Budapest Business Journal 3006 by Business Publishing Services Kft.

VOL. 30. NUMBER 6

MARCH 25 – APRIL 7, 2022

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

SPECIAL REPORT INSIDE THIS ISSUE

Manufacturing & New Technologies

Manufacturing Sector Sees Capacity Expansions in March The long-term outlook for Hungary’s manufacturing sector seems healthy. However, EU sanctions against Russia have started hurting the European economy, and their effects are hard to predict. 16

Soaring gas Prices Disrupt Fertilizer Manufacturing Like some other fertilizer manufacturers in Europe, Hungary’s Nitrogénművek has temporarily halted ammonia production and may soon stop fertilizer production on soaring gas prices due to the Russo-Ukrainian war. 19

Virtuous Trinity of Vocational Training

SOCIALITE

NEWS

BUSINESS

German chamber vice president Achim Weinstock says vocational training represents a triple win for companies, their future workforce and Hungary as the DUIHK hands out it coveted vocational education preis for the ninth time. 14

Central Bank Heats up Inflation Battle

BUSINESS

1st Budapest Hydrogen Summit a Massive Success In the fight against climate change, many see hydrogen as the most promising energy source of the future and one of the primary vehicles for achieving mid-century net-zero targets. 10

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Budapest Business Journal | March 25 – April 7, 2022

IMPRESSUM

THE EDITOR SAYS

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

A HUMAN RESPONSE TO A HUMAN TRAGEDY

Czifra, Kester Eddy, Bence Gaál, Gergely Herpai, David Holzer, Christian Keszthelyi, Gary J. Morrell, Nicholas Pongratz, Robert Smyth LISTS: BBJ Research (research@bbj.hu)

I had a telephone conversation with my Mum this week. That’s an odd opening, I know, but stick with me. She’s 92; we haven’t seen each other for two years because of COVID restrictions that have finally been lifted to the extent that traveling back becomes viable. I hope to do that soon. In the meantime, the phone has been a vital link. We talk about the family, the weather (we are British) and the world. She thinks differently than me. It’s not just the generational gap; it’s also her life experiences. On both her mother and her father’s side of the family, there were deep mental scars left by World War I. They were also physical, in my Grandfather’s case. He was wounded twice and gassed once before being invalided out of the Army. My memory of him (I was four or five when he died) was of a distant, quiet man. My Mum was nine when World War II broke out and spent most of it in London, after a brief flirtation with evacuation during the Phoney War period. She had just shy of a year’s worth of highly disrupted education during the Blitz, sheltering in the Underground. The idea of Ukrainians huddling together in the Metro stations is eerily familiar for her. Breaking all the ligaments in my right ankle, once playing rugby and once playing cricket, doesn’t remotely compare with that. During our call this week, I mentioned to her that the annual Polish-Hungarian friendship day had been postponed because, as the organizers put it, “Together,

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we thought that while the Ukrainians were fighting a heroic fight for their occupied homeland, now was not the time for us to celebrate happily.” She thought about that for a second and said, “Well, I think that’s a shame. It is awful what is happening, but you can’t stop everything.” And so, tonight, we will hold our eighth Expat CEO of the Year Gala and honor three outstanding business leaders: Britain’s John Ford, managing director of GoTo in Hungary, Dutch national Frank Iepema, CEO of Hydro Extrusion Hungary Kft., and Giacomo Pedranzini, CEO of Kometa 99 Zrt., our first-ever Italian nominee. We will find out the winner at the end of the evening. We will do so mindful of events to the east, but to channel my dear old Mum, allowing life to go on is not disrespectful. The extraordinary Expat CEO community, comprising some of the top business leaders in Hungary, their better halves, significant diplomatic representation, and decision-makers with the ear of government, have responded in an entirely human way to what is a human tragedy. Companies have stepped up, some of which we report in this issue, but more than that, the people in those companies, from the C-suite to the factory floor, have been doing their bit. That is the response that matters. Robin Marshall Editor-in-chief

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• 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. • Crisis Management. We have all lived through a once-in-a-century pandemic. But we also face an existential threat through climate change and operate in a period where disruptive technologies offer threats and opportunities. Now, more than ever, factual business reporting is vital to good decision-making. For more information visit budapestbusinessjournal.com

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THEN & NOW

Minister for Foreign Affairs and Trade Péter Szijjártó (right) and local dignitaries visit the Caola cosmetics manufacturing plant at the inauguration of a HUF 616 million capacity expansion on March 22. The black and white image from the Fortepan public archive shows the assembly of generators in the former Ganz plant in Kis Rókus utca, Budapest, in 1922. The building today is an exhibition center. Founded by Ábrahám Ganz, the company used to make tramcars, ships, bridge steel structures, and high-voltage equipment.

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Budapest Business Journal | March 25 – April 7, 2022

News macroscope •

Central Bank Heats up Inflation Battle, Modifies Outlook

Soaring inflation paired with slowing or even stagnating economic growth; that’s the scenario for most of the world’s economies in the coming years, and Hungary is no exception. The central bank ramped up its rate hikes to combat rising prices, but inflation might still climb above 10% in some months in 2022 before, hopefully, returning to the tolerance band at the end of next year at the earliest. ZSÓFIA CZIFRA

Stagflation is a term that most economists do not like to hear but is likely to characterize most economies in the world in the coming months or years. It occurs when slow economic growth is paired with a high inflation rate. Like crisis-hit economies worldwide, Hungary also faces such tendencies, and the ongoing RussoUkrainian war could further deteriorate the situation.

Numbers to Watch in the Coming Weeks The Central Statistical Office (KSH) will publish the latest data on the labor market the day this issue is published, March 25. On March 28, January earnings figures will be released, and the balance of the general government sector for the full year 2021 and the 4th quarter of 2021 will be out on April 1.

Development of the Central Bank Base Rate in Hungary (March 23, 2004-March 22, 2022)

Source:

In a move that marks the most significant hike since 2008, the National Bank of Hungary (MNB) raised its key rate by

100

basis points

to 4.4% at its rate-setting meeting on March 22. The decision aims to fight high inflation due to rising energy costs and the war in Ukraine and was in line with analysts’ expectations. The MNB also raised its inflation forecasts for both 2022 and 2023, saying that average inflation could rise to 7.5%9.8% this year and would come back to the bank’s 2-4% target range only in the first half of 2024. “The Russia-Ukraine war has posed a much higher risk than usual to the outlook for inflation. The increase in inflation risks warrants a further tightening of monetary conditions,” the Monetary Council said in a statement following its meeting.

Inflation Targeted According to the assessments of financial analysts based in London, the MNB has made it clear that it will continue to focus its monetary policy on curbing inflation. Capital Economics analyst Liam Peach forecasts that the rate-setting monetary council will raise the base rate by 100 basis points in the next interest rate decision-making meetings. He believes that the base rate, together with shortterm interbank interest rates, will rise to

close to

this year. According to Morgan Stanley’s analysts, the national bank has adjusted its base position and made it clear that core inflation risks and higher inflation

expectations call for further tightening of monetary conditions, including higher base rate hikes. They said this could be interpreted as an indication that both the one-week deposit rate and the central bank’s base rate would continue to rise, but the base rate would catch up faster than thought earlier. Morgan Stanley now expects the MNB to raise its one-week deposit rate to 6.85%. The company emphasizes that it sees upside risks to this forecast, depending on the weekly development of the forint exchange rate.

Traditional Tools may not Work Gergely Suppan, senior analyst at Takarékbank, said that the base rate could rise to 7% by the middle of the year due to a significant increase in inflation risks, gradually catching up with the one-week deposit rate, which is expected to reach 7% in May. The analyst does not expect the oneweek deposit rate and the base rate to be reduced until the second half of 2023 at the earliest, if forecasts suggest that inflation may return to the tolerance band

after

2023.

According to Péter Kiss, investments director at fund manager Amundi, all central banks, including the MNB, are in a very difficult situation right now, as the traditional instruments of monetary policy do not provide an effective solution to the surge in inflation caused by the supply crisis, which the war has worsened. Some analyst sees decisive government intervention as the

best solution. That, however, will cost a great deal; there may be a resumption of central bank government securities purchases, he said. Gábor Regős of economic think-tank Századvég also said that the supply-side inflation shock could only be moderately balanced by monetary policy, as it cannot fundamentally influence factors. He noted that the outbreak of the RussoUkrainian war poses a significant risk to inflation through further increases in energy prices and disruption of supply chains. In the longer run, interest rates may stabilize at higher levels than before; a further increase in the oneweek deposit and base rate will likely be required, the analyst predicted.

Forecast Ranges The war in Ukraine and the consequent sanctions policies that have been introduced, as well as the newer wave of the coronavirus epidemic, cause significantly higher uncertainty in macroeconomic outlook than usual, the MNB wrote in its latest Inflation Report published on March 22. Given this situation, the central bank has prepared forecast ranges. As for inflation, following a 5.1% rate in 2021, the MNB now forecasts a 7.5-9.8% rise in consumer prices this year. The range is 3.3-5% in 2023 and 2.5- 3.5% in 2024. The economic growth rate will slow to 2.5-4.5% this year from 7.1% in 2021. As for 2023 and 2024, the MNB predicts GDP growth of 4-5% and 3-4%, respectively.

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Budapest Business Journal | March 25 – April 7, 2022

Fifth Wave Recedes in Face Coronavirus ///roundup of High Vaccination Rates The fifth wave of the coronavirus pandemic has receded, largely due to the high vaccination coverage, according to the official government website for coronavirus news, koronavirus.gov.hu.

NICHOLAS PONGRATZ

To celebrate the success of the vaccine in returning society to a relative sense of normalcy, the National Bank of Hungary (MNB) issued a commemorative coin on March 10, acknowledging the Hungarian invention that provided the basis for messenger RNA vaccines. The rectangular collectors’ coins display the names of the Hungarian, American and Canadian scientists who played instrumental roles in the research and production of the BioNTech/ Pfizer and Moderna COVID-19 vaccines: Katalin Karikó, Ian MacLachlan, Norbert Pardi and Drew Weissman. At the time of print, the number of vaccinated people in Hungary

vaccine deliveries there to 656,000. In total, Hungary has delivered close to five million COVID jabs to

countries,

he added. The government has also been providing coronavirus vaccines to refugees from Ukraine. Indeed, as one epochal global crisis appears to be waning, another has readily appeared to take its place in the form of Russia’s invasion of Ukraine, which began in the early hours of February 24. Some businesses facing labor shortages, for instance, now expect that the situation will be even more serious, according to the Institute of Economics and Entrepreneurship of the Hungarian Chamber of Commerce and Industry (GVI). According to their survey, The German-American Pfizer-BioNTech Comirnaty only 7% of companies expect an coronavirus vaccine is prepared for use at the Dorottya improvement; 52% say there will Hospital in Nagykanizsa (214 km southwest of Budapest), be no relief, and 41% fear an even on March 23, 2022. Photo by György Varga / MTI more significant labor shortage than at present. Meanwhile, around three-quarters Donations Abound stood at just over 6.4 million. of Hungarian companies expect the However, in its abundance of Some 60% have already received war in Ukraine to negatively affect vaccines, Hungary has also their booster jab, while business, according to a survey by another donated a significant number economic research institute GKI of doses to countries in greater conducted between March 4-18. Around need around the world. Minister 26% of companies expect a “very have applied for a fourth dose. The of Foreign Affairs and Trade Péter negative” impact on business and 46% government website suggested those Szijjártó said in a post on Facebook a “moderately negative” impact. In who received their last jab more than on March 10 that Hungary was contrast, roughly 27% don’t expect the four months ago get a third dose, donating another 523,000 doses conflict to have a “tangible effect” on adding that five vaccines, Pfizer, of the AstraZeneca Vaxzevria business for the time being; 57% of Sinopharm, Moderna, AstraZeneca, and vaccine to Cambodia, bringing companies in business services don’t Janssen, were available to choose from the total number of COVID jabs expect it to have much of an effect on at hospitals. Hungary has donated to Cambodia business at all. It also emphasized that vaccinations to over one million. While industrial companies were continue to be provided at hospital Hungary also donated 156,000 the most concerned, companies checkpoints, GPs, and pediatricians, doses of the AstraZeneca coronavirus in the construction and commerce with vaccination action days continuing vaccine to Vietnam, Szijjártó said sectors were less so. As this crisis every Thursday, Friday, and Saturday in on Facebook on March 17. Szijjártó has overtaken COVID in terms of its March. Of the 30 million vaccines doses noted that Hungary had earlier acute effects on Hungary’s businesses, received thus far, more than 16.6 million sold 400,000 and gifted 100,000 economy and society, this column will doses have been administered as first, AstraZeneca jabs to the Southeast be shifting its focus to weekly updates second, third and fourth vaccinations. Asian country, bringing total on the conflict in Ukraine.

