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

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BUSINESS JOURNAL BUDAPEST

VOL. 26. NUMBER 5

MARCH 9 – MARCH 22, 2018

SPECIAL REPORT Banking and Finance

NEWS

Hungarian Economic Crime and Fraud Survey PwC’s Global and Hungarian Economic Crime and Fraud Survey 2018 was conducted between August and October 2017; in Hungary, the questionnaire was completed by senior executives from 71 companies. We present some of the highlights.  4-5 SPECIAL REPORT

Private Banking Sees Steady Growth

Hungary’s private banking sector is not about to rival that of Austria, let alone Zurich. But after suffering a crisis of confidence in 2012, it has been expanding without pause ever since, says industry specialist Blochamps Capital.  14

SOCIALITE

Second Budapest Photo Festival

Lovers of photography who happen to be in Budapest will be spoilt for choice over the coming months when the capital is transformed into the “City of Photography”.  21

Building Business Across Borders

I N ES BUS

The Carpathian Expo on March 12-13 aims to strengthen trade relations between Hungarian companies within the borders and those in neighboring countries. Zsanett Oláh, CEO of the Hungarian National Trading House tells the Budapest Business Journal how. 7

Bigger & Better Top Ranked: M&A & Banking & Finance & Capital Markets & Intellectual property & Projects Energy & Dispute resolution & TMT & Real estate & Data protection

2 | 1 News BBJ

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Budapest Business Journal | March 9 – March 22, 2018

THE EDITOR SAYS

EDITOR-IN-CHIEF: Robin Marshall EDITORIAL STAFF: Zsófia Czifra, Kester Eddy, David

Holzer, Levente Hörömpöli-Tóth, Christian Keszthelyi, Gary J. Morrell, Rob Smyth, Ágnes Vinkovits. LISTS: BBJ Research (research@bbj.hu) NEWS AND PRESS RELEASES:

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

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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

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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 2017-2018: 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. 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.

HUNGARY REDISCOVERING ITS HOSPITALITY HERITAGE This issue takes on something of a service theme, and in doing so covers some pretty broad ground. Whether you are in need of financing from a bank, or translation services, help in finding business contacts in the Carpathian Basin, or even in need of discrete and exclusive travel services at the airport, you will find it covered in these pages. All of us in business need the services of others from time to time. In our case, we have always prided ourselves on providing you with useful and useable business information; “Business news that works”, as they put it on the front cover of the very first issue of this newspaper, some 25 and a bit years ago. It was while I was talking with Péter Mészáros, who runs Cavok Aviation, the operator of the new VIP services at Budapest Airport, that I was struck yet again by the fact that it can be hard to describe what makes for truly excellent service, but you know it the moment you see it. Kam Jandu, chief commercial officer of Budapest Airport, had just joked at the launch that other airports in the region may have had VIP services for longer, but they suffered by comparison because they were “without the amazing Hungarian hospitality, of course”. That prompted Yves Giacometti, the Paris-born general manager of the Four Seasons Hotel Gresham Palace Budapest to volunteer his own backing. Mészáros has worked at the airport for 27 years, during which time the Four Seasons has called on his help for its own guests on many occasions. “The service you get is very good,” Giacometti told the audience. As unsolicited endorsements go, that is pretty powerful.

For those whose experience of Hungarian hospitality was based on visits during the socialist period before the change of regime, or on holidays in the years immediately after, the idea of putting the words “Hungarian”, “hospitality” and “excellent” in the same sentence might well seem absurd. Yet Hungary did have a truly world class reputation for hospitality before World War II. Fortunately, there are still enough concierges and maitre d’s and managers around who learned their craft in the 1960s and ’70s from the last of that prewar generation and are now passing on the secrets. Customer service itself might have some way to go, particularly in some of the shops in Budapest, but even that has improved immensely since I first arrived here 20 years ago. As it is in hospitality, so it is in business. Finding a partner prepared to go the extra distance is less rare than it once was. I am certainly not suggesting all is perfect, or that you won’t on occasion experience epically awful service or care. But you can find that pretty much anywhere on this planet. It is nice to see Hungary regaining something it had lost. (Quite where it went is another question: if you have ever spent time in a Hungarian countryside household, you will know they make for excellent hosts.) Hungary still has a way to go to get there, but the direction of travel is promising. And that is a development we can all do our best to encourage.

Robin Marshall Editor-in-chief

MTI / Gergely Jánossy

Fortepan.hu / Pál Berkó

THEN & NOW

BBJ-PARTNERS

Hungary, like much of the rest of Europe, saw winter make a dramatic, bitter return as February gave way to March, with extreme cold reported across the country. In the color photo, a ferry pushes its way through the icestrewn Lake Balaton between Tihany and Szántód on February 28. In the black and white picture, the frozen lake can be seen at the marina in Balatonfüred in 1966. VISIT US ONLINE: WWW.BBJ.HU

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Budapest Business Journal | March 9 – March 22, 2018

News

///macroscope

Good Industry Figures Project Strong Q1 GDP Data The statistical office also published industrial output figures for January. The report reveals that it was a strong start for the sector: industrial output was up 6.9% in the first month of the year from the same month of last year. The preliminary release also shows that, based on workingday adjusted data, production grew by 6.7%. Output rose after a 0.5% unadjusted decrease last December. Analysts see the fresh figures as a promising sign for the first quarter GDP growth. Virovácz of ING Bank said that the working-day adjusted data was above market expectations, adding that the automotive and electronics segments are likely to have a strong year ahead. If so, that might be the basis for a growth

Industrial output was up nearly 7% in January from a year before. The figures give reason for optimism and analysts also expect good GDP data for the first quarter.

rate of

ZSÓFIA CZIFRA

Hungary’s economy expanded by 4.2% last year - the seasonally and calendaradjusted data hasn’t been at such a high level since 2005 - the second reading of gross domestic product released by the Central Statistical Office (KSH) shows. Growth was mainly driven by domestic consumption and thus services and investments also contributed significantly. Figures for the fourth quarter show an even better picture: the volume of GDP was 4.4% higher in the given period than in the corresponding period of the previous year. According to seasonally and calendar adjusted and reconciled data, the performance of the economy was

up by

4.9%

compared to the corresponding quarter of the previous year and by 1.3% compared to the previous quarter. In 2017, the volume of GDP grew by 4% - unadjusted - compared to a year earlier. Compared with the fourth-quarter figure issued in the flash estimate, the second estimate was unchanged. As for Q4, on the production side, the role of industry grew by 2.9%. The performance of construction rose by a robust 36%, while the value added of agriculture decreased by 11% compared to the high base a year earlier. The gross value added of services was up by 3.6% in total, making it the biggest contributor to the growth. On the expenditure side, the actual final consumption of households was up by 5.2% compared to the same period of the previous year. Household consumption expenditure, representing the largest proportion of the components of the actual final consumption, grew by 5.6%, within which volume increases were measured in all the groups.

Above Average

The volume rose at rates exceeding the average in the case of furnishings and household equipment, food, restaurants and hotels as well as other products and services. The (domestic) consumption expenditure of households realized on the territory of Hungary increased by 5.4%. Actual final consumption rose by 5.7%. For the entire year of 2017, the volume of gross domestic product grew by 4%. According to seasonally and calendar adjusted and reconciled data, the performance of the economy rose by 4.2% compared to the previous year. The value of GDP was put at HUF 38.183 trillion at current prices in 2017. From the production approach, gross value added

increased by

32%

in construction, by 3.9% in industry and by 3.3% in services and fell by 9% in agriculture. The KSH data shows that services contributed to the growth of GDP by 1.8 percentage points, construction by 1 pp and industry by 0.9 pp, while agriculture lowered growth by 0.3 pp. Analysts expect the year-end economic momentum to last thoroughout this year, with consumption and investments being the biggest contributors again. Balanced growth can also be supported by the improvement of industrial output and a good harvest. Apart from consumption and investments, construction could also play a significant role in this year’s economic performance, K&H Bank head analyst Dávid Németh said. He expects an increase of 3.8% for the full year, noting that,

with a good harvest period, the agriculture sector can cause positive surprises.

Favorable Trends

Favorable labor market trends, coupled with the increased willingness of households to make purchases, boosted domestic consumption at the fastest rate in years in Q4, ING Bank chief analyst Péter Virovácz commented. He said ING Bank expects the Hungarian economy to expand by 3.9% in 2018, albeit in a more balanced structure. The economic momentum could continue this year, agreed Erste Bank senior analyst Orsolya Nyeste. She thinks that the growth will be backed up by further strong EU funding absorption and increased investment activity. ADVERTISEMENT

for the sector this year, he said. Takarékbank analyst Gergely Suppan expects industrial output to accelerate to 7.5% in 2018, from 4.8% in 2017. However, he also warned that the labor shortage could hinder stronger growth in production. But prospects are good, and this year many segments could contribute to boosting the performance of the sector. For the full year, he predicts a growth rate of above 5%.

Numbers to watch in the coming weeks A day after this paper goes to print, KSH publishes consumer prices for February. KSH will publish a second estimate of industrial output figures for January 2018 on March 14. On the very same day, the office will also release the January performance of the construction sector.

4 | 1 News

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Budapest Business Journal | March 9 – March 22, 2018

Hungarian Economic Crime and Fraud Survey PwC’s Global and Hungarian Economic Crime and Fraud Survey 2018 was conducted between August and October 2017; globally, it was completed by 7,228 respondents, while in Hungary the online questionnaire was completed by senior executives from 71 companies. The full report can be seen on the PwC website, but here we present some of the highlights. More than a half of Hungarian organizations have experienced economic crime in the past 24 months according to respondents to PwC’s Hungarian Economic Crime and Fraud Survey 2018, which represents a 100%

increase compared to the 2016 survey. While that is an eye-catching figure, PwC argues that this statistic more accurately measures awareness of fraud. Interestingly, though, it still warns of the dangers of a blind spot.

WHAT TYPE OF FRAUD AND/OR ECONOMIC CRIME HAS YOUR ORGANIZATION EXPERIENCED IN YOUR COUNTRY WITHIN THE LAST 24 MONTHS? (%)

Types of Fraud HAS YOUR ORGANIZATION EXPERIENCED ANY ECONOMIC CRIME IN YOUR COUNTRY WITHIN THE LAST 24 MONTHS? (%)

Asset Misappropriation

Consumer fraud

Cybercrime

Business Misconduct

Bribery and Corruption

CEE

Global

0 20

28 30 34

26 38 37

25 33 36

51 47 49

2011

2014

2016

2018

The Cost of Fraud When asked to quantify the direct financial loss to the organization caused by its most disruptive crime over the past two years, 45% of organizations that suffered economic crime have lost USD 100,000 or more in Hungary (21% CEE, 19% global); no Hungarian respondent reported a loss over USD 50 million. But when secondary costs such as investigations and interventions are added in, the overall expense can increase substantially. One in two companies in Hungary spent at least the same amount on investigations and/ or other interventions as the fraud had initially cost. This illustrates well that the cost of remedial actions (such as investigations, litigation) can easily exceed the cost of establishing a robust antifraud program.

AS A RESULT OF THE MOST DISRUPTIVE CRIME EXPERIENCED IN THE LAST 24 MONTHS, WAS THE AMOUNT SPENT BY YOUR ORGANIZATION ON INVESTIGATIONS AND/OR OTHER INTERVENTIONS, MORE, LESS OR THE SAME AS THAT WHICH WAS LOST THROUGH THIS CRIME? (%)

Less

51 43 14

The same

14 17

More (twice as much or more)

36 22

CEE Global

Don't know

14 11 0

Asset misappropriation (42%) remained the most frequently committed economic crime reported by the survey respondents in Hungary. It is followed by the “new” frauds, whose prominence has grown so much that PwC measured them as separate threats for the first time. These include fraud committed by the consumer (at 39%) and business misconduct (28%) – in 2nd and 4th place, respectively, among

all reported frauds. PwC believes the inclusion of these two categories is partially responsible for the decrease (from 46% in 2016 to 42% in 2018) in the larger category of asset misappropriation. Cybercrime, at 31%, is ranked third. This is in line with Eastern European and global results as asset misappropriation, cybercrime and frauds committed by the consumer are present and cause problems everywhere.

