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13/09/2004
Business FinMin announces public-sector cutbacks Power supplier workers put off strike Ft 3 billion injection for Malév Pannonplast removes chairman-CEO Ft 185 billion rural development plan begins Matáv to lay off 2,000 Megatend invests in Munich office Budapest International Fair opens Pick to stop slaughters, lay off 450 USD 5 mln Hun-Ukraine agri investment Windscreen wiper production for Hungary Balaton Sailing breaks even Foreign tourists spend 3% more guest nights HVB to decrease stake in Bourse Batthyány Castle gets go ahead Bp Airport invites 4 bids for Ferihegy Economics Scrapped 26% may affect 900,000 taxpayers Investment funds' assets rise 1% Ft 24.5 billion spent from budget reserve Ecofin accepts pension funds proposal Number of subsidized home loans down Apeh says companies are more profitable Politics Gyurcsány 17% more popular than a month ago Domestic Early welcome for Hungarian workers Rival wine festivals

14/09/2004
Business Brokers protest capital gains tax Unions reject gov't wage hike proposal Podravka's Hungarian plant closes Dráva to close for good Telephone and Cable change in ownership Alliance Capital announces MOL holding Tender called for asset man. companies More job losses at Customs & Excise McHale buys Szolnoki Mezogép assets French company to lay off 200 eTel launches corporate package Bumper crop all round Volvo must adapt to Hungarian roads Pannonplast names Balázs Szabó new CEO Billerbeck optimistic re sales Economics Ft 69 million to gov't consultants Gov't to Impose Capital Gains Tax Ft 212.5 million to eradicate ragweed Value of EU membership Budget slippage acceptable - World Bank Politics Parliament elects new deputy speaker Parliament violates constitution Domestic Green light for dual citizenship referendum No summary court case for Neo-Nazi chief

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15/09/2004
Business Hungary commits to using renewable energy Richter rebounds after bond sale Forras EGM appoints new CEO Acquisition of Eximbank and Mehib approved Invitel - EBITDA of Euro 74 mln MOL and OTP among Forbes top 400 MOL to focus on upstream CAD 11 million for safe water MTV to review business plan Malév flying high Two more Baumax stores open Car sales slows overall Raining down on tabloids GVH dismisses Matáv misconduct case Matáv, MOL get Investor Relations awards Autoker opens Romai Kert apartments Over 11,000 subsidized jobs in 3 years Economics Consumer prices fall for 1st Time in Year FinMin-inflation figure bodes well MNB counting on 5.4% GDP budget deficit Foreign currency loans, risky - PSzÁF Politics Fidesz sets up think tank for 2006 elections SzDSz reject return of capital gains tax German chancellor to discuss EU affairs in Bp Domestic Steps to stop anti-Hungarian incidents Tighter gun-licence rules introduced

16/09/2004
Business Irish Ballymore to invest Ft 250 billion Richter privatization to reduce borrowing GE to build new logistics center in Nagykanizsa Freesoft to enter BSE next week Debrecen local council upgrades sewage network First Subaru dealership opens in Budapest Hungarian Tourism Rt to announce translation tender 8 express interest in 3G mobile tender Masped's merging Vienna Capital selling BorsodChem stock Environmental indecision may loose Ft 100 million Shoe industry in danger of extinction Nest of black market workers Savings coops chide peer for PSzÁF censure László Resigns as Pottery Maker Chairman Mahart to sell stake in Interlighter CinemaElectric to deliver mobile content Antenna shares may be sold this year 2004 budget gap raised after breeching target Fin.institutions- tax rise,16% to 24% Banks say raised tax bad for business Trade unions propose 6-7% wage rise July new industrial orders up 14.5% yr/yr Housing help planned for families Draskovics to stay on as FinMin Schroeder, Medgyessy discuss cooperation Prosecution drops terrorism case

Economics

Politics Domestic

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17/09/2004
Business FinMin forecasts Ft 86 bln deficit Fundamenta breaks into black in H1 K&H Bank H1 profit up 42% yr/yr Parmalat on the up turn Ft 500 Million contracts for KÉSZ Wizz Air to fly to Liverpool from Dec Brau Union Rt. president resigns Acting head chosen for DunaTV Fund management changes for Erste Wheat exports to Bosnia reduced OTP amend fund management rules Albacomp invests in retail Daewoo to become Chevrolet HRP group founds IT security company Founding of micro loans company Richter's Rigevidon drug to Be Reviewed IT Ministry official to become ENISA vice president Boerse to establish Cent. Euro. Exchange Economics Economy in good shape - Gyurcsány Billions paid unnecessarily in car reg. tax Draskovics promises good budget Real wages up 0.2% yr/yr Swiss franc loans on the rise Politics New gov't to be sworn in on Oct 4 No time to legally ban neo-Nazi demo Domestic New national police chief sworn in UN High Commissioner's new Bp office opens

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13/09/2004 Business
FinMin announces public-sector cutbacks The government plans significant job cuts in public administration and will earmark Ft 40 billion for one-off costs related to the dismissals, mainly for severance pay, Finance Minister Tibor Draskovics said yesterday. Draskovics was speaking after most cabinet ministers had met Prime Minister designate Ferenc Gyurcsány for one-on-one talks about next year's plans, before the cabinet discusses the draft budget during the coming week. The government will spend more next year on priorities such as increasing employment, regional support to certain local councils to cut back administrative costs, co-financing some projects to attain EU funds, financial support of the police force, and highway construction, Draskovics said. (MTI; Ng 1, Vg 1) Power supplier workers put off strike Power supplier workers put off strike. Workers at a Hungarian power company have postponed a strike to protest against a three-month delay in wage payments. More than half of the workers assembled at the premises of DAM Energy yesterday voted to put off for 48 hours industrial action planned for today, as a "gesture" to managers. "There is a promise that one-month's worth of wages will be paid on Tuesday, and the rest of the backlog will be paid later," a local trade union leader said yesterday. Workers had gone on an 8-hour strike on Thursday to force the firm's owner Matroholding Rt to pay Ft 57 million in back wages. (MTI; Ng 5, Nb 15) Ft 3 billion injection for Malév Monthly figures for Hungarian airline Malév Rt until August meet criteria which will allow the airline to draw on a promised Ft 3 billion subsidy from the state, chairman-CEO László Sándor told reporters on Friday. The State Privatization and Holding Company ÁPV, which owns 99.97% of Malév's shares is expected to decide on the subsidy in October. The government decided late last year before Hungary's EU accession that it would award Malév the Ft 3 billion in subsidies if the airline could demonstrate that it could operate without losses. Sándor said that the airline's organization had been restructured to accommodate its growth and would result in annual savings between Ft 100 million and Ft 150 million. (Econews; Ng 5) Pannonplast removes chairman-CEO An EGM on Friday of plastics maker Pannonplast Rt recalled chairman-CEO Csaba Zoltán from the board of directors with 61.09% of votes. Votes present represented 55.45% of the total. István Torocskei said that the failure to harmonize the interests of a group of shareholders represented by himself and those of another group of investment funds, which have stakes in Pannonplast, were the reason for Zoltán's removal. Zoltán was asked to resign because of Pannonplast's poor first-half figures, but refused. (Econews; Ng 8) Ft 185 billion rural development plan begins The Minister of Agriculture and Rural Development Imre Németh has signed three ministerial decrees, which signal the beginning of the Ft 185 billion National Rural Development Plan (NVT). As part of the plan spanning three years, Hungary will receive Euro 602.3 million from the EU's agricultural funds, which the state will round off to Euro 754.14 million, or Ft 185 billion. According to the calculations of the ministry, around 80,000 farmers will receive non-refundable grant through NVT. (NG 4) Matáv to lay off 2,000 Fixed line telephone service provider Matáv Rt plans to lay off around 2,000 people next year, according to news channel Hír TV. Matáv's communication director Bálint Nagy did not want to comment on the news, but added that the company is already in talks with the trade unions about a possible pay rise, the increase of social benefits, and some reorganization plans. Matáv dismisses around 600 employees this year, mostly from its subsidiary in Macedonia, MakTel. (NG 8) Megatend invests in Munich office Software manufacturer Megatrend 2000 Information Technology Rt is opening its newest office in Munich, Germany in the near future. The company, whose main profile is to develop company management systems plans to turn the future Munich office into to a subsidiary by next January, announced Imre K. Szabó, the company's president-CEO. Megatrend Rt founded its first subsidiary abroad in Romania in 2002. The company managed to increase its turnover by 79% to Ft 1.1 billion in H1 compared to the same period last year. (Vg 8) Budapest International Fair opens The largest consumers' fair in Central Europe, the Budapest International Fair (BNV), was opened on Saturday. Speaking at the opening ceremony, Speaker of Parliament Katalin Szili said the fair was also a major meeting point of investors and businesses. Exhibitors, from 178 countries of the world, number nearly 800 companies 175 of them first-time participants at the BNV, which goes back 98 years. During the time of the fair, lasting until September 19, the real estate, IT and consumer electronics sectors will introduce their products in special shows. (MTI; Nv 5)

