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VOL. 20, NUMBER 22 NOV 16, 2012 – NOV 28, 2012
Budapest Business Journal
Q&A Sándor Kürti, co-founder of Kürt Corporation
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YR/YR FALL IN EXPORT VOLUME IN SEPTEMBER
HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BBJ.HU
One year after it first raised the possibility of an IMF loan, Hungary has not struck a deal yet. Will the parties squeeze out an agreement anytime soon? PAGES 10-11
SPECIAL REPORT
SPECIAL REPORT
SOCIALITE
Medicine overuse
Blinded by tenders
Art on the market
Hungarians rank third in Europe when it comes to unnecessary medicine use, but improving that situation is made harder when professionals emphasize that there is no clear-cut definition as to which medicines qualify as unnecessary or redundant. PAGE 17
The blind tendering system – where manufacturers bid to keep their products amongst the subsidized medicines without being aware of competitors’ prices – is causing huge losses to the pharmaceutical industry, market players say. PAGE 19
Hungary could be a perfect place for a successful art fair, but this year’s Art Market Budapest was more about visibility than doing business. A change in attitude, however, is critical to transform the local audience from visitors to customers. PAGE 21
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BI-WEEKLY
Gov’t could shelve planned entry onto mobile market Package deal by the government
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No decision yet on lifting EDP According to Minister for National Economy György Matolcsy, the European Commission (EC) has awarded a good mark for Hungarian economic policy in its Autumn Forecast published on November 7, and thus the excessive deficit procedure against Hungary can be closed next year. However, the fact the EC’s 2014 budget deficit forecast is above the 3% threshold makes the sustainability of the budget and thus the closing of the procedure against Hungary questionable. “Recently adopted saving measures are expected to bring the deficit below 3% both this year and next. However since most of these measures aim at increasing tax revenue, in a rather distorted way, economic growth is not expected to ensure a fiscal space for the planned expenditure increases, and the deficit is expected
to increase again beyond 3% of GDP in 2014, under the no policy change assumption,” MTI cited European Commissioner for Economic and Monetary Affairs Olli Rehn.
gary’s EU accession in 2004. GDP is expected to decline by 1.2% in 2012, due to shrinking domestic demand and slowing export markets followed by a weak recovery in 2013,
HUNGARY AND THE EUROPEAN COMMISSION DISAGREE ON FISCAL PATH Based on the commission’s current forecast, Ecofin is expected to assess Hungary’s fiscal policy at a meeting in December. A decision on closing the procedure could be made only next year. According to the Autumn Forecast, budget deficit will be 2.5% of GDP in 2012, 2.9% in 2013 and 3.5% in 2014. The deficit was below 3% in 2011 for the first time since Hun-
The Excessive Deficit Procedure (EDP) is a mechanism established in EU treaties that aims to ensure that member states correct gross fiscal policy errors. There are two key reference values: one for the general government deficit (3% of GDP) and one for gross government debt (60% of GDP).
primarily driven by improving export markets. GDP growth of around 0.25% is projected for 2013, accelerating to around 1.25% in 2014. The EC said that the higher 2014 deficit is due to the new compensation scheme in the education sector and the increasing interest expenditure. Moreover, the forecast also assumes that an expected loss of close to 0.5% of GDP of the central bank in 2013 needs to be compensated in 2014. The positive impact of the economic recovery and the expected additional gains from structural reforms are foreseen as only partially offsetting these negative impacts.
MATOLCSY DISAGREES
The government does not agree with either the EC’s deficit projection for 2014 or its GDP forecast for 2013. Matolcsy said that the expectations of the Commission are based on some unfounded forecasts on lower lending in the bank sector resulting from the bank tax and the transaction duty. In his opinion bank lending has declined as a consequence of overexposure in 2005-2008, especially to foreign currency lending, and not because of extra taxes. According to a research note by Erste, the latest data of the Bank for International Settlement shows that foreign banks reduced their external assets in six central and eastern European countries, including Croatia, Czech Republic, Hungary, Poland, Slovakia, Romania, by about $8.6 billion in the second quarter of 2012 and by $45 billion in the period between the third quarter of 2011 and the second quarter of 2012, with Hungary responsible for 40% of overall outflows from the region.Hungary
SAME DIFFERENCE The difference between the government’s new 2013 deficit target and the Commission’s deficit projection reflects the following elements: ■ the Commission’s more conservative growth projection results in a lower revenue forecast of close to 0.25% of GDP;
additional revenue from enhanced tax administration as well as lower expenditure in light of a potential financial assistance program with the EU and the IMF cannot be fully considered due to the considerable uncertainties related to both;
■
slippages of 0.5% of GDP are anticipated in view of implementation risks related to selected saving measures, notably in the pharmaceutical, transport and education sectors;
■
■ a number of expenditure items were not incorporated in the government’s forecast, such as the compensation of the loss of the central bank incurred in 2012.
has clearly been an outlier in the region, both in terms of magnitude and the reasons behind the steep cross-border deleveraging, the note said. These are, according to Erste, the unorthodox measures including the early prepayment of FX loans, which freed up part of FX funding. On an annual basis, the global banking sector reduced its external position to Hungary by about $18 billion, or 14.2% of Hungarian GDP.
Opinions differ on GDP, too. According to the ministry, economic growth in 2013 will be significantly higher than the 0.3% figure anticipated by the Commission. “Chances are good that growth will be above 1%,” said Matolcsy, referring to recent vehicle industry capacity expansion at, for example, Opel and Mercedes. As a matter of fact, the government’s official GDP growth forecast has just been reduced to from 1.6% first to 1% and later to 0.9%. GL
E-Star bondholders get to choose between bad and worse Shareholders of alternative energy company E-Star authorized the board to continue the company’s OTC bond repurchasing program at a discount at a general meeting held on November 2. The company issued corporate bonds at the face value of HUF 10 billion gross during 2010 and 2011. EStar started a bond repurchase program in order to moderate its liabilities related primarily to 2012/A bonds before their maturity on October 24. According to the company’s liquidity report issued at the beginning of November, EStar has already repurchased 2012/A bonds at a nominal value of HUF 884.5 million, at
a gross rate of 35% of face val- tors, mainly fund managers, “The financial situation of ue. This translates into a cash which have not yet offered the company is still not clear, outflow of HUF 310 million. their bonds for repurchasing, as the liquidity report focuses The gross rate of repurchasing are not likely to accept that only on expenditures and of each of three other payment obligations, bond issues, including while there is no word E-STAR TRIES TO 2014/A, 2015/A and on cash inflow or poCONTINUE BOND 2016/C, is 26%. tential revenues from In case talks with the company’s projREPURCHASES, bondholders fail or a ects,” Equilor analyst CONSIDERS DEBT TO liquidation proceedÁkos Kuti told the Buing is initiated against dapest Business JourEQUITY SWAP the company, the gennal. The report simply eral meeting authorized the rate, as they hope to achieve does not give answers to the board to file for bankruptcy. a better deal via a liquidation most important questions. E-Star now has the neces- procedure. Market players be- Thus, bondholders still do not sary funds to repurchase the lieve that E-Star will probably know what chances they have remaining 2012/A bonds at file for bankruptcy at the end of getting back their money. the offered 35% of face value. of November, a couple of days As an alternative to the However, the holders of these before bondholders could ini- bond repurchase program, bonds, institutional inves- tiate liquidations proceedings. the company is also consid-
ering a debt-to-equity swap. The transaction would allow bondholders to convert their debt to equity in the company via issuing new equity. At the same time, some existing shareholders may be given some warrants as an option. Details of the new issue, such as the conversion ratio or the size of issue, are not yet known. Furthermore, the company is trying to get a bridge loan, which, according to the report, “would exclusively serve the purpose to repurchasing the bonds at the discounted level.” Regarding E-Star’s municipality portfolio, the compa-
ny has terminated its service agreements with three municipalities by mutual agreement. The Hungarian State Treasury transferred the exit fees of Fejér and Veszprém counties to the value of HUF 2.54 billion on October 26. From this amount, the company had a HUF 1.08 billion loan pre-payment obligation and a VAT liability of HUF 426 million. E-Star expects a more than HUF 707 million exit fee from the municipality of Sárospatak. Accounts receivables are not expected to be paid by eight municipalities where E-Star has officially ceased its services. GL
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The greatest success of the current Hungarian economic model is that the country will overcome the crisis without any austerity PRIME MINISTER VIKTOR ORBÁN, AT A PRESS CONFERENCE
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Tents at Terminal 2 of Budapest Airport
Photo: MTI/Imre Földi
Passengers of low cost airlines WizzAir, Ryanair and EasyJet will have to wait in tents at Liszt Ferenc International Airport before the departure of their flights. The companies decided not to use the bus transport service of the airport to transfer passengers directly to the aircraft to save costs. The passengers are required to walk, and wait in tents with no hygienic or comfort facilities before departure. “You don’t have to travel with low cost airlines,” commented Mihály Hardy, spokesperson of Budapest Airport. None of the airlines were available for comment.
ECONOMY HUNGARY CPI SLOWS TO 6% IN OCTOBER Consumer prices in Hungary rose 6% year-on-year in October, slowing from a 6.6% increase in September, Central Statistics Office data shows. A 2% drop in fuel prices in the month of October and base effects explain the slowdown of the 12-month CPI. Consumer prices rose 0.1% month-on-month in October after rising 0.4% in September. January-October prices were up 5.8% from a year earlier. Annual average inflation slowed to 3.9% in 2011 from 4.9% in 2010. Twelve-month CPI reached a more than four-year peak in September. October 12-month inflation was boosted by excise duty raises that pushed up spirits and tobacco prices, as well as by vehicle fuel and food.
EXPORTS/IMPORTS DROP, SURPLUS LITTLE CHANGED IN SEPT Hungary had a €739.1 million trade surplus in September, slightly down from €752.9 million in the same month a year earlier, the Central Statistics Office (KSH) said in
a first reading. Exports fell 4.3% from a year earlier to €6.854 billion in September. Imports dropped 4.6% yr/yr to €6.115 billion. Exports and imports dropped yr/yr for the first time since April. The trade surplus for JanuarySeptember came to €5.419 billion, down €73 million from €5.492 billion in the same period a year earlier. Nine-month exports were up a slight 0.5% from a year earlier at €59.982 billion and nine-month imports edged up 0.7% to €54.563 billion. Euro-term trade values contracted in September despite a lower base: last year the pace of both exports and import growth started to slow in September. The monthly surplus widened from €588 million in August and was the third highest surplus registered so far this year. KSH said that 77% of Hungary’s September exports went to other EU countries and 71% of its imports came from the EU.
FOREIGN HOLDINGS OF FORINT GOV’T SECURITIES FLAT IN OCT Non-resident or foreign investors held HUF 4,840 billion in Hungarian forintdenominated government
securities at the end of October, unchanged from a month earlier, data published by the Government Debt Management Agency (ÁKK) shows. Foreign investors were net buyers of the papers in the previous three months, investing a combined net HUF 587.2 billion or a little more than €2 billion in July-September. They sold net HUF 24.2 billion in June. Foreign investors increased their holdings by HUF 1,043 billion in the first ten months of 2012. The stock of forint-denominated government securities held by foreign investors rose 27.5% or HUF 1,043 billion in the first ten months. It increased HUF 1,264 billion in 2011. Foreigners’ holdings reached a new all-time high at HUF 4,924 billion on October 17. ÁKK reported that retail investors increased their holding of forint government securities designed for the general public by HUF 60.6 billion in October and by nearly HUF 396 billion in the first ten months, to HUF 868.4 billion at the end of last month. The October retail purchases were up after dropping to HUF 36.8 billion in September.
RETAIL FOOD SALES UP 5% IN DEC-SEPT Retail food sales in Hungary increased 5% yr/yr to HUF 1,145 billion in the period between December 2011 and September 2012, while sales remained stable in volume terms, market research company Nielsen said. Mediumsize stores slightly raised their market share at the expense of large stores, the Nielsen figures show. Small grocery stores, defined as those with a surface area of 400sqm or less, commanded 35% of the grocery market in value terms between December 2011 and September 2012, unchanged from the base period. Medium grocery stores, those with a surface area of 401-2,500sqm, also commanded a 35% share of the grocery market in value terms between December 2011 and September 2012, up from 34% yr/ yr. Large grocery stores, those with a surface area of 2,501sqm and above, commanded a 30% share of the grocery market in value terms between December 2011 and September 2012, down from 31% during the base period.
TRANSACTIONS DUTY TO SECURITIES COULD PUT CAPITAL MARKET AT DISADVANTAGE The introduction of a duty on financial transactions could put Hungary’s capital markets at a disadvantage compared to peers in other European Union member states, the Budapest Stock Exchange and the Association of Investment Service Providers said in a joint statement. Parliament recently approved legis-
lation that will introduce the duty in 2013, and a bill now before lawmakers would double the rate for most transactions from 0.1% to 0.2%. The duty is one of a number of fiscal improvement measures announced by the government. The bourse and the brokers association acknowledged the importance of the government’s goal to achieve fiscal balance, but said the duty should be applied to se-
PREMISES FOR SALE NEAR FERIHEGY AIRPORT - ÜLLŐI STREET 833. The property can be expanded by further 900 sqm. SITE: 16.400 m2 OFFICE (AIR CONDITIONED): 410 m2 COLD HIGH CEILING WAREHOUSE: 970 m2 COLD WAREHOUSE: 2.170 m2 WORKSHOP (HEATED): 360 m2 ASKING PRICE: 290 Million HUF + VAT
There are three building blocks on site. Office area, showroom and high ceiling warehouse can be found in the main building, warehouses and workshops in the other two buildings.
INFORMATION: GVA ROBERTSON, +36 1 327-2050
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curities transactions only at the same time as such a tax is applied across the EU. Otherwise, Hungary’s capital market could be competitively marginalized, negatively affecting the attraction of the Hungarian economy to investors, the statement said.
BUSINESS
said in its earnings reports in accordance with International Financial Reporting Standards (IFRS). EBITDA increased by 9.7%, from HUF 51.6 billion to HUF 56.6 billion, owing mainly to the HUF 5.7 billion increase in other operating income. This was mainly driven by the real estate transaction in Macedonia, which resulted in a gain of HUF 3.7 billion.
MOL DOWNSTREAM BUSINESS LIFTS Q3 PROFIT 86%
TVK Q3 LOSS NARROWS ON FINANCIAL GAIN
Wider margins in the downstream segment lifted Hungarian oil and gas company MOL’s third-quarter net income by 86% to HUF 67.5 billion from the same period a year earlier, the company’s consolidated IFRS report shows. Profits were slightly under the HUF 72.3 billion estimates of analysts polled by Portfolio.hu. Basic earnings per share came to HUF 769 during the period. MOL attributed the jump in Q3 earnings to better product margins, higher sales volumes and inventory gains in the downstream segment. Indeed, the downstream segment generated EBITDA of HUF 75.9 billion in Q3, compared to just HUF 4.9 billion in the base period. The business accounted for about 90% of the company’s total revenue in Q3. At the same time, EBITDA of MOL’s upstream business fell 15% to HUF 99.0 billion and the gas business’ EBITDA dropped 12% to HUF 17.9 billion. MOL’s overall revenue rose 6% to HUF 1,445.3 billion. Cost of raw materials and consumables climbed at a slower rate, increasing 4% to HUF 1,111.2 billion. Total operating costs edged up 2% to HUF 1,342.3 billion. Operating profit nearly doubled to HUF 103.0 billion from HUF 52.5 billion.
