Budapest Business Journal 2715 by Business Publishing Services Kft.

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BUSINESS JOURNAL BUDAPEST

VOL. 27. NUMBER 15

AUGUST 2 – SEPTEMBER 5, 2019

SPECIAL REPORT

Translation

SPECIAL REPORT

Untrained Businesses Dilute Market The Hungarian translation market is a busy sector employing a huge number of freelancers, with large agencies fighting price depression caused by one-man bands without proper qualifications.  17 SPECIAL REPORT

The Gradual Rise of the (Translating) Machines Machine translation has been gaining ever more ground globally and, to some extent, in Hungary as well. Though it aids the translating process, it is unlikely to replace translators entirely in the foreseeable future. 19

SOCIALITE

The Smile of Sziget Success

Remembering Legendary Jazz Guitarist Gábor Szabó The self-taught guitarist fled Hungary in 1956, made his way to the States and had a huge influence on Carlos Santana, among others. He died tragically young. 22

NE BUSI

Tamás Kádár, CEO of Sziget Cultural Management Ltd., talks about the economic realities of putting on one NEWS of Europe’s biggest music festivals, while remaining true No Base Rate Action to its philosophy of Before September FOCUS freedom. 7 The Monetary Council of the National Bank of Hungary once again left the base rate unchanged at its latest rate setting meeting; albeit expected by many, the European Central Bank also kept the interest rate on hold last week. 3

Developing a ’Vital Part’ of the Hungarian Economy András Sávos of Knorr-Bremse Rail Systems Budapest, who became president of the German-Hungarian Chamber of Industry and Commerce this year, discusses the challenges and opportunities of doing business here. 14

News

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Budapest Business Journal | August 2 – September 5, 2019

THE EDITOR SAYS

EDITOR-IN-CHIEF: Robin Marshall EDITORIAL STAFF: Zsófia Czifra, Kester

Eddy, Bence Gaál, David Holzer, Éva Kaszap, Christian Keszthelyi, Eszter D. Kovács, Gary J. Morrell, Robert Smyth, Zsófia Végh. LISTS: BBJ Research (research@bbj.hu) NEWS AND PRESS RELEASES:

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The German corporate love affair with Hungary continues unabated. There are historical links in play, of course (Balaton was the meeting place for East and West Germans separated by the Wall), but the simple truth is that the two economies are very deeply connected. Hungary, as Minister of Foreign Affairs and Trade Péter Szijjártó is always pointing out, has an extremely open economy. The country has worked hard to spread its commercial links so it is less dependent on any one key partnership, with the “Opening to the East” perhaps the most high profile example. Think of all those official visits to Asia, and the welcoming of numerous Oriental dignitaries here. But for all that, most of Hungary’s business is still done with the European Union. According to europa.eu, the EU’s official website, intra-EU trade accounts for 81% of Hungary’s exports, by far the biggest share of which (28%) goes to Germany. In terms of imports, 78% come from EU countries (again, the lion’s share, 26%, from Germany). Much, though not all, of that business is in manufacturing, with the automotive sector the key driver (if you will excuse the pun). When a German carmaker based in Hungary slackens off production, either because of a slump in sales or a change between models, it doesn’t take long for the GDP growth figures to take a hit. This is not all one way traffic, though. It was noticeable that one of the German experts we spoke to for our Country Focus waned that this year’s Audi Hungaria strike “must not” happen again. It shocked Germans used to the flexibility of the Hungarian workforce. In these days of “just in time” manufacturing, it also stopped production in Audi’s Ingolstadt HQ when it ran out of parts from Győr. But that aside, German companies seem very happy here. Indeed, according to the annual survey by the GermanHungarian Chamber of Commerce and Industry, some 84% of its members say they would reinvest.

The economic relationship is clearly sound. The political friendship has not fared so well, however. There is a slight disconnect here: the role Hungary played in helping dismantle the Iron Curtain built political trust between the leaders of the two countries; money and German knowhow followed that trust. There does not appear to be much trust today between Prime Minister Viktor Orbán and Chancellor Angela Merkel, whose views on the future of the EU seem poles apart. That said, Fidesz MEPs did back Ursula von der Leyen, a close Merkel ally, for the role of incoming President of the European Commission. Orbán was due to meet von der Leyen after we went to print but before we published, and Merkel has already said she will stand down in 2021. Perhaps the political relationship will improve then.

* * * * * This is the last issue of the print edition of the Budapest Business Journal for a month. As we have done every summer for the past 27 years, the paper takes a break, although the website will continue to be updated and our morning newsletters will go out as usual. The next printed issue will be published on September 6. Whether you do “the Hungarian thing” and head for a dip in Lake Balaton, or choose to explore some other part of the country, whether you travel somewhere more exotic altogether, or go back to wherever home may be, we wish you a relaxed and relaxing holiday, and look forward to reconnecting with you all, batteries suitably recharged, in the fall. Robin Marshall Editor-in-chief

Photo: Fortepan.hu

Photo: MTI/Zoltán Balogh

The Budapest Business Journal, HU ISSN 1216-7304, is published bi-weekly on Friday, registration No. 0109069462. It is distributed by HungaroPress. Reproduction or use without permission of editorial or graphic content in any manner is prohibited. ©2017 BUSINESS MEDIA SERVICES LLC with all rights reserved.

THE GERMAN LOVE FOR HUNGARY

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The recent days have seen a number of heavy storms sweeping through the country. In the color photo from state news agency MTI (right), storm clouds gather into a supercell above the Danubeʼs Szabadság híd (Freedom Bridge) on 28 July. The black and white photo (left) from the Fortepan public photo archive shows a storm building up near the same bridge in 1955.

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Budapest Business Journal | August 2 – September 5, 2019

News///macroscope

No Base Rate Action Before September

ZSÓFIA CZIFRA

In a decision that met the expectations of various analysts, the Monetary Council decided to remain on the sidelines at its latest rate-setting meeting on July 23. The 0.9% key rate has now been kept on hold since the spring of 2016, when it ended it lengthy easing cycle. The Monetary Council also left the overnight deposit rate unchanged at -0.05%. This was also kept on hold at the previous policy meeting. In an important move, the council’s rate setters dud raise the overnight deposit rate by

basis points,

which marked the first policy tightening in years. In a statement released after the meeting, the council said macroeconomic data released since the previous policy meeting confirmed the baseline projections in the MNB’s latest quarterly “Inflation Report”, which was released a month earlier. “Incoming data confirms the baseline projection in the June Inflation Report,” the council said, explaining that the pace of price growth had started to slow in the summer months as the MNB’s measure of core inflation excluding indirect tax effects, a bellwether indicator of underlying inflation, fell to 3.5% in June.

-1.7

-0.4

-0.9

+2.7

+5.5 +3.3

+4.3 +0.7

+4.2

+4.9

+4.5

+0.3

+3.5

+3.1

+2.4

+5.0

+6.6

Same period last year equals 100

Source:

Core Inflation

The council reiterated that core inflation excluding indirect tax effects is likely to decline gradually to 3% from the end of 2019. Incoming data also suggests that the dynamics of GDP growth is likely to slow gradually from the second quarter, in line with expectations, the council said. It relies “mainly” on the projections in the “Inflation Report” when taking monetary policy decisions. The council repeated that it “applies a cautious approach” to monetary policy decisions, and that future developments in the outlook for inflation would be “a decisive factor in the necessity of further measures”. Any changes in the monetary policy can now be expected no sooner than in September, analysts say, adding that so far, international economic developments have helped the Monetary Council to stick with its loose policy. Just recently, the European Central Bank has hinted it could cut interest rates to tackle a slowdown in the eurozone economy; although its governing council left the rate unchanged at the latest meeting, it did hint at cutting rates in September in a bid to support the trading bloc’s ailing economy. The ECB also said it saw rates at current or lower levels until mid-2020, but is also considering other measures to support the eurozone, including resuming quantitative easing. In the meantime, Hungary’s labor market has reached a point where the unemployment rate cannot significantly fall further and employment can only

4,510,900 among

those aged 15-74 in April-June 2019, some 36,300 or 0.8% more than in the corresponding period a year earlier. The number of those employed on the domestic primary labor market rose 2% from a year earlier to 4,285,000, while the number of those in fostered work programs dropped 34.9% to 108,700. The number of those working abroad was up 9.4% at 117,200. The rate of employment among Hungarians aged 15–64 grew by 0.7 of a percentage point to 70%. The employment rate for men aged 15–64 was 77.1%, while among women it was 63%.

Hungary’s Industrial Producer Price Index (2002-January-June 2019)

-1.8

The Monetary Council of the National Bank of Hungary (MNB) once again left the base rate unchanged at its latest rate setting meeting, and, albeit expected by many, the European Central Bank also kept the interest rate on hold last week.

that the number of employed people in Hungary stood at

be slightly expanded. According to data released by the Central Statistical Office (KSH), Hungary’s three-month rolling average unemployment rate

reached

3.3%

in April-June 2019, edging down from 3.4% in the previous three-month period, and down from 3.6% 12 months earlier. In absolute terms, there were 155,500 unemployed Hungarians aged 15-74, down 9,700 from April-June 2018. The unemployment rate among men aged 15–74 was 3.4%, while the jobless rate among women was 3.2%. Broken down by age group, the unemployment rate in the 15-24 age group stood at 10.8%, up 1.3 percentage points compared to the base period. This age group accounts for more than one-fifth of all jobless. The unemployment rate in the 25–54 age group, i.e. persons belonging to the “best working age”, decreased by 0.5 of a percentage point to 2.9%, while the rate among people aged 55–74 increased by 0.3 of a percentage point to 2.5%.

Working Women

According to ING Bank analyst Péter Virovácz, that the jobless rate and the number of unemployed is again at a new low is mainly due to improving employment among women. In the second half of the year he said the jobless rate could be around 3.4% and he does not expect it to fall significantly lower, state news agency MTI quoted him as saying. Employment figures have also been released by the KSH and they show

Any changes in the monetary policy can now be expected no sooner than in September, analysts say, adding that so far, international economic developments have helped the Monetary Council to stick with its loose policy. The rate of employed young people aged 15–24 years was 28.2%. In the “best working age” group of 25–54 years, the employment rate was 84.6%, while in the older, 55–64 age group, the employment rate grew by 2.6 percentage points to 56.1%. Although the labor market is close to reaching its full potential, András Horváth of TakarékBank told MTI that around 250,000-300,000 jobs could still be filled until the economy reaches full employment, but the remaining labor pool consists of unskilled workers or those who are difficult to employ and some form of policy intervention would be needed to get them to work.

Numbers to Watch in the Coming Weeks The last month of the summer will finally bring some excitement in terms of macroeconomic indicators. First, industrial output figures for June will be published on August 7, in a first estimate, followed by the detailed second estimates on August 13. The consumer price index for July will be out on August 8, and we’ll find out about the expansion of the Hungarian economy in the second quarter of 2019 on August 14.

4|1

News

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Budapest Business Journal | August 2 – September 5, 2019

Hungarians Relatively Loyal, but Retailers Cannot sit Back, Says Nielsen Hungarians are almost twice as brand loyal as the average global citizen: 15% (nearly one in seven) of Magyars say they stick to their favored brands against a mere 8% of the international public, according to the latest Global Consumer Loyalty survey by market research company Nielsen.

varied influences on consumer behavior, says Ágnes Szűcs-Villányi, market leader at Nielsen Hungary. “On a global scale, there is an overwhelming majority of consumers who actively or passively are open to unfaithful actions, and gradually turn their backs on brands,” she told the Budapest Business Journal.

Amazon Effect KESTER EDDY

The survey results, based on the answers of 500 volunteers in 64 countries, revealed conservative Hungarian consumer tendencies through other questions. For example, Nielsen found that “a significant 42% of global consumers say they love trying new things” compared to just 21% of Magyar respondents. And while 26% of Hungarians replied that, compared to five years ago, they are more likely to try brands they have never tried before, this is well down on the European average

40%

and the global response of 46%. Yet in spite of such indicators, marketeers in Hungary must be alert to the many and

In particular, Szűcs-Villányi highlights the so-called “Amazon effect” as a major threat to brand loyalty. “The selection of available goods has never been greater, and consumers can now compare product features, attributes and prices on an unprecedented scale,” she says. Such factors, along with numerous special promotions, which encourage the feeling of better value for money with little risk, mean Hungarian consumers are likely to become as fickle as any other nationality once among the supermarket shelves over time. Indeed, 34% of Hungarians say they will switch brands when offered better value for money (much like the rest of the world, at 39%),

26% succumb

to price reductions, and 23% will switch for “more convenience”.

Brand Loyalty Strongest for Coffee, Tea, Detergents and Shampoo When it comes to hardcore brand loyalty, Hungarians are little different to global citizens, with the tea and coffee category attracting the firmest devotees. “People seem to be very conservative when it comes to their morning routine,” says Nielsen’s marketing specialist Metta Karafiáth. “Some 35% of Hungarians, will choose between one and two brands of coffee and tea; 45% say that brand is important, although they will be prepared to switch,” she explains.

