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07 December 2004
Business OTP pipped at the post in Jubanka bid Lidl faces pricing accusations MOL to reduce pump prices PSzÁF allows increase in IC Bank stake MTV resorts to loan for liquidity Griff clothes look to expand globally Company registration easier over Internet Fresh mineral water enters Hungary Fines levied for disregarding work safety Subsidies for IT from next year Matáv leaps to center ground in BSE Teleworking in Hungary needs developing MNB: Hungary must cut budget gap to reduce debt MFB to pay government Ft 8 bln dividend Number of retail outlets slightly up in Q3 Effect of high interest rate Hungary exploits EU funding well, says minister Real-estate sluggish, set to awaken next year FinMin, KSH announce deficit calculation change ForMin: vote will improve ties with neighbors Layoffs in Defense Ministry Prison to be built in Tatabánya BUX Close: 14,398.24 Change: +83.64 (+0.58%) Fixed Middle Rate Tomorrow: p/cloudy

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08 December 2004
Business Rába lands order from Russian Trolza Wellness center in western Hungary Cetelem Q3 results Suzuki recalls 1.3-litre Wagon R+ models Plane Station turns airstrip into airport Malév could end year in black, or red Retail outlet center opens in Törökbálint Defense Min purchases missiles Regulator orders Heineken to correct Brau bid Borsodi cuts staff Dataplex optimistic about year-end Styl clothes co’ sheds real estate Phylaxia unveils pet plans Multi-entertainment units made by computer co’ AgMin’s marketing company to get bigger budget Investors buy historic Danube building: Ft 4 billion Economics Preliminary November fiscal deficit Ft 106.5 billion Industrial output up adj. 8.4% yr/yr in October Politics Fraud cases at referendum complaints rebuffed Ethnic Hungarians may hand back entitlement cards Domestic Naturalization process under scrutiny Richest people in Hungary Former MTV president to be charged Serbian Hungarian man flees to Hungary Stockwatch BUX Close: at 14,417.01, Change: +18.77 (+0.13%) Exchange Fixed Middle Rate Weather Tomorrow: p/cloudy

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09 December 2004
Business T-Mobile, Telenor win 3G Licenses OTP gets Nova Banka stake for Euro 236 mln BÁV begins listing prices for gold Biggeorge's renamed Eston International Audi to invest Euro 1 bln over 5 yrs Graphisoft buys own shares New Getronics CEO Tender announced for design center Walt Disney opens center in Budapest Kafijat sells stake in Antenna Oct. trade deficit est. Euro 390 mln Expansion in auditing market Growth of monetary base accelerates in Nov APEH to get fewer than expected premiums Gov't grants to aid companies to double Hotel occupancy up Gov't to launch agricultural loan program 17.9 mln transactions with Mastercard Value of homes falling because of glut Hungarian banks "still inefficient" AgriMin comments on forint rate AKK mandates USD 100 mln 2-yr bond issue "State security documents should be published" Ethnic Hungarians plan conference Construction of new metro line begins BUX index: BUX Close: 14429.99 Change: +12.98; ( +0.09%) Fixed Middle Rate Tomorrow: p/cloudy

Economics

Politics Domestic Stockwatch Exchange Weather

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10 December 2004
Business K&H Bank's 9-month net profit up 31% Keravill goes into liquidation Euro 13.5 mln plant addition completed Forlev increases stake in Konzum Real estate fund goes public SW Umwelttechnik to double production BKV to increase tariffs MVM sells excess capacity at auction Discount airline carry tourism boom Széles re-elected New ÁPV head to be appointed New logistics center for Kecskemét Balaton Airport license awarded PM takes stance against strong forint EU tender process moving slowly APEH introduces new service Auth warns of banks' risk on forex Alliance of CE bourses planned Public procurement at record high Agri producer prices down 9.9% in Oct. Q3 growth driven by agriculture Monetary policy fight weakens forint Draskovics Says He Won't Be Fired 400 yrs of French painting on show in Bp BUX index: BUX Close: 14345.36 Change: -84.63; (-0.59%) Fixed Middle Rate Tomorrow: sunny

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13 December 2004
Business BAT lowers Pall Mall price Brau board hands in resignation Ice rink goes to Publika MTV welcomes Fischer for sales Tatabánya opens gas-fuelled station EBRD sells stake in Matáv, says Portfolio Aviation Solution to bid for Malév again MOL transfers 8.02% stake in TVK Greenhouse gas quota for 2005-2007 set Wayfinder Systems offers mobile navigation Autoker increases its Depo stake Homeless CEOs Raiffeisen Property Fund's assets increase in Nov BSE week: BUX drops 1.07% to 14,161.57 Economics Business confidence index pessimistic Gov't plans to raise Ft 300 bln from asset sales Politics EU concern over tension in Hungary World Federation demands recount of votes Gyurcsány in Iraq Greens and farmers want stricter GM maize rule Domestic No Chernobyl threat to village, MÁV says Elmu builds transformer in Budapest's district 14 Tab tourist development goes ahead NGOs activists petition to curb domestic violence Stockwatch BUX index: BUX Close: 14,161.57 Change: -183.79 (-1.28%) Exchange Fixed Middle Rate Weather Tomorrow: cloudy

