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BUSINESS JOURNAL BUDAPEST
VOL. 29. NUMBER 23
DECEMBER 17, 2021 – JANUARY 13, 2022
SPECIAL REPORT
Deals of the Year
NEWS
MNB’s Inflation Battle Continues Apace The MNB is continuing its fight against rising inflation expectations by maintaining its tightening cycle and putting an end to its bond purchase program. Inflation reached 7.4% in November, a 14-year high. 3 SPECIAL REPORT
Investment and Letting Deals Ongoing The letting and investment deals concluded in 2021 reflect the positive positions of the office and industrial sectors and the favorable prospects for the hotel sector, despite a difficult period given the various lockdowns. Questions remain, however, over retail. 19 SOCIALITE
The Hanukkiah and the Tree
David Holzer investigates how the country’s Jewish community celebrate Christmas, and discovers a blend of traditions that have impacted all Hungarians. 21
Hungarian Trailblazer
SS
István Szászi discusses his position as a role model for others in Hungary and the region, having taken over earlier this year as the head of the German multinational Bosch in Hungary and the Adriatic region. 8
We create value to preserve value. OTP Private Banking provides intergenerational and professional solutions to its clients in the CEE region.
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Budapest Business Journal | December 17, 2021 – January 13, 2022
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THE EDITOR SAYS
EDITOR-IN-CHIEF: Robin Marshall EDITORIAL CONTRIBUTORS: Balázs Barabás, Zsófia Czifra,
NEW YEAR, BETTER BLESSINGS
Kester Eddy, Bence Gaál, David Holzer, Levente HörömpöliTóth, Christian Keszthelyi, Gary J. Morrell, Nicholas Pongratz, Gergely Sebestyén, Robert Smyth, Zsófia Végh. LISTS: BBJ Research (research@bbj.hu)
One of the curiosities of living through COVID is that measuring time, at least through our memory recall, seems to have become much harder. Events that happened a year ago feel like they were just last week, and vice versa. This sort of made sense in lockdown, when a lack of holidays, or even the difference between home and office, limited our options for measuring when events actually took place. Be that as it may, the dateline on the back issue of the newspaper I have on my desk tells me it is apparently a year since I wrote these words: “The pace at which researchers the world over have worked to find a viable vaccine has been remarkable, and we now have the hope of a more normal year ahead of us. Let us hope that in the rush to recover, we don’t forget what we learned anew this year.” The arrival of the vaccines in the spring and the reopening of the economy from the summer on ensured that 2021 was “more normal” than 2020 (although perhaps “less abnormal” might be closer to the mark). But my words from a year ago could equally well apply now. The Prime Minister has said we might be at the peak of the fourth wave (for more on this, see our regular Coronavirus Roundup on page four), and I guess most businesses (leaving aside hotels
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and hospitality at one end of the spectrum and e-commerce and logistics at the other) have had a better 12 months. Better, but not record-breaking. After its initial explosion (17.8% GDP growth in Q2!), the recovery has been held back somewhat by supply chain bottlenecks and component shortages. We have a highly transmissible new variant of the virus, which is already dominant in South Africa, where it was first spotted barely a month ago, and well on its way to being so in the United Kingdom. The first two cases have been found here, in a married couple who have not traveled. That means they contracted Omicron in Hungary, and there are more cases about which we do not yet know. So, we stand ready to step into 2022, hoping for a better year, but with some disquiet about what may lay ahead. Back in 2019, most of us only had anticipation, I guess. It was a different time, figuratively as much as actually. Writing back in December 2020, I also added: “the hope that 2021 will prove more peaceful, healthy and prosperous for all of us.” I think that’s an equally good sentiment to take into the New Year this time around. However you celebrate it, let me wish you all the happiness the season can bring. Robin Marshall Editor-in-chief
Why Support the BBJ? • Independence. The BBJ’s journalism is dedicated to reporting fact, not politics, and isn’t reliant on advertising from the government of the day, whoever that might be.
• Crisis Management. We have all lived through a once-in-a-century pandemic. But we also face an existential threat through climate change and operate in a period where disruptive technologies offer threats and opportunities. Now, more than ever, factual business reporting is vital to good decision-making. For more information visit budapestbusinessjournal.com
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THEN & NOW
In the color photo from MTI, young people living in foster care in Eger (135 km northeast of Budapest) receive Christmas presents on Dec. 13, 2021. Supported by the government, the initiative is expected to raise Christmas spirits for almost 7,000 disadvantaged young people. In the black and white image from the Fortepan public archive, a mother sits for a Christmas portrait with her baby in 1906.
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Budapest Business Journal | December 17, 2021 – January 13, 2022
News///macroscope
National Bank’s Inflation Battle Continues Apace
The National Bank of Hungary (MNB) is continuing its fight against rising inflation expectations by maintaining its tightening cycle and also putting an end to its bond purchase program. The inflation rate reached 7.4% in November, and the MNB has significantly raised its inflation forecast for 2022. ZSÓFIA CZIFRA
The November inflation figure was a 14-year high. The last time the inflation was as high as recorded in November was in December 2007. The highest price rises over the previous 12 months were measured for motor fuels as well as alcoholic beverages and tobacco. In one month, consumer prices increased by 0.7% on average. Food prices were up 6% on a yearon-year basis, of which the highest rise was registered among edible oils (26.9%). In line with expectations, the MNB has continued its tightening cycle, albeit the pace of the rise is still slower than expected by analysts. On Dec. 14, the Monetary Council decided to raise the base rate by 30 basis points
to
2.4%,
its highest level since May 2014. It also made it clear it would carry on with further rate hikes next year to anchor rising inflation expectations. The central bank also raised the rate on its overnight deposit facility by a larger-than-expected 80 basis points to 2.4%. This was a surprise move that the bank said aimed at supporting the stability of swap market rates.
Development of the central bank base rate in Hungary (March 23, 2004-Dec. 14, 2021) Numbers in percent
Source:
In a move that has been expected for some time now, the MNB ended its bond purchase programs with immediate effect. In a press release following the rate-setting decision, the central bank said that it would closely monitor liquidity developments and be ready to step in with occasional and targeted government securities purchases if necessary. “Occasional government securities purchases will not indicate a change in the stance of monetary policy,” the MNB emphasized. The 30 basis points hike was below analysts’ expectations. Gábor Regős, head of the macroeconomics department at Századvég Gazdaságkutató, said that while the rate hike was lower than anticipated, raising the bottom of the interest rate corridor to the level of the base rate (2.4%) was a surprise.
More Significant Tightening However, the most significant tightening in Tuesday’s decision was the closure of the bank’s asset purchase programs. Hopefully, the cessation of government securities purchases will also mean a tightening of fiscal policy due to a more difficult financing environment, Regős added. Gergely Suppan of Takarékbank said that natural gas, electricity and oil prices have plummeted since the MNB’s interest rate decision in September, which could lead to significant and widespread inflationary pressures while maintaining household energy prices. Meanwhile, a tight labor market, coupled with a pick-up in wage dynamics and a higher inflation environment, could lead to a further
rise in inflation expectations and a strengthening of second-round inflation risks, he warned. Regarding the closure of the bond purchasing program, Suppan said that the ample liquidity and robust capitalization of the banking system paired with the improved conditions of the bond market in recent years make market-based financing possible for the corporate sector.
“However, the question is whether there will be another tightening in the last two interest rate tenders of the year. We still expect the MNB to raise the one-week deposit rate to a minimum of 4%.” Orsolya Nyeste, the chief economist at Erste Bank, said that MNB communications suggest further interest rate hikes; short-term effective interest rates could be well
above
4%
in the near future, she noted. K&H Bank chief analyst Dávid Németh pointed out that the central bank has now pushed up and narrowed the interest rate band, raising the deposit rate by 80 basis points, while the other end of the band and the lending rate went up by 30 basis points.
Short-term Interest Rate
With this move, the bank is trying to influence short-term interest rates. Together with its other assets, such as the foreign exchange swap and the short-term bond, it is trying to stabilize the interest rate environment. According to Németh, the central bank may be expected to raise the interest rate on the one-week deposits, which now plays the role of the key interest rate, further. “However, the question is whether there will be another tightening in the last two interest rate tenders of the year. We still expect the MNB to raise the one-week deposit rate to a minimum of 4%,” Németh added. Following the rate-setting meeting, the MNB also released a few cornerstone figures from its Inflation Report published on Dec. 16. As it turns out, the MNB now predicts much higher-thanexpected inflation next year. After the 5% inflation rate this year, the bank warns that a similar pace of price increases
of
4.7-5.1%
may follow in 2022. There has also been a significant change in GDP growth forecasts. Average annual GDP growth for 2021 could be 6.3-6.5% instead of the 6.5-7% range predicted back in September this year. This lower growth forecast reflects weaker-than-expected Q3 GDP data and a deterioration in the fourth-quarter outlook. The growth outlook has become gloomier for next year as well, with the assessment deteriorating by one percentage point to 4-5%. The 2023 GDP forecast, on the other hand, has risen by 0.5 of a percentage point to 3-4%.
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Budapest Business Journal | December 17, 2021 – January 13, 2022
Pfizer Vaccines for Children Arrive in Coronavirus ///roundup Hungary, Along With Omicron Variant The Omicron variant of the coronavirus was detected in Hungary, chief medical officer Dr. Cecília Müller told TV news channel M1 on Dec. 13. The Hungarian-owned Neumann Labs identified two Omicron cases in a married couple. However, the pair had not been abroad, which means they had been infected domestically. the state of emergency powers, which had been set to expire upon the New Year, until June 1, 2022, according to Because the Omicron variant is in state news agency MTI. community-spread across Europe, its The government said it would initiate appearance in Hungary “was to be an early end to the state of emergency expected,” Müller said. She added that the “if the pandemic situation allows,” Delta variant is still almost exclusively according to the justification, and added responsible for the current cases. that it would not impact the general Concentrations of coronavirus election in the spring. hereditary material in wastewater Breaking Wave? corroborate the increasing number of cases reported, having risen across most Despite the extension of the precautionary measures, Prime Minister of the country. Despite stagnating in Viktor Orbán told Kossuth Rádió on Dec. some areas, an increase was observed 10 that experts believe the fourth wave in many others, including settlements of the pandemic could be peaking or surrounding the capital. Concentrations had “increased” in a total perhaps even declining in Hungary. “Nobody knows for certain, but of 21 places and were exceptionally high in the public wisdom at the moment, Győr (120 km northwest of Budapest) and among our experts, is that we are at Nyíregyháza (240 km northeast). the peak of this wave, and it could Due to the ongoing coronavirus crisis, even be ebbing,” Orbán said. Parliament voted on Dec. 14 to extend NICHOLAS PONGRATZ
employment-mandated vaccinations. According to a report from 24.hu, the vast majority of the municipalities in the capital have not made the employment of people working in kindergartens and nurseries conditional on receiving the coronavirus vaccination. They have generally cited high vaccination rates in their districts for not doing so. As of Dec. 2, the national vaccination rate of those over 12 stood at 69.7%, according to the government website for pandemic news, koronavirus.gov. hu. Hungary had the highest rate for COVID booster jabs in the European Union, according to a ranking posted on Botond Sára, the commissioner in the government’s Facebook page, which charge of the capital’s government showed that 26.19% of the population office, delivers ampoules containing had received a booster. the Pfizer-BioNTech coronavirus These favorable numbers can be vaccine for children on Dec. 15. attributed to recent government efforts, Photo by Zoltán Máthé / MTI. in particular the extended national inoculation drive, which saw one million doses administered during its recent He also stressed the importance of three-week run. Earlier, Orbán had receiving vaccinations prior to family said that these inoculation drives would gatherings for the holidays, emphasizing be organized in “all settlements” in that inoculations against the coronavirus Hungary in the coming month and a half. for children aged 5-11 would start in Meanwhile, given its abundance of Hungary on Dec. 15. The first delivery vaccines, Hungary continues making of Pfizer’s coronavirus vaccine, sufficient charitable donations to countries more for roughly 69,000 members of this age in need. Minister of Foreign Affairs and group, arrived in Hungary the day before. Trade Péter Szijjártó said in a post on Inoculations of children have been a Facebook on Dec. 1 that Hungary would be hot-button subject recently, in one case donating 150,000 jabs of the AstraZeneca involving the other sensitive issue of coronavirus vaccine to Tajikistan.
CTP Undertakes new Speculative Development The industrial market continues to record positive data with the CEE developer and industrial park operator CTP beginning work on a 30,000 sqm logistics facility at CTPark Tatabánya. The BREEAM accredited speculative facility is scheduled to be delivered next year. GARY J. MORRELL
This reflects three growing trends: for developers to construct outside of the capital, as is common elsewhere in the CEE region, the increasing
market by the end of the year. Total stock is put at 3.75 million sqm. The vacancy rate is 6% in the countryside
and
4.3%
CTPark Tatabánya amount of speculative development and demand for sustainability accredited space at the higher end of the industrial market. The total modern industrial stock in the Budapest area stands at a little more than 2.5 million sqm according to the Budapest Research Forum, which comprises CBRE, Colliers International, Cushman & Wakefield, Eston International, JLL and Robertson Hungary. What space is available consists mainly of office space at logistics centers; there is very little contiguous logistics space. “Total demand in the Greater Budapest area in the third quarter
equaled 143,000 sqm, renewals represented a higher share of take-up
with
77,000 sqm,
while the remaining 65,000 sqm was made up of net take-up,” comments Cushman & Wakefield. “Among net take-up, pre-lease has the highest share with 57%, followed by new leases with 37%. The remaining 6% was represented by expansions,” the consultancy says of the Q3 industrial activity. It has traced eight buildings handed over so far this year, representing 172,000 sqm of space. Cushman & Wakefield expects a further 162,000 sqm of space to be delivered to the
for the whole of Hungary. Around 367,000 sqm of space is under construction in the Budapest area and 106,000 sqm in the countryside for a total of 473,000 sqm across the country. CTP has recently signed a purchase agreement for a new 25,000 sqm building in Szombathely. Developer-led projects have been rare in regional cities in recent years despite high demand in the logistics and industrial sectors. CTP and other builders are committed to developing industrial parks in what they see as regional hubs in addition to the greater Budapest area. The new project is the third building at CTPark Tatabánya and brings total space at the complex to 88,000 sqm offering facilities for logistics and industrial purposes, according to Dávid Huszlicska, country manager at CTP Hungary. The complex is located on a 12.5-hectare site 60 km from Budapest. CTP is a logistics park operator in nine countries with more than 6.6 million sqm of space. The company aims for 10 million sqm of space across the region by the end of 2023.