“Chief executives are increasingly seen as the personal embodiment of an organization, expected at all times to have their finger on the pulse of every facet of its culture and operations. And when ethical or compliance breakdowns happen, business leaders are often held personally responsible – both in the court of public opinion and, increasingly, by regulators.” Csaba Polacsek, partner, Advisory Services, PwC Hungary

1 News | 5

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Budapest Business Journal | March 9 – March 22, 2018

Cybercrime

Bribery and Corruption

Cybercrime in Hungary has increased significantly compared to PwC’s last survey in 2016. Thirty-one percent of the respondents experienced cyber crime-related fraud, putting Hungary on the same level as the global results. A contributing factor to the growth in cybercrime is the appearance of global ransomware (including Petya and WannaCry) in Hungary,

as they have infected several local companies in the past 24 months. Seventy-two percent of the respondents stated that their companies have an incident response plan for dealing with cyberattacks that is fully in operation compared to the 42% reported in the 2016 Survey, which represents an enormous increase and significantly exceeds the global average (59%).

DOES YOUR ORGANIZATION HAVE A CYBER SECURITY PROGRAM (PREVENTATIVE/DETECTIVE) TO DEAL WITH CYBER-ATTACKS? (%)

59%

72%

Yes, this plan is fully in operation

Surprisingly, bribery and corruption were not ranked among the three most common economic crimes in Hungary for the first

time since the 2007 survey; it was ranked only fifth, in spite of the slightly increasing Eastern European and global trends.

“The high proportion of Hungarian respondents who are unsure if their respective organization had been asked to pay a bribe (44%), or had lost an opportunity to a competitor they believed paid a bribe (59%) in the last 24 months, however, is worrisome, and adds real cause for a concern/suspicion. This also illustrates well the hidden nature of corruption - this is why we consider corruption a likely/genuine blind spot in Hungary.” Csaba Polacsek, partner, Advisory Services, PwC Hungary

General Fraud Only 50% of Hungarian organizations said they have conducted general fraud or economic crime risk assessment

Hungary

IN THE LAST 24 MONTHS, HAS YOUR ORGANIZATION PERFORMED A RISK ASSESSMENT ON ANY OF THE FOLLOWING AREAS? (%)

Globally

THE MOST FREQUENT TYPE OF CYBER ATTACKS IN HUNGARY (PERCENTAGE OF RESPONDANTS WHO FACED THESE KIND OF ATTACKS IN THE PAST 24 MONTHS)

44% Malware

37% Phishing

Whistleblowing and Anti-fraud Technology Some 56% of the respondents in Hungary stated that their company uses a whistleblower hotline to ensure that its compliance system works effectively – this represents a 12% increase compared to the 44% reported in the 2016 survey. Interestingly, only 38% of Hungarian respondents indicated that they have seen an increase in funds used to combat fraud and/or economic crime, while 62% stated that their spending remained unchanged (or even decreased). At the same time, there has been a significant jump in the occurrence of economic crime – a 100% increase compared to the 2016 survey.

(49% believe they haven’t been touched by fraud at all!). So how ready are Hungarian firms?

PwC argues that the business case for investment in anti-fraud technology goes beyond protecting against reputational, regulatory or financial damage. It also includes reducing the cost of fraud prevention through efficiencies; enabling businesses to safely build and sell new products and services on a digital platform; and fine-tuning fraud programs to reduce what it calls “customer friction”, allowing “good customers” to interact more freely with platforms and products, without excessive fraud prevention controls getting in the way.

General fraud risk assessment

50 50 54

Anti-Bribery and Corruption (ABAC)

28 34 33

Sanctions and export controls

20 20 19

AML

38 24 23

Anti-competitive / Anti-trust

22 21 16

Cyber-attack vulnerability

58 45 46

Cyber response plan

38 28 30

Industry speciﬁc regulatory obligations

22 25 27

No risk assessments performed in the last 24 months

13 13 10

Don't know

13 14 11 0

HU CEE Global

6 | 1 News

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Budapest Business Journal | March 9 – March 22, 2018

Atenor Completes Latest Phase of Váci Greens Atenor has officially handed over the 14,000 sqm Váci Greens D, the first component of the latest phase of the office project that will consist of 130,000 sqm of space in six buildings upon completion. Váci Greens D.

GARY J. MORRELL

Atenor started the large-scale Váci Greens project when market conditions were much less favorable than today; four completed phases are successfully let and have been sold onto investors. Váci Greens D was designed by the Hungarian architects Vikár & Lukács Építészstúdió Kft. Atenor has a policy of employing different architects on each phase of a project in an attempt to introduce diversity in developments. Cushman & Wakefield have been appointed project managers on the BREEAM “Excellent” certified project, with Uniszol employed as facility managers.

The complex is already

50% occupied,

with further lease agreements due to be finalized that could bring the letting status to 90% in the next 2-3 months, according to Nikolett Püschl, leasing manager at Atenor Hungary. Buildings E and F will complete the second phase of Váci Greens with a further 45,000 sqm of office space. Currently around 6,000 staff are employed at the complex. Construction of Building E is due to start this spring with a proposed completion date in the second half of 2019, while development of building F is planned for the first quarter of 2020, with delivery expected in 2021.

The undertaking of such a large-scale project was generally regarded as a brave decision ten years ago in a market that was going through a downturn with very little development.

Potential Growth

“The stone-laying ceremony for Váci Greens took place eight years ago when there were no cranes visible on the skyline, which is very different from what we see today. We opted for Hungary on the basis of the potential economic growth,” said Stéphan Sonneville, CEO of Atenor. Office development activity is accelerating, with vacancy in the Budapest office market currently standing at a record low. In this landlords’ market, more developers are opting for speculative

development. Prime rents have risen to around EUR 15.25 per sqm per month as of the end of 2017. The so-called Váci Corridor remains the most favored area for office development with around 30% of the total under construction. Around 140 of office space is currently under construction in Váci út including Váci Greens D, according to David Johnston of CBRE. The area has seen as much as one million sqm of office development and an additional one million sqm of residential development according to József Tóth, Mayor of District XIII. This has seen the creation of around 70,000 new jobs. Atenor have presold Váci Greens D to a private Hungarian investor. The first three phases have been purchased by a private Hungarian investment group, OTP Real Estate and the Slovak ZFP Investments. Atenor is also attracting international institutional investors. With regard to further development, Atenor has acquired a further 19,000 sqm development site in Hungária körút. It is planning the

phased

72,000 sqm

office and retail Aréna Business Campus development in four buildings, with a hope that construction will start this year. Atenor is also planning to develop in the residential sector. The company has 18 projects underway across Europe, including Bucharest with phased developments on the pattern of Váci Greens. Atenor is also looking to expand into Poland. The company specializes in the development of large-scale urban office and residential projects. The 40,000 sqm One Brussels Europe has delivered residential office and retail space in the Belgian capital, for example. Atenor finances developments using its own funding.

Construction starts on Budapest ONE Business Park Brownfield Development Futureal has commenced development of its The project is the second brownfield ambitious Budapest ONE Business Park, located development project by Futureal after its Corvin Promenade urban regeneration at the transport hub at Etele tér, adjacent to the project that has thus far delivered a 44,000 sqm shopping center and Kelenföld railway station and the Metro 4 stop. 10,000 sqm of street retail, in addition to office and residential space. “Based The first phase of the 68,000 sqm complex is on the success of our flagships project, the Corvin Promenade, we see an scheduled to be completed in the second enormous market demand for locations half of 2019 and will deliver 25,000 sqm of with direct access to key transportation hubs,” said Tibor Tatár, CEO of Futureal, office space in addition to 2,500 sqm of retail on the project. and service units and 480 parking spaces. GARY J. MORRELL

CBRE and JLL have been appointed joint letting agents on the project. The speculative development project reflects the growing confidence of developers in the Budapest office market. According to CBRE, 60% of offices for the 2018 pipeline are already pre-leased in a Budapest office market with a vacancy rate of just 7.5%. Budapest ONE Business Park will form part of a wider Kelenföld urban

Futureal has been awarded WELL Building “Platinum” pre-certification for its three current Budapest office developments including Budapest ONE. The other projects are the EUR 68 million, 20,000 sqm Advance Tower on Váci út, which will be completed in two phases, and the EUR 90 mln, 27,000 sqm Corvin Technology & Science Park (Corvin 5). The first 12,000 sqm phase of Advance Tower is due to be completed in the fourth quarter of this year. The first phase of the Corvin 5 office complex is scheduled to be handed over by the end of the year.

redevelopment project that will also include the 53,000 sqm Etele Plaza retail center, the first large Budapest shopping center development to be delivered in Budapest for several years. Futureal aims to create a business, service and leisure hub on the 22-hectare site; an estimated

165,000 passengers

pass through the transport intersection daily according to the company.

Budapest ONE Business park.

www.bbj.hu

Budapest Business Journal | March 9 – March 22, 2018

Business

sessions are held not only in Budapest but also on the spot in the bordering regions. BBJ: To what extent do the figures justify the enthusiastic expectations you have towards this regional initiative? ZO: Since the opening of our first such trade office focusing on Carpathian Basin integration, deals

Joining Hungarian Forces to Make it big on the Global Stage

LEVENTE HÖRÖMPÖLI-TÓTH

BBJ: Where does the idea of the Carpathian Basin cooperation stem from? Zsanett Oláh: The concept itself is not entirely new since a network of trade offices has existed for years now in neighboring countries with the purpose of fostering business relationships between Hungarian companies from within and outside the borders. The initial goal, however, was to export products and technology to those areas from Hungary. Under the current scheme, this aspect remains important, with the Carpathian Basin being a key export market for SMEs and large corporations alike. Smaller enterprises can capitalize on the proximity of markets that pose less

HUF 5.7 bln

Photo by Árpád Pintér

As part of the Carpathian Basin cooperation framework, the Carpathian Expo on March 12-13 aims to further strengthen trade relations between Hungarian companies from within the borders and those in neighboring countries. Zsanett Oláh, CEO of the Hungarian National Trading House (MNKH), a staterun agency, tells the Budapest Business Journal this ecosystem will allow ever more Hungarian companies to go global. Larger corporations, in particular, have much to gain.

worth

have been closed. Last year alone the amount totaled HUF 2.1 bln. But there is a lot more to it than just business transactions. Hungarian companies from both sides of the border have set up subsidiaries, thus creating jobs and growth. This phenomenon also helps boost exports and improve competitiveness, since subsidiaries set up on nearby foreign soil might open the gate towards undiscovered third country markets as well. It is also important to note that the border regions with major Hungarian populations have also started to do business with each other, so we have already achieved our goal that Hungary should become the leading economic force of the Carpathian Basin and get Hungarian products to remote destinations with the help of an existing network. The pillars are there to build on. What we lacked for a long time was the framework that makes this whole cooperation work and the processes along which it can come into existence. BBJ: Where does Carpathian Expo come into the picture? ZO: The first event was held last year in Hajdúszoboszló, a town in eastern Hungary, with the purpose of creating a specific platform for this Carpathian Basin network. Some 600 companies attended that event, with attendance expected to double in this year’s gathering at the Castle Garden Bazaar, a prestigious venue in Budapest. These summits are crucial to build this ecosystem; we get to meet the major players, most of whom typically represent the food industry and agriculture, with machinery, furniture and tourism-related services being slightly less dominant.

risk. Another key aspect is that the export of certain products and services is viable only to those countries because of logisticsrelated reasons and customer service issues. BBJ: What added value has MNKH to offer in this connection? ZO: The idea was to take this Carpathian Basin cooperation to the next level by establishing an ecosystem where Hungarian companies located in Hungary and in neighboring countries will not be competitors but rather partners. This can happen by either forging new supplier relationships among themselves or joining our ‘Build Your City’ concept. BBJ: What is this latter scheme, specifically, and how can companies benefit? ZO: ‘Build Your City’ is tailored to offer complex solutions, not just given products or services, that can be marketed as a package to third countries. Under this framework, the phases of planning, execution and related services are bundled. In many cases, the products themselves are innovative, but the enterprise behind

them is not competitive enough to go global on its own. Joining forces this way will also give the opportunity to promising, yet internationally inexperienced companies to gather references abroad. BBJ: Getting back to the Carpathian Basin cooperation, how difficult was it to find and engage ethnic Hungarian companies in neighboring countries? ZO: Our trade office network identified those under Hungarian ownership and those employing mostly Magyars. As a result, we now have a data base comprising

some

3,000

such enterprises. We have organized a lot of events where the word was spread about MNKH’s services, opportunities to attend international fairs with our help or benefit from our export academy, a cutting-edge training program for firms wishing to make it big on foreign soil. The export academy has an e-learning curriculum as well, which is available at all times, without any geographic limitations. On the other hand, though,

BBJ: So the Carpathian Expo is like a typical B2B trade show? ZO: The set-up will resemble that, but there will also be a huge exhibition area. This is where Hungarian companies from across the border will have the chance to put on display what they have to offer. On the other hand, a plenary session is also scheduled to reflect on related economic issues. BBJ: What is envisaged in the longer run for the Carpathian Basin cooperation? ZO: We would like to maintain the existing dynamics. Both smaller innovative companies and larger capital-strong corporations have a lot to gain. In particular, if large-sized companies are open to complement their own solutions with innovative concepts from outside sources with our help, they could enter third markets with a more complex range of services. This would certainly boost their competitiveness. They could also access new markets, not least because MNKH has its own trade offices on the spot that are bound to facilitate the launch of operations greatly. The role of large enterprises is even more crucial in countries where there have been no successful Hungarian projects. In those cases, large companies have the potential to deliver the first relevant references that can pave the way for further projects from Hungary.

