Budapest Business Journal 20/19

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1992-2012

20 YEARS

IN BUSINESS

VOL. 20, NUMBER 19 OCT 05, 2012 – OCT 18, 2012

Budapest Business Journal

441

BLN HUF

THE ESTIMATED HOLE IN NEXT YEAR’S BUDGET CAUSED BY GOV’T MEASURES

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

IN POLE POSITION? In an effort to help those who start job seeking from the worst positons, the government has introduced its Job Protection Plan.

But how much will it cost the taxpayer? PAGE 11

The narrowing possibilities of the local market could provide an impetus for the domestic translation industry.

PAGE 13

Q&A

SPECIAL REPORT

SPECIAL REPORT

New telco tax unacceptable

On their way

Language is not the barrier

The current “telco tax” is more discriminatory than its predecessor as it goes after only some lines of business within the telecom sector and distorts the whole market, Christopher Mattheisen, Chairman and CEO of Magyar Telekom says.

PAGE 07

Hungarian potential migration is hitting records. A recent poll shows that almost every fifth adult wants to try their chances somewhere else.

Where do they want to go, what will they find there and what will happen to those who stay?

PAGES 18-19

While German-speaking markets are among the most popular targets for Hungary’s cultural exports, there is no tried and true path to follow when artists or managers aim to extend their audience beyond the country’s borders.

PAGE 24

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BI-WEEKLY

NEWS

Teva inaugurates HUF 22 bln plant at base near Budapest

05

Telco tax is discriminatory and unacceptable 07

macroscope

Further rate cuts on the way, but what about inflation?

The National Bank of Hungary (MNB) cut the base rate by 25 basis points to 6.5% on September 25 following a similar cut on August 29. After the meeting of the Monetary Council (MC), MNB governor András Simor said the decision to reduce the base rate was made by a “tight majority”.

Taking into account the MC members’ monetary policy attitudes and voting records, the four external members probably voted for a rate cut against the three internal members’ proposal to hold the rate – again. This indicates that the external members are willing to accept higher inflation and a weaker forint to boost economic growth.

The MNB is indeed in a difficult position, as factors simultaneously pointing in the direction of an easing or a tightening of monetary policy have been present since the outset of the fi nancial crisis. The MC said that it will “consider

a further reduction in interest rates if the improvement in fi nancial market sentiment persists and medium-term upside risks

expected to remain significantly above the 3% target for most of the forecast period, with the target only likely to be met in the sec-

HIGH INFLATION AND WEAK ECONOMIC GROWTH CALL FOR OPPOSITE INTEREST RATE PATHS to inflation remain moderate.” JP Morgan analysts recently cited an unnamed external member saying that there is room for a 100 bps rate cut before the EU/ IMF agreement and for another 100 bps after.

But this comes at a price.

The MNB drastically increased its inf lation targets in its report on inf lation published two days after the decision on the second cut. “Inf lation is

ond half of 2014,” says the MNB. According to the baseline scenario outlined in the report, the MNB’s 2013 consumer price index forecast increased by a massive 150 bps to 5% from the 3.5% June forecast. This year’s CPI forecast rose to 5.8% from the previous 5.3%.

UNDESIRABLE CONSEQUENCES “The MNB’s credibility eroded to a high extent af-

ter the second cut,” according to a research note by OTP Bank analysts. As it confirms that the August decision was the beginning of a rate cutting cycle, the second cut has undesirable consequences, such as the growing uncertainty of the future CPI path. This could lead to growing long yields and country risk premium.

The research note says that “with the structural problems causing lower potential GDP growth, the rate cut is much less effective than it would be in a healthy economy”. The analysts point out that without the interest rate transmission, the rate cut is ineffective, adding that a potential significant forint weakening could actually lower GDP because of the high FX debt. Due to a 175 bps decline in real interests, which is the result of the 150 bps higher inflation expectation and the 25 bps rate cut, Hungarian assets will become less attractive. GL

ANALYSTS’ EXPECTATIONS In the money market, forward Rate Agreement (FRA) quotes, which reflect interest rate expectations, are currently pricing a further gradual decline of the base rate.

OTP We expect two more rate cuts resulting in a 6% base rate at the end of this year.

TAKARÉKBANK We do not expect further base rate cuts before the end of the IMF talks. If negotiations are successful, there might be a further 25 bps cut to 6.25% by the end of this year.

This could be followed a further 50 bps cut to 5.75 % by the end of 2013.

EQUILOR The council might consider another easing in November.

While we foresee a 6.25% base rate at the end of this year, we cannot out-rule one more rate cut in 2012.

ARGUMENTS FOR AND AGAINST A BASE RATE CUT FOR easing money market conditions declining yields and risk premia ■ stronger forint rates ■ the development of macroeconomic indicators ■ ■

AGAINST ■ ■

decreasing, but still high level of stability risks strengthening inflationary risks

Source: Takarékbank analysis

A falling star: will E-Star bondholders get paid in October?

Although Hungarian energy company E-Star does not yet have enough cash to meet its HUF 1.42 billion bond payments due on October 24, analysts believe that it will somehow be able to ensure the necessary funds during the remaining few weeks. But how? “E-Star might either receive the second part of the Polish loan or reach some kind of an agreement with its non-paying municipality customers,” Equilor analyst Ákos Kuti told the Budapest Business Journal. “There is also a chance of it receiving a loan from the Hungarian Development Bank (MFB),” he added. In case the company cannot meet its obligations in October, the rest of

the bonds will become im- as possible, preferably in the Polska, a Polish holding commediately payable. more promising Polish mar- pany held 100% by E-Star.

E-Star, once the darling of ket rather than in Hungary or According to the agreement, the Hungarian capital mar- in Romania. Other, less op- part of the facility can be ket, launched its HUF 10 bil- timistic analysts believe that used directly by the parent lion corporate bond program the company will go bank- company. However, E-Star in September 2010. claims that it canThe company was one not use all the funds CAN E-STAR, ONCE of the first players befor the upcoming THE DARLING OF THE bond repayment, as sides banks to raise financing in the form HUNGARIAN CAPITAL it has significant acof a public bond issue. cumulated accounts MARKET, PAY ITS But there are bigpayable that need to ger concerns than just be settled in order BONDHOLDERS AND the October deadline. to ensure continuAVOID BANKRUPTCY? ous operations. AlThe main questions are how E-Star will though cash at hand get back on its feet and meet rupt in 2014, the latest. was quite high at the end of its other bond payment obE-Star received a long- August, at €6.3 million, the ligations and whether it can awaited PLN 36 million loan company will probably have avoid bankruptcy. According facility from Bank Zachodni spent most of it by the end to Kuti, the company has to WBK based on an agreement of October. According to the launch new projects as soon signed on June 15 by E-Star August flash report, from the

PLN 36 million total amount, PLN 12 million served the prepayment of the loan facility that has been used for a gas engine investment in August 2011 and PLN 4 million has moderated the exposure of heating subsidiary EC Mielec inside the E-Star internal financial system.

E-Star blames the nonpayment of its problematic municipality clients, the high level of central costs and the high consultancy fees for its liquidity problems. The company says in its flash report that the outstanding receivables of the municipality portfolio further deteriorated. In the case of three municipalities, E-Star has already launched

a litigation process to enforce payments. The company stated that it is not able to finance the delays of the payments due for months or more than a year. Thus, it will terminate the relevant contracts and start more litigations before the start of the heating season.

Two Hungarian private investors, Csaba Soós and József Makra, established E-Star, previously known as RFV, in 2000. The company floated its shares on the Budapest Stock Exchange in 2007.

E-Star shares have been listed on the BSE BUX Index since 2010. A year later, the company’s shares were introduced to Warsaw Stock Exchange through a dual listing. GL

04 1 News BBJ

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bi-weekly

QUOTE OF THE WEEK

Certain members of groups in the gambling industry represent serious national security risk.

JÁNOS LÁZÁR, THE HEAD OF THE PRIME MINISTER’S OFFICE, AFTER

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

Hungary’s MTVA center named Best Public Building in Europe The headquarters and production base of the Media Service Support and Asset Management Fund (MTVA) was granted the title “Best Public Building in Europe” in the European Property Awards 2012 competition on September 24. The building was developed by Hungarian firm WING Zrt a decade ago and was originally designed for Hungarian state television (MTV), but following the integration of the public service media it has also become the production site for Duna Televízió programs, and also houses public news portals. Later this year, the nominees that achieved the top scores in the European Property Awards will compete with the winners from the Asian-Pacific, African, North and South American and Middle-Eastern regions, in order to determine which will take the coveted “World’s Best” title.

ECONOMY MEASURES TO CAUSE HUF 441 BLN FISCAL DETERIORATION IN 2013 Measures announced by the government since the end of June are likely to have a net negative effect of HUF 441 bln on the 2013 fiscal balance, the staff of the National Bank of Hungary have calculated. The two biggest factors affecting the balance are measures included in the Job Protection Plan, that have a HUF 243 bln negative impact on next year’s budget, and changes to the planned financial transactions duty that translate to a HUF 203 bln shortfall in revenue, the staff said in the MNB’s latest quarterly Inflation Report. The staff estimate targeted preferences that are part of the Job Pro-

tection Plan will cause the fiscal balance to deteriorate

by HUF 99 bln, while a new tax small businesses may opt to pay will result in a HUF 144 bln fall in revenue.

With regard to the financial transactions duty, the staff said it took into account a cap on the duty written into the legislation as part of a deal with banks. On the expenditure side, the staff noted the allocation of HUF 42 bln for the establishment of a usage-based electronic road toll system that is to be spent next year. The staff assumed that HUF 40 bln in revenue targeted from a mobile frequency would arrive in 2013, instead of 2012, as the tender was annulled by a court in September.

HUNGARY GEN GOV’T DEFICIT 1.1% OF GDP IN Q2 Hungary had a general gov-

ernment deficit of HUF 78.9 bln in the second quarter, or 1.1% of GDP during the period, preliminary data published by the Central Statistics Office (KSH) show.

The accrual-based deficit, calculated with European Union accounting standards, fell by HUF 250 bln or 3.6 percentage points of GDP from the same period a year earlier. Revenue of the general government rose 13.5% to HUF 3,352.4 bln in Q2 from the same period a year earlier. New opt-outs from private pension funds contributed HUF 56.2 bln to the increase, while taxes on production and imports increased 9.7%, VAT brought in 13.9% more and taxes on income rose 14.4%.

Expenditures of the general government climbed 4.5% to HUF 3,431.3 bln. Interest expenditure was up 7.8%

and payroll costs rose 4.5%, but gross capital formation plunged 22.4%. KSH noted that it had reported data from the second reading of national accounts data for 2011 to Eurostat as part of Hungary’s Excessive Deficit Procedure (EDP). The data show a general government surplus of HUF 1,213 bln or 4.3% of GDP in 2011, according to the Maastricht definition. Hungary’s state debt reached HUF 22,690 bln or 81.4% of GDP at the end of 2011, based on data from the National Bank of Hungary, KSH added.

HUNGARY PPI SLOWS TO 5.1% IN AUGUST Industrial producer prices in Hungary rose 5.1% in August from the same month a year earlier, slowing from a 6.2% increase in July, according to data from the

Central Statistics Office. In a month-on-month comparison, producer prices fell 0.3% in August after dropping 0.4% in July. The monthly drops followed a 1.6% drop in June and slight increases in the previous three months, and came as the strengthening forint pushed export prices lower.

Domestic producer prices rose 5.7% year-on-year in August, slowing down from a 6.1% rise in July. They were unchanged monthon-month in August after edging up 0.4% in July. The forint weakened 2.4% to the euro and softened 18.5% to the dollar in the 12 months to August. The Hungarian currency strengthened 2.6% to the euro and firmed 3.5% to the dollar from July.

Twelve-month PPI in the pharmaceutical segment of the manufacturing sector

jumped 10.9%. Producer prices rose 3.9% in the computer, electronic and optical products segment, increased 1.8% in the transport equipment segment and were up 8.2% in the electricity, gas, steam and air conditioning segment. January-August producer prices were up 6.7% as domestic producer prices rose 7% and forintterm export prices rose 6.5% in the period.

HUNGARY PMI RISES OVER 50 THRESHOLD Hungary’s seasonally adjusted Purchasing Managers Index (PMI) rose to 52.5 in September from 49.6 in August, climbing over the 50 threshold between contraction and expansion, the Hungarian Association of Logistics, Purchasing and Inventory Management (HALPIM), which compiles

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the index, said. The index was over 50 for the sixth time this year. Among the sub-indices that comprise the PMI, the new orders index showed expansion for the fift h month this year.

The production volume index was down from August but still over the 50 threshold, also for the fift h time this year. The employment index was over 50 in September after showing contraction in July and August.

Delivery times were longer in September. Purchased stocks were up in September – for the fift h month this year – after falling in August. Among the indices that HALPIM compiles but does not include in the PMI, the order volume index rose over 50 and the purchase prices index showed prices rising at a faster rate. The gauge of finished product stock showed inventories were lower. The export index was close to 50 and the import index fell but was still over the 50 threshold.

HUNGARY C/A SURPLUS REACHES €519 MLN IN Q2 Hungary’s current-account surplus came to €519 mln in the second quarter of 2012, the National Bank of Hungary said in a first reading.

Adjusted for seasonal effects, the Q2 surplus came to €367 mln. The MNB revised the Q1 c/a balance to a €7 mln deficit from a preliminary €186 mln in the data.

It revised the seasonally adjusted figure to a €1 mln surplus from a €117 mln surplus in the first reading.

The MNB revised the c/a surplus for 2011 to €910 mln from the earlier €1.416 bln, citing a revision of the VAT resident adjustment. Based on definitive data on 2011, VAT residents that have no sales transactions with Hungarian residents have been completely excluded from data on trade in goods, the MNB explained. As a result, the surplus in trade in goods for 2011 was revised downward by €664 mln from the preliminary estimate. Hungary’s net external financing capacity came to €975 mln in Q2, up from €326 mln in the previous quarter and from €788 mln in the same period a year earlier. Adjusted for seasonal effects, the net external financing capacity was €857 mln, or 3.6% of GDP, in Q2, 1.1 percentage points higher than in the previous quarter. Unadjusted net current transfers from the European Union reached €299 mln in Q2. Net capital transfers from the EU came to €472 mln. The seasonally adjust-

ed data show the surplus of goods and services reached €1.9 bln in Q2. The surplus of goods came to €1.172 bln and the surplus of services was €755 mln.

UNEMPLOYMENT LIKELY TO RISE AFTER SEASONAL EFFECT WEARS OFF Analysts have attributed a lower than expected jobless rate in June-August to seasonal factors and warned that unemployment was likely to rise in the coming months. The average unemployment rate in Hungary was 10.4% in the 15-74 age group in June-August, down from 10.5% in May-July and from 10.8% in the same period a year earlier, data published by the Central Statistics Office (KSH) shows.

CIB chief analyst Mariann Trippon said the unemployment rate dropped because of seasonal effects during the summer months. As the economy is in recession, the rate is likely to remain in the double digits and rise close to 11% by year-end, she added. Takarékbank senior analyst Gergely Suppan said the data was a positive surprise, but noted that much of the increase in employment was due to fostered workers. He said the unemployment rate could fall to 10.3% in the fall before rising again to reach 11.4% by year-end. He put the annual average jobless rate at 10.9%.

BUSINESS PORTFOLION INVESTS €1.5 MLN IN SOCIAL MEDIA MONITOR Venture capital fund PortfoLion, a unit of OTP Bank, Hungary’s biggest commercial lender, has invested €1.5 mln in Replise, which monitors and indexes online conversations and social media content. The investment will support the expansion of Replise – earlier called BrandMonitor – abroad, PortoLion said. PortfoLion now manages 11 active investments in companies in areas as diverse as biotechnology and fashion. PortfoLion makes its investments in the framework of the European Union’s Jeremie I program.

GOV’T TO SIGN STRATEGIC AGREEMENTS WITH MNCS A government resolution published in the latest issue of the official gazette Magyar Közlöny mandates the prime minister to sign strategic agreements in the name of the government with the local units of multinationals Suzuki, Alcoa and Hankook Tire, as well

as with Hungarian drug maker Gedeon Richter. The government earlier signed such agreements with the Hungarian units of CocaCola and Daimler. State secretary for foreign affairs and trade Péter Szíjjártó said in a radio interview early in September that the government planned to sign about 40 of the strategic agreements in the coming weeks and months, with the aim of making foreignowned exporters “feel even better, more secure and more predictable in Hungary”. Talks on agreements are underway with KnorrBremse, ThyssenKrupp, Bombardier, Nokia Siemens and Opel, he added. The agreements are expected to broaden companies’ circles of Hungarian suppliers and involve more in vocational training as well as regional development.

TEVA INAUGURATES HUF 22 BLN PLANT AT BASE NEAR BUDAPEST Israeli drug maker Teva has inaugurated a HUF 22 bln plant at its base in Gödöllő, near Budapest.

The new plant makes sterile preparations, such as infusions and vaccines. Jeremy Levin, Teva’s global CEO, spoke about the company’s commitment to providing the highest quality products to patients. “We fi rmly believe in the Hungarian people and the Hungarian economy,” he added.

Mihály Kaszás, who heads Teva’s Hungarian unit, said the investment had created 263 jobs. Israeli ambassador to Hungary Ilan Mor said more than 10,000 Hungarians work for or with Teva. Teva Magyarország had net profit of HUF 49 bln on revenue of HUF 252.2 bln in 2011.

JOHNSON CONTROLS OPENS HUF 1.5 BLN PRODUCTION HALL AT BASE IN HUNGARY United States-based automotive industry supplier Johnson Controls has inaugurated a HUF 1.5 bln production hall at its base in Mezőlak. HUF 400 mln of the total expenses were financed from EU and Hungarian government funds.

Johnson Controls will make parts for car seats at the plant, said Johnson Controls Automotive Experience vice president Manfred Rotterdam. The investment will create 50 jobs, he added. More than 600 people work at the base in Mezőlak at present. The plant is expected to generate revenue of HUF 20.2 bln in 2012, said plant director Csaba Kovács. Johnson Controls

employs a combined 2,500 people at four plants in Hungary. In the spring, the company opened its fourth base in the country, in Kecskemét, near German carmaker Daimler’s new plant.

The plant supplies seats for Mercedes compact models.

LONG-DELAYED CONSTRUCTION OF EUROVEGAS COULD START THIS YEAR Austrian investors could start the long-delayed construction of a €300 mln casino and hotel near Hungary’s border with Austria and Slovakia this year, the communications agency for the project, dubbed Eurovegas told MTI. The investors Hans Asamer and Alfred Supersberger – in partnership with Hard Rock International – are “ready for the construction” and are now working on ensuring fi nancing for the project, the agency said. About half of the project’s costs are to be fi nanced from loans. The casino is planned to open early in 2014, the agency said. The investors won a 20-year license to operate a big casino at the site in 2006. The complex was to have opened by 2010, but construction was delayed because of the crisis.

MAGYAR TELEKOM TO LAY OFF 500 Magyar Telekom plans to make 500 employees redundant in 2013. The company said it reached an agreement with trade unions on the layoffs and other cost efficiency measures at its Hungarian business for 2013. Most of the layoffs are expected to take place by the end of 2012, it added. The 500 layoffs do not include termination of executives or retiring employees. Severance costs related to the layoffs will come to about HUF 6 bln, to be booked in Q4 2012.

Under the agreement with unions, Magyar Telekom

will raise the base salary of employees at the parent company by 4% from April 2013. Magyar Telekom said it aims to reduce total workforce management related costs, excluding severance and capitalized employee expenses, by HUF 5.8 bln in 2013. In 2008-2013, it sees these costs decreasing by 18.4%.

