INTERNAL AFFAIRS 12.07.2004 - Health care troops on their way to Kabul 13.07.

2004 - Medián: advantage of Fidesz on the increase 15.07.2004 - Government to increase real wages by 2 percent next year 16.07.2004 - Debate on taxes: no agreement in sight - Hungary ranked 38th in welfare list - Suspicion of cartel-like operation on home loan market MACROECONOMY 14.07.2004 - Inflation peak already behind us? 15.07.2004 - Euro going under HUF 250 16.07.2004 - Companies asking for lower taxes - Industrial parks come and go - Industry driven by export - Larger freedom in Hungary - This year’s deficit estimation may come true BANK 12.07.2004 - Banking profits increased - DSK increasing its profit by one-third - Modifying interest rates at several banks 14.07.2004 - Hungarian banking sector in good position 16.07.2004 - Fake banknotes INSURANCE 12.07.2004 - Insurance companies’ damage compensation payments increased HEAVY INDUSTRY 12.07.2004 - Gold mine near Lake Velencei 13.07.2004 - Hungarian manufacturers supplying spare parts for Russian buses ENERGY INDUSTRY 12.07.2004 - MVM carrying out developments 13.07.2004 - GE Hungary’s sales revenue rose 16.07.2004 - Mol, OMV and PKN to join their forces? BUILDING INDUSTRY 13.07.2004 - Strabag to relocate its cement plants to a neighbouring country? 15.07.2004 - Leier plant in Jánosháza to start production this year ELECTRONICS 16.07.2004 - Sony Ericcson: 30 percent market share TELECOMMUNICATION 15.07.2004 - Colt Telecom to expand in the region - Matáv to buy a Bulgarian mobile service provider? - T-Mobile increasing its media presence significantly INFORMATION TECHNOLOGY 16.07.2004 - EBay heading to Hungary - Illegal software usage FOOD INDUSTRY 13.07.2004 - Baldauf and Fonyódi Ásványvíz acquired by a Croatian company - No lack of butter expected in Hungary 14.07.2004 - Cigarette prices facing drastic increase AGRICULTURE 13.07.2004 - Agrarian prices grew by 20 percent

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TRADE, FAIRS 12.07.2004 - Import of used cars drastically down 13.07.2004 - Bétex opened up store - Financial penalty to Baumax 14.07.2004 - Benetton to change strategy - Sopron more expensive in many respects than Vienna - Cadillac office in Budaörs - Volkswagens sold well in Hungary 16.07.2004 - Strabag acquiring Asia Center - Zara shop in Váci street TRAFFIC, TRANSPORT 13.07.2004 - Waberer's acquired Transporta Kft. 14.07.2004 - In relation to foreign airlines Lufthansa preserved its leading role - MÁV suspending its negotiations with the government - SZK Transport to establish country wide network - Wizz Air raising its capital again 16.07.2004 - Malév aiming at new destinations TOURISM, HOSPITALITY 12.07.2004 - More guests, lower foreign currency income 16.07.2004 - More guests in luxury hotels SERVICES 13.07.2004 - ExxonMobil servicing centre handed over 15.07.2004 - American giant on the domestic PR market INVESTMENT, DEVELOPMENT 12.07.2004 - No price explosion on flat market 13.07.2004 - Budapest is the most attractive destination in the region - Elcoteq intends to open up additional manufacturing plants 14.07.2004 - Hinterberger to move its entire production capacity to Hungary? 15.07.2004 - Perlos to increase capacity 16.07.2004 - Michelin investment in Hungary? SECURITIES’ MARKETS 12.07.2004 - Freesoft: extraordinary risks 16.07.2004 - Warsaw bourse to expand towards Vienna WORLD ECONOMY 13.07.2004 - Hyundai’s Slovakian investment to fall through? CULTURE 12.07.2004 - Scandal instead of Minelli concert MEDIA 12.07.2004 - New owner at Juventus

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INTERNAL AFFAIRS - 12.07.2004 Health care troops on their way to Kabul
14 soldiers specialised in health care will travel to Afghanistan at the end of August. They are going to work in the medical post ensuring the health care safety of the airport in Kabul. Hungary had offered seven military surgeons and seven nurses back in spring. Soldiers will travel to Kabul in the draft of the mission approved in the Parliament, and will number a maximum of 50. At present, a total of 31 Hungarian soldiers are working in Afghanistan and Hungary has recently offered to send an exploratory company to help in NATO operations going on there. (NSZ, 10 Jul, p 3, Nszab, 10 Jul, p 8, MH, 10 Jul, p 4, MN, 10 Jul, p 2)

INTERNAL AFFAIRS - 13.07.2004 Medián: advantage of Fidesz on the increase
One week after June’s European Parliament elections, public opinion supports winners. This is revealed by the latest survey of thinktank Medián. According to this, should elections be held today, opposition Fidesz Hungarian Civic Alliance would get 55 percent of votes with senior governing power Hungarian Socialist Party MSZP at 35 percent. Junior coalition partner Alliance of Free Democrats SZDSZ is at 6 percent and other opposition party Hungarian Democratic Forum MDF at 3 percent. This means that the advantage of Fidesz has gone up by 5 percent since early May. As regards popularity of politicians, the list is still led by MDF chairwoman Ibolya Dávid, followed by chairman of SZDSZ Gábor Kuncze. President Ferenc Mádl is third, whilst Fidesz chairman Viktor Orbán occupies fourth position. Prime Minister Péter Medgyessy is twelfth, leader of Fidesz parliamentary group János Áder is 14th, and Foreign Minister László Kovács is 15th. (MH, p 1 and 4)

INTERNAL AFFAIRS - 15.07.2004 Government to increase real wages by 2 percent next year
The government plans to carry out a two- percent real wage increase in the public sector. The cabinet, calculating with 4.5 percent inflation, foresees a 6.5 percent gross wage increase for public sector workers and civil servants. To cover resulting costs of the pay hike, the government is set to execute rationalisation measures in the public sector, translating into staff reduction in the public administration sphere. According to daily Magyar Hírlap (Hungarian Journal), the central budget is going to give only a bit less than one-third of the necessary funds for the planned wage increase. Yesterday’s cabinet session did not deal with the fourth tax rate and there was no word on the simplified 30 percent personal income tax rate and capital gains tax, either. It is coalition parties that will have discussions on these topics today. (Nszab, p 1 and 6, NSZ, p 3 and 5, MH, p 1 and 9)

