Investing in Hungary a good decision

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• Investing in Hungary a good decision
• János Róbert FÜLE
• Director
• Hungarian Trade Office, Taipei

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H U N G A R Y Land 93,030 km² Population
10,080,000 people GDP (2004) USD 100,742 million

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• Favorable Investment Environment
• FDI Growth as the Main Focus of Government Policy
• Investment Incentives

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1. Favorable Investment Environment

• Dynamic macroeconomic growth
• Hungary a bridge between East and West,4
  Pan-European Corridors
• Highest FDI stock per capita
• The highest labor productivity in the region
• Well developed telecommunication and highway
  infrastructure
• HUF fluctuating within a narrower range than that
  of the neighbors currency

Economy
Location
Capital attraction
Productivity
Infrastructure
Real exchange rate
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1. Favorable Investment Environment Dynamic
macroeconomic growthserves as the base for
favourable investment conditions
Euro billion
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1. Favorable Investment Environment
Hungarian labour force is outstanding in the
region
Source Eurostat
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1. Favorable Investment Environment The labour
costs of the output lags behind that of the rivals
Source Ministry of Economy and Transport
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Four Corridors Crossing Hungary
1. Favorable Investment Environment
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1. Favorable Investment Environment
Eastern extension of Corridor V.
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1. Favorable Investment Environment
KOSICE
V
Tornyosnémeti
LVOV, KIEV
Tisza
Miskolc
BRATISLAVA, PRAHA
IV
Emod
Nyíregyháza
Parassapuszta
V
VIENNA
Polgár
Eger
Duna
Gyor
Vác
Füzesabony
Sopron
BUDAPEST
Debrecen
Tatabánya
Szombathely
Szolnok
Székesfehérvár
Veszprém
GRAZ
IV
RO
Dunaújváros
CLUJ-NAPOCA, ARAD
Kecskemét
Zalaegerszeg
Békéscsaba
Lelle
Kiskunfélegyháza
Nagykanizsa
V
ARAD
Szeged
Letenye
ZAGREB
Kaposvár
Szekszárd
V
IV
V/A
Helsinki Corridors Highway Motorway Highway under
construction
Baja
Mohács
TIMISOARA, BUCAREST
Nagylak
Röszke
Pécs
BELGRAD
Ilocska
X/A
V/C
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2. FDI Growth as the Main Focus of Government
Policy Hungary is a preferred target of FDI
in the region
Source national banks
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2. FDI Growth as the Main Focus of Government
Policy I.
Cumulated FDI in Hungary 1990-2004, in million
euros
48 320
Source National Bank of Hungary, Ministry of
Economy and Transport
Including reinvested earnings from 1995
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2. FDI Growth as the Main Focus of Government
Policy
FDI Inflow in Hungary
1990-2004 EUR 48,3 bn 2004. EUR 3,45
bn 2005. EUR 3,7 bn
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2. FDI Growth as the Main Focus of Government
Policy
FDI Inflow by Countries, 1989-2004 June
Source Ministry of Economy and Transport
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2. FDI Growth as the Main Focus of Government
Policy
FDI Stock in Hungary by Sectors
Source National Bank of Hungary
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2. FDI Growth as the Main Focus of Government
Policy
Shared Service Centers in Hungary
Financial centers
RD centers

• Alcoa, BAT, Avis, Exxon Mobil, IBM, GE Electric,
  Diageo

• Bosch, Zenon, Electrolux, IBM, Novartis, Astra
  Zeneca, Siemens, Nokia, Philips, Ericsson

Regional call centers
Outsourcing

• GE Hungary (European HQs), ING, Hewlett Packard,
  General Motors

• EDS, SYKES

Logistic centers

• Renault Nissan, Porsche, Velder AG

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2. FDI Growth as the Main Focus of Government
Policy
Major Automotive Companies in Hungary

• GM Opel
• Suzuki
• Audi
• Daewoo-MGM
• Visteon
• Bosch
• Knorr-Bremse
• Denso
• Delphi Calsonic
• Delphi-Packard
• Mitsuba
• Delco Remy
• U-Shin
• Valeo
• Diamond Eelctric
• Musashi
• Stanley Electric

