authority’s (NKH) Directorate for Air Transport (LH). As it told the Budapest Business Journal, once a company gets the flight rights for a given line, this right can be revoked after five years – or more precisely, after ten schedule periods – at the earliest. This means that if the rights are successfully tendered and allocated and the new owner operates its flights according to the regulations, a new Hungarian national airline will not have a chance to get back its assets for a long time.

BEYOND THE BORDERS Losing assets is not the only reason any hypothetical new Hungarian national carrier is racing against the clock. The international air transportation market is also working against the cause with every passing day. Ryanair has made its third offer to buy Ireland’s struggling national airline, Aer Lingus, a takeover that would only make the already prosperous and aggressive Irish low-cost airline even more dangerous for any competitors. Turkish Airlines is also in the hunt for Aer Lingus, while it also made several offers for Poland’s troubled LOT. Meanwhile, the Finnish and Serbian national airlines are fighting for survival.

LOT’s story, in particular, shows many similarities with that of Malév. Following an unsuccessful privatization attempt, the Polish airline was renationalized.

In the past four years, LOT generated almost €240

million in losses and also received financial support from the state, which might raise questions from the European Commission.

However, competition from LOT could still be a serious threat to any new Hungarian airline. After long years of struggle, the company has improved its numbers in the past two years, and by 2011 had reduced its losses to €29 million from 2010’s €32 million. The Polish State Treasury currently owns 67.97% of LOT shares, but privatization is already in the pipeline, and as LOT plans be back in the black this year, its denationalization does not seem to be a lost cause at all.

And while LOT’s position is easy to boost with a capital injection, any post-Malév company would have to start over from zero. In that regard, it seems unlikely that a private investor would choose to finance Hungarian plans. As such, by the time the financial resources are finally found and the Hungarian airline can get back into the air, there may be no market gap to fill. Not to mention that the summer, the most profitable period of the year, will clearly be over by the time a new carrier can take to the skies.

SEEKING PARTNERS A private investor will be essential, as the European Commission not only forbids the new airline from being the legal successor of Malév Zrt but also specifies that the Hungarian state cannot be the majority owner of the new company.

“As such, involving a financially strong investor that has a well-built strategy in line with Hungary’s national interests is necessary to establish and run a new airline,” the National Development Ministry (NFM) told the BBJ. To our question

about the identity of possible investors, the ministry refused to mention names but admitted, “finding the appropriate partner is an especially time-consuming and complex task among the current world economic circumstances and in the situation of the international air transport market.”

Despite the problems, the NFM’s communication still hit somewhat optimistic tones. “Even with the difficulties and the unfavorable circumstances, the ministry does not consider the establishment of a new Budapestbased airline unrealistic.”

DARK CLOUDS Expert Ferenc Turi is less hopeful, saying that airlines can choose from three strategic models: low-cost, network or regional. As he pointed out, there are enough lowcost airlines; a network airline is not an option for Hungary as it requires a strong intercontinental system of connections; while to implement the regional model, a Budapest-centered network airline would be needed as a partner. “Not to mention that as time goes by the chance for an investor seeing potential in a Budapest-centered airline only decreases. As such, the market value of the Malév brand, which is owned by the state, becomes questionable as well,” he said.

And according to many international experts, in the long-term, smaller national airlines cannot compete either with low-cost airlines or with huge airlines with powerful fleets and well-built flight networks.

As a result, they say, a few low-cost airlines and three or four big airlines, namely Lufthansa, British Airways, Air France and KLM, might rule the European skies in five to ten years’ time. ■

2 Business 13

BBJ

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Budapest Business Journal | july 13 – july 26

Can you beer it?

Unified communication

Trade credit

Flavored beers with low alcohol content gain popularity

Communication tools currently used are no longer satisfactory

Less than 2% of invoices are uncollectible in Hungary

1/3

OF ANNUAL SALES VOLUME IS SOLD IN THE SUMMER

Not surprisingly, beer consumption is significantly higher during the summer season than in the rest of the year. But this year’s football European championship and the persistent heat wave experienced in Hungary in the past few weeks has further boosted beer sales, say manufacturers and distributors.

“Although Euro 2012 has ended, we are still selling 40-50% more beer than usual,” Attila Fodor, communications director of Hungarian food retail chain CBA said in a recent interview with daily Világgazdaság.

Demand is high for both traditional and flavored beer: a wide selection of the latter has recently appeared on the Hungarian market.

“Beer is a strongly seasonal product. We sell one-third of the total yearly volume in the three summer months,” said Zsuzsa Sükösdi, corporate communications director at brewery Borsodi Sörgyár Zrt. “Weather has a great impact on sales volume, as even those who are otherwise not typical beer fans will opt for a cold pint on these hot days.”

Flavored beers usually come with low alcohol content and, in many cases, with lower sugar content. They are increasingly popular among Hungarian beer drinkers, leading breweries to introduce their own brands.

“Sales from these beers have shown such a growth that we had to take our part in it,” Sándor Lóránt Kovács, who heads corporate development at Dreher Sörgyárak Zrt, said. The market share of flavored beers is expected to grow further in Hungary in the coming years; despite their current fast growth rate, the sales volume generated by flavored beer is still only one-fifth of total beer sales at the moment.

Heineken Hungária Sörgyárak Zrt introduced four new flavored beer brands at the beginning of the year. According to communications director Éva Kiss, sales of higher category beers have started to stagnate – but the new hype for flavored beer is making up for this stagnation. PF

Revenues from beer retail sales HUF HUF

105 bln

76%

Massive trends will shape the future of corporate communication and force companies to use unified communication platforms, claims a recent study released by Enterprise Group, a key distributor of Siemens Enterprise Communications. As a result of an ongoing paradigm shift in corporate communications, we will see significant changes in where and how we communicate with co-workers, clients and partners, the study says. The systems currently used have reached their limits and are no longer able to fulfill new requirements such as mobility and flexibility. The study identifies the main trends that will shape the future of corporate communication.

Unlimited mobility: mobile phone penetration has reached 100% in developed countries, and tens of millions of tablets are already connected to corporate networks.

New-generation user experience: according to 70% of executives queried in the study, using touch screens and other technologies that enhance user experience make employees more productive – some 84% of employees already use their smartphones and tablets in their work and want to connect them to their corporate network.s The role of social media in corporate communication is on the rise: statistics show there are some 4 bln views on YouTube on a daily basis and 7.5 bln uploaded photos on Facebook every month, while 25 bln tweets go to Twitter every year.

