Budapest Business Journal 3001

VOL. 30. NUMBER 1

JANUARY 14 – JANUARY 27, 2022

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

SPECIAL REPORT INSIDE THIS ISSUE

The Year Ahead The 2022 BBJ Wish List As is now tradition, the Budapest Business Journal has asked a wide variety of folk in business and services around the country for their wishes (beyond a solution for COVID) for 2022, the Chinese year of the Tiger. 14

Office and Industrial Remain Sectors of Choice The industrial sector is expected to continue to return buoyant demand and supply indicators, although office remains the sector of choice for both developers and investors. 16

Positive Pipeline

SOCIALITE

Dry January: is it Really Good for You? It seems wrong to knock Dry January, given that it’s all about stopping boozing and, as the Alcohol Change charity puts it, getting “your fun back… your energy back... your calm back.”

But David Holzer is not convinced it’s such a good thing. 18

NEWS

New Year Kicks off With a Positive Economic Surprise Industry’s November performance exceeded analysts’ expectations, thus increasing the chance for even more favorable economic growth data in the fourth quarter of 2021. 3

BUSINESS

In an in-depth interview, HIPA CEO Róbert Ésik talks about another record-breaking year for FDI, expectations for 2022, and involving Hungarian SMEs in the multinational value chain.8 BUSINESS

Cleaner Energy Goals Drive Automotive Changes We talk renewables and global climate change with Andrea Solti Istenesné, country chair of Shell Hungary Zrt., a company looking to move with the times. 1O

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Budapest Business Journal | January 14 – January 27, 2022

IMPRESSUM

THE EDITOR SAYS

EDITOR-IN-CHIEF: Robin Marshall EDITORIAL CONTRIBUTORS: Balázs Barabás, Zsófia

RAISING A GLASS TO THE YEAR AHEAD

Czifra, Kester Eddy, Bence Gaál, David Holzer, Christian Keszthelyi, Gary J. Morrell, Nicholas Pongratz, Gergely Sebestyén, Robert Smyth, Bálint Szőnyi, Zsófia Végh.

LISTS: BBJ Research (research@bbj.hu)

This being our first issue of 2022, it is only fitting that we have dedicated this publication to looking forward to the year ahead. In the real estate market, for example, we discover that office, especially (despite the dire predictions that came with the first lockdown and the adoptions of working from home), but also the industrial and logistics sectors are well placed and expected to be winners in 2022.

The hotel sector can also look ahead to better times, albeit within a longer timeframe, once tourism and business travel really ramp up again. However, question marks remain for retail, given the constant rise of e-commerce.

As has become traditional, Kester Eddy casts his net far and wide to find a variety of voices who share with us their wishes for the new year. You’ll find everything from an understandable desire for some resolution to Russian-Ukrainian tensions to a call for greater support for Hungary’s underground musicians.

One thing no one needs a crystal ball to see is the upcoming general elections on April 3. Arguably for the first time since the 2006 election (when the Socialists, then led by Ferenc Gyurcsány, defeated Fidesz under Viktor Orbán), this is the first election in more than a decade to offer a hint of jeopardy, with an alliance of opposition parties backing one common candidate for prime minister.

This is the playbook that unexpectedly won the Hódmezővásárhely mayoral election in 2018, taking what had been a safe Fidesz seat. And the man who

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won that seat is the man who will now joust with Orbán and Fidesz for the PM’s position: Péter Márki-Zay. Of course, there are many questions to be answered.

Can a man, untested in national politics and with a coalition behind him that is so disparate it must be hard to keep together, really topple such a wily political operator as Viktor Orbán? Time will tell, but oddly, it might not make much difference to policy. Márki-Zay is no left-wing radical firebrand but a former Fidesz supporter who naturally sits in the center-right ground.

Businesses might get the continuity they crave, whoever the Hungarian public elects.

Another thing that requires no crystal ball is the fact that this is a subject we will return to this spring.

For all that we “don’t do politics,” it is the national government that sets the economic framework within which we all work, and general elections are, therefore, a topic we can never ignore.

Elsewhere, David Holzer casts a slightly sardonic eye over the relatively new trend of “Dry January.”

That is juxtaposed against our regular wine column, where Robert Smyth reports the sad news of the passing of two influential players in the world of Hungarian viticulture. For those of you not abstaining this month, he even has a suggestion for a suitable vintage with which to raise a glass in a toast. Gone, but not forgotten, as the saying goes.

Happy New Year!

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

Photo by MTI / Tibor Illyés

• Value Creation. We have a nearly 30-year history of supporting the development of diversity and sustainability in Hungary’s economy. The fact that we have been a trusted business voice for so long, indeed we were the first English-language publication when we launched back on November 9, 1992, itself has value.

Photo by Fortepan / Péterffy István

• Community Building. Whether it is the Budapest Business Journal itself, the Expat CEO award, the Expat CEO gala, the Top Expat CEOs in Hungary publication, or the new Expat CEO Boardroom meeting, we are serious about doing our part to bind this community together.

THEN & NOW

Sándor Liu Shaolin, a member of the Hungarian national short track speed skating team, is pictured by MTI preparing for the Winter Olympic Games in Peking. The black and white image, from the Fortepan public archive, shows spectators and a participant in the local fast track championships in Gyömrő (35 km southwest from central Budapest by road) in 1972.

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News macroscope •

New Year Kicks off With a Positive Economic Surprise

Despite some declines in the two main segments of Hungarian industry, the November performance of the sector exceeded analysts’ expectations, thus increasing the chance for even more favorable economic growth data in the fourth quarter of 2021.

Industrial production in Hungary, 2001-2021 (January-November)

ZSÓFIA CZIFRA

The Central Statistical Office (KSH) said in a second reading on Jan. 12 that industrial production increased by 2.6% on a year-on-year basis last November.

Based on working-day adjusted data, production rose by 2.1%. According to seasonally and working-day adjusted data, industrial output was 2.9% higher than in October 2021.

In a yearly comparison, increases were measured in the majority of the manufacturing subsections; however, the manufacture of transport equipment, representing the largest weight, dropped by 15.1%, mainly due to the global shortage in semiconductors.

The manufacture of computer, electronic and optical products, accounting for almost 12% of manufacturing, also declined by 2.1%, again due to the microchip shortage.

Takarékbank analyst Gergely Suppan said that industrial output in November grew above expectation on a yearly basis. The monthly increase was due to the fact that some automakers picked up production of new models as the shortage of microchips started to ease.

“The good performance of other sectors partially counterbalanced the decline in the automotive industry,” he explained. According to him, if it wasn’t for the shortage of semiconductors and other parts, the volume of industrial production could exceed the current level by as much as 9-12%.

External demand may also be driven by the recovering European and U.S. economies, the European Recovery Fund, and the U.S. fiscal stimulus, Suppan said.

Source:

Delayed Demand

The emergence of delayed demand and the replenishment of inventories may also help industry to recover, so Takarékbank’s analysts expect a gradual recovery in industrial production in the coming months, although the semiconductor shortage may persist for a long time to come.

Due to base effects and the deploying of new capacities, Suppan expects 10% industrial growth this year and 5-6% in 2023.

Gábor Regős, head of the macroeconomic department of economic think tank Századvég Gazdaságkutató, which is close to the government, also noted that after the downturn in previous months, the industrial performance in November was much better than expected.

KSH measured an outstanding expansion in the food industry, which may be related to looser restrictions due to the coronavirus, so compared to the previous year, hospitality did not suffer from any tightening.

Vehicle production performance has continued to be unfavorable due to a shortage of microchips, Regős emphasized, which appears to be taking a long time to resolve. The analyst also pointed out that the contribution of industry to the economic performance may have been neutral or slightly negative in the fourth quarter.

This will basically be determined by the December data, for which there is a risk of a longer-than-usual outage of

vehicle production. In 2022, industry can again make a positive contribution to economic performance, especially if raw material shortages and transport difficulties are reduced.

Return to Spring

Péter Virovácz, a senior analyst at ING Bank, estimates that industry has finally made up for the summer downturn, and production levels have, by and large, returned to the levels seen in the spring.

However, the two manufacturing industries that make the most significant contribution still lag behind; the heaviest, vehicle production, is experiencing a considerable drop in production, while the electronics industry is struggling with a shortage of parts and thus declining production, he said.

On the other hand, it is particularly encouraging that other manufacturing sectors together have been able to offset the weakening of the two powerhouses, which perhaps predicts, as hoped, that the Hungarian industry as a whole will be able to show a good performance without the automotive and electronics industries.

After a weak October, the industry’s performance in November could give a healthy boost to GDP expectations for the fourth quarter, which have downgraded recently, the ING Bank economist said.

According to János Nagy, a macroeconomic analyst at Erste Bank,

the positive surprise in the November data may be due to new capacities, including in the food industry, which has counterbalanced the weakening of the automotive industry.

He also noted that the KSH had carried out another significant revision of the previous data, as a result of which the base last year became lower.

Looking ahead, however, the moderate performance of the automotive and related sub-sectors in November may continue to be offset by new capacity building in other sub-sectors, which will support output expansion.

The difficulties of the supply chains can be alleviated substantially from the middle of this year, after which a significant recovery of industrial exports can be expected due to the high order stock of the companies and developing capacities, the economist said.

Numbers to Watch in the Coming Weeks December inflation data is released today (Friday, Jan. 14), and the KSH will also publish consumer price index figures for 2021 at the same time. On Jan. 25, KSH will issue statistics on November wages.

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Booster Drive Continues in Face of Omnicrom, ‘Flurona’

Coronavirus ///roundup According to MOK, an extremely small number of patients are expected to be vaccinated in any given practice, which could result in the unnecessary disposal of unused vaccines. The chamber urged the decoupling of vaccination activities from GP practices and specialist clinics, suggesting instead the establishment of vaccination and testing centers in each district.

Nevertheless, György reported on Jan. 11 that

Prime Minister Viktor Orbán listed pandemic defense among the top three “most important topics” for 2022, at an international press conference on Dec. 21, according to state news agency MTI.

