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BUSINESS JOURNAL BUDAPEST

VOL. 25. NUMBER 15

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Budapest Business

28 – September Journal | July

JULY 28 – SEPTEMBER 7, 2017

7, 2017

ial Report Spec Innovation

16 to Become Smart Unified Action tion22 Cities Need Innovation Destina 27 Hungary as an on Incentives Praise Innovati Stakeholders Hungary 28 s Clouds From SAP Operate

n and new How innovatio helping are technologies re of shape the futu omy Hungary’s econ

SPECIAL REPORT

Innovation SPECIAL REPORT

HeartBit Solution Uses Real-time Data In line with international health care trends that place more emphasis on prevention and put the responsibility for their health in people’s hands, a Hungarian health startup has created a wearable ECG device. 19 SPECIAL REPORT

Hungary the Innovation Destination Budapest has a lot to offer to budding enterprises looking for an inspiring innovation location in the region, but many features, which would make it a go-to choice, are still missing.22

Driving Hungary Forward

SOCIALITE

Tállya Turns up Trumps High quality wineries are continuing to spring up around the country as the Hungarian wine scene builds momentum, more than a quarter of a century after the switch from an emphasis on quantity to one on quality.30

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BUSINESS

Hungarian Encryption A Hungarian innovation helps prevent mobile phone snoops picking up your trade secrets, and its potential business is about to get much bigger. 6

S FOCU Y R T COUN

Dale A. Martin, President of the GermanHungarian Chamber of Industry and Commerce, discusses Germany’s traditional role in the local economy, the work of the chamber and future trends.  9 NEWS

Summer Heat Brings Positive Macro Numbers Business confidence is record-high, wages are on the rise, and the construction sector continues its upswing that finally started a few months ago.5

2017. 07. 26. 18:40

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Budapest Business Journal | July 28 – September 7, 2017

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

I

n this last issue before we take our traditional summer break, we look at a relationship that has long helped build up Hungary’s economy, and a trend that will surely shape its future, indeed already is doing so; that the two will come together seems inevitable.

GermanY has always been a strong trading partner of Hungary. Siemens’ roots in Hungary date back to the 19th century: the first electric tramway line was constructed in Budapest in 1887 by what was then Siemens & Halske.

Bosch has a similarly long history, having first opened up factories here in 1898.

Although the more than 40 years that Hungary spent as an unwilling Eastern Bloc satellite of the Soviet Union naturally put a damper on economic ties, the bilateral relationship grew only deeper in the years after the fall of the Iron Curtain, in part out of German gratitude to Hungary for the role the latter had played in 1989 in allowing East German tourists through its border fences into Austria and the West.

With both countries now members of the European Union, the pace of growth in bilateral trade has accelerated. According to Kristina Steltzer, the commercial attaché at the German Embassy (a beautifully restored historical building up in the Castle District, by the way): “It has doubled since 2000, and since 2010 it has grown by EUR 10 billion. German direct investments take a 22% share of all investments in Hungary.” The impact of German businesses on Hungary should be clear from that one sentence alone.

The other theme we look at in this issue is that of innovation. It has been impossible to ignore the government’s mantra that the country is moving from a “Made in Hungary” mentality to “Invented in Hungary”, so often have various spokespeople trotted it out. It is surely right to make that move; perhaps we can regard

it as Smart Government, provided policies and subsidies and predictable legislation (the lack of which has been identified by some German investors as a concern) match the rhetoric.

We are constantly being told that, in as short a timeframe as 30 years, the only meaningful job creation will be in services and roles requiring high skill levels.

Manual repetitive work will begin to disappear altogether.

Given all of that, Hungary, indeed every country, needs to start investing in the sort of value added jobs where brain cells are favoured over brawn. And German companies are certainly interested in the creativity and innovative thinking that Hungarian engineers and designers have to offer.

As Dale A. Martin, the president of the GermanHungarian Chamber of Industry and Commerce says: “The global trend of digitalization will sooner or later appear in the bilateral trade and investment relationship. [….] Major companies in Hungary are very active in these fields – just look at autonomous driving – and many of them are German companies. [….] The automotive industry is traditionally very sophisticated, being highly automated with a complex supply chain. Having this industry in Hungary has brought advantages to the country’s economy. This is a driving force which will continue to take the Hungarian economy forward.”

In 1887, Siemens was laying tracks for electric trams in Budapest, a sign of how sophisticated and advanced the Hungarian capital was at the time. In 2017, and increasingly more so in the years to come, innovation and technology must go evermore hand-in-hand if Hungary is to continue to prosper.

Vorsprung durch Technik, as a famous German automaker used to say.

Fortepan.hu / Márton Ernő Kovács

MTI / Balázs Czagány

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

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THEN & NOW A spectator in face paint and trendy goggles supports the Hungarian national women’s water polo team in the quarter finals of the 17th FINA World Championships in Budapest on July 24. In the black and white picture, slightly more reserved spectators observe a Davis Cup tennis match between Hungary and Switzerland in 1949 in Budapest.

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Budapest Business Journal | July 28 – September 7, 2017

News

///in brief

Hungarian Red Cross Helps Storm-hit Villages The Hungarian Red Cross has been supporting 1,300 people affected by severe storms in late June, with financial and technical assistance from the International Federation of Red Cross and Red Crescent Societies (IFRC), according to a press statement sent to the Budapest Business Journal. IFRC contributed a little more than CHF 87,000 (HUF 24.4 million) following the hailstorms and heavy rain that hit several parts of Hungary on June 21. The village of Megyaszó in Borsod-Abaúj-Zemlén County and other villages around the city of Kecskemét in Bács-Kiskun County were worst affected, with roofs, windows and gardens destroyed by the ice. More than 230 homes suffered serious damage, with some of them left uninhabitable. Acting together with the local authorities and civil society groups, the local branch of the Hungarian Red Cross

responded immediately by deploying 50 staff members and volunteers who distributed food and cleaning kits. With the support of IFRC, the Hungarian Red Cross was able to provide tools, materials and skilled volunteers to repair damaged roofs and windows. “There is no way to avoid natural disasters that may hit our country repeatedly, and being the largest humanitarian organization in Hungary, we must be able to help quickly and efficiently in these unexpected situations,” said István Kardos, director general of the Hungarian Red Cross.

Bosch Sets up HUF 1.6 bln SSC at Power Tools Plant in Hungary German engineering giant Bosch has wound up a HUF 1.6 billion project to establish a shared services center at its power tools plant in Miskolc, Robert Bosch Power Tool Kft managing director László Fűkő

said on July 25. Minister of Foreign Affairs and Trade Péter Szijjártó said the government is providing Robert Bosch Power Tools with a HUF 358 million grant for the investment, which the company promised would create 205 workplaces. Fuko said the service center had been operating since last fall and now employs 260 people, more than initially expected.

The cooperation agreement with the government has been finalized and the company will use the grant money to cover payroll costs, he added. The Bosch group employs 14,200 people in Hungary.

Hungary, Azerbaijani Foreign Ministers Meet in Budapest Minister of Foreign Affairs and Trade Péter Szijjártó met with his Azerbaijani counterpart Elmar Mammadyarov in Budapest on July 24, according to Hungarian news agency MTI. Szijjártó said after the talks that Azerbaijan could supply an annual 16 billion cubic meters of gas for delivery through the Trans-Anatolian pipeline, slated to be completed next year. Later, the country could supply the pipeline, which will bring gas to Europe, with 26 billion cubic meters a year, he added. Szijjártó noted that he had signed an agreement with

Russia’s Gazprom earlier in July on investments that would give Hungary access to the gas delivered through the pipeline. Mammadyarov said Azerbaijan wishes to strengthen its bilateral ties with Hungary, adding that a strategic partnership agreement with the European Union could support this goal. A meeting of the Hungarian-Azerbaijani joint economic committee will be held in October and later the Azerbaijani president will visit Budapest, Szijjártó said.

MÁV to Reward Employees Referring new Workers Hungarian state-owned railways company MÁV is trying to tackle its labor shortage by offering a HUF 35,000 bonus for workers who refer an acquaintance, according to a report

by Hungarian daily Magyar Idők.

The money is paid if the referred employee stays at the company after the probation period is completed and has fulfilled the requirements of the position fully. The railway company has nine such positions open, Hungarian online daily index.hu reported. The online portal notes that such incentives have been successfully applied in the private sector. Index.hu notes that at some places the reward can reach HUF 40,000-60,000.

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REAL ESTATE NEWS

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Budapest Business Journal | July 28 – September 7, 2017

Futureal Starts Work on Corvin 5 Futureal Group has started the construction of the two-phased, 27,000 sqm Corvin 5 office building.

increasingly being utilized in the Budapest office market with, for example, Skanska and HB Reavis also aiming for accreditation in their projects.

Elsewhere, in the ever popular Váci Corridor, Futureal is constructing the speculative Advance Tower that will deliver 11,000 sqm of BREEAM accredited space.

In another speculative development, the company is planning the Budapest One business park adjacent to the terminus of the Metro 4 line. The 45,000 sqm development is part of the redevelopment of a road, metro and rail transport hub. The first phase is planned to consist of around 25,000 sqm of office space.

With regard to office supply, an estimated

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GARY J. MORRELL

The complex is located in the Corvin Promenade project, adjacent to the 25,000 sqm Skypark, and is seen as forming a high-tech area of the office, residential, retail and leisure development.

The company has obtained debt finance of more than EUR 45 million from Erste Bank with a repayment period of ten years for the project. “Together with Corvin 5 we will be able to

provide

100,000 sqm

of GLA in Corvin Quarter, one of Budapest’s most frequented areas, which gives a new dynamism to a whole district,” commented Gábor Futó, founder of Futureal Group.

The first phase of the EUR 90 million Corvin 5 project is expected to be handed over by the end of 2018, with the second phase planned for delivery in the second quarter of 2019.

The complex, designed by 3h Architecture Ltd., was awarded BREEAM “Very Good” certification at the planning phase. Corvin 5 will also be one of the first office projects in Budapest to obtain Well Building

office

developments are planned for delivery in Budapest in 2018. According to the Above, and artist’s impression of what the Corvin 5 project will look like. Budapest Research Forum (comprising Below, the construction site. CBRE, Colliers International, Cushman & Wakefield, Eston International, JLL and Robertson Hungary), vacancy in the Budapest office market currently stands at 8.6%, a record low in a city with a total quality office stock of around 3,345 million sqm. Class “A” stock constitutes 2,680 million sqm.

JLL estimates Budapest stock at a similar level to Prague while office stock in the Warsaw office market has surpassed the five million mark. Bucharest is catching up on its Central European neighbors, with quality office stock approaching three million sqm.

Most of the office assets under construction are expected to be substantially certification, based on aspects that have a Well Accreditation let before completion as pre-leases positive impact on the health and well-being “The International Well Building Institute’s of employees. system examines a building’s impact on the represented around 19% of total leasing activity in the second quarter of the year.

The project will comprise an inner human body, health and environment and With regard to sub-markets, the Váci garden and roof terrace, automated shading rates them based on seven categories – air, Corridor recorded the highest leasing technology, energy-efficient mechanical water, nourishment, light, fitness, comfort activity with more than 34% of total systems, bicycle storage, shower facilities, and mind,” said Futureal. demand, followed by South Buda with 25% water-saving systems and electric car The company plans to attain Well and Central Buda with 13%. charging facilities. accreditation for all its projects as it is

Erste Asset Management Purchases SPAR Supermarket Portfolio

The Hungarian Erste Asset Management fund has completed the purchase of a portfolio of 40 SPARleased supermarkets from TREI Real Estate, the property arm of the German Tengelmann Group.

GARY J. MORRELL

With the exception of two assets, all the components of the total 39,500 sqm portfolio is leased to SPAR Hungary on long-term contracts in locations across the country, with 13 in Budapest. Retail is regarded as an increasingly attractive asset class for investors.

The closing of the deal at the end of last month means Erste Asset Management is now managing funds with a value of close to HUF 1.5 trillion (EUR 4.9 billion) including HUF 450 bln of real estate.

“The Erste Real Estate Forint Fund and

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the Erste Real Estate Euro Fund further increased their already significant retail portfolio with this transaction, which already included a significant proportion of retail properties leased to SPAR Hungary. The duration of income of the two acquiring funds has considerably increased, which together with our new investments in excess of EUR 110 million are expected to deliver robust profits to the funds’ shareholders,” commented Balázs Pázmány, chairman of the board of Erste Asset Management.

Strong H1

With the transaction, Hungary has produced the strongest first half year of investment deals on record in exceeding EUR 800 mln according to Colliers International.

“This was an important deal following a complex process in which a larger number of institutional property investors had participated. Following this transaction, Colliers International anticipates a great number of retail acquisitions and it is highly likely that retail will play the most

dominant role for the first time in the history of the Hungarian investment market,” said Bence Vécsey, director of capital markets at Colliers International Hungary. Colliers advised TREI Real Estate on the transaction, while CMS Cameron McKenna provided legal advice.

The consultancy expects the purchase of some leading Budapest shopping centers to be concluded this year: a total of EUR 2 bln in investment volume for 2017 is predicted, which would make it the most active year in the history of the Hungary investment market.

The investment breakdown for H1 is put at 45% for the office sector, 28% for retail, 14% for logistics/industrial and 13% for hotel and other sectors.

Local investors accounted for 53% of the purchases; a large number of international institutional investors are said to be working on deals.

Vécsey says the yield gap between Hungary and Czech Republic narrowing.

He puts prime Budapest office yields at 5.7%, prime retail at sub-6% and logistics at 8%. “One of the main obstacles to further development of the market is the shortage of prime and core-plus acquisition opportunities. Quality assets are highly oversubscribed,” he concluded.

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News

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///macroscope

Summer Heat Brings Slew of Positive Macro Numbers

Business confidence is record-high, wages are on the rise, and the construction sector continues its upswing that finally started a few months ago.

Construction Output in Hungary (2001-2017) Volume index change as compared to the same period a year earlier (100)

ZSÓFIA CZIFRA

Summer has inevitably arrived, proof of which is Hungary’s nearly empty macroeconomic calendar in the past two weeks. Only two data sets worth talking about were released recently: one involves the construction sector output in May, the other is about wages in the January-May period. The construction sector continued its progress: the volume of output was

35.4% higher in May 2017 than the low base a year earlier, up from a 22% increase in April.

According to the Ministry for National Economy, this is a 12-year record, and economy minister Mihály Varga attributed the growth mainly to the government’s home building program.

Parallel with faster absorption of European Union funds, the construction output was able to grow sustainably, and state investments also gave a boost to the sector, the ministry said in its comment.

The performance of the sector shows that the Hungarian economy can steadily rely on the industry and the export activities, and also on the consumption-increasing effect of the six-year wage agreement signed at the beginning of the year, Varga noted.

Earnings up in May Indeed, wage agreements had an impact on Hungarian earnings in May as well as in the first months of the year. In May 2017, average gross earnings

amounted to

HUF 296,100, 12.9% higher than a year earlier, the Central Statistical Office (KSH) reported.

In January–May, average gross earnings amounted to HUF 288,900. In the first five months of the year, both gross and net earnings grew by 12.1% compared to the same period of the previous year. Real wages were up 10.6% in May.

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Rises of 15% in the minimum wage and 25% in the guaranteed minimum wage as well as salary adjustments affecting specific areas of the public sector and the employees of state-owned public service companies all had an impact on earnings growth.

Although slightly beyond expectations, gross wages still showed a significant increase in May, TakarékBank analyst András Horváth said in a comment.

According to the analyst, it was mainly the lack of skilled workforce and the wage agreements that influenced May’s salaries. However, earnings in the private sector were only 11.9% higher in May than in the same month of 2016, down from a 12.9% year-on-year increase in April, while employees in the public sector earned 18.5% more in May than a year before, and there was still a massive 15% growth when public workers’ earnings are not counted in.

Horváth expects earnings to be 13% higher this year on average on a yearon-year basis, due to wage arrangements and the missing workforce.

Inflation not Likely to Rise This Year The National Bank of Hungary’s Monetary Policy Council (MPC) decided to leave its key rate

unchanged at

0.9%, matching the market consensus, while O/N rates were also left unchanged, including the depo already in negative territory at -0.05%. The base rate has

been kept unchanged for more than a year now.

In the council’s assessment, Hungarian economic growth will pick up over the forecast horizon. The MPC also noted that some degree of unused capacity has remained in the economy, but this is likely to be gradually absorbed as output grows more dynamically.

The MPC further said that the sustainable reaching of the inflation target, set at 3%, is not now expected until the beginning of 2019. For the shorter-term, the council noted that if inflation remains persistently below the target, “the council will stand ready to ease monetary conditions further using unconventional, targeted instruments”.

Based on the above statements, CIB Bank analysts expect the base rate to be kept unchanged for an extended period, that could last until 2018. “The council’s decision was in line with our expectations,” Equilor commented on the decision, highlighting the council’s comments that the consumer price index is likely to remain near its current level over the remainder of this year. “Earlier, rate setters expected inflation to slowly begin rising at the end of the year,” the investment service provider noted.

Business Confidence Soars In the meantime, economic research institute GKI released its latest business confidence index. The combined gauge of consumer and business confidence of the think-tank rose to

4.2 points in July, a historic high, from 3.2 points in the previous month; the business confidence index also rose to 11.3 points from 9.5 points.

The outlook for the industrial and construction sectors improved, but it worsened slightly for trade and service companies.

