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27/09/2004 BUSINESS
Vodafone buys out minority partner Employers reject taxing interest margin Raiffeisen gains 5.6% in Antenna Hungária Forrás sells 9.2% Antenna stake Antenna trading suspended Report slams lack of banking competition Insurance sector's risk-weighted capital falls T-Mobile beats brand name target PSzÁF imposes fine on Citibank Retail lending rates rise, deposit rates fall Business borrowing rates up to 13.25% Brau to hold EGM in October BUX peaks on Monday, down 0.14% on week

ECONOMICS
Govt to levy 25% tax on share capital gains ECB official says Hungary back-paddling on euro zone criteria Economic growth optimistic Agricultural subsidies Central bank and gov't share inflation projection Ministry to cough up Ft 45.5 bln

POLITICS
PM-designate's supporters to pick culture minister for MSzP Former PM threatens lawsuit over charges MDF re-elects David as chair

DOMESTIC
Bank robbery and murder suspects' trial opens today Local bickering scuppers US troop plans Church 1% donations Decrease in marriages, births and deaths

28/09/2004 BUSINESS
"No" vote for central bank reports OBI aims to become DIY leader by year-end Fewer to be laid off at Pick Tycoon Demján eyes Malév Applications filed for Hungexpo tender System House wins Ft 1.1 bln Pécs Uni tender Auchan planning major expansions Russian buys stake in Antenna Kika to open further outlets Telephone and Cable announces agreements MOL to raise diesel price Motorway sticker sales up 38% yr/yr Freebie guides fight for space Malév expects charter revenue to rise 25% OTP starts screening Jubanka Vehicle leasing profits up 6.5% yr/yr Beijing denies interest in Bp Airport IEB signs for Euro 20 mln loan

ECONOMICS
Deficit could reach 10% Taxes key to competitiveness-AmCham Increased vacation subsidies Savings coops protest planned tax

POLITICS
Gyurcsány will face spending constraints FinMin receives "Budget Box"

DOMESTIC
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Transylvanian Hungarian University opens yr

29/09/2004 BUSINESS
10 buy tender documents for 3G license McDonald's expects 15% turnover rise Poultry industry nervous re South American birds Mobile phone subscribers top 8.3 million Tax dampens coops' merger plans Sláger tops the charts Tesco to open 5 more gas stations Dresdner, JP Morgan hired for bond sale Ft 125 bln public bond issue launched Posta outsourcing receives complaints Last attempt to save Humet Logistics center for Kecskemét Hungary's Nabi Bus May Boost U.S. Output

ECONOMICS
Unemployment rate at 5.9% in June-August Consumers cautious Industrial parks on the up Tax changes aim to boost competitiveness Falling figures of bank employees Investors should sell forint against euro Analysts expect Euro 2.29 bln deficit

POLITICS
Gyurcsány presents gov't platform at rally Referendum support from strange bedfellows

DOMESTIC
Terrorist gets 12 yrs for Budapest bomb Clean up begins of Tisza waste

30/09/2004 BUSINESS
Shell begins sales of new diesel fuel New spa hotel built in Marcali Electrolux develops frost-free freezer Zalakerámia stake used for collateral Nypro to extend in Nagyigmánd Dacia returns to Hungary Lottery fever attracts gambling tourists PSzÁF fines Generali Ft 1 mln Európa Bísztosító's risk reserves adequate István Park construction to start this fall Airport development Passenger traffic at Ferihegy up 29.5% Tourist info on the air Dunaferr expects profit of Ft 15 bln MTV refreshes website

ECONOMICS
Járai Says Government Must Cut Spending Contributions to benefit bankrupt entrepreneurs Summer tourists put USD 135 mln on Visa cards Industrial output rises 10% yr/yr Banks search for interest tax alternative

POLITICS
Gyurcsány elected prime minister Gyurcsány program continuity Economy Minister István Csillag Steps Down

DOMESTIC
Hungarian family receives refugee status Decision on Kulcsár's house arrest 3

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01/10/2004 BUSINESS
Dunaferr sale closed Jysk to come to Hungary Antenna to pay extra dividend New logistics center for Ferihegy BT to open regional office in Bp Pannonmill completes mill Rewico plans acquisitions BorsodChem on Warsaw Exchange BSE suspends trading in E.ON subsidiaries Danubius acquires majority stake in Gundel Raflatac opens new plant Ft 1.5 bln awarded for IT improvement Hungarian toy story IBM initiates software support Local councils to select bank via tender Őrmester plans to go public

ECONOMICS
Conflict of C/A gap and strong forint Analysts say c/a deficit will slow in H2 Budget delay "does not affect main targets Industrial prices up 0.2% m/m, 2.6% yr/yr Borrowing costs drop at 35 Bln bond sale

POLITICS
Prime minister names new cabinet László Kovács expounds plans at EP hearing State secretary László Keller quitting

DOMESTIC
Crowd trouble mars Fradi 3:1 win

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27/09/2004
Business
Vodafone buys out minority partner Vodafone Group Plc, the world's largest mobile-phone operator, bought out a minority partner to take full ownership of its Hungarian unit, Vodafone Magyarország Rt. Antenna Hungária Rt sold a 12.1% stake in the unit to Vodafone. Antenna wants to sell the stake at more than its book value of Ft 17.6 billion CEO Géza László said. Antenna's stake fell from 30% in June last year, when Vodafone invested Ft 28.2 billion in the smallest of the country's three cell phone providers. (Bloomberg; Vg 5) Employers reject taxing interest margin Employers represented in the National Interest Coordination Council on Friday stated their opposition to a plan to tax the interest margin of banks. Addressing the plenary session of the National Interest Coordination Council (OET), an interest group comprising representatives of both employers and employees and the government said they also opposed raising corporate tax in the banking sector, but consider this solution the more acceptable one of the two versions, their representative said. PM-designate Ferenc Gyurcsány and Finance Minister Tibor Draskovics on Sept. 15 announced plans to raise the corporate tax on financial institutions from 16% to 24, introducing a two-rate corporate tax. (MTI) Raiffeisen gains 5.6% in Antenna Hungária Raiffeisen Bank announced that it had purchased a 5.6% stake in Antenna Hungária Rt, explaining the large turnover in the share during the last hours of trading on the Budapest Stock Exchange on Thursday. The bank did not disclose the seller or the purchase price. (Econews) Forrás sells 9.2% Antenna stake State-run holding company Forrás Rt, said it sold a 9.2% stake in broadcaster Antenna Hungária Rt that the government is preparing to sell to an industry investor this year. Forrás sold 1.1 million Antenna shares to an undisclosed buyer, cutting its holding to 1.29%, the company said. The sale price was Ft 4.3 billion, or Ft 3,920 a share, according to Bloomberg data. (Bloomberg) Antenna trading suspended Antenna trading suspended The Budapest Stock Exchange said it suspended trading in the shares of stateowned broadcaster Antenna Hungarian Rt, pending an announcement. The announcement, which may significantly influence the share price, "can be expected,'' the bourse said on its web site. Antenna shares rose Ft 375 as a result, or 11 %. (Bloomberg) Report slams lack of banking competition A report by analysts at the National Bank of Hungary says there is still no genuine competition on the banking market, citing the sector's profitability, which is well above the European average, as supporting evidence. The report notes that, although businesses have been able to get cheaper loans as the result of some competition among banks, retail lending practices - especially for consumer loans - suggest big market players may be taking advantage of their positions. Banks entering the market in the nineties tended to focus first on the corporate segment rather than spend the money on costly networks of retail branches and deal with the credit-riskier general public. (Econews) Insurance sector's risk-weighted capital falls Hungary's insurance firms' capital adequacy - the rate of actual and minimum required risk-weighted capital - fell from 190% at the end of 2003 to 164% by mid-2004, according to PSzÁF's first-half report on the sector. Insurance firms' risk-weighted reserve capital on their policies was down 1% from Ft 149.89 billion in the previous year, which was said to be a result of changes in accounting regulations. Hungary's 28 insurance companies had risk-weighted reserves of Ft 148.5 billion on their policies, well over the required minimum of Ft 90.3 billion. (Econews) T-Mobile beats brand name target Mobile service provider T-Mobile Rt has reached the popularity of the brand name that was projected for December this year, CEO András Sugár said referring to opinion polls. T-Mobile changed its name in May this year from Westel, one of the most well-known brand names in Hungary. T-Mobile's brand key words are trust and inspiration as well as ease of service, Sugár said. Since May T-Mobile has been suggesting an image of youth and speed, Sugár said. (Ng 4) M.K.