135,000 doses

NICHOLAS PONGRATZ

Orbán said inoculations would remain Hungary’s front line of defense against the pandemic, adding that Hungary has over 2.4 million jabs of the Pfizer COVID vaccine and has ordered two million doses for 5-11-year-olds.

In its abundance of vaccines, Hungary has continued to donate doses to countries in greater need, with 530,000 AstraZeneca COVID jabs delivered to Bangladesh on Dec. 22, and 100,000 doses to Armenia on Dec. 29, Minister of Foreign Affairs and Trade Péter Szijjártó reported on his Facebook page.

The first shipment of the childrens’ vaccines, containing 138,000 doses, enough to vaccinate 69,000 children, arrived in Hungary on Dec. 13, with second and third deliveries of 48,000 jabs, on Jan. 4 and 11. An additional 54,000 doses are due on Jan. 18, totaling in a delivery of 150,000 doses for the first month of the year.

A boy is vaccinated with the pediatric version of the German-American Pfizer-BioNTech Comirnaty coronavirus vaccine at the Ferenc Markhot Hospital in Eger on January 11, 2022. Photo by Péter Komka / MTI Following the initial delivery of these special doses, the vaccination of children in Hungary began on Dec. 15, with

77 vaccination

centers specially designed for them, according to koronavirus.gov.hu, the government website for coronavirus information.

While parents must register their children online before taking them to be vaccinated, those older than 11 can get their COVID jabs without making an appointment at inoculation points on Thursdays, Fridays and Saturdays this month, State Secretary István György, who heads the national vaccination working group, said on Dec. 23.

Without any prior registration, people can receive jabs between 2-6 p.m.

on Thursday and Friday afternoons, and all day Saturday, from 10-6 p.m.

Vaccination Weekends

The head of the epidemiology department at the National Center for Public Health (NNK), Ágnes Galgóczi, added that in January, vaccination weekends would also be organized at GPs, who are obliged to devote one Friday and one Saturday to vaccinating patients at their practices.

However, in a letter to Minister of Human Capacities Miklós Kásler, the Hungarian Medical Chamber’s (MOK) General Practitioner’s Group wrote that the GP system is burdened by the obligation to organize these out-of-hours and weekend vaccination days.

had been delivered during the first weekend of the January drive.

The first cases of the Omicron variant of the coronavirus appeared in Hungary in December, and account for more than 29% of new infections as of Jan. 12.

Despite being more contagious than other COVID variants, having spread rapidly through a number of European countries, there have been conflicting reports on the severity of illness it causes due to a lack of clinical experience.

The first cases of the Omicron variant of the coronavirus appeared in Hungary in December, and now account for more than 29% of new infections.

Additionally, a new complex disease, which combines the coronavirus and influenza, was recently discovered in Israel. With Neumann Labs having identified the “flurona” dual-infection in Hungary, diagnostic laboratories will now perform an additional influenza test on all positive COVID-19 PCR tests. Despite these developments, the NNK reported that, as of Jan. 11, trace levels of the coronavirus in wastewater have stagnated.

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Sustainability Accreditation Ever More key to Successful Office Projects Sustainability accreditation and the provision of amenities continue to be central to the commercial success of office projects. Developers are increasingly aiming for double sustainability accreditation for new builds, while older stock is being upgraded to meet green criteria.

GARY J. MORRELL

According to CBRE, 98 office buildings in Budapest are green certified, representing 43% of the total stock in its database.

Skanska is now building H2Offices, its tenth office project in Hungary, with the retail area and restaurant regarded as one of its most important features, according to the developer.

“Our partner for this in the first phase of H2Offices is Kantin, which has

leased

1,200 sqm

and will provide premium food in a premium-designed environment,” says Skanska.

H2Offices by Skanska.

“We are sure that the presence of such a service provider in the building complex will be a big advantage for any tenant in their decision-making.

Negotiations are ongoing with further potential ones. H2Offices is also designed to obtain WELL and LEED certifications and is already pre-certified for WELL and Access4you ‘Gold,’” the company explains. The Access4you organization promotes accessibility in the workplace.

“As for the Budapest office market, it is in good shape, but of course, we see that there is a slowdown in decision-making processes, especially with the major players. However, activity is higher compared to the previous year, and we see that the demand for premium offices remains. Budapest has good potential, and the capital specifically is popular with investors,” the developer insists.

“There have been significant investment transactions lately and there are more in the pipeline.

Nordic Light Trio, our ninth project and the final phase of the Nordic Light office

complex, is our first office development in Hungary to obtain the WELL Core & Shell “Gold” certification. We are also proud that the building got the Access4you “Gold” certification for accessibility. In 2021, our global group climate goal has been updated; by 2030, we will be able to reduce our emissions by 70%, and in 2045 we aim to reach zero emissions,” Skanska adds.

CEE First

Horizon Development’s Szervita Square Building project has successfully completed its LEED certification process.

“Confirming the great sustainability initiatives and future-proof solutions implemented within the project, Szervita Square Building also received its LEED Platinum environmental rating, making it the only LEED “Platinum”-certified mixed-use property in CEE, and endorsing

News | 5

Horizon Development as a flagship development company with a clear ESG agenda,” the company comments.

Elsewhere, Atenor has announced that RoseVille on Bécsi út has been awarded a BREEAM “Excellent” sustainability rating. Construction work on the project is ongoing, and it is expected to be handed over in the third quarter of this year.

“Atenor’s aim is to create the city of tomorrow: a city that is more resilient, inclusive, attractive, better suited to the needs of its citizens and, therefore, a pleasure to live in,” says Zoltán Borbély, country director of Atenor Hungary.

“As for the Budapest office market, it is in good shape, but of course, we see that there is a slowdown in decision-making processes, especially with the major players. However, activity is higher compared to the previous year, and we see that the demand for premium offices remains.

Budapest has good potential, and the capital specifically is popular with investors.”

“Given the challenges of the future, this can only be achieved in a green and sustainable way. Therefore, at Atenor, we build our buildings in line with the United Nations sustainable development goals,” he adds.

In addition to sustainability certification, the developer is in the process of attaining an Access4You “Gold” rating. According to Atenor, the primary aim of the development, designed by Artonic Design Architect Studio, is to create a human-centered workplace that fits organically into the historical townscape of Óbuda and serves the needs of the tenant companies.

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and UNION Vienna Insurance Group, has acquired Da Vinci Private Clinic, Hungary’s largest private hospital outside of the capital, Doktor24 said on Jan. 6, Forbes.hu reports. The transaction has been cleared by the Competition Office (GVH), Doktor24 [businesses] that take out credit with noted. Da Vinci Private Clinic has nine such high forint interest rates, and the operating theaters and 85 beds. Last year, SME credit market could even dry up.

42,000 doctor-patient consultations took That’s why we must put all of our efforts place at the clinic, and 3,200 surgical toward fighting inflation and returning interest rates on credit to the 3-5% range,” procedures were conducted. The clinic, the market leader in the region in terms Nagy said. “If that is only possible in of both in- and out-patient service, had 2023, we could weigh bringing back revenue of HUF 3.6 billion. Doktor24 the FGS and BGS, targeted at financing and UNION set up their JV last spring green investments, while maintaining to build a national network of private preferential CSOK credit [for families raising children] and for green homes on healthcare service providers through acquisitions and targeted investments. the retail market,” he added.

In September, EMH announced the purchase of LIFE Egészségcentrum, the Hungarians Evacuated leading private healthcare provider in From Kazakhstan Székesfehérvár (65 km southwest of Six Hungarians and their family Budapest) and the Central Transdanubia members were evacuated on an aircraft region. Doktor24 has a staff of more of the Russian defense ministry that took than 750 professionals who work in more off from Kazakhstan’s Almaty airport, than 100 surgeries at nine locations in which is still closed for commercial six cities. UNION is Hungary’s largest flights, Minister of Foreign Affairs and private healthcare insurer.

Trade Péter Szijjártó posted on Facebook on Jan. 10, shortly after the plane’s Supply Disruptions departure. The minister noted that the Likely to Ease by H2 evacuation of Hungarians trapped in It seems inevitable that one of the Almaty had been carried out with the engines of this year’s economic growth help of the Russian foreign ministry according to an agreement he made with may be domestic consumption, but with the decline in the omicron variant, Sergei Lavrov, his Russian counterpart, external demand may improve, Zoltán on Sunday, Jan. 9. Szijjártó said that Varga, senior analyst at Equilor the Hungarians were to be flown to Befektetési Zrt., told business daily Russia, from where they would be taken Világgazdaság (Global Economy). to Hungary by a plane of the Hungarian armed forces. A seventh Hungarian, who According to the optimistic scenarios cited by the expert, most supply holds dual citizenship, decided not to disruptions could ease in the second leave the country, Szijjártó noted. half of the year, leading to a more stable growth pattern. Zoltán Török, JV EMH Acquires a senior analyst at Raiffeisen Bank, Largest Private Clinic told the newspaper something similar, Outside Budapest saying that GDP growth does not Első Magánegészségügyi Hálózat depend solely on retail consumption.

(EMH), a joint venture of private He expects the manufacturing industry healthcare provider Doktor24 Medicina to contribute to this year’s growth.

in Brief

Hungarian Businesses Rank Low in Digitalization Hungary ranks 23rd out of the 27 member states of the European Union according to the 2021 indicator measuring the development of the digital economy and society, writes profitline.hu.

In terms of the corporate integration of digital technologies, Hungary ranks 26th among the European Union (EU) member states, while it ranks 25th in digital public services, according to the DESI index published by the European Commission last November. Based on the aggregate indicator measuring the digital development of each member state, Hungary is ranked 23rd.