The consumer confidence index slipped to -15.9 points from -14.6 points. Fear of unemployment slightly increased, as did inflation expectations.

Households’ assessment of their own prospective financial positions worsened, but their ability to make savings was little changed.

Numbers to watch in the coming weeks

The first two weeks in August brings a bit more excitement in terms of macroeconomic data: first, on July 28, the KSH publishes the number of construction permits issued in the first six months of the year, giving an updated picture of the state of the construction sector. On August 3, the first estimates of retail trade figures will come out; the reference month is June. A day later, we’ll learn about the June performance of Hungary’s industry. Construction sector output – also for June – is to be released on August 10.

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Business

Hungarian Encryption Frustrates Governments and Criminals Alike A Hungarian innovation helps prevent mobile phone snoops picking up your trade secrets, and its potential business is about to get much bigger.

KESTER EDDY

Gyuri Karady has long studied the Gyuri Karady, director of business risks of telephone eavesdropping: he development for Arenim Technologies. can be very persuasive on the subject.

“If you are a western corporate any third party, be that a government executive chasing, say, a mining concession in an African country, agency, business competitor, tabloid where you are negotiating with the journalist or criminal group. government and where there are a Quietly launched in late 2014, couple of other companies competing CryptTalk has attracted almost 16,000 for the same contract, I’m sure you’d users world-wide: clients range from feel uncomfortable talking to your head OTP Bank to television celebrities, from office back home on a mobile phone law firms to gemstone dealers. Revenues about the deal,” he tells the Budapest last year came to some EUR 0.4 million.

Business Journal in a half statement, “Basically, it’s for anyone or any firm that needs privacy. Just recently we’ve half question.

The implication is obvious: the price, been talking with two very big European the concession timeline, the bargaining football clubs: their managers need tactics – almost every detail of the deal security for [transfer] negotiations, would be highly valued business secret – and their players to protect their and it could all be compromised by illicit private lives,” says Szabolcs Kun, chief executive and co-founder of Arenim phone tapping.

The problem is any such phone call Technologies. is at much a risk of interception in With a track record in advanced Budapest or Boston as it is in Banjul telephone systems, Kun was first made or Addis Abiba – indeed, perhaps even aware of the hazards of eavesdropping more so, such is the ready availability of by energy traders (and long-term the required gadgetry in the developed clients) who reported being beaten by the finest of margins on bids for world. contracts submitted after discussions on mobiles. Such corporate eavesdropping At Risk was destroying their business. Kun “Most corporates just don’t seem to have investigated the problem and studied caught on that they are at risk – until the solutions on offer. itʼs too late. Just look at what corporate or bank IT managers are focusing on: Peer-to-Peer it’s email, network security, firewalls,” Encryption he says.

Karady should know. A Canadian- They shunned the idea of using a Hungarian and former banker, he is separate, especially designed phone (a director of business development for route used by some competitors) and Arenim Technologies, a company set focused on encrypting the voice message up to develop and market CryptTalk, from every-day handset to handset – an award-winning software package so-called “peer-to-peer” encryption. created in Hungary that is designed By using a state-of-the-art algorithm to combat phone tapping – and assure (designated AS 256) as the basis for callers their conversation is unheard by encryption, each conversation uses

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Business

agencies using the so-called “back door” available via telecom companies’ servers. Indeed, since the encryption key is neither shared nor stored, not even CryptTalk staff can intercept a call, nor can the call be saved and decoded later.

Zsolt Cseledi, a partner with law firm Oppenheim in one satisfied CryptTalk user: “The system is really impeccable. Voice quality is great, transition from Wi-Fi to 4G and vice versa is great. We were ensured right at the outset that the system would be stable … [which] was of paramount importance for us, given that we wanted to offer this service to our clients,” he says. Some “small hiccups” encountered have been “mainly attributable to poor mobile networks and not to the product itself”.

Karady freely admits that rivals use the

AS 256 algorithm:

where CryptTalk scores is through attention to detail in all aspects of the package. “Itʼs not about my Szabolcs Kun, chief executive and encryption is stronger than your co-founder of Arenim Technologies. encryption, because the encryption is strong enough,” he says. “But there are a whole bunch of other a separate code – sometimes several in a single call – which is not shared things, like authentication, like the way elsewhere and is unique to each call. you exchange and manage the keys, the This renders their system effectively way you protect this information within unbreakable: any illicit eavesdropper the phone. using available monitoring equipment “Itʼs the whole system: this is where will receive only babble that would take we think CryptTalk is more systematic and better protected than many of our an aeon to decrypt.

Equally, the system prevents even competitors who have not been quite as legal phone tapping by government careful putting it all together.”

Android Compatible CryptTalk Ready for Launch Arenim Technologies will launch a version of CryptTalk compatible for Android-based smartphones “in late September or early October” Szabolcs Kun tells the BBJ. Given that Android phones far outnumber their iOS rivals across the globe, the move promises to be a major milestone in CryptTalk’s development.

“I think this will lead to exponential growth in users; we have been losing users daily because weʼve not been able to supply Android users,” Szabolcs says.

The Budapest-based development team initially focused only on devices using Apple’s iOS operating system because of its inherently superior security characteristics, but has long sought to offer CryptTalk to users of the more popular Android smartphone.

For a time, Kun even toyed with the idea of introducing a special CryptTalk for Android – accompanied with a warning that it was not a 100% guaranteed protection against malware – but ultimately held back, fearing the compromise could taint its otherwise impeccable record achieved with the Apple system.

But in the past two years, Google, the owners of Android, have made “serious improvements” to the system says Kun, enabling the security characteristics of its latest devices to a level that has enabled Arenim Technologies to design a CryptTalk package without fear of compromise.

“CryptTalk for Android is especially important for us in countries like Korea, where weʼve recently opened a subsidiary,” says Kun. “Korea has Samsung, and that means almost every Korean uses Android phones. I think this [new application] will open the floodgates there.”

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Budapest Business Journal | July 28 – September 7, 2017

WHO’S NEWS

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

Wizz Air Welcomes new Deputy CEO Stephen Jones has been appointed executive vice president and deputy CEO at Hungary’s low fare airline Wizz Air, taking effect from of the second half of the year.

Jones will report to the company’s CEO and be a member of the executive team. He will be responsible for Wizz Air’s commercial, marketing and information technology organizations with the company’s chief commercial officer, chief marketing officer and head of information technology as direct reports, as well as being an important part of the board’s succession planning. The deputy CEO, who is a dual national of New Zealand and the United Kingdom, has been the chief strategy, network and alliances officer at Air New Zealand since 2013, during which time he was responsible for the airline’s overall corporate strategy, network development, alliances and sustainability. He also currently serves as chairman of the Star Alliance Management Board and the Star Alliance Strategy Committee.

“We are delighted to be welcoming Stephen Jones as Wizz Air’s executive vice president and deputy chief executive officer,” said József Váradi, Wizz Air’s CEO. “Stephen’s extensive and successful experience in numerous areas of airline management over many years will bring significant extra capacity to the company’s leadership team,” Váradi added.

Wizz Air Promotes Managers to Executive Board

Two members of the management of Wizz Air have been promoted to the firm’s executive team. Iain Wetherall, currently head of financial planning and control and investor relations, has been promoted to chief financial officer, taking effect as of August 1. As CFO, Wetherall will report to the company’s CEO and be responsible for the accounting and tax, financial planning and controlling, fleet acquisition and corporate finance and purchasing organizations. Wetherall joined Wizz Air in July 2011 as head of corporate finance.

Wetherall holds an Advanced Treasury Diploma from the Association of Corporate Treasurers, a Securities and Investment Diploma from the Chartered Institute for Securities and Investments and was a securities representative authorized by the Securities and Futures Authority (now Financial Conduct Authority).

Heiko Holm, currently head of technical services, has been promoted to become Wizz Air’s chief technical officer, reporting to Diederik Pen, executive VP and COO. As Wizz Air’s fleet continues to grow, the technical and operations complexity associated with the size of the fleet and its multi-base operation also increases, the airline says. To ensure that Wizz Air is adequately resourced for its future growth,

the new position of CTO has been created.

This appointment also takes effect from August 1.

“The promotion of Iain Wetherall to chief financial officer and Heiko Holm to the newly-created chief technical officer position are further examples of Wizz Air’s planning for its future significant growth by bringing additional capacity into its senior management team, while leveraging its great talent pool to promote from within,” said József Váradi, Wizz Air’s chief executive officer. “Both Iain and Heiko have already proven themselves as successful leaders in Wizz Air, and each brings significant and extensive expertise to their role,” Várad said.

Réti, Antall and Partners Law Firm PwC Legal Names new Members Dr. Zoltán Várszegi (46) the former deputy of Dr. László Réti (60) is appointed the new managing partner of the Réti, Antall and Partners Law Firm PwC Legal, a Budapest law firm with 47 practicing lawyers. Várszegi started his career as a trainee lawyer, later he worked as a bank

lawyer and then he joined PwC’s tax department. He has been working with the law firm since 2000. In recent years, he has been involved in the management of the firm, alongside Réti. Recently, he has gained a reputation for representing his clients before the EU’s Court of Justice.

As of July 1, Dr. Zoltán Martonyi (41) has joined the law firm as a partner, returning to the place of his first traineeship after 22 years.

Martonyi started his legal career at Szecskay Law Office and then continued at Linklatersʼ Budapest and London offices. Between 2004 and 2008, he worked at Martonyi and Kajtár Baker & McKenzie as a partner. He led Baker & McKenzieʼs bank, financial and capital markets group from 2006. He founded his own law firm in 2008. In recent years, he has been a leading legal adviser in the most significant finance and capital market transactions. At Réti, Antall and Partners, he will primarily focus on developing the corporate transaction and banking, financial and capital market business with a view to the Central and Eastern European region.

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An old companion for the long run

2017.04.10. 14:09:37

2017. 07. 26. 18:41

3

www.bbj.hu

Budapest Business Journal | July 28 – September 7, 2017

Focus

German Investments Growing Stronger by ‘Working Well Together'10 Germany: Is it Time to Change?11 Germany Heavily Invested in Hungary’s Growth 12

A look at the impact Germany continues to have on Hungary’s economy, and the likely future trends

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2017. 07. 26. 18:41

www.bbj.hu

3 Focus | 9

Budapest Business Journal | July 28 – September 7, 2017

Driving Force Moving Economy Forward

Dale A. Martin, President of the German-Hungarian Chamber of Industry and Commerce (known as DUIHK or AHK Ungarn), talks to the Budapest Business Journal about the work of the chamber and the bilateral trade relationship.

“The automotive industry is traditionally very sophisticated, being highly automated with a complex supply chain. Having this industry in Hungary has brought advantages to the country’s economy. This is a driving force which will continue to take the Hungarian economy forward.”

SONJA BENCZE

How have Hungarian-German economic ties have changed in the past few years?

Over the last 20 years, trade between the two countries rose by 800%. In the past five-six years, German-Hungarian trade has been growing faster than the overall Hungarian foreign trade – hence the share of Germany in the Hungarian exports and imports has been rising again. The turnover between the two countries was more than EUR 47 billion in 2016; as a comparison, Hungarian GDP was EUR 112 bln.

What do you put this dynamic growth down to?

As a major industrial country, Germany has traditionally had a good relationship with Hungary. In the ’90s, Hungary saw very significant German investments which have been growing ever since.

The fact that companies that have established a foothold then have been expanding shows that investors appreciate the quality Hungarian colleagues can provide.

Is this growth sector-specific?

The industrial sector is one main driver, but it is not the only one. One reason why German-Hungarian trade is growing faster than the overall Hungarian economy is that the German economy overcame the recession earlier, and is growing at a faster pace than many other large European economies. This has provided additional demand from the German market and vice versa. Although Germany is the global export champion, Hungary is one of the few countries of the world that has a substantial trade surplus with Germany. This is, in part, due to the German export companies that are present in Hungary.

Besides investor relations, what other factors count – be they historic or geographic?

Strategic investment decisions are based on a very complex mix of evaluation criteria. It has a lot to do

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with history, geopolitical proximity, and infrastructure. There is a special relationship due to the opening of the borders in 1989, which is a positive memory. Due to all of this, German companies invested in here relatively early and created success stories.

Dale A. Martin was born in Pennsylvania in 1957 and graduated from the University of Economics and Business Administration in Vienna, Austria (1984), having read management and organization and export marketing. Prior to this, he studied Mandarin Chinese in Taiwan and spent a semester in Angers, France.

He began his professional career with AWT International Trade and Finance Corporation in Vienna in 1984, responsible for the Hungarian market; and was subsequently named deputy general manager for AWT Services, on secondment in Hong Kong. He joined Siemens in 1991, moving back to Europe as the CFO of Siemens Telecommunications in Hungary.

Later he became CFO of Siemens Hungary and, concurrently, CFO of Hungarian Cable Works.

In 2000 he was appointed CFO of Siemens Healthcare Japan, relocating to the Asian continent once more. Thereafter, in 2004 he took up the post of CFO of Siemens Slovakia. Accepting his current position as president and CEO of Siemens Zrt., he returned to Hungary in 2010.

He was elected President of the German-Hungarian Chamber of Industry and Commerce in May 2013.

Are there any global trends that have also been drivers of this growth?

More than half of German investments in Hungary are in the manufacturing sector; this ratio is far higher than that of other countries – which also explains the trade surplus. More than one-third of the total German investment in Hungary relates to the automotive industry, another 15% to other manufacturing sectors. But German companies are also present in telecommunications, business services, retail and wholesale trade, the energy sector. There are around 3,500 German companies here, most of them are smallor medium-sized. Their investments may often be less spectacular, but they also add up to a significant size.

Hungarian Investment Promotion Agency (HIPA) – can provide qualified assistance. But one should bear in mind that an ever increasing part of German investments here stems from the expansion of existing operations.

Are there any sectors – maybe less represented – or companies the chamber reaches out to?

One role of the chamber is to be here for the companies that are already in Hungary. The second focus area of our activities is to support companies that show an interest in entering the Hungarian market. This is an important segment, where we – along with the

How about the government’s role in German companies’ expansion? How have measures affected it?

Of course, governmental activities have an influence. On the one hand, HIPA is offering a good bundle of services for newcomers and expansions. Other measures may raise eyebrows in the investment community, e.g. if they put an additional administrative burden on the companies.

Does the government listen to the needs and requests of the Chamber?

There are partners in government who listen to the business community actively and take steps to improve the business climate. Two years ago, the new electronic road transport control system, EKÁER, was nearly impossible to fulfill within the given timeframe in the beginning. Yet at the end, with the relevant ministry, we were able to find a better way whilst achieving the aim, which was the clear-cut aim of the government – to make transport system more transparent and whitening the economy.

Has the relationship between the government and the chamber improved?

Definitely there has been an improvement in communication. In 2013, we started a series of regular meetings between the representatives of the chamber and the Ministry of National Economy. Furthermore, we provide the government with suggestions from and about the German business community, and we notice that there is demand for this input, and it is being used for their evaluations.

How do you think the GermanHungarian economic ties will evolve in the future? Will we see more German companies from the IT sector, related to digitalization, specialized in artificial intelligence, etc. in Hungary?

I believe so. The global trend of digitalization will sooner or later appear in the bilateral trade and investment relationship. We are supporting this so that it happens sooner rather than later. Major companies in Hungary are very active in these fields – just look at autonomous driving – and many of them are German companies. And if one sector steps ahead, this has a ‘pull-effect’ on related sectors. The automotive industry is traditionally very sophisticated, being highly automated with a complex supply chain.

Having this industry in Hungary has brought advantages to the country’s economy. This is a driving force which will continue to take the Hungarian economy forward.

2017. 07. 26. 18:42

10 | 3 Focus

www.bbj.hu

Budapest Business Journal | July 28 – September 7, 2017

Growing Stronger by ‘Working Well Together’

Germany is destined to continue as a major trade partner for Hungary. Despite concerns over transparency and corruption issues, and the pressing worry of a growing labor shortage, the overwhelming majority of German companies in Hungary say they would consider reinvesting here.

“It depends on the sector; producers find very good conditions here. Other companies have an issue, and that is the question of ‘reliability’. They all say it would be great if, before new laws are passed, there would be more talks with stakeholders, and that they would be given more time before implementation.”

ROBIN MARSHALL

“The big investors really get a ‘good ear’ from the government, and a good service from HIPA [the Hungarian Investment Promotion Agency],” says first secretary Kristina Steltzer, the head of the economic section at the German Embassy.

“They can talk with HIPA and the Ministry of Foreign Affairs and Trade about any problems. They have proven, in this regard, to be very supportive and very good. If you are in a sector that is less favored you might not be so happy.

All in all, Hungary remains a good location, economy-wise.”

Germany has long been an important industrial ally for Hungary, but that relationship has been on a marked growth path since the year 2000, even allowing for the economic crisis of 2008.

“It has doubled since 2000, and since 2010 it has

grown by

EUR 10 billion.

German direct investments take a 22% share of all investments in Hungary,” Steltzer says.

The direction of flow is far from one-way.

“Hungary exports more to Germany than Germany does to Hungary, which is an unusual position for us,” Steltzer confirms.

“In 2016, Hungary imported more than EUR 22 bln; 26.3% of all imports to Hungary came from Germany. Hungary’s exports to Germany amounted to 27.4% of all its exports, at EUR 25.59 bln.”

The major markets for Hungarian goods are the southern German states of Bavaria and Baden-Württemberg, and the central state of Hessen. The lion’s share (37.2%) of Hungarian exports is taken by the automotive sector; 11.8% is comprised of data processing and electronics; while electrical equipment is just behind at 11.4%.

