Budapest Business Journal 21/20 by Business Publishing Services Kft.

SPECIAL REPORT: VOL. 21. NUMBER 20

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HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BBJ.HU

PROFIT TRIMMING 11%

cut in energy prices from November

Photo: Attila Kovács / MTI

Energy firms will be subjected to another blow to their Hungarian profitability after parliament approved a further mandatory reduction to household utility costs. The governing Fidesz party’s caucus leader Antal Rogán and his colleagues see room to go even further, and elections are approaching, meaning another decision is likely on the agenda. 03

NEWS

BUSINESS

Welcome to the Hotel Budgetonia! It is no longer the sole preserve of budget airlines to usher customers into their own branded hotels. Low−cost bus operator Orangeways has joined the game, and it means business. 07

SPECIAL REPORT

Last minute fiscal deal

On trembling legs

The two−week political stalemate in the U.S. invoked the specter of America defaulting on its debts for the first time ever. Global markets, and especially vulnerable countries, will be relieved in light of the last− minute deal, but understand that the matter has yet to be fully resolved. 09

Hailed and bashed by many, the prodigy of life insurance, the unit− linked segment is back in the headlines. One−off sales are up, but a heyday is not close at hand, market players say. The BBJ takes a look into Hungary’s insurance market. 12

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Budapest Business Journal | Oct 18 – Nov 03

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THE EDITOR SAYS

GAME OF CHICKEN All eyes are on the United States, where escalating ten− sions between Democrats and Republicans, and the political right’s drive to throw its weight around, took us to the brink of what could have been a major global economic meltdown. As always, it was all about who yields or, as Amer− ican politicians like to say, ‘who blinks first’. Republi− cans naturally blamed the Democrats for insisting on the affordable healthcare act, or Obamacare, which President Obama considers one of, if not the, crowning achievements of his presidency, although they were the ones to back down. From Europe, the notion of a political squabble that looks for all the world like two grumpy children fight− ing and refusing to make up, thus leading to a coun− try’s government infrastructure shutting down, seems like yet another curious part of the American political system, like the Electoral College or the filibuster. Then we think about our own neighborhood and remember that very recently Belgium got along just fine without a government for a more than a year and a half, and we recall that there are, in fact, plenty of odd aspects to any of the Old Continent’s electoral systems, if we only take a closer look. And yet, for a country like the United States, the stakes are much bigger. Hungary, which is often at the mercy of the mood on international markets, is hoping that the U.S. Federal Reserve will continue with its stimulus campaign for as long as possible, that the new nominee as Fed chair−

man Helen Yellen will meet markets’ liking and, more importantly, that the possible American default doesn’t lead to widespread panic in the near future, as was seen last year with the eurozone. We shouldn’t forget that the Senate debt resolution plan, announced just as the Budapest Business Journal went to print, mainly delays addressing the issue rather than solving it. As such, it is annoying, to say the least, to see not only the current American political elite’s apparent negligence for the consequences of their actions, risk− ing a global crisis to gain some cheap political points over a done deal, but also the U.S. political system’s failure to assure its own continued operation in such cases. The BBJ has often pondered the manner in which Hungary’s current government uses and abuses its supermajority in parliament, but if the stakes were this high, for the entire world, maybe the Hungarian system has it right after all. The tentative agreement between the Senate Demo− crats and Republicans was widely applauded and sent market indices soaring. But the agreement – if passed by the House of Representatives – is still only an exten− sion of the matter until February and in light of the bit− ter antagonism, the already looming deadline just a few months into the future already points to another quagmire not too far down the road. Speaking from and for our small and fragile economy, we can only hope that they finally get their act together.

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The past weeks have made it sometimes difficult to get a clear picture of how relations currently stand within the gov− ernment’s oligarch camp, but one thing is crystal: there is cer− tainly plenty of action. What was earlier dismissed as a bluff became reality, when Croatian authorities actually went ahead and issued an international arrest war− rant for MOL boss Zsolt Hernádi. Currently, the chief executive of the com− pany – ranked as the top revenue−maker in the Buda− pest Business Journal’s lat− est Book of Lists – has his picture on display on the Interpol website and could be detained anytime he leaves the country. The government went out of its way to weigh in on the matter, took surprisingly strong diplomatic measures against Croatia and even urged MOL to accept losing the value inherent in its Cro− atian subsidiary INA and just sell it. Prime Minister Vik− tor Orbán was more than happy to appear together with Hernádi in public after repeatedly dismissing the Croatian bid as a mere domestic political issue, and insisted his government will defend MOL as well as its chief executive. The government’s willingness to take on open conflict at a state level was all the more interesting seeing the tradi− tionally good relations between the two countries. In fact, Hungary, already then under Orbán’s government, was one of the most vocal advocates of admitting Croatia to the European Union.

In contrast OTP Bank chief executive Sándor Csányi is not only not getting any protection, he’s actually on the receiving end of flak from government party members for his role as head of MLSz, the national football federation. After taking legal action for being called a loan shark by state secretary János Lázár, tensions between Fidesz and him eased. Now, after clue− less performances from the national team that led to a 3:0 loss in Bucharest and an 8:1 whopping in Amsterdam, even Fidesz members are calling for Csányi’s head, along with any− one else who works with him. Csányi lashed back at his critics in style, but that didn’t mean he could provide an answer – or even an accept− able excuse – for the deplor− able sports results, even though he was appointed to the MLSz post with the specific assign− ment of finally giving local fans something to feel happy about by finally getting the team to qualify for a major tournament after decades of watching from the sidelines. Prime Minster Orbán said he too was shocked by the crush− ing results, however, as Csányi told reporters, the prime minister made no indication that he wanted changes in the federation and that their personal relations are balanced. The oligarch landscape is clearly in motion, with Hernádi, who had seemingly good but mostly neutral relations with the right wing, becoming a national treasure, while Csányi, who is known to be a personal friend of Orbán, now appar− ently fair game for Fidesz. It will be interesting to see what unfolds next.

PRIME MINISTER VIKTOR ORBÁN WAS MORE THAN HAPPY TO APPEAR TOGETHER WITH HERNÁDI IN PUBLIC

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1 News

NEWS IN BRIEF

ÁSz: 2014 deficit target achiavable

NEWS

Welcome to the Hotel Budgetonia!

macroscope

HOUSE PASSES NEW WAVE OF UTILITY PRICE CUTS GERGŐ RÁCZ

The parliamentary majority has approved an 11% reduction to energy prices effective November 1. The legislation means that the price of natural gas, electricity and district heating will have dropped by a combined 20% from December 2012 following the accumulated effect of the government’s cost− cutting campaign. Given the crowd−pleasing nature of the bill, it passed with a 95% majority with only 18 representatives not giving an ‘aye’. According to György Barcza, senior analyst at the Századvég Gazdaságkutató research institute, the government drive to reduce utility expenditure has left a total of HUF 200 billion more with households, which is showing a favorable trend in retail spending, and consequently economic growth, as well as households’ holdings in Hungarian government bonds. The combined growth of savings and spending mean that 2014 could bring a turning point, with economic growth assuming a sustainable trajectory, he told public radio POLITICAL BATTLE “The utility price cut is a bluff,” said Benedek Jávor of the opposition Együtt−PM organization, “one that is of the most cynical and expensive kind.” As the group, which voted against the cut, argues, the move in itself favors those that don’t necessarily require any assistance from the state. He added that consumers will pay the price of the cuts manifold, because while they will pay less directly, the cost for institutional and private sector users will increase and that will be reflected in everyday purchases, while it will drive smaller business to the brink or beyond. The Hungarian government is also preparing for another bout with Brussels over the matter, since the European Commission has sent queries to Hungary to determine whether the mandatory price reductions constitute a violation of free−market practices, violating European Union laws.

STORY HIGHLIGHTS ■

Parliament approves another 11% cut in energy prices for households ■ Another wave likely on the agenda ahead of general elections

“This is how it always starts. First they ask questions, then they deliberately misinterpret the answers and then they launch an investigation against Hungary,” Fidesz MP and head of the utility cost−cutting working group Szilárd Németh said on public television. The European Commission said that while it doesn’t formulate an opinion on EU member states’ local price regulatory systems, in general it prefers interventionist measures to stay in effect only for the short−term since they impact competiveness. “If the consumer price doesn’t reflect actual costs, then business will likely avoid such markets seeing the low profitability, there won’t be investments, there won’t be competition and without competition the situation becomes permanent and there will be no factor to put pressure on prices,” Marlene Holzner, spokeswoman for Commissioner for Energy Günther Oettinger said. RALLYING CALL The governing parties has sought widespread public support and claim to have collected 2.5 million signatures backing the drive and also formulated a political declaration to fend off any “attacks” Brussels may be considering against Hungary. Media outlets on the right loyal to the governing side are likewise discussing the ‘rezsiharc’, a term referring to the battle involved in protecting lower prices for Hungary’s consumers at the expense of

MARLENE HOLZNER, SPOKESPERSON OF GÜNTHER OETTINGER

providers that have enjoyed ‘extra’ profits during the reign of left wing cabinets between 2002 and 2010. “The government will stay the course, in fact, it will continue to strive to make utility businesses nonprofit at the end of the process,” government spokesman András Giró−Szász said. Apparently the next step in the process isn’t far away, especially considering that the next general elections are basically just a few months off and the government still sees untapped capacities. As Economy Minister Mihály Varga said in an interview, the fact that

Photo: European Commission

Parliament has passed yet another mandatory reduction in household utility costs. Based on government comments and the approach of the 2014 general elections, yet another cut is likely in the making.

the energy firms are still paying dividends to their shareholders is a clear indication of their profitability, which consequently allows additional room to reduce prices. Energy companies spoke out against the government drive during the previous round of cuts, insisting that they are not enjoying any unwarranted profits in Hungary; in fact, they say they are subject to excessive tax burdens as it is. They also warned that the central drive is a threat to the firms’ ability to maintain and develop their networks, pointing to potential supply shortages and safety issues in the near future.

THE GOVERNMENT WILL STAY THE COURSE, IN FACT, IT WILL CONTINUE TO STRIVE TO MAKE UTILITY BUSINESSES NONPROFIT AT THE END OF THE PROCESS

04 News

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NEWS

IN BRIEF

Budapest Business Journal | Oct 18 – Nov 03

Apart from the own goal I played pretty well Hungarian soccer defender Szilárd Devecseri, who contributed to the Netherlands’ crushing 8−1 defeat of his team with an own goal.

GYURCSÁNY AND CO SQUAT IT OUT IN A DARKENED PARLIAMENT

photo: Noémi Bruzák/MTI

Former Prime Minister Ferenc Gyurcsány and some members of his Demokratikus Koalíció party gathered in parliament, staying in their seats in protest at revisions to the education system. Maintenance turned off the lights while they held an online discussion with supporters.

