Budapest Business Journal 3105

Banking

Strains Grow, but Banks Will Weather the Storm

Rising inflation, the energy crisis, interest rate freezes, and extra taxes have increased the strain on banks operating in Hungary. While their situation has become more complicated, they are liquid enough to withstand even more severe economic circumstances.  15

Chinese Business Etiquette

As someone who has taught intercultural behavior to Westerners planning to work with Chinese partners, Csaba Wolf, vice president of ChinaCham, says the pitfalls are many and varied.  12

SOCIALITE

Hungarian Food Bank’s Work More Vital Than Ever

Hungary is suffering a record increase in food prices of around 50%. Inevitably, this is hitting the most vulnerable hardest. Against this backdrop, the work of the Hungarian Food Bank Association has become even more critical.  22

Industrial Reboot

Inflation may Have Peaked in January

The latest inflation data from the Central Statistical Office confirms the preliminary expectations of analysts that inflation in Hungary may have peaked in January. A more notable drop, however, is only expected in the second half of the year.  3

Adrienn Berta, the deputy CEO of Exim Hungary responsible for business operations, talks us through the rationale behind the Baross Gábor Reindustrialization Credit Program to support companies. 16

More Inclusivity, Fewer ‘Lonely Heroes’ Needed Among Execs

Groundbreaking research by Corvinus University aims to fill a gap in the Hungarian literature on management and provide insights for practitioners and policymakers. One of the main findings is that Hungarian execs tend to work as lonely heroes rather than team players.  8

CHINA COUNTRY FOCUS

EDITOR-IN-CHIEF: Robin Marshall

EDITORIAL CONTRIBUTORS: Balázs Barabás, Zsófia Czifra, Kester Eddy, Bence Gaál, Gergely Herpai, David Holzer, Christian Keszthelyi, Gary J. Morrell, Nicholas Pongratz, Robert Smyth.

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THE EDITOR SAYS

LOGISTICS ARE OUR LIFEBLOOD

Logistics are essential to just about every business going. Without them, you can’t receive the raw materials you need or shift your goods to the shops. Little wonder, then, that it was the focus of the latest CEO Breakfast Briefing the German-Hungarian Chamber of Commerce and Hungary runs with the Budapest Business Journal

Businesses have always understood their dependence on logistics, but I suspect that hasn’t always been the case with the general public, who traditionally probably didn’t think much about it beyond their personal transport needs. I think that began to change with the pandemic, and it was underscored by the supply chain disruptions that followed.

René Droese, chief development officer at Budapest Airport, agrees with my thesis. When not much else was moving through the terminals (he said there could be as few as 50 passengers a day at the height of the lockdowns and travel bans), the cargo was. Suddenly, the role the airport played became a matter of strategic importance. Minister of Foreign Affairs and Trade Péter Szijjártó referred at the time to an “air bridge” between Budapest and China. Droese recalled that “even Prime Minister Viktor Orbán stood on our apron” to welcome a cargo flight.

But while COVID may have boosted the public perception of logistics, and it certainly saw the amount of air freight rise, Droese made the point that it was never enough to offset the missing millions of passengers, and there is no doubt that is where Budapest Airport makes its money.

We did not just speak about the past, though. Ádám Mészáros, country managing director at DHL Express Hungary, gave some fascinating insights into the challenges of finding more sustainable technologies while also underlining that, while moving road or air freight to rail might seem like a good idea, the infrastructure is “ultrathin,” and there simply isn’t the capacity. Our other panelists, Ádám Tálosi of East-West Intermodal Logistics Plc. (which runs an intermodal facility in northeast Hungary, near the borders with Slovakia and, especially, Ukraine), and Thoralf Wagner, CEO at Lufthansa Technik Budapest Ltd., also had plenty of interest to share.

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That was no small thing for the airport, considering that the government had not always given the impression it thought it was well run and had made a non-binding offer to buy a majority stake in the early summer of 2021, then submitted a revised bid in October of that same year, according to international news wire Reuters, before eventually balking at the price.

We are in the process of producing a podcast from the roundtable discussion that formed the highlight of the March 7 CEO Breakfast Briefing event: look out for it in the Podcasts section of our budapestbusinessjournal.com website soon. I heartily recommend it; it is not often you get to explore a subject such as this in greater depth, and I found some of the data that came out of it genuinely fascinating.

Robin Marshall Editor-in-chief

The six-decade-old Avas kilátó (viewpoint) in Miskolc (185 km northeast of Budapest by road) is to be renovated and reopened to the public by the end of the year. The black and white image from the Fortepan public archive was taken in 1963, the year of the structure’s original construction.

Photo by MTI / János Vajda

Photo by Fortepan / Zoltán Mészáros

Inflation may Indeed Have Peaked in January

The latest inflation data confirms the preliminary expectations that inflation in Hungary may have peaked in January. A more notable drop, however, is only expected in the second half of the year.

Consumer prices were 25.4% higher on average in February than a year earlier, following a 25.7% increase in January, the latest data published by the Central Statistical Office (KSH) shows. In the 12 months since February 2022, a price rise of 43.3% was recorded for food, while electricity, gas, and other fuels became 49% more expensive. Consumers paid 12.6% more for consumer durables, and service charges went up by 11.6%.

In the month since January 2023, consumer prices increased by 0.8% on average. Food became 1.7% more expensive. The better news was that the cost of electricity, gas and other fuels fell by 2%.

According to analysts, while inflation may remain high in the immediate months, there may be a more marked decrease in the second half of the year due to adjustments in the economy and the high base, which will probably bring the rate below 10%

by December.

Inflation moderated to 25.4% in February after peaking at 25.7% in January. This moderation was primarily caused by the drop in fuel prices in February. On the other hand, the cost of alcoholic beverages rose much more than expected, while the increase in food prices showed a slowdown, Magyar Bankholding’s Gergely Suppan says, commenting on the data.

According to the analyst, the peak of inflation is reflected by the fact that core inflation also slowed to a small extent, to 25.2%. Last year, consumer prices increased by an average of 14.5%, he recalled.

Accelerating Decrease

“In the coming months, due to base effects, the continuous decrease in fuel prices, and price reductions announced

Changes in Consumer Prices in Hungary (February 2022-February 2023)

February

for some food products, we expect inflation to moderate gradually and then sharply from the middle of the year, so we think inflation may have peaked in January,” Suppan says.

According to him, base effects can be amplified by the fact that international raw material, crop and energy prices and transport costs have fallen significantly in recent months, and further external price shocks are not expected. The strengthening of the forint could also moderate inflation.

The formation of a price-wage spiral can be observed in some sectors, which may slow the decrease in the inflation rate, but Magyar Bankholding still expects singledigit inflation by the end of this year.

“At the same time, this year’s average annual inflation may exceed our previous expectation of 17.6%,” Suppan notes.

While the inflation data finally showed some improvement, the industrial sector started the year with an unexpectedly weak performance.

The volume of industrial production declined in January by 0.2%

year-on-year. Based on working-day adjusted data (there was one day less in the base period), production dropped by 3.2%. According

to the seasonally and working-day adjusted figures, the industrial output was 5.1% lower than in December 2022.

Fastest Growth

From the subsections with the most significant weight in the economy, the manufacturing of electrical equipment grew at the highest rate, although the manufacture of transport equipment and computer, electronic and optical products increased as well. On the flip side, however, the volume of production fell when it came to the manufacture of food products, beverages and tobacco products.

January’s industrial performance is barely higher than the peak before the coronavirus crisis, and if you observe the trend since the fall, you can clearly see a fall, writes the financial portal portfolio. hu. The decline at the beginning of the year was also an unpleasant development because it corrected an encouraging rebound in December, which now looks more like a one-time jump between declining months rather than the turning of a corner, the website believes.

The skyrocketing energy prices may have forced several sectors to curtail production in the fourth quarter of last year, however, and thanks to the recent drop in energy prices, several producers can now resume operations. More negatively, external demand could be

worsened by inflation-driven increases in food and energy prices through a decrease in purchasing power. At the same time, the exceptionally high order book can still stimulate the industry, market experts say of the data.

This year, analysts at Magyar Bankholding expect an increase of around 3.5-4% in industrial production. There is potential for better news beyond that point, however; as of 2024, economists believe industrial production may significantly increase due to rising new capacities.

Unsurprisingly, the government chose to look on the more positive side. Commenting on the fresh data, the Ministry of Economic Development insisted the decrease in the performance of the industrial sector is only temporary. It also attributed the weaker performance to the war and the sanctions Brussels has imposed on Russia.

In its press statement, it recalled that the government had already adopted a package of 20 measures in order to break inflation, prevent a recession, maintain full employment, and protect families. Due to such government measures, the ministry expects inflation will drop to single digits by the end of the year, while the Hungarian economy could grow by 1.5%, it says.

MET Group Appoints CEO of MET Energía España in Spain

MET Group, an energy company based in Switzerland with Hungarian roots, has announced the appointment of Ángel Crespo as the new CEO of its Spanish subsidiary MET Energía España.

Crespo has more than two decades of experience in the Spanish gas and power sales and wholesale markets. He previously worked for Union Fenosa Gas, Alpiq, Mibgas, and Molgas Energy Holdings. He is also a member of the steering committee of Sedigas (Spanish Gas Association).

MET Group has had a strong presence in Spain since 2018, with direct LNG supplies into Spain as well as a diversified pan-European wholesale gas and energy portfolio.

Budapest Airport says that the expert has played a significant role in the airport winning the Skytrax “Best Airport in Eastern Europe” award several times and the “Best Airport in Europe” Award, announced by Airports Council International (ACI) this month.

He created and implemented Budapest Airport’s corporate strategy and also launched projects related to quality and sustainability.

Gerhard Schroeder, the chairman of the board of directors of Budapest Airport, said, “The shareholders and the entire management and staff of Budapest Airport are grateful for Chris Dinsdale’s commitment and leadership in the past years. Especially his dedication, ensuring the company’s stability during the pandemic and preparing the airport for the restart of aviation after COVID was outstanding. We wish him all the best and great success for his future work in Canada.”

“We are excited to have Ángel join our team and lead our Spanish business. With his local knowledge and experience in both gas and electricity, MET will continue to be able to support our Spanish customers under his leadership,” said Benjamin Lakatos, group CEO and chairman of MET Group.

Budapest Airport CEO to Leave at end of July

The CEO of Budapest Airport, Chris Dinsdale, will leave the company at the end of July, taking up a position as president and CEO of the Calgary Airport Authority in Canada.

Dinsdale informed the shareholders of Budapest Airport at the beginning of the year that, after more than seven years in senior management and almost two decades in Hungary, he will be taking up a new challenge in his native Canada.

The shareholders of Budapest Airport respect the CEO’s decision and wish him all the best, the company tells the Budapest Business Journal

Dinsdale had worked as CFO from 2015 and later also as deputy CEO, and became CEO in 2021.

The shareholders of Budapest Airport say the process of finding a successor has already begun, and they will announce the new CEO shortly.

Marketing Manager Appointed at Danone Hungary

Richárd Révész took up the position of marketing director at Danone Hungary in January. The manager has 15 years of experience in the FMCG and pharmaceutical industry and is an accomplished professional in strategic and operational marketing and commercial management.

Révész graduated from the University of Debrecen, first in economics and later in marketing management. After graduation, he started as a marketing trainee at Danone. Between 2007 and 2016, he gained experience in the company’s marketing department in various roles. As a result, he was appointed head of trade development for the company’s Czech and Slovak markets in 2016.

Subsequently, as head of marketing and sales for the then-newly acquired Alpro brand, he managed the international team in the Czech, Slovak, and Hungarian markets.

After more than 10 years at Danone, he spent two years in the pharmaceutical industry. In 2021, he joined Parma Produkt, a subsidiary of the Phoenix pharmaceutical group, as marketing and sales manager, where he contributed to strengthening the company’s market position.

In January this year, he rejoined the Danone team, where he will be responsible for the strategic building of prestige brands such as Activia, Actimel, Oikos, Danone, Danette, Danonino, Alpro, Milupa, and Milumil.

