INTERNAL AFFAIRS 22.06.2004 - Mádl does not consider the Price Act an annoying one 23.06.

2004 - Half of party supporters turned up to vote - Palestinian dentist released 25.06.2004 - Americans leaving Taszár - Drug market to calm down FOREIGN AFFAIRS 23.06.2004 - Support for support 24.06.2004 - Green light for Union funds for new members 25.06.2004 - Annual deficit may get lower - Brussels MACROECONOMY 22.06.2004 - Base rate to remain unchanged till August? 23.06.2004 - Hungary in line for a European Union censure 24.06.2004 - ICEG: Hungary last but one to catch up to the EU 25.06.2004 - GVH offering amnesty for companies acting in cartel - Investors are discouraged by the lack of professionals BANK - K&H posting good first quarter figures 22.06.2004 - Budapest Bank to change its name? 24.06.2004 - OTP to get a foothold in Serbia 25.06.2004 - Postabank to become Erste HEAVY INDUSTRY 22.06.2004 - DAM tender again CHEMICAL INDUSTRY 24.06.2004 - Trilak counts on expansion ENERGY INDUSTRY 22.06.2004 - E.On continuing squeeze out 23.06.2004 - E.On squeeze out extended - E.On to set up power plants - Total focuses on selling special products BUILDING INDUSTRY 21.06.2004 - Race on for M6 ELECTRONICS 21.06.2004 - American order for Videoton - Ericsson to bring centre TELECOMMUNICATION 23.06.2004 - AH getting out of Vodafone this year? 25.06.2004 - Matáv in expansion - Siemens’ mobile division to stay in Germany INFORMATION TECHNOLOGY 24.06.2004 - SAP to come to Central Europe FOOD INDUSTRY 21.06.2004 - Philip Morris’ Eger plant to be closed - Podravka to downsize 22.06.2004 - Spar to produce meat products in an own plant - Troubled cooling industry 25.06.2004 - Imported beers gaining ground - Poultry may bet more expensive

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AGRICULTURE 21.06.2004 - Hyundai machines from Axiál 23.06.2004 - Price of pork on the increase 24.06.2004 - Wheat speculation to get impetus? TRADE, FAIRS 22.06.2004 - AEG going to Electrolux - E.On continuing squeeze out 23.06.2004 - New financial services in Tesco hypermarkets 24.06.2004 - Tesco store with less ground space to be constructed in Százhalombatta TRAFFIC, TRANSPORT 22.06.2004 - Malév checking in one-millionth passenger - Waberer’s on its way to the bourse 23.06.2004 - First private railway on track - Wizz Air starts from Budapest tomorrow 24.06.2004 - Croatian motorway ready to Rijeka TOURISM, HOSPITALITY 22.06.2004 - Gresham Palace opened - Hotel Auróra to open in October 25.06.2004 - Pannonia to carry out development SERVICES 24.06.2004 - Szerencsejáték Rt.’s monopoly to come to an end? INVESTMENT, DEVELOPMENT 21.06.2004 - Norsk Hydro brings new production 25.06.2004 - Israeli investors in Miskolc - Regional Renault-warehouse basis in Gyõr CULTURE 21.06.2004 - After Monet, Picasso, Cézanne and Gauguin exhibition on the way to Hungary MEDIA 23.06.2004 - Ringier Hungary significantly increased its sales revenue OTHER 24.06.2004 - Sophia Loren’s son to marry a Hungarian girl

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INTERNAL AFFAIRS - 22.06.2004 Mádl does not consider the Price Act an annoying one
Hungarian President Ferenc Mádl signed the modifications of the Price Act, under which the government is empowered to carry out drug price freeze for a maximum of 9 months to avert temporary disturbances of the drug market and to uphold the balance of that. The Parliament passed the modification motion back on 14 June with no abstentions and no votes against. An agreement was reached last Wednesday between the government and interest protection bodies of drug manufacturers which says that medicine costs of patients may not go up this year, thus making it unnecessary that the law modification is made use of. However, drug manufacturers have turned to the President to ask for a norm control before the law takes effect. They argued that the accepted motion does not include clear definitions in relation to an eventual intervention. They are of the opinion that this hurts legal security. After the President’s decision, drug manufacturers stated that they would turn to the Constitutional Court for remedy. According to a joint announcement of the Association of Innovative Drug Manufacturers (Innovatív Gyógyszergyártók Egyesülete), the Interest Protection Society of Generic Drug Manufacturers and Distributors (Generikus Gyógyszergyártók és Forgalmazók Érdekvédelmi Egyesülete) and the Society of Vaccination Manufacturers and Distributors (Védõoltásgyártók és Forgalmazók Egyesülete), the National Association of Hungarian Drug Manufacturers (Magyarországi Gyógyszergyártók Országos Szövetsége) will make a decision on joining the protest later on. Producers argued that since the topic is of a constitutional nature, it should be treated independently of the agreement made between the government and manufacturers’ associations. (NSZ, p 1, Nszab, p 6, MH, p 3)

INTERNAL AFFAIRS - 23.06.2004 Half of party supporters turned up to vote
According to a survey by pollster Szonda Ipsos, conducted days before European Parliament elections, opposition Fidesz Hungarian Civic Alliance has a 31 percent support base, translating to two and a half million Hungarians. At the same time, governing Hungarian Socialist Party MSZP has a corresponding figure of 25 percent, that is, two million people. It can be seen from this data that socialists could persuade half of their supporters to turn up to vote on June 13, whilst Fidesz managed to make 60 percent of its fans to take part in the voting. Should elections be held this Sunday, largest opposition force Fidesz could count on 49 percent of those with a decided party preference, whilst socialists only on 38 percent. Junior coalition partner Alliance of Free Democrats SZDSZ has a 5 percent support base in this respect, whilst opposition Hungarian Democratic Forum MDF boasts 4 percent. (Nszab, p 1 and 6)

Palestinian dentist released
The Palestinian dentist, charged with terrorism, has been released. The court is of the opinion that evidence collected against S.Tayseer, arrested back in April on grounds of organising attempts against Jewish institutions in Budapest, does not confirm that further charges should be made against him. However, the police are continuing the process. (MH, p 4, NSZ, p 3)

