Invented in Hungary 2020-2021

INVENTED Price: HUF 1,490

IN HUNGARY

2020-2021

RE SE ARCH & DE VELOPMEN T • GOVERNMEN T SUPP OR T: HUNGARIAN IN VE S TMEN T PROMOTION AGENC Y, N AT ION A L INNOVAT ION OF F IC E • REGION A L C OMPA RI S ON S • R& D S U C C E S S S T ORIE S • C A S E S T UDIE S

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INVENTED IN HUNGARY

CONTENTS INTRODUCTION: Hungary Hoping to Craft an Algorithm for Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 HIPA: Charting the way to Become the Regional Leader in R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 HCEMM: Flagship Project of the Ministry for Innovation and Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 HKFIH: Supporting Knowledge Creation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 HKFIH: Narrowing the Innovation Gap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 HKFIH: Igniting the Entrepreneurial Rockets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 R&D Activities Remain Strong in 2020 Despite COVID-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Improved Education key to Better R&D Scores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 CASE STUDY DIGIC Pictures: Movie-makers for the Gaming World . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 CASE STUDY ReSysten at the Forefront of Combating Infection From Contaminated Surfaces . . . . . . . . . . . . . . 26 Businesses, Universities Want More Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 CASE STUDY Payment With Your Face and Palm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 AI Strategy: Preparing Hungary to Take a 21st Century Lead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 CASE STUDY Old Tires Given new Life in BASF, New Energy Deal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 CASE STUDY Working to Ensure Tax Compliance has Never Been Easier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 CASE STUDY BitNinja Strengthens Position With USD 2.5 mln Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

INVENTED IN HUNGARY 2020-2021 | A BUDAPEST BUSINESS JOURNAL PUBLICATION BBJ Editor-in-chief: Robin Marshall • Editorial: Kálmán Béres, Kester Eddy, Bence Gaál, Gergely Herpai, Christian Keszthelyi, Zsófia Végh • Sales: Csilla Lengyel, Bernadette Oláh, Erika Törsök • Layout: Zsolt Pataki • Cover photo: PopTika/Shutterstock • Publisher: Business Publishing Services Kft. • Media representation: AMS Services Kft. • Address: Madách Trade Center, 1075 Budapest, Madách Imre út 13-14, Building A, 8th floor • Telephone: +36 (1) 398-0344 • Fax: +36 (1) 398-0345 • ISSN 2732-1568

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INTRODUCTION HUNGARY HOPING TO CRAFT AN ALGORITHM FOR SUCCESS There has never been much doubt about Hungarian creativity. This is the nation famed for the number of its Noble-prize winners, a country that contributed key brain power to the development of the atomic bomb and helped make Hollywood, whose mathematical and modelling excellence has led international financial services firms to target Budapest for centers of excellence.

We debuted this publication last year as” Research & Development.” The change in title to “Invented in Hungary” comes because we think it better reflects the way in which Hungary is trying to market itself today.

When Viktor Orbán was returned to power in 2010, with the country badly exposed by its open economy to the 2008 financial crisis and the ongoing fallout from that, the focus

was very clearly on taking a page out of the German playbook and, to put it bluntly, making things. Thus, the Hungarian Investment Promotion Agency was charged with bringing not just foreign direct investment to Hungary (the country had long been attracting shared service centers here), but entire factories, and the manufacturing jobs that go with them.

They say a week is a long time in politics, which must make a decade an eternity. Certainly, the advance of AI, automation and digitalization, all key elements of Industry 4.0, has moved the employment dial in the 10 years since 2010. The government was smart enough to realize that, increasingly, many of those manufacturing jobs would become redundant. Maybe not today or tomorrow, but certainly in a relatively short period of time.

So the emphasis switched from manufacturing to more highly skilled jobs, so-called value added roles.

Made in Hungary became Invented in Hungary. Shared service centers have become business service centers, capable of taking on roles that are increasingly much more complex than answering a phone. The jobs that Hungary wants to attract now must stand the test of time. Circle back to those financial services firms putting research centers here, and you have the ideal career profile. Those same roles also offer Hungary’s young talents, either thinking of moving abroad or already there, an alternative, domestic career path.

Hungary says it is committed to spending more as a proportion of its GDP on research and development (although the figure for 2019 was slightly down on 2018). But as one of the experts we interview inside puts it, “Increasing funding amounts is not in itself a solution. We believe that the way to bring domestic R&D to a much higher level in the foreseeable future […] will be through the education system.”

That remains the challenge. Money is being made available, strategies are being put in place (the big national approach to artificial intelligence has just been outlined, as we detail in an exclusive interview with Roland Jakab, the head of the AI Coalition), skills are being upped, there is even some evidence of joined up thinking when it comes to policy. The world of research and development and innovation in Hungary is becoming a very exciting space to watch. To make the most of the opportunities of the fourth industrial revolution, all of the above will be needed, along with an education system that promotes and rewards critical, creative thinking among Hungary’s digital natives.

Robin Marshall Editor-in-chief Budapest Business Journal

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CHARTING THE WAY TO BECOME THE REGIONAL LEADER IN R&D

The Hungarian Investment Promotion Agency (HIPA) explains the work it undertakes to promote the country as a research and development and innovation center for the region, and the system of incentives and subsidies it has at its disposal to produce tailor-made offers to potential investors, whether in the countryside or the capital, Budapest.

By BBJ Staff An investor friendly business environment, highly educated labor force and competitive incentive system: these are the factors that contribute to the success of the research and development and innovation centers in Hungary.

The government has been highlighting the role of innovation and research and development to enhance productivity growth and

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competitiveness. As such, promoting higher value-added activities and R&D projects has gained a significant role in Hungarian investment promotion policy.

The country plans to spend 3% of its GDP on research and development by 2030. The clear ambition is to become the regional leader in innovation and R&D.

Hungary recognizes the importance of innovation and research and development as the key factor of the future growth of the economy.

New economic policies were initiated to support the business environment in order to make Hungary the most advanced

manufacturing and innovation center in Central and Eastern Europe. Significant taxation related modifications and a new R&D related incentive system have also been introduced.

The aim of HIPA is to help and support the R&D related projects, no matter where the location of the

HUNGARY’S GROWING R&D STATISTICS R&D EXPENDITURES AS A PERCENTAGE OF GROSS DOMESTIC PRODUCT

R&D INVESTMENTS AS A PERCENTAGE OF TOTAL NATIONAL INVESTMENTS

R&D EMPLOYEES AS A PERCENTAGE OF TOTAL EMPLOYMENT

2010

2018

2010

2018

2010

2018

1.14%

1.53%

0.79%

1.02%

0.84%

1.02% Source: KSH

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activity within the country is.

To this end, HIPA provides tailormade incentive offers, information on the labor pool and state subsidy issues in order to encourage investments. To achieve this goal, significant and favorable changes have been introduced in the R&D cash subsidy system launched by HIPA. In 2018, the pharmaceutical and automotive industries accounted for a combined 63% of R&D expenditure within manufacturing, while the rapidly increasing ICT sector reached almost 11% of total R&D spending in the business sector in 2018.

Last year witnessed a massive increase of 6% in R&D expenditure in Hungary, reaching an overall HUF 693.7 billion (EUR 2.1 bln).

INVENTED IN HUNGARY

Hungary recognizes the importance of innovation and research and development as the key factor of the future growth of the economy. The country plans to spend 3% of its GDP on research and development by 2030. The clear ambition is to become the regional leader in innovation and R&D. BUSINESS SECTOR CONTRIBUTION Based on the available statistical data, it can be observed that the ratio of the business sector’s contribution related to R&D expenditures was the largest in

CASE STUDY

the region. Last year, the number of R&D units in Hungary amounted to 3,445 while the total headcount of R&D related employees reached an absolute record in

Sanofi, founded in 1973, is one of the leading pharmaceutical stakeholders worldwide, and its products are distributed in 170 countries. In 2019, Sanofi established its new global competence center in Budapest, which focuses on accounting, HR and finance activities as a center of excellence.

As the second largest healthcare company in Hungary and the 15th most important exporter for the country, Sanofi has been officially recognized as a strategic partner of the Hungarian government since 2013. The company has five sites in Hungary.

Chemical development and production take place at the central premises and R&D center in Budapest, but Sanofi also has production units in Veresegyház (33 km northeast of the capital) and Csanyikvölgy (182 km to the northeast, near Miskolc).

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the country’s history, employing almost 70,000 people.

The Hungarian education system puts special emphasis on training the qualified labor supply in order to fulfil the need of the corporate sector for high value added positions. In 2019-2020, more than 49,000 students studied business administration, almost 55,000 students were involved in STEM (science, technology, engineering and mathematics) programs and 22,500 students in the field of IT.

In 2018, the pharmaceutical and automotive industries accounted for a combined 63% of R&D expenditure within manufacturing, while the rapidly increasing ICT sector reached almost 11% of total R&D spending in the business sector in 2018. Last year witnessed a massive increase of 6% in R&D expenditure in Hungary, reaching an overall HUF 693.7 billion (EUR 2.1 bln).

Major Hungarian universities have traditionally enjoyed strong cooperation with the most innovative multinational and local companies operating in the country. Hungarian university cities have become cosmopolitan educational centers of the regions, allowing them to attract more and more foreign youngsters to the country.

cash incentives or tax allowances.

The Hungarian Government provides a VIP cash subsidy for R&D activities on the basis of individual government decision throughout the whole area of Hungary, including Budapest.

There are various kinds of subsidies available in the field of R&D, either

This opportunity is available for large enterprises that undertake to

implement an R&D project (qualified as industrial research and/or experimental development activities by the Hungarian Intellectual Property Office) with a minimum value of EUR 3 million during a minimum of a one- and a maximum of a three-year period and undertakes to create a minimum of 25 new R&D jobs and to maintain them for

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a minimum of two years after the completion of the R&D project.

AID INTENSITY The maximum aid intensity is 25% of the eligible costs comprising of: depreciation of buildings, and the rental fee of buildings; depreciation of equipment; personnel costs regarding researchers and developers to the extent of their involvement in the project; costs of material (a maximum of 25% of total eligible costs); and costs related to contractual research (up to a maximum of 25% of total eligible costs).

Beside the VIP cash incentive, companies performing R&D activities have the opportunity to further decrease their corporate income tax base with their R&D costs. A total of 100% of the direct costs of fundamental research, industrial research, or experimental development carried out by the taxpayer within its own scope of activities are deductible from earnings before taxes, or 300% of the direct costs of R&D activity (up to a maximum of HUF 50 million) are deductible from the earnings before taxes in cases where research activity is carried out jointly with a specified organization.

Tax payers performing R&D activity are also entitled to social contribution allowances in the case of research or development employees with a PhD or higher academic degree, or students and PhD candidates in doctoral programs. The current rate of social contribution tax (15.5%) can be deducted to 0% in the case of such employees with a PhD or higher academic degree, and to 7.75% in the case of students and PhD candidates in doctoral programs.

Despite the COVID-19 pandemic there is a strong interest from companies towards investing in Hungary. One of the main strategic goals of HIPA is to

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CASE STUDY AVL, the world’s leading independent development company in the automotive industry, is building a new automotive test base and development center in Érd (20 km from central Budapest on the southwestern border of the capital).

In the new complex, implemented as part of a greenfield development on 5.7 hectares,

traditional and electric test benches will be used alike from 2021 onwards, for the development, simulation and testing of new generation internal combustion, hybrid and electric engines and power trains.

AVL List GmbH, which has more than 11,500 employees, was founded in 1948 and has its headquarters in Graz, Austria.

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The technology company ARM, which specializes in IT, particularly in microprocessors and graphic processors,

constantly support R&D activities in Hungary, through its management consultancy services for new and existing investors.