Hungarian oil and gas company MOL’s petrochemicals unit TVK booked a HUF 4.1 billion loss in the third quarter, a slight improvement over the HUF 5.1 billion loss in the base period, helped by a slight financial gain, the company’s consolidated IFRS report shows. TVK’s revenue fell 23% to HUF 75.8 billion. Cost of raw materials and consumables was down 22% at HUF 76.7 billion. Total operating costs dropped 19% to HUF 81.3 billion. TVK booked a HUF 5.5 billion loss at operating level, but the bottom line was lifted by a HUF 456 million net financial gain, compared to a HUF 2.9 billion loss in the base period. TVK had a loss of HUF 6.9 billion in Q1-Q3, widening from a HUF 2.8 billion loss in the base period. Revenue fell 13% to HUF 275.1 billion. Cost of raw materials and consumables dipped 11% to HUF 267.1 billion. Total costs were down 9% at HUF 285.7 billion. The loss at operating level came to HUF 10.6 billion. TVK had total assets of HUF 204.5 billion on September 30, down 6% from 12 months earlier. Net assets dropped 12% to HUF 116.0 billion.
ONE-OFF SURPRISE FROM MAGYAR TELEKOM IN Q3 Magyar Telekom has published its consolidated financial results for the third quarter of 2012. The revenues are in line with analysts’ expectations; however, growth in underlying EBITDA was mainly driven by a one-off item, a real estate transaction in Macedonia, where four old buildings were replaced with a new one. Revenues decreased by 1.3% in the third quarter of 2012 compared to the same period of 2011, from HUF 152.1 billion to HUF 150.1 billion. The decline in fixed and mobile voice revenues coupled with lower SI/IT revenues could not be offset by a significant increase in revenues from energy services and growing TV, mobile internet and mobile equipment sales revenues generated by higher smartphone sales, Magyar Telekom
K&H BANK Q1-Q3 PROFIT NEARS HUF 15 BLN K&H Bank, the Hungarian unit of Belgian’s KBC, had consolidated after-tax profit of HUF 14.6 billion in Q1-Q3, up from a slight HUF 100 million in the same period a year earlier, CEO Hendrik Scheerlinck said at a press conference. Scheerlinck said the proportion of non-performing loans in the banks’ lending portfolio had fallen as more clients take advantage of government assistance for borrowers with foreign currency-denominated mortgages as well as of K&H’s own loan restructuring program.
UNICREDIT BANK HUNGARY Q3 PRE-TAX PROFIT RISES ALMOST 70% IN EUROS UniCredit Bank Hungary, the Hungarian unit of Italy’s UniCredit Group, posted pre-tax profit of €22 million in the third quarter of 2012, up 69.2% yr/yr, the UniCredit Group reported. The report noted
that UniCredit Bank Hungary had posted positive results in the third quarter “despite a widespread difficult environment for the national banking system”. The unit had pre-tax profit of €69 million in the first three quarters of 2012, up 15% yr/yr, a 23.5% increase excluding foreign exchange rate changes. Net profit of €55 million in the first nine months compares to €1.4 billion net profit for the group in the period. The stock of customers’ loans fell 11.7% yr/yr to €3.896 billion at the end of September, including a 1.2% drop from the end of June. The stock of costumers’ deposits rose 0.4% in three months and 3% in 12 months to €3.407 billion. The cost-to-income ratio rose to 53.8% in January-September 2012 from 47.4% a year earlier. Net write-downs of loans totaled €21 million in the first three quarters of 2012, including €15 million in the third quarter. They dropped in euros in both comparisons, as net write-downs totaled €70 million in the first nine months of 2011, of which €38 million came to Q3 of 2011. Net interest revenue of €162 million in the first nine months was down 4.9% in euros and up 2.% at constant foreign exchange rates.
DANUBIUS HOTEL AND SPA QUADRUPLES Q3 PRE-TAX PROFIT Danubius Hotel and Spa has posted a third-quarter pre-tax profit of €10.6 million, up from pre-tax profit of €2.5 million a year ago, the company announced in its consolidated, preliminary, unaudited financial report for the period. The company had a pre-tax profit of €12 million in the first three quarters of 2012, compared to pre-tax losses of €100,000 a year ago. Danubius Hotel and Spa attributed the rising profit this year to improved financial results stemming primarily from foreign-exchange differences. The company sustained no financial losses in the third quarter of 2012, compared to financial losses of €7.5 million in Q3 of 2011, and €2.6 million in financial gains in the first three quarters of this year, compared to €5.8 million in financial losses in Q1-Q3 of last year. Danubius Hotel and Spa generated net sales revenue of €51.2 million Q3, up 1.8% yr/ yr. The company generated net sales revenue of €122.7 million in the first three quarters of this year, up slightly from €122.4 million in the first nine months last year. Danubius Hotel and Spa is a B-category issuer at the Budapest Stock Exchange.
MALÉV LIQUIDATION DRAGS ON The liquidation of former Hungarian national carrier
Malév was due to have been wound up on November 12, but the process continued as business partners sued, daily Népszabadság said a day later. The liquidation cannot be closed because Malév’s balance sheet has not been audited, and because the airline is being sued for unpaid invoices even as it sues business partners for overdue receivables, liquidator Jenő Varga told the paper.
BANKING ASSOCIATION CHAIRMAN RESIGNS Hungarian Banking Association chairman Mihály Patai has resigned, the professional body’s chief secretary told MTI. Patai had said he would resign if Parliament approved a package of measures that presented banks with an impossible burden without first holding professional consultations. Parliament on November 13 approved legislation that will defer a 50% reduction in the bank levy next year. The Hungarian Banking Association said earlier that the decision to defer the reduction, one of many fiscal measures announced by the government in October, violated a cooperation agreement with the banks. Under the pact, the government agreed to first consult with banks before taking decisions on matters affecting the sector. The Hungarian Banking Association has started preparations for an extraordinary general meeting that will appoint a new chairman. Vice chairman Dániel Gyuris will oversee the association in the interim period under the body’s bylaws.
GOV’T COULD SHELVE PLANNED ENTRY ONTO MOBILE MARKET The government could scrap plans to make a state-owned company the fourth player on Hungary’s mobile telecommunications market, daily Népszabadság said. The government has written off the project, unnamed sources told the paper. The National Media and Infocommunications Authority (NMHH) announced in January that MPVI, a newly established state-owned telco, was the winner of the biggest block in a recent frequency auction. But the Budapest Metropolitan Court later annulled the auction results, ruling that MPVI unlawfully won the right to build its own network and that Hungary’s three existing mobile service providers – Magyar Telekom, Vodafone and Telenor – were unlawfully awarded new blocks in the 900 MHz frequency band. Magyar Telekom and Vodafone have asked Hungary’s supreme court for a judicial review of the decision by the Metropolitan Court.
STRABAG MOVES INTO INFOPARK STRABAG Zrt will move into Infopark Building D in April 2013, IVG Hungary Kft announced. IVG leased out 7,500 sqm to STRABAG in just one month after the previous tenant moved out. With this transaction a total of 12,000sqm office area has been leased out in Building D this year, including three new lease contracts. Infopark, which was completed in 2009, is the first innovation and technology park in Central and Eastern Europe with nearly 100,000sqm of leasable area. Approximately 7,000 employees work in Infopark’s office buildings.
SYNERGON SELLS CZECH SUBSIDIARY Hungarian IT company Synergon Informatika has sold its wholly owned subsidiary in Czech Republic, Infinity, to the local management for almost HUF 1.5 billion. Synergon now sees more opportunities in expansion by acquisitions than in organic growth, Synergon said in explaining the transaction. The sale of Infinity will help Synergon start strategic purchases this year, it added.
PUBLIC MEDIA FUND TAKES OUT HUF 63 BLN LOAN TO BUY PRODUCTION BASE The Media Support and Asset Management Fund (MTVA), a part of Hungary’s public media, is taking out a HUF 63 billion loan, part of which will go towards purchasing its headquarters and production base, MTVA said in a statement to MTI. A consortium of the state-owned Hungarian Development Bank, OTP Bank, KDB Bank and Takarékbank won a tender to provide the loan. The fund did not announce the term or other conditions of the loan. MTVA currently leases its headquarters under “highly unfavorable” terms, and said an agreement signed in the summer enables it to reacquire ownership. Part of the loan will be spent on technological developments and updates, as well as to pay back debt assumed before 2010, the fund said.
DUVENBECK LAUNCHES €3.5 MLN INVESTMENT IN CENTRAL HUNGARY Duvenbeck IMMO Logisztikai Kft, the Hungarian unit of German logistics company Thomas Duvenbeck Holding, will launch a €3.5 million investment at its base in the city of Kecskemét to expand the unit’s warehouse capacity and improve its infrastructure and technology, company manager Attila Kórusz announced. Kórusz noted that the developments are the second phase of an
investment aimed primarily at enabling the unit to better satisfy the logistics needs of the nearby Daimler plant.
DOMESTIC PAKS SHUTS DOWN BLOCK FOR REPAIR The number four block of Paks Atomerőmű, Hungary’s only nuclear power plant, was shut down on November 9 to repair a secondary circuit water leak, communications director Antal Kovács told MTI. The block was expected to go back online after six days. Kovács added that the secondary circuit does not contain radioactive water and the leak was rated “level 0” on the on the International Nuclear Event Scale (INES). Level 0 corresponds to “no safety significance”, according to the International Atomic Energy Agency. The Paks plant, which has four blocks, generates about 40% of Hungary’s electricity.
EU REJECTS HUNGARY WINE-NAMING SUIT AGAINST SLOVAKIA The European Court of Justice has rejected a lawsuit brought by Hungary against Slovakia over the disputed naming of wines from the Tokaj region along the two countries’ border. Hungary argued that Slovakia should not have been allowed to change the language in which wines from the region are inscribed in the European Union’s E-Bacchus database of protected trademarks of origin and wine region names in 2010. The change could damage the reputation of Hungarian Tokaj wine and its producers, Hungary argued. But a statement from the Court of Justice said it had ruled that the change was technical only and did not affect the trademark protection of wine produced on the Hungarian side of the border. ■
06 1 News BBJ
energy Hungary has no plan to sell stake in MOL, ministry says There are no plans to sell the state’s stake in Hungarian oil and gas company MOL, the National Economy Ministry said. The ministry noted that an eventual use of the shares to draw on funding does not necessarily involve their sale. The shares represent a surplus security reserve for the financing of the general government, the ministry said. “It is possible to raise favorable market financing while holding on to strategic ownership rights as well,” Economy Minister György Matolcsy said in a written reply to Reuters questions, without specifying what kind of funding it had in mind. Matolcsy also said recently that the government’s purchase of a 21.2% stake in MOL from Russian peer Surgutneftegas was a “strategic investment” and may serve to help raise money if market pressures increase. The state paid Surgutneftegas €1.88 billion for the stake in MOL last year.
regional Eastern European credit growth stalls, Vienna Initiative says Eastern European credit growth has ground to a halt because of the euro region’s recession and a withdrawal of funding by the Western lenders that dominate the market, the Vienna Initiative group of international lenders and regulators said.
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South Stream construction to start in December, official says The building of the South Stream gas pipeline will start on December 7 on the Russian coast of the Black Sea, near the town of Anapa, media reported, citing a Gazprom official. Gazprom has agreed investment terms with its partners in the project and will sign formal agreements by November 15, Leonid Chugunov, head of Gazprom’s project management department said on November 8. The company has in recent weeks finalized the pipeline’s route and signed final investment decisions with its state-backed partners in Hungary, Bulgaria and Serbia. The South Stream project, worth €16 billion, aims to be operational in 2015 with a capacity of 63 billion cubic meters per year, or about 14% of EU gas consumption. Gazprom, Hungary sign deal for South Stream pipeline section Russia’s Gazprom and Hungary have signed a final shareholders’ agreement to build the Hungarian stretch of the South Stream gas pipeline, Gazprom said in a statement
on October 31. Gazprom and Hungarian energy wholesaler MVM, through joint venture South Stream Hungary, will build the 229-kilometer Hungarian stretch. Hungary gets nearly all of its natural gas supply from Russia under a long-term import agreement with Gazprom, which shipped 6.26 billion cubic meter of gas to Hungary in 2011. Czech gov’t OKs national action plan for renewable sources The Czech government has approved the proposal of the Czech Republic’s National Action Plan for energy from renewable sources, website Prague Monitor reported. The document, drafted by the Industry and Trade Ministry, sets the way for Czech Republic to achieve a 13% share of renewable sources on total energy consumption by 2020, as required by the EU. The plan expects that renewable sources will make up 14% of gross energy consumption in 2020, adding that after achieving the 13% share no operating support will be provided to any renewable source in the following period. The plan is to
be revised every second year, which will allow for adjustment of the set target for renewable energy share, it said. Greece, Cyprus seek EU funds for Mediterranean energy corridor Greece and Cyprus will present two Mediterranean energy plans to the European Commission in an effort to secure partial financing from the EU, the Greek Energy Ministry said. Greece, Cyprus and Israel are to promote the connection of the three states with an underwater electricity cable and a natural gas pipeline, the ministry said in a statement. The 2,000-megawatt EuroAsia Interconnector Project underwater cable between Israel and Europe would help ensure the security of power supplies to Israel, Cyprus and Greece as well as to Southeast Europe and the Mediterranean area, energy authorities said in April. The pipeline would allow Israeli, Cypriot and possibly later Greek gas to be sent to European clients via Greece, offering the region a third source in addition to Russian and Azeri supplies, it said.
Poland will get cheaper gas from Gazprom Russia’s Gazprom has reached an agreement with Poland’s PGNiG to adjust the price of Russian gas supplied to the European country, in a move that allows the partners to terminate the procedure over the price issue at the Arbitration Court in Stockholm. The two companies have signed an amendment to the contract to adjust price terms of Russian gas supplies via the YamalEurope gas pipeline, Gazprom said in a statement. Stateowned PGNiG was able to secure a reduction of between 10% and 20%, Mikolaj Budzanowski, Poland’s treasury minister, told journalists. As a result of the price cut, PGNiG expects earnings before interest, taxes, depreciation and amortization for 2012 to grow by PLN 2.53 billion ($776-931 million). Poland uses around 15 billion cubic meters, or almost 3% of EU gas demand a year, most of which comes from Russia. The EU has launched a formal investigation into the long-term contracts and possible abuse of a dominant market position by Gazprom, mostly in former Soviet satellite states in Central and Eastern Europe.
Ukraine gets first gas from Germany Ukraine has received the first 3.3 million cubic meters of natural gas from Germany’s RWE, the newspaper Zerkalo Nedeli Ukraina reported, citing a source in the Energy and Coal Ministry. Under a contract with the German utility, Ukraine’s state-controlled oil and gas company Naftogaz is due to receive up to 8 mcm of gas in the first week of November. The newspaper earlier reported Naftogaz and RWE Supply & Trading signed a contract for annual deliveries of 1.4 billion cubic meters of gas with a possible increase to 4-5 bcm.
parliament seats in singleseat constituencies and Batkivschyna got 39 seats. But a team from the Organization for Security and Cooperation in Europe (OSCE), which sent more than 600 observers to monitor the election, criticized the way it had been conducted, saying the country had taken a “step backwards”.
ject the bill, which includes raising sales-tax rates, adds a new levy for high earners, and curbs spending on public wages. But on November 6, three of the deputies in question resigned their mandates and two said they would back the bill in the 200-seat chamber.