INTERNAL AFFAIRS - 25.06.2004 Americans leaving Taszár
Last American troops are set to leave the military base of Taszár till the end of the month. The base will go the Hungarian National Defence and will be liquidated by the end of next year. However, the United States has not informed whether it was going to resign from the base near Kaposvár for good. The base is in an area of 550 hectares and Taszár, Kaposvár and Somogy county are all interested in getting it. (VG, p 4)

Drug market to calm down
Vast majority of drug manufactures, among them the 30 largest market players has signed the agreement on drug prices. Under the contract, manufactures are obliged not to modify their prices this year. Starting from January 2005, they can hike the prices of their subsidised products only if the rate of euro goes out of the 6.25 percent band. This regulation applies till the end of 2006. Manufactures that have not signed the agreement yet have to take into consideration that the government may freeze their prices at the rate of 85 percent. Financial burden on patients will not be larger, since drug manufactures will support the drug fund to the tune of HUF 9 million and the government with HUF 12 billion. Experts are hoping that the agreement marks the end of the abrupt lack of medicine. In the meantime, economic competition watchdog GVH has started an investigation to find out whether holding back products before the price hike of July was the real cause of supply problems. GVH is investigating 10 wholesalers that account for more than 90 percent of the market. (VG, p 5)

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FOREIGN AFFAIRS - 23.06.2004 Support for support
Hungarian troops will stay in Iraq till 31 December and the United States is to grant economic support for the development of Hungarian infrastructure in return. This has been one of the topics on the agenda of talks between Hungarian Prime Minister Péter Medgyessy and American President George Bush. Medgyessy informed Bush of the European Union’s standpoint, too. On the press conference of the two politicians, which was broadcast live on CNN channel, Bush promised that they would investigate Hungary’s appeal to abolish visa obligations for its citizens. He termed Hungary as an example of democracy and praised economic plans of the government. Medgyessy also met American Secretary of State Colin Powell in a working lunch yesterday. (MH, p 1 and 7, Nszab, p 1 and 3, NSZ, p 1 and 2)

FOREIGN AFFAIRS, EUROPEAN UNION - 24.06.2004 Green light for Union funds for new members
The European Commission approved the more than EUR 24 billion „money frame„ for the ten new member states for the period of between 2004 and 2006. This amount is going to cover three-fourth of investments realised from the structural and cohesion fund and the ratio sometimes reaches even fourfifth. Hungary may have EUR 2.8 billion in the first three years, should it apply with appropriate projects. (Nszab, p 15, MH, p 11)

FOREIGN AFFAIRS, EUROPEAN UNION - 25.06.2004 Annual deficit may get lower - Brussels
The European Committee has stated that outside circumstances do not justify an excessive general government deficit. The committee started a process against Hungary and five other European Union member states on the back of too large deficit figures. A decision can be expected on 5 July. As for the macroeconomic path for he next years, Brussels has a critical view with expectations of the Finance Ministry termed optimistic. In addition, the European Committee draws the attention to risk factors. As for the Hungarian convergence program, the committee suggests that the council should approve it. According to the analysis, Hungary and the Czech Republic can see lower deficit figures this year, whilst in Poland and Slovakia they can go even higher. (VG, p 1 and 3, NG, p 1 and 2)

MACROECONOMY - 22.06.2004 Base rate to remain unchanged till August?
In line with expectations, the central bank’s Monetary Council has left the benchmark interest rate on hold at 11.50 percent. Analysts are of the opinion that there will not be another rate cut till the end of August, so the main rate will be left unchanged. Should there not be macroeconomic indicators significantly differing from expectations, the council is not likely to carry out any modifications. The Monetary Council said it maintained its view that the stance of monetary policy should remain cautious because of different economic uncertainties. Economist of ING Bank György Barcza is of the opinion that it means that the National Bank of Hungary will have an eye on developments and wait for the appearance of investors who can contribute to lower long-term yields. Some sources say that summer break can increase the fragile nature of the market, since lower liquidity will mean that extreme deals of lower amount may generate significant changes. The decision had no effect on the forint: after the announcement was made, it strengthened slightly, but the tendency proved to be short and temporary. (NG, p 3, VG, p 13)

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MACROECONOMY - 23.06.2004 Hungary in line for a European Union censure
It can not be excluded that Hungary will be the only European Union member state that has not met any Maastricht criteria. As for inflation, it is for sure that we can not push it down to the expected 2.7 percent rate with projections ranging from 6.5 percent to 6.9 percent. When it comes to general government deficit, the 5.8 percent forecast is far from the prescribed 3 percent. Up to now, at least national debt seemed not to exceed 60 percent of GDP. However, sources from the central bank warn that Ecofin, made up of the finance ministers of European Union member states, will present a draft report to the European Committee, which - based on the Hungarian convergence program and probably on the back of a calculation error - sets the national debt for this year at 60.4 percent of GDP. (The Finance Ministry’s convergence program foresees a corresponding figure of 59.4 percent.) Sources from the National Bank of Hungary add that Ecofin is not satisfied with the fact that Hungarian general government deficit would be decreased to under 3 percent of the GDP only by 2008, whilst the vast majority of member states promised to do so by 2006. The final version of the report will be published on 5 July and a decision on against which countries a process will be started on the back of high deficit figures will be made simultaneously. (At present, general government deficit is likely to exceed 3 percent of GDP in 12 countries.) On the course of the deficit process, Ecofin can come up with recommendations on how to lower the deficit, however, it can not apply sanctions against countries recently joining the Union. (NG, p 1 and 3, MH, p 9)

MACROECONOMY - 24.06.2004 ICEG: Hungary last but one to catch up to the EU
According to the convergence index of research institute ICEG European Centre and economic daily Világgazdaság, Hungary has not posted any results on the grounds of catching up to the level of the European Union in the past years and outlook is not positive, either. The report says that Hungary is the country with the worst achievements when it comes to meeting Maastricht criteria. On top of all that, Hungary has presented the slowest convergence program to the European Committee. This year is likely to see the best convergence indicators coming from Slovenia and the Czech Republic with Hungary expected to take the last but one position as regards catching up to the Union - the report concludes. (VG, p 1 and 4)

