Bbj 2513

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

HUF 1,250 | €5 | $6 | £3.5

BUSINESS JOURNAL BUDAPEST

VOL. 25. NUMBER 13

3

www.bbj

.hu

Budapest

Business

Journal

JUNE 30 – JULY 13, 2017

2017 – July 13, | June 30

eport SpeNocirthaAml eriRcan Focus

15 tment12 Improvement Mission: Reinves Climate, but Room for a 16 s North Americ Good Busines to Open in 19 Similarities ‘Bold Move’ Taking the Building on Each Other, Discovering

American How North ing to look firms are businesses grow their e y (and som in Hungar companies Hungarian erica) in North Am

SPECIAL REPORT

Human Resources SPECIAL REPORT

‘It Feels Great to Promote Such a Positive Brand as Canada’ Ambassador Isabelle Poupart shares her thoughts on thriving bilateral trade relations and tourism, as well as the surprising number of Hungarians who have a personal link to Canada. 18 SPECIAL REPORT

U.S. Footprint Increasing in Hungary As Hungary’s second most significant investor, the United States and several of its leading global firms have been present in Hungary for more than 28 years, and now employ more than 90,000 people.11

Going to America

BUSINESS

Tax: A Constantly Changing Landscape How KPMG’s specialist tax operation in Budapest has grown from a oneclient unit to a high added-value SSC targeting a staff of 700. 6

SOCIALITE

L RE SPECIA

PORT

Prezi CEO Péter Árvai on taking that “bold move” to open in the United States with a five-month old business. That step, he says, is essential if you want a global business. 16

Basalt Badacsony Rocks the Balaton With its choice lakeside setting on Balaton’s northern shores and talented winemakers, Badacsony is a hot vinous destination at any time of year, let alone this summer. 22

NEWS

Inflation Target Will not be met in 2018

While Hungary’s central bank now says that the inflation target will be met only in 2019, international analysts are warning about a possible “inflation shock”. 3

www.bbj.hu

Budapest Business Journal | June 30 – July 13, 2017

BBJ

THE EDITOR SAYS

EDITOR-IN-CHIEF: Robin Marshall NEWS EDITOR: Christian Keszthelyi EDITORIAL STAFF: Sonja Bencze, Zsófia Czifra, David

Holzer, Levente Hörömpöli-Tóth, Gary J. Morrell, Claudia Patricolo, Rob Smyth, Noémi Titz, Ágnes Vinkovits.

LISTS: BBJ Research (research@bbj.hu) NEWS AND PRESS RELEASES:

Should be submitted in English to news@bbj.hu LAYOUT: Norbert Balázs PUBLISHER: Business Publishing Services Kft. CEO: Tamás Botka ADVERTISING: AMS Services Kft. CEO: Balázs Román SALES: sales@bbj.hu

CIRCULATION AND SUBSCRIPTIONS: circulation@bbj.hu

Address: Madách Trade Center 1075 Budapest, Madách Imre út 13-14., Building A, 8th floor Telephone +36 (1) 398-0344, Fax +36 (1) 398-0345, www.bbj.hu SUBSCRIPTIONS: Budapest Business Journal 1 year 6 months 3 months

HUF 27,500+VAT HUF 13,750+VAT HUF 6,875+VAT

News Services Hungary A.M., Energy Today, Regional Today 1 year, from HUF 179,000+VAT 6 months, from HUF 104,900+VAT 3 months, from HUF 58,900+VAT Book of Lists 2016-2017: HUF 19,120+VAT DigiBOL HUF 39,900+VAT Call +36 1 398-0344 or email circulation@bbj.hu What We Stand For: The Budapest Business Journal aspires to be the most trusted newspaper in Hungary. We believe that managers should work on behalf of their shareholders. We believe that among the most important contributions a government can make to society is improving the business and investment climate so that its citizens may realize their full potential.

P

resident Trump’s famous antipathy toward free trade deals has left T-TIP, the great EuroAtlantic pact that was supposed to open up our economies and spur growth forward, in a curious form of limbo: Not yet dead, but currently stored in a file marked “deep freeze”.

With a serendipitous piece of timing, we are about to find out if he was a prescient president or plain wrong. Fittingly for this issue, with its focus on North America, we have a rival trade deal on the cards, this time between Canada and the EU: The Comprehensive Economic and Trade Agreement, or CETA. Like T-TIP, CETA has had its detractors from the outset. People power groups like SumOfUs and 38 Degrees have been deeply skeptical about what it means for the ordinary citizen. Data protection and sovereignty issues have been raised, as well as what can be seen as fundamentally different approaches either side of the Atlantic to issues like GMOs. Indeed, CETA nearly did not happen at all. Needing unanimous support from the member states for the European Commission to sign it into force, it fell victim to Belgian politics, of all things. The Fidesz government may have been early and vocal supporters of the Trump candidacy and later presidency, but it disagrees with him about free trade deals. When CETA was still hanging in the balance, a clearly frustrated Péter Szijjártó, the Hungarian Foreign Affairs and Trade Minister, was said to have remarked: “Who can we sign a trade agreement with if not Canada?”

But signed it was, and it will come into effect very soon, presumably to growing fanfare. Nick Sarvari, the

president of the Canadian Chamber of Commerce in Hungary makes two important points about CETA: The first is that it is an “exceptionally important beginning to a new level of dialogue”; and, when people are talking there is a chance to address the most complex of challenges and “find solutions to the most convoluted dilemmas”. The second is that CETA might well be the best trade agreement ever signed; the more important factor is “how well Hungary takes advantage of the environment CETA has created”.

One other thought on North American relations with Hungary. Our Special Report includes interviews with the Canadian and Mexican Ambassadors to Hungary.

We would love to have included one with the U.S. Ambassador, but were unable to do so.

Five months after the inauguration of President Trump and the departure of the last post holder, Colleen Bell (an appointee of President Barack Obama), there is still no U.S. Ambassador in post in Budapest. This is not the first time there has been such an interregnum.

Indeed, Bell herself was nominated in 2013 but did not take up the office until early in 2015, her appointment having become embroiled in partisan power politics in Washington. But as of today, we don’t even have a hint as to who might be considered for the role.

The embassy is just as much in the dark as anyone else, as press attaché Richard Damstra told the Budapest Business Journal: “President Trump has not yet nominated a new U.S. Ambassador to Hungary. We have no further information at this time.”

Fortepan.hu

MTI / Zsolt Szigetváry

The Budapest Business Journal, HU ISSN 1216-7304, is published bi-weekly on Friday, registration No. 0109069462. It is distributed by HungaroPress.

Reproduction or use without permission of editorial or graphic content in any manner is prohibited. ©2017 BUSINESS MEDIA SERVICES LLC with all rights reserved.

FREE TRADE DEAL MUST BE TAKEN ADVANTAGE OF

BBJ-PARTNERS

VISIT US ONLINE: WWW.BBJ.HU

THEN & NOW Above right, bottled water being distributed to passers-by in the extreme summer heat near Hungary’s Déli pályaudvar (Southern Railway Station) on June 23 by state-owned railway company MÁV. In the black and white photo, a group of friends enjoy the summer heat at the Weiser Boat House near the Danube in Újpest in 1930.

1

News

1 News | 3

///macroscope

Inflation Target Will not be met in 2018

ZSÓFIA CZIFRA

The National Bank of Hungary (MNB) lowered its inflation forecast for 2017 to 2.4% in its quarterly Inflation Report released on June 22, down from 2.6% in the previous report published in March.

According to the report, the mid-term inflation target will not be met next year as stated in the earlier report; it now says only half a year later, in 2019, will the 3% target be reached. As for 2018, the central bank lowered its inflation forecast to 2.8%.

According to the latest available data released by the Central Statistics Office (KSH), consumer prices were 2.1% higher on average in May 2017 than this time last year, while on a month-on-month basis, inflation increased by 0.2% on average.

The MNB has left its predictions for GDP growth unchanged from the previous report: It forecasts 3.6% economic growth for this year, 3.7% for the next, and 3.2% for 2019. Growth projections by the MNB, by the way, are significantly different from those of the government for 2017 and 2018: The latter projects 4.1% and 4.3%, respectively, and a mere 1.6% in 2019.

4

Inflation in May, 2017

As compared to the same month a year earlier.

3.5 3.2

3

2.9 2.7 2.5

2 1.4 1.4 1.4

1 0.5

0

0.7 0.7

0.9 0.9 0.9

1.0

1.5 1.5 1.5

1.6 1.6

1.7

1.8

1.9 1.9

2.0

2.1 2.1

1.1 1.1

Ireland Romania Denmark Netherlands France Cyprus Finland Croatia Malta Slovakia Eurozone Bulgaria Germany Greece Poland Slovenia EU28 Italy Portugal Sweden Belgium Luxembourg Spain Hungary Austria Czech Republic Latvia Great Britain Lithuania Estonia

While Hungary’s central bank now says that the inflation target will be met only in 2019 and is continuing with its dovish monetary policy, international analysts are warning about a possible “inflation shock”, claiming that maintaining the current extremely loose monetary conditions might ultimately result in a more aggressive tightening later on.

Domestic Demand

The MNB expects domestic demand to play an increasing role in economic growth, driven by household consumption and the pick-up in investment activity.

Investments could grow by 15.8% this year, on a low base, followed by a 11.1% growth next year, and a more moderate 4.3% expansion in 2019.

The upswing in investment will be driven by the increase in the absorption of EU transfers and the pick-up in household investment, the central bank added in the report.

The economic growth in the coming years will be accompanied by a continuous decline in the unemployment rate, the Inflation Report reads, with the 4.2% rate in 2017 potentially falling to 3.8% by 2019.

At the latest rate-setting meeting on June 20, the Monetary Council left the 0.9% base rate unchanged; at the same time, it set a HUF 300 billion limit on the stock of three-month deposits, the central bank’s main sterilization instrument, for the end of the third quarter. Three months earlier, the limit set for the 3-month deposits was HUF 500 billion for the end of Q2. In an accompanying statement, policymakers noted that they believe the extended set of monetary policy tools operating since July 2016 have been a success, and consider the limit set on the

three-month deposits and its eventual future changes an organic part of the set. The council will take a decision on the three-month depo limit for the end of Q4 at a policy meeting in September. At the meeting, the Monetary Council also left the interest rate corridor unchanged, with the O/N collateralized loan rate at 0.90% and the O/N central bank deposit rate at -0.05%.

Unconventional The Monetary Council has left the base rate on hold since signaling an end to an easing cycle at its policy meeting at the end of May 2016. However, ratesetters have made use of “unconventional, targeted” instruments to ease monetary policy further. At its latest meeting, the council repeated its earlier stand on keeping the base rate on hold “for an extended period”, while staying prepared to ease monetary conditions with unconventional instruments.

However, London-based analysts warn about the possible outcome of maintaining such loose monetary policy, which, as they state, is contrary to monetary policies in other European Union countries, where policy makers focus on the date and pace of raising key rates.

“We think inflation will surprise the (Monetary) Council on the upside next year, raising the risk that policymakers

fall behind the curve, which could ultimately result in more aggressive monetary tightening,” analysts of Londonbased Capital Economics wrote in a note that was released after the latest ratesetting decision of the Monetary Council.

As, according to the MNB, monetary policy is set to remain extremely loose over the rest of this year, William Jackson of Capital Economics says the council’s “extremely dovish” post-meeting press statement provided further evidence that policymakers are as yet untroubled by growing signs of capacity constraints. As for possible actions from the Monetary Council for the rest of this year, Jackson thinks the MNB will definitely continue its loose monetary policy; however, it is likely to start a tightening cycle in 2018. Capital Economics forecasts that Hungary’s central bank will raise the base rate to 2% by the end of 2018.

Diana Pasquale, head economist in charge with emerging markets at the investment division of Morgan Stanley emphasized that the “loosening” rhetoric of the MNB is outstanding among the central banks of the Central and Eastern European region. She added, however, that in spite of a significant economic expansion in Hungary, Morgan Stanley does not expect the MNB to launch a tightening cycle before the end of 2018.

4 | 1 News

REAL ESTATE NEWS

www.bbj.hu

Budapest Business Journal | June 30 – July 13, 2017

Budapest Airport Traffic Figures Continue Rising Passenger and freight traffic at Ferenc Liszt International Airport continue to rise, according to the latest figures released by the operator.

Artist’s impression of the ibis Styles Budapest Airport.

GARY J. MORRELL

Speaking at a conference organized in association with the Budapest Airport Region Cluster (BARC) and the Hungarian Investment Promotion Agency (HIPA), Gábor Szarvas, director for community affairs and environment at Budapest Airport Zrt. (BUD), said passenger numbers are expected to rise to 12 million in 2017, representing an annual growth rate that out performs most European airports.

Szarvas commented that if the growth rates continue at this pace, passenger numbers could

reach

14 million by 2021. Last year, close to 100,000 tons of cargo traffic was transported through the airport and this, too, is expected to be exceeded this year.

The hope is that Ferenc Liszt International Airport, which today has 124 flight destinations with 43 airlines, will become a regional hub to rival Vienna Airport; the latter currently has

around double the passenger numbers.

Szarvas stressed that the passenger and logistics infrastructure is being upgraded in order to facilitate further growth in airport traffic that will also benefit the surrounding region. An agreement was signed to further continue cooperation between BUD and BARC. The improvement of transport links between the airport and the center of Budapest and regional cities is seen as central to this.