Gazprom Q2 profit falls 50% OAO Gazprom, the world’s biggest natural gas producer, said second-quarter profit fell 50%, beating estimates, as the state-run company gave price discounts to European clients and the ruble weakened. Net income declined to RUB 150.8 billion ($4.8 billion) from RUB 303.7 billion a year earlier, the company said in financial statements on its website on November 2. Revenue slid 2.4% to RUB 1.01 trillion. ■
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Western banks stepped up a retreat from emerging Europe, excluding Russia and Turkey, in the second quarter, bringing the cumulative amount withdrawn since mid-2011 to 4% of gross domestic product, the group said in a statement. “Tightening credit supply played a role, although weak credit demand is also a driver at
the moment,” it said. In six countries, Western banks have reduced exposure by more than 5% of GDP, the group said. Funding in Hungary and Slovenia fell by 1015% of GDP and by 5-10% of output in Bulgaria, Croatia, Lithuania, and Serbia. Credit to households and companies increased by 1.3% in the 12 months through
June compared with 5.7% a year earlier, the group said. Credit contracted in seven countries: the Baltic nations, as well as Croatia, Hungary, Montenegro, and Slovenia. Ukraine electoral commission completes vote count Ukraine’s central electoral commission completed counting ballots for parliamentary elections, two weeks after the ruling party of President Viktor Yanukovych claimed victory. The Party of the Regions got 30% of votes in party lists, while opposition parties, united behind jailed former prime minister Yulia Tymoshenko’s Batkivschyna, got 25.54%. The commission counted 100% of ballots in 220 single-seat constituencies, while Parliament decided last week to hold a repeat vote in five single-seat constituencies on fraud concerns. Half of Ukraine’s 450-member legislature is elected as singleseat candidates. The Party of the Regions won 113
Czech government wins confidence vote Czech Premier Petr Necas won a confidence vote tied to an unpopular tax increase after suppressing a revolt among his lawmakers that weakened the government as it pursues budget cuts. The lower house approved a bill containing CZK 22 billion ($1.1 billion) of measures to reduce the budget deficit to less than the European Union limit next year. Necas mustered the backing of 101 lawmakers in the November 7 vote that was tied to a confidence motion. Six of Necas’ lawmakers joined the opposition on September 5 to re-
Greek unemployment rate hit new record in August Greece’s unemployment rate hit a new record high in August, as the deepening financial crisis in the debtstricken country continued to weaken the labor market. The seasonally adjusted unemployment rate increased to 25.4% from 24.8% in July, the Hellenic Statistical Authority said on November 8. The unemployment rate among youth, aged between 15 and 24, was 58% in August, markedly higher than last year’s figure of 45%. There were around 1.27 million unemployed persons in the country at the end of August, while the number of employed people amounted to 3,726.663. ■
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HUNGARY’S CHANCES › Package deal by the government The parliamentary governing majority gave its backing to a HUF 764 billion correction package presented by Economy Minister György Matolcsy. Lawmakers supported measures amounting to approximately 2.5% of annual GDP, which include connecting cash registers to a central server to reduce VAT fraud and increasing healthcare contributions in the cafeteria system, as well as implementing the bank tax in full throughout 2013, despite an earlier agreement to withdraw it struck with the Hungarian Banking Association. Bank association chairman Mihály Patai announced his resignation as a result. He had warned previously that if Parliament were to adopt the proposals pertaining to the bank tax he could no longer hold on to his post, having brokered agreements with the government that involved halving the bank tax in 2013 and scrapping it altogether from 2014. The association also said it would be ready to pay any sectoral tax from 2014 if it were introduced on an EU level. The measures hastily compiled at the start of October were needed to convince the European Commission that Hungary could keep its budget gap below the required
tolerance threshold of 3% of GDP. The latest EU projection shows that this goal will be met in 2013 because of the steps, but the Commission has questioned the revenue expectations associated with the new taxes and sees the gap widening back to 3.5% in 2014, a forecast the Hungarian government disagrees with. This means that Hungary’s chances of exiting the excessive deficit procedure that has been ongoing since its accession to the bloc in 2004, and which could well result in losing substantial amounts of development funds to the tune of HUF 1,000 billion, are fading. The funds are sorely needed since it is essen-
tially the only source of development money that will be available in the coming years with private investments few and far between. The main issue of contention between the government and Brussels is how the newly launched tax measures will affect economic growth. While the Economy Ministry has actually raised its growth expectation from 0.9% to little above 1% of GDP, citing the launch of new automotive investments, the Commission thinks these hopes lack foundation. In fact, they point to the new measures as a key cause of hindering growth, since the prolonged burden on the banking industry will continue to weigh on already
stifled lending activity and hold back growth as a result. Banks are now set to endure another blow from the management of municipal debts, following on from the bank tax and the early foreign currency mortgage repayment scheme. After announcing the takeover of HUF 612 billion in municipal debts – little more than 2% of Hungary’s GDP – the government also said it will be seeking discounts from the banks when it comes to paying up. Prime Minister Viktor Orbán also hinted that further tax increases are to be expected seeing Brussels’ doubts about the feasibility of the latest measures. After complaining that “no matter
OF EXITING THE EXCESSIVE DEFICIT PROCEDURE THAT HAS BEEN ONGOING SINCE ITS ACCESSION TO THE BLOC IN 2004, AND WHICH COULD WELL RESULT IN LOSING SUBSTANTIAL AMOUNTS OF DEVELOPMENT FUNDS TO THE TUNE OF HUF 1,000 BILLION, ARE FADING what the government does, it’s never enough,” he said that Brussels should name a sum and the government will raise
it. He nominated the banks, the newly taxed utilities and gambling businesses as potential sources. GR
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10-11 Flirting with the IMF What can you do with your Android phone? 12
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LMP at the crossroads Hungary’s green party, LMP is a young party facing weighty choices. Its policy of maintaining equal distance to MSzP and Fidesz appears untenable as pressure mounts to join a leftwing alliance to oust the Orbán government in 2014. LMP is under pressure from a variety of sources. For one, with the emergence of numerous new parties it is losing its position as the only left-wing MSzP challenger. Second, the emergence of former PM Gordon Bajnai fills large parts of the left – including many LMP supporters – with hope that the left has a viable candidate to challenge Viktor Orbán. For LMP this poses a serious dilemma as both routes, being the spoiler of a potentially successful left-wing alliance or losing its independence by joining it, carry sgreat risks. Before 2010, the LMP heaped success upon success, but since the fateful election that catapulted the new party into Parliament, it appears to have
been pulled down by political gravity. Already during the fall of that year the party was unable to meet the massively exacerbated signature requirements for local elections in much of the country, thereby failing to appear on the ballots of many voters. Unfair as the requirements may have been, the other parliamentary parties met them with relative ease and LMP’s organizational weakness outside Budapest was laid bare for all to see. More painfully, despite staunch criticisms of the Orbán government and fervent activism, the party has failed to significantly increase its support in public opinion, even as a record number of voters indicate no party preference and Fidesz is sinking to ever new lows in surveys. What must be especially irksome for the green party is that MSzP, the party LMP seeks to supplant on the left, appears to be gradually recovering some of its previous strength. With a recent poll showing impressive support for a potential party led by former PM Gordon Bajnai, along with very poor numbers for LMP, the young party is faced with two choices, both of which are risky: continue to go it alone and potentially end up squished between a clash of Fidesz and MSzP and/or Bajnai (this scenario includes the possibility of being the spoiler of the opportunity to oust Fidesz in 2014), or strike a deal with the whole or parts of the latter and potentially end up subsumed in a leftwing mass without any remaining distinct appeal to voters. For a party that has built its success on independence but is nevertheless dependent on a mostly left-
leaning intelligentsia that is deeply fed up with Fidesz, this is a highly uncomfortable situation to be in. A BIT OF HISTORY By any measure, LMP has had an astonishing career. A mere few years ago it emerged from nothing as the brainchild of a former Young Socialist, András Schiffer, who was massively disaffected with the Hungarian party system, which effectively meant the two dominant players, Fidesz to the right and MSzP to the left. Successive MSzP governments had governed the country into a series of crises, interrupted only by brief respites that were followed by deeper bouts of crisis. Endemic corruption and the impact of the world financial crisis removed even the slightest hope that the Socialists would land on their feet in 2010. Few doubt Schiffer’s commitment to the principles he relentlessly propagates, but his timing was also impeccable; there was a giant crater on much of the ground that used to delineate the position of the Socialist Party in the political landscape. Jobbik and Fidesz may have picked up much of the support lost by MSzP, but Schiffer’s team also realized that a portion of the left, especially among the young, would never vote for right-wing parties and needed a different alternative to the ruling Socialists. The rise of LMP began based on this demographic. With a mix of bemused bitterness, political analysts sympathetic to the Socialists relentlessly pointed out that the influential Fidesz media were also helping to build up the new party’s public standing, with the obvious intention of weakening the gov-
erning Socialists. In Socialist circles it was also whispered that Fidesz was giving the greens endorsement sheets to help the new party qualify for the ballot. Though this conspiracy theory might be more a reflection of MSzP supporters’ slightly paranoid mentality in 2010, it also shows that some of LMP’s animosity towards the Socialists was in fact mutual. What is a fact, however, is that the Nézőpont Institute, where Fidesz’ polls are made to order, often measured LMP above the level of other polling companies. NO LONGER THE ONLY GAME IN TOWN Now, a few months shy of its fourth birthday as an official party, LMP is facing a number of strategic challenges. First, it must gradually come to terms with the fact that its early failure to make more impressive inroads in public opinion has proven durable. In Medián’s most recent survey, it still stands at a mere 4% in the total population, though it also continues to be the least rejected party. More importantly, it is no longer the only left-wing alternative to Fidesz, with organizations mushrooming all over the place, from DK, Szolidaritás and 4K! all the way to Milla, which appears unable to decide whether to become a party. Unlike the newbies, LMP has of course already demonstrated its viability, but in the eyes of many it has also shown its limits. LMP may be even more threatened by the numbers that Medián measured for a currently nonexistent challenger, a potential party led by former PM Gordon Bajnai, which would be the strongest force on the left. With the Bajnai train on the move, the pressure on
LMP to support a left-wing alliance against Fidesz is growing, and it is no longer confined to those segments of the older left-wing intelligentsia that LMP loves to disdain. The party and its base appear less critical towards Bajnai than the leadership itself is, as the latter cannot forgive the former his prime ministerial role in the post-2006 MSzP-led government. But the pressure is bearing fruit. Before October 23, the party stuck by its rejectionist stance. Two weeks ago, the leader of the LMP parliamentary group, Benedek Jávor, was already far less resolute, mostly trying to avoid taking any stance by saying that LMP had not even been invited to the “Together 2014” coalition initiated by Bajnai. A few days ago, there was another clear shift in Jávor’s position: now LMP is positively eager to begin talks. Indeed, conflicted as LMP may be about Bajnai’s previous role, Jávor has now publicly backed down from Schiffer’s categorical pronouncements concerning the former PM; LMP is at least willing to discuss who the prime ministerial candidate may be. RISKS EVERY WHICH WAY If Jávor’s new position prevails inside LMP, then this would make at left-wing alliance a lot easier to forge than the skeptics imagined it would be. To be sure, Jávor’s willingness to talk leaves many potential outcomes open, but it is a move that would have been expected much later and after a more enduring courtship. It
arguably also marks the green party’s intense vulnerability at this time, and its sense that it may gain more from negotiations now when it still commands critical margins for any left-wing victory in 2014 than at a later point in time when its standing in polls may be further diminished. LMP is still in a strong bargaining position vis-àvis Bajnai. It does not matter whether it retains the loyalty of 4%, 7.5% or 10% of voters: no left-wing alliance is likely to be strong enough in 2014 to comfortably forgo these votes. Whatever strategic goals Jávor may have been referring to, this is indeed a good time to make them part of the Bajnai ’14 platform. Still, the risk that the LMP will disappear without a trace in the Bajnai movement continues to persist. For MSzP this risk is not as large (though it exists), as the party boasts significant funds, a larger loyal base and a better organization. The smaller parties have very little to lose, as at this point they are mostly bringing only their respective names. LMP, however, has believed that it could successfully imitate on the left Fidesz’ impressive gradual takeover of the right in the 1990s, when the small liberal party overcame a series of larger right-wing parties to emerge as the dominant force on the right. Joining the Bajnai bandwagon makes such a scenario far less likely. But of course becoming the force that effectively helps Viktor Orbán secure another term in government would also be pretty damaging to this prospect.
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For your eyes only One would think that in today’s world of the internet and computer technology, saving and managing your data and documents would be the easiest and cheapest thing to do. But one would be so wrong. Besides the hassle of storing digital data, big companies still have tons of printed documents on paper that need to be stored in one way or another. That is where firms specialized in secure document storing and management come in. Document management in Hungary has proved a good business, since many big com-
panies still prefer to store data on paper, rather than do so digitally. While free services, like Google Drive or Microsoft Skydrive are slowly growing more popular, large firms still prefer to hire specialists to store their documents. IBM Hungary, HUMANsoft, Albacomp, Iron Mountain, Rhenus Office and DocuScan are the biggest document storing companies in Hungary, and compete on a market that has known difficulties since the economic crisis. FOR YOUR SECURITY One of the most important tasks of document management is to guard sensitive data securely. HUMANsoft’s László Takács believes this may be the single most important factor placing specialists ahead of free services like Microsoft Skydrive or Google Drive. While these latter services are reliable, large corporations still prefer to make sure that
their data is guarded safely by professional care. “Modern cloud-based services still have to prove that they can meet stringent legal requirements and data protection guidelines. They have the chance to succeed in this business sector in the medium-term. I do not think, however, that the socalled “public cloud” solutions will work, only secure private cloud solutions will have a chance,” says Takács. Indeed, one of the most surprising facts revealed by Takács is that most companies still prefer to have their documents stored on paper rather than digitally. Thus HUMANsoft and other similar firms also safeguard information in a physical form, which can be consulted by their owner. “My experience shows that those managers and security professionals who are responsible for data security, especially in the financial sector,
have an aversion to cloudbased solutions for the time being,” confirms Takács. SCAN THIS, DESTROY THAT Of course, there are ever more companies who are more interested in scanning their documents, which can be analyzed and consulted later more easily than on plain paper. This process usually includes the utilization of text recognizing software as well, so that documents can be reviewed more swiftly than with a scanned version. IBM Hungary (one of the oldest computer technology firms, which has switched to data management services) has all the materials to provide those services. “IBM provides content management solutions for medium- and large-sized companies. This includes the whole life cycle of the documents: the scanning, archiving and the management and the possible destruction if needed,” says Gabriella
Tornoczky, communications leader at IBM. Obviously, getting rid of documents has to be done securely as well. LET’S DO THIS COST EFFECTIVELY The economic crisis has shaken this kind of service as well. “Our clients are increasingly cost-conscious and are looking for real value for money,” says HUMANsoft’s Takács, when asked about the effects of the crisis. It also means that the companies are more severe regarding the accuracy and the swiftness of the data management service. Competition between the various data management services is considerable, which means that each of them has to provide the best service possible so as not to disappoint their clients and to stay in business. Takács wouldn’t provide specific information about HUMANsoft’s clientele, but he confirmed that
their largest customers are from the telecommunications and financial sectors. While the former is still doing fine economically, it is no secret that banks have had a hard time of it lately in Hungary because of the bank taxes applied by the government, and it certainly affects their business with data management companies as well. FUTURE-ROOF TECHNOLOGY? Cloud-based services are all around those days, and even if larger companies don’t favor these right now, it’s hard to believe this will remain so for long. Skydrive, which is also present in the recently released Windows 8, is one of the obvious likely competitors and if saving and guarding data securely can be done easily for free, even big companies conscious of their costs will most likely turn to these solutions sooner or later. GH
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MIKLÓS BÁN ceo espell translation and localization
The suite of services that language service providers call document processing or something similar is a very broad one, ranging from conversion into editable formats, professional DTP and layout fixing to typesetting, content management and many other services. Most agencies use their own terminology to describe this sprawling array, and the first encounter can leave customers furrowing their brows. Why do service providers keep on asking for editable formats? What does generic “DTP” entail? To what extent does the layout of the translated documents need to be localized? This article aims to help you get to grips with the basics.