ECONOMY AUDIT OFFICE: 2014 DEFICIT TARGET ACHIEVABLE Hungary can meet the 2014 general government deficit target if the econ− omy grows 2%, as expected, according to an opinion issued by the Hungarian Audit Office (ÁSz). ÁSz noted lower− than−expected inflation, budget over− shoots and the debt of local councils – and of other government institutions –among risks to achieving the target. The 2014 budget bill targets a deficit of 2.9% of GDP, just under the 3% of GDP European Union threshold. It assumes GDP growth of around 2% and aver− age annual inflation of 2.4%. ÁSz said estimates and calculations for 52.6% of targeted revenue next year were well es− tablished in the budget. But it faulted, to a degree, targets for the rest of the rev− enue, including revenue from VAT, the financial transaction duty, the telecom tax and new taxes for small businesses. RETAIL GOV’T SECURITIES STOCK BREAKS RECORD IN SEPT Hungarian retail investors bought gov− ernment securities for a net HUF 108.5 bln in September, a historic record, the state debt management center ÁKK told MTI. Year−to−date growth of the outstanding stock of government pa− per intended for Hungarian private individuals reached HUF 580.8 bln at the end of last month. The total out− standing stock of such government paper was HUF 1,567.4 bln at the end of August. EXPORTS, IMPORTS DOWN IN AUGUST Statistics released by the Central Sta− tistics Office (KSH) for August show decreases in both Hungarian exports

and imports; the drops were 3.3% and 3.9%, respectively, year−on−year (yoy). On the plus side, the trade balance showed an improvement of €15 mln yoy. In August 2013, exports amount− ed to €6.4 bln (HUF 1.914 tln), while imports to €5.8 bln (HUF 1.728 tln). The surplus on the trade balance was €621 mln (HUF 186 bln) in the eighth month of the year. The share of Euro− pean Union member states was 75% in exports and 71% in imports in August. For the eight−month period, the value of exports was €53.5 bln (HUF 15.850 tln), while that of imports was €49.0 bln (HUF 14.485 tln) according to prelimi− nary data. Exports and imports in euro terms grew by 0.9 and 1.1%, respec− tively. The surplus on the trade balance was €40 mln less than in the January− August period of 2012. HUNGARY INDUSTRIAL OUTPUT DOWN IN AUGUST Hungary’s industrial output fell 1.4% yoy in August, preliminary unadjust− ed data published by the KSH shows. Adjusted for the number of workdays, output edged up 0.9% in August. In the previous 11 months, unadjusted indus− trial output fell in all but two months, including a 4.8% rise in July. Workday− adjusted output rose, however, for the third month in a row, although the pace slowed from the previous two months. In a seasonally and workday−adjusted month−on−month comparison, output inched up 0.7%.

DOMESTIC IMF, WORLD BANK: HUNGARY ECONOMY DOING WELL AFTER EARLY REPAYMENT The Hungarian economy had received a favorable assessment by the Interna−

Numbers in the news

1.4% Hungary’s 12−month consumer price index in September, a rise from 1.3% in August, data by the Central Statistics Office (KSH) shows.

No. 8 Hungary’s ranking in Freedom House’s annual ‘Freedom on the Net’ report. In the ranking, 60 countries were examined in terms of Internet freedom.

tional Monetary Fund and the World Bank thanks to the government’s early repayment of a 2008 loan and measures to consolidate the economy, Economy Minister Mihály Varga said. Hungary received much attention from investors, too, Varga told MTI after at− tending the fall annual meeting of the IMF and the World Bank in Washing− ton. Varga said he had met representa− tives of General Electric, a partner who has been hurt by measures targeting the banking sector in Hungary, but who will nevertheless face a favorable position in the production sector and other sectors of the economy. The Hun− garian state−owned Eximbank’s AAA bond issue was unanimously well re− ceived, Varga said. He said there was no lobbying regarding the govern− ment’s banking tax. SECOND ROUND OF MUNI DEBT CONSOLIDATION STILL POSSIBLE Hungary’s government has not ex− cluded a second round of consolidating municipal debt, business daily Napi Gazdaság said. The cwentral govern− ment took over a little more than HUF 690 bln of municipal debt at the end of last year and in the ﬁrst half of 2013, re− ducing the stock to about HUF 450 bln. State secretary for local governments András Tállai told the paper that the partial or full takeover of the municipal debt had been carried out to prevent repayments from making the provi− sion of public services difficult. He said the government would not exclude the possibility of a further consolidation, but had not yet taken a decision on the matter. EGERVÁRI QUITS AFTER DISASTROUS DEFEAT TO HOLLAND Sándor Egervári resigned as manager of the national soccer team after a

major, 8:1 defeat by the Netherlands on October 11. The Hungarian team dropped to fourth in its World Cup qualifying group with the result and had only a slight mathematical chance of advancing. József Csábi assumed managerial duties temporarily for the one remaining qualiﬁer against Andor− ra, which Hungary won 2:0, but it was not enough even to reach the play−offs.

POLITICS DRAGHI WARNS ORBÁN ON UNCOORDINATED FX LOAN MEASURES European Central Bank governor Ma− rio Draghi has warned Hungarian Prime Minister Viktor Orbán against uncoordinated steps regarding the country’s big stock of foreign currency− denominated loans, Austrian daily Der Standard said on its website on October 13. Draghi issued the warning in his capacity as the head of the European Systemic Risk Board (ESRB), Austrian central bank governor Ewald Nowotny said on the sidelines of a meeting of the IMF and World Bank in Washington. Draghi said unilateral acwtion could cause the decline in lending to accel− erate, which would have negative ef− fects on stability and growth, the paper said. Hungary’s government has given banks until November 1 to come up with a solution to the problem of the FX loans, based on consultations with borrowers. If banks fail to produce a so− lution by the deadline, the government has said it will act unilaterally. Cheap, Swiss franc−denominated loans were once the most popular retail−lending product in Hungary, until the forint weakened, causing repayments to in− crease and putting many households at risk of default.

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News 05

Budapest Business Journal | Oct 18 – Nov 03

COMPANY NEWS

Banks will likely greatly reduce the number of automatic teller machines (ATMs) after parliament ratified a bill guaranteeing clients two free cash withdrawals a month, sector portal BANKMONITOR.HU said. The measure entails an average monthly cost reduction of HUF 418, which will naturally in− crease the banking sector’s burdens.

REHAU INAUGURATES NEW PLANT IN GYŐR

Italy’s Intesa Sanpaolo Group will carry out a HUF 37.5 bln capital injection at its Hungarian unit, CIB Bank. The capital raise will be carried out through the issue of one A-category CIB Bank share of HUF 1 nominal value through the issue of one dematerialized, at a nominal value of HUF 1 per share. The remainder of the capital injection will increase capital reserves. CIB Bank’s registered capital will rise from HUF 145,000,000,004 to HUF 145,000,000,005 following the capital raise. CIB Group had losses of HUF 57.7 bln in the first half of 2013. Consolidated net assets fell to HUF 177.34 bln at the end of June from HUF 194.36 bln at the end of 2012 according its half-year report. Registered capital was unchanged at HUF 145 bln. Intesa Sanpaolo Group injected HUF 101.7 bln in the CIB group in 2012 and injected another HUF 36.5 billion in May 2013 to offset losses, the bank said in its half-yearly report.

ZOLTÁN CSÉFALVAY, STATE SECRETARY RESPONSIBLE FOR ECONOMIC STRATEGY

Hungary’s biggest lender OTP Bank is among the companies looking to bid in the privatization of Hrvatska Postanska Banka and Croatia Osiguranje, Croatia’s post bank and insurance company, respectively. Hungarian tire supplier Abroncs Hungária has completed a HUF 2 bln de− velopment of the company’s logistics center in the village of Baj. The com− pany has received HUF 500 mln in government and EU support for develop− ment of the nearly 20,000 sqm logistics center. ThyssenKrupp Ferroglobus, the Hungarian unit of Germany’s Thyssen− Krupp, has established a €2 mln steel industry service center in Budapest. The new 4,000 sqm facility has plasma and ﬂame−cutting, stripping and pipe−cutting machinery. The company said it plans to set up a 4,500 sqm pipe−cutting center as the next step, scheduled to start operating in spring 2014. Hungarian supermarket chain CBA wants to open a Hungarikum Delikát store in Moscow in the foreseeable future, communications director Attila Fodor told MTI. CBA recently showed almost 50 products at the Golden Autumn farm and food fair in Moscow, Fodor said. Hungarian automotive industry company Rába Jármű has received an or− der for ﬁve midi buses from Sweden’s Vinga Bus. Rába will deliver the bio−

Photo: Csaba Krizsán / MTI

INTESA SANPAOLO INJECTS HUF 37.5 BLN IN CIB BANK

German polymer−based products company Rehau has inaugurated a €60 mln bumper plant in the city of Győr. The new plant and its logistics facilities cover an area of 26,000 square meters. The factory will make bumpers for installation on Audi A3 and TT models manufactured in Győr and for Audi Q models manufactured in nearby Bratislava, Slovakia. The company reported earlier that it expects to employ 200 workers at the plant once production has begun.

diesel−fueled vehicles, to operate as school buses, next spring. Hungarian road haulage company Waberer’s International has placed an order for 650 new Volvo trucks worth more than €40 mln. The order is part of a development program that Waberer’s launched this year to buy 1,100 new trucks, replacing old ones and also expanding its fleet. OTP Bank allocated HUF 97 bln in the first phase of the National Bank of Hungary’s ‘Funding for Growth Scheme’ and disbursed the entire amount. OTP Bank said about 78% of its allocation was used for SME loans. Of these, 70% were new outlays, equally divided between development loans and working capital loans. Hungary’s Xanga group has inaugurated a HUF 333 mln logistics develop− ment at Debrecen airport. Xanga won HUF 158 mln in European Union and state grant money for the investment. The investment is part of a HUF 5−6 bln development at the airport. Hungarian−owned agribusiness Bige Holding has signed a contract to ac− quire a 51% stake in peer KITE. Bige Holding and KITE will generate com− bined annual revenue of some HUF 400 bln. Market Építő, a member of the Hungarian−owned Wallis group, has signed a €100 mln financing agreement with a consortium of lenders led by Raif− feisen Bank, and including UniCredit Bank Hungary and the Magyar Ex− port−Import Bank, for the construction of a sports center in Russia. Finland−based publisher Sanoma has announced that it expects a loss of €23 mln in the third quarter of 2013 and as a result has sold NTK Educa− tional Holding Zrt, its Hungary−based publishing business, to a consor− tium comprised of the Sanoma management team. Juventus Rádió, the longest−running commercial broadcaster in Hungary, has announced a change in ownership. A tender for sale of the station was won by the Danish−Hungarian joint venture Ayudate Investment Group. The new owners have promised only minor changes to the station’s broad− cast structure. Hungary−based Est Media will no longer publish its free magazines under the ‘Est Lapok’ brand name after taking losses on the magazines for a year. Income had been derived for the publications solely through advertising revenue. Sweden’s Nolato has inaugurated a HUF 2 bln expansion at its medical devices plant in Mosonmagyaróvár. The unit built a 3,700 sqm warehouse and set up a 700 sqm clean room where parts for devices such as dialysis machines can be made, said sales director Norbert Meleg. Production head Bart Nolden said headcount at the base had risen from 400 to 515 as a result.

