Budapest Business Journal 2712 by Business Publishing Services Kft.

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BUSINESS JOURNAL BUDAPEST

VOL. 27. NUMBER 12

JUNE 21 – JULY 4, 2019

SPECIAL REPORT Healthcare

SPECIAL REPORT

Shorter Waiting Times, Proper Care Lead Patients to go Private Patients are increasingly abandoning public healthcare in favor of the private sector. Currently, two-thirds of Hungarian citizens have had at least some private treatment in their lives. 15 SPECIAL REPORT

The Uphill Struggle Combatting Rare Diseases Coordination, more data and, of course, money are needed to improve the conditions of those living with rare diseases in Hungary. 16 SOCIALITE

Celebrating International Yoga Day David Holzer will be celebrating International Yoga Day on Saturday along with his fellow yoginis and yogis in the southern city of Szeged at a public yoga class, but you will find opportunities to do so in Budapest, too. 21

Targeting Energy Dependency NEWS

Direction of Monetary Course Seen Differently While there is a strong inflationary pressure on the Hungarian economy, the National Bank of Hungary (MNB) is not likely to change the course of its dovish monetary policy in the coming months, several Londonbased analysts have said. 3

S FOCU

In an exclusive interview, U.S. Ambassador David B. Cornstein reflects on how both the States and Hungary are coping with the “high class problem” of a strong economy and low unemployment, and his number one priority. 11 BUSINESS

Government Vows to Continue Listening to Business The government will continue its investor-friendly economic policy, Minister of Finance Mihály Varga told a business forum of the American Chamber of Commerce in Hungary (AmCham). 10

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News

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Budapest Business Journal | June 21 – July 4, 2019

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THE EDITOR SAYS

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THE RANKINGS ROLLERCOASTER Mid-June has proven to be something of a rollercoaster ride for Hungary when it comes to international rankings. To start with the worst first, Hungary found itself bottom of the National Energy and Climate Plans Ranking. The organization behind the ranking is a serious umbrella body for NGOs, the European Federation for Transport and Environment, generally better known as Transport & Environment. It asked all 28 EU member states to submit their draft National Energy and Climate Plans or NCEPs, to validate where they stand in terms of delivery on 2030 energy and climate targets. Transport & Environment was particularly interested in how these plans might deliver on longer-term transport decarburization. The top ranked EU nation was the Netherlands with 73 points, boosted by its plan to scrap the internal combustion engine in all new cars by 2030. Hungary scored just 13 points. As Transport & Environment rather depressingly notes on its website: “Hungary says it will grow its transport emissions to 30% above 2005 levels.” Needless-to-say, that’s going in the wrong direction. If that is disheartening, the second ranking, which came out just a few days earlier, was perhaps more surprising. Hungary talks so much about becoming a 5G pioneer, with its 5G Coalition and its autonomous vehicle test track, that you kind of presume it must be somewhere near the digital forefront. But in an annual assessment of digital progress, the European Commission ranked Hungary 23rd out of the 28 member states in its Digital Economy and Society Index. BBJ-PARTNERS

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The idea is to identify areas requiring priority investment and action. Hungary was ahead of Poland (ranked 25th), but trailed Slovakia (21st) and Czech Republic (18th). The report said Hungary’s “most challenging” areas are digital public services and the integration of digital technology in businesses, areas in which the country scores “well below” the EU average. The report noted that just 14% of Hungarian companies use enterprise resource planning software to share information between different functional areas, the lowest rate in the EU, while the use of e-commerce, big data and cloud services “shows a similar pattern”. (Nor is this isolated. As we approached deadline, Pénzcentrum reported the European Commission had ranked Hungary sixth worst in the bloc in its 2019 European Innovation Scoreboard, based on performance in the field of innovation and capability to compete on the global markets.) There was some good news for the government, with the EC acknowledging a number of measures taken in the area of digital economy and society since 2014, and the continuation of largescale projects such as the Superfast Internet Program, the Modern Enterprises Program, the Support for Business Digital Development Program and developments in e-government and e-health. But if Hungary wants to become a leader, it clearly has much more to do. There was one area of good news, so I have saved that for last. The United Nations Children’s Fund, UNICEF, has placed Hungary second in a ranking of countries providing the longest governmentsupported maternity leave, based on OECD and Eurostat data from 41 countries in 2016. Estonia came top in offering mothers 85 weeks of paid leave, with Hungary next at 72 weeks, and Bulgaria third on 65. The bottom three were Australia and New Zealand, which offered just eight weeks each, and the United States, which offers none. Make of that what you will. Robin Marshall Editor-in-chief

ʼMost In-demandʼ Balaton Sound on the Way Balaton Sound, one of Europe’s largest electronic festivals, will open its doors to festivalgoers from July 3-7, with the organizers proclaiming 2019 the “most in-demand edition of the Hungarian festival so far”. ESZTER D. KOVÁCS

The open-air event, held annually since 2007, will again be hosted at Balaton’s Zamárdi, a town on the southern shore of the lake, just an hour’s car ride from Budapest. This year’s line-up once again contains some of the most popular artists of the world of electronic music, promising attendees the same high quality entertainment they have grown used to over the previous years. The headliners include well-known DJ’s, such as Tiësto on July 3, the Chainsmokers on July 5, Armin van Buuren on July 6, and KSHMR on July 7, all of them among the most famous electronic dance music artists with millions of streams on Spotify and Apple Music. Marshmello will perform on July 4, whose recent collaborations with Selena Gomez as well as A Day To Remember have placed him at the top of the charts. The line-up in terms of rappers and hip-hop artists has also received

positive feedback from the public. Some of the artists include J Balvin on July 3, Future on July 4, Sean Paul on July 6, and G-Eazy on July 7. Desiigner, who appears on July 6, is one of the few artists to receive more than one billion streams on Spotify. A special addition will be XXXTENCTATION collaborator Ski Mask

The Slump God, whose show will kick open the festival on July 3.

Popular Feature

Another popular feature of Balaton Sound is the eye-catching neon-themed party series brought by elrow, where artists like the techno world’s Paul Kalkbrenner, Jamie Jones, Claptone and the Grammy-nominated Camelphat duo, are scheduled to perform. Several Hungarian pop and hip-hop artists will also entertain the crowds. WellHello, Halott Pénz and Punnany Massif will all perform at the Dreher Arena, the former on July 4 and the latter two on the closing day. Festivalgoers will also have the opportunity to enjoy beach and boat parties hosted by popular DJs like Gabor

Kraft, Alle Farben and Dubfire. These special events are crowd-pleasers as they help create the special atmosphere of the festival by taking advantage of the much loved Lake Balaton, the organizers say. Food and drinks, as usual, will be available for purchase using a Mastercard or with the Balaton Sound bracelet, that can be topped up at the entrance. This means attendees do not have to watch out for cash or wallets, which, according to many, greatly improves the festival’s experience. Although the festival is selling out fast, tickets are still available at the official website, balatonsound.com. One-day passes are EUR 68, while 3-day tickets are EUR 179, 4-day passes EUR 199 and the full five days costs EUR 225.

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Budapest Business Journal | June 21 – July 4, 2019

News///macroscope

Direction of Monetary Course Seen Differently

While there is a strong inflationary pressure on the Hungarian economy, the National Bank of Hungary (MNB) is not likely to change the course of its dovish monetary policy in the coming months, several London-based analysts say. Others, however, argue that Hungary will, once again, go in the opposite direction to the EU and the United States and might deploy some tightening tools in the near future. ZSÓFIA CZIFRA

According to London-based financial analysts, the MNB is not likely to be in a hurry with tightening the current monetary conditions. A group of analysts at Bank of America-Merrill Lynch, who specialize in emerging markets, visited Hungary recently and reported their findings in London afterwards. “Although there is a strong inflationary pressure on the Hungarian economy, the National Bank of Hungary might find a reason for passivity in the next six months,” they say. According to them, the central bank might reason that the recently announced residential bond program and a tighter budget for the next year alone might have some tightening effects, while the deteriorating external environment could reduce imported inflation. Analysts from Morgan Stanley also visited Hungary and concluded that the MNB is in no hurry with

Mihály Varga, Minister of Finance, gives an opening address at the beginning of the general debate on next yearʼs budget at the plenary session of the National Assembly on June 19. In the background are: Sándor Lezsák, center, Deputy Speaker of the National Assembly of Parliament; Tibor Bárány, Deputy DirectorGeneral for Legislative Affairs of the Parliamentary Assembly (left) and László Varga, MSZP representative, notary (right). Photo by MTI/Attila Kovács

normalization, especially if the European Central Bank does not start a tightening cycle in the near future.

Improved Projection

Morgan Stanley, by the way, has just improved its growth projection for Hungary, up to an annual 3.9% from 3.3% for 2019, and predicted a 3.2% increase in 2020. The economic research institute reasoned its move by saying the Hungarian economy had proved to be more resilient than previously thought, and therefore might be influenced less by the slowing economies of the eurozone than feared. However, no move in the other direction should be expected either. All in all, analysts at BofA-Merrill Lynch Global Research think that the central bank will only engage in further easing if the ECB does the same. This scenario does not seem very likely for the time being, and others see the possible course of monetary policy in a completely different way, even taking into consideration that the ECB is preparing for a rate cut that could, analysts now say, happen as early in 2020. But in Hungary, as the head inflation figure is at its upper limit at

around

4%,

and the tax-filtered core inflation (which is even more important for the MNB) is also above target, there are analysts who argue

some sort of tightening could be expected as soon as the June rate setting meeting of the bank on June 25. Commerzbank analyst Tatha Ghose says that the MNB risks its credibility if it doesn’t act in the light of the latest inflation data. The form of any tightening might be through reducing the free liquidity on the market, or raising the overnight interest rate to zero or even to positive territory from its current negative level.

Slowing Growth

In the meantime, the growth rate of Hungary’s industry has slowed a little from its March pace in April, showing a 6.3% increase year-on-year, down from 8% in the previous month. According to data released by the Central Statistical Office (KSH), the majority of manufacturing subsections contributed to the increase. The rate of growth slackened in the manufacture of transport equipment (representing the largest weight), while the manufacture of computer, electronic and optical products declined. The manufacture of food products, beverages and tobacco rose at a rate above the industrial average. Output was

6.2% higher

than in the same period of the previous year. Analyst Péter Virovácz of ING Bank says that the March and April industrial

output data were influenced by the Easter effect, but that the sector’s output growth is sustainable at the level seen in the first four months of the year. Dávid Németh of K&H Bank notes that the April output figure is compared to a high base, reflecting strong performance. The data continues to show that growth is driven by the installation of new capacities, which offset the decline in external demand, he adds, forecasting industrial output growth of around 5% in 2019, or slightly lower if there is a marked slowdown on international markets. As for the full year, Zsombor Varga of Erste Bank predicts industrial output growth between 5% and 5.5%.

Numbers to Watch in the Coming Weeks Apart from the much-expected rate setting meeting of the Monetary Council on June 25, the upcoming fortnight is expected to be rather quiet. The KSH will publish data of the labor market for the March-May period on June 27. Retail trade figures for May will come out on July 4, while the May industrial data, expected to be published on July 5, might bring some excitement.

News

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Budapest Business Journal | June 21 – July 4, 2019

BP to Move to Agora Budapest

Greens office park. With the arrival of the new tenant in June 2020, the occupancy rate of the building will be

around

50%.

Developers such as HB Reavis and Atenor are increasingly concluding preleases in the Budapest office market to help them take speculative developments further forward. GARY J. MORRELL

BP will move its Budapest office to Agora Budapest. Currently under development by HB Reavis, the offices will house more than 1,800 of BP’s Global Business Services staff in 22,000 sqm of space from 2020 according to the schedule. The deal is seen as the biggest letting in the Budapest office market so far this year. The first phase of Agora Budapest consists of the 34,500 sqm Agora Tower and 32,500 sqm Agora Hub. The latter is now fully leased, while the former still has 6,000 sqm of space remaining available to tenants. In what HB Reavis describes as one of the largest and most complex leasing transactions of 2018, the European regional developer agreed a circa 20,000 sqm prelease with Raiffeisen Bank. The bank will establish its Budapest headquarters for around

1,300 staff

at the 34,000 sqm Agora Tower, the first building scheduled to be completed in 2020. Agora Budapest is being developed in accordance with BREEAM and WELL sustainability precertification. “When designing offices, HB Reavis bears in mind the well-being of the people that will be using the workspace and emphasizes the importance of the communities within,” the developer says.

Park Atrium in Budapest. “Incorporating these notions in development transforms modern constructions into spaces where health and productivity come first, where community buildings play a major role, and into meeting points where local life can thrive. On the other side, BP was in search of a flexible workplace that combines business and lifestyle with communal functionality to create a supportive environment on multiple levels,” HB Reavis adds.

12,000 workers. Construction of the next phase is aimed to start in 2020 with three further buildings offering office and retail space. In another letting on Váci út an international service provider has preleased circa 4,000 sqm of office space in Building F at Atenor’s Váci

“The first four buildings of Váci Greens, consisting of nearly 80,000 sqm have a 100% occupancy rate. Buildings E and F are under construction and offering an additional 50,000 sqm. Váci Greens F will be handed over in the second quarter of 2020 and Váci Greens E will be delivered by the third quarter,” comments Nikolett Püschl, development and leasing manager of Atenor. Váci Greens will provide 130,000 sqm of offices in what it defines as a “campus development”, consisting of six buildings surrounding an internal garden and passage. The project has attained BREEAM “Excellent” certification. Both HB Reavis and Atenor commenced construction of their ambitious, speculative office projects at a difficult time in the Budapest office market when vacancy rates were high, however vacancy now stands at 7% and tenants have to plan far in advance in order to acquire large contiguous office spaces at the prime end of the Budapest office market. It is now becoming increasingly difficult to source sites for such large developments in the Váci Corridor, meaning developers are beginning to look at other areas of the city for the development of office complexes.