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News | 5

MIPIM 2022 Sees Return to Large-scale Expo Events Hungary and Central European countries such as Poland and the Czech Republic attracted a strong attendance at the 2022 MIPIM real estate expo at the Palais Des Festivals in Cannes, following an essentially two-year break due to the coronavirus and resulting restrictions on international travel. GARY J. MORRELL

The largest commercial property Expo in Europe returned to its traditional annual four-day event in March against a background of the implications of the war in Ukraine for the markets. The expo attracted more than 20,000 delegates from

countries,

according to Reed Midem, organizers of the event. As has been the trend in recent years, the Hungarian Investment Promotion Agency organized a Budapest/Hungary stand in conjunction with the Property Developers Roundtable Association (IFK) and the Budapest Development Center (BFK).

Delegates at the Budapest/Hungary stand at MIPIM 2022. Present at the stand, which had a series of cocktail receptions and roundtable discussions on the investment and development opportunities that Budapest and major cities in Hungary offer, were Atenor, Futureal, GLP, TriGranit, Liget Budapest and Wing, plus consultants, CBRE, Stay in Hungary and Revetas Capital. Further consultants such as Cushman & Wakefield and Avison Young had Hungarian representatives promoting Hungary to investors present at the event. “We forecast around EUR 1.2 billion-1.4 bln in investment volume for Hungary, with the office sector providing more product,” said Tim O’Sullivan, director of capital markets at CBRE Hungary, at a presentation on the investment possibilities in Hungary. “Logistics is attracting significant interest from investors, although not much is being traded due to the low supply of product. Residential could

become a popular investment asset as is the case in the Czech Republic and Poland,” O’Sullivan added.

Possible Compression

He sees office yields for Hungary at 5.25%, compared to 4.25% in the Czech Republic and 4.4% for Poland. There is a possibility for compression in the industrial sector, while office yields will remain stable and retail is expected to come back. Kevin Turpin, now regional director of capital markets in CEE at Colliers, has recorded total CEE investment (covering Bulgaria, the Czech Republic, Hungary, Poland, Romania and Slovakia) at around EUR 11 bln,

with

EUR 1.6 bln

for Hungary compared to EUR 6.3 bln for Poland and EUR 1.8 bln for the Czech Republic. He sees lower investment levels due to the lack of big shopping center and hotel

deals in the region. Office transactions for CEE are expected to remain constant, while the number of industrial projects could increase. The conventional wisdom is that, despite issues relating to the pandemic crisis and now the war in Ukraine impacting the commercial property market, there is still a large amount of capital to be invested, and Hungary and Central Europe are attractive investment destinations that offer an appropriate yield spread. Notable by their absence were representatives of the Russian Federation, although Ukraine did maintain its presence, albeit with a more limited delegation. “We have been working at MIPIM without a great Ukraine delegation, as was planned before. A total of seven of us were in Cannes. I feel very broad support for Ukraine at the level of exhibition organizers and city representatives,” said the architect Anna Nestulia at a public meeting in support of Ukraine.

Top Real Estate Executives in Hungary 2021 The Top Real Estate Executives magazine is a special annual publication of the Budapest Business Journal. The magazine presents the profiles of the most influential real estate executives in the Hungarian economy. It puts a human face on the local development market, focusing on leading personalities’ profiles and outstanding achievements. Please forward your subscription request to: circulation@bbj.hu, or order your copy in the webshop at www.budapestbusinessjournal.com

• Provides an essential overview of how Hungary’s real estate system operates. • Get an insight into the most significant developments in 2020, and a look at what is in store for 2021. • Get to know the personalities behind the real estate business. • Read personal accounts from the country’s top real estate executives detailing how they got into the business and some of their proudest achievements, among other things.

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Budapest Business Journal | March 25 – April 7, 2022

Voters to Choose Between ConservativeChristian and Christian-Conservative Leaders KESTER EDDY

Hungarians cast their ballots on Sunday, April 3, to choose, at least on paper, between two prime ministerial candidates of very similar political leanings.

The Hungarian general election, the eighth since the fall of Communism in 1990, appears odd at first sight: the electorate will ultimately choose between incumbent prime minister Viktor Orbán, a wily veteran of 30-plus years in national politics and who defines his rule as

conservative and Christian, and a relative newcomer, Péter Márki-Zay, a marketing expert-cum-economist who leads a broad, six-party coalition but who similarly claims the Christianconservative mantle. That is not, of course, how the two view each other: Orbán denounces

Viktor Orbán: Liberal-youth Activist Turned ConservativeChristian with Deeply Committed Following personal income and corporation taxes) and a slew of generous subsidies for home building and young families, this, in turn, has led to a housing boom and a fast-growing middle class. Opposition critics, however, charge that the full price of these policies has yet to be paid, including, for example, the energy price caps, which have resulted in delayed but essential, maintenance. They are also quick to point out that the easy money of Orbán’s reign has been primarily to the benefit of family members and business friends and resulted in a one-third devaluation of the forint and inflation Viktor Orbán speaking to press in Downing Street climbing to 8%. after meeting with U.K. PM Boris Johnson on May 28, Moreover, Orbán’s fascination with 2021. Photo by Ilyas Tayfun Salci / Shutterstock.com prestigious and frequently economically dubious projects, ranging from oversized football stadia and narrow-gauge Today, the incumbent Hungarian prime his government has mostly held a railways to the massive museum building minister is indisputably the best“constitutional majority” of 67% or more program in Budapest’s City Park, has known politician to emerge from the in parliament. This majority, invariably meant less glamorous, strategic sectors former Soviet-dominated “Warsaw Pact” acting in line with government policy, such as health and education being countries of Central and Eastern Europe. has enabled the prime minister to starved of proper funding. The winner of four general elections, amend and enact laws requiring a twoOrbán delights in making quick and beginning in 1998, followed by thirds majority in the house at will. bold decisions and, despite the problems consecutive victories in 2010, 2014 and The prime minister highlights the that at times result, has a knack of 2018, this one-time anti-communist country’s recovery in the last 12 explaining away or diverting attention student dissident has led Hungary for years from the 2008-09 global crisis, from the consequences, at least to the precisely half of the 32-year period a recovery based upon hundreds complete satisfaction of his voters. that has followed the demise of the of foreign and domestic investment Take, for example, Hungary’s track Communist regime in 1990. projects which has led to sustained record regarding the coronavirus. In that time, Orbán has steered economic growth since 2013 (barring The prime minister trumpets success his once liberal Fidesz party onto a the hiccup of the COVID pandemic in handling both the economic and right-wing course which, he declares, in 2020). Simultaneously, the country medical aspects of the pandemic, with represents classical European Christian, now boasts record low unemployment the government continually referring conservative and democratic values levels of less than 4% and record to the fast vaccination programs of while simultaneously enforcing his nominal wage growth averaging some 2021. The line seems to work: Despite interpretation of those values on the 10% annually for the past four years. the high death rate (at the time of country. This has been particularly the Coupled with some of the lowest tax going to press, the official COVID toll case since 2010, during which time rates globally (at least concerning stands at well over 45,000, equating

The ‘Child-protection’ Referendum Somewhat complicating this year’s general election, voters on April 3 are simultaneously invited to participate in the government-sponsored “childprotection” referendum. However, the two are, legally, totally separate processes. In the summer of 2021, the government drafted a bill against

pedophilia, controversially slipping in some late amendments severely restricting the dissemination of literature, information or even discussion of homosexuality and gender transition in schools. LGBTQI (lesbian, gay, bisexual, transgender, queer and intersex)

groups were outraged, saying the amendments are intentionally vague (making them open to broad interpretation), conflating two entirely different issues, and falsely painting homosexuals as pedophiles. The European Union has also been critical. The government called the referendum to bolster its position on the law, and citizens will have

his opponent as a “leftist” and “clone” of former Socialist Prime Minister Ferenc Gyurcsány (a hate-figure for Fidesz). Márki-Zay, who says he voted for Fidesz up to 2010, labels Orbán a “liar and thief” who has squandered and stolen billions in EU subsidies.

to 4,700 deaths per one million population, meaning Hungary is the fourth-worst performer globally) and needless mass expulsion of patients from hospitals over Easter in the first wave, public opinion polls indicate even opposition voters assess the government’s handling of the pandemic has been good. Indeed, Orbán’s ability to resonate with the heartstrings of his supporters is the stuff of legend. This frequently involves references to highly questionable interpretations of historical events, typically referring to some perceived foreign mistreatment or betrayal of the Magyar cause. It has been a long-running preoccupation for the man from the village of Felcsút (46 km west of Budapest by road). “The emotion-filled explanation of the bad fate of Hungarian history. It was the continuous topic of conversation among [Orbán and fellow students], even in the ’80s,” says László Kéri, who supervised the dormitory where they lived as undergraduates. “I went up the wall when I heard this. It’s ridiculous because they don’t know anything about [say] Irish, Finnish, Greek or Polish history,” Kéri adds. Maddening or not, it surely works for Orbán’s core voters, especially those in rural areas with limited access to information and where the critical assessment of complex issues is rarely the stuff of conversation in street or pub. It also helps to bolster the image of Orbán as a wise father figure defending the Hungarian nation, above and beyond the daily, unseemly squabbles of party politics. It is an image his communication team has been seeking to create for some years. Thus far, it has been a core element of Orbán’s political success. And with a war next door to the east, it is an image seemingly ideal for further success on April 3.

the right to vote on four questions regarding the sexual education of minors. Opponents of the vote insist the questions are totally slanted and violate fundamental human rights. The referendum must attract at least 50% of the total electorate to be valid. Opposition groups are asking voters to invalidate the ballot by writing crosses in both the “yes” and “no” boxes.

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Budapest Business Journal | March 25 – April 7, 2022

News | 7

Péter Márki-Zay: The new Christian-Conservative on the Hungarian Political Block

Péter Márki-Zay speaks at a demonstration calling for peace held in front of the Russian embassy in Budapest on February 24, 2022. Photo by Zoltan Tarlacz / Shutterstock.com Márki-Zay (or PMZ, to mimic the Hungarian shorthand) appeared on the political scene only in 2018, when, running as an independent, but with the backing of the opposition parties, he defeated the strongly fancied Fidesz candidate in a mayoral by-election in his hometown of Hódmezővásárhely. A polyglot (he speaks English, French, German and some Spanish, as well as his native Hungarian), he repeated that feat a year later.

Aged 49, PMZ entered the national political scene last October when, again as an outsider, he topped the list in the run-off for the common opposition prime ministerial candidate. Thus, without a political party himself, he heads the “United for Hungary” alliance comprising six disparate parties ranging from Jobbik (once far-right, now reformed as democratic national-conservative) to the Socialists, with greens (LMP and Dialogue), center-left Democratic Coalition and Momentum liberals in between.