Develop the Region BUD helped established BARC in conjunction with city municipalities, firms in the airport area and HIPA, to develop the airport infrastructure and the surrounding area into what it defines as “a smart and sustainable airport city and region”. The declared aim is to enhance the profile of the airport and strengthen its competitiveness in the CEE region.

Airports are seen as “vital infrastructure that have a clear impact on their regions”.

In response to the positive figures, the circa EUR 160 million BUD 2020

development scheme will deliver 27 new boarding gates and ten new passenger bridges on a 10,000 sqm area with a proposed completion date of fall 2018. A third terminal, Terminal 2C, is planned with a proposed delivery of around 20202021.

BUD has undertaken development of a 13,000 sqm built-to-suit logistics base for DHL Express that is due to be completed this summer, employing 300 staff.

Another 12,500 sqm logistics facility for TNT is also due this summer. Further, the first phase of Cargo City is planned to deliver a 20,000 sqm cargo handling facility in the second quarter of 2018. A second, longer term phase will deliver logistics forwarding facility and offices.

As reported in our June 2 issue, Wing has topped out the first hotel at the airport, the ibis Styles Budapest Airport Hotel, which is due to open in December.

Szarvas argues that an improvement in transport links is central to improving the airport infrastructure. The government is planning to redevelop the road link between Budapest and the airport, which

The hope is that Ferenc Liszt International Airport, which today has 124 flight destinations with 43 airlines, will become a regional hub to rival Vienna Airport; the latter currently has around double the passenger numbers. is currently not capable of handling well the weight of traffic to and from the airport. The design for the state-financed development could be completed this year. There are also plans for a highspeed railway link between the airport and the center of Budapest, and thence on to regional cities. The airport itself has the capacity for further traffic growth and development with its two operating runways.

M7 Expands Light Industrial Portfolio

The U.K.-based investor, M7 Real Estate has increased its presence in the Hungarian market through the acquisition of seven light industrial assets across the country.

GARY J. MORRELL

The properties, which constitute part of a larger portfolio deal of around 210,000 sqm in 11 locations across Hungary and Czech Republic, were acquired from the Partners Group and Cromwell Property Group. This brings the M7 portfolio in Hungary to more 260,000 sqm.

The industrial sector is increasingly regarded as an attractive asset class despite the limited supply and availability of product. Acquiring older industrial assets is seen as a solution to this, as more

investment capital is looking for a home.

Prime industrial yields for Budapest currently stand at around 8%.

M7 has, to date, acquired 19 properties with a value of EUR 125.7 million for its M7 CEFEF 1 fund. “The portfolio provides M7 CEFEF 1 with both stable income from an existing tenant base, and also offers significant opportunities to create further value through the leasing of vacant units and targeted capital expenditure and lease extensions with existing tenants,” commented David Ebbrell, chief investment officer at M7.

Revitalized “We believe that a revitalized asset management strategy for this portfolio will enable us to capitalize on current occupier conditions in the region. The equity we raised in April has been efficiently deployed as we continue to secure properties where significant capital and income upside can be achieved that will deliver strong returns for the fund,” he added.

Aerozone logistics center.

“With nearly two-thirds of assets within M7’s Central European portfolio in Hungary, this is a further show of confidence in our market and is a demonstration of the comparative value that Hungary delivers,” commented Mike Edwards, head of Capital Markets at Cushman & Wakefield Hungary, who represented M7 on the deal.

The investor purchased the 62,000 sqm Aerozone logistics center, located close to the Liszt Ferenc airport earlier in the year.

The target raise of EUR 60 mln of investor capital for the fund has now been reached and a EUR 68.5 mln debt facility has been concluded with Starwood European Real Estate Finance.

1 News | 5

www.bbj.hu

Budapest Business Journal | June 30 – July 13, 2017

News

Szijjártó, Sagintayev discuss relations in Astana

///in brief

Consumer and business confidence improves in June Economic research institute GKIʼs combined gauge of consumer and business confidence rose to 3.2 points in June, a historic high, from 1.7 points the previous month, Hungarian news agency MTI reported. The standalone business confidence index rose from 7.9 points to 9.5 points. Expectations improved in all sectors in June except among service companies, GKI said. Industrial companies gave positive views regarding output in the preceding period, their production outlook and domestic orders, as well as inventories. In the construction sector, companies’ outlook improved minimally.

Expectations improved among both building construction and civil engineering firms.

Assessments of the order stock improved further. Trade companies were increasingly optimistic regarding their selling positions, inventories and prospective orders. In the service sector, there was a slight deterioration in overall sentiment, while companies’ assessment of turnover in the preceding period improved. The consumer confidence index rose from -16.1 points to -14.6 points.

Fear of unemployment lessened, as did inflationary expectations. Households’

assessments of their own financial positions improved, as well as their ability to make savings. GKI compiles the index with the support of EU funding.

Hungary, Croatia sign declaration of intent on reverse gas flows

Hungary and Croatia signed a declaration of intent on June 20 to enable reverse gas flows between the two countries, Hungarian news agency MTI reported.

Minister of Foreign Affairs and Trade Péter Szijjártó said the document was strategically important, arguing that it was crucial for Hungary’s energy security to have access to gas from the south as well.

Szijjártó added that the development of gas infrastructure in the south “seriously lags behind” the development of infrastructure in the north. The minister noted that both the Hungarian-Croatian and HungarianRomanian interconnectors only supply gas in one direction, from Hungary to Croatia and Romania, respectively. The declaration of intent covers the timeline for Croatia to enable reverse gas flows through its interconnector with Hungary, while Hungary is expected to be able to buy natural gas from Croatia from Q1 2019.

Hungarian Minister of Foreign Affairs and Trade Péter Szijjártó, who is on a tour of Central Asia in preparation for Hungary taking over the presidency of the Visegrád Group from July 1, met with Kazakh Prime Minister Bakytzhan Sagintayev in Astana on June 26, according to Hungarian news agency MTI. Stepping up cooperation between Central Europe and Central Asia will be the most important task for Hungary as it takes over the office, he said. The minister noted the recent establishment of a EUR 40 million HungarianKazakh farm investment fund, as well as talks on the participation of Budapest’s waterworks in infrastructure upgrades in several big Kazakh cities.

Hungary and Kazakhstan would like to play the role of a bridge between the European Union and the Eurasian Economic Union (Russia, Kazakhstan, Belarus, Kyrgyzstan and Armenia), because “Europe will only be able to regain its competitiveness and can keep up with the world’s dynamically developing regions if the eastern and western parts of Eurasia can finally begin cooperating in a civilized and effective manner,” Szijjártó was quoted as saying by official government website kormany.hu. “As two strategic partners, Hungary and Kazakhstan could play an extremely important role in this cooperation in future,” he added. (Photo: Ministry of Foreign Affairs and Trade)

ADVERTISEMENT

For flexible and fast solutions MINI LEASE from Budget!

Rent from 1 month up to 12!

Complete your fleet fast!

Fleet solutions & management

For further questions on Mini lease, contact our collegue: endre.papp@budget.hu For other solutions find us on: http://budgetflotta.hu/en

budgethu budget.hu rentacar@budget.hu +36 1 700 4864

Budget_renault_Mini_Lease_hirdetes_260x160.indd 1

budgethu

An old companion for the long run

2017.04.10. 14:09:37

2

2

Business

Business

Keeping Pace With a Constantly Changing Landscape

How KPMG’s specialist tax operation in Budapest has grown from a one-client unit to a high addedvalue SSC targeting a staff of 700.

KESTER EDDY

Some people like stamps, some like railway timetables: Ancuta Cotuna likes Value Added Tax. “It may seem funny, but I like VAT, very much,” the 31-year old Romanian says, laughing at how nerdy it may sound. “The legislation is changing all the time, and you donʼt get bored.”

So, in 2014, when she was working as a general tax adviser in Timisoara, western Romania, and she spotted a vacancy in Budapest in a business specializing in VAT compliance, it seemed an opportunity not to be missed – all the more so since she hankered after “a foreign work experience”.

Cotuna landed the job, and three years later, has progressed to first managerial level with KPMG Global Services Hungary (KGSH), a business

founded

in 2009 that now employs 430 specialists, primarily focusing on VAT and other tax matters for multinational clients.

“When we began it was already clear there was growing demand from multinational companies which were having difficulties, particularly ensuring their subsidiaries were… meeting their VAT payments correctly,” Michael Glover, who has headed KGSH since the beginning, tells the Budapest Business Journal.

Getting VAT compliance right when operating with a dozen or more subsidiaries, even in countries within the European Union, might appear straightforward on paper, but in practice causes numerous headaches.

Complex and Changing “VAT rules are complex and are forever changing. Tax authorities also change their interpretations of the law, mistakes are constantly being made in data input – think rubbish in, rubbish out,” Glover says. “All of which means [at headquarters] groups often have no idea what is going on regarding VAT compliance in their subsidiaries.”

Michael Glover, head of KGSH.

As an example, he cites the numerous times KGSH has asked clients to provide a full list of their VAT registrations; in theory, at least, a fairly fundamental request. “Yet in practice, almost none can do so!” he says.

Indeed, the team invariably find errors in “every data set” of accounts payable and accounts receivable processed; sometimes serious errors. All of which means multinational companies are frequently exposed to risk in their systems, and equally frequently “groups do not know if they are exposed, or where or how”.

Rather than having individual operations in each subsidiary calculating VAT returns, Glover set out to create a unified team which could say: “We’ll take the data off you once, we’ll deal with that data, and run the whole process [to complete] the VAT returns and identify any errors or issues.”

As Andrew Majlath, managing director of Process Solutions, a Hungarian financial services provider, commented on the model: “Who, in their right mind, wouldn’t sign up to that? I take my hat off to Mike and his team for spotting the opportunity and implementing a solution.”

Glover originally created KGSH around a small team of multi-lingual tax specialists, able to understand and interpret the VAT laws in the countries of the European Union. They were complimented with a clutch of software specialists, capable of writing the programs needed to accept and convert client data to a standard, in-house format, and subsequently analyze that data, checking it against a set of diagnostic tools to highlight any inconsistencies or errors for the tax experts to pore over.

The new operation, initially put to work for a Swiss-based multinational client, proved successful. “We started to grow quite quickly, attracting new clients,” says Glover. Not only that, but the team began to identify other processes where a specialist, centralized operation could deliver efficiencies and savings for clients.

Compliant in Many Places

Today, although VAT compliance forms the bulk of the work, and countries in the Asia-Pacific region are now serviced too, separate teams deal with tasks varying from preparing personal taxation returns for Swiss-based, ex-patriate executives to helping on-line traders (using the likes of e-bay and Amazon) to be VAT compliant in multiple countries.

KGSH now boasts more than 300 clients, including major multinationals from IT services and brewers to automakers. Revenues in the last financial year hit EUR 19.6 million, with growth running at some 28%.

KGSH is a good example of a specialized, high added-value shared services center (SSC), says Péter Villányi,

vice-chairman of the Hungarian Outsourcing and Service Association.

With salaries and costs rising over the past two decades in Hungary, “there is a trend away from the basic SSC operations founded in the 1990s to more complex, high added-value operations such as analytics and financial modelling”, he says, citing companies such as Diageo, Avis-Budget and Morgan Stanley, all present in Budapest.

However, such operations are typically “captive” SSCs, i.e. they operate in-house, dealing with their own company’s core data. “I think the KPMG operation is an exception here,” because it is dealing with sensitive, core data for outside clients, Villányi says.

According to Glover, KGSH is unique in terms of size and focus. “We have competitors, but not on the same scale, or same growth patterns,” he says. KGSH is now eyeing opportunities in countries from Arabia to South America, and expects to expand to

700

employees by 2020. Thus far, it has evaded the labor shortages in Hungary, meeting needs from domestic universities and the international grapevine.

Its own recruits also play a part: Cotuna, for example, has lured her brother to the tax compliance cause.

Cornel Cotuna, 29 and a former electrician, joined KGSH 18 months ago.

He appears happy with the job, although his passion for VAT doesnʼt quite match that of his older sibling. “I like it [VAT],” he says, “but, no, no, no. I don’t love it like she does!” he chuckles.

KPMG GLOBAL SERVICES HUNGARY C L IE N T S

STAFF FOUNDED

REVENUE GROWTH

SOURCE: KPMG

2

www.bbj.hu

Budapest Business Journal | June 30 – July 13, 2017

Business

|7

Italian Businesses Show Ongoing Interest in Hungary

The Italian economy is dominated by local SMEs that may not have the same capital strength as multinational corporations, but are still strong enough to invest abroad, with Hungary becoming a key target.

LEVENTE HÖRÖMPÖLI-TÓTH

As underlined by figures from Banca d’Italia, Hungary has been, and apparently is set to remain, a prime target for Italian businesses willing to invest abroad. Italian FDI flows in Hungary amounted to EUR 501 million in 2015, up from a negative balance of EUR 201 mln in 2013, whereas 2015 FDI stocks made up some EUR 1.4 billion.

The southern European country is represented in Hungary by more than 2,600 companies with a total turnover of EUR 4 bln and some

26,000 employees.

That makes Italy sixth in the list of countries with most enterprises in Hungary. The plan is to energize such economic activity even further; that was the message from a recent roundtable, called “From Made in Italy to Made With Italy”, hosted by the Italian Chamber of Commerce in Hungary (CCIU).

The event was attended by Nikoletti Antal, Deputy State Secretary at the Ministry for

National Economy, representatives of the Italian Embassy, the Italian Association of Industrialists (Confindustria di Firenze), the Italian Foreign Trade Institute (ITA/ICE) and several Italian entrepreneurs active in Hungary.

