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VOL. 20, NUMBER 09

I MAY 04, 2012 – MAY 17, 2012

Budapest Business Journal

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OF DESK SPACE WILL BE NEEDED PER GENERATION Y EMPLOYEE SEE TRENDS

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Deal or no deal?

ECONOMY Talks with the IMF and the EU on a financial Széll Kálmán 2.0: high hopes assistance package finally Hungary’s government has a new package of look closer – at least, the published “fiscal adjustment” measures European Commission in the Széll Kálmán Plan 2.0, hoping it will lead to the and Hungary seem to excessive deficit procedure have come to terms. against the country being PAGE 13

dropped. PAGES 06-07

BUSINESS ENTERPRISE

SPECIAL REPORT

Why invest in Hungary?

Call for lower VAT

For companies wishing to invest in Europe – and Hungary – now is as good a time as ever, with government aid still available, as PwC’s Investing Guide Hungary 2012, makes clear. PAGE 12

Hungary’s housing market is constrained on the demand side by low household income and the high cost of loans, while regulatory burdens weigh heavy on the supply side of new flats. Could lower VAT help? PAGE 16


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BI-WEEKLY

MOL says continued financing of Nabucco pipeline unsustainable NEWS Áder as president

FOCUS

Unions: a labored history

04 09 10-11

digest

It occurred to me that nothing is more interesting than opinion when opinion is interesting HERBERT BAYARD SWOPE, THE NEW YORK EVENING WORLD, 1921

MOL QUITS NABUCCO

NABUCCO IS A WOUNDED ANIMAL AND PUTIN IS PUSHING IN FOR THE KILL. United Press International

transport route to bring that gas to the European markets, with Nabucco one of the candidates, the article points out that “the decision could determine the ultimate fate of the project”.

central Asia will come from Azerbaijan,” the article says referring to the BP-led development Shah Deniz 2 that runs through Turkey and could reach Europe in 2017 or 2018.

Citing Christian Dolezal of the Nabucco consortium, Financial Times says that “Mol’s move would not endanger the project” as Nabucco has strong

Citing an unnamed industry source, Reuters points out a major circumstance, saying, “It is clear that nobody wants to take big gas infrastructure

shareholders and its financing is secure. Most importantly, Dolezal points out that Nabucco was underpinned by an intergovernmental agreement that granted transit rights across Austria, Hungary, Romania, Bulgaria and Turkey “regardless of the involvement of any shareholder company in the consortium”.

risks at the moment. The finance is drying up and there is also concern about the many gas pipelines and LNG gas projects around Europe at the moment, and whether there will be overkill. “

The future of the Nabucco pipeline, which would connect Central Asia with Europe and, as such, would reduce Europe’s energy dependency on Russia, is now in question. The project, since its establishment in 2002, has always been surrounded by concerns, but the latest and potentially fatal development was provided by Hungarian oil and gas company MOL when, on April 24, it decided not to approve the project’s 2012 budget, saying continued financing of the pipeline is unsustainable. Mol said it had raised its concerns about the implementation of the Nabucco project in its current structure and with its current management in a number of different forums over the past year and a half. Also, the costs of the pipeline, now estimated to reach up to $15 billion instead of the initial $10.6 billion, are still hard to be estimated and other companies involved in the project, such as the German RWE are also considering quitting the project. Still, as Hungary depends on Russia for 80% of its gas imports, the establishment of a pipeline that would connect the Caspian area with Western Europe without touching Russia might sound as a project good to support. However, later on April 24, Prime Minister Viktor Orbán not only affirmed that Mol would pull out but he also announced that, at the same time, Russia’ rival South Stream project, which would run through Hungary and is backed by Gazprom, was gaining momentum. While the topic has obviously been in the center of attention for the past week, most papers refrained from stating strong opinions about the case and rather stayed on the safe side, simply introducing the facts. Here are a few articles that did dare to offer opinion.

April 30, 2012 The article published on UPI. com puts the opportunities now opening up for Russia in focus. After briefly presenting the emerging doubts over Nabucco, which led to Mol’s decision to pull out and also made some other companies question the project, the author cites Chris Weafer, chief strategist at Moscow’s investment bank Troika Dialog saying that Russian President-elect Vladimir Putin could take advantage of the situation. “There is now very little support or even interest in Nabucco in Brussels,” Weafer states. “Nabucco is a wounded animal and Putin is pushing in for the kill.”

April 26, 2012 The author of the Financial Times article stays objective and factual but is not afraid of making strong statements. “The move [Mol stepping back] is a blow to the prestige of the EU-backed plan, one of Europe’s most ambitious infrastructure projects, which is designed to reduce Europe’s dependence on Russian gas.” When detailing that a BP-led consortium, developing a big gas field in Azerbaijan, is currently preparing to choose a

April 26, 2012 Reuters, in its snap analysis titled “Nabucco gas pipeline must shrink or die”, wastes few lines on presenting the background and goes for discreet forecasts. “For the foreseeable future, the only substantial non-Russian gas supplies from

As a result of Nabucco somewhat losing the support of the European Commission, Austria’s OMV has also begun to consider a smaller version of Nabucco, known as Nabucco West, which would start at Turkey’s western border, the article says. “Of all the projects, Nabucco West seems to be the most feasible and economic for a number of reasons. The legal structures are already in place, such as the intergovernmental agreements and regulatory regimes,” Reuters says, citing John Kennedy, analyst at Energy Quote JHA. ■


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Budapest Business Journal | May 04 – May 17

bi-weekly

QUOTE OF THE WEEK

MOL is the first to say clearly that this [Nabucco pipeline project] is unlikely to work in its current form. ANALYST JÓZSEF MIRÓ AFTER HUNGARIAN OIL AND GAS COMPANY MOL REJECTED THE NABUCCO PROJECT COMPANY’S 2012 BUDGET

NEWS FOR THESE PAGES IS TAKEN FROM THE BUDAPEST BUSINESS JOURNAL’S DAILY BRIEFING, HUNGARY A.M.

The Hungarian Parliament on May 2 elected János Áder, a prominent Fidesz member and a representative in the European Parliament, as the country’s new president. The election process did not hold any surprises: the ruling Fidesz-KDNP party alliance supported Áder, the far-right Jobbik voted no, while MSzP and LMP refused to vote saying that they did not want to “assist in this circus”. Their protest and ironic comments refer to the fact that the governing parties, which have a two-thirds majority in Parliament, did not consult with the opposition about the person of the new president and once again chose a party loyalist. Áder, who is considered a diligent and “likeable” man even by politicians on the liberal side, will have a five-year mandate in the country’s highest office. He replaces the disgraced Pál Schmitt, who resigned on April 2, after the Semmelweis University stripped him of his doctoral title because 96% of his thesis had turned out to be a copy and translation of other authors’ works. (See article on Áder on page 09.)

ECONOMY HUNGARY DEFAULT INSURANCE COSTS FALL AFTER IMF-EU TALKS MOVE CLOSER The cost of insuring Hungary’s sovereign debt against default fell further on markets in London on April 26, one day after the European Commission said talks with Hungary on precautionary financial assistance the country is seeking could start. According to Markit Financial Information Services, a major CDS market data monitor in London, Hungary’s five-year credit default swaps started trade Thursday at 528 basis points, down 40 bp from the previous close. The price of Hungary’s five-year CDS fell from around 600 bp early in the week after Prime Minister Viktor Orbán said that obstacles to talks with the European Union and the International Monetary Fund on the precautionary financing had been “essentially removed” after a meeting with EC President Jose Manuel Barroso in Brussels. A CDS contract valued at 528 bp means that the cost

to insure every €10 million worth of bond exposure against default is €528,000 a year for the benchmark fiveyear horizon.

HUNGARY JOBLESS RATE UP AT 11.7% IN Q1 The average unemployment rate in Hungary was 11.7 % in the 15-74 age group in JanuaryMarch, rising slightly further from 11.6% in December-February and also up from 10.6% in the same period a year earlier, data published by the Central Statistical Office (KSH) shows. The jobless rate for the 15-64 group also rose 0.1 percentage point both from the previous three-month period and from a year earlier. The activity rates in this age group rose slightly from the previous three months to 63.2% in Q1 and was unchanged in the wider age group, quarterly published data shows. Employment in both age groups fell from December-January but rose in one year. The jobless rate within the 15-74 age group dropped below 11% last spring and fell to 10.6% in September-November 2011 before a renewed rise started. Part of the rise could be seasonal as the pattern was similar one year ago.

RATE-SETTERS SAY BANKING SYSTEM STABLE, BUT ABILITY TO SUPPORT GROWTH WEAKENED The country’s banking system is stable and resilient, but its ability to support growth had weakened, the rate-setting Monetary Council of the National Bank of Hungary (MNB) said in an assessment of the central bank’s regular Stability Report published on April 26. “In the Council’s judgment, the Hungarian financial intermediary system continues to be stable and has strong resilience to shocks; however, its ability to support economic growth has been weakening,” it said. The Council noted several risks as well as mitigating measures. It said strong deleveraging in the eurozone banking sector and the weak ability of domestic banks to draw capital had resulted in a continued or accelerated outflow of external funds in a regional comparison.

HUNGARY ACCELERATION INDICATOR EDGES UP IN APRIL The Acceleration Indicator (GYIA), an annualized measure of economic and financial indicators compiled by business daily Világgazdaság, edged up 0.11% y/y in April, but fell 0.03% from the previ-

ous month, the paper said on April 26. The GYIA measures non-food retail sales, real interest rates, the real value of the Budapest Stock Exchange’s main BUX index, industrial output, the stock of vehicle loans, the yield curve for government securities, money supply and real wages.

BUSINESS MOL SAYS CONTINUED FINANCING OF NABUCCO PIPELINE UNSUSTAINABLE Hungarian oil and gas company MOL believes the continued financing of the Nabucco pipeline project is unsustainable and thus did not approve the project company’s 2012 budget, MOL said on April 25. According to industry experts, MOL’s failure to approve the budget meant in practice that it would not give any more money to the project company. They said if the current shareholders do not exercise their pre-emption rights, MOL could sell its stake in the project company to Bayerngas, which is in talks on becoming the seventh member of the Nabucco consortium. MOL said it had raised its concerns about the

implementation of the Nabucco project in its current structure and with its current management at a number of different forums over the past year and a half. It added that costs and the sources of supply for the pipeline were still unclear. A spokesman for European Commissioner for Energy Gunter Oettinger said earlier that MOL’s possible exit from the project would not be a negative development if a new, capital-strong partner could be found.

Hungary’s entire banking sector rose 2.8% in 2011. The managers expect the proportion of non-performing loans in their portfolios to rise to 16% in 2012 from 13.5% at the end of 2011. They see the proportion climbing to 19.3% from 17.7% in the corporate portfolio and to 15.6% from 12.5% in the retail portfolio. Loan risk provisioning is set to fall to 4.6% from 5.3% of the portfolio in the retail segment and to 2.1% from 3.7% in the corporate segment.

HUNGARY BANK SECTOR COULD RETURN TO PROFITABILITY IN 2012, SURVEY SUGGESTS

MOL SHAREHOLDERS APPROVE PAYMENT OF FIRST DIVIDEND SINCE 2008

Hungary’s banking sector could return to profitability this year, a survey of senior managers in the biggest banks suggests. Managers in the country’s eight biggest commercial banks and two local branches of foreign banks expect to close 2012 with a combined pretax profit of HUF 67 billion, compared to a loss of HUF 66 billion in 2011, the survey conducted by the National Bank of Hungary shows. The managers expect their total assets to fall by 3.6% on average this year after rising 2.3% in 2011. Total assets of

Shareholders of Hungarian oil and gas company MOL approved a proposal to pay a HUF 460 per share dividend on 2011 profit at its annual general meeting on April 26. The dividend fund comes to HUF 45 billion. MOL last paid a dividend on 2007 profits. The dividend is in line with MOL’s earlier announced policy of paying shareholders 40% of earnings, excluding one-off effects. Shareholders approved MOL’s consolidated IFRS report showing net income of HUF 154 billion and total assets of HUF 4,993 billion. Calculated

Photo: László Beliczay / MTI

János Áder elected as Hungary’s new president


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RICHTER BOARD PROPOSES HUF 660 PER SHARE DIVIDEND Shareholders of Hungarian drug maker Gedeon Richter approved a proposal to pay a HUF 660 per share dividend on 2011 profits at its annual meeting on April 26. The dividend fund comes to HUF 12.2 billion. The remaining HUF 66.9 billion of after-tax profit will go into profit reserves. Last year, shareholders approved payment of an HUF 860 per share dividend on 2010 profit. Summarizing the year for shareholders, CEO Erik Bogsch highlighted the company’s excellent performance on the Russian market, turnover of women’s health products in the European Union and the expansion of the product portfolio. He added that the company’s success on the European market showed Richter was heading from being a regional multinational toward becoming a European multinational. He said the regulatory

environment in Hungary continued to create a difficult situation for the country’s drug makers.

OTP SHAREHOLDERS APPROVE DIVIDEND PROPOSAL Shareholders of OTP Bank approved a proposal to pay 100% of the nominal value of shares, or HUF 100 per share, as dividend on 2011 profit at its annual meeting. The dividend is expected to be HUF 102 per share, taking into account the dividend of treasury shares, which will be distributed among shareholders. The dividend fund comes to HUF 28 billion, up from last year’s HUF 20 billion. OTP Bank had after-tax profit of HUF 136.6 billion and pre-tax profit of HUF 154.5 billion in 2011, according to Hungarian Accounting Standards. Chairman-CEO Sándor Csányi told shareholders that the bank had consolidated after-tax profit of HUF 83.8 billion in 2011, 29% less than in 2010, on a consolidated result without one-off items of HUF 161.4 billion, unchanged from 2010. One-off (corrective) items included a gross loss of HUF 65 billion and a net loss of HUF 34 billion on the foreign currency-denominated

mortgage repayment scheme. The bank levy reduced profit by HUF 35.5 billion.

COMMITTEE EXEMPTS 15 PROJECTS FROM PLAZA BAN A committee whose members are delegated by Hungary’s National Economy Ministry and Rural Development Ministry have proposed exemptions from a ban on the construction of big shopping centers in 15 cases so far, National Economy Minister György Matolcsy said in a written response published on Parliament’s website. An exemption from the ban can be issued by the national economy minister based on the recommendation of the committee, set up by the ministers responsible for rural development, environmental protection and trade. So far, 41 applications have been submitted to the committee, of which they discussed 29, rejecting 12 applications, supporting 15 and requesting further information in two cases, the minister said.

BUDAPEST AIRPORT SIGNS FIVE-YEAR LEASES WITH MALÉV UNITS Budapest Airport, the operator of Liszt Ferenc In-

ternational Airport Budapest, said it signed a fiveyear lease with two units of grounded national carrier Malév. Malév Ground Handling and maintenance unit Aeroplex of Central Europe will continue to operate at the airport. Malév stopped operating at the beginning of Febru-

ary. Aeroplex managing director Imre Nemcsók said the contract marked a milestone in the company’s restructuring undergone since Malév’s bankruptcy. Malév Ground Handling CEO Lóránt Limburger also said his company had to make adjustments to the post-Malév period.

AUCHAN SIGNS TO TAKE OVER CORA STORES IN HUNGARY French-owned supermarket chain Auchan on April 27 signed documents on the takeover of seven stores of peer Cora in Hungary, Auchan spokeswoman Katalin Gillemot told MTI. The European Commission cleared the acquisition of the stores on April 18. ■

Photo: Zsolt Szigetváry / MTI

by Hungarian Accounting Standards, the company had net income of HUF 150 billion and total assets of HUF 3,168 billion. Shareholders with 67.9% of voting rights in the company were represented at the meeting.

JENSON BUTTON SPEEDS THROUGH BUDAPEST DOWNTOWN As a unique celebration of its mobile network renewal, Vodafone brought former Formula 1 world champion Jenson Button to downtown Budapest. Horsepower ruled the streets on the long weekend between April 28 and May 1, 2012, dubbed by Vodafone as Start Something New Weekend. Attendants had the opportunity to see Vodafone McLaren Mercedes team member and former world champion Jenson Button trying to set a new downtown speed record, racing across the fresh asphalt of Bajcsy-Zsilinszky út three times in a row, reaching a top speed of almost 200 km/h on one run. At the highlight of the event series, the Vodafone Downtown Grand Prix, other motor sports stars (rally, WTCC, Lotus Lady) also demonstrated their skills on the road from the Basilica to the Parliament.

energy EUROPEAN NUCLEAR SAFETY GROUP SATISFIED WITH HUNGARY’S PAKS STRESS TEST RESULTS The European Nuclear Safety Regulators Group (ENSREG) approved a report on March 25 on the Targeted Safety Review of nuclear power plants. The experts considered the review of Hungary’s Paks Nuclear Power Plant and the resulting report as duly thorough and the measures proposed in the report as appropriate, the National Development Ministry said on government website kormany.hu. The stress test at Paks, the country’s only nuclear power plant, was started in May 2011, and the plant had submitted the related documents to the National Nuclear Energy Office by October 31.

INA TO FOCUS ON CROATIA AFTER SYRIA EXIT, EXECUTIVE SAYS INA Industrija Nafte d.d., a Croatian refiner controlled by Hungary’s MOL Nyrt, will focus on upgrading its domestic business after it pulled out of Syria to comply with European Union policy, the head of the management board Zoltán Áldott said. The company will invest about HRK 2 billion ($352 million) this year

on the continuing overhaul of refineries in Rijeka and Sisak, modernizing its retail network and boosting research and exploration, Áldott said in a briefing in Zagreb. That marks an increase from HRK 1.5 billion in total investment in 2011. INA said on April 27 that first quarter net profit had shrunk to HRK 412 million ($72.36 million) from HRK 1.05 billion year-on-year due to capped gas prices, lower demand and loss of income from Syrian oilfields.

