After a long last day in Paris, we arrived to our hotel in Budapest on Tuesday June 1st around 10:30 pm. The Budapest Marriot was probably the best hotel in our trip.
Our first stop in Budapest was the Hungarian Investment & Trade Development (ITD) agency. The ITD is a government body set-up to encourage foreign investment in Hungary.
Brief overview of Hungary: Hungary is a small country with a population of only 10 M people. The financial crisis had a strong impact on Hungarian economy resulting in a negative GDP growth in 2009. We were told that Hungary expects a positive 0.6% growth in 2010. Being in the eastern part of Europe, the average wages are much less than in those cities we visited before. Average wages here are about 700 Euros per month and unemployment is currently high at 10.5%. Lastly, Hungary is not in the Euro Zone and their currency is called the Florent (HUF). We all certainly had a tough time trying to figure out the value of goods in dollar terms. However, Hungary would like to enter the Euro Zone but does not meet the inflation criteria and the debt-to-GDP ratio.
New Government: Since we were visiting a government agency, we all felt a strong pro-Hungarian outlook during the entire presentation. It was a bit ironic when we visited ESSCA during our last meeting in Budapest where we were informed about the poor economic condition of Hungary. ITD has very high hopes of the new government and some of the goals of this government were to create new jobs, focus on SMEs, and attract investments in the financial services, R&D, and manufacturing industries.
Rationale for FDI: Some of the reasons highlighted in the presentation were:
- Higher Education – 90% of students speak English
- # of patents per capita is highest in the region
- Industrial parks encourage growth of foreign companies
- Low corporate tax rate
- High quality of life as compared to some developing Asian countries
- Strong presence of major US companies including GE, IBM, Morgan Stanley, CitiBank etc
- Investment schemes, EU-regulated cash subsidies, & tax allowances from ITD
ITD markets itself as a one-stop shop agency for FDI in Hungary. The main services of ITD are to:
- Help foreign companies in the decision making process including finding locations, finding suppliers etc
- Help during implementation of plan
- Help in the operation phase of the company
The speaker also spoke about the strong automotive & the electronic sector and briefly touched upon the recent Daimler Mercedes investment in Hungary. So our first meeting in Budapest was a typical, very optimistic government agency trying to convince us of the benefits of FDI in Hungary. It was a good start for subsequent discussions in Budapest as we were better informed about the trends & rationale of FDI in Hungary.
We then did a small city tour before heading to our next meeting at EGIS PLC - a pharma company.
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