Perhaps surprisingly, the average global citizen is more traditional than Magyars in this category, with 38% sticking to only one or two brands, and Austrians, at 40%, are yet more firmly wedded to their particular morning brew. The second most favored category in Hungary is laundry detergent and household cleaners, which have a 31% loyal rating, closely followed by the shampoo and hair conditioner, with a 30.5% devoted fan base.

Another 12% are “always influenced” by the recommendations of friends or family, and by perceived added benefits such as health attributes. “Hungarians can be conservative, but there are many tendencies affecting them,” Metta Karafiáth, marketing and communications specialist at Nielsen’s Budapest office, tells the BBJ.

‘Premiumization’

“There’s a shift, there’s a local finding of premiumization. If you believe that [a product] is better for various reasons, if it [matches] your specific needs, if it’s better quality, then people are willing to spend more and, ergo, switch brands. There are different things in play here,” she says.

“Hungarians can be conservative, but there are many tendencies affecting them.” Perhaps a more nuanced conclusion from the survey is that while a higher percentage of Hungarians compared to the global average are devoted to brands, those who are prepared to switch do so with gusto. At least this better matches the experience at the Spar Hungary cash registers, says Márk Maczelka, spokesperson for the Austrian-owned retailer. “We see the same trend: most customers are keen on trying new products,” he says. And whatever the brand loyalty ratings, Spar Magyarország, which boasts

400 outlets

across the country ranging from hypermarkets to convenience stores, is certainly not “sitting on its laurels”, says Maczelka.

Do Self-evaluations Reflect Reality? Given the powerful array of advertising and marketing techniques available to producers of consumer goods, and that the Nielsen survey is based on voluntary self-assessments of behavior, how accurate are its findings? Do respondents answer questions more in ways that fit their own self-image, as opposed to the emotional reality? Put another way, does self-deceit affect the results? Challenged on this point, Metta Karafiáth, marketing and communications specialist at Nielsen Hungary, admits she is “not fully aware of the methodology, but I guess the different algorithms involved ... I don’t know”. She insisted, however that the measurements are “representative for demographic figures, and for the whole country, with margin of error of plus/minus 4%. We pride ourselves for being very accurate when it comes to numbers, and large teams work on these surveys,” Karafiáth concludes.

“The competition among retail chains is fierce, so [all] Hungarian retailers have the same challenge: to lure in as many customers as possible, and new innovations are important assets in this game.”

Hungarians Reject Mobile Ads, Billboards and Public Displays The Nielsen survey uncovered what Metta Karafiáth terms “fun facts” regarding Hungarians and their self-assessments regarding their resistance to certain forms of marketing and advertising. For example, a whopping 42% of Magyars indicated that mobile phone adverts and messaging “never influences me to try new products or switch [brands]”, while only 30% of global respondents felt impervious to such techniques. A similarly high proportion, 40%, believed in their immunity to the powers of billboards, displays and public transportation adverts, while globally only 25% felt so confident. However, Magyars are less sure – and more in line with the international norm – that they can survive the pressure of product endorsements by celebrities, industry bodies and health organizations. One third (34%) felt they were “never influenced” by such practices, compared to 30% of global respondents.

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Budapest Business Journal | August 2 – September 5, 2019

News///in brief Formlabs Invests HUF 2 bln in R&D Center U.S.-based 3D printer manufacturer Formlabs is investing HUF 2 billion in establishing a research center in Budapest, Minister of Foreign Affairs and Trade Péter Szijjártó said at a press conference on July 26, kamaraonline.hu reported. The government is providing a HUF 171 million grant for the three-year investment project, which will create 100 workplaces, the minister said. Szijjártó noted that the government’s modified incentive system favors technology-intensive investments. IT services and manufacturing, which includes the 3D printer industry, employs 132,000 people in Hungary, 19% more than a year earlier, Szijjártó added, according to kamaraonline.hu.

Teachers’ Wages up Only 11% in 5 Years The private sector, coping with serious staff shortages, has generated some 47% salary increase over the past five years, while the payment for a beginner teacher grew only 11%, index.hu reported, citing information published by blogsite

Concorde. The difference between the private and public sector is significant both in terms of net and gross wages, and skilled teachers are shifting to the private sector. Condorde said that, unless drastic steps are taken to stop the widening wage gap, the workforce shortage in the public sector will grow further. The longer it takes to pay adequate compensation, the more expensive it will be to reverse the differences. The majority of skilled workers change jobs only for higher wages. It will be more burdensome and costly to tempt them back to the public sector than to keep the existing staff, index.hu said.

Orbán Hints at New Economic Stimulus Plans for 2020 Speaking at the 30th annual summer university event at Tusványos (650 km east of Budapest, in Romania) where he often makes important policy statements, Prime Minister Viktor Orbán teased his audience about the need for two stimulus packages to boost Hungary’s economy, ft.com reported. “In the last five years the EU has been selfdestructing as far as the economy is concerned […]. According to every analysis, hard times are

coming upon us and the question is not if they will be difficult, but how difficult they will be,” Orbán said. He did not provide details of the planned measures but said the programs would have to improve the country’s competitiveness, international news wire Reuters added. Orbán’s warning on the need for further steps to sustain economic growth comes amid deteriorating European outlooks, reuters.com added.

Local Elections Called for October 13 President János Áder has set the date of Hungary’s 2019 local elections for October 13, news site 168ora.hu reported. In a statement published on the website of the president’s office, Áder encouraged every citizen to vote and take part in the elections. He added that this will be the eighth local election since the political changes and the system change from Communism. The official election campaign starts on August 24, 168ora.hu added.

Prime Minister Viktor Orbán (center), with Zsolt Németh, Chairman of the Parliamentary Committee on Foreign Affairs (left) and László Tőkés, President of the Hungarian Transylvanian National Council (EMNT, right) at the 30th Bálványos Free Summer University and Student Camp on July 27, in Transylvania’s Tusnádfürdő. Photo by MTI/Szilárd Koszticsák.

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Nordic Light Trio Acquired by Asian Investors a KPMG-leased office building in central Prague

Skanska has sold the 14,000 sqm Nordic Light Trio office building to JR AMC, a South Korean real estate investment trust. This is the first office investment in the country by the trust after transactions in Vienna, Dublin and Paris.

for

EUR 65 million.

In Bratislava, the London-based investor Valesco and the South Korean AIP Asset Management have purchased the Twin City Tower from HB Reavis for EUR 120 million. Korean investors accounted for a third of the EUR 1.7 billion in investment transactions in the first half year in the Czech Republic, according to JLL.

Nordic Light Trio by Skanska.

GARY J. MORRELL

The close to fully leased property is valued at EUR 41 million and the transfer is scheduled to be completed in the second quarter of next year. JR AMC is a Seoul-based asset manager with a current cumulative total of EUR 3.4 billion in assets under management. “Nordic Light Trio is Skanska Commercial Development’s second CEE transaction with an Asian investor, but its first with a South Korean buyer,” says Adrian Karczewicz, head of CEE divestments at Skanska. “This is further proof that Asian investors have a positive sentiment towards Europe and are actively searching for new investment opportunities on our continent,” he says. “On the one hand, they find CEE countries attractive thanks to the political and economic stability that they offer, which is additionally guaranteed by being part of the EU. And on the other, prospects for the region are also promising with return on investment being higher than

in Western Europe. Asian investors are mostly interested in class ‘A’ properties developed by institutional developers,” Karczewicz adds. According to Colliers International Research, Asian investment capital is beginning to spread widely in Europe. The CEE region is attracting Asian investors with its favorable yield premiums and higher returns on investments. Between 2017 and 2018, the inflow of Asian capital investment into

the

CEE-6

(Bulgaria, the Czech Republic, Hungary, Poland, Romania and Slovakia) amounted to around EUR 2.6 billion.

High Yields

“With yields in Western Europe breaking historic records, our interest

is to constantly explore new markets whereby we can achieve high yields, simultaneously minimizing any trade-off in building quality or macro risk profile,” says Hyon Suk Jang, executive managing director of foreign investment at JR AMC. “In the case of Budapest, we have been following the market for the past year-and-a-half with high interest. Considering both macro and micro economic figures and also the trend of the real estate market in Hungary, we are convinced of the significant potential for further growth,” the executive adds. JLL have also noted an increasing number of Asian investors showing interest in class “A” assets in the core Central European cities. This was initially in Prague and Warsaw but now also includes Budapest. The South Korean Shinhan Investment Corp has purchased

Prologis Gets BREEAM Accreditation for 6 Hungarian Properties Common Approach Prologis has achieved BREEAM sustainability As with other regional developers, Prologis accreditation for six logistics facilities in Hungary has common policies across its CEE portfolio. The company has achieved BREEAM including BREEAM In-Use “Very Good” accreditation for “Outstanding” accreditation for two CEE projects (both in the Czech Republic), as well a 10,750 sqm facility at Prologis Park Budapest-Sziget. as two BREEAM “Excellent” certifications, 15 GARY J. MORRELL

As with the office sector, regional developers and park operators are developing logistics parks that conform to international sustainability standards, in response to changing tenant demand and international environmental regulations. The first version of the U.K.-based Building Research Establishment Environmental Assessment Method system was launched in 1990 for new office centers and has since been extended

to other areas such as industrial and logistics, hotels, retail, sports stadiums and public buildings. Four buildings at Prologis Park Budapest-Sziget, the largest of which is the

21,000 sqm DC7A

and 8,000 sqm DC8, have been awarded BREAAM “Good” accreditation. The major developers and operators are seeking third-party sustainability accreditation such as BREEAM and LEED as tenants are looking to save on utility costs.

“Very Good” and 32 “Good” certificates. “Prologis Park Prague airport is a study in what can be achieved when experts at all levels work together to reach the sustainability goals of creating a building that is environmentally efficient, has low operational costs and provides a healthy indoor environment for its occupants,” Prologis comments. In total Prologis owns and manages around four million sqm of logistics and light industrial space in

36 parks

across the V4 countries of Hungary, the Czech Republic, Slovakia and Poland.

Core Competition

“Competition for core real estate in major European cities is high, so the move towards Eastern European markets is an inevitable one,” comments Mike Atwell, head of CEE capital markets at JLL. The consultancy puts prime office yields in the Budapest office market

5.75%,

compared with 4.5% in Prague and 6% in Slovakia, although deals at the top end of the markets are known to be concluded below these levels. The area around Nordic Light will offer 2,400 sqm of landscaped multiactivity gardens open to tenants and neighboring communities, bicycle storage facilities with changing rooms and showers, as well as parking with charging stations adapted for electric vehicles. The complex was designed by Paulinyi-Reith & Partners and is planned to be the first WELL-certified Skanska building in Hungary, in addition to achieving LEED “Gold” certification.

The company has also recently achieved its first WELL accreditation for a logistics facility, this time in the United States. In meeting what it describes as “recognized standards for sustainable development”, the company prioritizes energy efficiency and therefore the reduction of operational costs. “This is reducing energy and water usage and waste operation costs and therefore environmental impacts,” Prologis explains. The firm has recently delivered a 10,600 sqm speculative facility at Prologis Harbor Park that will be submitted for BREEAM “Very Good” accreditation. According to Prologis sustainable features of the development include high graded insulated wall panels and roof systems that, together with high performance gas fired heaters, can cut heating costs by 30%. Energy efficient LED lighting and large skylights further reduce electricity costs by 40% compared with the latest lighting standard. Smart metering will also optimize water, gas and electricity consumption in the complex.

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Budapest Business Journal | August 2 – September 5, 2019

Business

S ziget Continues to Push for Island Freedom Since its launch in 1993, Sziget has grown to become one of the biggest music festivals in Europe. Tamás Kádár, CEO of Sziget Cultural Management Ltd., talks to the Budapest Business Journal about the challenges of booking (and paying for) the right festival acts, keeping sponsors happy, and going green. ZSÓFIA VÉGH

BBJ: Despite streaming and digital platforms, live music has not lost its appeal; music festivals are thriving. What accounts for that? Tamás Kádár: Listening to live music is very much in vogue these days: people love to go concerts. Also, as the record industry has disappeared, performers have turned to live events to fill the gap in their budgets. BBJ: That makes business sense, but why would a generation raised on digital platforms go to festivals? TK: Because it is a special experience. Music and musicians take off more easily these days – the selection is endless. But precisely because of that, listening to a live concert or a DJ performing live, which has always been something unique, now stands out even more in the digital world. BBJ: How does the expansion of the digital world impact visitor numbers at Sziget Festival? TK: There are more factors to it than that. Overall, the number of our visitors has been increasing in the past 8-10 years, but there are fluctuations. The number of visitors itself won’t tell you how profitable the event was. We could have a very high number of visitors but still fall short of generating enough to cover the costs of a star performer or the entire line-up and end up being profitable. We look not only at the number of visitors, but also results

headliner – as these megastars simply grow out of the business. They are replaced by new ones but our experience is that they are often hard to book. Sometimes their performance falls short of expectation. We operate seven days and the seven headliners account for 80% of the program budget. Or I can put it differently: all the remaining music and arts program cost as much as one headliner. We try and achieve an ideal mix of programs and performers that make visitors stay longer. This is the festival experience, not when one visits a festival, watches a concert and goes home. Also, it is still more economic to attend a festival than individual concerts, even with current ticket prices.

