Best Prospects
Automotive
1) Overview
In recent market investment news, carmaker Daimler is opening a new EUR 800 million plant to produce Mercedes-Benz compact car models. The company will receive a usual incentive package for investors who build new factories in Hungary, including tax breaks, training allowances and cash back. Daimler said its decision was based on Hungary’s stability, infrastructure and workforce, as well a means to boost its competitiveness and gain access to the potential of growing Eastern European markets.
Overall the market for automobiles in Hungary has expanded robustly since the mid-1990s, helped as incomes have risen and credit has become more available. In 2007 the value of imports from Hungary to the U.S was over US$365 million compared to over US$87 million in U.S exports to Hungary in the automotive sector. The automotive sector is one of Hungary's core industries and contributes 20 per cent of total exports. Over 600 companies employing a total of 110,000 people are active in the sector.
2) Best Prospects / Services
Hungary is home to a large automotive components industry, as well as some assembly plants. Carmaker Suzuki is the market leader with 21 percent, but U.S. automakers are also faring well. GM’s Opel and Chevrolet brands comprise over 18 percent of the market, while Ford has a 14 percent market share in passenger cars market but Ford is a market leader brand in Hungary for light commercial vehicles under 3.5 tons.
Other advantages for investment in the automotive sector include:
 | World class training and education of engineers in 5 major cities |
| Lower wages compared to Western Europe combined with the highest productivity rates in the region |
| Potential logistics or production hub due to its ideal location in Europe with direct access to the Balkans and Eastern Europe |
| Can supply the manufacturers and the customers in whole Europe |
3) Opportunities
The average vehicle age in Hungary is 11.2 years; many of these vehicles will need to be replaced. Demand for less expensive, small compact cars (engine sizes of 1,200-1,600 cubic cm) looks promising, as these are Hungary’s biggest sellers.
U.S. automotive brands enjoy strong image and demand in Hungary. But a faster growing market is that of automotive after-market products that improve a car’s appearance, comfort, output and security, which contributed to 70 percent of U.S automotive exports to Hungary.
| American-style accessories like chrome wheels, seat covers, spoilers, and racks. |
| Alarm systems and security devices are big sellers due to car thefts till being a major problem in Hungary. |
| Products like specialty metal, engine parts, AC systems, automotive-related chemicals, exhaust and ignition systems and diagnostic products |
4) Events
| Budapest Motor Expo: 03/11/09 to 03/15/09 (Annual) |
5) Resources / Links
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Information Technology
1) Overview
Recently EU ministers announced that Budapest will host the headquarters of a European Institute of Innovation and Technology, beating out prospective sites in Germany, Poland and Spain. The institute is meant to improve European innovation and plans to link academic and industrial research from around the 27-nation EU, concentrating on the fields of energy, climate change and information technology.
The Hungarian market represents almost 20 percent of the Central Eastern Europe IT market and 1 percent of the European IT market. In 2007, Hungary’s IT exports to the U.S. topped more than US$1.3 billion.
Several multinational companies have located manufacturing and service operations, as well as European headquarters and R&D centers in Hungary. Many foreign IT companies, including HP-Compaq, Nokia, Siemens and Ericsson, have established a long-term presence in Hungary and have relocated their research and development activities here.
2) Best Prospects / Services
Hungary has grown into one of the major players in hardware production in Central and Eastern Europe and leads the region for computer assembly and communications equipment manufacture. The value of computer production was €2.56 billion, while communications equipment manufacturing was worth €11.41 billion. Major products in the IT market include:
| Office equipment |
| Electric data processing and data communication equipment |
| Software and services |
| Computer equipment |
| Navigational, Measuring, Medical instruments |
3) Opportunities
The Hungarian SME sector represents a large potential for future IT investments. The largest obstacle of IT development in SME’s is the lack of financing. With the help of new financing structures the SME market will be one of the major driving forces behind IT development in the near future. The EU supports development of Hungary’s IT infrastructure through the second National Development Program. EU development funds totaling USD 4.6 billion for 2007-2013 will allow Hungary to increase IT spending by 25 percent.
