Budapest Business Journal 3106

VOL. 31. NUMBER 6 | MARCH 24 – APRIL 10, 2023

HUF 2,100 | EUR 5 | USD 6 | GBP 4

HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BUDAPESTBUSINESSJOURNAL.COM

SPECIAL REPORT INSIDE THIS ISSUE

Manufacturing and New Technologies

Ganz Launches new Tech for Transformers Storied Hungarian manufacturer Ganz has introduced new technology that helps transformers reach their peak performance, saving costs and contributing towards more sustainability in the power sector.  13

Collapsible Containers in an Expanding Market Busy building his company, Continest CEO Vidor Kis-Márton, didn’t take a summer holiday from 2016 until last year. It was an investment that is reaping its rewards. Revenues more than doubled to HUF 3.88 billion in 2022, and looks set to hit HUF 9 bln this year.  16

Save History, Create Value

SOCIALITE

On a Mission to Save Jazz in Hungary On April 26, the 2023 edition of Jazzfest Budapest kicks off with an appearance by smoky-voiced American jazz and gospel singer songwriter Lizz Wright. The program also includes a rare European appearance

by U.S. bassist Stanley Clarke.  21

NEWS

Gloomy Outlook for Construction Sector It wasn’t only industrial output that was down at the beginning of the year; the latest construction sector data also redrew the prospects for 2023.

The arrival of EU funding is crucial for the sector. At least one analyst has predicted a decline of 5% for this year. 3

BUSINESS

BDPST majority owner and chairman István Tiborcz explains how the renewal of historical gems such as the Gellért can help raise Budapest’s profile as a luxury destination. 10 BUSINESS

Magyar Bankholding Prepares for Merger With Good Results The chief business officer of individual services at Hungarian Bankholding, Levente Szabó, reveals the details behind strong corporate lending results and discusses the final steps in a three-way tie-up to create the country’s second-largest commercial lender.  8

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Budapest Business Journal | March 24 – April 10, 2023

IMPRESSUM

THE EDITOR SAYS

AWARDS SEASON COMES TO AN END

EDITOR-IN-CHIEF: Robin Marshall EDITORIAL CONTRIBUTORS: Balázs Barabás,

Zsófia Czifra, Kester Eddy, Bence Gaál, Gergely Herpai, David Holzer, Michael Miller, Gary J. Morrell, Nicholas Pongratz, Bálint Szőnyi.

LISTS: BBJ Research (research@bbj.hu)

They say the Oscars marks the end of the awards season, but not for us. Depending on when you get your copy of the Budapest Business Journal, we are either making the last-minute preparations for the ninth Expat CEO of the Year awards gala dinner or taking a deep breath, having just completed it.

The gala takes place on Friday evening, March 24, in its usual, glorious setting of the Grand Ballroom at the Corinthia Hotel Budapest. At the time of writing, I don’t know the identity of the winner. Nobody does.

The final decision is not taken until the final minutes before the gala starts (the ballroom doors open at 8 p.m.) when our awards jury gathers for one last time.

And it is quite some jury. Írisz Lippai-Nagy, CEO of the American Chamber of Commerce in Hungary, has been with us since we began planning the first award in the fall of 2014.

András Sávos, president of the German-Hungarian Chamber of Industry and Commerce, joined in 2020.

István Joó, the CEO of our official event partner, the Hungarian Investment Promotion Agency, came on board last year, and they are joined by our very own Balázs Román, CEO of the BBJ. By tradition, the previous year’s winner takes the fifth and final place on the jury, meaning Giacomo Pedranzini, CEO of Kometa 99, has a voice in picking his successor.

And it is Giacomo who will announce the person who takes on the mantle of his title, another tradition we have followed over the years. The chances are that when our audience hears the winner’s name for the first time, it will be the same for me. On a couple of occasions, a passing jury member has grabbed me and whispered the identity

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in my ear, but most years, they do not. I prefer it that way; I get to feel a little more of the suspense and tension in the room, even if I have no skin in the game.

This year’s shortlist of three nominees (Veronika Spanarova, Citi country officer; Andreas Szakácsi, of Claas Hungária; and Matt Zeller, of Novartis Hungary) offers a mix of gender, nationality and industrial sectors.

Whoever is picked will be a worthy winner.

We are also introducing a new prize this year, the Community Award. It will go to someone who may be a business leader, the head of a foundation, or in charge of a business organization. Their focus might be diversity, inclusivity, disability, sustainability, or a combination of any and all of these.

What is certain is that they are among the most influential members of our remarkable CEO community, contributing to bringing and binding it together.

In our estimation, they demonstrate both leadership and impactfulness.

If you are with us at the Corinthia on Friday evening, you will find out in person who will be the firstever Community Award winner and who will be the ninth Expat CEO of the Year. But don’t worry if you are not. We will ensure it is all over social media, and there will be extensive coverage in the next issue of the Budapest Business Journal.

If you are there, I hope to share a word or two with you in person. As the master of ceremonies, I’ll be the one up and down the steps to the stage like a yo-yo all evening!

Robin Marshall Editor-in-chief

Why Support the BBJ? • Independence. The BBJ’s journalism is dedicated to reporting fact, not politics, and isn’t reliant on advertising from the government of the day, whoever that might be.

• Crisis Management. We have all lived through a once-in-a-century pandemic. But we also face an existential threat through climate change and operate in a period where disruptive technologies offer threats and opportunities.

Now, more than ever, factual business reporting is vital to good decision-making.

For more information visit budapestbusinessjournal.com

Photo by Fortepan / G K

• Value Creation. We have a nearly 30-year history of supporting the development of diversity and sustainability in Hungary’s economy. The fact that we have been a trusted business voice for so long, indeed we were the first English-language publication when we launched back on November 9, 1992, itself has value.

Photo by MTI / Tamás Vasvári

• Community Building. Whether it is the Budapest Business Journal itself, the Expat CEO award, the Expat CEO gala, the Top Expat CEOs in Hungary publication, or the new Expat CEO Boardroom meeting, we are serious about doing our part to bind this community together.

THEN & NOW A train arrives at Veszprém Railway Station (115 km southwest of Budapest by road), which is being renovated through a HUF 1 billion investment. The facade of the building will be restored and the cladding of the waiting room replaced, a new platform roof will be added, and the station’s environment will be renewed. The work is expected to be completed by the third quarter. The black and white image from the Fortepan public archive shows a different train at the same stop in 1978.

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Budapest Business Journal | March 24 – April 10, 2023

News

• macroscope

Gloomy Outlook for the Construction Sector Inflation in EU Member States (February 2023)

It wasn’t only industrial output that was down at the beginning of the year; the latest construction sector data also redrew the prospects for 2023. The arrival of EU funding is crucial for the sector.

January

2022.

New domestic orders dropped by 10.7%, and new export orders grew by 3.1%. The total stock of orders at the end of January was above the previous year’s level by 3.4%.

Like industry, the construction sector also started the year with rather disappointing data. According to the raw numbers, the volume of construction output in January 2023 lagged behind the previous year’s level by 3.6%.

Construction of buildings declined by 4% and civil engineering by 2.1% on a year-on-year basis. Among the various construction divisions, production decreased by 7.8% in the construction of buildings, by 0.7% in civil engineering, and 1.9% in specialized construction.

The volume of new contracts concluded was below the January 2022 high base by

28%; within it, the volume of contracts for the construction of buildings was 23.2% lower, while the volume for civil engineering declined by 36.2% y.o.y. The stock of the end-of-January contracts at construction enterprises had lessened by 18.2% compared to the same period of the previous year.

Prices Still High

Price increases are still very high in the industry, mainly due to the rise in the price of construction materials, Gergely Suppan, head analyst at Magyar Bankholding, commented on the data. What is basically stagnation in the construction industry continued in January, and the macro factors also hint that the continuous growth levels seen in recent years will not characterize 2023, he says.

Based on the existing contract portfolios, there seem to be sufficient orders in the construction industry in the short- to medium term. But based on the declining level of new contracts, a further slowdown can be expected from the second half of this year, Suppan predicts.

According to him, the raw material prices, which have increased significantly and will continue to rise by

another

10-15%

at the beginning of this year, skyrocketing credit costs, and the falling private and restrained public demand all point in the direction of a slowdown.

“According to our estimate, there could be a decline of around 5% in the [construction] industry this year, and next year’s level is very uncertain in light of the order backlog. At the same time, in the next few quarters, the volume of

“According to our estimate, there could be a decline of around 5% in the [construction] industry this year, and next year’s level is very uncertain in light of the order backlog. At the same time, in the next few quarters, the volume of residential construction, renovation, and government orders that are still in progress can provide sufficient volume.” residential construction, renovation, and government orders that are still in progress can provide sufficient volume,” Suppan wrote in a note.

On the demand side, a further notable slowdown in credit applications is inevitable at the current market interest rates. The financing and return on investments will also be questionable; however, the energy renovations segment will continue to represent a driving force in the construction market, Suppan says.

Less Attractive Alternatives As for the investment market, demand is still lively, based on real estate market surveys. However, compared to the available returns at current price levels,

Hungary

Latvia

Czech Rep.

Estonia

Poland

Lithuania

Slovakia

Bulgaria

Romania

Croatia

Austria

EU-27 average

Italy

Sweden

Slovenia

Germany

the Netherlands

Portugal

eurozone

Denmark

Ireland

Finland

France

Malta

Cyprus

Greece

Spain

Belgium

The second reading of January’s industrial data confirmed the preliminary figures: in the first month of the year, the volume of industrial production declined by 0.2% year-on-year. Based on working-day adjusted data, production faired even worse and dropped by 3.2%. According to seasonally and working-day adjusted data, industrial output was 5.1% lower than in December 2022, the latest report by the Central Statistical Office (KSH) reveals.

The volume of industrial exports was 0.2% lower than a year earlier. Transport equipment exports, representing a 31% weight within export sales in manufacturing, grew by 19.5%, and exports in the manufacture of electronic equipment (accounting for a 14% weight) went up by 51%. Domestic sales of industry fell by 16.5% and those of manufacturing by 11.5% compared to the same month of the previous year.

A little more promising, though, was the fact that the volume of total new orders in the observed divisions of manufacturing was 1% higher compared to

Luxembourg

ZSÓFIA CZIFRA

12-month change in consumer prices

Source:

inflation-tracking government bonds are becoming less attractive alternatives, so this segment may also slow down temporarily, according to the analyst.

Although previously the order stock was relatively high, and based on this, more favorable data was expected, the fall probably reflects the decline in demand, which is primarily explained by the significant backlog of government orders, although the decrease characterized all areas of the construction industry, Gábor Regős, head economist of Makronóm Intézet commented on the data.

“The latest data significantly redraws our picture of the [construction] industry’s prospects: while in December the order book was only

1.2% lower

than a year earlier, at the end of January it was already close to 20%,” Regős explained.

“Even within this, a lag can be seen, especially in other construction, where government orders are significant, while in the case of company orders, the reduction is to a lesser extent,” Regős said.

The volume of new contracts also decreased significantly, by more than a quarter, and here the decline is also significant in the case of the construction of buildings. The question is how longlasting or how temporary the decrease in order stock was, he noted.

The arrival of EU funds is crucial from the point of view of the development of the performance of the construction industry since a significant portion of the money finances some kind of construction or investment, Regős emphasized.

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Budapest Business Journal | March 24 – April 10, 2023

Hungary Tries to Block NATO-Ukraine Ukraine Meeting Over Ethnic Education Crisis Roundup Secretary-General of the North Atlantic Treaty Organization Jens Stoltenberg declared on March 14 that he would convene the NATO-Ukraine Commission, a high-level meeting of the military alliance’s principal forum for cooperation with Ukraine, for the first time in several years on April 4, despite objections from Hungary.

NICHOLAS PONGRATZ

The last meeting occurred in 2019 in Kyiv, where NATO ambassadors joined Ukrainian President Volodymyr Zelenskyy and his cabinet, some three years before Russia’s invasion of Ukraine.

“This is an established framework. I have the mandate to convene it,” Stoltenberg said, according to the Associated Press. “In respect for the issues that Hungary has raised, I have not convened it for some time, but now I will continue to convene the meetings of the NATO-Ukraine Commission.”

After meeting with Stoltenberg in the morning, Minister of Foreign Affairs and Trade Péter Szijjártó called the decision to convene a meeting of the NATOUkraine Commission, despite Hungary’s opposition, a “violation of NATO unity,”

during a break at a meeting of European Union foreign ministers in Brussels, according to state news agency MTI. Deputy Minister at the Ministry Hungary’s persistent opposition to of Foreign Affairs and Trade (KKM) NATO-Ukraine Commission meetings Levente Magyar (left) welcomes stems from a law adopted in Ukraine in former Ukrainian Foreign Minister 2017, which the government has claimed Pavlo Klimkin in Budapest on March prevents the Transcarpathian ethnic 21. Photo by MTI / KKM minority from studying in Hungarian.

According to the Ministry of Foreign Commissioner on National Minorities Affairs and Trade, this was bolstered by of the Organization for Security and further legislation passed in December Cooperation in Europe (OSCE), Kairat 2022 that would turn 99 Hungarian minority primary and secondary schools Abdrakhmanov, in postponing the implementation of the law. into state-run institutions and reduce Having himself called the the class hours taught in Hungarian to just 20% after grade four from September. “unacceptable” legislation a “disgrace,” Szijjártó added that the commissioner OSCE Appeal also said the Ukrainian provisions Consequently, on March 14, Szijjártó violated international law. Prime sought the assistance of the High Minister Viktor Orbán also raised the

subject during a video conference held on March 21 with his counterparts from Greece, Slovenia, Slovakia, and Latvia, and European Council President Charles Michel, to prepare for a summit later in the week in which the war in Ukraine and economic issues are on the agenda.

Regarding Ukraine’s candidacy for accession into the European Union, Orbán emphasized that to be accepted, Kyiv must not disregard the rights of minorities, such as the Hungarian minority, living in its territory.

Meanwhile, Fidesz parliamentary group leader Máté Kocsis said on Facebook on March 17 that Fidesz MPs would “unanimously” vote in favor of Finland’s accession into NATO at a parliamentary session scheduled for March 27.

The same day, Turkish President Recep Tayyip Erdoğan announced that Turkey would also agree to Finland joining the military alliance, following a face-toface meeting with Finnish President Sauli Niinistö, according to business daily Világgazdaság [Global Economy].

However, Sweden’s bid to join NATO remains uncertain, with the Fidesz parliamentary group saying that MPs would decide on the matter “later.”

PRESENTED CONTENT

Termination of U.S.-Hungary Tax Treaty Will Hurt More in Long Run From 2024, Hungary is expected to be the only EU Member State without an effective double taxation treaty with the United States. Its absence could cause unforeseeable damage to the Hungarian economy and is a significant disadvantage in the competition for foreign investment.

KÁROLY RADNAI

On July 8, 2022, the U.S. Department of the Treasury announced the termination of the treaty with Hungary on the avoidance of double taxation concluded in 1979, although it remains in force until January 1, 2024.

Washington has never previously imposed such a sanction on any country with significant economic potential.

U.S. Waiting for an Excuse The convention was highly advantageous for Hungary. For this reason, the United States put intense pressure on our country 15 years ago to renegotiate the treaty, which resulted in a new agreement in 2010, but it was not ratified overseas for internal political reasons. It was not confirmed later because, in just a few years, this document has also become “obsolete” for the American party due to the major tax reform taking place there.