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Pick to stop slaughters, lay off 450 Meat processor Pick Szeged Rt has announced the company will stop pig breeding and slaughtering and will only process meat. At the same time the company plans to lay off 450 employees. Pick's management will start talks with the trade unions today who believe they could save 100-150 jobs by corporate reorganization. Pick's chairman Tamás Kovács denied they plan to buy pork from abroad, as rumors spread in the company. (MH 10) USD 5 mln Hun-Ukraine agri investment Agribusiness Szabolcs Gabona Holding of Nyíregyháza plans to invest USD 5 million in its subsidiaries in Ukraine, chairman-CEO of the group György Simon said on Friday. Szabolcs Gabona plans to spend USD 3 million to modernize a poultry farm and plant in Snyatyn owned by its subsidiary Varto, boosting its production from 2.6 million to 3.5 million chickens a year and making it one of the largest poultry processors in Ukraine. Szabolcs Gabona also plans to build a USD 2 million feed-mixing plant in Kolomyya. The plant will be able to turn out 30,000 tons of feed per year. Szabolcs Gabona already has a feed export-import company based in Uzhgorod. (Econews) Windscreen wiper production for Hungary Federal Mogul Sealing Systems Hungária Bt, Hungarian subsidiary of American automotive components manufacturer Federal Mogul moved windscreen wiper production capacity from Western Europe to its Kunsziget plant to West Hungary recently, announced the company's managing director Balázs Kalmár. The company plans to manufacture 4-5 million wipers annually and although the move does not require any development in the Kunsziget plant at the moment, the company plans to build 3 new halls in the near future. Federal Mogul Bt expects its turnover to rise Euro 14 million this year from last year's Euro 11 million. (Vg 7) Balaton Sailing breaks even Balaton Sailing Rt expects to turn even this year, due to the 15% shrink in the number of passengers by the end of August, announced CEO Gyula Horváth. From this year's 687,000 passengers 567,000 used the company's scheduled boat, while 120,000 people traveled on pleasure boats. The decrease in the number of passengers is due to the continuously falling number of German tourists around lake Balaton, for which the increasing number of Danish visitors could not compensate. The company, which has Ft 3.5 billion in registered capital, is owned by 22 lakeside municipalities and ÁPV Rt in 51% and 49% respectively. (Vg 8) Foreign tourists spend 3% more guest nights A total of 3.58 million tourists spent 10.27 million guest nights in Hungary in January-July, the number of tourists rose 3.1% but the number of guest nights fell 0.7% from a year earlier, the Central Statistics Office (KSH) reported on Friday. Within this 1.7 million foreign tourists spent 5.7 million guest nights in Hungary in the first seven months of 2004, up 9% and 3% respectively from the same period last year. Accommodation providers had revenue of Ft 88.6 billion in the first seven months of 2004, up 18% from a year earlier. Ft 45 billion of this revenue was from accommodation fees with the rest coming from charges for catering and other services. (Econews; Ng 3, Vg 7) HVB to decrease stake in Bourse HVB bank, Bank Austria Creditanstalt's (BA-CA) Hungarian subsidiary's medium-term plans include to decrease its stake in the Bourse to the original 12.5%, announced Gerhard Randa, BA-CA's director of the board. Randa claimed that the bank's May acquisition in the Bourse is not part of a long-term strategy only an investment, as it does not belong to a bank's basic activities. (Nb 15) Batthyány Castle gets go ahead The reconstruction of the Batthyány Castle in Enying, central Hungary, got the green the light from the local municipality, during which the estate will be turned into an administrative and cultural center. The renovation will cost a total of Ft 1 billion. The Ft 245 million first phase will kick off this year, financed mostly from the EU's PHARE funds, and is expected to be completed by November 2005. The local government hopes to cover the second phase of the renewal from EU funds as well, during which the municipality will move into the castle. (NG 18) Bp Airport invites 4 bids for Ferihegy Budapest Airport, the operator of Ferihegy airport, said on Friday - the deadline for bidding for a Ft 8.7 billion contract to renovate Ferihegy Terminal 1 - that it had invited four bids. A spokesman for Budapest Airport said they did not wish to publish how many bids were received. Under a government ruling, Budapest Airport had to invite at least three companies to bid for the job. OKFON is administering the public procurement procedure and OVIBER is checking the bidding companies' references. Ferihegy Terminal 1 will be closed between September 1, 2004 and the summer of 2005 due to reconstruction. (Econews)

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Economics
Scrapped 26% may affect 900,000 taxpayers Last year 916,000 individuals, or 22% of all taxpayers, declared income between Ft 900,000 and Ft 1.5 million, according to figures from the tax office APEH. Under the governing coalition's planned new tax regime for 2005, these people would fall into the 18% personal income tax bracket, with the elimination of the 26% bracket. Prime Minister designate Ferenc Gyurcsány said on Friday that the government planned to scrap the 26% bracket and keep only the remaining two -18% and 38% - with all income over Ft 1.5 million being taxed at the higher rate. 1,100,000 people (26.8% of the total) declared income of more than Ft 1.5m last year. (Econews; Nv 5, Ng 4) Investment funds' assets rise 1% Members of the Association of Hungarian Investment Fund Managers (Bamosz) handled Ft 854.7 billion in assets of investment funds in Hungary at the end of August 2004, 1% more than at the end of July, the Association of Hungarian Investment Fund Managers (Bamosz) said on Friday. The assets handled by Bamosz-members including pension fund assets and other portfolios rose by 1.9% to Ft 2.234 billion. With the exception of bond funds, the assets of all types of investment funds increased in August. Bamosz said investors still have no faith in bond funds, and their assets have declined nearly every month this year. Assets of shares funds increased by 2% to Ft 117.6 billion, thanks to a rise in stock exchange prices. (Econews; Ng 7, Vg 10) Ft 24.5 billion spent from budget reserve The general reserves of the central budget stands at a mere Ft 3.1 billion compared to the original Ft 27.6 billion at the beginning of the year, according to the latest figures prepared by Finance Ministry. The Interior Ministry received the most among the governmental departments with Ft 3.56 billion. This was partly to cover the increasing cost of the fight against terrorism. Ft 9.8 billion went for the wage increase of those working in the state sector, Ft 808.3 million was spent on the army unit deployed to Afghanistan, and the newly founded HungarianChinese bilingual elementary school also received Ft 30 million from the reserves. (NG 1) Ecofin accepts pension funds proposal Consensus was reached by the EU finance ministers and central bank governors on a Hungarian proposal to an Ecofin conference calling for including the effects of contributions to private pension funds when evaluating public sector deficits, the Hungarian finance minister said on Friday. "I also think there is a good chance that the finalized version of the stability pact will include this issue in the manner that Hungary would like," said Tibor Draskovics. The Hungarian proposal was based on the fact that pension reforms increase budget deficits on short term because some payments go into pension funds and not into the overall budget, but despite that, they do not really increase the public sector deficit, he said. (MTI; Nv 5) Number of subsidized home loans down By the end of July the total amount of subsidized home loans required for new apartments was Ft 101 billion and more than 15,000 new loan agreements were concluded, according to report published by DEM Economic Research Office. In the same period last year, the total value of subsidized loans were Ft 128 billion and the number of agreements surpassed 19,000. The amount granted in scope of subsidized loans for used old apartments was Ft 91.5 billion from January to July. (V 4) R.G Apeh says companies are more profitable According to the State Tax Office (Apeh) the total pre-tax profit of Hungarian companies in 2003 was Ft 3,357 billion, which is 23.4% higher than a year earlier. Kfts increased their profits by 8%, while Bts gained 7.2% more profits in 2003 than a year before, Apeh said. The losses of Hungarian companies declined by 5.6% to Ft 880 billion in 2003 compared to previous year, Apeh said. In 2003 302,565 companies operated in Hungary, 47.4% of these were Kfts and 46.1% of them Bts. (Nv 5)

Politics
Gyurcsány 17% more popular than a month ago Prime Minister candidate Ferenc Gyurcsány's popularity grew by 17% in a month according to the opinion poll of Medián conducted at the beginning of September. Gyurcsány was known by 78% of the population as Minister of Children, Youth and Sport in August, but a month later 93% of the people asked said they have heard of him, Medián said. At the same time, 26% of the people said they liked him a minister in August, but 43% trusted in him a month later, Medián said. Never before has Medián registered such a popularity change in such a short time. Currently MDF chairperson Ibolya Dávid is the most popular politician with 67% of the votes and Fidesz vice-chair László Kövér and Health Minister Mihály Kökény share the last place with 25 points, according to Medián. (MH 3)

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Domestic
Early welcome for Hungarian workers Several 'old' members of the European Union will open their labor market sooner than announced prior to the EU enlargement in May, the influential Polish newspaper Rzeczpospolita reported. The Polish minister responsible for EU matters Jaroslaw Pietras confirmed the report, and added that only Germany and Austria is expected to maintain restrictions from 2006. France was among the first countries to announce that it would open its market to seasonal workers from the ten new EU states in the near future, which will be followed by an opening on other areas of the market from 2006. Members, which opened their market without restrictions, have not experienced a flood of immigrants from the new states, which made other members rethink their labor market strategy, Pietras explained. (NG 1) Rival wine festivals Thousands of people have visited the first Hungarian Wine Village that took place this weekend in Felvonulási tér, near Hosök tere. The event was organized by small wineries that did not have a chance to participate at a similar celebration in Buda Castle. (Nv)