8| 2

Business

www.bbj.hu

Budapest Business Journal | March 9 – March 22, 2018

Intellyo Promises to Reshape Content Creation The Creator Engine of a Hungarian startup headquartered in Vienna and Budapest provides a tool that aims to radically optimize the digital content creation process by relying on AI-driven tech. LEVENTE HÖRÖMPÖLI-TÓTH

Writing compelling content for the web that performs well with large audiences and ideally converts crowds into paying customers no longer has much to do with how good a writer you are. With fierce competition out there, you need to be familiar with the latest cutting-edge digital marketing methods and constantly monitor your competitors and your own performance. And even that may not do the trick. “Everybody talks about how online content should be created efficiently, but apparently there is no such thing as the silver bullet,” says Fruzsina Peti, head of marketing of Intellyo, which detected the need for a multifunctional tool that makes the lives of online content writers a lot easier. Their Creator Engine is a collaborative tool, which therefore simplifies the three major phases of the process, namely research, creation and distribution.

customized manner. It is no longer necessary to collect data on your competitors, either, as Intellyo provides an overview of what topic performs well and what doesn’t. Following up on performance and analytics will become a lot easier, since the system can keep track of relevant data on where your article does best. A free trial period starts in March, with Intellyo betting on a freemium model. The idea is to charge only those who want to monetize their material. But even professional agencies and SMEs should calculate with a monthly fee

starting at

EUR 100,

“Our extensive research prior to product development indicated that those who just write for passion have totally different needs than peers in it for sales and marketing purposes,” says Peti. “We decided to focus on the latter target group more by allowing them to optimize their content and monetize it better.”

“Everybody talks about how online content should be created efficiently, but apparently there is no such thing as the silver bullet.”

depending on the levels of authorization, the number of collaborators involved and channels to be used. Custom pricing will The Intellyo Team. apply to bigger clients if they request features that need to be developed. Most of the mainly collaboration-related enterprise functionalities are live already. to provide fully SEO-optimized content, “We target both the B2B and the B2C a function that gets better as the system segments,” the head of marketing adds. becomes smarter. “Our aim is not only to help writers to The Push of a Button create better content more easily, but On the other hand, distribution has been also to educate companies about content taken to a whole new level as well. “Sharing creation with workshops, which are already your entries is also time-consuming and in the pipeline. Intellyo has a lot of content it is hard to know which social media marketing of its own. We do what we channels bring the best results for what believe in, we practice what we preach.” topic. Intellyo allows you to publish your Apparently, others believe in them too; material and measure the performance after four European angel investors and a with the push of a button across all your strategic partner jumped on board, Intellyo channels and platforms,” she says. is preparing for series A funding in Q3 or Timing matters too, and the engine is Q4, meaning it will be ready to switch into equipped to set the time of publishing in a an even higher gear of innovation.

S TA R T U P S P O T L I G H T This all-in-one solution heavily relies on the advantages of Artificial Intelligence, which can boost traffic tremendously. As Peti explains to the Budapest Business Journal, machine learning not only gives you SEO keywords, but a comprehensive recommendation package which helps

Your essential Guide to Investing in Hungary including articles looking at the benefits available, case studies, EU funding, and commercial property investment.

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///

CEO Promoted at Ariston Thermo Hungária

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

her on board and looking forward to get the best of her expertise at our practice.”

As of this year, Gábor Pavek heads heating technology company Ariston Thermo Hungária as CEO. Pavek has been working at Ariston since 2015 as sales and country manager. Pavek took over the CEO position from Grzegorz Wojcik, who is leaving the Hungarian business unit after five years. Wojcik will continue as regional director at Ariston Thermo Group, responsible for Ukraine, the CEE and Balkan regions. Pavek plans to further strengthen the cooperation of Ariston with universities through scholarships and professional support. In addition, the new CEO will concentrate on keeping the market-leading position of Ariston Thermo in the field of condensation boilers and electric water heating machines, which are the best sellers at Ariston.

CMS Budapest Adds Senior Expert to Tax Team Judit Kresz, previously head of tax at a regional law firm, joined the tax team of legal and tax services provider CMS Budapest as a senior associate on February 20, the law firm told the Budapest Business Journal. Kresz is a registered tax advisor with 13 years of experience gained at one of the Big Four professional services networks, and at various large corporations. Due to her background, she is particularly experienced in cross-border matters, and in her previous position led the regional tax practice of nine countries within the CEE. “Advising on tax matters at an international law firm like CMS Budapest requires a specific set of skills and knowledge that we believe Judit possesses entirely,” said Eszter Kálmán, head of tax at CMS Budapest. “We are very happy to have

Dutch Managing Director Heads Canon Hungária As of January 1, a new managing director, Jaap van ’t Ooster has been in post at Canon Hungária Kft. The Dutch professional has been with the company for 35 years. In the last two years, Jaap van ’t Ooster undertook the position of European director program lead B2B transformation for Canon EMEA working from London. Due to this transformation Canon is changing its product-focused marketing attitude to customer-oriented strategy and execution, a press release sent to Budapest Business Journal says. The portfolio of thousands of products and services have customer overlap and bring many new business opportunities. The transformation at such a huge organization comes with a series of changing ways of working and re-organization for each market, which by now has been completed across the EMEA region (Europe, Middle-East and Africa). “I want to thank Győző Kroó for his endeavors of establishing the new Canon setup in Hungary and managing his Hungarian team with good business results within the European organization in previous years. I will do my utmost to further build on these results through working with my team so that we can be proud of our achievements for our customers and Canon,” Jaap van ‘t Ooster said.

RSM Names Head of new M&A Business Unit Professional services firm RSM Hungary is expanding its business to include a mergers and acquisitions, company assessment and

financing unit, to be led by Levente Almási. RSM said it is launching its new business unit based on growing transaction activity on both the local and global markets. Almási has 18 years of experience in company acquisitions, sales, assessments and implementations. During the last five years, he was CEO at Concorde MB Partners, and before that manager of PwC’s M&A business unit, RSM Hungary said. Almási has overseen projects in multiple sectors, including automotive, steel, retail, wholesale, IT, healthcare, services, manufacturing and construction. RSM Hungary now claims to be able to cover every significant stage of a corporate acquisition or sales process, from legal and financial screening, legal advice, exposure of risk factors, optimal corporate structure from both business and taxation aspects, and preparation and full management of the acquisition or sale process, according to the press release.

UEFA Votes to Make Csányi FIFA VP Sándor Csányi, Hungary’s richest businessman, chairman-CEO of OTP Bank, and head of the Hungarian Football Federation (MLSZ), was named as vice president of FIFA, the international governing body of association football, at a congress of the Union of European Football Associations (UEFA) in Bratislava on February 26. Csányi, 64, was nominated by UEFA to replace Ángel María Villar, the MLSZ said on its website. Villar resigned last summer after being arrested on suspicion of corruption. Hungary’s first billionaire was elected unanimously by the 55 UEFA member states. He will officially be named vice president at the FIFA Congress in Moscow in June, becoming the first Hungarian to be elected to the post. “It’s important that the tendency whereby the big can become even bigger, while the smaller are left disproportionately behind at both club and national level, is reversed,” Csányi was cited as saying on the MLSZ website. Csányi added that he will also work to see that good regulations result in young players gaining more opportunities, and

GRL_bbj_252x77_Layout 1 2018. 03. 06. 14:03 Page 2

One of the best place to eat and stay.

Budapest, V. Gerlóczy u. 1.

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that non-professional and women’s football gains strength in all parts of the world.

CEPOL Executive Director Concludes 8-year Term

Ferenc Bánfi (right) with Detlef Schröder at the CEPOL handover ceremony. Ferenc Bánfi, the executive director of CEPOL, the Budapest-based European Union Agency for Law Enforcement Training, concluded his eight-year term and handed over to Detlef Schröder, who will serve as executive director for the next four years. In 2017, CEPOL reached new records in terms of participation: almost 24,500 officials from 39 countries were trained during 105 residential courses, 598 exchanges, 95 webinars and other e-learning tools (such as online courses) and within the framework of the Counter Terrorism Partnership Project (CTPP), the organization said in a press release. Two other important milestones were the graduation of 27 students from CEPOL’s European Joint Master Program, and the 14th Research and Science Conference held in November in Budapest, which brought together more than 200 researchers and practitioners from all over the world. “In 2009, CEPOL trained over 2,300 police officers. In 2017, with a more or less similar budget, CEPOL trained over 20,000 law enforcement officers,” noted Bánfi. “Moreover, CEPOL contributed to strengthening collaboration between law enforcement officers through its trustbuilding Exchange Program, with over 500 exchanges in 2017.” “If someone would have told me in 2010 that I will have to implement a project to work with Lebanon, Tunisia, Turkey and Jordan, I would not have believed it,” Bánfi continued. “Now, in the framework of the Counter Terrorism Partnership Project, we are working there and the collaboration is blossoming. Our achievements have exceeded all my expectations.”

10 | 2

Business

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Budapest Business Journal | March 9 – March 22, 2018

Budapest Airport Adds VIP Lounge and Service The operator of Budapest Ferenc Liszt International Airport has launched a luxury personal service, complete with an exclusive VIP lounge right next to check-in gate 30 at Terminal 2A. Donʼt expect a stampede of people though. The aim is exclusivity, rather than footfall, with a target of around 5,000 clients a year. ROBIN MARSHALL

“That’s about 0.04% of all the passengers going through Budapest,” Péter Mészáros told the Budapest Business Journal at the official launch on February 27. Mészáros runs Cavok Aviation, which operates the service. Kam Jandu, the chief commercial officer of Budapest Airport Zrt. told guests at the launch that the airport operator had wanted to launch such a VIP service for six or seven years but lacked available space and the right partner to make it happen before now. “During that time, we were looking at other airports with a VIP service and benchmarking against London, Paris, Vienna nearby and many German airports,” he said.

A big part of that benchmarking concerned setting the right price point against very different markets. According to the service brochure, the standard VIP service for a departing or arriving guest, including up to two hours use of the BUD:VIP lounge, will cost one person

EUR 215 gross.

Throw in luxury city transfer, and the price rises to EUR 290. Yearly rates range from EUR 5,700 for silver membership (limited to 30 occasions), to EUR 12,500 for platinum (unlimited).

Value for Service

Other airports charge “almost three times what we are charging here,” Jandu said. He was confident “the value offered for the service you get will make it the best VIP service in the region”. The lounge has a separate meeting room, toilet and shower facilities. Check-in assistance and a personal escort are offered, along with a baggage porter service. Fine foods and beverages are available, and there is even an

option to order á la carte meals. More is available upon request. Jandu said the service needs to be

booked

24 hours

in advance, which will help Cavok Aviation ensure the lounge does not become overcrowded. Whether film stars, top business executives or even couples waiting for their honeymoon flight, discretion and exclusivity is a key part of premium travel. But luxury travel does not mean safety can be ignored. Passengers and luggage still need to be processed, but dedicated security staff and equipment help speed that process. “This morning, we had a group going through and it took eight minutes to get 20 people through security,” Mészáros says.

Luxury Transfer

Once cleared, you are taken down to the tarmac and a luxury vehicle (either a Mercedes minibus or an AMG S-Class, depending on the number of passengers) will whisk you across the apron and deposit you at your aircraft - or pick you up if you are arriving. At the time of the launch, the driver was Mészáros himself. “Next week my staff will be trained on driving on the apron,” he explained. Clearly, driving out here is little different from a Sunday morning excursion to the shops, and the insurance premium is eyewatering. Little wonder, I suggest; aircraft are even more expensive than his AMG. “That’s not the point. If there is an accident the insurance will pay for it, but it won’t cover the loss of prestige.” He currently employs seven, but, despite having worked at the airport for

years

Manel Moreno, head of Commercial Landside Services at Budapest Airport, Kam Jandu, COO of Budapest Airport and Péter Mészáros, CEO of Cavok Aviation.

in one capacity or another, he says he does much of the work himself because it is a good way of discovering exactly what is required, both from the clients and of his employees.