Washington was probably just waiting for the right excuse to terminate the

old agreement, which was becoming increasingly disadvantageous for them unilaterally. Their communication suggests that this excuse was mainly motivated by the Hungarian position against introducing the global minimum tax. The Hungarian government seems to have adopted the wrong tactics on that issue, mistakenly believing that the global minimum tax was a good tool to fight for leeway and advantages against the European Union while, in fact, getting its opponents mixed up.

A Basic Safeguard The Treaty on the Avoidance of Double Taxation formed the basis of Hungarian-U.S. trade relations and contributed to making Hungary an attractive location for American investors. Issues like investment protection, type of income taxes, and a mutual agreement procedure were covered by the treaty, which was in force for more than 40 years between the two countries. Thus, it was suitable for providing essential safeguards for economic operators. From 2024, the

fees paid to Hungary in addition to passive income), which could marginalize Hungary as an investment destination. In addition, American investors will conceive the lack of treaty protection as an additional risk factor in their decisions, considering that currently, decades-old rules on global taxation are in transition in international tax relations. Furthermore, investors may also consider Hungary a country where a withholding tax could be imposed at any time on outbound payments, which would have a negative effect on the level of return on investments.

Károly Radnai, managing partner of Andersen in Hungary Hungarian and U.S. legal systems will not be able to replace that individually and independently of one another.

Negative Economic Impacts The adverse effects of the treaty’s termination will not necessarily be felt in the short term, but rather in the longer term, it will undoubtedly create serious uncertainty among investors. It will mainly be reflected in the lower level of investments and a shift of service functions to other countries.

Without an agreement, the United States can change its domestic law at any time (e.g., impose a withholding tax on service

New Agreement Needed Immediately According to the information available, there are currently no substantive negotiations in progress for a new agreement, although it is in the interests of both parties. A treaty is needed that provides favorable and predictable conditions for retaining and expanding investment in both countries. However, in international practice, the negotiation and ratification of such a tax treaty is a several years long process; unfortunately, we are not even at the beginning of that.

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Budapest Business Journal | March 24 – April 10, 2023

Strong Hungarian Presence at Annual Mipim Expo in Cannes The Mipim commercial real estate and investment expo at the Palais des Festivals in Cannes attracted more than 23,000 participants from 90-plus counties, including delegates from Hungary and other Central and Eastern European countries.

GARY J. MORRELL

Attendees included developers, investors, bankers, consultants, industry experts, architects, consultants, and city and country representatives. Delegates from financial institutions accounted for a quarter of attendees, according to Reed Midem, organizers of the expo.

This was the largest attendance in the post-pandemic period, representing a

15% increase

in 2022, with evidence that physical contact in a conducive and pleasing environment like Cannes is still a preferred method of conducting business and making contacts for many companies and individuals.

Mipim is established as the primary annual commercial real estate event in Europe, along with Expo Real in Munich.

The four-day event on the Cote d’Azur attracts a significant presence from the Central European region, including Budapest and major Polish cities, in addition to CEE representatives of the major international consultancies, promoting their respective countries.

The Budapest-Hungary stand promoted investment in Hungary with a series of wine receptions and panel discussions looking at the booming industrial market, investment acquisition possibilities in the office, industrial and hotel markets in Hungary, and a focus on investment and development opportunities in Debrecen and Szeged.

News | 5

Real Estate Matters A biweekly look at real estate issues in Hungary and the region

Budapest-Hungary stand developers’ reception at Mipim 2023.

Debrecen (220 km east of Budapest by road) is promoting itself as an industrial center, while Szeged (175 km southeast) is heralding its high-tech sector based around the University of Szeged.

The Budapest-Hungary stand was jointly organized by the Real Estate Developers’ Roundtable Association (IFK) and the Hungarian Investment Promotion Agency, with the Liget Budapest Project and the National Industrial Park Management and Development Company (NIPÜF) as featured exhibitors. The professional consultancy sponsor was CBRE. Guest of Honor at a wine-tasting reception was Georg von Habsburg, Hungary’s Ambassador to France.

Need to be Seen

Lóránt Kibédi Varga, managing director of CBRE Hungary, says there is a need for Hungary to be promoted through a stand as it competes for investment with Poland and the Czech Republic for office, industrial and hotel assets. This is seen as particularly important in more challenging economic times. In all, 11 companies were represented at the stand, with 90 people working in Cannes.

One of the main talking points of delegates at Mipim is the ongoing yield readjustment in European investment markets due to geopolitical, economic, and financial factors that have resulted in a downturn in investment activity across the various markets. Vendors and buyers are unwilling to conclude deals in the current uncertain environment.

“With regard to investment transaction activity, the first semester will be quiet, not only in Hungary but across markets in Central and wider Europe. However, there are signs that the market will rebound and come back in the second half of the year,” comments Benjamin Perez-Ellischewitz, principal at Avison Young Hungary.

“Although there are not a lot of transactions happening, I would say that prime office yields stand at 5.5-5.75% and logistics at

around

6.25-6.5%.

On the basis of ongoing conversations, there has already been a 50-basis point movement out for Hungary,” he explains.

“The yield differentiation between Hungary and the Czech Republic is still 100-150 basis points. It is very difficult to say what total investment volume will be for the year, but I think that, for sure, it will be below EUR 1 billion, as the first months of the year have been very quiet,” Perez-Ellischewitz notes.

The other main taking point at Mipim was environmental, social, and governance issues that impact the whole development and investment process.

Both Atenor and GTC commented on the need to develop office complexes in accordance with ESG principles.

That is timely, given the publication of the latest “synthesis report” from the Intergovernmental Panel on Climate Change, the scientific body that advises

“The yield differentiation between Hungary and the Czech Republic is still 100-150 basis points. It is very difficult to say what total investment volume will be for the year, but I think that, for sure, it will be below EUR 1 billion, as the first months of the year have been very quiet.” the UN on rising temperatures, bringing together all the most recent scientific findings and published on March 20.

UN chief Antonio Guterres has called it a “survival guide for humanity.”

(Editor’s note: For more environmental news, see our Green Matters column on page 12.)

The Budapest-Hungary stand.

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Budapest Business Journal | March 24 – April 10, 2023

Business

Push to Expand Battery Production Stirs Grass Roots Opposition Should the foreign automakers in Hungary today move their factories to other countries in the future, the outlook for the cities hosting the plants would be bleak indeed, Hungarian Prime Minister Viktor Orbán told the Hungarian Chamber of Commerce and Industry on March 9 in Budapest.

KESTER EDDY

“In Hungary, around 300,000 families are dependent for their incomes on factories linked to the automotive industry,” he said, hence retaining these car plants is paramount. With the EU mandating an end to the production of cars powered by the internal combustion engine from 2035, the global automotive industry is moving towards battery-powered vehicles.

So, to ensure the automakers remain in the country, the government must do everything necessary to woo battery manufacturers into Hungary to provide a ready supply of these vital components, the PM argued.

Aside from the fact that, given the excellent transport links in the region, the automakers could be supplied from neighboring states without the need to move elsewhere, the argument has merit. Hungary is therefore forging ahead with battery (and associated components) production.

By 2021, the country could

produce

28 GWh

per annum, making it the third-largest producer globally, behind only the United States and China. (Some claims put Poland ahead of Hungary.)

This is being expanded further, most notably with the planned Chineseowned CATL plant in Debrecen (capacity 100 GWh per annum), with the country’s ultimate aim to have a total battery capacity of 250 GWh by 2030.

But as this next round of investments is underway, criticism is beginning to mount

Retaining Workers

Location of the new Companies of the Hungarian Battery Value Chain Salgótarján Komárom

Nyergesújfalu

Tatabánya

Biatorbágy

Győr Környe

Plants in Operation and Announced

Sóskút Szigetszentmiklós

Miskolc

Bátonyterenye

Nyíregyháza

Heves Jászberény

Debrecen

Vác Göd Gödöllő Pécel Monor Újhartyán

Iváncsa Kecskemét

Materials Components Cells OEMs Recycling Highways

as of December 2022 Source: own compilation, based on HIPA and other news

from economic and ecological perspectives (see box). Indeed, on the same day the PM spoke, Márton Czirfusz, a research fellow at the Public Policy and Research Center Periféria, presented a paper on the battery boom and its implications for the Hungarian economy and workforce involved in the sector.

Value Chain

As the paper notes, battery companies in Hungary cover the whole value chain, except raw material mining and refining. In addition, there are no research and development units in Hungarian subsidiaries.

Hence, it concludes that “due to the labor-intensive and low added

value nature of battery production, this transition is a downgrading process in the automotive value chain, rather than an upgrading.”

Then there is the issue of the labor shortage.

According to data from the former Ministry of Innovation and Technology,

14,000 jobs

were created in the Hungarian battery value chain between 2016 and the fall of 2021. This figure will reach 30,000 by the mid-2020s.

But with unemployment hovering just below 4%, the labor shortage “poses significant challenges for companies,” the paper notes, arguing that scarcity of

Battery Plant Created ‘Behind our Backs,’ Civic Group Says The establishment in 2018 of the Samsung SDI battery plant in Göd, 30 km north of Budapest and employing 6,000 people, appears at first sight to be a very positive development.

But for Zsuzsa Bodnár, Zsuzsa president of the Bodnár.

“For Göd Association” (Göd-ÉRT Egyesület), it is an environmental and sociological disaster.

“The Hungarian government decided to build the factory, but the local population was not consulted and was not able to express an opinion.

It was done behind our backs. The government called the factory a priority investment, which means that the official permits were issued in a fast-track procedure,” she says.

labor does not automatically lead to better working conditions or higher wages.

Instead, it reasons the production of electric cars is leading to what it terms the “foxconnization” of the automotive industry, where the share of unskilled jobs is high, wages are low, and employment is highly flexible.

“Salaries in the Hungarian battery industry are slightly higher than in companies with similar activities in the raw material and component manufacturing sectors. [However], a living wage for assembly line workers can only be achieved with overtime, bonuses and other allowances,” the report argues.

Bodnár adds that the plant didn’t even need an environmental permit because Hungarian law doesn’t require a detailed ecological assessment before construction, despite the use of dangerous chemicals in the battery-making process.

Bodnár reels off a list of adverse effects that is long and far-reaching. For thousands of homes near the plant, the pulsating noise and light pollution has led to sleep disturbance, a collapse in property prices, and a heavy increase in road traffic, including the movement of hazardous materials.

But the cause of most concern is chemical leaks into the atmosphere and local water sources.

In May 2022, tests carried out on behalf of the Göd-ÉRT Association revealed the presence of lithium and a carcinogenic solvent called N-methyl-2-pyrrolidone (NMP) in the water of some agricultural wells near the plant. According to Bodnár, the only possible source of these chemicals was the Samsung factory.

Meanwhile, there are likely to be problems with retraining the workforce.

“There is only a partial overlap between vocational training sites and battery plant sites in Hungary,” the paper states.

In practice, significant numbers of foreign workers, whether ethnic Hungarians from neighboring countries, or from further afield, will be necessary to operate these plants. Indeed, at the Samsung SDI plant in Göd, the first battery plant to be established, an estimated

3,000 of

a total of 6,000 in the workforce are “guest workers,” typically from South Korea, China, Vietnam and Ukraine.

On top of all this, the battery industry uses prodigious amounts of water, gas and electricity. Greenpeace Hungary estimates that, if realized, the total planned 250 GWh of production capacity will consume some 15-16TWh of electricity per year, roughly equal to the annual output of the Paks 1 nuclear power station.

Presumably to power these investments, the government has announced plans for three large gas turbine plants with a total capacity of 1,650 MW to come online in the next three years.

Describing the future investments in his March 9 address, Orbán said: “These are fantastic industrial development achievements of historic proportions, which within a few years will show results in the eastern cities of Hungary, just as has happened in Győr, Kecskemét and Fehérvár.”

When asked for the results from its own tests on the groundwater, the local authority declined to release details. In response, the Átlátszó news portal turned to the court, which ruled that the water monitoring data had to be released. It then transpired that no groundwater tests had ever been carried out in the factory area.

“The documents reveal the shocking fact that no water samples have been taken from the monitoring well on the factory site since 2016,” Bodnár tells the BBJ. In his March 9 address, Prime Minister Viktor Orbán said that every Hungarian citizen has the right to a “liveable environment,” and the government will ensure all investments in Hungary are carried out in accordance with the strictest possible environmental rules. “I’ve already made it clear that Hungary will continue to apply the strictest safety standards to all industrial investments: stricter than those that apply in comparable German factories,” he said.

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Budapest Business Journal | March 24 – April 10, 2023

PRESENTED CONTENT

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Business | 7

Kempi Hotel Unveils 5 new Executive Suites According to the hotel, the design creates exciting aesthetics by pairing distinct materials. The iconic Giorgetti armchair contrasts with the other uniquely designed furniture and echoes the designers’ penchant for juxtaposition: the armchair amalgamates Louis XVI and post-war American industrial design trends.

The complete renovation of five panoramic corner suites in Kempinski Hotel Corvinus Budapest, the design for which was prepared by the Hungarian firm Biva Atelier Kft., was recently finished.

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A lot of natural light flows into the new suites through the huge bay windows in the living room, and thanks to their location within the hotel, they offer a view of two streets, Deák Ferenc and Bécsi utca.

The suite has a spacious living room, a bedroom, and two bathrooms.

Test of Time and Taste

The elegant cognac leather-covered sofa can be transformed into a bed. If the guest also books a room adjacent to the suite, they will receive a two-bedroom family suite, separated from the rest of the guest corridor and expanded with a lockable antechamber.

Designers Szilvia Lőrincz’s and Bea Zsilinszky’s vision was to create an interior that fulfills the requirements

“We imagined furniture you will never grow bored of,” the designers noted. “These pieces will stand the test of time and tastes.”

For those who love beauty and elegance, the suite’s sophisticated lighting brings a new dimension. The lights with adjustable intensity, sometimes hidden throughout, radiate calmness and an elevated mood, creating harmonious transitions within the space.

The technical solutions also serve comfort: in the bedroom, the curtains can be drawn and closed electronically; in the bathroom, of business guests as much as lighting and dehumidification built into discerning leisure travelers in what the mirror increase the feeling of comfort. they call a “contemporary, subdued, but The suites are decorated with cosmopolitan design environment.” Due the works of Gyula Sági, a young to the pastel color harmonies, the new Hungarian artist living in Berlin, who suites are expected to satisfy the tastes symbolizes the synthesis of geometric of guests of various genders, ages, and and organic abstraction. nationalities. Work and rest areas are The hotel has a total of 15 Executive separated, allowing for small business meetings to take place in the living room. Suites available to guests.

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ChocoMe Adds new Partner to Unique Travel Retail Portfolio Created 13 years ago, the chocoMe brand is now available through some 1,500 sales points worldwide, reaching gourmand lovers of exquisite chocolate products. Apart from a wide range of chocolate and gourmet shops, florists, wine stores, and home furnishing specialists, several premium international brands have chosen to carry chocoMe products, including Ferrari, Ritz-Carlton, Mercedes, and El Corte Inglés.

Apart from these partners, duty-free and travel retail have become one of our most important sales channels in recent years. ChocoMe Ltd. has been available at Ferenc Liszt International Airport since 2015, in the retail location operated by the Hungarian subsidiary of Gebr. Heinemann.

It did not take long before the German company recognized the excellent performance of the Hungarian brand and, in an unprecedented move, elevated chocoMe to glocal status. This expression (a portmanteau of “global” and “local”) refers to when a small local brand enters major global markets. This move presents a significant challenge to small businesses because of the complex supply and quality control requirements of the travel retail segment.

