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VOL. 21. NUMBER 07
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MONETARY SUPPORT 5% the new record low base rate
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The government has reason to smile after a surprisingly significant reduction of the budget deficit, while the new management of the central bank is living up to expectations and throwing its support behind central policy moves. 03
NEWS
BUSINESS
Q&A
No change in direction
Odds and evens
Hands−on approach pp
Former PM Gordon Bajnai points to the threats to the long−term outlooks represented by the policies pursued by the government. He says that only new investments can spur growth as exports are already at their peak and domestic consumption will not be a major factor anytime soon. 07
By re−regulating the Hungarian gambling market from the fundamentals, the government could kill two birds with one stone: it can raise much needed income and legalize online players’ status − provided that the stone is well−aimed. 10-11
Balázs Tahy, vice president of the Riverside Company, talks about the firm’s current investments, further possibilities and exit strategies. 09
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02 Opinion
Budapest Business Journal | april 05 – April 18
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THE EDITOR SAYS
A COSTLY VICTORY The Central Statistics Office delivered quite a shock when it revealed that Hungary’s 2012 budget deficit was not only within the 3% of gross domestic product limit required by the European Union, but was almost 1% better than what inter− national organizations and even the government expected. The government has long been expressing confidence that the Excessive Deficit Procedure that has been in effect against the country since joining the EU in 2004 can and will be lifted this year, following deep−cutting corrections in 2012. And while the EU and the International Monetary Fund have projected bigger gaps for this year and next, the government now has the 2012 2% figure and the low base it means for 2013 to support its case. The campaign to reduce the deficit has so far been a success. But the cost of this venture is already showing and it is becoming a painful prospect that these efforts have led to sac− rificing any growth that can be achieved in the near future. The excessive taxes that allowed the formidable reduc− tion of the gap have shaken investor confidence in the coun−
try, ruling out any major uptick in investments that could aid the labor market and consequently boost consumption, while companies already active in Hungary are looking at how they can cut their losses. RWE has announced that it has scrapped 50% of its planned investments for this year. Magyar Telekom is consid− ering exiting the Hungarian energy market altogether, leav− ing the state as the obvious buyer and the taxpayers to bear the costs of the necessary investments. Despite high central hopes for the new electronic motorway tolling system, the freight industry fears for its competitive− ness as result of the boosted costs, while gambling service pro− viders are starting to have serious doubts about whether they could be legally active in Hungary at the fees demanded. The Orbán cabinet’s method of trying to heal the econ− omy has always been blunt amputation rather than laser surgery, especially when dealing with the business sector. There may well be a cruel realization down the road that limbs don’t just grow back.
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THE VEIL DESCENDS The first rate−setting meeting of the central bank’s Mon− etary Policy Council under György Matolcsy’s governor− ship produced no surprises: the cutting cycle continued, taking the base rate to a historic low of 5%, and his sig− nature ‘fairy tale’ opti− mism has apparently also caught on among his new colleagues. The fact that the rate−setters, as well as National Bank of Hungary (MNB) staff, are now more inclined to adopt the gov− ernment’s favorable outlooks than they were during András Simor’s time is hardly surprising, especially since such a “sup− portive” approach is exactly what Matol− csy promised before he took office. However, while he advocated the use of new monetary tools that have previously been neglected, he has passed up per− haps one of the cen− tral bank’s most pow− erful and fast−acting weapons: words. When the MNB announced that Matolcsy would be parting with the decades−old tradition of holding a press conference after rate−setting meetings, legitimate concerns arose regarding transparency. These conferences featured
the central bank governor, as the head of the MPC, pre− senting the arguments behind the rate decision and, perhaps even more importantly, answering questions. Besides demonstrating that operations are transparent, central bankers use these occasions to influence markets through words without having to make actual policy moves. While this could easily be dismissed as “words are cheap”, one need only look back to last year when European Central Bank governor Mario Draghi used nothing but the power of verbal intervention to avoid a euro zone disaster. Why the MNB would want to exclude this tool from its arsenal is a moot point. However, it definitely gives the impression that mone− tary policymaking has become a cloak and dagger (if not a smoke and mirrors) affair, which seriously weak− ens the central bank’s credibility and, thus, its capability to reassure markets should things take a turn for the worse. Hopefully that won’t come to pass, or if it does, Matol− csy’s words will still carry weight once he emerges from the recesses of his central bank office.
POLICYMAKING HAS BECOME A CLOAK AND DAGGER AFFAIR, WHICH WEAKENS CENTRAL BANK CREDIBILITY
03
BBJ
1 News
NEWS IN BRIEF
MNB lowers inflation projection
04
NEWS
Bajnai: Hungary stuck in recession
07
macroscope
GOVERNMENT HAPPY TO SEE SINKING DEFICIT AND BASE RATE While the weather outside raises doubts that winter ever ended, economic developments will allow the government to think it’s finally spring. Not only have corrective measures pushed the budget deficit to an unforeseen low level, the cabinet also has a truly supportive central bank in its corner.
STORY HIGHLIGHTS ■ Hungary
beats expectations by lower than expected 2012 budget gap ■ New central bank management begins “supportive” running of MNB
put a permanent end to the traditional press conferences held after rate−setting meetings, so he was not available to pro− vide any additional details. Matolcsy’s first days at the MNB led to considerable internal changes alongside the change in approach that entailed staff reshuf−
country’s economic policies and also fore− casts a widening budget deficit that will exceed the EU’s 3% tolerance level. The IMF sees the general government defi− cit at 3.2% of GDP this year and at 3.4% in 2014. The newest statistics from the KSH show that the IMF overestimated the
fles. The approach, supportive of the gov− ernment of which Matolcsy was so recently a part, was also reflected in the latest study complied by MNB staff. The March inflation report, also the first one to be published under Matolcsy, states that the government will indeed be able to keep the deficit of the central budget below 3%, It sees the 3% consumer price inflation tar− get being met this year and also goes against outside opinions that Hungary will be stuck in recession in 2013. The growth projec− tion of 0.5% of GDP compares to the govern− ment’s own 0.9% forecast and was unchanged from the last report published under András Simor’s central bank leadership.
2012 budget gap for Hungary with its pro− jection of 2.5%. The IMF also repeated its objections to the unpredictability of policy−making that has shaken investor confidence, building a high hurdle to growth, which the Fund finds is the most important element to recovery from eco− nomic downturn. “Priority should be placed on strengthen− ing policy credibility, delivering the fiscal adjustment in a more growth−friendly way, and restoring bank intermediation,” the report said. The IMF report also sees worse outlooks for growth this year, projecting stagnation as opposed to the government’s positive growth forecast. Despite the criticism from the IMF, the government will in all likeliness continue to focus its efforts on Brussels instead of Washington and will concentrate on pre− senting its case for ending the EDP. The 2% figure for 2012 is a valuable argument in this discussion, potentially paving the way for a huge economic and political success for Viktor Orbán’s government.
The Central Statistics Office (KSH) caused quite an upset when it published the latest budget deficit figures for 2012, which show the gap as being not only below the 3% of gross domestic product level required by the European Union but also well below the gov− ernment’s own projection. The KSH found that last year, Hungary’s government sector generated a deficit of HUF 567 billion, which was 2% of GDP, notably better than the government’s expectation of a 2.7% gap. While there had been doubts ear− lier about the manageability of the deficit, the figure has also compelled market analysts to voice more favorable opinions about the eco− nomic outlook and, unsurprisingly, the minis− try gleaned confidence from the report. “The forecast [‥.] confirms, too, that this year’s target of the government, a deficit of 2.7% of GDP, will be achieved. This proves the commitment and the ability of the govern− ment to keep the deficit sustainably under 3%, therefore we have a good chance to conclude the EU’s excessive deficit procedure that has lasted for nine years,” the ministry said. If EU officials share the government’s sentiments, there is now a much stronger chance for Hungary to end the EDP, a scru− tiny against member states unable to keep their spending in check, a procedure that has been in effect against Hungary since it joined the bloc in 2004. Having been under the EDP for the longest time among all member states, the matter last year raised the prospect that the country could lose sorely needed develop− ment funds as a penalty. CENTRAL BANK SUNSHINE The government received encouragement not only from the statistics office but also
Photo: Elvira/Indafotó
GERGŐ RÁCZ
THE NATIONAL BANK OF HUNGARY
the National Bank of Hungary, where newly appointed governor György Matolcsy pre− sided over his first rate−setting meeting of the Monetary Policy Council. The session con− cluded with yet another 25 basis point cut and took the base rate to a historic low of 5%, sup− porting the decision with language indicating favorable outlooks. The statement issued after the rate−setting session highlighted mainly positive outlooks that the MPC now endorses. These include favorable outlooks on external financing capability and the central drive for the contin− ued reduction of public debt, both projections largely reflecting the government’s own com− munication. The statement also points to the continuation of rate cuts, even though there were more hawkish interpretations of the lan− guage, an idea that most observers reject. Nomura analyst Peter Attard Montalto expects rate−setters to continue with the cuts until they reach 4%, while Equilor’s Gergely Gabler sees the indicator bottoming out at 4.5% in the wake of the latest decision. Matolcsy’s arrival at the central bank
CONVINCING STILL LEFT TO DO While the better−than−expected deficit fig− ure for 2012 is perhaps the strongest point the government has made in its ongoing effort to end the EDP, there are still doubters. The International Monetary Fund also released its latest country review for Hun− gary, which reiterates concerns about the
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NEWS
IN BRIEF
Budapest Business Journal | april 05 – April 18
Viviane Reding is waging a private war against Hungary The Justice Ministry said of the deputy chairman of the European Commission, who criticized the independence of the Hungarian justice system during the course of a presentation that showed the country’s indicators in the field improved.
PROTESTERS GATHER TO OBJECT TO CONSTITUTIONAL CHANGES Anti−government protesters gathered for a demonstration in front of the governing Fidesz party’s headquarters in Budapest, expressing their objections regarding changes to the constitution and other modifications to the institutional system of the country. The protest attracted around 1,000 people and featured speakers from political and student groups. The demonstrators then marched to the Gyorskocsi utca police detention unit to protest the fact that participants from an earlier, similar protest (which involved attendants actually entering the Fidesz HQ), were sought by authorities for questioning.
ECONOMY VARGA DISMISSES FORINT WEAKENING
Hungary’s government plans to de− crease foreign currency exposure and help export growth at the same time, economy minister Mihály Varga told the Wall Street Journal. He dismissed any speculation that the govern− ment was looking to achieve the goal through planning to weaken the cur− rency to boost exports. HUNGARY PMI RISES TO 55.7 IN MARCH
Hungary’s seasonally−adjusted Pur− chasing Managers Index (PMI) rose to 55.7 in March from 54.1 in Febru− ary. An index value above 50 shows expansion in the manufacturing in− dustry while a value under 50 reflects contraction. Among the sub−indices that comprise the PMI, the new orders index “rose at a more moderate rate”. It rose for the fourth time in the past six months. The production volume index rose again, and showed an expansion, similar to January and February. 2012 DEFICIT 2% OF GDP
Hungary reported a preliminary gen− eral government deficit of HUF 566.7 bln or 2% for 2012 under the excessive deficit procedure (EDP), significantly lower than the government’s 2.7% tar− get for the year. The Economy Minis− try said the data shows Hungary can keep its budget gap below the EU− requirement of 3% this year as well, allowing it to exit the EDP, which has been in effect since 2004. IMF SEES HUNGARY ECONOMY STAGNATING
The International Monetary Fund sees
Hungary’s economy stagnating this year, as opposed to a growth of 0.8% forecast published last October. The IMF now expects consumer prices to climb 3.2% on an annual average this year (last fall it projected 3.5%) after 5.7% last year, the current account sur− plus to work out at 2.1% of GDP (the earlier forecast was 2.7%) after 1.7% last year, and unemployment to aver− age 11.1% (instead of the earlier projec− tion of 10.5%) after 11% last year. Other projections by the IMF see the general government deficit at 3.2% of GDP this year and 3.4% next, after 2.5% last year, and gross public debt to grow to 79.9% of GDP this year and 80.3% next year from 79% last year.
Numbers in the news
2.2% consumer inflation in the second half of 2013, as projected by the latest inflation report of the National Bank of Hungary
MNB LOWERS INFLATION PROJECTIONS
The National Bank of Hungary low− ered is projections for all gauges of consumer inflation this year. The MNB said that CPI could remain be− low the 3% mid−term “price stability” target over the full forecast horizon, the main findings of the report out− lined. It put average annual CPI at 2.6% for 2013, well under the 3.5% pro− jected in the previous Inflation Report published in December.