5

1051 Budapest, Hercegprímás utca 19 PSzÁF imposes fine on Citibank

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Financial market authority PSzÁF has imposed a fine of Ft 2 million on Citibank Rt for failing to follow accounting rules to the letter, according to the latest issue of Magyar Tokepiac. PSzÁF also called on the bank to conduct an internal audit. PSzÁF imposed a fine of Ft 9 million on Citibank in 2001 and fine of Ft 5 million in 2002 for failing to follow risk management rules and run credit checks on potential clients. (Econews) Retail lending rates rise, deposit rates fall Average interest rates for consumer and other retail loans fell during August, but rates on home loans and overdrafts rose slightly, according to figures published by the National Bank of Hungary. The spread between lending and deposit rates for maturities up to a year, including overdrafts, fell from 11.91% to 11.58 during August. The average interest rate on home loans rose 14 basis points to 12.46%, but the APR on these loans rose by just 10 basis points to 15.74%. The average interest rate on home loans with floating interest rates, or with rates fixed up to a year, rose 38 basis points to 12.58%. Banks granted Ft 15.2billion in home loans in August, Ft 1.9 billion less than in July. (Econews) Business borrowing rates up to 13.25% The average interest rate on business loans, excluding overdrafts, rose by 11 basis points to 13.25% during the month of August, according to figures published by the National Bank of Hungary on Friday. Corporate loans came to Ft 237.8 billion in August, down Ft 17.4 billion from July. The average interest rate on overdrafts for nonfinancial companies fell 56 basis points to 12.36% in August. The average interest rate on deposits with maturities up to a year dropped by 35 basis points to 10.35%, and the rate for deposits over a year fell 54 basis points to 9.76%. (Econews) Brau to hold EGM in October Brewery company Brau Hungária Rt announced the company would hold an extraordinary general assembly on October 17. The EGM will discuss the dematerialization of shares and the amendment of the company constitution. One of the questions to be cleared is whether the majority owner Amstel-Heineken may exercise its voting right, since they bought their stake without a valid public bid. (Ng 8) M.K. BUX peaks on Monday, down 0.14% on week The BUX hit an all-time high on Monday at 12,364.21, but was unable to revisit the point at any time during the rest of the week, closing Friday at 12,323, down 0.14% from the previous Friday. Turnover during the week came to Ft 38.61 billion (Euro 154 million), a far cry from the Ft 78.83 billion of a week earlier. Among the blue chips, only oil and gas company MOL Rt ended the week higher, with telecom Matáv Rt remaining flat. Drug maker Richter Gedeon Rt fell 1.28% to Ft 23,100 on the week. MOL announced during the week that it had applied to list its shares on the Warsaw Stock Exchange. (MTI)

Economics
Govt to levy 25% tax on share capital gains The government plans to raise the capital gains tax on profits from the sale of stock exchange investments from the current 0% to 25% next year, Finance Minister Tibor Draskovics said Friday. The government's aim is to bring the rate of taxes on income from capital investments closer to the rate of taxes on income from labor. The government also intends to raise the rate of the withholding tax on dividends from 20% to 25%, Draskovics said. (Econews: BBJ 1) ECB official says Hungary back-paddling on euro zone criteria After significant advances toward euro zone entry, the Hungarian economy has recently been back-paddling, European Central Bank Vice President Lucas Papademos told a conference on EMU accession in Budapest on Saturday. Papademos said that public sector employment in Hungary was the highest of all the OECD countries, and that how quickly it could reform its public sector would be the key to its success. "Hungary's policy choices of the past few years have led to the current divergence," Papademos said. (MTI) Economic growth optimistic A report prepared by economic research firm GKI Kft and Erste Bank Rt predicts a 4% increase of the economy, dynamic growth for investment, but a moderate rise in real wages for this year. The report takes into account a drop in inflation and a more balanced budget. GKI and Erste also expect that the budget deficit will be 5%-5.3% of the GDP compared to the 4.6% projected by the Finance Ministry. (Vg 4) P.O.

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Hungary has disclosed a total of 108 agricultural state subsidies to the EU, which the country wishes to maintain until the end of 2006. The subsidies include the funding of state-owned agriculture company Bábolna Rt, which was previously attacked by local agribusinesses in Brussels. Hungary, together with the other new members of the EU, had to submit the list of agricultural funds to the EU by the end of August. The full list is yet to be made public, but the Agricultural Ministry has not ruled out the possibility of publishing a detailed report. Specialists claim that some of the subsidies do not comply with EU regulations, but the ministry declared them well grounded. (Vg 1) P.O. Central bank and gov't share inflation projection The government and the central bank agree on the inflation rate estimated for the end of next year, FinMin political state secretary János Veres said. National Bank of Hungary managing director István Hamecz said the central bank projects 6% inflation for the end of this year and 4-5% inflation for the end of 2005. In its latest Inflation Report published in August, the National Bank forecast Dec. 2004 inflation at 6.1% and Dec. 2005 inflation at 4.4%. Hamecz said that higher oil prices do not pose a fundamental threat to the projection, however, wage rises do. (Econews; NV 5, MH 9) Ministry to cough up Ft 45.5 bln The Ministry of the Interior will fund a total of 75 projects, managed by local municipalities, with Ft 45.5 billion during the next four years, Minister Mónika Lamperth announced. The projects include the renovation of the local hospital in Baja, southern Hungary, the modernization of the county library in Debrecen, eastern Hungary, and the József Attila Cultural Center in District 13 of Budapest will also get a face-lift. The ministry picked projects, which would improve the quality of municipality services. (Nb 8, *Vg 4) P.O.

Politics
PM-designate's supporters to pick culture minister for MSzP The Gyor-Sopron County group of the Socialist Party (MSzP), headed by prime-minister-in-waiting Ferenc Gyurcsány until his Sunday resignation, voted to support the culture minister in his bid to chair the senior government coalition party. Culture Minister István Hiller, who is known to be a close ally of Gyurcsány in the party, is one of five candidates running for the post. The winner will be chosen by MSzP's congress on October 15-16. Gyurcsány attended the county group's meeting on Sunday, where he officially stepped down as leader of the W Hungary party group since he expects to be asked to form a government on Monday as new prime minister. (MTI) Former PM threatens lawsuit over charges Former Prime Minister Viktor Orbán of the opposition Fidesz party on Saturday threatened to sue the spokesman of the senior government coalition party MSzP in an exchange of verbal blows about unethical behavior. Orbán fired the first shot in the duel earlier on Saturday, charging the government with siphoning off state property into waiting pockets. In response, MSzP spokesman István Nyakó denied this, saying that Orbán's description fitted the performance of the previous administration, when he was PM. (MTI) MDF re-elects David as chair The opposition MDF party re-elected Ibolya David as its chair with 322 votes to 91. David has chaired the party since 1999. Recently the members of the party's parliamentary group sought to remove her, wanting a closer alliance with the larger opposition party Fidesz, but the national assembly stuck by her. David has topped public opinion polls as the most popular political figure in Hungary for several years. (MTI: MH 1, Nb 1, Nv 4, Vg 4)

Domestic
Bank robbery and murder suspects' trial opens today A Budapest court begins to try a case involving the bloodiest bank robbery in Hungarian history today. The two defendants are charged with killing eight people during a bank robbery in the western Hungarian town of Mór two years ago. The defendants, Ede Kaiser and László Hajdú, have denied the charges. Police say the two men entered the local branch office of Erste Bank in 2002. They allege that while Kaiser stood at the door and sent arriving people away, Hajdú first killed the security guard, and then killed all the customers and staff in the room. Twenty minutes after entering the bank, the two men walked away carrying a bag with Ft 7m (approx. Euro 28,000) inside. (MTI; MH 3, Nb 21)

7

1051 Budapest, Hercegprímás utca 19 Local bickering scuppers US troop plans

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Hungary is not included on a list of East European countries where the US plans to station troops, a senior Defense Ministry official said. Deputy director of communications István Bocskai was speaking on the heels of a US announcement that it planned to reorganize its military presence abroad to enhance the mobility and effectiveness of its armed forces. "Squabbles on the domestic front triggered by the training of Iraqi civilians at a base in Taszár, SW Hungary, from Dec. 2002 to Apr. 2003 may be one of the factors that prompted the Americans decide against maintaining any military base in Hungary and to remove its troops from Taszár," Bocskai said. (MTI) Church 1% donations The State Tax Office APEH reported that the 118 churches officially registered in Hungary received a total of Ft 3.5 billion from 648,000 taxpayers who chose to donate 1% of their 2003 personal income tax. The number of donors was 2% higher than last year. The Hungarian Catholic Church attracted the bulk of the contributions from 417,000 taxpayers, who raised Ft 2.18 billion in total. Listed second and third most popular recipients of tax forints were the Calvinist Church of Hungary (attracting Ft 690 million) and the Lutheran Church of Hungary (Ft 214 million). The Federation of Jewish Communities in Hungary (Mazsihisz) received Ft 70 million from 6,628 taxpayers, thus receiving the highest per capita donations of the four mainstream churches. (Nv 3) P.P. Decrease in marriages, births and deaths Marriages were 2.1% down and births 1.4% down from the first seven months in 2003, representing almost 500 fewer marriages and 780 fewer babies, the Central Statistics Office (KSH) said. 24,200 marriages were registered, 54,500 babies were born and 78,300 died between January and July. Deaths fell between March and July from extraordinarily high figures in spring 2003. The overall number of deaths - 3,200 - in the first seven months was 4.0% down compared to the corresponding period in 2003, alleviating the tendency of a slimming population. Hungary had a total population of 10,103,000 at the end of the period surveyed. (MTI)

