Hungary:
The Ideal Location for Investors
Miklós Merényi
State Secretary for International Economic Relations
April 2007
Agenda
• Hungary in Europe
• Factors of the favorable business climate
• Incentives
• Bilateral economic relations
• Opportunities for Canadian companies
Hungary in Europe
Factors of the Favorable
Business Climate
Economy
Capital attraction
Location
Infrastructure
Productive, qualified,
available workforce
• Dynamic macroeconomic growth,
favorable real exchange rate
• Highest FDI stock per capita in the region
• Hungary: a bridge between East and West,
4 Pan-European Corridors
• Well developed telecommunication and
highway infrastructure
• The highest labor productivity in the region,
motivated and qualified workforce is available
Economic policy
1. Austerity package
Tight fiscal policy
Convergence plan  € introduction 2010-2014
2. Deep structural reforms
Healthcare, public administration, education, public transport
3. Effective use of EU funds
New Hungary Development Plan
€ 23 BILLION EUROPEAN UNION DEVELOPMENT FUNDS
FOR 2007-2013
MAIN OBJECTIVES
 Sustained growth:
 Increasing
competitiveness
 Extending economic base
 Developing business
environment
 Expanding
employment
 With the incentives of
creating more and better
workplaces
PRIORITIES
 Economic development
 Infrastructure
development
 Social reform
 Environment and
energy development
 Regional development
 State reform
Hungarian Macroeconomy
GDP
Output
Employment
and wages
• Av. growth rate over 4.0% in the last 10 years
• Industrial boom: 10% y/y growth by 2006
• Export growth reached 16.6% in 2006
• Unemployment rate : 7.5% in 2006
• Unit labor cost decreased over 10% in 2006
• Stock of FDI grew by 19% in 2006
Investments
FDI Inflows to Hungary
62 236
5 500
70 000
4 500
3 500
USD million
60 000
50 000
2 500
1 500
500
-1 500
40 000
Equity capital
Reinvested earnings
Other capital
H1 2005
30 000
H1 2004
2004
2003
2002
2001
2000
1999
1998
1997
1996
-2 500
1995
USD million
-500
20 000
Stock of FDI in Hungary
10 000
Source: National Bank of Hungary
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
0
Hungary - The Natural
Regional Logistic Centre
Central location in Europe
Border with 7 countries and 4 EU, 3 non-EU member states
Three international major road corridors and the Danube cross
Hungary
Innovation-logistic ring around Budapest
Zahony the Reloading centre between narrow and wide railway
system
Easy access to the Balkans and Europe
13 logistic centres are located in the focal points of the
international movement of goods.
High Labor Productivity
Productivity
GDP per person employed (in purchasing power standards)
80
Hungary
Czech Republic
Slovakia
Poland
60
50
2006
2005
2004
2003
2002
2001
2000
1999
1998
40
1997
EU-25 = 100
70
High Quality Labor Pool
•
•
Number of higher education institutions: 69
Number of students in higher education: 424160
– Faculty of Natural Sciences: 21 524
– Faculty of Medicine:
9 836
– Faculty of Pharmacy
1 436
– Faculty of Health Care
12 085
Budapest
164,105
Miskolc
14,130
Debrecen
23,403
Veszprém
9,680
•
Number of graduates in 2006: 57 162
Pécs
31,705
Pécs
Szeged
30,942
University Towns
90% of the students speak English
All diploma with foreign language certificate
and computer skills!
Source: Ministry of Education and Culture, 2005/ 2006
Competitive Labor Costs
The labor costs of the output lags behind that of other CEE countries
Labor costs of the production of
one unit of GDP, 2005*
0,50
0,61
0,54
0,50
0,45
Czech
Republic
Germany
Hungary
Austria
Poland
0,56
Slovenia
Source: Calculation of Ministry of Economy and Transport
* Approximate values, in case of Austria indicator is originated from 2004 figure
Incentives
1. Tender applications in the framework of the New Hungary Development
Plan ( II. National Development Plan) co-financed by the EU VII.
Framework Program 2007-2013
2. Special incentive package for strategic investors
The Hungarian Government prepares a tailor-made incentive package
3. Development Tax Benefit
4. R&D expenditures deductible from solidarity tax base
5. Subsidy for employment creation and training
6. Special support programs for R&D activity: National Office for Research
and Technology
Hungarian-Canadian
Bilateral Trade
300
250
200
Export
150
Import
100
Turnover
50
0
2004
Million USD.
2005
2006
Canadian Investors in Hungary
Priority Sectors
of Our Investment Policy
• Biotechnology
• ICT sector
• Automotive industry
• Shared service centers
• Logistics
• Specialized tourism
• R&D
• Innovation
• High added value
• Knowledge based
economy
Opportunities for
Canadian Companies
Main sectors for investments
» Automotive
» Electronics
» ICT
» Service sector (SSC, call center)
» Biotechnology, life sciences
» Logistics
» Construction sector (PPP)
» Real estate development
modern services
MÁV Cargo is a modern company with a
decisive role in Hungary, providing the
basic rail transport services flavoured with
variety of value-added services and
operating in a strategic network in Central
Eastern Europe.
HUNGARY’S NO1. FREIGHT FORWARDING PARTNER
Revenue: HUF 93 billion
13,000 wagons
3,170 employees
Pre-taxation profit:
EBIDTA: HUF 6.1 billion
HUF 2.8 billion
46.8 million tonnage
Subject of the privatisation
The MÁV Cargo group
 assets owned by MÁV Cargo
 subsidiaries of MÁV Cargo
 business opportunity
Buying MÁV Cargo, the investor obtains the dominant
market share, client relationships and the know-how of the
company
– approximately 90% market share in the Hungarian rail
freight business
– approximately 700 clients
– access to the broad-gauge network of the CIS countries
– qualified professionals
MÁV Cargo’s development and ability to provide highlevel transportation services in Hungary are key
factors for the current shareholders
There are no investor preferences by the seller, all
kinds of investors are invited to the bidding:
–
–
–
–
both
both
both
both
financial and professional investors
rail and road haulage companies
Hungarian and international investors
EU and non-EU investors
Two round process
Consortiums are accepted
The owner wants to take both professional and financial
considerations in to account
The winner will be the applicant giving the best proposal
over all conditions
The transaction should be closed by the end of 2007
Thank you for your kind attention!
Miklós Merényi
State Secretary
for International Economic Relations
H-1055 Budapest, Szemere utca 6.
Phone: (36 1) 374-2824 Fax: (36 1) 312-3268
E-mail: [email protected]
Internet: www.gkm.gov.hu
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