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Slide 1: Business opportunities and t iti d economic situation in Hungary Tommi Pelkonen Business Consultant October 1, 2009
Slide 2: Business opportunities and economic situation in Hungary Finpro in short Hungary as a market area Selected industry highlights Finns in Hungary Conclusions and recommendations / © Finpro ry /
Slide 3: Finpro: Key Figures Structure • A registered not-for-profit association for Finnish companies, supported by the Finnish government with an annual grant Personnel • 353 of which 248 in Trade Centers and 95 in Finland Network • 52 Trade Centers in 44 countries Assignments • ca. 1500 ordered assignments, Average project ~8,7k€ Call Center • ca. 4000 contacts by phone or email t tb h il Turnover • ~35 m€, governmental support ~ 59% of the total spending © Finpro ry
Slide 4: Finpro – Finnish business partner globally We help you to succeed • Customized consulting services • All phases of internationalization • “One-stop shop” • Analyzed market information & networking • Partner network at your service: in Finland and target markets The International Trade Centre (ICT), a joint technical cooperation agency of the United Nations and the World Trade Organization WTO, awarded Finpro as the best trade promotion Organization of the developed countries as well as the Best of the Best TPOs in the world in 2008.
Slide 5: We support internationalisation all its means We support companies throughout the whole internationalisation process © FinproFinpro ry © ry / 5
Slide 6: Business Opportunities for Finnish companies Any business operation is possible in the CSEE region! © Finpro ry
Slide 7: FINPRO Central and Southeast Europe and Middle East 8 Finland Trade Centers ca. 200 assignments annually ~30 people, mostly local staff Industry expertise: Construction, Machinery, Life Sciences, ICT, Energy, Environment, Forestry, Pulp & Paper, Food industry The best customer satisfaction rate within Finpro! Prague Vienna Budapest Bucharest Sofia Istanbul Riyadh Dubai © Finpro ry
Slide 8: CSEE: Attractive Business Region Fresh and upcoming EU members Growing economic interdependence with Western Europe Improving business climate Rising living standard Lower transaction costs Developing infrastructure Less regulatory barriers Cultural similarities EU funds to development of knowledge based economies Cost advantages Favorable Location Central location in Europe Geographic proximity to Finland Good transportation possibilities G Employment costs still 20-40 % lower than in the Western Europe Centralization of supporting activities bring cost advantage e.g. buying of goods, services or logistics Tax benefits for investments Fast growing markets GDP growth rates 4-9 % before the g 2009 crash Westernization of customer behavior •Appreciation of western products and life-style / In short: An attractive location for any business operations – still!
Slide 9: Business opportunities and economic situation in Hungary Finpro in short Hungary as a market area Selected industry highlights Finns in Hungary Conclusions and recommendations / © Finpro ry /
Slide 10: Eastern Europe? History gives us keys to understand current situation in the area / © Finpro ry /
Slide 11: Eastern Europe? History gives us keys to understand current situation in the area / © Finpro ry /
Slide 12: Hungary in the Heart of Europe Employment by Main Activities 4,8% Agriculture 32,3% 62,8% Industry UA SK A SL HR RO YU Services Major exports 1,9% 5,5% 2,5% Machinery & Equipment Other manufactures 27,6% 62,4% Food, beverages & tobacco Raw materials Others Land: 93,030 km² Population: 10,1 million 10 1 GDP/capita, at PPP: EUR 16,040 / 12 Finpro/Insight to Hungary / © Finpro ry
Slide 13: IMPACT OF THE EARLY 1990’S TRANSFORMATION GDP dropped by Real wages decreased by g y 21% % 11 - 17% Unemployment increased from 0,5% 0 5% to 12% Hardest hit: pensioners, families with many children / 13 Finpro/Insight to Hungary / © Finpro ry
Slide 14: Hungary GDP – forecast for 2009-2010 Recovery is expected to realise in 2010 in most of the counties in CSEE region
Slide 15: Yet, the challenge of social unrest remains… / 15 Finpro/Insight to Hungary / © Finpro ry
Slide 16: Cumulated FDIs in Hungary & Finland in million euros Sources: ITD & Bank of Finland, 2008 Hungary has accumulated gy much more FDIs than e.g. Finland!