28/09/2004
Business
"No" vote for central bank reports Parliament yesterday voted down the central bank's reports for 2002 and 2003, but approved its 2001 report, with the "no" votes coming from the government majority. "The National Bank of Hungary (MNB) interpreted the function of the central bank in a limited manner, focusing on its main goal of cutting inflation, pushing up the exchange rate of the national currency in a forced manner, which caused huge losses in GDP growth for the economy," MP Albert Molnár of the senior government coalition Hungarian Socialist Party (MSzP) and member of the MSzP parliamentary group's economic working group, said. (MTI; MH 1, Vg 5, Nv 3) OBI aims to become DIY leader by year-end With the opening of four more stores in Hungary by the end of the year, DIY chain OBI Kft, owned by Germany's Tengelmann, aims to become market leader in Hungary, László Reiter, who heads the stores in Hungary, said yesterday. OBI, which has been in Hungary for ten years, recorded sales revenue of Ft 34.3 billion in the business year ending April 30, 2004, a 17% increase from the previous year. This business year, OBI expects turnover of around Ft 41 billion, with four new stores opening. (Econews; Ng 4, Nv 5, Vg 10) Fewer to be laid off at Pick Meat processing company Pick Rt has reduced the planned number of layoffs from 450 to 250 due to successful talks between the company and emloyees' groups, announced Gábor Golhovics president of the workers' union at Pick Rt. The company, which employs 2,380 people announced the layoffs as a result of its planned shutdown of the company's pork slaughtering division. Earlier Pick Rt explained the decision by the fact that pork in the EU is available at a considerable lower price than in Hungary. (Vg 15) R.G. Tycoon Demján eyes Malév With less than a month ahead of the Oct. 20 deadline, only one investor, Euroinvest Rt, has expressed formal interest in the tender to buy Malév Rt, the state-owned flag carrier said. Partially owned by business tycoon Sándor Demján, Euroinvest is now looking into ways to carry out a massive capital injection at Malév to clear the troubled airline of its Ft 36 billion debt burden and return it to profit. Malév, which flies some 3 million passengers annually and generates revenues in excess of Ft 110 billion, was put up for sale by the State Privatization Holding Rt (ÁPV) in early Sept. (MH 11) S.F.

8

1051 Budapest, Hercegprímás utca 19 Applications filed for Hungexpo tender

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Six investors filed their applications to the State Privatization and Holding Rt (APV) for the privatization tender of the majority ownership of Hungexpo Rt until yesterday's deadline. ÁPV is to determine the upcoming weeks which applicants match the professional and the financial criteria. Those that qualify may start the scanning process of Hungexpo and may submit their offer until January 11. The projects must include the plan of a program and exhibition center conforming to certain parameters. APV leaves it up to the investor whether they want to invest and develop on the current site or decide to move on to a new area: the aim is to have a high standard and competitive exhibition center in Budapest. (NG 4) E.C. System House wins Ft 1.1 bln Pécs Uni tender Software developer International System House Kft (ISH Kft) has won a public procurement tender for Pécs University worth gross Ft 1.1 billion to set up a management IT system in the university, announced Kristóf Asbót, communications director at ISH Kft. The company will have to install a 200-user-network by the middle of 2005 and will also operate the system for the next 8 years. SAP and IBM are also taking part in the program as subcontractors. (Vg 16) R.G. Auchan planning major expansions Auchan Hungary Kft. is planning on having a 17-20 unit network by the end of 2008. This year, however, Auchan only opened 1 hypermarket, which is the 9th store and was opened in the XI.th district of Budapest, and there will be no more than 2 new hypermarkets opened next year. Auchan intends to develop the largest own-brand gas station and wants to surpass the magic limit of the turnover of Ft 200 billion by the end of this year. Smaller stores are to come, too, however, they are currently concentrating on huge base area hypermarkets. (NG 5) E.C. Russian buys stake in Antenna Megdet Rahimkulov, majority owner of General Banking and Trust Ltd (ÁÉB) through its company Kafijat Kft, acquired 5.89% in state-owned broadcaster Antenna Hungária on Thursday, the same day ÁÉB sold its 50% stake in Zalakerámia Rt, Rahimkulov announced yesterday. He also added that although he expects huge profits from the transaction, he does not want to take part in the company's oncoming privatization. Although he declined to disclose the price, sources say that AH shares were purchased at Ft 3.920 per share from Forrás Rt. (Vg 17) R.G. Kika to open further outlets Despite the fact that the Hungarian home improvement market has experienced a severe downturn, Kika Kft is planning on building new stores. The next large unit is going to be either in Pécs or in Debrecen, and in the upcoming years, there will be three more stores serving customers in Miskolc, Györ, and Budapest. Kika, having bought the other Austrian home improvement chain Michelfeit, has inherited 7 more units, 2 of which are located in Hungary. In addition to these, Kika opened a 40 000 sqm store in Budaörs last year which led it to an even higher level of turnover. Kika's expansion is quite significant as the home improvement market is the first to suffer when there is an economic down turn and this is the last to start increasing when consumption increases. (NG 5) E.C. Telephone and Cable announces agreements Hungarian Telephone and Cable Corporation said today that it has reached definitive agreements with the remaining two shareholders of PanTel Rt. to acquire their aggregate 24.9% equity stake in PanTel Rt. Hungarian Telephone previously announced that it had reached a definitive agreement with Royal KPN NV the majority shareholder of PanTel, to purchase its 75.1% share in the business of PanTel. Hungarian Telephone has agreed to ultimately purchase nearly all of the assets of PanTel, through a series of transactions, from PanTel's three shareholders for an aggregate purchase price of approximately euro 27.0 million and 250,000 shares of Hungarian Telephone's common stock. (BU.S.INESS WIRE; Vg 9, MH 9) MOL to raise diesel price Hungarian Oil and Gas Company MOL Rt, the country's major distributor of fuel, will raise the wholesale price of diesel by Ft 4/litre on September 29, a MOL spokesman said yesterday. MOL said the new wholesale price of diesel would be Ft 233/litre. Wholesale petrol prices will remain unchanged. Explaining the measure, MOL cited a recent major rise in international crude oil prices. (MTI; Nv 5)

9

1051 Budapest, Hercegprímás utca 19 Motorway sticker sales up 38% yr/yr

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State motorway operator AAK sold 5.8 million motorway stickers in the first eight months of this year, 38% more than in the same period of last year, the company said yesterday. The marked rise was due in part to the inclusion of a 120-kilometre section of the M5 motorway in the sticker system in March. Sales of four-day stickers were up 45% yr/yr in the first eight months of the year, but sales of 10-day stickers fell by almost half to around Ft 1.1 million. Sales of annual stickers rose 10% during the period to 176,000. Sales of annual stickers will probably be insignificant from now on. (Econews; Ng 3, Nv 5) Freebie guides fight for space Tough competition is to be expected on the free program guide market as Finnish Sonoma Budapest Publishing Rt and Boomerang Kft are jointly entering the market with a new publication Exit. Furthermore, another free publication, Flyers, by an independent publishing company has entered the arena targeting the under 20 market. According to Laszlo Bartucz, CEO of Est Media Group, the firm that is publishing Pesti Est, the increased competition is good for the market since it needs to increase the number of readers as well as the number of advertisers. Pesti Est increased its circulation from 110 000 to 130 000 this year. In the long run however, 3 companies will not be able to survive, added Bartucz. (Ng 4) E.Cs Malév expects charter revenue to rise 25% Hungarian airlines Malév Rt expects its charter flights to generate 25% more revenue this year than 2003's Ft 7.6 billion, in line with the target, spokesperson Adrien Krebsz announced yesterday. Charter revenue during the first seven months of the year rose 30% over the same period in 2003, Krebsz said. Malév expects half a million charter passengers by year-end, up 40% over 2003. Around 268,000 passengers flew on Malév's charter flights in the first seven months of the year. (Econews) OTP starts screening Jubanka OTP Bank Rt sent a delegation of nearly forty executives and consultants including deputy-CEO László Wolf to Belgrade on Sunday afternoon to start screening Jubanka yesterday morning, business daily Napi Gazdaság reported yesterday. In addition to OTP, the French bank Societe Generale and Alpha Bank of Greece have submitted bids for an 88% stake in for the sale of 88% of Jubanka, Serbia's fifth-largest bank by the end of August. Chairman-CEO of OTP Sándor Csányi recently announced that OTP is to make three or four acquisitions in the next 18 months, in addition to Jubanka. (Econews) Vehicle leasing profits up 6.5% yr/yr Vehicle leasing and loan companies had combined pre-tax profits of Ft 23.7 billion in the first half of 2004, up 6.5% yr/yr, according to a report by financial regulator PSzÁF. Vehicle leasing and loan companies' ROA during the first half was 3.62%, down from 4.74% a year earlier, and ROE was 37.91%, down from 41.47%. Vehicle leasing and loan companies which were members of banking groups - 45 of the total 193 - accounted for Ft 14.96billion of the industry's H1 pre-tax profit, up 28.7% yr/yr. (Econews) Beijing denies interest in Bp Airport Beijing Capital International Airport Co., China's biggest airport operator, denied a Hungarian newspaper report that it's interested in buying a stake in Budapest Airport Rt. "Budapest Airport has not said they'd like us to invest, and we haven't considered that either," Company Secretary Shu Yong said in a telephone interview. Hungary's daily Világgazdaság, citing former Beijing Capital Chairman Li Peiying, reported that the Chinese company is interested in investing in the operator of the Hungarian capital's international airport, which Beijing Capital considers a link for Chinese visitors to Europe (Bloomberg) IEB signs for Euro 20 mln loan Inter-Europa Bank (IEB) Rt has signed an agreement for a seven-year, Euro 20 million loan with SanPaolo IMI London, IEB said yesterday. The bank's shares are 85.87% held by SanPaolo Internazionale S.p.A and 9.99% by Holneth BV, a Banco Santander Central Hispano subsidiary. The bank reported a 56.3% yr/yr rise in nonconsolidated after-tax profits, to Ft 1.06 billion, and a 55.6% rise in consolidated after-tax profits, to Ft 1.35 billion. IEB had begun drawing up a medium- to long-term plan with the involvement of a strategic owner, which envisages further growth and will involve considerable investments. The bank plans to delist its shares, but has not made a final decision on the matter yet. (Econews)

