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Update No: 057

The Hungarians are doing rather well right now. The economy has suffered temporarily because of the current crisis, tourism being right down, but in other respects is doing fine.
The Hungarians are worried about an exodus of workers from Transylvania to Hungary to take advantage of its more vibrant economy. They used to rule the whole region, with the Austrians, in the Austro-Hungarian Empire. There are almost two million Hungarians in Transylvania, a relic of the Treaty of Trianon, co-signed with the Treaty of Versailles in 1919. This has created a huge problem.
The Hungarian Prime Minister, Victor Orban, and his Romanian counterpart, Adriane Nastase, in early January agreed to resolve the dispute in an amicable fashion. By the end of June there should be a status-law in place to adjudicate disputes.
The Hungarian economy has been growing so well of late that it can probably weather the coming EU-wide downturn better than most. Growth of GDP of 4% in 2001 came this year, after 4% growth in 2000. Industrial output, which grew by 18.3% in 2000 rose by 6.5% in 2001. 
Whatever the immediate prospects the longer term perspective could hardly be rosier. Budapest is developing as the hub for foreign investors in its region, drawing on its rich tradition of entrepreneurship and education, technical innovation and openness to outside influences. It is one of the most cosmopolitan cities in Europe and yet still reasonably cheap for the foreign businessman or tourist. Budapest is of course one of the architectural wonders of Europe, with a magnificent location athwart the Danube.
The government of the Fidesz-led coalition under premier Viktor Orban is doing what it can to attract further investment and keep the economy in a modernising mode. 
In November it finalised a HUF 200bn programme of infrastructure investments, partly financed by off-budget funds from the EU. Projects will include new road and rail links and environmental overhaul.
The drawbacks to current policies of modernisation are that they involve a lop-sided development, leaving the east and south rather out of the frame, and an unemployment rate of over 10% of the work force concentrated in those backward regions. The neighbours in these regions, Ukraine and Romania, are less advanced than those to the west and north. 
Finance Minister Mihaly Varga has initiated an idea that would accentuate the two track development problem, but is a good one all the same, to merge the three bourses of Budapest, Prague and Warsaw. This bold conception would clearly align Hungary even more to the successful economies to its north. The country is on schedule to become 'a little Pannonian tiger'by 2015 when its per capita GDP is expected to reach the EU average. A success story in the making.

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AGRICULTURE

Government adopts new agricultural loan system

The cabinet has expanded the Szechenyi Plan [government's medium-term economic programme] by a new chapter adding a new agricultural loan system, which includes family farms and individual farmers working on less than 300 ha, and legally registered small and medium-size entrepreneurs, Hungarian Radio has reported.
Three kinds of loan criteria were established, the first one is for buying land, the second to set up premises, create plantation and to purchase equipment, the third is for loans for fixed current assets.
Family farms can apply for loans to buy land without any capital. To acquire land up to 100 ha is possible with a no interest loan, when buying land larger than 100 ha, 50 percents interest rate support will be given.
The loan can be a sum between 1m and 300m forints over a period of five to 20 years... 
The government tasked the [state owned] Hungarian Development Bank with working out the loan system and providing the money and it was given 22.6bn forints state guarantee to do this.
Besides this the government set aside a so called green-loan worth 13.3bn forints for the autumn and spring sowing and 3bn forints to facilitate quality production support... 
In his reaction to the government's announcement, HSP [opposition Hungarian Socialist Party] Chairman Laszlo Kovacs, has said that the problem in agriculture is not the lack of loans but the fact that a debt of 300bn forints has been accumulated and this cannot be settled with new loans...

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BANKING

OTP Bank awards Unisys hardware supply contract

OTP Bank will collaborate with Unisys Magyarorszag Kft for the supply of hardware for the formers project to implement a SAP system, which is valued at hundreds of millions of forints, Hungary Around the Clock quoted OTP deputy CEO, Gyula Papp, as saying. Meanwhile, Unisys CEO, Gabor Fekete, noted that despite that his company is a long-term supplier of OTP, it was obligated to submit a bid for the contract. "OTP first wants to implement a bank card management system at its latest purchase, Slovakia-based IRB Bank, most likely by utilising its idle capacity in Hungary," Papp said.