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Budapest Business Journal | December 17, 2021 – January 13, 2022
Szijjártó Lambasts European Assumptions on Energy Security Minister of Foreign Affairs and Trade Péter Szijjártó, speaking at the third LNG (Liquified Natural Gas) Summit in Budapest on Dec. 6, pilloried European authorities and energy companies for what he termed their “irresponsible approach” to Central European energy needs while arguing that Hungary has enacted a “comprehensive and responsible” energy policy over the past decade. KESTER EDDY
European governments everywhere have understandably focused on combating the coronavirus pandemic for the past two years, but this has led to lax energy security and, ultimately, to the “crisis” currently facing the continent, Szijjártó told delegates in his opening address to the summit. “Maybe all of us have considered the safe and secure energy supply of the continent as a fact. But that was a mistake. It’s not a fact; it’s something for which we have to continuously work,” he emphasized. “This kind of irresponsible approach [...] has consequences, and a price has to be paid. Unfortunately, mostly by the customers of the continent,” he added. In contrast, Hungary, where the government and energy authorities have been following prudent energy policies for more than a decade, has been “continuously [sounding] the alarm” that the energy supply situation of the continent is “in the 24th hour,” the minister insisted. “I regret to say [it], but we Europeans had all possibilities to prepare for and prevent such a situation. […] We should have put predictability and a professional way of decision-making in focus, instead of dogmatically and politically motivated decision-making,” he argued, although he failed to cite a concrete example of these alleged mistakes.
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As a result of such dithering and poor decision-making, Hungary had been left with few choices when determining its energy policies in general and gas policy in particular. The minister maintained that this resulted in condemnation from Western circles, which was more than a little hypocritical.
‘Bunch of Contradictions’
Minister of Foreign Affairs and Trade Péter Szijjártó gives the opening speech at the Budapest LNG Summit on Dec. 6, 2021. Photo by Attila Kovács / MTI For Szijjártó, the main concern was that the difficulties and costs of the transition to a carbon-neutral economy had “seemingly” been forgotten, and he pointed to four “major mistakes” that had been committed, all of which had contributed to the current crisis.
No Significant Investments
First, he lamented that no significant investments or projects had been launched, let alone completed, in “the region of Europe which is the most exposed and most defenseless towards one dedicated source of energy.” Regarding the diversification of routes and sources, he said some “forward progress” had been made in the region, presumably alluding to recent interconnector projects with Hungary’s neighbors. Yet, in his assessment, no “real game-changer project or investment” had been undertaken in the region. Second, the minister alleged that politics and ideologies “have been too much confused with energy issues” in
recent years. “It is impossible to heat houses and flats, and it is impossible to operate industry with political statements,” he said. Hungary and its neighbors need gas, and to get that, “either you have to exploit it or you have to buy it.” Moreover, Europe had indulged in “a short-sighted way of thinking;” strategic decisions to fully utilize storage capacities had either not been made or not been implemented. This third mistake had left Western Europe with “much lower” reserves than in earlier years and, by implication, less capable of handling the recent price surges. As for the fourth blunder, “while we were speaking about our green deal, how to reach the 2030 and 2050 [climate change targets], the forms of energy in the transition period have been negatively discriminated [against].” In particular, this had resulted in “unnecessary anti-gas and anti-nuclear” sentiment, which had hampered clear thinking on energy matters, he argued.
“We have received a lot of criticism in recent years because of our energy cooperation with Russia. To us, it’s a little bit, well, not a little bit, a big bunch of contradictions, because those who have criticized us have not done anything to change this situation in the region; namely, being exposed to one source of gas and one source of energy,” Szijjártó said. He declared Hungary “had not received any help in this regard,” which sounded somewhat disingenuous considering all the interconnector projects had benefited from significant European Union funding. Nonetheless, Szijjártó insisted that “everyone knew” Hungary’s former longterm gas contract with Russia would finally expire at the end of last September and that this “could create a totally new situation in this region.” Yet, no additional gas sources were added to the country’s energy mix. “I’ve had dozens of negotiations with those Western companies who own the rights to exploit the offshore gas field in the Romanian Black Sea. And they promised me that the final investment decision is to come and that we could count on this new resource when it comes to our upcoming energy mix,” he said. Hungarian companies had “even signed contracts with these Western companies to buy gas from them.” Yet, to date, not only had no final investment decisions been made, but he complained: “Now we have heard news that these contracts will be canceled by these Western companies!” Given this situation, Hungary had no choice but to once again sign up on a long-term contract with Russia. “Of course, I can only speak based on my own experience, but I have to tell you that negotiating with [the leaders of Gazprom] has not been the easiest chapter of my practice. But once we agree, those agreements have always been kept. Our cooperation with Gazprom, and once again, this is an experience, not a political statement, has always been reliable and fair, and I see no reason not to continue that,” Szijjártó concluded.
Hungary Plays its Part in Developing Energy Infrastructure: Szijjártó Hungary has “always supported projects and plans that contribute to the energy security of Europe, and will continue to do so,” foreign minister Péter Szijjártó insisted in his address. He pointed to the construction of the LNG terminal on Krk island, in the Croatian Adriatic, as a project which Budapest had supported from the very start, with an interconnector linking Hungary to Croatia, allowing for gas flows in either direction, according to demand.
While not a game-changer, “when it comes to the historic situation, it is something really new because this gave us the chance to sign a long-term gas contract with a nonRussian company for the first time ever in our history. We have signed a [contract] with Shell to buy 250 mcm of gas on an annual basis for a period of seven years. This has made LNG gas part of our national energy mix, and to a certain extent, it definitely contributes to us being able to
uphold one of the lowest utility costs in Europe,” Szijjártó declared. In addition, Hungary has made “significant efforts” to link the country to the southern gas corridor. “We have done all our homework by constructing the interconnectors to Romania, Croatia, Slovakia and Serbia,” he declared. Except for Slovenia, Hungary is now physically linked to six out of its seven neighboring states’ high-pressure gas transmission systems.
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Budapest Business Journal | December 17, 2021 – January 13, 2022
News///in brief EC Steps up Infringement Procedure Over Sexual Education Legislation
with the chairman of the European Subcommittee in the Senate, among other similar members of Congress. Since security policy plays a prominent role in the bilateral relations between the United States and Hungary, the issue of stability in the Western Balkans was also discussed. The United States appreciates Hungary’s role in the Balkans, especially since KFOR was taken over by a Hungarian general in the fall and Hungary has significantly increased the proportion of its contingents in the region, Németh said. He added that he also received recognition of the role that Hungary played in successfully helping evacuate many American citizens during the evacuation in Afghanistan.
The European Commission brought the infringement procedure against Hungary over recently approved legislation that codifies the right of parents to take charge of their children’s sexual education to the next level, according to state news agency MTI. The EC launched the infringement procedure by sending Hungary a “letter of formal notice” in July. It argued that provisions in the legislation “violate human dignity, freedom of expression and information, the right to respect of private life as well as the right to nondiscrimination as enshrined [...] in [...] the EU Charter of Fundamental Rights.” On Dec. 2, the EC sent a “reasoned Gov’t Postposing State opinion” to Hungary, the second and Investment, Boosting penultimate step in an infringement Reserves by HUF 350 bln procedure, explaining that it did not find Hungary’s government has decided to the Hungarian response to the letter of postpone some state investments, boosting formal notice to be satisfactory. The EC this year’s financial reserves by HUF also stepped up a separate infringement 350 billion, the Ministry of Finance said procedure against Hungary at the same in a release on its website. The ministry time over a decision by the national consumer protection authority to require a evaluated the jump-start of the economy disclaimer for a children’s book depicting “a success,” noting third-quarter GDP growth of 6.1%, an investment rate of more forms of behavior it said: “deviate from than 12%, employment numbers exceeding traditional gender roles.” 4.7 million and a jobless rate under 4%. “This all means that the performance of Zsolt Németh Holds the Hungarian economy now requires Talks in Washington stimulus through state investments to a MP Zsolt Németh discussed security smaller degree. The government has thus policy, economic cooperation and political decided to carry out some investments relations in Washington D.C. over the later, thereby significantly raising, by a weekend of Dec. 4-5, according to total of HUF 350 bln, this year’s financial profitline.hu. The chairman of the Foreign reserves in addition to reducing state debt,” Affairs Committee of the Hungarian the ministry said. “Hungary is not only National Assembly held consultations among the first to jump-start its economy;
Szeged Inaugurates HUF 29.3 bln Pick Arena The city of Szeged (170 km southeast of Budapest) inaugurated a HUF 29.3 billion sports arena, the thirdlargest in Hungary, on Dec. 9, hvg.hu reports. Pick Arena, the new home for the Pick Szeged handball team, will be the venue for several matches of the European Men’s Handball Championship in January 2022; Hungary is co-hosting the contest with Slovakia. The arena, the largest handball hall in the region with room for 8,143 spectators, will also hold concerts and other events. Sándor Csányi, the owner of the salami maker Pick Szeged, the sponsor of the local handball team, said SC
the Hungarian economy has already surpassed its pre-pandemic performance. That offers the chance to improve balance indicators, strengthening [Hungary’s] financial stability and further improving its assessment by investors,” it added. The ministry said the financial reserves would be raised in such a way as to ensure the payment of an annual pensioners’ bonus, equivalent to a whole month’s pension, and the rollout of a personal income tax rebate for families raising children, a personal income tax exemption for under-25s and a HUF 750 bln reduction in taxes on labor
Pick Szeged now has infrastructure better than that of its rival Veszprém. The arena was designed by the architecture firm Hajós Építésziroda. West Hungaria Bau was the general contractor for the project. Photo by Sándor Ujvári / MTI
period Q1-Q3, GDP growth reached 7.1%. Varga said Hungary’s construction sector could grow 10% this year. An expanding order stock signals further growth in the future, too, he added.
Orbán Welcomes new German Chancellor Scholz
Prime Minister Viktor Orbán expressed his best wishes to Germany’s newly elected chancellor, Olaf Scholz, in a letter, the PM’s press chief Bertalan Havasi said, according to state news agency MTI. Orbán told Scholz that Germany is a Varga: 6-6.5% GDP Growth partner of “key importance” for Hungary. “We remain committed to maintaining Expected This Year and developing our diverse cooperation,” Minister of Finance Mihály Varga said he said. Orbán acknowledged Hungary’s Hungary’s GDP is expected to grow by historical ties with Germany, noting that 6-6.5% this year at a general meeting “the change of system in Central Europe of construction industry association and the removal of the border dividing Évosz yesterday, according to novekedes. the German people laid the foundation hu. Early in November, the Ministry of for European reunification.” He invited Finance lowered its projection for GDP Scholz to a summit of the heads of growth this year to 6.8%. Hungary’s government of the Visegrád Group (the GDP growth slowed to 6.1% yearCzech Republic, Hungary, Poland and on-year in the third quarter. For the Slovakia) in Budapest in 2022.
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Budapest Business Journal | December 17, 2021 – January 13, 2022
News | 7
How the Pandemic Influenced Recruitment in 2021 HR Matters
Today, an entrylevel engineer may earn as much as one with several years’ experience. The gap between skilled bluecollar workers and new joiner engineers has also been shrinking; often, the two make almost the same.
A regular look at HR issues in Hungary and the region
with three, say, is around 50%, while between three years and five-to-seven, it
is
10-15%,
Farkas says. The increase in wage demand among juniors is related to the high demand for less-skilled labor. The wages of skilled manual workers (for example, technicians) have caught up with entrylevel engineering. Young graduates are aware of that, of course.
ZSÓFIA VÉGH
“In IT, the market needs roughly 8,000-9,000 professionals. Here, the competition for good candidates is huge. Experience measured in years is becoming less important. Much more emphasis is placed on technological knowledge and project experience.”
Despite what seemed likely a year ago, the coronavirus pandemic did not turn the labor market dynamics of recent years on their head. After a temporary halt in recruitment and the lay-offs (or in some cases, furlough)
in
2020,
most companies returned to hiring in 2021. And not just one or two positions, but employing in large numbers, where they were able to. That is because they not only had to take on the figures planned for this year but also had to make up for the hires they did not make in 2020. Considering the acute labor shortage that has returned, this has been challenging, to say the least. That is particularly so in sectors such as IT and engineering, where the market was candidate-driven well before the COVID outbreak and where, due to digitization, the demand for professionals has only been rising during the pandemic. “In IT, the market needs roughly 8,0009,000 professionals,” Tamás Farkas, division head at Grafton, tells the Budapest
Key Trends of 2021 The Year of Counter Offers There are too many jobs and not enough candidates, which has resulted in companies competing for top talent offering potential candidates a higher salary. This phenomenon existed before, but it has become rampant this year, and Hungary has been no exception. Professionals in accountancy, engineering, IT, logistics and any skilled blue-collar position where there is a shortage have been given offers by firms. This has eroded the “pull” of loyalty and many have chosen to leave. Even those who stay often do so because their existing employer will offer a raise.
Tamás Farkas, division head at Grafton. Business Journal. “Here, the competition for good candidates is huge. Experience measured in years is becoming less important. Much more emphasis is placed on technological knowledge and project experience,” he adds.
