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Stock index has best year since 2009 OTP Bank and Richter helped the BUX outperform most other stock indexes in 2015, but the number of firms listed was actually reduced. New management and state ownership should bring change. 8

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Real estate experts see more good times

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Interviews with more than a dozen experts in the local market indicate upbeat attitudes about the prospects for the coming year. Still, there are concerns, including the lack of development in the pipeline. 16

While he acknowledges there is still some room for some development here, the new CEO of Commerzbank Zrt. says Hungary remains an exciting market for corporate banks in particular. 12

The world-beating Budapest Festival Orchestra will have some exciting concerts, and the Spring Festival is bringing in great talent, but you need to buy tickets early. See our preview of upcoming shows. 20

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OTP Bank and Richter helped the BUX outperform most other stock indexes in 2015, but the number of firms listed was actually reduced. New management and state ownership should bring change. 8

Zsanett Ducsai-Oláh, CEO of the Hungarian National Trading House, talks about her mission to expand exports. 9

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New Yearʼs resolutions weʼd like to see The New Year brings with it the hope of positive developments. It is a good time to think about the progress we would like to see. If we could make resolutions for Hungary and its leadership, they might be as follows: A more transparent and predictable legal environment: This is not only our wish. Read any of the last few years of reports from credit rating agencies explaining why Hungary’s debt, yet again, will keep its junk status, and all of them mention the need for this improvement. One-off taxes on certain industries and other “unorthodox economic” moves have proven to do more harm than good, and the government has shown some indication that they understand this. A good example is the promise to reduce bank taxes and start treating the finance sector as a vital part of the economy, instead of a goose with an endless supply of golden eggs. Further predictability, and fewer sector-specific laws, like the ones currently dogging retailers, would be a big improvement. Better transparency would also mean a reduction in deals that appear to be enriching politicians or their families. Corruption is an ancient practice that flourished under Hungarian communism, and, at the very least, the current government sometimes gives the impression of taking it back to that level. Reasonable tax rates: Hungary has some of the highest payroll taxes and value added taxes in Europe. Hungary also kept its deficit remarkably low in 2015, thanks to government appropriation of private pensions and better-than-expected tax collection. This indicates there is room for a reduction in state levies, though a smaller deficit is not the only reason for such a move. Intelligent tax cuts can encourage business and limit the incentive to cheat on taxes – and both these factors have been proven to increase tax revenue. Avoiding the kind of exorbitant and pervasive levies that cripple the economy can be a win-win situation for business and the government.

An end to the Sunday closing law: The retail sector has been saddled with a perverse law requiring stores of more than 200 sqm to close on Sundays. The law was justified as a way to make sure shop workers can see their families, but it also clearly favors the CBA grocery chain, which is headed by a man who donates a lot of money to the ruling Fidesz party. Regardless of why this law went into effect on March 15, it was a bad idea. Retailers, shoppers and store workers have all expressed their opposition to it, and a referendum to dump the law would have already taken place if it were not for political wrangling to thwart the democratic process. Those in power may be able to protect the Sunday closings law, but they should remember that the majority of the country hates the idea, and they are also likely to hate the people who keep it alive. Respect for refugees and other foreigners and an end to politicking through fear and hatred: This is a big wish that covers a lot of ground. Just as the ruling party’s popularity was foundering, the refugee crisis in Europe became big news, and the Fidesz government latched on to the opportunity to foment hatred. The prime minister began making abominable, racist statements about Muslims and watched his poll numbers rise. Fences went up along Hungary’s borders, casting a chill on the openness that has been a sign of progress in Europe. The government’s fear campaign has included spreading dubious stories about terrorists recruiting among the same Syrian refugees who were fleeing terrorists. A January 12 proposal to allow for a “terror state of emergency” would permit broad rollbacks of our civil rights – including allowing the government to control the media more intrusively than it already does – for two months at a time. One can easily imagine this law being horribly abused in the two months leading up to a national election. The changes wished for here would bring about a saner, more effective government that enjoys greater support of the people. It would be wonderful to see them put into effect, though for now, that seems like wishful thinking.

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Chimney sweeps clink glasses on January 1, 1970 in the city of Cegléd, in a Fortepan photo provided by Tamás Urbán, left. Above, Nyíregyháza Mayor Ferenc Kovács clinks glasses with chimney sweeps in Nyíregyháza on January 1 this year in an MTI photo by Attila Balázs. According to Hungarian tradition, it is good luck to toast with a chimney sweep at New Year’s.

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1 News BBJ

macroscope

NEWS

Fidesz proposes new type of emergency powers  4

NEWS

European court curtails domestic spying

Good news on Hungary’s budget

The Budapest Business Journal presents some of the most important macro data of the past fortnight.

2.4% Year-on-year rise in tourism nights at accommodation establishments in November, according to a January 13 report from the Central Statistical Office (KSH).

ZSÓFIA CZIFRA

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MACRO Speaking X of figures

Economics Minister Mihály Varga had some pleasantly surprising fiscal news to impart at year’s end: Higherthan-expected tax revenues and lowerthan-expected deficit and public debt figures.

4.8% State Secretary Péter Benő Banai, left, and Economics Minister Mihály Varga, at the January 6 press conference about deficit figures. (Photo: kormany.hu)

Data also shows that tax revenues rose HUF 848 billion year-on-year, which is related to higher economic growth and the whitening of the economy, the ministry said. below the earlier target of 2.4%. According to Varga, Hungary’s debt-to-GDP ratio had also dropped to below 76% by the end of last year, down from the 76.2% recorded at the end of 2014. Hungary posted a general government deficit of HUF 1.2186 trillion in 2015, according to preliminary data, the National Economy Ministry said in confirming what Varga had announced on January 6. Data also shows that tax revenues rose HUF 848 billion yearon-year, which is related to higher economic growth and the whitening of the economy, the ministry said.

Last-minute cash reduction However, at the end of the third quarter of 2015, Hungary’s debt-to-GDP ratio stood at 78%, which indicated that approximately two percentage points of reduction was necessary by the end of last year (in an effort to meet the debt rule which stipulates that the debt-to-GDP

ratio must fall from one year to another). In order to fulfill this requirement, the government decreased its deposits at the MNB in December, so the cabinet’s ready cash dropped to below HUF 660 bln, which is significantly lower than the amount at the end of 2014 and marks a seven-year low. Portfolio.hu lists a number of possible ways the government could have lowered the ready cash stock, among them the central bank buying back a significant amount of forex bonds on the secondary market, and such a repurchase was made by the Government Debt Management Agency (ÁKK) in December, which also reduced public debt. But the yearend depletion of the ready cash stock could become problematic, as a lot more foreign currency debt will come due in 2016 than last year, and most of the maturities will be in the first half, between March and May. The ÁKK plans to finance these from forint issuances, and the economy minister also announced recently that Hungary would offer a Eurobond in January or February; if that happens, it would be the first time the country has sold bonds on the international markets in almost two years. Hungary will submit its ESA report to the European Union at the end of March; it will contain the final details on the country’s debt and budget.

Increase in volume of retail sales in Hungary in November, according to a January 7 release of initial figures from KSH.

€673 mln Hungary’s trade surplus in November, according to a January 8 release of initial data from KSH.

9.5% Growth of Hungary’s industrial output in year-on-year terms in November, according to a January 13 report from KSH.

HUF 181 bln Net sales of retail government securities denominated in forints in December, according to a January 12 announcement from the Government Debt Management Agency (ÁKK).

Source: KSH, MTI

Hungary closed 2015 with some good macro data: Just two days before the year ended, the National Bank of Hungary (MNB) published its seasonally adjusted figures of the Q3 budget balance, which showed that Hungary’s net financing requirement in the third quarter of last year was exactly zero. That means the country did not rely on external sources to keep itself financed – something that has not been seen since such data was first recorded. In the 12 months to September 2015, Hungary’s net financing capacity was -0.6% of GDP, which is said to be the smallest figure since 1990. It’s important to note that the MNB’s financing requirement statistics are not the same as the budget deficit calculated in line with the Maastricht criteria. Still, these figures projected that the country’s government deficit could be significantly lower than the targeted 2.4% of GDP – an analyst consensus at business portal portfolio.hu suggested that the headline deficit for 2015 would be even smaller than the earlier projected figure at between 1% and 2% of GDP. The site notes, however, that while shrinking the deficit is a laudable result of economic growth, it should be noted that without the sectoral taxes and the re-channeling of private pension funds to the state coffers, the deficit would be above 4% of GDP. According to the National Economy Ministry, tax revenues exceeded expectations in 2015. At a press meeting at the end of last year, State Secretary for Public Finances Péter Benő Banai confirmed that, as a result of the higher tax revenues, the 2015 ESA deficit will be 2.4% or even lower. After all this good news, Economy Minister Mihály Varga delivered even rosier figures at a press conference at the beginning of this year. He said that the budget situation had turned out to be more favorable than expected. He estimated economic growth at 2.8%-2.9% for 2015, and put the budget gap at around 2%,

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04 News

Budapest Business Journal | Jan 15 – Jan 28, 2016

Mac Index, invented by The Economist in 1986, is based on the theory of purchasingpower parity (PPP), and takes the price of a Big Mac burger sold in the United States as a basis for comparison. On January 6, a Big Mac burger in the United States cost $4.93, while in Hungary the same burger’s price was $3.08, The Economist said. In the Eurozone a Big Mac cost $4, while in Poland the same burger was $2.37, the index shows.

EC says Paks deal is state aid, gov’t denies claim

New electronic ID

The first eIDs issued in Hungary are shown in this image taken on January 11. Described as a ‘one-stop card’, the eID combines personal identification including fingerprint and other biometric data and an electronic signature – if the user opts for these – along with social security and tax identification information. (Photo: MTI/Zoltán Máthé)

NEWS IN BRIEF Law would create new emergency powers Hungary’s ruling Fidesz party called a five-party negotiation on January 12 to discuss its proposal to let the government declare a “state of terror emergency”, which would apparently allow for a curfew, stricter domestic surveillance, control of the media and other unusual security measures, online daily origo. hu reported. Fidesz MP Gergely Gulyás confirmed following the negotiations that the government is proposing changes to Hungary’s Fundamental Law – or Constitution – to allow for the new type of state of emergency, which he said could be declared for a maximum of two months. Gulyás did not give details on the measure, but origo.hu said it learned before the meeting that, in a “state of terror emergency” the government would be authorized to: Limit and influence media coverage; limit the consumption of vehicle fuel and other consumables; reinstate border controls without concern for international treaties; monitor internet and postal

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traffic; and introduce a curfew. The declared state would be one step away from the currently existing “state of emergency”, which is declared if serious attacks take place endangering the lives of Hungarian citizens, origo.hu added.

Government to spend HUF 3 bln more on fostered workers The Hungarian government is planning to launch a program at a cost of HUF 3 billion this year to help fostered workers enter the labor market, in addition to the HUF 340 bln currently allocated for fostered workers in general for this year, Hungarian online daily index.hu reported on January 5. Péter Cseresnyés, state secretary of the National Economy Ministry (NGM), announced the launch of the program – “From public work schemes to the labor market” – to help with the integration of fostered workers, index.hu reported. The Hungarian government’s original justification for the fostered work scheme was to help unemployed Hungarians reenter the labor market, index.hu noted. Cseresnyés said he expects the new

program to help approximately 20,00025,000 fostered workers return to the labor market, index.hu reported.

Hungary plans to issue Eurobond, privatize banks, says EconMin Varga

Hungary is planning to issue a Eurobond in dollars or euros, either in January or February, and to privatize state-owned banks, possibly by listing them on the bourse, Hungary’s National Economy Minister Mihály Varga said in an interview with business portal Bloomberg, published January 7. “The custom in Central and Eastern Europe is to finance ourselves as rapidly as possible early in the year so there’s peace and quiet afterwards,” Varga told the business portal. “Because of maturities, we obviously need to make a market move in January or February,” the minister said, but did not specify the size or maturity. The economy minister also talked about the planned re-privatization of MKB Bank, with the possibility of listing the lender on the Budapest Stock Exchange (BSE), Bloomberg reported. “One scenario in the case of the privatization of MKB Bank is also to do it via the stock exchange,” the portal cited Varga as saying.

