The European Times - Hungary

HUNGARY OPEN FOR BUSINESS

Content INTRODUCTION • Ancient Nation with Very Modern Outlook • Hungary’s Fact File • British Embassy • British Chamber of Commerce in Hungary • Benefits of EU Membership

4 8 10 11 12

• Health Care Sector Reforms in Progress • Pfizer • Novartis • Biotechnology Targeted As One of Top Five Sectors • Teva Pharmaceuticals

45 46 48 49 50

BUSINESS & INVESTMENT OPPORTUNITIES • Economic Success Story • ITD Hungary • Investment Opportunties from Auto Parts to Tourism • Doing Business in Hungary • Highly Favourable Tax Incentives

15 17 18 20 22

FINANCE & BANKING • Financial Sector Strengthened by Stabilisation Programme • Hungarian Banking Association • Volksbank Hungary • Banking and Capital Markets Meeting EU Standards

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31 33 34 35 36 38 40

HEALTH • Health Care Sector Building on History of Innovation 42 • Renewal of and Moving Forward in the Health Care Sector 44

Regional Manager: Lieve Luyten Business Analyst: Aukje Oostendorp Project Coordinator: Khayla Banks Editorial: Emily Emerson-Le Moing

• EU’s Transport and Logistics Hub • Strategic Location and Much More Keep Hungary Competitive • An increasingly International Economy • Raabersped

52 54 56 57

AGRICULTURE & FOOD INDUSTRY

ENERGY & GAS • Liberalised Energy Sector with a Focus on Boosting Efficiency • The Hungarian Energy Office • Budapest Gas Works • Genesis Energy Investment Company • Energy Market Officially Open • Emfesz • European Leader in Renewable Energy

TRANSPORT & LOGISTICS

• Modernised Agriculture Sector Focuses on Exports • Agriculture Minister Highlights Sector’s Growth Potential • KITE • The Federation of Hungarian Food Industries • Food Sector Meeting High Standards • Sio-Eckes • Hungerit

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RESEARCH & CONSULTING • Business Consulting Meets the Challenge of Expanding Economy • TESK Tanácsadó Kft.

69 70

TOURISM • Wealth of Attractions for Business and Leisure Travellers • Ambitious Goals Outlined in New Tourism Strategy • City Home Residency • Places of Interest in Budapest

72 74 75 76

Production Coordinators: Katrien Henkens, Katrien Delamotte, Heleen Castro Design: Martine Vandervoort, Carine Thaens Johny Verstegen, Walter Vranken, Dirk Van Bun

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HUNGARY

Ancient Nation with Very Modern Outlook

Saint Stephen’s Statue

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HUNGARY

Introduction

Hungary, a landlocked state in the heart of Europe, borders Slovakia, Ukraine, Romania, Serbia, Croatia, Slovenia and Austria, and has long been a European crossroads for trade and cultural exchange. Its capital city, Budapest (originally two separate cities, Buda and Pest), a sophisticated international urban hub, lies on either side of the Danube and is known for its architectural monuments and lively intellectual and cultural scene. Hungary’s culture is rich and varied. The country is particularly known for its folk music, which inspired Liszt, Bartók and Kodály, among others, and for its advanced research institutions, highly ranked universities, colourful handicrafts, unique cuisine and fine wines.

New EU member has long history Formerly communist Hungary is one of the ten Eastern European countries which acceded to the European Union in May 2004. This new EU member has a very long history.

Hungary’s origins date back to the pre-historic era along the central Volga, believed to be the ancient homeland of the Magyars, as Hungarians are known. Sometime in the middle of the first millennium BC, the ancestors of modern Hungarians settled in the Carpathian Basin and quickly dominated Slavic tribes living there.

Their leader was Árpád, the founder of the realm that would become Hungary. For many centuries, the Magyars’ territory was a crossroads for trade and migration.

The Carpathian Basin was eventually invaded by Roman legions and de-

Budapest

clared a Roman province, Pannonia.

The four centuries of Roman rule which followed created an advanced and flourishing civilisation in what is now Hungary. Both Sopron and Szombathely (formerly Scarbantia and Savaria), near the Austro-Hungarian border, developed into important settlements along the ‘Amber Route’ which extended from the Baltic countries to Italy; the predecessor of Pécs in southern Hungary was the Roman town of Sopianae; and Aquincum, the Roman predecessor of today’s Budapest, was a large town along the river Danube.

As Roman fell, Huns drove Roman rulers out of what is now Hungary, and when the Hun empire itself fell, Slavic people established new settlements in the Carpathian Basin.

Their advanced culture influenced the Magyars. Several words related to agriculture and handicrafts in the Hungarian language were borrowed from Slavic languages.

King Stephen, Hungary’s first king In the first half of the tenth century, Magyar mounted warriors invaded

areas throughout Europe and were greatly feared, but were soundly defeated in 955 at Lechfeld (Bavaria)

by Otto the Great.

The Magyars were forced to transform their nomadic, war oriented lifestyle. Under the rule of Géza (972-997) and particularly during the reign of his son King Stephen I, considered Hungary’s first king, Magyar society was transformed into a culture based on agriculture and handicrafts, and in which a pagan religion was replaced by Christianity.

Stephen was declared a saint by the Pope. One of Hungary’s great treasures is a sculpted head, believed to be of King Stephen, dating from the Romanesque period. The crowning of King Stephen on December 25, 1000, is still celebrated as the date Hungary truly began.

Romanesque art found fertile ground in Hungary, not only in the design of churches but also in jewellery and other creations by Hungarian goldsmiths, metallurgists and stonemasons. King Stephen instituted a sound system of government and defended his country’s independence from Rome and Byzantium

5

HUNGARY

Introduction

Buda Castle

Defeat by Mongol forces Mongol forces invaded what is now Hungary in 1241, and defeated Magyar troops led by Béla IV. As one German chronicler put it, “After three hundred years, Hungaria was no more.” In-fighting among the Mongol invaders weakened their hold on the country, however, and Béla IV began Hungary’s reconstruction, building castles and fortified towns. He invited German, Walloon and Italian settlers and promoted urban development.

Known as “the second founder of the state”, Béla IV planned the construction of Buda Castle, and raised the settlements of Buda and Pest to the rank of towns.

Béla IV’s reign (1235-1270) was followed by struggles over succession, but in the 14th and 15th centuries, Buda Castle became a meeting point for Europe’s elite, and was filled with works of art. Charles Robert, the descendant of the Naples branch of the Angevin rulers and of the House of Árpád, became Hungary’s king and brought prosperity to feudal Hungary, as well as an international perspective, with particularly strong links to Italy.

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International trade and expansion Charles Robert introduced Hungary’s currency, the gold forint, modelled on a Florentine design, and promoted trade between Hungary, Poland and Bohemia. His son, Louis I (1342-1382), known as Louis the Great, extended Hungary’s borders and acquired the Polish throne. He was succeeded by his son in law, Sigismund of Luxemburg, who oversaw significant building programmes and a flourishing artistic scene as well as the decline of Hungary’s military strength against the Ottoman empire.

János Hunyadi, the outstanding military leader of the age, eventually defeated Ottoman forces at Belgrade and thus preserved what is now Hungary. His son Matthias was later named king of Hungary at the age of 15. King Matthias’ image as the defender of the common people against arrogant barons whose power had been achieved in the feudal era is central to Hungarian folklore. Matthias roams the country in disguise, unveils injustice, rewards virtue, and conquers the hearts of young girls and beautiful

women, who never suspect that the clever, handsome traveller is the king himself.

Hungary’s golden age In fact, the reign of King Matthias (1458-1490) was the golden age of medieval Hungary. The young king created a highly disciplined mercenary army supplied with modern weapons, reformed the justice system, a stable centralised government and public security, and provided a solid basis for the development of industry and commerce as well as the arts. Buda Castle, his royal residence, became one of the most beautiful castles in Europe, and the first printing press was established in Buda in 1473. There was also an outburst of scientific research, and scholars and artists from all over Europe flocked to Hungary, establishing the reputation Hungary still enjoys as a centre for intellectual activity.

In 1541, Buda was besieged by both Ferdinand of Habsburg and Turkish ruler Sultan Suleiman. They eventually defeated Hungarian forces and claimed different parts of the Hungarian empire.

HUNGARY

Introduction After many battles against many adversaries, Hungary was reconstituted as part of the Hapsburg empire.

In 1825, Hungarian count István Széchenyi founded the Hungarian Academy of Sciences, beginning the so-called Hungarian Reform Movement.

Struggle for independence In 1848, revolution swept through Europe, and in 1849, Hungarian forces under Kossuth defeated the Hapsburgs and proclaimed the independence of Hungary on April 14, 1849, with Kossuth the country’s first elected president. Hapsburgs assisted

by Russian troops defeated Hungarian forces later that year, but reforms and industrialisation continued.

In the First World War, the AustroHungarian Empire aligned itself with Germany and eventually lost three million soldiers in battle, a million of whom were Hungarian. The Russian revolution further threatened the Austro-Hungarian Empire. Finally, in November 1918, Hungary was proclaimed an independent republic.

Between the two world wars Hungary achieved a measure of economic development, but 500,000 Hungarians Buda Castle

died in the Second World War, and 40% of the country’s resources were destroyed. The German army was driven out of Hungary by the Soviet army in April 1945, and after a brief period of democracy, Hungary came under communist rule. An uprising led by Imre Nagy in 1956 was crushed

by Soviet troops.

Return of democracy After a period of oppression, the regime of János Kádár tried to introduce a “softer” brand of communism, known as “goulash communism”, in Hungary, but the economy declined and resistance grew. In 1989, a new Hungarian government opened the country’s frontiers to citizens of Soviet-occupied East Germany, launching a wave of anti-Soviet activity in the region. Following general elections in April 1990, the independent Hungarian republic, with an elected parliament, was born, and in September that year, parliamentary democracy in Hungary officially began.

Since 1990, Hungary has been rebuilding its economy and gradually instituting free market principles.

The transition has been difficult, but Hungary has managed to turn itself into a thriving modern nation

with global economic perspectives, as its accession to the EU in 2004 demonstrates.

Hungary is now a parliamentary democracy with a president (Laszlo Solyom, elected in 2005) and a prime minister (Ferenc Gyurcsany, elected in 2004). The government includes a Council of Ministers elected by the National Assembly on the recommendation of the president. The National Assembly, or Orszaggyules, has 386 members elected by popular vote for four-year terms. Hungary’s constitution was first established in 1949, revised in 1972 and reinstated in 1989.

Sound economy with investment appeal Hungary has made significant progress in liberalising and strengthening its economy. In 2007, the government eliminated a trade deficit that had plagued Hungary for several years, and inflation dropped from 14% in 1998 to 7.8% in 2007, following a low of 3.6% in 2006. Germany is by far Hungary’s most important trading partner, but trade with other countries is increasing. Through an austerity programme of tax hikes and subsidy cuts, the government has reduced the public sector deficit to 4% of GDP this year, but the programme has slowed GDP growth. The government plans to eventually lower the public sector deficit to below 3% of GDP and to adopt the euro.

Hungary has some limited natural resources (bauxite, coal, and natural gas), as well as fertile soils and arable land. It has developed a wide range of thriving sectors, including pharmaceuticals, machinery and transport equipment manufacturing, processed foods, transport and logistics, tourism, agriculture, renewable energy, and chemicals, among others.

Hungary’s private sector now leads the economy and new investment incentives are attracting increasing FDI in this ancient nation with a very modern outlook.

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HUNGARY

Introduction

Hungary’s Fact File Area:

93,000 km2

Population:

10.06 million in 2006

Capital city:

Budapest

Currency:

forint

National holidays:

March 15, August 20, October 23

EU membership:

May 2004

Head of State:

President László Sólyom

Head of Government:

Prime Minister Ferenc Gyurcsány

Foreign Minister:

Kinga Göncz

Government:

Governing parties: MSzP (Socialist Party), Chairman: István Hiller; 186 deputies in the parliamentary group SzDSz (Alliance of Free Democrats) Chairman: Gábor Kuncze; 18 deputies in the parliamentary group

Parliament:

386 members, last elected in April 2006 for four years

Economy at a Glance GDP:

€142 billion in 2007

GDP growth:

1.4% in 2007

GDP per capita:

€14,456 (IMF estimate, 2008)

GDP contribution by sector: agriculture 3%, industry 32%, services 64% Gross external debt:

€105 billion in June 2007

Inflation:

8% in 2007

Unemployment:

7% in 2007

Public debt:

70% of GDP

Public revenues:

€45 billion

Public expenses:

€51 billion

Economic aid:

EU funds, €220 million in 2004

Leading industries:

mining, metallurgy, construction materials, processed foods, textiles, chemicals (especially pharmaceuticals) and motor vehicles

Exports:

€63 billion in 2007

Main exports:

machinery and equipment (61%), other manufactured goods (29%), food products (7%), raw materials (2%), fuels and electricity (2%)

Imports:

€63 billion in 2007

Main imports:

machinery and equipment (52%), other manufactured goods (36%), fuels and electricity (8%), food products (3%), raw materials (2%)

Main sources of imports:

Germany (27%), Russia (8%), China (7%), Austria (6%), France (5%), Italy (5%), Netherlands (4%), Poland (4%)

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HUNGARY

Introduction

Fulfilling Maastricht Criteria As an EU member state, Hungary must fulfill the Maastricht criteria in order to adopt the euro as its currency.

These criteria include reducing the rate of inflation to maximum 3% (Hungary’s is currently 8%), reducing the percentage of the annual public sector deficit to GDP to a maximum of 3% (Hungary’s is currently 4.9%), reducing the percentage of gross public sector debt to GDP to 60% (Hungary’s is currently 66%), and keeping the interest rate to a maximum of 6.4% (Hungary’s is currently 7.5%). Hungary has set 2014 as the deadline for reaching these goals.

From Communism to a Free Market Economy With the collapse of the Soviet Union, Eastern Bloc countries suffered a significant loss in subsidies and markets for goods. Almost overnight, Hungary lost nearly 70% of its export markets in Eastern and Central Europe and 800,000 jobs. Elimination of social services formerly provided by the communist government also created great problems for the Hungarian people and for the economy.

In the early 1990s, the Antall government began market reforms, but high government spending and slow privatisation efforts hampered economic recovery. Meanwhile, the abolishment of subsidies led to dramatic increases in the prices of food, medicine, transportation services, and energy. GDP slumped and unemployment grew, reaching 12% in 1993. Hungary’s external debt was one of the highest in Europe, rising to 250% of the country’s export earnings in 1994.

Austerity programme In March 1995, the government of Prime Minister

one-third of all FDI in Central and Eastern Europe over that period. EU accession in 2004 further boosted foreign investment and trade.

Dominance of private sector Today, around 80% of GDP is from the private sector, and foreign interests control 70% of the country’s financial institutions, 66% of its industrial activities, 90% of its telecommunications, and 50% of its trade activities.

Hungary no longer requires IMF financial assistance and has repaid all of its debt to the fund. Hungary now has investment grade ratings from all major credit rating agencies, although the country was recently downgraded by Moody’s and S&P and remains under observation with a negative outlook at Fitch following a decline in GDP related to the austerity programme.

Free floating currency

Gyula Horn implemented an austerity programme, along with aggressive privatisation of state-owned enterprises and a strong export promotion campaign. By the end of 1997, consolidated public sector deficit had declined to 4.6% of GDP and the current account deficit had been reduced to 2% of GDP, while government debt was paid down to 94% of annual export earnings.

Hungary’s currency, the forint (HUF), became convertible for all current account transactions in 1995, and in 1996, after Hungary became a member of the OECD, it became convertible for almost all capital account transactions. The forint has been pegged to a basket of currencies since 1995 and is entirely free-floating. Hungary hopes to adopt the euro by 2014.

Hungary has gradually stabilised the economy, reduced unemployment, created new social services programmes, and attracted significant foreign direct investment of more than €44 billion between 1989 and 2007, more than

Remaining economic challenges include reducing fiscal deficits and inflation, maintaining stable external balances, and completing structural reforms of the tax system, health care, and local government financing.

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HUNGARY

Introduction

British Embassy

Your Business Partner in Hungary trade partner for Hungary and vice versa,” Greg Dorey points out.

H.E. Greg Dorey, UK Ambassador to Hungary since December 2007, explains that the British Embassy in Hungary “is here to help Britons who want to do business in Hungary and Hungarians who want to invest in the UK. We provide examples of best practice and expert advice to save investors from making mistakes as well as let them know where others have been successful.”

H.E. Greg Dorey, UK Ambassador to Hungary

Greg Dorey points out that commercial ventures in Hungary continue to offer growth potential. But the difficult political and economic period the country is going through, means that the British Embassy has recently spent much time and effort promoting transparency and consistency in the business environment. He adds that such problems are not surprising in a transitional period.

In the long term, Hungary could still offer excellent investment prospects. As Greg Dorey explains, “Hungary is in the heart of Europe, and has a well-educated labour force.

Although this labour is not as cheap as in some neighbouring countries, the overall human resource package is excellent. British companies which are interested in establishing a regional presence or expanding into an upcoming country in Europe should take a close look at Hungary.”

Challenges facing Hungary include the perception that the business sector is not transparent, a perception which needs to be addressed or Hungary might lose out against competing countries in the race to attract investors. “It is important to ensure that all parts of Hungary’s society are involved in resolving the situation Hungary is in,” the ambassador says, noting that progress on finding solutions to problematic issues like party financing and public procurement would go a long way towards reassuring international investors.

As for the future, Greg Dorey says, “I would like to see a more transparent and predictable business environment and even better direct communication between the UK and Hungary.” To those in the UK, he adds, “Come and visit Hungary, enjoy what it has to offer, and judge for yourself the business opportunities here.”

Strong trade ties between UK and Hungary Hungary, a member of the EU and of NATO, is already the UK’s third largest export market in Central and Eastern Europe and the UK is the fourth largest foreign investor in Hungary.

“Hungary is looking for long term investments and know-how, and British business people are looking for local knowledge. The UK is an important

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British Embassy, Budapest Harmincad u. 6 H-1051 Budapest Tel.: +36 1 266 2888 Fax: +36 1 266 0907 E-mail: info@britemb.hu http://ukinhungary.fco.gov.uk

HUNGARY

Introduction

British Chamber of Commerce in Hungary

British Chamber Promoting Bilateral Ties The British Chamber of Commerce in Hungary (BCCH), founded in 1991, aims to foster trade and investment flows between the UK and Hungary and to reinforce business co-operation between the two countries. Now with around 200 members, including both small and medium sized enterprises (SMEs) as well as major multinationals, both local and foreign, the BCCH works closely with other European chambers of commerce and with local government bodies, including the British Embassy in Budapest.

The BCCH regularly organises networking events for British investors in Hungary and local enterprises, including Hungarian companies wishing to invest in the UK. The BCCH has proved instrumental in helping to reinforce the British presence in Hungary, where more than 500 UK companies are now operating. In fact, the UK is one of the largest European investors in Hungary after Germany, The Netherlands, Austria and France; these countries combined have invested some €50 billion in Hungary to date.