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Economics
Deficit could reach 10% Although Reuters predicts Q2 budget deficit around Euro 2-2.4 billion Világgazdaság experts think that it might surpass Euro 2.5 billion and overall deficit in the last four quarters could reach 10% of GDP. Foreign trade deficit in Q2 is estimated at Euro 500 - 600 million, which alone will rise budget deficit in Q2 to Euro 2.4 billion. Experts also say that figures might catch up in H1, as unfavorable foreign trade results are mainly due to Hungary's EU accession in May, which also resulted in some economic players increasing their import in April. (Vg 4) R.G. Taxes key to competitiveness-AmCham The system of taxation is the most efficient device to increase the country's competitiveness, Peter Fath, director of the Hungarian American Chamber of Commerce said yesterday. Fath was presenting the recommendations based on a study by an AmCham committee set up with the objective of improving Hungary's competitiveness. Corporate and local profit taxes should be harmonized, with a 16% corporate tax, 4% of which to be transferred to local governments, László Nemeth, an AmCham board member, said. Local business tax is non-existent in the EU and it should be eliminated, the study suggests. (MTI; Ng 3, Vg 5, Nv 5) Increased vacation subsidies The advisory board of the Hungarian National Vacation Fund (MNUA) accepted the proposal of calling for a tender called 'The Family Vacationing Together' on their board meeting last Friday. The fund will distribute Ft 300 million for those in need. A family of 4, for example, may get a Ft 120 000 holiday voucher, in addition to which a Ft 40 000 retention is needed that can be provided by the family itself or by any organization such as the employer, the trade union, the local government, the church or an NGO. In 2005, MNUA is hoping to spend Ft 1.2 billion on holiday aid, allowing up to 100 000 people to afford a vacation. (NG 3) E.C. Savings coops protest planned tax Savings cooperatives have protested plans to introduce a 6 % tax on net interest revenue of financial companies, arguing that, unlike Hungary's very profitable banking sector, at which the tax is aimed, savings cooperatives have not enjoyed the recent windfall that banks have. In a statement made on Sunday, chairman of the National Alliance of Savings Cooperatives (OTSZ) Endré Kiss also said savings cooperatives' exclusion from negotiations made before the announcement of the tax's planned introduction was unacceptable. (Econews)

Politics
Gyurcsány will face spending constraints Ferenc Gyurcsány promised "daring changes" to win his party's nomination for PM. Spending cuts demanded by the EU mean he may be as constrained as his predecessor, said fund manager Gergely Forian-Szabó at CA IB. President Ferenc Madl confirmed Gyurcsány as official candidate of the Socialist-led coalition yesterday. According to Forian Szabó, Gyurcsány's dilemma is the same as his predecessor's, he's committed to reining in government spending so the country can qualify to adopt the euro in 2010, however, he's also pledged to sustain social welfare payments as the Socialist party seeks to rebuild voter support and win elections in 2006. (Bloomberg; Nb 1, Nh 1, Nv 1, Ng 3, Vg 5) FinMin receives "Budget Box" The finance minister has received a leather "Budget Box" from the speaker of Parliament yesterday, modeled on the British example, which in future will contain the budget for the coming year. Speaker of Parliament Katalin Szili told reporters after handing the Budget Box to Finance Minister Tibor Draskovics that finance minister in office will, from now on, present the budget to the speaker in the box. The Hungarian Budget Box is a 38x27x10 centimeter red box made of leather, with a sign "Budget Box of the Finance Minister" on its upper left quarter. (MTI; Nv 3)

Domestic
Transylvanian Hungarian University opens yr The Sapientia Transylvanian Hungarian University must seek other sources for its work to complement Hungarian financial assistance, the head of the Government Office for Hungarian Minorities told the university's academic year opening ceremony in Cluj yesterday. Jozsef Bálint-Pataki said the Hungarian budget has provided nearly Ft 10 billion to the ethnic Hungarian university so far, an amount that covered more than 96% of the university's costs. Bálint-Pataki said the university has proven it fulfils its mission and promotes that ethnic Hungarians prosper in their land of birth. (MTI)

11

1051 Budapest, Hercegprímás utca 19

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29/09/2004
Business
10 buy tender documents for 3G license Ten potential investors have bought the tender documents for Hungary's high-speed mobile licenses so far, a month before the government's application deadline. The potential bidders include European, American and Asian companies, with service providers and hardware manufacturers among them, Sándor Debreczeni, a board member of the country's phone regulator, said. No further details on the companies were provided. Hungary delayed plans to sell licenses for so-called third- generation networks during the past two years as European phone companies cut back expansion plans after spending USD 100 billion on permits elsewhere. (Bloomberg; Ng 1, MH 11, Vg 15) McDonald's expects 15% turnover rise The Hungarian subsidiary of fast-food giant McDonald's expects a 15% sales revenue increase from last year's Ft 26 billion, well above expectations, managing director Radek Janalik said yesterday. McDonald's will invest Ft 1 billion in Hungary this year, opening two new restaurants and renovating one, as well as opening five new McCafe's. McDonald's has 45 restaurants in Hungary that it owns and another 41 which are franchises. It is market leader, with a 70% to 80% share of the fast food market. McDonald's Hungary Kft had registered capital of Ft 6.528 billion last year with capital reserves of Ft 4.739 billion. (Econews; Ng 4, MH 10, Vg 15) Poultry industry nervous re South American birds EU trade negotiations with Mercosur, the association of South-American countries may bring European poultryindustry into trouble. According to unnamed sources, the Committee is about to increase the import-quota of poultry meat from 330,000 tons to 600,000 tons with reduced duty level of 1%-3% to help other European products at the South-American markets, director of Poultry Product Council László Takács said. South-American producers have much lower cost levels than their European competitors, for example the consumer protection and hygiene regulations of EU do not apply to them. (NG 1) G.R. Mobile phone subscribers top 8.3 million As of August, the number of mobile telephone subscribers in Hungary - which has an overall population of 10 million -- reached 8.317 million, climbing by 58,000 for the month, the National Telecom Authority (MHH) said yesterday. The MHH press release said that subscriptions were up by 10.7% in August year-on-year. T-Mobile Hungary had the largest ratio of subscribers - 47.74% - while Pannon GSM Rt had 33.36% of the market and Vodafone Hungary Rt had 18.90%. In the past year, Vodafone increased its customers by 3.34% and T Mobile increased its by 0.24%, while Pannon GSM was down by the same amount. (MTI; MH 11) Tax dampens coops' merger plans The integration of savings co-operatives may slow down because of the interest margin tax planned by the Finance Ministry. The 6% tax would apply to co-operatives that have equities above Ft 250 million. According to the law, co-ops must increase their equity above Ft250 million by 2007. To avoid the new tax, co-ops may adjourn their planned mergers till 2007. At the end of March, 90 of 167 savings co-operatives had equity above the required level. For this year about 25-30 mergers were planned by co-ops to fulfill legal requirements. (NG 4) G.R. Sláger tops the charts In August Sláger Radio reached 30% share among people between age 18 and 49 overtaking former market leader Radio Danubius, which had 28% share. According to the survey of Szonda-Ipsos, between January and August among the whole audience above 15 years the market share was 23.5%. The radio also has the longest time spent with listening daily on average; in August that was 215 minutes compared to 199 minutes of Danubius Radio. (NG 7) G.R. Tesco to open 5 more gas stations Tesco-Global Department Stores Rt said it plans to open another 5 gas stations before the end of the year in various parts of the country next to its already existing 4 stations. Hungary's number one retail chain operator plugged into the gas distribution market in late July when it launched its first pump in Ajka, western Hungary, selling fuel at discount prices. Meanwhile Tesco is being closely watched by rivals like Shell and Agip, who said they would to turn to the competition authorities should the retailer breach regulations by cross-financing its fuel distribution arm. (Vg 1) S.F.