Slide 17: Hungary is a pretty easy place to run business The World Bank has recognized Hungary’s reforms to reduce bureaucracy Top Rank - Global p Indicators of the index 1. 2. 3. 4. 5. 6. 7. 8. 9. Starting a business Dealing with licenses Employing workers Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts 10. Closing a business Source: World Bank, The Doing Business project 2009
Slide 18: Among OECD countries, doing business in Hungary is feasible NOTE: Eastern European countries are compared, too: see the website! Source: Doingbusiness.org, 2008
Slide 19: Corruption exist in the region, but is manageable 57: GR 58.TR 62: CR 70: RO 72: BG, MAC 85: ALB, CG 85: SRB Total 180 countries Source: Transparency International, 2008; Target, 3/2009 NOTE: ranking is based on perceived corruption
Slide 20: Capitals are the key growth locations – but other options exist The number of companies expecting to locate in European cities NOTE ALSO: Budapest ranked among top20 favourable expatriate locations globally! Expats tend to like to work in the region – it is a p g challenging but rewarding business area! Source: European Cities Monitor, Cushman and Wakefield, 2007; FDi Magazine, 2008
Slide 21: Competitive average wages Monthly gross average wages in EUR in 2008 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 EU27 - average *latest available year: 2007 Source: National statistical offices, 2009
Slide 22: Strenghts of the Hungarian labour force Competent senior managers Finance skills Availibility of skilled labour Working hours ('000) Labour regulations Knowledge transfer between companies and universities Availibility of qualified engineers 0 1 2 3 4 5 6 Hungary Slovak Republic Czech Republic Poland Source: IMD Competitiveness Yearbook, 2009
Slide 23: Management needs training, but has talent Source: Target 3/2009
Slide 24: Mapping talent: Hungary ranks 4th of 13 European countries Rank Rk 2012 1 2 3 4 5 6 7 8 9 10 11 12 13 Country Austria Russian Federation Poland Hungary Czech Republic Slovenia Bulgaria Slovakia Ukraine Turkey Romania Croatia Serbia Talent I d T l t Index rating 2012 57.9 53.8 46.6 46.2 45.7 45.6 43.9 41.4 40.3 37.7 37 7 37.0 36.6 30.0 The EIU ranks Hungary 4th of 13 countries in the CEE TalentIndex Source: Economist Intelligence Unit – Heidrich & Struggles, 2009
Slide 25: Good availability of labour 1 2 3 4 5 6 7 … 27 … 30 31 33 42 46 52 57 Ireland Japan Switzerland Sweden Denmark Finland Philippines … Hungary … United Kingdom Czech Republic Slovak Republic Bulgaria Romania Poland Venezuela 7.90 7.24 6.94 6.90 6.89 6.88 6.87 6 87 … 5.74 … 5.60 5.58 5.43 4.83 4.58 4.34 2.67 • • IMD’s World Competitiveness Yearbook ranks 57 countries by the availability of skilled labour Hungary is among the best 10 European countries Source: IMD, World Competitiveness Yearbook 2009
Slide 26: Strong scientific capacity The World Economic Forum ranks Hungary 24th of 131 countries for the quality of scientific research institutions Country Switzerland USA Germany France Norway Hungary Czech Republic Slovenia Spain China Ch Poland Greece Ranking 1 2 5 19 21 24 30 33 49 56 6 64 76 Source: Global Competitiveness Report, World Economic Forum, 2007/2008
Slide 27: IT Competitiveness: Hungary ranks well Hungary globally #28 Finland # 13 / 27 Source: Economist Intelligence Unit, 2008. Finpro/Insight to Hungary / © Finpro ry
Slide 28: Excellent access to key markets • At the cross roads of 4 main European transportation corridors Extensive road and railway transportation network Highly developed logistics and telecommunications infrastructure • • Source: ITDH, 2009
Slide 29: Expanding highway network Total Highway Network: 1100 km. g y Warsaw, 10 W hrs Prague, 5 hrs Munich, 6 hrs Hamburg, 8h Hb 8hrs Vienna, 1 hr Rotterdam, 12 hrs Kyiv, 12 hrs Bucharest, Bucharest 10 hrs Constanza, 12 hrs Zagreb, 1 hr Trieste, 6 hrs Koper, 6 hrs Source: ITDH, 2009 Beograd, 4hrs