Tamás Kádár per days, per performer, etc. to have enough information on what performers, performances are worth inviting the next year. We also rely on intuition. After 2017, we took a deep breath and started spending considerably more on performers at Sziget Festival. This was also a must, but until 2016 we capped spending on performers. The arrival of the investor in 2017 has “freed the genie from the lamp”: bringing huge and more expensive stars has become a new direction and we broke those previous barrier. BBJ: Was this the reason for involving a private equity investor? TK: Yes and no. The then owners’ risk taking ability was lower. Even if they wanted to take more risk, they had limited backup compared to a private equitybacked investor. BBJ: From an investment viewpoint, are live music festivals sexy? TK: They are. Our investor [Providence Equity/Superstruct] has invested in roughly ten festivals in the past two years. I see a niche on this market. There is Live Nation, the market leader in live event production and there are hundreds of independent festivals. But in between the two there is a huge gap; a shortage of companies that gather a number of festivals and tap into the synergies. Superstruct has recognized this niche and has been investing in events in Europe. BBJ: In terms of return and risks, does the same apply to music festivals as other investments? TK: I am not entitled to reveal concrete figures. The methodology is the same but there are more risks that may be more difficult to cover. Weather, for example. Negative comments following a rainy day can make selling tickets for a performer twice as popular difficult the next year.

BBJ: How has marketing changed considering that the majority of Sziget Festivalgoers are in their early 20s? TK: Channels have been changing, tone is too. Our marketing is fully conducted online. Tone matters as well and how cooperative our performers are; for example, if they send a short video we can promote. BBJ: With consumption becoming global, how much can a festival preserve its identity? TK: Not all of them have. I believe Sziget is different from most in this respect having preserved its core values of freedom from the very beginning. Its atmosphere has been a constant reference point: once someone crosses that rusty bridge [to the island festival site], they will feel they have entered a different word. This is something that makes Sziget Festival unique. BBJ: Were there any occasions when you turned down a sponsor because they did not fit into this image? TK: We have, and we have also advised against some of the ideas sponsors have come up with. The aim is to have long-term cooperation. Sponsors need to feel good in their role at a festival and feel the audience’s positive feedback. A good example for this is our partnership with Mastercard. They welcomed the introduction of the cashfree payment method despite the fact that it wasn’t Mastercard behind it. But the expansion of a then-new method made it worth sponsor Sziget for them. We have been building this partnership with them ever since. The next big thing as of this year is going to be payment with phones. We hope to remain a test field for Mastercard in the coming years for some new features. BBJ: How do you create an enticing line-up year by year? TK: It is not easy as there are ever fewer performers the audience welcome as a

“I believe Sziget is different from most in […] having preserved its core values of freedom from the very beginning. Its atmosphere has been a constant reference point: once someone crosses that rusty bridge [to the island festival site], they will feel they have entered a different word. This is something that makes Sziget Festival unique.” BBJ: Festivalgoers now expect a festival to be sustainable, and Sziget Festival wasn’t always that. How has this changed? TK: Despite some efforts, we did create a huge carbon footprint: I personally felt bad about. To achieve sustainability though, you have to involve and educate the audience as well. We introduced a so-called re-cup last year, which rid the Sziget of nearly 1.5 million plastic cups. We launched a campaign against straws called “Don’t Suck” asking visitors not to ask for a straw at bars. With that we halved the use of plastic straws and will replace the remaining ones this year. This is something not only the international audience expects us to do, but we feel is important as well. The overall goal would be to make the festival PET [plastic] free, but to achieve that we need the help of sponsors and supporters as well.

The 2019 Sziget Festival runs from August 7-13. Find out more at szigetfestival.com

8|2

Business

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Budapest Business Journal | August 2 – September 5, 2019

Debt Financing of Acquisitions In their latest Investor Column, Les Nemethy and Sergey Glekov look at the arguments in favor of taking out a loan to execute an M&A deal. There are many reasons for using debt to finance an acquisition. Some buyers simply do not have enough cash. Others want to improve their return on equity by using low cost debt (see our earlier article “Optimizing Company Valuation via Cost of Capital”). Still other investors prefer to take advantage of the tax write-offs permitted by deductibility of interest costs in most jurisdictions. Quantitative easing has also made debt cheap over the past decade, by historic standards. Debt financing may help avoid the need to raise equity financing, hence dilution of equity and control. In most cases, mid-sized companies have limited access to public capital markets (equity or bonds), hence there may not be that many alternatives to financing an acquisition by bank debt. The table summarizes some of the basic types of bank debt to finance an acquisition. When an acquirer considers financing options, the potential to raise debt based on assets and cash flow of the target are usually taken into consideration, but the synergies between acquirer and target are sometimes neglected.

Demonstrating Synergies

Years ago, we were representing Hungarian Telephone and Cable Corporation (HTCC) in its acquisition of PanTel, a Central European data communications company, where we constructed a financial model that persuasively demonstrated synergies resulting from the acquisition in excess of EUR 20 million a year.

The Corporate Finance Column

Types of Bank Debt Finance for Acquisitions Type

Defined

Characteristics

Borrower

Guarantor

Asset Based Financing

Based on value, and liquidity of assets of the acquirer, target, or combination thereof

Asset-based loans differ from commercial term or revolving loans because of covenants and control focus on specified assets

May be the acquirer or a Special Purpose Vehicle established by the buyer. Assets of target may be securitized.

Not a universal requirement

Cash Flow and Covenant Light Financing

Based on credit quality of borrower (and possibly guarantors), focused on cash flow available to service and repay the loan

Access to such loans requires a robust and assured source of revenue and high credit quality

May be the acquirer or SPV established by the buyer. Assets of target may be securitized.

Not necessarily required

SponsorBased Borrowing

Based upon the strength of the proponent of the M&A transaction (e.g. sponsor), based upon its credit worthiness and covenants

Usually structured as a standard format term or revolving loan, or both, with a heavy requirement for sponsor support

Can be the acquirer, as combined with the target or a co-borrowing relationship with the sponsor

The sponsor will always be required to provide a form of guarantee

Traditional Project Finance

Project Finance may be defined as funding for the development of a specific project (where the enterprise might be deemed to be the project).

Deals with the acquisition of a specific business enterprise usually in a single location with a single business purpose and with recourse limited to that “project”

The borrower is the owner of the project to be acquired or constructed

May not involve a guarantee requirement because of project specific recourse

Structured Finance

Finance where structuring is designed to alter liquidity and risk, or to transfer liquidity and risk aspects of the transaction to another entity, in a manner intended to provide increased liquidity to lenders and increased sources of funding to borrowers

Will generally be an SPV intended to isolate the transaction from possible operating loss and risks of the operating entity

Will generally be the operating entity which is actually undertaking the business activity of interest, or its administrator

Includes such structuring techniques as the use of synthetic leases, lease-toown, financing through structured funding vehicles

Source: Created by authors with data from “M&A Trending Trends in Debt Financing” by Alison Manzer

This provided HTCC with the additional cash flow to service the additional acquisition financing, and calculating company valuation at 6x EBITDA, an additional EUR 120 million in valuation. (Care must be taken with synergy analysis, as synergies often prove to be a mirage.) In conclusion: debt financing is a flexible and relatively low-cost option for financing acquisitions, particularly

in today’s competitive and liquid market environment. However, leverage is a significant risk which may contribute to or cause business failure, especially during recessions or financial crises. An acquiring firm’s financing decision should be strongly influenced by its debt capacity, existing leverage and target leverage ratio; in short, on shareholders’ appetite for risk versus reward. A balance must be struck.

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.

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Budapest Business Journal | August 2 – September 5, 2019

Business | 9

PwC Hungary Initiative Aims to Reduce Office AC Use There is no denying that it is getting really hot outside. Every continent has its fair share of heatwaves during the summer; most recently it was the United States that had to endure an extremely hot weekend, followed by much of Western Europe last week. ZSÓFIA VÉGH

With hot spells becoming more common, the use of air-conditioning is on the rise. The number of air conditioner units installed globally is set to jump from 1.6 billion today to 5.6 billion mid-century, according to data by the International Energy Agency (IEA). The United States (23%) and China (35%) account for half of the world’s stock of air conditioning units – the European Union’s share is currently just 6%. Air conditioners increase electricity demand; in fact, their use emerges as one of the key drivers of the global growth in demand for electricity, IEA notes. Using air conditioners and electric fans to stay cool already accounts for about a fifth of the total electricity used in buildings around the world,

10%

of all global electricity consumption today. In addition, they funnel heat outside, making the so-called “urban heat island” effect even worse. Bloomberg

New Energy Finance, a research organization, expects electricity demand from residential and commercial air conditioning to increase by more than 140% by 2050. That is an increase that is comparable to adding the European Union’s entire electricity consumption. Some firms have recognized this problem. One is PwC Hungary, where Friday comes differently for workers.

Higher Goal

The aim of the so-called Bermuda Day, as PwC partner László Radványi, the author of the idea, christened it, is different from Casual Friday. It may be executed in a similar way, but its goal is far loftier: employees do still dress down, but they do so to help reduce energy consumption. “We wear formal attire every day to show respect towards our fellow colleagues and clients,” Radványi says. “But to make wearing a jacket and tie tolerable during summer, we set the air conditioners to 21ºC [70ºF].”

So why not wear Bermuda shorts and polo-shirts on one day each week, and set the air-conditioning

25ºC

[77ºF] instead? Radványi says he was inspired by a climate expert who spoke about the harmful effects of carbon emissions and global warming, which is listed as one of the major business risks on PwC’s global CEO survey. “The energy specialist team of PwC did some calculations and found that, by setting higher [air conditioner] temperatures, we can roughly save the energy consumption of a small Hungarian village,” Radványi says. The company is spreading the word on social media and inviting ever more companies to join the initiative. The long-term aim would be to extend Bermuda Day to more days per week, Radványi notes. Being environmentally conscious also improves the employee experience as well.

“The energy specialist team of PwC did some calculations and found that, by setting higher [air conditioner] temperatures, we can roughly save the energy consumption of a small Hungarian village.” “There was standing ovation when we announced the program, and since then there has been no need to communicate the program more, because the message has spread very quickly. We see the Bermudas [in the office] as proof of it. Every year, 100-150 young people apply to our firm. They do grasp the importance of dressing formally to pay respect to each other, but for their future it is equally important to respect our environment,” Radványi points out.

1054 Budapest, Hercegprímás u. 11. info@madoffbar.com madoffbar.com MADOFF_OroszBarbi_hirdetes_252x77mm_04v.indd 1

2019. 05. 08. 13:57

10 | 2

Business

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Leasing Director Appointed at Colliers Hungary

Real estate consultancy Colliers has announced the appointment of Melinda Kovács as head of landlord office agency for Hungary in Budapest. Kovács was formerly leasing manager and part of the management team of Skanska Hungary. There she played a key role in leasing Mill Park (securing IT Services and

Melinda Kovács Cognizant as tenants), Nordic Light 1-3 and Green House to international companies. Prior to joining Skanska, she worked as an office agent at DTZ for many years. Colliers say she is responsible for overseeing and developing landlord leasing activities, including the leasing of Codic’s Green Court Office and TriGranit’s Millennium Gardens. Kovács took up her role at the beginning of June, replacing Michael Smithing, who stepped down from the position but will stay on through August as director of green building advisory services. Smithing is leaving Colliers after serving the company for more than 25 years in a variety of roles. He was managing partner for more than nine years, and was also responsible for launching Colliers’ current operation in Bratislava, Slovakia. Smithing was also a pioneer of the green building movement in the region with responsibility for developing Colliers regional green building advisory practice, which has certified almost one million square meters of space in some 60 projects.

“I want to thank Eric for his commitment and years of loyal service,” Fries added of Tveter. He said Tveter had been key to the transformation of the company’s operations in Switzerland, Austria and Eastern Europe.

SPB Investment Names Premium Banking Director

Sándor Szabó, formerly head of MKB Private Banking, is continuing his career as premium banking director of SPB Investment. The 45-year-old has more than 20 years of experience in domestic and international banking. Szabó graduated from Budapest University of Economics (now Corvinus University of Budapest) with a degree in finance in 1997. After graduation, he worked for K&H Bank and Citibank in treasury and corporate areas. From June 2006, Szabó worked for three years as a liaison officer for the KBC Group in Brussels. Subsequently, from April 2009, he worked at K&H Bank as private banking director for eight years, gaining extensive knowledge of the needs of private banking clientele, and increasing the assets managed by the business unit from HUF 80 billion to HUF 200 bln. From June 2017 until February this year, Szabó managed MKB Private Banking, the second largest player on the domestic private banking sector. Over this period, assets held by MKB Bank’s key customers increased to more than HUF 540 bln, a growth exceeding the market average.

Sándor Szabó With the arrival of Szabó, SPB Investment is now looking to give a further boost to its premium banking business, which manages nearly HUF 7 bln in assets for more than 400 customers.

