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HUNGARY


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 82,805 65,843 51,900 41
         
GNI per capita
 US $ 6,330 5,280 4,830 67
Ranking is given out of 208 nations - (data from the World Bank)

Books on Hungary

REPUBLICAN REFERENCE

Area (sq.km)
93,030

Population 
10,032,375

Capital 
Budapest

Currency 
Forint 

President 
Ferenc Madl

Private sector 
% of GDP
 
60%




Update No: 094 - (24/02/05)

Hungary has a new premier in Ferenc Gyurcsany, a politically young man at 43, who is turning into a decided, if perhaps ephemeral, success. Twelve months are due before the next parliamentary elections in Hungary in April 2006. The ruling Social Democrats are trailing the centre-right opposition, Fidesz, by some 12-15 points in the polls; but Gyurcsany is determined to confound those who think that they are likely to be out of office in just over a year.
A property and manufacturing tycoon who was a communist youth leader in the 1980s, Gyurcsany vowed his Cabinet would be much more decisive and establish a markedly left-wing tone. "I envision a left wing which has the courage to be outraged by social injustices and has the strength to do something about them," Gyurcsany said in an interview in the daily newspaper Nepszabadsag. "Our government stands by the principle there should be more responsibility taken above and more opportunities below."
The leader of Fidesz is Victor Orban, former premier and with a striking resemblance to his namesake, Viktor Yushchenko, in Ukraine. Fidesz only lost by a narrow margin in 2002 and are, therefore, sure favourites to win in 2006, given that any government in a transition economy, facing enormous problems, is bound to disappoint.
If one wanted a foreign comparison for Gyurcsany, it would be Tony Blair; but the Blair of the late 1990s, when he was sweeping all before him, not of the bedraggled mid-2000s. 

Improving relations with Romania 
Gyurcsany is a great believer in forging alliances abroad, as was Blair, first with Clinton, then Bush. Romania is undoubtedly the top priority. Bilateral relations between Hungary and its southern neighbour, Romania, have long been strained. This is not least due to the fact that Hungary lost land to Romania after the First World War at the treaty of Trianon, namely the largely mountainous territory of Transylvannia (of Dracula notoriety), which has a Hungarian minority of approximately two million. 
Gyurcsány has announced a historic departure that his government will hold joint cabinet meetings annually with Romania in order to help its neighbour join the European Union and "ease the historic burden" of the two countries' relations. On January 17th, the premier met with his Romanian counterpart Calin Tariceanu in Budapest where they held a joint press conference. The two said the first joint cabinet meeting will take place in the fall of this year.
"It is not only an opportunity, but also a duty of Hungary in the upcoming years to support Romania's European Union entry," Gyurcsány said. "All debates must be kept within that framework." On January 17th, speaking to Hungary's international press, Tariceanu said, "My meeting with Hungarian officials is symbolic of the special partnership between Hungary and Romania, two countries now reaching a new period - the end of transition from communism. This period is now characterized not by the problems of the past, but by our future common projects, such as bilateral political and economic issues." 
Tariceanu, who formed his coalition cabinet just only a month ago, chose Hungary as his first foreign visit since taking office - itself seen as a symbolic gesture. "I have to underline that we highly appreciate the input Hungary has given in the recent past to help Romania join the EU and engage in the negotiation process," he added. Romania is hoping to join the EU in 2007. Gyurcsány said the Hungarian government would not blackmail Romania by holding out the prospect of vetoing its EU entry, as suggested by the opposition. "I would not like to toy with the idea of vetoing - as the opposition does - Romania's EU entry, sending a message to the Romanian Government that Hungary is one of the 25 EU members in a position to say no," Gyurcsány said. 
Following the failed dual citizenship referendum in Hungary on December 5, the topic of citizenship for ethnic Hungarians abroad and Gyurcsány's provisional plans for a national visa for ethnic Hungarians were also discussed by the two prime ministers. Tariceanu told press that since this issue of visa plans was raised the Romania Government has asked for more information and an official answer has now been given. It is now up to officials from the Romanian ministry of foreign affairs to examine this and better understand what Hungary is proposing, he said, indicating that any plans are only in their infancy. 
Tariceanu also touched on the subject of autonomy, and said he favoured greater autonomy, but not on the basis of ethnicity. "We need a new mentality. Hungarians or Romanians are citizens of equal rights and responsibilities. For me, there are not two categories of Romanian citizens." 

