Budapest Business Journal 23/11

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Automotive

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local carmakers Innovation fuels

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Room for Tata,

or other OEMs

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Pointing to a bright future

AUTOMOTIVE INDUSTRY members of the We explain why in Hungary automotive industry look at the are so upbeat, and for the sector. future potential plant in Győr.

Shown is the Audi

JUNE 05, 2015 – JUNE 18, 2015

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Market revs up

NEWS

Writing up a last-minute wish list MPs proposed more than 500 amendments to the state budget bill, but only Fidesz proposals – like more funding for City Park, museums, and a sports center – are likely to be passed into law.

3

NEWS

Uber tries to get over crackdown The San Francisco-based ‘sharing economy’ firm has raised the ire of local taxi drivers and drawn the scrutiny of tax officials. But the company says its drivers should be allowed to work here.

6

BUSINESS

When state health care flounders, go private

The growth of the local auto production sector fuels more success, as strong supply lines make Hungary an attractive place to locate a factory, says Csaba Kilián, CEO of the Automotive Industry Association.

16

SOCIALITE

One of the investors behind a €40-50 million private hospital that is being developed in Budapest talks about his plan to provide high-quality care for those who have private insurance.

12

BUSINESS

SPECIAL REPORT

Your guide to summer music festivals

Sentiment improves in real estate market

Innovation drives sector, and vice versa

Few countries do outdoor entertainment quite like Hungary, which is why the festival season is so special. Find out where to hear classical music, view folklore or get down and dirty at rock shows. 28

Yet another report finds investor interest in Hungarian property is growing stronger, as JLL releases its analysis of a first quarter that saw €110 million in investment. Experts share their prognosis for the future. 11

Innovative businesses help attract automotive production to Hungary, and the growing importance of the sector means that there is a a greater market for innovators – like engineers developing driverless cars. 17

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Budapest Business Journal | June 05 – June 18, 2015

BBJ

3Special Automotive

SPECIAL REPORT:

Innovation fuels

local carmakers

17

Report Room for Tata,

or other OEMs

18

Pointing to a bright future

AUTOMOTIVE INDUSTRY members of the We explain why in Hungary automotive industry look at the are so upbeat, and for the sector. future potential plant in Győr.

Shown is the Audi

BUSINESS JOURNAL BUDAPEST B

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JUNE 05, 2015 – JUNE 18, 2015

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Market revs up

NEWS

Writing up a last-minute wish list MPs proposed more than 500 amendments to the state budget bill, but only Fidesz proposals – like more funding for City Park, museums, and a sports center – are likely to be passed into law.

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Uber tries to get over crackdown The San Francisco-based ‘sharing economy’ firm has raised the ire of local taxi drivers and drawn the scrutiny of tax officials. But the company says its drivers should be allowed to work here.

6

BUSINESS

When state health care flounders, go private

The growth of the local auto production sector fuels more success, as strong supply lines make Hungary an attractive place to locate a factory, says Csaba Kilián, CEO of the Automotive Industry Association.

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One of the investors behind a €40-50 million private hospital that is being developed in Budapest talks about his plan to provide high-quality care for those who have private insurance.

12

BUSINESS

SOCIALITE

SPECIAL REPORT

Your guide to summer music festivals

Sentiment improves in real estate market

Innovation drives sector, and vice versa

Few countries do outdoor entertainment quite like Hungary, which is why the festival season is so special. Find out where to hear classical music, view folklore or get down and dirty at rock shows. 28

Yet another report finds investor interest in Hungarian property is growing stronger, as JLL releases its analysis of a first quarter that saw €110 million in investment. Experts share their prognosis for the future. 11

Innovative businesses help attract automotive production to Hungary, and the growing importance of the sector means that there is a a greater market for innovators – like engineers developing driverless cars. 17

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Then and soon Above is the Városligeti Horse Racing Course in 1927, which is now on the site occupied by the Puskás Ferenc Stadium. At left is an artist’s sketch of how the stadium should look when reconstruction is completed in 2019.

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Emigration bigger problem than immigration 5 NEWS

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macroscope

MPs take a shot at rewriting budget More than 500 amendments were proposed to the 2016 budget, but less than a tenth of them are likely to be inserted into the final plan, which should be approved by the end of June.

Assessing his own leadership

The Hungarian Parliament spent the last days of May tearing next year’s budget to pieces. MPs submitted more than 500 amendments to the budget bill – of which only 31 came from representatives of the governing Fidesz party and its coalition partner, the Christian Democrat People’s Party (KDNP).

The majority of the amendments were aimed at getting extra resources for local purposes, including a host of proposals for local road construction. Some MPs sought massive amounts for further stadium construction, while others want more subsidies for state−owned institutions.

One thing is common in the majority of the proposals: nearly everyone thinks the extra money should come from the general reserves of the budget.

The proposals likely to pass On the government side, Fidesz representatives submitted 28 amendments, while the KDNP had only three. Given the government’s large majority in the Parliament, it is their proposals that are likely to be put in place.

Gergely Gulyás, who heads the legislative committee of parliament, wants to earmark some HUF 200 million for renovating the Committee of National Remembrance’s headquarters, and would also like to see HUF 100 mln more in state subsidies for the state−owned Design Terminal. He also wants to put aside HUF 50 mln to increase funding for the “ReConnect Hungary” program, which specializes in supporting the descendants of Hungarians living abroad.

János Lázár, cabinet chief and the minister in charge of the Prime Minister’s Office, has filed three proposals. He has proposed spending HUF 300 mln more on the Hungarian National Gallery and HUF 1 billion more on the Budapest Operetta and Musical Theater. He also suggested regrouping funding to benefit the Liget Budapest project, especially the Fine Arts Museum, Ethnology Museum and the Technical and Transport Museum.

Photo: MTI/Szilárd Koszticsák

ZSÓFIA CZIFRA

Giving an extended ‘state of the country’ speech on May 29, Prime Minister Viktor Orbán evaluates the past five years of governance by himself and his Fidesz party. Orbán praised central bank governor György Matolcsy’s monetary policy, stating that the government would have fallen if not for the conversion of foreign-exchange mortgage loans to forint-based loans. The prime minister also spoke about the changes in the tax code that his administration implemented during the past few years. He said these ‘reforms’ were the secret of the country’s success, meaning the government must protect these changes and the system must be preserved. Orbán also mentioned the relationship between Hungary and the European Union, saying that, in spite of the ongoing controversial issues, ‘we will not divorce’ from the EU. ‘The EU is our family, so it is in our interest to improve it, but not to leave it,’ Orbán said.

Lajos Kósa, managing vice president of Fidesz, proposed adding HUF 1.5 bln to funding for national sports centers in connection with the World Aquatic Championships that Budapest will host in 2017. He also proposed HUF 2 bln in funding for road construction near Debrecen, where he was mayor until last fall.

Péter Harrach, caucus head of the KDNP, would spend HUF 300 mln more on church−run health care institutions, and HUF 80 mln on programs of the Áron Márton Memorial Year.

The opposition would also like to reshape next year’s budget: The green LMP (Politics can be Different) suggested redistributing more than HUF 1.6 trillion, saying that the amount gained from the radical amendment – which would not increase the budget deficit – should be spent mainly on eliminating labor poverty.

A final vote on the budget bill is expected to take place on June 22.

Lajos Kósa, managing vice president of Fidesz, proposed adding HUF 1.5 bln to funding for national sports centers in connection with the World Aquatic Championships that Budapest is to host in 2017.

Help from the central bank Paying for this budget will require maintaining current growth projections, and the government has apparently received some help on that score from the continued monetary easing policy of the central bank. Just one day before the budget bill debate kicked off, the central bank further lowered its base rate by 15 basis points to a new all−time record low of 1.65%.

“Cautious easing of the policy rate may continue as long as it supports the achievement of the medium−term inflation target,” the Monetary Council of the National Bank of Hungary (MNB) said after announcing the rate cut.

Hungary has room to cut interest rates further as the global market backdrop is supportive and the forint exchange rate is stronger than the level projected in the 2015 budget, Economy Minister Mihály Varga told Reuters in an interview shortly after the cut was announced.

The minister said he expected at least one of the three main credit agencies to upgrade Hungary’s sovereign rating to investment category this year. On May 29, Fitch took a small step nearer to that when it changed its outlook for Hungary from stable to positive. This speculation was supported in a report released May 29 by Morgan Stanley London−based emerging markets analysts.

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Budapest Business Journal | June 05 – June 18, 2015

NEWS

Getting a jump on recycling

IN BRIEF Hungary’s National Economy Minister Mihály Varga said that the Hungarian Government is planning to seal a deal to purchase Budapest Bank from GE Capital by December and merge it with MKB – which the government bought in 2014 – as it considers this to be “a highly logical step”, Reuters reported on May 29. Varga noted that the government’s relations with commercial banks were improving. The minister added that a “lot would depend on whether the credit market picked up in 2016”, according to Reuters. Varga reiterated that the Hungarian state is not planning on buying “any more systematically important banks”.

Family bankruptcy bill could help 25,000 families A bill submitted to Parliament by Hungary’s Christian Democrat People’s Party (KDNP) – the coalition partner of the ruling Fidesz party – is designed to protect families with debts from bankruptcy and could help 20,000-25,000 families, Márton Nagy, the National Bank of Hungary’s managing director said on state-owned news channel M1 on May 22. According to Nagy, a further 10,000 families could be assisted by the national asset manager NET, established to buy the homes of troubled borrowers and allow them to continue living in them as renters. Hungarian households have approximately 180,000 non-performing loan contracts at present, he added.

Under the bill, insolvent Hungarians with debts – including interest and fees – of between HUF 2 million and HUF 60 mln would be allowed to file for personal bankruptcy, exempting their assets from debt collection. Debtors and lenders would have an incentive under the rules to first reach an agreement on repayments among themselves, the bill states, adding that the agreement could involve a restructuring of debt, an exemption from late payments or a partial discharge of debt. If debtors and lenders fail to reach an agreement, a court would act as an arbitrator. The bill would also limit eligibility for personal bankruptcy to Hungarians whose debts do not exceed twice the value of their assets and the income they expect to use for repaying their lenders over a period of five years. It would also require at least 80% of the debts to be undisputed and limit the number of lenders to whom the borrower is indebted to five years.

Bence Rétvári of KDNP said earlier that the assistance would only be available to those who apply. Hungarians who

file for personal bankruptcy would be prohibited from filing again for a period of ten years from the close of the previous procedure, MTI added.

The personal bankruptcy rules would come into force from September 1, 2015 for Hungarians whose homes could be repossessed. The rules would become universal from October 1, 2016.

Photo: MTI/Tamás Kovács

Varga: Gov’t to seal Budapest Bank deal by December

Government mulls support program for big companies Hungary’s government is considering creating a program to support large companies that are not eligible for European Union cohesion funds, deputy state secretary at the Prime Minister’s Office Nándor Csepreghy said on May 26. Because big companies represent a large portion of Hungarian economic output, the government wants to give them opportunities and incentives for investing in development projects, Csepreghy said.

The supported companies have not yet been selected, as there have been no decisions taken so far, he added. Funding could come from the budget, he said, though noting the importance of taking into account fiscal constraints. Nonfinancial support could also be part of the program, he added. Cabinet chief Janos Lázár said a week earlier that the government was working on a program for some 100 big Hungarian companies.

Some press excluded from PM’s speech Left-leaning Hungarian online media outlets were rejected when applying for accreditation to attend Prime Minister Viktor Orbán’s state-of-the-nation speech, according to press reports on May 29. Online dailies index.hu and origo.hu reported that the reporters of Klubrádió, print daily Népszava and online daily 444.hu were rejected entry due to limited “capacity of seats”.

Klubrádió, Népszava and 444.hu have all been openly critical of the government.

Orbán was giving a speech on the fifth anniversary of the 2010 election that put his Fidesz party in power. It was reelected in 2014. Answering a query from Népszava about why the state-ofthe-nation speech was necessary when Orbán gave an evaluation of the past year at the end of February, cabinet chief János Lázár said that, to the best of his knowledge, an NGO initiated the evaluation. “The prime minister needs to report on what he used the trust of the people for,” he added. Index says that the NGO initiating the evaluation ceremony was the Association for a Civil Hungary, a foundation set up by Fidesz.

Children jump on collapsable beverage cartons to crush them in an attempt at a Guinness record in Budapest’s Millenáris Park on June 3. Some 500 local school children tried to set the new world record for recycling beverage containers at the event, organized by the Second District Council in cooperation with the Budapest’s department of public maintenance and an NGO called the Italos Karton Környezetvédelmi Egyesülés.

Helsinki Committee names Fidesz in defamation suit The Hungarian Helsinki Committee is turning to court over a public announcement by Fidesz entitled “Helsinki Committee should stop lying about immigrants”, according to reports. The Helsinki Committee is charging that the ruling party made defamatory comments about it, online daily 444.hu reported on May 22.

In response to the Prime Minister’s speech last week in the European Parliament, Gábor Gyulai of the Helsinki Committee said that Viktor Orbán has been confusing immigrants with refugees since February. Reacting to the committee’s statement, Fidesz said that the “faux NGO Helsinki Committee is unabashedly trying to forge black and white data”. The statement by Fidesz said, “We urge the Helsinki Committee to stop lying and, at least in a serious and crucial issue like this, stop being concerned with stuffing their pockets with the money of George Soros [Hungarianborn American business magnate].” In response to the party’s announcement, the committee said, “it is difficult to decide, whether [...] the public announcement [by Fidesz] resembles Germany of the 1930s or the communist bloc of the 1950s.” The committee said in its response that it is turning to the court over what it says is defamation by the party. During his university years, Orbán received a scholarship from

the Soros Foundation and spent four months in Oxford, England, where he studied at Pembroke College, Oxford University, in 1989, according to his CV posted on the Parliament’s official website. Orbán halted his studies in England and came back to Hungary for the elections held in 1990.

PM: Immigration more crucial than death penalty Reacting to EC President Jean-Claude Juncker’s comment regarding the EU breaking ties with Hungary, Hungarian Prime Minister Viktor Orbán said on June 2 that the European Union is “correct regarding the issue of the death penalty”, as “no EU member state can introduce it”, Orbán said at a conference celebrating Helmut Kohl’s birthday, according to Hungarian online daily Origo.hu. Orbán said that the death penalty cannot be introduced in Hungary and the country does not intend to do so, Hungarian online daily Index.hu reported. The prime minister said, on April 28, that the question of the death penalty should be kept “on the agenda”. Hungary has received wide criticism over the issue in the international press. National Economy Minister Mihály Varga and members of the junior governing party alliance KDNP also said they were against the reintroduction of the death penalty.

According to the prime minister, however, there are more important issues: namely, immigration. The

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Budapest Business Journal | June 05 – June 18, 2015

prime minister said he believes that if we view immigration not from an EU perspective, but following a “holistic” approach, it is not immigration that is taking place but “great modern migrations”. “There is no way back from a multicultural Europe to a Christian Europe, nor to a world of national cultures,” Orbán said. “Today we are experiencing great modern migrations that could restructure the image of Europe, and once this happens it cannot be restored,” Orbán reportedly said. The prime minister also reportedly said that multiculturalism is “a threat to the continent”, and if it becomes commonplace for “groups of different cultural roots to live together” in Europe, there is no way of returning to a fundamentally Christian Europe. The issue of immigrants has been a hot topic for the past couple of weeks in Hungary.

The government has initiated a national consultation on the issue of immigration both by mail and online.

Report: Lázár may resign if Rogán is promoted Cabinet chief János Lázár might resign if Fidesz caucus leader Antal Rogán is appointed as the head of the Prime Minister’s Office, according to unnamed sources cited by Hungarian online daily hvg.hu. Rogán reportedly declined to comment on the news. “János [Lázár] is deathly serious about resigning” if the hierarchy of the office is “jumbled up”, an unnamed colleague of Lázár reportedly told HVG. Lázár is currently head of the Prime Minister’s Office, but according to recent news reports, Rogán is being considered for that position. Online daily 444.hu says that, in hierarchy, Rogán would be under Lázár, but he would report directly to Prime Minister Viktor Orbán, which would make the hierarchy dubious. Lázár currently has minister status. According to 444.hu, there is a “serious power play between” Lázár and Rogán, which could make the two working together difficult, but Rogán said last week in an interview that he had been able to “work together with Lázár well in many periods” and added that they “regularly ask for each others’ opinion”.

Eurostat: Hungarian quality of life rated 6.2 out of 10 Hungarians rated their overall quality of life at 6.2 on a scale of 0-10 with 0 being “not satisfied at all” and 10 “fully satisfied”, while the indicator reached 7.1 for the entire European Union, according to a report by Eurostat, based on data collected in 2013 in the EU. The satisfaction of Hungarians was on the same level as people living in Greece, Cyprus and Portugal, the report reveals. Data suggests that Hungarians expressed higher satisfaction with their jobs at 7.1, as well as with their homes at 6.8, however they rated their fi nancial situation at just 5.2.

Szijjártó: Mongolia could become key destination for tech exports Mongolia is soon to become a key destination for Hungarian technology exports, Foreign Minister Peter Szijjártó told state news agency MTI on May 29.

Szijjártó spoke following talks in Ulan Bator with Mongolian President Tsakhia Elbegdorj, Foreign Minister Lundeg Purevsuren and other ministers, as well as the mayor of Ulan Bator. Szijjártó said the Mongolia mining industry and dynamic agriculture had continued to contribute to an economic growth rate of at least 10% over the past several years.

This rapid rate of economic growth has created a need for technological development, and Szijjártó sees this as a major opportunity to increase Hungarian technology exports to Mongolia.

Hungary’s Eximbank established a $48.8 million credit line to fund bilateral trade, and agreed to launch a $5 mln joint credit line with Mongolia’s Golomt Bank, the minister added.