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Kristina Steltzer, the head of the economic section at the German Embassy.

Growing Stronger As Hungary’s economy continues to expand at a healthy lick, it seems certain the ties between the two nations will grow only stronger. “Hungary is concentrating on automotive and looking for innovations around that, with a strong interest in electrical cars and autonomous driving. Germany is a strong partner in these areas with the likes of Audi, Mercedes, Bosch, ThyssenKrupp and Knorr-Bremse among others,” Steltzer points out.

But all that positivity should not leave you with the idea that there are no issues of concern. “It depends on the sector; producers find very good conditions here.

Other companies have an issue, and that is the question of ‘reliability’. They all say it would be great if, before new laws are passed, there would be more talks with stakeholders, and that they would be given more time before implementation.”

The commercial attaché says the unhappiest businesses are found in the service sector: media and ad sales companies, banks, food retailers and energy. “Energy utilities have had their problems. Now, for more than one year it seems like something might be coming up that could affect the retail sector, and we have already had the Plaza Stop law [greatly restricting the size of shopping developments] for more than two years.”

There is a more pressing worry, though.

“At the moment, the major concern is the problem of finding qualified workforce. It is a good thing that the employment rate is so high, but the downside of that is it is

getting more difficult to find skilled staff, and that affects everybody. At the end of 2016 there were

50,000 unfilled

workplaces. The larger companies can usually manage, but it gets more difficult for the SMEs to find people.”

Steltzer admits that this is something of a common phenomenon across the region, and that the government is both aware of the problem and trying to take steps to counter it. But answers will need to be found, she says. “The lack of workforce is not only due to the low birth rate, but also a worrisome number of people leaving the country. And these are typically young and well-trained people.”

Naturally enough, with German being one of the more common second languages spoken here, many Hungarians looking to leave have an eye on heading north. The German Labor Agency says that, in April of this year, 94,000 Hungarians were working in Germany.

Working well Together Much, then, is good on the economic level, so much so that

81%

of respondents

told the German-Hungarian Chamber of Industry and Commerce they would invest here again. There seems to be a genuine appreciation of German culture

and values among Hungarians, the diplomat says: “We work well together, we understand each other.”

But when the focus moves to the political sphere, the picture becomes a little more complicated. “Especially the attacks on the EU and the civil society as well as the differences of opinion regarding the migrant crises are matters of concern. The EU is the greatest peace project ever. We have now had more than 70 years of peace in Western Europe. And the EU is for both countries, Germany (58.9 % share) and Hungary (78.1 %), the most important market. Therefore the EU has been a success story for everyone, and especially for Hungary. In the funding cycle from 2007-13, Hungary received EUR 21 bln from the EU, that’s 57% of all government capital expenditure. It’s infrastructure investment, technology etc. We think they should have a more positive, and not negative, view, since it was a determining factor for the good economic development of the country. ” The commercial attaché makes the point that most of the companies talking about investing, are already here; they know the market and the conditions and have infrastructure in the country.

For those who have not yet invested in the country, but are thinking of doing so, the national image has an amplified importance.

“If the country has an image problem some SMEs might think twice before investing. And some head offices might ask twice when a subsidiary wants to invest.”

The German chamber has raised one other issue, and that concerns transparency and corruption. Asked specifically about that, 7% of businesses said they were happy, 76% not so happy, and 45% considered it a problem. Nor is it doing so well on a regional comparison.

On the corruption index, it dropped one place from 11 to 12, and in terms of transparency it was placed 11th in CEE. So, there is much to celebrate, and the signs seem to point to even stronger growth in bilateral trade. But there are issues to be addressed, and they need to be talked about openly and frankly too, Steltzer says.

2017. 07. 26. 18:42

www.bbj.hu

3 Focus | 11

Budapest Business Journal | July 28 – September 7, 2017

CEU COLUMN

Germany: Is it Time to Change?

Károly Banai CEU PhD student advisor on foreign affairs CEU BUSINESS SCHOOL According to the latest OECD forecast, the German economic performance is strong and continues to remain solid; it shows no signs of abating.

This year, the European Commission has predicted 1.6% GDP growth for Germany, and next year it could accelerate to 1.9%. Leading economic indicators are reaching statistical all-time peaks. The unemployment rate continues to fall. The number of employees will grow from 43.6 million to 44.2 million this year

and to

44.6 million

next year, a new record high.

Exports, the traditional engine of the German growth, are benefiting from strong demand in China and the United States. In 2016, Germany ran a currentaccount surplus of approximately €270 billion, or 8.6% of GDP. Some may say these are impressive pieces of statistical data. And rightly so. Most EU members would welcome such figures. Others, however, emphasize that Germany’s current economic strengths, such as strong competitiveness and low unemployment, are to a large extent the result of the economic reforms carried out more than ten years ago. German trade unions had practiced a decade of wage restraint and former Chancellor Gerhard Schröder had revamped the labor market.

So, despite the convenient start in 2005, during the last ten years or so the performance of the economy was not up to expectations. Productivity growth has become rather poor. The population is ageing, and with declining rates of firm entry and exit, so is the economy.

Unmet Needs Germany has massive unmet needs in healthcare, education, and communication and transportation infrastructure. Much-needed changes have hardly attracted the attention of the politicians. But there was a good reason for that: Chancellor Angela Merkel’s government has faced a series of political challenges, ranging from the refugee influx to the war in Ukraine, that have absorbed much of the government’s attention.

But let’s be honest, too. There are limits to what any head of government can do. Chancellor Merkel can’t set interest rates or wage levels. Trade policy is, after all, the domain of Brussels, as is the regulation of the EU single market. And yet, the Chancellor has left her mark on Germany’s economic performance.

During the financial crisis, she alone prevented the collapse of German banks by guaranteeing all deposits and saved the European currency by abandoning the provisions of the Maastricht Treaty.

Taking all these views into account, one can easily draw the conclusion that the German economy will continue to be dominant in Europe. But this decisive economic role can only be maintained by introducing new economic incentives, rationalizing the taxation system and increasing investments in the field of infrastructure and education.

Ways and means to that end will become the major trajectory of the upcoming elections in September.

Berlin should put economic reforms back high up the agenda.

So far, none of the parties have tabled convincing ideas about new economic prospects. The focus is still on redistribution, which by itself will do little to preserve the outstanding strength of the German economy that have been envied by many, so far.

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

Building Success on German Roots It is well-known that the role of German businesses has been invaluable in maintaining and developing the overall standing and stability of the Hungarian economy during the past several decades, and since 1989 in particular.

special expertise in areas directly relevant to greenfield investments, real estate and corporate advisory work, competition law and state aid issues regarding incentives for manufacturers to select Hungary for their production hubs.

There has always been a strong degree of confidence placed in the Hungarian economy, which has differentiated German investors by a broad margin and which has proved conducive to achieving volume and success as well as diversity in terms of the scope of investments by German businesses, whether by individual entrepreneurs, “Mittelstand”, or by global corporations.

When it comes to advising German clients, Noerr (as a law firm with German roots) can bring a host of added values to its clients, for reasons less obvious for the on-lookers than just language skills.

On top of the attractiveness of the business environment and the opportunities on offer, the success of any investments is not something to be taken for granted.

The happy outcome of any transaction takes more than just an intention – it will invariably require a complex and refined collaboration among all parties involved in the process, from industry experts to financiers, from regulatory experts to investment bankers, as well as to a host of business advisors including management consultants, tax specialists and lawyers.

When it comes to lawyers, it is easy to define what legal advice consists of: familiarity with the relevant legislation in order to ensure that all aspects of a transaction are dealt with in such a way that things happen in a compliant and commercially viable manner. What is less obvious is the complexity of the process.

It is our experience that legal advisors can play a particularly important part in attracting and satisfying foreign investors throughout a transaction.

When it comes to German investments, Noerr has always been perceived as an international law firm built on strong German foundations. Noerr likes to differentiate itself as a pan-European law firm with distinctly German qualities and capabilities, and the firm takes pride in having advised on a wide range of investments from the 1990s to date. The fact that a large portion of German FDI has flowed into the manufacturing sector has in itself helped the firm to develop

BBJ_2515_bus.indd 11

Noerr can field lawyers in Hungary, who not only “speak the language”, but also can “think German” and “read the minds” of their clients. Success and trust will be built easier if communication allows more room for thinking of and finetuning business issues with a view to finding solutions rather than struggling to understand one another.

If critical negotiations can be conducted in the client’s mother tongue, it will accelerate the process. Noerr has a culture that caters to diversity and empathy and if a legal advisor has a strong background of having studied German law, it adds a new dimension to a clientadvisor relationship.

The Budapest office has 15 lawyers including German-Hungarian dualqualified lawyers advising on some of the largest investments by German businesses in this country. We have built a strong focus on advising clients in manufacturing and other industry sectors. We provide high quality services through client relationship teams involving, where needed, German and other internationally qualified advisors to help our clients succeed.

We have been in international business for more than 60 years, supporting clients around the globe in investment, M&A and joint venture projects, in court and arbitration procedures as well as in compliance investigations. Accordingly, we are able to provide excellent advice even across national borders.

www.noerr.com

2017. 07. 26. 18:42

12 | 3 Focus

www.bbj.hu

Budapest Business Journal | July 28 – September 7, 2017

Germany Heavily Invested in Hungary’s Growth Germany’s role BOSCH GROWTH in Hungarian

trade relations is unquestionable. With a 27.7% share of the country’s export last year, Germany was Hungary’s most important foreign trade partner. It is also the most significant investor in the country: foreign direct investment to Hungary in 2014 was EUR 21.5 billion or 26.3% of the entire FDI entering the country.

SONJA BENCZE

Paramount to these figures are the activities of German firms established in Hungary, some of which, such as Siemens, have been present here for more than a century. The history of Siemens in Hungary dates back to the 19th century: the first electric tramway line was constructed in Budapest in 1887 by what was then Siemens & Halske.

Since then, the company has broadened its range of activities extensively. Today, the Hungarian Siemens group comprises Siemens Zrt., Siemens Healthcare Kft., Siemens Wind Power Kft., and evosoft Hungary Kft, covering the energy industry, infrastructure development, manufacturing, and healthcare. The company employs more than 3,000 people in Hungary, a number that has grown by

more than

50%

in the past seven years.

Between October 1, 2004 and March 31, 2017, the company invested more than HUF 56.6 bln in Hungary.

Beyond its Budapest headquarters, production takes place at two other facilities. The Energy Management Plant in Budapest makes dry and oil transformators for foreign markets, while the power and gas manufacturing plant in Budapest is Europe’s largest turbine blade manufacturing plant.

Siemens recently announced it would invest EUR 32.3 million euros in the

BBJ_2515_bus.indd 12

HUF 72 bln

8,500 HUF 47 bln

HUF 35 bln HUF 18 bln AMOUNT INVESTED

2012

2016

R&D SPENDING

2012

2016

NUMBER OF BOSCH ASSOCIATES 2012

2016

SOURCE: BOSCH GROUP expansion of this plant. This will add more than 10, 000 square meters to the existing manufacturing area and require an additional 150 highly-qualified employees.

the Audi TT Roadster, which are built exclusively in Hungary.

Audi Hungaria produced a total of

Key Player

and 122,975 automobiles in Győr last year; not surprisingly, it has developed into one of the country’s largest exporters and most profitable companies. It is also one of the largest foreign investors in Hungary, and with 11,631 employees as of December 31, 2016, is also one of the region’s largest employers.

While it might not boast with such a long history in Hungary as Siemens, E.ON is a key German player of the Hungarian energy market. Through its legal predecessors, the company has been present in Hungary since 1995; since 2000, E.ON Hungária Zrt. has been the owner and coordinator of all E.ONʼs activities here.

The company, which employs roughly 5,000 workers, is active in areas such as power wholesaling and services for electricity and gas end-users. Based on the information of the German-Hungarian Chamber of Industry and Commerce (known both as DUIHK or AHK Ungarn), E.ON Hungária was the third largest German company in Hungary in 2015.

(The organization used HVG and Figyelő ranking lists). E.ON recently revamped its Hungarian brand and has continued to invest in the reconstruction of its electricity and gas infrastructure.

The largest German company by revenue is Audi Hungaria Zrt., which was established in Hungary in 1993. The company develops and produces engines at its site in Győr for AUDI AG and other Volkswagen Group companies. Since 2013 and the launch of a new automobile plant, which covers the entire production process, the company has also made cars here. First the new Audi A3 Sedan and the Audi A3 Cabriolet rolled off the assembly line, which were followed in 2014 by the new Audi TT Coupé and

1,926,638 engines

Largest Employer Another key employer, Bosch has a history in Hungary to compete with Siemens, having been present since 1898. Since its re-establishment as a regional trading company in 1991, it has grown into Hungary’s largest foreign industrial employer. In the 2016 fiscal year, the Bosch Group’s ten Hungarian subsidiaries had a total turnover of HUF 1.149 trillion and sales of the Bosch Group on the Hungarian market – not counting trade among its own companies – stood at HUF 238 bln.

In addition to its manufacturing, commercial and development business, Bosch has a network of sales and service operations that covers the entire country. The headquarters is in Budapest, and the company has subsidiaries located in Budapest, Hatvan, Eger/Maklár, Miskolc, Kecskemét and Pécel. Operations are divided into four business sectors: mobility solutions, industrial technology, consumer goods, and energy and building technology.

The history of Siemens in Hungary dates back to 19th century: the first electric tramway line was constructed in Budapest in 1887 by what was then Siemens & Halske.

The number of Bosch associates has grown from 8,500 in 2012 to more than 14,200 employees in 2016. The amount it invested more than doubled from HUF 35 bln in 2012 to HUF 72 bln last year.

The company has also increased its R&D spending between 2012 and 2016 from HUF 18 bln to HUF 47 bln.

The first Mercedes-Benz car plant in Europe outside Germany is now the second biggest German company in Hungary, based on revenues (according to data provided by DUIHK). MercedesBenz Manufacturing Hungary Kft. started production in what was a greenfield factory development in Kecskemét in March 2012.

The plant covers the entire car manufacturing process from stamping to assembly. Since 2012, more than 500,000 vehicles have been produced there. Last year, more than 180,000 compact vehicles were produced at the plant. The MercedesBenz B-Class, the four-door compact CLA Coupé, and the CLA Shooting Brake are all produced at Kecskemét.

By the end of the decade, Daimler will build a second factory in Kecskemét. The company employs more than 4,000 people (up from 700 in 2010). Overall investments at the site amount to EUR 1.3 bln.

2017. 07. 26. 18:42

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Budapest Business Journal | July 28 – September 7, 2017

Special Report Innovation

Cities Need Unified Action to Become Smart16 Hungary as an Innovation Destination22 Stakeholders Praise Innovation Incentives 27 SAP Operates Clouds From Hungary 28

How innovation and new technologies are helping shape the future of Hungary’s economy

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2017. 07. 26. 18:57

14 | 4

Special Report

www.bbj.hu

Budapest Business Journal | July 28 – September 7, 2017

Let There be (Smart) Light

LED lighting technology manufacturer Inesa Europa Kft. has just announced plans to expand its commercial and logistics center in Hungary this year, which will make it the biggest such in CEE. CHRISTIAN KESZTHELYI

Although Hungary appears to be open towards so-called “smart” solutions, wide ranging use of smart lighting is yet to be seen. However, as it is a core interest of business is to run energy-efficiently, trends in adopting smart lighting might soon start to accelerate.

Thanks to the spread of the smartphone, nowadays ever more devices or solutions are prefixed with the word “smart”, especially if they can be controlled by applications stored on mobile phones or tablets. Thus, it should be no surprise that the phenomenon of smart lighting should have appeared and is not only becoming more popular, well supported by EU energyrelated incentives and laws, but is expected to become a significant player in the near future’s smart city concept.

Sensors built into light bulbs can collect information and based on this give orders for their own operation, Inesa (founded in 2015 by the Beijing Shenan Group) tells the Budapest Business Journal. Furthermore, these can communicate with smart devices, which can also be used to give orders to the lighting solutions installed in facilities.

Large-scale Application Such features are not limited to lighting, but heating systems and window blinds can also be automated or

“Linking the interior lighting of homes up with automated systems is one of the key elements of future technologies.”

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The INESA logistics center at Dunakeszi, close to Budapest. controlled to suit the actual weather and lighting conditions.

Similar automation and control cannot only be applied in buildings, but also on a much larger scale: public spaces and city streets.

Inesa says it envisages a future where several smart lighting solutions are integrated into the same system, and are able to communicate with smart solutions in other infrastructure.

“Lamp posts will be an important part of the infrastructure of smart cities, which, in addition to lighting, will encapsulate other solutions, such as security cameras, speakers, Wi-Fi hotspots, electric car chargers or even traffic sensors in order to make cities smart through lighting technologies,” Inesa tells the BBJ. Overall, Hungary seems to be open to smart solutions; interest in them is huge, public dialogue references them, incentives encouraging their use keep appearing, but the wide scale use of smart lighting still needs to take place. Yet, Inesa has hope.

“In the field of commerce, it is the

“Lamp posts will be an important part of the infrastructure of smart cities, which, in addition to lighting, will encapsulate other solutions, such as security cameras, speakers, Wi-Fi hotspots, electric car chargers or even traffic sensors in order to make cities smart through lighting technologies.” business interest of economic investors to apply energy-efficient solutions. In the case of cities, energy and related expenditures are receiving increased attention. Furthermore, services offered by smart cities can significantly boost the comfort sense of citizens, as well as their security and life quality,” the lighting company argues.