Traditional ways of sharing information are gradually becoming the sole preserve of artistry and craftsmanship, as content is stored and generated in digital databases in almost all cases when the main purpose is communication. This is no different in the world of translation and localization. Digitalization and structured data handling provide overwhelming benefits to both customers and language industry professionals. The technology we have at our disposal today translates into lower costs and turnaround times, while improving quality by ensuring both stylistic and terminological consistency. It is common sense that input content needs to have certain properties enabling these advantages to be exploited. PDF documents, images and vector graphics etc. are usually incompatible with the data structure of translation memories and term bases and as such require preparation. Depending on the format and volume, the conversion can take from minutes to tens of hours and sometimes can even defeat the point of the whole exercise. Such hassle can be avoided by relying on so-called editable formats, but it is worth noting that, regardless of the format, only clean content can yield perfect results. However, having the material available in the right format always prevents the preparation process from ballooning in terms of cost and time. Generally speaking, editable formats can be anything that is not rasterized (like an image), vector-based (such as non-font-based texts in Illustrator) or otherwise restricted. Pedestrian examples are Word, software interchange for-
mats and scripts, but other non-trivial types fall into this category as well, such as Photoshop (with text layers) and certain exports of AutoCAD. Of the garden variety of file formats, PDF is the master of illusion, because it can and usually does contain textual data. On the other hand, it was devised to be locale- and system-independent, so layout and document structure take precedence over composition, effectively hindering proper extraction of textual content. Another sensitive and trending topic within document processing is the concept of DTP. Contrary to the publishing method that the term was coined for, DTP is not usually synonymous with design and typesetting in the context of translation and localization. Many language service providers can accommodate requests for professional typesetting and document layout localization, but DTP is most commonly taken to mean post-translation adjustments and minor fixes. If you need your translated whitepaper or company brochure to have a layout and structure similar to the original, the document has to be touched up, but does not need to be recreated from scratch. On the other hand, if the aim is to produce a document which conforms to the target locale’s customs and publishing practices, a complete overhaul of the original may be in order, requiring professional typesetting. If you are contemplating having any of your materials translated, it is worth consulting a translation agency before content generation or authoring. There are many pitfalls that
you can avoid by not treating localization as an afterthought. It is best to think in advance about the implications of adaptation and how your image and message can be preserved, in order to prevent changes in typography, layout, spacing and graphics that upset the applecart. Usually materials are authored in English, which can lead to spacing and length issues, English being more concise than many other languages. The script of the target language can also cause complications. InDesign has grown into the most popular DTP tool over the years, but right-to-left languages are still only supported unconditionally by noncross-compatible Middle-Eastern editions. If the target language uses a different writing direction from the original, keep a close eye on the images used as well, because regional adaptation also involves inverting the document layout, and someone’s watch in a picture may end up being flipped. Moreover, bear in mind that the fonts your designer uses may not be compatible with other languages, which can bring about unexpected costs or an undesirable change in typography. Document processing is a very broad topic and this brief summary does not claim to be comprehensive. If it has left you with any questions or comments, please feel free to approach my colleagues at translation@espell. com. We will be happy to help.
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Your documents in the works – Disentangling document processing
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Flirting with the IMF The Hungarian government has been flirting with a new IMF deal for roughly a year, but has not committed so far. There is much at stake in the early stages of a relationship: it is when the parties decide whether it is worth continuing or not. But what happens when one keeps leading on the other, leaving them unsure about their real intentions? One year after it first raised the possibility of an IMF loan, Hungary has not struck a deal yet. Last week, however, the prime minister said the country was very close to an agreement. The PM’s remarks came after the European Commission (EC), in its fall forecast, set Hungary’s deficit below 3% of the GDP in 2013. This may lead to a breakthrough in the talks with international lenders, Viktor Orbán said commenting on the figure.
Talks on a potential IMF deal have been going on for more than a year and the parties have exchanged information several times, but no real progress has been made. A major barrier in the way is that the Hungarian government is not being offered what it has asked for, the government says. Hungary needs a ‘credit’ that helps shield the country against the repercussions of the crisis, Mihály Varga, minister without portfolio responsible for IMF negotiations said last week in an interview on national television. What the IMF is offering is a loan with binding obligations concerning the country’s economy, he added. Many of the terms set by the IMF-EC mission
such as a cut in pensions, or the launch of a property tax, are out of question, Varga said, explaining why the talks have not gone further. Progress has also been hampered by some of the government’s economic measures. Last December talks broke down over a proposed central bank law that international lenders regarded as endangering the independence of the National Bank of Hungary (MNB) and set its amendment as a precondition to continue. The government was presented with the conditions of the deal in late July and August, and sent its response to the European Commission in September. There has been no step forward here, either.
Still, with the Commission forecasting a lower-than-3% budget deficit for 2013, the PM claims the major obstacle has been removed. “Budget deficit has never been a precondition for a potential IMF deal”, said Zsolt Szarvas, analyst of Brussels-based think-tank Bruegel. However, the expert believes it is quite a recognition that the EC projects a 2.9 %figure for next year, even if it means the government has to use the budget reserves to plug the holes. What is even more significant is that Hungary’s structural deficit, an indicator of real deficit, has been improved by 0.5% of GDP for 2013, Darvas added. Better figures will certainly help negotiations on a mid-term program. Yet the 2014 projections are not that bright: assuming that the government continues with its current economic policy, the Commission forecasts a higher deficit and a
1.5% drop in structural deficit to 2.6%. As there is no budget for 2014, figures will likely change, the government claims. The expected discrepancy between official figures as well as the proposed economic measures already questioned by the EU will be a topic of future debates. This will probably not calm the markets, which is one of the reasons why an IMF agreement would benefit the country, Darvas claims. “The deal would set a transparent macroeconomic and structural path for the country that would be easy to follow and would improve investors’ confidence.” Hungary’s fiscal position may have improved in the past two years, but consumer activity remains very weak, with retail sales volumes shrinking on a monthly basis. The government cut its GDP forecast to a contraction of 1.2% this year from 0.1% growth and predicts an
expansion of 0.9% in 2013, compared with a previous forecast of 1.6%, which adds to uncertainty. The government’s rhetoric does not help the country’s image, either. The Orbán regime has many times been accused of inconsistent communication on the negotiations. In part this has to do with politics: at home, the government tries to please voters by saying no to something that may bring more austerity. It also justifies the righteousness of its policy. “The government has laid a number of cornerstones such as boosting childbirth or improving the social net and family security, and does not want to go back on those. It will stick with its predefined economic strategy,” said Gergely Kitta, senior researcher of Hungarian think tank, Századvég. “The deal would undoubtedly limit the country’s economic sovereignty. But considering
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The International Monetary Fund is established. Its aim is to support countries facing economic difficulties financially and help development and growth by enforcing reforms.
Hungary becomes a member of the International Monetary Fund.
Hungary applies for a loan. The measure comes as the aftermath of the Bokros-package, a set of austerity measures named after the thenfinance minister of the country. The loan was repaid in 1998.
Ten years after paying off the first loan, Hungary applies for another. The deal is struck in less than a month: Hungary receives a €19 billion emergency bailout in the immediate aftermath of the financial crisis, with funds from the IMF, the EU and the World Bank.
News of a potential new deal appear in the Hungarian media. The government highlights that it has not applied for a loan, but rather for a precautionary credit line that would help shield Hungary’s markets against turmoil in the euro zone and rein in borrowing costs. The forint strengthens on the news.
Preliminary talks between the country and the European Commission and the IMF are suspended when the EC delegation leaves the country. Representatives suspended talks due to a proposed amendment in the bill regulating the central bank that could jeopardize the bank’s independence, EU Monetary Affairs Commissioner Olli Rehn’s spokesman in Brussels said later. The Hungarian forint hits a record low (HUF 320=€1). In a radio interview the PM says the central bank law may change, but other pieces of legislation are domestic issues. Commissioner Rehn announces that Hungary has not taken sufficient measures to adjust its excessive deficit in a sustainable manner.
National Economy Minister György Matolcsy participates in a committee meeting where the budget is discussed. The IMF publishes a report on Hungary’s outlook citing domestic economic policy as one important contributor to poor macroeconomic performance and economic uncertainties surrounding the country. Bond yields climbed more than 10% on worries that in the midst of the financial turmoil hounding much of Europe, Hungary may fall short of financing its debt load
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the market’s perception of Hungary’s unorthodox economic policy, it may be wise to take it,” said Péter Krekó, an analyst at Political Capital,
02/2012 The volume of safety measures could be anywhere between €15-20 billion, says Mihály Varga, minister responsible for the talks.
a think tank based in Budapest. “The percentage of those who agreed with the government resuming talks with the IMF in 2011 and 2012, even
07/2012 Following a nearly sixmonth halt, talks restart. The IMF presents its deal to the Hungarian government.
casts doubt on the Washington-based organization’s apolitical status. Even within the two organizations, differences of opinion on how to best induce growth in crisisstricken countries abound. The government says the country needs the credit to fend off worsening external conditions, say, if liquidity problems arise and big states like Spain will have priority. If the global environment stays stable until the middle or the end of 2013, the country may not need external financing at all. “But why finance the debt from 6% interest rate loans when we could reach 3% rates with the deal,” asks Darvas. Hungary may not need to withdraw from the market entirely: financing half of its debts from loans would help too, the expert added. “Until it reaches the verge of default, the government will not agree on a package,”,Krekó said. The overall goal is to retain cohesion funds, worth close to HUF 2,000 billion. “Should these funds get frozen, it will hurt not just the economy but also the interests of domestic businessmen the government is relying on.” Will the country reach an agreement with the IMF anytime soon? As anyone who has ever dated knows, the answer depends on whether the government really wants to commit. Or not. ZsV
among Fidesz voters, is more than 50%,” said Krekó citing a study by Medián “which may explain the recent antiIMF campaign.”
Last month, the Hungarian government ran a media campaign explaining to people how a deal pushed by the IMF could harm the coun-
try’s interests. The campaign served as a prelude to Fidesz’s future election campaign and was meant to evoke hostile feelings against the IMF, and indirectly, Gordon Bajnai, who will be positioned as the “PM candidate of the IMF”, Krekó holds. Varga said the campaign intended to discuss a significant issue that concerns the general public. The government’s unwillingness to strike a deal under international lenders’ terms is understandable up to a point. The IMF does not have an excellent track record: the deal it brokered with Greece has a long way to go before delivering results. Other countries pressured into a deal so far, such as Ireland or Portugal, have seen a serious deterioration in the standard of living, though overall economic figures have improved. That may also account for a more flexible approach the organization has adopted. This IMF is no longer defined by restrictive tax policies set in the Washington treaty, and the fund is now more about advancing deals that focus on growth and development. But is not the IMF that sets the terms exclusively. “It is the Commission that issues reports and initiates non-compliance procedures against the country, the IMF only reacts to these,” Kitta noted. There are growing complaints in Europe that the Commission’s approach
08/2012
09/2012
10/2012
11/2012
The Commission also hands its set of terms over to Hungary.
After studying the conditions set by prospective lenders, the Hungarian governments sends it response to Brussels. It says it will not allow wage and pension cuts or launch a property tax – reforms should strictly concern economic issues, not social ones.
The government runs a media campaign on the risks involved in accepting a deal by the IMF.
One year into the talks After the EC’s fall forecast is released, the PM says the main obstacles have been removed and there is nothing in the way of negotiations accelerating. “Hungary is very close to reaching an agreement.” The IMF may not be so sure. Speaking before Orbán’s pronouncement, Gerry Rice, director of the external relations department of the IMF told a press conference in Washington: “I can say directly I do not have a date for the resumption of the mission to Hungary.” He adds: “A meaningful progress on program negotiations would require a clear indication and commitment from the authorities that they see the IMF and the EC as valuable partners.”
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What can you do with your Android phone? More than two million people in Hungary now own an Android smartphone, but very few are using it to its full potential. It’s a shame since the Android system has so many possibilities that can assist in daily life, help reach goals, organize daily schedules, or just have some fun. Here are some of the most relevant and useful Android apps to help you every day. There are literally thousands and thousands of software apps to choose from on Android Play, the virtual marketplace where you can browse and download, but the chances are high that, left to your own devices, will not find those which best suit you.
We will not tell you which are the best either, but we will try to categorize those with the most useful functions for every Budapest businessperson. Most of the software here is free and only carries a fee if you want to use its most advanced functions. WHERE AM I? HOW DO I REACH MY DESTINATION?
If you own an Android phone, the chances are high that some version of Google Maps is already installed; still, few people are actually using it to its full potential. What you must know about Google Maps is that with the help of the built-in GPS in your phone, it can find you anywhere in the world, including any street corner in Budapest. If you type in your destination, it can calculate the fastest way to get to it, be it by car, public transport, or even on foot. With your car it basically functions as the usual GPS systems, with a detailed map showing where are you driving and which direction to take. But what if you don’t own a car,
or don’t want to use it? Well, Google Maps also knows the public transport system surprisingly well, so if you have to arrive at some business meeting on time, it will calculate your route using the exact schedule of every kind of transportation near you. Yes, if you are right now at the most remote corner of Budapest and want to get to some address in Király utca, near Deák tér, the software will first calculate the best type of transport to take, where and when to take it, where to get on and where to get off – it even “observes” you via the satellite GPS system, shows all the stations on your phones, warns you when you have to get off and shows where to pick up the next transport. When you are on foot, the map takes a “closer look” at you and shows the exact route to take. It’s neat stuff and can save you valuable time if you get used to it. Just don’t forget that it also eats a lot of battery, so be sure to fully charge your smartphone before going out. There is a lot of other GPS software out there as well,
but with its constant updates and extremely user-friendly interface, the free Google Maps is still the best for normal use. I WANT TO GET SLIMMER!
OK, you are looking at the mirror and are somewhat unhappy with your shape, so you make the solemn oath to run every day. Nice, but don’t forget that just running is boring, and with your smartphone you can track everything about your daily runs: the distance, the calories burned, the elevation of the trajectory, your speed, etc. While you are running, it checks every stat at specific times and will even reads them out loud. Most Android software also tracks other kinds of sports as well: cycling, skiing, swimming, (well, don’t be surprised, there are waterproof Android phones out there), and so on. There are many of these types of app on the Android market, but we still like RunKeeper most for its simple yet well-made interface, and the possibility to compare statistics with your running bud-
dies and automatically post your runs on Facebook and Twitter. Because if we make the effort, we want others to see it, right? Right, but don’t forget to watch your diet as well. There are many calorie counting apps which calculate your food if you bother to keep records of it every day. If you take a photo of your meal, some software will try to analyze the picture, but it still can’t calculate their calories; the only thing it can do is to see what kind of food it is (bread, meat, etc.) Still, you can manage the calories taken or set out specific goals. WHAT IS THIS… THING?
