Budapest Business Journal 21/13

SPECIAL REPORT:

USA COUNTRY FOCUS JUNE 28, 2013 – JULY 11, 2013

VOL. 21. NUMBER 13

BUDAPEST

BUSINESS JOURNAL HUF 1,250 | €5 | $6 | £3.5

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

MORE OF THE SAME HUF 120 bln expected in budget revenues from newly increased taxes

Photo: Lajos Soós / MTI

If banks and telcos didn’t have it bad enough as it is, they will now be paying even more in sectoral taxes to make up for revenues lost to the central budget as a result of the government’s own measures which have stifled inflation. 03

Q&A

SOCIALITE

Preparing to ride the wave AmCham President Willy Benkő is confident that Hungary will be among the countries to take off once global economic recovery arrives, regardless of what colors the political landscape is showing. 11

TRENDS

Handcrafted revolution

The flood in numbers

As well known ‘industrial−scale’ breweries fill the market with cheaper beers, smaller beer makers are turning toward specialties, starting a kind of beer revolution in Hungary. This has been the year of handcrafted beers, and there are still more to come.

19

The latest flooding of the Danube broke many records. Law enforcement deployed a total of 18,687 officers and cadets during the crucial week, more than 10 million sandbags were filled with 242,500 cubic meters of sand. The flood endangered 206,000 people.

11

SUBSCRIPTIONS

THE EDITOR SAYS

Call +36 1 398-0344, or email circulation@bbj.hu BUDAPEST BUSINESS JOURNAL 1 year HUF 27,500+VAT 6 months HUF 13,750+VAT 3 months HUF 6,875+VAT Newsletters HUNGARY A.M., ENERGY TODAY, REGIONAL TODAY 1 year HUF 179,000+VAT 6 months HUF 104,900+VAT 3 months HUF 58,900+VAT BOOK OF LISTS 2012-2013

HUF 19,120+VAT

DIGIBOL Subscription fee: HUF 49,900 + VAT

MANAGING EDITOR:

Patricia Fischer COPYEDITOR/PROOFREADER:

Robin Marshall EDITORIAL STAFF:

Gergely Herpai, Krisztián Kummer, Gabriella Lovas, Gergő Rácz, Zsófia Végh LISTS: BBJ Research (research@bbj.hu) NEWS AND PRESS RELEASES: news@bbj.hu

MORE OF THE BAD AHEAD The government received ultimate confirmation that it had reached its key economic policy goal of exiting the European Union’s budget deficit scrutiny after the bloc’s finance ministers approved the European Commission recommendation to lift a procedure that has been in effect since 2004.

During that process toes were stepped upon and bridges burned, relying on the optimistic view that the country has the capacity to stand on its own feet, come what may.

Global factors played into the government’s hands, allowing it to essentially kick out the International Monetary Fund a sec− ond time, ignore international criticism targeted at its policies on grounds of curbing democratic rights, and continue to mount pressure on profitable foreign−owned industries.

However, the same international sentiment has started to sour. The United States Federal Reserve is talking about end− ing its stimulus program, which was one of the key drivers of the overall upbeat mood of recent months. Then there’s the ticking bomb in Asia, with the Chinese banking system show− ing very similar symptoms of financial dehydration that was the precursor to the 2008 Lehman Brothers collapse in the U.S., which then promptly took most modern economies down

with it. Violence and political unrest continue in Turkey and Brazil. Already there are strong signs that, not only is Hun− gary not immune, but it remains so strongly imbedded into the international economic landscape, that it is therefore prone to tumble upon even smaller swings, much less bigger ones. Over the course of a single week, the forint depreciated from low 290s to more than 300 against the euro. Government bond yields on the secondary market also leaped by 30−40 basis points on average in the case of benchmark paper.

The government went as far as it could to keep its indepen− dence on the global stage, which included the refusal of finan− cial backing from the EU and the IMF in return for a bit more discipline and transparency in how it conducts its business. It still shrugs off any warnings about where the continuing manda− tory profit cuts in the banking, energy, and now media industries may lead in the not too distant future.

The economy seems stable enough to clamber along – at least until the next elections – if the global situation doesn’t grow too tumultuous. If the indications of the present unleash a worst− case scenario, that surely won’t suffice and the only thing left available will be less than useful: hindsight.

DESIGN:

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

Tamás Tárczy ADVERTISING:

Absolut Media Zrt (hirdetes@amedia.hu) SALES: sales@bbj.hu CEO:

Balázs Román PUBLISHING DIRECTOR:

Ágnes Balla PUBLISHER:

Tamás Botka CIRCULATION AND SUBSCRIPTIONS: circulation@bbj.hu PRINTING:

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

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

The Budapest Business Journal, HU ISSN 1216-7304, is published bi-weekly on Friday, registration No. 0109069462. It is distributed by HungaroPress. Reproduction or use without permission of editorial or graphic content in any manner is prohibited. ©2011 BUSINESS MEDIA SERVICES LLC with all rights reserved.

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

BBJ.HU YOUR DAILY DOSE OF INFORMATION IN BBJ QUALITY

PUTTING OUT THE BACKFIRE Economy Minister Mihály Varga used the final days before the summer lull truly settles in to the country to shake things up quite profoundly. Out of the blue, he announced the govern− ment would be raising extraordinary sector taxes once more, despite stating repeat− edly earlier that no fur− ther tax changes are necessary, and once again doing so without discussing it with any− one affected.

As usual, the given reason behind the changes is to assure that Hungary comes out from under the European Union’s bud− get gap scrutiny and, as importantly, that it won’t follow the exam− ple of Malta, which exited the excessive deficit procedure only to be subjected to it yet again a short six months later.

However, the real reason apparently has much more to do with the fact that the government’s own measures are starting to backfire in promi− nent fashion.

Varga said that only a fraction (17%) of the planned 42% of the revenues from the financial transaction tax had arrived in the budget so far this year because, as he subtly conceded, Hungarians were that “good” at evading the levy. The government had ample warn− ing from analysts and the banks that this is exactly the reaction the tax would provoke and surrounding countries are actually

actively promoting their financial services to attract Hungar− ian clientele. Furthermore, the government also claimed that the costs of the tax would be paid by the banks and in no way affect customers. In reality, the financial market regulator found that the over− whelming majority of banks dodge the costs and pass them on to their customers.

The other reason the new tax revenues are needed is spec− tacularly low con− sumer price inflation.

Although the govern− ment has lowered its 2013 CPI projection from 5.2% to 3.1% so far this year, the 1.8% mea− sured in May indicates that the annual figure will be even lower.

As Varga explained, while low CPI is good for the consumers, it has a negative effect on budget revenues.

What he was ignor− ing is the main reason behind the muted price index growth: the gov− ernment agenda’s lat− est centerpiece, the mandatory reduction of utility costs.

The current government has never been a big enthusiast of thinking ahead in terms of economic policies, and was always happy to make overnight corrections later on, blaming outside factors and happily ignoring commitments it had made earlier.

It looks like we can expect more of the same as parliament shuts down for summer recess.

THE CURRENT GOVERNMENT HAS NEVER BEEN A BIG ENTHUSIAST OF THINKING AHEAD IN TERMS OF ECONOMIC POLICIES

BBJ

1 News

NEWS IN BRIEF

MNB continues easing cycle, as expected 04 NEWS

Kúria delays verdict in key FX loan case

07

macroscope

FURTHER STRINGENCY FOR TELCOS AND BANKS Economy Minister Mihály Varga raised quite a few eyebrows when announcing that the government is introducing even further taxes to shore up the budget. As usual, the biggest direct casualties are banks and telecom firms.

STORY HIGHLIHGHTS ■

Mihály Varga announces new set of extra taxes ■ Banks, telcos, energy firms to bear the brunt of new burdens

especially since it took most of them com− pletely off guard. The government’s reve− nue target was also called into question.

government rhetoric that the law requires companies to shoulder the expenses.

To date, the finance market regulator has fined two banks for a total of HUF 30 million, but the regulator’s spokesman Ist− ván Binder said that further audits and penalties are likely to follow.

Telecoms companies objected to the fact that they weren’t consulted, not to mention the impact the regular reshuffling of the

It noted that the unpredictability of the environment raises doubts about whether investments are worthwhile in Hungary and if the soon−to−be auc− tioned mobile frequency spectrums can be sold at a good price.

IVSz cites a study from the KT Kearney international consultancy, which found 40% of minute−fees in Hungary are comprised of taxes and authority fees, the highest such proportion in Europe.

Varga’s announcement was all the more surprising since, shortly before, the Euro− pean Commission decided that it deemed earlier measures satisfactory and proposed that Hungary exit a nearly decade−long probe into its budget deficit.

The minister cited historically low con− sumer price inflation figures that indicate the annual indicator will be significantly lower than the benchmark forecast used for planning the budget.

“There are processes – such as low inflation – that are explicitly favorable for citizens, but at the same time reduce pre− viously planned budget revenues,” Varga said. Originally, the government calcu− lated with a CPI of 5.2% this year. It later lowered the projection to 3.1%, but the lasting muted inflation level, 1.8% in May, the lowest in 40 years, points to an even lower level by year−end.

“Hungary must not reach the same fate as Malta,” government spokesman András Giró−Szász added; the southern European country will reenter budget scrutiny as a result of its money keeping, a mere six months after monitoring was lifted.

Varga also noted that Hungarians had been rather ‘clever’ in avoiding the finan− cial transaction levy so far, so much so that only 18% of the planned annual total has come to the budget thus far, as opposed to the planned 52%.

MORE OF THE SAME The new set of measures involve raising the transaction fee, the telecoms tax, the min− ing royalty, as well as another charge on banks which are managing municipal debts that the state recently took over.

“Based on preliminary estimates [‥.] the tax measures are set to compensate HUF 110−120 billion of the year’s pro− jected revenues that won’t be arriving because of lower−than−foreseen infla− tion,” Varga told public radio.

Unsurprisingly, the affected industries were less than thrilled about the decisions,

Photo: Imre Földi / MTI

GERGŐ RÁCZ

ECONOMY MINISTER MIHÁLY VARGA AND GOVERNMENT SPOKESMAN ANDRÁS GIRÓ-SZÁSZ

MONEY FOR A BOOM Immediately, doubts arose regarding the actual motivation behind the pack− age, given that the Commission had already said it was satisfied before the announcement. The most likely driver for the package leaked from govern− ment sources is the planned launch of a family incentive program.

Reported details of the program would include a HUF 288,000 single payment after each newborn child; a HUF 224,000 increase from what is currently available.

The plan, apparently originating from the junior governing partner, the Christian Democratic KDNP would also introduce regulation protecting the interests of moth− ers on maternity leave, while extending the scope of family taxation.

Giró−Szász confirmed that an incen− tive program is indeed in the works, but declined to comment on any of the spe− cifics published thus far. The government has long tried to boost demographics as

THERE ARE PROCESSES – SUCH AS LOW INFLATION – THAT ARE EXPLICITLY FAVORABLE FOR CITIZENS, BUT AT THE SAME TIME REDUCE PREVIOUSLY PLANNED BUDGET REVENUES The latest Varga package can realis− tically raise HUF 70 bln for the budget this year, according to the calculations of the Fiscal Responsibility Institute Buda− pest (KFIB), an independent think−tank.

Its head, Balázs Romhányi, added that the banks are likely to pass on 90−95% of costs to their customers, despite persistent

policy environment bears on the economy.

“Now, without any professional consul− tation or the preparation of impact stud− ies, the government has significantly modified the industry’s tax burdens for the third time in a year,” IVSz, the associ− ation of IT, telcoms and electronics firms said in a statement.

the number of Hungarians continues to decline. The latest data from the Central Statistics Office recorded a 5.8% year−on− year drop in the number of children born between January and April. The last com− prehensive census in 2011 counted little more than 9.9 million Hungarians, a 2.6% drop from the previous tally in 2001.

04 News

WWW.BBJ.HU

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

NEWS

IN BRIEF

Budapest Business Journal | June 28 – July 11

We are wiping away the last remnants of Kadarism and putting an end to the patronizing role of the state Late Gyula Horn wrote in TIME magazine in 1996, in reference to long−time communist leader János Kádár

Former socialist prime minister Gyula Horn passed away at the age of 81 from a prolonged illness that has for years necessitated hospital care. Horn’s political career began in the later stages of the communist regime where, after several lesser roles, he became foreign minister. In 1989, he proved instrumental in paving the way for the collapse of the Iron Curtain. He is internationally renowned for his decision and has been recognized on numeral occasions. Although his socialist party lost the first democratic election in 1990, the MSzP recovered and won the next vote in 1994.

It was under Horn’s premiership that the infamous set of austerity measures known as the Bokros package, named after the finance minister Lajos Bokros, were introduced to stabilize the wobbly economy. Horn was a controversial figure. A study in 2012 comparing the performance of the past 20 years’ prime ministers showed he was the only one to have an overall positive result. At the same time he had admitted to serving the socialist state during the 1956 revolution against Soviet occupation and his exact involvement in thwarting the uprising is still unclear.