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07 December 2004 Business
OTP pipped at the post in Jubanka bid

As expected, Serbia-Montenegro’s bank privatization authority has officially announced that it has accepted a bid by Alpha Bank of Greece for an 88.64% stake in Jubanka. Bids submitted by Alpha Bank and OTP Bank Rt were evaluated on the basis of purchase price and development strategies, including plans to keep the bank’s employees, according to the statement published yesterday. Alpha Bank will be invited to negotiate the sale contract. If negotiations are unsuccessful, the Serbian authorities will offer to negotiate with OTP. OTP Bank expected to be informed by the weekend on whether its bid for Serbia’s Jubanka had been accepted, but it has received no official word, OTP Bank officials said yesterday. (Econews; Vg1, Nv 6, Nb 16, NG 11)
Lidl faces pricing accusations

The supervision division of the Pest County Agricultural Office initiates an inspection against Hungary’s newest retail chain Lidl Kft today following a list of complaints from producers and manufacturers against Lidl’s price strategy. Since Lidl first opened in mid-November, rival producers have been accusing it of selling goods below the wholesale price. György Vámos, president of the Hungarian Trade Association, said that in case of imported goods it is hard to trace the wholesale price. While cabbage-growers were distributing free cabbages in front of the Dunaharaszti Lidl in protest last Friday, the Consumer Protection Office has also started an examination on claims that there is not adequate information given on packages of products sold by Lidl. (NG 1) R.G.
MOL to reduce pump prices

Hungarian oil and gas company MOL Rt, the country’s major distributor of fuel, will reduce retail petrol prices by Ft 6/litre and the retail price of diesel by Ft 8/litre on December 8, a MOL spokesman said yesterday. MOL said the new price would be Ft 237.5/litre for 95-octane unleaded and Ft 230/litre for diesel. Explaining the measure, MOL cited a decline in international crude oil prices over the past week. (MTI; MH 3, NG 3, Vg 5, Nv 6, )
PSzÁF allows increase in IC Bank stake

The State Financial Institution Supervision (PSzÁF) has given its consent to Switzerland-based ICB Financial Group Holdings Ltd to increase its stake by 15% in IC Bank. ICB Financial Group Holding has held a 20% stake in the bank since September, when it increased the bank’s registered capital to Ft 24,105 billion. Besides ICB Holdings, 6 other owners hold 10-14% stakes in the bank respectively. (NG 5) R.G.
MTV resorts to loan for liquidity

MTV is to take a bank loan to solve its liquidity problems, according to Népszava. If approved by the presidential committee, the media complex would take a Ft 4 billion credit to even out its 2004 dues. The public channel called for a tender, the winner is to be contracted, and the terms and conditions will be negotiated at today’s meeting. (Nv 3) E.C.
Griff clothes look to expand globally

After successfully offloading its various construction and furniture industry holdings, men’s clothing maker Griff Gentlemen’s Rt is set to go global by opening a first store in Poland next year and a couple more in China later on, chairman and CEO Zoltán Süto said. The decision was prompted by the sluggish domestic market, which is beginning to take its toll on sales, Süto added saying that the company is also leasing out its central store in Nyugati tér to move to a cheaper shopping mall. Giff last year made a profit of Ft 190 million on revenues of Ft 2.4 billion. (Vg 1) S.F.

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Company registration easier over Internet

Company registration over the Internet is soon to come, since the Ministry of Justice is starting to digitalize existing hard copy registrations from January 2005. From January 2006, yearly company reports may be filed via Internet, from September 2006, MJ will accept company registration requisitions, and from 2007, all company documents should be available via Internet. State commissioner Miklós Hankó Faragó said that the usage of online tools is being promoted by a reduced price for the online services compared to the traditional method. There will be a total of Ft 500 million spent on developing the system, which is expected to reduce and end queuing at the office. According to the new bill on corporate law, the 60 and 30-day registration period of Rt’s and Kft’s respectively may be halved. (Nb 8) E.C. Graphisoft replaces head of FM business Architectural and building management software developer Graphisoft Kft announced that Wolfgang Reinecke will replace Gábor Dióssy as head of the company’s Facility Management (FM) business as of January 3, 2005. Mr Reinecke earlier led Graphisoft’s FM arm in Germany and has a deep understanding of the market. (Econews; NG 11)
Fresh mineral water enters Hungary