With the assistance of HIPA, nine R&D project decisions were made in favor of Hungary between January and September 2020, which will create 359 high value-added jobs in the country. HIPA is currently in negotiations with seven other companies planning to decide about their R&D investment projects in the forthcoming months. With the assumption of positive decisions in these cases, 550 new R&D workplaces will be created.

chips and network devices, is growing its staff of developers by more than 50% in its R&D center in Budapest.

The expansion project of EUR 9 million will result in the creation of 60 more jobs in research and development.

With the assistance of HIPA, nine R&D project decisions were made in favor of Hungary between January and September 2020, which will create 359 high value-added jobs in the country. HIPA is currently in negotiations with seven other companies planning to decide about their R&D investment projects in the forthcoming months. With the assumption of positive decisions in these cases, 550 new R&D workplaces will be created.

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HCEMM: FLAGSHIP PROJECT OF THE MINISTRY FOR INNOVATION AND TECHNOLOGY HCEMM is a seven-year project aimed at establishing a new Hungarian Centre of Excellence for Molecular Medicine (hence the initials) in partnership with the European Molecular Biology Laboratory (EMBL).

HCEMM is drawn from leading Hungarian academic institutions including the University of Szeged, Biological Research Centre and Semmelweis University in Budapest, as well as the EMBL. The center of excellence is a flagship project of the Ministry of Technology and Innovation (MIT), but it is also much more than that. It seeks not to compete, but to cooperate; the goal is to create a scientific ecosystem by being the institute to guide and support basic research targeting molecular medicine and translation of scientific results to clinical applications.

The focuses of the research are immuno-inflammatory diseases, metabolic and cardiovascular diseases, and genomic instability and cancer. Altogether, 11 groups operate with more than 80 researchers ensuring a critical mass of excellent scientists.

To ensure scientific excellence and autonomy, the selection procedure of the principal investigators of the researchers’ groups are based on the best practices of EMBL. Independent external reviewers evaluate the research projects of the group

leaders, where the only aspect of the selection is internationally tracked scientific excellence.

HCEMM, which is also member of the National Laboratories’ network, has also joined the global effort to fight COVID-19 by starting projects aiming at understanding how the evolution of the coronavirus influences the development of the current pandemic and to help advance treatments.

URGENT NEED HCEMM had already established a partnership within the first two months of the pandemic with premier Hungarian scientific institutions excelling in virology and nanobiotechnology. As their joint research results have indicated, there is an unmet need to fight against the long-term effects of SARS-CoV-2 infections.

In this field, Semmelweis University, the National Biosafety Laboratory and the University of Veterinary Science Budapest have partnered with HCEMM. The consortium is initiating a research project developing immune modulating compounds and a special throat sample test to stratify infected persons with an increased risk of “long haul” post-COVID-19 syndrome.

HCEMM also partners with BRC in high-throughput bioinformaticsbased speedy and sensitive testing of infected people.

HCEMM provides scientists with cutting edge technologies, opportunities for cross-fertilization and autonomy as well as the freedom to conduct innovative research. Its Advanced Core Facilities (ACF) offer services for both academic and industrial R&D partners, while society also benefits through the technology and knowledge transfer processes.

ACFs are established in Szeged and Budapest, so that they provide the best support to the HCEMM’s founding institutions located in these two cities, with the aim of extending its activities across the entire country and in Europe in the near future.

In 2020-2021, further research groups will join the project to strengthen the impact of its excellent research.

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SUPPORTING KNOWLEDGE CREATION In the digital era, the progress of countries depends largely on how efficiently they can bring together research, development and innovation. This may seem an easy task, but many needs and possibilities must be integrated and, not least, motivated. These are the main roles of the National Research, Development and Innovation Office (NKFIH). The Budapest Business Journal talked with its president, Zoltán Birkner, about the office’s future plans.

By Kálmán Béres BBJ: What opportunities does NKFIH have to invigorate Hungarian innovation, especially among young professionals?

Zoltán Birkner: The Hungarian government, the Ministry for Innovation and Technology has supported expanding the creation of knowledge, catalyzed setting up the elements connecting knowledge bases and knowledge users, and also catalyzed a more receptive approach of companies towards innovation.

This is how this whole context starts becoming a coherent system.

How are we supporting knowledge creation? The government, and the NKFIH, has selected and is providing funds for the education of new scientists, for research and institutional excellence, which will contribute to stabilizing the operation of universities and research facilities. An important practical step

was starting the Cooperative PhD Program, which is, on the one hand, an important instrument in preparing new scientists, and on the other hand strengthens cooperation between industries and universities. We had 100 openings for the program, and 536 applications. This is an extraordinary response, given that we announced it after the standard PhD program had been announced, so universities and PhD centers needed to provide new exams for this huge wave of new applicants.

BBJ: What is the role of the universities from the NKFIH perspective?

ZB: One of our main focus points is the Program for Thematic Excellence.

Within this, we provide financial support for researches on global challenges conducted by universities and research centers, as well as for research programs based on institutional excellence. We expect

the supported institutions to acquire a deep expertise in some areas and to concentrate on these areas with a scientific thoroughness, focusing on the results and usefulness of that specific research.

Minister for Innovation and Technology László Palkovics recently announced a similarly important program on national labs. Altogether there are 18 such labs, aimed at fostering the cooperation of all key Hungarian players of a specific area on a focus issue. A great example is the huge program related to digital transition and on artificial intelligence.

Scientists, universities, research facilities and companies that excel in the field of AI joined their efforts to create centers able to achieve significant results and that could also be attractive for large international R&D projects.

An equally important initiative is the development of competence centers. Universities are cooperating with industrial partners to expand together or to make developments in a specific area. We will set up 10 such competence centers countrywide. One exciting example is the center of competence focusing on the transition to a circular economy. Pannon University, together with MOL, Hidrofilt Kft. and some other local companies joined forces to process together the basic research, development and sectoral issues on the circular economy.

Obviously, the research is not the most important on its own, yet the practical results and developments it provides and the economic potential it generates are. The competence center model has two main messages: on the one hand, universities and companies must cooperate to achieve success, and on the other, they should be in service of market demands. More specifically, the “output” of this cooperation must always be a new product or service for the market.

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If we look at a new product or product group, we can already see the opportunity of sectoral development. We can take advantage of these new areas, via science parks, to generate and prepare new industry sectors. We are planning for the near future nine regional, scientific-innovation-economic hubs aiming at specific areas.

BBJ: How has NKFIH restructures the system for international tenders?

ZB: We are channeling international cooperation, and bilateral scientific and technology relations towards results for the markets; therefore, beside research mobility, we also support international joint projects between universities and industrial players. Our scope here is the same, to have new products or technologies which can be sold easily on several markets. We also aim to be more efficient in winning directly accessible EU funds. Based on our experience with the EU Horizon 2020 (H2020) Research and Innovation Frame Program, we have made new plans so that Hungarian applicants can be more successful in gaining funds within the new, Horizon Europe Frame Program starting 2021. We had 1,381 successful applications in H2020, gathering EUR 346 million. This means that we earned 0.6% of the H2020 funds, which ranks us 17th in the EU. Our aim is to reach 2.18%, based on population proportion, and for that

Zoltรกn Birkner

we have taken very seriously planned steps. First, we have offered incentives to Hungarian researchers, scientific institutions and companies to apply for EU funds. The secondly, we encourage thematic institutions, competence centers and national labs to apply for international projects. The catalyst for companies to cooperate is that they earn additional points in national innovation applications if they apply to international projects. Thirdly, we are aligning our national application systems to EU applications, so that Hungarian scientists and companies can get familiar with EU application procedures.

How are we supporting knowledge creation? The government, and the NKFIH, has selected and is providing funds for the education of new scientists, for research and institutional excellence, which will contribute to stabilizing the operation of universities and research facilities.

Of course, the question apart from all this is how we can further support potential applicants.

Obviously, we need to completely restructure our application system and organizational structure. We will significantly increase the number aiming to apply successfully to the Horizon Europe program who can be supported with information and consultancy, as well as with companies dealing with international relations. We have started several supporting applications, for example one for setting up a consortium for international projects, or in the case of innovative companies, making a competitive business plan. For some special programs, we offer state co-financing through targeted calls for applications. We support applicants with mentor programs or with training and sectoral consultancy for project management and financial reports. In addition, professionals with experience of examining international applications will help improve project drafts.

So, we are offering financial support to all initiatives related to international networks and contact building.

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NARROWING THE INNOVATION GAP Deputy Secretary of State for Innovation Tibor Gulyás, of the Ministry for Innovation and Technology, talks to Budapest Business Journal about how Hungary can improve its position on the research and development and innovation world market.

By Kálmán Béres BBJ: The importance of innovation is obvious, but not all countries have efficient procedures in place to support it. Where does Hungary stand on this scale?

Tibor Gulyás: If we are looking at the innovation capacity in an international comparison, we will clearly see that every country has its strengths, and also areas where it still has opportunities for growth.

Efficiency and innovation capacity can be seen as an interaction of these areas. Hungary, too, has such clearly identifiable strengths, for example the level of company investment in areas of innovation or the progress in hiring a highly qualified labor force. Meanwhile, it is crucial for increasing our innovation capacity to be able to expand the available pool of highly qualified labor force and the willingness of small- and medium-sized companies to innovate.

“Our primary goal is to narrow the gap with developed European countries on areas improving innovation; therefore, probably the most important task of the last two years has been to identify the measures to be taken for Hungary to become a strong innovator. As a result of this research we have identified many values of the national R&D and innovation system, based on which we can already see the growth of the development potential.”

Our primary goal is to narrow the gap with developed European countries on areas improving innovation; therefore, probably the most important task of the last two years has been to identify the measures to be taken for Hungary to become a strong innovator. As a result of this research we have identified many values of the national R&D and innovation system, based on which we can already see the growth of the development potential.

We have a reliable institutional system of higher education, which we need to support to become a strong player in implementing innovation processes. We have a research network which needs to play an essential role in basic research and another one in applied research. For that, supporting excellence must be much stronger within the stable and predictable financing system that we offer.

Apart from that, we can see big companies very successful in innovation, bringing some of their R&D to Hungary, and also SMEs increasingly active in innovation.

More and more of the latter are joining the innovation space. This trend confirms that we are on the right path to create an RDI-friendly environment.

BBJ: What is the role of patents in the innovation process?

TG: Patents are important instruments for growing company value. The company value grows if it protects with patents newly produced knowledge that has a market value. We can see on an international level the growing role of patents protecting intellectual property. And because of the importance of intellectual property, we stress in an increasing number of programs that the registration of patents can ensure a longterm advantage on the market, and ignoring this will lead to

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“Within the universities that set up innovation ecosystems we will set up hubs that companies will be able to use for gathering customized information and support for their development and innovation goals. The network of Scientific and Innovation Parks will contribute to this work. As a result of these measures, Hungary, building on universities, will be able to become an important knowledge center by the end of this decade.”

universities, as well as the targeted development of a university innovation ecosystem.

Within the universities that set up innovation ecosystems we will set up hubs that companies will be able to use for gathering customized information and support for their development and innovation goals. The network of Scientific and Innovation Parks will contribute to this work. As a result of these measures, Hungary, building on universities, will be able to become an important knowledge center by the end of this decade.

significant risks. The National Fund for Research, Development and Innovation is allocating specific resources to support protection of intellectual property, and even in the calls for applications we express the idea that measures taken for the protection of the achieved results are an important element of the R&D process.

BBJ: You mentioned the importance of higher education; what will be the role of universities in the future?

TG: We see the institutions of higher education as central players that, through their human resources, intellectual capital, infrastructure, services, international relations and the further development of the necessary capacities, can become central to the innovation ecosystem.

This central role needs continuous development; therefore, we have been paying special attention – and will also do so in the future – to ensuring the necessary resources in these institutions. We consider equally important the cooperation between companies and

Tibor Gulyás

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IGNITING THE ENTREPRENEURIAL ROCKETS Startup companies can greatly contribute to the GDP growth of a country. They can generate high income with low investment and they can create jobs. In order to foster creative thinking and the startup culture, it is of utmost importance for the young generation to be open to innovation, and to be able to make a profit from their ideas. Krisztián Kölkedi, head of department at the National Research, Development and Innovation Office (NKFIH) and head of the Hungarian University Startup Program (HSUP) talks with the Budapest Business Journal about making that reality.