This begs the obvious question: can they all hang in together? Surprisingly, the mood from inside is positive on this score. The trials and tribulations of the past four years have “created an opposition community,” says Kata Tüttő, deputy mayor of Budapest and member of the Socialist Party national board. “This [alliance agreement] is not just a technical agreement, that we ask voters and supporters to support each other. We’ve been fighting, demonstrating, and working together. And not just the politicians, but our supporters, voters and activists. [...] So it’s an opposition community now, not just [a] technical cooperation for power,” she told a recent meeting with foreign journalists. Asked if Jobbik activists would genuinely support other parties at grass-roots levels, Márton Gyöngyösi, Jobbik’s sole Member of the European Parliament, concurred. “It’s working out very well. Our candidates are running with DK’s [Democratic Coalition] support, and DK candidates are running with Jobbik’s support. Our people understand [the needs],” he told the BBJ. PMZ himself sticks to a tight criticism of the current government, accusing Prime Minister Viktor Orbán of creating “crony capitalism” that primarily favors family and friends. He promises “a level playing field”

Hungary’s Election System: Evolution and Basic Elements The Hungarian election system can, at first sight, be bewildering. This overview outlines its historical roots and how it works in practice today. In 2010, after Fidesz’ sweeping election victory that spring, the government, without consulting opposition parties, created a new election law. The new system has only one round of voting (a change from 1990-2010, when there had been two), with a total of 199 parliamentary seats (down from 386 previously). MPs are elected in one of two ways: 106 represent individual constituencies across the country, with the remaining 93 appointed via the so-called “party lists.” The government argued the new system was fairer, cheaper and more understandable. Critics, though in favor of the smaller parliament, accused the government of gerrymandering the new constituencies by, for example, diluting opposition-supporting populations (generally in urban areas) into surrounding, government-leaning rural populations. Regardless, many ordinary Hungarians struggle to fully understand the new system, along with its electoral implications. “The system has many majoritarian elements, meaning it favors the largest party, even if it only wins a minority [i.e.,

for business, regardless of political affiliation. He has pledged to keep all the tax and other benefits introduced by Fidesz in the past 12 years while putting those on a minimum wage into a tax-free bracket and reducing the VAT rate on basic foodstuffs. Under a PMZ government, Hungary would be pro-EU, seeking to adopt the euro within five years while keeping Russia and China at a more armslength distance. Public education and healthcare would receive top priority, making all this affordable by cutting out corruption in the funding processes. Yet, despite its promises, the opposition alliance is struggling to regain the momentum created by the opposition primaries in the fall. The latest poll by Publicus, a left-leaning pollster, indicated that while 42% of Hungarians want a change of government (with 39% seeking to re-elect Fidesz), only 31% would vote for the In Unity for Hungary alliance, against 33% supporting Fidesz. Given that Publicus found 32% of the electorate is undecided, there is an ongoing teacher’s strike, and inflation is at more than 8%, the opposition alliance remains in the competition. But against an experienced incumbent with massive funding and media power, 12 days before the poll that counts, it looks like an uphill struggle.

which would appear unlikely if the trend in this example continued elsewhere.) Now for the winner’s “surplus booster.” In this example, Ágnes only needed 15,001 votes to beat Balázs and win the seat, but she polled 20,001, giving 5,000 “surplus votes,” which were not necessary to defeat her strongest opponent. According to the 2010 election rules, these 5,000 votes are also added to the list pot for the Blues. (This, despite critics arguing it goes against the very purpose of the compensatory list.) Hungarian citizens living abroad with a registered address in Hungary get two votes (like their compatriots at home), but they can only vote in person at a Hungarian embassy, consulate or designated polling station. They may not use postal ballots. Citizens not registered at an address in Hungary may vote by post but only receive one vote, valid for the party list. This illustrates the essence of the electoral system but is a somewhat simplified explanation that does not list all elements.

less than 50%] of the constituency votes,” However, in an element unique to says Róbert László of Political Capital. Hungary, the new election system Citizens with a registered address includes what might be called the winner’s in Hungary receive two votes. One is “surplus booster” component, whereby for their choice of candidate for their the “excess” votes of the winning constituency. It is a first-past-the-post candidate are also added to the pot. race; the candidate with the most votes As an example of how this works, wins the seat. let us consider the result of the The second vote is for the “party constituency vote for the fictitious seat list.” Citizens vote for the party of of Délváros. (See table below.) their choice (usually, but not always, In this example, Ágnes becomes the the same party represented by the constituency MP. It also illustrates candidate they voted for in the how multiple candidates divide the constituency vote). This list vote is opposition vote, enabling Ágnes to win added to a national pot. Up to 93 MPs the seat despite garnering only 43.5% of are then chosen according to the the total vote. proportion of votes in the pool. Csilla, as an independent, does not Parties must achieve at least 5% of the have a party list, so her 10,000 votes total list vote to qualify for list seats. are lost, yielding no result whatsoever. Fail to hit this threshold, and those The votes for Balázs and Dénes votes are lost. go to the compensation pot for their Also added to the pot are the “surplus” respective lists, Greens (one party votes of the losing candidates in the within the opposition alliance) and Reds. constituency fights. This practice is (However, this assumes the Reds attract quite common in mainland European enough votes to cross the 5% threshold, elections; the whole purpose of the list is to compensate the losers in the firstpast-the-post individual constituency Candidate Party vote, giving them at least some Ágnes Blues (governing) representation in parliament. (This is in contrast to, for example, the United Balázs Green (Opposition Alliance) Kingdom system, whereby the losers’ Csilla Independent votes fail to gain any representation whatsoever, even if the winner defeats Dénes Reds the nearest competitor by just one vote.)

Votes 20,001 15,000 10,000 1,000

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Budapest Business Journal | March 25 – April 7, 2022

Property Sustainability Integrating Into Wider Regularity Systems With the perceived growing need for third-party accountability, commercial property sustainability accreditation systems are already being designed for various project types, and not only the “classical” office, retail and industrial sectors. GARY J. MORRELL

“They are already positive examples about masterplan level certifications [BREEAM Communities standard] for larger scaled urban development projects

ESG Issues now ‘Unavoidable Factors’ Sustainability considerations and environmental, social and governance (ESG) matters are now unavoidable factors for real estate investors that presuppose planning and future responsibility, comments Csaba Zeley, managing director at ConvergenCE. “ESG, as an approach, has already become paramount at the beginning of the investment, even in Hungary, as it is also decisive at the exit, determining the marketability of the given property. When ConvergenCE, in partnership with Europa Capital, recently acquired Academia (formerly known as Akadémia Business Center), we were committed to making the fullest possible use of the ESG framework during the refurbishment and management of the project and aim for net-zero emissions,” he said.

– for example, Liget Budapest, or Agora Budapest – where not just the building level sustainability accreditation is within the focus, but the whole project’s sustainable integration into an existing urban network is analyzed, and a wide range of stakeholders are consulted as well,” explains Zsombor Barta, president of the Hungarian Green Building Council (HuGBC). “But beyond that, we also see that the new EU taxonomy regulation, which sets new sector-specific standards regarding sustainable market operations, is also being heavily considered by different stakeholders, including the classical green building rating schemes, which also adopts the EU Taxonomy-related requirements within their own scheme. EU Taxonomy, ESG benchmarking, or BREEAM / LEED ratings are all standards focusing on the real estate sector in general and are setting holistic sustainability frameworks, which are not sectorspecific,” he adds. The HuGBC president says the EU taxonomy focuses on an ambitious pathway towards a net-zero EU by 2050. To achieve this ambitious goal, the real estate sector needs to switch to more energy-efficient and therefore more sustainable buildings, Barta argues. This energy efficiency focus is currently also being introduced to the updated BREEAM certification framework to harmonize with the new EU taxonomy regulation.

Must do More

“Generally speaking, we need to do much more than until now. Nice green building certification pledges are not enough anymore. We need to have an ambitious strategy for net-zero operations, which clearly shows the pathway to that, and this pathway needs to be continuously monitored; concrete emission reduction measures need to be taken and reported. This is something new, as this was not necessarily the case with the third-party certifications until now,” he adds. Barta believes that sustainability should already significantly impact wise and thoughtful architects and designers. “If this was not the case until now, this is already a huge gap. However, in the very near future, sustainable design and energy-efficient measures will play an even bigger role, as the financial sector is also connecting their products to actual sustainable measures,” he points out. “ESG benchmarking or the EU taxonomy are two frequently used frames, which are becoming more important. If the fulfillment of these frameworks is essential for receiving a beneficial financial product, then the designers need to act and adopt these requirements very quickly. A lot of innovative ideas and progressive thinking is needed to actively reduce the building’s emissions, by providing at the same time a high level of liveability and comfort,” he concludes. For much more news from the MIPIM event, see MIPIM 2022 Sees Return to Large-scale Expo Events on page 5.

Hexum Group to Build Solar Park Hexum group, owned by the Hungarian Hydrocarbon Stockpiling Association (MSZKSZ), will build a HUF 15 billion (USD 44.25 million) solar park in Sümeg (170 km southwest of Budapest). With a capacity of 25 megawatts (MW), the park is scheduled to be completed by spring 2024, government commissioner Tibor Navracsics said. It will also have a storage capacity of 6 MW, MSZKSZ chief executive Béla Bártfai said. (source: MTI)

Solaris Hydrogen bus Being Tested Arrivabus Kft., the service provider of the Budapest Transport Center (BKK), has been testing a hydrogen-powered Solaris bus, according to profitline.hu. The vehicle, which produces water instead of exhaust gas, was run on bus line 105 for three days. Passengers could try the bus for free, BKK stated. It added that the Urbino 12 hydrogen-powered bus, powered by Solaris, a “revolutionary new” technology, is 15 meters long and has 37 seats.

ESG, Sustainability Emphasized at MIPIM More than ever, the consensus across the MIPIM property expo in Cannes this month was how the industry could tackle the risks that possible outcomes are embedded into real estate decision making, says Guy Grainger, global head of sustainability and ESG at JLL. This reflects how broader environmental concerns are an integral component of issues in the construction, property and investment industries. Most debates and roundtables at the event reflected on the reciprocal impact of sustainability and ESG issues on the real estate markets and wider society.

House of Music Hungary Wins Expo Award The House of Music in City Park, an integral part of the governmentbacked urban regeneration Liget Budapest Project, has won the Special Jury Prize at the annual MIPIM international property Expo in Cannes. The building, designed by the Japanese architect Sou Fujimoto was noted for the aspects of sustainability, aesthetics and visitor experience in the jury assessment. The architect was previously showcased at the Budapest-Hungary stand in MIPIM.

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Hungary ‘Should be Proud’ of Contribution to Global Road Safety In the week this issue of the Budapest Business Journal went to print, the Hungarian capital was playing host to the seventh international meeting of the Global Alliance of Road Safety NGOs. The Hungarian Motorsport and Green Mobility Development Agency was to sponsor a fundraising gala due to be held yesterday, March 24, to support road safety initiatives across the country. In this op-ed, Nneka Henry, head of the United Nations Road Safety Fund, says it is an apt time to highlight Hungary’s key role in road safety financing. NNEKA HENRY

Hungary should be proud. Across the globe, Hungary has one of the lowest rates of road traffic deaths at 6.2 per 100,000 inhabitants, compared to the world average of 18.2, according to the World Health Organization. What is equally admirable is that, as far as the Sustainable Development Goal (SDG) to halve road traffic deaths by 2030 goes, Hungary appears to be walking the talk of its International Development Cooperation Strategy 2020-2025. According to the strategy, Hungary seeks to play a prominent role in addressing some of the foremost challenges faced by the international community, with a focus on leaving no

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of proven solutions that are delivered through UNRSF road safety projects. In Sub-Saharan Africa, countries such as Ethiopia and Mozambique are receiving technical know-how to design and build safe cyclist and pedestrian pathways in cities. As a least developed country, the Democratic Republic of Congo is one of 15 West African states benefiting from the establishment and enforcement of used vehicle safety standards. In the Middle East, UNRSF has also been working with the governments of Egypt, Iran and Jordan to strengthen the legislative and regulatory framework for road safety. Hungary’s strategy does not only speak to having a role on the international level and promoting the SDG Agenda. Another key pillar of Hungary’s approach to international development includes mobilizing civil society and the private sector. On both accounts, the Hungarian public and private sectors have responded to the call.

Another key pillar of Hungary’s approach to international development includes mobilizing civil society and the private sector. On both accounts, the Hungarian public and private sectors have responded to the call.

Nneka Henry one behind, especially Sub-Saharan Africa, least developed countries, and the Middle East. Its role within the global development landscape to improve road safety does just that. Road traffic crashes are the leading cause of death for children and youths aged five to 29 years old in the world, and the reason that every year, 1.3 million perish, and more than 50 million suffer severe injuries. However, although road traffic fatalities are a shared experience by all countries, the jaw-dropping reality is that 93% of road deaths occur in low- and middleincome countries. This “epidemic on wheels” is particularly deadly in Africa, where the road traffic death rate is reported to be as high as 35.9 per 100,000 inhabitants. Through multi-year financing to the United Nations Road Safety Fund (UNRSF), Hungary has proven to be a committed partner in the UN-led global

partnership to improve road safety in developing countries. In line with its own development assistance priority of leaving no one behind, Hungary’s support ensures that nine African SubSaharan countries, eight least developed countries, and three developing countries in the Middle East receive much-needed expertise to help them improve critical aspects of their road safety systems. Hungarian road safety improvements, including the establishment and enforcement of laws on speeding, drink-driving, seat belt use and child restraints, have led to a notable lowering of road traffic crashes in recent years. Having undertaken its own set of interventions and infrastructure improvements in recent years, Hungary is a credible global actor and world example that road safety solutions exist and work. It is precisely these types

In 2021, the Hungarian Motorsport and Green Mobility Development Agency (HUMDA) sponsored a fundraising gala dinner which donated all proceeds to advancing the work of the Global Alliance of Road Safety NGOs. One year later, during March 21-24, 2022, the Global Alliance of Road Safety NGOs held its seventh global meeting in Budapest and featured opening statements by Minister for Innovation and Technology László Palkovics, the UN Secretary General’s Special Envoy for Road Safety, Jean Todt, as well as high-level representatives from the European Commission, FIA Foundation, Johnson & Johnson and UNRSF. The objective of the meeting is to raise awareness and mobilize further NGO support for the upcoming UN High-Level Meeting on Improving Road Safety which will take place at the UN Headquarters in New York on June 30, 2022. Given its previous success, HUMDA, with the participation of the private sector, was again to sponsor a fundraising gala at the Museum of Fine Arts on March 24, with the goal of using proceeds to support educational road safety campaigns for children in Hungary. Hungary should be proud. With Hungarians’ continued commitment to improving road safety at home and abroad, the international community is better equipped to deliver on its promise of leaving no one behind with respect to safe roads.