The popularity of cloud computing is expected to “Currently used communications increase further: last year, networks are basically barriers in 78% of executives said they development. Their maintenance, planned to invest in cloudhigh costs, and low cooperative based solutions within a year. and communication abilities cause The study forecasts that due extra expenses and difficulties. to technologies that can The fact that, according to international studies, 89% of be flexibly installed, private executives plan communication clouds and hybrid solutions investments in 2013 underlines will come to dominate the need for such a shift,” says corporate communications Előd Orbán, managing director of within two years. PF Enterprise Group.

89%

Proportion of executives planning communications investments

98 bln

2010

Source: ACNielsen Magyarország

OF FIRMS ASKED PLAN INVESTING IN COMMUNICATIONS THIS YEAR

35%

OF HUNGARIAN COMPANIES USE TRADE CREDIT AS A SHORT-TERM FINANCING TOOL

The recently published 11th edition of the Atradius Payment Practice Barometer focuses on the use of trade credits, credit management practices, and customers’ payment behavior. The results of the report are based on feedback from 820 companies in the Visegrád Four countries: the Czech Republic, Hungary, Poland, and Slovakia.

The survey shows that, despite a high days sales outstanding (DSO) figure of 55 days, less than 2% of invoices are uncollectible in Hungary: a significant improvement in managing outstanding receivables, the study states. Also, when compared to other countries in the region, Hungary performs quite well in this respect, as the ratio of uncollectible invoices is 2.6% in Eastern Europe and 3.5% in Western Europe on average.

At the same time, the figures show a significant shortage in resources. The vast majority of respondents, 96%, indicated the lack of liquidity as the reason for their buyers’ late payments.

The reason behind this is, among other things, decreases in consumption and the reduction of short-term credit limits provided to companies by banks. There has been an 11% decrease observed since 2009, the report says. In this situation, it is particularly important for companies to assess and to reduce their risks, which is also confirmed by the dynamic increase in the demand for credit insurance and debt collection services.

The probability of collecting domestic receivables over 90 days past due is higher than that of collecting foreign receivables over 90 days past due.

The report found that of the V4 countries, Hungarian respondents were the most inclined to sell on credit terms to their domestic B2B customers.

Domestic B2B customers of Hungarian respondents were granted trade credit mainly as a source of short-term financing, and foreign customers mainly as a tool to promote growth in sales internationally. PF

What are the main reasons that your company grants trade credit to its domestic/foreign B2B customers?

2011

Source: Siemens Enterprise Communications

to establish long lasting trade relations with customers

to allow customers time to confirm the quality of the product before payment

As a sales promotion tool

As a source of short term finance

Source: Atradius Payment Practices Barometer – June 2012

14 2 Business BBJ

WWW.BBJ.HU

Budapest Business JJournal | jjuly 133 – jjuly 26

SpecialReport

French-Hungarian business Bi-lateral relations between France and Hungary have been more or less restrained through the centuries. The revolution of 1848 brought the two countries closer through French assistance in taking in Hungarian refugees – amongst them Prime Minister Lajos Kossuth – after the defeat to the Russians.

However, the Treaty of Trianon at the end of World War I, according to which Hungary lost two-thirds of its area and a third of its population, caused permanent and – for many – still painful scars.

After 70 years of relatively frozen silence in relations, cooperation between the two countries received a new boost in 1990 after the fall

France. An integrated action plan (BALATON) allows for more than 10 scientific groups from the two countries to do research together each year, resulting in joint publications and industrial developments.

French customs statistics show that Hungary is responsible for 0.68% of total French exports and 0.71% of imports.

In 2010, Hungary was the 30th largest buyer from, and the 26th supplier to, France.

In 2010, French exports to Hungary were boosted by an exceptional 14.2% to €2.6 billion. Imports from Hungary grew at a slightly lower pace, at 9.9%, to €3.1 billion.

Thus the trade deficit from the French point of view was €560 million at the end of 2010, down from €600 million in 2009.

The effects of the crisis put severe pressure on commercial relations, but some improvement could be observed from the second half of 2009, promoting growth and a positive impact on the results of coming years.

The French-Hungarian Chamber of Commerce and Industry (CCIFH) had 212 members in 2011. Amongst them, partially or totally French-owned companies had a revenue of €9.27 billion, which represents 79.3% of all the revenue of French companies in Hungary.

These companies employed 39,762 employees, or 75.9% of the total “French” staff numbers in Hungary.

According to a survey made by the CCIFH in 2010, the 291 companies identified

and interviewed had a total revenue of €11.7 billion (HUF 3.2 billion). These companies employed 52,346 people. The data showed that the longterm investments of French businesses are between €300 and €700 million annually.

French companies significantly contribute to the successful operation of the Hungarian economy and thus to the economic development of the country. The Economic Department of the French Embassy in Hungary estimates that direct investments from France are in the range of €10-15 billion.

Overall, the environment and energy sectors achieved the highest sales in 2010, while the consumer goods and trade sectors employed the most workers. ■ STOCK OF FOREIGN DIRECT INVESTMENTS IN HUNGARY BY COUNTRIES

NUMBER OF FRENCH COMPANIES BY SECTORS

THE MOST IMPORTANT FRENCH-RELATED BUSINESS EVENTS IN 2011

(million EUR, 2010) (list is not full)

COUNTRY

SUM

Germany

15,775.27

Netherlands

11,638.31

Austria

8,730.86

Luxemburg

5,479.12

France

3,399.34

USA

3,195.72

Switzerland TOTAL

2,469.67 67,948.54

Source:: MNB

BBJ KRISZTIÁN KUMMER

of the iron curtain. To help improve relations, an annual cooperation budget was created, and the Institut Francais built, inaugurated by the then President of Hungary Árpád Göncz in the spring of 1992.

A new French High School opened in Budapest, and five rural Alliance française organizations were added to the international network.

Every year, more than 50,000 Hungarians learn French, the third most popular language after English and German; some 30,000 choose French as a second language. The 11 French-Hungarian bilingual schools in Hungary educate more than 1,000 teenagers. Each year, 130 middlers (third-year students) and young researchers receive scholarships in

Source: FHCCI, 2011

France has been an important economic partner of Hungary for more than 20 years: according to the latest statistics, it is fourth on the list of most important foreign investors. French companies work mainly in energy, pharmaceuticals, tourism, retail sales, the agri-food industry and public utilities.