Total direct investment by British companies in Hungary from 1990 through 2007 totalled approximately €3.5 billion, and British enterprises are already operating in Hungary’s retail, pharmaceuticals, telecommunications, and machinery sectors. According to a spokesman of the BCCH, around 25% of total British investment in Hungary is in manufacturing and some 45% in trade. Investors include UK-based international groups BT, Tesco, Vodafone, BAT, GlaxoSmithKline, Unilever, Diageo and Bernard Matthews as well as many SMEs. Vodafone opened a new support center in Budapest last year, BT started up a new customer service center in Debrecen in 2008, Unilever has opened a new manufacturing center in Hungary, and Tesco continued its program to expand throughout the country.

The BCCH welcomes both large and small British companies and aims to help British firms take advantage of the many opportunities Hungary’s economy offers. According to a spokesman of the BCCH, the government is currently particularly interested in attracting companies active in the en-

vironmental technology, water treatment and infrastructure development sectors, all of which are set to benefit from substantial EU funding.

Hungary offers a highly trained, multilingual workforce, a modern telecommunications infrastructure, and sophisticated business services, including high quality banking services. In addition, Hungary’s strategic location in the heart of Europe and its easy access to markets throughout the region make it an ideal hub for a wide range of activities. According to the BCCH, “The openness of the economy as well as the willingness and commitment of people to learn and develop are key strengths that will play a crucial part in Hungary’s future development.”

The BCCH will continue to expand its activities and services and is dedicated to promoting even closer business ties between Hungary and the UK in the future.

For this article we interviewed Mr. István Varga (former Chairman of the BCCH) and Mr. Gergely Mikola (recently elected as new Chairman of the BCCH).

The British Chamber of Commerce in Hungary H-1137 Budapest Szt. István krt. 24. IV/3.

Tel.: +36 1 302-5200 or 302-5201 Fax: +36 1 302-3069 E-mail: bcch@bcch.com Web: www.bcch.com

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HUNGARY

Introduction

Hungary became a full member of the European Union on May 1, 2004, and ever since its economy has been growing even more rapidly. Hungary’s EU membership gives companies operating there a wide range of competitive advantages.

Benefits of EU Membership

These include an economy which is even more stable, democratic, prosperous, and secure, and which operates according to EU standards. In addition, EU membership has stimulated Hungary’s GDP growth as well as its industrial output.

mestic demand. Trade oriented companies operating in the country can target not only regional markets but also Hungary’s own market.

EU membership has also created more jobs and attracted more skilled professionals to the Hungarian market. Workers have more benefits now than in the past, as well as higher wages and pensions.

Access to growing domestic market and 450 million EU consumers With EU membership, Hungary’s domestic market has been growing more rapidly, resulting in higher disposable income and greater doCentre of Budapest

Now that Hungary is an EU member, companies there have access to the EU’s 450 million consumers and can also count on free movement of labour, goods, services and capital.

The macroeconomic impact of Hungary’s EU membership also benefits companies based in the country.

Foreign direct investment is increasing, with investors reassured

by Hungary’s EU affiliation. In addition, Hungary’s role as a regional hub has been enhanced now that the country can more easily serve as a gateway between the EU and markets throughout Eastern Europe and the Balkans.

As it strives to make itself even more competitive as part of the EU family of nations, Hungary is emphasising innovation, research and development; this will create a strong foundation for future economic growth.

Financial benefits for investors EU membership also brings a number of financial benefits for investors.

The state subsidy system has been harmonised with EU regulations, and companies operating in Hungary – including small and medium sized companies – now have access to EU financial institutions and funds.

Now that Hungary’s regulatory environment has been brought in line with EU standards, Hungary offers an even more transparent taxation system and business accounting rules.

In addition, procedures for dealing with other EU member states have been simplified.

Elimination of trade barriers For trade oriented companies, the fact that Hungary is now an EU member opens up a range of new markets thanks to the elimination of trade barriers, mutual certification of goods, harmonised value added tax payments, and the single standard certification process for the entire region. EU regulations also guarantee the rigorous enforcement of competition policies and measures to protect intellectual property rights.

When the European Monetary Union goes into effect in around 2012 or

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HUNGARY

Introduction

2013, Hungary’s economy will offer even more benefits for investors and companies. As ITD Hungary points out, stability will be increased through the Maastricht convergence criteria. In addition, price stability will enhance economic transparency and facilitate business planning, lower real interest rates will boost investments, exchange risks and conversion charges will be eliminated, economic growth will be stimulated, and an improved fiscal balance will bring Hungary an even higher rating from international ratings groups.

European Institute of Innovation and Technology Hungary is positioning itself as a leader in the EU, and the country’s significance in the wider EU family was emphasised recently when EU ministers announced that they had chosen the Hungarian capital, Buda-

pest, to be the location of the headquarters of the planned European Institute of Innovation and Technology, or EIT. Germany, Poland, Spain and a joint bid by the Austrian and Slovakian capitals Vienna and Bratislava had all competed to host the new institute, which “will become a symbol of the combination of European research and innovative capabilities,” according to Slovenian Higher Education Minister Mojca Kucler Dolinar.

The planned institute is meant to bridge the innovation gap between the EU and its major economic rivals, the US and Japan. The American version of the new institute is the Massachusetts Institute of Technology (MIT).

The EIT, whose first stage has been budgeted at 308.7 million, will be

designed to serve as a focal point for academic and industrial research being undertaken throughout the 27nation EU. Work on the project will begin later this year.

The first stage in the project will be to establish the EIT’s governing structure and to set up the institute’s first two or three research units. The total cost of the project will be much higher, with the balance of the funding sought from national grants and industry.

The choice of Hungary as the location for this prestigious new institute reflects Hungary’s solid reputation as a base for research, development and innovation as well as the country’s determination to be a leader in the EU. For international companies looking to set up a base in the EU, Hungary is a top choice.

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• Investment Opportunities from Auto Parts to Tourism • Doing Business in Hungary • Highly Favourable Tax Incentives

Business & Investment Opportunities

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HUNGARY

Business & Investment Opportunities

Economic Success Story Hungary, strategically located at the heart of Europe and now a member of the EU, has a history of foreign trade and of innovation in economic development.

By the late 1980s and early 1990s, Hungary had created fundamental laws governing the banking system, foreign investments, the foundation of companies, trade, competition, labour, intellectual property and bankruptcy. The government had also liberalised imports, prices and wages.

History of innovation Hungary was the first country in the region to launch market based privatisation, including of strategic sectors like energy and banking, and the first to reform basic public sectors, including health and education. Thanks to these steps forward, Hungary has seen rising foreign direct investment.

Many very attractive incentives for foreign investors have been instituted, including significant reductions in corporate taxes for particular types of investments and for investments in regions the government wishes to promote. Key sectors for investors have included transport and logistics (building on Hungary’s central location and well-developed infrastructure), pharmaceuticals and other research oriented enterprises taking advantage of Hungary’s long history of excellence in research and its pool of highly skilled workers, and new sectors the government has targeted with special incentives, from environmental technologies to food processing.

ther this year. Wage growth, fuelled largely by government spending, has kept pace with that of other nations in the region. Unemployment, however, remains at around 6%.

Trade deficit eliminated in 2007

Turnaround in first quarter 2008

By 2007, Hungary had eliminated a trade deficit that had persisted for several years, and had reduced inflation from 14% in 1998 to 7.8% in 2007, following a low of 3.7% in 2006.

Inflation is expected to decline fur-

In the first quarter of 2008, Hungary’s economy seemed to have reached a turnaround, growing by an annualised 1.6% over the quarter following four consecutive quarters of deceleration. Monthly indicators show that domestic demand has suffered from restrictive public spending and ailing private consumption, while performance of the private sector has been improving, giving a boost to net export growth.

Hungary’s Economy at a Glance Key indicators Real GDP growth (%) Consumer price inflation (average %) Consumer price inflation (year-end %) Budget balance (% of GDP) Current-account balance (% of GDP) Short-term deposit rate (average %) Exchange rate Ft:US$ (average) Exchange rate Ft: (average)

Source: The Economist Intelligence Unit

2007 1.3 8.0 7.7 -5.6 -5.8 7.2 183.6 251.3

2008 2.3 5.9 4.9 -4.2 -5.9 6.8 164.3 253.0

2009 3.4 3.4 3.1 -3.6 -6.2 6.5 166.9 247.0

2010 3.9 2.7 2.6 -3.1 -6.5 6.7 171.4 240.0

2011 3.7 2.4 2.2 -2.8 -5.9 6.2 176.0 235.0

2012 3.4 2.2 2.1 -2.5 -5.5 5.7 177.1 232.0

GDP growth remained below 4% in 2006 and less than 2% last year as a result of the government’s austerity programme aimed at reducing the budget deficit, at which it has been successful. Fiscal consolidation is the focus of economic policy. The government intends to introduce far reaching reforms in the social security and pension systems to ensure the long term stability of public finances and to keep the public sector deficit below 3% of GDP.

According to analysts, Hungary’s GDP is projected to continue to grow in 2008 and 2009 as domestic demand rebounds, although it is not expected to rise above 4%. The Hungarian forint is expected to strengthen steadily against the euro, but will be increasingly affected by speculation about entry into the EU’s exchange-

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HUNGARY

Business & Investment Opportunities

rate mechanism (ERM2) and Hungary’s accession to European economic and monetary union (EMU), which is anticipated for around 2013.

The current account deficit is expected to rise in 2008-2010 as consumer and business confidence recover, while it will begin to fall towards the end of the period as domestic demand is affected by efforts to meet Maastricht criteria for euro adoption.

Cautious approach to interest rates Net external borrowing will remain high. The National Bank of Hungary (NBH, the country’s central bank) raised its main policy setting interest rate by 75 basis points, to reach a three year high of 8.25% in April 2008. The NBH may raise interest rates further in the short term to control inflation, but could reduce them towards the end of 2008 if inflation continues to decline. The NBH is expected to be cautious about cutting rates, as the forint is vulnerable to international changes.

To accelerate the country’s economic recovery, the government has launched a number of major development programmes, many of them with the support of EU funding; a €22.4 billion EU subsidy will be available to Hungary until 2013. As Hungary’s trade and development agency, ITD Hungary, points out, “The country has never before had an opportunity for targeted development on such a scale throughout its history.”

Given its track record for stable long term progress and a commitment to setting the foundations for sustainable economic expansion, Hungary is well placed to achieve improved economic performance in the future.

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ECONOMIC CHARACTERISTICS AND DATA IMPORTANT ECONOMIC DATA GROSS DOMESTIC PRODUCT (GDP) GROWTH OF GDP:

in 2005: 4.2% in 2006: 3.9 %

GDP VOLUME:

23.56 trillion forints

(at current prices in 2006)

GDP PER CAPITA:

2.34 million forints (8,855 EUR)

2006

GDP UTILISATION IN 2006 (volumen index, prevrious year = 100 %)

Domestic consumption Ultimate consumption Gross accumulation

100.5 100.4 101.1

GROSS NATIONAL INCOME (GNI) Growth of GNI in 2005:

3.3%

GNI volume in 2005:

20.76 trillion forints

IMPORTANT MACRO-ECONOMIC INDICATORS (Growth vis-à-vis previous year in %) 2005

2006

Industrial production

7.0

10.1

Consumer price index

3.6

3.9

Real earnings

6.3

3.5

Investments

6.4

-2.0

Exports

11.6

18.0

Imports

6.8

12.6

EVOLUTION OF THE CURRENT BALANCE OF PAYMENTS (million Euro)

2005

2006

Commodity turnover

-1,460

-417

Services and incomes

-4,802

-5,064

Unbalanced current remittances

171

285

Current balance of payments

-6,091

-5,197

HUNGARY’S MEMBERSHIP OF IMPORTANT INTERNATIONAL ECONOMIC ORGANISATIONS - World Trade Organisation (WTO) - Organisation for Economic Co-operation and Development (OECD) - International Energy Agency (IEA) - United Nations Economic Commission of Europe (UN ECE) - United Nations Conference on Trade and Development (UNCTAD) - United Nations Industrial Development Organisation (UNIDO) - International Trade Center (ITC) - European Energy Charter Convention (EECH) - International Sugar Organisation (ISO) - International Grain Council (IGC) - International Cocoa and Chocolate Organisation (ICCO)

HUNGARY

Business & Investment Opportunities

ITD Hungary

Local Agency Serves as Essential Partner for Foreign Investors The Hungarian Investment and Trade Development Agency (ITD Hungary), created in 1993, has positioned itself as the ideal partner for foreign investors in Hungary.

With eight offices in Hungary as well as 55 international offices in 43 countries, ITD Hungary provides a wide range of high quality support services.

ITD Hungary has already helped to attract more than 1.6 billion in foreign capital and to create almost 10,000 new jobs, and is currently providing assistance to more than 300 projects. As Csaba Kilian, Executive Director, explains, “We are helping to put Hungary on the map globally in the regional competition to attract the largest investment projects. Investors who are looking into Hungary are generally looking into 40 to 50 different kinds of economic and political indicators, so we prepare detailed information on these to help them make well-informed decisions.”

This dynamic organisation has created more than 100 investment promotion events as well as networking events, seminars, trade shows and other activities. ITD Hungary also provides individual consulting services and serves as a liaison between investors and local, regional and federal government offices. Csaba Kilian explains, “We work with the govern-

Both SMEs and large enterprises are served by ITD Hungary. As Csaba Kilian points out, “For larger investors who want to invest over �10 million, we can provide an in depth analysis of the potential of their investment, give them a concrete offer concerning a cash incentive, and inform them about all incentives they can receive. We are currently focusing on the more technology-intensive industries and companies that can bring in more research and development, particularly in the field of information and communications technology (ICT). Hungary has already established itself as a regional ICT hub.”

Csaba Kilian, Executive Director

ment to initiate changes and create a more competitive environment for investors here.” ITD Hungary also coordinates the Hungarian activities of the Enterprise Europe Network supported by the European Commission’s Enterprise and Industry Directorate.

ITD Hungary’s specific services for foreign investors include providing in depth, tailored information on the local economy, regulatory environment and business climate and on Hungary’s many investment incentives. ITD Hungary teams also visit sites, introduce investors to local service providers, assist investors with site selection and licensing, help finalize incentive agreements, assist with recruitment and visa applications, and offer extensive follow-up services.

Urging potential investors to contact ITD Hungary, Csaba Kilian concludes, “Investors who want to create a competitive business for the long term can trust in ITD at the beginning of their project and beyond.”

Andrássy út 12 H-1061 Budapest, Hungary Tel: +36 1 472 8100 Fax: +36 1 472 8101 Mail: info@itd.hu www.itdh.com

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Investment Opportunities from Auto Parts to Tourism

Parliament Building

Hungary offers high potential investment opportunities in an impressive range of sectors, many of which are set to receive substantial EU funding. A growing local market as well as the potential for sales throughout the region and beyond make Hungary a very attractive base for business.

According to the UK Trade and Investment Team of the British Embassy in Budapest, certain sectors have particularly attractive prospects for UK investors.

Building on established competencies The automotive industry is a top choice, since Hungary has carved out a niche for itself as a major supplier of auto parts for auto companies in Hungary and throughout the region.

There are outstanding opportunities for joint production agreements with some of the 300 or so auto firms now operating in Hungary, and the government has launched a suppliers’ development programme to stimulate the growth of subcontractors of big foreign investors. There are also new opportunities in technology and know-how transfer. Hungary’s electronics sector is also well developed and dominated by foreign companies, many of which seek out UK technology.

Biotechnology is another key sector in which Hungary has a long tradition. Most research is conducted by

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affiliates of the Hungarian Academy of Sciences and by laboratories at pharmaceutical firms and universities. Multinational biotech and pharmaceutical firms are very active, and smaller firms have been growing rapidly over the past two years. The government’s five year biotech development programme launched in 2005 has given a strong boost to the sector overall.

The British Embassy has also targeted construction in spite of fairly restrictive local regulations and strong price competition. The production of construction materials as well as the emerging regeneration and property development sectors have excellent potential.

Demand for graduate education, particularly in business, is on the rise. A large number of new business schools have opened over the past 15 years, many of them offering courses

HUNGARY

Business & Investment Opportunities

solely in English. E-learning and distance learning have also gained popularity, particularly at the university level. Providing companies with specially designed on-the-job training in partnership with a local educational institution is a key growth area.

The Hungarian health care market provides business opportunities for British companies in sales of medical equipment and consumables; knowhow and expertise for investment projects, including EU funded projects; and health care and hospital management services and consultancy.

Boosting logistics and meeting EU environmental standards Hungary is a recognised logistics hub and the government is focusing on infrastructure development to keep the country competitive. The Hungarian logistics market has grown by around 20% annually over the past five years and accounts for around 20% of Hungary’s GDP. In fact, the government has designated logistics as one of seven strategic sectors to support with domestic and EU development funding.

garian companies for EU funded jobs in Romania, Ukraine, Bulgaria and Serbia.

EU accession requirements have tightened environmental standards in Hungary and created new opportunities for providers of environmental technology and services. Hungary’s environmental and waste management market was worth about €787 million in 2005 and is set to grow by 15% over the next few years. EU funds are supporting environmental infrastructure projects. Around €867 million will be spent on drinking water quality improvements by 2015 and an additional €2.39 billion is required to meet EU waste water regulations.

Service centres, sports and tourism Developing regional service centres with the help of foreign partners is another priority for the government, which is providing special incentives, for example for corporations

investing more than €10 million to establish a service centre in Hungary. Around 30 such centres are currently operating, including Diageo.

Tax breaks of up to 80% of corporate taxes for 10 years require a minimum investment of €12.4 million (€4.1 million in less developed regions or for research and development projects) and the creation of 100 jobs (50 in less developed regions).

Security equipment, sports and leisure centres, and travel and tourism facilities and services are other attractive investment possibilities in Hungary. In the tourism sector, for example, possibilities include upgrading and developing tourism infrastructure and improving services, including building convention centres, reconstructing Hungary’s thermal baths and spas, and meeting increasing demand for golf parks and holiday villages.

Hungary is clearly a high potential European investment target.

Budapest

Current priorities include the development of logistics centres and combined transport terminals to boost environment friendly transportation; basic infrastructure of public ports on the Danube; international airports with regional importance; and the use of an Intelligent Transport System to improve public transport and the transportation of goods.

Budapest’s Ferihegy International Airport is currently undergoing a €50-63 million upgrade, and the country’s railway infrastructure is set to be developed in a €3.6 billion programme (with substantial EU funding) over the next few years. Foreign players are welcome in such projects.

Hungary can also act as a hub for UK companies to bid jointly with Hun-

19

HUNGARY

Doing Business in Hungary

Doing Business 2008, a World Bank publication, ranks Hungary a respectable 45 out of 178 economies concerning the ease of doing business in the country. The ranking is based on starting a business, dealing with licenses, employing workers, registering property, getting credit, protection for investors, taxes, trading across boarders, enforcing contracts, and closing a business. In all categories, Hungary scores well.

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HUNGARY

Business & Investment Opportunities

Only 16 days to start a business Those wishing to launch a business in Hungary, for example, can do so in around 16 days by following only around six procedures. Hungary has reduced the business start up time to much less than that required in competing economies in the region.