Fonte Verde Kft will start the production of a new mineral water brand called Fonte Verde in its recently completed Somogyvár plant in southwestern Hungary in mid-December, announced Nárcisz Csákabonyi, the company’s managing director. The company has realized investments worth Ft 500 million, having recently completed a 2,000 sqm plant, a 500 sqm office building and a logistics center. Next year the company also wants to enter the Swedish market and Arab countries with its products. (NG 5) R.G.
Fines levied for disregarding work safety

Last year Kft’s (limited companies) were by far the most notorious violators of occupational safety regulations, paying total fines of Ft 465 million, the National Labor Affairs and Labor Safety Supervision (OMMF) said in a government-commissioned report. This makes up 53% of the total penalties levied on companies for labor safety-related irregularities in 2003. Apart from the 927 Kft’s, 290 Bt’s (limited partnerships), 288 sole proprietors and 98 Rt’s (stock companies) got the official rap on the same account. (Vg 6) S.F.
Subsidies for IT from next year

Tender publications for EU subsidies for IT developments will be issued in January and applications can be submitted from February, announced Sándor Kisgergely, managing director of IT Kht, an association created by the IT Ministry to handle major IT projects and tenders. Between 2004 and 2006 Ft 35 billion is available for IT developments and applications have been submitted for Ft 27 billion so far. The amount of IT subsidies will considerably increase from 2007 in scope of the 2nd National Development Plan. Kisgergely also added that IT Kht suggested some changes in application procedures in order to make application easier for SMEs in the future. (NG 4) R.G.
Matáv leaps to center ground in BSE

Budapest shares closed at an all-time closing high yesterday, but most investors took to the wings amid a dearth of corporate or economic news. The failure of retail bank OTP Rt’s bid in Serbia hit the share’s price, if only moderately, while telecom Matáv Rt surged to 6-week highs. The BUX index rose 83.64 points, or 0.58%, at 14,398.24 points, which is a new all-time closing record. But the gain was solely due to some robust last-minute buying boosting the price of Matáv, fuels group MOL Rt and mortgage bank FHB Rt - for the biggest part of the session the BUX seesawed around the flat-line. Turnover was a measly Ft 6.8 billion (EUR 27.6m), with OTP posting around half of its recent average volume and MOL around 20% of its 30-day average. However, Matav bucked the trend as around twice as many of its shares were exchanged as on an average day in November. (Econews)

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Teleworking in Hungary needs developing

Hungary has a lot of catching up to do to make teleworking more accessible to employees since it has only 2-3% of its active labor force working from home, compared to the EU’s 15%, Gábor Simon, head of the Teleworking Council said prior to the upcoming 3rd National Teleworking Conference held on Thursday. Some Ft 800 million will be earmarked from the labor market fund next year, which will all go toward creating teleworking jobs, Simon added. In the past 3 years, some 2,500 new jobs of this kind have sprung up through the help of state funding. (Vg 8) S.F.
MNB: Hungary must cut budget gap to reduce debt

Hungarian Prime Minister Ferenc Gyurcsány’s government must reduce the country’s budget deficit to put a halt to rising debt as it works toward adopting the euro by the end of the decade, the central bank said. Delays in trimming the budget deficit are the biggest threat to the country as inflation risk has decreased and money markets are stable, the bank said in a faxed statement yesterday. Hungary aims to adopt the euro in 2010. It has to keep its debt at less than 60% of gross domestic product and push its budget deficit to below 3% of GDP to switch to the common currency. Rising deficits led to increasing debt, the bank said. „The country has a high need for outside financing in an international comparison, which has primarily been provided by debt- type instruments since 2002,” the bank said in its report. (Bloomberg; NG 3, Vg 4, MH 11)
MFB to pay government Ft 8 bln dividend

The Hungarian Development Bank (MFB) Rt will pay a Ft 8 billion dividend to the state this year, CEO Sándor Czirják announced yesterday. The bank has not been paying a dividend over the last few years, but, under an amendment to the law governing it, MFB is now able to pay half of its net profit as a dividend. The government ordered payment of an advance dividend of Ft 850 million in June and a further Ft 1.65 billion in July. The bank was ordered to pay another Ft 3.5 billion after the third quarter. MFB expects to end the year with net profits of Ft 5.6 billion. MFB projects pre-tax profit of Ft 12.136 billion and total assets of Ft 600 billion. (Econews; Nb 16)

Economics
Number of retail outlets slightly up in Q3

There were 165,423 retail outlets in Hungary at the end of September, up 0.1% in Q3 alone and up 0.6% yr/yr, the Central Statistics Office (KSH) reported yesterday. Around 18,400 new outlets opened and 18,200 closed in Q3. Around 43% of the retail outlets were one-man operations. The number of shops selling FMCGs fell 0.3% in Q3 to 49,875, and the number of shops selling non-food items rose 0.3% to 104,690. The number of vehicle and parts dealers rose 0.7% from the end of June to 8,705 and the number of filling stations increased 0.6% to 2,153. Around 170,000 square meters of retail space was built in January-September 2004, almost 75% was built in central Hungary and more than 70% of new retail space opened in Q3. (Econews; Vg 4)
Effect of high interest rate