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06 News

Budapest Business Journal | Oct 18 – Nov 03

NEWS FOR THIS SECTION IS TAKEN FROM THE BUDAPEST BUSINESS JOURNAL’S DAILY BRIEFING, ENERGY TODAY NEWSLETTER AT WWW.BBJ.HU/STORE/NEWSLETTER-PACKAGE

V4 COUNTRIES URGE EU TO SUPPORT NUCLEAR ENERGY Czech Republic, Hungary, Poland, and Slo− vakia want the European Union to support nuclear energy projects and not to over− regulate the area, Prime Minister Viktor Orbán said on October 14 after a summit of the Visegrád four (V4) countries. The four also threw their backing behind shale gas extraction in Europe, and agreed to set up a natural gas market forum with the aim of fostering a regional gas market, which will convene in Budapest this month, Orbán said. The central European countries are reliant on gas imports, mostly from Russia, and want to diversify their energy sources. While countries such as Germany and Aus− tria oppose nuclear power, others such as Britain and the V4 are in favor. EU UNVEILS FUNDING LIST FOR GAS, POWER PROJECTS The European Commission unveiled on October 14 a list of 250 power and gas proj− ects eligible to share €5.85 billion ($7.93 bln) of funding as part of plans to curb re− liance on Russian gas and create a single energy market. The funds will be shared among trans−European energy infrastruc− ture projects from 2014 to 2020, with the aim of helping EU countries integrate their

energy markets and diversify sources of supply, the bloc’s executive arm said. The list includes up to 140 projects in the elec− tricity transmission and storage sector, around 100 projects in gas transmission, storage and liqueﬁed natural gas (LNG), and several oil and smart−grid projects, a statement showed. One of the highest pro− ﬁle projects on the list is the Trans Adriatic Pipeline (TAP), selected by a consortium in June to ship Azeri gas. Other schemes on the list include a Baltic LNG terminal and infrastructure upgrades in the eastern Bal− tic Sea area. A gas pipeline from Bulgaria to Austria via Romania and Hungary is also on the list, as well as a gas link from offshore Cyprus to Greece via Crete. OECD: CARBON MARKETS 94% CHEAPER THAN RENEWABLE SUPPORT Carbon markets are about 94% cheaper at cutting greenhouse gases than renewable subsidies paid to power producers, accord− ing to the Organization for Economic Coop− eration and Development. The cost of reduc− ing one metric ton of carbon dioxide in the power industry using emissions trading sys− tems is €10 ($13.56) on average, compared with €169 for feed−in tariffs, the OECD said in a fresh report. Some tariffs cost more than

€700 a ton, the OECD said in the study, based on data from 15 countries, including China and the United States. ROMANIA TO TENDER 36 OFF- AND ONSHORE OILFIELDS Romania plans to launch tenders for 28 on− shore and eight Black Sea offshore oil ﬁelds, officials from the National Agency for Miner− al Resources (ANRM) said. ANRM sources quoted by business newspaper Ziarul Finan− cial would not give a timeframe for the ten− ders. Similar tenders took place in 2010 when 20 out of 30 auctioned ﬁelds were leased. In a 2010 tender, U.S. oil major Chevron acquired rights to explore for shale gas in three blocks totaling 670,000 acres (270,000 hectares) near the Black Sea.

MOL CHAIRMAN-CEO ZSOLT HERNÁDI

MOL LAYS CORNERSTONE BUTADIENE PLANT Hungarian oil and gas company MOL has laid the cornerstone of a HUF 35 bln butadi− ene plant in Tiszaújváros. PM Viktor Orbán participated at the ceremony at the base of MOL petrochemicals unit TVK. He called MOL the ﬂagship of Hungary’s strong indus− trial sector. “We are proud of [MOL], we ap− preciate it, and we will defend it if we must,” Orbán said, noting that the state is MOL’s biggest stakeholder. MOL chairman−CEO Zsolt Hernádi said the investment would play a key role in keeping MOL competitive. This was Hernádi’s ﬁrst public appearance ever since Croatian authorities have issued an international warrant for his arrest on charges of corruption.

Photo: János Vajda/MTI

ENERGY

Hungarian oil and gas company MOL said it is shutting down its refinery in Mantova, Italy, and converting it into a logistics hub. MOL said the conversion was expected to have a “significant” non−cash one−off effect on third quarter consolidated earnings.

SERBIAN POWER GRID OFFERS EPEX STAKE IN NEW ELECTRICITY EXCHANGE Elektromreza Srbije (EMS), Serbia’s na− tional grid operator, offered Epex Spot SE a stake in Seepex, a Balkan power exchange to be set up next year. Paris− based Epex “is expected to respond by the end of the year what stake they want to have in the company”, which will be created in early 2014 and become opera− tional in the third quarter.

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News 07

Budapest Business Journal | Oct 18 – Nov 03

ORANGEWAYS: WELCOME TO THE HOTEL BUDGETONIA!

LEVENTE HÖRÖMPÖLI-TÓTH

It is all set now. Orangeways, a long− distance coach company, has dived into the hotel business. The firm, known for operating a business model introduced by budget airlines, aims to run the new division of its portfolio on the same principles; rates will vary depending on occupancy and, with some luck, a room could cost less than €30 in off−peak season. Bargain prices will not mean low quality, though. The idea is to provide a fair three−star−milieu at a competitive price level, guaranteeing – in the company executives’ words − “unbeatable value for money”. It was high time for Orangeways to turn on the neon lights of its own “VACANCIES” sign: the first hotel opening was initially scheduled for September 2011 and there has been growing demand on the part of customers. “Our firm has been seeking the ideal solution for implementing the hotel project as an additional service to its main activity, i.e. provision of ADVERTISEMENT

STORY HIGHLIGHTS

The National Economy Ministry, the National Innovation Office (NIH) and the Israeli Embassy to Hungary hosted the first Israel−Hungary Innovation Day at Graphisoft Park.

■

Low cost bus tour operator Orangeways enters the hotel market ■ If the project proves a success, the vision is to set up a budget hotel chain

international comfort coach trips,” CEO Miklós Kovács told the Budapest Business Journal. “We had a preliminary contract with a big hotel chain, but it turned out to be economically unjustified. We have come up with a definitely marketable option.” A market assessment led Orangeways to the conclusion that it would not make sense to build something from scratch, but rather renew an existing property. Thus a place was picked and leased for thirty years in Ócsai út, southeast Pest, near the M0 ring. The location is far from being central, yet in the budget world this is anything but new. “The real estate chosen suits our strategic goals perfectly,” Kovács added. “A shuttle service will be provided free to take our guests to the bus terminal at Népliget three times a day.” The 93 rooms can be booked online either when buying an Orangeways bus ticket or separately at any other time, even during the trip to Budapest. Potentially, there is a 150,000−strong pool of its own passengers visiting Hungary on an annual basis that is up for grabs. Also on the radar are tourist groups traveling on busses run by other operators, but the hotel is open to anybody wishing to keep their accommodation costs low. If the plans are realized, that could be only a start in achieving something more grandiose. Reaching an occupancy rate of 75% is expected within a year, which would pave the way for setting up an entire hotel chain.

GERGŐ RÁCZ

Photo: apuska/indafoto

In spite of the crisis, low− cost bus trips are selling so well that one of the major providers, Orangeways, has felt obliged to venture into the territory of the hotel business in applying its no−frills business model. With revenues and passenger numbers going up hand−in− hand, the company has rapid expansion in mind.

HUNGARIAN STARTUPS MEET WITH ISRAEL-BASED BUSINESSES

“Prague is first on our list of preference for future locations, but at the request of our English investor we are planning to have London among our coach destinations soon, so ultimately the UK capital may host the second hotel,” Kovács explained. Whatever happens next in the hotel arena will largely be influenced by how the Budapest project performs. Optimism is certainly abundant: Orangeways’ share capital has recently been increased to a hefty HUF 2.5 billion and the new public limited company structure should also help achieve ambitious plans. The next move is going public, probably in the fall, in an effort to raise even more capital. All that fresh money is meant for further international expansion. After all, there are plenty more destinations to target in Europe and travelers will always need a place to stay: and not too costly, if at all possible.

NIH acting chairman László Korányi announced that his office has signed an agreement based on which his office would provide €2 million in funding to Israeli and Hungarian business looking to establish or advance business relations. National Economy Ministry state secretary Zoltán Cséfalvay meanwhile announced the establishment of a working group by his ministry that will seek to transform Budapest into an regional center for startups in Central and Eastern Europe by the end of this decade. Cséfalvay expressed his thanks to the Israeli Embassy, which had initiated the event, noting that Hungary, while having all the potential, still has plenty to learn from Israel. For instance, there isn’t even a Hungarian word for ‘startup’, Cséfalvay noted in his speech. Accordingly, the Innovation Day featured speakers representing Hungarian startups that have already made a name for themselves, as well as regulators and officials from Israel who introduced a wide range of best practices that have made Israel a hub for startups.

BBJ

2Business insight

Steady Chinese demand set to boost oil prices 10

FIFTH AMENDMENT: JUST FOLLOWING ORDERS?

Once again Fidesz is patching up its constantly rewritten Fundamental Law (colloquially known as the constitu− tion), which was initially meant to be ironclad. In the government’s defense, however, this round of amendments – the sixth to date – mostly seeks to incor− porate changes requested by the ‘hos− tile colonial powers’, also known as the European Union. Indeed, the state sec− retary in the Ministry of Justice, Róbert Répassy, noted that the “government wishes to remove those seeming prob− lems that could be used as pretexts for attacks against Hungary”. Given that Répassy is considered a moderate voice in Fidesz, one can imagine what the mood is like in the party’s more hard line nationalistic wing, also known as ‘the rest of Fidesz’. The package of amendments touched upon several areas. Fidesz gave in, par− tially, to EU demands concerning the controversial power of Tünde Handó, the president of the National Office for the Judiciary, to transfer cases between courts, the ban on screening campaign advertisements on commercial televi− sion, and the registration of churches. For the most part, however, these changes only partially realize what the international community asked for, and some subvert the legitimate goals underlying the amendments.

NO MORE FREE TRANSFERS STORY HIGHLIGHTS ■

Governing Fidesz party amends the Fundamental Law for ﬁfth time ■ Some of the planned changes subvert the legitimate goals underlying the amendments

The reform of the judicial system sought to concentrate vast powers in the hands of Handó, who – being the wife of a Fidesz MEP – is generally considered close to the main governing party. Among her most controversial competencies was the power to transfer cases between courts, ostensibly to ease the burden on courts facing excessive caseloads. In effect, this power offered the possibility to take away politically charged cases from ‘unreliable’ courts and give them to benches that were less likely to present the reigning government with an unpleasant verdict. In response to pressure from the EU, the government gave in on this issue and removed this particular competency from Handó’s still substantial range of powers. However, it did it grumpily: the explana− tory note attached to the bill noted how many billions in forfeited savings this would cost the budget. Generally, cost estimates are almost non−existent in draft legislation, so this note only serves as just another tool in the government’s ‘fight’ against the European Union. CAMPAIGN ADVERTISEMENTS EVERYWHERE? One of the most widely criticized provi− sions of the new electoral law was its ban on campaign advertising on commercial television. The law provided that parties could run free ads in the public media, but refused access to commercial televi− sion, which has far more viewers, espe− cially in the crucial segment of the unde− cided. Fidesz claimed that this was to level the playing field for impecunious organizations, but it seems more likely that the goal was to keep the opposition from addressing hard to reach voters in rural areas. The limitation seemed arbitrary and in conflict with fundamental rights, thus it was hardly surprising that there was inter− national pressure on Fidesz to change it. Still, Fidesz’ solution skillfully found a loophole: while political ads on commer− cial TV are now allowed, they must still

TÜNDE HANDÓ

be provided either for free for all those who qualify as candidates or alternatively not at all. Under such circumstances the commercial TV channels will have to forgo substantial revenue during the cam− paign period if they want to allow par− ties to advertise, and all they will receive in return is the wrath of the likely winner. Ratings winner RTL Klub, already rumored to be in a conflict with Fidesz, may decide to risk it nevertheless, but with both money to lose and the disfavor of Hungary’s all− powerful ruling party, it’s hard to see the upside. However, while this limitation contra− dicts the voters’ right to information, it is not necessarily against the interest of the opposition parties. As Fidesz’ financial sit− uation is much better than the one of the opposition parties, should they be allowed, they could easily purchase as much airtime as they need on commercial TVs. FOR SMALL CHURCHES, ONLY A DUBIOUS RELAXATION Finally, the governing majority has also enacted provisions that purportedly ease the recently imposed harsh regis− tration requirement for state−recognized churches, which had suddenly stripped hundreds of smaller (and a few not so small) denominations of their officially recognized status as churches, and the concomitant rights and privileges. What the fifth amendment does is to constitu− tionally enshrine the recent amendment of the Church Law – itself a reaction to a Constitutional Court decision and inter− national pressure – that gives the status of “organizations that pursue religious activ−