DOMESTIC GOV’T TO SUBSIDIZE TILL REPLACEMENT
The government has decided to offer some businesses a HUF 50,000 sub− sidy to install tills that can meet new re− porting requirements, National Econo− my Minister Mihály Varga said. Varga said the subsidies would be available to businesses with annual revenues of less than HUF 500 mln. He added that the subsidies would be awarded for no
11.6% the average unemployment rate in Hungary in the 15−74 age group in December−February, up from 11.2% in November−January, but level with the same period a year earlier. There were 501,900 unemployed on average in December− February, including 90,100 in the 15−24 age group.
more than five tills per business. As many as 180,000 businesses could be eligible for the subsidies, he said. Busi− nesses with tills with an online data connection have until May 1, 2013 to connect them to the tax office. KROES CRITICIZES HUNGARY OVER MEDIA FREEDOM
Hungary has failed to resolve concerns about media freedom as the govern− ment has implemented “only a fraction” of the recommendations to deal with the issue, according to European Union Commissioner Neelie Kroes. “Issues of media freedom are not yet solved; only a fraction of the Council of Europe recommendations have been imple− mented,” Kroes said. The award of a fre− quency to opposition radio Klubrádió this month after a series of lawsuits was “welcome”, Kroes added. EASTER HOLIDAY SET TO BOOST FOOD SALES HUF 40-45 BLN
Consumer purchases around the Easter holidays could boost supermarket food sales HUF 40−45 bln this year, accord− ing to the National Trade Association (OKSz). Hungarians spend about HUF 8 bln on ham, HUF 6 bln on sweets and another HUF 6 bln on eggs around the Easter holiday. Sales of spirits and perfume, which play a role in local holi− day traditions, also climb. The average Hungarian household spends HUF 15,000 on food for the Easter holiday. Food and food−type retail sales came to HUF 267.7 bln in January, fresh data from the Central Statistics Office (KSH) show. FX DEBT RELIEF SCHEME DEADLINE EXTENDED
Parliament approved an extension of the deadline for applying to join a support scheme for borrowers with
foreign currency−denominated loans to May 31 from the end of March. Un− der the exchange rate limit scheme, borrowers may opt to cap their repay− ments based on the limit for up to five years. The difference between the rate of repayment and market rates is placed on a separate account for repayment later. Interest costs on the separate account are covered in equal part by banks and the state.
POLITICS STATE TO CALL MORE TOBACCO SALES TENDERS
The state will issue a new tender for retail tobacco sales in 1,417 commu− nities in Hungary from which no ap− plications were received in the course of the initial tender for such sales. So far 15,633 applications for the retail sale of tobacco were submitted by the February 22 deadline stipulated in the initial tender. MARTONYI SAYS BANKS ARE SAFE
Foreign Minister János Martonyi said that the Hungarian bank sector is safe. Martonyi said the situation in Cyprus affects all European countries and it is everyone’s interest that the crisis there should be resolved. He said this is an exceptional, one−off situation. MKB SET TO RESHUFFLE
Shareholders of MKB Bank mandated the board of directors to take neces− sary steps to continue a restructuring program launched in the fall of 2011. BayernLB, the bank’s majority owner, said it was “working intensively” on re− structuring the bank and had “begun to reap the fruits of its labors in the form of lower costs and independent funding.”
Photo: Zsolt Szigetváry/MTI
04 News
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News 05
Budapest Business Journal | april 05 – April 18
COMPANY NEWS
GENERAL ELECTRIC could move production from a plant in the American state of Ohio to Hungary, an unsourced report in business daily Napi Gazdaság said. GE said in January it would shut down the plant in the city of Ravenna by the end of Q1 2014. The plant, which makes high−intensity discharge lamps, employs 164 people.
CIB Group, the Hungarian unit of Intesa Sanpaolo, quadrupled its af− ter−tax loss last year to HUF 151.9 bln from HUF 37.3 bln a year earlier, due to the difficult economic environment, its deteriorating loan port− folio, growing financing costs and the extremely high extraordinary bank levy. CIB Group had total assets of HUF 2,119.3 bln at the end of last year, falling from HUF 2,524 bln a year earlier.
Troubled Hungarian dairy company Óvártej has been purchased by Italian family business Belcolatte, former head of the company László Tóth told MTI. Econews earlier reported that Óvártej owes suppliers some HUF 850 mln. The purchase price has not been revealed, but Tóth said the buyer “has brought €3 mln into the company” to settle debts and to finance operating conditions. The new owner plans to spend a similar amount on developments at the plant. The Hungarian Investment and Trade Agency (HITA) has signed a partnership agreement with the Property Developers’ Roundtable As− sociation (IFK), the latter said. Under the agreement, HITA has agreed to inform the property developers of the possibilities and conditions for obtaining funding and to mediate business development opportu− nities between Hungarian suppliers and IFK member companies. IFK has agreed to raise awareness among its members of the activities and services of HITA. Hungarian construction company KÉSz has won a tender to rebuild the square in front of parliament with a bid of HUF 14.63 bln, the Office of Parliament told MTI, confirming earlier press reports. Other bidders in the closed tender were the consortia of Magyar Építő−Reneszánsz and Penta− Swietelsky. Reconstruction of the square must be completed by March 2014. Budapest Bank, the Hungarian unit of GE Money, had after−tax profit of HUF 10.9 bln in 2012, up 13% from the previous year. The improve− ment is attributed to a significant reduction in risk provisions and stable operating costs. The bank finished 2012 with consolidated total assets of HUF 925.6 bln, down 2% from 12 months earlier. Shareholders of Hungary’s MKB Bank mandated the board of direc− tors to take necessary steps to continue a restructuring program launched in the autumn of 2011. BayernLB, MKB Bank ’s majority owner, said it was “working intensively” on restructuring the bank and had “begun to reap the fruits of its labors in the form of lower costs and independent funding.”
WHO'S NEWS
Name ANDRÁS SIMOR Current company/ position EBRD / VICE PRESIDENT FOR POLICY
Former National Bank of Hungary governor András Simor will become vice president for policy at the European Bank for Reconstruction and Development (EBRD) from July 1. Simor will report directly to the EBRD president and will also be a member of the bank’s executive committee. He will be responsible for leading the coordination of strategies, policies and related initiatives supporting the EBRD’s transition mandate.
Photo: Tamás Kovács/MTI
MAGNET BANK PURCHASES BANCO POPOLARE FOR €500 MLN MagNet Hungary Community Bank has purchased a 100% stake in Banco Popolare Hungary, the Hungarian unit of Italy’s Banco Popolare, for €500 mln. Banco Popolare said that the sale of its Hungarian unit conforms to the bank’s strategy of focusing on its activities in Italy. Banco Popolare Hungary operates 10 branches, and had total assets of €133 mln at the end of 2012.
CIG Pannónia’s 100% non−life insurance unit will begin operations in Es− tonia, Latvia and Lithuania, CIG Életbiztosító announced. It had decided to operate in these countries via cross−border services. In other news about the company, shareholders have proposed recalling the company’s chairman, Béla Horváth. This is thought necessary because of changed market conditions and expectations and the further development of the company, as well as to ensure CIG Pannónia’s competitiveness. Sharehold− ers also proposed recalling supervisory board chairman Zsigmond Járai.
EXIMBANK SIGNS REFINANCING AGREEMENT WITH COMMERCIAL LENDERS The Hungarian Export−Import Bank (Eximbank) signed an agreement with 14 commercial lenders on a €400 mln foreign currency credit line to refinance export loans, CEO Roland Nátrán said. The financing will mainly support the exports of Hungarian SMEs, Nátrán said. Eximbank signed the agree− ment with Granit Bank, Raiffeisen Bank, UniCredit Bank, MKB Bank, Takarékbank, Budapest Bank, K&H Bank, CIB Bank, OTP Bank, Széchenyi Bank, Volksbank, Erste Bank, Bank of China and the Hungarian branch of Deutsche Bank.
CORRECTION
In the article “Not as rosy as it used to be” in our latest issue, we falsely gave the impression that contaminated meat products were found on the shelves of Tesco hypermarkets this March. In a written statement, Tesco Globál Áruházak Zrt has informed the Budapest Business Journal that the only time such product were detected was in September 2010 in the company’s hypermarket in Dunaújváros.
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Name MIHÁLY PATAI Current company/ position HUNGARIAN BANKING ASSOCIATION / PRESIDENT
The Hungarian Banking Association has re-elected UniCredit Bank Hungary president-CEO Mihály Patai as its chairman. Patai resigned as the association’s chairman last November, after Parliament approved legislation making the bank levy permanent and doubling the scale of a duty on financial transactions without prior professional consultations.
Name LÁSZLÓ BALÁZS Current company/ position HUPX ZRT / CHIEF EXECUTIVE OFFICER
Balázs was named CEO of Hungary’s electricity trader HUPX Zrt on March 18. Before his current assignment, he was head of Magyarországi Volksbank Zrt, and in 2011-12 was a member of the presidential board of the Hungarian Banking Association. He started his career at Magyar Külkereskedelmi Bank in 1990, and after spending several years at Bayerische Hypotheken und Wechsbank AG in Germany, he took part in founding Hypo Vereinsbank Hungária Rt.
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06 News
Budapest Business Journal | april 05 – April 18
ENERGY
NEWS FOR THIS SECTION IS TAKEN FROM THE BUDAPEST BUSINESS JOURNAL’S DAILY BRIEFING, ENERGY TODAY NEWSLETTER AT WWW.BBJ.HU/STORE/NEWSLETTER-PACKAGE
E.ON SELLS HUNGARY NATURAL GAS FIRMS TO STATE-OWNED MVM Hungary has bought back German utility E.ON SE’s domestic natural−gas businesses as Prime Minister Viktor Orbán seeks to strengthen the state’s hold on strategic as− sets and deliver on a pledge to slash utility prices. The government paid about €870 mln ($1.1 bln) for E.ON’s gas storage units and gas distribution business, including liabili− ties, state−owned energy company MVM Zrt and E.ON said at the end of March. The final price depends on the value of gas inventories on the closing day of the transaction, which is expected in the second half of 2013, pending approval from authorities. MOL SIGNS FOR $480 MLN OF REVOLVING CREDIT Hungarian oil and gas company MOL has signed an agreement on a $480 mln revolv− ing multicurrency credit facility. Erste Group Bank and KBC Bank are coordinating the facility, with Citibank International acting as the facility agent, MOL said. The term of the agreement is three years, but it can be ex− tended by a further 1+1 years. UKRAINE TO BOOST NATURAL GAS IMPORTS FROM POLAND, HUNGARY ADVERTISEMENT
HUNGARIANS WILL USE 1-4% LESS ELECTRICITY PER DAY
after turning the clocks ahead on March 31, transmission system operator MAVIR said. Hungarians use about 120 GWh less electricity during daylight savings time, MAVIR said.
Ukraine will increase natural gas imports from Poland to five million cubic meters per day (mcm/d) beginning April 1, up from about two mcm/d at present, state gas shipper UkrTransGaz said at the end of March. Ukraine, a transit route for more than half of Russian gas shipped to the European Union, wants to pay less for gas from Russia because it says a 2009 deal with Moscow set an exorbitant price. PANNERGY UNIT WINS HUF 2.8 BLN IN STATE SUPPORT PannErgy Geotermikus Erőművek, a unit of Hungarian geothermal−energy company PannErgy, has won HUF 2.84 bln in government support for con− struction of an innovative greenhouse complex that will use excess district heating the company generates in the city of Miskolc. PannErgy said that the company would initially hire more than 30 employees to work at the 10−hectare greenhouse complex. MAGYAR TELEKOM IN CONSULTATIONS ON RETAIL ENERGY SERVICES Magyar Telekom is holding consultations on the conditions under which the company could continue to provide energy services
to retail customers after the government’s decision to reduce household utility costs, the company told MTI after several press articles suggested it could withdraw from the retail energy services market. Magyar Telekom did not reveal the identity of the party or parties with which the company is in consultations. RWE TO REDUCE INVESTMENT IN HUNGARY German energy company RWE is plan− ning to reduce its investment in Hun− gary by 50% in 2013, according to board director Martin Herrmann. Herrmann named the Hungarian government’s measures as the reason behind the com− pany decision, and voiced hope that the EU would put an end to what he saw as a violation of European Community law. The director suggested that other com− panies could follow suit. ENI CONFIRMS BUYOUT OF TIGÁZ Italian oil and gas company ENI confirmed purchasing German electric utility com− pany RWE’s 44.2% stake in Hungarian re− gional gas company Tigáz. The deal raises the Italian oil and gas company’s stake in the Hungarian gas company to around 97%.