However, chocoMe successfully mastered the requirements in 2017 (it was the only Hungarian brand to do so) and entered more than a dozen

European airports via Heinemann’s network of stores. Before the COVID lockdowns, locations included Berlin, Hamburg, Frankfurt, Amsterdam, Copenhagen, Vienna, Bratislava, and Istanbul. ChocoMe products were also available at a vast number of sites, many of them quite exotic, where Gebr.

Heinemann was a supplier of goods.

Throughout this cooperation, now in its ninth year, chocoMe has always welcomed suggestions from its partners. As a result, we regularly participate in and support marketing campaigns and tastings organized at airports. The feedback received has motivated us to make specific moves and engage in continual developments that allow our products to reach our customers more efficiently. By strengthening our IT background, we can now label our products in five different languages. This was indispensable for entering the Scandinavian travel retail markets, among others.

We leverage the long-standing experience of our partners when we heed their advice on the packaging, design, or even flavors of our products aimed at the travel retail segment.

As regards our post-COVID activities, in 2023, chocoMe was the first Hungarian brand to enter the dutyfree and travel retail establishments operated by Lagardére. The first location of this new partnership is the busiest and largest airport in the Czech Republic, the Václav Havel International Airport in Prague, where we are available at both terminals.

It makes us immensely proud that our portfolio of partners now includes not one but two major airport operators. The Lagardére brand best known to Hungarian consumers is probably the Relay network; however, frequent flyers may also be familiar with the Aelia Duty Free and BuY Paris Duty Free brands. Gaining the approval of Lagardére has reaffirmed the vision behind the chocoMe brand and its ever-expanding portfolio of products, ensuring the utmost satisfaction of our business partners and chocolate-loving customers alike.

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Budapest Business Journal | March 24 – April 10, 2023

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Magyar Bankholding Prepares for Final Merger With Good Results The chief business officer of individual services at Hungarian Bankholding, Levente Szabó, reveals the details behind strong corporate lending results and discusses the final steps in a three-way tie-up to create the country’s second-largest commercial lender.

BENCE GAÁL

BBJ: 2022 was a busy year in finance.

How did Magyar Bankholding fare last year in its corporate lending and investment service results?

Levente Szabó: Despite a rather hectic business environment, at the end of Q3, the MKB Group’s corporate loans amounted to HUF 2.577 trillion, an increase of 25.9% year-on-year. This growth reflects some one-time issues, like the impact of the acquisition of the Sberbank portfolio, some large individual transactions, and the effects of the exchange rate changes. Business demand for loans rebounded strongly in Q3 2022 after a small decline. The main focus was on the launch of the new Széchenyi Card MAX program products.

Since a significant part of the micro and small business lending volume has been contracted through this scheme, the launch and disbursement were prioritized. This is because MKB Bank was also at the forefront of the subsidized loan programs and guarantee schemes included in the economic stimulus packages, which have generated significant demand among customers since their introduction, and there have been substantial changes in these products in this period.

Regarding investment services, as inflation hit a record high in 2022, investors, including our clients, rebalanced their portfolios.

In the changing inflation and yield

Levente Szabó environment, the previously more popular MÁP+ was replaced by the inflation-tracking PMÁP, which became the focus of customer demand and sales.

In addition, the sale of fixed-rate bonds with maturities of up to one year, and discount treasury bills, has become increasingly important. Another strong feature of Q3 was that investors turned to the money market, short bond, and fixed-income securities, which offer increasingly higher nominal returns, by selling equity-type investment funds as short- and medium-term uncertainties intensified.

BBJ: Do you see a rise in interest for subsidized lending programs?

LSz: There is a clear shift in the lending focus of mid and large corporates, with long-term funding now being less common and more focused on working capital financing. The demand is real, and the volume of working capital loans requested from the bank has increased.

Those lucky enough to have been able to borrow some longer-term funds in the last two-three years, even at the low-interest costs of the time, are in a good position. These firms can now rely heavily on these funds, as they can invest at lower financing costs.

In February, Exim Bank launched the Baross Gábor Re-industrialization Loan Program to support Hungarian SMEs and large corporates most affected by the energy crisis. The package aims to provide investment, working capital, and green loans to Hungarian entities at favorable interest rates and with flexible terms, helping the competitiveness of participants.

In addition, the Széchenyi Card MAX+ loan program also promotes the competitiveness of domestic MSMEs and supports sustainable growth, continuing to provide interest rate subsidies and lower guarantee fees for the borrowers.

Companies are now looking to secure liquidity, so the aim is to create and increase overdraft facilities and obtain specific medium-term loans to help working capital. In the case of large corporates, we are currently seeing these objectives being reinforced.

BBJ: The spring merger of MKB Bank and Takarékbank is the final step in a three-way tie-up to create Hungary’s second-biggest commercial lender.

How is Bankholding preparing for this?

LSz: On April 30, MKB Bank Plc. and Takarékbank Ltd. will merge, and the merged bank will operate under a single brand as MBH Bank Plc. Following the merger, former MKB Bank and Takarékbank branches will gradually change their brand visuals in stages during the year. Many colleagues are working to ensure that the merger goes smoothly so that, from May, customers will benefit from an integrated and modern large bank, offering a unified product portfolio and a wider national branch network backed by an even more advanced technological platform.

BBJ: Where does Bankholding stand on the factoring market with three merged factoring companies (MKB, BB, and Takarékfaktor), and what are its ambitions for the future?

LSz: Individually, they were crucial actors in the Hungarian market with significant customer portfolios and financed turnover for each player, but in different segments. The merger will create the market’s second-largest operator in terms of the number of clients and portfolios. But that is only a start, given that each bank is a market leader in corporate finance or the agricultural segment. By optimizing processes and exploiting the synergies of the merger, the group can achieve significant growth

in its existing client base. In the shortto-medium term, the goal for the bank, like many of its corporate financing services, is to achieve a market-leading position in factoring.

BBJ: How can factoring help finance the medium and large corporate sectors?

LSz: Surprisingly, factoring services are no longer only used by SMEs but are becoming more common in the medium and large corporate segments.

In addition to financing, factoring services also include, for example, risk management and accounting benefits, which are of considerable value to a large company. Liquidity financing as a service remains an essential element of clients’ contracts, but in the large corporate segment, it is now more important if the provider bank can offer a customized solution to help the client deliver risk-free to new partners or new foreign markets.

In addition to risk management, another essential service for large corporates is so-called “working capital management” services, whereby the bank can help, whether on the supplier or customer side, achieve strategic financial goals by improving turnover rates or even by taking over entire customer portfolios on a temporary or permanent basis.

BBJ: Bankholding is the only Hungarian bank operating a separate agribusiness. How important is agriculture for the group, and what are the main challenges in this sector?

LSz: Our group is a leader in financing agribusinesses; in some segments, we perform well above the market. This is mainly due to our strong rural presence and rich market expertise.

Great importance is attached to the agricultural sector. In recent years, it has become even more apparent that it is in the interests of society to support and develop the domestic food processing industry. The merger has also expanded our portfolio, adding food and larger agricultural businesses producing for export to our client base, creating an ideal client mix. Our agricultural model is unique in Hungarian banking. We believe that the main challenge facing the sector in the coming decades is to ensure that the growing urban population can be supplied with food of sufficient quality and, crucially, at affordable prices. As a bank, we need to facilitate this adaptation.

BBJ: What is Bankholding’s vision for the domestic agribusiness industry?

Does sustainability play a significant role in the plans?

LSz: The Common Agricultural Policy will provide the sector with unprecedented development funding, and the pandemic has highlighted the importance of food self-sufficiency. Food production is a strategic sector, and Bankholding plays a key role with its expertise and knowledge. As a lender and financial service provider, we take a leading role in developing the Hungarian food economy and making agriculture efficient and sustainable economically, socially and environmentally.

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Budapest Business Journal | March 24 – April 10, 2023

Fed Will Prioritize Financial Stability Over Fight Against Inflation For the past six months, the U.S. Federal Reserve has been fighting inflation by jacking up interest rates and tightening the money supply.

Our columnist Les Nemethy, and others, predicted that “something will break.” Something did: Silicon Valley Bank (SVB).

And now the Fed is busily trying to contain the contagion.

Here, Nemethy discusses across five points how the financial stability goal trumps fighting inflation; the longer the instability persists, the more the idea of battling inflation will take a back seat. The ramifications are far-reaching. If he is correct, we could see another significant inflation spurt in the coming year.

1) Recent statistics demonstrate that inflation-fighting has taken a back seat.

The U.S., European and Japanese Central Banks have been selling down assets for the past year (tightening the money supply). In the first half of March 2023, considerable loosening occurred. This is inflationary.

2) There is still considerable potential for future contagion.

Let us examine how SVB failed.

As the premier banker to Silicon Valley tech firms, it amassed vast deposits.

It chose to invest most of these into long-term Treasuries when interest rates were lowest (in other words, Treasury prices were at their peak). Then the Fed jacked up interest rates by the steepest increase in percentage terms in its history. Bond prices, being inverse to interest rates, collapsed.

Business | 9

Finance Matters A biweekly look at f inancial issues in Hungar y and the region

MARCH 10, 2023: The Wall Street Journal reports on the closure of Silicon Valley Bank by regulators. Photo by Domenico Fornas / Shutterstock.com SVB could have held the bonds to maturity to recover their face value, but that would potentially have taken decades. Meanwhile, depositors wanted their money now, forcing SVB to liquidate bonds, thereby recognizing losses, rapidly creating a vicious circle leading to SVB’s demise.

One might say the Fed whipsawed SVB, first by keeping interest rates artificially low, then jacking them up very quickly. And how ironic that U.S. Treasuries, one of the safest assets in the world, was the cause of SVB’s downfall.

SVB is not the only bank facing this predicament. In the U.S. banking system alone, more than

USD 600 billion of bonds

are “below water.” And that doesn’t cover shadow banks, pension funds, or foreign financial institutions. So, the potential for future contagion is definitely there.

Due to the nature of fractional reserve banking, banking is, by definition, a confidence trick. If enough people withdraw funds from a bank…

Until confidence can be restored, reverberations will continue through the financial system, despite the attempts by central banks to tamp down the contagion.

3) The U.S. and global economies are highly leveraged.

High leverage is associated with high risk. The global economy is now more leveraged than ever. Global

government, private, and corporate debt sits at a mind-boggling 370% of global GDP, considerably higher than during the 2008 Global Financial Crisis. This has made the world much more sensitive to record-fast increases in interest rates.

4) The future fight against inflation is made even more difficult.

The Fed is literally between the proverbial rock and a hard place.

To fight inflation, it and other central banks must increase interest rates and decrease the money supply.

Yet, it is a decrease in interest rates that would help to refloat the value of the underwater bond portfolio and loose liquidity that would help take the pressure off banks in general.

In the coming months, we will find out whether the path is extremely narrow or perhaps there is no path at all.

5) Ultimately, central banks will need to prioritize financial stability.

If financial stability is lost, for example, if banks start falling like dominoes, we would be into a 1930s-style Great Depression. The possibilities are too horrible to contemplate: double-digit unemployment, possible deflation, and so on.

Central banks cannot afford to walk anywhere near the deflation precipice. As long as sufficient stimulus is provided early enough (before major financial institutions go bankrupt), it is not that difficult

to achieve financial stability. Just throw enough money at the situation!

(In the most recent week, U.S. banks

borrowed

USD 150 bln

from the Fed’s discount window, blowing past the prior 2008 record of USD 112 bln).

Short-term disaster can be averted but at the cost of catalyzing longterm inflation. Politicians and central bankers have a bias to avoid disaster under their watch and kick the problem down the road.

The loosening of monetary policy today means we will likely face an even bigger debt bubble and higher inflation tomorrow. So, buckle up; we are likely facing a rough ride on inflation. The longer financial instability persists, the higher the inflation will be.

Les Nemethy is CEO of EuroPhoenix Financial Advisers Ltd. (www.europhoenix.com), a Central European corporate finance firm. He is a former World Banker, author of Business Exit Planning (www. businessexitplanningbook.com), and a previous president of the American Chamber of Commerce in Hungary.

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Creating Value by Finding Synergies Between Growth and Heritage On the way to the interview location, as if it were meant to be, the GPS took me past the Gellért Hotel, a now somewhat timeworn landmark of the city to whose rescue BDPST Group has ridden. A few minutes later, majority owner and chairman István Tiborcz explains how the renewal of such a historical gem can help raise Budapest’s profile into a luxury destination. This is just one of BDPST’s many projects across a rapidly developing portfolio. Tiborcz is at least as famous for being Prime Minister Viktor Orbán’s sonin-law as he is for being a successful businessman.

He has big plans, and there is much to discuss regarding finance, property development and tourism.

BÁLINT SZŐNYI

BBJ: In January, BDPST sold two ski hotels in Murau, Austria, a popular Hungarian skiing destination. Did the lack of snow give you second thoughts about the long-term potential there?

István Tiborcz: Not having enough snow was nothing compared to the COVID lockdown! There are purchase opportunities and periods in business when it is time to clean your portfolio.

Murau attracts a lot of Hungarian skiers, but it is a highly seasonal destination

BBJ: Is Budapest underrated, considering the overall quality it has to offer?

IT: It is not right that people only come here because Budapest is a cheap destination; that perception must be changed. It would be better to have fewer visitors with more spending power. Stag weekends are fine, but more elevated needs must also be served to target tourists with more sophisticated expectations. Wealthy visitors now spend their money in Vienna because that is where they find luxury stores. Average five-star hotel rates also need to be increased to catch up with the West and to reflect the quality that especially new developments represent.

As a result, the commercial segment will also have to adapt to the rising standards of tourism service providers.

The benefits of refurbishing iconic buildings and reintegrating them into their environment are not just financial.

Our vision is to save historical buildings and to create values with social benefits at the same time.

István Tiborcz in Austria. We strive for hotels in our portfolio with something to offer all year round. We have two types of hotels: large ones with many rooms that we operate in partnership with renowned global chains to achieve maximum efficiency, and high quality smaller properties under our own management, representing a premium segment under the Botaniq Collection umbrella brand.

We sold the Austrian hotels so we could focus on this brand and concentrate on the luxury market.

BBJ: Meaning you believe that the demand for this kind of quality exists.

IT: The Botaniq Collection stands on four pillars: five-star hotels, luxury home development (both in top locations), top-of-the-line retail projects, and F&B outlets that improve those properties’ recognition and reputation. Budapest has tremendous untapped potential in high-

end tourism. The city is destined to lure more guests who book longer stays, are willing to shop and yearn for culture.

Everything needs to be done to get them here through elite league hotels, quality gastronomy, and cultural programs. Our regional rivals are ahead of us. Take Prague: it is a relatively small city, yet most luxury brands are present there, unlike in Budapest. Luxury homes are far more expensive as well. And that’s not to even speak of comparisons to Vienna!

Supply must come first; demand is about to follow. I hope our plans will contribute to increasing the number and quality of overnight stays in Hungary and, thus, domestic tourism revenues.

Our Botaniq Castle in Tura is an excellent example, as there had been no domestic benchmark before its opening.

Yet, we have had several Forbes Global Top 100 guests, showcasing that quality does draw the right type of customers.

BBJ: The renovation of the iconic Gellért Hotel fits into this concept.

One of BDPST’s stated missions is to create value by renovating classical buildings and equipping them with contemporary functions.

Isn’t it too much of an endeavor during an energy crisis? Can you renew and operate such typically large properties profitably?

