HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BBJ.HU
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BUSINESS JOURNAL BUDAPEST
VOL. 29. NUMBER 6
MARCH 26 – APRIL 8, 2021
SPECIAL REPORT
Manufacturing & New Technologies
SPECIAL REPORT
5G Will Boost Industry 4.0 Momentum Further With the 4th industrial revolution almost a decade old and already starting to significantly shape many industries, and 5G mobile internet connection around the corner, humanity is on the edge of dramatic changes. 13 SPECIAL REPORT
Robot Revolution Making Progress, but not yet Banging Down the Door There’s a lot going on in terms of robotization in Hungary, but amid a fierce global automation race, it will take even more effort to keep up with the pace. 16
From Bench to Bedside in Szeged
SOCIALITE
Discovering Hungarian Cinema Online
Stuck for something to watch after a hard day at the electric coal face, it occurred to David Holzer that now might be an excellent time to see what Hungarian movies and TV shows might be lurking online. Here's some of what he found. 17
NEWS
MNB Warns of ‘Volatile Inflation’
The Monetary Council of the National Bank of Hungary, as expected, kept rates on hold at its latest rate setters’ meeting this week. More interestingly, the MNB also revealed its latest quarterly Inflation Report expectations for 2021, pinpointing potentially “volatile inflation” once the recovery gathers pace. 3
N ES BUSI
S
Hungary has all the human capital it needs to become a leading player in molecular medicine insists Dr. Christoph Sensen, the German scientist charged with laying the foundations for the ecosystem that will support such ambitious global plans.7
BUSINESS
PwC: Hungarian CEOs Bullish on COVID Rebound Despite the extraordinary challenges created by COVID, Hungary’s bosses have never been so optimistic about the rate of either global or Hungarian economic growth, PwC says in its 10th annual Hungarian CEO survey. 12
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THE EDITOR SAYS
EDITOR-IN-CHIEF: Robin Marshall EDITORIAL CONTRIBUTORS: Kálmán Béres, Zsófia Czifra,
Kester Eddy, Bence Gaál, David Holzer, Christian Keszthelyi, Gary J. Morrell, Nicholas Pongratz, Gergely Sebestyén, Robert Smyth, Bálint Szőnyi, Zsófia Végh. LISTS: BBJ Research (research@bbj.hu) NEWS AND PRESS RELEASES:
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Life in the time of coronavirus feels positively medieval in some respects. A pandemic that comes seemingly out of nowhere, brought by travel and trade and spreading death in its wake. And yet we have learned so much, in such a short period of time. We have developed a series of vaccines of remarkable efficacy, at least in the shortterm, at a previously unimaginable speed. If former U.S. President Donald J. Trump’s Operation Warp Speed seemed a typically bombastic piece of naming, it did nicely capture the mood, and the necessity. We are far from through the pandemic, as the third wave enveloping much of Europe makes clear. Tragically, Hungary saw a new record daily death rate of 252 people on Tuesday (March 23), with the total for Wednesday (March 24) standing at 249 at the time of writing, according to the worldometers.info website, citing the government’s Hungarian-language koronavirus.gov.hu (those stats don’t appear to be on the English-language version, at least not in the same format). We do, though, have a viable way out of the pandemic through vaccination. The speed with which the pandemic laid our economies, if not our societies, low was humbling. In that sense, the coronavirus harks back to the Spanish Flu outbreak of 1918, an unseen, unknown pathogen taking a modern society close to breaking point. Where the analogy fails to hold is that, thankfully, we were not involved in a brutally destructive world war at the start of 2020. Neither did our grandparents and great grandparents vaccinate their way out of trouble. Spanish Flu seems to have dissipated over time, with successive waves becoming less deadly as they mutated to spread faster. It ceased to be a pandemic by the summer of 1920, probably because by then the global population had reach such a level of “heard immunity” (to use a phrase that became popular last spring) that it had become very
hard for the virus to spread further, coupled with plenty of physical distancing, hand washing and mask wearing: Plus ça change, plus c’est la même chose. One other significant difference between then and now is that, with the horrors of the war fresh in mind and the diversions of the Roaring ’20s all around to distract it, the world seemed happy simply to move on without fully understanding what had caused the Spanish Flu outbreak in the first place. Only much later was it discovered to be a strain of H1N1 bird flu that had jumped species from avian to human. In effect, Spanish Flu never went away, it is with us still today, but it is hard to imagine that science won’t continue to mine away at the COVID coalface this time round. After all technological and scientific progress are perhaps the key attributes of the 20th and 21st centuries, and we touch on that in the Special Report inside this issue: Manufacturing & New Technologies. Artificial Intelligence and robotics may seem like very modern science fiction (can you believe the Steven Spielberg film “A.I. Artificial Intelligence” was released in 2001?), but they are very much science fact nowadays. Labor shortages meant digitization and automation were already trends driving the fourth industrial revolution, and have only accelerated during the current pandemic. One snippet jumped out at me in this issue, however, in our piece looking at how the Budapest University of Technology and Economics (BME) is attempting to keep itself at the cutting edge of this breakneck development. With Nokia, one of its many industrial partners, researchers and students at the university are working now to develop 5G technologies but will soon turn their attention to 6G. To quote Leonard I. Sweet, the American theologian and semiotician, “Change is life. Stagnation is death.” Stay safe. Robin Marshall Editor-in-chief
Photo by MTI / Prime Minister’s Office
Photo by Fortepan / Szalay Zoltán
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STAGNATION IS DEATH
THEN & NOW
The coloured image, published on March 23, shows an artist’s rendering of the HÉV suburban railway station at Rákosfalva, near Kerepesi út in District XIV, which will be modernized as part of a HUF 200 billion investment connecting the Gödöllő HÉV line with Budapest Metro Line 2. The black and white image from the Fortepan public archive shows the same station in 1975.
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News///macroscope
Volatile Inflation Poses Greatest Challenge
Recovery from the coronavirus crisis might be quicker than previously expected, but it will be accompanied by higher inflation, the National Bank of Hungary (MNB) says in its latest Inflation report. The greatest challenge is the volatile nature of inflation during 2021; however, for the full year, CPI will remain within the bank’s tolerance band, the MNB says. According to analysts, there is mounting pressure on the central bank to raise its shortterm interest rates. ZSÓFIA CZIFRA
There will be “temporary upsurges” in inflation in 2021, but these will be the consequence of one-off and external factors, MNB governor György Matolcsy said at a press conference following the ratesetters’ meeting of the Monetary Council of the MNB on Tuesday (March 23). Hungarians should not fear “runaway” inflation, he stressed. By the first quarter of 2022, MNB expects inflation to be “close to the 3% target.” The Monetary Council decided to leave the central bank base rate unchanged
at
0.6%
at its monthly policy meeting on Tuesday. The council also decided to leave the overnight (O/N) deposit rate
Analysts at one of the biggest financial research institutes, Capital Economics, say it is surprising that the MNB raised its inflation forecast
Government Balance in Hungary January-February 2021
for
Central budget balance; billion forints.
General government balance; billion forints.
-254.6
-283.7
-505.5
-539.7
Source:
at -0.05% and the O/N and one-week collateralized loan rate at 1.85%. In a statement released after the meeting, the council said inflation is “likely to be highly volatile” in the coming months, spiking due to base effects, rising fuel prices, further increases in excise duties and demandsupply frictions as the economy restarts.
High CPI
According to the MNB, consumer price inflation would be as high as 5% in the second quarter, with rising fuel prices and tax changes accounting for about half of the increase, before returning to the central bank’s 3% +/- one percentage point tolerance band from the summer months. As for the entire year, average annual inflation is expected to be “in the range of 3.8-3.9%,” the bank said, while core inflation excluding indirect tax effects will be “around the 3% level,” policymakers added. The council said the MNB remains “committed to maintaining price stability even during the third wave of the coronavirus pandemic,” adding that it is the central bank’s “clear intention to prevent the current uncertain environment from causing a sustained rise in inflation.” It said the “greatest risk” in terms of the outlook for inflation is posed by “the increase in risk aversion vis-avis emerging markets and potential second-round effects following the restart of the economy.” In its latest quarterly Inflation report, also released on March 23, the MNB upgraded
its previous economic forecast. The central bank now expects Hungary’s GDP to grow
by
4-6%
this year, returning to its pre-crisis level. The bank had forecast a growth rate of between 3.5 and 6% in its previous report released in December. The central bank sees the economy expanding by 5-6% next year and by 3.5% in 2023. The bank’s forecasts for inflation show CPI at 2.9-3% in 2022. It left the 2023 inflation forecast unchanged at 3%.
London View
The MNB seems willing to put up with a higher-than-targeted inflation rate for a certain period, London-based financial analysts have commented on the MNB forecast. Global financial services firm Morgan Stanley said it is clear that the MNB thinks the higher inflation to be temporary; however, it would tolerate a higher rate for a few months. According to analysts at Morgan Stanley, although the MNB is confident the Hungarian economy will kickstart following a weak first quarter performance caused by the restrictions, it is also committed to preventing a further rise in the inflation rate later. Morgan Stanley’s economists said that they maintain their forecast about the MNB keeping its rates at its current level; however, if inflation data causes an unexpected surprise, that might force the MNB to raise its one-week collateralized loan rates.
2021.
However, they also emphasized that the MNB clearly thinks it is only temporary and that the inflation rate might be able to return to its tolerance band in the second half of the year. They also noted that the MNB is clear about preventing inflation from remaining high for a longer period of time.
The MNB remains “committed to maintaining price stability even during the third wave of the coronavirus pandemic.” [...] It is the central bank’s “clear intention to prevent the current uncertain environment from causing a sustained rise in inflation.” According to them, this is a clear sign that the MNB is ready to start tightening monetary conditions. That in turn, they say, might mean that the central bank needs to act soon. They note that the last two occasions when the MNB tightened its monetary policy, the forint/euro exchange rate hit an all-time low of 370. Therefore, as the forint is close to this exchange rate now, and inflation seems to remain at its current higher level, there is a mounting pressure on the central bank to raise its short-term interest rates, the analysts at Capital Economics add.