Jost Lammers, CEO of Budapest Airport, said the lounge was just the latest example of progress at Budapest. “Over the last few years we’ve consistently upgraded and improved the services available for all our customers at Budapest Airport. Our new lounge and VIP services form part of our comprehensive designs to ensure we continue to be one of the best airports in the Central and Eastern European region,” he said. “It remains important for us to be able to offer good services for all our passengers, and with so many more people travelling through our terminals today, it’s essential to be able to provide an additional facility for those looking for the little added extras.” More about the lounge and the service can be found at vip.bud.hu.

Passenger Growth The airport says it welcomed more than 13 million passengers in 2017, flying to 125 destinations in 45 countries. Monthly passenger traffic at Budapest grew by more than 12.7% in December alone. Upcoming new routes include regular services to Stavanger, Athens, Santander, Paphos, Kraków, Basel and Marseille. LOT Polish Airlines will launch a four-times-a-week service to New York JFK from May 3; and a twiceweekly service to Chicago O’Hare, starting May 5, while American Airlines will launch a daily service to Philadelphia that same day. Budapest Airport Zrt., the operator of Budapest Ferenc Liszt International Airport, is owned by an international consortium of investors, led by the privatelyowned German company AviAlliance, an independent airport manager holding a 55.438% stake, together with Caisse de dépôt et placement du Québec (21.228%), and Malton Investment Pte Ltd. (23.334%).

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Budapest Business Journal | March 9 – March 22, 2018

Special Report Banking and Finance

Hungary’s banking industry faces possible consolidation, and demands for greater digitalization, even as it continues to bounce back from the crisis and government levies.

Banking Sector Facing Consolidation, Digitalization



Private Banking Sector Sees Steady Growth



Operating Exim Prudently More Crucial Than Ever



EIB Gave Hungary EUR 700 mln in 2017



12 | 3

Special Report

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Budapest Business Journal | March 9 – March 22, 2018

Banking Sector Facing Consolidation, Digitalization The Hungarian banking sector saw profits jump 50% last year and domestic ownership further growing, according to the latest data from the National Bank of Hungary (MNB). Despite speculation about the state possibly selling Budapest Bank, we appear to be looking at a healthy sector that might face some kind of concentration, MKB Bank tells the Budapest Business Journal. CHRISTIAN KESZTHELYI

The latest central bank report pointed out that the after-tax profit of the banking sector was up by 50% to HUF 632.4 billion in 2017, chiefly lifted by higher revenue from commissions and fees, and freed up risk provisions and the lower corporate tax rate, as reported by national news agency MTI. “If you compare the size of the Hungarian economy and its banking system to regional peers, the conclusion is that we have a much less concentrated banking system and many universal players,” Dr. Ádám Balog, CEO of MKB Bank (formerly Hungarian Foreign Trade Bank) tells the BBJ. MKB believes that the Hungarian banking system is healthy and profitable, with clear underlying trends, which is facing, if not already undergoing, a gradual change fueled by innovation, as wells as cost and regulation pressures. “These forces will eventually lead to some kind of concentration of the Hungarian market as well. The pace and timing of this adjustment is the real unknown factor; I would say that four or five universal banks are likely to stay and the transformation would happen within five years,” the MKB CEO adds.

and MKB would get an invitation, we would, for example, analyze Budapest Bank, as we see synergies in case of a potential merger.” The state bought Budapest Bank in June 2015, when Corvinus Nemzetközi Befektetési, a unit of the state-owned Hungarian Development Bank group,

paid

USD 700 mln

Improving Relations

The Hungarian government lowered the bank levy rate on January 1, 2017, to 0.15% for up to HUF 50 bln of the tax base, and 0.21% on the amount above that - down from 0.24% the preceding year, according to a Reuters report. This helped significantly improve relations between the banks and the government; the levy, introduced in 2010 at 0.53% as a temporary measure, though it still lingers on, caused uproar in the market at the time.

“If you compare the size of the Hungarian economy and its banking system to regional peers, the conclusion is that we have a much less concentrated banking system and many universal players.” “Relations have improved significantly. The bank levy was reduced, generally the market environment is more beneficial due to past years more favorable global economic situation and the pro-growth decisions by the fiscal and monetary policy authorities. MNB’s “Funding for Growth Scheme” played a vital role to avoid a credit crunch for the SME sector and supported lending to close to 40,000 enterprises. There are many regulatory changes underway, whether it be on instant payment or the implementation of the PSD2 regime. I see a cooperative atmosphere,” Balog says. The Hungarian government has in the past been vocal about its willingness to keep reducing the banking levy,

provided the banks increase their lending. Apparently, cutting the burden has had a beneficial effect. “There is a very positive trend in households’ savings. In the last four years alone the volume of household gross financial assets increased by 35%, more than HUF 12 billion. This increase was supported partly by the favorable wage developments,” says Balog. Furthermore, banks do appear to be lending more lately. “The last two years have witnessed a significant lending volume increase both for corporates and retail clients in line with the consolidated and balanced growth environment,” MKB tells the BBJ. “Unemployment is at historic lows, there is a double-digit wage increase while customers also benefit from the low interest rate environment. This can be seen in the statistics as well: mortgage lending volumes

increased by

40%

in 2017 compared to the previous year, while personal loan lending volumes increased by almost 50%. Outstanding corporate loans increased by close to 10% compared to 2016. At MKB Bank we were able to considerably outperform the market in 2017,” the CEO adds.

Eyes on Budapest Bank

The reported sale of Budapest Bank, currently owned by the government, has sparked speculation about who might bid for it. While MKB Bank was cautious about the reports, and declined to comment directly on the matter, Balog offered something of a hint. “As mentioned, the seller is the state and as the owner it is its decision. I would not anticipate any new participants, thus the real question from the buyers’ perspective is who could get most synergies and value out of such a deal. I think if circumstances are given

to General Electric Capital Group for 100% of the bank’s shares, according to a report by MTI. Should the state decide to sell Budapest Bank in the future, if the buyer is not a Hungarian entity, domestic ownership in the market would fall below 50%, which the government has long targeted as its minimum threshold. Like any other sector or business, banking is also facing huge digital transformation. A few years ago, participants at a banking summit in Budapest pointed out that banks were significantly lagging behind as far as technological solutions were concerned, some even saying the sector’s approach was traditional globally. Today, more and more banks offer not just online banking, but fast mobile application-based banking and solutions, not to mention contactless payment. “Currently the main focus of bank managers is on digitalization and the fintech world. In the next decade we will face a gradual shift towards innovative solutions that will make our customers lives easier, focusing ever more on client needs, fast and tailor-made solutions,” Balog says. “This is explained by the change in client needs of the digital generation, the emergence of new technologies and adjustments in regulation. This will be visible in business models, in products/services and also in the channels through which banks serve their clients. We at MKB Bank very much believe in digitalization; we very much focus our efforts to build a bank based on traditional values but with an innovative approach that benefits our customers,” the CEO concludes.

Editor’s Note: All the major banks were contacted to contribute to this article, but all the others declined, one going so far as to say: “We do not answer such questions.”

Market Shares National Bank of Hungary data reveals that market concentration only slightly changed during the last year as compared to 2016. The ten biggest financial institutions held a total of 71.7% market share, while the five biggest lenders cut out a 49.5% slice of the pie. Additionally, the ratio of domestic ownership in the sector edged up just a tiny bit to 55.4% of total assets from 54.7% at the end of 2016.

www.bbj.hu

Budapest Business Journal | March 9 – March 22, 2018

Banking Sector Profit Jumps 50% in 2017 The after-tax profit of Hungary’s banking sector climbed 50% to HUF 632.4 billion last year, lifted by higher revenue from commissions and fees, freed up risk provisions and the lower corporate tax rate, data released by the National Bank of Hungary (MNB) on February 28 shows, state wire service MTI reported. The sector’s net interest revenue edged down 1% to HUF 775.2 bln. But net revenue from commissions and fees rose 5% to HUF 512.4 bln. The MNB noted that it made the comparison from the start of the year, rather than the end of 2016, because of the switch by 14 lenders from Hungarian Accounting Standards to International Financial Reporting Standards from January 1, 2017.

Erste Group net Income in Hungary Climbs 23% Net income of the Hungarian business of Austria’s Erste Group rose 23.4% to EUR 164.9 million last year, state news service MTI reported. Net interest income was up 14.4% at EUR 198.4 mln on the back of the acquisition of Citibank’s retail portfolio. Most of the loans in the portfolio are unsecured, Erste noted. Net income from commissions and fees increased 11% to EUR 157.4 mln due to higher card, payments and securities fees in the retail business, also supported by the former Citibank portfolio. Operating expenses rose 12.9% to EUR 220.8 mln but the business’s cost-to-income ratio fell to 55.9% from 57.5%. Erste Group booked a EUR 55.3 mln cost for the bank levy and made a EUR 8.7 mln contribution to the deposit insurance fund. Erste’s headcount in Hungary rose 6.1% to 3,047 at the end of December. The group has said it is not interested in acquiring Budapest Bank.

KBC Shows Interest in Budapest Bank Johan Thijs, CEO of Belgium’s KBC Bank N.V., the parent of Hungary’s K&H Bank, said it is definitely interested in Budapest Bank, although he did not go into any details, reported portfolio.hu. According to some sources - including Minister for National Economy Mihály Varga - state-

INSIDE VIEW

From Fintech to Solar Financing: What Moves the Banking Sector in 2018?

owned Budapest Bank may be offered for sale this year. K&H Bank, meanwhile, had after-tax profit of HUF 41.8 billion last year, CEO David Moucheron said at a press conference on February 26, vg.hu reported. The bank’s share of the lending market edged up to 10.5% from 10.2%.

OTP CEO Speaks out Against Transaction Tax The banking costs of customers have increased by 48% since the implementation five years ago of the financial transaction tax payable on most banking transactions, and OTP Bank last year paid HUF 50 billion to the state budget, said Sándor Csányi, chairman-CEO of OTP, Hungary’s biggest commercial lender, hvg.hu reported. Csányi said that the transaction tax should be phased out or the rate should be lowered. In other news, OTP’s fourth-quarter after-tax profit jumped 159% year-on-year to HUF 68.5 billion, lifted by an increase in lending activity and a strong performance by the bank’s foreign units, an earnings report released on March 2 shows, Hungarian news agency MTI reported. Csányi also said OTP Bank has specific acquisition targets in two European countries where it is not yet present. Csányi did not name the two countries but said OTP plans acquisitions that it can execute quickly and that produce a return. It’s difficult to find a target in Slovakia, where 3-4 banks control 90% of the market, but it “would be nice” to expand further in Romania, for example, he added.

UniCredit Books Profit of EUR 165 mln Italian bank UniCredit booked after-tax profit of EUR 165 million at its business in Hungary in 2017, down 5% year-onyear, an earnings report released by the lender shows, portfolio.hu reported. Net interest income fell 7% to EUR 188 mln. Net revenue from commissions and fees rose 7% to EUR 134 mln. Operating costs rose more than 3% to EUR 173 mln. Operating profit fell 13% to EUR 216 mln. The stock of client loans reached EUR 3.857 billion at the end of December, up 8% from 12 months earlier. The stock of client deposits rose 6% to EUR 5.245 bln.

Erika Papp

Sándor Kovács

Partner, Head of Banking and International Finance

Associate

CMS BUDAPEST

so, despite of relatively high prices, In this article, we try to present the most important we expect new acquisitions as well. Portfolio Transfers trends to follow in 2018 In the last few years, we have in the finance market. We represented both sellers and buyers certainly do not have a in respect of several loan portfolio transfers. Such transactions were due to crystal ball, our predictions the clarification of the banks’ portfolios, are mostly based on logical selling NPLs. The purge of banking conclusions of the past years’ balance sheets is in an advanced phase, although it is not yet over. On the other experience and market hand, due to the decreasing default rates, performing retail (and to a certain extent knowledge gained from corporate) portfolios have become our clients, including all the attractive to many investors. Therefore, major Hungarian banks and this year we expect more PL portfolios to be marketed, even bearing in mind that many blue-chip investors.