ECONOMY MNB CONTINUES EASING CYCLE, AS EXPECTED The National Bank of Hungary’s Mon− etary Council decided at a meeting on June 25 to cut the central bank’s key rate by 25bp to 4.25%. In line with market expectations, the rate− setters continued an easing cycle for the 11th month in a row, bringing the base rate, yet again, to a new histori− cal low. In a statement published af− ter the meeting, the Council said it judged that “the achievement of the medium−term inflation target and the condition of the real economy al− low further cautious monetary policy easing.” But it warned that a marked shift in perception of risk associated with the economy might influence the room for maneuver of monetary policy. “The Council judges that as long as the outlook for inflation and the real economy justifies it, interest rates can be reduced further; how− ever, increased caution is warranted in the volatile and rapidly changing global environment,” it said.

MNB CUTS INFLATION PROJECTION FOR 2013 The National Bank of Hungary has cut its forecast for average annual inflation in 2013 to 2.1% in a fresh quarterly report, down from 2.6% in the report published in March. The MNB put the average CPI for 2014 at 3.2%. The central bank noted that the forecasts assume an endog− enous monetary policy. The MNB put GDP growth at 0.6% in 2013 in the fresh report, up from 0.5% in the March report. It forecast GDP growth of 1.5% in 2014, lowering the projection from 1.7% in March.

NUMBER OF REGISTERED JOB SEEKERS FALLS IN MAY There were 515,000 registered job seekers at the end of May, down 3.6% from a year earlier, and down 6.7% from a month earlier, fresh data from the National Labor Affairs Office shows.

The number of jobs registered at local employment offices reached 86,200 in May. About 62% of these were subsi− dized by the state. There were 168,400 long−term unemployed in Hungary at the end of May, accounting for almost one−third of the total.

RETAIL SALES RISE 3.4% IN APRIL Retail sales in Hungary rose a calendar year−adjusted 3.4% year−on−year in April after a 2.9% decline in the previ− ous month, the Central Statistics Of− fice (KSH) said in a second reading of the data. Food sales rose 3.1% dur− ing the period, while non−food sales edged down 0.2%. In the first reading, KSH said food sales had risen 3.3% and non−food sales were flat. Online and mail order sales jumped 34%. Vehicle fuel sales were up 6.5%. The National Trade Association said after the data was published that full−year retail sales could be flat or even rise in some areas, if the launch of the state monopoly on tobacco sales causes no market disrup− tion and if the forint’s recent weakening proves only temporary.

ECOFIN LIFTS EXCESSIVE DEFICIT PROCEDURE AGAINST HUNGARY The European Union’s Economic and Financial Affairs Council (Ecofin) has acted on a recommendation by the Eu− ropean Commission to lift the exces− sive deficit procedure (EDP) against Hungary, National Economy Minister Mihály Varga said in Luxembourg, at the meeting of EU finance and econo− my ministers. The EC recommended

Numbers in the news

0.6% GDP growth for 2013 predicted by the central bank, up from 0.5% in March

-14.8 GKI−Erste’s combined consumer−business confidence index in June, up from −16.7 in May, reaching a two−year high on the back of improved sentiment among companies.

lifting the EDP on May 29. In the rec− ommendation, it acknowledged that an adjustment of Hungary’s general government deficit had taken place, and it projected a gap of 2.7% of GDP in 2013 and 2.9% in 2014, under the 3% EU threshold. Hungary has been under the EDP since 2004, the year it joined the European Union.

DOMESTIC PSzÁF DEPUTY HEADS RESIGN The two deputy heads of financial mar− ket regulator PSzÁF, Éva Sáray and László Balogh, along with the chair− man of the Financial Arbitration Board (PBT), Géza Nadrai, have submitted their resignations, PSzÁF said. PSzÁF chairman Károly Szász accepted the resignations with effect from June 21.

Szász appointed Zoárd Gázmár, manag− ing director of PSzÁF’s oversight direc− torate, as his new deputy head, effective June 24. Sáray and Balogh were ap− pointed for six−year terms in July 2010.

Nadrai was appointed in February 2011.

PSzÁF spokesman István Binder said the watchdog did not wish to announce the reason for the resignations. The gov− ernment submitted a bill to Parliament on June 7 that would integrate PSzÁF’s activities with the National Bank of Hungary. PSzÁF would be wound up without a legal successor under the bill.

MARGITSZIGET LIKELY TO STAY UNDER CAPITAL CONTROL President János Áder rejected a bill that would have transferred supervision of Margitsziget to Budapest from the 13th district. Áder said standing legisla− tion doesn’t allow the modification of districts without prior consultations, assessments or local referenda, and the transfer of control would have con−

stituted just such a case. He urged par− liament to reconsider the bill. The gov− ernment motioned the transfer since the island is a location of key strategic value in terms of tourism and deemed that Budapest could better coordinate the necessary investments and devel− opments than a district government.

POLITICS KÖVÉR REVOKES JOBBIK PARLIAMENTARY PRIVILEGES Chairman of Parliament László Kövér has revoked the rights of the Jobbik party to invite guests and staff into parliament, after members of the radi− cal party’s parliamentary group staged a protest where they took to the pulpit and displayed a banner saying “trea− son” in protest of the newly approved law regulating the leasing of state− owned farmland. Jobbik representa− tives objected to Kövér’s decision, say− ing it is illegal.

KDNP TO SUBMIT BILLS ON FAMILY BANKRUPTCY, TAX PREFERENCES The allied governing Christian Demo− crat KDNP will submit bills to Parlia− ment on bankruptcy protection and tax preferences for families in the sum− mer, parliamentary group leader Péter Harrach said in an interview published in daily Magyar Hírlap. The bill would provide assistance to families on the fi− nancial brink through the person of a bankruptcy commissioner, who could reschedule debt and serve as a go− between with lenders as well as help with other possibilities, Harrach said.

If the affected families cooperate, their debt could be discharged after a certain amount of time, he added.

Photo: ZKároly Matusz/MTI

FORMER PREMIER GYULA HORN DIES AT 81

WWW.BBJ.HU

News 05

Budapest Business Journal | June 28 – July 11

COMPANY NEWS

BUDAPEST IS ONE OF THE BEST VALUE CITIES, according to Tripadvisor, one of the world’s biggest travel websites.

The website’s TripIndex indicator shows European cities are the most expensive to U.S. tourists; however, Sofia, Warsaw and Budapest are excellent choices in terms of price/value ratio.

Belgian developer Atenor Group has inaugurated a €40 mln office building in Budapest, the first unit of its ‘Váci Greens’ complex. The 15,700sqm building is located on Váci út, and was built with Atenor Group’s own resources.

The Budapest Stock Exchange launched trade in the shares of the Hungarian assetmanagement company Altera on June 25, the BSE announced.

The company will float 299,344 ‘C’ ordinary shares with a nominal value of HUF 1,000 per share, the BSE said.

Investors subscribed for 204,344 new shares in a public offer that took place in March. They subscribed one-third of the shares at the HUF 2,250 per share and the remainder at a 10% discount.

The company also has 2,500 ‘A’ voting preference shares and 2,500 dividend preference shares, both issued privately and with a nominal value of HUF 1,000 each. Altera had net profit of HUF 11.5 mln last year, audited figures show.

Shareholders’ equity stood at HUF 211.5 mln at the end of 2012, and rose by HUF 429.2 mln as a result of the March public offer. Altera will be a B-category issuer at the Budapest Stock Exchange. The BSE will replace its A- and B-categories with Premium and Standard categories, respectively, as of July 1.

Slovnaft, the Slovakian unit of Hungarian oil and gas company MOL, has signed a €50 mln oil delivery contract with state−owned Transpetrol in Bratislava. Transpetrol will deliver 12 mln tons of oil to Slovnaft through the Friendship and Adria pipelines.

The Hungarian unit of Prague−based LLP Group, a specialist in business management software, generated 15% of group−level revenue and 30% of profit last year. The biggest revenue generators outside of the Czech Repub− lic are Hungary, Romania and Bulgaria.

The Hungarian unit of Austrian engineering company Andritz has inaugu− rated a €2.5 mln office building at its base in Tiszakécske. The investment was supported by a €1 mln state grant.

Ganz Engineering and Energy Machinery (Ganz EEG), a joint venture of Hungary’s Ganz and Russia’s Atomenergomash, will soon deliver a €700,000 reloading apparatus to a nuclear power plant near Saint Peters− burg, company officials said at a press conference at the end of June.

Business Telecom’s profits rose 43% last year: although revenue jumped, increasing costs and taxes took their toll. Net income rose to HUF 59.6 mln from HUF 41.8 mln, while total net revenue increased more than fourfold to HUF 3.5 bln from HUF 842 mln.

Chinese IT company Lenovo will triple orders from the Flextronics plant in Sárvár beginning in October. Flextronics plans to hire an unspecified number of workers as a result of the increase in production, though it does not need to expand the size of the plant.

AGC Glass Hungary, the Hungarian unit of Japanese flat−glass manufac− turer Asahi Glass, will build a HUF 3.5 bln production hall at the com− pany’s plant in Tatabánya, The unit would hire 100 new employees to work at the 8,300sqm production hall, which is expected to begin operation in the summer of 2014.

German vehicle steering−system manufacturer ZF Lenksysteme will be− gin construction of a new plant in the village of Maklár, the German Press Agency dpa reported. Construction of the 23,000sqm plant would begin this summer.

Hungary’s private pension funds are continuing to wind up, two years after almost all of their members’ assets were moved to the state pension pillar, daily Népszabadság wrote. Private pension assets equivalent to almost 10% of GDP were transferred to the state in 2011.

A total of 1.5% of Hungary’s housing market is composed of luxury homes, real−estate broker Otthon Centrum said. Otthon Centrum defines luxury homes as houses worth more than HUF 300 mln and apartments worth more than HUF 100 mln.

German carmaker Opel’s new engine plant in Szentgotthárd could boost output at the base to one mln by the middle of the decade, Opel Szent− gotthárd managing director Tamás Solt said at a press conference. Opel started production at its €500 mln engine plant last September.

A consortium of Magyar Aszfalt and Közgép have won a tender to build a bypass around the city of Csorna with a bid of HUF 29.9 bln. The consor− tium won with the lowest bid, beating Colas Hungária and a consortium of Prague−based Subterra, Slovakia’s Dobrastav and Hungarian peer Dom− per. The bypass is to be completed in two years.

German fastening technology company Ferdinand Gross has held a topping−out ceremony at a HUF 710 mln logistics base it is building in the Tatabánya industrial park. The base will be the first abroad that the company owns itself.

The Hungarian Competition Office (GVH) has fined three taxi companies

RÓBERT ALFÖLDI WITH ACTRESS DOROTTYA UDVAROS

Photo: János Marjai / MTI

ALTERA SHARES’ TRADE BEGINS ON JUNE 25

Germany’s ThyssenKrupp has inaugurated a HUF 1.2 bln plant in Győr, near carmaker Audi’s factory. The plant is expected to generate annual revenue of €120 mln.

AUDIENCE SAYS FAREWELL TO NEMZETI’S ALFÖLDI The Nemzeti Színház (national theater) held its final showing under the direction of Róbert Alföldi on June 22. The audience gave the last playing of ‘Mephisto’ a standing ovation that lasted nearly 20 minutes. Attila Vidnyánszky will succeed Alföldi. The change was made because while the government didn’t find anything wrong with Alföldi’s professional work and turnout at the theater, they wanted someone who is closer in values and beliefs that the governing parties endorse.

for publishing misleading advertising regarding discount fares. GVH has fined Taxi Plus Service HUF 4.7 mln, Taxi−2000 Hungary HUF 2.2 mln and Top Taxi−2000000 HUF 1.7 mln for running the misleading advertise− ments in 2011 and 2012.

State−owned power transmission system operator MAVIR had after−tax profit of HUF 11.68 bln last year, sharply up from 2011, when it fell 14% to HUF 5.1 bln. Revenue grew by HUF 3 bln to HUF 133.8 bln, in spite of electricity consumption falling 0.6% to 42,374 GWh. Bulgarian national airline Bulgaria Air will begin operating four flights per week between Sofia and Budapest, Liszt Ferenc International Airport operator Budapest Airport told state newswire MTI. Assets in investment funds managed by the Association of Hungarian Investment Fund and Asset Management Companies (BAMOSz) rose by HUF 144 bln, or 3.6%, to HUF 4,116 bln in May, BAMOSz said. Investors purchased net units worth HUF 125 bln during the month.

Hungarian baking industry company Zalaco Sütőipari will build a new plant at the industrial park in the city of Zalaegerszeg at a cost of between HUF 800 mln and HUF 1 bln. The company will begin construction of the 2,000sqm plant and connected refrigerated warehouse this fall.

WWW.BBJ.HU

06 News

Budapest Business Journal | June 28 – July 11

ENERGY

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

GO GREEN LOCALLY, EU SAYS Green policies at the local level can help with broader goals for European economic recovery without harming the environment, a commissioner said on June 14. The Euro− pean economy is struggling to recover from ADVERTISEMENT

with support of the country’s state energy organizations is creating a feasibility study on a clean coal project in Hungary.

Clean Coal Technologies are designed to use coal efficiently and reduce coal combustion’s environmental load. the global economic crisis of 2008. Europe’s statistical office, Eurostat, reported on June 14 the rate of unemployment increased 0.5% among the 27 member states during the first quarter of 2013. European Environment Commissioner Janez Potocnik said EU mem− bers were focused on economic recovery.