NEW PIER AT FRANKFURT AIRPORT OPENS ON OCTOBER 10 A new structure at Frankfurt Airport is to be unveiled and put into operation on October 10 – the A-Plus pier, designed to give positions at Terminal 1 for wide-body aircraft. Lufthansa will exclusively use the additional capacity of 6 million passengers that the new A-Plus pier provides.

According to its estimates, Frankfurt Airport will serve 88 million passengers a year by 2020 – a 3.5% growth from the current 56 million-plus passengers. The development of the A-Plus pier will contribute significantly to meeting demand for more wide-body aircraft docking positions and additional passenger waiting areas. The project cost about €700 mln, of which €560 mln went into aboveground constructions.

DOMESTIC BAN ON GAMBLING MACHINES OUTSIDE CASINOS PASSED Parliament has passed a bill that banned the operation of gambling machines “with the exception of those located at casinos operating in a concession”.

The government submitted the bill to Parliament in an expedited procedure. The legislation will take effect on the day after it was published. Explaining the bill, János Lázár, the head of

the prime minister’s office, said after an extraordinary cabinet meeting that earlier measures had failed to scale back gambling among the poorest population. He added, without giving details, that serious national security risks had emerged in connection with the gambling industry. Lázár also said that imposing a tax on online gambling would offset the revenue decline in the budget. The government projected revenue of HUF 37.2 bln this year from the gambling tax payable after gambling machines, slightly up from HUF 33.2 bln collected in 2011. Total gambling tax revenue is targeted to rise to HUF 78.4 bln this year from HUF 51.6 bln collected in 2011.

STATE TREASURY TAKES OVER ALL NEW ‘BABY BOND’ ACCOUNTS FROM OCTOBER 1 Hungarian parents who wish to receive a “baby bond” for their newborn may only take receipt of the “start-of-life subsidy” on the account of the State Treasury from October 1, under an earlier approved amendment to legislation, business daily Világgazdaság said. Since 2006, the State Treasury has made the subsidy – now HUF 42,500 – available to all Hungarianborn citizens who reside in the country. Parents may make additional, subsidized, contributions to the bond on a “Start” account until their children turn 18. The paper noted that the cap on parents’ contributions has been scrapped. Until now, contributions could not exceed an annual HUF 120,000 with a maximum subsidy of HUF 6,000. The change in legislation does not affect Start accounts set up earlier at commercial banks.

Parents have put about HUF 20 billion in Start accounts since 2006 ■

06 1 News BBJ

energy MOL CUTS JOBS IN DOWNSTREAM RESHUFFLE, INVESTS $1.35 BLN IN HUNGARY OVER THREE YEARS Hungarian oil and gas company MOL plans to lay off 700 workers as part of a wider reorganization of its downstream business, Reuters wrote citing an emailed statement from the company. It said the reshuffle, prompted by “an extremely negative” downstream business environment and a weak global economy, was aimed at lifting earnings before interest, taxes, depreciation and amortization (EBITDA) by about $500-550 mln by 2014.

MOL announced on September 24 that it would invest more than HUF 300 bln ($1.35 bln) in Hungary over the next three years to boost efficiency and “outgrow the crisis”. The investments will be made both in exploration and production as well as in refining and marketing.

MOL INAUGURATES €1 MLN PETROL STATION IN ROMANIA Hungarian oil and gas company MOL inaugurated a €1 mln petrol station in Romania, bringing the number of retail units in the country to 131.

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MOL Romania controls 12.5% of the country’s retail fuel market at present but plans to open another 70 petrol stations by 2015, raising its market share to 15%. MOL Romania’s petrol station revenue climbed 12% in the first half from the same period a year earlier. Petrol sales rose 5% to 59,000 tonnes and diesel sales were up 7% at 158,000 tonnes.

EU MOVES STEP CLOSER TO NONRUSSIA GAS LINK-UP Europe moved a step closer to loosening Russia’s grip on European Union energy supplies after Italy, Albania and Greece signed a memorandum of understanding supporting the construction of a pipeline to deliver gas from Azerbaijan. At a ceremony in New York on September 27, the three countries signed a MoU bringing the Trans-Adriatic Pipeline (TAP) closer to reality, although building is not likely to commence until 2014 or 2015. The deal improves TAP’s chances against Nabucco West, the other remaining contender in the race to become the first pipeline to deliver Azeri gas to Europe, diversifying sup-

ply. Nabucco West would run from the Turkish border via a northerly gas hub in Austria while TAP would link to Europe via Italy. By May, the BP Plc-led companies developing the Shah Deniz gas project in Azerbaijan’s part of the Caspian Sea plan to choose between the TAP project and Nabucco West, led by OMV AG.

EU VOWS ‘NO COMPLACENCY’ ON NUCLEAR PLANT DEFECTS The European Commission has vowed there would be “no complacency” when it comes to nuclear safety in Europe despite “hundreds of defects” revealed by stress tests, especially in France.

“Our stress test was strict, serious and transparent,” European Union Energy Commissioner Guenther Oettinger said in a statement, after German daily Die Welt published what it said were figures from a report Oettinger presentation to the EU executive board.

The testing regime “reveals bluntly and objectively what we are good at and where there is a need to improve,” the German official said.

“Generally the situation is satisfactory, but there is no room for complacency.” The German newspaper said Oettinger’s report puts the bill for improving the safety of Europe’s nuclear power plants at €25 bln ($32 bln), after identifying “hundreds of defects”. It said the faults lay mainly in French reactors – France has 58 of Europe’s 145 nuclear reactors.

SERBIA AND BULGARIA TO BUILD GAS PIPELINE Serbia and Bulgaria will build a natural gas pipeline, linking networks and improving energy security for both countries that now have single supply routes. Construction of the 180 kilometer (112 mile) pipeline is to begin next year and take 18 months to complete, at an estimated cost of €100-120 mln ($129-155 mln), Serbian Prime Minister Ivica Dacic told reporters in Belgrade on October 1. The two-way pipeline will have annual capacity of 2 billion cubic meters and the EU will support Serbia’s 60-kilometer section with a €10 mln donation, he said. According to Dacic, Serbia and Bulgaria

will sign a bilateral agreement by the end of next month, and construction of the pipeline – which will stretch from Nis, southern Serbia, to Dupnitsa, south of the Bulgarian capital Sofia – could start next year.

Serbia’s only supply route comes from neighboring Hungary, Dacic said.

INA CROAT SUPERVISORS ASK GOV’T TO REPLACE ÁLDOTT, PAPER The four Croatian supervisory board members of INA Industrija Nafte d.d., the Zagrebbased refiner controlled by Hungary’s MOL Nyrt, asked the government to seek the dismissal of Zoltán Áldott, president of INA’s management board, Jutarnji List reported, citing people it didn’t identify.

Croatia has renewed its pressure to gain a greater say in the running of its largest company, saying its controlling Hungarian shareholder risked conflict with the Balkan country if it ignores government interests.

Finance Minister Slavko Linic told reporters on September 27 it was true that MOL, owner of 49.1% of INA, could run the company without government input. The government holds

44.84% of the refiner. Linic said the status quo at INA was not acceptable. Deputy Prime Minister Radimir Cacic told Reuters in an interview that Croatia was unhappy because “the management rights [in INA] do not correspond to ownership rights”.

EU GAZPROM PROBE ABOUT FAIRNESS, NOT POLITICS, ALMUNIA SAYS An EU probe of alleged abuse of market muscle by Russian giant Gazprom is not political and simply aims to create a level playing field, its competition chief Joaquin Almunia said on September 27. “We are not investigating Gazprom for any political reason, but simply because we have to make sure that the company has not abused its dominance in upstream gas supply markets in Central and Eastern Europe, especially given that it is virtually the only supplier in some countries,” he told a competition policy conference in Warsaw quoted by AFP. The European Commission is investigating Gazprom’s actions in Poland as well as Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania and Slovakia. ■

SAP takes education to the next level One of the major tasks in implementing and maintaining a SAP solution within a firm is that of education. In order to make the most of the application, the company needs to make sure that every employee, administrators and end users alike, has his or her fair share of SAP knowledge.

Education is usually treated as one of the painful necessities at most companies, and according to Zoltán Korompay, education manager at SAP Hungary, “quality and efficiency are not always top priorities when evaluating alternative solutions for education”. Courses usually take place in a meeting room at the company’s office, with one SAP consultant, using an ad hoc infrastructure that, more often than not, lacks SAP implementation in line with the course material. To make things even more complicated, usually there are no accepted metrics, or indeed intention, for measuring the efficiency and quality of the course.

“SAP knowledge is important, because it can mean career, success, and money,” says Korompay, adding that the education portfolio of the company has now been extended with a service that aims to improve SAP education precisely in these areas: quality and efficiency.

“Our new virtual classroom service, VLC+V, primarily focuses on SAP consultants and the experts of Hungarian and international companies,” Korompay explains. The format of the courses, a fully interactive video stream, allows a flexibility and accessibility that was previously unheard of. A live course can be

attended from anywhere in the world, with the use of a simple desktop or mobile devices.

The new technology delivers huge savings in educational costs while keeping all the interactivity and adjustability of real-life courses. This scheme makes it possible to organize courses that would face difficulties in garnering enough attendants from a certain country or region by broadening the geographic area of potential students. Customer needs can be answered more flexibly and swiftly, since courses can be held from anywhere in the world. It is also important to highlight that, contrary to traditional e-learning solutions, the audience manages to remain focused a lot more easily, which results in better efficiency and more thorough knowledge acquisition.

To make the VLC+V service even more attractive, SAP is now offering four-hour courses on top of the traditional eight-hour education to make life easier for those who cannot afford to miss a whole workday due to their busy schedules. Test-driving VLC+V is free for one day, and Korompay points out that the feedback the company has received so far has been unequivocally positive.

Training SAP professionals is one thing, but the company also extends its focus to end-users. Along with the new virtual classroom service, SAP has also announced the launch of a new fully localized (that is, translated to Hungarian) education package directed at end-users, at affordable prices. This material is also available in the virtual classroom scheme, and is targeted at new graduates and at people who aim to work at companies where SAP skills are key criteria of employment. The package is accompanied by a Hungarian-language certification system as well, Korompay said.

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We continue to operate the way we always have T-Systems Magyarország Zrt began operations on October 1, 2012 as Hungary’s sole service provider offering a full-scale and comprehensive info-communication technology (ICT) product portfolio. Fully owned by Magyar Telekom Nyrt, the new company was brought to life through the merger of four long-established industry stakeholders in the Hungarian market. Interview with Róbert Budafoki, CEO of T-Systems Hungary.

Q: WHAT WAS THE MAIN REASON FOR MERGING THE BUSINESSES: ECONOMIES OF SCALE, EFFICIENCY IMPROVEMENT, COST REDUCTION OR SOMETHING ELSE? A: The answer is very complex. On the one hand, from the organizational point of view, it is definitely easier to manage one company than four. The aim of the merger was to increase efficiency, but we do not want to use that to cut costs and have fewer employees, providing less to our customers, but rather to give more to clients. This is necessary because of the current economic situation, because the tight IT and

telecom budgets of companies let them spend only at reliable partners that can provide a wider range of services. That, in turn, requires that we understand the needs of customers and approach them with relevant knowledge of their respective industries.

From this point of view, the merger was absolutely necessary and timely.

Q: WHAT WILL YOUR CUSTOMERS SEE AS A RESULT OF THIS CHANGE? A: It will simplify their lives as, instead of four people, only one contact person will negotiate with them, and this person will represent

and bring in all the necessary IT skills and services.

Q: DID THE MERGER FREE ENERGIES WITHIN THE COMPANY? IS THERE ANY MARKET EXPANSION INTENTION BEHIND THE MOVE? A: Yes, a lot of energy has been freed that we want to rotate back to development. We are searching for areas where we might have ground to cover and where we can offer our customers the full extent of the services that they might need. Based on our experiences of the first half of the year, customers seem to appreciate our efforts, as we have been able to grow in a declining market.

Q: HOW DOES THE TRANSFORMATION AFFECT PUBLIC CONTRACTS? A: We continue to operate the same way as we always have done throughout our

history. The contract with the Hungarian state is an essential part of the IT spending budget, with a historical share of around

25%. Like all other industry players, we also intend to help implement the ideas of such a huge market player. KK

Telco tax is discriminatory and unacceptable On September 17, 2012 a Budapest court ruled that the newly established state-owned mobile operator had unlawfully won the right to build its own network. The court said that, according to the annex of the government decree effective at the time, the frequency that MPVI obtained could not be allocated to a state-owned company. The court also ruled that the three existing mobile telcos – who contested the results of the frequency auction in court – were unlawfully awarded new frequency blocks. We asked Christopher Mattheisen, Chairman and CEO of Magyar Telekom Nyrt about the decision and also about the new telco tax introduced in July.

Q: TO PARTLY SUBSTITUTE THE SOCALLED “CRISIS TAX” INTRODUCED IN 2010 FOR THREE YEARS TO LEVY THE MOST PROFITABLE SECTORS OF HUNGARIAN ECONOMY, THE GOVERNMENT INTRODUCED A NEW TELCO TAX, PUTTING CHARGES ON MOBILE PHONE CALLS AND TEXT MESSAGES. DO YOU THINK THE NEW BURDEN IS REASONABLE? A: We recognized that the country was in a difficult situation and that it is an unorthodox business environment we have to operate in. We understood that the government had to do something, however we had some concerns about its tax policies introduced in recent years. What we did not like in the first crisis tax intro-

duced in 2010 was its discriminatory nature, as it levied only a few specific sectors. Even if it is only a temporary net income levy for three years, it still represents a very high chunk of our net income. As we knew that the crisis tax had a threeyear deadline, we were able to handle it by simply reducing our dividend, so it was not threatening our investments.

Now, on the other hand, the current “telco tax” has no deadline set whatsoever, so it might extend to perpetuity, and it is also discriminatory. In fact, it is more discriminatory as it goes after only some lines of business within the telecom sec-

tor but distorts the whole market. We do not think that is any more sustainable under EU law than the first tax was. We have no problem with the efforts of the government to fight the crisis with unorthodox measures, but these measures are discriminatory and unacceptable.

Q: ON SEPTEMBER 17, A HUNGARIAN COURT ANNULLED THE RESULTS OF A TENDER FOR THE COUNTRY’S FOURTH MOBILE FREQUENCY, WHICH WAS AWARDED TO A CONSORTIUM OF STATE-OWNED COMPANIES. WHAT IS YOUR OPINION OF THE DECISION? A: With the court’s decision on September 17, the results of the entire tender have been

quencies to use. In our opinion, in the tender that has just been invalidated, there were not enough frequencies allocated to existing operators.

We welcome the decision of the court from our heart, mostly because it provides a pause when existing operators and the government can rethink their opinions on frequency policy. If a new tender comes up, there is an environment that can create enough room and frequencies for the existing operators, who have existing customers.

invalidated and – in my view – with good reason, as the tender had contradictory rules and regulations.

Q: WHAT WERE THE MAIN REASONS WHY THE EXISTING OPERATORS COULD NOT ACCEPT THE RESULTS OF THE TENDER? A: Our biggest issue was that the state claimed for itself a huge chunk of frequencies at a time when existing operators also need them. Mobile

broadband growth is going to explode in Hungary. Right now the penetration of smartphones is around 20%. However, our new phone sales are 85% smartphones, and growing smartphone sales mean mobile data growth. So maybe not today, not next month, but in a year or two data traffic will explode. But mobile data should grow only if existing operators have enough fre-

Q: DO YOU THINK THE GOVERNMENT WILL COMPETE AGAIN TO BECOME A FOURTH MOBILE OPERATOR IN HUNGARY? A: I don’t know. We have a challenge right now from the so-called mobile virtual network operators or MVNOs, like Tesco and Lidl, and frankly we do not believe it is the state’s business to use taxpayer money to compete in a challenging market. It would be very difficult to make an acceptable and justifiable business case for any fourth mobile operator that wants to enter a Hungarian market that is otherwise working perfectly. KK

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Tax breaks to treat lack of hiring appetite Voter registration has come to stay

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Hungary must reinvent itself “Attractiveness depends on perception... Hungary has to reinvent and retell its story,” says Nick Kós, the recently appointed CEO of PwC Hungary. Kós has an Irish-Hungarian personal background and field experience in Ireland, Poland, Russia and Hungary. He believes that each country has its particular attractions as a location for investment and that global companies weight these up before making an investment decision. The ability to tell a good story is vital in attracting foreign direct investment.

Q: MANY SAY THEY ARE CONFUSED BY THE HUNGARIAN GOVERNMENT: ON ONE HAND THE ADMINISTRATION IS VERY OPEN AND COOPERATIVE, ON THE OTHER WE HEAR A SELF-CONFIDENT OPINION ARTICULATED IN A REBELLIOUS TONE THAT THE WORLD SHOULD LEARN FROM HUNGARIAN CRISIS MANAGEMENT METHODS. WOULD YOU AGREE WITH THIS LATTER SUGGESTION? A: I would not disagree.

There are certain examples that one could use to support this. I guess what

the government is trying to say is that there are options other than austerity programs. Some people subscribe to this view and believe that introducing a flat tax rate and reducing taxes in general to boost the economy has worked in other countries. In Russia, for example, where taxes were significantly reduced and many were brought

back to the tax system, and tax revenue grew. Does it work here? Even if not, then one should not assume that a bad economic policy is to blame for everything. The timing can be wrong, and the value of any policy can be overwhelmed by financial turmoil.

France and Greece, two countries with varying economic conditions, are both loudly protesting the austerity programs, if you keep cutting your expenses, it will damage growth. Hungary may enjoy a better state of economy then Greece as it has not increased its liabilities as much, so the country may not have to face those massive austerity requirements and instead attempts to follow a growth program.

Q: HOW ABOUT THE STATEMENT THAT MUCH CAN BE LEARNED FROM HUNGARY? COULD YOU NAME ANY HUNGARIAN METHODS THAT SHOULD BE FOLLOWED ABROAD? A: Hungary is a young economy. It is hard to claim yet that this country is setting an example for others and we have a long way to travel to economic success. Hungary may be able to achieve a balanced budget, as it has a moderate size. In terms of the IMF loan that means €15-20 billion, while Ireland for example had no other choice but to borrow €80 billion on an emergency basis.

Ireland just did not have any room to maneuver and had to introduce austerity measures. The Hungarian approach may have its merits, as the crisis management introduced by others is just one size that does not fit all.

However, while this may be a legitimate approach it does not mean that success is ensured or that you cannot make a mistake by following it. Hungary should look

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at successful policies implemented abroad, for example Ireland, where agreed political stability gave the players on the market more certainty about what to expect and the confidence supporting growth. I also believe that Hungary has lots of attractions for foreign direct investment and technological development, like Ireland did during the boom years. We could also compare ourselves to Poland, which does not have a welldeveloped road network.

Hungary has great infrastructure, which makes this country more attractive.

And this is an advantage to leverage as the Hungarian economy and internal market are much smaller than that of Poland and so

FDI point of view, if a company like Mercedes wants to invest, that decision is heavily influenced by other factors such as the skills of the workforce, the infrastructure, the cost of transportation, etc. Today the challenge is much bigger than it was 10 years ago. Hungary must reinvent itself, as attractiveness depends on perception. Hungary has to reinvent and retell its story. For example, an investor may think that the costs equal X both in Hungary and in another country, but based on the news in the world press spreading about the conditions in the two competing countries, Hungary may seem to be more unstable. The story about instability does not have to

resources and dependent on global trade, we need to send the message that we support business.

of our client base, and they are becoming more and more important now alongside the major companies.