MACROECONOMY - 25.06.2004 GVH offering amnesty for companies acting in cartel
Economic Competition Office (Gazdasági Versenyhivatal (GVH) is offering total amnesty and secrecy for the first company charged with cartel-like operation that will give a damming statement of its competitors. The investigation focuses on background agreements aiming at harmonising prices and dividing the market among them. In case of those companies that come up with the whole truth later on and will present further evidence, the court will release 70-90 percent of the fine. Those reacting to the call at the latest will not even have to give new information, it is enough if they admit that they had taken part in the cartel and will be levied half of the fine. The method seems to working, since in a short period, companies have turned to the economic competition watchdog in 4-5 large cases. Department head of GVH said that they do not want to make players of economic life betray each other at the court, all they ask for is information that can help to clear the market and do away with price manipulating firms. (MH, p 1 and 9)

Investors are discouraged by the lack of professionals
Budapest lacks research and development, sales and marketing executives the most, whilst Northern Hungary is suffering from the low number of applied programmers. At the same time, whole Hungary is characterised by not enough skilled workers, engineers and technical experts - a study by the GermanHungarian Industrial and Commercial Chamber (Német-Magyar Ipari és Kereskedelmi Kamara) and Kienbaum Executive Consultants reveals. Companies with German interests interviewed are of the opinion that the lack of experts has a negative effect on investment willingness into the country. Half of companies say that professional training is weak and inflexible and it, together with contention, leads to lack of workforce,. The analysis concludes that professional training is not harmonised with demands of employers, thus companies are forced to start their own training programmes. (VG, p 1 and 4)

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BANK - 21.06.2004 K&H posting good first quarter figures
Commercial and Credit Bank K&H increased its total asset figure to HUF 1,499 billion by the end of the first quarter. Stock of loans amounted to HUF 979 billion with deposit stock at HUF 847 billion and investment fund assets at HUF 68 billion. Profit before tax increased 74 percent to HUF 9.273 billion with after-tax profit reaching HUF 7.843 billion, an increase of 83 percent. General Manager Ágnes Bába stated that the growth could be attributed mainly to foreign currency loans and investment services. CEO John Hollows reminded that branch offices, cards and Internet pages of the credit institution have gone through a significant change of appearance. (NSZ, 19 Jun, p 5, MH, 19-20 Jun, p 12, MN, 19 Jun, p 12, VG, 21 Jun, p 15, NG, 21 Jun, p 4)

BANK - 22.06.2004 Budapest Bank to change its name?
In the draft of an aggressive expansion by General Electric experienced on the banking market, the company would like to unite all its commercial banks under the brand name of GE Money. GE would like to compete with giant banks like Citigroup and HSBC. To this end, it plans to enter the market with loans of easier access and lower interest rates than its competitors are granting. The company has started changing its name in Germany and Austria and plans call for the continuation of the process in 15 European and Asian countries in the autumn. As for the United States, name changes of banks will start next year. Budapest Bank, the Hungarian subsidiary of GE has not received any official notification of the name change – a source from the bank informed. According to some sources, the merger would mainly apply to the foreign units of GE Consumer Finance. However, a change of the well-introduced BB-brand, standing on a safe base on the Hungarian market, is not justified. (NG, p 5, VG, p 15)

BANK - 24.06.2004 OTP to get a foothold in Serbia
After Slovakia, Bulgaria and Romania, National Savings Bank OTP is now set to enter the Serbian market as well. To this end, the largest Hungarian bank applied on Friday for the purchase of Serbian credit institution Jubanka a.d. Beograd’s 88 percent share package, which would mean acquiring a majority stake. The tender process starts with a pre-qualification. The letter of intent does not mean any obligations for OTP for the future. Jubanka posted an EUR 217 million total asset figure last year and its losses amounted to EUR 7 million. The credit institution boasts 250,000 clients and almost 90 branch offices. Interest for the bank is quite large with 10 banks, among them Bank Austria Creditanstalt, HVB, Banca Intesa and Piraeus Bank taking part in the race for the fifth largest Serbian credit institution. The Serbian National Bank calculates that the value of the 88 percent share package on offer is EUR 112 million. (NG, p 11, MH, p 13, VG, p 18)

BANK - 25.06.2004 Postabank to become Erste
The name “Postabank” will be abolished as the result of a legal merger between Erste Bank Hungary and Postabank by the end of September. The new credit institution will bear the name „Erste Bank Hungary”. A final decision on the legal merger of the two banks will be made on the parallel annual general meeting of Erste and Postabank on Friday. General Manager Péter Kisbenedek said that after the merger, the new bank would be a legal successor and thus will bear all obligations. He added that the merger would have no effect on the legal case of minority shareholders of Postabank. The capital stock of the united company will amount to HUF 39.411 billion. Also on the agenda of the annual general meeting of Friday will be a decision on the exchange value of shares. Under a proposal made by the Board of Directors, Postabank will have a 71.12 percent stake in the merged bank with Erste accounting for the remaining 28.88 percent. Owners of Erste Bank will be offered 2,932 ordinary shares in the merged bank with a face value of HUF 1 in exchange for HUF 3,918 Erste face value ordinary shares. Investors of Postabank are in for 7 HUF 1 shares in exchange for the ordinary share with a HUF 5 face value and the dividend priority share. Owners will get 14,000 HUF 1 new ordinary shares in return for Postabank’s serial B ordinary shares with a face value of HUF 10,000. Péter Kisbenedek stated that the integration was on track and costs would stay under the limit. He is of the opinion that consolidated total assets of the credit institution will exceed HUF 1000 billion at the end of the year with after-tax profits above HUF 5 billion. (VG, p 18, NG, p 5, MH, p 13)