Fintech

Starting with what will not come, we need to mention fintech. Whilst advanced technology-based financing methods were in the focus of attention last year, and some already ring the bell over the banking sector as we currently know, in our view, 2018 will not be the year of the Hungarian fintech revolution. The main reason is the absence of a legal background: whilst the London market is full of ICOs and crowdfunding projects, the lack of a solid legal framework will discourage not only investors, but also potential customers. What seems to be more realistic is that more traditional banks will take a step forward and use new technology, for instance blockchain methods in their internal processes.

Real Estate Market

We predict that 2018 will be the year when REITs finally find their place on the market. Alongside existing and popular investment fund structures, this year we shall see new projects using REITs (and related companies) instead of simple SPVs. Such choice of developers will definitely be inspired by tax benefits, but some of them will also be made in course of pre-structuring IPOs. Last years’ rise in the number of retail developments might not continue due to the uncertainty around the preferential VAT rate. The average 1.5-2 years’ timeframe for such projects indicates that if the preferential VAT is over by the end of 2019, a project started after Q2 of 2018 bears a higher risk. Thus, given the lack of a clear message from the government in this respect, we expect fewer new residential projects to be started in the second half of the year. Office building market still seems to be stable, new projects will be ongoing. The 6-6.5 % yield may still be attractive to foreign investors, and many domestic players sit on too much cash;

transferring such portfolios is a much more complex exercise that requires careful structuring.

Solar Projects

It is not bold to predict that this year will bring massive numbers of solar developments. Calculating even with only one-third of existing “KÁT” licenses, we see that many of the projects are yet to be realized. The available double-digit equity return is very attractive for both domestic and foreign investors, and such enthusiasm does not seem to be calmed by changing legislation risk. Nevertheless, it is to be emphasized that many banks are already full of credit requests, so they could be very selective with their clients. SPVs are highly preferred as borrowers in order to avoid performing a full scope due diligence. Also, the location of the project may be even more important than the number of sunny hours; a wellpositioned network access point may save a lot of extra cost. For this reason, prudent banks will prefer industrial parks, or at least brown field investments when deciding on a project. Having in mind the relatively long-term of such loans comparing to the short-term sources allocated to them, we expect that increased cost and market disruption clauses will attract a lot of attention during negotiations. Given the license structure, the high number of obligors may be challenging when structuring or contracting such projects. Our office has elaborated the necessary template agreements, which will save time and costs on both the borrowers’ and lenders’ side.

cms.law

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

Banking ///briefs

Special Report | 13

14 | 3

Special Report

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Budapest Business Journal | March 9 – March 22, 2018

Private Banking Sector Sees Steady Growth than HUF 3 bln in assets will grow by more than 50% in the next five years.” Hungary has some 15-17 private banking institutions (the exact number depends on how the term is defined),

Hungary’s private banking sector is not about to rival that of Austria, let alone trouble the gnomes of Zurich. But after suffering a crisis of confidence in 2012, it has been expanding without pause ever since, says industry specialist Blochamps Capital.

serving

18,000-20,000

“High Net Worth Individuals” - the industry term for the rich, who typically hold two or three accounts each.

Market Leader

According to Karagich, the market is led by OTP, which boasts some 21,800 accounts - half the sector total, with assets under management of HUF 1.515 tln, more than three times that of second placed Friedrich Wilhelm Raiffeisen PB. However, the story is not all about expansion. Market consolidation, primarily caused by the decision of Citibank to sell its Citigold high-end operation (see box) meant some

KESTER EDDY

8,000 accounts

István Karagich, Blochamps Capital.

Hungary’s Private banking sector, designed to attract the savings of the wealthy, saw its total assets under management rise to a record HUF 4.135 trillion (EUR 13.2 billion) last year, a 7% increase on the 2016

figure, according to the latest study by Blochamps Capital, a Budapest-based private banking advisory firm. Moreover, given the economic outlook and supportive taxation environment, this trend is set to continue.

“I expect the sector to see a compound annual growth rate of some 10-12% from now to 2020,” István Karagich, chief executive, Blochamps, told invited financial journalists on March 1, adding: “That segment of the population with more

were transferred last year to Erste’s “Erste World” banking segment, a classification one level below genuine “private banking” status. This, together with pressure to reduce costs, has meant a reduction in account numbers, from 48,000 in 2016

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

INSIDE VIEW

TOTAL ASSETS FOR HUNGARIAN PRIVATE BANKING

Rising Expectations Kolos D.Nagy Team Leader – Accountancy&Finance recruitment HAYS HUNGARY As in previous years, the trend continues in 2018 as companies are increasingly centralizing their financial processes. Several companies that are present in the Central and Eastern European region have decided to outsource their financial processes to clusters responsible for three or four country processes at one time, so they can centrally manage monthly closings. As a result of the centralization processes, the number of “classic” fullscope accounting and controlling positions has clearly decreased in the last three years. From 2018, we expect that the largest multinational companies will further expand their shared service centers in Budapest with high value added financial processes especially in taxation, auditing and controlling areas. The financial and accounting labor market is significantly different from other areas as it has a “ job-driven” labor market, which means that there are more professionals available on the market than the number of vacant positions. Due to this phenomenon, the competition is getting stronger among the candidates. In order to

be able to stand out from the mass of jobseekers, these professionals should have some additional financial qualifications (IFRS, ACCA) or technical knowledge (VBA, SQL) as well as their degree.

2016

In line with these impacts, candidates can also be seen favoring opportunities where the company also provides vocational training. If the employer financially supports IFRS, ACCA or other sector-specific training, there is a noticeable increase in employee loyalty and satisfaction.

2015

After some tough years following the economic crisis, the newly strengthened banking sector is producing more and more profit and staffing is expanding. While some years ago, banks closed their respective departments, new features and new market players have emerged, and new credit and investment products have an incentive effect on both retail and corporate customers.

2012

In the investment banking sector, 2017 was an exciting year as the emergence of new market players resulted in serious job competition. Fluctuation has increased, which has led companies to spend more on internal career paths. Salaries grew, bonuses changed, cafeteria became higher, so wages rose by 10-15% over the year.

HUF 3.860 tln HUF 3.480 tln

2014

HUF 3.018 tln HUF 2.750 tln

2013

HUF 2.424 tln HUF 2.511 tln

2011

HUF 2.349 tln

2010

HUF 2.126 tln

2009 2008

HUF 1.691 tln

2007

HUF 1.671 tln

2006

www.hays.hu

HUF 4.135 tln

2017

2005

HUF 1.270 tln HUF 902 bln

BBJ infographic Source: Blochamps Private Banking Advisory

www.bbj.hu

Budapest Business Journal | March 9 – March 22, 2018

The swish world of private banking is available in Hungary at a significant discount compared to the United States. “You really need USD 1 million in New York to start an account,” says István Karagich, of Blochamps Capital. “If you are handsome, or well connected, you might be accepted for half that. But, with quantitative easing and cheap loans, the banks have got more choosy,” he says. Unsurprisingly, Hungary is in a different league: according to Blochamps, the entry threshold varies from as low as HUF 10 mln (USD 39,000), though most banks require something in the range

to 42,335 last year, a shrinkage of 12%. Blochamps estimates the sector employs about 380 staff today, a contraction of nearly 1% on 2016. Nor has the going always been serene: Karagich declines to reveal names but says recent changes of ownership and management have resulted in convulsions in some operations, with key relationship managers, the professionals who work face-to-face with clients, unhappy with the changes and jumping ship. “I have excellent contacts [in this industry]. People talk to me, and I would say two or three banks have had management issues. Private banking is very personal: it’s not like fund management,” Karagich told the Budapest Business Journal.

Satisfactory Returns

of HUF 30 mln-100 mln (USD 120,000-390,000). A quick check on a handful of websites found some banks taking banking secrecy so seriously that they fail to reveal their minimum balance requirements. Raiffeisen specifically Friedrich Wilhelm Raiffeisen PB - was one exception. It’s most informative website (in Hungarian and English) stipulates HUF 70 mln (USD 275,000) as the threshold balance for “preferred private customer status”. But it allows no slackers: any dip below HUF 50 mln and the client risks the ignominy of reclassification to mere “retail customer” ranking.

The industry is also facing “huge costs” in complying with MIFID II - the acronym for the latest set of European financial regulations which came

“We’ve largely missed out on the recent stock market boom,” says Karagich. “Hungarians typically want to hold about 15% in stocks. In the West, it’s more like 35-45%.” into force at the beginning of 2018. These outlays are likely to force more consolidation within the next 24-36 months, Blochamps argues. Nonetheless, the sector has come a long way since 2012, when assets under management declined by

Furthermore, in this period of recordlow interest rates and quantitative easing, private banking has struggled to offer its clients satisfactory returns on capital - a problem exacerbated in around Hungary by client aversion to investing in stocks. “We’ve largely missed out on the “For years it was a challenge to convince recent stock market boom,” says people to keep their money here,” says Karagich. “Hungarians typically want to hold about 15% in stocks. In the West, Karagich. “The taxation system now is excellent; we will see more growth.” it’s more like 35-45%.”

HUF 87 bln.

Citibank: Service When it Really Counts All banks promise service with a smile, at least when they want your custom: but it’s when they pull out of the market that you really know if they mean it. At such times, the service can suddenly turn short and sour. So, when Citibank decided in 2014 to off-load Citigold Hungary, it’s premium retail operation, clients were understandably concerned. They needn’t have worried. According to Blochamps’ Karagich, Citi took pains to ensure customer satisfaction to the end. “There were three or four potential buyers, all trying to negotiate terms, but Citibank U.S.A. insisted it would sell only

if service standards were maintained,” he told the BBJ. It meant that when Erste Bank Hungary completed the sale in early 2017, Citi’s 8,000 clients completed a smooth transition to their new bank. Those meeting the HUF 70 million entry threshold moved into Erste’s full private banking services, while the majority, slotted into the Austrian provider’s “Erste World” customer segment. “This was a very good commercial for Citibank,” says Karagich. “The big winners were the Hungarian clients. They should be very grateful to Citibank U.S.A. for this.”

INSIDE VIEW

Uncertainties related to ICOs and ITOs Gergely Szalóki

Virág Palguta

Partner

Associate

SCHOENHERR HETÉNYI ATTORNEYS AT LAW

Initial coin and token offerings (“ICO/ITO”) are innovative ways to finance startups similar to shares IPOs or crowdfunding. Startups may use these processes to raise funds with the aim of avoiding the rigorous regulation of the traditional capital-raising process. What is an initial coin/token offering?

In ICO/ITO, tokens (i.e. tools allowing for different benefits) are issued and sold to investors in exchange for legal tenders or other cryptocurrencies. The first generation of these virtual assets were crypto-coins like Bitcoin, while the next generation are tokens which cover a broader utility than crypto-coins and therefore, they may be more attractive for investors. In the ICO/ITO processes, the startup issuing the token creates a whitepaper. This document describes the background of the project, the features of the product, the terms and conditions of the token, timeframe and the team behind the project. ICO/ITO campaigns are conducted online, meaning anyone with access to the internet may participate in an ICO/ITO. After the marketing stage and when the whitepaper has been circulated, the startup will have a sense of whether investors have an interest in the project. Considering the amount of interest shown, the startup may sign the offer and announce the start date of the ICO/ITO. The tokens may have several features; for example tokens may provide access or purchase rights to the product developed by the issuer using the proceeds gained from the ICO/ITO, or a share in future revenues/voting rights etc. Other tokens may be exchanged for traditional or virtual currencies at specialized coin exchanges after issuance. The ICO/ITO will be unsuccessful if the money raised by investors does not meet the minimum amount required by the startup. If the raised money meets with the required funds within the specified timeframe, the scheme will be completed.

Startups may bypass the regulatory requirements as the tokens do not qualify as financial instruments (except when the token’s benefits are related to participation rights, such as voting or some form of profit sharing, in which case there is a risk that the tokens qualify as securities). Therefore, the ICO/ITO will not constitute a regulated activity and thus, will not be bound by legal requirements. Also, there is no legal standard for the whitepaper. Whereas, in the case of an IPO, the issuer must comply with a broad range of regulatory obligations. From the investors’ side, however, an ICO/ITO is considered much riskier than other types of investments. At the end of 2017, the European Securities and Markets Authority issued two statements addressed to investors and firms involved in ICO/ITO schemes, identifying the main risks emerging in relation to them. In particular, investors are not protected by law, investors may lose the invested money due to the risk of failure of the funded project, an ICO/ITO may be used for fraudulent activities, whitepapers may contain incomplete or inadequate information, or coins/tokens may be stolen.