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Business

Market Forces

Energy Revolution on the Brink, 1st Budapest Hydrogen Summit Told The first Budapest Hydrogen Summit was held on March 10, bringing together the bosses of leading companies in Hungary and the region, highlevel government and EU decision-makers, prominent professional organizations, and renowned researchers to discuss the opportunities and challenges facing the hydrogen market in the light of 2050 climate goals. GERGELY HERPAI

The timeliness of the topic is undoubted. In the fight against climate change, many see hydrogen as the most promising energy source of the future and one of the primary vehicles for achieving the mid-century net-zero targets. Pál Ságvári, vice president for international affairs at the Hungarian Energy and Public Utilities Regulatory Office (MEKH), opened the conference by saying that hydrogen would play an essential role in achieving carbon neutrality. The National Hydrogen Strategy adopted last May focuses on “green” hydrogen (extracted using renewables power sources) in the long-term. Still, in the shortand medium-term, low-emission hydrogen (“blue” Hydrogen, produced through a process that also creates greenhouse gasses, requiring carbon capture) will be needed to rapidly reduce emissions and create a functioning market. On the sidelines of the Budapest Hydrogen Summit, MEKH and the Hungarian Hydrogen Technology Association signed a memorandum

Kazuyuki Imazato, director-general of the European office of NEDO. to promote the industrial, economic, and scientific cooperation needed to create a Hungarian hydrogen economy. Jorgo Chatzimarkakis, CEO of Hydrogen Europe, the largest European organization covering the entire hydrogen supply chain, stressed that it is time for the EU to act and accelerate the deployment of hydrogen technologies.

“This week, the European Commission came forward with a plan to target 20 million tonnes of renewable hydrogen

2030.

This means we need to quadruple the amount we agreed on last June,” said Chatzimarkakis, adding that hydrogen will soon have to become a global commodity.

Speakers at the conference discussed the main challenges and opportunities facing the hydrogen market. Thomas Schubert, a partner at Dentons, stressed that one of the obvious challenges is that green hydrogen is currently much more expensive than conventionally produced grey hydrogen (extracted through the same process as blue hydrogen but without carbon capture), and there is no real market for it today, so one needs to be created. He stressed that regulatory challenges also need to be addressed. “What is important is that the processes that will help the move towards carbon-free hydrogen are accelerated,” he said. Ákos Hegedüs, managing director of Linde Gas Hungary, highlighted the challenges of managing the distribution of hydrogen, noting that hydrogen should be produced locally to avoid transportation costs. “The infrastructure is in place to transport and distribute the gas,” explained Zoltán Jászberényi, CEO of Pietro Fiorentini Hungary. “The big question is, therefore, how well this infrastructure is suited to the new challenges and how well we can make it capable of accommodating larger quantities of hydrogen.” On the issue of blending hydrogen with gas, he stressed that the three main issues facing gas network operators are safety, availability and sustainability. The FGSZ also supports the blending of hydrogen into natural gas and its transport utilizing the current gas network so that existing assets remain operational and valuable even when the role of natural gas is reduced. Szabolcs I. Ferencz, CEO of FGSZ, said that the gradual mixing of hydrogen with gas is possible and that FGSZ should achieve a

mixture

rate by 2025. Natural gas infrastructure can play an essential role in laying the foundations for the hydrogen economy of the future. A good example is the

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Akvamarin project, in which MFGT is installing hydrogen production and blending technology in its underground gas storage facility. “Under the project, an electrolysis system with a total capacity of about 2.5 MW will be installed at the underground gas storage facility in Kardoskút,” said Ákos Kriston, CEO of MFGT.

Infrastructure Needed

The use of hydrogen could become crucial in the most challenging sectors to decarbonize. Its versatility means that the hydrogen revolution will affect many sectors, from energy to transport, and could open up a new era, speakers said.

“Hydrogen fuel cell passenger trains have the potential to decarbonize the rail sector in the region. In Hungary, more and more decision-makers are turning to hydrogen technology so that we will see a full deployment of hydrogen-powered passenger trains in the country within four years.” Richárd László, country director of Toyota Central Europe Hungary, underlined that hydrogen vehicles already exist, but the charging infrastructure is not in place. “Building this is not just about investment, but also about regulation. The goal is clear: we need to build charging stations.” Gáspár Balázs, CEO of Alstom, pointed out that its hydrogen trains have already been commercially proven in several countries. The technology is also a viable alternative for non-electrified lines. “Hydrogen fuel cell passenger trains have the potential to decarbonize the

rail sector in the region. In Hungary, more and more decision-makers are turning to hydrogen technology so that we will see a full deployment of hydrogen-powered passenger trains in the country within four years,” he said. The Budapest summit brought together speakers from across the globe to present their countries’ hydrogen technology objectives and strategies. Kazuyuki Imazato, directorgeneral of the European office of NEDO (the New Energy and Industrial Technology Development Organization, Japan’s largest public management organization promoting R&D and deployment of industrial, energy and environmental technologies), told

the conference that it had launched a “Green Innovation Fund Program,” with a

EUR 15 billion budget

over 10 years, a significant part of which will support hydrogen research and development. Stefan Kaufmann, Germany’s innovation commissioner for green hydrogen, stressed that no single strategy could guarantee success; international cooperation and a global hydrogen chain are needed. He emphasized that research cooperation opens the door to developing the hydrogen economy. “We have the opportunity to shape the market of the future, and this requires cross-sectoral cooperation, joint thinking between the investment sector and science,” he suggested.

Oleksandr Riepkin, president of the Ukrainian Hydrogen Council energy association, joined the conference online because of the war. In his speech, he stressed that although it is difficult to talk about the future under conflict conditions, Ukraine has the capacity to produce 10 GW of electrolysis capacity in line with the EU 2030 targets. He added that his country has one of the largest gas transmission systems capable of transporting pure and mixed hydrogen.

Given the success of this conference, the organizers have already indicated they plan a follow-up next year.

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Budapest Business Journal | March 25 – April 7, 2022

Businesses Stepping up for Ukrainian Refugees

Ukraine

Crisis

Roundup the steps that led to it run counter to the values represented by the company,” which is present in

Businesses across Hungary and the region are stepping up their efforts to aid and assist Ukrainian refugees displaced by Russia’s invasion of the country. Here’s a roundup of what some have pledged.

countries

across Europe and in Japan. “Therefore, a number of measures have been taken to support those affected by the crisis in Ukraine, because compassion is no longer enough: action is needed,” the company adds. In Hungary, the Wolt app now provides customers with the opportunity to directly support the work of UNICEF. (The charity was originally founded in December 1946 as the United Nations International Children’s Emergency Fund to provide immediate relief to children and mothers affected by World War II.) Users can choose to donate HUF 500, 1,000, 2,500, 5,000 or 10,000.

ROBIN MARSHALL

Hungarian Bankholding

In response to the Russo-Ukrainian war, the Magyar Bankholding Group says it is donating HUF 1,000 on behalf of each employee, totaling HUF 10.5 million, through the Bridge for Transcarpathia (Híd Kárpátaljáért) aid program. The group announced the donation at an internal corporate event held on March 11, where it also encouraged colleagues to make further donations. “As one of the largest groups of companies in the country, we felt it was important to join the Bridge for Transcarpathia initiative, exercising our responsibility to society,” explained Zsolt Barna, chairman and CEO of Magyar Bankholding. “In addition to the joint donation, many of our colleagues are also supporting the refugees from the war through voluntary work, which inspires the owners and management to continue to help,” he added. Donations can be made to the Bridge for Transcarpathia via the national

helpline

1357

for HUF 500 per call or text message. The program is also accepting financial contributions from donors to the account number 11711711-22222222. In addition, the charitable organizations participating in the aid program are also looking for offers of accommodation and host families and donations of food (especially non-perishable food). Magyar Bankholding Ltd. is a domestically-owned financial holding company that will oversee the merger of Budapest Bank Zrt., MKB Bank Nyrt., and Takarék Group. The company commenced effective operations on Dec. 15, 2020, after the central bank of Hungary approved

Ukrainian war refugees arriving at railway station in Budapest on March 5, 2022, are greeted by aid workers handing out food and supplies. Photo by lithian / Shutterstock.com the merger of three credit institutions, and the shares of the key owners were transferred to the joint holding company, establishing the second-largest banking group in Hungary.

Futureal Group

Under the slogan “We stand with Ukraine!” leading regional real estate developer and investor Futureal Group says the employees of its various units have made several commitments to help refugees from Ukraine.

“As one of the largest groups of companies in the country, we felt it was important to join the Bridge for Transcarpathia initiative, exercising our responsibility to society.” The group has pledged to donate

HUF 300 mln from

corporate funds in addition to what is raised by its employees to support humanitarian projects in Hungary, Poland, Romania. At the same time, it is identifying properties from within its CEE portfolio that can be repurposed into a suitable location for humanitarian activities. In line with this, work to convert buildings in Gdańsk,

“We are following events in Ukraine with a heavy heart and with a deep sense of duty to help.”

Wrocław, and Warsaw, all in Poland, into shelters and a temporary Wolt Hungary’s employees are also kindergarten for refugees has begun. collecting donations of food, baby care Cordia, Futureal’s residential unit, products, vitamins, disinfectants says it is offering furnished rental and the like and delivering them to apartments in Budapest free of charge designated collection centers. to refugee families. The company is an Wizz Air established brand in Hungary, Poland, Hungarian low-cost carrier Wizz Air and Romania, has a pilot project in has confirmed that it is continuing to Spain, has bought a U.K. property make free seats available to Ukrainian developer, and has a 15% stake in a refugees on all continental flights from listed Dutch company. It is also asking neighboring countries. its customers to provide housing if “We would like to reassure all they can and support aid organizations Ukrainian refugees that there are still a working to address the crisis. significant number of free seats on all The group says it is working with flights departing from Poland, Slovakia, several humanitarian aid and medical Hungary and Romania, including flights organizations that help rescue people from Budapest, Gdansk, Krakow and from Ukraine. Katowice,” the airline said. “We are following events in Ukraine “We’ve also extended the travel period with a heavy heart and with a deep sense of duty to help,” said Gábor Futó, founder for these free seats from the end of March to April 10, 2022.” and co-owner of Futureal Group. In addition to the free seats, Wizz is “I am very proud of everyone at also offering Futureal-Cordia Group, as many a of our colleagues have already taken in refugees, and many are also preparing to actively participate in “rescue fare” on all other flights, the programs and donations we are or EUR 69.99 on flights to the UAE, organizing,” he added. Iceland, and the Canaries, “to ensure Wolt Hungary refugees have access to affordable Finnish-based delivery service Wolt travel no matter where they are located says it is making a significant donation during this time of crisis.” of EUR 1.5 mln to support relief organizations. Local subsidiary Wolt Hungary has made it possible for users What is your business doing to directly support the work of UNICEF to help Ukrainian refugees? in helping children with a few clicks of Email us the details in English at its application. editor@bbj.hu or news@bbj.hu Wolt says it finds the war situation in Ukraine “deeply depressing because

EUR 29.99

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Budapest Business Journal | March 25 – April 7, 2022

New Name, New Plans: Telenor Completes Rebranding as Yettel Mohamed ElSayad, chief commercial officer at Yettel Hungary, talks to the Budapest Business Journal about Telenor Hungary’s recent rebranding to Yettel and what’s in store in terms of future innovations. BENCE GAÁL

BBJ: The Yettel brand was launched on March 1 in Hungary, Serbia and Bulgaria. What is behind the rebranding, and what does the name Yettel mean? Mohamed ElSayad: When PPF took over these Telenor subsidiaries, we had a time frame to use the former brand in the region, so we had to change it. The question was whether we switched to another known but licensed brand, or do we develop our own? PPF is a company that believes in value creation; creating our own strong brand will offer much more value. Yettel has no specific meaning; it will mean to

Mohamed ElSayad customers what content and services we will fill [it with] in the future. BBJ: Yettel extended the availability of virtual SIM cards to small enterprises and retail clients shortly after the launch. What are the benefits of these eSIM cards? ME: As of March 8, the virtual SIM card is available to everyone, including Yettel’s B2C customers, as well. With the help of the eSIM, the plastic waste associated with classic SIM cards can be eliminated entirely in the long run. And eSIMs make mobile use more convenient with several benefits like easy and flexible “installation,” and people can trace their devices (in case of loss or theft). Beyond that, eSIMs enable those devices that couldn’t be connected directly to mobile internet before to have a direct mobile Internet connection.