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1051 Budapest, Hercegprímás utca 19 Dresdner, JP Morgan hired for bond sale

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Hungary hired Dresdner Kleinwort Wasserstein, a securities unit of Dresdner Bank AG of Germany, and JPMorgan Chase & Co. to manage a sale of euro 1 billion of euro denominated bonds. The fixed- coupon, sevenyear securities should be sold in the first half of October, the fourth foreign-exchange denominated bond sale this year. The agency said it plans to use the proceeds from the sale to cover maturing debt. Hungary's foreign debt is rated A1 at Moody's, four levels below the highest grade, and A- at S&P, six steps from the top. (Bloomberg; Nv 5, MH 13) Ft 125 bln public bond issue launched Student loans center Diákhítel Központ has launched a two-year Ft 125 billion forint-denominated public bond issue to finance student loans, CEO Tamás Csillag and deputy CEO of state debt management agency AKK András László Borbely said yesterday. Three different series of the fixed-rate bonds will be issued in the two years of the program and Diákhítel plans to reissue each of the series several times, raising the potential issue amount by tens of billions of forints. Unlike Diakhitel's previous issues, the bonds will carry a state guarantee. (Econews; Nv 5, Ng 12, Vg 18) Posta outsourcing receives complaints In addition to money transportation, cash handling, property management and cleaning, national postal service provider Magyar Posta Rt has recently begun outsourcing mail delivery in Budapest for better cost efficiency. While the company is indeed making considerable savings on wage costs, the service quality provided by subcontractors leaves a lot to be desired, broadsheet Magyar Hírlap claims citing complaints from Dist. 12. "We have not yet received any serious complaints regarding subcontractors' services", Spokesman Tamás Tomecskó said, adding that the Postal Services Act permits outsourcing of mail delivery as long as registered mail, packages and cash delivery is performed by postal employees. The Independent Trade Union of Postal Employees argued that Magyar Posta is sacrificing its reliability and good reputation by using subcontractors. (MH 10) P.P. Last attempt to save Humet The board of directors of food supplement producer Humet Rt decided to make a last effort to save the company from liquidation. The company will try to issue 7.2 million new shares, tripling their amount. The papers may be subscribed by the creditors of the company at a price of Ft 29 each resulting in a Ft 210 million income. The management wants to redeem 85% of its debts with the shares, the rest in cash within two years. To carry out the transaction the terms must be accepted by the majority of the creditors. Dr Elek Csucska Fund, the largest lender of Humet Rt already offered the company to meet its debts with newly issued shares. (NG 11) G.R. Logistics center for Kecskemét Hungarian-owned Bertrans Rt is in the process of a Ft 700 million green-field investment, which will create a new logistics center in Kecskemét, central Hungary, Pál Rózsa said on behalf of the owners of the company. The logistics complex will serve as a regional hub providing domestic and international freight forwarding, warehousing and customs clearance services. The 5,000-sqm facility will feature a storage capacity of 10,000 pallets and state-of-the-art technology, Rózsa added. (Nv 11) P.P. Hungary's Nabi Bus May Boost U.S. Output Nabi Bus Industries Rt, the third- largest supplier of city buses in the U.S., may transfer some work to the U.S. from Hungary because of rules about domestic production, daily Világgazdaság said. A U.S. transport authority rejected a request by Canadian bus maker New Flyer Industries Ltd. to extend an exemption from the so- called Buy American rule for spare parts of articulated buses, the paper said, citing András Bodor, a Nabi director. The Buy American rule requires that 60 % of the buses sold by foreign companies have to be made in the U.S. so transport companies can benefit from state subsidies to pay for them, Világgazdaság said. (Bloomberg)

Economics
Unemployment rate at 5.9% in June-August Hungary's average rate of unemployment was 5.9% in the three months to August, unchanged from the preceding three-month period, and up 0.2 %age points from the same period a year earlier, the Central Statistics Office (KSH) said yesterday. The average number of unemployed was 246,600 between June and August of 2004, as against 244,400 between May and July, and 238,800 between June and August of 2003. According to ILO standards, which put working age between 15 and 64 years of age, Hungary's employment rate was 56.8%. This compares to 64.4% in the EU-15 and 62.1% in EU-25 (Econews; Nb -Piac, Ng 3, Vg 5, Nv 5, MH 10)

13

1051 Budapest, Hercegprímás utca 19 Consumers cautious

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While companies are today more upbeat on their business prospects than they were in the previous 3 months, consumers have turned somewhat gloomier, Ecostat said in its latest survey. The economic researcher's Top 100 growth index, gauging the sentiment of the largest corporations, rose to 55% in Sept., the SME growth index was up at 50.3%, while its consumer sentiment index stood at 40.9%, down 2.5% from April-June. (Vg 5) S.F. Industrial parks on the up The number of industrial parks operating in Hungary rose to 165 by the end of last year, of which 141 accommodated altogether 2,450 companies, according to figures released by the Industrial Parks Development Council. Employing total staff of some 139,000, these businesses have, to date, carried out investments totaling Ft 1,256 billion and produced goods worth Ft 3,430 billion, 66% of which was exported. Industrial parks today employ 17.3% of the industrial sector's total workforce, and account for 23% of its entire revenues and an even higher 28% of its export income. (Vg 4) S.F. Tax changes aim to boost competitiveness The Finance Ministry's amendments to the tax law, which were submitted to parliament on Monday, include changes designed to boost competitiveness, raise employment, bring businesses in line with EU rules and discourage businesses from finding ways to avoid paying taxes. As part of the changes, SMEs will be able to deduct costs of protecting patents. Also, businesses employing at most 5 people will be allowed to deduct an amount equivalent to the minimum wage for each new employee they hire. If, however, headcount is reduced within three years of the deduction, penalties will apply. (MTI Econews; Nv 5, MH 9) Falling figures of bank employees In the first six months of 2004, banks cut back their total headcount by 500 to 26,500 despite a steady growth in the number of branches, the state financial watchdog PSzÁF said. The decline in the number of bank employees came amidst the ongoing merger of Postabank Rt into Erste Rt and ahead of OTP Bank Rt's recent announcement that it would shed 1,000, mainly back-office jobs, or 6% of its workforce. The H1 fall-off reversed the upward trend of 2001-2003, when banks boosted their staff by almost 1,000 to 27,200. (Vg 1) S.F Investors should sell forint against euro Investors should sell the Hungarian forint against the euro because tensions between the central bank and the government may weaken the currency, BNP Paribas SA said. Hungarian lawmakers rejected the central bank's reports on its 2002 and 2003 operations in a vote on Monday, parliament's press office said. The central bank said in a statement after the vote the rebuke won't affect its work. The clash may call into question the position of Central Bank President Zsigmond Járai, she said. Under Jarai, policy makers at the bank boosted the cost of borrowing to 11 %, the highest in the EU, in an effort to rein in inflation. (Bloomberg) Analysts expect Euro 2.29 bln deficit Analysts polled in yesterday's issue of business daily Napi Gazdaság put Hungary's Q2 current account deficit at Euro 2.29 billion, Euro 600 million more than the Euro 1.705 billion deficit in Q1. The estimate would put the deficit for the first half of the year at Euro 4 billion, compared to Euro 3.285 billion in the same period last year. The National Bank of Hungary (MNB) will publish its current account report for H1 on Thursday. The analysts put the c/a deficit for the whole year at Euro 7,074 billion, under the MNB's estimate of Euro 7.2 billion in its August Inflation Report, but over the Euro 6.840 billion estimate produced by the latest Reuters poll of analysts. (Econews)

Politics
Gyurcsány presents gov't platform at rally Ferenc Gyurcsány played up his left-wing, redistributive credentials at a Socialist Party rally yesterday, saying he would strive for justice and improvements for all Hungarians. Gyurcsány pledged his government would provide more opportunities to the poor, while he said affluent groups should carry a greater burden of responsibility. The government would bring in policies to boost investments, such as tax breaks for those businesses that create more jobs, particularly for young mothers and the over 50s, Gyurcsány added. Anyone who earned between Ft 100,000 and 150,000 would be better off, he said, as a result of changes to the tax system. (MTI; MH 1, Nv 1)

14

1051 Budapest, Hercegprímás utca 19

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Mail: kiadvany@inetkft.hu

Referendum support from strange bedfellows Ending a case that has been pending for almost a year, the Constitution Court finally gave the green light to a referendum on the privatization of healthcare yesterday. Originally coming from the Worker's Party and other far left organizations, but also embraced by the two major opposition parties, gained support from over 240,000 citizens. The popular vote is expected to take place in December. The question voters will have to answer is, "Do you agree that public healthcare institutions and hospitals should remain in state ownership, and that an Act of Parliament to the opposite effect" should thus be annulled?" (MH 1, Nv 4) P.P.

Domestic
Terrorist gets 12 yrs for Budapest bomb German terrorist Andrea Martina Klump was sentenced to 12 years imprisonment by a Stuttgart court yesterday for bombing a busload of Jewish emigrants in Budapest in December 1991 that injured six. Klump, a suspected former Red Army terrorist, tried to blow up the busload of Jewish emigrants from the Soviet Union bound for Israel who were transiting through Budapest by detonating a car bomb from a parked vehicle as the bus, carrying 33 passengers, went by on its way to the airport. The bomb went off prematurely, seriously injuring two people in the police car leading the bus, and hurting four passengers on the bus, none of them seriously. Klump was arrested in Vienna in September 1999 in a shoot-out with authorities that killed her companion Horst Ludwig Mayer, another suspect in the bombing. Klump's 12-year-sentence includes a prison term she received in 2001 for another bombing, this one committed in Spain. (MTI; Nv 1, MH 20) Clean up begins of Tisza waste Water authorities have started the cleanup of 60 tons of floating residential waste that entered Hungary on the Tisza river earlier this week. The operation will be completed by the weekend, Spokesman Csaba Csont of the Northern Hungary Regional Environmental and Water Authority said. Supposedly originating from an illegal waste dumping site in Ukraine and now spread over a 25-km stretch of the river, the non-hazardous mass measures 100 cubic meters in volume and consists of plastic bags, plastic and glass bottles, and pieces of wood. (MH 4)