BP WAITING FOR OFFERS FROM NABUCCO, SEEP, TAP SAYS The BP Plc-led group behind the Caspian Sea Shah Deniz gas field that’s planning an export route to Europe is awaiting formal submissions from Nabucco and the South East Europe Pipeline (SEEP), by May 16. The group, which also includes Statoil ASA, Total SA and State Oil Co of Azerbaijan, intends to choose between SEEP and Nabucco West, a revised version of the EU-backed project, in June, said BP Vice President for Shah Deniz Al Cook in an interview on the TAP website. The winner of the Central European route

will then compete with TAP, or the Trans-Adriatic Pipeline developed by EGL AG, Statoil ad E.ON Ruhrgas. The Shah Deniz partners will make a final route selection by mid2013, Cook said.

BRUSSELS WANTS MORE DETAILED EUROPE NUCLEAR STRESS TEST REPORT The EU’s energy chief has deemed an almost yearlong study on nuclear plant safety in Europe as short on detail and numbers and demanded further work before publication of the critical report. “Going deep is more important than being fast,” AFP quoted Commissioner Guenther Oettinger, saying that a final report would be available to the public in the fall. Ordered in the aftermath of the Fukushima catastrophe, the European Commission and national atomic regulators launched stress tests in June on 147 nuclear plants in 15 EU countries, including Lithuania which has closed down plants, plus 15 reactors in Ukraine and five in Switzerland. After tough talks, EU nuclear regulators agreed tests on the ability of reactors to survive earthquakes, floods or man-made

events like plane crashes. Oettinger said he had agreed with the European Nuclear Safety Regulators Group (ENSREG) to have more plants visited and to add more concrete information on the potential impact of airplane crashes.

ENI WINS RUSSIAN ARCTIC OIL AND GAS DEAL Rosneft and ENI have signed an agreement in the presence of Russian Prime Minister Vladimir Putin to jointly tap new fields in Russia’s Barents and Black Sea zones, Rosneft’s second Arctic deal in two weeks. ENI CEO Paolo Scaroni also said that Rosneft and ENI may expand their cooperation efforts to Europe and the Americas. The companies said in a statement they would jointly develop the TsentralnoBarentsevsky and Fedynsky blocks in the Barents Sea, as well as a Black Sea deposit, with combined recoverable resources estimated at 36 billion barrels. ENI will hold 33.33% in the joint venture with Rosneft.

OMV GAS PRODUCTION OMV AG’s Q1 oil and gas production grew by 3.5% on increased output in Libya. OMV

produced 299,000 barrels of oil equivalent a day from 289,000 in the previous three months, while its refining margin rose to $1.92 a barrel from $1.77, it said on April 24. Output in Libya, where operations resumed in November following a nine-month hiatus after contributing about 10% of 2010 volumes, averaged 25,000 barrels a day in Q1, OMV said. Libya is currently pumping about 1.5 million barrels of crude a day. Oil hedges crimped Q1 earnings before interest and taxes by €64 million ($84 million), OMV said.

EU BIOETHANOL PRODUCERS SEEN BOOSTING OUTPUT The European Union’s bioethanol industry looks set to expand production later this year, with US imports expected to fall sharply following the closure of a tariff loophole, Reuters wrote citing industry sources. The EU revised its regulations, effective April 3, to close a loophole that allowed ethanol/petrol blends with less than 30% petrol to be classified as a chemical product rather than denatured ethanol and attract a much lower duty rate. Bernard Chaud, vice-chair-

man of French alcohol and bioethanol producers group SNPAA, said a rise in capacity use in Europe, from around 80% last year, would benefit plants which had halted or sharply cut output, like the Ensus refinery in Britain and Abengoa in Rotterdam, as well as new projects in Britain and Hungary.

HUNGARIAN BIOMASS-FUELED POWER PLANT OWNER FILES FOR BANKRUPTCY PROTECTION Liget Bioenergia Művek, the majority owner of a HUF 14 billion ($65 million) biomassfueled power plant financed by the state-owned Hungarian Development Bank (MFB) and commercial peer K&H Bank, has filed for bankruptcy protection, business portal Gazdasag.hu said on April 23. Liget Bioenergia Művek inaugurated the plant, financed in equal part by MFB and K&H Bank, in 2009. The plant’s operator, Dél-Nyírségi Bioenergia Művek, is also majorityowned by Liget Bioenergia Művek. Japan’s Tohoku Epko is a minority stakeholder. The economic crisis as well as regulatory changes made the plant unviable and it shut down in 2011. ■


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Széll Kálmán Plan 2.0: h The government is proposing five new taxes to offset or replace the expiring extraordinary levies. BBJ GABRIELLA LOVAS

Through the first and second Széll Kálmán plans, Hungary aims to carry out fiscal adjustments equal to 2% of GDP in 2012 and 4% of GDP in 2013, according to the Economy Ministry. Ecofin, the body of EU finance ministers, earlier recommended that Hungary make fiscal adjustments equivalent to 0.5% of GDP this year and further measures in 2013 to keep the general government deficit under the 3% of GDP threshold. The first Széll Kálmán Plan completed 83% of the HUF 550 billion planned improvement to the budget balance, at HUF 458 billion, the ministry said. The second plan aims to improve the fiscal balance by an additional HUF 154.7 billion in 2012 and HUF 567-665 billion in

2013, depending on the revenues from a new financial transaction tax. First, however, the government intends to ensure that the excessive deficit procedure (EDP) against the country is suspended as soon as possible as a result of the new plan, the ministry said. The government claims that as a result of the first and second Széll Kálmán plans, budget deficits of 2.5% for 2012 and 2.2% for 2013 are safely attainable, and consequently government debt is set to continue to decrease. In addition, the government hopes to unfreeze nearly 30% of its cohesion funds (€495 million) from the EU next year that were suspended by the European Commission due to insufficient deficit reduction measures. Ecofin will take a decision on June 22 on whether to lift the suspension from January 1, 2013, based on an assessment of the measures that Hungary takes. The plan could also serve as a basis for the impending IMF/EU negotiations. The study, called ‘Next

Main macroeconomic indicators GDP growth (%) Household consumption (%) Gross fixed capital formation (%) Exports (%) Imports (%)

2015

1,7

0,1

1,6

2,5

2,5

0

-1,4

0,7

2,6

2,6

-5,4

-2,3

0,3

3,5

3,5

8,4

4,7

8,8

10,5

10,5

2,8

8,1

11

10,9

10,3

9,5

8,9

Employment rate (15-64, %)

56

56,9

58,5

60,6

63,2

External financing capacity (% of GDP)

3,6

6,6

7,3

7,3

6,4

Consumer Price Index (%)

3,9

5,2

4,2

3

3

Source: National Reform Program 2012

Budget deficit and public debt forecasts (% of GDP) Budget deficit forecasts in the 2011 Convergence program

2011

2012

2013

2014

2015

2

-2,5

-2,2

-1,9

-1,5

Budget deficit forecasts in the 2012 Convergence program

4,3

-2,5

-2,2

-1,9

-1,5

Debt-to-GDP forecasts in the 2011 Convergence program

75,5

72,1

69,7

66,7

64,1

Debt-to-GDP forecasts in the 2012 Convergence program

80,6

78,4

77

73,7

72,7

Source: Convergence Programs 2011, 2012

Step: Széll Kálmán Plan 2.0’ unites Hungary’s Convergence Program and the National Reform Program. REVENUES: FIVE NEW TAXES The Széll Kálmán Plan 2.0 introduces five new taxes. Antal Rogán, an MP of the governing Fidesz party, said it would have been impossible to achieve the scale of

44,7

Pharmaceutical subsidies cuts

10

40

Balance improvement of local governments

60

90

New telecom services tax

30

52

Reverse charge VAT in agriculture

10

15

Increased electronic road toll

0

75

Central subsidies cuts to public transport

0

10

Elimination of central subsidies to the Research and Technological Innovation Fund

0

25,2

Amendment of public tasks of state-owned companies

0

20

New financial transaction levy

0

130-228

Extension of the income tax levied on energy providers

0

55

Merger and transformation of taxes on insurance companies

0

15

Reduction of the number of smaller taxes

0

-0,5

154,7

567-665

Source: National Economy Ministry

2014

10,9

44,7

Total

2013

6,3

Expected revenues 2013 (HUF billion)

Budgetary institution expenditures cuts

2012

10,9

Unemployment rate (%)

Expected revenues 2012 (HUF billion)

Fiscal improvement measures

2011

fiscal improvement desired by the IMF and EU through spending cuts alone. The new taxes represent a shift towards consumption taxes; however, they are clearly being introduced to offset or replace those taxes that will be eliminated next year, such as the sectoral crisis taxes and the halving of the bank levy. Most of the improvement is expected from the financial transaction levy (HUF 130-HUF 228 billion), the implementation of an e-road toll (HUF 75 billion) as well as the extended income tax on energy services suppliers (HUF 55 billion). The government also plans to implement a telecom services tax, a HUF 2 charge per minute on phone calls and text messages, from which it expects revenues of HUF 30 billion in 2012 and HUF 52 billion in 2013. A reversecharge VAT in agriculture will be introduced this year to tackle tax fraud. This is a practice of obliging the buyer, rather the seller, to pay VAT. EXPENDITURES: SPENDING FREEZES AND LOWER SUBSIDIES Cost-cutting measures in 2012 include reducing allocations for central budgetary institutions (HUF 44.7 billion) trimming the drug subsidy budget (HUF 10 bil-

lion) and fiscal adjustments for local governments (HUF 60 billion). In 2013, there will be further measures on the expenditure side, such as the replacement of state subsidies with European Union resources at the Research and Technology Innovation Fund (HUF 25 billion), savings of HUF 10 billion and HUF 20 billion from the reduction in central budget subsidies for public transport in big cities and the amendment of public tasks of state-owned companies, respectively. A government resolution published on April 27 contains a breakdown of the combined HUF 44.6 billion in government spending freezes. The heads of the affected ministries must submit a detailed account of the spending freezes to the Treasury by May 7. The development minister must submit a plan of changes to the local public transport system as well as railway company MÁV that result in the fiscal improvement outlined in the Széll Kálmán Plan. In addition, he has to produce a proposal for the introduction of an electronic road toll system. The economy minister has to implement a HUF 10 billion reduction in 2013 from this year’s central bud-

get funding levels for public transport in the capital. The resolution limits funding for state-owned companies to professional resources, thus reducing the burden on ministry budgets. REVISED MACRO OUTLOOK Under the government’s macro outlook outlined in the plan, GDP growth was revised down to 0.1% for this year and 1.6% for 2013, from a respective 3% and 3.2% in the previous plan. Mediumterm growth is lower as well, only at 2.5% for 2015 compared to the previous 3.5%. GDP growth will still be driven by net exports on the output side in 2012-2013, the ministry said. However, from 2014, with the fading of the deleveraging process of the domestic economy, domestic components are expected to contribute to economic expansion. Consumption is expected to grow by 2.6% and investments by 3.5%. Foreign trade may signal a trend reversal at the end of 2012, as the debt crisis of the Eurozone subsides. The government also significantly revised its forecasts of state debt levels, seeing the rate drop from 78.4% of GDP this year to 72.7% in 2015, versus the earlier expectation of a decrease from 72.1% to 64.1% in the same period. ■


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Budapest Business Journal | May 04 – May 17

high hopes MEASURES TO GUARANTEE THE INDEPENDENCE OF TYPICAL MARKET ECONOMY INSTITUTIONS ARE STILL MISSING GKI

THE PREVIOUS PLAN More than a year ago, on March 1, 2011, the Hungarian government published its structural reform measures dubbed the Széll Kálmán Plan. The plan’s main target was the drastic reduction of state debt and the consequent significant improvement of competitiveness. National Development Minister György Matolcsy highlighted a number of oneoff and continuous revenues sources that would in their entirety be devoted to reducing the indebtedness of the Hungarian state to 65% by 2014 from a level that was over 80% of GDP last March. Sources included 63% of the freshly

nationalized private pension fund assets. The government was also set to introduce a road use toll that would go to filling the gap, while the special tax on the finance sector was extended to three years. All revenues would go to forcing down the debt, the government said at that time. Likewise, the planned reduction of industry taxes was to be postponed and the resultant extra earnings was planned to go to reducing the margin. Deputy Prime Minister Tibor Navracsics said that Hungary’s new constitution – then in the making – would include provisions preventing national debt from passing a certain limit. Other steps were to reduce central spending.

The Széll Kálmán plan would help end squandering and in 2012 it would improve the balance by HUF 550 billion, the government said. According to the expectations, “in 2013 and 2014 it will improve the situation by HUF 900 billion each”. The strategy alone was expected to boost competitiveness and lead to the creation of 300,000 jobs. Hungary could grow by 4-6% in the wake of these measures and would become one of the leading countries in Europe in the field of new investments and economic advance, Matolcsy said upon announcement of the program.

REACTIONS MONETARY COUNCIL OF THE NATIONAL BANK OF HUNGARY (MNB) After its meeting on 24 April, where the central bank base rate was left unchanged at 7%, the Monetary Council (MC) said that “the latest government measures, announced as part of the Structural Reform Program, are likely to result in an increase in inflation in 2013 while causing aggregate demand to contract, which in turn may reduce the risk of second-round effects on inflation.” The MC pointed out that “Uncertainty surrounding the prospects for income growth and the contractional effects of fiscal consolidation on aggregate demand continue to point to weak growth in investment and household consumption.” In the council’s view, it is important that the new taxes are introduced in a way that minimizes their distorting effects on the economy.

NOMURA EMERGING MARKETS RESEARCH ANALYST PETER ATTARD MONTALTO The EU may well drop the cohesion funds suspension, even against the recommendation of the European Commission given the amount of headline adjustment contained in this report, Montalto said. “While implementation risks within the Hungarian budget are always substantial, we believe these measures could narrow the deficit this year to 3.9% of GDP and next year to 2.4%,” he added. “We think that the European Commission may well have serious concerns about both the sustainability of these measures as only around half them by value are what we would call sustainable and also the distortive nature of some of the measures, the financial transactions tax in particular,” Montalto said. He pointed out that it is potentially highly distortive to the process of financial intermediation and may lead to an increase in the black market and cash hoarding, which in turn will lower tax revenues elsewhere. He added that the tax would affect households and corporates rather than the banks themselves. “Overall, we have some issues with the politically challenging nature of many of these measures too, particularly in view of those in 2013 that will be just before the election in 2014,” Montalto stressed.

TELENOR MAGYARORSZÁG Communications Director István Kutas of telecom firm Telenor Magyarország told MTI that the company is in talks with the government on “how the burden passed on to customers can be as small as possible”, with regard to the proposed HUF 2 per-minute tax on telephone calls and HUF 2 per-message tax on text messages. Kutas said that in addition to problems regarding the base and the collection of the new tax, the required restructuring of fee packages and technical investments would also represent significant burdens for telecom companies. He pointed out that the new taxes would cause the telephone and text-message fees of several customers to rise by double-digit percentage points, which would make Hungarian companies less competitive. Kutas said that there are many unresolved matters, such as the collection of the taxes from clients with pre-paid cards, billing of second-based packages and the status of guaranteed free minutes. Kutas added that the possible elimination of guaranteed free minutes would be especially painful for corporate clients, most of which choose packages containing such minutes so that their employees can call one another free of charge.

ECONOMIC THINK TANK GKI “The Széll Kálmán Plan 2.0 may be sufficient to terminate the excessive deficit procedure against Hungary next year, and to keep Hungary’s access to cohesion funds unchanged. However, the plan concentrates on increasing revenues, thus hindering economic growth. As a result, markets will only be partly reassured, and the investment climate will hardly improve. “Measures to guarantee the independence of typical market economy institutions are still missing. The government continues its autonomous economic policy, sometimes manifested in regulation almost at the corporate level, and the government still insists on maintaining the widely controversial flat-rate income tax. It is a question as to what extent these issues will be discussed at the IMF negotiations.”


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Budapest Business Journal | May 04 – May 17

IMF/EU talks get green light, but concerns remain Nearly six months after the Hungarian government took a U-turn and admitted the need for continuing negotiations with the IMF and the EU on a financial assistance package, talks finally look ready to kick off – at least, the European Commission and Hungary seem to have come to terms. BBJ BBJ

The European Commission is ready to close the infringement procedure against Hungary concerning the central bank, paving the way for talks to begin on IMF/EU financial aid, the EC said in a statement on April 25, after European Commission President José Manuel Barosso and Hungary’s Prime Minister Viktor Orbán met in Brussels. “Guarantees have been provided by the Hungarian authorities vis-à-vis the independence of the central bank. Assurances have also been provided in accordance with the Venice Commission work on the independence of the judiciary, which means the Commission is today prepared to discuss financial assistance as requested by Hungary from the EU and the IMF last November,” Commission spokesman Olivier Bailly said after the meeting. But while the Commission agreed to close the infringement proceeding on the independence of Hungary’s central bank once the relevant legislation is adopted, two other issues have remained open. Although the Commission admitted that “some improvement” had been noted on the issue of the independence of the data protection authority, it would still bring the matter to the Court of Justice. Spokesman Bailly added that the Court of Justice would also examine the matter of the low-

ering of the retirement age of judges as an urgent procedure. He said Hungary would be asked to refrain from implementing the law until the court takes a decision on the matter. The International Monetary Fund welcomed the progress Hungary has made in talks with the European Commission and said it is ready to start negotiations on precautionary financial assistance the country is seeking – as soon as steps to ensure the independence of the National Bank of Hungary are taken. “The Fund is ready to start negotiations as soon as adequate steps are taken to ensure central bank independence as has been discussed with the Hungarian government,” IMF’s resident representative in Hungary Iryna Ivaschenko said one day after the EU released its statement on the progress.

SAFETY NET, FAST! This development is certainly a positive turn of events, and the parties have come a long way since the summer of 2010, when the then-newly elected government claimed that Hungary does not need any financial aid either from the IMF or the EU. Estimating the damage – both financial and in reputational terms – that the confusing communication and hesitation of the Hungarian government has caused to Hungary in the last two years is not the subject of this article. One thing is for sure: the opposition is pointing the finger at Orbán and his cabinet for the protracted process, while the prime minister tends to shift blame onto the international organizations. Nonetheless, the government still insists that Hungary needs only a safety net in case there are problems on the European bond market that might make financing the country from the market more difficult. However, it now wants to close talks with the IMF as fast as possible. Orbán said in an interview with public radio MR1-Kossuth that he had driven the government’s message home successfully during talks in

CONFUSING CHOREOGRAPHY – WHO SAID WHAT IN THE PAST TWO YEARS REGARDING THE IMF TALKS 29/9/2011

17/11/2011

“We said a word in the summer of 2010,” said Mihály Varga, state secretary of the Prime Minister’s Office at the end of September, referring to the Orbán cabinet’s statement after the elections in 2010 about not prolonging the IMF credit line. The government will not seek financial resources from the IMF, even in the event of a larger recession, Varga added. 18/10/2011

“In my opinion, there is no reality of the government applying for another credit line from the IMF, we do not plan such actions,” Debrecen mayor and Fidesz vice president Lajos Kósa said in an interview with public television. 26/10/2011

“Hungary is cooperating with the International Monetary Fund, but has no plans to seek a new IMF loan,” National Economy Minister György Matolcsy said in an interview with the weekly Heti Válasz, adding that he thought it would be a sign of weakness to return to the IMF.