By Kálmán Béres BBJ: The NKFIH not only supports the innovation of existing companies, but also the spread of a new approach. What is at the core of this new initiative?

Krisztián Kölkedi: The aim of the office is to go beyond the role of a funding agency, towards a service agency in R&D and innovation. This means that it provides not only the classic financial resources, but handles the whole innovation ecosystem as one process, thus offering complex solutions to those interested. We believe that innovation does not start with SMEs or with companies: there is an increasing focus on the youth, the innovators of the future. Our concept is that we need

to present the available opportunities as early as possible, already in high school, so that we can teach students in higher education applied courses.

This year, we will offer in high schools the InnoGEN platform, while university students will have access to the more complex Hungarian Startup University Program (HSUP), allowing them to become innovative entrepreneurs.

BBJ: Using web browsers, young people can access any information. What is the “plus” that this program offers?

KK: First, we need to separate the two programs. Since the information available is decentralized and their availability is relative, those searching for information do not know where they can find it. It would be useful for

the young to have a platform where they can reach all the information in one place: competitions, scholarships, applications, everything that this generation needs in terms of innovation. That is why we developed the InnoGEN platform, which aims to be an umbrella brand and a community where the common denominator is a solution-centered, innovative approach. This way innovation can become a bridge between generations. Under this umbrella we gather the “brands” for the young, be it a program, contest or scholarship, or really anything that is related to RDI and connects generations to the ecosystem and helps them. One of the most recent and spectacular result of this effort is HSUP, the program created by NKFIH together with universities and companies. Here we offer not only information and knowledge sharing, but a very elaborated, two-semester course available at 21 universities.

Four other universities already signed up for the program and the list is expanding further.

In the current pilot year, more than 1,700 students registered for the course. It has three very basic goals.

The first is to allow as many young people as possible to understand the importance of innovation and the opportunities within. It is not our aim to make everybody an entrepreneur, but to show them the full spectrum of opportunities. If they come to realize that this is not for them, no problem.

But if they are interested and come up with an idea, they have our full support. Not forcing anything, but giving them a chance to grow.

This is the first course available countrywide, unified and complex. The curriculum is fully online, available by e-learning, everything is the same for all 21 universities across Hungary. The first semester is about raising awareness and offering basic information. At the end of the first semester the students will take an

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exam, and they need to elaborate on the business solution for a practical problem. The most viable projects will be assigned teams, which will be elaborated further with a mentor and some state funding. A student can receive up to HUF 150,000 so that one will not be forced to take a part-time job, and instead can concentrate on the studies. By the end of the second semester the project ideas will turn into a prototype, or MVP, which will be presented by the teams “live”, to business experts. The students present the project and the experts will evaluate it, advise them, or, if it is already in an advanced status, they will be invited to an incubator program. Those eligible can even receive investment funds to enter the market.

BBJ: There are some who are talented in innovation, but less inclined to business...

KK: Obviously, our main goal is not to turn everyone instantly into a startupper. If we manage to have 1520 companies out of 6,000 students, then we can say that we have a working system. But the student, no matter if one became an entrepreneur or not, will get familiar with a creative way of thinking, centered on solutions.

And later, when he encounters a problem, will not look for excuses, but for solutions. And even if one will not succeed, he or she will go through a huge development. But if one does, and the project will be prone for an innovation viable for market, then we will support them in any way we can to succeed.

We consider equally important that if a startup will start growing, it should be able to reach other state and private investors, and the NKFIH should just give the starting impetus with the scholarship. We are just one element of the system, which will add later to a company, an incubator, a capital fund, so we, together, will be able to finance the project.

BBJ: Why are startups important?

How much is international presence desirable?

KK: The more startups are successful, the bigger potential they represent to the national economy.

The more that young people become entrepreneurs, the more innovative companies start, which will later become motors of the economy.

Probably eight out of 10 startups will not survive but the remaining two will bring gains for the other eight as well, while the necessary initial investment is minimal. Thus, young entrepreneurs are creating jobs not only for themselves but potentially for another seven-to-eight graduates. Of course, it is important for us to have as many startups alive and growing as possible, and to support those growing efficiently. We always tell startups: do not get stuck at a comfortable, yet low level, as startups can grow exponentially. The rockets will be ignited fully only when the company goes abroad. There are countless startups started in Central and Eastern Europe that became global firms, because they offered solutions to problems that may not even be

relevant locally or, if in case they are, they won’t achieve more than just becoming a test market.

So if they remain inbound, they may stagnate at best. People usually invoke the Estonian example: there is almost no internal market in the country, and the Estonian startup scene is so successful exactly because, right from the start it aims at the international market.

BBJ: What are your future plans?

KK: We would like to have project groups not only within one university, but groups that connect students of different areas, complementing each other. A medical innovation can co-opt an engineer, a law or financial student, each of whom can bring a new dimension to the project. We are already negotiating to expand HSUP with the support of one of the most important players, the European Institute for Innovation and Technology (EIT). For now we are talking about organizing multiplicator events with EUR 1 million in funds next year, providing access to the mentor network. But this is just the future, for now.

Krisztián Kölkedi

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R&D ACTIVITIES REMAIN STRONG IN 2020 DESPITE COVID-19 Photo by gualtiero boffi/Shutterstock

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Although the impact of COVID-19, most notably lockdowns and an economic activity blackout, have weighed heavily on the local research and development sector, with the Hungarian government earmarking financial aid for researchers, the first half of the year saw some intriguing activity, laying the cornerstones of many projects, and inaugurating some others.

By Christian Keszthelyi Hungarian startup-turned international navigation firm NNG announced on January 20 that it is developing a cloud-based navigation system for electric vehicles with approximately HUF 600 million in support from the National Research, Development and Innovation (NKFI) Fund.

The new system will incorporate battery charge levels and the distances between charging stations when planning journeys, which could help EV drivers significantly, as battery life and charging infrastructure are both in the infancy, relatively speaking, and conscious planning is an important factor when driving an electric car. NNG says it expects to develop and test the product in three years.

The announcement signaled the start of a busy year for the local R&D scene, further strengthened in February when the National Competition Council recommended the government amend the local business tax to encourage economic growth, proposing that businesses could off-set a bigger part of R&D, up to five times the current level, Minister of Finance Mihály Varga said after a meeting of the council.

The beginning of the year saw further R&D buzz when automotive supplier Vitesco Technologies, formerly Continental Powertrain, inked a research cooperation pact with the Hungarian Academy of Science’s Institute for Nuclear Research (Atomki) in Debrecen (230 km east of Budapest), where the supplier is building a plant through an EUR 100 mln investment. Vitesco will set up measuring instruments worth EUR 2 mln in Atomki’s labs, while Atomki will help Vitesco scale up its tech. Vitesco says it is planning to add 450 new jobs by the end of 2020.

Another automotive firm, Chineseowned Starters E-Components Generators Automotive Hungary (SEGA), laid the cornerstone of a 25,000 sqm production hall at its logistics base in Szirmabesenyő (187 km northeast of Budapest), where the component-maker will carry out research activities, too.

Similarly, state-owned cereal research company Gabonakutató Nonprofit laid the cornerstone of a HUF 300 mln planting seed unit at its base in Szeged (175 km southeast of the capital), funded from a HUF 460 mln capital raise, to reach exports markets faster, chasing a “serious competitive advantage”, according to Minister of Agriculture István Nagy. Hungary is the fifth-biggest planting seed exporter in the world.

On March 6, around the time COVID-19 was becoming established in the country, but before the pandemic had placed a red light on the local economy, the National Scientific

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Policy Council, a research, development and innovation (RDI) body, held its inaugural meeting. The RDI council is chaired by Minister for Innovation and Technology László Palkovics and co-chaired by former German European Commissioner Günther Oettinger, who was to participate in meetings after he had been cleared by a European Commission compliance probe. The council has nine members, beyond the two chairs, representing the state, business and scientific sectors in equal parts.

ALTERED PRIORITIES The economic environment, however, was quickly overtaken by the effects of the coronavirus and priorities changed.

Prime Minister Viktor Orbán and innovation minister Palkovics stressed the need for drug production and stockpiling with coronavirus research groups, including the country’s top academics and the chair of drug maker Gedeon Richter, at the dawn of April.

The prime minister called for the development of medicines that could ease COVID-19 symptoms.

As the local RDI sector started looking for remedies for the disease, the government turned to supporting the various players of the national economy. Palkovics said on April 7 that the government would cover 70% of wage costs for reduced hours at businesses hardest hit by the

“The coronavirus pandemic is causing an awful lot of difficulty for everyday routines, but it also highlights that Hungarians have not lost their good will or their readiness to help. There are stories in the news, one after the other, of private individuals, organizations and businesses that have selflessly helped others, often through creative solutions and innovative ideas.” pandemic, which would include 40% salary coverage for engineers working in research and development.

Just a week later, State Secretary Sándor Bodó, of the Ministry for Technology and Innovation, announced wage subsidies covering 40% of super-gross wages up to HUF 318,920 per month for some 33,000 researchers at businesses in the RDI private sector would be available.

By April 20, the EC had approved an EUR 88 mln aid scheme to support researchers in all sectors in Hungary, concluding that the scheme was “necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a member state.” Meanwhile, the

National Research, Development and Innovation Office (NKFIH) called for fresh ideas to tackle the challenges the coronavirus pandemic has caused, together with the innovation ministry, offering a total of HUF 60 mln in funding for universities, business incubators and organizations supporting businesses.

“The coronavirus pandemic is causing an awful lot of difficulty for everyday routines, but it also highlights that Hungarians have not lost their good will or their readiness to help,” said State Secretary Tamás Schanda.

“There are stories in the news, one after the other, of private individuals, organizations and businesses that have selflessly helped others, often through creative solutions and innovative ideas. That’s what we want to support with this tender,” he added.

As workers started returning to their jobs in May, positive RDI news emerged once again. Minister of Foreign Affairs and Trade Péter Szijjártó announced a HUF 6.5 billion investment by Turkish farm machinery manufacturer Yaris Kabin in Iváncsa (58 km southwest of Budapest), creating 150 jobs, where the firm will also undertake research and development operations.

A lab technician at the Szeged ELI super laser.

A Pécsi Brewery-led consortium, in announced in May it was embarking

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on an R&D project to utilize byproducts from brewing through an investment of HUF 1.7 bln, supported by a HUF 1.2 bln joint EU and national grant. Zoltán Szemerey, a board member, forecast the research would turn brewing byproducts into value-added food products to reduce environmental footprint.

Photo by Chokniti Khongchum/Shutterstock

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SUPER LASER In mid-May, Szeged’s Extreme Light Infrastructure (ELI) super laser research center and its Czech sister laboratory, together with Italy and Lithuania, applied to the EC to create a European Research Infrastructure Consortium (ERIC).

“This application is a significant milestone after a decade of planning and construction,” said Allen Weeks, director general of the ELI Delivery Consortium.

ELI’s Hungarian center focuses on ultrashort light pulses experiments, while the Czech sister center carries out ultrahigh intensity light.

“Operating the two facilities will be more efficient and enable joint development. But the biggest impact for scientists is getting access to so many quality lasers through one organization,” Weeks said.

Elsewhere, Hungarian researchers established the laboratory conditions to make the antiviral favipiravir successfully used to tread COVID-19 patients in Asia. The innovation ministry said production of the drug would start in the fall. The procedure was developed by the Natural Sciences Center and the active ingredient would be produced by Első Vegyi Industria and Gedeon Richter, leaving the production of the final medicine to Meditop Gyógyszeripari, after three phases of clinical testing wound up by the beginning of fall. The NKFIH supported the project with more than HUF 370 mln.