BBJ: What other client benefits were introduced after the rebranding? ME: Besides our name and image, we have also renewed our entire prepaid and postpaid B2C portfolio: we launched the Yettel Prime postpaid tariff family, which provides different options for unlimited domestic mobile connectivity and can be combined with group-based discounts that make our customers’ life easier. As for the prepaid plans, we introduced one-day unlimited data after each top-up; unlimited internet connection for a longer period is also available. BBJ: What are the company’s innovation plans for 2022? Can we expect an increase in 5G coverage? ME: 5G has an essential role in our development plans for sure. After the 5G frequency tender back in 2020, we have

Business | 13

the largest capacity in Hungary’s critical 3600 MHz frequency band, so we can build a very robust 5G network in the Hungarian market. Thanks to dynamic network development processes, we already deliver 5G via close to 300 base stations countrywide, and this number is growing dynamically. While we will keep expanding the range of 5G-enabled handsets in our portfolio, Yettel will also introduce further 5G-based commercial solutions in an exciting new way, focusing on households this year. Besides 5G, we are also focusing on ensuring that our customers will get the best customer experience through our touchpoints as well as our services; we are focusing on introducing new digital products that we will be announcing soon for B2C and B2B customers. BBJ: What is Yettel doing to help refugees arriving from Ukraine? ME: As a responsible company, we are constantly working in partnership with several aid organizations on how we can help refugees with our own tools and services. We are currently crediting the charges for international calls to Ukrainian telephone numbers; the same applies to roaming data, voice, and SMS charges for our customers in Ukraine. We provide more than 40,000 topped-up SIM cards for free to Ukrainian refugees, with unlimited mobile internet in Hungary on the day of SIM activation, 5GB of mobile internet and 50 minutes of domestic calls (to be used in 30 days), free international calls to baserate Ukrainian phone numbers (until withdrawal) and free roaming in Ukraine (until withdrawal). Furthermore, Yettel provides a paid day-off for its volunteer employees to join humanitarian organizations and participate in food distribution, packing and loading tasks. We have organized in-house fundraising, and Yettel will double the amount collected before transferring it to help people in need.

Special Effects Expands Portfolio With Virtual Studio The latest expansion by event service provider Special Effects Ltd., acquiring a stake in the Budapest-based Cyd Virtual Studio, will further develop and expand the portfolio, the company says. It builds on a significant investment early in 2021 that “opened new horizons […] in the entertainment industry.” BBJ STAFF

CYD Virtual Studio has international references and specializes in the production of virtual content, combining virtual and real environments with state-of-the-art tools. The founders, CEO, advertising and television producer Kati Csényi and technology producer Dániel Bényi, describe the technology as a combination of the film industry, the entertainment industry and the gaming industry.

During filming, a digitally reproduced photorealistic environment appears on the LED wall, so at the touch of a button, you can jump from the heights of the Himalayas to the bustling streets of New York, or simply to the surface of Mars, without the staff moving. Any location can be created in 3D or customized from ever-growing libraries. The creative possibilities are limitless, Special Effects says. As with Special Effects’ XR Studio, producers can save time and money,

while the post-production process is made faster and easier. Virtual technology is becoming increasingly popular with international filmmakers, but it is also growing in popularity domestically, and more industry representatives believe it will be the production trend of the near future. “Even on a European level, there are only a few studios equipped with this technology, and since Budapest is a particularly popular filming destination, we have made an effort to

provide our customers not only with the location and equipment, but also with full support for the producers and the complete workflow, be it 2D/3D backgrounds or scanning of real locations,” says CYD Virtual Studio owner Csényi. Special Effects was founded 40 years ago, initially to produce television shows and film tricks, and then evolved into a full-service event provider. The internationally renowned company has returned to the entertainment industry this year, in addition to serving domestic and international events. “We have opened up to the new market with pioneering solutions and professional collaboration,” explains Tamás Szegő, director of sales and marketing at Special Effects. “We can take the experience of film, television, commercials and video clips, as well as virtual and hybrid events to the next level.”

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The GermanHungarian Chamber of Industry and Commerce (DUIHK) has awarded its Vocational Training prize for the ninth time, with two training institutions, a company, and a local vocational initiative being honored this year. BBJ STAFF

In the “Motivation” category, the Automotive and Machinery Institute of the Vocational Training Center of Győr was awarded for its “Ki(d) s Engineer Camp,” which is provides career guidance for fifth- and sixthgrade students. The “Cooperation” winner was the training center for the energy industry company MVM. The new unit aims to create standardized apprenticeships in the sector all over Hungary. The third category, “Innovation,” went to auto manufacturer Audi Hungaria Zrt. for its “Compulsory? Training?” initiative, which uses the methodological potential of gamification. The project focuses on learning about relevant business topics such as

Photos by DUIHK/Pelsőczy

German-Hungarian Chamber Awards Exemplary Vocational Training

Achim Weinstock environmental management and IT DUIHK vice president Achim security through its playful approach. Weinstock emphasized that a wellFinally, a special prize was given designed and functioning vocational by the awards jury to the Mórahalom education and training system would Foundation for Vocational Training. create a triple win-win situation: The small town in southern Hungary, for the young, because they acquire about 180 km from Budapest by road, “marketable” knowledge and skills set up a new, modern vocational school that open up a wide range of career where local students, as well as those opportunities for them; for the from neighboring Serbia, are trained in companies that engage in their own professions that are particularly needed training activities, because they get in the region. well-qualified and motivated employees; “For a few years, Hungarian vocational and finally for society as a whole, which training has been undergoing benefits from competitive companies fundamental changes,” Dirk Wölfer, the and high employment rates. chamber’s head of communications, tells The award was an important the Budapest Business Journal. “The instrument to promote these benefits aim is to adapt the successful German by putting outstanding efforts into scheme of a ‘dual system’ to Hungary, the public spotlight, Weinstock thus combining theoretical education in said. It is held in high esteem among schools and practical, hands-on training players in vocational training in in companies.” Hungary: The Minister of Innovation To that end, the German-Hungarian and Technology (ITM) is its Patron, Chamber’s Berufsbildungspreis while the independent Jury comprises (Vocational Education Award or BBP) representatives from the Hungarian was launched in 2013 to support this Chamber of Commerce and Industry, transformation. This year’s ceremony the ITM, vocational schools, as well as was held in the ballroom of the Andrássy corporate and education experts. University (the only completely GermanAfter laying down the foundations language university outside the German- for a new vocational training system, speaking countries) on March 10. the government seeks to enhance

the efficiency and flexibility of the framework, said Pölöskei Gáborné, Deputy State Secretary for Vocational Education and Training at the Ministry of Innovation and Technology (ITM). The key focus will shift to the quality of the “outcome,” i.e., on better matching the content of the knowledge taught with real company needs. Therefore, efforts will be made to keep pace with and reflect changes in the skills needed by real-world businesses in the education system, for example, by accurately monitoring the labor market success of school leavers. The state secretary also announced that further adjustments are planned to widen ways for transition between different secondary and tertiary educational sub-systems.

“All of them [the vocational projects] are characterized by the extraordinary personal commitment of those involved: teachers, corporate trainers, local officials and, of course, the students themselves. This makes every single project so valuable; for them, and for those who can make use of the new ideas.” In the 2022 competition, 13 companies, vocational schools and chambers of commerce and industry from all over Hungary were shortlisted for the three main categories. All the applications were evaluated by a seven-member independent jury of renowned vocational education experts. When asked what she appreciated most in the many projects submitted, one jury member said: “All of them are characterized by the extraordinary personal commitment of those involved: teachers, corporate trainers, local officials and, of course, the students themselves. This makes every single project so valuable; for them, and for those who can make use of the new ideas.”

Gáborné Pölöskei

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Will U.S. Sanctions on Russia weaken the Dollar as a Reserve Currency?

59%

An energy crisis is taking shape, caused by poor transition planning from fossil fuels to alternative energies. We have shut down nuclear reactors (for example, in Germany) and underinvested in fossil fuels (drilling is at a fraction of previous levels), while alternative energies are ramping up too slowly. Nor do they provide baseload capacity when the sun does not shine, or the wind does not blow. An impending financial crisis is driven by much higher levels of debt than during the 2008-9 Great Financial Crisis (now exceeding 360% of Global GDP), vulnerability arising from high record equity valuations, and the highest inflation since the early 1980s still on an upward trend. Then there is the food crisis. Two of the main inputs to agricultural production, energy and fertilizer, have soared over the past year. European ammonia prices have sextupled! We have only begun to see this reflected in foodstuff prices. Furthermore, Russia and Ukraine account for

25%

of global wheat exports; supply chains have been broken and prices have

Safe Haven

I do not expect the U.S. dollar to collapse tomorrow. In fact, it may even rise considerably in the short- to medium-term. In the event of a war or crisis, the dollar will continue to be viewed as a safe haven. As U.S. Treasury Secretary Janet Yellen likes to point out, there is no alternative to the dollar as the world’s reserve currency.

Indeed,

LES NEMETHY

some

The Corporate Finance Column Photo by AlexLMX / Shutterstock.com

Our corporate finance columnist Les Nemethy looks at three crises brewing in the world today, all of which may be amplified by the war, and ponders what it might mean for the American currency.

Business | 15

skyrocketed since the war. Middle Eastern countries, such as Egypt and Lebanon, seem especially vulnerable. These three crises could presage riots and/or the election of more populist or extremist governments and have the potential to reinforce each other. Additional waves of COVID may further catalyze them.

Workarounds

In this already risk-laden environment, add Western sanctions on Russia to the mix. You can bet your bottom dollar this will propel all three crises, but this article focuses on how workarounds to the sanctions are being negotiated. While in the short-term, everyone marvels at the power of the U.S. dollar and how deprivation from the U.S.dominated global financial system can bring a nuclear power to its knees, workarounds are likely to decrease longterm demand for the dollar. Let’s look at two types of workarounds already being discussed in the press: 1. Energy trade. China is increasing its energy purchases from Russia; these will likely be dominated in yuan, not dollars. Similarly, India is negotiating energy purchases from Russia, dominated in rupee/ruble. The so-called petrodollar system, whereby demand for USD was underpinned by the Saudis and others selling energy for dollars, is unraveling in slow motion before our very eyes.

of global reserves are denominated in USD). I do, however, see a long-term downward trend for the U.S. dollar, possibly 2. Reserve assets. U.S. sanctions have over decades, which, if current trends frozen most of Russia’s reserve assets. continue, will result in the loss of global Much of Russia’s USD 460 billion in reserve currency status, either to a basket reserves was held in Western bank of currencies (similar to the Bancor that accounts. Every government in the John Maynard Keynes proposed at Bretton world will probably reconsider and Woods) and/or to a gold-backed currency. rebalance how it holds reserve assets. Why would the loss of reserve currency These are likely to contain more gold status matter? Former French President and alternative currencies and fewer U.S. dollars. Indeed, the same argument Valéry Giscard d’Estaing called it an can be applied to rebalancing individual “exorbitant privilege.” Barry Eichengren, an American economist, once wrote, “It and corporate investment portfolios, costs only a few cents for the Bureau of given the Canadian government’s Engraving and Printing to produce a sudden freezing of bank accounts of USD 100 bill, but other countries have hundreds of trucking strike supporters. to pony up USD 100 of actual goods in The above workarounds should be order to obtain one.” considered in light of the fact that Due to enormous budget deficits, there have been negative factors the States will need to sell very large influencing demand for USD in the amounts of treasury bonds in the years prior to sanctions. coming years. To sell more treasuries in a weak demand situation, interest rates • U.S. Federal Government debt has may need to rise, stressing the highly increased past 100% of GDP; leveraged global financial system. This • there has been massive money effect is likely to be felt long before the printing; • there are huge financial and budgetary loss of reserve currency status. deficits; • there are colossal unfunded social security liabilities; Les Nemethy is CEO of Euro-Phoenix Financial • America has a net NIIP (international Advisers Ltd. (www.europhoenix.com), a investment position) of -62%, which Central European corporate finance firm. He means that foreigners own far more is a former World Banker, author of Business assets in the United States than the Exit Planning (www.businessexitplanningbook. other way around. com), and a previous president of the All of the above make the U.S. economy, American Chamber of Commerce in Hungary. however powerful, vulnerable to crises.

