INTERNAL AFFAIRS 04.03.2004 -Home building subsidies to rise, but loans stay and conditions stay strict - Fidesz performs better among the elite as well 05.03.2004 - Easing regulations in the home loan system FOREIGN AFFAIRS 04.03.2004 - Working in EU: Hungary hits back 05.03.2004 - European Union not luring many Hungarian employees MACROECONOMY 04.03.2004 - Surprising general government deficit figure again 05.03.2004 - Faith coming back to the forint market BANK 04.03.2004 - 33 percent more MasterCards - Record profit at HVB 05.03.2004 - The first K&H agreements are concluded HEAVY INDUSTRY 04.03.2004 - Péter Róna appointed as member of the board 05.03.2004 - Borsod Steel halting production ENERGY INDUSTRY 04.03.2004 - Gazprom to focus on gas transportation BUILDING INDUSTRY 04.03.2004 - Construction companies fined TELECOMMUNICATION 04.03.2004 - Mobile tariffs will decrease as of May 05.03.2004 - Mobile phones numbers still rising INFORMATION TECHNOLOGY 04.03.2004 - Index.hu changes owner - New regional leader at Intel FOOD INDUSTRY 05.03.2004 - Hungarian dairy plant in Slovakia TRADE, FAIRS 05.03.2004 - Skála to open in store today TOURISM, HOSPITALITY 05.03.2004 - The first Hungarian NH Hotel is opened SERVICES 05.03.2004 - Increasing postal tariffs - Mega merger on the Hungarian security scene INVESTMENT, DEVELOPMENT 04.03.2004 - New Yamaha centre in Budapest - Additional GE centre moves to Budapest - Hungarian real estates in Cannes - There are not enough penthouse apartments downtown 05.03.2004 - Hammerstein continues to develop - Hankook to come to Hungary? MEDIA 04.03.2004 - Sláger Radio’s General Manager to step down



INTERNAL AFFAIRS - 04.03.2004 Home building subsidies to rise, but loans stay and conditions stay strict
The government may modify its housing loan regulations already in March. The so-called „szocpol”, that is, the home building subsidies depending on the number of children is set to rise and those between the ages of 35 and 40 can get it in advance. Also planned to be part of the new system are the subsidies for house rent costs. On the negative side, the so-called half „szocpol”, to be used to buy resale homes, will be left out of the modifications and according to sources near the government, the budget can not afford in its current state to modify and increase the upper limit of the loan for resale home purchases and ease renovation regulations, either. Economic daily Napi Gazdaság carried an article yesterday, writing that the loan for resale homes may go up from the current HUF 5 million to HUF 8-10 million and categories of house renovation would be extended at the same time. Csaba Horváth, President of the Housing Subcommittee said that the information came from banking circles. At the same time it has been considered that the exchange risk of cheaper foreign currency loans could be transferred to the state and mortgage banking experts confirmed that it could be worth to calculate how much it would cost the budget. However, they added that in case of 10-15 years long home loans it would be quite difficult to enter into a contract that covers all related risks. (NG, p 1 and 4, MH, p 1 and 11)

Fidesz performs better among the elite as well
Fidesz has 42 percent, MSZP (Hungarian Socialist Party) 23 percent and SZDSZ (Alliance of Free Democrats) 6 percent support among the business elite - reveals the survey of Szonda Ipsos. A year ago socialists were leading with a significant advantage. The situation is interesting because the majority of executives admit themselves to be leftist and liberal. According to Tibor Závecz, research director, the elite is a pragmatic range, in which party preference is not a question of ideology. He thinks that the party that appears in the EU with stronger interest representation has the chance to win the trust of leaders. (VG p1, 7)

INTERNAL AFFAIRS - 05.03.2004 Easing regulations in the home loan system
Players of the home market can count on already announced larger subsidies and easing state discounts and no stricter rules. The so-called „szocpol“, the subsidy given depending on the number of children, will increase, for those with two children HUF 2 million will be given compared to the current HUF 1.6 million. Besides this, young couples will be given exemption of fees in case of buying a resale home, too and the age limit of 35 for would-be parents applying for a pre-paid form of the subsidy - before the birth of children - will be changed to 40. At the same time, construction material will be 6-8 percent more expensive on the back of increasing taxes and energy prices. (Nszab, p 1 and 14)

