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2004-11-23

Business

Economics

Politics Domestic Stockwatch

Richter schizophrenia treatment bought Fornetti expanding in Scand'via and US Tesco opens 40th store MTI and Radio forge new agreement VAT rebates delayed by red tape Too few places to use bankcards OTP to continue rapid expansion VirusBuster licenses from Commtouch Insurers paying for damages of uninsured Ban on unfair commercial practices in offing Magyar Hírlap reappears today m2 changes program structure Budapest spa upgrades and reconstruction Kékoportó grape to change name Hungarian exports to Slovakia on the rise Hungary and neighbors develop transport corridor MOL buys Rom'n gas stations from Shell Tax office may not reach target Retail sales volume up adjusted 5% yr/yr in Sept OEP exceeds budget Járai: Central Bank may cut interest rates again Parties disagree on call to take part in referendum Hungary considering writing off $120 mln Iraq debt Accidents at work down 18% 9% of ethnic Hungarians in Serbia ready to resettle Azeri officer pleads guilty BUX index: BUX Close: 14,210.97 Change: +197.22 (+1.41%)

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2004-11-24 Business

Economics

Politics Domestic Stockwatch

CIB’s 9-month profit up 34% yr/yr DAM steel starts rolling today TIR Bíztositó leads on-line market Helia-D brand changes hands Szenkirályi water market share Green companies awarded prizes Hungarian travel agents slow to sell online Beekeepers picket Brussels Stock exchange capitalization Smart program Körte-Organcia wins prize for innovation Subway restaurant chain Analysts say 50 bp rate cut no surprise September constr’n output up adjusted 0.7% yr/yr Economist forecasts for Hungarian economy Interior Ministry 2005 budget Customs satisfied with revenues Parliament approves central bank act amendment Hungarians Fed. protests over ref’ campaign Hungary sends troops to Iraq summer 2005 Inmate injures three prison guards Tourist tax for under-18s in Siófok BUX index: BUX Close: 14,013.75 Change: -171.79 (-1.21%)

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2004-11-25 Business

Economics

Politics Domestic Stockwatch

OTP makes binding bid for Nova Banka K&H Bank issues corporate credit card Cable Internet users up 60% MOL finances acquisitions with gas sale OTP targets retail market via mortgages PSzÁF ban diamond traders MÁV to operate 10% less trains next year Fujitsu Siemens H1 sales up 37% yr/yr TriGranit May Win Top Romanian Project Holiday center up for sale Pensioners to get Ft 57,000 more Banks drop interest rates after MNB’s Monday cut FinMin plan EVA tax Gov’t to modify M5 concession agreement Subsidies give way to mortgages Hungarians move east Járai will take amendment to court Bankruptcy act almost complete Car sales stop growing this year Insurance interest decrease Hungary heads N.Y.C. debtors list Euro plan sticks to deficit goal By-elections in 2 constituencies on Sun. MSzP media guru attacks Hungarian Radio Hungarian soldiers return from Iraq by Dec. 31 BUX Close: 14100.00 Change: -110.97 (-0.78%)

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2004-11-26
Business MOL to cut investment by 25%

Canning lobby pressures Kovács Matáv retail landline fees to go up 5.6% Unilever takes over local cosmetic firm Spar to expand in Ft 10 bln program New printing house for Komárom Lang buys national textbook company New player in Telco arena Security company eyes expansion Bookline mulls listing stock HP Magyarország sales up 21% yr/yr Brit/Hungarian EU proposal welcomed Tokay'75 wins VinAgora Grand Gold Ganz may make trains with Alstom
Economics Home loan rates fall in Oct

Need for cautious interest rate Unemployment rate 6.1% in Aug-Oct Fix Plusz 7 fund registered Business lending rates fall in Oct Privatization may reap Ft 375 bln Base rate to fall to 8% in Q1
Politics Hungary to be EU president in 2017

'No' vote sanctions Trianon - Duray Spain to ease labor restrictions
Domestic Stockwatch Lamperth made honorary firefighter

Cuban-born Hungarian goalie dies
BUX index: BUX Close: 14171.06 Change: +71.06 ( +0.50%)

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2004-11-29 Business

Economics Politics Domestic Stockwatch Exchange Weather

OTP makes binding bid for Jubanka MOL and INA bid jointly for Energopetrol Erste okays merged bank balance sheet Euler Hermes expects revenue of Ft 2 bln Ferrari Maserati dealership in Budapest Szentendre expects Ft 8 bln investor Water Works to set up franchise network Vértes power plant sale modified Hotels expect 5% growth rate this year Local council sells Dunaferr stake to consortium Gas prices up Ft 2 MÁV to spend Ft 3 bln more on wagon maintenance Székesfehérvár mall and leisure center Student dorm to be built in Miskolc Court rules in Dédász suit Keler calls EGM for December 15 Euro 10 mln in subsidies for Hungary's winegrowers Camilo Pinto opens first Budapest shop this winter Poll says TV ads annoy GKI report: Hungary slack amongst EU 10 Drug prices may rise next year Gov't to propose protecting SMEs in EU Elections Committee turns down complaints Hungary wants to mediate between EU and Russia Ft 6 billion waste mang'ment system in Cegléd Financial advice for municipalities BUX index: BUX Close: 14,101.88 Change: -69.18 (-0.49%) Fixed Middle Rate Tomorrow: rain

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2004-11-23 Business
CIB’s 9-month profit up 34% yr/yr CIB Bank Rt had more profit than expected in the first nine months of the year due to rapid growth, in spite of expansion costs which rose faster than the rate of inflation. The bank’s growth more than offset the rise in expenditures, the bank’s top three men, president György Surányi and CEO’s Ádám Farkas and Ferenc Karvalits, told a press conference in Budapest yesterday. CIB’s consolidated nine-month net profit rose 34% yr/yr to Ft 12.686 billion, according to the bank’s unaudited IFRS figures. The bank expects to end the year with net profit of more than Ft 17 billion. CIB’s total assets rose 16.1% in the twelve months to September to Ft 1,161.173 billion. Pre-tax profit rose 29.6% yr/yr to Ft 15.743 billion. Net revenue rose 33.8%, a little more than operating costs which rose 27.5%. Net revenue from fees and commissions rose 35.2%, and net revenue from interest rose 59.5%. (Econews; NG 5, Nv 6, Vg 18,) DAM steel starts rolling today DAM 2004 Kft, the new owner of bankrupt steel maker DAM Steel Rt, is to restart metal rolling operations today, while holding off on steel production indefinitely, company CEO Béla Tóth said in a statement adding that some 700 staff have been signed up for the launch. DAM 2004, a subsidiary of Dunaújváros-based steel manufacturer Dunaferr Rt and originally named Európahíd 2003 Kft, took over the assets of DAM Steel in a fourth successful bid in August. (NG 5, Nb 17) S.F. TIR Bíztositó leads on-line market TIR Bíztositó, a company which sells third-party compulsory vehicle insurance online, has sold 12,000 new policies this year, making it the leading seller of online car insurance policies in Hungary. TIR Bíztositó is tailed on the online market by Union TIR Bíztositó and Argosz TIR Bíztositó, according to data published by online insurance broker Netrisk. Although the number of compulsory vehicle insurance policies sold online rose from 1,600 in 2002 to 18,000 in 2003, it is still dwarfed by the number of conventional policies. The number of online policies has been boosted by clients switching companies as well. (Econews) Helia-D brand changes hands As part of restructuring its product portfolio, Dutch-and-British-owned FMCG supplier Unilever Hungary Kft offloaded the Helia-D cosmetics brand to Helia-D Kft, a consortium of strategic and financial investors with ambitious plans for the brand. The largest investor behind the transaction is venture capital firm Renomé Rt, with three private investors complementing the syndicate. Based on the 1982 discovery of the healing powers of a sunflower stalk extract, the Hungarian brand was widely popular in the 80s. (Nb 17) P.P. Szenkirályi water market share Szenkirályi Mineral Water Kft is expected to have a market share of 8% by the end of this year, after having 0.3% last year, said Levente Balogh, company CEO. Next year, they are planning on investing Ft 3 billion to increase their bottling capacity to 300 million liter/year. The construction of the new 2500 sqm bottling plant is to be started early 2005. The EAU-scar winner Szenkirályi also expects international recognition and an increase in foreign turnover. (Vg 12) E.C. Green companies awarded prizes Green companies awarded prizes Flextronics International Kft, GE Hungary Rt, and Gallicoop Turkey Processing Rt were awarded the Environmental Savings prize yesterday, sponsored by the Association for Environmentally Aware Company Management. Six companies applied for the prize this year investing Ft 13.8 billion altogether, Ft 1.7 billion of which will return within a year. Flextronics has introduced a waste product recycling system that required no major financial investment, yet resulted in a saving of Ft 130 million and caused environmental benefits. In the category of ’investments with a 3year return time’, GE reduced its annual energy consumption by 362 MWh. Gallicoop was awarded a prize for reducing their increasing water consumption by drilling 5 new wells and building a purification system. (Vg 12) E.C.