INTERNAL AFFAIRS - 16.07.2004 Debate on taxes: no agreement in sight
The viewpoint of governing parties is still far from each other after Yesterday’s consultations on the matter. Senior governing force Hungarian Socialist Party MSZP is still sticking to its opinion that those with an annual income of above HUF 6 million should pay a tax rate of 48 percent and also that capital gains tax should be levied. At the same time, junior coalition partner Alliance of Free Democrats SZDSZ is against this and argues for the introduction of the simplified personal income tax, the rate of which would be set at 30 percent. MSZP, in turn, is of the opinion that this measure could enlarger social injustice. However, there is a point where parties agree and that is the necessity of bringing down tax rates. While working out next year’s budget, socialists will focus on creating workplaces and narrowing social gaps, whilst free democrats give priority to university education and health care. There is total harmony when it comes to a differentiated lowering of health care contributions and also that 50 percent of local industrial taxes could be deducted from the base of corporate tax next year. Experts asked by daily Népszava (People’s Freedom journal) are of the opinion that those with a large income can anyway find loopholes not to pay taxes and the measure MSZP plans to carry out against them is likely to gain income to the central budget only to the tune of HUF 20-30 billion. On the negative side, it would turn intelligentsia forming politics and managers against the government. According to calculations of the daily, introducing the fourth tax bracket would apply to 108 thousand people in Hungary, translating to 2.6 percent of taxpayers. In a related development, increasing the upper limit of the middle tax bracket from the current HUF 2 million to HUF 2.5 million would effect 305 thousand Hungarians, that is, 7.3 percent of those paying tax. (Nszab, p 1 and 6, MH, p 1 and 9, NSZ, p 1 and 3)

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Hungary ranked 38th in welfare list
Hungary is ranked 38th in the welfare list of the United Nations. The survey contains 175 countries and reveals that the best is to live in Norway and that the worst living conditions are in Sierra Leone. Rankings are based on the life expectancy of citizens, finished school studies, literacy and income per capita. It is not surprising that Hungary lags behind Western Europe, the United States of America, Israel and Japan, what really is shocking that we follow countries like Poland, the Czech Republic or Slovenia on the list. According to figures from 2001, life expectancy of women stands at 75.7 years and that of men at 67.3 years. The ratio of literate people is 99.2 percent with women and 99.5 percent with men. 83 percent of women and 80 percent of men have finished primary school studies. When it comes to average income, ladies have USD 9,183 and men USD 15,803 on an annual basis. The study adds that men from Luxembourg have the best salary, averaging USD 78.7 thousand yearly, followed by their Irish (USD 46.2 thousand) and American (USD 42.5 thousand) colleagues. As for women, also ones from Luxembourg came first in the list with USD 29.5 thousand a year. On the negative side, lowest income is in Tanzania, where men earned USD 679 a year and ladies USD 464. (Nszab, p 1 and 15)

Suspicion of cartel-like operation on home loan market
Economic Competition Office GVH started having a closer look at Hungarian home loan sector this week. The watchdog does not want to focus on one bank, but rather would like to have a comprehensive picture of the whole sector. Its investigation will mainly deal with the practise in relation to mortgage home loans, such as conditions, costs, criteria of judgement, value calculation, call option, notification of clients. As it is known, ombudsman Barnabás Lenkovics stated back in May that the current banking practice of mortgage home loans was violating clients’ constitutional rights with properties in several respects. (Nszab, p 15, VG, p 4, NG, p 1 and 4)

MACROECONOMY - 14.07.2004 Inflation peak already behind us?
May inflation was in line with analysts’ forecasts: according to data from the Central Statistics Office KSH, the yearly rate reached 7.5 percent, whilst the month-on-month rate was 0.1 percent. (Morning, 12th July) 2.2 percent of the 7.5 percent rate comes from excise and VAT changes at the beginning of the year. Foodstuff prices went up by 7.8 percent in annual terms, exceeding the average price increase. Market experts are, however, of the opinion that next months will not see as high increases in this segment. Analysts are of the opinion that the economy has already gone though the inflation peak and the rate is set to go down in the remaining part of the year. Gergely Szabó Fórián, one of the pessimistic ones, economist from CA IB Fund Manager counts on a 6.8 percent annual inflation rate for December. György Kovács from Budapest Economics is more optimistic with a 6 percent forecast for the end of the year. The Monetary Council of the National Bank of Hungary is not likely to modify the base rate in its Monday session, the next rate cut could take place in August or in September - Kovács added. Gergely Szabó Fórián stated that decreasing the benchmark interest rate mainly depends on exchange rates and a lot depends on the central bank’s August inflation report and on its opinion on risks for next year’s inflation. The analyst went on to say that an even lower than 5 percent inflation rate could be possible for next spring. (NG, p 1 and 3, VG, p 1 and 4, Nszab, p 13)

MACROECONOMY - 15.07.2004 Euro going under HUF 250
The Hungarian currency, for the first time since the end of April, has broken the rate of HUF/EUR 250 and has strengthened against the dollar to around HUF/USD 200. Experts state that next year will not see very drastic rate movements, however, the euro rate might to up to HUF/EUR 260 in the third quarter of the year in view if uncertainties surrounding the budget. Chairman of the Hungarian Banking Association (Magyar Bankszövetség) Tamás Erdei said that Hungarian interest rates are too high and the forint is unjustifiably too strong compared to the country’s economic climate. Erdei is of the opinion that bettering inflation should lead to a slight interest rate cut by the central bank, thus the benchmark rate level could go down to under 10 percent by the end of the year. (VG, p 15, NSZ, p 5)