A registration application for the establishment of a Limited Liability Company (Kft) or Public or Private Companies Limited by Shares (NyRt. or ZRt.) must be filed with the appropriate Hungarian Court of Registration, located in each county, within 30 days following the signing of the deed of foundation or the articles of association. The company is officially established when it is added to the Companies Register.

Hungary’s Foreign Investment Act of 1988 grants full protection of the investments and businesses of non-Hungarian resident investors and guarantees that investors will be treated in the same manner as national investors.

The act also gives foreign investors the right to remit profits and investment capital to their home country. Incentives are available to all enterprises registered in Hungary, regardless of the nationality of owners or location of incorporation.

Privatisation projects and greenfield initiatives The Hungarian Privatisation and State Holding Company (APV Rt.) manages and privatises state owned properties, with Ministry of Finance approval for the banking sector. Hungary actively seeks investors to purchase privatised firms and to implement greenfield investment. Some projects, such as those funded by the EU, require participation by a European partner. Tender announcements and decisions are published weekly in the Kozbeszerzesi Ertesito (Public Procurement Review, www.kozbeszerzes.gov.hu).

Partnering with a local business is the best idea for foreign firms entering the Hungarian market, at least in the initial stages. Joint ventures are a popular option. For companies not planning to establish their own production or direct sales subsidiary in the country, working with a local agent or distributor is highly recommended, especially since Hungary has many independent distributors – many of them small to medium-sized enterprises – with solid expertise and capability. Local distributors typically help position brands for the local market through advertising and promotion, and assist with after-sales service. Some European firms have established their own subsidiaries in Hungary to handle distribution in the local market and beyond.

Many Hungarian firms prefer to act as agents rather than distributors, working on a commission basis, generally around 5% to 8%. The use of agents is common in sectors where capital and technical expertise is most important.

Foreign firms can establish a commercial representative office, which is limited to mediating and preparing trade contracts between foreign and Hungarian businesses or individuals, and promoting goods, services, and rights of the represented foreign company. Foreign investors can also enter the Hungarian market through franchising. There are now around 400 franchises operating in the country, around half of which are foreign owned.

Foreigners do not need government approval to establish bank subsidiaries or to establish more than a 10% stake in existing banks. Foreign or Hungarian credit institutions, insurance institutions, and investment companies may own up to 100% of a financial institution, and foreign banks can establish branches in Hungary offering crossborder financial services.

For investors in the agriculture sector, according to the 1994 Land Law, non-

resident persons and legal entities may not acquire title of ownership of agricultural land, but they may conclude leasehold contracts of not more than 20 years (with certain exceptions, such as forests and vineyards) for not more than 300 hectares of land.

Trade promotion Trade associations and business chambers (such as the British Chamber of Commerce in Hungary) offer high quality publicity and low cost web advertising. Partnering with Hungarian universities also offers a vehicle for trade promotion, and sector specific trade shows have become increasingly common.

Foreign direct investment in Hungary has increased rapidly. Currently, foreign firms control two-thirds of Hungary’s manufacturing, 90% of telecommunications and 60% of the energy sector. Direct investment in Hungary by British companies since 1990 totalled around €5.2 billion in 2007. Over 500 UK companies are represented in Hungary, and the UK is particularly strong in the services sector. The biggest UK investors include Tesco, Vodafone, BAT, GlaxoSmithKline, Unilever, Diageo and Bernard Matthews Ltd., but a growing number of small and medium sized UK companies have also entered the Hungarian market.

British companies enjoy a very positive reputation in Hungary, which is doing its best to make it easier and faster for investors to establish a business there.

21

HUNGARY

Business & Investment Opportunities

Hungary’s favourable tax regime is one of its most important incentives for foreign investors. Incentives awarded by the Ministry of Finance can decrease corporate taxes (now 16%) by up to 80% for ten years.

Highly Favourable Tax Incentives

Eligible investments include those over HUF1 billion (€4 million), or €400,000 for investments in environmental protection, broadband Internet service, hygienic food processing, film and video production, and basic or applied research or experimental development, with certain restrictions.

Favoured regions are northern Hungary, the northern and southern Great Plains, the central and southern Transdanubian region, and the smaller regions of Celldömölk, Letenye, riszentpéter, Tét, Vasvár and Zalaszentgrót.

Over the first five years, the company must increase the number of its employees by at least 100 (or 50 in underdeveloped regions), or increase wage costs by at least 600 times (or 300 times in underdeveloped regions) the annual minimum wage, or procure a minimum of 30% of its supplies from small- and mediumsized enterprises (SMEs).

For job creation investments, at least 300 new employees must be hired (150 at medium-sized enterprises, 30 at small enterprises), or 150 in underdeveloped regions (75 at medium-sized enterprises, 15 at small enterprises), and at least 20% of new jobs must be filled by school leavers.

Investment in assets reduces taxes At least 25% of the investment must be financed by the project, and at least 30% must be in new facilities

22

or assets, with no more than 20% in renovation. Taxable income may be reduced by investments in assets (up to €120,000) and 40% of the interest on an investment loan is deductible, up to €24,000 per year.

SMEs qualify for tax allowances if they employ no more than 250 people, their annual net sales revenue does not exceed HUF4 billion (€16 million) and/or the total balance does not exceed HUF2.7 billion (€11 million), and no more than 25% of the company’s shares are owned by the state, local government or a third party.

The rate of the tax benefit is the maximum intensity ratio minus all direct subsidies. Maximum intensity ratios are 35% in Budapest, 40% in Pest County, 45% in Western Transdanubia (excluding less developed areas), and 50% in all others.

For investments of up to €50 million, no restriction in addition to regional preferences is applicable.

For investments of €50 million€100 million, 50% of the regionally allowed intensity ratio applies; for investments of over €100 million, 34% of the regionally allowed intensity ratio applies.

• Financial Sector Strengthened by Stabilisation Programme • Banking and Capital Markets Meeting EU Standards

Finance & Banking

23

HUNGARY

Finance & Banking

Hungary’s financial sector has seen dramatic changes over the last 15 years. The current post-EU accession environment and an increasingly competitive market continue to stimulate the development of the country’s financial services. Hungary is playing an increasingly important role as a European financial services hub, thanks to its strategic location and to the significant presence of foreign financial services institutions, which give the local financial sector global reach.

Painful but productive Hungary’s financial sector has been strengthened by the government’s efforts over the past two years to achieve economic stabilisation. As the Hungarian Banking Association puts it, “The process of returning to a sustainable growth path has been painful – GDP growth slowed, real wages declined, consumption dropped – but successful. The bud-

24

Financial Sector Stabilisation get deficit has been reduced and the balance of trade closed at close to zero at the end of 2007.”

government’s forecast for real GDP growth). Consequently, there is no room for tax relief unless it is offset by spending cuts.”

The International Monetary Fund, praising Hungary’s productive efforts to deal with its budget deficit, says that the government’s 2008 fis-

A draft fiscal responsibility law, along with proposed amendments to the constitution and to the local gov-

cal deficit target of 4% of GDP is attainable, and that it should be possible to continue to reduce the deficit to 3.2% of GDP next year, providing stringent controls are observed.

The IMF says, “Achieving the target will require strict spending restraint (especially on wages and transfers, in line with the announced spending ceilings) and continued strong revenue growth (in line with the

ernment act, are initiatives under way that would further strengthen Hungary’s public finances. A parliamentary budget office has been proposed; it would provide independent scrutiny of compliance with fiscal regulations. The new fiscal responsibility law would strengthen the medium-term expenditure framework by making spending ceilings binding.

HUNGARY

Finance & Banking

Strengthened by Programme HFSA oversees financial sector Hungary’s financial sector is overseen by the Hungarian Financial Services Authority (HFSA), established in 2000. While the Ministry of Finance is responsible for the legal framework governing the financial sector, the HFSA has the power to issue guidelines and recommendations, and it also has full autonomy in granting and withdrawing licenses for non banking financial institutions.

The HFSA and the NBH have the joint responsibility for licensing banks. The HFSA works to promote world class standards and aims to bring Hungary’s financial services sector in line with EU criteria.

Hungary’s financial services sector is made up primarily of banks but also includes specialised credit institutions and financial services firms, investment enterprises, investment funds, insurance companies and pension funds. Most financial institutions are subsidiaries of major foreign financial services groups. The West European banks that dominate Hungary’s financial sector are mainly from Austria, Germany and the Netherlands.

Monetary policy focuses on inflation control Hungary’s monetary policy is now focused on controlling inflation.

The government has set a target of 3% inflation by 2010, and the National Bank of Hungary (NBH), the country’s central bank, says that

this inflation target is achievable at an exchange rate of HUF250255 to the euro. In early June this year, the forint reached 230 to the euro.

In fact, a new challenge for Hungary is the rapidly growing strength of the forint over the past few weeks, according to a recent statement by Finance Minister Janos Veres. The government abolished the forint’s trading band in February and the value of the currency has been rising ever since, more quickly than anticipated. Janos Veres explains that the abolition of the forint’s band was a credibility issue for the central bank as it boosted the bank’s options concerning monetary policy, but that the high exchange rate is disadvantageous for many Hungarian companies.

The Minister of Finance says that he does not foresee an increase in Hungary’s interest rate, now at 8.5%, in spite of the current situation, and adds that revising the government’s inflation targets upward is not an option either.

Strong performance in first half of 2008 In spite of these challenges, the Ministry of Finance reported strong results for the economy in the first half of 2008. In May, general government accounts showed a surplus of HUF97.5 billion, or 0.3% of GDP; this surplus is above the projected surplus of HUF88.6 billion.

The central government budget and social security funds showed a surplus of HUF76.2 billion and HUF24.0 billion respectively, while the deficit of extra-budgetary funds was HUF2.7 billion, according to the Ministry. In addition, receipts from personal income tax totalled slightly above projections in May, while contributions paid by employers and employees were somewhat below the anticipated total.

Most promisingly, public sector spending was lower than projected over the first half of the year.

Hungary’s financial sector has many challenges to face but seems well prepared to meet them.

25

HUNGARY

Finance & Banking

Hungarian Banking Association

Banking Association Helps Banks Meet Challenges The Hungarian Banking Association (HBA), now with 38 members, promotes Hungary’s banking sector and serves as an advocate for the sector when the government makes decisions that will affect banking sector activities.

Dr. Peter Felcsuti, General Manager of Raiffeisen Bank Hungary, was elected HBA president in April 2008. He describes his role as “coordinating the activities of our members and promoting a common ground concerning issues that affect all of us. In addition, I am expected to speak on behalf of the association to the media and the government.”

The HBA works to forge links between the local banking sector and other banking organizations around the world, and has been working with the European Banking Federation since 1991. It has been cooperating with the European Mortgage Federation since 1993, and has also developed bilateral relations with banking associations in several countries.

Challenges for the banking sector Concerning major issues for the banking sector today, Dr. Peter Felcsuti says, “I was elected at a time when the Hungarian economy is facing serious structural problems and the banking sector is also experiencing difficulties, including a deterioration of its loan portfolio. In addition, there are growing European demands for large service providers, among them banks, to improve the transparency and fairness of their services. The Hungarian banking industry needs to adjust its policies and practices to meet these challenges.”

Dr. Peter Felcsuti points out that the previous president and elected officers of the HBA had already recognised these problems and had initiated programmes to help HBA members cope with them. He says, “My task is to help roll out these programmes to maximum effect.”

26

Dr. Peter Felcsuti, President of Hungarian Banking Association

Competition increasing In fact, a key goal of the HBA is to upgrade Hungary’s banking sector overall through promoting institutions and programmes that will enhance local banks’ stability and efficiency. Dr. Peter Felcsuti says, “After a decade of fat years, the Hungarian banking industry is now experiencing a slowdown. In addition, competition is increasing. Risk management, cost efficiency, and funding are important issues for us now.”

Enhancing communications is essential in meeting the challenges the sector faces. Dr. Peter Felcsuti explains, “I believe in the power of communication and also believe it might be one of my strengths. Hence I have no problem working to promote better communication between members of the banking sector and between the banking sector and the government.”

HUNGARY

Finance & Banking

Volksbank Hungary

Local Bank Excels at Providing Personalized Service Volksbank Hungary, which was launched in Hungary in 1993, was created in a joint venture between Österreichische Volksbanken (with a 51% share), Banque Fédérale des Banques Populaires (France), DZ-Bank/WGZ-Bank (Germany) and Italian and Turkish popular banks. Volksbank Hungary focuses on satisfying the needs of individual customers and small-to-mediumsized enterprises.

“Volksbank has great knowledge of customers’ needs. If your customer portfolio is not developing, you cannot drive a successful strategy.”

The bank is particularly active in the export related sectors and in real estate and tourism. “We like to focus on sectors with great development potential,” Balázs László says.

Volksbank also aims to respond to new trends, for example the current strong demand for modern residential property.

Balázs László says that personal banking is the bank’s focus. He explains, “Consumers need personal banking services, and I believe that a large-scale global bank cannot provide true personalised products.

Volksbank specialises in personalised services. Concentrating on this niche has made us grow more rapidly than our competitors.” He adds that a focus on smaller and medium-sized companies is an excellent strategy for Hungary, where such companies play a major role in the country’s GDP.

Volksbank serves foreign customers as well as Hungarians and has established an international department staffed by native speakers of German, English, Italian, French and Turkish. “If you come from a foreign country to live and work in Hungary, the first difficulty is the language and the second is learning about local regulations and practices, for example concerning loans.

Volksbank Hungary provides these services. We also provide expert advice on the Hungarian market,” Balázs László explains. He concludes, “Volksbank offers universal banking services employing the latest technologies, and we specialise in personalised service for our local and international customers.”

Volksbank has boosted its number of customers to over 145,000 and has achieved a 35% rise in its net loan portfolio as well as a 47% growth in deposits. “Our balance sheet five years ago was €500 million and now we have €1,7 billion,” Balázs László points out, adding,

Volksbank Magyarország H-1088 Budapest, Rákóczi út 7 Tel. +36 1 326 6666 www.volksbank.hu

Balázs László, Chairman and CEO

Now with a staff of around 600 people, the bank operates 65 branches throughout Hungary and is ranked among the top ten banks in the country. “We provide our customers with a broad product range and excellent retail banking services,” explains Balázs László, Chairman and CEO. He adds that the bank plans to reach a 3% market share by 2011 and eventually double the size of its branch network.

27

HUNGARY

Finance & Banking

Banking and Capital Markets Meeting EU Standards Hungary’s banking and capital markets activities are fully liberalised. The Hungarian forint (HUF) has been fully convertible since 2001, and the banking sector has been privatised since 1995. Today, more than 90% of the registered capital of Hungary’s banking sector is under foreign ownership. Only the Hungarian Development Bank and Eximbank, two banks with special governmental functions, remain under government control.

The banking sector includes 27 commercial banks, each of which has adapted its foreign parent institution’s financial know-how and banking technology to the particular needs of the Hungarian market.

Banking services available in Hungary are on par with those anywhere in Western Europe in both quality and technological advancement.

Hungary’s banks have been granted a universal license to engage in both financial and capital markets transactions. The banking market is relatively concentrated, with 10 leading banks in keen competition.

Recent banking trends While Hungarian banks’ rates of return significantly exceeded the international average between 2001 and 2006, their real rates of return converged to the EU average in 2007.

The stock of corporate loans in Hungary doubled between 2001 and 2007, and that of retail loans rose seven and a half times, although this growth slowed last year to 26%.

Consumer loans increased by 40.5% in 2007, but home loans, making up more than half of all retail loans, grew by 17.1% in 2007, the lowest growth in six years.

Loans grew more than twice as fast as deposits between 2001 and 2007; last year loans grew by 22.1%, deposits by 6.9%. Overall, Hungary’s loans to deposits ratio grew from 80% in 2001 to 153% in 2007. Central bank and inter-bank deposits dropped

28

Budapest Stock Exchange

significantly last year, to 68% of the 2006 level, indicating diminishing liquidity in the Hungarian market.

The share of foreign currency assets in total assets, totalling between 30% and 34% between 2000 and 2002, had risen to 49.5% by the end of 2007, and the share of foreign currency loans in total retail loans, only 3% in 2001, reached 59.5% by the end of 2007.

In fact, net interest margins dropped last year partly due to borrowers’ preference for low rate foreign currency loans. Recent trends include eased lending standards for households, including lengthened maturities, raised loan-to-value ratios, and new products with higher risk profiles (such as yenbased loans).

HUNGARY

Finance & Banking

The share of foreign currency loans in corporate loans reached 53.7% last year. Securities for trading were the only forint-denominated assets showing growth in 2007, reaching 1.8 times the 2006 value.

Classic commercial banking activities in Hungary are supplemented by leasing, factoring, mortgage banking and other specialised financial services, usually offered by companies owned by major banks.

Hungary also has around 30 insurance companies offering a full range of products, and insurance firms, along with institutional pension funds, are seeing particularly strong growth.

The Budapest Stock Exchange Just as Hungary’s banking sector has evolved to match EU standards, the country’s stock exchange, Budapest Stock Exchange (BÉT), is a dynamic exchange that has attracted significant interest from both local and foreign investors.

BÉT – the first post-Communist stock exchange when it re-opened in 1990 – has around 50 members, with around 40 domestic and foreign broker companies trading securities on primary and secondary markets. In addition, the exchange includes more than 80 funds.

The four main activities of the stock exchange are listing companies, serving as a platform for trading financial instruments, communicating up-to-date market information in real time and on-

line, and supporting the development of new financial instruments and products, including on the futures and option markets. Investors seeking hedging opportunities, for example, can select from a wide choice of individual stocks and currency, interest rate and commodity derivatives.

Well-regulated capital markets Hungary’s capital markets are governed by the Capital Markets Act of 2001, which has been revised regularly, particularly following Hungary’s accession to the EU in 2004; new provisions in the act are designed to make sure Hungary’s capital markets comply with EU standards.

The Hungarian Financial Supervisory Authority (HFSA) oversees Hungary’s banking, insurance, other financial services and capital markets, and applies international

and EU criteria. Concerning capital markets, the HFSA regulates securities offerings and investment service activities, and cooperates with other national supervisory authorities, especially with those of other EU member states. Under the framework of a developing supervision strategy set for completion by 2010, the HFSA is gradually shifting to a more preventive, riskoriented supervisory role.

Clearing and depositary activities are handled by a single organisation, the Central Clearing House and Depository (KELER), a private company owned by the National Bank of Hungary and the BSE and operating under the supervision of HFSA. Hungary’s banking services and capital markets meet EU standards of performance and protection for clients, and present interesting opportunities for local and foreign investors.

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• Energy Market Officially Open • European Leader in Renewable Energy

Energy & Gas

30

HUNGARY

Energy & Gas

Liberalised Energy Sector with a Focus on Boosting Efficiency Hungary’s energy sector has been developing rapidly. The energy market was liberalised in 2004, the 2005 Electricity Act has further increased competition in both the electricity and gas markets, and in January 2006 Hungarian electricity grid company MAVIR was established as a true transmission system operator, with enhanced powers and responsibilities. Since July 2007, all electricity and gas customers have been able to freely select their suppliers.