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HEAVY INDUSTRY - 22.06.2004 DAM tender again
After the last tender was qualified unsuccessful on Friday, liquidator Mátraholding has asked for bids for the assets of steelmaker DAM Steel for the fourth time. However, conditions have seen changes. The new process left the assets of DAM priced at HUF 5.325 billion, but this time bids can be made for not only the whole asset, but also for its elements that can be operated separately. The General Manager of the liquidator argues that the process was fastened since dismissal of workers had already started and should the company not be sold soon, there will be no one to restart production with. (MH, p 10)

CHEMICAL INDUSTRY - 24.06.2004 Trilak counts on expansion
Trilak Festékgyártó Kft. (Trilak Paint Producer Ltd.) the leading player of the Hungarian paint market of 20-25 billion forints closed its last business year with a sales revenue of 11.6 billion forints. This year the company expects an expansion of 5-6 percent just like previous year. The company produces and sells sort of paints, which are consumed mainly in the retail sector. László Horváth managing director said: paint import in Hungary will expectably grow in the coming years and companies located in the neighbouring countries will introduce new products to the market. The market has significant reserves: paint consumption adds up to 17-20 kg per capita annually in the EU member countries, while this figure is around only 10-12 kg in Hungary. (VG p16)

ENERGY INDUSTRY - 22.06.2004 E.On continuing squeeze out
In spite of a resolution of the Municipal Court for suspending the process, E.On continues the squeeze out of minority shareholders of regional electricity distributors Titász, Édász, and Dédász. These companies announced on Monday that they would invalidate all of their registered ordinary shares that were not offered for sale by shareholders to majority owner E.On from 23 June. The Municipal Court has earlier decided on the suspension of the squeeze out, because one minority shareholder has contested the E.On process. Reacting to the announcement on the cancellation, the legal representative of the minority Édász shareholder that took the case to court stated that they would do all possible legal steps in connection with the case and would dispute the court motion on the cancellation. He added that they would start a compensation case against E.On Hungária, Édász Rt. and HVB Bank, the latter taking part as a distributor in the case. The cancellation is contested by the Interest Protection Association of Private Stock Exchange Investors (Tõzsdei Egyéni Befektetõk Érdekvédelmi Szövetsége) that holds one share in all three companies, too. The association said they would start civil cases, should E.On go on with the squeeze out process. (NG, p 11 and 12, VG, p 14)

ENERGY INDUSTRY - 23.06.2004 E.On squeeze out extended
Taking into account the problematic situation, regional electricity distributors Dédász, Titász and Édász have extended the final deadline of the squeeze out till 5 July. The three companies cited legal cases started on the back of the Édász offer as reasons for the decision. The court has decided on the suspension on the squeeze out in view of the lawsuits. According to some opinion, it can mean the suspension of executing the bidding right at the same time, whilst some interpretations add that E.On Hungária can not execute bidding at all. Under an announcement by the electricity companies, shareholder rights of owners of shares not offered for sale are acknowledged as long as the legal case comes to an end. These shareholders have to verify through their account executives that they own shares of the given company. E.On also issued a statement, warning that should shareholders not meet their obligations (for example the transfer of invalidated shares), then they are accountable for the damage caused. (NG, p 11)

E.On to set up power plants
E.On Energie AG is studying opportunities of setting up new power plants not only in Germany and Italy, but also in Hungary. The German utility giant is of the opinion that in Hungary energy production has not kept pace with consumption, thus E.On plans to get positions in energy production in the middle term. E.On’s share on the Hungarian electricity market reaches 45 percent: it has a significant stake in regional electricity distributors Édász (North Trans-Danubian Electricity Supplier Co.), Dédász (South TransDanubian Electricity Supplier Co.) and Titász (Trans-Tisza Electricity Supplier Co.). (MH, p 13, NG, p 5)

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Total focuses on selling special products
After selling its petrol stations Total Hungaria Kereskedelmi Kft. focuses on selling its special products such as bitumen, greases, diluents as well as PB gas – announced Paul Mannes managing director of the company. The leader also gave account of the company’s result achieved last year. The company’s sales revenue decreased bt 0.5 percent to 42.1 billion forints last year, while due to selling of the petrol station network there was an increment in the profit. Operating income grew by 150 percent to over 3.5 billion forints and the company’s profit after taxation increased by 210 percent to 2.6 billion forints. Owing to the elimination of the filling station network this year’s sales revenue will be merely around 12-13 billion forints, however the profit will stay at last year’s level. Total owns two pressure-bottle filling works in Hungary at the moment, but aiming better utilisation of capacities the company will close down the one located in Gyõr in the near future. Total will pursue pressure-bottle filling activity in its plant located in Újudvar/Nagykanizsa in the future. (NG p4)

BUILDING INDUSTRY - 21.06.2004 Race on for M6
National Motorway Rt. (Nemzeti Autópálya Rt.) is to make a decision on bids for the construction of motorway M6. The order is priced at HUF 80-90 billion. Taking part in the bidding process are Housing and Construction Holding, Vinci Concessions SA, Dunamenti Autópálya Konzorcium, made up of Vinci SA és a Betonút Rt., Bilfinger Berger BOT, Porr Infrastruktur Swietelsky International M6 Duna Autópálya Konzorcium and Euroinvest/Strabag/OTP/ASF/Egis Pályázati Konzorcium. The 57-kilometre stretch, connecting Érd and Dunaújváros will be ready by the spring of 2006. (MH, 19-20 Jun, p 12)

ELECTRONICS - 21.06.2004 American order for Videoton
Videoton Holding Rt. will supply light regulators and driving units to the English and Dutch contingent of American Eaton to the tune of HUF 1.5 billion. Orders may go up to HUF 2.5-3 billion next year. Larger consignments will be transported from the Bulgarian plant, whilst lower ones from Videoton’s Hungarian plants. According to General Manager Péter Lakatos, after posting a HUF 72 billion sales revenue last year, the corresponding figure may see a 10 percent growth in 2004. (MH, p 11, NG, p 4)

Ericsson to bring centre
Ericsson will establish a service centre related to telecommunication networks spreading to the whole world in Hungary. The company currently employs 550 persons in our country in the field of research and development. The new centre can be set up within a few months and will expectedly employ more than one hundred people. (NSZ June 19th p10, MH June 19-20th p9, VG June 21st p10, NG June 21st p5)