Big Mac Index: Hungarian forint 37.6% weaker than U.S. dollar The value of the Hungarian forint is 37.6% lower than the value of the American dollar, meaning Hungary is still among the cheap countries, according to the latest Big Mac Index compiled by The Economist, published January 7. The Big

Hungary has failed to provide sufficient information supporting its argument that a planned upgrade of its sole nuclear power plant does not confer the power generator with an unfair economic advantage, the European Commission said in a report released January 12. The government refuted the report, which describes concerns first officially flagged by the EC in November, according to state news agency MTI. Hungary has contracted Russian nuclear firm Rosatom to build two new reactors at the Paks plant for €12.5 billion, with €10 bln in financing provided by the Russian state. The Hungarian government has argued that the project complies with the market economic investor principle (MEIP), a key EC criterion for assessing state aid, MTI said. But the EC disagreed with the government’s assessment. “Hungary has not provided sufficient information on whether the investment is profitable on economic terms, taking into account the allocation of risks under the contract, and expectations on future revenues (based on future electricity prices),” said the summary of the EC report, published in the Official Journal of the European Union on January 12.

State support could boost new car sales, says business association Hungary’s new car market could recover with the help of government support that should be extended to buyers, János Eppel, co-chairman of business association VOSZ, told Hungarian economic daily Világgazdaság January 8. The co-chairman said the precedent in other countries, which recouped in 3-4 years, involved industry and state support in the form of price, financing and tax preferences, all of which helped the sector. The number of new cars sold stands at an annual 77,000, a figure well below 2008’s 182,000, Eppel noted. Eppel also mentioned that government talks are underway on how to boost tax morale among car mechanics, who fail to pay HUF 40-50 billion a year into the budget.

MOL relinquishes share in Akri-Bijeel Block in Iraq Hungarian oil and gas company MOL reached an agreement with Gulf Keystone Petroleum and the Kurdistan Regional Government’s Ministry of Natural Resources to relinquish its share in the Akri-Bijeel Block in the Kurdistan Region of Iraq, the company announced January 11, according to Hungarian news agency MTI. The decision is based on a comprehensive assessment of the block’s potential and MOL had already alluded to it in its Q3 interim report in November 2015, according to a statement released on

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Budapest Business Journal | Jan 15 – Jan 28, 2016

the Budapest Stock Exchange (BSE). MOL and Gulf Keystone Petroleum as contractor entities signed the relinquishment and termination agreement of the production sharing contract on December 31, 2015. MOL says it remains committed to maximizing the value of its investments in the Kurdistan Region of Iraq, among others in the Shaikan Block.

Banking Association fined HUF 4 bln for cartel activity Hungary’s Competition Office (GVH) fined the Hungarian Banking Association HUF 4 billion and the International Banker Training Center a further HUF 15 million on charges of cartel activity, the competition office announced January 12, according to Hungarian online daily index.hu. The competition office fined the association for a database it operated with the involvement of the training center, allowing banks to share business secrets for a period of 12 years, index. hu reported. According to GVH, the database provided too much information, violating both Hungarian and European Union competition rules, index.hu reported. Up-to-date information in the database included information on the market, market trends, and the performance of their competitors, their business policies and strategies. Banks used the information to formulate their own business policies, strategies and product development, Hungarian news agency MTI reported, citing the GVH. MTI reported that GVH agreed to a request by the Banking Association allowing it to pay the fine in installments, as its membership fees do not cover the total cost of the fine.

Pigging out just got cheaper

Minister of Agriculture Sándor Fazekas at a January 12 press conference about the reduction of VAT on pork, which went into effect at the beginning of the year. Pork is alone among meats in enjoying a VAT reduction from 27% to 5%. The press conference, at a Coop store in Vecsés, also featured a presentation of pork products. (Photo: MTI/Attila Kovács)

Hungarian ambassador urges NYT to print correction Réka Szemerkényi, Hungary’s ambassador in Washington, asked the New York Times in a letter to correct a piece it carried on January 2, claiming a Hungarian guard beat a Syrian refugee woman, as Hungary insists allegations in the article are false, Hungarian daily Magyar Idők reported January 12. The ambassador stressed that, while the American paper accuses a Hungarian official with a serious crime, it provides no evidence for the accusation, Hungarian online daily origo.hu reported. The Hungarian embassy in Washington said it asked for a correction in the piece before taking legal steps, origo.hu reported. According to origo.hu, writer Katrin Bennhold told the Hungarian press that she did not check the truth behind the allegation she carried in her article. The New York Times article, published on January 2 and entitled “On Perilous Migrant Trail, Women Often Become Prey to Sexual Abuse”, discusses the violence refugee women in Europe can face and says that a Syrian refugee woman “was beaten unconscious by a Hungarian prison guard after refusing his advances”. Hungarian officials say the event never happened.

Compulsory army recruitment unnecessary in Hungary, says advisor

While news surfaced that the Swedish Interior Minister is planning to reinstate compulsory military recruitment,

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Hungary is not in need of such measures, György Bakondi, chief security advisor to the Prime Minister, said according to Hungarian online daily origo.hu. In an interview with state-owned all-news channel M1 yesterday, Bakondi said that although it is unnecessary to reinstate compulsory army recruitment, the number of reserves in the Hungarian army should remain at “appropriate” levels. Meanwhile, Hungary’s far-right radical Jobbik party was reported to be drafting a proposal to be submitted to Parliament, in order to lay the groundwork for the establishment of a volunteer army, Hungarian news agency MTI reported. Jobbik deputy chairman Előd Novák reportedly said that although Hungary’s fundamental law declares that all citizens have an obligation to defend the country, the state does not guarantee potential volunteers the necessary basic training, according to MTI.

FT: Orbán, Polish leader discuss shared values Following a secretive meeting on January 6 in southern Poland between Hungary’s Prime Minister Viktor Orbán and Jaroslaw Kaczynski, president of Poland’s governing Law and Justice (PiS) party, critics speculated that the pair may be collaborating on plans to further undermine the EU’s democratic values, according to a report published by the Financial Times. A long-time Orbán supporter, Kaczynski is seen by

many as the key figure behind Warsaw’s ultra-conservative PiS party, which came to power in October, the Financial Times reported, adding that the party has been employing similar, allegedly antidemocratic tactics as those used by the ruling Fidesz party to secure its power. International media has widely criticized the new Polish government for attempts at increasing state influence over the constitutional court and media since it was elected.

Report: M1 shows Cairo sex assault video, says its Cologne Hungarian state-owned all-news TV channel M1 aired a video recording of a Dutch woman being sexually assaulted in Cairo’s Tahrir Square in 2013, claiming the video shows “dozens of migrants” raping a woman in Cologne, Germany, on New Year’s Eve, Hungarian online daily 444.hu reported on January 12. According to the online daily, the channel aired the video with the following description: “The video was taken on New Year’s Eve in Cologne, and it was recently uploaded to the largest video sharing site. Dozens of migrants surround a blonde woman, who has no chance of escaping. Her shouts and attempts to push the migrant men away failed, as they did not let her go. The video might have been taken with a phone by one of the migrants, exposing the incident.” M1 has not yet responded to 444.huʼs allegations on the matter.

European court rejects Hungarian law allowing domestic spying The Hungarian government is not allowed to conduct surveillance of its citizens without a judge’s order, according to a European Court of Human Rights in Strasbourg ruling that was announced on January 12 and goes against a ruling by the Constitutional Court. The European Court ruled in favor of two employees of the Károly Eötvös Institute who objected to Hungarian laws allowing secret surveillance and data collection by national security services without a judge’s warrant, state-owned news agency MTI reported on January 12. The ruling said that the Hungarian law breached the Human Rights Charter’s provisions on the right to privacy. In a democracy, the authorities can only sidestep this right if national security or public safety is at stake or when a crime must be prevented or public morals or others’ freedoms must be safeguarded, the Strasbourg ruling said. The court ordered a compensation of €4,000 to be paid to the plaintiffs. The plaintiffs organization appealed to Strasbourg after Hungary’s Constitutional Court rejected their petition in June 2012 asking for the annulment of a 2011 amendment of law-enforcement legislation. The amendment authorized the justice minister to permit secret surveillance of any individual by the TEK counter-terrorism force without court approval.

2016. 01. 13. 19:38

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Audi Hungary turns out its 300,000th vehicle The Hungarian unit of German car manufacturer Audi in Győr, northwestern Hungary, turned out its 300,000th vehicle since it launched full vehicle production about two years ago, Hungarian news agency MTI reported on December 22, citing a report from Audi Hungaria Motor. The plant had been making engines for several years, but production of full vehicles was launched in 2013, MTI said. Currently the plant in Győr has a headcount of approximately 4,300, and it turned out 135,000 autos last year, MTI said. The models produced in Győr include A3 limousines (like the one shown here), A3 cabriolets, TT coupés and TT roadsters, MTI added.

COMPANY NEWS Wizz Air launches three new routes from Budapest

Hungarian low-fare airline Wizz Air is launching three new routes from Budapest, adding Liverpool, Reykjavik and Ibiza to the company’s destinations from the capital, CEO József Váradi announced January 8. Iceland will become the 23rd country to which Wizz Air flies from Hungary. Wizz Air is scheduled to fly to Ibiza on Saturdays as of June 18, and to Liverpool and Reykjavik on Wednesdays and Sundays as of March 27, the announcement said. “Since 2004, when the first flight took off, we have garnered the loyalty and trust of 16 million passengers on our flights from and to Hungary and closed last

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year with a record number of 2.9 million passengers,” Váradi noted.

Netflix enters Hungarian market

Online video streaming service Netflix has launched services in Hungary, and in more than 130 countries simultaneously, including all Eastern European countries. Co-founder and CEO Reed Hastings made the announcement in Las Vegas in a keynote speech via live stream. The move expands Netflix’s global reach from 60 countries. New subscribers in Hungary will receive their first month free, with package prices ranging from €8 to €12 per month after the trial period.

“Today you are witnessing the birth of a new global Internet TV network,” Hastings said in his keynote speech. “With this launch, consumers around the world – from Singapore to St. Petersburg, from San Francisco to Sao Paulo – will be able to enjoy TV shows and movies simultaneously – no more waiting. With the help of the Internet, we are putting power in consumers’ hands to watch whenever, wherever and on whatever device,” the chief executive said.

MNB fines Banif Plus Bank HUF 49 mln The National Bank of Hungary (MNB) fined Banif Plus Bank HUF 49 million on charges of maintaining weak levels of regulation on its internal operations, insufficient identification, poor measurement and treatment of credit risks and numerous minor legal breaches. The central bank obliged Banif Plus Bank to strengthen its business management and risk treatment regulations, and to establish a mid-term business and risk strategy, the MNB’s press statement issued on January 11 shows. During its investigation, which wound up in

December, the central bank found deficiencies in Banifʼs IT system, and urged it to actualize its regulations. The bank needs to present changes initiated by the MNB in March, June and at the end of the year, the announcement says.

EMA to evaluate Richter’s new drug teriparatide The European Medicines Agency (EMA) has accepted Hungarian drugmaker Gedeon Richter’s regulatory submission for the proposed biosimilar to Eli Lilly’s Forteo (teriparatide), according to a press release issued by the company on January 4. Biosimilar teriparatide was developed by Richter-Helm BioTec GmbH & Co. KG, based in Hamburg, and according to license agreements, the new drug will be launched under both Richter and STADA labels in geographical Europe once the patent of the original product has expired, the press release noted. “Teriparatide is prescription only medicine used for the treatment of osteoporosis, leading to frequent bone fractures,” says the press release. Richter added that teriparatide is identical to the biologically active

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fragment of the human parathyroid hormone and replaces the natural hormone to stimulate bone formation.