Numbers to Watch in the Coming Weeks Employment and unemployment figures for February will be released by the Central Statistical Office (KSH) on March 30. The next day, the KSH will publish earnings statistics for January. On April 7, the KSH will shed light on the performance of Hungarian tourism in February. The next day, the first estimate of the February industrial output figures will be released.
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Do you know someone on the move? /// Send information to news@bbj.hu
New Head of Practice, Foreign Legal Counsel Join KNP LAW
and negotiations concerns and handled matters involving the Committee on Foreign Investment in the United States. Prior to law school, Oliver spent time with both Hogan Lovells and Foley & Lardner. “Growing up, I spent my afternoons after school in the conference room of KNP LAW, and it feels surreal to be back after planning this moment for so many years. I am thrilled to be in the city, the amazing Palazzo Hunyadi where KNP moved last year and surrounded by the historical Buda Castle area. It is a true privilege to work with such an amazing and motivated team,” Koppány said about his relocation to Hungary.
Csaba Rusznak has joined KNP LAW Nagy-Koppány Lencs & Partners to lead the firms dispute resolution practice group, with Olivér Koppány rejoining the firm as foreign legal counsel, according to a press release sent to the Budapest Business Journal. Koppány is a member of the U.S. District of Columbia Bar and a registered foreign advisor with the Budapest Bar Association. Oliver is a dual American-Hungarian citizen currently working on issues involving cross-border pharmaceutical transactions, including CEE regulatory approvals. He is also actively involved in advising clients on complex cross-border commercial real estate transactions. He is also responsible for several business development tasks at KNP LAW, in addition to learning management skills and assisting in the day-to-day operations of the firm. Currently, he is actively working with Kornélia NagyKoppány, who stated, “Olivér brings a new energy into the office. He is a part of the new generation of lawyers who bring a progressive outlook and dynamic approach to our management and operation.”
Csaba Rusznak
Olivér Koppány Prior to returning to Hungary, he gained experience throughout law school under Willkie Farr & Gallagher’s Global Trade & Investment Practice Group where he assisted clients with current and upcoming economic sanctions and export controls concerns, anti-money laundering concerns, international trade policy,
Rusznak is a U.S.-qualified international arbitration lawyer who specializes in representing parties in investment arbitration proceedings, as well as in litigation before U.S. courts. Previously, he worked as an international arbitration lawyer at Arnold & Porter, a pre-eminent law firm in the United States. In May 2020, Hungary appointed him to the ICSID Panel of Arbitrators and Conciliators (as a conciliator). Earlier in his career, Csaba served as a law clerk to several courts in Louisiana and West Virginia, which gave him a deep understanding of U.S. court practices and procedures.
Organizational Changes in BDO Hungary’s Consulting Business In early 2021, the owners and the management of BDO Hungary decided to merge its financial advisory and hotel
Ákos Csobádi and real estate services, which have been operating in parallel for more than 10 years, and to create a business line that provides complex, one-stopshop financial and real estate services in accordance with the international network strategy previously adopted by the group, according to a press release sent to the Budapest Business Journal. The goal of the transformation is to create synergies between the successfully operating consulting competencies to serve clients in a more efficient and complex manner, BDO Hungary says. The company’s renewed advisory services will provide financial and real estate advisory, as well as hotel and tourism services, and is planning to introduce new, innovative services in the future.
György Rábai The new acting managing director of financial advisory is Ákos Csobádi who came to BDO with nearly two decades of experience in the banking and finance sector and intends to place greater emphasis on developing bank financing, restructuring, company valuation, business plan reviewing, due diligence, and transaction services and to leverage on the post-COVID reconstruction and financial stabilization opportunities. Csobádi gained experience in managing
and selling large real estate portfolios, as well as in the areas of structured project financing, syndicated financing, and financial restructuring at the Raiffeisen Bank Group. Managing director György Rábai, who is an RICS accredited surveyor, will remain head of real estate advisory and property valuation, his main clients being real estate funds, real estate development companies, and financial institutions. Rábai is responsible for the valuation of office, logistics and industrial, as well as retail properties and, in cooperation with the hotel branch, for the valuation of hotels and other tourist properties.
Attila Hegedűs Managing directors Attila Hegedűs and Richárd Németh will continue to manage Hotel and Tourism Advisory. Hegedús and Németh have been regular participants in domestic and international hotel industry conferences, and have set up one of Hungary’s leading consulting companies offering hotel consulting, valuation, due diligence, operator’s and tenant search services, and preparation of tourism strategies. They have an extensive domestic and international network of contacts and reputation among banks, hotel chains, developers, and owners. Their clients also include state-owned companies, spas and local municipalities.
Richárd Németh
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DVM Group Starts Construction Work on Drechsler Palace restoration projects in Budapest including the Eiffel Palace and the Váci 1 building. Looking at the wider hospitality sector, CBRE says it has traced a development pipeline of more than 2,000 hotel rooms in Budapest and more than
DVM group has started construction works on the Drechsler Palace on Andrássy út. The listed-building, once famous as the home of the Hungarian State Ballet Institute, is owned by the hotel developer and investor QPR Properties, which is redeveloping it into the first W Hotel in Hungary. GARY J. MORRELL
The heritage building by the architects Ödön Lechner and Gyula Pártos was built between 1883 and 1886 in a French Renaissance and Neo-Gothic style. Although part of the Andrássy út UNESCO World Heritage site, it has been left abandoned for the last 19 years and several attempt to bring forward development plans have stalled over the years. When the hotel sector will recover from its COVID-enforced shutdown remains to be seen, although the importance of the industry to national income cannot be underestimated. Hotel development has also contributed to the redevelopment of the city infrastructure over the years, given a use value and enabled the renovation and preservation of several listed buildings, therefore enhancing the atmosphere and look of Budapest and other areas of Hungary.
“Our task is not only to authentically restore the much-deteriorated building and its interiors, but also to prepare it to meet the technical requirements of a luxury hotel,” comments Balázs Czár, joint managing partner of DVM group, on the project. “Heritage protection is combined with a significant mechanical and electrical rejuvenation across all premises of the
16,000 sqm property.
One of the two most prominent architectural changes in the building includes adding a fifth floor by transforming the roof into valuable hotel space,” he explains. “This week we are finishing the professional demolition of asbestos roof covering and the removal of joists, and starting the complex roof reconstruction, complementing the original Lechnerian design with modern HVAC [heating, ventilation, and air conditioning] systems. We will also convert
300 rooms
Drechsler building hotel redevelopment. the courtyard to an intimate, protected, sun-flooded atrium using a state-of-theart, doubly curved hyperbolic paraboloid glass surface,” Czár adds.
Significant Experience
According to the investor, Farshad Khazei, the future W Budapest Hotel will offer 151 guest rooms and suites, a signature W Living Room, restaurant, conference center, meeting rooms and events space, Away Spa and Fit fitness center. That QPR Properties would mandate DVM group with the restoration work comes as little surprise. The latter has significant experience in redeveloping and renovating similar heritage
in the regions outside the capital, due for completion in 2021, despite the pandemic. However, this pipeline realistically needs to be questioned and revised downwards, with a significant proportion likely to slip back to 2022 according to analysts, due to the pandemic and the already intrinsically complex hotel development process. Indeed, several projects have been put on hold with no new delivery dates announced. However, the pipeline remains strong and hotel investment discussions are expected to restart, increasing the potential delivery for next year in the view of many analysts. “The restrained performance is expected to continue until the second quarter of 2021, with expectation for recovery to start in the second half. Supply growth is expected to remain limited and some projects are anticipated to experience delays due to COVID-19. Ongoing refurbishment projects will improve the quality of hotels for when the market returns,” concludes Cushman & Wakefield.
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If you are a UK National living in Hungary before 1 January 2021, the UK-EU Withdrawal Agreement protects your rights. This means that you need to apply for a new National Permanent Residence Permit in Hungary by the end of 2021 even if you already have a pre-transition period EU residency document. All UK nationals and their family members who want to continue living in Hungary must apply before 31 December 2021. You can find further information on the scheme at the website of the Hungarian immigration authority: http://www.bmbah.hu/index.php?option=com_k2&view=item&layout=item&id=1314&Itemid=1853&lang=en.
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MOK and MKIK Take Divergent Stances on Restrictions Prime Minister Viktor Orbán said tighter pandemic restrictions introduced between March 8 and 22 would be extended at least another week to March 29 in an interview with Kossuth Rádió on March 19. During this period, non-essential businesses have remained closed, while primary schools are continuing distance learning until April 7 and the end of the Easter break. NICHOLAS PONGRATZ
Meanwhile, on March 22, the Hungarian Chamber of Physicians (MOK) advocated for even tighter restrictions. MOK said it urged decision-makers to place limits on the number of shoppers allowed in stores, and to ban groups of more than three people in public spaces. The chamber also asked decision-makers to close
shopping centers with the exception of supermarkets and pharmacies. At the other end of the spectrum, the Hungarian Chamber of Commerce and Industry (MKIK) recommended “a more rational and nuanced regulation” concerning pandemic restrictions. In a video posted on his Facebook page, Orbán said the chamber had asked for limits to be placed on the number of shoppers relative to area, rather than shuttering businesses, and proposed special rules for shopping centers. He said these would be discussed during a Cabinet meeting on March 24. Regarding the public’s opinion on the matter,
some
88%
of Hungarians believe pandemic restrictions should be lifted only gradually, rather than all at once. State Secretary Csaba Dömötör shared the results from the latest national consultation on Facebook on March 20. According to Dr. János Szlávik, the chief infectious diseases physician at the South Pest Central Hospital, it will take a few more weeks to reach the 2-3 million vaccination rate. Despite the fact that this may only
Coronavirus ///roundup
for roughly half of all those delivered to Hungary to date. Despite the country being one of only two states in the world utilizing five vaccines, the National Faster Rate Institute of Pharmacy and Nutrition Szlávik told TV news channel M1 that the (OGYÉI) has cleared the use of an number of infected people in the third wave additional two vaccines; one developed is rising at a much faster rate than during the by China’s CanSino and the other the first and second waves. He said the British version of Covishield, developed by mutation of the coronavirus is causing AstraZeneca and the University of more serious illness, and the average age Oxford, produced in India under license. of hospital admissions has dropped by As of March 20, more than half a about five years. To address questions million people had been vaccinated from the public related to the pandemic within the past 10 days, koronavirus. Szlávik began appearing on a new public gov.hu reported. According to a weekly interest program on Kossuth Rádió survey by the Central Statistical Office called Virus Info, alongside Béla Merkely, (KSH) ending on March 7, roughly the Rector of Semmelweis University. 46.4% of Hungarians had set plans to Within the past two weeks, Hungary says get vaccinated. That figure jumped it has received at least another 550,000 significantly to 69%, according to doses of the Chinese Sinopharm vaccine, another survey commissioned by proaccording to posts on the Facebook page government daily Magyar Nemzet of Minister of Foreign Affairs and Trade (Hungarian Nation) and conducted by Péter Szijjártó. On March 23, he said that Nézőpont Intézet. Hungary would also be receiving another The results of the latter survey, conducted between March 16 and 17, likely reflect Hungarians growing concern doses over the mounting number of infections of Russia’s Sputnik V vaccine. taking place. According to Gergely According to koronavirus.gov.hu, Gulyás, the head of the Prime Minister’s the government’s official coronavirus Office, Hungary aims to inoculate its website, these vaccines now account entire adult population by June. have a small effect on the course of the epidemic, he said 60-70% of the population must be vaccinated to stop it.