“The Hungarian economy is financing itself from the market, we do not rely on the benevolence of others. Thereby the period of renewal has closed and that of growth has begun for which we must take advantage of all possible means,” a statement by the National Economy Ministry, announcing that the government will start talks on a new type of agreement with the IMF. 22/12/2011

“We do not need money, we do not want credit. […] We need an agreement that assures a credit line for Hungary in case international money markets freeze. […] We need a precautionary credit line,” said PM Viktor Orbán in an interview with HírTV. 8/3/2012

“I’ve been sitting at my desk for two months, but they are not coming,” PM Orbán said, implying that the delay in the talks is the sole responsibility of the international organizations.

14/11/2011

“We finance ourselves from the market and Hungary is able to stand on its own feet,”

27/4/2012

“The IMF is our friend,”

claimed Péter Szijjártó, spokesman of the prime minister, in an interview on public television, in which he said there is no need for a precautionary credit agreement with the IMF.

PM Orbán told public radio MR1-Kossuth, intending to reject the suggestion that the IMF only wanted to lend to Hungary to influence its economic policy.

Brussels and that it would not change its goals, only discuss the means of reaching them. “Hungary is not withdrawing, suspending or changing anything,” he said. The government will stick to implementing an across-the-board retirement age and believes that the issue of judges’ retirement is not a judicial issue. Orbán said the government had not yielded regarding the salary and oath of the central bank leaders either, and as the European Commission had acknowledged this, these are no longer contentious issues. The requested changes to the Central Bank Act will soon be tabled for debate in parliament, he added.

He added, however, “Hungary is in no immediate need of financing as there’s no risk of default.” He also said he didn’t see the cabinet playing the ‘Turkey card’, meaning stalling talks until the environment gets better, finding the potentiality of a loan deal sufficient to calm markets. The decision by the European Commission to finally give the go-ahead for the talks over an IMF package is clearly good news but the process is likely to be drawn out and assumptions of rapid interest rate cuts are misplaced, London-based emerging markets analysts have said. But they think that the market will still focus on this good news story in the short-term, especially given its prior negative bias. Analysts at Capital Economics said they are “somewhat surprised” that the

CAUTIOUS OPTIMISM Analysts, both in Hungary and abroad, handled the latest developments with care.

Hungary won’t be able to reach an agreement with international lenders as each counterpart has a different stance toward negotiations, economist László Csaba said in a lecture. Csaba, who is a member of a panel of economists that meets regularly with the prime minister, said there is a fundamental difference between the manner in which the EU and the IMF approach such talks. The EU is a community based on values, and recent changes to the structure of European integration mean that any decision will necessarily have political components. The IMF, on the other hand, will seek a deal based on purely economic considerations. “We are in a never-ending debate with the EU, whereas we need to do business with the IMF,” Csaba said.

infringement case was dropped as the government had recently submitted amendments to the disputed central bank law that only covered part of the EC’s concerns. This suggests that the EC “has become more flexible towards providing financial help”. However, there are clearly some grounds for contention; the IMF in particular might demand an end to the “piecemeal austerity measures that we have seen so far”. They have already voiced criticism of the flattax personal income system, which “we estimate has caused Hungary’s budget deficit to widen by 1.5% of GDP”, but the government appears “wedded to this policy and is unlikely to cede to drastic reforms in this area”, Capital Economics said. ■


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Budapest Business Journal | May 04 – May 17

Áder as president No loud gasps of shock were heard when Fidesz nominated its MEP János Áder as its candidate to succeed resigned president Pál Schmitt. Given Orbán’s insistence that the new president be a person of unfailing loyalty, the party had few experienced persons to choose from. Among the 3-4 names on the table, Áder must indeed have appeared the best choice, even though he spent his entire adult life in politics where he built a relatively undistinguished and recently declining career. Disappointing as the selection may be for those who had hoped that Fidesz would nominate someone universally respected, Áder’s even temper may serve as a welcome contrast to Fidesz’s heated style. Still, like Schmitt, he likely won’t be the person to put the brakes on Fidesz when the latter does something blatantly injurious to the rule of law. At best, he could become the successful quiet president that Orbán had intended Schmitt to be. BBJ POLICY SOLUTIONS

The major question was whether Fidesz still needed someone as president who would be loyal to the core, as Schmitt had been, or if it

would be willing to embrace a high-profile, widely respected intellectual who could not be relied on to do the government’s bidding when it comes to unreflectively signing in controversial legislation. The answer to this question would also implicitly reveal whether Fidesz’s restructuring of democracy and state has reached a stage of completion where the governing party can lean back and even risk a more meddlesome president. Whatever Fidesz’s specific plans may be, the answer is that it does not feel confident enough to risk someone who is not a party loyalist. There would have been a number of widely recognized candidates well-disposed towards Fidesz and who would not have quarreled with it save for in the most extreme occasions – the president of the Hungarian Academy of Sciences and former Fidesz minister, József Pálinkás comes to mind – but Fidesz did not dare choose from that pool. The candidate therefore had to satisfy a difficult mix of criteria: he or she had to be widely known and considered a heavyweight, had to be scandal-free and also of ironclad loyalty. At other times, being respected across the political spectrum may be an important criterion, but it was certainly not crucial enough now to be on equal footing with the loyalty requirement.

SLIM SELECTION Very few people meet all these criteria and they belong exclusively to the shrinking group of still active Fidesz politicians from the party’s founding generation, i.e. the President of Parliament, László Kövér, and MEPs József Szájer and János Áder. MEP Tamás Deutsch satisfies all criteria but one: he was never taken seriously and has shredded his remaining reputation with a series of obscene comments that were shocking even within the very debased standards of Hungarian political discourse. Kövér apparently did not want the job, though he too would have been an ill fit: even for a Fidesz politician, he loathes the Socialists to

an unusual degree, and has found that his theoretically impartial position as Speaker does not compel him to moderate the outward expression of his hatred. In his most recent outburst he said it was shameful “that the MPs to my left [where the Socialist parliamentary group sits] may be Members of Parliament at all”. Though he issued an apology of sorts, he refused to deliver it personally. With such a polarizing attitude, Kövér either would

Clearly, his seeming unfriendliness – the press mocked his stern expression by asking government politicians whether they had ever seen him smile – probably disguises a natural shyness, but either way, he lacks Schmitt’s natural gregariousness and the grandfatherly demeanor of Árpád Göncz and Ferenc Mádl. At least in terms of the manner of his appearance, he will be more like László Sólyom, though a difficulty with

racies. Anyone who is successful in such an environment is likely to be rejected by a significant proportion of the public, regardless of personal merits. This is likely to hold for Áder as well; even though opposition voters generally loath him less than most other prominent Fidesz politicians, he would have to make huge efforts to win their sympathies. Incidentally, the apparent irreconcilability of total loyalty to Fidesz and a dis-

POST-TRANSITION POLITICS HAS NOT YET LEARNED TO HANDLE CONFLICT WELL have been compelled to exercise significant restraint – his words and actions as Speaker of Parliament suggest that that might not be possible – or else risk miring the presidency in continuous political battles, which cannot be in Fidesz’s interest. As for Szájer, he still does not exude the authority that the office requires, despite the fact that he has received highly important tasks recently, including drafting Hungary’s new Basic Law.

THE MAN WHO NEVER SMILED With the demanding criteria that framed the selection process, Áder was therefore clearly the most suitable candidate. Due to his reserved, generally calm demeanor, he had been less used in the warfare that is Hungarian politics even before he left for Strasbourg in 2009. His prolonged absence since then has made him an even more unlikely candidate to become the object of opposition attacks. As anticipated, opposition reaction was hostile but muted: Áder does not elicit much emotion, neither in favor nor against.

smiling is where all parallels between them ends.

AN ENTIRELY POLITICAL… Pundits and opposition politicians have made much of the fact that Áder’s entire career was spent in politics and that he never had to prove himself in any environment other than that of Fidesz and politics. While the miniscule number of political survivors since the democratic transition shows that this is anything but an easy or riskfree career, the implicit argument, namely that politics as a vocation is an inferior type of activity, is troubling; unfortunately it is also not without merit. It is true that, elsewhere, party politicians have successfully morphed into distinguished, impartial and widely respected heads of state. It is no coincidence, however, that when it comes to the presidency, Hungary’s post-transition politics has mostly eschewed politicians in favor of scholars, judges, etc. For one, post-transition politics has not yet learned to handle conflict well, and thus it is more acrimonious than in most established democ-

tinguished professional career amplifies why Schmitt seemed so suitable: he was reliably loyal and yet had a respected career as a sports functionary – though for reasons related to his personality rather than his professional achievements, many, even on the conservative side, found him somewhat lightweight.

… AND HARDLY DISTINGUISHED CAREER In spite of his name recognition, Áder’s career is rather undistinguished. He never served in a cabinet position and he was not known for the vocal advocacy of any major public policy issue. During Fidesz’s first term in government he served as the Speaker of Parliament, a position that he handled unspectacularly but without major scandals (the disputes that did arise during his tenure were due to Fidesz’s efforts to curtail the rights of Parliament rather than Áder’s actions.) After the loss of the 2002 election he served as Fidesz’s parliamentary leader. Though that was necessarily a polarizing position, he wasn’t as divisive as János Lázár is now – though Fidesz also had far less power.

www.policysolutions.hu Political Research and Consultancy Institute

By 2006, his star was clearly fading and after the election he declined to lead Fidesz in Parliament. He retreated back into the safety of the parliamentary vice presidency instead, until given the opportunity to go to Brussels, where he reportedly felt very much at home. There were rumors of clashes with Orbán, but nothing was ever aired publicly and the gossip that was revealed was inconsequential. In the runup to the 2006 campaign, for instance, Áder supposedly attacked Orbán heatedly in a closed meeting because he felt that the party’s campaign staff and Orbán’s special access staff were working at cross-purposes; hardly the stuff that legends are made of.

BEYOND THE FRONT LINES Though he is battle-tested, Áder obviously feels more comfortable in a non-divisive position. The presidency is therefore ideal for him, even if it marks the end of his political career at a relatively young age. He may yet surprise the public and the opposition by making an effort to embrace the nonpartisan nature of the office. While that is just one possible scenario, Áder might strive to express the national unity that his new office is supposed to embody. His bland personality and lack of charisma clearly limit his possibilities, but his ability to spend two decades as a Fidesz politician without eliciting visceral hatred from the left shows that he has some promise. And he is clearly far less gaffe-prone than his predecessor, a significant advantage in terms of restoring some of the office’s battered luster. He is very unlikely to surprise in terms of acting as a protector of democracy – also part of his constitutional role – when that requires standing up to Fidesz. In the unlikely case that there will be conflicts, Áder is more likely to relieve the tension by travelling more abroad, as he did in 2009. In the best scenario for Fidesz and himself, he could fulfill the role that had been designated for the discredited Schmitt: a quiet and loyal president, calm enough to stand above opposition attacks. ■


10 1 NewsFocus BBJ

Unions: a labored history While the strongest appeal of International Workers’ Day probably comes from the fact that this is a public holiday in Hungary, opposition parties and civic organizations took advantage to try to persuade people to raise their voices against the government and to fight for labor rights that have recently been cut back in the country’s new Labor Code. Hungarian workers organized into unions celebrated Labor Day for the first time 122 years ago, but the real growth of institutionalized unions started only after World War II. Before the war, total membership in unions was just 100,000, most of them crafts people. From the 1950s, the National Council of Trade Unions (SZOT), elected by a national congress, supervised 19 officially recognized unions, organized according to branch of industry. In theory, trade unions had great power, but they traditionally made little use of them. Unions did have influence over the use of the social and cultural budgets of enterprises and in industrial safety issues. They also controlled the administration of health care and holiday resorts. By the mid-1980s, official trade unions had almost 4.4 million members, approximately 96% of the active workforce. In this period, with the weakening of the regime, trade unions experienced a significant easing of restrictions. Official unions became increasingly outspoken, criticizing such practices as the requirement for overtime work and other austerity measures. More and more workers tried to separate themselves from SZOT. In May 1988, the Democratic Union of Scientific Workers, the first independent trade union established in Eastern Europe since Poland’s Solidarity, was founded. Later that year, the Democratic League of Independent Trade Unions (LIGA) was established. The same year, brief strikes took place, involving workers in officially recognized unions (under

socialism, going on strike was prohibited). With the change of regime, the National Confederation of Hungarian Trade Unions (MSzOSz), today one of the major trade union organizations in Hungary, was formed in 1990. (MSzOSz primarily represents employees working in the public sector. Among its members are public service employees, media and education unions.) In October of the same year, the “taxi blockade” broke out, triggered by a 67% increase in the price of gasoline. Four days after its start, the National Interest Reconciliation Council reached a tripartite agreement on ending the dispute. In April 1992, Parliament passed the new Labor Code (Act 22/1992). LIGA claimed that the law split the rights of interest representations between trade unions and works councils. From the mid-1990s until the country’s EU accession, the number of strikes organized by unions representing railway workers, firefighters and health care employees increased. Trade unions were often criticized for not properly representing the interest of their workers or for their sometimes quite obvious inclination towards certain political parties. (For example, between 1994 and 1998, 14 members of MSzOSz became politicians of the Hungarian Socialist Party). Most recently, union representatives have been involved in the creation of new legislation, including that of the new Labor Code. Yet many have expressed their disapproval about changes that will limit their scope as well. ■

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Budapest Business Journal | May 04 – May 17

Hold on, Feri!

at the sány received a warm welcome Ex-Prime Minister Ferenc Gyurc ion. alit Co tic new party, the Democra Worker’s Day ceremony of his ing err ref e!” read one of the placards, “Hold on, Feri, we are on your sid n tte in sány plagiarized his thesis wri to the recent claim that Gyurc e is just p with his supporters: his cas 1984. The politician kept ste nt”, he me ern ving a “blackguard gov another proof of Hungary ha ion on sat o held a roundtable conver said. DK’s deputy presidents als ngary’s d the party wants to restore Hu May 1 where Tamás Bauer sai dly er to establish a corporate-frien former constitution and, in ord ed. lish t tax system must be abo economic environment, the fla

NOTHING POSITIVE

Far-right parliamentary party Jobbik celebrated International Workers’ Day, which is also the anniversary of Hungary joining the EU in 2004, in a un ique way. The two depu ty leaders of the party, Levente Murányi and Előd Novák remov ed the European Union flag from the off ice block of parliamenta ry parties to protest against the Comm unity that “offers nothing positive to the country”. Jobbik justified its action by referring to an EU regulation stating that an EU flag mu st be placed on every pu blic institution except for Parliament. Ho wever, Jobbik could not go for the big fish, since the EU flag at Pa rliament had temporarily been replaced by the Chinese one, due to a visiting delegation fro m that country. Novák said at the event that if Jobbik enters gove rnment, it would make it possible to hold a referendum to decide wh ether Hungary should remain an EU me mber.


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Budapest Business Journal | May 04 – May 17

! S N O I N U E D A R T INTO

monstration de unions held a joint de tra r ajo m s, rce fo ed ifi nfederation In the name of un mous Trade Unions Co no to Au e Th t. ge sli ns (ÉszT), in Budapest’s Váro Intellectual Professio r fo ns io Un e ad Tr of n d the (AszSz), the Associatio e Unions (MszOSz) an ad Tr n ia ar ng Hu of n atio ter joined by the the National Confeder Unions (SzEF) were la e ad Tr of n io at er op le salaries. Forum for the Co rkplaces and reasonab wo fe sa r fo ll ca to t president Solidarity Movemen event, where MSzOSz e th of to ot m e th s don’t “Into trade unions!” wa get turned out, if you to nt wa t n’ do u yo “If me uneducated Péter Pataky said that your children to beco nt wa n’t do u yo if s, want to earn les e and find us!” industrial slaves, com

THE BETRAYED GENERATION

WORK AND SALARIES Attila Mesterházy, the pre sident of the socialist MS zP held his speech in Városlig et in front of a few hundred attentive people –the res t hanging around seeme d more interested in picnic king in the early summer su n than paying attention to the leader of a party that has seen better days. Howeve r, Mesterházy did his best to spice up his audience an d defined Hungary’s curre nt leaders as “the governm ent of taxes” as they tax ev en the taxes. The burdens on people had been increased only as a result of gove rnance failures, Mesterhá zy said, adding that the MS zP, which is the party of people living from their ow n work and salaries, would immediately restore the rights of trade unions tha t have been cut by the recen tly introduced Labor Code .

The message of the gre en-liberal parliamentary party LMP was clear at their event held in Városliget: at tim es when the unemployment rate ha s reached a two-year pe ak, there is nothing to celebrate on Worker’s Day. The speech es also had a special focus on the yo uth. According to LMP sp okeswoman Katalin Csiba, “the betra yed youth” cannot estab lish families in such an unpredictable eco nomic and regulatory en vironment. About the increasing amou nt of migration, MP Aran ka Széll said that the real tragedy is no t the fact that young peop le go abroad to work, but that the sta te of the country is so po or it cannot attract these people back to Hungary.