FOREIGN AFFAIRS, EUROPEAN UNION - 04.03.2004 Working in EU: Hungary hits back
The Hungarian government announced yesterday that it would restrict citizens of current European Union member states taking job opportunities in Hungary on the principle of reciprocity. It means that those coming to work to Hungary from Union member states would have the same rights as Hungarians will have in the given countries. The decision has been made after Ireland –as last of the current European Union member countries- announced that it would give social service for workers coming from the countries joining the EU this May in case of a two-year employment. This way, all Union countries have restricted working opportunities of citizens coming from the accession countries: there are countries where social services are not given, whilst in other ones some sectors will be blocked from those looking for a job from the 10 newly entering counties. The government is in bilateral talks to achieve the best possible rules for those looking for a job. Besides Hungary, other member states are also expected to voice their concerns in the ambassador council of member states meeting today. The case is set to be on the agenda of the Union summit in two weeks. (Nszab, p 1 and 13, MH, p 1 and 11)



FOREIGN AFFAIRS, EUROPEAN UNION - 05.03.2004 European Union not luring many Hungarian employees
The European Commission declined to comment on a Hungarian government decision to reciprocate measures by EU members to restrict their labour markets as of the accession date of 1 May. JeanChristophe Filori, spokesman for Enlargement Commissioner Gunter Verheugen said that countries which introduce restrictions will very quickly recognise that there will be no need to retain them throughout the entire seven-year transition period. According to a recently published study, only 1 percent of Hungarian employees were considering to take up a job abroad. Currently, all European Union member states are putting restrictions against people wishing to work there from the 10 accession counties. There are countries where social benefits would not be available for them, whilst in other ones whole sectors are blocked for citizens of these counties. The Hungarian government is in bilateral talks to achieve the best possible solution in this topic. (Nszab, 5 Mar, p 1 and 12)

MACROECONOMY - 04.03.2004 Surprising general government deficit figure again
The February general government deficit came to HUF 122.7 billion in Hungary, which compares to the Finance Ministry’s projected figure of HUF 150-170 billion. The total deficit for the first two months of 2004 is HUF 341.3 billion, that is, 28.9 percent of the annual plan. The budget deficit figure cause positive surprise already in January, when it was HUF 218.6 billion, down on the Finance Ministry’s expectations of HUF 230-250 billion. Raiffeisen analyst Zoltán Török is of the opinion that the positive figure can put off the changing of the trend expected in the forint market, namely the strengthening of the euro, however, he added that it was not expected to be enough to calm down investors. (NG, p 1 and 3)

MACROECONOMY - 05.03.2004 Faith coming back to the forint market
Analysts are of the opinion that the forint’s recent strengthening can be sustainable with the Hungarian currency gaining HUF 12-13 against the Euro and going down under the rate of HUF/EUR of 254 yesterday during trading. Market experts state that the forint’s strengthening that in turn has positive impact on the inflation can be put down to favourable macroeconomic figures. Gergely Szabó Fórián, analyst from CA IB said that the reason for the process was rather the trend turn in external balance and not in better than expected economic growth figures published this week. Investors expecting weaker forint are uncertain on the back of more favourable economic climate and they have left the market. The large demand for forint is mainly thanks to the fact that the 12.5 percent benchmark interest rate led to double-digit yields on Hungarian bonds for investors. 3-year government bond auction boosted foreign investor confidence and the offer was three times oversubscribed and the average yield was 80 points down from a day earlier. The above-mentioned developments may as well lead to a decrease in interest rate levels, however, experts are uncertain about the timing of it. Many are of the opinion that the central bank will intervene at the rate of HUF/EUR 250, but Forian thinks that only at the rate of 245 we can expect lower interest rates. In spite of all this, there are still pessimistic ones saying that fundamentals would justify a rate of near HUF/EUR 270. (VG, p 1 and 4)

BANK - 04.03.2004 33 percent more MasterCards
There were 980 thousand more Master Cards issued in Hungary last year, which is 31 percent more than a year before. There were with 20.66 million transactions done by plastic money in a gross value of 2.86 billion dollars. The MasterCard-portfolio increased to 3.62 million peaces in Hungary. By plastic cards with Maestro logo on them users can withdraw money from approximately 3 thousand ATMs and are able to complete payments at 24.5 thousand points free of charge. (VG p15)