30/09/2004
Business
Shell begins sales of new diesel fuel Shell Hungary Rt has introduced a new high-detergent diesel fuel, "V-Power Diesel", and expects the new brand to boost its diesel fuel sales in Hungary between 5% and 10%, Shell Hungary retail director Balázs Erényi said on Thursday. Diesel fuel accounts for 35% of Shell Hungary's sales. The new diesel fuel, which already meets standards to be adopted by the EU in 2005, will be delivered from an oil refinery in Godorf, Germany. (Econews; Ng 4, Vg 12) New spa hotel built in Marcali A new four-star spa hotel will be built in Marcali, southwest Hungary, for Ft 1 billion, the local council said. The investment will create 200 jobs in the town. From the construction costs, Ft 400 million will be covered by the government's Széchenyi plan and other tender resources, the municipality will pay Ft 200 million and a bank loan will be taken for the remaining Ft 400 million. The hot springs in Marcali were declared a spa in 1990 and the local spa received 40,000 guests annually. (Vg 7) M.K. Electrolux develops frost-free freezer Refrigerator maker Electrolux Lehel Kft has begun production of the world's first frost-free freezer in its factory in Jaszberény, Electrolux said yesterday. Electrolux spent more than euro 1 million to develop the freezer in Hungary. The freezer will be introduced in Western Europe this year and in Hungary in spring of 2005. Electrolux plans to make 600,000 freezers worth euro 106 million in 2004 in Hungary. Marketing manager Ildikó Szmida said the new freezer will be around 25% more expensive than Electrolux's traditional products. (Econews; Vg 3, Ng 5) Zalakerámia stake used for collateral Lasselsberger Ceramics of Austria is using its shares in Hungarian tile maker Zalakerámia Rt as collateral for a loan from the Raiffeisen group and Investkredit Bank, according to an announcement in capital markets gazette Magyar Tokepiac. Last week Lassselsberger announced it had raised its stake in Zalakerámia by 50.11% to 89.7% with the purchase of a stake owned by bank ÁÉB Rt. The sale was agreed on earlier in summer. The banks providing Lasselsberger the loan include Raiffeisen Zentralbank (RZB) Raiffeisen Zentralbank Osterreich, Raiffeisenlandesbank Oberrosterreich, Raffeisenlandesbank Neidersosterreich-Wien and Investkredit Bank. (Econews; Vg 15)

15

1051 Budapest, Hercegprímás utca 19 Nypro to extend in Nagyigmánd

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Plastics producer Nypro Hungary Kft plans to extend its plant and profile in Nagyigmánd, northwest Hungary, Nypro Inc.'s European manager Jack McCabe said. Nypro produces telecommunications plastics primarily for Nokia in Nagyigmánd, but the company wants to make other electronics, IT, machine industry or health care products too. Nypro has so far invested euro 12 million in Hungary and has two plants with 4,700 sqm in total. Nypro reported a net revenue of Ft 5,273 million in 2004. (Vg 10, N) M.K. Dacia returns to Hungary Car model Dacia Logan will soon be sold in Hungary for Ft 1.75 million, thus meaning the return of Romanian Dacia cars on the Hungarian market. French Renault invested euro 450 million in Romania to produce Dacia cars there, and the make was once well known in Hungary too. Dacia's Logan will be meant for poorer people who want a big car, make director Gábor Sipka said. Other dealers are afraid that the rock bottom price may give Dacia an unfair advantage over their cars. (Vg 12) M.K. Lottery fever attracts gambling tourists Tens of thousands of tourists from Hungary's neighboring countries come to gamble to Hungary every week, spokesman of Szerencsejáték Rt László Somorai said. Gamblers from Austria, Croatia, Ukraine and Romania are attracted by the currently Ft 1.6 billion prize. Last year there was no lottery winner for 38 weeks and by the end of the year 15-20% of Szerencsejáték's lottery revenue came from tourists, Somorai said. (Vg 9) M.K. PSzÁF fines Generali Ft 1 mln Financial watchdog PSzÁF has fined fund manager Generali Alapkezelo Ft 1 million for failing to regularly provide it with information and for inadequate documentation of transactions. At an on-site investigation in May 2004, PSzÁF found discrepancies as great as Ft 24.82 billion between Generali's reports on its portfolio and the net assets registered with custodial banks. The discrepancies were the result of bad calculations and incorrect data entry. PSzÁF also found that Generali's contract with OTEK-Gordius Kft, the firm to which it outsourced accounting and IT tasks related to portfolio management, contained irregularities. (Econews; Vg 13) Európa Bísztosító's risk reserves adequate Financial market regulator PSzÁF has said that risk reserves of insurance company Európa Bísztosító Rt were adequate on July 21. Groupama of France, Európa Biztosító's sole owner, raised capital in the company by Ft 1.8 billion on June 22. The raise was more than enough to cover a Ft 685 m shortfall in risk reserves cited by PSzÁF in May. PSzÁF had given the company until the middle of November to correct the situation. Európa generated revenue from premiums of Ft 10.86 billion in 2003, of which Ft 5.67 billion was from the sale of third party vehicle insurance. (Econews; Vg 13) István Park construction to start this fall The construction works of residential park István Park in Dist. 14 will start this fall, sales manager of investor SL Properties Kft Adrienn Harmath said. István Park will be built next to the new shopping and entertainment center Récsei Center and the park will host 800 families, Harmath said. 47% of the flats have been sold before starting the construction, Harmath said. Apartments in István Park will have deep garage, a common bicycle storage room as well as an internal park. (Vg 19) M.K. Airport development State Privatization and Holding Rt (ÁPV), as 100% owner of Ferihegy International Airport operator Budapest Airport Rt, has recently approved a long-awaited Ft 5 billion project to develop a new cargo base with the company's own funds. Budapest Airport is planning to construct a 19,000-sqm logistics complex with 6,000 sqm of office space, for which a comprehensive feasibility study has already been carried out. The planned facility is required to accommodate the airport's booming cargo business, which totaled 50,000 tons in 2003 and is growing at an annual rate 7.5% above the European average. Several logistics service providers, including TNT Express Worldwide Hungary Kft, DHL Hungary Kft, and Magyar Posta Rt, have signaled interest in leasing space once the new base is operational, which is scheduled for 2006. (NG 13) P.P. Passenger traffic at Ferihegy up 29.5% Around 4,160,000 passengers passed through Budapest's Ferihegy international airport in the first eight months of 2004, up 29.5% on the same period in 2003. Airport operator Budapest Airport reported 740,000 passengers passed through the airport the month of August, 24.5% more than in the same period in 2003. Transfer passengers accounted for 10.6% of all passengers in the first eight months. Passengers traveling with low-fare airlines increased tenfold to 433,339 in the first eight months. (Econews)

16

1051 Budapest, Hercegprímás utca 19 Tourist info on the air

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Mobile service provider T-Mobile Hungary and Hungarian Tourism Rt (MT Rt) have jointly launched a WAP portal for tourism recently, announced Gábor Galla, CEO of MT Rt. The portal features information provided by MT Rt on restaurants, hotels, spas, cultural and other programs, weather and on Tourinform offices. T-Mobile customers can even get information on facilities nearest to their current location. (MH 12) R.G. Dunaferr expects profit of Ft 15 bln Steel company Dunaferr Rt expects pre-tax profit of Ft 15 billion in 2004, CEO Peter Honig said. The company had pre-tax profit of Ft 10 billion by the end of August, Mr Honig said. In 2002, Dunaferr had losses of Ft 9.5 billion. In 2003, the company had profits of Ft 193 million. Mr Honig's mandate as CEO was extended at an EGM on September 20 until 2006. The EGM also approved a Ft 17.3 billion capital raise in the company through the private placement of new shares. The shares will be subscribed by Kundax, a member of the consortium, led by Donbass and Duferco, which purchased a majority stake in Dunaferr. (Econews) MTV refreshes website Hungarian state television MTV has recently renewed its website both in form and content. www.mtv.hu has been transformed to an Internet news portal where in addition to items broadcast on MTV's news programs, other information is also available. Other planned developments on the web page include a searchable archive of MTV programs and a blog site. (MH 12) R.G.

Economics
Increased gov't spending The share of welfare spending in state expenditure is set to increase considerably, rising over 60% next year, the Finance Ministry said after discussing the draft of the 2005 budget. The ministry will be fixing targets of Ft 2,048 billion in VAT revenues, Ft 454 billion in corporate tax, Ft 662 in excise tax and Ft 999 billion in personal income tax. According to the draft, the two social security funds will have a combined deficit of Ft 354 billion, which will arise as the difference between the planned Ft 1,167 billion revenue and Ft 1,521 deficit of the National Health Administration Fund. The Finance Ministry is projecting 4% GDP growth in 2005, and 4%-4.5% in the next two years. Hungary's state debt may total 57.7% of GDP this year and 56.4% in 2005, and the budget deficit could be reduced by an annual 0.5-0.7 percentage points in terms of GDP. Housing loans are estimated to grow to Ft 1,600 billion by the end of 2005, with government subsidies rising from this year's Ft 200 billion to Ft 270 billion. (NG 1) P.P. Járai Says Government Must Cut Spending Hungarian Central Bank President Zsigmond Járai said tensions are growing between the government and the central bank over the direction of monetary policy and public spending in the coming years. Járai said the country's budget deficit is now unsustainable and must be cut if interest rates are to decline, from 11%, the highest in the EU. The central bank wants to see more spending cuts in the 2005 budget, he said. "Consolidation should sooner or later occur, because the current state of the budget is unsustainable" he added. (Bloomberg) Contributions to benefit bankrupt entrepreneurs The Finance Ministry is planning to impose a new, mandatory social security type of payment for small enterprises and self-employed people from next year, according to unnamed sources. Small companies and private entrepreneurs would have to pay 4% of their income in addition to other social security in payments, which in case of the minimum wage of Ft 57,000 would be Ft 2,280. In exchange, they will be entitled to unemployment benefit if their companies go bankrupt. (MH 1) R.G. Summer tourists put USD 135 mln on Visa cards Summer tourists in Hungary spent USD 135 million using their Visa cards, up 30% from a year before, Visa International said yesterday. Around 56% of the amount, spent in June, July and August, was at POS terminals in shops, restaurants and places of entertainment. Although there are some 19,000 POS terminals in Hungary, the country is still far behind the Czech Republic with its nearly 50,000 POS terminals. U.S. tourists spent the most, USD 20 million, followed by tourist from the UK, spending of USD 16 million, followed by the Germans, spending USD 14 million. (Econews; Ng 5)