Redeveloping Area

The complex, designed by the Londonbased Make Architects and Hungary’s Finta Studio, is planned to deliver WELL “Gold” and BREEAM “Outstanding” and “Communities” certified office, retail and service space, which will be utilized by the local population as well as redeveloping the area adjacent to the Árpád híd metro station. The phased Agora project is due to be completed by 2023, providing space for

Agora by night.

Horizon Development to Redevelop Park Atrium Horizon Development, has taken over the property management, redevelopment, leasing and marketing of the landmark 26,000 sqm Park Atrium office building on Dózsa György út. GARY J. MORRELL

The building was designed by the Dutch architect Erick van Egeraat, who was also responsible for the landmark ING headquarters. The building consists of four blocks providing office and retail space to tenants including ING Hungary and Deloitte. “To be entrusted with the complex property management, redevelopment, leasing and marketing mandate of

complex after the purchase of Eiffel Palace by Corpus Sireo from the National Bank of Hungary.

Well-established

“We have a well-established cooperation with Horizon Development ever since we purchased Eiffel Palace, developed and managed by the premium Hungarian Park Atrium is a great privilege for our developer. It was the most logical next development company, which has been on step for us to continue with an even the real estate market for one and a half wider collaboration,” comments Dominik decades now,” comments Attila Kovács, managing partner at Horizon Development. Ewerz, asset manager at REInvest Asset Management, representing the owner. “With our expertise gained in selfPark Atrium was completed in 2004 and developed properties – Eiffel Palace, extensively refurbished in 2015. The ING Váci 1 and Promenade Gardens – we can and Deloitte offices have both achieved guarantee that current and future tenants LEED “Gold” accreditation. The complex of Park Atrium will enjoy world-class was subsequently acquired by a Corpus services,” he adds. Sireo-managed fund (now part of Swiss Horizon Development established Life Asset Managers); this was seen as a a relationship with the owner of the

significant deal as it marked the return of European institutional investors to the Budapest investment market. Horizon Development has built more than 500,000 sqm of high-end office buildings, shopping centers, logistic centers, sports complexes and residential projects. This includes the 25,000 sqm Eiffel Square, the 14,500 sqm Eiffel Palace development and the redevelopment of the UNESCO world heritage-listed 13,700 sqm Váci 1. Ongoing projects by the company are the 12,500 sqm LEED “Platinum” accredited Szervita Square Building, a high end mixed-use complex, due to be delivered in 2020. In another development project, the 9,000 sqm, 150-room Luxury Lifestyle Hotel is due to be completed in 2022. Both are located in the central business district.

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Budapest Business Journal | June 21 – July 4, 2019

News | 5

Making STEM More Popular, Graduates Better Prepared At its fifth conference on education, the American Chamber of Commerce in Hungary (AmCham) and the Hungarian Investment Promotion Agency (HIPA) discussed the challenges of STEM (Science, Technology, Engineering and Mathematics) education and tried to find ways to make it more attractive for students. ZSÓFIA VÉGH

There is a lot for schools to do if they want to improve the ratio of their students interested in sciences, and in particular in IT or engineering. These are the skill sets the economy needs the most and, of course, they are in short supply. So much so that this skilled labor crisis has grown into the single most important factor defining a company’s future now and in the shortterm future. To keep up with innovation and technology, companies in Hungary need 6,000 engineers and 20,000 IT professionals, the conference was told, but education is just not providing enough. Despite efforts to turn more kids toward sciences and technology, the statistics have not greatly improved.

“We hold special courses for them [...] but it is crucial that they arrive with the right attitude and be conscious of their own limits and their abilities,” said János Levendovszky of the Budapest University of Technology and Economics (BME). According to him, the main question is how committed the students are. “Sharing knowledge with them is not a problem, as long as they are motivated enough,” he added.

Newly Graduated

Motivation can be an issue for the newly graduated, as well. “At Morgan Stanley, we

employ

200-250

László Ábrahám, managing director of NI Hungary. Photo by Hajnalka Hurta/AmCham. “The ratio of those studying and graduating from STEM

should be

40%;

now it stands at 29%,” László Ábrahám, managing director of NI Hungary told the audience of the fifth conference on competitive education, jointly organized by AmCham and HIPA. But why such a gap? For starters, trying to steer 18-year-olds towards a science career during career orientation talks in high school is often too late. By then, many have lost any genuine interest they had as a child in the sciences for which, mostly, it is the education that is to blame. In Hungary, students are prepared for entrance exams, for an outcome, a physics and chemistry teacher from Lauder Javne High School said from the audience. “The curriculum is so big that we don’t have time to linger longer at more interesting parts,” she added.

Differentiation

Another issue, teachers at the conference agreed, is the lack of differentiation. Children with different levels of interest and

ability should be taught in accordance with their skills, but the system doesn’t allow for it. But by differentiation they don’t mean separating brighter kids from those that take longer to grasp something; in fact, teachers at the conference condemned this system, although it is still in use in many schools. So what could schools do to make STEM subjects more attractive?, AmCham asked its audience. The answer was smaller classes and group-sized and projectbased education. This may be more timeconsuming, but it is also more affective, the professionals agreed. Schools should also improve efficiency by applying more digital tools in classrooms and, most importantly, make learning STEM subjects fun. This requires a lot more from teachers; some went as far as to suggest educators should take a paid sabbatical and spend a semester at universities, attending the classes in the faculties they prepare students for to get a better understanding of what is expected from their pupils. Proper preparation is crucial as a high proportion of those students who do decide to go for a career in sciences get to college with large gaps in their knowledge.

Roundtable discussion at the conference. Photo by Hajnalka Hurta/AmCham.

fresh graduates every year,” said Norbert Fogarasi, managing director of the Budapest office at Morgan Stanley, and a former AmCham board member. “Upon entry, they are sent to a global training. Their professional knowledge is good overall, but their motivation and attitude [could be improved],” he said. How these graduates fit into the corporate culture is crucial; indeed, their future could hang on it, Fogarasi noted. Students invited by AmCham had a different take on this topic. “Today, we have more space to ‘levitate’ between jobs; changing careers is no longer something to be ashamed about,” said Emese B. Varga, a participant of the finals of the 2019 SCIndikátor, a science communication program for college students. So losing motivation, realizing that something is not for you and changing career are not as big issues as they used to be. “We tend to start things more because if we find out we were wrong [about our choices], we have the opportunity to change,” Varga said. Companies also tend to listen more to young employers’ needs. “There is much flexibility both in terms of topics and worktime,” Fogarasi said. “STEM careers in general give one much more flexibility overall.”

Must Try Harder It is not only schools that have their homework to do; clearly, the state has a big stake in improving education. Spending on education as a ratio of GDP is very low in Hungary: 6.2% compared to the EU-average of 8.5%, László Ábrahám, managing director of NI Hungary pointed out. Only half of the contribution paid to vocational training is actually spent on vocational training, he added. Good command of language is crucial for further education as well. As of next year, everyone entering higher education requires a language exam and schools have not done much to ensure that will happen. Also, rather than making students fill in a career orientation test with concrete professions to choose from, their abilities and affinities should be tested, Ábrahám said.

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Budapest Business Journal | June 21 – July 4, 2019

Business

Changing Wine to Match Customers

Millennials are no longer interested in stories, they simply want wine they like. To capture their interest, wine makers and sellers are changing their strategies, and their wines. ZSÓFIA VÉGH

As the baby boomers are ageing out of wine buying and drinking, the new target of the wine industry are the next generations: X and Y. With a defined taste in food and wine, and a larger income, the former is a consumer group easier to understand. But the young are much harder to grasp. Unlike previous generations, Millennials won’t do posh and spend a small fortune just to be able to say they have tasted some fancy terroir wine. They also won’t feel guilty about trying to find the best deal in terms of price-tovalue ratio or drinking canned or bag-

“Differences in taste can easily be traced by our two Aranymetszés wines,” Máté Varga of Varga Pincészet tells the Budapest Business Journal. “The older generation prefers the classic, ripe, nagytestű (heavy) Olaszrizling, Gen-Y opts for the Friss (fresh, lighter) variety,” he explains. With roughly 6,000 wineries in Hungary, competition for consumers is fierce, so vintners need to listen to their customers more. “We can either respond by rolling out new products or reforming existing ones,” Varga says. This latter is ongoing, although they have been very cautious with the changes, Varga admits. “Changing packaging is a sensitive issue though. We have seen some bad examples when brands lost their consumers as a result of wrongly redesigned label,” he says. Technology also helps satisfy the needs of their young consumers. In line with changes in gastronomy, there is a shift towards fresher and more fruity wines.

Constantly improving the quality of wines is, therefore, a must, Varga notes. When making a choice, the young are not influenced by the story of a wine or

Open to new Wines

The young have an impact on their parents’ choices as well. They show their parents what they like, and in an attempt to try and remain more youthful, those parents are becoming more open to new wines, Varga says. While Gen Y sticks with their favorite wines, Gen Z is not loyal at all, and buys on impulse, Varga notes. They are more proficient tasters and “punish” bad wines, he adds. “They won’t spend a lot of time trying to find the best rosé; if two out of three they have tasted turn out to be not good, they’ll move on and drink beer.”

Krisztián Kathona the region. They will make their own decision, simply based on whether they like a wine or not. “When I worked at Sziget Festival, some people wanted to hear the story of the wine even before trying it. I told them to taste it first and decide for themselves. We don’t want to sell a story or an “experience”, we want our customers to decide what they like,” Varga says. Communication is key. It is important to keep reminding these younger buyers you exist as, even if they like a brand, they easily forget about it, being bombarded by thousands of other offers, Varga says.

Wine Network

Máté Varga in-box wine. And they have a much shorter attention span, so wine marketing professionals really have to put their thinking cap on to maintain it.

Indeed, the craft beer industry is a serious contender for winemakers, as it is proving to be better at providing drinks with no fluctuation in quality.

allows the young to taste and pick wines freely with none of the preconceptions characteristic of the older generation. “Our aim is to get to a point where consumers feel they can ask questions and drink a wine they like with no guilt. This takes time as wine snobbery is a thing and you would find many claiming

they will not drink wine from the Mór Wine Region or only drink Cabernet Sauvigon,” Kathona says. In terms of varieties, Irsai is by far the most popular among Borháló customers.

“Some people wanted to hear the story of the wine even before trying it. I told them to taste it first and decide for themselves. We don’t want to sell a story or an ʼexperienceʼ, we want our customers to decide what they like.”

Borháló, a wine store network selling wine in different containers to create a favorable price point, holds wine tasting events on a regular basis. Not only is this part of its marketing strategy to get people closer to their wines, it also serves business purposes to get instant feedback on what people like. “We are moving away from sweet and semiThe people attending these tastings sweet wines towards the more fresh and are quite an assortment, from customers fruity ones. And it makes absolute sense in their early 20s to people in their as most drink it as fröccs [the Hungarian 50s. The latter have a certain taste in wine and soda drink],” he adds. Of equal wines, but the young have no preferences, popularity is rosé. Krisztián Kathona, founder of Borháló As a retailer, Borháló is in constant touch tells the BBJ. with wineries. Kathona visits cellars every “They are more open and are certainly week and takes new samples he thinks not deterred by different containers such as would be popular with their customers. a bag-n-box,” he says. “Retailers are a crucial link between What the young are more concerned wineries and consumers”, Kathona says. It about is getting a good deal. Many is important that wineries remain open and, won’t go to expensive wine bars, they if necessary, adjust their wines based on would rather buy the quantity they the feedback they receive.” want and drink it at a concert or in a park. According to Kathona, this sort of See also Cross-border Kékfrankos “ignorance” is actually quite useful as it Musings, page 22.

Reverse Takeovers In their regular investor column, Les Nemethy and Sergey Glekov look at an alternative means of taking a company public. In a typical merger deal, the bidding company acquires the target company and the bidder’s existing shareholders obtain the majority in the combined entity. In a reverse takeover (RTO), the inverse occurs: the target firm’s shareholders become the majority shareholders of a merged public company. “Reverse” refers to the fact that the initiator of the merger is the private target, which ultimately takes control over the public combined entity. An RTO can help private shareholders avoid much of the time, expense and tedium of an Initial Public Offering. Hence, the process is sometimes referred to as a “backdoor IPO” or a “backdoor listing”. Quite often, the publicly traded company involved in a reverse is an inactive “shell” corporation. A merger of the public and private entities allows the private company to shift its assets and operations into a public entity with relative ease. The first part of this article will compare the pros and cons of an IPO versus an RTO; then we will provide some statistics on the prevalence of RTO’s in Europe and North America; finally, we will finish by illustrating with some concrete examples.

Business | 7

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Budapest Business Journal | June 21 – July 4, 2019

IPO vs RTO

An RTO can typically be accomplished for a fraction of the cost of an IPO. The process of listing a company and taking it public requires hiring an underwriter, extensive disclosure, a due diligence process undertaken by an underwriter, filings with and fees paid to the stock exchange. The underwriting process usually provides comfort to investors that securities purchased are of a certain quality. Given that an RTO is a somewhat shortcircuited process, without an underwriter, investors have less comfort as to the quality of securities purchased. This may result in securities trading at a discount. While a traditional IPO may require months or years to complete, an RTO may be completed within weeks.

Prevalence of RTOs

Reverse mergers initially gained popularity in the U.S. over-the-counter (OTC) markets in the 1980s. Despite more publicity given to US RTOs, back-door listings are a global phenomenon. In Australia, RTO’s are frequent in the mining industry. In Hong Kong, RTOs are popular in the real estate development sector, according to “A Comparative Analysis

Between IPOs and Reverse Takeovers: Evidence From Europe” by Vasileios G. Oikonomou, Antonios I. Tsianakidis. RTOs are a popular mechanism for going public in Europe as well, especially in the United Kingdom and Sweden. According to a study which examines 224 reverse takeovers in Europe between 1996 and 2015, there were 167 private and 154 public companies involved in RTO transactions. (Note that the number of public and private entities involved in RTO’s are not necessarily the same in a given country or region, given that there are many crossborder transactions.) As we can see from the chart to the right, 12% of the 224 firms merged with a foreign entity.