HALPIM: Hungary’s PMI climbs to 55.1 in May The seasonally-adjusted Purchasing Managers Index (PMI) in Hungary saw a rise to 55.1 points in May from April’s 51.2, the Hungarian Association of Logistics, Purchasing and Inventory Management (HALPIM), which compiles the index, reported on June 1. HALPIM said that an index value of more than 50 shows expansion in the manufacturing sector, while a value of less than 50 signals contraction. The index has been above the growth threshold for more than a year, HALPIM reported. Among the sub-indices that comprise the PMI, the new orders index rose slightly and was above the threshold, while the production volume index also rose and was above the threshold for the fi fth month in a row. Data by HALPIM suggest that the employment index increased and showed growth. Delivery times were slightly longer than in April, while purchased stocks were up after falling in the previous month, HALPIM added.

Government launches online immigration questionnaire The government launched an online version of the “national consultation on immigration” questionnaire, government spokesperson Zoltán Kovács said at a press conference, according to online daily nol.hu.

Kovács said the government would also initiate a campaign in connection with the questionnaire to inform the public on how immigrants to Hungary must respect the culture and laws of their host country and not pose a threat to the jobs of Hungarians, the daily reported. By making the questionnaire available online, the government aims to reach all those reluctant to reply by mail. Unlike the paper version of the questionnaire, however, the online version is not anonymous. Names and other details are required at the outset to prevent individuals from filling out the questionnaire more than once, according to Kovács. The government, however, has yet to implement the functionality in the system that can verify the identity of the individuals responding online.

Some 200,000 questionnaires were returned by mail, Kovács says, adding that the ratio is an improvement on the previous national consultation. Eight million questionnaires were sent out at the end of April at taxpayer’s expense to all Hungarian citizens over the age of 18.

Never mind immigration, emigration is more common Although the government has raised concerns about people coming into the country, experts say the number of people leaving is far more significant.

Emigration from Hungary (in thousands) 80 70 60

Hungarian citizens in European Countries (mirror statistics)* Emigrants from Hungary (Official Hungarian statistics)**

50 40 30 20 10 0

’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 '12 Source: Gödri, Hungarian Demographic Research Institute *Eurostat data (updated May 5, 2015) **HCSO, Yearbooks of Demography

CHRISTIAN KESZTHELYI

While the news is full of concerns about immigrants coming into the country, it appears that the more important demographic trend is the number of people who are leaving.

Emigration from Hungary has been on the rise over the last couple of years for many reasons and is expected to rise further. Still, Hungary is not seeing the same exodus as some of its neighbors, according to experts who spoke to the Hungarian International Press Association at a June 2 event entitled “Emigration from Hungary”.

The experts agreed that measuring emigration is difficult, as surveying those who have left the country is impossible.

The best way to get an estimate is to ask Hungarians who are still in the country whether they know anyone who has left, and assess the issue through them.

In the 20−59 age group, more men left the country after 2009 than after 1989, said Zsuzsa Blaskó, senior research fellow at the Demographic Research Institute, presenting the findings of her pilot study conducted in 2014. Emigrants from the country primarily fall into the 20−29 and 30−39 age groups, with a high likelihood of them possessing secondary school diplomas and/or university degrees, Blaskó added. She noted that target countries of the emigration involve Germany, the U.K., Austria, the Netherlands, and the United States in order of number of migrants.

Hungary has still not reached the level of emigration seen in Romania, Bulgaria or Poland, Blaskó said, noting that despite the gradually increasing figure, the number leaving Hungary it is still not “extreme”.

But rather than emigration, it is immigration that has dominated the headlines recently, as officials in Brussels press European Union members to take in more people fleeing north Africa and

the Middle East. But according to András Pulai, strategic director of Publicus Research Institute, and another expert at the event, this is a non−issue.

“There is no real immigration into Hungary,” he said, adding that immigration to Hungary has actually been on the decrease. While he noted that the number of refugees and asylum seekers has been increasing, Pulai pointed out these immigrants do not threaten the jobs of Hungarians.

More people concerned about emigration By contacting 1,000 people around the country and asking for their opinion on emigration, Publicus Research found that 57% of respondents believe that emigration from Hungary is a problem, while 23% see asylum seekers as problematic, 7% said that none of them pose a problem for the country, while 13% would not answer.

The institute conducted the same poll among active political party members and found that 41% of Fidesz respondents see emigrating Hungarians as a problem, while only 23% believe asylum seekers are problematic. The same ratios for those polled from the socialist MSZP were 67% and 18%, while for Jobbik it was 57% and 20%.

“These results clearly show that the government’s propaganda against immigration is not working,” Pulai said.

Asked what people think might be responsible for emigration, four main drivers were identified: Some 47% of respondents believe people leave because they cannot make a living in the country; 29% believe emigrants do not agree with the politics of Fidesz and Prime Minister Viktor Orbán; 23% said they there are not enough jobs in the country; and 20% said that the economic situation is the reason for people leaving.

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Budapest Business Journal | June 05 – June 18, 2015

EXPERT OPINION

The most valuable asset Katalin Bárány Group Human Resources Director MET GROUP

H

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

aving become a recognized industry expert, having developed great and lasting relationships with partners and our clients – you, the ones who rely upon us to keep the fire on at home, we take great pride in our accomplishments. We have won praise on our performance and market understanding, and have even managed to grow MET (our company) from a local, Hungarian start up, to now operating in eight countries around Europe.

Human Capital is where the big money is We measure success off of three factors: customer satisfaction, cash flow, and employee engagement. To be a good company requires having the business knowledge, plus energized people who drive the business goals and objectives.

This may seem simple at first but in fact employee engagement is anchored in company culture, one we as a local, small business take great pride in. Our culture and business practice involve: Empowerment; trust; initiative; delegation; sustainability; and belief in the mission and shared goals. What all this means to our clients and partners is that they see a robust, adaptive, agile company that can withstand changing business parameters and influencers. By supporting our team of talent our organization becomes more resilient and quicker to deliver, more accurate and meets the expectations of the clients, partners, and the vision of MET. The local factor – Making the best better As a Hungarian origin company we recruit the most talented individuals from the different disciplines offered on the labor market. We provide a detailed program to present the necessary skillset to our team members that best ensures their success within the company. By providing knowledge, listening to feedback, we are able to continually adapt to our environment and provide new, cutting edge solutions to our business partners.

Where they learn not only the theoretical characteristics of the business but they learn the importance of practical thinking, reacting quickly and continually implementing change if and when it is needed, and under very little supervision.

The outcome of that is that our talents return home to Hungary with more involvement, skills, and capabilities which then make them more valuable to our community, our state, and to us as a company. Many of our local leadership team members here in Hungary have taken the same road. After proving themselves abroad for a period of time

they have returned back to Hungary to take on bigger roles and more responsibility.

Why it is important We believe that to be the best, we must recruit and more importantly retain the best. Our goals for recruitment do not stop at the introduction program of entering the company, but rather help guide our employees through their lifespan within MET Group. By having a supportive, mentoring environment where new starters are given standards in which they must operate, it is also a chance for our company culture to nurture our young talent and letting them grow into the young experts and professionals who will be the future leaders in Hungary.

Company culture is not simply a buzzword to us, one that we have simply ticked the box on, but rather makes up who we are. We believe that the decisions and actions we take as a company affect not only our employees, but the surrounding communities as well.

The new kid on the block MET is a relatively young company that has had to grow up fast. We started out as an idea, a belief and have been able to transfer the belief into tangible real business results. For us and our employees this is why we are striving to become better every day.

Experience comes from exposure and cognition. Warriors do not become great overnight by reading Sun Tzu or Miyamoto Musashi. They gain experience by being the people in the trenches fighting it out every day, understanding the situation, intent, and building knowledge.

Knowledge that translates into anything these individuals should put their mind to.

This thirst for development and openness is what drives each of our new employees, and keeps MET continuously on the path of improvement.

We take great pride in being a local company, one that has been able to go onto the world stage, take a punch, and return as champions. We believe in our clients more so than can be imaginedand our employees are just as important for us as our clients. They are the heart and spark of our company. They are the ones who are able to meet the business expectations of our clients beyond their prospects. This is no easy task but rather a recipe of belief + shared vision + intent + knowledge + risk that equals to a more energetic, experienced, adaptive company. The good news is we are always looking for the next Mark Zuckerberg. We are an innovative company of the energy sector that offers great perspective for the future if you are willing to learn and work hard.

www.MET.com

Uber vows to get over legal woes Drivers for the sharing economy taxi service face big fines for allegedly operating without proper licenses and/or avoiding taxes, but the San Francisco−based firm insists it runs a legitimate business.

CHRISTIAN KESZTHELYI

Despite a series of stings by the Hungarian tax authorities (NAV), all of which allegedly turned up violations, the San Francisco−based ridesharing service Uber says it is legal and will continue operating here.

“Uber is fully compliant with all tax requirements in Hungary and is proud to be investing in the Hungarian market,” Rob Khazzam, Uber’s international launcher for Europe, the Middle East and Africa, told the Budapest Business Journal. “We will stand by the drivers on the platform and support them as we assess the recent NAV report.

Meanwhile, we will continue to operate and provide people in Budapest with the same affordable, safe and efficient service they have enjoyed since our launch in November 2014.”

NAV sent out investigators posing as regular customers between May 11−23, and the tax authority reported finding irregularities for every single driver it investigated. The drivers can reportedly expect fines of up to HUF 200,000.

A relatively new firm, Uber lets customers order drivers through a mobile app. Customers preregister by phone with their bankcards, so the payment automatically goes from the bank account of the passenger to the bank account of the driver. The fare is determined based on GPS tracking for maximum accuracy.

As a true “sharing economy” style company, Uber allows its drivers to make some money from their own cars when they have time to pick up fares, though they don’t make as much as local cab drivers.

Uber advertises a base fare in Budapest of HUF 300 and a HUF 130 per−kilometer fee, while the base fare for Budapest taxis was set at HUF 450 with a per−kilometer fee of HUF 280 as per a decree established in September 2013.

Investigation follows strike This competitive advantage apparently inspired a strike by registered drivers working for traditional taxi companies. Following the mid−March strike, Hungary’s National Economy Minister Mihály Varga said he ordered NAV to launch scrutiny of Uber drivers in Hungary.

Varga added that the “situation can’t remain like this”, claiming that Uber offers taxi services in Hungary without paying the necessary taxes, and drivers are chiefly working in connection with a firm in the Netherlands. Varga added that these drivers offer services, but lack the professional registration needed to offer such services.

Rob Khazzam: Stands by drivers.

The violations alleged by NAV’s May investigations included drivers having no tax numbers and giving no receipt after the ride was completed. NAV also reported that cars had no taximeters, drivers provided no invoice of the payment, and the drivers did not have taxi licenses.

The whole point of Uber is that the drivers don’t need to be professionals and that they can afford to work cheaply.

But according to Khazzam, the system can still comply with Hungarian laws.

Indeed, Uber drivers generally give paper receipts if requested to do so, and their transactions are recorded in their bank accounts, so they could presumably be tracked for tax purposes.

The lack of professional chauffer certification for drivers might be a more difficult problem for the company to solve, but Uber is open to discussions with Hungarian stakeholders “about a regulatory framework that would strengthen the benefits that ridesharing services such as Uber can bring to Budapest,” according to Khazzam.

“It is important to remember that services such as uberX, and the sharing economy more generally, are empowering citizens across Europe with new and flexible economic opportunities,” he added.

“All stakeholders, at the local, national, public and private level, should cooperate to ensure these services are regulated and also allowed to develop for the benefit of our cities and citizens.”

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News 07

Budapest Business Journal | June 05 – June 18, 2015

Bill could outlaw ad agencies The industry is in an uproar over changes that it says could put thousands out of work by July 1.

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Hospitality Summit in Budapest Leaders in Hospitality CEE & CIS once again promoting regional collaboration for top hoteliers

CHRISTIAN KESZTHELYI

The Hungarian advertising and marketing sector was sent into shock by a bill proposal that could make the operation of advertising agencies illegal.

The bill proposed on May 20 by the Hungarian Government, and which could be passed as early as June 6, would restrict advertising agencies from establishing contractual relationships with media outlets and acting on behalf of firms who want to advertise. Sector players say that, if the bill were passed, it would put an end to the operation of advertising agencies, as sales activities on behalf of firms would become illegal.

The government reportedly argued that bonuses, currently received by ad agencies for mediating, and the agencies’ mediating role between the clients and media outlets, have a distorting effect on the whole market, therefore “middle men” ought to be “cut out” from the system.

Though there is no exact data on how many people work in the sector, market players claim that thousands of people would lose their jobs chiefly in the SME sector and would be forced to find work outside their expertise, as the bill would eliminate all sales operations of advertising agencies, leaving no jobs for salespeople to opt for.

The Budapest Business Journal contacted the Prime Minister’s Office to ask its point of view on this, but no answer was received. Market representatives did say that they have initiated negotiations with the government over the issue, but did not want to comment further.

According to several experts, what makes the whole situation even more worrisome is that the bill proposal would take effect 15 days after submission, or

by July 1 at the latest, leaving no room for the agencies to adjust. Advertising agencies mostly sign annual contracts with clients, and if the bill is submitted and takes effect by the end of June, the current contracts would need to be cancelled, for which there is no best practices worked out.

Legal questions “It is not clear from the proposed bill whether sales houses will be allowed to operate,” the Association of Communication Agencies in Hungary (MAKSZ) said in a public statement on June 1. “In our view, until the outcome of this government’s law proposal is clear, one cannot responsibly provide prices on tenders or guarantee media costs, or propose agency remuneration offers, as the quantity of work payload and the tasks cannot be foretold, nor can one differ from fixed prices if the bill really is going to be introduced,” the statement adds. MAKSZ refers to the proposal as a “thoroughly ill−considered bill, which has a severely negative impact on the work of the media agencies, on our clients and our cooperation with our media partners”.

Market players claim that the government restricting their ability of

Bálint Bassola: ‘Unnecessary interference’.

A statement from the association of ad agencies said the “ill-considered bill, has a severely negative impact on the work of the media agencies, on our clients and our cooperation with our media partners.” establishing contractual relationship with media outlets freely is unlawful and might collide with European Union regulations; however, the case is not as black and white as it might seem. “If it turns out that these ‘mediators’, as the bill proposal calls them, are owned by foreign companies in the majority, and the bill if approved puts Hungarian companies into an advantageous position, then this might be against EU law and the European Union might thus launch investigations over the bill,” Bálint Bassola, attorney with Jalsovszky Law Firm, told the BBJ. “However, because at the first glimpse the proposal seems to regulate the whole sector, this is less likely to happen,” the attorney noted.

Addressing the restriction of establishing a contractual relationship, Bassola said it would be “essential to see what is the reason that overrides the freedom of contracting. If the reason is not significant enough to make this change, then it could violate the [Hungarian] constitution.”

In terms of competition Bassola said: “It seems that this regulation is an unnecessary interference by the state with competition and it is questionable whether it is justifiable that the state is willing to interfere with free competition in Hungary to this extent.”

On May 28th and 29th, in Budapest, Hungary at the Danubius Flamenco Hotel, International Business Council brought together the top hoteliers from across Central Eastern Europe and the CIS for the Leaders in Hospitality CEE & CIS Summit. With CEE expanding its tourism and hospitality industry sectors, it was an important platform for the region’s hoteliers to discuss best practices and share their expertise.

The tourism industry is the highest contributing factor to the region’s GDP economic development. International Business Council strongly believes that it is important for hoteliers to meet and discuss these pressing issues not only to share and collaborate but to expand business opportunities and maximize profitability. The more successful this region is at promoting tourism the more successful the region’s hoteliers will be.

CEE & CIS have struggled to compete with western Europe in the tourism industry and with political and economical issues this region hoteliers finds it difficult to prosper in such circumstances. To gather the region’s experts together once a year to discuss the trends, issues and benefits of CEE & CIS creates an important platform for these hoteliers to better understand and collaborate. IBC continues to change the location of the event to expose top hotel chains as well as smaller and independent hotels to all the potential the region has to offer.

Some of the hot topics discussed at the summit were The Forecast of the CEE & CIS Hospitality Sector Development, Market Gaps and New Segments and Unveiling the Investment and Development Opportunities in the Region.

There was a special segment for General Managers and a keynote presentation on E-Commerce by Attila Hegedus, Partner and Managing Director or BDO Hungary

Hotel and Real Estate Services Ltd. He stated “Tomorrow’s guests are seeking experience and bearing in mind that our competition is only 1 click away, hoteliers with or without external assistance will have to be always on top of the latest e-commerce trends. Obviously we cannot have full possession of the knowledge at all times but with efficiently spent funds on online and offline marketing, measuring our activities and participating at trainings we can have sustained success, happy customers and increase in revenues and profitability.”

The two-day event provided attendees with the opportunity to participate in interactive panel discussions as well as numerous networking sessions. Experts from Hyatt, Hilton, Starwood, Kempinski and Accor shared their experiences, both positive and negative, and provided insight on the region. Christopher Cox the Regional Director of Central Eastern Europe for Preferred Hotels and Resorts said “I think such an event is very important for the hospitality industry in the region which is definitely a very important region with unlimited potential.”

With Oliver Fodor, Head of Tourism Administration and Catering Unit in the Deputy State Secretariat for Tourism and Ministry for National Economy of Hungary and Dr. Akos Niklai the President of the Hungarian Hotel and Restaurant Association and V.P. HOTREC, this event, once again, provided attendees with insight on a wide range of important issues in the region’s hospitality industry.

http://www.hotelcee.com/en/ http://www.intlbc.com/en/ Marketing and Communications Manager: LaurenJ@Intlbc.com

BBJ

2Business GE factory hits LED milestone General Electric reached a manufacturing milestone at its plant in Nagykanizsa, western Hungary, producing 250,000 LED lights since the launch of production two years ago, the plantʼs director István Magyar said on June 2, according to news agency MTI. GE began producing LEDs at the plant after a European Union directive phased out conventional, low−efficiency lighting. The current headcount at the Nagykanizsa plant is between 1,800 and 2,200.

COMPANY NEWS

been designed for users to execute great things using the OS,” Terry Myerson, Microsoft’s executive vice president of operating systems, said. “Windows 10 is our first OS that realizes our concept of a more personalized user experience than ever,” the executive added. Reservations for the free upgrade can be made on the company’s website.