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Humet fails to agree with creditors Troubled dietary supplement maker Humet Rt has failed to negotiate a deal with its creditors. Managing director of the BSE decided to suspend trading with Humet shares from 1:01 to 3:00 PM yesterday. The company announced on the bourse’s website simply that it has failed to reach an agreement with its creditors, without offering any further details. Humet filed for bankruptcy protection in May. In addition to debts, the company owes Ft 265 million in back taxes, of which it must pay Ft 34 million by the end of this year. (Econews; NG 1, Vg 18) Hungarian travel agents slow to sell online Most Hungarian travel agencies have an online presence, but less than a third of these allow clients to book online, and hardly any accept online payment, according to a survey by GKI. The survey, prepared together with T-Mobile Magyarország Rt and Sun Microsystems in July, shows that 67% of Hungary’s travel agencies had their own homepage, but only 20% of all travel agencies allowed clients to book online. Just 3% of Hungarian travel agencies accepted online payments. Online sales accounted for 10-15% of revenues of the travel agents which offer booking online. (Econews) Beekeepers picket Brussels Beekeepers from Austria, the Czech Republic, France, Germany and Slovakia joined a Hungarian initiative to picket Brussels demanding restrictions on low-quality imports that are hurting domestic producers in the EU. European honey producers find it difficult to remain competitive against cheap Chinese and South American products, some of which fail to meet food safety standards, according to Attila Nagyernyei, a board member of the National Association of Hungarian Beekeepers. Hungary’s 15,000 family-run beekeeper businesses produce 17,000 tons of honey annually, 80% of which is exported at a sales value of $40 million. The Ministry of Agriculture and Rural Development promised a national program to assist the industry at a recent conference. (Nb 1, Econews) P.P. Stock exchange capitalization Capitalization of the Budapest Stock Exchange (BSE) leaped from Ft 4193 billion in July to Ft 4545 billion in September on the back of a bull market that also propelled the bourse’s benchmark index by nearly 1 percentage point to 12,646, figures released by the Central Bank reveal. The uptrend was largely prompted by foreign investors, who owned 75.4% of all the shares in September, up 1% from three months earlier. In the July-Sept period, private investors raked in profits of Ft 13.6 billion on equity trading, financial institutions made Ft 23.2 billion, non-financials cleared Ft 24.2 billion, while foreign investors scooped Ft 241 billion. (NG 11) S.F. Smart program The Economy Ministry has extended the deadline for applications to the SMART program until December 1, because of the high level of interest, said Ákos Nemeth, assistant head of department. The tender was put out in the beginning of 2004 to enhance the transition to environmentally friendly technologies to reduce energy consumption and the amount of industrial waste. The total budget for the Smart program within the period 2004-2006 is Ft 3,685 billion. Since the deadline has been moved, the amount planned to be used this year, Ft 880 million, will also be increased. Applications submitted total 58, and these are still being processed. Some Ft 868 million has already been awarded to 11 successful applicants. The total number of successful applicants is estimated to be 40-50. (Vg 5) E.C. Körte-Organcia wins prize for innovation Körte-Organcia Rt, known for its biological sewage management technologies, is the winner of the Company of the Year prize in category ’Small and medium enterprises’ awarded by the Hungarian Venture Capital Association at a conference organized recently. The selection criteria included strategic thinking, ability for innovation and development, synergy, and creative management. (Vg 8) E.C. Subway restaurant chain Subway restaurant chain New Subway restaurants are to open in Hungary. Visitors to Biatorbágy Premier Outlet Center will get a chance to taste the sandwiches from December 2004, and there will be two more restaurants opened in February 2005. In the next 9 years, Subway are to increase their network to 50 units in Hungary. They have 22,280 restaurants worldwide and are present in 78 countries. (Vg 12) E.C.

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Economics
Storm damage claims Insurance companies are expected to pay out in excess of Ft 500 million in damages following a weekend of severe storms that swept across the country ravaging thousands of buildings. Generali Providencia Rt, the second-ranked insurance company, registered nearly 1,800 claims by yesterday afternoon at a value of over Ft 80 million, top insurer Allianz Hungária Rt received some 600 claims during the weekend, however the brunt fell on Aegon Hungary, which took altogether 1500 damage claims worth an estimated Ft 120 million-Ft 150 million in two days. (NG 4) S.F. Analysts say 50 bp rate cut no surprise Analysts polled by MTI yesterday said the central bank’s 50bp rate cut yesterday came as no surprise. They also agreed with the bank’s reasons for making the rate reduction: slowing inflation and better borrowing conditions for Hungary. András Pintér of Inter-Európa Bank Rt said that analysts had earlier expected as much as a 100bp cut, but the market was pricing in only a 50bp cut by the end of last week. Mr Pintér agreed that slowing inflation and falling long-term yields had created room for the cut. He noted, however, that the central bank had raised its forecast for the general government deficit well over the government’s own target, auguring a continuation of the bank’s cautious rate policy. Mr Pinter said rates could still fall by 50bp by the end of the year. (Econews; Nb 1, Vg 4, Nv 9,) September constr’n output up adjusted 0.7% yr/yr Construction industry output rose 0.7% yr/yr in volume terms in September according to both unadjusted and working-day adjusted figures, the Central Statistics Office (KSH) announced yesterday. The rise was driven by civil engineering volume up 14% yr/yr in September and an 18.7% rise in the first nine months over the same period last year. At the same time building construction was down 10.4% and 1.9% respectively. Construction industry output totaled Ft 1,153 billion (euro 4.7 billion) at current prices in the first nine months of the year, compared to Ft 1,526 billion during the whole of last year. (Econews; NG 3) Economist forecasts for Hungarian economy According to a report on the period up to 2006 published by the Economist Intelligence Unit (EIU), the Hungarian economy looks set to show slow but steady growth, with the export sector producing exceptionally good results despite the strong forint and the halt in expansion of the major export markets. Capital investments are to increase as a result of competitive goods exported, and in 2006, the growth rate of GDP is expected to reach 4%. On the down side, the report states the state deficit may be larger than planned, there may be a delay in joining the Euro zone, and the inflation rate may be underestimate. (Vg 4) E.C. Interior Ministry 2005 budget Local municipalities will get a total Ft 1334,6 billion from the central coffers next year, up 8% or a real 3%-3.5% over 2004, Interior Minister Mónika Lamperth announced yesterday citing the government’s 2005 budget draft proposal. Of the various sectors, welfare stands to get the biggest financial boost in the draft receiving an extra Ft 30 billion, up 12% from 2004. State expenditure on education and R&D are set to grow by a respective 3.7% and 7%, while 4.7% more will go toward culture. (Vg 5) S.F. Customs satisfied with revenues The Customs and Excise Office (VPOP) expects to collect over 89% percent of 2004 customs and excise tax revenue targets by the end of November, the minimum required for VPOP’s staff to receive bonuses totaling Ft 2.7 billion this year, national customs chief János Nagy said. Of the Ft 1,300 billion total revenue VPOP set as a goal for 2004, customs and excise tax account for a respective Ft 40.5 billion and Ft 655 billion, while the rest comes from other taxes. VPOP is meanwhile going ahead with the job cuts necessitated by Hungary’s EU accession. The staff of the customs office will be reduced to 6,738 by the end of the year, with 370 layoffs scheduled for mid-December. (Nv 6) P.P.

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Parliament approves central bank act amendment Last night Parliament passed a controversial amendment to the central bank act, which will give the government more influence over the bank’s monetary policy. The amendment will increase the number of members on the bank’s rate-setting Monetary Council from between 7 and 9 to between 9 and 11, and it will allow the Prime Minister to appoint four new members immediately. It will also allow only one of the central bank’s vice presidents to be a member of the Council instead of three. (Econews; NG 3, Nv 6, Nb 15)

Politics
Hungarians Fed. protests over ref’ campaign The World Federation of Hungarians (MVSz) has lodged a complaint with the police against the government, charging it with trying to unlawfully influence the outcome of the forthcoming referendum on dual citizenship for ethnic Hungarians, the organization’s leader said in Budapest yesterday. „One of the government parties, the Socialists, is manufacturing millions of misleading brochures in which the Prime Minister is shown on the title page and the Culture Minister on the second page. This amounts to a crime threatening the clarity of the referendum and the principle of equal opportunity,” MVSz President Miklós Patrubány told a news conference. (MTI)

Domestic
Hungary sends troops to Iraq summer 2005 Hungary plans to send troops to Iraq next summer under a NATO training mandate, Defense Minister Ferenc Juhász said yesterday. The Hungarian parliament last week voted against extending the mandate of the 300-strong contingent, but the government does not need its permission to contribute to a NATO mission. „A military training base for 1,200 to 1,500 will be set up in Iraq next summer. Three units will be put in charge of security at the base and one option is that we will make up one of the units,” Juhász said. NATO is to train around 1,000 senior Iraqi military officers a year as part of its military aid program. (Novinite) Inmate injures three prison guards An inmate wielding a knife injured three warders before being restrained by other guards in a north Hungarian prison, the Hungarian News Agency MTI was informed yesterday. The warders were injured on their arms and palms, but none of them are in serious condition, while the inmate, 29, also suffered minor injuries during the incident which occurred last Friday, according to the prison’s press release. The inmate used a knife provided by the prison for meals, which he sharpened himself. He is serving time for robbery and blackmail in the Márianosztra prison, 60 kilometers north of Budapest. (MTI; Nv 16, Nb 22) Tourist tax for under-18s in Siófok The lakeside town of Siófok at Lake Balaton will continue to lobby the government and legislation for a license to levy tourism tax on holidaymakers aged 14-18 in the same way it collects dues from adults, although the proposal was recently voted down by Parliament, Mayor Árpád Balázs said. Down from 2003’s Ft 140 million to Ft 120 million this year, Siófok’s tourism revenues have been shrinking in spite of an unprecedented boom in teenage visitors attracted by the town’s numerous clubs and bars. The municipality suspects there are many adult visitors and approximately Ft 80 million worth of tax evasion among the masses who say they are under-18 partygoers who now account for 40% of all tourists in Siófok. (Nb 11) P.P.