ROMANIA’S ENERGY MINISTER CONSTANTIN NITA
ROMANIAN ENERGY MINISTER HOLDS TALKS IN BUDAPEST A delegation led by Romania’s Minister Delegate for Energy Constantin Nita met with officials from Hungarian oil and gas company MOL as well as the state−owned Hungarian energy group MVM at the begin− ning of April. Officials told Nita they were interested in cooperating in cross−border projects, and in exploration and extraction activities in Romania. Nita and Pál Kovács, who is responsible for climatic and energy affairs at Hungary’s National Develop− ment Ministry, agreed that completion of the proposed Nabucco−West gas pipeline, transporting gas from Azerbaijan to west− ern Europe via Hungary and Romania, is in the national interest of both countries.
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News 07
Budapest Business Journal | april 05 – April 18
BAJNAI: HUNGARY STUCK IN RECESSION Former Prime Minister Gordon Bajnai expects the economy to contract this year, just as it did in 2012, and expects further socially disastrous events in the next few years with− out a change in government. Bajnai, head of the Együtt 2014 political group, predicts that recession will prove a lasting burden for Hungary with the econ− omy to shrink by 0.5% of gross domes− tic product this year. As he told a confer− ence celebrating the 20th anniversary of the founding of the GKI economic research institute, a study prepared by his associates that assumed a “no change in policy” sce− nario for the next six years showed the situ− ation can only deteriorate. His forecasts say that any growth in the time span covered could only amount to an annual 0% to 0.5%, and that unemployment will remain stuck at 11−12%, repeatedly forc− ing the government to implement corrections to annual budgets. His projections are somewhat worse than the latest yearly forecast released by GKI, which sees stagnation in 2013, meaning the output levels seen in 2012 will be repeated. However, it noted – largely agreeing with Bajnai – that even this feat could only come
GORDON BAJNAI
at the expense of burning through what lit− tle reserves the system has left to offer, and that all the while qualified labor is look− ing to leave the country and capital is flee− ing. GKI pointed out that the nationalized private pension funds, some HUF 2.5 tril− lion forints, have already been spent with− out any structural reforms and the economy remains in recession. The former premier also underlined the consequences of the pension wealth nation− alization and the fact that it was spent, say− ing the government has encoded a major general conflict into the welfare system, since those meant to keep the system alive through their taxes won’t have pensions of their own to look forward to. Bajnai said that from the three possible channels spurring growth – exports, invest−
Photo: Péter Komka/MTI
GERGŐ RÁCZ
ment and consumption – only inviting new investments can come into consideration, since exports are already at their peak and domestic consumption will not be a major factor anytime soon, given the high level of unemployment and the poor financial state of the population. For 2013, GKI does not see the desired increase in investments, but rather a 2% year−on−year drop. Bajnai urged the removal of Viktor Orbán’s government from power at the next general elections in 2014. He stressed that the change in “regime” must not lead to a quest of retribution spanning all levels of government, but should instead lead to a six−year comprehensive economic agree− ment with all stakeholders involved, as this is the only way to give prospective inves− tors any assurance that their assets in Hun− gary are safe. He laid out the political mix for a govern− ment in which he is a factor: liberal towards businesses that need only to be left in peace to operate, conservative to protect the mid− dle class from falling behind, and social democratic towards the impoverished, who need the support of the state. For businesses, Bajnai proposed a “tax constitution”, a document that provides written guarantees to investors about what their expectations can be for the upcom− ing years. Such a document has become a necessity after the hectic policymaking of the Orbán government has utterly shaken confidence towards the country. This too, must be created with the involvement of all stakeholders, he added.
TEDXDANUBIA 2013 – CROSSING THE LINE Hungary’s first, independently organized TEDx event, TEDxDanubia was held at the Uránia National Film theater. ZSOLT BALLA
From musicians, to award−winning war correspondents, to executive coaches, the entire region represented itself to share “ideas worth spreading”, and to talk about innovative or inspiring theories that are capable of defining the world today as well as shaping its future. We live in a world characterized by opportunities and connection, by an abundance of choices and stimuli, by great wealth and freedom. But we also live in a world defined and constrained by lines we do not cross: the lines of the impossible, lines of differences, the lines of fear and of poverty, lines of mistrust and intolerance, lines of
ignorance, doubt and indifference. Lines that seemingly and rarely protect, but more often imprison us. “I’d like to talk about the future, about an immediate, tangible future, about children,” said Szilvia Gyurkó, a lawyer, criminologist, and legal director at UNICEF Hungary. She talked about the common fears of children, and how these are supported, if not worsened, by the current political and legal system. She concluded that a new partnership needs to be formed with children, involving parents and educationalists, and the re−thinking of the basic structures of our society in order to answer these concerns. While recalling all the speeches of such an event may seem impossible in one single article, the three key principals of Szilvia Gyurkó’s presentation – fear, basic patterns of life and the future – featured in almost all of them. Executive coach György Sárvári, for example, highlighted the importance of breaking old systems and patterns, and the power that this change can bring to
HESNA AL GHAOUI, TELEVISION JOURNALIST
any situation. He highlighted a moment from a Hungarian women’s water polo team game, when a goal by Dóra Antal seconds from losing against Australia provided the Hungarian team with a second chance. War correspondent Hesna Al Ghaoui emphasized the importance of fear, saying that instead of overcoming or ignoring it altogether, it can be used as a force of motivation or inspiration, something that helps people boost their performance in ways they never thought possible. Microbiologist Aubrey de Grey said that it was just a matter of time before scientists will be able to tackle all seven symptoms of growing old, and basically invent immortality. The presentations from TEDxDanubia will shortly be available on its website: www.tedxdanubia.com
The eurozone will overcome recession by H2 2013, and an era of economic growth is about to begin, a recent study commissioned by Ernst & Young has revealed. But in spite of the change in tendencies, this year will still see an overall shrinking, the study found. ZSOLT BALLA
Photo: Gábor Mózsi/TEDxDanubia
Former premier Gordon Bajnai points to the threats to the long−term outlooks represented by the policies pursued by Viktor Orbán’s government.
EUROZONE TO OVERCOME RECESSION THIS YEAR
According to the specific figures of the report, GDP will decrease by about 0.5% in 2013, which is expected to be followed by growth of 1.1% in 2014, and then average yearly growth of 1.4% until 2017. The relatively slow pace of the acceleration is indicated by the fact that the projected GDP growth of 1.4% in 2017 will still be almost one percent lower than the average growth of 2.3% in 2007. “Altogether the eurozone is clearly in a better shape than it was six months ago, although we still expect recession for the entirety of the year, which is topped with the uncertainties resulting from the situation of Spain and Italy,” Ernst & Young CEO István Havas was quoted as saying. “From Hungary’s perspective it is a particularly good sign that Germany shows signs of recovery. This results in a change of tendencies not only in the eurozone, but in Hungary, too: we expect the Hungarian economy to increase by about 1.5% next year,” he added. Household consumption is expected to shrink by 0.6% this year, which will be followed by a growing trend of 1% from 2014 on. The sharp differences between the central economies and the states on the periphery of the EU will remain tangible and substantial in 2013, but the difference is expected to decrease from 2014 on. Ernst & Young’s study found that these latter states will see a slowdown in the speed of decline of their economies, and turning into slow growth by next year.
BBJ
2Business insight
Online gambling: odds and evens
10-11
The populist poker begins
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CUSTOMER-HANDLING TECHNIQUES STORY HIGHLIGHTS ■
Checking out basic data and business figures can tell a lot about your customers ■ Consistency is key when handling potential conflicts
Bankrupt companies tend to burn billions of forints from the Hungarian economy, and due to the domino effect, hundreds of other companies are drawn into bankruptcy every year. Creditors do have various useful and effective tools to map the liquidity and credibility of their partners, even if the basics of this professional know−how are hard to find in Hungarian business life. ZSOLT BALLA
The Budapest Business Journal asked the experts of Credit Management Group to gather the basic practices and sources of information that are accessible by and avail− able to anyone, are free or very low cost, and that will greatly improve a company’s ability to filter out the “weakest links” of its customer portfolio. Although the following list is just a little slice of the palette, consis− tently using these tools could save a com− pany millions of forints, not to mention the substantial amounts of anxiety, stress and panic it can also spare its management. FIRST STEPS FIRST (BEFORE YOU DELIVER ANYTHING) It might not be obvious at first, but it is well worth checking a company’s state and oper− ational status way before the first meeting. This will not cost money and it can be of great help: if a liquidation procedure or a winding up procedure is underway, even the first meeting can be cancelled with that partner. An enforcement procedure by
THERE MAY BE TROUBLE AHEAD As a rule of thumb, the changes listed below might be simple administra− tive changes, but they also might signal trouble ahead. It is usually worth looking into the potential reasons for the changes when they occur by talking to the client and consulting as many of the resources mentioned above as possible. COMPANY DATA − Change in the company’s name − Changes in the company’s field(s) of activity − Changes in the company’s locations − Changes in the company form − Changes in the top management − Enforcement procedures, winding up or liquidation procedures
MISCELLANEOUS INFORMATION − Changes in payment patterns − A sudden change in the volume of orders − A frequent change of the contact person − Delayed yearly report − Changes to the patterns of contacting the company − Significant changes of basic operational figures (revenue, investments, etc.) the National Tax Authority (NAV) is also likely to change the mind of even the fierc− est salesperson. And the good news is that all this information is publicly available and accessible: anyone can easily check a part− ner company based on a certificate of incor− poration or by a search on the NAV website. GETTING TO KNOW THE PARTNER Another common protocol is briefly map− ping the partner company’s market posi− tion, references and operational procedures as well as its owners, decision−makers and suppliers. The best resources for research of this kind include the certificate of incorpo− ration, browsing the company’s own web− site, checking its media presence and tak− ing a quick look at its market environment. After finishing the obligatory rounds, like searching the company’s name in Google, reading its press releases and exploring its media appearances for the past few years, comes another quick check skimming through the basic busi− ness facts and figures. Has the partner company submitted its mandatory yearly report? What do its numbers show? How did the revenue change? Is it making a
profit or is it massively in the red? How big are its debts? What about its disburse− ments? How has the circle of suppliers changed? Finding the answers to these questions is quick and easy by reading through a company’s yearly report. After getting to know the partner com− pany a little better, it is of utmost impor− tance to set a deadline and a credit line, at least internally, and to attempt to keep the partner within these pre−set frameworks while doing business with it, CMG’s experts advise. PUT IT IN WRITING! Putting the conditions of any cooperation into writing is imperative, the credit man− agement experts highlight. Undocumented or inappropriately documented business relationships can lead to extreme amounts of trouble. The conditions of a contract are equally important to both parties: they have to describe and define the exact parameters of delivery (such as price, quality standards, the bearing of unexpected costs, payment conditions, etc.) as well as prescribe the pro− ceedings in case of a potential argument. Of course, the contract can specify impor−
tant rights for the supplier, too. The frame− works of a contract have to be prepared only once – after that, the document can be used with minimal changes throughout the lifes− pan of the cooperation. FOLLOW UP ON THE OPERATION OF THE CUSTOMERS! Following the changes and acting upon them is a task of primary importance, especially since the economic crisis broke out in 2008. The status of a certain cus− tomer may easily and swiftly worsen, even if it was deemed favorable earlier. The only way of knowing this is to contin− uously monitor the operational changes of your clientele, with a particular focus on developments that might have a poten− tial effect on liquidity or solvency (see our box for a list of changes that might well signal more than just administrative transformation and that might be worth looking into more thoroughly). If you suspect that the payment capac− ity of your customer has changed, you must not remain idle yourself. Downgrading a partner and applying more rigid conditions can be one of the most important precau− tions you can take to avoid future losses. CONSISTENCY IS KEY Although no general advice can be carved into stone, the critical thing to do with the overdue payments and outstanding invoices of a partner is to remain consis− tent and predictable. While a key supplier can easily suspend its deliveries, even after a short delay in payment, a more competitive environment where there are lots of alternative suppliers may require more flexibility with deadlines and a lon− ger period of patience. In order to maintain a good and mutu− ally satisfying relationship with your cus− tomers, your debt collection practices need to be fair, predictable and consistent. It is crucially important that identical situa− tions trigger identical reactions. Typical mistakes, like demanding shorter pay− ment deadlines because of a company’s own liquidity problems, or neglecting to send out late payment notices in the sum− mer holiday period, should be avoided at all costs, as inconsistencies of this kind can ruin months of dedicated work in an instant, CMG’s experts conclude.