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CONSTRUCTION

Kerepesi project to start in March

The construction of the Kerepesi Entertainment and Shopping Centre, the largest ever mall development in Budapest, is expected to start in March, sources close to the project said recently.
The mall will be developed by French real estate developer, Bouygues, on the site of the current trotting and flat racecourse on Kerepesi ut in District 8. Set to be completed by the end of 2003, the first phase will include development of the local infrastructure and construction of the mall, while in the second phase an office building and hotel will also be built on the site, the Budapest Business Journal reported recently.
According to the plans, the ground area of the site totals 300,000 square metres, including a 250-room hotel and an office building with a gross area of 30,000 square metres. The underground and above-ground levels of the entertainment and shopping centre will have a gross floor space of about 190,000 square metres.
The mall's net retail space will total 45,000 square metres, which is calculated - unlike in most shopping malls - excluding the floor space of service shops, such as dry cleaners, and the storage area of the individual shops. The mall will have between 3,500 and 4,000 parking places and will have direct traffic connections to Kerepesi ut.
Architecture firm, Kasib Kft, prepared the plans for the complex. Besides the Kerepesi centre, Kasib also prepared plans for the wholesale, trade and exhibition complex Asia Centre, the largest ongoing commercial real estate development project in Budapest, which is under way in District 15.
Although the project was given the green light by local authorities earlier last year, the development of the Kerepesi mall could not start earlier because of the operation of the racecourse, the sources said. Along with the mall construction, the racecourse will be moved next year to a new location in District 10, called the Kincsem Park.
The sources added that there has been a legal dispute between Bouygeus and a minority owner of the Kincsem Park site, which the company hopes to settle by March. According to market rumours, the dispute was fuelled by German real estate developer, ECE Group. The rumours indicated that ECE fears revenue losses at its Arkad Shopping Centre, which is soon to open with a main access route passing by the planned Kerepesi mall.

Borsod Power Plant says it will switch to wood fuel

Borsod Power Plant will cease using coal for fuel in 2003 and take up wood instead, Hungary AM quoted AES Borsod Energetics Kft CEO, Gyorgy Vecsi, as saying. Switching over to wood fuel will cost the company's US-based owner US$10m. The switch must be carried out because the company cannot afford to run on coal any longer. If it fails to use wood, the plant will shut down in two years time when the current delivery agreement is set to terminate. Under the scheme, 280,000 tonnes of fast-growing wood will be burned each year. The wood fuel will yield 200 gigawatt hours of current per year.

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FOOD & DRINK

Unilever to expand remaining plants

Following the sale of its frozen food plant, Unilever Hungary Kft, the local subsidiary of the UK-based food and household products giant, will continue to expand its four remaining plants in Hungary, reports the Budapest Business Journal.
Unilever Hungary President, Chris Bull, announced the plans recently, following the signing of the final contract for the sale of Unilever's frozen food plant in Baja to local canning company Globus Rt.
Unilever also announced recently that it would sell its professional, institutional and industrial cleaning division, DiverseyLever, to Johnson Wax Professional. The sales are part of a global strategy switch, whereby Unilever will focus on key earnings-generating businesses.
Unilever is currently implementing an Ft 1bn (US$3.5m) development project at its margarine plant in Budapest. Unilever has invested €280m in Hungary to date. Unilever margarines have a local market share of more than 70%, according to figures of market researcher, Amer Nielsen, though margarines only account for 20% of the group's overall sales in Hungary. The ice-cream division, which has a market share of 60%, produces 10% of Unilever's total sales revenues in Hungary.
Unilever has a local market share of 40% in household and personal care products, a 30% share in both dental hygiene and deodorant product, 50% in savouries and 40% in dressings.
Unilever Hungary, which is also in charge of Unilever's activities in Croatia and Slovenia, projected a 13% sales increase to Ft 85bn for 2001. Last year the company reported consolidated sales of Ft 62.6bn, including Ft 13.2bn in exports. It posted after-tax profits of Ft 2bn in 2000.

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INDUSTRY

New power tool plant for Miskolc

German electronics group, Robert Bosch GmbH, is planning to develop a power tool plant in Miskolc, Hungary, Miskolc Mayor, Tamas Kobold, and Bosch Power Tool unit President and CEO, Alfred Odendahl, said in a joint statement, reports New Europe. Effective from 2003, the new plant will produce between 3-3.5 million tools each year. In the initial stage, Bosch will invest €16.5m for the greenfield project. According to press reports, the municipal authorities have offered a 22-hectare area equipped with public utilities for the project. More than 500 people will be engaged to work at the plant. "In the framework of a long-term programme, the company would relocate its product development and research branch to the city," Bosch Power Tool Co., executive, York zu Putlitz, said. 