Unilever Picks Leader for Hungary, Adriatic Region

Robert Redeleanu

Change at top at Liberty Global Eastern Europe

Liberty Global has announced that Eric Tveter, its Eastern European Group CEO, will leave the multinational telecoms firm, with Robert Redeleanu (pictured) replacing him. Tveter held senior leadership roles since 2009 during his tenure at Liberty Global, acting as CEO of the company’s Swiss cable business, later as CEO of the Central and Eastern European group. Most recently, he held the positions of CEO of the Eastern European Group and Chairman of UPC Switzerland at the same time. Tveter’s departure coincides with the sale of a number of assets he supervised, such as UPC Austria, as well as the sale of the company’s operations in Switzerland, Hungary, Romania, and the Czech Republic, to Vodafone. In total, Tveter was CEO of UPC Switzerland for nine years, helping the firm achieve a more than 50% increase in revenue since it was first acquired by Liberty Global. The Eastern European CEO position has been filled by Redeleanu, who will report to Severina Pascu, CEO of UPC Switzerland, since July 1. Redeleanu first joined Liberty Global in 2013 as UPC Romania’s CEO. Later, his responsibilities were expanded to also oversee UPC Hungary and Poland. He was to lead the firm’s operations in Eastern Europe until the closure of the transaction with Vodafone, after which he will lead UPC in Poland and Slovakia. “Robert is a leader with excellent abilities, significant energy, and clairvoyance, who has a client-centric way of thinking, and is also a shining example of our homegrown talent at Liberty Global,” said Mike Fries, CEO of Liberty Global.

Alberto Di-Leo has been appointed managing director of Unilever Hungary & Adria as of June 1, succeeding Regina Kuzmina. Di-Leo also becomes a member of the leadership team managing the Eastern Europe region. Di-Leo joined Unilever Italy in 1997 and moved up the ranks in the organization, holding various roles in marketing from North America, through the United Kingdom to the Netherlands. Over the last three years, he worked as head of ice cream and tea for Europe, leading teams across 20 markets. He will now hold responsibility for managing a region which consists of Hungary, Croatia, Slovenia, and Bosnia and Herzegovina.

Alberto Di-Leo “I am truly delighted to be moving together with my family to this great country and beautiful city of Budapest,” says Di-Leo. “It will be my honor to join this highly successful team and build on what has been achieved thus far. The great portfolio of iconic and purposeful local brands like Baba, and strong global ones from Domestos to Dove, is one that can truly allow us to improve the lives of millions of Hungarians every day.” Di-Leo studied at the International School of London, and also earned a degree in marketing from Luiss University in Rome.

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Business | 11

PRESENTED CONTENT

A School That Opens Fresh Opportunities Sziget: An Unlikely Hungarian Success Story Far from the fumes and heat of Budapest, deep in the southwest countryside of Zala, a group of artists, musicians and other such folk got together in the summer of 1992 for a cool week of musical jamming, poetry reading, discussion and general bonhomie. KESTER EDDY

The vibe was so good that host Péter Müller, a teacher, rock lyricist and former anti-communist dissident, decided to expand on the idea. Müller shared his vision with another former dissident, Gábor Demszky, who had meanwhile become Mayor of Budapest. A year later, 43,000 attended what was then called “Student Island” on Hajógyári-sziget in the Hungarian capital. This, in a nutshell, is the genesis of the highly acclaimed annual Sziget Festival, a week-long shindig that this year is expected to attract in excess of 500,000 visitors to see global stars such as Ed Sheeran and Foo Fighters among more than

1,000 performers.

(See also Sziget Continues to Push for Island Freedom on page seven.) Under the slogan of “Love Revolution”, some 120,000 foreign individuals attended Sziget last year. That made it by far the single biggest event in Hungary, with more than twice the pulling power of the Formula 1 Grand Prix, says Dániel Indra, senior manager specializing in leisure and tourism with business consultancy KPMG in Budapest. Tamás Kádár, chief executive of Sziget Cultural Management, which runs the festival, attributes its continuing success to the broad nature of the event. “At the origins, Sziget wasn’t a rock festival. It wasn’t meant to be only a musical festival. From the [very beginning] it was a cultural festival, with theaters, very alternative music, even classical music. It was meant to be a 360 degree cultural festival. And it still is: that’s what makes it special,” he told foreign journalists in July. Kádár admits Sziget has been in the wars, both with the local council and the city of Budapest. It is also a risky

Headteacher Zsuzsa Szilánk talks with the Budapest Business Journal about what the Maimonidész English-Hungarian Jewish Secondary Grammar School in Budapest has to offer students interested in learning the English language, getting familiar with the Jewish religion, and opportunities to study abroad.

business in terms of financials. It nearly went bust in the 1990s. This year, the seven headline acts come at a cost of between EUR 300,000 and EUR 2 million each,

Headliner Inflation

“EUR 2 million. That’s a huge risk,” the CEO said. Another threat is what he terms “headliner inflation”, i.e. the cost of booking the big acts, which is “rising faster than we can raise ticket prices.” There is also evidence that some Hungarians are put off by the sheer size – and perhaps internationalism – of Sziget. Hungarian media in July cited research that showed Magyars under 30 preferred smaller festivals, with

only

11%

wanting to attend Sziget. And while Kádár stresses the peaceful mood on the island (“There are no fights on Sziget. If there is something, then we did something wrong. We have 1,200 security staff,” he said) there is, inevitably, some risk to attendees. “My ambassador goes away, but I can’t go on holiday in August, because of Sziget,” one foreign diplomat confided to your correspondent at a recent reception. Sensing bewilderment, he continued: “We always have some trouble, Young people, away from home, drunk out of their minds. When they wake up, their money or passports, or both, are gone.” Enquiries to other embassies revealed that, while such “losses” are not endemic, they are of concern. “We issued only eight emergency travel documents related to the festival last year, and there were no other Szigetrelated consular cases,” another European diplomat noted, adding: “We did put a lot of effort into a prevention campaign.” For both organizers and attendees, Sziget, like life, has its risks. Especially if you get blotto.

Zsuzsa Szilánk

BENCE GAÁL

BBJ: The school is now three years old. How was it founded? Zsuzsa Szilánk: Our school is operated by the EMIH [United Hungarian Israelite Religious Community] Óbuda Religious Community, which gives away that our institution is affiliated with a religious organization. BBJ: What kind of unique features does the school offer in Budapest? ZsSz: Thanks to the small classes, which we determined at 15-20 persons, our pupils get a great deal of attention, and not only from the education aspect. We can immediately react to their individual development and possible comingof-age type of challenges too. This is further supported by the developmentaland remedial teachers working at our school, as well as the school psychologist, and our educator who teaches the methodology of studying. Our teachers create a close, sometimes almost friendly relationship with our students, and we are also putting great emphasis on life outside the institution. We react quickly to any change involving a student, and after the appropriate communications process, also becomes a partner and helper of the parents of our students. We find the most fitting way forward together to handle any “problems”. We have a student whose

mother came in to see me after the first semester, and told me with tears in her eyes that her child’s behavior at home had changed as well, and expressing gratitude for our cooperative help. BBJ: What benefits does bilingual education offer? ZsSz: My mother always told me that, “every new language brings a new opportunity to your life.” Today, language is indispensable; as a matter of fact it is a basic requirement. Our students can use the English language without an accent. Our native speaker teachers help students not only in getting to know the language, but also the Jewish communities living in English-speaking areas. Every year, our students fly out on a study trip to America, Israel, and England. During this time, they practice the language and meet Jewish communities living in other countries. Friendships and acquaintances form, opening up further opportunities for our students. BBJ: What kind of international educational institutions does the school cooperate with? ZsSz: We are cooperating with American, English, and Israeli secondary schools; our students are able to take part in our scholarship program participating in trips to these schools. This scholarship program takes into account individual development, by looking at school performance as well as participation in school life as the basis of evaluation.

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Budapest Business Journal | August 2 – September 5, 2019

Country Focus

There are some 3,000 German firms in Hungary employing more than 250,000 people. We take a closer look at Hungary’s single most important trading partner.

Germany

German FDI: Strong Manufacturing and R&D Investment Focus

13

Developing a ’Vital Part’ of the Hungarian Economy

14

When Structure Meets Ingenuity

15

German-Hungarian News in Brief

16

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Budapest Business Journal | August 2 – September 5, 2019

PRESENTED CONTENT

German FDI: Strong Manufacturing and R&D Investment Focus Economic relations between Germany and Hungary have been vigorous during recent decades. Based on the latest statistics, significant results have been achieved in terms of foreign trade and investment, the Hungarian Investment Promotion Agency tells the Budapest Business Journal. BBJ STAFF

German companies have a strategic role in respect to the performance of the Hungarian economy. Germany is the largest investor in Hungary in terms of foreign direct capital stock. Foreign direct investment (FDI) from Germany amounted to EUR 22.1 billion in 2016, representing 29% of the total FDI stock. Between 2016 and 2018, the Hungarian Investment Promotion Agency supported 72 projects from Germany with a total investment volume of almost EUR 5 bln. These developments, in the field of manufacturing or service activities, will create nearly

20,000 new jobs

in the coming years. The proportion of projects of high added value is

Case Study: BMW Expanding the BMW Group´s production network in Europe, a new plant will be built in Hungary’s second city, Debrecen (230 km east of Budapest). The plant will create a new automotive benchmark in respect to standards in digitalization, sustainability and flexibility. Moreover, with its innovative solutions, high-tech auxiliary equipment and flexible logistics in the field of automotive

significant. Based on the investment decisions in 2018, three out of ten R&D projects will be implemented by German companies. There are about 6,000 Germanowned companies operating in Hungary, employing 300,000 people. Most of these German firms operate in high valueadded areas such as the automotive and electronics industries. Hungary’s main exports to Germany, meanwhile, are motor vehicles and vehicle parts as well as machinery and chemical products. The largest German-owned companies, based on the number of employees in Hungary are Bosch Group, Audi Hungaria Zrt., Continental Group, Magyar Telekom Group, Lidl Magyarország Kereskedelmi Bt., Schaeffler Group, Mercedes-BenzGroup, IT Services Hungary Szolgáltató Kft., Penny-Market Kereskedelmi Kft., Siemens Group and Rosenberger Group.

Happy to Reinvest

According to the latest survey by the German-Hungarian Chamber of Commerce and Industry (DUIHK), German companies operating in Hungary are satisfied with the Hungarian business environment, and 84% of them would reinvest in Hungary. The commitment of the largest German companies towards Hungary

production, it will instantly become a technological ground-breaker. Due to the highly flexible production system, the new facility will be able to produce models with traditional combustion engines as well as electrically powered premium cars on the same production line. Debrecen has purchased all 400 hectares of land and the preparation work is progressing according to the original schedule, as outlined in the agreement concluded with the BMW Group.

The trend is unbroken, German companies are Hungary’s most important partners, and they have a vital role in the development of the market-based competitive Hungarian economy. is also expressed in the form of strategic cooperation agreements with the Hungarian government.

Some

German-owned companies or groups are among the 81 strategic partners of the state. The Hungarian automotive industry has a history of nearly 120 years. Today, the sector is the flagship of the Hungarian economy. The industry is undergoing major global transformation characterized by emerging new technologies, increasingly technology-intensive production processes, new business models and changing customer behavior, as well as market uncertainties and regulatory challenges. The automotive industry and its market players have achieved great success, and the sector has become one of the main drivers of the Hungarian economy. Hungary has also obtained key references in the area of electromobility and the development of autonomous vehicles. Germany-based companies create value in both the general and advanced manufacturing segments, and provide a great variety of high value-added services. By employment, German operations in the vehicle and engine parts manufacturing sectors play the most determining role.

Focus | 13

Case Study: Infineon Infineon’s plant in Cegléd is a major production base of performance-semiconductor modules; the semiconductors made here are used in industrial automation and power technology, medical equipment, energy production, transportation and distribution, and also in the field of renewable energy sources. A new factory will be built on Infineon’s Cegléd site (80 km southeast of Budapest), creating 275 new workplaces in an investment of up to EUR 100 million.

to the transformation from the “Made in Hungary” to the “Invented in Hungary” approach of the country. The continuous development of these German companies and their cooperation networks have a significant impact on several additional industries and local communities throughout Hungary. German companies are also keen on cooperating with local vocational and tertiary education institutions and on taking advantage of the opportunities provided by the Hungarian dual education system. This enables companies to train their future employees. Students can learn and study in a project-based format, on a platform where industrial reality and academic theory meets. The trend is unbroken, German companies are Hungary’s most important partners, and they have a vital role in the development of the market-based competitive Hungarian economy.