Gold mine or gold dust?
Another topic the Romanian premier was keen to respond to was Hungarian concerns over the planned gold mine at Rosia Montana. The mine, if built, will extract over 300 tons of gold and 1,600 tons of silver. 
The Hungarian public and environmentalists are anxious not to see another spill such as the one in 2000, when a Romanian gold mine in Baia Mare spilled cyanide into rivers and destroyed 30-40% of the flora and fauna in the river Tisza. The accident created toxic pollution 200 times the maximum safe limit. Romania has pledged to involve Hungary in the official licensing process of the mining project. "The project is in an initial stage and a study of the possible impact of the project has been ordered and we await these results. The ministry of environmental protection will analyse this project from the perspective of EU legislation." 
The prime minister acknowledged that the mining project has also been questioned in Romania, where the media raised questions concerning environmental impact, archaeological heritage and the "origin of the money invested". Tariceanu said that these issues were more than enough to warrant an attentive analysis of the project. When questioned about houses being levelled on the mine site and the suggestion that the project was in fact already underway, Tariceanu said, "The project has not in fact started, but the land has been purchased. 
"At present it is more like a real estate project than a mining one." The project, he said, cannot continue past this initial land purchase stage until it receives the "necessary clearance" following results of the commissioned study. 

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AUTOMOBILES

Linamar deals with Opel


Auto parts maker Linamar Hungary Rt announced on January 6th that it has entered into an agreement with Opel Hungary Powertrain Ltd, regarding the financial compensation for a HUF 3bn order cancelled by Opel last year, the Budapest Business Journal reported. 
Gyorgy Furqr, Linamar CFO, said that while the exact amount of the compensation is treated as trade secret, the forecasted significant losses arising from the lost order have been reduced. Furar warned that the amount received should not be considered as profit as it will only be enough to offset the effect of asset and stock write-offs.

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AVIATION

Malev to save on younger fleet

Hungarian Airlines Malev withdrew its last Boeing 737 Classic on January 3rd, as part of a replacement project aimed at considerable savings on maintenance and operation, the company's technical director was quoted as saying by MTI recently. Viktor Hajso said Malev had started replacing its aircraft in 2003, reducing the fleet's average age from 9 to 3 years, adding that the operation would result in a 15% drop in maintenance cost saving the company HUF 1.5-2bn (€6-8m) a year. Cost of operation is also expected to go down by 15%, leaving an annual HUF 7bn (€28m) with Malev, the director said.
So far the company has returned 12 Boeing 737 Classic planes on lease from International Lease Finance Corp (ILFC) and from another leasing firm. Classics are withdrawn to be replaced by Boeing 737 Next Generation, of which Malev currently leases 18 from ILFC, the first was received in January 2003 and the last to be handed over next March. Despite rumours that the emergence of European low-budget airlines has caused a shortage of pilots to Hungary's airlines company, Malev pilots are even loaned to some foreign companies, including a Chinese airline, the company's communication chief said.
Over the last few weeks only a few of the more than 300 Malev pilots quit the company to work for other airlines, Krisztina Nemeth told Nepszabadsag, dismissing rumours that Hungary's EU entry and the spread of no-frills airlines had led to a shortage of highly qualified pilots in the company. "Although Malev has felt the impact of market liberalisation, it will not become short of pilots in the future either," she said.

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CONSTRUCTION

KESZ closes 2004 on high note

Hungarian construction company KESZ Kft ended a very successful 2004 with turnover increasing 16% year-on-year and pre-tax profit rising 28% on 2003 figures, the Budapest Business Journal reported recently. 
The trend is expected to continue in 2005, as a number of promising orders have already been received, said KESZ spokesman Gabor Morva. In 2005 the company will construct a campus costing HUF 4bn commissioned by the Szeged University of Sciences, providing accommodation for over 1,000 students. KESZ will also be entrusted with the operation of the new facilities.