Photo: Lajos Soós/MTI

The governing supermajority amended the constitution for the fifth time since its adoption in September. The latest refinement introduced a whole range of changes, including three ostensibly enacted to satisfy unceasing criticisms from abroad. While the new rules are supposedly liberalizations and are portrayed as such by Fidesz, in fact they are mostly cosmetic changes to problematic statutory arrangements.

ities” to most denominations, as opposed to their previous classification as plain civil associations. Nevertheless, the law and the constitu− tional amendment retain two of the most critical elements of the previous regula− tory scheme. For one, most of the finan− cial benefits of an ecclesiastic status only accrue to a few privileged churches, rat− ified as ‘accepted’ churches by a two− thirds majority in Parliament. The most controversial aspects of the previous scheme remain, therefore. Firstly, many churches remain deprived of the benefits they used to enjoy. Secondly, and even more importantly, even if a given church fulfils the legally established criteria for a privileged status, its ratification as such is Parliament’s decision. The latter is not required to justify a negative decision, nor do rejected churches have any legal remedies if unjustly denied a status that may well decide their financial viability. The constitutional law think thank Eötvös Károly Intézet assesses that the law fails to redress the concerns raised by the Con− stitutional Court regarding the previously effective legislation, and correspondingly remains unconstitutional. AMENDMENT NO. 6 COMING UP? Now that the government has done the EU’s bidding, it might feel that it is enti− tled to another round of self−gratification. In other words it might be tempted to enshrine another public policy ‘achieve− ment’ in the constitution. The most recent fad is the ubiquitous “rezsicsökkentés”, i.e. the government−mandated drop in utility prices. The policy has been stun− ningly successful in recouping popularity that Fidesz has lost over the past years, and expanding its already massive lead in the polls. Still, even some in the gov− erning party balk at the idea of raising “rezsicsökkentés” to the constitutional level. Whether it happens or not is likely to be a pragmatic decision rather than a principled one – just as the whole idea was to begin with. In other words utility com− panies better pray that Fidesz’ re−election prospects remain rosy.

www.policysolutions.hu Political Research and Consultancy Institute

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2 Business

Budapest Business Journal | Oct 18 – Nov 03

U.S. LAWMAKERS REACH LAST MINUTE FISCAL DEAL Market participants could afford a sigh of relief as U.S. lawmakers reached a last−minute agreement to end a two−week government shutdown and avoid, at least for now, defaulting on the country’s debts, and thus cause economic shockwaves on a global level. GERGŐ RÁCZ

As the Budapest Business Journal goes to print, the more than two−week shutdown of the United States government looks set to end after Republicans and Democrats in the Senate came to an agreement over the con− flict, which had been triggered by Tea Party opposition to President Barack Obama’s affordable healthcare act, more commonly known as Obamacare. The Republicans stepped back as they realized that the widespread perception was that it was they who were ready to risk eco− nomic disaster over a healthcare bill that has already been passed into law and found to be constitutional by the Supreme Court. “The deal we’ve got‥ you know the old say− ing ‘we may have left a little bit on the table?’ We left everything on the table,” Republi− can Senator Lindsey Graham said. “This has been a very bad two weeks for the Republi−

STORY HIGHLIGHTS ■

U.S. ofﬁcials reach last-minute deal to end shutdown, dodge default ■ Republicans yield position fearing further political fallout

can brand, conservatism,” he added. A shutdown isn’t unprecedented in U.S. history, but this time it coincided with another key unresolved issue, the raising of the debt ceiling, a legal prerequisite for America to avoid defaulting on its debts. ADVANTAGE EUROPE The threat of a default, as well as the relent− less conflicts between the political poles in the States, pointing to further likely fiscal squabbles that can’t easily be solved through compromise, initially directed investors’ attention to other markets. “Eurozone stocks have outperformed U.S. stocks since the U.S. government shutdown began... Also, notably, value stocks have outperformed in non−U.S. markets year−to− date as of October 7,” Russell Investments said in a note to investors. While there is no resolution, or until there is some indication that a more permanent solution is within reach, that trend is likely to continue. “We continue to see improving economic fundamentals in Europe combined with rel− atively low market valuations. Given these

factors, it is no surprise that value stocks have outperformed in Europe amid an increasingly favorable climate for European equities,” Russell Investments added. Raiffeisen analysts were confident that even if the matter goes to the wire, there would be a temporary agreement, at least in the case of the debt ceiling, avoiding a default and restoring favorable global senti− ment. “Our view is that the passing of the polit− ical risks will bring back risk appetite and will carry stock markets to higher levels by the end of the year,” Raiffeisen said. WORRIES FOR THE WEAK A default, or even lasting political tension, is of course especially negative for weaker and exposed economies, such as Hungary, where assets typically overreact to interna− tional gloom regardless of the fundamentals. The forint is currently hovering around 300 to the euro, having been at 280 a short while ago, and seeing that the country’s risk perception isn’t changing despite the cen− tral bank’s continuing rate cuts, Raiffeisen expects a further weakening to 305 by the spring. Looking just at recent history, it’s clear that country−specific negative news when com− pounded by a sour international sentiment could have disastrous consequences for an economy so heavily integrated into the oper− ation of the international financial markets

SENATOR LINDSEY GRAHAM

while having such small output to rely on. In 2012, after Hungary had its sovereign debt−rating cut to junk, it terminated talks on a bailout from the International Monetary Fund over disputes on central bank regula− tion, and the eurozone debt crisis was rag− ing. It took hardly a week to bring the coun− try to the brink of total economic collapse. Fortunately, the present is very differ− ent from the utter gloom−and−doom that weighed on Europe for most of last year, but the U.S. political tensions that could well resurface in just a few months when the newly extended deadline ends, the upcom− ing end of the Federal Reserve’s stimulus program and the euro’s still unresolved trou− bles are all prospective bombshells, and Hungary has a tendency to find itself in the blast radius whenever one of them goes off.

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The picture is only illustration.

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10 2Business EXPERT OPINION

CHINA OVERTAKES THE U.S. AS THE WORLD’S LARGEST NET OIL IMPORTER Diána SZŐKE

Péter Simon VARGHA

Budapest Business Journal | Oct 18 – Nov 03

STEADY CHINESE DEMAND SET TO BOOST OIL PRICES China has become the world’s biggest net oil importer and its continued demand already carries the risk of narrowing global supplies. GERGŐ RÁCZ

There is no stopping the Chinese economy’s demand for fuel, which propelled the county into taking over top spot as the world’s biggest net crude importer from the United States in September. According to energy research firm CLSA, a further 10 mil− lion new cars will take to China’s roads annually for the com−

Angola, Iran, Russia and Oman still account for approxi− mately a third of its imports. After becoming the biggest buyer in the Persian Gulf in 2009, China is set to surpass import records from the region established by America in 2001. Analysts are speculating that not only are the Ameri− cans concerned about Chinese economic growth and its global impact, but the possibility that increasing reli− ance on the Middle East and historic differences in pol− icy there may strain relations between Beijing and Wash− ington. Besides potential disputes about military control in the region, the United States likely frowns upon the fact that OPEC statistics show Iran to be among the top five crude oil exporters to China this year.

NOTE: ALL ARTICLES MARKED E XPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILIT Y

very week, there seems to be a fresh news story on how China has surpassed the United States in yet another comparison. However, this latest milestone has reason to make Americans rather more pleased: China has topped the States as the largest net oil importer globally. According to estimates by the American Energy Information Administration (EIA), the gap between oil use and domestic production this September rose to 6.30 million barrels per day in China, while it was slightly lower, at 6.24 million barrels per day in the United States.* To put this into perspective, the United States has been in the lead in terms of net global oil imports since the 1970s. It is the world’s greatest gross consumer of oil, and will probably remain so for this decade. This is especially true in the case of per capita oil use, which was still almost seven-eight times higher in the States than in China last year (and about twice as much as in the EU) – so there is still plenty of room to use oil more sparingly in America in the longer run. Interestingly, global per capita oil consumption has been roughly stable over the past 30 years, though various countries’ share of this is of course constantly shifting. This also means that with an increasing per capita GDP, the oil ‘intensity’ of the world economy is decreasing: globally, ever less oil is being used to produce an additional unit of GDP. This reshaping of the global energy landscape through falling American and rising Chinese imports is likely to continue over the coming years. The United States is in the midst of a production boom, thanks to the widespread use of horizontal drilling and hydraulic fracturing (so-called fracking). This ‘unconventional revolution’ is now increasingly spreading from natural gas to oil as well. The Financial Times recently reported that the States’ liquid fuels output has grown by more than 40% since 2008. This means that by the mid-2020s, the United States may export not only gas, but oil too. On the other hand, American oil demand is decreasing due to the aftershocks of the global financial crisis, better vehicle fuel economy, as well as a decline in personal car use. New developments, such as the transition from diesel to natural gas for fuelling some of the truck fleet, are underscoring this trend. The picture is completely different in China. There, oil demand increased by 40% over the same five-year period. Although domestic production has also increased, it is unable to keep up with this surge in energy demand. Even with slower Chinese growth (the recent breakneck growth pace is not sustainable) it is likely that oil demand will increase further. Overall, these pieces of news once again highlight just how fundamentally the international energy sector has changed over the past decade or so, with improving supply thanks to unconventionals, and the shifting of global energy demand towards developing economies. (*The above figure refers not just to crude oil, but also to other, liquid fossil and non-fossil energy sources, such as gas condensates, natural gas liquids (NGLs), and bioethanol. This ultimately means that the United States’ oil imports, in a stricter sense, may still effectively surpass those of China.)

ing decade. Furthermore, the strongest demand is for high− consumption vehicles, with sales of four−wheel drive cars increasing 25% every year. This trend alone is expected to increase China’s fuel demand by 10 million barrels per day to 18 million by 2035, according to a forecast compiled by World Bank con− sultant Mamdouh Salameh. All of the extra amount will have to come from abroad, essentially doubling imports. Already, China is making strong efforts to secure its sources. Russia’s Transneft and Rosneft have just reached an agreement on the costs for expanding an oil link to China, necessary to cope with demand. Earlier this year, Rosneft agreed to double its Chinese supplies, currently 300,000 barrels per day. Naturally, the development will be reflected in prices. Salameh estimates that in a best−case scenario, meaning no conflicts or political upheavals, then the price range for a barrel of oil will remain constrained to the $100− 130 range. This, however, is the less likely version, and spikes are to be expected which he thinks could drive the unit price to $200. On the other hand, the supply glut cur− rently unfolding thanks to a rise in non−OPEC and uncon− ventional production worldwide may counterbalance this trend. UNQUENCHABLE THIRST The United States is probably happy to give up its role as the world’s greatest importer, especially because it stems from the country quickly becoming self−reliant thanks to unconventional exploration and production. It is less happy about the political implications and the import sources that the Chinese are considering. China’s imports have surged in recent years from OPEC nations such as Saudi Arabia, Iraq and the United Arab Emirates, according to Chinese customs data. Nonetheless, more traditional import sources such as

Apart from the Middle East, China’s thirst for oil is also causing worries in Europe, given the Russian angle. Some observers fear that if demand keeps growing as it is, Russia won’t be able to properly supply its European markets. Although major Russian companies are indeed considering pivoting towards Asia, this will be a long− term, slow transition, and is unlikely to directly threaten exports to Europe. EUROPE ON THE FRACKING FENCE Europe too is interested in exploring new alternatives for fuel, but the most obvious option, the unconven− tional exploration that has proved so successful in the States, faces far more opposition on the continent, largely thanks to environmental considerations. As György Szabó, chief executive of Falcon Oil and Gas’s Hungarian subsidiary TXM noted in a 2012 interview, the situation is greatly different on the two continents. “Whereas the environmental concerns in the U.S. emerged after unconventional exploration produced results, in Europe, the industry already faces opposition before any significant exploration has even started,” he said. The United States was at a further advantage com− pared to Europe thanks to its liberal regulatory environ− ment, thriving services industry and the fact that min− eral rights owners were more incentivized to engage in unconventional upstream activity. Some European countries have banned fracking alto− gether, while others like Poland hope to start extraction for commercial purposes within the decade. Hungary itself has a potential unconventional deposit that is estimated to amount to several years of the country’s ovrall consumption, based on Falon’s first evaluation of the volume. Falcon is currently exploring the Makó Trough, as the area in southern Hungary is known, in association with Serbian energy group NIS.