TELECOMMUNICATION - 23.06.2004 AH getting out of Vodafone this year?
General Manager of broadcasting company Antenna Hungária (AH) Géza László has resigned from his position as a Member of the Board in mobile service provider Vodafone Magyarország Rt. All this does not mean, however, that Antenna will have no control in Vodafone, since other AH executives, among them Péter Dobozi, General Manager of Antenna Telecommunications Rt. (Antenna Távközlési Rt), will take part in the management of the mobile company in the future. Antenna Hungária holds a 12.1 percent stake in Vodafone Rt. and has been in talks with the parent company of Vodafone on the package it owns. Experts are of the opinion that a decision on the sale of the share package can be made already this year. (According to sources, AH can get up to HUF 17.6 billion for it.) This would be good for AH, since an eventual privatisation would gain a lot from a closed deal and also because Vodafone is likely to take part in the bidding process for the UMTS tender, scheduled for the autumn. Investment costs of UMTS mean that the mobile company is not likely to pay dividend for some time and it is fresh capital that Antenna Hungária would need the most. (NG, p 11 and 12)

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TELECOMMUNICATION - 25.06.2004 Matáv in expansion
Parent company Deutsche Telekom has approved the expansion plans of Hungarian telecommunication company Matáv in Eastern and South-eastern parts of Europe - German economic weekly Wirtschaftswoche writes. Main destinations are Romania, Serbia and Montenegro, Bulgaria and Moldavia. Matáv can spend EUR 1 billion on acquisitions and this amount would not jeopardise its credit rating, either. Besides expansion, Deutsche Telekom plans stronger co-operation between subsidiaries. All mobile interest will be renamed T-Mobile and fixed-line telephone service providers will also be renamed sooner or later. T-Systems Ungarn of Matáv can operate as T-Com in the future and will merge into the company. Internet service provider Axelero, for the time being, will not be named T-Online, (NG, p 11 and 12)

Siemens’ mobile division to stay in Germany
The mobile telephone manufacturing unit of Siemens will not move to Hungary, since the company has made an agreement with trade unions. Under the agreement, working places in plants of Kamp-Lintfort and Bocholt will be saved. The company had calculated earlier that relocating production to Hungary would have meant 30 percent savings in costs and firing 2,000 employees. The draft contract of Siemens and trade union IG Metall is for two years and increases weekly working time from the current 35 hours to 40. Workers will not be given several extra benefits in the future and there will be no premium for overtime, either. (VG, p 9)

INFORMATION TECHNOLOGY - 24.06.2004 SAP to come to Central Europe
SAP is to set up a new service centre in one of the Central European countries and it would relocate its human resource, financial and administrative divisions, too. The decision is aimed at decreasing costs German newspaper WirtschaftsWoche wrote yesterday, citing corporate sources. The weekly added that the software giant is considering Bratislava, Prague and Budapest as its new centre. A total of 2,000 people work in the above-mentioned three divisions in the German central office, whilst total workforce reaches 3,100 employees. (MH, p 11)

FOOD INDUSTRY - 21.06.2004 Philip Morris’ Eger plant to be closed
On the back of the management’s decision, Philip Morris Magyarország Kft. is to close its plant in Eger for good – the company has informed the county labour office. An advisor appointed by Philip Morris, together with the labour office, would try and help the 334 workers that stay without job as a result of the decision. To this end, a schedule has been worked out. An advisory centre has been set up on the premises of the company, aimed at looking for opportunities for other job. Production will be terminated by the end of the year in Hungary and will be relocated to one of the plants operating in another European Union member state. Philip Morris will establish its national logistics centre in Eger, thus the plant will be extended. Contract with wholesalers will expire at the end of the year. In a related move, an own supply system will be operational by next May. Other sector peer British American Tobacco (BAT) is not planning to close its production plant in Pécs. General Manager Pauline Stam is of the opinion that the tobacco industry was not surprised to hear the information on the closure of plants in Eger and earlier in Debrecen, since tax increases of past year have left the sector in a critical situation. According to BAT, legal turnover figures were 20 percent down with unchanged consumption, whilst the black market gained ground and now accounts to 30 percent of the market. Tabán Trafik Magyarország Rt. announced that its Salgótarján tobacco manufacturing plant would continue production. (NSZ, 19 Jun, p 10, Nszab, 19 Jun, p 13, MH, 19-20 Jun, p 9, MN, 19 Jun, p 13, VG, 21 Jun, p 11, NG; 21 Jun, p 4)

Podravka to downsize
Retail manufacturer Podravka International Kft. is to fire 12 of its 80 employees within days. Economic Director Ferenc Újvári said that on the back of lower demand, the company’s production went down by 20 percent last year, that is why the decision was made. The Croatian parent company, awaiting privatisation, is to screen the operation of its Polish, Czech and German plants working at a larger cost, however, a decision on their fate is not expected before privatisation takes place. (NG, p 1 and 4)

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FOOD INDUSTRY - 22.06.2004 Spar to produce meat products in an own plant
Retail chain Spar Magyarország is to spend almost HUF 7 billion for investments. Nearly HUF 3.7 billion will be spent on the extension of the warehouse centre in Bicske, where HUF 3.3 billion will go for a meat processing plant of 6.000 square meters. The plant will employ 120 and plans call for 3.5 tones of own products to be produced here. Besides cost efficiency, better quality was also an argument for the establishment of the plant. At the same time, almost half of Spar’s suppliers will have to look for other partners. (MH, p 11)

Troubled cooling industry
According to sector analysts, Hungarian cooling industry enterprises are in a difficult situation in view of large energy costs and the appearance of foreign competitors on the market. Zoltán Baráth, Production Director of Székesfehérvári Hûtõipari Rt., distributing its products under the name of Fevita and posting a turnover of HUF 3.8 billion last year, stated that entering the European Union has not brought about any significant changes in their operations, since half of export income had already been generated by export markets earlier. What is a problem for them is that Polish and Slovakian sector peers are operating in a better agricultural subsidy system, which makes them capable of competing with domestic prices. He added that higher costs would result in almost disappearing profits for his company. French Bonduelle Nagykõrös Kft., mainly processing green pea and sweet corn, is bringing its frozen products from abroad and is only distributing them in Hungary. (VG, p 12)