ÁV, ZsV


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Software-as-a-Service

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SPECIAL REPORT

Residential property developers call for lower VAT

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PARTNER WATCH

‘A’ category office buildings

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TRENDS

Why invest in Hungary? For companies wishing to invest in Europe, now is as good a time as ever. BBJ ZSÓFIA VÉGH

If you are an investor eagerly scanning the European map looking for a place to put your money, this is your lucky day. Point your finger anywhere you like and you cannot go wrong. The recession has hit the Europe indiscriminately and hard, with no country spared. Good for you! Economies throughout the Continent (and off it as well) are doing their very best to lure you. Consider Ireland: the greenest spot in Europe, thriving before 2008, is now striving to get investors back. The country offers exceptionally favorable tax breaks and aid for foreigners setting up a business there, many of them with a no-refund clause. Prospective investors have access to a highly skilled workforce and valuable plots, both at low cost. An IMF agreement and a government that is committed to honoring it rules out the chance of anything going awry; you can establish a business there basically risk-free. Hungary has the same to offer in a continental setting. Located in the heart of Europe, this small country has excellent infrastructure – much better than many of its neighbors. It also has abundant skilled labor willing to work for low wages and a government equally committed. (True enough, Hungary does not yet have an IMF deal, but it’s just a matter of time.) To deliver on its promises to put the country back on track, the government is offering an attractive incentive package,

starting with non-refundable cash grants, available for investments exceeding €10 million, or those between €10-€25 million. These have been popular enough: in the past two years, 28 companies have applied for €3.71 billion overall, according to the Investing Guide Hungary 2012, an annual publication on the investment and business environment in Hungary by PricewaterhouseCoopers (PwC). Yet cash grants are not necessarily among the top considerations for firms when choosing a site for investment, they are rather mid-ranking, along with tax incentives, claims Tamás Lőcsei, partner at PwC. Money does matter though. Cash subsidies get a more defined role in regional comparison. Unlike Poland, which has already handed out all of the state aid available until the end of the 2013 budget period and is now forced to look for other tools, Hungary still has allowances available. What tops the list then? It depends. For car manufacturers and electronics makers, a central location is a plus. For logistics firms, infrastructure can be a dealmaker. Obviously, the recent shutdown of national airline Malév, austerity measures and transaction taxes don’t help. Yet what counts most, regardless of industry, is that the government sticks to what it has promised, Lőcsei explained. “Investors care nothing about the content or the inclination of the government. What they need is an administration that keeps its word.” In this respect, Lőcsei claimed, the country places well. There are plenty of other areas, however, where there is room for improvement. Increasing business sensitivity is one, especially in the

countryside, where towns and town leaders are often inexperienced in doing business with, say, Korean investors. Not all mayors can be expected to be able to lead a tough business negotiation. So the Hungarian Investment and Trade Agency (HITA) has launched a ‘Program for investment-friendly townships’, a training series to teach future stakeholders how to market their assets. Participants are taught what a difference a proper greeting or a tour makes or how to argue to win over a hesitant candidate. “Even small things count,” explained Katalin Németh, head of the relevant department at HITA. “Covering the dirt road with gravel to make it easier to walk on, or setting up a tent in 35°C in the middle of the plain during the tour will make a better impression.” Once the program is completed, towns will be able to devise their own investment-attracting strategies. The number of attendants for these training programs is

limited. “With more than 30 people, it would be difficult to teach negotiation or business communication skills effectively,” said Németh. As a result, spots for upcoming courses are taken quickly, now that town leaders have realized what a course like this can earn them. Whether it is a convincing financial aid package, a town beefed up with effective marketing tools or the constant search for new contacts by HITA, PwC and other parties, apparently it has had an effect. In the past year, the country has seen a 24% rise in investor interest. (Sluggish FDI inflow is one if the major criticisms expressed by the IMF toward Hungary.) Greenfield projects have been less sought-after but there are smaller-scale projects by family-run companies that don’t apply for loans. Among the most notable is Rehau Automotive’s €60 million investment in Győr. The family-led German car parts business has been present in Hungary for five years

and has decided to expand as a result of a rise in export demand. Rehau will build a 26,000sqm plant in the Győr Industrial Park (to be finished in 2013), creating 200 jobs in the region. “In Győr, we have everything we need to operate profitably, from favorable subsidies to an expert workforce,” said Markus Grundmann, the group’s managing director. Another, somewhat bigger German company is also developing. The Bosch Group is investing in several new projects in Hungary, such as a €20 million Bosch Engineering Center in Budapest. The company is not exactly a newcomer – it opened its first unit in the country in 1899 – therefore this expansion counts more as a reinvestment. Globally, 40% of investment comes from reinvestment. (No such figure is available for Hungary.) So it is no coincidence that in early 2012, HITA announced Reinvest, a program aimed at assessing company satisfaction on the investment environment,

regulations, and similar factors. A clever move indeed, if done right: with the knowledge gained, HITA can learn firms’ investment plans and help them to expand. For economists, increasing a country’s FDI is similar to having a growing piggy bank, but it sounds more abstract to locals, unless it translates into something tangible, like jobs. Many investment subsidies (nonrefundable cash in particular) are tied to job creation in Hungary. This is the way by which locals can most benefit from foreign investment. The number of directly created jobs is limited but the chance to become a supplier is always there. These have to go through a fairly strict selection process that often ends with a foreigner winning the order. In several fields, fortunately, this trend is changing. General Motors, for instance, hired six Hungarian suppliers from a list of several hundred last year. It sounds few at first, but the automaker was satisfied with the result. “It expected to cooperate with one or two at best,” György Kerekes, deputy director of HITA explained. He said that often it is not the product quality or timeliness that makes Hungarian candidates fail, but their mindset: “These firms want 100% commitment from suppliers, as if they were a branch of the parent company.” (In some companies’ defense, it is difficult to commit 100% if, for example, some supermarket chains pay only after several months’ delay.) For all the negative news you may have heard, investing in Europe is still worth it. Apparently, Hungary is as good a spot as any other country, if not better. So why not invest in Hungary? ■


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Budapest Business Journal | May 04 – May 17

Set for something new While still lacking a comprehensive R&D strategy, some recent modifications to the Innovation Act show that the Hungarian government has probably not forgotten about its EU-imposed duty to increase R&D activity by 150% by the end of the decade. What does Hungary need to do to reach the targets and what do companies hope for? BBJ ÁGNES VINKOVITS

“The secret of Hungary’s reform and its upcoming economic success resides in this story,” Prime Minister Viktor Orbán said at the inauguration ceremony of pharmaceutical company Richter Gedeon’s new biotechnology plant in Debre-

cen on April 20. The HUF 25 billion investment, which creates 120 new workplaces, might be a sign of Hungarian R&D finally finding its path to glory, but the picture is somewhat more complex. Currently, Hungary spends 1.16% of its GDP on R&D, a proportion that, in European Union terms, puts the country into a group of moderate innovators, together with countries such as Spain, Greece, Slovakia and Poland, meaning that its innovation performance is well below the EU27 average of 2%. However, according to the EU’s 2020 strategy, Hungary, like all member states, is targeted to increase its GDP-proportionate R&D expenditures to 1.8% by the end of the decade. “To reach the 2020 target, the government has to hurry up in the coming years,” Csaba Márkus, head of the R&D and government incentives division of Deloitte told the Budapest Business Journal. To stay on schedule, a comprehensive and long-term

R&D strategy that is able to give Hungarian SMEs a start has to be established by the beginning of 2014 at the latest, the expert said, explaining that without a predictable system of incentives, companies might choose other countries for their R&D investments. TENDERS NOT ENOUGH While the government promises to present the draft of an R&D strategy very soon, some modifications to the Innovation Act came into effect in January this year and have already started to rearrange the R&D budget. For example, led by the aim of putting an end to extensive abuses, the possibility for companies to reduce their innovation contributions by the direct costs of their R&D activity has been abolished, with the money saved by this to be made available via tenders. While the result of this step and companies’ willingness to apply for tenders can only be analyzed in a few months’ time, making some labor requirements

more flexible and ordering that the headcount of a project must be maintained for only one year after the work is done are widely considered on the market a step in the right direction. This change might be particularly favorable for SMEs, mostly in the field of infocommunication, that have conducted increasing R&D activity since 2007; by 2010, their R&D headcount almost reached the number of people working on pharmaceutical innovations. Still, IT companies’ R&D expenditures per capita remains far below the money spent in the drug sector, which provides more than one-third of Hungary’s total R&D expenditure of HUF 300 billion. Domestic pharmaceutical giant Richter alone contributed HUF 28 billion to this amount in 2011. And despite the above-mentioned nonnormative subsidies available, what Richter is really hoping for is a normative subsidy system. “It is nice that the direct costs of R&D activity are tax

deductible, but when the burdens on the sector increase significantly year after year, such refunds are only enough to keep the system working somehow, but are far too little to be a catalyst,” Zsuzsa Beke, head of public relations and public affairs at the company told the BBJ. “Only normative subsidies together with a deliberately built tender system could guarantee predictability and serve as real incentives,” she pointed out. In light of the recently announced Széll Kálmán Plan 2.0, the pharmaceutical sector’s need for a normative subsidy system is only increasing. For 2012, the plan targets HUF 10 billion in savings from another review of the drug subsidy system, which will be followed by another whopping HUF 40 billion in 2013. The results of these cuts, together with the restrictions introduced in the first Széll Kálmán Plan a year ago, which ordered a onethird reduction of the HUF 343 billion drugs budget, are unforeseeable for now.

Due to the restrictions, Richter has already abandoned the development of six oncological and cardiological medicines in 2011. However, when it comes to R&D, the company is still somewhat optimistic. “There is a dialogue between the state and the big companies and this we appreciate,” Beke said, adding that many of their suggestions appeared in the recent modification of the Innovation Act. “This is a good sign.” Still, giving more money in a more reasonable way is not enough. As a result of the weakening quality of natural sciences education, finding a suitable workforce might soon be a problem for companies engaged in R&D. “Training a career-starter to meet our professional requirements often takes one year and this is only getting worse,” Beke said, adding that if the government fails to reform the education system, the sector will be in trouble regarding the supply of new professionals. ■

Digital TV in Hungary: many unanswered questions

Perhaps the most important of these was when the country will finally complete the transition to digital broadcasting. According to Antenna Hungária’s CEO Jean-Francois Fenech, it could take place in six or 18 months time; in truth, no one really knows. What is clear, however, is that the absence of an ASO date is creating uncertainty and indeed having a detrimental effect on the industry. So, too, is the controversial telco tax, which delegates

from such leading companies as Antenna Hungária, Magyar Telekom and UPC Hungary all touched upon to some degree. Yet there was also a lot of good to report about the Hungarian digital TV industry. In the DTT sector, for instance, the FTA service MinDig TV is now received in more than 300,000 homes, while its pay counterpart MinDig TV Extra already has more than 60,000 subscribers. Antenna Hungária’s aim is to have one million homes receiving its DTT, and despite the already saturated nature of the Hungarian pay-TV market that goal looks achievable. Magyar Telekom is, meanwhile, making significant strides in its roll-out of interactive services, evidenced by the early success of the DTH platform Interactive Sat TV last December. Without going into details, Balazs Birck, head of the innovation and product development department at the com-

NUMBER OF HOUSEHOLDS USING MINDIG TV

NUMBER OF MINDIG TV EXTRA SUBSCRIBERS

Source: Antenna Hungária

The latest in Broadband TV News’ series of business breakfasts, organized jointly with Telenor Satellite Broadcasting and held in Budapest on April 19, left many questions about the Hungarian digital TV scene still unanswered.

pany, revealed that it would be launching multi-screen services this year. Hungary has been a key market for both UPC’s cable and DTH operations for a number of years and continues to be so. Although Betzalel Kenigsztein, the CEO of UPC Hungary, was unable to shed any light on when Horizon will make its debut

in the country, he emphasized that triple play was the key to success for the operator. There is demand in the market for higher internet access speeds and the operator undertook a trial that attained 1 Gbps only a couple of months ago. Magnus Ternsjö, MD of UPC Broadband’s DTH business said that it sees itself

as a regional player in the sector, being present in Hungary, Czech Republic, Romania and Slovakia. Citing figures produced by the regulator NMHH, he added that its share of the DTH market in Hungary was growing month by month. Hungary is also an important market for the content sector, being the headquar-

ters of Chello Central Europe. Levente Málnay, the company’s CEO, said that high multichannel penetration in Hungary showed digitalization was “a done deal” and discussed in some detail the challenges a media company faces in the non-linear world. Chris Dziadul, Broadband TV News


2 BusinessTrends 15

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Budapest Business Journal | May 04 – May 17

Software-as-a-Service

Sustainability

Office space

Interest in the Cloud blooming

Legislation causing irreversible changes

New generation needs more space

2014

83%

THE YEAR WHEN MOBILE INTERNET OVERTAKES FIXED-LINE

Imagine an office without optical or phone cables to trip over and no more crashing of local servers. While mobile voice services have successfully challenged fixed-line voice among businesses, mobile internet is also taking over in the private sector as a substitute for cables. According to communications authority data, 63% of mobile internet users opt for this service exclusively for internet access. Moreover, 22% are using it on desktop PCs and 8% on a PC and a mobile device. The two trends have natural consequences on the use of IT infrastructure in the office too because they produced bundled services that combine mobile telecommunication with IT services and even data center access. The natural area where these services meet is the cloud, according to Telenor, which has just launched a suite of productivity-enhancing services for businesses, including ‘Webiroda’, a combination of cost-effective messaging, collaboration and communication services based on Microsoft technology, delivered securely from the cloud by CE On-Demand. Interest in cloud services is certainly on the rise, successfully overcoming fears of a lack of security and bringing companies significant cost savings. The 2,500 small and home offices and SMEs testing Telenor’s service registered an average 50% reduction in IT spending; Telenor itself predicts that IT costs could be reduced by 65% in three years’ time. Research group IDC predicts the compound The market that started out annual growth rate (CAGR) from a size of $17.4 billion in of public cloud services will 2009 would reach $44.2 billion be 27.6% by 2015, rising by 2013, according to IDC’s from $21.5 bln to $72.9 bln predictions at the time. It also globally. Meanwhile, the forecasted a 10% share for cloud global IT market expects of the total IT market by 2013, growing six times as much as a 6.7% CAGR in the same traditional IT services. period. In Hungary, total income from cloud services was HUF 1.6 bln in 2010, according to IDC. AJM

While sustainability is the highest priority among strategic issues in the office real estate market in Europe according to most professionals, the industry adapts to it at different speeds, according to Jones Lang LaSalle’s Offices 2020 report. While environmental change, cost control and ethical business practices are all part of the equation, legislation is the real gamechanger forcing European occupiers and investors to adapt their office buildings. The EU requires all new buildings to be nearly zero-energy by 2020, but there is a growing divergence across different buildings and countries. This gap is widening and will increase over the next decade. New legislation is driving the evolution of best practices in countries such as France, Germany and the UK, but economic constraints are impacting overall progress in other countries. Consequently, the pricing gap is expected to widen between sustainable and nonsustainable assets. Occupiers will also need to remain watchful of sustainability when evaluating their real estate requirements. While older, less sustainable buildings may offer lower rental costs, any savings are likely to be offset by higher operating costs given the trend towards rising energy prices. “Unfortunately, regulation in Hungary still does not pay enough attention to sustainability objectives. The energy certificate required by the European Union has been compulsory in Hungary from January 1, CoreNet Global, an international 2012, but this alone will not association of workplace and be sufficient in the future. corporate real estate executives, Professional organizations and Jones Lang LaSalle surveyed have been dealing with more than 2,300 firms on proposals for further four continents for the first development for a long time in 2007. Together, they learned that a large majority of time, which hopefully will companies around the world view lead to a change,” noted sustainability as critical to their Tuza Rita, head of research business and are willing to pay a at Jones Lang LaSalle premium to help their companies Hungary. AJM become more sustainable.

Cloud computing in 2010

Replacement rates: potential for refurbishment

10%

Percent of on-premise spending replaced by cloud computing

79%

How critical is sustainability? 2007

Actual market share in 2009 ($bln) Actual market share in 2010 ($bln)

Source: Deloitte

Source: JonesLangLaSalle

Source: CoreNet/JonesLangLaSalle

OF DESK SPACE WILL BE NEEDED PER PERSON

Alternative workplace strategies, a concept that has been around from the early 1990s, are used by an increasing number of companies to satisfy employee demand, Colliers reports in its latest white paper on the so-called Generation Y. It explores how the next generation will work and how population trends will impact office space demand across Europe. An increasingly mobile workforce, growing access to high-speed internet, and a continuous drop in ICT prices are trends that suggest we face a big decline in the use of traditional office space, which will have to be far more flexible to meet the needs of companies of the future. In a research project conducted by Johnson Controls among Generation Y staff, it turned out there was a preference for offices that support collaborating, provide common areas and the latest IT. Staff would rather have their own desks than share, however, and want private desk-space of at least 12 m3. So it seems that, contrary to preconceptions, even though the main office-based population is set to shrink by almost 25%, the increase in the amount of space per person (up from 8-9 m3) equates to a 25-33% increase in the volume of space required – thus mitigating the erosion in demand. From a corporate perspective, However, Colliers “space optimization” (79%) believes there will be and “cost savings” (74%) a great deal of change are the main reasons for in how office space is companies to implement used and configured. alternative workplace strategies. There will also be Furthermore, only 55% of offices are utilized at a satisfactory level, increasing pressure to according to research produced utilize technology and by the New Ways of Working other flexible solutions Benchmarking Study of 2010. to cut regular rent demand. AJM

55%

Alternative work approaches: business drivers 2008 (%)

Space optimization/Increased capacity Cost savings Employee work/life balance Employee attraction/retention Employee productivity

Market share prediction for 2013 ($bln) Market share prediction for 2015 ($bln) Source: IDC

12m

3

OF PROFESSIONALS BELIEVE SUSTAINABILITY A TOP PRIORITY

Source: New Ways Of Working

Alternative work approaches: business drivers 2009

Employee work/life balance Employee attraction/retention Cost savings Space optimization Business agility


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SpecialReport

Residential property developers The government has no housing policy to speak of, according to residential property developers. BBJ GABRIELLA LOVAS

On the demand side of the housing market, household income and high credit costs remain strong limitations to growth. The unemployment rate has remained high despite the government’s attempts to boost the labor market, while household income has increased only slightly as a result of the reduction of personal income tax rates. The early mortgage repayment scheme has also hit the already shrinking retail credit market hard. Market players are now urging the government to introduce a fair, incentivebased package of housing policy measures to boost demand. The supply side is no less gloomy. The construction of housing units in 2011 is only a fraction of the peak value recorded in 2004. Last year 12,655 new housing units were completed and received occupation permits in Hungary. “With the big developments coming to a halt in the wake of the economic crisis, there is a shift from newly built flats to used flats, with 96% of all transactions happening in the latter market,” Attila Déry, an analyst at real estate company Otthon Centrum told the Budapest Business Journal. At the end of 2011, the average number of flats per project was only 22, compared to 60 flats at the end of 2007. With such a lack in demand, developers are not willing to start bigger projects, although the market for used flats is expected to pick up in 2013, Déry pointed out. Within the developments handed over in 2011, there are only five projects in Budapest with more than 100 apartments and four with more than 200 apartments, Déry said. This indicates just how risk avers developers have grown post-crisis.