German Investments in Hungary

EUR 22.1 billion in FDI in 2016

300,000

people employed

6,000

German-owned companies

HIPA-supported German investment projects (2016-18)

strategic partners of povernment

Major Contributor

The technology-intensive investments and R&D focused activities of German companies like Audi, BOSCH, Mercedes Benz and Rehau make a major contribution

BBJ Infographic

Source:

14 | 3

Focus

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Budapest Business Journal | August 2 – September 5, 2019

Developing a ’Vital Part’ of the Hungarian Economy András Sávos has been managing director of KnorrBremse Rail Systems Budapest, the Hungarian subsidiary of the Munich-based Knorr-Bremse Group, since 2015. He became president of the German-Hungarian Chamber of Industry and Commerce (DUIHK) this year, and talks to the Budapest Business Journal about the challenges and opportunities of doing business here. ZSÓFIA VÉGH

BBJ: How satisfied are you with the work of the DUIHK? András Sávos: I have been serving as a board member of the organization for two years now, and in the past years I have been committed to the issues and the direction the chamber has been following. Additionally, this organization has been serving the membership and society at a high level for a long time now. So, I am not planning any radical changes. I also would like to highlight our efficient cooperation with the members of the advisory body, with whom I continuously have lively discussions on our running projects and on the scope of our vision. BBJ: What are the areas that you would like to develop? AS: The chamber continues to serve as a bridge between German investors and Hungarian enterprises looking for business opportunities in Hungary. As I mentioned, this is something it has been doing well and effectively. Serving as president, I believe it is important to remain independent and impartial and to provide credible information for potential

András Sávos investors. Beside the opportunities and advantages, we of course also speak about the challenges they may encounter in Hungary. Although there is still room for improvement, Hungary is a good place to invest in compared to other regions or other countries in the region. BBJ: Is there an industry or field you would promote more or would like to see develop further? AS: We are not promoting any specific industry to investors; our aim is to help them in their selection and provide them with a comprehensive overview of the country or the specific market they are interested in. This activity has not changed throughout the years, it is “business as usual”. Of course, it is in our interest that even more technology-intensive companies come to invest in Hungary; we have a positive approach to all this. BBJ: What challenges could impact the organization’s and its members’ activity the most? How do you plan to respond to them? AS: One is technology. The chamber has certain issues to which we dedicate more time and attention every year: digitalization is one of them. This is an area where Hungary and Hungarian businesses lag behind and something we try and improve by, for example, organizing workshops and training. A new initiative, Netzwerk Digital (Digital Network) has been launched recently. This program mainly targets small- and medium-sized firms, where digitalization is still not something of strategic importance. It is mostly about shaping businesses’ mindset. Digitalization is also strongly related to efficiency, and will help to improve it in the Hungarian economy as a whole, and also on individual business level. A key area I personally feel strongly about is the country’s competitiveness. As the

new president of the chamber, I believe this is a question we should focus on intensively. The country’s competitiveness hangs on a lot of factors: global trends, new requirements we may not see ahead. What we do see is that the era of low wages has come to end. Yet with the dynamic growth of wages an improvement in efficiency at

“Yet with the dynamic growth of wages an improvement in efficiency at the same pace and level has not come. This will, sooner or later, impact companies of all sizes and it is our job as well to find ways to improve it. The question is how a low-cost country can change paradigm and operate efficiently as a mid-cost market.” the same pace and level has not come. This will, sooner or later, impact companies of all sizes and it is our job as well to find ways to improve it. The question is how a low-cost country can change paradigm and operate efficiently as a mid-cost market. BBJ: How can you contribute to improving competitiveness as an organization? AS: The chamber can pick topics that the board believes it is important are

strengthened or that awareness is raised about them. A key area we have always placed much emphasis on is training. We cooperate intensively with the government and other Hungarian partners in helping establishing the dual vocational training system in Hungary; for six years now we have even been awarding a vocational training prize. More practically, we ourselves organize training courses in and for companies, for example in the areas of management, HR or energy efficiency, and we help companies to establish their own training framework. We also communicate our members’ stance and ideas on certain areas to the government. We are continuously monitoring global trends and seek to sensitize companies, be that education or labor market issues, technological developments or questions of strategic management. In the fall, the board will identify its key medium-term focus areas and outline ways in which to provide practical support to the members. BBJ: How do you see the relationship between Hungarian and German companies and investors? AS: There are around 3,000 German firms in Hungary, employing more than a quarter million staff. This alone shows that German companies are a vital part of the Hungarian economy. Many of them serve Hungarian customers with their products, as service-providers or retailers, while others are mainly producing for export markets. Already today, German companies cooperate with numerous Hungarian suppliers, but I think there is room for intensifying the integration of Hungarian SMEs into international production and value chains. This could create sustainable business chances for the local firms and, at the same time, raise the competitiveness of the economy as a whole.

www.bbj.hu

Budapest Business Journal | August 2 – September 5, 2019

PRESENTED CONTENT

When Structure Meets Ingenuity

20 years

ago. You need to be able to educate the top talents here, because if they go to study at MIT or Stanford, you have lost them, they are not coming back.” (That isn’t to say that all travel is bad. Krug cites the example of PwC, which encourages its people to take foreign postings of two or three years to broaden their experience, but then bring that knowledge back and apply it here.)

“German engineering and Hungarian ingenuity has proved to be a winning combination. The Germans bring structure, the Hungarians are more innovative, have a trial and error approach.”

ROBIN MARSHALL

That Germany is a vital economic partner of Hungary is not news. But how did it come to be such an influential player? “It was a combination of factors, I think. History is certainly part of it. Hungary played a big role in breaking down the Iron Curtain and the reunification of Germany, and that helped build a lot of trust among the politicians at the time,” Krug recalls. “But there were lots of links before that, with Hungarian companies doing contract manufacturing for Germany in the 1980s. Bosch has a

150-year history

Enviable Reputation

So much of that partnership was built around manufacturing. Hungary, like Germany, had an enviable reputation for its skilled engineers. Unlike Germany, the conditions around the workforce were much less restrictive. “German firms were definitely attracted by the flexibility and the skill of the Hungarian workforce. Remember, at the time factories were opening here, they were closing in Germany.”

Focus | 15

areas. More has to be done to teach and encourage entrepreneurism; indeed, education in general has to be improved, and the brain drain has to be stopped at source. “Universities need the right curriculum to show students what they can do now, rather than what was done

If you want to know anything about the still unfolding story of Germany’s economic interest in Hungary in the past quarter century, you could do a lot worse than ask PwC’s Armin Krug. And that’s exactly what the Budapest Business Journal did.

here, Siemens also. And a lot of East German people studied in Hungary and then stayed here afterwards, which built up further contacts,” the PwC partner points out. “Proximity played its part too. After all, there is only Austria between the two countries. So German companies were well placed to take advantage of the opportunities when the utilities were put up for sale, and you had the likes of RWE, E.ON and Deutsche Telekom coming down. There has also been a lot of retail, Penny Market, Metro, Aldi and Lidl, who saw opportunities in bringing Western-type consumerism to the region.” Krug also points to the good rail and road networks Hungary enjoyed even back in the 1990s, which made it easy to shift products and parts into or out of the country. German firms were seen to be honest partners, in that they tended not to repatriate profits, but reinvest in their Hungarian businesses, he says. “One plant became two, just as it did at Audi and Mercedes.”

Armin Krug Hungary still offers a cost saving in many cases, though the gap with the West is certainly closing. Krug makes the point that, as it closes further, Hungary will need to make sure it remains competitive. “The Audi strike [in Győr] at the start of the year was a warning to everyone, I think. That must not be allowed to happen again. It was a shock to many Germans, not least because it stopped production in Ingolstadt.” Hungary, like Germany, will probably always have a production base, though increasingly the work itself will be done by robots. Where Krug thinks Hungary can

Go East, Young Man When Armin Krug first came to Budapest in 1996, he had no links with the country at all, other than a boss who wondered if the German might not want some international experience in the Hungarian capital. “I was curious. Most of my peers at that time were looking to the West, to the United States, if they wanted to get some experience. But after the Iron Curtain fell, I thought it would be really interesting to see how things developed.”

really set out its store is in its brain power, developing software as much as hardware. “German engineering and Hungarian ingenuity has proved to be a winning combination,” he says. “The Germans bring structure, the Hungarians are more innovative, have a trial and error approach.” The likes of Bosch, Knorr-Bremse and Thyssenkrup are all involved in both manufacturing and R&D in Hungary.

Brain Power

Focusing on Hungarian ingenuity and brain power touches on a number of

He was invited here by a colleague from Arthur Andersen who was setting up a German desk. “The first wave of investors arrived around 1993, the second wave in 1996, and all the then Big Five were setting up German desks. My boss at Andersen who I had worked for in Frankfurt had been here a year, and thought I might be interested in getting two or three years’ experience.” Andersen famously fell apart in the wake of the Enron scandal and,

Digital transformation is, therefore, just as much an opportunity as it is a threat, and touches all areas. “In Hungary, parts of the public administration that are handled digitally are far ahead of anything we have in Germany.” Krug is involved with PwC’s Future of Finance project, and says this is a good example of how the world is developing. “This is where we see a lot of growth for our firm. Of course we still recruit talented young graduates, but we are also looking for data scientists and small startups that are successful in dealing with data analytics.” Is he optimistic for the future of Hungary? “Yes, because you can see the administration is trying to lay the groundwork to take advantage of the opportunities. Encouraging entrepreneurism and getting education right are very important. But there are already good examples: NNG in automotive navigation, and ArchiCAD [the market leading architectural software developed by Hungarian firm Graphisoft] has been around for 20 years.

in 2002, Krug’s team joined EY. He stayed there until 2004, when he moved to PwC. A partner at PwC, his career has seen him focusing first on automotive, then energy, and now telecoms, where he is the engagement partner for a major telecom service provider. He is also on the board of the German-Hungarian Chamber of Industry and Commerce, and on the supervisory board of the Hungarian Automotive Organization.

16 | 3

Focus

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Budapest Business Journal | August 2 – September 5, 2019

News///in brief German-Hungarian

BMW Appoints new MD for Hungary

Audi Hungária Appoints New Chairman

German carmaker BMW has appointed a new head at its Hungarian unit, BMW Group Magyarország told autopro.hu. Maciej Galant will take over as managing director of BMW Group Magyarország from August 1, replacing Massimiliano Di Silvestre, who is leaving to become head of BMW Group Italy. Galant has been heading BMW Group Slovenia for the past three years. Before that, he was sales director at BMW Group Poland, autopro.hu said.

Audi is replacing the head of its car and engine plant in Hungary, Audi Hungária told autoszektor.hu. Alfons Dintner, who earlier headed Audi’s business in Mexico, will take over as chairman of Audi Hungária from Achim Heinfling, who is to oversee the plant at Audi headquarters in Ingolstadt, autoszektor.hu said.

5,000 More Hungarians Living in Germany In 2018 some 400,000 more people moved to Germany than left, according to the latest study of the German statistical office (Destatis), portfolio.hu reported. The pace of Hungarians relocating to Germany slowed somewhat from 48,000 in 2017 to 44,000 in 2018, while the willingness to return was slightly up to more than 38,000. Thus, net outflow stood at 5,524, which means that at the end of last year Germany officially registered some 212,000 Hungarian people living within its borders.

Lidl to Install EV Chargers The Hungarian unit of German discount supermarket chain Lidl is to install electric chargers at 106 of its stores, index.hu reported. The new filling station network will be able to charge 372 EVs. The Hungarian Energy and Public Utility Regulatory Authority (MEKH) has granted permission for the installation of 190 filling stations, index.hu said.

Audi Announces HUF 41 bln Expansion The Hungarian unit of German car maker Audi will earmark HUF 41 billion to expand its vehicle manufacturing

infrastructure, engine development center and electric motor unit at Győr (120 km west of Budapest), news portal mfor.hu reported, citing Minister of Foreign Affairs and Trade Péter Szijjártó. The Hungarian government is supporting the investment, which will create 250 jobs, with a HUF 6.4 bln grant, the minister said. Audi Hungária chairman Achim Heinfling said the investment would be completed by the end of 2020, mfor.hu added.

Daimler in Central and Eastern Europe. Münster replaces Jörg Schmidt, who is taking another position within Daimler as sales director for the Australian and New Zealand passenger car market. MercedesBenz was the market leader in Hungary’s premium car category for the third year running in 2018, hvg.hu noted.

Daimler Sales Unit Gets New Head

Hungary was the biggest buyer of German weapons in the first half of 2019, portfolio.hu reported. New acquisitions by the Ministry of Defense amounted HUF 573 billion, which Hungary will pay in instalments. The transaction includes new tanks and howitzers, various assault rifles, anti-tank weapons, uniforms, helicopters and missile defense systems. The ministry held a military demonstration of the new equipment earlier in May.