Impact on Wages
This rising demand for professionals has impacted wages. Since candidates with little or no experience know
Perks and Pre-requisites The uncertainty of 2020 led to employees valuing aspects of their jobs other than just their monthly wage. Even more so for Gen Z, as 29% said their salary was crucial to their engagement compared to 49% for those over 55, according to a study by the IBM Institute for Business Value. Companies are looking at how they can not only attract but also retain employees to positively influence a potential candidate’s decision to join or stay with the company. Among perks job seekers value are home office opportunities, although this has become more of a pre-requisite than a benefit for most. So is subsidizing the commute when workers do travel
they are needed, they ask for much higher salaries, and companies have no choice but to pay. That means, however, that the salary of an entrylevel engineer is not much less than one with three or four years of experience. And not just in IT. In the case of engineers and logistics professionals, the wage difference between those with zero years of experience and those
to a central office. The coronavirus has also highlighted the importance of health; many companies now offer private healthcare packages to their employees. Personal and professional development are also in focus; besides professional training, a growing number of firms claim they care about the mental health of their employees. Online Interviewing Although it has its downsides, many firms decided not to part with online interviewing. It is more timeefficient and, combined with other digital tools, can lift some of the burdens from the HR department. Online interviewing makes it is possible to shorten the pre-
“In addition, the significant increase in the cost of living and even the news of a potential increase in the minimum wage and skilled minimum wage were enough to set the wage demand of graduates soaring,” Farkas adds. The tension between senior professionals and those with less experience can only be mitigated if employers increase the more experienced workers’ salaries. Whether they can keep up with rising wages, or for how long, is yet to be seen.
selection process and devote more time and human resources to the shortlisted candidates. This option may not work so well, for example, in manufacturing, where touring the site or checking the skills of a machine operator are essential. Online Training Evermore firms have to rely on training their own supply of workers, be they pilots or shop assistants. What is common is how many approach training these days. Rather than in-person education, instruction is online, and they also provide employees with tools (for example, a tablet). The courses are short, interactive, and exams are also many times are taken online.
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Budapest Business Journal | December 17, 2021 – January 13, 2022
Business PRESENTED CONTENT
Bosch Boss Striving to Keep up Competency and Competitiveness
There are plenty of Hungarian leaders of Hungarian firms, and there is a sizeable cohort of expat CEOs of international firms based here. But Hungarian heads of foreign-owned multinationals are less common. István Szászi is one such example. ROBIN MARSHALL
His role does not just take in Hungary; he is also the Bosch representative for the Adriatic region, and he is responsible for Bosch R&D centers in Bulgaria and Romania. Having replaced Daniel Korioth this summer, he recognizes that his elevation has made him a role model, most obviously in Hungary but also across the region. He insists there is no secret to his career at Bosch, “just to be really open to cultures, to learning, to growing and showing and proving to the management, the stakeholders, that you can be successful.” The cultural point is interesting. Szászi says he learned a lot about other cultures, he lived for eight years in Germany, and this influenced his leadership style. His “Bosch story” started
17 years
ago; Szászi tells the Budapest Business Journal he identified with the company culture, which he could see recognized and rewarded talent. “You need to find out how you can be successful, which skills you need to apply to a certain situation, be it negotiation, a leadership situation, a face-to-face meeting with your associates, or an inspirational presentation, like a town hall meeting,” he explains. “This is basically the task for leaders, for CEOs; to have a good perception, a good feeling of how to act in different situations. And this is my strength; I can balance how to behave in different situations, which communications style needs to be applied.” Korioth left his Hungarian and regional role to take on promotion as president of the Bosch Group in Turkey and its representative for the Middle East. Szászi is full of praise for the results achieved by his predecessor
but adds that teamwork was and is fundamental to continued success in the region, alongside maintaining competitiveness. “But next to the competitiveness, we need to be competent. This is very important; this is our USP. So, this is my first aspiration; to improve our competitiveness and at the same time to improve the competencies. We need to adapt and adjust the organization; we need to adjust and improve our skills. And this is a continuous improvement process,” Szászi explains.
Broader Ecosystem
Part of that improvement program means looking beyond Bosch and tapping into the broader ecosystem, Szászi believes.
“Hungary is very important within the Bosch Group and is a significant contributor to its results. We are certainly growing in terms of autonomous driving and e-mobility, which are crucial trends.” “The universities have some competencies, research and innovation, and basic or applied research competencies especially, that we don’t,” he points out. He also wants to involve what he calls the “innovation power” of local SMEs and startups. No one should think Szászi simply wants to use the universities for the betterment of Bosch, however. Before joining the company, he spent seven years as an academic researcher and teacher. He says he knows how good the system can be from the
István Szászi inside and feels duty-bound to help higher-level education in Hungary. “We need to support the universities with industrial knowledge, start common projects with them that bring the automobile industry inside the walls of the university. We have a responsibility to show up at the universities, to teach the students, to be a kind of industrial professor and bring our knowledge into universities,” Szászi reasons. We hear a lot nowadays about a shortage of skilled labor. Does this affect Bosch today? Might it become a problem tomorrow? Szászi seems more upbeat on this than many to whom the BBJ has spoken. Partly that comes down to his faith in the universities, as outlined above, and the “intense collaboration” his company has been building with them. But it also results from the drawing power of Bosch itself, with its ability to offer young talents the opportunity of “working on the most attractive megatrends in the automotive industry like autonomous driving, like electrification, like artificial intelligence or, in manufacturing, like
Industry
4.0
and factories of the future.” The group has three competence centers dealing with autonomous driving based in Germany, California and Hungary. The Bosch Engineering Center Budapest has 3,000 engineers and is Bosch’s largest R&D location in Europe after Germany.
“It is dealing with those topics that are part of the paradigm change that is taking place today in the automotive industry in terms of power train solutions, in terms of fuel-cell, in terms of pure battery electric vehicles,” says Szászi. He argues that the center offers engineers “something unique, not only for Hungary and within Hungary, but also Europe.”
Innovation Power
Across the region, from roughly 20,000 colleagues, 4,500 are R&D associates. That, he says, shows the “innovation power of the company.” Every week the Budapest engineering center submits five so-called inventor reports, three of which, on average, go on to be filed as patents. Other areas of innovation Bosch is working on include Industry 4.0 and a blending of artificial intelligence and the Internet of Things, or AIoT. “Bosch is the number one industrial company in terms of IoT,” Szászi says. The firm has set itself the target that all its products should be connected to AI technology, either directly in terms of features or indirectly in terms of production. And the motto for all its technology is “It should be safe. It should be robust. And it should be explainable.” And what of that other great buzzword of our times, sustainability? Szászi says this is “the most important area for Bosch. We achieved our ambitious goal significantly earlier and more costeffectively than planned. Bosch was climate neutral in February 2020.” The next goal is a further reduction in CO2 output by 2030 of an absolute 15% on the 2018 levels, the equivalent of 67 million tonnes. In the automotive sector, it has long-term ambitions to develop fuel cell technology, while midterm targets center on e-axels, “a 48-volt system we believe will be critical to transforming the auto industry.” Short-term measures include making internal combustion engines (ICE) as efficient as possible, crucial
since
95%
of the 1.4 billion vehicles on Earth today are still ICE-powered. It will be a long time before zero-emission engines are in the ascendence. Asked if Bosch will bring more investments, jobs, or projects to Hungary anytime soon, Szászi points to recent expansions at the automotive steering factory in Maklár and the creation of a service center there, as well as a new production hall at the power tools plant in Miskolc. Also in Miskolc, Robert Bosch Energy and Body Systems Kft. is preparing to expand production of a number of its products, including electric bicycles. The automotive plant in Hatvan is gearing up to manufacture new components related to electromobility and automated driving. In Budapest, the Engineering Center campus is undergoing a 90,000 sqm expansion, the first phase worth EUR 120 million. “What I can say is we are stable, we are investing. Hungary is very important within the Bosch Group and is a significant contributor to its results. We are certainly growing in terms of autonomous driving and e-mobility, which are crucial trends.”
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Budapest Business Journal | December 17, 2021 – January 13, 2022
PRESENTED CONTENT
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Business | 9
OTP Global Markets Going From Strength to Strength In 2020, OTP Bank adopted a new approach to its regional strategy when it integrated its investment, markets (formerly treasury), advisory, private and prestige banking services at the group level. This initiative was launched as OTP Global Markets. Today, it is in charge of other OTP Group services, including securities origination, custody management, and discretionary portfolio management. It also has its own research department. DAVID HOLZER
As a market innovation in a region defined as unified but with massive diversity between countries, OTP Global Markets is already proving to be remarkably successful. Today, Global Markets has around 73,000 private banking clients in the region and manages more than EUR 9 billion worth of customer assets. OTP leads the way in Hungary with 24,000 private banking clients and managed assets of HUF 2.543 trillion. Recently, OTP Global Markets announced it had been named “Best Private Bank in Hungary” for the ninth year in the Global Private Banking Awards presented by The Banker and Professional Wealth Management magazines. Its Ukrainian subsidiary was named “Best Private Bank in Ukraine” for the third time. Global Finance magazine named OTP Private Banking “Best Private Bank of Central and Eastern Europe” for the first time in its annual Banks Awards for 2022. CKB, OTP’s Montenegrin subsidiary, won the “Best Private Bank in Montenegro” award.
Attila Bánfi, managing director of OTP Global Markets. Against this backdrop of continued growth, outstanding success in the region, and recognition from some of the world’s most respected institutions, I sat down with Attila Bánfi, managing director of OTP Global Markets, to discuss OTP Global Markets and its future. The MD has more than 20 years of professional experience in financial markets, investment services, and asset management. BBJ: Could you tell me why the name change came about? Attila Bánfi: OTP Group had become a major financial institution in Central and Eastern Europe, and we needed to make it clear that we’re a key financial service provider in the region and a regional player in wealth management and investment services. We also wanted to let our customers know they can access all the global markets and benefit from our financial solutions at the same time. We’re working hard to fulfill the promise our name suggests. BBJ: Is the private banking sector growing in the region? AB: Sure, it’s growing worldwide, not just in Hungary and the region. BBJ: What is the vision of OTP Global Markets? AB: To serve any customer from any location, regardless of where they are, with the same exceptional level of service. This is particularly gamechanging for customers who are present in several countries because they have access to a single source for a complex set of services. I hope our efforts will help reach these goals and put us in the region’s top three within three years.
BBJ: How have customers and the industry responded to the launch of OTP Global Markets? AB: The number of customers is constantly growing, and more and more of them like the fact that we’re with them from idea generation to transaction. We’re also expanding in our subsidiary banks, especially now that we’ve integrated our private bank and investment services. The feedback we’re getting is that customers and the industry are curious about where we go next. BBJ: OTP Global Markets has recently received an impressive number of awards. How do you feel about that? AB: Awards are important because they show you’re on the right track and give external validation. We are especially delighted that Global Finance magazine named OTP Private Banking “Best Private Bank of Central and Eastern Europe” for the first time this November. Apart from the feedback from our customers, these are important indicators for us. BBJ: Do you feel there are characteristics that set OTP Global Markets apart within the Hungarian and regional markets? AB: I would say we’re exceptionally strong when it comes to innovation and digitization. OTP Group is investing massively in digitization to support this. OTP Global Markets has innovation in its DNA, too, especially offering support to customers in one channel from idea generation to transaction. Basically, we have all the financial and capital market functions, investment services, and wealth management solutions that
the bank can offer to its customers under one umbrella. Our experience also means we can provide excellent investment advice and customers can trust us. BBJ: Do you have a five-year plan? AB: Every aspect of banking is changing rapidly; just look at the market before and after COVID. As I said, digitization is a priority. This is connected to the need to offer customers unique solutions and truly personal relationship management. We’re also focusing on increasing standardization across the entire group. In addition, we’re agile and proactive, always looking for new solutions and creating innovations to take over the market. BBJ: Why do you personally enjoy what you do? AB: I like the feeling that I, and the 300 regional experts I work with, am part of something new that’s really innovative and creative but also backed by powerful business logic. It seems to work, so that’s very satisfying. I also appreciate how much support we get from the bank’s management and colleagues in other departments, along with local colleagues in the subsidiary banks. BBJ: Most of all, what do you want customers to know about OTP Global Markets? AB: That we listen to our customers and would like to have a long-term partnership with them. Whatever happens with the markets, we’ll always be there for them to offer the best possible business or investment solutions.
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Business
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Budapest Business Journal | December 17, 2021 – January 13, 2022
Company ///news strengthen its position in the chemical industry, creating jobs and accelerating the company’s transformation,” Zsombor Márton, head of MOL’s petrochemicals Hungarian oil and gas company MOL division, said. With the investment, MOL will add polyols, essential components expects to finish construction of a EUR used by several industries, including 1.3 billion polyol plant it is building in the textile, furniture, automotive and Tiszaújváros (175 km northeast of Budapest) construction sector, to its product palette. in the second half of 2022 according to portfolio.hu. The investment, launched in fall When the plant starts operating, MOL will become the first integrated polyol producer 2019, is 89% complete, MOL said. “With the construction of the high-technology complex, in the region. The group plans to invest USD 4.5 bln in petrochemicals by 2030. unique in the region, MOL will further
MOL Expects to Complete EUR 1.3 bln Polyol Plant in H2 2022
Tata Increasing Headcount by 300
Indian-owned Tata Consultancy Services announced on Dec. 3 plans to add 300 more staff in Budapest over the next two years, according to state news agency MTI. At an event to mark its 20th anniversary in Hungary, TCS said it would make new hires in financial analysis, market research and IT. Minister of Foreign Affairs and Trade Péter Szijjártó said TCS’ decision to pick Hungary again from the hundred countries in which it has a presence is a “great acknowledgment.” After the expansion, around 3,000 people will work for the company in Budapest, he added. He noted that 99 nationalities speaking 33 languages work for Tata in the capital.