FOOD INDUSTRY - 25.06.2004 Imported beers gaining ground
This year can see a total of 800,000 hectolitres of imported beer coming to Hungary after the corresponding figure of 400,000-500,000 hectolitres last year. This amount exceeds 10 percent of the average domestic consumption of 7.8 million hectolitres. The invasion of cheap foreign beers started early last year when German shops were forced to get back beer cans that were bought in their shops, thus part of merchants rather gave up selling canned products. German manufacturers then sold their products from the warehouse at production cost. However, they are not likely to terminate production that was started with large cost back in the nineties, so imported beer is gaining ground constantly. The process got further impetus after custom was terminated this May. As a result, Hungarian retail chains sell canned beer for as cheap as HUF 80-90 and more and more premises of the catering trade also serve this product. Large import figures mainly hurt middle quality beers, accounting for 55 percent of consumption and experts of the beer sector do not rule out that in view of unfavourable Hungarian tendencies, international companies operating in Hungary will relocate their production more to the North or to the East. (NSZ, p 5)

Poultry may bet more expensive
According to experts, poultry meat prices are likely to follow higher pork prices within a month, since the two sectors’ prices move in parallel. The 10-15 percent price hike of pork meat may result in a 5-8 percent price increase in the poultry sector, but it may go up to even 10 percent in some cases. The process can be slowed down by higher figures of cheap imports and also because some domestic meat processors are selling their products at a discounted rate. Largest criticism in this respect is addressed to state-owned agricultural company Bábolna with some of its competitors already turning to authorities in Brussels with charges of infringement of competition rights. (VG, p 1 and 5)

AGRICULTURE - 21.06.2004 Hyundai machines from Axiál
The Baja based Axiál Ltd. entered into an exclusive contract with the Hyundai group about the sale of construction machines in Hungary. Last year the group sold machines in the value of 91 million euros in Europe. Axiál counts on the sale of 150 machines and a turnover of HUF one billion in three years. (NG p5)

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AGRICULTURE - 23.06.2004 Price of pork on the increase
After Hungary’s accession to the European Union, the purchase price of pork has seen a 15 percent increase and that of good quality ones will go up by a further 10 percent. Higher prices can be attributed to lower pork numbers on one hand, and the price-increasing trend of the Union and price equalisation experienced there on the other. Hungarian pork breeders, suffering from financial difficulties earlier, can get hope from the fact that after this year’s harvest, feeding will expectedly get cheaper. In a parallel development with larger pork prices, domestic meat prices are also on the increase: Tesco reported 10 percent larger prices in two months, whilst Spar saw corresponding figures of between 5 and 7 percent. (VG, p 11)

AGRICULTURE - 24.06.2004 Wheat speculation to get impetus?
Speculations could gain a lot of money from the 5.3 million ton wheat crop, which is 80 percent more than last year. They make use of the fact that the HUF 26,000 per ton intervention price, set by the European Union, making production profitable, will take effect only from 1 November, but many farmers have no money to store their products till that time, thus they are forced to sell. Information has it that merchants that offer HUF 16,000-18,000 for the wheat before harvest are hunting helpless producers. Although this money does not cover even production cost, many are rumoured to have made a deal already. Zoltán Lakatos, Chairman of the Association of Grain Processors, Feed Manufacturers and Traders (Magyar Gabonafeldolgozók, Takarmánygyártók és Kereskedõk Szövetsége) is of the opinion that farmers do not have to sell their wheat too early and too cheap, since several banks have worked out constructions, under which they could be given 95-98 percent of the intervention price. (MH, p 11)

TRADE, FAIRS - 22.06.2004 AEG going to Electrolux
White goods manufacturer Electrolux group would earmark more than EUR 50 million to strengthen the AEG brand, recently bought from Daimler-Chrysler for EUR 18 million. As a result of the transaction, the Swedish company will be present on the Hungarian market with three brands: there will be equipment under the name of Electrolux with current AEG products marketed under the name of AEG-Electrolux and Zanussi will also stay on the market. Electrolux posted sale revenue of HUF 113 billion in Hungary last year and 5 percent of that came from AEG products with Electrolux accounting for 20 percent and Zanussi taking the remaining part. (NG, p 5)

E.On continuing squeeze out
In spite of a resolution of the Municipal Court for suspending the process, E.On continues the squeeze out of minority shareholders of regional electricity distributors Titász, Édász, and Dédász. These companies announced on Monday that they would invalidate all of their registered ordinary shares that were not offered for sale by shareholders to majority owner E.On from 23 June. The Municipal Court has earlier decided on the suspension of the squeeze out, because one minority shareholder has contested the E.On process. Reacting to the announcement on the cancellation, the legal representative of the minority Édász shareholder that took the case to court stated that they would do all possible legal steps in connection with the case and would dispute the court motion on the cancellation. He added that they would start a compensation case against E.On Hungária, Édász Rt. and HVB Bank, the latter taking part as a distributor in the case. The cancellation is contested by the Interest Protection Association of Private Stock Exchange Investors (Tõzsdei Egyéni Befektetõk Érdekvédelmi Szövetsége) that holds one share in all three companies, too. The association said they would start civil cases, should E.On go on with the squeeze out process. (NG, p 11 and 12, VG, p 14)

TRADE, FAIRS - 23.06.2004 New financial services in Tesco hypermarkets
As of yesterday the Tesco Financial Partner program relieved Budapest Bank’s goods crediting service at Tesco hypermarkets. The program offers four credit lines. „Áruhitelkártya” Goods-credit card that amalgamates the advantages of a credit card and goods credit is replacing now the usual goods credit, the card can be used for purchases between HUF 20 thousand and 200 thousand. The service Áruhitel Plusz (Goods-credit Plus) offers higher credit limit, between 200 thousand and 500 thousand forints. There are Tesco Purchase Cards, which product is already known (15 thousand cards) and personal loan in Tesco’s new financial package. There are more and more customers interested in personal loans. (NG p4)