In June, the University of Debrecen laid the cornerstone of a HUF 8 bln vaccine plant and innovation center in its industrial park, which is

expected to turn out small batches of vaccines to further strengthen the educational institution’s cooperation with the industrial sector. University chancellor Zoltán Bács said the threestory innovation center would be an important meeting point for startups, research and companies to serve as a “community innovation marketplace.”

To keep the sector going, the government gave a greenlight to ITM’s RDI strategy in May, earmarking HUF 53 bln for innovation projects from a HUF 145 bln NKFIH fund to serve job creation, job retention and strengthening the RDI capabilities of SMEs. The ministry, furthermore, promised to allocate more support to market-oriented RDI projects, and make it easier to apply for patents and intellectual property protection.

Innovation minister Palkovics also hinted that the central budget may see an additional allocation of HUF 22 bln in 2021, to the currently available HUF 17.5 bln, which was cut by 69% from 2019, for the research institutes of the Eötvös Loránd Research Network (ELKH), which was established in 2019 to take over the previous network of the Hungarian Academy of Sciences.

The summer served up more good news relating to funding. In July, Palkovics revealed plans to spend

almost HUF 14 bln on establishing 18 national laboratories, focusing on R&D activities centered around industry, digitalization, culture, family, health, society and the environment to support autonomous systems, efforts against climate change, the development of artificial intelligence and virology.

In August, the government reallocated budget funding of HUF 31.4 bln to achieve the 2020 goals of the NKFIH from the Economic Defense Fund, chiefly to fight the negative impact of the pandemic and support economic growth. At the time, funding allocation stood at almost HUF 145 bln to support market-driven innovation, startups, and private and public sector research centers.

June’s European Innovation Scoreboard report found that Hungary’s innovation performance has been growing relative to that of the EU, particularly accelerating since 2017, putting the country at 66.4% of the European average. Compared to its Visegrád Four peers, Hungary finished ahead of Poland (58.9%) and was slightly behind Slovakia (66.6%), with the Czech Republic well clear of them all (at 84.3%). The annual report identified employment, sales and an innovation-friendly environment as the country’s strongest factors, while the weakest dimensions were the number of innovators, human resources, and finance and support.

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IMPROVED EDUCATION KEY TO BETTER R&D SCORES In line with the Europe 2020 strategy, the objectives of Hungary’s National Strategy for Research and Development and Innovation for the period 20132020 were to increase R&D expenditure to 1.8% of GDP by 2020. While spending on R&D in Hungary is more or less on par with the regional average, and it has been increasing lately, last year it was slightly lower than in 2018. However, spending alone is not the key to improve the country’s competitiveness in the field or its position in innovation scoreboards.

For that, more structural changes are required, including the improvement of education, one R&D expert tells the Budapest Business Journal.

By Zsófia Végh According to the most recent data from last December by the Central Statistical Office (KSH), Hungary spent 1.48% of its GDP on R&D in 2019. While the trend is growing, mostly due to corporate activities, its pace is more moderate than that of the GDP increase. As a result, the figure is lower than the year before (1.53%), when more than HUF 654 billion was spent on research and development, the second highest since 1991.

As for the locations that received funds in 2018, research institutes took the lead with 76% of the national R&D expenditure or HUF 495 bln.

Another 13% (HUF 83 bln) was spent in higher education, with 11% (HUF 71 bln) in institutions belonging to the public finance sector and other budgetary institutions.

Regarding what the money was spent on, HUF 129 bln was paid from the state budget’s R&D appropriation for R&D purposes.

HUF 39 bln, or 30% of this amount, was allocated for research to improve the general level of knowledge. Another HUF 23 bln (18%) was spent on industrial production and technology, HUF 11 bln (8.8%) on agriculture, while HUF 19 bln (15%) went for socioeconomic research on health, according to KSH data.

Detre Horváth

When it comes to regional comparisons, the European Innovation Scoreboard, which has been published since 2010, is a good indicator of how each EU member state is doing in the field. Based on the complex innovation index, the member states are put into four categories: leading innovators whose performance is 20% above the EU average, including Sweden, Finland and the Netherlands. They are followed by strong innovators (Austria, Belgium, Estonia, France, Germany, Ireland, Luxembourg, and the United

“The Hungarian figures are more or less in line with the regional average, and we currently spend about one and a half percent of GDP on research and development.”

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“Increasing funding amounts is not in itself a solution. We believe that the way to bring domestic R&D to a much higher level in the foreseeable future […] will be through the education system.

It is there where a significant additional source of funding should already be provided so that capacity can be substantially improved in 5-10 years.”

Kingdom), whose performance is between 90-120% of the EU average.

The next group is the moderate innovators, with 50-90% of the EU average. This is where Hungary and most of its neighbors (the Czech Republic, Poland, Slovakia, and Slovenia) are found, with the exception of Romania, which belongs to the group of lagging innovators that are at 50% below the EU average.

In 2019, Hungary placed 23rd among the 28 member states and was placed third among the Visegrád Four countries, after the Czech Republic and Slovakia, but ahead of Poland.

REGIONAL AVERAGE “The Hungarian figures are more or less in line with the regional average, and we currently spend about one and a half percent of GDP on research and development,” confirms Detre Horváth, tax and R&D expert at PwC Hungary.

“While this is higher than the domestic values of previous years, the breakthrough that would be needed to catch up with countries that really benefit from technological development is yet to come. To do this, the current spending should be doubled,” Horváth adds.

In Hungary, R&D intensity was 1.35% of GDP in 2017, according to the most recent data provided by the European Commission. In Slovakia it was 0.88%, in Slovenia 0.86%, in the Czech Republic 1.79% and in Romania, 0.5%. By source of fund, 56.4% of GDP-expenditure on research and development came from the business enterprise sector, 26.2% from the government, 0.7% from the private non-profit sector, and 16.6% from abroad.

In international comparisons, significant funding is also available in cases where big companies undertake to launch large-scale research and development projects in Hungary, Horváth points out. These projects can receive priority financial support, which, together with the related tax incentives, can amount to up to 30% of the total project cost over a number of years. There are few such generous funding opportunities in European comparison.

“It is also good news that we see that the government is providing more and more resources to support research and development and is committed to maintaining R&D jobs even during the COVID situation,” Horváth notes. In contrast to many other areas, a substantial monthly salary subsidy of several hundred

thousand forints has become available for maintaining research and development positions.

SUPPORTED POSITIONS “We hope that in the second wave of COVID, it will be possible to support these positions to a similar extent,” he adds.

“At the PwC network, our foreign colleagues are always surprised by the high rate of tax and non-tax subsidies that are available in connection with research and development in Hungary,” Horváth explains.

“Where we see the challenge is the fact that Hungary rarely comes up as a possible location for the establishment or expansion of truly significant R&D centers in large multinational companies,” he says when asked where the country is lagging behind.

“The reason for this is not so much the support funds, rather that these groups, at least when it comes to high value-added positions, tend to stick to well-proven locations that can be planned and calculated in all respects.

Obviously, this also has to do with the international reputation of the education system, which is difficult to improve in the current funding environment.”

So, what would be needed for research and development to improve in Hungary. According to the expert, it is not simply a case of more funding.

“Increasing funding amounts is not in itself a solution. We believe that the way to bring domestic R&D to a much higher level in the foreseeable future, also outstanding at the regional level, will be through the education system. It is there where a significant additional source of funding should already be provided so that capacity can be substantially improved in 5-10 years,” Horváth explains.

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CASE STUDY DIGIC PICTURES: MOVIE-MAKERS FOR THE GAMING WORLD flow of information with the client is essential and the company places great emphasis on talking with the customer. A dedicated account manager team facilitates communication between the customer and the production unit; it is through these that customer expectations and manufacturing information reach the team.

Ubisoft, Activision, CD Project, and Sony Computer Entertainment are just a few of the bigger names among the companies for which DIGIC Pictures has made cinematic trailers, intros, and in-game cut-scenes since its foundation in 2002.

By Gergely Herpai The studio’s first work was an intro and cut-scenes for the real-time strategy video game “Armies of Exigo”, developed by Black Hole Entertainment. Thanks to its huge success, more and more major publishers asked them to make similar film intros, cut-scenes, trailers, or commercials.

Thus DIGIC Picture’s name has been associated with such famous game franchises as the Assassin’s Creed

series, Final Fantasy, Mass Effect 3, Civilization V, The Witcher 3, Halo 4, Destiny, and the Call of Duty series, among others.

While the Hungarian video game industry’s current situation, as far as the development of actual video games is concerned, isn’t very impressive, in the field of animation production, DIGIC Pictures truly stands out, in Hungary and internationally.

For Alex Sándor Rabb, CEO, producer and co-founder of the company, a

“The very first step in working together is to get the treatment, the storyboard, or even the entire script from the client. Based on this, we get an idea of the world of the film, the characters and the locations, which helps us to create a so-called 3D animatic, in which we outline how we imagine the film,” Rabb explains.

How much they get a free hand in shaping the story is customer dependent. Some clients will come with a fully developed concept, or will know exactly what characters they want. Others will ask for DIGIC Picture’s input.

Rabb gives one example: when making the animated short film “The Secret War” for the “Love, Death & Robots” animation anthology running on Netflix, the client was fully open to DIGIC’s suggestions. In this case, the team worked based on a script.

All the other creative and production developments needed to make the film were entrusted to them.

MAJOR STARS DIGIC Pictures also sometimes works with major stars such as Kevin Spacey or John Malkovich

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for their respective roles in “Call of Duty: Advanced Warfare.”

“Kevin Spacey and I had the opportunity to shoot for Advanced Warfare in Los Angeles, and John Malkovich was recorded in Paris.

Kevin Spacey was a fantastic and dedicated actor. Many times he suggested more and more recordings because he felt his acting wasn’t perfect yet,” recalls Rabb. “He was prepared as if he were shooting a high-budget live-action movie. A true pro who added a lot to his role because he wanted to give his best to a game as well.”

Rabb explains that most actors don’t usually travel to Budapest because of the motion capture technology, which is used to record the actions of human actors, before using that information to animate digital character models in 2D or 3D computer animation. Only if the actors are Europeans or are shooting in Europe will they fly into the capital for a day, for example for the sake of 3D Photoscan.

Looking at the current situation of the animation profession in Hungary, DIGIC Pictures does not have the field to itself. According to Rabb, there is

an extremely strong professional environment in Hungary, with many animation professionals and programmers.

“However, I believe that a good professional alone, unfortunately, does not always get such a professional opportunity compared to working for a company with an already established network of relationships,” he added.

“In 2002, I followed this line of thought and we founded DIGIC, seeing an excellent opportunity in the professionally established environment of this era. It took nearly 20 years of hard work and now I can say that we are a company that is at the forefront internationally and has recurring customers such as Netflix, Sony, Microsoft Studios, Activision, Ubisoft, Bungie, Riot Games, and Square Enix.”

Rabb admits that the first five-to-10 years were especially difficult for DIGIC, because it was still building up its portfolio. At that time, it had to fight hard for all the work opportunities it could get. This has changed so much that it is already counted on by potential customers and is usually on the list of game

producers as well. But this is not enough for success, as for each project the game companies choose the animation studio that it considers will be the most suitable for the job.

SUCCESS-HUNGRY “In this line of work, it’s not enough that someone made a good animation years ago. They look at how our latest films have succeeded. It is not enough to rely on old successes, as there are always talented and success-hungry claimants to the throne who are applying for the same job as us,” Rabb explains.

He says DIGIC needs to pay close attention to its competitors in the United States and Canada, primarily because of its extensive customerbase there.

Rabb adds that being based in Hungary makes the job more difficult in some respects. Due to language barriers and time differences with North America, communication is somewhat more difficult. Therefore, DIGIC needs to be much better than a Montreal team, for example, if it is to be chosen by a big publisher there.

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Getting the educational background to join the profession can be a challenge, given the wide range of requirements.