180,000
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Business
Incubator to Ensure Scientific Research Leads to Commercial Success
Hungary has all the human capital it needs to become a leading player in molecular medicine, insists Dr. Christoph Sensen, the German scientist (and Hungarian resident) charged with laying the foundations for the ecosystem to support such ambitious plans. ROBIN MARSHALL
The Hungarian Center of Excellence for Molecular Medicine, H-CEMM for short, brings together the University of Szeged, Budapest’s Semmelweis University and the Szeged Biological Research Center. The National Research, Innovation and Development Office represents the government as project coordinator, and the Germany-based European Molecular Biology Laboratory (EMBL) also has input as an advanced scientific institution. Sensen, a university professor and specialist in genome research and bioinformatics, has headed up H-CEMM since December, although he has been in the background for longer than that. He actually holds two titles. As director general, he oversees the scientific work of the organization, but he is also CEO of HCEMM Kft., the company that will put in place all the building blocks to allow the science to take place, and that is consuming most of his time and efforts right now. A large chunk of the funding comes from a European Union Horizon 2020 program that aims to smooth out significant differences in terms of research and innovation among member states by creating centers of excellence that can run so-called “teaming projects.” “The goal is to attach research groups within Hungary to international research organizations to facilitate the transfer of knowledge into Hungary, to identify end uses for that knowledge and to commercialize it,” Sensen tells the Budapest Business Journal in an exclusive interview. “This is a translational medicine project; we want to go from bench to bedside.” The point of focus for the scientific research will be wide-spread ageingrelated diseases, grouped into three so-called pillars: immuno-inflammatory diseases; metabolic and cardiovascular diseases; and genomic instability and
cancer. All three are already areas of investigation in Hungary, meaning there is an “incubator environment” of excellent scientific research, infrastructure and education to build upon. Since the pandemic, work has been ongoing in adding a fourth pillar, researching infectious diseases in old age, such as sepsis, fungal infections, COVID and the like. Sensen makes the point that, although a death certificate might record cancer as the cause of death, often it is a viral infection that is ultimately responsible. This pillar will be limited to the major causes of death and their side effects, so as to maximize returns.
“The goal is to attach research groups within Hungary to international research organizations to facilitate the transfer of knowledge into Hungary, to identify end uses for that knowledge and to commercialize it. This is a translational medicine project; we want to go from bench to bedside.” “What we do not want to do here is to investigate rare diseases. We have finite resources and a limited workforce; we cannot work on every disease in the universe.”
Incubating Success
A critical bricks and mortar element of the ecosystem supporting all this research is finally underway. “We are building our own space in Szeged Science Park, at the so-called Incubator
was followed by a longer meeting in Budapest a few weeks later, during which Sensen presented his plans for the center. “The minister made a commitment to me to support the further development of H-CEMM into a Hungarian flagship institute. And he did it.” In August 2020, the center received status as a National Laboratory for Translational Medicine.
State Funding
Was Sensen at all concerned about government involvement in the funding of H-CEMM? “If you look into scientific funding, there is not a single academic outfit anywhere that is not working in conjunction with their government, and not a single one working independently of government funding decisions. That’s true in Germany, in Canada it is absolutely so, in Austria the same thing. In Hungary, what I see is the government wants to spend more [on scientific research], it is generally increasing the level, looking at making the structures more efficient, and that is not an easy process, but it is a process that needs doing.” Hungary can be very progressive, he says; broadband internet coverage is much better than in Austria, for example, and while it took him half an hour of form filling to become a Hungarian resident, the same process took his wife 15 months in Canada. But in other ways Hungary can be infuriatingly bureaucratic, especially when trying to get different sectors to work together. Whatever else happens, Sensen says he will be retiring on April 30, 2025. Dr. Christoph Sensen Assuming he gets to that point, how will he judge whether his time at H-CEMM has been a success? House. The University of Szeged is “What we need to build is something renovating the old officers’ mess of the that is at least partially self-sustaining. former Russian Army barracks. Half of You need the proper funding streams to it will be occupied by the HCEMM Kft. maintain equipment and keep up to date. headquarters, and we will also have our It will take 10-15 years to be fully selfown laboratory space there.” Those are sufficient. We will work with the EU and being designed so they could also be Hungary to get there, but at least the mobilized as emergency research centers foundations have to be in place by the should another pandemic come along. time I leave,” he says. Work finally began in December 2020, “If we get the right mechanisms in and is expected to take a year to complete. place now, we will have the ability to Once complete, the Incubator House will grow beyond national funding cycles. I allow HCEMM to become fully functional. see some good signs of that.” Sensen, who most recently was a Professor Once up and running, he expects at Graz University of Technology, but prior business will ask H-CEMM to tackle to that worked for 20 years in Canada specific research projects equally as much in a number of scientific roles, started as H-CEMM will take its research to his career in 1992 at EMBL. His own business to commercialize it. Immediate research work meant he already knew and/ plans include bringing in more university or had worked with leading university partners. Sensen is particularly impressed scientists in Hungary. He is also married with the work being done at Pécs to a Hungarian, and became a Hungarian University, where they have already resident about 10 years ago. sequenced more than 1,000 COVID “When they started looking for a new genomes from the Hungarian population. CEO and director general, I was not “In proportion, that is much more than an unknown entity,” he says. That did Germany has been able to do,” he points not mean he came on board right away, out. That is the sort of work that needs however. He was initially interviewed, to be highlighted. “We have to raise our via Zoom, in March 2020. “I had as many international visibility so that everybody questions as they did.” Austria was in a wants to come and work with us.” hard lockdown, but that period did give If he could have one additional request, him time to thoroughly investigate what the he says he would love a small airport in challenges were, and whether he wanted to Szeged. “I even have a suggestion for take them on. He says he spoke to at least that. It only needs to be able to take a 50 people before making his decision. helicopter shuttle service. Even if you are A brief two-minute chat at an event in a researcher, it is not every day you get a Szeged with Minister László Palkovics, ride in a helicopter,” he says with a laugh. whose Ministry for Innovation and “Well, you have to think out of the box if Technology is responsible for H-CEMM, you want to get things done!”
8|2
Business
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How is M&A Holding up Under COVID? M&A Activity by Volume and Value for V4 Countries in 2020 282
100
119
6 4
4.42
42 1.03
Czech Republic
Poland
Hungary
2019. Indeed, Central Europe was the only geographic area in the world where an increase in value of transactions was observable.
Deal Value (USD bln)
400 Q4
Q1 2020
Q2
Q3
Q4
Source: MergerMarket
Percentage Rise/Fall in Value of Deals by Region (H1 2019 vs H1 2020)
+50% 0 -50%
North Latin America Western America & Caribbean Europe
30
2
0.89
0
Slovakia
Source: CMS Emerging Europe M&A Report 2020/2021
800
Q3
10 8
1,200
Q2
12
12.28
200
Estimated Total Value of deals in 2020 (in bn EUR)
M&A Activity by Value Worldwide (Q1 2019 to Q4 2020)
0 Q1 2019
14
Number of deals in 2020
0
In a nutshell, surprisingly well. This article looks at geographic areas and sectors that have been performing better and general trends in valuation. While M&A experienced a “near death” experience worldwide in Q2 2020, by Q4 of last year, M&A activity exceeded pre-pandemic levels. The value of M&A transactions in Central Europe (excluding Russia) increased by 28% in 2020 over
300
Les Nemethy and Francois Lesegretain investigate how the Central and Eastern European mergers and acquisition market is coping with doing business in a pandemic.
Eastern Europe
Middle East & Africa
Asia Pacific Souce: Bloomberg
It should be noted that, during this time frame, global volume of transactions decreased by 7% and the number of transactions in Central Europe decreased 28%, according to MergerMarket. Looking at just the Visegrád Four (V4) countries of the Czech Republic, Hungary, Poland and Slovakia, even on a population-adjusted basis, Poland and the Czech Republic by far outperformed Hungary and Slovakia. In Poland, the value of transactions rose 41% to EUR 11.2 billion from 2019 to 2020, despite COVID-19, though the number of transactions fell from 154 to 124 during the same period. For the other three Visegrád countries there was a sharp decline in both volume and number of transactions. Inbound investments, mainly driven by the United States, France, Netherlands and Austria, accounted for a 69.8% share of the market by value in 2020, according to MergerMarket.
M&A by Sector
The impact of COVID-19 has not been the same for all industries. Some sectors have experienced a boom during the crisis and the trend is likely to continue for 2021;
The Corporate Finance Column other sectors declined and are unlikely to return to normal activity for some time. The majority of M&A activity seems to have occurred in the following industries: telecom, media and technology (TMT), industrials and chemicals, business and financial services, and real estate and construction. On the contrary, the agriculture and transportation industries have suffered a lot during this period with a decrease in deal volume of 35.2% and 37.8% respectively compared to 2019, MergerMarket says.