Gov’t Signs Strategic Agreement With Roche Hungary’s government signed a strategic cooperation agreement with Swiss pharmaceutical group Roche on Dec. 3, according to novekedes.hu (Growth). Minister of Foreign Affairs and Trade Péter Szijjártó noted that the deal is the eighth the government has signed with a pharmaceutical company. He said that the output of Hungary’s pharma sector reached a record HUF 963 billion last year, adding that around 85% of local drug
makers’ production is exported. Pictured is Raffaella Bondi, managing director of Roche Magyarország Kft., speaking at the signing event at the Ministry of Foreign Affairs and Trade. Roche has been present in Hungary for 37 years. In addition to its pharmaceutical and diagnostic activities, it has also established a quality assurance and business services center in Budapest. Photo by Zoltán Balogh / MTI
Chip Shortage, Shutdowns Reduce Magyar Suzuki’s Output 25%
Shutdowns because of the global microchip shortage and supply chain interruptions will reduce output at Japanese automaker Suzuki’s plant in Esztergom (50 km northwest of Budapest) by about 25% from this year’s 143,000-vehicle production target, business daily Világgazdaság (Global Economy) said. Production at the Magyar Suzuki plant has been cut to a single shift several times this year because of the global semi-conductor shortage, and a total shutdown took place for two weeks in September, the paper said. In December, the plant is operating with a single shift until the year-end shutdown around Christmas, it added. Last year, Magyar Suzuki turned out 112,475 vehicles in Esztergom.
Mercedes Brings Forward Holiday Break
The Mercedes factory in Kecskemét (95 km southeast of Budapest) has brought forward the start of its Christmas break in line with the constantly changing supply situation, Mercedes-Benz Manufacturing Hungary Kft. said on Dec. 11, according to hrportal. hu. Production stopped on Dec. 10 and will resume on Jan. 12. Manufacturing at the Mercedes factory in Kecskemét was originally due to have halted on Dec. 15. There have been no shifts on Fridays since Oct. 18, when the factory switched to a four-day working week.
KPMG: Push and Pull Factors Make ESG Inevitable Sustainability as a business concept has been around for well over a decade. ESG, adding social and governance aspects to the environmental mix, is much newer but will come to be a dominant force in how companies think, consultancy KPMG says. ROBIN MARSHALL
“Sustainability has been on our radar for 15 years, maybe more. The term ESG, and everything a little more complex around that, is in the last three years,” Ágnes Rakó, partner for diversity at KPMG, tells the Budapest Business Journal. “Many entities have already done something on the sustainability side, and they are in much better shape to turn that kind of effort to focus on the S-G now.” And focus they will have to. International bodies such as the United Nations and the European Union are increasingly demanding businesses meet ESG values on sustainability and diversity. Customers and employees, especially the younger generation, actively look for that. Multinational firms must respond to these forces, which both push and pull, and that means their SME suppliers will have to do the same.
While there is a broad understanding of ESG, there are no agreed standards, but steps are underway to achieve that. As part of the COP26 U.N. climate change conference in Glasgow this fall, the International Financial Reporting Standards Foundation announced on Nov. 3, 2021, that it and the International Organization of Securities Commissions will work to create the International Sustainability Standards Board and deliver a “comprehensive global baseline of sustainability-related disclosure standards,” according to the website ETF Stream. “Having this standardized would help entities meet requirements because it will be clear what they should provide and will also help the readers of that information assess and compare,” Rakó points out. “If we look at the verifier standards that are currently out there, they do not only focus on the ‘E,’ but also on the ‘S’ and ‘G.’” That, she says, will be the trend going forward.
the whole ‘E’ agenda. The other is the entities with more than 250 employees.” In Hungarian terms, that would mean the largest companies, but at the EU level, it is comparatively small. Interestingly, the EU had initially aimed at firms of more than 500 employees. It is clear it wants to take in as many businesses as possible, and not only directly. To meet their ESG requirements, suppliers in their value chains will also have to be compliant. “The expectation is that it will trickle down into the value chains,” Rakó says. Firms will need to hit ESG criteria on sustainability and diversity to win contracts as multinational suppliers, but also to get access to cheaper “green” financing. The business case is already evident in that regard, the Ágnes Rakó KPMG partner says. Hungary, in many respects, is in line with its Central and Eastern Front Runner European peers when it comes to ESG “The EU is definitely a front runner reporting. “Maybe one difference is here, and I think in this case it will that the National Bank of Hungary is be an advantage for EU firms very much advanced with its green because it [ESG reporting] will be programs, and, for example, the capital an advantage on the global markets requirement relief, so the pressure too. Frameworks, like the EU from the local regulators is maybe a taxonomy, are already out in draft little bit bigger.” form and will come into force in the next two to three years.” For more on ESG matters, see our article The EU is targeting two groups, the “ESG: Time to Gear up for new Green age partner says. “One is the regulated is Now” on pages 9-12 of our Investing sector, because they believe if they in Hungary 2022 publication, available have a hold on it, they can push to purchase in the bbj.hu webshop.
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The 33rd General Assembly and Board Elections of the American Chamber of Commerce Hungary were held in person and face-to-face on December 1, 2021, and served as yet another occasion to demonstrate the power of the AmCham community. LEVENTE HÖRÖMPÖLI-TÓTH
Like most organizations, AmCham endured a difficult time during the pandemic. However, as President Zoltán Szabó said in his report on the activities of the past 12 months, the chamber had emerged more robust than ever. “We learned how to be more effective in what we do and how we do it. We managed to become more streamlined in terms of all three pillars of our strategy, the Policy Agenda; that is smart growth, human capital and business environment,” he said. Members now have greater freedom to drive more bottom-up activities and cooperate for more tangible results. Work continued in committees, working groups and in the form of initiatives despite the COVID situation, the president said. The chamber’s annual policy recommendation pack, which lays the foundation for its annual advocacy work, was duly forwarded to the competent governmental bodies. Events switched back to face-to-face mode from the early summer on, with the highlight being the seventh edition of the Business Meets Government Summit on October 8, Szabó recalled. The latter featured renowned guests such as Minister of Foreign Affairs and Trade Péter Szijjártó and the deputy governor of the National Bank of Hungary Barnabás Virág. “What really matters is the people of our community who continued to support our cause and were always ready to go the extra mile, even during the tough times of the pandemic,” Szabó noted.
Stable Finances
“AmCham Hungary’s finances are stable, but we are only as strong as our membership,” Secretary-Treasurer Mike
Photo by Lázár Todoroff.
Solid Foundations, Ambitious Plans
Carlson reminded the audience, noting that up to 70% of total revenues come from membership fees. Therefore, membership retention is the key focus area for 2022. The year 2020 was closed with a HUF 21.5 million profit, with total revenues of HUF 178.7 mln and total expenditures of HUF 157.2 mln. All that was achieved even though incomes from events were down by 69% compared to 2019. However, the financial outlook is positive, with Carlson planning to stick to the rigor of securing a solid foundation. There will be a lot happening next year under the three core pillars of AmCham’s activity portfolio. The advocacy effort will see a series of new events such as conferences on healthcare and sustainability, not to mention the return of the HR Dream Day. State secretary roundtables, policy and business forums, and meetings with government participants are also in the pipeline, as chief executive officer Írisz Lippai-Nagy revealed in her presentation of the 2022 annual plan. “We are not experts of a particular area, but we are very good at how to synthesize all your input and make sure it represents the values and interests of the AmCham community,” Lippai-Nagy said. “Feel free to suggest new topics that should be
added to our Policy Agenda or that can be a trigger to set up a new committee. Our policy officers are always there for you if you have any suggestions.” Under the knowledge pillar, members will continue to have the opportunity to sharpen their skills further and benefit from seminars, leadership masterclass series, board simulations, and career orientation programs.
Community Events
AmCham community events will, of course, continue in the upcoming months. Patron dinners are underway, and there will be plenty of occasions for informal networking in afterhours events and at the annual Insight dinner. The hope is that AmCham will be able to bring back its hugely popular Independence Day family celebration and the Thanksgiving charity dinner in 2022 without any restrictions. The membership satisfaction survey is another novelty to look forward to. “AmCham is a powerful community, and although working online is effective to share knowledge and have discussions, nothing matches being together,” LippaiNagy concluded. She also announced that next year would see an end to the paper copy era of the Journal magazine.
Business | 11
AmCham Foundation (ACF) is a bridge between donors and beneficiaries, and it’s a role model for CSR and related activities, said Edit Bencsik in her report on the latest results of the charitable organization. 2021 was big in challenges and small in opportunities and donations. Despite the limited resources, important achievements were made, from foster home refurbishment to computer donations. A total of HUF 1.5 mln was raised for three educational institutions. As is traditional, the general assembly also served as the occasion for presenting the annual Dr. Iván Völgyes Award. Völgyes is deemed by many to have been the father of modern lobbying in Hungary. He left for the United States in 1956, and he went on to bring numerous U.S.-based companies to Hungary, generating more than USD 1 billion in investments. This year Dr. Péter Komáromi, chairman of the board of trustees at the ACF, won the award. In the board elections LeasePlan CEO Timea Pesti won the role of First Vice President. Mike Carlson was confirmed as Secretary-Treasurer, being the only candidate. Matt Zeller and Krisztián Toka were voted Board Members-at-Large, with Dr. Andrea Jádi Németh reelected as the chairperson of the Supervisory Board. David Young remains the Supervisory Board member.
The new Board of AmCham Hungary is as follows: • President: Zoltán Szabó • First Vice President: Timea Pesti • Second Vice President: Dr. Dávid Kőhegyi • Secretary Treasurer: Mike Carlson • Board Members-at-Large: Ildikó Beck, Robert Bence, Péter Csucska, István Katona, Orsolya Ludwig, Krisztián Toka, Matt Zeller • Supervisory Board: Dr. Andrea Jádi Németh, chairperson, David Young, member
Photo by Lázár Todoroff.
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Budapest Business Journal | December 17, 2021 – January 13, 2022
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Business
PRESENTED CONTENT
Learning to be Responsible and Responsive Around COVID and ESG Moving country can be stressful. Relocating to a place where you don’t speak the language is daunting. Changing jobs always presents challenges, especially in a leadership position. But how about doing all three at the same time amid a pandemic? That was what faced Peter Gazik when he took over at Telenor, as he tells the Budapest Business Journal. ROBIN MARSHALL
He jokes that he officially took over the company on Jan. 1, 2021, “but the first four or five months are not counted because of COVID. Honestly, it has to be said that it was not easy to really grasp the company when I could not see the company,” the CEO admits. The lifting of restrictions and adoption of a hybrid model has helped. “From June onwards, we are following a three-to-two pattern; we expect our colleagues to show up in the office roughly three days a week. And we are happy to continue operating in this mode.” Business life has, necessarily, continued. January, for example, saw the 1800- and 900-megahertz mobile license auction. Telenor has also been working on its own projects. “In September this year, in both the B2B and B2C markets, we made a step towards the home service offering. In terms of the B2C, the household proposition, our enhanced home proposition, will be followed by what we call fixed wireless access next year. With B2B, we are moving towards a fixed mobile cloud convergence offering.” Gazik was previously CEO at 02 Slovakia. The Telenor boss says a noticeable difference between the markets beyond size is that Slovakia has four leading mobile players, compared to Hungary’s three. Here, it is instead the fixed market with four actors in play. “What we see here on the fixed side, the aggressiveness of the competition, I witnessed on the mobile side. O2 in Slovakia entered the market as the third company, so it was natural to
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finance these investments; how to create synergies and partnerships smartly, maybe also how to consolidate,” he says. Despite COVID, Telenor Hungary has demonstrated solid business growth. Gazik says his industry was able to prove itself during COVID. “I would say our reliability in these uneasy times is an important part of the puzzle; we proved to be relevant and reliable partners for customers, for businesses, for societies, and lots of activities did shift online.” The macroeconomic picture also helps, of course. “The genuine growth [of Telenor] in Hungary is something that is naturally feeding on the growth of the economy,” he acknowledges. But he adds that the products and packages it has developed, and is developing, more than played their part too.
Top Priority
Gazik says the industry is moving at a pace that he has not seen since he became involved with it in 2007. One top priority is to invest in his people. “Whatever happens in the market, I want to make sure that this company has the right people to grasp those opportunities that arise.” There is “a huge war for talent,” he adds, with labor costs “spiraling upwards.” Beyond that, network modernization and 5G rollout “will determine our pace over the next couple of years.” He says learnings from the first waves are now being implemented as part of “business as usual,” making Telenor “more efficient and lean, being able to serve the customer better because, clearly, customer habits have changed and in many ways will remain changed, regardless of when this pandemic is over.” Learnings of a different kind have been coming to the fore in the form of ESG. Peter Gazik Gazik says he believes it is up to us as individuals to play our part, noting that he has changed: 10 or 15 years ago, he was has bought Telenor Montenegro from not separating waste at home. For his kids, start as mobile-only and gradually PPF and has signed to acquire Digi in on the other hand, it would be unnatural transform into the household offerings,” Hungary, subject to approval. Is more not to see four or five bins at home. he explains. “Even though the market consolidation likely? “As much as we as individuals go dynamics are somewhat different, the “Apart from COVID and the many through this transformation, the same position of how to enter and develop are things that have been happening happens in the corporate world,” he says. fairly similar.” internally, the last year has also been Telenor itself benefits from an HQ built Telenor Hungary’s majority owner intense because of the things happening by the previous Norwegian owners that since July 2018 is the Czech investment around us, which we follow and reflect was one of the biggest environmentally fund PPF, with the state of Hungary on and monitor and evaluate,” Gazik conscious buildings in Europe when it holding a 25% share through Antenna acknowledges. opened a decade ago. That sets a daily Hungária since November 2019. Gazik “Coming from a country where example to staff. insists that does not impact the way the competition happened between “From September onwards, we have Telenor goes about its business. four players, the fact that there is a had a dedicated commercial proposition Strategic Partner consolidation happening in Hungary is collecting used devices from the “Antenna Hungária is an important local not necessarily worrying me. In many whole country. More than 25,000 older strategic partner. We have been trying cases, the mobile-only companies can electronic devices were collected thanks to look for all the synergies we can find be somewhat more flexible or agile, can to this offering. And that is a nice to enhance our strategy and make sure draw maybe more efficiently on what example of how we can tie the natural that we draw on the opportunities that technology is bringing, 5G and the many commercial things we do as a company these two companies have. But, back to things that are now starting to dominate with very important responsible your question; the transaction has not the industry,” he explains. “We are still elements. So, these two are not detached changed the leadership, the management, working on us being the one who has the but are rather perceived as natural the organizational structure and the best value offering on the market.” and this, I believe, is a very good way decision-making in the main strategic He insists he has no crystal ball but forward for the company.” initiatives of Telenor Hungary. The notes that the industry is becoming more The company is currently reporting management and leadership are in full capex heavy, a fact that is Europe-wide according to GRI standards. Will it control of PPF, and Antenna Hungária rather than Hungary-specific. change its non-financial reports? “ESG has a passive position.” “All layers of infrastructure, be it will gain importance, and we are working 2021 has seen movement in the 4G, 5G, potentially 6G and 7G going on this in other countries. Adopting it is telecoms market: The ambitious forward, will require operators to start something we will discuss. We want to Budapest-based listed IT company 4iG being innovative in terms of how they be both responsible and responsive.”