“It is an honor to return to Danone, where I spent many years. My experiences in FMCG and pharmaceuticals have shown me that the two areas face similar challenges in many respects. Danone is a major player in both segments. And success for our brands, be it dairy, plant-based products or specialty nutraceuticals, can only be achieved if we learn from each other and look for solutions that create value for both consumers and external partners in a sustainable way,” Révész said.

supports the service provider’s product development and pre-sales activities on the technology side.

Gaszmann joined Pannon GSM in 1999 as a transmission engineer. He later worked as an IP network design engineer and was responsible for technology engineering at Telenor Common Operation, the regional operations company of Telenor companies.

He was then operations director at Cetin Hungary, from which role he came to the position of director of digitalization and transformation.

Balázs Kővári, Cetin’s new operations director, is in charge of the smooth and high-quality operation of the company’s national telecommunications network of around 4,000 base stations, data centers, and IT infrastructure.

Like Gaszmann, he began his career at Pannon GSM, joining in 1997. Apart from a short stint in the network planning directorate, he has always worked in the operations area and, for the last 20 years, has been a manager in both network and IT. Until joining Cetin Hungary, he worked for Yettel Hungary as an IT area manager, contributing to the successful launch of the Yettel brand by leading the technical project team.

Cetin Hungary Appoints 2 Managers

Independent integrated telecommunications infrastructure provider Cetin Hungary Zrt. announced it had expanded its management team on March 7 with two new hires.

György Gaszmann now fills the newly created position of director of digitalization and transformation. The company’s new operations director is Balázs Kővári, who joins from Yettel Hungary.

György Gaszmann is responsible for developing and implementing Cetin Hungary’s digitalization strategy, with a particular focus on introducing innovative and data-driven technologies and the resulting process optimization opportunities. In addition, he also

WHO’S NEWS Do you know someone on the move? Send information to news@bbj.hu

Ángel Crespo

Chris Dinsdale

Richárd Révész

Balázs Kővári

György Gaszmann

Finland, Sweden Told Hungary Will Back NATO Application Roundup Crisis

Hungary is primed to approve the accession of Sweden and Finland into the North Atlantic Treaty Organization (NATO), a Hungarian delegation told their counterparts in Stockholm on March 7, and at a similar meeting held in Helsinki the following day, according to a report from Bloomberg News.

“We made it clear that the Hungarian government, the Hungarian president, the prime minister and most Hungarian lawmakers clearly support a Swedish NATO membership,” Csaba Hende, a member of the Hungarian delegation and a former defense minister, told Sweden’s TT News Agency.

Although Prime Minister Viktor Orbán had previously said that he was in favor of Sweden and Finland joining NATO, he had added that members of his ruling Fidesz party were “deeply divided” on the matter, claiming that the governments of both countries had “spread outright lies” about Hungary.

According to Maté Kocsis, leader of the Fidesz parliamentary group, MPs argued that Swedish and Finnish politicians had “publicly insulted” Hungary over the past few years. In light of these grievances, he explained that MPs have been inhibited from expediently approving the countries’ requests to join NATO, which they characterized as “asking a favor.”

Consequently, Hungary dispatched a parliamentary delegation to Sweden and Finland on February 24, ostensibly to gather information regarding the countries’ accession to the military alliance, as reported by state news agency MTI, but Orbán later clarified they were sent to seek explanations regarding the perceived slights.

‘Clear the Matter Up’

“How can a fast and fair decision be expected when we have continuously heard recently that there is no democracy in Hungary, that the rule of law is not ensured in Hungary, that there is no freedom of press, and that the independence of the judiciary is not guaranteed?” Szijjártó inquired. He added that such allegations question the legitimacy of MPs’ mandates from voters, which is why he said a “discussion to clear the matter up is necessary.”

Although Kocsis had said that sending a delegation would neither extend nor postpone the process in which the Parliament weighed the ratification of the two countries’ accession, it had once again postponed the vote to ratify the accession of Sweden and Finland on March 2. The Parliament is now scheduled to ratify NATO’s enlargement in the week of

March 20,

according to the latest agenda on its website. Meanwhile, in his address to the spring session of Parliament on February 27, Orbán reiterated his government’s stand on remaining out of the war in Ukraine and continued to emphasize the need for a ceasefire and peace talks. He said the war is “bad for Ukrainians, bad for Russians, bad for Hungarians, bad for Europe and [...] bad for the whole world,” adding that “nobody can win.”

Gergely Gulyás, the head of the Prime Minister’s Office, had earlier expressed a similar sentiment, reaffirming the government’s position on “staying out” of the war in a weekly press briefing on February 25. He added that Hungary would persist in not delivering weapons to Ukraine, but would continue to provide humanitarian assistance.

Ukraine

From left, Adriány Kincső, executive director of the United Way partner organization, Roland Schilling, chief of the Central European Representation of the United Nations High Commissioner for Refugees (UNHCR), and State Secretary for Church and Ethnic Relations Miklós Soltész at the presentation of the Hungarian chapter of the Regional Asylum Coordination Framework 2023 at the Hungarian Academy of Sciences on March 7, 2023. Under the framework the Regional Refugee Action Plan intends to spend USD 1.7 billion to help refugees displaced by the war in Ukraine in 10 countries, including Hungary, between January and December 2023. Photo by Zoltán Máthé / MTI.

In a video message broadcast on Ukrainian television channels on February 24, the one-year anniversary of Russia’s invasion into Ukraine, President Katalin Novák expressed her sympathy to the beleaguered nation.

“The war has been raging for a year now and we still cannot see the end of it,” she said. “Ukraine’s territorial integrity and sovereignty cannot be called into question,” the President stressed, adding that “the war criminals deserve to be punished.”

HOTEL MARRIOTT

2.

HYDROGEN SUMMIT

BUDAPEST JOIN THE REGION’S LEADING HYDROGEN CONFERENCE

This was confirmed by Minister of Foreign Affairs and Trade Péter Szijjártó when he met with his Swedish counterpart, Tobias Billström on February 27.

BUDAPEST

A P R I L 4 2 0 2 3

Analysts Expect H1 Real Estate Yield Correction

Sentiment towards the CEE markets indicates that investors are adopting a cautious wait-and-see approach to Hungary and the wider CEE region, reflecting the unstable geopolitical environment and the resulting economic and financial uncertainty.

Against this backdrop, many vendors and investors are exercising caution in anticipation of a more favorable political, economic, and financial environment and, critically, more predictable yields and pricing levels. In spite of these issues, a recovery in market activity is expected across Europe and CEE, possibly beginning in the second half of the year in the view of some analysts.

The general view is that, at least for the first half of this year, there will be a period of “yield correction” with most yields moving out, reflecting concerns over interest rates and the price of borrowing. However, the time scale of this process of correction could well be longer.

Colliers have traced a total of EUR 10.7 billion in investment volume for the CEE-6 (Bulgaria, the Czech Republic, Hungary, Poland, Romania and Slovakia) for 2022. CEE investment volumes were down just 3.3% year-on-year but more than 20% lower than pre-pandemic levels.

Poland represented over 50% of the investment volume and remained by far the dominant CEE market with

EUR 5.8 bln

recorded for the year, followed by the Czech Republic with about EUR 1.7 bln and, significantly, Romania with EUR 1.25 bln.

Hungary came fourth in the region with EUR 860 million, although

the country traditionally comes in third after Poland and the Czech Republic concerning investor sentiment and investment volume.

The Hungarian investor Adventum’s acquisition of the 273,000 sqm Tesco portfolio in the Czech Republic and Hungary, including 14 multitenanted assets at various locations here, was seen as a significant deal in Hungary for 2022 in terms of magnitude. This was one of the ten largest single asset or portfolio transactions traded throughout the year, each above EUR 200 mln.

Rising Financing Costs

Colliers put prime Budapest office yields at 5.75%, with industrial at 6% and shopping centers at 6.5%. Office and shopping center yields are expected to move out, with industrial remaining constant. This still provides a yield differential of around 100 basis points compared to Prague, where prime office yields stand at 5%, industrial at 4.75%, and shopping centers at 5.75%.

“While there has been an overall lack of prime transactions to gauge new benchmarks, we have moved yields further outwards

“While there has been an overall lack of prime transactions to gauge new benchmarks, we have moved yields further outwards by as much as 100 basis points, in some markets, compared to only 12 months ago. We cannot rule out further shifts with the ECB having recently moved its key rate to 3%, meaning all-in financing costs can now reach north of 5%. With prime yields in early 2022 having been at or below the current higher debt costs, there will naturally be a period of mismatched expectations on pricing between buyers and sellers.”

by as much as 100 basis points, in some markets, compared to only 12 months ago,” comments Josefina Kurfurstova, research analyst for CEE at Colliers.

“We cannot rule out further shifts with the ECB having recently moved its key rate to 3%, meaning all-in financing costs can now reach north of

5%.

With prime yields in early 2022 having been at or below the current higher debt costs, there will naturally be a period of mismatched expectations on pricing between buyers and sellers,” she explains.

A further potential challenge is the central role of ESG in any investment decision.

“This is partially driven by changing attitudes on responsibility towards the impact of real estate on the environment, but also by increasing requirements on the financing and reporting side of things that will ultimately impact the feasibility of business models going forward,” says Kevin Turpin, regional head of CEE at Colliers.

“But we also see sustainability and green ratings moving from a ‘nice to have’ to a ‘must have’ for various players active on the market, in particular from tenants and banks. This means that investors and developers will need to react and adapt if they want their buildings to continue to be competitive and attractive in the future,” he adds.

Colliers currently estimates that year-end volumes could reach anywhere between EUR 7 bln and EUR 10 bln for 2023.

GARY J. MORRELL

Green Court Office. Yields in this sector are expected to move out this year.

Hungary to Showcase Industrial, Offices, Hotels at Mipim

“The aim of the Hungary-Budapest stand is to promote investment in the capital and cities around the country, to showcase the investment environment in Hungary, and to provide information about development targets and opportunities,” said the Hungarian Investment Promotion Agency, one of the organizers of the national promotion effort.

The annual Mipim real estate and investment expo at the Palais des Festivals in Cannes is the largest commercial property show in Europe. It expects to attract more than

20,000 participants from 80-plus counties, including developers, investors, industry experts, consultants, and city and country representatives.

The four-day event on the Cote d’Azur will have a significant presence from the Central European region, including major cities in the Czech Republic, Hungary and Poland, in addition to CEE representatives from the major international consultancies, promoting their respective countries.

The Hungary-Budapest stand was jointly designed by the Real Estate Developers’ Roundtable Association (IFK) with the Liget Budapest Project and the National Industrial Park Management and Development Company (Nipüf) as featured exhibitors. The professional sponsor is CBRE.

Project Showcase

Leading developers such as Atenor, GLP, GTC, HelloParks (a member of the Futureal Group), InfoGroup, Inpark, and Wing will be present at the event to showcase their latest projects. City representatives from Debrecen and Szeged will also attend.

“Last year, the logistics and office markets performed particularly well, and major changes are also expected

Budapest and the surrounding area. There are plans to add [another] nearly one million sqm, of which nearly 500,000 sqm is already under construction,” the firm says.

Smaller Cities the Future

In the hotel segment, development projects focus on increasing the attractiveness of both Budapest and destinations outside the capital. According to Takács, the future lies in business hotels in smaller cities and towns, as well as quality tourism-related developments in Budapest.

Béla Köves, CEO of Nipüf, sees a robust demand for industrial parks. The company entered the industrial property development market in 2016 as a state-owned business and is known for its Inpark brand. The industrial development group is now present in 17 cities in Hungary.

an even stronger year is expected in 2023. Up to 92 large foreign direct investment deals were closed, creating some

15,000 new jobs and retaining tens of thousands more, he says.