17

1051 Budapest, Hercegprímás utca 19 Industrial output rises 10% yr/yr

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Industrial output rose nearly 10% yr/yr in the first seven month of the year, although growth slowed in July, according to the Central Statistics Office's (KSH) monthly summary for July published yesterday. Unadjusted industrial production rose 4.9% yr/yr in July, while the working-day adjusted figure shows a 7.6% rise, well over the comparable 1.9% rise in the EU-15, the KSH summary notes. Exports were behind the rise, rising 19% in the first seven months, while domestic sales fell 0.5%. (Econews) Banks search for interest tax alternative Banks are unhappy with the way in which the government plans to levy a tax on net interest revenue, Hungarian Banking Association secretary Rezso Nyers said yesterday. On September 24, the government announced plans to introduce a 6% tax on net interest revenue for financial companies for two years starting in 2005. Nyers confirmed a report in daily Magyar Hírlap that the association has set up a committee with representatives from more than 20 financial institutions to present an alternative method for taxing the banks. (Econews)

Politics
Gyurcsány elected prime minister Ferenc Gyurcsány was elected prime minister by Parliament yesterday evening, with 197 votes for and 12 against and no abstentions, while 175 MPs did not vote. The vote also meant the approval of the Gyurcsány government's platform. Gyurcsány, 43, a millionaire businessman, becomes Hungary's 6th prime minister since 1990. Ferenc Gyurcsány was then sworn into office during a brief ceremony. (MTI; Vg 1, Nv 1, Ng 1,3, MH 1, Nv 1) Gyurcsány program continuity Presenting his program in Parliament yesterday, Hungary's new Prime Minister Ferenc Gyurcsány promised a dynamic style of government for the eighteen months remaining until the 2006 elections. According to the program, the new premier will not undertake to tackle any of the much-discussed major reforms that are needed in healthcare, public administration and local government financing; furthermore, the issue of tax reform, a new Constitution, and the introduction of a 38-hour week will also be shelved until 2006. Some of the specifics mentioned in the 40-page document include additional financial support for the over 75s, a new Európa Plan and waging a war on racial discrimination. While Gyurcsány considers his tenure a continuation of Medgyessy's efforts, some of the latter's election promises, most notably the construction of 800 km of new highways, will only be partly fulfilled. (NG 1) P.P. Economy Minister István Csillag Steps Down Economy Minister István Csillag, whose proposed firing in August led to the collapse of the country's government, resigned two days before the new prime minister was scheduled to name his cabinet. Csillag resigned to avoid creating conflicts for the new government and Hungary's minor coalition party, the Free Democrats, which accepted his decision, the party said on its Web site. Csillag is a member of the Free Democrats. Peter Medgyessy, Hungary's previous prime minister, resigned after the Free Democrats withdrew their support in him after he fired Csillag. (Bloomberg)

Domestic
Hungarian family receives refugee status An ethnic Hungarian family that fled from the northern Serbian town of Subotica after being repeatedly harassed for their ethnicity was granted refugee status, the interior minister informed MTI yesterday. "I have granted refugee status to the Sotet family on special grounds," Monika Lamperth said. She said the family was subjected to harassment in Vojvodina that "led to their utter despair" and their decision to "leave their homeland once and for all". The family -- father László, mother Slavica, their son Denis, who was beaten up several times in Serbia, and their daughter Kelmentina, 13 -- crossed the border to Hungary and have been staying at a refugee facility since then. (MTI; Nv 3) Decision on Kulcsár's house arrest The Budapest Central District Court decides today whether to impose house arrest on former K&H broker Attila Kulcsár suspected of embezzlement. As the period of his detainment expires today, Kulcsár submitted a plea to the Prosecutor's Office for his release on Monday. The Prosecutor's Office proposed house arrest instead of detainment to the Budapest Central District Court on Wednesday. Kulcsár has been held for a year now, and has been questioned by the Prosecutor's Office since June 22. (MH 4) R.G.

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01/10/2004
Business
Dunaferr sale closed The State Privatization and Holding Company (ÁPV) closed the sale of steel maker Dunaferr to the DonbassDuferco consortium yesterday. ÁPV CEO Miklós Kamarás, Sergei Taruta of the Donbass-Duferco consortium and Dunaferr Chariman-CEO Peter Honig all signed one of the company's shares in an act intended to signal the close of the sale, which has been dragging on for more than nine months. At yesterday's continuation of an EGM adjourned on September, the decisions taken by in September, including electing Taruta as chairman of Dunaferr's supervisory board and confirming Honig in his position, took effect (Econews; Ng 1, Vg 1,15 Nv 10, MH 10) Jysk to come to Hungary Danish furniture manufacturer and retailer Jysk Holding A/S announced its intentions to enter the Hungarian market. The company's Hungarian subsidiary called Jysk Kereskedelmi Kft is currently in the process of being registered at the Company Court. Jysk, one of the largest Danish companies is active in 18 countries with 860 retail outlets and is known for its rock bottom prices, which will surely cause a stir in the Hungarian furniture market. (NG 1) A.K. Antenna to pay extra dividend State Privatization and Holding Rt (ÁPV) the majority owner of telecommunications company Antenna Hungária Rt (AH) announced its plans to commission the payment of an extraordinary dividend to AH shareholders, following the sale of AH's 10% stake in mobile communications provider Vodafone Magyarország Rt to Vodafone International Holdings BV at an estimated price of Ft 17 billion. ÁPV also put forth a proposal to the government concerning the privatization of its 73% stake in AH to be finalized within a year. (NG 1) A.K. New logistics center for Ferihegy Budapest Airport (BA) Rt will start building a logistics center at Ferihegy airport within a few weeks. The investment will cost Ft tens of billions and is to be finished in 2006. It will contain 19,000 sqm storage yards and 5,000 sqm offices and will greatly increase international competitiveness of the airport. Some of the worldwide delivery companies requested space to rent at the future yard; Magyar Posta Rt and Customs and Excise Office will also settle to the new facility. Circulation of goods through the airport has been increasing for several years, and grew steeply this year. In the first eight months, 50,000 tons of cargo moved through the airport, 20% more than in the same period of 2003. (Vg 1) G.R. BT to open regional office in Bp British Telecom (BT) will establish its Central-European IT service center in Budapest, strategy director Aad van Waveren said. The new center will be opened Oct 21 and within a year, 100-150 people will be employed. The unit will work as a general service center for BT but it will be able to offer outsourcing solutions for other companies, too. British Telecom established its first office in Budapest in 1999, which has 30 employees now. It controls sales and technical support in the Central- and Eastern-European region. (Vg 13) G.R. Pannonmill completes mill Pannonmill Rt, one of the largest Hungarian milling companies completed the construction of a new grinding mill in Komárom, Northern Hungary at a cost of Ft 1 billion. The company plans to gradually replace the rest of its old mills with new ones to secure capacity for the milling of hundreds of thousands of tons of grain a year. Pannonmill was created through the recent merger of Hungaromill Rt, Pannon Gabona Rt and Pannon Borsod Kft by Austrian owner Vonwiller GmbH to form a company with a combined annual turnover of Ft 20 billion. (NG 4) A.K Rewico plans acquisitions Thomas Scheleife co-owner of logistics company Rewico Logistics Kft said that the company will spend Euro 11.5 million per year in the next three years to improve its facilities and to finance acquisitions of smaller local logistics companies especially in the region of Eastern Hungary. Rewico currently owns 20 thousand sqm. of storage space in Budapest with a further 40 thousand sqm. in the environs. Rewico expects to exceed its turnover plans of Ft 2,2 billion for this year. (NG 4) A.K.