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TRADE, FAIRS - 24.06.2004 Tesco store with less ground space to be constructed in Százhalombatta
Tesco-Globál Áruházak Rt. (Tesco Global Stores Co.) starts to build a new store, the ground space of which is less than used to be. The hypermarket will be located in Százhalombatta and the building will lie on 3000 square metres. The company has already achieved a country wide coverage with its hypermarkets of 5-12 thousand square metres, as a result of this they intend to build smaller size units in smaller towns in the future. The store in Százhalombatta will represent the first step of this policy. (NG p5)

TRAFFIC, TRANSPORT - 22.06.2004 Malév checking in one-millionth passenger
The one-millionth passenger of Hungarian airlines Malév checked in one month earlier than last year. The national carrier counts on passenger numbers at 2.6 million this year after a corresponding figure of 2.3 million in 2003. As for destinations, Paris saw an 11.2 percent growth, Milan a 13.8 percent one with Venice posting 33.12 more passengers than a year ago. 26 percent more people travelled to Helsinki and 24 percent more to Stockholm, whilst London boasted 41 percent more Malév passengers. This is a remarkable achievement, since in the latter routes budget airlines are also operating several flights. Higher numbers can be attributed to renewed price and commercial policy introduced last year on one hand and to several new routes in the timetable on the other. Despite spectacularly increasing passenger figures the company’s operation losses acceeded last year’s critical level in the first five months of this year already, which is said to seriously stagger the Ministry of Finance and the State Privatisation and Holding Co., since Malév that accummulated losses of 13.5 billion last year intended to reach break even this year already, and this was the prerequisite of receiving the second, HUF 3 billion instalment of the HUF 1ö billion state subsidy that was promised in December. Among high costs at least half of the HUF 1.1 billion separated for information technology consulting is hard to justify, but it is also surprising that headcount is increasing at the company that is fighting for survival, and personnel expenditure is approximately one-quarter higher than a year ago. (NG p5, MH p11)

Waberer’s on its way to the bourse
Waberer’s Group would like to go public in the third quarter of the year – Chairman of the company György Waberer announced in a press conference. The transportation company plans to have annual funds of HUF 10 billion from entering the stock exchange, which will be earmarked for developments. The group had sales revenue of HUF 57.1 billion, an increase of HUF 2.2 billion. Operating profits grew 45.6 percent and reached HUF 5 billion. Higher figures are a result of significantly better indicators from the parent company, Hungarocamion and BILK Logistics RT. Waberer told the press conference that besides freight transportation, the company sees good chances in personal transportation, too. Thus, the group is to take part in the privatisation of 24 Volán companies. He added that in spite of earlier plans, Waberer’s Group will not take part in the privatisation of shipping company Mahart, but plans to acquire foreign logistics service providers to strengthen its regional role. A total of EUR 8-12 million (HUF 2-3 billion) would be earmarked for acquisitions this year, he concluded. (NG, p 5, MH, p 11)

TRAFFIC, TRANSPORT - 23.06.2004 First private railway on track
The engine car of the first Hungarian private railway getting an official licence has gone through the exams yesterday, meaning that Floyd Kft, can start test runs on the Szentgotthárd-Szombathely-SopronWiener Neustadt route. The company aims to have part of railways transportation that has been shifted to roads and plans to operate five diesel and ten electric locomotives by the end of the year on the above-mentioned stretch and expectedly between Curtici and Hegyeshalom and Curtici and Sopron. (Nszab, p 15, NG, p 5, NSZ, p 5)

Wizz Air starts from Budapest tomorrow
Wizz Air will start its first flights from Budapest to London, Paris, Prague, Rome, Athens and Barcelona, while there will be lines to Stockholm and Brussels available as of the middle of next month. The first flights will be almost completely booked out. In the framework of a hot sales at tickets are available to Stockholm and Brussels at a price of 4900. This one-way ticket price does not include duties. Wizz Air’s average ticket price is around 50 euros. The company’s leader József Váradi said: since the very first flight of Wizz Air from Poland in May this year the company transported 20 thousand air passengers up to now and one hundred thousand people want to book tickets for the airways’ flights. (NG p5, MH, p11)

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TRAFFIC, TRANSPORT - 24.06.2004 Croatian motorway ready to Rijeka
After opening a 15-kilometre stretch yesterday, Rijeka can be accessed on a motorway from the Hungarian border with toll at 86 kuna (HUF 3,180). From the end of the month, motorway will connect Zagreb and Split, too. Here toll is 150 kuna from the Hungarian border, that is, HUF 5,500. According to projections, this year will see 10 percent more Hungarian tourists going to Croatia, translating into 400,000. Prices have not increased significantly since last year with accommodation prices and services costing as much as last year. (MH, p 10)

TOURISM, HOSPITALITY - 22.06.2004 Gresham Palace opened
Budapest’s newest luxury hotel Four Seasons Hotel Gresham Palace has opened. Gresco Kft, with Canadian, Irish and Cypriot investors behind, has spent HUF 23.5 billion on reconstructing the secession-style palace, built back in the early 20th century on Roosevelt square, in line with formalities to totally match the original one in design and quality alike. Construction works finished with a three-year delay on the back of these conditions. The luxury hotel has 179 rooms and its management counts that mainly starts, businessmen and prominent personalities will stay at the hotel that has room prices ranging from HUF 60.000 to 900.000 per night. (Former one is for a room for one person with no view to Danube, whilst latter is the 136 square meter presidential suite that can be extended to a 223 square meter one through connecting other rooms.) The hotel has discounted booking prices going down to HUF 51.000 till 31 August. Occupancy rates are projected at 50 percent for this year and managers promise that they will not take part in the degrading price war, characteristic of Hungarian hotels recently, that is, they will not lower their rates. The interior of the hotel will not be locked for those interested with guides showing them around. (MH, p 10 and 11)