Similarities with crowdfunding – Hungarian aspects

The Hungarian regulatory environment for ICO/ITOs is very underdeveloped. Due to the similarities between crowdfunding and ICO/ITO, though, there is a chance that ICO/ITOs might be treated similarly to investment-based crowdfunding. Regarding crowdfunding, the National Bank of Hungary (MNB) concluded that investors may be deemed as providing lending activity which may be subject to licensing requirements, if repayment of the invested money is set forth (e.g. in case tokens will be exchanged for (crypto)money). The MNB also noted that startups looking for funding (via crowdfunding) might be deemed as collecting money from the public if repayment of the invested money is required. In Hungary, such activity is strictly reserved for banks. Such a conclusion might also be reached regarding an ICO/ITO in the case that the terms of the tokens are not carefully worded. Considering the above uncertainties, we can conclude that the Hungarian regulatory environment is not (yet) adept at ICO/ITO, but there are signs that both the legislator and the regulator have started to consider the new world of cryptos.

What is attractive for startups, might be a gamble for investors ICO/ITO requires less effort, and fewer resources and obligations to fulfill.

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

Private Banking Easier in Hungary

Special Report | 15

16 | 3

Special Report

www.bbj.hu

Budapest Business Journal | March 9 – March 22, 2018

Hungarian Team to Launch Korona Coin Cryptocurrency

KESTER EDDY

Korona Coin, created by a Budapestbased team, will go on sale in a European offering from March 26, but it is registered in Switzerland, and regulated by Swiss law.

Jean-Marc Stiegemeir. If you believe Jean-Marc Stiegemeir, Korona Coin, Hungary’s soon-to-belaunched contribution to the growing array of world cryptocurrencies, will revolutionize the lives of everyone with access to a smartphone. “I predict that over the next few years we’re going to see a revolution in how retail merchandising, as well as commercial banking, operate,” head of management Stiegemeir told the media on February 15 at a press conference announcing Korona Coin, a new cryptocurrency. “Within ten years, cryptocurrencies are going to be widely accepted not only in-country, but on a world-wide basis... to buy retail goods, [do] business and trade currencies,” he added. Stiegemeir, a former NASA space engineer, compares this forthcoming cryptocurrency revolution to Amazon and the online sales shake-up that has left shuttered retail stores in its wake.

Financial Officialdom Wary of Cryptocurrency Risks

Business Wallet

Banks, which increasingly rely on ever increasing fees to boost profits, should be alert or order the shutters, he hinted, because cryptocurrencies, especially Korona Coin, are going to take away much very lucrative business.

In addition, the Korona Coin market will be an e-commerce website “presenting products from third-party websites that normally don’t accept cryptocurrency payments”, while retail businesses will use a business wallet that enables companies to register and give support for VAT reporting, invoicing and accounting;

Music to the Ears?

While this may be music to the ears of anyone reading the bewildering list of charges on their bank statements, with Bitcoin and other cryptocurrencies available, why bother with Korona Coin? Because the new currency, and its associated ‘eco-system, is a quantum leap in the game, asserted Tuan Trinh, a cybersecurity expert, associate professor at Corvinus Business School and adviser to the Korona project. Bitcoin may dominate the market for now, but it is slow, expensive and energy intensive, making it unsuitable for efficient business transactions, Trinh said. To address these weaknesses, Korona Coin will create three pillars: an efficient digital payment platform, a crypto-bank allowing zero-cost currency exchange, and the korona tokens essential for the new crypto-economy. “We have cryptocurrency 1.0 right now. We are here to build cryptocurrency 2.0,” Trinh said. In further, detailed explanation, Attila Bustya, Korona Coin’s head of technology development, said the ecosystem would include a unique “price comparator” that

“A lot of trials have been made to overcome the bitcoin shortcomings, but none has [emerged] as a clear contender. Maybe it could be Korona Coin.”

Photos by Mary-Anna Nagy

Cryptocurrencies and controversy have gone handin-hand since the debut of Bitcoin in 2009. A cheap, easyto-use money in the eyes of supporters; a volatile risk, if not a potential fraud, for detractors. Now Hungary is about to get its own cryptocurrency, kind of.

Attila Bustya. would allow retail customers to buy products “at the cheapest possible price” anywhere in the world.

functions that are “really hard to implement” with the first generation of cryptocurrencies, Bustya said. It sounds very impressive, although by March 7, the Korona Coin website koronacoin.io displayed a mere nine cooperating companies, including Csikisor, the Romania-based brewery at the center of a trademark row with Heineken last year. As to whether Korona Coin in particular, or cryptocurrencies in general will leave banks closed and shuttered, the jury is still out. “I guess a good comparison with the current mania around cryptocurrencies might be with the dot.com years of two decades ago,” János Samu, head of research at Concorde Securities, Hungary, told the Budapest Business Journal. “Today, we can see the landscape, and only a couple of them survived. The names which are currently ruling the internet were either absent at that time, or not in the first-tier companies from that time.” Moreover, commercial banks are themselves working on their own cryptocurrencies. “A lot of trials have been made to overcome the bitcoin shortcomings, but none has [emerged] as a clear contender. Maybe it could be Korona Coin,” Samu said. “It is very hard to say in what form cryptocurrencies are going to survive or change the world.”

While the National Bank of Hungary (MNB), at the time of going to press, has not issued any opinion on Korona Coin, like other central banks, it has warned in the past about what it sees as the dangers and volatility risks of cryptocurrencies. In December 2016, as reported by the BBJ, the central bank stated that “So-called cryptocurrency issuers, generally advertising on the internet with intensive marketing tools and promising yields, are trying to entice more uninformed users into the system.” In other words, apart from the risk of systems designed to defraud from the outset, even ‘good’ cryptocurrencies are very risky. For central banks, the very essence of cryptocurrencies - part of their inherent flexibility and costsaving characteristics - is at the same time, their potential downfall, namely, there is no “authority” i.e. central bank, ensuring proper transparency, regulation and, ultimately, able to support the currency in time of crisis. This makes cryptocurrencies very much a matter of belief: should token holders lose faith in the new money, it will collapse. Naturally, this is true even for national currencies, except that such traditional money has a ‘home’ country (or countries) which use and need it every day, plus a central bank, regulator and government which must answer if things go wrong. Advocates of cryptocurrencies respond that it is the very nature - indeed the responsibility - of central banks and associated established infrastructure to eye any revolutionary systems with suspicion. Speaking as a neutral, János Samu, head of research at Concorde Securities, told the BBJ: “The MNB warnings are similar to what other central banks are saying and thinking.” Samu notes, however, that among big financial hitters, Christine Lagarde, head of the International Monetary Fund has stood out as an exception to the rule. “Christine Lagarde has been the most positive official, more broadly about fintech, and within that, perhaps even the cryptocurrencies have been mentioned by her a couple of times. I think the IMF is pretty much keen on it,” Samu said.

www.bbj.hu

Budapest Business Journal | March 9 – March 22, 2018

Special Report | 17

Prudent Operation of Exim Devil in the Data More Crucial Than Ever INSIDE VIEW

LEVENTE HÖRÖMPÖLI-TÓTH

After Exim CEO Zoltán Urbán was found dead on an Austrian ski slope on December 30, his duties were provisionally performed by András Puskás, deputy CEO and Gergely Jákli, managing director. At the time of going to print, no new leader has been appointed; However, as of February 1, Dr. József Dancsó became operative deputy CEO and he simultaneously assumed the role of acting CEO for now. A statement Exim sent to the Budapest Business Journal in response to our questions says Dancsó’s “duties shall include control of accounting, controlling and reporting, money and capital market operations, strategic analysis, procurement and operation, IT operation and development.” Dancsó told online publication OrosCafé: “I believe my years of experience in banking justify my appointment and I hope I can live up to the trust placed into me.” OrosCafé has shown particular interest in the latest career development of the economist because Dancsó was Mayor of Orosháza (a town 197 km southeast of Budapest) from 2010 to 2014. After being mayor, Dancsó was chairman of the Hungarian State Treasury until September 2017. His arrival at Exim was made even more necessary after former deputy CEO Puskás left the entity for a top management position at state-owned Budapest Bank. Online news portal 24.hu speculates that Puskás ended up there since the government might want to create a Hungarian super bank by merging it with MKB and saving cooperatives. The state is obliged to sell Budapest Bank this year and, as 24.hu argues, it is highly unlikely that they would simply sell it to a market competitor since they had bought it just a few years back for HUF 200 billion.

Exim now Part of State Debt How prudently Exim is run has become more crucial than ever as, according to Eurostat, the EU’s statistical body, its liabilities must be added to state debt calculations from now on. Effectively, Hungary has lost a legal dispute with Eurostat, in which the local authorities tried to argue that Exim’s debts should not be considered part of the state budget. The liabilities in question are made up of bond debt worth

HUF 1 billion and EUR 400 million, plus additional bank loans, which totals

1.9% of GDP.

As a result of the new calculation method, the drop in state debt relative the GDP, while still heading in the right direction, turned out to be less spectacular in retrospect than had been communicated by the government. Yet, the ratio did go down from 76% to 74% between 2016 and 2017. That figure is also way below the European Union average of over 80%, although skeptics argue that the heyday of 50% last seen back in the early years noughties is still a long way off. The government of Hungary is bound by the constitution to reduce state debt each year until that 50% threshold is met.

Dr. Edina Schweizer

Partner Co-Head of Banking&Finance Group CEE Head of Banking&Finance Group Hungary Noerr & Partners Law Office

How digitalization, artificial intelligence and blockchain will change the financing landscape. The financial services industry is going through dramatic changes as a result of shifting customer expectations, the adoption of innovative technologies and the digitalization of society in general. Contracts are being written by algorithms, artificial intelligence like the humanoid robot Sophia is evolving dramatically, and people are trading with virtual money. The banking sector has also reached a digital crossroads.

Digitalization

József Dancsó. Pundits welcomed the fact that the government had acknowledged the binding European decision, since this avoids projecting an image of being an untrustworthy data supplier. Interestingly, though, nominal debt has actually been rising since 2011: at that time it stood at EUR 72 billion, whereas at the end of 2017 it exceeded EUR 84 bln. However, the Russian loan of HUF 3 trillion taken out to expand the nuclear power plant in Paks and the mostly Chinese loan of HUF 550 bln to be used to construct the Budapest-Belgrade railway link are bound to make things worse in the longer run in terms of state debt. So, one could argue that compared to those two massive financial commitments, Exim’s liabilities are tiny, no matter how unpleasant the government might find it to take them into account in the future when reporting government debt figures relative to GDP.

Digitalization is both the accelerator and the result of our fast-paced lifestyle. Like other industries, the banking sector also faces pressure to digitalize. Digitalization may impose significant cost burdens, but on the other hand it will help the banking industry to boost revenues by increasing efficiency, saving costs and mitigating fraud risks. Customers in the 21st century expect to be able to handle their financial transactions on every possible device at any time: it’s the user experience that counts. In addition, they appreciate innovative services like being able to check their bank account balance through Facebook Messenger or using a money application on their smartphones to arrange for automated small-scale savings from their account each week. Banks have to catch up, otherwise the market may find a way to create substitutes for these services.

Besides ‘FinTech’ (financial technology) companies, another threat or opportunity (chose your standpoint) for the banking sector is the presence of digital giants like Google, Apple, Amazon and Facebook, which have completely shaken up and reframed the industries they originally entered and are now dedicated to entering new segments and markets such as financial services to broaden their services vertically.

market crash caused by automated algorithmic trading? Yes, it was. Thus, AI research and development is key to helping decision-makers identify the appropriate areas and level for integrating AI into banking processes to minimize the risk of similar system crashes.

Blockchain

Recent incidents relating to Bitcoin and other digital currencies have discouraged banks from focusing on blockchain technology. But remember the dotcom bubble? A lot of internet-based companies failed, while the internet itself as the basis survived and evolved. Similarly, Bitcoin may fail but the underlying blockchain technology will most probably survive. For banks, “permissionless” open blockchain technology like the Bitcoin ledger may be less appealing simply because the potential risks are still less well understood. Therefore, banks are likely to focus on closed or “permissioned” blockchain technology. Blockchain technology has great advantages but also has its limits. For example, it is currently unable to process transactions as quickly as the traditional systems of banks and credit card companies. If this feature bug is eliminated without compromising the level of security and proof, theoretically the bank account balance registers of each Hungarian bank could move to a shared blockchain system. If so, a customer transferring money to another customer at another bank would not need to run the operational risk of two banks and the GIRO system as an intermediary. Some financial service providers are already developing their own blockchain system. There is no standard widely adopted yet, so there may be a race for the upper hand in permissioned blockchain technology, similar to the race between Blu-Ray and HD DVD technology in the early 2000s, allegedly won by the latter – until the entire concept of storing media on discs was swept away by Netflix and other video-on-demand systems.