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2004-11-24 Business
Richter schizophrenia treatment bought Forest Laboratories Inc., which sells antidepressant Celexa, said it bought U.S. and Canadian rights to sell a schizophrenia treatment being developed by Hungary's Gedeon Richter Rt. The drug, called RGH-188 is in the first phase of clinical trials in the U.K. and may start final phase III tests in the U.S. in 2006, Forest and Richter said yesterday in a PR Newswire statement. They did not disclose terms of the transaction. This is Forest's fifth licensing agreement this year. (Bloomberg; NG 11, Vg 13) Fornetti expanding in Scand'via and US Hungarian-owned frozen pastry franchise Fornetti Kft is planning a market entry in Scandinavia and in the Benelux countries in 2005 and is also eyeing the U.S. market, according to József Palásti, a founding member of the company. Fornetti adopted the International Food Standard system a few days ago to meet the food safety requirements of international wholesale chains such as Metro, Aldi or Rewe. The company is spending Ft 700 million on the expansion of a factory in Kecskemét, central Hungary, while a new 12,000-sqm production base, which will be the largest of Fornetti plants, is scheduled for completion in Romania in mid-2005. Started in 1997 as a family business with Ft 20 million, Fornetti expects Ft 5 billion in sales this year. (Vg 12) P.P. Tesco opens 40th store Retail chain Tesco opened its 40th store in Százhalombatta, South of Budapest yesterday. The new 3,000 sqm store was built with an investment of several billions forints, said Kozima Szökendi, PR manager of the company. Tesco Global Stores Rt currently employs 16,000 people and opened 6 new stores this year. The next opening will take place in Kalocsa, South Hungary, Szökendi added. (NG 5) R.G. MTI and Radio forge new agreement The Hungarian News Service (MTI) and the Magyar Radio Rt signed a news service agreement yesterday. According to the terms of the contract all three channels and the website of the radio will be entitled to utilize news from MTI as of January 2005. Another agreement between MTI and MR enables MTI to use news from the radio's news program Krónika. A previous news service contract between the two was terminated by the Hungarian Radio in May. (NG 5) R.G. VAT rebates delayed by red tape Businesses with a European tax ID could see their VAT rebates linger in the state coffers well into 2005 as a result of extended red tape related to a series of tax inspections ordered in early Nov. by the Finance Ministry to establish the causes behind unexpectedly low VAT revenues this year. According to a recently issued memo by the tax authority, refunds that have been screened during the inspections are only to be paid out individually after they have also been approved by the Finance Ministry. The inspections are regarded by many as an implicit move by the government to improve the 2004 budget balance. (Vg 5) S.F. Too few places to use bankcards Hungary's bankcard market is saturated in terms of number of cards, but the number of points-of-sale which take bankcards is still lower than in other countries in the region, according to a survey by MasterCard Europe of Russia, Ukraine, Poland, the Czech Republic, Hungary, Slovakia and Croatia. Marketing Director for Central and Eastern Europe Gyula Hajdú said that in June 2004, 4 million out of a total of 6.8 million bankcards issued in Hungary were MasterCards. Clients with MasterCards used their cards to make 35 million purchases in the first half of 2004. The cards accounted for 41% of transactions, but only 12% of the total value of transactions. Credit cards account for half of the value of all retail purchases in the UK. (Econews; Vg 14) OTP to continue rapid expansion OTP Bank Rt has no choice but to continue aggressive expansion in Central Europe, although it may also move into Western Europe once it gains critical mass, Reuters quoted the bank's chief executive as saying. OTP sees its net profit rising to euro 1 billion euro within three years, and once it has that sort of muscle power, the bank will be large enough to be taken seriously even in the western half of
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the EU, OTP Chairman and Chief Executive Sándor Csányi told Reuters in an interview yesterday. OTP has plenty of room to grow at least for the next ten years. (Econews; NG11) VirusBuster licenses from Commtouch Commtouch, a global developer of anti-spam security solutions, today announced a software licensing agreement enabling VirusBuster, headquartered in Budapest, to integrate Commtouch's anti-spam engine into its MailShield. "By integrating Commtouch technology into our offerings, we have created a robust and comprehensive spam filtering solution that is affordable, easy to integrate and easy to deploy," said Péter Agócs, development director at VirusBuster. (Business Wire) Insurers paying for damages of uninsured Insurers paying for damages of uninsured The Association of Hungarian Insurance Companies (MaBiSz) is paying more money to more people who are injured or whose vehicles are damaged by drivers without compulsory third-party vehicle insurance. MaBiSz members pay for the damages every month based on their market share, but must eventually pass the costs onto their clients. MaBiSz paid out Ft 1.482 billion for damages caused by drivers without a valid compulsory vehicle insurance in the first nine months of 2004, up from Ft 1.25 billion in the same period a year earlier, said István Ragályi, who heads the MaBiSz office which processes such claims. (Econews) Ban on unfair commercial practices in offing The EU's Council of Ministers sanctioned measures against misleading advertising and other unfair commercial practices. If they get the final go-ahead early next year, the new regulations will replace a tangle of country-specific laws and legal precedents. The new directives would prohibit retailers from posting "final clearance sale" signs when they are not planning to pull out of business, ban the advertisement of a product at a discount price when it is not in stock, and paid advertisements disguised as editorial content in the media. (Vg1) P.P. Magyar Hírlap reappears today The defunct daily Magyar Hírlap is out again today after a company co-owned by former newspaper staff bought the publishing rights from former owner Ringer Publishing Kft, its chief editor said yesterday. Switzerland's Ringier Publishing announced in late October that it would shut down the paper because of an Ft 2 billion debt it had run up since 2001. Some staff members of Magyar Hírlap, which last appeared on November 5, published a new daily, entitled Pont, for two weeks from November 9. The new owner, Pont MH Publishing Ltd, intends to rely on a broad circle of freelancers, said chief editor Pál Szombathy. The daily's publishing rights were sold for their fair value, which is estimated to exceed Ft 100 million. (MTI Econews) m2 changes program structure The Hungarian Television's satellite channel, m2, revamped its program structure as of Monday, said MTV's president Zoltán Rudi. From Monday m2 broadcasts educational programs in the morning and cultural programs in the evening. The restructuring did not cost MTV any extra expenditure and is a bid to increase the number of viewers. If MTV manages to take a Ft 4 billion loan with a state guarantee this year, it will have the chance to break even in 2004, Rudi said. (NG 8) R.G. Budapest spa upgrades and reconstruction Budapest's spa management company will focus on historic baths in the next phase of its ongoing reconstruction project, CEO Gábor Horváth said. Budapest Baths and Spas Rt, which owns and operates 8 of the 13 facilities classified as such, expects Ft 5 billion in central funds for the project. This would enable the company to start a major hotel and tourism project surrounding the reconstruction of Rác bath, in addition to upgrades at Gellért and Rudas baths. The company is also planning a Ft 4.5 billion-Ft 5 billion development in cooperation with private investor N.B. Invest to add a water fun park to Dist. 13's Dagály outdoor swimming pool. Bath and spa revenues fell 9% this year due to the cold summer, but the spa operator will probably make a moderate profit in 2004 after posting Ft 170 millon loss in 2003. (Vg 11) P.P.

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Kékoportó grape to change name Previously known as kékoportó, the first bottles of wine sold under the label "portugieser" will hit the shelves in a few days. The labels kékoportó and kékmedoc, which misleadingly suggest a connection with the Portuguese and French wine regions of Port and Medoc, respectively, can no longer be used outside of these geographical areas. Grown over nearly 1,500 hectares in Hungary, kékoportó is the fourth most popular red grape in the country and is one of the major varieties grown in the southwestern wine region of Villány. (Vg 4) P.P. Hungarian exports to Slovakia on the rise Hungarian exports to Slovakia are expected to be worth $1.8-$1.9 billion this year, $300 million more than in 2003, the head of the Trade Office in Bratislava, Tibor Varga, told a forum of Hungarian and Slovak businessmen in Gyor yesterday. Varga noted that Hungary's exports to Slovakia rose by more than 40% in 2003, and as a result, Slovakia's trade surplus decreased from $280 million in 2000 to $80 million in 2003. Half of trade between the two countries turnover was generated by SMEs. Hungary was the third-biggest foreign investor in Slovakia in H1 2004, followed by Austria and the UK. (Econews) Hungary and neighbors develop transport corridor Government officials and municipal delegates from Slovakia, Austria, Hungary and Slovenia recently signed an agreement to accelerate the long-planned development of a regional north-south railroad and highway transportation route, Szombathely Mayor György Ipkovich said. The project has become a higher priority as several companies from the region are interested in becoming suppliers to Slovakia's booming automotive industry, and the region aspires to become one of Europe's major logistics hubs. The four countries will be lobbying the EU for funding together. (Vg 6) P.P.