Jeantet law firm opens office in Budapest

French business law firm Jeantet opened its first office in Budapest on November 1, according to a press release issued by the company on January 8. Operating in the fields of M&As and real estate transactions, Jeantet’s Budapest office will be managed by François d’Ornano and led by partner Ioana Knoll-Tudor, while Karl Hepp de Sevelinges will manage the firm’s Kiev office, which also opened in November. Jeantet’s Budapest office serves as a regional hub for the South East Europe region, with the team assisting clients in cross-border transactions throughout the area, the company said. “We share Jeantet’s commitment to independence, professional standards, and its ideas on how the legal profession should be practiced. We also see in Jeantet the entrepreneurial approach, energy and ambition that have always driven us in our own business, and we are delighted to be able to contribute to Jeantet’s expansion and reputation in France and Europe,” said Hepp de Sevelinges and d’Ornano in a statement about the new openings.

Amended law speeds up GVH merger decisions Under amended legislation that took effect on January 1, Hungary’s Competition Office (GVH) is required to make a decision on simple mergers within eight days, Hungarian news agency MTI reported on January 4. The decisionmaking period for the competition office has been reduced from the previously required 30 days. However, the simplified procedure only applies to cases where the transaction clearly does not restrict competition on the given market, MTI said.

InterContinental welcomes new director of sales and marketing

The InterContinental Budapest has announced its newly appointed Director of Sales and Marketing, Michael Borges, who has worked in the hospitality industry for 15 years at such hotel chains as Starwood Hotels and Resorts and Hilton Worldwide, according to a press release issued on January 7. Prior to transferring to Budapest, Borges, a dual citizen of both Canada and Portugal, was the director of sales and marketing at the five-star Epic Sana hotel in Lisbon. During his tenure at InterContinental, the new director will be responsible for the strategic operation and reorganization of the sales, marketing and reservations departments, as well as assisting in InterContinental Budapest becoming a leader in the business hotel segment in Budapest.

Competition office fines beverage company, firm appeals

Hungarian bottling company Fővárosi Ásványvíz és Üdítőipari was fined HUF 40 million by Hungary’s Competition Office (GVH) on charges of failing to ensure winners prizes in the last weeks of a promotion called “Pepsi Funball”, Hungarian news agency MTI reported on

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January 5. The competition office said the company had run out of balls to offer weeks before the promotion campaign ended, however, GVH counted the company’s efforts to provide substitute gifts to winners as a mitigating factor. Fővárosi Ásványvíz és Üditőipari said on January 6 that it is appealing the decision. The company said its promotional activities have always been in line with regulations and it has always observed professional standards when working out the details for such programs.

Synergon requests delisting from Budapest bourse

Hungarian IT company Synergon Informatikai on January 8 requested the delisting of its shares from the Budapest Stock Exchange, Hungarian news agency MTI reported. Synergonʼs shareholders decided at an extraordinary general meeting on December 22 to wind up the company. The process began on January 1, 2016. Synergon said in November that shareholders’ equity had fallen below the two-thirds of share capital threshold, and it also announced that its troubled unit Synergon Integrator had failed to reach a final agreement with its creditors. Synergon shares were listed on the Budapest Stock Exchange on May 5, 1999.

Vajna says he bought TV2, Fonyó

says he didn’t

Hungarian film commissioner Andrew G. Vajnaʼs company claimed in a report that it had closed the purchase of Hungary’s second largest commercial television station TV2, but the lawyer of media mogul Károly Fonyó said on January 4 his client is still the owner of the station, according to reports. Vajna’s firm, Magyar Broadcasting Co. Kft., said that it is in possession of the necessary permits and has submitted a request to the company court to register its ownership. The company said that Dirk Gerkens, who used to be the CEO of leading commercial channel RTL Klub, has been appointed the CEO for TV2 group, according to state news agency MTI. But Győző Óvári, the lawyer of Fonyó-owned Megapolis Media Zrt., insisted that Fonyó is still the rightful owner. He told Hungarian news portal origo.hu that the ownership of TV2 will be decided in the courtroom. Óvári claimed that mother company TV2 Media Holdings Kft. has not received the purchase price for the television channel, origo.hu reported. Since Vajna announced his purchase in mid-October, Fonyó, who is partner of media mogul Lajos Simicska, has claimed to be the legal owner of the channel. He was still fighting last month’s decision by the Competition Authority to clear Vajna’s purchase. Fonyó’s partner Simicska boasts a media empire with several outlets, which had provided government friendly news coverage until last year. In February, Simicska had a public break with his long-time ally, Prime Minister Viktor Orbán, and since then his media has been more critical of Orbán’s government. Vajna, who has a position in the government and has won exclusive tenders to run casinos in Hungary, is expected to run more government friendly news coverage, although he insists that his station will stress interesting content over political loyalty.

2016. 01. 13. 19:38

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08 2Business

Budapest Business Journal | Jan 15 – Jan 28, 2016

Budapest Stock Exchange has impressive 2015 As the central bank took over ownership of the exchange, its BUX index was hitting levels not seen since the economic crisis.

Annual BUX performance

CHRISTIAN KESZTHELYI

Hungary’s Budapest Stock Exchange (BSE) announced the close to a prosperous year in 2015, reporting overall turnover of HUF 2.225 trillion, a year-on-year increase of 14.6%, with shares accounting for 96.1% of turnover. Away from the trading floor, a major development was the purchase of majority ownership of the bourse by the Hungarian National Bank (MNB) in late November. The BUX was the fourth bestperforming stock market index in the world in 2015, according to Mónika Kiss, head of research at Equilor Investment Ltd. The BUX consists of 14 different shares and was lifted by the performance of OTP Bank shares, which increased by 57.4%, and Richter, which increased by 55.5%, BSE said. The Budapest bourse noted there were large fluctuations in the BUX index, which hit a low of 15,687 and a high of 23,964 during the year, but by the end of 2015 the index was up 43.8% as compared to its starting value in December 2014. The rise in the index has not been as marked as this since 2009, when it saw a rise of 73.4%,

according to BSE. The BUX continued its growth this year, reaching 24,532.71 on January 13. OTP, Richter and the other two blue chips, Magyar Telekom and MOL, continued to dominate the market in terms of turnover: In 2015 OTP shares accounted for 55.3% of turnover, MOL shares for 19.3%, Richter shares for 19% and Magyar Telekom shares for 4.8%, BSE said. The average daily turnover of the bourse came to HUF 8.6 billion, up by a year-on-year 10.3%, while stock market capitalization increased by 33.8% to HUF 5.067 tln, which accounts for 15.3% of Hungary’s GDP, the BSE reports. Although Hungarian logistics company Waberer’s was planning an IPO on the

exchange, it finally withdrew, citing “current market conditions”. No new companies were listed on the bourse during 2015, while Hun Mining, TVK, Business Telecom and Danubius Hotels were all delisted.

State takes over The MNB announced on November 24 that it had acquired a majority stake in the bourse, having signed a contract to purchase a combined 68.8% of BSE shares from CEESEG, a unit of the Vienna Stock Exchange, and from Osterreichische Kontrollbank. Lajos Bokros, the first chairman of the Budapest Stock Exchange after it reopened in 1990 and a finance

minister in the mid-1990s, said the central bank’s purchase of the stock exchange is “absolutely unprecedented” and risky. Márton Nagy, deputy-governor of the national bank, was elected chairman of the BSE on December 16, and took over on January 1. MNB deputy-governor Ferenc Gerhardt was elected head of the supervisory board, while MNB Director Richárd Végh, responsible for capital markets and market oversight, became CEO of the stock exchange. Végh said he expects new incentives to be introduced, designed to help raise the number of companies listing shares on the bourse for a period of at least five years. The new companies are to include stateowned companies, enterprises and SMEs alike, preferably with at least five new IPOs, reports say. Market players are reportedly optimistic about the state’s involvement in the exchange, which is expected to stir the still waters of the bourse. Analysts also said that the new management is seen as a guarantee for development. Nagy said that the MNB should provide some sort of incentive to medium-sized firms to list themselves on the BSE. These would be present on the stock market, “in a separate section, on a separate list”, Nagy said, adding that stimulating the capital market is important since, even if companies can get loans, they still have no access to capital. He also noted that retail investors could also raise demand for shares but they will need suitable incentives to consider share purchases as an alternative to investing in government bonds.

Matolcsy tells AmCham comptetitiveness is key ROBIN MARSHALL

If Hungary is to have a successful future, the competitiveness of the country – and the region – must be improved, the governor of the central bank, György Matolcsy, told American Chamber of Commerce members. Speaking at AmCham’s final event of the year on December 14, an evening business forum at the Budapest Marriott Hotel, the head of the National Bank (MNB) said the prospects for Central and Eastern Europe looked “brighter” than for the EU as a whole, adding “our future depends on the future of all the family members”. He gave particular praise to Poland’s “outstanding success story”, saying its annual GDP growth of around 4% over a period of 15-20 years was “quite something”. “Hungary has made a successful comeback, but faces new challenges and should respond correctly. The main challenge is competitiveness,” the MNB governor said. “Hungary’s economy has to grow, to develop, to re-shape via programs, projects and state reforms resulting in a higher level of competitiveness. Consolidation is over, stabilization is over, but we are just at the starting steps of a hopefully successful 20-30 years, and key to that success is competitiveness.”

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“Consolidation is over, stabilization is over, but we are just at the starting steps of a hopefully successful 20-30 years, and key to that success is competitiveness.” We have to strengthen them, we have to save the banking system from any other ‘adventures’ like FX loans.” Earlier he had said the return to economic balance and growth for Central bank chief György Matolcsy addresses AmCham on December 14. (Photo: MTI) Hungary had been built on six pillars: Prudent fiscal policy; decline of public The message will have pleased have to help Mother Earth and improve debt; tax reform; employment growth; the AmCham, which has been championing competitiveness by saving on energy bills. FX debt bailout; and economic growth. greater competitiveness for a number of Key to a sustainable environment is saving “Since 2010 we have been correcting past years, and in late 2014 set a goal of seeing energy in all fields of the economy,” he said. mistakes – some mistakes will cast a very Hungary and the region improve by ten There is still a need to improve the long shadow on the Hungarian economy – places in the world competitiveness financial education of Hungarians, and and also responding to new challenges in to change the mindset away from a the Hungarian and global economy,” he rankings within ten years. Matolcsy was asked to comment – as willingness to embrace indebtedness, he said. an economist rather than governor – said. There are signs that the message For the future, the focus would be on the likelihood of increased taxes is getting across, he believes, but the the sustainability of both a balanced on fossil fuels in the wake of the UN’s process needs to be accelerated. “We budget and economic growth. “The MNB recent global climate change conference have to invest in the future, and we has dual goals: Gradually phasing out in Paris. “Even as an economist I would have to invest in grey matter …. I am the ‘Funding for Growth Scheme’ and not be brave enough to try and influence optimistic by nature, but it will take some supporting market-based lending. Both government policies on taxation” he joked, time to do this job; these are very deep are important, but from January 1, step but added that, as a Hungarian, he saw changes in the mindset of the majority of by step, we will emphasize the second the importance of energy issues. “We Hungarian people and also households. part, more market-based lending.”

2016. 01. 13. 19:38

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2 Business

Budapest Business Journal | Jan 15 – Jan 28, 2016

Convincing the world to buy Hungarian Exports are crucial to Hungary’s economy, and increasing the appetite for those exports is the job of Zsanett Ducsai-Oláh, CEO of the Hungarian National Trading House. In this exclusive interview with the Budapest Business Journal, she explains how it is done.

“Our performance is reflected by the success of Hungarian companies and export growth. In this regard I find the past eight months of our activity positive and I expect even better results in 2016.”