4) Events
| Infomarket-Infotrend - Date: 09/03/08 to 09/16/08 (Annual) |
| Cable & Satellite Exhibition - Date: 10/14/08 to 10/16/08 |
| MTB Electronics - 2009 - Date: 03/18/09 to 03/21/09 (Annual) |
| Electro Salon - Date: 05/19/09 to 03/22/09 (Annual) |
5) Resources
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Travel & Tourism
1) Overview
According to the Hungarian statistical office, in 2007 over 39.3 million international arrivals came to Hungary. Of that total over 12 million individuals were motivated by tourism, spending over 4.5 million dollars in the tourism sector. Every corner of the country is steeped in art, culture and natural beauty, while wellness, sporting and leisure facilities are never far away. Not only do tourists come for the culture and wellness facilities, but to conduct conferences and business meetings due to the central location of Hungary. In particular Budapest, known as the “Pearl of the Danube,” has adapted to cosmopolitan life without sacrificing its traditions and charms – making it a fascinating and vibrant place to visit. Among the highlights:
| Variety of well maintained pools and thermal spas throughout the country |
| Sailing enthusiasts will find fine yachting clubs around Lake Balaton or Lake Velence |
| Hungarian Golf Association currently incorporates 13 private golf clubs. |
| The Budapest Opera House and the Franz Liszt Music Academy are among the most evocative symbols of this rich heritage. |
| Budapest’s historic castle district offers medieval streets and houses, museums, caves and Roman ruins. |
| One of the largest parliament building in Europe, riverside promenades, flea markets, bookstores, antique stores and café houses. |
2) Best Prospects/ Services
Tourism is a successful economic sector in Hungary with potential for further development. Experts estimate that nine percent of Hungary's GDP currently derives from tourism, accounting for 300,000 jobs. Objectives include increasing foreign and domestic tourism and improving services. Of particular importance are development of conference centers and hot springs as tourist attractions. There are many opportunities in infrastructure development and improving services through construction and management, including:
| Hotels and Resorts |
| Convention, Conference, and Exhibition Centers |
| Reconstruction and development of existing baths and spas |
| Golf courses and holiday villages, especially near existing tourism locations such as Lake Balaton. |
| Shopping Malls |
| Restaurants |
3) Opportunities
The Hungarian Tourism Office hopes to increase foreign interest in areas outside Budapest such as the Danube Bend, the Great Plain, and historical cities like Szekesfehervar, Veszprem, and Pecs. Hungary's National Development Plan will allocate $1.7 billion for the development of tourism in the years to come. The Government of Hungary will offer tenders for construction and development of tourist facilities. Opportunities in expanding services to tourists should increase. Hungary is also a favorable location because 19 countries can be reached within one day, and Hungary shares borders with seven countries - three EU and four non-EU member states - with easy access to travel sites due to an extensive transportation system.
4) Events
| BNV-Budapest International Fair - Date: 09/13/08 to 09/21/08 (Annual) |
| Hoventa - Date: 10/14/08 to 10/17/08 (Annual) |
| Spa & Wellness-Hungary - Date: 11/06/08 to 11/09/08 |
| IFE Hungary - Date: 11/18/08 to 09/20/08 (Annual) |
| Utazas-Tourism Exhibition - Date: 02/09/09 to 03/01/09 (Annual) |
5) Resources
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Logistics
1) Overview
Hungary’s geographic location in Central Eastern Europe plays a critical part in transportation and communication with countries in the Balkans and other European countries. Hungary shares its borders with seven other countries: Austria, Romania, Slovakia, Slovenia (EU nations), Ukraine, Serbia, and Croatia (non-EU nations). Hungary’s logistics network is continually being upgraded and expanded throughout the nation to improve efficiency.
| Currently Hungary’s road network exceeds 160,000 km (99,419 miles) |
| Main highways starting in Budapest link up with the European road network. |
| Railway network covers the whole country with almost 8000 km (4970 miles) |
| Hungary plays an essential part of the international railway network in Eastern Europe and other European countries. |
| The Danube river allows access to the Black Sea and the North Sea, with four major ports in Hungary |
| One main international airport, five regional airports throughout the country |
| 19 countries can be reached within one day, less than 1000 km (621 miles) away |
2) Best Prospects / Services
Logistics and transportation services are one of the seven main industry sectors supported by the state due to an annual growth of 10-20 percent, and which accounts for 4-5 percent of the GDP of Hungary. Improving and expanding road and rail networks is a key goal for the Government of Hungary. The second National Development Plan and the European Development Plan will provide funds to programs that are considered strategically important for the development of Hungary and the 27-EU nation logistical network. The following plans are designated priorities between 2007 and 2015:
| Development of a network of logistics centers and modern, combined transport terminals to increase the share of environment friendly transportation |
| Development of basic infrastructure of public ports on the Danube river |
| Development of international airports with regional importance |
| Use of ITS (Intelligent Transport System) to make transportation of people and goods more effective |
| Upgrading and expansion to four lane highways of current road networks |
3) Resources
Biotechnology
1) Overview
The biotechnology sector has developed significantly in the last few decades to become one of the largest and most experienced markets in Eastern Europe. Many of Hungary’s top scientists work in the biotechnology field, and research is conducted through the Hungarian Academy of Sciences, laboratories at pharmaceutical firms, and many universities around the country. Many of Hungary’s universities have great traditions in offering degrees and advanced education in many specialized fields including engineering, medicine and sciences. Hungary’s vital know-how, world-renowned academic excellence and long tradition in R&D activities contribute greatly to the biotech industry.