BBJ

3Special Report Online insurance: getting popular

Insurers covering niche markets

INSURANCE Hailed and bashed by many, the prodigy of life insurance, the unitâ&#x2C6;&#x2019;linked segment is back in the headlines. Oneâ&#x2C6;&#x2019;off sales are up, but a heyday is not close at hand.

WWW.BBJ.HU

Budapest Business Journal | Oct 18 – Nov 03

LONG-TERM GROWTH ON TREMBLING LEGS Long−awaited positive growth figures should give rise to hope in the insurance sector. The boost comes from life insurance, thanks to the flagship unit− linked segment. But while single premium sales have shot up recently, regular premium products are still declining, thus making the long−term outlook grim; in other words, consume the thumbs−up news responsibly. LEVENTE HÖRÖMPÖLI-TÓTH

The Unit Linked Insurance Plan, a product providing a combination of insurance and investment, has been pronounced dead sev− eral times by the financial blogosphere in Hungary. Disproportionately high costs and aggressive sales methods have provoked neg− ative headlines. Now ULIP seems to be flex− ing its muscles again. As stated in the latest

STORY HIGHLIGHTS report by the Association of Hungarian Insur− ■

Reviving insurance market mainly due to recent high sales of single premium unit linked products ■ Long-term perspectives still looking hazy, as overall economic performance is an obstacle to the growth of the regular premium unit linked market

ance Companies (MABISz), a major increase in unit−linked revenues in the second quarter of 2013 was behind an overall growth of 11% of the life insurance market to a large extent. “The Hungarian life insurance market has been falling in real terms since 2007, but we have also witnessed a nominal drop in the past three years,” explains Attila Bosnyák, CEO of Consequit Group, an insurance bro− ker company. “2013 might be the turn of the tide with revenues rising in two consecutive quarters and unit linked products accounting for 65% of total market sales.” A BUMPY ROAD AHEAD But popping the cork would be premature. “The life insurance market expansion in the

CONSEQUIT GROUP CEO ATTILA BOSNYÁK

first half of 2013 is primarily due to an ever increasing interest for single premium unit linked products,” Linda Sallai, deputy CEO of product development and risk management at CIG Pannónia Life Insurance Plc high− lights. A sudden jump of 36.1% on the single premium front may sound astronomic, but in reality it is rooted in the change of the mac− roeconomic environment. Dropping inter− est rates led to bank deposits losing their sex appeal and a rise in the financial transaction fee further pushed clients towards more prof− itable territories, where ULIP has handsome returns to offer for short−term liquid invest− ments. However, the large amount of money that was dumped with so much haste into the unit− linked segment may go as fast as it came. Steady economic growth, rosier employment perspectives and more disposable income would be needed for massive regular pay− ments. None of that is in sight. “People have been seeing their real wages go down for years now. We estimate that a 3% decrease of real wages may trigger a plunge of 6−9% on the market,” András Kozek, deputy CEO for life and pension insurance at Allianz notes. The market players place their bets on vari− ous factors in seeking to attract long−term investments in their ULIP sector. The role of a cost indicator enabling a comparison of unit linked products to one another and to other financial instruments could help. More inno− vative products offering an extremely low cost structure and the improved training of insur− ance brokers are also on the agenda.

FANCY AN INVESTMENT APPETIZER? What ultimately may save the day for ULIP is the taxation issue. Returns enjoy major tax reliefs in terms of the 16%−inter− est tax and the 6%−healthcare contribu− tion, and under given circumstances, a complete tax exemption is granted. On the other hand, whilst tax is due at expiry of any banking products or funds invest− ments, switching between funds dur− ing the entire tenure of the unit−linked investment is fully exempt of taxes, allow− ing for flexibility and tax savings. “Clients tend to lose their appetite for risk with every crisis and negative expe− rience, and regain it slowly, but surely,” Bosnyák from Cosequit observes. It takes more than appetite to take a risk, though. “We need to make our clients aware of what they actually buy and for what pur− pose those products can be used exactly,” Kozek from Allianz says. CIG Pannónia expert Sallai adds that only such products that offers additional and special services or features have a future. Creativity will be in heavy demand from ULIP sellers for certain, especially if you take a look at the recent report of financial watchdog PSzÁF on consumer protection risk. It states that revenues from new regular premium unit−linked contracts have dropped and so has the share of such contracts among new life insurance policies compared to 2012. Long−term growth for unit−linked prod− ucts is still on trembling legs.

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Budapest Business Journal | Oct 18 – Nov 03

ONLINE INSURANCE: GETTING POPULAR? With the obvious possibilities of the Internet, the administration of various services has become, in some cases, cheaper, faster and generally free of hassle for the client. The same holds true for insurance bonds, the online versions of which are actually cheaper, according to an article by HVG.hu. But is the online insurance bond market reaching some level of maturity, or is it still very much in its infancy?

example.” Kurtisz, from Uniqa, is more pos− itive; according to him online insurance is “fast, comfortable and cost effective. Still we must add, that it can be only used effectively for basic products.” MARKET INFLUENCE “Online insurance broadened our possibili− ties of communicating with customers and, besides doing simply business with them, it created additional channels of value for our company,” Kurtisz replied when asked about the general influence of online insur− ances on the market. “In our case the sales channel is still mainly based on the postal network. Inter− net insurance sales are still a small part of our income,” added Mester. That confirms, somewhat, that the online insurance mar− ket is still somewhat in its infancy. Mester added that Magyar Posta Biztosító’s clients seem keen to use online services only with standard products, such as the compulsory auto insurance, but almost never choose the Internet for a life insurance. Lesti, was able to give the BBJ more specific num− bers: according to her, 60−70% of K&H’s clients go online for the compulsory auto insurance, 15−20% for house insurance and 40−50% for the travel insurance. Online life insurance is negligible. Kurtisz estimated that about 30% of Uniqa’s clients book their travel insurance online.

GERGELY HERPAI

Those looking for a good deal when it comes to insurance bonds can get their reduced by as much on average of 5−10% by going online, with discounts at the top end going as high as 25−30% compared to the traditional methods administration, accord− ing to azenpenzem.hu (Mymoney.hu in Hungarian). NOTHING NEW HERE? This kind of online ‘self−service’ is not new, of course. “We started our online services in 2006 with travel insurance, and followed with the compulsory auto insurance,” Péter Mester, marketing leader of Magyar Posta Biztosító, told the Budapest Business Jour− nal. “Afterwards we added CASCO and home insurance to the list of our online ser− vices,” he added. Other companies, like K&H, have only offered online insurance possibilities rel− atively recently: according to Mónika Lesti, from the communications depart− ment of the bank, clients have been able to get home insurance since 2010 and travel insurance since 2011. Krisztián Kurtisz, a member of the board at Uniqa, confirmed that it has been offering online insurance

for three years. This may sound a little sur− prising, considering that using the Internet for various services has been common in Hungary since the early 2000s. WHAT’S THE BIG DEAL? “The administration of simpler insurances can be done a lot quicker and from home, it’s a big plus. Also the system is automated in such a way that it can alleviate the process− ing of the contracts,” Mester confirmed to the BBJ. Lesti adds that, “The transparent prices also promote price competition and thus rea− sonable discounts.” Still there’s a problem

that complicates the whole online insurance business: clients may not know what kind of specific insurance is best for them. “Some clients choose insurances only keeping in mind the price factor, and don’t think about some possible and important risks, to which our administrators can draw their attention,” Mester said. Lesti agrees. “With some more complicated products like CASCO or home insurance, doing it online the client is mak− ing his or her choices regarding the compo− nents of the insurance alone, and sometimes those choices aren’t optimal, which can cause real problems during a car accident for

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PIONEERING ADVANTAGE? “Today, for each insurance company the existence of the online channel is a must. Those companies who are serious about the online insurance bonds can only report positive experiences,” Kurtisz said. Lesti can see little competitive gain for the online pioneers, however: “Since prod− ucts can be quickly introduced and cop− ied by different companies, there is not much advantage for those who were the first to introduce online insurance.” Nei− ther could Mester speak of any major dif− ferences between the pioneers of online insurance and those who followed later.

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Budapest Business Journal | Oct 18 – Nov 03

INSURERS COVERING NICHE MARKETS Having insurance is commonly considered a good idea to prevent damage in accidents or as a result of crime, but it is often surprising what kind of policies are available and the things people are looking to insure. Hungary has some ground to make up in reaching the tabloid headlines, but we’re getting there. GERGŐ RÁCZ

It is a common recurring theme on the lighter side of the news whenever an insurance policy covers something odd or out of the ordinary, usually for an astro− nomical sum. Piano tuners insure their hands, famous actresses take out poli− cies, often worth millions of dollars, for their breasts or eccentric wealthy people spend a fortune to protect various tidbits they hold on to as keepsakes from their lives. In searching for new market oppor−

STORY HIGHLIGHTS ■

Insurers are covering a wide range of items ■ Gadgets, pets, even suicide can be covered

tunities, insurers have discovered that expanding their range of services to any and every eventuality imaginable is sim− ply good business. For instance, it’s easy and common to get insurance for yourself, your children or partner. The business opportunities appar− ent in the ties now also cover ‘extended families’: you can insure your pets. A sur− vey released by insurer Generali found that 79% of dog owners and 72% of cat owners consider their pets as family members. Accordingly, the company launched a new policy targeted specifically at those who want to have savings in case there is an accident or a visit to the vet. Based on the terms, the contract could cover up to HUF 300,000 in vet costs, Generali said. SENSITIVE GADGETS The range of things that can be covered by a policy has grown as more relatively

VISITS TO THE VET ALL COVERED

pricey equipment has become available to a broader consumer base. It is now com− mon for mobile telecommunication firms to include handset insurance in their basic tariffs, or to make such solutions available to their subscribers. Getting insured may actually be a good idea, since many of the popular gadgets are anything but cheap. For instance, the latest wave of the super−hyped iPhones could cost up to HUF 195,000, depending on the package available at the provider. Similar considerations apply for lap− tops, where insurance is on sale to cover the eventualities that aren’t included in the normal warranty terms. A website promoting a laptop policy states that the insurance will pay for common accidents like dropping the device, spilling a bev− erage on it or damages from voltage fluc− tuation. Those looking to buy top−notch gear may want to consider the option, espe− cially if they are looking for high−end brands. The latest 13−inch MacBook Air has a starting price of HUF 350,000, while the peak Alienware laptops opti− mized for heavy−duty use like gaming or graphic design could easily cost upward of HUF 900,000 – and they break just as easily. FULL COVERAGE While one of the main issues in the ongo− ing debate over healthcare insurance in the United States is whether companies should be held to cover medical bills

in the case of preexisting conditions, there are policies that cover deliberately inflicted self harm. While a man in Germany was denied payment from an insurance company after he injured his partner in an extreme sex act last year, after a 2010 court ruling, Hungarian clients have the option to buy life insurance that also pays in the case of suicide, if it happens two years after the contract is signed. Death in general is a sensitive niche market for insurance but one that will never go out of business for obvious rea− sons. Clients are offered policies that allow them to have a budget ready to cover their burial and relieve their fami− lies of the eventual costs. One brokerage has three separate offers ranging from HUF 250,000 to HUF 800,000 depending on the desired elements of the ceremony, with monthly installments depending on the type of coverage chosen and the age at which the customer enters the contract. While nowhere near as final, companies are also finding a niche in high unem− ployment. Leading insurers all offer pol− icies targeted specifically at people con− cerned that they will lose their income for whatever reason so they can bridge the interim period. Clients who find themselves in unex− pected trouble but who had the foresight to save against the possibility can rely on payouts for up to nine months, according to the terms of one popular insurer.