Reinhard Münster has taken over as managing director of Mercedes-Benz Hungária, the local sales unit of German carmaker Daimler, hvg.hu reported. Mercedes-Benz Hungária said Münster is familiar with the Hungarian market, having worked earlier in the area of regulation and business development for

Hungary Spends HUF 573 bln on German Weapons

Sziget’s ʼLove Revolutionʼ Brings World ‘Influencers’ to Hungary with a focus on childhood and teenage Sziget Festival first announced its “Love bullying leading to suicide, exclusion, and problems related to poverty and a Revolution” campaign two years ago, with a lack of education. focus on the importance of sustainability, human Meaningful Dance rights, condemning war, and speaking out against There will be another dance production: Swiss artists Dakota and Nadia will discrimination based on skin color, religion, or try to demonstrate things which are impossible to put in words, through sexual orientation. This year’s program features a dance. Their choreographies will investigate the question of domestic range of world famous speakers such as violence, calling attention to a problem Dr. Jane Goodall and Emi Mahmoud. that affects many. “For the first time in the history of Sziget, we would like to call attention to the most important agendas of Love Revolution through the invitation of real ‘influencers’, who will express their opinion on their own topics on the main stage,” says Sziget CEO Tamás Kádár. Among others, visitors will have a chance to hear primate researcher, U.N. peace ambassador, and environmentalist Dr. Jane Goodall; former U.S. Vice President and Climate Reality Project founder Al Gore, who will convey his thoughts to the festivalgoers through a video message; and activists Rosa Anders and Milan van der Meulen, who will perform “The Truth in Ten Minutes”. However, the lineup of celebrities who preach the Love Revolution’s messages

does not end here, as Sziget will also host poet, activist, and UNHCR goodwill ambassador Emi Mahmoud. As a former refugee herself, she will call attention to fellow sufferers and those who live in disadvantaged communities. Mahmoud is known for both her heartfelt speeches and her slam poetry pieces. The main stage will feature Drew Dollaz from the United States. As a street dancer, he rose to fame with his unbelievable flexibility, forming his own hybrid style by combining multiple types of movements. Over the course of his career, he has collaborated with partners such as Madonna, Rihanna, and Skrillex. Besides dancing, he tries to makes his voice heard in human rights questions,

Acrobatic duo The Arrow will tell the story of the first glance, the first hug, and a bond that lasts forever. “Looking at the process of developing feelings, anybody who has been in love before can recognize themselves as every love is equal, independently of their gender identity,” Sziget tells the Budapest Business Journal. Finally, the SUPERAR Children’s Choir will invite the guests at the main stage to sing along. The choir provides free musical education to disadvantaged and refugee children, helping their integration. At the interactive concert, the audience will get to know the songs of people near and far, experiencing the unique spirit of the choir, and the power of its diversity. The financing of the international SUPERAR organization’s Hungarian activities has been provided by Sziget since last year.

Emi Mahmoud

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Budapest Business Journal | August 2 – September 5, 2019

Special Report Translation

Untrained Businesses Dilute Busy Market The Hungarian translation market is a busy sector employing a huge number of freelancers, with large agencies fighting price depression caused by one-man bands without proper qualifications, market actors tell the Budapest Business Journal. CHRISTIAN KESZTHELYI

To little surprise, the most-sought languages for translation are either English or German, chiefly to Hungarian, however, this particular mix is often seasoned with more exotic tongues. “English and German are still thriving as target languages,” says Tünde GálBerey, senior project lead at Villámfordítás Fordítóiroda. “As for the revenue, English, German, Spanish and Russian are the most important target languages but being a multilanguage translation agency (our specialty is the proprietary PM system with prompt solution suggesting and strong online presence), Slovak, Czech, Chinese and Ukrainian projects represent a large share as for the number of orders,” she adds. Douglas Arnott, the owner of EDMF Language Services Kft., who was awarded a British Empire Medal this year, agrees. “For us, in Hungary, the most soughtafter language pair is Hungarian-English, accounting

for

40%

of our work, with work in the opposite direction [English-Hungarian] amounting to 10%. We also do a fair amount of German-English work, which makes up 25% of our volume. In terms of services, 70% of our work is translation and 25% is

rather low, although there is a very clear separation of professional and nonprofessional language services companies (LSCs),” he says. “Competition is reported to be quite fierce on the home market with severe price pressure and shortening turnaround times. This, however, is nothing new: it has been a trend in the past two decades,” Bán says. Nevertheless, he mentions that as espell’s client portfolio is 70-75% comprised of foreign companies and enterprise customers, its experiences less local competition. Although the market sports a huge stock of freelancers, real talent is scarce. “On the Hungarian language service market, invoices of the translators are usually paid in

25-35 days.

proofreading,” Arnott says. Gál-Berey notes that in addition to translations, proofreading as a service is on the rise. “Regarding the services, most of the projects include only translation but I am glad to note that the number of projects including translation and proofreading has doubled in the last two years,” she adds. However, espell paints a slightly different picture of its market, saying its case “is somewhat different to most language services companies here,” according to CEO Miklós Bán. He is also the chairman of the Hungarian Association of Professional Language Services Companies [Proford] and the vice president of the European Union of Associations of Translation Companies [EUATC], the largest representative umbrella organization for the European language industry.

Language Pairs

“Only about 15-20% of all translation assignments we do are from or into Hungarian, which is approximately the opposite of the case for most providers in Hungary. So in our case the largest language pairs are English and German into German, French, Italian, Spanish, Japanese, Chinese, Korean and CEE languages and, to a lesser degree vice versa,” Bán adds. The Hungarian market comprises

120

translation

agencies, most having only one or two employees. “There is a huge size

difference between a big agency in, for example, Poland (or any other European country) and the biggest Hungarian translation agency. Our national market is more scattered than it is in other countries, thus the competition varies quickly,” says Gál-Berey. She adds that while the market still sees some unfair trading, transparency has become the new “sexy”, and some clients particularly choose her firm for its efforts in this regard. Although there is plenty of work on the market, bigger and more established translation agencies face competition from sole entrepreneurs, many of whom are actually selling untrained services. “Many ‘translation companies’ in Hungary are actually just sole entrepreneurs, and unfortunately many people think that with a decent level of language proficiency they can make a living out of translation,” says Arnott of EDMF. “They do so frequently without any formal training or qualification in translation. The issue here is that this has a price-depressing impact in the market, as such ‘translators’ are willing to work for less money,” he explains.

Pulled Down

As prices play a significant role in the choice of end-customers who do not speak the required language, hence have no point of reference, prices are pulled down in the market. Bán, of espell, has also experienced dilution of the market. “The barriers of market entry in our industry is still

Most of the agencies explain this delay as a cash flow issue. This is the old school behavior of translation agencies and they are losing talents,” says Gál-Berey Espell has also seen some troubles on this front. “I would say this is the most critical issue that we are faced with at the moment. Espell has been struggling with scaling up as great talent is scarce. Owing to espell’s

“The biggest difficulty is sifting through the many people offering their services to make sure we are always working with trained translators.” special situation in the home market in terms of hiring, the competition we face comes not so much from other Hungarian LSCs, rather from tech companies, startups, SSCs of large enterprises and, increasingly, from western LSCs,” says Bán. Another difficulty is that not every company knows its translators personally. “The biggest difficulty is sifting through the many people offering their services to make sure we are always working with trained translators,” Arnott confirms. “It is a global online market, which means we do not actually know most of our resources personally. This makes it all the more important that we rely on our quality assurance systems to screen applicants properly and test their abilities before we actually assign them client work,” Arnott adds.

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Special Report

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Budapest Business Journal | August 2 – September 5, 2019

Found in Translation: MemoQ Software Formed by three Hungarian language technologists more than 15 years ago, memoQ is one of the country’s fastest developing translation management companies. The company grew from an after tax profit of HUF 108.2 million in 2017 to HUF 131.7 mln in 2018, while net sales edged up to almost HUF 2 billion, according to public records. The Budapest Business Journal spoke with co-founder Balász Kis. ÉVA KASZAP

BBJ: Who were memoQ’s founders? Balázs Kis: In our early stage we had three partners: István Lengyel, Gábor L. Ugray and myself. We were colleagues working together at language technology company MorphoLogic at that time. Gábor graduated in mathematical programming and in German, István is an economist and translator. I am a computer engineer and I have also done a PhD in the field of applied linguistics. BBJ: What was the original idea and target market? BK: We had three basic motivations. First, around 2003-2004 we realized that we could do something better than the computer assisted translation technologies at that time, so we started to write codes and created a program. Second, I was teaching translators how to use translation technologies better. Finally, my inspiration came from my

agencies. This is a traditional market, where we successfully managed to fill a vacuum. Between 2008 and 2011 it generated a 100% increase. The third focus group is industry players, international companies running their own translation department. Among them, game software designers dealing with game localization or companies partnering healthcare manufacturers are the most common. Healthcare industry firms have to operate in a strictly regulated business environment. One of our colleagues in Germany, for example, is dealing only with this industry, having a comprehensive knowledge on legal and linguistic standards.

Balázs Kis, owner and founder of memoQ. parents who had a book publishing company focusing on IT titles, where several translators were working on a single project with very tight deadlines. We had to produce a high quality and terminologically consistent outcome with group translation. There, we created an effective workflow, where translator team members had access to the work of each other and were able to collaborate. BBJ: Did you have any financial support at the beginning? BK: No. We had some tender money, but the majority of our financial backing in the early stage came from own sources, and with time from revenues generated slowly by the business. BBJ: What is the key to the success of your business model? BK: Before 2010 we targeted projects with only one additional competitor running for the business next to us. Today our business strategy is rather turbulent. Our product is very traditional. Customers buy it, download it to their PC and use it. The use of computer software, however, is undergoing significant changes nowadays. Cloud computing services are the latest trend, increasingly gaining ground. Accordingly, we have two business models. The traditional software as well as cloud computing. Traditional clients can usually afford higher initial costs, cloud services require monthly fees. The two designs live perfectly side by side. We have only one product: memoQ, our translation software. It offers many tailor made services for individual translators, for translation teams, for translation agencies or industry players. We adapt to our customers’ needs and offer various deployment and licensing options. In terms of deployment, our server can run in the cloud with three different geographical centers. We also provide dedicated servers and manage the full hosting service. In this case, all maintenance responsibilities are shifted

to us. A third deployment option is when customers install and run our software on their PCs. As for licensing, we offer perpetual licenses along with a technical support period of one year. And we also have a monthly or annual licensing model, allowing our customers to pay a per subscription fee including software licenses, access to support services and new versions of our software as they are released.

“Our customer base is mainly foreign international companies. We have clients from 100 different countries. Main customer areas are Germany and the United States, but Poland and Slovenia are also strong. We have local distributors in China and in Japan as well.”

BBJ: What is the breakdown between local and foreign customers? BK: Our customer base is mainly foreign international companies. We have clients from 100 different countries. Main customer areas are Germany and the United States, but Poland and Slovenia are also strong. We have local distributors in China and in Japan as well. Our total headcount reaches more than 80 people, including overseas dealers. Japan is a dynamically growing market, making a 100% expansion last year. Hungarian partners amount to only 1% of the total. It does not make sense relying solely on them as the Hungarian market is very small. BBJ: What is memoQfest? BK: This is our annual festival organized for current and future users. The first such event was in 2009. Our aim is to boost our brand and budget as well as to provide professional content to our clients. BBJ: Will machine translation ever replace human work? BK: The answer to this question is a firm no. There will always be a difference between machine and human translation. Quantity and quality requirements of translation work are constantly growing. One of the traps of neural machine translation is, for example, that it provides a perfectly formatted target language outcome, but it simply skips sentences it cannot translate. Such mistakes can be picked up only through a content based postediting work.

BBJ: What future goals does memoQ have? BK: We have a significant technical “debt”. Our code needs modernization. BBJ: MemoQ is the product. What is the It should be redesigned for cloud company behind it? based services. It is also our aim to BK: Last summer we renamed our company introduce more automation features from Kilgray to memoQ Translation into memoQ and to enlarge our services. Technologies with the idea of unifying The translation industry has a common the brand. Following a buyout, there are view: translation is a kind of forced only two of us in the business now, and activity. Most content is not created for we wanted to create a transparent a local audience. Globalization requires and clear trademark. more localization, which should be pinned in an earlier stage of the entire BBJ: Who are your main target groups? workflow. Post editing is the most BK: We are targeting three main expensive means of quality control. segments. Individual translators are the MemoQ provides tools such as term base strongest in terms of number, but the management or automatically detected smallest group in volume. They give terminology, as well as translation some 25-30% of our total sales. Our memory to speed up translation work second core audience is translation and boost quality.

www.bbj.hu

Budapest Business Journal | August 2 – September 5, 2019

Special Report | 19

Anyone who had to quickly translate a text or an email has probably used Google Translate at least once. And, depending on the source material, they will either have got some good or some rather, um, funky results. Either way, texts translated by machine always require some human post editing; how much, exactly, depends mostly on the type of the text and the style. Machine translation works well only with certain text types. It is not suitable for translating, for example, marketing or creative texts, where phrases, idioms, or style can change the meaning of the text. Machine translation doesn’t recognize fixed expressions, and cannot really distinguish between styles such as sarcasm, translating them word-by-word. It uses terminology quite well, though, meaning it is excellent for translating legal or technical texts, says Igor Varga, a freelance translator. “These two fields are the most important ones where it is supposed to be used. Nevertheless, companies are trying hard to force its use on other types of texts as well,” he notes. Even when using it for legal texts there is a risk that the translation could look good but mean something completely different, he adds. Because it is unable to properly recognize style and register, machine translation always requires review and post editing, which can sometimes mean more work for an editor/translator than translating the text without it. Still, there are translation companies which, mainly with the aim of saving money, use machine translation and commission post-editing.

OK vs Perfect

There used to be tutorials for postediting which differentiated two quality levels – there were texts that were fine

“It [machine translation] is expanding in Hungary as well, but in baby steps. Post-editing cannot be skipped though. It is a long way until that can be minimized.” if you edited them just “OK” (resulting in a more raw text), and others required full editing (where the output text must be perfect). These, however, seem to have disappeared, probably because clients insisted on good quality and therefore only the second variant survived, Varga notes. There are, however, some cases when texts can be translated entirely by a machine: usually for in-house use by, for example, a large carmaking company, where a huge corpus of vocabulary has been accumulated throughout years. “In these cases, there is no need for translator; the machine translation will result in a quality that workers can use,” Varga says. For now, though, machine translation is unlikely to replace translation by people, the expert says. It is simply not smart enough and, as already discussed, cannot handle register, types of style, etc. Clearly, care should be taken when using it, but it can be a nice complementary tool.