ANALYSIS OF JOB FUNCTIONS OF TARGETED RECIPIENTS

Construction 6 %

Communication 6 %

Construction 6 % Services 6 % Environment 28 % Industry 13 %

Industry 21 %

Trade 22 %

Source: FHCCI, 2011

– A new cement plant opened in Királyegyháza in the autumn of 2011, in which the French company Lafarge has a 70% stake; under a G3 project started in 2009, a new ultramodern block of the GDF Suez Group-owned power plant Dunamenti Erőmű opened in Százhalombatta; the Decathlon sports store chain, which has been on the Hungarian market for six years, continued to expand in Debrecen; – newly arrived French fashion brand Camaïeu opened eight stores; – Normandy-born Anthony Lecaudé opened his bakery and confectionery A table in Budapest in September 2011; – the Chez les Français délicatesse opened its doors on October 15, 2011 in Városmajor utca in Budapest.

WWW.BBJ.HU

15

Budapest Business Journal | july 13 – july 26

relations on the rise again

Bilateral trading relations (billion euros)

2008

2009

Change 09/10 (%)

2010

Export

2.71

2.792

2.825

2.305

2.633

14.2%

Import

2.801

3.203

3.445

2.905

3.193

9.9%

Total turnover

5.511

5.995

6.27

5.21

5.826

11.8%

Trading balance

-91

-409

-620

-600

-560

-6.7%

Environment 14 % Services 14 %

Source: FHCCI, 2011

IMPORT

IMPORT

TOTAL TURNOVER

TOTAL TURNOVER

2010

2011

2010

2011

2010

2011

68,725

75,820

52,872

42,108

15,853

33,712

Hydrocarbons, electricity, waste

8,893

3,487

7,864

15,103

1,029

-11,616

81,136

96,479

134,761

136,764

-53,625

-40,285

5,153

5,726

9,521

3,801

-4,368

1,925

Refined petrol products

Trade 32 %

EXPORT

Agricultural, sylvicultural and fishing products

Agri-food

Industry 8 %

EXPORT

Electrotechnics

918,525

1,011,310

1,751,385

1,796,903

-832,860

-785,593

Means of transportation

447,734

457,735

366,797

437,042

80,937

20,693

Other industrial products

1,111,777

1,272,614

874,487

964,825

237,290

307,789

Other products

4,622

4,187

8,689

7,938

-4067

-3,751

2,646,565

2,927,358

3,206,376

3,404,484

-559,811

-477,126

Source: FHCCI, 2011

Communication 2 %

Construction 8 %

Industry 19 %

2007

STRUCTURE OF COMMERCE BETWEEN FRANCE AND HUNGARY (THOUSAND EUROS)

ANALYSIS OF JOB FUNCTIONS OF TARGETED RECIPIENTS Construction 3 %

2006

Source: French Customs Office, 2010

BILATERAL TRADING RELATIONS (BILLION EUROS)

16 2 BusinessSpecialReport BBJ

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Budapest Business Journal | july 13 – july 26

No more taxes, s’il vous plaît – French companies Hard times require tough decisions. In the dark days of the crisis, Hungary implemented unorthodox measures to meet deficit targets, which in many cases hit foreign companies – including Frenchowned ones – hardest.

BBJ ÁGNES VINKOVITS

The “economic freedom fight” that the government declared after winning a twothirds majority in 2010 was supposed to mean that the negative effects of the ongoing global economic crisis and the burdens left here by the Socialist governments that had ruled the country for the preceding eight years would fall not on Hungarian taxpayers but big companies instead. Without going into analysis of how realistic it is to significantly increase financial burdens on suppliers and not indirectly contribute to price hikes through this measure, let us focus on the most spectacular elements of this unorthodox economic revolution: the so-called crisis taxes.

The Fidesz-KDNP government levied a special tax on the banking, energy, telecommunication and retail industries in October 2010 in order to meet deficit targets.

ALL ABOUT MONEY Those saying that the IMF and the EU apply stricter rules against Hungary than some other countries see their conspiracy theory supported by the following train of thought: the Hungarian government has caused a lot of trouble to multinational companies, including French-owned ones, and the leaders of the above-mentioned international organizations are trying to alleviate this offense against certain financial interests by messing with Hungary.

Be that as it may, mortgage loaner UCB Ingatlanhitel, owned by the French BNP Paribas, in May 2011 announced it would cease operations in Hungary. Also, French-owned AXA suspended its property mortgage loaning activity in Hungary as of December 15, 2011. The

company did not cite a reason and also declined to answer the Budapest Business Journal’s questions, but the HUF 9 billion loss with which AXA closed 2010 speaks for itself.

The bank levy, later compounded by the early repayment scheme for FX mortgages, may well have been behind AXA’s decision. Hungarian bank losses generated by the early repayment scheme, which enabled FX borrowers to repay their debts before the end of February at a fixed exchange rate well below market prices, is estimated to have reached up to HUF 260 billion.

ENERGY SECTOR With the extra tax on the energy sector, all energy companies have to pay 1.05% of sales regardless of size.

Although the measure obviously hit the French-owned EdF Group, this is not the company’s biggest problem in the Hungarian market. As Jean-Noël Reimeringer, the head of Budapest Erőmű Zrt, a company majority owned

by EdF, previously pointed out, “the unpredictable regulatory environment is far from being investor-friendly”, adding that the biggest problem is the heating price regulation launched in 2011, which leaves only a narrow profit margin for suppliers and does not draw a distinction between free-market sales and residential sales.

“The company’s aim is obviously not to be in the red,” Reimeringer said in October 2011, adding that his company “is analyzing the possible strategies but it is already certain that among the given circumstances the group cannot operate in Hungary in the long-term”.

EVERYDAY BREAD Although the retail sector had already been hit hard by the crisis, with turnover dropping from €19.9 billion in 2009 to €19.4 billion in 2010, retail companies with sales of more than HUF 100 billion also have to pay a tax of 2.5% of sales. This remains in force until 2014. The Frenchowned Auchan Magyarország Kft lost HUF 2.7 billion to the crisis tax in 2010 and, based on 2011 sales, the company expects to pay HUF 300 million this year. “It is understandable if the economic difficulties result in special

taxes, but it is annoying if this measure is discriminative,” Auchan Magyarország head Dominique Ducoux said two weeks ago, referring to the fact that by setting a minimum limit on sales, the tax obviously targets multinationals and so favors Hungarian retailers.

While the European Commission in March 2012 already announced it would take Hungary to court over the telecom tax, it also raised concerns about the special retail tax in its June letter of formal notice to Hungary. Hungary was given two months to explain how it would make the taxes comply with EU rules. If the response is not satisfactory, the Commission will send a letter of reasoned opinion, the first stage in legal proceedings, which can ultimately lead to the European Court of Justice.