14/09/2004 Business
Brokers protest capital gains tax The Association of Investment Service providers (BSzSz) has asked the Finance Ministry to scrap plans to reintroduce the capital gains tax, arguing that it would yield little extra revenue while lowering even further the already minimal level of household savings. According to a statement sent to MTI by BSzSz yesterday the move would adversely affect 160,000 small investors, lowering even further households' propensity to make savings. Only 4.3% of the shares traded on the stock exchange are owned by private investors, and this %age has been steadily declining in recent years. (Econews; Nv 5, MH 9, Ng 10, Vg 17) Unions reject gov't wage hike proposal Trade unions rejected a government-sponsored 4.5% wage rise for 2005, made at a meeting of the National Interest Reconciliation Council. The gross rise proposed was not enough, the union representatives said, arguing that even if real wages rose by 4.5% this would be inadequate to offset inflation. Employer representatives said although taxes and mandatory contributions would decline, these would be insufficient to cover any extra increases. Prime Minister-designate Ferenc Gyurcsány addressed the meeting of government, employer, and employee representatives, saying that the government was ready to offer cuts in taxes and mandatory contributions and to increase budget spending to create new jobs and improve the employment level. (MTI; Vg 1, Nb 7) Podravka's Hungarian plant closes Croatian food and food ingredients manufacturer Podravka International Kft will shut down its plant in Mohács, South Hungary and move production back to Croatia, the Mohács municipality confirmed. Podravka's Hungarian subsidiary Podravka International Kft produced food seasoning brand Vegeta in Mohács for 10 years. The decision to close the plant and to layoff its 56 workers is in line with a reorganization and cost-saving program in scope of which the parent company closes down plants in the region. (NG 1) Dráva to close for good Despite concerted efforts to salvage it from bankruptcy, the 125-year-old Dráva Timber Kft is going to shut down and discharge its 100 workers next week, the company's liquidator, ÁFI Rt said. Previously state-owned, the Barcsi-based parquet maker was sold to a German investor a decade ago, but went into liquidation last year after it racked up debts of Ft 1.7 billion. The company also became loss-making this spring and has been unsuccessfully put up for sale three times. Meanwhile, its floor price fell from Ft 800 million to Ft 350 million. (Nb 11) S.F. Telephone and Cable change in ownership Hungarian Telephone and Cable Corp. (AMEX:HTC) said yesterday that Ashmore Investment Management has increased its equity stake in Hungarian Telephone by purchasing the common and preferred shares held in Hungarian Telephone by Citizens Communications Company (NYSE:CZN). Ashmore has also entered into separate agreements with TDC A/S (NYSE:TLD), pursuant to which Ashmore granted TDC an option to purchase a portion of the shares Ashmore purchased from Citizens. TDC, a Danish full-service provider of communications solutions throughout Europe, has been an equity investor in Hungarian Telephone for over a decade. (BU.S.INESS WIRE)

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Alliance Capital announces MOL holding New York-based Alliance Capital Management LP announced yesterday that it holds 7,143,180 ordinary shares or a 6.6% stake in Hungarian oil and gas company MOL Rt, and handles assets for "around" 123 clients. The Hungarian state owns 11.8% of MOL, JP Morgan has 14.5% and Vienna Capital Partners 2.8%. Other Hungarian and foreign institutional investors hold 37.6% in MOL. Strategic investors include the Austrian oil company OMV with a 9.1% stake and Slovbena of Slovakia with 8%. Treasury shares account for 4.9%, and 4.7% of shares are held by private investors. The rest of shares are held by employees. (Econews; Ng 10) Tender called for asset man. companies The State Privatization and Holding Company (ÁPV) yesterday invited a single-round open tender for the combined sale of three asset management companies. Buyers may pay for up to 10% of the purchase price with compensation coupons, with the remainder to be paid in cash, according to the tender invitation. The deadline for bidding is October 29. Up for sale is a 99.98% stake in Hungarian Investment and Asset Management (MBV), with a face value of Ft 992.8 million. Buyers must also purchase Borsod-Abauj 2000 Asset Management, which is jointly owned by ÁPV (98.95%, with a nominal value of Ft 296.85 million) and MBV (1.05%); along with Treport Kft, which is also owned by ÁPV (26.56%, with a nominal value of Ft 53.11 million) and MBV (73.44%).(Econews; Vg 5) More job losses at Customs & Excise The Customs and Excise Office (VPOP) will have to cut its staff by another 300 by the end of this year in addition to the previously planned 808 layoffs, announced VPOP leader János Nagy. According to Nagy, the savings on staff cut will finance the planned wage rise for the Office' remaining employees. Ft 3 billion will be paid to dismissed staff in compensation, Nagy also added. (NG 3) McHale buys Szolnoki Mezogép assets The Hungarian subsidiary of McHale Engineering of Ireland signed on Saturday the contract to purchase the assets of farm machinery company Szolnoki Mezogép, currently under liquidation. György Molnár, the bailiff for the company, and managing director of McHale Hungária Tamás Kiss would not disclose the price of the sale. Szolnoki Mezogep's debts exceeded Ft 1.2 billion when the liquidation procedure began. This included more than Ft 100 million in public debts and hundreds of millions in bank loans, Molnar told Econews. Kiss said the company had stopped producing Szolnoki Mezogep products, with the exception of its stalk shredders, and would now make McHale bailers. (Econews; Nv 11) French company to lay off 200 French clothing firm Pasha Kft. will lay off more than 200 of its workers in Tolna county in September, the director of the county's Employment Center said yesterday Valéria Breban said the company, with headquarters in Dombóvár (140 kms SW of Budapest), had already announced dismissals of 95 workers from Dombóvár and 115 from its unit in Tamasi during the summer. The committees set up to help the workers find new jobs believe more than half of the 95 Dombóvár workers will be employed by two companies in Pécs, south Hungary, and talks are in progress with three firms in Tamasi about other employment opportunities for the dismissed workers, Breban said. (MTI) eTel launches corporate package Telecommunications company eTel Hungary Kft will launch its telephone service for local calls to corporate clients from Sept. 15, Zoltán Nagy, the company's marketing director announced. Subscribers to eTel's new service will be able to choose from several packages but will have to sign up for a certain number of calls and for one or two years' period. eTel provides a prepaid service for private clients. (NG 5) Bumper crop all round This year saw a harvest of 8.4 million tons of corn, which is double the amount of last year's crop, and also a 10year record. The area of cultivation has increased by 3.9%, which takes in a total of 1775 acres of land. The most important crops such as wheat and barley are nearly twice as much as in 2003. (MH 9) E.C Volvo must adapt to Hungarian roads New Volvo buses bought this year are not tough enough to cope with Budapest potholes, said Ferenc Haverla, chief engineer of Budapest Transport Company (BKV). BKV has asked the Swedish supplier to develop a shockabsorver that would better resist the unevenness of the road, should the hard suspension persist, BKV's future maintenace expenditures may be sky high. Based on customer feed-back, BKV is also asking for bigger collapsible windows, better padding on passenger seats, and air conditioning. AC, however, may cost up to Ft 1 million per bus per year. (MH 5) E.C. Pannonplast names Balázs Szabó new CEO Pannonplast Rt. named a new management team, led by Chief Executive Officer Balázs Szabó, as the Hungarian plastics maker's previous managers were unable to reduce costs and boost profit. Szabó, 49, replaces Csaba Zoltán, who was fired at an extraordinary shareholders' meeting Friday. The shareholders elected a new fivemember executive board, which in turn named Balázs Bokorovics, 30, as its chairman, the company said in a regulatory filing. Szabó also is a new member of the board. (Bloomberg)

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Billerbeck optimistic re sales Quilt maker Billerbeck Kft is looking to boost its sales by 10% this year aiming for total revenues of Ft 2.9 billion by the end of 2004, managing director Zoltán Kincs said. While the Budapest-based company has seen flat sales on the domestic front, exports to Romania are expected for the first time to exceed Ft 100 million this year. Billerbeck had total staff of 299 and revenues of Ft 2.6 billion in 2003. (Vg 12) S.F.