European RTOs 1996-2015:

Distribution by Country Country

Private firms

Public firms

Belgium

Czech Republic

Denmark

Finland

France

Germany

Ireland

Isle of Man

Italy

Netherlands

Norway

Poland

Russia

Spain

Sweden

Switzerland

United Kingdom

167

154

Total

224

Examples of RTOs

The chart below provides examples of concrete RTOs during 2019. A reverse takeover might be considered an option for a company that has already decided that it would like to do an IPO, as an accelerated and cheaper route to a public vehicle. Moreover, for those owners of private companies that have decided against an IPO for reasons of expense, delays, risks and effort, RTO might warrant a fresh look.

Les Nemethy is CEO of EuroPhoenix (www.europhoenix. com), a Central European corporate finance firm, author of Business Exit Planning (www. businessexitplanningbook.com) and a former president of the American Chamber of Commerce in Hungary.

Source: A comparative analysis between IPOs and reverse takeovers: Evidence from Europe by Vasileios G. Oikonomou, Antonios I. Tsianakidis.

Selected Recent RTOs in Europe Stock Exchange

Public Company

Private Company

Date of Transaction

Country of operation

Sector

AIM

Polemos Plc (Digitalbox Plc)

Digitalbox Publishing

February 28, 2019

United Kingdom

Media

Nasdaq First North

Indentive AB (Artificial Solutions International AB)

Artificial Solutions Holding ASH AB

February 28, 2019

Sweden

Software & Computer Services

AIM

Chaarat Gold Holdings

Kapan Mining Ltd

February 4, 2019

Armenia/ Kyrgyzstan

Mining Source: Allenby Capital Limited, Mynewsdesk

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S TA R T U P S P O T L I G H T

Helping Construction With the Power of Digitalization

From left: Lior Vadas, Bence Vas and Marcell Zoltán Végh at Brain Bar.

Lokcheck is an award-winning Hungarian startup striving to make the construction industry more efficient through the power of digitalization and smart solutions. BENCE GAÁL

According to the company’s CEO and co-founder Bence Vas, the core idea of the startup was conceived after he took a summer job working at construction sites alongside Lokcheck CTO and co-founder László Ábrahám. He says the pair were “baffled by the lack of coordination and the constant supervision the construction site was in need of. We decided to bring the benefits of digitalization to this industry and see where we could improve it. Still to date it is our goal.” The founders started drawing up the concept of the firm in the summer of 2018, and founded the company at the end of the same year. Within months, Lokcheck found itself on the stage of the Brain Bar Blastoff startup competition, winning the Deloitte Fast50 Most Disruptive Technology Special Award. As a result, the startup is also set to receive advisory services

worth

HUF 3 million

from the Big Four Firm. “The competition at Brain Bar gave us exposure, which we are thankful for,” the CEO notes. “Our goal is to best serve the partners we score from the competition and make our service better. Our focus is on internationalization and exceeding expectations.” “We’re on a mission to create the next step in digitalization, which is digital project management,” Vas tells the Budapest Business Journal.

“We see an opportunity in cloud-based and integrated solutions resulting in time savings and automated processes.”

Maps and Punch-lists

Among other functions, Lokcheck’s smart solutions offer construction maps and daily punch-lists, with the latter allowing firms to keep the working hours of employees automatically. “We sparked interest at top tier construction firms, management consultants and social events that believe in changing the world through modernization,” he says. “We have fallen asleep over our computers too many times, but we delivered on time for our customers. We have external support from many sources. Mentors like Marcell Zoltán Végh, who’s part of the team since day one, help us make the right decisions. Our investor, Hiventures is also a great source for guidance and a vast network of startups. We got to know intelligent people in the startup ecosystem, we have a genius network of advisors,” Vas adds. Since the launch of the startup, the team has also grown in number, now consisting of “three developer wizards and two business smartguys” in the words of the CEO. “Lokcheck is developed by László and his team. András [Vas], our UI/UX expert, is responsible for the visualization, while János [Kirtyán], our lead developer, is the one who works on everything under the hood. They’ll probably meet some new developer colleagues soon.” Vas is responsible for most of the relationship management and public outings, alongside Lior Vadas. “We’re all pretty young and not afraid of being disruptive.”

Economic ///news Hungary Ranked 23rd in Digital Progress

Two-thirds of Hungarians Would Welcome Euro

The European Commission ranked Hungary 23rd out of its 28 European Union member states in an annual assessment of digital progress, state news wire MTI reported. The Digital Economy and Society Index (DESI) measures the progress of EU member states towards a digital economy and society and identifies areas requiring priority investment and action. In a regional comparison, Hungary was ahead of Poland (25th) in the ranking, but behind Slovakia (21st) and Czech Republic (18th). Hungary performs best in the area of broadband connectivity. The report said Hungary’s “most challenging” areas remain digital public services and the integration of digital technology in businesses, areas in which the country scores “well below” the EU average. The report noted that just 14% of companies use enterprise resource planning software to share information between different functional areas, the lowest rate in the EU, while the use of e-commerce, big data and cloud services “shows a similar pattern”. The report acknowledged a number of government measures taken in the area of digital economy and society since 2014. It also recognized the continuation of large-scale projects such as the Superfast Internet Program, the Modern Enterprises Program, the Support for Business Digital Development Program and developments in e-government and e-health.

The majority of the non-euro area EU Member States would welcome the introduction of the common European currency, kamaraonline.hu reported. Among them, Hungary is the biggest supporter, according to the latest Eurobarometer poll. The survey said that an average of 55% would join as soon as possible in the seven countries concerned, while some 42% are against the introduction. In Hungary, some 66% of responders support the launch of the single currency, and 44% expect it within ten years. In general, 56% consider that the euro has a positive impact on the economy. In Hungary this rate stands at 70%, kamaraonline.hu added.

Hungary’s Inflation 2nd Highest in EU Hungary’s annual inflation rate, which stood at 4% in May 2019, is the second highest in the European Union, the EU’s statistical body Eurostat reported. Across the whole European Union, annual inflation was 1.6% in May, down from 1.9% in April; a year earlier, the rate was 2%. The lowest annual rates were registered in Cyprus (0.2%), Portugal (0.3%) and Greece (0.6%). The highest annual rates were recorded in Romania (4.4%), Hungary (4%) and Latvia (3.5%).

USD 2 bln Deal for Budapest-Belgrade Railway Upgrade Signed Hungarian-Chinese consortium CRE Konzorcium has signed a contract to upgrade the Hungarian section of the Budapest-Belgrade railway, nepszava.hu reported, citing a statement from Opus Global. The tender for the railway upgrade was called by Chinese Hungarian Railway Nonprofit, in which Hungarian state-owned railway company MÁV has a 15% share and the People’s Republic of China an 85% stake. The winning consortium consists of China Tiejiuju Engineering and Construction and China Railway Electrification Engineering Group, holding a combined 50% stake, and RM International Zrt. the other 50%. RM International, in turn, is a subsidiary of R-Kord, and Mészáros and Mészáros and Opus Global holds a 51% voting stock in it. Opus is controlled by the billionaire

investor Lőrinc Mészáros, a key ally of Prime Minister Viktor Orbán. Opus expects to have around HUF 295 billion income from the five-year project through its subsidiary, as the contract is valued at USD 2.078 bln, which translates to about HUF 590 bln based on current exchange rates, and the contractors will receive payments based on their relative stake within the consortium, nepszava.hu said. The project is part of China’s One Belt, One Road initiative that aims to open up a new foreign trade channel for Chinese firms. The rail link will carry Chinese goods that arrive by sea at the Greek port of Piraeus. The contract is conditional on Chinese Eximbank providing the required financing, news service Reuters pointed out. The Hungarian Ministry of Finance has already submitted a loan application for the project.

Photo is illustrative only, by Denis Belitsky/Shutterstock.com

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Gas Imports: Levers and Pressure Points The Budapest Business Journal looks at why the year 2020 seems to hold such importance in negotiations to secure Hungary’s long-term gas supply. BALÁZS BARABÁS

Hungarian Minister of Foreign Affairs and Trade Péter Szijjártó seems to grab every occasion to draw a menacing picture about the Russian gas supply after 2020. In early June he spoke in Belgrade about the “uncertainties” floating around receiving Russian gas via Ukraine, pointing to a situation where Hungary will have “no other choice” but to sign a long-term agreement with Russia on gas imports. Shortly after, in St. Petersburg, Szijjártó again “drew attention to the uncertainty factor relating to the fact that there is still no valid transit agreement between Russia and Ukraine concerning the transport of natural gas”, as he was quoted in an official statement released by the Hungarian government. He added that he had signed new agreements with Russia, by which “the quantity of gas required for the operation of Hungarian industry and the heating of homes and houses

for

2020

is at our disposal”. So 2020 is seen (or at least, communicated) by the Hungarian government as being a major turning point, when everything may collapse on the European gas market, although Budapest will stand firm, doing what needs to be done for “heating the homes and houses”. But is the situation really that critical? The close of this year will mark the end of a ten-year agreement between Ukraine and Russia. This agreement ensured that European countries could receive Russian gas via Ukraine.

Pipeline laying. Photo by Reinhard Tiburzy/Shutterstock.com. This also represented a vital source of income for Ukraine, an annual USD 3 billion, roughly 3% of the country’s GDP.

Leverage

Moscow is aware of what a huge blow it would be to the Ukrainian economy if the deal is not renewed, and with the significant deterioration of bilateral relations since 2014, this would represent convenient leverage for Moscow against Kiev. There are signs of mounting pressure, with several rounds of negotiations on renewing the contract having failed. By keeping the issue of the gas transit in limbo, Russia is able to pressurize other countries, too: Sign a long-term agreement with us now and we’ll give you a good price. If not, who knows what comes next year is the implied theat. To add more weight, Russia, in an international cooperation, has started the construction of a new pipeline, dubbed North Stream II, which would allow Germany to receive Russian gas bypassing Ukraine. From this angle, Szijjártó may rightfully say that if no other gas import alternative arises, he will have to sign such a long-term agreement with Russia. However, as always in international negotiations, things are more complicated than that. Russia is not able to play quite as freely with the threat of closing the

pipes as it seems. The gas exports through Ukraine amount to an annual

65cubicbillion meters

and it is not simple to handle such a loss. Russia’s Deputy Foreign Minister, Aleksander Pankin, recently said that his country’s government will not stop gas deliveries to Europe through Ukraine from 2020. “No one has ever made an announcement that we will refuse. For us, it would be deadly and irrational.” This, however, does not mean that Gazprom (i.e. Russia) would accept any kind of ultimatum from Naftogaz (i.e. Ukraine), he added. While this seems a return to the stalemate situation, Pankin also said he hopes that trilateral negotiations between Russia, Ukraine and the European Union would begin during the second half of 2019.

No Hurry

Apparently, Russia does not need be too hasty in finalizing these negotiations. One if its largest export markets, Germany, looks secured through North Stream II, a 1,200 km-long pipeline running beneath the Baltic Sea, with a capacity of 55 cubic meters. Meetings at the highest level paved the way for the agreement, culminating with the summit less than a year ago between Chancellor Angela Merkel and President

Business | 9

Vladimir Putin. The initial plans for completing North Stream II were set for 2020, but in the meantime, Denmark has refused to grant approval for laying the pipe on its territory, citing environmental damage concerns. There is also another issue, perhaps more difficult: the position of the United States in this matter. The Trump administration has clearly stated, through various channels, its opposition to North Stream II. U.S. Vice President Mike Pence insisted Germany would become “literally a captive of Russia”; Secretary of State Mike Pompeo warned the Kremlin uses energy “as a lever of pressure on Europe”. President Donald Trump himself warned that “Germany is making a tremendous mistake” and he envisaged sanctions against companies participating to the project. The project has already cost of USD 10 bln with about

1,000 km of pipeline

laid down. While the sanctions are not likely to shake European companies too much, the effects of political clashes between Germany (and ultimately the EU) and the United States may be far more damaging in the long term.

Pipelines (Plural)

To make things even more complicated, there are more gas transport projects in play apart from North Stream II. One of these is BRUA, an acronym for a cooperation between Bulgaria, Romania, Hungary and Austria for extracting and transporting gas from the Black Sea (and, in the long-term, also from the Caspian Sea) to Central Europe. The other is TurkStream, another route for Russian gas, this time via a Southern region, first to Turkey, then via Bulgaria and Serbia, to Hungary. Initially, Hungary backed BRUA, but last year it withdrew its support, invoking high costs. However, TurkStream could be a route Hungary might use for importing Russian gas, should the trilateral talks for the Ukraine transit route fail and Budapest ultimately signs a long-term deal with Moscow. But TurkStream has been as heavily rejected by the United States as North Stream II (the source of the Gas, Russia, is the same, after all). Hungary insists it must have the last say in matters concerning its energy security, as Péter Szijjártó has stated on several occasions. That said, uncertainties remain, as Szijjártó has also pointed out.

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Government Vows to Continue ʼInvestment-friendlyʼ Economic Policy The government will continue its investor-friendly economic policy, Minister of Finance Mihály Varga told a business forum of the American Chamber of Commerce in Hungary (AmCham).

Lawmakers Vote to cut Payroll Tax

ROBIN MARSHALL

That goal would be served by both the 2020 budget and the “13+1” points of the Economy Protection Action Plan, which will provide some HUF 500 billion in support to the Hungarian private sector, the minister said at the Budapest Marriott Hotel on June 7. He mentioned reductions to business taxes and the accommodation tax, with the temporary lowering of the advertising tax rate to 0%. Not least among these changes, though, would be the 2% cut in social contributions (see separate box). The elements combined aim to shield what is still a robust Hungarian economy from the impact of a global slowdown. “As a result, taxes will continue to fall, the business environment will continue to improve, and it will be easier for enterprises to receive credit in the interests of promoting investment,” the minister insisted. As he so often does, Varga sought to put the current figures into context by giving a brief historical overview. He remembered “how shocked I was

Hungary’s economy continues to outperform the European Union, with Q1 2019 growth in Hungary of 5.3%, compared to the EU average of 1.5%. The Minister of Finance said it is obvious that Hungary, indeed much of the Central and Eastern European region, is now much better represented in the global value chain. While that has brought clear advantages, it also exposes Hungary to global slowdowns, meaning it is only prudent to look now at creating rainy day contingencies, though the minister did not use that exact phrase. “Hungary has a strong macroeconomic framework, so we are building fiscal buffers against similar trends we have seen in many neighborhood countries” in preparation for a period when “growth momentum gradually slows down in the EU and the entire global economy”, he said.

