Budapest Business Journal 20/24

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1992-2012

20 YEARS

IN BUSINESS

VOL. 20, NUMBER 24 DEC 14, 2012 – JAN 10, 2013

Budapest Business Journal

Q&A

3.1%

András Farkas, the commercial head of Consequit

Y/Y FALL IN RETAIL SALES IN SEPTEMBER

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

DOTY 2012

The Budapest Business Journal presents the most significant deals of 2012 in private equity, M&A, foreign direct investments and capital outflows and JEREMIE transactions.

PAGES 10-12

DEALS OF THE YEAR 2012

ECONOMY

BUSINESS

SOCIALITE

Budget bill 2013 approved

M&A market outlook

BBJ celebrates 20 years of business

The revenue, expenditure and deficit lines of the 2013 budget were modified from those approved by Parliament in July in a bill submitted at the last minute.

The bill shows revenue of HUF 15.3 trillion, expenditures of HUF 16.1 trillion and a deficit of HUF 842 billion. PAGE 04

Hungary’s transaction market saw decreasing activity in 2012. As we enter the New Year, the signs are not promising; the current unfavorable tendencies are expected to continue, with the Hungarian state still dominating the M&A market next year.

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Gov’t unveils higher education plan The new forms of taxation

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macroscope

Hungary set to issue forex debt sans IMF, but only in 2013 Hungary is progressing its plans for foreign currency debt issuance even without a signed contract with the International Monetary Fund, despite earlier claims that the debt management agency would definitely wait for the conclusion of a deal. Still, it will definitely not hit the market in 2012.

Hungary’s government has been adamant over the year that it would not be orchestrating any foreign currency bond issuance in the absence of IMF backing for its planned €4 billion worth of foreign currency targets this year, saying the high yields payable on the paper would be too high. State secretary at the Economy Ministry Gyula Pleschinger told the Wall Street Journal a few months back that he would fight until “his last drop of blood” to block any issuance if there is no IMF agreement signed.

As Pleschinger, the former head of the debt manager ÁKK, recently told Reuters, no bloodshed is planned for 2012.

“This year we do not plan a foreign currency bond issuance: this statement obviously reflected that we will clearly not finance all expiring foreign currency debt from forint issuance,” he told the agency.

The statement Pleschinger referred to was from the Economy Ministry, confirming that Hungary will indeed seek to attract investors to buy foreign currency

debt even as demand for forint-denominated paper remains high.

Deputy chief executive of ÁKK Sándor Borbély said recently that the volume of issuance in forint-bonds was already well ahead of the annual 100% planned by early autumn, and added that ÁKK would keep the auctions going, seeing that time and again the offers for papers of various maturity were well covered and regularly oversubscribed.

“It is… clear, and we have made no secret of this, that with nearly half of our debt being in foreign currency, we were obviously never going to refinance all of this from forints,” Pleschinger said.

DOWNGRADED MOOD Any plans the government may nurture also hinge on the international perspective of the country and the risks investors are willing to take by financing it.

Standard & Poor’s decided late November on another incremental downgrade to Hungary’s sovereign debt rating — with the country being ranked in the highest junk category by all three major rating agencies since the start

of the year. Business daily Napi Gazdaság reported that Moody’s Investors Service has no immediate plans to revise the Hungarian rating, while Fitch is expected to announce its revised expectations for Hungary this month Nomura analyst Peter Attard Montalto said he expects Fitch could well follow the S&P example and also call a downgrade.

DOWNGRADE, SCHMOWNGRADE The government was quick to dismiss the S&P call and stressed that, seeing the activity of the rating agencies over the past few years, as well as their alleged complicity in sparking the ongoing global economic crisis in the first place, their opinions no longer matter.

Apart from pointing out the frequently cited economic achievements of great lengths traveled to keep the annual budget deficit under the 3% of GDP required by the European Union and the reduction of public debt, officials pointed to the muted market reaction to the S&P call.

True enough, the response was nowhere close to slipping below the junk threshold in 2011. Before the call, this was something a government official predicted – off-the-record – would have meant “the end of the story” in an equivalent turn of phrase in Hungarian.

There is no sight of the panic that compelled the government to seek the IMF’s help with what was an overnight U-turn in policy at the time.

IMF? NEVER HEARD OF IT It seems that the government now has a timeline of its own

GYULA PLESCHINGER: NO DEAL, NO ISSUANCE?

for managing its finances and one that no longer necessarily considers the reduced yields from the confidence boost that can be attained through an IMF package.

The events of the past months – nothing to show for the trip to the IMF summit in Tokyo, no date set for the continuation of talks, unwavering anti-IMF rhetoric from the government, the repeated appearance of if over when in the language – all show that a deal is nowhere in sight.

For the time being, Hungary can ride the waves of the continued interest toward emerging markets with their more advanced counterparts offering low, or even nearzero yields, and that does in-

deed appear to be the government’s main intent.

Even if the costs of an issuance are higher when issuing without the international lenders’ backing, the freedom to shape economic policies at will, with no direct oversight from the “banks”, remains the preferred alternative.

RED BUTTON RISK The main issue that decisionmakers have to consider is how all of this could backfire, which is something investors are already looking at.

If there was another global negative swing, like an unfavorable turn in the seemingly endless downward spiral of the Greek debt crisis, concrete negative repercussions

in the EU’s budget talks or a significant stalemate in U.S. economic policies, the already shaky situation is prone to produce a steep downward slide for Hungary.

A country that is basically benefitting from little else but the favorable international sentiment towards emerging markets, whereas its economic policies are widely viewed with suspicion, is likely the first to go from the ballast portfolio of any sinking ship.

Should that happen, it remains to be seen whether words of comfort – like those quickly uttered by the government at the start of the year – would be sufficient, but it seems doubtful in light of the recent past. GR

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Budapest Business Journal | Dec 14 – Jan 10

bi-weekly

QUOTE OF THE WEEK

I think we haven’t caused any surprises with our decisions. Since its first day, the government has been playing with open cards …, and this openness can be taken for granted in the future, too.

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Light against the darkness

PRIME MINISTER VIKTOR ORBÁN IN A LETTER TO DÁVID NAGY, PRESIDENT OF THE STUDENTS’ SELFGOVERNING ORGANIZATION (HÖOK), EXPLAINING HOW A RADICAL CUT IN THE NUMBER OF FULL SCHOLARSHIPS IS DIFFERENT FROM INTRODUCING A TUITION FEE

Photo: MTI / Tamás Kovács

Israel’s ambassador to Budapest Ilan Mor and Chábád Lubavics chief rabbi Oberlander Báruch light the fourth candle of the giant chanukkia at Budapest’s Nyugati Square as part of the Light against Darkness event on the fourth night of Chanukkah. Artists and politicians are participating in the candle-lighting ceremony on all eight nights of this year’s celebration, including Budapest mayor István Tarlós, Socialist party chairman Attila Mesterházy and renowned Roma violin player Zoltán Mága.

ECONOMY PARLIAMENT APPROVES 2013 BUDGET BILL The Hungarian Parliament approved the 2013 budget bill showing revenue of HUF 15.3 trillion expenditures of HUF 16.1 tln and a deficit of HUF 842 bln. The revenue, expenditure and deficit lines were modified in a bill submitted at the last minute from those approved by Parliament in July. The framework approved in July showed revenue of HUF 15.08 tln, expenditures of HUF 15.7 tln and a deficit of HUF 654 bln.

The modified budget framework reflects the effects of fiscal adjustments announced by the government in the fall.

The measures, which include a HUF 300 bln rise in the National Protection Fund budget reserves to HUF 400 bln, are intended to ensure Hungary meets its 2.7% of GDP deficit target, according to the EU’s accrual-based accounting. National Economy Minister György Matolcsy said earlier that Hungary must meet the target to end the Excessive Deficit Procedure against the country

that could put its Cohesion Fund allocation in jeopardy.

The ESA general government deficit target in the 2013 budget was bumped up to 2.7% from 2.2% in early October.

Legislation passed by MPs in the autumn established the possibility of amending the 2013 budget framework if required to reach an agreement with the International Monetary Fund and the European Union or to end the Excessive Deficit Procedure against the country brought by the European Union.

Q3 GDP DROP CONFIRMED AT 1.5% ON YEAR, 0.2% ON QUARTER Hungary’s GDP fell 1.5% year-on-year according to unadjusted figures in the third quarter of 2012 and Q1-Q3 GDP contracted by 1.3% from a year earlier, the Central Statistics Office (KSH) said. A big contraction in agriculture explained 1.1 percentage points of the yr/yr drop in Q3 and a fall in services explained 0.3 percentage point of the decline. GDP in manufacturing fell for the second quarter in a row, but the construction sector showed growth. On the utilization side, net ex-

ports remained the main growth factor, but their 2.3 percentage point addition was more than offset by final consumption, which cut the Q3 GDP change by 2.4 percentage points, as well as by the 1.5p percentage point reduction from investment and stockpiling combined.

Third-quarter GDP fell 0.2% quarter-on-quarter, seasonally- and calendar year-adjusted data show.

GDP produced by industry fell an adjusted 1% from Q2 but that of the construction sector rose 2.8%. GDP in services rose a slight 0.2% on the quarter. Within GDP use, consumption spending was down 1.4% from Q2, and final consumption fell 1% as in-kind support from the government rose 0.2% and government consumption rose 0.1%. Exports fell 0.8% and imports were down 1.3% from the previous quarter.

RETAIL SALES FALL 3.1% IN SEPTEMBER Retail sales in Hungary fell a calendar year-adjusted 3.1% year-on-year in September, accelerating from a 2.4% drop in the previous month, the Central Statistics Office (KSH) said. Retail sales

fell 0.4% month-on-month in September, adjusted for calendar year and seasonal effects. January-September retail sales were down 1.5% from the same period a year earlier, according to calendar year-adjusted figures.

Sales rose only in January and March. Retail sales in Hungary rose a calendar year-adjusted 0.3% in 2011 after steady drops between 2007 and 2010. In nominal terms, retail sales were worth HUF 716.8 bln in Sep-

tember, down HUF 22.5 bln in a month, and up HUF 23.9 bln from a year earlier. Sales of food, drinks and tobacco fell a calendar-adjusted 3.7% yr/yr in September and were down 0.3% in January-September. They fell seasonally and calendar-adjusted 0.7% from August. Sales of nonfood products fell 3.3% yr/ yr and were down 0.2% on the month in September, the adjusted figures show. January-September non-food sales were down 2.6% yr/yr.

BUSINESS GOV’T SIGNS STRATEGIC PARTNERSHIP AGREEMENT WITH GE Hungary’s government has signed a strategic partnership agreement with the local unit of General Electric (GE). General manager for GE Lighting in EMEA, Ivan Hutter, said the agreement created the possibility to put ties between GE and Hungary on new footing. The gov-

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ernment has signed similar strategic partnership agreements with the local units of Coca-Cola, Alcoa, Daimler, Suzuki and Hankook as well as with Hungarian drug maker Gedeon Richter. National Economy Minister György Matolcsy said GE was among the first companies with whom the government had signed a cooperation agreement, as it had been “our partner for more than two decades”.

operation agreement with Hungary’s state-owned postal company Magyar Posta, but replacing it with another one that aims to support business continuity. From February 1, Magyar Posta clients with securities accounts will only be served at Erste Bank branches. Clients with bank accounts will continue to be served at postal offices.

EURONEWS LAUNCHES LOCAL HUNGARIAN CHANNEL APRIL 2013

The Hungarian unit of German carmaker Audi has been awarded almost HUF 900 mln in subsidies to support training related to an expansion, according to a government decree published in the fresh issue of the official gazette Magyar Közlöny. Audi is undertaking a big expansion at its base in Győr.

ERSTE, MAGYAR POSTA CHANGE COOPERATION Erste Bank said its investment unit is cancelling a co-

EXIMBANK PLANS $500 MLN BOND ISSUE Hungary’s Eximbank has announced that it plans to raise $500 mln in a dollar-denominated bond issue, Reuters reported. Guidance for the fiveyear bond is 5.875%, Reuters said. Deutsche Bank and Jefferies are managing the deal.

Standard and Poor’s rated Eximbank ‘BB’ by and Fitch rated it ‘BB+’, two notches and one, respectively, under investment grade.

MASTERCARD LAUNCHES MOBILE SHOPPING APPLICATION AWARDS Hungary is one of the nine countries participating in MasterCard’s newly launched competition, recognizing the best available mobile shopping applications in countries

Photo: MTI / Zsolt Szigetváry

Euronews unveiled plans to launch its Hungarian local newsroom in Budapest next April. It will be the channel’s 13th national edition and the second – after Greece – to be based on a local newsroom, Euronews CEO Michael Peters said at a press conference in Budapest. The project – cofinanced by Euronews and the European Commission – offers 37 full-time jobs: 22 journalists and a technical and support staff of 15 will work in Budapest, Brussels and at Euronews Headquarters in Lyon. The recruitment of the head of team is only a matter of days, and the rest of the staff will be recruited

by February 2013, Peters said.

Euronews is already available in 20% of Hungarian households. It is the fourth biggest news channel in Hungary, 7% of the Hungarians watch Euronews at least a week, according to EMS Europe.