Prinzhorn to erect HUF 45 bln biomass power plant in Hungary EDF Démász again taps profit reserves to pay dividend French-owned regional electricity distributor EDF Démász dipped into profit reserves to pay a dividend this year, Hungarian daily Népszabadság reported on June 2 citing recently updated public records. Owners approved payment of a HUF 6.3 billion dividend on last year’s earnings of HUF 2.8 bln, making up for the difference from profit reserves, the paper said. The paper added that the company did the same last year, when it paid an HUF 11.3 bln dividend on after-tax profit of HUF 1.7 bln.

OTP, Richter treasury share stocks up marginally in May The treasury share stock of blue chips OTP Bank and drugmaker Gedeon Richter were up slightly in May compared to a month earlier, while those of oil and gas company MOL and Magyar Telekom remained unchanged, disclosures published by the issuers revealed, according to Hungarian news agency MTI.

OTP had 3,856,549 treasury shares at the end of May, up from 3,807,235 a month earlier. The shares accounted for 1.37% of registered capital. Richter’s treasury share stock rose to 1,377,481 or 0.7% of registered capital from 1,375,990. MOL had 1,542,147 treasury shares, or 1.48% of registered capital, and Magyar Telekom had 390,862 treasury shares, 0.04% of registered capital, at the end of May, both the same as at the end of April.

Windows 10 available for free from July 29 New operating system Windows 10 will become available free of charge in Hungary from July 29, in addition to 190 countries all over the world, Microsoft Hungary said on June 1 in a press release.

Users of Windows 7 and Windows 8.1 will be able to upgrade their versions free of charge, even if they use pirated software, Microsoft said earlier. As such, Microsoft expects hundreds of millions of people to take advantage of the Windows 10 operating system. “Windows 10 represents the new generation of Windows, which has

Austria’s Prinzhorn is currently building a HUF 45 billion biomass power plant at its paper factory in Dunaújváros, central Hungary, CEO Cord Prinzhorn said on May 29, according to state news agency MTI. The development was initiated following an assessment that energy costs at the plant needed to be reduced, said the CEO. In the last 20 years, the Prinzhorn group has invested €600 million in its three Hungarian units, which contribute to an annual output of HUF 129 bln, the group said. The company has a headcount of 1,260 in Hungary. Hamburger Hungária, the Dunaújváros subsidiary, produces 670,000 tons of corrugated cardboard a year using recycled paper.

NetIQ launches cloud manager software Software company NetIQ Novell SUSE Hungary launched NetIQ Cloud Manager 2.4, a new application that will facilitate the management of infrastructure services, the corporation announced on May 29. The new software supports every widely used virtualization technology including the VMware vSphere, Xen,

SUSE Linux Enterprise Server, Citrix XenServer and the Microsoft Hyper-V system. According to a press release, the company also launched the new NetIQ IdentityAccess Service 2.2 and NetIQ Account Management Service 2.2 software package. “By using the NetIQ Cloud Manager, private, public and hybrid clouds can be created rapidly and managed easily,” said Zsolt Hargitai, Business Development Manager of NetIQ Novell Hungary. According to Hargitai, Cloud Manager can be made available from any device for IT professionals.

Ericsson to open collaborative innovation space in Budapest Sweden’s Ericsson has announced the opening of a collaborative workspace at its research and development base in Budapest. The “Ericsson Garage” will offer “representatives from operators, academia, start-up companies and players from other industries as well as local communities” a place to innovate, Ericsson said. The garage will focus on cloud computing and virtualization at the start. Gábor Peceli, rector of Budapest University of Technology and Economics, which has cooperated with Ericsson for more than 23 years, said the garage would take their joint activities “to the next level”.

MKIK: Business confidence improves in 2015 Q1 A gauge of SME confidence by the Economy and Business Research Institute of the Hungarian Chamber of

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2 Business

Budapest Business Journal | June 05 – June 18, 2015

that teaches kids the principles of coding with custom-built visual programming language. With the usage of an “intuitive, creative and colorful” visual coding app, users can code a toy robot. Developers say that Codie is “a creative tool, a companion that augments other toys and games”.

The company was able to raise $82,000 for its project on the crowdfunding site IndieGoGo. Currently eight people work in Codie’s development team.

Waberer’s inaugurates HUF 600 mln retreat

LogMeIn wins Genius Loci Award

Hungarian road haulage company Waberer’s International inaugurated a HUF 600 million corporate retreat in Balatonvilágos on the shores of Lake Balaton on May 28, Hungarian news agency MTI reported. Waberer’s is planning to invest an additional HUF 1.5 billion at the 100-room retreat over the next two years.

Spar Magyarország opens HUF 317 mln unit in Budapest Retailer Spar Magyarország opened a HUF 317 million unit on Váci út 34 in Budapest, with a total area of 500 sqm, the company said in a press release. Spar said in a statement that the company would focus on expanding its franchise network in the country this year, in line with plans announced earlier. “The company has invested more than €1 billion in the past 24 years in Hungary, with investments of €55 mln only last year,” Spar CEO Erwin Schmuck said at the opening ceremony. The CEO noted that last year’s investments created approximately 800 jobs in the country. Spar is committed to further expansion despite the “changed economic environment in the country” the CEO noted, referring to the increased oversight fee and changes in consumer behavior following the Sunday closures.

Richter’s uterine fibroid drug OK’d for long-term use Gedeon Richter announced on May 28 that European Commission officials had approved its Esmya drug for long-term management of uterine fibroids. The drug had already been approved for preoperative treatment of symptoms of the disease. According to Richter, the approval came after several levels of successful clinical trials. “The present extension of indication adding the intermittent treatment courses of Esmya provides an opportunity to women to benefit from long-term medical management of uterine fibroids and to potentially avoid surgery,” a press release said. “Uterine fibroids are the most common benign, solid tumors of the female genital tract, affecting between 20 and 40% of women of reproductive age.”

Gedeon Richter is Hungary’s leading drug company and a blue chip on the Budapest Stock Exchange, with a reported market capitalization of €2.1 billion in 2014. The company boasts the largest R&D unit in Central and Eastern Europe.

Codie named most promising startup Hungary’s Codie was named the most promising startup at this year’s Hungarian Innovation TechShow (HITS), event organizers told Hungarian news agency MTI. Codie is a tiny wooden robot

Hungarian startup LogMeln was awarded the Genius Loci Award for its Micro Grant program which supports IT and mathematics education, along with helping strengthen the future labor market, having distributed altogether $30,000, the company said on May 26 in a press release. “A few years ago we realized that we need to do something for the young geniuses; however, we did not want to carry out empty CSR activity, so we were looking for something that matched our portfolio and helped for real,” Michael Zwecker, director of LogMeIn user assistance said. “We put special emphasis on educating the youth,” he added. Matematika Összeköt Egyesület, a Hungarian NGO specializing in the organization of math competitions, was awarded HUF 600,000 to popularize mathematics education among children, involving approximately 5,000-6,000 children. “The work of our hundreds of volunteers was aided by LogMeIn, and we are thankful for that,” association chairman Tamás László Balogh said.

CEO of MOL assesses the government

Photo: András Hajnal

Commerce and Industry (MKIK) rose to a record 24 points in April, up from 19 points in January. The index rose on improved expectations, mirrored by better assessments of investment activity, use of capacity, business position and headcount.

Production in the last six months was the only category where sentiment worsened.

The measure of SMEs’ uncertainty grew by four points to 39, reflecting the uneven nature of economic recovery.

MOL Group CEO and chairman Zsolt Hernádi speaking to AmCham.

ROBIN MARSHALL

Budapest Airport offering retail space Budapest Ferenc Liszt Internatioanl Airport has room for six stores, with a total space of 600 sqm, in the airport’s SkyCourt building, a mostly duty-freezone, the airport announced in a press release on May 22. The stores currently in those locations had five-year contracts with the airport, and those contracts are set to expire, the release said. The airport primarily expects applicants who are planning to offer watches, jewelry, fashion goods, travel products, newspapers, magazines and books, the press release added. Winners of the tenders would reportedly be able to operate the stores for five years. “As growth in annual passenger numbers has exceeded 10% [a year-on-year rise of 10.8%, reaching 840,000 in April] and commercial income has increased accordingly, we believe that the time has come to get potential partners involved,” Kam Jandu, chief commercial officer at Budapest Airport said. According to Jandu, the store locations on offer are located in an area that can generate “high income”.

Wizz Air signs leasing contract with ALC Hungary’s low-cost airline Wizz Air has signed a leasing contract for an Airbus A320 with Air Lease Corporation (ALC); the plane is expected to arrive in July as the 63rd A320 in the airline’s fleet, Wizz Air said in a press release on May 20. “We are really happy about this new connection with ALC, not only because of its reputation and portfolio, but also because the company’s founder Steven F. Udvar-Hazy originates from Budapest,” Wizz Air CEO József Váradi said.

09

Business people should leave politics to the politicians, and concentrate on what they do best. Change what you can change, and move past that which you cannot: That was the crux of the argument put forward

by Zsolt Hernádi, chairman and CEO of MOL Group when he spoke at an AmCham Business Forum on Tuesday (June 2).

Perhaps surprisingly, Hernádi, head of what is by far the biggest company in Hungary, and according to the Coface CEE Top 500 the second biggest in the region, was addressing AmCham for the first time. But rather than talking up MOL, he preferred instead to analyze Hungary.

He noted with a laugh: “I have spent most of my time in Hungary in the past one and a half years.” The joke needed no further explanation for this audience, but referenced his inability to travel since Interpol put an international arrest warrant out for him on bribery charges at the request of the Croatian government.

Hernádi denies any wrongdoing, and Hungary’s state prosecutors have refused to extradite him, citing “national interests”.

The MOL boss dealt first with the negative news. “We have to focus on demographics: In most cases quality is more important than quantity, this is one of the few exceptions.

Hungary has the worst demographics in the region. The convergence, unfortunately, is to us.” He also attacked the size of the state – of Hungary’s neighbors, only Austria is bigger in terms of public spending – and most importantly its efficacy. Sectoral taxes, he argued, did the public image of Hungary far more harm than the “good” they contributed to state coffers. Education was another concern. “We spend relatively little on primary education,” he said. As a result, he added, Hungary’s position in the PISA

table – the Program for International Student Assessment, an international survey that evaluates education systems worldwide by testing the skills and knowledge of 15−year− old students – is getting worse compared to its regional peers.

And, of course, there were the continual complaints about a lack of predictability.

But that, Hernádi argued, belonged to the sphere of politics. Businessmen could complain, perhaps justifiably, but that was unlikely to change as long as the government could argue it was giving the people what they wanted in lower utility bills, for example. “We probably have to accept we cannot change how politics works. If the state wants it, you cannot change it,” he warned.

Just different On the plus side, the budget deficit has been maintained below the 3% threshold, there is good growth at 3.6% of GDP in 2014, low interest rates, a relatively good exchange rate at around 300 HUF to the EUR, as well as a positive current account balance. “We have to be proud: 3.6 is a really big achievement.”

These figures would seem to point to the success of what the Fidesz government has long championed as its “unorthodox” policies. “Unorthodoxy is not bad by definition; it is just different.” But that doesn’t always mean it is the right answer, he said. “Just take the energy sector alone. From 2010−12 35 times they [the government] changed the regulations. How can I plan? Was it unorthodox? Absolutely.

Did they have other choices? Yes, they did. That was a bad decision.[.‥] In some other cases I can say ‘Yes, they did it well’.

Unorthodoxy itself is not black and white.

Sometimes you have no other choice.”

10

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2 Business

Budapest Business Journal | June 05 – June 18, 2015

REAL ESTATE NEWS Latest four-star opens in heart of city Prestige Hotel Budapest joins the capital’s flourishing hotel market, which saw both occupancy and room rates improve last year.

GARY MORRELL

The latest edition to the Budapest hotel market, the 85−room Prestige Hotel Budapest in Vigyázó utca in the central fifth district has welcomed its first guests.

The design hotel, owned by the Jordanian−born Mazen Al Ramahi, was planned and built by the same group who worked on the Boutique Hotel Budapest in Só utca and the Continental Hotel Budapest in Dohány utca, also owned by Al Ramahi.

He describes the hotel as: “A great combination of modernity, classic old− fashioned elegance and the latest technology.” The hotel already has a four− star ranking and is awaiting a possible four−star Superior accreditation from the Hungarian Hotel Association.

“The historic facade of the gorgeous building in Vigyázó Ferenc út, designed

by József Hild, has been meticulously restored into its former beauty. The building has been restored in such a way that the internal structure is intact, allowing all 85 rooms to open to the inner circular gallery, which is a six−story high atrium. The idea was to keep the classic character of the building by preserving the upper−class elegancey from the most beautiful time of the Monarchy,” said the hotel operator.

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The new Costes Downtown restaurant, above. At top right and right are images from the Prestige Hotel Budapest.

The hotel offers standard, deluxe and executive rooms and suites overlooking the inner courtyard. Some suites extend to 50 sqm.

Home to new Costes The hotel includes the 60−seat Costes Downtown restaurant, the newest outlet of the Costes brand owned and operated

by Sziget co−founder Károly Gerendai and Miguel Rocha Vieira. The original Costes restaurant is located on Ráday utca and

was the first restaurant in Budapest to be awarded the Michelin star.

Another feature is a wine cellar adjacent to the 28−vehicle underground parking area that will provide the possibility for wine tasting events. In addition there will be a relaxation room with fitness facilities, sauna and Jacuzzi, and a café lounge.

The total cost of the Prestige Hotel redevelopment was €10 million, funded by the owner and a loan from OTP Bank.

According to Al Ramahi, occupancy at Prestige Hotel since opening has been 90%.

The longer−term aim of the management is at least 80% occupancy.

The Budapest hotel market performed outstandingly last year as the average hotel occupancy rate in the capital rose to 75%, and the average room price was 7% higher than in the previous period according to CBRE. The company put Budapest hotel stock at 2,700 three−star rooms, 7,300 four− star rooms, and 1,500 five−star rooms, in addition to 7,400 non−classified rooms as of the beginning of the year.

Al Ramahi said he plans to keep the Prestige Hotel in his three−hotel Budapest portfolio and has expressed a desire to expand it further by developing another Budapest hotel with what he defines as a unique design.

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Budapest Business Journal | June 05 – June 18, 2015

REAL ESTATE NEWS

2

Business 11

JLL says market sentiment is improving With €110 million in the first quarter, investment volume in Hungary is impressive, but the neighbors are doing even better.

GARY MORRELL

Investment transaction volume reached €110 million for the first quarter of this year, according to international real estate specialist JLL. “The general market sentiment is improving and market fundamentals are strengthening quickly, especially in the office and industrial sectors,” said JLL in its latest research on the first quarter of the year.

Poland and Czech Republic remain the leading CEE investment destinations.

The company expects the average deal size in Hungary to increase and predicts an annual total investment volume of at least €750−800 mln for 2015. Total investment for 2014 was €580 mln. JLL sees investor appetite for Hungary increasing with improving macroeconomic indicators, real estate market fundamentals and attractive prices compared to Poland and Czech Republic.

“There are deals in the pipeline that will close in the next three−to−four months. Investors are in general waiting for the completion of arm’s length deals that will provide concrete guidance on pricing,” commented Ferenc Furulyás, managing director of JLL Hungary.

Transactions in the first quarter were completed across all major sectors. In an industrial deal, Prologis (through the Prologis Targeted Europe Logistics Fund) purchased the M1 Business Park Hungary from CA Immo and Union Investment. The now re−named Prologis Park Budapest M1 comprises five facilities of 69,000 sqm. Another local investor, Diofa REIM has purchased the 19,000 sqm Innove Business Park In the office sector, Erste Asset Management has completed the purchase of the second phase of the 20,000 sqm Vision Towers from Futureal; the Hungarian fund now owns the whole of the complex, having earlier acquired the northern wing of the center.

In the retail sector, the French retail investor Klepierre has purchased three regional shopping centers totaling 19,000 sqm from Indotek.

Czechs on a record pace Despite this positive outlook, however, Hungary still lags behind Czech Republic, where a massive €760 mln in transactions was recorded for the first quarter, representing a 330% year−on− year increase. A substantial part of this was taken up by the €570 mln acquisition of the Palladium shopping center in Prague by Germany’s Hannover Leasing from Union Investment. “The

Big deal: Vision Towers is now completely owned by Erste Asset Management.

MAJOR TRANSACTIONS IN HUNGARY IN Q1 ASSET CLASS

PROPERTY

SIZE (SQM)

SELLER

BUYER

Industrial

M1 Business Park

69,000

CA Immo

ProLogis

Office

Vision Tower South

9,075

Futureal

ERSTE RE Fund

Retail

Three countryside shopping centers

37,400

Klepierre

Indotek

Industrial

Innove Business Park

19,000

Altan Beton

Diófa REIM

SOURCE: JLL

Ferenc Furulyás, managing director of JLL Hungary. activity of investors and the weight of money attempting to force itself into the Czech real estate market is promising substantially increased volumes over the coming quarters and some predict, possibly, another record year in terms of transactional volume,” commented JLL research.

In the same time period, €448 mln of investment activity was recorded in Poland. Significantly, office investment in regional cities is expected to reach record levels for this year. For example, the Griffin Group acquired the Green Horizon office building in Lodz from Skanska for €65 mln.

Further south, the Romania investment market is showing signs of recovery.

JLL Romania expects investments of between €600 mln and €1 billion, based on a number of key office and industrial buildings that are expected to transact this year. “The weight of money and compression of yields in markets like Poland and Czech Republic have prompted more investors to look at Romania, which translates into the highest level of interest since 2008,” said JLL Romania.

Yields in Hungary are continuing to compress: office yields are put at 7.25%, retail at 7% and industrial at 9%. This provides a significant advantage on Czech Republic, where office yields stand

“Investors are in general waiting for the completion of arm’s length deals that will provide concrete guidance on pricing.” at 6% and retail and industrial at 5.25% and 7% respectively. Prime office yields for Poland are put at 6%, shopping centers at 5.5% and industrial at 7%.

There were no additions to the office market as the Budapest Research Forum put total Budapest office stock at 3.23 million sqm with vacancy falling for the fifth successive quarter to 15.7%. Net absorption almost doubled year−on−year to 13,000 sqm with rents remaining stable at €20 per sqm per month. JLL describe the volume of new Budapest office supply as “very limited” with less than 30,000 sqm predicted to be delivered this year.