Inesa has recently announced it will expand its Hungarian commercial and logistics center this year through

an investment of

EUR 2 million.

The 12,000 sqm plant, which was realized in 2015 through an investment of EUR 6 mln, currently serves almost the whole European market. Through

the latest investment in the plant (which employs a staff of 51), Inesa is planning further expansion in the retail sector, as well as envisaging the spread of “smart” solutions and participating in public lighting projects.

Determining Player Inesa says it hopes to become a determining player on the CEE lighting technology market, and eyes further investments and research, as well as production in order to answer customized demands faster. The firm believes the expansion of the center in Hungary will help achieve all of that.

According to figures from Inesa, LED lighting technology solutions are spreading in Hungary; currently, more than

50%

of residential

investments include such technologies and more than 60% of public spaces investments turn to LED solutions.

This is spurred by regulatory changes in the European Union taking effect in 2020, which will force traditional light sources to be switched off once and for all, giving way to a 100% LED-run lighting here in Hungary too, says Balázs Tóth, regional sales director of Inesa Hungary.

“Linking the interior lighting of homes up with automated systems is one of the key elements of future technologies,” Tóth says, adding that demands for solutions related to smart cities and smart lighting appears to be increasing not only in Hungary, but also the CEE region.

2017. 07. 26. 18:57

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Budapest Business Journal | July 28 – September 7, 2017

Special Report | 15

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Brand new, not new Born

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Globally, the company works with most sectors: insurance, healthcare and life sciences, travel and transportation, the public sector, energy, banking and capital markets, manufacturing, consumer products and retail, communications, media and entertainment, and aerospace and defense. Czibók says telecoms, energy, government representation, travel and transportation, manufacturing and automative are particular focus areas in Hungary.

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The world’s leading independent, end-to-end IT services company, DXC Technology was formed in April from the merger of CSC and the Enterprise Services business of Hewlett Packard Enterprise. The global headquarters are in Tysons Corner, Virginia, with the new company focused on helping clients, both from the world of business and the public sector, harness the power of innovation to, as one company slogan puts it “thrive on change”.

“We decided on a brand-new name to represent that something new was born out of the merger,” explains Zoltán Czibók, the managing director of the Hungarian operation. He had been with Hewlett Packard in Hungary since 1997, and was previously Enterprise Services Country Manager here.

In May, at our leadership conference in Dallas we presented a well-known new company to our partners: We are neither one nor the other of the legacy companies, but really, something new. In fact, our slogan for the event was ‘Brand new, but not born today’,” Czibók explains.

The intent is to build on those rock-solid foundations and exploit the freedom created by the merger, which the MD says has allowed it to become nimbler and more flexible. “The goal is to become number one in the world.

We are totally independent; we are not bound to any hardware or software provider, which means we chose the technology that is best for our customers, not best for us,” Czibók says.

The Right Tool Being innovative doesn’t purely mean finding the best software or the best hardware, but rather thinking in terms of a solution based on the right tool, whatever that may be, and “to make the room for further analysis”, he says.

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“In May, at our leadership conference in Dallas we presented a well-known new company to our partners: We are neither one nor the other of the legacy companies, but really something new. In fact, our slogan for the event was ‘Brand new, but not born today’.”

Zoltán Czibók, the managing director of the Hungarian operation.

“We are totally independent; we are not bound to any hardware or software provider, which means we chose the technology that is best for our customers, not best for us.”

“We are able to give clients better solution services, by helping them decide what it is they are currently doing that can be improved; applying a continuous focus on traditional businesses, it is important to find the right way to transform them.”

example, more than 20,000 pay slips and associated paperwork are processed by us,” Czibók says.

The Whole Region So, much has changed. But not everything. DXC Technology Hungary is spread across five sites in Budapest and out in the countryside. “As one of the largest employers within the IT sector, we provide expert activities throughout the whole region. All of our clients have my number and can call me anytime.”

For all fields, advice on best practices, finding efficiencies, and automation of routine roles are going to be important going forward. As is so often the case, knowledge (and how you apply it) is key, and to that end DXC Technology initiated a Business Forum series for C-Suite executives specifically to share such knowledge.

Managed cloud services is an area where Czibók sees good growth potential for the Hungarian business as well, and DXC is also developing its own offerings, especially for banking and insurance and the financial markets. The company seems extremely well set to continue building on its 60 years of innovation, even if it is brand new.

Hungary is suffering something of a labor shortage in most sectors, but Czibók does not seem unduly worried about maintaining his

The MD points out that when growing a company, restructuring its processes, digitalization and automation play a major role. Nowadays, companies can no longer afford to stand still; rather, they need to look for continuous improvement and innovation.

Given the global reach of DXC, often a workable solution is already out there somewhere in one of those 70 countries where it is present; all that is required is the appropriate localization.

And if requested and it is the best solution for a client, DXC will take on some aspects of work itself, to allow a client to concentrate on its core activities. “We have a very strong BSP [business service provider] team in Hungary, working for a huge number of clients. For

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Budapest Business Journal | July 28 – September 7, 2017

Cities Need Unified Action to Become Smart

The notion of the smart city has become a buzzword in Hungary lately, and while the approach some settlements have adopted towards development has been promising, unified and synchronized steps are needed in order to improve future city life effectively.

CHRISTIAN KESZTHELYI

With the increased speed of urbanization and the dynamic growth of cities, many complex questions have emerged related to how the cities of the future can remain livable and sustainable. One possible solution is the so-called smart city.

Although the concept has been known in this country for years, until the beginning of 2017 no generally accepted description of a smart city existed in Hungary. However, in March the Hungarian government included just such a definition in a decree: “A smart city is a settlement that executes its integrated settlement development strategy in line with smart city methodology.”

The latter was defined as “A development methodology of a settlement or settlements, which develop its natural and constructed environment, digital infrastructure and the quality and economic efficiency of its services through the use of modern and innovative information technologies, in a sustainable way, with the increased involvement of the population.”

funded developments that are based on the integration of sectors [...but a] project-like approach has dominated among the development programs, which, in the majority of the cases, included developments completely independent from each other.”

INFOTER is, however, happy to acknowledge that, thanks to a positive sentiment change lately, more and more cities put the “smart city methodology” into practice. Under this, settlements establish their smart city strategy and carry out investments in line with plans covering the short-, middle- and longterm. This strategy shows commitment to the renewing of their systematic and economic operations, INFOTER adds.

Hungary has seen the establishment of several smart solutions, and many

“A smart city is a settlement that executes its integrated settlement development strategy in line with smart city methodology.” others have been in progress in Budapest and secondary countryside cities. In the capital, the most notable examples include the public bike sharing BuBi scheme and Budapest Transport’s BKK Futár (carrier) application, that helps public transport passengers see realtime traffic and schedule information on a map.

Cooperation Missing

But while many analysts argue that the development of cities must head in a smart direction in order to establish a sustainable future, the most important players of such developments — government, business life, universities and civil organizations — have thus far failed to cooperate on the matter, the Information Technology for Society Association (INFOTER), the organizer of the Budapest Smart Cities conference held on May 25, tells the Budapest Business Journal.

“The government of Hungary launched the Modern Cities Program two years ago, with the purpose of helping cities with county rights become the dominant economic centers of their region,” INFOTER says. “The framework would be well-suited to serve strategically well-

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A BuBi docking station at Fővám tér, Budapest, Hungary.

(Photo: Wikimedia Commons / Gyetvate)

Miskolc is undergoing the introduction of a public CCTV system in the framework of the Modern Cities Program; Békéscsaba is seeing a complex energetics smart grid investment; and Kecskemét will see the creation of a City Development Fund soon to improve public services, INFOTER says.

Unseen Systems

Although what tomorrow may hold in terms of smart cities is highly dependent on what actions are implemented today, it is highly likely that cities will not change much visibly. However, the unseen systems fueling services will, and so will the link between citizens and their settlements, INFOTER expects.

While our current image of a city is not that much different from the one our grandparents and great grandparents held 100 years ago, almost anything that happens in a city today can generate data that is collected by the devices of passers-by and sent to country-wide or global databases, INFOTER adds.

The association sees cities becoming more dynamic systems, in which services are customized to the people and changes in time. The centralized systems of the 20th century (public lighting, energy, water, sewer, communication) are all becoming decentralized and are being complemented by local elements, an approach that extends digital and service platforms as well as physical solutions.

INFOTER warns that such operations demand suitable legislation, policy decisions and technological solutions.

At the same time, the aforementioned changes could trigger the transformation of social participation; beyond crowd usage, crowd maintenance and crowd funding might also appear. In the future life of Hungarian cities, the availability, openness and exclusivity of technology and data will play a very important role, INFOTER says.

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Fellowes: The route of a 100-year-old brand from American movies through storing documents and data security to office ergonomics

Although business machines and workplace management products manufacturer Fellowes has only been present on the Hungarian market for six years, the brand is actually 100-yearsold this year.

is data security, for which a determining product of ours is manufacturing and selling paper shredders. This is one of the main areas to exploit nowadays, as we see that possessing information is power and sensitive information getting into the hands of incompetent people can lead to great damages being caused through the abuse of such information. An innovation of Fellowes, later adopted by our competitors, is its ‘jam proof’ technology which prevents the paper from getting stuck when shredded. Or safety functions that practically block the device immediately if a hand comes close to the shredding gap. But I could also mention Silentshred technology, which makes the device efficient for use in today’s open offices without bothering others around. Another advantage of our machines that they also shred paperclips, staples and CDs.

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Hungarians have long known the brand from American movies, even if we have not consciously so; when somebody is fired or quits their job and packs their office stuff into a box, the chances are strong that what you will see is the iconic Bankers Box of Fellowes.

The firm was launched during World War 1, when Harry L. Fellowes purchased the business from an acquaintance who was conscripted for USD 50. The business is now under the control of the fourth generation of the Fellows family and is currently present in 15 countries through subsidiaries. We spoke to managing director László Kreutz about the Hungarian operation.

The company’s presence in Hungary is relatively recent, but it appears that introducing an almost century old firm to the market turned out to be valid. How so?

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László Kreutz, managing director.

I could say that it is better later than never; a huge American brand has arrived in the country. Probably in Hungary, especially because it is a B2B brand, it is not yet a very well-known name, such as Whirlpool, or Kodak, although Fellows is on the same level. I believe that the difference between old and big brands and old and big brands that still exist can be encapsulated in one single word: Innovation. Those who were not able to keep up with the passage of time, or even more so, to process the demands, fall into the category of history, while those who are among the leaders today can thank their position to eternal renewing. This is what Fellowes is like, and this is also the answer to the question: how did

the introduction of the firm to the Hungarian market turn out to be valid?

Give us a showcase of the innovations that have appeared in the past 100 years via Fellowes.

As was mentioned in the introduction, the iconic Bankers Box helped to lay the foundation for storing documents. This product, which is known by patriotic Americans as the Liberty Box, is still the symbol for storing documents overseas.

Naturally, this product has gone through several improvements with the passage of time and a complex system of archiving and storing documents has been built around the concept. Another huge division of ours launched in the 1980s and ’90s

Arriving at the present day, what other innovative solutions could you mention in the field of office furniture?

Office ergonomics is becoming a more important part of our portfolio. This is a sensitive area, because here we are talking about big stakes, as we are talking about our health. We are spending more time by sitting at our desks, and sitting above our computers at home with arched backs. We lead a more sedentary lifestyle than 20 or 30 years ago, which triggers serious health consequences. It does matter, therefore, in what kind of office environment we work in, or whether our workstation hides the causes of health issues or serves in retaining our health. We have established so-called “danger-zones” and we developed devices for these, such as wrist rests and foot rests. Our latest sit and stand devices can be used to transform office desks into sitting or standing workstations, which make it possible to swap between standing and sitting at our office desk while working. This is another state-ofthe-art solution from us for everyday life that has a positive effect on the life of people who get in touch with Fellowes. This is what our continuous innovation is aimed at.

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Budapest Business Journal | July 28 – September 7, 2017

Smart Advertising and Street Furniture: A Win-Win

While street furniture chiefly aims to offer greater comfort for passers-by, with the advent of smart solutions new platforms for advertising are on the rise that are expected to benefit both advertisers and consumers.

JCDecaux Hungary walks the Budapest Business Journal through the possibilities.

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Szilárd Szelei, co-CEO of JCDecaux Hungary.

CHRISTIAN KESZTHELYI

Although street furniture basically offers functions to make city life more livable, advertisers can easily benefit from such functions. “The secret of smart advertisements is in the data, and technological solutions that collect them,” Szilárd Szelei, co-CEO of JCDecaux Hungary, tells the BBJ. “Advertisers can attain information that helps them enhance their reach; for

example, they can have different content on display dependent on the time of the day, weather, or even the demographics of people nearby,” he adds. With the employment of smart street furniture, advertisers are given the same benefits as in the digital space, the advantages of which are seeping into the out-ofhome advertising field. In this way, an advertisement can reach the customer just seconds before making a purchase.

Around the world, smart street furniture is cutting itself a bigger slice of the pie. Interactive and multifunctional waiting areas, automated street toilets, public bicycle sharing systems, digital displays, touchscreen info systems and other street furniture are all paving the way for smart advertising. This infrastructure can be made even more clever with the application of smart technology, such as the Internet of Things, sensors, telecommunication devices, beacon receivers, virtual reality equipment, and payment methods.

Developing Infrastructure While the three chief markets – Europe, America and Asia – are in strong competition, Hungary also keeps developing in this regard. “JCDecaux has a strong presence on all the three main continents and develops a know-how in synergy,” the co-CEO says. “Thanks to the main strategy of the firm, it has almost

10,000 pieces

of street furniture in the Hungarian market. Currently, we are developing the infrastructure and expanding it,” he adds.

Today, JCDecaux offers advertisers an array of virtual reality, beacon and payment solutions in Hungary, and more is expected to come. Following in the wake of prominent European cities such as London, Vienna and Berlin, Hungary is planned to receive smart solutions, like digital displays showing content that can be changed in real time, as well as touchscreen displays of a standard size that could be introduced in premium locations, where different age groups can efficiently be reached, JCDecaux foresees.

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Making Hungarian cities ready to offer smart advertising solutions has never been timelier, now that the billboard market, traditionally the most-used form of street advertising in Hungary, has just been strongly regulated. Not only is the number of billboards expected to dramatically drop

after

2020,

but the surface areas of those remaining must be reduced. Those changes are also expected to fuel the further spread of smart solutions.

Technological Renewal “Thanks to the changes, most probably we will witness an entire technological renewal of the out-of-home market,” Szelei expects. “Billboards lacking social functions will disappear from the streets as of 2021, and they will be replaced by street furniture equipped with functional smart solutions.”

Szelei believes that media owners who are willing to make investments now will be able to deliver quality and functional solutions that can be further boosted by smart solutions to enhance the experiences of city dwellers. Through these developments, Szelei argues, the new smart devices replacing traditional billboards must be in line with the clean city concept, which has successfully been implemented in many Western European and South American cities.

With the spread of smart advertising, less but more quality surfaces will be available for advertisers. “Quantity will be replaced with quality, and the ‘less is more’ principle will be applied,” the co-CEO says. On the one hand, advertisement noise will be reduced, and advertisers will find it easier to reach interested consumers. On the other hand, innovative and interactive street furniture and devices can offer a more intelligent and more comfortable way of life for people living in the cities.

“Smart advertising solutions offer more beneficial opportunities for local governments, city dwellers and advertisers alike, therefore we believe that the clean city concept will hugely contribute to the development of Hungarian cities,” Szelei concludes.

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HeartBit Uses Real-time Data to Avoid Heart Stress

In line with international health care trends that place ever more emphasis on prevention and put the responsibility for their health in people’s hands, a Hungarian health startup has created a wearable ECG device.

SONJA BENCZE

Currently only aimed at recreational users and non-elite athletes, the HeartBit solution, (patent pending), indicates the health level of users’ heart muscle through real-time monitoring, recording and analyzing of ECG signals.

On demand, it also gives them a personalized training program adjusted to their heart muscle condition, in order to avoid over stressing the heart during most physical activities.

measurement device intended for home use. They relied heavily on the research of Kozmann’s father, Professor Dr. György Kozmann, who devoted much of his time to studying points on the surface of the body that are able to provide information on the cardiovascular state of a person.

Like an ECG

Real-time Stats The devices currently available on the market will tell you how far to run in order to lose weight or reach a certain fitness level, says György Kozmann, CEO. Yet this is the wrong approach, he says. During physical activities, the devices should take real time body surface data (real ECG, not just heart rate) to be able to avoid the chances of ischemic heart failure. The risk is higher if you are unhealthy from a cardiovascular viewpoint, and in this case, you have to do your workout with such a sensitive device as the HeartBit in order to get real time feedback from the system on when to stop the activity.

The HeartBit team, which is made up of former university classmates (physicists, developers, and engineers) worked out a solution that uses the collected data smartly.

At the heart of the innovation (if you will pardon the pun) is the algorithm, a selflearning version of which detects and provides a warning about the stress level of your heart (during rest, stress, and recovery states). Real-time data assessment also detects arrhythmia, atrial fibrillation and potential anomalies during activity.