Economics
MOL buys Rom'n gas stations from Shell MOL Rt said it has bought Royal Dutch/Shell Group's remaining 59 filling stations in Romania, almost doubling its network in the Balkan country. The acquisition, which MOL expects to close early next year, boosts the company's retail network in Romania to more than 130 units and includes Shell's local lubricant, jet-fuel and wholesale businesses, MOL said in a stock exchange statement. MOL did not release terms of the purchase. "The presence is very important, having the logo there," said Gergely Suppan, an analyst at Takarékbank Rt in Budapest. (Bloomberg; Nv 5, NG 11, Nb 17, Vg 15) Tax office may not reach target The National Tax Office APEH may be Ft 108 billion short of its Ft 2,508.4 billion target for VAT, personal income tax and simplified business tax (EVA) income for the first 11 months of 2004, according to unnamed sources. If APEH fails to meet this amount by tomorrow, November 25, tax office employees will not receive their annual bonus payment this year, an estimated Ft 6.79 billion. (NG 5) R.G. Retail sales volume up adjusted 5% yr/yr in Sept Retail sales volume rose 5.0% yr/yr in September, and January-September sales volume was up 6.6% yr/yr from a year earlier according to working day-adjusted figures published by the Central Statistics Office (KSH) yesterday. Retail sales rose by working-day-adjusted 5.6% yr/yr in Q3 alone. Retail sales volume rose by 0.3% in the month of September alone, according to seasonally- and working dayadjusted figures. In line with EU statistics, the figures do not include vehicle, vehicle parts or fuel sales. (Econews; Vg 5) OEP exceeds budget By mid-November, the National Health Fund Administration (OEP) exceeded its pro rata budget spending by Ft 3.2 billion, according to official data. The overrun came on the heels of an unexpectedly strong upswing in the consumption of subsidized 'flu' drugs and fears of a rumored 15% drug price hike, which prompted a rush on medications, a top OEP official said, adding that under the agreement signed between OEP and drug makers in July, a freeze was imposed on subsidized drug prices until the end of 2006. Then the government also undertook to raise OEP's funding by an annual 5% from next year, while both signatories pledged to bulk out the fund's budget by a combined Ft 21 billion this year. (Vg 4) S.F.

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Járai: Central Bank may cut interest rates again Central Bank President Zsigmond Járai said he may cut interest rates for a seventh time this year and predicted more reductions next year, since the highest borrowing costs in the EU slow inflation. ``Inflation is slowing in Hungary and this may create the opportunity for further rate reductions,'' said Járai in an interview late on Monday in Budapest. "I can imagine that we will have single-digit interest rates by the end of the year.'' Járai said a benchmark interest rate of 8.5 % at the end of 2005 is the "most likely scenario." Consumer price inflation slowed to 6.3 % in October, the lowest this year, and Járai said inflation may fall to 5 % in January. (Bloomberg; NG 3, Vg 5)

Politics
Parties disagree on call to take part in referendum Hungary's four parliamentary parties yesterday failed to reach an agreement on a political declaration that calls upon the electorate to turn out for the December referendum. The referendum will decide whether millions of ethnic Hungarians living abroad could be granted Hungarian citizenship and hospitals could be prevented from being privatized. The governing Socialists and Free Democrats objected an amendment to the original text proposed by the major opposition Fidesz party. Both governing parties oppose the idea of granting Hungarian citizenship to ethnic kin under easier terms. (MTI) Hungary considering writing off $120 mln Iraq debt Hungary has not yet decided whether it will write off the $120 million debt it is owed by Iraq. The Finance Ministry is examining the issue, ministry spokesman Ferenc Pichler said yesterday. The Paris Club of 19 creditor nations agreed last weekend to write off 80% of Iraq's debt in three phases until 2008. The club called upon the other creditors to follow suit. Hungary is not a member of the Paris Club. (MTI)

Domestic
Accidents at work down 18% According to a recent survey of the National Labor Safety Supervision, the number of accidents at workplaces decreased by 18.3% in the first half of 2004 compared to the same period last year. However, the number of lethal accidents increased notably, by 32.1%. Most accidents happen in the food manufacturing industry, with 847 accidents in six months. Construction comes only 5th on the list although the industry leads the list of deadly casualties with 31 deaths in H1. (NG II) R.G. 9% of ethnic Hungarians in Serbia ready to resettle Only 9% of ethnic Hungarians in Serbia's Vojvodina province would move to Hungary if granted preferential citizenship, showed a survey published by a Hungarian Novi Sad-based paper yesterday. The daily Magyar Szó asked readers about the possible outcome of Hungary's December 5 referendum which would grant citizenship to ethnic Hungarians abroad. A total of 9% of respondents said they were prepared to move and settle in Hungary, 82% would not leave their homeland and the remaining 9% were undecided. (MTI) Azeri officer pleads guilty The Azerbaijani officer who killed an Armenian classmate during a NATO Partnership for Peace course in Budapest last February has pleaded guilty in court. Ramil Safarov, 27, used an ax to hack to death his sleeping colleague Gurgen Makarian of Armenia, one year his junior. Safarov showed no remorse in court and said the murder was revenge for a 1992 Armenian assault of Azerbaijanis in the NagornoKarabakh region, which he witnessed as a child. (MTI)

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2004-11-25 Business
OTP makes binding bid for Nova Banka

OTP Bank Rt has made a binding bid for a 95.59% stake in Croatian bank Nova Banka, the bank said yesterday, the deadline for bidding. Nova Banka is Croatia’s seventh-largest bank, with total assets of Euro 1 billion and net assets of Euro 78 million, according to figures from the end of 2003. It has 92 branches, mainly along the Adriatic coast, and more than 300,000 clients. The bank controls 6.3% of the market for retail deposits, and 4.3% for retail loans. OTP has submitted a draft contract of sale along with its bid, which would speed up the acquisition if OTP is picked to buy the bank. (Econews; Nv 5, Ng 13, Vg 18)
K&H Bank issues corporate credit card

K&H Bank Rt has started offering corporate credit cards with limits up to Ft 1 million. Businesses have 45 days interest free in which to pay the bank back for purchases made using the card. After that, the bank charges monthly 1.9% interest. K&H Bank noted at the card’s launch that most SMEs do not have trouble getting loans, rather the problem is maintaining their liquidity, and the credit card should help. The bank will issue up to four cards for each corporate account. At the end of June, the bank had 8,000 corporate accounts, giving it 14% of the market. (Econews; Vg 17)
Cable Internet users up 60%

Cable service providers have increased their Internet user counts by 60% since 2003 and currently control 30% of the broadband market, according to market leaders UPC Hungary Kft, MatávkábelTV Kft and Fibernet Kft. UPC remains by far the most dominant player with 61.600 customers, while MatávkábelTV has 10,000. Fibernet’s customer base has expanded at a spectacular annual rate of over 350% to 9,000, Deputy CEO István Bed? said. All of the three are optimistic about their 2005 outlook, expecting their accounts to swell at a similar rate as they have done this year. (Vg 1) P.P.
MOL finances acquisitions with gas sale

Hungarian oil and gas company MOL Rt will spend money from the sale of its gas business to make acquisitions. MOL sold the gas business at the start of November to German energy giant E.ON so it could focus on its oil business. MOL stands to get about Euro 2.2 billion from the deal over the next five years. Zsolt Hernádi, who heads MOL, told German business daily Handelsblat that the money from the sale would be spent primarily on acquisitions, and that MOL is planning to play a bigger role in oil production in Siberia, Kazakhstan and North Africa. (Econews; Nv 5)
OTP targets retail market via mortgages

Mortgage bank OTP Jelzálogbank Rt is offering two series of mortgage bonds aimed at the retail market, a new, one-year bond carrying fixed interest and its OJB 2014/J series, being sold for the seventh time. OTP Jelzálogbank will offer a minimum Ft 100 million of its new OJB 2005/XI bonds at 100% of nominal value. The bonds mature on December 10, 2005 and carry fixed annual interest of 9.1%. OTP Jelzálogbank will offer a minimum Ft 50 million of its 2014/J mortgage bonds. The price will be 101.07% for the remaining nominal value of Ft 9,894.(Econews; Ng 14)
PSzÁF ban diamond traders

The State Financial Institutions Supervision (PSzÁF) banned DT Diamond Trade Rt from practicing financial services and will be prosecuted by the police. DT Diamond Rt offered diamonds for investment to clients promising a 20% annual yield on increase of value. The PSzÁF examination revealed that clients bought diamonds for investment exclusively, in which case DT Diamond Rt’s activities are considered financial services, for which the company did not have permission. (NG 5, Vg 17) R.G.
MÁV to operate 10% less trains next year

Hungarian Railways (MÁV) Rt will operate 10% less trains next year, especially on routes that are not too busy, but service will not stop on any route, branch manager Ferenc Vizsy said. MÁV will introduce its new timetable for next year on December 12. The number of train services will increase in Budapest’s suburbs and the number of express services will increase, Vizsy said. (Nv 4) M.K.
Fujitsu Siemens H1 sales up 37% yr/yr

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Fujitsu Siemens Computers’ Hungarian subsidiary had revenue of Euro 13.7 million in the first half of its 2004/2005 financial year ended September 30, compared to Euro 10 million in the same period a year earlier, CEO Gábor Poros said yesterday. The company sold 40% more computers and equipment during the period. The company expects to finish its financial year ending March 31, 2005 with revenue of Euro 35 million, Poros said. Notebook sales accounted fro 30% of sales revenue in H1, while peripherals made up 30%, PC sales 20% and server sales 20%. (Econews; Vg 13)
TriGranit May Win Top Romanian Project

TriGranit Rt, a real estate company controlled by Hungary’s second-richest man, may win a contract for a USD 1.3 billion development project in Bucharest, the largest ever in the Romanian capital, daily Ziarul Financiar reported. The agreement will probably come next year following elections this weekend, the newspaper said, citing unidentified officials familiar with the project. The project, which will stretch over 110,000 square meters in the center of Bucharest, will include offices, residential apartments, shopping malls, hotels, and parking lots, the paper said, citing the Ministry of Transports and Constructions. Investor Sándor Demján owns a 75 % stake in TriGranit (Bloomberg; Nb 16)
Holiday center up for sale

Easy-Life Club, a holiday center in Mosonmagyaróvár, North-West Hungary is put up for sale by liquidator Kurátor Kft for Ft 1.25 billion due to liquidation proceedings of its owner, H-Build 2000 Rt. The real estate consists of three adjacent lots with a 280 bed apartment hotel, a store and a residential building. The deadline for the purchase tender is Dec. 6. (NG 7) R.G.