Minister of Finance Mihály Varga addresses the AmCham forum. Photo by AmCham/Lázár Todoroff.

“Hungary has a strong macroeconomic framework, so we are building fiscal buffers against similar trends we have seen in many neighborhood countries” national Competitiveness Council” that he chairs, and on which AmCham president Farkas Bársony sits. “We will continue our policy of tax cuts that aim to reduce taxes that place burdens on labor, companies and families,” he promised.

There can be no doubt how important America and its businesses have become to Hungary. Referring to the recent White House working meeting between U.S. President Donald Trump and Hungary’s Prime Minister Viktor Orbán, Varga said: “It has become clear we share views on the most important issues.” He added that, in economic terms, the “United States is the second most important country for Hungary after Germany,” noting that it was Hungary’s most important export partner outside Europe and the largest investor in Hungary from outside Europe; there are approximately

1,700 U.S.-owned

companies operating in the country, employing more than 100,000 people, he said.

Parliament has approved a twopercentage-point reduction in the payroll tax to 17.5%, effective July 1, state news service MTI reported. The amendments reducing the tax were passed in an expedited procedure with a vote of 160 ayes, one nay and five abstentions. The payroll tax was cut from 27% in 2016 to 22% in 2017 and 19.5% in 2018. At the same time, the minimum wages for skilled and unskilled laborers were raised by double digits. The agreement stipulates that, from 2019, the payroll tax will be reduced a further four times by two percentage points on each occasion. The cuts are timed from the start of the second quarter of each calendar year as long as the gross average private sector wage rises at least 6% year-on-year in the first quarter of the given year. Private sector wages rose 11.8% year-on-year in Q1 2019.

2010

by the state of the country; the exchequer was empty, debts going through the roof”. The entire system of government and how it is financed had to be overhauled, with a shift away from personal taxation and toward consumption taxes, he said, but the relationship with international business also had to be improved with “the establishment of a new dialogue-based approach”. In this regard, Varga said the American chamber had proved itself a key ally that “has been working on improving Hungary’s competitiveness for years” and “played a role in the role in the introduction of the flat rate tax,” he recalled. “The government regards AmCham as a highly important partner,” he said.

‘Grateful’

He referenced the chamber’s latest “Cooperation For A More Competitive Hungary” recommendation package, and added he was “grateful for the work that is jointly conducted on the

Minister of Finance Mihály Varga (center) met with the AmCham ledership before the forum. Photo by AmCham/Lázár Todoroff.

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U.S. Country Focus Reveling in the ‘Purity’ of Hungarian (and U.S.) Numbers

In his first exclusive interview with the Budapest Business Journal, U.S. Ambassador David B. Cornstein reflects on his first year in office, the strength of bilateral relations, how the States and Hungary are coping with a “high class problem”, and his number one priority. ROBIN MARSHALL

In one of his fist public appearances after he officially took up post on June 25, 2018, Cornstein joked at an American Chamber of Commerce event that, in order to become ambassador, first you have to live long enough to get through the selection process. “Well, I did live long enough to get through the process, and now I have lived long enough to have a year’s anniversary, and I thank God for both,” he tells the BBJ with a chuckle.

Taking a Select Crew to Market The main reason for Ambassador Cornstein’s recent visit to Washington, D.C. was to lead a delegation of Hungarian business leaders to the SelectUSA Investment Summit, the highest-profile event dedicated to promoting FDI in the United States. Convened by Secretary of Commerce Wilbur Ross and featuring top-level U.S. government and business leaders, the summit connects foreign firms directly with U.S. economic development

with President Donald Trump (though it affects more countries than just Hungary), and that is “the balance of trade between the United States and our allies and friends”. [See separate story on the U.S.-Hungary Economic Relationship, Page 13.] One possibility for closing that trade gap, and also for Hungary to meet EU and NATO commitments for

spending

U.S. Ambassador David B. Cornstein. Photo by Árpád Pintér/BBJ With a background in business, he says his experience of CEOs is that one good quarter of results will see them exaggerating the good news, while poor figures are blamed on the business cycle, the weather or whatever. “The one thing that never really exaggerates or you have to explain is a number. Numbers are very pure and the numbers here show a very high class problem, and it is one we are experiencing in the United States as well, that of having a very strong economy,” he says. “Things are good; things could always be better, but the atmosphere for conducting business here is quite good.”

Biggest Drawback

The second element of that “high class problem” is “exceptionally low unemployment”, and that represents

organizations to facilitate business investment and job creation. Fifteen Hungarian companies were represented in its delegation to SelectUSA 2019. “I was totally impressed with the summit,” says the businessmanturned-diplomat. “There were business people there from all over the world looking to expand their business into the U.S. market. I met the CEOs of all 15 Hungarian companies before we went over, and we were with them in Washington, of course. I was really impressed with the quality of the people, the products, services,

just about the only fly in the ointment, the ambassador says. “The biggest drawback for me to attract American companies to come to Hungary is to find workforce for those companies.” Cornstein says more should be done to expand the number of women in the workforce, and to attract “the right kind of immigrants into the country”. He acknowledges that higher salaries among neighboring countries has been a problem for Hungary, but points out wages have been on the rise. He says the American companies he visits in Hungary are “very happy either selling their products or providing their services here [….]. The main problem is the labor force; I think they could grow more, but they do not have the workers.” There is one other area of concern, one the ambassador says he shares

innovations they have. I think they would be very welcome in the United States,” he adds. With the strength of the economy, he says “this is a good time to come to the America. Hungary should have more companies there. I know I just took 15; 15 is a nice number compared to zero, but it could be 115. We have an incredible market; where else would you find a market like America? If you want to grow, that is the place to grow, for sure.” For more information about SelectUSA, visit www.selectusasummit.us

of GDP on the armed forces, is military procurements, the ambassador says. Hungary recently announced it is considering replacing its fleet of Saab JAS 39 Gripen fighter aircraft, and whether on a lease or purchase basis, the Lockheed Martin F-35 Lightning II Stealth Fighter would certainly be a replacement option. “I am not actually a pilot, but I am told it the superior aircraft of choice,” Cornstein says, pointing out that it is also already in service or on order with many NATO allies.

Robust Relationship

The bilateral relationship is now extremely robust, the ambassador says. “I think that is one of the things we at the embassy are most proud of in this past year,” he explains. “The strategy of the previous Washington administration was basically not to have any relationship at all with the government of Hungary, because they did not agree with a lot of what they perceived was happening here. “I do not believe in that; Secretary [Mike] Pompeo does not believe in that; President Trump does not believe in that. [….] We have done a lot to try to improve the relationship. The highlight, of course, was the meeting at the White House between Prime Minister [Viktor] Orbán and President Trump, but we have had Secretary of State Pompeo to visit, and Secretary of Energy Rick Perry. On the American side, we have shown how important it is to us to have a [strong] relationship with this wonderful country.” The ambassador says he believes Hungary, which he describes as “Europe’s best-kept secret”, has suffered from not doing enough to get its message out – he is delighted the government has finally followed his advice and hired two international PR companies – and from the way large sections of America’s press view Orbán. “It is both. They are not getting the message across. I do not think I have read a positive article about Budapest or Hungary. And a strong conservative leader does not play particularly well with the liberal press such as the New York Times or the Washington Post.” Continued on page 12 ► ► ►

12 | 3

Focus

Continued from page 11 ► ► ► He describes Orbán as a friend, and says he has not met one member of the government he does not like. “Does that mean we see eye-to-eye on everything? No, but then I did not with my parents, God rest their souls, and I do not my wife, or my son, and I certainly don’t with the Prime Minister.

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But we are friends. The relationship works. It works for America and for Hungary.”

Great Institution

One example of not seeing eye-to-eye remains the Central European University. When he arrived he said keeping the university here was his number one priority. When the government changed the rules

The U.S.-Hungary Economic Relationship The United States is the second largest investor in Hungary behind Germany, according to the latest June 2019 figures supplied by the U.S Embassy. American-based companies have invested more than USD 11 billion in Hungary and employ more than 100,000 Hungarians. Hungarian investment in the United States is small but growing. Similarly, the United States is the largest consumer of Hungarian exports outside the EU. Hungary exports approximately USD 5 bln a year in goods to the United States. The United States exports around USD 1.7 bln to Hungary, leading to a roughly USD 3.3 bln trade deficit in Hungary’s favor. Products From 2017 to 2018, U.S. merchandise exports to Hungary decreased by

7.2%, but this is within the normal range of USD 1.7 bln-USD 1.8 bln that has been fairly consistent since 2013. The United States continues to export machinery (turbojets) (34%); electrical machinery (18%); optical/ medical instruments (9%); and vehicles (9%). Over the last five years, U.S. machinery exports to Hungary have decreased, but increases in other important sectors such as optical/ medical instruments, aircraft parts, and pharmaceuticals goods have increased, leading to a stable trade relationship. From 2017 to 2018, U.S. merchandise imports from Hungary remained the same (USD 5.1 bln). From 2013 to 2018, U.S. merchandise imports from Hungary increased from USD 3.8 bln to USD 5.1 bln, or 34%.

for foreign accredited universities, many felt it was aimed at the CEU, which was founded by George Soros, the U.S.-Hungarian financier, investor and philanthropist who holds diametrically opposed views to the Fidesz-led government. The government has always denied it is targeting CEU, but the university insists it is being chased out of Hungary, and from this

Services U.S. services exports to Hungary have seen an increase from USD 0.9 bln to USD 1.1 bln between 2015 and 2017. U.S. services imports from Hungary have increased from USD 0.8 bln to USD 1 bln between 2015 and 2017. There is thus a healthy two-way services trade relationship between the two countries. Agriculture In 2018, U.S. agricultural exports to Hungary totaled USD 40.3 million and U.S. imports of Hungarian products totaled USD 54.8 mln. Major U.S. exports to Hungary include planting seeds, prepared foods, and protein concentrates. Major Hungarian exports to the United States include down stuffing feathers, essential oils, and processed fruit and vegetables.

September its freshman U.S. students will study in Vienna. “When and if it does move down the road [to Vienna] I will be very sad [….]. It is a great institution, a great institution for Hungary. I would love to see the status quo remain. Will it lead to long-term repercussions in the relationship? No, but I will be very sad to see it go.” The ambassador says his number one priority today is to see Hungary’s energy dependency on Russia reduced from its very high

level of

85%,

by opening up other sources of gas supply. “Personally, I think the entire region, not just this country, would be better served by that,” he says. Although there are several plans floating around for new pipelines to bring gas to Europe, almost all would still have Russia as the source of the gas. Two exceptions are an LNG terminal for U.S. gas in Croatia, and the Black Sea reserves in Romania that U.S. company ExxonMobil is interested in extracting. “Everyone I speak to in the U.S. government wants to see this [dependency reduced]. I had a conversation in the Oval Office with the President last week about this. [….] That’s why one of the alternatives, and hopefully both, has to materialize.” He emphasizes that the “Hungarian government is not an obstacle in this. They understand how important this is.”

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PRESENTED CONTENT

Focus | 13

‘Vital’ Role of U.S. Firms in Hungary’s Economic Development During the past decades, Hungary has taken on a strategic role for U.S. companies in the field of trade and investments. The Hungarian Investment Promotion Agency (HIPA) explains how that has come about, and details some of the results. A stable business environment, access to the EU markets, availability of talented workforce, developed infrastructure, EU and state incentives were among the most important factors of the location selection process for companies such as GE, BlackRock, IBM, Citi, ExxonMobil, BorgWarner etc. U.S. companies have had a vital role in the development of the market-based Hungarian economy. The continuous development and the cooperation networks of these corporations has had a significant impact on several industries and local communities throughout Hungary. The United States is the second largest investor in Hungary after Germany, with around 1,400 American companies employing more than 100,000 people and with more than USD 12.4 billion in

FDI stock in

2016

(15.3% of total FDI stock of Hungary, according to the National Bank of Hungary on March 25, 2019, based on data from 2016). Between 2016-2018, HIPA supported 39 projects from the States with a total investment volume of more than EUR 700 million. These projects in the field of manufacturing or service activities will create almost 7,000 new jobs in the coming years. The portion of projects of a high added value is significant. The number of American investment projects belonging to the “Invented in Hungary” category is growing: based on the latest investment decisions, five out of ten R&D projects will be implemented by U.S.-based information, communication and technology (ICT) companies, for example Flowserve, Itron, and Cloudera. Bilateral commercial trade reached USD 5.69 billion in 2018, showing a 5.4% increase compared to the previous year. According to the most recent data of the Hungarian Central Statistical Office, America is the third most important trade partner of Hungary outside of the European Union. With more than USD 3.5 bln of exports in 2018, America was the 11th most important export market for Hungary. Imports came to more than USD 2.1 bln, putting the United States at 15th place on the list of import source countries.