Record profit at HVB
Last year HVB Bank Hungary Co. achieved record taxed profits, HUF 10.4 billion, compared to the HUF 8.3 billion of the previous year. The balance sheet total increased from 578.9 billion to HUF 734.3 billion. The cost-revenue rate is 50.7 percent and deposits amount to 84 percent of customer loans. HVB’s market share is 5.4 percent and thereby it is the sixth largest player in Hungary. In the corporate business line the financial institute’s market weight is 9.1 percent on the credit side and 9.4 percent on the deposit side. Last year the company integrated CA IB Securities Co. and the group of subsidiaries will soon expand with a now founded factoring firm. Last year HVB Mortgage Bank’s balance sheet total improved by more than two-and-a-half times and its pre-tax profit by more than three times to HUF 675 million. This year HVB mainly intends to strengthen its market positions in the small entrepreneurial and retail market. The branch network that currently counts 35 members will increase to twofold in two or three years. General manager Matthias Kunsch said that his bank, as the largest direct owner of BSE, hopes that MNB (National Bank of Hungary) would not sell its Keler share, because it is important that both the depository and the stock exchange remains in Hungarian ownership. (VG p15, MH p15)

BANK - 05.03.2004 The first K&H agreements are concluded
Kereskedelmi és Hitelbank Rt. (Commercial and Credit Bank Co.) concluded the first agreements with enterprises concerned in the case of K&H Equities. The account history of the mentioned customers could be reconstructed relatively easily. However, customers who were affected by the broker scandal the most will establish a lawsuit partnership, which can submit its file to the court against K&H Equities next week due to the non-fulfilment of accountability. (NG p1, 4)

HEAVY INDUSTRY - 04.03.2004 Péter Róna appointed as member of the board
Hungarian bus maker NABI Rt appointed Péter Róna, board chairman of the group, member of the board of directors of its fully-owned U.S. subsidiary NABI Inc and of NABI's subsidiary in the UK, Optare Holding Ltd. NABI explained its decision with the group's efforts to return the bus maker to profit, company officials said. Róna has recently stepped down as the General Manager of First Hungarian Fund (Elsõ Magyar Alap) to focus his activities on NABI group. The group's board of directors appointed also Optare Holdings' group CEO, András Rácz, and the group's managing director Bob Coombes members of the board of directors of Optare Holding. (VG, p 13)

HEAVY INDUSTRY - 05.03.2004 Borsod Steel halting production
Steel manufacturing was stopped again in Diósgyõr, since liquidation proceedings were initiated by three contractors against Borsod Steel (Borsodi Nemesacél Acélgyártó (BNA) Kft), the company founded to manage the assets of DAM Steel Rt., the latter one going bankrupt back in last year. Operations of the steelmaker were financed by CIB Bank since last August through a credit contract to the tune of HUF 2 billion per month, but the bank declined to renew a six-month agreement that expired at the end of February. The 1,100 workers were sent on holidays. There is one company interested in Borsod Steel, but the credit application has not been judged yet. (NG, p 5)

ENERGY INDUSTRY - 04.03.2004 Gazprom to focus on gas transportation
Russia's gas monopoly Gazprom said on Tuesday it was interested in buying the gas units of Hungary's oil and gas group Mol, namely transport unit Földgázszállító – Kommerszant writes. The Russian newspaper writes that Hungarian Mol is expecting to have at least USD 470 million from the partial sale of the gas division’s assets, with Földgázszálító Rt. priced at USD 250-270 million. Alexander Medvedev, the head of Gazprom's export arm, Gazexport confirmed that Gazprom was interested in all three gas companies, that is, stockpiling company Földgáztároló, transport unit Földgázszállító and distributor Földgázellátó. Hungary used a total of 16.5 billion cubic meters of gas last year with 4 million cubic meters coming from domestic sources and Gazprom transporting the remaining part. This year Naftohaz Ukraini planned the imports of 6 million cubic meters of gas from Turkmenistan and Russia. Through buying Földgázszállító, Gazprom could have an opportunity to control its Ukrainian competitor. Besides this, Gazprom can get closer not only to Hungarian customers, but also to the Union end-users after the liberalisation of the European Union gas market from 2007. (VG, p 14)