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Budapest Business Journal | Oct 18 – Nov 03

Insurance companies[1]* RANK

Ranked by gross premium income in 2012

COMPANY WEBSITE

GROSS PREMIUM INCOME IN 2012 (HUF MLN) IN H1, 2013 (HUF MLN)

BREAKDOWN OF GROSS AMOUNT OF CLAIMS PAID IN 2012 (HUF MLN)

LIFE

NON-LIFE

ALL

PRE-TAX PROFIT IN 2012 (HUF MLN)

42,280

44,741

87,052

5,032

MARKET SHARE IN 2012 (%)

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

17.23

– Allianz New Europe Holding GmbH (99.99), Allianz SE (0.01)

Péter Kisbenedek Gábor Bognár –

1054 Budapest, Bajcsy-Zsilinszky út 52. (1) 301-6565 (1) 301-6100 ugyfelszolgalat@allianz.hu

0LKiO\ (UGŃV $QQD +HJHGŝV –

1066 Budapest, Teréz körút 42–44. (1) 301-7100 (1) 452-3505 generali@generali.hu

ALLIANZ HUNGÁRIA BIZTOSÍTÓ ZRT www.allianz.hu

132,286 75,911

GENERALI-PROVIDENCIA BIZTOSÍTÓ ZRT

109,845 58,186

41,352

18,792

60,144

2,238

14.31

– Generali PPF Holding B.V (100)

45,590

18,792

64,382

2,238

– Groupama S.A (100)

Yann Ménétrier Mihály Bácsfalvi István Csonka

1051 Budapest, Október 6. utca 20. (1) 373-7500 (1) 373-7549 info@groupamagarancia.hu

Péter Zatykó Gyula Horváth –

1091 Budapest, hOOŃL ~W (1) 476-5765 (1) 476-5710 ugyfelszolgalat@aegon.hu

www.generali.hu

GROUPAMA GARANCIA BIZTOSÍTÓ ZRT www.groupamagarancia.hu

84,705 44,910

AEGON MAGYARORSZÁG ÁLTALÁNOS BIZTOSÍTÓ ZRT

78,233 41,347

38,596

18,335

56,931

12,829

10.19

– AEGON Hungary Holding B.V (50), AEGON Hungary Holding II B.V (50)

65,746 34,112

75,258

–

75,258

–294

8.56

– ING Continental Europe Holdings B.V (100)

Cornelia Coman Gábor Borza –

1068 Budapest, Dózsa György út 84/B (40) 464-464 (1) 267-9093 biztosito@ing.hu

Othmar Michl 6iQGRU .ŃV]HJL –

1134 Budapest, Róbert Károly körút 76–78. (1) 238-6000 (1) 238-6060 info@uniqa.hu

www.aegon.hu

ING BIZTOSÍTÓ ZRT www.ing.hu

UNIQA BIZTOSÍTÓ ZRT www.uniqa.hu

54,291 33,823

MAGYAR POSTA BIZTOSÍTÓ / MAGYAR POSTA ÉLETBIZTOSÍTÓ ZRT

43,963 38,491

www.postabiztosito.hu

K&H BIZTOSÍTÓ ZRT www.khdirektbiztositas.hu

27,281 17,345

UNION VIENNA INSURANCE GROUP BIZTOSÍTÓ ZRT

27,073 19,294

www.unionbiztosito.hu

CIG PANNÓNIA ÉLETBIZTOSÍTÓ NYRT 10

22,521 7,792

METLIFE BIZTOSÍTÓ ZRT 11

15,841 7,959

www.cigpannonia.hu

www.metlifehungary.hu

20,365

8,689

29,054

–674376

– Uniqa International Beteiligungs- Verwaltungs GmbH (99.92), Uniqa International VersicherungsHolding GmbH (0.08)

22,976

3,230

26,206

815

5.73

Magyar Posta Zrt (33.07) Talanx International AG (66.93)

Anett Pandurics Ferenc Pap Péter Mester

1022 Budapest, Bég utca 3–5. (1) 423-4200 (1) 423-4210 info@mpb.hu

Wim Guilliams – –

1851 Budapest, Lechner Ödön fasor 9. (1) 461-5200 (1) 461-5276 biztosito@kh.hu

14,317

9,451

23,768

2,203

3.55

– KBC Insurance N.V. (100)

10,393

3,979

14,372

495

3.53

– Vienna Insurance Group Wiener Städtische Versicherung AG (100)

Gábor Lehel – –

1082 Budapest, Baross utca 1. (1) 486-4200 (1) 486-4390 info@unionbiztosito.hu

2.93

– –

Ottó Csurgó Miklós Barta –

1033 Budapest, Flórián tér 1. (1) 244-5858 (1) 247-2021 info@cig.eu

– MetLife EU Holding Company Ltd (100)

János Bartók – –

1138 Budapest, 1pSI UGŃ XWFD (1) 391-1300 (1) 391-1660 info@metlife.hu

6,558

21,077

–

6,558

21,077

–2133

–17

RANK

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Budapest Business Journal | Oct 18 – Nov 03

GROSS PREMIUM INCOME IN 2012 (HUF MLN) IN H1, 2013 (HUF MLN)

COMPANY WEBSITE

ERSTE VIENNA INSURANCE GROUP 12 BIZTOSÍTÓ ZRT www.erstebiztosito.hu

SIGNAL BIZTOSÍTÓ ZRT

AXA BIZTOSÍTÓ ZRT

www.signal.hu

www.axa.hu

GRAWE ÉLETBIZTOSÍTÓ ZRT 15 www.grawe.hu/hu

BREAKDOWN OF GROSS AMOUNT OF CLAIMS PAID IN 2012 (HUF MLN)

LIFE

NON-LIFE

ALL

PRE-TAX PROFIT IN 2012 (HUF MLN)

MARKET SHARE IN 2012 (%)

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

Zsolt Raveczky – –

1082 Budapest, Baross utca 1. (1) 484-1700 (1) 484-1799 info@erstebiztosito.hu

15,119 6,280

7,400

–

7,400

426

1.97

UNION Vienna Insurance Group Biztosító Zrt (5), Erste Bank Hungary Zrt (5) Vienna Insurance Group (90)

13,872 8,366

8,423

2,734

11,157

–223

1.81

– Signal Iduna Allgemeine Versicherung AG (100)

Tamás Kálózdi Dénes Csata –

1123 Budapest, Alkotás utca 50. (40) 405-405 (1) 458-4260 info@signal.hu

13,151 6,123

15,139

203

15,342

–5671

1.71

– Société Beaujon (100)

Anett Vadas-Földvári – Csaba Bunghardt

1138 Budapest, Váci út 135–139. (1) 465-6565 (1) 413-5101 info.axa@axa.hu

– Grazer Wechselseitige Versicherung Aktiengesellschaft (100)

Andras Hochmann – –

7632 Pécs–Üszögpuszta, Kastély (1) 202-1211 (1) 355-5530 info@grawe.hu

8,178 3,240

4,226

–

4,226

1,599

NOTES: (1) From the database of Magyar Biztosítók Szövetsége and the Hungarian Financial Supervisory Authority (PSZÁF)

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

This list was compiled from responses to questionnaires received by October 14, 2013 and publicly available data. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of press time. While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, Madách Imre út 13–14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

BBJ

4 Socialite PEOPLE ON THE MOVE

RESTAURANT REVIEW

Baltazár: casual, fresh and cool

DR. PÁL SZABÓ SIEGLER / WEIL LAW OFFICE, SENIOR ASSOCIATE

Q&A

Steering the wheel: Andrea Kővágó−Laky

20-21

➜ Page 23

Photo: Tamás Bujnovszky

STATE-OF-THE-ART WINES

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4 Socialite

Budapest Business Journal | Oct 18 – Nov 03

WHAT IS AN EXECUTIVE WOMAN LIKE IN 2014? Lecturers at the Budapest Business Journal’s business conference on Women in Leadership 2014 demonstrated both their ability to argue their case as well as their wit. Thanks to MKB’s hospitality, the overall atmosphere of the conference was elegant, and at the same time cozy. For those who missed the event on October 2, we offer a sampling of the conference’s best bits.

FORD SPONSORED THE EVENT

ROUNDTABLE DISCUSSION WITH MODERATOR ERNŐ SIMON, KATALIN RÁNKY, ÁGNES JAGICZA, ÁGI PATAKI, ANDREA KŐVÁGÓ-LAKY, ZSUZSA BEKE, ANDRÁS SIMON

Photos: Márton Mundy

MKB HEADQUARTERS, THE VENUE OF THE CONFERENCE

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4 Socialite

Budapest Business Journal | Oct 18 – Nov 03

hat makes a top female executive different? The richest woman in Hungary, Erika Kósa, the president of Consequit (and ex−owner of Brokernet), thinks it is a surplus of emwotional intelligence. “Every top executive must possess a great deal of emotional intelligence as success is only 20% based on traditional intelligence; 80% of it is the fruit of one’s emotional

intelligence,” she emphasized, citing American psychologist Daniel Goleman. “We should praise our colleagues/ subordinates for their accomplishments. People in the corporate world long for recognition; we should not consider people’s achievements as self−evident: we must also give them a sense of being appreciated. In general, an executive must learn how to manipulate people, and praise is a good way of stimulating the members of one’s team.”

ent ways of purchasing cars as well.” Zsófia Körmendi−Seidler, product gen− eral manager at GE Lighting, thinks that gender and ethnic diversity is vital for multinational companies. “The rea− son why multinational companies pro− mote the idea of a female team is not that they believe in ideals, but because they can boost sales that way. If forty−some− thing white males develop products, and forty−something white males do the mar−

reconciliation to strife. They are better communicators, and their communicative techniques are superior to those of their male counterparts. While men tend to use words either for combat, or for deliv− ering information, or for making argu− ments, women pursue real dialogue and achieve better results based on consen− sus. Women are better at dividing their attention, while men can only concen− trate on one thing at a time. This is rooted in the ancient division of labor already typical in primeval human groups [‥ .] Even in stereotypically male−dominated spheres, women can perform greatly as leaders. Look at car racer Kaltenborn’s stable. This stable is led at the moment by a female manager who came from India.” Andrea Kővágó−Laky, managing direc− tor of Ford Hungária, says some path− breaking inventions, like bullet−proof

A virtuoso presentation was given by the director of Ispiro Consulting, András Simon, who was not stingy with great ges− tures toward women. “Women are more suitable for executive positions than men for several reasons. Executive women pre− fer compromise to battle, and they prefer

when one works in the media. The media promote a ruthless cult of youth these days. When I think about how I assist in

boosting this cult while I myself am get− ting older in the meantime, I cannot help noticing the contradiction.”

keting as well as the sales, then only forty− something white males will buy the prod− uct. That is the reason why gender, ethnic diversity is crucial for multinational corpo− rations [‥.] GE has its own Women’s Net− work. It was originally created in 1998 on the initiative of Jack Welch, CEO of the cor− poration in the USA, and it gradually devel− oped into an internal network which helps female staff to coach each other.”