LEVENTE HÖRÖMPÖLI-TÓTH

Photo: Mátyás Pődör

Hungary’s strong export performance is a key driver of growth in the economy, and the government is working to keep it that way. In April, Zsanett DucsaiOláh became the CEO of the Hungarian National Trading House (MNKH), a government body charged with promoting Hungarian exports around the world. She spoke to the Budapest Business Journal about the challenges and rewards of pushing Hungary abroad. Zsanett Ducsai-Oláh: ‘We need to build a global reputation for Hungarian sectorspecific know-how and other hot tech stories outside the European Union.ʼ You became CEO of the further measures are included in Hungarian National Trading exploit the potential of exports, you pushed an ambitious agenda this fall. your “Export Express” program that House (MNKH) in April could lead to similar success stories? Can you explain your reasoning? 2015. How would you evaluate your first months in office? A: Our program, called “Export Express” A: In parallel to the demand-driven A: MKNH was established to help aims to accelerate the export activity approach applied thus far, we have Hungarian SMEs extend their export of domestic SMEs. There were many drawn up a supply-oriented strategy activities. For that purpose, we provide driving forces behind the initiative. First focusing more strongly on domestic our partners, among other things, with off, thanks to continuously conducted products and services. Under this specific business opportunities and market research and incoming requests, scheme, we are looking for sales up-to-date market information. Bearing it has become clear what Hungarian opportunities for products and services that in mind, my primary goal was to products and services there is real of 20 to 30 already successful exporters boost the efficiency of our operation. demand for in certain countries and on international markets, which will The export of innovative technologies regions. Our country is competitive in then pave the way for other Hungarian and knowledge and expertise enjoy several sectors; it can pride itself on companies to prevail. The second pillar priority. Therefore the Directorate for innovative solutions with reason. strives to help startups and innovative Technology and Knowledge Transfer SMEs succeed in foreign countries, was set up, the explicit task of which and that is why our “InnoTrade” Hungarian firms still is to assist domestic innovative program has been launched. As a have lots of obstacles third cornerstone, we’d like to deepen to overcome, including enterprises in entering markets abroad. cooperation with businessmen with The number of our trade representative bottlenecks caused when huge Hungarian roots living abroad who, offices has also increased: Now we are orders come in and firms struggle to through their network, can give live up to expectations. present in nearly 40 countries. A: Indeed. A frequent problem is impetus to our companies to get on the that they simply can’t meet volume right track. The latest statistics show exports up 7.3% in January- demand on a large scale, so we need to find partners inside and outside of November 2015 and the What short-term results the borders in order to satisfy such foreign trade surplus up €1.4 billion are expected under the compared to the year before. This program? requests. On the other hand, Hungarian is the global picture. But is there a companies often don’t have appropriate A: This is a long-term building process. targeted strategy for CEE as well? information on the needs of a particular We’ve got decades to make up for. After A: The Central and Eastern European market, or they lack resources to enter the collapse of communism the foreign region is treated with special care, export markets. The already mentioned trade enterprises were dissolved, whole which is shown by the fact that, under “Export Express” program should tackle sectors were left on their own and our trade development program, we this issue and so should the umbrella focused only on meeting domestic are opening 22 offices in total in seven brand called “Áldomás”, which was demand; SMEs could not deal with neighboring states and Poland. Our created to support the export of domestic how to enter foreign markets. We want performance is reflected by the success premium quality food products and high to fill this gap. We need to build a of Hungarian companies and export value-added hand-made goods. global reputation for Hungarian sectorgrowth. In this regard, I find the past specific know-how and other hot tech eight months of our activity positive The breakthrough of handstories outside the European Union. made Zador soaps and and I expect even better results in 2016. fashion label BYME are Are you sensing that the great examples of products you target markets abroad are Hungary’s economic personally promoted during your trip getting your message about growth is buoyed by its to the United States in October. What Hungarian exports? trade surplus. To further

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A: I am confident that high quality Hungarian products and services, Hungarian knowledge and expertise are recognized and well received worldwide. In the food sector in particular there are world-class products – just look at how much Japan is interested. But innovative solutions in ITC, health care, engineering, and smart city technology are much sought-after too. In early December an agreement worth €25 million was signed with the municipality of Mongolia’s capital, Ulaanbaatar, where major city development projects will be executed with Hungarian smart city technology.

Currently, 81% of exports and 76% of imports involve EU Member States, and non-EU members on the continent are major trading partners. What are the results of MNKHʼs effort to increase trade volume with territories outside the continent? A: There’s fierce competition out there for Eastern and Southern markets. Our ambitions to boost exports with the East are hampered by sanctions against Russia, and the conflict with Ukraine has an impact on all of our foreign trade activities with the entire community of the Commonwealth of Independent States (CIS). Under such circumstances, even maintaining the former export volume is a huge task. In Africa, only eight representative offices have been opened, whereas three have been set up in Latin America, where local experts will be charged with representing Hungarian products. As a result of the trip of the prime minister and 200 businessmen who travelled with him to South Korea and Kazakhstan, business opportunities worth HUF 23 bln and HUF 37 bln, respectively, are expected to materialize in the near future.

MNKH has launched its own startup program too. How can a government agency support private-sector startups? A: Under “InnoTrade”, startups planning to go global are given the chance to attend international events, where they can meet potential investors and get invaluable market feedback. We help them build a professional image: We provide exhibition stands, accommodation and admission. We are ready to consider supporting their attendance at events other than those listed on our website as well. The first such select gathering was CES in Las Vegas. We are excited to learn how it went for our protégé startups.

2016. 01. 13. 19:38

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Budapest Business Journal | Jan 15 – Jan 28, 2016

CEU BUSINESS SCHOOL

Smart business schools promise competitive revitalization wisdom and vision, are essential catalysts. Top management concerns are changing in significant ways. Today emerging and re-emerging economies Dean and University Professor are becoming the flash points for growth and economic progress. CEU BUSINESS However, top-ranked business SCHOOL schools are still clustered in North America, Western Europe and parts of Pacific Rim Asia. The very regions This is the first column in of the globe most in need of superior and relevant management education – a series of contributions emerging and re-emerging economies – from professors and other are being bypassed. Twenty-first-century MBAs increasexperts at the Central ingly aspire to participate in a more entrepreneurial global economy – not European University only as entrepreneurs per se, but also Business School. as part of entrepreneurial teams or as venture capitalists and professional Budapest and other parts of Central experts. However, for much of their and Eastern Europe have a striking history, business schools have focused opportunity to become world-class on producing executives for large hubs of business innovation and corporations, including multinationals, competitiveness. New style, smart and the professionals for financial business schools, acting with boldness, services and consulting firms serving

Mel Horwitch

Again a premiere from the playwright Mark. St. Germain at the Rózsavölgyi Salon The God Committee, which one critic very well put it as the combination of Twelve Angry Men and E.R. takes place in a New York hospital, where the transplant committee must take a decision abruptly regarding which patent out of four should receive a new heart in less than an hour. Members of the committee in midst of this “huge drama” argue against principles, reasons, emotional, medical, moral and material aspects to arrive finally at a responsible decision... “I became interested in the issue of organ transplants, when my friend’s father got involved in this. The more I learned about how the selection of the lucky ones happens, who can ultimately get a new organ, the more clearly I saw that each of these medical decisions: is a huge and unique drama and where so many other factors play part besides science, facts, and medical evidence…” said St. Germain.

The Rózsavölgyi Salon is one of the most decisive and unique cultural places in downtown. In addition to the superb theatrical plays you can choose from a great selection of books in the bookshop or have a light dinner served in the café. The essential artistic concept lying behind the idea of the Salon is to put on stage such primarily national and international contemporary plays, which have not yet been showed in Hungarian theatres. In the light of this, the year of 2016 starts with another Mark St. Germain premiere. The God Committee is first performed in Hungary thus it further increases the good reputation of the Theater at Szervita tér – directed by Péter Valló with an outstanding casting: Gabi Borbás, Andrea Söptei, Eszter Bánfalvi, Premiere: January 28, 2016 Tamás Dunai, Áron Őze, and with András Further performances: 29, 30 January • 8, Márton. The dramatic text delves into similar 15, 25 February topic as the author’s other highly acclaimed Rózsavölgyi Salon Arts work, called the The Last Hour, which was & Café also set to stage in the Rózsavölgyi Salon 1052 Budapest, Szervita by the director Róbert Alföldi and was tér 5. • Tel.: +36 1 performed more than a hundred times. 486 33 38 • Ticket Information: +36 30 Mark St. Germain is a prominent American 463 88 22 • szalon@rozsavolgyi.hu • playwright; his works were several times www.szalon.rozsavolgyi.hu • facebook. selected among the “top 10 plays” of the com/rozsavolgyiszalon Time Magazine.

Schools can offer communities a greater chance to become more valuable in the global economy by educating cadres of entrepreneurial and professional managers. large companies. This is no longer the case. Business schools now have to teach new capabilities. With much of business now occurring in the digital universe, acting with speed is a fact of life, and the pace of decision making is accelerating. Moreover, business is increasingly taking place in the midst of far-flung and vast spiders’-web-like networks, known as business ecosystems. Such structures often function differently from both large corporations and startups. Within these new ecosystems no single member has complete control. In such an interconnected digital age, where leveraging speed is essential, global rivalry for preeminence is intensifying. Competition and collaboration take place simultaneously; entrepreneurship is increasingly global; and knowledge dissemination accelerates. Competitiveness now increasingly depends on hard-toimitate innovative, entrepreneurial and professional capabilities. This new world now presents overlooked economic regions, and business schools in such communities, with bold new prospects. Business schools can also provide leadership to address significant issues beyond the private sector. In a time of looming and massive economic, political and social challenges, including healthcare, environmental printMAURI Hird-Turkish-124x77-2015.pdf ADVERTISEMENT

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disruption, security, and population dislocation and migration, we need competencies learned at business schools to be applied across all sectors. Forward-thinking business schools are rising to the challenge in at least four ways. First, they are redesigning curricula. For example, at CEU Business School new required courses include Innovation Imperative, Action Learning, and an MBA NYC module; new or redesigned elective courses include Entrepreneurship, Developing a New Venture (in our CEUInnovationsLab), Managing Risk, and Business Analytics. Second, business schools are redefining and expanding the markets they serve to include the private, public and not-for-profit sectors. In so doing, business schools can offer communities a greater chance to become more valuable in the global economy by educating cadres of entrepreneurial and professional managers for all key sectors. In this regard, we just introduced a course, Managing Across Sectors, which explores the likelihood of holding multiple career paths, and we have launched such courses as Social Entrepreneurship and Sustainability in Business, both of which deal with innovation across both public and private domains. Third, business schools are turning away from their traditional standalone posture within the university. Pressing challenges and opportunities today demand diverse perspectives. This is why CEU Business School is moving this summer to its modern new home on CEU’s main campus. This move will enable greater integration and collaboration with other academic units, including Economics, Environmental Sciences and Policy, Legal Studies, Public Policy, International Relations, and others. 1

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2016. 01. 13. 19:38

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Budapest Business Journal | Jan 15 – Jan 28, 2016

REAL ESTATE

New player in logistics from Czech Rep. With its new acquisitions in Hungary, industrial real estate firm CTP has expanded its portfolio to more than 3.25 million sqm of available space in five CEE countries.

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REAL ESTATE NEWS Duna House: Home prices rise slowly in Q4

The price of homes in Hungary continued to rise in the fourth quarter of last year, however, at a slower pace than in the preceding quarter, real estate broker Duna House said in a January 8 report. Based on nominal rates at the end of 2015, the countrywide home price index stood at 104 points in Q4, Duna House said, increasing from 101 points at the end of Q3, while based on the real rate, the index was up to 83 points from 80. The rise in home prices slowed for brick, prefab and communist-era flats, Duna House said. On January 4, Duna House repored that the Hungarian real estate market saw its most prosperous year in 2015 since the beginning of the financial crisis. The number of properties sold last year increased by a year-on-year 20%, reaching approximately 135,000, Duna House said.