The HeartBit is not the first invention

by Kozmann and his team; they have also created a prototype called WIWE, a small credit card-sized, non-exercise ECG

“HeartBit is like an ECG-exam done in a hospital which we brought out of the lab conditions and use it during physical workout,” Kozmann explained. They have developed a fully operational prototype of the HeartBit which is undergoing clinical trials. This time around, Kozmann and his team plan to roll out the product themselves; that was not the case with WIWE, the technology for which they sold to a strategic investor in Europe in 2014.

Exactly how much they received Kozmann will not reveal, but it was far more than HUF 100 million plus royalties in the next five years, Kozmann says. That has been used to finance the development of the basic HeartBit model.

The team has recently closed the third round of investment. By the fourth round, they hope to have HUF 1 billion and a validated product in Hungary and the United States. Production will take place in Hungary; Kozmann says there are manufacturers that are able to produce at large enough scale. Nevertheless, the product has to be validated abroad to gain recognition on the global markets. The rollout on the Hungarian market is planned for this December.

Radical Change Needed in Digital Education

With connectivity essential for today’s children to succeed in their careers, immediate measures are required to transform education to live up to the challenges of the digital era.

“In terms of digitalization, education lags behind very much, and I don’t know what to do, but it’s got to be radical.”

LEVENTE HÖRÖMPÖLI-TÓTH

How does the internet alter classrooms and what can be done about the digital education of the current and future workforce? These were the most critical questions addressed at a joint roundtable hosted by Telenor Hungary and the American Chamber of Commerce.

Alexandra Reich, CEO of Telenor Hungary highlighted the importance of providing more mobile data to enable communication on-the-go. Telenor is contributing to this mission by offering unlimited data plans, she said. But Reich also warned about the need to educate people about how mobile data can and

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Alexandra Reich, CEO of Telenor Hungary. should be used meaningfully. Telenor’s Hipersuli (Hyperschool) project takes in

4,000 students,

15 schools, and 200 teachers. As Krisztina Varga, who works as a teacher, IT mentorconsultant and professional coordinator for the program, said, kids are great at technology, but they don’t know how to handle their emotions, solve problems or communicate. Therefore, all that needs be taught.

At own Pace Schools have been equipped with digital devices before, of course, but teachers were left on their own and they often didn’t know how to use those gadgets most effectively. Under Hipersuli, by contrast, they can go their own pace, there is time to figure it out for themselves and outside support is also available.

Jerry Kürti, CEO of Tabello System, an organization with the mission to increase the use of digital technologies

in public and corporate language education, hailed the strengths of online interactive education.

“Involving artificial intelligence is set to revolutionize teaching, allowing kids to learn at their own pace,” he said. “The teacher will be needed only if pupils don’t understand a concept, as AI can walk them through the repetitive stuff.”

Kürti admitted that society has been slow at integrating digital changes into education and young people need to be prepared in how to make use of them.

The ability to write by hand is still important, he said, but digital writing skills are not given enough attention, and they are inevitable to improve digital competencies. That requires intensive teacher training.

“In terms of digitalization, education lags behind very much, and I don’t know what to do, but it’s got to be radical,” Kürti concluded.

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Budapest Business Journal | July 28 – September 7, 2017

Finding the key to Unlock Hungaryʼs Global Competitiveness

LEVENTE HÖRÖMPÖLI-TÓTH

The AmCham Innovation Policy Task Force launched the “Business Meets Universities” (BMU) project in January with the aim of starting a dialogue that creates a mutually beneficial advantage for both academia and enterprises.

The series of workshops bringing together representatives of universities, corporations, startups and government will examine key elements of the government’s paradigm shift from the “Made in Hungary” approach to the “Invented in Hungary” principle by focusing on how to enhance the development of the local innovation ecosystem.

The importance of the effort is further highlighted by the fact that Hungary fell from 50th place in the World Economic Forum’s global competitiveness ranking to 80th. As Jörg Bauer, President of GE Hungary (and co-chair of AmCham’s Innovation Policy Task Force, and the 2017 BBJ Expat CEO of the Year) pointed out, the main reason for the decline is rooted in the fact that innovation

R&D expenditure is increasing in Hungary... but Czech Republic, for instance, spends around 0.5% more of its GDP on research, and consequently it is far better off.

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Christopher Ball, Director of the Central European Institute.

has been losing ground, whilst the relationship between the business and academic sector has traditionally been poor.

R&D expenditure is increasing in Hungary, which is at least taking things in the right direction, but Czech Republic, for instance, spends around 0.5% more of its GDP on research, and consequently it is far better off. “The GDP of Czech Republic outperforms that of Hungary by 30%. The correlation clearly exists,” Bauer added.

Money Alone not Enough More money alone will not be enough, though. How higher education and the private sector interact matters even more. By listing best practices from abroad, keynote speakers emphasized critical factors that will be decisive for taking that cooperation to the next level.

Christopher Ball, Director of the Central European Institute and speaking on behalf of Quinnipiac University (a private, nonsectarian, coeducational university located in Hamden, Connecticut, at the foot of Sleeping Giant State Park) highlighted that, in Connecticut, technology and incubation programs help startups engage students under well-organized schemes.

Special ten-week summer training courses offering paid traineeships provide further opportunity for those studying to forge closer relationships with startups. Disseminating best practices and management techniques on an institutionalized level also has a positive snowball effect.

It is largely two factors that hamper the smooth cooperation between businesses and universities: timing and the difficulty in finding a champion.

“Companies in Holland had no choice but to follow the path of development by embracing quality management, justin-time models and flexibility. But all that is no longer enough to succeed in the corporate arena, as companies need to be innovative and entrepreneurial on top of that.”

“Universities work in discrete blocks of time; they are stuck that way, whereas companies are not,” Ball said. This timing mismatch can be resolved, however, by structuring projects in blocks and breaking them up to make them compatible with the university structure. Another idea is to organize one-week hackathons or weekends with a short-term focus.

Planning at least one semester in advance is key: companies need to get their intended project locked in well ahead so that professors can allocate resources in time. According to Ball, finding a champion is another frequent pinch point, as you need one or two people to be passionate about the project at both ends of the effort, otherwise things just won’t move forward at the desired pace.

Aard Groen, Professor of Innovative Entrepreneurship & Innovation at the University of Twente and the University of Groningen.

Photos: AmCham / Hajnalka Hurta

Urgent changes are long overdue to improve the efficiency of cooperation between Hungaryʼs business and academic spheres. To realize that goal, a roadmap was drawn up at the “Business Meets Universities” event organized by the American Chamber of Commerce in Hungary (AmCham) at the LogMeIn offices in Budapest this summer.

Building Networks Aard Groen, Professor of Innovative Entrepreneurship & Innovation at the University of Twente and the University of Groningen (both in the Netherlands) shared the experience of the Dutch Twente region to give an idea of how Hungary could proceed in order to get more out of innovation.

“Companies in Holland had no choice but to follow the path of development by embracing quality management, just-in-time models and flexibility,” the professor explained. “But all that is no longer enough to succeed in the corporate arena, as companies need to be innovative and entrepreneurial on top of that.”

Networks need to be built between players and consistent policies from government are essential, as universities and businesses alike influence one another. It all takes time, though; in the case of Twente, it took from 1980 to 2000 to implement a smoothly running system based on efficient cooperation between the various innovation stakeholders.

Participants closed the session by forming small groups to identify best practice projects of business-university cooperation, how to retain high level scientific goals and become successful in business activities. They also discussed how to build an innovation ecosystem around a large company, which has proved a successful model for establishing ecosystem hubs around the world.

A White Paper from the event, summarizing its conclusions, will be discussed with universities throughout this summer, and on the basis of those talks policy recommendations will be submitted to the annual AmCham “Business Meets Government Summit” in September 2017.

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When it Comes to Business, Canon Can

The company distributes altogether some 16,000 different kinds of medicaments, and another 6,000 or so products that do not qualify as medicine but are sold in pharmacies. Canon’s back office support enables Hungaropharma to marry up its SAP data archiving system with invoicing data into one seamless digital ecosystem.

Ask a member of the general public to play word association with the brand name “Canon”, and the most common answer is likely to be “camera”.

Play the same game in an office, and you might get “printer” or “scanner”. All three are vital elements of the Japanese manufacturer’s business, but there is so much more than that. Not least, innovative business services.

Document Intensive

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“We have a lot of new capabilities, in particular three B2B value propositions,” says Ferenc Mezei, business unit director at Canon Hungária Kft. These include the managed print services of Canon Global Services, offering fully integrated hardware and software, business information security and, most recently, information management and business process outsourcing.

“This was reorganized into a new business this year. In the past two or three years, we have started building up this business area.

Now we have created a new business unit.

Information management is a special area for a company like Canon. It is less than 20 years since we had a footprint in this area.

Initially we concentrated on hardware, but now we also have a focus on software and complex solutions.”

And it has already started to pick up some very high-profile customers. “Because of our software system integration and service platform, we have a very good relationship with Magyar Posta,” explains Mezei.

Using Canon solutions, the Hungarian government has developed a central digitalized mailroom, the so-called “Citizens Mailroom”. “Traditional mail communications are sent to the mailroom, where they are opened and digitized, and the digital format forwarded by email, meaning the relevant ministry or institution gets to work with digital documents.” The answers come back to the central mailroom in digital format, where Magyar Posta prints them out (again, using Canon printing technology and services) and forwards them to the citizen concerned.

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Ferenc Mezei, business unit director at Canon Hungária Kft.

Competing With the Biggest With B2B business consultants, technical consultants and social architects, plus the background of hardware and increasingly sophisticated software solutions, Mezei says Canon is “ready to step into the info tech market; we believe we can compete with the biggest IT players.” Indeed, as the company website makes clear, Canon’s application palette spans five key areas, each focusing on a different way to improve business: Differentiate: Marketing solutions that enhance customer communication; Accelerate: Document management solutions for today’s business challenges; Transform: Business process management solutions for the digital office; Simplify: Out-of-the-box solutions that reduce complex admin; and Evolve: Innovative solutions for print services providers.

recognize and manage invoices. Now we are ready to build up a whole back office ecosystem,” Mezei says. “We have been looking at how we can help customers digitize the back office and free up time for other activities. We have all the necessary software and expertise to do just that.”

That has already happened at one bank, where, over a period of five or six years, Canon has built up what is now a fully digitized back office. Another satisfied customer has been a Hungarian real estate developer, where back office support for project management and consultant invoicing is handled.

One particularly complex customer is Hungaropharma Zrt., the largest pharmaceutical wholesaler in Hungary.

The net of potential clients is spreading, with shared service centers, law firms and HR departments all in focus now. “If you analyze any general company activities, you will always find some document intensive areas. We are able to offer out of the box solutions for document management.”

But it will never be enough just to offer off-the shelf software. There is rarely a one-size fits all scenario, which is where the human element, the consultants, come into play. Mezei says a vital element behind the business Canon has been winning is the knowledge and expertise of his colleagues.

“You have to understand deeply the business requirements of the industry segment. If you are sector specific you can build trust that you know how you can increase efficiency appropriately, and trust is vital to making these decisions.”

That level of expertise is just as important among the software developers. Canon has a team of 40 or so down in Szeged, for example, working on cloud-based solutions.

“Canon’s approach is to build up more developer centers around Europe, and this is one of those.”

One of the cloud solutions the Szeged team has been responsible for developing is Canon’s Picasa-like service Irista, launched in 2014, which allows users to store and share (and even print in book format) photos and video across multiple devices, and includes 15 GB of storage free.

Of course, you are never far from printing in one form or another where Canon is concerned. It should come as no surprise, therefore, that the company is active in field of 3D printing services. “A lot of automakers use 3D printing and are looking for service providers. We can supply them with the most modern machines and technologies. Initially, automakers want to pay for the services rather than buy the machines. In the next two or three years, we are going to see a lot of new technologies and innovations coming from this area. This is a huge opportunity for Canon in the B2B arena.”

One such way in which Canon is aiming to make life simpler for its clients is through its information management companies, Therefore and I.R.I.S., which were acquired in the past five-ten years as a natural step in its strategy of providing customers with end-to-end office solutions that complement its existing worldclass portfolio, and developing a more consultancy-based sales approach.

“Initially it was based on a relatively simple piece of software that was able to

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Hungary as an Innovation Destination

R&D EXPENDITURE RELATIVE TO GDP 2015

2020

EU target

Average EU spending Hungary's spending 3% 2.03% 1.38%

SONJA BENCZE

These days, cities compete for new enterprises just as much as government do to attract large corporations. In order for a company to set up their headquarters somewhere, a lot has to be accomplished.

Startups may demand even more than established organizations. Not only do they need an investor-friendly economic environment and excellent infrastructure, the city/country has to be inspiring enough to boost innovation and growth.

The indicator that best compares countries’ innovation performance is R&D expenditure relative to GDP. Both the Lisbon Treaty and the

Europe

2020

Strategy have set the goal of member states spending 3% of their GDP on innovation by 2020. There is still a while to go on that particular journey; average EU-expenditure in 2015 was 2.03%, with Hungary standing at 1.38%.

The 2017 European Innovation Scoreboard, an index that compares EU-countries based on the above figure, placed Hungary among ‘moderate innovators’, the third category out of four (Innovation leaders; Strong; Moderate; and Modest Innovators). The country

achieved

68%

of the EU-average in 2016 (relative change to 2010), a similar performance to that of Slovakia, Greece and Serbia. Over time, its performance has declined by 3.5% relative to that of the EU in 2010.

Cooperation Strengthened But while spending on innovation may have declined, some fields essential to boost innovation performance have improved. Cooperation at regional and European levels, especially in fields

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0%

such as information technology, has strengthened.

“In Hungary, there has been a real growth among the innovation hubs that the EIT Community have set up,” Martin Kern, interim director of the European Institute of Innovation and Technology (EIT), tells the Budapest Business Journal.

The EIT Community is the largest innovation community in Europe, with almost

1,000 partners

from leading business, higher education and research institutions.

The community powers entrepreneurs and innovators across Europe to turn their best ideas into startups, products and jobs. EIT has its headquarters in Budapest at Infopark, a center for universities, research facilities and industry players. Physical proximity of business, research and education is crucial, says Kern, as it boosts the ecosystem approach which is at the heart EIT. Being close to all of these players is something that EIT Digital, also based at Infopark, benefits from, too.

The organization, which is a member of the EIT network and one of the 11 EIT Digital ‘nodes’ that comprises top corporations, SMEs, startups, universities and research institutes, can better coordinate the thesis or research work between industry partners such as Ericsson or Magyar Telekom, and students participating at its elite European double-diploma programs, also run in Budapest.

Although EIT Digital has a node in Silicon Valley as well, it differs in many ways from the U.S. approach to innovation and incubation. Rather than building one strong center, the idea is to have more differentiated hubs that

we interconnect, Kern explained. The scale, the growth rate is different too; the venture capital available in Silicon Valley there is five times that of Europe, he added.

Which is not to say that in Europe, or even Hungary, there is not enough capital. Potential investors, however, often won’t invest due to a lack of financial experience. Some of them are businesspeople who have some extra capital to invest, but know little about the process.

Hesitant Investors

Nevertheless, it is not only inexperienced investors who are unwilling to invest; established market players are also hesitant, especially in the initial phases of the innovation process or until they see some return that is more guaranteed.

That is where the EIT Community can play a role, as it tries to engage investors early on. Once they see that the risk is not taken only by themselves they are more likely to invest.

Access to talent, state-of-the-art research facilities and financing for innovation projects also helps to attract business. This kind of cooperation has been proven to work well at EIT Community, including EIT Digital Budapest, which has managed to bring on board some big firms such as Magyar Telekom and OTP Bank. The organization also manages an outreach program.

“There is some real potential for Hungary and Budapest to become a regional center that runs outreach programs reaching out to partners from countries where EIT Community Innovation hubs are not yet present,” Kern said.

Another hurdle in the way of competitiveness is red tape. Securing funding for a project takes some reporting, which is understandable as

SOURCE: EUROSTAT

Hungary, and in particular Budapest, has a lot to offer to budding enterprises looking for an inspiring innovation location in the region, but many features, which would make it a go-to choice at a larger scale European level, are still missing.

public funds are involved, Kern said.

“At the end of day, it is taxpayers’ money, and both citizens and authorities want to be reassured that is well spent,” he said.

Though regulations are also set up at national and EU levels, EIT is working on simplifying the processes under its control; for example, by collecting feedback from its Innovation Hubs and bringing it to policy makers.

Budapest as a Startup Capital When it comes to a startup location, buzzing cultural and creative life are of equal importance to an investorfriendly environment, says Zoltán Ács, director of incubation at Design Terminál.

Being a technology metropolis alone is not enough, Ács says, citing Bangalore as an outpost of Silicon Valley. Engineers will give the answer for “How”, but it is artists and social scientists who determine what it is that benefits people – hence having them both in a city is the ideal combination.

The business environment in Budapest is mediocre, the government is working on creating a more tax-friendly scheme for investors. Its location is good, but it is far from the real markets, Ács said.

Overall, the capital’s potential to attract startups is fine, but only at a regional level.

“Startups are willing to move locations for a good ecosystem and price-to-value ratio and Budapest can be one stop in this process.”

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Returning to Reboot Solar Energy with the Rebox Master’s Degree in spectroscopy and a PhD studying hydrogen,” Kiss tells the Budapest Business Journal.

Leading solar expert Dr. Zoltan Kiss returned to Hungary to retire, but is now building on Hungaryʼs pioneering work to develop the solar energy industry here.