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Budapest Business Journal | December 17, 2021 – January 13, 2022
Business | 13
Digital Development: Faring Well, but Room for Improvement According to Microsoft’s Digital Futures Index, a data model that maps digital development using a wide range of parameters, Hungary has an average ranking in the CEE region. Game changers would include techsavvy leaders and a digital-first government to significantly boost the country’s competitiveness. LEVENTE HÖRÖMPÖLI-TÓTH
Microsoft’s model analyzed data from, among others, Eurostat, the World Bank, the OECD, Euromonitor, and the Digital Economy and Society Index (DESI) to create 55 parameters that describe the digital maturity of the Hungarian economy. The purpose was to give a snapshot of the size of the digital sector and to see how businesses, the labor market, digital public services, infrastructure, and human capital compared to other CEE countries and some of the European digital frontrunners. Microsoft says that the insights provide an overview of Hungary’s strengths as well as development opportunities and can serve as a basis for making critical business and national economy-level decisions. Hungary ranks way above the average, set at 100 points by the Digital Futures Index, in several categories. For one, proportionally, Hungarian businesses employ most IT professionals. The country also scores particularly high on connectivity, smartphone usage and remote working maturity, Christopher
Christopher Mattheisen, managing director of Microsoft Magyarország. Mattheisen, managing director of Microsoft Magyarország, highlighted. Furthermore, relatively low living costs and well-developed digital infrastructure are attracting digital nomads in record numbers. The size of the digital economy surpasses that of automotive, accounting
for
6%
of GDP, and a McKinsey report estimates that it can add some EUR 9 billion to the economic output by 2025. As far as businesses are concerned, the Digital Futures Index finds that more investment leads to more innovation, and cloud technology boosts not only innovation but also productivity.
Drive Transformation
“It is more important than ever that senior managers in the age group 45-64 are digitally-savvy and can drive digital transformation within their organization,” Mattheisen said. Part of the long-term success is hybrid working. Team collaboration is typically boosted by flexible working conditions that help retain talent as well. “A new generation of workers take the existence of hybrid working culture and infrastructure for granted,” Gabriella Csanak, director of marketing and operations at Microsoft Magyarország, explained. Training is another issue of which the importance can’t be emphasized enough. Return on investment into technology has substantial yields only if skilled labor is available that adopts and runs it across the entire spectrum of the operation, Microsoft says. Employing “learning managers,” who arrange technology-related training, should be prioritized. This can be part of
the life-long learning concept that still needs to be embraced on a larger scale. Adult training and reskilling should involve as many people as possible at the workplace since knowledge transfer can enhance productivity. The most successful businesses adopt technology such as AI, the Internet of Things and the Cloud in their everyday practices.
“It is more important than ever that senior managers in the age group 45-64 are digitallysavvy and can drive digital transformation within their organization.” “In Hungary, there are great IT specialists, but even more companies need to invest in Cloud and training,” Csanak said. He added that this is indispensable for better exploiting digital solutions and minimizing worker fluctuation.
Room for Improvement
In some areas there is definitely room for improvement. Gender diversity, for one, is 40% lower than the average, which screams for making IT more attractive for women. The number of students with STEM studies is 27% lower than the CEE average. The level of digital skills in the 16-29 age group is similarly alarming. On the other hand, the ICT-related labor shortage is at a record high. In addition, less than 10% of businesses provide
compulsory IT training for their workforce. For the sake of comparison, in Estonia, the figure is 35%. The level of digitization of public services received a score
of
84;
its improvement is important because it triggers an entire cycle of processes. People get used to using digital services, which affects their needs and demands in general and that, in turn, creates more demand for digital services. “The result is bigger digital wealth,” Mattheisen said. Digital literacy goes hand in hand with better quality of life. The findings of the Digital Futures Index indicate that quality of life is higher where the elderly and women have better digital skills. This is also connected with sustainability: the more mature society is in terms of digital knowledge, the more sustainable lifestyles can be maintained. Harnessing the power of data can accelerate positive trends. As Mattheisen noted, no business is immune to change, and those that have regarded their data assets as a strategic tool all along have fared better. Sophisticated data analytics will provide added value on all levels, from the government to businesses and citizens. All in all, those countries that are better off in terms of digital transformation also score better on indicators that reflect economic and social development. In other words, they are “greener,” more innovative and competitive, and they have a higher living standard. In Hungary, the continuous cooperation of government and the market is a precondition for progress, Microsoft says.
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Business
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Budapest Business Journal | December 17, 2021 – January 13, 2022
Can the Fed Engineer a Soft Landing? Corporate Finance columnist Les Nemethy looks at the tension between loose monetary policy and rising inflation and what that might mean for the future direction of the markets. When Apollo 13 was re-entering earth’s atmosphere, a re-entry angle of fewer than 5.2 degrees would have seen the craft bounce off the atmosphere into space. With a re-entry angle of greater than 7.8 degrees, the craft would have burned up. There was only a 2.6-degree range of safety. This analogy illustrates the challenge currently faced by the U.S. Federal Reserve. If it tightens too far too fast (for example, tapers the USD 120 billion monthly bond purchases and increases interest rates), stock and bond markets will crash; if it allows the current exceedingly loose monetary policy to prevail, inflation may careen out of control. The Fed claims it will take a “datadriven” approach, taking its cues from the market. The market now expects tapering of bond purchases and increased interest rates. However, anything beyond a relatively minor increase in interest rates and the markets will push back (a process known as “tantrums”). The Fed may repeatedly try to tighten. This bouncing back and forth will create volatility, but the result will likely be a continuation of inflation and negative real interest rates. Most economists, and the market itself, are expecting inflation to diminish from the 6.8% annual rate announced on December 10, which was the highest inflation rate since 1982. There were specific base rate effects in 2020, and there are some strong deflationary forces at play today (for example, aging demographics and technological innovation).
Does U.S. Secretary of the Treasury Janet Yellen have a blind spot when it comes to inflation? Photo by Alexandros Michailidis / Shutterstock.com That said, inflation may yet prove surprisingly stubborn for a number of reasons. • The world faces a self-inflicted energy crisis. The goal of carbon neutrality has deterred energy majors from investing in future fossil energy supply while creating an inflationary spiral in commodities required for electrification. We face record oil and gas prices, which could go higher. • Ammonia prices have roughly quadrupled in the last 18 months. This is the most critical input for agriculture. Substantial food inflation is virtually inevitable. • The United States has reached full employment (11 million jobs going begging), leading to wage inflation. • Various bottlenecks in the global economy (from container shipping to microchips) are likely to take years to resolve. • The longer inflation prevails, the more inflationary expectations become embedded. We have perhaps already passed a tipping point. There is no one in the United States with sufficient backbone to make the painful decisions necessary to curtail inflation in the manner of Paul Volcker, the American economist who served two terms as the 12th Chair of the Federal Reserve under U.S. presidents Jimmy Carter and Ronald Reagan, and who is
widely credited with having ended the high levels of inflation seen in America during the 1970s and early 1980s. • With Lael Brainard appointed as Fed Vice-Chair (confirmation pending), the Fed has tilted farther towards loose monetary policy. • U.S. Secretary of the Treasury Janet Yellen (who was the 15th Fed Chair) seems to have a blind spot when it comes to inflation. • A Democratically controlled Congress seems to believe in so-called Modern Monetary Policy (a theory justifying printing almost limitless amounts of money).
Skyrocketed
Even if a latter-day Volcker did exist today, debt levels are far higher than during his era. Global debt has skyrocketed to more than 365% of global GDP and is still rising. The U.S. Government must pay an additional USD 290 bln in interest costs for every percent increase in bond rates. In 2020, the U.S. Federal Government collected just over USD 3 trillion in taxes while spending almost USD 6.5 tln. If the 10-year treasury bond rate would revert to 4-5% (as Jamie Dimon, CEO of JPMorgan, predicts), not only would that trigger an extra trillion in interest expenditures in the United States,
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The Corporate Finance Column
but defaults would also be triggered on emerging market debt, junk bonds, etc. The U.S. Government could be heading towards a government debt/GDP ratio of 200% within 5-10 years. There is much incentive for the Fed to back off rate increases. The pandemic has served as the trigger and excuse for exceedingly loose monetary policy, untargeted helicopter money to U.S. citizens, and lending guarantees to banks. The unprecedented uncertainty surrounding COVID mutations (think of the initial panic in response to the discovery of Omicron just a few weeks ago) makes planning the re-entry angle next to impossible. U.S. President Joe Biden faces political heat from rising inflation; heat from a market collapse, recession or depression would be far greater. Continuation of inflation at 5-7%, with 10-year treasuries at 2-3%, would provide the enormous benefit of inflating away the national debt, a temptation difficult to resist. Economist Russell Napier argues that government guarantees have encouraged significantly increased bank lending, a potentially much larger source of money supply increase than the Fed printing money, unlike the money printing during the 2008 crisis, which ended up in bank reserves, not increasing lending and money supply. Napier argues the Fed is becoming irrelevant. The coming decade is likely to be characterized by inflation and negative real interest rates. Count on volatility! Disclaimer: This article is for educational purposes only and must not be construed as investment advice. Investors should obtain their own financial advice.
Les Nemethy is CEO of EuroPhoenix Financial Advisers Ltd. (www.europhoenix.com), a Central European corporate finance firm. He is a former World Banker, author of Business Exit Planning (www. businessexitplanningbook.com), and a previous president of the American Chamber of Commerce in Hungary.
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PRESENTED CONTENT
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Business | 15
Serving the Future With Applied Research BBJ: What results do you expect in the short and long term? NG: One of the short-term results will be if we can cover the whole surface of Hungary with applied R&D points, and anyone who goes to a network member’s site in, say, Miskolc, Debrecen or Győr will get information on how the network can help their business, and they will be connected to the right team. And in the long term, the aim is to transform Hungary from its current phase, which is classical manufacturing, low-cost and labor-intensive, into an innovative development country with lots of engineers and lots of R&D companies, with higher added-value. We can help in this process as a network so that if a business gets stuck, it has somewhere to turn to for solutions and help.
The Zoltán Bay National Applied Research Institute Network was established on Sep. 20, 2021. The basic idea was conceived in 1993 by Ernő Pungor, a former Minister of Research and Development and the first head of the Zoltán Bay Research Institute. Industrial research institutes had been operating in Hungary since the 1950s, but after the fall of communism, they were closed down.
BBJ: How does the network support environmental protection? NG: One of our key themes is the circular economy, where network members can help in several areas, from the development of new materials to the development and testing of environmentally friendly building materials, as well as various analytics on the recycling cycle and its logistics.
BENCE GAÁL
As there was much demand for government-funded applied research, work was restarted in several areas towards the end of the century. The Zoltán Bay National Applied Research Institute Network was modeled after the German Fraunhofer Network, which has approximately 30,000 researchers. Dr. Norbert Grasselli, head of the network, spoke with the Budapest Business Journal about the network’s aims and operation. BBJ: What does the “applied research” in the network’s name mean? Norbert Grasselli: To put it simply, basic research is a form of research that is also described as exploratory research. This could be, for example, the proof of mathematical formulae that are of great long-term importance to humankind, but where the results may not have an immediate market application. Applied research, also known as industrial research, leads to results that can be utilized in the markets relatively quickly. Innovation itself is also seen as a separate category. As someone once aptly described it, “Innovation is research and development that makes money.” BBJ: What is the purpose of the network? NG: The network’s primary objective is to provide industrial applied research services to companies in Hungary and neighboring countries. This means that network partners can help with research where a company is doing some kind of development, and their own engineers get stuck and can’t move forward, or where they are trying to make the prototype of a completely new product. Our network can offer solutions in these situations.
Norbert Grasselli BBJ: Who are the founding members? NG: The network is based at the Zoltán Bay Applied Research Nonprofit Kft., where, among other areas, research is carried out on topics such as material and technology development, material testing and biotechnology. Other founding members are the Automotive Test Track Zala Kft., which carries out testing and development related to the main trends of the automotive industry, the ÉMI Construction Quality Control Innovation Non-profit Kft., which specializes in construction industryrelated R&D, and the KTI Transport Science Institute Non-profit Kft., which, in addition to providing training and examinations, is responsible for the organization and development of Hungarian land, air and sea transport. BBJ: How does the network work in practice? NG: The members signed the founding documents on Sep. 20, 2021, and the first year will be a so-called “founding year” in the life of the network, after which the four founding members will elect a chairperson for three years, and new members will also be able to join. The network will be governed by a members’ forum composed of the leaders of the four founding companies, and we will soon establish an innovation advisory board, which is expected to add eight consultative members to the members’ forum. The network also has a cabinet
responsible for operational tasks, such as legal, financial, and PR/marketing. BBJ: How does the funding of the network work? NG: Funding will follow the Fraunhofer model, which means that government funding may cover up to one-third of the total budget, with the rest coming from the market and tenders. In the long term, this means strengthening research and development areas and services that companies will require for their future development. BBJ: What research areas are supported? NG: At the moment, there are two broad areas of research: transport/mobility, which includes everything from drones to automobiles to rail transport, and materials, which is everything from building materials to metals. The two strategic areas are linked horizontally by the theme of the circular economy. These are areas where the network members can carry out specific sub-tasks, and if we coordinate these sub-tasks, synergies will be created to establish more significant research hubs. Integrated network solutions can be a huge competitive advantage for many businesses, so I encourage all interested parties to contact the network members. In addition, we would like to launch our own research, which will mainly be applied research tailored around prototyping, small-scale production or manufacturing technology.