The intent seems fully justified, as Italy has immense potential to solidify its economic positions in the region. We are talking about a state with the third biggest economy in Europe, and that is the eighth largest manufacturer in the world. Trade is also thriving, with 2016 having seen a surplus of EUR 51.6 bln, equivalent of 3% of GDP.

Positive Outlook According to Dr. Marco Bulf, director of ITA/ICE, the overall outlook remains very positive, and in particular three areas should be in the spotlight in the short- and midterm: Manufacturing; renewable energies; and logistics. Italian manufacturers already employ the most workers abroad out of all industries, totaling some 950,000, and their activity is expected to grow.

Green energy-related investments can

Toasting future Italian growth in Hungary. look forward to extra growth thanks to the EU’s commitment to gradually increase the clean energy ratio in the energy mix, where Hungary can play an important role as well due to its solid geothermal and solar resources. On the other hand, Italy is perfectly positioned geographically to serve the Mediterranean, the ScandinavianMediterranean and the Baltic-Adriatic Corridors alike. The latter includes Budapest, which is an easy-to-reach destination in terms of logistics.

More assistance is to come from Confindustria di Firenze, among others, a territorial member of Confindustria, the largest business federation in Europe, which represents the interests of

1,046

manufacturing

and service companies based in the province of Florence. The organization

provides consultancy services, networking opportunities, training and information to help its member companies find their way abroad.

“The Italian economic structure is based on local SMEs, up to 90-95%, that may not have the same capital strength as multinational corporations, but the Hungarian market does not require huge enterprises,” Angelo Arcuri, international affairs manager at Confindustria Firenze said.

“Our SMEs can meet the demand of the Hungarian market; all they need to do is to operate in a targeted manner.”

Arcuri further noted that labor costs are increasing in Hungary, which might prompt some capital to take a detour to places like Romania or Bulgaria instead, but that does not change the fact that Hungary will continue to be a key destination of Italian SMEs to invest.

ADVERTISEMENT

DR. ROSE PRIVATE HOSPITAL

DR. ROSE ORTHOPEDIC CENTER

DR. ROSE OBSTETRICS

DR. ROSE BUDAPEST PLASTIC INSTITUTE

DR. ROSE CORPORATE HEALTH CARE

7/8. SZÉCHENYI SQUARE 1051 BUDAPEST TEL.: +36 1 377 6737 WWW.DRROSE.HU

Private Hospital Obstetrics Orthopedic Center Budapest Plastic Institute Corporate Health Care

Dr. Rose offers an expanded range of services for its patients in an attractive and modern environment. Patients are offered examinations in 28 fields, preventive screenings and excellent specialists without any waiting time. Besides the Private Hospital, the Obstetrics, the Orthopedic Center and the Budapest Plastic Institute, we also operate a Corporate Health Care department. We provide our complex, premium quality health care services with up-to-date equipment and qualified staff amongst stylish surroundings in the heart of the inner city.

8| 2

Business

WHO’S NEWS

www.bbj.hu

Budapest Business Journal | June 30 – July 13, 2017

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

EY Hungary Welcomes Partners

At the end of its financial year, EY Hungary is welcoming two new partners: Krisztina Bedő, is joining as tax partner, and Tamás Lelkes is joining as an auditing partner, as of July 1. Starting in 1998 with Arthur Andersen and continuing with EY in 2002, Lelkes has chiefly served clients in the Hungarian government and private sectors. Together with his audit teams, he has been involved in several successful multidisciplinary projects with colleagues from all service lines, dealing with real business issues.

“My ultimate goal is to give back the prestige of audit to our people and in the market. I would like to pass on the knowledge I gained from my mentors and colleagues to future generations.

This includes how to motivate our leaders to answer our clients’ questions better, and how to organize strong and cohesive teams,” Lelkes said. Bedő has been working with EY for 13 years, having started at the firm during college, where her major was in the field of accounting. She originally planned to join the Assurance team, but she was convinced during her interviews that Human Capital (pre-PAS) would be a better fit for her personality and interests. During her career at EY, she has worked with many different sized international and Hungarian based clients, and has had the opportunity to go on a mobility assignment twice.

She spent eight months in Prague as a senior and two years in Rome as a manager. “In my current role, I lead the PAS Hungary team of 40 specialized professionals. My main specialization is mobility, and I have started building my expertise in rewards,” said Bedő.

Hungarian Steel Association Names President

Roland Fazekas, the CEO of Carboferr Zrt., was appointed president of the Association of Hungarian Steel and Metal Traders (MAFE) at its latest general meeting. The most important task in the coming three-year cycle is to boost the representation of member firms and to improve the cooperative framework with ministries and economic decision makers, according to the press statement. “In the next three years, primarily, we are planning to strengthen the status of the sector’s members,” said Fazekas. He added that for this, market players need strong professional representation to facilitate the information flow between traders and investors. As steel usage in Hungary is chiefly based on imports and is realized through traders, the association is also focusing on establishing a domestic strategy through active cooperation with decision makers. Fazekas stressed the importance the association places on anti-dumping and marketprotecting measures, as well as urging amendments to be made in order to limit the outflow of steel scrap. At the same time, the association would like to see the development of supply chains

between the steel industry and other sectors. Fazekas also believes that the supply opportunities of Hungarian steel market players should be considered in relation to the Paks 2 project, the expansion of Hungary’s sole nuclear plant in Paks.

Kinstellar Budapest Promotes new Partner

Europe, Legal 500 and IFLR1000. “With his extensive background, talent, commitment, and leadership, Ákos has played a major role in the success of Kinstellar and our clients,” says Csilla Andrékó, managing partner at Kinstellar Budapest. “We are honored to welcome Ákos to the partner team, and look forward to his expanded influence in the firm while he continues to deliver to clients the quality, excellence and integrity on which we pride ourselves.”

Nagy has been with Kinstellar since its inception and previously with its Budapest team (then Linklaters) since 2004, when he started his career. He graduated from the University of Debrecen and also holds a degree in European law from Leiden University in the Netherlands. He completed advanced postgraduate studies in the field of information communication at the University of Pécs. Kinstellar sees Nagy’s promotion as an important career milestone, demonstrating the firm’s proactive commitment to career progression and the importance of recognizing efforts and high performance, says the press release.

Skanska Picks Projects Director

Cushman & Wakefield Names Associates

Ákos Nagy has been promoted to partner at Kinstellar Budapest, an independent law firm focusing on Emerging Europe and Central Asia.

Nagy primarily deals with corporate and M&A transactions. Nagy has more than 12 years of experience in advising on asset and share deals, mergers, MBOs, joint venture investments, minority and majority investments, and corporate restructuring, the Kinstellar press release says. Since 2014, Nagy has played a key role in developing the firm’s Compliance, Risk and Sensitive Investigations (CRSI) and White-Collar Crime practices, working on complex and highly sensitive matters, and bringing constant valuable contributions to know-how development in these practices. Sensitive commercial matters have become one of Nagy’s focus points, in addition to servicing the existing corporate clientele and advising on M&A transactions, with an emphasis on strategic investors active in the automotive, industrial and pharmaceutical sectors. The key clients that Nagy has been advising recently include Teva, Johnson Controls, Energizer, Ibiden, Nordic, MVM, Yanfeng Hungary, Nitrogénművek, CBRE, Rubik Ventures, Chapelhill and Hamburger Hungária. Kinstellar believes Nagy has built a sterling reputation on the market, as evidenced by his recognition as a recommended practitioner in the corporate and M&A practice by international legal directories Chambers

Real estate services firm Cushman & Wakefield has promoted Dr. Melinda Szilágyi and Balázs Kádár as associates at the Hungarian office. Szilágyi joined Cushman & Wakefield in 2012 as a retail negotiator and was promoted to a senior in 2014. She has more than 10 years of experience on the Budapest retail property market and holds a Master of Science degree in Law and Political Sciences and a Master of Science degree in Italian Linguistics and Literature. Her main field of work is the downtown retail market and shopping center leasing, and she benefits from additional experience in retail and outlet park leasing. Kádár joined Cushman & Wakefield as a senior valuer in 2014. He specializes in the valuation of all sectors of commercial and development property in Hungary and the CEE region. He has more than 11 years of experience in property valuation, having worked both on the consultancy and banking sides. He holds a Master of Science degree in Economics from Corvinus University of Budapest. “I am delighted to announce that our team of associates is growing.

It is always a pleasure to honor hard work and dedication to the company and both Melinda and Balázs have proven their capability to lead in the past years. I wish them the best of success in their new roles,” said Gergely Pados, international partner, head of Hungary at Cushman & Wakefield. Globally the firm is celebrating its 100th anniversary this year. The Budapest office, founded in 1993, is the largest real estate advisor in the country with more than 100 professionals (growing further in the coming months) on board and with the most mandates secured, according to the press release. With seven service lines, the company covers a property’s life cycle from construction to letting, and from daily operations to sales.

Mariusz Wieczorek has been appointed projects director of Skanska Property Hungary. Wieczorek moved to Budapest from Skanska Poland, bringing knowledge and expertise in managing complex development projects. He reports directly to Marcin Łapiński, managing director of Skanska Property Hungary and Romania. “I am glad that Mariusz joined our team. His extensive knowledge in project management is extremely valuable for our ambitious development plans. I strongly believe that with Mariusz’ help, we’ll be able to utilize even more cross-country synergies which Skanska offers through its global presence,” said Łapiński. Wieczorek has vast experience regarding project management and wide range of knowledge in commercial development: He was born in Poland and he started his career in the United States, later moving back to Europe, Skanska says.

As senior project manager in Skanska, he was responsible for full project development of office buildings such as: Green Horizon – Łódź; Silesia Business Park - Katowice; and Nowa Fabryczna – Łódź. “For me it is a pleasure to join the Hungarian team and to be a part of this fruitful and prospective knowledge sharing opportunity within Skanska. I am sure that the experience gained on our projects in Poland will strengthen the business plan development activities here in Budapest,” said Wieczorek.

Skanska Property Hungary Ltd. has 30 years of experience on the Hungarian market and during this time developed 178,000 sqm of commercial space (office and retail). Mill Park, the company’s new project, located in the IX. District, will be delivered in Q2/Q3 of 2018.

2

www.bbj.hu

Budapest Business Journal | June 30 – July 13, 2017

Company Takata to expand in Hungary despite parent bankruptcy

Despite its parent declaring bankruptcy in Japan and the United States, automotive firm Takata has promised to continue its capacity expansion in Hungary as planned, according to Hungarian news agency MTI. Takata Safety Systems Hungary says it is committed to continuing its capacity expansion at its airbag plant in Hungary. In the following months, the automotive industry supplier expects to add 200 more jobs to the current staff of 1,400 at its plant in Miskolc. The parent company, Japanese car parts manufacturer Takata Corporation, which is at the center of the largest vehicle recall in history as a result of a string of deaths due to faulty airbags, has filed for bankruptcy protection in the U.S. and Japan. China-owned rival Key Safety Systems is reported to have offered USD 1.6 bln for Takata, and to take over production of seat belts, airbags and other automotive safety parts. Takata Safety Systems is a strategic partner of the Hungarian ADVERTISEMENT

///news

government, which supported the opening of Takataʼs factory in Miskolc (an investment of EUR 68 million).

Diehl invests HUF 3.7 bln in capacity expansion Germanyʼs Diehl Aerosystems is investing HUF 3.7 billion in increasing the production capacity of Diehl Aircabin Hungary, based in Nyírbátor in the northeast of the country, Minister of Foreign Affairs and Trade Péter Szijjártó said on June 23, as reported by state news agency MTI. The Hungarian government is supporting the project with a HUF 1.38 bln grant, the minister added. The avionics parts manufacturer will construct new buildings and purchase machinery with the investment, creating 230 jobs. Diehl Aerosystems CEO Rainer von Borstel said the company currently has more than 500 employees at the plant in Nyírbátor. According to public records, Diehl Aircabin Hungary posted EUR 22.4 million sales revenues last year, following EUR 16.2 mln in 2015. The company booked EUR 670,700 profit last year.

Siemens lays cornerstone of HUF 10 bln turbine blade plant German engineering giant Siemens laid the cornerstone of a HUF 10 billion turbine blade plant it is building at the manufacturing base of Siemens Power and Gas in Budapest on Tuesday, according to state news wire MTI. Siemens said the plant will turn out the new products from 2019. The company will build a 10,000 squaremeter production hall and add 2,500 sqm to an existing one. The expansion will create 150 qualified jobs. Dale A. Martin, chairman-CEO of Siemens Hungary, said that 59 of the employees are being trained in Berlin for the new job. The event was also attended by Minister of Foreign Affairs and Trade Péter Szijjártó.

Wabererʼs founder to revoke rights to brand name for new owner György Wáberer, the founder and former CEO of Hungarian logistics and haulage firm Waberer’s, announced he would revoke his right to use the company’s brand name as of the summer of 2018 with the expiry of the related contract, according to a press statement sent to the Budapest Business Journal. Wabererʼs International Zrt.’s founder and former co-owner sold his part of the company in June last year to investor group Mid

Business

|9

Europa Partners. The Waberer’s brand appears on more than 3,500 trucks and is well-known internationally in the region, the press statement adds.

Hungarian online news portal napi.hu recalled that Wáberer sold his 40% of the company to Mid Europa Partners together with the right to use the brand name, for which the contract expires next summer. In the press statement, Waberer’s new owners explained that handing over the rights for use of the brand name was an inseparable part of the deal made last year. Wabererʼs recently started offering its shares for subscription in an initial public offering (from June 19 until June 29).