The investor Diófa Fund Management will detail the macroeconomic and investment environment in Hungary, along with investment opportunities offered by real estate funds. György Habsburg, Hungary’s Ambassador to France, will be the guest of honor at the stand.

in the hotel market. So, it is no coincidence that these are the three focus areas at the exhibition,” comments Ernő Takács, president of IFK, an organization that promotes the largest property developers in Hungary Consultancy CBRE will share its latest analyses at a series of roundtable discussions at the stand.

“Opportunities in Hungary are demonstrated by the fact that

300,000 sqm

of office space was delivered last year, and demand has kept up with supply. The logistics market is expanding at a pace unseen for years, with supply growth of around 400,000 sqm in Budapest in 2022, and demand exceeding 500,000 sqm,” CBRE notes.

“The total area of industrial properties grew to 4.5 million sqm nationwide, with more than three million sqm in

HIPA CEO István Joó comments that a record EUR 6.5 billion in investment came into Hungary last year and that

“We are proud to return to the exhibition, as last year the House of Music, Hungary [designed by Japanese architect Sou Fujimoto] was the first Hungarian development to win the Jury Grand Prize in the threedecade history of the Mipim Awards,” concludes Benedek Gyorgyevics, CEO of Városliget, promoting the Liget Budapest Project.

GARY J. MORRELL

Industrial and logistics, office, and hotel development projects will be the focus of the Hungary-Budapest stand at Mipim 2023 next week, in addition to investment opportunities.

“The aim of the HungaryBudapest stand is to promote investment in the capital and cities around the country, to showcase the investment environment in Hungary, and to provide information about development targets and opportunities.”

HelloParks will be one of the exhibitors attending the show.

The Budapest stand at the 2022 Mipim Expo.

2 Business

More Inclusivity, Fewer ‘Lonely Heroes’ Needed Among Hungarian Executives

Groundbreaking research by the Corvinus University of Budapest shows the current challenges of managing companies in Hungary. What do Hungarian executives think about the future of organizations and leadership, and what are the current trends? The answers to these questions were presented to the public for the first time at a press conference on February 23. GERGELY

The research into “The Future of Organization and Leadership,” was conducted by the Institute of Management Science at Corvinus. It involved 1,200 executives from various industries who shared their opinions and experiences on topics such as strategy, innovation, culture, teamwork, communication, motivation and ethics. The research aims to fill a gap in the Hungarian literature on management and provide insights forpractitioners and policymakers.

One of the main findings of the research was that Hungarian executives tend to work as lonely heroes rather than team players. They rely more on their intuition and experience rather than

data or feedback. They also prefer to give orders rather than involve others in decision-making. This leadership style reflects a belief that they can do everything better than anyone else and are responsible for saving their organizations from any crisis.

However, according to György Drótos, one of the research leaders and an associate professor at Corvinus University, this style of leadership is not conducive to innovation or collaboration.

“The lonely hero syndrome is a sign of insecurity and lack of trust,” he said. “It also leads to isolation and burnout.”

He added that lonely heroes often create unnecessary dependencies between themselves and their followers, which hinder workforce productivity and empowerment. Moreover, he warned that such managers might suffer from a distorted self-image and overestimate their abilities, which can result in poor decisions and failures.

He suggested that Hungarian executives adopt a more humble and inclusive approach to leadership, where they share their vision and goals with others, delegate tasks and responsibilities, seek feedback and input, and recognize and reward achievements. He argued that this would foster a culture of trust, learning and innovation among employees.

Where’s the Strategy?

Perhaps surprisingly, another takeaway from the research was that Hungarian executives do not have a clear vision or strategy for their

organizations. They often react to external changes rather than anticipate them. They also focus more on shortrather than long-term goals.

Róbert Marciniak, another research leader and associate professor at Corvinus University, explained that this lack of strategy hinders the development and competitiveness of Hungarian firms. “Without a strategy, there is no direction or purpose,” he said. “It also makes it harder to align resources and actions with objectives.”

Conversely, having a strategy helps with long-term planning and sustainability by setting a roadmap for achieving desired outcomes. Second, it can assist in gaining a competitive advantage by identifying strengths, weaknesses, opportunities and threats. Thirdly, Marciniak said it helps collect input and feedback from stakeholders and customers by involving them in the strategic process.

Fourthly, it contributes to preparing for different markets and products by analyzing customer needs and preferences. Fifth, it helps protect against a sudden change in environment by being flexible and adaptable. Sixth, it assists in optimizing and increasing profits by allocating resources efficiently and effectively. Lastly, it helps improve marketing communications by creating a consistent brand identity and message.

Marciniak suggested that Hungarian executives develop a strategic plan that defines their organization’s vision,

mission, values, goals and actions. The associate professor argued that this would create a forward-focused approach that could guide decisions and actions.

The third significant finding in the research was linked to the first, in that Hungarian executives favor a hierarchical culture over a participatory one. They value authority and obedience more than autonomy and empowerment. They also communicate more vertically than horizontally.

Top-down Limitations

Anikó Almási, another assistant professor at Corvinus involved in the research, argued that this culture limits the potential and creativity of employees.

“A hierarchical culture creates barriers and silos,” she said. “It also reduces motivation and engagement.” She added that a hierarchical culture has several disadvantages.

It causes internal communication difficulties as employees may have to contact several people just to ask their employer a question. Secondly, it removes the requirement for employee and teamwork participation, as decisions are made top-down without consulting those at the bottom.

Partly as a result, businesses become rigid and incapable of adapting to change as they follow fixed rules and procedures. Finally, there is an increased risk of discrimination remaining undetected, as employees may feel disrespected by those above them or fear reporting any misconduct.

Almási suggested that Hungarian executives adopt a more participatory culture that encourages employees to share their ideas and opinions, collaborate across departments, show initiative and take responsibility. Colleagues should also receive recognition and feedback for their performance. She argued that this would create a culture of trust, learning and innovation among employees.

The research concluded that Hungarian executives need to change their mindset and behavior if they want to lead successful organizations in the future. They should embrace teamwork, strategy, and participation as critical elements of effective leadership. They must also adapt to changing customer needs, market conditions and social expectations.

Lajos Szabó, the vice-rector of Corvinus University, praised the research for its relevance and contribution.

“This research is a valuable source of information for anyone interested in management,” he said. “It also shows how Corvinus University is committed to producing high-quality academic work with practical implications.”

“Without a strategy, there is no direction or purpose. It also makes it harder to align resources and actions with objectives.”

Research leader György Drótos presents some of the Corvinus findings.

Chameleon Smart Home Solutions Developer Enters BSE Xtend

Innovative home solutions are rising in Hungary, even if the market lags internationally.

Chameleon Smart Home Plc. recently floated its shares on the Budapest Stock Exchange’s Xtend market and is eying local and international expansion. The Budapest Business Journal talks to Péter Szarvas, founder and chairman of the board, about the listing and the potential in the local market.

Sales in the total Hungarian smart home market were forecast to be around USD 185.8 million in 2022, according to PerryHope Partners, a publisher of global market analysis and product reports based in Naples, Florida.

Hungary (where one in four households lacked an internet connection in September 2022, according to local telco Yettel’s figures) is behind international smart home markets. PerryHope Partners estimates the North American market at USD 32.7 billion, the Asia-Pacific region at USD 31.5 bln, and the European market at USD 17.8 bln in 2022.

Nevertheless, by the end of this year, sales in the Hungarian smart home market are seen as increasing by 21.2%. Globally, a compound annual growth rate of 20.1% is predicted from 2023 to 2028, reaching USD 452 mln, according to PerryHope Partners’ latest 2022 Global Innovative Markets Forecast.

Founded less than half a decade ago in 2017 by Péter Szarvas and Róbert Bíró, Chameleon has expanded into international markets, delivering solutions to Europe and Canada.

“In 2018, we received our first capital investment of HUF 75 mln from the incubator company SmartWare. tech, and later also angel investors came in with smaller amounts, making it HUF 200 mln,” Szarvas tells the Budapest Business Journal

Finding Investors

“When I founded Chameleon, I already knew the pace and scale at which I wanted to develop the company, and it became clear to me early on that we had to be listed on the stock exchange. We were looking for a new investor, and that’s how we and Hiventures found each other. It invested a total of HUF 850 mln in three rounds,” the president explains.

When the founders started working on smart home technology, they realized that vendors’ products would typically only communicate with their native software. A lack of interoperability in the domestic market hindered the integration of systems.

“This is a big risk on the user side. If you commit to one direction, you cannot switch to another later or add new tools to your previous system. We believe that interconnectivity, integrability, should be fundamental in the 21st century,” Szarvas says. Therefore, Chameleon started working on systems that would allow the integration of devices and services

from different brands and technologies. Chameleon’s solutions can control lighting, air conditioning, temperature, household appliances, and security equipment via a central “brain” that connects them and communicates with the in-house developed software and apps.

“All along, we thought going public could catalyze our growth. As we were also planning a major international expansion, we saw that a company listed on the stock exchange would be viewed differently by a partner in the United States or Asia. Given our current ambitions in foreign markets, the listing has fully met our expectations.”

“Today, the real value lies in the high level of software expertise that gives the smart home a system,” Szarvas believes.

For example, Sky Shutter Control, one of Chameleon’s systems, allows users to shutter the blinds when the sun is shining, which goes beyond simple comfort and convenience and taps into energy savings.

“The current energy market environment highlights the importance of being energy conscious in your own household, as a smart home means quantifiable savings. We are developing in the latter direction, with Chameleon’s technology capable of integrating solar PV systems and our market-first semiisland solution, which makes the energy generated fully usable,” says Szarvas.

Technological Leaps

Chameleon says it has made two significant technological leaps. Firstly, it has developed beyond its wired systems and established technology for newlybuilt homes where its wireless solutions offer the same robust experience, albeit with more flexible integration. Secondly, its UpHome system can turn entire apartment buildings, not just one apartment, into smart condominiums.

In the first half of 2022, Chameleon joined the EU-funded Mentor Program, part of the Budapest Stock Exchange’s services for mid-sized companies to support successful listing. On February 2, 2023, Chameleon’s shares were listed on BSE Xtend, the market opened by the bourse in 2017 specifically for medium-sized businesses.

Chameleon, which started as a classic startup and has remained in that mindset, according to the co-founder, does not intend to be acquired by a larger market player but rather to stand independently.

“We could have moved in other directions as well, but all along, we thought that going public could catalyze our growth. As we were also planning a major international expansion, we saw that a company listed on the stock exchange would be viewed differently by a partner in the United States or Asia. Given our current ambitions in foreign markets, the listing has fully met our expectations,” Szarvas said.

By 2018, Chameleon’s product and service package had reached a stage where it could be sold in a B2C arrangement.

In

2021,

however, the company realized that the model undermined growth. Therefore, it looked into expanding abroad via a distributor network.

“Today, we only sell through our partners. We definitely wanted to expand abroad, first in the neighboring countries, and we are now present in Romania, Serbia, Slovakia, Austria and Germany. But the ‘big bang’ was our entry into the Canadian market, which is of a completely different dimension compared to Central Europe,” Szarvas notes.

The company has ambitious plans. “Going public on the BSE Xtend is only the first step. As the number one player in the domestic market, we would like to enter other stock exchanges as well and find investors similar to the Canadian model; for example, in the Middle East. On the one hand, it could expand the fundraising, and on the other hand, it could open up huge markets for sales, and with that, multiply revenues,” Szarvas concludes.

CHRISTIAN KESZTHELYI

Péter Szarvas of Chameleon Smart Home rings the Budapest Stock Exchange bell on the day the company’s shares were listed.

Technology as a Driver of Both Economic and Societal Growth

Finance Matters

A monthly look at financial issues in Hungary and the region

Allow me to start with two thoughts. First, an economist called Thomas Malthus once projected that the population would continue increasing while resources were finite; hence, humanity was doomed to famine and pestilence.

He was dead wrong. He and other classical economists ignored or completely underestimated the role of technology in economic growth. Today, economists generally recognize technology as the most crucial driver of economic growth, even more important than capital accumulation.