Targeted Return of Corporate Lending Stimulus Being Considered Policymakers could consider bringing back support for corporate lending, targeted at financing for green investments, if interest rates don’t fall with easing inflation by 2023, Márton Nagy, the prime minister’s chief economic policy advisor, said in an interview published in the Jan. 7 issue of daily Magyar Nemzet (Hungarian Nation). Nagy, a former deputy governor of the National Bank of Hungary (MNB), warned that corporate lending rates could climb to 8-12% from July 2022 amid a monetary policy tightening cycle that aims to counter spiking inflation. To support monetary policy transmission, he noted that the central bank had wound up its Funding for Growth Scheme (FGS), which supplied cheap credit to corporate borrowers, and is phasing out its Bond Funding for Growth Scheme (BGS), in which it subscribed to corporate bonds. “There won’t be many

Greenpeace to sue Over UNESCO Protected Lake Development large swimming pools, amongst other things. The winning bidder will have 36 months to complete the project. Greenpeace plans to sue the government, saying the second tender is more problematic

than the first. Hungarian and international nature conservation and heritage protection organizations have consistently opposed construction projects on the site, Euronews says.

Photo by berni0004 / Shutterstock.com

Environmental protection agency Greenpeace plans to sue the Hungarian government over a controversial development project it has put up for tender, Euronews has reported. The NGO claims the development threatens a lake recognized as a UNESCO world heritage site. Lake Fertő, known to the Austrians as Lake Neusiedl, is the largest so-called endorheic lake in Central Europe and straddles the Austrian–Hungarian border.

Last December, Sopron-Fertő Tourism Development Nonprofit Ltd withdrew its original tender to build a yacht port and hotels at the lake. However, on Christmas Eve, the government issued a second call for an even larger development project. The new plans envisage two motels, a visitor center with a restaurant, and two

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Zsolt Barna. Photo

by Tamás Katona

Zsolt Barna appointed CEO of Hungarian Bankholding Since Jan. 1, Zsolt Barna has managed Hungarian Bankholding as chairman and CEO, the entity tells the Budapest Business Journal.

In addition to managing the business activities of Budapest Bank, MKB Bank, and Takarék Group, his task will be to successfully implement the fusion and transformation of the three financial institutions.

The merger will result in an integrated, universal bank that fully serves the needs of both retail and corporate clients. The emerging superbank aims to cover the whole market spectrum and all customer segments in the future, with a significant emphasis on the provision of a new, modern range of products and services to retail, micro, small, and medium-sized enterprises, as well as agricultural customers, the group says.

The financial executive started his career at the National Monetary and Capital Market Supervisory Authority. From 1998 he was a head of a department, from 2004, he was a director and later the managing director of the supervisory board of directors at the Hungarian Financial Supervisory Authority (PSZÁF).

He joined OTP Group in 2010, and during his career there, he managed OTP Ingatlan Befektetési Alapkezelő, its real estate investment fund manager, and from September 2018 to July 2020, he was the deputy CEO of OTP Bank.

He also gained experience across the borders during this period: he led the first significant international subsidiary integration of the financial institution in Croatia, as well as the reorganization of CKB Bank in Montenegro.

Since September 2020, he has been the chairman of the board of Hungarian Bankholding. From January 2021, he also holds the position of chairman and CEO of MKB Bank; furthermore, he participates in the management of certain subsidiaries of the MKB Group as a senior member of the board.

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News | 7

One of the world’s most prominent software as a service companies, LogMeIn, Inc., has announced plans to establish one of its cloud-based solutions, LastPass, as a standalone company. The move has implications for Hungary, where LogMeIn was founded in 2003, since this is the biggest location for LastPass globally.

BBJ STAFF

John Ford, VP of digital workplace technology and managing director for LogMeIn Hungary (including LastPass), describes the development as a “spinning up,” rather than spinning off. “We are excited to welcome this new member to the Hungarian tech scene, which is not only a genuine global leader in the business-critical area of securing the remote workforce but also has all its software engineering, product design and tech support located here in Hungary,” he tells the Budapest Business Journal.

The award-winning password manager already helps more than

Photo by monticello / Shutterstock.com

LogMeIn to set up LastPass as Stand Alone Company

30 million users organize and protect their online lives and supports more than

85,000 businesses

of all sizes, providing identity and access management solutions.

LogMeIn says LastPass is the category leader in zero-knowledge password management. As a standalone entity, it will look forward to “strong and sustained growth” as consumers and businesses prioritize password security.

In “spinning up” LastPass, LogMeIn says it plans to increase investment in the customer experience, go-tomarket functions and engineering to accelerate its organic growth in password management, Single Sign-On, and Multi-factor Authentication.

“The substantial scale of LastPass, its tremendous growth, and its marketleading position and brand makes it a perfect candidate to seize new opportunities as its own standalone company,” said Bill Wagner, president and CEO of LogMeIn. Today, the significant majority of LastPass’ business is represented by corporate customers, illustrating the business imperative that password management has become to organizations of all sizes. The importance of securing

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identity verification among consumers and businesses is rising, given the rapid proliferation of passwords and the prevalence of unauthorized access by hackers.

Vast Growth

Francisco Partners, a leading global investment firm specializing in partnering with technology and technology-enabled businesses, is part of the financial support for the move.

“The success we’ve seen across the entire LogMeIn portfolio over the last 18 months proves there is a vast growth opportunity ahead for both LastPass and LogMeIn,” said Andrew Kowal, a partner at Francisco Partners as well as a LogMeIn director.

The global shift to remote working has also fueled the adoption of new accounts and apps;

50% of

people in the 2021 Psychology of Passwords research reported twice the number of accounts today compared to pre-pandemic levels.

“Organizations of all sizes across all verticals have applications that lack an OpenID interface for single sign-on access, and their management is

acutely aware of the financial costs and productivity burdens that come with repeated credentials resets,” comments Jay Bretzmann, a program director at IDC Security Products, a global provider of market intelligence and advisory services for the information technology, telecommunications, and consumer technology markets.

“LastPass clearly sees the opportunity in today’s market, and with this announcement, is poised to deliver increased strategic value to customers,” he adds.

“We are excited to welcome this new member to the Hungarian tech scene, which is not only a genuine global leader in the businesscritical area of securing the remote workforce but also has all its software engineering, product design and tech support located here in Hungary.”

Using what it calls a zero-knowledge security model, LastPass enables end users to generate secure credentials and share them across teams, companies or families with ease. It also monitors weak credentials and potential breaches, such as personal information on the dark web, while providing insight and control to IT teams with a comprehensive admin console and policy configurations.

Wagner says the announcement “reflects our strategic priority to strengthen and invest in our flexible work enablement portfolio across unified communications and collaboration and IT management and support. We believe that LogMeIn is well-positioned to continue to deliver strong results and capitalize on the tremendous opportunity in today’s virtual environment,” he adds.

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Business

PRESENTED CONTENT

Return of Greenfield Investments Augurs Well for FDI in 2022

2021. And the investment volume from Korea represented more than half of the large FDI deals. In fact, if we add up all the investments coming from the East, they represent more than 60% of the investment.

So, the first conclusion that we can draw from this is that the Asian investors were in the lead again. But parallel to this, the highest number of projects we dealt with were coming from Germany: 24, altogether. So, we continue to have an active, growing cooperation with Germany and other European investors.

In an exclusive, in-depth interview, Hungarian Investment Promotion Agency CEO Róbert Ésik talks to the Budapest Business Journal about another record-breaking year for FDI, investment trends, expectations for 2022, and involving Hungarian SMEs in the multinational value chain.

BBJ: What were the top business sectors?

RÉ: I would like to highlight maybe three points. Firstly, the electronics sector, including battery manufacturing, represented more than half of the investment volume.

Secondly, I’m really pleased that we were able to make agreements with 19 companies in the area of high valueadded service activities, including business services, engineering, software R&D, and infocommunication, representing more than 2,600 jobs.

Last but not least, the automotive industry and the food industry have also been significant contributors, representing close to one-third of the newly created jobs.

For us, the geographic distribution of investments also matters. One of our roles is to try to reduce regional differences. Except for one county, we have been able to bring at least two new, large projects to every county of the country. And among the top performers, we have, for example, Szabolcs-Szatmár-Bereg County [at the eastern tip of Hungary], which, from a GDP per capita point of view, is typically not in the lead when it comes to the revenue of the counties.

ROBIN MARSHALL

BBJ: What are the final figures for 2021?

Róbert Ésik: We have yet again had a record-breaking year. It was historic for two reasons. Number one, we have been able to break the record of the overall investment volume, which was the equivalent of EUR 5.9 billion.

Secondly, we’ve made an agreement with SK Innovation to carry out Hungary’s largest greenfield FDI project ever, worth EUR 1.9 bln. These two things make the year very special.

Like 2020, the projects we have dealt with can be put into two categories. On the one hand, we were actively working on large FDI deals, which is the core business of HIPA. And on the other hand, we were still active with our COVID-specific subsidy programs.

Relative to the relaunch of the economy, we started to welcome back investors with large greenfield project plans. In 2021, we closed eight deals that each had an investment volume of more than EUR 100 million. And just to give you an indication of the

Róbert Ésik trends, we currently have 27 large projects where we are still in discussion with investors, which have a value in excess of EUR 100 mln. We’ve also been able to close 326 smaller COVIDspecific investment projects and the corresponding investment value of these is approximately EUR 600 mln in total.

BBJ: Tell us more about the SK project RÉ: It is a battery factory in Iváncsa [a village of 2,900 people, 50 km southwest of Budapest], with 2,500 jobs planned and a yearly output of 30-gigawatt hours in terms of capacity. The company has purchased 80 hectares of land, 800,000

sqm. This investment is important because of its volume but also because of its strategic fit in strengthening our role as one of the leaders in electric mobility in Europe. Right now, Hungary is clearly within the top three in EV battery manufacturing, and we possibly have the highest current annual output of batteries, amounting to approximately 50-gigawatt hours. We expect to reach 150-gigawatt hours by 2025.

BBJ: Which were the top nations in terms of FDI into Hungary?

RÉ: Following 2019, Korea was number one for the second time in

BBJ: Is it fair to say these figures show that the “Opening to the East” was not about replacing Western partners but supplementing them. It’s not either-or; it’s both.

RÉ: Absolutely. And if you think about it, having an open economy means that you must be open to opportunities from both the West and the East.