Q: THAT MAY BE ONE OF THE NEW FEATURES OF PWC, INCLUDED IN A STRATEGY THAT HAD TO BE ADJUSTED TO THE REQUIREMENTS OF THE CRISIS. HOWEVER, COMMUNICATION IS NOT YOUR CORE ACTIVITY. THE MARKET AND YOUR CLIENTS REQUIRE MUCH MORE FROM PWC. ARE THERE ANY OTHER STRATEGIC CHANGES IN PROGRESS? A: For us, supporting our global partners has been a full-time job. We see that now we can offer local companies, SMEs and entrepreneurs value at a price that is attractive, and that PwC has a real opportunity to help them. Many of our staff are very talented Hungarians in senior positions who can build relationships in the local

Q: HOW WOULD YOU CHARACTERIZE THE MATURITY OF THE LOCAL ENTERPRISES, ESPECIALLY IN THE COUNTRYSIDE WITH LOW INTERNET PENETRATION AND LACK OF LANGUAGE SKILLS? A: They are very price sensitive. And it is not only the question of numbers but also their relationship to the money they spend. When you are dealing with major companies, the managers do not deal with their own money, while the owners of the small- and mediumsized enterprises are usually the managers themselves. It is a different approach.

It means a real challenge for us, which is fine. These

very cautious about investing in resources and kept a closed circle of management, went to the stock exchange and expanded rapidly across territory. Ultimately it faces collapse as it struggled to implement processes to manage its growing empire. The same may apply to Hungarian companies. We have to make them understand that this is exactly the value that they are looking for and what they get for their money.

Q: THE MOMENT IN THE LIFE OF THE ENTERPRISE THAT YOU HAVE DESCRIBED IS NOT THE START BUT A MAJOR LEAP IN ADVANCEMENT. A: These enterprises meet huge challenges on every level.

First, when you have the idea, you need financing. Once it is running, it becomes survival

the skills and weaknesses of our client. That is why we call our method and colleagues ’the Trusted Business Advisor’, who understand all these individual parameters. We do not have profiles for these small enterprises, as we would just lose the sense of individuality and the idiosyncrasies. The second step in the process is world-class delivery. And the third is taking pride in what we do.

Q: YOU HAVE THE REPUTATION OF BEING A SPORTSMAN. IT IS VERY COMMON TO USE A SPORT METAPHOR FOR THE OPERATIONS OF COMPANY. DO YOU HAVE ANY? A: Absolutely. I used to play rugby at quite a serious level.

What continues to have a massive impact on my personal and business life is the team ethic, and apart from

›

FIRST, WHEN YOU HAVE THE IDEA, YOU NEED FINANCING. ONCE IT IS RUNNING, IT BECOMES SURVIVAL EVERY DAY. WHEN YOU BECOME SUCCESSFUL, THAT IS WHEN YOU REALLY NEED HELP.

depend much more on the global economy. If you go back to the ’90s, Hungary received many more investments than other parts of the region. We had a better story to tell.

Q: THE WORLD PRESS MENTIONED A MUCH MORE PROSAIC REASON FOR THE ATTRACTIVENESS OF THE COUNTRY WHEN, FOR EXAMPLE, MERCEDES INVESTED IN KECSKEMÉT: CHEAPER LABOR. A: What does ’cheaper’ mean? Many factors contribute to this judgment. If you go back six years, the forint was much stronger, and it has weakened. Or to be more precise it was overvalued back then and as its value has deflated, foreign exports have become more competitive. Hungarians are understandably anxious about the weak currency because of foreign-denominated loans.

However, the weaker forint makes you more attractive from an investment point of view. Also from the

be true, it is enough to have the perception of instability, and we lose business opportunities.

Q: HOW CAN PWC CONTRIBUTE TO THIS EFFORT? A: Through our network: we exchange information on a regular basis in our network.

For example, last year some of our colleagues in the United States called to say that their clients were worried about the security of their money in the local banks. So we answered that we could have asked the same questions about the American banks. That happens when paranoia sets the agenda and distorts the perception of a country. It can happen also when people have the best intentions but they communicate their messages poorly, which can trigger anxiety. So we have a lot to offer in communicating it better in our network. Few countries can afford to be arrogant, particularly if not rich in natural

CURRICULUM VITAE Nick Kós took over as country managing partner at PwC Hungary on July 1, 2012. At PwC Hungary, he also serves as assurance service line leader. An auditing expert of Irish-Hungarian heritage, Kós began his career at PwC 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 on he held a leading position at PwC Poland, and was assurance leader at PwC Moscow. He returned to Hungary last year to take over as assurance service line leader. market. Our network and foreign colleagues and more and more our Hungarian professionals can bring the global experience. I am Hungarian and Irish by origin, and I have worked in Warsaw and Moscow. I am very happy to come back to Budapest and see the opportunity here that my colleagues and I can bring global experience while understanding the local needs. It also signals that we are going back to the original role of PwC as well. Small- and mediumsized enterprises were the core

entrepreneurs demand real value for their own money, which we can deliver. Many of these entrepreneurs are great minds, with brilliant ideas, but these do not necessarily equal great business abilities. And at a certain point of the process, when they are exposed to investors and tax regulations, for example they have a need for specialist expertise. That is the moment when they become corporate.

We had experience elsewhere when a small family business, which had always been

every day. When you become successful, that is when you really need help.

Q: LET’S SAY I HAVE A GREAT IDEA AND I KNOW HOW TO USE EXCEL WORKSHEETS – HOW CAN YOU HELP ME? WHAT IS THE PROCESS? A: Same as with the big clients.

The first step is being interested in and getting to know our new partner, building great relationships. We have to understand the immediate challenges, the fears and the wishes. The conversation lays the foundation that shows us

everything else I try to emphasize always that sport teaches us best how to cope with failure. If somebody makes a mistake, instead of sending them away, pointing the finger at them, we take him or her back, solve the problem together and learn from the mistake together. That is how you deal with problems and difficult times. That is how you learn to win consistently.

There have been difficult economic times before, but we always have the opportunity to overcome them together. ■

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Leadership development for tomorrow’s corporations The corporate world is in crisis, leaders are failing: in the United States, more than 40% of new leaders fail within their first 18 months. Many companies, however, are also failing their leaders as they continue to invest in a broken leadership development model.

Billions are spent annually almost exclusively on classroom learning and lockstep generic curriculums; these dinosaurs of training simply do not have what it takes to develop the next generation of leaders, managers and even employees.

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The key is a new leadership development model that is scalable but accommodates the uniqueness of each leader’s techniques and strengths; one that is stable enough to permit the training of dozens at once but dynamic enough to incorporate and distribute new practices and other innovations in real time. I will offer you some insight below on how to improve your leadership development programs (LDP) based on my experiences working with corporations in the past 10 years.

THE KNOWING-DOING GAP Why does so much education and training, management consulting, business research and so many books and articles produce such little change in what managers actually do?

I call this a knowing-doing problem – the challenge of turning knowledge about how to enhance leadership performance into actions consistent with that knowledge. Improving performance depends

largely on implementing what is already known, rather than on adopting new or previously unknown ways of doing things. I would emphasize that the gap between ‘knowing’ and ‘doing’ is more important than the gap between ‘not knowing’ and ‘knowing’.

Most LDPs revolve around one huge false assumption: if people understand it, then they will do it. That is not true.

Most of us ‘understand’, we just fail to ‘do’. Corporate surveys indicate that only 17-20% of the knowhow learnt in LDP goes into practice. I would consider this a very low return on investment, so it is better to be more careful about when and how to apply training or development.

TRAINING OR DEVELOPMENT? It is important to note that training and development are not synonymous. Training is the opportunity to bridge the gap between not knowing and knowing by enhancing your level of skills and knowledge. For example, a people manager can learn what best practices are in place to motivate people, but it does not help her learn how to use her strengths to apply them more effectively. This is where development comes in. Once you can spot the difference between training and development deficiencies, you are more likely to apply the correct solution to the problem.

Development is a good choice when you want to learn how to do things differently (covering the knowing-doing gap) based on your personality.

The right kind of program does not rely on a rigid formula, program or plan. The right training or development program is issue-based and specific. If you need better product knowledge then this is a training issue. The right program accommodates individual strengths and learning styles, e.g. those with input or learner strengths might not mind reading a 400-page product manual, whereas strong activators or achievers can be impatient to see the product in the field.

It is simple enough: people’s

approach to work is as diverse as people themselves. Steve Jobs rejected focus groups because he believed “people don’t know what they want until you show it to them”.

In contrast, other leaders rely on input from the ordinary world. Sam Walton of WalMart, for example, used to visit his stores every Friday to see what customers were doing and what they wanted.

He called it quick market intelligence. The takeaway? A technique that works for one person does not necessarily work for another.

STRENGTHS-BASED LEADERSHIP DEVELOPMENT When I recently worked with a CEO, after reviewing the summary of his 360-degree report, he started to study the “areas for improvement” section where his weaknesses were described. It is very easy to jump on our shortcomings as we are socialized to fix what is missing. If mountains and valleys symbolize strengths and weaknesses, then when we work on our weaknesses we can make the valley shallower and shallower, but it never becomes a mountain. On the other hand, most leaders report that fixing weaknesses requires enormous time and energy.

The question for all of us is this: given the same amount of time and energy, which method brings better results?

Leadership styles are as diverse as the leaders themselves. One uses a mascot to symbolize best practice behavior and attitudes among staff; another rewards employees with a bimonthly “breakfast with the manager” during which she encourages team members to share stories and details of what they appreciate about one another.

These techniques work spectacularly well for them, even though the same techniques would not work nearly as well for managers with different strengths. There are, however, some managers who could benefit from using some of these techniques, or who might be inspired to create another variation.

This is where the strengths-based approach comes in: it helps target the right techniques to the right people. Discovering what you are strong at is not that easy, though. You have to understand what is the key to your individual success – and you have to know yourself very accurately. It might be a good idea to start with a personality test (e.g. Strengths-

Finder or StandOut), which helps you better describe your talents or traits.

A GOOD LPD INCORPORATES FOLLOW-UP In a study, the results were astonishingly consistent: follow-up was defined as interaction between would-be leaders and their colleagues to see if they were, in fact, improving their leadership effectiveness. When leaders did little or no follow-up, there was little or no perceived change in the effectiveness of leaders.

The conclusion is that people will not get better without follow-up. Leaders who do not do follow-up are not necessarily bad leaders, they are just not perceived as getting better. I would say that followup is the missing link in most training concepts and also in getting leaders to change.

IF YOU CAN MEASURE IT, YOU CAN ACHIEVE IT Most of us in business spend a great deal of time measuring, as it is the only way we can know for sure how we are doing. Its value is documented when hard facts are in focus. Although soft values are hard to quantify, in the area of interpersonal performance they are as vital as any hard number we can come up with.

Dr. Róbert Dobay, CEO, Menedzsmentor Coach, change manager, author of the Menedzsmentor blog: blog.menedzsmentor.com dobay.robert@menedzsmentor.com, www.menedzsmentor.com

Everything is measurable if we are clever enough to see that it needs measuring and can devise a way to track it. For example, no matter how busy you are or how much you travel for your job, it as easy to measure how many days a year you spend with people development. All you have to do is look at your calendar and count. You can decide to spend 10 minutes each month engaging your subordinates in a one-onone conversation about their strengths. Ten minutes is hardly a long time, but it is still a significant improvement from zero.

Our clients also found some revealing results: leaders managed to put 87% of the know-how into practice, and teams that participated in strengths-based development programs managed to decrease the attrition rate to 6% or managed to handle the same amount of workload with two people less after task reorganization.

My conclusion is that it does not matter if you are in management or HR, your goal is the same: it is worth considering some tangible benefits before deciding on a leadership development program. ■

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Tax breaks to treat lack of hiring appetite To make hiring more attractive, the government simplified tax payment and cut red tape. It further sweetened the deal by offering additional tax breaks.

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There are not many departments where the Hungarian economy compares well with its European peers, but the country is working hard to catch up. Employment, for one, has improved 2% yearon-year while unemployment hit its lowest rate (10.4% between June and August) since the crisis started. More people in work is the result of measures the government has taken to steer people back to the job market. Tying welfare to public work and shortening the duration of unemployment benefits were good choices, but left many fields untapped. So the government turned to enterprises and offered them tax breaks as a carrot. It figured less tax to be paid after employees will improve the hiring appetite of companies, and presented details of the deal in the summer in a ten-point job protection action plan that was subsequently approved by Parliament earlier this week.

Unlike on many other occasions, a real discussion of the draft actually took place this time. From June until the end of September, councils and advocacy groups proposed several changes, most of which made it into the final version of the law. That may be the reason why experts in general have a good opinion of the new tax forms.

LESS RED TAPE One of the most welcomed results of the talks is that taxpaying for an enterprise has become much simpler. Micro enterprises with less than HUF 6 million annual turn-

over can pay an itemized tax: a one-sum payment. When it comes to taxes, simplification is always a good way to win hearts. “Enterprises with a small tax base no longer need to hire accountants, as the payment of the fees (HUF 25,000 or HUF 50,000) can be completed with a click online,” said Sándor Hegedüs, tax specialist of consultancy RSM DTM Hungary. It is so simple that, apart from the registration of a new company, business owners can do it for themselves, he added.

Some bookkeepers disagree, however, and claim that the collection of data and calculations still requires a professional. Even so, less accounting translates into less administration and fewer costs. The introduction of a new tax for small enterprises (a single tax instead of five) will also ease accounting regulations.

PUTTING THE DISADVANTAGED IN POLE POSITION The aim of the government was to help those who start job seeking from the worst positions, explained Tamás Lőcsei, tax services leader at PricewaterhouseCoopers.

“At least a third of Hungarian entrepreneurs are forced entrepreneurs. If the government does not help them, it will have a negative effect on the economy.” Job prospects for career-starters, the elderly, the unskilled, and mothers with young children are also most unfavorable; with lower taxes, the chances of these groups securing a job will improve.

Employers hiring careerstarters below the age of 25 will pay social taxes and training contribution for two years, and nearly half of all contributions for the third year. The allowance can be used for up to HUF 100,000 gross income.

THE PRICE TAG ON JOB SECURITY The government’s job protection scheme will cost the budget HUF 300 billion in 2013. In addition to

the reduced rate of levies on the profits of small businesses (approximately HUF 150 billion), it will also collect less in tax revenues under the new tax schemes (estimated at another HUF 150 billion). Add to that the HUF 500 billion that was left in the system thanks to the flat-rate personal income tax system, and you end up with more than HUF 800 billion. That is the price to protect 1.5 million jobs and create hundreds of thousands more.

The question is how the government will plug that hole in the budget. A positive scenario is that simplified and lowered rates will mean more people pay taxes. Fair enough: if they can save the hassle of complex taxpaying and also avoid inspections, why not? On the other hand, it is unlikely that turning notorious tax evaders to the light side will bring in enough money to recover the costs.

Taxpaying ethics in Hungary are rather slack. “Still, as a result of recent measures, this moral has improved - though its effect on the budget is yet to be seen.”

Yet the new approach is not bad. Less tax is always attractive and, as it is regulated well, it may straighten some frauds. Hegedüs claims that only those can stay in the system of itemized tax payment who fulfill every other requirement (invoice, employment, report, etc.) and has no significant tax debt.

The same goes for previous tax measures. The tax amnesty offered for offshore revenues did not work out because the government did not adequately highlight the consequences of future sanctions.

The National Economy Ministry is optimistic and is counting on the National Tax and Customs Administration of Hungary (NAV) to do the job. Since the NAV collected extra revenues of HUF 40 billion last year, they may even be right.

CARROTS WITHOUT STICKS A small enterprise tax will replace the current corporate tax, the personal income tax payable for profits, vocational training contributions, the health care contribution payable for dividends, and the social contribution tax. The tax base is made up of the sum of profit and the wage costs for the employees of the enterprise.

An itemized tax of HUF 50,000 (for full-time employees) or HUF 25,000 (for part-time staff) will be an option for businesses with an annual turnover of less than HUF 6 million.

Employer’s liabilities in the first two years of employment will be reduced to zero. From the third year, contributions payable by the employer for unskilled workers, or for employees below 25 or above 55, will be halved from 28.5% to just 14%.

More precisely, it will levy transaction duty on the financial transactions of the National Bank of Hungary (MNB), which will provide HUF 100 billion for the scheme. The same amount is expected from the financial transaction duty on the Hungarian State Treasury. An additional HUF 100 billion will come from bud-

getary reserves, which now amount to HUF 320 billion.

Lőcsei does not see how the budget shortfall will be balanced with the above steps.

“The funds intended to cover the deficit may not be enough.” Expecting the tax breaks to whiten the economy is also questionable, he says. “The surplus generated by tax collection may be wiped by the crisis.

The government has to find the way to finance the costs, having set the ambitious goal of achieving full employment by 2020. In their calculations, 5-5.5 million people should be working by that time. To meet this target, all 495,000 currently registered jobless will need to get work in the market or in public work schemes over the next two to five years. ■

12 2 Business BBJ

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Budapest Business Journal | Oct 05 – Oct 18

Voter registration has come to stay Following the reforms of the respective laws on municipal and parliamentary elections, Fidesz has finally introduced the last piece of the electoral rules puzzle, the new bill on electoral procedure. As has been anticipated for a while now, this law will bring Hungary a voluntary voter registration scheme to replace the system of automatic registration in place until now. Apart from Fidesz’ hopes that registration will keep anti-government late deciders at home, the measure has not much to recommend it. Fidesz has deftly added a few other changes to the bill, which managed to steer quite a bit of the reporting on it away from the most controversial measures. Not for the first time, a legal act in Hungary would compel every municipality to have at least some fully accessible facilities for people with limited mobility. Also on the plus side, at least in the context of parliamentary elections, the proposed bill would make it significantly easier to become a candidate.

Voter registration has been one of the buzz issues of the past few months, with countless analyses and critiques published on the question, a hunger strike held by former PM Ferenc Gyurcsány and some of his supporters and a brief period of agonizing whether the left-wing opposition should participate in the debate over the relevant bill, which is meant to comprehensively reform the law on electoral procedure. By the time the bill was actually introduced on September 25, however, registration barely registered.

It appeared that the debate was exhausted or at least the media thought the public has had enough of it. Reactions were subdued, and hardly anyone noticed how the rightwing media managed to frame the bill as if the most relevant changes proposed were improved accessibility requirements for voters with limited mobility. Given that the government is planning to adopt a measure that will bar people from voting for four years in any election – referenda, byelections, etc. – if they fail to register within the timeframe allotted, pinpointing the otherwise relevant accessibility requirements takes chutzpah.

AS EXPECTED It is true that no stunning revelations came to light concerning registration. Citizens who are also residents of Hungary have two weeks to register by mail in September 2013. Once that time has elapsed, they can register either by trudging to the local municipality or by using the government’s e-portal. For the roughly seven million voting age citizens who have not yet registered for use of the e-portal, however, it is back to square one: they still have to go to the local munici-

› FIDESZ EXPECT

REGISTRATION TO FORESTALL MASSIVE ANTI-GOVERNMENT SENTIMENT AT THE POLLS, AND THEY ARE LIKELY RIGHT.

pality to register. Which, incidentally, could prove quite a hassle for those with reduced mobility, since many Hungarian municipalities have failed to provide for fully accessible municipal services, even though it is now well past the legal deadline by which they should have done so.

Hungarians outside the borders have it somewhat easier, assuming they like snail mail or have no problems accessing the internet.