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Special Report Electronics Manufacturers

Manufacturing Sector Sees Capacity Expansions in March The Hungarian manufacturing sector has seen its fair share of recent investments in capacity expansions. These activities indicate a healthy long-term outlook. However, EU sanctions against Russia following its invasion of Ukraine have started hurting the European economy already, and the severity of their effects are, as yet, hard to predict. CHRISTIAN KESZTHELYI

The country’s seasonally-adjusted Purchasing Managers Index rose to 53.2 points in February, up from 50.9 in January, according to data released on March 1, just a few days after the Russian invasion in Ukraine started (and before the effects of sanctions against Russia started trickling into the European Union’s economy). If the PMI indicator, compiled and published by the Hungarian Association of Logistics, Purchasing and Inventory Management (Halpim), is

above

50,

it signals expansion in the manufacturing sector. The indicator has been showing recuperation after contractions during the many waves of the pandemic and the disruptions to global supply chains. The PMI is made up of a handful of sub-indices. New orders climbed in February compared to January and remained over the 50-point threshold. So did the production volume index, which showed expansion for the 12th consecutive month in February.

syringe production to its Hungarian base, a function that had previously been conducted exclusively in Schott’s Swiss factory will create 120 jobs in the country. Scintilla Mérnöki Iroda, a privatelyowned Hungarian cable confectioning and electronic assembly firm, has just completed an almost HUF 1.64 bln capacity expansion project at its base in Jászberény (96 km east), supported by a HUF 800 mln European Union and government grant. Winding up the two-year-long project, Scintilla says it has improved its infrastructure and expanded its production with modern machinery, production lines, and industry 4.0 technologies. Hungarian metalworking business Buttner will invest HUF 682 mln in purchasing new equipment, expanding a production unit, and installing heat pump systems at its base in Nagyatád The glass facade of Schott AG’s headquarters in Mainz, Germany. (229 km southwest of the capital), with It has announced a HUF 28 bln expansion at its Hungarian factory. 70% of the investment costs being Photo by Bastian Kienitz / Shutterstock.com covered by a European Union grant. The investment is scheduled to be completed by summer 2023. While the employment index also U.S.-based medical tech firm Becton an annual seven tonnes of mortar increased, recording growth for the fifth Dickinson plans to invest a particularly production at the plant, boost powderconsecutive month, and the gauge of based plaster product output to 225,000 noteworthy HUF 70 bln into doubling purchased inventories grew for the 10th capacity at its base in Környe (69 km tonnes a year, and add 10,000 sqm of successive month, longer delivery times west), supported by a government grant additional warehouse space. Due to were experienced than in January. of HUF 4.4 bln. After installing three be completed at the end of 2025, the new production lines by the end of 2024, company targets shortening its supply Capacity Expansions the company expects to create 300 new chains via the expansion. Although the effects of the sanctions jobs once production starts. Caola, a Hungarian cosmetics and on the economy will surely begin to cleaning products maker, laid the Uncertain Future crystalize over time, March has seen cornerstone of a HUF 3.8 bln antiseptic Although this month has certainly been some intriguing capacity expansions in factory in Martonvásár (32 km from busy with manufacturing developments, the country. the capital’s center) on March 11, the Russo-Ukrainian war and its impact K9-Sport, a Hungarian dog harness supported by a HUF 2 bln grant from a on the region’s economic environment maker, inaugurated a HUF 270 million fund earmarked to boost the country’s raise questions. On March 15, the capacity expansion, supported by a healthcare production self-sufficiency. European Union revealed the fourth HUF 135 mln government grant, at Construction should wrap up by the round of its increasingly punitive its base in Tiszafüred (148 km east of end of this year, and the plant will start sanctions against Russia for its invasion. Budapest by road) on March 18. The operating with a staff of 21. The wild swings in natural gas prices investment in the factory will add 70 Continest Technologies, a Hungarian new jobs, raising the headcount to more maker of foldable, multi-purpose mobile caused by the conflict have already been causing havoc across many industries, than 500. Public records show that containers, inaugurated a HUF 541 one of the latest victims being fertilizer exports accounted for more than 95% of mln capacity expansion, supported by production (see our story on page 19). K9-Sport’s 2020 turnover. a grant of HUF 433 mln, at its base in Audia, Mercedes and Suzuki have either Hungarian-owned Somapak, a maker Székesfehérvár (65 km southwest), also altered shift patterns in their Hungarian of food and tobacco packaging machinery, on March 11. The additional 1,000 sqm factories in response to missing supplies also announced on March 18 that it would production area, which raises the total from Ukraine or stopped shipping be investing HUF 245 mln in capacity space to almost 5,500 sqm, will create vehicles to Russia. expansion, supported by HUF 172 mln in 26 new jobs by the end of the year. This most recent package banned the European Union and state grants. Once Some 90% of Contitest’s turnover comes export of luxury cars from the EU to finished in November, Somapak will have from global exports. Russia and applies what the European added a production hall and warehouse, Schott Hungary, the local subsidiary Commission calls, “A far-reaching ban bought a CNC machine center and a five- of the German maker of specialty glass on new investment across the Russian tonne capacity running crane, and made products, has announced that it is energy sector, with limited exceptions for IT upgrades at its base in Pécs (217 km planning a very significant civil nuclear energy and the transport of south of the capital). certain energy products back to the EU.” Italian-owned Mapei Kft., a expansion, Russian exports of raw minerals, construction materials maker, is supported by a HUF 3.3 bln including fossil fuels and palladium, investing HUF 8 billion in a capacity government grant, at its Hungarian essential for the auto industry, remain expansion of its Sóskút plant, just base in Lukácsháza (232 km west of possible for now, but no one knows with 26 km southeast of central Budapest. Budapest). Adding prefillable sterile any certainty for how much longer. Under the investment, Mapei will add

HUF 28 bln

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Budapest Business Journal | March 25 – April 7, 2022

PRESENTED CONTENT

Special Report | 17

The Circular Route From Fossil Fuels to Hydrogen As the global demand for energy increases, countries must address the issue of their energy needs through better resource management. In the case of Hungary, while results have been achieved in some areas, a more comprehensive approach is needed; the country has taken a significant step to enhance its efforts with the launch of the Circular Economy Technology Platform. BALÁZS BARABÁS

Hungarian households have long been using selective waste collection, and social awareness regarding green technologies and carbon footprint reduction has also increased. However, challenges in this area need to be managed within a broader framework so that the isolated initiatives can merge into an efficient and seamless system, environmentalists say. This framework must be designed following basic principles that aim at eliminating waste and pollution, circulating products and materials, and promoting the regeneration of the natural environment. Unlike those of the traditional linear economy, these principles form the core concept of a circular economy, a new model of production and consumption.

is an environmentally friendly source of energy. While the storage technology for this source is not yet available on a large scale, hydrogen is already used as fuel in experimental bus prototypes, the minister added. “We do not aim to use less energy but to use exactly as much as is necessary and, ideally, to minimize waste,” Palkovics concluded. Waste management is another area needing further work, not only in the recycling of communal waste but also of construction and agricultural waste, the minister added.

Laying the Groundwork

László Palkovics The idea behind the circular economy is to keep raw materials, products, and even equipment and infrastructure in use for as long as possible by employing reuse, sharing, repairing, refurbishment, remanufacturing, and recycling. One such example is vehicle sharing, available in Hungary (especially, but not exclusively, in Budapest) for cars, scooters and bikes. These programs come with several benefits: fleets are managed more efficiently, with regular maintenance resulting in reduced waste and pollution outputs, while clients save money by using vehicles only when they need them, paying for the services through minutes-based fees.

“We do not aim to use less energy but to use exactly as much as is necessary and, ideally, to minimize waste.” Car sharing is a concept that would not have been feasible 10 years ago, experts tell the Budapest Business Journal. It came to fruition by combining several technological achievements: smartphone apps, mobile networks with broadband data transfer, electric cars, and advanced GPS location services. More such projects would significantly contribute to the creation of a circular economy.

This process can be catalyzed further with the involvement of state incentives. The Circular Economy Technology Platform, launched on March 11 in Veszprém, aims to become such a catalyst in accordance with Hungarian and European strategies.

Environmentally Conscious

At the inauguration event held at the University of Pannonia, Minister of Technology and Innovation László Palkovics, representing one of the platform’s leading partner organizations, said that the new initiative not only enhances dialogue and cooperation but will also serve as an important actor for an environmentally conscious and sustainable economy. One of the most important sectors in Hungary is the automotive industry, which is currently undergoing significant changes. As the world increasingly turns towards electric cars, the demand for batteries inevitably increases, the minister pointed out. To remain competitive, Hungary has to attract battery-manufacturing companies, which require a complex supply and manufacturing chain for their operations. Consequently, automotive companies will start relocating to countries that already host battery factories. Therefore, Hungary must prioritize economic development with incentives for battery manufacturing firms, Palkovics said. Another priority would be developing hydrogen cell fuel technology. Hydrogen

The Board of the Circular Economy Technology Platform • President: Zoltán Birkner, NKFIH • Consultancy firms: Viktória Bodnár, IFUA Horváth and Partners • SMEs: Krisztina Borsos, Hidrofilt Kft. • Agriculture: Attila Csányi, Bonafarm Zrt. • Industry: Péter Ratatics, MOL • Construction: Sándor Scheer, Market Zrt. • Digitalization: Mátyás Dobó, Vodafone • Chambers: Péter Dunai, MKIK • Financing: Barnabás Virág, MNB • Municipalities: László Balogh, Nagykanizsa

Palkovics has appointed Zoltán Birkner, the National Research, Development and Innovation Office president, as head of the newly created Circular Economy Technology Platform. In his keynote speech, Birkner said workgroups would begin sessions in May, and by the end of the year, they will be able to present several recommendations to the government. This will be an essential task for the board, with members selected to represent the economy vertically, with companies taking part in the circular economy, but also horizontally.

Zoltán Birkner “We need to create both the regulator and the consultancy capabilities for this body,” Birkner said. He added that it is important to set up contacts not only locally but also on a regional level. Attila Steiner, Deputy Minister in the Ministry of Technology and Innovation, outlined the financial opportunities for 2021-2027. He admitted that Hungary is lagging behind other countries in several areas. The ministry has set targets that are needed not only to access European funds but also to serve as a catalyst for economic development. Zsolt Hernádi, CEO and president of MOL Group, the Hungarian oil and gas giant, noted that more than 80% of energy sources are related to fossil fuels, which need to be gradually replaced in the future. One of these fossil fuels is gas, dependency on which can be significantly reduced, although it requires major investments and a lot of work. A solution for bridging over the interim period may well be implementing a circular economy, Hernádi said.

18 | 3

Special Report

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77 Elektronika Kft. Launches Continuous Glucose Monitoring System Diabetics and their physicians will be able to get a more detailed picture of the body’s sugar metabolism thanks to a continuous monitoring system introduced this month by Hungarian medical equipment manufacturer 77 Elektronika Kft. BBJ STAFF

The launch of the GlucoMen Day continuous glucose monitor (CGM) system in Hungary is in cooperation with Italian company A. Menarini Diagnostics. 77 Electronika says the new system delivers real-time, continuous glucose monitoring via a sensor that takes a measurement every minute,

24 hours

a day. It is compatible with a mobile application, meaning the data can also be shared with the patient’s doctor. That means both can gain insights into how, for example, eating, exercising, or certain medications affect an individual’s metabolism. The device can even warn the patient if dangerous values are detected, during sleep, for example.