IT: Energy costs are an issue, but price levels should drop substantially at some point. On the other hand, historical buildings can be renewed to comply with energy efficiency standards. Our core purpose is to save and create value. We systematically pick legendary properties in top locations requiring renovation and then add modern functions and sustainability aspects. The Gellért Hotel fits this description. Its historical past makes it ideal for turning into a luxury property, and with the involvement of a global hotel chain, it can help raise Budapest’s profile on the tourism map.

The benefits of refurbishing iconic buildings and reintegrating them into their environment are not just financial. Our vision is to save historical buildings and to create values with social benefits at the same time.

BBJ: Sofitel’s renewal is another ongoing BDPST real estate development project, but certain architects raised their voices that the original design concept is not being observed.

IT: The best thing would have been if the original building, called the Lloyd Palace, still existed; the surrounding area would look totally different in this case.

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Budapest Business Journal | March 24 – April 10, 2023

But, unfortunately, the Lloyd Palace was destroyed, so the harmonious scenery is gone, too. BDPST Ingatlanfejlesztési Zrt. has been tasked through a services agreement to carry out the development works of the building that is presently in poor condition, meaning renovation works are essential. A legally binding construction permit is in place that sets out how the façade will be reshaped so the renovated and partially rebuilt property should be in harmony with its surroundings. It should form an architectural bridge between the historic buildings and the ever-evolving Danubeside environment. Our job is to keep the core values of the building, whether esthetic or physical. Once the sample design of the façade is complete, we need to reach a consensus that aims to preserve the original elements by architect Lajos Zalaváry and complement them with modern features.

BBJ: What about your latest deal, the purchase of the Patrícius Winery? BDPST already has a hotel in the Tokaj region, the Andrássy Kúria in Tarcal, part of the Botaniq Collection brand. Expanding further locally seems like a natural choice. Is it because Tokaj represents a powerful Hungarian global brand?

IT: Our Botaniq Collection luxury umbrella brand aims to be not only about hotels and restaurants. We strive to add a range of luxury services to our portfolio that reinforces synergies.

Therefore, buying the Patrícius Winery was an obvious choice for us. Now that we have several culinary outlets in our own hotels, we can promote and offer Tokaj wines there. Tokaj is a unique brand that we need to build up and strengthen.

Wineries in the Tokaj region are also tourist attractions, which presents further synergy opportunities for us.

Our portfolio will also be expanded by a sports-focused members club, the Botaniq Budai Club, this year, and purchasing a golf club is on our agenda, too. This way, we can offer our clientele, whether domestic or international, a wide range of services. The entire portfolio can work smoothly together, thanks to the synergies and cross-selling opportunities.

BBJ: How did BDPST do in 2022 after a record-breaking year in 2021?

IT: 2022 was a successful year, thanks to the fact that BDPST had diversified its fields of activities: while it started as a property developer, it now acts as a capital investor

A Footprint in Finance Through Diófa management company, Gránit Bank, and Equilor investment company, BDPST is now firmly present in the financial sector. As for Gránit Bank, Tiborcz doesn’t have any illusions that it should compete with the largest lenders in Hungary that have massive deposit holdings and a vast customer base.

“We have different goals that have been implemented very effectively in the past decade,” he says. “When

in new industries as well. Our operating profit should be around HUF 40 billion, far exceeding our 2021 results. But what is even more important, I think, is that we provide jobs for almost 7,000 people.

We have long-term plans, but given the fluctuating business climate, we need to update them from time to time. What is certain is that we will focus on the one hand to increase our market share in sectors where we have invested already, and on the other hand, on becoming more efficient by improving structural effectivity and cross opportunities between the subsidiaries of the BDPST Group.

BBJ: How difficult is it to plan at times like these? For one thing, interest rates are up, which is bad news for property development.

IT: I was convinced that extremely low interest rates couldn’t be maintained for too long, so we aimed at securing loans at fixed long-term rates to finance our acquisitions which gives us stability. This interest climate, although it didn’t stop investments, surely pulled the brake on the new real estate market. The premium segment didn’t suffer that much, and it looks more crisis-resistant. We really hope interest rates will go down again, which could give a further boost to developments.

COVID, there were no layoffs, and our salary scheme is motivational and exceptionally transparent. This resonates well with our colleagues and helps us fight the labor shortage. To address your other point, it is great if a hotel has a wellness section; but that’s not enough anymore; we have to offer exciting experiences to our guests that make their stay memorable. In Budapest and in the countryside as well, it will be crucial to provide highlevel services that attract international guests. Thanks to the Hungarian climate, we can offer these experiences all year around in every season.

BBJ: Getting back to your foreign portfolio, you said in a previous interview that you might want to continue your expansion in Spain.

Investment targets in Croatia or Italy are also on your radar.

IT: We are continuously monitoring the investment landscape; however, right now we are not focusing on foreign transactions in hotel management. We are cooperating with several big name international brands, such as LVMH, Small Luxury Hotels, the Intercontinental and the Marriot hotel chain. Now that capital investment has become BDPST’s dominant activity, we would like to manage our international presence through specific structures. Diófa Fund Management, which is part of the group, enables us to buy mainly office portfolios in the region. This crossborder expansion is definitely part of our strategy to become a major player in the region, though it is not carried out by BDPST but instead by Diófa, because it has the expertise to operate facilities on a large scale.

BBJ: As far as tourism is concerned, there are issues such as the labor shortage and the falling real income of consumers, to name only two factors. You have mentioned the importance of turning places into all-season destinations, and there is a lot of talk about adventure tourism.

IT: As I said, we employ 7,000 people, and I’m really proud to say that staff fluctuation is very low at BDPST. During

BBJ: I found a remarkable statement from you that you prefer not to have a stake in companies that get public funds in any way. Does this self-restriction also apply to the subsidized loans now offered, for instance, to boost corporate energy efficiency investments?

IT: Companies like Diófa, Gránit Bank, or Waberer’s, in which BDPST has a stake, all have independent management, and I can’t instruct them to apply or not to apply for whatever tenders because, by doing so, I might harm other shareholders. For that reason, the managers make the right

it comes to banking digitalization, Gránit has been leading the way, which greatly helped it to become the most efficiently functioning and fastest developing bank on the market.”

BDPST’s owner says he believes in solutions that make people’s lives easier, and Gránit’s digital banking approach fits that. It is no accident that the bank’s return on investment is more than 20%, an exceptional figure.

“I had been looking for a digital platform like this, on which we

started to build a finance group that provides complex financial services and which is capable of serving private banking clients and offering asset management services,” he explains. Gránit purchased the oldest Hungarian investment service provider, Equilor, which aims to form a private banking portfolio.

Diófa manages Hungary’s thirdlargest public real estate fund.

“And part of our mid-term plan is to acquire a bank with eurobased operations in the region,” Tiborcz concludes.

Business | 11

When Investment Opportunities Present Themselves BDPST occasionally ventures into new sectors; logistics was one such area, where BDPST acquired a nearly 50% stake in hauler Waberer’s in two steps.

The company weighs several factors before entering new territory, its owner says.

“When an opportunity presents itself, we examine it, regardless of the sector,” Tiborcz notes. “We look at the strategy, the market position, and the quality of management of the company, and we also assess whether it has a longterm perspective.”

As Tiborcz explains, Waberer’s ticked every box since we are talking about incredible potential with professional management.

“That is why we’ve increased our stake, and we would love to increase it further if possible because Hungary’s recent large-scale industrial developments pave the way for even greater demand for logistics services,” he adds.

decisions on such matters regardless of me, that’s all. These kinds of political attacks may prejudice investors, but I stand by my former statement.

BBJ: Alteo is another story worth mentioning.

IT: The company was an excellent investment target, and I was delighted that Diófa decided to go for it. We use a lot of energy during our operations, and Alteo, as a leading green energy producer, can help us balance energy use.

BBJ: Are there any plans to take BDPST public any time soon? Do you want to follow the example of Opus Global?

IT: BDPST is primarily a capital investment holding that invests either in listed companies or several industries. Those listed companies are active in their given sector. Opus Global has a diverse portfolio in many strategic industries, and is listed on the stock exchange. So, there are different recipes for success, but, you know, as we say, everyone swears by their own fish soup recipe. We’re not planning to float BDPST on the stock exchange.

BBJ: What will your fish soup contain in 10 or 15 years?

IT: We have long-term plans, but given the fluctuating business climate, we need to update them from time to time. What is certain is that we will focus on the one hand to increase our market share in the sectors where we have invested already, and on the other hand, on becoming more efficient by improving structural effectivity between the subsidiaries of the BDPST Group.

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ESG Very Much a Central Issue at International Real Estate Expo ESG, the interplay of environmental, social, and governance issues, was one of the main themes of debate at the Mipim 2023 commercial real estate and investment expo in Cannes last week. The subject is seen as impacting all stakeholders at all stages in the development and exit process in the real estate and property investment industries.

GARY J. MORRELL

Real estate is responsible for 40% of carbon emissions globally, with 30% down to development and construction processes and 70% caused by the operation of buildings. Thus, ESG and sustainability issues are relevant throughout the lifespan of a given building and impact developers, tenants, investors, banks, consultants, and architects as stakeholders in the ESG process.

“In an uncertain global environment, Mipim acts as a catalyst for innovation and a focal point for the transformation of real estate,” Nicolas Kozubek, director of Mipim, said in Cannes.

“More than ever, we experienced incredible energy from political leaders, investors, and the wider real estate community, who are collaborating to create better, more sustainable buildings and places. With the decarbonization of cities foremost on the agenda this year, Mipim has signed the Road to Zero Alliance together with fellow real estate leaders to affirm our sustainability commitments,” Kozubek added.

The Road to Zero zone at the expo contained 400 sqm of exhibition, conference, and networking space,

Green Matters A monthly look at environmental issues in Hungar y and the region

“The Path to Net-zero Buildings” presentation at Mipim 2023 on March 16. Photo by S. CHAMPEAUX / IMAGE&CO focusing on creating groundbreaking methods to decarbonize the real estate industry.

“The aim of the Road to Zero is to promote proptech solutions in order to achieve net-zero carbon emissions by 2030. We have made a lot of money, and we aim to bring together stakeholders,” commented Thomas Veith, global RE partner at PwC Germany, in a presentation on the aims of the alliance.

Developers and investors can be seen as looking to measure value beyond the financial performance alone, and these other elements also impact returns on investment at the same time.

on ESG compliance, commented Mike Edwards, head of capital markets at Cushman & Wakefield, at an investment panel at the Budapest-Hungary stand at Mipim 2023. From an ESG and sustainability perspective, he says assets in Hungary are on a similar sustainability and ESG level to those in Western Europe.

a higher social value and ultimately a higher valuation, so it simply makes more sense to invest in them,” he added.

Breeam Accreditation of Choice in Budapest Office Market Breeam is the majority third-party accreditation system of choice with office developers in Hungary and the wider Central Europe. According to Colliers, Breeam accounts for 74% of office sustainability accreditations in Budapest, with Leed representing 26%. Analysts argue that a more standardized approach or framework is needed, the direction for which is already set within the new EU taxonomy framework.

Wing Issues ESG Report “Being green and sustainable has become a big priority not only for developers, but also for tenants and investors,” said Noah Steinberg, chairman and CEO of Wing. “As a leading Hungarian and regional real estate developer and Office Developers Emphasize investor, Wing has a long-standing Importance of ESG commitment to environmentally-friendly Need to Digitize ESG Zsolt Berényi, regional development property development and operation.

Information, Says KPMG director at GTC Hungary, commented We have put in place our ESG strategy ESG information in a digital form is on the need to develop office projects and published a special report crucial for a real estate investor in making in accordance with ESG principles at summarizing our accomplishments an important acquisition decision. An a panel discussion of developers at the in terms of ESG,” he explained. investor requires access to ESG data from Budapest-Hungary stand at Mipim 2023.

In 2021, the company reached the building owners and tenants. This is He argued that there is a need for energy a significant milestone by issuing a valuation issue and therefore involves efficiency and a focus on the people in green bonds, enabling it to integrate data collection and analysis using a building. In this way, the design of a environmental awareness not only in the proptech techniques, according to KPMG. project needs to be rearranged to benefit architectural and technical design but staff. Zoltán Borbély, county director also in terms of financing, Steinberg said. Growing Role of Energy-efficient at Atenor Hungary, said that what is “What we are seeing is that the Residential Buildings required in the office market is an “ESG environmentally responsible The role of green and energy-efficient mindset.” He said his company had development and operation of buildings for residential tenants is growing been a trendsetter in the Budapest office office buildings is now becoming strongly, not only as part of ESG policy market by developing the first Breeam a standard requirement for tenants. results but also because of the financial “Excellent” accredited office building On the operational side, ESG leads benefits, comments Colliers in its “Living in the city as far back as 2009. to more efficient operations and Sector in CEE-6” report. “Consequently, lower tenant costs thanks to energy we will soon expect to see a rising gap in ESG Critical for Investment efficiency and sustainability pillars. In terms of rent and value between green and ESG elements are critical elements for addition, from an investor perspective, efficient buildings for all countries in the a transaction as investors, international buildings with green certification or CEE-6 group. This should apply to all real corporate tenants, and banks all insist companies with sustainable goals have estate sectors, including residential,” it adds.

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Budapest Business Journal | March 24 – April 10, 2023

Special Report Manufacturing and New Technology

Ganz Intelligent Solutions Launches new Tech for Transformers Storied Hungarian manufacturer Ganz has introduced new technology that helps transformers reach their peak performance, saving costs and contributing towards more sustainability in the power sector. Its experts tell the Budapest Business Journal how Ganz Intelligent Solutions contributes to more streamlined operations and a greener future.

MICHAEL MILLER

Swiss-born manufacturer and engineer Ábrahám Ganz founded the Ganz Works in 1844. After his early death at 53, András Mechwart, a Germanborn Hungarian-German mechanical engineer, became the chief executive.

The company grew to be one of the flagships of the 19th-century Hungarian economy and has stood the test of time.

One and a half centuries later, Ganz Electric is still innovating.

The latest transformation at the company took place a few years ago.

When CG Electric Systems Hungary Zrt. went into liquidation in July 2020, Ganz Transformers and Electric Rotating Machines Ltd. acquired all the company’s assets in a public auction. The new company also bought the Ganz plant in Tápiószele (90 km southwest of Budapest) and concluded employment agreements with almost 300 former employees.

With this move, Ganz Transformers became

due, putting an end to costly scheduled maintenance. These systems help prevent sudden faults that would stop equipment from generating electricity, which saves costs and minimizes interruption to electricity network operations.

“The first condition for the digitalization of transformers was the availability of monitoring tools, as only with the help of these can we access data on the status of the units,” Gábor Farkas, brand manager of Intelligent Solutions, tells the BBJ.

Flexible Partnership

“The idea of a condition monitoring system accessible to a wide range of end-users has been floating around in our sector for years. Though Ganz had previously produced transformers with partial condition monitoring, a centralized system combining different protection and control functions was considered too expensive for the market,” he explains.

100% Hungarian-owned

again after 15 years of rapid changes in ownership that saw a British majority stake, Austrian ownership, and then membership of an Italian industrial giant.

As if signaling a new chapter in its history, the company introduced a new technological development, the Ganz Intelligent Solutions, in 2022.

This launch has opened a new era of transformer manufacturing, the fruit of intensive research and development activities, and a strategic partnership signed with Germany’s Maschinenfabrik Reinhausen (MR). Today, this new arm manufactures a unique monitoring system that can provide a complete picture of the transformer unit’s status.