Slide 30: Business opportunities and economic situation in Hungary Finpro in short Hungary as a market area Selected industry highlights Finns in Hungary Conclusions and recommendations / © Finpro ry /
Slide 31: Logistics: Excellent geographical position • • • Centre of gravity for distribution in the CEE 13 logistics centres serving at least two transport modes Modern warehousing and industrial facilities Source: ITDH, 2009
Slide 32: Logistics: recent developments Nokia: opened new logistics centre in Komárom (2007) Panasonic: set up regional distribution centre (2007) DAF: established distribution centre in Zsámbék (2008) ( ) Pfizer: relocated its Central-Eastern-European Distribution Centre to Hungary, supplies 15 countries from here (2008) Porsche Parts: further expansion in Törökbálint (2008) Spar: opened new logistics centre in Ü (2008) Üllő Rail Cargo Austria: acquired MÁV Cargo (2008) Záhony: Sophisticated economic development programme Renovation of wide gauge railway system commenced „Hungary has a good geographical location and transport infrastructure for distribution to our traditional European and non-European markets.” Amos Anatot, Vice President, TEVA Pharmaceuticals. markets ” Anatot President Pharmaceuticals Source: ITDH, 2009
Slide 33: Automotive: Major production hub Original manufacturers: Suzuki, Audi Suzuki: 282,000 pcs (2008 est.) Audi Motor: 60,000+ TT coupés and roadsters, A3 cabriolet Engine manufacturing (2008): Audi Hungary: 1.9 million engines GM Opel: 400 thousand engines 14 of the world’s top 20 TIER-1s present in Hungary World’s 2nd largest powertrain plant in Hungary by Audi! Source: ITDH, 2009
Slide 34: Automotive: What happened in 2008? • Daimler investment announced Audi upgraded its plant to produce 12-valve, 6liter 500 HP diesel engines Bosch provided the ISG for the KIA cee’d Audi started production of engine and body parts for the R8 GT3 Suzuki began exporting the Splash to Japan The solar-powered Solo hybrid was introduced at the Paris Motor Show • • • • • „A well trained labour force, a dense A ll t i d l b f d supplier network and favourable logistical conditions were the main arguments in favour of Kecskemét.” Dieter Zetsche, CEO, Daimler D i l AG Source: ITDH, 2009
Slide 35: Biotechnology & Pharmaceuticals „It is worth investing in Hungary since, in the very recent years, Hungarian researcher have discovered two original molecules which are in development phase now.” JeanFrancois Dehecq, CEO, Sanofi-Aventis • The 5th largest drug producer in Europe (note: vaccinations!) • Largest biotechnology innovation and spin-off sector in the CEE region • University biotechnology centres clustered in four academic towns Source: ITDH, 2009
Slide 36: Bio & Pharma: What happened in 2007/2008? Beike Biotechnology from China launched a stem cell research project in two locations (Budapest, Debrecen) Sauflon Pharmaceuticals (UK) began building a contact lens factory near Budapest. Capacity is expected to reach 100 million contact lenses per year Pfizer (USA) opened a logistics and distribution centre in Budapest TEVA (Israel) expanded its capacity further in Debrecen Richter Gedeon (H) opened R&D facilities in Budapest and Debrecen Source: ITDH, 2009
Slide 37: Electronics: Major production location • Largest electronics producer and exporter in the CEE • Major global manufacturers: Samsung, GE, Philips, Sanyo, Sony and Jabil, Flextronics • Booming sectors: IT manufacturing telecommunications, consumer electronics „ „Hungary p g y provides an ideal environment for electronic manufacturing services as g the country has good industrial infrastructure and a strong industrial culture.” Hannu Hanatala, Managing Director, Elcoteq Source: ITDH, 2009