“But it doesn’t mean it has to be done at the expense of the environment,” Potocnik was quoted as saying in a statement. “Greening our production processes, innovations and consumption patterns and making them more resource efficient will undoubtedly re− sult in cost savings and create new markets”, he said. Potocnik said urban policies could go a long way toward a sustainable economic future for Europe.

EU ENERGY COMMISSIONER GUNTHER OETTINGER

EU WANTS NUCLEAR STRESS TESTS EVERY SIX YEARS The European Commission has published a draft nuclear safety law that includes mandatory EU−wide reviews every six years in response to lessons learnt from the Fukushima nuclear disaster in Japan, media reported. “There are 132 nuclear reactors in operation in Europe on June 13. Our task at the Commission is to make sure that safety is given the utmost priority in every single one of them,” said Energy Commissioner Gunther Oettinger in a statement. A total 14 EU nations currently run nuclear plants, some with several reactors, and while Germany is shutting down its nuclear energy sector, Poland is planning to join the club. Two− thirds of the reactors are located within 15 kilometers (nine miles) of towns of more than 100,000 people.

Photo: European Commission

HUNGARY GOVERNING PARTY WANTS NEXT UTILITY PRICE CUT IN THE FALL Hungary’s governing party wants the gov− ernment to cut household utility prices in the fall with the start of the heating season, sooner than the originally planned January 1, 2014 a top party official said June 18. Fi− desz, which has a two−thirds majority in parliament and is facing parliamentary elec− tions in less than a year, has already slashed household utility prices. It cut household en− ergy prices 10% on January 1, and cylinder gas prices by 10% on July 1. The party is re− questing the Cabinet to “cut natural gas and electricity prices by at least 10% again from the autumn”, said Antal Rogán, the party’s parliamentary faction leader. Several of the utility companies, most of which are owned by foreign parent firms, already generate losses at the current price levels. Germany’s E.ON SE and RWE AG have said they would consider pulling out of the country if another round of energy price cuts is made.

THE INSTITUTE OF ENERGY ECONOMICS OF JAPAN,

PLENTY OF GAS FOR EUROPE, AZERBAIJAN SAYS Azerbaijan is situated to play a vital role in European energy security strategies over the long haul, the country’s Energy Min− ister Natig Aliyev said. Aliyev attended a conference in Vienna on the European re− lationship with energy producers from the Caspian region. Aliyev said as much as $60 bln was invested in Azeri infrastructure, meaning there’s now as much as 91 trillion cubic feet of proven natural gas reserves

on hand for European markets. “We can produce a whole lot more,” he was quoted as saying in a statement on June 10. Euro− pean leaders are looking to offshore natural gas reserves in the Azeri waters of the Cas− pian Sea as a way to break the Russian grip on the regional energy sector.

RWE NOT GOING TO GIVE UP RE-EXPORT OF RUSSIAN GAS Top executives of Germany’s RWE Supply & Trading GmbH, which has been shipping gas for Naftogaz Ukrainy since November 2012, has denied reports of talks on giving up re−exporting of Russian gas in order to get lower prices in long−term contracts with Gazprom, Interfax−Ukraine reported.

“The relations between RWE and Gazprom are one matter, and the RWE−Ukraine rela− tions are another matter. And they are not connected,” Interfax quoted RWE Supply & Trading CEO Stefan Judisch as saying in an interview with the Dzerkalo Tyzhnia weekly. The top manager noted that Gaz− prom has indeed submitted its proposals to RWE concerning changing the price of gas, as it did for other companies that buy Russian gas. However, when “we buy gas it becomes our property, and we can do with it what we want”, Judisch said.

WWW.BBJ.HU

News 07

Budapest Business Journal | June 28 – July 11

KÚRIA DELAYS VERDICT IN KEY FOREX LOAN CASE The Kúria decided to put off what will surely be a controversial decision that has the potential to outlaw foreign currency loans.

The top court continues to evaluate a case brought against OTP Bank by a client with a foreign currency−denominated loan. The basis of the challenge is that the cost of the exchange rate margin was not indicated in the loan contract, and as such, it is null and void.

The case received widespread attention from the media as well as protestors who have orchestrated several demonstrations in the past, demanding that foreign−currency loans be declared illegal and all debts scrapped.

The case reached the top legal level after the first and second−instance courts reached contradictory verdicts, one ruling for the plaintiff, and one for OTP. After the postponement was announced, demonstrators vandalized banks and clashed with police.

Foreign−currency loans remain a key concern for institutions as well as several

Photo: Attila Kovács / MTI

GERGŐ RÁCZ

groups in the general public. These deals were highly popular in the middle of the last decade since they were much cheaper than forint−based borrowing. Since then,

though, exchange rate changes have caused installments to skyrocket, leaving families and towns unable to pay their debts.

The matter is so crucial that Károly Szász, the head of the financial regulatory authority PSzÁF warned the Kúria that declaring forex loans void could potentially cause a state default. His letter sparked outrage since it was perceived as an attempt to influence the work of the independent court. In turn, the government came down on Szász for seemingly siding with the banks providing the loans over the interest of the general public.

The governing Fidesz party’s parliamentary leader, Antal Rogán said, “We have the feeling that the head of the authority is sitting on the horse backwards.”

Forcing currency loans are high on the government’s economic agenda. It has already introduced three different schemes aimed at debt relief, either through allowing the paying off the entirety of the debt at a discounted rate or reducing the monthly installments.

The biggest concern now surrounds the households that lack the financial means to avail themselves of the options and are close to defaulting or are already past the 90−day in arrears mark, officially making their contract a non−performing loan.

BAD BALANCE SHEETS WON’T BOOST GROWTH Rather than coming up with revolutionary ideas, the speakers of the conference ‘Boosting The Economy’ reviewed the past to analyze in which ways recent government measures have served the benefit of growth.

ZSÓFIA VÉGH

The recipes for boosting growth are infi− nite. Some governments prefer interest rate and tax cuts to boost public spend− ing; others pump money into the econ− omy with the same aim. Yet recently, the defining trend has mostly been aus− terity: Europe and many of its crisis− stricken peers have opted for it. Without doubt, austerity has worked in slowing down rising deficits, but it has also put a brake on growth.

In Hungary, the measures taken by the Orbán government have been success− ful at curbing the deficit; indisputable proof of that is the European Commis− sion’s (EC) decision to lift the exces− sive deficit procedure (EDP) against the country in place since 2004. Owing to an adjustment of Hungary’s general gov− ernment deficit, the EC projects a gap of 2.7% of GDP in 2013 and 2.9% in 2014, under the 3% EU threshold.

That does not mean the country has pulled out of the slump. Due to the fragile state of the budget and national reserves, the country is more in a state of transition, noted Gábor Orbán, state secretary for the National Econ− omy Ministry, speaking at the Joint Ven− ture Association’s conference ‘Boosting The Economy’ on June 18. “From a shock cre− ator, economic policy should become a shock absorber,” Orbán said.

That’s yet to come. The newly introduced taxes and skyrocketing interest rates on loans have suppressed the country’s entre− preneurial appetite almost entirely. Invest− ment rate between 2000 and 2012 fell from above 24% to below 17%. It is 4.5% lower than the CEE average and 2.5% less than that of the eurozone.

Among the reasons responsible for the lack of growth, Orbán listed decreased household and corporate spending, and cost cutting. To the list can be added cautious corporate lending as well. “When the cri− sis hit, parent banks started to heavily with− draw capital from local subsidiaries,” said András Kármán, director of the European Bank of Restructuring and Development (EBRD). This has made credit institutions wary of lending. Deleveraging has been larg− est in those countries with the highest ratio of external funding and didn’t stop even last June, when the European Central Bank announced its three−year credit tender: Hun− gary experienced the largest net funds out− flow in 2012, Kármán explained.

Improving the quality of their portfo− lio could boost banks’ lending activity, Orbán added: “As long as banks’ balance sheet correction is ongoing, many invest− ments will be stalling.”

As for measures boosting a willing− ness to lend among the banks, expert opinion varies. Kármán would wel− come an easing of bank burdens to resume their competitiveness. Hun− gary’s banking industry was unprofit− able for the second consecutive year in 2012 as total lending fell and bad loans rose. Weak profitability will per− sist in the next two years, the cen− tral bank said on June 14. The EBRD director doesn’t see the ‘Funding For Growth Scheme’ of the National Bank of Hungary (MNB) itself as a good tool enough to spur growth. Kármán warned that, by creating dual interest rates and not being focused enough, the program may have loopholes and the money granted may be used for purposes other than investment.

Orbán highlighted the introduction of the positive debtors’ list, the regulations on transparent pricing, the early repay− ment scheme for FX−loans and the set− up of the National Instrument Manager as measures to strengthen households’ ability to repay their loans. He added that directing more EU funding in the Union’s next multiannual budget period towards creating growth can also be a tool.

VOUCHER PROGRAMS AT RISK? A decision by the European Commission to take Hungary to court over recently introduced food and recreation vouchers could put resources for the new system at risk, the Public Administration and Justice Ministry and the National Economy Ministry said in a joint statement, state news agency MTI reported.

BBJ

The decision by the EC could endanger operating resources for the Erzsébet program, which the government operates as a social scheme, as well as put at risk the financial foundation for a recovery of domestic tourism supported by the Széchenyi recreation card (SzÉP), the ministries said. The EC said earlier that it had brought Hungary before the Court of Justice to contest restrictive conditions on the issue of the food and recreation vouchers. It said the restrictions were contrary to the fundamental principles of the freedom of establishment and the freedom to provide services.

Hungary established a unified voucher system under a government initiative in 2012. The new system contains two elements: the SzÉP card, an electronic system used for hot meals or recreation; and the Erzsébet voucher, used only for food. The EC said the legislation “created a monopoly” for the issuer of the Erzsébet vouchers and subjected issuers of the SzÉP card to “particularly restrictive conditions”, effectively barring all but three financial institutions from the market. The EC acknowledged arguments made by Hungary that the restrictions are “justified [...] for the protection of consumers, creditors and recipients of services and [...] by social policy and fiscal coherence objectives.” But it said the measures went “beyond that which is necessary and proportionate to guarantee the objectives in the public interest.” The ministries said in their response to the decision that the Erzsébet program was a social program and service. Establishing the financial basis for such social tasks is within the scope of influence of the member state, not the EU, they said.

BBJ

2Business THE PRICE WE PAID insight

KRISZTIÁN KUMMER

The reign of former economic minister György Matolcsy, now head of National Bank of Hungary, evoked ambivalent feel− ings at best. After three years of ‘revolution− ary war’ against the measures indicated by Brussels and the International Money Fund, the country was released from the EDP that had been in place against Hungary since its accession to the EU in 2004. But the ‘unorth− odox’ measures and sectoral special taxes of the Matolcsy−era have throttled profitabil− ity and investment rates in many sectors and might have caused the Hungarian Econ− omy deep wounds for the middle− and long− term, analysts the Budapest Business Jour− nal spoke to warned.

WHAT IS AN EXTRA TAX? To define the impact of ‘unorthodox’ mea− sures, it is first essential to clarify what, exactly, is meant by an extra tax in Hungary.

According to the government’s own commu− nication, only the new tax on financial insti− tutions (the so−called bank tax) and on credit institutions includes the word extra tax (kül− önadó) in their title. However, in practice, the extra taxes target a certain sector or industry (e.g. financial institutions, tele− communications, utilities, etc). According to this approach, currently 10 such taxes are in effect in the domestic tax system, most intro− duced in 2010. A special income tax on the energy sector (the energy suppliers’ income tax or ‘Robin Hood tax’) was introduced in 2009 by the former socialist government; a tax on energy itself was introduced in 2004.

“Last year, the total revenue of the state budget from different unorthodox measures was around HUF 268 billion, giving 2.8% of central revenues altogether. This figure doesn’t include public health product tax, commonly known as the ‘chips tax’ or ‘ham− burger tax’, and the accident tax, as they don’t contribute to the central government coffers, but are revenues specifically for the Health Insurance Fund,” said Judit Jancsa− Pék, a partner and leading tax consultant at the firm Leitner+Leitner. “Revenues from special taxes were significantly higher in 2010 and 2011, when approximately 4.5% of the total budget revenue was accounted for these measures. In the original budget for 2013 – before the recently announced pack− age of the new economic minister Mihály

STORY HIGHLIGHTS ■ ■

Currently 10 extra taxes are in effect Revenues lag far behind predictions for this year’s budget

Varga – it has been reported that the rate would rise to 6.5% this year,” she added.

THE PRICE WE PAID While the effect of unorthodox measures is clearly visible from the point of view of the decreasing deficit, Hungary has neverthe− less paid a high price for its release from EDP. The country’s GDP fell by 1.7% in 2012 and new investments fell to a level where even amortization is not covered. “The overall effect of extra taxes on investments is very hard to estimate as sometimes it is not just the higher tax expenditure that has deterred companies from investing, but also a lack of confidence in the constantly chang− ing business environment,” said Eszter Gár− gyán, a leading analyst of Citibank. “Due to

even before the global financial crisis. In the wake of the depression, many sectoral taxes were introduced partly to cover the budget expenses of bank rescues, and partly to con− solidate national budgets.

Many countries have introduced bank tax, including Austria, Belgium, France, Germany, Slovakia, Sweden and the United Kingdom. However, the Hungarian rate is exceptionally high: the new mea− sures of economy minister Mihály Varga would double the financial transaction tax (FTT) rate on cash payments from 0.3% to 0.6%, and transfers between accounts would rise to 0.3% from 0.2%.