The chances are high that you have already seen the a socalled QR code, an Android barcode, which can be photographed with your smartphone and by scanning it, it takes you instantly to a webpage. Truth be told, most Hungarian advertisers still can’t make the best use of this technology: scanning the Android barcode usually just takes you to a webpage where
you get the same advertisement as on the poster where you saw the code in the first place! So, what’s the point? Well, forget the world of advertisement, and let’s explore. The latest trend for business cards is to include your very own Android barcode, which leads to your data: vcf (phone) data, gmail or facebook address, etc. The vcf data is perhaps the best solution: you give your card to someone who scans the barcode on it, and with the help of the vcf system it puts the phone number and every additional data in his/her phone automatically. There are many sites that can generate your very own QR code: http://www.qrstuff.com/ is one of them: you just type your data and it generates a QR code of it. You can make the QR code instantly, save it, and then put it on your next business card. It’s not only very useful but also chic and trendy – a way to impress people with your tech savvy attitude! Gergely Herpai (BadSector)
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Budapest Business Journal | Nov 16 – Nov 28
Christmas on the web
Facebook and work
Defensive properties
Ever more people buy holiday gifts on the net
People with higher education visit FB frequently at work
Real estate prices fell moderately in Europe
HUF
33,900
55%
THE AVERAGE AMOUNT CHRISTMAS SHOPPERS INTEND TO SPEND THIS YEAR Hungarians plan to spend an average of HUF 33,900 on Christmas presents this year, a recent online survey conducted by Árukereső.hu reveals. However, one-third of those asked cannot afford to spend more than HUF 20,000 on gifts, the survey says. A slim 12%, on the other hand, will buy gifts worth at least HUF 50,000 this holiday season. Men and those living in the capital have a larger budget for holiday presents. Women, on the other hand, although working with a thinner budget, will surprise more people on average. People are seeking convenient solutions when it comes to holiday shopping: this year, a massive 69% plan to buy gifts on the internet. Last year, this figure was 57%, up from 48% in 2010 – meaning the proportion of net shoppers has grown by 40% in the past two years. More than half of internet shoppers opt for the online solution to avoid crowds and queues. Another large chunk of shoppers prefer the net because of cheaper prices and product diversity, the survey says. When choosing a certain webshop, the main criteria include reliability, a wide product range and favorable pricing. The number of those paying attention to guarantees is growing each year, the survey notes. Nearly 90% of those opting for internet shopping said they gathered information on the net beforehand, and 66% also turned the pages of supermarket catalogues looking for good deals. Most people embark on Christmas shopping when the shops start to offer holiday deals, but one-third of Hungarians leave it to the week before Christmas. About half of them buy everything they want within a few days and spend only a few hours on actual shopping. One-fifth of shoppers spare less than a day for holiday shopping. PF
Portion of those planning online Christmas shopping
21.9%
OF EMPLOYEES USE FACEBOOK AT THEIR WORKPLACE
More than half of Hungarian employees with an internet connection use social media site Facebook while at work, IT security company Gateprotect said in a recent survey. Of the 1.5 million employees with internet access currently working in Hungary, 26% said they checked their Facebook account once or several times a day, and 29% view Facebook occasionally. It translates into some 800,000 Hungarian employees spending time on the social media site at work, the survey concludes. “Our survey reveals that those visiting Facebook during working hours are usually employees with higher education,” said András Petrányi-Széll, Gateprotect’s communications leader for Hungary. This comes as no surprise as people with higher education are more likely to be employed in areas where internet connection is available, he added. On the other hand, he notes that this raises certain problems; namely that those receiving the highest salaries spend time on the social media sites in their working hours. More than 60% of those visiting Facebook or similar sites on a daily basis are men; 54% of them have a college or university degree; 57% are under the age of 30 and more than half of them reside in Budapest. While wasted working hours represent a real problem, Hungarian employers are still reluctant when it comes to limiting access to social media sites. Only 19% of those asked in the Gateprotect survey said they did not visit Facebook or other similar sites at their workplace because their employer blocked their access for such content. Interestingly, one-quarter of the 1,000 employees who participated in the representative survey said they never visited such sites because they were not interested in them. PF
Frequency of visiting social media sites at workplace
THE AVERAGE LOSS IN VALUE OF INDUSTRIAL REAL ESTATE
Europe’s industrial real estate values declined 21.9% on average from the precrisis peak (2007) to the trough (2009) of the market, according to the latest analysis by industrial real estate operator and developer Prologis. Values are only up by 1.3% from the trough, providing considerable upside. Today’s values are attractive relative to replacement costs and the pattern of value recovery in the U.S. following the financial crisis. Despite weak GDP growth in the short-term, trade and supply chain reconfigurations are expected to continue to drive strong demand for distribution space in Europe. The EU’s GDP growth was just 1.5% in last 10 years, but the compounded average growth rate in take-up of distribution space equaled 13% over the same period. This underscores the fact that drivers of demand in logistics are structural rather than cyclical. Despite muted economic growth, industrial has been the second bestperforming property sector, after retail, with an annualized return of 7.3% over the last 10 years. Since the start of the pan-European IPD series in 2000, industrial sector returns came to 7.6% per annum. The level and stability of the income return offered by logistics remains attractive to a number of investor types, especially those with liability-matching mandates. According to CBRE, logistics delivered 7.6% in direct return over the last 10 years; this is 200 and 240 basis points above the direct return component of offices and retail, respectively. While the spread over offices compressed to about 150 basis points at the peak of the market in 2007, logistics clearly outperforms on a current income basis. This higher current yield gives logistics a buffer against economic volatility and provides a cushion to increasing financing costs. KK
10-years average yields (2002-2011)
Industrial yield Visit sevaral times a day Office yield
Visit once a day Visit occassionally Never visit because such sites are blocked at workplace
Retail yield
Never visit because not interested
Source: Árukereső.hu
Source: Randstad
Source: Prologis
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The art of leadership Dr. Sándor Kürti, co-founder of one of the most renowned Hungarian family enterprises, Kürt Corporation, tells us about the beginning, a piece of advice worth billions, philanthropy, the art of leadership and succession planning. Q: WHEN I ENTERED THE BUILDING, I SAW MANY AWARDS IN THE DISPLAYS AND ON THE WALLS. A: Well, we never set it as a
goal to win awards, but we have a certain dedication to our mission: to be the best in our field. Awards just follow the process. Without underestimating the importance of awards, our approach is quite different. We don’t want to be Best Employer for Underprivileged Workers, but we need these workers to be happy in order to do their jobs successfully. Q: WHERE DID YOU GET THE GENERAL IDEA TO FOUND A DATA RECOVERY COMPANY? WAS THERE ANY DEMAND FOR IT IN 1989? A: Not at all. Before the
change of regime in 1989, the founders of Kürt were all employed at high-tech Hungarian corporations involved in the hard disk business. Hungary had an ambitious plan to manufacture a magnetic disk drive, the predecessor of the HDD. Licenses were bought from France and a fair number of experts were trained. Unfortunately, these huge Hungarian corporations went bankrupt with the fall of the socialist regime, like Magyar Optikai Művek, which was a main supplier of the Red Army and Zeiss Jena. Now its headquarters is a shopping center in the 12th district. The founders of Kürt joined their forces because
otherwise they would have all lost their jobs and they didn’t want to sell vegetables for a living, but rather wished to exploit their real expertise. At the time the company was called to life, its founders already had 30 different patents registered, all linked to magnetic data storage. We tried to figure out our opportunities. We didn’t have enough money to manufacture, so we tried to find something in the service area. We had a wheel balancer for magnetic disks and a computer – these were the first assets at Kürt. Our first order came from the Red Army for five magnetic disk laundry machines. We put them together from a washing machine engine, a Lada screen washer engine and a 50-liter aluminum washbasin. We could build a machine with the same properties as one with cutting-edge Western technologies, which wasn’t affordable for the Soviets due to the then-existing CoCom lists. When we were done and they were satisfied, we said that we can save data from hard disk drives as well. Although the magnetic disk manufacturing project was canceled in Hungary, many installations had already been built, like the cleanroom at the research institute Központi Fizikai Kutatóintézet. We got those areas, so at least someone was using them. It has a huge value in absolute terms and for us, too. We managed
to transfer the professionals and the manual knowledge, so we could really claim to being in possession of hard disk drive repair knowledge if necessary. It started like this. Back at that time, being market-driven from the beginning was entirely impossible. Q: KÜRT WAS A MARKET LEADER IN THE DATA RECOVERY BUSINESS, AND IT IS STILL MARKET LEADER IN MANY ASPECTS. A: Actually, our field of oper-
ation is a very narrow segment of the market. IT security is a small area in IT, and data recovery is a small area within security. We found a niche where we settled down and where we feel at home and want to be good. However, this narrow line is broad enough for us to live and prosper. If we were bigger, the big manufacturers would choke us. Currently, there are four big HDD manufacturers in the world. They control billions of dollars. They won’t bend down to our level, because they would have to install the same equipment that we have, find the same experts that we have, but a market of millions as opposed to billions is too small for them to make it worth it. On the other hand, breaking into this miniaturized professional market from the bottom is too expensive and difficult for a small company without prequalification and a huge amount of money. So we feel we are comfortable and safe. But we had to find our place on the market. In 1990, Hungary received economic assistance from Canada in the form of consultants. Our visiting consultant took a look around. “How many employees are in the company?” he asked. “Twelve,” we answered. “But how many competences are highlighted on the façade of the headquarters? Fifteen. No one will believe that you are experts in so many fields. Highlight only one,” he said. But we didn’t believe him, we thought the more competences we claim, the better chance we have to lure in a client. One year later he came back, took a look at our façade and said: “I can’t believe the
Canadian government wants to spend its money on stupid people like you!” Then I started to think about it and figured that maybe he was right after all. We owe billions to this man. Since then, Stanford University professors also reinforced the theory, as according to their research, all leading companies of the Fortune 500 are highly
competent in only one single activity. The only exception is General Electric and its brilliant former CEO, Jack Welch, who in turn gathered the best managers from all around the world and let them do whatever they were best in. Q: DATA RECOVERY DOESN’T SEEM LIKE ANY OTHER PARTICULAR BUSINESS. WHAT KIND OF DIF-
FERENCES DO YOU HAVE TO FACE IN YOUR WORK? A: Indeed, data recovery
needs a unique approach. Its marketing is very hard to define, because from the point of view of the client, it’s impossible to foresee when a company will need our service. And I cannot say for sure that our service will be needed at all. All I can do is say:
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“We have helped many companies, maybe we can to help you too.” The work is actually a team game. Our managers need to understand the short- and long-term processes and stand on their own feet. Developments have to ensure our future income, while other strategies have to ensure our position on the current market, and these two tasks have to move in the same direction. The best practice is to have a target we want to reach, have development strategies determined by our target, and have daily routines subordinated to these strategies. A huge chunk of our resources is spent on joint thinking on different timelines. If we look at the problem as mathematical optimization homework, we can recognize that it is easy to define in a multi-dimensional space what is in the interests of Kürt and what is not. Now we have to find an objective function to determine the optimal operation point. If it is determined well, all the stakeholders – owners, managers, employees and suppliers – will
experience success. We have to find a place where we feel good and we can hold our position not just momentarily but in the long-term too. But that belongs to the Art of Leadership chapter. Q: TO PROTECT YOUR POSITION ON THE MARKET, YOU MUST HAVE EMPLOYEES WHO JUST CAN’T BE FOUND AT ANY UNIVERSITY. A: This kind of education
cannot be found at any single university. On one hand, Kürt has professionals who have worked here with us from the beginning. On the other hand, as part of our long-term strategy, we have trained our employees. The fact is, in the first five years of employment, employees produce zero profit for the company. They watch and learn. It’s an important process they have to survive and go through step by step. Younger and older employees have to promote the company together. The young respect the old for their knowledge, and the old are glad of the young who take care of the challenges of new times. Currently we have direct orders
from 12 different countries. We could not handle this many tasks without cooperation. We need this kind of chemistry in the company to ensure cooperation among co-workers at any time. They could not work here all day long if they hated everyone and everything. In a small environment like this, work cannot be done properly if one thinks of fighting and competing with other colleagues. That’s why it is so hard for our employees to leave this safe haven at the end of their shift and face the hateful outside world. I don’t want to enter into political issues, but it is very hard to perform in an external environment that is not at all constructive. Q: THROUGHOUT THE YEARS, KÜRT HAS ENTERED ANOTHER IT AREA BEYOND DATA RECOVERY, IT SECURITY. DID YOU FEAR THAT ONE BUSINESS BRANCH WOULD TAKE CLIENTS FROM THE OTHER? A: Not at all. We asked
ourselves the same questions at the beginning. But the operation of the two branches is absolutely different. Let me give you an
example: everyone asks surgeons what to do to prevent chronic issues. Because they are trusted as they see the damage done every day. The situation is same for us. The client asks us what to do to prevent further damage. As they are already with us, all we have to do is give them a direction to the security branch. It’s a very lucky constellation, a tie-in business. But no matter how similar the communication of the two branches is, the technology is very different. Q: IS BUILDING A POSITIVE ENVIRONMENT RELATED TO THE WELL-RENOWNED PHILANTHROPY OF THE COMPANY? A: I wouldn’t call it phi-
lanthropy. We started supporting a high school a long time ago. Basically, we gave our very first year’s profit to the institution, which is now called the Kürt Foundational Secondary Grammar School, to do their best with the money. We did it to honor the memory of our mother, who was a teacher but unfortunately couldn’t see the rise of our company. Besides this, we have been
supporting underprivileged students, mainly of Roma origin, at the University of Veszprém since 1997. We finance them in their studies: to graduate or to obtain a language certificate. Two or three years ago we also started the H2O program to finance disadvantaged elementary schools to catch up or advance. Half of the 3,000 Hungarian elementary schools are disadvantaged, meaning that their students will be unemployed after graduation. We started financing one school, now we have ten with the kind help of private investors. In my opinion, this is the most effective of all our programs. Improving a school costs HUF 40 million and it helps hundreds of children. The Hungarian Academy of Sciences is continuously measuring the main indicators of these schools, and reports a decrease in criminalization, drastically reduced absenteeism and a constant increase in the number of children who want to continue their education. I think, these programs for the disadvantaged
should cover all the education courses from elementary school to university. Q: ACCORDING TO RECENT MARKET RESEARCH, PASSING ON THE RESPONSIBILITIES AND TASKS IN A FAMILY ENTERPRISE FROM ONE GENERATION TO ANOTHER CAUSES PROBLEMS AT TWO-THIRDS OF BUSINESSES. HOW DID YOU MANAGE TO PASS ON LEADERSHIP DUTIES? A: I first thought about pass-