ECONOMY
Pensioners to get Ft 57,000 more

Pensioners will, on average, receive Ft 57,000 more in 2005 than in 2004 in the wake of government pension measures, a government spokesman told reporters after yesterday’s cabinet meeting. András Batiz said pensions would go up by 6.3% as of January 1, an average increase of Ft 3,550 per month per pensioner. Batiz said the purchasing power of pensions in 2005 was expected to rise by 3.7%. The rise in real pensions in 2005 is expected to be 2.5% higher than that of real earnings, something „unprecedented since 1991”, Batiz said. (MTI; Vg 5, Nv 3)
Banks drop interest rates after MNB’s Monday cut

Several commercial banks have dropped the interest rates to be paid for deposits by 50 basis points following the cut of the National Bank of Hungary’s key interest rate on Monday. Inter-Európa Bank Rt will apply the 0.5% smaller rates as of today granting only 8% to clients. Budapest Bank Rt will decline the interest rate paid to entrepreneurs. CIB Bank Rt has decreased the interest rate of retail CIB Takarékszámla by 50 basis points, while OTP Bank will pay a smaller interest by 25 basis points from next Monday. (Nv 5) M.K.
FinMin plan EVA tax

The Finance Ministry is planning to propose a new eva-type tax to be initiated from 2006 for companies with higher revenue and costs, announced Finance Minister Tibor Draskovics at a parliamentary hearing yesterday. The Ministry would propose the expansion of the availability of eva (simplified business tax) to businesses in commerce, hospitality and production to ease their administrative burden. According to László Zara, president of the Association of Hungarian Auditors and Tax Consultants, the EU would definitely oppose the idea of ignoring cost accounting in case of businesses with more than Ft 25 million in annual revenue. (NG 1) R.G.
Gov’t to modify M5 concession agreement

The government will modify its earlier concession agreement with M5 highway operator Alföld Concession Motorway Rt (AKA) to authorize the company to continue construction between Szeged and the southwestern border, the Economy and Transport Ministry said. The new section may be completed by 2006. Now 40% owned by the State Motorway Management Rt (ÁAK), AKA was chosen in early 2004 to buy out the developer of M5 and build the second phase of the motorway between Kiskunfélegyháza and Szeged. This section will reach completion by the end of 2005, with Hungary paying a total of Ft 208.5 billion in availability fees for operation and maintenance. (Vg 1) P.P.
Subsidies give way to mortgages

State-subsidized housing loans are gradually giving way to commercial loans and mortgages, market research company DEM Kft concluded in a recent survey. Banks extended Ft 257.6 billion in
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subsidized loans and Ft 132 billion at a market rate this year. Subsidized loans for purchases on the resale market have become increasingly difficult to obtain, as shown by the sharp decline in monthly totals from Fr 29 billion in January to Ft 5.5 in October. Government aided finance for newly built homes is also becoming more marginal, if at a slower pace: the comparable monthly figures were Ft 23 billion in January and Ft 13.8 in October. Subsidized loans averaged Ft 3.89 million in the resale sector and Ft 6.74 million for new homes. It appears that borrowers who are not eligible for government-aided credit lines are still not afraid to take out foreign currency loans, in spite of the dangers of currency rate fluctuation. (Vg 4) P.P.
Hungarians move east

Low wage costs have attracted some Hungarian manufacturing companies to relocate production to Slovakia, Romania, Ukraine and Serbia, and it is not unlikely that this new trend will intensify, according to László Parragh, president of the Hungarian Chamber of Commerce and Industry. Although wages stand at approximately the same level in Ukraine, Serbia and Romania at about 35% of the Hungarian average, political and legal uncertainty make the first two far less attractive locations, Parragh said, adding that consumer electronics manufacturer Videoton Rt has recently decided to build a new plant in Ukraine in spite of the difficulties. Business activity between Hungary and Slovakia is buoyant in both directions, while Hungarian investment in Romania is not reciprocal. (Vg 1) P.P.
Járai will take amendment to court

If the President of the Republic will not challenge the amended Central Bank Act before the Constitutional Court, the central bank will do so, Governor of the National Bank of Hungary (MNB) Zsigmond Járai said yesterday. Járai said he believed the amendment approved by Parliament on Monday is unconstitutional, but he added that it would not affect the central bank’s monetary policy. The amendment will increase the number of members on the bank’s rate-setting Monetary Council from between 7 and 9 to between 9 and 11, and it will allow the Prime Minister to appoint four new members immediately. (Econews; Nb 15)
Bankruptcy act almost complete

The draft of the new Bankruptcy Act will be complete by the end of the year, business daily Világgazdaság reported. The new law is aimed to offer creditors a better chance to recuperate losses, leave room for the reorganization of companies with serious liquidity problems and make liability issues transparent - functions that the current Bankruptcy Act fails to fulfill. While in theory bankruptcy laws are intended to address the financial problems of a company before they grow out of proportion, 90% of liquidations in Hungary start against companies entirely stripped of assets and less than 1% of collectibles can be claimed. The bill defines a condition of „perilous insolvency” in which the management will be under obligation to report to authorities. (Vg 5) P.P.
Car sales stop growing this year

Approximately 207,000 new cars will be sold in Hungary in 2004, which is about the same amount as last year, chairman of the National Association of Car Dealers Gábor Gablini said. However, the number of new cars to be sold next year may hover between 180,000-190,000 only, which is a 10-15% drop to be foreseen, Gablini said. Among the reasons Gablini mentioned the saturation of the market in Hungary and the fact that the favorable apartment subsidy systems make people buy apartments first. (Nv 5) M.K.
Insurance interest decrease

The Finance Ministry will decrease the technical interest, a guaranteed yield, on life and accident insurance payments from a maximum 4% to 2.9% as of 2006. According to experts, the planned cut would result in a 5-10% increase in fees and a considerable yield decrease. As opposed to the Ministry’s proposal, insurers would realize the cut gradually. The last, 2% cut in technical interest resulted in a 15-20% rise of insurance fees. (NG 1)R.G.
Hungary heads N.Y.C. debtors list

Hungary owes USD 49.7 million to the city of New York in unpaid real estate taxes imposed on buildings used by the country’s diplomatic mission in New York and partially leased by them to third parties, according to the New York Daily News. Foreign diplomatic missions owe an approximate USD 190 million to New York in taxes and unpaid parking fees and Hungary is the biggest debtor. It is due to the fact that the amount of the tax was imposed on the whole building of the mission as Hungarian

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diplomats refused to let city officials check the utilization of the house. According to a recently accepted US bill, such debts can be deducted , with interest, from US aid to the respective countries. (NG 2) R.G.
Euro plan sticks to deficit goal

Hungary’s updated plan for adopting the euro will stick to a goal of meeting the EU’s budget deficit limit in 2008 despite slippage this year, Finance Ministry deputy state secretary Álmos Kovács said in an interview with Reuters yesterday. Hungary’s revised convergence report, which is due to be submitted to the European Commission by the end of November, will pledge annual deficit cuts of around 0.6-0.7 % of GDP. These would lead to a 2.9 % shortfall in 2008, just below the EU’s 3 % limit, he said. (Econews; Ng 3)

POLITICS
By-elections in 2 constituencies on Sun.

Hungarians in two cities go to the polls on Sunday in the second round of parliamentary by-elections. The two parliamentary seats in question were left vacant by opposition Fidesz MPs József Szájer in Sopron and László Surján in Szécsény, who were elected to the European Parliament this past May. The first round, held on November 14, was invalid in both constituencies as fewer than half the eligible voters turned up at the polls: somewhat less than 29% in Szécsény and about 32% in Sopron. In the second round, one-fourth of eligible voters plus one person must cast ballots for the election to be valid, and the candidate with the most votes wins. (MTI; Nv 1, Nb 6)
MSzP media guru attacks Hungarian Radio

A media expert from the Hungarian Socialist Party (MSzP) István Újhelyi plans to turn to the National Radio and Television Board (ORTT) to ask for the suspension of Hungarian Radio’s (MR) broadcasting rights. MR is biased in its information programs on the referendum on dual citizenship on December 5, Újhelyi said. MR also broadcasts public announcements before news where civilians call for yes votes at the referendum without counter-arguments, Újhelyi said. MR’s chairperson, Katalin Kondor is also active in the referendum campaign, though not on the air. (Nb 1) M.K.

DOMESTIC
Hungarian soldiers return from Iraq by Dec. 31 The majority of Hungarian soldiers serving in Iraq will return to Hungary by Christmas and the last soldier will be home by December 31 too, the government decided. Following a similar decision of Parliament that did not extend the soldiers’ mandate, the transportation of soldiers to Hungary will start on December 17, after this soldiers will only protect their properties in the NATO mission in Iraq, the spokespersons announced. (Nb 7) M.K.