Economics
Ft 69 million to gov't consultants Extra costs resulting from the recent change of government include an approximate Ft 69 million to be paid to government consultants, whose assignments expire with the change of cabinet, as compensation. Government consultants are entitled to receive compensation equal to their two months' wage if their employment has been continuous for two years. The Fidesz government employed 109 consultants while the Medgyessy cabinet 86. Their monthly wage ranged from Ft 260,000 to Ft 480,000. (NG 1) Gov't to Impose Capital Gains Tax Hungary plans to reintroduce a tax on capital gains and curb tax breaks to help make up for an estimated Ft 100 billion of lost revenue next year when the country lowers the personal income tax. The capital gains tax rate would be 12.5 %, according to a Finance Ministry proposal sent to Bloomberg News via fax. Tax deductions will be curbed at Ft 100,000 a year, with the exception of child-care and home-loan support. People earning more than Ft 6.5 million a year wouldn't be eligible for any tax loopholes. "Income earned through trading on the stock exchange will cease to be tax exempt," the proposal said. "None of the tax allowance categories will be eliminated but the combined amount of the deductions" will be limited. (Bloomberg; MH 9) Ft 212.5 million to eradicate ragweed A sum of Ft 340 million has been separated from the central budget for rhag weed control especially for local councils. Until last week, however, no local councils had applied for it, because the application procedure is said to be complicated and ponderous. Therefore, the money is to be re-grouped: Ft 212.5 million is to be spent on community work projects, communication campaign and ads, and updating the aero-biological network. The Ft 800 million that was distrained in the beginning of this year will be spent on weed control on Hungarian Railways property. (MH 5) E.C. Value of EU membership Hungary may have a Euro 1.5 million surplus against the EU budget during the period 2004-2006, said Andras Inotai, president of the Institute for World Economics. This year, we may have a Euro 300 million plus, which could be Euro 539 million next year, and in 2006, there is speculation of a surplus of Euro 677 million. This period, Hungary contiributed only Euro 2,524 billion whilst receiving Euro 4038 billion from the EU budget. Next period, 2007-2013, Hungary is expecting a subsidy of Euro 3 million each year, while joining with a payment of Euro 0.8-1 milion. (MH 10) E.C. Budget slippage acceptable - World Bank Hungary's government should make a small adjustment in the 2004 budget soon to calm markets and demonstrate its intent to tighten fiscal policies, Thomas Laursen, the World Bank's leading economist for Central Europe and the Baltics told Reuters yesterday. "As a demonstration of commitment for stricter policies, the government should take some measure soon," said Laursen. "They do not have to be draconian measures, but something to demonstrate intent." Laursen added that markets have fully accepted that the government would miss its deficit target of 4.6% of the gross domestic product but investors' tolerance for budget slippage was not unlimited. (Econews)

Politics
Parliament elects new deputy speaker MP Gábor Vilagosi of the junior coalition partner Free Democrats (SzDSz) was elected deputy speaker of Parliament yesterday, following the resignation of Ferenc Wekler. Vilagosi, 48, a lawyer by training, was state secretary of the Interior Ministry between 1994 and 1998. He served as Parliament's notary over the past six years. Vilagosi's predecessor in the post, Ferenc Wekler, faced strong pressure to stand down after winning at least Ft 128 million in non-refundable state assistance for his wine-growing business. (MTI) Parliament violates constitution Parliament is now in violation of the constitution in 13 cases, according to a Constitutional Court (CC) resolution on the law governing electoral procedure yesterday. Yesterday the Constitutional Court stated that Parliament had failed to enact decrees determining how nationals staying abroad on the day of parliamentary elections and national referendums could vote. Speaker of Parliament Katalin Szili has convened a four-party coordination meeting for Tuesday to discuss the law-making tasks arising from the CC resolutions related to the work of Parliament. (MTI)

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Domestic
Green light for dual citizenship referendum MPs yesterday unanimously voted to hold a binding referendum on dual citizenship, which will have to be held within 90 days of publication of the related parliamentary resolution, or the completion of legal remedy proceedings against the resolution. The vote was held after the World Federation of Hungarians (MVSZ) submitted 320,000 signatures in favor of a binding referendum on granting preferential dual citizenship to ethnic Hungarians in neighboring countries. Eligible voters will have to answer the question of whether to grant Hungarian citizenship with preferential nationalization to persons with certificates proving their Hungarian ethnicity, or other means to be determined by a future law on dual citizenship. (MTI; Nv 1, MH 4, Ng 4, Nb 6) No summary court case for Neo-Nazi chief The head of a Hungarian neo-Nazi group, arrested over the weekend and still being detained, will be tried in court under normal proceedings rather than face a summary trial, police said yesterday. Police on September 11 detained Diána Bacsfi, leader of the unregistered Hungarian Future Group, suspected of incitement of hatred against a community. Prosecutors have 72 hours to file charges. Bacsfi and two others are also suspected of using symbols of tyranny, for which charge the summary court proceeding was scheduled to have taken place yesterday. One of the two other suspects summoned to appear in court failed to turn up, which is why yesterday's summary trial could not proceed, police said. (MTI; Nv 1, MH 4, Nb 1)

15/09/2004 Business
Richter rebounds after bond sale Shares in drug maker Gedeon Richter Rt rebounded after the government sold a record euro 640 million of bonds that can be handed over for a quarter of the company's stock. Richter rose 3.4 % at Ft 23,160, its highest since March, after sliding as much as 3.6 % earlier trading. The bonds "were oversubscribed and the investors stopped being nervous about how the whole bond issue will end up," said Gergely Varkonyi, an analyst at ING Financial Markets in London, who maintained a "buy" recommendation on the stock. (Bloomberg: Vg 1, Nb 1, Nv 5, MH 10, Ng 15) Forras EGM appoints new CEO Yesterday's EGM of holding company Forrás Kft approved the appointments of Emese Hidasi as chairwoman of the board of directors and János Zeitvogel as CEO, the company said on the website of the BSE yesterday. Zeitvogel replaces Péter Palko. The EGM also recalled István Nagy, Katalin Vilagosi, Gábor Csányi and Palko from the board of directors, effective immediately, and appointed Hidasi along with Bernadette Kabai Perein, as well as extending the mandate of Zeitvogel. (Econews; Vg 1, Nb 16) Acquisition of Eximbank and Mehib approved Financial market regulator PSzÁF said yesterday it has approved state-owned Hungarian development bank MFB Rt's acquisition of a 74.9504% stake in the Hungarian Export-Import Bank (Eximbank) Rt and a 74.9411% stake in Hungarian Export Insurance (Mehib) from the State Privatisation Agency (ÁPV). The inclusion of the two companies in MFB's consolidation will allow them to make better use of their synergies. Parliament approved MFB's acquisition of the stakes in May. The 25%-plus-one-vote stakes the state retains on the long run in both companies will continue to be held by ÁPV. (Econews; Nv 5, MH 10, Vg 13) Hungary commits to using renewable energy Renewable energy sources account for 3.6% of Hungary's total energy consumption, and the government aims to double this amount by 2010, Ferenc Bohoczky, a senior official at the Ministry of Economic Affairs, told a conference of energy experts yesterday. In 2003, Hungary produced 36.5 petajoules of renewable energy, 85% of which came from biomass plants. On average, 5.3% of all energy in the EU comes from renewable resources. The EU aims to raise this to 12% by 2010. Under EU rules, renewable energy sources must account for at least 3.6% of Hungary's total electricity production by 2010, Bohoczky said. In order to achieve this, electricity plants with a combined output of 110 MW will be built in Ajka, Kazincbarcika and Pecs by 2005. (Econews; Ng 5, MH 10) Invitel - EBITDA of Euro 74 mln Hungarian Telecom B.V., the parent company of Invitel Rt, reported EBITDA of Euro 74 million in the 12 months to end June 2004, up 14.6% compared to the 12 months to end March 2004, the company said yesterday. Invitel had revenue of Euro 44.6 million in Q2 2004, down from Euro 44.8 million in Q2 2003, the company said. Invitel said growth in revenue generated from internet traffic and wholesale revenue has offset revenue loss in retail voice services in areas where it has a concession. Also yesterday, telco Matáv Rt said from September 15, it is offering competitive rates for retail clients switching from alternative telcos, such as Invitel, HTCC or Monortel Rt. (Econews; Ng 5)