However 2016 pipeline is forecast to reach the highest volume since 2010 with 90,000 sqm. Asking rents may also rise, although office space is extremely price sensitive.

Office vacancy expected to fall “Office vacancy could fall to 13−14% by the end of 2016; this would be below vacancy levels in Czech Republic and Poland,” said Rita Tuza, head of research at JLL Hungary. “With the very low pipeline and the number of pre−lets, office projects are close to 100% pre− leased before delivery. However

vacancy in class “B” assets looks set to rise as companies upgrade to class “A” offices. A possible option would be for building owners to upgrade.”

As a comparison with Prague, JLL estimate that 147,000 sqm of office space is under construction and due to deliver this year, although supply is predicted to fall to 29,000 sqm in 2016.

In Warsaw, more than 300,000 sqm of office space is under construction according to JLL Poland, where the company has been selected as the sole leasing agent for Warsaw Spire, the biggest office project in the country.

Developed by Ghelamco, the building includes a 49−story tower and two adjacent 15−story buildings, providing 100,000 sqm of office space.

Rents for Prague are put at €19.5/sqm/ month, while prime headline CBD rents stand at €24/sqm/month for Warsaw.

Vacancy for Warsaw office is put at 13%, with the figure 15% for Prague.

There were no warehouse completions in Budapest in the first quarter with total stock put at a little more than 1.8 million sqm. A fall in the vacancy rate was noted with a drop to 14.5%. However speculative development remains absent, although in Czech Republic the first fully speculative building since the crisis was delivered in Prologis Park Prague Airport and JLL expects the share of speculative development to gradually increase. Almost 400,000 sqm of space is under construction and due to be delivered in 2015.

A further brake on market activity is that office developers are reluctant to develop outside of the capital. This also extends to the industrial sector.

12

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2 Business

Budapest Business Journal | June 05 – June 18, 2015

Private care as a cure for health system One of the investors in a €40−50 million project to build a hospital that takes private patients talks about what he expects to achieve – and gain.

finalization. As soon as we are done with this, we will issue a tender for the construction work. Right now there is no delay for the hospital; we are running according to plan.

Q

Which diseases will be treated in the private hospital?

A: We have set the ambitious target to become the center of excellence for private healthcare in Hungary.

To achieve that, we will not neglect areas that are less profitable: Duna Medical Center’s hospital will be comprehensive, covering all major areas of medicine. This will be one of our main differentiating factors – in addition to excellent staff and state− of−the−art equipment.

ZSUZSA SZABÓ

The professionals involved in Hungary’s state healthcare, and the patients who avail themselves of it, frequently say the system is sick.

Finding funding for a quality state health system is a constant concern.

But for those who can afford private insurance, there is a wider range of possibilities. These possibilities are about to increase with the pending launch of the Duna Medical Center, comprised of a clinic and a main hospital on Soroksári út. The hospital will have a staff of 600 and will provide comprehensive health care according to the organizers. The One− Day Surgery Center is set to open this summer, with the full hospital due to follow next year. We spoke to Igor Iankovskyi, the Ukrainian−born backer who is partnering with healthcare investor Joseph Priel in the project.

Q

What is the projected return on investment in the long run?

A: As in most cases in healthcare, our fixed costs will be relatively high so this is definitely a long− term investment. We will not compromise on quality, on experts or on equipment for the sake of extreme profit. Of course, I am here to do business and I do expect significant returns later on.

Q

Q

You control the Diamond Sphere Group from Monte Carlo, with business interests including financial services, rail and water transport, agriculture and mining. Why invest in healthcare in Hungary?

A: I have had various other investments in the country so there has already been some good experience with those projects. When it comes to healthcare investment in particular, I see great potential in Hungary’s location and the expertise of its people. This meets the modern world’s needs for efficient, high quality private healthcare services.

This all adds up to an environment where I expect a private healthcare investment to thrive.

Q

The public healthcare system in the country is facing serious difficulties right now. Why, in your view, is this the right time to start a business in this field?

A: In a competitive business environment, when the time is right for an investment, it is already too late to step in and reap optimal benefits. In some aspects, private healthcare is still a challenging environment in Hungary; however, economic, demographic and business trends show that there is a good opportunity to invest long−term.

Q

Have you received financial support from the government?

A: We have not received any support from the Hungarian Government – either in the form of financial support or in tax relief.

Igor Iankovskyi: Bullish on health.

“When the time is right for an investment, it is already too late to step in and reap optimal benefits. In some aspects, private healthcare is still a challenging environment in Hungary, however, economic, demographic and business trends show that there is a good opportunity to invest long-term.”

Q

Some investors have expressed concerns about the business environment here, and the government’s unorthodox approach to economics.

Does this worry you?

A: I am a seasoned investor with a wide investment portfolio in multiple countries. I believe that every challenge can be dealt with. When it comes to my investments in Hungary and Duna Medical Center in particular, I am not concerned at all.

Q

How is the preparation work going at the first clinic?

A: The Ambulatory and One−Day Surgery Center is set to open in the summer. We have done a tremendous

job converting four floors of an existing office building and by now we have finished the major building works and are installing equipment and training our staff for the opening.

Q

I understand the main hospital, located on Soroksári út near the first clinic, is being built on a plot purchased from Sándor Demján’s TriGránit property firm. How is this project going? When do you expect the hospital to open and start taking patients?

A: The estimated budget of the entire project, with equipment included, is €40−50 million. This is a very complex undertaking: we are now going over the plans, which are at the stage of

Can you say something about your connections to Hungary and how you came to get into a partnership with Joseph Priel?

A: My family has been the owner of one of biggest chemical companies in Ukraine for many years and I established and managed the company that was responsible for supply and marketing of production. Back then we did business with several key partners in Hungary.

Two years ago some good friends who are doctors approached me. They told me about the lack of private health care facilities in Hungary and in Budapest, and that many good professionals are willing to work but don’t have opportunities for private practice in the right surroundings and with modern equipment. We went through research and statistics; we investigated the situation and based on this data I decided to invest.

By that time I was looking at several opportunities, one of which was that of Joseph Priel, together with another partner, Amir Nachumi.

Their offer was good and this is how this ambitious project, Duna Medical Center, started. Since then, there have been a lot of improvements.

Q

Do you have any thoughts on what would make a good investment these days? What is your next investment?

A: Of course healthcare represents a good opportunity: Life expectancy is increasing and people are becoming more health conscious. The other areas that I am keen to explore, or to broaden current activities in, are those related to environmentally friendly investments in food and energy – and IT remains a hot topic.

GRUPPO T.F.M. KFT. 1068 Budapest, Király u. 102.

1ST DISTRICT

2ND DISTRICT

2ND DISTRICT

2ND DISTRICT

2ND DISTRICT

2ND DISTRICT

141 SQM – 4 ROOMS + HALL, ATTILA STREET

83 SQM – 2 ROOMS, MARGIT CIRCUIT

95 SQM – 3 ROOMS, ÜRÖMI STREET

154 SQM – 4 ROOMS, HIDEGKÚTI STREET

283 SQM – 9 ROOMS, BOGNÁR STREET

140 SQM – 4 ROOMS, HERMAN OTTÓ STREET

Nice view over the Tabán Park, this very bright and spacious apartment in good condition has balcony and it is situated in a period building with elevator.

In a renovated building with elevator, this very sunny apartment has separate rooms and private gas heating. Close to the Mammut shopping mall.

In a Bauhaus style building, this sunny, spacious, street and garden facing, completely renovated apartment has separate rooms, balcony and air conditioning system.

In a new built building, this duplex, well divided apartment has open kitchen, separate rooms, 2 bathrooms, 60 sqm of terrace, 2 car garage and beautiful private garden.

This semi-detached house consists of 2 separate, two storey apartments with separate entrances, 2 terraces, 50 sqm of roof terrace, garage and private garden.

This very spacious, well divided apartment has 16 sqm of terrace, 150 sqm of private garden, parking space and it is situated in a small condominium, in a green area.

32.900.000 HUF

21.900.000 HUF

42.900.000 HUF

69.900.000 HUF

79.900.000 HUF

120.000.000 HUF

+36.1.201.0403

3RD DISTRICT

+36.1.201.0403

3RD DISTRICT

+36.1.336.1706

4TH DISTRICT

+36.1.376.6080

4TH DISTRICT

+36.1.376.6080

5TH DISTRICT

+36.1.336.1706

5TH DISTRICT

73 SQM – 2 ROOMS + HALL, SAN MARCO STREET

246 SQM – 6 ROOMS, CSILLAGHEGY

54 SQM – 2 ROOMS, SZÉKPATAK STREET

84 SQM – 4 ROOMS, NÁDASY KÁLMÁN STREET

84 SQM – 4 ROOMS, MOLNÁR STREET

43 SQM – 1 ROOM, KÁROLYI GARDEN

This sunny, street facing apartment has separate rooms, private gas heating, balcony and it is located in a green side street.

This three storey, completely renovated family house has 638 sqm of lot, two bathrooms, big terrace, balcony, air conditioning system, sauna and garage.

This street facing apartment in good condition has separate rooms, balcony and it is situated in a well maintained condominium with elevator.

Nice panorama over the garden suburb area, this sunny, well divided, high floor apartment has 4 separate rooms, balcony and it is situated in a building with elevator.

In the very heart of the city centre, this very spacious, street facing apartment has 3 separate bedrooms, 1 living room, 2 entrances and it is situated in a nice condominium with elevator.

Beautiful view over the fabulous Károlyi Garden, in a completely renovated building, this sunny apartment that needs renovation has private gas heating.

69.900.000 HUF

11.990.000 HUF

16.990.000 HUF

36.500.000 HUF

29.900.000 HUF

24.490.000 HUF

+36.1.430.1403

+36.1.430.1403

+36.1.782.7275

+36.1.782.7275

+36.70.222.5063

+36.70.222.5063

TWO APARTMENTS IN THE SAME BUILDING, ON THE SAME FLOOR, SIDE BY SIDE: 115 SQM – 4 ROOMS, SZINVA STREET

6TH DISTRICT

Close to the City Park, this very spacious and sunny, street facing apartment has separate rooms and 2 entrances.

7TH DISTRICT

25.700.000 HUF

87 SQM – 3 ROOMS, KIRÁLY STREET

91 SQM – 4 ROOMS, IZABELLA STREET

Nice view over the very green Lövölde Square, this high floor, sunny apartment in good condition is situated in a renovated period building with elevator.

Close to the nice Rózsák Square, this very sunny and spacious, street facing apartment in good condition has 2 entrances and it is situated in a period building with elevator.

29.900.000 HUF

25.700.000 HUF

+36.70.322.3697

8TH DISTRICT

+36.70.322.3697

9TH DISTRICT

+36.70.322.3697

106 SQM – 4 ROOMS, SZINVA STREET

7TH DISTRICT

10TH DISTRICT

This spacious, street facing apartment that needs renovation has separate rooms, private gas heating and 2 entrances.

27.500.000 HUF

+36.70.322.3697

10TH DISTRICT

7TH DISTRICT

7TH DISTRICT

73 SQM – 2,5 ROOMS, KAZINCZY STREET

100 SQM – 2 ROOMS, DOB STREET

Historical Jewish area. This renovated apartment is situated in a renovated period building in the newly renovated pedestrian Kazinczy Street with its bars and restaurants.

This new apartment is in the attic of a new development. Perfectly positioned in a quiet street next to the newly renovated pedestrian Kazinczy Street in the historical Jewish area.

34.900.000 HUF

46.900.000 HUF

+36.70.3156.087

11TH DISTRICT

+36.70.3156.087

11TH DISTRICT

76 SQM – 3 ROOMS, KŐFARAGÓ STREET

60 SQM – 2 ROOMS, RÁDAY STREET

168 SQM – 3 ROOMS, SZÁRAZ STREET

460 SQM – 8 ROOMS, LAVOTTA STREET

74 SQM – 3 ROOMS, BUDAFOKI STREET

130 SQM – 4 ROOMS, TORMA STREET

Next to the beautiful Gutenberg Square, this street facing, bright apartment in good condition benefits of private gas heating and it is situated in a nice period building.

In a completely renovated period building with elevator, this very quiet and bright apartment in good condition is located in a pedestrian area.

This very spacious and nice family house built on 615 sqm of lot and has big terrace, alarm system, garage and well kept garden with sprinkler system.

This two storey luxury house has 966 smq of lot, terrace, swimming pool in the beautiful garden and garage. There is a second building in the lot with 2 rooms, kitchen and bathroom.

This renovated, very quiet, garden facing apartment has 2 separate bedrooms, living room with open kitchen and it is situated in a period building with common garden and roof terrace.

This two storey family house that needs renovation has 650 sqm of lot, 2 bathrooms, nice veranda and parking space in the courtyard.

25.480.000 HUF

24.700.000 HUF

55.000.000 HUF

99.900.000 HUF

25.900.000 HUF

+36.70.414.7126

11TH DISTRICT

+36.70.414.7126

11TH DISTRICT

+36.70.268.5017

12TH DISTRICT

+36.70.268.5017

12TH DISTRICT

102 SQM – 3 ROOMS, BERCSÉNYI STREET

262 SQM – 8 ROOMS, SZENTPÉTERY STREET

94 SQM – 4 ROOMS, MÁRVÁNY STREET

173 SQM – 4 ROOMS, SZÉCHENYI MEMORY LANE

In a new, modern style building with elevator, this quiet and sunny, high floor apartment has 2 balconies, air conditioning system and 3 parking spaces.

In a quiet side street, this 2 storey family house in good condition built on 1296 sqm of lot has terrace, roof terrace, nice garden and parking space.

This well divided, sunny, high floor apartment has separate rooms, private gas heating and it is situated in a period building with elevator.

Breathtaking panorama over the Buda hills from the terrace and the 2 balconies, this duplex apartment has separate tower room with entrance from the staircase and 2 car garage.

89.900.000 HUF

155.500.000 HUF

+36.1.784.0707

13TH DISTRICT

+36.1.720.2433

13TH DISTRICT

32.900.000 HUF

+36.1.789.2846

15TH DISTRICT

105.000.000 HUF

+36.1.789.2846

74 SQM – 3 ROOMS, KRESZ GÉZA STREET

65 SQM – 3 ROOMS, RÁKOSPALOTA

87 SQM – 5 ROOMS, RÁKOSPALOTA

In a new building, this sunny apartment benefits of 30 sqm of private garden, living room with open kitchen and air conditioning system.

In a nice, renovated building, this garden facing apartment benefits of separate rooms, private gas heating and air conditioning system.

In a new building, this garden facing apartment has 2 balconies, private gas heating and parking space. Good connection to public transport.

This duplex, new built terraced house has 4 bedrooms, 1 living room, 2 bathrooms, private garden and parking space.

21.500.000 HUF

23.500.000 HUF

+36.70.414.7759

+36.70.414.7759

+36.70.398.8754

30.900.000 HUF

+36.1.720.2433

The Moment when you think of a sunny home Are you searching for apartment?

15TH DISTRICT

39 SQM – 2 ROOMS, ROKOLYA STREET

18.900.000 HUF

+36.1.784.0707

25.900.000 HUF

+36.70.398.8754

www.tecnocasa.hu CONTACT US: INFO@TECNOCASA.HU

EACH AGENCY INDEPENDENTLY OWNED AND OPERATED. • THESE OFFERS ARE VALID, TILL THE APARTMENTS ARE SOLD. • THESE INFORMATION DO NOT CONSTITUTE A CONTRACTUAL ELEMENT.

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BBJ

3Special Report

Automotive

Innovation fuels local carmakers

17

Room for Tata, or other OEMs

Pointing to a bright future

We explain why members of the automotive industry in Hungary are so upbeat, and look at the future potential for the sector.

Shown is the Audi plant in Győr.

18

16

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3

Budapest Business Journal | June 05 – June 18, 2015

Carmakers park production here The importance of Hungary’s mighty automotive sector continues to grow, as production rises and more firms locate in the country. Automakers are not only attracted by the low wages: A skilled local workforce and a high standard of quality also help.

DIANA SEFTON

“Our plant here is among the top three Suzuki plants worldwide, which means we outperform even some Japanese plants.”

Armin Krug of PwC.

István Pintér of Rába.

Auto production in Hungary Total number of units produced annually

Credited with providing more than a quarter of Hungary’s manufacturing output, and more than one−fifth of total exports, the auto making business is a vital part of the country’s economy, and the sector’s importance is growing.

Among the many attractions for carmakers, Hungary’s skilled labor force and the quality of production cannot be ignored.

The estimated production of 431,936 vehicles last year, boosted by the recent addition of Daimler (Mercedes−Benz), was more than double the production of 211,218 autos in 2011.

Four global original equipment manufacturers (OEMs) have production plants located here. In 2014, Daimler Mercedes−Benz produced 150,000 units at its plant in Kecskemet, Suzuki in Esztergom produced 146,704 units, Audi’s Győr plant rolled off 135,232 cars, and Opel made more than 350,000 engine components at its Szentgotthárd facilities. Autos produced in Hungary are exported worldwide with some of the main destination markets being Europe (Germany, Spain), North America (USA, Mexico), Latin America (Brazil) and Asia. About 15 of the top− 20 global Tier 1 & Tier 2 suppliers also have a presence in Hungary, including Bosch, Hankook, Continental, and ThyssenKrupp, among others.

In all, Hungary’s automotive production sector includes more than 700 firms, employing close to 135,000 people and generating more than €20 billion a year, according to the Hungarian Investment Promotion Agency.

One reason for the concentration of key automotive players in Hungary is the country’s proximity to Western Europe, which allows for strategic planning flexibility with OEM headquarters and a reasonable radius for logistic cost considerations. Hungary is a near−shore solution for these markets. Budapest is about a six−hour drive away from Munich, but wages here are about one third of what they are in Germany. PwC Partner Armin Krug notes that being close to Germany is a benefit: “It allows for short notice changes in engineering,

500000 Audi

431,936

Suzuki 400000

Mercedes

342,049 300000

313,223

292,027

212,769

208,541

211,218

2009

2010

2011

230,658

200000

100000

0 2007

2008

2012

2013

2014

Source: Hungarian Automotive Association (MAGE)

you have the engineers close by; it’s all about flexibility.” This means that OEMs can quickly adjust their portfolio for optimal production as conditions change and the companies can leverage invested capital and human resources with lower costs and better allocation. Many key suppliers are within a 300 km radius of OEM production facilities.