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1051 Budapest, Hercegprímás utca 19 BorsodChem on Warsaw Exchange

Tel: 354 3290 Fax: 354 0130

Mail: kiadvany@inetkft.hu

Polish Securities and Exchange Commission permitted shares of BorsodChem (BC) Rt to be traded at Warsaw Stock Exchange. This will be the first Hungarian company listed on the Polish stock market. This also allows Polish institutional investors buy the shares. Austrian VCP, one of BorsodChem's owners offered most of its shares for sale. About USD 100 million of total USD 550 million is intended to be sold at Warsaw Stock Exchange, according to Reuters information. (Vg 19, NG 11) G.R. BSE suspends trading in E.ON subsidiaries The Budapest Stock Exchange has suspended trading in the shares of E.ON Hungária Rt's three Hungarian electricity distributors E.ON Northern Transdanubian Electricity Provider,, E.ON Southern Transdanubian Electricity Provider and E.ON Transtisza Electricity Provider on September 30 and October 1, the BSE said on Wednesday. The shares were suspended pending further information on how and when shares not offered to E.ON Hungária in its public purchase offer for the three companies will be invalidated. On Wednesday a court of arbitration ruled in favor of E.ON Hungária in a dispute against its three Hungarian electricity distributors, allowing E.ON Hungária to buy out the remaining small shareholders in the three subsidiaries. (Econews; Ng 11, Vg 17) Danubius acquires majority stake in Gundel Danubius Hotel Group has acquired a further 17.6% of LL Partners's subsidiary Lang Gasztronomia, which owns Budapest's exclusive Gundel restaurant, Danubius Hotels said on Wednesday. Danubius announced that it now holds 66.6% of Lang Gasztronomia. Danubius bought a 49% stake in Lang Gasztronomia in July this year, and announced plans to acquire a further 17.6 % of the company after approval by the Competition Office (GVH). Danubius said yesterday that GVH had approved the planned purchase and Danubius Hotels transferred the purchase price of the 17.6% stake to the seller on September 30. (Econews; Ng 11, Vg 18) Raflatac opens new plant Finnish paper processing and manufacturing company Raflatac will inaugurate its new plant in Tatabánya, Northern Hungary today. The facility manufacturing self adhesive labels will initially employ 30 people with a tenfold increase planned in the payroll for the near future complemented with the enlargement of the production hall from the current 5,000 sqm. to 20,000 sqm. The factory will primarily supply Austrian and Hungarian customers as well as other Eastern European markets with pressure sensitive adhesive labels. (NG 4) A.K. Ft 1.5 bln awarded for IT improvement Ft 1.5 billion has been distributed amongst the first round of winners of a tender put out by the Economic Competitiveness Operative Program (GVOP) for IT infrastructure improvement. The four successful applicants are the local government of Egér, Pécs, and Veszprém, and the Nyíregyháza based company Marso Kft, announced László Koczkas, CEO of Information Society Kht, yesterday. There were 256 applications received for the seven tenders altogether until the end of September. (NV 10) E.C. Hungarian toy story German toy manufacturing company Marklin Holding GmbH is to relocate to Hungary. As a result of the high working expenses, Marklin is to cut 400 jobs in Goppingen, Germany and reduce its costs by 15% until the end of 2005. Marklin has been present in Gyor, Hungary, for over 10 years, which is where the new location is thought to be, and where the expenditure is only one tenth of Goppingen. (MH 12) E.C. IBM initiates software support IBM Hungary starts its support program for independent Hungarian software developers today. Firms will be able to use IBM's Innovations Center for free to test develop and get IBM certification for their softwares. The center includes several million dollars worth hardware equipment. The applicants who will be chosen in a tender will also get sales and marketing training. IBM principally invites software developers that are specialized for SMEs. (Vg 15) G.R. Local councils to select bank via tender For the first time, local councils are to choose their bank before the end of October via a public procurement tender. According to the banks involved, the tender makes the process more transparent, however, the changes will only effect the administration, not the end result. The position of OTP Bank Rt is unshakeable: 77% of local councils hold their account with OTP, and Ft 110 billion out of the total savings of all local councils of Ft 183 billion are held by OTP. Among the Ft 173 billion credit, OTP holds Ft 90 billion. The local councils' second most influential business partner is Raiffeisen Bank Rt, with a 15% credit portfolio. (MH 10) E.C.

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1051 Budapest, Hercegprímás utca 19 Őrmester plans to go public

Tel: 354 3290 Fax: 354 0130

Mail: kiadvany@inetkft.hu

Hungarian security company Őrmester Security Kft is planning a public listing on the Budapest Stock Exchange within three to eight years, business daily Napi Gazdaság reported yesterday. Őrmester has been operating in Hungary for about 15 years. The company provides security guard services, sets up alarm and surveillance systems and offers consulting services. It has subsidiaries in Serbia and Montenegro and Slovakia and has also begun setting up an office in Romania. Őrmester is also planning to expand in Slovenia and Croatia. Őrmester closed 2003 with revenue of Ft 1.23 billion and plans to boost sales to Ft 1.7 billion in 2004, aiming for profits of Ft 125 million. (Econews)

Economics
Conflict of C/A gap and strong forint Hungary's central bank is being torn between the yawning current account gap that requires high interest rates to attract portfolio investments necessary to plug the deficit and a strong forint that calls for monetary loosening for it to avoid testing the strong end of the official band, London-based emerging markets analysts said after the second quarter current account figures had been released yesterday. Wike Groenenberg at Citigroup said that although the numbers are "a touch better" than the market consensus, she still sees the full-year figure coming in close to 9% of GDP. (Econews; Vg 15) Analysts say c/a deficit will slow in H2 Analysts polled by MTI said Hungary's smaller-than-expected Q2 current account deficit came as no surprise to them. The analysts also said they expected the deficit to widen more slowly in H2. The National Bank of Hungary said yesterday that the current account deficit was Euro 2.12 billion in Q2, and totaled Euro 3.825 billion in H1, as against Euro 3.285 billion in the same period last year. Economic research institute GKI will not modify its forecast for an annual c/a deficit of Euro 6.5 billion, betting on a Euro 2.7 billion deficit in H2, CEO Gabor Karsai said. (Econews; Ng 1,Vg 4, Nv 5, MH 11,) Budget delay "does not affect main targets Finance Minister Tibor Draskovics said yesterday that the week delay in submitting the 2005 budget bill to parliament - the budget should have been submitted yesterday - would not affect any of the targets earlier announced and contained in the budget. Confirming his earlier statement, Draskovics said that the 2005 budget would aim to reduce the deficit by more than the earlier targeted half of a %age point. (Econews; Vg 5, Nb 16) Industrial prices up 0.2% m/m, 2.6% yr/yr Industrial producer prices rose 0.2% in the month of August and were up 2.6% in the twelve months to August, the Central Statistics Office (KSH) said yesterday. Twelve-month producer price increase in August was the lowest rate so far this year. Industrial producer prices for domestic sale rose by 0.4% in August, while producer prices in forint terms for sales abroad increased by 0.1%. Twelve-month domestic sale prices were up by 9.0% and forint-term export prices decreased by 2.4%. January-August industrial producer prices were up 3.9% from a year earlier. (Econews; Vg 18) Borrowing costs drop at 35 Bln bond sale Hungary's borrowing costs fell at a sale of forint-denominated government bonds, according to the country's debt management agency. The agency sold 35 billion forint of 8.25 % bonds due October 2009 at an average yield of 9.35 %, 33 basis points lower than at an auction of the same- maturity notes on Sept. 2, it said on its Bloomberg page. A basis point is 0.01 %age point. The average yield was the same as that on bonds with similar maturity on the secondary market on Wednesday. The maximum yield at the auction was 9.37 % and the minimum 9.28 %. (Bloomberg)

Politics
Prime minister names new cabinet Prime Minister Ferenc Gyurcsány yesterday named the members of his new cabinet. Minister of Foreign Affairs: Ferenc Somogyi (MSzP) from November 1, until Foreign Minister László Kovacs becomes EU commissioner Minister of Defense: Ferenc Juhász (MSzP) Minister of Finance: Tibor Draskovics (nominated by MSzP) Minister of Economic Affairs and Transport: János Koka (SzDSz) Minister of the Interior: Monika Lamperth (MSzP) Minister of Agriculture and Regional Development: Imre Nemeth (MSzP) Minister of Health: Jeno Racz (MSzP) *Minister of Justice: József Petretei (MSzP) Minister of Labor and Employment: Gábor Csizmar (MSzP) Minister of Environment and Water Management: Miklós Persányi (SzDSz) Minister of Information Technology and Telecommunications: Kálmán Kovács (SzDSz) Minister of Cultural Heritage: István Hiller (MSzP) Minister of Education: Bálint Magyar (SzDSz) (MTI; Nv 1,8,9, MH 1,2,3,4, Ng 1, Vg 1, Nb 1)

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László Kovács expounds plans at EP hearing Hungarian Foreign Minister László Kovács, about to become EU energy commissioner on November 1, said energy policy would be a key area of efforts to make the European economy more competitive on global scale, which is a priority of the Lisbon strategy for the coming five years. Kovács identified, during the hearing by the European Parliament's committee of industry, research and energy yesterday, three energy policy priorities, namely: raising economic competitiveness, ensuring sustainable energy supply and enhancing cooperation with external partners. (MTI; Ng 1, Nb 2, Vg 3) State secretary László Keller quitting László Keller, state secretary in charge of uncovering corruption in utilizing public funds, said he was unwilling to retain his post after Oct 3. A politician of the senior governing Socialist Party, Keller said yesterday he had informed Prime Minister Ferenc Gyurcsány about his decision. "After my mandate as parliamentary state secretary expires next Sunday, I would like to work exclusively as a Member of Parliament elected in an individual constituency," he said. (MTI; MH 1,2,3,4, Nv 1,8,9)

Domestic
Crowd trouble mars Fradi 3:1 win A fan was stabbed and left fighting for his life after crowd trouble marred the UEFA Cup match between Ferencváros and Millwall yesterday which spelled the end of FA Cup finalist Millwall's European dream. Over 3,000 Millwall fans traveled over for the game. Scuffles broke out in and around the stadium resulting in a handful of arrests. Riot police were called to break up running battles in Budapest an hour before the game. Two Millwall fans were reported to be arrested and in police custody. (AFP)

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