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ENERGY

MOL finds new oil & gas discoveries in Pakistan

Hungarian oil and gas concern MOL on January 10th announced that it had made a new discovery of oil and gas in the Tal Block, located in the Northern Western Frontier province of Pakistan, Interfax News Agency reported.
Hydrocarbon exploration has been carried out in this block since 1999 by a consortium of companies including Oil and Gas Development Co Ltd (OGDCL), Pakistan Petroleum Ltd (PPL), Pakistan Oilfields Ltd (POL) and Government Holdings Ltd (GHPL), with MOL as an operator of the joint venture.
MOL has a 10% interest in the consortium. Exploration activity already resulted in a discovery (Manzalai-1 well) in December 2002, and following the first discovery, the consortium decided to continue the exploration in the block. Seismic acquisitions performed in 2003 resulted in another attractive geological prospect, so the consortium decided to drill a new exploratory well (Makori-1) in 2004. "The well tests are in progress and the well has already produced significant volumes of oil and gas," MOL said.
So far the tests of three zones proved the presence of hydrocarbon, with test results showing a combined 1179 bbl/day condensate production and production of 688,000 cubic metres of gas per day. "Testing of the remaining prospective zones is in progress. After that the consortium will be conducting further extended tests to evaluate the size and economic potential of the reserves," the statement added.

Vertes ends retrofit project

The Hungarian state-owned Vertes Power Plant inaugurated on January 13th a new desulphurisation unit at its Oroszlany power plant (western Hungary), thus completing a three-year, HUF 20.4bn retrofit project, Interfax News Agency reported.
The retrofit included an upgrading of Oroszlany's furnaces as well as its main machinery, while the combined capacity of its four generating blocks was raised to 230 MW. As a result, the lifespan of the power plant has been extended until 2020. The second phase of the project included the building of the desulphurisation unit for HUF 8bn, which will help nearly eliminate harmful gas emissions, and bring environmental performance in line with EU levels. The plant accounted for nearly 40% of the country's SO2 emissions in recent years. Vertes CEO, Vilmos Hollo, said the company financed the developments mostly from loans, with the state providing a HUF 10.3bn guarantee.

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INFORMATION TECHNOLOGY

Axelero expands server hosting site

Axelero Internet, the ISP subsidiary of the Matav telecom group, has more than doubled its server hosting capacity and targets dynamically growing sales revenues from its server hosting division in the coming year, the company announced recently, New Europe reported.
Axelero opened, a new, 405 square metre server room in its Budapest Adatpark server hosting site on January 12th, which can hold up to 2,000 servers in addition to the 650 already located there.
Axelero currently has a 26% share of the Hungarian server hosting market, while sales revenues from the segment reached HUF 192m (US$948,000) in 2004, up from HUF 123m in 2003. Of Adatpark's current clients, some 50% come from the IT industry, while the rest are from the financial, commercial and content providing sectors. The company's largest clients include content provider Publishing Factory Kft, which operates the online editions of several daily newspapers and commercial TV stations; IT firm Kirowski Rt; and online advertising provider Adverticum Rt, which places one billion ad banners on Hungarian websites each month.
In addition to the new server room, Axelero has also widened the bandwidth available at its Adatpark facility. The server hosting site is now hooked up via 10 Gbps connections to Matav's IP backbone network domestically, while international connections are provided by a 622 Mbps connection to Matav parent Deutsche Telekom's international backbone network, a 1 Gbps connection to Telia's international network, and a 155 Mbps connection to Vienna-based hub VIX.