My second thought is a memory dating back to watching “Star Trek” as a teenager. As the starship encountered brave new worlds in outer space, the crew decided that the single best explanatory variable to get a quick read on the state of advancement of a civilization was to examine its use of energy. When you look back at human development, from the discovery of fire to nuclear fission, this becomes self-evident.

I explore these two thoughts as a way leading into an important question: are we potentially on the verge of major technological breakthroughs, ones with the potential to accelerate GDP growth and lead to a more advanced state of development? (I will briefly discuss downside risks as well).

I have sometimes been accused of being a pessimist, whether predicting that COVID would claim a million lives in the United States or that inflation would not be transitory. This article provides the underpinning as to why I am actually a radical optimist.

Although it always seems that the world is going to hell in a handbasket,

the continuous advance of technology, combined with entrepreneurialism, has, over the past millennia, led to steady economic growth and improvement in the human condition.

Quantity and Quality

There is a case to be made that currently, technology is improving both quantitatively and qualitatively. What do I mean by that? You might look at the rate of patent applications or patents granted, for example, as a proxy for the quantity of technology. The number of patent applications has been rising inexorably in each of the States, Europe, and China (with the latter seeing the most significant growth over the past decade).

Technology has always contributed to economic expansion and human well-being. We may be on the cusp of technological change of such magnitude that it has the potential to dramatically increase the rate of GDP growth and improvements in standards of living.

Qualitative change is a more subjective concept, harder to measure. Think of some inventions as being utterly useless. Others, such as electricity, have changed the world. I would argue that we may be on the cusp of a number of changes that may fundamentally

change current notions of economics, scarcity, and, indeed, the human condition. I will briefly touch on three areas: energy, artificial intelligence, and biology.

Nuclear fusion has seemed to be 40 years away for at least the last 40 years.

Fortunately, in the past few years, it seems to have come tantalizingly close. Experimental fusion reactions have recently occurred in controlled environments where the reaction released more energy than it consumed.

But there are so many other breakthroughs in energy, from constantly improving efficiencies in harnessing alternative fuels to constant breakthroughs in battery technologies.

Artificial intelligence allows us to produce more with fewer factor inputs (materials and labor). It has the potential to impact productivity vastly, hence output per person. We are now on the cusp of computer programs creating new programs without human intervention, which would considerably speed up the rate of progress. And ChatGPT has set the world afire.

Meanwhile, advances in genetic engineering will eliminate or treat numerous diseases. We are on the cusp of technology that dramatically increases lifespan and health span.

Step Change

On all three points, I am only scratching the surface, just to provide examples of where the potential for significant breakthroughs is greatest.

Technology has always contributed to economic expansion and human well-being. We may be on the cusp of technological change of such magnitude that it has the potential

to dramatically increase the rate of GDP growth and improvements in standards of living.

Consider, for example, the implications of harnessing nuclear fusion, a potentially close-to-infinite and almost free form of energy. I don’t mean tomorrow but within a decade or two.

I am the first to admit the downsides of these technological advancements. I’m sure very soon after man invented fire came the first arsonist. The greater the power, the greater the potential for abuse.

Nuclear power has enormous potential as an energy source but could also blow up the world. Artificial intelligence could turn on its human masters and enslave us. Genetic engineering might create a monster race or virus epidemics. Perhaps Elon Musk is correct that humanity needs to create a presence beyond planet earth to enhance its chances of survival.

If my thesis is correct, technology in the medium to long term may well provide us with higher GDP growth and faster improvements in living standards; but remember a fundamental principle of finance: risk and reward are correlated. Higher rewards beget higher risks.

Les Nemethy is CEO of EuroPhoenix Financial Advisers Ltd. (www.europhoenix.com), a Central European corporate finance firm. He is a former World Banker, author of Business Exit Planning (www. businessexitplanningbook.com), and a previous president of the American Chamber of Commerce in Hungary.

Les Nemethy delves into the memory bank to combine Malthusian economics and, well, Star Trek for his latest Finance Matters column on whether technology could have us on the verge of significant societal advances.

Photo by Stockbakery Shutterstock.com

Global Energy Crisis Increases Electric Vehicle Expenditure Automotive Matters

A monthly look at automotive issues in Hungary and the region

Costly Repairs

Additionally, spare parts are more expensive, another characteristic of new technology, which is further exacerbated by sputtering supply chains in the aftermath of COVID19 and since the war in Ukraine. The average expenditure to cover damage repairs on an EV can be up to HUF 200,000 more than on a non-green model, according to the Hungarian Association of Insurance Companies (Mabisz).

According to Generali’s research conducted early last year, Hungarians viewed electric cars as an attractive alternative before the energy crisis snowballed. Some 16% of the respondents in the insurer’s survey said they would be willing to switch to a pure EV or plug-in (rechargeable) hybrid vehicle if they could.

oldest rides are in Lithuania at 17 years. Hungary scores over the past two years for which data is available are below the European Union average of 11.8 years. There is room for improvement.

The pool of vehicles with green license plates, available since October 2015 for plug-in hybrids and EVs and which give owners some benefits such as free parking in the capital, stood at 65,187 in Hungary in January 2022, according to data published by the Ministry of Interior Deputy State Secretariat for Data Registers. Full EVs made up 35,761 of those.

The number of these vehicles, more environmentally friendly than their internal combustion engine (ICE) peers, form a thin slice of the overall transportation pie for now. At the end of 2021, there were a total of 4,885,598 vehicles registered in Hungary, according to the latest figures from Hungary’s Central Statistical Office (KSH).

Electric rides might be considered a fad among early adopters, but their popularity is growing in a market characterized by older autos. The average age of cars in Hungary was 14.2 years

in 2020, according to the latest figures from the European Automobile Manufacturers’ Association (ACEA).

The youngest auto fleet can be found just next door in Austria, with an average age of 8.5 years, while the

The European Union is applying pressure across the bloc; new ICE vehicles cannot be sold after 2035. Also, the willingness among Hungarian drivers to consider an EV is rising. Recent data by Generali Hungary, the local arm of the Italian insurer, found that one in six Hungarians would buy an electric car if they could. That is not a decision vehicle owners should take lightly, though.

While people are increasingly environmentally conscious and willing to invest in a more sustainable future, going green with cars is a costlier alternative right from the initial investment. While a well-equipped auto with an ICE engine is available for around HUF 6 million-8 mln (in a country where the minimum wage, according to KSH, was HUF 232,000 in January 2023), the electric version of the same vehicle hovers around HUF 10 mln-11 mln. That would take 43 minimum wage monthly installments to pay off instead of 25.

Complex Calculations

Is working nearly twice as long to pay for an EV worth it? Would the initial heavier investment come back in the long run?

The answer to those questions is complex for two reasons.

Firstly, electricity prices have recently risen sharply due to the energy crisis caused by the continent’s traditional dependence on Russian gas and the ongoing war in Ukraine. When prices first started taking off, the Hungarian government initially capped them. But recently,

it identified 210 kWh as the monthly average for household electricity consumption. Anything below the cutoff line is subsidized, while the rest must be purchased at market value, which obviously makes electricity significantly more expensive.

Calculating with a typical e-car’s energy demand of 17 kWh per 100 km, the subsidized price for the required energy is around HUF 627. Above the threshold, the same consumption costs around HUF 4,290, an almost seven-fold difference. This puts electric cars in the same garage as ICE cars when considering energy cost per mileage.

At the beginning of January, the market price of fuel rose again. Gasoline costs around HUF 631 per liter, while diesel is around HUF 693. Tallying with an average consumption of seven liters per 100 km (which may creep beyond 10

liters

for older autos or those with more powerful engines), the cost comes between HUF 4,417 and HUF 4,851, respectively, per 100 km.

The lucky can save, for now. Hungary is equipped with public charging points, many offering free charging. But these are usually occupied. The public bays that charge the users for electricity have seen prices increase almost three-fold since January 2, 2023, according to Generali.

Beyond the cost of getting around, EV maintenance costs are higher for a handful of reasons. As with all innovations, electric cars are more challenging to service, which means the engineering expertise to handle such work is relatively scarce on the market, hence costlier.

A year ago, most of the respondents, some 57%, said they were motivated by environmental concerns, the rising cost of conventional fuel (53%), and innovative technology (45%) to consider the switch. Back then, however, they were put off by the expected repair costs (52%) and the price of spare parts (46%). Today, they can add electricity prices to the pool of concerns, too.

József Szikszai, head of claims at Generali Insurance, points out that with EV maintenance costs, people must consider factors that make servicing cheaper. An electric auto needs no timing belt, clutch, gearbox, or engine oil change. Szikszai adds that the brakes wear out slower. Yet, Szikszai also notes that the labor required to service electric cars is more expensive.

“The length of the checklist for servicing electric cars is shorter than a conventional car, but those items come at a higher price,” he says.

Figures suggest that going green with an EV is not more economical right now. Sooner rather than later, people will not have a choice, though. One can only hope Moore’s law (that the number of transistors per silicon chip doubles every year, according to britannica.com) will make both electric cars and electricity more affordable, and the energy required to charge our autos greener.

With motorists eyeing greener transport options, electric vehicles are gaining ground in Hungary. Yet, driving a pure EV has gotten considerably more expensive as the unfolding energy crisis has pumped up electricity prices. The Budapest Business Journal looks into price changes in the market.

CHRISTIAN KESZTHELYI

Photo by totojang1977 / Shutterstock.com

“The length of the checklist for servicing electric cars is shorter than a conventional car, but those items come at a higher price.”

China 3 Country Focus

The Dos and Don’ts of Chinese Business Etiquette

Csaba Wolf once watched aghast as a Hungarian businessman committed an extraordinary faux pas according to Chinese cultural norms, for which he paid the price, despite careful coaching before the fateful meeting.

Believing that the Hungarian visitor had got the essential message, Wolf accompanied him into the meeting.

One day around 1990, Wolf received a call from the Hungarian embassy in Beijing: a business delegation was arriving from Budapest. Could he spare a day to help one company with interpreting at meetings?

For Wolf, studying international politics at Beijing University and already fluent in Chinese, the request was not unusual. Indeed, he relished such opportunities, as the remuneration was a significant addition to his scholarship stipend.

“You cannot really surprise Chinese people in negotiations. Yes, of course, there are extreme situations, but normally Chinese business people go well prepared for meetings, better than you imagine.”

But well aware of the etiquette mistakes commonly made by newcomers to China, he arranged to meet the Hungarian before the appointment to brief him on some basic rules of engagement.

“I spent an hour with the Hungarian negotiator. Since they badly wanted to buy a certain product from the Chinese, they were in the weaker position. So, I told them to be very careful with manners, and how, at the beginning, they needed to hand over and receive business cards with two hands, as an important symbol of respect,” Wolf, who today is vice-president of ChinaCham, the Hungarian-Chinese Chamber of Economy, recalls in an interview with the Budapest Business Journal

“This Hungarian guy didn’t even wait for the Chinese to greet him, shake hands and exchange cards; he went to the chair, sat down, took out his name card, and slipped it over the table towards his Chinese counterpart,” he remembers all too vividly. Worse still, the card slid across the table, slipped off the edge and fell on the floor.

A Wasted Trip

“The Chinese counterpart just looked at this, stood up, went out of the room, and that was it, finished! The Chinese guy actually said nothing. That was like a wasted airplane ticket, a wasted trip. And this after an hour of telling him what to pay attention to,” he says.

“This was an extraordinary reaction: I wouldn’t say every [Chinese person] would react like that, especially in Europe today, where they are probably more loose because they meet a lot more people without any [knowledge of] Chinese business culture. But what I am saying is, if you don’t follow these very simple courtesy rules, then you can lose a lot,” Wolf argues. Eventually, the Hungarian commercial office found another supplier for the businessman, but the quality was not as good.

As someone who later taught intercultural behavior to Westerners planning to work with Chinese partners,

Beware the Numeral Four

When Csaba Wolf worked as a diplomat at the Hungarian embassy in Beijing, he lived on the 25th floor of an apartment block. At least, it was designated as such, but from a strictly architectural point of view, it was the 21st floor.