Entrepreneur

CLAUDIA PATRICOLO

“Sixty-years ago, I took part in a conference dedicated to solar energy; there were 16 people. In 2017, the InterSolar exhibition (the world’s leading conference for the solar industry and its partners, hosted in Munich), had one million visitors,” recalls Kiss, who has had a 50-year career in the field, and is still active with his company, Holistic Solar.

Kiss says he is working to create the solar jobs of the future in Hungary. He defines a holistic approach to the industry “where beside the optimum technological approach, the social implications of the industry are also considered”, as fossil fuel energy sources are replaced by clean renewable energy, primarily solar photovoltaic (SPV).

SPV lends itself to distributed generation, when even individual residential users can generate their own energy at a cost lower than what they currently pay. To demonstrate this point, Kiss installed Holistic Solar’s

Dr. Zoltan Kiss.

main product, the Rebox, at his home in Budapest.

Rebox (which stands for Renewable Energy Box) generates solar electricity and stores it for use when the sun does not shine, using Nickel-Iron batteries and locally generated hydrogen.

“In the history of industrial evolution, there has never been an industry of the size of SPV, or one that has developed as rapidly as this,” Kiss insists.

Born in a small village in Hungary, Kiss emigrated first to Canada and then the United States, having escaped Hungary in 1950. “When I ended up in Canada, in the early 1950s, I did many different jobs. I worked on a farm, primed tobacco and did any jobs that came along.

In 1952, I enrolled at the University of Toronto where I got my bachelor degree in engineering physics. Then a

He came back to Hungary in 2015, having become an entrepreneur in 1970.

“I do not exactly know why I came back – my whole family now lives in the United States – but I do not regret that I did come back. If in my remaining days we can create a strong solar industry in Hungary, and I can contribute to that, then I will know that my return was the right move.”

Hungary has been one of the early players in the SPV field. Kiss himself was instrumental in starting the first thin film-based PV factory in Budapest, named Duna Solar in 1998. This factory delivered the modules that were installed in Sacramento, California, close to the first nuclear plant ever built. The first BIPV (building-integrated photovoltaics: PV materials that replace conventional building materials in parts of the building such as the roof, or facades) on a skyscraper in New York City, also used modules from Duna Solar.

“The fossil fuel industry is turning to using renewable energy. This industry will be the biggest job creator in this century. More than two million people are employed in the solar industry worldwide; that is more than people working for the IT sector,” Kiss comments.

And Kiss says the industry is expected to grow another 1,000-fold during the 21st century; this is where the social part of the holistic approach will be most important, to ensure fair access for all in exploiting our common asset, the sun, for energy.

Holistic Solar, which has units in the United States, Germany and Hungary, is also involved in carrying out R&D.

Rebox, a Product for the Future, Today.

Holistic Solar’s leading product is the Rebox. As you approach the Kiss residence, you see a shining black fence, facing east. These are solar panels collecting the morning sun.

Inside the wall is the Rebox, with the batteries, Hydrogen generation and storage. Kiss explains that while the sun shines, the generated SPV electricity is used to power objects in the house. If any electricity is left over, the batteries are charged. The still remaining electricity is used to make hydrogen from water, and store that hydrogen. This box can provide the electricity when the sun does not shine, it can also provide heat by burning the hydrogen and making water.

Rebox can also charge your electric vehicle (EV) during the night, whether it is powered by batteries or by hydrogen.

An additional plus for the environmentally conscious is that this is clean fuel, unlike using grid electricity to charge your vehicle.

Perhaps the most important aspect of the Rebox is that even in Budapest, where there is only 1,200 hours of annual equivalent peak sun, it is cost competitive with central electricity and natural gas.

Keep on Innovating How do companies born out of innovation maintain that way of thinking once they become industry leaders? The Budapest Business Journal asked NNG and Prezi about their practice .

SONJA BENCZE

It is indeed a great challenge to maintain the initial power of innovation: with rapid growth comes the introduction of more processes and rules, and constantly delivering quality products to existing customers becomes a priority, Giles Shrimpton, NNG’s CEO told the BBJ. A small-scale enterprise of four employees at its 2005 launch, the number of staff at NNG today exceeds 900, and the company plans to hire around 100 additional people. It is the leadership’s task to make sure that proper time

BBJ_2515_special_report.indd 23

and resources are spent on working on innovation, and they also need to act as role models in this, he said.

For example, NNG introduced an in-house innovation program that allows colleagues to submit their innovation ideas to an Idea Box. “Ideas can be voted for, the community chooses the best ones, which are also checked by the firm’s Innovation board. Those that are selected will be realized. Another way for us to maintain our way of thinking is our values.

One of our core values at NNG is to stay forever curious – this mindset ensures a constructive environment for new ideas and initiatives,” Shrimpton said.

“We are also constantly looking for new partners for innovation, from all over the globe, to expand our portfolio – one of our latest cooperations resulted in a solution to address cognitive workload in the car, which we worked on together with a Japan-based startup.”

Cross-functional Teams The dilemma of how you maintain an entrepreneurial mindset when a startup ceases to be a startup emerges every

Giles Shrimpton, NNG’s CEO.

time a company reaches a certain size.

It is important to remain innovative and creative, which Prezi says it achieves by applying cross-functional teams. “We create several small startups within the company that comprise colleagues from all fields from user experience managers to designers to product managers. We have them sit at one table and find a solution for a certain problem together,” Csaba Faix, EMEA Communications lead for Prezi told the BBJ. The mixture of professionals mimics the workings of a startup rather than a large corporation, where problems tend to be divided between departments. This

working method is also more efficient as experts don’t have to wait for the decision of departments, they can decide together at the same time, said Faix. He cites Prezi’s downloadable version as an example. “We always aim to add nice, high resolution graphics in our presentation, but it increases file size enormously. So, we assigned a cross-functional team to solve the problem of downloadability, nice graphics at a manageable size.”

Prezi’s product development cycle also favors experimenting – usually the privilege of early-stage companies. If they are to develop a new feature, they first send it out to test for a limited number of users. Based on their feedback they may scrap it or, more likely, modify it substantially.

One might think this means of product development is costly and lengthy, but Faix insists it isn’t. “This is when product managers come into play,” he says. “If they fail three times out of ten, it doesn’t matter as they at least test some ’wild’ ideas.”

There is a lot of knowledge accumulated in the company they can build on. That’s why the company welcomes any Prezi employee to join the table. “If they have passed the rigorous hiring process, why should they sit for years without having a say? On the contrary, we badly need new ideas, so we want them to make themselves heard”.

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MTA Institute Helping Pave the way to Autonomous Driving

With 16% of Hungary’s GDP derived from the automotive sector, it is becoming ever more affected by innovation and digitalization. The Research Institute for Computer Science and Control of the Hungarian Academy of Sciences (SZTAKI) is developing new projects in order to make this sector as innovative as possible, with the hope of attracting even more foreign investors and multinational companies.

CLAUDIA PATRICOLO

Founded in 1964, SZTAKIʼs aim is to perform basic and application-oriented research in an interdisciplinary setting in the fields of computer science, engineering, information technology, intelligent systems, process control, wide-area networking and multimedia. As reported by its website, SZTAKI has a huge tradition of values, being associated with the German Fraunhofer Institute for Manufacturing Engineering and Automation and was awarded with the title of a “Center of Excellence” by the EU. “What we do has always been – and it is also today – supported by the government and we constantly have discussions with the Secretary of State László Palkovics,” Dr. József Bokor tells the Budapest Business Journal.

“We could summarize the automotive industry in three different dimensions,” Bokor explains. “The first concerns

SZTAKI’s smart factory laboratory. research and development; the second, higher education; and the third is the one regarding the production. This last step is entirely in the companies’ hands.” All three are linked however, and the likes of Audi and Knorr-Bremse have decided to open R&D centers in Hungary, while Mercedes takes part in dual training, as well as building its cars here.

Develop new Systems “What we are doing at MTA SZTAKI is to help those [automotive] companies. We are trying to develop new autonomous driving systems – and driving assistance systems – using both combustion energy and electric vehicles. We validate concepts and take care of the onboard tools: cameras, lidars [light detection and ranging sensors], radars, gyroscopes, etc.” Bokor reveals that Bosch, for example, understood the value of this help when deciding to open its plant for autonomous vehicles part manufacturing in Hungary. The final date for that is yet to be revealed, but the company is already putting together various departments.

Speaking of what SZTAKI can do for companies, senior research engineer Dr. Géza Haidegger, refers to the smart factory demonstrator laboratory for

Industry 4.0

technologies. “Like the open applications of smartphones, managing factories is part of the 4th industrial revolution,” says Haidegger.

“Companies have the challenge to manufacture million products – most with individual parameters - and, when

“What we are doing at MTA SZTAKI is to help those [automotive] companies. We are trying to develop new autonomous driving systems – and driving assistance systems – using both combustion energy and electric vehicles. We validate concepts and take care of the onboard tools: cameras, lidars [light detection and ranging sensors], radars, gyroscopes, etc.”

BBJ_2515_special_report.indd 24

“It will be a critical point in the future to attract engineer students.

After graduation, they often move abroad and it seems unlikely they will come back.

We need to approach them while they are still studying in high school. Otherwise we are forced to hire people from other countries, who are not better qualified than Hungarians.” it comes to the automotive industry, they cannot foresee what the future will be, how customersʼ need will change and which car model will be the next trend. So, our smart factory laboratory comes to help.

Here we can reproduce entire companies’ production systems, showing results and how things would eventually turn, opening various scenarios without waiting for weekly or monthly reports from inside the companies. In few minutes, you have all the answers.”

A job like this requires highly-skilled workers, and Haidegger believes this will create more jobs. “We have qualified people here in Hungary and robotics is something that cannot work just by itself.

We need to merge monotonous work with people’s skills. We will always need people,” he adds.

The Academy of Science also believes in dual education. “It will be a critical point in the future to attract engineer students.

After graduation, they often move abroad and it seems unlikely they will come back.

We need to approach them while they are still studying in high school. Otherwise we are forced to hire people from other

countries, who are not better qualified than Hungarians.”

For this reason, SZTAKI is starting a new Masterʼs Degree, together with ELTE University and Széchenyi István University in Győr (the city about 120 km northwest of Budapest where Audi has its plant). The course will start next January and it will consist of classes, laboratories and dual training.

Cyber Physical Systems

“Digitalization affects all production systems,” Bokor says. “Following the German example, we are now focusing on cyberphysical systems. Nowadays, security and safety represent one of the biggest challenges.

At plants we can reconfigure control systems, but what if the communication system fails?

This is what cyber security means. We have many responsibilities defined by law.”

To assure security, the autonomous car is not actually entirely autonomous. “It is better to call it ‘driving assistance’ because the car does not take over total control from the driver, who is forced to keep both hands on the steering wheel,” Bokor explains. To realize the final end product will take an estimated five phases, and the autonomous driving industry is currently between the third and fourth.

As Alexandros Soumelidis, a senior research fellow at SZTAKI explains, current experiments are being made using a Nissan Leaf electric car, but the driver still needs a computer in order to control the car, and there is always an emergency switch to turn into manual mode. “The next phase will allow drivers to control the car using just their voice, but we are not at this point yet,” Soumelidis says.

But still, Hungary has a pioneer tradition in the automotive sector that explains why many foreign investors are attracted to the country. “Hungary lies in a central position, close to all the big producers, Germany first, and highly qualified engineers,” comments Bokor.

In May, Prime Minister Viktor Orbán took part at the inauguration ceremony of the test track based in Zalaegerszeg.

The first in Europe, it is intended for both conventional cars and autonomous models.

“It is something we have been talking about for two years and today those promises have been kept,” says Bokor.

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Combining Innovative Communication to Grow Stronger Hungarian tech firm and startup poster boy Prezi made its first acquisition in May, purchasing the Latvian company Infogram, well known for creating impactful and functional infographics and maps. Two innovative startups born from simple ideas, they developed in their respective countries gaining customersʼ trust, and have now merged together.

CLAUDIA PATRICOLO

“We have long looked for a pioneer in data visualization to help compliment the great storytelling enabled by Prezi’s platform,” Preziʼs CEO and co-founder Péter Árvai tells the Budapest Business Journal.

“Our search encompassed global markets to find the best in technology and leadership, and we found that in Infogram.

The company is based in Latvia and is the most successful startup to have originated from that country, just as Prezi is the most successful startup that incubated in Hungary.”

Infogramʼs CEO Mikko Jarvenpaa says the merger of the two companies offers great benefits. As he announced on the Infogram website: “By uniting with Prezi, we will be able to create more powerful, delightful and useful products than ever before. It means making Infogram stronger and even better than it is today.

It also means providing you with the best technology from two world-class leaders in visual communications.”

Based in Riga and San Francisco, Infogram was launched in 2012, with the aim of helping people such as marketers, educators, journalists, consultants, and business professionals create

Péter Árvai, CEO and co-founder Prezi. charts, infographics, maps and reports, expressing complex ideas quickly and effectively.

“The company has exploded in popularity and emerged as an innovator in this space. We knew marrying these two companies would significantly improve the experience for both sets of customers,” Árvai comments.

Independece

Infogram will maintain an independent website, and will also retain its physical location, with its 30 employees working between the two offices and supporting three million users and 50

million visitors monthly. “This is a thoughtful partnership, one that has been discussed over months and has taken into account the considerations of everyone, from customers and shareholders to management and employees. Both companies have shared values, we both have open APIs [application program interfaces], providing improved integration in the modern workplace, and a strong passion for the future of data visualisation,” Árvai says.

Prezi, launched in 2009, now has 85 million users benefiting from its presentation tool. As underlined by Árvai, the combination of Prezi’s conversational presenting and storytelling with Infogram’s strong data visualization not only helps an audience understand complex messages, it may also further motivate them to action.

Even considering the great success of this first acquisition, Prezi did not wish to disclose any future plans, beyond insisting that it is committed to keeping Infogram available as a standalone data visualization product.

“Infogram is a leading provider of visually stunning, interactive webbased data visualization technology, including interactive graphics and infographics. By combining, this will allow our users to tell stories in more complex, compelling ways, with data to back them up,” Árvai says.

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Innovation and Tradition in Confectionery

Tradition and innovation combines well in the personality of master confectioner László Zila. He is an inventor, who continuously seeks for new things and ideas, and also the owner of a 35-yearold confectionery and cafe called the Zila Coffee House. His design-patented Zila silicone cake molds are used around the world in more than 90 countries.

Exhibition in Dubai, sharing the national Hungarian booth with several other companies from the food industry.

The Gulfood Exhibition is one of the largest of its kind and is held every year in the business and commercial center of the Arabian region, in Dubai, UAE. More than 100,000 visitors attend from all around the world seeking for new ideas and trends.

Research and development of these silicone molds was a long process with many prototypes, research in silicone production, development of injection machines and, of course, the creation of cake and filling recipes. The project won European Union R&D funds, and the molds were exclusively developed by Zila and his team. He wanted to create a cake which is similar to bonbons, filled with liquid fillings.

Five types of molds exist today, of which three are for making eight-slice, 12-slice and 16-slice cakes. There are two other molds, one of 25-cubes and the other of 40-triangles for plated desserts and finger foods. With each mold, one can make baked or frozen products of dough or mousse.

Zila leaped one step forward and created a cake in which there is a creamy heart.

No matter where the line of cut falls, the cake’s side shows a heart shape.

Combined with the innovative Zila Cake Molds, this makes for the perfect surprise

BBJ_2515_special_report.indd 25

On applying for the exhibition, the team was introduced to Gulfood Awards, a forum and competition for new ideas and products. They knew at once that their brand new product – the heart inside a Zila cake – must enter this competition. They won first prize award in the Best Food Service Innovation category. The winners were announced in a fabulous award ceremony on the first day of the Gulfood Exhibition, in a luxurious five-star hotel.

– a cake, each slice filled with different liquid fillings, which hides a heart inside.

With this new heart silicone mold set and the technology, one can easily make any kind of flavored cake, whether it is baked or frozen, of dough or cream mousse.

This is a unique technology not found anywhere else in the world.

New shapes, such as clouds, squares and triangles are under development as well.

These new silicone molds, like the original

Zila Cake Molds, are design patented.

Every year, Zila Cake Molds exhibit at the major expos in Europe, such as IBA in Munich, Sigep in Rimini, Italy, and Südback in Stuttgart.

The team has found at these exhibitions that visitors from Arab countries show above average interest in the molds, therefore at the end of last year it was decided to move one step further, and in February 2017 the molds were introduced to the Arabian region at Gulfood

The award-winning product soon became very popular, and they quickly focused on the final development of the new technology to start standardized production as soon as possible. Until the final heart silicone molds become available on the market, the award winning I ♥ Cake can be tasted in Zila Coffee House, Budapest. The cake is a fine combination of white chocolate mousse, with raspberry mousse inside as a heart shape, and raspberry sauce liquid filling on top.

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Hungarian AR and VR Needs to up its Pace The local startup ecosystem has been focusing on virtual and augmented reality solutions for a while now, but tends to be a bit slow at it, although the potential opportunities are endless.

LEVENTE HÖRÖMPÖLI-TÓTH

Make an educated guess at what industry will generate the second most Virtual Reality revenues after gaming by 2025. Surprising as it may sound, the answer is not porn. It is the NFL with USD 1.23 billion projected turnover according to the statistics of Piper Jaffray, an investment bank. The value of the global VR market, including hardware, software and content, is estimated to hit the USD 200 bln mark, a Citi study says.