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Budapest Business Journal | april 05 – April 18
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BALÁZS TAHY Vice President The Riverside Company Balázs Tahy has been working in Riverside’s Budapest and Munich offices since 2006. Previously he worked in management positions in the corporate finance and transactions advisory department of PricewaterhouseCoopers, as well as in the corporate finance and acquisitions department of KPMG’s Budapest and London offices. He has advised a number of clients in M&A transactions in Hungary. He also gained experience in corporate transactions in the privatization of Budapest Airport Zrt as a financial advisor of the Hochtief Airports GmbH-led consortium.
The Riverside Company, an international private equity firm, has been present in the Hungarian market since the end of the ‘80s. It started as a financial consultancy, but it soon became evident that its main profile would be investments. KRISZTIÁN KUMMER
The company has a heritage in Hungary as founder Bela Szigethy is of Hungarian ori− gins. Riverside is currently investing from its fourth fund, worth around €420 million and aimed at investment opportunities in the EU, Croatia and Turkey. We talked with Hungar− ian vice president Balázs Tahy.
Q
Every private equity firm has its own investment strategy. What is yours? A: Riverside is not a specialist, we don’t limit our investments to specific sectors, if you take a look at our portfolio, it’s very wide ranged and mixed. Usually, we focus on the size of a company and the potential for growth. We prefer small and medium transactions with €15−150 million enterprise value and we always look for little leaders. There is a well−established theory behind our strategy. If an SME needs funds for further expansion (geographic or diversification) or the company just can’t find a successor after the retirement of the founder, Riverside could provide a viable solution. A good example is Diatron, a company we bought in late 2005. The company was a manufacturer of hematology analyzers, but we wanted to build a global IVD com− pany, supplying small− and medium−sized laboratories with a complete range of diag− nostic instrumentation and reagents. Our strategy was to develop a product port− folio and enter new markets as well. We purchased all the necessities to produce reagents and also expanded the clinical chemistry capacity of the company. Another example is Rameder, a German specialist that offers tow bars for almost any make and model car sold in Europe. When we bought the firm, we installed a new manage− ment with significant sectoral experience and based on the original model, we entered new markets like Benelux and Switzerland.
Q
Do you have a strict strategy on exits, based on revenue or time? A: We always have a developed exit strat− egy, but, as happens all the time, life changes these. Our basic investment period is 5−7 years. However, we have seen cases where our investment received a non−solicited offer much sooner than
EVEN IF THE NUMBER OF TRANSACTIONS MAY BE DECREASING, THE NUMBER OF OPPORTUNITIES IS NOT. that standard hold period, and if it is the right decision for the business and for our investors, we proceed in that case. Like− wise, we have held companies in our port− folio for longer than the standard period, again, if it makes sense for the business and our investors. But basically we plan for 5−7 years, being similar to most pri− vate equity firms in the industry.
Q
So what are the values that differentiate Riverside from its rivals? A: Contrary to most market players, we try to use a more “hands−on” approach. What does that mean? We know a lot of sectoral specialists who have spent 30−40 years in one particular field, but instead of retir− ing, they remain active and help our work as experts. That way, we can enter more into details and specifics, contrary to other investors on the market who have more of a financial focus, rather than operational
Q
M&A possibilities are deterio− rating according to the latest research by Ernst & Young... A: On the Hungarian market, the number of transactions are very limited, because there are few potential targets. In recent years, the transaction value chart was usually distorted by single transactions, like the acquisition of BorsodChem. But I think most private equity firms don’t see Hungary as a single country but rather as part of a region. There are many interesting stories in the region and I hope we can finalize some of them before the end of the year. So even if the number of transactions may be decreas− ing, the number of opportunities is not. However, there are three main answers to the decreasing number of transactions on the market. After the start of the crisis, many company leaders tried not to notice harsh realities and continued to offer their companies at pre−crisis price levels. More− over, the crisis has shaken confidence in
business plans − it became increasingly difficult to evaluate the viability of a busi− ness plan on a five−year basis. The third component is financing, as banks lost their appetite to finance and became very cau− tious after 2008. Now part of the appetite is back, but banks are still much more con− servative than before.
Q
How many investments do you actually have in the region and how many more do you plan in the near future? A: We currently have three investments in the region: Diatron, mentioned earlier, Turk− ish pet food manufacturer Tropikal and Bohemia Interactive Simulations, which we acquired in the very last days of 2012. In the current pipeline there are four or five inter− esting projects, but one can never tell at such an early stage which will succeed and which will not be a fit for Riverside.
Q
We already talked about Diatron, but please tell us a few words about the other two investments. Why are they so interesting? A: Bohemia is a very interesting company, designing military training software. The company’s customers include armed forces in the United States, UK and Australia. Our plan for Bohemia is to further strengthen an already impressive management team, in addition to providing the financial capi− tal needed to complete add−on acquisitions, and opening new markets and new technol− ogies for the company so that it can become the global leader in the market. Our other investment is Tropikal, the only independent pet food manufacturer in Tur− key. The brand is very strong and the Turk− ish market is growing rapidly, if only for demographic reasons. Since we invested in the company in 2010, we have focused on improving productivity and operations to allow the company to serve more customers and increase market share and revenue.
10
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2 Business
Budapest Business Journal | april 05 – April 18
ONLINE GAMBLING: ODDS AND EVENS STORY HIGHLIGHTS ■ The
government aims to collect HUF 30 billion from the new online gambling tax ■ Concession fees are too high for the size of the Hungarian market, might scare away operators
THE GOVERNMENT MUST OPEN TOWARDS OPERATORS INSTEAD OF SCARING THEM AWAY
By re−regulating the Hungarian gambling market from the fundamentals, the Hungarian government could kill two birds with one stone: it can raise the tight budget’s income and legalize online players’ status. Provided that the stone is well−aimed. KRISZTIÁN KUMMER
With the appearance of the first sports betting, poker and casino sites on the internet, Hungarian gamblers found themselves in a situation that was hard to solve if they wanted to obey the law and gamble at the same time. According to Act XXXIV/1991 on the organization of gambling, the permission of the Hungarian State Tax Authority (NAV) is needed to organize, to provide or even to advertise remote gambling or sports betting in Hungary. However, for more than two decades, only the state−owned monopoly Szerencsejáték Zrt has obtained such permission, so online gambling games organized in Hungary by other operators are illegal. Therefore, Hungarian visitors playing on these sites are breaking the law. Although the current legislation does not penalize Hungarian players for taking part in illegal games, participation in these games is at the player’s own risk as prize−related claims by juridical process are not enforceable. On the other hand, the participation of Hungarian citizens in gambling and betting abroad is not under the scope of the current law, so these particular cases do not fall within the competence of the tax authority, NAV told the Budapest Business Journal. In an effort to clear up these irregularities, the Hungarian government has submitted an amendment of the 1991 Gambling Act to the European Commission, proposing a gross profits tax (GPT) of 20% for licensed operators and a concession fee of HUF 100 million per game type per year. Additionally, a revenue−based 2.5% quarterly gambling management fee is to be paid, except for
those who have a mirror server in Hungary. According to the amendment, players would no longer be obliged to pay taxes, as operators would do so instead. HARMFUL OR NOT? While the Economy Ministry is trying to find new ways to raise budget revenue to keep the deficit under the 3% threshold of the GDP, the relationship of the ruling party and gambling is ambivalent to say the least. In November 2011, the tax on slot machines was raised from HUF 100,000 to HUF 500,000. In a short period, half of these machines were shut down, not being able to produce enough revenue to cover the tax. A year later, slot machines were banned outright from Hungarian bars, citing socially harmful effects. State secretary of the Prime Minister János Lázár also claimed
state security reasons had resulted in the decision, although he did not expound on this statement at all. The resolution caused a roughly HUF 30 billion loss of income for the budget, which is why the government aims to collect the same amount from the new online gambling tax. But the Remote Gambling Association (RGA) disapproves of the idea, claiming that the planned HUF 30 bln tax income from gambling games is absolutely unrealistic, while the concession fee is disproportionate by Western European standards. “The concession fee is at the same level as on the British market, except that the British population is six times higher,” RGA CEO Clive Hawkswood told the BBJ. “International experience clearly shows that if the right balance can be achieved, it will result in clear benefits for the Hungarian
Government and Hungarian consumers. Unfortunately, we also have experience from jurisdictions such as France that measures which effectively prevent the establishment of a competitive domestic market will cause very serious problems and will lead to consumers continuing to seek out operators in other jurisdictions,” Hawkswood added. While the government would badly need new operators on the market to achieve its HUF 30 bln tax income target, the high level of taxation may also deter potential Hungarian operators who would like the join the market beside the single current legal operator, Szerencsejáték Zrt. For most of the operators, a triple concession fee would have to be paid (HUF 100 mln for sports betting, casino and poker each). Based on current estimates of the RGA, the high concession fee could undermine
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Budapest Business Journal | april 05 – April 18
SZERENCSEJÁTÉK IS NOT ENOUGH By itself, Szerencsejáték is unable to meet such a huge tax payment expectation. To achieve this alone, an additional profit of HUF 130−140 bln in Hungary would be necessary, which requires 13−14 times more income from the online branch in 2013 than the combined offline and online income of Szerencsejáték Zrt last year. “While revenues from non−traditional marketing channels, such as the internet, ATM, phone or mobile, are proportionally increasing, the share of these in total sales revenue did not reach 5%,” Szerencsejáték said. Meanwhile, the brand new online site of Szerencsejáték, slated to open a long time ago, is still not functional. Earlier statements promised the site would be ready by the start of the 2012 UEFA European Football Championship and later by the Olympic Games. While Szerencsejáték still did not give a precise date on the grand opening to BBJ, market rumors expect it to launch in the near future. Given the low proportion of online sport betting and gambling in Hungary and the fact that 2013 lacks any major sport events that would catch the attention of players, a significant increase in income is not expected before the 2014 FIFA World Cup. ADVERTISEMENT
RESTRICTIONS EASY TO BYPASS Also, the government must open towards operators instead of scaring them away, as non−cooperative providers are hard to reach, grab or punish effectively. “When it comes to sanctioning the operators not keeping the Hungarian rules, the government has very few options to follow. They could ban advertising related to the provider or they could block the IP address of the operator in the country, which is easy to bypass. They might also try to block the financial services of non−cooperating operators in Hungary, but players could easily bypass these restrictions as well by opening a bank account abroad,” Hawkswood added. As their operation is neither legal nor followed in Hungary, NAV was unable
to provide any official financial details on foreign−based operators. But through non−official channels, it is very clear that foreign operators are very active in Hungary. Insider gambling blog Ittapiros estimated foreign operators’ advertisement sales in Hungarian TV channels at around HUF 615 mln at list prices, based on the number of appearances and average ad prices. However, the market has shrunk significantly, as the number of appearances in 2012 lags behind that in 2011 by 70%. Most of the advertisements were broadcast during the Olympic Games and in November, when beleaguered poker site Full Tilt was restarted. According to Ittapiros, 46% of ads were related to poker, 39% to sports betting and 15% to casinos.
“Illegal” operators’ advertisments in Hungarian TV channels, 2012
Source: ittapiros.blog.hu
the whole concept of “legalizing online gambling”, i.e. instead of the planned HUF 30 bln tax revenues, only HUF 5 bln should be expected including the tax paid by the state−owned gambling operator Szerencsejáték Zrt.
11
THE STATE’S STAKE Legal or not, online gambling winnings on games organized by foreign operators are taxable in Hungary if the individual is a resident in Hungary. (Winnings on Szerencsejáték games are already net amounts and no further taxes are due.) Based on the net profit (income minus the cost of the bet), any individual should determine in advance his income and pay the tax no later than the 12th day of the month following the quarter in which the win occurred. Also, a 27% health contribution is to be paid. Overall, after every HUF 100 of winning, HUF 43 is to be paid in tax and contribution according to the current law. No wonder the willingness to pay is very low amongst players.