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PRIVATISATION

APV says 2001 revenues to reach HUF 50bn

Hungary's State Privatisation & Holding Co. (APV) announced that last year's revenues should amount to HUF 50bn, according to Bluebull. The figure comprises HUF 36bn from the sale and use of assets.
APV's portfolio has also been changed, with its current value at about HUF 700bn. One of the biggest changes to the portfolio has been the transfer of APV's ownership of 12 agricultural enterprises to the state-controlled Hungarian Development Bank (MFB). By end-March 2001, the agency divested its last holding in Budapest Bank, a stake of 23.7%, which was purchased by GE Capital for HUF 6.1bn. Another HUF 18.2bn was generated from the stake of CD Hungary to Magyar Ingatlan Befekteto Kft, a regional property group and a member of the OTP group.
In January, a 50% stake +1 vote sale in pharmaceutical distributor, Hungaropharma, to a consortium of leading pharmaceutical makers and pharmacists could generate another HUF 4bn for the agency's revenues by end-2002. This will only come about if the Competition Office gives a green light to the deal.

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SCIENCE & TECHNOLOGY

ComGenex revamps MiniReactor instrument, GSK keen

Hungary's ComGenex Inc., said it has redesigned and modernised its MiniReactor ™ combinatorial and high throughput synthesis instruments, according to PR Newswire. The newer instruments will be sold on the commercial market. Created by ComGenex as part of the group's ComGenex Matrix Technology™ (CMT) high throughput synthesis approach, the MiniReactors were introduced to the market three years ago. Leading British pharmaceutical group, GlaxoSmithKline (GSK), was the first to receive the modernised devices.
"We were pleased that GlaxoSmithKline recognised the relevance of our synthesis technology and the impressive specifications of these newly redesigned instruments," ComGenex's CEO, Laszlo Urge Ph.D., said. "This is another example of how our clients and partners can benefit from our integrated technology and solutions in a wide range of service portfolio." 
David Emiabata-Smith Ph.D., team leader of the laboratory automation at GlaxoSmithKline added: "We have had much success with this reactor in the past and given the increasing interest in its application within GlaxoSmithKline we were keen to incorporate these new devices and extend our synthetic capabilities."
The MiniReactor is a profitable component of ComGenex and is a good research tool for leading global research groups.

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TOURISM

HVB to take over Malev's half of five-star hotel

Hungary's newest and fifth largest bank, HVB Hungary Rt, will soon become half-owner of Budapest's seventh busiest hotel, the five star Hyatt regency Budapest, the Budapest Business Journal reported recently.
HVB said recently that it will acquire a 50% stake in Pannonia Hotel Kft, the company that runs the 351-room hotel, from Malev Hungarian Airlines Rt. The three companies announced the transaction plus hotel chain Pannonia Hotels Rt, which holds the other 50% stake and is owned by France's Accor Group.
HVB signed the contract in December after Malev failed to find an investor in a tender that started in March. It is expected to complete the payment before the end of 2001, according to Olivier Granet, Pannonia Rt's financial director.
Market players said that Malev, which is selling the hotel as a divestiture from non-core assets, could collect US$20m-US$25m from the deal. Executives at the three contracting parties would not disclose the sale price, citing a confidentiality agreement.
"I will not comment on biased articles concerning the price," said Granet.
Both Granet and Ferenc Kementzey, head of prime corporate clients at HVB, indicated that there is an agreement between the two parties over ways to deal with HVB's 50% stake.
"HVB is a cooperation partner of Pannonia," said Kementzey, without elaborating on what is included in the partnership.
"The two entered in the deal as partners. But I will not comment on the nature and contents of the agreement," said Granet.

Tourism industry expanding, others profiting too - Matolcsy

Hungarian Economy Minister, Gyorgy Matolcsy, told the parliament's tourism committee recently that the state has seen much growth in the tourism industry and many other industries have profited from that as well, reports Hungary Around the Clock. 
"Tourism revenues reached US$4bn last year, resulting in a record US$2.5bn surplus," Matolcsy was quoted as saying. "The tourism industry could boost its revenues four-fold within the next nine years with the support of the Szechenyi plan." The Szechenyi plan ear-marked about HUF 30bn for the tourism industry in 2001, including another HUF 120bn in investments throughout the entire region, the minister said.

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