AUDI HUNGÁRIA AWARDED ALMOST HUF 900 MLN IN EXPANSION-LINKED TRAINING SUBSIDIES

GOV’T UNVEILS HIGHER EDUCATION PLAN Hungary’s government unveiled a broad-reaching plan that aims to make higher education accessible to more students while creating disincentives for dropping out. The plan aims to level the playing field and allow more Hungarians to enter college or university. The merit-based system will allow as many people as possible to enter university, not just those with money, the government said. State-sponsored student loans, under the aegis of the Diákhitel 2.0 program, will serve as a disincentive for leaving university before graduating, a spokesman said, adding that the dropout rate is almost 50% at present. The proposal, obtained by state news agency MTI, shows a total of 74,100 full and partial state scholarships in the next academic year. They include 10,480 full and 46,330 partial scholarships for undergraduates, as well as 16,000 scholarships for master’s programs and 1,300 for doctoral programs. The number of students on full state scholarship fell to 39,087 this academic year from 53,450 in 2011/12, Econews reported earlier. Maruzsa said full scholarships would now be available for the best 15-20% of students. In 2011, 66,810 of 101,835 applicants were accepted into undergraduate and master’s programs in Hungary, data from the Central Statistics Office (KSH) show. The unveiling of the plan was followed by a general uproar and widespread protests across the country. Both student and education industry organizations said the proposal was effectively the introduction of a tuition fee. The tuition fee was eradicated by a referendum in 2008 initiated by the then-opposition Fidesz party. drawn from Central and Eastern Europe, Russia and Turkey. This unique new initiative will reward the top performers and showcase the most innovative applications in the mobile shopping space, MasterCard said. The MasterCard Mobile Shopping Application Awards will recognize the best mobile applications that allow users to browse and optionally purchase products or services.

Mobile applications that are already publicly available in the official languages of the nine countries launching the awards may enter the competition and must be available on at least one of the following platforms: iOs, Android, or Windows Phone.

DELOITTE AWARDS MAGYAR TELEKOM 2012 “GREEN FROG” Consultancy Deloitte said Magyar Telekom had won its 2012 “Green Frog” environmental reporting award.

Magyar Telekom was competing against 35 companies from seven countries in the region for the prize. Deloitte established the Green Frog Award in 2001 for CEE companies that prepare the best annual environmental or sustainability report. Hungarian oil and gas company MOL was runner-up in this year’s contest.

FLEXTRONICS TO LAY OFF 1,100 AT PLANT IN WESTERN HUNGARY

TWO INTERNATIONAL COMPANIES EXPAND IN ARÉNA CORNER A multinational, leading provider of information technology, consulting and business-process outsourcing services as well as the shared service center function of an international bank will continue their activities in larger offices as the two companies recently signed to expand their leases by a total of 2,350sqm in the Aréna Corner Office Building. One of them is the first company to have acquired LEED Platinum qualification for its office premises in Arena Corner. The A class building complex offers office space of 24,000sqm and retail space of 3,500sqm on eight floors in three office towers with direct connections to each other, with large, efficient spaces ideal for the operation of shared service centers.

Contract electronics manufacturer Flextronics will lay off 1,100 people at its plant in Zalaegerszeg (western Hungary), the head of the local labor office said. Flextronics will lay off 800 people in December, 150 in January and 150 in February, said József Borsos. The layoffs effect 950 blue-collar and 150 whitecollar workers, he added.

Flextronics has already laid of about 500 people at the plant this year.

KÜRT SPENDS HUF 500 MLN ON CLOUD COMPUTING DEVELOPMENT Hungarian data recovery and security company KÜRT has completed a two-year HUF 500 mln project to develop services for businesses that use cloud computing, company officials said at a press conference. KÜRT will launch the services in Q1 2013, said research development manager Zsolt Nagy. KÜRT won a HUF 300 mln European Union grant for the project.

AEM WON ELECTRIC METER TENDER AEM from Timisoara, Romania won the tender of Elmű-Émász and EdF Démász for delivering one and three-phase electric meters, said Peter Steinreich, the Central European director of the company’s partner Metrima Energia AB. AEM has two years to deliver the 180,000 “traditional meters” that will be equipped in households in Budapest, Miskolc and Szeged. The winner of E.On’s tender – the last big provider in Hungary – will be published in January 2013.

IL BACIO DI STILE LUXURY STORE TO OPEN IN EARLY 2013 The seven-story luxury il Bacio di Stile department store, a Docler Holding investment, is set to open its doors in spring 2013, the company said in a statement. The store will host luxury brands, a café, a restaurant and the most renowned names in the world,

generating some 120 jobs in a 5,000sqm real estate on Budapest’s Andrássy út boulevard.

The brands represented in the store will include Donna Karan, Giorgio Armani, Saint Lauren Paris, Ralph Lauren, Valentino and others.

PROLOGIS RESEARCH ON EUROPEAN INDUSTRIAL PROPERTY MARKET European industrial real estate values declined 21.9% from the pre-crisis peak in 2007, and have subsequently only recovered by 1.3% on average. Current values are attractive relative to replacement costs and the pattern of value recovery in the United States following the global financial crisis, research by Prologis Inc, the leading global owner, operator and developer of industrial real estate, found. According to the study, logistics real estate delivered 7.6% in direct return over the last 10 years, some 200 and 240 basis points higher than the direct return component of office and retail respectively. “Over the long term, the industrial property sector has proven to be a solid and defensive asset class,” Ali Nassiri, vice president of Prologis Europe commented on the study, adding, “The ongoing drive for greater operational and cost efficiency will benefit industrial real estate, fueling the sector through its recovery in the near term and into the future.” ■

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

ROSATOM SEEKS PARTNERSHIPS WITH HUNGARIAN SUPPLIERS Russia’s state atomic energy company Rosatom is making a priority of forming partnerships with Hungarian suppliers, Ivan Dibov, deputy head of the company’s marketing unit, Rusatom Overseas, said at a press conference on December 6. Rosatom will open an office in Budapest in days and plans to start talks with potential Hungarian suppliers early next year, Dibov said. Hungarian suppliers could get contracts for foreign as well as domestic projects, he added.

DECLARATION OF INTENT SIGNED ON SALE OF E.ON GAS BUSINESS IN HUNGARY Prime Minister Viktor Orbán and E.ON Chairman-CEO Johannes Teyssen signed a declaration of intent earlier on November 30 regarding the purchase of E.ON’s gas business in Hungary by wholly stateowned Hungarian Electricity Works (MVM), state newswire MTI reported. A sales contract is expected to be finalized by December 15 of this year and signed by January 31, 2013. The purchase of E.ON’s gas business could be financed with the remaining part of a loan the government took out from the

regional ROMANIA’S RULING COALITION COMFORTABLY WINS WEEKEND POLL Romania’s governing centerleft coalition comfortably won parliamentary elections, results showed on December 10. The Social-Liberal Union (USL) headed by Prime Minister Victor Ponta took nearly 60% of the vote, according to results from more than 99% of the polling stations. Parties close to the USL coalition’s arch-rival President Traian Basescu, the Right Romania Alliance (ARD), came in a distant second with around 17% of the vote, less than one third of center-left’s share. Turnout was low at 41.6%.

GREEK JOBLESS RATE HITS NEW RECORD HIGH IN SEPTEMBER Greece’s unemployment rate increased further and reached a new record high in September, latest data showed on December 6. The seasonally adjusted unemployment rate increased to 26% in September

International Monetary Fund in 2008 and a bond issue, daily Népszabadság said on December 1. Sources familiar with the transaction confirmed reports the deal would be worth about €800 mln, MTI said.

POLAND SETS LAUNCH DATE FOR GAS EXCHANGE Polish power exchange POLPX set a December 20 launch date for its planned natural gas exchange, taking a step toward liberalizing Eastern Europe’s biggest gas market. Central and Eastern Europe’s largest economy is required by the EU to introduce free market rules to its gas market and the creation of the new exchange by POLPX, a unit of the Warsaw Stock Exchange, could be a significant move in Europe’s energy market. State-controlled PGNiG currently sells nearly all of the gas available in Poland, of which around 70% goes to industry and the rest to homes. The gas exchange, proposed earlier this year, could help bring new entrants into the market.

RUSSIA LAUNCHES CONSTRUCTION OF SOUTH STREAM, ANALYST DOUBTS EMERGE OVER PROJECT European energy executives lined up with Russian

President Vladimir Putin to witness the first weld on the South Stream pipeline on December 7 in a show of support for a project that would enable Russia to retain its dominance of Europe’s gas market. Top executives from partners in the South Stream consortium – France’s EDF, Germany’s Wintershall and Italy’s ENI – joined the chief executive of project leader Gazprom, Russia’s gas export monopoly, for the ceremony near the Russian Black Sea resort of Anapa, Reuters reported.

Despite the groundbreaking ceremony, Gazprom hasn’t ordered pipes for South Stream, UPI wrote, citing an analyst. Jonathan Stern, a natural gas analyst at Oxford University, told Radio Free Europe, that Gazprom can’t “start laying the offshore section until 2014 (at the) earliest,” because it had not ordered pipes yet. UPI also wrote that Marlene Holzner, a spokeswoman for the EU energy commissioner, had told RFE/RL that Gazprom hasn’t issued a formal route declaration.

The 3,600 kilometer-long (2,234 mile) pipeline, with a capacity of 63 billion cubic meters, would run through Serbia, Hungary, Slovenia

and Austria before connecting to ENI’s distribution network in Italy.

OMV IN TALKS WITH RWE TO SELL 17% STAKE IN NABUCCO Austrian energy group OMV may buy German utility RWE’s stake in the Nabucco gas pipeline project that aims to bring Caspian supplies to Europe. Both companies have confirmed that they are in discussions over RWE’s 17% stake in Nabucco. OMV remains committed to the project, which is intended to transport gas from the Caspian Sea region to Central Europe, CEO Gerhard Roiss said at a press briefing. RWE Supply&Trading had initiated the sale of RWE’s stake, a spokeswoman for RWE told Reuters, adding that the company would continue efforts to make Caspian gas available to its home market through, for example, supply contracts.

The Nabucco group of six companies originally wanted to build a 3,900-kilometer (2,400-mile) pipeline traversing the Caspian, Middle East and Europe. Construction goals have been shortened to the so-called Nabucco West, a 1,315 km line that would carry natural gas from Azerbaijan into Austria.

EU CLIMATE FIGHT HIT

BY NEW RECORD LOW CARBON PRICE The European Union’s leadership in the fight against climate change suffered a further setback on November 30 as the carbon market it created to help spur a switch to greener energy tumbled to a record low.

The $148 bln EU Emissions Trading Scheme is core to Europe’s efforts to prompt utilities and industry to go green, but carbon prices are currently far too low to provide that incentive. EU allowances for December plunged 5.8% to the lowest closing price since the contract was first listed in April 2005 on the ICE Futures Europe exchange. Permits dropped 38 cents to close at €6.20 ($8.07) a metric ton.

The EU ETS has been hurt

by Europe’s economic slowdown, which has lowered demand for carbon permits.

Cheap gas and coal prices also make it harder to wean users off of them.

GAS TRANSIT TO EUROPE FALLS THROUGH UKRAINE Ukraine reduced gas transit to Europe and other CIS countries by 20.7% year-on-year in January-November this year

to 75.04 billion cubic meter.

The press office of Ukrtransgaz, a subsidiary of national oil and gas company Naftogaz Ukrainy, said transit to Western Europe fell 21.3% to 72.6 bcm, and transit to the CIS fell 2.8% to 2.66 bcm. In November alone, gas transit via Ukraine fell 35% yr/yr to 6.108 bcm, with transit to Europe down 35.8% to 5.807 bcm and transit to the CIS down 13.5% to 300.81 mcm.

ROMANIA MAY BE ABLE TO EXPORT GAS FROM END OF 2015 Romania may be technically able to export natural gas through a pipeline to neighboring Hungary starting from the end of 2015, Ziarul Financiar reported on December 3, citing unidentified officials at gas grid operator Transgaz SA. The technical conditions for gas exports through the pipeline running between Arad in western Romania and Szeged, in southeaster Hungary, will be created at the end of 2015, ZF said.

Romania’s gas production covers about 80% of the country’s consumption and Transgaz has not received any requests for exports so far, according to the newspaper. ■

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

from 25.3% in August, which was revised down from 25.4%, the Hellenic Statistical Authority said. The latest figure was also significantly higher than the 18.9% recorded in September 2011. The unemployment rate among youths, aged between 15 and 24, was 56.4% in September. There were around 1.3 million unemployed people in the country at the end of September, sharply higher by 38% compared to last year. On a mth/mth basis, the number of jobless rose by 2.8%.

HUNGARY, BULGARIA LEAD BANK FUNDING DROP IN EU’S EAST Bulgarian and Hungarian lenders suffered the largest funding drop of seven central and eastern European countries surveyed by Fitch Ratings, as Western parent banks have been seeking savings since the onset of the financial crisis. Funding withdrawals, although slowing, remained significant in the first half of the year, suggesting that “changes

in risk appetite, a weaker medium-term economic outlook and limited attractive lending opportunities were the main drivers,” according to a survey of 43 foreign-owned banks in CEE published by Fitch on December 5. Group funding at Eastern European banks decreased by 20% to €62 billion ($81 billion) between the end of 2008 and July 2012, representing a “moderate” 4% of total liabilities, the survey said.

The drop in funding has been largely replaced with domestic deposits, it said. The most significant reductions in parent funding were in Bulgaria, by 47%, and Hungary, by 38%, approaching 10% of gross domestic product in each country.

SLOVENIA ADOPT PENSION REFORMS Slovenian lawmakers approved changes to the country’s pension system, which has one of the highest spending levels in the euro region, raising the retirement age to 65 years or 40 years of employment, media

reported. Lawmakers voted 76-0 to adopt the changes on December 4. Tougher retirement conditions will come into effect in January and are expected to save €150 million ($195 mln) in 2013. The pension reform is part of efforts by conservative Prime Minister Janez Jansa to reduce the budget deficit to 4% of GDP in 2012, after a shortfall of 6.4% of GDP last year.