Auchan would obviously be very happy if the European Commission forced Hungary to retroactively abolish the crisis tax but, according to Ducoux, it would already be a relief if the government phased it out from next year.

The crisis tax is not the only government initiative to give Auchan Magyarország – together with three other French-owned companies – a headache. On January 1 2012, the government launched the Erzsébet Voucher for purchasing ready-to-eat meals.

Previously, three major firms (Sodexo, Chéque Déjeuner and Edenred, incidentally all in French hands) issued the bulk of food vouchers, which could be given to employees as a tax-free benefit. Now only the state voucher, issued by the National Recreation Foundation, can be given taxfree, while the tax on the other three vouchers is set at 15%.

It is not only that the current situation in the voucher market can easily be defined as a monopoly; another point of contention is that Tesco is the only multinational retail chain that was licensed to accept Erzsébet Vouchers so far, while Auchan’s application has remained unanswered for the past three months. “I hope that a decision will be made to favor customers,” Auchan’s Ducoux said tactfully. The Erzsébet Voucher scheme, however, is already under scrutiny at the European Commission to see whether it complies with EU rules.

INFORMATION SOCIETY On an imaginary notoriety list of Hungary’s crisis taxes, it is no doubt that the one imposed on the telecom sector would be the first by far.

It has made headlines on a

weekly basis for almost two years, and although it is less painful for French interests as Hungary lacks French telecom companies, its significance makes it appropriate to give it a place in this summary as well.

The tax, which was also launched in 2010, was designed to raise about HUF 61 billion annually and is due to be reduced by half in 2013 before finally being abolished in 2014. However, as the EU’s telecom rules allow sector-specific charges only to cover the specific costs of regulating the sector and not to generate additional revenue for the central budget, the European Commission in March announced it would take the case to the European Court of Justice.

Interestingly, France, along with Spain, has also been referred to the Court over similar one-off taxes. ■

2 BusinessSpecialReport 17

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Budapest Business Journal | july 13 – july 26

s and Hungary’s unorthodox economic policy ANGRY COMPANIES

TAX BURDENS ON HUF 5,000 ALLOWANCE FROM EMPLOYEES

While experts and analysts keep warning Hungary that such rapid and unexpected introduction of measures like the crisis taxes creates an unpredictable economic environment, which is an especially unsafe game to play at times when FDI is already hard to attract due to the ongoing world economic crisis, the government’s protectionist policy does gain it some support among citizens.

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!

source: Étkezési Utalvány Forgalmazói Egyesülés

“We fully support the Orbán administration’s aim to impose a special tax on Hungarian and international big companies that skim extra profit, and we insist that the companies fully pay it,” said a letter written in January 2011 and signed by civilians as well as by legal experts and economists. Their statement came as a response to a letter from 13 companies – namely Deutsche Telekom, Rewe, Allianz, E.ON, RWE, EnBW, Spar, OMV, Baumax, CEZ, AXA, ING, and Aegon – that were so outraged by the crisis tax they have to pay in Hungary that they referred the issue to the European Commission in December 2010.

Their efforts eventually remained without spectacular success, but the case was inconvenient as Hungary was just about to take over the rotating EU Presidency at that time. However, the international media was so much obsessed with Hungary’s controversial media law in those days that there was not much capacity left to cover the 13 angry companies.

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Behavior changes faster during crisis The way people think about energy consumption and savings changes more rapidly during a crisis. Energy utility companies and consumers must find new ways to act together, says Gérard Bourland, chairmanCEO of Hungarian energy provider Dalkia Energia Zrt. Q: THE CRISIS HAS BITTEN HUNGARY AND THE HUNGARIAN ECONOMY HARD. WHAT WOULD YOU POINT OUT AS THE SINGLE MOST CHALLENGING ISSUE FOR ENERGY MARKETS AND PROVIDERS IN THESE HARD TIMES? A: What we see in Hungary is more or less true in all countries in Europe. Our main concern is the price of electricity, which is very low, or to be precise, the ratio between the prices of gas and electricity is very low.

Regarding the unique problems of Hungary, I’d mention the difficulties of cash-stripped municipalities. We must find and push innovative solutions for their solvency problems on one hand and find a sustainable long-term way to cooperate on the other. Fortunately, in ever more cases our customers come to us to initiate dialog and this is more frequent than in times of prosperity. Dalkia focuses very much on liquidity issues, as we want to avoid both the increase of exposure to debts and the stressing of consumers.

Municipalities with serious financial problems need to prioritize solving shortterm problems, and shortterm means cash in this case. For the middle term, in the majority of cases we can find a win-win situation for both parties. We have ideas about what to change in the “design” of contracts to make our cooperation more efficient – like building into the consumption scheme of schools the periods when there is nobody in the building during holidays.

Q: IN YOUR OPINION, HOW HAS THE HUNGARIAN GOVERNMENT HANDLED THE CRISIS IN THE ENERGY SECTOR? A: I think globally the government took the right steps to handle the situation –

but I speak only about the energy market that I know.

These were tough but necessary measures. However, the results won’t be seen in the short-term, but maybe in two to three years.

Q: HOW HAS THE ROLE OF ENERGY UTILITIES CHANGED DUE TO THE IMPACT OF THE CRISIS? A: Some years ago public utilities didn’t think about the amount of energy sold to the costumers. “The more I sell, the more I gain,” was the motto. But that is over now. If the customer can’t pay, or pays for more energy than is needed, the cooperation won’t last long. So there is a task for our company to propose new solutions to consumers to change their behavior, whether it is a public building or households we are talking about.

But also, consumers have to be open to new ideas about being more efficient. We propose new investments to reduce consumption and raise efficiency, but these are long-term investments with an impact of 10-15 years. So, in exchange, we offer customers a share of the profit gained with us, so this way, all participants win on the energy savings.

Q: DO YOU FEEL ANY PROTECTIONISM ON BEHALF OF THE CENTRAL GOVERNMENT IN HUNGARY TOWARDS HUNGARIAN BUSINESSES? A: No, not at all. In the Hungarian energy market the main issue is the dependence on foreign fossil resources.

So the protectionism of the government is manifested in support for the use of local fuels over foreign resources, whether it is biogas, biomass, coal, or anything else.

In line with this effort of the government, Dalkia tries not just to use fuels from

› EFFICIENCY IS THE NAME OF THE GAME

within Hungary in general, but from nearby resources.