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MOL and OTP among Forbes top 400 American Forbes magazine chose shares of Hungarian oil and gas company MOL Rt and OTP Bank Rt to belong to the 400 most recommended investments of the world. These are the only corporates from the Central-EasternEuropean region to be on the list. The register, which was made for the sixth time contains shares that are expected to gain the most in the future. No other of the ten new EU-member states has a company on the list; from ex-socialist countries only Russia has two candidates. (Nv 5) G.R. MOL to focus on upstream Hungarian oil and gas firm MOL Rt plans to focus its strategy on acquiring exploration assets in Russia and former Soviet states and to boost dividends next year, Michel-Marc Delcommune told Reuters in his first interview after taking over as MOL's newly appointed director for strategy earlier this month. "We are looking closely at Russia and the CIS countries for upstream opportunities. But oil prices are high, so we're not going to rush into billion dollar deals," Delcommune told Reuters. (Econews; Vg 14) CAD 11 million for safe water The Hungarian army ordered water treatment equipment worth CAD 11,000,000 from Canadian military drinking water specialist Zenon. The army has been using Zenon products since 1998 for preventing infections spreading via drinking water. The products now ordered in greater quantities have already been tested during peacekeeper operations in Kosovo. MM (Ng 4) MTV to review business plan The Tuesday board meeting of Hungarian National Television MTV decided that the broadcasting company has to modify its 2004 business plan. The reason is that while MTV managed to obtain 85% of the state subsidies available to public media in 2003, this year they only managed to get Ft 4.8 billion from the total Ft 6.8 billion distributed so far. Even though the company has introduced extreme saving measures this year, their deficit totals Ft 5.2 billion, while all the remaining state subsidies amount to Ft 3.2 billion. MM (Ng 4) Malév flying high Flag carrier Malév Rt flew 1,786 passengers in the first 8 months of the year, up 16% over the year-ago period and slightly above the previous consensus. The Hungarian national airline also improved its load factor in the JanAug period by cutting several underutilized flights. The company's better-than-expected figures will enable Malév to draw down the remaining Ft 3 billion of the Ft 10 billion capital injection put up by ÁPV Rt, president and CEO László Sándor said. (Vg 1, MH 11) S.F Two more Baumax stores open DIY store chain Baumax Hungary Trading Rt will open two new stores today. The building of the shops in Kecskemét (South-Eastern Hungary) and Budapest cost about Ft 3 billion. Baumax now has 14 outlets in Hungary, corporate plans include having 25 on mid-term. The company have made profit since its formation in 1992; last year's turnover was Ft 27 billion. This year, it is planned to increase by 18% to Ft 32.5 billion. By now, 40% of the products sold come from Hungarian suppliers. (MH 10) G.R. Car sales slows overall Hungarian car sales slackened by 3.8% yr/yr in the first eight months of 2004, with 137,900 new vehicles sold. According to car magazine Autó2, Suzuki led the market in Q1, with 18,300 cars, showing a 17% fallback. The second position was taken by Opel with 10,400 car sales and a similar loss compared to the base. Renault, Skoda, Volkswagen, Peugeot and Toyota all managed to climb on the sales list, but Daewoo showed the most explosive, over 50%growth, selling 7,300 cars so far. MM (Ng 6) Raining down on tabloids Hungarian tabloids in general suffered some losses due to the rainy summer. Usually, tabloid sales are boosted in the Lake Balaton area, because of strong domestic tourism and the related greater demand for tabloids; this year, however, the leading tabloid Blikk sold 30% less there in a yr/yr comparison. At the same time, Hungarians spending their holiday at the Croatian seaside and in Austria also contributed to tabloid sales this year. Blikk actually registered a 5% overall growth, and from the 13,000 more copies they sold, about 10,000 were bought abroad. MM (Ng 8) GVH dismisses Matáv misconduct case The Competition Office (GVH) has dropped an inquiry into an alleged price squeeze by dominant telecom Matáv Rt. The watchdog said there was inconclusive evidence to prove that between February and July 2002 abusing its market power, Matáv set its interconnect service and tariffs package prices in a way which could have hampered the entry of rival providers onto the market. (Vg 9) S.F.

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Matáv, MOL get Investor Relations awards The UK's Investor Relations Magazine awarded distinctions in ten categories at a conference in Budapest on Monday, and in six of the ten categories, the award went to a Hungarian company. The grand prize for investor relations was awarded to Hungarian telco Matáv Rt, just as last year. The judges also shortlisted Hungarian oil and gas company MOL Rt and Agora of Poland for the prize. Michel-Marc Delcommune of MOL was selected the region's top executive. The award for best business management went to Matáv and the prize for the best organization of investor meetings was given to MOL. (Econews) Autoker opens Romai Kert apartments Autoker Holding Rt officially opened its Ft 7 billion, 380-unit "Romai Kert" apartment complex yesterday. The complex, built on a 7,500-square-metre plot near the Danube in Budapest's District XII, has around 25,000 square meters of living space, Autoker president and CEO Ehud Amir said. The project was financed by K&H Bank Rt. Autoker Holding is currently working on a 224-unit apartment complex on the banks of the Danube in Budapest's District XIII, as well as a 143-unit complex in the city center. (Econews) Over 11,000 subsidized jobs in 3 years Enterprises received Ft 11.2 billion in subsidies from the labor market fund, resulting in 11,000 new jobs over the past three years, the Labor Ministry said yesterday. The companies were granted approximately Ft 1 million per new position. The jobs were created mainly in disadvantaged regions, easing the current situation of high unemployment, the ministry said. This, it added, would contribute to greater stability resulting from a followthrough of marketable goods and services offered by the subsidized companies. (MTI)

Economics
Consumer prices fall for 1st Time in Year Hungarian consumer prices fell in August, the first monthly decline in a year, as fruit, vegetable and clothing prices dropped and the strengthening forint made imported household electronics cheaper. Consumer prices fell 0.3 % from July after stagnating in the previous month, the Budapest-based statistical office said. The annual inflation rate was unchanged at 7.2 %. The median forecast of 12 economists surveyed by Bloomberg expected a 0.2 % monthly drop and an annual rate of 7.3 %. (Bloomberg; Nb Piac, Vg 1) FinMin-inflation figure bodes well The August inflation figure published yesterday was in line with the Finance Ministry's projection and there is every reason to believe that inflation will slow down substantially during the remainder of the year, Finance Minister Tibor Draskovics said yesterday. Consumer prices fell by 0.3% in the month of August alone and rose 7.2% yr/yr, the Central Statistics Office (KSH) reported yesterday. Draskovics said that the figures show that inflation peaked in May and has continued to decline since then. (Econews; Nb piac, Vg 1, Ng 3, Nv 5, MH 9) MNB counting on 5.4% GDP budget deficit During a parliament hearing, Hungarian National Bank (MNB) vice president Henrik Auth stated they were still counting with a 5.4% GDP-proportional state budget deficit. The vice president warned the Minister of Finance to avoid repeating last year's communications mistakes. Auth claimed that state securities with a one year or longer duration are not directly affected by the base interest rate. He also stressed that the current, 11% base interest rate is not a bottleneck for economic growth. MM (Ng 3) Foreign currency loans, risky - PSzÁF Financial market regulator PSzÁF and the central bank have advised Hungarians to be discerning when taking out foreign currency-denominated loans because of exchange rate risks and because of two kinds of "hidden" charges the loans contain. Since the government cut subsidies on home loans, the volume of foreign currencydenominated loans - especially forex home loans - has grown at a breakneck pace, with one bank reporting that 90% of new loans were foreign currency-denominated. (Econews)

Politics
Fidesz sets up think tank for 2006 elections The main opposition Fidesz party has set up a think tank to coordinate preparations for the 2006 elections in anticipation that it might form the next government. Called "Civic Government 2006", the consultative body will carry out strategic studies in economic policy, health care and culture, and compile political analyses, Tibor Navracsics, a senior Fidesz official, told reporters yesterday. Fidesz Chairman Viktor Orbán attended the founding session. The team is composed of six members of Orbán's government (1998-2002), its chief church policy adviser, a historian and a political scientist, he said. (MTI; Nb 1, Nv 3, MH 4)

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German chancellor to discuss EU affairs in Bp German Chancellor Gerhard Schroeder will discuss EU affairs and economic and scientific cooperation issues during his two-day official visit to Hungary starting on Wednesday. "Alongside reviewing cooperation within the EU, a key element of the visit will be to mark the 15th anniversary of the opening of Hungary's borders," Foreign Ministry spokesman Viktor Polgar said yesterday. In 1989, the Hungarian government opened its borders to the West paving the way for tens of thousands of former East German refugees, who did not want to return to the former GDR, to leave the country. (MTI; Nv 2, MH 6) SzDSz reject return of capital gains tax Alliance of Free Democrats (SzDSz) will not vote for capital gains tax, chairman Gábor Kuncze said. The tax was terminated in order to promote investments in Hungary, so its restoration would be inconsistent, he added. Furthermore, it would cause disadvantage for hundreds of thousands of private pension fund members. SzDSz accepts increasing of withholding tax from 20% to 25% as a necessary compromise; but considers the reform of personal incomes tax as "great success of liberals". (MH 10) G.R.