On the upside, the government has made available a non-refundable subsidy of HUF 800,000- HUF 2.5 million for the purchase of new flats, as well as subsidized forint loans, as of this year, Déry said. However, banks are not willing to provide these loans at the required rates. The new subsidy system is clearly not working in its present form and currently has zero effect on the housing market. TIME TO BUY? According to the FHB Housing Price Index, a slight drop of 1.9%, or 5.5% in real terms, was recorded in housing prices in 2011, compared to the previous year. The decrease in the level of housing prices has slowed over the last two years, FHB noted. Housing prices fell more than FHB’s previous expectations due to the unfavorable macroeconomic and financial environment and previously unexpected circumstances, especially the early repayments of FX mortgage loans at undermarket rates. Because of the scheme, households partially spent their accumulated savings, including those set aside to purchase homes, on the repayment of loans, and sellers were prepared to accept lower prices for their real estate due to the fixed deadline. NO TURNAROUND IN 2012 Market players expect no major turnaround on Hungary’s residential property market in 2012. The unstable international environment, budget measures and further deterioration of lending conditions weaken the prospects of recovery, FHB pointed out. Growth forecasts anticipating stagnation indicate a constantly low housing market demand. Housing prices are expected to stagnate in 2012, according to FHB. The annual number of completed housing units in 2012 will not exceed the value recorded in 2011. No improvement can be expected regarding borrowing either. ■

TIBOR FÖLDI CEO of Cordia Zrt

TAMIR KISHON regional director of the Nanette Real Estate Group The main challenge on Hungary’s residential property market is how to develop affordable residential units when construction costs have not dropped in line with home prices. Most developers are waiting for a demand-driven market they believe will come soon because of the drastic drop in new constructions in the past few years. The government does not have a housing policy to speak of, experts claim. The solution to injecting new life into this sector is to make a much lower VAT rate available for the purchase of newly built apartments and to bring back subsidized loans. Demand and need are very high, only the financing capability is weak. Buyers are price-sensitive, so no excess square meters are allowed in units in order to minimize price without compromising the quality of construction and service, good location and good interior design. Currently, there is demand for small units for investment purposes. Because of the uncertainty that government policies toward banks have created, people are looking for alternatives to bank deposits. Small units, which can be rented out easily, are highly popular. A good quality project at a good location can be successful if the price range of the apartments is in tune with the particular market segment. No real project financing is available, as equity demands are up to 50%, with 40% pre-sale requirements. We have two completed projects and two projects under construction. In the first quarter of 2012, we sold 104 units. We plan to continue our City Home project by opening new phases and entering into the social apartment building sub-sector by developing a project in the 9th district.

The main challenges on the market are low demand, the heavy regulatory burden and the lack of financing. The residential market is stabilizing, with the number of flats sold slowly increasing from 1,900 in 2009 to 2,700 in 2011. We are past the worst period, but I would not compare these numbers to the peak of 11,000 flats sold in Budapest in 2005 as the business environment was completely different back then. Demand remains weak. Only one-third of the estimated sustainable fundamental demand of 7,000 new flats per year was sold last year. Household incomes are low and Hungarians are uncertain about their future, thus reluctant to take out new loans. A positive development is that, lately, new forint-based long-term loans with fixed installments have been introduced. The problem is that with a rising central bank base rate, these loans have become quite expensive, with interest rates of around 10%. Of the 2,700 new flats sold, Cordia’s and Nanette’s sales accounted for about 150-160 flats each, a combined 15% of the total. Currently, there are 328 developments in Budapest, mainly smaller projects with 15-20 flats each. On the supply side, the main problem is regulation, which has unnecessarily increased developers’ burdens as well as the risks and costs of projects. For instance, a developer with a project in downtown Budapest has to contact every single flat owner in the neighboring buildings to renounce their right to appeal, which can take several months. Project developers can also no longer reclaim the VAT on construction costs outside the immediate plot, such as for footpaths and roads. The government could provide a lifeline to the residential property market in a relatively cheap and simple way. Our proposal would somewhat decrease budget revenues, but only in the short-term. In 2011, the combined tax revenues from the sale of the 2,700 flats reached HUF 28 billion. If the current 27% VAT rate was decreased to 10%, developers would need to sell just 1,700 more flats to ensure the same amount of budget revenues, which is not at all unachievable. The VAT rate would stay at this level for a period of only five years, after which it would gradually rise


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Budapest Business Journal | May 04 – May 17

rs call for lower VAT MARKUS NEURAUTER

managing director of real estate company Raiffeisen Evolution Project Development

Residential markets in Central and Eastern Europe, as well as in Southeast Europe, are still facing a rough time. Although in 2011 the markets improved moderately, there hasn’t been much growth lately. The markets in the region differ in their economic growth and development. I certainly see demand, but there are problems to be solved on both the developer and the buyer side. Residential property financing is available in the region, but the conditions are tough as the requirements for equity are high. I expect that the residential segment will continue to slightly increase in countries such as Czech Republic and Poland. Overall, there is a potential for high-quality residential developments. Although destinations such as Budapest, Bucharest and Sofia still suffer from the economic uncertainty and financing situation of potential buyers, we expect to see some positive improvements within the coming months. Hungary is facing a hard time, both politically and economically. In 2011, economic growth was only 1.4 %, which is very low compared to, for instance, the Baltic markets. We hope that the market will pick up again, but I personally think that it will take more time until the recovery will be complete. Comparing the 2005 with 2012, dwelling completions in Budapest have dropped 50% to 6,000 units. Raiffeisen Evolution Project Development is headquartered in Vienna, but it has developments in Austria and the CEE region. The company’s portfolio primarily comprises residential and office buildings. In addition, Raiffeisen Evolution builds hotels, shopping malls, retail centers and mixed-use developments. The overall value of the current 32 projects is €1 billion. Over 75% of total investment costs are related to developments in the CEE region. In Austria, Raiffeisen Evolution has 11 projects with a gross floor area of almost 120,000sqm, of which more than 60% are in the residential sector. Currently, 483 apartments are either under construction or in development.

[ EXPERT OPINION ]

GRZEGORZ STRUTYNSKI Managing Director SKANSKA

Skanska Property Hungary’s managing director Grzegorz Strutynski makes the business case for sustainable solutions Our ongoing office development, Green House, is Hungary’s first and only LEED Platinum pre-certified building. In the operational phase it will use 30% less energy and 64% less potable water than other category ‘A’ office buildings that only meet local regulations with regards to their measured energy- and water efficiency. We just laid the corner stone of the building in May 2011, but the next milestone in the project’s lifecycle is already around the corner; 26 June 2012 marks the topping out the building, and it signifies that we have reached the highest point of the structure. With only eight months until the building's handover in December, it is time to go beyond a development update and also reflect on the Hungarian market’s reaction to the Green House from a business perspective.

In the first quarter of 2012 two prestigious international companies chose Green House as their future office. Both ABB (our technology partner and a global leader in power and automation) and AVIS Budget Group Business Support Center Ltd. share our unwavering dedication to sustainability and efficiency. Green House is a real manifestation of both qualities, where improved performance is combined with the lowest possible environmental impact. These two lease contracts are a definite

positive sign on an office market where preleases in speculatively developed buildings are rarely seen. Green House is now 45% occupied, demonstrating that great quality still generates demand in the market. Great testimonials from both ABB Hungary and AVIS Budget Group Business Support Center indicate that our delivered green promise was a decisive factor in their final

decision, but they also reassure us that the road towards sustainable solutions that we have been taking in Hungary for the last 25 years is the right one.

www.skanska.hu

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

Green Promise. Delivered.


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‘A’ category: room for improvement While the office market in general is still in poor condition, there is room for improvement in the upper segments. BBJ BBJ

The Budapest office market continued to see poor figures in the first quarter of the year. Only one new delivery was registered in downtown Budapest, and total demand was 53,000sqm, only twothirds of that from a year ago, the Conciliation Forum of the Budapest Property Consultants’ quarterly report shows. Vacancy rate was 20.4%, which marks a 1.2 percentage point increase from the previous quarter. According to industry experts, development activity will remain moderate in the next three to four years, and the lack of financing will still characterize the market.

Despite the difficult market conditions and gloomy outlooks, there are developers who still see opportunities. HB Reavis Group, an international commercial property developer with a Slovak background, thinks the time is right to expand in Hungary. The company is not a newcomer to interest in the local market: it planned several transactions just before the crisis hit in 2008, but none of those deals took off. But now the company seems to have found a market niche it thinks worth developing. “The Hungarian market has always been and will always be strategically important for us,” Zoltán Radnóty, HB Reavis Group’s country head for Hungary told the Budapest Business Journal. “Therefore we have accelerated negotiations, and we intend to announce our first project in Budapest soon. Yet, in these days you need to be very selective, and only very focused projects targeting a

well-defined circle of tenants can be successful.” According to Radnóty, an increasing portion of the office stock on the market is getting out-dated, and the lack of new buildings will further deteriorate this ratio in the coming two years. “Buildings that were built up to the mid-’90s did not meet international standards even at that time. Back then, the demand was so immense that basically any type of office building in a good location was leased quickly,” Radnóty explained. Location, location, location – that has been the mantra of developers for years. But now, while location is still among the key factors when it comes to developing new office projects, other factors need careful consideration too. “I see demand only for office space that was genuinely designed and built for that purpose; such buildings utilize all parameters to the

maximum extent, respect the tenants’ infrastructure needs and provide them with a generous working environment,” Radnóty said. An increasing number of tenants start to recognize the fact that paying even a singledigit square meter rent may not be the one and only factor. “For example, tenants who pay single digit rents for 500-800sqm of office space in inefficient, outdated office buildings are greatly surprised when they are confronted with the fact that in a modern, well-designed office scheme they would need 10-15% less space – in extra, they gain a brand new office giving more comfort. Consequently, the total leasing costs may even be significantly lower due to the savings on the rented space, even if the new building is more expensive per square meter. Certainly, a further substantial cost advantage comes with the lower service fee in the case of new green buildings,” Radnóty claimed.

NEW GENERATION With Generation Y (those born after the early 1980s) appearing in the business life, demands will change. A recent report issued by Colliers International says that while demand for office space will stay at a similar level to today in the next 20 years, we will see a great deal of change in how office space is used and configured. Given the effect on the bottom line of reducing rental outgoings, there will be increasing pressure to utilize technology and other flexible office solutions to cut the regular rent demand whilst keeping core staff happy. “Amidst ever more competitive labor markets, having the right workplace strategy will be key to a company’s future success,” Kata Mazsaroff, head of tenant representation at Colliers International said. For developers and landlords, having the right type of space which can accommodate changing

layouts and needs and provide the sustainable building solutions which occupiers and investors are now demanding will be paramount to the success of an office portfolio. The office market in Western Europe has been ready to serve the needs of Generation Y – Hungary is somewhat lagging behind, Ottó Feuertag, managing director of Europa Design Office Kft told the BBJ. “In Hungary, such offers usually cover facilities that support physical activities – such as bicycle storage, changing rooms or showers,” Feuertag said. According to him, a modern ‘A’ category office, apart from being built in an excellent location, needs to sport high quality and convenient facilities in the surrounding area. He says that is why an ‘A’ category office sells better in an environment which is specifically designed for business purposes than in, say, downtown Budapest. ■

[ EXPERT OPINION ]

KATALIN SERMER Country Manager S IMMO Hungary Kft.

S IMMO Hungary Kft. is a subsidiary of S IMMO AG of Vienna and has been operating on the domestic market for the past ten years. S IMMO Hungary focuses on asset management and letting activities. The company’s Hungarian portfolio consists of seven prime office complexes and the recently renovated building of the Budapest Marriott Hotel. S IMMO Hungary manages properties of nearly 100,000sqm with around 105 tenants; most of them world famous brands. All of the office properties are centrally located on one side of the Danube or the other.

The Company’s premium quality properties in Budapest are: • Blue Cube Office Building • Buda Center • City Center • Maros Utca Business Center • Pódium Office Building • River Estates • Twin Center • Budapest Marriott Hotel “The success of S IMMO Hungary Kft. is driven by the high quality of our real estate portfolio as well as the skills and motivation of the team. Our asset managers are experts of their areas and we provide excellent services for our tenants. Our first ten years showed that companies look for a transparent and trustworthy partner regarding the office issues; this is the secret of our success,” said Katalin Sermer, Country Manager. “Flexibility and dynamism are important for our tenants, and the S IMMO brand is a guarantee that our partners receive top services in all our office complexes,” added Sermer. The future plans of the company include active asset management in order to further increase the occupancy rate, refurbishment and rebranding of some buildings, strengthening relations with existing partners and building contact with future tenants as well.

“Budapest has a very good position in the region and plays a significant role in Central and Eastern Europe. This is why we are very happy that we can celebrate our tenth anniversary. We would like to take the opportunity to thank all our tenants and partners in the past decade,” said Sermer. Sustainability is also important for the Company. “As a real estate investor, we also play an important economic and social role in the market. We actively shape the environment in which we operate through a wide range of projects and individual measures in order to keep our commitment towards good corporate citizenship,” Sermer said. S IMMO AG – FIRST REAL ESTATE INVESTMENT COMPANY IN AUSTRIA AND THE CEE REGION S IMMO AG, Austria’s first property investment company is present in Austria, Germany and in six other countries in the CEE and SEE region. It has been listed on the Vienna Stock Exchange for 25 years. Furthermore, core shareholders Erste Group and Vienna Insurance Group are well-known market players of the European finance sector. The business and partner networks of its shareholders and local partners ensure the company’s pro-

fessional expertise in its markets. In the past 25 years the company has extended its portfolio intensively and nowadays it manages a widely diversified range of residential, office, business and hotel properties. The company invests in high-quality real estate in Austria, Bulgaria, Croatia, Czech Republic, Germany, Hungary, Romania and Slovakia. In these countries S IMMO currently handles around 240 properties with a total area of roughly 1,400,000sqm and a total value of around €2 billion. S IMMO AG always monitors the markets for proper business opportunities. The firm’s strategy consists of three elements: searching for excellent locations with a focus on European Union capitals, longterm credit worthiness of tenants and stability of contractual framework. In the past 25 years the company has built a strong network of partners, thanks to its dedicated, experienced and flexible teams in all related markets.

www.simmoag.hu

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

S IMMO – 10 years in Hungary


2 BusinessPartnerWatch 19

BBJ

WWW.BBJ.HU

Budapest Business Journal | May 04 – May 17

’A’ category office buildings in greater Budapest

1

2

CAPITAL SQUARE OFFICE BUILDING www.capitalsquare.hu

32,000 38,000

7 2200

35 5

18 690

12.5– 13.95 1100

»

































» » » »

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

GATEWAY OFFICE PARK www.gatewaybc.hu

LEASING AGENT, PHONE

ADDRESS PHONE FAX EMAIL

»

– Ablon Group (100)

1138 Budapest, Dunavirág utca 2. (1) 225-6600 (1) 225-6601 sales@ablon.hu

– (100)

1133 Budapest, Váci út 76. (1) 268-1288 (1) 268-1289 info.budapest@ eur.cushwake.com

OTHER

INDEPENDENT POWER SUPPLY

BICYCLE PARKING

WASTE RECYCLING

NATURAL LIGHT AND AIR VENTILATION

BANK OFFICE/CASH MACHINE

Magyar Posta, AON, Samsung, Tesco

IN-HOUSE FACILITY MANAGEMENT

13-14.5 3.80

GREEN TECHNOLOGIES

PARKING SPACES

4+3+3 422

SUITABLE FOR DISABLED PEOPLE

330-36300 5

GREEN ENVIRONMENT

9 1,500

WELLNESS AND SPORTS SERVICES

AVERAGE MONTHLY RENT IN 2012 (€/SQM) AVERGARE MONTHLY SERVICE CHARGE IN 2012 (€/SQM)

35,900 50,800

24-HOUR RECEPTION AND SECURITY

NO. OF ELEVATORS NO. OF PARKING SPACES

CURRENT MAIN TENANTS

RESTAURANT, CAFÉ

MINIMUM LEASABLE OFFICE SIZE (SQM) MINIMUM LEASE TERMS (YEARS)

SERVICES

NO. OF LEVELS AVERAGE SIZE OF FLOORS (SQM)

COMPANY WEBSITE

The list is not comprehensive. The full list will be included in the Book of Lists 2012-13, to be published in the second half of the year.