“In Chinese skyscrapers, there is normally no fourth floor, no 14th, and no 24th floor either. They simply

the Hungarian-Chinese Chamber of Economy. He studied at the International Politics faculty of Beijing University from 1986-92 on a foreign ministry scholarship and served as a commercial counselor at the Hungarian embassy in Beijing between stints at private companies.

Wolf says the pitfalls are many and varied. Training sessions “could last hours, even longer. There is so much material on this subject that if a company wants a really deep training, it could last a couple of days.”

For example, he advises never to give a Chinese person a clock. The Chinese word for it is “biao,” and to give it to someone is “song.” Saying “song-biao” has the same sound, though it is written differently, as the Chinese for “to pay your last respects.”

(Gifting a watch, however, is acceptable, even if the spoken words are similar. “The Chinese love watches, so that overrules everything,” Wolf says.)

leave them out,” he says, the reason being, once again, in the Chinese pronunciation of the word for four, “si,” which is the same sound as the word for “death.”

“The writing is different, even the tone is different, but if you give anything or in any way represents four, that means you wish death to the person. You don’t do that, of course. And you don’t give anything in sets of four,

Similarly, a knife, or any sharp implement, cannot be a present: it would be viewed as a sign of cutting the relationship. And just in case your company color is green, beware of the gift of a baseball cap or any green headwear, which is considered not polite.

“You see, there is a Chinese legend about a pretty lady who had a young husband, but the lady also had a lover. To be sure that the lover knew when the husband was not at home, the wife knitted a bright green hat. So, when he left in the morning for work, the lover could see the hat in the crowd and knew it was safe to visit the wife,” Wolf explains.

Ponderous Progress

The newcomer to business negotiations in China should also beware of reacting badly to what, to the western mind, can be frustratingly ponderous progress.

“You cannot really surprise Chinese people in negotiations. Yes, of course, there are extreme situations, but normally Chinese business people go well prepared for meetings, better than you imagine,” Wolf cautions.

But what frequently happens, especially in the first meetings, is the Chinese negotiating partner is not the final decision maker.

“You are probably authorized to make decisions, [but] your counterpart is not, and that puts you into an uncomfortable situation. You want to push the negotiations further, but your counterpart merely takes notes and says we’ll discuss this with my boss. This makes things complicated, and you seem to be repeating things and going nowhere,” he says. “That’s just how it goes with the Chinese; you get used to it.”

The key to at least avoiding failure is not to lose patience, however exasperating the state of negotiations may appear, Wolf warns.

“Don’t get angry. Don’t start speaking faster or raising your voice. It never brings success. If you lose your temper with the Chinese, it doesn’t get you anywhere.”

especially if it says four on the box, which it usually would,” Wolf warns. The keen observer might ask, if Wolf lived on the 25th floor, even accounting for numbers containing the accursed four, isn’t another level still missing in the skyscraper’s floor arithmetic?

“Ah, yes,” Wolf says, “because a lot of Westerners lived there, so, like the Americans sometimes do, they left the 13th out too, [out of respect] for us.”

Csaba Wolf is vice president of ChinaCham,

A Chinese Match Made in Heaven

and the Digital Silk Road program both aim to improve connectivity and cooperation among multiple countries spread across different continents in a wide range of sectors. This activity, and Hungary’s pro-China stance, seem to be a match made in heaven, with Hungary now designated as the primary investment location in the CEE region for Chinese businesses.

E-mobilty Accelerator

As indicated by the data of the Hungarian Investment Promotion Agency, and given the ever-closer relations between the two countries, the investment pipeline looks set to remain solid and further vitalize economic ties. Just a few weeks after the announcement of a EUR 15 million investment, China-based NIO launched production at its first overseas plant in Hungary last September. The company promises to set new global standards in e-mobility and user experience by pioneering its Power Swap Technology. The fully automated solution swaps depleted batteries for charged ones without the user needing to leave their car, a convenient and speedy way to fight EV users’ range anxiety.

positions on the way to net zero. Chinese investments have been providing a catalyst to this effort and Hungarian economic growth. Just to name but a few examples from the recent past, PEX Automotive, Chervon Auto, and Zhejiang Huashuo Technology have all decided to set up sites to manufacture EV parts on a mass scale. Semcorp’s EUR 183 mln project in Debrecen paves the way to turn the city into a significant manufacturing hub of separator film, a key component of lithium-ion batteries. Chinese investment intensity in Hungary has been a steady feature in recent years. The Asian giant, combined with Hong Kong, is the eighth largest investor in the country, accounting for nearly EUR 4 billion in investment volume, according the latest available data of the Hungarian Central Statistical Office (KSH).

Including Hong Kong, China’s share of Hungary’s total FDI stock is 3.9%. The past five years alone have witnessed up to 28 HIPA-guided deals worth nearly EUR 1.2 bln, creating around 3,000 new jobs. That data doesn’t include leading global battery manufacturer CATL’s record investment of EUR 7.3 bln, which, although announced in 2022, will count towards the 2023 statistics with construction starting this year.

EU Record-breaker

will enable CATL to better meet the demands of its European partners and the market. In fact, Mercedes-Benz was named as a primary buyer of future batteries made in Debrecen at the time of the announcement.

Hungary has been working on attracting Asian investments for more than a decade. The so-called “Opening to the East” policy back in 2010 envisaged intensified relations with Eastern countries.

“FDI statistics reflect the success of this approach: up to 60% and 48% of the total investment volume was attributed to Asian investors in 2021 and 2022, respectively, as evidenced by our data,” HIPA CEO István Joó highlights. “China became the largest investor in 2020 for the first time, and thanks to the CATL project, it will most likely finish first in 2023 again.”

Excellent foreign relations between the two countries fuel such positive developments to a large extent. The level of mutual respect and trust were praised during the visit of China’s highestranked diplomat, State Councilor Wang Yi, in mid-February. It was also agreed that cooperation with China has been essential for Hungary to emerge from every crisis stronger than before. According to KSH data, China is Hungary’s third most important trade partner. Bilateral trade value was up by 5.9% in 2022, year-on-year.

CATL’s decision to set up shop here is part of this pattern. The project is seen as accelerating the transition to e-mobility in Hungary and Europe, generating substantial tax revenues for the host country and becoming a new driver for the local economy. The expectation is that it will help attract both upstream and downstream partners across the EV value chain to Hungary, thus injecting vitality into the country’s sustainable development. On-site sustainability will be taken to the next level too. In Debrecen, CATL plans to replicate its Southwest Chinese Yibin plant, the world’s first zerocarbon certified battery factory, which has achieved carbon neutrality through the use of green electricity, intelligent energy management and electrification of transportation.

USD 13 billion (2022) PLUS 5.9% y.o.y.

Source: HIPA

CATL has also created the Big Databased “Credit,” the first audit toolkit in the industry to calculate indices about the sustainability performance of enterprises across the supply chain, thus helping them explore their paths towards sustainability.

The Hungarian operation is a crucial part of NIO’s European expansion, since it will serve as the manufacturing, service and R&D center of its power products on the continent. As the company puts in a statement, “with this game-changing technology, NIO can help Hungary to strengthen its leading role in the European EV industry.” Indeed, Hungary has been going full steam ahead to secure strategic

Given its sheer volume, the CATL deal deserves particular attention. It is not only the most significant greenfield investment yet to be carried out in the country, but also a record-breaking battery manufacturing investment at the EU level. Having already built a plant in Germany, CATL chose Hungary for its second European site, where it plans to create thousands of jobs.

“As Europe steps up its ambition to combat climate change, the Hungarian plant, CATL’s largest overseas plant, dovetails nicely with the EU’s ambition and also marks a milestone in CATL’s global journey,” the company says in a press statement.

Building a gigafactory in Debrecen is a logical step due to its close proximity to many automotive enterprises, which

China is expanding its global footprint. The Belt and Road Initiative

Chinese firms that are settled in Hungary are here to stay, and the investment pipeline looks similarly promising. As Minister of Foreign Affairs and Trade Péter Szijjártó recently announced, negotiations are ongoing with four Chinese corporations as a result of which several new projects of considerable value could enter the bloodstream of the Hungarian economy in the near future.

Chinese investment deals closed by HIPA, 2018-2022

A growing number of Chinese businesses are choosing Hungary as the location of their investments. In particular, e-mobility seems to have caught the imagination of China-based investors, since the country presents an ideal meeting point for Western automakers and Eastern suppliers.

Chinese-Hungarian Bilateral Trade

Minister of Foreign Affairs and Trade Péter Szijjártó (third from left) shakes hands with CATL representatives in September 2022 when the massive greenfield project was formally launched by signing the purchase agreement for the factory’s plot.

Culture Clash: the Chinese Expat Living Experience in Hungary

by May. I hope I can finish translating another 100 Petőfi poems by the fall. Why 200 poems in total? Because this year marks the 200th anniversary of the birth of this great poet. I still dream of visiting those places where Petőfi went, including areas now outside Hungary.

My second dream is to translate Hungarian pop songs into Chinese. So, I sing them, make music videos and publish them online for Chinese people. My favorite pop stars are getting on now: Zsuzsa Koncz, Éva Csepregi, Sándor Homonyik. I also want to know more about Tankcsapda.

A Slower Country That Cares for Disabled and Animals

Property, Petőfi’s Poems, and Hungarian Pop

Wanliang Wu, 52, is originally from Zhejiang province, south of Shanghai, in eastern China. Wu has spent more than 12 years in three stints living in Budapest, working as a real estate developer here since 2018.

At school, I was deeply influenced by the poem “Freedom, Love” by Sándor Petőfi. It was taught, in Chinese translation, in the textbook for middle schools. This is the most well-known foreign poem in China, no competition. And, at the time, pupils who studied Hungarian might have the chance to study in Hungary. That was very attractive in 1988, although this dream did not come true for me.

So, I majored in Hungarian at university and got to know this country, including its history, culture, cuisine, places, and so on, relatively well. I like living here and am glad the ties between China and Hungary are getting closer in all fields.

Ten years ago, I had a Hungarian restaurant in Beijing. I had a Hungarian chef and waiters beside the locals. For sure, I like Hungarian cuisine. But here, we occasionally get really salty dishes in restaurants; that is a bit problematic. Hungarians like salt and sugar more than we Chinese.

Another problem is the lack of skilled, physical workers, so related tasks may be slow and expensive compared to Chinese prices. This is all professions: workers in construction, in factories, doctors, nurses, air-conditioning installers, cleaners, plumbers. Many have gone to the West. In my opinion, the lack of labor is one of the biggest problems for the Hungarian economy.

I have translated 100 poems of Sándor Petőfi into Chinese and sent them to a well-known Hungarian publisher. I think these will be published in book form

Sophia Zhao, 24, grew up in Shanxi province, Taigu county, about 530 km southwest of Beijing. She’s currently studying for a master’s degree in fashion design at Metropolitan University, Budapest.

This is the sixth year that I’ve been living in Hungary. In that time, I graduated with a bachelor’s degree, married, and started my master’s degree. Whether good or bad experiences, after five years, I treasure them all.

One big cultural shock for me was, unlike China, there were not a lot of entertainment activities in Hungary, making the lifestyle slower. From government office workers to university administrators to shop cashiers, in my experience, everyone is more chilled out than in China. Hungarians have their own rhythm of dealing with work. You cannot rush them, which has made me become a more patient person since I arrived here.

facilities to inform visually challenged people when it is safe to cross the road. Similarly, buses have no slope for wheelchairs to access nor dedicated space for them. Policies here have created a more friendly environment for disabled people, which I hope we will soon take on in China.

Since I am also an animal lover, I also found out there are so many dog parks here in Budapest. There are even shelters and organizations for all kinds of animals, for example, where I adopted my beloved hamsters, Pluto and Bambusz.

While there have been moments when I faced bad people or things in Hungary, I accept that is just how life is; it does not matter where you are. I’ve met great people here, I met the love of my life, and I’ve built a family and friendships here. There have been good and bad times, but I am glad I could call here my other home.