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MACROECONOMY - 16.07.2004 Companies asking for lower taxes
A report by the Hungarian European Business Council (Magyar Európai Üzleti Tanács), made up of managers of 14 large companies in the country reveals that deficiencies of the Hungarian tax system jeopardise competitiveness. Multinational companies are asking for lower VAT and wages costs and would like to see a consensus when it comes to main economic development goals in Hungary. According to leading businessmen, Hungary could act as a bridge between current and future members of the European Union. At the same time, four working committees, founded by economic players, have started operating together with the Finance Ministry. The committee responsible for the introduction of euro and for the reform of the tax system has come up with its report already. The document on the budget reform is currently debated, whilst the council that will draft economic policy proposals will have a session in August. (VG, p 1, 3 and 4)

Industrial parks come and go
Due to non-accomplishment of their liabilities incurred (settling companies, creating new jobs) the title „industrial park” can be revoked from 8-10 such units in Hungary by now. Competent authorities will expectably decide about their future existence before the year is out – said Pongorné Csálvári Marianna deputy under-secretary of State at Economic Portfolio to Népszabadság (People’s Freedom journal), who is voted to president of Ipari Parkok Fejlesztési Tanácsa (Development Board of Industrial Parks) founded yesterday. There were 2450 active enterprises in 165 Hungarian industrial parks at the end of last year, and the 139 thousand workers employed there created a value of 3430 billion forints as succeeding of direct investments of an aggregated value of 1256 billion forints. 15 companies submitted applications for the title „industrial park” this year, results will be given out by autumn. (Nszab., p16)

Industry driven by export
Compared to April the industrial output increased by 0.7 percent in May – informed KSH (Central Statistics Office). The index-number increased by 9.9 percent in proportion to previous year’s figure. The export sales grew by 3 percent in one month and productivity improved averagely by 13 percent in the first five months of the year. (VG p4, NG p3)

Larger freedom in Hungary
Hungary has stepped forward nine places in the rankings of Economic Freedom Network (EFN) and currently occupies 26th place out of the 123 countries on the list. The country with the largest freedom is still Hongkong. (VG, p 2)

This year’s deficit estimation may come true
The Ministry of Finance expected a deficit of 89 billion forints in July. István Várfalvi deputy undersecretary of State said: in spite of the fact that the deficit in the first seven months adds up to 5.5 percent of the GDP, the portfolio holds by its currency deficit estimation of 5.8 percent. The deficit will increase further by 145.6 billion forints in the third quarter, but the budget will realise a surplus in the last quarter of the year. the state budget closed the first half of the year with a deficit of 1040 billion forints. The net financing request added up to 1012 billion forints. (VG p4, NG p3)

BANK - 12.07.2004 Banking profits increased
In the first three months of the year the pre-tax profit of credit institutes in Hungary reached HUF 72.9 billion, which exceeds that of the previous year by 33.8 percent – stated PSZÁF (State Supervision of Financial Organisations). The consolidated balance sheet total increased by 23.6 percent to HUF 13148 billion, loans outstanding by 28.3 percent to HUF 8350 billion and deposits by 14 percent to HUF 6729 billion. (NSZ July 10th p5, MN July 7th p12)

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DSK increasing its profit by one-third
Bulgarian DSK Bank, owned by National Savings Bank OTP of Hungary, has posted a BGL 35 million profit in the first part of the year, BLG 8 million (1 EUR= 1.995 BLG) more than in the base period. It translates into an expansion of 30 percent – Bulgarian daily Dnevnik writes. Loan stock of the subsidiary bank went up similarly, by 32 percent to reach BLG 1.6 billion. According to experts, DSK accounts for 7.5 percent of OTP’s total profit and has a 9.4-9.5 percent contribution to the HUF 3,700 billion total assets figure. (NG, p 8)

Modifying interest rates at several banks
Deposit rates slowly followed decisions of the Monetary Council of the National Bank of Hungary in the last months. At present, several banks are offering interest rates of above 11 percent for significant amounts. National Savings Bank OTP is to pay 10.75 percent yearly for sums exceeding HUF 30 million as of Monday. In a similar development, the bank’s deposit stock has increased by 22.5 percent to HUF 1,025.9 billion in the first quarter. Highest interest rates are currently paid by Hungarian Foreign Trade Bank MKB for deposits of three months for above HUF 5 million. Raiffeisen and HVB pay 11.1 percent annually for the same period and same amount of deposit, whilst other credit institution Erste 11.15 percent for amounts of more than 10 million. Inter-Európa Bank is offering negotiable interest rates above HUF 5 million in deposits. (Nszab, 10 Jul, p 13).

BANK - 14.07.2004 Hungarian banking sector in good position
To have a successful credit institution system, low bank density is necessary, in way that the number of branches per one market player and the level of concentration should be high - a study on European banks, conducted by Deutsche Bank Research, reveals. If we take into account the above-mentioned criteria, the Hungarian banking sector is in a good position: according to the latest report of financial market watchdog PSZÁF, a total of 36 credit institutions, 31 banks and 5 specialised financial institutions were operating in Hungary at the end of March. Figures registered at the end of the first quarter show that concentration is quite large: 86.3 percent of deposits and 83 percent of loans belong to the 10 largest banks in the country. Although profitability has been somewhat down, it is still outstanding: the sector?s capital ratio profit is nearing 24 percent. Central European banks can count on significant development, the analysis adds, citing reasons that the population still has not enough banking products at its disposal. Another positive statement is that the bank market is adequately consolidated and already split in the region, thus no further significant acquisitions are expected. (VG, p 15)

BANK - 16.07.2004 Fake banknotes
Exports of the National Bank of Hungary MNB found 6,209 fake banknotes in the first part of the year, twice as many as a year ago. Most popular on this list is the HUF 1,000 banknote with 71 percent of all forgeries. When it comes to euro, only 268 were checked after confiscating 642 forged ones last year. All fake banknotes were manufactured with office copy tools, no banknotes were „made” in printing. (MH, p 9)

INSURANCE - 12.07.2004 Insurance companies’ damage compensation payments increased
In the first quarter of the year HUF 69.8 billion was paid for damages and other services, which is 24 percent more than a year ago – stated PSZÁF (State Supervision of Financial Organisations). The reason for large growth is presumably the mass expiry of life insurances. (Nszab. July 10th p13)

