Budapest Business Journal 2810

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

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BUSINESS JOURNAL BUDAPEST

VOL. 28. NUMBER 10

MAY 22 – JUNE 4, 2020

SPECIAL REPORT

Automotive

SPECIAL REPORT

Forging a way Through the Coronavirus Challenges Since the outbreak of the pandemic, the health of employees and business continuity have become the number one priorities of major manufacturers in the automotive and related sectors, and they have now gradually begun resuming production in Hungary.  11 SPECIAL REPORT

Helping Automotive Back into Overdrive While it has not been as hard hit as the tourism and hospitality sectors, most carmakers have seen near total shuts downs of their production lines. How quickly they can get back to work will obviously have a large effect on the country’s overall performance. 12

SOCIALITE

The Slow Recovery From Clipped Wings

Face Mask Chic and the new Flirting Normal David Holzer securers himself a Hungarian designer face mask from Laoni Design, a Budapestbased store that, before COVID19, specialized in leather bags, luxury leather and special items, and is transported back to a memory of devastating Islamic eye flirting.  20

NEWS

Crisis-hit Economy Performed Well Above EU Average The first macroeconomic data that already show the effects of the pandemic were released in the past week, and they reflect that the economy came to a halt in Q1.

However, the data was much less worse than expected, and stands out from the rest of the EU.  3

N ES BUSI

S

Ferenc Liszt International Airport has become a key lifeline for bringing in cargo, especially medical supplies. Rolf Schnitzler, CEO of operator Budapest Airport, tells the Budapest Business Journal what it is like running such an operation amid a pandemic.6

BUSINESS

Drive-thru COVID-19 Testing at Groupama Arena Local company Rollet Kft. and its partner DriveCell Systems Zrt. have launched drive-through coronavirus testing at a purpose-built temporary facility at Budapest’s Groupama Arena.  7

2|1

News

BBJ

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Budapest Business Journal | May 22 – June 4, 2020

THE EDITOR SAYS

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

Bence Gaál, Gergely Herpai, David Holzer, Christian Keszthelyi, Gary J. Morrell, Nicholas Pongratz, Ekaterina Sidorina, Robert Smyth, Zsófia Végh.

LISTS: BBJ Research (research@bbj.hu) NEWS AND PRESS RELEASES:

Should be submitted in English to news@bbj.hu LAYOUT: Zsolt Pataki PUBLISHER: Business Publishing Services Kft. CEO: Tamás Botka ADVERTISING: AMS Services Kft. CEO: Balázs Román SALES: sales@bbj.hu

CIRCULATION AND SUBSCRIPTIONS: circulation@bbj.hu

Address: Madách Trade Center 1075 Budapest, Madách Imre út 13-14, Building A, 8th floor. Telephone +36 (1) 398-0344, Fax +36 (1) 398-0345, www.bbj.hu

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

The Budapest Business Journal, HU ISSN 1216-7304, is published bi-weekly on Friday, registration No. 0109069462. It is distributed by HungaroPress.

Reproduction or use without permission of editorial or graphic content in any manner is prohibited. ©2017 BUSINESS MEDIA SERVICES LLC with all rights reserved.

BBJ-PARTNERS

We, like so many of you, are slowly picking out our path back towards a more routine way of working. This will be the first Budapest Business Journal that has seen all the key production staff in the office on deadline since the March 27 issue.

Regular readers will know that we did not just pack up our belongings, head home and hunker down, waiting for better times. We have continued to produce the BBJ every two weeks – indeed, I am quite proud of the three issues that separate that March 27 edition from this one – we just found different ways of doing it.

I suspect that the compulsion to find different ways of doing things, a shared experience for many if not most of us during lockdown, will influence the way we operate in the future.

We learned new things; that home office was possible en masse, provided you have enough IT kit and internet access. We seem to have been talking about telecommuting, distance learning, home office (is there a different name for each decade?) for years – certainly, we have been writing about it in HR articles for long enough – without seemingly making any progress.

Some staff didn’t like the idea of it, some employers worried that contractual law wasn’t suited to it, some IT directors worried about security issues. All are valid points and all were overcome when people realized they had a week or less in which to plan. I had previously worked as a freelancer from my home office for several years before taking up the editorship here, and loved it.

But working from home is a very different beast when you also have to factor in homeschooling. Several of my friends who either own or run businesses have noted how a certain category of worker, usually men, usually in their late 20s to mid-40s, and always with children at home, will volunteer to come into the office.

One other thing we learned, though it is less tangible. You can get your work done in isolation. You can join virtual meetings by Skype or Zoom or Google Meet or Office Teams. But you can’t replicate the creative buzz that comes from people sitting in the same room and firing ideas and suggestions at one another in a normal, human voice, rather than a tinny, echo-laden approximation of one, occasionally punctuated by the phrase “caller three has left the meeting” whenever someone’s internet connection packs up.

Back to work will, I think, evolve into a combination of office-based and home office. That will, in turn, influence office design and the need for more flexible arrangements. But don’t expect a certain category of worker, usually men, usually in their late 20s to mid-40s, and always with children at home, to volunteer to work from home until the schools reopen.

Stay safe, and socially distanced, as you navigate the return to work.

Robin Marshall Editor-in-chief

Photo: MTI/Tamás Vasvári

Photo: fortepan.hu/GGAABBOO

VISIT US ONLINE: WWW.BBJ.HU

BACK TO WORK, IN A SOCIALLY DISTANCED WAY

THEN & NOW

The bicycle path between Tatabánya and Tata (10 km distant as the crow flies), some 60 km west of Budapest, has been named Cyclistsʼ Route of the Year in 2020, in the first such popularity vote held in Hungary. Sartorially speaking, cycling looked very different at the 19the century turned into the 20th, as the black and white photo from the Fortepan public archive, dated to 1900, shows.

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Budapest Business Journal | May 22 – June 4, 2020

News///macroscope

Crisis-hit Economy Performed Well Above EU Average

The first macroeconomic data that already shows the effects of the pandemic were released in the past week, and they indeed reflect that the economy came to a halt in the first quarter of the year. However, first quarter GDP data was much less worse than expected, and placed in international comparison, it stands out from the rest of the EU. Worse is yet to come, analysts warn, but the government expects the economy to rebound in the second half of the year.

ZSÓFIA CZIFRA

Hungary’s GDP grew by an annual 2.2% in Q1, showing a significant slowdown from the previous quarter, the Central Statistical Office (KSH) has said in a first reading of data. Growth was an annual 4.5% in Q4 2019, and 4.9% for the full year.

A year ago, the Hungarian economy was able to expand by a massive 5.3% annually.

Calendar year-adjusted data shows GDP grew by 1.8% in the first quarter, while adjusted for seasonal and calendar-year effects, it grew by an annual 2% in Q1, down from 4.4% in Q4.

Compared to the previous quarter, the volume of gross domestic product decreased by 0.4% – according to seasonally and calendar adjusted and reconciled data – in the first quarter

of

2020.

The engines of the growth were marketbased services; industry, albeit to

Minister of Agriculture István Nagy (first row, center) and Minister of Finance Mihály Varga (front row, right) at the plenary session of Parliament on May 19. Photo by MTI / Zsolt Szigetváry. a lesser extent, also contributed to the results, the KSH data show.

As for the latter, in March 2020 the volume of industrial production declined by 5.6% year-on-year, data published

by KSH reveals. Based on working-day adjusted data, production fell by 10%. The economic effects caused by the coronavirus epidemic were already significant in this period, KSH said.

Although the March figures have heavily been impacted by the pandemic, industry was still able to contribute to the first quarter GDP growth because of the strong start of the year: industrial production increased 2.4% and 4.1% in January and February on an annual basis, respectively.

Production was 0.1% higher in the first three months of the year than in the same period of the previous year.

Industrial output in March, according to seasonally and working-day adjusted indices, was 10.4% below the level of the previous month. The volume of industrial export dropped by 8.1% year-on-year.

Manufacturing Drop

Within industry, production declined by 5.7% in manufacturing, representing the decisive weight of 95%, while it dropped by 27% in the small weight representing mining and quarrying.

The output of energy industry (electricity, gas, steam and airconditioning supply) rose by 5.4%.

In spite of the weak industry data in March, the Hungarian economy still performed better than in most economies in the European Union, the latest data from the EU’s statistical office Eurostat shows.

Hungary’s Minister of Finance Mihály Varga, commenting on the data, emphasized that, although the coronavirus epidemic had fundamentally rewritten economic expectations, Hungary’s

2.2% growth

rate had exceeded the European Union average by nearly five percentage points.

He also noted that, prior to the coronavirus outbreak, Hungary was one of the EU’s fastest-growing economies. The government has been pursuing a disciplined fiscal policy and had been ensuring the public debt shrinks, Varga stressed.

The finance minister expects that the data will show the crisis peaked in April; however, he said that the government’s relief package would help the economy to rebound in the second half of the year.

Above Expectation

Analysts agree that the Hungarian economy performed better than expected.

According to Takarékbank analyst Gergely Suppan, the better-thanexpected performance of the Hungarian economy was due to an outstanding start of the year and the fact that Hungary had introduced fewer strict measures against the epidemic than some other countries.

Péter Virovácz, head analyst at ING Bank, noted that while the strong performance of the first two months was able to counterbalance the weak March data, the upcoming months will see a further decline before a slow recovery starts. ING analysts expect a 3.3% decline in DGP growth this year.

According to Erste Bank analyst Orsolya Nyeste, recession will reach the Hungarian economy in the second quarter, with April being the worst month due to the lockdown and sharply declined demand. However, she stressed that the effects of a slow re-opening will already show at the end of May, which might help the growth. She thinks the recovery process will be slow and maintains

Erste’s

4.2%

GDP contraction for 2020.

Opinions vary on the possible contraction of the economy and the extent of the rebound: while the government still thinks that after a 3% decline in 2020, the economy will expand by 4.8% in 2021, the European Commission sees a darker future with not less than a 7% contraction this year, although they put next year’s GDP growth at 6%.

Numbers to Watch in the Coming Weeks KSH will release data on Hungary’s labor market in the February-April period on May 27. Figures will already be compromised by the crisis. The next day, data on investment activity in the first three months of the year will be published.

The second estimate of the Q1 GDP data will be out on May 29.

On June 4, KSH will publish the state of the retail sector in April, followed by the first estimate of April’s industrial production.

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News

WHO’S NEWS

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Budapest Business Journal | May 22 – June 4, 2020

Do you know someone on the move? /// Send information to news@bbj.hu

Zita Albert Joins Cerha Hempel’s Budapest Office Cerha Hempel’s Budapest office has announced the appointment of Zita Albert as a partner in the company’s mergers and acquisitions team.

Albert has more than 15 years’ experience in M&A, joint ventures, and private equity transactions across the CEE region. She is also recognized by leading legal ranking firms, such as Chambers & Partners and IFLR.

Zita Albert The advocate is a graduate of the Eötvös Loránd University in Budapest, and also attended the University of Leipzig in Germany on a one-year scholarship.

Over the course of her career, she worked in the M&A team of the Budapest office of White & Case and Dentons, and led the M&A team of Schoenherr Budapest for three years. She led a number of local and cross-border transactions in various industries and represented major local and international clients.

“I am happy to join one of the biggest law firms in Budapest, where my goal is to further develop the M&A team on the local market,” Albert says. “Although the current situation in the world is full of challenges, I am excited about my new role and the tasks ahead of us.”

Attila Dezső, the managing partner of Cerha Hempel’s Budapest office adds, “Zita has worked at some of the most prestigious law firms in the country over the last decade and her excellent knowledge and reputation on the M&A market will undoubtedly contribute to the continued success of the team and will help us increase our client base.”

Diófa Appoints Head of Real Estate Diófa Asset Management has announced the appointment of Bence Balázs as its head of real estate, replacing Balázs Czifra.

He gained 13 years of professional experience in domestic, regional and international commercial real estate markets, and joined Diófa Asset Management in 2019 as

portfolio manager responsible for real estate investment funds.

As head of real estate at Diófa Asset Management, his responsibilities include the coordination of the asset management, fund management, leasing and investment management operations of the company.

Balázs aims to further expand the core real estate portfolios of Diófa, to refine the asset and fund management systems of the company and intends to ensure stable and predictable return levels for the retail and institutional investors of the funds. In addition, he says he wants to launch new funds and investment products together with the Diófa team.

Before joining Diófa, he led the asset management division of Australian-based real estate investment management firm Marprop in Sydney for two years. Between 2010 and 2016, Balázs was the responsible senior asset manager for the CEE real estate portfolio of GLL Real Estate Partners, a German, global institutional investment management company.

He began his career at the international real estate advisory company, DTZ in 2007 as a commercial real estate consultant and was part of DTZ’s CEE real estate valuation and consultancy team.

Balázs graduated in 2007 at the Luigi Bocconi University of Economics in Milan with a degree in Financial Markets and Business Administration. In 2011, he completed a degree in real estate investment at the University of Reading, England. He is also a postgraduate member of the Royal Institution of Chartered Surveyors since 2012.

“The company’s continuous dynamic growth has shown that we are on the right track and have chosen the proper strategy for growing a quality commercial real estate portfolio of 320,000 sqm since 2012,” says Gergely Biró, CEO at Diófa Asset Management.

Bence Balázs “We are grateful for all the efforts that Balázs Czifra has invested during his three years at Diófa Asset Management and wish him the best for his future endeavors. We are certain that with Bence Balázs’ international experience and leadership, Diófa Asset Management will reach new milestones,” he adds.

Márton Kocsis Rejoins Cerha Hempel Dezső & Partners Márton Kocsis has rejoined Cerha Hempel Dezső & Partners as head of competition and compliance, effective from the start of April.

legal environment, and therefore our organically growing competition practice needed a new, well experienced leader.