SLOVAKIAN LAWMAKERS RAISES INCOME-TAX RATES Slovak lawmakers have approved tax increases for individuals and companies, dismantling the previous system of a uniform 19% tax rate, as the country seeks to boost budget revenue. Deputies voted 8060 to back the government’s proposal to raise the corporate tax rate to 23% and impose a 25% top rate for individuals with an income exceeding €2,867 ($3,749) per month.

The changes are effective from 2013. Robert Fico’s administra-

tion is relying on income-side measures rather than spending cuts to trim the budget deficit below the EU’s limit next year.

Tax increases for high earners and companies follow Fico’s pre-election pledges to limit the impact of fiscal consolidation on most citizens.

MONTENEGRO NEW PM SAYS EU, ECONOMY ARE PRIORITIES Montenegro’s Prime Minister-designate Milo Djukanovic vowed to work on the country’s EU integration and boosting the crisis-hit economy as he presented his cabinet to Parliament on December 4. He said the government would also continue its integration into NATO, adding that joining the military alliance offered “the guarantee of lasting stability for a small Balkan country like Montenegro”. Djukanovic repeated his campaign promise to improve the quality of life of the republic’s 625,000 inhabitants, who face an unemployment rate of

over 20%. The economy grew by 2.7% in 2011, but the government forecasts an expansion of just 0.5% this year.

POVERTY RISK UP IN EU In 2011, 119.6 million people, or 24.2% of the population in the EU, were at risk of poverty or social exclusion, compared with 23.4% in 2010 and 23.5% in 2008. This means that they were at least in one of the following three conditions: atrisk-of-poverty, severely materially deprived, or living in households with very low work intensity. A reduction in the number of persons at risk of poverty or social exclusion in the EU is one of the key targets of the Europe 2020 strategy.

In 2011, the highest shares of people being at risk were recorded in Bulgaria (49%), Romania and Latvia (both 40%), Lithuania (33%), Greece and Hungary (both 31%), and lowest in Czech Republic (15%), the Netherlands and Sweden (both 16%), Luxembourg and Austria (both 17%). ■

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Budapest Business Journal | Dec 14 – Jan 10

Surprise! – it’s a new tax The new forms of taxation introduced to boost state revenues may have surprised Hungarians, but most have had their equivalents elsewhere.

BBJ ZSÓFIA VÉGH

Taxes are a tried-and-tested way to boost government revenues. Thanks to the economic crisis, they have been routinely used in the past few years. The Hungarian government has also applied them generously: some of the taxes introduced would never make it to the parliament during times of prosperity. With austerity, however, they are all justified – no matter how unusual they may be.

In fact they rarely are unique: most have been tried out elsewhere at some point in time.

TAX AVOIDANCE IS WHERE THE MONEY IS HUF 2 trillion is the amount seasoned tax evaders pull out of the state’s pocket, according to the estimates of the National Economy Ministry. Value added tax is one of the most (successfully) avoided taxes, especially in the agricultural sector. To restore some of the losses, the government introduced this July a reverse charge mechanism on certain farm products such as grains, oil and protein plants. Under the system, tax liabilities are passed down the business chain: the

goods are sold at a net price and the buyers pay the tax. The logic goes that if suppliers don’t need to collect and pay over the VAT, there is less likelihood of fraud. Reverse VAT payment is not a novelty, even in Hungary – it was already launched in the construction sector.

Austria, Germany, Italy, the Netherlands and the United Kingdom all use similar reverse taxes. The Dutch launched their system this summer too, and must have been hard pressed to make up for lost revenues, as the country did not even wait for European Commission approval. High-risk products that reverse charge are now applied to include mobile phones, computer games, computer parts, and tablet computers.

PBJS: PRICEY, BAD-FORYOU JUNK FOODS Hungary pioneered in introducing taxes on “unhealthy” foods – even the World Health Organization noted the move.

Beloved treats such as sugary and energy drinks, crisps (though “only” the fried and toasted ones), prepackaged sugared products, and yes, jams, fall under the scope of the public health product fee.

Since 2011, beer and pretzels have not only been a poor choice, but a more costly one as well. The rationale behind the tax is that higher prices will promote better health and improved state revenues.

The first assumption is, more or less, supported by a recent

study by the British Medical Journal (BMJ) that claims at least a 20% tax on unhealthy foods is needed to have a significant effect on diet-related conditions such as obesity and heart disease. This criterion is met by Hungary’s hamburger tax, which, for example, levies HUF 500/kg on jams or HUF 250/kg on salty snacks.

Thanks to new items added to the list, like flavored beers and alcoholic refreshments, plus big summer events (which people generally watch while snacking on beer and junk food) like soccer’s European Championship and the Olympics, revenues will only be few billions short of the projected HUF 20 billion this year. The BMJ study notes that, ideally, the tax should be combined with subsidies on healthful foods such as fruit and vegetables, a recommendation that is not followed in Hungary at all.

Making people pay more for unhealthy choices is rather popular at a corporate level.

Pepsi and several others MNCs “punish” obese employees and those who smoke by making smaller contributions to their healthcare costs.

The French are considering a similar tax, but it has not always proved a success. Denmark introduced of a fat tax countrywide in October 2011.

The government applied the levy to butter, milk, cheese, pizza, meat, oil and processed foods that contain more than 2.3% saturated fat. Last month, the Danish Tax Ministry announced it would abolish the

MEDIEVAL EUROPE SOAP TAX – HYGIENE HAS ALWAYS COST MORE In the Middle Ages, European governments placed a tax on soap, which remained in effect for a very long time. Great Britain didn’t scrap its soap tax until 1835.

CLEAN-SHAVEN AND FORWARD LOOKING In 1705, Russian Tsar Peter the Great imposed a tax on beards, claiming that a hirsute chin tied its user to archaic customs while a clean-shaven look was progressive and more common in Western Europe.

BETTER OFFLINE? Wisconsin is one of the few states to levy a tax on internet access. Back in the day, when dial-up was a popular method for getting online, the internet was subject to double taxation because phone calls were also taxed.

BBJ FAVORITE: PARTY FINANCING Oliver Cromwell imposed a tax on his political opponents, taking one tenth of their property. Cromwell used the money to fund his own activities that were, not surprisingly, aimed against the Royalists.

fat tax as it had failed to change Danish eating habits. What’s more, it had boosted cross-border trade, put Danish jobs at risk and had proved a bureaucratic nightmare for producers and outlets. A proposed sugar tax plan was also scrapped.

ONE FOR ALL If cutting taxes is out of question, cutting red tape can still be played out. The government launched two taxes to lighten bureaucracy in 2012: the itemized tax (KATA) and the small company tax (KIVA). The first applies to enterprises with less than HUF 6 million annual turnover: a one-sum payment of HUF 25,000 or HUF 50,000 that replaces entrepreneur’s personal income tax and the tax or flat-rate tax on the entrepreneur’s dividend base, corporate income tax, personal income tax, contributions and healthcare contribution, social contribution tax, healthcare contribution and training fund contribution. The introduction of a small company tax is another simplification that replaces corporate income tax, social contribution tax and training fund contributions.

A proposal to replace all levies with a 23% sales tax was first suggested in the United States in 1999. The Fair Tax Act would introduce a national retail sales tax on new goods and services and simultaneously release the taxpayer from the need to paying all federal income taxes, payroll taxes including social security and Medicare taxes, gift taxes, and estate taxes. The sales tax would pull in enough to cover all government programs by taking revenue from what is spent rather than what is earned. To make sure that the poor don’t suffer the brunt of these sales taxes, the government would send a monthly check (called a prebate) to families that would cover taxes on necessary expenses up to the poverty limit. Less popular is the fact that, in order to generate sufficient revenues, the tax would also be imposed on legal fees, health care and new home sales: areas where people don’t currently pay tax.

You may find some or all of the above taxes surprising or unacceptable, in which case we invite you to take a look at the taxes in the box, left. Hopefully, we won’t see any of these in next year’s legislation. ■

MINI Q&A SÁNDOR HEGEDÜS, HEAD OF TAX ADVISORY SERVICES AT RSM DTM HUNGARY KFT Q: In your experience, what taxes generate the most revenue and why?

A: The amount of tax revenues depends on a number of factors including the tax base, the tax rate, the possibility to avoid it, and so on. One would think that, based on the above, it is only a matter of resourcefulness about what taxes are introduced or what rates are increased. But it is also a question of how entrepreneurs and consultants try and address these new challenges, what alternative ways they use. Experience shows that it is taxes levied on spending that can generate the most revenues: European trends also support this fact.

Q: How about the crisis taxes introduced so far (the bank levy, transaction services tax, and utilities tax)? Are they really a good choice to tap budget holes?

A: Due to its nature, revenues generated by the utilities tax can be quite well estimated. The subject of the tax cannot be moved so owners of the system should calculate with this.

The transaction services tax is different: firms with large financial traffic will likely start looking for alternatives.

The question here is how much of the financial traffic will be affected. Legislation should consider the relationship between the tax rate and alternative costs to be able to maintain/generate projected revenues.

Q: Considering the economy, is the current tax policy sustainable in the long-term? Where are the pitfalls?

A: This tax policy and related changes could have worked well during dynamic growth. Unfortunately, these are not such times. That explains the need for making some taxes permanent or for launching new ones. I believe the main idea behind them is right: to focus on spending instead of income, which is easy to hide. This could boost performance and employment, and would help to whiten the economy. Sector-specific extraordinary taxes however affect investors’ confidence negatively, and this also has an impact on sectors that are not directly concerned. In the long run, the stabilization of the tax system and the phasing-out of sector-specific taxes are needed most.

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Deals of the year

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Population still split between digital natives and digital immigrants

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New election procedure finally passed The much-awaited new Act on Electoral Procedures has finally been adopted, and from new rules on voter registration all the way to peculiar campaign advertisement regulations, it contains all the controversial elements that critics have lambasted for months. Fidesz has ultimately rejected proposals that would have made the registration process easier for citizens who are also Hungarian residents, even the two-week mail-in window provided for in the original bill. It is limiting both the time for campaigning as well as spaces where advertisements may be displayed, thus placing even greater restrictions on the opposition’s already limited communication channels to the public. Even what had been anticipated as slight progress, the number of signatures necessary for placing candidates on the ballot, ultimately turned out to be far less generous than originally suggested.

After a delay of three weeks, Fidesz has finally passed the new Law on Electoral Procedure. The bill was continuously amended by the governing parties – whose MPs sometimes introduced contradictory provisions – and many key proposals in the original draft turned out very differently in the bill that was ultimately adopted. Fidesz MP Ferenc Papcsák submitted a 65 page long list of 227 amendments, for example, for which the governing parties offered a full hour of review before voting. It is doubtful whether many of those passing the bill really had a clear idea of the innumerable crucial details in the bill that will govern many of the rules pertaining to the next elections. And their ignorance is only partly due to the complexity of the legislation.

Though our possibilities are also limited in terms of space, we hope to provide our readers with an overview of at least

some of the most important regulations in the new law. The Act on Electoral Procedure is a law designed to regulate all elections, from municipal to national parliamentary all the way to referenda and EP elections, though separate acts also apply to each of these individually; some of the latter were amended as part of the overall bill approved last Monday.

REGISTRATION Of course, the most important change is the abolition of the system of automatic voter registration. Hungarian citizens are no longer automatically entitled to vote but must register every four years to be allowed to vote.

This is extremely unusual in any European comparison, but even the very few countries that require registration strive to make it easier on their citizens.

While the original bill contained a provision giving citizens in Hungary proper a brief window of two weeks to regis-

ter by mail, the version finally adopted scrapped this option.

Registering by mail will only be open to citizens abroad.

While citizens abroad clearly would find it much more difficult to register in person than those of their compatriots who reside in Hungary, the different handling of the two groups puts a lie to what is Fidesz’ very thin justification for introducing the registration requirement: namely that all citizens ought to face equal requirements and the introduction of suffrage without residence makes registration for at least the latter class of citizens inevitable. So while registration by mail makes sense for those abroad, there is no way in which depriving residents of this possibility is necessary or justified, even with the rationale advanced by Fidesz.

JUST WALK There was a proposal that would have required a municipal representative to visit citizens in their homes to allow them to register, but this was changed to an optional possibility extending to those with reduced mobility or other documented conditions. Impractical as the idea was, it would have been a small gesture to show that the plan was not only to suppress voter turnout among the disaffected segments of the electorate, which would be likely to vote against the incumbents. What remains is a system that is relentlessly geared towards ensuring that Fidesz sympathizers will compose a larger share of those allowed to vote than their share of the overall voting-age population.

For the opposition, the major challenge will therefore be to make sure that undecided citizens register in time, so that they retain the option of voting even if they have no clear preference at the time of registration. That won’t be easy,

since in line of its earlier promise, Fidesz has also shortened the campaign period to 50 days. This will be awkward for several reasons. For one, the date of the election has to be announced 70-90 days before, so for three-six weeks parties will have to sit still even though they know an election is impending. Moreover, given that registration will have to be completed 15 days prior to balloting, parties will have a mere five weeks to encourage citizens to register through all potential campaign tools. At the same time, the bill does away with the anachronistic institution of the campaign stop in the last 24 hours before balloting, which means that parties may continue working voters up until the last minute.

CAMPAIGN LIMITATIONS The strict limitations on the campaign period are designed to shorten the opposition’s time to make its case against the government – Fidesz appears to figure it won’t need much time to make its own case – but it will be difficult to enforce, and nothing illustrates this better than the fact that even as we write, roughly a year and a half before the expected date of the election, Fidesz is already campaigning, though it is doing so by proxy. Following the government-funded anti-IMF campaign, now buses all over Budapest boast anti-Bajnai posters sponsored by a Fideszfriendly civic group whose funding is obscure.