Domestic
Steps to stop anti-Hungarian incidents Serbian Prime Minister Vojislav Kostunica yesterday expounded his government measures on halting the antiHungarian incidents in Vojvodina during a meeting with visiting Hungarian President Ferenc Madl. "Serbia does not want to either play down or exaggerate the incidents against the ethnic Hungarian population in the province of Vojvodina," Kostunica said, adding this was a sensitive issue for his country as Serbians live in other neighboring countries as well. Kostunica and Madl agreed that the bilateral minority protection agreement offers a good framework to improve the situation of the Serbian and Hungarian minorities living in both countries. (MTI; Nb 1, MH 1, Nv 2) Tighter gun-licence rules introduced The government has introduced tighter gun-licence rules in a bid to bring its legislation in line with the EU acquis, a police officer said yesterday. The related law was passed in April while its implementing rules were made public on September 3, Col. Ildikó Kincses of the National Police said. "Under the new rules, possession of firearms is specifically allowed for purposes of work, sport, and the stepped up defense of life and personal safety," she said. The conditions for keeping self-defence arms were also tightened: only those may possess such arms who can prove that their life and safety can only be protected this way. (MTI; Nb 1, MH 1, Nv 4)

16/09/2004 Business
Irish Ballymore to invest Ft 250 billion Irish real estate developer Ballymore Properties' short term plans include investing Ft 250 billion in Hungary. In scope of the first phase of the investments Ballymore wants to construct luxury apartments, offices, cultural an entertainment facilities and a 3 hectare public park on a lot near Budapeat's Western Railway station, announced Carlos Coelho, managing director of Ballymore's Hungarian subsidiary. The 82,000 sq m area was purchased by Ballymore from MÁV Rt for Ft 3.25 billion at an auction. The construction of the complex is scheduled to last for 3 years. (Vg 15) Richter privatization to reduce borrowing The Euro 639 million in revenue that the sale of bonds exchangeable for Richter shares will generated will be used to finance government debt and reduce borrowing requirements or will be used to repay government debts in advance, Finance Minister Tibor Draskovics said yesterday. The bonds were sold with the best conditions that any bond issued by Hungary has ever achieved on foreign markets, Draskovics noted. The State Privatization and Holding Company (ÁPV) issued the exchangeable bonds, due in 2009, with an initial exchangeable premium of 54% and a 3% yield to maturity in a transaction lead managed by JP Morgan on Tuesday. (Econews; Nv 5, Ng 11, Vg 19) GE to build new logistics center in Nagykanizsa General Electric (GE) is constructing a new logistics center in Nagykanizsa, west Hungary, the company announced. GE already finished a 15,000 sq.m. complex in Nagykanizsa Industrial Park last year. The facility will be financed by Merkantil Real Estate Leasing Rt, which will lease the building to GE. GE and Merkantil bought the 10,000 sq.m. site from the local council this summer, the purchase price was not made public. (Ng 5) Freesoft to enter BSE next week Software developer Freesoft Rt will ask Budapest Stock Exchange (BÉT) Rt to introduce its shares at BÉT at the end of next week, financial consultant Gábor Móricz said. Freesoft's capital raise was registered by Budapest Company Court this week and this was the last step the company had to wait for to apply for a BÉT license, Móricz said. Freesoft will be the first and maybe last new company at BÉT this year. The company's shares were almost eight times more over-registered in the middle of August. (Ng 11)

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Debrecen local council upgrades sewage network The municipality of Debrecen plans to announce two public procurement tenders in October to upgrade the city's sewage and water purification system. The investment will cost 22 million Euros, that is approx. Ft 5.45 billion. 58% of this sum will be granted by the European Union's ISPA and cohesion funds, 32% by the government and 10% by the local council. Construction works will be started in April next year and must be finished by the end of 2008. (Ng 8) First Subaru dealership opens in Budapest Car dealer Emil Frey Import Kft has opened the first exclusive Subaru dealership in Budapest, managing director Mihály Groska announced. Emil Frey has represented Japanese Subaru brand in Hungary for years, but no separate dealership existed before, Groska said. Emil Frey plans to establish ten Subaru dealerships in Hungary this year, Groska said. Several of these can be extensions of already existing firms, thus can be created with an investment of Ft 5-10 million, but new dealerships require Ft 100 million from Emil Frey, Groska said. (Ng 4) Hungarian Tourism Rt to announce translation tender Tourism promotion agency Hungarian Tourism Rt has announced a translation tender to translate 7.7 million characters from Hungarian into English, German, Chinese, Italian, French, Russian, Spanish, Polish, Swedish and Finnish and to proof-read 3.2 million characters in the same languages. Some of the English texts must be translated into French, Russian and Italian. Bids are expected by November 2 this year. (Ng 10) 8 express interest in 3G mobile tender Eight companies have purchased the documentation to the 3G mobile tender so far, according to Dániel Pataki, president of the National Telecommunications Agency (NHH). Among the would-be tenderers there are European, American and Asian applicants as well, Pataki also added. Applications can be submitted from Sept. 1. Budget revenues from the tender this year will mount to Ft 5.5 billion. (Vg 15) Masped's merging Masped Rt's two subsidiaries, TT-Masped Záhony Logistics Kft and Masped Rail Freight Forwarding Kft, both in international railway freight forwarding, have merged recently, announced managing director Tibor Gyabronka. After the merger, Masped Rail Kft's registered capital is Ft 280 million. The company last year had Ft 9.5 billion in turnover and projects Ft 11 billion for 2004. (Vg 16) Vienna Capital selling BorsodChem stock Vienna Capital Partners (VCP) yesterday launched the sale of a 67.9% packet of shares in Hungarian chemicals company BorsodChem Rt through an international private offering. VCP holds 91.17% of BorsodChem shares through two subsidiaries. VCP has set a price range of Ft 1,775 to 2,075 for the shares. The indicative price range amounts to a significant discount compared to recent market levels or Tuesday's close of Ft 2,470 from where BorsodChem dropped to 2,280 on the news of the sale before recovering to 2,340 by 2:20pm. (Econews; Ng 11) Environmental indecision may loose Ft 100 million Among the EU member states, Hungary is the only one that hasn't announced the Natura 2000 network yet. Although the regions have been indicated on time, no accurate definitions of the areas has been provided, and the legislation on their protection still hasn't been passed. The Hungarian segments of the Natura 2000 network should have been accurately defined on the accession day May 1, 2004. According to MH information, the legislation is to be discussed next week. 9.2% of Hungary is classified as nature conservation areas. With the Natura 2000 network, it may reach 20%. If legislation decision is not made in time, Hungary may loose up to Ft 100 million EU subsidy. (MH 5) E.C. Shoe industry in danger of extinction The Hungarian shoe industry may fade away if no state intervention is to arrives. There are 20% less workers each year, and more are to be layed off. In the past 2 years, Baranya, Vas, Zala and Tolna counties were stricken the most. A complete change in profile, the transformation of structure, and a modernization in marketing strategy would be essential to survive, however, it can not be carried out without government support or EU subsidy. Shoe industry workers' situation is getting worse year by year: their average gross income is Ft 72.206 including top managers' benefits, which is 43% lower than other industry workers. (NV 4) E.C. Nest of black market workers Hungarian tax office APEH yesterday swooped construction site of the Palace of Arts in Budapest's Distr. 9 near Lágymányosi híd, searching for illegal workers. Inspectors not only found several workers also claiming unemployment benefit, but caught illegal immigrants and people wanted by the police. According to constructor Arcadom Rt, on an average day at least 300 workers are employed on the site, all hired by subcontractors. Although results of the search have not been published yet, experts say that millions could be imposed in fines or even the construction could be suspended for some time. (Nb 15)

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Savings coops chide peer for PSzÁF censure Hungary's National Association of Savings Cooperatives (OTSz) said yesterday that it would take any steps necessary to ensure that Szolnok Area Cooperative, one of its 159 members, would operate within the bounds of the law. The OTSz also called for stricter legislation for financial institutions. PSzÁF published a ruling on September 14, but dated August 13, censuring Szolnok Area Cooperative for failing to submit data and for failing to seek approval prior to the purchase of a stake in it by an investment group which appointed three members apiece to its boards. (Econews) László Resigns as Pottery Maker Chairman Csaba László, who was fired as Hungary's finance minister in January, resigned as chairman of the board of directors of Herendi Porcelain Rt, business daily Napi Gazdaság said, citing a statement by the company. László, elected in March after workers in a paint workshop nominated him, cited a conflict of interest, the paper said. László joined KPMG LLP, the world's No. 4 accounting firm, in June as a partner for its corporate tax business, according to the report. He was fired as finance minister after last year's budget deficit came to 5.9 % of gross domestic product, topping the government's highest forecast. (Bloomberg) Mahart to sell stake in Interlighter Shipping company Mahart Rt said yesterday that it is selling its 25% stake in peer company National Sailing Company Interlighter. Interlighter has registered capital of Ft 125 million and net assets of Ft 551 million. It was set up in 1978 by Bulgaria, the U.S.S.R, Czechoslovakia and Hungary to conduct shipping on the Danube. Bidders are limited to other shipping companies in majority Hungarian ownership and they must purchase the entire 25% stake. Bidders must also agree to remain partners in the company after the purchase. The deadline for submitting bids is October 15. (Econews) CinemaElectric to deliver mobile content U.S. wireless services company CinemaElectric has announced its PocketCinema mobile video clips will now be available in Hungary through an agreement with T-Mobile. The movie clips play on a variety of multimedia enabled mobile phones.(Econews) Antenna shares may be sold this year Hungary may start the sale of shares in broadcaster Antenna Hungária Rt this year amid rising demand for similar telecommunication companies, said Miklos Kamarás, the head of asset-management company ÁPV Rt. Antenna, which has a minority holding in the local unit of Vodafone Group Plc., also broadcasts signals for several Hungarian television stations and provides Internet backbone services. "The situation around Antenna is ripe for carrying out the privatization, Kamarás said, "We won't let favorable" environment "go just because revenue" for this year "exceeded our expectations." (Bloomberg)