2) Best Prospects / Services
In Hungary the main fields of development and application of biotechnology are the following: soils, water pollution treatment, production and processing of biomass, recycling processes, genetic engineering, nanotechnology, molecular chemistry, agriculture and food processing. However, development of the biotech industry has made Hungary one of the leading EU countries in pharmaceutical products, including medical equipment. Large international pharmaceutical companies are among those who have invested in local manufacturing and R&D in the biotech industry, but some small and medium firms operate as well. In 2007, the U.S imported more than US$148 million worth of pharmaceutical and related products from Hungary, and these products make up Hungary’s 7th largest export to the U.S. The Hungarian government supports start-up companies in the biotech industry by offering seed money and by forming biotech clusters around existing biotech companies and university R&D centers.
3) Opportunities
With the active support and commitment of the Hungarian Government, biotechnology now shows dynamic expansion and development. In 2005, the Hungarian Government developed a 5-year National Biotechnology Strategy to advance the biotechnology sector. Other key factors that strengthen the biotech industry include:
| Investment incentives depending on type of products or research |
| Recognized academic research base with strong collaborative ties to universities and companies in the EU, US and Japan |
| Significant FDI into pharmaceutical R&D and manufacturing |
| Intellectual property rights are given to beneficiaries of R&D project funding |
4) Events
| Hungaromed – 11/06/08 to 11/09/08 (Annual) |
5) Resources
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| National Office for Research & Technology (managing the Innovation Fund) |
| Biological Research Center of the Hungarian Academy of Sciences |
Franchising
1) Overview
Franchising in Hungary is still relatively new and underdeveloped, compared to American or Western European standards. About half of the franchises are foreign owned in Hungary, with 25 percent of those franchises being American, while EU countries control the remainder. The Hungarian Franchise Association estimates that there are about 400 franchise systems in Hungary, with fast-food establishments leading the sector. Recently ice-cream maker Häagen-Dazs has announced it will operate a franchise network in Hungary. Other big names include McDonald's, Burger King, Pizza Hut, Kentucky Fried Chicken and Subway, which together operate a total of approximately 140 restaurants, mainly in Budapest. The most successful franchiser in Hungary is McDonald’s, using multiple franchising techniques. Other American franchises include Kott Koating’s porcelain finishing, Eastman Kodak and car rental companies such as Hertz, Avis and Budget. Best Western, Holiday Inn and Marriott are also present in the market.
2) Best Prospects / Services
Relatively high interest rates and limited access to capital force successful franchisers to modify the typical American model to succeed in Hungary. McDonald’s, the most successful and popular fast food franchiser in Hungary, uses multiple franchising techniques, often acting as – in essence – a real estate developer, purchasing land and buildings and assigning a partner to run and manage its restaurants. Another franchising technique frequently used involves the purchase of a master franchise by a company or group of private investors, who then own and operate most or all of the outlets. This is the model used by Burger King, Pizza Hut, and Kentucky Fried Chicken. Industry experts suggest that the best franchising models for the Hungarian market are home-based, lower capital franchises that focus on well-educated, highly motivated Hungarians who have a natural inclination toward entrepreneurship but lack financing. They might be well adapted to such businesses as car washes, equipment and home maintenance, laundry and cleaning services, among others.
3) Opportunities
The greatest opportunities are available in the service sector because the Hungarian government encourages small and medium size enterprises (SME) to play a major role in its development. As part of Hungary’s National Development Plan, SME development and growth is a priority. Within the SME development program, some subsidies are available directly from EU funds to both franchisers and franchise licensees. To apply for funding, the franchise partner and master licensee, can be a local entrepreneur, an American-Hungarian joint venture, or foreign owned company, and must establish a company and register with the Court of Registration.
4) Events
| Franchise & Business Opportunities Expo-Hungary - Date:11/06/08 to 11/08/08 (Annual) |
5) Resources
Pollution Control
1) Overview
Hungary’s inauguration into the European Union has tightened pollution standards in the country. These new requirements and standards have created new opportunities for environmental technology and service providers. In 2006, total investment in the environmental sector was US$961 million, or 4.4 percent of total investment in Hungary. The environmental sector has about 2,000 firms, mostly SMEs and micro-sized companies, employing roughly 20,000 people; the Ministry of Environment expects employment to increase to 40,000-50,000 by 2010.