M&A Valuation Trends
While Enterprise Value/EBITDA multiples have declined in Western Europe over the past few years, they have improved, despite COVID-19, in Central Europe. Although the gap has narrowed, it has not been completely eliminated. Across Europe, the healthcare and pharmaceuticals sector had the highest median valuation in 2019-20, standing at 15.34x, followed by real estate at 14.39x, and technology at 13.98x. At the lower end of the valuation scale was energy and utilities, with an EV/ EBITDA multiple of just 6.85x, followed by 7.69x for both construction and transport and logistics, MergerMarket notes. In conclusion, it appears that purchasers and sellers of companies seemed to have learned a great deal about how to cope with the pandemic after the initial shock of Q2 2020. Zoom meetings and virtual data rooms are now practically universal. It will be interesting to observe whether the current radical peaks of COVID-19 in countries like Hungary and Slovakia will be reflected in the statistics that emerge.
Les Nemethy is CEO of Euro-Phoenix Financial Advisers Ltd. (www.europhoenix.com), a Central European corporate finance firm. A former World Banker, he is author of Business Exit Planning (www.businessexitplanningbook.com) and a former president of the American Chamber of Commerce in Hungary.
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ThousandEyes Better Than 1 in Service Problem Detection The rise of mobile apps, the shift from on-premises to Softwareas-a-Service (SaaS), and the reliance on thirdparty services has increased the complexity of application delivery. ThousandEyes and AppDynamics address the newly emerged challenges of cloud and internet-centric enterprise environments by bridging the gaps left by traditional, siloed monitoring tools to provide a proactive and comprehensive view of the app experience. BENCE GAÁL
the application code, monitoring performance between service tiers and identifying anomalies impacting business transactions. Together, the two platforms give IT Ops a common dashboard to detect business-disruptive incidents across the entire digital delivery stack and every dependency on which the business relies.
Greater Clarity
being slow or unavailable when nothing seems wrong with the application as seen by the provider. This is typical when things go wrong in delivery. Several things outside the data center environment may be impacting the user experience. A third-party DNS service the application relies on could be misbehaving; a CDN used by the provider could be adding longer delays; or network problems somewhere along the path could be negatively impacting the application. Furthermore, the source of the problem might be within the enterprise or local network using the application, making it almost impossible to troubleshoot. There are a host of things that can go wrong. App providers need to track an ever-growing variety of different metrics in order to find out the root cause of service degradation.
Nowadays, when things go wrong, no matter where, online operations and site reliability teams are expected to react quickly to minimize the impact on their customers. The challenge for app providers is that users may often experience service degradation even when the application stack seems to be working perfectly fine, making troubleshooting extremely difficult. In addition, it is becoming increasingly New Solution more difficult to ascertain what the To troubleshoot problems quickly, a new problem may be. Service degradation solution is needed that can find problems may be due to problems anywhere in the anywhere along these different network application delivery chain: inside the segments and can correlate network user’s local network or the customer’s issues with application performance. corporate network, in the internet or Many VPM solutions are fragmented and even in the app provider’s data center. work in isolation, resulting in overdesign Traditional performance monitoring and additional spend. Working in tight solutions that rely on server-side cooperation, Cisco and it's primary instrumentation are ineffective in VPM partner NTT Ltd provides a fully troubleshooting these various network integrated approach to monitoring your segments between the end user and the entire hybrid IT environment. app itself, each of which can negatively ThousandEyes Internet and impact user experience. Cloud Intelligence integrated with The primary challenge that online operations teams face today is lack of deep AppDynamics Application Performance Monitoring is the industry’s most visibility beyond their application stack. comprehensive digital experience Users may still complain about the app
monitoring solution that offers visibility into the end-to-end digital supply chain. ThousandEyes provides a unique solution that allows SaaS providers to characterize and troubleshoot the different elements of app delivery using measurements from lightweight agents. Providers can conduct measurements using Cloud Agents spread across the globe or easy-to-install Enterprise Agents in their own data centers or customer environments. The solution provides deep visibility into each layer of application delivery and a connecting thread between these layers, making it possible to jump from layer to layer to understand where the problem is. Online Operations teams can immediately identify which component of application delivery (e.g. DNS, HTTP, Network) is broken and dive deeper into that specific component to visualize the problems and interact with the data. In addition,ThousandEyes clearly shows large scale internet outages, learned from data in all customer tests, to speed up the process of root cause analysis. The solution combines active and passive monitoring techniques to gather telemetry across the digital delivery stack that enterprises don’t control. ThousandEyes vantage points proactively collect performance data on internet health and routing behavior, ISP connectivity, network metrics, cloud connectivity, and tracks the impact on application availability and end-user experience. AppDynamics, through agent instrumentation, goes deep into
Thanks to the service, one can now detect service disruptions in ISP networks as well as DNS and CDN providers, and see how it impacts app availability, response times, and page load performance. Furthermore, visibility into hybrid- and multi-cloud deployments slows for the testing of backend application interactions and dependencies with external third-party APIs or cloud-based services. Using ThousandEyes and AppDynamics together offers a simple, efficient solution for anomaly detection, as ThousandEyes reports and alerts are now embeddable as widgets within the AppDynamics dashboard. It is also possible to create custom events in AppDynamics upon alert notification to trigger policy actions for remediation or to trigger enhanced ThousandEyes tests adaptively. In order to make moving across the two platforms seamless when troubleshooting, ThousandEyes’ interactive share links are also embeddable within the AppDynamics custom event alerts. With these cutting-edge solutions, online operations teams can troubleshoot application delivery problems in hybrid environments in a matter of minutes. Cloud agents are an easy way to get started with ThousandEyes, since they don’t require any special deployment effort except test configuration. Enterprise agents can be deployed at customer sites and be configured to perform periodic tests on the application provider’s application. ThousandEyes can reduce the MTTR (Mean Time to Resolution) of infrastructure problems from hours and days to a few minutes.
More information is available at www.thousandeyes.com and appd.hu.
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Budapest Business Journal | March 26 – April 8, 2021
DI P LOM AT IC A L LY S P E A K I N G : I N DI A N A M B A S S A D OR K U M A R T U H I N
Building a Modern, Mature Trading Relationship on Strong Cultural Links Modern India-Hungary relations are based on a mutual respect for culture and traditions as well reflecting the maturity of the countries’ economies, says Kumar Tuhin, India’s Ambassador in Budapest since November 2018. ROBIN MARSHALL
Post-World War II ties were formally established between the two nations 72 years ago, in November 1948, with the first trade agreement following six years later in 1954, says Tuhin, a very experienced diplomat who came to Hungary from being High Commissioner to Namibia, but who has also been posted to Hong Kong, Beijing, Geneva, Hanoi and San Francisco during his career. “Those are the formal diplomatic links, but our ties go back much further,” says Tuhin. “Sándor Kőrösi Csoma visited India close to 200 years ago, looking for the ancestors of the Hungarians.” Csoma’s
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work, compiled over two decades, resulted in the first Tibetan–English dictionary and grammar book. The Indologist, who died in 1842 in Darjeeling, in the Western Bengal region of India, has been described as the founding father of Tibetan and Buddhist studies. Nor is Csoma the only cultural link. Amrita Sher-Gil, who has been called one of the greatest avant-garde women artists of the early 20th century and a pioneer of modern Indian art, was born on January 30, 1930 in Budapest. Indeed, her parents were an exotic mix of a Punjabi aristocrat father and a Hungarian-Jewish opera singer who had first met in Lahore in 1912. Bringing things more up-to-date, trade between the two countries in 1
2021. 03. 24.
11:57
east of the country), and Sun Pharma (in Tiszavasvári, not far from Nyíregyháza)). By contrast, Hungary’s biggest investment in India is a USD 20 mln joint venture dating back to 2004 involving drug maker Richter Gedeon called RichterThemis Medicare. Tuhin says he would like to see more companies follow this path. “Given the growth of the Indian economy, it would be good for the Hungarian side, not just to tap into our market, but also to set up joint ventures to enter third party countries. Water is one area where Hungary has a lot of knowledge.” He mentions a pilot project conducted in India in 2019 using Hungarian expertise to limit water evaporation as just one example of this.
Warm Welcome
Indian Ambassador Kumar Tuhin. Photo by Ms Ankita Verma 2020 came to USD 761 million, a slight increase of 2.3% compared to 2019. Exports from India to Hungary came to USD 478 mln (actually a 2.4% decline from the previous year), but there was better news for Hungarian exports to India, up by 11% at USD 283 mln. “Last year was very tough for both India and Hungary because of COVID, but still in many areas trade has been increasing, and that is a good sign,” the ambassador says. “If you look at trade in 1954 and now, its composition has completely changed,” Tuhin says. Where once it was traditional raw materials such as textiles, now it is medicines, electrical parts, and automotive components. The areas of trade represent more mature economies, the ambassador says. “Both Hungary and India’s economies have grown and developed significantly. In terms of GDP, India is the fifth largest economy in the world. If you look at IT and scientific activities, Hungary is very advanced.”