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2 Business
Budapest Business Journal | april 05 – April 18
THE POPULIST POKER BEGINS All the above is unsurprising since Fidesz is resorting to tried and tested methods of financial populism, of which voters appar− ently can’t get enough. As always, ques− tions about the sustainability of “presents” such as the reduction in the price of utili− ties are drowned out by the eagerness of political parties to outbid one another with wild promises. Given that it can actually start delivering on its promises, Fidesz has the better odds in this game. We hinted already a few weeks ago that with the option of limiting voter partici− pation to those who pre−register – which would have increased the weight within the electorate of the upper−middle and upper classes that have profited most from Fidesz’ economic policies – dashed by the Constitutional Court, Fidesz may have to buy the 2014 election with a credit advanced by future taxpayers. And in fact a populist pocketbook cam− paign is fervently underway now. The opposition is of course trying to pick up the tempo dictated by the governing party, but it not only lags behind Fidesz’ mas− sive, decade−and−a−half−old experience in unrealistic “don’t tax but spend” rheto− ric but is also hampered by lacking access to the public purse. Some opposition actors also suffer from the fact that many voters have a keen memory of their past actions, which many consider an indication of their anticipated future performance. In other words, they don’t hold their spending pledges in high regard. Fidesz faces such distrust, too, but it is actively working on overcoming it in office; MSzP would need to gain office to allay citizens’ distrust, but it is unlikely to do so if it is not believed. DECLINING UTILITY PRICES: THE SILVER BULLET After long periods of gradual decline, Fidesz was in a strong position going into 2013. For one, even at its low point in the polls last year it was significantly ahead of its challengers. With the prospect of retaining a plurality in most electoral dis− tricts, it would have swept any election. Moreover, the governing party’s numbers
the cost of living has actually increased substantially under Fidesz, while wages have not kept pace with inflation. Nevertheless, two problems remain for the opposition parties. By refocusing on pocketbook issues – a somewhat daring undertaking in light of the past years’ effects on wallets – Fidesz is clearly set− ting the campaign agenda. It also steers public debate away from issues where it knows that even many generally sym− pathetic intellectuals believe its posi− tions to be indefensible, towards issues where its record thus far may be weak but where it nevertheless can actually improve before next spring – unlike the opposition, which can merely talk in response to Fidesz’ palpable largesse.
Party supporters among decided voters, %, Jan-Mar 2013
JAN 2013 FEB 2013 MAR 2013
OTHER
Source: TÁRKI
It seemed unlikely a few months ago, but Fidesz’ star is on the rise. Already towards the end of last year it had managed to halt its steady decline in the polls, and since January it has been expanding its base while the opposition is apparently struggling.
EVEN AT ITS LOW POINT IN THE POLLS LAST YEAR IT [FIDESZ] WAS SIGNIFICANTLY AHEAD OF ITS CHALLENGERS slightly improved in early 2013. It has now received a further significant boost, especially among less educated and low− income voters, the segments that have suffered most from the economic malaise of the past years. The latter group appears to appreciate the price controls imposed by Fidesz on public utility companies, which has led to a decline in the money households must expend on essential goods and services. Fidesz has found a policy that not only eases the intense financial burden experi− enced by many on account of the unceas− ing economic drought but has also done this in a way that seemingly only hurts service providers – many of which are for− eign−owned to begin with. This chimes beautifully with the persistent anti−cor− porate, and especially anti−foreign cor− poration, rhetoric of Fidesz. In terms of its communication on economic policy,
Fidesz has steadfastly stood by its own rhetoric, even when the facts blatantly belied it (cf. austerity). Now the fanatic refusal to submit the propaganda to a reality test may pay off: a portion of the electorate is clearly buying the idea that Fidesz is making life easier for poor folk. NO REST FOR THE OPPOSITION The Bajnai campaign quickly picked up the gauntlet, moving away from the cere− bral campaign mostly focused on con− stitutionalism, quality of democracy and a modernized economy towards a more populist emphasis on living stan− dards. None of the opposition parties appears inclined to cede bread−and−but− ter issues to Fidesz, especially since the government’s performance in this area is spotty, to put it nicely. Both Bajnai’s E14 and MSzP were right in pointing out that, regardless of the slight adjustment now,
BIDDING WARS So the opposition might well feel that it needs to raise the stakes on whatever Fidesz does until May 2014 and what it promises until 2018. The last time the left emerged victorious from such an unsa− voury auction cost Hungary dearly: the spending spree in 2002 set the country’s development back significantly. More− over, the opposition faces the problem that promises of future bounty inherently sound more credible when proffered by someone who is dispensing goodies as he speaks. Also, political memories may be short, but neither Bajnai nor the Social− ists have a good track record in the role of Santa Claus that they wish to assume now. For Fidesz, moreover, the particular opportunity of squeezing partly foreign− owned utilities to give customers a break is a triple boon. Voters are obviously grateful for the lower bills and aren’t wont to question whether this particular gift can go on giving. Furthermore, the effect on the exchequer is for now indirect, and the impact on the contentious deficit will not be as obvious as a straight−out cash gift to voters. Finally, the attack on large corporations owned by foreigners – who are allegedly protected by that shady Soviet−style power in Brussels, to bor− row from Viktor Orbán’s recent parlance – meshes perfectly with the grand narrative of Fidesz’ struggle against global capital− ism and foreign domination. This potent combination makes Fidesz’ latest move particularly suave. But it is at the same time another warning shot to foreign investors, whose wariness Fidesz arouses at the country’s peril.
www.policysolutions.hu Political Research and Consultancy Institute
BBJ
3Special Report Road freighters under pressure to support growth 14
E−toll: the secret source of budgetary income 16
Market round−up Warehouses with vacancy 19
LOGISTICS
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Budapest Business Journal | april 05 – April 18
ROAD FREIGHTERS UNDER PRESSURE TO SUPPORT GROWTH STORY HIGHLIGHTS ■
Logistics plays strategically important role in exports ■ New regulations raise concerns of hurting sector competitiveness
The government is looking to haulers as obviously significant agents of exports and the resulting boost to economic growth, even as companies fear for their competitiveness in the wake of government measures.
WEIGHT OF TRANSPORTED GOODS, THOUSAND TONS
YEAR RAILWAY
ROAD
WATER
PIPELINE
OVERALL
2001
50 117
129 935
2 903
24 064
207 043
2002
50 370
217 099
3 006
23 360
293 845
2003
50 612
214 390
2 105
24 107
291 227
2004
51 726
213 339
7 356
25 142
297 581
2005
50 850
228 935
8 413
25 818
314 032
2006
54 705
250 801
7 327
25 793
338 642
2007
53 983
243 299
8 410
25 809
331 518
2008
51 542
258 380
8 829
25 189
343 954
2009
42 277
229 809
7 744
23 232
303 079
2010
45 794
199 848
9 951
24 410
280 020
2011
47 424
182 840
7 175
31 050
268 501
Logistics and the freight industry are key elements for the government’s strategic aim of boosting growth through exports, which remains essentially the only economic driver, absent extensive new developments and rising domestic consumption. The current government projection is for growth of 0.9% of gross domestic product this year, which it is expected will mostly be cov− ered from exports, since new investments will largely come from European Union develop− ment funds, with no expectation of an uptick in domestic consumption. The latest figures from the Central Statis− tics Office (KSH) attribute 6.2% of annual GDP to the logistics sector, which includes freight as well as storage. The National Development Ministry estimates road freight’s contribution to the economy at 1.7−1.9% of GDP annually, an indicator that changes little year to year.
DEVELOPMENT SITES
FOR SALE
BALATONALMÁDI – 9,519 + 58,165 m2 BUDAKESZI – 2,750 m2 – 68,600 m2 BUDAPEST, XIII. VÁCI ÚT – 2,890 m2 BUDAPEST, XVI. RÁKOSPALOTA – 12,000 m2 + 6,000 m2 BUDAPEST, III. TARHOS U – 4,849 m2 More information:
Tel.: 36 (1) 327 2050, 327 2061 E-mail: industrial@robertson.hu www.robertson.hu
TAKING TOLLS Now, however, with the planned introduc− tion of electronic road tolls, even prosperous members of the industry are concerned that the leap in costs will prove highly detrimental to the sector’s competitiveness. According to György Waberer, owner of major player Waberer’s International, the launch of the new system will increase oper− ators’ costs by 40−50%, which is why freight− ers have approached the government to take steps that will support the industry in other areas. This figure, however, is seen as an exaggeration at the ministry. “Fees payable for the use of commer− cial infrastructure constitute approxi− mately 10% of road transport costs,” the ministry said when queried by the Buda− pest Business Journal. As such, it dis− missed the leap in expenses cited by Waberer as incorrect. It also pointed to previous government measures such as targeted fuel tariffs, tax benefits for truck drivers’ employment and tax benefits after fuel purchases as steps that were targeted at improving the operating con− ditions for the freight industry. Furthermore, European Union laws allow the state to pro− vide direct subsidization to transport firms operating domestically, especially smaller ones, should the need arise to intervene in protection of their competitiveness. The ministry stressed that it aims to hold constant discussions with the industry to explore options.
PLENTY LEFT TO BUILD The government has also pledged to com− mit resources to expanding and improving the existing infrastructure. Prime Minister Viktor Orbán told companies participating in the government’s series of strategic coop− eration agreements that they can hope for upgrades to the motorway system to pro− vide their respective sites better access and better routes of delivery. Shortly afterwards, state secretary for foreign trade relations Péter Szijjártó announced the planned construction of the V0 rail freight ring around Budapest. The ministry said the costs of the proj− ect are currently under evaluation, a pro− cess which should be completed by the end of April. The expenses are to be cov− ered by the existing €1 billion financial framework with China or by funds from the European Investment Bank, it added. Last year, the government also con− sidered buying back MÁV Cargo, for− merly the freight division of state rail com− pany MÁV, which was privatized to Rail Cargo Austria in 2008. The ministry did not clearly state whether the venture is still on the agenda or if the idea had been dropped. It did note that the government’s economic strategy includes the creation or the availability of a Hungarian−owned rail cargo firm. The government noted that with the creation of a cargo division at regional rail company GySEV in 2011, this goal has partially been met.
NO TAMPERING WITH CURRENCY Given the overwhelming importance of exports as the only potential source of eco− nomic growth, speculation has arisen that the government would be happy to see a weaker forint and may actually be adjust− ing its policies to that end. Economy Minister Mihály Varga has firmly rejected the notion and it appears that shipping firms that conduct their businesses mainly traveling to foreign destinations would also disapprove of any such effort. According to Waberer, the euro−forint range of 280−300 seen in the past months is OK, but any sig− nificant weakening would actually have an adverse effect. “Of course, a weaker forint is good for exporters, but seeing how much imports have lapsed, our vehicles would be unable to find a commission for the return trip if the currency was any weaker,” he said, high− lighting the industry’s constant concern of getting goods not only to ship to some loca− tion but also to carry something on the way back to make the venture worthwhile. Still others in the private sector would be happy to see the forint somewhat weaker. Last year, head of the entrepreneurs’ umbrella organization VOSz Sándor Dem− ján praised the prospects of a tangibly weaker forint. He said the target should be 315 against the euro so that exporters could benefit more and increase their contribution to overall economic growth.
Source: KSH
GERGŐ RÁCZ
WWW.BBJ.HU
15
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Budapest Business Journal | april 05 – April 18
MORE DATA, QUICKER Entrepreneurs, invariably keen on monitoring and controlling every aspect of the workflow, are still very open to business efficiency IT−tools. With the advance of mobile technologies, the difference between IT and telecommunications are fading away. KRISZTIÁN KUMMER
Following a long and steady trend, logis− tics firms are still very open to business efficiency tools. Fortunately, from the software−focused point of view, a broader variety of analytical software is ready to fulfill the ever−growing requirements. “As it has for larger businesses, SAP has integrated native tools in the cor− porate governance system for SMEs too. This feature helps entrepreneurs to achieve tighter cost control, better inte− gration of processes and the analysis of relations and effects between logistics and affected areas,” Csaba Balázs, prod−
ADVERTISEMENT
uct specialist at SAP Hungary explained. The logistics sector is particularly interested in so−called ‘big data’. To quickly reach and use such data, SAP provides a new memory−based tech− nology that uses memory as a source for data processing instead of the hard drive. This enables real−time monitor− ing of logistic processes and also the possibility for immediate interaction. “For example, the work of several thou− sand taxi drivers in Tokyo is supported by traffic information and route sugges− tions based on the GPS−coordinates of the drivers,” Balázs added. While the precise need may differ in many ways, the main challenges of logis− tics are always the same: accuracy and traceability. Synergon, however, has an interest in a very specific field of logistics IT. “Public transport passenger informa− tion and traffic management services are not at all mainstream IT−support tasks, but the system we provide to the trans− port authority company of Budapest, BKK− BKV, fulfills these requirements com− pletely,” says Synergon CEO Zoltán Jutasi. SLOW, STEADY PACES In the case of mobile technologies, market
expansion has only just started, but demand is growing fast at the management level, both in Hungary and around the world. The mobile application supporting SAP Business One, for example, has been downloaded more than 100,000 times globally. According to Synergon, the state mobile payment applications announced lately might bring a small boom in this particular field, but the pioneering role must be undertaken rather by domestic small− and medium−sized enterprises. Hungary is lagging behind the world’s leading areas in the field of cloud services, mostly because decision−makers here don’t believe that sensitive data and information are secure on servers they don’t own. “Even if we feel and know that cloud services could provide great data security, financial predict− ability and savings, the perspective of mar− ket players has to mature to accept these val− ues in a wider range,” Jutasi said. DIFFERENCES ARE FADING AWAY Looking at the international market, the differences between telecommunica− tions and information technology is blur− ring and that process cannot be stopped. Smartphones and their connected appli− cations providing a wide variety of use
have helped telecommunications morph into infocommunications. Two key directions seem to frame the IT−industry related to logistics. On one hand, companies see substan− tial growth in IT−spending due to a conscious investment policy; on the other hand, IT−spending increasingly manifests itself in service contracts, rather than just purchasing. Instead of large projects, a long−term cooperation forms between provider and customer. In Hungary, the IT−sector expects much from the planned government invest− ments, even if the huge turnover and rev− enue might lead to unpredictable risks to corporations. Actually, in the cases of e−toll, e−ticketing, mobile payment appli− cations and the railway GSM−R system, where significant development and deci− sion−making process are taking place. “We find, that only those who are stand− ing on several feet and able to offer complex solutions to customers can survive on the domestic market. Therefore, we have estab− lished an ICT value chain, which could pro− vide a cost−effective package of services in the fields of data asset management, data security, IT outsourcing and ICT to existing and future partners,” Jutasi said.