BBJ: How can network members help solve the food problem, for example? NG: The biotechnology division of the Zoltán Bay Research Center deserves special mention: research is being carried out into soil testing, soil improvement, and animal nutrition, among other things, the results of which will be used to replace various environmentally damaging technologies. BBJ: Are there any research projects underway that involve children? NG: The members of the network are primarily guided by educational aspects, as each member has a strong objective to educate and inform young people. An excellent example of this is the Transport Science Institute, which organizes an annual mobility week, giving young people the opportunity to learn about environmentally friendly transport. The Zoltán Bay Research Competition is also aimed at young people. BBJ: What research is being done in health protection and health promotion? NG: There are a relatively large number of initiatives in this area, as one of the most topical challenges of our time is to combat the pandemic. One of these initiatives is the research on materials technology mentioned earlier, in other words, the development of materials with antiviral or antibacterial properties, their use in public transport, or, with the help of the ÉMI, in buildings on surfaces, railings, handrails and handles that many people touch. The Zoltán Bay Research Center also has a particular focus on the development and production of health protection devices.
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Special Report Graphic by sevenke / Shutterstock.com
Deals of the Year
A review of some of the deals that tell the story of 2021, a year when business bounced back, despite the ongoing pandemic.
Deals of the Year 2021: Companies’ Appetite Remains Strong
17-18
Investment and Letting Deals Ongoing Despite Pandemic
19-20
Impact of ESG Aspects on M&A Activities
19
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Budapest Business Journal | December 17, 2021 – January 13, 2022
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Deals of the Year 2021: Companies’ M&A Appetite Remains Strong Hungary’s M&A market continued its relatively strong activity despite the ongoing coronavirus pandemic in 2021. The market saw further consolidation of the banking system, several large-scale acquisitions in the IT and telecommunications sector, and deals in energy. ZSÓFIA CZIFRA
To give some contextual background against which to judge this year’s figures, it is worth recalling that the market for mergers and acquisitions started to liven up in 2020, and analysts expect 2021 to have been a similarly busy year in terms of M&A. According to the international consultancy firm EY, approximately 105 closed deals were registered last year, at an estimated total amount of more than USD 5.69 billion (HUF 1.68 trillion). The number of deals showed a 4% increase from 2019, while their
value rose by 7.5% in 2020 from the year before. As for transparency, there was some notable development in 2020: financial data was disclosed in 32% of cases; in 2019, this ratio had only been 19%. Technology was the most popular sector for investors; altogether, 22 deals had been made in the IT field. At more than half of the M&A transactions, domestic companies acted as buyers; the ratio of foreign companies was a mere 29% in 2020. At the same time, the percentage of Hungarian companies making acquisitions abroad grew by 1% in 2020 from 2019. Venture capital
companies were quite active in 2020, with 22 deals sealed during the year. As for 2021, although the pandemic still determines global markets, according to the experts from EY, the size of the transaction market in Hungary has not decreased. It remains active and, in line with international trends, the interest of both domestic and foreign investors in the favorable opportunities is growing. Many of the negotiations that began before the restrictions were introduced continued. The pandemic has hampered the progress in terms of timing, though, especially in the SME sector.
Special Report | 17 Finance
Consolidation of the Hungarian banking system continued in 2021, with the ongoing integration of the member institutions of a Hungarian megabank, known for now, at least, as Magyar Bankholding. The holding, consisting of three banks: MKB, Budapest Bank and Takarékbank, started effective operation about a year ago after the National Bank of Hungary (MNB) approved the merger and the lenders’ shares were transferred to a joint holding company. This November, the holding announced the schedule of a two-step fusion: first, Budapest Bank and MKB will merge under the name of MKB Bank Nyrt. next spring, then Takarék Group will join in the second quarter of 2023, thus creating the second-largest commercial bank in Hungary. The fusion, however, will leave the ownership structure of the group unchanged. According to the current plans, Magyar Bankholding will appear on the Hungarian Stock Exchange in 2025 and will also enter international markets in the same year. Back in 2012, Prime Minister Viktor Orbán said he wanted at least 50% of banks in Hungary to have national or state ownership. Several state acquisitions have helped achieve this goal, as in the cases of Takarékbank, Continued on page 18 ▶▶▶
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Special Report
Continued from page 17 ▶▶▶ Budapest Bank, and Erste Bank, and this October, another bank joined the Hungarian ranks. The 100% Hungarian-owned MagNet Bank Zrt. has acquired HypoBank Burgenland AG’s Hungarian subsidiary, Sopron Bank Zrt. Following the sale, Hypo-Bank has not left Hungary but says it plans to focus on serving corporate customers in Hungary, primarily in the field of real estate financing. With the acquisition, MagNet Bank acquired a branch network in Western Hungary and almost doubled its market share. The bank has been profitable in the domestic market for the past 25 years and has served more than 50,000 customers through several previous M&A deals, including the 2013 acquisition of Banco Popolare Hungary. Hungary’s biggest lender, OTP Bank, has also been active in 2021 in the region. The group announced in June that it had signed an agreement to acquire a 100% stake in Nova KBM. With the most significant acquisition in the history of the OTP Group, it would become the market leader in Slovenia, the financial institution said in June. The transaction is expected to close financially in the second quarter of next year after obtaining the necessary supervisory approvals. In November, OTP Bank said it would buy Alpha Bank’s Albanian subsidiary, Alpha Bank Albania, for EUR 55 million. The transaction is set to close financially in Q2 2022. With a market share of almost 5% in assets, Alpha Bank is the eighth largest bank in the country, active in both the retail and corporate segments. It currently operates a network of 34 branches and is present in all the major Albanian cities. This is the
second acquisition OTP has made in Albania: SGAL bank, owned by Société Générale at the time, was purchased by OTP in 2019. Sándor Csányi, OTP’s chairman and CEO, said at the time that OTP wanted to be the largest bank in the Albanian market. He predicted that would be achieved primarily through organic growth, but if a suitable target were found, an acquisition would be considered, he said. Digital banking is among the trends that primarily define the future of banking. In October, the Hungarian W.UP and the Czech-based Banking Software Company (BSC) announced their merger. The two are setting up a new group of companies called Finshape to facilitate international expansion. The digital banking technology provider resulting from the merger will accelerate banks’ digital developments by combining lowcode platforms and data-based personalization solutions. The transaction involved PortfoLion Capital Partners, one of the leading venture and private equity companies in Central and Eastern Europe, providing a solid backdrop for further expansion in Europe, Asia, and the Middle East, the companies said.
IT and Telecom
The most active player in the IT sector is technology company 4iG. Its goal is to become one of the key actors in the Hungarian and regional IT and telecommunications market, and it did a lot to achieve this in the past few months, adding several domestic and regional assets to its portfolio. According to the latest announcements, 4iG is now expanding its telecommunications portfolio into the Western Balkans region after concluding a final sale agreement with
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Cetel Telekom, which holds a majority stake in Turkish Çalik Holding, to buy an 80.27% stake in ALBtelecom. ALBtelecom is Albania’s number one fixed-line Internet and TV provider, the owner of the largest optical network in the country, and a major mobile operator with its own network. Following approval by the Albanian authorities, the acquisition of a controlling majority stake in ALBtelecom is expected to be completed in January 2022. The parties did not disclose the value of the transaction.
4iG said at the end of November that it acquired Digi’s Hungarian interests from the Romanian RCS & RDS Group. The transaction value is EUR 625 mln, which equals approximately HUF 232 bln. The transaction may close in January 2022 following regulatory proceedings. In mid-October, 4iG said that Hungaro DigiTel Kft., a joint subsidiary of 4iG and Antenna Hungária Zrt. (which has a 25% stake) entered into a final agreement with Israeli firm Space-Communication Ltd. to acquire a 51% stake in the company. Again, the value of the deal has not been disclosed; however, market estimates put it at USD 65 mln. Announced in July and executed in October, 4iG also acquired a 100% stake in Telenor d.o.o. Podgorica (Telenor
Montenegro). Once more, 4iG declined to disclose how much it had offered to owner PPF Telecom Group under the agreement. Telenor Montenegro is the leading mobile operator in the southern Slavic country, with sales of EUR 44 mln in 2020. However, the biggest deal the IT company sealed this year was the acquisition of cable service provider Digi’s Hungarian subsidiary. 4iG said at the end of November that it acquired Digi’s Hungarian interests from the Romanian RCS & RDS Group. The transaction value is EUR 625 mln, which equals approximately HUF 232 bln. The transaction may close in January 2022 following regulatory proceedings. The number of employees of the Digi Group in Hungary exceeds 3,000. In 2020, its consolidated sales revenue was HUF 70 bln, and its adjusted EBITDA reached HUF 19 bln. Digi has 61 customer service offices in major cities in Hungary, while its subsidiary Invitel has another 16. 4iG has also teamed up with stateowned terrestrial digital broadcaster Antenna Hungária. In August, the two parties announced that they had entered into a cooperation agreement. The aim here is for the parties to combine public and private capital to create a strategic telecommunications and infrastructure company that, in addition to competitive market services, gives due weight to national interests within the industry. Antenna Hungária, in the meantime, has completed its acquisition of telecommunication service provider MVM NET from state-owned energy company MVM Energetika Zrt. MVM Net, which provides critical telecommunications services availability, primarily within the MVM Group, as well as to state and wholesale customers, will change its name to AH NET Távközlési Zrt.
Energy
Consolidation in the energy market also continued in 2021. In April, MVM Energetika signed a purchase agreement with Émász Zrt. to buy 100% of Émász Hálózati Kft. With the acquisition, MVM guarantees a secure technical background for electricity services to almost one and a half million customers. Andrea Máger, Minister without Portfolio responsible for national asset management, said that the transaction is another stage in the business construction that will result in the MVM Group covering the entire domestic energy value chain and becoming a key market player at the regional level. She recalled that MVM and E.ON had signed an agreement in the fall of 2019, as part of which MVM would acquire Émász Hálózati this year. In March, OPUS Global signed a purchase agreement with the Swissbased MET Group for the acquisition 4iG has teamed up with state-owned terrestrial digital broadcaster Antenna of 50% of MS Energy Holding AG, with Hungária. In August, the two parties announced that they had entered into which OPUS will acquire a 49.57% stake a cooperation agreement. Photo courtesy of Antenna Hungária. in Tigáz Földgázelosztó Zrt.
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Special Report | 19
Investment and Letting Deals Ongoing Despite Pandemic Impact of ESG Aspects on M&A Activities The letting and investment deals concluded during INSIDE VIEW
GARY J. MORRELL
Office Overview
The office sector accounted for 80% of investment activity in the first half of the year, according to consultancy Avison Young Hungary. The CEE developer and investor GTC has invested EUR 160 million to acquire the LEED “Gold” accredited 20,000 sqm Ericsson headquarters and the 21,500 sqm Evosoft HQ in South Buda, both from Wing. The transaction fits in with the aim of Wing to become a regional player as it focuses its activity on development and investment in CEE, partly through its Polish subsidiary, Echo Investment. GTC also acquired the 15,500 sqm Váci Greens Building D, developed by Atenor and sold to a Hungarian private investor. “GTC’s very strong ‘all-out attack’ is very interesting: Their purchase of the Infopark buildings from Wing, the purchase of two buildings in the Váci Corridor (Váci Greens D and Váci 188), and the only Class ‘A’ quality larger office building in Debrecen, Forum Offices, will make it an extremely strong player on the office market,” comments Valter Kalaus, managing director of Cresa Hungary. The largest single asset transaction of the year was the purchase of Váci Greens F by a domestic closed-end fund from Atenor, after a prolonged process that carried over from 2020. Another investment transaction of note was the
acquisition of the earlier generation BC 140 by the U.K. investor Resolution Property from German asset manager DWS. This is the third office purchase by Resolution Property after acquiring the Margit Palace and Buda Square buildings, totaling 37,000 sqm, from Adventum. In an unrelated transaction, CBRE represented Wing in the disposal of four office towers at Infopark, representing 49,000 sqm, to Sky Green Buildings. In a regional transaction of note, the Hungarian investor, Indotek Group, announced it is to purchase GTC’s Belgrade office portfolio for EUR 267.6 mln. The agreement covers 11 buildings within five business parks and a total of 122,000 sqm of space. Once completed, the deal will become one of the most significant real estate transactions in the last five years on the CEE market, according to analysts. Developers are undertaking more sustainable and imaginative office designs to meet changing demands from office occupants. Total modern class “A” office stock in Budapest now stands at approaching four million sqm, according to the Budapest Research Forum (or BRF, consisting of CBRE, Colliers International, Cushman & Wakefield, Eston International, JLL and Robertson Hungary). The overall vacancy rate of close to 10% is expected to increase further. However, the relatively small pool of Hungarian and regional office developers operating Continued on page 20 ▶▶▶
Váci Greens by Atenor.
Dr. Ákos Mátés-Lányi, LL.M., MRICS
Dr. Ákos Bajorfi, LL.M.