Though they cannot register in person, they can use regular mail for the entire seven or eight months of the registration period and may also take the online option. While some critics have decried this as a scheme designed to favor ethnic Hungarians across the borders over ‘inlanders’, the fact is that those outside Hungary would face a huge obstacle if they wanted to register in person, even if consular facilities were made available for this purpose.

LITTLE THOUGHT AT ALL Even if there was a problem of unfairness with the respective

treatment accorded to Hungarians in and outside the country, it appears relatively minor compared to the issue of why registration is necessary at all. The government for its part has hardly bothered to explain. Generally, the reasoning was that registration is good because Fidesz says it is good. At least that is the most generous interpretation of the arguments the governing party has advanced, such as the notion that registration will facilitate and increase participation, because…well, because they say so. Though there may be some abstract notions that one might use to justify voluntary registration (e.g. voting is a privilege rather than a right) and some practical circumstances (frequent voter fraud might be one), the latter do not apply and the government has not bothered with the former. That is probably no coincidence, as most of the commonly voiced reasons sound quaint and elitist.

As with many other issues, Fidesz clearly feels no need to provide a cogent rationale for a decision that will be expensive

to administer and will significantly reduce democratic participation (which was not all that high to begin with). But the most vociferous critics of registration would never have voted for Fidesz anyway. As far as the rest is concerned, those roughly 50% of voters without a party preference, the idea is precisely to make sure that many of them stay at home. Under the current electoral regime, these plodding and politically disaffected masses might have roused themselves at the last minute to teach the government a lesson, as they have done in most elections since 1990.

KEEPING THE IDIOTS AT BAY To date, the most honest assessment of the intention behind the registration scheme has come from an anonymous Fidesz source, who said the goal was to “keep the idiots from voting”, though not even the anonymous comment is fully sincere since idiot is probably code for dissatisfied, and hence likely non-Fidesz, voters. All in all, Fidesz speculates that its own core demographic, the educated

and politically active uppermiddle class, will be among those most likely to register. For the MSzP, registration cuts both ways: pensioners are likely to be active, while the lower middle-classes are less likely to register. Jobbik and the LMP will probably also suffer, since they are strongest among young voters who are traditionally less active politically and also often face additional administrative burdens, such as living away from where they are officially residing and where they would be allowed to register. Both parties, but Jobbik especially, draw heavily on anti-establishment sentiment, which – outside a core of enthusiastic anti-establishment types – is more difficult to mobilize. However, Jobbik’s strong organizational background – and its proven success in mobilization at the grassroots level – might help them overcome these difficulties and mobilize their potential voters.

One could parse the various demographics and their anticipated tendencies at length, but ultimately the crucial point is that Fidesz’ experts expect registration to forestall massive anti-government sentiment at the polls, and they are likely right. That is the only rationale behind registration, and clearly one that is difficult to convey to the public.

ACCESSIBILITY Odd as the government’s communication may have been on the issue, one cannot be but impressed how prominent an issue accessibility became on the day of the announcement.

And to be sure, the hype in the right-wing media was not entirely unjustified. Ballots in Braille, accessible voting stations and other similar measures are long overdue.

Yet it appears that the new commitments are mostly cheap (e.g. Braille ballot), while the most expensive commitment – physically accessible voting stations in each municipality – is merely another iteration of a promise that was made already in the 2007 amendment of the law on the rights of people with disabilities. With a 2010 deadline that has already long expired, the law provides that all municipalities ought to have at the very least one fully acces-

sible municipal building. If that were the case, it would make it very easy to meet the new legal requirement of designating a fully accessible voting station in each municipality. In reality, however, many municipalities have been unable to meet the previously designated deadline, and given their dearth of funds it is unlikely that they will be able to meet the next one.

BALLOT ACCESS EASED For all the bad news, there is also something very right about the pending bill, even if its inspiration is probably not comprehensively fair-minded.

We have complained before about ballot access requirements, the onerous burdens parties and individual politicians must bear if they want to appear on the ballot. According to the rules adopted by Fidesz last year (which already constituted an easing over the previous requirements), it would take almost as many signatures to field a national list in Hungary as in Germany, a country eight times the size.

Pursuant to the new rules, an individual candidate for Parliament will only have to collect 200 signatures to qualify for the ballot rather than 1,000. A party that wishes to have a national list and is thus required to qualify 27 candidates can appear on the ballot nationally by collecting only 5,400 signatures rather than the previously required 27,000.

That is still high in international comparison, but it is no longer extreme and, more importantly, it does not appear unreasonable. Sure, candidates will find a few new requirements irritating: before collecting signatures, they must designate the persons who will perform the collection and they may only use government-issued sheets. But overall, it would be impossible not to acknowledge that this will make the Hungarian political system much more open, even if only for candidates rather than voters, who will find their way towards the ballot box much harder. However, it must also be added that easing ballot access may also favor Fidesz in 2014: a fragmented left with many candidates to vote for clearly improves the chances of the governing party at the next general elections. ■

www.policysolutions.hu Political Research and Consultancy Institute

2 BusinessTrends 13

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Budapest Business Journal | Oct 05 – Oct 18

No loans, please!

Hard times ahead

Torrent trends

People show lower interest in bank loans

Domestic economic expectations basically unchanged since May

Users trust content downloaded from torrent sites without thought

83%

-25

OF HUNGARIANS USE BANKING SERVICES

The crisis that hit the world in 2008 has changed customers’ mindsets and financial habits, market research company GfK’s Retail Banking Monitor survey shows. This year’s research scrutinized customer behavior in 15 countries in Central and Eastern Europe, including Hungary.

Although the financial sector is still struggling with difficulties across the region, slightly positive market tendencies are about to shape up in the area, the research claims.

The proportion of those using retail banking services had grown to 80% by the end of 2011 in the CEE region. In Hungary, 83% of the adult population uses such services, and this number has changed little over the past few years.

“The increase of bank penetration is not primarily an infrastructural issue anymore, because Hungary is in the top league when it comes to the number of bank offices per 1,000 persons,” Albert Dunai, project head of the Retail Banking Monitor survey said. In his opinion, it is now more of a question of financial culture and attitude towards banks.

Take a closer look at how customers use banking products in Central and Eastern Europe, and you’ll find a correspondence between the spread of bank account usage and the increase of those using banking services. However, there is dynamic growth in the use of bankcards and internet banking services. In 2011, every second citizen in CEE used bankcard for their shopping.

The change in consumer habits and demands is clearly reflected by another GfK survey on bank-related advertisements.

The market research company has been monitoring the effectiveness of bank ads since 2008. Data shows that while the popularity of these ads hasn’t significantly changed in the past four years, their mobilization effect has fallen back to half of what it was before the crisis, Dunai says.

This correlates with the findings of GfK’s Retail Banking Monitor research, namely that people show a decreased willingness to take out bank loans, Dunai explains. PF

Proportion of bank service users in CEE (%, base: total population)

Source: CEE FMDS Data 2011

73%

THE GKI-ERSTE ECONOMIC CONFIDENCE INDEX IN SEPTEMBER

The GKI-Erste economic confidence index adjusted for seasonal effects has been essentially unchanged since May. A modest increase at the beginning of the year was followed by a fall in May, since when it has been fluctuating slightly.

According to the empirical survey conducted by GKI with the support of the EU, business expectations deteriorated somewhat in September (from -14.9 in August to -16.4), whereas consumer expectations improved (from -52.7 to -49.5), approaching their peak figures for this year, recorded back in April.

Business expectations deteriorated more or less in all sectors except for trade.

Following its fall in August, the industrial confidence index decreased further, but only slightly. The assessment of the production and the stock of orders (including exports) improved, whereas that of production prospects and stocks declined.

The construction confidence index had hardly changed between May and August, but it fell sharply in September. The evaluation of the construction production level of the past three months remained more or less unchanged, whereas that of orders deteriorated significantly.

The services confidence index fell most in September, and the evaluation of the general business climate and sales worsened.

In contrast, the trade confidence index rose slightly after two months of slight decline.

The assessment of sales positions improved somewhat, though respondents considered the level of stocks declining. Pessimism concerning new orders continued to increase.

Following a slight decrease in August, the GKI consumer confidence index increased by a somewhat larger extent in September, approaching its peak value of April; even this, however, still reflects grave pessimism. People assessed their own financial positions and savings opportunities for the next year somewhat better than in August, and saw a greater opportunity to purchase consumer durables. PF

Economic sentiment index September 2008 - September 2012

Source: GKI-Erste

OF INTERNET USERS DOWNLOAD TORRENT FILES REGULARLY

Hungarian internet users are keen on downloading bittorrent (BitTorrent is a peer-to-peer downloading protocol) files, a recent survey by G Data reveals.

The majority of young people visit torrent sites for some peer-to-peer downloading frequently, but the older generation is also interested in file exchange, the survey says.

The survey, which involved 1,000 Hungarian internet users, found that 47% of internet users between 18 and 75 are torrent users – however, 21% do not even know what a torrent is. When looking at the 18-29 age group, 73% use torrents to download films, music and software. In this age group, only 6% did not know what a torrent was. Those above 50 also visit file exchange sites, and 20% of them regularly download torrent files from the internet.

As for content types, nearly 80% of Hungarian users regularly download movies, followed by music (62%), software (49%) and documents (35%).

It is noteworthy though that users, in most cases, trust the content downloaded from torrent sites without a second thought. Although 68% of torrent users said that their antivirus program had sent alarm messages during download, they still opened the downloaded file. One-fifth even think that their antivirus program sends them false alarms. “Many people believe that antivirus companies have an agreement with other software companies and release false alarms when a user is trying to download a torrent file in order to hamper the illegal use of software,” says Csaba Maulis, IT security expert of G Data. “But the truth is that the creators of malware programs frequently use file exchange sites to spread their viruses.”

The survey concludes that the typical torrent user in Hungary is a young male living in Budapest with relatively little education who primarily uses file exchange sites to download movies. PF

Do you use torrent sites?

yes, regularly

heard about it but not a user

yes, occasionally

never heard of it (in the age group of 18-75)

Source: G Data

2 Business

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SpecialReport//HR

On their way - Hungarian worker migration threats German-Hungarian trade relations

18-19 23

Think locally, act globally With the rise of multinational corporate culture, it is easy to forget that both companies and their employees have their own roots in national traditions.

When companies begin to extend their operations across country borders, it is just a matter of time before they face the problem of aligning their own culture with that of local employees.

Communication, as always, is critical and often a key issue when it comes to tackling the challenges that may arise.

BBJ ZSOLT BALLA

“Hungarian employees tend to lack general openness and a willingness to express opinions, even if that means confrontation, at least according to many executives who encounter difficulties in their everyday communication with local staff members.

“Avoiding conflicts, even at the price of sacrificing one’s standpoint, is one of the most common sources of misunderstanding between a Hungarian employee and an executive with an Anglo-Saxon or Western European background,” says communication consultant Péter Szerémi, who gained his experience through personal coaching sessions with executives over the past six years in Hungary.

While this attitude is not unique to Hungary, it is def-

initely unusual and unexpected to senior businessmen, who are used to tough arguments as well as being challenged by their own direct reports. A banal example is the Q&A session at the end of the executive’s presentation of the company’s yearly goals. While the audience is not likely to ask questions, rumors on the corridor will be about unrealistic expectations. “A logical reaction an executive can have is ‘If they thought the plans were unrealistic, why didn’t they tell me so?’” Szerémi says in explaining the different understanding of openness, and the willingness (or the lack thereof) to undertake conflict situations.

Taking risks and making decisions is another key area where conflicts between a manager and a direct subordinate can have their backgrounds in the difference between their cultures. “Most Hungarians are a lot more conservative than Americans but are ready to take risks when we compare them to Germans or Asians,” says Zsolt Szelecki, a partner and regional human resource-consulting leader at PwC Hungary. He highlights six key areas where cultural interference is most likely to occur within an MNC (see our box Six degrees of separation) and says that Hungarians have a reputation of being relatively easy to get along with.

“Hungarians are known to be flexible and cooperative.

Flexibility, however, has two sides,” he points out. “When it is within the framework of the rules and company goals, it is obviously a good thing.

But on the other hand, Hungarians will be the first to bend the rules in their own favor and enter through the exit the moment they notice that nobody is asking for their tickets there,” the consultant says. But while this

SIX DEGREES OF SEPARATION According to Zsolt Szelecki, PwC’s HR consulting leader for Central and Eastern Europe, there are six common factors that show how a company is exposed to problems due to cultural differences.

Executive communication: how formalized, organized and regular it is, and whether it exists at all.

Organizational structure: whether there is a mutual understanding of tasks and responsibilities and if relations are clear to all involved parties.

Teamwork: whether the environment is competitive or if employees are encouraged to cooperate.

Are there personal goals or team objectives?

Performance management: whether there is a mutual, forwardlooking understanding and agreement in what is expected and what is required from an employee or just judgement call.

Decisions and risks: whether employees are expected to make decisions and take risks or, to the contrary, avoid risks and do what they are told to.

Long-term strategy: whether the company has a long-term strategy and vision versus driven by daily preferences.

might be annoying to some, on balance, the reputation of the Hungarian workforce is still very favorable.

“A positive attitude is something a foreign executive will likely miss when working with Hungarian staff,” says László Bek-Balla, HR director at Erste Bank Hungary. “When facing a problem, a Hungarian employee will mostly focus on the difficulties, and he will try to explain why it cannot be solved. Also, enthusiasm, and particularly the acceptance of change, is often lacked from Hungarian workers,” the director highlights.

Another common area of miscommunication is separating the personal from the professional. “A Hungarian employee will write a detailed email to his American boss, and when the executive replies with a single ‘OK’, he will take it as an

insult,” says Péter Szerémi.

“Staying high-level, getting to the point and focusing is common practice in AngloSaxon cultures but seems impolite from a Hungarian perspective. It is like ‘I’m not worth a Hello and a Goodbye and a few polite words’.

When senior executives first encounter these problems, they are utterly surprised,” the consultant explains.

As a rule of thumb, we can say that the longer the traditions of being part of a globalized economy, the better a certain country’s corporations can handle the related challenges. “US companies are best at coping with these issues, followed by Dutch corporations. Germans have learned their lesson well (for example with BMW’s infamous Rover acquisition), and they are improving at an amazing pace. Most French

companies have a lot to learn, and so do Italians and Spaniards. Far Eastern and Indian companies are typically not performing very well in this league at all,” Szelecki says.

Although these issues are important, there is no need to exaggerate their gravity.

According to Szelecki, corporate culture is a lot more important than national culture. “Most of the executives who come to Hungary represent the culture of the corporation, rather than the nation behind it,” he says.

László Bek-Balla agrees: “We have more important organizational development issues to handle and more important areas to focus on. In most cases, the single intention to cooperate and to understand the motivation of one another goes a long way,” he concludes. ■

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15

Budapest Business Journal | Oct 05 – Oct 18

Holding on to your executives takes real skill EMŐKE FÜLESI

The European Central Bank (ECB) is often criticized for its inefficient or untimely decisions.

Now critics can add another pejorative adjective to that list: discriminative. At least in the European Parliament’s (EP) opinion, which postponed a hearing with the nominee for a vacant position on the ECB for one simple reason: the candidate was male.

Principal, Executive Division HAYS HUNGARY

There is more to successful executive recruitment than meets the eye. Emőke Fülesi, Principal for the Executive Division within Hays Hungary, looks at some of the challenges faced by organizations.

BBJ ZSÓFIA VÉGH

In mid-summer, members of the European Parliament Committee on Economic and Monetary Affairs (ECON) were due to meet Luxembourg central bank governor Yves Mersch, nominated by eurozone finance ministers and recommended by the Council of the European Union, and debate his accession to the European Central Bank board.

But the vote on his appointment never happened.

Sharon Bowles, the British member of ECON, raised concerns about gender imbalance on the ECB board, and apparently convinced others not to proceed with the nomination. Her worries are not without apparent foundation: the previous vacancy on the board was filled by Belgian’s Peter Praet, who defeated a female applicant, the Slovakian Elena Kohutikova. The ECB’s executive board and governing council now consist of 22 men. Were Mersch given a seat, there would be no vacancies until 2018. The bank’s previous track record is not any better: only two women, Finland’s Sirkka Hämäläinen and Austria’s Gertrude Tumpel Gugurell, have ever served on the board.

Eurozone governments select candidates for ECB board positions, and the EP has no legal power to reject

nominations. This has been the first complaint since the bank was set up in 1998.

The appointment, however, needs to be concluded soon as the three-month deadline since Mersch’s nomination is approaching. Since the parliament does not have a right of veto, the European Commission and the European Council may circumvent the EP altogether, saying the deadline has passed.

Whatever they decide, the problem of women being underrepresented in boardrooms remains unsolved.

Forced placement should not be an answer, but practice shows a little push never hurts.

So believes the European Union’s justice commissioner, Viviane Reding, who is backing a motion to set quotas and timetables to increase the number of women on the boards of public companies.

The commissioner’s proposal

to make companies employ more female directors may face resistance from EU states led by the UK, who prefer voluntary measures to encourage more female business leaders. The draft legislation says companies listed in EU member countries would face sanctions if they failed to reserve at least 40% of their non-executive board seats for women.

Defining the conditions of the sanctions would be the responsibility of member states. The proposal is expected to be published this month or next.

The representation of women in board positions is highest in northern European countries like Norway (42%), Latvia, Finland and Sweden (approximately 30%), and lowest in the south in Greece, Italy, Cyprus and Malta (under 10%). At the executive level, the ratio of women on boards is even lower. ■

Regardless of the economic situation, in Europe or globally, organizations across various sectors are still looking to hire new talent for executive roles, particularly individuals with fresh ideas who can directly stimulate business growth and influence bottom line.

This has been particularly apparent for companies operating within the IT sector, especially those offering internet-based solutions and services, as well as those in energy and manufacturing, where there has been buoyant demand for executive high-fliers who can make an immediate impact. Management restructuring has also created significant demand for senior level roles, such as CEO, CFO and sales director positions.

So what else have we been seeing in 2012?

Firstly, there has been a growing trend over the past year for organizations to establish a presence in Hungary and wider afield in Central and Eastern Europe in countries such as Bulgaria, Romania, Serbia and Croatia.

Multinationals often choose Hungary as a center for this region, and this also creates opportunities for locally based professionals to embark on an international career path.

Such positions are becoming available in various functions, for example in areas as diverse as operational management, sales and HR. THE ‘CHALLENGE’ FOR EXECUTIVE CANDIDATES In the time-pressured environment we all live and work in, employees want to see an efficient response mechanism and experience a sleek user journey. This requires effort on the part of employers to make sure that their recruitment procedure runs like clockwork to maximize the end result: getting the right candidate for the role.

The perceived stability of an industry has become an increasingly important factor for senior experts when looking for their next career challenge. Variety of work and greater responsibility are also seen as key drivers, while remuneration packages, although important, are often secondary when considering a new executive level role. Opportunities to network internally and externally are also decisive factors.

For executives to feel fulfilled in their roles and engaged with their company, aspects such as career development and training support figure highly on their list of desirables. Communicating career training programs is an effective way to attract senior talent; organizations that are complacent towards their employees in senior positions and don’t address these issues risk losing their best staff.

According to the 2012 Chartered Institute of Personnel and Development (CIPD)/Hays Resourcing and Talent Planning survey, two thirds of organizations said that they had difficulty in retaining staff and one in five reported that they had no specific retention initiative in 2011. Companies that are able to provide executives with these opportunities can expect a higher level of loyalty and the acquired knowledge gained will add considerable value to their business in the long-term.