BUILDING INDUSTRY - 04.03.2004 Construction companies fined
Economic Competition Office GVH levied a record HUF 590 million fine on three construction companies. The reasoning says that Baucont Rt., Épker Kft. and KÉSZ Kft. have acted in cartel while renovating the building of National Principal Pension Directorate (Országos Nyugdíj-biztosítási Fõigazgatóság) in Fiumei Road, thus breaking competition rules. The authority stated that before the final bid for the renovation of the headquarters was handed in back in 2002, Baucont and Épszer had made an agreement before presenting their bid in the public procurement process. Under this, should any of them be selected as the winner, the loser will be given compensation as a subcontractor or in money. Later they had included KÉSZ Kft. to the agreement, too, which in turn gave up its plans to turn to the court against the results of the second round. In that round, bids were asked from Középület-építõ Rt., Baucont Rt. and Épker Kft. (Baucont and Épker Kft. had tried to include Középület-építõ Rt., but the plan fell through in the end. Baucont came out as the winner in the end and has given part of the job to Épker Kft. and KÉSZ Kft. Sources at Baucont did not wish to comment the decision before receiving it officially, whilst KÉSZ Kft. representatives denied that they had acted against competition rules and added that they would turn to the court for another investigation. They concluded that Economic Competition Office treated an agreement that had never been inked as a fact and tried to verify it through indirect proofs. (MH, p 12, NG, p 9)

TELECOMMUNICATION - 04.03.2004 Mobile tariffs will decrease as of May
As of May mobile phone tariffs can decrease by ten percent, since the new interconnection fees of mobile and fixed line service providers will enter into force. The aim is that domestic fees get close to the EU level as soon as possible, that is, that they become lower than the current level. Népszava claims to know that both companies considered to have significant market strength, Westel and Pannon, have sent their offers to the National Telecommunication Authority by the deadline. In case of fixed line service providers, new fees were accepted in January already. These mean 18-37 percent reduction compared to earlier tariffs. (NSZ p5)

TELECOMMUNICATION - 05.03.2004 Mobile phones numbers still rising
Hungary had 3.6 million fixed telephone lines at the end of last year, down by 1.6 percent compared to the same time in 2002, the Central Statistical Office reported on Thursday. The number of mobile subscribers increased from 6.9 million to 7.9 million in that period. There were some 8,000 fewer fixed lines in operation in the last quarter of 2003 than the year before, whilst the number of mobile subscriptions increased by 373,000. The number of Internet subscribers approached 674,000 at the end of 2003. (NG, p 3, MH, p 9)

INFORMATION TECHNOLOGY - 04.03.2004 Index.hu changes owner
According to market rumours Index.hu will change its owner in the near future. It is said that the ownership structure of Index.hu will become simpler within the frame of the transactions, since it will get into the ownership of only one company. The majority share of this company would get to a management firm, and the remaining part would get to Index.hu’s current minority owner, Wallis group. (NG p1)

New regional leader at Intel
Róbert Székely is Intel’s regional customer relations manager. His scope of activities covers Romania and Bulgaria as well in addition to Hungary. The professional worked for Axico Ltd. and Elbatex-Hun Ltd. earlier. (VG p9)

FOOD INDUSTRY - 05.03.2004 Hungarian dairy plant in Slovakia
Hungarian Industria Budapest will build a dairy plant in South Slovakian Roznava in an investment of SK 328 million (EUR 8 million). The plant will have 100 employees at the start and the total capacity of the factory will reach 75,000 litres per day. Industria Budapest cited reasons of cheaper workforce and better environmental features as the reasons for the location of the plant. (The latter one is important when it comes to manufacturing bio products.) (NG, p 1 and 4)



TRADE, FAIRS - 05.03.2004 Skála to open in store today
Hungary's largest department store operator Skála Divathaz Rt is opening its outlet in Pécs today. The store was renovated in an investment of HUF 300 million. The 2,700 square meter outlet is located opposite Árkád shopping centre, which opens on 31 March. Under the store, there will be a Plus supermarket. SDH is continuing its modernisation programme, under which it is opening other outlets all around the country: the Kecskemét one will open partially on 10 March and will be in total operation from the end of March. Also modernised will be the stores in Szeged, Miskolc and Eger. Skála Divatházak is to earmark HUF 450 million for these works. In a related development, Skála did not accept Debenhams spring collection, meaning that these products will be removed from Skála’s supply- To replace them is products from Coumbia and Camel Active. (VG, p 13)

TOURISM, HOSPITALITY - 05.03.2004 The first Hungarian NH Hotel is opened
The Spanish NH Hotels opened its first Hungarian hotel officially yesterday. NH leases the building that accommodates the four star hotel in Budapest (which was established with a cost of 12 million euros and has 160 rooms) from an Austrian company. The Spanish company counts on 12 percent return on the total value of the investment annually. (VG p15)

SERVICES - 05.03.2004 Increasing postal tariffs
As of the middle of March we can send postal consignments with normal or priority indication, in case of which local and distance differentiation will cease. Postcards and mailing cards will also be sent for the price of a letter; standard size ones in case of normal mailing for HUF 48, while in case of the faster priority delivery for HUF 90. (MH p11)