Market reform in line with EU directives In only a few years, Hungary has successfully introduced the legislation to build a foundation for market reform in line with the most recent EU gas and electricity market directives. The country’s first National Allocation Plan has been accepted by the European Commission (EC), and all of the institutions required for emissions trading under the European Union’s Emissions Trading Scheme (EU-ETS) now exist in Hungary. Hungary aims to be a productive international player in the energy sector, and contributed significantly to the success of the International Energy Agency (IEA) relief programme following hurricane Katrina.

In spite of these very positive improvements, Hungary’s energy sector still faces a number of challenges. One is the government’s austerity programme to reduce the budget deficit, which has resulted in significant cutbacks in some of the country’s most effective energy sector organisations, including the Energy Centre, which has been leading a drive to promote energy efficiency.

Well-established players still dominate In addition, in spite of market liberalisation, the state owned Hungarian Electricity Companies (MVM) in electricity an E.On-Ruhrgas in gas still dominate the local electricity and gas markets, and power purchase agreements (PPAs) in electricity and the Panruszgás import arrangements in gas are hampering the emergence of strong competitors to these key players. MVM, which owns the Paks nuclear power plant, is the sole

buyer and seller of electricity generated in Hungary under long-term PPAs, and is the unique supplier to the regulated market. Imports of electricity have nevertheless proved more competitive than those of gas.

A recent study by the OECD and the International Energy Agency (IEA) recommends that Hungary should develop “new market models that take EU legislation into account to create competitive electricity and gas markets in Hungary.” The report continues, “Despite these concerns, the review finds that Hungary has made good progress over the past four years, and a solid understanding of these energy challenges exists throughout the government and policy-making institutions.”

Strong dependence on gas One challenge is significant use of gas as an energy source. Hungary has one of the highest dependencies on gas of any IEA member country, which was emphasised by the disruptions caused by interrupted gas supplies in 2006, although the government dealt very efficiently with the problem. Plans are in the works to develop a strategic gas storage facility with a capacity of 1.2 billion cubic metres by 2010 as insurance against additional supply breakdowns.

Hungary provides gas subsidies to most households, which has put a heavy burden on the state and also pushes gas demand to a higher level. The gas subsidy system is currently under review by the government.

At the same time, the government is working to implement two new gas pipelines, Nabucco and a pipeline

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HUNGARY

Energy & Gas

from the liquid natural gas terminal on Croatia’s Adriatic coast to Hungary. In June 2006, MOL and Gazprom signed the Bluestream gas pipeline contract to co-operate on the second stage of the Bluestream pipeline to Europe.

Paks nuclear plan supplies 33% of electricity Nuclear energy plays a major role in Hungary’s energy sector. The Paks nuclear power plant, Hungary’s only nuclear plant, supplies 33% of Hungary’s electricity needs and helps the country provide low-cost electrical power. Owner MVM is currently expanding the plant to meet growing demand.

Several foreign private companies are already operating in Hungary’s electricity generation and distribution sector, and both generation and distribution activities are set to increase as the economy continues to develop.

Commitment to energy efficiency Hungary is committed to energy efficiency as a means of making its economy more globally competitive. Hungary’s energy sector has already established a very strong track record in environmental protection. The country’s per capita energy consumption and carbon dioxide (CO2) emissions are significantly lower than the EU average, and overall energy efficiency has been improving at the impressive rate of around 3% per year for some time. Hungary signed the Kyoto Protocol in 2002 and appears to be on course to meet its commitments. EU funding is becoming available to Hungary to support investment in energy efficiency.

Hungary also has an ambitious renewable energy policy and has managed a rapid increase in the share of renewable energy in electricity generation to around 5%, above its 2010 target.

Overall, Hungary’s energy sector is well developed and regulated, and has excellent growth potential.

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The Hungarian Energy Office

Assuring a Fair, Efficient and Investment-Friendly Energy Sector The Hungarian Energy Office (HEO), established in 1994, is under the supervision of the Ministry of Transport, Telecommunication and Energy but it operates independently. HEO makes sure Hungary’s energy sector performs efficiently and that energy prices are fair for both consumers and the energy industry.

“We have to take into consideration not only the interests of consumers but also that of all players in the industry, including producers, distributors and traders,” says Ferenc J. Horvath, President.

do in this respect because the office has to suggest the support scheme and license the establishment of renewable-energy projects. We are working with the Hungarian Energy Center to achieve this goal,” Ferenc J. Horvath points out.

Ferenc J. Horvath, President

The HEO handles all matters related to electrical and gas energy supplies, including licenses for the generation, transport, trade, distribution and supply of electrical and gas energy, as well as overseeing the production of district heating by authorised power plants. Hungary’s energy sector now includes around 500 licensed companies. In addition, the office oversees that all license-holders comply with the regulatory environment of the Hungarian energy industry.

Current trends in Hungary’s energy sector, according to Ferenc J. Horvath, include a focus on energy conservation (energy efficiency) which has resulted in a decline in specific energy use in recent years. “Energy use per capita in Hungary is approximately half the European average,” he says.

CONTACT DETAILS: Hungarian Energy Office H-1081 Budapest, Koztarsasag ter 7 Phone: +36 1 459 7750 Fax: +36 1 459 7702

The HEO is also involved in environmental protection and supplies the Ministry of the Environment and Water with technical data on power-plant emissions. “We plan to implement a reduction of 20% of CO2 emissions until 2020,” Ferenc J. Horvath explains.

As Hungary’s economy continues to expand, more international energy companies are entering the Hungarian market, and foreign investors now hold around 50% of the assets in Hungary’s electricity sector. “In the area of enlarging renewable energy sources investors can be guaranteed that they will have a return on investment because energy purchase prices are augmented based on the yearly rate of inflation,” Ferenc J. Horvath explains. He concludes, “It is important that investors feel at home in this environment and that their long-term investments have an adequately safe and high return. We offer a reliable, transparent market and prices at the European level.”

A key goal for the HEO is to promote the efficient use of renewable energy sources, in line with Hungary’s National Development Plan for 2007 to 2020, which calls for a 15% share in the fuel mix. “The HEO has a lot to

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Energy & Gas

Budapest Gas Works

Gas Company Thriving in Liberalised Market Budapest Gas Works, with a 152year history, is among the top five, predominantly Hungarian-owned companies, and is a leader in Hungary’s newly liberalised natural-gas sector. The company supplies gas to more than 812,000 clients, both individual and corporate.

portfolio in a more effective manner.

The gas market being under liberalisation offers a great opportunity for revising our strategies, or even for expanding our range of activities.

Dr. Tibor Bakonyi told that current leaders of the Hungarian natural-gas market have to look beyond naturalgas trade and also have to focus on alternative sources of energy and their potential application. “In the next 5 years Budapest Gas Works continues to be one of the most significant companies in the Hungarian naturalgas market,” he added. The company is contributing to the spread of CNG fuelled vehicles in Hungary, and popularising other alternative methods of natural-gas use that help to reduce the level of air pollution.

Dr. Tibor Bakonyi, CEO

According to Dr. Tibor Bakonyi, CEO, Budapest Gas Works’ competitive edge is “professionalism and the ability to innovate thanks to our motivated, well-trained and creative workforce.” He added that Budapest Gas Works “serves as an example that a liberalised gas market, which the EU Commission mandated for Hungary, can operate successfully here.” Budapest Gas Works operates according to ISO 9001:2001 quality management standards and has proved it can meet the challenge of an open market. To remain competitive, the company plans to continue to offer new services.

Budapest Gas Works is considering its possibilities to make its purchases more competitive and to manage its

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The company is also involved in community-service and cultural projects, including a subsidy program through which, since 2000, Budapest Gas Works has significantly contributed to the modernisation of the gas heating systems among the citizens of Budapest and to reconstruction programs in block of flats. The company also supports the Budapest Autumn Festival, among other cultural initiatives.

Budapest Gas Works Koztarsasag ter 20 1081 Budapest Tel.: + 36 1 477 1111 www.fogaz.hu

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Energy & Gas

Genesis Energy Investment Company

Innovative Solar Energy Project Seeks Equity Partner Genesis Energy Investment Company, founded in 1983, is bringing a new kind of energy to Hungary. Its daughter company, Genesis Solar Hungary, will build a solar-energy production facility around 60 km outside Budapest, after completing a similar facility in Spain by Genesis Solar Spain; Genesis Energy also has a branch in Singapore. Genesis Energy made headlines when it was recently recognised by the Budapest Stock Exchange as the issuer with the largest price increase in 2007.

Genesis Energy is working with German engineers and shareholders to launch its projects, and aims to become one of the global leaders in the low-cost production of thin-film solar panels. “We believe that this company will set new standards concerning solar-energy technology. We have excellent growth prospects since solar energy will be needed more and more in the future,” Gábor Rényi believes.

Gábor Rényi, President and CEO

The Hungarian government is a strong supporter of the new project, having allocated the company a significant cash subsidy and 10 years tax exempt. This will reduce Genesis Energy’s tax obligations representing a savings of around €50 million.

The Hungarian plant will produce a-Si thin-film solar modules with an overall capacity of 98 MWp (megawatts peak) per year. “The factory will be very high-tech, with an exceptional industrial standard. This technology has never been employed before in Hungary,” says Gábor Rényi, Genesis Energy’s President and CEO.

The new venture will bring significant benefits to the Hungarian economy not only through launching a new type of energy sector but also through employing around 120 highly qualified people. As Gábor Rényi points out, “Hungary needs not only investments in general but also highquality investments with high added value for the long term.”

The new plant is a particularly innovative initiative in Hungary, where the use of solar energy is not popular yet. As Gábor Rényi explains, “We are not counting on the Hungarian market for our solar modules yet; our main market is Spain. We have found an opportunity in this niche market, and Genesis Energy attracted the best people to implement this project.”

Genesis Energy is currently looking for a long-term equity partner to participate in this high-potential new project. “It is a major investment, but one with very attractive returns,” Gábor Rényi explains, adding that in five years he expects Genesis Energy to be one of the biggest players in its market, if not the biggest. “The market is waiting for this project,” he concludes.

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HUNGARY

As of July 2007, Hungary has officially opened around 70% of its energy market to foreign participation, providing exceptional opportunities for investment, particularly as the country’s energy needs rise as the economy continues to expand.

The government has officially implemented all EU market directives for the energy sector, guaranteeing true market liberalisation and creating a level playing field for foreign and domestic investors.

Energy Market Officially Open ‘Legal’ versus ‘real’ market opening At present, however, Hungary’s energy sector is characterised by a gap between legal market opening and real market opening, or the number of companies which are actually taking advantage of market liberalisation.

According to a 2007 study by the OECD and the IEA, legal market opening in Hungary’s energy sector stands at 70%, while real market opening is significantly lower, only about 7% in the gas sector and

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30% in electricity. As the OECD/ IEA study points out, “While some elements of market regulation are very well developed, such as the electricity network regulation, other aspects, such as the creation of fully functioning wholesale markets, are lagging behind. In the electricity sector, the government has not yet undertaken action to restructure purchase agreements, which are significant barriers to the development of a competitive electricity market.

In the gas sector, the government and the regulator have not taken significant action to enable compe-

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Energy & Gas

tition against the incumbent to import gas.”

More opportunities anticipated In fact, Hungary’s energy sector is still dominated by well-established companies which benefit from long standing agreements that virtually guarantee their market dominance, particularly concerning gas imports. Given Hungary’s commitment to abiding by EU criteria and its growing need for diversity in the energy sector, the government is certain to focus on closing the gap between legal and real market opening in the future.

Reliance on imported oil and gas Hungary has limited indigenous resources of oil, gas and coal, but analysts agree that domestic oil and gas production has peaked and is expected to gradually decline. Hungary imports around 80% of its oil requirements and 80% of its gas requirements, both from Russia (Gazprom is its sole source for gas).

For electricity generation, Hungary has focused on nuclear power produced by the Paks power plant, which provides 33% of the country’s energy needs.

Paks is owned by state owned company MVM, the unique supplier to the regulated market.

Energy policy focuses on three ‘Es’ Hungary’s energy policy is aimed at balancing the three ‘Es’, namely energy security, economic growth, and environmental protection. Of the three, energy security is the government’s top priority at present, particularly concerning natural gas.

Hungary imports all its natural gas from one supplier, most Hungarian households use gas for heating, and gas is subsidised by the government.

This situation makes the country particularly vulnerable to problems like

Buda Castle

the recent Russia-Ukraine gas dispute which left Hungary temporarily short of gas supplies.

year terms by the Minister of Economy and Transport, and it reports to parliament.

To boost energy security, the government has opted for supply side measures, including increased oil storage and more electricity interconnections, with a gas storage facility in the planning stages. Hungary is also supporting the development of new gas pipelines.

Greater market opening in the gas and electricity sectors would enhance Hungary’s energy security.

The HEO’s chief responsibilities are to issue and amend licences for the generation, distribution, trade and public utility supply of electric energy, for the production of district heat in the authorised power plants, as well as for the distribution, supply, trade, and public utility supply of gas; and to issue operation licences to power plants. The HEO also approves the terms of energy operation, trade and distribution; ensures that customers’ interests are protected; sets official prices of natural gas, electric energy and heat energy produced in the authorised power plants; sets the conditions of price application for decision-making; and other tasks.

Well-established regulator Hungary’s energy sector is regulated by the Hungarian Energy Office (HEO), which oversees electricity, gas and also heat that is sold by power stations with a capacity above 50 megawatts (MW) to district heating facilities. The HEO is self-financing through licensing fees on the industries it regulates. Its president and vice president are appointed to six

Overall, while true market opening is still in the future, Hungary has laid the foundations for a liberalised energy sector with strong investment potential.

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Energy & Gas

Emfesz

Energy-Sector Leader Successfully Energy leader EMFESZ, Hungary’s biggest independent natural gas supplier, proved its spirit of innovation by entering the retail gas market in February this year. EMFESZ is providing residential gas supply under its brand name ‘gas.hu’, the very first online gas supply service in Hungary and Central-Eastern Europe. Target is 20% of the Hungarian residential market, that is around 600,000 customers. This aim is expected to be reached within a couple of years. Owned by Ukrainian businessman Dmitry Firtash, Emfesz accounts for about 20% of Hungary’s natural gas imports, buying its gas from the firm RosUkrEnergo. Last year Emfesz had revenues of over US$1.09 billion, up 32% from the previous year.

2.6 billion cubic meters of natural gas supplied in 2007 Emfesz’s primary activity is to supply natural gas to its customers (like factories, district heating companies, …), and in 2007 the company provided 2.3 billion cubic meters of natural gas. Emfesz transports to consumers around 80% of the natural gas sold in the open market in Hungary. As Istvan Goczi, Managing Director, points out, “We entered the market in 2004, and we have already managed to have an 80% share on the deregulated gas market. We serve as an example of the successful liberalization of Hungary’s energy sector.”

Emfesz’s success story reflects the company’s ability to adapt quickly to a newly liberalised market. As Istvan Goczi points out, “It is not easy for an entire country to switch from a regulated market to a non-regulated market from one day to the next, and Emfesz serves as an example of how this can be done well. We are acting as a model gas company to show others how to succeed in a free market.”

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Foreign investors can count on reliable natural-gas supplies Emfesz is enhancing Hungary’s appeal for international investors by guaranteeing reliable supplies of energy for new companies setting up operations. “Potential foreign investors looking into Hungary should know that reliable supplies of natural gas are available all over the country.

All the distribution networks are in place and ready to serve clients. We have available energy supplies, especially natural gas, and the Hungarian government is committed to making sure that companies can always count on reliable energy,” Istvan Goczi points out.

Direct from production center to consumer As for the added competition from international players that have entered Hungary’s energy market, Istvan Goczi is not worried about Emfesz’s ability to retain its leading position. He says, “We have ample resources compared to our competi-

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Enters Retail Market tors; in fact, all our competitors are just re-sellers of gas. We are different because we are delivering natural gas in the shortest way possible, directly from production to the end consumer. Emfesz offers the most direct route between gas production facilities and our customers’ homes and businesses.”

Emfesz has also proved its ability to work quickly and efficiently. Istvan Goczi explains, “We began negotiations for a new power plant only three years ago and it is well on track to open by the end of 2011, beginning of 2012. The plant will meet all the latest standards of efficiency. Thanks to our ability to complete projects quickly, we will be competitive from the very beginning, this is also our huge advantage on the market.” The Emfesz plant will be Hungary’s biggest gas-fuelled power plant, with a capacity of 2,400 megawatts.

company has around 500 corporate customers, and each one can count on personalised support from account managers and supervisors. A foreign company entering the Hungarian market can be sure that Emfesz will not only provide the natural gas the company needs but also that the company can count on Emfesz to provide the kind of individual service that will help the company succeed.

companies that manufacture highadded-value products. To conclude, he explains, “Emfesz is a modern company operating according to the latest EU regulatory criteria.

We support the EU Commission’s requirements and we will continue to provide a secure supply of natural gas at competitive prices.”

Foreign investors welcome As for the future, Istvan Goczi would like to involve Emfesz more in gas trading, and he also envisions a growing presence for Emfesz in Poland and Romania, where the company already has subsidiaries.

Emfesz welcomes foreign investors to Hungary, and Istvan Goczi points out that the country especially needs

Emfesz Bank Center Szabadsag ter 7 H-1054 Budapest Tel: +36 1 428 3080 Fax: +36 1 354 1958 E-mail: info@emfesz.hu www.emfesz.hu

Pioneered Internet gas sales in Hungary Another reason for Emfesz competitive edge is that the company has invested in the latest technologies and in implementing up-to-date procedures in order to boost efficiency and keep costs down. For example, Emfesz pioneered sales of natural gas through the Internet in Hungary, and now 95% of the company’s customers purchase their natural-gas supplies in this way.

Emfesz is also well known for its personalised service for both individual and corporate clients. The

Istvan Goczi, Managing Director

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Between 2001 and 2006, Hungary’s production of renewable energy grew dynamically, increasing by almost six times regarding electricity production and by 1.5 times in energy used for heating. Biomass represents almost 90% of the renewable energy being used in Hungary, with geothermal energy accounting for 8.2%, hydropower 1.7%, solar energy 3%, and wind energy 15%.

Hungary’s potential renewable energy production has been estimated at more than 2,200 petajoules (PJ) per year, and the government is focusing on encouraging investment in the country’s renewable energy sector.

Outstanding potential for biomass energy Biomass energy in particular has outstanding potential – around 350-360 million tonnes, of which 1.8 million tonnes (0.3%) are being used cur-

European Leader in Renewable Energy rently – and has attracted a number of international investors. Hungary transforms around 15 million cubic metres of manure and 300,000 cubic metres of organic waste into biogas every year, and six of the country’s power plants are now using biomass fuel.

Hungary’s bio-ethanol production capacity is now 80,000 tonnes per year, and its bio-diesel production capacity has reached 10,000 tonnes per year. Bio-ethanol projects with total capacity of more than 300 tonnes per year have recently been launched

by SEKAB (Sweden), United Biofuels Holding (Switzerland), MABIO (Hungary), and DunaBio Energy Company (Switzerland).