U.S. Giants

U.S.-based companies are present in various economic sectors of Hungary, from general and advanced manufacturing segments to a great variety of high valueadded services. By employment, U.S.

operations in the electronics, vehicle and engine parts manufacturing sectors play the most determining role. Ten giants (Flex, IBM, GE, Aptiv Group, Jabil, Lear, Adient, Arconic, Borg Warner, and National Instruments) employ more than

1,500

employees per company,

with locations stretching from Tatabánya to Debrecen. U.S. companies produce and/or develop a complex and wide range of products and services in Hungary, and are keen to install the most advanced technologies to boost productivity. On the other hand, they are open to cooperate with local vocational and tertiary educational institutions in order to train and employ their (future) employees. The services sector gained sizeable proportion amongst new projects during the recent years; around half of U.S. investment projects were in the field of ICT, business services (BSC) or logistics. U.S.-based ICT companies have traditionally had a strong presence in Budapest (for example IBM, Microsoft, Oracle, HP, GE, and Itron). HIPA has provided one-stop-shop services to U.S. BSCs (e.g. ExxonMobile, Ford, Thermo Fisher Scientific, and IFF) in establishing or expanding their operations in the field of finance, IT, HR, customer support related regional and/or worldwide activities. Although these companies are fierce competitors on the global financial market, the long standing local subsidiaries of Citi and Morgan Stanley are pioneering in sectorial cooperation with their fellow financial newcomers MSCI (2013) and BlackRock (2017).

and “traditional” asset-based incentive schemes are also available. In order to be eligible for a VIP cash subsidy for business services activities, investors should create at least 50 new jobs in all regions of Hungary which can be subsidized, in the case of investments aiming at the creation or the expansion of Regional Business Services Centers. For asset-based incentives, the investment in the “most preferred counties” (Nógrád, Szabolcs-Szatmár-Bereg, Békés, BorsodAbaúj-Zemplén) should reach at least

EURin volume, 5 mln

creating 50 new jobs. In the better off “preferred counties” (Vas, Zala, Veszprém, Somogy, Baranya, Tolna, Bács-Kiskun, Csongrád, Jász-Nagykun-Szolnok, Hajdú-Bihar, Heves) the investment should reach at least EUR 10 mln in volume, creating 50 new jobs. In “developed counties” (Győr-MosonSopron, Komárom-Esztergom, Fejér, Pest) the investment should reach at least EUR 20 mln in volume, creating 100 new jobs. Investments implemented by large enterprises can only be subsidized in the Central Hungarian region if the investment is located in an area which can be subsidized and the investor sets up a new establishment or expands the activity of the company with what is fundamentally a new activity.

Innovation Center

In addition to the “Made in Hungary” type of investment projects, we increasingly

focus on the “Invented in Hungary” type of opportunities, with the aim of becoming the innovation center of Europe. From the beginning of 2017, favorable changes have been introduced in the non-refundable VIP cash grant system in compliance with the requirements of investors with the purpose of supporting R&D and technology-intensive investments. The aim of the new form of VIP cash grant is to support capacity expansion and technology-intensive investments without creating new jobs. Those companies which already have 100 employees in Hungary and are considering a technologyintensive investment have the opportunity to benefit from VIP cash grant. The eligibility criteria is to invest at least EUR 20 mln and to achieve

30% increase

of revenue and/or wage costs within a four-year period. One of the main objectives of the VIP cash grant system is to promote R&D activities among large enterprises and the creation of R&D centers in Hungary. The government is able to grant aid for R&D projects anywhere in the country up to the maximum intensity of 25%. To be eligible, investors should reach at least EUR 3 mln worth of R&D projectrelated expenditure during a minimum of one and a maximum of three years and increase the R&D headcount by 25 employees.

Streamlining Processes

One of Hungary’s competitive advantages over other countries in the region is the government’s strong commitment to streamlining business processes and increasing the competitiveness of both SMEs and large corporates in Hungary. To help achieve this, HIPA offers wideranging incentives to facilitate foreign direct investments and reinvestments by local enterprises. The main types of incentives are cash subsidies (either from the Hungarian government or from EU funds), tax incentives and low-interest loans. The government considers technologyintensive investments and R&D investments as priorities in the field of investment promotion, providing VIP cash subsidy for such projects. In addition to these new forms of subsidies, business services-focused

Brain Bar Panel Discussion Hosted by HIPA HIPA hosted a professional discussion at Brain Bar, the biggest European festival on the future held at Corvinus University of Budapest. The panel, entitled “Earning a Spot on the World Map of Finance: Why Is Hungary So Attractive For Big Companies?” took place on Friday, May 31. C-level executives of U.S. companies such as BlackRock, MSCI, Morgan Stanley and Citi joined Róbert Ésik, the president of HIPA, to discuss the

experiences and prospects of U.S. financial institutions in Hungary. From left to right: Róbert Ésik (HIPA president); Melanie Seymour (head of global client service at BlackRock); Ákos Janza (head of the Budapest Office at MSCI Inc.); Beáta Juvancz (managing director, finance at Morgan Stanley); and Kevin A. Murray (CEO for Central Europe and country head for Hungary at Citi) with Yusaf Akbar, Associate Professor at CEU (moderator of the panel).

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Focus

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Budapest Business Journal | June 21 – July 4, 2019

Proud of AmCham’s American Roots and Values With the American Chamber of Commerce in Hungary celebrating its 30th anniversary, the Budapest Business Journal asked its current president, Farkas Bársony, to reflect on the journey AmCham has made in those years. ROBIN MARSHALL

BBJ: AmCham is celebrating its 30th anniversary this year. How has the chamber changed since 1989? Farkas Bársony: Since day one, AmCham’s purpose is to support foreign investment and to build a strong business community. Nonetheless, a lot has changed since ’89. Back then, many businesses and expats flowed into the country, lots of them American, because they saw tremendous potential in Hungary as we were ushering into a new era with the system change. It was clear early on that a strong network must be built to share knowledge, promote modern business conduct, develop international business relations and to lay down the groundwork for a more businessfriendly legal and tax system. The chamber was founded to address these needs and as it continued to progress and grow, the services expanded. Today we are in a position where we can focus more on issues integral to a successful future such as digital transformation, education and the labor market. BBJ: What were the biggest challenges in setting up the chamber? FB: The transition to a market economy was, of course, very difficult. Hungary lost a huge market with the collapse of the Soviet Union, but we gained a much larger one in the rest of the world. It was crucial to change the mindset of people, to move away from the establishment, to promote new values and to develop business culture. Lobbying, business networks and representative organizations such as AmCham were foreign territory here, and the lack of language skills had to be considered as well. BBJ: What have been the biggest AmCham landmarks along the way? FB: We could probably talk about this all day. The early years were all about growth. The AmCham name had to be established in Hungary and, of course, we needed a wide variety of companies to join the ranks in order to put weight behind

Farkas Bársony the organization, so it could be able to advocate on relevant issues effectively. During the ’90s, the chamber was fortunate to host several global leaders and highly acclaimed experts including U.S. President Bill Clinton and Microsoft’s Bill Gates. Our organization was also hit by the financial crisis; two-thirds of our members left basically, but AmCham regrouped and came out stronger than ever. What is probably more relevant now is that, over the years, the organization has successfully advocated for various beneficial changes such as the Company Act, Public Procurement Act and the game changing 9% corporate income tax. Five years ago, we revamped our advocacy work by introducing an annual cycle of consultation with our strategic government partners featuring regular state secretary and minister level meetings, new working groups, new flagship events such as the “Business Meets Government Summit” and the “Competitive Education Conference”, and the culmination of a year’s hard work, the annual “Cooperation for a More Competitive Hungary” recommended package. BBJ: As the American Chamber, you are seen as representing American business values. How well do these resonate in Hungary, and how has that changed? FB: We are proud of the roots of this organization and the impact its values had on business in Hungary. Without doubt, the arrival of American companies and the developing business relations led to more focus on efficiency, collaboration, transparency and accountability. While there is a noticeable improvement in entrepreneurship, we still have a lot to learn. AmCham

heavily supports this with the “Start Your Business” series. I would also like us Hungarians to be braver, willing to take calculated risks and incorporate the innovative spirit into our DNA.

“Today, the most pressing issues for our members concern education, workforce and digitalization. I believe these topics will set our agenda for the near future as well, so we do not expect a major change in our organization. Whatever the future may bring, AmCham will be ready to step up and lead in the efforts to make Hungary more competitive.” BBJ: The chamber is much more international than bilateral. What is the mix of nationalities represented, and why do you think non-American countries are drawn to it? FB: Today we represent 350 companies from 23 nations. One third is Hungarian, one third is American and one third is composed of international businesses. We are fortunate to have a strong and diverse membership so there is plenty of opportunity to learn and work with each other. It is the ideal place to build connections and promote

your brand. Furthermore, AmCham gives you the chance to make a difference, to define and discuss the most pressing challenges impacting your businesses with decision makers. BBJ: What is the key to being a successful lobbying organization? FB: Resilience, reliability and a strong foundation. First, we know that change takes time and sometimes we need to wait years until a recommendation gains traction and the right amount of support. Secondly, we established a good working relationship with the government and that is down to building trust and displaying dependability. AmCham Hungary is known as a solution provider. We do not just raise concerns or ask questions; we are here to utilize the expertise and knowledge of our membership to give answers and to take responsibility. Our goal is to be an indispensable partner in the mission to make this country more competitive and we can only do that by being open, consistent and constructive. At the end of the day what matters most is the membership itself. We are honored to represent so many powerful and successful companies. BBJ: How do you think the chamber will evolve over the next few years? FB: AmCham always reacts and changes according to the needs of the economy and the demand of the membership. Today, the most pressing issues for our members concern education, workforce and digitalization. I believe these topics will set our agenda for the near future as well, so we do not expect a major change in our organization. Whatever the future may bring, AmCham will be ready to step up and lead in the efforts to make Hungary more competitive.

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Budapest Business Journal | June 21 – July 4, 2019

Special Report Healthcare

Dissatisfaction

The private sector clearly benefits from dissatisfaction with the public service, but that is not to say Primus has not pinpointed areas where the public sphere could be made better. “The current situation could be improved through two important steps, mainly,” Leitner says. “The first is that more money should be invested in the

“As Hungarians, we can be proud of our doctors, they are highly trained and excellent professionals. It is no coincidence that our doctors are sought after by other countries. The professional level in state healthcare is good.”

CHRISTIAN KESZTHELYI

“We see patients transferring to private healthcare due to two reasons, mainly. The number one factor here is the shorter waiting lists for both diagnosis and special consultations, as compared to public health care,” György Leitner, president of Primus Private Healthcare Providers’ Association, tells the Budapest Business Journal. “Another key aspect is the customer experience; what some businesses would refer to as customer journey, is much better in private healthcare than the public. Patients feel to be cared for more appropriately in private health care,” he adds. Nowadays, private healthcare seems to pop up as a genuine option, even when it comes to basic examinations and less serious diseases, and the number of people using private services is constantly increasing. “Actually, I can say that at this level of service, private companies are competing in every area. In areas where we do not provide services, the only option is the state healthcare system,” Dr. Gyula Csermely, medical director and managing director of Rózsakert Medical Center tells the BBJ. “Doctors that can see you easily and quickly are available from 8 a.m. to 8 p.m. with no waiting list, and there are even services available at the weekend. There is quality time for patients, providing the opportunity for them to receive detailed information and counseling,” Csermely continues.

High Quality Care

“The doctor only needs to concentrate on providing expert care, because there is a nurse, receptionist, financial assistant, care assistant, administrator, payment assistant, accountant, etc., who all have a great service attitude towards both the doctor and patient and help form a vital part of providing high quality care,” he adds.

a very unhealthy nation on an EU-scale and globally too,” Leitner says. The private sector brings numerous advantages to the table, compared to the public sector. The main selling points seems to be availability, accessibility, and not having to wait very long to be treated. “The quality and quantity of time given over to the patient and, of course, the environment and conditions of the care count,” says Csermely.

The customer experience can be much better in private healthcare. Photo by Syda Productions/Shutterstock.com.

“Currently, the private healthcare sector is regarded as a rival for the public one. I rather see the two sectors as being more synergistic, both have their strengths and should learn from each other.” The private sector is growing rapidly in terms of outpatient care, imaging diagnostics and one-day surgery. According to the latest surveys,

nearly

60%

of the Hungarian population use private services, primarily due to the shortcomings of the state healthcare system, the director of Rózsakert Medical Center claims.

“Five years ago, it was more typical for patients to turn to a private healthcare provider for specific services such as fetal medicine, screening tests and specialist examinations. Now, because of the inaccessibility and conditions of the state system, more and more people are turning to private clinics for basic healthcare services,” Csermely insists. The current sentiment toward the public sector is hugely affected by funding. “Hungary

spends

7-8%

of its GDP on healthcare, which is relatively low in the European Union. Many countries spend more than 10%. On the other hand, one-third of total health expenditure is privately spent, which is one of the highest in Europe,” Leitner tells the BBJ. “What further worsens the situation is that the money we spend privately is out-of-pocket and not through health insurance schemes. As a result of all these factors, Hungary is

healthcare sector, and in a wiser way. At the same time, currently, the private healthcare sector is regarded as a rival for the public one,” he adds. “I rather see the two sectors as being more synergistic, both have their strengths and should learn from each other. Furthermore, through tax and other incentives, the private sector could be strengthened, taking some burden from the public sphere,” the association president argues. In particular, private practitioners are keen to praise what they say are excellent professionals working around the clock in public healthcare to offer the best treatment possible for those in need. “It is important to note that there are also a lot of excellent professionals working in state healthcare,” says Csermely. “As Hungarians, we can be proud of our doctors, they are highly trained and excellent professionals. It is no coincidence that our doctors are sought after by other countries. The professional level in state healthcare is good,” Csermely says of the hard work of his colleagues. “But state healthcare does not provide the opportunity for quality time, attentive care, which can be accessed easily quickly and in a better environment. This is what private healthcare has to offer,” Csermely concludes.

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Special Report

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Budapest Business Journal | June 21 – July 4, 2019

The Uphill Struggle Combating Rare Diseases like a resource center to another country. A team of experts has also been set up: economists, social scientists, special education teachers, etc. who work together. The federation would rely on EU funds to finance the initiative. There will likely be funds allocated to this purpose in the next seven-year package from 2020,” Pogány says. But even if financing is secured, there is still a lot to do. This field requires very complex knowledge so experts must be trained and their knowhow must be approved by physicians as well, Pogány says. Doctors also have to understand and accept the advice of these specialists. “A new cooperation culture must be developed.”