2) Best Prospects / Services
According to Hungary’s Central Statistical Office, wastewater treatment now accounts for 43 percent of all environmental spending, waste treatment for 17 percent, air quality about 14 percent, soil and groundwater quality 11 percent, protection of landscape and nature for 8 percent, noise pollution 4 percent. U.S. firms are active in the Hungarian pollution control market, primarily in project management and consulting. However, U.S. companies interested in the Hungarian market should strongly consider partnering with a local firm. The local partner will be able to provide information on local business practices, pertaining rules and regulations, the decision making process and provide technical assistance. Stiff competition exists in this sector from Hungarian, as well as German, French, Italian, Japanese and Scandinavian firms.
3) Opportunities
The Environment and Energy Operational Program (KEOP) is one of the operational programs of the 2007-2013 New Hungary Development Plan, aiming to promote sustainable development in Hungary. The key pollution control project areas anticipated to receive both Hungarian Government and EU funds are:
| Waste management (prevention, re-use and recycling, and environmentally friendly treatment) |
| Wastewater treatment |
| Protection of groundwater (main source of drinking water in Hungary) |
| Improvement of drinking water quality (building out water treatment technology, switching to other water bases, switching to other water supply systems. |
4) Events
| Okotech - Date: 11/14/08 to 11/17/08 (Annual) |
| Renexpo Budapest - Date: 04/16/09 to 04/18/09 (Annual) |
5) Resources
Renewable Energy
1) Overview
Hungary is unique in the EU since it uses more natural gas than oil, but still relies considerably on Russian oil and gas exports. Hungary supports the fact that the country has a huge potential for renewable energy use, especially in solar, biomass and geothermal energy production. From 2001 to 2006, renewable energy production increased by almost six times in electricity production and by 1.5 times in heating. Hungary hopes to triple its reliance on renewable energy by 2020, mostly from smaller power plants.
2) Best Prospects / Services
| Bio-fuel: A market for bio-fuels is emerging in Hungary, as evidenced by recent investment moves. Hungary hopes to achieve bio-fuel production of 200,000 tons per year, up from 70,000 tons. Sales of bio-fuels receive a tax break and sales of petroleum fuel containing no bio-fuel will be subject to a tax penalty in order to bring Hungary up to date with an EU directive specifying that 0.4% of all vehicle fuel consumed should be of biological origin in 2006, increasing to 4% by 2010. According to published plans in various phases of completion, 20 factories (15 bio-ethanol and 5 bio-diesel) are to be built within 4 years. |
| Biomass: Energy from plants represents currently the largest source of renewable energy in Hungary, accounting for almost 90% of all renewable production, with over 10 large biomass plants across the country. Possibilities for heat production stem from a strong agricultural environment and a supply chain supported by a developed transportation network. Total biomass potential is around 350–360 million tons, of which 1.8 million tons (0.3%) are used currently. |
| Biogas: Hungary has significant agricultural production and could become an efficient biogas producer. Hungary will increase its biogas production four or fivefold in the next three to five years due to stricter EU regulations for agricultural waste handling. While only 10% of potential was exploited in 2005, the role of biogas is expected to increase most in the coming years. |
| Geothermal: Due to the relative thinness of the earth’s crust and a large supply of thermal springs, Hungary has fantastic opportunities for the use of geothermal energy. There are over 3,000 thermal springs of various quality throughout the conuntry, over 200 of which are used by spas and baths. Eight potential sites have already been identified for electricity production with total heat production capacity of 255 MW and electricity production capacity of 79.6 MW. |
| Wind Energy – Solar Power: Investments, Hungarian and foreign, in large-scale wind turbine developments, above 1,500 MW, are strongly encouraged. Return on investment has shortened to seven years, offering producers stable business opportunities in Hungary. Solar power is relatively undeveloped but is expected to grow in the coming years. Newly introduced subsidies are expected to encourage households to install solar panels. The Japanese company Sanyo has been producing PV panels in Dorog since 2004 and expects to double production by the end of 2008. |
3) Opportunities
The Government of Hungary hopes to extend incentive packages to companies investing in renewable energy sector in order to increase output of renewable energy. Hungary's Energy and Environment Operative Programme earmarked USD 500 million to support renewable energy-related investments for the period from 2007 to 2013. The government will also channel over USD 200 million in EU development funds into renewable energy projects in biomass, biogas, and geothermal energy. Funding for investments in renewable energy sources of all types is supported by the EU. With cooperation opputunities with universities and support from the EU there are strong research and development capacities in the Hungarian renewable energy industry.
4) Events
| Okotech Date: 11/14/08 to 11/17/08 (Annual) |
| Renexpo Budapest Date: 04/16/09 to 04/18/ (Annual) |
5) Resources