NET OFFICE SPACE (SQM) TOTAL GROSS SIZE OF BUILDING (SQM)

RANK

Ranked by net office space

Grocery, underground parking, access control system, variable interior arrangement

Júlia Czepek (1) 484-1340

Avestus Real Estate (1) 688-0519

– (100)

1054 Budapest, Szabadság tér 7. (1) 302-9010 (1) 302-9020 anett.eles@ bankcenter.hu

DTZ (1) 269-6999

– (100)

1117 Budapest, Budafoki út 91–93. (1) 501-2800 (1) 501-2801 office@caimmo.hu

BANK CENTER www.bankcenter.hu 3

IP WEST www.ipwest.hu 4

»

30,041 52,184

1,400

150-2800 3

17 475

20 4.80

WEIL, REGUS, Citibank

26,500 30,000

7 1,200

60-3000 3

15 841

11.7512.5 990 Ft

NXP, Heineken, British Telecom, Quintiles, Transcom














































20 2 BusinessPartnerWatch

DOROTTYA UDVAR www.dorottya.net

NÉPLIGET CENTER www.nepligetcenter.hu 6

CITY GATE www.caimmo.hu 7

» »

EU GreenBuilding energy efficient office building, solar panels, Qauntum cooler

»

– (100)

1097 Budapest, Könyves Kálmán körút 11. (1) 382-9100 (1) 382-9129 property@skanska.hu



CA Immo Hungary Kft (1) 501-2818

– (100)

1092 Budapest, Köztelek utca 6. (1) 501-2800 (1) 501-2801 office@caimmo.hu





Barbara Baráth (20) 9844-977 – barbara. Austria (100) barath@ simmoag.hu







ConvergenCE (1) 225-0912, csaba.zeley@ convergence.com

– JP Morgan (100)

1027 Budapest, Henger utca 2. (23) 423-323 (23) 423-324 info@terrapark.hu

Recycled materials using

ConvergenCE, office@ convergence.com

– Europa Fund II (100)

1062 Budapest, Teréz körút 55–57. (1) 225-0912 (1) 375-0445 office@ convergen-ce.com



Infopark services

IVG (1) 382-7560

– IVG Funds (100)

1117 Budapest, Gábor Dénes utca 2. (1) 382 7560 (1) 382-7570 office@ivg.hu

»

– ABLON Group (100)

1139 Budapest, Váci út 99. (1) 225-6600 (1) 225-6601 sales@ablon.hu

26,000 28,500

»

120-1700 3

8 538

11 3.90

»

23,000 26,000

8 1,000

250-11670 3

12 450

12.500 1,096 Ft

Ericsson Magyarország, Co-op Hungary, MAI Insurance Group, AIM Általános Biztosító, Papyrus Hungária



















22,800 25,000

8

»

157 3

10 609

12-13 1,200 Ft

NSN, IBM

















19,487 20,681

10 2,000

600 3

11 352

12 4

Citibank, Procter & Gamble, Digi Kft

















19,307

4 400-1000

100 3

8 254

» »

AVIS, Fővárosi Ítélőtábla, Getronics, Ventív Health, Toyota, Oberbank



































LEASING AGENT, PHONE

OTHER

INDEPENDENT POWER SUPPLY

CBRE Kft (1) 374-3040

1113 Budapest, Bocskai út 134–146. (1) 888-0395 (1) 888-0399 cbrebudapest@ cbre.com

BICYCLE PARKING

ADDRESS PHONE FAX EMAIL

WASTE RECYCLING

NATURAL LIGHT AND AIR VENTILATION

BANK OFFICE/CASH MACHINE

IN-HOUSE FACILITY MANAGEMENT

GREEN TECHNOLOGIES

PARKING SPACES

SUITABLE FOR DISABLED PEOPLE

GREEN ENVIRONMENT

24-HOUR RECEPTION AND SECURITY

CURRENT MAIN TENANTS

WELLNESS AND SPORTS SERVICES

SERVICES

RESTAURANT, CAFÉ

AVERAGE MONTHLY RENT IN 2012 (€/SQM) AVERGARE MONTHLY SERVICE CHARGE IN 2012 (€/SQM)

NO. OF ELEVATORS NO. OF PARKING SPACES

MINIMUM LEASABLE OFFICE SIZE (SQM) MINIMUM LEASE TERMS (YEARS)

NO. OF LEVELS AVERAGE SIZE OF FLOORS (SQM) 4

WWW.BBJ.HU

Budapest Business Journal | May 04 – May 17

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

5

COMPANY WEBSITE

NET OFFICE SPACE (SQM) TOTAL GROSS SIZE OF BUILDING (SQM)

RANK

BBJ









RIVER ESTATES OFFICE BUILDING www.simmoag.hu 8

MARGIT PALACE – 9

» EIFFEL SQUARE OFFICE BUILDING AND CULTURAL PARK www.eiffelsquare.com

10

11

INFOPARK BUILDING D www.infopark.hu

18,500 23,700

7 3,200

250 5

10 365

20 3.50

Cetelem Bank, AXN, Grundfos, ESAB, Givaudan

18,500

7 2,500

200 1

7 350

11.50 3

Lufthansa Systems, DBH Business Center, Merlin, Mentor























Underground and surface parking, access control system,variable interior arrangement























LEED Silver

JLL (1) 489-0202

– IVG (100)

1117 Budapest, Neumann János utca 1/E (1) 382-7560 (1) 382-7570 office@ivg.hu

»

» »

1134 Budapest, Kassák Lajos utca 19–25. (1) 382-9100 (1) 382-9129 property@skanska.hu

Ágnes Kistamás (1) 374-3040

– (100)

1074 Budapest, Rákóczi út 70–72. (1) 374-3040 (1) 374-3050 info@eston.hu

»

– ABLON Group (100)

1139 Budapest, Váci út 99. (1) 225-6600 (1) 225-6601 sales@ablon.hu 2040 Budaörs, Puskás Tivadar utca 4. (23) 423-323 (23) 423-324 info@terrapark.hu

»

BUSINESS CENTER 99 www.ablon-group.com 12

13

INFOPARK BUILDING E www.infopark.hu

GREEN HOUSE www.skanska.hu 14













































17,300 17,550

1+4 1,500

100-16000 3

5 313

9-11 3.80

KPMG, Fundamenta, UniCredit Bank, Viasat

17,000

»

7 1,9002800

300 5

8 270

12.50 2.60

Lufthansa Systems, EITI, National Instruments, IVG

16,800 17,800

7 2,430

17,800 5

6 255

12.9513.95 855 Ft/ m²

»



» 

















LEED Platinum pre-certified green office building with environmentally conscious technology

15,932 17,261

10 2,100

233-1800 3

9 450

10.90-13 1,100 Ft

»



















Underground and surface parking, access control system, variable interior arrangement

R70 OFFICE COMPLEX www.caimmo.hu 15



LOMB BUSINESS CENTER www.lombbc.hu 16

17

TERRAPARK B TÖMB www.terrapark.hu

BARTÓK HOUSE www.caimmo.com 18

19

LAURUS OFFICES www.laurusoffices.hu

15,700 28,685

8 2,000

15,700 5

4+2 440

13.50-16 3.80

»

15,697 17,042

5 2,0003000

»

»

3

251

1011+VAT 3+VAT

Invitel, Toepfer, DuPont, Total, Pioneer, Berlinchemie, Carlsberg, Bellinda, CNIM Babcock, Eurasia Logistics























»

– JP Morgan (100)

14,306 30,000

9 2,200

360 3

5 406

12.50-13 1,100 Ft

HP, Novartis, Alexandra



















CA Immo Hungary Kft (1) 501-2818

– (100)

1114 Budapest, Bartók Béla út 43–47. (1) 501-2800 (1) 501-2801 office@caimmo.hu

Energy utilization in HVAC technologies, individually adjustable heating and cooling system, rain water management

»

» »

1103 Budapest, Kőér utca 2.A (1) 392-4075 (1) 392-4081 balazs.szerdahelyi@ immorent.com

Underground and surface parking, access control system,variable interior arrangement

»

– ABLON Group (100)

1138 Budapest, Esztergomi út 44–48. (1) 225-6600 (1) 225-6601 sales@ablon.hu

13,973 27,000

6-7 790-1162

269.03 3

8 247

12-13 3.50

13,700 20,400

8 1,600

13,200 5

4+2 244

13.50-16 3.80

BDO Magyarország Kft, ING Biztosító Zrt, Arena Hall Kft





































NEW AGE CENTER www.newagebc.hu 20

1134 Budapest, Váci út 35. (1) 429-5050 (1) 429-5055 office@simmoag.hu

»






















2 BusinessPartnerWatch 21

BBJ

WWW.BBJ.HU

22

23

INFOPARK BUILDING C www.infopark.hu

EUROPOLIS PARK BUDAPEST AEROZONE www.europolispark.com

MADÁCH TRADE CENTER www.madachtrade.hu 25

26

V48 www.v48.hu

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

ADDRESS PHONE FAX EMAIL

– (100)

1117 Budapest, Neumann János utca 1. (1) 501-2800 (1) 501-2801 office@caimmo.hu

13,500 13,600

5 1,100

250-1800 2

6 175

11.5– 12.5 1,200

IBM





















13,240

7

»

»

360 1

4 184

11 3.95

»























IVG (1) 382-7560

– HGA Capital (100)

1117 Budapest, Gábor Dénes utca 4. (1) 382-7560 (1) 382-7570 office@ivg.hu

13,000 65,000

4

»

100 2

6 570

9.50-12 1,080 Ft

DHL, Fedex, UTI, MASPED



















Cushman and Wakefiled, Emília Tarró (1) 268-1288

– (100)

2220 Vecsés, Lőrinci út 59-61. (1) 501-2818 (1) 501-2801 office@caimmo.hu

12,900 19,800

9 1,770

60-13000 3

4+2 221

12.50 3.80

Quaestor, BASF



















Underground and surface parking, access control system,variable interior arrangement

»

– ABLON Group (100)

1132 Budapest, Váci út 30. (1) 225-6600 (1) 225-6601 sales@ablon.hu

















Manual car wash, solar cells for producing hot water

No exclusive agent (1) 268-1900

– German (100)

1075 Budapest, Madách Imre út 13–14. (1) 268-1900 (1) 269-6684 info@madachtrade.hu





















»

Codic Hungary Kft (100) –

1132 Budapest, Váci út 48. (1) 266-6000 (1) 266-6002 b.gedai@codic.eu

BUSINESS CENTER 30 www.bc30.hu 24

LEASING AGENT, PHONE

OTHER

INDEPENDENT POWER SUPPLY

BICYCLE PARKING

WASTE RECYCLING

NATURAL LIGHT AND AIR VENTILATION

BANK OFFICE/CASH MACHINE

IN-HOUSE FACILITY MANAGEMENT

GREEN TECHNOLOGIES

PARKING SPACES

SUITABLE FOR DISABLED PEOPLE

GREEN ENVIRONMENT

24-HOUR RECEPTION AND SECURITY

RESTAURANT, CAFÉ

CURRENT MAIN TENANTS

WELLNESS AND SPORTS SERVICES

SERVICES

David Johnston Cushman & Wakefield, (1) 484-1319; Krisztina Enzsöl, Cushman & Wakefield (1) 488-1303

INFOPARK BUILDING A www.caimmo.com 21

AVERAGE MONTHLY RENT IN 2012 (€/SQM) AVERGARE MONTHLY SERVICE CHARGE IN 2012 (€/SQM)

NO. OF ELEVATORS NO. OF PARKING SPACES

MINIMUM LEASABLE OFFICE SIZE (SQM) MINIMUM LEASE TERMS (YEARS)

NO. OF LEVELS AVERAGE SIZE OF FLOORS (SQM)

COMPANY WEBSITE

NET OFFICE SPACE (SQM) TOTAL GROSS SIZE OF BUILDING (SQM)

RANK

Budapest Business Journal | May 04 – May 17

»

10+8 900+400

28 1

4 250

» »

Lilly Hungaria Kft; Lakatos, Köves és Társai Zrt; Morley Allen & Overy Ügyvédi Iroda; Appello Kft; MOBIL SYSTEMS GROUP Kft

12,000 13,500

6 2,000

»

6 120

» »

»

12,000

5

FINE OFFICES A+ CATEGORY OFFICES CURRENTLY AVAILABLE FOR RENT IN THE MOST PRESTIGEOUS AREAS OF THE CITY

A SPECIAL SELECTION BY THE

BBJ

Budapest Business Journal

TERRAPARK A, B PALACE ANDRÁSSY ADDRESS 2040 Budaörs, Puskás Tivadar út          BUILDING YEAR A: 2000, B: 2002 FREE SPACE A: 1200 sqm, B: 4350 sqm PUBLIC TRANSPORT BUS 240, 40 busz, TERRAPARK shuttle CONTACT Éva Szilágyi

Tel: +3620 / 9848 999 szilagyie@terrapark.hu

The two most successful buildings of Terrapark offer A-category offices in green surroundings, at excellent location in the junction of motorways M1-M7. The buildings have been constructed in a contemporary and representative style. Technical equipments of the buildings meet modern requirements. The buildings have secure underground parking and surface parking spaces.

MARGIT PALACE PALACE ANDRÁSSY ADDRESS 1027 Budapest, Henger utca 2. BUILDING YEAR 2004 FREE SPACE 2416 sqm PUBLIC TRANSPORT Tram 4, 6 Metro 2 HÉV 5 BUS 86, 11 CONTACT Éva Szilágyi

Tel: +3620 / 9848 999 szilagyie@terrapark.hu

The five-storey A-category building offers offices, service units and a two-storey underground parking lot for its future tenants. The building, which formerly housed trams, is under local heritage protection. The state-ofthe-art equipments of the facility meet today’s standards. It is accessible by car and public transportation; Déli railway station and the Danube is only a few-minute walk away.


22 2 BusinessPartnerWatch

27

28

RIVERPARK ww.riverpark.hu

LEASING AGENT, PHONE

7 2,200

84-2200 3

6 233

12.50-13 1,200 Ft

Leitner, Allianz, Santander















9,865

»

8 400-900

200 1

4 135

12-14 2.40

Henkel-Schwarzkopf, Sigma Kudos, Gameloft





















GVA (1) 327-2050

– IVG Funds (100)

1093 Budapest, Közraktár út 30–32. (1) 382-7560 (1) 382-7570 office@ivg.hu

9,600 10,000

9 1,000

80-9600 3

2 185

9-11 3.80

Groupama, Sumilumo, Brother, Strautmann

Underground and surface parking, access control system,variable interior arrangement

»

– ABLON Group (100)

1146 Budapest, Hungária körút 179–187. (1) 225-6600 (1) 225-6601 sales@ablon.hu



















9,587 10,220

5 2,100

300 3

5 185

11 4.50

Unilever Magyarország Kft



















220 3

3 130

10.50 3.90

»























»

»

3

200

1011+VAT 3+VAT

Roche, Diversey, Cap Gemini, ESHD, Continental, Cellum, Groupe Seb, Raiffeisen Agrárház Kft























31

INFOPARK BUILDING B www.infopark.hu

8,590

7

»

»

32

TERRAPARK A TÖMB www.terrapark.hu

8,530 9,173

4 300-700

M3 BUSINESS CENTER PHASE B www.m3bc.hu 33

34

INFOPARK I BUILDING www.infopark.hu

8,400 12,000

7 1,200

250-8400 5

3 161

10-12 3.80

8,200

8

»

»

250 1

4 100

9-10 3.90

CITY CENTER www.simmoag.hu 35

37

OKTOGON HÁZ www.oktogonhaz.hu

Öko Pannon, Creditexpress

»







































8,178 8,587

7 1,200

50 2

4 100

14 4.60

Belgian Embassy Wallon Office, Net Travel Services, Sopron Bank, Itochu Hungary Kft, Tony & Guy

19,869 21,280

5+5 2,000+ 600

15 1-3

6+6 360+162

6-9 3 + VAT

EDCO, Flaga, GDF Suez, Partner in Pet Food Hungaria, BAT, Bioderma























8 1,200

150 1

4 339

11.50 3.70

»

















TERRAPARK C, D TÖMB www.terrapark.hu 36

7,280

»

















IVG (1) 382-7560

– HGA Capital (100)

1117 Budapest, Infopark sétány 3. (1) 382-7560 (1) 382-7570 office@ivg.hu

»

– JP Morgan (100)

2040 Budaörs, Puskás Tivadar utca 4. (23) 423-323 (23) 423-324 info@terrapark.hu

Underground and surface parking, access control system,variable interior arrangement

»

– ABLON Group (100)

1146 Budapest, Hungária körút 179–187. (1) 225-6600 (1) 225-6601 sales@ablon.hu

IVG (1) 382-7560

– HGA Capital (100)

1117 Budapest, Infopark sétány 1. (1) 382-7560 (1) 382-7570 office@ivg.hu

Terrapark Kft +36 23 423 323

– Terrafinanz GmbH (100)

2040 Budaörs, Puskás Tivadar utca 4. (23) 423-323 (23) 423-324 info@terrapark.hu

IVG (1) 382-7560

– HGA Capital (100)

1062 Budapest, Aradi utca 8–10. (1) 382-7560 (1) 382-7570 office@ivg.hu

»

– ABLON Group (100)

1139 Budapest, Váci út 91. (1) 225-6600 (1) 225-6601 sales@ablon.hu

6,600 9,000

5 1,300

100-6500 3

2 78

11-12.5 3.80

Sony, Ericsson, Coty, Matte,l Danfoss



















6,422 6,704

8 700

03

4 69

10 4.60

Educatio, Scholz & Friends, Erste Bank, Brandmonitor













Barbara Baráth (20) 9844-977 – barbara. Austria (100) barath@simmoag.hu

1122 Budapest, Maros utca 19–21. (1) 429-5050 (1) 429-5055 office@simmoag.hu

5,711 5,711

9 850

03

2 87

11.50 4

Barbara Baráth, (20) 9844-977 – barbara. Austria (100) barath@ simmoag.hu

1065 Budapest, Nagymező utca 44. (1) 429-5050 (1) 429-5055 office@simmoag.hu

PODIUM OFFICE BUILDING www.simmoag.hu 40

1138 Budapest, Váci út 182. (1) 429-5050 (1) 429-5055 office@simmoag.hu

Underground and surface parking,access control system,variable interior arrangement

MAROS UTCA BUSINESS CENTER www.simmoag.hu 39

Eston, András Siklós (70) 702-8622 andras.siklos@ eston.hu; DTZ – Franciska Austria (100) Horváth (30) 989-0998, franciska. horvath@dtz. com

Eston International, András Siklós adviser – 1051 Budapest, (70) 702-8622 andras.siklos@ CEE Property- Bajcsy-Zsilinszky út 12. Invest Immo(1) 429-5050 eston.hu; (1) 429-5055 DTZ Hungary, bilien GmbH (100) office@simmoag.hu Anikó Kovács P. adviser (30) 525-1079, aniko.kovacs@ dtz.com