“I’m confident that the complex multinational knowledge Márton has acquired in a corporate setting during the last period of his career will further strengthen our office and practice,” Polauf notes.

AutoWallis Elects Board Member

Márton Kocsis Kocsis worked in various positions at the Hungarian Competition Authority (GVH) and the Directorate General Competition of the European Commission, where he led high-profile cartel and antitrust investigations, many of them resulting in record-breaking fines.

Between 2015 and 2019, he joined Cerha Hempel Dezső & Partners as senior expert for competition, where he, together with co-managing partner Tamás Polauf, developed a highly regarded competition practice.

The success of this period was recognized by leading law publisher Wolters Kluwer when it chose the firm’s competition practice group as competition practice of the year in 2017. Kocsis and Polauf also contributed, as authors and editors, to the publishing of a textbook on private enforcement of competition lawbased damages.

During the last year, Kocsis worked for MOL Group as group compliance chief counsel, acquiring experience in the energy markets.

“I’m very happy and excited to join my old colleagues in a new role, as leader of the competition practice group,” says Kocsis. “I will work with my colleague, Tamás Polauf, to serve our existing clients with the flexible and high-end legal services that they have grown accustomed to, and to attract new clients with state-of-the-art innovative legal and compliance solutions that help them achieve the highest possible level of compliance.”

Polauf adds, “As we continue to build the practice that we started in 2015, we couldn’t have asked for a person who is better suited to head our joint effort than Márton.

Competition law engagements have started to play an increasingly important role in our daily operations, and our clients are looking for new, innovative compliance solutions in today’s ever-changing and complex

Automotive company AutoWallis announced the election of Gábor Dévai, who has been the head of the vehicle rental subsidiary of the group for nearly two decades, as a new board member. The company now has six board members.

Dévai has been the representative of the Sixt brand in Hungary for almost 20 years.

According to AutoWallis, Sixt has earned several recognitions under his leadership, such as the Business Excellence Award, the Limousine Service Marketing Award, and the Superbrands Award.

The freshly elected board member, who speaks English and French, received his MBA in economics at the Budapest University of Technology and Economics, as well as at the Jean Moulin Lyon III University, and he also holds a teacher’s degree in French as a second language. Last year, he received a coaching leader’s certificate in the Neosys Coach training program.

He started his career in the tourism industry in Switzerland and Luxembourg, then went on to work as corporate sales manager at the central sales department of Accor Pannonia Hotels between 2000 and 2002.

Gábor Dévai From 2002 until 2003, he acted as regional sales manager at the commercial directorate of Hungarocamion. In 2003, he worked for General Electric European Operations Services as operations manager.

Between 2007 and 2013, he was general manager of Wallis Autóparkkezelő Kft., which was responsible for the fleet management of nearly 2,000 cars under the legal umbrella of the Sixt leasing franchise; since 2003, he has been the managing director of Wallis Autókölcsönző Kft.

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Budapest Business Journal | May 22 – June 4, 2020

News | 5

Markets Waiting for Governments to hit the Play Button The preliminary investment volumes for Central and Eastern Europe (Poland, Czech Republic, Slovakia, Hungary, Romania and Bulgaria) for the first quarter of 2020 reached circa EUR 3.7 billion, despite the onset of COVID-19 in CEE at the beginning of March, according to Colliers International.

GARY J. MORRELL

This volume was significantly boosted by the EUR 1.3 bln acquisition of the Residomo portfolio in Czech Republic by Heimstaden.

Traditionally, Hungarian investment volumes are in third place after Poland and the Czech Republic for the region.

However, Hungary was behind Slovakia and Romania in Q1 in fifth place.

CEE Investment Volumes 2017 . . . . . . . . . . . . . . . EUR 13.1 bln 2018 . . . . . . . . . . . . . . . EUR 3.8 bln 2019 . . . . . . . . . . . . . . . EUR 13.7 bln Q1 2020 . . . . . . . . . . . . EUR 3.9 bln Source: Colliers International

“Many of the transactions were already in advanced stages at the onset of the virus. So, these figures will not really provide the answer, as the whole situation is quite unique and different to other past crises,” Colliers warns.

After a record-breaking year in 2019, Poland maintains its leading position in the region with a

48% share

of the first quarter volume, followed by Czech Republic with 39%, Slovakia 5%, Romania 4% and Hungary with 2%.

“Due to the various measures imposed to keep people safe and prevent the spread of the virus, including flights and border restrictions, we expect that the volumes in Q2 and Q3 will be significantly impacted

as all parties involved in transaction processes are largely unable to meet or visit properties,” comments Kevin Turpin, regional director of research for CEE at Colliers.

Holding Off

In the current climate, many property owners and managers are currently assessing and managing any risks to their assets.

According to initial results from an ongoing Colliers survey, investor appetite remains strong, the volume of capital for deployment also remains and could potentially increase, but many investors

will hold off decisions for a number of weeks until the situation becomes clearer. That is particularly true in regard to financing, pricing and the ability to physically view potential opportunities.

“All of the above outlook is subject to how long the pandemic will continue to impact on our lives, to what extent damage is caused economically and how all active players can recover and adapt to the changes that will certainly come. After all, whether you are a developer, bank, investor, occupier or advisor, there will be an impact for all,” says Colliers.

With regard to market sectors, Colliers’ research indicates that 27% of investors have a preference for office, 26% have a preference for industrial

and

8%

for retail. This reflects the widely held view that retail and hotel are the worst hit sectors from the lockdown measures, though both had previously expected strong levels of activity.

“Investment perspectives have been changing in the last few weeks as restrictions have been lifted and there is a new sense of optimism,” said Luke Dawson, managing partner and head of capital markets for CEE at Colliers, speaking at the “New Investment Cycle in CEE/SEE: If & When” web seminar.

“Capital is being deployed to CEE and in the last few weeks we have had three new mandates. With regard to sectors we are seeing investors looking at industrial more than ever,” he concluded.

Long Road Back to Recovery Starts Coronavirus ///roundup Several restrictions related to the coronavirus were lifted in Budapest and Pest county on Monday, May 18. All shops could open and be visited; however, grocery stores, drugstores, pharmacies, shops selling medicines and medical aids, could still only be visited by those over 65 between the hours 9 a.m. and noon.

NICHOLAS PONGRATZ

Public areas, parks, outdoor playgrounds, beaches, outdoor baths, zoos and openair museums can now be visited, although wearing a mask while shopping or riding on public transport is still mandatory.

As György Vámos, secretary general of the National Trade Association, told Magyar Nemzet, consumption, which has been declining since the second half of March, will gradually expand after the April low, with an encouraging start in early May, and the market may strengthen by the second half of the year.

The ongoing damage is still being revealed. According to Google Trends, at least 120,000 people may have lost their jobs due to the coronavirus epidemic in Hungary, certainly higher than indicated, researchers at the Hungarian Academy of Sciences say. Roughly 27% of young Hungarians have lost their jobs and

32% expect a general pay cut, a survey of more than 3,000 young people by Zyntern.com reveals.

Financial institutions, in particular, are bearing their wounds. On average, more than 60% of the affected customers are taking advantage of the repayment moratorium, according to Magyar Hírlap.

Erste Bank Hungary’s after-tax profit in Q1 was halved close to HUF 4 billion from HUF 8.2 bln in the same period a year earlier, as the lender set

aside

HUF 6 bln

in provisions to cover loss related to the repayment moratorium. OTP Bank booked a HUF 4.1 bln loss in Q1 as risk provisions ballooned and the moratorium weighed on the bottom line.

The coronavirus epidemic also hit investment funds hard in March, with those managed by portfolio managers declining by 5.6% in a single

month to HUF 7.2 trillion, according to recent statistics from the National Bank of Hungary (MNB). However, only HUF 27 bln in capital left investment funds as a result of capital flows in April, which is a significant change after the HUF 261 bln of capital flight in March, according to the latest announcement of the Hungarian Association of Investment Fund Managers and Asset Managers (BAMOSZ).

Making the Most

Some firms have managed to make the most of current circumstances. Due to the epidemic, the demand for home delivery has greatly increased in hypermarket and supermarket chains, so a large part of the workforce working in stores has switched to organizing delivery.

The food delivery industry, which has seen a sudden surge, is expected to stabilize at a high level, according to Világgazdaság (Global Economy).

Sales and profit at Richter Gedeon Nyrt. increased well in excess of analysts’ expectations, with the pharmaceutical company achieving a consolidated profit after tax of HUF 29.1 bln in Q1, 34.6% higher than in the same period of the previous year, according to a report published on the website of the Budapest Stock Exchange.

This was confirmed by retail purchases, with data from Benu Hungary Zrt. and

Hiflylabs Zrt. showing turnover in prescription medication rising to HUF 60 bln in March, also some

30.5% higher

than a year prior.

Good news for public service companies for waste collection and transportation is that they have started to fill long-standing vacancies.

Despite the effects of the epidemic, the number of company closures in the hospitality industry is declining, according to the analysis of Opten, and by the end of May, a significant number of bookings are expected in tourism, president of the Hungarian Tourist Destination Management Association (MTDMSZ) Sándor Semsei said on the M1 channel.

Zoltán Guller, the CEO of the Hungarian Tourism Agency (MTÜ) believes that the number of domestic travelers and their spending will be higher than last year.

At the time of publication, some 7,200 companies had applied for the government’s wage subsidy program to save 95,000 jobs.

During the three-month support period, the support provides an average of HUF 167,000 per employee. The program has proven so popular that the government decided to double the HUF 50 bln funding.

The program was initially only available outside Budapest and Pest county but is now also available in the central region.

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Budapest Business Journal | May 22 – June 4, 2020

Business

Budapest Airport Coming Back to Life as Air Traffic Resumes

Ferenc Liszt International Airport has become a key lifeline for bringing in cargo, including medical supplies. Rolf Schnitzler, CEO of operator Budapest Airport, tells the Budapest Business Journal what it is like running such an operation amid a pandemic.

ROBIN MARSHALL

BBJ: What's the airport like now? Is it a ghost town, or is there more life there than we might imagine? How much of it is closed down?

Rolf Schnitzler: We are coming back to life. Of course, this is not like when Sleeping Beauty woke up from her slumber, and everything carried on as before.

Unfortunately, we have to prepare for a long and gradual process. The resumption of passenger traffic is primarily dependent on when borders are reopened and to what extent the propensity to travel returns. We are currently using this calm period for some repairs and improvements and, of course, we have already introduced special procedures to protect the health and safety of all passengers and staff at the airport.

Some terminal areas are currently closed, but these will be reopened in line with the volume of traffic. Most of the shops are also closed for the time being, given the low traffic, but also because the restrictions.

But a few outlets, like a cafĂŠ, a take-away bistro and the supermarket are open, so that travelers can enjoy at least a basic offer already.

BBJ: How many flights do you have on average a day, and what's the breakdown between cargo and passengers? How would that compare with pre-COVID? RS: Cargo is operating almost in line with our expectations. Budapest Airport handled 10,264 tons of air cargo in April and a total of 43,395 tons during the first four months of the year. Besides regular import and export goods, special medical consignments

Rolf Schnitzler, CEO of operator Budapest Airport. are arriving on a daily basis, with face masks, personal protective equipment and medical ventilators. I think this is the time when everyone realized just how important air cargo is. With borders closed, it is the only reliable mode of transportation, not to mention the fact that it supports the national economy and plays a key role in ensuring appropriate medical care.

As regards passenger traffic, April was the worst month on record. Passenger numbers are down 99% compared to last April. In numerical terms, this means that we recorded 200-300 passengers and some 20 aircraft movements per day, instead of 45,000 passengers and 300 take-offs and landings daily, as previously. There was a day when only two passenger flights took off from the airport. The numbers have increased a little since the beginning of May, when airlines started to serve around 20 destinations again from Budapest. More flights are likely to restart in June, but for the moment, these are only plans. The situation is changing day by day.

opportunity. Our colleagues have shown fantastic solidarity; everyone who could do so agreed to work part-time, in order to protect as many jobs as possible. This amazing solidarity and our preparations for the recovery of air travel have thankfully enabled us to keep most of our staff.

BBJ: The airport is a vital link in bring medical supplies into Hungary across the "air bridge" with China. How easy has it been to ensure your staff have the proper PPE, and how has that changed over time?

RS: We always had a quantity of PPE on stock, and with the outbreak of the pandemic, we immediately increased our stocks, to be able to protect our staff at all times. We also helped other companies involved in the handling of cargo flights to equip their workforce, to ensure the health and safety of staff. And with strong governmental support, we made sure that foreign air crews should undergo medical screening and can enter the country if they do not show any symptoms. They spend their resting time at the airport hotel, in BBJ: How many staff are working at the quarantine. This special procedure also airport now, and how are you structuring helped to attract cargo traffic to Budapest. work shifts?

RS: Right now, we only need about oneBBJ: What has the government support third of our staff at the terminal to keep the been like? Have they asked you to help airport operational and running 24/7 and to or ordered you to do so? handle the current level of passenger traffic. RS: We are working in very close We have separated the shifts from each cooperation with the government, the other, to minimize personal contact between Operational Group, the National Public colleagues. We have also established Health Center and the competent ministries. independent teams in critical operational For example, we had introduced body positions, to safeguard seamless operation temperature measurement, medical even if someone falls ill. Thankfully, at treatment as necessary and isolation present we are not aware of any such staff rooms at the airport already in January, in members, and the new shift system is cooperation with governmental bodies. The working very well. Wherever possible, we current situation requires close partnership; enabled office staff to work from home that is the only way to manage this already in March; many have utilized that pandemic. Luckily, we have that in place.