New bio-diesel projects include ones

by Rossi Biofuel Zrt. (Austria) in cooperation with MOL, Öko-Line Kft. (Hungary), Central EU Biofuels Hungary Kft. (Australia), and Tempora Bioenergia Zrt. (Switzerland).

A focus on renewable energy for export as well as for domestic use is an excellent strategy for Hungary, given its central European location, highly developed infrastructure, advanced research activities and a history of commitment to environmental issues.

Strong government commitment Hungary signed the Kyoto Protocol to reduce CO2 emissions by 6% between 2008 and 2012, and has made impressive progress in reaching the

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EU target of 20% of total energy production to be renewable energy by 2020. Hungary’s National Development Plan earmarks 380 million for renewable energy, and the government already spends around 100 million per year on subsidies for green energy used by electricity distributors.

Hungary is also working to meet the EU directive that 4% of all vehicle fuel used in the country by 2010 should be bio-fuels, and opened its first E85 petrol station July 2007. The government gives tax allowances for bio-fuels and levies penalties on vehicle fuel sold that does not contain bio fuels.

Hungary is positioning itself as Europe’s renewable energy hub.

• Health Care Sector Building on History of Innovation • Health Care Sector Reforms in Progress • Biotechnology Targeted As One of Top Five Sectors

Health

“We always focus on providing quality services for patients and on ensuring benefits for health care providers.”

Dr. Tamas Szekely, Minister of Health

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Health

Hungary has had a national health care system since the 19th century, when it organised health insurance on the German Bismarck model. Hungary’s pharmaceuticals industry, in fact, is one of the oldest in Europe, tracing its history back to a drug company operating in the country in 1867.

Health Care Sector Building on History of Innovation

In the 1920s, the government established a national health insurance institute, and by the end of the 1930s, more than one third of Hungary’s population had insurance coverage. While funding came from the public sector, health care was provided by private institutions and municipal hospitals.

public sector. While the introduction of universal health care had a very positive impact on public health initially, by the 1970s Hungary’s health care system had begun to fall behind that of other European nations.

Decline under communist regime After the Second World War, when Hungary came under a communist regime, the Semashko model of centralised health care was introduced in which both financing and provision of health care came from the

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As in other CEE countries, in Hungary only a small proportion of GDP was dedicated to health care, resources were unevenly allocated, primary care services were inadequate, inpatient hospital care was emphasised even though such care was generally sub standard, management of the system was poor and the workforce ill trained, and there were great variations in the quality of care.

This negative experience over many years is still being felt in Hungary’s health care system today in some ways, but the government is strongly committed to bringing the system up to western European standards.

Reforms have been in progress for more than a decade, and today Hungary offers universal free health care to every citizen.

Thriving pharmaceuticals industry Hungary’s pharmaceuticals sector has long played a major role in the country’s economy and in the provision of health care. “Hungary’s phar-

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Health

maceuticals industry is characterised by continuous innovation,” says Dr. László Buzás, director of the Hungarian Pharmaceuticals Manufacturers Association. Hungarian pharmaceuticals firms regularly cooperate with drug manufacturers in other countries to develop original products.

Hungary is respected for its research activities and highly educated professionals in many fields, and it is building on these competencies to create one of Europe’s leading pharmaceuticals industries.

1912; Phylaxia (now Ceva-Phylaxia), also founded in 1912; Dr. Wander (now EGIS Pharmaceuticals), founded in 1913; and Alkaloida (now ICN Hungary), founded in 1927.

Hungary’s top four pharmaceuticals firms – Chinoin/Sanofi-Aventis, EGIS, Richter and TEVA – are now ranked among the top ten Central and Eastern European drug companies.

tensive testing and are controlled by state-of-the-art quality assurance systems. Today, more than 40 companies are licensed to manufacture human medicinal products in Hungary, and pharmaceuticals exports have been growing by an average 16% per year.

As for the future, research and development will play an increasingly important role in Hungary’s health

Sales of pharmaceuticals products in Hungary totalled HUF595 billion in 2007, of which HUF99 billion was through hospitals, HUF496 billion was through pharmacies, and HUF69 billion was in over the counter sales. While both hospital and pharmacy sales declined slightly compared to 2006, over the counter sales increased by HUF2 billion.

Top 15 pharmaceuticals companies Hungary’s pharmaceuticals sector has attracted a number of top international players and is also marked by the outstanding performance of Hungarian firms. The top 15 pharmaceuticals companies in Hungary last year were Sanofi-Aventis in the number one spot (its Plavix and Clexane were the top two products in sales last year), followed by Servier, Novartis, TEVA, Gedeon Richter, Pfizer, Roche, GSK, Bayer Schering Pharma, AstraZeneca, Eli Lilly, Janssen-Cilag, Merck Sharp and Dohme, Schering Plough, and Krka, in that order.

Leading Hungarian pharmaceuticals firms include Gedeon Richter, founded in 1901; Alka (now Chinoin/Sanofi-Aventis), founded in 1910; Rex (now TEVA Pharmaceuticals, formerly Biogal), founded in

Liberalisation in the 1990s Beginning in 1990, the pharmaceuticals sector was liberalised and foreign direct investment in the sector grew rapidly. Local firms began to focus on human medicines and to use western marketing and sales techniques. Private pharmacies, launched as a result of the Companies Act in 1988, have also seen significant growth.

In 1994, Hungary passed from the process patent system to the product patent system, which signifies a shift to the highest level of intellectual property rights. All pharmaceuticals products in Hungary undergo ex-

care sector, for example concerning recombinant DNA technology, and contract research organisations as well as in house research groups are expected to have an even greater impact on the pharmaceuticals industry. Production and sales of generic products and over the counter sales are also expected to grow. In fact, Hungary’s pharmaceuticals sector is expected to continue to grow by around 10% per year.

For foreign companies and investors, Hungary’s health care and pharmaceuticals sectors present outstanding opportunities.

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Health

Renewal of and Moving Forward in the Health Care Sector Hungary’s Minister of Health, Dr. Tamas Szekely, former Director General of the National Health Insurance Fund, is dedicated to improving the quality of Hungary’s health care. He attaches importance to restoring confidence in the health care sector, enhancing the prestige and income of health care professionals, and strengthening the cooperation with the private sector. Minister Szekely aims at creating a strong regulatory environment for the health care sector and establishing a sustainable financing system, including the reform of the insurance system.

tem will continuously be able to provide high quality medical care and health services, equal to European standards.”

Dr. Tamas Szekely, Minister of Health

In Hungary, some 60,000 hospital beds are available. The country’s 6,500 general practitioners provide treatments for some 1,500 patients as an average per year, while nearly 2 million patients are treated in hospitals. Certified physicians treat around 60 million patients per year.

Hungary’s health care is financed through the country’s social insurance system, which budgets around HUF1,4 billion for health care.

The health care sector is, also currently, going through a significant development. Dr. Tamas Szekely explains, “We have created such a system in Hungary, through which we all bear the costs of health care. This solidarity-based national risk pooling generates the necessary resources for financial management. A strict, and consequently financially sustainable system for a long run, can guarantee that the Hungarian health care sys-

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Hungary has the same health challenges as other European countries are facing: an ageing society, a declining rate of labour force (contribution payers), and rising costs of health care. In addition, Hungary has to cope with lower life expectancy than the EU average. Another serious problem is that many health professions rather choose to leave the country to seek higher paid positions elsewhere.

The increasing role of the private sector The private sector is playing a vital role in Hungary’s health care system.

Almost the entire primary care is privatised, the majority of pharmacies, patient transportation and dialysis centres are also privately run. Moreover, more and more outpatient clinics and hospitals are getting to be managed by private professional investors. As Dr. Tamas Szekely points out, “The Ministry of Health has already contacted leading pharmaceutical companies to set up a forum to work together concerning Hungary’s regulations affecting the health sector. The Ministry of Health and the Prime Minister attach utmost importance to have a dialogue with key private sector players.” As Minister Szekely concludes, “We always focus on providing quality services for patients and on ensuring benefits for health care providers. We are aiming at achieving a balance.”

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Health Care Sector Reforms in Progress Hungary’s health care sector has been developing rapidly for many years thanks to new reform measures. In the thriving pharmaceuticals sector, for example, the Companies Act of 1988 allowed for the establishment of private pharmacies, and restrictions on imports of medicines were lifted in 1991. A number of major foreign investments have been made in Hungary’s pharmaceuticals sector, which continues to expand.

In 2006, the Hungarian government began a very ambitious health care reform programme in response to relatively low life expectancy, poor general health, an aging population, and a critically high rate of health care utilisation compared to international averages.

Upgrading hospital care The first goal of the reform programme was to reduce acute demand for hospital care, limit consumption of medicines, and limit unnecessary contact between physicians and patients. To reach these goals, the government focused first on hospital care. A system of high priority hospitals was created, along with increasing the number of hospital beds needed for chronic in-patient care. In addition, hospitals began to screen patients before hospital admission regarding their insurance coverage.

To deal with problems in the fairness of health care provision (a legacy of the communist era), the government made waiting lists for treatment publicly accessible. The government also instituted a programme to ensure the safe and efficient supply and distribution of medicines.

Coping with spiralling costs As is every other developed country, Hungary is facing spiralling costs of health care. To cope with this, the former government introduced a system of co-payments in which patients would share the cost of visits for primary care, outpatient specialist care and a per day fee for hospital in-patient care. This policy was revoked following a referendum in March this year in which voters rejected the new measures.

The former government also passed the Act on Health Insurance Management Funds (February 2008) in which different management funds would receive financing from an overall fund. This initiative has been revoked by the new Socialist government because it was deemed unworkable. Hungary’s new Minister of Health, Dr. Tamás Székely, former Director General of the National Health Insurance Fund, says that a revised programme on health insurance will focus on increasing the efficiency of the system and financing quality health care through eliminating current regional inequalities, creating conditions for flexible and responsible financing of service providers, and strengthening the insurance sector.

Focus on quality of care The new Minister of Health says that the emphasis in health care reform in Hungary will be shifted from the reform of insurance to the improvement of the quality of care and, by extension, the overall improvement of the health of Hungary’s population.

While reforming health care in Hungary as in other countries is fraught with political problems and the challenge of rising costs, the government is making impressive progress in improving the system and in opening Hungary’s health care sector to foreign participation.

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Health

Pfizer

Supporting the Need for True, Sustainable Pfizer, the world’s leading life-science company, is working to help bring better health care to Hungary in line with the company’s global vision of “working together for a healthier world,” according to General Manager Mario Gattino.

Pfizer Hungary reflects these global ambitions and commitments in everything we do locally.”

“I sense that there is a strong consensus in Hungarian society that the health care system must be reformed, we cannot ignore, that despite the best intentions of successive governments, Hungarians are not getting the service levels they should be entitled to and life expectancy is way below the EU average – that has to change.”

Mario Gattino, General Manager

Pfizer is present in 140 countries around the world pursuing its stated mission of applying innovative science to improve world health. In simple terms this translates to a few fundamental commitments to our partners and stakeholders: • Discover, develop and ensure access to safe and effective medicines and health solutions • Partner with key stakeholders and earn their trust • Build productive and enduring relationships with governments and communities Pfizer has been active in Hungary since the early 1960s. “I am sure it surprises many people to learn that we have been here for nearly 50 years and this illustrates our ongoing commitment to Hungary. Today we are working very hard to ensure that

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Pfizer is actively seeking partnership with a number of health care stakeholders to combat Hungary’s pressing health care problems, which include low life expectancy and high levels of cardiovascular diseases, cancer and smoking related illnesses. Pfizer is considering a number of programmes that will start to address these priority health issues. For example setting up a smoking cessation centre as well as supporting prevention centres to help combat cardiovascular diseases and provide early screenings for cancer. We have just entered into a major collaboration with the National Ambulance service, where we will provide new uniforms to the dedicated ambulance officers.

“Pfizer has a strong commitment to research and development and to bringing innovation to patients,” says Mario Gattino. “As the leading research based pharmaceutical company in the world we spent more than eight billion dollars last year on R&D – the largest amount in the industry.”

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Health Care Reform in Hungary Medical advances – in biopharmaceuticals, diagnostics and developing more targeted therapies – will sustain the transformation of health care. Pfizer is committed to being at the very heart of this progress, it is critical for patients as well as for the long-term sustainability of quality health care that innovation is recognised and encouraged. We understand and sympathise with the very real challenge the Hungarian government is facing to manage the demand of an ageing population and advances in medical science, which inevitably impacts health care spending.

Providing well-functioning, forward-looking health care systems may seem costly, but this is a responsibility that any government should be happy to shoulder. Economically it makes sense too. How do we shift the paradigm so that spending on health care is seen as an investment – an investment in people’s productivity, economic wealth and prosperity? Helping people stay healthy is a moral obligation, even as it reaps economic and social dividends far beyond the individual patient.

Mario Gattino explains “We are very much encouraged by the change in approach and early indications from the new Minister of Health, Tamás Székely and his team. True health care reform means involving all stakeholders and market players, and establishing a consensus for a reform that can last beyond political cycles. I wish him

luck and strength to be able to pull together a political consensus, because without it reforms cannot be completed, and on the other hand reforms are desperately needed and can no longer be postponed.”

He also adds that Hungary’s Ministry of Health is correctly trying to shift the focus away from costly secondary care to concentrate on promoting healthier lifestyles and prevention. The approximately 200 employees at Pfizer Hungary are dedicated to playing their part and supporting these important national health care reforms. “We are only too willing to bring our internal and external experts and knowledge to the table to assist the Hungarian government and society in true partnership with all stakeholders and market players for a sustainable solution that delivers a world class health care system.”

One reason Pfizer is confident about Hungary’s future in spite of the current challenges is the country’s strong evolving biotechnology sector. There is an enviable history of research and scientific discovery in Hungary, reflected in the number of Nobel Prize winners for science being the highest per capita for any country. “We see Hungary as a potential centre of excellence for biotechnology. The recent decision by the EU to place the European Innovation and Technology Institute (EIT) in Hungary only confirms the country’s long term commitment to innovation and Pfizer, with its strength in research and development, should be an

active partner in this. It could be a win-win situation for both the country and Pfizer. We offer enormous global resources and expertise, and if we combine that with positive local partnerships from stakeholders, we can bring that innovation to Hungary. We simply ask that this innovation is recognised and encouraged by appropriate economic and regulatory policies.”

Pfizer opened a major distribution centre in Hungary last year that supplies the company’s products to 12 markets throughout Central and Eastern Europe, with a potential second phase of development for late 2009. “Pfizer is working hard to establish itself as a trusted and valued partner in Hungary with a focus on the long term,” Mario Gattino says.

Pfizer Hungary Alkotas u. 53.

MOM Park “F” Building 1123 Budapest, Hungary Tel: +36 1 488 3711 Fax: +36 1 488 3719 www.pfizer.com

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Health

Novartis

Pharmaceuticals Leader Innovates for Patients Novartis, the global health care group with operations in 140 countries, has made a long term commitment to Hungary, where it supports a number of community service projects and has been instrumental in bringing world class standards to the local health care and pharmaceuticals sector.

As CPO Head & Country President Tamás Szolyák puts it, “The Novartis mission here in Hungary is to develop and successfully market innovative products that will prevent and cure diseases, to ease suffering, and to enhance quality of life. Novartis also wants to provide good returns for our shareholders and to reward those who invest ideas and work in our company.”

The Novartis portfolio is the second largest of any pharmaceuticals company in Hungary with special focus on cardiovascular and central nervous system (CNS) diseases, oncology and ophtalmology.

Novartis Hungary is particularly strong in over the counter (OTC) sales, and is also well known for its vaccines. Tamás Szolyák explains that reforms in the pharmaceuticals sector last year that affected sales of prescription medicines have had a negative impact on all

48

in a vast majority (70%) of patients with wet AMD.a treatment.

Tamás Szolyák , CPO Head & Country President

major pharmaceuticals companies in the country, but Novartis has offset this through increased OTC sales as well as more sales of generic medicines via its subsidiary Sandoz.

In fact, Novartis had a very successful year last year in spite of challenging conditions.

Focussed on innovation for patients A focus on innovation is one reason Novartis continues to thrive in an increasingly competitive market, according to Tamás Szolyák, and the company continues to create exceptional new products. Novartis has been a leader in developing and marketing therapies for the treatment of hypertension – the company recently introduced a new class of novel hypertensive agents that may provide longer term protection to patients. Also, Novartis markets the only approved therapy that has demonstrated improvement in vision and vision-related function

“With our therapies we always look to demonstrate the long term benefits for patients in preventing or slowing disease progression. We have developed expertise in developing and demonstrating impactful health economic data, to show that early treatment interventions lead to better quality of life for patients as well as long term savings for the health systems,” Tamás Szolyák explains. He adds that Novartis is also working with other pharmaceuticals firms in Hungary on issues of mutual interest, including the need to concentrate on preventative medicine.

As for the future, Novartis aims to grow faster than the market and plans to continue to introduce innovative new therapies and to attract the best people, according to Tamás Szolyák. He says, “Novartis is a profitable, innovative company which aims to have a good impact on the health status of the people in Hungary.”

Novartis Hungary Ltd. Bartók Béla út 43-47 H-1114 Budapest Hungary Phone: +36 1 457 65 00 www.novartis.hu

HUNGARY

Health

Biotechnology Targeted As One of Top Five Sectors Biotechnology has been chosen by the Hungarian government as one of the top five sectors in the country’s mid-term development plan for the period 2005 to 2010.

The government’s strategy for the biotech sector focuses on developing Hungary’s biotech human resources; promoting foreign direct investment, technology transfer and research; and financing small and medium sized biotech enterprises.

Specifically, the government hopes to attract two to three major biotech investors with projects worth more than €100 million; several medium-sized investment projects of €10-100 million; 15 to 20 smaller investment projects of €1 to 10 million; and two to five new research and development projects in biotechnology and pharmaceuticals; as well as to create several thousand high value biotech jobs and to enhance global recognition of Hungary as a biotech hub.

Hungary’s approach to biotech development is resolutely international. Dr. János Kóka, a physician and Hungary’s former Minister of Economy and Transport, explains, “Our strategy is to compete on science and human skills rather than cheap workforce. Our new midterm biotechnology strategy is designed not only to elevate Hungary to be a clear biotechnology leader among the EU accession countries, but also to place Hungary among the top 10 EU states in biotechnology by 2010.”

Competitive advantages Hungary’s competitive advantages for biotech investors include its strategic location; growing domestic demand; high quality infrastruc-

ture to support export activities; well-trained, creative and flexible human capital at competitive costs; a 30% to 50% cost saving compared to Western Europe; investment incentives; a large number of leading multinationals in high-tech sectors already present; and Hungary’s reputation for outstanding research and development activities in the pharmaceuticals and biotech sectors.

Hungarian Investment and Trade Development (ITDH) states, “Hungarian biotechnology has developed dynamically in the last decade. The main fields of development and application of biotechnology are the following: soils, water pollution treatment, production and processing of biomass, recycling processes, genetic engineering, nanotechnology, molecular chemistry, agriculture and food processing.”

Hungary takes part in various international programmes on biotechnology development and is also an active participant in the negotiations on the planned bio-safety protocol to the Convention on Biological Diversity.