Slide 38: Electronics: What happened in 2007/2008 • NCR relocated ATM manufacturing to Hungary • Nokia is expanding its Budapest office to oversee 11 national markets • Electrolux expanded its facility in Eastern Hungary • Schaffner Holding (Switzerland) is relocating production to Kecskemét in Central Hungary • Flextronics expanded in South-Western Hungary • Infineon expanded its manufacturing base in Eastern Hungary Source: ITDH, 2009
Slide 39: ICT & software development: Regional hub • Several major well known software developers are present including IBM, present, IBM HP, Siemens, CISCO, SAP, Oracle and TATA • Several IT companies, such as BT, EDSHP and Getronics operate technology service centres in Hungary • Strong cooperation between business and academia in R&D (IBM, CISCO, Oracle and SAP) Source: ITDH, 2009
Slide 40: ICT: What happened in 2008? • • • • • Cognizant: BPO, software development, Budapest CAS: software development, Szeged p , g Cognex: software development, Budapest IBM: data storage, Székesfehérvár Broadband penetration: leading role in the region Did you know that in the wake of the attacks against the World Trade Center, a Hungarian company recovered data necessary for the world's continuing financial development? Source: ITDH, 2009
Slide 41: Renewable energy: Good source • • • • • • Hungary plans to reach 13% of RES in total energy production by 2020 Major M j areas of growth: biomass, biogas, wind power f th bi bi id Investments into biofuel and biomass production have already increased Compulsory feed in tariff of between 5 13 cents depending on feed-in 5-13 plant size EU provides EUR 600 million to support renewable energy-related investments Emerging solar panel technology industry Source: ITDH, 2009
Slide 42: Green tech: What happened in the past few years? • Sanyo doubled its solar panel production capacity to 340 MW for EU export p • Iberdrola Renovables set up several wind farms, total capacity 158 MW • Rossy Biofuels opened a 150,000-tonbiodisel plant in y p , p Komárom • Zöld Olaj BB opened a 40,000-ton biodisel plant in Gyö gyösö Gyöngyösön • Ökoline increased its biodisel capacity to 50,000 tons in Bábolnán Did you know that Hungary’s renewable energy potential is 220 PJ/year and that H ’ bl t ti l i PJ/ d th t the country receives as much as 2,200 hours of sunshine a year? Source: ITDH, 2009
Slide 43: Shared Service Centers: Popular location Hungary had the highest number of shared service b fh d i investments between 20022006 in Europe (Ernst&Young, ) 2007) SSCs throughout the country: Debrecen, Miskolc, Pécs, Székesfehérvár etc Székesfehérvár, etc. Positive feedback from companies already present in Hungary Source: ITDH, 2009
Slide 44: SSCs: What happened in 2009? • BP: financial service centre, 1100 employees, Budapest • IBM: expansion of IT service centre, Székesfehérvár • Vodafone: new financial centre in Miskolc • Celanese: Honorary Mention for Best New Captive Shared Services Organization in Europe „EDS would not be employing a thousand workers here if we did not believe in this country and in its people.” László Szakál, Managing Director of EDS Hungary Source: ITDH, 2009
Slide 45: R&D in Hungary • • • Large presence of multinationals investing into R&D activities Continuously expanding R&D investments in automotive manufacturing, software development and life sciences World-class tertiary education and scientific research • • In summer 2008 EU ministers chose Budapest as the headquarters of p q the European Institute of Innovation and Technology The institute focuses on energy, climate change and information technology „…I think that Hungarians are at least as good as their American, Chinese, Indian or Western European peers. Their enthusiasm and motivation are the key factors. In addition, they are extremely innovative...” Michael Fritts General Manager of Engineering at GE Healthcare in Hungary Source: ITDH, 2009
Slide 46: Real Estate: Office market trends Major challenges in the office markets in the next few years Sources: Colliers; Cushman & Wakefield, 2009