Super Kind School Teachers Appreciated, Not the Pessimism

Jiu Xu, 36, left Shanghai as a child to grow up in Hungary. Today, married to a Hungarian, he’s an operations manager with a Chinese multinational in Budapest, leading a team of 300 people.

I came to Hungary in 1990 with my parents, who were market traders. Later they opened a shop in Székesfehérvár. As a child, I was happy to move abroad, but when I arrived, I was confronted with culture shocks that I had to overcome and accept daily. Language barriers put such an invisible wall around me that I found it hard to breathe. I wanted to go home.

and patience. Other children were curious and accompanied me everywhere, helping me to learn more about their lives.

During that time, I learned their language, and the language difficulties slowly disappeared, so I understood their way of thinking better, although I still cannot think or count in Hungarian after 25 years here.

In China, I had very little time to be a child; I had to study all the time and had my days fully booked with all kinds of lessons. It was the norm, though I can’t say I wasn’t happy because I had nothing to compare it to.

I started university in Germany, reading mechanical engineering at the Friedrich-Alexander University Erlangen-Nürnberg. Even though Hungary and Germany are close, they have different mentalities. German people are less direct and easygoing but kind and helpful.

As 30% of German university students are foreigners, I experienced multicultural life. There, I was not stared at like in Hungary.

The Chinese believe that flexibility allows you to adapt easily and grow faster, but they place less importance on accuracy and detail.

However, I’ve noticed many heartwarming details here that I wish Chinese society could adopt. For example, when I left China in 2017, there were a lot of cities with no

These feelings eased after I started at the local village school, where, having set up a separate timetable for me, the teachers taught me with incredible kindness

When I was a kid, my parents would say, “We’ll go to Uncle’s house later,” but in reality, that could mean any time, morning, afternoon, or evening. In contrast, Germans are extremely punctual, and every step is planned in advance, but in return, they are more rigid and slow to adapt. Hungarians, on the other hand, are much more easygoing and extremely patient. Work is never rushed. “Walk slowly; you will get further,” as one Hungarian proverb puts it.

So, you have to learn to slow the pace of your life. However, one of the attributes which I cannot identify with is the extreme pessimism. I hear the word “impossible” a lot, always looking for the bad in good things and also finding it. My grandfather told me that as long as you are human, you can solve everything and achieve everywhere.

The Budapest Business Journal asked three Chinese nationals living in Hungary what cultural surprises they have met in their interactions with Hungarian society.

KESTER EDDY

Wanliang Wu

Sophia Zhao

Jiu Xu

4Special Report

Banking

Economic Strains Grow, but Banks Will Weather the Storm

Rising inflation, the escalating energy crisis, interest rate freezes, and extra taxes have increased the strain on banks operating in Hungary. While their situation has become more complicated, banks are liquid enough to withstand even more severe economic circumstances. The Budapest Business Journal investigates the national banking market and industry sentiment.

CHRISTIAN KESZTHELYI

The current economic environment fuels a growing uncertainty among retail and corporate bank clients. The housing market has slowed, and subsidies have been reduced. The rising interest rates and an interest rate freeze on variable rates and longerterm mortgages lowered the mood for borrowing and have prompted people and businesses to save.

The National Bank of Hungary (MNB) has sharply increased its base rate. From 2.9% in January 2022, the base rate had shot to 13%

by September 2022, where it has remained: The MNB’s Monetary Council kept it there during its most recent monthly policy meeting on February 28.

Higher policy rates generally involve a higher cost of funding for banks, which is reflected in the higher interest rates on loans extended by them. Consequently, demand for credit

decreases as it becomes costlier, especially for loans with longer maturity dates, such as mortgages. And the interest rate may climb higher.

“Current expectations are for the domestic benchmark interest rate to peak at 18%, which is already a high nominal interest rate environment,” the Corporate Communication Department of OTP Bank, Hungary’s largest lender, tells the BBJ

“These factors and the risks related to the Hungarian economic outlook impact OTP Group’s results. Due to this, OTP Group recorded significant one-off losses last year but has been operating in a stable and predictable manner.”

More Vulnerable

The economic environment has not favored the country either, as Magyar Bankholding confirms.

“Despite Hungary’s robust growth performance in recent years, the country’s economy remained more vulnerable to external shocks than most of its regional peers, as exhibited by the impacts of the RussoUkrainian war on the forint and other Hungarian financial assets,” Magyar Bankholding’s Strategic Research Center told this newspaper.

Magyar Bankholding is the holding company overseeing the merger of three banks (Budapest Bank,

MKB Bank, and Takarékbank) into one, due to be completed this year on April 30

under the unified brand name and image of MBH Bank Plc. This wholly Hungarian-owned bank will become the second largest market player in the country, considering total assets.

The Hungarian economy is heavily dependent on foreign energy, especially Russian gas. When prices took off as the energy crisis snowballed, both corporate and private bank clients started hemorrhaging money, flowing into utility costs that have jumped almost sevenfold. The deteriorating financial position of bank clients trickled through to the financial institutions themselves. Nonperforming loans increased, further exacerbating the already present inflationary pressures.

“Whereas in the higher yield environment, banks have more room for maneuver to generate revenues, a sharp decline in lending activity coupled with the need to form higher net impairment and provision markedly reduces the profit outlook,” Magyar Bankholding says.

Hungary’s 20%-plus inflation is among the highest in the European Union, affecting banks directly through the deterioration of clients’ financial standing and higher operating costs.

Corporate clients can, in some cases, pass on this burden to customers. Private clients usually have less leeway.

Rising Risk Costs

“Extending new credit hence becomes riskier, while the orderly servicing of outstanding debt may come under threat. A significant rise in risk costs thus looms on the horizon. Operating costs are also expected to grow due to rising wages and administrative costs, but those banks who invested heavily in digital solutions and processes earlier may be less vulnerable to rising costs,” Magyar Bankholding said. [See separate story on bank tech on page 18.]

But where does this inflationary environment take the market?

“Since high inflation involves high policy rates, and the Hungarian banking system has ample idle liquidity in the wake of the monetary expansion following the COVID pandemic, banks, in fact, earn hefty sums by keeping this liquidity in the central bank’s highyielding deposit facilities,” Magyar Bankholding explains.

“The balance of the impact of high inflation on banks is thus a complex issue, but in the long run, a low inflation economy creates a more transparent environment for clients to make informed and established decisions, and hence also serves banks better,” it adds.

Banks have also had to face extra tax burdens. Prime Minister Viktor Orbán raised the idea of windfall taxes in May

2022,

targeting banks, energy companies and telcos, and businesses in a handful of other sectors. The premier said that the proceeds would protect Hungary’s regulated utility price system for households and upgrade the military.

“Banks became subject to a new extraprofit tax, the interest rates on some loan products have been capped, and most recently, the central bank significantly raised the rate of the mandatory reserves, which also points to the direction of a higher level of foregone revenues,” Magyar Bankholding points out.

“While access to funding is still not a crucial issue, as there is abundant liquidity in the banking system, the stock of client deposits may decrease as clients face higher costs, and thus, their expenditures are on the rise. On the other hand, there is also a switch to financial instruments (most notably securities) earning higher yields. On a positive note, however, the banking system is still adequately capitalized and has a secure level of liquidity to function smoothly even in stricter economic conditions than currently envisaged,” Magyar Bankholding concludes.

Photo by George Khelashvili / Shutterstock.com

A Comprehensive Solution in Difficult Times

On February 1, Exim Hungary launched the Baross Gábor Reindustrialization Credit Program to support companies registered in Hungary. The Budapest Business Journal talked with Adrienn Berta, deputy CEO responsible for business operations, about what the new program aims to achieve.

BBJ: Why is further industrialization important; isn’t the current level sufficient?

Adrienn Berta: It’s more a matter of providing for the Hungarian economy, SMEs and large corporations with the right laws and resources. And improving the level of investment, which is lagging a little due to the current turbulent economic situation caused by the protracted war and the EU sanctions. It’s not a very easy life cycle for SMEs or large enterprises. So, for us at Exim Hungary, the program not only aims at re-industrialization but also supports any kind of production, liquidity, or investment because we realize that, in these circumstances, the commercial banks are very, very cautious about financing, and the interest rates are high. For this reason, companies are also very cautious about applying for loans. There are rates of 20%, 22%, which is extremely high. It is not something that could be covered over the years. That’s why it was important to come out with a comprehensive, regional product that could ease the situation for our clients.

BBJ: How many requests have you received for loans with better terms?

AB: In the last two weeks, we have received hundreds, but as applying for a loan is a matter of time, we will have a better picture in the next few weeks. These are just what we have received at EXIM. I have no statistics yet on how many leads or applications the commercial banks have received, but it should be more.

BBJ: What is the aim of the Baross Gábor Program? What is it offering to SMEs?

AB: The Baross Gábor Credit Program is a governmental loan scheme that was worked out by the Ministry of Economic Development and Exim

Hungary. The program has a budget of HUF 700 billion. It has three main subprograms. One is a general investment loan. The second is a green investment loan for sustainability purposes, to make the existing operation more energy efficient. And the third is a working capital loan. For the working capital and general investment loans, the HUF interest rate is 6%, the EUR rate is 3.5%, and the green investment loan is 5.5%. If you compare it with what is available on the market, it is very attractive.

BBJ: What happens if a company cannot pay back the loan?

AB: That’s always the big question for any bank risk management team. But Exim’s role in this program is more one of refinancing. We provide resources and very attractive conditions through our commercial bank partners and our leasing partners, and they contract them. We trust the commercial banks to have prudent risk management. Yes, there is always a risk, but it is independent of Exim and the Baross Gábor Program. It is inherent in the banking business.

BBJ: From what sectors are the SMEs drawn?

AB: Since the program was only launched on February 1, it is difficult to say which sectors are most interested. For now, we have a broad range of applicants. Within a few weeks, we will have a better understanding and better statistics. Some sectors are excluded, but overall, the credit program is open to any Hungarian company.

BBJ: Who is excluded?

AB: The hospitality sector. However, we’re having day-to-day conversations with our partners, with the commercial banks and asking them to give us feedback on what the clients want. So, if there is a huge demand from hospitality, then we may extend the program. Our aim is to help as many businesses as possible.

BBJ: What is the time frame for the applications?

AB: There is an EU framework behind this program, which will close at the end of this year, but I think that we will receive applications until the HUF 700 billion is exhausted, which will happen soon [Editor’s note: Since this interview was conducted, that threshold has now been reached] The working capital budget has already been exhausted; for this sub-program,

Exim Hungary

According to its website, Exim Hungary is one element of a network of 85 export credit agencies, each supporting the development, market penetration, and growth of its own country’s exporters by providing a stable financial background. “Exim Hungary is a specialist financial institution – or rather, a pair of institutions, consisting of a bank

we can’t accept any more applications. The other two investment loan subprograms are continuing without changes for now. We may increase the amount, but we must see the results first.

BBJ: Are other similar programs available?

AB: One that is very popular and works well is the Széchenyi Kártya program, run by Kavosz. However, we do not want to cannibalize it; if you look at our rates, we are a little bit higher than their rates. We are targeting larger investments and larger companies. Therefore, I think these two programs can complement one another.

BBJ: You mentioned earlier the complicated economic situation. What do you expect this year regarding economic growth and inflation?

AB: This is a difficult question. First, I would say that the anticyclical role of Exim, MFB [the Hungarian Development Bank], or any state-owned financial institution is nothing new. If you remember, during COVID-19, Exim had the loss-handling Kárenyhítő [mitigation] program, which was also very successful, and with this new program, we also fulfill this anticyclical role. I would turn the question around and say that when inflation is getting lower, the credit market is consolidating, and the rates are going down, then, of course, we will step back. Our role is to help the economy in this really difficult situation. We don’t want to compete with commercial banks. We just want to help them. In terms of expectations, the second half of the year will probably be easier, but we will see.