ing on the tasks of CEO about 10 years ago. My duties were not taken over by a family member, but I am convinced that the company is well driven this way. The process was quite long and needed a lot of confidence. However, our CEO has been leading the company single-handedly for five years now and I took the position of chairman of the board. My son will not become CEO; instead he is learning how to be a good owner. He acts as vice president, which is a great lesson in cooperating with the CEO and in understanding and acting in accordance with the company’s interests and strategy as an owner. KK
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PARTNER WATCH
Pharmaceutical manufacturers Hungarian pharmaceutical manufacturers blinded by tenders
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R&D at bay with new strategy just around the corner We often hear about the importance of innovation and R&D for a country as short on natural resources as Hungary. But while the government is about to announce its new National Innovation Strategy in a few weeks, the current state of play seems to show that previous strategies have failed to deliver the expected results. BBJ ZSOLT BALLA
The Medical Innovation Center in Debrecen, 220km east of Budapest, which opened its doors in July 2012, is one of the few positive examples. The building of the center, a HUF 6 billion project, was co-funded by Hungarian pharmaceutical giant Richter Gedeon Zrt and the Hungarian state in the framework of the New Széchenyi Action Plan. According to the plans, the 10,500sqm facility within the Pharmapolis Pharmaceutical Research Park will host Richter and other pharma companies, mainly from the SME sector, and provide them with world-class infrastructure to help their innovation and research efforts. When running at full capacity, the science park will be able to provide some 120 jobs. But while the Debrecen facility appears to be a clear success story, its example is
unique and slightly isolated. Hungarians like to regard themselves as a nation of great inventors, scientists and innovators, but recent years have failed to contribute too much to this image. The previous government’s plans to reach, and possibly pass, the EU average in terms of innovation by 2013 will remain unrealized. According to the European Innovation Scoreboard (EIS), an aggregate figure based on some 24 indicators, Hungary ranks fifth even among the countries qualified as “moderate innovators”, well below the EU average and just ahead of Greece and Malta. The overall rank of Hungary has dropped from 15th in 2005 to 23rd in 2011. According to the EIS, Hungary’s relative strengths are in human resources and economic effects, while its relative weaknesses are research systems, finance and support, linkages and entrepreneurship, intellectual assets and innovators (altogether 18 of the 24 indicators are substantially below average). Research and development investments in Hungary equal some 1.2% of GDP, which is significantly lower than the EU average of 1.9%. Only some 20% of Hungarian companies are involved in R&D or innovation activities, and even that is very polarized with 15 large companies being responsible for more than half of all related investments. The disproportion is also present at the regional and market sector levels. While the capital and the surrounding Pest County attract almost all of R&D spending,
the most important sectors are pharmaceutics and the car and IT industries, leaving virtually no room for any other market segments. “On top of increasing the available resources, we also need to create and maintain a harmony between government policies and those followed in the field of R&D. We must treat R&D as a long-term investment,” states the executive summary of the National Innovation Strategy, the public debate of which is currently underway before its official introduction at the end of November. According to the summary, the growth in
company R&D investments (which is largely a result of available EU funds) is not followed by an increase in state funding, and the statefinanced R&D sector is struggling to keep up with the challenges of global competition. Another issue highlighted by the document is the lack of venture capital, which means that many innovations, especially those of startup companies, are stuck at early stages due to a lack of appropriate funding. Interestingly, the introduction of the National Innovation Strategy was preceded by a bold change in the state subsidy scheme for
innovation. Under the previous regulations, the mandatory innovation contribution (which equaled 0.3% of companies’ turnover), and in turn the majority of the state’s innovation-related revenues, could be reduced by the company’s selffunded innovation projects. But due to alleged discrepancies in its use, this possibility is no longer available and the entire amount of the contribution has to be paid, regardless of a company’s own innovation activities. Adding insult to injury, according to news site Index. hu, the Hungarian Tax Authority (NAV) has begun
to target previous companyfunded innovation projects in recent months. NAV has launched 152 inspections between January and September 2012 at 114 companies in the sector, 103 of which ended with the authority fining the company due to various irregularities. While most experts in the industry agree that there were abuses related to companies’ internal innovation projects (such as studies ordered by “friendly” partners for several million forints), they find the above proportions a little too rough, especially as most of the scandals of a similar nature were unveiled at state-run companies in recent years. ■
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Medicine overuse is a bitter pill to swallow According to the National Health Insurance Fund, Hungarians rank third in Europe when it comes to unnecessary medicine use, and while the market has similar notions, professionals emphasize that there is no clear-cut definition as to which medicines qualify as unnecessary or redundant. Cultural background is certainly a key factor of medicine consumption, but increasingly so is price. BBJ ZSOLT BALLA
“The key numbers in medicine sales in Hungary have been virtually unchanged over the last 15 years,” says Dr. Attila Horváth-Sziklai, professional secretary of the Hungarian Pharmacists’ Chamber (MGYK). “What might have changed, though, is people’s perception of what they consider to be a medicine,” he adds. With non-prescription drugs becoming more popular, the thin line between drugs and other, health-related products has grown more vague, meaning that people may now be less conscious about their medicine consumption than they were. What is unnecessary or redundant is by no means clearly defined when it comes to medicines. Furthermore: the many players in the industry have entirely different definitions on the phenomenon. “For a pharmaceutical company, a medicine well-used equals a medicine sold. Pharmacists have three very different criteria,” says HorváthSziklai. “The drug needs to be necessary in a way that the person taking it will have to need some kind of
medication. The medicine needs to be effective, meaning that the medicine the person takes has to have the desired effects on his health or symptoms, and finally it needs to be safe, in the sense that there are no side-effects, or if there are, they remain manageable,” he explains. From a professional point of view, if any of the above criteria are not met, the medicine is not being appropriately used, or, in other words, unnecessary. “It is clear that Hungarians tend to buy more medicine than they actually consume, meaning that a significant chunk of the drug sold is wasted, but it is also true that most Hungarians take medicines for minor problems, such as a cold or a headache, and Hungarian doctors prescribe drugs more often than their colleagues in other European countries,” says a young pharmacist who runs a drugstore in Pest county in the vicinity of Budapest, but who asked to remain anonymous. According to her, the habit of medicine consumption is largely a question of cultural background and education, and neither extreme is optimal. “We can say that Hungarians use too much medication, but I have seen cases in other countries, where severe pneumonia occurred because the doctor prescribed anti-biotics way too late,” she claims. “It may sound awkward for a pharmacist, but I am not a pro-medicine person myself, meaning that things others deem necessary may slip into the redundant category in my view. But it is easy to see that the balance between factors promoting medicine use and those advising against it is nowhere to be found,” she adds. Among the various factors that impact a potential customer in his decision on whether to use drugs or take alternative measures (for example drink two glasses of water for a headache or have a good night’s sleep for the beginning of a cold), marketing is a big one. It has become business as usual for the
pharmaceutical industry to get top rankings in ad spending, especially as the competition gets more cutthroat with cheap, generic medicines entering the market in a growing number of areas. “It is immediately apparent in market demand, which medicine is advertised. TV is by far the strongest, but magazines also have a huge impact,” our source confirms. Horváth-Sziklai adds that, “As for prescriptiononly medicines, the decision is ultimately in the hands of the doctors, and we have no valid grounds to question their competence.” So a prescription drug only becomes unnecessary in certain, rare cases, for example when the patient fails to cooperate with the doctor, and abandons the therapy, or if the boxes contain more pills than the therapy requires. “It may be a case of medicine overuse from the perspective of some other countries, but it doesn’t mean that these drugs are wasted. And we always have to remember that some 80% of the world’s drug production is used by 20% of the population. Normal use or overuse are, therefore, very relative terms,” the secretary adds. The Health Ministry established a medicinewaste collection program in 2005, which may also be a good indicator for tendencies of unnecessary drug use. But industry experts say that there is not much to see there: following a peak shortly after its introduction, the number of returned drugs (unused or expired medicines) remains stable. “There still exist a few who can afford impulse purchasing in pharmacies, but the price of non-subsidized, non-prescription drugs has increased hugely in the recent years, and most customers are highly price-sensitive,” says Horváth-Sziklai. “There is a valid need to have some medicine at home, but this pool needs to be filled only once. Other than that, I don’t think that people tend to spend too much on unnecessary drugs just for the sake of it,” he concludes. ■
[ EXPERT OPINION ]
No ‘one size fits all’ solution PÉTER SITTE Section Manager, Life Sciences HAYS HUNGARY
The challenges and requirements for employers and jobseekers in the Life Sciences sector are like no other. Péter Sitte, Section Manager, Hays Life Sciences, Hungary, dissects the 2012 ‘Hays Life Sciences HR Survey’ results. What we discovered from our findings is that there is no uniform solution in the life sciences sector – each hiring project is very specific and has to be tackled differently to produce the most effective results. That was the resounding conclusion based on our sample of 500 professionals, all with at least six years’ experience, and 50 of the top life sciences companies operating in Central and Eastern Europe. The results of our survey indicate that the life sciences sector requires a special approach and tailored recruitment solutions, which are very different to those for companies operating in other sectors. COMBATING SKILL SHORTAGES So, what are the challenges facing employers? Firstly, there are some acute skill shortages and organizations have significant obstacles to overcome when it comes to finding people with the required levels of experience to fulfill their role requirements. Sales and business development expertise is the hardest to find, according to 42.6% of our respondents, followed by marketing and brand management (27.7%). The next key finding is that the majority of organizations we surveyed (74.5%) prefer to enlist the services of a specialist recruitment agency to help them. This was followed by referral schemes (59.6%) and the use of headhunting firms or executive search players (55.3%). Organizations are prompted to consider multiple options if the local demand for skills outstrips the supply of talent. If skills shortages exist in a certain region, then employers may need to find candidates from beyond their borders who are willing to relocate.Our survey revealed that although life sciences professionals are open to the prospect of relocating, this will depend on a number of factors. Employers need to take into consideration not only the financial aspects but also other issues, such as living standards, that may sway the right candidate.
CANDIDATE-DRIVEN MARKET As far as jobseekers go, our findings also revealed some interesting themes. Experienced life sciences professionals are not particularly active in the job search market, nor do they use popular job-hunting methods, such as online job boards. This primarily has to do with their status and the skills they possess, which are much in demand, so they are more likely to be approached with a job offer rather than actually have to search one out directly. Given their background and experience, jobseekers prefer to form lasting relationships with a specialist recruiter who they trust and who will regularly inform them about the market situation and any relevant vacancies. If these life sciences professionals feel that the right opportunity presents itself, they will evaluate the overall package with their specialist consultant to see if they are a perfect match and whether they are right for the role and the company culture. MOTIVATED BY CAREER DEVELOPMENT This brings us to the next question, what do we actually mean by the “right” opportunity? Although salary considerations are a decisive factor for most candidates, there are a number of other key areas that carry weight. A common trait among life sciences professionals is that they are ambitious and career-driven; therefore they will seek a company that can offer a comprehensive development and training program that will allow them to thrive. Organizations that offer a good working environment and whose values resonate with the individual are also at a distinct advantage. As to what constitutes an “ideal work environment”, respondents cited an “attractive base salary” (58.1%), “stability of employment” (47%) and the “opportunity for self-development” (44.3%). The rewards package that a business offers to employees is another key factor in deciding whether to accept a job offer and again personal development needs score very highly. Interestingly, the majority of respondents prefer professional training and funding for further education to a company car. What is evident from the 2012 Hays Life Sciences HR survey is that life sciences jobseekers have very specific requirements, as do the organizations that hire them. If you’d like to know more about the 2012 Hays Life Sciences HR Survey, please contact Hays Hungary Life Sciences on +36 1 501 2408.
hays.hu
NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY
WWW.BBJ.HU
18 2 BusinessPartnerWatch BBJ
WWW.BBJ.HU
Budapest Business Journal | Nov 16 – Nov 28
Pharmaceutical manufacturers NET REVENUE FROM PHARMACEUTICAL PRODUCTION IN HUNGARY (HUF MLN) IN 2011 IN 2010
EXPORT REVENUE (HUF MLN) IN 2011 IN 2010
1
SANOFI[1]
353,889
345,885
321,375
»
»
»
307,868
34,029 32,330
272,185 241553
» »
» »
2
3
www.sanofi.hu
RICHTER GEDEON NYRT www.richter.hu
TEVA GYÓGYSZERGYÁR ZRT www.teva.hu
4
EGIS GYÓGYSZERGYÁR NYRT www.egis.hu
5
6
7
BAYER HUNGÁRIA KFT www.bayerhungaria.hu
GLAXOSMITHKLINE KFT www.gsk.hu
NOVARTIS HUNGÁRIA KFT www.novartis.hu
8
9
PFIZER KFT www.pfizer.hu
ROCHE HUNGARY KFT www.roche.com
»
156,125
»
129,000[2][3]
»
41,485
»
36,734
»
36,648
»
35,993
»
31,912
»
35,000 32,700
94,000 86000
» »
» »
» »
» »
MAJOR THERAPEUTIC AREAS
168
Cardiovascular, diabetes, oncology, OTC, vaccines
MOST POPULAR OTC PRODUCT
MAJOR EXPORT MARKETS
»
CIS, Central and Eastern Europe, France, Germany
YEAR ESTABLISHED NO. OF FULL TIME EMPLOYEES IN HUNGARY ON MAY 1, 2012
TOTAL NET REVENUE (HUF MLN) IN 2011 IN H1, 2012
PARENT COMPANY NAME AND HQ NO. OF PARENT COMPANY'S SUBSIDIARIES
COMPANY WEBSITE
NO. OF PRODUCTS IN HUNGARY
RANK
Ranked by total net revenue
OWNERSHIP (%) HUNGARIAN NONHUNGARIAN
TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR
ADDRESS PHONE FAX EMAIL
Sanofi-Aventis Europe, Paris
1996 2,085
– Sanofi-Aventis S. A. (100)
Christophe Gourlet – –
1045 Budapest, Tó utca 1–5. (1) 505-0050 (1) 505-0060 kapcsolat@sanofi.com
1923 10,844
MNV Zrt (25), Investors (13) Investors (62)
Erik Bogsch Gábor Gulácsi –
1103 Budapest, Gyömrői út 19–21. (1) 431-4000 (1) 260-6650 posta@richter.hu
» »
TEVA Magyarország Zrt (100) –
Mihály Kaszás – –
4042 Debrecen, Pallagi út 13. (52) 515-100 – –
István Hodász Csaba Poroszlai –
1106 Budapest, Keresztúri út 30–38. (1) 803-5555 (1) 803-5529 mailbox@egis.hu
»
»
Gynecological, cardiovascular, central nervous system, anti-ulcer, muscle relaxer
Panangin, Kalmopyrin, Dipankrin, Daedalon
Russia, Commonwealth of Independent States, EU, USA
– 28 (production and trade)
»
Cardiovascular, gastroenterology, tumor therapy
Bilobil, Revalid, Eurovit, Neogranormon, Peponen
Russia, Poland, Czech Republic, Romania, Ukraine, Slovakia
Teva Pharmaceutical Industries Inc., Israel
»
Cardiovascular, central nervous system, respiratory system
Reparon, Betadine, Jovital, Telviran (ointment), Cralex
Russia, Poland, France, Czech Republic, Romania
EGIS Gyógyszergyár Nyrt, 1106 Budapest, Keresztúri út 30-38. 10
1913 3,894
(private and institutional) (11.600) ATP (Servier) (50.90), Other foreign (private and institutional) (37.49)
»
Pain killers, anti-cold drugs, dermatology, gynecology, oncology, cardiovascular, CNS disorders
Aspirin, Saridon, Aleve, Canesten, Supradyn, Elevit
»
Bayer AG, Germany 283
1989 200
– Bayer AG (100)
Gerhard Waltl – –
1123 Budapest, Alkotás utca 50. (1) 487-4100 (1) 212-1574 info.bayhun@ bayer–ag.de
»
Asthma and COPD, thrombosis, infection (antibiotics and other respiratory infections), central nervous system diseases (epilepsy, Parkinson's disease, depression, migraine) and cancer
Aquafresh, Coldrex, Panadol
Setfirst Ltd.