Ottakringer sells Pécs Brewery to Hungarian peer Pécs Brewery, the Hungarian subsidiary of Austrian brewer Ottakinger, was sold to Hungaryʼs MAVA Befektetési and BanKonzult Commerce, under an agreement signed recently, according to reports. The purchase price of the brewery, which has posted losses for the past couple of years, was not made public at the request of the buyers, Hungarian news agency MTI reported. “It was important to us that the new owners will continue operating the brewery and that people will keep their jobs,” head of the Ottakringer group Sigi Menz said in a statement quoted by MTI.

3

www.bbj.hu

Budapest Business Journal | June 30 – July 13, 2017

Special Report North American Focus Mission: Reinvestment12 Good Business Climate, but Room for Improvement15 Taking the ‘Bold Move’ to Open in North America 16 Discovering Each Other, Building on Similarities 19

How North American firms are looking to grow their businesses in Hungary (and some Hungarian companies in North America)

www.bbj.hu

3

Budapest Business Journal | June 30 – July 13, 2017

Special Report | 11

U.S. Footprint Increasing in Hungary

As Hungary’s second most significant investor, the United States and several of its leading global firms have been present in Hungary for more than 28 years, now employing more than 90,000 people.

SONJA BENCZE

The United States is Hungary’s 12th most important trading partner; its share of the total Hungarian international trade in goods is 2.8%, based on the data of the Central Statistical Office (KSH) in 2016. With its 2.1% share it ranks 13th in imports and tenth in exports with a share of 3.4%.

In terms of foreign direct investment, the United States is Hungary’s second most significant investor. The volume of FDI to the country was

USD 18.455 billion in 2014,

according to the data of the KSH and the Hungarian Investment Promotion Agency (HIPA). There are 1,715 U.S.owned companies in Hungary, employing 92,703. Last year, the value of bilateral commercial trade was USD 5.524 bln.

Hungary’s trade surplus with the United States was USD 1.584 bln.

Among the U.S. firms present in Hungary are some global market leaders, such as General Electric (GE), which has been present in Hungary for 28 years.

It is not only the largest U.S. investor, but also one of the largest Hungarian companies at the same time. GE operates 12 factories, five R&D centers and three business service centers in 13 Hungarian cities, employing more than 10,000 people. Almost all GE businesses are represented in Hungary, in its local

factories the company manufactures state of the art healthcare, water, oil & gas, aviation, lighting as well as power generation solutions. GE is one of the biggest exporters in Hungary, exporting 99% of its total production to global markets.

Dynamically Growing Over the last two years GE has invested approximately USD 120 million into its Hungarian operations. The company’s most dynamically growing business, Global Operations, created more than

2,000 new jobs

“GE is transforming its industrial footprint in Hungary to what it calls a digital industrial footprint, an area where GE strives to be a leader in Hungary and the region, supporting the transformation of the local economies as well.”

Year

Imports

Exports

2014

2,019.4

3,971.1

5,990.5

1,951.8

2015

1,872.1

3,590.7

5,462.8

1,718.6

square meters and increased the number of employees by 5%, while GE Power hired 300 highly qualified people at Veresegyház, where it already employs 2,000.

In 2016, the company opened one of its six global Digital Hubs in Budapest.

GE’s new Digital Hub will create 400 highly skilled expert positions by the end of this year in the field of industrial internet solutions. The hub is responsible for software development, business processes and application resiliency, building and running infrastructure and offering access to big data solutions. Just as is the case globally, GE is transforming its industrial footprint in Hungary to what it calls a digital industrial footprint, an area where GE strives to be a leader in Hungary and the region, supporting the transformation of the local economies as well. Along the transformation there are some significant changes, which will have also an effect on GE’s presence in Hungary, the company said.

Change 2015/2014 (%)

-7.3%

-9.6%

-8.8%

-11.9%

Early Birds

2016

1,969.8

3,554.6

5,524.4

1,584.7

Change 2016/2015 (%)

5.2%

-1%

1.1%

-7.8%

since opening in 2014 and will grow further this year. It provides integrated shared services to GE businesses across Europe and beyond and is an integral part of GE’s global strategy driving service innovation and simplification in its operations.

Other facilities such as the Oil & Gas plant at Fót, just outside Budapest, or the GE Aviation and Power at the Veresegyház factory (about 35 km northeast of the capital) have also grown significantly. GE Aviation nearly doubled its size with an additional 4,600

Hungarian-American Bilateral Trade (million dollars) Trade (export plus import)

Foreign trade balance/ account

Another company from among the ‘early birds’ in Hungary is Microsoft Magyarország Kft., which stands out among the list of major U.S. corporations headquartered in Hungary based on

the number of people it – indirectly – employs. The company was set up as the Hungarian representation of Microsoft Corporation in 1993 with only two employees. By now, it has grown into a significant player of the domestic IT industry, and the number of its direct employees exceeds 250 people. The company sells Microsoft products through its network of distributors and dealers/resellers involving a large number of partner companies; Microsoft Magyarország says it has ties to nearly all the Hungarian technology firms.

Overall, the company’s 2,000 partners give work to

50,000 people

in the country.

Some firms, manufacturers in particular, have chosen to have headquarters in the countryside.

Although NI Hungary Kft., the local subsidiary of the Texas-based National Instruments (NI), which makes industrial gauges and control systems, has sales office in Budapest, its major operations are centered in Debrecen.

Since it set up its first overseas facility here in 2001, the electronic device maker has constantly been growing – today it counts more than 1,200 experts in 13 areas. In addition to production – more than 90% of hardware manufacturing takes place here – the company’s financial department and global IT services to assist European, Asian, and U.S. operations are also based here. The company also operates an R&D center in Debrecen. At its 15th anniversary celebration last October, NI Hungary announced it would invest nearly USD 20 mln in the development of R&D, IT and manufacturing capacity, for the establishment of a new, fourth building and for the expansion of NIʼs global shared service center capacity. As a result, 210 new, high value-added jobs will be created.

12 | 3

Special Report

www.bbj.hu

Budapest Business Journal | June 30 – July 13, 2017

Mission: Reinvestment

The U.S.-Hungary Business Council (USHBC), a one-stop platform for dialogue between American corporate executives and top Hungarian government leaders, brought its second annual mission to Budapest this week to enhance bilateral business relations. The Budapest Business Journal spoke to USHBC President Eric Stewart, who says he is delighted that during talks the importance of reinvestment is getting more focus.

LEVENTE HÖRÖMPÖLI-TÓTH

The U.S.-Hungary Business Council is the only organization in Washington, D.C., that is solely focused on economic and business relations with Hungary, and it represents a handful of major American companies doing business here. This year marks its second mission led by President Eric Stewart, to whom the country is far from unknown territory; he was U.S. Deputy Assistant Secretary for Europe and Euro-Asia under the Bush administration, and thus gathered lots of experience specifically about Hungary.

“Most of our member companies have invested or reinvested in finance, healthcare, automotive, and manufacturing, but some of them are new, ADVERTISEMENT

like the ones in defense,” Stewart says. The latter area might be of particular interest, as there has been a recent commitment on the part of Hungary’s government to increase defense spending to

2% of GDP .

“We are not like AmCham, even though we are in lockstep with them,” Stewart says, referring to the close relationship between the business organizations, which is demonstrated by a joint meeting with the AmCham board during the mission to discuss key current affairs. One of the potential topics during that discussion could be the competitiveness of the country, after Hungary fell back dramatically on the

OECD ranking in spite of AmCham’s joint efforts with the Hungarian government to move things in the opposite direction.

Noteworthy, ‘not a Bible’ “Such a ranking is not the Bible, but it is definitely noteworthy,” Stewart says. “But I can tell you from the American investor standpoint that we find working with the Hungarian Investment Promotion Agency (HIPA) and the government to be absolutely fantastic. When talking to HIPA officials, you hear them continuously stressing the importance of reinvestment, which we also believe in very much.”

He understands that everybody wants to see who is bringing the new Walmart to Budapest and creating 1,000 new jobs.

That makes a nice press release, he says.

By contrast, creating 40 jobs in Orosháza, deep in the countryside, in an existing operation might not make such a splash in the headlines, but it is just as important.

USHBC is designed to be small. It serves as an exclusive club that allows member companies to talk to senior government officials in face-to-face meetings about what is important to them, like pending legislation, or existing legislation that is hindering growth, which then can be sorted out informally.

Normally, very few issues are raised, though, the biggest challenge being the labor shortage. “Labor costs are increasing, which is not good news for investors, but in order to have a skilled workforce, this is inevitable,” the president admits and emphasizes that companies keep looking for the same stable, transparent and efficient environment they want to invest in.

As to global political developments of late, Stewart further believes that you will see a different trade relationship between Hungary and the United States under President Trump, but the good news is that Europe has not been a negative focus for the Trump administration, unlike China or Mexico and NAFTA (the North American Free Trade Agreement).

On the other hand, Brexit might play out in favor of Hungary, as some businesses may need to relocate their operations. “And my assumption is that the Hungarian government has a plan as to how to attract those companies to Hungary,” Stewart concludes.

www.bbj.hu

3

Budapest Business Journal | June 30 – July 13, 2017

Special Report | 13

CEU COLUMN

U.S. Foreign Trade Policy Paul Marer Emeritus professor of economics and business CEU BUSINESS SCHOOL

Campaign Rhetoric

Donald Trump had campaigned for the presidency by blaming trade agreements being perennially unfair to the United States, saying that these – along with globalization – were significant causes of the loss of manufacturing jobs and the hard times being faced by America’s bluecollar workers. He cited as evidence the USA’s persistently large trade deficits with China, Mexico, Japan, and South Korea.

He promised to “fix” the problems by abrogating or renegotiating existing trade agreements, by moving trade negotiations from multilateral to bilateral channels, and by putting “America’s interests first”. He threatened to impose punitive tariffs on “unfair” imports, to force others to open market segments where U.S. firms face discrimination, and to penalize U.S. firms investing in manufacturing abroad.

Trump’s First Five Months President Trump had taken several headline-grabbing actions on trade during his first five months in office (January 20 - June 20), enabling him to claim that he is making good on his promises. Trump denounced, and has withdrawn from Congress, the U.S.led Trans-Pacific Partnership (TPP) that President Obama signed in

February

2016,

along with Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The TPP ’s two-fold purposes were to counterbalance China’s increasing economic and political dominance in Southeast Asia and to allow this U.S.-led coalition (instead of China) to modernize the rules of trade and investment that go beyond those already agreed under the auspices of the WTO. Trump’s action were/ are motivated by U.S. domestic political considerations (such as being a prisoner of his own rhetoric as well as heeding the opposition of organized labor), even though approving TPP would clearly have been in America’s global trade and political interests. Abandoning it is a clear win for China.

The Transatlantic Trade and Investment Partnership (TTIP) – an agreement between the USA and the EU’s (pre-Brexit) 28 members – had been nearly finalized in 2016. It would remove tariffs, cut red tape, and reduce restrictions on investment – many of its details similar to those in the TPP. To be sure, there has been some opposition to TTIP on both sides of the Atlantic. In the wake of Brexit and President Trump’s opposition to multilateral trade agreements, TTIP negotiations have stopped; the draft treaty is in “deep freeze”. It is important to note, however, that it has not been formally abandoned, as TPP was.

The North American Free Trade Agreement (NAFTA), signed by the United States, Canada and Mexico

in

1994,

was the focus of much of Trump’s ire during the campaign. He said that he would withdraw America and renegotiate bilaterally with each partner, on terms much more favorable to the USA. In April, Trump was about to sign an executive order to withdraw the States from NAFTA when Mexican President Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau called on him to back off, arguing that NAFTA’s sudden collapse would be a huge economic shock to the many firms engaged in cross-border trade. Trump complied with their request.

U.S. businesses are divided on renegotiating NAFTA. While some industries are eager to rewrite it, NAFTA is working just fine for others.

Realizing this, Trump’s Secretary of Commerce, Wilbur Ross, said that the first trade-policy principle of the new Administration is to avoid doing unnecessary harm – a welcome voice of reason in the face of the mercurial

U.S. businesses are divided on renegotiating NAFTA. While some industries are eager to rewrite it, NAFTA is working just fine for others. Realizing this, Trump’s Secretary of Commerce, Wilbur Ross, said that the first tradepolicy principle of the new Administration is to avoid doing unnecessary harm.

President’s bombastic and often inconsistent pronouncements.

Experts agree that there is a ready recipe for revising NAFTA quickly to improve it. NAFTA’s three members had already agreed with the nine other signatories of the (now abandoned) TPP on new trading rules. Basically, all that would be needed is for the three NAFTA countries to agree among themselves to implement the already agreed provisions of the TPP. The most consequential protectionist action to date has been Trump’s announcement that he will soon restrict in a major way steel and aluminum imports – mainly from China – on the WTO’s rarely invoked “threat to national security” grounds.

Supposedly unfair global competition in these metals has left only a small number of plants still operating in the United States, endangering the supply of these metals needed to build ships, tanks and other military supplies, according to the legislation about to be submitted to Congress.

Economists’ Views on the Issues There is near consensus among economists that: 1. U.S. manufacturing output is at a record high. But large improvements in productivity over decades have shriveled the number of workers needed to produce it.

This is similar to U.S. agriculture, feeding a population much larger than America’s, with only a tiny fraction of its workforce. Job growth is in service sectors.