Greenfield Investor
In terms of Indian FDI into Hungary, the ambassador put the total at around USD 3 billion. “Indeed, India was the largest greenfield investor in Hungary in 2014, and the third largest in 2015.” Many of those investors will be known to our readers, whether it is Apollo Tyres, whose first overseas greenfield factory was opened on a 72-hectare site in Gyöngyöshalász (80 km northeast of Budapest) in April 2017, or Tata Consultancy Services, whose latest office opened in Budapest in January 2020, and whose leader Prabal Datta is one of three people shortlisted for the BBJ Expat CEO of the Year Award 2021. But there are many other Indian firms here. Speaking at the Tata opening last year, Minister of Foreign Affairs and Trade Péter Szijjártó said there were about 40 large Indian companies, employing more than 10,000 Hungarians. Examples include the Motherson-Group (which has several SMR and SMP factories in Hungary including in Kecskemét, Mosonmagyaróvár and Túrkeve), Sona Group (in Polgár, in the
The ambassador’s experience suggests Indian businessmen have been very pleased with the welcome they have received from their Hungarian hosts. “My feedback with Indian investors is that they have a very good relationship with the Hungarian Investment Promotion Agency; wherever there have been issues raised, they have been sorted out.” On occasion, the embassy has also stepped in to help. Without being specific, Tuhin cites one example of a company importing stainless steel tubes that had anti-dumping tariffs imposed on the suspicion the raw material was sourced from elsewhere. The ambassador says the embassy was able to help the firm provide the documentation needed to prove the origin of the tubes, and the tariffs were successfully removed. Such interventions are only possible given strong political relations, which the ambassador describes as “close and friendly. Over the years they have certainly developed and consolidated.” The period from 2019-2020 was particularly noteworthy for that, the ambassador explains, with three ministerial visits within a period of six months: External Affairs Minister Subrahmanyam Jaishankar came to Hungary in August 2019; India’s Water Resources Minister Gajendra Singh Shekhawat attended the Budapest Water Summit in October 2019; and Hungary’s Minister of Foreign Affairs and Trade Péter Szijjártó visited India in January 2020. The economic relationship had naturally cooled somewhat a little after the 1990s as Hungary re-aligned with the European Union and NATO. “But that basic friendship and strong goodwill was always there,” the ambassador says. The evidence of strong people-to-people connections can be seen in the immense popularity of yoga, and the strong interest in Indian music and dance. He also cites the ancient Indian medicine of Ayurveda as another point of contact, although under current Hungarian laws, Ayurveda medicinal products have been relabeled as food supplements. “We are working on getting these medicines their due recognition,” says the ambassador, who admits it is a subject close to his heart. The hope is that post-doctoral studies may be possible, so Hungarian doctors can also be trained in and prescribe Ayurveda products. “It is good to look at health in a holistic way, and Ayurveda should be seen as complimentary to modern medicine,” the ambassador says.
2
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Budapest Business Journal | March 26 – April 8, 2021
Company ///news Audi Hungária Revenue Falls 12% in 2020 Revenue of the local unit of German car maker Audi fell 12% to EUR 7.518 billion in 2020, Audi Hungária chairman Alfons Dintner said at an online press conference, according to origo.hu. Audi Hungária's after-tax profit rose by EUR 114 million to EUR 499 mln, Dintner said. Audi Hungária said earlier its engine output declined by 307,143 to 1,661,599, while vehicle output dropped by 9,660 to 155,157 in 2020. The Hungarian subsidiary shut down production at its plant in Győr (120 km northwest of Budapest) on March 23, 2020 as lockdowns to contain the spread of the coronavirus created supply chain uncertainty. Engine production restarted on April 14 and vehicle production on April 28. Dintner said Audi Hungary wants
to ramp up daily engine production from 700 units to 2,700 in future, raising annual output to more than two million electric and internal combustion units.
MOL Launches Biofuel Production at Primary Refinery Hungarian giant MOL has announced the launch of biofuel production at its main refinery in Százhalombatta (30 km southwest of Budapest), according to mfor. hu. Instead of blending the biocomponents, MOL is now processing it together with the hydrocarbon element. MOL group bought more than 500,000 tonnes of biofuel last year, but wants to raise its own output of biofuel to more than 100,000 tonnes by 2030. Meanwhile, in unconnected news, it
Óvártej Investing HUF 1.1 bln to Expand Capacity Hungarian dairy company three years and now takes Óvártej, owned by Italy’s deliveries from more than Valcolatte since 2013, is 40 dairy farms. About 95% spending HUF 1.1 billion to of the cheese it produces is expand capacity at its base exported to other countries in Mosonmagyaróvár (160 in Europe. Óvártej’s chief km northwest of Budapest), executive Carlo Volpe Minister of Foreign Affairs and said the company’s main Trade Péter Szijjártó said on business is supplying catering March 19, according to origo.hu. companies, mostly with Szijjártó presented company mozzarella, adding that orders officials with a HUF 294 million have dropped because of government grant for the pandemic restrictions. The investment which will preserve new investment will broaden 135 jobs. Óvártej is building a Óvártej’s product palette, 1,200 sqm production hall and he said. Valcolatte group outfitting it with equipment owner Enzo Panizzi said the that will boost capacity by 20%, investment could clear the he added. The hand over was way for Óvártej to export its also attended by Minister of products to the Middle East, Agriculture István Nagy. Thanks Asia or North America. Óvártej to earlier investments, Óvártej had revenue of HUF 14.6 bln in has doubled the volume of 2019. Exports generated HUF milk it processes in the past 13.9 bln of the total.
has been announced that MOL-PE Circular Economy Science Park Nonprofit, set up by oil and gas company MOL and the University of Pannonia, will build a HUF 30 billion innovation and research center in Nagykanizsa (215 km southwest of Budapest), the Ministry of Innovation and Technology has said, according to business daily Világgazdaság (Global Economy). The project company will build the facilities on an area of 18,000 sqm. The aim is to create a worldclass research and development infrastructure in Nagykanizsa and at Veszprém (115 km southwest of Budapest, where the university has its campus) based on the university’s knowledge base and MOL’s management and professional knowledge, the statement said. The park’s planned R&D projects will focus on technologies such as circular waste management, renewable energies such as the hydrogen economy, battery reuse, and sustainable water management.
CE Glass Spending HUF 4 bln at Szatymaz Hungarian glass making group CE Glass 1989 Üveg- és Gépipari Kft. will spend around HUF 4 billion to expand its production and logistics base in Szatymaz (160 km southeast of Budapest), owner and CEO Gusztáv Varga has said, according to state news agency MTI. Half of the investment costs will be spent on construction and the other half on equipment purchases, he explained. The project, scheduled to be completed by yearend, will be financed mostly from internal funds, with some government and EU funding, Varga added. The investment will add a 5,400 sqm production plant at the base and expand production of multilayer security and thermal insulation glass products. It will include installing a photovoltaic unit on top of the plant, which will cover more than half of its electricity consumption, he added. CE Glass had revenue of HUF 2.39 bln in 2019, with exports accounting for one-third of the total. The firm employs more than 400 workers. It had revenue of HUF 490 million in 2019 and a similar turnover in 2020.
SEON Receives EUR 10 mln in Funding
Minister of Agriculture István Nagy gives a speech at the handover of a competitiveness-enhancing grant at the Mosonmagyaróvár plant of Óvártej Zrt. on March 19, 2021. Photo by MTI / Csaba Krizsán
Hungary’s SEON, whose fraudprevention platform lets online businesses weed out fake accounts, has received a EUR 10 million round of funding, the tech startup has said, according to novekedes. hu (Growth). Creandum, an early investor in Spotify, and OTP group member PortfoLion, among others, participated in the funding round, SEON said. The company will use the injection to raise headcount by 100 from 47, it added. Established in 2017, the firm counts KLM, OTP Bank, AirFrance and AVIS among its clients.
Business | 11
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Business
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PwC: Hungarian CEOs Bullish on COVID Rebound List of top potential economic, policy, social and environmental threats to organisation’s growth prospects
Despite the extraordinary challenges created by COVID, Hungary’s bosses have never been so optimistic about the rate of either global or Hungarian economic growth, PwC says in its 10th annual Hungarian CEO survey. Some 65% of the 240 respondents think the growth of both the global and Hungarian economies will accelerate. That is a new record, and a huge turn round from last year, when just 9% of CEOs were confident about global economic growth, and 16% about Hungarian economic growth. Only a third of the CEOs interviewed reported that they had been forced to reduce their headcount in 2020, while half expect an increase in 2021. Over the next three years, as many as 62% of them expect to grow staffing levels.
(respondents who are concerned about the factor in question)
N=240
2020
2021
Hungarian CEOs Pandemics and other health crises
91%
77%
Availability of key skills
72%
74%
Exchange rate volatility
58%
72%
Uncertain economic growth
83%
69%
Cyber threats
85%
67%
Over-regulation
80%
61%
Populism
69%
59%
Declining health and well-being of your workforce
61%
58%
Readiness to respond to a crisis
69%
57%
Protectionism
66%
56%
Trade conflicts
68%
56%
Misinformation
70%
The pandemic does seem to have deepened worries business leaders already had. While the percentage of CEOs concerned about a higher tax
51%
59%
56%
55%
35%
16%
65%
16%
16%
Hungarian CEOs
24%
36%
41%
38% 36%
35%
60%
40% 11%
29%
4% 2014
11% 2015
5% 2016
9% 2017
Stay the same
2019
2020
2021
Source: PwC
Do you expect headcount at your company to increase, decrease or stay the same over the next 12 months? Hungarian CEOs 34%
43% 30% 42% 45%
51% 54%
59% 55% 51%
30%
Improve Stay the same Decline Did not answer
37% 36% 22% 26%
Source: PwC
2012
2013
39%
34% 32%
31%
34%
27%
41% 12%
N=240
N=1779
burden has increased to 50% (up from 21% last year), crisis preparedness, the health of the workforce and the spread of misinformation also rank much higher. Surely to the surprise of no one, pandemics and other health crises have moved to the top spot on the list of CEOs’ concerns at 82%. Other worries include the availability of key skills (an old chestnut), exchange rate volatility, uncertain economic growth and cyber threats. Interestingly, the survey reveals that 38% of the companies have not been adversely affected by the pandemic, while most of those negatively impacted expect their performance to return to pre-COVID levels by 2022. The pandemic has highlighted the importance of digitization and automation in almost every industry. In the financial sector, 86% of CEOs expect a boom in e-commerce in the next 12 months. Nearly
Source: PwC
70% of respondents anticipate a decline in the demand for access to goods and services in a physical location, and they also expect the use of cash to diminish. Three-quarters of respondents say they miss forming personal relationships with employees or customers/clients via faceto-face interaction, and the majority also miss the ability to boost employee motivation via in-office collaboration. However, the share of CEOs who miss working from the office is only 8%, according to PwC’s research. The 10th Hungarian CEO Survey was conducted in parallel with the global survey to gain a more comprehensive picture of what Hungarian senior executives think. The full survey was published on Thursday, March 25. An info-video and further details are available on PwC’s Hungarian CEO Survey website (http://www.pwc.com/hu/ceosurvey).