Globally, there has been a shift within the composition of FDI volumes. In the past, more investments were of Western origin; currently, there are more of Eastern origin. If we don’t want to miss out on opportunities, we must be open to these projects. But it’s not a strategy that everyone can follow successfully. If you look at South Korean investments, according to the data of the Korean Exim Bank, Hungary was the second most favored investment location for Korean investors within the European Union in the past three years. And we’ve

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Budapest Business Journal | January 14 – January 27, 2022

been clearly number one in the region.

So, the fact that more investments are coming from the East doesn’t mean that all countries have been able to take advantage.

BBJ: What are your expectations for 2022? Does the pipeline of future FDI projects look good? Do you anticipate any impact from the General Election in the spring, perhaps a delay to investments until the election is over?

RÉ: Well, as opposed to COVID, what I can tell you is that the upcoming parliamentary elections have, to my knowledge, absolutely no influence on companies’ long-term FDI decisions.

And what we can see in our pipeline is that we have 141 firms that we are in discussion with. This, I believe, is one of the strongest pipelines we have ever had from an investment volume point of view, which also means that we have a relatively high concentration. So, the outlook is quite positive. But, of course, it’s always a competition. We can never be sure that these large deals will end up in Hungary. But this is one of the things which makes it so interesting to deal with these projects.

BBJ: Are those 141 projects following the established investment trends, or do you see anything potentially new on the horizon?

RÉ: I think we can say that we see a continuation of the existing trends, focused on e-mobility, with a relatively large share of Eastern investors. We also see some trends partly related to COVID, like the strengthening of the food industry or the pharmaceutical industry.

And we again see Business Services projects that potentially target not only the capital but also the countryside university cities, which is a trend that we’d like to encourage.

BBJ: Do you see the countryside cities growing as destinations? Are investors more open to going to Szeged, say, instead of just looking at Budapest?

RÉ: I think there’s an increased interest in the university cities in Hungary. A company that has already established operations here, for example, partly because of the tight labor market, partly because they want to take advantage of a labor pool that is more or less untapped, or partly because of the additional flexibility they would like to offer to employees, yes, they are thinking about opening offices in the countryside. Either in one of the university cities, or we even have some companies looking at the Balaton area for a secondary office, to improve their offering to their employees.

When it comes to greenfield investments, I think it depends on the size. If somebody is thinking about a highly complex, large-scale project of more than 500 people, they will most likely focus on Budapest. If it’s an operational hub with a smaller scale or size, then they might decide to focus on a tier two city from the beginning. We try to advise the clients on what would be most suitable for them and, if and when possible, try to promote those university cities in the countryside.

BBJ: Are the municipalities also getting better at marketing themselves. Debrecen, for example, has a lot of experience now, and it’s got good results.

RÉ: There’s definitely a learning curve; the more you do it, the better you become. And because of some successful examples, we see there’s a growing interest from the leadership of municipalities to emphasize economic development. The important thing, in my opinion, is to have a few dedicated experts who have this as a primary target, thinking about economic development and focusing on formulating the right messages for investors.

50% throughout the territory of Pest County, which was not previously the case. And secondly, and maybe even more importantly, we are now also able to financially support capacity extension type projects; before, we could only support the launch of new economic activity in the area. We have already given information on this to some of our major clients, and there’s additional information that you can find on our website for details.

BBJ: Subsidies also help. Are you able to offer specific subsidies to large companies to go to areas with less employment?

RÉ: If you talk about state subsidies, then within the European Union, we always have to find a valid legal title for financial support. This has four categories at the moment: regional aid, training subsidy, R&D grants, and COVID-specific subsidy programs.

We deal with all four of them as an organization.

There are two significant changes that are probably worthwhile mentioning.

One is that 2021 was the first full year we took care of the training subsidy program. We have been able to make 25 different agreements with companies regarding the training of their employees, always asking for some additional investment from them in return for the financial support. In these 25 training programs, close to 15,000 employees are taking part in the upcoming period.

The other important change became effective on Jan. 1 this year. This is the regional aid intensity map that applies to Hungary for 2022-27. The Central Hungary region has been divided into two parts, from a state aid point of view: to Budapest and to Pest County. In other words, Pest County is now treated separately from Budapest, which has two significant consequences. On the one hand, we can now offer a maximum intensity of

“The first conclusion that we can draw from this is that the Asian investors were in the lead again. But parallel to this, the highest number of projects we dealt with were coming from Germany: 24, altogether.

So, we continue to have an active, growing cooperation with Germany and other European investors.”

And maybe, last but not least, for us, it is always important to make sure that we are delivering a service that has the right quality and based on which we have a higher chance of winning an FDI project. That’s why we also follow international rankings and recognition closely. Site Selection Magazine did not publish its investment promotion agency ranking in 2021, but Hungary did perform very well in all categories.

We came out first in the best to invest top metros category, we were second in the best to invest per capita, and second in the overall best to invest category when it comes to Central and Eastern Europe. We were ahead of all the other Visegrád Four countries, which shows that Hungary continues to be a favorable investment destination. So, I think, all in all, we can be happy with the results achieved during 2021. And

Business | 9

based on the pipeline, we are looking forward to an exciting first half of this year because some of the major deals will come to a decision, according to our expectations, before summer.

BBJ: Is there anything else you would like to add?

RÉ: In addition to positioning Hungary as a favorable investment location for foreign investors, we also try to make sure that, once a foreign investor decides in favor of Hungary, this opens up additional opportunities for Hungarian, small- and midsize enterprises. That’s one of the reasons why we are running supplier development programs, which help SMEs get integrated into the value chain of these international investors.

And during 2021, have recommended close to 2,700 mid-size corporations to integrator companies, which means that, hopefully, several companies will get new orders from these integrators.

One program I would like to highlight from the last year was the HIPA Innovation Boot Camp that we ran together with Design Terminal. The goal was to identify those Hungarian startups that could offer solutions to the existing and real challenges of the automotive industry. That’s why we also involved four large automotive companies in the program. The startups had several workshops with these companies and even had the opportunity to present their results and projects during the demo day, which we held together at our traditional HIPA Automotive Conference.

So, in other words, our supplier development team was also very active in 2021 in opening up new opportunities for Hungarian SMEs and has been able to expand the portfolio in an interesting direction.

BBJ: Will that continue into this year?

RÉ: We will continue to work on this, but probably in a different format, having maybe more bilateral activities with individual integrators, focusing on their existing supplier network, and also trying to follow up with some of the startups that we have been able to get in touch with last year.

HIPA Results 2016-2021 2016

2017

2018

2019

Total number of projects

71

96

98

101

Investment volume (billion EUR)

3.243

3.512

4.312

5.350

4.078

5.879

Number of new jobs created

17,647

17,021

17,024

13,493

12,914

13,883

1 Number of large FDI projects

2 Number of Covid-specific projects

Source: HIPA

2020

2021

907

422 8102

971

961

3262

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Cleaner Energy Goals Drive Automotive Industry Changes Climate goals calling for cleaner energy to counter global warming and reverse its harmful effects are causing changes that are seeping into the automotive industry via e-mobility and fuel consumption. The Budapest Business Journal discusses these changes with Andrea Solti Istenesné, country chair of Shell Hungary Zrt.

Motorized two- and three-wheelers, cars and vans are such a significant contributor to overall global emissions that road vehicles of all kinds account for around 18% of the carbon dioxide emissions from burning fuel, according to the latest statistics by the International Energy Agency.

If the world is to achieve the climate goals agreed on in Glasgow and in the Paris Agreement, urgent action is needed. Little wonder, then, that the

A monthly look at automotive issues in Hungary and the region

Andrea Solti Istenesné, country chair of Shell Hungary Zrt. growing pressure on the mobility sector to cut carbon emissions is seeing the automotive industry accelerate changes.

“Tackling it effectively requires not just innovative ideas and new technology but also a complete redefinition of the relationship between mobility and emissions,” Solti Istenesné tells the BBJ. The task is immense. More than 90% of Shell's total emissions are associated with the use of our energy products. The oil giant has a target of becoming a netzero emissions energy business

by

CHRISTIAN KESZTHELYI

Automotive Matters

2050,

following a strategy called Powering Progress that it says is based on “ambitious but achievable” goals.

“Becoming a net-zero emissions energy business means that the company is reducing emissions from its operations, and from the fuels and other energy products they sell to their customers,” the country chair of Shell Hungary explains.

“We have targets to reduce the carbon intensity (net carbon footprint) of the energy products we sell. This includes

LNG Infrastructure

18

In line with this thinking, Shell Hungary has recently purchased an LNG filling station near the M0 Highway to expand its fuel portfolio.

The station is likely to start operations in the second half of 2022.

“The company’s goal is to build a network of LNG filling stations in Hungary in the coming years along key transport routes and international transport corridors, providing nationwide coverage and a safer and cleaner fuel supply to its partners,” Solti Istenesné explains.

“Shell Hungary’s new site is an important milestone in the development of the European network of Shell’s ownbranded LNG filling stations. Regarding Central and Eastern Europe, the M0 location is the third in the region in addition to the existing Polish stations.

Shell is planning to build further LNG sites in the CEE region in the mid- to long-term,” she adds.

To incentivize change, Shell has also launched a carbon compensation program. Customers can choose to offset their carbon dioxide emissions when buying fuel by paying a surcharge.

“Business, as well as retail customers, can decide to compensate for their carbon footprint for an additional fee when refueling at any of Shell’s

and LNG, BioLNG as well as hydrogen fuels for vehicles over 18 tonnes as the future,” says Solti Istenesné.

LNG and BioLNG are currently the most suitable alternatives for longdistance haulage, in particular, as a fuel for ships and trucks, as they are cleaner than diesel and heavy fuel oil because they produce less sulfur, particulates and nitrogen oxides and can help reduce greenhouse gas emissions from production to use.

“Shell LNG can help reduce well-towheel greenhouse gas emissions when compared to conventional diesel; it is a clean-burning fuel. When used in modern Spark Ignition LNG engines,

stations in Hungary. This is up to the customers; they are the ones who decide to participate and pay a fee,” Solti Istenesné concludes.