Head of M&A / Transactions
Head of Corporate / Private Equity
Noerr and Partners Law Firm
Noerr and Partners Law Firm
“ESG” means using Role in M&A Deals Due to the rising importance of ESG Environmental, Social and factors, ESG will continue to be an Governance factors to evaluate increasing concern in transactional due companies on how far advanced diligence. Before ESG became a trend, transactional due diligence primarily they are with sustainability. focused on the target’s historical financial Recently, the importance of ESG and legal background. Certain key ESG factors were already part of traditional factors has surged significantly due diligence, like climate change in terms of M&A activities, and environmental issues, anti-bribery which have come together and corrupt business practices, diversity and labor issues, and data privacy. with the development Due diligence for ESG issues demands of sustainable investing. a broader analysis of the potential The role of ESG is increasingly valued as the market adapts to a constantly changing world. The critical driver is investors’ willingness. Around the world, particularly in the European Union, companies are facing increasingly stringent environmental rules and regulations. As a result, investors are also more willing to invest in companies that are more attentive to strict environmental regulations and thus have higher ESG indicators. ESG is also relevant in the field of real estate. The underlying environmental standards and the increasing importance of ESG have led to a steady increase in the value of real estate. Aging, outdated and therefore energy-inefficient buildings require continuous renovation, which also increases investments in construction. If a company is not attentive to ESG-factors, then it is a less desirable investment for conscious investors, which can damage its reputation. ESGconscious companies, therefore, seek to avoid regulatory conflicts and mitigate reputational risks. The benefits of a proactive ESG strategy considered by companies include participation in tax policy debates, brand building, tax incentives, reduced tax risk, and reduced insurance premiums. Besides environmental protection, the other important factor is the social factor meaning the well-being of the employees. Not only have environmental rules tightened, but rules towards worker protection as well. Employers are expected to ensure a safe and healthy working environment. Obligations of the ESG’s social factor related to social protection, e.g., carrying out a prior risk assessment, choosing competent and qualified workers, having informing responsibilities.
risks for the target company, taking into account various factors like the jurisdiction, sector and business. The purpose of the ESG-related due diligence is to disclose the target company’s risk profile and risk exposure. If an ESG risk has been identified within the due diligence, the investor may consider requesting contractual protection in the acquisition agreement. A standard warranty package, which includes representations and warranties on legal and regulatory compliance, environmental and employee matters, should offer significant protection. With the growing focus on ESG, investors may consider negotiating additional ESG-related representations and warranties, like compliance with applicable ESG policies, labor law and environmental law warranties, etc. When contemplating an acquisition, the investors will also investigate how the target company fits into the investors’ company group. Within the framework of sustainable investing, an analysis and an action plan should be prepared on how ESG considerations can be mainstreamed into the target company’s operations. It is important for investors to minimize the risks of their investments, which is possible through conscious investment thanks to a more extensive investor base. A higher ESG score implies predictability, so companies are better prepared for external shocks and market changes. Investors take ESG indicators into account and incorporate them into their strategies and basic due diligence processes, thus increasing their impact.
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2021 reflect the positive positions of the office and industrial sectors and the favorable prospects for the hotel sector, despite a difficult period given the various lockdowns. Questions remain, however, over the medium- to longer-term position of retail. Sustainability accreditation and ESG matters are playing an increasingly prominent role in both the development and investment markets.
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Budapest Business Journal | December 17, 2021 – January 13, 2022
Continued from page 19 ▶▶▶ in Budapest has been undertaking restrained development policies for several years and oversupply is not expected. Planned office projects are going ahead, although the leasing process can be more protracted, according to developers and consultants. IBM Hungary has signed for 14,500 sqm of space to establish its new headquarters at the Corvin Innovation Campus, part of the Corvin Quarter urban regeneration project. This is is the first office building in Hungary to obtain WELL certification; the complex has BREEAM “Excellent” and WELL “Platinum” certification according to Futureal Group. Elsewhere, the 14,000 sqm Nordic Light Trio, developed by Skanska and sold on to investors, has obtained WELL “Gold” accreditation. The 12,500 sqm Szervita Square Building by Horizon Development has received a LEED “Platinum” environmental rating, making it the first (and thus far only) mixed-use property in CEE accredited at this level, according to Horizon. A number of developers are committed to building offices to WELL standard: 26 projects now have WELL registered, pre-certified or certified status according to the Hungarian Green Building Council (HuGBC). Wing and RTL Hungary Television have signed a long-term lease agreement for nearly 9,000 sqm of space at the Liget Center and Liget Auditorium opposite the Város Liget. The renovation and redevelopment of the historic complex will be tailored to the tenant’s needs; RTL Hungary’s headquarters and news studios will move into the complex in 2024, according to Wing. The leading serviced offices provider New Work has established a 2,000 sqm office at Science Park building. With a 68% occupancy rate, the company now has 11,000 sqm of space in Budapest. That will grow to 20,000 sqm in 10 locations, according to Hubert Abt, founder and CEO of New Work Offices. Contracts have been signed with access4you for the operation of the flex offices. “Although everyone is talking about industrial projects leading the way in 2021, in fact, they did not rule the investment market in our country. The Hungarian property investment turnover was much more defined by the office sector, representing circa 80% of transactions,” says Csaba Zeley, managing director of ConvergenCE. “For us, naturally, the most important deal of the year was the sale of Árpád
The LEED “Platinum” accredited Szervita Square Building. Center to Investum. Since its purchase in 2019, we have turned the then undermanaged building into a fruitful asset. We have renegotiated existing contracts, leased the vacant spaces and forged strong relationships with our tenants. As a result of these and the buyer’s fast decision-making process, we managed to sell the building offmarket, ahead of the date scheduled in our business plan. We were also happy to have been mandated with continuing the management and leasing duties. This proves that well-managed and wellmaintained buildings at great locations increase their value and can arouse investor appetite,” Zeley adds.
Industrial Overview
Total modern industrial stock in the Budapest area stands at a little more than 2.5 million sqm, according to the BRF. The overall vacancy rate in the industrial market of less than 4%, and the sector has been attracting developers new to the field. The initial phase of HelloParks Maglód, part of the Futureal Group, has been occupied by its first big tenants; the design stage of the complex has received a BREEAM “Excellent” certificate. The company is developing three mega parks with a total capacity of 884,000 sqm of warehouse and industrial space on 219 hectares. The total investment value exceeds EUR 140 mln, according to Futureal. The new Hall D3 of the East Gate Business Park by Wing, with a total area of over 9,000 sqm, reached 100% occupancy in 2021. Wing has also signed a long-term lease agreement for 5,000 sqm of fully tailor-made warehouse space in Login Business Park with Packeta, one of Europe’s leading logistics providers. Colliers has sold a 30,000 sqm industrial complex as part of a nine-
hectare site close to Veszprém to the Austrian automation company Knapp. Colliers Hungary also represented GLP Hungary in leasing 43,000 sqm of warehouse and office space to the Fiege Group, a European logistics company, in GLP Sziget in Szigetszentmiklós.
Hotel Overview
The hotel sector has been severely hit by the lockdown and restrictions on travel following what had been a boom period for the CEE hotel markets. A pick-up in the hotel market that would again make the sector attractive to investors is not expected until at least spring 2022. There is a substantial hotel pipeline with more than 2,000 rooms in the active pipeline across Hungary, according to CBRE. More than 1,000 rooms were due to have been delivered in Budapest by the end of the year. DVM group has started construction work on the Drechsler Palace on Andrássy út. The listed building, also known as the Hungarian State Ballet Institute, is owned by the hotel developer and investor QPR Properties and will become the first “W” brand Hotel in Hungary. Wing and Accor have concluded a long-term agreement for a 12,000 plus sqm hotel at the 42,000 sqm Liberty development complex, which will be dualbranded accommodation under the Ibis and Tribe names. The 3-star ibis and the 4-star Tribe brands will each operate half of the building, with 332 rooms. According to Wing, construction is underway, and the hotel is due to open in fall 2023. Wing has also completed and sold as a turnkey project the first Hungarian B&B Hotel in Budapest to the company, having converted the former office building in Boráros tér to a 214-key hotel. Accor group has also signed a deal for what will be the first Tribe hotel in Hungary in partnership with Futureal. The 250-room hotel in District VII is scheduled open at the end of 2023 and is designed by the Puhl and Dajka Architects Studio.
Retail Overview
The Árpád Center, subject of an investment transaction.
Retail development in Hungary has been very low in recent years with concerns over the level of consumer spending following the 2008 financial crisis, stringent planning regulations for shopping malls and latterly, the impact of COVID and the rise of on-line retail on demand and footfall in bricks and mortar retail. Therefore, the successful letting Budapest listed building and opening by Futureal of the 55,000 the Drechsler Palace. sqm Etele Plaza, a EUR 300 mln project,
East Gate Business Park by Wing. is seen as a milestone in the Budapest shopping center market. Shopping center stock in Budapest stands at 822,000 sqm with the recent addition of Etele, according to Cushman & Wakefield. “Comprehensive sustainability strategies and holistic energy efficiency and green building ratings are important for existing and new retail projects. The Etele Plaza project by Futureal is such an accredited development, but, for example, the Allee Shopping Center is also a well-known example for certified and increased sustainability,” comments Zsombor Barta, president of the HuGBC. Futureal has extended its activities with the establishment of Futureal Investment Partners, aimed at investment and asset management in Europe. The company has purchased the 25,000 sqm Manhattan shopping center project in Gdansk, completed in 2004. Futureal looks to generate aboveaverage returns from value-add and opportunistic situations.
Investment Overview
Colliers estimates the Hungarian investment volume for 2021 at EUR 1.2 billion from a Central European total of EUR 10 bln-11 bln, placing Hungary in third place after Poland and the Czech Republic, the established pattern in recent years. Gábor Borbély, head of research and business development at CBRE Hungary, estimates the investment total for the year at a possible EUR 1.4 bln. CBRE put current prime office yields for Hungary at 5.25-5.5% and 6.15% for industrial with a significant gap between Hungary and the Czech Republic and Poland. “Towards the year-end, some very interesting deals have emerged. CPI’s intention to buy Immofinanz is certainly one. It is a very large deal with a competitive portfolio. It would result in CPI becoming the most dominant player on the Budapest office market,” comments Valter Kalaus. “In terms of sustainability, the deals including green bonds issuance are of high importance; for example, CPI,” says Barta. “This trend highlights the importance of sustainability within the investment and financing sector. This further strengthens Hungarian real estate deals, where ESG compliance reporting was also part of the process. The financing and investing sector is also highlighting the importance of sustainability, of reduced risks related to climate change and emissions, etc.,” he concludes.
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Socialite The Hanukkiah and the Tree: Celebrating a Hungarian-Jewish Christmas Approaching my seventh Christmas in Hungary, I became curious as to whether the country’s Jewish community celebrated along with the rest of us or whether they did anything different. I hoped a JewishHungarian Christmas would be a time of arcane practices and, more importantly, food and drink into which I could, as they say, take a deep dive. DAVID HOLZER
That’s because one of the reasons I like living in Hungary is the feeling that Jewish culture, something I know little about, is alive and well in Budapest.
Advertisement on a Christmas market stand from 2019 for Ráchel Raj’s family recipe flódni. Photo by Petr Pohudka / Shutterstock.com
The special Hanukkah menorah, the hanukkiah, is central to the celebration. Its branches hold nine candles, one of which is used to light one of the other candles every night until all are lit. Because the miracle is all about oil, fried food such as latkes (potato pancakes) are traditionally eaten during the festival. In Hungary, many of the same dishes are eaten during Hanukkah and over Christmas.
Fish Soup and Cholent
A Jewish community has existed in the city since roughly the 12th century, with the first synagogue being built in Buda in 1307. This was destroyed later in the century when the Jews were kicked out of Buda for the first time. By the 15th century, Jews had begun to be persecuted again. Their property was seized, and loans they had made went unpaid. After 1541, when the Turks invaded Hungary, many Jews became involved in high finance and the Buda Jewish district flourished. After the 1686 siege of Buda and subsequent Hapsburg victory, the Jews were expelled from Buda again. This led to District VII, over in the then neighboring town of Pest, becoming Jewish. It was as close as Jews were allowed to be to the river. In the 19th century, Jews gained more freedom. By 1873, the Jewish population of Budapest was around 200,000, and the new city made by combining Buda, Pest and Óbuda was home to 125 synagogues. Jewish affluence led to District VII booming from the late 19th century until the Holocaust. Today, Budapest’s Jewish community is much reduced. But, at around 110,000 people, it’s the most important in Europe. I knew none of this history when, one bitterly cold December morning a few years back, I first wandered into the Frőlich Kosher Cukrászda on Dob utca and discovered flódni, the Hungarian Jewish confection made with layers of poppy, walnut, apple, and plum jam separated by layers of sweet pastry.