N=240
5% 2018
Improve Decline
24%
2020
Global CEOs
82%
Do you believe Hungarian economic growth will improve, stay the same, or decline over the next 12 months? 55%
2021
2014
18% 2015
13%
13%
10%
14%
18%
2016
2017
2018
2019
2020
15% 2021
“Companies are redefining their strategy: half of the CEOs plan to change their organizational goals in response to the COVID-19 crisis. Those who make changes are primarily aiming to make their company future-proof and sustainable, and are more intent on returning to the new normal. More than three-quarters of Hungarian CEOs plan to spend more on digital transformation, and 77% are investing in initiatives to realize cost efficiencies. It is not good news, however, that CEOs’ focus on foreign markets has decreased. In addition to digital transformation, export is the best route to success.” Tamás Lőcsei, PwC Hungary’s CEO.
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Budapest Business Journal | March 26 – April 8, 2021
Special Report Manufacturing & New Technologies
Advent of 5G Will Boost Industry 4.0 Momentum Further With the fourth industrial revolution almost a decade old and already starting to significantly shape many industries, and fifth generation (5G) mobile internet connection just around the corner, humanity is on the edge of impressive changes. Hungary has been a vibrant adopter of Industry 4.0 technologies, and the potential is promising, market players say. CHRISTIAN KESZTHELYI
The first recorded mention of “Industrie 4.0” dates to Germany 2011, when the government’s high-tech strategy openly promoted computerization in manufacturing. Later that year, the term was publicly introduced at the Hannover Fair, one of the world’s largest trade fairs. In 10 years, the fourth industrial revolution has become a synonym for the digital transformation of manufacturing and production related industries, as well as value creation processes. In Industry 4.0, thanks to the Internet of Things (IoT), products and means of production are linked to a network where they can communicate with each other, enabling enhanced value creation and real-time optimization. 5G will give an essential extra boost to this revolution (especially IoT elements) thanks to its increased speeds and low-latency. “Hungary has a large number of manufacturing and assembly plants and it also has a strong agricultural sector where the use of Industry 4.0 solutions is a synonym of competitiveness and modernization in an essential, and in most cases also profitable, investment,” Márton Homola, director of digital
products at Telenor Hungary, tells the Budapest Business Journal. Tamás Jeránek, head of digital industries at Siemens, agrees. “For one thing, it is a generally accepted fact that the global competitiveness of Hungarian industry cannot be achieved without following the 4.0 direction. On the other hand, regardless of the industry, this is a condition for Hungarian industrial companies to be accepted suppliers to large international manufacturing businesses in Hungary,” he says. Siemens says it a priority to provide its partners with technology that meet Industry 4.0 requirements. Products and services in its portfolio vary from design through implementation, operation and maintenance, enabling users to build on a unified platform, providing answers to the Industry 4.0 challenges. While general sentiment depends on the industrial segment, a positive attitude towards the fourth industrial revolution in Hungary is undeniable. Boris Zupančič, system architect and executive director at Signify Czech Republic, tells the BBJ that is especially so “in the automotive sector and similar verticals, which are moving strongly in this direction. Common solutions, not only in Hungary, include measurement, next step in automation, storage of historical data, analytics, integration of systems and digitalization.”
Boris Zupančič
The foundation of the fourth industrial revolution is data collection. “Data can be stored both locally and in the cloud, and can be displayed, interpreted, and processed immediately or afterwards. The most common use of this is energy efficiency, where by collecting, analyzing and displaying the energy consumption data generated during production, we can make the production process more efficient and a larger production volume can be achieved with less energy consumption,” says Jeránek. By installing sensors that measure energy consumption, for example, by a production line, a plant can analyze data that will help optimizing manufacturing. “Data extracted from sensors can be used to optimize machine heating and then minimize energy consumption during weekend out-of-hours downtime,” Jeránek adds. Furthermore, using collected data means unexpected failures can be predicted, allowing for a proactive approach: replacing and repairing parts that are in a near-failure condition, which results in a reduction in downtime and an increase in plant efficiency. In this context, 5G will be a game changer. “We see more and more Hungarian companies considering the implementation of 5G and expect Márton Homola them to become mature and be able to integrate 5G technology in their daily production processes soon,” Multiple Benefits Homola adds. He adds: “Systems are becoming more Value Equation integrated which results in higher Wireless communication of any production efficiency, better planning kind delivers numerous benefits, but and faster resolution time, just to thus far 5G seems to be the most mention a few benefits.”
promising one. “What is important is the balance between investment needed and value delivered (including the stability and reliability of operations). 5G is one of the future’s most interesting wireless solutions, but still needs some work in that direction,” according to Zupančič. The Industry 4.0 momentum is strong all over the European Union and seems to be unified. “There is no visible difference between Hungary and the other V4 countries. All are strong in the automotive sector, which is one of the segments moving strongly in an Industry 4.0 direction,” adds Zupančič. In the future, digitalization will become more widespread in Hungary. “The tools and processes corresponding to the Industry 4.0 approach will be applied to a large extent in SMEs as well, and will [need to] be included in the curriculum of secondary and higher education. Siemens is working to accelerate this by supporting relevant educational institutions,” Jeránek explains.
Tamás Jeránek The future of Industry 4.0 appears to be steady due to the expected consistency in the implementation of relating solutions. “In the case of international companies, their internal implementation plan will have an impact on timing. Regional and local companies are and will continue to implement elements of even more complex Industry 4.0 solutions,” Zupančič concludes. It seems the future direction of industry in Hungary is not only here already, it is unavoidable.
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Artificial Intelligence a key Sector for the Domestic Economy In the competition for Artificial Intelligence innovation, the United States is currently at the forefront of research funding, equipment, and human resources, followed by China and then the EU, according to a comparative study made by the American Center for Data Innovation published in January 2021. But that does not mean AI research is not also important in Hungary. GERGELY SEBESTYÉN
The Budapest University of Technology and Economics (BME) is heavily involved in Hungary’s AI development. Photo by Geza Kurka Photos / Shutterstock.com It has worked with companies such as Bosch, Continental, Ericsson, KnorrBremse, Morgan Stanley, MOL, Nokia, Siemens, and Vodafone in recent years. For example, BME partnered with Knorr-Bremse to develop an AI solution that monitors railway tracks and their surroundings to prevent accidents by initiating early braking. With Nokia, researchers and students at the university are working to develop 5G technologies and will soon turn to 6G. Building on this institutional background, work was started by the National Laboratory for Artificial Intelligence, established with significant government support, and related research groups from BME as members of the consortium.
By 2021, more than 30 countries have established national AI strategies. The development of intelligent technologies is gaining new momentum at the Budapest University of Technology and Economics (BME), which is at the forefront of artificial intelligence research. In addition, the research groups of the National Unified Strategy Laboratory of Artificial Intelligence have “We are working on AI research along also started work. with a unified university strategy. Six of In a few years, AI has exploded, the eight BME faculties participate in the with few industrial sectors not work of the AI National Laboratory,” says taking advantage of state-of-the-art János Levendovszky, Vice Rector for technology. Its application will also Innovation and Coordinator of Artificial radically transform the development Intelligence Research at the of Budapest dynamics of many industries and University of Technology and Economics. the related labor market needs, so “The experts of the technical university governments are increasingly supporting are active in almost all research and businesses by promoting artificial application areas involved in AI; we intelligence investment, creating also deal with machine vision, language educational programs, and encouraging technology, healthcare applications, research and development. sensors, networking of smart devices BME is connected to the national AI and security technology,” he explains. strategy in many ways, has won tenders to “For the time being, a small proportion of join governmental and EU-themed projects, AI patents filed in the EU can be attributed and participates in several excellence programs. Artificial intelligence-focused to Hungary, although there is significant thematic research is also underway, from potential in Hungary; I am convinced that we could easily take the lead in which a total of more than mathematically based, algorithmically oriented research,” Levendovszky says. worth He adds that the AI National Laboratory, of cooperation has been generated with the social, economic, and environmental the university’s large corporate partners, utilization of research results, focuses according to the BME website. on knowledge transfer between research
HUF 1.1 billion
and industry in line with Hungary’s AI National Strategy, which has launched last year and set targets
for
2030
to advance domestic AI research. The laboratory was established in 2020 as a consortium of several leading scientific and higher education institutions.
“For the time being, a small proportion of AI patents filed in the EU can be attributed to Hungary, although there is significant potential in Hungary; I am convinced that we could easily take the lead in mathematically based, algorithmically oriented research.” BME is, of course, a member of the consortium, and leads the Computer Science and Automation Research Institute of the Eötvös Loránd Research Network.
Forefront
According to “Who is Winning the AI Race: China, the EU or the United States?”, a comparative study published in January 2021 and undertaken by Daniel Castro and Michael McLaughlin, the United States is currently at the forefront of research funding, equipment, and human resources, followed by China and then the European Union. The study estimated that, in 2019, the U.S. put up USD 14.3 billion in venture and
private equity funding to AI businesses, followed by China at USD 5.6 bln, and the EU at USD 3.2 bln. While China is catching up with the United States at the speed of light, the Union is also significantly encouraging relevant research and has spent EUR 1.5 bln on R&D in recent years, a 70% increase over the previous period. According to CB Insight AI’s ranking of startups (in an article called “AI 100: The Artificial Intelligence Startups Redefining Industries”), 65 out of the
top
100
startups can be linked to the United States, with eight companies based in the United Kingdom, eight in Canada, six in China, three in Israel, and five companies registered in the EU. The European Union says it aims to encourage a total investment of more than EUR 20 bln a year in this decade. The European Commission has offered more than EUR 4 bln under the Digital Europe program to support high-performance and quantum computing. Under InvestEU, it aims to increase access to finance for AI startups by building on a EUR 100 mln pilot investment fund. BME also participates in the work of communities that carry out research that underpins the development of intelligent technologies. In addition to AI itself, the university participates in the tasks of the National Laboratory of Quantum Informatics and the National Laboratory of Autonomous Systems. The latest part of the future-shaping podcast series of the Budapest University of Technology and Economics, Inno Sapiens (innosapiens.bme.hu), deals with the practical application of artificial intelligence. The goals of the National Laboratory of Artificial Intelligence are also detailed in the program, which is available in Hungarian only.