So in the Pécs plant we don’t use biomass from the eastern part of the country but from the vicinity, and so on.

Q: IN THE LAST FEW YEARS, MANY SMALL RENEWABLE OR GAS-FIRED PLANTS STARTED TO PROVIDE ENERGY TO SATISFY LOCAL DEMAND IN HUNGARY. NOW,

CURRICULUM VITAE Bourland has been in the energy industry since 1978. He spent several years with France’s EDF, specializing in the areas of nuclear energy and carbon, but also worked in HR and held various managerial positions. He has been living in Hungary since 2001. Before becoming CEO-chairman of Dalkia Energia, a subsidiary of Veolia Environnement, in 2008, he was CEO-chairman of the Budapest Power Plant Zrt for six years. Bourland was appointed CEO-chairman of Dalkia Energy this year. Married with two children, he is the captain of a rugby team in his spare time, and as a long-distance runner, he regularly takes part in amateur running races.

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IN TIME OF CRISIS AND WITHOUT THE GOVERNMENT’S SUPPORT, THEY ARE FACING VERY DIFFICULT TIMES. HOW DO YOU SEE THE PROSPECTS OF THE HUNGARIAN ENERGY MARKET IN THE SHORTAND MEDIUM-TERMS? A: Efficiency is the name of the game. If the efficiency of the assets was not high enough through the time of recession, the business would fail. We were planning our projects very carefully, as we believe that projects should work in any kind of economic circumstances, so we don’t jump into any project where we can’t see the profitability.

And on top of that, financing became very difficult. Banks are very cautious about giving credit to partners. If a project cannot meet all the criteria, it won’t receive the necessary financing background; it is simple as that. In the energy market, one has to think in the long-term, so even if a partner is ready for the project and a bank is willing to invest, we say no if we don’t see the long-term prospects of the project.

Q: WHAT ARE THE MAIN PRIORITIES HUNGARY AND THE HUNGARIAN GOVERNMENT

MUST SUPPORT IN ORDER TO ACHIEVE A MORE STABLE ENERGY MARKET? A: First of all, the dependency on foreign supplies. It could be lowered through the better exploitation of local resources, but also through the reduction of energy demand. There is a huge potential in energy and cost savings to lower energy dependency. But it makes no difference how prepared the utilities are if the consumers don’t want to participate. Without the customer, you can do nothing. In the busi-

ness sector, the change of behavior has already happened as the market has been opened. Now it’s time to see some change in the public sector. And the crisis helps achieve this goal, because the way people think about energy changes faster now than without the financial pressure of the crisis. We see that people are opening up to energy saving measures such as insulation and changing doors and windows, so we have to find ways to help finance and support these measures.

But even if we have consultants who know consumers’ problems and offer solutions to them, it is a very hard, step-by-step work to convince customers to change their behavior. Also it’s not enough to make decisions in offices in Budapest or Brussels, help needs to be much closer to the consumers. That’s where municipalities have a huge role: in informing and convincing customers about their opportunities. Sometimes the solution is very simple, people just don’t know about it. Be practical, be local.

Q: THE EUROPEAN UNION EMPHASIZES A REDUCTION IN ENERGY CONSUMPTION BY 20% COMPARED TO 1990 LEVELS BY 2020. IS THIS TARGET ACHIEVABLE IN HUNGARY? A: The 20% target by 2020 sounds nice, but it’s a little bit far off. I prefer to think in the mediumterm, for two to three years in advance. So I think the 20% reduction could be achieved much sooner than 2020. Because of the high gas prices and the impact of the crisis, a 5% energy saving could be reached annually in Hungary. KK

Budapest has a lot to show and sell The number of visitors in Budapest is far from the optimal, considering the opportunities and the attractions of the city. The collapse of Malév Hungarian Airlines and the new tax on catering and business lunches has worsened the situation, says Philippe Godard, the CEO of Sofitel Budapest Chain Bridge.

Q: YOU WERE APPOINTED CEO OF THE SOFITEL BUDAPEST CHAIN BRIDGE HALF A YEAR AGO. HOW DO YOU LIKE THE CITY AND WHAT DO YOU THINK ABOUT THE PRESENT STATE OF TOURISM IN HUNGARY? A: When I arrived in Budapest, it immediately took my heart.

It’s a very nice city, which has a lot of opportunities and a lot to show and sell. Unfortunately, many tourists miss Hungary as a destination because the advertisements are less emphasized than other counties surrounding us. Considering the value of the attractions in the city, the volume of the tourism is far from the expectations.

Q: HOW HAS THE COLLAPSE OF MALÉV HUNGARIAN AIRLINES AFFECTED TOURISM IN BUDAPEST AND AT SOFITEL? A: The collapse of Malév had an immediate impact around February and March, however the number of leisure visitors climbed back to previous levels due to the increased activity of low-cost airlines. On the other hand, the business segment especially the MICE (meetings, incentives, conferences, and exhibitions) area, is still suffering from the lack of scheduled flights. We are looking forward to positive results after the high season, as we are not sure if airlines will open new routes in

order to fill the gaps the collapse of Malév has left. Up to now, the number of guests at Sofitel is 6% less than in the previous year. However, I’ve seen some statistics made by Budapest Airport, the operator of Hungary’s main Liszt Ferenc airport: the company predicts almost a million visitors less for 2012 then a year ago in a “best case scenario”.

Q: FROM TIME TO TIME WE HEAR FOREIGN COMPANIES COMPLAIN ABOUT PROTECTIONIST DECISIONS OF THE CENTRAL GOVERNMENT AND THE LOCAL MUNICIPALITIES FAVORING HUNGARIAN BUSINESSES. DO YOU FEEL ANY PROTECTIONISM IN THE TOURIST AND HOTEL INDUSTRY? A: As an international hotel chain, we don’t feel any particular protectionism in Hungary.

However, new taxes, especially the one that puts heavy burdens on business lunches and other organized events, impact us very hard. (Due to the changes in the law governing representation expenses, the costs of the catering business increased substantially from January 1, manifesting itself in a major drop in traffic in restaurants, one day meetings.)

Q: HOW DO YOU SEE THE ROLE OF LOCAL MUNICIPALITIES IN IMPROVING THE ATTRACTIVENESS OF HUNGARY?

A: When I arrived in Budapest, I observed the city as a newcomer. I was totally impressed by the active life of the city. In my opinion the local municipalities invest a lot of energy and time to make the city attractive with a wide range of colorful programs. Let me share a positive experience with you.