BUSINESS CENTER 91 www.ablon-group.com 38

– –

1027 Budapest, Kapás utca 6–12. (1) 374-3040 (1) 374-3050 cbrebudapest@ cbre.com

11,654 14,300

BLUE CUBE OFFICE BUILDING www.simmoag.hu 30

ADDRESS PHONE FAX EMAIL

OTHER

INDEPENDENT POWER SUPPLY

BICYCLE PARKING

WASTE RECYCLING

NATURAL LIGHT AND AIR VENTILATION

BANK OFFICE/CASH MACHINE

IN-HOUSE FACILITY MANAGEMENT

PARKING SPACES

SUITABLE FOR DISABLED PEOPLE

GREEN ENVIRONMENT

24-HOUR RECEPTION AND SECURITY

WELLNESS AND SPORTS SERVICES

CURRENT MAIN TENANTS

GREEN TECHNOLOGIES

Ágnes Kistamás (1) 374-3040

M3 BUSINESS CENTER PHASE A www.m3bc.hu 29

SERVICES

RESTAURANT, CAFÉ

AVERAGE MONTHLY RENT IN 2012 (€/SQM) AVERGARE MONTHLY SERVICE CHARGE IN 2012 (€/SQM)

NO. OF ELEVATORS NO. OF PARKING SPACES

MINIMUM LEASABLE OFFICE SIZE (SQM) MINIMUM LEASE TERMS (YEARS)

WWW.BBJ.HU

Budapest Business Journal | May 04 – May 17

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

VIZIVÁROS OFFICE CENTER www.caimmo.hu

NO. OF LEVELS AVERAGE SIZE OF FLOORS (SQM)

COMPANY WEBSITE

NET OFFICE SPACE (SQM) TOTAL GROSS SIZE OF BUILDING (SQM)

RANK

BBJ

UniCredit Bank


















2 BusinessPartnerWatch 23

BBJ

WWW.BBJ.HU

NATURAL LIGHT AND AIR VENTILATION

WASTE RECYCLING

BICYCLE PARKING

INDEPENDENT POWER SUPPLY

OTHER















BUDA CENTER www.simmoag.hu 42

43

ANDRÁSSY 12 www.andrassy-11-12.hu

44

STEFÁNIAPARK OFFICE BUILDING www.stefaniapark.com

45

CANADA SQUARE OFFICE BUILDING www.caimmo.com

KINNARPS HOUSE www.jarl-konferenciaterem.hu NR

LEASING AGENT, PHONE

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

BANK OFFICE/CASH MACHINE

Ad Novum, Top Soft, IRF

IN-HOUSE FACILITY MANAGEMENT

11.9013.5 1,100 Ft

PARKING SPACES

3 173

SUITABLE FOR DISABLED PEOPLE

129 3

GREEN ENVIRONMENT

7 900

24-HOUR RECEPTION AND SECURITY

AVERAGE MONTHLY RENT IN 2012 (€/SQM) AVERGARE MONTHLY SERVICE CHARGE IN 2012 (€/SQM)

5,540 6,100

WELLNESS AND SPORTS SERVICES

NO. OF ELEVATORS NO. OF PARKING SPACES

CURRENT MAIN TENANTS

GREEN TECHNOLOGIES

RESTAURANT, CAFÉ

MINIMUM LEASABLE OFFICE SIZE (SQM) MINIMUM LEASE TERMS (YEARS)

BUDA BUSINESS CENTER www.caimmo.hu 41

NO. OF LEVELS AVERAGE SIZE OF FLOORS (SQM)

COMPANY WEBSITE

SERVICES

NET OFFICE SPACE (SQM) TOTAL GROSS SIZE OF BUILDING (SQM)

RANK

Budapest Business Journal | May 04 – May 17

ADDRESS PHONE FAX EMAIL

Ágnes Kistamás (1) 374-3040

» »

1027 Budapest, Kapás utca 11–15. (1) 501-2800 (1) 501-2801 info@eston.hu

DTZ Nikolett Püschl (30) 251-7914 nikolett. puschl@ – dtz.com; Austria (100) Eston András Siklós (70) 70- 8622 andras.siklos@ eston.hu

1016 Budapest, Hegyalja út 7–13. (1) 429-5050 (1) 429-5055 office@simmoag.hu

5,455 5,820

7 800

30 2

2 65

10 4.60

UniCredit, Leasing, Citibank, Volksbank















5,368

7

2

»

»

80 1

»

9-13 3.40

»













IVG (1) 382-7560

– HGA Capital (100)

1061 Budapest, Andrássy út 12. (1) 382-7560 (1) 382-7570 office@ivg.hu

5,320 m2

4 1,200

280 3

2 63

13 3.20

HLB Klient, Segafredo, bnt



IVG (1) 382-7560

– IVG (100)

1143 Budapest, Stefánia út 101–103. (1) 382-7660 (1) 382-7570 office@ivg.hu

6

» »

4 58

» »

Embassy of Canada, Fővárosi Törvényszék

» » » » » » » » » » » »

»

– (100)

1027 Budapest, Ganz utca 16. (1) 501-2800 (1) 501-2801 office@caimmo.hu

» »

1133 Budapest, Váci út 92. (1) 237-1251 (1) 237-1250 reservation@ jarl-konferenciaterem.hu

»

4,953 6,000

» »

»

» »

» »

» »

» »

»































»

FINE OFFICES A+ CATEGORY OFFICES CURRENTLY AVAILABLE FOR RENT IN THE MOST PRESTIGEOUS AREAS OF THE CITY

A SPECIAL SELECTION BY THE

BBJ

Budapest Business Journal

INFOPARK A ANDRÁSSY PALACE ADDRESS 1117 Budapest, Neumann J. u. 1. BUILDING YEAR 2000 FREE SPACE 3 100 sqm PUBLIC TRANSPORT Bus 8, 103, Infopark Bus Tram 4-6 CONTACT David Johnston

Tel: +36 1 484 1319 David.Johnston@eur.cushwake.com

Infopark Building A is a grade A office building that is ideally located in the neighborhood of the Technical University of Budapest on the Buda side of the city. Convenient location in a quite part of the city, oasis of greenery right at the building’s doorstep where people can enjoy short breaks. Flexible lay-out options, efficient floor plans, light flooded atrium, state-of-the-art technology and security around the clock to satisfy all requirements of tenants.

IP WEST ADDRESS 1117 Budapest, Budafoki út 91-93. BUILDING YEAR 2006-2009 FREE SPACE 7 000 sqm PUBLIC TRANSPORT Bus 103, 33 Tram 4-6 CONTACT Anikó P. Kovács

Tel: +36 30 525 1079 aniko.kovacs@dtz.com

IP West is a modern A class office building offering exceptionally efficient layout options with plenty of natural light and high quality technical solutions. The internal gardens and cafeteria offer relaxation opportunities. IP West office building is located at the foot of Rákóczi Bridge on the Buda side, neighboring Budapest’s fastest developing innovation and research area.


24 2 BusinessSpecialReport BBJ

WWW.BBJ.HU

Budapest Business Journal | May 04 – May 17

office news HUNGARY’S FIRST GREEN SHOPPING CENTER TO OPEN IN FALL Hegyvidék Központ, Hungary’s fi rst environmentally conscious shopping center is structurally complete and will open at Apor Vilmos tér in Budapest’s 12th district in the fall, on schedule. The shopping center, developed by Wing Zrt, is built of recyclable materials, will reuse rainwater and has already been pre-certified by BREEAM as “very good”. Thanks to pre-leases with companies such as OTP Bank, CBA Príma, Bortársaság, Líra bookstore and Príma Pék, two-thirds of the 5,300sqm retail space of the shopping center has already been signed for. Hegyvidék Központ also offers 1,400sqm of leasable office space and a 200sqm store area.

JONES LANG LASALLE WINS CEE REAL ESTATE QUALITY AWARDS At the 9th CEE Real Estate Quality awards, held on April 17 and organized by CEE Insight Forum in association with the Financial Times, Jones Lang LaSalle picked up two out of four agent awards for its performance in 2011. The firm was named the Best Agent in CEE for Retail and Leisure Leasing and also for Capital Markets. Jones Lang LaSalle won the latter for the second year in a row.

RECKITT BENCKISER MOVES TO DOROTTYA UDVAR Reckitt Benckiser, a global household, health and personal care company, has signed an office lease for 1,400sqm at Dorottya Udvar. The Hungarian affiliate of the global company has already moved into the awardwinning office complex in south Buda. According to of-

fice agency CBRE, this move presents an upgrade in Reckitt Benckiser’s accommodation in many ways. With this long-term contract the company will not only occupy a larger office area than at its previous location, but also can benefit from the green, quiet and inspiring working environment Dorottya Udvar offers, the company added.

NORDIC LIGHT RECEIVES LEED GOLD PRE-CERTIFICATION Nordic Light Offices, Skanska Property Hungary’s next project in the pipeline, has successfully qualified for the Gold level of the American LEED (Leadership in Energy and Environmental Design) certification, and also received an enforceable building permit for both phases I and II. The building, after opening in the second half of 2012, will offer 26,000sqm of leasable office space on Budapest’s busy Váci út office corridor.

GAMELOFT OPENS NEW OFFICE AT RIVERPARK Gameloft, a leading global publisher of digital and social games, has chosen the RiverPark development at Budapest’s Petőfi Bridge for its new 550sqm office. Paris-based Gameloft’s main preferences during the search procedure were flexibility, high-quality space, and their need to occupy the new office as soon as possible. RiverPark is an ‘A’ category development, which consists of two office buildings and offers almost 10,000sqm of leasable office space. The central location of the building as well as the clear design of the office, which also offers a direct view of the Danube River, will contribute to the long-term well-being and creativity of

the game development team, Gameloft said.

CITIBANK CENTER IN BUDAPEST TO COLLECT EASTERN EUROPE’S FIRST LEED PLATINUM Citibank’s Global Shared Service Center at Arena Corner in Budapest’s 8th district is not only the first Citi Office facility in the EMEA region but is also the first project in Eastern Europe to receive a LEED Platinum for Commercial Interiors certification. An entire office floor of approximately 3,200sqm gross area was fitted out in the seven-floor building, which offers a total of 28,000sqm in office space. “LEED Platinum certification required the full integration of LEED criteria into the design process,” noted Colliers International Eastern Europe, the company that secured the certification. To conserve resources, 56% of the project furniture was relocated from other Citi facilities. In addition, more than 20% of the total materials used on the project were recycled and 25% were manufactured within 800km of the building, supporting the local economy. Over 50% of construction waste generated on-site was diverted from the landfill for recycling.

notably Lille. Over the full year, rents rose 3.4% across Europe, indicating a slowdown in rental growth in the second half of the year. Prime rents are stable in most locations, with only a few high street locations experiencing significant growth. Occupier demand is still heavily focused on the prime areas of major cities, although retailers are increasingly competing for suitable space. However, tenants have continued to push for more favorable lease terms and negotiate for incentives, including significant fit-out contributions, which in some cases are increasing the time it takes to complete lease agreements, the CBRE research showed.

NEW TENANT IN MOM PARK MOM Park Building D has welcomed its latest tenant, CSL Behring Ltd. The Australia-based company is a global leader in the plasma protein biotherapeutics industry. The 221sqm leased area in MOM Park on Alkotás út in Budapest’s 12th district is the first commercial branch office of

CSL. The role of the new office will be to direct the company’s operational function in Hungary, as well as to provide the administrative background. The new tenant has signed a long-term contract with the landlord. The exclusive agency for the MOM Park office spaces is Jones Lang LaSalle.

JONES LANG LASALLE AND CUSHMAN & WAKEFIELD JOINT AGENTS ON WEST END BUSINESS CENTER AEW Europe, the representative asset manager of West End Business Center, has selected Cushman & Wakefield international real estate consultants as a joint agent alongside Jones Lang LaSalle, which has already been working for the building since 2011. West End Business Center is the closest building to downtown on the Váci corridor, directly opposite the WestEnd Shopping Center. The office complex consists of three buildings with a total of 28,000sqm office space, which has been the office of well-known companies such as Sara Lee,

Diageo and Ernst & Young. The eight-story building currently offers approximately 5,000sqm of free space. Offices can be leased from 300sqm to 1,300sqm. While the on-site property management team secures the smooth running of the property, other amenities such as bank branches, restaurants, a carwash and the adjacent shopping center all help the daily tasks of workers.

TRIGRANIT THE PROPERTY DEVELOPER OF THE YEAR TriGranit has been awarded the Developer of the Year by the CEE Real Estate Quality Awards, organized by CEE Insight Forum in association with the Financial Times. The awards are judged by a jury panel of senior representatives of market leading companies supervised by globally respected consulting firm Deloitte. During its successful operation of 15 years, TriGranit has established itself as one of the major players in the Central-Eastern European market. ■

RETAIL RENTS STABLE THROUGHOUT EUROPE In spite of a challenging economic environment and subdued retail sales, rents across Europe remain stable as retailers compete for limited space in the most sought-after areas of major cities, according to the latest research from CBRE. The overall growth in CBRE’s European Prime High Street Rent Index was just 0.5% in Q4 2011, in spite of strong performances from Berlin, Manchester and most

INFOPARK BUILDING B CLOSE TO 100% OCCUPANCY The list of companies present at Infopark in south Buda has expanded: the new tenant, MSX International, occupies a 182sqm office on the ground floor of Infopark Building B, which has now reached almost 100% occupancy; there remains only one office premise to let in the ‘A’ category building. MSX International is a provider of outsourced business solutions for automotive companies and has gained a world leader position. Its clients include Ford, Nissan, General Motors, Volkswagen and Fiat.


2 BusinessPartnerWatch 25

BBJ

WWW.BBJ.HU

Budapest Business Journal | May 04 – May 17

Facility management companies REAL ESTATE DEVELOPMENT

MAINTENANCE

FINANCE MANAGEMENT

INFRASTRUCTURAL SERVICES

TECHNICAL SUPERVISION

SERVICES

LOGISTICAL AND TRADE FACILITIES (%)

INDUSTRIAL FACILITIES (%)

PORTFOLIO

OFFICE BUILDINGS (%)

COMPANY WEBSITE

NET REVENUE FROM FACILITY MANAGEMENT IN 2011 (HUF MLN)

TOTAL NET REVENUE (HUF MLN) 2011

RANK

Ranked by total net revenue

STRABAG PROPERTY AND FACILITY SERVICES ZRT www.strabag-pfs.hu 1

2

11,000

FUTURE FM LÉTESÍTMÉNYGAZDÁLKODÁSI ZRT www.future-fm.hu

11,000

34

40

26









OTHER

Property management, energy management

MAIN CLIENTS IN 2011

YEAR ESTABLISHED NO. OF FULL-TIME EMPLOYEES ON APR 1, 2011

OWNERSHIP (%) HUNGARIAN NONHUNGARIAN

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

Magyar Telekom, MOL, Magyar Nemzeti Bank, Raiffeisen Bank, OBI Retail Hungary

2004 462

WING Zrt (49) STRABAG Property and Facility Services GmbH (51)

László Vágó Gyula Jászai Gábor Landi

1095 Budapest, Máriássy utca 7. (1)325-1850 (1)325-1855 info@strabag-pfs.hu

» »

Ferenc Batári – –

1148 Budapest, Fogarasi út 5. (1) 468-4080 (1) 468-4088 mail@future-fm.hu

»

Sándor Demján » ( ), Sándor Csányi » ( ), Sándor Nyúl » ( ) Peter Munk » ( )

Philip M. Evans Zoltán Lehoczky Ernő Koncz

1062 Budapest, Váci út 3. (1) 374-5600 (1) 374-6500 info@tgm.hu

6,386

»

67

12

6











Cleaning, Budapesti Erőmű technical Zrt, Vodafone operation, safety Magyarország services, garden- Zrt, EDF DÉMÁSZ ing, vehicle fleet Zrt, Szombathelyi management, Országos Büntecatering, docutés-végrehajtási ment manageIntézet, Zwack ment Unicum Zrt

6,318

»

25

0

75









Leasing, marketing, controlling

»



Project management

SEB, List Group, Shell

2001 13

– Artelia Austria GmbH (100)

Hubert Mühringer Péter Radó Marcell MIhályfi

1075 Budapest, Wesselényi utca 16. (1) 479-6020 (1) 479-6029 contact@ hu.atreliagroup.com

GE Hungary Kft, Robert Bosch, IG Hungary, Volksbank Premiumred, ERSTE Bank, Raiffeisen Bank

2001 72

– Viktor Wagner (100)

Gábor Pintenics Margit Szász –

1061 Budapest, Paulay Ede utca 12. (1) 381-6000 (1) 381-6019 iroda@reiwag.hu

Security, cleaning, horticulture, financial services

Immofinanz, Tengelman, Emerson Worldwide, GM, Johnson & Johnson

1999 80

Tibor Balogh (85), András Balogh (15) –

Tibor Balogh György Osváth –

1112 Budapest, Brassó út 64. (1) 248-3800 (1) 248-3809 center@millenia.eu

Facility, property management, energy, fast service

Raiffeisen Ingatlanalap, Graphisoft Park Services, Mercedes/Voith Industries Services, GDF Suez, Allianz, GLL/ Cushman

2003 49

Biggeorge » ( ), NV Vagyonkezelő Kft » ( ), Drexler & Co Holding Kft » ( ) –

Gábor Décsi Zsolt Jurecska Kinga Kurta

1023 Budapest, Lajos utca 28-32. (1) 423-0000 (1) 423-0001 info@domefsg.hu

1992 200

(100) –

Zoltán Paár – –

1137 Budapest, Szent István park 22. (30) 982-5991 (1) 799-0558 kotr92.fm@t-online.hu

1997

(100) –

Dániel Jellinek Péter Grädig Helena Huszta

1148 Budapest, Kerepesi út 52. (1) 688-1700 (1) 688-1701 info@in-management.hu

» »

Charles Taylor Zsuzsanna Kiss Orsolya Németh

1052 Budapest, Deák Ferenc utca 15. (1) 268-1288 (1) 268-1289 info.budapest@eur. cushwake.com

1991

»

TRIGRANIT MANAGEMENT ZRT www.tgm.hu 3

4

ARTELIA KFT www.arteliagroup.com

970

5

REIWAG KAISER & SCHMIDT KFT www.reiwag.com

6

MILLENIA LÉTESÍTMÉNYÜZEMELTETŐ ZRT www.millenia.eu

893

600

180

210

600

90

60

20

20

10

10

20

70

























7

DOME FACILITY SERVICES GROUP KFT www.domefsg.hu

8

KÖT R 92 LÉTESÍTMÉNYGAZDÁLKODÁSI KFT www.kotr92fm.hu

388

360

65

10

10









»