The Ganz innovation enables conditionbased maintenance, which extends equipment lifetime. Ganz equips its transformers with monitoring systems that send notifications on the unit’s condition, alerting when repairs are

Jan Prins, managing director.

transformer operation, evaluate electrical machines’ thermal conditions, analyze oil content and chemical composition, and maximize equipment usage and cooling. The system annuls unnecessary maintenance and eliminates on-site monitoring of transformers that are often in hard-to-access locations.

The solution is already in use. Ganz Intelligent Solutions has delivered three intelligent transformer units with a combined value of more than HUF 960 million. The Tápiószele factory turned out the units for companies in Sweden, Estonia and Hungary. The immediate production pipeline is charged with orders for a

“I think this result speaks for itself. In addition to our foreign customers, one of the largest Hungarian energy suppliers has also launched its first digitalization pilot project, in which they will be using the highest possible level of Ganz’s packages,” the brand manager adds.

Ganz’ novelty comes at a time of heightened need for more sustainable solutions: the

27

member states

of the European Union are negotiating emission-cutting laws, and the bloc is overhauling its carbon market in a bid to curb climate change.

According to Ganz, its technological development contributes to the enhanced sustainability of the power industry. The company helps reduce costs, material consumption, and carbon emissions through timely failure detection.

further

18

intelligent transformers from Hungarian and international renewable energy market players.

“When computers first came into our lives, many people were suspicious of these new devices. Today, most of our society cannot even imagine life without smart devices. As with all major changes, the digitalization of transformers also provoked, and still provokes, mixed emotions in many end-users,” says Farkas.

“This, though, can be a barrier to technological innovation. Which is why at Ganz, we try to present the benefits and opportunities of digitalization to our partners objectively, as well as the emerging threats and responses to them,” he notes.

Ganz has recently made a significant strategic decision. Happy with the monitoring system’s development process and market reception, the company will only produce transformers equipped with intelligent monitoring systems in the future.

Dedication Pays Off

“Our first pilot project in Sweden, like the first in any field, required a lot of “The solution was finally found in a flexible dedication and commitment. With that partnership with MR, since the supplier is said, we are proud that just a few months able and willing to consider our requirements after delivering the first unit, we had already been approached by end-users and integrate third-party tools.” who want to order more machines with The monitoring system comes with increased technical content,” Farkas recalls. additional perks. Users can optimize

Gábor Farkas, brand manager.

Furthermore, its system supports sustainability projects via condition monitoring and data-driven decisionmaking, ensuring that the transformers that connect renewable energy plants to the grid operate correctly and that the energy produced is not wasted.

On top of this, Ganz has expressed its commitment to upgrading its factory in Tápiószele to meet sustainability standards.

“As one of the key players in the energy industry, specifically the transformer market, our company’s explicit goal, with the launch of Intelligent Solutions, with the intelligent transformers already manufactured and installed, and with the sustainable operation of our company, is to contribute to the green revolution in the electricity industry and to make the transformer market more efficient,” Jan Prins, managing director of the company, tells the BBJ.

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Special Report

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Budapest Business Journal | March 24 – April 10, 2023

Time Machines, Digital Twins, and Crash Avatars: Welcome to the Industrial Metaverse The concept of the metaverse has been around for some time, though it seems to stir much less public excitement than AI-backed online chat programs, despite being championed by the likes of Mark Zuckerberg. To an extent, that is understandable: while chat programs are spectacular and entertaining with their ability to mimic human interaction, the metaverse is yet to produce groundbreaking novelty, at least for private users.

BALÁZS BARABÁS

The evolution of digital tools for designing industrial equipment, AutoCAD, among others, has dramatically enhanced engineering.

However, these cannot predict how the final product will operate in real life, much less in conjunction with other equipment.

A system capable of simulating a whole factory would save significant costs and time, as potential flaws could be identified before physical construction starts. In the case of a dysfunctional operation, the design could be reversed to a previous checkpoint, like the time machines in science fiction novels.

In fact, that technology already exists, and some do indeed call it a time machine, while others prefer the term industrial metaverse. In a recent article, Jan Burian, associate vice president of consulting company IDC describes the industrial metaverse “as a highly immersive future environment that blends the physical and digital to enable a shared sense of presence, interaction, and continuity across multiple spheres of operations, supply chain, and business.”

Another term often used is digital twin, the “virtual representation of a physical

A virtual production line designed by Nvidia and Siemens and its “first life” realization. product, component, asset, or even process.” Large companies are already using this technology. BMW, for example, created a virtual twin of its production plant in Bavaria before building the physical facility, while Boeing uses a digital twin to design its airplanes.

The industrial metaverse requires significant processing capacities, as described in an article published by the MIT Technology Review.

“For mission-critical industrial applications, the metaverse will require low latency, massive machine communications, and high reliability, in addition to fast network speeds,” the article says.

Potential Risk

It should be noted there is a potential risk with the industrial metaverse, namely, an inclination to rely too much on it. As another article warns, “a pitfall to avoid is the over-reliance on technology that might not be able to adapt like humans if disruptions in the supply chain or other low-probability events happen.”

For now, this is not an imminent threat, as the technology is just starting to take off. Last year, Siemens and Nvidia, an American multinational technology company known for its computer video cards, partnered to develop immersive digital twins. Automakers BMW, Hyundai, Mercedes-Benz, and software giants Google Cloud, Infosys, and Microsoft, are all researching the industrial metaverse.

Indeed, such a project is already in development in Hungary.

As Tamás Jeránek, CEO of Siemens Hungary, puts it, “the metaverse is knocking at the doors of BMW in Debrecen.”

BMW has already started the construction of its bricks-and-mortar factory in Debrecen, Hungary’s secondlargest city, some 230 km east of Budapest.

In January, the company announced that there had been no disruptions, and the training center is in the finishing phase.

According to the plans, the factory will start production in 2025, for which the company will need 1,500 employees.

Currently, BMW is recruiting

Scaling Up

But the new technology can also be used at a larger scale, in designing cities, for example. In Berlin, it will be used to create a new district that, the planners say, will be 100% CO2 free. people The industrial metaverse will be an for 70 different roles. Siemens will essential tool in the changing economic implement its first industrial metaverse environment. project here, at BMW Debrecen.

“When the insufficient labor force and The automotive industry can benefit the energy crisis, together with many other significantly from the digital twin factors, endangers maintaining the level technology in the metaverse, as Jeránek of industrial productivity, one of our most outlined in a recent article. Car crash important tasks is to develop and implement tests, for example, are very expensive, technologies that require the minimum and prototypes can be crashed only once. possible resources,” Jeránek writes.

However, what we might call a digital This is the path BMW is following crash avatar of the product can be used with its plant in Debrecen. As Milan endlessly, even with changing parameters. Nedeljkovic, a board member at BMW Also, millions of test kilometers can be AG, says, the new factory will exhibit the moved into the simulation space. highest technology in the automotive industry in terms of flexibility, sustainability and digitalization.

Sustainability is indeed a core focus at BMW. Almost one-third of its cars are now “Technology is a link to the produced of recycled and reused materials, real world, in which we so-called “secondary raw materials.” Some will be able to bring quick parts are made from recycled fishing nets.

The stated aim of the Bavarian-based and efficient solutions to automaker is to raise the amount of problems. It may seem sci-fi reused and recycled materials

400

for now, but we are laying today the foundations of the industrial metaverse, with the utmost care, preparing the necessary bricks.”

Of course, one question immediately arises: how can we be sure that the simulations are realistic and produce the same outputs? The technology has already been tested, Jeránek notes. The real-life crash tests produced precisely the same results as the much cheaper digital models.

to

50%

and to reduce carbon emissions to a minimum. The factory in Debrecen will be the first to eliminate completely the use of fossil energy sources during production. A large part of the necessary electricity will be produced on-site.

So, this is where we stand now, Jeránek concludes: “Technology is a link to the real world, in which we will be able to bring quick and efficient solutions to problems. It may seem sci-fi for now, but we are laying today the foundations of the industrial metaverse, with the utmost care, preparing the necessary bricks.”

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Budapest Business Journal | March 24 – April 10, 2023

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Continental: Value-added Hungary ‘a key European Manufacturing Location’ Matthias Matic is the head of Continental’s Safety and Motion business area and a board member for the Automotive Group.

In mid-February, he visited the company’s facilities in Hungary and spoke with the Budapest Business Journal.

BBJ: You recently visited Hungary.

Can you tell us the nature of your trip here and how often you see the Hungarian operations?

Matthias Matic: Both the automotive industry and Continental are in the middle of a transformation. In such times, we clearly need the right strategy to bring our vision to reality. This year, my business area had one of our global strategy workshops in Budapest. I try to visit Hungary almost every year, and my team members are even more frequent guests here.

BBJ: In financial terms, how significant are the Hungarian operations to Continental’s global business, and what role do Budapest and Veszprém play in the innovation capabilities of the worldwide company?

MM: Generally speaking, Continental generated around 47% of its sales in Europe last year. In the same period, the SAM

As you outlined, EVs are already a part of today’s mobility. However, the share of EVs will increase furthermore.

Since the spin-off from Vitesco Technologies, Continental has been relatively independent of the powertrain.

Nevertheless, we at SAM develop specific solutions supporting this type of drive. Examples are our so-called drybrake systems, which do not use brake fluid to actuate the brakes. Instead, you use electric actuators directly on the brake. Next to this, we offer special sensors for EVs, like one that detects if your battery is physically damaged.

“Due to the increase in value-adding activities, price per performance is the name of the game. So, the key to future success is investing in our people to grow in crucial competencies and striving for an innovative and continuous improvement mindset.”

ROBIN MARSHALL

BBJ: The Safety and Motion (SAM) business area you head has manufacturing and R&D facilities in Budapest and Veszprém. What does Continental do at each Hungarian site?

MM: Continental has 12 locations in eight cities in Hungary, including our two SAM sites, which have a vast portfolio in electronic manufacturing and related product and software development. Our two facilities here focus mainly on innovative electronic brake systems and associated sensors.

In Budapest, we have an industry 4.0 pioneer manufacturing plant with additional R&D teams. In Veszprém, beyond other activities, we’re developing brake systems from scratch, testing them on our own test track, and also manufacturing these innovations.

Special Report | 15

Matthias Matic business area I am responsible for achieved global sales of around EUR 6.8 billion. Budapest and Veszprém have significant contributions globally when it comes to innovation. The Budapest plant is a state-of-the-art facility with a unique competency in rolling out industry 4.0 solutions in manufacturing. In Veszprém, beyond software and product development, testing and manufacturing of brake systems and sensors, our colleagues also provide engineering services for the global automotive industry. Furthermore, outside SAM, Continental has an innovation hub, our largest AI center, in downtown Budapest working on autonomous mobility.

BBJ: What did you say to the Hungarian management team during your visit here? What needs to be done to improve the competitiveness of the Hungarian locations?

MM: I expressed my appreciation to our colleagues for their excellent contribution to our global efforts. We discussed where they need to focus in these transformational times and reviewed the future of the automotive industry in general. Due to the increase in valueadding activities, price per performance

is the name of the game. So, the key to future success is investing in our people to grow in crucial competencies and striving for an innovative and continuous improvement mindset.

BBJ: SAM is part of Continental’s automotive business, where you are a board member. A lot of the attention here is on automated driving and electric vehicles. EVs are already present (and the Hungarian government has made the sector a priority investment area); automation is a work in progress. How do you see them developing?

MM: In the upcoming years, autonomous vehicles will change the industry’s understanding of mobility. The market for assisted and automated driving will continue to grow, and global safety regulations intensify every year, which results in a growing need for solutions in this field. We are already driving forward the increasing degree of vehicle automation with safe, supportive, and complementary full-stack system solutions and respective functionalities for assisted, automated, and ultimately autonomous driving in the future.

BBJ: What part do you think Continental will play in this future in Hungary?

MM: During this journey, we count on the excellent performance of our Hungarian locations. As the role of software will further increase in future cars, the added value of our sites here will also improve. Besides the best-inclass production and R&D capabilities of our two local SAM facilities, another key player for our global market success will be our Budapest-based autonomous mobility hub. In terms of production, we apply the “in the market, for the market” principle; therefore, Hungary will be one of our key European manufacturing locations for many more sensors, brake systems and automotive electronics.

BBJ: Finally, a more personal question: what is your credo, and how does it manifest in your leadership?

MM: You can summarize my credo in three aspects: Be humble, be honest, and be prepared. “Be humble” means being aware of my strengths and weaknesses, recognizing and rewarding the achievements and accomplishments of the people I work with, and being eager to improve myself. I consider authenticity an essential characteristic, and the first component to it that I live is honesty. “Be honest” represents the behavior of being transparent in every situation and the openness to share my opinion and perspective, even if it is an unpopular one. “Be prepared” allows me to shape my view and opinion upfront, being fast with decisions by making the best out of every task.

It is also an appreciation towards the people with whom I work. Being prepared is an excellent basis for finding the best solution faster and getting the required things done.

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Special Report

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Continest Delivers Collapsible Containers Into Ever-expanding Market Busy building his company, Continest CEO Vidor Kis-Márton, didn’t take a summer holiday from 2016 until last year. It was an investment that today is reaping its rewards.

KESTER EDDY

Based in Székesfehérvár, 65 km southwest of Budapest, Continest manufactures collapsible containers.

Under Kis-Márton’s guidance, revenues

They had discovered what he now terms the “preliminary life” of Continest. [See box for the genesis of the foldable container].

Kis-Márton and Tegzes felt they were onto something. In a world that was seeing an ever-increasing number of events, each needing temporary, secure space and accommodation, they reckoned the potential demand for collapsible units, rather than the classical solid box, had to be huge.

The pair tracked down Rob van den Berg, bought the design from him, and, recognizing their lack of engineering knowledge, invited the Dutchman to come on board as technical adviser.

“That was one of the most important decisions we made. He’s been with us since 2016,” says Kis-Márton.

Water in the Desert Continest CTO Rob van den Berg (left) and Continest CEO Vidor Kis-Márton. more than doubled to HUF 3.88 billion in 2022, and it looks set to repeat the feat to hit HUF 9 bln this year.

Its current complement of 86 employees is expected to produce

2,000 containers

this year, of which 80% will be exported, primarily to the United Kingdom, Scandinavia, Germany, Australia and the United States. Continest has come

a long way in a relatively short time, but it started with a chance meeting.

“In 2016, me, Dáni [co-founder Dániel Tegzes], and Máté [a business colleague] did this tour of Hungary, looking for business opportunities. And one of the stops during the trip was a company that, at that time, was an infrastructure supplier to Sziget Festival. They were dealing with power generators, fencing, everything, and using collapsible containers,” Kis-Márton recalls.

The tiny outfit entered 2017 full of enthusiasm but with an empty order book. But they were in luck. That year, Budapest was hosting the female water sports world championship.

“You know the sporting appetite of the Orbán government, so it was an open budget, meaning that they just sucked away every temporary infrastructure on the market, so Sziget and the other organizers were left with nothing. We came to the market with this new technology, and we were selling water in the desert,” says KisMárton. It was to prove a hectic summer.

“It was a real garage business. We were pretty clueless about what we were

PRESENTED CONTENT

InfoGroup: Built on Time, and Built-to-suit The privately held Hungarian real estate developer InfoGroup is pursuing what it says is a distinct strategy compared to many of its competitors in the Hungarian market.

BBJ STAFF

“We are not active in the Budapest industrial-logistic market, which is the largest in Hungary. We rather think of ourselves as a regional player, which means in our case that we are active in central and eastern Hungary,” explains Balázs Czifra, director of sales, asset management, and business development at InfoGroup.