When we had the opportunity to host as a hotel part of the FIFA delegation, I was amazed by the efficient cooperation between local authorities and hotels all around the whole city to make everything smooth and well-organized in order to communicate the excellent reputation of the capital.

Q: TALKING NOW ABOUT CRIME, WHAT DO YOU THINK ABOUT THE SAFETY ON THE STREETS OF BUDAPEST? A: Budapest is a very safe city compared to other metropolises. I have worked in many countries, and I can tell you, the streets of Budapest are safe. The only problem we encounter from time to time is pick pocketing, however, in less cases than in other cities.

Q: WHAT MESSAGE WOULD YOU SEND TO FOREIGN TOURISTS TO CONVINCE THEM TO VISIT HUNGARY? A: Budapest has a fantastic history with a lot of interesting sites to visit. Culture is an important part of the city.

The food and wines are great and on the top of that, there are a lot of baths to relax and replenish. Budapest is a wonderful tourist destination because its price/value ratio is very high, hotel rooms are relatively cheap compared to other cities and the city offers great entertainment. KK

CURRICULUM VITAE Philippe Godard has 20 years of international experience in hospitality.

His grandparents owned a restaurant and he always had it in mind to do a job like this. Godard started his career with Air France in 1993 in the airline’s catering branch.

In 1995, he joined the Lucien Barrière Group, where he steadily climbed the ranks to the position of Resident Manager. In 2000 when he had gained enough experience in the luxury hotel industry and in airlines, he joined the Accor Group and became the Resident Manager of the Pré Catelan in Paris in the same year. Four years later, he became the General Manager of the Sofitel and Novotel hotels in Bora Bora, where he spent three successful years. After this he took over as General Manager of the Sofitel Cebu Real in the Philippines, before being appointed in 2008 to the position of Area General Manager Sofitel Vietnam. He arrived in Hungary in January 2012.

20 2 BusinessPartnerWatch BBJ

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Budapest Business Journal | july 13 – july 26

French companies in Hungary

*

In alphabetical order

COMPANY, WEBSITE

AIR FRANCE www.airfrance.hu

AXA CSOPORT MAGYARORSZÁG www.axa.hu

ALD AUTOMOTIVE MAGYARORSZÁG KFT www.aldautomotive.hu

AUCHAN MAGYARORSZÁG KFT www.auchan.hu

AXEREAL GROUP www.axereal.com

BNP PARIBAS MAGYARORSZÁGI FIÓKTELEPE www.bnpparibas.hu

CAPGEMINI MAGYARORSZÁG KFT www.capgemini.hu

CITROЁN HUNGÁRIA KFT www.citroen.hu

CEGOS KFT www.cegos.hu

COFIDIS MAGYARORSZÁGI FIÓKTELEPE www.cofidis.hu

DALKIA ENERGIA ZRT www.dalkia.hu

GDF SUEZ ENERGIA MAGYARORSZÁG ZRT www.gdfsuez-energia.hu

DANONE TEJTERMÉK GYÁRTÓ ÉS FORGALMAZÓ KFT www.danone.hu

* Based on the BBJ’s own selection

YEAR ESTABLISHED

MAIN ACTIVITIES

TOP LOCAL EXECUTIVE

ADRESS, PHONE, FAX EMAIL

–

Air transport

Botond Melles

1088 Budapest, Rákóczi út 1–3.

(1) 483-8800, (1) 373-7795 mail.cto.bud@airfrance.fr

2007

Bank, life insurance, accident insurance, travel insurance, health insurance, home insurance, pension fund, health fund, investment

Violeta Ciurel

1138 Budapest, Váci út 135-139.

(1) 413-5100, (1) 413-5101 info.axa@axa.hu

2001

Car and truck rental, fleet operation

Viktor Szántó

1138 Budapest, Váci út 76.

(1) 802-5800, (1) 802-5830 ugyfelszolgalat@aldautomotive.hu

1995

Food retail trade

Dominique Ducoux

1113 Budapest, Bocskai út 134–146.

(1) 887-4500, (1) 887-4599 auchan@auchan.hu

2004

Malting, grain production and trade

Stefan Schodts

1123 Budapest, Nagyenyed u. 8–14.

(1)213-4141, (1) 213-4140 maria.ujvari@axereal.com

1990

Universal commercial and investment banking services for large- and medium-sized domestic and international companies, subsidiaries in Hungary, as well as for private individuals with significant savings

Laurent Poiron

1051 Budapest, Széchenyi István tér 7–8.

(1) 374-6300, (1) 269-3967 info.hu@bnpparibas.hu

1997

Management consulting, computer systems and applications integration, IT outsourcing, front office computing services

Jérome Cadiou

2040 Budaörs, Puskás Tivadar u. 4.

(23) 506-800, (23) 506-801 hello@capgemini.hu

1994

New and used car sales, financing arrangements, maintenance, repair

Wojciech Tomaszkiewicz

1194 Budapest, André Citroёn u. 1.

(1) 348-4848, (1) 348-4849 info.hu@citroen.com

1995

Corporate and organizational development consultancy, corporate training, e-learning

István Boros

1013 Budapest, Krisztina krt. 41–43.

(1) 319-1933, (1) 319-2671 cegos@cegos.hu

2005

Fast general purpose credit for individuals

Bence Holló

1066 Budapest, Mozsár u. 16.

(1) 354-5001, (1) 354-5099 info@cofidis.hu

2000

Heat supply contracts, industrial technologies, facility management, co-generation, heating networks, power generation at power plants

Gérard Bourland

1117 Budapest, Budafoki út 91-93.

(1) 265-1617, (1) 264-9346 titkarsag@dalkia.hu

1995

Natural gas sales, natural gas trade, electricity trade, portfolio management

Patrick Eeckelers

6724 Szeged, Pulcz u. 44.

(62) 569-600, (62) 473-943 kommunikacio.hu@gdfsuez.com

1991

Production and distribution of dairy products

Paolo Maria Tafuri

1106 Budapest, Keresztúri út 210.

(1) 432-2800, (1) 261-8294 –

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Budapest Business Journal | july 13 – july 26