Among regional markets Hungary is distinguished by its production of small premium cars. These are quality compact models. Both Mercedes and Audi have launched small premium models out of Hungary, the B, GLA, CLA and A3 models for example, taking advantage of the low cost environment here, especially cheaper wages. The weak forint in Hungary also helps in terms of exports to eurozone economies.

Skills and quality matter While location and low cost conditions benefit Hungary’s positioning in the market, two other elements are repeatedly recognized as defining characteristics: Hungary’s skilled and highly educated

workforce, and the high level of quality output. Players comment that their facilities here in Hungary reach production and quality standards dictated by headquarters in much less time than it takes for plants located elsewhere.

The top−notch automotive industry players already present here contribute to Hungary’s good reputation in this industry. “This reputation attracts Tier 1 and Tier 2 suppliers as well and has wider benefits for the economy,” says Csaba Kilián, CEO of the Hungarian Automotive Industry Association (MAGE). All in all, MAGE estimates that more than 6,000 new jobs were created over two−to−three years by the establishment of Mercedes and Audi in the country. According to the association’s analysis, investment in Hungary on behalf of its member companies totaled more than €2 bln in 2014. MAGE aims to continue to attract more investment to Hungary and support companies’ growth by targeting labor issues, R&D and Innovation, development of the supplier industry and benchmarking over the upcoming years.

The goal is to make sure Hungary stays competitive with production locations in Asia and Latin America, as well as the neighbors: Some of the same characteristics that make Hungary attractive have also lured carmakers to Czech Republic, Poland, Romania, and Slovakia.

Kilián recalls Mercedes’ entry to Hungary, which was the country’s largest greenfield investment at that time. He was working with Hungary’s governmental agency and remembers that Hungary was not even being considered until the agency became aware of Mercedes’ plans from a small newspaper publication in Germany that reported another nearby country being very close to winning the bid.

Kilián later discovered that the story had come from one of the competing governments, counting their chickens before they had hatched.

Mercedes had reviewed more than 50 possible locations before narrowing its selection down to Poland and Romania, considering more than 45 indicators such as labor force, education levels, infrastructure, political environment, and each country’s economic background, among others.

Hungary was not in the running at the time, but the Hungarian government got to work and spent five months negotiating the deal.

“They were satisfied with the education level here,” says Kilián. The plant’s location is also convenient logistically to reach Western European markets and Kecskemét is well connected to universities and by roadways and close enough to Budapest to facilitate a supply of labor force.

Viktoria Ruska of Suzuki mentions that the skilled labor forces as well as the Hungarian state support were key factors in the OEM’s decision to establish here.

A decision that has paid off, as Ruska notes: “Our plant here is among the top three Suzuki plants worldwide, which means we outperform even some Japanese plants.”

István Pintér, chairman and CEO of Rába Automotive Holding, supplier of heavy duty truck axel components, points out that quality is an even more important aspect for small− and medium−sized enterprises in the local supply chain who need to be able to deliver consistent quality and provide reliable delivery to their client base. “This is your own challenge (as a supplier), because your clients do not care about your problems.” He adds that in addition to quality, on time delivery and price are also major considerations. Some 97% of Rába’s output is exported, as there are no major truck production operations located in Hungary.

WWW.BBJ.HU

17

3

Budapest Business Journal | June 05 – June 18, 2015

Hungarian ingenuity drives car business R&D and innovation support are helping turn Hungary into the scene for some exciting new developments in automotive technology.

DIANA SEFTON

Innovation is booming in Hungary, helping to drive the country’s automotive industry. At the same time, that sector’s ability to invest heavily in R&D supports innovation here. The result is a host of new ideas in the automobile world coming out of Hungary – as well as a tendency for evermore companies to locate their research facilities here.

One recent example of Hungarian ingenuity put to work in a car is Suzuki’s Vitara model which has been developed in Hungary from the proto production phase and will be produced here for export world−wide.

Viktória Ruska of Suzuki Communications notes that this is the result of the local plant maturing over its 24 years of operation.

“We grew up to this task to be able to launch a new product,” she says. The development of this model involved not only Japanese technology but also Hungarian engineers and a local work force that made contributions to design. According to company information, a lot of important innovation took place locally with Hungarian teams heavily involved, making suggestions to the parent company.

The Vitara model is distinguished by its ability to be personalized, with many options to add or remove features.

While the most important markets for its production continue to be the traditional European targets (Germany, Great Britain, France, Italy and Russia), Suzuki has started to expand its export and distribution partners over recent years to include Latin America, Asia and New Zealand. “During the crisis years we had to expand and not only focus on Europe but other markets as well,” comments Ruska. Suzuki currently makes its X−Cross model available in Mexico and the Vitara is expected to follow.

In anticipation of these two latest models, the company began reconstruction at its plant in Hungary one−and−a−half years ago in order to readjust production, technology and lay out. There have been several phases to the reconstruction, some of them on−going.

The new models are fully robotized with no manual welding; there are more than 700 robots in operation at the plant.

Approximately €400 million have been invested by Suzuki in the launch of these models, including technology, reconstruction and innovation expenses.

The X−Cross production also added 100 people to the labor force for a total of 3,100 employees; the company reports it is in heavy production at the moment.

Suzuki’s Vitara, in addition to product launches by Daimler and Audi, is expected to push light vehicle assembly volume in Hungary. PwC’s “Autofacts”

Marc Eckstein, GM of ThyssenKrupp Presta Hungary.

“We develop the electronic control here in Budapest, the brain of the unit.” expects total assembly volume to grow by 5.7%, exceeding 461,000 units in 2015.

PhDs design steering systems Automotive production is not the only realm benefitting from local innovation in Hungary. ThyssenKrupp, a leading global Tier 1 supplier, not only sources the hardware and software for its electronic steering system directly from Hungary to production plants around the world; the system itself was developed here. “We are very proud of this accomplishment in innovation here,” says Marc Eckstein, general manager of ThyssenKrupp Presta Hungary. The innovation behind its electronic steering system began with three Hungarian PhD students working on it 16 years ago. From there, the company saw potential in Hungary and began to build up its development center here.

Compared to a hydraulic system, which relies on a constant supply of energy, the electronic steering system uses fuel only when in use, saving on average three deciliters per 100 kilometers.

ThyssenKrupp’s clients for this system include Daimler and BMW, among others.

The Mercedes C Class already has the electronic steering system in use.

“We develop the electronic control here in Budapest, the brain of the

László Naszádos, department leader at ThyssenKrupp Presta Hungary.

unit,” says Eckstein. The systems are produced all over the world using the technology developed locally in Hungary.

“This development center is unique to Budapest within ThyssenKrupp,” adds László Naszádos, department leader at ThyssenKrupp Presta Hungary. The center employees 370 engineers, many with Masters and PhD degrees, and the company is considering expansion.

Both Eckstein and Naszádos recognize that the driverless car is the future in automotive innovation. ThyssenKrupp has an advanced development team working on the interface between cameras and sensors that capture external data, and the steering systems that need to react to this data input.

Bosch Hungary’s 1,200 engineers Another key player in the auto parts sector is Bosch, a company also recognized for its work on the driverless car. Thomas Beyer, regional director of automotive aftermarket at Bosch Hungary, notes that development of many driverless aspects is already underway in the automotive industry. Automated parking systems are already in use and the company plans to have an operational highway pilot system up and running in the next five years.

This will allow for nearly automated driving on the highway, with drivers in a monitoring role. Beyer believes that this will eliminate some driver error and boost safety. Bosch’s acquisition of ZF Lenksysteme earlier this year also points towards a focus on automated driving technologies. The company

is specialized in steering systems for highly automated cars.

Bosch is an important employer in the country, boasting 8,900 associates, 1,200 of whom were engineers, by 2013.

Bosch focuses on connectivity, linking innovation and knowledge from a variety of sectors in which it participates to advance in its automotive branch called Mobility Solutions. According to Beyer, the name of the division reflects a change in mindset: “It is not only about the car; we have to consider new products outside and beyond the car.” Beyer says Hungary has a good level of technological education and skill as well as creativity to be able to develop these solutions. As proof of this, Hungary is home to some of the company’s largest production facilities outside Germany.

Bosch prides itself on serving the automotive industry from a car’s production (by supplying OEMs) to its servicing and all the way through to its life cycle end.

In Hungary this involves servicing 70 – 80,000 parts in 3.5 million used vehicles.

The average age of a car in Hungary is 13 years, according to Beyer, which means the replenishment rate is low. Per household penetration is also low. In Germany, for example, families will have second and even third cars; in Hungary, many are restricted to just one car per household. “The potential in Hungary is great. And as these old cars are replaced with new cars, it will result in a major ecological impact as well as the many safety benefits you get with new cars. It is just a question of how and when purchasing power is spent in this direction. It will come, I just can’t say when.”

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Budapest Business Journal | June 05 – June 18, 2015

Automotive industry has room to grow Hungary is likely to attract more carmakers, and some think the best place for them is in the southern and eastern parts of the country.

DIANA SEFTON

Hungary serves as a manufacturing hub for the nearby European market as well as globally, with a specialization in small premium cars such as Mercedes’ B model and Audi’s A3. Supplying premium cars to meet demand in Asian and Latin American markets has helped to boost production in Hungary, with estimated revenue of more than €20 billion generating close to one tenth of the country’s GDP. With factors like low−cost labor and proximity to major markets still in play, production in Hungary is expected to increase steadily in the coming years.

Csaba Kilián, CEO of the Hungarian Automotive Industry Association (MAGE), sees the possibility of another one or two large investors entering the sector over the next two to five years.

According to some analysts, the best place for new investors might be in the east and south of the country, where there is a large, underutilized workforce.

Tata Motors has been rumored to be searching for a site to produce 100,000 units at a new Jaguar and Land Rover plant, and Hungary is said to be on the

The Bosch plant near Miskolc.

“The government should ensure that companies who want to innovate here face no obstacles in doing so.” short list, along with Slovakia. BMW is also rumored to be scouting for a location, although its entry here seems less likely considering the company’s recent investment in the U.K. If someone like Tata were to come to Hungary, it would be a boost to the supply chain, observers say. Given that 15 of the top−20 global Tier 1 and Tier 2 suppliers are already located here, it seems likely that supply growth would mean that existing players would expand production, increase investment, employ more people and perhaps shift some production from

export to local consumption, according to Armin Krug, a Partner at PwC Hungary.

In addition to potential new entrants, Kilián recognizes the possibility for expansion among existing players. He notes, for example, that Daimler purchased 440 hectares of land in Kecskemét, and only half of that is currently built upon.

This suggests the potential for future growth and expansion.

Possibilities in the east With Daimler in the center of the country, Suzuki in the north, Audi in the northwest and Opel on the western border, this leaves the eastern and southern regions with available infrastructure and work force to support large investments.

PwC’s Krug recalls Bosch’s early establishment near Miskolc, where unemployment was high. “It was the first mover towards the east and many wondered

what the underlying reason was and how it would cope with the lack of infrastructure.”

But now the company has a steady flow of labor force from nearby universities and construction of the M3 motorway has brought infrastructure east as well.

While the overall outlook is positive, industry players recognize a few challenges that Hungary may face in upcoming years. “Growth is currently limited by the workforce,” comments István Pintér, chairman and CEO of Rába Automotive Holding. German−style dual training education programs have been widely recognized as one solution to this issue, and many OEMs and suppliers already have systems in place, although the first graduates of these programs are only now coming in to the workplace. Many note that there are issues of labor scarcity in some regions of Hungary, as well as issues of labor mobility. Kilián says there are historical, cultural, and financial reasons behind this, for example the difference in housing prices in eastern Hungary and western Hungary, and the importance Hungarians place on owning their own home.

Overall, many see innovation as the key to long−term growth in the automotive industry. Kilián notes that Hungary has received EU funds specifically designated for R&D. “How well we use these funds in the next four to five years will set the direction of the industry’s economic growth,” he says.

Many feel that the government will play an important role in determining future growth opportunities, not only in terms of regulatory issues but also in promoting education programs and innovation in Hungary. “The government should ensure that companies who want to innovate here face no obstacles in doing so,” says Krug.

CEE countries compete for Jaguar Land Rover plant Analysts agree that the winner will be the country that offers the cheapest overall production environment.

ANDRÁS ZSÁMBOKI

The location of the new Jaguar Land Rover (JLR) factory in Central Europe is due to be announced in early June. Four towns are said to be on the shortlist including Szombathely, in western Hungary, Nitra in Slovakia, Stara Boleslav in Czech Republic, and Częstochowa in Poland.

“The Hungarian Ministry of Foreign Affairs and Trade is trying to do its best in order to get Hungary chosen,” announced Róbert Ésik, President of the Hungarian Investment Promotion Agency. But the competition is stiff.

The owner of JLR, Tata Motors, is expected to take advantage of its bargaining position as an investor and see who will give it the best deal. Originally, places like Turkey and Brazil were under consideration, but

the selection has reportedly been narrowed down to Central and Eastern Europe.

“Facilities used to be located to bring production close to the companies’ big sales markets. This investment, however is different,” said David Bailey, senior automotive expert at Aston Business School. “It’s about reducing costs.” Several experts interviewed by the Budapest Business Journal agree that cheap labor is the most important factor to look at when creating a plant, and the country that can offer the lowest production costs is likely to win the prize.

Apparently, geography is only a secondary consideration. People in Poland and Hungary do not buy Jaguar cars. On the other hand, Polish or Hungarian automotive sites are close enough to the German market.

Part of lowering costs is having a good supply chain. The most extensive network of automotive suppliers is based in Slovakia. “That relatively tiny country has enormous automotive production capability; Volkswagen, Peugeot and Kia have been present for more then ten years, and the parts manufactured locally make up more than 70% of the parts used,” Ésik said.

“Historically speaking, Fiat has had a very strong presence in Poland for almost a century, and a huge part of the automotive

Ratan Tata, owner of Tata Motors, with a Jaguar. industry in Poland is based on that, starting from skilled engineers to professional workers,” he added.

But Ésik also noted that Hungary has different comparative advantages.

“Hungary happens to have just the factories that make luxury cars, the ones

that Jaguar Land Rover is competing with,” he said. For this reason, Hungarian foreign trade diplomacy is built on the assumption that the same Hungarian suppliers that are capable of handling Mercedes’ and Audi’s needs will do just as well for Jaguar and Land Rover.

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Budapest Business Journal | June 05 – June 18, 2015

HIPA helps sector’s SMEs, researchers to cooperate Agency seeks to build a bridge between higher education and businesses.

LEVENTE HÖRÖMPÖLI-TÓTH

“Due to the strategic importance of the automotive sector in the Hungarian economy, universities and enterprises must work together actively in order to strengthen the position of SMEs in the supply chain of multinational manufacturers located in Hungary,” said Róbert Bödőcs, deputy−chairman for investment of the Hungarian Investment Promotion Agency (HIPA), at a recent roundtable discussion. The event marked an important step whereby HIPA joined the Cooperation Agreement on Automotive− related Higher Education and Research.

Initially the instrument in question had been signed by seven top players of higher education specializing in the car industry back in 2012, with the intention to coordinate training and relevant R&D activities.

HIPA was more than glad to back the initiative. Its core profile concerns forging relationships between big corporations operating in the country and their Hungarian suppliers. Now the agreement provides an excuse for the agency to serve as a bridge between such SMEs and

academia. A HIPA program called “TIER UP!” was launched this April in order to help share the knowledge accumulated in universities among interested companies.

A common problem is that SMEs simply don’t have the resources to run a research department, not to mention quality assurance labs, whereas higher education has a lot of unused brain capacity. On the other hand, professors and students badly need practical experience. At the moment, they are not encouraged to conduct research on a market basis and their projects tend to be theoretical, destined for a desk drawer.

The “TIER UP!” scheme could therefore be of mutual benefit for both parties since they get the chance to exchange information and best practices. For now, 18 Hungarian suppliers have been selected to participate in the program.

Human capital comes first There is a lot of work to be done. “SMEs need to understand why intellectual value must be added to the product on their part,” noted Dr. László Palkovics, deputy state secretary for the Ministry of Human Resources. Indeed, small− and medium− sized firms lag behind in innovation by European standards. More engineers with the right skills are desperately needed in order to catch up.

“Human capital is step one, money comes only second in the order,” Dr. Gábor Szabó,

On the panel of the recent HIPA roundtable are, from left, Dr. Péter Földesi, from Széchenyi István University, Lászlo Palkovics, state secretary responsible for higher education, and Róbert Bödöcs of HIPA. chairman of the Hungarian Innovation Association reminded. For now there are hardly any professionals who not only have the right knowledge, but are also creative enough to solve problems in the field. “Higher education academics need to also understand that it will not suffice to draft scientific studies. They need to be able to make exact calculations for specific projects,” Palkovics said.

The issue must be addressed as soon as possible since, under the current EU budget, unprecedented funds will be available for R&D. “The only question now is whether we can use them wisely and efficiently. This is a big responsibility,” Szabó noted.

The “TIER UP!” program and HIPA’s involvement in mediating between higher education and the automotive industry could give a decisive push to change things for the better.

“SMEs must keep on innovating in order to stay on or climb higher the supply pyramid of large manufacturers. Their standard tasks should include product development, optimizing production processes and developing tools for measurement methods and quality assurance. The human resources needed to complete those duties must also be taken care of,” Bödőcs said.

HIPA’s engagement in the agreement is meant to accelerate that positive process.