It is illustrative looking at the mistakes Google Translate makes. This currently represents the highest level of artificial intelligence in the translation industry, and one can clearly see the problems currently unsolved. The quality also varies according to language; there is even more room for mistakes with those not part of the Indo-European language family.

Third-party Disclosure

Using machine translation has its limitations not only because of the capabilities of the system. If texts contain sensitive information, the client may require that data is not disclosed to any third parties. For that reason alone, many customers ban the use of machines, explains freelance translator Barna Kanik. He says there have been cases where translators have been fined for using a machine to translate a text. To what extent machine translation can be useful depends a great deal on the language pairs, or the texts that run through the system, Kanik says. In the case of a German-English language pair, it can give quite good results. For languages that are not a member of a large language group, such as Hungarian, it will give poorer results. At this point, machine translation is an addition, not a replacement for translation by people, he notes.

Internationally, therefore, it is common practice to use these tools, including Google Translate which has a much more sophisticated version behind a paywall. “It is expanding in Hungary as well, but in baby steps. Post-editing cannot be skipped though. It is a long way until that can be minimized,” Kanik says.

When it comes to the types of translation software, all major translation service companies have their preferred computer-assisted translation tools (CATs) such as SDL’s Trados. These are not to be confused with cloud-based machine translation, such as Google Translate, the bestknown one, or Microsoft’s similar service. These cloudbased translation APIs can dynamically translate text between thousands of language pairs (but always via English). They let websites and programs integrate with the translation service programmatically. With certain plug-ins, CATs can be connected to these platforms. The programs with fully-fledged services are subscription based; Google Translate translation charges on a per-character basis, even if the character is multiple bytes.

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Special Report

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Budapest Business Journal | August 2 – September 5, 2019

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György Kovács (100) –

boglárka tímea tési – –

1054 Budapest, Tüköry utca 5. (1) 439-0650 info@leg.eu

Sándor Sojnóczky (50), Anikó Sojnóczky (50) –

sándor sojnóczky – –

6726 Szeged, Sepsi utca 5. (62) 950-222 mail@hunnect.hu

1982 25 770

Individuals (100) –

miklós bán Edit Takács –

1056 Budapest, Belgrád rakpart 26. (1) 239-8043 forditas@espell.com

1997 27 450

Individuals (Ÿ) Individuals (Ÿ)

alistair binks Péter Márton –

2890 Tata, Sport utca 20. (1) 793-3610 info@ albionlanguages.com

150

Gábor Pataki (100) –

gábor pataki – –

1026 Budapest, Rügy utca 12. (1) 394-4758 lcbt@lcbt.hu

2004 17 1,872

Individuals (100) –

andrás Winkler-virág Erika Antal Judit Darnyik

1093 Budapest, Lónyay utca 29. (1) 310-7168 afford@afford.hu

ISO 9008:2015

1999 9 1,400

Individuals (100) –

anita nagy Ráczné Réka Radnits Roland S. Rácz

1036 Budapest, Árpád fejedelem útja 54. (1) 250-6729 info@bttranslations.com

Ÿ Ÿ

ISO 9001

–

Ÿ Ÿ

ISO 9001:2015

✓

Finance, law, life sciences, biotechnology, ITC, technical memoQ, SDL, XTM, Crowdin, Memosource, Across

ISO 17100

Life sciences, industrial automization, car and machine industry, IT, software localization, law, finance, marketing SDL Trados Studio, MemoQ, Across, Star Transit, SDL Passolo

–

391 295

✓

–

✓

–

350 260

380 260

✓

–

✓

–

MLSZ, NRA, OBA, HM

✓

–

Police, finance, law, defense, IT, marketing

yeaR establisHed no. of full-time employees on june 1, 2019 no. of subContRaCtoRs

tRanslation

✓

sign language inteRpRetation

inteRpReting

–

liaison inteRpRetation

desktop publisHing

✓

ConfeRenCe

softWaRe loCalization

–

ConseCutive

native pRoofReading

✓

–

2005 19

2003 23

1990

323 160

✓

–

✓

Európai Bizottság, Morningside, Erste Bank, Unicredit Bank

✓

business team inteRnational kft.

298 140

✓

–

easy media kft. villámfoRdítás foRdítóiRoda

280 182

✓

Translation technology, localization, business MemoQ, Trados, Memsource

ISO 17100

2007 18 1,240

Tünde Gál-Berey (100) –

tünde gál-berey – –

1131 Budapest, Babér utca 1-5. (30) 844-3444 info@villamforditas.hu

www.tranzpress.hu

270 140

✓

SAP SE, Phoenix Contact GmbH, Eni Group, Nissan Sales Eastern and Central Europe Kft.

✓

–

IT, business, law, technical MemoQ, SDL Trados, Across

ISO 9001:2015

2005 14 1,000+

(100) –

andrás szalayberzeviczy Anna Ruff –

1025 Budapest, Felhévízi utca 31. (1) 225-1426 info@tranzpress.hu

edimaRt tolmáCsés foRdítóiRoda kft.

250 145

260 145

✓

Vodafone, Prohuman, Union, TDK group, Rail Cargo, Alpha-Vet

✓

2005 13 400

Márta Balázs (50), Edit Balázs (50) –

márta balázs, edit balázs Edit Balázs Márta Balázs

1068 Budapest, Benczúr utca 43. (20) 975-9092 info@edimart.com

237 129

✓

–

✓

European Commission, KKBK, Sanofi-Aventis Zrt., OTP Bank, K&H Bank, Allianz Hungária Zrt.

✓

1991 12 125

Veronika Mendel Lehel (50), László Lehel (50) –

veronika mendel lehel – –

1054 Budapest, Hold utca 15. (1) 269-1153 office@icontact.hu

201 100

✓

Ÿ 8 73

László Jankovics (49) Star AG (51)

lászló jankovics Attila Sipos Attila Sipos

1067 Budapest, Teréz körút 11. (1) 413-6493 star@star-hungary.hu

✓

Alstom Transport Hungary, Belügyminisztérium, Külgazdasági és Külügyminisztérium, Lidl Magyarország Bt., Magyar Posta Zrt., Máv-Start Zrt.

✓

1989 5 190

Individuals (100) –

ferenc jantner, zoltánné lehel – –

1113 Budapest, Bartók Béla út 86. (1) 209-2482 forduna@forduna.hu

tRanzpRess kft.

www.edimart.com

inteRContaCt budapest kft.

11 www.icontact.hu

✓

323 160

https://villamforditas.hu

✓

addRess pHone email

affoRd foRdítóés tolmáCsiRoda kft.

www.businessteam.hu

✓

top loCal exeCutive Cfo maRketing diReCtoR

fields of speCialization / Cat tools used

Medical, medical technology, pharmaceutical, health care, tourism,, business, economic, finance, IT, ISO telecommunication, tech17100:2015, nology, vehicle indsutry, ✓ ISO electrical engineering, law, 9001:2015 humanities MemoQ,SDL Trados, Across, XTM, Passolo, Memsource, Wordfast

www.afford.hu

631

majoR Clients in 2018

oWneRsHip (%) HungaRian non-HungaRian

HunneCt kft.

631

seRviCes

Quality assuRanCe

www.leg.eu

pRoofReading

leg magyaRoRszág zRt.

total net Revenue in 2018 (Huf mln) total net Revenue in H1 2019 (Huf mln)

Company Website

type of inteRpRetation

net Revenue fRom tRanslation and inteRpRetation in 2018 (Huf mln) in H1, 2019

Rank

Ranked by net revenue from translation and interpretation in 2018 (HUF mln)

staR HungaRy kft. www.star-hungary.hu

foRduna foRdító

13 kft. www.forduna.hu

150 64

163 95

✓

–

✓

SDL Trados, Groupshare, Omega-T

Vehicle industry, ISO finance&law, life sciences, 9001:2015, technical ISO MemoQ 17100:2015

–

EU, pharmaceutical, financial, bank, law, insurance MemoQ, SDL Trados Studio

MSZ EN ISO 9001:2015, MSZ EN ISO 17100:2015

✓

–

Technical, economic TRANSIT NXT

EN ISO 9001:2015

✓

–

Economic, law, technical, traffic, medical, business Trados Studio

ISO 9001:2015, ISO 15038:2006

ils nemzetközi foRdító 15 szolgálat kft. www.ils.hu

tRm kft.- tRm

16 tRanslations www.trmtranslations.com

multi-lingua foRdító és tolmáCs kft.

✓

–

✓

120 60

✓

113 60

✓

111 55

✓

–

– Trados, MemoQ, Memsource

✓

tuRRis babel kft.

96 44

✓

–

✓

–

✓

www.emerald.hu

p és v nemzetközi

21 szolgáltató kft. www.pandv.hu

H-net nyelvi 22 központ kft.

www.h-net.co.uk

amplexoR magyaRoRszág NR kft. www.amplexor.com

ConCoRd

NR foRdítóiRoda kft. www.concordforditoiroda.hu

Consell tRanslations Cee NR kft. www.consell.net

linguaRium kft.

penna-euRópa kft. www.penna.hu

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

Ÿ Ÿ

www.linguarium.hu

Ÿ Ÿ

224

139

✓

–

✓

–

✓

–

✓

–

✓

–

✓

–

✓

–

✓

–

✓

–

✓

–

– SDL Trados Studio, WordFast, X-Bench

ISO 90012015, ISO 17100-2015

–

1982 5

top loCal exeCutive Cfo maRketing diReCtoR

addRess pHone email

Alex Bramahalex b. lawani Lawani (70), Ágnes Bramah- Ágnes B. Lawani Ágnes B. Lawani Lawani (30) –

1013 Budapest, Attila út 33. (1) 487-0660 office@interlex.hu

László Reha (70), Lászlóné Reha (20), Kerstin Reha (10) –

kerstin Reha, lászló Reha Bálint Ágnes –

1114 Budapest, Móricz Zsigmond körtér 3/A (1) 209-6386 ils@ils.hu

Individuals (100) –

istván fülöp – –

1015 Budapest, Hattyú utca 14. (1) 599-9299 info@ trmtranslations.com

3V Systems Kft. (50), László János Végső (35), Gergely Balázs Végső (5), Péter Zsolt Végső (5), Liza Borbála Végső (5) –

lászló jános Végső Sándor Rónai –

1173 Budapest, Pesti út 8–12. (1) 202-0202 multi@lingua.hu

Tibor Palásti (70)Norbert Hegedűs (20) Gyula Kovács (10) –

tibor palásti Renáta Czinege Kissné Szilvia Szagán

1076 Budapest, Thököly út 25. (30) 561-8454 apt@apthungaria.hu

Péter Gárdos (50), Ádám Breuer (50) –

péter gárdos – –

1054 Budapest, Tüköry utca 3. (20) 576-3371 info@turrisbabel.hu

✓

–

Energy, law, accounting, technical MemoQ

GE, C&A, Ikea, New Silk Road, Mewa, Scorpio

✓

–

Legal, economic, science, technical Trados 2017, MemoQ, Across, Memsource

EN ISO 9001:2015

–

1998 2

Zsolt Kunos (100) –

zsolt kunos – –

1117 Budapest, Fehérvári út 132–144. (1) 464-3144 info@emerald.hu

1993 5

Individuals (100) –

balázs péch, zoltán attila veres – –

1011 Budapest, Hunyadi János út 22. (1) 224-0013 iroda@pandv.hu

✓

–

Software localization, company management, vehicle industry, medical equipment, compliance, marketing SDL Trados Studio, Idiom, Translation Workspace, Passolo

✓

–

Ÿ Ÿ

–

Ÿ Ÿ

✓

2003 7 103

Special Report | 21 oWneRsHip (%) HungaRian non-HungaRian

Quality assuRanCe

sign language inteRpRetation

✓

–

✓

liaison inteRpRetation

✓

2004 6 150

✓

ISO 9001:2015

–

103 56

1989 7 50

✓

97 53

emeRald kft.

–

✓

apt HungáRia kft.

✓

1997 3

Ÿ Ÿ

✓

www.turrisbabel.hu

✓

fields of speCialization / Cat tools used

Technical, law, finance SDL Trados, Across, MemoQ, Transit

Főgáz Zrt., Tata Consultancy Sercives, NGM, Olajterv ✓ ✓ Cégcsoport, Magyar Államkincstár

www.apthungaria.hu

ConfeRenCe

ConseCutive

teRminology management

attestation management

tRanslation

inteRpReting

desktop publisHing

softWaRe loCalization –

majoR Clients in 2018

Wolters Kluwer Kft., CMS Cameron McKenna LLP Magyarországi Fióktelepe, Weishaupt Hőtechnikai Kft., Yokogawa Hungária Kft. , New Yorker Hungary Kereskedelmi Kft., BFTK Nonprofit Kft.