GARY J. MORRELL

There’s a new player in the Hungarian real estate market. The Czech-based logistics/light industrial park developer and operator CTP has concluded the purchase of a portfolio of industrial real estate in Hungary. With this acquisition CTP has increased its footprint in Central Europe with a leasable area of more than 3,250,000 sqm as of the beginning of the year in more than 60 sites across Czech Republic, Slovakia, Ukraine, Romania and Hungary. The financing partner in the acquisition was UniCredit Group Hungary. The entry of CTP into Hungary is a further indication of the improvement in the industrial and logistics market following a downturn in the aftermath of the economic downturn. “Hungary has made the most progress over the last 12 months with the vacancy rate dropping by 6%. Vacancy is falling and developers are having to bank land in order to develop quickly,” said Ferdinand Hlobil, head of CE industrial at Cushman & Wakefield. The CTP Hungary portfolio comprises two assets: The 34,300 sqm re-named CTPark Üllő on the M0 ring road; and the 6,000 sqm CTPark Tatabánya warehouse and production facility in Tatabánya, 60 km to the west of Budapest on the M1 motorway. “CTP continues to acquire new properties in strategic locations across Central Europe. Both CTPark Üllő and CTPark Tatabánya are ideally located to suit a wide range of businesses, from logistics and warehousing to back office and light manufacturing. Hungary is an interesting market for us and you can expect more news from our Hungarian team in the near future,” commented Remon Vos, CEO of CTP According to Cushman & Wakefield, CTP is one of the top three industrial developers when it comes to take-up, along with Prologis and Panattoni. Several other major industrial developers are looking at development projects and investment opportunities in Hungary. Vacancy has fallen to around 12% from a high of around 25%, although availability is very fragmented and even if a park can offer 10,000 sqm, this would typically be split into two or three units. The vacancy rate is expected to decrease further to 7-8% this year and

2 Business

CTPark Bucharest West.

Big demand seen for subsidized home loans for families

Hungarian banks are seeing strong interest in the newly introduced subsidized home loans scheme for families with three or more children, Levente Kovács, chief secretary of the Banking Association, told Hungarian news agency MTI on January 8. Banks are preparing for the addition of the preferential loan to their product portfolios and expect to start meeting the strong demand by mid-January, the chief secretary said. In addition to receiving preferential interest rates on loans of HUF 10 million, families with three or more children are also eligible for a HUF 10 mln government grant. More than 200,000 families are currently eligible for the program.

CTPark Üllő.

Pre-fab home building market faces labor shortage

CTPark Tatabánya. developers are more actively looking at opportunities in both built-to-suit and speculative development, according to László Kemenes, vice president at Prologis Hungary. CTP has agreed to a €50 million loan deal with UniCredit Bank Czech Republic/Slovakia in order to finance new acquisitions by the developer-

operator in Slovakia. The proceeds were used to finance the re-branded CTPark Bratislava, which now consists of 87,000 sqm of lettable space, on the D2 highway. The company now has six logistics/light industrial parks in Slovakia. In Romania, meanwhile, CTP purchased Prologis Park A1, close to Bucharest, for a reported €50 mln.

A reduction in the home construction VAT rate has boosted orders for prefabricated homes, but a shortage of Hungarians with the skills to erect those homes could weigh on business, said József Kárpáti, who heads the pre-fab chapter of construction association EVOSZ, according to an MTI report on January 11. Many of the Hungarians qualified to erect pre-fab homes have gone abroad to work since the economic crisis, Kárpáti explained. In 2009, 31 companies received orders to build 950 pre-fab homes; last year, orders fell to 100 and the number of companies in the business was down to seven, he added.

2016. 01. 13. 19:38

12 2Business

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Budapest Business Journal | Jan 15 – Jan 28, 2016

New bank CEO sees opportunities here Hungary has plenty of potential for further development in its corporate banking market, and while that provides some challenges, it also makes for opportunities, according to Klaus Windheuser, the new CEO of Commerzbank Zrt. ROBIN MARSHALL

In an interview with the Budapest Business Journal, Windheuser, who took over as CEO at Commerzbank on November 1, spoke about the bankʼs possibilities here. “My first impression is that Hungary after its opening in the late ʼ80s developed tremendously – though there is still room for development,” says Windheuser. “That will work out; in the financial industry that was also the case for years between the most advanced financial markets in the U.S. and the U.K. and other Western countries like, for example, Germany. That gives us – an international bank with a comprehensive knowledge of corporate business – a lot of potential. We see a kind of waterfall-development effect, starting in the U.K. and U.S., coming via the more developed Western countries into the CEE,” Windheuser explains. “Soon, not next year but certainly within the next five years, we will start to see more structured products, and a broader variety of financing products, that will be tailored to the customers’ value chain and needs.” The Düsseldorf native chose Hungary from a number of options, he says. He had been looking to get further experience abroad for a number of years “but my career path took me in other directions”, he explains: International, but based in Germany. Previous posts with Commerzbank AG, the German parent, include global head of financial engineering, a catchall title that covers structured finance, acquisition finance, syndicated loans, trade and commodity finance, mezzanine finance, private equity, and restructuring, among other things. Prior to that, he was global head of cash management and international business. “But then there was a group wide reorganization of the business in corporate banking, and that gave me the opportunity to become CEO of an international subsidiary,” he recalls. “I liked Hungary because the setup of the bank and the potential was very interesting. Additionally I really like the country, which I know from my former global responsibilities. I was responsible for Hungary from 2010-13 as global head

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“I can’t talk about SMEs because that is not our focus, but in corporate banking – starting at revenues of €12 mln – there is absolutely no credit crunch. Credit is available to credible businesses that seek it.” European connectivity and also to Asia and the U.S. are also well established. So why not grow to 10%?” The CEO insists the bank’s outlook has altered. “We were more cautious in the last couple of years; we rather maintained our position. That has changed, and we want to grow, but grow prudently. That means organically, and always on a case by case basis with, from a management perspective, a portfolio view.” He says there is no credible corporate company the bank would not consider taking on as a customer, regardless of type of business.

No credit crunch for mid- to large-sized corporations

Perhaps equally importantly, there are no capital restrictions, he insists. “We have none, and talking to the CEOs of other banks active in corporate banking in Hungary, they have none either. I can’t talk about SMEs because that is not our focus, but in corporate banking – starting at revenues of €12 mln – there is absolutely no credit crunch. Credit is available to credible businesses that seek it.” Klaus Windheuser, CEO of Commerzbank Zrt.: ʼWe see a kind of waterfallAnd, since October of 2015, credit – or, development effect.ʼ at least, accounts – has been available in of cash management, so I had an idea of The CEO says he was sent to Budapest Chinese renminbi (CNY). While the first the country, I had a very good idea of the with clear expectations from Frankfurt: customers are already using the service, team, and the business opportunities.” “Avoid loan loss, grow to the maximum take up has been slow, but Windheuser says The staff are motivated and talented, he possible amount, but in a prudent and that is to be expected. In the initial stages, says, and also young. The average age compliant way.” Oddly, Windheuser says it is all about explaining the advantages in the Hungarian business is 36 – barely Commerzbank does not know its exact of a CNY account with Commerzbank in out of baby grows in banking terms but market share, because there is no such Hungary to clients who, in turn, have to already quite experienced; the average statistical information for the relevant negotiate with their suppliers or customers. age in the German business is 42.5. corporate banking sector bracket. Those advantages include a bank network “Seven years doesn’t sound like a lot, but Commerzbank’s strategy is to focus on with a couple of branches in China and the you really feel that youthful excitement clients with annual revenues of more other relevant markets in Asia. “I see great potential, but it takes time. here,” Windheuser says. than €12 million, and based on publicly disclosed figures from its competitors in We see CNY as one of the core currencies Corporate banks here to stay Hungary, he estimates his market share in the world in a few years, and so we This early into his role, he is cautious to be around 6%, stressing: “That’s a rule decided to be one of the first adaptors; we want to offer these products. The key here when it comes to talking about the of thumb figure, far from exact.” Even so, it gives a working base is patience.” Hungarian banking market as a whole, So if the business looks promising, though he does see some “very first from which he believes the bank can observation” differences based on sectors. – prudently – grow. “I think we have a what about personal life? “Budapest is a “There are banks that have made their fantastic and comprehensive range of wonderful place to live,” he says, as we decision to leave the market, and banks products and solutions for corporate take in the views of the Danube from his that are discussing what their strategic businesses, and some USPs from our Széchenyi rakpart office in District V. “I position should be, and that makes international coverage of more countries feel at home here, we have a house, my customers feel more unsecure. That will than our competitors, especially when family is here. My son is in the German lead into more consolidation. But when you leave the CEE region. There are kindergarten and he is happy. And when talking about corporate banking in the many Central European banks, not so the child is happy, the mother is happy, and mid- and large-sized brackets, there is many Western European. We obviously that means the father is happy, too. This intensive competition, and I do not expect have strong connectivity to Germany, is important: We see it in Commerzbank, even one corporate bank to disappear and Hungary’s strongest, most important how difficult things can be if a partner is from the market.” connectivity is also with Germany. Our not happy in a new posting.”

2016. 01. 13. 19:38

3Special Report BBJ

The economy in 2016

 14

Encouraging real estate forecasts

 16

Eyes on the future

We asked analysts to look ahead to 2016 and offer projections – on the economy in general and on the property market. For the most part, the outlook is upbeat.

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2016. 01. 13. 19:39

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Budapest Business Journal | Jan 15 – Jan 28, 2016

Economic forecast for 2016 Analysts tell the Budapest Business Journal what to expect in the coming year. ZSÓFIA VÉGH

Employment and wages are likely to improve. Growth may slow but should continue, and inflation will creep into a safer range. These are among the predominantly upbeat predictions that analysts gave to the Budapest Business Journal when we asked them to tell us about the year ahead. The following are their thoughts on important developments to watch.

GDP and growth

Analysts are hoping that domestic demand can step up in 2016 to replace the boost EU-funded investments provided for the economy last year. It is estimated that EU funds generated as much a 6% of GDP in 2015, while this year their contribution will drop to about 2.5% (see box). Even though they predict domestic consumption will rise, analysts say the rate of increase in GDP should slow down this year. “We expect GDP to grow by 2.5%,” Gergely Suppan, chief analyst of TakarékBank told the BBJ. Erste analyst, Gergely Ürmössy said he expects a more significant slowdown, to 2.2%. Equilor’s estimate for growth this year was lowest of those we spoke to at 1.9%.

External factors

Of course, external threats can impact growth here, and analysts expressed concerns about fragile European growth, economic slowdown in China and the U.S. Federal Reserve’s rate hikes. The biggest worry is that these factors can take a bite out of the export market. “The European Central Bank used every possible tool to boost growth, from launching a bond purchase program to lowering interest rates below zero. Now it is up to the fiscal side to see what response it gives to the structural changes,” Erste’s Ürmössy said.