Hungary now has the strongest biotech sector among the new EU member states, with 70 core biotech companies and 170 companies engaging in biotech related activities.

Hungary’s major goal is to be recognised as one of the EU’s top 10 biotech countries.

Hungary’s Health Indicators Total population: 10,058,000 Gross national income per capita (PPP): €18,290 Life expectancy at birth m/f (years): 69/78 Healthy life expectancy at birth m/f (years, 2003): 62/68 Probability of dying under five (per 1,000 live births): 7 Probability of dying between 15 and 60 years m/f (per 1,000 population): 249/104 Total expenditure on health per capita (2005): €1,329 Total expenditure on health as % of GDP (2005): 7.8 Figures are for 2006 unless indicated Source: World Health Statistics 2008

49

HUNGARY

Health

Teva Pharmaceuticals

Global Pharmaceuticals Group Betting on Hungary Teva Pharmaceuticals, one of the world’s top 20 pharmaceutical companies and a leading provider of generic pharmaceutical products, has been active in Hungary since 1993 when it introduced its then top selling Alpha D3 to the Hungarian market.

The Teva Group, headquartered in Israel, achieved US$9.4 billion in global sales last year and has production facilities all over the world.

It specialises in the development, production and marketing of proprietary and generic pharmaceuticals products. With more than a century of experience in the health care industry, Teva has 28,000 employees worldwide. Its shares are traded on the Tel Aviv stock exchange, NASDAQ, the Frankfurt stock exchange, and Seaq International in London.

In Hungary, Teva operates a production and research centre that supplies products to the European market. András Rózsa, General Manager for Teva Hungary, explains, “We have significant exports and quite significant research and development activities, and we are deeply a part of Hungarian society.” Teva set up its own production in Hungary in 1995 through acquiring the public sector enterprise Biogal, which had already established a strong reputation for its expertise and had a facility that could be expanded. Teva’s operation in Hungary was its first step into the European market.

Since its acquisition of Biogal, Teva has invested some US$500 million in expanding and upgrading the production centre and building new facilities. Between 2008 and 2010 Teva invests another US$100 million in further extending its production capacity. It has also acquired local firms Human, Humanpharma and

50

Humantrade to expand its portfolio and service offerings. After reorganisation of these entities, Teva Hungary has become a thriving subsidiary of the global Teva group. Teva is now number one in the Hungarian market in the hospital segment and number four in the whole market.

Defining the company’s competitive edge, András Rózsa says, “We have a wholesale operation here in Hungary that gives us exceptional diversity. We now have a portfolio of more than 300 products and an excellent marketing and sales team, which makes us unique.”

András Rózsa recommends Hungary as an investment target. He comments, “For long term investors interested in Hungary, the time is now, despite the economic and political challenges to be faced over the coming two to three years. Hungary will be the leading economy in Central and Eastern Europe five years from now. Here at Teva, we are supporting Hungary’s continued growth.”

Teva Hungary Ltd. Rákóczi út 70-72, 1074 Budapest tel.: +36 1 288 6400 fax: +36 1 288 6410 www.teva.hu

• EU’s Transport and Logistics Hub • Strategic Location and Much More Keep Hungary Competitive

Transport & Logistics

51

EU’s Transport and Logistics Hub As the EU expands eastward, Hungary – at the intersection of four major European transport corridors – is becoming even more attractive as a hub for transport and logistics. It is already ranked a key distribution centre for Central and Eastern Europe, and it provides efficient access to the EU consumer market of some 493 million people as well as to the fast growing CIS market, the Balkans and Turkey.

52

For investors in transport and logistics, Hungary offers a cost-efficient and highly qualified labour pool, high standard logistics services, modern warehousing and industrial facilities, and investment incentives.

The government has long focussed on logistics development, and every year around 500 students specifically trained in logistics graduate from Hungarian universities, while nearly 5,000 students receive logistics training in 10 higher education institutes annually.

New logistics projects in the works The greater Budapest area has always been the primary focus for logistics activity in Hungary. To date, 26 modern logistics and warehouse parks of approximately 930,000 square metres have been developed in a 24 km radius around the capital, primarily along the M0 ring road.

New development projects are now under way beyond Budapest, includ-

HUNGARY

Transport & Logistics year. DHL Express Hungary’s revenues rose 25% to €36.8 million in 2006, and the new centre is expected to boost the company’s growth still further.

Global leaders praise Hungary’s logistics Other international investors investing in logistics and transport projects in Hungary include Audi, Suzuki and General Electric. “The good working culture, efficiency and flexibility of Hungarian workers made rapid growth possible. Within 15 years, Audi in Gyôr became the world’s third largest engine manufacturer, and logistics had to keep pace with this expansion. Thanks to Gyôr’s good geographical location and excellent rail connection with Ingolstadt, this could be achieved comfortably,” says Thomas Faustmann, Managing Director of Audi Hungary.

Audi is now Hungary’s top exporter and one of its biggest revenue earners. Audi has already invested some � 3 billion in Hungary, €360 million of that in 2006 alone.

ing a 25,000 sq m facility by ProLogis on the M1 motorway at the Hungarian-Austrian border; new warehouses under construction at the Szeged Logistics Centre on the HungarianRomanian-Serbian border on the M5 motorway; and projected development projects around Gyôr and Székesfehérvár in western Hungary and near Miskolc, Debrecen and Nyíregyháza to the east.

Hungary now has 179 industrial parks offering greenfield opportunities, and many global leaders have taken advantage of Hungary’s investment attractions. One is DHL Express, which opened a €17.8 million logistics centre in Budapest last

General Electric (GE) has set up a European logistics centre in Hungary, and István Salekovics, SCM and Manufacturing General Manager, GE Commercial and Industrial, explains, “I see great potential in Hungary as a distribution centre. From GE Consumer and Industrial’s European Logistics Centre in Nagykanizsa, Hungary, we comfortably serve most markets within Europe, while the proximity of Port Koper offers good opportunities for worldwide distribution.”

Deputy Managing Director of Suzuki Hungary, Dr. István Fórián, adds, “Hungary is not just an ideal country to assemble cars in; it is also a good place to distribute our products in the CEE region and Europe. We use rail, road and waterways.” In 2007, the Japanese company invested €190 million in its Hungarian operation to expand its output capacity to 300,000 cars per year this year. It is also increasing its workforce to 5,800.

Infrastructure upgrades in progress Hungary is continuing to upgrade its infrastructure to support the growth of its transport and logistics activities. All motorways and trunk roads will reach national borders by the end of 2008.

The country’s rail network is also being upgraded and restructured, and MAV Cargo, currently owned

by Hungarian State Railways, is being privatised. Over 20% of freight is transported by rail in Hungary, well above the EU average. Záhony is the key hub and reloading centre for European standard gauge railways and for the widegauge system of the CIS states and Asia. Several scheduled train lines connect Hungary with the sea ports of Hamburg, Bremen, Rotterdam, Koper and Trieste, with connections to Constanza being developed.

Concerning air cargo services, Budapest Airport has the highest airfreight traffic and best connections with South-East Asia of any city in Central and Eastern Europe. In addition, airports in other Hungarian cities are being modernised, and military airports are being transformed into regional logistical centres.

Hungary also has a well-developed water transport system through the Danube-Rhine-Main channel. The government is investing heavily in making the Danube more cost effective as a transport link by keeping it open 300 days per year.

The government is also planning to expand intermodal logistics centres and container terminals at major ports, such as Budapest Freeport, Gyôr-Gönyû, Adony and Baja Proximity.

Hungary is clearly enhancing its attractions as a top EU logistics and transport hub.

53

HUNGARY

Transport & Logistics

Strategic Location and Much More Hungary’s EU membership has brought the country new competitive advantages that will keep the economy thriving for years to come. Hungary has a workforce that is among the most skilled in Europe and its costs of doing business are still much lower than the European average: operating a business in Hungary costs around 30% to 50% less than in Western Europe. In addition, Hungary’s productivity rate is the highest in the region and grew by more than 11% last year alone.

54

Centre for R&D While wages in Hungary and throughout Central and Eastern Europe (CEE) are rising, these increases are expected to deliver a shift in foreign direct investment (FDI) away from low cost, labour intensive production towards value added operations such as research and development. Hungary will remain the regional leader during this shift thanks to its internationally recognised research institutions in many fields, combined with its educated population and openness to technology transfer.

As a 2003 report by the Ministry of Economy and Transport on the ef-

fects of EU membership points out, “In many EU candidate countries, technology driven industries already account for growing shares of exports. Furthermore, there are encouraging signs of the creation of EU-wide production networks that draw on complementary patterns of specialisation and go beyond lowcost delocalisation strategies.”

Hungary’s EU membership also provides additional reassurance to investors that their businesses will be governed

by EU regulations and will have streamlined trade links to other EU markets.

Hungary is also appealing to investors for its strong track record in suc-

HUNGARY

Transport & Logistics

Keep Hungary Competitive cessfully shifting from a communist system to a stable free market economy. Its private sector now accounts for more than 80% of GDP, and cumulative FDI in Hungary has totalled more than €50 billion since 1989.

Location, location, location One of Hungary’s most powerful competitive advantages is that it has one of the most strategic locations in Europe, with easy access to the fast growing markets of the CEE, the former Soviet countries, the Balkan states and Turkey. While the CEE contains other new EU members with some of Hungary’s investment appeal, no other country in the re-

gion can match the draw of Hungary’s central position on the European map.

Hungary sits at the intersection of the strategic trade route linking Western Europe and the Balkans as well as the route between the Ukraine and the Mediterranean basin. It is the hub of three major international road corridors, and the Danube and Tisza rivers, both historic trade routes in themselves, add to Hungary’s advantages. Nineteen countries can be reached within one day from anywhere in Hungary, and Hungary shares its borders with seven countries, including three EU and four non EU member states.

To enhance the inherent advantages of Hungary’s location, the government continues to invest in infrastructure upgrades. Hungary has around 160,000 km of roads, around 70,000 km of which are paved, as well as a thriving rail network that is currently being upgraded with many services privatised. Hungary’s rail links reach to some of Europe’s busiest business centres and ports. In addition, Hungary is investing in expanding its air cargo services.

The government is also targeting investment in logistics and distribution centres, both in the Budapest area and throughout the country. Hungary’s 11 logistics districts and 13 logistical centres are located at focal points for international trade. Hungary also has more than 190 well-equipped industrial parks.

Thanks to its advantages of location and infrastructure, Hungary’s trade activities are increasing rapidly, with exports growing by around 16.6%

per year to total €71 billion last year compared to €26 billion in 2003.

This year’s total is expected to reach €71 billion.

CEE’s highest rate of per capita FDI With its many drawing cards, it is no surprise that Hungary has attracted the highest rate of FDI per capita (€6,300/ US$7,604) of any country CEE country, and this FDI covers a wide range of sectors, from the automotive industry to pharmaceuticals.

Increasingly Hungary is being chosen as a base for research and development centres for multinationals.

Nokia, GE, Samsung, SDI, Bosch, Audi, ThyssenKrupp and Visteon have all based R&D centres in Hungary, as have many smaller firms, and many international enterprises have launched successful partnerships with Hungarian universities, research institutions and companies.

World class telecom services, investor friendly new tax regulations that offer a reduction in corporate taxes of up to 80%, and a strong commitment to developing renewable energy and to protecting the environment add to Hungary’s investment appeal.

Another advantage for investors is Hungary’s excellent quality of life.

Budapest, for example, is a cosmopolitan capital with several international schools and a lively cultural scene.

Hungary, already one of Europe’s most competitive economies, is set to become even more attractive for investors as the government’s development programmes and infrastructure investment bear fruit.

55

HUNGARY

Transport & Logistics

An Increasingly International Economy As Hungary goes increasingly global, it is working to strengthen its international image and its business links with other markets throughout the region and internationally. Dr. Abel Garamhegyi, Government Commissioner for International Economic Affairs, is charged with handling regional issues related to Hungary’s business sector, developing Hungary’s trade activities, and promoting Hungary’s image throughout the world.

Hungary has already earned a strong reputation for its fast growing economy and investor friendly policies as well as for its highly trained human resources and globally minded companies. Most Hungarian companies have already adopted international perspectives. As Dr. Abel Garamhegyi points out, “Hungarian companies may operate in Hungary, but they are international, both inside and outside the country.”

Well-developed infrastructure a key advantage Hungary offers significant advantages for investment, including excellent quality of life, high productivity, highly trained and committed workers, and a very well developed infrastructure that includes more than 1,000 km of highways, half of which built in the last five years – which is an outstanding achievement in the region.

56

Focus on quality To meet this third challenge, which Hungary shares with all countries, Hungary has been focusing on quality, added value, and particularly on high technology initiatives. Here in Hungary, we are focusing on added value. It’s not the quantity; it’s the quality. If an investor’s competitive advantage is quality, Hungary can enhance that.

Dr. Abel Garamhegyi, Government Commissioner for International Economic Affairs

Hungary’s infrastructure, coupled with its strategic location in the heart of Europe, make it an ideal base for trade oriented companies. Hungary’s advantages have already attracted large numbers of multinationals to establish operations in the country.

Challenges Hungary faces, according to Dr. Abel Garamhegyi, are the need to promote individual responsibility and entrepreneurship, the need to make sure government initiatives are implemented effectively, and the need to carve out a niche in the global economy.

“According to the latest Global Competitiveness report of the World Economic Forum on the quality of scientific research institutions, Hungary outruns the regional contestants, the Mediterranean countries and even China. The report ranks Hungary in 24th place from the examined 131 countries,” Dr. Abel Garamhegyi says.

He adds that research and development, biotechnology, and information technology all have outstanding investment potential in Hungary today.

Dr. Abel Garamhegyi welcomes contacts with potential investors in the UK who are interested in learning more about investing or setting up a business in Hungary. “I am here to solve any problems and to sell Hungary, which offers all kinds of advantages for foreign investors and companies,” he concludes.

HUNGARY

Transport & Logistics

Raabersped

Rail Transport Leader Now Offering Complete Logistics Services Raabersped, a leader in Hungary’s forwarding sector, is branching out from providing rail forwarding services to offer road transport and other logistics support.

Managing Director Jozsef Bor explains that Raabersped is now part of a diversified international group owned

by Rail Cargo Austria, which has a 51% share in the company; HungaroRail is also part of the Vienna based group. He says, “The diversity of the group’s companies creates synergy for us. We now offer the full logistics supply chain, including warehousing, tracking and tracing, and distribution throughout the group’s network, for example from Milan to Russia.”

Last year, 92% of Raabersped’s turnover was from rail forwarding, 5% road transport and 3% related logistics services. By 2009, Raabersped aims for the breakdown to be 80-85% rail forwarding and the remaining 15-20% in logistics, warehousing and distribution.

Jozsef Bor explains that this does not mean that the company will cut down its rail forwarding services but rather that it plans a 10% annual global growth in turnover. In fact, Raabersped will continue to focus on rail transport because it is both efficient -- especially for large volumes -- and ecologically friendly.

will continue to be the leaders in our sector,” Jozsef Bor says confidently.

Raabersped has opened its first dedicated logistics centre just outside Gyor, Hungary. “This location is important for Raabersped because several different multinational companies are located there or nearby,” Jozsef Bor explains.

The new logistics centre is “a first step in our effort to provide extended business services like cross stocking, warehousing, logistics, distribution and more, in order to create added value for our partners,” Jozsef Bor says.

Raabersped aims to be the preferred provider of outsourced logistics services, and hopes to build another logistics centre in Eastern Hungary.

Raabersped works with international and local companies, including Electrolux, Mol, and Dunaferr. Jozsef Bor concludes, “If clients are looking into Hungary, we urge them to sit down with us and our experts will organize value added services to fit each client’s individual needs. Our services are quick, effective, and competitively priced.”

Set to handle 10 million tons of goods in 2013 Raabersped’s turnover grew from €58 million in 2005 to 90 million last year.

“In 2007, we forwarded five million tons of goods of all types, including grains, LCD screens, construction materials and more. By 2013, we will be handling 10 million tons of goods and

Raabersped Kft. Montevideo utca 4 H- 1037 Budapest Tel: +36 1 430 8500 Fax: +36 1 430 8599 www.raabersped.hu

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• Agriculture Minister Highlights Sector’s Growth Potential • Federation Promotes Hungarian Agriculture and Food Production • Food Sector Meeting High Standards

Agriculture & Food Industry

“Hungary is working toward perfect quality and very safe food.”

József Gráf, Minister of Agriculture and Rural Development

58

HUNGARY

Agriculture & Food Industry

Modernised Agriculture Sector Focuses on Exports With a temperate climate, varied geography, abundant water, and around 85% of its land area suitable for agriculture or forestry, Hungary’s agricultural sector and food industry have long been significant to the country’s economy. Hungary produces a wide range of crops which include wheat, corn, sunflower seeds, sugar beets, potatoes and other vegetables, fruits, and wine. The country is also known for its pork, beef and poultry production.

Agriculture and rural development

nies producing food products, beverages and tobacco products that year.

The agriculture sector has successfully made the difficult transition to a free market economy and is being boosted by new development strategies. As Minister of Agriculture Jozsef Graf explained last year, “The system of agricultural subsidies is expected to change substantially under the New Hungary Regional Development Programme. Hungary’s agricultural potential should be developed to a higher extent than at present and its development will be implemented as a closely related part of rural and regional development. Improving farmers’ competitiveness is among our key goals, so that we can provide domestic consumers with safe foodstuffs and also increase exports. We also aim to improve the state of the environment and countryside.”

Hungary’s agriculture and food sectors have attracted significant foreign direct investment (FDI): around 30% of the country’s agribusiness industry has been acquired by foreign interests, a total that has risen to 50% in the high potential food processing and beverages sector, which has been completely privatised.

Significant FDI in agribusiness

Hungary is a major regional exporter of corn, wheat, and sunflowers. Total grain acreage in Hungary is about a third of the size of Poland’s grain cultivation area, although Hungary’s yields are higher, except for rye. Feed demand accounts for 80% of Hungary’s corn crop and a third of its wheat crop. Net exports for both corn and wheat are positive, but vary from year to year, depending on weather and world market conditions.

Agriculture now represents around 7% of Hungary’s GDP and employs around 5% of the working population, while agribusiness overall now accounts for around 12% to 13% of GDP, according to Jozsef Graf. Agriculture employed more than 100,000 people in 2006 and total agricultural production that year exceeded HUF1.6 trillion, a 6% growth over the previous year. Hungary’s agricultural enterprises achieved HUF71 billion in pre tax revenues in 2006, an increase of more than 50% over 2005.

Animal husbandry accounted for 36% of total agricultural production in 2006. Hungary also had 2,741 compa-

Opportunities in domestic and export markets A significant raise in domestic consumption along with increasing disposable income has created interesting opportunities for local and foreign companies in Hungary’s domestic food market, and agriculture and the food industry both have significant export potential.

Hungary is a net importer of protein feed material – primarily soybean meal – but is a net exporter of sunflowers.

Hungary appears to have a comparative advantage in sunflower production, relative to major soybean-meal-producing countries such as Brazil and the US.

59

HUNGARY

Agriculture & Food Industry

While Hungary’s production of beef cattle, pork and chicken declined by around 40% after the fall of the communist regime, today the country is a net exporter of beef, chicken and pork products.