3D animation in a broader sense is an extremely exciting, diverse and intricate means of adding animation or visual effect for movies. Indeed, according to Rabb, it’s a form of applied art, an interesting mix of technology and flair. As it covers a lot of sub-fields, those working in this profession also come from a lot of backgrounds. There are a wide variety of jobs, from programmers to modelers, animators, assistants, coordinators, to visual designers.

If someone specifically knows that he or she wants to be employed in the industry, there are both public and private education institutions.

In Hungary, the art part is covered

by Moholy-Nagy University of Art and Design Budapest (MOME), animation by Budapest Metropolitan University (METU) and the technology (informatics, programmingmathematics) by Budapest University of Technology and Economics (BME) and Eötvös Loránd University (ELTE), but the various fields are necessarily quite different.

BME and ELTE do not have a specialization in animation, computer

“The very first step in working together is to get the treatment, the storyboard, or even the entire script from the client. Based on this, we get an idea of the world of the film, the characters and the locations, which helps us to create a so-called 3D animatic, in which we outline how we imagine the film.”

generated imagery (CGI) or visual effects (VFX), but there are related compulsory and admissions subjects.

There are several private educational institutions as well, which can provide shorter and more targeted training in specific areas such as VFX, visual design, character modelling, or software-based training.

How has DIGIC coped with the move to home office? The studio started a gradual transition to working from home in mid-March. This was a completely new situation, but Rabb says he decided to introduce home office because the most important thing during this period was to keep

the health of his employees and their families and to work continuously on projects. He adds that economic “casualties” were caused because of the COVID-19 situation. “Unfortunately, the health situation also affected us. A previously won project was eventually cancelled precisely because of the virus,” he recalled.

Still, regardless of the difficulties, the creative company has been able to make continuous progress on the production of its films, and expects to have the opportunity to start new projects “of exciting and well-known franchises.” It is also making a trailer announcing some completely new games.

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CASE STUDY RESYSTEN AT THE FOREFRONT OF COMBATING INFECTION FROM CONTAMINATED SURFACES Located in Tรถrรถkbรกlint, a village abutting the southwestern boundary of Budapest, a company with a headcount of just 20 people is in the advance guard of coating technology, a fast-growing sector seen as crucial to the fight against pandemics such as COVID-19.

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By Kester Eddy In 2011, János Pintér was perusing a research paper on the biological properties of Titanium Dioxide (TiO2).

Although an information technology professional, Pintér’s entrepreneurial spirit was aroused: he found the results intriguing.

Prepared correctly, a very fine nanocoating of TiO2, when exposed to light, acts as a catalyst to create chemicals that decompose and destroy cell membranes. Because most microbes are single cell cells, they die very quickly once they come in contact with any such coating.

Knowing that there were serious issues with infections by highly resistant, socalled “super bugs” in hospitals, Pintér saw huge potential for TiO2, a food additive used in such everyday items as toothpaste and chewing gum, in combating this threat. He quickly began working with contacts in chemical research laboratories to find ways to create an affordable titanium dioxide-based coating that would act as a safe, efficient disinfectant over a long time period.

“It takes time for any new hygiene technology to be accepted, and we had to prove our worth. The early adopters of ReSysten were public transport companies and the food industry.” technology to be accepted, and we had to prove our worth. The early adopters of ReSysten were public transport companies and the food industry,” Pintér, the company’s chief data officer, says.

LARGE-SCALE TESTS Since the pioneering days, researchers have continued to fine tune the formula, “vastly improving” the durability and sensitivity to lowlight environments. ReSysten, in cooperation with transport companies, has also carried out several largescale tests on trams and buses, and even escalator hand-rails on the Budapest metro system. Pintér describes the latter experiment as “the toughest of them all”.

“I believe this remains the only largescale handrail coating experiment using a photocatalytic anti-bacterial solution in the world,” he says.

“Think about it, the Budapest metro moves more than one million passengers every day. The coating has to perform in relatively lowlight conditions, with hundreds of thousands of passengers adding to the contamination every day.”

In addition, the handrails themselves are subject to continuous abrasion from the driving mechanism.

Astonishingly, eight months after the application the coating performed better than when

“In short, we wanted to revolutionize the anti-microbial coating industry, which was then still in a very much nascent state of development, with an industry-standard solution,” Pintér told the Budapest Business Journal.

After three years of research and development, the former IT specialist believed his spray-on product had the simplicity of application, cost and lifespan that made it competitive with anything else on the market.

Teaming up with Péter Lohockzy, a management and sales expert who became CEO, the pair founded ReSysten Hungary Kft., a company synonymous with its core product.

However, they soon found the going tough, even in their native Hungary.

“It takes time for any new hygiene

From left, Shajjad Rizvi, János Pintér, and Péter Lohockzy at the U.K. launch of Resysten at the Hungarian embassy in London.

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500,000 from coating in excess of 30,000 sqms of surface area.

“That may not sound like much, but we only coat critical touch areas, not, for example the roof or floor of a tram.

In offices, if the building is 1,000 sqm, we coat about 15-20% of that,” Pintér notes. Then, early this year, came the coronavirus.

originally applied, a result put down to the effect of low light levels, the coating actually improving as exposure to light built up.

Growth, however, has been steady, if limited, and largely restricted to Hungary. ReSysten has an impressive array of companies and institutions on its website that have

signed up for the coating, but most are domestically based – or the local subsidiaries of multi-national operations, such as Audi and Spar.

(One notable exception is Austrian Federal Railways, ÖBB.) Prior to COVID-19, the volume of work doubled each year, and in 2019 the company had revenues of some EUR

‘BONKERS’ “Things went bonkers,” is how Shajjad Rizvi, the international development manager, succinctly describes interest in ReSysten as the pandemic exploded.

Rizvi, a Briton who joined the company in part to help it respond to the surging demand, says that over the summer, mostly as a result of online approaches, the company has signed distribution agreements in more than 20 nations.

Managing, and particularly financing, such expansion, causes its own headaches. But such is the demand that ReSysten has been able to team up with local partners who have been

ELIMINATING THE RISK OF INFECTION IN THE AVIATION INDUSTRY The fear of falling victim to the coronavirus has brought the airline industry to its knees, decimating passenger loadings around the globe.

and are thus potentially deadly transmitters of infection, even if few in the queues eager to get past the X-ray machines are conscious of the risk.

But that fear is mainly perceived to be in the flight itself. In fact, the chances of infection go well beyond the time in the aircraft, and ReSysten was working with Budapest Airport, the operator of Ferenc Liszt International, last year (well before the onset of the COVID-19 pandemic) on a project to eliminate pathogens on the humble tray used at security checks.

Using industry-standard ATP swab tests, ReSysten measured the results before applying a coating, and three months after application to assess the relative merits of its product.

As every frequent flyer knows, these trays are used by scores, possibly hundreds of passengers every day,

FLIGHT-WORTHY The Budapest-based company also insists its coatings are equally

The results (see chart) were dramatic, a virtual elimination of pathogens on the trays a full 90 plus days after treatment.

effective and, indeed, cost-saving when applied to the flying part of air travel.

“A modern, mid-range airliner, such as the A321 Airbus, working with a modern, low cost carrier, will normally do four trips a day, and that means, if sanitizing with once-use materials, four wipe-downs between flights,” says Shajjad Rizvi, international development manager for ReSysten.

Assuming a time of one hour for a two-person team to wipe down properly, this means each plane needs eight-man-hours per day for sanitation, he argues.

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ready to invest themselves in order to become the exclusive distributor for their nation and initiate use of the much needed coating.

“The process of approval in each country varies, and so does the cost. In the Netherlands, for example, it takes a year for the approval process to run its course, and the cost is close to EUR 50,000. We have a partner working on this,” says Rizvi.

In other countries the barriers are even more daunting. In the United States, the approval also takes time and the cost can climb into the millions. Again, ReSysten has begun working with local partners to make progress.

In some cases, countries have yet to establish regulations and standards for TiO2-based, antimicrobial coatings, and approval is something of a moving target, being written on the hoof.

“They don’t even have a process for our type of technology, and we have

“We only coat critical touch areas, not, for example the roof or floor of a tram.

In offices, if the building is 1,000 sqm, we coat about 15-20% of that.”

to do extra testing. This all takes time and money, and it can be a real pain, you can imagine,” says Rizvi.

These processes have been further complicated by the new sectors seeking protection, including, for example, office buildings, schools, gyms and courthouses.

WELL-FINANCED Naturally, given that the photocatalytic properties of TiO2 have been known about for a century (and its ability to destroy pathogens for perhaps half that time), ReSysten is facing stiff, and often well-financed competition,

BUD AIRPORT – SECURITY CHECK TRAYS – ATP MEASUREMENTS 422640

307829

188003

331 Low Wall Tray

High Wall Tray RLU Values TO-2020.03.19.

Scaled up, such operations will result in a total wage bill of approximately EUR 15,000 per plane per year, not including materials.

“Some are using TiO2 as a base, some silver or copper as a base,” says Rizvi. “I guess one area where we differ is, we stress the application is as important as the product, if the coating is not applied correctly you will not get the desired result, such as the one-year effectiveness that we get from ReSysten.”

Indeed, the durability of the Hungarian product is a huge plus in its favor; one competing product in the United Kingdom with an advertised lifetime of just 30 days

Naturally, cabin crew or someone would still have to do a litter clean up, but ReSysten would guarantee the surfaces free of infection for an entire year.

The cost benefits to any airline using the system would clearly be huge, which could, naturally, be passed onto the price of a ticket.

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965

with many more players appearing in the world of coatings.

1582 Padded Tray

238 Padded Tray Sidewall

RLU Values T1-2020.06.24.

“We would do the same jet for approximately EUR 5,000, and that covers the material costs of 20 liters of fluid, valued at EUR 3,000,” he says.

“When I recently quoted a ReSysten solution to a low-cost carrier, it came to just EUR 0.12 cents per passenger over the year,” he says.

So far, however, “no airline has yet bitten,” he admits, though he argues take up depends on timeconsuming approvals and is “just a matter of time.”

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“The process of approval in each country varies, and so does the cost. In the Netherlands, for example, it takes a year for the approval process to run its course, and the cost is close to EUR 50,000. We have a partner working on this.”

failed to live up to its hype, and was forced to withdraw the claim.

It is, then, no surprise that ReSysten is very coy about its business secrets.

Asked for only the basic details of its production process, the normally voluble Rizvi is uncharacteristically tight lipped.

“We buy the raw ingredients; I can’t say more than that. The formula has other elements, not just TiO2.”

GUESSING GAME With the current explosion of interest, coupled with the uncertainties of approval, ReSysten’s financial future looks full of promise, but the shortterm is something of a guessing game.

“If all 20 plus countries come online – but we are still in the regulatory approval process in many of these, even if some are in the final stages – we are looking at perhaps EUR 0.5 – 1 mln in revenues generated from

each country,” says Rizvi. “I’m using pre-COVID and Hungary’s model as a benchmark here, but these countries also have the potential for a lot more.”

Astonishingly, ReSysten has financed its development thus far from its founders’ own pockets and generated profits. Yet, despite the global concerns caused by the COVID-19 pandemic fueling unprecedented demand, this small Hungarian company (it currently has a mere 20 employees) is wary of external funding.

“We have always been keen to explore funding, but not at the risk of losing control or direction of the company,” says Pintér, who adds: “We are six years old, have a positive bank balance and no debt. We are not opposed to investment; the added capital injection would fastrack so many aspects [of development]. But, we don’t want investors who are keen on making a quick buck, and want control of the company’s direction.”

Pintér had confidence in the future well before the onset of the coronavirus pandemic, and his optimism stretches beyond it.

“Coatings are the new world in hygiene, and we will see huge interest and growth in this area,” he argues.

“Certainly, COVID-19 has accelerated the demand for ReSysten locally and internationally. But we’ve had six years of growing the company based on the need for increased hygiene solutions, and when COVID-19 is done and dusted, hopefully as soon as possible, the need for ReSysten will continue.”