The device differs from the traditional fingertip blood glucose measurement in that the former provides real-time, dynamic information on the rate and direction of glucose change. In contrast, a blood glucose meter provides only a brief “snapshot” of glucose levels. The company says the sensor is placed under the surface of the skin painlessly (without a needle) using a simple device. Once in situ, it can help determine what causes significant changes in blood sugar levels and analyze what needs to be changed in the therapy.

The real-time glucose readings it takes are automatically transmitted to a smartphone or monitor using a built-in data transmitter.

Danger Warning

The GlucoMen Day device is able to detect and notify when glucose levels reach the upper or lower end of the optimal target range (entering the hyper- or hypoglycaemic phase) and can even predict trend-based dangerous values and alert the user in good time. 77 Elektronika was the first manufacturer to make fingertip blood

glucose monitoring widely available to diabetics in Hungary. The

100%

Hungarian-owned

firm, which owns and manufactures the Dcont blood glucose measuring product family, still plays a leading role in the Hungarian blood glucose measuring market. The latest models in the Dcont family are the first in the world to allow near-laboratory level blood glucose measurement during home selfmonitoring. The “smart” blood glucose meters can also be connected to a telemedicine system also developed by the company. In April 2021, 77 Elektronika bucked the usual trend of foreign companies buying up Hungarian businesses when it acquired the German medical diagnostics firm Analyticon Biotechnologies AG, the second-largest manufacturer of reagent strips on the German market.

77 Electronika says the new system delivers real-time, continuous glucose monitoring via a sensor that takes a measurement every minute, 24 hours a day. It is compatible with a mobile application, meaning the data can also be shared with the patient’s doctor. Sándor Zettwitz, co-owner and CEO of 77 Elektronika, said at the time, “We believe that there are very few examples of a Hungarian company buying a German company; the opposite is a lot more common. The acquisition of Analyticon AG is 77 Elektronika’s first foreign investment, and we are confident that we have taken a big step forward to ensure the security of the company’s operations,” he continued.

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Soaring gas Prices Disrupt Hungarian Fertilizer Manufacturing Like some other fertilizer manufacturers in Europe, Hungary’s Nitrogénművek has temporarily halted ammonia production and may soon stop fertilizer production on soaring gas prices due to the RussoUkrainian war. While Nitrogénművek claims this will cause problems in the local agricultural sector, possibly leading to price increases in food production, the Ministry of Agricultural insists that fertilizer supplies for the country have been secured. CHRISTIAN KESZTHELYI

Nitrogénművek Zrt., a Hungarian nitrogen-based fertilizer producer and agricultural input-material distributor, announced on March 9 that it would be temporarily halting its ammonia production, which is the prerequisite of fertilizer manufacturing. The 90-year-old business, based in Pétfürdő (98 km southwest of Budapest by road), justified its decision with the enormous daily price swings of natural gas used in the fertilizer manufacturing process. As this issue of the Budapest Business Journal was going to press, it seems highly likely that Nitrogénművek will have run out of its ammonia stock and halted the production of its fertilizers products. “The war in Ukraine created an extraordinary situation in the European and Hungarian economies. Natural gas prices have more than doubled and the risk of energy supply security has also increased,” Nitrogénművek Zrt. said in a press statement sent to the BBJ. “Government decisions that unpredictably affect the market fundamentals of agriculture (i.e., grain export restrictions) further increase our

Minister of Agriculture István Nagy speaks at a press conference on March 11. Photo by János Mészáros / MTI market risks, which forced us to halt our ammonia production temporarily,” the company statement added. Nitrogénművek has said it is constantly monitoring the situation and “will do its utmost to restart production and reduce the region’s dependence on fertilizer imports.” Nevertheless, the firm said the highly energy-intensive ammonia production stoppage was necessary given the current market environment.

“Natural gas prices have more than doubled and the risk of energy supply security has also increased. Government decisions that unpredictably affect market fundamentals of agriculture (i.e., grain export restrictions) further increase our market risks, which forced us to halt our ammonia production temporarily.”

Volatile Price Swings

The prices of natural gas have been so volatile, swinging between EUR 100 and EUR 250 in a single day, that such raw material price changes cannot be incorporated into the selling price of the fertilizer, László Bige, one of the owners of Nitrogénművek, said in an interview on Hungarian commercial television channel ATV. “End-users cannot adjust so fast [to price changes], and it is not even possible to do so,” Bige said in the interview. “If we consider that we

manufacture a product that we would not be able to sell, we would rather halt production,” Bige added. Bloomberg reports that natural gas, a feedstock for nitrogen fertilizers, usually accounts for almost 80% of a manufacturer’s cost, adding that European gas futures are now about 10 times higher than a year ago. Nitrogénművek is not alone in its production difficulties. Norway’s Yara, which is one of the world’s largest fertilizer producers, has also curtailed its ammonia and urea (a fertilizer and feed supplement) output in Italy and France, according to Reuters. Yara also cited the surging natural gas prices. “Including optimization and maintenance at other production facilities, Yara’s European ammonia and urea production is expected to be operating at approximately 45% of capacity by the end of this week,” Reuters quoted Yara as saying. Yara is the world’s second-largest producer of ammonia, with a capacity of 4.9 million tonnes per year in Europe, which in turn is used in the manufacture of urea fertilizers. Borealis, another European fertilizer producer, also announced that it was reducing its ammonia production capacity, similarly citing the high natural gas prices. In an email sent to Bloomberg, Borealis’ corporate communications manager Virginia Wieser said it was also considering stopping production for “economical reasons.” Nitrogénművek’s Bige told Hungarian ATV that the company had not thought it would sell so much fertilizer in a week that it would nearly empty all its ammonia stocks. The firm, which supplies 50-60% of the Hungarian market with fertilizer, according to Bige, could stop fertilizer production too, as it is running out of ammonia. Bige also warned that the

Special Report | 19 Hungarian market is missing almost 30% of the fertilizer stock needed for wrapping up this year’s harvest.

Harvest Covered

After the interview with Nitrogénművek’s Bige aired, the Hungarian Ministry of Agriculture issued a statement in which it insisted that the Hungarian agricultural sector has the fertilizer levels necessary for the spring harvest. Minister István Nagy said he had discussed the supply situation with Hungarian fertilizer distributors and importers, the Hungarian Chamber of Agriculture and the Association of Hungarian Economic Circles and Cooperatives. The minister emphasized that the partial shutdown of European fertilizer production capacities is not a direct problem in Hungary at present. Nagy also pointed out that farmers have already carried out the first cereal topdressing (spreading a thin layer of soil mix over a turf area and working it into the turf to stimulate thatch decomposition) this year and that there is a sufficient supply of fertilizer in the country for the next work phases. Nagy underscored that, in the interests of Hungarian farmers, all possible means must be used for the safe supply of domestic fertilizers. “Our main task is to protect Hungarian farmers and Hungarian families from economic and supply problems,” the minister emphasized. European governments have scrambled to cushion the effect of gas prices hikes on consumers and industries dependent on the raw material. Gas prices have soared since Russia invaded Ukraine; the former is the continent’s top gas supplier, and EU sanctions against Russia have severed economic ties between the two. In the fertilizer manufacturing industry, this situation is pushing up farm input costs and, pundits reckon, is adding to the risks of worldwide food shock, as essentially every major crop in the world depends on input such as nitrogen, a fact that is exacerbated by Russia also being a key supplier of fertilizers.

László Bige, one of the owners of Nitrogénművek

20 | 3

Special Report

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Budapest Business Journal | March 25 – April 7, 2022

Electronics Manufacturers Ranked by total net revenue in 2020 (HUF mln)

oRiginal dEsign ManuFaCtuRER

tElECoM

ConsuMER ElECtRoniCs

autoMotivE ElECtRoniCs

no. oF Full-tiME EMployEEs on July 1, 2021

HousEHold ElECtRoniCs

yEaR EstablisHEd

oWnERsHip (%) HungaRian non-HungaRian

saMsung ElECtRoniCs MagyaR ZRt. www.samsung.com

998,004

–

✓

–

✓

–

1989

(100) –

Joseph Rhee Sang-Woo Lim, Witsch Gerda –

5126 Jászfényszaru, Samsung tér 1. (80) 726-7864 –

FlExtRoniCs intERnational kFt. www.flextronics.com

901,412

✓

6,478

1992

Flextronics Sárvár Logistics Kft. (A) Flextronics International GmbH (A)

lászló nagy, tamás lászló – –

8660 Tab, Munkás utca 28. (84) 526-100 legalhungary@flextronics.com

RobERt bosCH ElEktRonika gyáRtó kFt. www.bosch.hu

arne Ziegenbein, attila Horváth, Markus karl Heinrich Hildenbrand – –

3000 Hatvan, Robert Bosch utca 1. (37) 549-100 info@hu.bosch.com

Rank

oRiginal EquipMEnt ManuFaCtuRER

sECtoRs

ElECtRoniCs ManuFaCtuRing sERviCE

aCtivity typEs

total nEt REvEnuE in 2020 (HuF Mln)

CoMpany WEbsitE

Cloud nEtWoRk tECHnology kFt. www.foxconn.hu

top loCal ExECutivE CFo MaRkEting diRECtoR

addREss pHonE EMail

623,236

–

✓

5,624

1998

– Robert Bosch Investment Nederland B.V. (100)

525,161

✓

–

2017

– Focus PC Enterprises Ltd. (100)

péter tálos Gabriella Pistauer –

2900 Komárom, Bánki Donát utca 1. (34) 886-888 komarom@emea.foxconn.com

ContinEntal autoMotivE HungaRy kFt. www.conti.de

336,489

–

✓

4,454

1990

– Continental Automotive Holding Netherlands B.V. (100)

Róbert keszte, tamás pápai – –

8200 Veszprém, Házgyári út 6–8. (88) 540-100 –

RobERt bosCH poWER tool ElEktRoMos sZERsZáMgyáRtó kFt. www.bosch.hu

283,653

–

✓

–

✓

–

3,946

2001

– Scintilla AG (100)

lászló Fükő Péter Révay –

3526 Miskolc, Robert Bosch park 1. (46) 518-300 info@hu.bosch.com

Jabil CiRCuit MagyaRoRsZág sZERZődésEs gyáRtó kFt. www.jabil.hu

228,472

✓

–

✓

–

✓

3,976

2000

– Jabil Circuit Netherlands B.V. (98.10), Jabil Circuit Limited (1.90)

sándor kékesi, sergio alonso Cadavid, anikó szőlősi, timothy traud – –

3580 Tiszaújváros, Huszár Andor út 1. (49) 548-500 tis_jabil_info@jabil.com

ni HungaRy kFt. www.ni.com/en-in.html

180,748

–

✓

–

✓

–

2001

– Enterprise International Holding B.V. (100)

Róbert Hosszu – –

4031 Debrecen, Határ út 1/A (52) 515-400 –

gE HungaRy kFt. www.ge.com

169,294

✓

–

✓

–

1,574

2003

GE Infrastructure Hungary Holding Kft. (100) –

Zoltán gábor Horváth, Zoltán simon győrfi, Miklós Zoltán bogár – –

1138 Budapest, Bence utca 1. (1) 237-6800 –

ElECtRolux lEHEl HűtőgépgyáR kFt. www.electrolux.hu

165,030

–

✓

–

✓

–

1,697

1985

– AB Electrolux (100)

sándor gönczi – –

5100 Jászberény, Fémnyomó utca 1. (57) 415-999 jozsef.babucs@electrolux.hu

lg ElECtRoniCs MagyaR kFt. www.lg.com

143,793

1992

– LG Electronics European Holding B.V. (100)

kim dae Hwan, kim Hyeong tae – –

1097 Budapest, Könyves Kálmán körút 3/A (1) 455-6060 –

tdk HungaRy CoMponEnts kFt. https://hu.tdk-electronics.tdk.com/

74,005

✓

–

✓

–

✓

2,325

1994

– TDK Elektronics AG (100)

balázs József takács – –

9700 Szombathely, Csaba utca 30. (94) 522-100 hrszombathely@ tdk-electronics.tdk.com

ibM data stoRagE systEMs kFt. www.ibm.com/hu

39,916

–

✓

–

3,202

1995

– IBM Ireland Product Distribution Limited (100)

János andrási, katalin turza, Zoltán Zerényi – –

2600 Vác, Deákvári fasor 16–18. (27) 500-400 info@hu.ibm.com

sanMina-sCi MagyaRoRsZág kFt. www.sanmina.com

21,866

✓

–

✓

–

✓

1,544

1997

– Sanmina-SCI System Holdings LLC (100)

károly Hoffmann – –

2800 Tatabánya, Kóta József utca 2. (34) 515-600 sanmina.tatabanya@ sanmina.com

pHilips MagyaRoRsZág kFt. www.philips.hu

18,700

✓

–

✓

–

1989

– Koninklijke Philips Electronics N.V. (100)

Zoltán Mészáros – –

1097 Budapest, Könyves Kálmán körút 11/C (1) 382-1700 zoltan.meszaros@philips.com

dElpHi poWERtRain systEMs HungaRy kFt. www.delphi.com

16,989

–

✓

–

✓

–

– BorgWarner Luxemburg Holdings S.á.r.l. (100)

szabolcs karaszek – –

9700 Szombathely, Zanati utca 29/A (94) 517-800 –

vidEoton Holding ZRt. www.videoton.hu

1938

Gábor Széles, Péter Lakatos, Ottó Sinkó (100) –

péter lakatos, ottó sinkó, gábor széles Gyöngyi Rácz Ranczné –

8000 Székesfehérvár, Berényi út 72–100. (22) 533-421 vthjogi@videoton.hu

A = would not disclose,

NR = not ranked, NA = not appliacable

14,836

✓

–

✓

–

✓

–

✓

579

This list was compiled from responses to questionnaires received by March 25, 2022, and publicly available data. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of press time. The list is based on companies’ voluntary data submissions. While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, Madách Imre út 13–14, or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

www.bbj.hu

Budapest Business Journal | March 25 – April 7, 2022

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Hashing out the Neszmély Wine Brand

A new wine brand, #Neszmély, was recently born as a quintet of winemakers from the Transdanubian region premiered their first bottlings of this mutual wine, although the vintners make their own individual versions.