“We eat halászlé, the Hungarian fish soup during these celebrations,” Singer tells me. “We also eat cholent, the traditional Jewish stew. We’ll have a leg of goose. Those of us with a sweet tooth will eat beigli or flódni.” Beigli is the long pastry roll filled with walnut or poppy seeds served at Easter and Christmas. It’s delicious but, unlike flódni, heavy on the pastry. This means if you have more than a couple of slices, it can feel like you’ve eaten a piece of furniture We debate which establishment in Budapest makes the best flódni. I suggest Fröhlich on Dob utca, but Singer Traditional tripple-layered flódni cake. argues in favor of Ráchel’s. Ráchel Raj, Photo by grafvision / Shutterstock.com christened “Budapest’s Flódni Queen” and a TV personality as well as a baker and cake designer, is new to me. Hannukah Food I can’t imagine any flódni being better Although it’s eaten all year round in than Fröhlich’s, but I’m sure Raj’s is at Budapest now, flódni was traditionally the very least different. only eaten in the fall and winter, Interviewed for the EasyJet Traveler especially during the Hannukah festival. website in 2020, she says, “My mum and Flódni dates back to that 13th-century grandma would make it only for special Jewish community in Buda. Originally family gatherings,” she says. “Every made using goose fat, its ingredients family has their own version of the are typically Hungarian but used in a recipe. I put a personal spin on all my particularly inventive combination. After other cakes, but I would never mess with talking with Viktor Singer, manager of my grandma’s flódni.” the wonderful Fülemüle restaurant at In the same interview, Raj gets to the Kőfaragó utca, not far from the old heart heart of what it means to be a Hungarianof the Seventh (as locals often call the Jew or a Jewish-Hungarian today when district), I realized that flódni kind of she says, “The question of whether I feel symbolizes what it means to be Jewish more Hungarian or Jewish doesn’t make in Hungary today. It was created by Jews sense to me. [….] The younger generation using Hungarian ingredients and is now is super-interested in Jewish food; they part of the culture of the entire country. aren’t thinking of those divides.” Although non-practicing, Singer Viktor Singer puts it even more celebrates Hanukkah, the eight-day succinctly when he says, “You couldn’t Jewish “festival of lights” that falls separate the culture of the Jewish during Advent in the build-up to the community nowadays from the Christian feast of Christmas. Hungarian because we live together Hanukkah, or Chanukah, means in cooperation and influence each “dedication” and celebrates the other. We proudly celebrate Hanukkah reclamation of the Holy Temple in because we are Jews. We celebrate Jerusalem from the Syrian-Greeks Christmas because it’s part of our life who ruled the Holy Land in the second in Hungary. In our house, we have a century BCE. hanukkiah and a Christmas tree.” When the Jews wanted to light the Temple’s menorah, the iconic Jewish seven-branched candelabrum, they Fröhlich is at 22 Dob utca found only a tiny bit of olive oil and Ráchel at 13 Wesselényi that hadn’t yet been ritually blessed utca. Thanks to Budapest.com and could be used. They lit the for the potted history of menorah candles with this, and they the Jews in Budapest. miraculously burned for eight days. Hanukkah recalls this miracle.
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Bonfire Night Charity Party Returns, Raises HUF 4.4 Mln A packed house of guests from Hungary’s international community, including VIPs like British Ambassador Paul Fox, united to “Feel Good + Do Good” at XpatLoop’s 21st-anniversary celebration, raising HUF 4.4 million for Hungarian children’s charities. BBJ STAFF
Held on Nov. 9 in the Budapest Marriott Hotel, attendees included a great mix from Hungary’s business, cultural and diplomatic circles. The Grand Ballroom glowed thanks to a virtual bonfire officially “set alight” by Ambassador Fox. A traditional fireworks display was projected onto a big screen by Special Effects International. The British Ambassador, who attended with his wife, thanked XpatLoop for organizing what he called an “excellent event. Vicki and I really enjoyed it and met lots of lovely people; importantly, it raised an impressive amount for local causes.” COVID-restrictions forced the event to become an online-only fundraiser in 2020, so this was a welcome return, a point made by Arne Klehn, general manager of the Marriott
“This was the fifth occasion in the past years when the hotel provided the venue and sponsored the event with various raffle prizes,” the GM said. “The whole evening was full of surprises, emotions and the return was simply amazing.” The sponsors (it is an impossibly long list to name all here) included FirstMed, Dr. Rose Private Hospital, B + N Referencia, Samsung, Bortársaság and Zwack Unicum. “This event never disappoints, bringing together a diverse group of good people to have fun and raise money to help local children in need,” said Dennis A. Diokno, CEO of FirstMed, a decade-long sponsor. The international buffet featured dishes from many restaurants, hotels and food service organizations across the city, alongside sweet and savory pastries and treats and three birthday cakes. A wide range of beverages were served
a “bidding war” at one point), with one of this year’s “priceless” items donated by Aston Martin Budapest. This would see the winner collected by one of the brand’s luxury vehicles and taken for lunch at the Matild Palace Luxury Collection Hotel, and also included an Aston Martin F1 team cap signed by British Ambassador Paul Fox (left) drivers Lance Stroll and four-time world and XpatLoop publisher and Bonfire champion Sebastian Vettel. Night charity party organizer Stephen This fundraising highlight was led by Linfitt. Photo by Árpád Zoltan Bakcsy. local expat actor and voiceover artist Hans Peterson and TV personality Zsuzsa Demcsák. They also guided proceedings throughout the evening, all evening, including cocktails, beers, including announcing the winners of the fine wines, and spirits, plus soft drinks, silent auction. mineral water and coffee. The “feel good” aspect highlighted in Proud Contribution this year’s party motto refers to raising “We are always proud to contribute to charity funds. Afterward, the director the Xpat Bonfire Night Charity Party. of the Csodalámpa Foundation, Éva A great event with great people,” said Patzauer, was undoubtedly grateful. Sándor Zwack, chairman of the board of “Thank you for all of your work on the Zwack Unicum, who ensured that bottles Xpat Charity Party event, which was a real of Unicum Barista and Unicum Riserva success again,” she said afterward. “A good were on all tables booked by guests. number of children will be happy thanks to Musical entertainment included the outstanding support from you, all the cover band The Vibe, live pop and guests and event sponsors and supporters. funky tunes by Fruzsina & Badman, Please give our sincere gratitude to them all an enticing mix of eclectic grooves from the depth of our heart!” by DJ Mahogany from Brooklyn, NY, and a set by local DJ Tamás Máj. For more on the event, including The live auction prompted generous photo galleries and the complete list giving and much excitement (including of sponsors, go to xpatloop.com.
PRESENTED CONTENT
Reality Check With High Hopes at the Opera No mass demonstrations are expected, nor is it likely that people will attempt to storm the building at the reopening of the Hungarian State Opera on March 12 next year. The above-described events did happen, though, when it put on its first performance, and furious fans gathered to express their anger that they didn’t get tickets. LEVENTE HÖRÖMPÖLI-TÓTH
General director Szilveszter Ókovács speaks with the Budapest Business Journal about how the Opera is gearing up for the realities of the 21st century. Excitement over resuming operations at the epic venue after a break for renovations lasting nearly five years is understandable. The occasion will be marked by a three-day star-studded musical feast featuring, among others, Placido Domingo showcasing his excellence in conducting this time. “The building got a complete face-lift, but what really makes a difference is the stage tech upgrade,” says Ókovács. “All that was built in respects the original design of architect Miklós Ybl, but everything will become faster, quieter and more grandiose.”
COVID left its mark on the institution. In pre-pandemic times, about 30-50% of the audience were from abroad, but now they are practically gone. Therefore, the goal is to make up for some lost revenues by having six shows per week with a super short summer break. Pricing must also be adjusted to changing circumstances. A decent ticket would cost around one hundred euros. “We heavily rely on our revenues, so prices must reflect this necessity,” notes Ókovács, adding that Hungarian guests will also be targeted with repeat customer deals. Those that prefer enjoying their culture remotely will have online broadcasting and on-demand services at their disposal. This should rather be the exception, though.
that holds 400 guests, but it also functions as a workshop, arts warehouse and rehearsal center, a rarity even for global standards. The weekends are for welcoming the young with shows tailored to their taste and offering site visits. (Your correspondent can say from experience that the availability of Ischler, a dessert, at the buffet is a factor for kids too, just as it was back when he frequented the Opera matinees.) “This is home to contemporary Opera and ballet, which simultaneously addresses black-belt opera fans and those not fond of the typical opera toolkit. It’s not a rival to the Opera, but a complementary sister institute,” Ókovács says. The District X location might be far from downtown, but that also has advantages: finding parking Szilveszter Ókovács. spaces is not an issue and the Photo by László Emmer. neighborhood benefits overall. Ókovács is aware that his organization cannot turn back time. Immersion Therapy “Supporters of Gluck and Piccini used “Immersion is key in this genre. to get into fights with chair legs to You’ve simply got to be there for show their passion about their beloved the real experience,” the general genre. In the 1955-56 season, the director says, adding that there’s Opera and Erkel Theater drew one a lot to look forward to. “This year million guests in total. Those times and next alike, the season will feature are gone. By rewrapping our message, up to 80 titles, an exceptionally we will be happy if we manage to large selection, from one of the get 300,000-400,000 spectators and most active operas in the world.” 10,000-15,000 kids to the Opera and A new addition is the Eiffel Art Eiffel every year, respectively. But it’s Studios, a multipurpose facility that still a large audience, which could opened in the fall. The 22,000 sqm fulfill our mission. We believe opera venue not only hosts a theater hall is bound to thrive in the future.”
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Socialite | 23
Welcome to the Winter Wine Wonderland the potential of various vineyards, especially with the Furmint grape, and following an organic approach.
While it’s always hard to single out a single winemaker above all others, the awarding of the Hungarian Wine Academy’s Winemaker of the Year title does provide a chance to evaluate the work of certain individual vintners. ROBERT SMYTH
It is easy to be cynical regarding the selection of certain winners, but a glance through the ever-lengthening list does give credit where credit is due, and it doesn’t just focus on the most esteemed regions. The 2021 winner, Beáta Pühra Nyúlné, plies her trade at the very well-known Nyakas Pince in Tök, a short 24-kilometer ride from Budapest, in the Etyek-Buda wine region. She is the second winemaker from the winery to scoop the award; the first to do so, back in 2002 was the late Ernő Malya, who passed away last year. He was a pioneer of the reductive winemaking school in Hungary, and his picture adorns the wall of Nyakas’ tasting room. Pühra Nyúlné joined Nyakas in 2000 as an intern and learned under Malya. She has successfully and seamlessly led this large winery, with a whopping 30 owners, 187 hectares of vines (with three hectares organic on a trial basis), and makes around 1.4 million bottles a year, since Maya headed into retirement. Visiting Nyakas this summer, the attention to detail and cleanliness paid in making such a large amount of wine was clear to see. The result is well-made, fruit-forward, and varietally pure wine that is excellent value for money. Nyakas’ Irsai Olivér is a benchmark example of this aroma bomb of a grape variety, which is an early-ripening
Women Winners
crossing of the Csabagyöngye and Pozsonyi fehér varieties, created by Pál Kocsis in 1930.
Refreshing and Zesty
All too often, Irsai excites on the floral, fruity (mainly lychee and grapes) nose, only to fall flat on the short palate. But grown in the limestone soils of EtyekBuda, Nyakas’ Irsai never fails to retain sufficient acidity, which props up the palate and suitably backs up the aromas and makes the wine refreshing and zesty. The 2021 version costs HUF 2,100 from Bortársaság. The most exciting wine I encountered on my summer visit was Menádok Budai Pinot Gris 2017, which is full-bodied, honeyed, and rich, oozing the grape variety’s classic peachy notes. It has 15% alcohol, but that doesn’t stick out due to the wine’s impressive structure. It was harvested relatively late, from Sep. 29 to Oct. 10, and while the majority of the must underwent controlled fermentation in stainless steel tanks, two barrels that were spontaneously fermented went into the final wine, which was then aged for a month in oak barrels. It won a silver medal in the 2020 edition of the international Mundus Vini wine competition. It costs HUF 3,200 from nyakas.hu and is a lovely winter drink. Pühra Nyúlné emerged ahead of a field of shortlisted candidates for the 2021 gong, and very talented winemakers they are, too. Among them, Mihály Figula from the Balatonfüred-Csopak wine region has built on the work of his late father (also Mihály Figula), who was
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25th Annual Budapest Burns Supper 22 January 2022
Winemaker of the Year 2000. Fugula Jr. has shown how the Olaszrizling grape variety can be a fine articulator of terroir with several spontaneously fermented single-vineyard bottlings. Figula’s Sáfrán Olaszrizling 2019 has the warmest character among them, coming from Csopak’s Sáfránykert vineyard, which is the closest to Lake Balaton, capturing reflected rays and warmth from the lake to produce a ripe, tropical and round take on the panCentral European grape. It is a wonderful wine for cold winter days as it can transport you back to summer at Balaton with its warm character. Expect to pay HUF 4,350 from Bortársaság. Pühra Nyúlné is only the second female winemaker to receive the accolade, after Kunság vintner Éva Dignisz Gálné, in 2016. That is relatively low, given that Hungary is brimming with female winemaking talent. Thankfully, the Winemakers’ Winemaker of the Year was also a woman: Judit Bodó from the Bott Pince in Tokaj. She has worked wonders in unlocking
She is the second woman to claim the award, with fellow Tokaj winemaker Stéphanie Berecz, who originally hails from France’s Loire region and now runs the Kikelet winery with her husband Zsolt in the village of Tarcal, winning the award in 2014. Berecz has proven that the Hárslevelű grape, the region’s second most planted grape, can make dry wine that’s every bit as good as Furmint, the most planted grape in Tokaj. Staying in Tokaj, another resident French winemaker, Samuel Tinon, has achieved considerable success in the village of Olaszliszka with an almost forgotten style of Tokaj wine: Dry szamarodni. Szamorodni is actually a Polish word that reflects that country’s meaningful connection with Tokaj in times past when the Polish royal court prized the wine from here. It is usually loosely translated “as it comes,” meaning that botrytized and regular grapes are picked together and vinified without selecting out the aszú berries. Szamorodni comes in two types, sweet and dry, with the former remaining popular and a great, slightly fruitier and cheaper alternative to Tokaji aszú. Dry Szamorodni should be fermented to dry under a layer of yeast. It requires extensive aging to capture the full spectrum of aromas and flavors, including tobacco, dried apricot, walnuts and blue cheese. Tinon says that the alcohol drops down a couple of degrees during aging due to the cellar’s humidity, temperature, and ventilation. France’s Vin Jaune from the Jura is perhaps the closest international wine comparison. Dry Szamorodni is just the wine to sip in the cold of winter, and Tinon’s is as good as it gets. His 2009 costs HUF 7,430 from winelovers.hu. Tokaji Aszú itself is another ideal wine for the advent, Christmas and New Year period: Once opened, the wine won’t spoil for weeks, allowing for sparing seasonal sipping. A small glass of this sweet yet structured and layered wine is packed with intensity and taste sensations.
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