Insurance provision is also taxed in most Western European countries. In international practice, either the service provider or the insured party could be lia− ble to pay: in Bulgaria, Finland, France, the Netherlands, and Slovakia, for exam− ple, the insurer is liable to pay, but in Aus− tria and Germany, it is the insured, the Ministry of National Economy told the

So based on the statement of the ministry, most of the measures are considered perma− nent, even if they were referred to as contri− butions to the war against the crisis in early Fidesz communications. Or perhaps it is bet− ter to say they will stay as long as the Euro− pean Court doesn’t declare them illegal: the European Commission opened infringe− ment proceedings against Hungary in late January of this year over the telephone tax imposed in the summer of 2012.

LESS INCOME THAN PREDICTED Although Hungary is no longer under the EDP, economy minister Mihály Varga recently announced his second set of mea− sures to have an impact on the position of the 2013 budget. “According to available estimates, the increased level of the trans− action fee might add HUF 50−70 bln to the revenues of the budget. This year, budget income might be higher by 0.5% due to the changes,” said Jancsa−Pék.

One possible reason behind rate hike is

UNORTHODOX MEASURES IN HUNGARY INTRODUCED BY THE FIDESZ GOVERNMENT SINCE 2010

MEASURE

YEAR OF INTRODUCTION

HUF BLN

% OF GDP

IMPACT

Extraordinary banking tax

2010

140

0.5

permanent

Extraordinary telecom tax - temporary 2010-2012

2010

60

0.2

2010-2012

Extraordinary energy tax, 2010-2012

2010

50

0.2

2010-2012

Elimination of the 2nd pillar of the pension system

2011

2700

9.3

one-off public revenue

dec-11

280

1.0

one-off loss for banks

2012-2017

40

0.1

permanent

2011

20

0.1

permanent

New taxes on mobile services

2012

50

0.2

permanent

Fiscal Transaction Tax

2013

240

0.8

permanent

Introduction of new utility taxes

2013

60

0.2

permanent

Corporate tax hike for energy firms

2013

90

0.3

permanent

Increase in revenue-based business taxes

2013

30

0.1

permanent

FX mortgage early prepayment scheme Cost of FX mortgage loan fixation scheme to banks "Hamburger tax" on unhealthy food

the multi−round effects of the extra bank tax on lending and investments, it is one of the most harmful. And taxes imposed on the energy sector may bring a backlash in the long−term through the amortization of the infrastructure,” she pointed out.

The special taxes also contribute to the change of ownership structure in each sec− tor. The government openly aims in some cases to curb the dominance of large foreign companies, often reflected in size−related progressive tax rates (e.g. utility tax, the proposed media tax, and the 2009 bank tax determined by the closing balance sheet).

RATES TOO HIGH Additional taxes are not unknown elsewhere around the world, of course. In the Euro− pean Union, many such taxes were in effect

BBJ. But Hungary’s instant premium tax (IPT) rate is, again, unusually high: 15% in the case of comprehensive car insur− ance and 10% in the case of all other (non− life) insurance products and services.

TAXES FOR EVER? The restructuring of the Hungarian tax system is considered finished, with the government now endeavoring to sustain the stability of the established tax sys− tem, the National Economy Ministry told the BBJ, when we asked how long the taxes might stay in place. The chang− ing economic and legal environment and problems in the application of law or the need to eliminate possible loopholes could yet justify some fine tuning, the ministry added.

the less−than−predicted income the extra taxes have generated. The difference can be observed mainly in the Robin Hood taxes, the bank tax, and the industry specific taxes.

In all three cases, these raised almost all that was expected in 2011, but lagged behind targets markedly in 2012: on average 36% under the expectations. The sector−specific taxes fulfilled their expectations in both years, but the bank levy and the Robin Hood tax lagged behind 40−45% last year.

It hasn’t escaped notice that 2014 is an election year. Although the government has repeatedly promised it will not implement an election budget and boost spending, none of its predecessors were able to resist doing so going back to the change of regime. If there is to be additional spending, it will need to be paid for somehow. More taxes?

Source: Citibank

Economic ministers of the Fidesz government have introduced many extra taxes throughout the last three years, and the economy has paid a hard price for the success in exiting the EU’s excessive deficit procedure (EDP).

WWW.BBJ.HU

2 Business

Budapest Business Journal | June 28 – July 11

09

INSURANCE BUSINESS STILL INSECURE Natural disaster claims after the record flooding on the river Danube are expected to give reinsurers the leverage to push through price increases next year.

GABRIELLA LOVAS

The day I interviewed Yann Ménétrier, CEO of Groupama Garancia Biztosító, water lev− els on the Danube peaked in Budapest at 8.91 meters, beating the previous record of 8.6 meters in 2006. As if that were not enough, a violent thunderstorm suddenly broke. Light− ning started flashing and thunder crashing, accompanied by heavy rain. A perfect setting to discuss the impact of natural disasters on the insurance market, then.

Q

How do the record floods effects Groupama?

A It is too early to tell. It will of course have a huge impact on the non−life business, where Groupama is the third largest

result, administrative costs dropped by more than 5%. With better−than−expected financial income, net profit reached more than HUF 4.5 billion, representing a ROE of more than 18%. This compares to a 14% average ROE for the entire insurance market. Our tax burden reached HUF 3.5 bln, the same as the year before, as it is based on 2009 income every year with only some slight fine−tuning.

Q

What were the main develop− ments this year thus far?

A The main problem in Hungary’s business and economic environment is the uncertainty and the huge number of legal changes. In 2012, Hungary returned to reces− sion for the second time in three years, which is still hurting the insurance business. At the same time, we see the government introduc− ing lots of new tax measures in order to exit the excessive deficit procedure to have access to EU financing. Inflation fell under the 3% target for the first time in years in February.

However, the public debt is still too high and the currency is volatile and we are also wor− ried about the decline in industrial output and

IF THE COUNTRY IS UNABLE TO PRODUCE FOOD, CARS AND FLATS WE WILL HAVE NOTHING TO INSURE insurer in household insurance and the first in agricultural business. As the flood covers a big area we are still waiting for the claim noti− fications to arrive. We are currently estimat− ing flooding impact using our nat−cat (natu− ral catastrophes) model.

After such disasters, the cost of reinsurance increases. Considering this year’s events, we will probably increase tariffs in 2014. The insurers will start making their calculations in mid−September, at the earliest, based on the claims they receive. The tariff increases are expected to be determined about a month later. After the floods in 2010, reinsurance tar− iffs rose by 15−20%.

Q

Are you satisfied with Groupama’s performance last year?

A Last year was one of the worst years for the insurance market, marked by a record decline of 6.5% globally. In the Hun− garian market Groupama Garancia main− tained its third place position with an 11% market share. In the life and non−life seg− ments, the market share was 10.5% and 11.6%, respectively. Due to the introduction of the special bank tax, which was replaced by the general insurance tax in 2013, we launched a cost cutting program two years ago. As a

investments. If the country is unable to pro− duce food, cars and flats we will have noth− ing to insure.

This trend is confirmed by the insurance market’s performance in the first quarter of 2013, as the non−life market decreased by a huge 3.8%. I see many insurers passing part of the new general insurance tax on to their cus− tomers. Without the new tax, non−life would have decreased probably by around 5−6%.

This does not come as a surprise, as the coun− try is not creating new value, the number of new registered cars as well as new apartment authorizations is decreasing.

In this market, Groupama’s non−life reve− nues dropped by only 1.5 %. On the upside, in terms of the number of contracts, the MTPL (Mandatory Motor Third Party Lia− bility) portfolio increased by 5−6% in the first quarter, as now we sell lower−premium products to new, less risky customer seg− ments. Thus, although premium revenues are lower, we expect fewer claims.

Q

What about the life segment?

A The life segment in general per− formed better in the first three months. The sector’s premium revenues rose by 6.6%. Due to the FX exchange−rate

CURRICULUM VITAE Yann Ménétrier, a qualified agronomist engineer, joined Groupama in 1988 as deputy CEO of Groupama Toulouse. In 2006, he was appointed director of Groupama’s non-life business, after leading the group’s bank, Groupama Banque, for three years. Ménétrier became the CEO of the Hungarian subsidiary in July 2008, as the company needed an experienced leader to manage the merger of Groupama Biztosító and OTP Garancia. limit repayment program, household debt decreased and the financial situation of households is slowly improving. But because of the economic uncertainties, households still prefer to save rather than spend.

Groupama’s premium revenues in the life segment rose by 11%, at a rate almost twice as high as that of the market. Because of the early repayment scheme, the base was very low and, as the central bank’s base rate cuts made deposits less attractive, customers invested more in life insurance products.

Q

The latest report by the Hun− garian Insurers’ Association (MABISz) shows that the Hungar− ian Post Life Zrt surpassed Groupama as the third biggest player in the life segment.

Is this something that worries you?

A That may be due to seasonal effects. We have to take into account several things, such as for instance campaign timing.

Therefore, I believe that the yearly market share will be a more reliable measure.

It is true that Magyar Posta could signifi− cantly increase its market share in the single− premium segment by offering fixed yields at a very short duration. We are not willing to provide such yields because we think it is too

risky and unprofitable for such a period. In regular premiums, however, our performance was much better than that of the market.

In unit−linked single premiums we are first in terms of technical provisions, which is at least as important as gross return premi− ums for me. If the provision change is posi− tive at the end of the year, it means that you are making customers more loyal and you are developing the business. If the provision is decreasing, you have to start worrying and do something about it because it indi− cates that your customers are investing their money somewhere else.

Q

Because of financial difficulties, the Groupama Group sold its Spanish and UK units last year.

What’s next? Hungary maybe?

A The group’s financial stability is now restored; its solvency ratio reached 179% at the end of last year thanks to a large−scale restructuring program including layoffs and subsidiary disposals. There are no plans to sell the Hungarian unit, as it is a relatively recent investment made in 2008. In addi− tion, it is a profit−making business with a sta− ble market share with a strategic partnership with the number one retail bank in Hungary.

10

WWW.BBJ.HU

2 Business

Budapest Business Journal | June 28 – July 11

MONEY GOING MOBILE Citigroup has high hopes for the development of mobile technologies for the present, and especially the future of the banking industry, not to mention its operation in Hungary. The Budapest Business Journal spoke with Don Callahan, head of operations and technology for Citi about the outlooks for the global industry and the prospect of the Hungarian arm reaching a headcount of 1,000 or more.

GERGŐ RÁCZ

Q

As the supervisor of technologi− cal developments for Citi, which segment of your business do you see as the most crucial?

A All of the businesses. We have very large institutional and consumer franchises. Our focus on digital is equal for both and the demand for this is clear on both sides.

We do a lot of business with CFO’s of For− tune 500 companies and this all has to be secure. The movement and the manage− ment of their money is something that they want to be able to do anywhere in the world, securely. If they want to pick up a phone or a tablet or whatever device to manage their finances, we should be able to facilitate their unique needs.

Citi’s ‘CitiDirect BE’ mobile solution, which stands for “banking evolution” and is our mobile browser−based application allow− ing corporate and institutional clients to receive notifications and authorize payments using their mobile phone, reached $1 bln in transaction volumes last February, which I announced at a conference at that time. We ended the year with what I thought would be $12 bln, with over $30 bln. We’re in line now to move over $100 bln in transaction value.

This growing significance of mobile clearly shows one of the biggest and most important trends in the evolution of digital technologies in the financial sector.

Q

How do you address security con− cerns? There’s still a perception that wired technology is more secure than wireless.

A I don’t necessarily think that’s correct. You can get the degree of security in a mobile device to be at par with what a wired con− nection offers. That said, it takes a lot of dis− cipline in the development process to assure you’re keeping bank−grade quality. We have a special team to evaluate technologies that can be used for mobile and to be, as I say, “rigorized”, to address all possible security issues that may arise.

On the consumer side the demand from our customers is for them to be able to bank any− where, anytime, on any device. We have to be forward in our thinking so we can anticipate what they’re looking for. Whatever the next device to be introduced to the market is, we have to make sure that Citi applications work immediately. So far we have a very good track record in this respect and we have received several accolades for our solutions.

STORY HIGHLIGHTS ■

Citi aims to establish universal digital platforms that work everywhere in the same manner ■ The key is to be able to keep the technology convenient and most of all, secure

Q

Are these newly developed prod− ucts available in Hungary as well?

A You may be surprised but in April we introduced our most cutting−edge consumer end−to−end IT solution in Hun− gary. We chose Hungary because the qual− ity of the staff we have here allowed them to oversee a fair amount of the development but also to understand the unique require− ments to this particular marketplace. They worked in cooperation with our teams in Jacksonville, Florida, in London and Singa− pore and many other locations.

CURRICULUM VITAE Don Callahan oversees operations and technology for Citi, which covers the development and introduction of new digital banking solutions. Prior to joining Citi, Callahan held executive posts at Credit Suisse, Morgan Stanley and IBM. Callahan received a B.A. in history from Manhattanville College.

This was the first full−scale roll out of Citi’s new global IT platform in Europe.

This system is unique to Citi in that it’s a global consumer platform. When com− pleted, Citi will offer a common banking platform all across the world.