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2004-11-26

Business
MOL to cut investment by 25% MOL Rt, the largest oil company in the 10 countries that joined the EU in May, will cut investment by about a quarter next year because it's completed a program of upgrades, reducing the need for spending. MOL is set to invest a record Euro 1 billion this year, said Michel-Marc Delcommune, MOL's director for strategy. In 2005, investment will be about 25 % lower, he said at a press conference in Bratislava. (Bloomberg; Nv 5, Vg 18, Ng 12) Canning lobby pressures Kovács The Hungarian Association of the Canning Industry along with European canning companies want to turn to László Kovács EU commissioner responsible for tax issues to lobby against the EU's planned measures to lift customs on Thai canned corn by 3.5% in the near future. The measure would adversely effect the Hungarian canning industry, 50% of output being made up of corn caning, said József Galambos, secretary of the Hungarian association. If the EU eased customs on Thai corn, Hungary's canning production could decrease by as much as 100 million cans next year. (Vg 1) R.G. Matáv retail landline fees to go up 5.6% Hungary's incumbent telco Matáv Rt is raising monthly subscription fees for most of its retail analog landline packages by 5.6% from the start of next year. Traffic fees as well as business packages will remain unchanged. Yesterday, Matáv said the monthly subscription fee for its "Basic" package would rise from Ft 2,568 to Ft 2,712, citing it as an example. Subscription fees for three of Matáv's packages will remain unchanged. (Econews; Vg 5, Nv 5) Unilever takes over local cosmetic firm Traditional Hungarian cosmetic brand Helia-D was bought from Unilever Rt by a group of Hungarian investors lead by venture company Renomé Rt, announced Hália-D Kft's managing director Péter Budaházy. Unilever sold the brand in scope of a product portfolio reorganization. Hélia-D Kft wants to increase the brand's turnover from Ft 250 million to Ft 400 million next year. The company also plans to acquire 20% of its turnover from export in 2005, Budaváry also added. (Vg 18) R.G. Spar to expand in Ft 10 bln program Retail chain Spar plans to expand its more-than-150-store-chain by 15-20 supermarkets and 4-5 hypermarkets next year in scope of a Ft 10 billion investment program, announced Péter Feiner, Spar Magyarország Kft's managing director. Trial operations have recently started in the company's meat processing plant in Bicske, West of Budapest. The 6,000 sq m plant, which was constructed with an investment of Ft 3.5 billion, will supply the chain's stores with 3,500 tons of meat products from January. (Vg 7) R.G. New printing house for Komárom American company RR Donelly have just finished building a new printing house in Komárom. The 1 acre production base of the multinational company will produce print products on a 2500sqm industry hall including a warehouse. The new factory starts out with 50 employees. RRD, founded in 1864, has 600 outlets all over the world hiring 50 thousand people, with a 2003 turnover of USD 4.8 billion and a profit of USD 270 million. (NG 4) E.C. Lang buys national textbook company The sale contract of National Textbook Publishing House Rt (NTK) was signed by The State Privatization and Holding Company (ÁPV) and Láng Publishers and Holding Rt yesterday. Láng Rt will pay Ft 3,215 billion for a 70% share of the publishing company. The state will keep its 25% plus one vote share in the company, vice-CEO of ÁPV Rt, Márton Vági said. Láng Rt was chosen on a tender among disputed circumstances; two further bidders were banned due to proceedural errors on their part. ÁPV Rt was accused of abuse, and having fabricated the charges, which ÁPV denied. One of the banned bidders, Mozaik Publishing Kft admitted making a mistake in their application. (Nb 7, Nv 10) G.R. New player in Telco arena US telecommunications company Net2Phone decided to enter the Hungarian market in the near future, announced Solomon Gahtan, the company's leader responsible for the Eastern European region on Internet portal Isite. Net2Phone will provide telephone services through the Internet to both retail and business clients. Gahtan cited new opportunities and favorable market conditions as motives to the move. (Vg 8) R.G.

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Security company eyes expansion Hungarian security company Ormester Kft will expand in Slovakia and Romania by buying up new companies, in addition to its three existing subsidiaries in Serbia, Slovakia and Romania, announced managing director Mihály Vida at a press conference. The company will also open a new regional center in Serbia in 2005 and plans to expand in Croatia and Slovenia as well. Ormester Kft forecasts Ft 1.5 billion in net turnover for 2004 compared to the Ft 1.23 billion it had last year. (Vg 1, Ng 5) R.G. Bookline mulls listing stock The largest Hungarian online bookstore Bookline Kft may be introduced to the stock market in the next 2 years, György Márffy, company founder and majority owner said The website hosting 8-10 visitors a day is expected to have a turnover of Ft 200 million this year, as opposed to Ft 40 million last year. The eager reader my find 30-40 thousand book titles listed on the site, including antique editions and freshly published books. Bookline's 2005 target is Ft 1 billion. (NG 4) E.C. HP Magyarország sales up 21% yr/yr Sales of IT company Hewlett Packard's (HP) Hungarian subsidiary rose by 21% in the business year ended October 31, helped by the effects of HP's global merger with computer company Compaq two years ago. HP Magyarország strengthened its market position in all areas, growing 50% faster than the market, CEO György Beck said yesterday. HP Magyarország controls 50.4% of the corporate servers market, 51.3% of the Unix server market and 23.1% on the PC market. They also control 10% of the IT services market and 77% of the Hungarian market for monochrome laser printers, the third-strongest position on the market for the devices anywhere in Europe, Beck said. (Econews; Nv 5) Brit/Hungarian EU proposal welcomed The EU Competitiveness Council warmly welcomed the Hungarian-British proposal on the registration of chemicals. According to the REACH (Registration, Evaluation and Authorization of Chemicals) system, all companies should register all chemicals they use to make sure that no materials they work with have harmful effects on health and environment. The Hungarian-British proposal, however, targeted the concept of one chemical - one-time registration, because it is simpler and enhances transparency. Some 9.8% of the Hungarian GDP comes from the chemical industry, thus Hungary is directly affected by REACH. (VG 3) E.C. Tokay'75 wins VinAgora Grand Gold The seventh international wine and pálinka expo, VinAgora, was staged as a part of Budapest's international food industry fair Foodapest. Sixteen gold and 48 silver medals were distributed among 194 foreign wines and 29 gold and 65 silver ones among 351 Hungarian wines. There were 81 entries in the pálinka category, all from Hungarian producers. Samples were judged by jurors from 17 countries. Villus vineyard's 2003 Villus Cuvee was given the prestigious Champion award in the red wines category, and Tolcsva Bor's 1993 Tokay Essence won the Champion award in the botrytised wines category. Tokaj Kereskedoház's 1975 Szarvas, a six puttonyos Tokay won the Grand Gold Medal. (Econews) Ganz may make trains with Alstom Heavy machinery maker Ganz Holding Rt will help Alstom Transport make 30 Coradia Duplex double-decker trains for Hungarian railways MÁV Rt, if Alstom wins a tender to supply MAV with the rolling stock. Alstom announced the agreement with Ganz yesterday. It also said it would bid on the MÁV tender for the supply and 15/30-year maintenance of 30 trains and maintaining with its Coradia Dublex trains. The commission will create 100 new jobs at Ganz's subsidiary in Budapest. (Econews)

Economics
Home loan rates fall in Oct Retail lending rates rose in October, with the exception of rates for home loans, which fell 53bp to 11.76%, according to the National Bank of Hungary's report published yesterday. Home loans' APR, which reflects the total cost of borrowing, fell a steeper 95bp to 14.14%. Households took out Ft 22 billion in new home loans in Oct, Ft 1.8 billion more than in Sept. Home loans share of total retail lending rose from 34.7% to 44.4%. Hungarians took out Ft 21.4 billion in consumer credit in Oct, Ft 1.2 billion less than in Sept, but consumer loans share of total retail lending still rose from 38.9% to 43.1%. (Econews; Nv 15, Vg 19) Need for cautious interest rate Monetary conditions have not been too tight over the past years in Hungary and the Monetary Council must tread carefully with its interest rate policy, István Hamecz, managing director of the National Bank of Hungary said at a conference organized by the economic research institute GKI yesterday. Hamecz added that the interest rate expenses of Hungary's general government were high not because of the high interest rates but because of the substantial rise of its indebtedness. The level of government securities yields is affected rather by credibility and trust than the central bank base rate, Hamecz said. (Econews; Ng 1)