Prices

External factors, especially oil prices, are expected to have the biggest influence on the rate of inflation. “Ever more experts warn about potential deflation in Europe and in Hungary,” Mónika Kiss, head of research at Equilor Investment Ltd., told the BBJ. Bloomberg analysts estimate Hungary will have an average inflation rate of 2.1% in 2016, but Equilor forecasts a rate of 1.4% for the year, as it does not anticipate a significant rise in oil prices but instead foresees a further slide. Kiss noted that the weather can also have an impact: This year may see the mostextreme El Nino conditions on record, and that may hurt crops and cause food prices to rise worldwide. “Hungarian food exports can benefit from this, especially if this is coupled with a weaker forint,” Kiss said. In 2016, base effects – like the governmentenforced cuts in household utility prices – are expected to have less of an impact on prices, while rising consumer demand is

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Currency:

HUF 325/euro HUF 330/dollar –Equilor

Inflation:

+1.4% –Equilor +1.5% –Erste +2.1% –Bloomberg expected to provide some upside pressure. several reasons: He noted that the 5.7% Since fuel prices account for 10% of the minimal wage hike could push wages consumer basket, oil prices will have an upward, and that a severe shortage of underlying effect on inflation, which adds professionals in certain fields could lead some uncertainty to any price predictions, to salary increases. Furthermore, Suppan Ürmössy noted. A weaker forint against said, the government is planning to the dollar could also have an impact, he introduce more career path models, and said. While Erste expects inflation for these could increase public sector wages of 2015 to settle in at close to zero, Ürmössy some fields. He said TakarékBank projects projected that the rate will increase to 1.5% an unemployment rate of about 6.5% this this year. “Excluding fuel, unprocessed year, down from approximately 7% in 2015. food, administered and energy prices, the “Communication indicates the government inflation in Hungary is at an acceptable is trying to slightly change its public work scheme with the aim of enhancing level,” Ürmössy said. education,” Suppan said. “In addition, the primary job market can further improve, Employment With the 1% reduction in the national creating new jobs.” income tax, TakarékBank expects gross wages to grow by 4-4.5% this year. Given Subsidies for homes that it projects inflation at 2% in 2016, the Regarding the government’s new wage hike would result in real wage growth homebuyers’ subsidy (CSOK), which of 3.5-4%. In fact the increase could be promises grants of as much as HUF 10 greater, said TakarékBank’s Suppan, citing million for families building homes,

TakarékBank said it is making calculations of an impact in 2017, as the construction of new homes usually takes at least one-anda-half years. Suppan expressed confidence that, together with the cut in VAT on home construction, this measure will help revive the sector. “The construction industry will sprint from a standing start. The development of residential parks in particular may explode: With a VAT level down from 27% to 5%, it will be profitable to develop.” Government loan subsidies are also expected to increase lending, as “banks will be more willing to lend as risks are lower”, he said. Given the lack of data on exactly who is eligible for the CSOK program, precise figures are hard to calculate, Ürmössy said. If the eligibility is broad, and the need for new homes actually doubled this year from the 8,00010,000 built in previous years, it is still questionable whether the construction industry could keep up with the heightened demand, the expert said.

Budget and tax

Though data is not yet finalized, experts agree that 2015 was a good year for the state budget. The government apparently outperformed its original deficit target of 2.4% of GDP, and it seems that the deficit will be more like 2%. The debt-to-GDP ratio is also expected to improve. Major changes in taxation will include a reduction in the special bank tax, which is expected to improve ties between the leadership and the banking sector, while improving the outlook for banks. Other sectoral taxes are expected to stay in place – including the tax on telecoms. The continuation of the telecoms tax, and the reduction of termination and roaming fees, hurt earning prospects for Magyar Telekom in the midterm. In this situation, money managers have been recommending sales of shares in the blue chip.

Credit rating

Erste analysts expect Fitch to upgrade Hungary’s rating in the first half of 2016, which they say, may be followed by an upgrade by Moody’s and/or S&P. “Should this happen, Hungary will basically become investment grade, which could help strengthen the forint and lower government bond yields,” Ürmössy said. TakarékBank’s Suppan said he believes Fitch and Moody’s will rank Hungary as an investment-grade country this summer and fall.

Base lending rate

When it comes to the base lending rate, analysts say it should remain at its current level of 1.35% for the coming months, but if the National Bank of Hungary (MNB) sees the need for stimulus, it has room to maneuver and could start cutting rates in April, Ürmössy said. According to Suppan, rate cuts are not the only tools the bank could use to stimulate the economy. “The central bank will use different tools, such as lowering the yields on long-term bonds, but those will likely come down eventually if Hungary’s rating improves,” he said. Regarding the base rate, a possible turning point may come in June, when Polish National Bank President Marek Belka is due to step down, according to Kiss of

2016. 01. 13. 19:39

www.bbj.hu

Budapest Business Journal | Jan 15 – Jan 28, 2016

Fewer EU funds likely to mean lower GDP

GDP:

+1.9% –Equilor +2.2% –Erste +2.5% –TakarékBank

Employment: 6.5%

–TakarékBank

Wages:

+4-4.5% Equilor. Provided the Polish interest rate (standing at 1.5%) is cut, further easing is possible in Hungary as well, Kiss said.

Currency

Although the MNB is not directly intervening in the market to manage the value of the forint, it is not doing anything to stop the weakening of the national currency either, Kiss noted. That is why, despite the country’s improving external balance, low

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The massive influx of European Union funds that drove last year’s impressive GDP growth in Hungary will be reduced this year, and growth is expected to suffer as a result. The National Bank of Hungary (MNB) said in a research note published on January 7 that, as Hungary hits a lower point in the funding cycle this year, the provision of EU funds to the country could drop by as much as HUF 1.2 trillion, to about half of what it was last year. In 2014 and 2015, when Hungary was spending the majority of the EU funds it received for the 2007-2013 funding period, that money was credited with providing 5-6% of the country’s GDP, according to the MNB research, written by Dániel Babos and Gábor P. Kiss. In 2016, they said, EU funds will probably contribute about 2.5% of Hungary’s GDP. mean a further weakening of the forint against the U.S. dollar. Equlior’s estimate for 2016 is a rate of HUF 330 per dollar.

State borrowing

Analysts expect the MNB to continue pushing banks to purchase government bonds, but consumers are apparently also doing their part. Those with household savings have created significant demand for these bonds, both because they are buying the bonds directly and because they invest in pension schemes, insurance or investment funds. In an interview with Bloomberg, National Economy Minister Mihály Varga said Hungary plans to issue eurobonds this year, and the equivalent of €1 billion in FX bonds on international markets according to a December statement by the Government Debt Management Agency (ÁKK). The head of ÁKK, György Barcza, has said the share of FX-denominated debt could reach approximately 25% by 2017, but Equilor’s Kiss said she sees this as rather ambitious. According to Suppan of TakarékBank, issuing eurobonds makes sense for benchmarking reasons.

Stock market expectations

The BUX was the fourth best-performing stock market index in the world in 2015, mainly driven by the performance of OTP Bank and Richter, according to Equilor’s Kiss. She said the central bank is going to keep interest rates at record low levels, which provides a favorable environment for equities, because they can offer an attractive alternative to savings accounts. According to Equilor, inflation, low budget deficit and possible the Budapest Stock Market’s performance sovereign debt upgrade, the forint will in 2016 will be determined by two remain weaker against the euro in 2016, major factors. The first is the U.S. Fed’s she said. Kiss predicted that the exchange tightening of interest rates, which should rate will reach something like HUF 325 to lead to a higher expected rate of return in the euro this year – but more than HUF 330 stock valuation and a potential upgrade is unlikely because of the strong external by credit rating agencies. The second is balance position and the European Central the moves of ratings agencies, because an Bank’s extended easing cycle. The Equilor upgrade of Hungary’s sovereign debt to analyst said she expects the EUR-USD rate investment grade would result in renewed to reach 1.05 within weeks, which would interest in Hungarian stocks as well.

–TakarékBank

“The volume of called-down EU funds is expected to fall significantly, and this is unavoidable. Only the ratio of the decrease is in question,” said economist István Madár, speaking at a December 16 press conference organized by the Kopint-Tárki Institute for Economic Research. He said he expects statisticians will find that an impressive €7 billion, or about HUF 2.23 tln, in EU funding was utilized in 2015. Madár also noted the importance of this investment to GDP. “Practically speaking, our new foreign direct investments are made up of EU funds,” Madár said. Hungary’s GDP growth in 2015 came in around 2.8-2.9%, National Economy Minister Mihály Varga announced on January 6. For the following two years analysts expect a GDP growth of 2-2.6%, and they project that the rate might fall further in the upcoming years. In the 2007-2013 EU funding period, Hungary called down approximately €28.7 bln, utilizing nearly 100% of available funding, according to the MNB research. The report notes that, after a slow start, 60% of the total EU funding was utilized in the last three years. Madár said this meant the government’s spending was most intensive around the time of the 2014 national elections. For the current funding period, Hungary is expecting slightly less EU support: €25 bln. The MNB researchers forecast that genuine utilization of these funds is unlikely to start before 2017. According to Madár, we can once again expect big spending before elections in early 2018, but that is likely to be the peak of spending in the current funding period. “An ambitious estimate for 2016 is that Hungary will call down HUF 1.5-1.6 trillion, which can be further increased for 2017, just in time for the elections, but following these years the volume of called down funds will start falling,” he said. –Christian Keszthelyi

2016. 01. 13. 19:39

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Budapest Business Journal | Jan 15 – Jan 28, 2016

Real estate 2016: Expect growth We asked property experts in Hungary to give us their pedictions for this year. For the most part, the crystal ball reveals a continuation of the positive trends of 2015, though some observors note potential market drags. (Interviews: Gary J. Morrell) Péter Számely Head of CEE real estate finance, HYPO Niederösterreich

Tim Hulzebos Managing director, Colliers International

We are opportunity-driven and Poland is a very competitive market, so it is difficult to find the right return. Property has become very expensive to buy and very cheap to finance, so it does not make sense for us to finance, although we are still looking for opportunities. Czech Republic is very similar, although the market is smaller and a little more favorable for us. Hungary is interesting, and I hope we will become more active as we have already started discussions with clients. The macroeconomics for Hungary are stronger, and there is strong demand for office and retail. However, the highest demand is for hotels. I would mainly focus on office as, with the lack of delivery, the risk-return relationship is good from the perspective of lenders. If a project is good, then financing can be found and in this way it becomes competitive, although competition is obviously not on the same level as Poland, where there are five lenders competing on one transaction. Here you might find two-to-three banks. With regard to the loan-to-value ratio, I would probably go up to 65% for prime.

The attitude towards Hungary at international events is certainly improving. Fundamentals are good, and there is available product. We need big ticket deals of €50 million and above to get investment volumes up, and we know of a couple of major buildings that will be available this year. With regard to office vacancy, if you take away notoriously bad buildings, then vacancy is not worse than elsewhere. Further more, if there is a 5,000 sqm requirement for new modern space, then there are only one or two options, far too limited for a city like Budapest, and therefore we need new buildings. Investors are attempting to pick out the best pipeline or potential pipeline projects and looking at forward-purchase deals. There are a number of obstacles to market development: One is that companies are changing their way of working and require less space, another is the scarcity of qualified staff as people are moving abroad. For example, SSCs have trouble in finding and replacing staff. However, I would rather be a developer in Budapest than Warsaw at the moment.

Viktória Szabó Partner/head of retail, Cushman & Wakefield

Hamish White Head of asset management, CIB Bank

The retail market will continue to move fast as retailers enter Hungary. The target entry point is typically through one of the best performing shopping centers (Allee, Mammut and MOM in Buda and Aréna Pláza, WestEnd City Centre and Árkád in Pest) and central high streets (Váci utca for mass market products and Fashion Street and Andrássy út for high-end and luxury goods). A question remains as to the timing of the two pipeline projects by Futureal and ECE. The Sunday closing laws have not negatively impacted the positive retail figures, according to retailers and shopping center owners, as the indications are that consumers have changed their habits to meet the new opening times.

Over the last 36 months, we have seen a steady increase in the level of interest from buyers for the real estate that CIB Bank offers for sale – translating into more than 1,000 transactions since we started the disposal of repossessed property. The bulk of our sales are to Hungarian buyers, given the profile of the assets offered. However, we are experiencing rising interest from “international” players as the upside perception of the Hungarian real estate market gathers momentum. The majority of the assets sold and marketed for sale are a result of foreclosure of loans issued several years ago. However, the bank is currently running a tender for some landmark buildings. Basically there is a buyer out there for every property.