Hungary’s entry into the EU has resulted in higher costs for Hungarian products, and poultry, which is priced lower than beef and pork on the domestic market, is selling better in Hungary than other meat products, particularly given the global rise in food prices.

Growing demand for imported food products

20.3

2.9

8.0

227.6

30.3

10.5

3.6

7.5

314.8

2000

4.6

27.6

6.9

4.7

6.6

302.2

2004

4.1

26.1

6.0

4.3

5.3

223.1

2005

3.7

25.1

5.8

4.5

5.0

181.1

2006+

3.7

25.1

5.5

4.2

4.9

214.5

Billion HUF

Vineyard

Orchard

Middle-Hungary

434

327

446

673

Middle-Transdanubia

387

279

834

756

West-Transdanubia

370

257

735

1,437

South-Transdanubia

540

215

1,358

1,119

North-Hungary

329

107

1,453

964

Northern Plain

353

107

395

823

Southern Plain

326

192

416

468

Total

388

184

815

859

60

32.4

4.9

Balance of external trade turnover a),

Grassland

Source: Test operational system, Agricultural Research Institute

5.9

1998

At current prices, %

a) agricultural and food industry products +) preliminary data Source: Hungarian Central Statistical Office

Arable land

Region

In employment %

LAND PRICES BY REGION (2006) (thousand HUF/ha)

In investment

Hungary’s agriculture and food industries have been rapidly upgrading their technologies, and many of the

1995

Year

In exports a)

Geothermal energy

Share of agriculture In consumption a)

Much of the imported seafood is distributed through the catering sector, which supplies hotels and restaurants.

The expanding tourism sector coupled with a rise in the number of food distribution centres and hypermarkets is broadening demand for imported food products.

SHARE OF ARRICULTURE IN THE NATIONAL ECONOMY

In GDP-production

Hungary also has a viable fishing industry, with many fish farms providing freshwater fish for the domestic and export markets. Hungary also imports seafood, and while consumption of ocean fish and shellfish is still low (around three kilograms per capita per year), it is growing and sales have reached around €15 million annually.

country’s farms have implemented automated systems that save energy and boost crop yields.

To keep Hungary’s agriculture sector competitive, the government is employing innovative strategies that include the development of geothermal heating systems for greenhouses, tents and tunnels used in agriculture and horticulture. Cultivation of vegetables in greenhouses is becoming increasingly common, with peppers, tomatoes and cucumbers the main crops, and geothermal energy fulfils more than 80% of the energy demand

by Hungary’s vegetable farms. Geothermal heating is also becoming more common for heating facilities in farms raising animals.

Hungary’s high potential, increasingly modern agriculture sector is sure to continue to attract local and foreign investment.

HUNGARY

Agriculture & Food Industry

Agriculture Minister Highlights Sector’s Growth Potential With more than 1 million acres of farmland planted in crops -- two-thirds of the country’s land area -- Hungary is one of Europe’s most agricultural nations, and the government is committed to keeping it that way. “Hungary has excellent advantages for agricultural development, including a temperate climate, extensive agricultural land, and a well-trained, youthful agricultural workforce,” says József Gráf, Minister of Agriculture and Rural Development.

Hungary’s agriculture sector involves four different groups, according to the minister. These are small private gardens, private farms, family-owned businesses and large industrial producers. While the last two groups account for around 90% of the country’s agricultural production, “for the ministry, all these groups have the same importance,” József Gráf says.

In 2007, not a good year because of frost damage, Hungary’s agricultural exports totalled €4.6 billion, with imports totalling €3.2 billion. The EU Agriculture and Rural Development Operational Programme is allocating €317.2 million to Hungary’s agriculture sector, of which half is to go toward upgrading technology, machines and environmental protection. “Within three years, thanks to better technology, the sector will be more efficient,” the minister says. He adds, “The first priority is to increase the competitiveness of agricultural production, including fisheries, through investments to reduce production costs, increase added value and quality, preserve the environment, and improve hygiene and animal welfare standards.”

The second priority for the ministry is to develop Hungary’s food processing sector through implementing new technologies and upgrading logistics and storage systems, information technology networks and warehousing. “Investments will also focus on consumer health protection and food safety and quality, as well as on the environment, treatment of by-products and waste, and on a better adaptation to the sales channels,” the minister adds.

József Gráf, Minister of Agriculture and Rural Development

ployment opportunities there, develop and implement regional pilot programmes, and in general help to make rural areas more attractive to live in. A fourth priority is providing technical assistance to help the sector implement new programmes.

Potential investors should know that until 2011, foreigners cannot purchase agricultural land in Hungary but they can invest in food processing, which has excellent growth potential. There is one exception for foreigners who are producing for three years here in Hungary because they have totally integrated within the sector and Hungary. “The majority of foreign investors in Hungary’s agriculture sector are involved in trade activities,” the minister says. He adds that agriculture accounts for around 4% of Hungary’s GDP, but when food processing is included, the share is around 14%.

József Gráf believes that with the help of current funding programmes Hungary’s agriculture will soon be more modern, more productive, and more environmentally friendly. “Hungary is working toward perfect quality and very safe food,” he concludes.

The ministry’s third priority for the agricultural sector is to improve infrastructure in rural areas, create more em-

61

HUNGARY

Agriculture & Food Industry

KITE

Agriculture Leader Focuses on Quality from A to Z KITE is helping Hungary’s agriculture sector flourish. The company specialises in the wholesale trade of agricultural input materials, machinery, equipment, crops and also provides agricultural consultancy services.

KITE works with Hungary’s Ministry of Agriculture and with several associations and federations.

Hungary’s agriculture sector has excellent potential thanks to the country’s temperate climate, significant quantity of farmland and long farming tradition. Hungary has 12.9 million acres of agricultural land and 192,459 registered farmers. Key crops are sunflowers, rape, maize and corn.

“Hungary’s agriculture sector has a high level of quality and technology, and Hungarian agricultural products have a very good reputation,” Csaba Balogh says. KITE works with around 10,000 customers in the agriculture sector, of which around 7,700 are farmers.

Overall, KITE’s clients are farming 40% of Hungary’s total agricultural land.

Wide range of products and services Csaba Balogh points out that KITE’s wide range of products and services include seeds, pesticides, fertilisers, horticulture, machinery, irrigation and other special equipment, parts and service, and consultation concerning farming practices, including environmental protection. Around 80% of the agricultural machinery

62

to spread the modern and environmental technologies. “Funding support for agriculture will allow our customers to buy new machinery. We are also seeing tenders and funds related to agriculture which are having a major impact on KITE’s business,” Csaba Balogh says.

Csaba Balogh, President

KITE sells is imported, and the company has established strong partnerships with international suppliers.

KITE helps its customers with financing. The collateral is the produced rape, sunflower, wheat and maize.

The KITE also buys up oilseeds, and they are sold to processors.

KITE has a strong reputation in Hungary thanks to its focus on long term customer service. “We feel responsible for the machinery we have sold even if it is ten years old. We have an excellent warranty system,” Csaba Balogh says. He concludes, “KITE’s competitive edge is our high level of quality and service, our broad range of products, our well-trained staff, and our cutting-edge technologies.

We operate according to EU standards. From A to Z, we focus on quality and food safety. People need to try the special taste of Hungarian food.

Hungary has many producers using very modern technology to produce safe, high quality products.”

KITE has been growing dramatically in recent years because of a marked increase in Hungary’s agricultural production as well as a huge increase in the price of crops.

Funding will help farmers upgrade machinery Increased funding of agricultural activities, for example by the government and the EU, will increase agricultural production and help

KITE zRt. Bem József u. 1 H-4181, Nádudvar Hungary Tel.: +36 54 480-401 www.kite.hu

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Agriculture & Food Industry

The Federation of Hungarian Food Industries

Federation Promotes Hungarian Agriculture and Food Production The Federation of Hungarian Food Industries (FHFI) has around 700 member companies and 13 branch associations who account for around 80% of Hungary’s total food production and who use around 70% of Hungary’s total agricultural production. The total turnover of FHFI member companies is around €8.8 billion, or around 80% of Hungary’s total turnover in the food industry.

Hungary is among the world’s top five producers of sweet corn, and the industry is beginning to use biofuels to handle its corn production.

Attila Boródi, Executive Chairman

Member companies range from micro-enterprises to almost all of the significant multinationals like Unilever, Nestlé, Mars or Coca-Cola.

The member companies employ altogether a total of around 70,000 people, or 70% of Hungary’s total workforce in the food industry, and have a combined domestic market share of 70% as well as “a healthy foreign trade balance, an unparalleled feature in the Hungarian manufacturing sector,” according to Attila Boródi, Executive Chairman.

and international cooperation at the small- and medium-size companies and representing Hungary’s food industry to the EU and to international organisations.”

A key role for FHFI is to serve as a liaison between the EU, the government and individual companies concerning EU policies as well as funding support for the agri-food sectors.

Attila Boródi says, “The FHFI serves as a communication exchange, helping local companies understand EU policies, building up a widespread network for encouraging innovation

Hungary’s agri-food sector has excellent growth potential thanks to a temperate climate, low pollution, and abundant supplies of water. It includes many well-known companies as well as prized wines, such as Tokaj, Hungarian specialities so called ‘Hungaricums’ such as Pick Salami or pálinkas and fine mineral waters. Corn is a major crop. In fact,

The FHFI works closely with the agriculture sector to help it reach the government’s goal of a 30% increase in production over the next five to seven years. “Achieving this means modernisation of techniques and logistics in the agriculture and food processing sectors as well,” Attila Boródi says.

Hungary’s agriculture and food sectors offer outstanding investment opportunities. “Investments in agriculture and food production can be combined with other types of investments to spread the risk,” Attila Boródi advises. Pointing out the advantages of Hungary’s central location in Europe, which gives investors easy access to other markets, he adds, “If I were a foreign investor, I would capitalise on the plentiful raw materials here in Hungary and look into advancing the supply chain and getting involved in research and development. We have an ideal climate, we have creative, quickly acting, flexible and knowledgeable people, and we are able to produce competitive highly added value products.”

Federation of Hungarian Food Industries Kuny Domokos u.13-15 H-1012 Budapest Tel: +36 1 375 3721 Fax: +36 1 355 5057 E-mail: efosz@efosz.hu www.efosz.hu

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Hungary’s food industry, one of the country’s most important sectors, achieved a gross production value of HUF1.9 trillion in 2006, a rise of HUF86 billion over 2005. This performance is particularly impressive since around 80% of Hungary’s food companies are small to medium sized enterprises.

Hungary’s food processing sector has been fully privatised and includes thriving operations owned by both domestic and foreign interests.

Foreign owned companies are particularly dominant in vegetable oil and tobacco production (both 100% foreign owned), turkey production (90% foreign owned) and meat processing (50% foreign owned).

Hungary’s food processing sector has great investment appeal: it is among the most modern in the CEE region and has a strong focus on exports; EU membership has helped to boost standards and market opportunities; and the proliferation of hypermarkets – where Hungarians purchased almost one-third of their food in 2005 – has increased sales opportunities on the domestic market.

EU membership benefits food sector Hungary’s EU membership has benefited the food industry. As Jozsef Graf, Minister of Agriculture, points out, “The Hungarian agri-economy has managed to integrate itself into the CAP framework and EU requirements have been assimilated and implemented. At the same time, as a member of the EU, Hungary has participated in debates on further agricultural development and in the development of new regulations.”

Hungary places great emphasis on guaranteeing food safety, having put

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Food Sector Meeting High Standards in place its own regulations as well as those of the EU. Strict inspections have contributed to maintaining the safety of domestic food supplies as well as of Hungarian food products for export.

Trademark a guarantee of quality Hungary’s Agricultural Marketing Centre (AMC), overseen by the Ministry of Agricultural and Rural Development, works to make Hungarian food products better known in domestic and foreign markets.

The AMC particularly focuses on the Russian and German markets, top markets for Hungarian food exports, as well as the British mar-

ket, a leading market for Hungarian wine.

The AMC has developed a trademark designed to recognise high standards of quality in Hungarian food products. The trademark, Kíváló Magyar Élelmiszer (‘Excellent Hungarian Food’), is a guarantee of food safety and quality, especially since some of its quality criteria are even stricter than the EU standard. Food producers must apply to have the right to use the trademark, and their products are carefully inspected before receiving the AMC’s stamp of approval.

Hungary’s food sector reflects the country’s focus on quality.

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Sio-Eckes

Healthful Drinks from Local Market Leader Sio-Eckes, the Hungarian subsidiary of German professional investor Eckes granini, is Hungary’s market leader in sales of fruit juices, accounting for 20% of the volume of sales and 26% of the value. Around 95% of the company’s products are sold locally. “Sio brand is a traditional brand which is very important for the Hungarian people as it has been on the market for 30 years. We are continuing to build a close link with our consumers,” says Endre Fazekas, CEO.

Sio-Eckes has formed productive partnerships with local and international shops, from small cash and carry operations to huge hypermarkets. Around a decade ago, the company repositioned itself with a new look while retaining its core values of reliability and high quality. Since then it has been steadily expanding its portfolio of products.

One new product is Sio Lite, with fewer calories; this line accounts for 4% of the company’s sales so far but is expected to capture a larger share as Hungarian consumers’ awareness of the need to watch calories increases. Sio also produces a premium line of concentrated fruit juices and nectars as well. Sió is one of the biggest NCSD distributor in the country covering the Szentikiralyi brand mineral water and the popular Bomba energy drink. Sio produces around 80 million litres of fruit juice, drinks and nectars each year.

In addition to its drinks, Sio produces around 15,000 tonnes of processed fruits per year at its plant in Siofok, Hungary. “We are in line with EU commission mandates on promoting a healthy diet. Fruit and veg-

etable based products like compotes, smoothies are becoming increasingly popular,” Endre Fazekas says.

Thriving food and beverage sector The food and beverage sector is thriving in Hungary, in spite of competition from imports and rising inflation in prices of food products.

Endre Fazekas is very hopeful about Sio’s future. He says, “There is increasing demand for varying food products on the Hungarian market and it is no surprise that Hungary is a preferred producer of quality food products, since Hungary has extensive experience in the sector.”

Sio-Eckes, a successful partnership, reflects the potential of Hungarian business for foreign investors. Looking to the future, Endre Fazekas concludes, “We see ourselves in the next four to five years with a strong market position in fruit juice and nectar. In addition, we see many new opportunities for future growth, since a lot of different products can be made from fruit. We are looking forward to taking advantage of these possibilities.”

Sio- Eckes Majus 1 ut. 61, 8600 Siofok, Tel.: +36 84 501 550 www.sioeckes.hu

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Hungerit

Poultry Products Firm Concentrates on Added Value Hungerit Poultry Processing and Food Industrial Plc., headquartered in Szentes, was created in 1997 with the merger of three local companies, all of which had extensive experience in the food sector. Hungerit is founded on a long tradition of food production in Hungary; there has been a poultry processing plant in Szentes since 1922. Today, Hungerit products are sold throughout Hungary and in 35 countries abroad.

duction lines for processing poultry, including specialised equipment for producing breadcrumb coatings. Hungerit has a production capacity of around 45,000 to 47,000 tons of processed poultry per year.

Its products include chicken, geese and ducks.

József Magyar, General Director

József Magyar, General Director, explains that Hungerit focuses on its three core activities, which are raising and producing slaughtered and cut poultry, producing processed poultry products, and producing high-quality “heat and serve” products featuring a breadcrumb coating. He says that the company raises around 65% of its poultry on its own farms and hopes to increase that percentage to 80% within two years. “People want to be able to trust food products, and raising our own poultry helps us to better control quality,” he explains.

Hungerit has been growing steadily and now employs 1,500 people.

The company’s processing facilities include two European standard poultry slaughtering lines, two chopping lines, and advanced pro-

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In its commitment to quality, Hungerit has implemented an Integrated Management System, the HACCP food-safety system, the ISO 9001:2000 quality management system, and the ISO 14001:2004 environmental management system.

The safety and high quality of Hungerit’s food products are also guaranteed by the QS, EFSIS (BRC) and IFS certification systems, which ensure customer confidence. Hungerit was one of the first Hungarian companies to receive EFSIS certification, which is recognised by the Tesco supermarket chain and which allows that retailer to market Hungerit’s products.

Hungerit is known for its focus on high quality. “For us, the customer is GOD. We do everything to provide the best possible products for our customers,” József Magyar says.

Consistency is another of Hungerit’s guiding principles. If one of the company’s new products proves successful on the market, Hungerit will not change the recipe. “Hungerit’s customers can always count on Hungerit to produce reliable, consistent quality,” József Magyar explains.

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Around half of Hungerit’s products are sold in Hungary in shops and supermarkets, and the other half is exported to the company’s 35 foreign markets. Hungerit works with more than 200 commercial partners around the world. Hungerit’s top export markets are Austria, Germany, Belgium and France, although the company also exports to Switzerland, NATO services, China and Japan.

The UK has become one of Hungerit’s top six markets over the past four years, with Hungerit’s breadcrumb coated products selling particularly well in the British market.

József Magyar explains, “An English company tried and liked our products, and came to visit our production facilities. We have been working together ever since.”

Hungerit aims to continue to expand and improve its product lines and to invest in new technologies in order to ensure the highest possible quality and efficiency. “We want to make sure our customers receive customised products,” József Magyar explains, noting that providing customised products is a challenge

as the EU market works toward standardisation. Hungerit vows to continue to produce distinctive products with high added value.

József Magyar adds that he welcomes visitors to the Hungerit processing facility and that he would like to work with investors and partners in projects to implement new technologies, create new products and expand the company. He would particularly like to develop a broader range of “heat and serve” products to fulfill growing demand.

“We aim to focus on adding value,” he concludes.

Attila str. 3; P.O. Box 8 H-6600 Szentes Tel: +36 63 510 510 Fax: +36 63 510 640 E-mail: hungerit@hungerit.hu Site: www.hungerit.hu

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Research & Consulting

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Business Consulting Meets the Challenge of Expanding Economy The Hungarian services sector has attracted more than half of the total capital invested in Hungary since 2000, and much of this investment – both local and foreign – has gone toward establishing top quality business and human resources consulting firms, according to ITD Hungary. Hungary now has a number of dynamic firms specialising in providing the best human resources for local enterprises as well as in offering the kinds of business consulting services that can help companies boost efficiency and revenues.

VTMSZ, the Hungarian Association of Management Consultants, says that Hungary’s management consultancy sector achieved turnover of €251 million in 2005, an 11% rise over the previous year, and that the average rate of growth for Hungary’s top 20 management consultancies in 2005 was an impressive 18%.

ness solutions and IT in Budapest; the group chose Budapest from among 100 possible locations. Convergys, a global leader in HR and other business services, has chosen Budapest as its base in the CEE region, while call centre specialist Sykes has opened a second call centre in Miskolc and US technology enterprise Corning opened a services centre in Hungary in 2006.

The future looks bright for Hungary’s business consulting enterprises. VTMSZ predicts that EU related consulting will achieve particularly strong growth over the next five to eight years, given current EU co-financing of Hungary’s business and technical infrastructure, SMEs, business training, and other activities.