RETAINING A COMPETITIVE ADVANTAGE From an employer perspective, the most sought-after skills are language, especially English and typically a second language.

Senior jobseekers who can demonstrate proficiency in several languages can differentiate themselves in the marketplace. International experience, cultural awareness and flexibility are also advantageous.

Alongside recruitment, retention of employees including at the executive level, has also been an ongoing issue, with a significant proportion of organizations highlighting problems. They are faced with a fundamental challenge to attract and retain top talent – 82% of organizations experienced greater difficulties in filling at least some vacancies across all sectors and almost three quarters (71%) reported an increase in the number of unsuitable applicants compared to the previous year.

By attracting and retaining the best talent for executive level roles, and focusing on resourcing and talent management, organizations of all sizes and from all sectors will be best able to achieve their objectives and attain a comparative commercial advantage.

Securing the best executive talent and investing in their training and development is as important now as it has ever been. Companies must work hard at their employee and employer value propositions and sell especially their executive roles as opportunities rather than mere jobs.

To find out more about how Hays Hungary can help your organization, call +36 1 501 2400 or visit our website.

hays.hu

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

ECB not on board about a female member on its board

[ EXPERT OPINION ]

16 2 BusinessSpecialReport//HR BBJ

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Budapest Business Journal | Oct 05 – Oct 18

Call centers: rural outsourcing Ever more large companies are moving customer service centers to rural towns, where they are greeted with an educated labor force and preferential treatment.

BBJ ENIKŐ VASS

Next to the Budapest agglomeration, ever more rural call and contact center locations are being chosen as the base for customer service departments.

“We can’t list anything but advantages,” said Éva Mária Tóth, president of the professional association of the call and contact center profession, the Human Resources Foundation. Employees are more

loyal, thus churn is lower: in some places non-existent. The employer can find trained, multilingual, loyal employees, people who could prove to be a watershed advantage in today’s economic climate.

Local authorities also strive to attract companies to their region with a series of preferential treatments.

Miskolc is one such regional center to which customer service departments have been migrating. HP, Vodafone and United Call Center Kft all recently arrived in an area eager to welcome additional centers; by city calculations, 700-750 people had been employed.

They have joined centers for TIGÁZ, Generali Biztosító, the customer service department of Magyar Posta, and smaller centers operated by IBM, UPC and Magyar Telekom.

According to Péter Pfliegler, deputy mayor of Miskolc, the most attractive aspect of the city is that the region has a well-educated, dedicated labor force with foreign language skills. Companies who have settled in the city have also highlighted the reliable and high quality of telecommunications services and suitable infrastructure as additional factors of consideration.

The city pulled together a support package for companies, including the active support of official business, the provision of temporary office space and support, a business development subsidy and assistance in securing accommodation. If necessary, the local authorities are also willing to adjust public transportation in accordance with the needs of the company, take on the costs of incorpora-

tion, support employee training and provide consultation for writing tender bids.

United Call Centers Kft has been in Miskolc since January of 2009, creating 150 jobs. According to operations manager Richárd Kozma, three years ago the company reviewed multiple rural sites, before chosing Miskolc, as unemployment was high here and wages lower. Soon, it discovered that in the city it had chanced upon a much more valuable treasure. In the case of outsource call centers, the success of the given service is, most of all, dependent on the motivation and performance of the operators. In the region, the attitude of the employees was completely different to what the company had experienced in Budapest; due to the difficult position of the labor market,

workers have a much stronger attachment to their jobs, also reflected in their performance, and staff turnover is practically unheard of. “However, as more call centers have appeared in the city, it is harder for the company to find good labor,” complains Kozma. He believes that the local training does not match the regional growth of the profession, therefore, after evaluating the abilities of applicants, they also evaluate what the skills must be developed further via in-house trainings.

Another favored location is Szeged, where the customer service department of EDF Démász has been located since 2001, employing 84 people. According to Endre Réti, the head of the customer contact center, there is no problem in finding properly educated employees, as Szeged, a univer-

sity town, has plenty of fresh graduates. During the selection phase, applicants undergo strict testing, with the evaluation of necessary skills at the position sought. Following selection, the applicants receive a five-week development course, which encompasses everything from IT training and processes to communications skills. A few years go, the company opened up to employees with disabilities as well, consequently, as an accredited facility, it is able to integrate many disabled employees as well. The loyalty of employees is outstanding here as well, as job opportunities in the region are scarce.

The largest contact center in Szeged is the customer service department of Magyar Telekom, but the city is also home to centers for Lombard, DÉGÁZ and Kontakti. ■

Hungary shared by service centers Hungary is proving a popular location for shared service centers.

Nearly 30,000 people work is this sector in Hungary, a number that is set to grow.

BBJ ENIKŐ VASS

A shared service center – or SSC – is responsible for the execution and handling of specific operational tasks, such as accounting, human resources, payroll, IT, legal, purchasing or security, says Zsolt Tóth, member of the curatorium of the Human Resource Foundation, the professional organization of call and contact center professionals.

ATTRACTIVE OPPORTUNITIES Many MNCs have found it attractive to build these SSCs in Hungary, because the local universities provide a skilled workforce while the average salary is somewhat lower than in Western countries. The government is also encouraging these investments, through tax incentives and local support packages.

EXPANDING OPERATIONS The first regional service centers were established in Hungary around the year 2000 and, so far, about 70 such units have been set up here, employing nearly 30,000 people. The larger ones, including those of EDS, ExxonMobil, IBM, Sykes and Morgan Stanley, have created anywhere between 500-1,700 jobs each and dozens of multinational enterprises have also set up smaller regional service centers with head counts ranging from 50 to about 600, such as those operated by Diageo, Avis, Budget Group or Cemex. Many of them have been steadily expanding their operations, having hired additional workforce exceeding the initial head counts substantially, in some cases by hundreds, and also promising to implement further expansions in the coming years.

According to Katalin Németh, head of the Investment Promotion Directorate of the Hungarian Investment and Trade Agency (HITA), these centers create a large number of jobs for qualified employees, primarily people with university degrees and with a good

command of foreign languages. They also employ a significant numbers of career starters. Most of the SSCs established in Hungary supply the subsidiaries of their owners (so-called “captive centers”). Their customer base includes enterprises in the CEE region for the most part. Most of the service centers that have settled in Hungary are engaged in the performance of finance, accounting, HR, back office and IT activities.

Those that are expanding their presence and the newly arrived SSCs are performing increasingly complex activities of high added value, Németh added.

CAR RENTAL EXPANDING The latest SSC development on the Hungarian market came from Avis Budget Group, which announced in September that it would expand its Business Support Center, creating 235 new jobs. HITA has supported the project throughout, from the initial decision to the provision of a support package. Avis Budget Group BSC launched operations in Hungary in January 2004, making

WHAT IS HITA? HITA, the Hungarian government’s investment and trade agency, was established in 2011 to promote inward investment and bilateral trade. With representative offices in 15 regional centers of Hungary and a foreign network operating under Hungary’s diplomatic services by special assignments in almost 50 countries, HITA is the first point of contact to support decision-makers looking for new business opportunities in Hungary.

The agency provides foreign investors with high-quality support and a wealth of supplementary services in the decision-making process: • Tailor-made, comprehensive information packages on the macroeconomic environment • Information on SSC/BPOspecific issues • Site visits, liaising with local, regional and government authorities Advice on project partners: • Site selection assistance • Assistance in incentives applications In the operational phase: • Special follow-up services • Advice and assistance to companies seeking to expand Advocacy to improve the business climate

the company was one of the first international entities to set up a regional service center in Hungary. Its operations were focused on business support services for its European network. According to its draft 2011 business report, the company’s sales revenue was HUF 3.042 billion; its profit before taxes amounted to HUF 168.38 million, while its balance sheet total came to HUF 860.17 million. The company plays a leading role in the domestic SSC market as it has attained a status where the key goal is to continuously develop and centralize its high added value processes.

OUTSTANDING IN MATHEMATICS Morgan Stanley was another of the early adopters to choose Hungary for its SSC. In the fall of 2005, Morgan Stanley established its Mathematical Modeling Center in Budapest to provide quantitative analysis supporting the company’s global fixed income trading business. The decision to locate the center in Budapest was based on Hungary’s outstanding mathematical traditions, says general manager Norbert Fogarasi. The

firm continuously tracks and evaluates where its support functions can best be performed. The decision to locate here was also based – among other factors – on the country’s excellent higher education and the quality of local talent.

Morgan Stanley is one of the world’s largest investment banks and global financial services providers, serving a diverse group of corporations, governments, financial institutions and individuals. In July 2006, Morgan Stanley increased its presence in the region by opening a Business Services and Technology Center in Budapest to support business activities in North America and Europe. The office in the Millennium City Center provides support across a variety of services including financial control, tax and other financial services, application development, information technology, credit analysis, risk management, institutional securities documentation and mathematical modeling. By 2012 the office had grown to employ more than 900 people. ■

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Call center - profit center A call center was regarded for a long time as a cost center, a place where the money was spent. But an efficient contact center is able to at least help the sales process, if not to make a profit.

BBJ ENIKŐ VASS

Call centers are not what they once used to be, a place where customer calls are handled, says Éva Mária Tóth, president of curatorium of the Human Resource Foundation (the professional organization of call and contact center professionals). Long before the unfavorable economic climate, these centers were handling sales calls and customer retention calls and were also doing customer satisfaction research and other marketing activities.

ACCENTUATED CHANGES Changes in the economy only emphasized the need for a more sophisticated approach to customer relations, and nowadays even activities such as handling overdue payments are often part of the average center’s activity. It seems handling overdue payments is a hot issue, as a HRF club meeting in the spring which debated this problem proved extremely popular amongst members.

“As the professional organization for the people working in SSCs, we will give them the opportunity to meet and exchange their experiences at the 3rd Budapest Calling: International call center exhibition, which will be held between October 16 and 18,” Tóth added.

CUSTOMER CARE: ONE OF THE TASKS Károly Szőke, head of the call center department at the capital’s waterworks Fővárosi Vízművek, agrees with the board president: he believes

that classical call centers, where only customer questions are answered and problems are solved, now survive only in easily defined businesses where processes are still simple. In most cases, customer service is one of the many activities a call center handles: sales is the most common process – whether for one’s own company or offered as a BPO service. Customer retention is an important activity for the profit-oriented sector, where the loyalty of customers can be reinforced with a proactive approach using bonuses or discounts.

Work can be divided between the back office and the call center, and so employees can be used more effectively or as a backup when upholding service level agreements requires additional help.

The Fővárosi Vízművek operates in a unique situation as it has no competition, being a utility company, so customer retention calls are not needed.

According to Szőke, its call center makes regular phone calls in order to improve the quality of service and to measure customer satisfaction. The call center is also used when customers have to be reminded of something, for example the changing of their meters.

EVOLVED TASKS In the last decade, call center functions and tasks have evolved, says Richárd Ferenci, call center general director and deputy director at Magyar Telekom. The classic task of information exchange was gradually complemented with marketing duties, customer retention and customer loyalty programs.

Complex and customer-centric customer care implies that agents have to identify those customer needs that are not obvious. They have to propose optimal solutions and have to sell services that may not yet be known to a client. Magyar Telekom customer service

pays maximum attention to all customer contact to provide a state-of-the-art service, and this can be achieved only if the provided services are also complex ones, Ferenci says.

With the wide spread of CRM systems, it is easy to make a personally tailored offer to a customer, and this really contributes to the success of selling, Ferenci said. A well-tailored offer can retain customers and make them loyal to a company that really knows what they want. These activities are an everyday part of call center operations, and customer care thus becomes a direct sales point.

EMPHASIS ON RETENTION With the saturated mobile market, customer retention is an increasingly important goal. The emphasis today is on who can retain customers who were so expensive to win over in the first place. And from this perspective it is vital to identify, and approach with a good offer, those customers who are likely to change service providers. An expert group handles those who have already signaled that they would like to leave their current service provider, which means they can minimize the number of customers leaving, Ferenci added. ■

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On their way - Hungarian BBJ ÁGNES VINKOVITS

A survey conducted by research company TÁRKI in May drew a worrisome picture about Hungarians’ willingness to leave the country in the hope of a better future.

three years after the change of regime in Hungary, it was at around 6% only.

This intensification comes not only from the increasing number of those speaking foreign languages and easier access to Western countries, but is also a result of socalled chain migration. “If several members of a community have emigrated to Sweden, then chain migration appears, meaning that their family members might follow them and, if things turn out well, they will also recommend it to their friends,” Attila Juhász, political and migration analyst at Political Capital told the Budapest Business Journal.

Indeed, if there is already someone in the new coun-

new field. “People are more likely to go for something that professionally suits them and is secure or at least, if they have some time, to wait for something worthy,” he said.

THE PROPORTION OF HUNGARIANS PLANNING LONG TERM WORK ABROAD

WHERE TO GO? While the UK and Ireland had been the main target countries for those leaving Hungary for almost a decade, primarily due to their flexible labor market and the low administrative burdens on foreign workers, this tendency is expected to change, which is only partly due to Ireland’s economic situation. As all Western European countries, most importantly Germany, opened their borders in May 2011 to those coming from the CEE states that joined

source: TÁRKI

Hungarian potential migration hit a postregime change record when a recent poll showed that almost every fifth adult wants to try and find a life somewhere else. Where do they want to go, and what will happen to those who stay?

survey showed a whopping increase in the willingness of Hungarians to migrate in the past two years, rising from 13% in 2010 to its current 19%, probably one of the spectacular results of Hungarians’ weak belief in any imminent economic upturn in their country.

“Hungary has been in crisis for more than five years,” Political Capital’s Juhász said, adding that people either go simply to make a living, or in order to find better working conditions, which incidentally also comes with a higher salary. That is supported by the TÁRKI survey, which showed the weakest migration potential in the middle of the salary scale, while those who earn much less or much more than the average were reportedly more ready to go.

Hungarian migration potential hit an all-time high at 19%, meaning that almost every fifth Hungarian adult plans to leave the country and work abroad for a period of time. It is equally noteworthy that 7% of them are not even planning to return.

Although this obviously does not mean that all those people will actually go, the tendency is still clear. The proportion of those planning to leave has been continuously expanding since the beginning of the ’90s: in 1993,

try who can help in the first months and, for example, can offer at least a sofa to sleep on, the challenges a new start entails might seem easier to handle. “That way, people can wait even a few months to find a nice job,” Csaba Greguss from the Hungarian branch of recruitment agency Grafton International pointed out, adding that this might also be a reason why it is less typical now than it was three or five years ago for people to go West and start from scratch taking up a job in a

the European Union in 2004, Germany might take the lead.

With the UK still retaining some of its appeal and the recent addition of Germany and Austria as valid destinations, migration experts expect a big boom in coming years that has the potential affect Hungary badly. According to German migration records, an average 1,400 Hungarians have registered every month since last May, which translates to almost 24,000 people by now.

Hungary’s Central Statistic Office (KSH) estimates that

no less than 160,000 Hungarians might go to Germany by 2030. This might be of no surprise, seeing as salaries are at least one and a half times higher there than in Hungary – and can be three or four times higher in fields that are short on trained professionals.

Germany’s hunger for skilled workers is not likely to ease soon as, according to the estimation of Nuremberg’s Institute for Employment Research, by 2015 the country will lack three million skilled workers as a result of its decreas-

ing population. As such, Germany awaits skilled workers in the tourism and hotel fields as well as in industrial sectors such as machinery manufacturing, construction and processing. Indeed, qualified workers are equally eagerly wanted in most Western countries, including the UK. Good IT specialists or engineers are welcome almost everywhere, not to mention Hungarianeducated health care workers, who have a traditionally good reputation worldwide.

Meanwhile, the TÁRKI

LEFT ALONE Such a high migration potential as currently exists in Hungary poses several threats to society. The evident fact that those who leave will not pay taxes here is just one of the negative effects, and one that is expected to be compensated only to a very small degree by money sent home. The empty hole left in the Hungarian skilled labor force, often working in precisely the fields that should participate in kick-starting the

2 BusinessSpecialReport//HR 19

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Budapest Business Journal | Oct 05 – Oct 18

worker migration threats SOCIAL GROUPS WIH MIGRATION POTENTIAL ABOVE AVERAGE

Content with their health state

Voters of farright party Jobbik

Between With Unemage high ployed 31-40 school graduation

Romas source: TÁRKI

Under age 30

economy, might be an even bigger problem. The longterm demographic effects are also not something to cheer up those who stay behind: migration willingness was highest among young Hungarians, with 48% of those under 30 saying they planned to leave the country. It is easy to imagine what the loss of almost half the young population would mean to an already aging society. Hungary’s migration rate, an indicator that shows the differential between immigrants and emigrants, has always been positive thus far, but experts warn this might change soon. “We have reached a risky turning point,” Juhász noted.

Decision-makers seem to have realized the problem and are trying to balance or prevent the negative effects.

More than 250,000 ethnic Hungarians from surrounding countries, non-Hungarian citizens as a result of the Trianon Treaty that redefined Hungary’s borders at the end of World War I, have already come to the motherland in the past two decades since the democratic transition. After the government put into force a regulation in January 2011 that practically eliminates the administrative burdens of applying for citizenship for those who can prove they had Hungarian nationals among their ancestors, the Diaspora probably feel even more welcome now. The most logical way of replacing the missing workforce is to attract people who can culturally integrate into society very easily.

Another recent step aims to prevent the young and well-educated workforce

from leaving in the first place. Those who entered higher education this year as freshmen in a fully or partly state-financed scheme had to sign a contract which obliges them to work in Hungary for a period that is at least twice as long as their state-financed studies. The regulation inspired numerous outraged comments from civil organizations and also provoked demonstrations, but was finally approved by Parliament and signed by the vast majority of students.

Time will tell if relocated cross-border Hungarians also decide to go West in the hope of a better life; and also if those young people in higher education are made only angrier by a restriction that seriously limits their freedom and finally decide to just pay the price and run away. ■

Social media might serve career aims As social media is taking an increasingly big bite of our daily lives, its importance is also growing when it comes to work force selection and job seeking. Recruitment via social media has even become a tendency on the rise.

BBJ ÁGNES VINKOVITS

“An impressive profile on LinkedIn, for example, can be a good entry for good future positions,” Csaba Greguss, customer relationship manager at recruitment agency Grafton pointed out. If containing a detailed list of professional skills, former positions and also an impressive contact list together with some recommendations, such profiles can serve as a pub-

lic and internationally available CV. “Having your LinkedIn profile attached to your CV might be captivating,” Tammy Nagy-Stellini, managing director of specialist recruitment agency Hays Hungary said, adding that as HR recruiters closely follow such websites, even those who are currently not seeking a new job might get good offers. “The more platforms you are present on, the better the chances you have.”

From the job seekers’ point of view, social media is also of increasing importance. A recent survey conducted by recruitment agency Randstad found that some 15% of Hungarian candidates reported that when it comes to finding new employment, they prefer social websites to the regular job seeking platforms.

Still, the majority of those polled admitted that they mostly share personal information instead of building

a professional profile. “The reason is that in general Facebook or IWIW are still far more popular in Hungary than networks such as LinkedIn, which purely aims to gain professional contacts,” Balázs Varga, the head of marketing and PR at Randstad explained, adding that as a result, he forecasts LinkedIn-like pages to rule social recruitment in the future for both employers and employees.

However, Varga admits that Facebook-like social websites might come to the fore when employers have to choose from several candidates of mainly the same professional level or experience, something that has previously been done by regular selection methods such as job interviews or professional tests. In such cases, the personality and, as such, the impression given by social websites might become a decisive element.