EXPERT OPINION

Porsche: Purveyor of automotive art supports artists Over the past decades, Porsche has become synonymous with perfect body design, excellent performance and efforts that have moved car manufacturing to the level of artistry. In this way, Porsche cars have inspired numerous pieces of art. But this is the first time in Hungary that brand representatives have become forerunners for an initiative offering a tender for young artists, centered around the countours of Porsche’s classic body shapes. The tender is offered through Porsche Centrum Budapest at the Hungarian University of Fine Arts, and puts a special emphasis on the eternity of artistic values. You can see the results in a June 5-18 exhibition at Porsche Centrum Budapest. tender were evaluated by a professional “Truly great magic occurs when an jury of six, but fans of modern art can artist creates something from scratch. also assess the final result. The most Something that had not existed before,” successful entries are portrayed on the József Szurcsik, deputy rector of the Facebook page of Porsche Centrum Hungarian University of Fine Arts and Munkácsy-award winning artist, says Budapest. about the joy of creating. He speaks The pieces are also available in an proudly about how his students find exhibition, running June 5-18 at it important to experience and live Porsche Centrum Budapest (1117, the beauty of creation, a process that artists was the classic design Porsche “If you experience something similar, it Szerémi út 63.). The location is the sixth becomes a personal experience, similar to Porsche Center in the world, who won Porsche is supporting with the current Classic cars.

Commenting on the joy of creation, Pál following the birth and growth of a child,” the global award of “Porsche Classic tender. Based on the art pieces already Nánási, one of Hungary’s best-known the late Ferdinand Alexander Porsche, Partner”. Porsche Centrum Budapest submitted for the tender, it can be said photographers, said that he is constantly the designer of the iconic model 911, said has the ability of servicing, refurbishing, that the imaginative powers of young seeking the moment that is worth being about the creation of Porsche model 911. reconstructing Porsche cars that not artists have delivered numerous diverse captured on a photo.

“When I become one You can hardly fi nd better evidence that been produced for the last ten years, ideas, and Porsche did not limit artists by the joy of creation does not exclusively with what I am doing, that is a sensational offering professional maintenance and giving them topics or means of creation.

The only guideline to inspire the young experience,” the photographer said. exist in Art pieces submitted for the original spare parts.

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Budapest Business Journal | June 05 – June 18, 2015

Team spirit helps Kecskemét crew set records Thanks to immense global demand for its quality vehicles, production at the Mercedes−Benz plant in Kecskemét is operating at record levels, but a German insistence on continuous improvement still prevails.

LEVENTE HÖRÖMPÖLI-TÓTH

Enter the Mercedes−Benz production facility in Kecskemét and, even before you are given an impeccable reception, you see a CLA Shooting Brake in the hallway. What is peculiar about it is that every employee of the plant has signed it, a normal procedure for the very first number of a model produced there.

The signatures on the car on display are also a manifestation of something that’s valued around here very much: team spirit.

“We can only grow together,” Thomas Geier, managing director of Mercedes−Benz Manufacturing Hungary Kft. says. “It is our quality team where our success is rooted,

and we are thankful to them that we were granted ‘The Most Attractive Employer of Hungary Award 2014’.”

Team spirit is further strengthened by Daimler’s legendary dual training program, in which dedicated future colleagues participate at both secondary and higher education levels. Idea management is also meant to boost employee engagement. Last year some 1,370 suggestion forms were filed out, from which more than 300 were implemented.

Feels like Germany This inclusive approach pays off, apparently, as output has reached never before seen highs. Production soared by more than one−third, to some 150,000 in 2014 from the year before, and net revenues peaked at HUF 2.8 billion, a large increase from HUF 2.1 bln in 2013. “In our youngest plant in the world, which has been in operation

for three years now, we have done an enormous job,” Geier stresses.

The plant’s capacity is at 30 cars per hour at the moment; the plan is to go up to 33 in the near future. In order to rev up production, last May a third work shift was introduced. Staff grew rapidly in parallel to meet demand, reaching nearly 4,000.

Tour the facility and it feels like you are in Germany: Everything is neat and orderly, and work in the production hall couldn’t be more organized. Workers look busy, but focused, with those in charge of adjusting the window elevation system seemingly under the most stress.

Eternal bondage in the production hall The climax of the production process is when the engine is attached to the chassis. The Germans call it “Hochzeit”, that is “wedding”, with reason: They refer to the moment that makes the two parts inseparable, and this is how they should remain till the end of time.

The product is also regarded as a “car” from this moment then on, which further raises its significance.

CLA coupés make up the bulk of production, together with the newly added CLA Shooting Brake; both models are made exclusively in Kecskemét.

A key part of the Mercedes approach is to pay attention to the well being of its employees, in order to ensure motivation and thus to live up to the expectations

reflected in the motto: “The best or nothing.”

Accordingly, the company takes CSR very seriously. As director of finance Ekkehard Phillip highlighted, one of its key efforts is aimed at educating children about how to behave in traffic. The Mobile Kids (MOKI) program embraced by parents and teachers alike has taught many the basic skills needed.

Ekkehard praises the company’s performance as well. “Only those that conduct business in a transparent manner can prevail in the long run,” he says. Geier further affirmed that the plant would never stop improving and it plans for the long run.

“Our aim is provide stable workplaces and continuous development,” he notes.

The magic formula of passion and discipline Executives at Daimler have every reason to look forward to the future. It was the most dynamically growing premium brand in the world last year, for the fourth time in a row.

The recipe for such success is simple, says director of sales, Ingo Fröhlich: “There’s a motto over the entrance of the changing room of the German national football team; it says ‘A good start requires passion, a good ending, in turn, requires discipline’.

The ‘Nationalelf’ won the World Cup with this attitude. Mercedes is its main sponsor and can wholeheartedly associate itself with that approach that is ultimately bound to lead to success.”

EXPERT OPINION

Continental grows along with local auto sector Dr. Róbert Keszte CEO CONTINENTAL AUTOMOTIVE HUNGARY KFT. How is the automotive industry doing in Hungary and what are your expectations for the next couple of years?

Business is currently increasing. The automotive industry is determined by long term supply contracts. So if no major market change is coming, then we have a good chance to maintain the high level of output.

Furthermore we know, that there will be lot of new facilities opening soon that will generate further growth. So overall the automotive industry looks promising.

When an automitive manufacturer is planning to invest in Hungary, what are the most important considerations?

• Workforce availability and workforce quality (knowledge, moral, loyality, drive, etc..)

• Long-term sustainable cost competitiveness (labour, energy, services, taxes, subventions) • A predictable and stable business environment

Regarding innovation, what are the latest examples of the innovations Hungarian automotive companies are part of?

Here we need to distinguish between multinational companies located in Hungary and local SMEs. The multinational companies in Hungary cover the entire field of the automotive industry, and that includes part of the latest and greatest innovations. Just to name three megatrends: safety (automated driving), sustainability (electrification of the cars) and comfort (infotainment, connected cars).

There are also some good examples, where local SMEs are able to enter this market, and offer innovative solutions. Maybe the best example is the navigation system, developed by a local company.

Why is it important for the Hungarian automotive industry to focus on innovations?

If we speak about product innovation, then it is obvious: the most innovative companies will survive in the long term. Car users demand the latest technology in their cars, even in the lower-price segment. If we are not able to offer products with the latest features, the competitors will get the orders. As for the majority of the Hungarian automotive industry, innovation involves the production processes taking place at

manufacturing sites. If we want to be cost- steering, brake and hybrid drive systems competitive with other Eastern European or that are all integrated in automated driving Asian locations, and we still want to offer solutions. fair compensation to our employees, there is no other way: we need to work smarter; What is the status of the development we need to innovate in our manufacturing process of the fully automated car? and administrative processes. And we need The development of these systems will soon allow the market to feature first to do it relentlessly, every day. partially, then from 2020 – according to How do industry players in Hungary our expectations – highly automated cars. participate in the development of fully From 2025 onwards, it is likely that we will be able to experience fully automated automated cars?

I can speak for our company, Continental. driving. Naturally these developments will We are working on this technology for first be installed in luxury vehicles, but midseveral decades. Safety is the main range cars will also be gradually equipped motivation for automated driving. First with the technology. we developed passive and active safety features for cars, like ABS, ESP, tempomats, How automated driving will change the lane departure warning systems and ACCs. mobility of the world?

Now these features are getting further If automated driving becomes reality, then developed, combined and integrated to a the driver of the car is granted free time, holistic system, which is more and more and can talk to the other passengers or use taking over tasks and decisions from the internet to read, watch TV or work. If the the driver. Due to their complexity, these car faces a situation where it cannot make systems are not developed in a single a clear decision, it alerts the driver in time location, butr rather in a global network and gives back the wheel for the time being. of engineering and production centers. New type HMIs, such as voice control, sign Nevertheless, many components are linked control and head-up displays (HUD), can to our Hungarian sites: in Veszprém we are also make the ride more comfortable for developing software solutions for intelligent the passengers (formerly known as drivers). brake and sensor systems and producing These features are all contributing to a sensors; in Budapest we are manufacturing comfortable, safe and enjoyable trip.

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Budapest Business Journal | June 05 – June 18, 2015

Mercedes plant chief expects growth Thomas Geier, CEO of Mercedes−Benz Manufacturing Hungary, talks about the exceptional growth of the company’s plant in Kecskemét and surveys the Hungarian car making business in general.

DIANA SEFTON

Q

How would you describe the performance of Mercedes− Benz Hungary, and the Hungarian automotive industry in general? What is your prognosis for the near future?

A: Mercedes−Benz Manufacturing Hungary Kft. closed its best ever fi nancial year in 2014. It has been a step forward, also in fi nancial terms, that our production numbers have increased from 109,000 to 150,000 cars per year. The net revenue increased from €2.1 billion to €2.8 bln. This growth – already affecting positively Hungary’s GDP – shows the trend in the Hungarian automotive production industry well.

And as I see it, there is still further potential to grow, when we take into account that our three−shift model was introduced only in June 2014.

It is also amazing that we can proudly introduce models that are made solely in Kecskemét, Hungary for the entire world.

Our CLA and CLA Shooting Brake are shipped to more than 180 countries.

That serves as testament to the success of the flourishing Hungarian automotive manufacturing industry.

The other promising trend for the Hungarian economy is that further new jobs have been created, with the number of positions growing from 3,200 to 4,000 last year.

We have every reason to expect a promising future in the Hungarian automotive production industry, as Daimler closed its best ever financial year and registered record sales, specifically in the segment of compact cars, which are also produced in Kecskemét.

Every fifth compact car went to the German market, while unit sales in USA more than doubled, and there was a 36% increase in China. It is promising that one of our major export markets, the United States (every third CLA produced in Hungary goes to a U.S. client, the biggest market for coupes), is expanding immensely.

Taking into account the above− mentioned positive sales trends, the automotive industry – including us – is projecting a growing volume of production. In line with this promising tendency, our number one priority is to fulfill our production program at the premium quality that is typical for Mercedes−Benz.

Therefore incentive programs for our employees are of utmost importance.

Our highly successful sport club for our employees has been steadily growing, offering free of charge swimming opportunities for our employees, along with fitness, football, handball and running training. This very much belongs to our growth strategy, as engaged employees are our number one asset, creating real value for our premium Mercedes−Benz brand.

Thomas Geier at left, and with a car in the factory he runs.

“We have every reason to expect a promising future in the Hungarian automotive production industry, as Daimler closed its best ever financial year and registered record sales, specifically in the segment of compact cars, which are also produced in Kecskemét.”

Q

What are the main challenges for OEMs operating in Hungary’s automotive industry right now?

A: I can speak only on behalf of Mercedes− Benz Manufacturing Hungary, and the main focus area for us here in Kecskemet is fulfilling client demand at top quality – to fulfill the world−class quality demand for Mercedes−Benz.

In order to be successful in this priority area, recruitment and relevant (mainly dual) education is crucial.

Q

When Mercedes−Benz decided to establish a presence in Hungary, what were its main considerations? What other locations or countries were considered?

A: A various number of different locations were considered when Daimler was searching for the best location for its plant in Europe. In Hungary alone, several towns were in competition. The education system, potential candidates and infrastructure were of utmost importance.

We are very glad that Kecskemét has been chosen as the town, and Hungary has proven to be an excellent partner in harnessing our long−term goals. That is why we also intend to make our ties with the region where we operate even closer, and also to help the local community and regional initiatives, including in the area of corporate social responsibility.

a production site, because every fifth compact car produced in Kecskemét is exported to Germany.

Q

What are some recent examples of innovation in the Hungarian automotive industry? How is Mercedes−Benz pursuing innovation in Hungary?

A: One of the latest innovative trends in the How would you define automotive industry in Hungary is related to logistics concepts – that there is a tendency Hungary’s relationship toward partnering. The other key focus with Germany in terms of area is ergonomic and flexible equipment, the automotive industry? Has this designed to create a better working relationship changed over the years?

A: Interestingly enough, Kecskemét environment and greater efficiency. We are and Rastatt (Germany) form a common very proud of our “Warenkorb”, which is production system, enabling us to adjust to actually a robotic device that always delivers market demands very flexibly. Moreover, the adequate spare parts to production and there is a plan for an internationalizing thus eliminates or minimizes the need for concept within Daimler that means career items to be stored on shelves. Our highly opportunities for Hungarian colleagues in successful “Ideen Management” program Germany too. We have encourages all of our been working closely employees to submit their ideas, which may contribute together with our sister “Hungary has been to better working processes factories in training a perfect choice for and increased efficiency programs right from provide cost− the beginning of our investment, and the and/or effective solutions. investment project, and know−how sharing will testament to this is Is Hungary be maintained as a tool our success story in for constantly improving well positioned performance. The new as an Kecskemét.“ Daimler factories in innovation hub for the other continents, in automotive industry?

A: Hungary has been a Mexico and China, actually provide the opportunity for perfect choice for investment, and the innovative new production techniques testament to this is our success story that were successfully implemented in in Kecskemét. Having said that, we are Hungary to be shared with our teams in currently pursuing innovation in regards other continents. to production processes; if we want to Even in today’s globalized world, extend this to other areas of innovation it makes sense to have production we should look more closely at further facilities near the markets where the developing the education system, in demand is. Our core markets are order to secure the best talents on Europe, the USA and China. In this an even bigger scale – in the area of sense, Hungary is a perfect choice as development as well.

Q

Q

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Budapest Business Journal | June 05 – June 18, 2015

Car sales creep back to old levels Sales have been sluggish since 2008, though they are finally beginning to grow.

Fleet sales are a big help, but shady dealers who illegally undercut the competition are an obstacle, experts say.

DIANA SEFTON

Hungary is not a huge consumer of cars, and for the last few years Hungarians have been buying even less than usual, but it does seem like the market is climbing back up.

Auto sales in Hungary are currently 44% of the level they were in 2008, when Hungarians purchased 153,000 cars, according to data compiled by PwC’s “Autofacts”. During the first years of the crisis, sales fell by more than half and continued to fall. This was in part due to an artificial bubble created before the crisis by cheap credit conditions, which allowed people to purchase cars even if they were not actually able to afford them.

In many of these cases, the banks ended up having to take the cars back.

According to Dr. Sándor Vérten, director of communications at Porsche Hungary, attracting private customers is a big challenge in this market, where 75−80% of auto sales go to fleet customers.

“Private customers are still cautious. They may be spending on their house perhaps, but not on cars. Our private customers disappeared with the credit,” he said.

While auto sales have not yet recovered, they have a least stopped declining, but the recovery has run into some challenges.

Car sellers say they have been hampered by informal sellers, who illegally avoid paying the 27% VAT tax on imported used cars and are therefore able to sell at a much lower rate, undercutting the market for new and legal used car sales.

The importation of used cars to Hungary has increased in recent years, observers say. Vérten of Porsche Hungary estimates a 20% increase in sales during the last year alone. Many second−hand cars come from Germany and Austria, where used cars are newer and of better quality than those coming from Hungary.

Individuals will often cross borders in order to bring back used cars found for sale online.

VAT scammers hurt market This kind of sale is not a big problem, according to those in the business. The real issue, they say, is that some dealers will set up a foreign license to avoid paying VAT on the cars they sell in Hungary, and then disappear afterwards, only to start up again under a new name.

This practice essentially gives them a 27% price advantage over legally operating

A leader in the market, Porsche Hungary sells VW, Audi, Seat, Skoda – and of course Porsche cars.

Auto sales

BEST SELLING CARS IN HUNGARY 2014 2015 Q1 % of 2014

In thousands of units

Opel

8,774

2,740

12%

Skoda

8,437

3,536

12%

VW

7,308

2,725

10%

Ford

7,043

2,391

10%

Suzuki

4,735

1,850

7%

Dacia

3,832

1,093

5%

Toyota

3,370

1,063

5%

Nissan

2,768

1,105

4%

Kia

2,627

1,014

4%

Renault

2,569

751

4%

Seat

2,501

779

3%

Audi

2,287

755

3%

Peugeot

1,888

617

3%

BMW

1,736

674

2%

Fiat

1,677

709

2%

Citroen

1,579

372

2%

Hyundai

1,442

412

2%

Mercedes

1,385

737

2%

Mazda

1,308

454

2%

Volvo

1,135

418

2%

Honda

1,068

333

1%

Mitsubishi

680

439

1%

200000

150000

153

90

100000 60 43

50000

44

56

58

68

99

108

74

0 2008

2009

2010

2011

2012

2013

2014

2015 2016 2017 2018 (2015-2018 P R O J E C T E D S A L E S)

Source: PwC Autofacts 2015 Q2 - Armin Krug, PwC Hungary Partner

used−car dealers in Hungary. According to Vérten, the Government is aware of this situation and has been responsive to lobbying by the Importers’ Association (MGE) to implement stricter controls.

MGE would like VAT to be paid by used car dealers when the car enters the country, and not when the car is sold. The association is also pushing for ownership records on used cars to track kilometers, service story and spare parts.

Additional efforts being made by the government to support and boost car sales include a tax refund for car leasing, which began four years ago and includes a quarterly refund of VAT, as well as many measures related to hybrid cars including permitting them to use bus lanes and free parking.

Three years ago sales figures stopped falling and since then Porsche Hungary has seen its sales grow 7% and then 10%, and is expecting another 10% growth this upcoming year. Vérten credits this comeback to fleet sales to customers, such as Coca Cola, the Postal Service and the Hungarian Police Force. Porsche has a strong standing in fleet sales in

Hungary where 60% of fleet sales come from four brands and Porsche has two of them (Skoda and VW). The company sites its parts center in Budaörs as one of its key strengths, with the ability to supply replacement parts in one day.