111 55

www.multi-lingua.hu

✓

native pRoofReading

124

pRoofReading

124

www.interlex.hu

total net Revenue in 2018 (Huf mln) total net Revenue in H1 2019 (Huf mln)

inteRlex CommuniCations 14 kft.

net Revenue fRom tRanslation and inteRpRetation in 2018 (Huf mln) in H1, 2019

Rank

Company Website

type of inteRpRetation

seRviCes

yeaR establisHed no. of full-time employees on june 1, 2019 no. of subContRaCtoRs

www.bbj.hu

Budapest Business Journal | August 2 – September 5, 2019

2004 4

1999

Ÿ Ÿ

–

– XTM, Trados, Star Transit, Across, MemoQ

2002 28

–

Ÿ Ÿ

2012 3

1996 15

–

Ÿ Ÿ

–

✓

–

Ÿ Ÿ

2001 3

–

✓

Ÿ Ÿ

2000 2

✓

Zsuzsanna Tóth zsuzsanna tóth (100) Szilvia Szöllősi – Zsuzsanna Tóth

1095 Budapest, Lechner Ödön fasor 1. 8/19 (20) 953-3862 zsuzsanna.toth@ h-net.hu

– Amplexor Luxembourg S.à r.l. (100)

violeta-manuela velicu, magdalena agnieszka konopek, edit karády – –

Lajos Róbert Kurcz (100) –

lajos Róbert kurcz – –

1025 Budapest, Pusztaszeri út 70/C (1) 336-1148 info@ concordforditoiroda.hu

– Consell Consultancy B.V. (50), Suzanna V. Ellmann (50)

mark ellmann – –

1073 Budapest, Erzsébet körút 23. (1) 373-0112 info@consell.hu

Individuals (100) –

zoltán kardos – –

1075 Budapest, Madách Imre út 13–14. (1) 486-0508 office@linguarium.hu

Sándor Tóth (50), Balázs Fejes (50) –

sándor tóth, balázs fejes – –

1078 Budapest, István utca 5. (1) 321-6606 translations@penna.hu

1061 Budapest, Andrássy út 12. (1) 555-0100 info-amhu@ amplexor.com

This list was compiled from responses to questionnaires received by July 31, 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 | August 2 – September 5, 2019

Socialite Remembering Legendary Jazz Guitarist Gábor Szabó “When I was learning jazz, I heard many things about Gábor Szabó, that he was a popular guitar player in the USA. I believed he was very old because I heard so many things about him. But I didn’t hear his music. You couldn’t buy American jazz albums in Hungary then,” Másik told me.

The self-taught guitarist fled Hungary in 1956, made his way to the States and had a huge influence on Carlos Santana, among others. He died tragically young.

Improvisation

DAVID HOLZER

All Gábor Szabó took with him that dark night of November 1956 when he crossed the border from Hungary into Austria was the thing that mattered most to him. As he later told Jazz magazine, he thought the acoustic guitar “would be a pacifier in case we were caught. At night, though, it looked like a machine gun; I may have been inviting trouble, now that I think about it.” Szabó was born in Budapest in 1936 and died there in 1982. He was inspired to play guitar by a Roy Rogers cowboy movie and pretty much taught himself. His earliest influences were Gerry Mulligan, Chet Baker and Tal Farlow, heard on the Voice of America radio station which broadcast to combat Soviet propaganda. Settling in San Bernadino, California, after he escaped to the West, Szabó attempted a career in music but ended up working as a janitor to save enough money to enroll at the Berklee School of Music in Boston. He was accepted to study composition and arranging there in 1958. In that year, he took part in the historic Newport Jazz Festival, and things happened to him fast. After Berklee, Szabó joined the Chico Hamilton Quintet. As he told Down Beat magazine

1965,

“It wasn’t until I joined Chico Hamilton in 1962 that I developed my own style and really loosened up.” Szabó’s solo career began in 1966 with the album “Spellbinder”. It included “Gypsy Queen” which inspired a hit for the band Santana in 1970. Carlos Santana described Szabó’s music as “fantastic, spellbinding […]. Until I heard Gábor, I never knew there were other possibilities with the guitar.”

Gábor Szabó and János Másik (with back to camera) in a still taken from one of their 1970s TV appearances. He also picked up on Szabó’s ability to grab a song “and immediately make it like it’s the first time you ever heard it. It takes a very strong soul personality, not so much an ego personality, to be able to put your fingerprints on somebody else’s song.”

Cult Album

Throughout the 1960s and into the early ’70s, Szabó made sometimes great albums. But it’s 1967’s “Jazz Raga” that has become a cult.

“When I was learning jazz, I heard many things about Gábor Szabó, that he was a popular guitar player in the USA. I believed he was very old because I heard so many things about him. But I didn’t hear his music. You couldn’t buy American jazz albums in Hungary then.” As Matthew Fiander wrote on the Pop Matters website in 2010, the year the album was reissued after languishing in obscurity for too long, “It’s an important jazz record, it’s an important guitar record, and it’s an important rock record.”

With its mix of Hungarian, Indian, jazz and pop music, it’s been suggested that “Jazz Raga” is the first jazz fusion album. Critic Doug Sheppard wrote in his liner notes to the 2010 reissue, “Szabó’s already fluid licks are blended with the sitar in uncanny fashion, producing sounds so far out from jazz that it’s almost an accidental psychedelic rock album.” “Corny psychedelic […] so f*cked up and good,” is how American singersongwriter Beck described “Jazz Raga” when he cited it as an inspiration for his 1996 album “Odelay”. Unfortunately, “Jazz Raga” was met with mild approval but also a large dose of incomprehension on its release. It’s taken the past 50 or so years for a slightly larger audience to catch up with what the cognoscenti saw, or rather heard, right away. Somewhere along the way, Szabó became a heroin addict. He was treated at a facility connected to Scientology and came under its spell for a time before breaking away. Because of his addiction, he suffered from ill health. On a visit to Budapest in 1982, he was hospitalized and died. He was not

even

46.

Highly respected Hungarian keyboard player and writer János Másik befriended and played with Szabó when he visited Hungary in the 1970s. I was fortunate enough to be introduced to Másik, who told me his story. Born in 1952, Másik was the right age to fall for rock and roll in the mid-’60s but he soon moved on to the blues and then jazz. His band Interbrass won Hungary’s only talent show in 1972.

“In 1974, I heard from other musicians that Szabó was going to visit Hungary for the first time since he escaped to the West in 1956. At that time, my band Interbrass would play once a week in Marczibányi square. We didn’t rehearse, just improvised,” he recalled. “One night when we were playing, a young man was sitting near me with a guitar. ‘What will we play?’ he asked me. ‘I don’t know, we improvise,’ I said. This young man was Gábor Szabó. He later asked me to play keyboards in the band he put together for the two performances filmed for TV

1974

and ’77. Szabó said I played like the best American jazz musicians.” Szabó told the younger man stories of his life in the United States, and the musicians he had worked with and played

“He wasn’t interested in virtuosity but in pouring all of his soul into simple, beautiful musical sentences. He was brave to do things this way.” with, including George Harrison, Miles Davis and Chick Corea. “He opened windows into himself as a simple human being and to another world, very different from Hungary,” Másik said. Replying to my question as to Szabó’s legacy, Másik said “his music influences younger musicians all over the world. He wasn’t interested in virtuosity but in pouring all of his soul into simple, beautiful musical sentences. He was brave to do things this way.”

You’ll find a decent biography of Szabó at dougpayne.com/szabo. htm. His albums are available at good Budapest record shops. You can watch Carlos Santana talk about Szabó’s influence on him on YouTube. The music of János Másik is available on Spotify.

www.bbj.hu

Budapest Business Journal | August 2 – September 5, 2019

Socialite | 23

Summer a Great Excuse to Head to Balaton for Bor As ever, Lake Balaton is on many Hungarian and expat agendas in August. Not only does the “Hungarian sea” provide relief from the sweltering summer heat; the wine regions in the area are positively brimming with vinous treats for wine lovers. ROBERT SMYTH

On the southern side of the lake, the Balatonboglár region with its predominantly loess soils, and warm climate can produce both white and red wines that are ripe, structured and round. Dani Konyári believes firmly in the class and panache of Bordeaux varieties to make the best and most sophisticated red wine possible, but my pick from the cellar is a Kékfrankos, because it has the winery’s stamp all over it and also shows just what you can do with indigenous varieties. Konyári Piritye Kékfrankos 2015 (HUF 7,250 from Bortársaság) oozes Konyári’s classic intensity with pristine purity of fruit and beautifully integrated oak. This was named among the Top Wines of Excellence in “The Hungarian Wines of Excellence” (Borkiválóságok) books for 2018/2019 and is a wine to silence those who doubt that Kékfrankos is capable of making top-notch, layered red wine of substance and backbone. The Konyári winery is in very good hands following the death of János Konyári in 2017, who had been making the wine in tandem with his skilled son Dani for years. János also oversaw winemaking at the larger Ikon winery, where his younger daughter, Bori Konyári, and her husband, Emil Kvák, are now calling the winemaking shots. Ikon is a source of very good value single varietal wines, such as Riesling (Rajnai rizling in Hungarian) for HUF 1,850 (Bortársaság). The single varietal range culminates in the always impressive Cabernet Franc Evangelista (the 2016 is priced at HUF 4,750). The couple also have their own small winery called Késa, which works four

hectares. Késa Riesling 2018 (HUF 4,150) is nicely crafted – half barrel and half tank fermented with the whole wine aged for a month in new barrels. The riper Riesling from the sun-kissed southern side of the lake can handle the oak, which gives it good depth and makes a wine that is representative of the region.

Sterling Form

Ottó Légli was one of the first names to come through from Balatonboglár and his wines are in sterling form. His singlevineyard Gesztenyés Rajnai Rizling 2017 actually comes from limestone soils from the Gesztenyés vineyard in Szőlősgyörök. This was spontaneously fermented in tanks, then aged in five-hectoliter barrels for a year. It’s varietally pure, well-structured and linear. Légli is also notable for his Olaszrizling (the pan-Central European grape that’s not related to Riesling), especially his bottling from the Banyászó vineyard. He also makes one of the best value Furmints around – one that really captures the grape’s varietal quince-like character and zestiness for a very friendly price (the 2016 costs HUF 2,150). Loess can be an excellent conveyer of a grape’s varietal characteristics and this wine, which comes from grapes grown on János-hegy, was made solely in the tank to allow the fruitiness to come to the fore. Furmint, earlier named Szigeti around the lake and elsewhere, was once widely planted and is being re-established on both shores. Ottó’s brother Géza also makes very nice wine under the Kislaki name. A third Légli brother, Attila, a ceramics/ porcelain manufacturer is getting in on the winemaking act by producing amphora that I’m increasingly seeing in cellars around Hungary.

While Furmint and Riesling are widely considered noble varieties, streaks ahead of Olaszrizling for most people, quality offerings of the latter grape are being made in the Balatonfüred-Csopak, Balatonfelvidék and Badacsony areas, on the northern side of the lake. These wines are right up there amongst the country’s best whites. Figula’s Száka Olaszrizling 2017 from Balatonfüred-Csopak was harvested on September 23 as small, concentrated clusters from nine-year-old vines from the mineral-rich Száka vineyard, three kilometers from the lake in Balatonszőlős.

Complex Youth

This wine flies in the face of the assumption that young vines aren’t capable of yielding complex wines. The fermentation was started spontaneously with no added yeast in steel tanks, then finished in 1,000 liter used Hungarian oak barrels, where it was aged for six and a half months. The oak doesn’t impede on the wine whatsoever, which exudes citrus fruit and green herb notes. The barrels enabled the developing wine to take in small amounts of oxygen through the porous oak, which builds the complexity and structure. The acidity of 5.7 g/l tingles nicely on the tongue and gives the kind of steely structure one would more readily associate with the likes of Furmint, delivering impressive length and zestiness. Often the acidity of Olaszrizling drops off quickly as the grapes are left out on the wine in the pursuit of full ripeness, but not so often in the complex mixed soils and moderated climate of northern Balaton. Other exciting Olasz offerings from Csopak come from the Szent Donát, Jásdi and Homola wineries. The Száka 2017 is available at the Figula winery in Balatonfüred and at the Figula Borsarok at Bartok Béla út 64 in Budapest’s 11th district. For several years now, Szent Donát has delighted us with its Kékfrankos called Magma, which comes from grapes from the special mesoclimate and volcanic soils of the Tihany

peninsula that juts out into Lake Balaton and provides prime conditions for making red wine. The Szent Donát Magma 2017 (HUF 4,150 from artizanshop.hu) lives up to its polished predecessors, yet with a welcome bit more body and substance. Gyula Szabó of the Káli kövek winery buys in Kékfrankos grapes from various growers and in 2017 had the opportunity to purchase grapes from two sites – one from Badacsony’s Szent György hegy that was an ‘impulsive buy’ according to Szabó, while the other, from Dörgicse, was the outcome of the winery’s search for Kékfrankos. Szabó almost blended the two together but in the end decided to bottle them separately; a smart move, as these wines nicely reflect the grape’s ability to be an articulator of terroir.

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