HEAVY INDUSTRY - 12.07.2004 Gold mine near Lake Velencei
The Veszprém mine has given the theoretical licence for Eastmine Bányászati Kft. to explore primary metal and colour metal ores in the area near Lake Velencei. Besides the theoretical go-ahead, several licences from authorities will also be necessary before exploration starts. Should everything go according to plans, test exploration can start near mountain Meleg in 2005. (NG, p 1 and 4)

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HEAVY INDUSTRY - 13.07.2004 Hungarian manufacturers supplying spare parts for Russian buses
Hungarian manufactures, earlier supplying spare parts for Ikarus buses are now transporting front panels for their Russian busmaker partners. The export of these main parts from Knorr-Bremse has reached the level the company has lost when its contact with Ikarus was terminated. The company is supplying also spare parts to Russia, however, these orders are less significant than earlier ones. Sector peer Rába also has to change its strategy: instead of spare parts the firm is now supplying Chinese manufactures with new engines. General Manager of Rába József Szakács is of the opinion that it is to early to speak about the end of the era of Ikarus buses, since there are around 5,000 buses of this brand running in Moscow and total number in Russia reaches 230,000. Rába had earlier been hit hard when several Ukrainian, Turkish and Chinese manufacturers have started offering imitated Rába engines for Russian companies at half price. Latter companies, however, have realised that these engines are lagging behind original ones in terms of life span and quality, so they rather purchase them from the Gyõr-based company. Delco Remy Kft. would like to strengthen its positions in a larger circle than bus manufactures do and plans to spread its ignition engines and generators on the van market as a whole. Opportunities of the Mezõkövesd-headquartered company, however, are hit by the fact that Ukrainian and Russian manufacturers, while fixing their vehicles, usually make use of ready-made engines, imported from Western Europe. As for the spare parts market, the competition is quite harsh. (VG, p 1 and 6)

ENERGY INDUSTRY - 12.07.2004 MVM carrying out developments
National electricity wholesaler MVM is to spend HUF 70 billion in the next three years to modernise its transmission network to neighbouring states. General Manager László Pál said that power plant upgrades would cost around the same. MVM is mainly focusing on establishing electricity and heat generating units connected to district heating services. Pál added that this year’s plan calls for HUF 420 billion in sales revenues and HUF 1-2 billion in losses. He urged the formation of the electric energy act and the operation model of the sector. He is of the opinion that parts of the legal regulation are not working well in practice and new European Union directives taking effect in July should also be introduced. (NSZ, p 5, MH, p 10)

ENERGY INDUSTRY - 13.07.2004 GE Hungary’s sales revenue rose
The sales revenue of General Electric rose from 298 billion forints registered in 2002 to 391 billion forints last year. The significant growth is owing to the expansion of the turbine business line. (MH, p11)

ENERGY INDUSTRY - 16.07.2004 Mol, OMV and PKN to join their forces?
Out of the triplet made up of Hungarian oil and gas distributor Mol and its Polish and Austrian peers PKN and OMV, two are expected to merge within five years, but it can not be excluded that all three will join their forces - General Manager of Mol Zsolt Hernádi announced. Earlier, Zoltán Áldott from the Hungarian oil giant had stated in an interview that there were four companies competing in the region: PKN, OMV, Mol and Lukoil. Hernádi highlighted that Mol’s primary goal is to have an annual budget of USD 150 million by 2005. (VG, p 14, NG, p 11 and 12)

BUILDING INDUSTRY - 13.07.2004 Strabag to relocate its cement plants to a neighbouring country?
Owner of construction company Strabag Építõ Rt , Austrian Bau Holding is likely to build its cement plant in a neighbouring country, since the Sunday referendum in the original scene - Hungarian Bükkösd resulted in a negative opinion towards the investment there. (Morning July 13) Strabag has started investigations on the back of the referendum, trying to find out whether referendum can be asked for when the construction takes place on the plot that is owned by the investor itself. Besides this, Strabag would like to have a closer look at how many more people have „moved” to Bükkösd for the referendum and also who is behind violating campaign silence. Bükkösd - suffering from a difficult economic situation - could do with the plant Strabag wanted to build for HUF 27 billion. It would have meant 100 new workplaces and HUF 100 million extra revenue for the budget that stands at HUF 20 million annually. (NG, p 5)

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BUILDING INDUSTRY - 15.07.2004 Leier plant in Jánosháza to start production this year
Austrian seated Leier group expects an increase of 20 –30 percent in its last year’s sales revenue of 19 billion forint arose from Hungary. Production can be launched in the company’s concrete panel factory still this year. In the first phase the company spent five hundred million forints on the construction of the plant – said Michael Leier owner of the company, which possesses different construction industrial firms and has interest in vehicle merchandising companies in Hungary. (VG p12)

ELECTRONICS - 16.07.2004 Sony Ericcson: 30 percent market share
In the second quarter of the year Sony Ericcson achieved a market share of 20 percent in Hungary, where nearly 450 thousand cellular phones were sold in three months. This is approximately the same figure as in the first three months of the year – announced Tibor Wágner the company’s director for the region Central-Eastern-Europe. Sony Ericsson sold altogether 350 thousand cellular phones in Hungary last year, which amount exceeds previous year’s figure by 33 percent. The company achieved its second biggest market share in Hungary, they control a more significant percentage of the market only in Sweden. (NSZ p10, VG p12)

TELECOMMUNICATION - 15.07.2004 Colt Telecom to expand in the region
British Colt Telecom is to start high-speed data transfer service for corporate clients at the end of summer in Budapest. At the same time when the firm comes to Budapest, it enters the market in Warsaw and Prague, too. Plans call for revenues of EUR 3-5 million coming from the region. The service, providing a very high speed data transfer, may be subscribed from EUR 1000 per month. (VG, p 12)