16
WWW.BBJ.HU
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Budapest Business Journal | april 05 – April 18
E-TOLL: THE SECRET SOURCE OF BUDGETARY INCOME While the 2013 budget expects HUF 75 billion in income from the electronic toll system on the Hungarian motorways from July, the only advancement in the process is that the government has encrypted the details of the investment. KRISZTIÁN KUMMER
Hungary’s e−toll system seems to have turned from a not so secret weapon to boost this year’s budget into a time bomb. The government was to introduce a new e−toll system to replace the electronic vignette on its motorways by July 2013, but the project seems destined to undergo a long delay since tender winner Get− ronics Magyarország announced that it would withdraw and not sign the contract. The cabinet had been left to choose between two options: to invite a new ten− der or carry forward the project with− out public procurement. Government
decided to do the latter with the intention of keeping the deadline of July 1, 2013, announced a year earlier. Starting the project in time is not just an issue of credibility for the government, but also a financial question, as the cen− tral budget for 2013 expects HUF 75 bil− lion in income from the system.
toll collection for state security reasons. Although this might sound mysterious, it’s clearly just a legal loophole to speed up the process. According to a govern− ment decree from 2011, simplified tenders could be held in a so−called national pro− cedural order, which does not necessitate a public procedure, and negotiations can be undertaken with invited (and for state security reasons already checked) Hun− garian companies. Opposition parties have already expressed concerns that the Fidesz−led government wants to spread around billions to friendly corporations without control. But whoever the winner will be, the government has to find accept− able reasons to explain to the European Union why the procurement procedure has been encrypted. This is especially the case given that there has already been an open public procurement procedure, and that construction of toll systems is not a secret anywhere in the world. And Hungary will also has to convince the European Com− mission, which will look again at the exces− sive deficit procedure against Hungary in April, that the gaping hole in the central budget can be filled somehow.
GOING BEHIND SCHEDULE With only a few months left, the govern− ment is still sticking to its original date of introduction, the Development Minis− try confirmed to the Budapest Business Journal. Two state companies have been appointed to initiate the related tenders, but there is no certain information about the elements or requirements of the sys− tem, nor about the general contractor. From a simple logistics point of view, how− ever, it is clear that purchasing, shipping and installing 280,000 electronic devices in all the trucks on the Hungarian roads in just a couple of months is impossible. But there are still options to save the budget, like to intentionally delay the construction of the electronic system, and instead introduce a “section ticket”, as daily newspaper Népsz− abadság speculated. The existing vignette system would be upgraded, so different dis− tances would require differently priced tick− ets for vehicles over 3.5 tons. This informa− tion has been neither confirmed nor denied. The likely solution to the problem has been made no clearer by the government declaration that community public pro− curement rules don’t apply to electronic
DRAMATIC CHANGES TO LOGISTICS EDUCATION
ZSOLT BALLA
Hungary may not be as attractive to foreign capital now as it was a few years ago, but ever more international companies continue to set foot in the country, with an increasing demand for an appropriately educated work− force. And while the Hungarian education system has numerous weaknesses, one of the most important, almost everyone agrees, is that it is far from being aligned to the require− ments of the market. The situation gets even worse if we look at lower level education: while most companies entering Hungary are look− ing for skilled workers, they frequently strug−
gle or fail to fill vacancies even in regions with high unemployment rates. Efforts to improve Hungary’s vocational education capacities are being made, but to date the results are few and far between. On top of changing attitudes towards skilled work, the financing structure and also the curricula of all vocational training facili− ties needs to be thoroughly reviewed and reconsidered, says Klaudia Szemeryné Pat− aki, deputy mayor of Hungary’s eighth larg− est city, Kecskemét, and Ministerial Com− missioner of vocational and dual education in the vehicle industry. While this mammoth undertaking is still underway, she says one of the greatest achievements to date is a newly established logistics branch, which will offi− cially become part of the recognized curricu− lum from September of this year. “Since logis− tics is of foremost importance in the vehicle industry, we needed to introduce it as a stand− alone profession, among with five other areas, while derecognizing professions that no lon− ger exist in today’s business environment,” she told the Budapest Business Journal. TOUGH SCHOOLING While being recognized by the state and for− mally becoming part of higher education is a big step forward for certain professions, on a practical level it also poses market players and educational institutions with substantial
The average hours of education now and the min/max hours of education after Sep, 2013.
1,440 190 current average
min (after Sep, 2013)
960 max (after Sep, 2013)
problems to tackle. Especially as becoming an official part of the higher educational curric− ulum also means a dramatic increase in the hours of education, and consequently a jump in the costs of the training. As part of the new regulations, which will become effective after a short grace period, by September 2013, the previously undefined number of hours will be set to a minimum of 280 for a qualification as a storekeeper, and 960 in the case of a logis− tics administrator. To put this into a better context, this means a roughly 500% increase in the timeframe of the education, and has a similar, if not bigger effect on the costs. To date, neither companies nor educational insti−
Source: ittapiros.blog.hu
No key industry can survive, let alone develop, in an environment where education is completely out of touch with market requirements and with the importance of the specific field within the economy. Logistics, for one, is a great example: as long as learning is not in line with real−world requirements, it will surely remain a bottleneck for the entire area.
tutions know how this change will affect the number of new graduates in the field. The question marks around the new scheme are of particular importance as the new requirements will barely allow for courses that are optimized to be completed while also working a full time job (a common condition when the education is paid for by the student’s employer). Since companies and potential stu− dents have seriously limited budgets, it is diffi− cult to imagine that de−motivating businesses to pay for the education of their employees will result in an increase in the number of appropriately educated professionals in the industry. Or in other words, if students are left to their own devices, and required to pay for their education themselves, they will likely be unwilling or unable to do so, as the estimated costs of these courses exceeds hundreds of thousands of forints. “We are proud that on our latest course, 26 unemployed people over 45 years of age received a qualification as a storekeeper, and 23 of them managed to find a job shortly thereafter,” says a statement from the Hun− garian Association of Logistics, Purchas− ing and Inventory Management (HALPIM), issued when it launched its traditional edu− cation, focused solely on professional skills, for the last time in the second semester of the 2012/2013 school year. What comes after September is still to be seen.
3
WWW.BBJ.HU
Budapest Business Journal | april 05 – April 18
17
LOGISTICS SERVICE PROVIDERS
2
DHL CSOPORT
3
GYSEV CARGO ZRT
4
www.railcargo.hu
www.dhl.hu
www.gysevcargo.hu
GEBRĂœDER WEISS SZĂ LLĂ?TMĂ NYOZĂ SI ÉS LOGISZTIKAI KFT
70,514
53,764
12,166
10,000
Âť
53,764
1,264
10,000
109,600
28,000
43,000
–
–
–
–
Âť
–
–
–
–
–
–
–
–
–
–
–
–
DISTRIBUTION
TRANSPORTATION
DUTIABLE GOODS
SEA FREIGHT
AIR FREIGHT
LCL
LTL
FTL
DOMESTIC
DOMESTIC GOODS
WAREHOUSING OTHER SERVICES
FREIGHT FORWARDING SERVICES
INTERNATIONAL
RAILWAY
DISTRIBUTION
WAREHOUSING
NET WAREHOUSE SPACE USED FOR LOGISTICS WAREHOUSING (SQM) 0
LOGISTICS SERVICES
–
MAIN CLIENTS IN 2012
MOL Nyrt, Audi Hungaria Motor Kft, Borsodchem Zrt, ISD Dunaferr Zrt, Magyar Suzuki Zrt, MĂĄtrai (UĹƒPĹ? =UW 0HUFHGHV Benz Manufacturing Hungary Kft
Âť
Âť
YEAR ESTABLISHED
1
RAIL CARGO HUNGARIA ZRT
NET REVENUE FROM LOGISTICS SERVICES (HUF MLN) IN 2012
COMPANY WEBSITE
TOTAL NET REVENUE (HUF MLN) IN 2012(1)
RANK
Ranked by total net revenue
OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN
TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR
ADDRESS PHONE FAX EMAIL
2005
– Rail Cargo Austria AG (99.90)
Imre KovĂĄcs Clemens FĂśrst MĂłnika Kurdi
1133 Budapest, VĂĄci Ăşt 92. (1) 512-7300 (1) 512-7799 cargo@railcargo.hu
1993
– Deutsche Post AG (100)
Zoltån Rezsek, PÊter Bartha, John Lucas, Balåzs Jånositz – –
www.dhl.hu/hu/ elerhetosegek.html
2009
GySEV Zrt (100) –
JĂĄnos SkĂĄla Zsolt Szalai GĂĄbor MĂĄrta
9400 Sopron, MĂĄtyĂĄs kirĂĄly utca 19. (99) 517-139 (99) 517-401 info@gysevcargo.hu
1989
– Austrian family business (100)
Thomas Schauer – –
2330 Dunaharaszti, RaktĂĄr utca 2. (24) 506-700 (24) 506-705 gw.hungary@ gw-world.com
Szabolcs Czifrik Libor Bruna Bolyki Ă gnes
2330 Dunaharaszti, Jedlik Ă nyos utca 31. (24) 502-000 (24) 491-820 hungary.info@ raben-group.com
Âť
Food, nonfood, excise goods, FMCG sector, white goods, automotive industry
1989
– Raben Group N.V. (100)
MOL Nyrt, Tiszai Vegyi KombinĂĄt Nyrt, 6DQRĂ€ $YHQWLV =UW (SDFN 0Ĺ?DQ\DJLSDUL Kft, Henkel MagyarorszĂĄg Kft, Trilak FestĂŠkgyĂĄrtĂł Kft
1998
– (90.10) – (9.99)
,VWYiQ (UĹƒV ErzsĂŠbet TĂłth MĂĄrta Fogarasi
4030 Debrecen, VĂĄmraktĂĄr utca 3. (52) 510-120 (52) 510-197 info@trans-sped.hu
1991
GyÜrgy Karmazin (100) –
Gabriella SzĂŠcsi LĂĄszlĂł PĂĄlmai Anna Barbara Bagi
5000 Szolnok, VĂĄrosmajor Ăşt 23. (56) 524-050 (56) 524-040 info@bi-ka.hu
SĂĄndor BĂĄtki ViktĂłria Paksi Ă dĂĄm TomkĂł
2890 Tata, Barina utca 1. (34) 586-600 (34) 380-052 hungary@ vrtranspoint.com
www.gw-world.hu
5
RABEN TRANS EUROPEAN HUNGARY KFT
8,510
8,510
45,000
www.raben-group.com
6
TRANS-SPED LOGISZTIKAI SZOLGĂ LTATĂ“ KĂ–ZPONT KFT
7,550
Âť
35,000
–
–
–
–
–
–
www.trans-sped.hu
7
BI-KA LOGISZTIKA KFT
8
TRANSPOINT INTERNATIONAL (HU) KFT
www.bikalogisztika.hu
3,913
3,908
19,000
Ă TI DEPO KĂ–ZRAKTĂ ROZĂ SI ZRT
www.bilkkombi.hu
DELOG KFT 11
www.delog.hu
MOGĂœRT 12 KERESKEDELMI ZRT
www.kuehne-nagel.com
NR
SCHENKER NEMZETKÖZI SZà LL�TMà NYOZà SI ÉS LOGISZTIKAI KFT
–
–
–
–
–
Âť
1990
– Transpoint International (FI) OY (100)
1996
Âť Âť
TĂĄdĂŠ AlfĂśldy MĂĄria F. SzabĂłnĂŠ GyĂśrgyi SzabĂł KovĂĄcsnĂŠ
1136 Budapest, PannĂłnia utca 11. (1) 305-2200 (1) 305-2234 mail@atidepo.hu
2001
Rail Cargo Hungaria (100) –
IstvĂĄn FullĂŠr LĂĄszlĂł Vass Huszti IstvĂĄn
1239 Budapest, EurĂłpa utca 4 (1) 289-6000 (1) 289-6060 bilkkombi@ bilkkombi.hu
– (90.01) – (9.99)
Zsolt FĂźlĂśp ErzsĂŠbet TĂłth MĂĄrta Fogarasi
4030 Debrecen, VĂĄmraktĂĄr utca 3. (52) 510-100 (52) 510-193 info@delog.hu
Âť
Låszló Lehel – –
1113 Budapest, Bocskai út 77–79. (1) 317-4052 (1) 209-2133 RIÀFH#PRJXUW KX
2006
Âť Âť
Danu M. Temelie – Krisztiån Forgåcs
1097 Budapest, GyĂĄli Ăşt 50 (1) 333-8888 (1) 333-8890 info@ euroministorage.com
(OHPpU eOĹƒ PĂŠter Kiss MiklĂłs Csaba
2071 PĂĄty, M1 Ăœzleti Park (23) 889-000 (23) 889-099 info.budapest@ kuehne-nagel.com
Ă rpĂĄd VĂĄsĂĄrhelyi, SĂĄndor BarĂŠnyi IldikĂł KotĂĄnczi Zsuzsanna Papp
1239 Budapest, EurĂłpa utca 5. (1) 278-7878 (1) 278-7888 info@schenker.hu
40,000
–
1,924
1,924
153,000
–
–
–
–
–
Âť
–
Eurogate, HungĂĄria IntermodĂĄl, HUPAC Intermodal, MSC Hungary
TEVA GyĂłgyszergyĂĄr Zrt, WKS Ungarn Kft, Family Frost Kft, Trilak Kft, Philip Morris MagyarorszĂĄg Kft, SvĂĄb-Gasztro Kft
1990
Âť
1946/ 1992
1,700
792
215
100
www.euroministorage.hu
KĂœHNE + NAGEL NR SZĂ LLĂ?TMĂ NYOZĂ SI KFT
2,338
1,400
Âť
60
92,000
35,000
10,000
www.mogurt.hu
EURO MINI STORAGE 13 HUNGĂ RIA KFT
2,338
www.atidepo.hu
BILK KOMBITERMINĂ L ZRT 10
Grundfos, Coloplast, AGC, Sanmina-SCI, Reckitt Benckiser, 6FDQĂ€O
www.vrtranspoint.com
9
Âť
Âť
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Âť
Âť
61,000
Âť
Âť
17,000
–
www.schenker.com NOTES: (1) Financial data provided by the companies has been closed by accountants but not yet audited.