2. Focusing on bilateral trade balances, or even on a country’s overall trade balance with the rest of the world, is not meaningful for a large economy with floating exchange rates, like that of the United States. While it is true that the States annually imports about USD 500 billion more than it exports, the rest of the world acquires the equivalent in U.S. assets. This net inflow of foreign capital allows U.S. domestic investment to exceed its level of domestic savings, fueling productivity and growth.

3. If the United States were to unilaterally impose tariffs on a wide range of imports, the other countries would surely retaliate, moving the structure of global trade away from comparative advantage. To give just one example: China could drastically cut its large imports of Boeing airplanes. More importantly, the States would thereby abrogate the 1994 Uruguay Round Agreements Act, which pledged that the country would play by World Trade Organization (WTO) rules. Trust in any international agreement the USA had signed or offers to sign – not only on trade but in any area – would plummet; the negative consequences for the USA and for the world would be obvious.

It is hoped that Trump’s need to obtain China’s cooperation vis-a-vis North Korea will moderate the nature and extent of his protectionist steps, stopping well short of triggering a global trade war.

Conclusion President Trump has realized that while campaign rhetoric is easy, you often face severe constraints when trying to implement those promises.

It is fortunate that – so far – President Trump’s bark on foreign trade and investment has been worse than his bite. Most of us economists hope that this will continue, for the benefit of maintaining a reasonably orderly global trading system.

This column is part of a series of opinion pieces from experts at the CEU Business School in Budapest. The opinions stated here do not necessarily reflect those of the BBJ.

14 | 3

Special Report

www.bbj.hu

Budapest Business Journal | June 30 – July 13, 2017

Talks Finally Begin on CEU’s Future

Officials of the Hungarian government and the State of New York have started negotiations on the further operation of the Central European University (CEU) in Budapest, according to a statement issued on June 23 by New York Governor Andrew M. Cuomo. CEU welcomed the launch of the talks.

BBJ STAFF

“Today we held productive negotiations with representatives of the Hungarian government on the status of the Central European University, a world-class institution that is accredited in New York State,” Cuomo wrote in the statement.

“We met to discuss a new law that threatens CEU’s continued presence in Hungary and the urgent need to preserve academic freedom. We made good progress in talks with Kristóf Altusz, Deputy State Secretary in the Ministry of Foreign Affairs and Trade,” the statement said, adding that “we look forward to a speedy resolution that safeguards the integrity of CEU and its vital educational mission.”

Shortly after the announcement, CEU welcomed the beginning of talks to resolve the issue, triggered by the recent passing

of an amendment to Hungary’s higher education law (commonly known as lex CEU because it is seen by many as targeting the university founded by George Soros). That amendment sets new conditions for the operation of foreign-funded institutions in Hungary.

The government has always insisted the aim of the legislation is not to target CEU but rather to ensure greater transparency in the legal environment in which institutions of higher education operate, as well as to close “loopholes” which it claims CEU has exploited. Despite that, the law has been widely condemned by academics at home and abroad, as well as by the European Commission and U.S. government, and prompted mass demonstrations in support of CEU in Budapest.

“CEU welcomes the statement from New York State Governor Andrew Cuomo calling

yesterday’s discussions with Kristóf Altusz, Hungarian Deputy State Secretary in the Ministry of Foreign Affairs and Trade, productive,” reads a short statement put out

by CEU and sent to the Budapest Business Journal, among other media outlets. “CEU is not a participant in the negotiations, but we hope they lead to a solution that enables CEU to remain in Budapest as a free institution,” the statement added.

No Intergovernmental Talks Hungary had earlier been pushing for intergovernmental talks between Budapest and Washington to resolve the matter, but the United States refused, insisting that New York State, as the accrediting authority for CEU in America, was the proper authority.

That did not stop the American administration from passing comment in calling on to the Hungarian government to suspend the lex CEU, as Mark C. Toner, acting spokesperson of the U.S. Department of State, confirmed when answering a question during a press briefing back in April.

“We are very concerned about this legislation that was passed by Hungary’s Parliament last week that was signed into law by the president this week,” said Toner at the time. “We believe it threatens the continued operations of Central European University, which is a leading academic institution. It’s an important conduit for intellectual and

cultural exchanges between Hungary and the United States. And frankly, it’s at the center of freethinking and research. The legislation, we believe, can also similarly threaten the operations of other American universities with degree programs in Hungary, so it goes beyond just Central European University,” he added, according to a transcript of the briefing posted on the website of the U.S. Department of State.

Toner confirmed that Under Secretary of State for Political Affairs Thomas Shannon and CEU President and Rector Michael Ignatieff had met to discuss the effect of the legal amendment on the university.

“We’re urging the Government of Hungary to suspend implementation of the law. We want to see a review and discussion in order to address any concerns through dialogue with the university itself and other affected institutions going forward,” Toner added.

Since that time, the Minister of Human Capacities Zoltán Balog and United States Secretary of Education Betsy DeVos have exchanged letters on the act, as reported on the government website kormany.hu.

The headline says she “raised no objections to the Act”, although that isn’t specifically mentioned again in the text. In his latest letter to DeVos, Balog expressed his hope that “this complicated legal issue can be resolved to everyone’s mutual satisfaction at the earliest opportunity in view of the fact that American institutions of higher education operating legally in Hungary help reinforce Hungarian-American relations”.

Canada 150: A Celebration of Core Values

2017 marks the 150th anniversary of the creation of the Canadian Confederation, which provides an excellent opportunity for Canadians to reflect on what brought – and keeps – their nation together.

LEVENTE HÖRÖMPÖLI-TÓTH

There is a fair chance you have realized that this year is something very special for Canadians, as a series of events has been going on since January to celebrate

150 years

of Canada in a dignified manner. The land on which Canada was formed existed before July 1 1867, however with the passage of the British North America Act, a piece of

The Canadian Embassy organized a Canada Day reception on June 27. legislation adopted by the British Parliament on that day, the Dominion of Canada was formed, consisting of the Provinces of New Brunswick, Nova Scotia, Ontario and Quebec.

“This day allows us to reflect on what it means to be Canadian and what values we hold dear and want to project,” Isabelle Poupart, Ambassador to Hungary, Slovenia and Bosnia and Herzegovina tells the Budapest Business Journal. Four main themes have been identified and are being promoted: youth; reconciliation of indigenous and non-indigenous Canadians; environment; and diversity.

Accordingly, a four-day celebration is taking place in Canada combining National Aboriginal Day (June 21), SaintJean-Baptiste Day (June 24), Canadian Multiculturalism Day (June 27) and the grand finale of Canada Day (July 1). Apart

from that, a vast range of activities are under way to engage citizens and visitors alike across the country.

Diversity a key Role As Poupart explains, the government aims to highlight the identified core values where diversity plays a peculiar role, as it is a very important feature of Canadian identity. “Identity is under constant debate in Hungary as well, and we need to share perspectives about how we see these complex issues for a better mutual understanding,” the ambassador says. This touches on many other matters such as migration, which in the Canadian context covers refugee resettlement, economic migration and family reunification. Last year alone, Canada welcomed 330,000 newcomers, something

the authorities believe is essential to maintaining high economic performance.

“Growth requires this influx of people bringing skills and expertise, and this explains at least partially why the Canadian experience with migration remains positive,” Poupart adds. In this sense, the soon-tobe-applied EU-Canada Trade Agreement, CETA, can help as it is a progressive agreement reflecting the highest standards of labor and environmental protection.

Recently the Canadian Ambassador was invited to speak at the Hungarian Business Leaders’ Forum to reflect on the Canadian experience of diversity. “It goes well beyond ethnicity or religion, it is a much broader concept including gender equality, equal opportunities for the LGBT community and non-discrimination for people with disabilities,” Poupart stressed. As she notes, multiculturalism is what helped Canada become the nation it is now: Starting with the aboriginal peoples, then the engagement of the two founding nations, and finally all those who came to live in Canada in various waves for various reasons.

The Hungarian government has also offered a generous gift on the occasion of Canada’s 150th anniversary: A talented Hungarian children’s choir will perform on and around Canada Day at a series of events at various locations in Ontario. But no worries,

Canada

150

will be heard of around here too, so stay tuned for more.

www.bbj.hu

3

Budapest Business Journal | June 30 – July 13, 2017

Special Report | 15

Good Business Climate, but With Room for Improvement

Overall conditions to do business in Hungary could hardly be better for North American companies, but, according to the two relevant chambers of commerce in Hungary, further success requires closer cooperation between business, as well as well-crafted trade promotion.

The opportunities presented by the new EU-Canada trade agreement, CETA, should not be missed, either.

Nick Sarvari (right), president of the Canadian Chamber of Commerce.

CETA, a Game Changer?

LEVENTE HÖRÖMPÖLI-TÓTH

The picture looks pretty good for both American and Canadian companies present in Hungary, albeit some concerns do exist, as the Budapest Business Journal found out from senior executives of the respective chambers of commerce of the United States and Canada in Hungary.

As AmCham CEO Írisz Lippai-Nagy stressed, the Hungarian investment environment is increasingly recognized abroad, and the reduction of the corporate tax, which AmCham lobbied for, plays a

“I suppose I would equate the challenge [of making the most of CETA] to a situation where a highly positioned university opens in your city and offers your citizens the chance to attend for free; it’s meaningless if you don’t send your students to attend, whereas it could have an immense impact upon their future if they attend and use it to its maximum advantage.”

to the entrance or reentrance of the younger generations, women, the 50-plus generation and the physically challenged into the labor market.

“We also advocate the transformation of the education system by putting the emphasis on key digital and language competencies and skills,” LippaiNagy said. “The market changes faster than our education system can adapt; therefore, a stronger relationship between businesses and educational institutions is fundamental for success.”

AmCham’s advocacy work aimed at improving the competitiveness of the country focuses on four strategic areas: Competitive Workforce, Digitalization, Investment, and Innovation. “We agree with the government that time has come to move from the ‘Made in Hungary’ approach towards the ‘Invented in Hungary’ paradigm to bring high value-added activities and technology intensive investments,” the AmCham CEO said. In order to make R&D&I Hungary’s competitive edge in the region, tight knit cooperation between large enterprises, SMEs, startups and the academic sector is essential.

AmCham CEO Írisz Lippai-Nagy. huge part in that. “We must emphasize that the majority of the overall FDI projects were reinvestments and those who invest in Hungary are satisfied and here to stay for the long run,” she said.

Nick Sarvari, president of the Canadian Chamber of Commerce in Hungary highlighted the excellent bilateral economic relations that have evolved in the past three decades.

However, he also drew attention to an unfortunate turn in sentiments of late as the Hungarian government’s rhetoric against the EU, its apparent moves towards control the media and, more recently, the position on civil associations or the Central European University have all produced negative news that overall harms the image of the business environment.

“Our concern is wholly around the fact that the government took a decision which can be translated as a disadvantageous effect for any private business in Hungary,” Sarvari said in relation to the CEU affair. “The big question for business is if this could happen to companies in other industries?

Unfortunately, we see this as threatening to the security of the business environment – something which took Hungary the better part of three decades to build.”

More Bottlenecks Sarvari identified two more key challenges. First, the business environment needs to be addressed.

Hungary is open for business, but that is something that needs to be underpinned by facts and actions. The government needs to be a predictable and reliable partner – it cannot appear to be anything different because that will simply scare business away.

The second is about trade promotion.

Inward investment promotion seems to have been significantly revamped, but the communication towards businesses about export readiness is in need of serious reconsideration, he says. Trade representatives need to know what the image of Hungary is internationally and need to be ready to address the questions being raised about this country abroad. “Business needs to be enticed to consider trade abroad beyond the normal channels as a part of an overall plan badly needed to turn Hungary into an innovative society,” Sarvari said.

According to AmCham, labor shortage in quality and quantity causes major problems for businesses in Hungary.

That is why it is essential to support the launch of efficient training programs and measures which remove barriers

Sarvari agrees that Hungary’s smalland medium-sized businesses could see the most benefit from bilateral trade with prospect of export oriented growth.

But it will take a strategy for awareness and trade promotion on the part of the government to take advantage of this.

The biggest promise is held by the new EU-Canada trade deal, CETA, that will come into effect soon and could potentially have huge economic impact.

“CETA is becoming one of the most important developments in the life of the Canadian Chamber of Commerce in Hungary,” the president said. “We are devising a program currently around CETA and finding ways to fill the gaps in communication so that companies can find the information they need faster and as accurately as possible through information sessions we are organizing.”

CETA is a massive agreement in many ways, so complex that it has the potential of being a new standard for global trade. This type of agreement is important to Canada as it is expected to diversify trade – something that the EU needs also to consider. “For all the negativity around the deal, I see this is an exceptionally important beginning to a new level of dialogue; and, where there is dialogue, there is a way to address the most complex challenges and find solutions to the most convoluted dilemmas,” the president added.

But he also stressed that it will all come down to how well Hungary takes advantage of the environment CETA creates. “I suppose I would equate the challenge to a situation where a highly positioned university opens in your city and offers your citizens the chance to attend for free; it’s meaningless if you don’t send your students to attend, whereas it could have an immense impact upon their future if they attend and use it to its maximum advantage,” Sarvari said.

16 | 3

Special Report

www.bbj.hu

Budapest Business Journal | June 30 – July 13, 2017

Taking the ‘Bold Move’ to Open in North America Most businessmen dream of opening a branch in the United States. Such a step can determine the success or the failure your business but, as Prezi CEO Péter Árvai says, if you want to build a global brand, America is the key.