Matáv to buy a Bulgarian mobile service provider?
According to Bulgarian daily Dnevnik, Hungarian telecommunications company Matáv, more precisely, its parent company Deutsche Telekom is interested in Bulgaria’s largest mobile service provider MobilTel, boasting a 70 percent market share on the domestic market. According to some calculations, the market value of MobilTel, which has a clientele of 2.7 million people, is above EUR 1 billion, so Matáv could buy it only with the help of a loan from Deutsche Telekom or one taken out on the international money market. Earlier, MobilTel had been entirely in the hands of Israeli billionaire of Russian origin Michael Tshorniy. More recently, however, a financial investor group led by ABN Amro and Citigroup has also acquired a stake in the Bulgarian company. Matáv has not commented any MobilTel-related information. (NG, p 11 and 12)

T-Mobile increasing its media presence significantly
Mobile service provider T-Mobile is spending more than ever on advertisements on the back of its image change. The company, earlier operating as Westel, bought advertisement opportunities for a total of 26.1 thousand seconds in April, increasing it to 42,000 in May and 59,000 in June. According to list prices of Mediadiagnozis, the mobile company has become the tenth largest advertiser in the period between January and May. (The list is led by Unilever, followed by L’Oreal and Procter & Gamble.) Costs of the name and image change of the mobile company are set at HUF 5-6 billion, which was totally financed by parent company Deutsche Telekom. (VG, p 9)

INFORMATION TECHNOLOGY - 16.07.2004 EBay heading to Hungary
The online auction house eBay intends to launch new portal sites, among other locations in Hungary as well. The Internet auction market is still undeveloped in Hungary, but it shows a dynamic growth. Vatera.hu Kft. offering 28-30 thousand products has a market share of 90-95 percent. (NG p5)

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Illegal software usage
The ratio of illegal software usage added up to 42 percent in Hungary last year. as a result of this the Hungarian software market is the 22nd clearest market in the world. (MH, 11. old.)

FOOD INDUSTRY - 13.07.2004 Baldauf and Fonyódi Ásványvíz acquired by a Croatian company
In the framework of an investment of 20 million euros Agrokor the most significant Croatian private company acquired Baldauf Kft. producing and trading family-pack ice creams and Fonyódi Ásványvíz Kft. (Fonyódi Mineral Water Ltd.). The purchase money per companies was not disclosed. The company financed the expansion mainly from own financial resources, but OTP Bank (National Savings Bank) supported the Croatian company by granting credit and with consultancy. Agrokor plans to invest 30-40 million euros into the two companies. Agrokor hopes that due to the planned development Fonyódi Ásványvíz Kft. will be one of the three biggest mineral water bottler companies in the Hungarian market. (NG p4, VG p6, NSZ, p5, Nszab., p13, MH, p9)

No lack of butter expected in Hungary
Slovakia has been hit by a lack of butter, since retail chains are not selling butter there, only margarine. It comes from the fact that Slovakian milk producers are selling their milk on the Union market, since there milk fat has a much better price. Experts are of the opinion that producers should be given 25 percent more to shift their products back to the Slovakian market. When it comes to Hungary, there is no need to fear of similar developments, since domestic consumption is not significant. Per capita it reaches 1 kilogram, much down on the European Union average. (VG, p 7)

FOOD INDUSTRY - 14.07.2004 Cigarette prices facing drastic increase
The excise tax of tobacco should be increased to the minimal level of the European Union by 2009, which necessitates a 30-40 percent raise in its tax. Although the Finance Ministry is planning tax hikes carried out in consistent steps, under an agreement inked by the ministry and the Association of Hungarian Tobacco Industry (Magyar Dohányipari Szövetség) tax rate of cigarettes will not be increased next year. It also remains to be seen whether there will be tax hike at all in the election year of 2006. As a result, the time available for the 30-40 percent tax raise goes down to 3 years. Another problem is that to introduce the euro in Hungary in 2010 as planned, all macroeconomic conditions should be met by 2008. Experts are of the opinion that higher excise tax would be good news for the budget, however, pushing down inflation asks for other measures, for example a moderate hike in consumption-related taxes. To this end, a drastic cigarette price increase can be forecast, albeit later than expected. The agreement between the Finance Ministry and the Association of Hungarian Tobacco Industry was necessitated by the fact that black market activities were expanding. According to calculations, turnover of taxed products went down from 18-20 million to 15 million cigarettes in two years, whilst in a parallel move the illegal market saw increase to 5 billion cigarettes. Customs and Excise Office VPOP is of the opinion that tobacco smugglers get their products from Romania and the Ukraine. It happens more and more often that instead of cigarettes, there are sheets of paper in boxes on the black market, this way smugglers do not only save on taxes, but also on purchase prices - an expert of VPOP added. (NG, p 1 and 4)

AGRICULTURE - 13.07.2004 Agrarian prices grew by 20 percent
Based on KSH (Central Statistics Office) data compared to last year’s same period prices of agrarian products rose by 19.4 percent, plant-growing and horticultural prices rose by 30.4 percent, while prices of animals and animal products got cheaper by 0.6 percent in May. The rise in prise between January and May added up to 15.5 percent and in annual comparison based on April’s figures was 13.6 percent. (NSZ, p5)

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TRADE, FAIRS, CAR - 12.07.2004 Import of used cars drastically down
The first half of the year saw a total of 12,000 used cars brought to Hungary, translating into around half of the indicator from the same period of last year. The significant increase can mainly be attributed to the problems surrounding registration tax. The unfavourable trend has come to a halt after Hungary’s accession to the European Union and some expansion can be felt. In a parallel move, import of new cars has gone up with 89,000 entering Hungary in the first six months of the year, which compares to 77,000 a year earlier. Magyar Suzuki sold 17,600 cars in Hungary between January and June. (VG, p 1 and 4)

TRADE, FAIRS - 13.07.2004 Bétex opened up store
Hungarian owned Bétex Rt. handed over its biggest Hungarian store. The company spent 500 million forints on the project. In addition to selling soft furnishings, curtains and draperies, in its new unit Bétex operates also a sewing department equipped with the latest technology. The store is located at the stage of the motor roads M7 and M1 leading out from the city and the ground space adds up to 1500 square metres. Based on the stores location Bétex expects clients from abroad as well. To offer a better service they sell the products directly from an own stock. The company achieved a sales revenue of 1 billion forints last year and they expect a growth of 25 percent this year. (VG p7)