BBJ: What other programs does Exim offer?

AB: The Baross Gábor Program is our main program. We also have two others called Exportélénkítő (Export Booster) and Jövő Exportőrei (Future Exporters). In this way, we can provide our clients with different combinations. Together with Baross Gábor, we have five running programs.

BBJ: Are these programs available to foreign companies in Hungary?

AB: The company must be Hungarian, i.e., it must be registered in Hungary. The owners can be foreign citizens, but the company must be registered in Hungary.

and an insurer working together in an integrated way – whose mission is to provide exportrelated credit services and risk-insurance products of the highest international standard to businesses operating in Hungary, or to firms that supply them, and through its specialist competencies, knowledge, and experience, to create export opportunities and assure security for domestic companies,” the website says.

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Banks Enjoy Digital Advances, Serving Increasingly Tech-savvy Customers

sales channels, business models, and a seamless digital customer experience. Collaboration is key for banks because regulation imposes various requirements, restrictions and guidelines on them, which makes it more difficult to catch up with the trends,” MKB Fintechlab explains.

Plug-and-play

Such collaborations come in multiple forms. Banks invest in plug-and-play models, allowing both sides to explore synergies in culture, business processes, and IT without significant financial commitments.

“However, one field that still needs to be explored is blockchain, the most innovative emerging technology in the financial services industry. Banks can experiment with blockchain technology to protect data, verify and identify, record transactions, sign contracts, and improve traceability. Because of its safety and dependability, this technology is beneficial to financial services,” MKB Fintechlab says. [For more information, see box below.]

Exploring Opportunities

As technology advances rapidly, the Hungarian banking sector’s focus has fallen on fully leveraging the opportunities provided by recent tech solutions.

“As a result, the Hungarian market saw the arrival of several new mobile banking applications and experienced the expansion of such features as video banking. Importantly, an ever larger share of banking technology runs on the so-called cloud infrastructure,” the Corporate Communication Department of OTP Bank tells the BBJ “Banks also seek the possibility of using artificial intelligence and machine learning tools. For example, OTP Group is building a supercomputer to use its machine learning capability to examine and process the Hungarian language,” the comms department adds.

AI solutions have been around for a while; chatbot technology in the banking industry provides customers with personalized assistants and support through virtual assistants. Machine learning can help analyze customer data and provide personalized financial advice.

“Also, some banks have already introduced personal financial management tools that help customers track and manage their spending, create budgets, and achieve their financial goals,” MKB Fintechlab, the innovation and design lab of MKB Bank says.

As processes increasingly move to the cloud, such architecture is becoming an ideal solution to enable smooth global payments, peer-to-peer transfers, and contactless payments for banks.

“While most of the early BNPL [buy now, pay later] players were fintechs and other digital players, we see a great opportunity for banks to expand into this form of payment through consumer and corporate credit cards as well as short-term unsecured lending. A few banks have already started to explore these opportunities, despite having previously distanced themselves from BNPL in its original form,” MKB Fintechlab says.

Banks aren’t the only ones adapting. People are also becoming more aware, says OTP.

“The financial literacy of clients is constantly evolving. Based on the annual research of OTP Bank, the ‘Financial self-care’ index increased from 34 to 37, which is the highest y.o.y. growth in the history of this survey. The positive externality of the current economic situation is that the population is trying to save money and pay attention to expenses, which OTP Bank supports through its MobileBank app with the ‘Expenses Monitor’ (PFM) and ‘Wealth Portfolio View’ functions,” OTP tells us.

Magyar Bankholding sees similar improvements but acknowledges the role that educational institutions

Blockchain, Crypto and NFTs

When Bitcoin first surfaced, users hailed it as an alternative to traditional finance. Today, banks are increasingly looking to exploit the advantages of the technology behind it.

“Many blockchain applications in banking provide opportunities to improve the sector’s current processes and procedures.

and banks must play in strengthening customers’ financial literacy.

“According to MKB Fintechlab representative research, 73% of

Hungarians use some kind of financial application, and this number has been growing over the years. When it comes to financial education, there’s clearly room for schools and universities to step up. But it makes sense for banks to play a role in this, too, as they have the data and tools to help people manage their money in real life. Financial education strengthens consumers’ relationships with banks and can improve their financial condition and outlook,” the bank argues.

When fintechs first started gaining ground, they were seen as a genuine threat to traditional banking. In a spirit of free market competition, the objective was to offer a better alternative and lure users away from banks. Today, the two ends of the spectrum are more likely to work in synergy.

“Collaboration between banks and fintechs is evolving, driven by the rise of digital ecosystems, regulatory changes and increasing customer adoption. A collaboration with a bank provides fintech companies with a stable client base, a stamp of trust, access to capital, and know-how. Banks profit by ensuring new

However, it is also conceivable that banks will employ blockchain solutions designed to live outside of the existing system in the future. If this occurs, the blockchain challenge to the sector will be a success,” MKB Fintechlab tells the BBJ . “Financial institutions should shift from thinking of crypto as a competitor to more as a partner.”

“NFTs [Non-fungible tokens, or unique digital assets] have

But how does Hungary compare internationally? “The Hungarian market is pretty much open to competition from other EU markets, hence fiercely competitive,” reckons OTP.

“Given that EU-based fintechs are also present on the market, OTP Bank constantly launches new solutions to remain relevant to the digitally mature or younger customers too. For the best functions, OTP Bank cooperates with fintech companies. It provides one of the ‘best-in-class’ digital services in Hungary, as is confirmed by its mobile store rating, which is among the top international players. In addition to digital solutions, OTP Bank can also provide personal advisory for complex needs,” the country’s biggest lender says.

The total value of the region’s most significant technology companies exceeds

USD 130 billion,

according to the Digital Champions CEE 2021 publication.

“This is 12 times more than it was a decade ago, and it is also ahead of China in the rate of growth. Among the 13 countries participating in the research, Hungary ranks sixth in terms of the market capitalization of enterprises with USD 4.98 bln,” MKB Fintechlab points out.

“OTP Bank does not see major differences in technology goals among European banks; they all see that if they don’t keep up with the technology, they may be at a market disadvantage,” OTP Bank concludes.

real-world uses in financial services that major banks are now exploring, whether as part of a marketing strategy, to assert themselves as digital innovators, or because they want to expand their presence in asset management. The topic might not achieve the explosive growth that some analysts predict, but banks should have a strategy to reap the rewards if the market does mature,” MKB Fintechlab adds.

If anything, the adage of technology disrupting every industry is amplified in banking. Beyond the usual suspects of AI and machine learning, banks must grapple with fintechs, peerto-peer payment, cryptocurrencies, blockchain and NFTs. The Budapest Business Journal explores a market of great potential.

CHRISTIAN KESZTHELYI

Photo by panuwat phimpha / Shutterstock.com

UniCredit Posts Strong Corporate Results, While Spearheading ESG Efforts

BBJ: First of all, congratulations to UniCredit Bank Hungary on being named “Best Service” provider and “Market Leader” in Hungary, according to the latest Euromoney Trade Finance Survey. What would you highlight regarding the solutions that allowed the bank to win these titles?

Albert Hulshof: I am honored that clients re-confirmed their trust in UniCredit in the field of trade finance. Our business philosophy is mainly defined by our efforts to serve our clients’ needs to the highest level possible whilst tailoring our product offering to individual client needs. Our most significant competitive advantage, as recognized by our clients, is that we provide such bespoke solutions according to their business needs. On the other hand, we put a strong emphasis on our advisory role. We support our clients from the beginning of their commercial negotiations until the closure of a successful deal. UniCredit is a panEuropean commercial bank; therefore, we can support our clients’ crosscountry business activities with high efficiency, help them step into new markets, and broaden their export and import activity while leveraging the know-how of UniCredit Group.

BBJ: How would you assess the bank’s results in the Hungarian corporate financing market in 2022?

AH: UniCredit delivered a record set of financial results as a group. In Hungary, 2022 was also very successful, and the same goes for our Corporate Division. The corporate loan portfolio increased by 21%, supporting our clients with working capital and investment facilities.

BBJ: The economy has been through some challenging times due to COVID and then the war in the neighborhood. This January, Minister of Economic Development Márton Nagy discussed the recently announced Baross Gabor Reindustrialization Program, a subsidized credit scheme for businesses, with several banking sector players, including UniCredit. How do you think this program will help revitalize the economy and businesses?

AH: Subsidized lending schemes always play an essential role in ensuring favorable and predictable financing, which is even more critical in an economic environment characterized by high interest rate levels. The success of the Baross Gábor Reindustrialization Program is apparent; the working capital part of it has already been oversubscribed, and we share the view of the Banking Association that it should be extended. Until it is decided, we are concentrating on the still accessible investment-type facilities of the program. It is worth drawing attention to the fact that, besides the usual loan purposes such as capacity expansion, there is a particular focus on efficiency improvements, technology modernization, and green objectives within the program. This is entirely in line with UniCredit Bank Hungary’s lending strategy.

BBJ: In February, 3Sun, part of Enel Green Power, signed a non-recourse financing agreement with UniCredit, partially backed by the Southern Alliance for Clean Energy (SACE), to finance the expansion of the largest solar panel factory in Italy. How involved is UniCredit in the solar energy sector here in Hungary? What products and support does the bank offer for sustainable energy projects in the country?

AH: This is a topic close to my heart, as I started my UniCredit career in the project finance department, financing renewable energy projects throughout Central and Eastern Europe. We committed ourselves to deepening our knowledge and focusing on ESG financing. This has resulted in UniCredit becoming a leading financier of green investments, especially for solar parks in Hungary. We are now a lending partner with considerable experience. We know this industry well, and my colleagues are among the best in the business. We want to be – and will be – the bank of the future for Europe, and renewable energy financing is an important pillar in this. We are proud of the fact that our business policy has supported Hungary’s solar power capacity to grow at the fastest rate in the EU in recent years. We are now above 3,600 megawatts, thanks to which the proportion of solar power generation within the annual Hungarian electricity production is almost double the European average.

We are ready to support both wind and solar investments, whether groundmounted or rooftop solar projects, to support our clients’ energy strategies.

BBJ: What opportunities do you see for corporate banking in Hungary to further drive sustainability and ESG initiatives?

AH: We see a significant role for ourselves in educating and financing the ESG transition. We are privileged to be part of UniCredit Group and can leverage best-practice sharing from countries like Italy and Germany. We are training our colleagues continuously, which will give us the opportunity to understand the context more thoroughly. Through this, we will be able to identify individual client needs in each industry and ensure a transition to sustainability. There are a number of highlights that showcase what UniCredit Hungary has been doing so far. During 2021, we successfully implemented a green bond program for UniCredit Hungary’s mortgage bank, and our Social Impact Bank program was awarded No. 1 in the „Opportunity creating business” category by Effekt 2030 Community Investment Award. In 2022, we procured 100% green energy and joined the Hungarian Banking Association’s Good Deed Bank-Green Heart program, planting 4,000 trees in the UniCredit “forest” by the end of last year. We look forward to rolling out further ESG initiatives to help drive sustainability.

The Budapest Business Journal talks with UniCredit Bank Hungary’s head of corporates, Albert Hulshof, about the lender’s corporate financing market results, ESG commitments, and more.

Albert Hulshof

Commercial Banks

Corvinus Befektetési Zrt. (15) EBRD (15), Erste Group Bank AG (70)

Szabadság tér 5–6. (1/20/30/70) 325-3200 info@unicreditgroup.hu

Jelasity Radován Manfred Schmid Debóra Blaumann

1138 Budapest, Népfürdő utca 24–26. (40) 555-444 uszolg@erste.hu

Pannónia Nyugdíjpénztár (7.50), TiberisDigital Kft. (43), employees (37), MKB Nyugdíjpénztár (5.60), other (6.90)

éva Hegedűs ––

Budapest, Lechner Ödön fasor 8. (1) 235-5900 info@granitbank.hu

FR-Invest Kft. (66), individuals (34)

Zsolt Hernádi (19.90), Garancsi István (19.90), Illés Zoltán Pál (19.50), individuals (40.70)

li

1062 Budapest, Teréz körút 55–57. (1) 374-6300 info.hu@bnpparibas.com

1054 Budapest, Bajcsy-Zsilinszky út 42–46. (40) 374-9900 info@kdbbank.eu

1051 Budapest, József nádor tér 7. (1) 429-9200 bocbp@pronet.hu

Zsolt Fáy, János salamon ––

1062 Budapest, Andrássy út 98. (1) 428-8844 info@magnetbank.hu

Zoltán illés ––

BNP Paribas Personal Finance (100)

péter szabó ––

Individuals (90.60), Alpha Hungary Zrt. (9.40) –

lászlóné Béke ––

notes: (1) Financial data are IFRS consolidated.