BBJ: Are you picking up any industry indications for when more flights might resume, assuming government regulations allow it?

RS: Passenger traffic will only restart after the lifting of the governmental restrictions; that is clear. The opening of the borders and the lifting of the blanket quarantine requirements will depend on the spread of the virus during the coming weeks. If the pandemic slows down, we expect governments throughout Europe to ease restrictions. The European Commission has already started to promote the restoration of transportation and connectivity.

BBJ: British Airways has warned it may have to lay off 125,000 people. How worried are you about the ability of airlines to survive a prolonged period where they have little or no aircraft in the air?

RS: Not all airlines will survive the current crisis. Just like airports, airlines face a huge fixed cost base and generate little or no turnover right now. An aircraft only earns money when it is in the air. However, market consolidations are not a new phenomenon, but part of our economic system. Strong or new players may fill the gaps created by those exiting the market.

Aircraft are available, and ultimately, air travel will be rebuilt by the demand from passengers to fly. Budapest and Hungary are charming, vibrant and economically successful destinations that will continue to attract leisure travelers and business people alike. Hungarians also love to travel. Our mix of airline partners will always serve the demand to and from this prime location, which I believe will continue to be above-average, as it has been in the past.

BBJ: Budapest Airport had broken passenger and cargo numbers year after year for five consecutive years. Do you have any idea how long it will take to get back to those levels?

RS: We do not expect to reach last year’s record of more than 16 million passengers before 2022, or maybe 2023 is even more realistic. Rebuilding our route network will take great efforts and a lot of hard work. Unfortunately, we already know that some, mainly long-haul destinations will not be accessible from Budapest for the rest of this year.

BBJ: Is it your expectation that people will return to their pre-crisis flying habits?

RS: People like to travel, and if their experience is that they can do this without health risks, then they will fly again. We, as airport operator, and the airlines have to do everything we can to ensure a safe and risk-free passenger experience. But habits will definitely change until the virus is really under control.

BBJ: What has been the hardest part of your experience of leading an organization through an unprecedented time like this?

RS: The hardest part was realizing that the downturn will not only last for the winter schedule season, but leaves real skid marks, forcing us to reduce our workforce. That involves the livelihoods of our colleagues. On the other hand, it is challenging to rebuild operations and traffic under circumstances which change day by day. But my team and I are ready for the challenge, and optimistic to rebuild from the ashes as quickly as possible. That is what we are working for, day and night.

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Drive-thru COVID-19 Testing at Groupama Arena Local company Rollet Kft. and its partner DriveCell Systems Zrt. have launched drive-through coronavirus testing at a purpose-built temporary facility at Budapest’s Groupama Arena.

ROBIN MARSHALL

The test being offered tells you whether you have the virus on the day of your visit; it is not an antibody test that would tell you if you have had COVID-19 in the past, as these have proved unreliable.

At the drive-through station, the client is handed a swab in a sealed bag and asked to take a sample from the back of the throat (a slightly uncomfortable process, especially if you have a low gag threshold), before placing it in an airtight container and back in the bag. The process takes about three minutes per person.

That sample is then given a nucleic acidbased PCR (polymerase chain reaction) test that “is currently the officially accepted and most accurate way to detect infection. It detects the presence of the virus, which lasts from after the gestation period until eight14 days after the virus has been fought off,” Andy Zhang, CEO of Rollet, says.

“This is a test which officials everywhere rely on, but if we see the antibody tests becoming more reliable and we have better data about it, we would like to introduce those.”

Testing is by appointment only (done online via www.tesztallomas.hu), which is how Rollet ensures a minimum waiting time and a streamlined traffic flow, and is performed in the parking area in front of the soccer stadium from Monday to Saturday, between 8 a.m. and noon.

It is recommended patients do not eat, drink, brush their teeth or smoke for at least four hours before the test, which means earlier times are typically busier.

The online booking system is in Hungarian only, but most staff at the drive-through station speak some English.

Priority Option

The standard test costs HUF 26,990, with the results delivered within 72 hours.

A priority option is available for HUF 36,990, in which case, the customer

can come at any time they choose and the results are delivered the next day.

“We set up Rollet two and a half years ago,” says Zhang. “We design technologies and processes for seamless drive-through experiences. When this pandemic came along, we looked at how we could and should help. Looking at international precedents of drive-through testing stations, it is a very effective and efficient way to screen a large amount of people,” he explains.

Rollet then went through its network to find a medical partner, which is where DriveCell Systems comes into the picture. Rollet provides the technology and operational crew, there is a lab that

is certified to process large number of samples, as well as a doctor who is resident for the operation.

“With two lanes we are handling up to 100 visitors per day, but we can scale that linearly. We have a team of 6-8 outside on location to take care of all the visitors; we simply want to make sure every single step is well taken care off.”

Zhang says a wide variety of people use the facility, ranging from people who are out and about working and exposed and want to come in on a weekly or biweekly basis, to whole families or households who want to make sure they are fine, to companies who are sending their employees over for a check.

The location is not in a congested zone, but is easy to approach by car; ironically, it is opposite Szent László Hospital, an isolation center for the epidemic.

“Groupama offered this location to us for the purpose of supporting the pandemic response as much as possible,” Zhang says.

“We believe that what we have created is well replicable; we are in the process of exploring other needs to have other locations across Hungary. We have also had other governmental organizations approach us looking at what this solution entails and how they can realize this outside of Hungary’s borders. Again, because most of this is just information technology and a very simple process, we believe this can be very quickly replicated elsewhere.”

PROMOTION

The Benefits of Microsoft Teams in the Time of Coronavirus The Budapest Business Journal talks with György Kosztolánczy, CEO of real estate trading and advisory firm Otthon Centrum about the benefits of using Microsoft Teams.

BENCE GAÁL

BBJ: How has Otthon Centrum been using Microsoft Teams for work since the stay at home orders were introduced?

György Kosztolánczy: After the introduction of government measures following the appearance of COVID-19 in Hungary, the management of Otthon Centrum also decided to switch to work from home in order to protect the health of our colleagues.

In the current situation, it was clear to us that we needed to choose a high-quality application that offers a secure, flexible way to communicate, while being easily accessible from anywhere and for everyone, even on smartphones without the need to download.

As our company had already been a subscriber of the Office 365

BBJ: The Hungarian economy is slowly beginning to emerge from its lockdown. How will you use Microsoft Teams in the postpandemic period?

GyK: We are planning to use the app even after the epidemic. Being a nationwide network, it will make it easier to communicate with rural colleagues, organize larger meetings and implement them on the Teams interface. Additionally, we plan to hold our regular professional conferences on this platform, at least until the virus disappears for good from our lives.

business package for some time, Teams seemed an obvious solution for this purpose. The correctness of our decision has also been confirmed in recent weeks. Since the introduction of the restrictions, we have been using the app on a daily basis for consultations, business negotiations, presentations, and education.

BBJ: Could you imagine making home office work without Microsoft Teams?

GyK: The app offers a great deal of help to all of us in our daily work. It simplifies communication within the company, eliminates unnecessary e-mail exchanges, and it helps in issuing tasks and controlling them more smoothly, even in the current situation. We can use the app to great effect for organizing online meetings, presentations, teamwork, as well as creating and managing common documents.

the instructors, but most of the courses continue to take advantage of the opportunities offered by Teams. According to our plans, some of our training will stay on this platform, since it saves time for our colleagues.

György Kosztolánczy BBJ: How are you also using Teams for educational purposes?

GyK: We have moved Otthon Centrum’s training to digital platforms in the recent months. We have courses where our students can master the curriculum with the help of videos pre-recorded by

BBJ: What do you like most about Teams?

GyK: We are pleased, as a market leading company with a nationwide network, to be able to use the application as a partner with Microsoft.

In the case of the Otthon Centrum, Teams is especially useful, as we have offices in almost every part of the country, and we can keep in touch with colleagues working there through this communication channel. They can do so on a platform that is independent, provides mobility, and can be used on any popular operating system (iOS, Android, Windows) and any device (PC, tablet, mobile). Furthermore, it is safe and free of advertising.

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Could COVID-19 Trigger a European Banking Crisis?

The Corporate Could COVID-19 Trigger a European Banking Crisis?

Charts Finance Column

Will COVID-19 be the trigger that takes us from a health crisis to a financial meltdown?

Les Nemethy and Nicolas Beguin investigate.

Forecasts for GDP decrease within the European Union in 2020 run as high as 13%, even after taking into account massive stimulation by governments, according to NPL Markets, “Forecasting NPL Ratios after COVID-19.”

This is likely to trigger many bankruptcies and even more non-performing loans (an “NPL” is a loan where a borrower has a high probability of default or is actually in default).

NPL’s lead to the question: will COVID19 lead to failure of one or more European banks? In this article we will talk about capital adequacy of the European banking sector; non-performing loans in the European banking sector; give a brief analysis of several weaker European banks; and some concluding comments as to the likelihood of bank failure or default.

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Worst-case Projections ononNPL Selected European Countries Chart One: Worst-case Projections NPLfor for Selected European Countries Historical Max Latest NPL NPL Ratio (%) Ratio (%) Austria 3,5 Czech Republic 29,3 France 6,3 Germany 5,2 Hungary 16,8 Italy 18,1 Poland 21,2 Slovak Republic 31,6 Spain 9,4 United Kingdom 4,0 Country

1,6 3,1 2,5 1,3 1,5 6,7 3,9 2,9 3,2 1,3

COVID Max NPL Percentage Total Loans COVID Max NPL Ratio (%) increase 2019 bn € bn € 7,1 333,0 498,0 35,0 8,0 155,0 138,0 11,0 7,5 199,0 4 819,0 360,0 3,3 155,0 2 394,0 79,0 6,0 295,0 60,0 4,0 20,3 202,0 1 731,0 351,0 8,1 110,0 133,0 11,0 6,0 119,0 43,0 3,0 10,6 234,0 2 450,0 259,0 4,1 218,0 5 544,0 229,0

The “Latest NPL Ratio” is the last one the 2019 ratio). (typically the 2019 ratio).

Theavailable “Latest NPL(typically Ratio” is the last one available Source: NPL Markets, Forecasting NPL Ratios after Covid-19, May 6, 2020, https://go.aws/3dzMnll

Source: NPL Markets, Forecasting NPL Ratios after Covid-19, May 6, 2020, https://go.aws/3dzMnll

Capital Adequacy liquidity and ability to absorb shocks. notch. S&P expects bank earnings, asset The European banking system has Some of these requirements include: quality, and in some cases, capitalization, considerably improved capital to asset ratios • Common Equity Tier 1 ratio (CET1), to weaken meaningfully through yearend since the Lehman Brothers crisis, with a 6% which refers to the most basic and liquid 2020 and into 2021, according to Reuters.

Chart Two: Top 10 Europeancore weakest banks: 2019 Return on Equity annual growth rate over the past 10 years. equity capital of a bank. Basel III This growth in capitalization was driven has decreed that, since 2019, CET1 must Likelihood of Bank Default We can breathe a sigh of relief that by the application of Basel II and III rules, exceed 4.5% for European banks; no European banks met their Basel III which impose requirements for capital, dividends or employee bonuses may be 10,0% requirements on schedule in 2019, just in paid in the event of losses unless CET1 time for COVID-19. Even the credit ratings has been topped up; 5,0% of weaker banks, as mentioned above, seem • Minimum Tier 1 capital must be at least to be within the range of acceptability.

10.5% (e.g. capital requirement that must 0,0% Much stress has also been taken off the be met in order for a bank to stay in banking sector by massive government business); -5,0% bailouts and guarantees. For example, in • Minimum Tier 2 capital at 2% (e.g.

Italy, both the Italian government and additional capital that must be available -10,0% the European Commission have provided to satisfy liquidation). guarantees on emergency loans given by Tier 1 and 2 are percentages related to -15,0% Italian banks. so-called risk weighted assets, creating However, the NPL projections above are a disincentive to hold highly risky assets, based on IMF calculations which assume be they loans or derivatives. The Basel a one quarter shock, and the virus will Committee has also introduced additional subside in the second half of 2020 (see the legislation for what it identifies as “Systemically Important Financial Institutions” IMF’s “World Economic Outlook, April 2020: average The Great Lockdown”). e.g. banks that are “too big to fail.”

ROE european Return(SIFI), on shareholders’ equity But what if there are subsequent waves Fortunately, as of Q3 2019, European banks a resilientresults’ CET1 capital ratio of 14.78%, of virus, or worse, a severe mutation?

Source: European Banks 2019had financial reports What if no vaccine is found? What about according to ECB supervisory statistics, compared to the 4.5% threshold set by Basel III. the current crisis triggering as-of-yet unforeseen domino effects, which may Non-performing Loans range from supply chain breakdowns Chart One provides an overview of historic to war? Some pundits are suggesting and most recent NPL ratios in the European that COVID-19 may even trigger the Union, as well as a so-called “worst case” dissolution of the European Union. forecast taking into account COVID-19.

In the end, runs on banks are seldom COVID-19 will have massive effect triggered by capitalization levels, but by on NPL’s, particularly in Italy and Spain, depositor panics. where the NPL ratio could exceed 20% and We should count our blessings that Basel 10% respectively.

III has been implemented, that we do not BUDAPEST TERRACE seem to be facing an immediate crisis; but we are far from being out of the woods.

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Selected Weak European Banks

Deutsche Bank has been on the regulators’ watch list for many years. While capitalization has come into line with Basel requirements, its profitability remains a concern. In 2019, it clocked a whopping -9.5% return on equity, albeit in the context of a restructuring exercise. A continued negative or low return could jeopardize financial stability.