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Robot Revolution Making Progress, but not yet Banging Down the Door There’s a lot going on in terms of robotization in Hungary, but amid a fierce global automation race, it will take even more effort to keep up with the pace.
Annual installations of industrial robots 15 largest markets 2019 (‘000 of units)
China 49,9
US
33,3
Republic of Korea
27,9
Germany
20,5
Italy
11,1
France
6,7
Chinese Taipei
6,4
BÁLINT SZŐNYI
Japan saw its very first robot bartender taking up duties around one year ago. The model serves tap beer in 40 seconds, while cocktails are fixed by its robotic arm within a minute. The idea behind this pioneering measure is not to replace humans but rather to fight a labor shortage in a society where soon one third of the population will be over 65. There is no need to look that far for similar trends. Pepper, once the world’s first half-humanoid robot, works as a receptionist in Enjoy Budapest Café & Apartment Hotel, where waitress robot Amy helps serve coffee. The locally invented Robin, on the other hand, is known for cleaning vast areas at Groupama Arena, Ferenc Liszt International Airport and Honvédkórház, a flagship hospital in the capital. These collaborative robots are still rather the exception, though. As István Komlósi, principal developer at KUKA, a leading supplier on the Hungarian automation market, tells the Budapest Business Journal, the market uptake of collaborative robots lags far behind expectations from 10 years ago. That said, the few examples do help improve the image of machines. Automotive is responsible for the bulk of local robotization efforts, followed by the metal, rubber and plastic industries. According to the World Robotics Report 2020, Hungary has some legwork to do to keep the pace in the global automation race.
140,5
Japan
Mexico
4,6
India
4,3
Spain
3,8
Canada
3,6
Thailand
2,9
Czech Republic
2,6
Poland
2,6
State Support
The average number of automated units per 10,000 employees jumped from 18
to
84
in Hungary for the period from 2010 to 2018, but robot density still lags behind the world average of 113 in 2019, not to mention regional rivals such as Slovakia (169) and Slovenia (157). Poland and the Czech Republic both ranked among the top 15 largest markets in the world in terms of annual installations in 2019. Annual installations peaked in Hungary in 2017 at nearly 2,500 units, markedly higher than the years prior and since (see chart). The year 2017 sticks out with reason, as it was record-breaking for Hungary in terms of FDI hitting EUR 3.5 billion, where automation-driven automotive had a major share.
Encouraging Signs
An encouraging sign is that the country advanced from 32nd in 2016 to 23rd place in 2018 on the global robotization chart, and installations in manufacturing
There is plenty of scope for state incentives. Turnkey solutions are needed that enable players to integrate robotized stations in their own systems and, given the limited financial means of many SMEs, they could certainly use some government help to carry out such investments on a larger scale. Hungarian SME situation has Source: World Robotics Report 2020 BBJ Infographic worsened during the pandemic, with it becoming even more difficult for them to find the resources to upgrade equipment. Paradoxically, though, the and automotive soared by 13% and 20%, COVID crisis revealed the need for respectively, from 2014 to 2019. As more automation more strongly than of today, the total number of robotic ever. Entire supply chains collapsed installations has passed the 10,000 mark. overnight, which made many companies Other factors hint at a growing trend. readjust their strategies and opt to Key elements of Industry 4.0 such as the install more automated systems. Internet of Things and cloud solutions “Since SMEs are a lot more exposed are popping up on a near continuous to losing manpower to illness, they basis in Hungarian businesses, with need to robotize more as it would large corporations taking the lead. provide more stability by minimizing Growing demand is satisfied by a the human presence at work, thus thriving ecosystem of some preventing further infections; yet, the availability of financial means is questionable,” adds Komlósi. suppliers Rescue might come from “above”, of integrators, manufacturers of robots meaning the cloud. “The increase in and automation solutions, distributors, cloud capacities means robots do not advisors, and sub-component suppliers, need to be so self-sufficient and thus as shown by the 2021 edition of the building them becomes cheaper, as only #HowToRobot supplier market report the absolutely necessary elements are for Hungary. left on them. Operability is then subject KUKA is among those leading to the quality of communication, and suppliers with an ambitious development that’s where importance of 5G kicks in,” agenda. As Komlósi points out, what says Komlósi. matters most is to make robots that are While all this sounds promising, the easy to program and integrate into the reality looks a little harsher. Take the manufacturing processes. survey of the Industry 4.0 National Technology Platform, run by SZTAKI (the Institute for Computer Science and Control) that
200
Annual installations of industrial robots in Hungary (units) 2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
year
found
2009
2470
197 926
912
717
974 517
534
555
One of KUKA’s ongoing developments concerns a robot control mechanism driven by artificial intelligence. Another hot area is related to logistic functions supported by mobile robots. In the latter case, problems arising mostly in automotive are tackled by an interface that defines a common language for mobile robots involved in different manufacturing processes. As far as the SME sector is concerned, robotics is an emerging trend with manufacturing clearly showing room for automation. “For SMEs, the main objective may not only be to replace labor but to improve quality and productivity and thus competitiveness,” says Komlósi.
961 202
Source: World Robotics Report 2020 BBJ Infographic
80%
of Hungarian enterprises don’t have an Industry 4.0 strategy. But what to expect around here if even the global picture is far from rosy in this respect. A recent Deloitte Insights survey involving 1,600 senior executives in 19 countries was conducted with a similar aim, to find out about corporate readiness to benefit from Industry 4.0. It turns out that just 14% of respondents feel fully ready to exploit the opportunities offered by the latest industrial revolution. The remaining 86% could surely use an algorithm to figure out a way to reap those benefits.
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Discovering Hungarian Cinema Online in Lockdown A few nights ago, stuck for something to watch after a hard day at the electric coal face, it occurred to me that now might be an excellent time to see what Hungarian movies and TV shows might be lurking online. DAVID HOLZER
In all the time I’ve been in Hungary, I’ve remained woefully ignorant of the joys of Hungarian contemporary cinema. This is partly because the Hungarian movies shown at our local cinema (the splendid Belvárosi Mozi in Szeged) aren’t subtitled in English. It would take me several lifetimes to be fluent enough in Hungarian to understand even the simplest kid’s cartoon. But, over the past few evenings, I’ve discovered some Hungarian gems online that have opened my eyes. I’ve based the recommendations that follow on the insight they offer into this country and its culture. Abandon your preconceptions, all ye who enter here.
Mindless Fun: “A Kind of America” (2002) Tamás is a Budapest commercials and pop video director who dreams of making a feature film. He has two brothers, Ákos, a coarse Casanova, and András, a tortured poet. Out of the blue, a supposedly American producer named Alex Brubeck writes to say that he likes a script Tamás has written called, tellingly, “The Guilty City” and wants to put up half the money to make it. The film is a slapdash comedy based on a notion that, if you’re a nativespeaking English person, is utterly preposterous. It’s crude, sexist and portrays Hungarians as, for the most part, money-obsessed, alcoholic dupes but it’s funny and left me wanting to watch parts two and three. After I’ve got the taste of part one out of my mouth. My partner told me that the movie is a Hungarian favorite and it’s easy to
understand why. Hopefully this isn’t too much of a spoiler, but the movie ends with the Hungarian characters reunited and blessed by an utterly daft stroke of luck. Not only that, they don’t need any help from the “American” interloper. Available to stream on Netflix.
Well Worth 7 Hours: “Sátántangó” (1994) A British friend of mine who writes about film claims this black and white epic is one of the greatest films ever made. It was directed by Béla Tarr, who grew up in Budapest. Although his parents were in cinema and the theater, Tarr has said that he originally wanted to become a philosopher and saw making movies as a hobby. This changed when the Hungarian government denied him permission to go to university and so he went into movies instead. “Sátántangó” (Satan’s Tango), which took more than seven years to make, was released in 1994 and brought Tarr international acclaim. No less a critic than Susan Sontag hailed him as a savior of modern cinema and wrote that she would happily watch this film once every year. American director Gus Van Sant (“Good Will Hunting”, “Drugstore Cowboy”) credits Tarr with introducing him to the joys of long, uninterrupted takes in movies.
The shots in “Sátántangó” are certainly long. According to Tarr, there are only about 150 in the entire seven-hour movie. This, coupled with its length and non-chronological structure, makes the movie mesmerizing even if you can’t watch it in a single sitting. As to plot, I don’t have enough space to summarize that here. And, given that the film is organized as 12 parts that follow the tango scheme of moving six steps forward and six steps back without any thought for linearity, my feeling is that I’d just be wasting your time. In any case I have to confess that, while admiring the movie no end, I’ve never managed to watch more than 30 minutes or so of it at a time. But I would recommend you at least try some of it to remind yourself that cinema doesn’t have to come from or ape Hollywood. Stream “Sátántangó” on Amazon Prime. Given that you have a limited time to stream the movie, be prepared for it to take over your life for a couple of days.
Black Comedy, Vivid Color: “Liza, the Fox-Fairy” (2015) My partner has seen “Liza, the FoxFairy” at least twice. When we watched it together, she started to giggle as soon as it started. While I wouldn’t say I found the movie sidesplittingly funny, it is entertaining enough to keep you watching to the end.
Liza has been looking after Márta, the wife of the former Japanese ambassador and her life changes when Márta dies, murdered by Tomy Tani, the ghost of a 1950s Japanese pop singer who is Liza’s only friend, she thinks. After Márta’s death, Liza inherits her apartment. She encounters various men who all die mysteriously, killed by the jealous, demonic Tomy Toni. Believing that she’s the cause of the deaths, Liza becomes convinced she’s a fox-fairy, a figure in Japanese mythology. The only survivor is Sergeant Zoltán, who moves into Liza’s apartment to investigate the murders and falls in love with her. For me, the plot is just enough to propel the story, but it has little to do with the real pleasure of watching the movie, which is entirely visual. The color palette ranges from shadowy blacks, greys, browns and muted greens to eyepopping reds, purples, oranges, pinks and yellows. From time to time, frames are composed so they look like mutant versions of 1970s magazine photo spreads or advertisements. It’s like spending a long afternoon in the fantastic Bambi Eszpresszó café on the Buda side, emerging at dusk and strolling back to one of those nicely gloomy Budapest apartment blocks where the lobby hasn’t been decorated since before the 1956 Revolution. Immerse yourself in the surreal world of “Liza, the Fox-Fairy” at Netflix.