9

IN-MANAGEMENT KFT www.in-management.hu

301

»

39

51

10











Property management, leasing

Marks&Spencer, Cewe Color, Líra Könyv Zrt., Xerox, STI Group

CUSHMAN & WAKEFIELD NEMZETKÖZI INGATLAN NR TANÁCSADÓ KFT www.cushmanwakefield.com

»= would not disclose, NR = not ranked, NA = not applicable

505

»

433

»

31.90

»

47.80

»

5.30

»











»

1994

»

1993

»

This list was compiled from responses to questionnaires received by May 02, 2012 and publicly available data. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of press time. While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, Madách Imre út 13–14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu


26 2 BusinessSpecialReport BBJ

WWW.BBJ.HU

Budapest Business Journal | May 04 – May 17

A sector waiting to be recognized

BBJ ANIKÓ JÓRI-MOLNÁR

Regardless of the sector’s young age, facility management is something no organization can live without, as the state cannot live without its added values. Unfortunately, official statistics still lack such a category,

but experts estimate that the market generates about 5-7% of GDP and employ 400,000 people (10% of the active workforce). REGULATORY DEFICIT Most companies know about services such as maintenance, cleaning, security, energy and fleet management, catering, IT or occupational health and safety services. Most also know that it’s best to assign these tasks to a dedicated service provider, but only a few know exactly what to look for in a facility management company. “This profession is actually about risk management, so no one really cares unless something bad happens,” Gábor Décsi, managing partner of Dome Facility Services Group, said summing up the situation. Consequently, the market is saturated but not regulated, in terms of compliance to client’s needs. The crisis opened new opportunities for some com-

panies that added facility management to their portfolio only to generate cash flow, but without the necessary professional background. This opened the gate to unrealistic price competition – mostly through undeclared employment. Those players that comply with all the regulations can apparently do nothing else but put their trust in the self-cleansing of the market, and wait for a time when clients’ perspective has changed and they are willing to pay more for quality services. But Décsi goes even further: “This purification process is too slow – it should be accelerated by the regulator role of the state.” READY TO PARLEY The Hungarian Facility Management Society initiated the elaboration of an extensive strategy for the sector in 2009, but there has been no breakthrough since then. “There will not be

FACILITY MANAGEMENT SERVICE COSTS (ESTIMATE)

Utilities Taxes Cleaning Security Maintenance Management

27% 19% 18% 18% 10% 8%

Source: Dome Facility Services

The sector is probably one of the most significant contributors to GDP, but is still in the dark in terms of employment and professional quality control: facility management is desperately seeking a way to become better known and more appreciated.

such a breakthrough while the Hungarian industry is so insensitive about the work environment,” said chairman József Czerny. He also pointed out that there’s too much talking about the real estate market while concerns should be directed to the clients of real estate. The largest client would, without doubt, be the state, if it didn’t have it’s own way of managing facilities. Although this part of the market is not yet transparent enough and only a couple of FM companies manage to get orders, Czerny said that in the long-term, this is a perspective to build a strategy upon. The other large group of clients are MNCs in the industrial, trade or technology sectors, which have the cultural background to demand professional facility management and compliance to certain standards regarding ser-


2 BusinessSpecialReport 27

BBJ

WWW.BBJ.HU

Budapest Business Journal | May 04 – May 17

vice levels and employment. The only problem is that they are usually local representations of global enterprises and are easily moved if the parent company decides the operation is not effective enough. Czerny believes education is the only way forward and therefore HFMS is putting this into focus. The chairman (a tutor himself) says the market could accommodate many more than the 20 managers that finish dedicated post-grad training at universities, not to mention the serious shortage of skilled workers and engineers. Experts believe greater emphasis should be put on the training of future professionals that could prepare them for such a complex role. OPPORTUNITIES FOR NEW SERVICES Beyond the at times unregulated market, the general economic climate, and con-

sequently the struggling real estate sector, presents difficulties for FM companies. Most are trying to widen their service portfolios: it is quite common to overlap services with property management. Leading players are also ready to use synergies presented within a group to better serve a wide range of client demands. HSG Zander Hungária, which has large multinational clients in various sectors in Hungary, is offering a project plan mapped out by its parent company and ensuring the life-long coverage of a facility, to balance the negative effects of the economy. “We have the advantage of working within a large group and therefore are able to offer a wide service portfolio while still managing to keep core facility management competencies in-house,” deputy managing director Enikő Vanó-

Huszár told the Budapest Business Journal. Although market share, indeed basically any kind of exact data, is considered sensitive by the companies involved, the market still has some room for new players that can offer high-quality services, as shown by the most recent debut of Porreal. Created by the restructuring of the Austrian construction giant Porr Holding, it entered the Hungarian market in April, and can take advantage of instant access to the parent company’s full service portfolio, including property, facility and asset management services. Internationally, Porreal manages the outlet complex in Parndorf, and according to managing director Tibor Karsai, it aims to win the facility management and consulting services of offices, hotels, malls and other trade facilities that appreciate high quality and stability in value. ■


3 Socialite

BBJ

WHO'S NEWS

Name Viktor Lénárt Current company/position GROW Organization Development Group, CEO Previous company/position GROW Organization Development Group, consultant

Lénárt has become the CEO of GROW Organization Development Group, having worked as a consultant for the group for six years. In the past three years, as an owner/ partner, he has had a marked role in the company achieving its largest revenues. The company’s previous CEO, László Eszes, will continue as an innovation and strategic director of T-Systems Hungary.

LAUGHING MATTER BOOK REVIEW

The Pest Cabarets II Sir Bryan Cartledge: The Will to Survive

30 31

Do you know someone on the move? Send information to research@bbj.hu

Name György Mohai Current company/position -/Previous company/position Budapest Stock Exchange, CEO

Mohai, CEO of the Budapest Stock Exchange (BÉT) resigned from his post, effective as of 15 May. Michael Buhl, the board director of the BÉT said he wanted Mohai to join the board, in order to further benefit from his experience. The BÉT says it has started the selection process for a new CEO. Mohai had held the post since 2008. Prior to that, he worked as deputy CEO for four years.

Name Ansgar Lengeling Current company/position Robert Bosch Power Tools Szerszámgyárto Kft, general manager, plant manager, and vice president Previous company/position Bosch Power Tool Company China, plant manager

Lengeling has been appointed general manager, plant manager, and vice president at Robert Bosch Power Tools Szerszámgyárto Kft, based in Miskolc. The 45 year old professional has worked in China since 2008 as plant manager of Bosch Power Tool. He is not unfamiliar with Hungary; prior to his Chinese deployment he led the quality control department in Miskolc. Lengeling succeeds Attila Horváth, former general manager.

Name Gabriella Liptay Current company/position Invitel, marketing ommunications director Previous company/position independent communications consultant

Liptay has become marketing communications director of Invitel. In 1994, she became a telecommunication and IT customer service manager for Szezám Advertising and PR agency and then became head of the company. From 1997 she was the PR director, and from 2000 communication director, of Ericsson Hungary. In 2004 she became a deputy communication director of Westel/TMobile and a director from 2006. Since 2011, she has worked as an independent consultant.


30 3 Socailite BBJ

WWW.BBJ.HU

Budapest Business Journal | May 04 – May 17

LAUGHING MATTER

The Pest Cabarets II On June 28, 1914, Gavrilo Princip, a Serbian student anarchist, assassinated Archduke Franz Ferdinand, the heir to the throne of AustriaHungary, and his wife Sophie. The murder resulted in a Habsburg ultimatum against the Kingdom of Serbia one month later. In another 48 hours, World War I broke out. “During wars arts are silent”: in Budapest theaters closed, but the cabarets continued to offer the public a bit of relaxation and distraction from the gloomy atmosphere of a long war. BBJ ANDRÁS SZARVASI

By the early 1910s there were some 30 cabaret theaters operating in the Hungarian capital. The “Apolló Kabaré” moved to its central location (today’s Corvin Department Store) in 1912. Several young talents, including Mihály Kertész (later, as Michael Curtiz, an Academy Award-winning Hungarian-American film director) started their illustrious careers on Apolló’s stage. Endre Nagy managed another popular place in downtown Budapest, the “Modern Stage Cabaret” on Andrássy út, until 1913. Nagy’s role of konferanszié, or master of ceremonies, the person whose short and funny monologues before and between the pieces kept the show together,

was taken over by László Békeffy, a popular and prolific author of light comedies. In 1916, in spite of the depression and hardships of war, a new palace was built in Koronaherceg (today Petőfi Sándor) utca with a large theater hall on the ground floor. As the developers failed to get a license to operate a cinema, the owners of the “Modern” took the opportunity and moved their cabaret into this brand new Art Deco building (today housing the Katona József Theater). Renamed the Belvárosi Színház, the new company staged several single-act comedies in addition to traditional cabaret pieces. In the meantime, former members of the Modern established a new company under the “Andrássy úti Színpad” name at their old venue, triggering a long and vicious rivalry between the two troupes. Andrássy’s main contributors included writers Frigyes Karinthy, Lajos Zilahy, Jenő Heltai, Ferenc Molnár and composers of the most popular hits of the day, Albert Szirmai and Dénes Budai, whose songs were sung by the Queen of Chanson, Vilma Medgyaszay. A new genre was also invented at the Andrássy: the bluette, a short comedy with its musical material based on popular melodies, folk songs and opera arias. As if to help the public forget the sufferings and dark memories of the war as soon as possible, new cabarets began to mushroom from the 1920s. Between the two wars about 50 theaters operated for shorter or longer periods. Several of the new establishments had to shutter within a short time due to financial difficulties, while others were forced to close for political reasons. Managers, authors and performers alike were faced with the reality that the old liberal attitude towards political caba-

rets was a thing of the past: the new “counter-revolutionary” regime under Regent Miklós Horthy, who came to power after the failed Hungarian Soviet Republic, was autocratic, populist and anti-Semitic. Only the most adroit could survive these critical years: those that were clever enough to use cunning scripts and techniques to outsmart distrustful censors and policemen. Evasion, prevarication, overacting, unexpected silence, deliberate slips of the tongue, blunders and ambiguities were just a few of the most frequently used stage methods to convey thoughts and ideas to the audience without risking the closure of the theater. The public was quick to learn the new language, and the Pest cabaret, originally a literary genre, transformed into a political art form. The Pest political cabaret, which took its typical form between the two wars, was and remained a joint act of performers and audience. What really mattered was not what was said on stage but rather what the audience perceived from it. A great deal of courage and determination was needed – from actors and audience alike. Among the new cabarets the Royal Bier Cabaret on Erzsébet körút proved relatively long-standing. Its director was Szőke Szakáll, who under the name S. Z. Sakall later played numerous supporting roles in Hollywood musicals and comedies in the 1940s and 1950s (he is best known, though, as the head waiter in Casablanca). Endre Nagy, the legendary konferanszié, launched a new cabaret in the basement of the Gresham Palace in 1921. The authorities, however, did not like Nagy’s daring jokes and closed the establishment after a few seasons. At first sight, a garage in a tenement building in Jókai utca

would not seem a very attractive venue for a theater, yet from 1912 on, it housed several cabarets. In 1917, the main entrance was shifted to the opposite side of the building at Teréz körút 46. In addition to short comedies and operettas, “Intim Cabaret” also played Grand Guignol-style horror stories. Renamed first in 1923 as the Terézkörúti Színház, then in 1939 as Kamara Varieté, the theater earned recognition for the high standard of its productions and remained the capital’s leading cabaret until 1944. Terézkörúti engaged Endre Nagy as art director and a young comedian, Béla Salamon, as manager. Salamon (1885-1965), the son of a Jewish village chandler, moonlighted as a super in various cabarets although he was warned his hoarse voice made him unfit for a stage career. Yet he had overwhelming success with the character he played throughout his long career: the awkward, fumbling yet artful “average Joe” whose shrewdness always helps him out of bad situations. The partnership of Nagy and Salamon lasted for six years. Initially it seemed these two contrasting characters – the soft-spoken, sarcastic and reserved Nagy and the stentorian, outspoken Salamon – got on well together. Nagy insisted on preserving the cabaret’s literary approach. He came to realize, however, that his droll chatting style was no longer popular with the public. In 1929, he resigned and wrote The Story of Cabaret, a book many of his critics believe was his most successful konferansz. This is all that has remained of his oeuvre: emphasizing that live speeches do not qualify as literary works, he never let his earlier monologues be published. Despite the departure of Nagy and, two years later, Salamon, Terézkörúti remained a top amusement spot in Buda-

pest. A new sketch, the dialogue of Hacsek and Sajó written by László Vadnai (later a successful screenwriter in Hollywood), became one of the regular pieces. In the series, Sajó, a serious, dry gentleman brings up current social and political issues in a no-nonsense way, but the less-educated Hacsek always misunderstands him. Behind the humor of the irrational, the audience could well sense the absurdity of everyday life. The “Komédia” Cabaret at Jókai tér also had a relatively long run. Originally a cinema, under the management of Sándor “Short” Rott (so nicknamed in the show-biz world because of his diminutive figure), Komédia opened in September 1927 and remained in operation until April 1944. László Békeffy opened a new cabaret in the Gresham Palace under the name “Podium Writers’ Cabaret” in 1936. At the opening he pledged he would follow in the footsteps of his famous predecessor Endre Nagy and revive “the most noble traditions” of the Pest cabaret. In the late 1930s, however, amid deepening social and ethnic tensions, growing anti-Semitism and increasing political restrictions, this proved a tall order. Békeffy’s daringly outspoken programs and hardlydisguised anti-German tone drew capacity crowds every night, but the regime did not appreciate his acidic humor: first the Actors’ Guild banned him in 1941, then he was imprisoned and deported to the Dachau concentration camp. He survived but never returned to Hungary. ■ Next: Cabaret in The Happiest Barrack This article is based on the contents of History of the Hungarian Theater I, edited by Tamás Gajdó.


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Budapest Business Journal | May 04 – May 17

Sir Bryan Cartledge: The Will to Survive In modern times, particularly in the aftermath of political cataclysms, Hungary has become the subject of profound political and historical studies. BBJ ANDRÁS SZARVASI

One of the most comprehensive surveys of Hungarian history written by a non-Hungarian comes from a former British ambassador who, though he spent only a few years in Budapest, gives convincing evidence of his vast knowledge and intellectual insight into this subject. The author, Sir Bryan Cartledge, is a distinguished British diplomat and academic. After studying in Cambridge, Oxford and the United States, he entered the diplomatic service in 1960. He was British Ambassador, first to Hungary (1980–1983), then to the Soviet Union (1985–1988).

In his book’s preface, Cartledge describes his motivations: “I began this book – The Will to Survive – in order to satisfy my own curiosity about Hungary’s past. While serving as British ambassador to Hungary in the early 1980s, I was frequently struck by how little British visitors to Budapest, both official and private, knew of the country’s history, and also by the small margin by which their ignorance exceeded my own . . .” Cartledge traces Hungary’s history from the arrival of the Magyars in Europe to Hungary’s membership in NATO and the European Union. The 1,100 years covered by this stirring account embrace medieval greatness, Turkish occupation, Habsburg domination, unsuccessful struggles for independence, massive deprivation of territory and population after the First World War, a disastrous alliance with Nazi Germany, motivated by the hope of redress, and 40 years of Sovietimposed communism inter-

rupted by a gallant but brutally suppressed revolution in 1956. The most interesting sections are those in which the author, breaking off his narrative, sheds the aloofness of the impartial historian and shares his personal views with readers. A good example is his reflections on the (rather ignominious) role British diplomacy played in the Trianon Peace Treaty signed in 1920 after the Great War between the Allies and Hungary. “The Treaty of Trianon – the part of the Paris Peace Settlement that dealt with Hungary – constituted the most severe reverse sustained by the Hungarian nation since the Battle of Mohács in 1526 […] The implications […] included: the reduction of Hungary’s area by two-thirds […] the reduction of Hungary’s population by over half […] the confiscation from Hungary of two-thirds of her railway, road and canal networks, together with approximately 80 per cent of her forests and mines; and – perhaps more

importantly than all these losses – the transfer of over three million ethnic Magyars to Czechoslovak, Romanian, Yugoslav or Austrian rule. […] The obsessive concern of the Entente powers to give their new creations, the Successor States, frontiers they would be able to defend against the perceived menace of Bolshevik Russia – and even, at the time, Communist Hungary – had the effect of leaving Hungary herself virtually defenseless against any future foe. Hungary lost most of the security of her historic natural frontiers, mountains and rivers … Taken together, the effect of these provisions was to make future Hungarian governments dependent on alliance with a major power if they were to fulfill their basic duty of ensuring the security of their citizens […] […] The fact remains that in the relatively limited areas in which its deliberations could make a difference,

the decisions of the conference were on balance unjust and gratuitously injurious to Hungary. They sowed seeds of bitterness and resentment that would eventually poison Hungarian public life and endanger peace in the region. Nevertheless, in acknowledging the evident injustice of an outcome in which Versailles cost Germany 10 per cent of her territory against the 66 per cent of which Trianon formally deprived Hungary, a caveat must be entered: the major part of Hungary’s losses stemmed not from the Peace Conference, not even from the defeat of AustriaHungary in the war, but from the policies which for threequarters of a century had made Hungarian rule unpalatable, sometimes intolerable, to the non-Magyar nationalities of Hungary. Those policies helped to ensure the eventual victory of the national idea in a kingdom the heterogeneous ethnicity of which had been deter-

mined by geography, migration, historical accident and, in her medieval past, overambitious expansion; and they must, therefore, bear much of the responsibility for the kingdom’s dissolution […]” The book is both instructive and entertaining. It offers a profound, still fresh and sometimes original insight into Hungarian history. It should be required reading for all who wish to know more about the past of this country and its people. ■ The Will to Survive London: Timewell Press, 2006 ISBN 1857252128 From the same author: Mihály Károlyi and István Bethlen: Hungary (Haus Histories) 2009 ISBN: 9781905791736 This review was first published in HINT Business Magazin. Budapest Business Journal reprints the article with the author’s permission.



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