PROFESSIONAL VS. PRIVATE Although Hungary is still far from some extreme overseas examples when companies ask for the candidate’s password to fully check their social website content, including private messages and photos that are not visible to the public thanks to privacy settings, privatefocused social websites such as Facebook are of increasing importance in the recruitment method here.

However, while professionalfocused social media is useful in the process of hunting out the proper workforce, Facebook profiles have the tendency to affect the decision of whether the person fits the position and the company profile.

Private life-focused social media websites might weigh even more when personal aura is an important aspect for the position sought. This might be an administrative job, a sales position or

anything where teamwork is required. “It counts less in the case of trained workers, and when it comes to management positions, the importance of such sites is almost fully eliminated as only the professional experience and previous achievements are in focus,” Randstad’s Varga explained. Hays’ Nagy-Stellini somewhat disagrees, saying that nowadays social media profiles might be checked for any kind of position, including managers. “Maybe only for the sake of curiosity, but there is always a chance that it will be checked.”

STAY REAL Still, HR experts warn that our private life being on display can easily turn into a disadvantage if someone shows too much. “Provoking pictures of hard-core parties should be removed for the period of job seeking and also for the proba-

tionary period,” suggested Grafton’s Greguss.

Most HR experts polled by the Budapest Business Journal share this idea, with NagyStellini even saying that one of their clients had rejected a candidate because the pictures on their profile were found to be far too provoking.

However, showing one’s real face, even if it includes somewhat hard-core elements, might have its benefits as well. “We can never know what comes off as negative or positive for someone else, so it is pointless to give the impression of being someone else,” Varga pointed out.

Once, he explained, Randstad was recruiting for a junior sales position where the client had specifically requested they find someone who had partied from Monday to Sunday throughout their university years, as only an outgoing type of personality could have the skills they were looking for in that given situation. ■

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Executive search: the need to go up The number of companies recently pulling out of Hungary and the low number of investments has not left the executive search market untouched. But while headhunters can only wait and hope for better days to come, some strengthening trends might favor leaders looking for a new position.

BBJ ÁGNES VINKOVITS

The executive search market is a good indicator of a country’s economy. Considering the obvious fact that companies are in need of new leaders when they grow, in the current Hungarian economic circumstances it might not be a big surprise to find that the executive search market

is facing hard days. The negative trends that started in 2011 have only become worse. “We have less new clients to greet, while the old ones check in less and less frequently,” Katalin Bereczky, managing partner at executive search company Neumann & Partners said, pointing out that it is not only the lack of business expansion that gives the headhunter sector a headache, but also the slowing fluctuation rate among managers.

The main reason behind this is probably not that companies give more time to the top dogs they already have in place, as the need for a new leader is still reported to appear every two years on average; it is rather that they tend to find new leaders themselves, either through their contact networks or, more frequently, by training a promising staff member to become a manager. “Talent management in this sense is on the rise,” Csaba Greguss, customer relationship manager at Grafton explained.

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The banking and energy sectors show the biggest decline in the books of executive search firms when compared to previous years, but the FMCG and service sectors also seem to be way down when it comes to spending on the selection of new business heads. “It is only the industrial sector that still keeps its head up, and also the fields occupied by the local branches of multinationals, as these companies can rely on the support of the parent company,” Bereczky said. Ákos Bihacker, the head of HR-COM, agrees. “The lack of investments and the closing down of factories have affected us badly and represent a major setback for us,” he said, adding that although signs of recovery have appeared in the past few weeks, it remains to be seen if this is a foreshadowing of better things to come or just a result of the company’s business efforts.

SEARCHING STILL WORKS As the feeling of uncertainty

is more or less present in all sectors, luring managers from their current jobs is becoming increasingly difficult. “A new company has to be very good to be able to make someone leave their job,” Bereczky noted. Her opinion is widely shared: nowadays finding the proper workforce is much less of a challenge compared to tempting them to leave a secure place for a new one.

“Searching still works through the well-known channels of environment checks, but convincing someone to leave has really become an art form,” HR-COM’s Bihacker said. The full process of selecting new leaders and convincing them to sign a contract, takes five to eight weeks on average.

At the same time, the fact that the executive labor market is quite international makes the job of headhunters easier. Specific requests for finding a foreign national for a certain position do not appear too often, but it is getting increasingly common that not being Hun-

garian is not seen as a disadvantage, either. Moreover, in fields where the local executive workforce is very much limited, for example in air transportation, expanding the search beyond the borders might be inevitable. In less special cases, however, cost-consciousness favors Hungarian executives.

“There are great experts in Hungary, so why would companies pay more?”

Bihacker pointed out.

Indeed, executive salaries, which in the case of Hungarian professionals come without the added costs of relocation, have not risen recently and have even decreased in some sectors such as HR or PR. FROM HERE AND THERE From the workforce point of view, finding new employment might require a bit more patience. While a few years ago executives could find a new position in an average of 6-12 months and chief executives in a year, these periods have somewhat lengthened.

However, the quickness of the sale very much depends on the sector. “If a quality assurance manager with all the required qualifications shows up now, I can find him a position in five minutes,” Neumann & Partners’ Bereczky said adding that if, for example, a PR executive needs a position, they will probably have to wait at least eight months.

At the same time, businesses do not always insist that new executives come from the company’s sector, a growing trend that might slightly improve the prospects of experienced professionals aiming for a new position. “Sectors are becoming more and more interoperable,” Bihacker said, adding that the banking and telecom, as well as the FMCG and other service sectors are very good “friends” in this sense. Of course, the limitations of this trend are obvious, as while one can switch from the energy or telco to the financial sector, the head of an electronic manufacturer might not be so welcome in the financial field. ■

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Executive search firms

»

»

»

NO. OF FULL-TIME EMPLOYEES IN HUNGARY ON AUGUST 1, 2012 NO. OF OFFICES WORLDWIDE

4

PERIOD OF GUARANTEE TO CLIENTS SEARCH PERIOD

250

FEE CHARGED IN PERCENTAGE OF SALARY IN FIRST YEAR (%) SUCCESS-BASED (%) FLAT FEE (%)

245

OTHER

»

MIDDLE MANAGEMENT

»

BREAKDOWN OF CANDIDATES PLACED IN 2011 (%)

TOP EXECUTIVES

»

NO. OF PEOPLE IN DATABASE ON AUGUST 1, 2012 NO. OF CANDIDATES PLACED IN 2011

7

PLACEMENT FROM DATABASE

288

ADVERTISEMENTS

NUMBER OF CONSULTANTS WITH INDEPENDENT REVENUE PLANS ON AUGUST 1, 2012 REVENUE PER CONSULTANT IN 2011 (HUF MLN)

253

SEARCH METHODS (%)

DIRECT SEARCH

TOTAL NET REVENUE (HUF MLN) 2011 H1, 2012

COMPANY WEBSITE

NET REVENUE FROM PERMANENT PLACEMENTS (HUF MLN) IN 2011 H1, 2012

RANK

Ranked by net revenue from permanent placements

OWNERSHIP (%) HUNGARIAN NONHUNGARIAN

30-35 – –

6-12 months 5-8 weeks

15 18

– Grafton Recruitment B.V (75), Niall Keyes (25)

Jacques De Jager – –

1053 Budapest, Károlyi Mihály utca 12.

(1) 577-5200 (1) 577-5202 budapest@ spenglerfox.com

12 months 6-10 weeks

9 90

Richárd Kohlmann (50) David Young (50)

Richárd Kohlmann, David Young – –

1022 Budapest, Eszter utca 6.B (1) 391-0950 (1) 391-0951 office@amrop.hu

»

12 8

Éva Gombás (34) A2H Societé a Responibilité Limitée (61), Armelle Boulon (5)

Éva Gombás – –

1075 Budapest, Madách Imre út 13–14/B building (1) 361-3612 (1) 361-3612 arthurhunt@ arthurhunt.hu

3-12 months 4-8 weeks

10 36

– (100)

Ákos Bihacker – –

1126 Budapest, Derkovits utca 9.

(1) 801-8888 (1) 801-8889 info@hrcom.hu

12 months 4-5 weeks

8 26

– Neumann Leadership Holding GmbH (100)

Katalin Bereczky – –

1025 Budapest, Ali utca 8.

(1) 489-4489 (1) 489-4488 neumann@ neumann-partners.hu

3-12 months

6

»

»

Judit Tóth Simonyi (67), Béláné Tóth (33) –

Judit Simonyiné Tóth – –

1015 Budapest, Szabó Ilonka utca 71/A (1) 214-1286 (1) 214-1286 info@sandt.hu

6 90

András Lipcsei (100) –

András Lipcsei – –

1012 Budapest, Logodi utca 44.

(1) 487-0241 (1) 487-0248 pandp@ pendlpiswanger.hu

András Sághy – –

1062 Budapest, Andrássy út 100.

(1) 267-0944 (1) 267-0943 budapest@ kienbaum.com

James Brennan, Klemens Wersonig – –

1051 Budapest, Vörösmarty tér 2.

(1) 429-1020 (1) 429-1029 office@ targetexecutivesearch.com

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

GRAFTON RECRUITMENT KFT/ SPENGLER FOX www.spenglerfox.com 1

100

–

–

» »

80

20

–

AMROP KOHLMANN & YOUNG KFT www.amrop.hu 2

100

–

–

35,000

»

33

80

20

–

» »

ARTHUR HUNT KFT www.arthur-hunt.com 3

229 111

229 111

183 76

183 76

4

»

80

10

10

66 93

10

67,000 76

65

30

5

» » »

40

20-30 or fixed – 100

–

30 – 100

15

20–30 – –

6-12 months

HR-COM SZERVEZETFEJLESZTÉSI ÉS VEZETŐI TANÁCSADÓ KFT www.hrcom.hu

4

5

NEUMANN & PARTNERS KFT www.neumann-partners.hu

5

»

150 62

180 85

» »

95 50

122 60

3

80

95

10

5

–

» »

–

6.000 29

20

90

40

10

SIMONYI & TÓTH KFT www.sandt.hu 6

7

DR. PENDL & DR. PISWANGER KFT www.pendl.hu

94

94

»

»

»

3 23

90

80

10

1

19

» »

30

27

55

46

27

» – 100

6-12 months 5-6 weeks

»

30 – 100

6-12 months 5-9 weeks

5 34

– Kienbaum Consultants International GmbH (50), Kienbaum und Partner GmbH (50)

–

Fix – 100

6 months 4-6 weeks

6 7

– Klemens Wersonig (100)

KIENBAUM EXECUTIVE CONSULTANTS KFT www.kienbaum.com 8

9

TARGET HUNGÁRIA KFT www.targetexecutivesearch.com

81

»

87.5 38

67

67

»

»

2

»

» »

100

90

–

5

–

5

» »

73,000

»

»

70

»

30

22 2 BusinessPartnerWatch FEE CHARGED IN PERCENTAGE OF SALARY IN FIRST YEAR (%) SUCCESS-BASED (%) FLAT FEE (%)

PERIOD OF GUARANTEE TO CLIENTS SEARCH PERIOD

NO. OF FULL-TIME EMPLOYEES IN HUNGARY ON AUGUST 1, 2012 NO. OF OFFICES WORLDWIDE

OWNERSHIP (%) HUNGARIAN NONHUNGARIAN

20

20-30 75 25

3-6 months 2-6 weeks

5 1

Vera Urbán (90), Ágnes Bán (10) –

50

25 – 100

»

» » »

»

» » »

–

» » »

»

» » »

OTHER

MIDDLE MANAGEMENT

BREAKDOWN OF CANDIDATES PLACED IN 2011 (%)

TOP EXECUTIVES

NO. OF PEOPLE IN DATABASE ON AUGUST 1, 2012 NO. OF CANDIDATES PLACED IN 2011

2 22.50

PLACEMENT FROM DATABASE

45 21

SEARCH METHODS (%)

ADVERTISEMENTS

NUMBER OF CONSULTANTS WITH INDEPENDENT REVENUE PLANS ON AUGUST 1, 2012 REVENUE PER CONSULTANT IN 2011 (HUF MLN)

45 21

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Budapest Business Journal | Oct 05 – Oct 18

DIRECT SEARCH

TOTAL NET REVENUE (HUF MLN) 2011 H1, 2012

COMPANY WEBSITE

NET REVENUE FROM PERMANENT PLACEMENTS (HUF MLN) IN 2011 H1, 2012

RANK

BBJ

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

Vera Urbán Ágnes Bán –

2000 Szentendre, Széchenyi tér 34.2/17 (1) 789-0747 (26) 316-410 hrconsulting@ synchronex.hu

»

3 1

Grow Csoport (40), Péter Lendvay (60) –

Péter Lendvay – –

1037 Budapest, Montevideo utca 2/C (1) 487-9090 (1) 487-9099 deltasource@ deltasource.hu

6-9-12 months 4-6 weeks

4-6 weeks 1

Individuals (100) –

Zsolt Lukács – –

1132 Budapest, Váci út 28.

(1) 781-1224 (1) 781-1228 office@telkes.hu

» »

– Egon Zehnder Finanz AG (»), Egon Zehnder International AG (»)

Stephen Benkő – –

1055 Budapest, Honvéd utca 20/A (1) 474-9740 (1) 474-9734 budapest@ egonzehnder.com

»

– Korn/Ferry International Los Angeles (100)

Vilmos Szabó – –

1022 Budapest, Bimbó út 77.

(1) 346-0600 (1) 346-0619 budapest@ kornferry.com

Individuals (100) –

Bernadett Iker – –

1024 Budapest, Lövőház utca 7–9.

(1) 202-1008 (1) 202-1009 contact@ nextconsulting.hu

– (100)

Mónika Kecskés – –

1052 Budapest, Sütő utca 2.

(1) 328-0277 (1) 328-0277 budapest@ pedersenandpartners. com

» »

András Gábor – –

1026 Budapest, Riadó utca 12.

(1) 200-0850 (1) 394-1097 infobudapest@ spencerstuart.com

SYNCHRONEX CONSULTING KFT www.synchronex.hu 10

80

10

10

19,300 21

50

30

DELTA SOURCE KFT www.deltasource.hu

11

NR

DR. TELKES KFT ww.telkes.hu

EGON ZEHNDER NR INTERNATIONAL KFT

35 15

44 15

3 24

75

25

–

10,000 20

» »

29

» »

80

15

5

» »

» »

www.egonzehnder.com

»

555

»

» »

100

–

–

» »

10

»

»

40

»

»

KORN/FERRY INTERNATIONAL BUDAPEST KFT www.kornferry.com NR

» »

» »

» »

NEXT-CONSULTING KFT NR

» »

144

» »

www.nextconsulting.hu

NR

PEDERSEN & PARTNERS KFT www.pedersenandpartners.com

» »

»

108

»

» »

100

85

70

–

10

–

–

» »

5

» »

30

» »

100

»

»

–

»

»

»

» » »

12 months

» »

12 months

»

6-12 months 4-8 weeks

12 months

»

78

» 1

» 50

SPENCER STUART KFT www.spencerstuart.com NR

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

» »

» »

» »

100

–

–

» »

33

98

2

–

» »

9 months 6-12 weeks

6 55

This list was compiled from responses to questionnaires received by Oct. 3, 2012 and publicly available data. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of press time. While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, Madách Imre út 13–14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

2 BusinessSpecialReport//Germany 23

BBJ

WWW.BBJ.HU

Budapest Business Journal | Oct 05 – Oct 18

German-Hungarian trade relations With its 25% share in Hungarian imports and exports, Germany is our biggest trade partner.

In fact, without the German relations the Hungarian economy would completely lose ground.

BBJ KRISZTIÁN KUMMER

EXCHANGE RATES The EUR/HUF exchange rate has been very volatile recently: in the last 12 months it has been traded at anywhere between 274 and 324. However, exchange rate movements usually do not impact trade flows immediately, but rather in the medium- and long-term. For most exporters and importers, a reliable and predictable exchange rate path is more important than the actual market rate. Therefore, economic policies should aim at a predictable policy frame-

MERCHANDISE TRADE (MLN €) According to German statistics

German exports

German Imports

Balance

According to Hungarian statistics

Hungarian exports Hungarian imports

Balance

2000

10 299

10 633

-334,3

2000

11 370

8 899

2 471,4

2001

10 520

12 030

-1 509,9

2001

12 098

9 353

2 744,5

2002

11 185

12 154

-969,6

2002

12 955

9 690

3 264,7

2003

11 860

12 297

-437,0

2003

12 933

12 621

311,8

2004

12 816

13 412

-596,4

2004

14 098

14 217

-118,6

2005

13 646

14 209

-563,0

2005

15 068

14 649

419,7

2006

16 034

15 708

325,5

2006

17 376

16 744

632,5

2007

17 297

17 305

-8,5

2007

19 584

18 538

1 046,2

2008

17 360

16 815

545,0

2008

19 571

18 786

784,5

2009

11 675

13 766

-2 090,5

2009

15 114

13 741

1 373,1

2010

14 133

16 388

-2 254,4

2010

17 943

15 831

2 111,7

2011

15 744

18 184

-2 439,5

2011

20 141

17 987

2 153,3

2012 *

16 425

19 027

-2 602,2

2012 *

20 567

18 278

2 288,6

work that prevents unwanted exchange rate volatility, the German-Hungarian Chamber of Industry and Commerce (DUIHK) said.

GROWING CHALLENGES ON THE DOMESTIC MARKET Given their wide reach in Hungary, nearly any change in economic policy will inevitably affect a large number of German companies. Companies active in the manufacturing sector are generally satisfied with the conditions for their operations here. Others, in particular in the services, retail trade or utilities sectors, which serve local rather than

export markets, face challenges that may curb the competitiveness of these firms and thus lead to a reduction in investments in the future.

About two-thirds of bilateral trade flow consists of advanced products and components from the manufacturing sector. Key areas – in both directions – are the automotive and machinery, electric and electronic equipment manufacturing. Other important goods include chemical and pharmaceutical products.

LONG TRADITIONS Economic ties between the two countries have very long

and successful traditions.

In many areas, Hungary offers attractive conditions to German manufacturers or importers. Hungary’s favorable geographical location, high-quality training, academic background and the significant simplification of its tax system make it a competitive state in the Central European region, insists the Hungarian Investment and Trade Agency (HITA). The recent investments of large industrial companies – such as the Daimler plant in Kecskemét – showed that Hungary remains an attractive environment for investment, and even the

most critical surveys confirm that the Hungarian labor force remains an important factor in keeping German companies in Hungary. German investors continue to appreciate the efficiency, job skills and high level of education of Hungarian workers, HITA said.

However, there is no guarantee of a top position given fierce regional and global competition, DUIHK warned.

In order to sustain and intensify the existing mutual ties and to exploit the potential advantages, companies first of all need a predictable, calculable economic and legal framework and a chance for a

decent profit. Provided such a business environment exists, Hungary will be able to keep a key position among Germany’s trading partners, the chamber said.

But without good German relations, the domestic economy would completely lose ground, as Germany is also a strategic partner to the Russian and Chinese economies, two countries that are of high importance to the Hungarian economy; that is, Germany can give significant help in strengthening local relations with these regions as well through Hungarian suppliers to German MNCs.

Source: DUIHK * DUIHK estimate

Even after years of the ongoing economic crisis, Hungary’s trade with Germany has nearly doubled since the year 2000 and will probably exceed €38 billion this year. Hungary ships about 2% of all German imports and absorbs 1.5% of German exports, meaning it ranks 16th among the European giant’s trade partners.

The total turnover is about the same as Germany’s trade with Sweden or Japan and nearly twice as big as that with India.

In the other direction, Germany is Hungary’s largest trade partner, with a 25% share in both exports and imports.