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2016. 01. 13. 19:39

www.bbj.hu

Budapest Business Journal | Jan 15 – Jan 28, 2016

Office vacancy rates (percentages)

With vacancy rates falling, experts see a lot of possibility for Hungary’s office market, though the supply of new space in the pipeline is limited. (Source: Central Statistical Office)

Rita Tuza Head of market research, JLL After the 2008 collapse of the Hungarian investment market, the recovery has gained momentum with annual transaction volumes 30% higher than in 2014. Furthermore, we have recorded increasing activity in every asset class, which signifies that the general Hungarian market environment has become very appealing for investors due to the convincing fundamentals, in parallel with the yield discount that the market offers compared to its peers. Although the final statistics are not available, we believe that 2015 will see the highest volumes in the past eight years, with roughly €750 million traded. We foresee more transactions taking place in 2016 and expect that single, trophy asset deals will drive the market.

Tamás Beck Head of industrial, Colliers International

Lóránt Varga Managing director, CBRE

Following the 60% growth rate seen last year, we expect the Hungarian Several developers are already property investment turnover to get testing Hungary by looking at close to the €1 billion line again by projects, investment opportunities, end of 2016. We anticipate not only plots, and clients. These are mainly the further rise of interest from equity companies who already have a investors but also the willingness presence in CEE. Most of them prefer of banks to provide financing for acquisition or single tenant built-tolucrative investment opportunities. suit opportunities to start with, not This means that more deals will speculative greenfield development. be possible and manageable for However, one or two logistics buildings investors, making the Hungarian will be developed on a speculative investment market more attractive. basis in well located parks with high On the occupational side, there is more interest from tenants and or full occupancy as a further drop in vacancy can be expected therefore the basics or fundamentals are improving in all sectors. in early 2016. Rising demand is mainly driven by the industrial/ Limited acquisition target availability is a problem, especially automotive sector. However, FMCG and 3PLs (companies that work with shippers to manage their logistics operations) may also play a as owners are holding on to their investments due to improving u rents and yield compression. more important role if retail consumption continues to grow.

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2016. 01. 13. 19:40

www.bbj.hu

Budapest Business Journal | Jan 15 – Jan 28, 2016

“We see very positive trends in the market in terms of occupier demand.” –Noah Steinberg, CEO, Wing “The ‘big stars’ are all in the region looking for investments.” –Árpád Török, CEO, TriGranit “The major obstacle is the small size of the Hungarian market and its lack of growth.” –Csaba Széll, MD, CE Land “There is more interest from tenants and therefore the basics ... are improving.” –Lórant Varga, MD, CBRE László Kemenes Vice President, Prologis

I think that remaining vacant facilities will let and the bigger units of 10,000 sqm and above are already occupied. Therefore, the vacancy rate will decrease to 7-8%, and developers will more actively consider both builtto-suit and speculative development, though there will in general be more of a focus on built-to-suit. We are considering the speculative option: We have the development land, which is zoned and has all the required building permits. We will continue to focus on our core locations, and this is defined as the greater Budapest area. We develop all our buildings in line with BREEAM specifications, which we believe is a clear requirement of, for example, blue-chip companies as customers. For Hungary, construction is 15-20% more expensive than in Czech Republic or Slovakia. With regard to demand, e-commerce is a huge emerging sector and the other main source of demand is from the automotive and electronics industries.

Mike Edwards Head of capital markets, Cushman & Wakefield

Eszter Holmes Managing director, Gateway Properties Demand should continue to be strong for residential property in Budapest, with both domestic and demand from abroad continuing to be robust. The reduction in VAT from 27% to 5% on new property purchases should be a significant boost for new property sales. Developers will now be far more confident that building will be profitable and they will be motivated to start new developments. Pent up demand due to undersupply is there, all that is missing is the new apartments. We believe that the Airbnb effect will continue to spur demand for centrally located properties with Districts V, VI, VII, VIII and IX being the most popular. This is due to the popularity of Budapest as an almost all-year-round tourist destination and the number of apartments lost to the long-term letting market reducing supply and pushing up the cost of renting. This has made investment more attractive for those who prefer long term tenants.

Árpád Török CEO, TriGranit

The real estate market shows signs of stirring, however, there are some years ahead of us before the full awakening. We have seen the return of Economic expectations will probably international investors, however, the remain above-trend, economic key issue holding us back is high indicators are among the best in the interest rates and the strict terms on region and investor confidence is which banks are lending. People are growing. While there was only 65,000 not going to be convinced to invest in sqm of office space delivered in 2015, Hungary until internal rates of return the 2016 pipeline is almost 90,000 are competitive with other markets, sqm, the highest since 2010. However, and this is the real hurdle that we the 40% BTS/pre-lease ratio is similar have to cross. That said, lending terms to last year. This could affect not only are improving. There are positive vacancy but also rents. I also expect large transactions. The “big arguments for all sectors, although stars” are all in the region looking for investments. As for the the key issue holding the retail market back is a severe lack of stock. I think that offices are very under-priced with limited new retail market, it’s a shame that, due to the ban on development, no big centers can be developed as there is a definite demand supply and rents are still suffering from the days of oversupply. with approximately 270 sqm of shopping center space per 1,000 When the new genuine class “A” product is delivered, this will lease well and rents will increase. Hungary has five or six years of inhabitants, below the 360 sqm CE average. Budapest is far from saturated. The two known pipeline projects are the 40,000 sqm investment to catch up on, compared to other Central European Etele City Center and the 48,000 sqm Árkád Aquincum, and countries. Clearly there are issues with politics in Hungary, those are due to be delivered this year. IKEA Soroksár and the although investors are looking beyond this and considering the Alba extension also underline this demand. I assume that the economic story. We should not expect parity with Poland and acquisition of single retail assets will continue. Czech Republic, but the gap is closing.

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2016. 01. 13. 19:40

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Budapest Business Journal | Jan 15 – Jan 28, 2016

Noah Steinberg CEO & chairman, Wing

Domonkos Joó Industrial real estate professional

Obviously there has been very little office development in recent years and so we see very positive trends in the market in terms of enhanced or increased occupier demand. While there is vacancy in the market, there is a lack of large, vacant, contiguous modern space. Overall, vacancy rates have been falling and large quality tenants have needs that are unfulfilled. I think that we started our latest project, V17 office building, at an ideal time, though there was a lot more uncertainty in the market when we began the development. At this point, I see that we have come into the market at a sweet spot in terms of demand and with regard to market development. Although finance is more expensive in Hungary than in surrounding markets, it is available for quality developers and quality projects.

The coming year will be strong, based on the current pipeline and the general economic conditions as GDP, consumption and industrial output are rising. This makes us consider that demand for logistics/industrial space will continue to increase. Companies considering logistics and manufacturing tenders tend to not only consider Hungary as a location, but also the wider region and therefore Poland, Czech Republic, Slovakia, Romania and even Turkey. Hungary is not so far behind Czech Republic in terms of stock and with regard to the Budapest Research Forum (BRF) calculation, all the agencies should agree on a clear definition of class “A” stock and register all buildings outside the capital. Vacancy is around 12%, which seems to be high, but does not tell the real story as availability is very fragmented: A park can offer 10,000 sqm but this would be split into two or three units.

Csaba Széll Managing director, CE Land The major obstacle is the small size of the Hungarian market and its lack of growth. Furthermore, there are hardly any transparent investment deals – unfortunately. The recent Duna Tower transaction that we concluded was a very rare positive exception, as all participants experienced a fully prepared and pre-defined tender process. Authorities are more focused on small issues and in most cases the big picture considerations are sacrificed. I also think that our real estate market is rather plain, some may say boring, due to size and outlook considerations. On top of that, it has lost its cutting edge for investors – with a few exceptions.

Rudolf Riedl Managing director, Raiffeisen Evolution The essential difference from last year is that investors are returning, but they are only looking for completed, income-producing assets, and are not prepared to enter a project at the development stage. Office developers require a 60-70% pre-let level, as banks are not ready to take a risk. We have two projects with building permits and we are now looking for tenants, as without pre-lets we will not get financing.

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Ioannis Ganos Senior investment director, Bluehouse Foreign investors are returning to Hungary, including a number of new companies. These are essentially smaller-scale investors, or those who see value-add potential with a higher return, rather than those investors who purchase class “A” office buildings of 100,000 sqm with a decent cash flow and 80-90% occupancy. The investors are 60-70% Hungarian and 30% foreign. The more expensive a property, the more there is a movement towards foreign investors.

Tim O’Sullivan Head of Hungary & SEE capital markets, CBRE I think we will see an improvement on 2015, with a 20% or more increase in investment volume. Office will be the most popular sector, followed by retail. Industrial will see massive growth, although this is coming from a lower base. I think there will be a significant number of industrial transactions due to stabilization in this sector. The gap between Hungary and Czech Republic will remain, but this will narrow. If anything goes wrong in the economy, it will be at the European, not the Hungarian, level.

2016. 01. 13. 19:40

4 Socialite BBJ

Hot classical tickets for the coming season

Iván Fischer conducts the Budapest Festival Orchestra.

Budapest offers a wealth of classical music performances at affordable prices, but tickets for the better shows can disappear quickly. The following is a guide to performances you might want to book soon. ANIKÓ FENYVESI

Budapest is renowned for its classical music scene, fed locally by esteemed music schools that frequently produce exceptional musicians, composers and conductors. As the year winds into gear, several worthwhile shows will be

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presented on stages around the capital culminating in the annual Budapest Spring festival. Despite the abundance of performances to choose from, however, we recommended hitting the box office early as tickets for these events sell out fast. The Budapest Festival Orchestra (BFO) is ranked among the top orchestras in the world and has received many accolades, including a Gramophone Award for best orchestral recording. The orchestra was founded in 1983 by its principal conductor and musical director Iván Fischer and pianist Zoltán Kocsis, and originally comprised an interim assembly of the country’s finest classical musicians. It became a full-time group in 1992, and was one of the first of its kind to receive state-funding, enabling it to operate with a reasonably high budget that in turn helped bring big-name soloists and conductors from around the world to Budapest.

Kicking off the year with a series of orchestral concerts, the BFO will be led by Finnish conductor Jukka-Pekka Saraste for three nights beginning on January 14, in a presentation of works by Finnish and Czech composers. Contemporary Finnish composer and pianist Magnus Lindberg’s “Feria”, which is described as having Spanish fiesta-like energies, will open the evening, followed by Dvořák’s violin concerto. The concert will close with a performance of renowned Finnish composer Sibelius’ second symphony, which is a hybrid of Romanticism, Modernism and Finnish folk music. The BFO’s annual all-day classical marathon, launched in 2008, is one of the orchestra’s most well attended performances, attracting nearly 10,000 classical music fans each year. This year the marathon will be held at Budapest’s Palace of Arts on January 31 starting at 10:30 a.m. for a remarkably low HUF 990 per show, and will feature several

works by Felix Mendelssohn and Robert Schumann. Other composers presented in the past include Tchaikovsky, Bach, Beethoven, Bartók, Mozart, Schubert, Dvořák and Stravinsky. From March 10-12, BFO musical director Iván Fischer, a world-renowned composer and conductor in his own right, will lead the orchestra in a performance of Mahler’s “Symphony No.3 in D Minor”. The Grammy nominated conductor has been presenting a different work from Mahler each year since the first Mahler Fest in 2005. This year he will stage the Austrian composer’s longest piece, which spans several movements, each very different in character and construction from the other. The work was completed in 1896 and was described by Mahler as “so uncanny to me that I can hardly recognize it as my own work”. This performance features the vocals of alto Gerhild Romberger and the Bavarian Radio Chorus.