Economics
2004 budget gap raised after breeching target The government raised the 2004 budget deficit forecast after the eight-month shortfall breached the annual target. The deficit target was widened to as high as 5.3 % of gross domestic product for this year, including local governments, from 4.6 % previously, said Finance Minister Tibor Draskovics. The country needs to reduce the deficit so it can adopt the euro by its target date of 2010. To use the euro, the public-finance gap must fall below 3 % of GDP. (Bloomberg; MH 1,2, Ng 1, Nb 1, Vg 1, Nv 5) Fin.institutions- tax rise,16% to 24% The corporate tax rate for financial institutions will rise from 16% to 24% next year under a draft bill which the government will submit to parliament on Monday, Finance Minister Tibor Draskovics said after yesterday's cabinet meeting. The corporate tax for other businesses will remain 16%. According to the Finance Ministry's calculations, the higher tax will generate Ft 30 billion in extra revenue for the central budget. He added that government interest subsidies for home loans had been good business for banks, and might justify the government's decision to raise rates in the sector. (Econews; Vg 1, MH 1,2, Nv 1) Banks say raised tax bad for business Tamás Erdei, chairman of the Hungarian Banking Association, said that the government's move yesterday to raise the corporate tax for financial companies was discriminative and went against the principle of neutrality, in addition to harming financial investors. Erdei said a higher corporate tax for financial companies would put such businesses at a disadvantage in the region. Erdei said a tax on interest would be a better and a fairer solution. (Econews; MH 1,2) Trade unions propose 6-7% wage rise The national association of Hungarian trade unions MSzOSz has proposed a gross 6-7% wage rise and a Ft 62,000/month minimum wage next year, MSzOSz said yesterday. In recent negotiations with the National Interest Coordination Council (OET), an interest group comprising both employers and employees, the government and employers suggested a gross 4.5% wage rise and a Ft 55,400 minimum wage, as against the current Ft 53,000. MSzOSz said the 6-7% rise would ensure that real wages would rise 4%, in line with GDP growth. (Econews; Ng 3, Nv 4)

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July new industrial orders up 14.5% yr/yr New orders of selected branches of Hungary's manufacturing industry were up 14.5% in July in volume terms from a year earlier, the Central Statistics Office (KSH) said yesterday. New export orders were up 16.6% and new domestic orders rose 6.3% in the twelve months to July. The total stock of manufacturing industry orders at the end of July was 17.3% higher in volume terms than a year earlier. Total export orders held were up 19.9% and the domestic order stock was up 6%, KSH reported. (Econews; Vg 5) Housing help planned for families The proposal to ameliorate Hungary's demographic situation is to be discussed by the government in October. Some issues, such as the housing program, may be effective from January 2005. This program would help couples planning on having children, to find a home. When buying a house, the government would guarantee the credit coverage of the downpayment when it can not be made. For couples not able to afford their own flat, the government would offer subsidy to rent one. (MH 5) E.C.

Politics
Draskovics to stay on as FinMin Prime Minister-designate Ferenc Gyurcsány said yesterday that he was retaining Tibor Draskovics as finance minister. Gyurcsány made the announcement during a news conference at the Finance Ministry reporting revised deficit numbers for 2004. Draskovics is the second person following Prime Minister's Office chief Peter Kiss who Gyurcsány said he would retain in his new cabinet. Investors have been particularly interested in Gyurcsány choice of finance minister, saying they saw retaining Draskovics as a guarantee that a tight budget policy would be continued. (MTI; Vg 1, Nb 1 MH 1,2, Ng 3, Nv 5) Schroeder, Medgyessy discuss cooperation German Chancellor Gerhard Schroeder, who began a two-day official visit to Budapest yesterday, said German companies are interested in the privatization of the Hungarian energy supply network. "We do not want to lure capital away from one another; we instead want to cooperate to create new jobs in both countries by applying new technologies and development opportunities," Prime Minister Medgyessy said after their meeting. (MTI; Nb 1, Nv 2, Vg 2)

Domestic
Prosecution drops terrorism case The Municipal Prosecutor's Office has not found sufficient evidence to bring charges against a Palestinian man who was suspected of preparing a terrorist act during the visit of the Israeli President in April. Palestinian dentist Tayseer Saleh, 42, a Hungarian citizen who has lived in Hungary for 25 years, was arrested in Budapest just a few hours ahead of the visit of Israeli President Moshe Katsav on April 13 on suspicion of preparing a terrorist attack. However, the prosecutor's office released him in June. Saleh, the spiritual leader of a Budapest Islamic community -- allegedly commissioned a person to procure explosives at the end of 2003 so that a third person, also at his behest, could blow up a Jewish museum in Budapest. (MTI; Nb 8)

17/09/2004 Business
FinMin forecasts Ft 86 bln deficit The Finance Ministry projects a monthly public sector deficit of Ft 85.6 billion for September, according to cash flow-based GFS figures and excluding local governments and revenue from privatization, the ministry said on its website yesterday. The ministry also raised its public sector deficit forecast for the year by Ft 150.4 billion to Ft 1,335.1 billion. The new projection is equivalent to 6.5% of GDP, according to GFS, compared to 5.8% of GDP under the earlier projection. The deficit projection for September would bring the nine-month deficit to Ft 1,277.9 billion, leaving only Ft 57.2 billion of wiggle room for the rest of the year if the target is to be met. (Econews; Ng 3, Vg 5) Fundamenta breaks into black in H1 Home savings bank Fundamenta Rt had profits of Ft 100 million in H1 2004, and it expects to close 2004 with a profit as against expected losses of Ft 500 million, CEO Károly Gergely said yesterday. In 2003 Fundamenta had losses of Ft 1.2 billion, as against the planned Ft 1.5 billion. The losses were a result of the costs of the merger of Fundamenta with Lakaskassza-Wustenrot in June 2003. Fundamenta holds more than 452,000 contracts worth over Ft 431 billion. In the first eight months of the year Fundamenta signed 35,000 new contracts worth Ft 80 billion. (Econews; Ng 4, Nv 5, Vg 19) K&H Bank H1 profit up 42% yr/yr K&H Bank Rt had consolidated IFRS pre-tax profit of Ft 13.2 billion in H1 2004, up 42% yr/yr, CEO John Hollows told the press yesterday. After-tax profit rose 45% to Ft 11.1 billion in H1 2004. Speaking on the government's proposal to raise the corporate tax for financial companies from 16% to 24%, Hollows said K&H Bank would be unhappy with legislation that discriminated against a sector of the economy. He added that K&H Bank would shield clients from the unfavourable effects, should the proposal become law. (Econews; Ng 4, MH 13, Vg 19)

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Parmalat on the up turn Reorganization of dairy company Parmalat Rt, which started in April seems to be successful. By August the company could double its production, reaching 140,000 liters daily, liquidator Ferenc Somogyi said. Turnover of August was Ft 700 million more than twice as much as of April. By the end of the year the company may break even, a next year it may be in the black. To succeed with the reorganization, the laying off 130 people was necessary. Parmalat has 320 employees now. The product portfolio has also been revised; production of loss making goods was stopped. (NG - Appendix I) G.R. Ft 500 Million contracts for KÉSZ One of the biggest Hungarian construction industry companies, KÉSZ Kft. has signed two major contracts in the region, worth nearly Ft 500 million. The automotive producer Peugeot trusts KÉSZ with the partial planning, production and installation of the steel structure of its new painting site in Trnava, located in Serbia and Montenegro. At the same time, KÉSZ got a contract from the Metro chain for the construction of their first store in Serbia and Montenegro. KÉSZ is counting with a total 2004 income of over Ft 40 billion. M.M. (Vg 15) Wizz Air to fly to Liverpool from Dec. The no-frills airline Wizz Air said it would launch a flight to Liverpool from December. Tickets from Budapest will be sold from Friday for Ft 990 (Euro 4). CEO Jozsef Varadi, a former chief executive of Hungary's national carrier Malév, said he expected the Liverpool flight to become popular among business travellers and tourists as well. Wizz Air launched its first services from Katowice, Poland, in May. (MTI; Ng 5, MH 10) Brau Union Rt. president resigns The president of the brewery Brau Union Hungária Rt. board of directors, Edmund Ranftl, has resigned from his post with effect from September 15, a company press release said yesterday. The company's supervisory committee elected Alle Ypmat as member of the board of directors until June 30, 2008, and then elected him president of the board, according to the press release published on the Budapest Stock Exchange home page. (MTI; Ng 11, MH 13) Acting head chosen for DunaTV The board of curators of state owned broadcaster DunaTv elected current financial vice president László Szekeres to become acting president. Szekeres will take over duties from István Pekár, whose mandate expires next Wednesday, should there be delays in the selection of a new president. The board of curators is currently conducting interviews with the twelve applicants competing to fill the vacant position. (Nv 4) Fund management changes for Erste State Financial Institutions Supervision enabled Erste Bank Fund Management Rt is to amend the fund management rules. From now on, the commission on buying or selling of the papers may be up to Ft 600. The exact amount of the charge will be decided by the beginning of October. At the same time, investment policy of Erste Alpok Tradition fund was changed. Until now only 20% of the fund's assets could be shares, now it will be over 50% and up to 85%. The change will take effect in a month. (NG 11) G.R. Wheat exports to Bosnia reduced Because of a bilateral trade agreement effective since 1 September, Hungarian wheat export to BosniaHerzegovina and Serbia-Montenegro will be reduced from 250,000 to 80,000 tons this year. The new regulation, which maximizes the number of lorries in 3,200 for the countries involved, was the result of Serbian transporters using lorries registered in Bosnia-Herzegovina for transit shipments. The situation is even more serious since the limitation also affects vegetable oil trading and MOL transports. M.M. (Vg 4) New wine processing plant completed With the Ft 700 million investment of the Villány wine producing family Wunderlich and a financial partner, a new bottling plant and a nearly 2,000 sqm wine cellar complex has been completed in the vicinity of the southHungarian settlement. The complex has 35 acres of vineyard. Wunderlich Kft. is planning to market an annual 160,000 to 180,000 bottles of quality wine within two-three years. M.M. (Nb 10) OTP amend fund management rules State Financial Institutions Supervison (PszÁF) enabled OTP Real Estate Fund to amend the fund management regulations. The yearly payment of the yield in every December was terminated, so the earnings will be realized through price increase. The decision was made because clients did not demand the yearly payment, CEO of OTP Real Estate Fund Management Rt, Balázs Tóth said. At the same time the commission, which must be paid if the paper is sold within a year, was decreased from 2% to 1.75% and the time limit was also reduced to nine months. (NG 12) G.R. Albacomp invests in retail Hungarian computer parts manufacturer and wholesaler Albacomp Rt opened its first retail outlet called Digital Home in the Lurdy shopping center in Budapest. The new store will carry the whole range of Albacomp products from notebooks to hi-fi systems. Albacomp expects the first Digital Home store to generate Ft 100 million in turnover until year-end. If the venture proves successful more retail outlets will open next year, with long-term plans including the creation of a chain of stores said Albacomp marketing director Csaba Deme. (MH 12)