It is little wonder the hype is attracting money from all kinds of investors

concert experience, whereas advertising, presentation techniques, and healthcare are all being re-thought by specialized Hungarian businesses.

Remember the User Experience

Dr. Barnabás Takács.

that don’t want to miss the next big thing, Dr. Barnabás Takács, VR expert tells the Budapest Business Journal.

Simultaneously, the sharply falling price of 360 degree cameras has created mass access to VR, which means that even small studios now have the chance to capitalize on this emerging technology.

“Companies need to find a tiny niche and focus on it, and the startup ecosystem is perfectly fit for that,” he explains. Ideas can be turned into what are known as minimum viable products (MVPs) only if they are focused enough.

Several local startups are active in the field, with a wide range of specialization.

Many work on interactivity as the avatar scene is being redefined by more realistic than ever VR images. Others are considering the full transformation of the

“The problem is that we are still a bit too slow at it,” Takács says. “One year in this industry is equivalent to three or four years in others.” What domestic startups often fail to do is to concentrate on the user experience. Instead they often get lost in the MVP details, whilst quality suffers.

Industrial use also offers huge opportunities, whereby bigger and smaller players enter the race with an equal level of commitment. Among the latter are companies like Panocast, ARworks and Lara that have made it big across the borders. However, larger local entities such as Accenture have also been advancing by bringing a more structured concept into the field, as opposed to the creative chaos of startups.

Aero Glass is another hot project in the field that offers Augmented Reality aerial navigation and recently won the Best App category in the prestigious Auggie Awards at the world’s definitive AR&VR event, AWE USA 2017. The solution helps pilots and drivers by giving a heads-up display of key navigation data on a smart glass, and so reduces the risk of attention

“Our product is also very area specific, which doesn’t make its penetration easier. But we have a validated edge and we are confident we have a superior solution.” distraction and accidents.

Founder Ákos Maróy says that the technology has come a bit too early for the market: devices are currently way too expensive. “Everybody active in this area generates revenues from those paying for development, but not from end users.”

Part of the process is thus to wait until the technology environment becomes sophisticated enough to support such cutting-edge solutions.

AR is typically used indoors, in an industrial or office environment; Aero Glass is unique in the sense that it focuses on the outdoors. “Our product is targeting a unique area, but market adoption will initially be confined to specialized use cases,” Maróy says. “We believe that in the long-term, general aviation pilots and everyday car drivers will also use our solution.”

Hungarian Ventures Riding the Wave of the 3D/VR Revolution The next big thing out there is the revolution revolving around 3D and virtual reality (VR). A Hungarian invention paved the way to make a real difference in this segment on a global scale.

LEVENTE HÖRÖMPÖLI-TÓTH

It has been more than a decade now since a Hungarian invention, Leonar3do, first hit the headlines, proving that local brains wanted to have a say in the quickly developing world of 3D technology. The kit was an integrated hardware and software platform that transforms the 2D flat dimension of desktop computers and other devices into a real 3D work environment. Its unique approach allowed one to easily create, demonstrate and visualize virtual 3D objects in real space. The first prototype of Dániel Rátai’s invention

BBJ_2515_special_report.indd 26

Péter Kertész.

was manufactured in 2009. But as Péter Kertész tells the Budapest Business Journal, market demand took an unexpected turn.

“We had expected the consumer segment to explode, but it didn’t happen for several reasons,” Kertész says. “Instead, industrial demand from health and dental care, automotive and aerospace emerged; in addition, 3D printing advanced both on the prototype front, and in manufacturing itself.”

Kertész was leading the sales operation at Leonar3do, but now he acts as the founder and CEO of 3Dster.io, an independent business matchmaker between 3D printer manufacturers and distributors. “We saw the potential of 3D printing as its volume has soared by 20% since last year, and we are talking about a USD 6 billion global market here,” he notes. According to a projection by Wohler Reports, the global 3D printing market is to

Roland Mányai.

reach

USD 30 bln by 2022.

While Leonar3Do carried on with the 3D hardware business, a whole new enterprise, Leopoly was formed to satiate the appetite for software, handling images and 3D files. As CEO Roland Mányai says, 3D printing, scanning, AR and VR technologies create new digital landscapes and opportunities, but so far they have been available only to the experts. Leopoly’s mission is to make it easy, quick and affordable to utilize 3D and VR for companies and individuals alike.

Create, Customize and Assemble “The company solutions enable you to easily create, customize and assemble

objects in 3D and VR without any developer or designer skills,” Mányai explains. “This is actually a big deal, as there has existed no such interface in this space.”

Many industries already apply such technologies, especially as these virtual solutions offer many advantages: you can view, explore, design, train and present in the VR spaces, in a life-like environment, without the need for physical objects and assets and presence, so a lot of time and money can be saved.

“Just imagine a car assembly training in VR, simulating medical operation procedures, or just presenting your designs not on a laptop but in a reallike digital environment,” Mányai adds.

In a few years’ time, users will be able to capture 3D photos with their phones, store, edit, share them, or even 3D print them. This may entirely change the way we consume, produce and design, he notes.

The significance of the technology is demonstrated by Leopoly’s 100,000 end users and 25 business partners that are served from the company’s offices in Budapest and San Francisco.

“We chose to give priority to develop solutions for business customers so that they can integrate VR and 3D solutions into their own processes, allowing them to serve their own customers better,” the CEO says. “The number of functions is growing, and when the time is ripe, they will be made available to end users as well.”

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Special Report | 27

Stakeholders Praise Innovation Incentives

In light of a recently published innovation list, where Hungary came 23rd among the 27 European Union member states investigated, deploying innovation incentives is more important than ever. In the past few years, the government has introduced several schemes to spur innovation activity in Hungary.

Such measures are mostly welcome by professionals and market players; however, the necessity for available highlyskilled workers is unquestionable.

ZSÓFIA CZIFRA

“The country has already been one of the most competitive EU member states regarding tax allowances related to research and development activity – only Ireland and Italy can compete with us in this regard –, and this position has further improved: since last year, companies can also claim social security tax allowance in respect of their R&D activity,” Barbara Koncz, senior manager at the tax and legal advisory division of PwC Hungary tells the Budapest Business Journal.

When it comes to direct incentives, the state spends significant amounts on them from both European Union funding and central budget sources. As of 2017, largescale R&D projects can be subsidized based on individual government decisions, which might contribute to the expansion of already existing R&D centers and might urge the development of new ones, Koncz said.

Hungary is now a leader in spurring R&D and innovation, and the paradigm shift announced by the government, from “Made in Hungary” to “Invented in Hungary”, plays the most important role in this, Tibor Pálszabó, partner of EY Hungary tells the BBJ. The government has realized that, like companies competing for customers, countries also compete to attract investments, including R&D projects. With the fourth industrial revolution taking place these days, disruptive business models

BBJ_2515_special_report.indd 27

Money Matters In 2015, a coherent portfolio of competitive calls was implemented by the National Research, Development and Innovation Office to facilitate the purpose-oriented and value-creating use of RDI funds coming from European sources and the National Research, Development and Innovation Fund. The portfolio support scientific research projects, developments by corporations and the realization of innovative ideas in a wellbalanced manner, according to the office. The chart below shows all calls for proposals and their budget relating to the main target areas. it comes to R&D projects. “R&D and innovation can be present at basically any industry,” says Szűcs, noting that there are several such projects in the food industry, in software development, but even companies in agriculture or in banking carry out R&D projects.

INNOVATION FUNDING BUDGET (HUF BILLION) refundable

80

215.92

Does Size Matter?

89.21

5.49

38.26

2017

68.43

112.19

11.29

255.91

2016

2015

GINOP

VEKOP

NKFI Fund

Economic Development and Innovation Operative Program

Competitive Central Hungary Operative Program

National research, Development and Innovation Fund

(European funds for the entire country except the Central Hungary region)

(European funds for the Central Hungary region)

Funding made up of the innovation tax paid by enterprises

SOURCE: NATIONAL RESEARCH, DEVELOPMENT AND INNOVATION OFFICE

emerging and employee shortages arising as a new phenomenon, corporations cannot survive in the long run without well designed R&D programs. A country that creates an attractive environment for companies’ R&D activities has a good chance of becoming a center for innovation, Pálszabó says.

Refundable or not?

One of the governments most recent incentives is a cash subsidy scheme for R&D projects based on individual government decisions, Tamás Szűcs, a manager at EY Hungary says. In addition to this, significant state and EU funds (both refundable and non-refundable) are available for R&D activities.

But when it comes to subsidies, the question arises, which is more effective, refundable or non-refundable funding?

According to PwC, they usually target entirely different groups, therefore benefits also vary.

For an enterprise where the lack of capital hinders innovation, even a partially refundable subsidy can be of great help. However, for larger international companies, which usually have the necessary financial resources for their R&D

activity, non-refundable funds might foster the implementation of further R&D projects in Hungary. As there is a fierce competition among locations for R&D projects, a direct subsidy (an aim recognized in profit before tax) can positively influence a company’s decision when it comes to selecting a venue for their next research and development project, explains Koncz.

“In my opinion, Hungary operates one of the most outstanding and favorable R&D subsidy schemes among the EU and even the OECD countries,” says Szűcs from EY Hungary.

The Hungarian system offers benefits and allowances through the entire lifecycle of an R&D project. At the very beginning, when an enterprise launches an R&D investment, it can receive a combination of subsidies and tax relief up to 50% of the investment costs. Further tax allowances are available in connection to operating expenses. In addition to this, Hungary has a favorable tax regime for utilizing intellectual property resulting from the R&D. Although usually the automotive and pharmaceutical sectors come to one’s mind first when talking about innovation, there are way more areas than these when

While innovation is essential when it comes to competitiveness, in general, large companies are more active in the area than small- and medium-sized enterprises.

In the case of SMEs, the problem is not a lack of willingness about innovation, but the lack of necessary resources or available information, claims PwC’s Koncz.

Subsidies, especially financial ones and loans with favorable conditions might help change this, as tax allowances are usually less effective among SMEs. Another good step is the support of R&D cooperation between larger corporations and SMEs, as these, in addition to developing business relations, might also help improve the innovation culture of SMEs. According to EY Hungary experts, utilizing the possibilities lying in R&D activities has little to do with company size. Both SMEs and large corporations can reap the benefits the government offers for facilitating such activities.

SMEs even have better options when it comes to tax allowances relating to R&D developments. Small- and medium-size companies, for example, can utilize such a tax allowance for investments in Budapest, while large companies are not allowed to do so, Pálszabó cites as an example.

He also mentions non-refundable subsidies for the SME sector, emphasizing that such subsidies are outstanding opportunities for smaller companies, as they can inspire investments in the sector, and thus strengthen the competitiveness of these firms.

Companies indeed welcome the government measures introduced to liven up the Hungarian innovation and R&D scene. Bosch, for one, plans to increase its R&D activity in Hungary. “The company spent a total amount of HUF 47 billion for R&D in 2016, a 27% rise from the previous year,” Daniel Korioth, representative of the Bosch Group in Hungary told the BBJ. The company is engaged in R&D activities at three venues in Hungary: in Budapest, Maklár (125 km northeast of Budapest) and Miskolc (180 km northeast). Korioth appreciates the professional knowledge and mindset of Hungarian engineers, which, as he puts it, is noteworthy even in international terms. However, he thinks that besides the various government policies to inspire innovation, there is a demand for an increasing number of creative, openminded and multi-lingual professionals in Hungary.

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SAP Operates Clouds From Hungary, Encourages Design Thinking

“With design thinking, we aim to find human meaning and use for technology. This is a flexible and collaborative approach that help companies to think differently.”

SAP Hungary has recently established an AI unit in the country that contributes to the cloud computing services of the German-rooted software giant.

Cloud appears to be becoming more important than ever; the local market value more than doubled for 2016, compared to the preceding year.

CHRISTIAN KESZTHELYI

SAP Hungary’s AI unit is one of the local subsidiary’s latest developments in the country. The Budapest team is tasked with making sure that the company’s cloudbased machine learning solutions operate flawlessly on a global level. SAP tells the Budapest Business Journal these positions are unique in the region, and the company is continuously looking for new colleagues here.

In 2016, the Hungarian cloud computing market was valued at HUF 35 billion, which is a

60-65% hike

over the preceding year, according to data from market research company IDC. But what causes so much buzz around the cloud?

“For local companies, cloud computing makes it possible for users to access data, applications, and services over the internet.

The cloud eliminates the need for costly

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native iOS apps tailored to their business needs,” Hilken explains.

Developers employed in Hungary have contributed to this project, which SAP believes is a clear indication of the addedvalue of the Hungarian skillset on an international level.

Importance of ‘Design Thinking‘

Markus Hilken, head of SAP’s local development center. hardware, such as hard drives and servers – and gives users the ability to work from anywhere,” SAP says. The major benefits of the cloud include elasticity, affordability, availability and simplicity, SAP argues.

AI up in the Cloud Artificial intelligence and machine learning further brighten the picture, though, as the latter offers tremendous potential for business globally and in Hungary alike. “SAPʼs vision for machine learning is to focus on solving real business problems that will have huge business impact,” Markus Hilken, head of SAP’s local development center, tells the BBJ. The company expects this area to help increase revenues and customer satisfaction, while reducing costs. “With SAP Leonardo Machine Learning, we can remove all the complexity from machine learning and make it incredibly simple because it is integrated into the application and will run out of the box. A huge share

of the world’s most relevant enterprises run SAP systems. We help them leverage their data and make all SAP applications intelligent,” Hilken says.

Hungary, which is considered an important part of SAP’s cloud computing, entered the giant’s circulation

in

2015,

when a cloud operation center was opened here. “This center has a global role in terms of providing HR software solutions for thousands of enterprises from the cloud,” Hilken describes.

“With SAP’s SuccessFactors cloud solutions, companies are equipped with human capital management capabilities.

SuccessFactors is one of the flagship cloud solutions, SAP globally offers. Based on the success and results of this center, we have welcomed another unit of similar worldwide importance: SAP’s S/4 HANA cloud operations unit also calls Budapest home, as does the latest, machine learning team now. We do not just make sure that the cloud solutions operate flawlessly, but we are also developing cloud applications here.

The cloud-related operations in Hungary encompass hundreds of employees and counts as the number one growing area of our workforce,” Hilken adds.

SAP’s local developers have also had a chance to play in the big league, as they have played an important role in shaping the Apple-SAP cooperation. “The aim of this global cooperation is to revolutionize the mobile work experience for enterprise customers of all sizes, combining iPhone and iPad apps with the capabilities of SAP’s platform. Aside from the fact that SAP is developing native iOS apps for critical business operations, this program also delivers a new iOS software development kit and training academy, so that developers, partners and customers can easily build

SAP’s development center also puts a special emphasis on design thinking. “With design thinking, we aim to find human meaning and use for technology. This is a flexible and collaborative approach that help companies to think differently,” says Hilken.

Design thinking requires employees to step into their customers’ shoes; it encourages them to think outside the box, carry out rapid prototyping, and helps them test ideas in the market with people. SAP notes that this means end users become an active part of shaping the final experience.

“This methodology is being used to fit both the external customers’ and employees’ needs at SAP,” Hilken adds.

SAP also says design thinking is vital in the field of software development; to that end, a special room has been established in the Hungarian office. The company also employs gamification strategies and the environment is filled with toys to help employees really think outside the box.

“The design thinking process encompass a few steps, such as exploring the situation from new perspectives and discovering the needs and goals of the end users through design-driven techniques. In the next phase, provocative insights, reframing existing problems and generating ideas in response to what was discovered is discussed. Finally, people come up with visualizations of the future, such as storyboards and videos, and create rapid prototypes, action plans and roadmaps,” the SAP Labs Hungary head describes the process.

SAP also employs dedicated design thinking coaches in Hungary who help facilitate these processes. With the help of these coaches, the firm has conducted several design thinking workshops and engaged in co-innovation projects focusing on topics that touch on customer experience, workforce engagement, supplier relationships, and the Internet of Things, among others.

“Using design thinking has led to dramatic improvements in the user experience of SAP products and we see that the design thinking methodology is getting more popular at other companies in Hungary. Design thinking is an example that shows we put the customer first.

Without empathy for our customers, there is no future in the enterprise software world,” Hilken concludes.

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Bowie, Vasarely, and a Budapest oddity

Beck. The last line of every stanza is “By the Danube, beautiful blue Danube”. At that time, the Danube didn’t flow through Vienna and the last word you would use to describe it is “blue”. But there’s such a thing as poetic license. With that in mind, please forgive the following indulgence.

David Holzer explores the links connecting David Bowie and Budapest.

Bowie in Budapest

DAVID HOLZER

The only reason I know the name of Hungarian artist Victor Vasarely is because of David Bowie. “Space Oddity”, Bowie’s 1969 album, features an op art image by Vasarely.

I would imagine whoever designed the Bowie cover used Vasarely’s work because op art was in fashion. The term was first used by “Time” magazine in a review of a 1964 show and it was meant to be dismissive. Which is more than a little unfair to Vasarely’s work.

Although he’s often described as Hungarian-French, Victor Vasarely was entirely Hungarian and born in Pécs in 1906. After abandoning medicine in 1927, he began to study painting. This changed when he enrolled at the Műhely or workshop, Budapest’s center for Bauhaus studies. Here, Vasarely learned typographical design and graphic art.

He left Hungary and arrived in

Paris in

1930.

He was to spend the rest of his life in the French capital, dying there in 1997, which perhaps led to the misapprehension that he was part French.