Using the funding brought in via this program, Shell will offset CO2 emissions by purchasing carbon credits from nature-based projects, such as the Cordillera Azul National Park Project in Peru and Katingan Peatland Restoration and Conservation Project in Indonesia.

The company insists it sources carbon credits from projects that are certified under credible, high-quality and independent standards.

short-term targets of 3-4% by 2022, and 6-8% by 2023, compared to 2016. It also includes medium- and long-term targets of 20% by 2030, 45% by 2035, and 100% by 2050, compared to 2016. It also means capturing and storing any remaining emissions using technology or balancing them with offsets,” she adds.

Transforming

Shell says it is transforming its business via finding new opportunities to provide more low-carbon energy solutions, such as biofuels, hydrogen, electric car charging stations, and generating energy from renewable sources such as solar and wind power.

Liquified natural gas (LNG) is an alternative fuel that industries are turning to, as research has shown that using it cuts emissions when compared to traditional fossil fuels.

“Shell sees a mosaic of fuels and engines developing: some will be suited to short journeys within urban areas, while others could be better for longer journeys between cities.

Depending on the size of the vehicles, Shell sees electric power suitable for vehicles under

tonnes

A Shell LNG filling station.

Shell LNG not only meets the latest EPA and Euro VI regulations for emissions but significantly reduces SOx and particulate matter (PM) to levels below the requirements without the need for extensive after-treatment systems,” she says.

“Shell LNG refueling stations are designed to help diminish methane emissions by eliminating the venting of LNG vapors to the atmosphere.

BioLNG produced out of manure is the only fuel with a negative carbon intensity, helping to reduce greenhouse gas emissions further. We see BioLNG as a key part of our wider work to provide a range of energy choices for our customers, to improve our own sustainability as a business, and to contribute towards the energy transition,” the country chair says.

190 service

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The Importance of Capital Allocation In his experience, Les Nemethy says most owners, CEO’s and boards of companies are highly concerned with improving operations but do not devote sufficient time to capital allocation or deal with capital allocation issues on a very ad hoc basis.

Decisions taken with respect to capital allocation have the potential to affect the share price or valuation of a company at least as much as operational decisions.

There are five ways in which the capital of a company may deployed: a) investing in existing operations (e.g., organic growth); b) paying down debt; c) acquiring other businesses; d) buying back shares; or e) issuing dividends.

There are three primary ways of acquiring capital: a) internal cash flow; b) raising equity; or c) issuing debt. I would consider joint ventures or franchising as variations of the above.

The above sources and uses of capital might be considered the capital allocation toolkit available to companies.

As Warren Buffett wrote in Berkshire Hathaway’s 2007 Annual Report, “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money.”

The Corporate Finance Column

monetary or potential future benefit to justify the investment (e.g., creating the potential for more business in the future).

• If a public company trades at 15x earnings, and there are plenty of private companies of similar quality and risk profile trading at 5-10x earnings, the public company can potentially create massive wealth by adopting a “roll-up” strategy consolidating the sector through acquisitions.

Capital allocation decisions are often based on intuition; they should be based on extensive and quantifiable analysis.

The decisions are immensely complex, requiring the processing of a vast amount of information. Just the due diligence on one acquisition target or getting a File picture shows Warren Buffet testifying before definitive quote on interest rates from a House finance subcommittee in Washington, D.C. banks can take many person-months of Photo by mark reinstein / Shutterstock.com. staff time. Decisions are enhanced by extensive financial modeling, which allows sensitivity analysis (e.g., analyzing “what Capital light business models if” type situations), as well as extensive • Many years ago, I advised a mature traditional copper wire telephone offer more opportunities for optionality, knowledge of tax regimes, as it is the aftercompany, where the writing was on the flexibility to move in different tax returns that count for shareholders. the wall that the days of fixed wire strategic directions.

It is no wonder that very few telephones were numbered, to acquire companies are indeed masters of capital Be the Investor a data transmission company, which allocation, especially among smaller There is no “one size fits all” capital was the future. Shareholders would, businesses that have fewer resources. allocation formula. A CEO or board of over time, have lost all their money I conclude with another excerpt by directors should constantly review the had they remained with the traditional Warren Buffett from that 2007 Berkshire toolkit, take on the perspective of an copper wire business.

Hathaway Annual Report: investor, and decide where to allocate cash • Warren Buffet’s company, Berkshire “Long-term competitive advantage within a company or group of companies.

Hathaway, repurchased enormous in a stable industry is what we seek in quantities of its own shares over the a business. If that comes with rapid The toolkit should be used past decade, believing that there are organic growth, great. But even without to optimize long-term shareholder very few investments out there that are organic growth, such a business is returns and a company’s capital better than their shares (and because rewarding. We will simply take the lush structure. A few examples: the tax treatment of share repurchases earnings of the business and use them is more favorable than dividends). to buy similar businesses elsewhere.

• The debt mix should be reviewed in light of changes in the company’s • For those businesses whose operations There’s no rule that you have to invest operational risk or changes in actual are capital intensive, it may be worth money where you’ve earned it. Indeed, or forecast interest rates. setting criteria for capital allocation. it’s often a mistake to do so.”

For example, I was once CEO of a • A start-up that is bleeding cash will have difficulty raising debt financing telecom operator where any investment from banks; pure equity financing in new infrastructure with a return on Les Nemethy is CEO of Euro-Phoenix Financial makes much more sense given investment below a certain threshold Advisers Ltd. (www.europhoenix.com), a the risk profile of such a company. (x%) was automatically rejected by the Central European corporate finance firm. He board. Any investment with an ROI • A mature, capital-intensive utility is a former World Banker, author of Business with low, regulated returns and a above y% was automatically approved.

Exit Planning (www.businessexitplanningbook. very stable cash flow might take on Any investment with an ROI between com), and a previous president of the substantial debt levels to improve x% and y% was subject to review by American Chamber of Commerce in Hungary. shareholder returns. the board and usually required a non-

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Special Report The Year Ahead

2022: Reading the tea Leaves for the Year Ahead What will 2022 hold in store for Hungary?

Well, an election is certain in the spring and promises to be more interesting than most in a very lopsided past decade.

We will cover that in more depth nearer the time. Of more direct interest to a business publication is the economic picture. The Budapest Business Journal has been sifting through announcements and reports to try and glimpse what might lie ahead. Here is our reading of the tea leaves.

BBJ STAFF

The Economy

The economy will continue to perform well, the government has insisted to the surprise of absolutely no one. Minister of Finance Mihály Varga said government decisions to reschedule some state investments in 2021 and 2022 would not dampen this year’s GDP growth in an interview published in the Dec. 31, 2021 issue of pro-government daily Magyar Nemzet (Hungarian Nation).

In December, the government decided to reschedule HUF 350 billion of investments due that year

and

HUF 755 bln

this year. The savings allowed the government to cut the 2022 deficit target a full percentage point to 4.9% of GDP. Asked whether postponing the investments could slow GDP growth,

Employment

European Commission’s Fall 2021 Economic Forecast for Hungary Indicators

2021

2022

2023

GDP growth (%, y.o.y.)

7.4

5.4

3.2

Inflation (%, y.o.y.)

5.1

4.8

3.4

Unemployment (%)

4.1

3.1

2.9

Public budget balance (% of GDP)

-7.5

-5.7

-3.8

Gross public debt (% of GDP)

79.2

77.2

76.4

Current account balance (% of GDP)

-1.1

-2.4

-1.9

Varga said, “We don’t think so. We continue to count on growth well over 5% in 2022.” The ministry’s official forecast for 2021-2025, released earlier in the week, puts next year’s GDP growth at 5.9%.

That’s broadly in line with European Union expectations for Hungary. The European Commission will make its next projection for Hungary’s economy in February. Its most recent figures are from the Autumn 2021 Economic Forecast, published on Nov. 11, 2021, and that puts 2022 GDP growth at 5.4%. See the chart for the full breakdown of the EC’s expectations for the Hungarian economy.

Government Spending

Related to the state of the economy is the government’s role in targeting funding to what it identifies as core areas, and significant sums have already been announced for spring tenders.

The Ministry for Innovation and Technology on Jan. 5 announced the start of pre-registration for a tender for HUF 10 bln in conditional grants for technology developments at green economy companies, according to state news agency MTI. The European Union and state funding, disbursed under the Green National Champions Program, may be used to make more efficient use of energy and water, support electromobility, get feedstock from secondary sources, and replace single-use plastics.

Grants are available for amounts between HUF 20 mln and HUF 1.5 bln, with a funding intensity rate of up

to

50%.

Companies with at least three people on payroll and net annual revenue of HUF 30 mln or more may apply. The deadline for pre-registration is Jan. 19. The tender itself is open from Feb. 10-24.

A couple of days earlier, finance minister Varga announced the Jan. 5 launch of a tender for HUF 140 bln in EU and state grant money for research, development and innovation investments at businesses via, as is so often the case nowadays, a Facebook post. Varga said the funding might be used to develop new products, technologies, or services and bring them to market, as well as experiment, conduct industrial research, or acquire equipment.

In a separate Facebook post, Varga announced HUF 25 bln had been allocated to support investments by big companies in 2022. Last year, 63 big companies were awarded HUF 50 bln under the scheme, supporting investments that added up to HUF 130 bln, Varga said. Since the 2015 launch of the program, which targets companies ineligible for EU funding because of their size, HUF 207 bln in subsidies have supported 241 investments with a combined value of HUF 510 bln, he said. Those investments created close to 4,000 jobs, he added.

That leads us onto another possible bottleneck for Hungarian economic growth, and certainly one that is often mentioned to the BBJ by CEOs: the tightening labor market. As ever, this is a double-sided metric: if it is hard to find employees, that implies a high employment rate, and no government on earth is going to be unhappy about that.

Nevertheless, severe disturbances can be expected in the Hungarian labor market due to the massive shortage of professionals, the Secretary-General of the National Association of Entrepreneurs, László Perlusz, warned InfoRádió on Jan. 4.