On April 23, 2020, S&P lowered its outlook for Deutsche Bank to negative from stable and cut Commerzbank’s credit rating by a

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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Fitch Downgrades CIB Bank Fitch Ratings Inc. downgraded CIB Bank Zrt.’s long-term rating on May 15, according to Világgazdaság (Global Economy). The immediate precedent for the international credit rating move was the downgrading of the parent bank,

Real Estate Market Picks up in Countryside

Two weeks after the easing of restrictive measures in the countryside, the climate in the real estate market has changed significantly, according to a recent announcement by Otthon Centrum Zrt., writes Hungary’s leading economic and political weekly hvg.hu. “Three-quarters of sales are taking place outside the Central Hungarian region,” said Gábor Soóki-Tóth, the company’s head of analysis, who said that the capital is lagging 32% behind in terms of purchase offers. The resurgence of the provincial market is clearly linked to easing government action; after the initial shock, people are quick to return to their former lives, the partial lifting of restrictions has strengthened their sense of security, and postponed buying or selling intentions have come to the fore again, the website notes.

Wingholding Raises HUF 54 bln in Bonds

Hungarian property developer Wingholding Zrt. (Wing) raised HUF 54.4 billion in proceeds from the sale of corporate bonds auctioned on May 18, according to an announcement on the website of the Budapest Stock Exchange. Wingholding offered bonds with a face value of HUF 50 bln at the auction and allowed for the possibility of 10% oversubscription. Bids came to HUF 54.7 bln, all of which Wingholding accepted. The bonds were issued under the Bond Funding for Growth Scheme (BGS) of the National Bank of Hungary.

New Airport Baggage Hall on Schedule

The coronavirus epidemic has not stopped investments at Budapest Ferenc Liszt International Airport; a new baggage sorting and control facility will be completed by the summer, the airport operator Budapest Airport Zrt. (BUD) told Forbes.hu. The new hall will increase

Intesa Sanpaolo S.p.A. of Italy. The ratings agency also downgraded Intesa’s Russian subsidiary, Banca Intesa Russia, to the same extent.

The outlook for the new long-term ratings of the two subsidiaries is stable, vg.hu adds.

the capacity of the current baggage sorting area under the SkyCourt passenger area by half. The 2,000 sqm building will be located just in front of the central hall of the second terminal. The facility has been designed in such a way that it can be expanded if necessary, but will not affect the available aircraft service capacities, BUD adds.

(For an in-depth interview with BUD CEO Rolf Schnitzler, see “Airport Returning to Life Thanks to 'Amazing Solidarity'” on P6.)

Pick Gets New CEO

István Takács has become the CEO of iconic salami maker Pick Szeged Zrt., reports magro.hu. The specialist, who now heads the meat industry company that celebrated its 150th anniversary last year, has previously worked in leading positions in large food processing and agricultural companies in Hungary and abroad. He gained his professional experience in the food industry at Kaiser Food Kft., Sága Foods Kft. and Unilever. His most recent job was as a plant manager at Pannon Vegetable Oil Kft.

Savings Bank and MKB Bank to Merge

MTB Hungarian Savings Bank Cooperative Bank Limited Liability Company (MTB Zrt.), the “central bank” for Hungary’s integrated savings cooperatives, and MKB Bank Nyrt. have signed a memorandum of understanding on setting up a joint financial holding company, the lenders said on May 15, reports state news agency MTI. According to the agreement, the two banks will establish a 50%-50% vehicle dubbed Magyar Bankholding. An application for a permit to establish the company will be submitted to the National Bank of Hungary, which combines the roles of central bank and financial market watchdog, at the end of May. Savings Bank and MKB together have some 1.3 million clients and 840 branches. With combined total assets coming to HUF 4.3 trillion, a merger between the two lenders would produce Hungary’s second-largest universal commercial bank.

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Special Report Automotive

How is the automotive industry, a major force behind the growth of Hungary’s economy, navigating its way back to work?

Forging a way Through the Coronavirus Challenges

11

Helping Automotive Back Into Overdrive

12

German Giants Ready to Jump Start Post-COVID Catch-up

14

Resilience the Most Significant Lesson From Pandemic

17

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Forging a way Through the Coronavirus Challenges Continuous production and delivery have not stopped, despite the challenges caused by the pandemic. Only a few longterm strategic project planning processes were put on hold (and then for about two weeks only), but right after proactively introducing new working methods, all these goal planning activities were back on track as well.

Since the outbreak of the coronavirus pandemic, the health of employees and business continuity have become the number one priorities of major manufacturers in the automotive and related sectors, who have now gradually begun resuming production in Hungary.

Strong Culture

The key to the continuity is the strong corporate culture and a very cooperative team which have helped smooth adaptation to the new conditions, general manager Róbert Hosszu told the BBJ. “We were quick to react. We have two main priorities: Caring for the health and safety of our NI team members, their families, and our communities, and doing everything we can to help take care of the needs of our customers and partners,” Hosszu explained.

“Well before the first patient had been registered in Hungary, we suspended all international travel to and from our site.”

ZSÓFIA VÉGH

Less than a month after its halt on March 22, Audi Hungaria resumed operations gradually from April 10. Work restarted with the production of engines, followed by autos and work in the press plant, the body and paint shop, and vehicle assembly from April 27, when 2,000 workers resumed work initially in one shift.

Overall, 5,000 employees are working either on site or from home. The employees who are not working at the moment are on leave ordered by the company. Audi says it has transformed working spaces according to health regulations and introduced a number of technical and organizational measures to protect the health of its employees, including the introduction of more shuttle buses (which are disinfected regularly) and take away food.

Regarding COVID-related activities, the idea of staff to make parts for protective masks using a 3D printer should be highlighted, Audi Hungaria told the Budapest Business Journal. The company works closely with the group’s other production sites. The first prototypes have already been manufactured and are currently being centrally validated.

In addition, Audi Hungaria has previously supported the purchase of two ventilators in its Hungarian hometown of Győr (121 km northwest of Budapest), and donated personal protective clothing for healthcare workers.

A wide array of protective measures has also been introduced at the Mercedes-Benz factory at Kecskemét (92 km southeast of the capital), where after a few weeks’ break, production restarted at the end of April.

Keeping a 1.5-meter distance in all areas (on shuttle buses, inside the factory, when entering the site, etc.) is crucial, as well as wearing the washable masks the company has provided their workers with.

Overall, the automaker has introduced 120 measures to keep and protect the health of the company’s

4,400 workers.

Production is being scaled up gradually, first in one, then two shifts.

Róbert Hosszu, general managerof NI Hungary.

Opel, a General Motors brand when it first opened up in Hungary, but a subsidiary of French automaker Groupe PSA since August 2017, paused its operations in Szentgotthárd, where it produces engines, on March 23.

“If a company can finance its operations today, in the medium-term it may be more a question of how it keeps pace with market growth.

Thanks to the wide spectrum of our products and clients, we are well positioned to endure this period.”

It, too, is gradually restarting work by enforcing safety measures such as checking body temperature, wearing protective glasses and masks or keeping doors at workstations and rest areas open to avoid touching points of contact. Incoming parts are “rested” when they arrive, and changes of shifts are scheduled in such a way that prevents workers from meeting.

Adapting

With constant customer orders and raw material supply, Knorr-Bremse Vasúti

Jármű Rendszerek Hungária Kft. says it continues to operate by adapting to the current situation under a strict a health protocol and a special work schedule.

“Following the declaration of the state of emergency, we ordered home office for all our colleagues whose physical presence was not essential for our operation,” a Knorr-Bremse spokesperson tells the BBJ. The separation of workers in time and space and regular disinfection of working areas between shifts are just a few of the measures introduced. To ensure continuous production, the company has also diversified its parts and raw material supply.

Thanks to its financial stability, KnorrBremse has not had to lay off any employees, and says it is not planning to do so.

“We are proud of the Hungarian engineering performance and the production of high value-added products.

The commitment of our development engineers is indicated by the fact that they have sought, through volunteer work, the opportunity to be able to provide an oxygen supply unit to temporary hospitals in the event that the country needs it,” the company told the BBJ. NI Hungary started what it thought would be a well-planned, busy year in 2020, with several strategic goals to accomplish, including the further innovative development of its Debrecen site (231 km east of Budapest) where, in the past few years, emphasis has shifted from producing electrical installations to be assembled by their customers to producing entire systems.

“We are proud of the Hungarian engineering performance and the production of high valueadded products. The commitment of our development engineers is indicated by the fact that they have sought, through volunteer work, the opportunity to be able to provide an oxygen supply unit to temporary hospitals in the event that the country needs it.”

NI Hungary set up a crisis team at the end of February which, in cooperation with the management and employees, worked out a crisis strategy. This, amongst many other steps, included the isolation of different functions at the site.

Home office has also been introduced for more than

700 people;

after some adjustments at the very beginning, the IT system is now working well with no hiccups, even under such heavy load, the company says. It has also helped some manufacturers that started to produce ventilators by providing them with testing systems at very short notice.

“If a company can finance its operations today, in the medium-term it may be more a question of how it keeps pace with market growth,” Hosszu says. “Thanks to the wide spectrum of our products and clients, we are well positioned to endure this period and NI remains committed to connecting engineers with the tools and resources they need, while also supporting its employees and their local communities around the globe.”

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Special Report

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Budapest Business Journal | May 22 – June 4, 2020

PRESENTED CONTENT

Helping Automotive Back Into Overdrive the government supporting the investment, which will create 150 jobs.

Yaris Kabin will also undertake research and development at the base.

The Turkish parent company expects its Hungarian unit to generate revenues of EUR 15 mln a year, according to Ádám Németh, managing director of the Hungarian subsidiary. Production at the factory is scheduled to start from early 2021, mainly targeting the German and Italian export markets.

That Hungary’s economy has long been powered by the automotive sector should be news to no one.

While it has not been as hard hit as the tourism and hospitality sectors, most carmakers have seen near total shuts downs of their production lines.

How quickly they can get back to work will obviously have a large effect on the country’s overall performance.

ROBIN MARSHALL

For a more detailed look at the global figures, see our box “UNCTAD’s Grim Statistics”. The short take away is that FDI flows globally could be down by up to 40%, according to the UN agency. Since automotive is a heavy source of investment worldwide, it will clearly suffer, and by extension so will Hungary.

“It is very difficult to give specific figures at this stage,” says Róbert Ésik, CEO of Hungary’s award-winning Hungarian Investment Promotion Agency, the body charged with bringing that FDI to Hungary.

“What we see in automotive is that companies are putting off decision making processes under the circumstances; site visits are being rescheduled or delayed, and financial decisions postponed.”

There were some local press reports that BMW Group, for example, was delaying the opening of its purpose-built Debrecen factory by a year. “What I can tell you is that BMW has confirmed its commitment to Debrecen and construction of the site is on-going,” Ésik insists.

“This is a complex project with long time lines. There might be changes as far as the end of the project is concerned, but according to the statement of BMW Group, this could be measured in months.

I do not think this is a major change that will have any significant impact on the Hungarian economy.”

“What we see in automotive is that companies are putting off decision making processes under the circumstances; site visits are being rescheduled or delayed, and financial decisions postponed.”

Róbert Ésik, CEO of Hungarian Investment Promotion Agency.

He adds that he was due to be meeting with BMW executives later in the week that we spoke. “I think the commitment from their side will be reemphasized.”

No Universal Picture

Ésik’s brief, of course, extends far beyond automotive. HIPA is involved with all those investing or reinvesting in the country, and while the likes of hotels and airlines are clearly suffering, there is no universal picture. No one in automotive, Ésik says, is talking about canceling projects for the time being. A select few sectors, such as the food industry and homecare product manufacturers, are actually seeing their position strengthen as demand rises.

UNCTAD’s Grim Statistics In late March, UNCTAD (the United Nations Conference on Trade and Development) updated its forecasts of economic impact and revisions of earnings of the largest multinational enterprises (MNEs).

It now suggest that the impact of the COVID-19 pandemic could mean foreign direct investment flows

The field with the second highest weight in the Hungarian economy after manufacturing is the business services sector, and although the pandemic and “stay at home” orders have made life more difficult, they have not brought about an early hibernation.

“We continue to hold site visits, but do them virtually,” Ésik explains.

“With electromobility we continue to see interest in site selection and investment.”

And even within automotive itself, there has been recent good news: This month it was announced Turkish parts manufacturer Yaris Kabin will invest EUR 20.3 million in a factory in Iváncsa (50 km southwest of Budapest), with

fall by 30-40% during 2020-2021, much more dramatic than previous projections of 5-15%.

Some 61% of the top 100 MNEs that UNCTAD tracks have issued earnings revisions, confirming the rapid deterioration of global prospects. And 57% have warned of the global impact on sales; problems clearly go far beyond disrupted supply chains. In addition,

Elsewhere, it was confirmed in March that Mercedes-Benz AG is once again reinvesting at its Kecskemét factory site, this time building a 23,000 sqm press plant worth more than EUR 100 mln. It is expected to start operating in 2022 and will strengthen the Kecskemét factory’s position in the Mercedes-Benz global production chain, while also ensuring the compact vehicles manufactured in Hungary will have more locally made parts.

Multiple Roles

HIPA, as its CEO likes to say, has three main roles: One, to promote Hungary as an investment location; two, helping clients with on-going projects; and three, making policy proposals to government.

“It’s fair to say that, under the circumstances, the third point has jumped in importance significantly,” Ésik admits.

That might be to help a company with a specific issue, or it may be something more generic, such as how the Labor Code can be made more flexible so home office can be better integrated or adapted better to the situation.

“We always aim to perform this bridging role between the private sector and the state; we are now receiving a lot of requests in this domain.”

the top 5,000 MNEs, which account for a significant share of global FDI, have now seen downward revisions of 30% on average for 2020 earnings estimates.