–
(99.90)
–
Âť
Automotive, high tech, pharma & healthcare, industrial goods, FMCG
1991
– Kßhne + Nagel Eastern Europe AG (Austria) (100)
Electronics, automotive, FMCG, chemical, wood and cereals, industrial customers
1999
DB Hungåria Holding Kft (100) –
18
WWW.BBJ.HU
3
Budapest Business Journal | april 05 – April 18
STATE-ACCREDITED LOGISTICS CENTERS
www.trans-sped.hu
3
ZÁHONY-PORT ZRT
4
ÁTI DEPO KÖZRAKTÁROZÁSI ZRT
www.zahony-port.hu
www.atidepo.hu
5
BILK KOMBITERMINÁL ZRT www.bilkkombi.hu
6
DELOG KFT www.delog.hu
BUDAPESTI 6=$%$'.,.g7ł NR LOGISZTIKAI ZRT www.bszl.hu
M3 LOGISZTIKAI NR SZOLGÁLTATÓ KÖZPONT www.m3logisztika.hu
PROLOGIS PARK BUDAPEST-BATTA www.prologis.com NR
PROLOGIS PARK BUDAPEST-GYÁL www.prologis.com NR
DISTRIBUTION LOGISTICS
RAIL LOGISTICS
DOMESTIC WAREHOUSING
CUSTOMS WAREHOUSING
MINI-BUS SERVICE FOR EMPLOYEES
PROFESSIONAL BUILDING MANAGEMENT
24-HOUR SECURITY / CONCIERGE DESK
12,166
28,000
–
–
–
–
Trans-Sped Logisztikai Szolgáltató Központ Korlátolt Felelôsségû Társaság 4030 Debrecen, Vámraktár u. 3. (52) 510-120, (52) 510-197 www.trans-sped.hu
Záhony-Port Zrt 4625 Záhony, Európa tér 12. (1) 513-3010, (45) 425-212 www.zahony-port.hu
ÁTI Depo 1136 Budapest, Pannónia u. 11. (1) 305-2200, (1) 305-2234 www.atidepo.hu
7,550
2,479
1,924
110
70,000
153,000
–
–
–
–
–
–
–
–
BILK Kombiterminál Zrt 1239 Budapest, Európa utca 4. (1) 289-6000, (1) 289-6060 www.bilkkombi.hu
1,700
92000
–
–
–
–
DELOG Debreceni Logisztikai Központ és Ipari Park Kft. 4030 Debrecen, Vámraktár u. 3. (52) 510-100, (52) 510-193 www.delog.hu
792
35,000
–
–
»
89,000 sqm normally covered storage, out of this 25,000 sqm tempered
Budapesti Szabadkikötô Logisztikai Zrt 1211 Budapest, Weiss Manfréd út 5-7. (1) 278-3502, (1) 278-3501 www.bszl.hu
–
–
–
–
–
»
–
»
YEAR ESTABLISHED OWNERSHIP (%) NO. OF HUNGARIAN FULL-TIME NONEMPLOYHUNGARIAN EES ON MARCH 1, 2013
CUSTOMS CLEARANCE
TRANS-SPED LOGISZTIKAI SZOLGÁLTATÓ KÖZPONT KFT
GySEV Cargo Zrt 9400 Sopron, Mátyás király u. 19. (99) 517-139, (99) 517-401 www.gysevcargo.hu
SERVICES
PERSONALIZED FACILITY DEVELOPMENT
2
www.gysevcargo.hu
TAX WAREHOUSING
GYSEV CARGO ZRT
BONDED WAREHOUSING
1
OPERATING COMPANY NAME, ADDRESS, PHONE & FAX NO., WEBSITE
NET WAREHOUSE SPACE USED FOR LOGISTICS WAREHOUSING (SQM)
COMPANY WEBSITE
WAREHOUSE LOGISTICS
TOTAL NET REVENUE (HUF MLN) IN 2012(1)
RANK
Ranked by total net revenue
–
2009 230
GySEV Zrt (100) –
János Skála Zsolt Szalai Gábor Márta
9400 Sopron, Mátyás király utca 19. (99) 517-139 (99) 517-401 info@gysevcargo.hu
1998 340
» »
,VWYiQ (UŃV Erzsébet Tóth Márta Fogarasi
4030 Debrecen, Vámraktár utca 3. (52) 510-120 (52) 510-197 info@trans-sped.hu
4625 Záhony, Európa tér 12. (1) 513-3010 (45) 425-212 szekeresistvan@ zahony-port.hu
–
–
»
TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR
ADDRESS PHONE FAX EMAIL
2007 406
MÁV Zrt (100) –
József Farkas Péter Simon László Hajdu
1996 182
» »
Tádé Alföldy Mária F. Szabóné Györgyi Szabó Kovácsné
1136 Budapest, Pannónia utca 11. (1) 305-2200 (1) 305-2234 mail@atidepo.hu
2001
»
Rail Cargo Hungaria (100) –
István Fullér László Vass Huszti István
1239 Budapest, Európa utca 4. (1) 289-6000 (1) 289-6060 bilkkombi@ bilkkombi.hu
1990 32
– (90.01) – (9.99)
Zsolt Fülöp Erzsébet Tóth Márta Fogarasi
4030 Debrecen, Vámraktár utca 3. (52) 510-100 (52) 510-193 info@delog.hu
2003 14
» »
Zsolt Szabó Edina Sponga –
1211 Budapest, Weiss Manférd út 5–7. (1) 278-3502 (1) 278-3501 freeport@ portfobudapest.hu
János Vágott (27.90), Nóra Vass (0.50), Péter Kuti (0.50), Zoltán Gazdag (0.50) Z. E. M. Establishment (70.40)
Katalin Juhász – –
1151 Budapest, Székely Elek út 11. (1) 445-1930 (1) 445-1927 titkarsag@ m3logisztika.hu
»
M3 Logisztikai Kft 1151 Budapest, Székely Elek út 11. (1) 445-1930, (1) 445-1927 www.m3logisztika.hu
»
63,000
»
»
»
Prologis Hungary 1095 Budapest, Lechner Ödön fasor 7. (1) 577-7700, (1) 577-7701 www.prologis.com
»
38,993
–
–
–
–
–
–
–
–
2010 11
– ProLogis B.V., Netherlands (100)
László Kemenes Sylwester Flaga 0DUWD 7ĕVLRURZVND
2440 Százhalombatta, Iparos utca 4 (1) 577-7700 (1) 577-7701 info-hu@prologis.com
–
2008 11
– Prologis B.V., Netherlands (100)
László Kemenes Sylwester Flaga 0DUWD 7ĕVLRURZVND
2360 Gyál, Ipari Park Hrsz. 7. (1) 577-7700 (1) 577-7701 info-hu@prologis.com
Prologis Hungary 1095 Budapest, Lechner Ödön fasor 7. (1) 577-7700, (1) 577-7701 www.prologis.com
»
151,443
–
–
–
–
–
–
–
1998
»
WWW.BBJ.HU
PROLOGIS PARK BUDAPEST-HARBOR www.prologis.com NR
PROLOGIS PARK BUDAPEST-SZIGET www.prologis.com NR
PROLOGIS PARK BUDAÖRS www.prologis.com NR
PROLOGIS PARK HEGYESHALOM www.prologis.com NR
Prologis Hungary 1095 Budapest, Lechner Ödön fasor 7. (1) 577-7700, (1) 577-7701 www.prologis.com
Prologis Hungary 1095 Budapest, Lechner Ödön fasor 7. (1) 577-7700, (1) 577-7701 www.prologis.com
»
»
132,446
120,519
–
–
–
–
–
–
–
–
–
–
–
–
–
CUSTOMS CLEARANCE
PERSONALIZED FACILITY DEVELOPMENT
24-HOUR SECURITY / CONCIERGE DESK
PROFESSIONAL BUILDING MANAGEMENT
MINI-BUS SERVICE FOR EMPLOYEES
CUSTOMS WAREHOUSING
DOMESTIC WAREHOUSING
RAIL LOGISTICS
SERVICES
DISTRIBUTION LOGISTICS
TAX WAREHOUSING
WAREHOUSE LOGISTICS BONDED WAREHOUSING
NET WAREHOUSE SPACE USED FOR LOGISTICS WAREHOUSING (SQM)
OPERATING COMPANY NAME, ADDRESS, PHONE & FAX NO., WEBSITE
TOTAL NET REVENUE (HUF MLN) IN 2012(1)
RANK
COMPANY WEBSITE
19
3
Budapest Business Journal | april 05 – April 18
YEAR ESTABLISHED OWNERSHIP (%) NO. OF HUNGARIAN FULL-TIME NONEMPLOYHUNGARIAN EES ON MARCH 1, 2013
TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR
ADDRESS PHONE FAX EMAIL
–
2008 11
– ProLogis B.V., Netherlands (100)
László Kemenes Sylwester Flaga 0DUWD 7ĕVLRURZVND
1225 Budapest, Campona utca 1. (1) 577-7700 (1) 577-7701 info-hu@prologis.com
–
2008 11
– ProLogis B.V., Netherlands (100)
László Kemenes Sylwester Flaga 0DUWD 7ĕVLRURZVND
2310 Budapest, Leshegy utca 30. (1) 577-7700 (1) 577-7701 info-hu@prologis.com
– ProLogis B.V., Netherlands (100)
László Kemenes Sylwester Flaga 0DUWD 7ĕVLRURZVND
2040 Budaörs, Seregély utca 8. (1) 577-7700 (1) 577-7701 info-hu@prologis.com
– ProLogis B.V., Netherlands (100)
László Kemenes Sylwester Flaga 0DUWD 7ĕVLRURZVND
9222 Hegyeshalom, Hrsz. 1073/1. (1) 577-7700 (1) 577-7701 info-hu@prologis.com
Prologis Hungary 1095 Budapest, Lechner Ödön fasor 7. (1) 577-7700, (1) 577-7701 www.prologis.com
»
291,36
–
–
–
–
–
–
–
–
2001 11
Prologis Hungary 1095 Budapest, Lechner Ödön fasor 7. (1) 577-7700, (1) 577-7701 www.prologis.com
»
24,093
–
–
–
–
–
–
–
–
2007 11
NOTES: (1) Financial data provided by the companies has been closed by accountants but not yet audited.