“The second important thing to keep in mind are the cultural differences. It takes a lot of time to manage people with diverse backgrounds. […] This was one of the most important factors in our success. We think that diversity – different point of views under the same roof – helped us to build a globally successful product.

For example, in our Budapest office, we have people from 26 countries. This diverse community is our main asset.”

CLAUDIA PATRICOLO

“When Prezi decided to open an office in San Francisco, that was a pretty bold move. We had been on the market for five months, and Prezi had 12 employees or so,” Árvai tells the Budapest Business Journal.

“But since we were aiming to have global success from day one, we knew that we had to go to the United States. There were couple of reasons for that. First of all, if you want to have a global success, today you need to be successful in the U.S. too. There are companies built in Hungary, which are able to make business in Germany or in the U.K., but that is not enough for global success. That is why it was crucial to gain some ground there.”

Prezi is not the only successful Hungarian firm operating in the American market, of course. The automotive navigation and infotainment software company NNG has four offices in the United States (Detroit, MI; Greenville, SC; Atlanta, GA; and New Market, VA).

In April 2015, the company opened its North American automotive offices in Detroit to help facilitate growth in North America, while strengthening local sales, marketing, engineering, and research and development support teams.

“The North American market remains a significant opportunity for NNG and will be a critical proving ground for our new technologies,” Jim Robnett, vice president of business development, NNG said at the time.

70 in San Francisco, 30 in Riga [after the recent acquisition of the Latvian company Infogram], 15 in Mexico City and a couple of them in different cities,” notes Árvai.

Adding Value

Prezi CEO Péter Árvai.

“Suburban Detroit is the focal point of the automotive industry. This, coupled with the exceptional technical talent located in southeast Michigan and the close proximity to our customers and partners, made Birmingham an ideal location for NNG’s new North American automotive offices. Consumer demand for a truly integrated and differentiated navigation experience in the car continues to intensify, and NNG is well positioned to capitalize on an evergrowing need.”

Prezi founders Péter Árvai, Adam Somlai-Fischer and Péter Halácsy.

Expand the Business Robnett is charged with helping NNG expand its business with U.S. automakers and leads the Detroit office. Late in 2014, NNG won a bronze International Business Award from the Stevie Awards in the “Fastest Growing Company in North America” category.

And NNG is not the only Hungarian company expanding in America.

Kecskemét-based Magnus Aircraft launched Magnus America LLC around this time last year and opened a maintenance plant in Fredericksburg, Texas.

When it comes to deciding where it is better to set up in the United States for business, Árvai suggests San Francisco.

“New York and Boston are closer to Europe which is a big pro; however, Silicon Valley has a really unique offer. Being in the Bay Area allowed us to learn from other companies and use their best practices, so we decided to open up our office there.”

According to the U.S. Department of Commerce, in the first half of 2017 exports and imports between the two countries amounted to more than USD 2 billion and the Hungarian Chamber of Commerce underlines how America is contributing to the Hungarian economy, being a very big player when it comes to FDI. But the United States is not the only North American target. Hungarian firms have also chosen Canada and Mexico, as Prezi again demonstrates. “We have 300 employees: 180 are based in Budapest,

The Hungarian National Trading House mentions several different areas where Hungary really adds value: ICT, automotive, and agriculture are all sectors where Hungarian businesses are welcomed abroad, especially considering the highqualified workers Hungary can count on, it says.

Canada seems to be a particular target for investment nowadays. Known as the best country in the G-20 in which to do business, Canada presents a good business environment with easy market access and lower tax costs (according to the Canadian Embassy in Budapest, taxes are markedly lower than in the United States, particularly corporate income tax).

Still, most entrepreneurs who want to live the “American dream”, want to do so in America. But, perhaps not surprisingly, entering the U.S. market is not that easy.

Arvai tells us the two major challenges Prezi had to face when it decided to open an office in San Francisco.

“Working with different teams divided between the United States and Hungary it is not easy. It takes a lot of time and it requires a lot of meetings to keep everyone updated and to make sure that everyone is on the same page.” And that is not helped by the nine-hour time difference between San Francisco (now on Pacific Daylight Time), and Budapest (Central European Summer Time).

“The second important thing to keep in mind is the cultural differences. It takes a lot of time to manage people with diverse backgrounds.” But at the same time, nowadays this diversity can be turned into a strength. “This was one of the most important factor in our success.

We think that diversity – different point of views under the same roof – helped us to build a globally successful product. For example, in our Budapest office, we have people from 26 countries. This diverse community is our main asset.”

www.bbj.hu

3

Budapest Business Journal | June 30 – July 13, 2017

North American ///briefs

category office space and 6,000 sqm Redevelopment of Exchange Palace, Budapest as premium retail space. to start next year 10 Hungarian Firms at The redevelopment of the former SelectUSA Investment Stock Exchange Palace (and later headquarters of Hungarian TV) Summit in Budapest may commence at the beginning of next year and is expected to cost EUR 38 million, reported napi.hu. The project is expected to be completed in 2020, with rental fees at EUR 18-25 per sqm, said JLL, the international property consultant responsible for leasing the office space. The redevelopment of the building will be performed by Tőzsdepalota Kft., a subsidiary of the Canadian Tippin Corporation real estate company.

The more than 100-year-old building is under protection as Budapest’s second largest historical building. JLL will be leasing 26,000 sqm as “A+”

Chargé d’Affaires David Kostelancik announced that ten companies from a variety of industries across Hungary travelled to Washington D.C. to participate in the SelectUSA Investment Summit, June 18-20. The summit is the highest profile event to connect global companies and U.S. economic development organizations (EDOs) to facilitate business investment in the United States. SelectUSA has historically provided returns for Hungarian business investors. At least two Hungarian companies that attended the summit last year have since invested in projects in the United States. “As the nation’s premier foreign direct investment

event, the summit brings business opportunities and resources from across the United States together in a single place, enabling participants to complete weeks of work in fewer than three days,” said Kostelancik. Past summit participants announced USD 20.6 billion of new investment projects in the United States from 2014 to 2016.

Gov’t proposes talks with U.S. on Paris climate agreement

At the European Union Arctic Conference in Finland, the Minister of Foreign Affairs and Trade Péter Szijjártó said that, instead of criticizing and attacking the U.S. President, Hungary is “strongly urging the international community to begin negotiations with the United States on the conditions under which it would at least be prepared to take part in the Paris climate agreement”, reported kormany.hu, the government’s website. Szijjártó called on the international community to also hear the second part of President Trump’s statement, namely that the United States may be exiting the agreement, but is prepared to renegotiate its conditions and obligations. Negotiations must

Photo: Márton Kovács/ Ministry of Foreign Affairs

Economic Cooperation Agreement With the State of Indiana

Minister of Foreign Affairs and Trade Péter Szijjártó said it was historically significant from the perspective of the Hungarian economy that the government had for the first time concluded an economic cooperation agreement with one of the states of the United States of America, and that Hungary is the first country to conclude an agreement of this nature with the Midwestern U.S. state of Indiana, reported kormany.hu, the government’s website. The minister also told the press that there are currently three enterprises from Indiana operating in Hungary, a pharmaceutical company and two automotive industry companies, which together employ some 800 people. “Economic relations are expanding dynamically and trade flow between Indiana and Hungary was around USD 100 million last year, and doubled proportionally during the first quarter of this year. This contributed to trade flow between Hungary and the United States increasing by 11% during the first quarter,” Szijjártó explained. With regard to the future of economic cooperation, the minister said the parties would be placing the greatest emphasis on the high-quality processing industry and the activities of the agriculture sector. “There is a good chance that Hungarian water management technologies will also be showcased and applied in Indiana”, the minister said.

Special Report | 17 begin on America’s obligations in view of the fact that it is much better if Americans “shoulder at least a part of their previously undertaken obligations, and are prepared to become at least partly engaged in the agreement, than if they did not participate at all”, he said.

Another major issue is that, according to studies, 13% of the world’s oil reserves and 30% of its natural gas reserves can be found under the Arctic Sea, and if this can be extracted then the energy security situation of the whole European continent will clearly also change.

According to Szijjártó, this is precisely why the dispute regarding ownership of the northern territories has already begun. However, it is obvious that the environmental effects must also be managed, for which the best instrument so far has been the Paris Agreement, and it is no accident that Hungary was the first EU country to ratify the agreement, he added.

Sale of GE Lighting leads to job loss for 1,000s in Hungary

General Electric (GE) has started talks on the sale of its lighting business, GE told MTI on June 12, according to a report on portfolio.hu. The sale will affect a large number of the company’s plants in Hungary and about half of the local workers, GE said. GE Lighting chairman-CEO Bill Lacey recently informed staff in Hungary via letter that official talks had started on selling the business.

GE Lighting employs about 5,000 people in Hungary. Depending on the negotiations with the potential buyers, the business could be split up for the sale and sold to several buyers. GE Lighting and Current

by GE’s communications director for the region, Kinga Kalocsai, said GE plans to sell the business “to optimize its portfolio and focus on its key digital industry activities”. The move did not come as a surprise, as GE was planning to make 300 people redundant from GE Current at the end of 2016. GE is one of Hungary’s largest employers with more than 10,000 people and since 2012 it has been a strategic partner of the government. GE insists it remains committed to its activities in Hungary; the company had recently set up a Global Digital Development Center in Budapest and plans to hire 400 IT professionals by the end of this year to staff it. GE has also created 300 jobs at its power division on the outskirts of the capital.

PM Orbán holds talks with President of World Jewish Congress

Prime Minister Viktor Orbán held talks with Ronald S. Lauder, president of the World Jewish Congress, in Parliament on June 21, reported kormany.hu. On the agenda were outstanding issues linked to U.S.-European relations, and the parties highlighted the importance of America paying greater attention to the investment opportunities in the Central European region. The parties are looking forward to the Israeli prime minister’s official visit to Budapest in July.

18 | 3

Special Report

www.bbj.hu

Budapest Business Journal | June 30 – July 13, 2017

‘It Feels Great to Promote Such a Positive Brand as Canada’ Isabelle Poupart has been Ambassador of Canada to Hungary, Slovenia, and Bosnia and Herzegovina since August 2016. In an exclusive interview with the Budapest Business Journal, on the eve of the 150th anniversary of Canada’s Confederation, she shared her thoughts on thriving bilateral trade relations and tourism, as well as the positive contributions of the many Hungarians who have a personal link to the North American country.

“Take the example of Linamar, an automotive parts manufacturer and one of the largest Canadian investors here. The current tariff of 6.1% applicable to its goods will be gone completely [under CETA].” as a destination of choice for ever more young Hungarians. We already have some ongoing programs, but more is under way. We also have a dense network of local “Canadianists” here who teach Canadian subjects through various aspects such as literature, sociology and language. They are great ambassadors for the Canadian culture.

LEVENTE HÖRÖMPÖLI-TÓTH

Canada does not make headlines often in Hungary, but there must be a lot happening on the diplomatic front.

Hungary and Canada are not only NATO allies, but also long-time friends. One important factor behind this relationship is that some 340,000 Canadians have Hungarian roots, which is close to 1% of the population. Many came after the 1956 revolution, the 60th anniversary of which was commemorated by a series of events in Canada with celebrations in Montréal and at various places all over the country. The high point was the visit of Minister of Foreign Affairs and Trade Péter Szijjártó to Ottawa on the actual day of the anniversary. But this is just one example; we have a regular schedule of visits. Recently, on the margins of an OECD conference in Paris, Mr. Szijjártó had talks with our Minister of International Trade, François-Philippe Champagne, while the Chair of the Parliamentary Committee for Foreign Affairs, Zsolt Németh is traveling to Canada at the end of June.

On trade relations, the EU-Canada Comprehensive and Economic Trade Agreement, CETA, is around the corner. Canadian direct investment to Hungary already amounts to USD 3.6 billion, which makes Hungary the fifth largest recipient of Canadian FDI in the

Isabelle Poupart, Ambassador of Canada to Hungary, Slovenia, and Bosnia and Herzegovina.

EU. Are you expecting this figure to grow thanks to CETA? In a few weeks it is expected that CETA will become provisionally applied; in fact, 98% of its provisions will apply immediately from the date of its entry into force. The ratification process is ongoing. Some EU states have already ratified it, and we expect Hungary to proceed in due course. What matters most is that Hungarian and Canadian companies and investors will benefit from it tremendously. Take the example of Linamar, an automotive parts manufacturer and one of the largest Canadian investors here. The current tariff of 6.1% applicable to its goods will be gone completely. Not only ongoing economic activity in both countries will profit from this development, but it should also provide an extra incentive for new projects.

Apart from automotive, what other trade areas promise to thrive?

There is great potential in agri-food, ICT and the oil and gas sectors, not to mention the area of security. These are the industries we are monitoring with a view to providing advice to Canadian investors and companies in

close cooperation with our Hungarian colleagues.

The hype around CETA, together with the 150th anniversary of Canada’s Confederation, seems like the perfect occasion to better educate people about Canada.

My core tasks as Ambassador of Canada are to promote Canadian interests and to project Canadian values while advancing the relationship between Canada and Hungary. Canada’s 150th anniversary gives us a perfect occasion to engage with Hungarians, including by being more active on social media In February, for instance, we organized a special “Canadian Night” at the ice rink in the Budapest City Park. Anybody showing up with a distinctively Canadian sign like a hockey jersey or a maple leaf, got a voucher for a warm drink. This was also meant to portrait our country as it is: Friendly, open to the world, and diverse.

Canada should be among the top destinations for talented students. Is there a plan to forge closer relationships in terms of academia as well?