The hardest-hit sectors are the energy and basic materials industries (-208% for energy, with the additional shock caused by the plunge in oil prices), airlines (-116%) and the automotive industry (-47%).

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That process isn’t one way, however; the state has put together a significant economic action plan, the total value of which is 18-20% of GDP. “It is one of, if not the largest, economic stimulus plans in the history of our country,” Ésik says.

It rests on four pillars: Protecting those jobs already created since 2010; supporting the creation of new jobs and additional investment; supporting the relaunch of the strategic industrial sectors that have been hardest hit; and providing financing solutions for companies.

Preserving Jobs

“A lot of jobs were created between 2010-19, 820,000; the more we can preserve the better,” Ésik says.

Thus, for employees whose work hours have been cut by between 15-75%, up to 70% of the wages can be paid by the state (up to a maximum of double the minimum wage). There is also a dedicated program aimed specifically at R&D professionals.

All of the incentives on offer before the pandemic are still available for new investors or existing companies reinvesting, and HIPA has not been neglecting what is perhaps the most visible of its roles.

“We always aim to perform this bridging role between the private sector and the state; we are now receiving a lot of requests in this domain.”

“Even under the current difficult circumstances, we have in the last three weeks made five major announcements, one of which was from the automotive sector [Yaris Kabin].”

Some help here has come from the European Commission, which on March 19 announced it would allow member states to create special subsidy programs for up to EUR 800,000 of what might otherwise, in more normal times, be considered state aid.

“We have reacted fairly quickly in introducing our own program: On April 20 this was launched by HIPA, offering the possibility to companies of temporary measures in place until the end of this calendar year.”

Quickly, indeed: In a month, HIPA considered its options, notified and got the approval of the EC, made presentations to government, which passed the necessary regulatory changes, worked out the application and documentation processes and published those on the agency website.

Thus, an investment in Hungary of EUR 1.6 mln or higher will attract a state subsidy of EUR 800,000, and unlike other subsidy scheme, where the money follows the action, this is an up-front cash payment.

“We are trying very hard to deliver liquidity up front and asking for contractual commitments,” the CEO says. “The program has led to a lot of interest. Based on the data from yesterday evening [May 19], we have received 552 applications for a potential total investment of EUR 746 mln, maintaining close to 97,600 jobs and with potential subsidies of EUR 352 mln.”

Indeed, it has been so attractive the government has already decided to double its original budgetary allocation of EUR 140 mln.

Strategic Support

The support for strategic industries is split between those suffering the most (airlines, hotels) and those proving increasingly important (food, medical equipment), companies that Ésik says “will be strategically even more important going forward.”

The financing solutions offered under the forth pillar are of critical importance, the HIPA CEO explains. “Companies do not go bankrupt because they produce

losses; they go bankrupt when they do not have liquidity anymore.”

This is an area that has less to do with HIPA and more Eximbank, for example, but tools on offer include preferential loans, providing financial guarantees, and also insurance products, some of which can be combined with HIPA subsidies.

“Even under the current difficult circumstances, we have in the last three weeks made five major announcements, one of which was from the automotive sector [Yaris Kabin].”

Special Report | 13 Automotive Impact on the Hungarian Economy

185,000 jobs

Almost

5% of GDP

28.9% of the processing The big question, naturally, is when we might see a return to pre-COVID productivity levels. Ésik admits that is hard to judge, not least because it involves several components.

“One is realizing all the social distancing processes that need to be designed. This can be done fairly quickly, but it might lead to changes in capacities.

Second, and more important, is how the market demand will look. Right now it is difficult to make any prognosis on when they will get back to the levels seen before the pandemic hit. For sure, this year will be impacted.”

One interesting theory is that local suppliers that are agile enough, and meet strict quality criteria, might be able to benefit from the relaunch as OEMs ramp up production and run down their preshutdown supplies.

“OEMs might want to shorten their value chain, so they could consider using more components locally, instead of bringing them in from other continents; […] security of supply might have a greater weighting [than price].”

industry’s output

Generates

EUR 29.3 bln of revenue

Total cars produced

0.5 million

Total engines produced

2.3 million

Figures as of the end of

2019

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Budapest Business Journal | May 22 – June 4, 2020

INSIDE VIEW

Challenge and Opportunity: State aid in the COVID-19 Crisis Benjámin F. Marton

Junior Consultant State Aid Specialist

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

Noerr and Partners Law Firm

The COVID-19 outbreak has become a new type of challenge for the entire world. The conditions of everyday life and day-to-day business operations have fundamentally changed as countries have gone under lockdown, economies have been shut almost entirely down and global supply chains torn to pieces.

Fortunately, the European Commission responded in time, and on March 12 stated, that the pandemic qualifies as an exceptional occurrence, as it is an extraordinary, un-foreseeable event having a significant economic impact.

For this reason, the EC communicated a so-called “Temporary Framework” on March 19 that enables member states to introduce state aid measures under a new and, in many respects, looser regulation.

This framework allows a subsidy for the migration of business activities inside the EU, which was previously not permitted. Furthermore, the location of a project formerly had a significant role in determining whether such aid could be given, but not now.

Taking the opportunity presented, the Hungarian government has also introduced a series of new subsidies for those who have been adversely affected by the epidemic but are ready to adapt and fight.

For those medium and large enterprises in the manufacturing and BSC sectors who are ready to take their business to the next level, a new, non-refundable subsidy scheme to improve competitiveness is available, with a maximum subsidy amount of EUR 800,000.

The competitiveness subsidy is available throughout Hungary,

even in Budapest. Enterprises should certify that that their sales revenue or the volume of their order has dropped by 25% as a result of the COVID-19 outbreak and there is causal link between the outbreak and the losses.

The costs of building, land purchase and purchase of assets and intangible assets are also eligible. The amount of aid received depends on the size of the investment; more than EUR 500,000, the aid intensity can be as high as 50%. This creates a good opportunity to take the next step by introducing industry 4.0 solutions to increase capability, for example.

An extended version of the competitiveness subsidy is expected to be launched in the end of June, with a raised threshold on the maximum subsidy amount, which will be calculated based on the quantified losses suffered due to the pandemic.

On top of cash grants, a number of favourable loan schemes have been introduced. A good example are the new investment and working capital loans, available at EXIMBANK with a maximum 2.5% interest rate and flexible repayment options.

In addition to that, there are four new and encouraging subsidized loan schemes available for SMEs as part of the Széchenyi Card Program.

A job retention loan, with a maximum 0.1% interest rate, has a term of two years with a maximum amount of HUF 750 million to ensure salary coverage.

This could be combined with an overdraft loan, with a maximum 0.1% interest rate, for a term of two years with a maximum amount of HUF 100 mln. To ensure liquidity, a working capital loan, with a maximum 0.2% interest rate, has a term of three years and a maximum amount of HUF 250 mln. For those who have even greater plans, there is an investment loan option up to a maximum of HUF 1 billion for a sixyear term and with a maximum 0.5% interest rate.

Proper combination of the above options could be a significant tool to navigate through this stormy period.

Every company should be concerned by this crisis, but it affects each differently. The secret recipe still does not exist, and there is no general solution. An economic crisis inevitably carries risks and dangers, but with careful planning and with the help of appropriate advice, it may also present opportunities.

Those who are able to seize these opportunities will coming out of the crisis more strongly.

www.noerr.com

German Giants Ready to Jump Start Post-COVID Catch-up Due to the impact of COVID-19, Hungary’s economic engine did not so much splutter as come to an abrupt halt. Factories are now cautiously relaunching operations, faced with social distancing challenges and a lukewarm output forecast. The Budapest Business Journal discusses the situation with the three biggest German automakers in the country: Daimler AG (Mercedes-Benz), Audi Hungaria and BMW.

CHRISTIAN KESZTHELYI

As the Hungarian capital has relaxed its lockdown measures, people are returning to life and a (new) normal, and the economy is restarting, albeit slowly. This silver lining, however, remains thin, overshadowed by the uncertain impacts of economic (when, and how much?) and jobless rates forecast to hit pre-depression levels, globally.

German automotive giant Daimler suspended production at its Kecskemét plant on March 20, and peer Audi Hungaria shuttered doors on March 23. BMW told a press conference it would postpone the opening of its plant in Debrecen by a year, although Minister of Foreign Affairs and Trade Péter Szijjártó was quick to reassure readers of his Facebook page that the giant “remains committed” to its planned plant.

Although both Mercedes-Benz (Daimler) and Audi relaunched operations late April, both have done so cautiously.

Mercedes-Benz’s plant in Kecskemét plays a vital role in the Hungarian automotive industry, being one of the largest players of the national economy. In 2019, the factory rolled out

190,000 compact

cars, built by more than 4,400 employees (making it one of the largest employers in our region.

The German parent company has praised Hungary’s “excellent trained

workforce and geographical conditions” on numerous occasions, important factors for the giant in terms of logistics.

Daimler AG decided to pause operations in mid-March 2020 and has gradually resumed production from April 28; the parent company tagged the relaunch as “successful based on experience to date”.

“During the gradual start of production, the work is carried out first in a oneshift schedule and then, from the end of May, in a two-shift schedule. The goal is for the factory to return to the threeshift production schedule in the shortest possible time,” Daimler AG told the BBJ.

Strict Measures

“During the resumption of production, the company developed and implemented a variety of strict hygiene and health protection measures based on specific risk assessment and derived from the company’s worldwide standard approach, applying to all employees in order to protect them and prevent the spread of the coronavirus,” Daimler AG’s spokesperson added.

While Daimler AG continuously monitors COVID-19 developments so it can react to the changing situation and adjust our measures accordingly, it says the economic effects of the stall in production are not yet clear.

“In view of the current spread of COVID19, the economic impact on Daimler in detail and via the timeline cannot yet be adequately determined or reliably quantified. From today’s perspective, a

3

www.bbj.hu

Budapest Business Journal | May 22 – June 4, 2020

Special Report | 15

PRESENTED CONTENT

Magyar Suzuki: COVID-19 Response Leaves Team ‘More Cohesive Than Ever’ The Budapest Business Journal spoke with Zsuzsanna Bonnár-Csonka, Corporate Communication Leader at Magyar Suzuki Corporation, about the Japanese subsidiary’s response to the COVID-19 pandemic and its gradual resumption of work.

ROBIN MARSHALL

significant decline in global economic output must be anticipated for the year 2020 as a whole,” Daimler AG said.

Audi Hungaria, another key player in the local automotive arena, appears to following a similar uncharted track.

Since its foundation 27 years ago, Audi Hungaria has invested more than EUR 11.5 billion in its Győr manufacturing site where two million engines and 160,000 cars are produced annually 130 km northwest of Budapest.

Audi has also been vocal about the favorable light in which it regards the Hungarian national economy’s framework, as well as the country’s geographical location, industrial traditions and highlyskilled workforce.

COVID-19 has infected Audi Hungaria’s impressive recent growth, too.

“Due to the decreased orders caused by the coronavirus pandemic and the uncertainty in the supply chain, we had to suspend production temporarily. We have been gradually restarting production from April 10. At our company, we have transformed workstations according to strict health provisions to protect the health of

our

12,800

colleagues,” an Audi spokesperson told the BBJ. “At present, the company runs a oneshift production in both the engine and vehicle factories amidst strict regulations.

The tool factory and the technical development work in full capacity again.

In the following weeks, we are planning gradual production ramp-up in order to reach the level that we had before the pandemic,” the German giant added.

Long-term Investment

The BMW Group insisted when asked by the BBJ that it is aiming for a longterm investment in Hungary, considering Debrecen, “the ideal location at the heart of Europe”, which is an essential market for the group.

“Our professional relationship with the Hungarian government provides the foundation for solid cooperation,” BMW said. In the last years, the group says it has purchased materials and services worth more than

EUR annually 1 billion

in Hungary.

Yet, COVID-19 has brought BMW wellgreased gears to a cranky slowdown (although work on the site in Győr continued). Mindful of its “unique responsibility” for the future of the company and its employees, with a special focus on its workforce’s health, BMW is gradually returning to its normal operation under coronavirus conditions.

“We have already implemented effective measures across the company to prevent infection and protect all our employees and their families. We are leveraging our global experience from the crisis at all locations around the world,” BMW said.

“With regards to production, the BMW Group is following a staggered approach to ramping up its production locations again. Over the coming weeks, plants worldwide are scheduled to join the component plants and the relaunched facilities in China by resuming series production,” BMW said. It added that it can give no “further information about the impact of COVID-19 at this time.”

BBJ: When and how did you begin to start production again?

Zsuzsanna Bonnár-Csonka: Production in Esztergom restarted gradually on April 29. We introduced more complex healthcare and safety measures than ever before to protect our employees.

We reorganized our processes to ensure proper distance and hygiene suiting the specific health situation.

Admission to the factory is subject to strict rules. Workers can enter the factory area on a painted, designated route, 1.5 meters apart. We have also set up extra entry points. We keep the recommended distance of 1.5 meters during work as well.

It is obligatory to wear a mask, we provide rubber gloves on request.

In production, workstations were disassembled, separators were installed in between, and all workers use face shields. We increased the number of bus services to ensure the appropriate distance between employees during the trip. In addition to the usual points, we introduced antibacterial hand disinfection in many other places. The canteen and buffet are closed, but, we provide prepackaged cold meals to staff at our own expense. We provide continuous disinfection on our sites, both in the factories and in the offices. Our previously introduced restrictions, such as bans on business trips and the entry of partners and visitors remained effective.

BBJ: How many staff are now back working at the factory?

Zs B-Cs: Some 1,100 colleagues have started working in one shift in our production halls. Our employees working in the main office can choose between remote work and office work in the first stage of resuming on rotation basis as part of the gradual restart of production.