If you want to pin that more precisely on the map, the developer is operating in Kecskemét (about 90 km southeast of Budapest by road), near the Mercedes factory, in Miskolc (180 km northeast of the capital), at Polgár (178 km northeast), Tiszaújváros (176 km northeast), and Karcag (170 km east).

“In our case, we are operating within our landbank. The first thing we do is acquire a site, as we did in Kecskemét,” Czifra notes. Indeed, seeing the likely need for component suppliers to be near the Mercedes factory, InfoGroup built up what the director says is the largest landbank around the city, although it has since sold some of that off.

“We create an industrial park environment. So, like many of the cities around Hungary in the past, we buy land and then create a practical industrial zone. What we do extra is that we usually go ahead with planning a ‘speculative’ building, a standard-use industrial hall, that we often complete for letting purposes. Otherwise site purchase, BTS [built-to-suit], BTO [built-to-order] solutions are also possible.”

Speculative and BTS Developments Effectively, InfoGroup’s approach combines speculative and built-to-suit strategies, as its “standard” building design can be made more specific once a client is onboard.

“Built-to-suit, in our case, is not meant to be an absolutely tailormade building. Our BTS concepts are typically converted from a standard logistics building, adding some elements that serve assembly or manufacturing operations, or a larger ratio of social or office elements if required,” the director explains.

Balázs Czifra The alternative use and re-letting potential is a key consideration factor.

It is a flexible approach that, Czifra says, finds plenty of uptake. “There’s a real, I would say, hot market currently in Hungary, simply based on the fact that automotive and e-mobility are currently the top and fastest developing industries in the country.”

The obvious magnates are Mercedes in Kecskemét and BMW in Debrecen in automotive, but there are others.

“Geely’s [Volvo] recent choice of the Kosice area in Slovakia to set up an electric manufacturing plant may, for example, impact Hungarian markets, like Miskolc, which is practically an hour’s drive away.”

Tight Delivery Times InfoGroup is providing a facility for the largest employer in Miskolc. It will be only 12 months or so since the

contract was first signed by the time it is handed over. The developer’s approach is as timely as it is flexible, which is an important consideration.

“Many currently active requirements in Hungary have a very tight schedule because the large manufacturers dictate to OEMs and other suppliers. The deadlines for BMW and Mercedes for example are all set for active production starting mid-2025 or so, and supplier operations should be started a year or nine months beforehand.”

But those tight time frames do not mean a future tenant should worry about the level of ESG compatibility.

“All companies we come across realize that they need to provide a facility that serves the workers on the shop floor and secures a level of comfort for them. We provide a proposal that already includes heating and cooling of the whole area, for example. I highlight that as just one example of a general ESG implication.

We design our buildings above the current standards and regulations.”

Czifra does not claim his company has pioneered this method, but while it was previously a niche approach taken by a few local developers, more significant players are beginning to see its advantages. What sets InfoGroup apart is that it does not sell on its buildings once completed and let.

“We are long-term holders of our properties in all our locations, so it’s somewhat easier for us to make more specialized, more tailor-made buildings.”

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Budapest Business Journal | March 24 – April 10, 2023

doing; we can say that now because those times have gone […]. I personally slept in a locksmith’s workshop for a week when we were building the first set of units for the Volt Festival,” he recalls.

“There were issues with the roof sealing. In summer, there are always thunderstorms, and

80% of our

units were leaking because we just couldn’t solve how to fix the roof. It was unbelievable, super stressful, but we also loved it; it was something completely new.”

The team produced 50 units that year, all for the Sziget or related festivals.

Slowly but surely, the order book grew.

At the end of 2018, the Alpine Ski World Championship in Sweden ordered 122 containers, their biggest and most prestigious contract to that point.

The range of containers on offer also grew, the design team drawing up plans for units to include cooking facilities, showers, and specialist uses, most notably a mobile military shooting range for the military.

In July 2019, needing cash for expansion, the team acquired roughly EUR 4 million from venture capital fund DBH in exchange for a 20% stake in the newly founded Continest Technologies Zrt.

COVID Booster

As with all businesses, COVID played havoc with plans in 2020. Yet, working with partners in the United Kingdom,

instead of supplying festivals and football games, Continest switched to providing testing facilities, vaccination points, and COVID laboratories.

“From May to December, we managed to over-achieve our 2020 business plan by 30% [despite] the fact that in the first five months, there was zero income,” says Kis-Márton.

But after four years of outsourcing the engineering work, it was at this point that the owners decided to invest in their own facilities.

“Using contractors, you have very limited control over the quality, pricing,

and lead times, and growing the business needed all these factors to be under our control. We decided we had the money, we had the skills, and we had the market, so let’s do it,” says Kis-Márton.

In January 2021, operations started at the current site on the eastern edge of Székesfehérvár. Then, in

February

2022,

came Russia’s invasion of Ukraine.

“The war broke out on Thursday, and on Sunday, we had already donated containers to the Knights

Continest: An Idea Made Reality Against the Odds Sometime around 2008, a Dutchman involved in the festival industry looked at the sector and was aghast. All through the summer, containers used as temporary office space were being transported, one by one, from one festival site to another. But for the most part, they contained nothing but fresh air. If they could be folded, a single lorry could take perhaps five containers, significantly saving on costs and reducing the environmental impact of the festival industry.

So, he phoned his brother, Rob van den Berg, and explained the

problem. A mechanical engineer, van den Berg, was more than skeptical. Designing a 20-foot, twotonne steel container that could be collapsed safely, repeatedly, in all weathers, and by untrained workers?

It couldn’t be done. And yet, the challenge wouldn’t leave him alone.

So, van den Berg sat down and attacked the problem.

And so the first Continest container was born, although not under that name. Van den Berg would fabricate 200 units for the Sziget team, but, in 2011, following a dispute, he closed his operation,

Special Report | 17 of Malta, so we have several units in different locations in Hungary near the border and on the Romanian side of the Ukraine border. We’ve delivered containers to the Ukrainian police, the Ukrainian state emergency services, and a pediatric facility for kids,” Kis-Márton lists.

“The interesting thing from our point of view is that, partly because of COVID, and partly because of the war, the demand for our solution is increasing: there are more and more end-users, both military and disaster management.”

coincidentally was also based in Székesfehérvár. The idea went cold until revived by Kis-Márton and Tegzes five years later.

Today, Van den Berg is the chief technical officer with Continest and plans to retire at the end of the year. Does he have any regrets, given that others, to a great extent, have benefitted from exploiting his brainchild?

“No, I don’t care. I don’t have the worries [of running the business].

The guys have done an amazing job setting up this beautiful factory.

It all looks great; it is great, but there are always a lot of worries.

I don’t need those.”

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Siemens at Forefront of Sustainability in Manufacturing Industry The Budapest Business Journal talks with András Simon, energy efficiency expert at Siemens Zrt., about the company’s successes and plans regarding sustainability.

BENCE GAÁL

BBJ: How does Siemens support the implementation of circular economy principles in the manufacturing industry?

András Simon: Siemens is committed to using resources responsibly and recognizes that the circular economy offers highly beneficial opportunities for business, the environment, and society. We want to accelerate recycling and a circular economy. Using software and simulations, our technology offers sustainable approaches for the design phase of products and solutions for both our customers and ourselves. We have developed a new standard for the design of environmentally friendly products that incorporates clear product design criteria and is intended to cover 100% of relevant product families. We also focus on resource efficiency over a product’s entire life cycle. In addition, we promote the decoupling of the consumption of natural resources from economic growth by increasing purchases of secondary materials. One of our commitments is that, by 2025, we will reduce our landfill waste by 50% from the 2021 baseline year.

BBJ: What steps has Siemens taken to reduce the environmental impact of its manufacturing facilities?

AS: Siemens has become a pioneer in digitalization and sustainability by using what we sell. For example, the World Economic Forum has designated the Siemens Electronic Works factory in Germany, which produces 17 million SIMATIC products annually with more than 1,000 product variants, as a Sustainability Lighthouse. It acknowledges the proactive approach to drive the future of sustainable manufacturing with energy and resource-efficient operations. The factory is nearly CO2 neutral. Also, this is the origin of the SiGreen solution: it measures and exchanges CO2 data along the supply chain to obtain a product’s true carbon footprint.

The blockchain-based software is open to Hungarian companies as well. This could help companies on their way towards carbonneutral production and helps eco-conscious customers to choose products based on valid emission data, and thus their sustainability efforts can become a competitive edge.

BBJ: Globally, Siemens plans to achieve a 55% physical CO2 reduction by 2025 and a 90% reduction by 2030. How will the company work towards achieving these goals in Hungary in the next decade?

technologies with advanced analytics and digital services, capabilities that deliver new levels of building performance. In doing so, we help real estate actors meet their strategic and operational goals. One of our latest solutions is the microgrid that helps office parks, communities, and factories manage distributed energy resources, increase energy reliability, and thus save CO2 emissions.

AS: To implement our carbon-neutral program, we have detailed a plan that includes, for example, CO2 emission reductions across the supply chain. Locally, we count on our dedicated sustainability team but also on each of our employees. Our efforts include, for example, nullifying plastic and paper waste and using our energy-efficient solutions in building tech, among other things.

BBJ: How can the company contribute to the energy efficiency and safety of buildings and infrastructure?

AS: We have a network of experts leveraging advanced technologies and building analytics to deliver a comprehensive portfolio of sustainability, e-mobility, and smart infrastructure services. In building management, it’s essential to ensure that properties remain fit for purpose for years to come while managing resources and costs more effectively. We combine the latest

BBJ: What is Siemens’ long-term vision for sustainability in the manufacturing industry, and how do you plan to achieve it?

AS: By combining the real and the digital worlds, we’re helping our customers to accelerate their digital transformation, reinvent their companies and industries, and to become more sustainable. Siemens’ technologies help decarbonize sectors that today account for nearly three-quarters of global greenhouse gas emissions.

Siemens initiated its corporate policy of responsibility toward the population and environment 50 years ago by establishing an environmental protection department.

Some 25 years later, the company presented its first Environmental Report, the forerunner of today’s Sustainability Reports. Sustainability is a strategic pillar of Siemens; our 360 Degree framework encompasses all elements of sustainability, and we follow it at every step.

One quote Ernst von Siemens made in 1971 speaks more than a thousand words: “We also want to preserve a free and intact natural world, which we all need to live a meaningful life.”

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Budapest Business Journal | March 24 – April 10, 2023

Done Well, 4-day Week Could Boost Productivity, Employee Happiness At face value, a four-day workweek looks tempting for the employee, but what about the employer? It could significantly benefit both ends of the spectrum, one expert tells the Budapest Business Journal.

MICHAEL MILLER

The idea of the four-day workweek has been tossed around increasingly in the past few years. Working fewer hours, the arrangement’s advocates argue, is not about working less but engaging in more efficient and productive deep work. But how did our five-day, eight-hour work pattern evolve?

“In 1926, Henry Ford introduced the 40-hour workweek for the employees of Ford Motor Company. He aimed to increase the workers’ efficiency, give them more time to rest, spend time with their families, and engage

News

in leisure activities, making them more satisfied with their work,” Tamás Jagodics, CEO of Cégmenedzser, the developer of an enterprise resource planning (ERP) software, tells the Budapest Business Journal.

Together with the assembly line launched in 1913, the five-day,

40-hour workweek

increased productivity tenfold for Ford. It reduced production time and costs. At the same time, it made Ford’s workplace more attractive to workers and left a lasting impression on how we work today, a century later.

Manufacturing and New Technology

in Brief

Pécs Brewery Launches HUF 800 mln R&D Project Hungary’s Pécs Brewery has announced the launch of an HUF 800 million R&D project to develop a non-alcoholic, low-carbohydrate product line made from organic grain, according to Menedzsment Fórum [Management Forum]. The brewery won a HUF 400 mln grant from the National Research, Development and Innovation Office for the project. Chairman Zoltán Szemerey said the new product could be commercially available in 2025.

Pécs Brewery had net sales revenue of HUF 2.5 billion in 2021, according to public records.

Regional Cloud Sales Growth Expected in Coming Years The sales revenue of the cloud technology market used in manufacturing and trade in the Baltics and Eastern Europe will grow by an average of 16.7% annually between 2022 and 2029, according to market researcher Fortune Business Insights, writes profitline.hu. In its study, which was prepared for Microsoft, it finds that the spread of Industry 4.0 technologies (such as 3D printing),

the strong growth of e-mail marketing, online shopping, and e-commerce, plus extended and virtual technologies that apply reality will encourage the further expansion of the cloud market in the coming years. In Hungary, the sector’s growth may be even higher than the regional average; the development of B2C e-commerce was already the most prominent in the region in 2020.

Another characteristic of the domestic market is the central role of SMEs in the growth of the cloud market.

HUF 3.5 bln for Quantum Information National Laboratory

A consortium led by the Wigner Research Center for Physics, part of the Loránd Eötvös Research Network (ELKH), has won a HUF 3.5 billion grant from the National Research, Development and Innovation Office to develop the Quantum Information National Laboratory, the ELKH said on March 21, according to business daily Világgazdaság [Global Economy].

Partnering with the Budapest University of Technology and Economics and Loránd Eötvös University on the three-year project, the research center aims to establish a local quantum communications network, establish

“In Sweden and Denmark, sixhour workdays are already common in certain sectors and companies.

While labor models can vary by country and industry, there is a general trend of placing increasing emphasis on workers’ quality of life and maintaining a work-life balance,” Jagodics explains.

Such arrangements are not only wellliked by workers but provide businesses offering them with competitive advantages in the labor market and increase economic efficiency.

Growing Feedback

“There is growing feedback that shorter workweeks or consideration for employee well-being benefits not only employees but also companies. Satisfied employees perform better, are less prone to sickness, and are more loyal, which gives companies a competitive edge,” Jagodics adds.

Like its peers across the continent, the Hungarian labor market is a cutthroat environment. Competition is Tamás Jagodics, fierce. With scarce specialized talent CEO of Cégmenedzser and many open positions, a company’s employer brand is a crucial factor in winning over prospects who may have However, there is change on the more than one employment offer on horizon. The four-day workweek has the table. The four-day workweek will become a go-to canteen conversation attract staff, who can work equally for employees internationally. It allows effectively on fewer hours at maintained workers to spend more free time with productivity if companies properly their families, friends and hobbies. automate and optimize processes.

basic physical infrastructure and bring together a group of experts in the field. The project involves almost 80 researchers, some 60 university students, and 50 Ph.D. candidates.

Óbuda Uni Launches EV Battery Manufacturing Course

Budapest’s Óbuda University announced on March 21 the launch of a course in EV battery manufacturing with the cooperation of Samsung SDI, according to portfolio.hu. The English-language course is called “Manufacturing of Automotive Li-ion Batteries” and started in the spring semester. Enrollment is currently open to students in Óbuda University’s mechanical engineering program; it will be expanded to electrical engineering students in the fall semester.

Samsung SDI will offer internships to participants at its battery plant on the outskirts of Budapest.

Schneider Electric Lays Cornerstone of HUF 16 bln Plant

French-owned Schneider Electric has laid the cornerstone of a HUF 16 billion factory that will make medium-voltage distribution equipment in Dunavecse (75 km south of Budapest), according to autopro. hu. The government is supporting the investment, which will create 500 jobs, with HUF 2.3 bln, Minister of Foreign Affairs and Trade Péter Szijjártó said. The plant is expected to start

operating in 2024. Schneider Electric’s VP for power systems and services, Frederic Godemel, said Hungary has a “distinguished role” in the business strategy Schneider Electric is implementing. The firm said earlier that it picked the site because of its proximity to the M8 motorway and the company’s regional logistics base in Szigetszentmiklós, on the outskirts of the capital.