THE ATP TEST: HOW TO MEASURE CONTAMINATION OF A SURFACE ReSysten, as the company explains on its website, uses so-called ATP technology to check the activity level of micro-organisms on a surface, both before and after treatment.

The test is a standard used in medical and pharmaceutical facilities, along with food and drink industries, based on the

levels of detection of adenosine triphosphate, or ATP. ATP is a molecule found in and around living cells, and as such it gives a direct measure of biological concentration and health. ATP is quantified by measuring the light produced through its reaction with the naturally occurring firefly enzyme

luciferase, using a luminometer. The amount of light produced is directly proportional to the number of living organisms present in the sample.

Modern monitoring systems are capable of immediately detecting the presence or absence of organic material, alive or dead, on solid surfaces.

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BUSINESSES, UNIVERSITIES WANT MORE PARTNERSHIPS

Photo by GaudiLab/Shutterstock

Hungarian universities and higher educational institutions, on one hand, and private businesses on the other, see bilateral partnerships as beneficial contributors both to the future labor market and research and development activities. So much so, that both sides want more cooperation.

By Christian Keszthelyi Only one fifth of Hungary-based smaller businesses have any type of cooperation with higher educational institutions, despite the fact that both parties can reap many benefits from such an arrangement, according to a survey by the Budapest Chamber of Commerce (BKIK). More than half of the surveyed respondents believe that an intermediary would be needed to bridge the gap, despite there being demand on both sides according to large businesses and human resources leaders.

The survey conducted deep interviews with research business managers and educational institution leaders, with the representation of almost 400 respondents from the SME sector.

Educational institutions identified cooperation between education and the economy as the cornerstone for training professionals and strengthening R&D. The cooperation envisaged can take many forms, such as dual training, or internships at project laboratories.

And while large corporations are often already present in partnerships, smaller companies are harder to find.

A large majority of the respondents who are already engaged in partnerships tagged their cooperation as win-win situations, while more than 80% rated their joint work as four or five on a scale of five. Respondents identified supporting the labor market and creating social value as the most important factors.

Nevertheless, both parties do come across bumps on the road.

Universities say that many gifted undergraduate students receive job offers “too soon�, so they cannot advance to post-graduate studies, which hurts societal values.

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Photo by Photographee.eu/Shutterstock

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Furthermore, employers sometimes keep students working too long hours, universities reckon. Businesses can see their investment go to dust if the students they train actually chose rival competitors when they do enter the job market, while some students seem to lack motivation, placing a burden on their employers.

The interviews revealed that higher educational institutions would be open to any kind of help in establishing partnerships with businesses, as building bridges to industry is a lengthy and difficult process for which they need to allocate professional human resources, Gabriella Szányi, BKIK’s PR and marketing manager said. She added that businesses sometimes do not know how to initiate such partnerships, or whether they would classify as a worthy party for such cooperation.

The desire from both commerce and academia revealed in the BKIK survey seems to have struck a chord with the Hungarian government. A key element of its higher education and economic strategy is to create an environment where international and Hungarian companies, as well as universities and research institutes, can work together effectively, Prof. Dr. József Bódis, State Secretary for Higher Education,

Innovation and Vocational Training, said at the end of September. He was speaking an event announcing that Knorr-Bremse Budapest and the Faculty of Electrical Engineering and Informatics at Budapest University of Technology and Economics (Budapesti Műszaki és Gazdaságtudományi Egyetem or BME for short) had agreed to launch joint research and scholarship programs. Braking system developer and manufacturer Knorr-Bremse is supporting the faculty with a grant of HUF 25 million.

“In Hungary, only 400-450 patent applications are submitted annually to the Hungarian Intellectual Property Office (HIPO), which is actually an improvement considering the downward spiral of the last years, but it is very important to draw enterprises’ attention to the fact that with different protections they could obtain further benefits (tax reductions, funds) and perhaps more importantly, they could hold more value on the capital market,” Gyula Pomázi, president of HIPO, said in August. He was speaking at a TUNGSRAM-ILEX Innovation Marketplace Powered By Corvinus-BIK event to introduced its achievements since its launch in the beginning of the year.

“Besides official activities and R&D and innovation qualifications, the primal goal of HIPO is education regarding the value of intellectual property and the Innovation Marketplace [a service that helps Hungarian enterprises create new national and international markets for their products through prominent R&D activity] is an excellent practical implementation of this idea. Therefore, the Hungarian Intellectual Property Office stands behind this initiative as the representative of the entire industrial property rights scene,” Pomázi added.

DEVELOPING SCIENCE, ECONOMY Large international companies such as Knorr-Bremse guarantee that the members of Hungarian higher education such as BME can serve the development of science and the economy with increasingly wideranging economic relations, Bódis said when signing the cooperation agreement. This is of primary interest to Hungary, as the competitiveness of society can be sustained by the partnership between industry and education, he added.

2020 has, in fact, seen a good number of partnerships between universities and businesses. The University of Szeged (SZTE), for example, agreed to set up a HUF 3.5 billion biobank to directly join the network of the Biobanking and BioMolecular Resources Research Infrastructure - European Research Infrastructure Consortium (BBMRIERIC), under an agreement the two parties signed in January. SZTE Rector László Rovó reckoned the agreement to be a recognition of the university’s high-standard of education and research activities.

A closer relationship between the education sector and businesses can also support the emergence of more patents, an area where Hungary has been lagging in recent times.

Hungarian multinational oil and gas company MOL Group partnered with the Veszprem-based University of Pannonia to set up a National Research, Development and

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The Hungarian arm of GE Healthcare and the University of Debrecen launched a 10-year program in March focusing on research, while the two parties had already been engaged in talks relating to expanding the cooperation to climate and energy technologies, autonomous machinery and laser physics, Minister for Innovation and Technology László Palkovics said. In the first phase, 15 researchers will work on projects.

UNIVERSITY TRINITY In April, three Hungarian universities, the University of Miskolc, the University of Dunaújváros and Szechenyi Istvan University (in Győr), completed a HUF 1.6 billion aluminum production technology development project, partnering with U.S.-owned Arconic-Kofem Mill Products Hungary. As a result of the project, which received a HUF 1

The interviews revealed that higher educational institutions would be open to any kind of help in establishing partnerships with businesses, as building bridges to industry is a lengthy and difficult process for which they need to allocate professional human resources.

The Hungarian arm of German giant Robert Bosch joined Knorr-Bremse in inking its own HUF 1.66 billion partnership with BME in June to develop better testing environments for self-driving vehicles. The project, which received a HUF 993 million grant from the National Research, Development and Innovation (NKFI) Fund, will end in 2023.

bln European Union grant, Hungarian higher education will adopt Arconic’s research technologies.

The Ministry for Innovation and Technology, Semmelweis University, and Oncompass Medicine, a healthcare and biotechnology business, signed a partnership to support healthcare innovation, focusing on personalized diagnostics and therapies, and the application of artificial intelligence in medicine.

In August, innovation minister Palkovics said the government would support a research partnership between MOL, the local unit of German car maker Audi and the University of Szeged through a HUF 4 bln grant. The research hub, known as the Sustainable Green Chemical and Mobility Competency Center, based in the Szeged Science Park, will be set up by 2022 to support basic and applied research on crude oil and oil derivatives.

In June, as one of the many attempts to deal with the epidemiological factors of the COVID-19 virus, Austria’s Central European Biotech Incubator and Accelerator (CEBINA) and researchers at the University of Pécs started partnering up on creating a “thirdgeneration” vaccine, with forecast Phase I clinical tests to come in 2021 Photo by Guschenkova/Shutterstock

Innovation Office-funded circular economy sustainability competency center, through an investment of HUF 4.8 bln. Water and waste management, recycling, sustainable energy sources, city development and environmentally-friendly tourism are at the forefront of the cooperation that also includes Hidrofilt, Netta Pannonia, Bay Zoltán Applied Research and Nagykanizsai Városfejlesztő as partners.

Additionally, in the framework of the 2020 Thematic Excellency Program, 27 universities and state research institutes will receive a combined HUF 43.9 bln from the NKFI Fund. When announcing the funding, State Secretary Tamás Schanda, of the Ministry for Innovation and Technology, said it would support 92 research projects.

Partnerships between educational institutions and businesses are the key to a better future, especially as our world is evolving so fast that universities must train professionals for jobs that do not exist at the time of enrollment.

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CASE STUDY PAYMENT WITH YOUR FACE AND PALM

with their smartphone camera, in order to allow the system to create a digital profile of their palms and faces.

Next, they have to register their bank card details on an integrated, secure payment gateway. The actual in-store payment process is implemented by using a special point-of-sale machine, equipped with cameras and facial recognition software that scans customers’ faces and palms and compares them to the biometric template created in advance.

In the case of a match, the payment is authorized, and the amount is charged to the credit card registered in the payment gateway of the corresponding PeasyPay account.

The fintech company responsible for PeasyPay was launched by EIT Digital in 2019 via its Innovation Factory, where EIT Digital’s partners come together to launch a deep tech venture into the market.

A new biometric payment system developed

by PeasyPay, a startup incorporated in Hungary, looks to make payment faster and more convenient through a solution that allows users to pay by just showing their faces and taking a picture of the palm of their hands.

By Bence Gaál The technology is being launched

by EIT Digital, a leading European digital innovation and entrepreneurial education organization driving Europe’s digital transformation.

“The system is composed of three elements,” PeasyPay’s product leader

Csaba Körmöczi explains, “a smartphone app for the customer, used only during registration, a smartphone app for the merchants, and the payment terminal.”

PeasyPay’s app is available for free on both Android and IOS operating systems. First, customers need to take a picture of their hand and a selfie

PAY WITH A SMILE The project is codenamed “Pay with a Smile” and it is part of the digital finance portfolio of the EIT Digital Innovation Factory. The international partnership behind the initiative includes Spanish partners Ci3 and Liberbank, Hungarian partners E-Group and OTP Bank, and Slovenia’s AV Living Lab. The PeasyPay solution has also been designed to be fully compliant with all European regulations, especially GDPR and national data protection laws.

Under GDPR provisions, the processing of biometric data for uniquely identifying purposes is not authorized, unless the data subject has given explicit consent for a specified purpose.

While other payment solutions are fully dependent on a proprietary infrastructure and ecosystem, PeasyPay is based on an open system, meaning that any bank and any merchant can join.

In order to let users have full control over their spending, the app also has

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Csaba Körmöczi

a feature which allows them to set spending limits and track all payments made through the system.

The new payment system’s pilot phase began last year in Hungary, and has been operational in Budapest since December 2019, albeit with a break in the spring due to the COVID-19 pandemic.

The Hungarian pilot involves a coffee shop frequented by the tech-savvy employees of the capital’s District II. In addition, a new marketing campaign for PeasyPay, organized with the help of OTP Bank and E-Group, is expected to be launched soon, targeting members of the local hospitality industry and retail sector.

The testing is not limited to Hungary, however, as another trial is underway

“User feedback was mostly positive, and while, naturally, there were problems of varying degree at the time of the system’s launch, such as minor translation issues and speed complications related to network problems, we managed to fix them quickly.” in Guadalajara, Spain. The pilot phase in that city began in July this year, involving four small shops located in the city center, and is gradually being extended to other businesses.

In total, 25 close proximity shops (bakeries, butchers, grocery stores, cafés, bookstores, print shops and herbal shops) will eventually participate in the Spanish trial. According to future plans, the test will be extended to include department stores as well.

POSITIVE FEEDBACK “User feedback was mostly positive, and while, naturally, there were problems of varying degree at the time of the system’s launch, such as minor translation issues and speed complications related to network problems, we managed

to fix them quickly,” Körmöczi tells the Budapest Business Journal.

He adds that a number of requests for new functions were received, mostly from merchants. “We have already fulfilled many of these, and we are looking into possible solutions for the remaining ones.”