Kinga Györffy, storytelling consultant with the Personal Brand Institute, says that the art of storytelling is the art of convincing others and women should not be afraid to use it as a tool. “A talent for storytelling has traditionally been a male rather than a female strength, and executive women sometimes find it hard to develop their narrative side. The typical female attitude is either ‘I cannot really tell stories in a funny way’ or, ‘the stories I could tell would inter− est nobody’. But they must not give up

Zsuzsa Beke, head of communication and public affairs at Gedeon Richter, talked about how to find the balance between work and family. “It is practically impossi− ble to perform equally well at one’s work− place and at home – but one can at least try. I could tell endless stories of how to rush from ballet class to an international meeting and back, and the adventures I

“For a female executive, I have recently been inspired by five charismatic men,” said Veronika Pistyur, managing direc− tor of Bridge Budapest. “Namely the lead−

ers of Prezi, LogMeIn and U−Stream.” Bridge Budapest is a joint foundation of the three startup companies mentioned above. “Values are important in busi− ness,” she said. “Vision and courage are pre−eminent,” she added. “Out of the world’s 29 leading infotech companies, only three are European firms. It will be the demise of Europe if we continue this way.”

fabric Kevlar, have been invented and developed by female engineers. “In the field of car sales, the importance of female cus− tomers is steadily on the rise. Women tend to control an increasing part of the family income today. When a family purchases a new car, the wife’s – and/or mother’s – pref− erences are decisive. In the car market, con− sidered a typically male sphere, women are spending more and more these days. On average, they make about 25% of the pur− chases, and in the case of middle categories such as Ford Focus, women buy about 50% of new cars. It is often they who take cars to service stations. Given all that, women often complain that their demands are not taken into consideration when car man− ufacturers design their marketing strat− egies. Cars are advertised in ways that women find uninteresting or irrelevant, and the emphasis is often on the development of features which women find completely unimportant. In general, the shopping men− talities of males and females are radically different, and that is reflected in their differ−

trying, because the art of storytelling is really the art of convincing others. While arguments immediately provoke resistance and counter−arguments, sto− ries immediately arouse sympathy in one’s listeners.”

had while trying to raise three children and cope with my career at the same time.” By quoting hard data, she dem− onstrated how the proportion of women gets ever smaller toward the top eche− lons of management. She used funny film excerpts to illustrate the difficulties of trying to harmonize raising a child with a career. Nóra Szily, journalist and coach, gave a charismatic presentation on the relation− ship of media and ageing. “Today, one simply does not have the freedom to age

WINNER OF THE CONFERENCE’S LUCKY DRAW RECEIVES HER WINNING FROM SPIRIT HOTEL

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4 Socialite

Budapest Business Journal | Oct 18 – Nov 03

STEERING THE WHEEL

ANDRÁS ZSÁMBOKI

What kind of Ford model do you drive? A: I am driving a five−door, auto− matic transmission Mondeo Titanium X, powered by a two−liter, 163 HP diesel engine.

What do you think your car reflects: your role as a mother with a family, or your position as top executive at Ford Hungary? A: The top−level equipment undoubtedly reflects my position at the company, in the meantime however the engine in my vehi− cle is by far not the strongest available in our range. As opposed to men in general, in the case of a car I am less concerned by attributes like horsepower and torque, and on the other hand I put much higher empha− sis on safety and fuel efficiency. Much like most female customers, I find the design of the vehicle very important: the Mondeo – the model I drive – is among the leaders of its segment in this term as well, possessing everything that can further enhance the ele− gant look of the car, including cutting−edge spoilers and impressive alloy wheels. As far as my role as a mother is concerned, in terms of the vehicle options this is mostly reflected by the active safety systems like adaptive cruise control, lane−keeping aid, blind spot information system and driver alert, while the automatic transmission is rather a comfort feature that enables me to reach my three−year−old daughter’s seat backwards if necessary. In the next gener− ation of the Mondeo we will introduce the industry first rear inflatable seatbelts, which I will definitely order once available for the sake of the further enhanced safety of my daughter. Summing up, the size and equip− ment of the car is a status symbol, just as it would be for a man, but my expectations toward car design are still feminine, and my expectations toward safety are the same as any mother’s would be. I make sure that the car I drive is the safest possible: the 5−star Euro NCAP safety rating achieved by all Ford vehicles is reassuring enough; topping that by all the available passive and active

safety systems and the maximum number of airbags, however, gives an extra sense of peace of mind.

In your lecture delivered at the ‘Executive Women 2014’ con− ference, organized recently by the BBJ, you mentioned that the pro− portion of women among car purchas− ers has been rising exponentially. In what ways do male and female prefer− ences differ when it comes to buying cars? A: For men, the size of the car is an unques− tionable status marker. On the other hand, most women prefer smaller cars for park− ing reasons. Male jokes about women being worse at parking have an element of truth in them. Surveys attest to the fact that women find it harder to maneuver their cars into tricky parking slots, so they look for options such as parking radar, rear view camera or active park assist system, though these are becoming more and more popular among male drivers as well: 35% of C−Max and Grand C−Max models sold in Europe are ordered with active park assist for instance.

Photo: Márton Mundy

The automotive industry used to be infamous for offering hardly any career opportunities to women. Andrea Kővágó− Laky is a living counterexample, as she has been directing Ford Kelet− és Közép−Európai Értékesítő Kft for almost ten years. “Increasing numbers of female car buyers make the whole industry more sensitive to gender issues,” the Budapest Business Journal learned from her presentation at the Women Leadership Conference. We could not help asking her some further questions.

What are these exactly? A: While the parking radar will only give a beeping noise if we are getting too close to an object with the car, rear−view camera combines this with an actual picture of what is behind the vehicle. Active park assist is a further developed sys− tem that enables the car to park itself into a place only as long as 120% of the length of the car in case of parallel parking: the driver has to press the button of the park assist and it will beep at every place one’s car will fit into, then one only has to put the car into reverse and the car will park itself into the chosen slot, without one having to touch the steering wheel. The next generation of the active park assist, which will also be introduced in the new Mondeo, will be able to provide perpen− dicular parking tasks as well.

This parking extra must come with serious software backup. A: Definitely, all the sensors and cameras that are used by these systems are controlled by advanced software that analy− ses and transmits all the incoming data. The same software is used by the other active safety systems as well, like the previously mentioned lane keeping aid, adaptive cruise control, blind spot information system and driver alert, or the active city stop and traf− fic sign recognition systems, just to mention the most important.

The dashboard of a top− equipped car must look like the control panel of a spacecraft! Is this not intimidating for ladies? A: This is a challenge for us as salespeople. We cannot remain merely sales personnel; we have to grow into the role of advisors. Out of the available technological solu− tions, we need to assemble the combination needed by a particular customer in a way that she will find the solution user−friendly and easy to understand, otherwise she will be disappointed, even if her choice was opti− mal for her needs. It is really helpful though that once we are able to demonstrate the use−

EXECUTIVE SKILLS MAY BE UNIVERSAL, BUT WOMEN TEND TO POSSESS MORE EMOTIONAL INTELLIGENCE THAN MALE CEOS fulness of these active safety systems, our clients are easily convinced by their neces− sity, and they are indeed easy to handle, thus we are able to avoid frustration.

In your presentation at the conference, you mentioned that in the United States, women file more than 35% of service claims. In what sense do female service claims differ from those of men?

A: In Hungary, no such survey has been conducted yet. I can only report on my own experiences. In general, women are more meticulous in this field. If a compulsory ser− vice is needed after every 20,000 kilome− ters in order to retain the service guarantee, women generally take their cars to service after 19,000 kilometers. How masculine do you think the auto sales profession is today?

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4 Socialite

Budapest Business Journal | Oct 18 – Nov 03

A: I have been working in the automotive industry for nearly 20 years, and obtained my present executive position in 2005. Not counting myself, at that time there was only one woman in a top executive position, namely Judit Domán at Mitsubishi. Since then, she has joined the Association of the Hungarian Vehicle Importers, leaving me as the only female executive at the head of a car manufacturer in the Hungarian market. As far as Ford is concerned, on a European level there is one other female executive besides me. The Swedish branch has a female CEO, but men lead the other 17 branches.

Throughout your career, have you ever felt you were treated differently because you are a

woman? A: I am asked this question regularly, and I am lucky to be able to always provide the same answer: at Ford, aptitude is the only criterion for career advancement. And this has always been the way. I have never felt I was being treated differently. It is only since I became a mother that I have been finding it more difficult to set the appropriate balance between work and private life. Earlier, I used not to notice that I was regularly spending 10−12 hours in the office, now, as a mother, I tend to appreciate much more the free time that I can spend with my daughter and with my family.

How did the corporation react when you went on maternity leave? A: The company was extremely positive and cooperative. I committed myself to Ford a long time ago, and they have returned my

commitment with generosity. I have never felt any pressure to return to work earlier than I had originally planned. I am proud of the fact that I could stay on a two−year maternity leave with my daughter.

Of course one needs a support− ive team for that, too. In Hun− gary, Ford operates a regional center, and, besides that, Ford Central− and Eastern European Sales LLC also manage certain global−level tasks. A: That is true. My direct manager, our regional director, Viktor Molnár is responsible for the so−called European Direct Markets (EDM), a vast, cultur− ally complex region that is composed of 32 countries – Hungary being only one of them – and stretches over seven times zones, covering more than 11.4 million square kilometers, and inhab− ited by approximately 320 million peo− ple; thus, it is larger than the USA, both in terms of territory and population. Hun− gary is special, however, in the sense that we have a national sales company here, while in the other countries of the busi− ness region Ford is working with inde− pendent exclusive importers. We are par− ticularly proud of the fact that under the lead of Viktor Molnár our local organiza− tion has received the opportunity to take over various European−level tasks from key divisions such as those in the UK and Germany. Today, our local headquarters fulfills certain functions and provides ser− vices to the whole EACEA region. In the meantime, the 150th anniversary of the birth of Henry Ford and the 100th anniversary of the beginning of the mass

production of the Model T – both cele− brated this year – is particularly impor− tant for us, as the famous model’s chief engineer, and one of Henry Ford’s most trusted employees, was the Hungarian József Galamb, after whom the street of our regional headquarters was named in 2008.

How is Ford performing in an industry that has been one of those most severely hit by the

crisis? A: I am really proud to say that Ford has not only been able to secure solid profits in the last 16 consecutive quarters, but has also managed to increase its sales and mar− ket share all around the world. This was greatly helped by the fact that Ford has collected an unheard−of number of profes− sional acknowledgements in the last two years, not to mention the numerous sales records achieved by its models. Profes− sional journalists seem to be won over by Ford’s products and technologies, for which the recent international prizes collected by the company provide a clear proof: seven Euro NCAP Advanced prizes have been collected by various Ford models for their active safety systems and revolutionary technologies, the Ford Ranger has been chosen International Pickup of the Yqear 2013, the Ford Transit Custom has been chosen International Van of the Year 2013, while the Transit Connect has been chosen International Van of the Year 2014 (with Ford being the only manufacturer ever receiving the title in two consecutive years), Ford’s 1−liter EcoBoost engine has received the International Engine of the Year title

both in 2012 and 2013, and the Ford B−Max has received the AUTOBEST 2013 award – just to mention a few of the most presti− gious awards secured by the company. In the meantime, both in 2011 and 2012, Ford was the only manufacturer to have three models among the 10 most popular cars of the world, and it is likely to be the same this year as well, with the Focus being the most popular car in the world, the Fiesta being the most popular subcompact in the world, and the F−series being the most popular pickup of the world in the last two years. The company’s global successes are echoed regionally as well: Fiesta, Europe’s second most popular car, is the clear leader of its segment in the continent, just like the Fiesta ST, Focus ST and B−Max. Regarding the local picture, in Hungary Ford really began to soar just at the peak of the crisis, achieving the market leader position in the Hungarian passenger car and commercial vehicle market in 2009 and holding it ever since (actually lost it only for a few months in the last five years, but regained it just as quickly). I am really proud to say that Hungary has been one of the best performing markets for Ford in Europe in the last couple of years.