Coordination, more data and, of course, money are needed to improve the conditions of those living with rare diseases in Hungary. ZSÓFIA VÉGH

Being a patient is never easy but being one suffering from a rare disease is even more of a struggle. These conditions are hard to recognize and are often misdiagnosed, thus many are treated incorrectly. Often it takes years or even decades until patients get a correct diagnosis. Research and development of drugs for rare diseases is said to be more expensive (there are heated debates about the actual R&D costs of all kinds of pharmaceuticals and the lack of transparency). But thanks to some incentives – the EU passed legislation in the field ten years ago – developing them does make more business sense now. Also, due to their high price, these drugs can end up being quite profitable, despite benefitting only a small fraction of the population. Besides financial dilemmas, there are the social aspects of drugs. It is important to keep expectations regarding the introduction of a new drug realistic, as long-awaited treatments may prove efficient only for a small circle of patients, PharmaOnline quoted Judit Molnár Mária, director of the Institute of Genomic Medicine and Rare Disorders of Semmelweis University, as saying at a recent conference on rare diseases.

Coordination is Key

“Better financing, better access to drugs, a comprehensive database – they are all needed to improve the lives of those living with a rare disease. Yet what we are striving for the most

How Rare is Rare? Dr. Gábor Pogány giving a presentation. at the moment for all the above to happen is coordination,” Gábor Pogány, president of the Hungarian Federation of People with Rare and Congenital Diseases (RIROSZ) tells the Budapest Business Journal. More than any other field, the treatment of rare diseases is impacted by a lack of information within healthcare and in all related sectors. This is an issue as roughly 94% of rare diseases are non-curable at this point, Pogány notes, although he does add that there has been some recent improvement. So, when healthcare cannot provide a solution, it is the social system’s responsibility to ensure that the quality of life of these people is maintained as best as possible. It is just as much a matter of housing, education and employment as it is of healthcare. Based on international practice, the solution would be to centralize this field. Yet no nation is wealthy enough to be able to do that, Pogány adds. Therefore, regional and even continental centers are being created to deal with these tasks. The so-called European Reference Networks provide information and a point of reference to families and professionals

who also have difficulty when, for example, they want to refer a patient to an institute or for further care.

Patient Pathways

Using funds from the Norway Grants, RIROSZ has set up an information and call center to help people. “We are helping to manage patient pathways, but our capacities are limited,” Pogány says. As an example of a “fully-fledged” resource center, he cites the Norwegian Frambu Center where, upon being informed about a diagnosis, the patient’s entire family is invited to the center. “They spend a few days in there with professionals who basically teach them how to lead a life with a patient,” Pogány explains. Many Western European countries, including Norway, Sweden, the Netherlands, Spain, and Portugal, have a reference center. In this region, Romania and Croatia have them. RIROSZ is working on upgrading its center, but it will take time. “We joined several EU programs, we also have a method as to how to transfer an integrated care model,

To date, around 6,000-8,000 rare diseases have been identified. In the European Union, disorders occurring in fewer than one in 2,000 Europeans fall into this category. However, in total, these conditions end up being quite wide spread, as they affect an estimated 25-30 million people in Europe. In Hungary, more than half a million people are affected by some rare disease, or 6-8% of the population. In an average family practice of 1,5002,000 people, there are 120 rare patients based on a test study by the Hungarian Federation of People with Rare and Congenital Diseases. However, the doctor and the patient are often unaware of total numbers. Of the rare diseases, only a few hundred have a unique identifying code. As a result, they remain “invisible” to the social security system. There are no rare disease patient registers either, which explains why there is so much discrepancy between official figures. Officially social security spending on medicines for people with rare diseases totals about HUF 500 billion annually.

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Special Report | 17

News///in brief Gov’t Earmarks HUF 11 bln for Healthcare Development

The government has allocated HUF 11.18 billion from this year’s budget to prevention and healthcare services, napi.hu reported, citing the latest resolution published in official gazette, Magyar Közlöny. According to original plans, the allocation was to be HUF 42.8 bln, which has been increased by an additional 25%. The new amount aims to cover a salary increase for healthcare professionals, among other things.

Medical Chamber: Safe Patient Care no Longer Sustainable

The Hungarian Medical Chamber (MOK) said that safe patient care is no longer sustainable in Hungary. According to a statement published on its website at the end of May, MOK said a series of negotiations with the Hungarian government have not resulted in measures, which had disappointed the sector. MOK said the healthcare industry lacks a predictable future. In its latest

announcement MOK demands fact-based budget and financial coverage, an urgent wage increase, and status settlement for public dentists, nurses and retired doctors. MOK said safe healthcare is not available in Hungary despite the maximum level of voluntary overtime and regular labor law infringements in medical institutions.

Association Suggests Additional Insurance for Holidays

The Association of Independent Insurance Brokers (FBAMSZ) suggests all Hungarian travelers take extra insurance for summer holidays even if they have valid European health insurance card, profitline.hu reported. According to the association, the European card covers costs related directly to healthcare but fails to cover additional expenses such as transport, travel expenses for relatives or baggage loss. It also fails to provide 24-hour phone assistance to clients. FBAMSZ pointed out that it is highly recommended to have a “tailor-made” additional insurance made on the basis of both the destination and the planned program.

E-Med4All Europe Gets EUR 500,000

E-Med4All Europe, which is developing a cloud-based tele-diagnostic interface, is getting a EUR 500,000 injection from P.I. Invest B.V., the Hungarian startup told tozsdeforum.hu. E-Med4All Europe’s SCN4ALL interface uses a monitoring device and smartphone apps. The company’s first app, PregnaScan is a world first. It monitors the health of pregnant women through a system which follows and collects the physiological parameters of patients. The company wants to use the fresh capital for further developments and to enter the Western European and American market. P.I.

Invest is getting a 10% stake in the company via the injection, tozsdeforum.hu said.

Extraordinary Hungarian Trauma Society Meeting An extraordinary meeting has been called by the Hungarian Trauma Society to warn of the possible collapse of emergency surgery in Hungary. The society said on its website, mtrauma.hu, that traumatological care in Budapest is close to breakdown due to the critical staffing situation. Lack of financial, infrastructural and moral appreciation of medical professionals will no longer allow safe, continuous healthcare, mtrauma.hu claimed.

Make Sure you Attend Regular Check-ups if you Wish to Stay Healthy Why are health screenings important? 1. Screenings can detect some diseases and conditions which do not cause any symptoms in their early stages. 2. You can receive advice on how to change your lifestyle in order to preserve your health, helping you to prevent the development of certain problems and illnesses. 3. For most diseases, the earlier we detect the easier to treat. 4. We are not only concerned with the most serious diseases, as more easily treatable problems can also be screened for and treated, improving the quality of the patient’s life as a result. 5. It is far easier to stay healthy than to fight to regain your health. Which check-ups should I have and when? You shouldn’t undergo unnecessary tests, only those screenings you actually need. This depends on your sex, your age and your individual and family medical history. Rózsakert Medical Center has compiled the following recommendations on the basis of Hungarian and international best practices. SCREENINGS RECOMMENDED FOR EVERYONE Comprehensive general screening program • 60-minute physical examination, resting ECG, laboratory testing by age and

gender: under 40 years of age: every two years, over 40 years of age: annually • For chronic conditions (e. g: diabetes, high blood pressure): individual screening program Dental assessment and oral cancer screening • Every 6 months, oral health assessment and check-up, including oral cancer screening test • Every 6 months/annually, dental hygiene treatment • Over 40 years of age: periodontal assessment Skin cancer screening • Mole screening: over 18 years of age annually ESSENTIAL FOR WOMEN Gynecological cancer screening • Under 25 years of age: annual cytologybased screening, after first sexual intercourse • 25-65 years of age: cytology+ HPVbased screening every three years • Over 65 years of age: cytology-based screening annually Breast cancer screening • 0-30 years: if history of breast cancer in family, or if you have a complaint • 35-40 years: basic testing • Over 40 years of age: annually • Over 65 years of age: every two years (annually if there is a family history of the disease, or taking hormones)

ESSENTIAL FOR MEN: PROSTATE SCREENING Over 45 years of age, annual: • Comprehensive urology examination • Complete urinalysis test • PSA test FOR ANYONE OVER 40 Eye test • Basic test: around 40 years of age Ear-nose-throat and head and neck oncology screening • Examination of the ears, oral cavity, throat, larynx and neck, further examinations if necessary: above 50-55 years • People at high risk (with regular smoking, alcohol consumption, dealing with carcinogens and airway irritants, especially

with poor oral hygiene): above 40-45 years. Intestinal cancer screening • At 45 years of age: basic tests (earlier, if history of intestinal cancer in the family) • Over 45 years of age: every 8 years Bone density test • Over 50 years of age: basic test, then • Every two years if early menopause, family or personal instances of osteoporosis, thyroid disease, or longterm steroid intake • Over 65 years of age: annually Lung cancer screening Low-dosage chest CT scan annually: • Over 55 years of age • Who have smoked one pack of cigarettes a day for 30 years, or two packs a day for 15 years

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Special Report

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Budapest Business Journal | June 21 – July 4, 2019

Market Talk: Private Medical Care an Increasingly Healthy Market The private healthcare sector appears to have reached a tipping point, and what earlier used to be the privilege of a few, now attracts ever-growing numbers of patients, while businesses are also sprouting up. CHRISTIAN KESZTHELYI

“The private healthcare provider market in Hungary has gone through a great evolution in the past three to four years. The market has very recently reached a turning point. Companies have become more active in marketing and brand building and five or six investor groups have created a vivid M&A activity in the sector,” György Leitner, president of the Primus Private Healthcare Providers’ Association, tells the Budapest Business Journal. Patient numbers have also been on the rise in the private sector. At this point, almost two-thirds of Hungarian citizens have taken private healthcare services, which is not anymore the privilege of the rich, but ever more lower-middle class people are opting to pay privately for medical services. Petra Kelemen, PR and marketing manager at Swiss Medical Services Kft., quotes figures that appear to confirm the growing tendency. “The market is growing by 10% year-on-year; large providers like Swiss Medical grow by

clinics’, practices operated in a block of flats,” Leitner points out. “These practices usually operate in the grey zone from a taxation point of view. Such practices account for 80% of the total private healthcare market. The market has been on double-digit

Dennis A. Diokno, FirstMed-FMC Kft.

around

15%.

The competition is getting fiercer, large investors are entering the market,” Kelemen says. She adds that in the past half a decade the market size has tripled, salaries have doubled while profits have stayed around 12-14% of gross income. “Nevertheless, the market is hugely fragmented due to the so-called ‘flat

growth, performing consolidation, and private health spend will soon reach EUR 1 billion,” Leitner adds.

Growing Demand

In parallel with this growth, comes increased demand. “In Hungary, a third of expenditure in health comes from the private money of patients (while these

individuals also make tax contributions to public healthcare). Hungary’s improved economic performance means that there is greater demand and also more money available: people are able to spend more on their health,” Dr. Gyula Csermely, medical director and managing director of Rózsakert Medical Center tells the BBJ. “With growth comes improved quality, which supports the high expectations patients have of their private healthcare. Because the number of service providers on the market has grown dramatically, there is more choice and when it comes to their health, and people want the best quality. We constantly monitor our customers’ needs and feedback to ensure we are always able to supply the highest possible level of healthcare,” Csermely adds. Dennis A. Diokno, the CEO and founding partner at FirstMed-FMC Kft., confirms the view of his colleagues and competitors. “The private healthcare sector is growing. There are a lot of new entries, M&As. It is also worth mentioning that demand is growing as people increasingly turn to the private sector for smooth, high-quality services,” Diokno says. “Healthcare in Hungary — as in all parts of the world — is one of the most dynamic industries in which to be. It is interesting to see how digital transformation is redefining patients’ expectations as well as opening up new horizons for customer care as well as healthcare services,” Diokno adds. The market seems to be a lively one; investments are growing, which is well-represented by the mergers and acquisitions activities. This sentiment leads to strong competition. “Individual institutions are becoming increasingly specialized in certain areas and are able to provide an even higher level of service, while there is also tremendous competition to get the best specialists in their field,” says Csermely.

More Services

Service providers and private clinics who offer comprehensive healthcare are looking to improve, offering their patients an

increasingly wide range of services with an emphasis on excellent quality. “We are a founding member of the Primus Association of Private Health Service Providers. One of the association’s primary objectives is to create a set of quality standards. If a provider meets these standards, it can receive the Certified Private Health Service Provider Trademark,” Csermely adds. Private healthcare providers are also paying special attention to customer experience. “We believe that the highest level of expertise, human-centered treatment and attentive, constantly evolving services are the foundation of growth,” Csermely explains.

Dr. Gyula Csermely, Rózsakert Medical Center This echoes president Leitner’s view. Talking about the differences between the private and public sectors, Leitner mentions the customer experience of patients as one of the main drivers for people transferring from the public sector to private care. (See a more detailed comparison of the sectors on page 15.) “It is also clear that the patients themselves now want more than what an ‘apartment clinic’ can provide. They want comprehensive healthcare, first class patient management, constant availability, convenient services and a bill after receiving their treatment. This is what a professional institution can offer,” Csermely concludes.

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Taking a Complex Approach to Private Healthcare having more patients every day, we strive to provide this. Should anyone have a complaint regarding care or the services, we deal with them individually and the patient doesn’t get lost in the system.

Petra Lancsalics, managing director of Dr. Rose Private Hospital, talks to the Budapest Business Journal about the role private healthcare service providers can play.

BBJ: Part of your client list is drawn from companies. How have legislative changes around corporate medical insurance impacted your business? PL: It took years of education for companies to recognize the importance of paying attention to their employees’ state of health; the labor shortage, too, has contributed to this perception becoming more widespread. We entered this market in 2014 by coming to an agreement with Union Biztosító. Many of our patients, CEOs, wanted to have this service available for their employees: this pushed us to open to this segment as well, again, to enhance the complexity of our services.