While in some cases, feedback during the pilot phase differs greatly depending on the country where the product is tested, this does not seem to be the case for PeasyPay. “Basically, we see serious differences not between countries but between user groups. The attitude of a merchant who has so far been paid only in cash is completely different from that of someone for whom a credit card or even a mobile payment is natural. On the consumer side, at least in the beginning, there is more interest, especially from the younger age group,” he adds.

The testing phase will soon be extended to other markets as well.

In the United Kingdom, the system is being set up to let taxi drivers seamlessly pay the fee to enter Glasgow Airport’s parking area.

Körmöczi says that the concrete schedule for a worldwide rollout is in the works, noting that it will happen in multiple phases. Besides the U.K. trial, the next stages will most likely involve Slovenia and Italy.

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AI STRATEGY: PREPARING HUNGARY TO TAKE A 21ST CENTURY LEAD As a result of the cooperation between the Ministry for Innovation and Technology and the Artificial Intelligence (AI) Coalition, which gathers more than 250 organizations and is run by the Digital Success Program, Hungary’s AI Strategy was launched recently. It foresees gross domestic product and SME efficiency to soar by 15% and 26%, respectively, within the next 10 years. Additional objectives are to offer society large-scale educational and awareness raising programs with the aim to adjust to AI transformation, help a for-profit approach take root in research processes, support responsible management of national data assets, and find effective responses to the challenges posed by automation. The Budapest Business Journal talked to Roland Jakab, head of the AI Coalition (and MD at Ericsson Hungary) about the details of the new plan.

By Zsófia Végh BBJ: What is the importance of the adoption of the strategy from the viewpoint of the economy, the companies and the job market?

Roland Jakab: The Hungarian economy must be prepared for the AI transformation, and that requires raising awareness among citizens and businesses alike. The labor market

will be altered to a great extent with up to 900,000 jobs to be affected by 2030, according to a recent PwC study.

This means that both employees and employers need to do their own homework. Our package of measures aims to set up the educational and institutional framework that can accelerate the widespread adoption of AI-driven solutions. As a result, an AIready workforce and the large-scale use by SMEs of AI are set to create

better paying jobs, and boost overall competitiveness.

BBJ: How will the strategy affect these areas in the next five-10 years?

RJ: The secondary use of data will become commonplace, so regulated trade in corporate records will allow domestic businesses to profit from their own data sets as well as develop solutions based on third party records.

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Photo by Zsolt Biczo/Shutterstock

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Corporate cooperation with research is expected to be taken to a whole new level. The newly established National AI Lab is commissioned to facilitate applied research, while the AI Innovation Center’s task is to help SMEs adopt tech in large numbers.

The latter effort will be backed by the AI Coalition too as it serves as an engine for ecosystem and market building. Thanks to targeted training programs, at least one

quarter of the workforce is bound to find higher value-added jobs. Getting things done in customer services should be automated in 60% of cases nationwide.

Other concrete desired benefits include that 2.5 million citizens should enjoy AI-supported education, two million citizens should actively manage their own data with the help of a data wallet,

Hungary should become the main European center for the development and testing of self-driving vehicles, and 70% of the scheduling of renewable energy production should be carried out by smart technologies by 2030. Also, the emission of ammonia in agriculture is expected to decrease by 32%, and three million citizens will be able to benefit from AI-based services through a digital healthcare system.

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BBJ: What development will take place this year?

RJ: The language tech project has been launched already, but the strategy’s appendix contains a detailed schedule for each planned measure. In some cases, such as competence and infrastructure development, or research, concrete results should be within reach in one or two years. Certain issues such as establishing the regulatory framework should see initial progress as early as this year. A prototype of the data wallet is also expected to be revealed by the end of 2020, and a new powerful High Performance Computing (HPC) facility should be up and running in Debrecen [Hungary’s second city, 231 km east of Budapest] by 2022.

Since tech is evolving at break-neck speed, measures have been scheduled just for the next five years. The plan is to adapt them on the go.

BBJ: How much funding will be provided for the implementation of the strategy?

RJ: As has been said by Minister [for Innovation and Technology] László Palkovics before, some HUF 10 billion has been earmarked to ensure appropriate computing power and to set up the National Data Asset Agency (NAVÜ). The AI Strategy, related projects and the supporting institutions are going to need HUF 170 bln through to 2030. Certain measures laid down in the strategy are not entirely new, though, as they might be under way already, or are about to be implemented anyways, under sector-specific plans. It’s worth noting, however, that since we’re talking about a very fast-changing environment, the strategy needs to be updated from time to time, and that applies to the budget as well. The scale of the resources dedicated for those measures must match the economic weight of the strategy.

BBJ: What fields will be given special attention (and funding)?

Roland Jakab

“Certain issues such as establishing the regulatory framework should see initial progress as early as this year. A prototype of the data wallet is also expected to be revealed by the end of 2020, and a new powerful High Performance Computing facility should be up and running in Debrecen by 2022.”

RJ: We identified a few industries where Hungary could stand the best chance to prevail in the global AI race. Accordingly, healthcare, manufacturing, agriculture, and government administration will be treated as priorities. Apart from that, transport, logistics and energy are also among the sectors with special focus. These are all areas where Hungary has strengths traditionally, it’s worth intensifying research, and state involvement is key for success.

Developing trustworthy AI and making the Hungarian language ready for the age of AI are also part of the effort.

BBJ: What is National Data Capital Agency and what purposes it has?

RJ: NAVÜ’s main task is to make local stakeholders aware of the

importance of the national data assets, and make secondary data use widespread throughout the economy, thus set the data economy in motion. Hungary’s digital sovereignty is at stake here, and we must do everything in our power to create an environment where not only Big Tech but also Hungarian businesses can benefit from the power of data. Collection of data needs to be well-regulated, but rules should be there to let data trade thrive on data marketplaces.

Some such marketplaces will be available on our new website on AI, www.ai-hungary.com, where you can find all related information including news, events, and training programs as well.

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CASE STUDY OLD TIRES GIVEN FRESH LIFE IN BASF, NEW ENERGY DEAL German multinational chemical company BASF SE has signed what it calls an uptake supply agreement with Hungary’s New Energy, a technology firm specialized in the manufacturing of pyrolysis oil derived from waste tires.

Tire Mountain: Viktor Váradi (right), CEO of New Energy, shows Christian Lach (2nd from right), project lead for ChemCycling at BASF, the waste tires which New Energy is turning into pyrolysis oil in its plant in Hungary.

By BBJ Staff According to the agreement, New Energy, based in Dunaharaszti, just 20 km south of the center of Budapest, will supply BASF with up to 4,000 metric tonnes of pyrolysis oil per year derived from waste tires.

In a pilot phase, first volumes of the pyrolysis oil have already been utilized successfully in BASF’s Verbund integrated chemical production site in Ludwigshafen, Germany.

BASF says the agreement is part of its ChemCycling project, which was launched in 2018 and aims to achieve

the chemical reprocessing of postconsumer plastic waste on an industrial scale. The first commercial products came on to the market this year.

The focus of the project is the use of mixed plastic waste, which would otherwise end up in landfill or incineration. Wrapped up in all of that,

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BASF also sees an opportunity to increase recycling rates for end-of-life tires.

BASF feeds the pyrolysis oil supplied

by New Energy into the Verbund site in Ludwigshafen, thereby replacing fossil resources. The share of recycled raw material is allocated to certain products manufactured in the Verbund by using a third-party audited mass balance approach.

Products which carry the name suffix “CcycledTM” have exactly the same properties as those manufactured from fossil feedstock. Customers can therefore further process them in the same way as conventionally manufactured products and use them in high demand applications regarding quality and performance, such as automotive parts.

“So far, there was no technology that allowed the recycling of pyrolysis oil from tires into high value applications.

By further broadening our raw material base to [include] waste tires, we can create a new circular value stream,” explains Christian Lach, project leader for ChemCycling at BASF. “Moreover, we establish a second recycled feedstock in our ChemCycling project, with which we

“We spent almost a decade to develop and optimize our technology and are now successfully operating an industrial-scale plant, which turns waste tires into secondary raw materials. This puts us at the forefront when it comes to establishing a circular economy for tires.”

can manufacture high-performance products for our customers’ demanding applications,” Lach adds.

DECADE OF DEVELOPMENT Viktor Váradi, CEO of New Energy, is delighted the partnership with BASF has born fruit. “We spent almost a decade to develop and optimize our technology and are now successfully operating an industrial-scale plant, which turns waste tires into secondary raw materials. This puts us at the forefront when it comes to establishing a circular economy for tires,” he says.

“Our objective is to achieve quantifiable environmental benefit. The reduced

need for primary fossil resources clearly serves this objective as well as the reduced carbon footprint of the newly manufactured products,” Váradi adds.

BASF and New Energy say they are both committed to work on solutions for the global plastic waste problem. As evidence of that, the two parties have additionally signed an agreement for a feasibility study that targets the adaption of New Energy’s proprietary pyrolysis technology to the conversion of other plastic waste streams.

“The collaboration with New Energy underlines BASF’s ambition to use recycled raw materials in the chemical industry and lead the transition to a circular economy for plastics,” says Lach.

According to New Energy’s website, there are currently three million tonnes of rubber waste generated every year in Europe alone.

Rubber Residue: Shredded waste tires, ready to be further processed into pyrolysis oil by New Energy. The technology company will supply BASF with up to 4,000 metric tons of pyrolysis oil per year derived from waste tires.

“When New Energy Ltd. was founded, our aim was to terminate the environmental impact caused by rubber waste by using a selfdeveloped technology which can be a final solution for environmental problems, at the same time can be a profitable investment for investors and besides fully meets all technical requirements,” the company website says. After 10 years of development, it believes it has reached that point.

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CASE STUDY WORKING TO ENSURE TAX COMPLIANCE HAS NEVER BEEN EASIER Founded in Budapest in the spring of 2018, by a Serb, British and Irish triumvirate, Taxually says it ensures “tax compliance has never been easier.” With some 1,500 clients after just 20 months of active operations, including names such as Amazon, the BBC and Alibaba, this Hungarybased start-up appears to be fulfilling its promise.

Members of the Taxually team at their Budapest base.

By Kester Eddy First thing each day in the office, Kata Dalkó peruses a dozen or more websites specializing in VAT rules from the world’s most important tax jurisdictions. Though drinking a latte

and seemingly relaxed, she checks the news with concentrated precision.

“VAT is an interesting, dynamically changing field. It is essential for businesses to get their VAT reporting and payments right. As,

normally, we are talking about large tax amounts, even small mistakes can lead to serious financial consequences,” she says.

Dalkó, a senior manager with Taxually, knows that companies find

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MACHINE LEARNING IRONS OUT TAX COMPLIANCE ISSUES IN ADVANCE Stefan Mladenovic is not one to hide what he considers Taxually’s winning characteristics under a bushel.

“One of the biggest differences between us and the other service providers in the market is that we put a lot of effort into the on-boarding process.

This approach makes the later, repeated processes, very easy,” he argues.

To do this, a company connecting with the Taxually system is asked to provide a full year’s worth of data, rather than a single month.

“With full annual data, we can immediately identify a lot of the anomalies in their reporting, and in their compliance. When you use one-twelfth of that, you can’t really achieve this,” he says.

Furthermore, the in-house technology can also predict likely

managing their VAT returns in-house across different tax jurisdictions fiendishly complicated and timeconsuming. Hence the growth in recent years of this outsourced niche service.

In turn, she is keenly aware that her review of regulations is a key task to keep her company at the forefront of tax-compliance service providers.

RELIABLE SOURCES “Since we provide services in relation to many different jurisdictions, my aim is to find reliable and up-to-date sources [on changes to VAT rules].

Following the appropriate people on LinkedIn can also help, so

anomalies, using the (anonymized) experiences from other companies’ data which has already been processed, enabling Taxually to alert clients to potential pitfalls in their filings.