Another element of the sector’s slow recovery is the now reduced number of dealers on the market. Porsche recognizes that the strength of its dealership network is what gave the company a competitive advantage through the crisis years and continues to be a differentiator among its competitors. As sales slowed down throughout the country during the recession, many dealerships closed; Porsche, for example, went from 100 points of sale to 70, but others lost up to 80% of their dealers. On the other hand, Vérten feels that this elimination has made the remaining players stronger coming out of the crisis.

A leader in the market, Porsche brands (VW, Audi, Seat, Skoda, and, of course, Porsche) accounted for 29% of all new cars sold in Hungary in 2014. Other leading names include Opel with 12% and

Source: Hungarian Importers Association

Ford with 10%. With 25,402 units sold as of April 2015, the market is on track to surpass the 2014 passenger vehicle sales of 71,640 (numbers according to MGE). Vérten does not think that a return to 2008 sales levels is realistic just yet, but he does think sales of passenger vehicles could hit 80,000, with 12,000 in commercial vehicles this year.

According to numbers provided by PwC “Autofacts”, sales are projected to grow at an average rate of 12.6% per year over the next four years.

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Budapest Business Journal | June 05 – June 18, 2015

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Vitara: a partner for life

Magyar Suzuki’s latest model, the Vitara, has conquered the top of sales lists. The car’s merits are timeless: while it is a SUV, it is still light, and excels in fuel economy, agility and off-road performance.

M

agyar Suzuki Corporation’s SUV model, the all-new Vitara was launched globally in early March. The car shot to the top of sales lists in Hungary, and the demand is growing across the planet. The Vitara from Esztergom is the car with the highest Hungarian added value: Hungarian experts do not only participate in the

production – they were also involved in the new model’s development too: the prototype was made almost fully in Hungary.

Featuring the new-generation ALLGRIP 4WD technology, the new Vitara offers the driver four drive modes to optimize performance and safety. Improvements to the engine and

reduced weight have resulted in the Vitara’s Vitara an excellent partner for people who live surprisingly low fuel consumption and air- a colorful life. The Vitara is a true companion, pollution. showcasing the most state-of-the-art technological and electronic safety solutions Numerous test-drives since the car’s – the car scored five stars, the highest rating launch have supported the manufacturer’s in the NCAP safety test. A large choice of description of the Vitara as a notably agile car external and internal elements allows the with excellent performance in and outside of Vitara’s owners to personalize the car’s look the city – on and off the roads. This makes the to match their character.

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Budapest Business Journal | June 05 – June 18, 2015

Not just a factory: Mercedes sales strong here too

LEVENTE HÖRÖMPÖLI-TÓTH

Q

Growth has been truly impressive lately at Daimler: Global car sales soared by 10%, while the Hungarian subsidiary, Mercedes−Benz Manufacturing Hungary Kft., grew even more dynamically at 18.7%. As director of sales you must be very happy with the figures.

A: This performance is stunning, indeed. We have been growing in every segment massively. It has become standard that the brand breaks records every month and it’s wonderful being driven forward by the market. This comes down to the fact that we build great vehicles. They are not only at the highest technical level, but also are made in a way that creates an emotional bond with clients. Our chief designer, Gordon Wagener managed to come up with a style that adds a lot to the attractiveness of our brand.

Q

The C Class was chosen as “2015 World Car of the Year”; the S−Coupe was awarded “2015 World Luxury Car”,

ADVERTISEMENT

Q

This excellent performance is further shown by the fact that Hungary was “Market of the Month” for Mercedes globally both in January and February 2015.

Is there room for even more success?

A: Ten years ago nobody would have believed this could happen. This is simply an amazing performance by the Hungarian team, but yes, I certainly see more potential. We overtook rivals Audi, Volvo, and BMW in the domestic market and became number one in the premium segment. And work done in Kecskemét is gaining recognition everywhere now.

and the Mercedes−Benz–AMG GT got the prize “2015 World Performance Car”. Which model is the most popular around here?

A: Our sales in the car segment in Hungary totaled 1,884 and a two−figure growth is projected for next year. Our C model was launched in 2014 and it turned out to be a smash hit very quickly. It is bound to remain as such since it has set new standards in its class. So many innovations are jammed in it that used to be the privilege of the S class before. Our competitors lag far behind in this category. I would not like to be in their shoes.

Q

What factors influence sales in Hungary?

A: Luckily the purchase power of customers has improved a lot; this is clearly detectable. The automotive industry received support from the state, too, in the form of tax incentives.

The main factor though is that there is an absolute necessity to replace cars in Hungary due to the badly over−aged car pool. The vehicles of registered domestic Mercedes owners are 14 years old on average; their operation is simply no longer economical.

Q

America plays a key role in your strategy. Do you have a tailor−made growth plan for that market?

A: Traditionally, Germany has always been our biggest market, but last year the U.S. figures were neck−and−neck with those in our homeland, which means we did many things right. This is where the significance of cars made in Kecskemét comes into play. Compact cars aren’t the favorites of Americans.

But the CLA proved this assumption wrong. The sweeping demand for it shows that we hit the right chord. Among other awards, CLA was voted the most beautiful car of 2014 in America and was received in an incredibly positive manner by customers.

Q

Mercedes is known for spending large amounts of money on research and development. Now the numbers sound even more ambitious than before.

A: Our R&D budget should surpass €13 billion for the current and upcoming years, an unprecedented amount. Funds will be used to improve technology in the area of driverless vehicles, environmentally friendly operation and hybrid driving. The strategy also includes investing into assets that will help car making more efficient.

Q

Would you describe Hungary as an innovation hub?

Photo: Balázs Glódy / Playboy

Producing record figures month after month, Ingo Fröhlich, director of sales at Mercedes−Benz Manufacturing Hungary Kft. is confident that dynamism will remain and he’s proud of the performance of the Kecskemét team.

He speaks with the Budapest Business Journal about the sales story in Hungary.

Ingo Fröhlich: ‘We build great vehicles’.

A: Every country where our production is located is an innovation hub per definition, as we strive to innovate constantly. Of course, not everything will be invented here that is used later in other production centers of ours.

But Kecskemét plays a substantial role in this. Our global sales reached 1.65 million vehicles, and without considering Smart sales you can see that every tenth such item sold in the world came from Hungary, which is unbelievable.

Q

Your financing scheme can help in this regard.

A: During the crisis, fleet managers didn’t have the resources at their disposal to buy new cars. Now our ISP package includes four years of guarantee and service. It doesn’t make sense not to go for the new models.

Q

How do you evaluate the prospect of financing?

A: Those clients that have a Mercedes beyond the guarantee range should definitely consider investing in a brand−new one since it has only advantages. Interest rates are low, and if they can afford the monthly rates, which start at HUF 70,000 and a 30% down payment in the case of the A class, they should surely opt for preserving their cash flow. An app will be available soon for download with which the total cost of ownership can easily be calculated so that customers can see for themselves how competitive we are.

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Budapest Business Journal | June 05 – June 18, 2015

Electronics manufacturers

GE HUNGARY KFT.

2

SAMSUNG ELECTRONICS MAGYAR ZRT.

www.ge.com

1,524,107

FLEXTRONICS INTERNATIONAL KFT.

–

–

–

–

AUTOMOTIVE ELECTRONICS

CONSUMER ELECTRONICS

HOUSEHOLD ELECTRONICS

IT

TELECOM

ODM

OEM

EMS

SECTORS

–

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

2003

GE Infrastructure Hungary Holding Kft. (100) –

Joerg Bauer – –

1044 Budapest, Váci út 77.

(1) 237-6800 (1) 237-6801 vacigreens.reception@ ge.com

István Facskó Brendan Kim Mónika Nagy Törökné

1138 Budapest, Dunavirág utca 2.

(1) 453-1100 (1) 453-1103 –

704,593

»

–

–

–

1989

– Samsung Electronics Co. Ltd. (100)

462,406(1)

462,000(1)

1992

)OH[WURQLFV 6iUYiU Logistics Kft. (0.02) )OH[WURQLFV International GmbH (99.98)

János Lang, Tamás László Zsolt Rába –

8660 Tab, Munkás utca 28.

(84) 526-100 (84) 526-023 ]VROW UDED#Á H[WURQLFV FRP

2900 Komárom, Bánki Donát utca 1.

(34) 886-069 (34) 886-101 szekesfehervar@ HPHD IR[FRQQ FRP

www.samsung.com

3

»

ACTIVITY TYPE

YEAR ESTABLISHED

1

NET REVENUE FROM ELECTRONICS MANUFACTURING IN 2014 (HUF MLN)

COMPANY WEBSITE

TOTAL NET REVENUE (HUF MLN) IN 2014

RANK

Ranked by total net revenue

ZZZ Á H[WURQLFV FRP

PCE PARAGON SOLUTIONS KFT. 4

5

ZZZ IR[FRQQ FRP

JABIL CIRCUIT MAGYARORSZÁG KFT.

303,556

»

–

–

–

–

–

2007

– Honhai (100)

Péter Tálos – –

285,934(2)

»

–

–

–

–

–

2001

– Jabil Circuit Ltd. (2), Jabil &LUFXLW /X[HPERXUJ 6 D U O (49), Jabil Circuit Netherlands B.V. (49)

Viktor Krisztián Aczél – –

3580 Tiszaújváros, Huszár Andor út 1.

(49) 548-500 (49) 548-512 tis_jabil_info@jabil.com

2001

– Scintilla AG (100)

Ansgar Lengeling – –

3526 Miskolc, Robert Bosch park 1.

(46) 518-300 (46) 518-399 info@hu.bosch.com

1991

– (OHFWUROX[ $%

Sándor Gönczy József Babucs Zsolt Belényesi

5100 Jászberény, Fémnyomó utca 1.

(57) 415-999 (57) 415-812 jozsef.babucs@ HOHFWUROX[ KX

1990

– Continental Automotive Holdings Netherlands B.V (100)

Róbert Keszte, Henning Döll – –

8200 Veszprém, Házgyári út 6–8.

(88) 540-400, (1) 881-9500 (1) 881-9585 –

2001

– Enterprise International Holding B.V. (100)

László Ábrahám Ilona Rózsa Ágnes Vajnai-Vad

4031 Debrecen, Határ út 1/A (52) 515-400 (52) 515-414 attila.karai@ni.com

1990

– Delphi Packard Austria GmbH & CO KG (91), Delphi International 2SHUDWLRQV /X[HPERXUJ S.á r.l. (9)

Balázs Sebestyén, Róbert Tancsics – –

9700 Szombathely, Zanati út 29/A (94) 517-800 (94) 328-838 –

www.jabil.com

6

ROBERT BOSCH POWER TOOL ELECTRIC TOOL PRODUCTION KFT.

267,669

»

–

–

–

–

»

–

www.bosch.hu

7

8

ELECTROLUX LEHEL KFT. ZZZ HOHFWUROX[ FRP

CONTINENTAL AUTOMOTIVE HUNGARY KFT.

267,631

210,484

267,631

»

–

»

»

»

–

–

–

–

–

–

–

–

www.conti-online.com

NI HUNGARY KFT. www.hungary.ni.com/debrecen 163,078

9

10

DELPHI HUNGARY AUTÓALKATRÉSZ GYÁRTÓ KFT. www.delphi.com

139,237 DSSUR[

92,154

»

–

»

–

»

»

»

»

»

WWW.BBJ.HU

ROBERT BOSCH ELEKTRONIKA GYĂ RTĂ“ KFT.

130,387

Âť

Âť

Âť

–

–

–

–

AUTOMOTIVE ELECTRONICS

CONSUMER ELECTRONICS

HOUSEHOLD ELECTRONICS

IT

SECTORS

TELECOM

ODM

OEM

EMS

NET REVENUE FROM ELECTRONICS MANUFACTURING IN 2014 (HUF MLN)

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ACTIVITY TYPE

YEAR ESTABLISHED

11

COMPANY WEBSITE

Budapest Business Journal | June 05 – June 18, 2015

TOTAL NET REVENUE (HUF MLN) IN 2014

RANK

26 3

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

1998

– Robert Bosch Investment Nederland B.V. (100)

Roger Seemeyer – –

3000 Hatvan, Robert Bosch Ăşt 1.

(37) 549-100 (37) 549-112 info@hu.bosch.com

1938

Gåbor SzÊles (47.05), PÊter Lakatos (26.48), Ottó Sinkó (26.48) –

PÊter Lakatos, Ottó Sinkó GyÜngyi Råcz RancznÊ –

8000 SzÊkesfehÊrvår, BerÊnyi út 72–100.

(22) 533-421 (22) 533-429 marketing.sales@ videoton.hu

PÊter Mohåcsi Tamås Kåldi –

2600 Våc, Deåkvåri fasor 16–18.

(27) 500-400 (27) 517-026 horvath.balazs@ hu.ibm.com

www.bosch.hu

12

VIDEOTON HOLDING ZRT.

13

IBM DATA STORAGE SYSTEMS KFT.

www.videoton.hu

130,000

57,100

–

–

–

119,057

Âť

Âť

Âť

Âť

–

–

–

–

2006

Âť

Âť

Âť

–

2000

– Koninklijke Philips N.V. (100)

Zoltån MÊszåros – –

1117 Budapest, AlĂ­z utca 1.

(1) 382-1700 (1) 382-1800 –

–

1994

– EPCOS AG (100)

Balåzs Takåcs Istvån PintÊr –

9700 Szombathely, Csaba utca 30.

(94) 522-599 – –

–

–

–

1997

– Clarion Co. Ltd (100)

Enokida Tatsuo – –

2760 NagykĂĄta, JĂĄszberĂŠnyi Ăşt 116.

(29) 640-100 (29) 640-161 clarion@clarion.hu

1997

– Sanmina-SCI Systems Holdings Inc. (100)

Kåroly Hoffmann ErzsÊbet Galgån –

2800 TatabĂĄnya, KĂłta JĂłzsef utca 2.

(34) 515-600 (34) 510-004 nikolett.monostori@ sanmina.com

1996

– Sanmina-SCI Dutch Holdings B.V. (100)

Låszló Bodnår, Patrick Macdonald – –

3571 AlsĂłzsolca, GyĂĄr utca 3.

(46) 520-600 (46) 520-621 –

2003

– Success World Holdings Ltd. (100)

PÊter Tålos – –

2900 KomĂĄrom, BĂĄnki DonĂĄt utca 1.

(30) 422-9608 (34) 886-001 –

1989

Kåroly Kovåcs (25), Attila Kovåcs (25), Róbert Kovåcs (25), Tßnde Kovåcs (25) –

KĂĄroly KovĂĄcs Orsolya Vida TĂźnde KovĂĄcs

6725 Szeged, Cserepes sor 9/B (62) 444-007 (62) 444-181 info@procontrol.hu

14

PHILIPS HUNGARY KFT. www.philips.hu

72,717 DSSUR[

15

EPCOS ELEKTRONIKAI KFT.

65,345(3)

65,345(3)

Âť

Âť

Âť

13,825(3)

13,825(3)

–

–

(4)

(4)

www.epcos.com

CLARION HUNGARY ELEKTRONIKAI KFT.

– IBM Ireland Product Distribution Ltd. (100)

www.ibm.com/hu

16

–

www.clarion.hu

SANMINA-SCI MAGYARORSZĂ G KFT. www.sanmina.com 10,349

17

18

SANMINA HUNGARY KFT.

19

FIH EUROPE KFT.

20

PROCONTROL ELEKTRONICS KFT.

www.sanmina.com

ZZZ IR[FRQQ FRP

5,649

447

360

(4)

10,349

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Âť

355

Âť

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–

Âť

–

–

Âť

–

–

–

–

www.procontrol.hu

1= Data of business year April 1, 2013-March 31, 2014.

2= Data of business year September 1, 2013-August 31, 2014.

–

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–

–

–

–

–

–

3= Data of business year April 1, 2014-March 31, 2015.

4= Data of business year October 1, 2013-September 30, 2014.

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BBJ

4 Socialite

Find your festival Just in time for the summer season of outdoor music and arts events, we offer a roundup of the major festivals that deserve your attention.

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4 Socialite

Budapest Business Journal | June 05 – June 18, 2015

Summer music fests around Hungary The country comes alive each summer with a compelling collection of festivals that celebrate music in all its forms.

ANIKO FENYVESI

Not surprisingly, many of the country’s biggest festivals take place in Budapest, but there are plenty of noteworthy events happening outside of the capital as well.

Whether you like to camp out or go more upscale, there’s likely a festival to suit your style. The following is a compilation of some of the major events scheduled for the upcoming season.

Belvárosi Festival June 5−7, Szabadság tér, Erzsébet tér, Zrínyi utca This free downtown festival features local musical acts that play anything from jazz to folk, rock and pop. The highlight remains the silent disco; a nighttime party where two DJs provide the beats and partygoers can chose their channel of choice on a pair of headphones. facebook.com/belfeszt

Budapest Summer Festival June 6−August 31, Budapest, various venues When traditional music venues close their doors for the summer season, many artists and musicians wind up on the open−air stages of Budapest’s Margaret Island. Over three months, classical, folk and jazz can be heard filtering through the warm summer air, with the main concerts being held on weekends. eng.szabadter.hu

Budapest Folk Festival June 10−14, Budapest, various venues Taking place at several folk−centric venues in the city, expect plenty of dancing and late night parties, as dance house is an integral part of the regional folk music scene. fono.hu/en/budapest−folk−fest

At right, a colorful show at last year’s Sziget festival. Above, is the Festival of Folk Art in the castle.

Fishing on Orfű June 17−20, Orfű Taking place just outside a serene lakeside town among the rolling hills of Orfű in southwest Hungary, this alternative music festival plays host to local talent and caters to a slightly older− than−average festival crowd. fishingonorfu.hu

standout lineup of international and Hungarian acts including David Guetta, Motörhead, Fatboy Slim, Nouvelle Vague and Triggerfinger, among many others.