We’re doing this not just because this is the right thing to do, but because we think the world has gone flat, people move around and we want to be able to treat them with the same consistent ser− vice level wherever they go.

Q

Why is this a novelty? It would seem logical to have a stan− dardized system for a bank that has a global presence.

A It would. But, most organizations have grown up over time and had different acqui− sitions and there are different platforms.

This new initiative is good for Citi since it reduces everything to a common platform and brings greater simplicity. This allows us to keep up with the development of tech− nology that is increasing with a startling velocity. If a new device appears, we want to be able to allow our customers to be able to use our application on it within a month.

Since our product is device agnostic, we have the ability to do that.

This agility has become a core require− ment. For instance, my children who are in their 20s don’t ask, they simply expect things to work and that is the general atti− tude globally. We have to be extremely responsive to this kind of demand.

CITI’S BUDAPEST SERVICE CENTER WILL TOP 1,000 EMPLOYEES BY THE END OF THE YEAR

Q

When are you planning to complete the introduction of the platform?

A We just started in Europe. and it’s going to be a multi−year effort, it already is. It’s a very ambitious effort but we think it’s going to give us a unique opportunity.

Q

What are your plans for the future of your service center in Hungary?

A Citi’s service center launched in 2006 in Hungary gradually increased its headcount over the course of years from 80 to 900 and we are aiming to top 1,000 by the end of the year. We are looking to continue invest− ing in this business model because we are extremely pleased by the quality of the talent and the education here. We have a chance to be directly involved in the curriculum of one of the Corvinus university’s finance course and we are able to work with the students

and then recruit them. It is a very welcoming environment for us. Even once we reach 1,000 employees, we don’t see the need to stop.

Q

In general, how do you see the development of technological trends in the industry?

A I think what’s happening is that you have a convergence of four things. When the internet came along, it took four years to reach 50 million people. It’s a lot faster than radio which took 38 years or televi− sion that took eight years. Facebook took less than a year. The world went social, that is one. Two: big data. There is now a huge amount of data and more gener− ated every year and you have to cross ref− erence it differently. Then there’s mobile.

The fourth one that people don’t talk about much is information security. Understand− ing these elements is a huge opportunity for the financial industry to get it right.

WWW.BBJ.HU

2 Business

Budapest Business Journal | June 28 – July 11

11

Gay shame

Hot sale

All hands on deck

Hungary amongst the least tolerant nations

Budapest retail market ahead of Barcelona, Vienna and Prague

Thousands deployed to combat record Danube flooding

58%

SAY SAME SEX COUPLES SHOULD NOT ADOPT CHILDREN

Most adults in developed countries support gay marriage or some kind of legal recognition for same−sex couples, according to a recently released international Ipsos poll.

Of the 12,484 adults questioned in the survey, 52% of people favor full marriage equality for gays and 21% support legal recognition but not marriage. “What we see is that in every one of the 16 countries we surveyed, there is a majority in favor of allowing same sex couples to have some sort of legal recognition,” said Nicolas Boson, a senior vice president at Ipsos. “In nine out of 16 countries we see an outright majority in favor of full marriage equality.”

Sweden, Norway, Spain, Belgium, Canada and France – all countries where same−sex marriage is legal – showed majority support for full equality for same sex couples, as did most Germans, Britons and Australians. However, in Argentina, which also recognizes gay marriage, only 48% of people favored marriage equality for gay couples.

As for Hungary, 51% of those queried were in favor of legal recognition but not marriage for homosexual couples, 26% were against it, and 23% would not take a stance.

When it comes to gay marriage, 47% of Hungarians do not support it, 30% would allow and 23% are undecided on the issue. Most supporters were found in Sweden, Norway and Spain, but the South Koreans, Japanese and Poles are less tolerant than Hungarians – only 26%, 24% and 21%, respectively, supporting same sex marriage.

The majority of Hungarians (58%) think that same sex couples do not have the same rights as straight couples when it comes to child− bearing. However, 42% think gays and lesbians should be treated equally in terms of child−raising conditions.

LET A THOUSAND FLOWERS BLOOM

36th

BUDAPEST’S RANKING AMONG MOST ADMIRED RETAIL DESTINATIONS

Hong Kong is the world’s hottest retail market, attracting significantly more new entrants than any other city, according to the 2013 edition of ‘How Global Is The Business Of Retail?’ by global property advisor CBRE. CBRE’s annual survey, published for the sixth time this year, maps the global footprint of 320 of the world’s top retailers across more than 200 cities, tracking cross−border retailer movements. The report found that retailers expanded into a wide range of markets in 2012, with 81% of cities seeing at least one new retailer enter the market.

The Budapest market beat much larger markets on the list such as Barcelona, Vienna and Prague.

“In 2012 Budapest has improved its position in this ranking of more than 200 cities; with 11 new retail brands entering the market Hungary has moved from 52nd position in 2011 to 36th position last year beating much larger markets such as Barcelona, Vienna and Prague,” Anita Csörgő, head of retail at CBRE Budapest said. “Some of the new retail brands that have opened shops in Budapest in 2012 include Massimo Duti, MONCLER, Parfois, CCC Shoes, and the Buddha Bar. This trend seems to be continuing in 2013 as well with Nike having re−entered the market with a new master franchise partner, GAP soon opening a flagship store in the Örs Vezér tere Árkád extension and Croatian bakery Mlinar already opening five stores in Budapest this year.”

In global terms, U.S. retailers are by far the most aggressive when expanding store networks. Traditionally, U.S. retailers have focused on Asian and Western European markets; however, they are increasingly targeting the Middle East (18% of all new entrants to the region were from the U.S. last year), Central and Eastern Europe (17%), and Latin America (10%). Italian, British and French retailers are also highly active, focusing mainly on their own region, although Asia is also a key target.

RETAILERS BY ORIGIN

Supporters of same−sex marriage, by nations (%)

206,000

PEOPLE ENDANGERED, 1,570 EVACUATED

The level of the Danube continues to remain high but in most cases the endangered sections can once more be opened to the public with the focus now switching to cleaning up the damage.

According to statistics released by the disaster prevention agency, there will be plenty of material to dispose of. Interior Minister Sándor Pintér has ordered the state of emergency and the related heightened provisions to stay in effect until July 19 on the most endangered sections of the river, but the most concentrated efforts took place over the course of six days early in June on a stretch of 807.4 km of levies.

The latest flooding of the Danube broke many records. It peaked in the village of Nagybajcs in Győr−Moson−Sopron County at 907 cm, 35 cm more than the local record. Budapest’s 891 cm zenith was higher than anything on record by 31 cm. In contrast, the levels started to ebb further down south, with Mohács seeing a peak of 964 cm, high enough but 20 cm below the record.

Law enforcement deployed a total of 18,687 officers and cadets during the crucial week. The military sent 8,306 pair of hands, volunteer firemen contributed 3,500 people, while volunteers added up to 36,780, not to mention thousand of others from diverse authorities and public institutions.

Building and reinforcing levies consumed 10,179,046 sandbags filled with 242,500 cubic meters of sand, that were transported by 254 construction vehicles, 1,092 transport vehicles, supported by 338 pumps.

The Danube flooded 47,285 hectares of land, 36,575 hectares of forests and 10,710 hectares of farmland.

Hungary was offered help by Germany, Israel, Poland, Romania, Slovakia, Slovenia, and Ukraine and in turn offered assistance to Austria, Croatia, and Serbia.

PEOPLE WORKING ON THE LEVIES Law enforcement Military Disaster specialists Volunteer responders

18,687 8,306 89 369

Volunteer firemen

3,500

Volunteer patrollers

19,515 6,018

Public employees

Source: Ipsos

North America

Asia

Mena

Europe

Pacific

Latina America

Source: CBRE

Volunteers

36,780

Source: National Directorate General for Disaster Management

12

WWW.BBJ.HU

2 Business

Budapest Business Journal | June 28 – July 11

PROMOTIONAL FEATURE

NOTE: ALL ARTICLES MARKED PROMOTIONAL FE ATURES ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILIT Y

WEAPON AGAINST CORRUPTION Hungary finished in 55th place in Transparency International’s 2012 Corruption Perception List. Many citizens and businesspeople are aware that corruption is present in Hungary, but very few of them recognize it and fewer still care or dare to do something against it. Telenor and Transparency International (TI) Hungary were among the first to take a step to help SMEs in their struggle against corruption.

S

mall- and medium-sized companies know they will be faced with corruption, but most of the time they don’t have effective means to detect specific situations, to consider the consequences or develop appropriate answers. Nepotism, conflicts of interest, official controls or unfair proposals in a sponsorship opportunity – these are just some of the difficult situations where entrepreneurs should consider what the right decision might be.

Telenor and TI Hungar y, committed to defend and promote decent ADVERTISEMENT

corporate behavior, have introduced new e-learning material to help companies to navigate their way through corrupt situations.

TI developed the National Integrity System (NIS) approach as a comprehensive means of assessing a country’s anti-corruption efficacy, sector by sector, including the legislative and executive branches of government, the public sector, ombudsmen, anti-corruption agencies and also business.

The NIS has already been tested in more than 50 countries.

“What we found in Hungary was that the marks for business are very low, indicating a high level of corruption,” said Dóra Rechnitzer, head of business programs at TI. “We wanted to create something to help SME leaders detect corrupt situations, be aware of them and learn how to react,” she added.

The anti-corruption material was ready by the start of this year. Developed jointly with Telenor, the primary objective of ‘SME Courage’ is that users get to know the situations where they face corruption risks, and to be aware of the possible consequences.

The material consists of important legal information as well as a number of practical, everyday examples to assist SMEs in engaging in fair business practices. By using ‘SME Courage’, a company can effectively teach its own staff and lay down foundations for fair and anti-corruption procedures, even if it has no resources to put into the effort. The e-learning kit is free and available on the websites of both TI Hungary and Telenor.

The early feedback has been encouraging. “We have received many positive reactions to ‘SME Courage’.

In April, Telenor held a conference where a very wide-based conversation started with more than 100 participants,” Rechnitzer said.

According to TI research, most SME leaders would like to operate in a fair way, but that’s not always an easy task in Hungary. ‘SME Courage’ helps

DÓRA RECHNITZER, HEAD OF BUSINESS PROGRAMS, TRANSPARENCY INTERNATIONAL HUNGARY

company bosses to recognize that it is possible to operate ethically in Hungarian business life against the bad old practices.

There are already forerunners in the process, like the Hungarian suppliers to international manufacturing companies who have already got used to higher expectations for ethical and transparent conduct.

Hopefully, many other SMEs will now follow. “The creation of the online aid was really just the first step. A webpage dedicated to efforts against corruption will be available from September, and we will start a roadshow as well. With

the help of Telenor, the American Chamber of Commerce in Hungary and many participating enterprises, we would like to organize conferences and presentations to help SMEs as much as we can in their fight against corruption, and towards ethical and transparent operations,” Rechnitzer emphasized.

www.telenor.hu

BBJ

3Special Report Q&A: Willy Benkő, President of AmCham

A plea for more predictability 14

16

LIST: The largest U.S. companies in Hungary

COUNTRY

FOCUS:

USA

17

14

WWW.BBJ.HU

3

Budapest Business Journal | June 28 – July 11

PREPARING TO RIDE THE WAVE

GERGŐ RÁCZ

Q

The Hungarian government expressed hopes of signifi− cantly increasing American investments to Hungary. Do you see that as a reality?

A Yes, further U.S. investments are possible, but it won’t be anything dramatic. This, how− ever, isn’t Hungary−specific. We have com− mon issues that everybody is trying their hardest to figure out, to find a way to emerge from the economic situation.

Also, you probably have heard that dur− ing the G8 summit, EU leaders and the US President plans to start negotiations on the Transatlantic Trade and Investment Part− nership (TTIP). The negotiations will focus on addressing tariffs, standards and regu− latory barriers and if accepted, it will cre− ate the world’s largest free trade agreement.

TTIP could increase growth on both sides of the Atlantic by 3% over the medium term and reinvigorate the transatlantic partnership.

Now this could be a milestone for Europe, CEE and Hungary as well when it comes to US investment and AmCham Hungary will of course be actively involved in this process.

Q

The government has already signed several so−called stra− tegic cooperation agreements with foreign companies. What do these documents actually entail for the com− panies involved?

A AmCham Hungary was the first to sign such a strategic cooperation in early 2011 in the Hungarian Parliament. This frame− work contract, developed jointly the Min− istry of Public Administration and Jus− tice and AmCham Hungary, was signed

by Tibor Navracsics and my predecessor István Havas, was designed to advance well−structured dialogue between legis− lators and the business sector during the legislation process. In the past two and a half years, we have submitted well− received and implemented comments and proposals on the Civil Code, the Labor Code, the Data Protection Act and the

Bankruptcy Act, among others in this framework on behalf of our members and the business community at large.

As for agreements with specific compa− nies, I personally understand the intent being to reach a partnership with multina− tional firms so they will remain committed to Hungary and to improving the economy on the long−term. However, the proof of the pudding is eating. We will have to see in a few years from now how much substance these agreements held.

stitution introduced by Viktor Orbán’s gov− ernment. Do these tensions affect you?