WAREHOUSES WITH VACANCY Hungarian logistics centers are trying to keep afloat and survive in a shrinking economy, but have to fight with low demand and decreasing rents. KRISZTIÁN KUMMER
According to the Central Statistics Office (KSH), the transport and storage sector (including rail freight transport, storage and postal activities) provided 6.2% of GDP in 2011. Although KSH is has no detailed data on the sub−sectors, the revenue−based proportion of road transport is estimated to be 1.7−1.9% of GDP. Since the millennium, the share of the transportation and ware− housing sector hovered in a narrow range compared to the GDP, and no significant change is expected this year either. Vacancy rates are similarly static, and rents depressed. “Average vacancy rate at the end of 2012 was just under 20%, Prologis had a 4% lower vacancy rate in Hungary, as of Decem− ber 31, 2012,” László Kemenes, vice president of Prologis Hungary said. “Prices are still low and under pressure, and while there are signs of a slight increase in prices on markets in Poland, Czech Republic and Slovakia, we do not see this happening in Hungary yet. Mar− ket players are basically the same as before, there are no newcomers.”
FIRE PROTECTION HANDICAP Client demands are mostly unchanged as well: 60−70% of demand comes from logistic service providers, who – being under pres− sure from their clientele – are looking for shorter leases at lower prices. But service providers are also facing new challenges, as a very strict height limit for storage in the logistics buildings in the new National Fire Protection Code is extremely detrimental to a sector already fighting with the effects of the crisis. An amendment from last year specifies that the maximum height of storage in a logistics hall shall not exceed the lower plane of the fire curtain. In practice this means that, for a ten meter high building where the lower edge of the fire curtain is five meters from the floor, the height of storage is limited to five meters instead of ten. Therefore, the storage capacity uti− lization on the market might decrease by an average 30−40% and many providers could become unable to satisfy their cli− ents’ need. Moreover, Hungarian prop− erty developers could find building logis− tics centers 30% more expensive than in neighboring countries. DREAMS SEEM LOST Changes and unpredictability in the local economic climate have reduced the appeal of Hungary, despite it having the most developed motorway network in the region.
The Hungarian dream of becoming a logis− tics hub for Central and Eastern Europe seems to be slipping further away with every day. Sándor Bátki, managing director of Transpoint International said, “Decisions in the recent period rather hindered and made it more expensive to provide logis− tics services than helped. The bankruptcy of Hungarian airline Malév also contributed to the problems, as Budapest’s transit traf− fic become highly dependent on surround− ing airports, such as Bratislava or Vienna.”
And the logistics sector shrinks in par− allel with the Hungarian economy. “There is an excess supply leading to decreasing prices on the market. Logistics centers are fighting to survive in many cases,” Bátki pointed out. Kemenes isn’t opti− mistic either: “We do not expect any big surprises: stagnation and minimal or zero new development is more likely. We expect an improvement of a few percent in the vacancy rate, but no major change in leasing conditions,” he added.
BBJ
Socialite
r e k sha E WHER
THIN
PPE N T... HA S U J GS
This March the Budapest Business Journal revived its old tradition and held 2013’s first BBJ Shaker, with several more due to follow. The first Shaker of the year features a presentation by Budapest chief architect Sándor Finta, who laid out the ambitious plans and the multitude of opportunities that the capital city yet holds. The guest speaker was all the more fitting, since the event also saw the introduction of the BBJ’s brand new design. The BBJ has always prided itself in being an integral part of Hungary’s business sphere, not just by informing its readers through reporting and analyzing current events. While technology over the past two decades has created more channels to reach audiences, it also important to sometimes remove the medium and allow people to actually connect. One of the best ways of doing just that are the BBJ Shakers which are informal get−togethers that are nonetheless informative thanks to the esteemed guest speakers who attend, while also offering participants a drink and some light snacks on the side. The BBJ looks forward to welcoming you to our next event.
SHAKEN, NOT STIRRED
WWW.BBJ.HU
Socialite 21
Photos: Zsolt Balla
Budapest Business Journal | april 05 – April 18
THE BBJ SHAKER SERIES CONTINUES:
OUR NEXT EVENT
focuses on how the MALÉV bankruptcy has affected the operation of Ferenc Liszt International Airport and the entire tourism industry. Our special guest is MIHÁLY HARDY, communications director of Budapest Airport. DATE & TIME: APRIL 28, 5 P.M.
r shaker G E TH IN WH E R
N APPE T... H S JUS
Looking forward to meeting you at the informal gathering of the Budapest Business Journal.
WWW.BBJ.HU
22
Budapest Business Journal | april 05 – April 18
PROMOTION
HAMBURG: GATEWA Proud, affluent, energetic – attracts both the joyful and the adventurous, being naturally exciting and certainly no prude. This is Hamburg, Germany’s second biggest city, and one of Europe’s most cosmopolitan. The international port town is a unique gateway to the world, with a genuine fusion of business, culture and culinary.
Population: 1.8 million Area: 755 km2 Airport: Hamburg-Fuhlsbüttel Airport Flight time from Budapest: 1h 40min Spring/summer weather: Temperatures range between 14-24°C, with occasional showers. Public transport: Very developed, day pass costs €6.80 Prices: Hamburg is mostly cheaper than Rome or Paris, but more expensive than Berlin; average prices are similar to those in Vienna or London.
UNFORTUNATELY I HAVE NOT MUCH FREE TIME
I AM HERE TO DISCOVER
BUSINESS TRAVELERS Being home to more millionaires than any− where else in Germany and having the highest GDP in the country, Hamburg offers a promising reason to travel here for business. Assuming that visitors with such interest would not have much spare time, we highlight the “must−experience” activities that can be achieved in one or two days. SHOPPING: You do your best to get the maximum out of your business trip – and even more! Would you like to surprising your colleagues back home? Or treat your beloved ones? Sure – let’s do some shop− ping! The streets along Lake Alster are the essence of elegance and modern chic. The Neuer Wall shopping area with the Jung− fernstieg promenade, Hamburg’s luxury boulevard, offers a splendid range of bou− tiques specializing in exclusive fashion, art and travel accessories. It also boasts the elegant Alsterhaus department store with jewelry, galleries and Hamburg’s old− est cinema, the Streits. CULINARY: Putting across a great deal, you deserve to treat yourself! Immerse your− self in the fusion of international flavors that is Hamburg. Some of the best restaurants can be found in the Schanzenviertel dis− trict. Star chef Tim Mälzer’s first−class selec− tion of dishes are available in the Bullerei (once the historical cattle halls of the old Hamburg slaughterhouse) at Lagerstrasse 34b. Just a stone’s throw from the city hall, still in the center at Rathausstrasse 4, Café Paris offers a genuine taste of France, Ham− burg style: fish couscous or rump steak in a pepper sauce. A real treat is a visit to Eisen− stein in a former ship propeller factory at Friedensallee 9 in the Ottensen district. This posh restaurant is the place to see and be seen. The divine offers speak for them− selves: bread−crusted Muscovy duck with asparagus and rosé oyster mushrooms or
pan−fried scallops on a tongue of veal, to name just a couple. GET OUT/IN THERE: Short of time, but still in the adventurous spirit? Why would you miss the “special character” of Hamburg? Visit the fun and vibrant dis− trict of St. Pauli, with its Reeperbahn, the party−capital of Hamburg. Yes, there are low−key local bars where wearing ties is forbidden, but making new friends is guar− anteed. Check into pubs where musicians often commemorate the fact that The Bea− tles started their international career here. Operettenhaus is the best place for qual− ity theater shows, but people often come here for other live performances: a rare phenomenon of red−light entertainment is booming here with several night clubs.
FISH MARKET IN THE MARKET HALL
PASSIONATE TOURISTS
REEPERBAHN - THE PARTY CAPITAL OF HAMBURG
FLOATING BOAT CHURCH
THE PORT-CITY: If you regularly receive the biggest cruise ships, it is naturally your obligation to host the biggest port festival in the world. The event takes place around May 7 when music, dragon boats and a grand flo− tilla of tall ships and sailing boats fill the har− bor, generating a thrilling atmosphere on the river Elbe. This lavish celebration kicks off the tourist season. Another traditional attrac− tion takes place here every Sunday since 1703: at the Fish market you can enjoy a lush breakfast while listening to live music in the Market Hall. The port has old industrial and new residential buildings but also provides space for modern culture: one can admire
WWW.BBJ.HU
23
Budapest Business Journal | april 05 – April 18
SPONSORED BY
WAY TO THE WORLD the works of Warhol, Chagall or Annie Lei− bovitz at the Deichtorhallen. A few years ago a very touching place was inaugurated in the district: the Ballinstadt Emigration Museum commemorates the millions who left Europe for the United States between 1850 and 1939. With the help of special data− bases, you can research your own relatives. The area is full of bars and musical theaters, restaurants and hotels; there is even a float− ing boat church – Flussschifferkirche – by the Kajen/Hohe bridge. Taking a boat trip is certainly a worthwhile effort to discover the port district. Check companies located by the Hohe bridge. THE HAMBURG TRANSFORMATION: The ambitious architectural fusion of Gothic and modern styles is one of the coolest parts of Hamburg. Speicherstadt’s warehouse district with its lovely boutiques and brick− built Hanseatic romanticism charms you and introduces you to two of Hamburg’s most popular museums: the Miniatur Wunder− land with fascinating toy railway worlds, and Hamburg Dungeon, which offers a ghostly journey through the history of the metropolis. HafenCity is a bold contrast to the once dom− inant neo−Gothic architecture with an array of supermodern designs. The flagship future project is the Elbphilharmonie, Hamburg’s new “transparent” concert call. Other eye− catching buildings are the Unilever building with its futuristic façade and the Marco Polo Tower with its terraces providing an excel− lent place to relax. Large varieties of cultural events take place in the new spaces where the Steinerne Orientteppich – oriental car− pet made of stone – is a real miracle. BROADWAY OF EUROPE: There are no more shows anywhere in Germany than in Hamburg. More than 40 theaters invite peo− ple from all over the world. The first public opera house in Germany, the State Opera, opened here, so classical music lovers will be spoiled with the three major orchestras of the town. Beside the Broadway hits Cats and The Lion King, last year Hamburg hosted the world premiere of Rocky, the musical at the TUI Operettenhaus. Another charming Disney show is Tarzan at the Neue Flora Theater with the music of evergreen super− star Phil Collins.
CITY MUSEUM - HAMBURGISCHE GESCHICHTE
WATERFRONT OF HAMBURG AT THE RIVER ELBE
WE ARE HERE TO RELAX FAMILY GROUPS
JAPANESE GARDEN IN THE CITY CENTER
OUTDOOR-GREENERY: Hamburg has 2,302 bridges − more than Ven− ice and Amsterdam combined. No sur− prise that with its several canals, the city has been called the Venice of North− ern Europe. Thanks to the green spaces, parks and nature reserves, Hamburg has also been named the European Green Capital. It is thus a perfect location for outdoor−friendly families. In the Alster− park you can picnic, cycle around or hire paddle or rowing boats and cruise on the lakes Innen− and Aussenal− ster. There is an oasis called Planten un Blomen with the largest Japanese Garden in Europe, right in the city cen− ter. The 4,300 sqm landscape also holds the Botanic Garden, and you can find a skating rink, roller−skate and inline− skating rinks with playgrounds and the− ater performances for children. Colorful water fountains are the real highlights of the area in the evenings. Hamburg’s Elbe Beach attracts locals and visi− tors alike by the shore of Oevelgoenne
beneath the Elbchaussee. You can even swim in the center of town. Try not to miss Strandperle Cafe, the ultimate city institution on the sandy coast. CHILDREN-FRIENDLY EATERIES: Visit the playground in Fischers Park and then go for a lunch of tasty snacks or homemade cake. Drawing sets, chil− dren’s books, high chairs and a chang− ing unit are all available at Frieda am Park on Bernadottestrasse 20. Café Fees on Holstenwall 24 offers a relax− ing time after touring the city museum, The Hamburgische Geschichte. Chil− dren and parents alike will certainly be pleased with the atmosphere and the famous chocolate waffles. Ham− burg labskaus – a plate of salted beef with herring, fried egg, beetroot and gherkins – can be ordered at the ele− gant Restaurant Brook, on the Bei den Mührer waterfront. But for the kids per− haps the real “seaside rendezvous” will be the spinach with lobster ravioli or the fillet of pike−perch.