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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