A Like I said, we tend to steer clear of politi− cal mattes and remain focused to represent− ing values towards our members. Any dis− putes that arise should be resolved by those involved. Having said that, business entities can and probably should play a facilitating role between governments. Who would be a better advocate of Hungary’s potentials then an American businessperson who success− fully conducts their activity in this country and is, in broad terms, happy about the envi− ronment, enjoys the undisputed political sta− bility and appreciates the bold decisions of the government that aim to dismantle old−fash− ioned inherited systems e.g. in healthcare, education or in labor regulation.

Q

How is AmCham’s relation− ship with the government and the political elite?

A I personally am determined not to get involved in political affairs, “colors” aren’t important and this is a view that everyone in the organization shares. What we want to convey is a consistent set of values at all times, such as the American business values of competitiveness, transparency, free enterprise and open partnership with all stakeholders.

Photo: István Nagyapáti

Companies from the United States remain committed to Hungary and despite any tussles they may have with the government, they have no plans of changing their attitude. The Budapest Business Journal spoke with the President of the American Chamber of Commerce in Hungary (AmCham) Willy Benkő about why he is so confident Hungary is set to capitalize on a global economic recovery, and why his conviction is politically neutral.

Q

Hungary like much of Europe is currently looking at the United States and the Federal Reserve with concerns that it may downscale or stop its economic stimulus program.

Given how reliant Hungarian assets and

BACKGROUND

CURRICULUM VITAE

The Hungarian government is highly hopeful regarding the current and future involvement of U.S. firms in the country.

According to government statistics, there are currently some 600 American firms active in the country. By the end of last year, U.S. investments in Hungary hit $9 billion and American companies had created 40,000 jobs over the past decade. Internationally renowned U.S.-based firms are already among those that the government has approached to conclude strategic cooperation agreements, and more are likely to follow.

Willy Benkő is the President of the American Chamber of Commerce in Hungary, among several other obligations. He is an owner of the Rózsakert Medical Center, works as an advisor to Consequit and has board seats on various foundations. During his career he has been involved in a broad range of sectors, including real estate, healthcare, electronic data management, renewable energy and the management of startups. He graduated from the University of Colorado with a degree in economy.

Q

What is the feedback you’re getting from your members about the outlooks for the Hungarian economy?

A AmCham has just accomplished evalu− ating the responses in an internal Business and Investment Climate Survey. We asked questions that were identical with the ones forwarded last year in order to make the surveys comparable. While in general busi− nesses would welcome greater stability and predictability and significantly bigger trans− parency in public matters, the overwhelm− ing majority of respondents expressed mod−

erate optimism. Companies Businesses that produce mainly for exports say they are doing quite well and that demand abroad is healthy.

Those that are focused on the domestic mar− ket are more intimately affected by the local regulatory environment.

Q

The current government has been criticized for years now because of the lack of pre− dictability in policymaking. Have you experienced any improvement in that department?

A One should not forget that business ven− tures aren’t asking for a favor when they push for predictability. There are firms that are investing heavily in industries that are bound to take off once Europe recovers and they will be able to take the economy along. The more information is shared with them and done in a timely fashion, the easier their planning pro− cesses, for the benefit of the given companies and the entire Hungarian economy.

Q

Hungary has had disputes with the U.S. mainly in political mat− ters, like criticism of the new con−

the strength of the forint are on interna− tional sentiment, what are your expecta− tions in the matter?

A I too mainly follow the issue in the press.

However, I can say with confidence that Hun− gary is strong in key economic areas, like the automotive sector, electronic manufacturing or the manufacturing of power plant compo− nents. These sectors and the major invest− ments that companies have made in the past place Hungary in a great position to go along with the growth trajectory that will come upon an improvement in international per− spective. Finally, as I have said, if signed at the end of the TTIP process some time by the end of next year, a new free trade agreement between the European Union and the United States of America has the potential to boost bilateral trade, opening markets for small and medium size enterprises that today can only dream about entering those markets. If trade barriers will be made away, investments and commercial relations will substantially grow, giving hope that for instance Hungary’s well recognized talent can get in the US and inno− vative Hungarian products and services arrive in America.

WWW.BBJ.HU

15

3

Budapest Business Journal | June 28 – July 11

U.S. THE NEW MARKET FOR HUNGARIAN SMEs? Momentum is building for a new and comprehensive free trade agreement between the United States and the European Union, with President Obama pledging his support for the plan and rumors abounding that EU member states will do the same before the summer break in politics. Such a deal would not only boost growth on both sides of the Atlantic, but would give a unique opportunity to Hungarian SMEs to enter the American markets – a step that most of them don’t even dare to dream of.

STORY HIGHLIHGHTS ■

A free trade agreement between the United States and the EU is likelier than ever ■ Hungarian SMEs could also profit from such an agreement

Given that both parties are hobbled by massive debt obligations and chronic defi− cits, any growth strategy should have a net positive effect on the transatlantic econ− omy. A free trade deal would help create jobs and income on both sides of the ocean and the more far−reaching the agreement is, the greater the impact on key sectors,

bilateral relationship that has been badly frayed and fractured over the past decade.

Indeed, the last ten years have been among the rockiest in decades for the transatlan− tic partnership. Solidarity and cohesion have been undermined by the increasing frequency of economic recessions. The U.S. dotcom bust and ensuing transatlan−

THE EUROPEAN CONSUMER IS MIGHTIER THAN THE U.S. CONSUMER (HOUSEHOLD CONSUMPTION EXPENDITURES, TRILLIONS OF $)

WITHOUT FRONTIERS The move towards a more barrier−free trans− atlantic market would also include product standardization, so that a car tested for safety in Bonn can be sold without further tests in Boston. Or a drug approved by the Fed− eral Drug Administration in Washington is deemed safe and market−ready in pharma− cies across the EU. Labeling and packaging requirements on both sides of the pond would be standardized, saving companies millions of dollars over the long run.

*Europe=EU27 plus Norway, Switzerland, Iceland, Albania, Bosnia and Herzegovina, Croatia,Macedonia, Montenegro, Serbia, Turkey, Armenia, Azerbaijan, Belarus, Georgia, Moldova Russia, and Ukraine

EU GDP 2012 VS. THE US, CHINA AND INDIA (% OF GLOBAL TOTAL, GDP BASED ON PURCHASING-POWER-PARITY)

Source: Source: International Monetary Fund, data for 2012

North America accounts for over one− fifth of world’s GDP – based on purchas− ing power parity rates from the IMF. It’s home for just 5% of the world population, but accounts for nearly 30% of global con− sumption and 15% of world imports. On the other side of the Atlantic the EU, con− sisting of 27 member states, is the largest economic entity in the world. The EU rep− resents one−fifth of world GDP and one− quarter of global consumption. In terms of trade, the EU is not only the largest exporter in the world; it is also the larg− est importer. It is a top supplier of goods to the developing nations and is the larg− est trading partner of each of the BRIC nations — Brazil, Russia, India and China.

While a high degree of market integra− tion already exists between the United States and Europe thanks to existing trade and investment agreements, much more can be done by fusing the world’s two larg− est economies together. A free trade pact is not only about joining efforts to reduce tariffs, but would affect many other areas, like the harmonization of food safety stan− dards and the standardization of a myriad of service−related activities in sectors such as aviation, retail trade, finance, maritime, procurement rules and regulations, tele− communications, and many others.

ANY GROWTH STRATEGY SHOULD HAVE A NET POSITIVE EFFECT ON THE TRANSATLANTIC ECONOMY The end results are lower costs for com− panies, reduced prices for consumers, more aggregate demand for goods and services and, of course, faster growing GDP on both sides of the Atlantic.

notably in services where there is plenty of scope for further integration.

That said, a U.S.−EU free trade agree− ment would do more than trigger economic activity. It would help reinvigorate a critical

tic recession in 2001, the U.S.−led finan− cial crisis and the subsequent recession in 2008, and Europe’s sovereign debt crisis of 2010 – all of these economic shocks have taken a toll on both sides of the Atlantic, and eroded bilateral trust and cooperation.

WIN-WIN A study by the European Commission found that eliminating or harmonizing half of all the remaining tariffs and non− tariff barriers on bilateral trade could add up to 1.5 percentage points to growth over the medium−term for participants.

The European Center for International Political Economy, meanwhile, estimates that a deal could boost U.S. exports to the EU by 17%, and EU exports to the United State by 18% over time.

“Hungarian exports into the United States might get a huge boost from the planned free trade agreement between the European Union and the United States, because many small− and medium−sized domestic enterprises will be able to enter the American market that are currently far away from that possibility,” Péter Dávid, Chief Executive Officer of AmCham, said in an interview with business daily Világ− gazdaság. “Cooperation would be easier and faster, less bureaucratic, with less finan− cial burdens and more incentives.”

Source: United Nations.

KRISZTIÁN KUMMER

16

WWW.BBJ.HU

3

Budapest Business Journal | June 28 – July 11

A PLEA FOR MORE PREDICTABILITY The United States is Hungary’s leading trade partner outside the EU. Many American companies have Hungarian subsidies and would like to operate and grow in a peaceful environment, but unpredictability may deter them.

KRISZTIÁN KUMMER

In 2012, the United States was Hunga− ry’s second largest trading partner outside Europe and in terms of exports the country came first, ahead of China. During last year 2.2% of total Hungarian foreign trade turn− over was conducted with the United States, making it the 13th largest amongst the country’s trading partners (13th in imports and 12th in exports).

About 600 American companies are pres− ent in Hungary, but include the small repre− sentation offices with just one or two employ−

STORY HIGHLIHGHTS ■

United States is Hungary’s largest trading partner outside Europe in terms of exports ■ Predictability and transparency are keys to luring further investments

ees, and the number could reach closer to 1,000, according to data from the Hungarian Investment and Trade Agency (HITA).

Important American investors are pres− ent in every major sector in Hungary and one is present in many of them: General Electrics. The company has become a major player in the Hungarian economy over the past 22 years, providing jobs for 12,500 people, about 50% of all GE employees in the region. Through its operations, GE helps improve the competitiveness of Hun− gary and the whole CEE. Prerequisites for GE’s continued effi− cient operations in Hungary include a

EXPERT OPINION

T

hree successful companies have come together to represent openness and are encouraging others to join. Google, Prezi. com, one of the best known and most successful startups, and espell, Hungary’s market leading translation provider, launched the initiative. We spoke to espell’s CEO, Miklós Bán, about it.

MIKLÓS BÁN: Like the leaders of Prezi and Google, I’m convinced that it simply makes sense, even business sense, for any enterprise to be open. A company can make headway if it concentrates on the behavior and performance of its staff and business partners rather than on variables such as their age, gender, origin or sexual orientation. We’re aware that many others think the same way, which is why we launched the initiative. The idea is to provide a space and an opportunity to those who would like to express this belief in connection with specific issues from time to time.

Does that mean it’s a political initiative?

MB: Definitely not in a party political sense. We welcome companies, civil organizations and other groups, including friendship associations and music groups. In other words, all those which would like to take a stand on issues they judge as important, beyond doing so on an individual level. We hope that the founders and the companies or groups that sign up can make a significant impact on how specific issues are viewed.

Where can companies or groups sign up?

MB: On the nyitottakvagyunk.hu website. They simply need to agree with the basic idea behind the initiative and our goals. Then the companies that sign up can decide whether to take part alongside us at our first joint event. We certainly encourage them to do so. The overall aim is for companies and other groups to take a stand supporting important human rights issues. The first opportunity to do so is to take part visibly in the Budapest Pride march here in Hungary, as many companies do at similar marches in the West. We’re creating a special banner for those companies and groups that sign up to highlight their presence.

Why Budapest Pride in particular?

MB: Of course we want to celebrate the creativity, energy and positivity of a thriving LGBT community in Budapest, but this is just the first of many good causes that all three companies wish to support. Budapest Pride is more or less the only major event in Hungary to talk about the LGBT movement. Bringing attention to them is one of the things we are planning to do to promote openness in Hungary. Last but not least, we do this because we think this is the right thing to do.

By the way, the idea arose from last year’s march, at which two Hungarian firms, Prezi and espell, were the first to take part as companies, independently of each other. Google is also known for working hard to bring attention to diversity and inclusion inside and out the company, so it came naturally for three companies from the knowledge industry to join forces this year and not to exclude others either. Of course it’s also significant that in the West, similar marches are a celebration of diversity. It’s a big party. That’s why the three companies will be there at the march on a large truck with good music, mobile Wi-Fi and other surprises. It’s also our way of officially launching nyitottakvagyunk.hu.

Why is all this good from your point of view? Why is it important for you?

MB: Espell, with the limited means at its disposal, supports two causes: human rights issues and contemporary art. Of course that choice arises from my personal preference, but it has since become part of espell’s corporate identity and is important for our staff too. For us it’s not marketing, even if it could be construed as that by the outside world. We hope that we can contribute, even if only in a small way, to positive developments using the means at our disposal, our enthusiasm and the strength of the espell brand.

www.espell.com

long−term, transparent and predictable investment environment and encourag− ing R&D incentives. “We keep emphasiz− ing the need to further improve an inves− tor−friendly environment with efficient tender application system, a stable and predictable political and economical leg− islation and competitive talent pool,” said Kristóf Kovács, a consultant of Corpo− rate Communications and Public Affairs.

“Therefore, GE believes that collabora− tion between government and business as stakeholders can reinforce the position of Hungary as part of the CEE in the global competition. To foster this collaboration and exchange of ideas and perspectives is the reason why we established the com− pany’s regional thought leadership blog, GE for CEE, two years ago, Kovács added.