The economic crisis resulted in a substantial drop in bilateral trade, primarily due to the fact that Hungarian-German shipments are mostly related to exports to global customers.

However, Hungarian exports returned to pre-crisis levels in 2011, while imports may be close to 2008 volume this year.

Since Hungarian exports to Germany grew faster than imports, Hungary is now one of the few countries producing a sizeable trade surplus versus the second-largest export nation of the world. Due to this phenomenon, the Hungarian trade surplus against Germany rose to €2.5 billion in 2011 from €2.3 billion in 2010.

24 2 BusinessSpecialReport//Germany BBJ

THE LARGEST CHAMBER The DUIHK currently has nearly 900 members, about 20 times as much as at its foundation in 1993, and is by far the largest bilateral chamber in Hungary. Its key objective is to support successful business contacts between Hungarian and German companies.

Therefore, the chamber facilitates networking platforms and helps companies with professional activities like market studies through business and legal consultancy, tax services, training offers or investment projects. Every year, DUIHK serve more than 1,500 individual customers, for example in finding appropriate business partners or staff, prepar-

SHARE IN GERMAN MERCHANDISE TRADE IN PERCENT

IMPORTS 1

Netherlands

9,09

1

France

EXPORTS 9,57

2

China

8,81

2

United States

6,95

3

France

7,34

3

Netherlands

6,54

4

United States

5,36

4

United Kingdom

6,18

5

Italy

5,34

5

China

6,11

6

United Kingdom

4,97

6

Italy

5,85

7

Russia

4,50

7

Austria

5,44

8

Belgium

4,25

8

Switzerland

4,50

9

Austria

4,15

9

Belgium

4,42

10

Switzerland

4,09

10

Poland

4,10

11

Czech Republic

3,65

11

Spain

3,29

12

Poland

3,59

12

Russia

3,25

13

Japan

2,61

13

Czech Republic

2,90

14

Spain

2,50

14

Sweden

2,08

15

Norway

2,28

15

Turkey

1,90

16

Hungary

2,02

16

Hungary

1,49

ing market studies or handling cross-border VAT refund procedures. Since many German and Hungarian companies face a lack of skilled workers, the chamber also plans to expand its activities in the field of vocational training based on the German “dual model”.

OFFICIAL TRADE RELATIONS BETWEEN HUNGARY AND GERMANY The Hungarian-German Chamber of Commerce in Budapest was founded in 1920. With the Ger-

man Economic Chamber of Austria, it was among the first German foreign chambers of commerce and lasted until 1945. After World War II, Germany’s external economy fell under the control of the allied forces. In September 1947, the Joint Export Import Agency (JEIA) signed its first commercial treaties, with Hungary among others. This convention has served as the foundation of West Ger-

man-Hungarian traffic of goods even in the 1960s.

In 1949, Hungary became a people’s republic based on the Soviet model. In 1955, Hungary was integrated as a founding member in the Council for Mutual Economic Assistance (CMEA), the Soviet-ruled Eastern European economic system. Until 1989, Hungary and the (East) German Democratic Republic cooperated through the CMEA framework.

In the communist era, commerce relations with the Western countries deteriorated significantly, but they did not cease to exist altogether. In 1963, the trade mission of the Federal Republic of Germany opened in Budapest. Until the middle of 1973, more than 100 West German-Hungarian joint ventures were established. In 1974, Sicontact Kft was founded as the first German-Hungarian cooperation, with the active participation of Siemens. And only three

years before the fall of socialism in Hungary, the Federal Republic of Germany and Hungary signed interstate agreements on investment protection and the development of economic relations.

In 1990, only a year after the collapse of the Hungarian communist regime, the Office of German Economic Delegation opened its gates.

Three years later, the German-Hungarian Chamber of Industry and Commerce was established. ■

national book fairs, and longstanding working relationships between Hungarian publishers and international agencies.

“There are no common trends or tendencies, it is completely up to an author whether his or her work can be successful outside Hungary,” says Tímea Tegyi, PR director of Magvető, one of Hungary’s most renowned publishing houses. “Selling the rights of a specific book is one thing, but becoming successful in terms of copies sold is another,” she explains. Although Magvető often represents its authors on foreign markets, when it comes to actual translations and publishing, it is always in cooperation with an international agency and a local publisher.

“The circle of internationally published and internationally successful Hungarian authors might not be closed, but it is really difficult to sell Hungarian authors to a foreign audience, even in Germany,” the director says, adding that there are a few authors who grew really popular with German readers over recent

decades. Péter Esterházy, Péter Nádas, László Krasznahorkai and Magda Szabó are among the most successful Hungarian authors in the German-speaking world, with Nobel Laureate Kertész, who lives and works in Berlin, representing a whole different league.

While it usually takes a lot of time for authors to become mature enough to speak to an international audience, there are examples of younger writers successfully breaking through. György Dragomán (born in Tirgu Mures, Romania in 1973) is one of the few. His 2005 novel The White King was translated into 28 languages and, as Tegyi reveals, its Hungarian success followed the great reviews it received and sales figures it achieved on the German market.

“There is no such thing as a Hungarian writer writing specifically for an international audience,” Tegyi says, “but there are authors whose subject and style is global enough to become relevant to readers outside Hungary.” ■

Language is not the barrier The cultural market of Hungary is artist- rather than market-focused, which makes the export of artistic products particularly difficult.

Experts say that while German-speaking markets are among the most popular targets for cultural export, there is no tried and true path to follow when artists or managers aim to extend their audience beyond the country’s borders.

BBJ ZSOLT BALLA

Classical music is definitely the most in demand export product of the Hungarian cultural market, but more or less anything that involves music, dance or theater has considerable appeal in German-speaking countries. The missing link, in most cases, is conscious

and targeted management and a broader environment to support these efforts.

“Hungary is a major player when it comes to independent arts, and still there are no standardized channels to export artistic products abroad,” says György Szabó, former head of the Trafó House of Contemporary Arts. “It is really difficult to follow the trends since there is no centralized or formalized way of moving productions or products to international markets” he adds.

Market-driven commerce does exists, but the only way to get a real overview is to attend catalyzer events, like the Duna Part (the name translates as Danube bank) art fair organized by Trafó a few years ago. Some 120-130 international managers, who came to Budapest in search of Hungarian artistic productions with export potential, attended the expo. “Regularity would be a key factor for events like this,” insists Szabó, “so it is a shame that after two successful events, Duna Part was not organized this year.” The for-

mer director was removed from the institution’s board after 13 years this January by Budapest mayor István Tarlós, in a much-debated decision, and Trafó’s new CEO took office only in the beginning of September, so the cultural center missed various tenders and skipped numerous events due to uncertainty over its leadership.

“Cultural life in Hungary is very static, defensive and artist-focused,” Szabó opines. “It tends to completely ignore cultural management as a profession, in particular because the role of the managers is to get things moving, whereas in Hungary, it often proves more important for decision-makers to protect their positions than to support this natural dynamism.”

Another unique characteristic to Hungarian art export is its direction. While common sense would suggest that the domestic market is the “school”, and export is a possibility that opens up to those who do well, in Hungary it is often the other way around.

It is not uncommon that the home audience only notices a Hungarian artists after eventually picking up on the echoes of their international success.

Examples of this phenomenon range from DJs like Yonderboi through dance or theater companies to the extremes of Imre Kertész, a writer and holocaust survivor, who was virtually unknown in Hungary (apart from within a very narrow intellectual audience), until he received the Nobel Prize for Literature in 2002.

While translation is often a major challenge, literature still remains one of the most frequently exported forms of art, especially to German-speaking countries. This bond may be based on physical proximity as well as common roots in cultural tradition, especially as in the 19th century, during the Austro-Hungarian Monarchy, German was one of the official languages of Hungary.

Moreover, literature tends to have better-established channels for export than anything else on the cultural market in the form of renowned inter-

Source: DUIHK

“From our standpoint, it is obvious in the present economic and political situation that we have no other option but to ‘make peace’ with our main economic partners, wrote an analyst with the Policy Agenda institute. “Since the uncertain situation would result in the loss of a yearly €14-15 billion in German investments or would weaken the excellent foreign trade relations, this would cause unmanageable and immediate damage and would violently shake the everyday operation of our economy.”

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Budapest Business Journal | Oct 05 – Oct 18

ExpertOpinion 25

WWW.BBJ.HU

Budapest Business Journal | Oct 05 – Oct 18

German investors in standby mode DR. ZOLTÁN NÁDASDY HEAD OF OFFICE NOERR & PARTNERS LAW OFFICE

Germany is one of Hungary’s most important business partners, but the relationship is somewhat asymmetric. How do German business decision-makers see Hungary, and how has this perception changed over the course of recent years?

German and other international decision-makers have certainly changed their approach towards Hungary in the past few years. This change is due to the combined effects of a global crisis and Hungary’s rapidly changing legal environment, which results in an insufficiently predictable economic environment. As a consequence, many investors have decided to wait out these uncertain times and unfavorable trends. It is not only the changes in the tax scheme and the extra taxes that were unexpected and out of the blue for many major companies, but also other changes to the legal environment that have their impacts on important business decisions. There are many aspects to consider when a company decides to start a new investment or extend its existing operations in a specific country: on top of the normal calculations, one of the most looked-for elements is stability. Since many things have changed very quickly in Hungary over the past few years, these companies failed to find the stability and predictability they were after. As a result, the number of new investments has dropped, and the time it takes to make a certain business decision has substantially increased.

Decisions that were previously straightforward now take a lot more time and need a lot more internal discussion, and when it comes to new investments, these decisions are not always made in favor of Hungary.

Is there a significant difference in how a German company reacts to the current situation versus any other European company?

Yes, what we see is that German companies are much more likely to think long-term. For example, if certain tendencies turn negative, or unfavorable, German companies will not close down businesses or leave a country or a region. They have long-term strategies, and we see that their business decisions are very analytical, thorough and very mature. It also correlates with the speed

of making decisions: we usually see that decisionmaking procedures take longer, but the outcome is a well-founded decision.

What is the assessment of Hungary when German investors compare it to other CEE countries?

DUIHK (The German Chamber of Commerce and Industry) regularly publishes prosperity reports analyzing the popularity of the region’s countries. The latest report revealed that Hungary’s popularity, for the first time ever, dipped below the level of all the other Visegrád countries (Czech Republic, Poland and Slovakia). It means that, contrary to previous years, Hungary’s reputation has now worsened compared to its peer countries in the region. On the other hand, in spite of all the difficulties, the perception of the country is still substantially better than that of its southern or eastern neighbors, such as Bulgaria, Romania and Serbia.

Is there considerable change in the number of German companies entering Hungary, or in the activity of German companies with existing Hungarian operations over recent years?

Yes. As I said, in the case of new investments there is a period of waiting or postponing new projects altogether. The only exception seems to be the car industry, where we can, for instance, highlight the already finished greenfield investment of Daimler or the extending of Audi’s production capacities in the country.

This, of course, affects a whole range of suppliers, but still, this industry is the only exception with a clear trend in an environment where, with few exceptions, new operations were brought to a halt, partly because of decreased demand and partly because of the country-specific factors we have mentioned before.

What is behind the car industry becoming “the only, refreshing exception”?

I think it’s important that both Audi and Mercedes are present in the luxury segment, which was left relatively unharmed by the crisis as opposed to lower categories. Another contributing factor may be the expectation and calculation of carmakers as to when this crisis will come to an end. Investments in this industry are, obviously, planned for the long-term, and they will have to have products to sell by the time demand begins to go up again. They simply cannot afford to be in a position where they have to start building plants from scratch when that happens.

How does this changed environment reflect on your daily work as a legal consultancy?

There is a tangible change in the nature of projects we are involved in. Prior to 2008, greenfield investments and M&A transactions formed a major part of our assignments. What we all see since then is a shift of focus towards restructuring, reorganization and similar tasks. It can either be the restructuring of a company’s credit portfolio, or rationalization of labor, or tasks tied to difficult financial situations like bankruptcy.

We hope that these crisis-related jobs will again be in balance with traditional transactions and investment-related projects once the current difficult times are over.

How general are these tendencies? Do all your clients have to tackle similar kinds of issues or are there clear differences we can highlight?

Our clients are more or less representative of German investments in Hungary, both in terms of sectors and company size, and one of the most interesting trends is that our big multinational clients face entirely different problems to our smaller clients. While most of the major companies are struck by the extra taxes and other tax-related challenges (again, with the exception of the car industry, which was spared from this extra burden for some reason), our clients in the SME sector are concerned mostly about debt management and the restructuring issues we mentioned earlier.

If we take a snapshot and say that a German company is about to set foot in Hungary at this very moment, what are the biggest and most important challenges it will have to face?

I think it’s the change of the legal environment that is still a work in progress. In some areas the codification is still unfinished: for example, the new Civil Code, which has been in preparation for 12 years, will be debated by Parliament in the upcoming weeks. But even where the new legislation is already in effect, there are many fields where there is no judicial practice associated with the new scheme yet. This practice is necessary to handle the legal environment as a solid, predictable base. Also, there are various cases where corrections are needed due to mistakes that were the result of too hasty legislation procedures. These uncertainties definitely pose new companies with major challenges. At the same time, this can be even more difficult for companies that have been

present on the Hungarian market for a longer time, because they were used to something that they will have to completely relearn from now on.

What are the critical skills necessary for you as a legal consultancy to serve German companies in their Hungarian operations?

As a company with a German background, we have the huge advantage of knowing our German clients particularly well. We know their priorities, their requirements and their expectations. All of our investor clients expect practical and legally secure advice, which goes well beyond knowing the legal environment: we have to understand their way of thinking and their preferences, and since we know their background, there is no need to over-complicate or over-explain these things.

We can provide them with an exhaustive comparison between the German and Hungarian environments, with a focus on the differences and their possible consequences to business operations.

What is the difference between advising a German client and any other international client on the Hungarian market?

Interestingly, there is a real difference that is present both in verbal conversations and in written documents. While all clients seek practical advice, we find that German clients are keen to know the path that was followed before a conclusion was made. They like to know the exact methodology of an analysis with the exact references to the relevant legislation. It is slightly exaggerated, but our clients with an Anglo-Saxon background often expect a yes or no answer that can support a quick decision. German clients, on the other hand, take the time to go through and understand the entire structure and accurately see the legal background of every decision they are about to make.

What are your experiences with representing companies the other way around? As far as I know, you also advise Hungarian companies on their German operations.

Although the number of the companies is relatively low, a few companies in the Hungarian SME sector have already got to the level where they can consider entering new markets. What we can do for them is mostly help with the language, and with comparing the German and the Hungarian legal environments. When it comes to actual consulting in line with German regulations, we direct our clients to our German head office (helping communication between the two if necessary), which can provide them with full service legal consulting. We do have German law graduates in the Budapest office, but they would only be involved in the preparation phase: the actual analysis would come from a professional in the German office who specializes in that specific area.

www.noerr.com

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“German investors are eagerly waiting for Hungary to regain its stability, both in terms of macroeconomic tendencies and a predictable legal environment,” says Dr. Zoltán Nádasdy, an attorney in Noerr’s Budapest office. Noerr Group is one of the major international law firms that helps German companies in their Hungarian operations, so the lawyer has a unique insight into how German businessmen perceive the country’s current difficulties and its future potential. He says that, rare exceptions aside, German companies are now in standby mode when it comes to launching new investment projects in Hungary. The Budapest Business Journal asked him about the reason for this extra caution as well as about the direction of the changes.

26 2 BusinessSpecialReport//Germany BBJ

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Budapest Business Journal | Oct 05 – Oct 18

European automakers: lean years are coming

France-based automobile company Renault is considering plans to completely shut down its factories as a result of the downturn in the European automobile market, reports Reuters. CEO of the company, Carlos Tavares, believes Renault has a competitiveness problem in Western Europe and France. Tavares said the company could possibly disappear “in its current form” if it is not competitive in its home market, and also confirmed that Renault is not looking to cut jobs in France at this stage.

Rival French carmaker PSA Peugeot Citroen will stop production in Slovakia for 21 days in the fourth quarter due to weak demand, the Slovak unit said.

Peugeot, which is losing €350 on every car sold in Europe and which plans to cut more than 10,000 jobs, will close one assembly plant and shrink another at its plant in the western Slovak town of Trnava where, it makes the Peugeot 207 and Citroen C3 Picasso models. “Demand for new cars in Europe has been falling continuously over the past 11 months,” PSA Peugeot Citroen Slovakia said in an emailed statement. The company has already shut production in Slovakia for 12 days this year, but said no job cuts were planned there.

According to the European Automobile Manufacturers Association, new car passenger registration declined by 8.9% in August throughout Europe. Regarding the first eight months of the year, the downturn reached 7.1% as the EU registered 8,591,968 new cars.

BBJ KRISZTIÁN KUMMER

While the continuous fall in southern member states’ car sales should hardly surprise anyone, the Continent-wide slump now appears to have begun moving north. Germany saw its demand contract by 4.7% and – according to more up-to-date data from the country’s Federal Motor Transport Authority (KBA) – the number of registrations fell another 11% in September against the same month last year.

For the first six months of this year, car sales in Germany had managed to steer around the roadblocks hitting other European markets, but now the country’s surprising resistance to the ongoing crisis in the European automotive industry has come to an end.

European car sales fell relatively slowly. In the EU-27 and EFTA countries, 722,483 new passenger cars were registered in August 2012, compared to 829,083 three years earlier. The American market fell from a peak of more than 17 million vehicles a year to barely 10 million by the time it bottomed out.

But in the United States, the industry moved aggressively to respond, largely through factory closings and job cuts.

General Motors and Chrysler both emerged from their own 2009 bankruptcies by shutting down lots of assembly and component plants.

By comparison, European automakers have done little more than sounding the alarm.

Even before the sovereign debt crisis began, Europe was laden with overcapacity. By some estimates it now has at least eight more assembly

plants than are needed.

Most industry observers don’t believe the situation in Europe will improve in the near future, with no sales improvement expected before the end of 2013. Indeed, many have reached a consensus that the European automobile market needs to undergo fundamental restructuring, focused primarily on eliminating the overcapacity that has dogged the industry in recent years.

Some carmakers are addressing the problem already. Fiat did shutter one grossly underutilized facility in Sicily and is also planning to slash 110 out of a total of 550 managerial jobs across Europe. Peugeot is closing a factory near Paris and cutting 8,000 jobs, according to a recent Bloomberg report, and Opel is widely expected to close its plant in Bochum by 2016.

“I’ve never seen it this bad,” Sergio Marchionne, head of Italian carmaker Fiat, told the New York Times in a summer interview. Referring to the discounts that many manufacturers have been offering, he added: “It’s a bloodbath of pricing and

it’s a bloodbath on the margins.” Part of the problem, Marchionne and others complain, is that German manufacturers have resisted calls for a unified response to the European automotive crisis, especially Volkswagen, which has managed to sidestep the worst of the situation — and which has declared its intent to become one of the world’s largest automakers, if not the top-seller, before the end of the decade.

The automotive industry in Germany remains much stronger than elsewhere in Europe, though. Luxury brands continue to do well, with both Porsche and Audi registering increased sales over the first nine months of the year. Overall, some 2.4 million cars were registered in Germany from January to September, a slight drop over the same period last year.

Many German brands have been able to rely on strong sales in both the United States and Asia.

However, as the situation worsens, some automakers are being forced to act even if there are dangers associated with moving unilaterally.

Opel is arguably the most

troubled of the European marques with various analysts forecasting that losses for the year will come to between $1.5 billion and $2 billion.