Financial penalty to Baumax
Owing to unfair manipulation of customer’s decision making the competition committee of GVH (Economic Competition Office) imposed a fine of 3 million forints to Baumax Magyarország Kereskedelmi Rt. (Baumax Hungary Commercial Co.). On throw-aways the company advertised reduction of prices they did not use before or the discounted product were sell at those high prices for just some days directly prior to the hot sales period. This happened last year and this year as well. (MH, p11)

TRADE, FAIRS - 14.07.2004 Benetton to change strategy
Due to its new sales strategy Benetton expects an increase of 20 percent in its turnover in the Hungarian market. In the framework of changing strategy Colorlife Kft. trading the company’s products closed down its store called Megastore located in the Váci street and opens three new smaller shops. According to the company’s estimation a higher sales revenue can be achieved by operating more smaller shops. They open new shops in Váci street Andrássy street an in Párizsi street. The company will sell Benetton cloths in the first two units and they will offer Sisley’s collection in the third one. The brand Sisley belongs to Benetton as well. (VG p6)

Sopron more expensive in many respects than Vienna
According to an Austrian study, although services are cheaper in towns of new European Union member states than in Vienna, but when it comes to electronic products, the Austrian capital has lower rates. As far as petrol prices are concerned, Sopron in Hungary has become the most expensive, whilst in Bratislava in Slovakia and in Brno in the Czech Republic it is somewhat cheaper than in Vienna. Food prices are lowest in Brno with Sopron only 10 percent cheaper than Vienna on average. The study reveals that as far as electronic products are concerned, like digital camera for example, all three new European Union cities have larger prices than Vienna. Economic daily Világgazdaság has a detailed table on price differences between these towns. (VG, p 2)

TRADE, FAIRS, CAR - 14.07.2004 Cadillac office in Budaörs
European representation of American car manufacturer Cadillac, Dutch Cadillac Europe BV is to open a regional marketing office in Budaörs. Cadillac comes to Hungary as the second brand from the States after Chrysler and plans to organise sales, marketing, service and spare parts supply of the Central and Eastern European region and the Baltic states from the Hungarian office. (VG, p 7)

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Volkswagens sold well in Hungary
Volkswagen’s sales figures in Germany decreased by 1.1 percent in the first half of the year in yearly comparison and according to press information the concern’s business is in deep trouble. It is not impossible that in the company’s result published in their flash report of the first six months will be in the red numbers. In order to cut labour costs Volkswagen intends to dismiss 5 thousand employees by 2005. Based on an article of the German daily paper Der Tagesspiel there are the insufficient sales figures of the new VW Golf in the background of the problems. Sales representatives say: these models were too expansive. Custumers are not willing to pay the price of a higher category for a middle category vehicle. On the other hand the new Gold is sold well in Hungary. Imre Ferró VW brand director of Porsche Hungária said: the company sold 2842 new Golfs in the first half of this year, while the sales figure was 1346 in last year’s same period of time. This growth indicates that customers do not think the new Golf would be expensive - Ferró added. Volkswagen sold 8005 passenger cars in the first half of the year, this means a market share of 7.8 percent, which is one percent higher than the figure measured in the basis period. The price decrease of 5.4 percent in Hungary due to the introduction of registration fee as well as the changes in quotation played significant roles in the growth. (VG p6)

TRADE, FAIRS - 16.07.2004 Strabag acquiring Asia Center
Construction company Strabag AG has acquired the 49 percent share of previous owners, a Chinese couple, thus becoming the exclusive owner of Asia Center. The Austrian company is to build the third, 70.000 square meter wing of the building next year. As economic daily Világgazdaság learnt it, investors could not make an agreement on the business center’s strategy and on the continuation of the investment. Thus, Strabag offered Michael Song and Li Li Ping to buy their stake. General Manager Rudolf A. Riedl said that the center aims to be the main bridgehead of Asian products in the European Union. Traders that would like to serve only professional guests will be located to the Western wing till the spring and autumn can see import companies and representations of manufacturers also gaining a foothold in the building. (VG, p 1 and 11)

Zara shop in Váci street
Spanish company Zara will open its first store in the Masped House located in Váci street in September expectedly. The ground space of the store will add up to 3 thousand square metres. This space was recently leased by Benetton. The Spanish commercial chain assumed the Italian company’s lease contract for 20 years with unchanged conditions. Zara will open a second store in the autumn, this will be located in Árkád shopping centre. (VG p10)

TRAFFIC, TRANSPORT - 13.07.2004 Waberer's acquired Transporta Kft.
Waberer's group that intends to be market leader in the region acquired Transporta Kft., which is one of the leading players of the Hungarian food distribution market. The equity capital of Transporta Kft. added up to 50 million forints. As a result of the transaction the scope of activities of the group that formerly operated under the name Volán-TEFU–Hungarocamion expanded with express package delivery and gas transportation. (NSZ, p10, VG p6.)

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TRAFFIC, TRANSPORT - 14.07.2004 In relation to foreign airlines Lufthansa preserved its leading role
Lufthansa achieved a sales revenue of 5.5 billion forints in Hungary in the first half of the year. This means an increase of 7.5 percent compared to previous year’s same period. In line with this, the number of air passengers increased by 3.7 percent to 271.7 thousand, which resulted an increase in the German airways’ market share from 21.96 percent to 22.31 percent in the circle of foreign airways companies representing themselves in Hungary. It means that Lufthansa managed to preserve its leading position in the market. The German airways’ business line dealing with goods transportation Lufthansa Cargo attained to similar success: in annual comparison freight export expanded by 24 percent and the import grew by 37 percent. Lufthansa Technik Budapest Kft. - employing 350 people - finished the general overhaul of 10 airplanes up to now, this means that since the company’s launch in 2002 the number of aircrafts renewed by the company increased to 31. Lufthansa System Hungária Kft. pursuing computersystem developing activities increased the number of its employees from 80 to 150 people. (NG p5)