According to a recently revealed com− petitiveness survey by the World Economic Forum, Hungary is in 60th position out of 144 countries, between India and Peru, some 12 places lower than last year. “As an AmCham representative on behalf of the 400 companies, I might say: if taxes are levied in an unpredictable way, not under the laws of economic policies, that might deter companies,” said László György, an AmCham board member and leader of Cisco Systems Hungary, at a roundtable discussion. “Of course we understand the reason: something had to be done with the budget deficit. And AmCham as a free−

HUNGARY-US TRADE VOLUME, 2012 (USD MLN)

Export

2453

Import

1900

Total trade

4354

market organization believes in the princi− ple that it tries to find a designed, prepared, negotiated compromise,” he added.

But György warned that the response to continued uncertainty might be down− sizing: companies could reduce the number of employees, rationalize, and restructure their activities. “Foreign companies are particularly interested in what kind of business environment could be expected next year, or three years later,” György pointed out.

But predictability is not enough in itself.

As AmCham Vice President David Young, of Amrop Kohlmann and Young, said at a recent press conference: “We believe that there’s a strong relationship between trans− parency and competitiveness. If a country is corrupt, it may lose its competitiveness and its development deteriorates as well.

Businesses need a predictable legal envi− ronment that provides equal opportunities, equal access to information and allows gov− ernment towards those whom it serves.”

Source: HITA

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

WE ARE OPEN - COMPANIES AT THIS YEAR’S BUDAPEST PRIDE

WWW.BBJ.HU

17

3

Budapest Business Journal | June 28 – July 11

THE LARGEST US COMPANIES IN HUNGARY* In alphabetical order

FIELD OF ACTIVITY

TOTAL NET REVENUE IN 2011 (HUF MLN)

REVENUES FROM EXPORT IN 2011 (HUF MLN)

ADDRESS, PHONE, FAX

metalworking

160 282

150 636

8000 Székesfehérvár, Verseci út 1-15, (22) 531-200, (22) 315-373

IT

3 673

–

1123 Budapest, Csörsz utca 45, (1) 225-4600, (1) 225-4611

banking

–

–

1051 Budapest, Szabadság tér 7, (1) 374-5000, (1) 374-5100

food

80 023

8 603

DELPHI THERMAL HUNGARY KFT www.delphi.com

auto parts production

46 178

45 476

2660 Balassagyarmat, Déli Ipar terület, Szügyi út, (35) 502-100, (35) 502-101

FORD KÖZÉP- ÉS KELET-EURÓPAI KFT www.ford.hu

auto trade

33 584

1 963

2000 Szentendre, Galamb József utca 3, (26) 802-533, (26) 802-590

machinery production

1 246 672

1 225 900

1138 Budapest, Népfürdő utca 22, (1) 399-1100, (1) 399-1100

automotive

–

–

9970 Szentgotthárd, Füzesi út 15, (94) 551-000, (94) 551-048

IT

35 331

14 066

1117 Budapest, Alíz utca 1, (1) 229-9999, (1) 229-9000

IBM DSS INFORMÁCIÓTECHNOLÓGIAI KFT www.ibm.com/hu

electronics

28 703

28 293

2600 Vác, Deákvári fasor 16-18, (27) 500-400, (27) 517-026

JABIL CIRCUIT MAGYARORSZÁG KFT www.jabil.com

electronics

348 073

341 776

3580 Tiszaújváros, Huszár Andor út 1, (49) 548-500, (49) 548-512

pharmaceuticals

13 323

–

LEAR CORPORATION HUNGARY KFT www.lear.com

auto parts production

169 772

158 357

LILLY HUNGÁRIA KFT www.lilly.hu

pharmaceuticals

16 704

2 783

catering

21 605

–

1097 Budapest, Gyáli út 3/b, (1) 455 2400

MICROSOFT MAGYARORSZÁG KFT www.microsoft.com/hu

IT

9 285

–

1031 Budapest, Graphisoft Park 3, (1) 437 2800

ORACLE MAGYARORSZÁG KFT www.oracle.com/hu

IT

16 238

–

1095 Budapest, Lechner Ödön fasor 7, (1) 224-1700, (1) 214-0070

pharmaceuticals

35 993

3 894

PROCTER & GAMBLE MAGYARORSZÁG KKT. www.pg.com/hu

cosmetics wholesale

46 531

25

VISTEON HUNGARY KFT

auto parts production

66 811

66 781

ALCOA-KÖFÉM KFT www.alcoa.com CISCO SYSTEMS MAGYARORSZÁG KFT www.cisco.hu CITIBANK EUROPE PLC. Magyarországi Fióktelepe www.citibank.hu COCA-COLA HBC MAGYARORSZÁG KFT www.coca-cola.hu

GE INFRASTRUCTURE CEE HOLDING KFT www.ge.com/hu/hu GENERAL MOTORS POWERTRAIN MAGYARORSZÁG KFT www.gm.com HEWLETT-PACKARD MAGYARORSZÁG KFT www.hp.com

JOHNSON AND JOHNSON MAGYARORSZÁG KFT www.jnj.com

MCDONALD'S KFT www.mcdonalds.hu

PFIZER KFT www.pfizer.hu

* We have listed only companies that are among Hungary’s Top 500

2330 Dunaharaszti, Némedi út 104, (24) 500-500, (24) 201-101

2045 Törökbálint, Tó park, (23) 510-919, (23) 510-929

2100 Gödöllő, Haraszti út 4, (28) 520-300, (28) 520-399

1075 Budapest, Madách Imre utca 13-14, (1) 328-5100, 328-5101

1123 Budapest, Alkotás utca 53, (1) 488-3700

1082 Budapest, Kisfaludy utca 38, (1) 451-1100

8000 Székesfehérvár, Aszalvölgyi út 9-11, (22) 530-300, (22) 530-157

Source: HITA, Opten

COMPANY, WEBSITE

BBJ

4Socialite BOOK REVIEW

PEOPLE ON THE MOVE

Book review: The truth about money

22

Q&A with new BCCH Chairman Vazul Tóth

WE ARE A JAM NATION Locally grown handmade food has found its way into the households of Budapest.

ZSÓFIA VÉGH

Stroll across the indoor yard of Kazinczy utca 14 on any given Sunday, and unlike most eve− nings, when you would aim for the bar for a cool beer, you will see stands mounted from across the hallway loaded with farmers’ pro− duce. Goods from the countryside, all of them handmade: Szimpla Kert, the first and best− known ruin pub in Budapest, turns into a Farmer’s Market every weekend.

can, andHIGHLIGHTS that reflects in quality, Mautner said.

STORY ■

Profitability may be the Achilles’ heel of the handcraft food revolution ■ Consumers may not all be connoisseurs, but they will think twice about what they buy

WORTH THE EFFORT? Profitability may be the Achilles’ heel of the handcraft food revolution. Consumers may not all be connoisseurs, but they will think twice about what they buy. “Basket value has risen but the number of transactions hasn’t; in fact it may even have decreased,” said Zol−

tán Meczner, managing director of Hegyközi Manufaktúra, a company selling and distrib− uting handcraft food and drink from northern Hungary. The firm has the mission of help− ing manufacturers in the region. After review− ing the goods of the farmers, Hegyközi Man− ufaktúra often asks them to tailor products to them exclusively. “We have a rule to only sell pálinka/spirits matured in strawberry or oak barrels. We often ask bonbon makers to develop new combinations for us,” Meczner said. In their selection, Hegyközi Manufak− túra have quince spirits and sweets of dried plum, bittersweet chocolate and almonds, though best sellers these days are those filled with amarena cherry and marzipan. Since it

23

went fully operational in 2010, the company has been serving retailers and customers in its brick−and−mortar shop in Budapest and also online. Maintaining the infrastructure – including a fleet – costs much more than set− ting up a table a table in front of the garden and selling jams from home, Meczner notes. Both have a place in the chain, but the latter cannot rely on steady and widespread demand.

Hungary mirrors well the changes that have taken place in the past two decades in other countries like the United States or Scan− dinavia. “It started in high cuisine, in luxu− rious restaurants as this is the segment that has the means, technical and financial, to renew cuisine,” Mautner explained. With master chefs embarking on their own projects and appearing more in the press, the process trickled downwards and has now reached the wider public. Torkos Csütörtök, a day when even Michelin−star restaurants offer menus at half price, and gastro festivals like the recent Gourmet Festival at Millenáris have refined consumers’ taste buds. Local produce is appreciated more than before reports GFK, a market researcher with a strong focus on con− sumer behavior. In the meantime, a grass− root movement of food manufacturing has occurred, driven by farmers striving to earn somewhat more for their produce than they do by handing it over to wholesalers. Many family−owned businesses could make it: the dairy products of Cserpes and Fruchts are already in the mainstream, with many more up−and−coming on the list.

Photos: Hegyközi Manufaktúra

FEEDING THE TOURISTS Strict quality control and the fact that these products are handmade don’t allow for steep profits in the beginning. “Preserving prod−

To get a snapshot of the current handcraft food market, Szimpla Piac is a good place to start off. Jams, cheeses, hams, sausages and yet more jams dominate the place. “We appear to be a jam nation,” notes Zsófia Maut− ner, gastro expert and food blogger.

Jams are good choice, anyway. Fruit in Hungary is plentiful and tasty and making jam is pretty straightforward, requiring no special technology. With cheese it is very dif− ferent, here shades in quality can be noted. To sustain liquidity, makers don’t mature cheese for a year. Instead, they sell it as soon as they

FIVE YEARS AGO IT WAS INCONCEIVABLE, BUT THE CAPITAL HAS BECOME A GASTRO DESTINATION

ucts’ handmade status and sustaining qual− ity usually means it takes a company years to turn profitable,” Meczner said. Hungar− ian buyers alone are not enough to absorb all the goods produced in the recent boom. The answer lies abroad: first through enthusiastic tourists who eat and buy here, then through export. “Today, many foreigners come to Budapest for a weekend gastro tour,” Mautner said. “Hungarian cuisine is mentioned in ever more international publications. Five years ago it was inconceivable, but now the capital has become a gastro destination.”

WWW.BBJ.HU

19

Budapest Business Journal | June 28 – July 11

HANDCRAFTED REVOLUTION KRISZTIÁN KUMMER

“Big industrial beers are bad and bor− ing,” explained Gergely Kővári, brewer, beer punk and owner of the Csak a jó sör beer shop. Even if the price tags on beers from small breweries match those of Belgian beers, many Hungarians have seemingly been prepared to pay more for a good, new and exciting beer. And sea− soned professionals and just−hopped−in brewers alike are equally keen to fulfill the growing demand.

“The traditional beer market is filled to the top with multinational companies, with no market niche left for small ‘hand− craft’ breweries,” pointed out József Simkó, owner of the Békésszentandrási Sörfőzde brewery. This was exactly the reason why he and his team started to create dark and flavored beers in place of the basic lager they had previously cre− ated for decades. “Handcrafted beer for− mulas are easy to change and improve continuously. Large breweries spend mil− lions to research a new beer; we can cre− ate samples as small as 50 liters to give to our most reliable customers for tast− ing. Then we decide on the sample’s future based on the feedback,” Simkó said as he explained the appeal of exper− imenting with new beers.

THE PIONEERS “The handcraft beer market might seem huge in Hungary, as all of a sudden many shops and pubs are offering them, but their share is not more than 1% on the Hungarian market,” Kővári empha− sized. “This is the pioneering age of beer brewing with many small ‘guerilla’ brew− eries that sometimes even lack proper equipment. I think brewing will be very trendy for the next few years.” He might be right as it seems that what is brewed on a small scale finds its market imme− diately. “I brew myself too, sometimes as much as a 1,000 liters and that could be easily sold here in the shop,” Kővári said.

We are still far away from the United States where small−scale beer crafting – the so−called microbreweries – has a his− tory of decades, but nonetheless, Hun− garian brewers have started out on their journey with huge enthusiasm and solid support from customers.

STORY HIGHLIGHTS ■

Small breweries turn toward specialties ■ Consumption of handcrafted beers increased in the last few years

A FESTIVAL ALWAYS HELPS The hype around ‘handcrafted’ beers in Buda− pest originated from Főzdefeszt, a small festi− val organized by amateur brewers for the first time in 2011. Hungarian handcrafted beers became a huge success immediately, and now half the pubs in downtown Pest offer Hungar− ian specialties. “Demand grew dramatically in the last two years. We saw a decline in vol− umes from 2004 until the end of 2010. Then the trend turned around in 2011 and now demand is hard to fulfill,” said Simkó, who sells 40% of his beers in the pub next to the brewery in Békésszentandrás.

And breweries face the same problem around the country. “Quality differences between ‘traditional’ beers from multina− tional companies and small handcraft beers are huge, which helped handcraft beers to become a trend,” Zsolt Gyenge, brewer and owner of Fóti Sörfőzde said. “Four or five years ago, only 30% of our capacity was used. Now we have reached the limits of our capacity and demand is growing contin− uously, so we keep on expanding the brew− ery. We have many request from abroad as well and we try to fulfill them, too, but fun− damentally we try to keep up with the grow− ing domestic demand,” he added.