1993
»
»
– Setfirst Ltd (100)
Vincent Loret, György Leitner, Krisztián Makkai – –
1124 Budapest, Csörsz utca 43. (1) 225-5300 (1) 225-5302 info.hungary@gsk.com
Neocitran, Fenistil, Venoruton, Voltaren Emulgel, Mebucain
– Novartis International AG (100)
Tamás Szolyák Lyle Stephen Wheeler –
1114 Budapest, Bartók Béla út 43–47. (1) 457-6500 (1) 457-6600 info.hungary@ pharma.novartis.com
– Pfizer International Inc (100)
Kersti Lindner – –
1123 Budapest, Alkotás utca 53. (1) 488-3700 – info@pfizer.hu
– Roche Finanz AG (100)
Lajos Tamás Hodossy István Németh –
2040 Budaörs, Edison utca 1. (23) 446-800 (23) 446-860 info@roche.hu
– Boehringer Ingelheim International GmbH (100)
Gábor Zalai – –
1095 Budapest, Lechner Ödön fasor 6. (1) 299-8900 (1) 299-8901 info@bud.boehringeringelheim.com
– Eli Lilly and Company (100)
Szinisa Gyuricsin Oliver Stahl László Jobb
1075 Budapest, Madách Imre utca 13–14.VII (1) 328–5100 (1) 328–5101 web_hungary@lilly.com
– AstraZeneca Continent B.V. (100)
Jennifer Winter – –
1113 Budapest, Bocskai út 134–146. (1) 883-6500 (1) 883-3336 –
1991 126
– Merck AG (100)
Tibor Meisel – –
1117 Budapest, Október huszonharmadika utca 6-10. (1) 463–8100 (1) 463–8174 merck@merck.hu
1991
– Ceva Sante Animale (100)
Thierry Le Flohic – –
1107 Budapest, Szállás utca 5. (1) 262-9505 (1) 260-3889 ceva-phylaxia@ ceva.com
– –
– –
»
Oncology, cardiovascular, musculoskeletal, respiratory, neurological diseases
» »
» »
110 (approx.)
Anti-smoking products, COPD, glaucoma, cancer, cardiovascular diseases, candida
» »
» »
»
Breast cancer, lung cancer, HIV, hepatitis, osteoporosis
»
»
»
–
»
»
»
Novartis International AG, Basel, Switzerland 140
Pfizer Inc., USA
» F. HoffmannLa Roche Ltd., Switzerland
1991
»
1991 162
1996
»
» BRANCH OFFICE OF BOEHRINGER 10 INGELHEIM RCV GMBH & CO KG
18,005
12,030
5,875
»
»
»
40
www. boehringer–ingelheim.com
LILLY HUNGÁRIA KFT 11 www.lilly.hu
ASTRAZENECA KFT 12 www.astrazeneca.hu
16,704
»
14,608
»
» »
» »
» »
» »
»
»
Cardiology, pulmonology, neurology, diabetology, veterinary medicinal products
Central nervous system, tumors, diabetes, cardiovascular diseases
Cancer, cardiovascular, infectious and neurological diseases
Rhinospray Plus, Dulcolax, Guttalax, Buscopan, Pharmaton Vital, Pharmaton Matruelle
»
Austria
Boehringer Ingelheim RCV GmbH & Co KG, Vienna
»
–
Eli Lilly and Company, USA
»
»
2008 92
–
Astrazeneca Continent B.V., the Neitherlands
1991
»
1994
»
»
13
14
MERCK KFT www.merck.hu
CEVA-PHYLAXIA ZRT www.ceva.com
14,234
»
11,332
»
» »
» »
» »
» »
25
»
»
»
Nasivin, Cebion, Femibion, Flexagil
»
»
Merck AG, Germany
»
Ceva Sante Animale, France
»
»
»
2 BusinessPartnerWatch 19
BBJ
WWW.BBJ.HU
BRISTOL–MYERS 15 SQUIBB KFT
16
6,700
www.bms.hu
»
XELLIA KFT
6,265
»
www.xellia.com
HUMAN BIOPLAZMA PRODUCTION AND 17 TRADE KFT
» »
» »
» »
» »
MAJOR THERAPEUTIC AREAS
»
Alzheimer's disease, arteriosclerosis / thrombosis, cancer, diabetes, hepatitis, HIV / AIDS, obesity, psychiatric disorders, rheumatic diseases, rejection
»
»
»
»
www.fresenius-kabi.hu
OMNINVEST KFT 19
www.omninvest.eu www.omninvest.hu
»
»
Anesthesiology, intensive therapy, surgery, interior medicine, nephrology, hepatology
Laevolac, Kabi Glutamine
» »
» »
4,418
4,418
»
»
» »
87
2,112
» »
» »
»
»
BÉRES NR PHARMACEUTICALS ZRT
» »
www.beres.hu
»
»
7,364
529
»
Bristol-Myers Squibb Holdings Limited, GB
»
Xellia Pharmaceuticals, Denmark
ADDRESS PHONE FAX EMAIL
– BMS Holdings Sarl (99.90), BristolMyers Squibb Latin American Nominees L.L.C (0.10)
Csaba Pácz, Vilem Zvonicek – –
1024 Budapest, Lövőház utca 39. (1) 301-9700 (1) 301-9701 –
– Xellia Pharmaceuticals ApS (100)
György Sántha, Attila Mile – –
1107 Budapest, Szállás utca 3. (1) 260-4130 (1) 262-4059 info.hu@xellia.com
– Kedrion S.p.A (100)
Péter Kinczel – –
2100 Gödöllő, Táncsics Mihály út 82. – – marketing@ humanked.com
1991 36
– Fresenius Kabi Austria GmbH (98), Fresenius Kabi AG (2)
Judit Tajthy Tímea Nagypál –
1036 Budapest, Lajos út 48–66. (1) 250–8371 (1) 250–8372 info@fresenius-kabi.hu
1991
»
»
Fluart Srl (»)
Ferenc Zimonyi – –
2097 Pilisborosjenő, Fő utca 7. (20) 419-7030 (26) 536-051 info@omninvest.hu
1989
Béres Befektetési Zrt. (100) –
Ferenc Major Miklós Nagy –
1037 Budapest, Mikoviny utca 2–4. (1) 430-5500 (1) 250-7251 info@beres.hu
2002
»
»
»
–
Fresenius Kabi AG, Germany
1993
»
»
»
»
Flu prevention
»
TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR
1992
Kedrion S.p.A, Italy
»
FLUART S.R.L., Romania
»
»
OWNERSHIP (%) HUNGARIAN NONHUNGARIAN
»
Haemophilia, treatment of immune deficiency diseases, infectious diseases
www.humanked.com
FRESENIUS KABI 18 HUNGARY KFT
MAJOR EXPORT MARKETS
»
»
5,742
MOST POPULAR OTC PRODUCT
YEAR ESTABLISHED NO. OF FULL TIME EMPLOYEES IN HUNGARY ON MAY 1, 2012
EXPORT REVENUE (HUF MLN) IN 2011 IN 2010
PARENT COMPANY NAME AND HQ NO. OF PARENT COMPANY'S SUBSIDIARIES
TOTAL NET REVENUE (HUF MLN) IN 2011 IN H1, 2012
NO. OF PRODUCTS IN HUNGARY
COMPANY WEBSITE
NET REVENUE FROM PHARMACEUTICAL PRODUCTION IN HUNGARY (HUF MLN) IN 2011 IN 2010
RANK
Budapest Business Journal | Nov 16 – Nov 28
Béres csepp, Actival, Béres C-vitamin, Béres Immun Herbal, Béres Antifront csepp és kapszula, Béres Trinell Pro
Romania, Ukraine
– –
»
NOTES: (1) The sum include the consolidated total net revenue of Sanofi-Aventis Zrt. and Chinoin Zrt. (2) Consolidated total net revenue. (3) Data for business year October 1, 2010 – September 30, 2011
»= would not disclose, NR = not ranked, NA = not applicable
This list was compiled from responses to questionnaires received by November 13, 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) 3980345. The research department can be contacted at research@bbj.hu
Hungarian pharmaceutical manufacturers blinded by tenders The blind tendering system – where manufacturers bid to keep their products amongst the subsidized medicines without being aware of competitors’ prices – is causing huge losses to the industry. BBJ KRISZTIÁN KUMMER
The pharmaceutical industry is one of the sectors best protected against crisis challenges, said Tamás Szolyák, managing director of Novartis Magyarország at the Budapest Economic Forum 2012 conference. Sometimes a crisis can even increase the use of prescription drugs, raising company revenues. However, in European countries, the state itself generates the largest demand. If the government reduces its potential for drug purchases, it fundamentally affects the sector’s prospects, he added.
For the pharmaceutical sector, the crisis started in 2007 when the pharmaceutical fund, peaking at 2006 at HUF 380 billion, fell to HUF 158 billion. And the blind tendering system causes additional – and significant – losses to Hungarian manufacturers, who cannot match foreign competitors’ prices. According to healthcare provider IMS Health, the combined sales of the four major Hungarian manufacturers decreased by HUF 11.5 billion in the first eight months of the year compared to the same period in 2011. Total drug turnover fell by HUF 12.3 billion at the same time. “We consider it a very negative measure in the Hungarian market. We have seen a loss of more than HUF 2 billion as a result of blind tendering, and so far we have been forced to withdraw 20 products from the market,” Zsuzsa Beke, head of public relations at Richter said. “The system has an extremely negative impact on our competitiveness.”
In total thus far in 2012, more than 150 drugs have been phased out of the Hungarian social security subsidy system, while no new drugs have been added, although more then 20 are waiting on a decision. Although the different dose and package versions of the same medicine have been counted as individual products in the balance, the final result is a decrease in the prescription drugs patients can choose from. Most products removed from the subsidy list are anti-infective and gastrointestinal or nervous system drugs. Support was also withdrawn for certain anti-cancer, immune deficiency and cardiovascular medicines. These withdrawals confirm earlier observations indicating that the distribution of many Hungarian drugs is no longer profitable for domestic manufacturers. The allocation available to support drugs is constantly – and radically – decreasing: in 2014, the health budget will be only half of the 1994 level in real terms. Due to this unfa-
vorable change, manufacturers are forced to compete with each other on price, which will not only jeopardize their profitability but also generate losses in some particular cases – against trends in the global economy. Several amendments were adopted by Parliament recently to improve the tiered payment system. “While the intention
to negotiate is clearly visible, further negotiations are necessary on the health budget, the so-called ‘blind tendering method’ and R&D regulations to keep the competitiveness of the pharmaceutical industry,” said Lívia Ilku, director of the Hungarian Pharmaceutical Manufacturers Association (MAGyOSz) in a recent interview on Orvoslátogatók.hu.
The tiered payment system – under which the deficit of the drug budget is compensated partly by the pharmaceutical manufacturers and, to a larger extent, by the state itself – was introduced in the drug efficiency law in 2007, but no government has used this opportunity yet. Due to the smaller health budget, 2012 could be the first year when the application of the tiered payment system takes place, but the final balance of this year is still quite blurry due to the multi-player market model. The pro rata portion of budget deficit changes from month to month. In September, the deficit of the National Health Insurance Fund reached HUF 15 billion, but the gap decreased to only a few billion forints in October. A predictable solution would be to calculate manufacturers’ payment obligations based on the overspend compared to the previous year’s budget. That way, expenditures would be predictable, Ilku said. ■
3 Socialite
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Who's news The Apple revolution by Luke Dormehl
22 23
Hamburgers, hot dogs, marshmallows and a good deal of cupcakes marked AmCham’s U.S. Election Night party held at the Corinthia Hotel Budapest this year. The evening, which turned into a late-night party of some 1,300 participants, saw expat Americans, Republicans and Democrats alike, joining their Hungarian friends and business partners in celebrating one of the greatest political events of the western world, the United States presidential elections. “I absolutely love watching democracy in action and regardless of political leanings or viewpoints, there is a deeply held belief in the United States that
individual citizens can and should have the final word,” said U.S. Ambassador to Hungary Eleni Tsakopoulos Kounalakis in her opening speech. “I have spent much of my life around politics, and I can tell you, people like me live for nights like tonight,” she remarked. Deputy Prime Minister Tibor Navracsics (Fidesz) kept his opening words short, focusing on U.S.-Hungarian relations, saying that America’s choice in picking a good president is important for Hungary, too. Both the Ambassador and the Deputy PM agreed that, regardless of the results of the election itself, the U.S.-Hungarian partnership and alliance will remain
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strong, vibrant and lasting. The speeches were followed by two films introducing the candidates, and a moderated debate between the representatives of the two parties: Merrill Oates from Democrats Abroad and Liam Crow from Republicans Abroad. The program also comprised a quiz game on U.S. democratic institutions, made interesting with some random trivia, and music played by the orchestra of the Hungarian Air Force. Outside the shiny, sparkling ballroom of the hotel, the event featured lots of programs and activities, highlighting some of the hallmarks of the American industry. From a Chevrolet
Photo: AmCham Hungary / András Hajnal, Lázár Todorof
U.S. election night party at Corinthia Hotel Budapest
Camaro convertible on display to the new models of Microsoft’s Xbox 360 Ava-
tar game system, from Starbucks to Jack Daniel’s, visitors enjoyed a whole range of
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Art on the market Huge interest from media and visitors alike, with relatively few sales – that sums up the annual Art Market Budapest. A new platform for contemporary Eastern European artworks is looking for adventurous investors. BBJ ROBERT V. WALLENSTEIN
There is a theory among the art gallery owners in Budapest’s Falk Miksa street, a well-known location for art boutiques in town. It concerns, in part, the prominent intellectuals of the communist elite from the ’60s to the ’80s with the money and willingness to buy contemporary art. Since 1990, the “new aristocracy” – entrepreneurs with strong connections to political elites – have not continued this pattern. Why? Well, according to the hypothesis it is quite simple: they have no intellectual demand or interest at all in living and working surrounded by art pieces or spending money on them. Attila Ledényi, the founder of the annual Art Market Budapest (AMB) is a striking counterexample. The sole annual art fair for contemporary artists in Hungary has just finished its 2012 edition. Its director held significant positions in the current governing party Fidesz in the early 1990s, when he was a key expert on the party’s international relations as secretary of foreign affairs. His network remains very valuable. No surprise that he could ask present Hungarian Foreign Minister János Martonyi and former U.S. ambassador Nancy G. Brinker – well-known art collectors – to be the main patrons of the event. Over the past 10-15
years, Ledényi forged an exceptional career in the Hungarian art management scene. As a PR and communication specialist, he had notable results in organizing forums, publications and media campaigns to promote art. Ledényi was the architect of success at the Fine Art Museum in 2005 when an exhibition on French painters attracted a record number of 300,000 visitors. His biggest ambition became reality in 2010 when he organized AMB for the first time. This year’s event took place at the prime location of the Millenáris Park and was visited by more than 15,000 people, who had a chance to observe the works of roughly 400 works from 12 different countries at 100 booths. As Ledényi told the Budapest Business Journal, the event had a HUF 30-35 million budget this year with state oil and gas company MOL as main sponsor and HUF 14 million awarded by the National Cultural Fund. Talk about the importance of maintaining valuable connections. “I believe in the future potential of AMB, since there is no other major contemporary art fair in the Eastern part of the region. Budapest has the geographical and infrastructural advantage with an already attractive image as a tourist destination,” said Ledényi, a passionate art collector himself. “From a business perspective, we are sentenced to success if we work consistently on
making AMB a popular brand among international art collectors.” As the BBJ learnt from organizers, the four-day exhibition had more than a dozen visitors who flew to town in their private jets just for the AMB. There were also international curators at the fair, whose presence is crucial from the perspective of Hungarian artists. They are meant to be the lobbyists for the unknown artists they can eventually introduce to Western countries. As the BBJ’s survey – based on multiple interviews with AMB participants – shows, the current market value of a Hungarian artist is 10-25% less than that of other Eastern Europeans. However, it is known among dealers that investing in contemporary art can be a good business. The return on well-known artists can be more profitable than oil. “Our market price is much less because the world does not know us at all. If one of us could break the ice, we would be discovered by others as well. This is just the pure logic of the
ART AND FIGURES – HOW MUCH IS CONTEMPORARY ART WORTH? The world’s most valuable contemporary living artist is Britain’s Damien Hirst, whose complete show of various works was sold at Sotheby’s for $198 million. There are two Hungarians – both have been or were living in France for decades – whose paintings are worth €500,000-700,000. Judit Reigl and Simon Hantai, who passed away a few years ago, are considered the most valued contemporary artists of Hungary. There are dozens of other internationally acclaimed living Hungarians whose work is yet to be discovered. Their estimated worth of their works is around €10-15,000 apiece. Among them, Imre Bak is known as the most valuable with a price tag of around €30,000.