Set in a lush valley in western Hungary, camping here is usually the best option. sziget.hu/volt

Balaton Sound

June 25−28, Budapest, various venues Live music and DJs perform at some of the city’s most epic venues including the Széchenyi Baths, the Hold utca and Grand Market halls, the Budapest amusement park, the Railway Museum, Margaret Island and a handful of the city’s coolest clubs and ruin bars. La Roux, Astronautalis, The Wombats, and Peter Kruder are on this year’s bill. budapestessentials.com

July 9−12, Zamárdi The small town of Zamárdi on the southern shores of Lake Balaton – Europe’s largest fresh water lake – is overrun for one full weekend of mostly electronic music acts and mainstream live shows. This year’s lineup includes: Tiësto, Faithless, Hardwell, Ludacris, Laidback Luke and many more. The main stage shuts down around 11 PM but a handful of late−night DJ parties are held in large tents set up on the festival grounds. sziget.hu/balatonsound

Volt

Bull’s Blood Festival in Eger

July 1−4, Sopron On the scene for two decades now, the Volt festival returns this year with a

July 9−12, Eger Not the plonk it used to be in communist days, Hungarian bikavér (bull’s blood),

Budapest Essentials Urban Festival

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HUNGARIAN RESTAURANT

particularly that found in Eger, can be very drinkable indeed. Sample many of the local varieties while enjoying Hungarian musical talent or perhaps the tractor beauty pageant and speed race. bikaverunnep.hu

EFOTT July 14−19, Velence EFOTT may be turning 40 this year but the crowd is just as young as when it began.

Once a covert meeting called the “National Tourist Meeting of University and College Students”, the festival is still home to an all−Hungarian lineup of musical acts. A good chance to go native! efott.hu

Kingdom of Hegyalja July 15−19, Tokaj−Rakamaz A largely Hungarian assortment of rock, folk and jazz acts, along with a few more underground foreign outfits, will perform in an idyllic location in one of the country’s most renowned wine regions, at the foot of a large hill where the Tisza and Bodrog rivers meet. Sample the country’s most famous sweet white Tokaj Aszú on site or at

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4 Socialite

Budapest Business Journal | June 05 – June 18, 2015

29

Alternative, folk and local talent at the Fishing on Orfű Festival.

Müvészetek Völgye

Sziget

July 16−18, Bánki Lake This grass roots affair has kept to its mandate of promoting local music and culture. Check many of the lesser known musical acts and DJs in a majestic setting: three small stages on the banks of Bánki Lake, a short drive from Budapest. facebook.com/bankitofeszt

July 24−August 2, Kapolcs, Taliándörögd, Vigánpetend The Valley of Artists festival grew out of a very small and independent event that now spans three villages in the picturesque Káli Basin just north of Lake Balaton. Dominated by folk acts, there are also a handful of rock shows, theater performances, workshops, and plenty of children’s programs. muveszetekvolgye.hu

Street Music Festival

O.Z.O.R.A

July 22−25, Veszprém Loads of underground acts from all over Europe perform at this festival. Although many of the shows take place on larger stages, the heart of the music is on the streets of the city. Folk, jazz, world and rock music are all represented. utcazene.hu

August 3−9, Dádpuszta This king of psychedelic music festivals, O.Z.O.R.A. attracts people from all over the world in Europe’s answer to Burning Man. Heady beats around the clock and spectacular visuals keep the trance fanatics happy. ozorafest.hu

August 10−17, Budapest, Óbuda Island Big musical acts and up−and−comers take over the dozen or so stages set up on the leafy island of Óbuda where as many as 400,000 foreigners and locals flock to the festival for seven days of hedonism.

Touted as one of the largest festivals in central Europe, this year’s event includes headliner Robbie Williams alongside Boban I Marko Markovic Orkestar, Ellie Goulding, Interpol, The Ting Tings, Kasabian, Limp Bizkit and many others. Street theater, circus and dance performances also feature at Sziget and are a nice distraction from the heaving crowds and dust that sometimes kicks up around the main stages. sziget.hu.

one of the nearby wine cellars. kingdomofhegyalja.hu

Bánkitó Fesztivál

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Strand Nagyon Zene Festival August 19−22, Zamárdi Like the earlier Balaton Sound, the

Strand festival also takes place in Zamárdi on the shores of Lake Balaton.

Expect plenty of beach activities and music to go alongside. Top acts this year include Simple Plan, Steve Aoki, House of Pain and loads more from Hungary.

Happening simultaneously, also in Zamárdi, the B.My.Lake festival features a fine selection of some of Europe and North America’s top DJs. strandfesztival.com

Festival of Folk Arts August 20−23, Budapest, Castle Hill Folk costumes and crafts take center stage at the annual Festival of Folk Arts (Mesterségek Ünnepe) held in and around the Buda Castle. Of course the festival would not be complete without a good dose of folk concerts performed by local and international acts. mestersegekunnepe.hu

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Budapest Business Journal | June 05 – June 18, 2015

Wine: Hársevelű hard to say, easy to swallow The other grape used in making Tokaji Aszú is a smooth, dry white.

ROB SMYTH

The tricky four−syllable word Hárslevelű may be harder for foreigners to get their tongues around than the more friendly two−syllable Furmint but as dry wine it can sure sit a little smoother on our palates than its more coveted peer. A host of good and, for the most part, dry Hárs were poured at the Hárslevelűk Éjszakája at the charming venue of the Romanesque church in the Vajdahunyad castle complex next to Hősök tere at the end of last month.

It seems hard to talk about Hárslevelű without saying a few words about Furmint, since their fates are so intertwined. Both work together to sublime effect as the two main grapes in making the world− renowned Tokaji Aszú sweet wine.

Furmint provides the structure and acidity for aszú, with Hárslevelű bringing its hedonistic richness to the palate party.

With sweet wines less in demand than they were when the Hungarian wine industry picked up the pieces following the political transition, Tokaj sought to reinvent itself by making dry wines and all the energy was put into Furmint as the flagship grape, with dry wine from Hárslevelű taking a back seat role. Now it is jumping into the front seat and threatening to take the wheel in Tokaj, although Furmint’s future is safe as it outnumbers Hárs significantly in terms of the amount of vines planted in Tokaj.

The frenzy for dry Furmint has indeed been quite staggering and it is being planted across Hungary at breakneck speed, which is all the more remarkable given that it is relatively new as a modern dry wine, with barely a two−decade history in Tokaj. Furmint is greatly esteemed for its role as an articulator of terroir, for the way it captures nuances between different places of growth and brings them to the glass. However, Hárslevelű can do that too, and sometimes that bit more. While Furmint does make some jaw−dropping dry wine, it can also be sharp and rasping, while Hárslevelű can be anything but harsh, for want of a better word. “Hárslevelű is fruitier and more aromatic than Furmint. It has lots of potential and can also capture the essence of the terroir as Furmint does so well,” says Dobogó winemaker Attila Domokos.

I would also add that Furmint’s potential to age as a dry wine is far from proven and that it often develops strong petrol notes while the fruit dips off sharply as the years pass, which contrasts with the desired petrol character of German grape Riesling, as it is usually backed up with nicely preserved fruit.

When Hárslevelű is picked at the right time it can keep its freshness for years. A case in point was provided at Hárslevelűk Éjszakája by Holdvölgy’s 2009 dry offering from old vines from Mád’s Betsek vineyard. It was still a fairly pale lemon in color and as fresh

“Hárslevelű is fruitier and more aromatic than Furmint. It has lots of potential and can also capture the essence of the terroir as Furmint does so well.” as a daisy but also picking up serious complexity with green herbs, candied citrus fruit and a touch of butterscotch on the otherwise dry finish. Holdvölgy’s Betsek 2012 was still in the first flushes of youth and was appealingly aromatic, smooth but structured, generous and inviting with a touch of honey and melon along with citrus fruit. Both these wines were fermented and aged for six months in used oak barrels, with the oak subtly integrated, complementing rather than bullying out the deliciously fruity juice; a pair of stunners that actually justify their HUF 7,500 price tag.

Tricky to cultivate Miki Prácser, winemaker at Tokaj’s Erszébét Pince, explained that Hárslevelű could be a tricky grape to cultivate in the vineyard due to uneven ripening. Several sweeps of even a small plot at harvest time can be necessary to capture the grapes at their optimal level of ripeness in order to make good quality dry wine from them, he says. Nevertheless, the grapes do ripen evenly in stronger vintages, according to Prácser, mentioning 2011 for example. Erszébét Pince’s 2011 also came from Mád’s Betsek vineyard, which is a remarkable cocktail of volcanic soils. Indeed, Erszébét’s Hárslevelű 2011 is more about the terroir than the grape. It wasn’t as smooth and polished as the more varietally pure Holdvölgy Hárslevelűs, but Erszébét Pince’s was fuller−bodied and still struck a nice Tasting the grape in the Vajdahunyad castle complex. balance between richness and freshness.

It also captured stony character alongside you want for a dry white. While Furmint yeasts to capture the essence of the site quince; the latter note being more readily actually increases its high acidity as of origin. associated with Furmint funnily enough. its picks up serious sugar and indeed Tokaj’s Gizella also uses cultured It is a good buy at HUF 3,400. intensifies its acidity when it becomes yeast and does a delicious and richly István Balassa has dug even deeper shriveled by the so−called “noble rot” or tropical cum floral Hárslevelű from the into this prized Mád vineyard, releasing botrytis needed for Aszú, Hárslevelű’s Brat vineyard from the southern slopes two Hárslevelűs in 2013 (and three acidity drops off quickly. As Bodrog of Tokaj Hill from Pécs clones, while Furmints) from different plots of the Borműhely’s Krisztián Farkas explains it, just 500 yards away in the Szil−völgy Betsek where different volcanic soils Hárslevelű is a sugar−gathering grape as vineyard, the loess is much shallower dominate. His Betsek Andezit Hárslevelű opposed to an acid−gatherer like Furmint. with volcanic rhyolite tuff beneath. The 2013 (available only in a magnum for He added that dry Hárslevelű has the resulting wine, which is incidentally around HUF 15,000) is from the andesite potential to be “at least as good” as dry from the Tarcal clone, is more savory and patch and exudes lemon curd, fresh and Furmint. Bodrog Borműhely’s tight and stony in character but in the 2011 vintage candied citrus fruit, green herbs and focused Lapis 2013 contrasted nicely it also has lots of citrus and tropical fruit a floral note. Balassa’s Betsek Kvarc with the rich candied and tropical fruit to make a very complex wine.

Hárslevelű 2013 is from the quartz part of of their Brat 2012. There’s more going on Furmint and Hárslevelű are also key the Betsek and can indeed be described here than the difference in soils between grapes over in the volcanic basalt soils as stony, as well spicy and oozing fresh the clay and volcanic rhyolite tuff of the of Somló, which is Hungary’s smallest citric zest. The differences may be subtle Lapis and the deep loess of the Brat, with wine region but like Tokaj is a producer but they are there all the same. Both are the former originating from clones from of some of the country’s biggest whites. huge, impressive wines and fermented the local Tarcal Research Institute and In Somló, Hárslevelű appears to have from the wild yeasts inherent in the the latter hailing from clones from the the edge over Furmint if recent releases vineyard and cellar.

Pécs counterpart. Furthermore, 2012 was are anything to go by. Barnabás and It is particularly important with baking hot compared to the cooler 2013. Somló Apátság showed two fine but Hárslevelű to pick it at the right moment These differences came about despite quite different wines from the hot 2012 when making dry wine. Pick Hárslevelű the wines undergoing fermentation with vintage with the former’s leaner and more a tad too late and it suddenly becomes cultured yeast, which flies in the face of fine−tuned and the latter’s unctuous with limp and flabby, which is the last thing the assumption that you must use wild honey and orange blossom notes.

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4 Socialite

Budapest Business Journal | June 05 – June 18, 2015

WHAT’S

ON RYAN MCGARVEY June 5, A38

local wines alongside traditional Hungarian cuisine. More than two−dozen vintners will be proffering their goods. Film enthusiasts can also visit the renowned Korda Film Studios during the open house on Sunday. etyekipiknik.hu

Fun things to d o in Budapest for the nex t t wo weeks.

JAPANESE FILM WEEK June 8−13, This year’s JFBP Japanese Film Week will showcase a number of recent film

FŐZDEFESZT AND STREET FOOD SHOW June 5−7, City Park This specialty festival attracts devoted fans of craft beers while also offering a foray into the street food craze that has taken over Budapest. Now at a new and bigger venue, visitors can enjoy a beer−bathed picnic in the heart of City Park with all the food and drink supplied by local vendors: More than 60 breweries will offer up more than 200 varieties of beer. fozdefeszt.hu

Red Horizon showcases the rich collection of Soviet art from the personal collection of Peter and Irene Ludwig, founders of the Ludwig Museum Budapest. Russian and ex−Soviet pieces and the artists who made them had a strong connection to the ruling power, whether official, semi−official, unofficial, conformist or nonconformist.

The first part of the exhibition focuses on various forms of realism, while the second part presents works by some now legendary artists of geometric art and Moscow Conceptualism. ludwigmuseum.hu SUMMER ETYEK PICNIC June 6−7, Etyek Growing in importance, the Etyek wine region is the nearest to the capital and the regularly scheduled Etyek picnic gives visitors the opportunity to sample the best of

Rising to fame through the colorful films of Serbian director Emir Kusturica, trumpet player Boban performs with his son Marko and one of Serbia’s most renowned Balkan brass bands. Their mix of Balkan and world music is sure to stir the crowd into a dancing frenzy. kobuci.hu BUDAPEST FESTIVAL ORCHESTRA WITH IVÁN FISCHER June 18, Hősök tere Under the direction of star conductor Iván Fischer, the Budapest Festival Orchestra brings the music of classical composer Mendelssohn to children aged 12−16 from disadvantaged communities around Hungary. For the past four months, participating children were taught how to dance in their home schools with the assistance of professional choreographers. On this day, they will show the fruits of their labor accompanied by the orchestra. The event is free to attend. bfz.hu

RED HORIZON From June 5, Ludwig Museum

At the age of 28, singer−songwriter and guitarist Ryan McGarvey has already shared the stage with musical greats Eric Clapton, Jeff Beck, B.B. King, Joe Bonamassa and many others. Travelling in the blues−rock vein, McGarvey has released three albums to date, all of which contain original material. a38.hu

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releases from Japan with a focus on the theme of cuisine and its importance in Japanese society. Feature films as well as documentaries form part of the program. Films are screened in the original language with English subtitles. jfbp.org.hu BOBAN I MARKO MARKOVIC ORKESTAR June 13, Kobuci kert

NIGHT OF THE MUSEUMS June 20, various venues Visit most of the city’s museums with only one entry ticket during the evening and late night hours of Saturday June 20. As many as 60 museums, galleries and related venues open their doors for the Budapest portion of the event. Regional museums are also taking part in this very popular event. muzej.hu

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Summer Festival takes to the open air The Budapest Summer festival returns to Margaret Island with a solid lineup of opera and ballet, symphonic and jazz performances.

The Budapest Business Journal caught up with the executive and artistic director of the festival, Teodóra Bán to find out more about the event.

All the main venues for classical concerts, operas and ballets close their doors during the summer months, but in this the organizers of the Budapest Summer Festival saw a great opportunity. “The best artists, musicians, soloist and dancers are available to perform at the festival,” explains Teodóra Bán. “The summer festival is a resounding success because the productions it puts on are of the highest caliber,” she adds.

the National Philharmonic Orchestra under renowned conductor Zoltán Kocsis.

Liszt and Dante July 3, 5

The Queen of Sheba July 3, 5 Karl Goldmark’s best-known opera tells the story of unrequited love in an exotic setting.

This performance will be staged in German with Hungarian subtitles.

The Margaret Island open-air stage hosts the more classically inclined repertoire, while the Water Tower is home to jazz concerts. There is also a “Theater” boat that ferries visitors to and from the island.

For 12 weeks, across 12 weekends, the festival hosts some pretty impressive acts.

The following are some of Bán’s hottest tips.

MARGARET ISLAND

OPEN-AIR STAGE

The festival opens with a performance of works by Franz Liszt that address themes of heaven and hell, to the accompaniment of

King Solomon: Zoltán Kelemen | Queen of Sheba: Erika Gál Assad: Nuttaporn Thammathi | Sulamit: Eszter Sümegi

Budapest Summer

Conductor: Domonkos Héja | Director: Csaba Káel

Festival

Featuring: Budapest Philharmonic Orchestra – Opera Ensemble, Choir of the Hungarian State Opera, the Hungarian National Ballet

3 and 5 July 2015 8 pm

The outdoor premier is a joint production by the Open-Air Theatre and the Hungarian State Opera.

/bnyfesztival Szabad Tér Színház Nonprofit Kft. is operated by the Local Government of Budapest Capital.

Catulli Carmina and Carmina Burana July 10 The Szeged Contemporary Ballet along with the Dohnányi Orchestra of Budafok, will perform the legendary ballet Carmina Burana

by German composer-director Carl Orff.

The lesser-known Catulli Carmina is part of the musical triptych that includes Carmina Burana. Nearly 400 performers will appear on stage, including a 200-person choir.

/budapest_summer_festival

/szabadter

06/1 301-0147 E-mail: iroda@szabadter.hu

Vive la France!

July 23 This evening of symphonic soundtracks puts France in the spotlight, in particular the music of French songstress Edith Piaf with special guest Élodie Frégé – the lead singer of Nouvelle vague. The film music portion of the evening is set to a backdrop of film projections in the French cinematic vein.

Tosca August 9 Giacomo Puccini’s famous opera of hate and passion will be performed by mezzo-soprano Béatrice Uria-Monzon in the role of Tosca and Chilean tenor Giancarlo Monsalve in the role of Cavaradossi.

For more information or to purchase tickets visit www.szabadter.hu.

GIFT COUPON

Use this coupon until 30 June at the Szabad Tér Ticket Office (1065 Bp., Nagymező st. 68.) and we give 10% discount of the entrance fee.

www.szabadter.hu

Timeless Art. You are kindly invited to the closing exhibition of the Porsche Classic Art Competition organized by Porsche Centrum Budapest in cooperation with the Hungarian University of Fine Arts.

The submitted works and creations will be on display 5-18th June, 2015 at the Porsche Centrum Budapest Showroom.

Porsche Centrum Budapest SzerĂŠmi Ăşt 63.

1117 Budapest Tel.: +36/1 38 23 000 Fax: +36/1 38 23 001 ertekesites@porsche.hu www.porsche.hu

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