If the opposition will be allowed to similarly attack the government by using proxy groups, then the current restrictions don’t make much sense. Deciding what counts as campaigning will of course be up to election overseers who are – just as most “independent” officials appointed since 2010 – selected by the governing party and whose position will be untouchable for nine

years, even if they happen to verify many critics’ suspicions that they are more loyal to the ruling party than to the needs of democratic elections.

Given the way Fidesz appointees have handled politically controversial issues (witness the Media Council’s repeated attempts at silencing the only opposition radio station in Hungary), at this point there are good reasons to suspect that non-partisan election and campaign oversight will be one feature missing from democratic elections.

MAKING MONEY OFF LIMITING DEMOCRACY? What makes the new oversight scheme particularly troublesome is that through the overseers Fidesz has de facto access to invaluable voter information. In an age where election campaigns will increasingly be conducted by exploiting electronic databases that facilitate addressing and mobilizing the right type of voters, the power over voter registry provides a major edge. In an instance that was fairly representative of how incapable Hungarian democracy is of prosecuting abuses by politicians, Fidesz’ chief campaigner Gábor Kubatov boasted at a semipublic event that the party possesses a list of voters broken down by party sympathy, which, if it really does exist, must be illegal. Whatever the truth of Kubatov’s statement, future lists will be easier to compile, and Fidesz will have even less cause to be concerned about the legal consequences.

In what appears to be the most gratuitous restriction of all, parties will not be allowed to buy advertisements on commercial television. Given that public television – where parties with a national list (see

below) will be able to advertise fixed amounts of time for free – is generally less watched, the goal here is obviously to ensure that the opposition won’t have access to a large swathe of voters who get most of their information from commercial TV. Moreover, the lack of restrictions on giant posters is a boon to those in the giant poster business, which funnily enough includes Fidesz’ infamous money-man Lajos Simicska and his company Mahir, already the beneficiary of legislation aimed at crippling its main competitor.

BALLOT ACCESS – LITTLE OR NO EASING AFTER ALL We have previously complained a lot about Hungary’s cumbersome ballot access requirements and have correspondingly lauded the earlier version of this bill for seeking to drastically lower those in the context of parliamentary elections. Now, the reduction in the number won’t be as drastic as previously planned – it is going from 1,000 to 500 instead of the originally proposed 200 – but the time of collection will be cut to a third, from close to six weeks to two weeks. Only time will tell whether this in fact means back to square one or maybe even worse – LMP’s failure to collect sufficient signatures in a short timeframe for the municipal elections in 2010 is a dire warning for any new organization – but in an international comparison it certainly still constitutes an unusually high burden on new parties. Parties need to collect 13,500 signatures in 27 electoral districts to field a national list, which though less daunting then previous requirements, still requires a fairly massive organization, especially given the overly tight deadline. ■

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Budapest Business Journal | July 27 – Aug 09

AND THE WINNERS ARE....

Every year, the Budapest Business Journal attempts to present the most significant deals of the past 12 months.

However, since only a fraction of these are made public, and of the few that are only a minority disclose a transaction value, the task is a real challenge. Due to the lack of transparency and reliable data on the transactions market, the results are based not only on publicly available facts, but also on expert opinions gained during our numerous consultations with some of the industry’s most well-known and respected specialists, as well as on subjective judgments.

For the first time, we separated private-to-private market transactions from deals where the state was the buyer, as most experts categorically refused to include such deals in the survey. However, as increasing government activity has contributed to deal flow in several sectors, we think it is important to list the major state-related deals in order to get the full picture of the transaction landscape in Hungary.

If we take a closer look at the market transactions, unfortunately, we do not see too many positive deals, where a new strategic investor enters the market. Most transactions are rather related to the exit of a major player from the Hungarian market. One of the reasons behind this is certainly the general recession in Europe.

However, central Europe is no longer seen as being the attractive investment target it was when these companies entered the market. Back then, the region was considered to be high-growth, low-risk; now it is sadly neither low-risk, nor high growth.

MARKET TRANSACTIONS MOST PROMINENT HUNGARYHEADQUARTERED REGIONAL DEAL: ALMA MEDIA ACQUIRES EAST EUROPEAN JOB PORTALS

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EURO Finnish media corporation Alma Media acquired the eastern European job por-

tal assets of A&N Media Limited, a fully owned subsidiary of Daily Mail and General Trust (DMGT) in November. The transaction price was €24 mln on an enterprise value basis. The largest of the acquired assets is Profesia s.r.o., which is the dominant recruitment service provider in Slovakia (Profesia.sk) and operates job portals in Czech Republic (Profesia.cz) and in Hungary (workania. hu). Calculated on a pro rata basis, the annual revenue of the acquired assets was approximately €8.5 mln for the financial year ending September 2012. The corresponding combined EBITDA from the assets is about €2.8 mln or 33% of revenues in the same period.

Lapcom Kft, a Hungarian branch of A&N International Media Slovakia, acquired Profesia, established in 2000, in 2005. Alma Media said that the acqui-

sition is in line with its strategy to seek growth from digital services and further internationalize its operations. “Acquiring these portals in Slovakia and its neighboring countries makes Alma Media the clear market leader in online recruitment services in the region,” said Raimo Mäkilä, senior Vice President of Alma Media’s Marketplaces business unit.

FIRST JEREMIE EXIT

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EURO Private equity fund PortfoLion closed its exit from Cryo Management with the sale of the company to Vitrolife in September.

The transaction marks the first successful exit made by a venture capital firm, which is part of the JEREMIE I initiative.

Vitrolife said that it has entered into an agreement to acquire 100% ownership in Cryo Management Ltd for €5 mln, which could rise to €9 mln upon the fulfillment of defined objectives primarily related to sales during the period 2013 to 2015. The purchase price is financed by a corporate acquisition loan of €3 mln and by payment of €2 mln in newly issued shares or cash.

Vitrolife said that through the acquisition it gains access to a product portfolio in the form of successful time-lapse products for IVF and increased knowledge within IVF technology and embryo development, adding that the companies have the same customers in the form of embryologists and gynecologists, which creates synergy gains in the sales area.

Cryo Management Ltd and its subsidiary Cryo Innovation Ltd are located in Budapest, Hungary. The company was formed in 2005, and has 20 employees and budgeted sales of approximately €2 mln for 2012. The company has successfully developed, produced and marketed time-lapse products, primarily for the IVF market.

MOST POSITIVE DEAL OF THE YEAR: SZENNA PACK EMERGES FROM BANKRUPTCY

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EURO Hungarian manufacturer of aerosol cans Szenna Pack escaped bankruptcy

when U.S.-based extruded aluminum can maker Exal Corporation agreed to acquire its troubled Hungarian peer for €14 mln as well as to pay off some of its debts. Family-owned Szenna Pack filed for bankruptcy protection in July 2011 because of a poorly timed investment.

Exal agreed to take care of unpaid wages and bills, and repay 50-75% of loans backed by collateral and 10% of loans without collateral. The deal was closed in the first quarter of 2012.

The transaction is considered to be a remarkable deal because Szenna Pack managed to reach an agreement with its creditors, who decided not to liquidate the company under bankruptcy protection (or chapter 11), but to accept the indemnification offered to them. This kind of agreement is very rare in Hungary, because bankrupt companies do not have sources to pay impatient creditors and banks also avoid financing companies in this stage.

In the meantime, Boxal, the European subsidiary of Exal, has been sold to Ireland’s Ardagh Group, but this change has not affected the acquisition of Szenna Pack.

MOST SURPRISING DEAL: A NEW STRATEGIC INVESTOR ENTERS HUNGARY’S FINANCIAL SECTOR

Nowadays, it is quite unusual to see a new foreign strategic investor entering the Hungarian financial services market, when many others are trying to leave.

Still, financial advisory group Brokernet Investment Holding, the owner of Quantis Investment Management Zrt, managed to sell a 30% minority stake in Quantis to LGT Capital Management in January.

The deal price has not been revealed, but it is estimated to reach several million euros. Within the framework of the agreement, Quantis will be responsible for the regional distribution of LGT Capital’s funds. As of December 31, 2010 Quantis had assets under management of $480 mln and managed 10 mutual funds and 21 segregated accounts.

LGT Group, the largest family-owned private banking and asset management group in Europe, and headquartered in Vaduz, the capital of Liechtenstein, offers global services from more than 20 locations in Europe, Asia and the Middle East with assets under administration of CHF 88.1 bln as of June 30, 2011.

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LARGEST FDI INFLOW: AUTOMOTIVE INDUSTRY MEGA-PROJECTS

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EURO Investments by three major carmakers, Audi, Daimler and Opel, are expected to be the main drivers of economic growth in Hungary. In the first half of 2012, Audi Hungaria invested approximately €300 mln in projects, which puts its total investment to €5 bln since the plant’s foundation in 1993. By June 30, 2012, the number of employees had reached 8,322, with 1,000 new employees hired over the first six months of the year. The company said that it aims to further expand its capacity at the Győr plant from 2015.

Audi Hungária is the central engine supplier of the Audi and Volkswagen groups. In addition, the Audi TT Coupé and TT Roadster sports cars, the Audi A3 Cabriolet and the RS 3 Sportback are also produced in Győr.

Daimler started production of compact models at its €800 mln plant in Kecskemet in March. Opel inaugurated a €500 mln engine plant at its base in Szentgotthard in September. The plant brings the amount Opel has spent on investments in Hungary to €1.25 bln.

PRIVATE EQUITY DEAL OF THE YEAR: ACQUISITIONS BY DOCLER

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HUF

Docler Investments, the private equity arm of the Docler group, acquired a 49% share in Hungarian design company Ivanka Concrete Factory for HUF 240 mln in July. Docler Holding appointed two members to Ivanka’s board. The capital increase will be used to set up a mass production line. Established in 2003 as a family business, Ivanka is specialized in design goods that are made of concrete, such as concrete furniture, tiles and clothing items.

Docler also acquired a majority interest in Hungary’s market leading authentication provider, NetLock Kft in February. With the agreement Docler acquired 51.05% share in NetLock and a purchase call option for the remaining quota,

which can be exercised within two years.

According to the agreement, NetLock will retain its autonomy and current management, but it will establish strategic cooperation with more members of the Docler group. NetLock Kft is the first qualified authentication, timestamp and archiving provider in Hungary.

Docler Investments Kft, established in 2011, provides capital as well as the experience and business and technology infrastructure of the entire group in order to support companies with high growth potential.

net assets of the businesses were approximately €57 mln. MetLife is a leading global provider of insurance, annuities and employee benefit programs, serving 90 million customers in more than 50 countries.

BLN HUF

Exiting the Hungarian market, Belgiumbased retailer Delhaize sold 110 of its 200 Match and Profi stores to domestic grocery retailers CBA and Coop. The latter has acquired 62 Profi and Match stores in the country, while the former aims to convert 48 Match stores to its high-end CBA Príma brand in the Budapest region. The acquisition of the Match stores by CBA is part of its strategy to regain a leading position in the Hungarian market.

Delhaize also sold its seven Hungarian Cora hypermarkets to Auchan Magyarország in April 2012. Following the rebranding process, Auchan has now 19 stores carrying its name in Hungary.

THE SWEETEST DEAL OF THE YEAR: ROCHEN ACQUIRES BONBONETTI

FINANCIAL SERVICES: AVIVA SELLS EASTERN EUROPEAN LIFE BUSINESSES TO METLIFE

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EURO Insurance group Aviva completed the sale of its Czech, Hungarian and Romanian life businesses to MetLife Inc’s local operating subsidiaries in those countries in August. The transaction was in line with Aviva’s strategy to focus on fewer business segments, where it can produce attractive returns. The purchase price has not been disclosed, but Aviva said that as of June 2011, the combined

TELECOM SECTOR: MAGYAR TELEKOM SELLS PRO-M ZRT

RETAIL SECTOR: DELHAIZE GROUP EXITS HUNGARY

OIL INDUSTRY: MOL EXPANDS FILLING STATION NETWORK

Oil and gas company MOL increased its Czech network by a further 124 fuel stations by completing the acquisition of Bohemia Realty and Pap Oil companies in October. MOL now has a retail network of 149 filling stations and reached close to a 5% share in the Czech fuel retail market.

With the acquisition, MOL became the fifth largest company in terms of the number of filling stations in the country. MOL aims to reach a 10% share in the retail market on midterm by further steps, both organic and inorganic. The filling stations will be operated under the Pap Oil brand, which is well known in Czech Republic.

MOL operates its filling station network in 11 countries under eight brands. With the acquisition of the Czech fuel stations, MOL Group has increased the total number of its filling stations to 1,744.

STATE TRANSACTIONS

Rochen, a major Ukrainian confectionery producer owned by Ukraine’s economy minister Petro Poroshenko, acquired Hungarian chocolate manufacturer Bonbonetti. Rochen and Bonbonetti signed a strategic agreement in July 2012 to strengthen the Bonbonetti brand on the European market and to support its expansion.

Rochen has four production units in Ukraine and two plants in Russia and Lithuania. The company employs 10,000 people and produces about 200 types of chocolate, bonbons, biscuits, cakes and toffees.

The company’s revenues reached $1.2 bln in 2011, making it the 15th largest confectionery producer in the world. Rochen’s main export markets include Canada, Germany, Israel and the USA. Bonbonetti exports to 40 different countries.

Telecom service provider Magyar Telekom signed a share purchase agreement to sell its 100% stake in Pro-M Zrt to the state-owned National Infocommunications Service Company Ltd for HUF 19.9 bln in August.