Summary

As digitalization technology, AI systems and blockchain technology get more sophisticated, banks are looking to this technology to gain an edge over the competition. This is seen as the way forward in this innovative and collaborative landscape. Everybody is talking about the digital era in banking, without exactly defining what it is. Thus, the question remains: are we there yet? The answer is 42.

Artificial intelligence

JPMorgan Chase, Wells Fargo and several banks are using AI for chatbots, security applications and even for contract review. But hang on a second! Wasn’t the 1987 ‘Black Monday’ stock

www.noerr.com

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

After tragically losing its CEO just before the New Year, Exim is still under interim management. From here on its liabilities will be under more scrutiny than ever as it must now be considered as part of the national debt according to the European Commission.

18 | 3

Special Report

www.bbj.hu

Budapest Business Journal | March 9 – March 22, 2018

EIB Gave Hungary EUR 700 mln in Loans in 2017 Smart City Feasibility Study

The EIB Group, comprising the European Investment Bank (EIB) and the European Investment Fund (EIF), increased its commitment in Hungary both in terms of lending and guarantees and investments in 2017, it was announced in Budapest on March 1. ROBIN MARSHALL

EIB loans reached EUR 702 million, an increase of approximately 3% year on year, while guarantees and investments by the EIF amounted to EUR 70 mln, a “very significant” increase from previous year’s EUR 10 mln, the bank said. EIB vice president Vazil Hudák, responsible for the bank’s operations in Hungary and Cohesion countries, told journalists in Budapest that the EIB sees even greater room for the bank’s engagement in the country. In particular, the bank is interested to boost financial support and to deploy advisory and expert services, leading to an increased use and absorption of available resources, he explained. “Hungary plays a crucial role in the Central European region and is, for many international companies, a gateway into the European Union,” Hudák said. “The stronger the Hungarian economy and businesses are, the better for the country. Small- and medium-size enterprises are of a particular importance

Vazil Hudák, EIB vice president, at the “EIAH Days” roadshow in Budapest. and supporting their scale-up and growth is a key priority for the EIB,” he added.

Long-term Finance

The EIB is the long-term lending institution of the European Union and is owned by the EU Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals. EIB loans

represent

0.63%

of the country’s GDP, compared with a EU average of 0.46%, showing the significant impact the EU bank’s financing has on the

Investment and Finance Survey financial year of consideration (the Coinciding with the visit to survey was conducted before last Budapest, the EIB Group has also summer); firms in the manufacturing released its latest annual EIB Investment and Investment Finance sector are the most likely to expect more investment, but the optimism Survey (EIBIS). It describes this as is shared by companies across all a unique, EU-wide survey of some 12,300 firms. It collects data on firm sectors. • Availability of skilled staff and characteristics and performance, uncertainty about the future are past investment activities and key investment barriers mentioned future plans, sources of finance, by companies, as is also the case financing issues and other EU-wide. Access to finance is still challenges that businesses face. a barrier for 43% of SMEs but only The key findings for Hungary, based 20% of large firms. on a survey of 475 firms are: • 9% of firms are finance • After a temporary slowdown in constrained. This is above the EU 2016, growth is forecast to pick up again, driven by private consumption average but an improvement since last year. and rebounding investment. • Hungarian firms on average expect The full report can be found on the eib.org website. to increase their investment in the

Hungarian economy, the investment bank said in a press release. Last year’s EIB lending in Hungary focused on fostering Hungary’s competitiveness and job creation in export-oriented SMEs with a EUR 400 mln loan to Magyar Export-Import Bank (Eximbank). With a new tranche of EUR 200 mln under the framework of European Regional Development Funds and the European Social Fund (as part of the 2014-2020 EU programming period), it sought to provide additional support in the development of the knowledge economy in Hungary, improvement of education and employability, health and social inclusion, the EIB said.

Dedicated SME Loan

It also aimed to ensure adequate financing conditions for Hungarian corporates through a EUR 100 mln loan dedicated for SMEs and Mid-Caps given to UniCredit Hungary. Separately on March 1, the EIB and Hungary’s Ministry for National Economy signed a nearly

EUR 100 mln project

supporting investment plans of Budapest’s University of Sport Sciences and Physical Education (USSB) and the University of Pécs, designed to increase quality of teaching, research and learning facilities. The enhanced university facilities will attract an increasing number of home and foreign students, thereby having a positive effect on the innovation capacity of the country and positively impacting growth opportunities.

EIB vice president Vazil Hudák signed an agreement between the European Investment Advisory Hub (EIAH) and the Hungarian Development Bank (MFB) on March 1 to explore the feasibility of creating an investment platform focused on smart cities and transport in the central European country. “Smart cities are particularly important as future hubs of investment and talent, with impact on growth and jobs in the economy,” Hudák said during his opening speech for the “EIAH Days” roadshow in Budapest. “For the EIB, smart city and regional investment is a way to respond efficiently to our social and territorial cohesion mandate by supporting the upgrade of local economies in a quickly evolving digital world,” the vice president explained. “The investment platforms can play an important role in facilitating better access to finance through the aggregation of projects that would otherwise be too small or too risky. With this flexible concept, I believe we can identify together with MFB a strong pipeline for the investment platform, to finance a number of smart investment project in Hungary.” The EIB’s investment survey (see box) has helped to identify existing investment gaps and opportunities for smart city investments in Hungary. The agreement signed with the MFB will help examine the extent to which an investment platform could help to address those investment gaps, the EIB said. Central and Eastern Europe cities show large, untapped potential for growth and development, the investment bank says. In many areas, city productivity is below the EU-28 average and smaller cities are lagging behind the capitals in terms of economic growth. Smart investment can address existing infrastructure gaps as well as unlock innovative potential. The European Investment Advisory Hub is one of the elements of the Investment Plan for Europe, an initiative by the European Commission and the EIB that aims to revive investment in strategic projects around Europe to ensure that money reaches the real economy, by offering advisory and technical assistance services for investment projects. The EIAH has been organizing a roadshow around target CEE countries in collaboration with local partners. Similar events have been organized so far in Slovenia, Bulgaria and Poland. The next EIAH Roadshow events, after Hungary, were due to be in Croatia and Slovakia. In total, nine countries have been identified by EIAH as having the greatest advisory service need, also including Latvia, Lithuania, and Romania.

www.bbj.hu

Budapest Business Journal | March 9 – March 22, 2018

Focus

Translation

Sandwiched Between Waves of Pressure The biggest players in the local translation market seem to be stuck with current rates, while the pressure is on from clients to improve efficiency and from subcontractors and employees to pay more. LEVENTE HÖRÖMPÖLI-TÓTH

More workload, intensifying competition and growing revenues − these are the key trends of the Hungarian translation market, estimated at HUF 9 billion, that were detected in the yearly survey by Proford, the Hungarian Association of Professional Language Service Providers. As Proford chairman Miklós Bán tells the Budapest Business Journal , the findings are in sync with what is going on globally. “The volume to be translated is on the rise, but since no proportionate budget is allocated to orders, more efficiency is badly needed to make clients happy,” Bán says. Sixty percent of the respondents in 2017 said that competition had become fiercer, as opposed to 38% in 2016, whereas the ratio of those reporting revenue growth climbed from 40% in

From left to right: Miklós Bán, espell Zrt.; Veronika Mendel, Intercontact Kft.; and Péter Lepahin, Hunnect Kft. 2016 to 50% in 2017. Average revenues in 2016 of the polled agencies amounted to

nearly

HUF 161 mln. The statistics indicate a parallel increase in rates, with 21% claiming last year that they managed to raise their prices. However, Péter Lepahin, general director of Hunnect Kft., believes that just a few players would be able to affect an overall rate increase. “It should be rather typical in certain specialized areas, such as in terms of rare language pairs or some highly complex material,” he says. “Another explanation is the fact that it’s more about catching up with fees after the long years of stagnation. In the long run, we don’t expect to see a constant hike, though.”

Dynamically Growing

Veronika Mendel, CEO and owner of Intercontact Kft. agrees that raising prices must have been the privilege of some smaller, dynamically growing agencies. “We also have two-to-four-year contracts with most of our clients, so until their expiry we cannot increase our rates,” she says. “In the case of public procurement,

Yet Another Market-shaping Force Assessment of the translation market must go hand-in-hand with highlighting the impact of key lobby organizations of the sector. As Miklós Bán says, Proford, of which he is chairman, does an enormous amount of work to promote the interests of its members and local translators in the broader sense. The same goes for SZOFT, a recently established organization for freelance translators, which gathers professionals of the

new generation. “These younger translators are a lot keener to train themselves; they build networks and are characterized by more digital-age behavior than their older peers, who tend to cling to their own status quo,” says Bán. The proliferation of cutting-edge technology also carries the trend to cut the number of middle men in the supply chain, so digitally trained freelancers are gradually getting closer to clients.

it seems the situation has even worsened because of a few companies that dominate this segment with super-low rates.” It is of little help in this regard that by now, on average,

some

45%

of orders stem from abroad, the survey found. The top Hungarian translation firms often work as a supplier for international agencies which, however, also implies they are placed low in the supply chain. Ferenc Jantner, CEO and owner of Forduna Kft., notes that one of his translators once commented on poor payment by comparing the job to digging ditches. “A professional chamber that would enforce rules on the industry which must include allowing only properly qualified people to practice this profession - could change all this,” he says. Such a move would trigger a self-cleansing of the market, Jantner believes. Bán adds that big translation agencies are sandwiched between client pressure, which calls for ever more efficient operations, and a growing demand on the part of subcontractors and employees to raise payment. Bán is also head of espell Zrt., one of the largest market players. The company operates in the super premium segment that serves a mature clientele, most of whom have had very negative experience with cheaper work and are willing to pay more to have guaranteed high quality. “It all comes down to what risk the client is ready to take, that is what is reflected in the rates,” notes Bán.

Quality Expectations

Among the biggest challenges, elevated quality expectations and the difficulty to retain talent were mentioned most frequently in the survey. Lepahin confirms that quality-related benchmarks are constantly growing ever more stringent; on the other hand, compliance with the

new European data protection regulation, the GDPR, may mean companies are faced with more obstacles in the near future. Forduna Kft. has invested in infotech solutions in order to meet the elevated expectations of its clientele. By upgrading Trados translation software and training staff to use it, more consistent translations can be prepared. “Trados provides ways to spare resources as well, which allowed us to raise profits. Our rates have stagnated, though,” Jantner tells the BBJ. Forduna Kft. also runs a junior traineeship program in cooperation with ELTE university thanks to which young graduates proofread the material before filing it with the client. This improves overall quality, whilst those participating in the program get trained on the job to become pros themselves one day. As far as fighting work force fluctuation is concerned, employee needs must be taken into account with care. Citing the practice of espell, Bán refers to the particular fluctuation in the project manager position, which is a highly stressful job. No wonder many young people head across the borders after a while, seeking better wages.

CHANGE IN REVENUES (%) 12 14

No answer Don’t know

Increased

Hardly changed

29 33 2

Dropped 10

12 20

HOW DID COMPETITION CHANGE? 12 12

No answer Don’t know

2 2

Increased

Hardly changed

Dropped 57 10 20

HOW DID THE SIGNIFICANCE OF QUALITY ASSURANCE REGULATIONS EVOLVE? 12 12

No answer Don’t know

7 7 36 38

Increased Hardly changed

5 5

Dropped 10

2017 2016 Source: Proford Market Survey 2017

20 | 4

Focus

www.bbj.hu

Budapest Business Journal | March 9 – March 22, 2018

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Budapest Business Journal | March 9 – March 22, 2018

Second Impressive Year for Budapest Photo Festival Lovers of photography who happen to be in Budapest will be spoilt for choice over the coming months when the capital is transformed into the “City of Photography”. Now in its second year, the Budapest Photo Festival runs from March until April 20, with a couple of exhibitions continuing until early June. DAVID HOLZER

I spoke to photographer Szilvia Mucsy, the festival’s director, about this year’s event and how it has moved on from last year. Mucsy began her photographic career at Young Photographers Hungary, is a graduate of Moholy-Nagy University of Art and Design’s photography department and studied at the Athens School of Fine Arts. She’s also the chair of RANDOM - the Association of Contemporary Hungarian Photographers. Her work has been exhibited solo and in group shows in cities that include New York, Athens and Rome. “We were very happy to see that last year’s programs and exhibitions generated such interest,” Mucsy told me. “This is also our goal in 2018. There are almost

exhibitions

this year. We’ve involved the International Cultural Institutes and organized exhibitions in the biggest galleries, museums and art schools in Budapest.” Alongside exhibitions, the festival includes public events such as lectures, work-shops, educational events, a photomarathon, a portfolio review and photobook show. All of these take place at

Hungary for the first time. The black and white photographs record the bucolic yet timelessly ordinary days spent by Labiole’s family – he is a father of six – and capture moments of childish freedom. Children will also be the center of attention at the exhibition by Reismann Mariann Artphoto and the Ata Kandó Deák 17 Gallery. There will be several solo shows: Balázs Deim and Melinda Kovács at B32 Gallery; Marge Monkoe at Molnár Ani Gallery; Mátyás Micsetics at Várfok Projekt Room; and Miklós Gaál at Viltin Gallery. Petőfi Literary Museum will focus on 19th century photography from the perspective of the poet János Arany, born 200 years ago. The Hungarian Museum of Trade and Tourism will exhibit the cover photographs of József Füles Tóth.