What do you think the recipe of your success as a top exec− utive is? What is the feminine component within that recipe? A: Expertise and experience in one’s field. Executive skills may be universal, but women tend to possess more emotional intel− ligence than male CEOs. On the other hand, we have to learn in what ways to take advan− tage of that.

SZAMOS GOURMET PALACE MARKS 2ND ANNIVERSARY

he newest and most impressive jewel of the Szamos family, the Szamos Gourmet Palace, located in the heart of Budapest on Vörösmarty square, celebrates the second anniversary of its opening this November. The café, operating in the former stock exchange palace, is not only a traditional confectionery in an exceptional setting, but also a café with bistro cuisine, and a chocolate manufacturing workshop. Szamos follows in the footsteps of a traditional confectionery, creating recipes and tarts from the age of Dual Monarchy. It does so manually, with traditional tools and without using any additives. Apart from the classic selection, it offers health-conscious products such as low calorie, light French desserts and sweets. In the bonbon-manufacturing workshop, separated by a glass wall from the shop, chocolate masters make classic and modern creations. Szamos offers them in more than 40 flavors, ranging from traditional truffles to fruity specialties and ganache. Szamos also operates its own chocolatemaking courses in the building. The Szamos Chocolate School provides the opportunity

of making bonbons, tarts, macaroons or candies. There are beginner and advanced courses, held both in Hungarian and English. Several companies choose the course as a unusual form of team building, and bachelorette parties are also held here. The selection of Szamos Gourmet Palace is much more colorful than that of an average

confectionery: it also offers, besides cakes and bonbons, breakfast and lunch. The menu intentionally has a Hungarian tone, but with a touch of lighter – French and Italian – notes. They aim to address both Hungarian and foreign guests. The colorful breakfast offer and the daily lunch menu is not only for those working in the neighborhood: cooking is done at the weekends too.

The café, with an area of more than 200 square meters, is a popular location for events, receptions, conferences and press conferences. 1052 Budapest, Váci street 1. Phone: +36 30 570 5973 www.szamosmarcipan.hu www.csokoladeiskola.hu www.facebook.com/SzamosGourmetHaz

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Budapest Business Journal | Oct 18 – Nov 03

WHO'S NEWS

Name DR. PÁL SZABÓ Current company/position SIEGLER / WEIL LAW OFFICE, SENIOR ASSOCIATE

Szabó has joined Weil Budapest’s internationally recognized, top-tier mergers and acquisitions group as a senior associate. He earned his J.D. from Pázmány Péter Catholic University, and an MA in English language, linguistics and literature from ELTE University. Prior to joining Weil, he spent nine years working for Allen & Overy in Budapest and London. Szabó has significant crossborder and domestic mergers and acquisitions experience.

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Name OLIVÉR MARTIN Current company/ position SZENTKIRÁLYI ÁSVÁNYVÍZ KFT / CHIEF FINANCIAL OFFICER

As of October 2013, Martin is the new CFO of Szentkirályi Ásványvíz. He started his career at ABN AMRO Corporate Finance in 1995. Seven years later he became board member of Rába Holding Nyrt. He was named director of Invescom Corporate Finance in 2003, and spent 10 years with the company. He received a degree in economics from the Technical University of Berlin and also studied in Brussels and Amsterdam.

Name ÁKOS GYENES Current company/ position BDO MAGYARORSZÁG / DIVISON HEAD, BDONLINE

Gyenes joined BDO in October as the new division head of the company’s online hotel and tourism consulting business BDOnline. Gyenes has more than 10 years’ experience in the hotel industry, both in Hungary and abroad. Among others, he worked at Accor Group in the areas of front office, operations, sales, revenue and yield, and online marketing. He has worked as a consultant and trainer in the hotel and tourism industry since 2011. He has a degree in tourism economics from the University of Veszprém.

RESTAURANT REVIEW

BALTAZÁR – CASUAL, FRESH AND COOL Baltazár is a bistro, wine bar, and even a boutique hotel in one place. It is located in the Buda Castle, and it is a part of a chain of six exquisite restaurants belonging to the Zsidai family. Baltazar is the twin brother of Spíler Pub, one of the most popular pub in Gozsdu udvar. Baltazár Budapest is a great place. It is beautifully designed with a grand, open ter−

race and modern Mediterranean decora− tion inside. It is casual, fresh and cool. The motto of the place is: honest and authentic ingredients in a real gastronomy adventure. The menu is simple, but that does not make it an easy job to choose. It is mainly built up from quality fast food items, such as burgers, homemade pizza, and tapas. There are also Hungarian specialties, and meat, fish and poultry from the charcoal grill of a handmade Josper oven (the kind that Heston Blumenthal and many other Michelin star chefs use). It’s time to order. I remember from Spíler Pub that the pizza is not a simple pizza, so it would definitely be a mistake to miss out – especially the one with goose liver and truffles. A few months ago in Budai Gour− met we enjoyed Baltazár’s Peking duck roll so much that we are not able to resist it again. My partner orders crispy pike− perch with baby spinach salad for the main course, and I go for a stew of veal tongue and lungs with porcini dumpling. The Hun− garian name of this dish – I must share this with you, because I think it explains everything – is ‘szalontüdő’, saloon lungs. The chef is Zsolt Litauszki, one of the most talented in Hungary, so I am not afraid of tasting an offal dish this time.

Our meals are fantastic. The pizza is awe− some, the goose liver and truffles match like a dream. The duck roll with its crispy bits and its spicy sauce is great fun, too. The perch is kept natural, light and fresh.

chocolate mousse with dark chocolate bites, and a mint mousse. It was delicious and creative: a perfect dessert. Walking downhill towards Széll Kálmán tér (the old Moszkva tér) from the

My tongue and lungs stew is also quite light, and does not remind me of the usual Hungarian dishes. For dessert we order butternut squash brûlée from the daily selection written in chalk on a blackboard hanging on the wall, and ‘After eight’ millefeuille. The brûlée was garnished with butter− nut squash ice cream, pumpkin oil and roasted seeds. It was not too sweet and tasted very smooth. The millefeuille was a great surprise. It consisted of a delicate

Castle was a real treat in the mid Octo− ber Indian summer. We enjoyed our din− ner at Baltazár so much, that we agreed to return as soon as possible to have some more of that pizza, sitting on the terrace watching tourists passing by on the cob− ble stone streets. RATATOUILLE

BALTAZÁR

1014 Budapest, Országház u. 31. Tel: (1) 300 7050

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WINE REVIEW

SIP SOPHISTICATED SAUVIGNON BLANCS AND GET ON THE GRUVEE TRAIN State−of−the−art new wineries shooting up in traditional settings can so often upset the applecart and alter the shape of the landscape, much to the chagrin of the locals. However, you don’t even catch a glimpse of Etyeki Kúria’s spanking new operation until you are almost right outside this tastefully built structure that blends in seamlessly on Öreghegy. While the recently opened winery is as modern and cutting−edge as they come, it is also harmonious with nothing exaggerated; in fact much like the wines themselves.

Etyeki Kúria’s Sauvignon Blanc 2012 is cur− rently drinking very nicely, now that the sharpish acidity that was evident back in spring has settled down. Etyek wines always manage to reach mouthwateringly high lev− els of acidity, no matter how hot the vintage. This particular year was really hot and dry all across Hungary, which was also true of 2011. However, in that year the soils were still full of moisture from the rain−drenched and cool 2010, which meant ideal ripening conditions in 2011. By 2012 the soils had dried out, lead− ing to lots of flavor−killing strain on the vines. With grapes like Sauvignon Blanc this ulti− mately led to a narrower spectrum of aromas, as was the case with this wine, but it neverthe− less still has plenty of varietal character with notes of green pepper and nettles, plus some lime and mint. It’s also got that rich concen− tration of the vintage on the palate and can be enjoyed beyond the traditional Sauvignon Blanc season of spring and summer and well into the autumn. Another outstanding producer of clean, vibrant and pure Sauvignon Blanc is Pan− nonhalmi Apatság, which has upped the ante with its latest offering. In 2012, they got so much richness from some of their best plots that winemaker Zsolt Liptai decided the ripest juice could stand up to fermentation and age− ing in oak, as opposed to the usual steel tank. Putting Sauvignon Blanc in contact with oak is a risky strategy as it all too often cancels out the grape’s plus points; namely the explosive aromas. However, in the case of Pannonhal− mi’s Sauvignon Blanc Válogatás (Selection) 2012, the oak helps to build the kind of body and structure that the sheer ripeness permits, and even demands. Thankfully the wine still has lots of gooseberry goodness that conveys the character of the grape. It also possesses power, body and depth, alongside juicy citrus and tropical fruit on the palate, with the mer− est hint of butterscotch from the oak. Laci Hernyák is another producer of killer Sauvignon Blanc and can be found back on Etyek’s Öreghegy. A few years back he eschewed making Sauvignon Blanc in steel in favor of oak, but the one I tried felt a bit too much on the butterscotch side. Having

Photo: Tamás Bujnovszky

ROBERT SMYTH

thought his scrumptious Sauvignon was a racy relic of the past, it was a pleasant sur− prise to see that he’s gone back to the fresh tank style that’s so lip−smackingly good, but not at all too light, thanks to the intensely fla− vorsome and extremely low yield of grapes that go into it in the first place. However, oak comes into play with his Zöldveltelini (Grüner Veltliner) 2012, which originates from 35−year−old vines, with half aged in oak and half in steel. Most takes on this über−trendy flagship grape from neigh− boring Austria, which is often dubbed Gru− Vee instead of given its full moniker, have left me cold. However, this one was at least inside the gates of the great Grüner ballpark when I tasted it just prior to bottling, with its clas− sic aromas and flavors of white pepper, lime peel, peach, apricot and pineapple, which are complemented by a dense and creamy palate. On returning from tasting some of the fin− est Grüners in Austria, I wasn’t expecting much when I came up against a pair of 2011 Zöldveltelinis, from Csobánc Hill, courtesy of Badacsony’s Villa Tolnay. Once again, every− thing was there in abundance. The first one, Tavasz, is about zippy tank freshness, with the use of oak and lees stirring (battonage) nicely fleshing out the palate of the second. Villa Tolnay’s Riesling, which is varietally pure while also exuding Badacsony’s savory stony character from the basalt soil, along with lots of spiciness, and is easily in the top flight of Rieslings in Hungary. This winery, which is owned by the Swiss Philippe Oser with the wines made by László Nagy, offers excellent bang for the buck and also cuts the mustard with Olaszrizling, Hungary’s wid− est planted grape, which despite its name has nothing to do with Riesling. At part of Olas− zrizling October, Tolnay claimed top spot with its 2007 effort out of a blind tasting of 81 Olaszrizlings, and a total of three entries in the Top 10. Tune in for a review of the Grand Olaszrizling tasting next month.

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