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TELECOMMUNICATIONS

Risks seen in Matav's new bid

Hungary's largest telecom, Matav Rt, is likely to acquire Montenero's state telecom company, but this might not be a very advantageous deal for Matav and needs to be followed by some larger buyouts, analysts said recently, the Budapest Business Journal reported.
"Matav has a good chance of acquiring the Montenegrin incumbent, though it could end up paying a bit over the odds," said Monika Tabanyi, an analyst at Concorde Securities Rt.
Matav offered €114m for a 51% stake in Telekom Crne Gore (Telekom CG), said Branko Vujovic, head of Montenegro's Restructuring and Foreign Investment Agency, Reuters News Agency reported.
Matav's bid also included investment funding of €67m over the next five years, as well as a promise to buy the remaining 49% of Telekom CG from small shareholders.
Matav which is owned by Deutsche Telekom announced in late December 2004 that it had submitted a binding offer in the public tender process for the sale of shares in Telekom CG.
Tabanyi said her estimates put the fair purchase price of the stake at around €100m. "The reason begind Matav's highest bid is that it has a proven track record in restructuring inefficient telecoms though its ownership of (Macedonian telco) MakTel, and it can afford it without too much of an impact on dividend payments," said Tabanyi.
"Montenegro has a population around one-third of that of Macedonia or Budapest, and its sales are one third of MakTel's" she noted. "The acquisition would add just 3% - 5% to Matav's overall sales."
Montenegro's incumbent fixed-line operator serves around 191,000 customers. The company generated standalone revenues of US$72.1m, with EBITDA of US$22.8m, in 2003.
There are not many potential add-on acquisitions around for Matav, Tabanyi said.
"Mobtel (the mobile wing of Serbian Telekom, Srbija) has an insufficiently transparent ownership structure for Matav, though this might change. MobilTel in Bulgaria looks to be going to Telekom Austria. There are not many incumbent operators left to buy," she said.
Last May, Szabolcs Szikszai, then an analyst at Takarekbank Rt, said that Matav may be readying a bid to buy Telekom Srbija.
"Matav's primary target could be Telekom Srbia. The sale of Telekom CG is likely to reveal potential buyers of Telekom Srbija," Szikszai said at that time.
Serbia has a population of approximately 10 million, while Montenegro has just 620,000 inhabitants.
The tender board will pass on the list of bidders to Montenegro's privatisation agency for approval, and talks will start with the best bidders in due course. Officials disclosed that the buyer will be chosen on the basis of both its cash offer and its business and social program. The cash element will count for 75 points during the assessment of the tender, while business and employment plans will carry 25 points.

Pannon taps Ericsson for 3G

Hungary's number two mobile operator, Pannon GSM Rt, is paying telecom manufacturer Ericsson Ft 5bn as its main partner for the first part of the construction of Pannon's high-speed, third-generation mobile network, the Budapest Business Journal reported.
"Winning the biggest 3G licence allows Pannon to offer the broadest bandwidth to its customers," said Ove Fredheim, CEO of Pannon. Unlike its rivals, Pannon secured a 3G licence which also contained extra 2G frequencies.
Under the contract, Ericsson will supply equipment providing the core infrastructure of the UMTS-based mobile telecommunications system, said a joint press release for the companies. Third-generation services are expected to be widely available in Budapest in the second half of 2005, and the network will be rolled out to other parts of Hungary in late 2005 and early 2006, said the press release.
Pannon used Ericsson's rival Nokia for the construction of much of its 2G network, and the Finnish company will still have a role to play in the network development.
"Nokia has been our partner on 2G for a long time and we continue to work with Nokia, which will also work with us on our 3G network. Ericsson is the major partner," explained Dora Somlyai, communications director at Pannon.
The UMTS radio network delivered by Ericsson is a future-proof solution, since it is already prepared for the migration to HSDPA (high-speed downlink packet access), a faster network than 3G, added Fredheim.
Pannon and Ericsson also signed a contract on the upgrading of Pannon's GSM EDGE network - a technology also known as 2.75G. In separate news, market rumours recently implied that France Telecom-owned mobile giant Orange is buying Pannon from Norwegian owner Telenor. This was strongly refuted by Somlyai at Pannon.
"Our owner is in more of a buying mood than a selling mood. With Pannon performing well, there is absolutely no reason for Telenor to sell Pannon," said Somlyai.

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TRANSPORT

NABI meets bus sales target

Hungarian busmaker NABI sold 349 buses in the fourth quarter of 2004, bringing total sales for the year to 1,227 units, 7% more than in the same period last year and in line with the company's target of 1200, NABI announced in a recently statement. Sales in the United States were level at 686 units, while UK sales increased by 77 buses or 17.4% to 519 units. NABI also sold 22 buses on the Hungarian market in 2004, compared to 19 in the base period. The group plans to build some 1,000 buses in 2005. NABI has received fixed orders from customers in the US for 522 buses and approximately 1,700 buses could be ordered under options, the company said. "Overall, the US transit bus market remains flat due to macroeconomic pressures and the uncertainties over future engine emission technologies," NABI noted. The public transport industry continues to be challenged by budget issues at the state and local levels of government, which comprise an increasing share of funding for new buses and rail systems.

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