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Unemployment rate 6.1% in Aug-Oct Hungary's average rate of unemployment was 6.1% in Aug to Oct, unchanged from the period between Jul and Sept, and up 0.4 %age points from the same period a year earlier, the Central Statistics Office (KSH) said yesterday. The average number of people out of work but actively seeking employment was 255,100 between Aug and Oct of 2004, as against 254,600 between Jul and Sept, and 236,800 between Aug and Oct of 2003. People out of work spent on average 16.7 months looking for a job, and 45.2% of them had been looking for work for more than a year. (Econews; Ng 3, Nb 4) Fix Plusz 7 fund registered With a Ft 2.6 billion base capital, the State Financial Institutions Supervision (PSzÁF) has registered the closed end guaranteed fund Fix Plusz 7, the yield of which depends on international stock indexes. The 7th member of the series is considered a mid-size fund amongst the Hungarian guaranteed funds. K&H Bank guaranteed a minimum of 24% yield on a 3-year run (7.44% APR). The maximum yield may reach 70% (19.3% APR), which will only happen if the prices on the major international stock markets nearly double in the next 36 months. (NG 11) E.C. Business lending rates fall in Oct Corporate lending rates fell 106 basis points to 11.88% in Oct, according to the National Bank of Hungary's latest report published yesterday. On Oct 18, the central bank cut the base rate 50bp to 10.50%. The rate excludes overdrafts and lending between financial companies. The average interest rate on overdrafts fell 52 basis points to 12.03%. The average interest rate on business loans up to Euro 1 million fell 120 basis points to 12.83%, and the rate for loans over Euro 1 million decreased 35 basis points to 11.34%. Businesses borrowed a total of Ft 158.2 billion in Oct, excluding overdrafts, Ft 99.2 billion less than in Sept. (Econews) Privatization may reap Ft 375 bln The state will end 2004 with Ft 375 billion in revenue from the sale of assets. State Privatization and Holding Company (ÁPV) chairman Tamás Mészáros announced the figure at a conference organized by economic research institute GKI and noted that it was ÁPV's third-highest annual revenue ever. The privatization of the remaining state stake in Hungarian oil company MOL Rt was not on the agenda, Mészáros said, outlining plans, or lack thereof, for future sales of state assets. Mészáros said bids would be called once again for Hungarian airline Malév Rt, but he did not yet know what would happen to Budapest Airport, the company that operates the capital's airport. Mészáros said neither Hungarian electricity works MVM nor Magyar Posta would be privatized in the next 2-3 years. (Econews) Base rate to fall to 8% in Q1 Hungary's central bank will reduce the base rate as far as 8% already in the first quarter of next year; the further development of interest rates will depend on the forint's strength against the euro, according to Peter Duronelly, who is head investor at Budapest Alapkezelo, a big fund manager. Duronelly noted that yields on Hungarian securities are extremely high, not only in regional, but also in global terms. Hungary's three-month yields (9.44% yesterday) are the fifth highest in the world, preceded only by Turkey, Brazil, Venezuela and Mexico. (Econews)

Politics
Hungary to be EU president in 2017 Hungary is to hold the EU presidency in 2017 along with The Netherlands and Malta, provided the proposal for the EU constitution is ratified in December. The current 6-month presidential rotational system is to be overtaken by a new system, where 3 countries would carry out a collective presidency in the framework of mutual collaboration and collective cooperation. Old EU members offer a 2-year preparation period. If the new constitution proposal will not get passed, Hungary will separately serve EU presidency in the first half of 2017. (Ng 1) E.C. 'No' vote sanctions Trianon - Duray A leader of ethnic Hungarians in Slovakia said those rejecting the idea of granting Hungarian citizenship to kin minorities in the December referendum will actually sanction the post-WWI Trianon Peace Treaty that deprived Hungary of two thirds of its territory and over half of its population. "Those who support a 'no' answer in the referendum are either unfamiliar with Hungarian law or deliberately want to mislead voters in Hungary," Miklos Duray, Deputy Chairman of the Hungarian Coalition Party of Slovakia, said in Gyor (W Hungary) yesterday. (MTI) Spain to ease labor restrictions Spain will gradually ease employment restrictions toward Hungarian citizens, Prime Minister Ferenc Gyurcsány said after talks with his Spanish counterpart Jose Luis Rodriguez Zapatero in Madrid yesterday. The two countries will set up a joint committee to examine whether all restrictions could be abolished in one and a half years time, he said. Gyurcsány recalled that Spain had imposed restrictions on labor from all the ten new EU member states since May 2004. Since Hungary's accession to the EU in May 2004, some 1,800 Hungarian citizens have applied for residence permit in Spain. (MTI; Nv 1, Nb 3)

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Domestic
Lamperth made honorary firefighter 39 fire engines were handed over by Interior Minister Mónika Lamperth to 25 professional and 6 voluntary fire departments yesterday. The Minister was made an honorary firefighter. That was the third time this year that new fire engines were given to fire departments, she said. The Ministry plans on setting up 67 new voluntary fire departments and increasing the number of municipal firefighters by 500, the Minister added. (Nv 4) G.R. Cuban-born Hungarian goalie dies Vladimir Hernandez, the Cuban-born goalkeeper of the Hungarian men's handball team, has died in Spain due to a dilated artery, according to an autopsy report. The 33-year-old failed to appear with his team's championship game on Wednesday. The club managers looked for him in vain. And yesterday morning police broke open the door of his Pamplona flat to find him dead in his bed. Hernandez was dropped from the Olympic squad because of disciplinary excesses. (MTI; Nv 19)

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2004-11-29 Business
OTP makes binding bid for Jubanka OTP Bank Rt has made a binding bid for a majority (88%) share packet in the Serbian bank Jubanka, OTP announced on the website of the Budapest Stock Exchange on Friday. Jubanka has 250,000 clients and 88 branches. Serbian central bank president Radovan Jelasic said in June that the stake was worth Euro112Euro115 million. Three banks signed declarations of intent with regard to Jubanka: OTP Bank, Societé Génerale and Alpha Bank. Serbian press reports indicate that Societé Génerale will not submit a binding bid and Alpha Bank may also opt out of the second round of the tender. (Econews; NG 7, Vg 10) MOL and INA bid jointly for Energopetrol Oil and gas company MOL Rt and its Croatian strategic partner INA have submitted a joint non-binding bid to buy stakes in Bosnia's state-owned leading fuels group Energopetrol, MOL said on Friday. Energopetrol, which has 66 petrol stations, ended 2003 with losses of Euro1.25 million. The company, 67%-held by the state, has a further Euro15 million in debts. It sold 123,877 tons of oil and oil derivatives last year. Media reports have named Austria's OMV, Slovenia's Petrol and a Turkish company as other potential bidders for Energopetrol. (Econews; NG 7, Vg 11) Erste okays merged bank balance sheet Shareholders of Erste Bank Hungary Rt approved the final profit and loss statements related to the merger of Erste Bank Hungary and Postabank Rt at an EGM on Friday, the bank announced. Erste Bank absorbed Postabank with all its rights and liabilities on August 31, 2004. "With a merger performed in record time, the Erste group has established a substantial presence on the market in Hungary as well," chairman-CEO of the merged bank Péter Kisbenedek said. The bank is now Hungary's second-biggest retail bank. (Econews NG 5, Vg 9) Euler Hermes expects revenue of Ft 2 bln The Hungarian subsidiaries of Euler Hermes, a big provider of credit insurance and manager of trade receivables, expects to end the year with revenue from premiums of Ft 2 billion, up from Ft 1.7 billion in 2003, Gábor Varga, a member of the board of directors of one of the companies, said on Friday. Euler Hermes' credit insurance company, which controls 65% of the market in Hungary, is expected to generate Ft 1.6 billion in revenue, and its subsidiary managing trade receivables should generate Ft 500 million-Ft 600 million. In the first ten months of the year, the two companies had combined net profit of Ft 100 million, already more than profits for all of 2003. (Econews; NG 5, Vg 10) Ferrari Maserati dealership in Budapest Italian Ferrari Maserati has opened its first dealership in Budapest. The new dealership will be managed by SPQR Hungária Rt's subsidiary SPQR Warm Up Kft. So far Ferrari and Maserati cars and motorbikes were sold by SPQR Hungária Rt, which also sells Fiat brands. Ferrari and Maserati are currently sold in 52 countries of the world. (Vg 5) M.K. Szentendre expects Ft 8 bln investor The municipality of Szentendre, north of Budapest, is negotiating with several potential investors about the construction of a four-star hotel belonging to the town on Pap Island. The hotel for 600 guests will be built on a nine-hectare site, of which six hectares are owned by the municipality and three by a private individual. The hotel will also offer medical and wellness services and a conference hall for 250 people. The municipality plans to rent the hotel and the land in exchange for the building costs. (Vg 5) M.K.