He also highlighted another burning problem: there are many professions with little supply. There are not enough car mechanics, room painters, and wallpapers, while fewer people are learning to become electricians or carpenters. In the view of Perlusz, even a significant increase in the minimum wage and the minimum wage for skilled workers will not change this situation.

The domestic unemployment rate may well remain below 4%, provided the coronavirus pandemic does not cause another shock to the world economy, Zoltán Varga, a senior analyst at Equilor Befektetési Zrt., told Világgazdaság. However, he also suggested that rising energy and raw material prices may slow the expansion of investments, reducing the need for new labor.

Be that as it may, Hungary’s jobless rate fell to

3.7% in

November, dropping from 3.9% in both October and the same month a year earlier, according to the latest data released by the Central Statistical Office (KSH) on Jan. 5.

In absolute terms, there were 179,200 unemployed, 9,400 fewer than in October, and 10,200 fewer than in the same month a year earlier. The rolling three-month average jobless rate reached 3.6% in November. KSH noted that data from the National Employment Service (NFSZ) shows there were 242,000 registered jobseekers at the end of November, down 18.3% from 12 months earlier.

Given this tight labor market, pressure on wages will not dissipate anytime soon.

Retailers Aldi and Spar reflected what is likely to be a trend across sectors for the year when they announced significant increases for their staff from the start of January 2022.

According to portfolio.hu, Aldi Hungary raised wages for its employees by 8% from Jan. 1, while penzcentrum. hu reported that Spar Hungary had announced on Jan. 3 that it would spend HUF 8.6 bln on pay rises in 2022.

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Budapest Business Journal | January 14 – January 27, 2022

2022 Wish List: Support Underground Musicians, Find More Grace and Rediscover Country Life As is now tradition, the Budapest Business Journal has asked a wide variety of folk in business and services around the country for their wishes (beyond a solution for COVID) for 2022, the Chinese year of the Tiger.

KESTER EDDY

SAVANNAH RUDLIN: Hungary Should Value and Nurture its Less-traditional Musicians When I’m asked about my favorite things about living in Budapest, I immediately mention the underground music scene.

On any day of the week, you can find DJ sets in the bars of Madách Imre tér and Széll Kálmán tér, late-night parties in transformed cinemas and daytime parties in cultural centers. Besides the

Savannah Rudlin music, there’s a wonderful community of talented artists that can be found in these spaces. In 2019, during my time interning at Budapest Showcase Hub (a festival and conference in iconic nightlife venues across the city over three days), I had the privilege of listening to and connecting with a great many musicians.

These people make Budapest vibrant and attract tourists and locals alike.

However, when speaking to them, a common theme is that they often struggle to make a living from music and feel unsupported compared to more traditional artists.

Still recovering from the COVIDinduced pause in live music, a primary source of income for musicians, many look to the state for assistance.

Yet, I’m told, the response from the Nemzeti Kulturális Alap, the National Cultural Foundation, is weak, with few underground artists receiving much funding from its hangfoglaló support program.

The Hungarian Oncoming Tunes (HOTS) program is one exception; it sponsors some underground artists performing at international music festivals.

However, both organizers and artists feel that the contemporary music scene has little financial support compared to Western European countries. France, in particular, provides substantial support to a wide variety of artists.

When speaking to organizers about possible reasons for this lack of assistance, some blame official attitudes towards avant-garde music, while others suggest that the support system is merely underdeveloped and needs time to grow.

In 2022, I wish for more general acceptance and increased funding for these brilliant musicians in the underground scene: they bring joy and freedom so desperately needed during these uncertain times. The onus is not on the government alone; artists need continuing support, albums and merchandise to be bought, and, importantly, crowds at gigs, and I hope 2022 will allow that.

Savannah Rudlin is originally from Cape Town, South Africa. She studied Communication and Media Science in Budapest and is now a creative copywriter with a multi-national telecommunications company in the Hungarian capital.

TAMÁS PLETSER: A rational Germany, Less Tension Around Ukraine and Energy Storage Innovations I believe foreign events and developments, especially concerning Germany and Russia, could play the most important role in the life of Hungary in 2022. I do not expect a change in the political scene in Hungary, despite the April Parliamentary elections.

In Germany, the politics of the new ‘traffic-light’ coalition, and in Russia, the tension with Ukraine could well be the most critical factors.

I wish that Russia avoids any escalation of the military conflict with Ukraine and stabilizes the political situation with its south western neighbor. Regarding this issue, I also blame the West’s policies,

which seemingly do not understand the geopolitical fears of Russia.

I also wish that the new German coalition will build its policies on rational rather than ideological grounds. Europe needs a smart German leadership with clear and achievable targets; otherwise, the whole EU project could become mired in a policy quagmire.

As an energy analyst, my greatest wish for this year is to have technological breakthroughs in energy storage. For some time now, we have been expecting new, solid Li-ion battery solutions, as well as new ideas for the long-term storage of electricity. The ideas vary widely, from traditional hydrogen to gravity or chemical-based storage systems, but these need to work on an industrial scale and not only in a laboratory environment.

Breakthroughs in these technologies could be pivotal and may substantially speed up the transition of global energy systems to achieve sustainability.

Climate change is a growing concern for future generations, and I doubt we can find a solution without new technical developments. These issues could have a significant effect on the Hungarian

Tamás Pletser economy as well: just think that 10% of our GDP is based on the automotive industry, which is directly affected by the electrification of transport.

Tamás Pletser is an Erste Bank EMEA oil and gas analyst. ÁDÁM SOMLAI-FISCHER: Taking Climate Change Personally We make a plan in my family every year, agreeing on things we would like to accomplish as a family and as individuals, and even asking each other for some things.

Because of climate change, we’ve been taking night trains in Europe instead of flying, have stopped eating beef altogether and generally reduced our meat consumption, things like that.

Ádám Somlai-Fischer But beyond the personal choices, I’ve decided to find a concrete project I can contribute to that actively fights climate change, something that is on the active innovation side of ecological efforts. I don’t know yet what that is or in what role, but it is a project I intend to take seriously and have done in 2022.

An example would be to join one of the fusion energy projects or companies and help them as best I can. Ádám Somlai-Fischer is co-founder and principal artist of Prezi, an international presentation software company originally founded in Hungary.

BEATRIX OLGYAY: More, not Less, Online Learning, but With Innovation In the last 10 years, we teachers have had to get used to the achievements of the constantly developing information technology and media, but it initially seemed a fruitless task to make people like online classes. Companies attempted to provide employees with a kind of hybrid learning, mixing e-learning programs with contact hours but, initially, this teaching method did not spread widely.

The arrival of the COVID-19 virus in 2020 turned the world upside down. It not only ruined several branches of the economy but also changed the lives of many people. But after the first shock, in 2021, people learned to turn a profit from lockdown. They discovered that the internet could be used for obtaining basic necessities even in quarantine, and it could also be a useful means of starting or developing businesses. Last year, company leaders also started to think more cost-effectively, investing in developing new technologies and less in recruiting new employees.

Adult education also experienced changing customer demands.

Companies began preferring online classes based on economic reasons

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and safety regulations. At first, everybody thought it was only a temporary trend, but with each wave of the pandemic, it became clear for everybody that learning languages would never be the same.

In 2021, teachers were not only more experienced than a year before, but students also got used to the idea of being taught online. Both have now accepted e-contact lessons as an alternative to on-site training.

My wish is that in 2022, more and more services will be provided online in the different economic fields to avoid close contact and for efficiency.

Adult education institutions will still provide online and traditional classes in parallel but will probably come up with new innovative ideas in teaching.

Many are likely to offer off-the-shelf e-learning programs and also improve the number of online tutors, being able to involve native teachers living far away.

Beatrix Olgyay is head of the Oxford Language School in the city of Győr, in western Hungary.

Beatrix Olgyay

rightness that we fail to consider that we may be at fault or that we may have erred.

I sometimes felt this was missing in my interactions in Budapest. I admit I could have acted more graciously at times, too. My Fulbright experiences with my students and colleagues in Budapest reminded me of the blessings that practicing grace bestows.

Rebecca M. Chory, Ph.D., is a professor of management at Frostburg State University in Frostburg, Maryland, USA. She recently spent four months in Budapest as a U.S. Department of State Fulbright Scholar teaching and researching malefemale workplace relationships at Corvinus University, Budapest.

Rebecca M Chory REBECCA M CHORY: More Grace for Better Understanding and Less Stress My wish is that we practice grace more frequently, in more situations, and with more people in 2022 than we have in the past. Having just spent four months teaching and researching as an American Fulbright Scholar in Budapest, I realize how easy it is to be offended, misunderstood, and judged unfairly by other people, as well as how easy it is to offend, to misunderstand, and to judge others unfairly. We need to remember that people have different beliefs, values, traditions, and experiences before judging.

COVID and divisive political and social issues have made us more anxious and frustrated, increasing the likelihood that we will “mess up,” offend or disappoint others.

When that happens, which it inevitably will, my wish is that we respond to each other with grace. I hope that we extend each other understanding and courtesy, that we give each other an opportunity to explain our points of view, that we are slow to judge, and that we avoid being so sure of our own

ROBERT KINDL: Getting Back to the Country Despite the obviously catastrophic consequences of the pandemic, I find the current trend of moving out of cities one welcome effect. Although big cities may generate tension among people due to population density, they also encourage a certain level of tolerance. They create way more opportunities to socialize.

Despite this, people still do not tend to really engage with each other: we can say people in big cities have a busy life.

Inevitably, it is more superficial.

Recently, even before the pandemic, Hungarians have been increasingly rediscovering Lake Balaton as a temporary or permanent home. As a result, there has been much infrastructural, welfare, and convenience development in the region.

My wish is that this process expands into other regions of the country. I hope there will be more programs to encourage prosperity and to retain young minds, as this is essential for Hungary. There are many aspects in favor of rural locations; for example, the quality of life, the closeness to nature, better mental health, and more chance to connect with fellow human beings as people pay more attention to each other.