Hotel Auróra to open in October
Hotel Auróra in Balatonalmádi is expected to be opened in October, 18 months later than planned. György Wossala, owner of the hotel, explained the issue with the breakup with the former general contractor. The total renovation costs a total of HUF 1.6 billion. The hotel will be operated by Wossala Hotels Ltd. belonging to Almádi Fürdõ Rt. (Almádi Bath Co.) that is in the ownership of Wossala. The operating firm is currently negotiating with the American Ramada hotel chain about co-operation. According to Wossala they were close to the agreement, but for the time being there is no signed contract. (VG p11)

TOURISM, HOSPITALITY - 25.06.2004 Pannonia to carry out development
The houses of Pannonia Hotels operated at an exploitage level of 67 percent in the first five months of the year. The company’s units were booked out in 85 percent. Compared to last year’s prices, the average income per room increased by 26 percent. Patrick Bourguignon, prospective general manager of the company said: the most significant increase was measured in the conference- and event tourism, as a result of this the company will implement an investments in Budapest Kongresszusi Központban (Budapest Congress Centre) in the value of 10 million euros and another investment in Novotel Budapest Congress Hotel also for 10 million euros. The company intends to strengthen the brand of Ibis in the Hungarian market. They will spend 30 million euros on these hotels. The company is analysing the possibility of constructing two hotels in Budapest, one in Debrecen and one in Gyõr. (VG p9)

SERVICES - 24.06.2004 Szerencsejáték Rt.’s monopoly to come to an end?
Largest sports event betting company of the world Sportbingbet Plc., posting a more than HUF 1 billion turnover last year, opened a Hungarian language online betting page. The company is competing with Szerencsejáték Rt. and made betting available for Hungarians since the start of the football European Championships in Portugal. The Gambling supervision (Szerencsejáték Felügyelet) has started an investigation in the view of the competitor’s emergence on the Hungarian market, citing reasons that under effective Hungarian regulations only majority state-owned companies can organise betting games. In reaction to the measure, Sportbingbet stated that Hungarian players could bet at the company legally, since in case of Internet-based betting games the venue of the betting is the domicile of the game organiser, that is, England. (VG, p 1 and 13)

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INVESTMENT, DEVELOPMENT - 21.06.2004 Norsk Hydro brings new production
The Norwegian Norsk Hydro will move the production of turbo cylinder heads manufactured for General Motors from England to Gyõr. 580 jobs will be terminated in the plant in Leeds. (Nszab. June 19th p13, NG June 21st p4, MH June 21st p12)

INVESTMENT, DEVELOPMENT - 25.06.2004 Israeli investors in Miskolc
An Israeli investor group spends more than 3 billion forints on the development of bazaar-block owned by the local government. In order to implement the project real estate trading and development company E.R.D. Building City Center Ingatlanforgalmazó és Ingatlanfejlesztõ and the municipality will found an enterprise through MIK Rt. in a business interest ration of 76-24 percent. (NSZ, p10)

Regional Renault-warehouse basis in Gyõr
Renault’s new warehouse centre will operate as from September. The company will supply its partners in Central-Eastern-European partners with Renault and Nissan spare parts from this centre. Hungarian Allience Logistics Logisztikai és Raktározási Kft. (logistics and warehousing Ltd.) will only lease the building, the costs of construction of which will add up to 2.3 billion forints, and its ground space will be 20 thousand square metres. The project will be built on commission of the real estate developer company Elrogan Ingatlanfejlesztõ Kft. and implemented by GSE Hungárai Kft. (All players in this projection are French interested companies.) (NSZ, p10)

CULTURE - 21.06.2004 After Monet, Picasso, Cézanne and Gauguin exhibition on the way to Hungary
Minister of Cultural Heritage István Hiller made an agreement with his French counterpart Jean-Jacques Aillgon on a temporary exhibition. Under the Paris arrangement, an even larger exhibition is on its way to Budapest than the successful Monet one in Arts Hall. The exhibition, entitled Lights and Shadows is to open in Arts Hall this December and is a summary of French painting of 400 years – from the beginning of 17th century to the end of 20th. The 123 paintings will be leased by the largest French museums, from Louver to Orsy. List of painters include giants like Picasso, Cézanne, Delacroix, Seurat, Monet and Gauguin. The exhibition lasts three months in Arts Hall. The meeting of the two ministers in France also saw discussions on an eventual Matisse exhibition in Budapest, scheduled for the end of 2005 at the earliest. (Nszab, 19 Jun, p 1)

MEDIA - 23.06.2004 Ringier Hungary significantly increased its sales revenue
Ringier Group’s sales revenue decreased by 2 percents to 1 billion franks, while the company’s profit increased by 10 percent to 43.2 million franks. Ringier’s Hungarian subsidiary increased its sales revenue significantly, by CHF 32 millions to 74.8 million Swiss francs. Concerning Hungarian journals - in the market of daily papers the income arising from advertisements was extremely high at Blikk. The paper is constantly leading the market with its number of sold copies of 250 thousand on the average and its sales figure show additional growth until the end of March. According to the company’s data the increasing tendency - measured up to now - of selling copies of the renewed Népszabadság (People’s Freedom journal) continues. Béla Papp managing director of Ringier Kiadó Kft. said: the first hearing in the lawsuit process initiated against the company because of the additional acquisition of business share in Népszabadság Rt. that was not approved by GVH (Economic Competition Office) will take place in September. the manager added: Ringier will grab all possibilities offered by law to achieve a „European” decree of court that enables keeping their majority ownership in Népszabadság Rt. concerning Magyar Hírlap (Hungarian Journal) the manager said: the paper’s loss decreased further and Ringier does not plan to get rid of the journal, however he confirmed the information according to which they lead negotiations on involving a co-owner. (NG p5)

OTHER - 24.06.2004 Sophia Loren’s son to marry a Hungarian girl
Sophia Loren’s son Carlo Ponti and his Hungarian fiancée Andrea Mészáros will marry in Saint Stephen basilica in Budapest. The Ponti family has rented the main room of the Grassalkovich castle in Gödöllõ for the day of the wedding. (Nszab, p 21)

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