Magyar Telekom and T-Mobile Hungary established Pro-M in 2005 to build and operate a national Unified Digital Radio Network (EDR) system in Hungary. EDR is a national 380-400MHz band professional mobile radio network used by the emergency services, such as the police, fire departments and ambulance services. EDR runs on terrestrial trunked radio (TETRA) technology, the international standard for public safety and security mobile radio communications. The National Infocommunications Service Company is responsible for operating telecom infrastructure in the public sector.

FINANCIAL SERVICES: DZ BANK SELLS TAKARÉKBANK STAKE

The state-owned Hungarian Development Bank (MFB) bought a 38.46% stake in Takarékbank, the umbrella bank of a group of savings cooperatives, from the Deutsche Zentral Genossenschaftsbank AG (DZ Bank) in November. The purchase price has not been disclosed. MFB made an indicative offer for the stake in the summer and got permission to carry out the transaction from the bank’s other shareholders at a general meeting in September. Local cooperatives hold a 56.6% majority stake in the bank.

The transaction is in line with the government’s strategy to increase its influence in Hungary’s banking sector. In July 2012 Prime Minister Viktor Orbán said that 50% of the banks in Hungary should be Hungarian-owned. Nevertheless, this is only a tiny step in taking over half of the banking sector, as Takarékbank’s market share is only slightly more than 1%.

Takarékbank was established by the savings cooperatives in 1989 in order to provide their clients services that they could not offer separately because of their small size, as well as to develop a uniform market presence, and to strengthen their competitive positions.

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Budapest Business Journal | Dec 14 – Jan 10

the bond repurchase program, the company is also considering a debt-to-equity swap.

E-Star issued corporate bonds at a face value of HUF 10 bln gross during 2010 and 2011. The company was one of the first players besides banks to raise financing in the form of a public bond issue.

THE BIGGEST DISAPPOINTMENT Two Hungarian private investors, Csaba OF 2012: E-STAR Soós and József Makra, established E-Star, previously known as RFV, in 2000. The Hungarian energy supplier E-Star, once the company f loated its shares on the Budadarling of the Hungarian capital market, is pest Stock Exchange in 2007. E-Star shares now struggling with serious liquidity prob- have been listed on the BSE BUX Index lems. The company launched a bond repur- since 2010. A year later, the company’s chasing program at a discount in October in shares were introduced to Warsaw Stock order to avoid bankruptcy. As an alternative to Exchange through a dual listing.

THE BIGGEST DISAPPOINTMENTS

LARGEST DELEVERAGING: THE HUNGARIAN BANKING SECTOR On an annual basis, the global banking sector reduced its external position to Hungary by about $18 bln, or 14.2% of Hungarian GDP compared to Spain with 14.3% of GDP, according to a study by the Erste Group on global deleveraging.

The study points out that Hungary has clearly been an outlier in the region, both in terms of magnitude and the reasons behind the steep deleveraging, which were mainly unorthodox measures including the early pre-payment of FX loans, which freed up part of FX funding. GL

We would like to thank the following experts for their contribution to this article: PwC director Ervin Apáthy Ernst & Young partner Margaret Dezse KPMG associate director László Fendrik KBC Securities Head of Corporate Finance György Herczku DLA Piper country managing partner András Posztl Deloitte managing partner Béla Seres Invescom managing director Zoltán Siklósi

Hungarian state continues to dominate M&A market in 2013 Exits and smaller JEREMIE transactions are the main drivers of deal making.

BBJ GABRIELLA LOVAS

In 2012, the state dominated Hungary’s transaction market in a wide range of sectors. Deal making was propelled only by the exit of major players in several sectors and by JEREMIE funds under pressure to invest. Another tendency was the exit of MNCs from the region.

“Central South East European (CSE) M&A activity decreased in 2012 compared to 2011, and Hungary was slightly below the regional average both in terms of number and value of deals,” says Margaret Dezse, partner of Ernst & Young Transaction Advisory Services. Hungary’s 2012 transactional activity was f lat, at the same level since the middle of 2011, when the transactions market significantly dropped. According to Invescom managing director Zoltán Siklósi, the crisis alone does not justify such a huge drop in the number of transactions. The main problems in Hungary are the lack of financing in the market and deterioration in investor confidence.

Most experts asked by the Budapest Business Jour-

nal have experienced a total lack of confidence in Hungary, too. One advisor pointed out that, even if a potential target company is attractive, investors – especially from Germany – will say no just because it is in Hungary. However, there are some happy endings, too. PwC director Ervin Apáthy cited the example of a Hungarian tool wholesaler, which was sold in the wake of the crisis because, besides being an attractive target, it perfectly fitted the investor’s business model.

The transaction process for M&A deals today typically lasts for approximately nine to twelve months, compared to only six months before the crisis, Siklósi said, although he noted that there are some extreme cases. For instance, the sale of aerosol can maker Szenna Pack took a mere eight months, as there was huge pressure to reach an agreement as soon as possible due to the ongoing bankruptcy procedure.

WORRYING TENDENCIES Transactions where the state is involved are sometimes in accordance with market rules, but more often they are not, said Deloitte partner Béla Seres. The latest example of the latter, if it goes through, is the sale of the gas assets of E.ON. Prime Minister Viktor Orbán and E.ON Chairman and CEO Johannes Teyssen signed a Memorandum of Under-

standing on November 30 on the transfer of the E.ON group’s natural gas assets in Hungary to stateowned power group MVM. The statement says that as Hungary strives to create long-term supply security in its energy policy, it seeks to increase its natural gas trading activity and expand into natural gas storage through MVM. The initiated share purchase/sale agreement is to be signed by no later than January 31, 2013.

“The is a perfect example of the government using non-market and regulatory pressure, such as the 10% cut in household gas and electricity prices as of 2013, to improve its negotiation position and ultimately nationalize a strategic industry,” said Seres. This is a worrying tendency, which represents such a high level of moral hazard and undermines business confidence that will be detrimental to the country for years to come, he warns. We did not include the E.ON transaction in this year’s Deals of the Year, as it had not been closed before the BBJ went to press.

“It is also known that some European banking groups are ready to sell their Hungarian subsidiaries, however, it is not that easy on the current market,” said Seres. This is what enables the Hungarian government to take funds from a sector struggling with losses with-

out caring about the longtern consequences. This is essentially a form of covert nationalization, the Deloitte partner says.

When operating repurchased companies, the state has to take into consideration the European Union’s state aid control mechanism, said DLA Piper country managing partner András Posztl. In addition, according to a new Supreme Court decision, the state as an owner can end up having full responsibility for the liabilities of the companies if it is keeping a loss making company alive instead of winding it up or letting it go bankrupt because of “strategic considerations”.

GOOD DEALS ARE RARE “We continue to see a buyers market with many companies looking for new owners; however, we have seen some good deals, not only domestic but also with foreign investors on the market,” notes Dezse. The impetuses for many transactions are mature domestic SMEs and the redirection of the investment strategy of some multinationals in CEE, including Hungary, to other parts of the world.

Dezse pointed out that financial investors were represented only by JEREMIE transactions in 2012.

However, according to experts, as the EU funds are under high pressure to invest, sometimes they pumped money into com-

panies that had previously been rejected. Only about 25-30% of JEREMIE transactions look promising, Siklósi noted.

The private equity market dried out in 2012 due to a global slowdown in PE activity and the lack of financing. In addition, Hungary is currently the least promising country in the region, noted Siklósi.

“We see several companies suitable for acquisition, although most of them need to get their finances righted first, which makes deal-making more difficult,” Siklósi said, adding that this requires a more active investor attitude.

The problem is that without making any greater effort, much better potential targets can be found in Poland, for instance.

WHAT TO EXPECT IN 2013?

Most experts expect the current tendencies to continue and do not foresee significant change, neither in terms of deal numbers nor in the average deal size, in 2013. The problems hampering deal- making now will prevail in the New Year, with increased governmental activity in several sectors.

Seres foresees little or no growth in the transaction market, with smaller JEREMIE transactions only, mainly in niche markets, and maybe a couple of private equity deals, which will prove the exception more than the rule. While he does

not expect the entry of many new strategic investors into this country, further consolidation in every sector is likely, together with the exit of some market players.

Apáthy expects an increase in transactions, with troubled companies striking deals to avoid bankruptcy. He cited the example of grain-based food product maker Cerbona and French DIY chain Bricostore. Naponta Kft signed an agreement in September with Agro Alba Zrt, the liquidator of Cerbona, to buy the Székesfehérvárbased factory. Thus, Cerbona’s whole extrusion business, the brand itself and 84 jobs were saved from liquidation. Bricostore made a “strategic decision” to withdraw from the Hungarian market in November, due to poor sales and negative forecasts. Siklósi pointed out that the owners of many firms in Hungary had finally had enough of struggling with their endless liquidity problems, and are looking for investors who are willing to solve their financial troubles, and then buy their businesses.

More regional deals are expected in the CSE region and also between the CSE region and the more developed Poland. As there is still a huge gap in the cost levels of Eastern and Western Europe, production bases and service centers of Western companies might be moved into Eastern Europe. ■

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Energy efficiency

Natives vs immigrants

Consumer protection

Improving energy efficiency of residential projects crucial

Population still split between digital natives and digital immigrants

People are price-sensitive but have higher standards

12.5

BLN HUF

45%

TO BE INVESTED IN THE MODERNIZATION OF THE ENERGY SECTOR BETWEEN 2013 AND 2020

After a yearlong negotiation with the European Commission, the National Development Ministry (NFM) has announced that it will cut back the amount of its proposed budget for the energy sector’s modernization between 2013 and 2020 by 90%, from HUF 125 billion to HUF 12.5 bln. The remnant of the original amount, HUF 100 bln, will be used to support residential projects to boost energy efficiency. The proposed HUF 12.5 bln will not be split equally among the budgetary periods between 2013 and 2020, but will be paid in one amount next year. Although the ministry hasn’t disclosed which projects will be supported, industry experts suspect that a Slovak-Hungarian natural gas interconnector pipeline and an “Intelligent Network” pilot will be subsidized, both run by project companies of state owned Hungarian Electricity Works (MVM), excluding all other market players.

István Bart, the director of the Hungarian Energy Efficiency Institute (MEHI) said that improving the energy efficiency of residential buildings is a critical issue, and he considers the change a step in the right direction. “MEHI has long been advocating that carbon forints (the revenue coming from the sales of Hungary’s CO2 emission quota) should be spent on improving the position of households, and major projects should be financed from the market,” he said.

Next year, the amount spent on residential projects will be around HUF 6.25 bln, and this will be raised to HUF 12.5 bln from 2014 on. This amount accounts for half of Hungary’s carbon forints – the other half is directly channeled into the central budget. ZsB

Hungary’s Total Greenhouse Gas Emissions

80%

IS THE PROPORTION OF INTERNET USERS IN THE 30+ POPULATION

TV and Internet remain the two main channels of information but the population is still divided along the lines of digital natives and digital immigrants, a survey conducted by eNet has found.

Although the terms digital natives and immigrants were coined more than a decade ago, they still cover the essence of the difference between the generations who were born after digital technology (most importantly personal computers and the internet) became widely available, and those who learned these technologies as adults. While 88% of Hungarians below the age of 30 use the internet, the proportion among the 30-60 year olds is only 45%, the study showed.

Within internet users, there are no substantial differences in the frequency and intensity, eNet highlighted.

An average 15-30 year old spends as much time in front of the internet as he does watching TV (it is not unusual to do both simultaneously), while people over 30 spend an hour a day more in front of the TV screen than they do surfing the web.

The difference is tangible in the consumed content, too. People below 30 are more likely to download via torrent sites or other services, they are more active on social sites, sharing photos or videos. Over 70% of youngsters are active on one or more social website, in contrast with 40% of those over 30. Older people, on the other hand, are more likely to read longer copy, and, not surprisingly they spend more time with administration online. Email services are equally popular with both age groups, the study learned, though with the younger generation, email is being replaced by social media sites such as Facebook. ZsB

Customers became more price-sensitive, but at their standards became also become higher in recent years, a recent survey by the Hungarian Council of Shopping Centers has revealed. Some 66% of customers deem that consumer rights are better respected at shopping malls than they are in individual stores.

Although the aggregate volume of retail is expected to dwindle this year, in line with the trends of the last few years, the tenants of shopping centers and shopping malls can have certain advantages, the study claims. More than 80% of customers asked said that they preferred malls to individual stores, although they were not willing to pay more for the same service or product just because of the location of the store. One of the major plusses for malls is that most people think consumer protection is far better: services like extended guarantee times, faster customer support and more favorable return policies all contribute to the better reputation.

While there are vendors, especially in the area of e-commerce, who try to attract customers with free delivery or lower prices, more than 90% of the stores in shopping malls will return the money to the customer no questions asked, even if the product itself was perfect. Shop owners such similar policies, which go well beyond the legal requirements, as important. Some 96% of them said that they considered it a competitive advantage to pay close attention to customer protection, and according to 75% it is essential to provide customer rights beyond the legally required standards. ZsB

Retail volume in Hungary (million HUF)

Breakdown of time spent online

1,000 tonnes of CO2 equivalent

source: EEA

CONTENT TYPE Online banking Reading news

30+ 23% 53%

15-30y 14% 37%

Using email Social site activity

60% 38%

61% 70%

Downloading software Downloading films and videos Downloading audio files

12% 16% 14%

26% 43% 48%

Source: eNet - Telekom

OF CUSTOMERS PREFER SHOPPING MALLS TO INDIVIDUAL STORES

Source: Dun & Bradstreet

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Budapest Business Journal | Dec 14 – Jan 10

Who will survive the crisis on the media market?

According to experts from PwC, the slow recovery from the crisis on the global and domestic markets will continue into 2016.