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Budapest Business Journal | Jan 15 – Jan 28, 2016

For more information on the BFO and its many performances this season, visit its website at bfz.hu. The Budapest Spring Festival is the most important of all classical music events to take place in the city and is on this year from April 8-24. It features not only the cream of the crop of the local music scene, but also many of the world’s leading international soloists and orchestras. There’s plenty to see and do at the Spring Festival during its 16-day run, including jazz and folk concerts as well as modern dance performances, but the following are some of the hottest classical tickets at this year’s festival. On April 12, pianist Shai Wosner and the Hungarian National Philharmonic, conducted by Zoltán Kocsis, will perform Beethoven’s “Piano Concerto No.3 in C minor, op. 37” and a concert performance of Rachmaninoff’s opera “Aleko” at the Palace of Arts. Israelborn Wosner now calls the United States home and has performed as a guest of the Chicago Symphony Orchestra, the Cleveland Orchestra and the Vienna Philharmonic. Critics worldwide have praised his renditions of Schubert, and his 2013 recording entitled “Signs, Games + Messages”, which features the works of Béla Bartók, György Kurtág and Leoš Janáček. South Korean pianist and conductor Myung-whun Chung will lead Milan’s

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whose dynamic playing styles perfectly complement each other. The Staatskapelle Weimar, under Austrian-born conductor Martin Haselböck, will performance Franz Liszt’s magnum opus “Christus” at the Palace of Arts on April 17. Composed by Liszt from 1862-1866, this oratorio tells the story of Jesus Christ from his birth to his passion and resurrection, recalling the work of Handel’s “Messiah”. Haselböck is well known among fans of Liszt for his reinterpretations of the Romantic composer’s symphonic poems using period instruments. On April 24, Martin Grubinger & Percussive Planet Ensemble will surprise classical music audiences with percussive interpretations of Fazil Say’s “The Bells” and Orff’s “Carmina Burana”. Grubinger is a young, Austrian Dezső Ránki and Edit Klukon perform at the Budapest Spring Festival. percussionist who has succeeded in transforming solo percussion Hungarian piano duo Dezső Ránki performances into the highlight of Orchestra Filarmonica della Scala in a performance of Mozart’s “Symphony and Edit Klukon will hold a recital on classical concerts the world over. No.40 in G minor, K. 550” and Mahler’s April 15 at the Vigadó concert hall in Austrian conductor and choir master “Symphony No.5 in C sharp minor”. celebration of the 150th anniversary of Heinz Ferlesch will lead the ensemble Budapest audiences may remember Erik Satie’s birth. Satie is considered in a presentation of the 20th century Myung-whun Chung for his remarkable one of the most original writers and classic “Carmina Burana”, while the interpretation of Mahler in the past. composers of the 20th century and an more contemporary “The Bells” was For this performance he will lead the important figure of the Paris avant- inspired by Edgar Allan Poe’s poem of orchestra of one of the world’s most garde. Interpreting his works for the the same name. famous opera houses in a performance piano requires a great deal of flexibility For more information on other of two significant pieces from the and concentration and who better to performances taking place during the international symphonic repertoire. pull this off than Ránki and Klukon, Spring Festival visit the website at btf.hu.

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WHAT’S

ON GATEWAY TO SPACE Opens January 15, Millenáris Park This exhibition of the history of NASA and space travel makes a stop in Budapest after a successful run in Brussels. “Gateway to Space” is one of the world’s largest collections of space paraphernalia and shows the development of one of the most exciting adventures in the history of humankind. It includes the history of NASA and space travel from its beginnings to significant events of the 20th century including the moon landing and speculations of life beyond our solar system. Visitors can also check out the preliminary stages of rocket construction and the everyday life of astronauts including a sample of a training program. urkiallitas.hu VACANT CITY January 15, Hungarian Contemporary Architecture Center The Hungarian Contemporary Architecture Center (KÉK) launched its Vacant City project in 2012 to address the use of vacant properties in Budapest and how to find innovative solutions for the community-based regeneration of these spaces. This exhibition, which opens at the KÉK gallery on January 15, will present the properties the organization has focused on in the last few years, individuals they have learned from or worked with, as well as those who have helped them in reaching their collective goal. KÉK’s activities include advisory services, property mapping,

Fun things to d o in Budapest for the nex t t wo weeks.

administrative, legal and economic guidance, as well as assistance in ‘Et maintenant on va où?’ screens at Une femme est une femme festival. renovation. lakatlan.kek.org.hu ENNIO MORRICONE Cecilia Bartoli, Sol Gabetta, Andreas January 17, Papp László Budapest Scholl, Heinz Holliger and Fazıl Say FREEDOM OF THE PAST Sportaréna Opens January 16, Mai Manó House among many others. mupa.hu This selection of works from collector Internationally renowned Italian film Róbert Alföldi reveals an important composer Ennio Morricone will make UNE FEMME EST UNE FEMME component of neo-avant-garde a stop in Budapest as part of his “60 January 19-February 23, French photographic art in Hungary and Central Years of Music World Tour” to mark the Institute Eastern Europe from the 1960s to the anniversary of his very prolific career present day. Alföldi has amassed this rich as a composer of dramatic film scores, This series of film screenings, twice collection of non-conformist photography including renowned soundtracks from weekly, celebrates woman in cinema both in only seven years. “There are no several Sergio Leone westerns as well as in front of and behind the camera. In an expectations, no world trends, no rules, the epic drama “The Mission”. industry that has been largely dominated no conformity here; there is freedom. ticketa.hu by men, this festival focuses on women’s voices. The screenings include the Boundless creative freedom,” said Alföldi in reference to the collection. “Piano”, the only film written and directed HÉLÈNE GRIMAUD AND THE BASEL maimano.hu CHAMBER ORCHESTRA by a woman to receive a Palme d’Or at the January 17, Palace of Arts Cannes film festival – and incidentally a French-New Zealand co-production. ZÚZMARA HALF MARATHON AND RUNNING FESTIVAL Accomplished French pianist Hélène Also in the program is: “Lady Chatterly”, January 17, Hungexpo and Grimaud demonstrates her passion for the “White Material”, “Suzanne”, “Bye Bye Kincsem Park classics, in particular Mozart and Bach, Blondie”, “Et maintenant on va où?” and in this evening’s concert which features “Augustine”. All films are screened with Calling all serious runners, this is an Stravinsky’s Concerto in E-flat major English subtitles. opportunity to kick off the running for Chamber Orchestra (“Dumbarton season early with the first half marathon Oaks”), J. S. Bach’s Piano Concerto in D ORCHESTRA IN THE CENTER in Budapest this year. The course begins minor, Prokofiev’s Classical Symphony, Jan 21, Liszt Academy Concert Center at Hungexpo’s G pavilion and winds along op. 25 and Mozart’s Piano Concerto in to nearby Kincsem park horse-race track D minor. Originally founded in 1984, Portuguese pianist Maria João Pires for a total of 7 km, which can be increased the Basel Chamber Orchestra operates will perform works by Mozart including depending on how many rounds runners under the direction of Paul Sacher. The La clemenza di Tito - Overture, Piano chose – either as a half, third or sixth orchestra’s repertoire features every style Concerto in B-flat major and Symphony marathon. The route includes asphalt, and genre from Baroque to contemporary in C major to the accompaniment concrete, grass and dirt sections and, and modern music, employing period or of the world renowned Deutsche depending on weather conditions, there modern instruments as required. Noted Kammerphilharmonie Bremen under may be icy patches. for its flexibility and artistic freedom, this British conductor Trevor Pinnock. futanet.hu/cikk/spuri-teliconductorless orchestra has worked with Founded in 1980 and re-formed in 1992, felmaraton-2015 a host of renowned soloists, including the Deutsche Kammerphilharmonie

Trattoria Toscana

is one of the most authentic Italian restaurants in Budapest. Ever since it’s opening 15 years ago, it offers the largest selection of Italian wines and original Tuscan gastronomy. We are proud of our fresh fish and seafood selection, home made pastas, wood-fired pizzas and premium quality Italian meat products. You can also enjoy our Tuscan meals in the comfort of your home…for more info on delivery, visit our website: toscana.hu!

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Ekaterinburg Museum of Fine Arts, which have never been seen together before outside of Russia, produced by such noteworthy Russian artists as Kazimir Malevich, Wassily Kandinsky, Alexander Rodchenko, El Lissitzky, Natalia Goncharova and Mikhail Larionov. The Ekaterinburg Museum of Fine Arts features outstanding works from almost every movement of the Russian avant-garde, including Cubism, Cubo-Futurism, Neo-Primitivism, Suprematism and Constructivism. The exhibition will be accompanied by a substantial bilingual catalogue in English and Hungarian. mng.hu/en

Bremen is a chamber orchestra with an unusual profile: Members are virtuoso soloists who create productions of astonishing intensity while retaining their artistic personalities including Daniel Sepec, who is second violinist with the renowned Arcanto Quartet. zeneakademia.hu THERAPY? January 21, A38 Modern metal band Therapy? will make a stop in Budapest to promote their latest release “Disquiet”, which is said to be a continuation of their chartbusting 1994 album “Troublegum”. Guitarist-vocalist Andy Cairns from Ballyclare, Northern Ireland founded Therapy? in 1989 and despite their harsh surroundings, the band’s focus has always been on the personal over the political, and that is still true to this day. Opening for Therapy? is Finnish horror punk outfit Flesh Roxon. A38.hu REMAKE January 25, Hátsó Kapu Remake is a stand-up performance, which borrows material from Hitchcock, the Dalai Lama, John Lennon, David Blaine, Allan Kaprow and the Bee Gees. It has been decribed as “a black celebration, a love letter to darkness, an ode to rotting, sinking into the unconscious”. The show touches on such heavy themes as impermanence, loss, transformation and death. Although it appears grim at first, it is actually intended to be a positive experience. hatsokapu.hu JAZZ SHOWCASE January 22-24, Palace of Arts The Jazz Showcase gives audiences an opportunity to hear gifted jazz musicians over the course of three days beginning with László Gárdonyi on January 22. A professor at the Berklee College of Music for the past three decades, Gárdonyi also pursues a successful career as both a solo pianist and as part of the trio he founded in 2003. On this evening he will be accompanied by John Lockwood and Yoron Israel, who have been making music together for 13 years. On January 23, audiences will get a chance to see Hungarian jazz greats the Binder Quartet,

RICHARD CLAYDERMAN January 30, Budapest Congress Center Cockpit at the Gateway to Space exhibition. as they revisit the late ’70s and early ’80s. Károly Binder founded a new quartet in 2012 and recorded two albums in 2015 both of which will be presented this evening. On January 24, Krisztián Oláh, Áron Tálas and Mátyás Gayer who were all finalists at the 2015 Montreux Jazz Solo Piano Competition will perform solo and with their own trios. A series of smaller concerts by new talents will also be held during the festival in the Atrium and Banner Square of the Palace of Arts. mupa.hu

A REVOLUTION IN ART: RUSSIAN AVANT-GARDE IN THE 1910S AND 1920S January 29-May 1, Hungarian National Gallery The Hungarian National Gallery will exhibit 40 outstanding pieces from the avant-garde collection of the

French pianist Richard Clayderman is a prolific performer and recording artist having recorded more than 1,300 melodies throughout his lengthy career. Clayderman’s signature hit “Ballade for Adeline” is an instrumental piece recorded in 1976, which sold 22 million copies worldwide. He is also known for his instrumental renditions of popular music, rearrangements of movie soundtracks, ethnic music, and easy-listening versions of popular classical songs. ticketportal.hu

KREMERATA BALTICA FEATURING MARTHA ARGERICH January 25, Palace of Arts The Kremerata Baltica ensemble founded by violinist Gidon Kremer has been making music for nearly two decades. The orchestra will be joined tonight by a key figure active in the music industry for nearly half a century: Argentine pianist Martha Argerich. She began her career as a solo performer but has been increasingly drawn to playing with orchestras and chamber music ensembles. The program includes Mendelssohnʼs four-movement String Symphony No. 7, Alexander Raskatovʼs 2001 work based on Tchaikovskyʼs The Seasons and Beethovenʼs Piano Concerto No. 2. mupa.hu

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Sail into the heart of Australia With its sun-drenched beaches, unique wildlife, stunningly diverse landscapes and lively culture scene, Australia is an exhilarating getaway destination. Go on an unforgettable journey with Qatar Airways and explore the four cities we fly to. *Sydney flights start 1st March 2016 and Adelaide flights start 2nd May 2016. Melbourne 路 Perth 路 Sydney 路 Adelaide

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