A dedicated effort by our trade team aims to promote Canadian universities

What significance can the direct Budapest-Toronto air route, launched last year, have for the future? Was it deliberately scheduled to serve as a prelude to the Independence Day hype around 2017?

Actually, it has been expanded this year as now there are six flights per week between the two cities. It is the only direct route from Budapest to a North American destination for the time being, and I believe both tourists and businesspeople will benefit from it greatly. I understand that packages are extremely popular with Canadians that include the flight and a cruise on the Danube. Hungary has a strong touristic appeal, and people like to come here.

What I tell everybody, though, is that they should not limit themselves to Budapest, but also visit other regions of your beautiful country.

What practical advice would you give first-time tourists planning to visit Canada?

Visitors to Canada should not be afraid of long distances and exploring the various parts of the country. When I started my career as a diplomat, I had the opportunity to go on a study tour across Canada and it was an incredibly rewarding experience to see how diverse Canada is. To this day, it makes me a better representative of my country. So, go to the Rockies, visit Montréal or the 1,000 Islands Natural Park, travel from coast-to-coast. That is how you get a real feeling for Canada’s beauty.

Affection works both ways. According to a study by the European Travel Commission in 2012, Canadians made some 0.4 million trips to the CEE region.

There is a natural connection between our two nations. Since the day I arrived here, I have been amazed at how many people have personal links to Canada. Wherever I go, I happen to meet someone who either has relatives or has studied there, or has some kind of other emotional attachment to our country. And it fills me with pride to see how positively we are regarded. It also feels great to promote such a positive brand as Canada.

www.bbj.hu

3

Budapest Business Journal | June 30 – July 13, 2017

Special Report | 19

Discovering Each Other, Building on Similarities

Mexico’s designate Ambassador to Hungary, David Rivas, talks to the Budapest Business Journal about first impressions, what the countries have in common and how to broaden trade and tourism links.

“I am very interested to promote Mexican companies to come and discover opportunities here. Not just opportunities to sell, but to invest in Hungary.

The country has a strategic location in Europe. We are not trying to go directly to compete in Germany, rather we would participate in the European market with you. The same applies to a Hungarian company: going directly to the U.S. market is not that easy; it is easier in partnership with a Mexican company.”

SONJA BENCZE

You have just taken over this posting.

What are your first impressions?

I have a very positive impression not only of the attractiveness and the beauty of the city, but also of the dynamics of the country. Hungary, like many other countries, is passing through this complicated process of adaptation to a new world that is very different to the one that used to exist before the financial crisis. The crisis has changed many of the perceptions and pressures of what could have been the future of the economy. Maybe the challenges were already there, but we did not see them as we were very optimistic, thinking we were going to grow forever.

The financial crisis has shown the limits of that model, and the challenge of how fast we can adapt to a new economy and new technologies. Also, environmental issues posed challenges and opportunities to the future development of the economy. We now have different rules, but much more realistic ones.

How do you think Hungary is keeping up with this process of adjustment?

Due to my recent arrival, I don’t think I already have a full picture. I believe Hungary will enjoy very relevant development in the future. I’m convinced that, in the coming years, those countries that prepare quality human resources – I mean, highly educated people with technical skills, innovative way of thinking, adaptability to changing environments as well as on the markets –, those are the countries ready to face the new economy. Knowledge is something that changes every day and people need to be able keep up with it. If you are a mechanical engineer who produced something related to cars, you need to be able to adapt easily to the new demands of the industry, shaped by electric vehicles for example. In that sense, Hungary and Mexico, are prepared: They have the adaptability and the flexibility that will make it easier for them to adjust to the new economic environment and market demands.

Are there any educational programs between the two countries that promote the creation of such a workforce?

Mini-bio:

In terms of official initiatives, Hungary is much more advanced at proposing to Mexico a more robust exchange of students and scholarships. One of the main challenges for Mexico is that we are located next to the largest economy of the world, which has a huge impact on our daily lives; not only in economic terms – the United States is a magnet that attracts and offers opportunities as well as challenges. It would be very easy to convince any Mexican to go and study in the States. Yet to convince them to cross the Atlantic and come to Europe is more difficult. There are two or three Mexican universities that have interesting exchange programs: They are the ones that will ensure people will come to study a wide range of subjects.

What are the common points of the two countries: what has the potential to bring the nations closer?

Both countries have strong, state-of-theart manufacturing industries. We both produce cars and parts for the automotive industry. Hungary’s main exports to Mexico are machinery for German cars produced in Mexico. It comes from a Mexican investment made in Hungary some years ago. We import parts for the aeronautical industry from Hungary as we produce military and commercial aircraft components and avionics for the USA, as well as other manufactures.

This is not the kind of manufacturing process that takes place in countries with a workforce of just basic skills or basic education. The production of such parts requires a constant supply of highly-

Ambassador David Renato Nájera Rivas is a career diplomat and has been a member of the Mexican Foreign Service since 1990.

Previously, he was Deputy Head of Mission in Mexico’s embassy in the United Kingdom, and served as Chargé d’Affaires ad interim from June 2016 until March 2017. Previous overseas postings have included China; Belgium, Luxembourg, Israel and Canada.

He has taught at the Mexican Natal Higher Studies Center and at the National Defense College, and has been a professor at El Colegio de Mexico, Universidad Iberoamericana, Universidad de las Americas, among other Mexican universities and academic institutions, and lectured at several universities in Latin America.

skilled engineers. I think the common grounds between the countries is that we already play an important role in the global economy in this field of complex manufacturing process.

In what other fields are the two countries connected?

For us to appeal to Hungarian tourists is one important aim. Mexico is quite an interesting tourist destination. Our success in recent years – we are now in the top ten tourist destinations in the world – is in part due to our diversified offer. Beaches, cuisine, culture, archeology, the Maya and Aztec cultures, the music, the sounds, the colors. The main value of Mexico’s tourism is the attitude of the people – they are quite open to tourists.

It is similar to what happens when Mexican tourist come here. They may come here as part of their road trip to several European capitals but when they

arrive they are surprised. Not just because of the beauty of the city, but also by the attitude of the people. Many of the capital cities look somewhat the same – different buildings but they are the same.

Budapest has a personal frame, it is not hypermodern and it has kept its identity.

People can discover the authenticity of a city both through its skyline and its people. Those personal experiences create the links that start to build the relations between the countries. When I am talking about tourism, I don’t only mean the question of having more visitors to Mexico. It is about discovering each other – it is something we have to work quite hard at in both countries.

Since we have similarities in terms of our roles in the global economy, we can also discover more business opportunities. This is going to be part of my job here. I am very interested to promote Mexican companies to come and discover opportunities here. Not just opportunities to sell, but to invest in Hungary. The country has a strategic location in Europe. We are not trying to go directly to compete in Germany, rather we would participate in the European market with you. The same applies to a Hungarian company: going directly to the U.S. market is not that easy; it is easier in partnership with a Mexican company.

Do you have a specific plan for what you aim to achieve?

Prior to my arrival, I have talked to a number of Mexican companies and entrepreneurs and they seemed interested in coming here. I have also talked to several state governors about them coming here (Mexico is divided into 32 states). I believe that it will be translated into real business opportunities in Mexico. A good example is a small but very high-quality winery in the state of Baja California, where some of the grapes are imported from Hungary. That’s the kind of story I am looking for. I am being realistic: If a big company wants to invest in Mexico, they don’t need us. What we can do is approach SMEs and entrepreneurs from both countries.

4

www.bbj.hu

Socialite

Budapest Business Journal | June 30 – July 13, 2017

From Kiscell Museum to Daubner Bakery: Adventures in the Buda Hills

David Holzer discovers a somewhat eclectic museum and a bakerybased site of pilgrimage up in the Buda Hills.

My favorite kind of museums are those where everything is jumbled together without too much obvious logic. The Kiscell Museum of Budapest History, in the green hills above Buda is just one of these.

The museum began life as a chapel built in 1724-25 in a vineyard. Later in that century, a monastery and church were erected. Because it housed a statue of the Virgin of Mariazell, the shrine became a place of pilgrimage. Mariazell is a town in Austria and its basilica is home to a miraculous wooden statue of Mary.

I don’t think the one at Kiscell was ever miraculous.

My favorite story about the miraculous properties of the original statue dates from 1157, when the St. Lambrecht Monk Magnus was sent to where the town is today to become a minister. When Magnus’s way was blocked by a rock he put the statue of Mary he’d bought with him down upon it and the rock broke open, allowing him to carry on. He placed the statue on a tree trunk and built himself a place to live and worship out of wood.

Today, Mariazell is the most popular place of pilgrimage in Austria and one of the most visited shrines in Europe.

Private Museum After the monastic order at Kiscell was dissolved, everything of value was auctioned off. By the late 18th century the building was a military barracks, hospital and veterans’ shelter. The army moved out

Photos: Gabriella Kiss

DAVID HOLZER

and this gorgeous place was turned into cheap tenements and temporary lodgings.

In 1910, Max Schmidt, a Viennese resident, bought the building and created interior decoration showrooms and a private museum.

In 1935, Schmidt gave the building and his private collection to the municipality of Budapest, on condition that it should become a museum of decorative arts. The building suffered badly in the siege of Budapest, but was reopened to the public

in

1949.

Today, the museum’s collections are dedicated to the culture of Budapest, everything from shop signs from old Budapest to an excellent collection of work by artists who helped shape the art milieu of the city.

Among the artists represented is Lajos Kassák, the Hungarian painter, poet, novelist and avant-garde theoretician who was born in 1887 and died in 1967. I’ve been wanting to see work by Kassák in the flesh, as it were, since I first attempted to visit the Kassák Museum in Óbuda, only to find it closed for several months.

(According to its website, the Kassák Museum is now open and I’m sure it’s well worth a visit.)

Kassák himself was a remarkable cultural figure who played a central role in

the radical intellectual culture of Budapest in the early part of the

20th century.

He adopted elements of expressionism, futurism, constructivism and Dadaism in his work. This preference for experimentation over commitment to one particular movement has led to art historians labelling Kassák an ‘activist’ artist.

As you might imagine from the term, an activist artist is socially engaged in their work. Kassák was concerned with functionality and social effectiveness.

Among other things, he painted billboards to bring his art to the public. But, despite its roots in street level activism, Kassák’s work is quite beautiful and highly collectible. My partner was startled to see the two Kassáks on display at the Kiscell Museum. Apparently, they’re worth a fortune.

Random Artifacts Should you go to the Kiscell Museum, and I’d highly recommend it, look for a room of random artifacts from across the centuries.

Here you’ll find battered pillars and statues with broken noses side by side for no apparent reason other than they might as well be there as anywhere.

Apart from being a wonderfully strange and eclectic museum, Kiscell is set in a quite beautiful location. Following our guide, who’d grown up in the area, we turned right out of the museum gates and strolled past various Stations of the Cross for a few minutes until we came to what I can only describe as a sylvan glade. The air underneath the overhanging leafy trees was blue with smoke from public barbeques and the fragrant aroma of sizzling sausages wafted up to where we were standing.

According to our guide, ordinary families had been coming up to this particular part of the forest to cook in the open for centuries. He had done the same

The air underneath the overhanging leafy trees was blue with smoke from public barbeques and the fragrant aroma of sizzling sausages wafted up to where we were standing. According to our guide, ordinary families had been coming up to this particular part of the forest to cook in the open for centuries. when he was a child growing up nearby in the 1980s. It certainly wasn’t hard for me to imagine myself back in time. Until my rumbling stomach brought me back to the present. Our guide suggested we head for Daubners.

Pastry Pilgrimage

Although it’s not quite as venerable as the Kiscell Museum, Daubner has been in existence

since

1901,

when it was opened by Béla Daubner.

Apparently, his grandson still runs the place. It might seem strange to head all the way out to the hills above Buda to buy cakes and pastries when the city center is filled with them. Go to Daubner and you’ll understand why.

The selection of classic Hungarian cakes and pastries, from the garishly colored and ornate to the simple but undoubtedly delicious, is mouthwatering.

As are the homemade ice-creams. Were they better than others I’ve tasted in Budapest? I honestly couldn’t tell you.

But I did like the idea of making a special pastry pilgrimage up into the hills. I enjoyed being perhaps the only foreigner in the place. And what I most enjoyed was our journey higher up into the hills above the city to have our cake and eat it while the sun set on beautiful Budapest, shining below us.

Find out more about Kiscell Museum at www.kiscellimuzeum.hu.

The Kassák Museum is in Óbuda, a short train ride from Margit Hid and its website is www.kassakmuzeum.hu.

The best way to get to Daubner is by car but, if you could also take streetcar 17 or buses, 6, 60 or 86 to Kolossy tér. The address is Szépvölgyi út 50.

5

www.bbj.hu

Budapest Business Journal | June 30 – July 13, 2017

Socialite | 21

Building on More Than a Breathtaking View

Back in 1977, the Hilton Budapest became the first Hilton to open behind the Iron Curtain. Now celebrating its 40th anniversary, general manager Zoltán Árvai talked to the Budapest Business Journal about the modernization of the hotel and the market in general.

LEVENTE HÖRÖMPÖLI-TÓTH

How will the image of the hotel change following the renovation works launched back in 2014?

Hilton Budapest is reinventing itself, so the venue’s interior is undergoing a beautiful change, featuring fancy and exciting

The grand ballroom.

design, whilst the medieval heritage of the building is preserved. An absolute novelty is a brand-new entrance for groups arriving by bus who now can access the building in a much more comfortable manner and without the hassle of going through the protected Royal Castle area. While it is true enough that TripAdvisor users have voted us among the Top Ten Hotels with the most breath-taking view, reality tells us that alone will not be enough in today’s fiercely competitive environment.