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Water Works to set up franchise network Budapest Water Works (FV) Rt plans to establish a franchise network to serve clients more efficiently, CEO Csaba Haranghy said. FV can offer its experience, know-how and technical background to smaller water works, Haranghy said. FV has reconstructed 65 kilometers of pipeline this year and 30% fewer pipes ruptured this year than last year due to the ongoing pipe reconstruction program, Haranghy said. FV expects a net revenue of Ft 22 billion and an after-tax profit of Ft 1 billion this year, Haranghy said. (Vg 7) M.K. Vértes power plant sale modified The latest EGM of mining and electricity company Vértes Power Plant Rt made further modifications to the proposed terms of a sale agreement concerning one of its power plants in the northwestern town of Tatabánya, CEO László Vas said. Vértes, for the most part state-owned, is planning to sell the Bánhida plant to Kárpát Energo Kft for Ft 2.3 billion. Since the plant does not meet environmental standards and is no longer financially viable, the buyer would build a combined cycle plant at the same location. (NG 5) P.P. Hotels expect 5% growth rate this year The recession in the tourism sector that started in 2001 should end soon, and the number of guest nights in Hungary should rise 4-5%, according to Ákos Niklai, who heads Hungary's Hotel Association. The aim is to maintain a yearly increase of at least 5%, Niklai told a meeting of the association. Although the number of guest nights spent in hotels by Hungarians has increased more slowly this year, Niklai said he hoped to see a turnaround in the November and December. Political state secretary in charge of tourism Béla Pál said the government had earmarked Ft 10 billion for tourism in the 2005 budget. (Econews) Local council sells Dunaferr stake to consortium Donbass-Duferco, a consortium of Ukrainian and Swiss steel makers which bought a majority stake in troubled Hungarian peer Dunaferr Rt at the end of September, has agreed to buy a 7% stake in the company held by the local council of Dunaújváros, where Dunaferr is located. Donbass-Duferco will pay Ft 1.5 billion for the stake, a local government spokesman said. The price is roughly equivalent to the proportionate price Donbass-Duferco paid for its 79.48% stake in Dunaferr in September. (Econews) Gas prices up Ft 2 Hungarian Gas and Oil (MOL) Rt is raising pump prices as of today due to a cut in the excise tax break introduced by the government to dampen the impact of high fuel prices in global markets. As a result, gas prices are increasing by Ft 2 to Ft 243.5-252.5 per liter, whereas Diesel is becoming Ft 1 more expensive and will cost Ft 233 per liter. (NG 3) P.P. MÁV to spend Ft 3 bln more on wagon maintenance Hungarian Railways MÁV Rt plans to spend Ft 3 billion more on the maintenance of renovation of freight wagons next year than this year, branch manager Imre Kovács said. Almost 50% of MÁV's 16,000 freight wagons are not suitable for daily use due to missing renovation, Kovács said. Every year 1,500 wagons should be renovated, but fewer than 300 have made it to the workshops in recent years, Kovács said. MÁV plans to renovate its fleet of wagons by 2007 and will spend Ft 13 billion on this project over three years, Kovács said. (Vg 7) M.K. Székesfehérvár mall and leisure center After several years of stalemate, the local government of Székesfehérvár may soon reach agreement on development plans with the private investor who acquired an 8-hectare outdoor sports facility from bus manufacturer Ikarus Rt two years ago, planning a residential real estate project. Latest plans however are that the investor will build a 11,000-sqm shopping mall on the larger part of the plot and hand over 2.5 hectares to the municipality to create a multi-billion-forint new sports and leisure center. (NG 17) P.P.

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Student dorm to be built in Miskolc A dormitory meeting the standards of a three-star hotel will be built in the campus of Miskolc, for a total of Ft 2.5 billion as part of a Public-Private Partnership (PPP) scheme. The building is scheduled for completion by February 2006, and will house 600 people. The monthly rent is expected to fall between Ft 15,000 and Ft 25,000. The project is financed by the Hungarian Development Bank (MFB) Rt, and Miskolc University given the leasehold of the property to the consortium of OTP Real Estate Rt and construction company Magyar Építok Rt for twenty years. The university plans the modernization of its current dormitories as part of another PPP scheme. (Nb 11, *NG 17) P.O. Court rules in Dédász suit The lawsuit initiated by the Association of Individual Stock Exchange Investors (Tebész) against E.ON Dédász Rt's decision to force small stockholders out of ownership was closed by the Baranya County Court with no judgment passed, saying that the company's articles of association refer such disputes to an arbitration court. Tebész had already appealed against the verdicts reached earlier by arbitration courts regarding small investors' conflict with German power giant E.ON AG, which is seeking to eliminate minority owners from its newly acquired Hungarian power distributors E.ON Dédász Rt, E.ON Titász Rt and E.ON Édász Rt. Trading in E.ON Dédász stocks ended at the Budapest Stock Exchange (BÉT) last week, after the de-listing of E.ON Titász. (NG 7) P.P. Keler calls EGM for December 15 Hungary's central depository and clearing house Keler Rt has called an extraordinary general meeting for December 15 to make changes to the company charter, approve the 2005 business plan and decide on payment for Keler's board members. Keler expects to end the year with net sales revenue of Ft 2.546 billion and pre-tax profit of Ft 1.359 billion. Financial profit is projected at Ft 1.125 billion, and operating profit at Ft 233.5 million. Keler will have spent Ft 580.7 million on developments by the end of the year, compared to Ft 767.6 million in 2003. (Econews) Euro 10 mln in subsidies for Hungary's winegrowers Hungary's winegrowers will be eligible for more than Euro10 million in EU subsidies in the 2004/2005 marketing year to make structural improvements, László Kovács, head of the Council of Mountain Communities, a winegrowers' association, said on Friday. The subsidies are based on the area of Hungary's vineyards before EU accession, which was 1,260 acres. The amount of the area-based subsidies may not be increased, but winegrowers may apply for EU funding to make structural improvements or switch to better varieties of grapes. (Econews) Camilo Pinto opens first Budapest shop this winter Portuguese company Camilo Pinto, which sells Peter Murray clothing products, will open its first shop in Budapest this winter, the company announced. Camilo Pinto was established in 1979 and the company has a franchise network in Spain and Portugal. Besides Hungary, Camilo Pinto plans to extend its business in Lithuania. The company reported a turnover of 15 million last year. (Vg 7) M.K. Poll says TV ads annoy According to a recent survey conducted by pollster Szonda Ipsos, the majority of TV viewers are irritated by the onslaught of ads during commercial breaks, while newspaper readers agree to advertisements, deeming them useful. The survey was commissioned by the Association of Hungarian Publishers, and was introduced to representatives of the advertising industry at a conference last week. Specialists have concluded that combined advertisements are the most effective ones, because TV commercials cannot substitute for the benefits of ads in papers. (Nv 16) P.O.

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Economics
GKI report: Hungary slack amongst EU 10 According to the most recent survey jointly prepared by research institute GKI Rt and Erste Bank Rt, the Hungarian economy is still growing stronger than the EU average by 2 percentage points, but its performance is one of the worst of the newly joined nations. Industrial output increased by 10% during the first six months of the year, but the third quarter showed growth of under 6%. Industrial export also lost steam with the Q3 result of 13%, compared to 20% in H1. The survey predicts that the base rate will drop to 9.5% by the end of the year. (Nb 15, *Nv 5) P.O. Drug prices may rise next year Pharmacies reported a shortage of some of the most popular prescription painkillers and fever reducers, especially those containing penicillin, although there are no signs of the usual year-end panic shopping. Nonsubsidized medications may become up to 15% more expensive next year since the government has lifted the price cap on these. The price of drugs subsidized by the National Health Fund Administration (OEP) may rise by 7% at most, Health Minister Jeno Rácz said. As regards the latter, manufacturers cannot hike prices until Dec. 31, 2006 unless there is a major change in forint rates against the euro compared to where they stood in June. (NG 1) P.P. Gov't to propose protecting SMEs in EU The Hungarian government plans to call for added protection for SMEs, Prime Minister Ferenc Gyurcsány said in Madrid on Friday. It will submit a proposal to this effect to the Party of European Socialists' (PES) program being drafted for the coming five years, he said. Gyurcsány, along with other left-wing PMs, met leaders of the PES to discuss a report by former French EU commissioner Pascal Lamy containing a set of recommendations on Socialist priorities in the EU for 2005-2009. The European Socialists should initiate protection for SMEs in their quest to remain competitive with the multinationals, Gyurcsány said. (MTI)

Politics
Elections Committee turns down complaints The National Elections Committee rejected on Friday a set of complaints against the government, tendered by the opposition Fidesz party, the NGO World Federation of Hungarians, and other organizations, concerning government publicity about Hungary's forthcoming referendum. The written complaints argued that recent government statements violated election law by using scare tactics to influence voters. In response to the complaints, the Elections Committee said that in the eyes of the law the government was not a relevant party in the electoral procedure, and as such, its statements did not amount to campaigning. (MTI; Nb 6) Hungary wants to mediate between EU and Russia Hungary intends to act as a bridge between Russia and the EU, a senior government official said on Friday. Prime minister's office chief Peter Kiss said after talks with Russian upper house speaker Sergei Mironov in Budapest that trade between the two countries had increased by 30-40% over the last two years, adding that the positive trend could also be felt on a regional scale. Hungarian entrepreneurs are looking to the huge Russian market of social rental housing and hospital reconstruction, while Russia seeks a role in the European subway development with Hungarian mediation, Kiss said. (MTI)

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Domestic
Ft 6 billion waste mang'ment system in Cegléd Building of a Ft 6-billion regional solid waste management system started in central Hungary on Friday. The system will serve 365,000 people in 48 communities lying between the Danube and the Tisza rivers. Half of the project's funding derives from the EU; the state is paying for 40%, and the affected local councils are covering 10% of the costs. The project is one of 17 which aim to bring waste management standards in Hungary up to EU standards by 2009, Environmental Minister Miklós Persányi said at the groundbreaking ceremony in Cegléd on Friday. (Econews) Financial advice for municipalities The Prime Minister's Office is drafting a plan to help municipalities with their management through a partly stateowned consulting firm, the Office's chief consultant Péter Szegvári said. The idea is based on a World Bank study, conducted on fifty Hungarian local governments from 1990 to 2000, which found evidence of mismanagement. Not only will the consulting firm help local governments find the right financial construction for development projects, but it will also vouch for loans if necessary. The strategy, which enjoys the backing of the government, municipalities and the European Investment Bank, will run at full steam in three to four years, Szegvári added. (Nb 9) P.O.

Stockwatch
BUX index: BUX Close: 14,101.88 Change: -69.18 (-0.49%) Stock Closing price Daily change (%) Average price Volume MOL 12,185 0.8 12,195 361,563 Matáv 794 2.5 785 494,042 OTP 5,270 -1.4 5,324 593,303 Richter 22,850 -3.2 22,928 90,577 Egis 10,655 -1.3 10,659 15,680 Antenna 3,870 0 3,875 4,216 TVK 4,880 0 4,880 17 Rába 635 0 638 2,892

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