Photographic Spirit Alain Laboile: Lili. Budapest Project Gallery’s Festival Center. Entry to most of the programs and exhibitions is free, though you may need to pre-register for some.

Festival Theme

“Our aim is to show the different styles and flavors of photography,” Mucsy explains. “But, every year, the festival will invite contemporary Hungarian photographers to think and create in a classical photographic genre as a way of expressing themselves. The theme for our first year was portraiture; this year,

decades. He has shot many celebrities, including his colleague and friend John Malkovich, and published nine collections of his work. The project is an homage to the iconic masters of cinema and photography, including Alfred Hitchcock, Andy Warhol and Annie Leibovitz. The exhibition is serious but also playful. Among other things, Sandro photographs Malkovich as two little girls à la Diane Arbus, as Marilyn Monroe Warholstyle, and as Einstein sticking out his tongue. Not something you’d want to miss seeing in the flesh, as it were. “We’re very excited to welcome these fantastic, unusual photographs to Hungary,” Mucsy said. Other notable exhibitions are “Invisible Cities” and “Alain Laboile: La Famille”.

“…[E]very year, the festival will invite contemporary Applicants Hungarian photographers to 300 The Hungarian photographers showing think and create in a classical their work as part of the “Still Life” exhibition were shortlisted from almost photographic genre as a way of expressing themselves. applicants. The theme for our first Still life photography was one of the first photographic genres and has never lost its year was portraiture; this popularity. It is fitting that the exhibition year, it’s still life.” is taking place in the atmospheric, eclectic

300

it’s still life. Our “Still Life” exhibition is presented in the context of the Budapest Spring Festival, with the cooperation of the Kiscelli Museum.” The festival has been designed around four flagship exhibitions. American star-photographer Sandro Miller’s “Malkovich Malkovich Malkovich: Homage to Photographic Masters” is the opening international show at Kunsthalle (Műcsarnok). “Sandro” has been a key figure in American photography for over three

surroundings of the wonderful Kiscelli Museum in the hills above Buda. “Invisible Cities” is a selection of work by Portuguese photographers Paulo Nozolino and José Manuel Rodrigues. Nozolino is one of the central figures of contemporary photography. Using sharp contrasts, glowing light and profound darkness, his symbolist universe emphasizes the lonely aspect of the metropolis. Rodrigues’ art explores the nature of beauty, time and the correlation between what is visible and invisible. Thanks to a collaboration between the festival and Institut Francais Budapest, the work of Alain Laboile is being exhibited in

Although I’ve yet to establish exactly what it is, I’m pretty certain there’s a distinctive Hungarian photographic spirit. And I’m sure Hungary produces more than its fair share of great photographers. Apart from the obvious – Robert Capa, André Kertész

Sandro Miller: Annie Leibovitz Meryl Streep, NYC (1981), 2014 – you also have Brassai, who I initially had no idea was Hungarian. His real name was Gyula Halász and he was born in Brassó, at that time in Austro-Hungarian Transylvania. Hence the nickname. Of course, the best-known Hungarian photographers of the 20th century had to leave Hungary to succeed. Today, that’s hopefully not necessary. Who knows, the next great Hungarian photographer may well be among those who entered the “Still Life” competition. At the very least, the spirit of photography is alive and well in Hungary. I’m looking forward to seeing it on display at the Budapest Photographic Festival over the next couple of months.

For more information, check out the festival website at budapestphotofestival.hu.

22 | 5

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Budapest Business Journal | March 9 – March 22, 2018

The Three Cs: Consistency, Consistency, Consistency This year’s edition of the EgerSzekszárd Bikavér párbaj (dual) held in the ballroom of Corinthia Hotel Budapest on March 2 revealed that the 33 producers present from both Eger and Szekszárd are starting to succeed in taking the bull by the horns in collectively conjuring something of a definitive style for each region. ROBERT SMYTH

Eger vintner Tibor Gál’s description of Bikavér from Eger as fruitier, dynamic, mineral and leaner than the wider, broader and fuller-bodied style from Szekszárd, did indeed hit the bullseye regarding the stylistic direction of the wines that mainly hailed from the 2015 vintage. As an aside to the main event, a sneak preview of the future was offered to wine professionals at a special masterclass at the párbaj involving as of yet (for the most part) unreleased wines from the 2016 vintage. While not wanting to automatically pen an uncritical

A key takeaway from the tasting was how well wines made from the Blaufränkish grape – in this case made by Burgenland producers Kurt Feiler and Georg Prieler – can age, picking up lots of complexity over the years. The Austrians have led the way with grape that is the same as Hungary’s Kékfrankos, of which little is set aside here for ageing, and I do hope the Hungarians will begin to keep some for cellaring. Surely the Austrians can’t touch Hungary’s sacred Furmint, or can they? Tokaj heavyweight István Balassa has cautioned that Hungarian winemakers ought to get their act together to make the best Furmint possible and do it now, as over the border in Austria the grape is being planted at a considerable rate.

Doing Furmint Well

Vineyard at the Káli Basin. “everything is getting better” kind of piece, I have to observe that barrel samples of

2016 Bikavér

from both Eger and Szekszárd showed that winemakers are getting it increasingly right. All of the wines (tasted blind) struck impressive balance between lively fruit and acidity on the one hand and restrained oak use and tannins on the other. An assortment of such wines several years ago from the same producers would have painted a much more inconsistent picture, both in terms of style and quality. However, it’s very much a case of “you ain’t seen nothing yet”, according to one Szekszárd vintner: István Bodri. “You should see the 2017s; they are going to be beautiful,” he declared, referring to a vintage in which everything pretty much went right in Szekszárd, in fact it will be the best since 2012, they confidently say.

Remarkable Consistency

My top two of the barrel samples were from Sebestyén (Iván-völgyi 2016) and Eszterbauer (Tüske 2016), two Szekszárd

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wineries that have been delivering bloody good Bikavér for some time. Another wine that again struck me for its remarkable consistency from vintage to vintage was Tüske’s 2016 Bikavér, which is light and airy with juicy pomegranate and spicy notes and was easy to identify tasted blind; it typically costs not much more than

HUFa bottle. 2,000

It has a fairly high 10% proportion of the spicily fragrant Kadarka in it, which helps make it so vibrant without sticking out. Tüske wines, made by the modest and retiring Csaba Halmai, a man who eschews the limelight but goes quietly and efficiently about his work, are great bargains. I remember being tickled pink once when, on congratulating him for the broadness of his Bikavér, he promptly pointed at his not so modest belly! It is wonderful to see Hungarian winemakers starting to reach the kind of consistency that is a given for their Austrian counterparts. The sheer quality of Austrian wine was plain to see at the tasting hosted by the Austrian ambassador, Elisabeth Ellison-Kramer, at her palatial residence in which four producers (all available at the KisBécs wine bar in Buda, by the way) were invited to show their wares. The KisBécs wine bar is doing sterling job in showcasing some fine Austrian wine with a portfolio that captures much of the excitement going on next door.

Speaking at the inaugural Furmint Napok Köveskál in the Káli Basin close to Lake Balaton on February 24, he mentioned that some one million Furmint vines, or 200 hectares, went into Austrian terroir in 2017 and he noted that the Austrians could do Furmint very well. However, it seems unlikely that the grape is ever going to surpass Austria’s Grüner Veltliner and Riesling in terms of significance. Balassa said that the relatively neutral Furmint offers winemakers carte blanche in terms of winemaking, enabling them to capture the essence of the terroir as it allows the characteristics of the place of growth to come through unimpeded by overt expressions of the grape. He added that the grape has very complete acidity that plays on the tongue for a long time, delivering length and complexity. Balassa’s Betsek Furmint 2015 was very distinctive with dill and green herb notes, alongside Furmint’s more typical quince and pear, with impressive concentration. There is certainly potential for Furmint in the Káli Basin, as examples from Pálffy and Káli kövek ably proved. But let’s not get carried away by Furmint there and from other lakeside regions just yet. While Káli kövek’s 2016 was on a par with some of the better Tokaj stuff, we were actually enjoying one of the last bottles. Winemaker Gyula Szabó lamented that birds got all the grapes in 2017 and his next step is to put up netting! Furmint February flexed its wings with this bijou but welcome new events out in the Káli Basin, reflecting the spread of the grape to other parts of Hungary beyond its strongholds of Tokaj and Somló – although all that is really happening is the grape being reinstated where it once thrived before the phylloxera louse devastated most European vineyards. Furmint was known as Szigeti when it thrived on both sides of Balaton.

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PRESENTED CONTENT

Budapest Business Journal | March 9 – March 22, 2018

Culture all Year Round

BBJ: What is the reason for that? Do we have so many talented artists here, good venues or a grateful audience? TB: It is overlapping. The audience goes for good content. If the assortment is wide enough and valuable, it will always find its people. Therefore, we organizers only have to endeavor for quality and create our vision based on that. For example, when I took over the organizational tasks of the Budapest Spring Festival five years ago, my concept was to keep running it as an opportunity for artists to introduce themselves. The festival is 39 years old this year and it has become a brand of excellence, mustering the international cream of musicians, soloists, dancers, etc. As such, we can support and award our best local artists by inviting them to participate.

Teodóra Bán, the head of Budapest’s Open-air Theater and the organizer of numerous cultural events tells the Budapest Business Journal how cultural tourism can support local art and reveals how Hungary’s image has evolved in the past decades. ÁGNES VINKOVITS

BBJ: Is winter a more relaxed period for you? Teodóra Bán: Luckily, I have a lot to do all year. I can easily say that Budapest is a

But, of course, this is the ideal situation. It is perfect for both tourists and locals.

cultural metropolis where all generations with all kinds of tastes can find quality programs throughout the four seasons. Since I want to ensure that all messages are delivered by connecting the art products with their audience, the abundance of events is even a challenge for me sometimes.

BBJ: Is this type of tourism able to overshadow Budapest’s evolving image for cheap parties? I live downtown and sometimes I have the impression that the stag night weekends are louder than our cultural attractions. TB: Well, both types are present and have their grounds. However, party tourism has reached a level when it is intolerable for the families living in those districts and so some action is necessary. It will either be regulated by, for example, an obligatory early closing time, or it will be declared as a party area and so real estate will change owners. To solve such issues, there must be a comprehensive cultural and tourism concept for the entire

Socialite | 23

capital, and not only for districts separately. In theory, there is one but there is still room for improvement. Nonetheless, I am happy with the tendencies. In 2017, the nights spent by guests at commercial accommodation stepped over 10 million, and 80% of the guests were foreigners. The Spring Festival was created four decades ago in order to fill the off-season. By today, there is no offseason here, which is great. Also, huge events like the FINA world championships last year, the Red Bull Air Race or the programs around August 20 (St. Stephan’s Day) make it sure that the image of Budapest is about much more than the party area. BBJ: How about the countryside? TB: Conference and wellness tourism are popular all year, but during the summer it is also full of cultural programs and people love it. Fortunately, it is not only the hotel developments that are in focus, as happened in the ‘90s, but there is an increasing emphasis on the content. Making Hungary attractive is handled at ministry level. BBJ: What are you the most excited about this year? TB: It is hard to choose, I could mention a lot of things. The Margitsziget Open-air Theater is 80 years old this year and we will celebrate it by giving culture to a wider audience. We will create KultPont (CulturePoints) at several spots in the city, including the outer districts, where our plays will be screened on huge monitors. People can take off their shoes, sit down in the grass and enjoy culture all day long without being interrupted by advertisements, news or actual politics.

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