market. If it finally happens, the low prices of artworks can rise,” Tibor Iski Kocsis, art director of Budapest’s Viltin Gallery and participant at many international art fairs, told the BBJ. That breakthrough could have happened in 2006 when the New Yorkbased auction house Sotheby’s featured one of László Fehér’s paintings. It was the first contemporary Hungarian work at such an important place, but no one was interested in paying $40,000-60,000 for one of the most important Hungarian artists alive.
SMALL APPETITE FOR ART Even though the price of contemporary art is comparably lower in Hungary, there is still a huge lack of willingness to buy. The market is small; there are no more than 25 commercial contemporary galleries in the country trying to serve those very few (3040) active art collectors. As a logical result, young artists – the privileged few who had been discovered by foreign art managers – are leaving the country, and some galleries have had to close. Erika Deák, vice president of the Association of Hungarian Contemporary Art Galleries, shared her optimism with the BBJ. “We revived our association and we now function as a lobby organization. We gained some support from the government and were able to host foreign curators in Hungary.
We are working hard on promoting contemporary art, and by doing that we are trying to help galleries survive in this sad economic environment”. Deák likes the concept of AMB and calls it “the most colorful representation of regional contemporary art so far. I see a lot of people in Budapest with lots of money but with not much desire for contemporary art yet,” she observed. Deák thinks
in attracting two New Yorkbased participants; Tamas Veszi (Radiator Gallery) and Ana Cristea (Ana Cristea Gallery) both told the BBJ that Budapest could be a perfect place for such a regional event. In terms of international networking it is perfect, but as far as the market is concerned, they did not sell too much here. The gallery representatives sold only two or three
that if the mindset of these newly rich could be changed, eventually they would understand that it is not only about art but also a good and comforting investment in the long run. That is what the organizers of AMB believe, too. They use various tools for popularizing art: they reached out through mainstream media, there was no entrance fee for the whole event, and different activities were organized for families, children, students and art lovers – all for free. Ledényi even had politically correct side programs as exclusive attractions: Jewish identity and history in contemporary art and an introduction of the Transylvanian city of Cluj, the recent contemporary hotspot of Eastern Europe with many successful artists. Following the logic of the market, establishing a strongly current Central European art fair in Budapest could be beneficial for all participants: organizers, Eastern European artists and Hungary as well. That is the future aim of Ledényi, who attracted many international galleries this year by offering them reasonable rental fees, in some cases just a third or less of what is customary at other events. The director also used his international connections
of their works, but they were excited that those ended up in local collections. Cristea said she was happy that the most valuable art deal at AMB was the sale of painting by her artist Zsolt Bodoni, for €13,000. However, she would probably think twice about coming back next year after being able to sell only one work during four days. “In New York we pay about $20,000-25,000 for participation at a huge art fair, but we most likely sell more there. The clientele is different. However, I can see the good intention of the organizers. The event needs time to establish recognition among art dealers. At the moment, the contemporary art market in Hungary is at its very beginning,” Cristea added. Several Israeli, Turkish and German gallery owners also reported the same experience of selling much less than they had expected. As for the future, AMB’s director is hopeful and intends to carry on with free entry for visitors, in contrast with other art fairs where they filter the audience with an entrance fee. With this step, Ledényi intends to keep emphasizing the educational importance of the event, reaching out to as many people as possible. With the right partners and sponsors, he should be able to do just that. After all, seeing the government back an art initiative so extensively is something quite unique in the Hungarian art scene. In terms of business, until an international star emerges from among contemporary Hungarian artists, the aesthetically competitive works of art remain much more accessible and open up possibilities for adventurous investors. ■
Photos: Fruzsina Mesterházy, André Wagner, Dorottya Kocsis, Jónás Mátyássy
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Budapest Business Journal | Nov 16 – Nov 28
WHO'S NEWS
Name Dávid Csont Current company/position CIB Bank/head of project finance department
With effect from November, Csont, head of the large corporate division of CIB Bank, has taken over the project finance business after the two departments merged. For nearly two years, Csont, as managing director, has headed CIB Bank’s large corporate section. Before his appointment at CIB, he worked in Vienna as a director of Raiffeisen Bank responsible for its international corporate clientele in Central and Eastern Europe.
NOV 20 AmCham Thanksgiving Dinner LOCATION Budapest Marriott Hotel, 1052 Budapest, Apáczai Csere János u. 4, Erzsébet room TIME 6:30 – 10 PM FEE AmCham members in good standing: HUF 19,050/person; non-members: HUF 38,100/person ORGANIZER American Chamber of Commerce in Hungary CONTACT www.amcham.hu
Do you know someone on the move? Send information to research@bbj.hu
Name Anita Csörgő Current company/position CBRE/head of retail
Csörgő joined the real estate consultant’s Budapest office in November 2012. She has been in the retail real estate industry for 15 years. For the past 12 years, she has headed Colliers International Hungary’s retail division, which she helped start up. She had previously lived in the U.S. where she worked as a project manager for one of New York City’s leading residential real estate consultancies, the Corcoran Group.
Name Sándor Pásztohai Current company/position Enterprise Group/head of software division
Pásztohai has been appointed head of the software division of system integrator Enterprise Group. He has more than ten years of experience in the field of healthcare IT. In addition to strategic and business planning, he will be responsible for the sales of the group’s Multi Medical Application. He graduated from the legal faculty of the Eötvös Loránd University and continued his studies at the University of Szeged.
NOV 28-29
NOV 29
DEC 6
Translog Connect Congress 2012
Painting - Antique Zsolnay Auction LOCATION Pesti Department Store, Lotz Hall, 1061 Budapest, Andrássy út 39. TIME 6 p.m. INFO www.parisgaleria.hu
Forum and Gala Dinner with Mihály Varga, minister without portfolio LOCATION Kempinski Hotel Corvinus, 1051 Budapest, Erzsébet tér 7-8. TIME 6-9 PM ORGANIZER:British Chamber of Commerce in Hungary, Joint Venture Association FEE BCCH members: HUF 15,000 + VAT, HABA members: 17,500 + VAT, non-members: HUF 20,000 + VAT CONTACT www.bcch.com; www.jvsz.hu
LOCATION Corinthia Grand Hotel Hungária,
Budapest, 1073 Budapest, Erzsébet körút 43-49 ORGANIZER The Events Group LINK translogconnect.hu
[ PROMOTIONAL FEATURE ]
Reducing operational expenses by healthier employees In today’s challenging business environment one of the most important factors is developing performance with the least possible increase in costs. A very significant enemy of this endeavor is a Key Performance Indicator well known to any chief executive, the working days lost. Can we do something about that only by educating our employees? Already in the last century, enterprises recognized that a way of growing profit is
to cut off the operational waste in all regards. This has been fine-tuned by Toyota’s TPS system which has been further developed to the philosophy we know today as lean management. Lean is absolutely about reducing waste, but at the same time has a strong human touch. There is a new urgency to introducing lean in working days lost due to injuries or illnesses. There are very good and natural ways to prevent illnesses and enhance concentration, but of course we cannot “force” our workers to take this or that pill, powder or liquid. Hence the ideal scene would be if the employees themselves would take more care for their health and safety, but this is difficult to achieve as the Health, Safety and Environment Manager (HSE)
alone cannot change the mind of every person. There is however a possible solution emerging in the form of a bestselling book that has been leading thousands of Hungarians to take their health in their own hands. Gabor Lenkei M.D.’s Censored Health has been sold in more than 140.000 copies in Hungary and more in Dutch, English and Romanian editions. The book reveals the single largest threat to our health and an easy natural method to dramatically improve it. Amongst the more than 50.000 positive feedbacks from the followers of this lifestyle there are thousands reporting on enhanced work performance and less days spent ill. Sounds like a good idea for a Christmas present for employees, especially as it may be purchased from the HSE budget.
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BBJ
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Budapest Business Journal | Nov 16 – Nov 28
The Apple revolution by Luke Dormehl
Journalist and award-winning documentary filmmaker Luke Dormehl uncovers how Apple has reinvented the computer and global capitalism; and how ‘the crazy ones’ took over the world. BBJ BBJ
A“In the beginning was the void. And the void was digital. But lo, there came upon the land the shadow of Steven Jobs (and Stephen Wozniak). And Steven (Stephen) said, ‘Let there be Apple.’ And there was Apple. And Steven (Stephen) beheld Apple. And it was good. And Apple begat Macintosh. And it was good. And soon upon the land
there began to appear The Cult of Macintosh. For they had tasted of Apple. And it was good.” (Russell W. Belk and Gülnur Tumbat, ‘The Cult of Macintosh’, Consumption, Markets and Culture, Vol. 8, No. 3, September 2005) Nowadays it’s hard to imagine a world without the iPad, the iPhone and the beautifully designed Apple Mac – but once upon a time, before the Information Age, there was a digital void. So how does something come from nothing? How did Apple emerge and revolutionize the digital landscape and change the way we use computers? In this comprehensive and detailed book, Dormehl explores how Apple sprung out of the hippy idealism of 1970s California and how the long-haired, yoga-practicing, deodorantdodging Jobs rose to become one of the leading figures of modern capitalism.
The dichotomy between capitalism and hippy ideals is a running theme throughout The Apple Revolution; as Dormehl states “although companies like Apple have continued to wave their world-changing ambitions over the years, the ideological problem exists with the notion of profiting from that new world order”, and “the voices of counter-culture, musicians like Jobs’ beloved Dylan were churning out the soundtrack to a revolution while being paid multimillion-dollar sums by major record labels”. While no firm conclusions are drawn, it is an interesting concept of how creativity and consumerism merged and transformed the landscape. Dormehl also offers a compelling account of the world inside Apple and of the squabbling in-house culture that was created, forcing Jobs to take a decade-long hiatus from the company
ose he’d founded. And for those interested in brands and marketing, there is a riveting account of how the udlogo was created, including details about how the ctooriginal design was a Victoote rian woodcut with a quote from Wordsworth’s The Prelude; “A mind forever voyagaging through strange seass of thought alone.” Apple continues to voyage age onthrough modern seas, continually rethinking and reineinventing products that, no doubt, we will all consume. e.
THE APPLE REVOLUTION ON by Luke Dormehl Random House Business Books ISBN: 9780753540626 Available to order through www.hungaropress.hu
[ EXPERT OPINION ]
Winter of discontent ‘No fruits, no flowers, no leaves, no birds! – November!’ run the infamously bad lines of Victorian rhymester Thomas Hood. For worthier lyrics, take Tom Waits’ hoarse take on Hood’s pome: ‘No shadow / No stars / No moon / No cars / November.’ OK, we got the message. The month of Scorpio sucks big time. If you have a tendency for depression, chances are ten to one that you emotionally suffer through the end of the year: autumnal melancholy easily slips into deep wintertime depression. The reasons are as murky as the November sky, but one thing the shrinks, who are fully booked and busy this time of the year, unanimously agree on: patients who get the blues – stricken with spleen, as Thomas Hood would put it poetically – are particularly susceptible and sensitive to light, and more so to the lack of it. “It is written in our genes, all coded in biology,” says Dr. László Lakatos, psychiatrist and therapist at Dr. Rose Private Hospital. “Biochemical processes in the nervous system of the human brain are affected by how ionized the air that we breathe is. The concentration of negative charged ions is higher in springtime. How sensitive we are is determined by our genetic code. The amount of natural light also plays a significant part in our shifting mood. Clinical trials proved that exposing patients to more light – even artificial light that bears certain physical characteristics of sunlight – measurably raised their spirits. Light therapy is apparently most effective early in the morning.”
Obviously the dark, somber November mornings raise none but the ravens’ spirits. The alarm goes off in the dark, when our internal clock is still ticking sleepy-sleep. No wonder that we start the morning knackered, and sleepwalk through the rest of the day. Fatigue turns into general inertness. Inactivity leads to cocooning – one becomes increasingly introverted and less outgoing, losing the drive to socialize. By not going out, one gets less exposure to natural light, which completes the vicious circle.
“Light therapy, antidepressants, deep-magnet brain stimulation, and psychotherapy offer various ways to treat the downbeat mood,” says Dr. Lakatos. “We recommend light therapy to begin with. It doesn’t always help, typical ‘night owls’ can even get worse from early exposure to light therapy. Low self-esteem and negative thinking are a common denominator in depressed patients, so psychotherapy is a cardinal part of the treatment.” Needless to say, the patient could be the best doctor: a healthy diet, with less carbs and more Omega-3 fatty acids, can work miracles.
Consciously socializing, going out and seeing people, doing sports and staying active are the selfexplanatory measures to keep depression at bay. Let there be light in your life, it’s a doctor’s order: Start the day with a therapeutic light bath, light up a candle for your meal, wear colourful clothes, take long walks, especially before noon. Do what makes you the happiest. If all these efforts fail, then one really needs to seek professional help. Combining medication, therapy and substitute light are usually enough to make the winter of discontent somewhat more glorious.
TWILIGHT ZONE It might seem logical that the further north we go, winter depression becomes more widespread. Wrong assumption. Studying the people of bleak Alaska, where the sun barely rises above the horizon for four hours in midwinter, researchers found that the rate of depression was no higher than in Europe. Genetic predisposition to depression is the key factor, while the lack of light is only a catalyst that triggers the symptoms at this time of the year. www.drrose.hu
For an appointment, call (+36)1-377-67-37 or go online at www.rendelo.drrose.hu