Meanwhile, the continuing expansion of digital content in Hungary will exceed regional and global levels.

The entertainment and media market analysis prepared for the 13th time examines globally 13 industry segments, including media, music, film, video games, publishing, and subscriber market evolution.

In 2012, nearly a third of total global media sales came from the digital segment, and with the market’s expected annual growth of 12.4% between 2012 and 2016, 40% of all revenues will be linked to the distribution of digital contents in 2016. A global trend of transition from wired to wireless access is also observed: while mobile internet had only a 26% share of all internet access spending in 2007, this ratio grew to 40% by 2011 and a further 5 percentage points increase is expected by 2016, according to PwC. “As digital distribution is ever more widespread, increasing penetration of digital contents is not a novelty; the real question is now how companies respond to challenges and how they can take advantage of the opportunities offered by digital distribution,” said Péter Sere, a senior manager of PwC Hungary.

The global shift in emphasis forecasts significant changes from west to east and from north to south. Over the next five years, the total eastern (Central and Eastern Europe, parts of Asia and Oceania) entertainment and media market will grow by 7.2% on average, while the western regions (North America and Western Europe) will increases by 4.3%. The south-

North America 2010: $492 bln 2011: $508 bln CAGR*: 5.3%

Western Europe 2010: $443 bln 2011: $454 bln CAGR: 3.1%

Latin America 2010: $77 bln 2011: $85 bln CAGR: 9.7%

Central and Eastern Europe 2010: $49 bln 2011: $56 bln CAGR: 8.1%

Middle East and Africa 2010: $31 bln 2011: $40 bln CAGR: 10.6%

Asia and Oceania 2010: $438 bln 2011: $462 bln CAGR: 7.1%

*compunded annual growth rate

ern regions (Latin America, Middle East and Africa) expect average annual growth of 10%, more than twice that of the northern (North America and Europe) regions’ projected 4.5% expansion.

HUNGARY LEADS THE WAY In Hungary, the size of entertainment and media market could reach $3.45 billion in 2012 – up 3.9% from $3.32 billion in 2011, according to PwC. On a five-year scale, the future looks much more promising: the total Hungarian entertainment and media market is expected to grow to $4.29 billion or 5.2% on average to 2016.

“The positive image suggested by the figures is much more nuanced,” said Sere. Based on data from the Hungarian Central Statistics Office (KSH), the Hungarian economy will continue to underperform compared to the previous expectation of analysts;

indeed, private consumption continued to decline in H1 2012. “Besides declining consumption, increased VAT and the introduction of sector specific ‘crisis taxes’ affected largely the most active enterprises on the advertising market, narrowing further the marketing budget of the concerned industries,” he added.

The Hungarian digital market share will grow to 40.5% of all entertainment and media market revenues, exceeding both the EMEA region (Europe, Middle East and Africa) and the global rates, predicts PwC. However, besides the overall positive growth prospects, 5 out of 13 market segments are not even expected to reach pre-crisis revenue levels of 2008.

In 2015-16, book publishing, newspaper and tabloid segments will see declining revenues, B2B will stagnate and television ads will grow only slowly.

INTERNET MARKET: THE REAL DRIVING FORCE Internet subscription-based services and online advertising are the real engines of the entertainment and media market in Hungary: both sub-segments of the domestic internet market could produce double-digit growth over the next five years.

The country has great potential for development of the internet: according to the PwC-forecast, the domestic internet market in 2016 will have a bigger slice of the media pie than other countries in the region.

The rapid growth drivers include broadband internet subscriptions gaining upon the regional growth rate: PwC forecasts that domestic broadband internet access rate will reach 86% in 2016 from 53% in 2011. Another factor is the dynamic increase of mobile internet penetration. While the 15.6% penetration of 2011 was significantly lower then that of the EMEA region (31.3%), in five years’ time domestic mobile

internet penetration could triple, reaching nearly 50%.

From the consumer side, the transition to wireless technologies could emphasize mobile internet penetration growth: as smartphones and tablets are extremely popular, they could force the development of broadband infrastructure.

In online advertising, the growing number of households with a broadband connection will be the primary driving force.

DECLINING NEWSPAPER REVENUES The crisis has been unstoppable in the press; the annual average rate of decline in revenues realized from subscriptions and ad sales was 5.6% between 2008 and 2011. As broadband internet and digital contents proliferate and readers move from printed press to online sources of information, the media industry seems unable to avoid further declines in revenues.

However, examples from the western half of the world show

that consumers are willing to pay for digitally distributed versions of newspapers.

WHICH WAY TO GO? PwC predicts that over the next five years, digital content will continues to dramatically increase revenue, both globally and on the Hungarian media and entertainment market. “In coming years, digital segment growth is expected to accelerate: an average of 12.4% globally is expected and in Hungary even higher: 14.1% average annual growth is projected,” said Sere. “Despite the boom of the digital world and its contents, 60% of industry revenues in 2016 will come from non-digital market segments.

So the really successful companies will be those that successfully combine traditional and digital product offerings,” he pointed out.

Based on PwC’s Global entertainment and media outlook 2012-2016

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Unsocial network: The rise and fall of iWiW Launched in 2002, the Hungarian social media site IWIW preceded the birth of Facebook by two years and it became extremely popular in a few years.

The majority of Hungarian internet users were on iWiW, or had at least heard about it. Fast forward ten years, and what we have now is a struggling, ever more desolate site, which becomes more unpopular day by day. While now almost everybody is on Facebook, iWiW itself has almost become an embarrassment, with tons of spam, inactive users and a badly constructed user interface.

What happened?

BBJ GERGELY HERPAI

iWiW still has 4.7 million users, according to Origo. hu, part of the company that now owns it. While this might technically be true, since most people don’t bother to delete their accounts, nowadays only a fraction of them regularly visit the site. When I do sometimes check my own account with about 700 contacts, either nobody is online or only one or two of them.

My friends – those who still bother to use iWiW at all – have similar experiences.

INVITATION ONLY When iWiW first launched, people couldn’t just register an account, they had to be invited by somebody else who was already a member. Theoretically, this kind of “elitism” could lead to the quick death of such an ambitious project, but in this case it proved the exact opposite. “Within less than a week, people unknown to me started to appear in the system,”

recalled Zsolt Várady, the founder of iWiW, in an April 2012 interview with Origo.hu.

“They were the friends of my own friends so they weren’t complete strangers either.

A month after the start, we gathered at my home with 16 close friends to plan the site, because with the extreme expansion of iWiW’s user base it became clear that this would be something huge.”

What was the business model behind iWiW? At first it wasn’t a planned model at all; indeed, there were even ideas to make it a completely non-profit application. “Then I changed my mind and wanted to make a profit-oriented enterprise. Others convinced me that web development is not like a pyramid where the work of many free volunteers will make something big. There must be a significant number of professional developers behind it, and many months of planning and actual work was also required, which would be impossible on a non-profit basis. On the other hand, I wanted to guard the possibility to make a business from iWiW later,” Várady said.

OPERATING BY DONATIONS The question Várady now faced was how to bring in the money? He quickly rejected the idea of the usual ad banners, wanting something special, like Zuchenberg at the dawn of the Facebook era.

“We actually had those special kinds of advertisements in the field of cultural events and cultural parties, but it did not really work out financially. So we learnt that, while it was easy to proclaim that there will be no lame banners, we were still faced with several thousands, then later millions of users, and such a big server cannot be operated anymore just out of coolness and for free,” said Várady.

This lack of a business model for iWiW explains somewhat why Facebook could expand its user base a lot faster – first in the United States, then overseas and in Hungary as well. While Zuchenberg had lots of possibilities for how to make money from his site, and thus could develop it faster, Várady operated from donations. “We could gather about HUF 132,000 from users, which was rather cool, but the

equipment which we needed would still cost about HUF 1 million. There was a user who divided this price of 1 million with the actual number of iWiW users and sent us the exact amount of money which was “due” from him: HUF 58,” recalled Várady.

LIFE IS “LIKE”?

In 2006 Magyar Telekom bought iWiW for €4 million. While some people were shocked that the independence of iWiW had been compromised, along with the privacy of its users, which had been “given” to Telekom, others were relieved that with the financial support of the telecoms giant behind it, iWiW could finally develop the site extensively. “I don’t understand why users are concerned about their privacy being compromised.

T-Online (a subdivision of Telekom) has to keep up with the Hungarian privacy laws as well, and we always did so with Freemail and Origo,” György Simó, a former deputy CEO of Magyar Telekom, said at a press conference at the time of the purchase.

Sure enough, privacy concerns were quickly forgotten, but really useful changes to iWiW never materialized either. The website’s management failed to realize that it had to take clues from the new kid on the block: Facebook. While it would still

take a couple of years for the American interloper to gain its foothold in Hungary, it was already clearly superior as far as possibilities, functions and user interface went. Várady only mentions the “like” button as a fundamental new function, but Facebook had a substantially better developed communication system already, with a central “wall” where every user could post comments, and a multi layered privacy system as well. (On iWiW, automatically everybody could see all data from every other user, while on Facebook users could manage the layers of how much data was given away about them.) Then there were the useless but funny Facebook applications, and the Facebook games, of course. While iWiW tried to mimic some Facebook functions (especially the games), it failed miserably and even drove people to give up on iWiW. “WI WILL, WI WILL” SPAM YOU! So iWiW became somewhat boring and clumsy, but it was still somehow likeable. Lately, however, incredibly annoying and obtrusive spam messages have flooded users; it is still extremely easy to send to any other user and there aren’t any filters at all. While Facebook filters spam in such a smart way that we won’t

even see offending items, on iWiW you constantly receive email messages saying something like “István sent you a message”, where this “István” guy is actually a spam account which sends you all kinds of unwanted and useless advertisements. This is the result of the free registration change: since now anybody can register an iWiW account, it’s extremely easy to send spam to a large number of people. This has finally led some users to actually unsubscribe from iWiW; until this spam wave, even with Facebook’s rising popularity, most users just left their accounts dormant.

“We are constantly working on finding a solution to the spam problem,” Gergely Kovács, product and business development manager at Origo (who also has responsibility for iWiW) told the Budapest Business Journal.

“Lately those kinds of activities have multiplied and we have already found some solutions that were applied and we will search for more solutions in the future. We hope that these will be successful but you have to understand that it’s the usual cat and mouse game,” Kovács added.

USING THE DATABASE What can be done to save iWiW? Well Magyar Telekom has to find a solution regarding the spam, and also

try to lure back its active users somehow. However, the company is set to fire about 500 people by the end of 2012, and it’s hard to believe that it will concentrate on iWiW. “iWiW’s true value lies in its huge user base. It still has many users: two million people per month are using the site. Hence, we are constantly working on projects that use iWiW’s database and infrastructure, such as the klapp.hu dating site, which has achieved great success in a short time. It has about 40,000 registered users and the number continues to grow,” Kovács tells the BBJ. True, klapp.hu seems to be a success, but while it’s in the user interface of iWiW, it’s actually linked to the dating site itself, and can hardly be called a revolutionary new and interesting “feature”.

And what of Várady? He has quit the management of the site he founded and now lives in Berlin, working on high tech electronic devices. “Last summer I used Facebook for three months, then unsubscribed from it, because I got bored of it.

The information flow is too intensive and I couldn’t keep up with it,” the Hungarian says. Almost a billion active Facebook users don’t share Várady’s view, though, and iWiW has to be woken from its coma, if Telekom don’t want it to forgotten forever. ■

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Balázs Fürjes: Personal links Balázs Fürjes, government commissioner of major investments in Budapest, was appointed just over a year ago. Since then, three major projects have been taken over by his team: a new stadium, a new museum and an old-new university.

Q: HOW DO YOU FEEL IN YOUR ROLE? A: Thanks for asking, I feel fine. I like my job and, thanks to my team, hard work and the support of Prime Minister Viktor Orbán, we have achieved a lot in the last 12 months. As I like to say: we have no reason to be proud, but we can at least be grateful! I hope we can continue on our path.

My job is somehow similar to that of a juggler spinning plates on sticks. He has to spin them at the right speed and be extremely cautious not to let them fall down.

Q: TELL US MORE ABOUT THOSE PLATES – THE INVESTMENTS IN BUDAPEST. DO YOU HAVE A FAVORITE? A: The answer is no. Strictly, I’m not allowed to have one.

However, I have previously worked in public administration and I know very well that only issues that have personal links to the people responsible can be implemented effectively. I feel very lucky as I’m connected to all the projects I’m working on – although the reasons differ from case to case.

I have a special relationship with the new stadium of the Ferencvárosi Torna Club (or as everybody in Hungary knows it, Fradi). I have been a supporter of Fradi since my childhood. Being a Fradi fan is a family tradition: my father and my father’s father were also supporters.

The new stadium, for which we’ve just received the final building permit, has a capacity of 22,000. In the planning phase one of the most important issues was to ensure the occupancy rate, as the facility operation has no right to access any public funds. Every year, around 30-50 football matches will be played in the

stadium: domestic championship and cup matches, international cup games and national team matches. As far as we can see, this multifunctional facility will be rented throughout the year and these events combined with football matches and sponsorship revenues could make a decent profit.

Q: THE MAIN PROBLEM WITH HUNGARIAN FOOTBALL IS THE LOW QUALITY, WHICH LEADS TO LOW ATTENDANCE AT GAMES. WHY DO YOU EXPECT ANY CHANGE IN THIS TENDENCY? A: Well, it’s a little bit of a “chicken and egg” problem. Several international analyses have showed that a new, modern family friendly stadium increases the number of visitors in itself. We will install a special new telecommunications system to enable a replay of goals in live matches on every smartphone in the stadium. And – as a family friendly stadium – we expect new generations to appear in the grandstands.