ROBERT SMYTH

The brand was created by the six founding members of Neszmélyi BORvidékÉrt Egyesületet, the local wine organization: Bősze Pincészet and Petőcz Pincészet from Ászár, Hilltop Neszmély Borászat from Neszmély, Kisbaka Családi Borbirtok from Baj, Kősziklás Borászat from Dunaszentmiklós, and Szivek Pince from Kesztölc. Kisbaka, however, has decided not to release a #Neszmély wine in its debut 2021 vintage. The brand was launched at Tata’s Esterházy Castle on March 10. Compared to other such mutual or common wines, such as Pannonhalma’s PH-Érték, Balatonbor, Villány REDY, or Bükk’s Balvány, producers have a much freer hand regarding composition. While Balatonbor is made from Olaszrizling, PH-Érték wines are based on a backbone of at least 50% Riesling, and Balvány wines must all use the same combination of grapes (one-third each of Chardonnay, Olaszrizling, and Zenit), the bulk of #Neszmély can be made up of any of six grape varieties. Up to 85% of the blend should come from Királyleányka, Olaszrizling, Rajnai rizling (Riesling), Rizlingszilváni (Müller-Thurgau), Chardonnay and Szürkebarát (Pinot Gris). The blend must comprise a minimum of two varieties, with no one type exceeding 50%. Up to 15% can come from the aromatic varieties of Irsai Olivér, Cserszegi fűszeres and Sárgamuskotály, which serve to ramp up the aroma attack. #Neszmély can only be fermented and aged in stainless steel tanks.

Kősziklás, which has 70 hectares of vines and has been working in its new winery for three years, is planning to expand production from its current output of 160,000 to 300,000-400,000 bottles per year, winemaker and partowner Ákos Béger told the Budapest Business Journal. Hilltop’s offering is also composed of 50% Királyléanyka but has an extended supporting cast of 15% Pinot Gris, 10% Sauvignon Blanc, 10%, Sárgamuskotály and 5% Irsai Olivér. It’s as clean as a whistle, with an airy nose and crunchy green apple aromas and flavors, with pleasantly tingling acidity. I’m not sure how the Sauvignon Blanc got in there, but it appears that the six grape varieties permitted are, in fact, seven, although it could easily be considered as an aromatic variety. Hilltop has a whopping

400 hectares

The grapes are vinified separately and later blended. The aim is not to make a very top wine, but rather one that captures the essence of Neszmély, a region that is

100

kilometers

long and has 1,000 hectares of land under vine That essence is underpinned by freshness and zesty fruitiness, according to Szabolcs Emmer, president of Neszmélyi BORvidékÉRT and partowner and founder of Kősziklás. “The individual characteristics of the grape varieties should not dominate the blend,” he said. The recommended price for all of the wines is HUF 1,890. Almost 20,000 bottles have been made of #Neszmély in its debut vintage, which, for the time being, are available through the winemakers’ individual sales channels, adds Emmer. When not presiding over Neszmélyi BORvidékÉRT, he spends most of his time in the vineyards as Kősziklás’ viticulturalist.

A Bit of Body

“This bottle of wine is Neszmély. Inside the bottle are the long-stretching northern region’s characteristics, the hills and valleys of Neszmély, the deep and warm loess soil, the cool climate, and the unending, serpentine River Danube,” said Hilltop Neszmély winemaker and part-owner Ákos Kamocsay, speaking at the launch. “It should have a bit of body, as well as the ubiquitous freshness, the crispy acidity, the rich, complex and full aromas and flavors, and outstanding harmony of Neszmély.” It is not permitted to blend across vintages, and the must has

to be clarified. The alcohol level must be between 12.5%

and

13.5%,

and it has to have minimum acidity of 5.8 grams per liter, with no upper limit. Other wineries are free to join and release #Neszmély, although the wines will need to gain approval from a tasting panel. István Turay of the exciting, eponymous bijou family cellar attended the #Neszmély launch. When I asked him if he was considering making a #Neszmély wine, he told me, no, having just two hectares of grapes at his disposal. Although made of quite different compositions of grape varieties, the wines do indeed have much in common and pretty much nail Kamocsay’s description. Half of Kősziklás’ #Neszmély is made from the Királyléanyka grape, which Emmer and the other owner Ákos Béger, who is also the winemaker, rate very highly. They describe Királyléanka as “the Sauvignon Blanc of the Carpathian Basin.” Emmer told me it captures the vibrant aromas and tingling acidity that characterize this cooler, northern wine region with its acid-retaining limestone soils and loess soils, which encourage fruitiness.

Aromatic Attack

It certainly has some of the aromatic attack of Sauvignon Blanc and similar zesty acidity but is still very much its own wine. In addition to Királyléanyka, Kősziklás’ has 20% Olaszrizling, 20% Müller-Thurgau and 10% Irsai Olivér. It is pleasantly peachy, grapey and floral with long and lively acidity.

and has started to grow some resistant varieties that don’t require spraying, Kamocsay told the BBJ. The Szivek winery has 18 hectares in the limestone vineyards of the Pilis hills, an area perhaps better known for hiking and which once belonged to the Archbishop of Esztergom. Some 3.5 hectares are now certified organic (with more under conversion), including the Cserszegi fűszeres that made up 10% of its #Neszmély. Szivek’s is the pick of the bunch for me and features 50% Chardonnay and 40% Müller-Thurgau. It oozes fresh green apple and grape soda on the nose and palate. It is light and soft off the palate, but it gives a citrusy kick in the otherwise elegant finish. For its part, Bősze, from Aszár (the wine region used to be known as AszárNeszmély), went with 40% Pinot Gris, with the rest made up of Müller-Thurgau (25%), Riesling (20%) and Irsai Olivér (15%). Despite the somewhat different composition to some of the others, it still ticks all the boxes regarding what a #Neszmély should be like, showing that the flexible approach work when it comes to bottling the essence of the place.

22 | 4

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www.bbj.hu

Budapest Business Journal | March 25 – April 7, 2022

Photos by Gabriella Kiss

House of Music Proves Surprisingly Thought-provoking David Holzer finds himself on an engaging and interactive multisensory voyage through humankind’s musical journey, from aping the sounds of nature to sampling classical tunes in the 21st century, at the award-winning House of Music. I was pleasantly surprised by my visit to the House of Music Hungary, to use the official English translation for the Magyar Zene Háza. Most of the time, my goal when I visit any exhibition space is to whizz through the stuff I’m meant to be there to look at as quickly as possible and head for the museum shop or café to finger fridge magnets or eye up cakes. Before my visit, I was most interested in seeing the already iconic building designed by Japanese architect Sou Fujimoto which won an open, anonymous competition and has been receiving plaudits ever since. This began even before the House of Music opened, with CNN and the World Architecture Community listing it as one of the 10 most anticipated new buildings of 2021. In 2022, Time Out magazine voted the House of Music runner up in its “best new thing in the world to do

in 2022” list. In case you’re curious, number one is the Maison Gainsbourg, opening in Paris in spring of this year and dedicated to the life of the French singer Serge Gainsbourg, globally famous for his hit “Je T’aime… Moi Non Plus” and for making Whitney Houston blush on live French TV. The first thing I noticed about the House of Music is that, like many architectural wonders of the world from Stonehenge to the Leaning Tower of Pisa, it’s surprisingly small. This is no bad thing as it adds to the sense that it is something you stumble across, tucked away in City Park. What I liked most about the building was the effect of being inside it, like being sun-dappled under a canopy of trees. I also like the way it’s built around a central spiral that runs from the educational section at the top through the level that houses the entry, performance spaces, café, and shop down to the permanent and temporary exhibition level. For me, form and function are married perfectly in the design. When I later sat down with Márton Horn, institutional director and a prime mover of the project from the very beginning, he explained how they arrived at that harmonious blend. “The Japanese approach to architecture is to start with form and environment. In Europe, function is

always core. We had to learn each other’s ways. Our agreement was that we, on the Hungarian side, could ask to change the design if it affected the function of the building. If our suggestions only related to the design, the Japanese could reject them.”

“In spring, we will open a creative sound space featuring 13 different, special instruments designed by us together with experts and the Medence Group that anyone of any age and ability can make music on.”

Music for All

I must admit I didn’t make the connection between the location of the House of Music, its architecture, and the way the exhibition proper starts until I started to type this paragraph. The exhibition begins by creating the sense that the visitor is in a forest listening to animal sounds, alluding to the theory that music arose when early man attempted to mimic what he heard. There’s also a set of conga drums to

bang on, related to the idea that our first attempts to make music as a species also began with rhythm. In case you’re wondering whether this isn’t all a trifle cacophonous, I should mention that visitors all wear headsets with a device fitted that triggers the interactive displays using a green light. Point your head in a particular direction and you’ll hear a certain sound. You might also trigger movement in a display. When you look at a monkish-looking dude on a stained-glass window in the space devoted to Gregorian Chants, for example, he moves while he sings. Given that my interest in music really only starts with the 20th century, I expected not to be detained by spaces devoted to Hungarian folk, classical music, or whatever, but that wasn’t the case. I was constantly discovering neat little touches like the snippets of film activated when I peered in the different windows of a model of the newly reopened Hungarian State Opera House. Quite apart from the ingenuity that must have gone into planning all this, it’s a smart move to create an environment that offers so many opportunities for photos and selfies. Snapping away while interacting with an exhibit means we engage with it for longer and might eventually pay attention to what we’re looking at.

www.bbj.hu

Budapest Business Journal | March 25 – April 7, 2022

Intense Interaction

In the space set aside for the 20th century, focused on the impact of technology on music, the level of interactivity is intense. Quite rightly so, as music has been radically changed by the arrival of everything from the humble radio to the sampler. But, as I watched four boys bellow into a microphone – soundlessly, thank Elvis – I was reminded that the fundamental impulse to make music has never

changed. Which was surely the point. This focus on interaction reinforces the notion that music belongs to all of us, a guiding principle of the House of Music. “In spring, we will open a creative sound space featuring 13 different, special instruments designed by us together with experts and the Medence Group that anyone of any age and ability can make music on,” Horn told me. “Inspired by 20th-century avant-garde Hungarian-Austrian composer György

Ligeti, who dreamed of creating an organ anyone could play, we will also introduce a robotic orchestra playing acoustic instruments. Visitors will be able to conduct this orchestra.” This emphasis on the idea that anyone can make music makes the final space in the exhibition extra thought-provoking. It provides an elegant conclusion to the voyage visitors take through musical history and brings us to a new point of departure. But, for me, it also opens up

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a debate over whether we should simply consume music passively or if we should really be producers taking control. I know which side I’m on.

You can discover what’s happening in the coming months at the House of Music Hungary at www.magyarzenehaza.com.