MÁV suspending its negotiations with the government
Hungarian Railways MÁV Rt. have suspended talks with the government on subsidies for the company for the next year. Representatives of MÁV are of the opinion that the offer of the Financial Ministry and that of the Ministry of Economics and Transportation are unacceptable, and are considering the amount of the subsidy as too low and asking for guarantees that payment would really take place. However, there is no such an opportunity at the time of drafting the budget and to make things worse, the budget will most likely not be able to give more. In the future, the state will have to order the passenger service from the railway and pay in line with the services rendered. The subsidy will have to cover the difference between ticket sales revenue and costs of railway public transport. (Nszab, p 1 and 13)

SZK Transport to establish country wide network
In order to cut transportation costs, SZK Transport Rt. seated in Miskolc and specialised in forwarding meat and meat products on highways intends to establish a logistics network that would cover the whole country. The first unit of the warehouse chain to be implemented in the framework of an investment of several billion forints will be located in Budaörs. The company that achieved a sales revenue of 4.3 billion forints last year works for such reputable firms as e.g. Bábolna Rt. and Metro store chain. (NG p5)

Wizz Air raising its capital again
Current owners of Wizz Air, together with new investors have carried out a capital raise at the budget airline to the tune of EUR 3 million from EUR 7 billion. General Manager József Váradi announced that they were planning a further EUR 40 million raise of capital. WizzAir has already made an agreement with American investment fund Indigo Partners on an EUR 20 million capital injection with the remaining part likely to come from European investors. Váradi added that flights to Katowice and Prague have been terminated for economical reasons. In a parallel move, seasonal flights to Athens and Barcelona have been suspended from October. The number of flights to London and Paris will be increased, he concluded. (NG, p 5)

TRAFFIC, TRANSPORT - 16.07.2004 Malév aiming at new destinations
Hungarian Airlines Malév is trying to renew its co-operation with Delta Air Lines, which had been terminated earlier. Consultations on operating flights jointly are likely to be finished within weeks. The Hungarian carrier is currently in co-operation with Northwest Airlines, but this - unlike Delta - is not using New York as its hub. Should consultations be successful. Malév can have several new destinations in Northern America. At the same time, talks are going on with Spanish Air Europa. As a result, there is a chance that direct flights can go to Madrid and later to other Spanish cities and Southern American destinations could also be reached from Budapest. Malév increased its sales revenue by 15.4 percent to USD 39 billion in the first half of the year. The number of passengers increased by 24 percent on European flights compared to figures a year earlier. (VG, p 9, NG, p 5)

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TOURISM, HOSPITALITY - 12.07.2004 More guests, lower foreign currency income
The first five months of the year saw a 5.6 percent increase in guest numbers and a 5.1 percent one in the number of guest nights in commercial accommodation year-on-year – Central Statistical Office KSH announced. Between January and May, a total of 2.071 million tourists spent 5.467 million nights in Hungary. The number of foreign tourists increased by 4.7 percent. However, tourism foreign currency income went down by 8.5 percent in the first four months of the year to EUR 697 million (HUF 178.7 billion). Till the end of May, mainly foreign guests spent 862 thousand nights in 580 commercial accommodation places of the Lake Balaton region, translating into a 6.1 percent decrease on corresponding figures of one year earlier. The number of foreign guests went down by 12.8 percent and that of Hungarians increased by 4.6 percent. Foreigners spent 2 percent more with Hungarian spending 15.3 percent more money than last year. Daily Magyar Hírlap gives an overview of the Lake Balaton region, which reveals that hotels rendering complex services and focusing also on Eastern guests are in a better position than their seasonal competitors. (NSZ, 10 Jul, p 5, Nszab, 10 Jul, p 13, MH, 12 Jul, p 10)

TOURISM, HOSPITALITY - 16.07.2004 More guests in luxury hotels
According to figures by Central Statistical Office KSH, occupancy rate of five-star hotels exceeded 57 percent in the first five months of the year. The corresponding figure stood at 43 percent in case of fourstar ones. Hotels posted better figures during the period of increasing prices. Hungary’s accession to the European Union has drawn the attention of foreign businessmen to Budapest and its luxury hotels. Hilton Budapest Westend, Four Seasons Hotel, Budapest Marriott Hotel, Andrássy Hotel Budapest and Sydney Apartment Hotel have all reported larger guest numbers - economic daily Napi Gazdaság (Daily Economy journal) writes in its section devoted to luxury hotels. (NG, p 7)

SERVICES - 13.07.2004 ExxonMobil servicing centre handed over
400 employees will work in ExxonMobil’s regional centre that was handed over yesterday by the end of the year. The centre started its operation with 120 workers. The firm fulfils accounting and other services for the multinational oil company’s European interests. The regional centre was erected in the framework of ExxonMobil’s investment of 44 million dollars. The multi might increase the number of employees with additional 500 people. (NSZ, p10, VG p6)

SERVICES - 15.07.2004 American giant on the domestic PR market
Nomugachi Communications, one of the leading companies of the Hungarian communication market has entered into an agreement with Porter Novelli, one of the largest Public Relations company in the world, expanding in Central and Eastern Europe. The Hungarian firm, in which the American giant has not acquired any stake, will operate further under the name of Noguchi Porter Novelli. Nomugachi Communications was founded six years ago, and has been market leader in Hungary for the last three years. Its main clients include Hewlett-Packard, Tesco, Kraft Foods, Ericcson, nuclear power plant Paksi Atomerõmû, Mol Rt. and Tetra Pack. It is expected that it can take part in the new partner’s global assignments, too. As a proof, Noguchi Porter Novelli is set to sign a contract with a drug manufacturer as part of a global campaign within days. (NSZ, p 10)

INVESTMENT, DEVELOPMENT, REAL ESTATE - 12.07.2004 No price explosion on flat market
In spite of expectations of many, flat prices have not skyrocketed after Hungary’s entrance to the European Union. Experts are of the opinion that the market had calmed down by 2002 and since then prices have been stagnating or growing steadily. Average square meter prices reached HUF 236,000 a year ago, whilst they are at HUF 264,000 in 2004. (MH, p 12, NSZ, p 5)