For its part, American owner GM continues to put together a rescue plan, that will see both the addition of new products and the contraction of production and manpower. But the latter goal is limited by government regulations and union contracts, making it extremely difficult to reduce capacity.

Mercedes and Porsche both recently announced that, after strong first halves for 2012, they were forced to revise downward projections for the year.

Germany’s Volkswagen is the only major European mass-market manufacturer to have thus far avoided significant problems from the downturn on the continent – largely by including Porsche results in its corporate numbers. The company has benefited from both a German market that has been strong until now and its significant share in markets abroad such as China and Brazil. “Despite all of the headwinds, we are stick-

ing to our ambitious goals for 2012,” CEO Martin Winterkorn said last week at the Paris Motor Show. Still, Tuesday’s numbers showed that VW’s September sales in Germany had dropped by 20% relative to September 2011.

While Opel has emergency plans to survive expected upcoming lean years, Daimler is planning to hire. Even if the company has registered a 1.7% fall in new car sales – largely due to plummeting demand for Smarts – the German automaker has denied plans to cut production at its largest car plant, Sindelfingen. Earlier, the carmaker had announced plans to cut production at the plant due to decline in sales of its Mercedes-Benz cars in Europe and China. Excessively strained relations at the plant regarding shifts for Q4 2012 had caused the carmaker to call in mediators to resolve the dispute.

But Daimler’s CEO Dieter Zetsche said that the group is preparing for challenging situations in Europe and China, with plans to increase employee count by 250 by the end of 2014. ■

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Energy efficiency does not pay off politically BBJ ZSÓFIA VÉGH

Angela Merkel has a reputation for being a tough leader.

This comes in handy when she needs to make decisions, such as the approval for ECB bonds, which will hardly add points to her popularity index. But the Chancellor is not known for bowing to public pressure: with only a year to go until the general elections, she is not afraid of raising taxes if the cause so requires. The cause, this time, is meeting energy efficiency targets and also Germany’s move to renewables. A year ago, after the disaster at the Fukushima power plant in Japan, Merkel announced a complete nuclear phase-out by 2020, and German opponents of nuclear power applauded.

But this initial enthusiasm has since faded considerably as people see their utility bills growing.

In order to finance renewable energy and grid expansion, a so-called eco-tax has been added to energy bills. This component has been included in the cost of electricity for households for more than a decade, but the demise of nuclear energy since last year has much increased its rate. From 2010 to 2011, the eco-tax rose from approximately two to three eurocents, in contrast to a tenfold rise between 2000 and 2009. According to the calculations of the federal economy ministry and other agencies, this fall the renewable energy law (or EEG) will further hike prices by two to three cents, to above five eurocents.

Germans are not happy: they do not understand why it is them who have to bear the costs of, say, over subsidized photovoltaic investments, or experience power cuts resulting from unpaid bills. Utility companies are also unhappy: those that had assets in nuclear power plants have suffered losses too.

ENERGIEWENDE TARGETS: 1. At least 80% reduction off greenhouse gases by 2050 in comparison with 1990 2. Electricity consumption should decrease 10% by 2020 and 25% by 2050 compared to 2008 level 3. Heat consumption should decrease 20% by 2020 and 80% by 2050 compared to 2008 level 4. Nearly zero emission level shall be achieved by 2050 (including existing building stock) Market share of renewable energies for 2050: more 60% in terms of primary energy consumption more than 80% regarding electricity generation

LAST YEAR, INVESTMENTS IN CONSTRUCTION OF RENEWABLE ENERGY INSTALLATIONS IN GERMANY TOTALED AROUND €22.9 BILLION, OF WHICH PHOTOVOLTAICS ACCOUNTED FOR €15 BILLION. UNLIKE JAPAN, WHICH HAS ONLY JUST STARTED TO WORK ON ITS ENERGY STRATEGY, GERMANY HAS BEEN CONSIDERING THE IMPLICATIONS OF THE ENERGIEWENDE FOR 30 YEARS. DOES NEW ALWAYS COST MORE? The replacement of nuclear by renewable energy is a costly business for many reasons. The installation of a new (smart) grid system and the integration of new technologies, including associated infrastructure, into existing ones accounts for the bulk of the hike. Germany’s 2012 grid development plan calls for approximately 3,800 km of new high-voltage lines and the retrofit-

ting of 4,400 km of existing power transport lines, at an overall cost of about €20 billion according to a study by the Wuppertal Institute, a scientific think tank. However, the establishment of new lines is well behind schedule: from 2005 to 2010, grid extension did not exceed 20 km per year. Connecting offshore wind parks would result in similar cost.

“Four hundred and forty km in ten years in not possible,

Nuclear Other RE Heating oil Gas Brown coal

we have to look for alternatives,” explained Manfred Fischedick, vice president of the institute.

Renewables not only swipe money from people’s accounts, but can also add some to them. Employment in Germany’s renewable energy sources sector has seen a 138% growth in the past seven years, and this tendency is bound to continue if Germany keeps on its current path.

GERMANS LEAD THE WAY Only one year after the decision, the full impact of the German phase-out is not yet visible, says Maria Da Graça Carvalho, Portuguese MEP of the Group of the European People’s Party, and a member of the Committee on Industry, Research and Energy.

She expects that the move will lower the price of renewables. “We have to make an effort to lower the prices, we cannot continue to have people bear additional burdens.”

Portugal also has an eco-tax in effect; the Iberian coun-

try tops the league in green energy generation, with 32% of its electricity consumption covered by renewables (in comparison, Germany’s share was 20.3% in 2011), but the eco-tax has become an issue as the economy has deteriorated.

The “Energiewende” (energy transition) is also likely to give a boost to technological development, Carvalho claims, pulling researchers together to work out solutions to make initial investments and production cost-efficient.

European experts do need to figure something out as competition in RE technology from outside Europe is gaining strength. Last year, Saudi Arabia invested around €105 billion in photovoltaics, while China is flooding the European market with cheap solar panels (heavily subsidized by its government). Japan, the United States, the Gulf countries and India are among the biggest rivals. A lot of knowledge that is gen-

Source: Wuppertal Institute

Despite technological hardships and growing social discontent, Germany is staying on its path of “Energiewende” (energy transition).

erated in Europe is commercialized and produced in Asia only to be exported back to Europe. To maintain Germany’s 25% market share by 2025, Fischedick proposes producing higher quality. “We need to have better quality, specific components not for the mass market, but for a highly innovative field. Like systems engineering that is not available in China but only in Germany.”

Developing new technology is less of a problem for Germany. However, promoting energy efficiency has more obstacles as the reluctance of investors to channel money into projects with up to a seven-year ROI or the lobby of energy utilities with assets in nuclear plants slows the process down.

“Energy efficiency is not a field where results can be shown, where one can say ‘I achieved this in four years’, so there is less push for politicians,” said Carvalho.

But Merkel probably plans long-term. ■

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In the Heart of America Why bother visiting the American Midwest? For an in-depth knowledge of what has made this country so powerful; for a first-hand awe of its people’s creativity and knack for the Good Life. Anything else? Yes. Profuse natural beauty.

CHICAGO

CHICAGO – ALL JAZZED UP The birthplace of skyscrapers and a cradle of jazz, the third biggest US city has a history rife with culture (and not only with mob wars). Take at least three days to discover a chunk of Chicago’s unmatched heritage and nightlife! Start it with a lapse of breath on top of the Willis Tower (former Sears Tower). Get a detailed multimedia presentation of its history, then a 360-degree view extending over four states and Lake Michigan.

Dare to try the glass balconies and marvel at the incredible depth under your feet.

Then behold another masterpiece of design: Millennium Park. Built atop railway yards, the 1.3 square kilometer, impeccably clean park features 13 imposing landmarks. The must-sees: the Jay Pritzker Pavilion (a glass-ceiling ‘acoustic shell’ with live concerts), Cloud Gate (a jawdropping, amorphous structure of steel inspirited by liquid mercury) and the Crown Fountain (a granite pool wedged between two glass brick towers displaying videos on their inward faces while drenched in cascading water).

You will also find McCormick Tribune Plaza and Ice Rink, the McDonald’s Cycling Center, and many other entertaining venues close by. Museum lovers should schedule a visit to the Field Museum (which lures visitors with the skeleton of the biggest T-Rex ever unearthed) or a jaunt to the

LUFTHANSA HIGHLIGHT: FLY TO CHICAGO WITH LUFTHANSA FROM: Frankfurt International Airport (Boeing 747-400) – daily Munich International Airport (Airbus A340) – daily Airport Dusseldorf International (Airbus A340) – 5 times a week For more Lufthansa tips on Chicago visit www.lufthansa.com/hu/en/Lufthansa-Highlights-Chicago

Chicago Cultural Center to discover America’s first public library nesting under lavishly ornate arches and stainglass domes. In shopping time, Michigan Ave turns Michigan Awe: find everything from upscale brands to basement bargains in this bustling, flashy marketplace!

Try also shops in the less congested side streets! After the shopping spree, take a dip into Chicago jazz (or blues?) at one of the most respected clubs of the world. Add to your list: New Apartment Lounge (504 East 75th St), where drinks and music come in generous proportions; Checkerboard Lounge (423 East 43rd St), where Junior Wells used to play a lot in his heyday; or Andy’s Jazz Club (11 East Hubbard St) with an exquisite cocktail bar and an imposing line-up of jazz performers!

tour Colorado State Capitol, the Cathedral of Immaculate Conception, and the Denver Art Museum (their Van Gogh exhibition opens on October 21). Art fans should also drop in on Clyfford Still’s oeuvre at the Museum named after the American painter. For a different experience ,visit Forney Transportation Museum to see more than 650 classic vehicles. The Wings Over the Rockies Air&Space Museum, a huge former air force hangar, houses historical artefacts from the aeronautic and space industry: next to 40 vintage aircrafts, you will also find an X-Wing from the Star Wars movies on display. It’s no paradox that a big city like Denver is also an ideal place for fans of nature. Do not miss out on Denver Botanic Gardens – it is surprising how neatly they arranged 15,000 species to create a sanctuary

of harmony. Denver is also a perfect base for forays to discover nearby natural wonders. Try Clear Creek Rafting in Idaho Springs (30 miles off Denver); visit Rocky Mountain National Park for scenic drives, high-altitude hikes or rock climbing. Denver lies in the heart of the sixth biggest ski area of the U.S. with outstanding resorts. Echo Mountain falls closest to the city (35 miles), but if you are willing to drive a bit farther, you can hit the best slopes of the US in one of the major ski resorts, Loveland (53 miles) or Winter Park (67 miles). Finally, two programmes you should not

DENVER – FUN BY NATURE Once a city for oilmen, Denver has become an exciting High Mile City in the heart of the U.S. The capital of Colorado has it all: highbrow museums, side-splitting entertainment, and 205 parks.

For a taste of architecture,

LUFTHANSA HIGHLIGHT: FLY TO DENVER WITH LUFTHANSA FROM: Frankfurt International Airport (Airbus A340) – daily

DENVER

miss out on: an excursion to Georgetown (47 miles off Denver), a picturesque historical Mid-Western village with 200 restored houses from the 1870s sitting in a spectacular mountain valley! For a culinary treat explore Denver’s Beer Triangle. A tour to Wynkoop Brewing Co., Great Divide Brewing Co. or Breckenridge Brewery is your ticket to become an aficionado of American ale.

“HOUSTON, WE HAVE A PROGRAM” Houston looks like two metropolises got merged, as its high high-rise rise buildings are scattered in many dif-

ferent neighbourhoods.

Lesson: no zoning makes a city messy but exciting.

For a full panorama, rise onto the 60th floor of JP Morgan Tower downtown.

Then, walk a good deal to behold some architectural highlights: the City Hall, the fountain in Tranquillity Park, the Wells Fargo Plaza and the Toyota Center (home to Houston’s greatest sports teams). The refreshing spot of downtown is Discovery Green Park, where you can have a hearty Houston lunch at a place called The Grove. Houston has plenty of museums, but the most mind-blowing of them is the Space Center Houston, which gives you a nextto-real experience of living in outer

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HOUSTON

THE QUEEN OF THE SKIES

The new Lufthansa Boeing 747-8

LUFTHANSA HIGHLIGHT: FLY TO HOUSTON WITH LUFTHANSA FROM:

The brand new version of the Boeing 747 adds a new chapter to a legend started in 1969. Much at Lufthansa’s encouragement Boeing designed the new 747-8 to become the longest passenger aircraft ever. The new Jumbo jet couples never-heard-of sizes with elegant contours, and a high degree of fuel efficiency.

Wedded with the service expertise and precision of Lufthansa, the technical wonders of the new ’Dash 8’ add up to what you would call ’a Pleasant Flight’.

Frankfurt International Airport (Airbus A380) – daily

space. Your kids can ride a moon rover and operate a real Apollo command module, at the Blast Off Theater you can come as close to being rocketed in space as a non-astronaut can get and observe the laboratories that simulate zero-gravity conditions on Earth. A highbrow tourist could wander for hours in The Menil Collection’s spacious, modern galleries before the evening performance at the J.H. Jones Hall for the Performing Arts or at the Wortham Theater Center. Tourists with children tend to opt for the Galleria, a giant shopping complex boasting a year-round indoor ice rink.

An amazing place to eat out is the Dharma Cafe on Houston Ave: daily menus vary enormously but their price is often fixed. Honeymooners can mark their trip with a heavenly steak dinner at the Strip House restaurant where expensive but perfect meat treats come along with

The Boeing 747-8 in numbers

LUFTHANSA HIGHLIGHT: REACH ANOTHER TW0 MIDWEST CITIES WITH LUFTHANSA: Fly to DETROIT from Frankfurt International Airport (Airbus A330-300) daily Fly to DALLAS from Frankfurt International Airport (Airbus A330-300) daily

ruby red wines. To taste the greater Houston area’s best fresh produce cooked up in bold creations, book a table at t’afia restaurant.

To buy the same produce fresh and raw, head to the same spot Saturdays when the parking lot turns into a local Farmer’s Market.

Dare to escape from town to Bay Area Houston. Seven smaller cities and wildlife refuges line the 35-mile seafront. Taste succulent seafood in Corpus Christi, sunbath on the sandy beaches of Padre Island, and wonder at whoopers in the Aransas National Wildlife Refuge. ■

Length: 76.3 m Height: 19.4 m Wingspan: 68.7 m Engines: 4x66,500 pounds-of-thrust GE engines – quiet and efficient.

Capacity: 362 passengers Flight range: 15,000 km Flying (from Frankfurt) to: Washington D.C., Bangalore, Delhi Max. take-off weight: 442 tonnes Cruising speed: Mach 0.87

First Class – Full ahead (of its time) The new First Class now nests in the plane’s extended ’hump’, the quietest part of the new 747-8. Noise has ho chance to disturb you aboard: a quiet location, as well as noiseabsorbing floor and curtains assure a tranquil flight. Buttons at your fingers bring things to motion: they turn your seat into a proper bed and navigate your personal multimedia set. Smooth design, peace and entertainment – a luxury to aspire for.

Business Class – The benefits of flying ‘V’ The new Business Class is divided between two decks – the upper and the main deck – and connected by a staircase. The new Business Class has been completely redesigned: it offers bigger space for legs and hand luggage, for motion picture (larger screens) and for your elbows. The new seats come in V-shaped pairs and can be extended to become full-length, full-flat beds. If you forget to switch off your personal reading lamp before falling asleep, a flight assistant will surely do it for you.

Economy Class – Do not economize on comfort The new Economy Class is more spacious, brighter (thanks to the bigger windows), and more comfortable than ever. Bigger luggage bins give more space to your belongings, whereas the new seat offers more comfort.

Entertainment is assured by a touch-screen-navigated multimedia system (CD’s, films, radio, games) in front of you. You will find a power socket on the lower side of your seat: use it to power your laptop or to charging your mobile any time!

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WHO'S NEWS

Name Orsolya Hamar Current company/position Interim Management Resourcing Kft/marketing manager

Hamar joined Interim Management Resourcing Kft as marketing manager in September. She holds a degree in economics and has an MBA qualification.

Previously she managed domestic and international trade exhibitions at Hungexpo and worked in the Hungarian and EU public administration.

Before joining Interim Management Resourcing, she coordinated external and internal communications at the Hungarian subsidiaries of multinational energy group GDF SUEZ.

Do you know someone on the move?

Send information to research@bbj.hu

Name Linda Sallai Current company/position CIG Pannónia Életbiztosító/ deputy CEO in charge of product development

Sallai joined insurance company CIG Pannónia in 2007, and was named product development director in 2011.

She graduated from Corvinus University of Budapest, and started her career at private pension fund Premium Magánnyugdíjpénztár as product manager.

Name Beáta Szőnyi Current company/position BNP Paribas/head of securities services in Hungary

Previously, Szőnyi worked for UniCredit Global Securities Services as a global relationship manager for the bank’s flagship U.S. and UK client activities in CEE and CIS, and also worked at Credit Suisse First Boston and Citibank. She succeeds Theofilos Mitsakos at BNP Paribas.

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Makers: The New Industrial Revolution

by Chris Anderson

The next industrial revolution is on its way. In his brilliant new book, Chris Anderson tells us how the internet is set to transform manufacturing.

BBJ

If a country wants to remain economically vibrant, it needs to manufacture things.

In recent years, however, many nations have become obsessed with making money out of selling services, leaving the real business of manufacturing to others. Makers is about how all that is being reversed. Over the past ten years, the internet has democratized publishing, broadcasting and communications, leading to a massive increase in the range of participation in everything digital – the

world of bits. Now the same is happening to manufacturing – the world of things.

Chris Anderson, bestselling author of The Long Tail, explains how this is happening. Technologies like 3D printing and electronics assembly are becoming available to everybody, and people are building successful businesses as a result.

Whereas once every aspiring entrepreneur needed the support of a major manufacturer, now anybody with a smart idea and a little expertise can make their ideas a reality. Just as Google, Facebook and others have created highly successful companies in the virtual world, so these new inventors and manufacturers are assuming positions of ever-greater importance in the real world.

Anderson acknowledges the fact that in the developed world, economic growth is often the result of improvements to productivity, which means doing the same work

with fewer workers. Automation is vital in this process; it is in fact the only way that wealthy countries can continue with large-scale manufacturing. However, he argues that it is the role of smaller companies that can change.

Entrepreneurs and individual innovators can reinvent manufacturing, creating jobs along the way.

“It used to be hard to be an entrepreneur,” he writes.

“The beauty of the Web is that it democratized the tools both of invention and of production.” What is more, there is little risk involved in pursuing an idea within this environment.

It may fail, but the cost is more likely to be measured in overdue credit card payments rather than in bankruptcy or a lifetime of disgrace. “Maybe lots of people will notice and like it, or maybe they won’t. Maybe there will be a business model attached, or maybe there won’t. Maybe riches lie

at the end of this rainbow, or maybe they don’t. But the point is that the path from ‘inventor’ to ‘entrepreneur’ is so foreshortened it hardly exists at all anymore.”

Informative, witty and thought provoking, Makers is a book for anyone interested in manufacturing, technology, or the transformative power of the internet. Moreover, it is for anyone interested in ‘Making’.

We are all ‘Makers’, says Anderson. “We are born Makers (just watch a child’s fascination with drawing, blocks, Lego, or crafts), and many of us retain that love in our hobbies and passions.

It’s not just about workshops, garages, and man caves. If you love to cook, you’re a kitchen Maker . . .

If you love to plant; you’re a garden Maker. Knitting and sewing, scrapbooking, beading, and cross-stitching – all Making.”

Welcome to the New Industrial Revolution.

Makers by Chris Anderson Random House Business Books ISBN 9781847940667 Available to order through www.hungaropress.hu