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Daewoo to become Chevrolet Car manufacturer giant General Motors decided to re-brand its range of cars currently sold under the Daewoo name. The cars will carry the Chevrolet brand name starting from October 1 in Hungary, Czech Republic and Slovakia, which will mark the premiere of the successful American brand on European markets. Chevrolet will make its debut on other Western European markets in January 2005. (MH 12) HRP group founds IT security company The HRP group, one of the biggest players in the Hungarian IT field, has recently established a new daughter company specialized in IT security, named Relnet Kft. Relnet will be focusing on marketing IT security products and providing related counseling services. The HRP group previously counted two companies, IT tools distributor HRP Hungary Kft. and the biggest Hungarian software trading company, Business Software Center Kft. Together, they have a staff of 87 and posted a Ft 20 billion turnover in 2003. M.M. (Vg 16) Founding of micro loans company Yesterday, the financial supervisory body authorized the founding of Mikrohitel Gazdaságfejleszto Pénzügyi Rt., a new small loans company aiming to support small businesses falling out of the regular loan circles. Mikrohitel, which lays an emphasis on giving loans to less competitive entrepreneurs, including disadvantaged romas, is supported by both the Soros Foundation and the Open Society Institute. M.M. (Vg 18) Richter's Rigevidon drug to Be Reviewed Gedeon Richter Rt.'s Rigevidon estrogen product will be reviewed for safety and effectiveness by the EU's Committee for Medicinal Products for Human Use, the European Medicines Agency said. The EU-wide review of the product, made by Eastern Europe's biggest drug maker, was requested by the Netherlands "because of potential safety and efficacy concerns," the agency said in an e-mailed release. Richter is the world's fifth-largest maker of birth control products and hormone substitutes. (Bloomberg) IT Ministry official to become ENISA vice president IT Ministry department head Ferenc Suba has been named vice president of the European Network and Information Security Agency (ENISA), the ministry told MTI yesterday. ENISA was set up in March 2004 as an EU think tank aimed at evolving an EU "security consciousness" and assisting member countries and common institutions in resolving IT security issues, the ministry said. (MTI) Boerse to establish Cent. Euro. Exchange At its meeting yesterday, the Supervisory Board of the Wiener Stock Exchange decided to pursue the strategy of establishing a Central European group of Exchanges, which was first implemented with the successful acquisition of Budapest Stock Exchange (BSE) in May, the exchange said in a press statement yesterday. A consortium of Austrian investors, including the Vienna bourse, acquired a 68.8% stake in the bourse in May. The acquisition gave HVB Bank Rt, which led the consortium, a 25.2% of BSE shares, the Vienna Stock Exchange 14%, Erste Bank 12.2%, Oesterreichische Kontrollbank 11% and Raiffeisen Zentralbank 6.4% of the Hungarian exchange. (Econews)

Economics
Economy in good shape - Gyurcsány Despite high public sector deficit figures published on Wednesday, the forint has continued to firm, indicating that the Hungarian economy is in good shape, Prime Minister-designate Ferenc Gyurcsány said yesterday. Meeting mayors and other officials from northern Heves County in the city of Gyöngyös, Gyurcsány said that fiscal policy was really only a narrow slice of the economy. "No one should forget that over the past two years real incomes have increased by 25% and pensions have gone up by 15%," he said. (MTI; MH 1, Nv 1) Billions paid unnecessarily in car reg. tax Hungarian news portal Index claims that because of the uncertainties surrounding the VAT-content of the new car registration tax, Hungarian car importers paid billions of forints unnecessarily to the state budget between February and July. Even though they could have reclaimed the Ft 22,500-Ft 450,000 tax per vehicle, a great number of companies decided not to deal with the issue retroactively. The Ministry of Finance stated that they were unable to give exact figures due to the great number of companies involved and the tax reclaims already in progress. M.M. (Nb 15) Draskovics promises good budget "The country will have a good budget next year," Finance Minister Tibor Draskovics said after a cabinet meeting yesterday. Draskovics said the cabinet had a hard, but good-humored discussion, and got another step closer to defining the 2005 budget. The Government Spokesman's Office said that with the budget the government aimed to create stable economic policy. (Econews; MH 1, Nv 1)

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Real wages up 0.2% yr/yr Gross nominal average earnings in Hungary rose by 8.6% in the first seven months of the year, net average earnings rose by 7.3%, the Central Statistics Office (KSH) informed MTI yesterday. Real earnings were up 0.2% yr/yr, alongside a 7.1% surge in the consumer price index. In the first six months of the year, gross average earnings rose by 8.6%, net real earnings by 7.4% alongside a 7.1% surge in the consumer price index, which was up 0.3% compared to the corresponding period of 2003. In January-July 2003, gross nominal average earnings rose by 14.1%, net average earnings rose by 18.1% and real earnings rose by 13.1% alongside a 4.4% rise in consumer price index. (MTI; MH 10, Ng 3) Swiss franc loans on the rise According to a study prepared by the International Training Center for Bankers (ITCB), consumers increasingly choose home mortgage loans denominated in Swiss francs taking advantage of favorable interest rates. During 2004 a radical decrease was observed in traditional Forint loans, while foreign currency loans grew by 45% said Júlia Király, CEO of ITCB. Király expects the proportion of Euro and Swiss franc loans, to reach 15% of the total home loans market by year-end. (Nv 5)

Politics
New gov't to be sworn in on Oct 4 Hungary's new government will be sworn in at Parliament on October 4, Speaker of Parliament Katalin Szili said yesterday. Szili said President Ferenc Madl will submit his proposal for the new prime minister during Parliament's plenary session on September 27 and the prime minister-designate will hand over his government program at the same time. "Parliament will debate the government program on September 29 and will vote on it the very same day," Szili added after the House Committee session. (MTI; MH 1, Nb 1, Ng 3, Nv 3, Vg 5) No time to legally ban neo-Nazi demo Hungary's four parties with seats in parliament agreed yesterday that they did not have enough time between now and October 15, the date of a planned neo-Nazi demonstration in Budapest, to pass legislation to ban it. All parties in parliament condemned the planned demonstration but disagreed over how to handle it. The government coalition leader Socialist Party prepared a draft amendment to the law of assembly, proposing that all demonstrations challenging the rule of law, constituting a crime, or violating the rights and freedoms of others should be banned. (MTI; MH 1)

Domestic
New national police chief sworn in Major-General László Bene was sworn in as the new national police chief yesterday succeeding Maj.-Gen. László Salgo, with effect from September 16. Bene, who has a law diploma, formerly served as criminal investigations director of Györ-Sopron-Moson county (W Hungary), and police chief of Vas county. (MTI; Nv 1, MH 5) UN High Commissioner's new Bp office opens The new Budapest office of the United Nations High Commissioner for Refugees was opened yesterday by Interior Minister Monika Lamperth and High Commissioner Ruud Lubbers. The office will serve as a regional refugee center for Hungary, Poland, Slovenia and Slovakia. In her address the minister spoke about concerns in handling the personal data of refugees, when human rights and the threat of terrorism need to be considered in parallel. Some 6,412 refugees entered Hungary in 2002 and 2,400 did so in 2003, mostly from non-European countries. In 2003 and 2004 most refugees came from Georgia and Vietnam. (MTI)

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