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INVESTMENT, DEVELOPMENT - 13.07.2004 Budapest is the most attractive destination in the region
According to the study made by Capgemini and Jenewein & Partner, multinational companies would choose Hungary to move their subsidiaries founded in order to outsource services to. The Hungarian capital taken over 27 cities. Comparing the countries Poland was the winner due to its labour cost - which is lower than Hungary’s- and its more significant labour force surplus. (VG p1, p2)

Elcoteq intends to open up additional manufacturing plants
To be able to fulfil the dynamically improving orders Elcoteq Magyarország Kft. that operates two manufacturing plants in Pécs would like to open additional factories. The Finn owned company leads negotiations with several municipalities, and is bargaining about the acquisition of a sewing works located in Tamási, but there is still no factual business transacted. In the framework of the investment programme of several billion forints the number of employees will increase by 1300 workers, as a result of this the number of employees will exceed 5 thousand by the end of October. (NG p1, p4)

INVESTMENT, DEVELOPMENT - 14.07.2004 Hinterberger to move its entire production capacity to Hungary?
Hinterberger Beteiligungs GmbH bought an additional site of 3.7 hectares in the industrial park of Pápa not long ago. Based on press information arising from Napi Gazdaság (Daily Economy journal) the reason of the transaction is that Hinterberger, which is one of the biggest Austrian automotive industry supplier, due to the continuously increasing production costs in Western-Europe, intends to move its entire production and even its logistics activities to Hungary. Tivadar Üveges manager of Hinterberger’s Hungarian subsidiary Precízióstechnikai Mûvek Bt. („precision mechanic instruments deposit company”) did not comment the press information, but briefly said: in the framework of an investment to the tune of billions the company erects an additional production hall next to its existing one. The ground space of the building will add up to approximately 1700 square metres and it will be completed in two years expectedly. (NG p4)

INVESTMENT, DEVELOPMENT - 15.07.2004 Perlos to increase capacity
In the framework of an investment of 15 million euros, Finnish interested company Perlos - one of the suppliers of the Nokia manufacturing plant located in Komárom - builds an additional factory next to its existing one in the local industrial park. The new manufacturing plant that will offer job opportunities for 400-600 employees will be completed by the beginning next year expectably. (NG p5)

INVESTMENT, DEVELOPMENT - 16.07.2004 Michelin investment in Hungary?
In the framework of an investment of 600 million euros Michelin’s Polish subsidiary could create 1200 new jobs in Hungary – wrote Gazeta Wyborcza. The French company leads negotiations with the municipal authority at the time being, the outcome of these talks will determine that the location of the planned manufacturing plant will be in Poland or in Hungary. (VG p10)

SECURITIES’ MARKETS - 12.07.2004 Freesoft: extraordinary risks
Hungarian financial market watchdog PSZÁF has written in its resolution giving the green light for the initial public offering of software developer Freesoft that shares of the company had extraordinary risks from the investor’s point of view. The reasoning says that Freesoft has been operating in its current form only since last year and adds that the software sector has more risks than other ones plus that the company has discovered its willingness to bear risks in the area of investments. Financial advisor of Freesoft Gábor Móricz thinks that PSZÁF’s explanation sounds realistic, however, he adds that he did not count on the qualification. (NG, p 7 and 8, VG, p 13)

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SECURITIES’ MARKETS - 16.07.2004 Warsaw bourse to expand towards Vienna
The Warsaw Stock Exchange will be privatised next spring at the earliest. According to market information, bids are expected to come from bourses of Vienna and Budapest, too. Chairman of the Warsaw Stock Exchange Wieslaw Rozlucki is going to have talks with his counterparts of exchanges of these two capitals. Chairman of the Austrian exchange Stefan Zapotocky has mentioned Poland as one of the potential partners and he added that the co-operation could be extended to the Czech Republic, Slovakia, Croatia and Serbia later on. The Vienna-headquartered association would be strengthened by the joint ownership of shares, but all exchanges would operate independently (VG, p 13)

WORLD ECONOMY - 13.07.2004 Hyundai’s Slovakian investment to fall through?
Owners of plots are putting obstacles on the way of car manufacturer Hyundai’s Slovakian investment. They would like to have twice as much as the Slovakian government offers them as purchase price. Should the government give in to plot owners, it will mean an extra SK 430 million to pay. The debate annoys the Korean company and has notified the concerned Slovakian minister of its opinion. In the meantime, experts warn that should there be no agreement soon, other Western investors could also turn away from Slovakia. (NG, p 1 and 2, VG, p 6)

CULTURE - 12.07.2004 Scandal instead of Minelli concert
It turned out only 24 hours before the concert that Lisa Minelli will not come to Budapest. Information has it that she resigned from it on the back of poor ticket sales. As a standby, Welsh disco queen Bonnie Tyler was on stage and spectators numbered between 300 and 800, based on different sources. The concert was to be the first event organised by Movies and Fashion Kft. The organiser, registered in 11th district and renting an office in Gerbeaud house, too, is totally new in the business. When it was announced that Tyler would be the star of the evening instead of Minelli, they moved out of their office. The American Oscar-winning actor was supposed to sing on 12 February in Sports Arena first, then it was modified to 10 July to Ferenc Puskás Stadium, then to smaller arena Kisstadion. According to the organiser’s homepage, main patron of the event was Foreign Minister László Kovács, however, sources at the ministry denied having anything in common with it. They stated that Kovács was patron only for the February date. Up to Sunday afternoon, 73 disappointed ticket holders have turned to the district police. For the time being, there is no information whether there will be prosecution into the case. (NSZ, p 16, MH, p 1 and 14, Nszab, p 1 and 21)

MEDIA - 12.07.2004 New owner at Juventus
The Irish Communicorp Group Ltd acquired nearly all radio interests of the American International Group (MIG) that is known in Hungary as the operator of Juventus Radio for 14.25 million dollars. MIG has earlier decided to part with its subsidiaries due to its difficult financial situation and it has been selling Juventus for one year. (NG p1, 4)

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