What is your corporate strategy to prevail against the competition?

We constantly monitor the performance of our key competitors and our own stats are analyzed in great detail all the time. As a member of Hilton Hotels and Resorts, we

get a lot of support from the global brand.

The Hilton sales offices boosts bookings tremendously in our key markets such as the United States and the United Kingdom. The Hilton Honors loyalty program generates a lot of traffic as our repeat customers are used to our level of service and they are happy to capitalize on the numerous benefits attached to membership. The Honors app further adds to customer satisfaction, not to mention that our newly refurbished rooms are equipped with cutting-edge technology. Our unique location is strengthened by the newly renovated Royal Castle area. We are confident that we have a good product and we have always been well-known for particularly strong services.

Overall, guest nights grew by more than 6% in 2016. Is the upward trend as strong in the premium segment?

Our occupancy rates have been great and are continuously improving. FINA World Aquatics Championships this summer fuel demand for hotels in Budapest. The countryside, however, has not profited from this bigger influx of foreigners at all, and this is an issue that needs to be addressed.

It is a pleasant trend that domestic tourism is on the rise, not least due to the widespread use of the recreational employee vouchers known as the Szép card. But guests from abroad will need to be given an incentive to widen their horizon and go beyond the boundaries of Budapest.

Where are Hilton Budapest and the industry headed?

Our goal is to make it back to the top three hotels in the city, and I believe we are on the right track to make that happen. We also pride ourselves on ranking seventh out of Hilton’s total of 150 hotels in the region, according to the brand’s overall guest satisfaction surveys, and we could climb even higher there. The industry would like to see a VAT cut for room rates, which would boost our regional competitiveness, give us some slack in terms of maintenance and CAPEX, and would allow us to pay higher wages.

ADVERTISEMENT

Balaton Sound program is ready The program of Balaton Sound, the 5-day non-stop music festival right on the beach of Lake Balaton, is now ready. More than 20 venues will await the visitors who cannot only see the biggest DJs, but have a superb vacation time, right on the beach with parties non-stop.

Kygo, Hardwell, Armin van Buuren, Axwell Ingrosso, Tiësto, Marshmello and more than 300 other programs.

Discounted tickets are available until 14 June, 2017.

Balaton Sound hosts the biggest names of electronic music, so this year fans can once again see the top DJs. The massive Main Stage facing Lake Balaton will hosts such acts as Armin Van Buuren, Axwell Ingrosso, KSHMR, Kygo, Hardwell and on 6th July, there will be even an extra headliner: Tiësto. In addition, G-Eazy, Galantis, Jason Derulo, Robin Schulz, Marshmello, Don Diablo, Krewella, Headhunterz, Zedd will entertain as well as Cheat Codes, just announced now.

The Jäger Arena is a great venue, with many genres and many exciting acts, featuring Hungarian performers as well.

Yellow Claw, Mija, Eptic, Sigma, The Bloody Beetroots, Carnage, Nod One’s Head, Dua Lipa, Netsky, Zeds Dead, Section Boyz, Example & Dj Wire, Troyboi and Hucci will be here as well.

The Party Arena is one of the core venues of Balaton Sound. In the giant tent, the party will start at 9 pm, where StadiumX,

Nicky Romero, Corey James, Raiden, Florian Picasso, Observer x Flip Capella, Blasterjaxx, Timmy Trumpet, Shaun Frank, Juicy M, Showtek, R3HAB, Oxia, Nicole Moudaber, Dave Clarke, Amerigo Provenzano, Ravitez, D.O.D, Afrojack, Kidda will bring their music.

The Heineken Beach, decorated with a huge pyramid will host: Max Cooper, Flavio Folco, Dubfire, Joseph Capriati, Jan Blomqvist, John Digweed, Mark Reeve, Kungs, Jamie Jones, Art Department, Eelke Kleijn, Erick Morillo, Martin Kremser, Hot Since 82 and Sasha.

The Sound & Bass Stage Powered by Bladerunnaz will feature – among many others – Hypoxia, Redpill, TC, Murdock, Dj Guv, Disaszt, Loadstar, Turno, Emperor and Noisia.

The whole Balaton Sound program will feature more than 300 programs during the 5-days at more than 20 program venues. Many of the venues are built

on Lake Balaton itself on piers with an exciting decoration, with many cocktail bars, chill areas, etc.

As a new program module, small street theatres will also be present at Balaton Sound from this year on. Giant jellyfish, magical live music, spectacular installations and mysterious characters will further make Balaton Sound a great party destination. The Bloco de Budapest Brazil Show, the Compagnie Planete Vapeur, Oakleaf Stelzenkunst and Spark! will be this year’s guests.

The Elrow Stage will definitely become the party central of the festival with their impressive decorations that will be built on a pier in the Lake itself. Just on the opposite side of the Main Stage, the Psychedelic theme of the Elrow party will bring a crazy vibe to the beach party

featuring great DJs as Henry Saiz, Edu Imbernon, CatzN’Dogs, Anja Schneider, Toni Varga, De La Swing, Eddy M, Mario Biani and Bastian Bux. The Elrow Stage will start the party already at noon and will build up the party right until the Main Stage takes over. The night series will start after the closing slot on the Main Stage and will last till sunrise. The venue will have a cocktail bar and comfy sunbeds, so visitors can enjoy the exclusive venue built on the water.

As an additional program element, visitors can party also on the Lake itself. The exclusive boat parties will leave every day in the afternoon, where prestigious DJs will play such as Sasha, Jan Blomqvist, Max Cooper, Art Department and Eelke Klejn. These tickets can be purchased on top of the 5-day pass to the festival on the festival website.

22 | 5

Socialite

www.bbj.hu

Budapest Business Journal | June 30 – July 13, 2017

Basalt Badacsony Rocks the Balaton

With its volcanic basalt soils, stunning landscape, distinctive indigenous grapes, choice lakeside setting on Lake Balaton’s northern shores and talented winemakers, Badacsony is a hot vinous destination at any time of year, let alone this summer.

ROB SMYTH

A certain complex saline feel is characteristic of Badacsony whites, which are made all the more impressive, complete and delicious to drink by virtue of the generous fruit they often manage to capture alongside their “minerality”. Whether you can directly taste the minerals of the soil in the wine is a hotly contested subject in the wine world. Nevertheless, the basalt soils retain heat nicely, which further enhances ripeness, while they also contribute the vibrant acidity that delivers length on the palate. Then there is prized limestone in places, as well as brown forest soils and loess.

The grapes usually benefit from the lake’s moderating and cooling influence that helps to preserve acidity, although grapes grown too close to the water can suffer from sunburn.

The grapes are grown on the slopes of a number of hills, each with its own distinctive mesoclimate.

Válibor in Badacsonyörs now has cozy accommodation to add to its exciting range of wines. It is here that you can encounter what is probably the finest example of wine made from the Budai Zöld grape, whose primary purpose is to pollinate the noble indigenous Kéknyelű grape. However, in Péter Váli’s hands it can become exciting and his 2016 is up to the usual high standard.

Light and Airy As ever, it is invitingly light and airy, with a mouth-watering and distinctive combination of zesty citrus and white flower notes, with that salty touch on the finish, which can even be present in many light, reductively made Badacsony wines. Válibor’s Budai Zöld is made reductively in the tank with the use of cultured yeasts, not his usually preferred indigenous yeasts, to keep the freshness and fruitiness.

Wines from the Kéknyelű grape itself reward patience and need time for the

sharp acidity to soften and also for more intense flavors to develop and transform what is very often a quite neutral wine in its youth into something with layers of complexity. In this, it is quite like Semillon from Australia’s Hunter Valley. Válibor’s 2015 has the body, acidity and fruit to develop into something very special and is already tasting nicely, but I found Málik Pince’s 2013 starting to pick up real character with a nice oily texture and nutty flavors alongside mouth-watering sour fruit and a savory finish.

Zoltán Malik is a real maverick of the Badacsony wine scene, championing such rare grapes as Bakator and Zeusz. His spontaneously fermented wines are typically restrained on the nose, but lengthy and complex on the palate. They are more about the place of the growth with the grape variety in the background, although there are nice nuances between his wines which he makes as single varietal bottlings.

An important Badacsony development is the emergence of the Rózsakő variety, a crossing of Budai Zöld and Kéknyelű, which also serves to pollinate the latter, as does the aforementioned Budai Zöld.

Although this crossing was created by Ferenc Király

in

1957,

and is believed to make better wine than Budai Zöld, it has only really been on the shelves for a couple of vintages.

Spicy Notes Szászi Rózsakő 2016 follows up quite nicely on the outstanding 2015, with firm body, as well as floral and spicy notes, but I found it a little on the closed side at this spring’s big

Badacsony tasting. The 2015 vintage was so good for whites that Endre Szászi made his first Kabócás Olaszrizling since 2006. This rich take on Olaszrizling actually comes from a plot on Szigliget which is not officially registered as a vineyard. Sabar’s 2015 single vineyard is also a stunner.

Badacsony is also a local powerhouse for the unrelated Riesling. While it is futile trying to compare wines from here with the great Riesling of Germany, the best – such as those from Szeremley, Gilvesy and Bence (these latter two both on Szent György hegy), and Villa Tolnay on Csobánc hegy, do capture the grape’s taught, linear structure with a local savory touch and lots of ripe, juicy stone and tropical fruit. Experimental Villa Tolnay also excels with Austria’s exciting Grüner Veltliner grape, known in Hungary as Zöldveltelini.

Furmint is also on the rise in Badacsony and Gilvesy’s Próbaüzem 2015 is worthy of being placed on the same table as top dry Tokaj. There is hardly any Hárslevelű in Badacsony, which is a pity given the sheer quality of Nyári Pince’s 2015.

Good reds include delightfully subtle Pinot Noirs from Bence and Válibor.

Two wines to watch out for:

Gilvesy Bohém Cuvée 2016 Balaton A bargain blend of Olaszrizling, Sauvignon Blanc, Pinot Gris and Riesling, mostly made in the tank via controlled fermentation with a small amount fermented spontaneously in oak. All aged on the lees with stirring carried out to whip up a delicious creamy touch and good mouthfeel that goes so well with the zesty fresh citrus and stone fruit.

Currently on offer for HUF 1,650 from Bortársaság (usually HUF 1,950).

Válibor’s Szürkebarat (Pinot Gris) 2015 With its onion skin cum orange color, what you could easily mistake it for a rosé is in fact a white wine made with prolonged skin contact of two days, which brings out some of the color of the skins. Pinot Gris is a mutant

of Pinot Noir and produces greyishblueish fruit but is considered a white wine grape, and is the same as Pinot Grigio. This full-bodied, round, rich wine impressively expresses the grape’s intense peachy character, along with caramel and buttery touches from the oak that support the fruit, but importantly do not override it. Szürkebarát, an international grape but one with a long local presence, was in danger of being pushed aside by the growing band of noble natives, but this wine shows it can still have a place. HUF 2,790 from Radovin.

5

www.bbj.hu

Budapest Business Journal | June 30 – July 13, 2017

Socialite | 23

Wine Rallies Explore Hungary on Two Wheels and Four Registration has opened for the 22nd annual Hungarian Wine Route Rally (Magyar Borok Útja Rallye), which will run from August 25-27. This year the rally will explore the wine regions of Sopron, Etyek and Pannonhalma, as well as the Austrian side of Lake Fertő.

CHRISTIAN KESZTHELYI

While the car rally has been going for more than two decades, last year the organizers also introduced a twowheeled version. The second instalment of the Motorcycle Wine Route Rally was organized during the Whitsun (Pentecost) ADVERTISEMENT

The Wine Rally encourages you to discover Hungary’s wine regions, but not to drink and drive. weekend in order to explore the wine regions of Lake Balaton.

Cyclists had the opportunity to try out the newest Vespa GTS 300 models in spectacular colors, and to compete against each other over the weekend as they explored the Balaton wine regions, where they could also engage in business networking.

“We are planning to establish tradition, with the motorcycle rally following the previous year’s route of the wine route rally,” said Róbert Péter Megay, the

president of the organizing committee.

“I believe that sophisticated wine-loving Hungarians are committed to quality wines and their responsible consumption, therefore we have chosen cellars for the race that offer excellent quality wines, but are not very well-known in the local and foreign markets,” he added.

Prelude Event The two-wheel rally is now considered a prelude to the traditional four-wheel ADVERTISEMENT

event in August. Like last year, Minister of Interior Sándor Pintér and Minister of Agriculture Sándor Fazekas are patrons of the main event.

The organizers say they pay special attention to safe driving; participants can only taste and drink wines in the evenings, when no driving takes place.

To ensure maximum safety, all drivers are checked with a breathalyzer each morning before being allowed to sit in their vehicles.

“Those who set off in the morning should get home sound and safe in the evening,” said István Knezsik, the president of Auto Big Coalition.

“Unfortunately, in the past years the ratio of people sitting behind the steering wheel after consuming alcohol has grown, and more stunning is that local data suggests that every tenth accident is caused by DUI. This is why I find it important to popularize responsible driving and drinking, for which the Motorcycle Wine Route Rally is a great opportunity,” he added.

Those who are interested in participating in the 22nd Hungarian Wine Route Rally, in exploring the wine regions of Hungary and promoting safe driving and drinking habits, registration is available via the official webpage: borokutja.hu/