BBJ: Do you think you might continue with home office for those staff that want it in the long-term?

Zs B-Cs: Given the nature of our company’s function, manufacturing, general home office is not an option in the long run. Our office colleagues work in close cooperation with the factory in order to support production. However, due to the coronavirus situation, our previous rules on urging home office is still effective.

BBJ: Have you had to furlough staff or make any redundant?

Zs B-Cs: It was very important for Magyar Suzuki to keep all our employees directly employed providing continuous payment of wages during the closure. All our staff members could choose from reorganization

Zsuzsanna Bonnár-Csonka of working time, home office, and paid holiday during the downtime period.

However, due to the coronavirus situation, we suspended the services of our labor hires partners. We are counting on members of our contracted workforce as soon as production restarts at its usual pace. We will strive to transfer hundreds of our previously hired workforce into our company’s own employment.

BBJ: How long do you think it will be before you are back at full production?

Zs B-Cs: We are constantly monitoring the market needs and trends, the Hungarian and European COVID-19 situation, consulting with our suppliers and shaping our production plan.

BBJ: Besides looking after your staff (which is very important), have you been supporting the wider community in any ways?

Zs B-Cs: We owe gratitude to all who take care of patients in this extraordinary situation, day by day. We feel obliged to help their essential work. So, Magyar Suzuki donated 200 face masks with FFP1 certification to the Vaszary Kolos Hospital in Esztergom. We also offered eight vehicles to doctors and nurses at Esztergom hospital, who will be able to commute in an easier, safer way. We supported Szent Borbála Hospital in Tatabánya as well, giving about 20 liters of hand sanitizer to the institute.

BBJ: What are you most proud of about Magyar Suzuki’s response to the crisis?

Zs B-Cs: The key to our successful response to the crisis is our team. The fact that we could react and work together as one team, re-scheduling our operations, successfully implementing all measures throughout the whole production chain, shows that our team is more cohesive than ever. It was equally important to us to help our greater community in the successful fight against the virus supporting regional health institutions.

16 | 3

Special Report

www.bbj.hu

Budapest Business Journal | May 22 – June 4, 2020

Automotive ///in brief PSA to Restart Production Gradually at Szentgotthárd French vehicle maker PSA was to gradually restart production at the Opel engine plant in Szentgotthárd (276 km west of Budapest) on May 13, the plant’s spokesman said on May 11, according to a report by state news wire MTI. Strict health safety measures have been taken at the plant, after consultations with unions and the workers’ council, as at all of the PSA group’s production facilities, said Zoltán Kaszás. Production will start with the three-cylinder turbo PureTech petrol engine, he added. Yann Vincent, the PSA group’s VP for production, said the group would ramp up output “gradually and securely.” Production at Szentgotthárd was shut down on March 23 because of the coronavirus pandemic.

Hungarian Electric Car Use Grew Most in EU Amid declining total market sales, the share of electric vehicles among new cars sold in the European Union in the first quarter has risen, according to a report published on May 12 by ACEA, a professional representative of European carmakers, writes novekedes.hu (Growth). Within the EU, the marketing of alternative propulsion cars has increased the most in Hungary. In the first quarter, the share of electric vehicles among passenger cars marketed in the European Union rose to 6.8% from 2.5% a year earlier. In Hungary, 517 battery electric cars were sold in the first quarter of this year, 35.7% more than in Q1 2019, and the number of plug-in hybrid cars increased by 109.9% to 487.

Some 1,004 rechargeable electric cars were marketed, a 63.8% increase.

The number of hybrid electric cars on the market has increased almost 3.5 times this year to 5,677 in Hungary; the share increased significantly in Q1 compared to the EU, the website adds.

Auto Showrooms Reopening in May In the first four months of this year, a total of 38,841 new cars received license plates, down 17% from a year earlier, and this has also led to a decline at leasing companies, which finance 40% of car purchases, says uzletem.hu. The situation may improve in May, however, as car showrooms reopen.

In both Europe and Hungary, sales fell sharply due to the epidemic, partly due to falling demand and the closure of car showrooms. “That is why it is important that the car showrooms are back in operation from the beginning of May,” Zoltán Tóth, secretary general of the Hungarian Leasing Association, was quoted as saying.

Turkey’s Yaris Kabin to Build HUF 6.5 bln Factory, R&D Base in Hungary Turkish farm machinery maker Yaris Kabin will invest HUF 6.5 billion in a factory in Iváncsa (50 km southwest of Budapest), Minister of Foreign Affairs and Trade Péter Szijjártó said on May 5, according to state news agency MTI. The government is supporting the investment, which will create 150 jobs, with a HUF 521 million grant, Szijjártó said. Yaris Kabin will also undertake research and development at the base, he added. Yaris Kabin expects the Hungarian unit to generate revenue of EUR 15 mln a year, managing director of the Hungarian subsidiary Adam Nemeth said. Production at the factory is scheduled to start from early 2021, mainly for the German and Italian markets.

Automotive Sector Output Drops Almost 1/5 on Shutdowns Output of Hungary’s automotive sector, normally an engine of industrial growth, dropped by 19.8% year-on-year in March as factories shut down to contain the spread of coronavirus, state news wire MTI reports, citing a detailed reading of data released by the Central Statistics Office (KSH).

Vehicle manufacturing fell by 28% and parts manufacturing by 13.1%.

The output of the automotive sector accounted for about 26% of total manufacturing output in March. Headline industrial output was down 5.6% in March, KSH confirmed. Adjusted for the number of workdays, industrial output was down 10%.

In a month-on-month comparison, industrial output was down a

seasonally- and workday-adjusted 10.4% in March.

The export volume of the industrial sector decreased 8.1% overall year-on-year in March, with exports of the automotive sector dropping 21.8%. Domestic sales of the industrial sector fell 0.8%, with manufacturing sales dropping by 1.9%.

Order stock in parts of the manufacturing sector which KSH tracks was down 6.5% at the end of March from 12 months earlier. New order volume fell 10.1% as new domestic orders were up 1.6% but new export orders were down by 11.9%.

For the period January-March, industrial output edged up 0.1% overall year-on-year.

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Budapest Business Journal | May 22 – June 4, 2020

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Special Report | 17

Resilience the Most Significant Lesson From Pandemic As a team, we will be closer and even more focused. I am very proud of the team for accepting a cut in working hours and other difficulties to get through the worst months intact and to secure as many jobs as possible.

Hungarian innovator (and automotive supplier, among other things) Tungsram is looking at new ways to sustain its business in the environment created by COVID19, as well as to come up with new solutions that help personal hygiene.

The Budapest Business Journal talks to president and CEO Jörg Bauer, a past winner of the Expat CEO of the Year award, about the future.

“We budget for a gradual, steady recovery till yearend and assume that, without a second wave, Q1 next year will see us back to regular business. Another lesson suddenly learned is the need to think, plan and act in scenarios.”

Quite a few of our investments have proved to be resilient. However, we know now where we want to continue to invest to be successful in the new reality after COVID19. Resilience is probably the most significant lesson for countries, companies and individuals. The question is not so much if there will be regionalization of critical supplies, simplification of formerly globalized supply chains, public investments into national food security, sanitation and healthcare in different parts of the world, but in what way and to what extent.

CHRISTIAN KESZTHELYI

BBJ: Tungsram is a Hungarian brand, of course, but what is the added value that this country can deliver to your company?

Jörg Bauer: Hungary has a long tradition of innovation, very often with limited resources. When we look at patents per 100,000 people, Hungary used to be among the best; a spirit I experience daily. However, most patents now are international ones submitted by the patenting companies abroad. Until 1989, when it became part of GE, Tungsram was always been at the forefront of Hungarian innovation in engineering, electronics and, naturally, lighting.

Throughout our more than 120 years, we had to reinvent ourselves multiple times. Now we are transforming into a company that builds on its sophisticated supply chain, global reach and refocuses on some of the most pressing challenges of our time: food security, sanitation and data-driven solutions that work toward energy- and cost-efficient buildings and cities. Light plays an essential role in all three, as much as data; the overall aim is to increase the well-being of humans.

BBJ: What is your company’s “weight” in Hungary?

JB: We are active in different industries with different weights. Overall, we are one of the largest innovative and industrial Hungary-headquartered companies with more than 3,000 staff in our five active factories, and around USD 250 million in revenues.

Jörg Bauer BBJ: How do your operations affect the global and EU markets?

JB: We are traditionally strong in Hungary and Southeast Europe, which we consider our home markets. We are present in the Middle East, Turkey and North Africa, too, with a presence of more than 100 years in some cases. Our more robust markets are in Western Europe, Spain, France, and the United Kingdom.

BBJ: How has COVID-19 changed your reality?

JB: In many ways. Today, 700 of our employees work smoothly from home, while we do what is realistically possible to safeguard our staff in factories. We are discussing what the right approaches are about the labor organization that we would like to keep after COVID-19.

We are selling in more than 100 countries globally, and we have been experiencing almost as many different reactions affecting our sales operations.

We are active in various industries, such as automotive lighting, that were impacted as early as the end of March.

Already before the crisis, we had implemented solutions relating to sanitation, such as using UV-C light.

Nevertheless, we got a massive push to develop prototypes and solutions that we

strongly believe will stay with us for the long-term. I cannot imagine that a traveler, for example, will not wonder how clean a transport device, a rented room or the food will be. Proactive communication (and actual action) about sanitation will become a must for hospitality, travel and healthcare. We see Hungary as the home of the inventor of sanitation, and Tungsram, together with other Hungarian innovators, as a potential winner of this megatrend.

BBJ: What is the “new normal” that you are returning to?

JB: It is still not clear what shape and timeline the expected recovery will take. Even Nobel prize winners sometimes disagree 100% (V-, U-, W- or Nike Swoosh shapes). We are tracking the hard facts daily, but also the sentiment in our industries, with our customers and business partners.

Based on what we see, we are carefully optimistic that, COVID-19-wise, we hit rock bottom at the end of April.

We budget for a gradual, steady recovery till yearend and assume that, without a second wave, Q1 next year will see us back to regular business. Another lesson suddenly learned is the need to think, plan and act in scenarios.

BBJ: How long might it take to get back to where you were prior to the outbreak?

JB: In our traditional business areas, we expect normal business by Q1 next year.

However, in some of the new activities addressing megatrends that COVID-19 has accelerated, we see a bright future.

Tungsram’s call for Innovation: ʼTogether, we can Succeedʼ Tungsram is welcoming innovative companies and startups in the infection protection field, from all over the world, to find solutions that are so important for Hungary and the global market. “We are also inviting universities to research the most effective and secure technologies. We are seeking areas of application, references in hospitals, hotels, in the food industry, in public transport, and anywhere else where sterile surroundings are indispensable. For this, we need a partnership among the companies, universities, and research centers of our country; alone, we cannot manage it,” the call says.

18 | 3

Special Report

www.bbj.hu

Budapest Business Journal | May 22 – June 4, 2020

Car Importers Ranked by total net revenue (HUF mln) in 2019

leasIng

assIstanCe

seCond-Hand CaR tRade

Fleet management

HybRId

194,447

✓

–

–

–

–

–

–

Suzuki

354,299 (2018)

38,398

✓

–

✓

–

–

✓

–

Audi, Volkswagen, Skoda

opel soutHeast euRope kFt.

203,269

44,882

✓

–

✓

–

✓

–

–

toyota CentRal euRope kFt.

176,901

A

✓

–

–

–

–

–

FoRd közép- és keleteuRópaI éRtékesítő kFt.

132,027

23,560

✓

✓

✓

✓

✓

meRCedes-benz HungáRIa kFt.

113,158

6,249

✓

–

–

–

FCa CentRal and easteRn euRope kFt.

101,066 (2018)

A

✓

–

–

8

Renault HungáRIa kFt.

88,000

22,015

✓

–

9

poRsCHe InteR auto HungaRIa kFt.

87,550

A

✓

Wae autóFoRgalmazásI és szolgáltató kFt.