ZSÓFIA VÉGH

BBJ: In Hungary, access to healthcare is provided on a universal basis and many still believe that should be the case. What impact do you think this has on private healthcare? Petra Lancsalics: People used to turn to private healthcare for a specific intervention or for care in certain medical branches like gynecology or dentistry. With waiting lists in public healthcare getting longer and access to quality care becoming more difficult, this tendency is no longer that marked today. More people use private healthcare services; as a result, the sector is growing more dynamically. BBJ: Has the number of your patients grown as well? PL: In the past few years, patient numbers have grown by 15-20% per year. Besides the aforementioned factors, we owe this to our striving to provide complex care. Since Dr. Rose was founded in 2007 and in-patient care was launched in 2010, we have constantly developed the range of our services based on patients’ needs. We are a premium-category institute – openly the most expensive one in Hungary – so our client base consists of people who are more health conscious and are willing to spend on their health preventively. This circle has widened since, also in line with the number of services/fields added, with patients who may not become “regular”; rather, they come to us a for specific treatment such as a hip replacement, but go elsewhere to have an annual screening test done. The fact that there is no waiting list and care is provided on the same day the request comes or the friendly, patient-focused service also helps this process. BBJ: Have you modified your strategy? PL: In the past few years, market conditions have changed substantially: competition for patients and physicians has become more fierce. In this setting, a more innovative, forward-looking approach is the one that can ensure our competitive edge in the long run and our new owners support this view. When talking about being innovative, I don’t mean going against business policies or following a strategy different from the one set by the previous owners. [Editor’s note: Dr. Rose has new owners since late 2018]. I am thinking of developing equipment, services; we wish to put more

“The decisions taken on healthcare at a governmental level obviously impact the operation of this segment. With waiting times increasing, dynamic growth in private healthcare will likely continue, but we would rather not estimate growth figures as a result.”

Petra Lancsalics

emphasis on our surgical procedures, for example, obstetrics so that mothers can give birth in near home-like conditions. In-patient care has been developing at a fast pace and plastic surgery, orthopedics and gynecology are the fields that have seen huge development in past six months.

We also try and accentuate medical aesthetics more. We opened an out-patient surgery in Buda a year ago where mainly laser treatments are available to offer a more complex service and options for a problem. These are also the fields that are the most profitable. BBJ: What do you do to attract new patients and keep existing ones? PL: Providing complex services is key, even in fields that are unavailable at our facilities. One is emergency care, which remains in public healthcare’s authority. We cooperate with other institutes, for example, Uzsoki Hospital, where patients requiring intensive care are treated at the hospital’s VIP department, or Pozitron Diagnostics where MR or CT-screening – equipment we at Dr. Rose don’t have – can be done. Cooperation between physicians is also an important factor. We provide care in more than 40 fields where our specialists work in teams and can discuss a patient’s care during a rapid session and can prescribe the best possible treatment. Providing tailored care for each patient is one of our biggest strengths. Despite

This January, tax-exemption for corporate health insurance was cancelled. We do have a few partners that did not renew their agreement with us, citing the change in legislation, but their number is low. Most would rather incorporate this cost in their budgets as employee satisfaction is important for them. Also, down time is reduced considerably. We try and offer more possibilities to our partners such as “target-specific services” that basically serve as an alternative to health care packages. BBJ: How do you see the future? What do expect to achieve in the coming years? PL: The decisions taken on healthcare at a governmental level obviously impact the operation of this segment. With waiting times increasing, dynamic growth in private healthcare will likely continue, but we would rather not estimate growth figures as a result. We do have some targets set: we aim to provide premium-level professional service in the first place, as we believe that providing complex care at a high-level and additional services are the key to remaining competitive in the long run. As for short-term goals, we are planning to expand our in-patient care, our most rapidly growing segment. Developing equipment, applying new surgery techniques and hiring renowned professionals are also planned.

20 | 4

Special Report

www.bbj.hu

Budapest Business Journal | June 21 – July 4, 2019

Private hospitals and clinics

aFFidea diagnosztika www.affidea.hu

budai egészségközpont kFt. www.bhc.hu

mediCoveR egészségközpont www.medicover.hu

RóbeRt káRoly magánkóRHáz

www.robertkorhaz.hu

duna mediCal CenteR kFt. www.dunamedicalcenter.org

8,846 (2017)

7,500

6,034 (2017)

www.rmc.hu

k-med kFt.

www.sasszemklinika.hu

pozitRon-diagnosztika kFt. www.pet.hu

oxygen mediCal kFt. www.oxygenmedical.hu

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

Outpatient care, corporate health programs, prevention screening, male and female screening packages, manager screening, lab screening

1991

505

– Affidea Diagnostics B.V. (100)

györgy leitner – –

1054 Budapest, Szabadság tér 7. (1) 803-6464 –

Budai Egészségközpont Kft.

Addictology, allergology, Anesthetics, audiometrics, internal medicine, dermatology, diabetology, dietetic counseling, life style consulting, endocrinology, vascular surgery, food intolerance, physiotherapy, dentistry, obstetrics, gastroenterology, geriatrics, spine surgery, spine surgery, pediatrics, hematology, hepatology, neurosurgery, immunology, infectology, cardiology , nephrology, neurology, gynecology, oncology, orthopedics, osteoporosis surgery, plastic surgery, proctology, psychiatry, psychology, pulmonology, radiology, rheumatology, sports cardiology, surgery, ophthalmology, traumatology, urology, travel consulting, vaccination

Complex spinal reflexology, inpatient care, preventive screening tests, management screening, arteriography, laboratory tests, company health programs, R&D

2001

471

Medikomp Kft. (40) Bonitas 2002 Zrt. (60) –

péter pál varga Anett Végh András Kiss

1126 Budapest, Nagy Jenő utca 8. (1) 489-5200 info@bhc.hu

Medicover Egészségközpont Zrt.

Laboratory tests, internal medicine, dermatology, bone densitometry, ODM, CT examinations, dietetics, endoscopy, physiotherapy, dentistry, ear nose healing, gastroenterology, pediatrics, physiotherapy, gastric mirroring, cardiology, mammography, MR examinations, neurology, gynecology, orthopedics, proctology, psychiatry, pulmonology, rheumatology, surgery, colon cancer screening, ophthalmology, traumatology, ultrasound tests, urology

Hospital operations, health insurance, dentistry, vaccination center, MRI, CT, ODM international medical tourism

1993

456

MI Hungary Kft. (100) –

lászló benedek, katalin Juhász, János Rózsás – –

1134 Budapest, Váci út 29–31. (1) 465-3100 info@medicover.hu

2011

154

MedAlliance First Kft. (100) –

istván gergely schiszler – –

1135 Budapest, Lehel utca 59/C (70) 377-4845 info@robertkorhaz.hu

János bartók – –

1095 Budapest, Lechner Ödön fasor 7. (1) 790-7070 info@ dunamedicalcenter. com

name oF opeRating Company

Imaging diacgnostics, CT, MR ultrasound, x-ray, mammograpgy, osteoporosis, isotop diagnostics, allergology, interAffidea nal medicine, dermatology, diabetology, Magyarország labor medicine, ear-nose-throat, cardiolKft. ogy, gynaecology, rheumatology, aviation medicine, surgery, sports medicine, eye doctor, urology, laboratory tests

aReas oF speCiality

2,411

2,201

Allergy, internal medicine, diabetology, hematology, dermatology, dietetics, vascular surgery, occupational health, ear and labyrinth arthrosis, gastroenterology, child gastroenterology, pediatric Duna Medical cardiology, cardiology, infertility, neurolCenter Kft. ogy, gynecology, oncology orthopedic traumatology, proctology, psychology, psychiatry, rheumatology, ophthalmology, pulmonary and respiratory allergology, urology, anesthesiology, bariatric surgery

top loCal exeCutive CFo maRketing diReCtoR

addRess pHone email

Hospital (inpatient) and one-day surgery in the following fields: vascular surgery, ear and nose arthrosis, gastroenterology, general surgery, neurosurgery, gynecology, orthopedic traumatology, proctology, ophthalmology, urology, bariatric (obesity) laboratory tests, molecular diagnostics, bone density test, ultrasonic tests, comprehensive screening rehabilitation physiotherapy and physiotherapy

2014

136

– International Medical Centers B.V. (100)

Allergy, audiology, cardiology, center of pediatrics, chiropractic, dental center, dermatology, diabetology, dietetics, ear-nosethroat, endocrinology, fetal medicine center, 24-hour pediatric care, gastroenterology, gynecologic oncology emergency care provided by surgery, headache clinic, hematology, immu- internist and pediatrician during nololgy, infectious disease medicine, internal office hours, RMC Health Mainmedicine, international vaccination center, tenance Screening Program, lifestyle change programs, nephrology, services for mom & baby, neurology, obesitology, obstetrics, gynecology, oncology, ophthalmology, orthopedics, services for expectant mothers health and beauty services plastic surgery, proctology, psychiatry, psychology, pulmonology, radiology, rheumatology, same day surgery center, therapeutic massage, urology, vascular surgery

2001

Ÿ Ÿ

gyula Csermely Zsuzsanna Kadala Anikó Kiss

1026 Budapest, Gábor Áron utca 74-78. (1) 392-0505 info@rmc.hu

1,722

Rózsakert Medical Center Cégcsoport

1,543

K-Med Kft.

Refractive surgery (laser eye operation)

–

1997

Varga és Társa Befektetési Kft., PMSZO Holding Kft. (100) –

botond Halmai – –

1118 Budapest, Ménesi út 57. (1) 250-5505 info@ sasszemklinika.hu

1,507 (2017)

Dr. Rose Magánkórház Kft.

Allergology, internal medicine, dermatology, diabetes, dietetics, endocrinology, ear nose, gastroenterology, immunology, cardiology, manual therapy, neurology, family planning, gynecology, pregnancy, obstetrics, orthopedics, plastic surgery, aesthetic interventions, psychiatry, proctology, radiology, rheumatology, surgery, ophthalmology, somnology, urology, pediatrics

Complex inpatient care, diagnostic tests, prevention screening tests, annual card packs, surgeries, rehabilitation, corporate health services, health insurance packages, occupational health care, international vaccination center

2005

112

(100) –

andrás kókay, petra lancsalics – Boglárka Keresztes

1051 Budapest, Széchenyi tér 7-8. (1) 377-6737 info@drrose.hu

1,406

PozitronDiagnosztika Kft.

Cancer diagnostic PET / CT coronaria CT, computer tomograph (CT) examinations, complex cardiology, psychiatric and endocrinological diagnosis, labordiagnostics

– Cross Border Management Holding GmbH (100)

andrás kókay, gábor Félix gombos Gábor Félix Gombos –

1117 Budapest, Hunyadi János út 9–11. (1) 505-8888 info@pet.hu

Oxygen Medical Kft.

Allergology, dermatology, diabetes, endocrinology, vascular surgery, physical therapy, dentistry, occupational health, otorhinolaryngology, gastroenterology, cardiology, laboratory testing, ophthalmology, rheumatology, ultrasound, urology

– katalin brigitta putz Hammond Sales LLC – (100) –

1042 Budapest, Árpád út 47. (20) 554-1498 info@ oxygenmedical.hu

dR. Rose magánkóRHáz kFt. www.drrose.hu

oWneRsHip (%) HungaRian non-HungaRian

Gynecology, infertility center, Dermatology, diabetology, endocrinology, aesthetic restoration surgery, gastroenterology, hand surgery, sexual hand surgery, gynecological onRóbert Károly diseases, gynecology, orthopedics, cology surgery, vascular surgery, Magánkórház surgical examination, ultrasound spine surgery, thyroid surgery, Zrt. diagnostics, urology andrology, ear and proctology, perineology, abdominose archeology, cardiology nal surgery, plastic surgery

RózsakeRt mediCal CenteR 6

otHeR seRviCes

no. oF Full-time employees on may 1, 2019

Company Website

yeaR establisHed

total net Revenue in 2018 (HuF mln)

Rank

Ranked by total net revenue

253

Radiopharmacon production

–

2005

2008

This list was compiled from responses to questionnaires received by June 14, 2019 and publicly available data. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of press time. While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, Madách Imre út 13–14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

www.bbj.hu

Budapest Business Journal | June 21 – July 4, 2019

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Celebrating International Yoga Day in Hungary

I’ll be celebrating International Yoga Day on Saturday (June 22, the day after this issue is published) along with my fellow yoginis and yogis in Szeged at a public yoga class. DAVID HOLZER

This will involve all the different yoga groups in the city and will, so my fantastic yoga teacher Ági tells me, be blessed with the presence of the Indian Ambassador to Hungary. International Yoga Day has been celebrated in Hungary ever since it was declared as such by the United Nations General Assembly in 2015. The event was proposed by the then Prime Minister of India, Narendra Modi in 2014. He summed up the value of the practice and its significance in an address, saying “Yoga is an invaluable gift of India’s ancient tradition. It embodies unity of mind and body; thought and action; restraint and fulfilment; harmony between man and nature; a holistic approach to health and well-being. It is not about exercise but to discover the sense of oneness with yourself, the world and the nature. By changing our lifestyle and creating consciousness, it can help in well-being. Let us work towards adopting an International Yoga Day.” If you’re a yoga devotee in Budapest, you’ll also be able to attend free public yoga events on

June

22.

International Yoga Day is actually June 21 but, as this is a work day, the likelihood of thousands massing in Hungary’s parks is presumably not that likely. Shame. It would make for a fine peaceful revolution.

India-Hungary Partnership

The Indian Embassy offers a daylong celebration of yoga and, as it puts it, “India-Hungary Partnership” at Bálna Budapest, the whale-shaped cultural center by the river on the Pest side. This is supported by the Budapest Sivananda Jógaközpont people. Also on Saturday, you have the Solstice Yoga Festival on Margaret Island, organized by the Atma Center and Mantra Yoga Studio. If you want to explore the more exotic byways of the world of yoga, today (Friday)

Participants in a mass yoga event in New York. Photo by Pri Ma/Shutterstock.com. Navnihal Kaur, leader of the Adi Shakti Kundalini Yoga Center will be holding a Summer Solstice Gong Bath called a Gong Puja at Harmonia Place, Budapest that lasts for between seven and eight hours. According to Zoltán Ambrus (Kundalini Yoga name Navraj Singh), who runs the Adi Shakti Kundalini Yoga Center in

“Yoga is very popular in Hungary and I’m glad it’s reaching more people every year. Here you can now find everything from traditional yoga to the new wave styles.” Budapest with his wife, “The vibration of a gong is a powerful method for reducing stress. The gong creates an ocean of sound that is profoundly relaxing; a state which activates the parasympathetic nervous system to balance the sympathetic nervous system. A gong bath is excellent therapy for depression, fatigue, feelings of separation, loneliness, anger, fear, hostility and many other conditions caused by a lack of balance and harmony in the body and mind.” If you’ve never had a gong bath, I urge you to try one. They really are incredibly relaxing. So much so that I always enter into a most pleasant altered state and often drift off to sleep entirely. I have to say that I’m tempted by the idea of a marathon gong bath.