COMPANY, WEBSITE

MAZARS HUNGARY KFT www.mazars.hu

PEUGEOT HUNGÁRIA KFT www.peugeot.hu

RENAULT HUNGÁRIA KFT www.renault.hu

SANOFI -AVENTIS ZRT www.sanofi-aventis.hu

SCHNEIDER ELECTRIC ZRT www.schneider-electric.hu

SÉGÉCÉ MAGYARORSZÁG KFT www.segece.hu

NEXUS KOMMUNIKÁCIÓS ÜGYNÖKSÉG www.nxs.hu

NISSAN SALES CEE KFT www.nissan.hu

VAILLANT SAUNIER DUVAL KFT www.saunierduval.hu

MICHELIN HUNGÁRIA ABRONCSGYÁRTÓ KFT www.michelin.hu

ALSTOM HUNGÁRIA ZRT www.alstom.com

L'OREAL MAGYARORSZÁG www.loreal.hu

GIDE LOYRETTE NOUEL – D’ORNANO IRODA www.gide.com

YEAR ESTABLISHED

MAIN ACTIVITIES

TOP LOCAL EXECUTIVE

ADRESS, PHONE, FAX EMAIL

1991

Audit, audit-related services, forensic and investigation services, outsourcing, tax and legal advices

Philippe Michalak

1074 Budapest, Rákóczi út 70-72.

(1) 429-3010, (1) 235-0481 mazars@mazars.hu

1993

Peugeot vehicles, parts and accessories import

Philippe -Jean Lafond

1113 Budapest, Bocskai út 134-146. E. building (1) 279-5555, (1) 279-5556 –

1990

Commercial distribution of Renault and Dacia cars and vans

Miklós Maróthy

1135 Budapest, Róbert Károly Krt. 96–98.

(1) 237-2100, (1) 350-0136 info@renault.hu

1991

Research, development, chemical and pharmaceutical production

Christophe Gourlet

1045 Budapest, Tó u. 1–5.

(1) 505-0000, (1) 505-2925 –

1991

Power supply and power distribution, industrial automation, energy monitoring and control, utility services, data management

József Spilkó

1117 Budapest, Hauszmann Alajos u. 3/B (1) 282-2600, (1) 206-1451 hu-vevoszolgalat@hu.schneider-electric.com

2004

Establishing and operating shopping centers, leisure centers, service facilities

Frédéric Bout

1138 Budapest, Váci út 178.

(1) 577-1100, (1) 577-1101 marketing@segece.hu

1996

Market research, ATL and BTL communication, event management

Gábor Simon

1115 Budapest, Bartók Béla út 105–113.

(1) 248-3100, 248-3111 nexus@nxs.hu

2005

Motor vehicle and spare parts trading

Philippe Saillard

1117 Budapest, Infopark sétány 3/B (1) 371-5300, (1) 371-5303 hungary@nissan-services.eu

1997

Import and ditribution of household gas appliances

Gábor Seidl

1117 Budapest, Hunyadi János út 1.

(1) 283-0555, (1) 283-0554 info@saunierduval.hu

1996

Tire manufacturing and trade

John Young

1087 Budapest, Kerepesi út 17.

(1) 459-2600, (1) 279-2875 –

–

Rehabilitation of power plants, maintenance, repair, production of new equipment

László Deák

1138 Budapest, Váci út 152–156.

(1) 889-2000, (1) 359-6719 informacio@power.alstom.com

1994

Distribution of cosmetic products

Marco Fabien

1023 Budapest, Árpád fejedelem útja 26–28.

(1) 438-2100, (1) 438-2299 mail@hu.loreal.com

1993

Legal and tax advice

Francois d'Ornano

1051 Budapest, Széchenyi István tér 7-8.

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

3 Socialite

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READING CORNER

Who’s news TI calls for enforceable lobby regulation

23 23

Reading corner

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what happened last night, but about the morning after.

If you hide under the covers because you can’t face another day of the same old grind, you clearly need more change in your life. If you leap out of bed precisely because, today, everything is going to be different and something is sure to surprise you, then you’re halfway there already. This is Velocity. Enjoy the ride.”

“Velocity: the Seven New Laws for a World Gone Digital” by Ajaz Ahmed and Stefan Olander Vermillion ISBN 9780091947569 Available to order through www.hungaropress.hu

[ EXPERT OPINION ]

Hot and skin tight Watch out for fungi!

Applying copious amounts of sun block is the bare minimum to avoid serious skin damage on holiday, but no guarantee that you won’t end up reminiscing about your vacation with the dermatologist. Not only holidaymakers enjoy poolside leisure but nasty fungi too: they thrive on damp surfaces, including sweaty body parts. A pair of stuffy shoes or a heavily worn baseball cap are perfect vehicles for them to spawn and multiply.

“Every other adult in the country – precisely 54% of the Hungarian population – contracts some fungal infection at one point,” says Dr. Krisztina Siklós, dermatologist at Dr. Rose Private Hospital. “Reproducing via tiny spores, fungi can easily spread with a wet towel or the nail scissors used by the whole family.” It is worth getting to know the most common types and taking preventive measures.

Unpleasant, itchy discomfort, peeling, blistery skin, thickened, yellow toenails – the telltale signs of athlete’s foot, caused by a fungus called Mycosis Pedis. Television ads like to trivialize its treatment: apply some magic cream and it’s gone in a jiffy.

In fact, it is quite difficult to get rid of athlete’s foot. With the combined use of oral medicine and local treatment, one has to make sure that all infected skin parts and nails grow off and are totally replaced.

It could easily take weeks or even months.

To avoid infection in the first place, wear slippers or flip-flops everywhere in a

swimming pool or thermal bath, even in the shower. Children should also be asked to wear footwear outside the pool, and only take it off when going into the water.

Hair loss is one of the symptoms of fungal infection, often caused by the use of a common towel or comb. Typically it is confused with plain dandruff, so we must remember that a flaky scalp and ensuing hair

Candida Albicans

loss show a fungal infection that needs to be treated without delay, as over time it will get more obstinate, and could easily spread to other parts of the body.

A few years ago Candida Albicans became the number one public enemy, destined to be purged in every way by naturopaths, although it is normally present in the human system, proliferating abnormally only when

the bacterial flora is imbalanced. Candida can indeed affect the skin, the mucous membranes and internal organs. Itchy rashes in skin folds, choppy wounds in the corner of the mouth, and genital infection are indicative of candidiasis. “The abnormal proliferation of candida is a reversible process, however, it needs a treatment regiment closely monitored by a specialist,” says dr. Siklós.