36,269

2,996

✓

oWneRsHIp (%) HungaRIan non-HungaRIan

top loCal exeCutIve CFo maRketIng dIReCtoR

addRess pHone emaIl

eleCtRIC

RepaIR

796,419

Company WebsIte

dIesel, gas

no. oF veHICles sold In 2019

Rank

total net Revenue In 2019 (HuF mln)

FInanCIng

CaR bRands

spaRe paRts supply

seRvICes

Suzuki

–

(0.01) Suzuki Motor Corporation (97.53), Itochu Corp. (2.46)

yoshinobu abe – –

2500 Esztergom, Schweidel J. utca 52.

(33) 541-100 –

Audi, Volkswagen, Skoda, SEAT

Audi, Volkswagen, Skoda

– (100)

János eppel, peter gstattner – –

1139 Budapest, Fáy utca 27.

(1) 451-5100 prsajto@porsche.hu

Opel

Opel

Opel

– Groupe PSA (100)

enrico de lorenzi Péter Oriskó –

2040 Budaörs, Szabadság út 117.

(23) 446-100 info@opel.com

–

Toyota, Lexus

Toyota, Lexus

–

– Toyota Motor Europe NVSA (100)

Jacek pawlak – –

2040 Budaörs, Budapark Keleti 4.

(23) 885-101 infohu@toyota-ce.com

–

✓

Ford

Ford

Ford

– Ford Motor Company (100)

attila szabó Will Periam Viktor Rákosi

2000 Szentendre, Galamb József utca 3.

(1) 777-7555 inform@ford.com

✓

–

–

MercedesBenz

MercedesBenz

MercedesBenz, smart

– Mercedes-Benz AG (100)

Reinhard münster Joachim Wolf Edina Kozári

1133 Budapest, Váci út 96-98.

(1) 887-7000 internet-hu@daimler.com

–

–

–

–

–

Alfa Romeo, Fiat, Jeep, Fiat Professional

–

– FCA Italy S.P.A. (100)

andrew terence Higgins – –

1138 Budapest, Madarász Viktor utca 47.

(1) 458-3100 customercare.hu@fiat.com

–

–

–

–

–

–

Renault, Dacia

Renault

– (100)

tamás Wachtler – Gabriella Kelemen-Tűz

1138 Budapest, Váci út 140.

(1) 358-6000 ugyfel.kapcsolat@renault.hu

✓

✓

✓

✓

✓

✓

Bentley, Porsche

Bentley, Porsche

Porsche

– Porsche Holding GmbH (100)

szabolcs nagy Tamás Tótvári Péter Árvay

1139 Budapest, Fáy utca 27.

(1) 451-5500 info@porschepest.hu

–

–

–

–

–

–

Jaguar, Land Rover

Jaguar, Land Rover, Isuzu, Ssangyong

Jaguar

AutoWallis Nyrt. (72.50) Andrew John Prest (27.50)

andrew John prest Roland Czeilinger –

2051 Biatorbágy, Budai út 16.

(1) 451-4851 info@wae.hu

györgy balkányi, zsófia bálint kovácsné – –

1194 Budapest, André Citroen utca 1.

(1) 275-5555 kapcsolat@ p-automobil-import.hu

pál kovács Péter Tajthy Ibolya Ördög

1186 Budapest, Cziffra György utca 15.

(1) 887-5700 info@hyundai.hu

magyaR suzukI zRt. www.suzuki.hu 1

2

poRsCHe HungaRIa keReskedelmI kFt.

www.porschehungaria.hu

3

www.opel.hu

4

www.toyota.hu, www.lexus.hu

5

www.ford.com

6

www.mercedes-benz.hu

7

www.fiat.hu

www.renault.hu, www.dacia.hu

www.porscheinterauto.hu

10

www.wae.hu

11

p automobIl ImpoRt kFt.

30,772

4,588

✓

✓

✓

✓

✓

✓

–

Peugeot

Peugeot

Peugeot

Frey Automobil Holding Kft. (100) –

12

HyundaI HoldIng HungaRy kFt.

26,812

4,964

✓

–

–

–

–

–

–

Hyundai

Hyundai

Hyundai

– AutoBinck Car Distribution and Retail B.V. (100)

www.peugeot.hu

www.hyundai.hu

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Budapest Business Journal | May 22 – June 4, 2020

no. oF veHICles sold In 2019

FInanCIng

RepaIR

leasIng

assIstanCe

seCond-Hand CaR tRade

Fleet management

HybRId

13

kIa motoRs HungaRy kFt.

26,194 (2018)

A

✓

–

–

–

–

–

–

Kia

C automobIl ImpoRt kFt.

21,792

3,100

✓

✓

✓

✓

✓

✓

–

Citroën

20,742 (2018)

A

✓

✓

✓

✓

✓

✓

✓

16,592 (2018)

A

✓

–

–

–

–

–

9,233

A

–

–

–

–

–

oWneRsHIp (%) HungaRIan non-HungaRIan

top loCal exeCutIve CFo maRketIng dIReCtoR

addRess pHone emaIl

eleCtRIC

total net Revenue In 2019 (HuF mln)

dIesel, gas

Company WebsIte

spaRe paRts supply

CaR bRands

Rank

seRvICes

Kia

Kia

– KIA Austria GmbH (100)

kim dowan, kim youngrae – –

1117 Budapest, Budafoki út 56.

(1) 324-2000 info@kiamotors.hu

Citroën

–

Frey Automobil Holding Kft. (100) –

györgy balkányi Péter Lugosi Nóra Hajdu

1194 Budapest, André Citroën utca 1.

(1) 348-4848 kapcsolat@ c-automobilimport.hu

Volvo

Volvo

–

– Volvo Personvagnar Aktiebolag (100)

gábor bodrogai Ágnes Tárkányi –

1044 Budapest, Váci út 50–58.

(1) 238-8100 huinfo@volvocars.com

–

Mazda

Mazda

–

– Mazda Motors Logistics (100)

tibor együd Erika Káldi Eszter Burovinc

1117 Budapest, Infopark sétány 1. Building I (1) 464-5000 mazda@mazda.hu

–

–

Jaguar, Land Rover

Jaguar, Land Rover

Jaguar, Land Rover

– AutoBinck Car Distribution and Retail B.V. (100)

pál kovács, nicolaas Hertsenberg – –

1186 Budapest, Cziffra György utca 15.

(1) 882-8930 info@jlr.hu

www.kia.com

14

www.citroen.hu

15

volvo autó HungáRIa keReskedelmI és szolgáltató kFt. www.volvocars.hu

16

mazda motoR HungaRy kFt.

Special Report | 19

www.mazda.hu

17

bRItIsH automotIve HungaRy kFt.

18

mm ImpoRt kFt.

5,562 (2018)

A

✓

–

–

–

–

–

–

A

Mitsubishi

A

Emil Frey Automobil Holding Kft. (100) –

gábor mátrai, Heinz schneiter – –

1149 Budapest, Mogyoródi út 34–40.

(1) 422-3910 gabor.matrai@ mitsubishimotors.hu

19

emIl FRey ImpoRt kFt.

1,543 (2018)

127

✓

–

–

–

–

–

–

Subaru

Subaru

–

Emil Frey Automobil Holding Kft. (100) –

gábor mátrai, Heinz schneiter – –

1149 Budapest, Mogyoródi út 34–40.

(1) 470-9010 info@subaru.hu

20

gablInI pRemIum kFt.

1,524

120

✓

✓

✓

✓

✓

✓

✓

Infiniti

Infiniti

–

(100) –

péter gablini Regina Spenger Péter Váradi

1152 Budapest, Városkapu utca 1.

(1) 799-2250 infiniti@gablini.hu

BMW, MINI

BMW I

– Individuals (100)

anna Rita tonini, Jean-philippe parain, neil domonic Fiorentinos – –

2220 Vecsés, Lőrinci út 59.

(29) 555-100 ugyfelszolgalat@bmw.hu

NR

www.jaguar.hu, www.landrover.hu

www.mitsubishi.hu

www.subaru.hu

www.infiniti.hu

bmW veRtRIebs gmbH magyaRoRszágI FIóktelepe

A

A

✓

✓

✓

✓

✓

✓

–

BMW I Performance, MINI

A

A

✓

–

–

–

–

–

–

–

Nissan

Nissan

– (100)

viktor gyula molnár Zoltán Magyari –

1124 Budapest, Csörsz utca 49–51.

(80) 333-888 hungary@nissan-services.eu

A

A

✓

✓

–

–

–

–

–

Honda

Honda

–

– Honda Motor Europe Ltd. (100)

Roland berger – –

2040 Budaörs, Puskás Tivadar út 1.

(23) 506-406 info@honda.hu

www.bmw.hu

NR

gRand automotIve CentRal euRope kFt. www.nissan.hu

NR

Honda motoR euRope lImIted magyaRoRszágI FIóktelepe www.honda.hu

A = would not disclose, NR = not ranked, NA = not appliacable

This list was compiled from responses to questionnaires received by May 20, 2020 and publicly available data. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of press time.

The list is based on companies' voluntary data submissions. 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

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Budapest Business Journal | May 22 – June 4, 2020

Socialite Face Mask Chic and the new Flirting Normal As I was writing this, our doorbell rang.

Thinking our face masks had arrived, my partner hurried to open the door.

Above his official issue mask, the postman, she reported somewhat breathlessly afterwards, had the most amazing eyes.

This reminded me of an extraordinary experience I had walking down the street in Wedding, the Turkish part of Berlin.

David Holzer securers himself a Hungarian designer face mask, and is transported back to a memory of devastating Islamic eye flirting.

Laser Beam

DAVID HOLZER

A couple of nights ago, my Hungarian partner and I ordered face masks from Laoni Design, a Budapest-based store that, before COVID-19, specialized in leather bags, luxury leather and special items.

Lilla Pápai, the daughter of Ilona, who founded Laoni Design, told me that the company began making masks around a month ago.

“After the pharmacies started running out, we made masks for family members and to donate to medical institutions and it went from there,” Lilla said. “Although we’re selling them online now, we’re continuing to give masks free to people who really need them.”

Now, in the new normal, the company offers a range of face masks for men and women, from rather menacing western movie outlaw black to a delicate rose pink. Sadly, they have no plans to make a leather mask.

“We experimented a lot before we launched the masks online,” Lilla explained. “These are the best designs.”

Lilla and Ilona will be making masks for the foreseeable future. Not least because the Laoni store, which offers other Hungarian brands including Lilla’s own organic WYHOYS clothing, is in the center of Budapest and was dependent on tourists.

“We’ve seen an increase in online sales, not just of masks,” Lilla said, “so we’ll build up that side of our business.”

A couple of months ago, if you’d told any of us we’d be shopping online for face masks that fit with our personal brand or at least go with our shoes we’d have raised our eyebrows.

Before COVID-19 (I’ll refrain from calling it BC), the only time I saw masks outside a medical establishment was on the faces of Asian people.

This includes being served by a waitress wearing an olive-green mask that matched her skirt in the fantastic HeHe restaurant at the Monori Center out in Kőbánya,

Budapest’s Chinatown. A somewhat unnerving experience but not enough to put me off the delicious dish I’d pointed at on the menu.

Fashion Statement

I told this story to a Chinese friend of mine.

She explained that, apart from protecting against pollution, masks were sometimes a kind of fashion statement.

Now, a page at Vogue.com currently lists 92 cloth masks to choose from and the number’s going up all the time.

Luxury brand Gucci, somewhat surprisingly, doesn’t appear to have capitalized on the publicity it received when teen pop sensation Billie Eilish wore a face mask emblazoned with their logo to the Grammys back in late January.

Eilish was quick off the mark, as you’d expect from such a singular artiste.

But now the dinosaurs of rock are getting in on the act.

Over at wegotyoucoverednow.com, the rockers among us can pick up face masks sporting the logos of the Rolling Stones, Black Sabbath and the Sex Pistols among others.

Somewhat bizarrely, you can also go for a Frank Sinatra mask or one featuring the likeness of 87-year-old country legend Willie Nelson.

The website promises that 100% of net proceeds will be donated to the non-profit Musicares, which provides for music people in times of need, something these most certainly are.

Schlepping past a group of teenage girls, I was smitten by a laser beam glance fired my way by a girl whose face was mostly hidden behind a plain black burka.

The girl didn’t just have the most astonishing green eyes I’d ever seen.

She used them to devastating effect.

I almost fell headfirst into a trash can.

By the time I’d hauled myself upright, the girl had vanished.

When I told the friend I was staying with what had happened, he laughed and said “They do that all the time for practice.”

Unable to show her made up face or wear figure-emphasizing clothes, that young girl had learned to flirt in the only way open to her.

Presumably, the art of eye-flirting is passed down from generation to generation of women obliged to wear the burka. I picture teenage girls sitting at the feet of a wizened old crone whose eyes, according to legend, no man is powerless to resist.

I have to admit that, at the time, I entertained the idea that the girl was interested in me. How could I not? It was the effect she was after. I’m sure that, when she aimed it in the direction of the guy she was really interested in, he fell at her feet and followed her around like a puppy.

Eye Candy

In our new normal, how we decorate those windows to our soul will become more and more of a statement.

Female eye makeup will become wildly expressive and outrageous, incorporating ornate eye jewelry. Men will start wearing eyeliner in subtle, masculine colors and statement-dyeing their eyebrows.

Eye tattooing will become more prevalent and the bravest among us will ink their irises.

Teenage Muslim girls will make fortunes teaching grizzled old businessmen how to use their eyes to clinch that mega-deal.

Us yogic types will master the ancient Indian arts of eye yoga, as revealed in the Chakshushopnishad-Upanishad of the eyes.

Those of you reading this and rolling your eyes are already way ahead of the rest of us.

• Go to www.laoni.hu for Hungarian-made face masks.

• Check out Lilla Pápai’s sustainable organic fashion brand WYHOYS at www.wyhoys.com.

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Budapest Business Journal | May 22 – June 4, 2020

Socialite | 21

Virtually Venturing Down South to Villány Having long been described as Hungary’s premier red wine region, Villány has become the region that many wine lovers love to hate, as tastes have shifted away from the kind of super-ripe, tannic, full-bodied reds that it pumps out, towards gentler, lighter and fresher wines from cooler climes.

ROBERT SMYTH

But before, I join in the rant against over-ripeness, I must point out that this blockbusting style, which is somewhat in tune with Villány’s quasi-Mediterranean climate, still appeals to many.

While guiding on tours down there, which sadly I’m unlikely to be doing again anytime soon, it was notable how the region’s powerful reds would appeal in particular to American guests thanks to all those kinds of intense traits that have seemingly become taboo.

They would often compare Villány’s Bordeaux-style blends very favorably to those of California’s prestigious Napa Valley, but with one big difference; bang for the buck! Even the most premium Villány wines are relative bargains compared to many of their Napa counterparts.

Villány has long been associated with big, tannic red blends made from the Bordeaux varieties. When the grapes are harvested at the right time (which is certainly not always the case), the limestone soils help preserve the acidity, build the structure and ensure elegant wines, although the overripe, overextracted and heavily tannic style that has seduced many a Hungarian palate is still alive and well today.

Cabernet Franc has become the region’s calling card, and wine made from the grape carries the Villányi Franc moniker. Unfortunately, there’s still much more of its internationally dominant sibling – Cabernet Sauvignon – planted here, which is less guaranteed to ripen as perfectly as Cab Franc.