European Pioneer

When I first came to Hungary, I thought that yoga was a recent introduction to this country. I assumed yoga was just another manifestation of the Western vogue for wellness. But I couldn’t have been more wrong. Hungarian spiritual teacher Elisabeth Haich and Indian yogi and author Selvarajan Yesudian, who arrived in Hungary in 1937, opened what’s claimed to be the first ever European yoga school in Budapest

1941.

It operated until 1948 when the communists came to power. Haich and Yesudian fled to Switzerland where they founded a new yoga school. I’m not sure how yoga was regarded under Hungarian socialist rule. The spiritual, mystical aspects of the practice would have been frowned on for sure. If the situation was anything like it was in Russia, yoga would have gone underground. If anyone reading this knows the story, please let me know via this newspaper. Today, yoga studios are springing up all over Hungary. It’s possible to practice every contemporary style, from hot Bikram yoga to gentle, relaxing Yin yoga. One of these studios is the popular Aum Jógaközpont which makes a point of offering classes in English at its Astoria and Blaha studios in central Budapest. For Renáta Szili of Aum, “International Yoga Day is a great reason to just be together and practice various forms of yoga with passionate teachers and loads of other fellow yogis. Energies and joy are

multiplied when we practice in a group. Yoga is very popular in Hungary and I’m glad it’s reaching more people every year. Here you can now find everything from traditional yoga to the new wave styles.” In future, Szili hopes that “more and more people will realize that yoga is actually a very practical guide to living a balanced life. It’s OK to start with yoga on a physical level and stay at that place. But there’s so much more to the practice.” I absolutely agree. I got into yoga in my forties because I needed to become healthier. But I’ve stuck with yoga because of the extraordinary way it’s transformed just about every aspect of my life. If you’ve never done yoga before and find the time to take part in an International Yoga Day event, maybe it’ll be the first step on your yoga journey. I hope so.

Find out more about the Budapest events on June 22 at the Facebook pages for Sivananda Jógaközpont and Napforduló Jógafesztivál. If you’re intrigued by the notion of a gong bath, go to www. shaktijoga.hu. For details of yoga classes in English at Aum, visit www.pest.aumyoga.hu.

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www.bbj.hu

Budapest Business Journal | June 21 – July 4, 2019

Cross-border Kékfrankos Musings Having been blown away a couple of years ago at a blind tasting of Hungarian Kékfrankos by a wine coming from well off the beaten track, from Vashegy (Iron Hill), the westernmost winemaking spot in Hungary, it was a pleasure to recently visit this hill that straddles the Austrian border. ROBERT SMYTH

This is where Pannonian heat coming from the Hungarian Plain meets the influence of the cool Styrian climate, providing balance for the grapes; the hill is called Eisenberg in German, and it’s also the easternmost winegrowing point in Austria. As the names implies, iron is a key component in the soil. Furmint once thrived in this region, but it is Kékfrankos, or Blaufränkish as the Austrians call it, that is king now. The Hungarian portion is nowadays officially part of the Sopron wine region, although it lies a long way from the ADVERTISEMENT

region’s other producers. The Austrian part lies in the southern Burgenland and, as the Austrians were quick to point out, the entire Burgenland was part of Hungary until 1920. The aforementioned wine that I had enjoyed so much was by Imre Garger, who continues to bring out classy Kékfrankos, such as his Válogatás 2015, with its potpourri and red fruit aromas, lovely grainy tannins, spicy and herby notes. It has high alcohol (14%) for the grape, which rarely tips the scales at more than 13.5%, but it doesn’t stick out. It is a bargain at HUF 2,800 a bottle from the cellar (delivery

to Budapest is free if six bottles or more are purchased). Garger considers himself as a Hungarian-German (coming from a Bavarian German background whereby the settlers came to the area 900 years ago) and also a hobby winemaker; in sporting terms he is more than ready to turn pro, although he makes just 8,000-10,000 bottles a year.

Spontaneous

All his wines, except for the rosé, are made via spontaneous fermentation. He makes his wine in the border-hugging Vaskereszt, a village of just 330 inhabitants, the majority of whom work over the border in Austria in various jobs, rather than turn out wine from what I feel is tremendous terroir. However, I have heard from Somló’s Kreinbacher winery that it now has a Kékfrankos vineyard here. Owner József Kreinbacher himself comes from Vaskereszt. As part of the 2019 edition of the Austrian Wine Summit, exploring the theme of “Vineyard Interfaces in the Heart of Europe”, it was exciting to taste a trio of Kékfrankos wines made from grapes grown in Hungary on Vashegy, yet vinified in Austria – the ultimate in cross-border Kékfrankos/Blaufränkisch cooperation. Garger is involved in the production of two of the wines. One is a joint project with his Austrian cousin Rainer Garger, a Grazborn Vienna-based businessman who came up with the idea and finances the “Nador project”, whereby his cousin grows the grapes, with the esteemed Eisenberg vintners Reinhold Krutzler and Christoph Wachter of the Wachter Wiesler winery making the wine. Incidentally, Krutzler’s own “Perwolff” 2012 Burgenland Blaufränkisch 2012 was perhaps the star of the show of Eisenberg Blufränkisch from Both Sides of the Border. Perwolff used to have a few percent of Cabernet Sauvignon in it, presumably to beef up the body, but this wine misses nothing and strikes a lovely balance between youth and maturity. Unfortunately, it doesn’t appear to be available in Hungary any more.

Vibrant Youth

Eisenberg Hungary Kékfrankos Ried Wanzer “Nador” 2012 (EUR 29 from nadorwine.com), comes from vines that were just nine years old at the time the wine was made. Note that ried means vineyard and denotes a single-vineyard wine. This elegant and balanced wine flies in the face of the assumption that you can only make really fine wine from older vines. Despite having a few years of ageing under its belt, this still retains a hint of youthful purple in its color and the freshness continues on the nose and palate with the fabulously pure red fruit,

especially sour cherry, alongside a subtle earthiness. Another wine made on the other side from Hungarian grapes is the Thom Wachter Kékfrankos 2017, which was fresh and juicy with raspberry joining the sour cherry. Wachter bought the grapes from Garger and earlier the two made a wine together. Schiefer & Domaines Kilger Ried Voller 2017 “Pala”, which refers to the slate soil (on the Hungarian side) from which it comes, was complex and vibrant with a nice floral touch. Wines made in Sopron (which famously voted to stay part of Hungary in 1921, earning it the title “The Most Loyal Town”) were also featured in a Mittelburgenland tasting as part of the Austrian Wine Summit, including Franz Weninger’s Spern Steiner Kékfrankos 2015, an earthy expressive biodynamic wine that’s low in sulfur. Weninger has wineries on both sides of the border. The Kékfrankos 2013 from Péter Wetzer, a tiny organic producer, was in great shape with lots of spiciness and complexity. Pfneisl’s “Mesés Vidék” 2007, from a winery run by two Austrian sisters, showed how well Kékfrankos can age, thanks to its vibrant acidity and initially rough tannins that become deliciously fine-grained with time. Kékfrankos typically gets classier with age, yet so little of the older stuff can be found. It was also a Kékfrankos from Sopron that shone through at a blind tasting to select the best Kékfrankos to serve to visiting foreign dignitaries and heads of state in the Országház bora 2019. Made by Etyeki Kúria, which now has around 40% of its vineyards in Sopron and works in cooperation with the Burgenland’s Weingut Esterházy, Kékfrankos 2015 (HUF 4,650 from Bortársaság) was aged for a year in 300 liter barrels, half of which were new. This delightfully vibrant wine also scored 88 points in the Decanter World Wine Awards 2018.

Tale of the Grape Hungary actually has more Kékfrankos than Austria has Blaufränkish, which Austrianwine. com describes as a “traditional Austrian variety [that] is a cross between Blauer Zimmettraube and Weißer Heunisch”. It notes: “Blaufränkisch was previously widely-planted throughout the Habsburg Monarchy.” In Germany it is called Lemberger, which comes from the presentday town of Maissau in Niederösterreich (in presentday Austria), which was formerly called Limberg.

www.bbj.hu

Budapest Business Journal | June 21 – July 4, 2019

PRESENTED CONTENT

Open Air Theater With World Stars

BBJ: The audience applauded you on stage for decades. How does it feel seeking their recognition from the other side? Teodóra Bán: My work is facilitated by knowing the stage world; I personally experienced the sensitiveness of artists. I feel what they need for fulfilment, almost on an instinctual level… Numerous world stars appear at the Margaret Island Stage, and we, the organizers, consider them as our ambassadors. On the internet, they do us a great service with their photos on their social media sites and the praise they share with many: they popularize the cultural values of Budapest, and the viewers “advertise” us too. A lot of people put in a lot of effort, and Budapest won first place at the European Best Destinations competition. For me, the mission is popularizing the wonderful values of the capital. Alongside its historical and natural features, its architecture, and wonderful baths, the Margaret Island Open Air Stage is also a guest-attracting brand. If I expect guests at home, I compile the dinner from the

BBJ: Who are the most significant stars this year? TB: Eight world famous guests will arrive for our shows. We managed to get Marcelo Álvarez to perform in the “Bajazzos” here after the New York Metropolitan and Opera de Monte-Carlo. One of the most versatile tenors today, Pavarotti-mentored Vittorio Grigolo will also give an opera gala concert. Cristina Pasaroiu and José Cura are two sought-after opera singers, who will enchant the audience with “Turandot”. Our violin virtuoso performer, Nigel Kennedy is featured in the Guinness Book of Records. Nicola Benedetti, one of the most influential classical artist of our time will perform Tchaikovsky’s “D Major Violin Concerto” with the San Francisco Symphony Youth

“The other miracle is the environment of the Margaret Island stage, surrounded by ancient trees. The sizes are grandiose as well. Its auditorium holds 3,000 people, the stage is twothree times as large as that of an average permanent theater. The pieces need to be adapted to the location to let them appear in their full glory.”

BENCE GAÁL

Despite her unfortunate early retirement from dancing at the peak of her career, she remained true to theater, culture and the audience. In the 1990s, she organized several pioneering cultural events in Hungary. She has been leading the Budapest Festival and Tourism Center for six years, responsible for performances at cultural events ranging from the internationally recognized Spring Festival to the Christmas Fair at Vörösmarty tér.

Socialite | 23

achieve the results of the immense work, done with love, that went into the preparation of the programs. Photo by Judit Dombóvári

Teodóra Bán, formerly a successful ballet dancer, has been the head of the Open Air Theater, organizing the summer shows of the Margaret Island Grand Stage and the Városmajor Open Air Stage, for some 15 years. The Budapest Business Journal asked her about this year’s open air programs and what happens behind the scenes.

Teodóra Bán finest meals. For those who arrive in the city, I offer delicacies of art, to make them choose this place, which, in my opinion, is the center of Europe, due to its dynamic cultural scene. When they arrive, they should see that the promises are fulfilled. BBJ: Who is the target audience of the festival? TB: The Budapest Summer Festival name really covers the two huge open air theaters in the Hungarian capital, one on Margaret Island and the Városmajor Open Air Stage. The latter features many excellent prosaic and children’s shows, requiring a knowledge of the language. The favorite of the foreigners is the Margaret Island stage; its mostly musical programs are accessible for everyone in a wonderful green environment. A real cavalcade of genres awaits visitors: opera, large symphonic concerts, ballet, folk dance, contemporary dance, operetta, and musical. So, both younger and older visitors, the lovers of classical and lighter entertainment can find the program they like.

BBJ: What kind of challenges does the organization of open air performance pose? TB: It is a challenge in itself that the summer lasts three months; the festival is not focused on a single genre, unlike many famous European festivals, diversity provides its magic. The other miracle is the environment of the Margaret Island stage, surrounded by ancient trees. The sizes are grandiose as well. Its auditorium holds 3,000 people, the stage is two-three times as large as that of an average permanent theater. The pieces need to be adapted to the location to let them appear in their full glory in front of the audience. For the operas and musicals, twice as many characters need to move around the stage as during other performances. The tall, shrubby trees behind the stage serve as props, utilized well in the garden scene of the “Turandot” performance, but they will also be in the limelight during the cacodemon (evil spirit) story adaptation of the classic ballet “Giselle”, and others. Of course we need the support of the weather to

Orchestra and conductor Christian Reif. Pink Martini from Oregon will also feature. Four famous groups will also perform at our evenings. The ballet group of Mariinsky Theater will enchant the audience with Prokofiev’s “Cinderella”. The artists of the Novosibirsk State Academic Opera and Ballet Theater will come with the classic ballet “Giselle”. The National Georgian Ballet will present Sukhishvili’s “Dance Night”, and we also invited Hervé Koubi’s genial production called “Barbarian Nights”. BBJ: What do you consider the highlight of the performances? TB: The longest summer festival in Europe has multiple highlights. Almost every genre represents a highlight. We are full of attractions, productions offering a special experience, that can only be seen here, at Margaret Island. I’m especially proud that last year we managed to bring back the outstanding genre of classical Hungarian culture, the operetta, which demands excellent voices. The “Csárdás Queen” by Imre Kálmán will be presented for the first time on the open air stage. We are trying to appeal to a wide layer and give them a great experience with our offerings. It is a stage with traditions where stars such as Giuseppe Patané, Yevgeny Nesterenko, and Lamberto Gardelli have performed, laying the base for the venue’s reputation. This also requires us to provide quality entertainment, a faultless enjoyment of art to the audience.

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