Consulting sector to grow by 10%-12% per year Overall, turnover in Hungary’s consulting sector is expected to grow by around 10% to 12% per year between 2006 and 2010, with the main drivers of growth expected to be EU related services, public administration, and services for medium sized enterprises, according to VTMSZ. Outsourcing, consumer relationship management, supply chain management, value chain engineering and human resources management are to see particularly strong growth over the next decade in Hungary. Demand is expected to come primarily from the public sector, financial services, telecom and media, energy and utilities, health care and other services.

View of Budapest City

Budapest has been a top choice as a base for consulting and HR firms, but other locations are attracting investors as well. A recent study by Deloitte’s Global Location and Facilities Services targeted Debrecen, Kecskemét, Pécs, Székesfehérvár and Szeged as having excellent potential for business services.

Recent investments in consulting centres Major recent investments include Morgan Stanley’s new centre for busi-

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TESK Tanácsadó Kft.

Human Resources Specialist Serving Top Multinationals Leading human resources specialist TESK Tanácsadó offers a full range of human resources support, particularly in the fields of engineering and high technology, and trade, sales and marketing.

The fast growing company was officially founded in 2002 but grew out of an operating company. Sister company ESTET Hungária HR Outsourcing extends TESK’s portfolio, while TESK specialises in human resources consulting.

By 2006, TESK had grown into a thriving enterprise serving 300 business partners and was the first human resources specialist to recruit personnel for the Hankook tire project, Hungary’s biggest greenfield development to date.

Today, TESK serves leading multinationals operating in Hungary, including Bosch, Lear, Honeywell, IBM, ABB, Nestlé Purina, Masterplast, Sykes, Continental-Temic, Nav N Go, Ibiden, and many others. Péter Tokár, Managing Director, says, “The company is changing very rapidly. We now have a team specialising in serving multinationals and another focusing on smaller local firms. We have already doubled our operations in the first quarter of 2008.”

Speciality is recruiting engineers and IT professionals TESK is looking to specialise in the recruitment of engineers and information technology professionals, and it is open to partnering with a foreign firm to achieve this goal. Péter Tokár adds, “One of our clients required 50 engineers, and we successfully recruited them within the timeframe.

We would like to focus on projects like this.”

The TESK team serving smaller companies excels in recruiting all types of employees and works directly with company managers. It also offers human resources support for companies looking to outsource their human resources activities, and may eventually specialise in this.

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TESK’s competitive edge is its focus on quality. Péter Tokár points out, “This business is about the quality of the recruited people. The winner is the company that can provide the best people, on time, and we can do that.” TESK finds the right people, ensures that they are trained (including offering training programmes), and concentrates on matching the right employee to each available position.

“Making sure that the position is exactly right for the employee is maybe the most important part of the job,” Péter Tokár explains.

UK or other foreign companies looking into the Hungarian market can contact TESK not only for their human resources needs but also for assistance in exploring business opportunities in Hungary. As for the future, Péter Tokár concludes, “We aim to be Eastern Europe’s – and on a longer term also Europe’s – biggest specialised human resources consulting firm.”

TESK Tanácsadó Kft. Thaly Kálmán u. 39 H-1096 Budapest Tel: +36 1 279 0706 Tel: +36 1 279 0707 Fax: + 36 1 466 0549 E-mail: info@tesk.hu www.tesk.hu

• Wealth of Attraction for Business and Leisure Travellers • Ambitious Goals Outlined in New Tourism Strategy • Places of Interest in Budapest

Tourism

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Tourism

Hungary, ideally located in the heart of Europe, offers a wealth of tourism attractions that begin for most visitors with the country’s beautiful capital, Budapest. The city, known as the Pearl of the Danube, has been ranked a UNESCO World Heritage Site for its well-preserved architectural treasures and for its magnificent perspectives on one of Europe’s greatest rivers, the Danube, which divides the city.

Today, Budapest is a vibrant, modern urban centre with a dynamic business sector and a lively cultural scene. Its population is multilingual and multicultural, with a very international perspective, and the city offers a wide range of accommodations for visitors, with a choice of four star and five star luxury hotels.

Wealth of Attractions for Business and Leisure Travellers Diverse attractions But Hungary’s attractions go well beyond Budapest. Travellers will find Romanesque churches, 2000 year old Roman ruins, 400 year old Turkish monuments, spectacular castles (many of them converted into luxury hotels), and Central Europe’s biggest lake, Lake Balaton, a natural paradise, among many other things to see and places to visit.

And that is just the beginning. Visitors in search of pampering can try

out some of Hungary’s many spas, most of which have been modernised and upgraded through significant investment projects. Hungary has had spas for more than 1,000 years thanks to its many natural springs known for their therapeutic properties. Health and wellness tourism, in fact, is a growing niche in Hungary’s tourism industry. Many visitors even come to the country to receive high quality dental or medical treatment at lower costs than back home.

Active travellers can explore Hungary’s great diversity of landscapes on horseback, by bicycle or by canoe.

Sports lovers will find world class golf courses, Formula One racing, equestrian events (including the horse shows which introduce the lifestyle and traditions of the “puszta”, or Great Hungarian Plain), all kinds of water sports, fishing and hiking, and much more.

Rich cultural scene Hungary’s cultural scene is particularly rich, and includes colourful folk art, performances of dance and music, and all types of theatre. Galleries abound in Budapest and in other cities, and shoppers will find many unusual items to bring back home.

Cuisine and wine Visitors can also sample Hungary’s famous cuisine and its many fine wines, which are already well known in the UK, one of the country’s top

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organised year round, and the government’s commitment to making sure MICE tourism continues to be a growth activity for the country.

Since January 2000, the Hungarian Convention Bureau (HCB), a division of the Hungarian National Tourist Office, has been assisting foreign meeting planners to bring events to Hungary, and to provide free information on Hungary as a MICE tourism destination. Budapest, for example, has several convention centres which can host up to 2,000 visitors each, while the city’s top hotels all offer their own high quality facilities for meetings.

Vajdahunyad Castle

markets for wine exports. Hungary has been producing wine for 1,000 years, and travellers can sample vintages in 22 official wine regions.

Wherever visitors travel in Hungary and whatever they do, they are certain to receive a warm welcome, since Hungarians pride themselves on their legendary hospitality. In addition, travellers find it easy to get to and from Hungary and to tour the country thanks to Hungary’s many international connections by air, road and rail and its highly developed domestic infrastructure.

The HCB’s suggestions for incentive travel to Hungary include a boat tour of the Danube, a cooking class in Budapest’s Grand Market Hall, exclusive journeys by luxuriously appointed vintage trains powered by steam engines, fashion shows, a garden party in a private chateau, a tour of Buda Castle, and much, much more. This list is just a taste of what Hungary has to offer visitors.

More and more international travellers are discovering everything that Hungary has to offer. International arrivals grew from 40.9 million in 2006 to 42.4 million last year, an increase of 3.7%, and visitors stayed longer as well. Hungary’s hotels registered an average 6.1% increase in revenues in 2007 compared to 2006, reaching HUF105 billion. Over 95% of Hungary’s visitors last year were from Europe, including the UK. Business travel was the main reason European visitors came to Hungary last year, although the leisure travel segment is growing as well.

MICE tourism a growth niche The meetings, incentive, conferences and events (MICE) tourism niche is expanding particularly rapidly in Hungary. Budapest has been one of the world’s top ten destinations for MICE tourism for many years, and was named the sixth most popular MICE destination in the world in 2006. Hungary’s appeal as a MICE tourism choice is based on its winning combination of a central location, excellent infrastructure, diverse tourism attractions, state-of-the-art business services, wide choice of hotel accommodations, efficient events planning services, attractive costs, high profile events

Lake Balaton

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Ambitious Goals Outlined in New Tourism Strategy ism and will utilise Hungary’s new tourism facilities and attractions,” Miklos Kovacs says.

Infrastructure development key to tourism projects Infrastructure development will go hand in hand with Hungary’s tourism development. “Thanks to upgraded infrastructure, Hungary will be one of the most accessible countries in Central Europe.

Our modern and environmentally friendly road and rail network will offer easy access to tourism oriented facilities. This will help boost the economies of outlying settlements in Hungary as well as the country’s overall economy,” Miklos Kovacs believes.

Hungary is making tourism a key focus in its new National Development Strategy for 2007 to 2013. Miklos Kovacs, State Secretary for Tourism, says that just as Hungary is ambitious in developing other areas of its economy, it is setting challenging goals for itself in the tourism sector.

The National Tourism Committee will develop an overall tourism strategy and regulations for the tourism sector that are coordinated with EU criteria and global EU development strategies. As Miklos Kovacs points out, “We aim to harmonise our tourism strategies with those of the National Development Plan as well as with the social and the economic objectives of the EU. Our new strategy must serve as a foundation for the elaboration of the next National Development Plan and the Europe Plan.”

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Guiding principles The guiding principles behind the new tourism strategy, according to Miklos Kovacs, are innovation, sustainable and competitive economic growth, economic and social balance, and the development of human resources. “In fact, the main aim of our new tourism strategy will be to improve quality of life through tourism,” Miklos Kovacs points out. He adds that the needs and goals of local communities affected by tourism projects will be taken into account.

All new tourism developments will focus on adhering to the highest standards of quality and will apply the latest EU criteria in all aspects, in order to make sure that Hungary’s tourism sector can compete effectively with other European tourism destinations.

In addition, domestic tourism will be encouraged. “Local communities will get more interested in tour-

Hungary aims to promote its regional airports as part of its tourism drive and will also develop river tourism through the international Port of Budapest. “We will of course aim to increase high quality accommodations, catering and other tourism services. Local communities will benefit from all these developments as well,” says Miklos Kovacs.

The government also hopes to develop special interest tourism offerings in Hungary, including medical tourism and heritage tours. In all its projects, the national tourism strategy aims to boost the knowledge and skills of the local workforce to create new job opportunities in the tourism sector.

Hungary already offers a wide choice of tourism attractions. Its new development plan aims to add to these, to boost the quality of Hungarian tourism, and to make it even easier for foreign visitors to travel to Hungary. Miklos Kovacs concludes, “I ask people to come to Hungary and see for themselves everything that this country has to offer.”

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City Home Residency

Luxurious Serviced Apartments in the Heart of the City City Home, created by Dr. Josef Finta of Finta Architects and Associates, offers a luxurious home-away-fromhome for visitors to Budapest. Dr. Finta is well known for his innovative designs for the city’s Hilton, Kempinski and Marriott hotels as well as for Budapest’s ambitious West End City Center development.

Modelled on similar luxury servicedapartment developments in New York City and London, City Home is designed to appeal to demanding international travellers. “Whether you stay for a night or a year, City Home takes care of you,” explains a City Home spokesman.

Luxurious amenities The five-star City Home Residency contains 96 spacious apartments, from studios to two-bedroom units, all elegantly decorated in contemporary style and equipped with the latest amenities. Each apartment has a fully equipped kitchen, a plasma television and a DVD player, a personal safe, Internet access and much more. Some of the apartments have balconies with views of historic Buda castle.

City Home’s managers anticipate that around 80% of the complex’s guests will be long-term residents.

City Home offers 24-hour concierge service, an underground parking garage, exceptional security, room service and housekeeping services. Within the complex is a state-of-the-art business centre that can accommodate conferences as well as smaller meetings and gatherings.

Guests can also enjoy the 800 sq m Pure Wellness Club & Spa with its 17-m heated swimming pool, Jacuzzi, sauna, steam room, fitness center, kinesis room, massage services, Pilates, yoga classes, and even personal trainers.

Chain Bridge over the Danube, museums and art galleries, various parks and gardens, and other attractions.

On the ground floor of City Home is the gourmet Segal Restaurant featuring inventive fusion cuisine by renowned chef Viktor Segal. A wide choice of other restaurants, bars and cafés can be found within steps of the apartment building, and a tramway stop is just outside City Home’s front door.

City Home is the best choice for visitors to Budapest who are seeking a luxurious home of their own in the city. “City Home is the place to stay, enjoy your break at your own pace, in your own way!” says a City Home spokesman.

Special services include event organising, babysitting, airport shuttle, laundry service, medical care, DVD rental and more. City Home’s multilingual staff can be guaranteed to provide top-quality services and a warm welcome.

City Home Residency 43-49. Ó utca, 1066 Budapest Tel: +36 1 354 7805 Cell: +36 20 9104 188 Fax: +36 1 354 7813 Ms. Rita Deé Director of Sales & Marketing E-mail: rita.dee@cityhome.hu www.cityhome.hu

Ideal location City Home is ideally located in the heart of Budapest’s business, commercial and cultural district, within easy reach of such landmarks as the Opera House, St. Stephen’s Basilica, historic Andrassy Avenue, the Music Academy, the picturesque

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Heroes’ square in Budapest

Places of Interest in Budapest Budapest is Hungary’s most important, internationally recognised tourist destination. Millions visit the Hungarian capital every year attracted by the unique geographic location, the historical buildings and monuments of the city that embraces the Danube, its World Heritage Sites, its cultural vigour, its spas, the convention and exhibition facilities and the favourable value for money ratio. The capital and its surroundings also feature as a popular stopover in tours of Central Europe.

The richness and variety of cultural entertainment, especially major annual events, such as the Budapest Spring Festival, the Island Festival, the Budapest Opera and Ballet Festival and the Budapest International Wine Festival attract multitudes to the capital of Hungary. Cultural programs, as well as gastronomic delights and world famous Hungarian wines, are additional attractions for a lot of foreign visitors during their stay. The internationally acclaimed historical spas based on the unique resource of medicinal waters below the city are likely to enjoy even more visibility and popularity in the years to come as a result of a series of reconstruction projects.

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one of the most important streets of Budapest, a World Heritage site. The millennial monument was built in 1896 to commemorate the 1,000th anniversary of the arrival of Hungarians in the Carpathian Basin. The monument consists of two semi-circles on the top of which the symbols of War and Peace, Work and Welfare, Knowledge and Glory can be seen.

The Opera The opera-house was opened in 1884 among great splendour in the presence of King Franz Joseph.

The building was planned and constructed by Miklós Ybl, who won the tender among other famous contemporary architects. It was built in neorenaissance style along the famous Andrássy Avenue.

The Castle After the Mongolian conquest in the 13th century, King Béla IV ordered fortresses from stone to be built. The

fortress of Buda was also founded at that time. The castle reached its golden age during the rule of the renaissance king, Matthias. He had it enlarged and transformed to a palace.

Later, during the Turkish occupation of Hungary, it was under Turkish rule for over 150 years. Not even the Habsburgs cared much about it, as the empire was ruled from Vienna.

During the Second World War it was badly damaged.

The very downtown The Váci utca is the heart of the downtown. It is an elegant shopping street with several restaurants, bank offices, cafés, souvenir- and bookshops.

The majority of the buildings were constructed at the turn of the 20th century but there are minor details that add to the special atmosphere.

There are small hidden passages, cast iron balconies, art nouveau style decoration and Zsolnay ceramic tiles that make each building different and worth noting.

The Parliament and its treasures Built between 1885 and 1904 the Parliament building soon became the symbol of the Hungarian capital. Not just because its sheer size – nearly 18,000 square metres – but because of its detailed decoration, inside splendour and eclectic diversity.

It is the most expensive building ever built in Hungary. It has 691 rooms, 10 courtyards, 27 gates and 29 staircases. It also houses a public library with 500,000 volumes. The walls from outside are decorated by the statues of the most important historical figures of Hungary.

The Heroes’ square The Heroes’ square is one of the most visited sights of the Hungarian capital; it is situated in front of the City Park, at the end of the Andrássy Avenue,

Budapest Chain Bridge

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List of Banks BNP Paribas Honvéd u. 20 H-1055 Budapest Phone: +36 1 374 6300 Fax: +36 1 269 3967 E-mail: info.hu@bnpparibas.com www.bnpparibas.hu

Citibank ZRT. Szabadság tér 7 H-1051 Budapest Phone: +36 1 374 5000 Fax: +36 1 374 5100 www.citibank.hu

Unicredit Bank Hungary ZRT. Akadémia u. 17 H-1054 Budapest Phone: +36 1 269 0812 Fax: +36 1 353 4959 www.unicreditbank.hu

Raiffeisen Bank ZRT. Akadémia u. 6 H-1054 Budapest Phone: +36 1 484 4400 Fax: +36 1 484 4444 E-mail: info@reiffeisen.hu www.raiffeisen.hu

K&H Bank NyRT. Vigado ter 1 H-1051 Budapest E-mail: khbinfo@khb.hu www.khb.hu

OTP Bank Ltd. Nádor u. 16 H-1051 Budapest Phone: +36 1 473 5000 Fax: +36 1 312 6858 E-mail: otpbank@otpbank.hu www.otpbank.hu

ING Bank ZRT. Dózsa György út 84/b H-1068 Budapest Phone: +36 1 235 8800 Fax: +36 1 268 01 59 E-mail: ing@ing.hu www.ing.hu

Central-European International Bank Ltd. (CIB) Medve u. 4-14 H-1027 Budapest Phone: +36 1 457 6800 Fax: +36 1 489 6500 E-mail: cib@cib.hu www.cib.hu

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Edward Jenner, Vaccination 1749 - 1823

Louis Pasteur, Bacteriology 1822 - 1895

Joseph Lister, Antiseptics 1827 - 1912

Paul Ehrlich, Chemotherapy 1854 - 1915

Wilhelm Röntgen, X-Rays 1845 - 1923 Marie Curie, Radioactive Metals 1867 - 1934

Who will carry on their legacy?

Alexander Fleming, Penicillin 1881 - 1955 Francis Crick, DNA structure 1916 - 2004

Restoring the Tradition of European Medical Innovation Over the past 200 years European scientists have been at the forefront of medical progress. Today, that proud tradition is under pressure from policies that devalue the role of innovation.

Innovation takes many forms: from the ground-breaking treatments and cures that emerge from our laboratories, to new solutions for today’s and tomorrow’s major health challenges. An ageing population, access to the best treatments and the availability of credible health information are issues of concern for both policy makers and society as a whole.

We believe that partnerships between governments, public institutions and the research-based pharmaceutical industry are essential to meet public demand for medical excellence, while revitalizing Europe’s spirit of innovation and competitive position in the global marketplace.

For more information: e-mail: europe.information@pfizer.com

www.pfizer.com

n i r o d l a V , So fine,so fresh ®

sh e r f r a D c a v o y r C

The road to success INNOVATION

• Unique product appearance • Vertical display (Euro-hole) • Environmental friendly solution • Excellent communication and promotion opportunities

SAFETY

• High product safety • Dripless, hermetic-pack • Constant quality • Reliable brand name

CONVENIENCE • Long shelf-life • Easy-open pack • Easy-to-use pack size and merchandising benets • Saving on logistics costs

HUNGERIT Poultry Pro Processing and Food Industrial Joint Stock Company H-6600 Szentes, Attila Str. 3. www.hungerit.hu Phone: +36-63/510-510* Fax: +36-63/510-520 Cryovac® and Darfresh® are registered trademarks of Cryovac Inc., a subsidiary of Sealed Air Corporation.

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