In past centuries, there was more diversity of populations in rural centers

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Special Report | 15 and even villages that encouraged tolerance. In today’s globalized world, it is increasingly important to use local products and services. These trends would be stronger if there were more people finding opportunities and support in the countryside.

Robert Kindl Rural culture is still the cradle of our traditional roots but, with local life being irreversibly connected to the entire world, village residents can also remain connected to the wider world. The more we spend time getting to know different cultures first hand, the more we enrich ourselves, recognize our values and learn tolerance. That is why I would like to see the growing interest in visiting rural Hungary by many more Hungarians continue. I believe our future generations depend on it.

Robert Kindl is the general manager of the Tokaj-Oremus Winery. He was born and raised in Budapest but now lives with his family in the small town of Sárospatak, northeast Hungary.

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Real Estate Year Ahead: Office and Industrial to Remain the Sectors of Choice The industrial sector is expected to continue to return buoyant demand and supply indicators, with non-specialist industrial developers having moved into the field, although office remains the sector of choice for both developers and investors.

GARY J. MORRELL

Longer-term, favorable prospects for the hotel sector remain a clear possibility, while questions remain over the mediumto longer-term outlook for retail development and investment.

Sustainability accreditation is playing a prominent role in the office market, with developers increasingly designing projects according to BREEAM or LEED alongside WELL accreditation.

The investment market is attracting international and local capital, with competition increasing for the limited supply of suitable assets.

Office

The most active office developers are all continuing with projects. Atenor has announced that RoseVille on Bécsi út is expected to be handed over in the third quarter this year. Skanska, meanwhile, is due to deliver the first phase of its H2Offices scheme this year, its tenth office project in Hungary.

Developers are undertaking more sustainable and imaginative office designs to meet changing demands from companies and office occupants.

Total modern office stock in Budapest now stands at approaching four million sqm of class “A” assets according to the Budapest Research Forum (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 in 2022. However, the relatively small pool of Hungarian and regional office developers operating in Budapest had already been undertaking restrained development policies for several years and, therefore, oversupply against the background of

Work is ongoing in 2022 on Skanska’s H2Offices project. the pandemic and its negative impact on the market is not expected.

Office delivery for this year is expected to be low; the overall pipeline expectation is around 270,000 sqm, as several projects have been delayed.

CBRE has estimated around 450,000 sqm under construction in Budapest.

“Office developers will be more careful, some planned projects may not turn into real development, and it is anticipated that very few pure speculative projects will be started. At least a 30-40% prelease will be required to get started with a new office building project. But developers are eager to build, so I will not be surprised to see some exceptions.”

“Office developers will be more careful, some planned projects may not turn into real development, and it is anticipated that very few pure speculative projects will be started. At least a 30-40% prelease will be required to get started with a new office building project. But

has taken in its first big tenants, and developers are eager to build, so I will not be surprised to see some exceptions,” the complex has received BREEAM “Excellent” certificate for the design comments Valter Kalaus, managing stage in the New Construction category. director of Cresa Hungary.

The company has undertaken the In the serviced offices sector, the development of three so-called mega leading CEE provider New Work Offices parks with a capacity of 884,000 sqm of has a 2,000 sqm office at the Science warehouse and industrial space on 219 Park Business Center at Irinyi József u. hectares, according to Futureal.

4-20 in District XI, with 68% occupancy Elsewhere, the leading CEE in its projects. According to Hubert Abt, industrial park developer and operator, founder and CEO of the company, this brings the company’s presence to 11,000 CTP, is committed to developing built-to-suit and speculative space sqm in Budapest, which will grow to in both the Budapest area and at key 20,000 sqm in 10 locations this year. logistics and industrial hubs across Contracts have been signed with the accessibility organization access4you for the country, such as Tatabánya, Komárom, Győr and Székesfehérvár. the operation of the flex offices, he adds “Leasing activity is likely to remain Industrial strong with a high share of preleases A boom in the industrial and logistics that are expected to keep rolling in as sector is predicted. According to the occupiers flock to the new availability Budapest Research Forum, modern after years of undersupply. There is industrial stock in the Budapest area further upside from potential new stands at a little over 2.5 million sqm. entrants as the current market dynamics There is an overall vacancy rate in are trending towards more competitive the industrial market of less than 4%, terms from a regional perspective. about as low as it can realistically get.

Further vacancy increases are likely over Last year, the sector began attracting the next quarters, but the vacancy rate developers beyond the traditional is expected to remain in single-digit market players. territory,” comments CBRE. Developers are committed to Hotel constructing at key regional logistics The hotel sector has been severely hit by hubs, although the greater Budapest the lockdowns and restrictions on travel area will remain the dominant industrial following what had been a boom period development area. CBRE has traced a for the CEE hotel markets, including one million sqm industrial development Hungary. A pick-up in the hotel market pipeline across Hungary, which it says represents the highest volume on record. is not expected until at least spring this with the return of international tourists The opening phase of HelloParks and business travelers. A fuller market Maglód, part of the Futureal Group,

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recovery that would once again make the sector attractive for investors will take even longer.

There is a substantial hotel pipeline with more than 2,000 rooms in the active pipeline across Hungary that is due to be delivered by the end of this year, according to CBRE. Over 1,000 rooms will have been handed over in Budapest by the end of 2022, according to the consultancy.

consumer spending following the global financial crisis of 2007-2008, stringent planning regulations regarding shopping center development, and subsequently the impact of COVID and the further rise of online retail and its adverse effects on demand and footfall at bricks & mortar retail. After the launch of the Etele Plaza mall in 2021, there are no new Budapest shopping centers in the pipeline, although Wing and CPI have ongoing refurbishments of existing centers continuing this year.

Other center owners are considering redeveloping their assets.

Hungarian developer Futureal has extended its activities with the establishment of Futureal Investment Partners, which will deal with investment and asset management in Europe. The company has purchased the 25,000 sqm Manhattan shopping center project in Gdansk, completed in 2004. Futureal follows a strategy of generating aboveaverage returns from value-add and opportunistic situations. This is part of a growing trend for Hungarian developers and investors to look at possibilities elsewhere in the region.

“Leasing activity is likely to remain strong with a high share of preleases that are expected to keep rolling in as occupiers flock to the new availability after years of undersupply. There is further upside from potential new entrants as the current market dynamics are trending towards more competitive terms from a regional perspective.

Investment Hungary is expected to remain in Further vacancy increases third place after Poland and the Czech are likely over the next Republic as a preferred CEE investment destination in 2022, as has been the quarters, but the vacancy established pattern in recent years. rate is expected to remain CBRE puts current prime office yields for Hungary at 5.25-5.5% and 6.15% in single-digit territory.”

DVM group started construction works on the Drechsler Palace in Andrássy út last year. The historic, protected building, also known as the former Hungarian State Ballet Institute, is owned by the hotel developer and investor QPR Properties and is being redeveloped into the first W Hotel in Hungary. The W Budapest is currently due to open this year, though the official website (whotel.hu-budapest. com) still proudly proclaimed “opening 2020” when checked on Jan. 10.

Retail

Retail development in Hungary has been very low in recent years as developers have had concerns over the level of

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for industrial, with a significant gap between Hungary and the Czech Republic and Poland, as well as Western Europe. This provides a yield premium for acquisitions in Hungary. However, the problem remains a low supply of suitable assets available, particularly in the industrial and retail sectors.

Colliers similarly puts prime office yields at 5.25% and 6% for prime industrial, where compression is anticipated. This compares to 4.25% and 4.5% for prime office and industrial in the Czech Republic.

“There has been sufficient liquidity to confirm or guide pricing levels in the office and industrial sectors, but the situation in retail and hotels remains more difficult to gauge and generalize,” comments CBRE.

The Drechsler Palace W Budapest is due to open in 2022.

Hungarian capital is expected to remain dominant in the investment market, although investors from the region and Western Europe are stepping up their activities, according to CBRE. In what was described as a benchmark transaction at the end of last year, Union Investment, one of the leading European investors, purchased the commercial element of the mixed-use Szervita Square Building developed by Horizon Investment.

“We are re-entering the Hungarian property investment market with the current purchase of Szervita Square Building. This exceptional technical and quality downtown Budapest asset with its diverse tenant mix and over 95% commercial occupancy level convinced us to return to Hungary,” comments Adam Irányi, head of the investment management office for Europe at Union Investment.

Sustainability

Sustainability accreditation to WELL, in addition to BREEAM or LEED, is an increasing trend for high-end office developments, reflecting the growing concern from tenants and staff about interiors, the provision of amenities, location and ease of transport, and, given the current environment, anti-virus measures within the office environment.

Sustainability accreditation is now a basic requirement from investors when making an acquisition.

A successful year for the various sectors depends very much on how well the economy and society recover from the effects of the coronavirus in Hungary and abroad.

Provided that goes well, it would maintain strong demand in the different property sectors that in turn encourages development, providing assets for investors.

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Socialite

It seems wrong to knock Dry January, given that it’s all about stopping boozing and, as the Alcohol Change charity puts it, getting “your fun back… your energy back... your calm back.”

But I’m not convinced it’s such a good thing.

DAVID HOLZER

If you’ve decided to try Dry January, you’re in the growing percentage of people who now do so. A poll of 2,200 U.S .adults conducted in early January 2021 by data intelligence company Morning Consult revealed that 13% of them were taking part, compared to 11% previously: • 79% did so to become healthier.

• 72% simply wanted to drink less alcohol.

• 63% wanted to “reset” their drinking.

• 49% admitted they were drinking too much because of COVID. Back in my drinking days, although I used to stop drinking for that one hellish month, Dry January wasn’t a thing. As a pseudo-event, it officially came into being in 2014 when the name was registered as a trademark by the U.K. charity Alcohol Concern.

The rise in popularity of Dry January also reflects a growing trend toward abstaining from booze, even if only for a short period.

It seems that the growth in teetotalism or moderation is being driven by the young. An article on

Photo by On The Run Photo / Shutterstock.com

Dry January: is it Really Good for You?