SUN FUNGUS Another strange skin condition that becomes more visible on tanned skin is pytiriasis versicolor, or sun fungus, caused

by Malassezia Furfur, a yeast-like fungus that is normally present on the human skin without any problem, only opportunistically manifesting itself when hormonal imbalance, warm and damp conditions, oily skin, or an impaired immune system facilitates its growth. Large, brownish spots on the neck and upper body turn white when exposed to the sun, as the fungi eliminate pigmentation. Although not itchy, the spots are unsightly, and need treatment. Infection starts on the scalp and spreads with dandruff, so thoroughly treating the scalp with fungicides is a must, otherwise we are in for a quick relapse. Unclean sun-beds can also be the culprit in spreading the spores. Those frequenting sun parlours had better disinfect the bed personally before use.

www.drrose.hu

For an appointment, call (+36)1-377-67-37 or go online at www.rendelo.drrose.hu

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23

Budapest Business Journal | july 13 – july 26

WHO'S NEWS

Name Nick Kós Current company/position PwC Hungary/country managing partner Previous company/position -/-

Name Bea Előd Current company/position Budapest Citi Service Center/head of the center and EMEA Citi shared services chief administrative officer Previous company/position -/-

Kós was announced as country managing partner of PwC Hungary at the beginning of 2012, and assumed his duties on July 1. An auditing expert of Irish-Hungarian heritage, Kós began his PwC career in Ireland in 1990. He moved to Hungary in 1994, where he rose to the role of lead partner in the telecommunications, information technology and media industry group.

Later he held a leading positions at PwC Poland and PwC Moscow. He returned to Hungary last year. Kós succeeds George Johnstone, who retired on June 30, 2012.

As head of Budapest Citi Service Center, Előd will run the Citibank International plc Hungarian branch office. In the past four years, she led the O&T organization in Hungary as senior country operations officer. She has been with Citibank Hungary for more than 20 years and has held numerous roles in the country: among others, she managed treasury operations and controls, securities and fund services, and global transaction services operations.

Do you know someone on the move?

Send information to research@bbj.hu

Name Tamás Lőcsei Current company/position PwC Hungary/head of tax and legal services Previous company/position -/-

Name Kornél Brassai Current company/position Well Reklámügynökség/ creative director Previous company/position -/-

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Lőcsei has been appointed as leader of tax and legal services at PwC Hungary. He joined the tax and legal department in 1997 as a lawyer, where he worked in the fields of customs and international trade law. He set up the indirect tax department in 2002. In 2005, after being appointed partner, he was put in charge of state aid and incentive services. Lőcsei succeeds Russell W. Lambert, who has become a member of PwC’s global tax team, and will support its global tax network from Budapest.

Name Ádám Osztovits Current company/position PwC Hungary/advisory leader Previous company/position -/-

Brassai has been appointed creative director of ad agency Well Reklámügynökség. In the advertising industry for nearly 15 years, he started his career at Scholz & Friends Budapest, and later worked as copywriter at BBDO Budapest for ten years.

Before starting his career in the advertisement industry, he was a freelancer on the economy column of daily newspaper Magyar Hírlap.

Name Krisztina Szigeti Current company/position Atradius Credit Insurance/ in charge of credit risk in Romania Previous company/position -/-

Osztovits took over as advisory leader at PwC Hungary in July.

He has 15 years of experience in management and business consulting. His task will be to strengthen PwC’s leading position in the business consulting services market in the region. He will also be responsible for developing PwC Hungary’s energy and consulting services practice. He succeeds Rafal Krasnodebski, who will continue his career as the leader of PwC Ukraine consulting practice.

In addition to her existing role at Atradius as head of credit risk management in Hungary, Szigeti has been in charge of credit risk management in Romania as of July 1. Before joining Atradius in 2010, she worked at Euler Hermes for eight years, first as senior risk manager; she was promoted to managing director in charge of risk management in 2007. She started her career at Magyar Fejlesztési Bank Zrt in 1993 and also worked at Raiffeisen Bank.

Lobbying is not a bad thing. It is a necessary and useful activity to channel the experiences and wishes of the business sector to the public sector, but it has to be regulated, Noémi Alexa, General Director of Transparency International (TI) in Hungary said at a business lunch last week organized by the French-Hungarian Chamber of Commerce and Industry.

BBJ KRISZTIÁN KUMMER

The comparative results of a national integrity system study made by TI in 25 EU-member countries clearly shows that there is a huge demand for lobby regulations to be intro-

duced in European countries.

“This is a cross-country issue.

Transparency International thinks that lobbying is an important public and private interest, but it must be regulated,” Alexa said.

However, lobbying activities are either unregulated or partly regulated only in the majority of countries.

The first and most basic step towards transparency in lobbying is the registration of lobbyists, a feature that is only mandatory in Canada, Lithuania, Poland, Slovenia and the U.S., and voluntary in France and Germany. TI recommends that governments use a broad definition of lobbyist, and that not just companies but also public affairs consultancies, NGOs, and think tanks be registered.

Another important feature of regulation, one that should be introduced in all areas, is so-called smart transparency, the TI Director said. This entails an online platform, developed by the government, where it is easy to register

Photo: Tamás Opitz

TI calls for enforceable lobby regulation

and follow lobby activities, with the system recording the time, the topic, and the name of the company. Even if it raises problems because the statement of lobbying

activities can conflict with the competitive interests of companies, the fact that lobbying is published online can still make the process more transparent.

Also, reporting on lobbying activities is required whether it takes place on behalf of public or private companies.

However, lobbying regulations and online platforms alone are not sufficient to improve transparency; they should be integrated into the full regulatory and legislation system, with sanctions applied if rules are breached, Alexa added.

Whether to regulate informal lobbying – such as golf matches, sailing trips, or ski holidays organized by businesses – is always an interesting question, Alexa noted. Surveys and in-depth interviews conducted by TI made it clear that such activities are almost impossible to regulate. That, therefore, would not form part of the lobbying law, which rather aims to regulate and incentivize formal lobbying only.

Hungary had a law regulating lobby activities until 2010, but it was abandoned in 2011, and new regulation is in the making. Even though

the Hungarian lobby law was copied from international best practices, with registration, reporting, and transparency measures, it did not work at all. However, lawmaking in Hungary is not transparent enough, especially in the parliamentary phase. So it should be more predictable, or at least more easily followed, not just by businessmen, but also society in general, as this would contribute to a more businessfriendly environment.

According to Alexa, the former legislation was doomed to fail as it put too much administrative burden on both parties. It was just not reasonable for either side, so after each meeting participants simply remained silent about their activities. Also, informal lobbying was found to be much more efficient than formal, as public officers did not take seriously the letters and petitions aimed at them, she said.

And as not following the rules was not sanctioned at all, public officers just “forgot” to record any lobbying of them. ■