As an example, Mladenovic points to the case of how much VAT a company can deduct on car rentals.

“Say you get an invoice from Car Hire X in, say, Poland. Now the local regulations may stipulate you can deduct only 70% of the total. If you are local, you may well know this, but if you’ve already centralized your reporting, the person who’s dealing with it in, say, Bucharest, probably doesn’t have that country-specific knowledge,” he says.

However, the system detects that the supplier of the service is Car Hire X, and sends an alert: “Hey, we’ve recognized a Car Hire X invoice, and in

I start my days by reading the latest updates,” she says.

But this is just a start. Whenever she finds news of changes, Dalkó turns to the original tax authority or governmental source to verify and clarify the details, frequently turning to her multi-lingual colleagues if the information is not available in English.

It is this kind of dedication and thoroughness which supports Taxually’s strong growth, but the key to its success lies in the machine processes developed inhouse which enable vast amounts of complicated calculations over multiple tax jurisdictions to be computed within minutes.

Poland it’s only 70% deductibility: you might want to check that invoice.”

“We’ve taken that from another company’s data, their experience, and we’ve built that into our data validation part,” Mladenovic explains.

“Once it comes up for any other customers, we can recommend them an additional validation, one that they will not have had before.”

Which is where Kata Dalkó and her associated informers come in to consolidate all the local VAT tax rules, and any changes that they undergo, into the system. “[This is why] we have dedicated roles for this knowledgemanagement aspect of it,” says Mladenovic. “They collect all this information, update it and make sure that we apply the different rules [accordingly].”

“We are taking a staid, old set of processes, and we’ve redesigned them for the future,” says Mike Glover, one of the three founding partners, who has spent a lifetime working with tax compliance.

“This wouldn’t have been possible 10 years ago; technology has moved on to such an extent that it is now possible to be much more efficient and effective in terms of building the process, and then putting the technology behind that process.

This is where younger people, with awareness of the latest technology, tend to come in,” he continues, gesturing towards the second partner, Stefan Mladenovic, originally from Novi Sad, Serbia.

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3-STAGE PROCESS Traditional providers of VAT compliance services, using a human-based offering, typically run a three-stage process before the work is delivered to the client, Mladenovic explains.

Although they might go by various names from firm to firm, essentially there is first a “preparer” or groundwork stage, where the raw data from the client is made ready for the number crunching.

Second, “reviewers” ensure that the calculations and documents prepared comply with the different country rules. Finally, the “managers” check that the results all make sense in the context of the client’s business model.

“VAT is an interesting, dynamically changing field. It is essential for businesses to get their VAT reporting and payments right. As, normally, we are talking about large tax amounts, even small mistakes can lead to serious financial consequences.”

“The three stages are of paramount importance in a process which relies heavily on human attention, skill and focus,” says Mladenovic.

“However, the task for the software engineer is to go beyond the complexity that lies in taxes,

and see what is common across different tax regimes and try to standardize, and simplify them to the largest possible extent.”

The Taxually team realized that by developing their own, custom-

Co-founders: (Left-to-right) Fergal Garvey, Stefan Mladenovic and Michael Glover.

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designed software using the most modern information technology, and utilizing higher quality input provided by the second stage people, the first stage could be completed by machine.

“An efficient, traditional service provider could process about 100,000 VAT returns per year with about 350400 employees. If you think about that, that’s up to 250 returns per person per year,” says Glover.

“The difference is that at Taxually, we need just one country specialist per country, whereas traditional providers need to increase country experts as the business scales up.

In fact, Kata alone is, in effect, the expert for a batch of countries,” says Mladenovic.

MORE PRODUCTIVE Taxually now employs 40 people, around half of whom process 80,000 filings (the remainder being software development). “This makes us between 15-20 times more productive than the best traditional provider,” he says. This, in turn, results in a much faster, high quality, yet cheaper service for clients.

Because the first stage comprises almost 50% of the staff required, the results of this approach are, relative to this niche market, revolutionary.

A multi-national group may typically have to file 1,000 VAT

returns annually across Europe, says Glover, by way of example.

The bill for outsourcing these tasks to an efficient, traditional service provider (which would be, of itself, a considerable cost saving over running an in-house department) “would be in the region of EUR 280,000-320,000. We can reduce that by a good 25-30%, and cut the process time from weeks to a few minutes,” he says.

Little wonder then, that Taxually is growing at an exponential rate. The client base, which totaled 150 at the start of the year, had passed 1,450 at the beginning of October and is growing at 100 per week, while revenues, which last year were a

FROM PUBLIC RELATIONS VIA DIPLOMACY TO INDIRECT TAX PROFESSIONAL “I’ve always loved research, analytical thinking and foreign languages; I’m fluent in Italian as well as English, and, of course, Hungarian, so this seemed like a good fit,” she says.

Kata Dalkó’s advice to high school students is to follow their passion and be open to life’s options.

Every year, as they approach the end of their school careers, a majority of students will most likely agonize over what to study at university, fearful that the choice made at that time will decide their future career path, possibly locking them into a professional life ultimately not to their liking.

Dalkó, now a senior manager at Taxually and key figure in the company’s knowledge-management team, understands those feelings, but says by adopting the right approach and keeping an open mind, a vast choice of careers will open up, almost irrespective of the chosen degree subject.

“I chose communication and media sciences for my bachelor’s degree, finally graduating with an MA in international relations, both at Corvinus

Dalkó started off learning “on the job”, but as she increasingly came to be fascinated by the practice and philosophy of VAT, she began studying for the Advanced Diploma in International Taxation: she is sitting her third and final exam this December.

Kata Dalkó

University [in Budapest],” she says. “My original plan was to become a diplomat or perhaps a PR expert but, as often happens, life had a different path for me.”

After graduating, Dalkó found an opening at KPMG’s Global Services international VAT team in 2013.

Eight years into her professional life (and one year with Taxually), when invited recently by her former high school to speak to their seniors about education and career choices, Dalkó thought hard how to explain the very tenuous connection between her university studies and her career as an indirect tax professional.

Yet, unlike, say, a law student describing life as an attorney, it

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mere EUR 200,000, are likely to be close to EUR 4 million.

In addition to the Budapest center, the company now boasts offices in China (an essential location, to help on-line traders comply with EU taxation regulations), the United Kingdom, Ireland, Germany, France, Poland and Italy. A U.S.-based subsidiary is planned for next year, or 2022 “at the latest”.

Headcount has grown from 15 at the start of this year, and is likely to hit 50 by the end of the year, with approximately 80-85% of the jobs in Hungary, mainly comprising software engineers and customer support staff.

made her presentation all the more valuable for her youthful audience.

“I realized that this does not really require an explanation. My career path is a perfect example that the decisions you make at the age of 18, or even at 23 do not necessarily determine what you can achieve in your adult life, and even less how you can achieve it,” she argues.

OPEN TO OPTIONS There is no single, “right” career path to follow. People are able to find satisfaction, self-fulfillment, and happiness in various areas, provided they are open to the different options life offers.

“It’s been very exciting.

Taxes are not the sexiest of subjects, it’s all very niche, but the market is huge, and there are not many players in it right now, and most of those are originally American.”

“It’s been very exciting. Taxes are not the sexiest of subjects, it’s all very niche, but the market is huge, and there are not many players in it right now, and most of those are originally American. They bring

years at elementary school,” she recalls. She also studied foreign languages and attended dance classes “for quite some time before realizing that I would never become a professional dancer for sure.”

“This was my parents’ way of teaching me that one can be good at many things and that it is perfectly fine to be indecisive about your future, just try to define what you love, be persistent and humble, keep your options open,” and Dalkó insists “great opportunities will show themselves on the way.”

a completely different approach to European taxation, where we have more complex jurisdictions,” says Mladenovic, “whereas we go the other way around in our conquering journey.”

For sure, Dalkó is a living example of this philosophy: she freely admits that, pre-university, she had no idea or intention of becoming a tax expert.

“When people asked me at the age of 18 how I saw myself in 10-15 years, I had no clue I would end up in the field of VAT,” she chuckles.

“No regrets, though!”

However, Stefan Mladenovic, her co-boss, stresses other key factors he looks for in new recruits.

Dalkó, who was raised in the small town of Mezőtúr, 150 km southeast of Budapest, moved to the capital aged 14 for schooling.

On this basis, she advises seniors to pursue the subjects they are passionate about and discover at university and afterwards the different possibilities out there.

“It’s not like we can hire welldressed salespeople to sell Taxually’s services,” he says.

Along with sectoral knowledge and a professional attitude, he looks for “quality of character” in new hires.

“Thanks to my parents, I had the privilege to learn about this openness already as a child: I took piano lessons for eight years, played handball for seven, and was part of the school choir during my

“Just because you go to medical school, you do not have to be a doctor; you can do research, become an academic or work in the pharmaceutical business, just to name a few,” she says.

“At the end of the day, we don’t need the Christian Ronaldos of the tax world, we need people who are able to collaborate and make us the FC Barcelona of taxes. It’s the team above all.”

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CASE STUDY BITNINJA STRENGTHENS POSITION WITH USD 2.5 MLN INVESTMENT As “Invented in Hungary” was approaching deadline, U.S.-registered, Debrecen-based BitNinja closed a USD 2.5 million funding round in a transaction led by Lead Ventures, the specialist in scale-up financing in the Central and Eastern European region. BitNinja says it aims to become a major player in the global cyber security market with its server protection solutions.

By BBJ Staff As corporate digitalization advances, the global cyber security market continues to grow. With the transformation of information systems, the methods of hackers who specialize in attacking them also change. Developers of cyber security solutions must react rapidly to these threats. SMEs are especially vulnerable with regard to IT security, as they usually lack proper protection and are unable to handle the consequences of a cyber-attack.

Recognizing this need, BitNinja began developing cyber protection solutions to web hosting providers. Its system detects, filters and eliminates attacks, while also collecting information about them as well. Once the information is gathered, the system automatically improves itself further, meaning that with an increase of users and more diverted attacks, it provides more effective protection.

BitNinja enjoys a clientele of major global web hosting providers such as

Dreamscape, Fastcomet and Hostinger.

Most of its dynamically growing turnover comes from the United States.

“BitNinja, founded in 2015, is registered in the USA, but the headquarter is based in Debrecen [231 km east of Budapest],” explains Zsolt Egri, CEO of the cyber security firm. “We decided to set up an American company because in this field, the major service providers are located in North America, besides Europe. Our main market is the United States.”

Previous funding rounds had raised USD 500,000 from various investors, which allowed the company to nearly double annual recurring revenue in the last 18 months, Egri says.

NEW PRODUCT “With the current second round of financing, we wish to strengthen our product sales and significantly increase our current workforce of 37 employees. In addition, we want to introduce our new product to the market, a site protection solution,

which has already generated great market interest,” he adds.

Balázs Haszonics, CFO of the Budapest-based Lead Ventures, explains what the VC investor sees in BitNinja. “This is an exciting Hungarian entrepreneurial success story, which we were immediately attracted to. The team, who started out as web hosting providers, realized that their servers and indirectly their customers, were under more and more attacks. They looked for their own solution to the problem,” he says.

“As a result, with several other investors, we have made the decision to support BitNinja’s development with an investment totaling USD 2.5 million.

The majority of the capital, USD 1.5 million, is provided by us. Our plans span for a time period of 3-5 years.

Our common goal is to make BitNinja an attractive target for overseas investors by the end of this period,” Haszonics adds.

The American-Hungarian iEurope and Oxo Technologies Holding have also joined the round as new investors, along with existing investors Octogon Ventures and Zoltán Györkő, Balázs Scheidler and Endre Wagner, the three founders of Balabit, a Hungarian security firm specializing in the development of IT security systems and related services that help businesses reduce the risk of data breaches associated with privileged accounts. In January 2018, Balabit was acquired by One Identity, a U.S.based provider of identity and access management solutions.

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