Mega merger on the Hungarian security scene
Group 4 Securicor, the newly-created security services company plans to have revenue to the tune of HUF 15-16 billion. The new company will be operational from September as a result of the merger of the two largest security market players in Hungary. The giant company will employ a total of 4,000. The merger of Danish Group 4 Falck and British Securicor is causing large waves on the Hungarian security services market that gives job to around 3,000 enterprises and has revenue of HUF 50 billion annually. Competitors are afraid that the new company, accounting for one-third of the market and responsible for two-thirds of best profit-generating money transportation and processing divisions, will push down pries and make others leave the business. Péter Kecskeméti, General Manager of Group 4 Falck Kft. stared that they do not wish to get rid of competitors after the merger and they would like to increase profits through the expansion of their activities. Their plans call for entering patient transportation and their employees would work as fire-fighters also. However, what seems for sure is that they would not take part in prison operations. (MH, p 10 and 11)

INVESTMENT, DEVELOPMENT - 04.03.2004 New Yamaha centre in Budapest
The new Budapest centre of Yamaha is handed over. They spent 900 million forints on the project. Yamaha Motor Hungária Kereskedelmi Kft. (Yamaha Motor Hungary Trading Ltd.) achieved a sales revenue of 3.1 billion forints last year, they sold 2011 motorbikes and scooters, 928 boat engines, 145 rubber boats, 40 sand runner vehicles and 33 jets. (VG p11)

Additional GE centre moves to Budapest
General Electric translocated one of its regional centres belonging to the Consumer and Industrial department, which has been established by amalgamating the Power Controls and Consumer Products business lines – announced Ruben C. Berumen, president of department for the Europe, Middle East, Africa and India region (EKKAI). The newly established division achieving a sales revenue of 14 billion dollars is one of the most successful business lines of GE. This is the second regional centre of the American mammoth company in Hungary, whereas the centre of Lighting was moved from London to Budapest two years ago. (NG p5)



INVESTMENT, DEVELOPMENT, REAL ESTATE - 04.03.2004 Hungarian real estates in Cannes
Thirty Hungarian companies represent themselves at the real estate fair in Cannes between the 9th an 12th of March. A Kincstári Vagyoni Igazgatóság – KVI (Management of Treasury Property) represents 22 projects at the event. Half of the portfolio is for sale, 40 percent of the real estates are offered for property management, while 10 percent is offered for real estate development. The organisation expects significant interest from the side of foreign investors. (VG p19)

There are not enough penthouse apartments downtown
There is a supply bottleneck of large downtown, loft penthouse apartments supplied with extras and having a terrace and a view. Apartments getting to the market are sold quickly. Expansion is expected in this field due to the amendment of the condominium act, which facilitates the implementation of lofts and story additions. In the 5th and 6th district there are still many ruinous blockhouses that had only recently been discovered by developers. (VG p19)

INVESTMENT, DEVELOPMENT - 05.03.2004 Hammerstein continues to develop
Hammerstein Autórészegység-gyártó és Fejlesztõ Bt. (Hammerstein Automobile Component Manufacturer and Developer Partnership) will start an additional investment of 3.5 million euros. As of 2007 1.4 million seat setters can be produced in the five thousand square metre large plant hall, primarily for the order of BMW. This year expectedly 134 thousand manual and automatic seat setters will be produced in the plant that employs 1100 workers. (NG p5)

Hankook to come to Hungary?
Korea’s Hankook Tire Manufactruring Co. plans to realise a USD 500 million investment in the Central and Eastern European region in relation to Hyundai’s Slovakian investment. According to Czech Press Agency CTK, the world’s ninth largest tire manufacturer is considering Hungarian, Czech and Polish sites for its plant. A representative of Hungarian Investment and Trade Development Kht. (ITDH) stated that although they had not received official information about Hankook’s Hungarian plans, they had taken steps in the case. (NG, p 13)

MEDIA - 04.03.2004 Sláger Radio’s General Manager to step down
Gábor György will resign from the post of General Manager in commercial radio Sláger tomorrow. György is on the list of Hungarian Socialist Party for the forthcoming European Parliament elections and cites reasons of staying unbiased and independent as reasons for his decision. Succeeding him is Barbara Brill, the vice president of the Rt.’s Board of Directors. (NG, p 5, MH, p 4)