13 of the worlds 30 top automotive suppliers
established production bases in Hungary. There
are 117 foreign companies in the sector with a
total FDI of USD 3.4 billion, employing 28,000
workers.
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2. FDI Growth as the Main Focus of Government
Policy
Major Electronic Component Manufacturers in
Hungary

• GE Hungary
• Philips
• Flextronics
• Samsung
• Sony
• TDK
• Nokia
• Siemens
• Aikawa
• Clarion
• SANYO
• National
• Instruments

• Jabil
• Ericsson
• Mitsuba
• Shinwa
• Alpine
• Hitachi
• Elcoteq
• Sanshin
• SCI
• Zollner
• Continental Temic
• Videoton

Altogether 470 foreign electronic and optical
equipment producers are present in Hungary with a
total FDI of USD 2.9 billion, employing 105,000
workers.
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2. FDI Growth as the Main Focus of Government
Policy Priority sectors of our investment
policy

• Electronics
• ICT sector
• Biotechnology
• Automotive industry
• Shared service centers
• Logistics

• RD
• Innovation
• High added value
• Knowledge based economy

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Trade Figures

• Value USD 772 m
• Growth fast growth
• Major Items Electronics, machinery

Taiwanese Export to Hungary in 2005

• Value USD 124.0 m
• Growth nearly 40 increase
• Major Items Agricultural products (pork, dawn),
  electronic parts, machines

Hungarian Export to Taiwan in 2005
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Taiwanese Manufacturers

• Total amount of investment USD 300 million -
  about 20 companies
• Major investors
• Eastern Asia Corporation (1999)
• Yageo ?? (2001)
• Foxconn ?? (2003, 2004)
• Behaviour Tech Computing ?? (2004)
• ICHIA Technologies ???? (2004)
• Global Brands Manufacturing ?????? (2004)
• Monitronics ?????? (2005)

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3. Incentives for Investments
I. Direct Subsidies for Investments1. Tender
applications in the framework of the Economic
Competitiveness Operative Program (ECOP) 2.
Special incentive package for strategic
investors3. Subsidy for employment creation and
training II. Tax-related Incentives III.
Supplier Development Program IV. One-stop Shop
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3. Incentives for Investments I. Direct
Subsidies
Economic Competitiveness Operative Program (ECOP)

• Non-refundable grants are available for investors
• Subsidy amount up to HUF 100-300 million
  (around USD 500 1 500 thousand) per project
• Tender applications for 2005
• Technological modernization
• Establishment of regional corporate centers
• Increasing the number and strengthening of
  suppliers of the manufacturing industry
• Development of industrial and innovation
  infrastructure
• Development of logistic centers and their
  services

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3. Incentives for Investments I. Direct
Subsidies
Special Incentive Package for Strategic
Investments

• If the investment volume reaches
• EUR 10 million of projects in the manufacturing
  industry or
• EUR 10 million in case of establishing regional
  corporate service centers
• The Hungarian Government may decide on granting
• a customized incentive package and VIP treatment

Within the customized incentive package more
favourable and significant subsidy is available
than through ECOP tender applications.
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3. Incentives for Investments II. Tax-related
Incentives
EU-Conform tax-related incentives

• Lowest corporate tax rate in Central Europe (16)
  
• Development tax allowance
• Tax allowance for RD activity, innovation and
  training
• Tax-free development reserve for five years
• Tax allowance on credit agreements
• 50 of the local tax is deductible from the
  corporate tax base

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3. Incentives for Investments III. Supplier
Development Program

• Operative forum for integrators and suppliers
• Credit scheme for suppliers
• HUF 25 billion (approx. USD 125 million) supplier
  credit fund on preferential terms (rate of
  interest approximately 4,5)
• HUF 5-1000 million (approx. USD 0,03-5 million)
  per project, available for 10 years for
  technology and product development, building of
  new capacities or development of the logistic
  background (JIT delivery)
• Supplier database, supplier networking and
  e-market
• Supplier competence centre, pilot projects

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3. Incentives for Investments IV. One-stop
Shop
ITDH, the Governments investment promotion agency

• provides information and tailor-made,
  complimentary services for foreign investors
  during the preparatory and realization phase of
  the project.

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Thank you for your kind attention!