Civita Group Inaugurates HUF 2.5 bln Plant in Monostorpályi

Family-owned Civita Group has inaugurated a HUF 2.5 billion glutenfree pasta and edible tableware plant in Monostorpályi (240 km east of Budapest), according to business daily Világgazdaság [Global Economy]. Civita Group unit Agri-Corn was awarded HUF 1 bln in European Union and state support for the investment, CEO Gábor Vaszkó said. The new factory can process 40,000 tonnes of GMOfree maize a year, Minister of Finance Mihály Varga said at the ceremony.

The group’s pasta capacity will triple, while cooking oil production will reach 150,000 tonnes annually, he added.

Varga said the company’s owners are weighing a listing on the stock exchange. Vaszkó said the pasta plant would turn out 20,000 tonnes of product a year. The edible tableware will replace 500 tonnes of plastic plates and cups annually, he added. He noted that this year, the group targets a 20% increase in revenue over last year’s HUF 5 bln.

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of

300

small and medium-sized business leaders, among whom the fourday workweek emerged as an important pillar.

About one-third of Hungarian entrepreneurs are considering experimenting with or implementing a four-day work week, the Cégmenedzser survey has found. However, only companies with controllable processes may be able to introduce such a working arrangement effectively.

“If a four-day work week were introduced in Hungary, it could make Hungarians happier and allow them to spend more time with their families and hobbies, but few Hungarian companies are currently ready for it. The solution lies in optimizing and automating with software support.”

Photo by Dmitry Demidovich / Shutterstock.com

Pundits opine that if working conditions are good and a company’s operations are sufficiently digitalized and automated, employees can complete the same amount of work in four days that previously required five.

“Unfortunately, the SME sector lags significantly behind large companies in terms of digitalization, which could provide momentum for catching up. In summary, if a four-day work week were introduced in Hungary, it could make Hungarians happier and allow them to spend more time with their families and hobbies, but few Hungarian companies

are currently ready for it. The solution lies in optimizing and automating with software support,” Jagodics says.

Hesitant Approach

The Cégmenedzser survey found that manufacturing companies are hesitant to adopt this work schedule.

“Primarily because I believe it is a company’s strategic issue. It is difficult to imagine that healthcare providers, waste management companies, or bakers would only work four days a week,” Jagodics adds. Recruiting additional talent for the spare days would enable the introduction of a fourday workweek in this industry, but that would bite into the financial bottom line and assumes you could find the necessary staff.

“However, even in these companies, efficiency can be increased, and stress can be reduced if there is ‘order’ in the company, that is, optimization and automation through controlled processes and enterprise management systems,” Jagodics says.

Could a four-day workweek be on the cards for Hungary?

Some companies have completed experiments, and some reports have shown benefits for employees and employers in these cases.

Magyar Telekom, the local unit of German telco giant Deutsche Telekom, launched a four-day workweek pilot project last year. Four teams adopted the arrangement for four months, receiving the same salary. MTel found the pilot so successful that the telco vowed to expand the test to more employees by

August

2023.

But further research and pilots are likely to be necessary before Hungary is prepared to roll out a four-day workweek for everyone.

“However, if large companies take steps in this direction, small and medium-sized businesses must adapt to the new conditions. The wider adoption of artificial intelligence (AI) solutions and the increased digitalization of businesses could significantly assist in implementing a four-day work week, as these measures can significantly shorten work processes,” Jagodics concludes.

INSIDE VIEW

Do not Fall Into a VAT Trap: Manufacturing or Toll Manufacturing Makes a Huge Difference dr. Gellért Menczel-Kiss Partner, Tax advisor LeitnerLeitner Hungary is often mentioned as a country of manufacturers, but there is a significant difference from a tax point of view between manufacturing independently or on demand, when a foreign customer engages a Hungarian firm to make products using the customer’s raw materials.

And it can be expensive to make a mistake in evaluating the nature of the transaction!

Producing goods from the raw materials of the principal is regarded as a service, but it changes the situation if the manufacturer adds its own goods to the finished product. Investigating the volume of the goods from the manufacturer and the exact scope of the engagement is crucial to see whether you can stay within the terms of toll manufacturing and providing a service.

As long as the added goods do not have a significant volume, it is clear that the nature of the transaction is unchanged, and the manufacturer never performs a sales transaction but instead remains within the framework of service supply. But there are no black-or-white answers; transactions should be reviewed on a case-by-case basis, considering the above factors and the intention of the parties.

Namely, it must not be ignored while defining the transaction if the principal is interested in the activity and service of the manufacturer (as in producing goods from its materials or installing and manufacturing the goods of the customer) or rather in the purchase of finished goods which are the products of the manufacturer. A wrong interpretation and treatment might bear significant VAT risks for both parties.

Toll manufacturing as a service is regarded as a general B2B service in terms of VAT, meaning that the place of supply is where the recipient has established its business. Assuming that the customer is a foreign taxable person without a seat or fixed establishment in Hungary for VAT purposes, the place of supply is outside of Hungary, so the manufacturer issues an invoice without VAT with a reverse-charge reference.

Does the manufacturer have any additional obligations in this relation? It is easy to say no, while it is responsible purely for processing and is not involved in delivering either the raw materials or the finished goods.

Nevertheless, even if the manufacturer is not engaged in the transportation of the goods (since it has been concluded that the manufacturer is providing a service), in some cases, it might be faced with a connecting liability.

If goods are delivered by the principal from its premises to the manufacturer for processing, and later these are returned to the principal, that creates no VAT liability in Hungary that would require a tax ID number. The delivery of goods does not require registration either, as those shipments are out of the scope of VAT. Nevertheless, if the products are subject to EKAER reporting in Hungary, in the absence of registration and the tax ID number of the principal, the manufacturer is required to register the deliveries in the EKAER system. Even if the scope of products subject to EKAER reporting has been significantly limited, it is worth checking both the Hungarian VAT status of the principal and the connecting liabilities of the manufacturer; further, within the contractual provisions, those questions should be outlined with task allocations.

Even toll manufacturing may not create a VAT liability for the principal in Hungary under the above-referred circumstances, as, from practice, we know this is not always so. Suppose the client orders goods from external suppliers to be delivered directly to the manufacturer. In that case, the exemption and possibility of nonregistration are no longer available since VAT liability immediately arises. This is also true when the finished goods are not returned to the principal but sold directly to the customer from Hungary.

Thus, as always, such cases require the utmost care and precise administration from all parties. Moreover, in doubtful situations, seeking confirmation from an external party, such as a tax advisor, is recommended.

LeitnerLeitner is one of the most influential tax consulting companies in Central Europe. You may rely on our specialized full-scope VAT package: advice for cross-border VAT issues, optimization of chain and triangular transactions, assistance with audits, and representation before tax authorities.

www.leitnerleitner.com

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

Another tempting factor is the possibility of working remotely.

Hybrid working arrangements have become a decisive factor for employees, and even the most reluctant companies are adjusting to the needs of the market. Cégmenedzser recently conducted an online survey

Special Report | 19

20 | 3

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www.bbj.hu

Budapest Business Journal | March 24 – April 10, 2023

Electronics Manufacturers Ranked by total net revenue in 2021 (HUF mln) no. oF Full-tiME EMployEEs on July 1, 2022

5126 Jászfényszaru, Samsung tér 1.

(80) 726-7864 –

7,021

Flextronics Sárvár Logistics Kft. (A) Flextronics International GmbH (A)

lászló nagy, tamás lászló – –

8660 Tab, Munkás utca 28.

(84) 526-100 legalhungary@flextronics.com

1998

5,470

– Robert Bosch Investment Nederland B.V. (100)

arne Ziegenbein, attila Horváth, Markus karl Heinrich Hildenbrand – –

3000 Hatvan, Robert Bosch utca 1.

(37) 549-100 info@hu.bosch.com

–

2017

A

– Focus PC Enterprises Ltd. (100)

péter tálos Gabriella Pistauer –

2900 Komárom, Bánki Donát utca 1.

(34) 886-055 komarom@emea.foxconn.com

–

✓

1990

4,396

– Continental Automotive Holding Netherlands B.V. (100)

Róbert keszte, Zoltán dapsy – –

8200 Veszprém, Házgyári út 6–8.

(88) 540-100 –

–

–

2001

4,173

– Scintilla AG (100)

lászló Fükő – –

3526 Miskolc, Robert Bosch park 1.

(46) 518-300 info@hu.bosch.com

autoMotivE ElECtRoniCs

Joseph Rhee Sang-Woo Lim, Witsch Gerda –

ConsuMER ElECtRoniCs

(100) –

HousEHold ElECtRoniCs

A

it

1989

tElECoM

addREss pHonE EMail

odM

top loCal ExECutivE CFo MaRkEting diRECtoR

total nEt REvEnuE in 2021 (HuF Mln) oEM

oWnERsHip (%) HungaRian non-HungaRian

CoMpany WEbsitE

EMs

yEaR EstablisHEd

sECtoRs

Rank

aCtivity typEs

1

saMsung ElECtRoniCs MagyaR ZRt. www.samsung.com

1,202,652

–

✓

–

✓

✓

✓

✓

✓

2

FlExtRoniCs intERnational kFt. www.flextronics.com

687,240

✓

✓

✓

✓

✓

✓

✓

✓

1992

3

RobERt bosCH ElEktRonika gyáRtó kFt. www.bosch.hu

646,791

A

A

A

–

–

–

–

✓

4

Cloud nEtWoRk tECHnology kFt. www.foxconn.hu

493,205

✓

✓

✓

✓

✓

–

–

5

ContinEntal autoMotivE HungaRy kFt. www.conti.de

348,536

A

A

A

–

–

–

6

RobERt bosCH poWER tool ElEktRoMos sZERsZáMgyáRtó kFt. www.bosch.hu

326,912

–

✓

–

–

–

✓

3,882

sándor kékesi, – gregory bowling Jabil Circuit Netherlands Hebard, anikó szőlősi, B.V. (98.10), Jabil timothy traud Circuit Limited (1.90) – –

1990

1,980

– Aptiv Global Holdings 2 (Luxembourg) S.a.r.l. (A), Aptiv Services Austria GPD GmbH & Co. (A)

bethany Jacobs appel, Eoin Muldowney – –

9700 Szombathely, Zanati út 29/A (94) 517-800 –

–

2001

1,557

– Enterprise International Holding B.V. (100)

Róbert Hosszu – –

4031 Debrecen, Határ út 1/A (52) 515-400 nora.kovacs@ni.com

A

A

1992

116

– LG Electronics European Holding B.V. (100)

Choi sung sik, kim dong Hyun – –

1097 Budapest, Könyves Kálmán körút 3/A (1) 455-6060 –

–

–

1991

1,579

– AB Electrolux (100)

sándor gönczi – –

5100 Jászberény, Fémnyomó utca 1.

(57) 415-999 –

1994

2,400

– TDK Elektronics AG (100)

balázs József takács – –

9700 Szombathely, Csaba utca 30.

(94) 522-100 hrszombathely@ tdk-electronics.tdk.com

2006

500

– IBM Products Holdings B.V. (100)

ng Chiang Choon, Radácsi Mónika – –

2600 Vác, Deákvári fasor 16–18.

(27) 500-400 info@hu.ibm.com

1997

1,324

– Sanmina-SCI System Holdings LLC (100)

károly Hoffmann – –

2800 Tatabánya, Kóta József utca 2.

(34) 515-600 sanmina.tatabanya@ sanmina.com

✓

1938

281

Széles Gábor, Lakatos Péter, Sinkó Ottó (100) –

péter lakatos, ottó sinkó, gábor széles Gyöngyi Ranczné Rácz –

8000 Székesfehérvár, Berényi út 72–100.

(22) 533-421 vthjogi@videoton.hu

–

1989

64

– Koninklijke Philips Electronics N.V. (100)

Zoltán Mészáros – –

1097 Budapest, Könyves Kálmán körút 11/C (1) 382-1700 zoltan.meszaros@philips.com

1997

217

Faurecia Clarion Electronics Zrt. (100) –

isao Masaki, Frank patrick lionel besson, Csaba szuda – –

2760 Nagykáta, Jászberényi út 116.

(29) 640-100 clarion@clarion.hu

2003

A

– Success World Holdings Ltd. (100)

péter tálos – –

2900 Komárom, Bánki Donát utca 1.

(30) 422-9608 komarom@emea.foxconn.com

7

Jabil CiRCuit MagyaRoRsZág kFt. www.jabil.com

310,945

8

aptiv sERviCEs HungaRy kFt. www.aptiv.com

261,351 (2020)

–

✓

–

–

–

–

–

✓

9

ni HungaRy kFt. www.hungary.ni.com/debrecen

231,952

–

✓

–

–

✓

–

–

10

lg ElECtRoniCs MagyaR kFt. www.lg.com

164,299

A

A

A

A

A

A

11

ElECtRolux lEHEl HűtőgépgyáR kFt. www.electrolux.com

119,552

–

✓

✓

–

–

✓

12

tdk HungaRy CoMponEnts kFt. https://hu.tdk-electronics.tdk.com/

80,015

✓

–

–

✓

–

–

✓

✓

13

ibM data stoRagE systEMs kFt. www.ibm.com/hu

34,460

A

A

A

–

✓

–

–

–

14

sanMina-sCi MagyaRoRsZág kFt. www.sanmina.com

25,619

✓

–

–

✓

–

✓

✓

✓

15

vidEoton Holding ZRt. www.videoton.hu

15,431

✓

–

–

✓

–

✓

–

16

pHilips MagyaRoRsZág kFt. www.philips.hu

13,439

✓

–

–

✓

✓

✓

✓

17

ClaRion HungaRy ElEktRonikai kFt. www.clarion.hu

13,124

✓

✓

–

–

–

–

–

✓

18

FiH EuRopE kFt. www.foxconn.com

609

A

A

A

✓

–

–

–

–

A = would not disclose,

NR = not ranked, NA = not appliacable

✓

–

–

✓

✓

–

✓

✓

2001

3580 Tiszaújváros, Huszár Andor út 1.

(49) 548-500 tis_jabil_info@jabil.com

This list was compiled from responses to questionnaires received by March 24, 2023, and publicly available data. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of press time.

The list is based on companies’ voluntary data submissions. While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, Madách Imre út 13–14, or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

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On a Mission to Promote Jazz in Hungary

On April 26, the 2023 edition of Jazzfest Budapest kicks off with an appearance by smoky-voiced American jazz and gospel singer songwriter Lizz Wright.

The program also includes a rare European appearance by U.S. bassist Stanley Clarke, a founding member of pioneering jazzfusion band Return to Forever and a film score composer, on May 6.

“I realized it was time to level up, think bigger and do something about jazz increasingly taking a back seat in the media and public consciousness. […] It was incredible to me that Budapest, a magical, diverse city with a vibrant cultural life, hadn’t had a major international jazz festival for nearly 15 years.”

DAVID HOLZER

The driving force behind Jazzfest is Attila Kleb, a photographer in his day job for the past 37 years. Kleb became a convert to jazz when he was assigned to photograph Miles Davis in concert in Budapest in 1989. The poster for Miles’ next, and final, concert used one of Kleb’s photographs. Kleb says it was a highlight of his life meeting Miles before that show.

Bitten by the jazz bug, Kleb ran a small CD store selling jazz and classical recordings for a few years.

Although the store was tiny, he organized intimate chamber concerts.

GetCloser Concerts, founded by Kleb and other like minds, was formed in 2014. Since then, it has put on roughly 200 shows featuring some of the biggest names in jazz as well as future stars. Jazzfest itself began in 2021 on, Kleb told me, a sleepless night in November.