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World-class Győr Ballet Dance Company Performs GisL Online for Bartok Celebration On April 6 at 7 p.m., ballet lovers from all over the world will have the opportunity to watch the renowned Győr Ballet dance a new interpretation of the muchloved romantic ballet Giselle, first performed in Paris in 1841 and renamed GisL for this production. DAVID HOLZER
The performance is part of the Bartok Spring International Art Weeks Festival at Müpa Budapest, which is marking the 140th anniversary of the birth of Béla Bartók. It is also a celebration of László Velekei’s first year as Director of the Győr Ballet. Velekei was appointed to the top role in July 2020, after a remarkable 23 years at the company.
László Velekei “When I first joined the Győr [Ballet], I thought I would move to a new company after three or four years, searching for inspiration,” Velekei tells me. “But, to my surprise, it didn’t happen like that. I went up through the echelon. I started as a corps de ballet then became a semi-soloist dancer. From there, I worked as a soloist, choreographer, and artistic director but it never occurred to me that I would be Director of the Győr [Ballet]. I’m glad it happened this way, not simply because I gained an enormous amount of experience, but also because I’m helping keep the company secure.”
Rising to the Challenge
Despite his first year as director being somewhat unusual because of the COVID-19 pandemic and the response to it, Velekei says, “I can’t complain. Since I began as director, we’ve achieved all the goals we set for the first six months. For example, we were able to give outdoor performances such as Anna Karenina at Szarvas [160 km southeast of Budapest], which won “Best Performance” and “Best Choreography Award” presented by Péter Fekete, Secretary of State for Culture. Most importantly, through vigilance and constant, rigorous
testing, we have made sure that everyone in the company has stayed safe and healthy.” Like all performing arts organizations globally, the Győr Ballet has also endured the experience of losing personal contact with its loyal audience. Fortunately, it has strengthened its presence online, as the much-anticipated production of GisL for Bartók Spring demonstrates. With choreography by Velekei and music by Félix Lajkó, this production of the mystical, beautiful and chilling ballet promises to be special. As Velekei explains, “With every work, I have a vision. With Giselle, it was the image of being danced to death that inspired me. For our GisL, I have condensed the original two acts of the ballet into one to make the story of Giselle’s broken heart and ordeals in the afterlife even more powerful. Our production is theater, ballet and a concert in its own right.” Looking to the future, Velekei is keen to continue living the values shared by the artists, dancers and support team that make up the Győr Ballet Dance Company. “We are preparing for another collaboration with Müpa entitled One Way To Heaven, co-produced by Jamie Winchester and Róbert Hrutka. After this, as part of our TánciTánci Baby Dance theater program, will present a children’s performance called Costume Ball. This will be followed by the 16th Hungarian Dance Festival. We also have a number of invitations to perform all over Hungary. Most of all, we hope that life will go back to normal. Once that happens, we’ll have a lot of work to do.”
Admission for the performance of GisL in the Bartók Spring virtual auditorium is free. Find out more at www.bartoktavasz.hu.
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In Pursuit of Pitch-perfect Pinot Picky, highmaintenance Pinot Noir is not a grape that likes to put itself about across the wine world in the way that its fellow Burgundian partner in Champagne crime, Chardonnay, does. Multi-coloured Pinot Noir grapes. Photo by Andrew Hagen / Shutterstock.com
ROBERT SMYTH
While Chardonnay can thrive in cooler and warmer climates alike, Pinot is highly particular as to where it is willing to put down its roots and yield pitchperfect grapes. A fraction of a degree too warm or a few rays of sun too many and it can come out jammy and flabby. While it prefers cool climates, it can still be a challenge to ripen it fully and its thin skin makes it prone to fungal infections and rot, a problem in damper climates. However, get it right and the results can be mesmerizing. Hungary may not be a Pinot paradise (it’s too hot for that) but there a few nooks and crannies from which skillful winemakers coax good quality Pinot and even channel the terroir into the bottle. A recent blind tasting by the Bormedence Borklub revealed some splendid specimens. Ottó Légli is more renowned for his elegant whites than reds from the southern side of Lake Balaton in the Balatonboglár wine region. However, he’s succeeding in bringing similar refinement to Pinot Noir, which hails from a Loire clone planted in Gyugy and Szőlősgyörök where it grows on loess and limestone-clay plots, close to Central Europe’s largest lake, which likely exerts a moderating influence in the heady heat of summer. Incidentally, back in Burgundy, the benchmark region to which all Pinot Noir is compared, the grape loves limestone, especially when it is combined with clay, when the high alkaline content of limestone results in wines that are higher in all-important acidity.
Potential Delivered
I remember tasting Ottó Légli’s Pinot years back and thinking it showed potential but was a little rough around the edges, but his 2018 is subtle and smooth. Fermented in open vats by indigenous yeasts, it was then aged for a year in 500-liter barrels and has a touch of oak that nicely enhances
the supple red fruit. It is great value at HUF 3,290 from Bortársaság. The top-rated Hungarian wine at the tasting, József Szentesi’s Nadap Pinot Noir 2017 (HUF 5,000 from the cellar or HUF 6,180 from wineloverswebshop.hu), is an organic wine that comes from soil with volcanic granite bedrock and limestone topsoil, from Burgundian (60%) and Hungarian (40%) clones, growing in Nadap, close to another lake, Velence, in what is officially the Etyek-Buda wine region.
preserve the wine’s freshness, was only added at the bottling stage, with no sulfur used elsewhere in the vinification. It was neither filtered nor fined. Pinot Noir is also grown on Tokaj’s volcanic soils, but the wine made from it cannot be labelled as Tokaj, as it is not one of the six permitted varieties in the region, so it goes under the name of Zemplén, from the Protected Geographical Indication (PGI) that covers wines made from other grapes in the area. It is notable that Sauska, which has wineries in both Villány, the renowned red wine region in the extreme southwest of the country, nestled next to the Croatian border; and in Tokaj, today an almost exclusively white (and sweet) wine region in the northeast – has chosen the cooler climate Tokaj to plant Pinot in.
Incidentally, red wine is nothing new in Tokaj. Purcsin, the somewhat Pinot-like red Tokaj grape that was prominent before the phylloxera louse arrived Rescue and Restoration Incidentally, red wine is nothing in Tokaj more than a century new in Tokaj. Purcsin, the somewhat Pinot-like red Tokaj grape that was ago, has been saved from prominent before the phylloxera the brink of extinction and louse arrived in Tokaj more than is being turned into wine by a century ago, has been saved from the brink of extinction and the likes of Szentesi. is being turned into wine by the This wine is rich and complex, yet balanced, with a floral touch of violet on the nose, then notes of red fruit (especially cherries and sour cherries), Christmas spices and tobacco. It’s got a pleasing combination of primary fruitiness and a tertiary touch of maturity, as well as a nice kiss of oak and round, ripe tannins (Pinot is generally low in tannins but this one not so much). It has a high alcohol level at 14.5% but it is well integrated into this concentrated wine, which reflects its warmish place of growth, adding body rather than burn on the back of the throat. A small amount of sulfur, to
likes of Szentesi. The super experimental Sauska winery actually has two single vineyard Pinots from Tokaj, which both come from French clones. Sauska Pinot Noir Birs 2017 (HUF 5,950 from Bortársaság) comes from organically-grown grapes from the Birsalmás vineyard, which has undergone restoration work in the last few years with the stone walls being rebuilt at an angle to protect the terraces against downpours and soil erosion. From clay-rich rhyolite loam, it was fermented for a whopping 28-35 days as
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a way of preserving varietal character. It was aged for 10 months with 80% going into used French barrels and 20% into ceramic “eggs.” The bid to preserve varietal character has worked, with an abundance of Pinot’s pure red fruit coming through in this fairly intense wine, especially strawberries and redberry compote, alongside complex herbal and spicy anise notes. It has fairly prominent tannins for Pinot, yet they are silky and smooth. It came a close second at the Bormedence tasting. This is very impressive for a Pinot from young vines and will likely become increasingly sophisticated as the roots dig down further. It looks like a very smart choice to opt for the comparative cool of Tokaj, rather than the warmth of Villány, especially given the tendency of rising temperatures. Sauska’s other Pinot Noir comes from the Padi vineyard. Other makers of Pinot Noir from Tokaj include prominent historian Krisztián Ungváry’s Váyi Pince, whose wine showed well in the tasting, and Izabella Zwack’s Dobogó Pincészet (not featured in the tasting). The third-placed wine at the Bormedence tasting came from Stumpf Pince from Eger, whose Nagy-Eged 2017 comes from the pure limestone of the landmark hill that towers over Eger. It was hedonistic and a tad jammy for my palate, with the 14% alcohol really sticking out. I found greater pleasure in another Eger Pinot: Kovács Nimród’s Monopole 777 Pinot Noir 2016, which was also ripe and concentrated but smooth, long and earthy.
Passion creates progress.
The new fully electric Audi e-tron GT quattro. Future is an attitude. Power consumption, combined: 19,2–24,7 kWh/km (WLTP). CO₂ emissions, combined: 0 g/km. The values specified are based on the default factory setup recorded at the type approval and are valid at the time the ad is posted. The designated values were measured according to WLTP. They do not apply to individual vehicles and are not part of the information notice, but serve the purpose of comparing different types of vehicles, in accordance with the provisions of Regulation (EC) No 715/2007. These values are influenced by additional equipment, accessories, driving habits and other non-technical (e.g. environmental) factors. The motor vehicle shown in the picture is an illustration and may contain additional equipment.