Nestled close to the Croatian border, protected from the northern cold by hills and replete with a sub-Mediterranean climate, the barren yet prime site of the limestone Kopár vineyard, which lies on

the southern slopes of the pyramid-like Szársomlyó Hill, looks like it could be straight out of coastal Croatia.

Reclaimed

Another great vineyard is the Ördögárok, which was painstakingly reclaimed from forests at the beginning of this century.

The Ördögárok is warm with great exposure, which allows the grapes to ripen nicely, but is also cooled by breezes that help preserve acidity to prevent the wines becoming cooked and jammy and keep the air circulating to prevent certain diseases taking hold.

In all, Villány, which lies in Baranya County, has more than 2,500 hectares under vine (out of Hungary’s 64,000). It encompasses the pretty settlements of Palkonya, Villánykövesd, Nagyharsány, Kisharsány and Siklós, in addition to the village of Villány itself. The region positively oozes charm with its old-world cellar rows (there are amazing doublerows of white cellars in Villánykövesd well worth checking out) that contrast with state-of-the-art wineries.

In spring 2014, Villányi Franc was launched in a joint-effort by many of the region’s winemakers to unite and promote its flagship grape Cabernet Franc.

Vylyan’s Mónika Debreczeni says that the page that describes what Cabernet Franc needs to thrive is identical with what Villány offers.

Cabernet Franc ripens a week earlier than Cabernet Sauvignon with no green flavors, according to Attila Gere, one of the region’s pioneers, who has now gone fully organic in his vineyards.

The legendary Michael Broadbent, a Master of Wine and long-time fine wine auctioneer for Christie’s, who passed away in March at the age of 93, proclaimed on visiting Villány, in 2000, that Cabernet Franc had found its natural home there.

Meanwhile, Kékfrankos, which is the country’s most-planted grape, was often an afterthought in Villány and was long considered way down the pecking order topped by the Bordeaux grapes, but it is now coming along nicely after years of relative neglect to make riper wines with darker fruit than usual for the grape, reflecting the warm climate.

The excellent Sauska, whose wines convey a remarkable level of consistency, balance and refinement, alongside that natural Villány warmth and sun, skillfully combines Kékfrankos with three Bordeaux varieties (Cabernet Sauvignon, Merlot and Cabernet Franc) in its midrange Cuvée 11. The 2017 (HUF 4,750 from Bortársasag) is made from those grapes coming from four vineyards – Makár, Konkoly, Kopár and Ördögárok.

One of my favorite Cabernet Francs used to be Péter Bakonyi’s Makár, but as of 2017 it goes under the Siklós name, with the organically cultivated French clones of

the Városhegy vineyard, also included. I like his restrained, leafy style that, for me, captures the essence of the grape (HUF 4,350 from Bortársaság).

Youthful

The Portugieser grape typically makes youthful, light red wines bursting with primary fruit that are put on the market soon after the harvest and serve to generate cash-flow while winemakers wait for their big guns to come online.

The region positively oozes charm with its oldworld cellar rows (there are amazing doublerows of white cellars in Villánykövesd well worth checking out) that contrast with state-of-the-art wineries.

While German Swabians played a massive role in the development of Villány (Gere, Bock), it is a new wave of Germans, Wassmann and Hummel, who are proving that you can make high quality wine out of an unfancied varietal like Portugieser if you treat it with tender

loving care (via organic and biodynamic principles) and minimum intervention.

Attila Gere’s Portugieser Védett Eredetű Portugieser 2019 (HUF 2,250) is another sophisticated take on the grape.

Hummel also makes one of, if not the best orange wines in the country in Góré Hárslevelű, the 2015 vintage of which spent three weeks on the skins (HUF 6,800 from Radovin).

The German and Swiss owned Heumann winery, whose big reds are among the best and most polished in the region, have also had success with the fragile and featherlight Kadarka grape although, this being Villány, it’s a bit more robust than the Szekszárd style.

Look out for Villány’s easy-drinking RedY wines. These are fruit-forward and light in tannins, and the perfect antidote to the region’s more full-bodied, mouthcoating reds. A RedY must include 51-66 % of the Portugieser grape, while local grapes (Blauburger, Kadarka, Kékfrankos and Zweigelt) have to contribute 20-49%.

Although created in Austria, Blauburger and Zweigelt can indeed be considered pretty much local, both being parented by the Austro-Hungarian Blaufränkish (Kékfrankos) grape. Incidentally, according to Austrianwine.com, the Portugieser grape comes from Portugal and is the very same as the Português Azul, and was brought to Central Europe, to Austria’s Thermenregion, in 1770 by the Baron of Fries. Others say it originates somewhere along the Danube Valley, perhaps from Germany.

22 | 4

Socialite

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Budapest Business Journal | May 22 – June 4, 2020

30 YEARS OF FREEDOM

The Sándor Palace (Sándor-palota) in the Buda Castle complex in the Castle District, is the present day symbol of the president of the republic, being the official residence and workplace (and the 37th largest palace in modern Hungary, according to Wikipedia). It was previously the residence and offices of the prime minister until it suffered bomb damage in World War II. Árpád Göncz, the first president of democrat Hungary, never used it, however, as it was not fully restored until 2003. Photo by Jaione_Garcia / Shutterstock.com

The ‘Four Yeses’ Referendum and the Election of Árpád Göncz On May 2, 1990, the National Assembly elected the writer and translator Árpád Göncz as interim President of the Republic of Hungary by a large majority. After many months of disputes between the new parties and the MSZP (the Hungarian Socialist Party, which had grown out of the former ruling Hungarian Socialist Workers’ Party or MSZMP), this was one of the more positive and tangible results of the regime change: electing the first president of the now free country.

BBJ STAFF

During the transition from the communist one-party system (technically, Hungary was a socialist country, but almost everyone refers to it as communist) into a multi-party democracy, the reburial of the executed 1956 leader Imre Nagy proved a catalyst.

The hardline Károly Grósz was outranked by the reformist wing within the MSZMP and the ruling party began discussions with the opposition groups within the framework of the so-called Round Table Talks. (Both the reburial and the Round Table Talks are discussed in detail in this series in previous issues of the Budapest Business Journal.)

The question of the post-communist presidential position proved one of the most problematic disputes between the parties. The MSZMP suggested a directly elected semi-presidential system; however, this proposal was strongly rejected by the sharply anti-communist Alliance of Free Democrats (SZDSZ) and the then liberal youth party Fidesz.

This was because they, and the leadership of the Socialist Workers’ Party, all assumed Imre Pozsgay, a head of the reform faction within the MSZMP and one of the most popular Hungarian politicians in those months, would win.

The smaller opposition parties wanted a parliamentary system, proportional representation, and a weak presidency.

However, they too believed that Pozsgay would be elected president.

In August 1989, József Antall, leader of the center right Hungarian Democratic Forum (MDF) presented a new proposal: a ceremonial presidential system with indirect elections by parliament, but, since free parliamentary elections had not yet been held, with the first election by the people.

Excluding the SZDSZ, Fidesz and the Democratic Confederation of Free Trade Unions (LIGA), the remaining five opposition groups and the MSZMP accepted and signed the proposal. Despite this, Fidesz and SZDSZ succeeded in collecting enough signatures to trigger a referendum.

This four-question plebiscite was held in Hungary on November 26, 1989. Voters were asked: Should the president be elected after parliamentary elections; should organizations related to the MSZMP be banned from workplaces; should the MSZMP

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Budapest Business Journal | May 22 – June 4, 2020

account for properties owned or managed by it; and should the Workers’ Militia be dissolved.

The SZDSZ asked people to give “four yeses” , and consequently, the vote was presented as a very positive message towards the population. All four proposals were duly passed, the first narrowly by 50.1% of voters, and the remaining three by 95% of voters. Voter turnout was 58%.

“I am not, I cannot be a servant of parties, party interests. In my whole life, within and outside party, I served and I will serve for national independence, freedom of thought, freedom of faith in the idea of free homeland, and social justice with human rights without discrimination and exclusion.”

A Popular President As for the first indirect presidential election, it was held in Hungary on August 3, 1990, following the parliamentary election in March of that year. Árpád Göncz from the liberal SZDSZ, the speaker of the National Assembly and as such acting head of state, had an absolute majority of the votes.

Göncz was a popular Hungarian writer, translator, agronomist and liberal politician and was well known for the role he played in the 1956 Uprising.

After the revolution was crushed by the Soviets, Göncz was arrested on political grounds and was jailed for six years from 1957 to 1963.

In prison, he spent the time learning to read and write English. Once released, that was to serve him well; he translated more than 100 literary works, and wrote his own English-language prose.

Some of his notable translations include E. L. Doctorow’s “Ragtime” and “World’s Fair”, Mary Shelley’s “Frankenstein”, Thomas Wolfe’s “Of Time and the River”, and William Faulkner’s “Sartoris” and “The Sound and the Fury”. Göncz referred to the latter, which employs several narrative styles, including stream of consciousness, as his “greatest challenge.”

However, his most famous translation is J. R. R. Tolkien’s “Lord of the Rings” trilogy, which gave him nation-wide recognition among younger people, who were not otherwise really into politics.

On August 4, Göncz was elected for a full four-year term as president by the National Assembly by 295 votes to 13, thus officially becoming Hungary’s first democratically elected head of state. He was also Hungary’s first non-communist president since the forced resignation of Zoltán Tildy 42 years earlier.

After taking the oath before the new legislative speaker György Szabad (of the MDF), Göncz stated in his inaugural speech, “I am not, I cannot be a servant of parties, party interests.

In my whole life, within and outside party, I served and I will serve for national independence, freedom of thought, freedom of faith in

A Pact for Regime Change The first free, multi-party parliamentary elections since 1947 were held in two rounds, on March 25 and April 8, 1990. The MDF won 42% of the 386 seats in Parliament, with the SZDSZ best of the rest at 24%.

With no party holding an absolute majority, the MDF, the Independent Smallholders’ Party (FKGP) and the Christian Democrats (KDNP) agreed to form a coalition agreement. (We will go into much more detail on the first democratic elections in an upcoming issue.)

On April 29, 1990, the MDF and the SZDSZ signed an agreement to address the stability of democratic institutions and public law issues affecting the country’s governance, although it was announced only on May 2, when Parliament first formed.

The document was signed by József Antall, István Balsai, Imre Kónya, Katalin Kutrucz and László Salamon on behalf of the MDF, and János Kis, Péter Tölgyessy and Iván Pető on behalf of the SZDSZ. In concluding the pact, the two parties assumed that there would be a need for cooperation between the ruling parties and the opposition on certain fundamental issues, because the constitutional constraints,

especially the wide range of laws to be passed by a qualified majority, could make the country inoperable.

In the interests of the stability and governance of democratic institutions, some previous provisions needed to be repealed and constitutional amendments implemented.

The negotiating representatives of the MDF and the SZDSZ believed that Act XXXI of 1989 amending the Constitution law, according to which rules on fundamental rights and obligations can only be laid down with a two-thirds majority, made the operation of the executive almost impossible in practice.

Another issue to be resolved was that on February 27, 1990, the last non-elected Parliament, ignoring the result of the so-called “fouryeses” referendum, decided that the President of the Republic should be elected directly.

The parties, therefore, agreed that the concept of constitutional law should be removed from the constitution and instead the basic institutions and fundamental rights that would require a qualified majority should be listed.

Socialite | 23

Árpád Göncz. Photo by Northfoto/Shutterstock.com

“I would like to serve the unprotected, the defenseless people, those, who lacked the means to protect themselves both in the ‘feudal crane feather world’ and in the ‘world of most equals among equals’.” the idea of free homeland, and social justice with human rights without discrimination and exclusion.”

The annex to the agreement indicated which laws required the amendment or adoption of a vote by a two-thirds majority of all of the members present, with the 20 most important laws listed item by item.

Interim

The document made the election of the President of the Republic a power of the National Assembly and stated that after the necessary constitutional amendments, Parliament would immediately elect the head of state. The parties jointly nominated Árpád Göncz, a member of the National Council of the SZDSZ, and president of the Hungarian Writers’ Union as interim president of the National Assembly.

On May 2, the new Parliament elected Göncz Speaker of the House and interim head of state by 339 votes and György Szabad the first deputy speaker by 348 votes. When Göncz was elected President of the Republic on August 3, Szabad became the Speaker of the Parliament.

The MDF-SZDSZ pact also stipulated that Parliament would decide on the person of the prime minister, and the ministers would be appointed by the president on the proposal of the prime minister.

A motion of no confidence against

He added, “I would like to serve the unprotected, the defenseless people, those, who lacked the means to protect themselves both in the ‘feudal crane feather world’ [a reference to Miklós Horthy’s Hungary right wing Regency of the ‘kingdom without a king’] and in the ‘world of most equals among equals’ [the communist regime between 1945 and 1989].”

Göncz went on to serve a second term as president from 1995 until August 4, 2000. He died on October 6, 2015 in Budapest, aged 93. In accordance with his his wishes, he was buried without official state representation or military honors, although many former and sitting politicians attended.

ministers could not be started, only against the PM, in the form of a “constructive motion of no confidence” (in other words, the prime minister could only be overthrown by electing another candidate for the post).

The pact also included that the constitution should provide for the foundations of the legal status of the National Bank of Hungary and the State Audit Office. Another important provision was that to preserve the independence of public service radio and television, whose respective leaders would be appointed by the President of the Republic on the proposal of the prime minister. It was further proposed to elect a Commissioner or Ombudsman for National Rights, to protect the rights and interests of all nationalities.

The “separate path” chosen by the two strongest political parties via their pact has been repeatedly criticized by the other parties, but it laid foundations for governability and political stability.

It created a strong head of government and a “moderately weak” head of state. But the situation also created some contradictions, and subsequent fierce domestic political battles were blamed on the pact by many.