WE WANT MORE BEER! Many pubs have felt the wind of change and are trying to ride the trend, but that’s not as easy as it sounds. “We started to sell Hungarian handcrafted beers years ago to expand our offering. They are sold out very quickly nowadays, but supply can lag ridic−

ulously, as these breweries are very small.

Sometimes we haven’t got a new supply for six months from one beer or another,” said Máté Horváth, owner of the Flying Puli pub, who added that local drinkers are not open to every novelty. “Hungarian and Belgian beers are easy to sell, but Hungarians show no interest to products from small Czech or American breweries,” Horváth pointed out, even if a Czech beer festival is being held in the heart of the city right around now.

Photos: Békésszentandrási Sörfőzde

Dozens of small Hungarian breweries have popped up, seemingly from nowhere, in the last few years, and the shelves of the pubs in down− town Budapest are flooded with so−called ‘handcrafted’ beers. But where has this new trend come from?

WWW.BBJ.HU

20

Budapest Business Journal | June 28 – July 11

DOWNTOWN HOTEL GETS NEW LOOK One of Budapest’s top hotels, Kempinski Hotel Corvinus Budapest, completed a major renewal this spring.

The facelift was done in a relatively short time in a still not−too−promising economic environment. General Manager Emile Bootsma talked with the Budapest Business Journal about the challenges and results of the renovation.

BBJ

Q

When did the idea of renewing parts of the hotel first pop up?

A There were plans for a reno− vation from 2007 already. Lots of plan− ning had been done back then but, due to the crisis, the start was put on hold.

When we dusted off the plans, we basi− cally had to redo all the planning, as it had become outdated.

Q

What difficulties did you have to face during the reconstruction?

A We had a relatively short period of time to do all the work, as the decision to go ahead with the renovation was made in February 2012, and work was completed early this spring. One of the biggest challenges was organizing the work on the premises: we wanted to keep the hotel up and running during con− struction. We had done lots of prepara− tion work in December, and managed to achieve that the work in the most visible area, namely at reception, took only six− seven weeks. During this time, reception was moved to the first floor and its oper− ation remained undisturbed.

THE RE-DESIGNED RE-DESIGNED LOBBY LOBBY OF OF THE THE HOTEL HOTEL THE

Q

Postponing such an invest− ment in the midst of the cri− sis is understandable, but why decide to go ahead with it now? Are you that optimistic about the market?

A Well, €4.5 million was spent on the basic construction works and another 20−25% came on top of it for things such as china and cutlery. So it was quite a big invest− ment indeed, especially for the time being.

But, looking at the Budapest hotel market, one can see that although the rates are still well below the EU average, volume is con− stantly increasing. So we decided to do the renovation now when we feel that things are moving forward a little, rather then wait until things are really getting better.

This way, we are ahead of our competitors and we can say that we are the first five− star hotel in Hungary to engage in a major renovation these days.

THE PROMENADE

THE LIVING ROOM

WWW.BBJ.HU

21

Budapest Business Journal | June 28 – July 11

€4.5 MILLION WAS SPENT ON THE BASIC CONSTRUCTION WORKS AND ANOTHER 20-25% CAME ON TOP OF IT FOR THINGS SUCH AS CHINA AND CUTLERY CURRICULUM VITAE Emile Bootsma took over the reigns at Kempinski Hotel Corvinus Budapest in November 2010.

Bootsma, a native of the Netherlands, spent two years in the Kempinski Hotel Beijing Lufthansa Center before coming to Budapest.

Prior to China, he managed Hotel Vier Jahreszeiten in Munich, another Kempinski property. He also worked for the Sheraton Arabellapark Hotel in Munich, as well as in Cape Town, South Africa.

He holds a degree in hospitality and a European Master of Business Administration, which he completed at Reims Management School.

KEMPINSKI’S BLUE FOX THE BAR

ÉS BISTRO

WWW.BBJ.HU

22

Budapest Business Journal | June 28 – July 11

BOOK REVIEW

THE TRUTH ABOUT MONEY Money was one of humankind’s greatest inventions. But we have become its slaves.

Felix Martin takes us to the heart of society’s misunderstanding of money and sets us straight.

NWhat is money, and how does it work? The conventional answer is that people once used sugar in the West Indies, tobacco in Virginia, and dried cod in Newfoundland in exchange for other goods and services. In short, today’s financial universe evolved from barter. Unfortunately, says Felix Martin, there is a problem with that story. It’s wrong.

In ‘Money: The Unauthorised Biography’, Martin intro− duces readers to the Pacific island of Yap at the beginning of the 20th century. It was on this island that Western explorers encountered an unusual monetary system: the ‘coins’ used by the island’s inhabitants were huge disks carved from lime− stone. Because it took four strong men to move one of these coins, they generally stayed in one place, but the ownership of them changed according to shifting credits and debts.

“The noteworthy feature of this stone currency”, noted an American explorer, “is that it is not necessary for its owner to reduce it to possession.”

Using the discovery on Yap as an example, Martin argues that money is not something that can be reduced to a tangi− ble object. Its value is not based on how many pieces of gold or silver it can be exchanged for, and it never was. Instead, it has always been based on a system of credit and a shared understanding that money is something more than its physi− cal manifestation.

To prove the point, Martin cites the crisis that took place in Ireland in 1970, when the nation’s banking system shut down for nearly seven months following an industrial dispute. Peo− ple were unable to withdraw or deposit money, yet there was little disruption to the local economy because the majority of payments continued to be made by cheque. This was in spite of the fact that the cheques could not be cashed, and that the date on which they could be cashed remained unknown. These IOUs were accepted based on an assessment of risk made by individuals who were connected by community bonds and informed by community knowledge. “The official parapherna− lia of banks and credit cards and solemnly printed notes with unforgeable insignia is not what is essential to money,” Martin writes. “All of this can disappear and yet money still remains.”

But, he continues, while all money is credit, not all credit is money. What is crucial to this arrangement is the possibil− ity that an IOU can be passed on to a third party. “Money, in other words, is not just credit – but TRANSFERABLE credit.”

It follows that it was the transferability of debts, rather than the movement away from a (mythical) barter economy, that revolutionized societies and economies.

Given that 25 countries faced banking catastrophes during the most recent crisis, this seems like the right time to reas− sess our understanding of money. ‘Money: The Unauthor− ised Biography’ unfolds a panoramic history and explains the truth about money: what it is, where it comes from, and how it works. More than a book on economics, it covers his− tory, sociology, anthropology, and moral dilemma, moving far beyond the recent financial crash to address the entire concept. Drawing on stories from throughout human history and around the globe, it may radically change your under− standing of the world.

THE UNAUTHORISED BIOGRAPHY

by Felix Marin Published by Bodley Head (an imprint of Vintage Publishing) ISBN 9781847922342 Available to order through www.hungaropress.hu

WINE – NOT QUITE WHAT THE DOCTOR ORDERED

O

ne glass is medicine, more a remedy,’ goes the silly saying. Our specialist begs to differ.

“Some researchers claim that red wine is beneficial for your health,” says Dr. Ádám Lelbach, leading physician at Dr. Rose Private Hospital.

“Read further on, however, and you will find that a daily dose of more than 0.1 liter could have adverse effects. Indeed, a sip of red wine might help most of us, but any form of alcohol is strictly forbidden with liver or pancreas conditions. Doctors are not unanimously happy to promote the idea that red wine is good for your health,” concludes Dr. Lelbach.

“It is easy to disregard the recommended quantity, thinking that the same amount of alcohol is less harmful when consumed as wine, compared to spirits. It is a gross fallacy.”

What makes wine allegedly beneficial in the first place?

“The presence of antioxidants, combined with the relaxing effect of alcohol, apparently,” explains Dr. Lelbach. It is fair to say that moderate and occasional consumption of red wine statistically makes us less prone to prostate cancer, heart attack, stroke, diabetes and cardiac related deaths, as well as slowing aging, protecting the bones and ligaments, and mitigating osteoporoses.

The bad news, on the other hand, is that alcohol may induce colorectal and breast cancer, and may aggravate liver and thyroid conditions.

It also makes your migraine a lot worse, while stomach problems and certain neurological conditions require a total ban on alcohol.

And do not forget pharmacological contraindication: a long list of drugs that cause serious side effects when combined with even a little alcohol. Should you have the slightest health issue, make sure that you discuss your drinking habit with your physician – how much and how often you are allowed to drink could be a lifesaver.

GOOD TO KNOW Wine stimulates salivation and the production of peptic acid in the stomach, and boosts your bile and pancreas, helping digestion. That is why it is best consumed before or during a meal. Stick to the recommended one glass, sip by sip, if you want to do your system some good.

For an appointment, call (+36)1-377-67-37 or go online at www.rendelo.drrose.hu Széchenyi square 7/8, 1051 Budapest

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

PROMOTION

WWW.BBJ.HU

23

Budapest Business Journal | June 28 – July 11

WHO'S NEWS

Name RENAUD CAPRIS Current company/position DALKIA ENERGIA / CEO

Capris is taking over the position of chief executive officer at Dalkia Energia as of June 2013. He arrived in Budapest from Dalkia Bulgaria, where he also worked as CEO. Capris has been with the energy company for 22 years and has extensive international experience. Previously, he worked in the Czech Republic. He succeeds Gérard Bourland, who has left the position after five years for Dalkia Poland.

Do you know someone on the move?

Send information to research@bbj.hu

Name DR. LÁSZLÓ ZLATAROV Current company/ position SIEGLER / WEIL LAW OFFICE; SPECIAL COUNSEL

Zlatarov has joined Weil Budapest’s expanding Regulatory Practice Group as Special Counsel focusing on the competition law area. He earned his J.D. from József Attila University Faculty of Law and an LLM from Harvard Law School. He spent ten years in private practice in Brussels and Budapest, working for international firms including Dechert and Baker & McKenzie. Most recently, he served as a member of the decision-making body of the Hungarian Competition Authority.

Vattay has joined real estate company CE Land, where her tasks include the preparation and set up of a new service for the company.

She has gained experience in the field of management, leasing and marketing, and she will work as head of restructuring services at the company. Earlier, she was with CA Immo and Austria’s Europolis.

Name CSILLA VATTAY Current company/position CE LAND / HEAD OF RESTRUCTURING

ADVERTISEMENT

REVALUED ROLE IN CRISIS The British Chamber of Commerce in Hungary (BCCH) held its Annual General Meeting on May 30.

New members were elected to the ruling council and also the chairman also changed: after leading the chamber successfully for five years, Gergely Mikola was succeeded

by Vazul Tóth, a director in the Consulting department of Deloitte Hungary.

CURRICULUM VITAE

KRISZTIÁN KUMMER

Q

You’ve been elected chair− man at the BCCH in harsh times, not just in Hungary, but all around the globe. How do you see the role of chambers in these unfriendly conditions?

A The role of chambers has been revalued during the crisis. We need to help enter− prises with increased attention to build up and cultivate their commercial and busi− ness relationships. We should provide meaningful and successful help through the Special Interest Groups (SIGs) and working groups for Hungarian busi− nesses, especially SMEs. For example, the three Shared Services Symposiums, which Deloitte organized in cooperation with the BCCH and the British Embassy, were a huge success and proved that such events organized around a special theme or sector are relevant, and provide valu− able insights for BCCH members. Also, we would like to expand the effective range of the groups and potentially cre− ate new groups, where interest is shown.

Furthermore, closer cooperation is needed with the British Embassy and personally with Ambassador Jonathan Knott, and with UK Trade & Investment (UKTI). There are also many relations between European chambers that Hun− garian members should benefit from.

Q

Chambers are having diffi− culty in keeping the number of members steady. How do you plan to persuade members to stay or join the BCCH? A It’s not a secret that membership figures have decreased dramatically over the past years. The BCCH has more than 100 mem− bers currently. The newly elected council brings a wealth of knowledge, experience and expertise from a wide range of indus− tries and sectors. I am convinced that this, coupled with the professional network of the council members, represents huge value both for our existing and new members.

Through this extended network, we would like to invite relevant subject matter experts to our events that attract many participants.

Q

Why did you decide to stand for the Chairman’s position? What kind of special qualities and

skills can you add to the chamber’s suc− cessful operations?

A On one hand, I’ve spent a number of years abroad, namely in Australia and the Netherlands. These years have provided me with ample opportunity to learn and acquire skills that I feel will bring value to the BCCH. On the other hand, I personally believe in British corporate values like transpar− ency and ethical conduct, and I’d like to pro− mote these values to members through the chamber’s events. I think that the only way a company can operate and survive in the long−term is via transparency and growing through valuable professional relationships.

And last but not least, I see that the United Kingdom has started to re−discover Central Europe, and especially Hungary. Increased emphasis is being placed on investing and trading with Central Europe and I think the BCCH has a role to play in supporting this.

Vazul Tóth graduated from the Corvinus University of Budapest in 1995. He has more than 15 years of experience in strategic sourcing, organizational restructuring, cost reduction initiatives, change management, process redesign, and system implementations across several industries and in a number of geographies. Prior to joining Deloitte Hungary, he worked in Sydney and in Amsterdam and has served clients in the Middle East and Southeast Asia as well. Part of his responsibilities include working with a number of member firms in Deloitte’s Pan-European Innovation program with a focus on inspiring practitioners to create new service offerings, incubating them and taking them to market. He is also a visiting senior lecturer of operations management at the Central European University.