Slide 47: Retail space estate market trends in Budapest At the edge of overcapacity in retail space Source: Colliers, 2009
Slide 48: Business opportunities and economic situation in Hungary Finpro in short Hungary as a market area Selected industry highlights Finns in Hungary Conclusions and recommendations / © Finpro ry /
Slide 49: Major Finnish Investors in Hungary Cca. EUR 1 billion investment value – largest share in the region – 200 companies/20,000 employees Elcoteq Finnforest Halton Group Helkama Forste Huurre Nokia Sanoma WSOY Savcor, Scanfil Stora Enso Tunturi , ICM, Lindström Mecanova, Raflatac Source: ITDH, 2009
Slide 50: Finnish Business Presence in Hungary (cont’d) Productional Nokia Mobile Phones Elcoteq Sanoma Budapest Perlos Savcor S Stora Enso Packaging Mecanova Ruukki Construction R kki C t ti Ruukki Engineering Scanfil Lindström Helkama Forste Clairia Hansaprint Raflatac Huurre Sanoma Sales offices R&D / Planning UPM Nokia R & D M-Real Elcoteq Stora Enso 3C Hungary (CCC) Martela Agil Eight Rannila ICM Tikkurila Kone Fiskars ~200 Finnish-originated Wärtsilä Ensto Et companies Itella Information and 350 exporters to Hungary Etc. Appr. 20 manufacturing companies Finnish-Hungarian trade exceeds 1 bn. euro / 50 Finpro/Insight to Hungary / © Finpro ry
Slide 51: Some considerations for Finns • Competition in Hungary is many sectors is intense • Early FDIs brought multinationals to Hungary g p • E.g. retail far more competitive than in Finland Financial crisis affecting Hungary – but can also lead to a positive change Finns are regarded in Hungary very positively (northern cousins) in all areas of business YET – Hungarian business culture and habits differ from Finnish in many ways • Negotiations, agreements, language skills, business drive, personal relationships etc. • • • Hungary is a very good stepping stone location for / 51 central European Regional operations! to Hungary / © Finpro ry Finpro/Insight
Slide 52: Business opportunities and economic situation in Hungary Finpro in short Hungary as a market area Selected industry highlights Finns in Hungary Conclusions and recommendations / © Finpro ry /
Slide 53: Region is the leading growth market in Europe Growth will return, b id G th ill t besides th global challenges the l b l h ll In selected sectors, CSEE and Hungary are still growing and markets are very attractive to new operations and operational development d l t The downturn makes timing excellent for new busines development and partner seeking Finns can gains cost savings, but also get new customers y , Salary and other cost difference still exists, but less than in the past. Yet, the difference can be significant e.g. in manufacturing business European and also global companies have and still are shifting their p g p g global & regional service centers to the CSEE region. This can open up interesting opportunities for Finnish service providers. Moreover, there is a constant flow of FDIs to the region. This enable international and to growing extent local sales to be realised IN SHORT: Time to act is today!
Slide 54: Each market needs to be understood as a local market. Act locally and: 1. do not accept the first person you meet to be your exclusive agent/representative 2. check the background of whatever potential partner 3. learn cultural matters and pay attention to cross-cultural communication 4. adapt yourself to each particular market 5. plan and allocate enough time, money and human resources Finpro is locally present to help Finnish companies to tackle these challenges!
Slide 55: Something to take home from Hungary … Tokaj wines and aszu (dessert wines) salami Zwack Unicum Herb liqueur salami Tibi Chocolate Törley Sparkling Wine Goose liver
Slide 56: Let’s go international! www.finpro.fi www.markkinoille.com Tommi Pelkonen tommi.pelkonen@finpro.fi +36 20 250 10 77