The Conversation website claims that research into the drinking habits of young Swedes shows “a decline across all types of consumption, from the heaviest to the lightest drinkers. Similarly, rates of binge drinking have gone down and people defining themselves as non-drinkers has increased.”

Social Drinking?

The Conversation article also suggests that the omnipresence of social media in our lives could be aiding the rise in non-drinking.

Dominic Conroy, the author, suggests that because young people meet on TikChat or SnapTok or whatever, the “once central role of pubs and clubs for initiating and consolidating social networks appears to have changed.”

This argument does not convince me. During lockdown in 2020, a group of young Hungarian male friends of mine, who would usually hit the bar on a Friday night to play pool and get hammered, met online to drink instead. They can’t have been the only people doing this.

I would suggest that, if Conroy is correct, the rise of respect for alcohol has much more to do with the way images on social media shape our online “personal brand.”

We all want to look bright-eyed and bushy-tailed online. Not gurning at the camera with our eyes going in two different directions,

swapping spit with some horror, or sprawled on the pavement with our unmentionables showing.

Alkoholmentes Hungary

The trend towards living an alcoholfree life – temporary or otherwise – is also growing in Hungary. Back in 2019, this publication reported that “Demand in Hungary for low-alcohol and nonalcoholic beer is on the rise, in line with the global trend.”

Today, there are plenty of nonalcoholic options for Hungarians taking part in Dry January. All the major breweries do a 0.0% beer as well as a range of combo fizzy fruit n’ beer-flavored drinks I’ve never seen anywhere else in the world. While I wouldn’t want to drink either for any length of time, unless I was conducting research into Hungarian bar restrooms, they’re perfectly quaffable.

At New Year’s, when a glass of champagne is mandatory in our house, along with lucky frankfurters and lentils, I sipped a non-alcoholic sparkling wine made by Törley that wasn’t bad at all. I’m glad I chose this one rather than Kölyök, a sparkling wine made by Törley for kids that its website describes as “puppy drinks enclosed in a champagne bottle.”

As for Hungarian non-alcoholic wine, I began by asking my colleague Robert Smyth, the BBJ’s wine correspondent, if there was such a thing. He told me, “Of all the many

wineries I’ve visited in Hungary, nobody has ever shown me an alcohol-free wine. While alcoholfree wine is gaining traction in some countries, the local market is not ready for it, I think. I also believe that alcohol is a key component of a wine’s structure.”

The extensive research for this article included hunting for nonalcoholic Hungarian wine in the finest of wine shops, and it appeared that, as I expected, Robert was right. But I did find the alkoholmentes.hu website, which offers “Light Live” Hungarian red, rosé and white wine.

Apparently, the alcohol is removed from the wine “by a special vacuum process, when the wine is heated to 28˚C in an airtight environment.”

Although alkoholmentes.hu claims its wine retains the flavor of wine, I’ve yet to quaff and confirm.

“Of all the many wineries I’ve visited in Hungary, nobody has ever shown me an alcohol-free wine.

While alcohol-free wine is gaining traction in some countries, the local market is not ready for it, I think.

I also believe that alcohol is a key component of a wine’s structure.”

When it comes to non-alcoholic spirits available in Hungary, I’ve only been able to find something called Fluère, supposedly an ersatz gin. I couldn’t tell from the taste. The problem for me with Fluère is that it doesn’t taste so great neat and, unless I use half the bottle, a long, tall drink made with it doesn’t taste of anything.

When you consider that it costs not much less than a bottle of gin-gin, that’s a bit of a waste.

As for mocktails, forget them.

You might as well drink banana or chocolate milk garnished with pineapple segments through a straw while burning money.

Ultimately, I’d say that substitutes for alcohol are a waste of time and money and maintain the ritual aspect of boozing, which is part of the problem. If you are really doing Dry January, stop drinking pretend booze and wear yourself out getting fit instead. In my experience, the only way to stay off the alcohol is to form a habit that won’t destroy your health, dignity and maybe your life.

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Socialite | 19

A Somber Festive Season for Hungarian Wine World The festive season started on a downbeat note with the sad news of the passing of Vilmos Thummerer, one of the pioneers in Eger’s revival following the regime change, at the age of 78 on Dec. 21, after a long illness.

ROBERT SMYTH

The former flower grower, who started making wine in 1984, built up an impressive estate and a large, cavernous, labyrinth-like cellar that is carved dramatically into the tuff cliffs and rock of Noszvaj, in a Middle Earth-like magical setting, some 13.5 km by road to the east of the city of Eger.

Thummerer long worked in close conjunction with the skillful and dedicated winemaker József Lamport, who oversees the production of around 600,000 bottles a year from more than 110 hectares of vineyards; the quality is very consistent, with some wines outstanding.

If one piece in the jigsaw puzzle was ever missing, it was that the Thummerer Pince somewhat flew under the radar when it came hitting the upper echelons of the domestic market due to nothing more than a lack of savvy marketing.

However, its membership of the Egri Borműhely, an association of the region’s leading producers, whose PR is handled by the very professional Wineglass Communication, should help get the message out.

Furthermore, Thummerer’s granddaughter, Polett Pulay, is already deeply involved in the winery as export and office manager, and the family continuity looks assured.

She is busy acquiring wine knowledge, and in December, I had the pleasure of teaching her on the WSET (Wine & Spirit Education) level three course at Budapest’s Borkollégium, which gives a broad understanding of the wines of the world and their places of growth.

took the WSET Diploma (level four), and I was impressed with his inquisitive, active mind that revealed both considerable knowledge and an openness to new ideas.

This manifests itself in the contemporary, fruity wines of good concentration and balance that appeal to international palates.

Traditional wine cellars with barrels near Eger.

Photo by Richard Semik / Shutterrstock.com Probably my favorite wine from Thummerer is the Egri Bikavér Grand Superior Nagy-Eged single-vineyard wine, the 2016 of which has vibrant blackcurrant and forest fruit aromas and flavors, along with lively acidity and restrained tannins on the very long, complex and balanced palate.

It gives a lot, but subtly; this medium plus bodied wine is perfectly balanced, and the alcohol hits the scales at a very welcome 13.5%. That’s on the low side for such a concentrated wine made from very low yields. The yield for Grand Superior must not exceed 60 hectoliters/hectare, and the NagyEged dűlő (vineyard) yields are much lower than that.

South-facing

Nagy-Eged dűlő is a south-facing vineyard lying in the middle of the pure limestone Nagy-Eged Hill, where there is some topsoil that holds muchneeded water reserves, according to Lamport. He adds that the acidity from the limestone is of a sort that helps to retain the vibrant fruitiness in the final wine.

This wine is a field blend of Cabernet Franc, Kadarka, Kékfrankos, Merlot and Syrah (all planted in 2008). The grapes of these different varieties are picked simultaneously and fermented together, as opposed to the more usual practice of vinifying separately and blending after the wines are aged individually in oak barrels.

The grapes ripen at more or less the same time, and the idea is that a bit of unripeness here can be compensated by a tad of overripeness there. In this case, this method works brilliantly in capturing the vineyard’s character without emphasizing the individual grapes. The 2016 is an absolute bargain at HUF 5,500 from shop.thummerer.hu.

Thummerer’s most famous wine is Vili Papa Cuvée, a Bordeaux-

style blend that rewards bottle aging.

Perhaps due to the aforementioned lack of marketing, some of the 2009 vintage is somehow still available; so many of Hungary’s top wines sell out before they get a chance to show their best.

I was fortunate to sip Vili Papa Cuvée 2009 last summer, and this is likely to still be at its peak.

The dry fall of 2009 helped the grapes (mainly Cabernet Franc and Merlot, with a little Cabernet Sauvignon) ripen fully, which can be a challenge in this northern, somewhat cooler climate wine region.

Aged for two years in new barrique barrels, the wood is beautifully integrated; the tannins are ripe and smooth on the palate, and it is both juicy and earthy. It costs HUF 11,500 from Bortársaság, which is excellent value for a high-quality, mature product.

It is the ideal wine to raise a glass to the Eger icon.

Jackfall Tragedy

In the New Year came the tragic news that Gábor Jandrasics (co-owner) and Ottilia Burger, of Jackfall Bormanufaktúra, a winery with charming apartment accommodation, in Kisjakabfalva, in the Villány wine region, were killed in a car accident.

Both were marvelous hosts when I guided guests on tours there and will be sorely missed. The Jackfall winery, which cultivates 13.5 hectares in Kisharsány and Nagytótfalu, has pledged to keep serving its customers. Incidentally, Jackfall is the Swabian name for Kisjakabfalva.

Jackfall winemaker András Kőszeli, who trained in Tuscany, was my study buddy when we

Jackfall winemaker András Kőszeli, who trained in Tuscany, was my study buddy when we took the WSET Diploma (level four), and I was impressed with his inquisitive, active mind that revealed both considerable knowledge and an openness to new ideas. This manifests itself in the contemporary, fruity wines of good concentration and balance that appeal to international palates.

This terrible news brings a painful reminder of the earlier loss of a significant player in Villány’s resurgence since the regime change: Pál Debreczeni, founder of the Vylyan Pincészet.

His wife, Mónika, has done a sterling job leading the Kisharsány-based winery since her husband’s death in a car accident in 2005. (Pál’s brother Kálmán Debreczeni exited Vylyan and is the owner of Debreczeni & Ferenczi Pince family winery, which is based in Etyek and makes wines from there, as well as Szekszárd, and also has a restaurant.)

Vylyan’s winemaker is now Sándor Tóth, having replaced, István Ipacs Szabó, who has moved on to concentrate on his family winery in Kövesföld, Villány, as well as tending the vines of a foreign neighbor on Tenkes Hill and making the wines.

Ipacs Szabó also has a new role as winemaker of the Research Institute of Viticulture and Enology of the University of Pécs.

Here, he makes countless wines from 1,800 grape varieties planted over 35 hectares on two sites. Ipacs Szabó was shortlisted for the Hungarian Wine Academy’s Winemaker of the Year 2021 medal, which went to Beáta Pühra Nyúlné, winemaker of the very well-known Nyakas Pince in Tök, in the Etyek-Buda wine region.