“I realized it was time to level up, think bigger and do something about jazz increasingly taking a back seat in the media and public consciousness, despite the fact that there are so many amazing, talented musicians here. It was incredible to me that Budapest, a magical, diverse city with a vibrant cultural life, hadn’t had a major international jazz festival for nearly 15 years.”

That first year, although there was funding from the Capital and National Cultural Fund, Jazzfest organizers

Hungarian Contributions

Hungary has made major contributions to the world jazz scene. For example, through musicians such as Gábor Szabó and jazz players’ perpetual fascination with composer and ethnomusicologist Béla Bartók.

But, today, in Kleb’s opinion, “The whole genre is completely marginalized in Hungary. Only members of a small subculture go to the concerts. Jazz gets no coverage in the media and, sadly, cultural policy acts as if it doesn’t exist. And we still produce outstanding musicians.”

With this in mind, as well as promoting jazz, Jazzfest Budapest features special performances where Hungarian musicians play with world stars and hopefully attract ears to their talent.

Lizz Wright. Photo by Jesse Kitt worked for free. The festival program was enjoyed by a mostly local audience of

Clarke (to be honest, the only names I recognized) Kleb prefers to mention his personal favorites.

“László Dés’ band, the Free Sounds Quartet, is entirely improvisational. They’re followed by a fantastically creative duo formed in January this year. Vietnameseborn guitarist Nguyen Lé and drummerpianist Gary Husband, known from

Kleb is keen to draw attention to the April 30 Jazz Day program of free concerts, officially part of a day of free concerts around the world promoting the genre, finishing with an international gala broadcast live globally. Jazz Day was launched in 2011, by Herbie Hancock and the institute he founded, and is supported by UNESCO. Last year, the finale of Jazz Day was watched by

30

million

viewers. Kleb and his team are working hard to bring the gala to Budapest.

“We’ve had lengthy discussions with global event organizers,” he tells me, and 8,000. “and managed to convince them that our For Kleb, a major achievement this year concept is worth supporting. But we’ve was putting together the team of curators still got a lot of work to do, and we need taking charge of the festival: Miklós major financial support.”

Level Lukács, Tamara Mózes, Mihály Borbély, Until that happens, anyone with open Kornél Mogyoró and Krisztián Oláh. ears can head for Madách tér on April 30 “I’m convinced that with this team, and enjoy music from the Balkan Union, and later John McLaughlin’s band, we’ll achieve major changes and the János Nagy Trio, the Péter Sárik will join Dés and his band for more overcome the challenges somewhat Trio and, finally, the Jazzfest Budapest improvisation,” the founder explains. paralyzing and poisoning the domestic Allstar Gala among others. If everything “This is sure to be a fantastic experience, goes as planned, Kleb and his team will jazz scene,” Kleb says. as will be the performance by Mihály stream the event live online.

International Appeal Borbély’s Balkan Jazz Project, which has As the festival has its own ticketing system, invited Mihály Dresch, one of the icons Kleb can see that there are significantly of Hungarian jazz, to play. These two more people coming from abroad than saxophone geniuses will be joined by the last year. This is important to him.

Italian jazz phenom Enzo Favata, who will “It’s vital that the city is not dominated perform after them. Three saxophones!” by party tourists, but that cultural Kleb continues, “Stacey Kent will be tourism is given as much weight as joined by the Danubius Orchestra to pay possible, as it enhances the value tribute to the work of Antonio Carlos Jobim. of the city in our common interest.

Also worth mentioning are the Avishai Check out the Jazzfest Budapest program We trust that the government will Cohen Trio and Stefano Bollani’s piano at jazzfestbudapest.hu. Listen to “Holding welcome this goal with open arms.” concert. Anouar Brahem, one of the Space,” Lizz Wright’s latest album, recorded Asked what he thought would be the biggest stars of the ECM label, will perform live in Berlin, on major streaming platforms. highlights of the festival, apart from the at the Music Academy. This, for me, is a appearances of Lizz Wright and Stanley clear sign of Jazzfest’s mounting prestige.”

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Budapest Business Journal | March 24 – April 10, 2023

Photo by Krzysztof Bielinski

Polish Founder of Bral Acting Method Holds Budapest Workshop The Song of the Goat Theater, a pioneering Polish company, will hold a three-day physical theater workshop in Budapest.

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The workshop from March 25-27 will be on “coordination” exercises that focus on seeking the organic connection and integration of movement and imagination. Led by Grzegorz Bral and organized by the Sarolta Cultural and Public Space, the event will be hosted in the Keres Emil Rehearsal Hall of the Radnóti Theater at Andrássy út 31. The Polish Institute Budapest is sponsoring the workshop.

In addition to creating traditional rehearsal processes and theater performances, the Song of the Goat Theater, founded in 1996 in Wrocław, is committed to researching and innovating theater forms, acting and performance qualities.

According to the press publicity for the event, the company continues the tradition of Polish ensemble theater work and has created “a unique way of performing through a constant exploration of acting craft and vocal and movement technique.” Its actor training method integrates movement, sound, music and text.

“The company is noted as one of the most exciting and innovative in the new avant-garde theater movement in Poland,” the press release says.

Director and Educator

The workshop will be led by director and educator Grzegorz Bral, the founder and artistic director of Song of the Goat Theater and

the Brave Festival in Wrocław and the pioneer of the Bral Acting Method.

He regularly holds workshops around the world; until 2012, he led the MA in Acting program in collaboration with Manchester Metropolitan University, and since 2013 he has been teaching in partnership with the Bral School of Acting in London.

The company continues the tradition of Polish ensemble theater work and has created “a unique way of performing through a constant exploration of acting craft and vocal and movement technique.”

Its actor training method integrates movement, sound, music and text.

Artistic manager Alicja Bral will also participate in the training. She has been working as a dramaturg or literary adviser with Bral and Song of the Goat company composer Maciej Rychły since 2016.

The workshops run from 11 a.m.-4 p.m. and cost HUF 30,000.

After the last day on March 27, a professional roundtable with Grzegorz Bral and invited Hungarian guests will take place at the Polish Institute of Budapest, 1065 Budapest, Nagymező u. 15. The discussion is free of charge.

St. George’s Day Party Returns to Budapest For the second year running, a St. George’sthemed event will bring together the international community in Budapest this spring for “A Feast of English Music.”

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Money raised from the live auction at the St. George’s Day Party on April 22 will go to help children affected by the devastating earthquakes in Turkey and Syria in February and will also help children affected by conflict in Ukraine via the Hungarian National Committee of UNICEF.

In addition, money raised through the raffle will benefit a food bank for Ukrainian Refugees in Hungary.

Organizer XpatLoop.com invites guests to “Enjoy a great variety of English music and refreshments at this social networking party marking the Patron Saint of England, in the good company of friendly expats and cosmopolitan locals from Hungary’s business and cultural circles.”

St. George is the patron saint of England and several other countries (Hungary also recognizes him as Szent György), and this will be a special year for Brits as it will also see the coronation of King Charles III. Commenting on last year’s event, Désirée Bonis, the Ambassador of The Netherlands to Hungary, said, “The St. George’s Day Event was a true hommage to English music and a cultural highlight in the Budapest spring season. Thank you to the team at XpatLoop for a fabulous evening!”

Guests of Honor this year again include British Ambassador Paul Fox, Ireland’s Ambassador to Hungary Ronan Gargan, Antónia Mészáros, the executive director of UNICEF Hungary, the Rev. Frank

community together in Budapest to extend the bonds of friendship and support charity in an enjoyable way.”

Event refreshments include English whisky and gin by Cotswolds, a cocktail bar thanks to Sándor Zwack, local wines, beer, plus a range of Coca-Cola products.

To keep costs down and make event tickets as accessible as possible, Shakespear Recital this is no formal black-tie dinner; Since Shakespeare is believed to have instead, there will be a cheese and been born on St George’s Day, there wine reception plus a buffet, including will be a brief recital of a famous English favorites like fish and chips. piece of his work by Alexis Latham, Linfitt told the Budapest Business founder of the local theater group Journal, “It’s interesting that Scallabouche.

England’s patron saint wasn’t actually A second live music performance English, and personally, I like that will come from the party group “Just he’s a truly international figure. I Show Band,” and DJ Woods will spin appreciate everything St. George English dance hits later in the evening. stands for, the courage to face There will even be an “Anyone for adversity to defend the innocent, and Cricket?” sports corner dedicated to he has an important unifying quality.” the bat and ball game distantly related to baseball.

Stephen Linfitt, the publisher of For more information and to XpatLoop.com, is English but notes reserve tickets or tables, that nationality “is an accident see the xpatloop.com website. of birth” and that the goal of the evening is “to bring the international Hegedűs, the priest at St. Margaret’s Anglican Church in Budapest, and Ambassador Bonis.

Event highlights include a David Bowie tribute led by Rob Robson, who XpatLoop.com describes as “one of the most sought-after David Bowie tribute artists,” having performed across Asia, Europe, and the United States.

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Budapest Business Journal | March 24 – April 10, 2023

Chamber of Commerce Corner German-Hungarian Chamber of Commerce and Industry (DUIHK)

Crises as an Opportunity and Katona illustrated how UniCredit Bank Keeping Motivation High had achieved more sustainability. For Sustainability, changing supply chains, example, it has implemented a Mummy is and the contributions of female leaders Back program, allowing mothers to work in times of crisis were the topics of the part-time or remotely after maternity Female Business Leaders Conference, leave. According to Mária Kirchner, organized on International Women’s sustainability and CO2 neutrality is also Day by the women@duihk network of a question of the product portfolio at the German chamber, together with automaker Audi. The company already DialogUngarn. The event, supported produces several electric vehicles and

by UniCredit Bank, the Hungarian plans to expand its range to 30 electrified Business Leaders Forum (HBLF), and models by 2025. At the Győr plant, the Association of German Women the carmaker already uses renewable Entrepreneurs (VdU), focused on energies on a large scale. Jessica Liepelt demonstrating how female leaders have (liepelt.design) from VdU Westphalia tackled challenges in times of crisis. came from Germany. She emphasized Mariann Peller, founder of the Virtuosos that sustainability also means respect classical young talent competition for resources. That is why her company and keynote speaker, described produces in the EU and Turkey, not in the challenges in the early days and in Asia, and the offices are heated with the internationalization of her company, steam generated during production. which is now active in 11 countries.

Another panel discussion, moderated In a panel discussion moderated by

by Hedvig Szakács (SZPH Consulting Dr. Marie-Theres Thiell (DialogUngarn), and VP of DUIHK), focused on the four women reported on their companies’ vulnerability of supply chains. Andrea efforts on the road to sustainable business. Agárdi-Nyárai reported that her company Zsuzsa Elek (ESG Solutions) emphasized Fath sells machine components produced that mounting ESG regulations increases in China only in Asia, while products for pressure on companies. Rita Mayerné the European market are manufactured

within the EU. Tamara Vass from the DIY retailer Praktiker and Valéria Gergely from the pasta producer Gergely Gasztronomi agreed that in crises, it is a matter of reacting quickly to the changes, but also of cohesion within the company to emerge from difficult times in the best possible way.

Marie-Theres Thiell’s interview with Andrea Solti Istenes, country chair of Shell Hungary and president of HBLF, focused on the question: Does the crisis strengthen female leadership? Solti clarified that it is not about having the same number of skirts and trousers in the company: diversity is needed to cultivate different leadership styles and qualities. The role of a manager in a crisis is to keep the employees’ motivation high and give them energy, but of course, also to ensure that the company’s goals are achieved. But they are also human beings, so paying attention to their own resources is essential.

11th Information Day: Workshops and Consultations The 11th DUIHK Information Day offers information on current economic opportunities, trends, and framework conditions in Germany and Hungary in thematic workshops. In individual consultations, guests will get answers to personal questions directly from DUIHK experts. Focus topics are trends in the labor market, securing skilled workers, and solutions for sustainable energy management in companies.

When: April 6, 9 a.m. • Where: DUIHK offices, Lövőház u. 30, 1024 Budapest

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This regular section of the Budapest Business Journal features news and events from the various international business chambers. For further information and to register, visit the website of the organizing chamber.

If you have information for inclusion on this page, send an email in English to editorial assistant Annamária Bálint at annamaria.balint@bbj.hu

British Chamber of Commerce in Hungary (BCCH) BCCH Annual Meeting: May 17 As this is an election year for the British chamber’s board and chairman positions, sending a representative is compulsory for BCCH member companies, but the post-vote reception is open to all and represents a prime networking opportunity with the vast majority of the Chamber’s membership and diplomatic circles represented. If you work at a BCCH member company and wish to stand for a twoyear term on the next board, you can submit your application via the chamber website.

When: Wednesday, May 17, 4-8 p.m. • Where: Kozmo Hotel Suites & Spa, Horváth Mihály tér 17, 1082 Budapest • Cost: Attendance at the event for up to two representatives per company is free for chamber members, while entry for non-members to the reception costs HUF 15,000 + VAT.

Canadian Chamber of Commerce in Hungary (CCCH)

French-Hungarian Chamber of Commerce and Industry (CCIFH) Economic Outlook for Hungary 2023 The CCIFH hosted its “Hot Topic” business breakfast on March 7, with Barbara Botos, Ambassador-at-large for Climate at the Ministry for Energy, on future energy sources, at the Kempinski Hotel Corvinus Budapest.

After greetings from László Károlyi, president of our chamber, and Ágnes Ducrot, its director, Botos spoke about the future of energy policy and the energy of the future. She said the era of cheap energy is over; the priority is to reduce import dependence and exposure while serving the rapidly

growing industrial needs. She dressed the picture of the existing infrastructure, pointing out that electrification is the new challenge for the industry and decision-makers.

The focus is also on further promoting energy diversification, including clean coal, natural gas, wind energy, geothermal and biogas/biomass opportunities, as well as solar power.

These issues were further discussed in a round table with company representatives from the sector: Equans, Ereco, Legrand, Sagemcom, and Weco-Travel.

CCCH and Equilibrium Institute The CCCH Business Breakfast with Equilibrium Institute will discuss the state and future of the Hungarian economy in 2023. Zsolt Becsey, a senior economist at the Equilibrium Institution, will provide insights on various topics, including the impact of the international energy market on the local economy and potential economic risks and opportunities for this year and 2024. The Equilibrium Institute regularly publishes economic forecasts to aid decisionmaking for economic actors and public policymakers. Based on its most recent data, Hungary is expected to align with European trends, albeit with potentially lower growth and higher inflation.

As an independent think tank in Hungary, the Equilibrium Institute strives to revitalize the nation’s political discourse. To this end, it develops comprehensive future visions for the political, economic, and cultural landscape and formulates detailed policy proposals and strategies. It engages in discussions with influential political, economic, and cultural figures, advocating for implementing its proposed policies and offering expert assistance.

When: Monday, April 3, 10-11:30 a.m. • Where: KPMG Global, 1134, Budapest Váci út 31. • Cost: Members, HUF 17,900 (incl. VAT); nonmembers: HUF 26,900 (incl. VAT)

Swiss-Hungarian Chamber of Commerce (Swisscham) Upcoming Swisscham Hungary Events: Swisscham HR Café: Motivate to retain employees Round table discussion for company managers and HR professionals, exchange of experience & ideas, knowledge sharing.

When: Friday, March 31, 9 a.m.-noon • Where: Nevis Security Kft., Bókay János utca 44-46, 1083 Budapest • Cost: members free; non-members HUF 15,000 / person (0% VAT)

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