According to our own calculations, if Fradi is in the top three in the national league, participates in international cups every year or two and the Hungarian economy shows a little expansion, the attendance and the revenues will be fine.

Q: READERS OF THE BBJ – BEING ECONOMYMINDED – LOVE NUMBERS AND SUMS. COULD YOU TELL US THE MAIN NUMBERS OF THE PROJECT? A: The total budget is HUF 14 billion net. However, I’m very optimistic that the final sum will be under HUF 10 billion through the partial

selling of the plot. According to the development plans, we moved the location of the new stadium backwards. This way, one of the most valuable land spots in Budapest will be available at the crossing of Könyves Kálmán körút and Üllői út, and we will have a serious chance to reduce the final sum of the investment.

Q: NOT TOO FAR AWAY FROM THE STADIUM, A NEW PUBLIC AFFAIRS UNIVERSITY AND ITS CAMPUS WILL BE ESTABLISHED IN ONE OF THE BIGGEST DEVELOPMENT PLANS IN BUDAPEST...

A: Re-established, to be precise, as Ludovika was the Hungarian military academy until 1944. Just as with the Fradi stadium, I feel some personal connection with the project, as my father and my mother’s father both graduated from the academy.

Q: I SPENT MY CHILDHOOD IN THE NEIGHBORHOOD AND ALL I CAN REMEMBER IS A SHABBY OLD MUSEUM AND A NEGLECTED PARK. REBUILDING THE PLACE SEEMS TO BE AN ALMOST IMPOSSIBLE TASK. A: There are many aspects that influenced us to finally decide to choose that “museum” as the old-new building for the newly established Public Affairs University. The site of Ludovika and the future campus is ideal as district 8 (also known as Józsefváros) is the most university-related part of the city. It has hosted universities for centuries.

But a very important aspect of the decision is that the project is not exclusively about the university

and the campus, but also the largest urban development project in years. It was a very conscious decision that we realize the project in a ruined and shabby part of the city, that can be revitalized in that way.

We will renovate the Orczy Park and its neighborhood, the green area of Budapest will grow by one hectare and the recreational and leisure activities of city residents will be expanded as the renewed park and the sport facilities inside will be available to everybody.

Furthermore, not far away from the new campus, on Diószegi utca, a new practice building will be erected for the military and police officers and also a dorm for 600 people. The omnipresent police forces will help stabilize public safety in this particularly infamous neighborhood.

The whole project for the 26-hectare area will be realized between 2012 and 2015.

Our first task is the authentic renovation of the historical building of Ludovika.

We’ve received the final building permit and we are currently preparing a construction tender. The next step is the authentic renovation surrounding Ludovika and the construction of new buildings that fit into that environment. We will rebuild the stables and the riding school, and develop a shooting range sunk into the ground. A swimming pool will also be available, and not just to the students and staff of the university, but to kids in the nearby schools as well. We are currently in negotiations with the Hungarian Pentathlon Association as four out of the five disciplines will be available at Ludovika and its park. Only a fencing hall is required and Ludovika will regain its old fame, as it was the Alma Mater of many Hungarian pentathlon champions before WWII. The whole budget of the development is HUF 24.5 billion, but I see a good opportunity to win European Union funds for as much as the 75% of the project from the 20142020 budget.

Q: YOU ANNOUNCED THE CONSTRUCTION OF A NEW MUSEUM FORMING A RUBIK’S CUBE IN MARCH. HOW IS THIS PROJECT EVOLVING? A: Well, it is not widely known, but the whole concept of the Rubik exhibition center has to be created before we should talk about the shape of the building.

There are four different objectives we’d like to bring under the same roof in this exhibition center. First of all, the Rubik’s cube, which is the most known game and design icon of our world. It is unbelievably universal in at least three ways. On the one hand, no special language or cultural knowledge is needed to solve the cube: the objective is crystal clear at first site. On the other hand, it’s universal because it is known in every county, and finally it has pervaded design, architecture, fine

CURRICULUM VITAE Balázs Fürjes graduated summa cum laude from the ELTE University Faculty of Law. After working for a law firm for two years, he was appointed as government commissioner responsible for the construction of the Budapest Aréna in 1999.

He was the government commissioner of the bid for the planned Olympic Games in 2001-2002 and also a member of the board of the Hungarian F1 Hungaroring circuit.

Between 2003-2011 he worked for Wing group, the property development branch of Hungarian holding group Wallis. Since 2011 he is the government commissioner of major investments in Budapest. He is also founder of the “I love Budapest” movement and Fidelitas, the youth organization of political party Fidesz.

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are very important › I’VE BEEN ASKED

TO EXAMINE THE POSSIBILITY OF A NEW CONFERENCE CENTRE IN BUDAPEST FOR 4,000 VISITORS

arts and even Hollywood blockbuster movies.

The second objective of the museum is to propagate the message of the cube: creativity, innovation, ingenuity and cunningness, to explore, to find a solution. Thirdly, it is Hungarian and fourthly but not finally Hungary needs a science center, where we can exhibit the great intellectual achievements and also teach the coming generations.

The form of the building is inspired by the cube, all right, but we have to find out what to import into the building, what the main theme will be, why this is going to be a great exhibition center. And this kind of planning is a little bit against nature, a little bit inside out.

Usually architects design buildings after the functionality is clear. In contrast, we have the cube, as a form, and we try to find out the real function of the building.

So we are in the middle of creating the concept. The plan is very ambitious and a lot of conversations and negotiations are needed to create a viable concept. So we convened – together with Ernő Rubik – an advisory board. The members are from all the different parts of business and social life, but they all are renowned for something. They all provide very productive ideas about

how to maximize the benefits of our project. Although this museum is about the great Hungarian intellectual achievements, Rubik and I believe that foreigners, who are not Hungarians by origin, but know the country very well and have a close link to Hungary also have to be invited to the board. People like April H. Foley, who served as the United States Ambassador to Hungary from 2006 to 2009. It is clear that without the help of foreigner advisors, the concept could not be successful.

Q: YOU MENTIONED THAT THE CENTER WOULD HAVE SCIENTIFIC AND EDUCATIONAL ROLES AS WELL. A: First of all, elementary and high school students may come to the museum and participate in natural sciences lessons, which they could not afford via the “usual” educational process.

But it is equally important that we’re not building this center just as a tribute to the past, but also we’d like to inspire the future and to stimulate intellectual work.

Due to this, we’d like to see a place where start-up competitions and exhibitions can be held, to demonstrate intellectual and innovative ideas to not just a professional audience but to the

wider public as well. Hopefully, two-three years after the opening, the Rubik exhibition center will be a place where prestigious international start-up conferences and festivals will be held.

Q: WHEN CAN WE EXPECT THE GRAND OPENING? A: We have a deadline to create the concept in the spring of 2013. We’d like to start an international design competition in the second half of next year.

Based on the first reactions we think that if our part of the job is done well, then the most acknowledged architectural firms from Hungary and from abroad would participate in the tender.

We would like to see the opening of the museum by 2017-2018. It is unwise and very unprofessional to declare a sum or a budget before the plans are drawn. All I can say that it’s going to be a multibillion forint project, but – as it is also a scientific and R&D investment – we expect to receive significant financial assistance from the European Union.

Q: AS A GOVERNMENT COMMISSIONER, ARE YOU EXPECTED TO COME UP WITH NEW IDEAS? A: Working with the Prime Minister means a lot of conversations and new ideas emerging, we discuss a lot of possible projects. What I can already tell you is that I’ve been asked to examine the possibility of a new conference centre in Budapest for 4,000 visitors. Hungary, in the heart of Europe, is a possible target of conference tourism – which happens to be the most profitable branch of tourism. The accessibility of Budapest is good, our hotels’ occupancy is currently low, and the city is relatively cheap and truly beautiful. All we miss is a large conference hall, as currently the largest has a capacity of only 2,000 people. So, besides my current duties, I’m in charge of finding a suitable place for a new conference hall. Details will come later as we progress. KK

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Consequit in search of hidden demand Figures and data might always take the limelight, but emotional intelligence is also a key factor in financial matters, advocates w, a newly launched financial and insurance consulting company started by former board and management members of Brokernet. After a dynamic start, the new company has achieved quick results despite the less-than-optimal state of the market.

Q: IT’S BEEN 50 DAYS SINCE YOU LEFT BROKERNET TO FOUND AND BUILD A NEW COMPANY. WHAT ARE THE FEATURES AND SERVICES THAT WILL MAKE CONSEQUIT UNIQUE ON THE MARKET, AND WILL ENSURE THAT YOUR OLDER “BIG BROTHER” DOES NOT OVERSHADOW YOU? A: Like our previous company, Erika Kósa, who I think is one of the best network-builders

in the world, and definitely the best in Hungary, also launched Consequit. She and the staff at Consequit, we believe in each other, and we are confident that our skills will complement each other better under the new circumstances. In our logo, the letters E and Q are highlighted, which refers to the importance of emotional intelligence in our consulting work. Being focused on people, and allowing more room for emotions in

RETURNING TO HER ROOTS ERIKA KÓSA, THE OWNER OF CONSEQUIT What was your motive for parting with Brokernet and launching a new company?

I have been working together with my partners for more than 23 years, and lately we found that our differences grew more significant than the similarities.

What values make your new company unique on the market?

We will return to our roots, and to the values we believed in when we started Brokernet in the first place. Harmony and emotional intelligence are of the upmost importance for me.

What does the new company’s ownership structure look like?

There are four entities within Consequit, and the whole group is 100% owned by myself.

What will the difference be between the two companies from a client’s point of view?

Our strategic partners develop products for both companies, and it is too early to tell the exact differences.

One thing is for sure, though: we will focus much more on the education of our consultants with ongoing training and exams. Only the best representatives can work with us.

business decisions will give us a considerable advantage over our competitors.

Q:WHY DO YOU THINK EMOTIONS PLAY SUCH AN IMPORTANT PART IN FINANCIAL DECISIONS? IF ANYTHING, THIS FIELD SHOULD BE DIRECTED

BY PURELY RATIONAL FACTORS. A: True, business decisions must be fully rational, but when it comes to savings and investments, we often find that rational arguments alone are insufficient to shape one’s behavior. Given that these decisions are about future events, we don’t always have satisfactory or reliable information on which we could base an entirely rational decision. Especially if the future in question is remote, as in the case of pension savings, or the likeliness of events happening is relatively low, like disasters or other unfavorable matters. People tend to exclude these thoughts from their mind, saying that “it will never happen to me”, or “it is still very far off”, in the case of pensions.

Emotional arguments, on the other hand, can often offset this lack of information.

Q: IN GENERAL TERMS, THE FINANCIAL MARKET IS NOT EXACTLY IN GOOD SHAPE. ONE WOULD ASSUME THAT LAUNCHING A NEW COMPANY IN THIS ENVIRONMENT IS PRETTY MUCH AGAINST THE ODDS. A: Yes, the market is definitely very tough at the moment.

We all know the difficulties on the financial market, and the insurance market, too, is dwindling rapidly. The life insurance market is down by 10-15% y/y since 2008, and single premium insurances have dropped radically as well. Big insurance companies live on their existing clientele, and the number of new clients

is decreasing by 10-15% a year. But if you think about it, Budapest has some 700 restaurants, and still, new ones open every week. And you know, what? The good ones will always find room on the market, and will always survive. I’m positive that the same will apply to us. Although the insurance market is shrinking, it’s not only a threat; it’s also a great opportunity, as the population is hugely underinsured. The demand is vast, albeit currently latent.

We will have to bring it into the daylight, and then our potential will become virtually infinite.

Q: HOW DO YOU REVEAL A HIDDEN DEMAND, EXACTLY? A: When thinking about pensions, most people still think that their incomes will be somewhat lower, but their life will basically remain manageable, which, if we consider the state-run payas-you-go pension system, is not the case. When we talk to someone in his 30s, paying the pension fees for a minimum wage amount (a rather widespread case), we can easily calculate that his or her pension in the state-financed system will amount to around EUR 90 a month or so. This might be a shocking discovery and definitely not something that can be handled with a simple ‘whatever will be will be’ mindset. Investments and savings have two basic factors: time and money, and, unsurprisingly, the more time you have, the less money you need. There is no such thing as too early, when you are starting to save for your pension.

We encounter similar surprises when we begin to add up someone’s expenses. We never ask how much someone earns; we always ask how much they spend. When we add everything that springs to mind, a shock usually follows. ‘I don’t have that kind of money,’ they would say when we show them the bottom line. ‘Well, you have just spent it,’ we have to reply. These surprises are not always pleasant, but they are very effective in changing someone’s mindset about savings and investments. What’s more, if someone has no idea how much he or she spends on a monthly basis, it will be a lot easier to spend, say, 10% less than that, and open a savings account with the difference.

Q: IS YOUR PORTFOLIO FOCUSED SOLELY ON INSURANCE AND INVESTMENTS? A: These are the two we are currently focusing on. Credit and real estate markets are so flat at the moment that we don’t want to put too much effort into entering them.

Of course, we will keep an eye on both, and we have the potential to make the necessary steps, whenever things get better. But for now, these two pillars are more than enough to keep us busy.

With the shrinking of the welfare state, people are forced to take responsibility for their own security, be it in the field of health, education or pensions. We now have financial solutions for all these issues including life, pension and health insurance, term fixed insurance or other forms of long-term investments. And I have to highlight that these financial products are getting ever more secure, even com-

pared to the constructions we had available three years ago. There are lots of safety nets around these products to ensure that nobody will lose too much, even if things go really wrong.