Presumably not short on self-belief, Vasarely opened his first museum to himself in Gordes, France in 1970. He also created the Foundation Vasarely in Aix-en-Provence, housed in a structure he designed. This opened in 1976. In the same year, a Vasarely museum was also opened in his hometown of Pécs. The Victor Vasarely Museum at Szentlélek tér in Óbuda, which I visited, was opened in 1987.

Wandering through the airy, spartan space, I was struck by the extent to which Vasarely’s vision had stayed pretty consistent from the 1930s. He was no flash in the pan op artist, as his 1938 painting “Zebras” shows. I was amazed by this but, according to my partner, every Hungarian child knows “Zebras”.

Apparently, a school visit to the Vasarely Museum at Pécs is a rite of passage.

“Zebras” is now in the Victor Vasarely Museum in Budapest, alongside a poster for something called “Mitin” – meeting – which also dates from 1938 and is equally op art-ish.

Grown-up Art This certainly made it clear to me that what ended up being christened op art

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Would David Bowie (seen here in New York in 2003, performing on NBCʼs Today Show at Rockefeller Plaza) have found similar inspiration had he lived in Budapest, rather than Berlin?

itself wasn’t simply something used by 1960s fashion designers like Mary Quant to make their fabrics seem oh-so-with it. It’s actually closely connected to grown-up, respectable art movements like Neo-Impressionism, Cubism, Futurism, Constructivism, Dada and kinetic art.

But, although this is nice to know if you like your art to be intellectually credible, it’s not necessary. The Victor Vasarely Museum is quite simply a great space to stroll around. The first thing you come to is a display of work from the Műhely, which gives a good sense of context. Vasarely’s own art is given plenty of room to breathe.

In among the work is a set of “Propositions for Exterior Mural Decorations of Cottages” dated 1970.

Looking incongruous among all the big, eye-wobbling abstract pieces, the Propositions are thoroughly Hungarian designs of peasants and so on. Proving, yet again, that you can take the boy out of Hungary but.… you know the rest.

Tucked away on the top floor of the museum are a couple of exhibitions by contemporary Hungarian artists working in a broadly similar vein to Vasarely. A piece featuring laser beams

skittering across an arrangement of broken glass reminded me of a Bowie light show. Which made we wonder if Bowie had ever come to Budapest.

Bowie did play Budapest – in 1990 and 1997. The second time was at the Sziget Festival and there’s an excellent quality recording of the show available online. For Bowie obsessives like me, it’s especially notable for the fact that a couple of songs into the performance Bowie starts playing a blues riff while his band vamps. “The blues were written in Budapest, on the Danube,” he says, before singing “I’ve been drinking and drinking like a ship on the open sea, won’t somebody help me, won’t somebody rescue me” to the tune of “Driftin’ Blues”.

This marks one of the very few times Bowie recorded anything like a hoary old 12-bar blues on record. I thought I knew why. The song which follows, “Jean Genie”, is based on a speeded-up blues. But Bowie’s quip that “The blues were written in Budapest, on the Danube” baffled me.

Until I realized that he was tipping his hat to the “Blue Danube Waltz”, which, apparently, was inspired by a poem by Austrian poet Karl Isidor

Between 1977-79, Bowie lived in Berlin. The city and its music scene inspired him to make a hugely influential trilogy of albums. Budapest, with its traces of fin-de-siecle decadence, its bullet-scarred buildings and splendidly ugly socialist-era tower blocks has always struck me as a very Bowiesque city.

Curious as to what Bowie might have found had he chosen mid-’70s Budapest instead of Berlin, I asked a couple of people what the music scene was like back then. László Kovács is the founder of Moiras Records, which specializes in releasing obscure Hungarian rock music. He told me that the local pop market was isolated from the rest of the music world.

“Very few foreign stars visited the country and a handful of records were imported. It was almost impossible to hear punk or new wave on the radio.

Hard rock bands ruled the Hungarian music scene. Most of the music clubs were discos playing Eurodisco.” I couldn’t imagine Bowie finding that especially inspiring.

Still, I persevered and spoke to punk rock tuba player Barango, 17 in 1977. He confirmed Kovács’ story that the music scene in Budapest at that time was utterly moribund. “If Bowie had come to Budapest looking for inspiration,” Barango said, “he would have been frustrated. And arrested.”

With characteristic Hungarian bluntness, Barango had shattered my picture of a tragic looking Bowie sitting in a strange Budapest bar – not unlike the extraordinary Calgary – and dreaming up marvelous Magyarflavored music. But, if he had visited, he could have tried the fish soup at Új Sipos Halászkert, just around the corner from the Victor Vasarely Museum. It’s reckoned to be the best in Budapest.

To get to the Victor Vasarely Museum take the bus nine to Batthyány tér and change for train five in the direction of Szentendre. Hop off at Szentlélek tér. The website is www.vasarely.hu. If you fancy that fish soup, Új Sipos Halászkert is at Fő tér 6. The astonishing Calgary Bar is at Frankel Leó út 24. Dip a toe in the strange waters of Hungarian rock music at www.moiras.somoskiado.hu.

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Tállya Turns up Trumps High quality wineries are continuing to spring up around the country as the Hungarian wine scene builds momentum, more than a quarter of a century after the system switch was pulled, ushering in what has been a long and winding road from an emphasis on quantity to one on quality.

ROB SMYTH

It has been a lengthy process, but on balance the industry continues to move onwards and upwards. Perhaps the most seismic shift has occurred in Tokaj, Hungary’s only truly world-renowned wine region.

While it may well have been the first region in the whole world to have had its vineyards classified by Royal decree, Tokaj-Hegyalja (to give the region its official local name) has found that this doesn’t count for much in the harsh light of the modern day. Tokaj’s vintners have seen that the sweet wine with which it excelled no longer has the great pulling power it once had and have gradually transitioned over to making dry wine.

Nevertheless, it appears that what was a good vineyard way back when is still a prime spot now. With a lot of the top vineyard sites long since snapped up, there’s still plenty more up for grabs and the vineyards around the village of Tállya have become the El Dorado of Tokaj.

Photos: Zoltán Miklóska

fledgling cellar has already forced itself onto the wine lists of Costes Downtown and Borkonyha, the Michelin-starred restaurants, and Café Bouchon, Fricska, Kispiac Bisztró and Mák Bistro.

The first wine I got to try from the cellar was actually a rosé, and a very good and complex one at that. The wines are made according to organic principles

by Tímea Éless, who runs and owns the winery together with her husband Tamás Éless. Everything except the rosé is spontaneously fermented from the yeast inherent on the grapes and in the cellar – which can either take the wine on the road to heaven or hell.

Szóló Frivolo 2016 is made from Furmint and has fresh Williams pear and apply aromas with richer apple pie there too, and a taut, linear palate with green herbs and a citrusy kick.

Clean and getting close to wine heaven, although Szóló Parlando 2015 is one step up the ladder. It comprises

80% Furmint

and 20% Hárslevelű, which were harvested at the beginning of November and vinified together. This one has a lot of great stuff going on from the floral

nose of white flowers with honey and citrus, plus a touch of flintiness, to the rich, round, waxy and very long palate.

Yet more fuel for the argument that these two grapes work just as well in dry wine as they do in the sweet Tokaj Aszú that made the region famous.

Two Tállya Wines to try This Summer:

Szóló Contra 2015

Fermented in oak barrels, this has very rich aromas for a rosé with chocolate, ripe peach and sour cherry. Complex and intense on the palate with candied fruit, a floral touch, good weight, caramel notes and a very spicy finish.

A great option for those looking for a fuller rosé. Made from 30-yearold Zweigelt and Blauburger vines, which are both crossings involving the Blaufränkish (Kékfrankos) grape as one of the parents. The former saw what is now Hungary’s most planted red wine grape crossed with St. Laurent, and the latter saw Blaufränkish crossed with Portugieser – both carried out by Austrian wine boffin Fritz Zweigelt in the early 1920s at the Teaching and Research Center for Viticulture and Horticulture (LFZ) in Klosterneuburg,

Austria. As it’s not made from Tokaj’s permitted grape varieties, it has to be labelled as Felső-Magyarország (Upper Hungary).

HUF 4,800 from Culinaris Parlament.

Kaláka Csepke Gyöngyözőbor 2016 The lightest wine in the Kaláka collection but certainly the best option for summer. It is made by Kaláka’s trademark, unbelievably arduous but ultimately rewarding production process. The Furmint and Hárslevelű bunches and part bunches were picked continually over a number of harvest days (in this case 22) to catch the grapes at the optimal level of ripeness to avoid the alcohol getting too high and losing the tautness that rests on a knife edge.

The grapes are slightly pressed and the juice is poured on top of the must that’s already fermenting from the previously harvested grapes It may be the simplest type of sparkling wine, made by the so-called “bicycle pump” method, whereby carbon dioxide is added, but it is flavorsome, floral and elegant.

HUF 2,500 from Bortársasag.

Genius

When the likes of István Szepsy, who has been described by wine expert Jancis Robinson as a “genius”, moves in and raves about Tállya’s volcanicinfused terroir, comparing it to the region’s hotspot of Mád but with its own special nuances, then you’ve got to take notice. The well-respected Hungarian wine writer László Alkonyi, who has done much to retrace the highly rated vineyards of centuries past, also chooses to make his own wine here, and with great results.

Szóló Fine Wine is a new kid on the Tállya block with seven hectares in the Dukát, Tökösmály, Bártfai, Héteny, Palota and Sipos vineyards, and while its first vintage was as recent as 2014, this

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European Pro Bono Movement Gathering in Budapest

Experts, supporters and shapers of the pro bono scene from all over Europe will be meeting in Budapest on October 19-20 for the second European Pro Bono Summit.

BBJ STAFF

After what organizers describe as a “very successful” first summit in Paris in October 2016, the Budapest event aims to provide useful content for both newcomers and experienced practitioners by examining the pro bono role in corporate leadership development programs, presenting a European market place for corporates and intermediary organizations, and creating local or multinational pro bono programs.

The two-day event is organized by Volunteering Hungary (Önkéntes Központ Alapítvány or ÖKA) in partnership with GE Hungary and with the active participation of Global Pro Bono Network

András F. Tóth, executive director of ÖKA.

members. The event is supported by the BMW Foundation Herbert Quandt.

The summit brings together stakeholders from both the corporate and the NGO worlds. “Presentations, panel debates, and brake out sessions will help participants to dive deep into the different techniques of corporate pro bono services,” András F. Tóth, executive director of ÖKA, tells the Budapest Business Journal.

“Next to this, we will actively help participants to make connections and network through a marketplace offer throughout the program. We expect equal number of corporate and pro bono intermediaries as participants, thus the European Summit will be a unique place for corporate-NGO partnership building and co-creation,” Tóth explains.

Connections and Networks “We aim to connect European level CR, HR, PR leaders and managers of corporations with intermediary organizations (from all regions of Europe) that are creating first class pro bono programs in the different countries of Europe.”

The organizers promise the Englishlanguage summit, hosted at GE’s Váci Greens office (Váci út 117 – 119), will enable participants to connect with likeminded professionals and experts, learn about innovative techniques and best practices, and engage with keynote speakers and European change makers.

Depending on which field attendees come from, they will be able to learn about and grow pro bono programs locally and

internationally, or connect their corporate brand with one of the most innovative and progressive social innovation crowds globally.

Although some of the speakers still have to be confirmed, it is hoped speeches will be delivered by: Mihály Varga, Minister for National Economy; Tibor Navracsics, EU Commissioner for Education, Culture, Youth and Sport; Nikolett Blaskó, owner/CEO of ACG Advanced Communication Group (about how pro bono work can help elevate even award-winning ad agencies); and pro bono and skillsbased volunteerism expert Joel Bashevkin.

More information can be found at the event website: www.probonosummit.eu

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Leaders in Hospitality CEE & CIS Summit The Leaders in Hospitality CEE & CIS Summit, organized by the International Business Council Group, took place from June 5 -6 in the Prague Vienna House Diplomat Hotel, bringing together almost 150 senior lever hospitality executives from CEE & CIS regions.

The event was opened by Marketa Vogelova, Institute Director at Czech Tourism, and followed by the keynote address of Vaclav Starek, president of the Czech Association of Hotels & Restaurants, who discussed the challenges and opportunities in the hospitality industry.

Over the course of two days, the attendees discussed current trends and explored new strategies for business development. They identified a regional hospitality industry perspective within the global business landscape in a discussion with Janusz Mitulski, director for Central & Eastern Europe of international hotel development at Marriott International; Miguel Martins, development director Poland for InterContinental Hotels Group; and Klaus Pilz, regional director Czech Republic for Vienna House. Questions addressed included where do we stand, what threats and challenges will we face and what are the opportunities we might unveil?

The hoteliers analyzed investors’ outlook within the regional market, where they received insight from Marc Socker, managing director of Invesco Real Estate’s (IRE’s) Hotel Fund management team; Max C. Luscher MRICS, managing director, B&B HOTELS GmbH; Philipp Klohr, vice president, acquisitions & asset management, Cedar Capital Partners; and Dr. Franz Jurkowitsch, CEO of Warimpex Finanz- und Beteiligungs AG .

The summit was endorsed by the Ministry of Regional Development of the Czech Republic, CzechTourism, Czech Chamber of Commerce, Association of Czech Hotels and Restaurants, Czech Chefs’ Association, Czech Bartender Association, Association of Czech Waiters, Association of Czech Furniture Manufacturers, Prague Convention Bureau, Czech Association

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of Sommeliers, Czech Association of Social Responsibility, Slovak Association of Hotels & Restaurants, Macedonian Association of Hotels and Restaurants, and the Hungarian Hotel & Restaurant Association, just to name a few.

“This year mark marked the fifth anniversary of the Leaders in Hospitality Summit. Over this period, we supported, educated and inspired the hospitality industry, while promoting the region within the global landscape and unveiling the numerous business opportunities the market has to offer. We are thrilled to receive the great encouragement and support from the hospitality community and look forward to advancing the sector through a series of focused educational and business events. For instance, our Leaders in Horeca Summit, which is a sister event to Leaders in Hospitality, will take place on November 28-29 in Prague and will focus on the food serving industry and opportunities F&B professionals and restaurateurs can explore,” said Elena Jassim, CEO of International Business Council Group.

The summit analyzed the challenges general managers face and stressed such important issues as the war for talent, where Clare Gates, group HR director of Meininger Hotels and Sylwia PawełczykMaśluk, vice president of talent & culture, Eastern Europe for AccorHotels, advised on how to develop and nurture a great team .

“We are pleased to sponsor Leaders in Hospitality CEE-CIS in its fifth year, since meeting key influencers in a centralized location allows Honeywell to continually increase our brand awareness in the CEECIS region through networking with new clients and business partners. We have historically found that this event allows us to reach a broad audience and will this year be using the event to demonstrate new and innovative products for hotel

developers, operators and interior designers alike”, said Paul Redding, strategic account manager – hospitality, for Honeywell Environmental & Energy Solutions – Europe.

The event also provided an opportunity for hoteliers to seek out the most innovative solutions for their hotels through the exhibition and focused oneto-one business meetings with 22 leading hospitality solution providers that were running thoughout the event.

Amongst 22 exhibiting companies were companies like Mitel, Aksel, Atlas Concorde, Ideal Standard, Philips, Honeywell, Ruckus Wireless, Brocase, Hafele, Materasso, Yamaha, Daikin, Balta Group, CISA, Christopher Guy, Elko Ep, Anolis, Baumann dekor, Gustaffo and pradelna kysely.

“It is with pleasure that we are sponsoring Leaders in Hospitality CEE-CIS at this year’s summit. We are excited to be part of this platform that supports, educates and inspires the hospitality industry, where so many key influencers gather, especially with this being the fifth anniversary. For Philips Professional Display Solutions, the CEE-CIS region is a market full of opportunities and we look forward to sharing our innovative solutions at the summit,” said Franck Racapé, sales director of professional display solutions EMEA, Philips.

The summit guests had an opportunity to unwind during the gala dinner hosted at Prague’s famous Letensky Zamecek, where they could taste Czech cuisine and actively participate in the entertainment program, which included a breathtaking magician’s performance, vibrant Brazilian dance show and best dancer competition featuring the attendees. The next edition of summit will take place in 2018. For more updates, visit www.hotelcee.com or www.intlbc.com.

The hospitality industry can next look forward to the Leaders in Horeca Summit, the only event in the region that brings together key influencers in the food serving market. From owners and operators to investors and regulators, from C-level F&B professionals to Michelin star chefs, from leading suppliers to the most senior industry decision makers and trendsetters, the summit provide the unique platform to explore region-specific market insights, emerging trends, revolutionary concepts, successful business strategies and array of business opportunities.

Join the movers and shakers of the industry to share ideas, bring innovation and explore best practices from around the globe through the series of highly efficient networking events, a knowledge-packed agenda, controversial debates, exclusive product showcase and product tasting as well as pre-arranged business meetings. For more information, visit www.horecacee.com.

International Business Council, the organizer of the Leaders in Hospitality Summit, is a global organization committed to advancing global economies by fostering business and leadership development opportunities amongst governments and businesses worldwide, through delivering highly specialized and integrated high-level summits, meetings, digital collaboration, publications, professional development programs, market intelligence and expertise.

By carefully analyzing global, industry and regional agendas, we engage with political, business, academic and society leaders in order to develop platforms that address pressing problems as well as highlight, reinforce and explore unprecedented opportunities for global business growth that is crucial for economic prosperity.

2017. 07. 26. 18:41