9022 Győr, Árpád út 93. (96) 550-720 kozpont@dunatakarek.hu

1062 Budapest, Teréz körút 55–57. (Eiffel Tér Irodaház) (1) 458-6070 cetelem@cetelem.hu

4090 Polgár, Hősök útja 8. (52) 573-035 titkarsag@polgaribank.hu

5 Socialite

Hungarian Food Bank’s Work More Vital Than Ever

by collecting and distributing surplus food from individual stores were struggling because skyrocketing fuel and energy costs had made it even more expensive to rescue food.”

As if this wasn’t challenging enough, retailers who had to pay closer attention to their own losses were managing stock more carefully. There was less food to give to charities such as the Hungarian Food Bank Association.

The Food Bank responded rapidly to the crisis. It began to call at 225 more stores every day, increasing the total number to 630. The amount of food donated has increased by 10%, and the value of donations has risen to HUF 10 billion.

The Hungarian Food Bank Association works with eight of the largest retail chains. An additional 100 food companies make food donations every year. Increasingly, people from companies outside the food industry are beginning to recognize the part they can play in the food rescue system and volunteering to participate in cookouts.

Food Waste Teambuilding

But there’s still plenty more business can do to help, and the Food Bank is encouraging this through an innovative approach.

Eight friends founded the Magyar Élelmiszerbank Egyesület, as it is known in Hungarian, in 2005. Since then, it’s operated on a non-profit basis, its growth driven by volunteers and donations from private individuals and companies.

A fundraiser for charities for the past 18 years, director of external relations

András Nagygyörgy joined two years ago and was impressed by the efficiency of the organization and its impact from the start. “We search for and collect food stocks that retailers and manufacturers would otherwise remove from their shelves and destroy,” he told me. “We currently save 30,000 kilos of food items every day. Last year alone, we delivered 8.7 million kilos of food to the needy and 239,000 people benefited.”

This model has been in existence since 2005. In the beginning, the Food Bank only rescued stocks from manufacturers,

but 10 years ago, its volunteers started visiting retailers’ stores daily. The activists couldn’t predict what they would find in any store at the end of any given day, and perishable products needed to be distributed on the same day. To make sure these got to people who needed them, charities local to a store would take the food and share it close by. Today, the Food Bank has a national network of 600 partner organizations, and each charity distributes an average of 40-50 kilos a day.

Nagygyörgy stresses that food donations don’t just reduce poverty, hunger, and malnutrition. If children don’t have to go to school hungry, they can concentrate and study better. When social workers knock on the door of an elderly couple to deliver food, they’re able to assess their health.

Different in Hungary

Unlike in other countries, where food banks are usually established in regions or even towns, there’s only one food bank in Hungary at the moment. This is because the food processing industry is centralized, and there are few large-scale food processors and traders in the country.

As a result, the Hungarian Food Bank Association prefers to distribute the saved food immediately through its networks of smaller local charities, and it stores less. It maintains just one food rescue warehouse or “pantry” in Budapest, to which some manufacturers deliver. “We’re keen to open more,” Nagygyörgy said, “but it’s a slow process.”

Last summer, Nagygyörgy and his colleagues noticed that the number of people needing their services had increased dramatically. But it had also become more difficult to feed them.

“In many places, people who had previously volunteered as helpers were queuing for food themselves,” Nagygyörgy said. “At the same time, local organizations that help the needy

“We organize exciting cooperation programs for these companies. For example, we do team-building cooking and baking events and attitude-shaping programs about food loss and waste issues,” Nagygyörgy explains.

“We’ve developed a pop-up treasure hunt game with a food waste theme used at company events. We cater conferences and gala dinners where all the food we prepare and serve uses a wastefree approach and technology. All the leftovers go to people in need. The funds we raise go to food rescue,” he explains.

The next step for the Food Bank is to save ready-to-serve cooked meals from restaurants, canteens and events. Nagygyörgy is keen to hear from office canteens open to starting such projects.

Asked how companies can do more to help, Nagygyörgy is clear. “We’d like companies to realize that supporting food donations is the most effective way to help people in need. Make a HUF 1 million donation to us, and we can deliver HUF 30 mln of food.”

In general, individuals can support the Hungarian Food Bank Association by making micro-donations or through volunteerism. For example, drivers with spare time could drive for the organization on weekday mornings. Anyone can come along to the Budapest warehouse to prepare 50,000 cans of vegetables for donation.

On May 12-13 of this year, the Food Bank will organize a non-perishable food collection initiative where anyone can donate food. Last November, 6,900 volunteers helped to collect 241 tonnes in three days. The May campaign will extend to more than 200 stores.

Right now, Nagygyörgy is simply keen for people to spread the word. “Tell your bosses about us,” he told me. “Encourage your colleagues to volunteer as a company team.”

Hungary is suffering a record increase in food prices of around 50%. Inevitably, this is hitting the most vulnerable hardest. Against this backdrop, the work of the Hungarian Food Bank Association has become even more critical.

DAVID HOLZER

András Nagygyörgy.

Photo by Csaba Fekete

Photo by Bea Kovács

Chamber of Commerce Corner

Energy in Focus at AmCham’s 1st Business Forum of 2023

Given the recent changes and challenges in the energy sector and wishing to learn about the Ministry of Energy, set up at the end of last year, AmCham invited Minister Csaba Lantos to its Business Forum on February 28.

Regarding the energy strategy of the ministry, Lantos stated that in the short term, it would concentrate on ensuring the security of supply. In the longer term, it wanted to establish a multilegged system built on transitional energy resources such as natural gas and nuclear energy, as well as

renewables such as solar, geothermal energy, biomass, and biogas.

The minister emphasized the role of nuclear energy, including production at Paks I and the planned expansion of Paks II. He also stressed the significance of electrification supporting the longterm goal of moving away from natural gas. Following the presentation, members had the opportunity to ask questions of the minister.

AmCham said the chamber values the opportunity the Business Forum presents to receive first-hand information about strategic areas and for dialogue between crucial decision-makers from the private and the public sectors.

Swisscham HR Café:

Motivate to Retain

Swisscham will host a round table discussion for company managers and HR professionals, covering topics such as the current trends and dynamics in the labor market, the significance of employee retention,

proven solutions and tools for retaining and motivating the workforce, and how to measure motivation.

When: March 31, 9 a.m.-noon.

• Where: Nevis Security Kft., Bókay János utca 44-46, 1083 Budapest

• Cost: Free for members, HUF 15,000 / Person (0% VAT) for non-members.

Guided Tour of MOL Campus

Members of the CCCH will be able to join a guided tour of the new MOL Campus led by Neudoerfler Office Systems. The innovative HQ of MOL Group unites the company’s Budapest operations into a single location and has contributed a fresh element to the city’s iconic skyline. The Campus is a vital component of the MOL’s sustainable vision for 2030, serving as a model for future office spaces.

The building’s distinctive shape combines a 28-story, 143 meters high tower. Its advanced technology controls illumination and temperature

and allows all occupants direct access to fresh air, natural light, and scenic views, creating a bright, stimulating environment conducive to productivity. It aims to achieve Leed (Leadership in Energy and Environmental Design) and Breeam (Building Research Establishment Environmental Assessment Method) certifications, reflecting its commitment to environmental responsibility.

When: March 30, from 9-11 a.m. • Where: MOL Campus, Dombóvári út 28, 1117 Budapest • For more information, please send email to events@ccch.hu or call +36(30)9939-789.

10th Vocational Training

Awards by DUIHK

The 10th DUIHK Vocational Training Award winners will be honored during the chamber’s Vocational Education Day, which will also feature lectures and expert discussions on vocational training in Hungary from the perspective of companies, schools and students. The event will be in German and Hungarian, with translation available. One of the guest speakers will be State Secretary for Higher Education, Innovation and Vocational and Adult Education Balázs Hankó.

When: March 21, from 3:30-8 p.m.

• Where: Deutsche Schule Budapest (German School Budapest) Cinege

út 8/c, 1121 Budapest. • Cost: Free

Passing the Torch: Successful Generational Handover

The Fejér County Chamber of Commerce and Industry, consultancy firm Emberfejlesztés Kft., and the DUIHK held a sold-out presentation on generational change in German and

Hungarian companies. The exchange of experiences showed that succession could and should be prepared step by step, with the involvement of professionals. An important aspect is to draw up a “family constitution” to work on the entry of younger generations and the exit of the older founders.

Jour Fixe 30: Time Travel to the 1990s The first Jour Fixe of the DUIHK’s 30th anniversary year was dedicated to our founding members and the member firms that joined at the very birth of the chamber in 1993. The venue matched the occasion, as the Kempinski Hotel Corvinus Budapest has been a member for 30 years. In his opening speech, general manager Stephan Interthal invited the guests on a journey through time. The hotel opened its doors on September 11, 1992, as Budapest’s first joint-venture luxury hotel.

Barbara Zollmann, CEO of DUIHK, recalled that in the first year after its establishment by 35 founding members, the chamber had already

attracted 400 members. A panel discussion saw guests remember the circumstances of their company foundation and the socio-economic climate of the time.

Rita Mayerné Katona, Director at UniCredit Bank Hungary, pointed out that in the early ’90s, several German banks followed their German clients to Hungary, but there were hardly any Hungarian banking professionals, so many foreigners had to come to the country as expats.

In contrast, Thomas Narbeshuber, managing director of BASF Hungária, stressed that chemistry or physics are the same in every country, so BASF managed to recruit wellqualified employees from the Budapest University of Technology and Economics, many of whom are still with the company today.

According to Rezső Rózsai, CEO of KPMG Hungária, one of the secrets of the Big 4 consultancy’s efficiency and success in Hungary is that, since its foundation, German and Hungarian colleagues always jointly attended meetings and negotiations, thus adopting the German corporate culture.

Dale A. Martin, the former CEO of Siemens Zrt. and until 2019, the president of DUIHK, said that transposing the German-Austrian Siemens model to the Hungarian market had given a great deal of flexibility in the days when customs borders still existed.

Keeping its tradition, the Jour Fixe also featured new and long-time members of the chamber, which counted 925 members at the end of 2022.

Can Communication on Sustainability

Encourage

Employee Engagement?

How can a company’s communication on sustainability strengthen the commitment and involvement of stakeholders? Why is it important to constantly examine ESG standards and communicate the results inside and outside the company? This CCIFH Communication Club event will be presented by Éda Pogány, sustainability and communications manager at Syngenta Seeds EAME.

When: April 4, from 9-10:30 a.m.

• Where: MGallery Hotel Nemzeti Budapest, József körút 4, 1088 Budapest. • Cost: HUF 8,500 + VAT for members, HUF 12,750 +VAT for non-members.

This regular section of the Budapest Business Journal features news and events from the various international business chambers. For further information and to register, visit the website of the organizing chamber. If you have information for inclusion on this page, send an email in English to editorial assistant Annamária Bálint at annamaria.balint@bbj.hu

American Chamber of Commerce in Hungary (AmCham)

French-Hungarian Chamber of Commerce and Industry (CCIFH)

Canadian Chamber of Commerce in Hungary (CCCH)

Swiss-Hungarian Chamber of Commerce (Swisscham)

German-Hungarian Chamber of Commerce and Industry (DUIHK)