SSTARTING OUT. WHAT IS THE CURRENT STATE OF PROGRESS, AND WHAT ARE YOUR SHORT- TO MID-TERM GOALS? A: Consequit was founded 50 days ago, and we have already contracted six major insurance companies and investment gold trader Solar Gold as strategic partners. We have 427 representatives, some 200 of whom are completely new recruits. We have a great know-how, partly via Erika Kósa, partly via myself and other management team members, and we have already started to improve upon the methodology and policies we previously used, focusing on the culture of the ‘gentle human touch’.

Although it is an multilevel marketing (MLM) scheme, it is far from the traditional ‘buy our product and forget us’ method, which accounts for MLM’s dubious reputation. We have also introduced a cutting edge IT support system that is completely unique on the Hungarian market.

As well as the Hungarian company, Consequit also has the Slovakian unit, with another 350 people operating in Bratislava, Kosice and other major cities across the country. With that said, we aim to reach a revenue of HUF 1.2-1.5 bln in 2013, and we definitely want to be in the top three companies in our sector by the next year. ZsB

1992-2012

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3

Anniversary

20 YEARS

IN BUSINESS

Celebrating 20 years in business On a festive night at the Kempinski Hotel Corvinus Budapest, the Budapest Business Journal celebrated its 20th birthday with some 200 guests, including readers, partners, and past and present staff members.

Keynote speakers at the evening were Péter Dávid, CEO of the American Chamber of Commerce in Hungary, Zoltán Cséfalvay, state secretary in charge of economic strategy, and Ádám Balog, deputy state secretary in charge of taxation. BBJ founder Mike Stone also welcomed the audience, recalling the early days of the paper.

ZOLTÁN CSÉFALVAY, STATE SECRETARY RESPONSIBLE FOR ECONOMIC STRATEGY

MIKE STONE RECALLS THE PIONEER DAYS

Photos: Attila Dubniczki

BBJ FOUNDER MIKE STONE, ZOLTÁN BOGÁTHY (OWNER OF CULINARIS), ERIC D’AMATO (FORMER BBJ EDITOR)

WWW.BBJ.HU

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Budapest Business Journal | Dec 14 – Jan 10

ZSUZSA VÁMOSI-NAGY AND KATINKA KINGA SZILÁGYI (LEFT), AND THE OLÁH KRISZTÁN JAZZ TRIÓ (RIGHT)

ÁDÁM BALOG, DEPUTY STATE SECRETARY

PARTY NETWORKING

PATRICIA FISCHER, BBJ MANAGING EDITOR, ZOLTÁN CSÉFALVAY AND BALÁZS ROMÁN, BBJ COO

ISTVÁN FEKETE, HONORARY PRESIDENT OF THE JOINT VENTURE ASSOCIATION

PÉTER DÁVID, AMCHAM HUNGARY CEO

BBJ ARCHIVE ON DISPLAY

22 3 Socialite BBJ

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Budapest Business Journal | Dec 14 – Jan 10

WHO'S NEWS

Name Krisztina Bedy Current company/position Avantgarde Public Relations/managing director

Before her promotion, Bedy was Avantgarde PR’s head of business and product communications services.

She started her career as a journalist and worked in the print and electronic media for 13 years. She joined Avantgarde five years ago as public affairs consultant, and then left for GlaxoSmithKline.

She later rejoined Avantgarde as division head.

DEC 18 Christmas cocktail party with the British Embassy and the Hungarian Association of British Alumni LOCATION Old Banking Hall of the British Embassy REGISTRATION 5:30-6 pm TIME 6-9 pm ORGANIZER British Chamber of Commerce in Hungary Fee BCCH members free; non-members HUF 5,000 + VAT CONTACT www.bcch.com

Do you know someone on the move?

Send information to research@bbj.hu

Name Wim Guilliams Current company/position K&H Biztosító/CEO

Guilliams will succeed Luc Cools as CEO of insurance company K&H Biztosító from January 1.

Cools will continue his career at Slovakian insurer CSOB. Guilliams began work at the Belgian arm of ING Group, and joined K&H’s owner KBC Group as a senior consultant in 2007.

He completed his MBA at Vlerick Management School.

DEC 19

FEB 5

FEB 7

Christmas drinks

Speed business meeting

Jour Fixe - DUIHK

LOCATION Kempinski Hotel Corvinus Budapest,

LOCATION Sofitel Budapest Chain Bridge,

LOCATION Gundel restaurant,

1051 Budapest Erzsébet tér 7-8 TIME 6 pm FEE HUF 5,000 + VAT ORGANIZER Netherlands-Hungarian Chamber of Commerce CONTACT www.dutcham.hu

1051 Budapest, Széchenyi /Roosevelt/ tér 2 TIME 6 pm ORGANIZER British Chamber of Commerce in Hungary, the FrenchHungarian Chamber of Commerce and Industry, the DEFH CONTACT www.bcch.com

Erzsébet ballroom, 1146 Budapest, Állatkerti út 2 TIME 6 – 10:30 pm ORGANIZER German-Hungarian Chamber of Industry and Commerce CONTACT www.duihk.hu

Uncontested AmCham president

AmCham Hungary has elected well-known entrepreneur Willy Benkő as its next president, albeit in an uncontested election. Four board members-at-large were also elected, again uncontested, at the chamber’s annual assembly on December 6.

Robert Peaslee, Commercial Counselor at the U.S. Embassy in Hungary, and also an ex officio member of the chamber who serves as chair of its election committee, admitted to a certain level of “disappointment and frustration” that there were not more candidates.

Quick to praise those who were standing, and saying his comments were no reflection on them and their undoubted qualities, he added that it was “a slightly pathetic outcome” for a chamber of more than 400

Name András Gyenes Current company/position Unilever Magyarország/ CEO

Gyenes began work at the Hungarian subsidiary of Unilever in 1993, after having graduated from the Janus Pannonius University of Pécs. Later he worked at the Dutch headquarters of the company as a senior auditor. He has held various management positions at the company in the past ten years, including managing director and marketing director.

members, and he challenged more candidates to come forward for the next elections.

Benkő, vice president of business development and member of the board at the DBH Group, as well as principal of Rózsakert Medical Center, is perhaps best known as part of the team that built up the bank-independent ATM business Euronet Administration Services Kft, and as a professional motivational speaker. He is also helping develop the U.S. market for a Hungarian software product at RankMiner USA. In his election address, Benkő vowed to inspire, include and innovate, looking both to boost membership overall, and increase participation of members in events. “I don’t care who you are, as far as I’m concerned, if you have a pulse, you are a candidate to join AmCham,” he said.

Two new members were taken onto the board: Edina Heal, country manager of Google Hungary, and Andrea Juhos, managing partner of Lee Hecht Harrison Hungary.

Márk Hetényi, VP of finance EMEA for Flextronics, and Eszter Szabó, corporate communications and public affairs leader CEE for GE, were re-elected for their second term.

Earlier, Peaslee had praised the leadership of outgoing president István Havas, the country managing partner of Ernst & Young. “I would like to express very heartfelt thanks on behalf of the Ambassador and everyone at the embassy to István, who has led AmCham during some very trying times in Hungary. We have appreciated his open and democratic approach, and the outstanding professionalism of his leadership.” RM

Spend your New Year’s Eve at one of these fabulous places...

Enjoy the atmosphere of a French bistro in Budapest’s downtown, where a great gastronomic and visual experience awaits you.

New Year’s Eve Menu Starter: Campari narancs / Campari orange, Kir Royal, Francois President Nyerspezsgő Pheasant velouté, brandy, truffle, quenelle “Mangalica’ jelly, remoulade Árvay Hárslevelű 2009 (1.5 dl) or Maigre fish, ceta caviar, shrimp Káli Kövek Sauvignon Blanc 2011 (1.5 dl) Pheasant Supreme, chestnut, rosemary jus Tűzkő Chardonnay Barrique 2010 (1.5 dl) or “Mangalica” cotlet, millet, forest mushroom St. Andrea Pinot Noir 2009 (1.5 dl) John Dory fish, beurre blanc, quinoa with pumpkin St. Andrea Napbor 2011 (1.5 dl) or Quail Supreme, pine nuts, potatoe fondant Kreinbacher Nagy Somlói 2009 (1.5 dl) “Beigli” pudding, walnut, poppy mousse Hétfürtös 6 puttonyos Tokaji Aszú 2000 (0.5 dl)

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BBJ

Housed in a historic building amid the heart of Buda Castle, Pierrot has reigned supreme among Budapest’s gourmet destinations for over three decades now. A comfortably elegant and fresh ambience welcomes aninunforguests toEnjoy delight gastronomy as it was enjoyed by gettable evening the Austro-Hungarian monarchs, but infused with 21st at Rivalda with century culinary innovation. a sumptuous dinner, Celebrateyear-end New Year’s Eve at Pierrot! Enjoy Pierrot’s fine in its ownwine unique cuisine and special selection while listening to live atmosphere t- or menu is available. piano music. Á la cartebefi dinner ting the special occasion.

Price of menu HUF 27,800/person includes the menu, welcome drink and midnight drink.

2321215653656 Wine pairing price: HUF 11,800/person. rivalda.hu

The program we offer: The Pop diva Brigitta Burkus will sing famous pop music Through the night Rudolf Lukács jazz piano player will play live music From midnight DJ Frank will entertain you with well known songs.

Breathtaking magic show with our illusionist András Csirmaz

For information and reservation please call 06 1 375 6971.

PIERROT WISHES YOU A HAPPY NEW YEAR!

WITH LIVE JAZZ! PRICE: HUF 28,000/PERSON/€100 ARRIVE: 7 PM

www.borsso.hu

Spoon Cafe & Lounge is organizing a New Year’s Eve Party again this year. We serve a six-course menu with a welcome glass of Möet & Chandon, unlimited mineral water and refreshments

+36 1 789 0975

www.pierrot.hu

+36 1 375 6971

EXCITING GAMES AND SPECIAL PRIZES ARE WAITING FOR YOU! PRICE: HUF 35,000/ PERSON (€130) www.spooncafe.hu

+36 1 411 0934

[ EXPERT OPINION ]

Sweet life, bitter aftertaste facts on diabetes In 20 years, every Hungarian family is likely to have at least one diabetic member. Or more.

According to a recent survey of the Hungarian Diabetic Society, nearly 700,000 patients are diagnosed with diabetes, just as many already suffer from the condition but go undiagnosed, and roughly the same number of people are at high risk, or as the doctors say, in the anteroom of diabetes. It totals two million – every fifth Hungarian is affected by the silent killer. If that doesn’t sound bad enough, think of this: the number is expected to double over the next 20 years.

“Some 90-95% of patients are diagnosed with type 2 diabetes mellitus, a metabolic malfunction previously associated with mature adults. Sadly though, youths are increasingly affected,” says Dr. István Filiczky, internist and gastroenterologist at Dr. Rose Private Hospital.

“Apart from genetic factors, our diet seems to play a crucial role behind the detrimental demographics. We eat junk, and even worse, we eat too much of it.”

What brought us so far from a healthy regime?

Good question. Some say that craving sweets is a natural remnant of breastfeeding – the sweet taste reminds us of mother’s milk, evoking the feeling of comfort, contentment and security. Sinking your teeth into sweetmeat has never been easier in the history of humankind. The bad news, however,

is that sugar happens to be highly addictive.

Eating per se is a way of rewarding ourselves for the tribulations of life. Courses for horses, some like it hot, others prefer sweet, sour, salty, or high octane alcohol – to the same effect, i.e. getting a quick fix against stress.

Eat, drink, relax.

Needless to say, it’s all a vicious circle. After a temporary relief, one needs more to calm those ragged nerves. The diabetic are denied even that petty little recompense. “There’s an old saying that the life of a diabetic is that of

a lowly civil servant: boxed into the cubicle of timely discipline,” says Dr. Filiczky. “It’s all about counting carbs and calories.”

“The real problem is that one can live with diabetes without serious symptoms for a decade or two. The majority of patients are not motivated to keep the diet, let alone get insulin treatment. When they realize that the complications of untreated, advanced diabetes are incurable and irrevocable, it is too late.

It is hard to grasp when you feel alright that in 20 years your kidneys, eyesight or microcirculation will be seriously affected by your present condition,” warns the doctor.

What are the telltale symptoms to watch out for? Constant, unquenchable thirst and

GOOD TO KNOW The biological reason behind diabetes is that most or all of the beta cells in the pancreas stop producing insulin. So far we have assumed that the cells decay, and researchers were primarily trying to induce the production of new beta cells in the body. A team of American researchers, on the other hand, realized that beta cells in an affected pancreas are not dead, they are just dormant, simply reverted to an earlier stage of cell development.

It appears as if increased stress – unhealthy diet, exhaustion, obesity, etc. – has drained them, so they call it a day and stop working for you. The recent discovery sheds new light on diabetic research, prompting scientists to find ways of somehow “poking” the retarded cells to convince them to start making the all-important insulin again.

frequent hunger are the first warning signs.

Unreasonable weight loss and frequent, intensive urination, nausea and vomiting are all alarming symptoms. The patient becomes prone to infections, because of high sugar level in the tissues, ideal for the propagation of bacteria and fungi. Fruity, acetone smelling breath is the result of ketoacidosis.

Forced, panting breathing and coma signal extremely unbalanced glucose metabolism.

The symptoms of diabetes are bad enough, but no way near as threatening as its complications, leading to a heavily impaired lifestyle. “Once you get to know the possible outcome of the disease, you have no doubts any more how important prevention is.

Evaluating the risk of diabetes, regular medical check-ups, and exercising selfrestraint in eating and drinking alcohol are paramount. A healthy lifestyle that makes up for the stress of modern life is the best way to keep diabetes at bay,” concludes Dr. Filiczky.

www.drrose.hu

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