Hungary’s high benchmark interest rate has a three-pronged impact on company’s borrowings and investments depending on size and the extent of foreign ownership, according to a recently published survey of MKIK-GVI, the Institute for Economic and Entrepreneurial Research. Firstly, businesses, particularly those smaller in size, are increasingly turning to foreign currency loans. Secondly, the higher base rate discourages companies’ current asset borrowings. It also hampers investments, again affecting primarily smaller businesses. (Vg 4) S.F.
Hungary exploits EU funding well, says minister

Hungary has made good progress in utilizing European Union development funds when compared to other European Union member states, the minister in charge of European affairs said on Saturday. Etele Baráth said the competition and evaluation procedures put in place only a few months ago to allocate the structural funds the European Union commits to smooth out development gaps across the 25-member bloc are working well, and the initial problems have been mostly overcome. Although some payments related to development projects already completed will be deferred to next year, Hungary’s overall EU balance will show a surplus of Ft 70-80 billion in 2004, he said. (Econews)

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Real-estate sluggish, set to awaken next year

According to the report of ECOSTAT Institute for Economic Analysis and Informatics, the real estate market has been stagnating in Q3. The number of new apartments built in H1 2005 is to be significantly less than in H1 2004. Next year a 7-11% rise in price expected, put down to the growing land and construction material prices. Apartments in county capitals and other major cities are to experience the most significant increase in price; however, the same tendency is expected in the suburbs of Budapest. The willingness of people to build a home is expected to drop in the next six months, with most wanting to buy it ready. Companies, however, are increasingly willing to invest and construct. Some 31% of those surveyed are planning on renovating their homes. (Nv 12) E.C.
FinMin, KSH announce deficit calculation change

Hungary will subtract revenue of private pension funds from the general government deficit under a new method of calculation, the Central Statistics Office (KSH) and the Finance Ministry said in a joint statement yesterday. The new method of calculation, which will also add private pension funds expenditures to the deficit, will narrow the gap significantly. The EU statistics office, Eurostat, gave Hungary permission to use the method until March 1, 2007. Although allowing Hungary to compare its deficit with other countries in the region which are carrying out pension reforms, the figures have no bearing on whether Hungary meets criteria for joining the ERMII and later adopting the euro. (Econews; NG 3, Nv 6)

Politics
ForMin: vote will improve ties with neighbors

The relationship between Hungary and its eastern European neighbors will improve following the country’s unsuccessful referendum on granting preferential citizenship to ethnic kin, Foreign Minister Ferenc Somogyi said yesterday. In an interview with Reuters news agency, the minister said the Hungarian government, which had opposed the initiative, was now given an opportunity to support ethnic Hungarian communities abroad in practical ways. (MTI)

Domestic
Layoffs in Defense Ministry

Defense Minister Ferenc Juhász announced that the Ministry is planning large-scale layoffs at its biggest armaments company HM Electronics and Logistics Rt (HM El) and has decided to reorganize the company into a holding. He denied however, that the Ministry would want to privatize HM El. The Ministry still wants to sell three other companies, HM Armcom, HM Arzenál and HM Currus but will not complete the procedure during the current term. (NG 5) R.G.
Prison to be built in Tatabánya

Tatabánya municipality has theoretically approved the construction of a 300-people capacity detention house. The construction is justified by the fact that the county police, county prosecutor, and the county court operate in Tatabánya. With the closest prison in Esztergom, the new institution will benefit the community by saving having to transport those apprehended in Tatabánya back and forth. The complex is to be constructed on a 6-acre plot on the outskirts of the city. Mayor János Bencsik said that the international statistics state that crime is 20-30% lower in the surroundings of detention houses. The jail will provide the city with 200-250 jobs. (Nb 10) E.C.

Stocks
BUX Close: 14,398.24 Change: +83.64 (+0.58%)

Stock Closing price Daily change (%) MOL 12,450 0.4 12,401 78,255 Matáv 815 2.4 806 1,954,451 OTP 5,395 -0.4 5,358 485,937 Budapest Stock Exchange

Average price Volume

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08 December 2004 Business
Rába lands order from Russian Trolza Rába, a Hungarian maker of vehicle parts, is supplying Trolza, a Russian company that makes trolley buses, with 260 axles. The axles will be used in buses operated by Moscow’s public transport authority. Rába announced the agreement to deliver the axles in Q4 2004 and Q1 2005 yesterday. Rába expects its sales in the Commonwealth of Independent States (CIS) to grow from $6 million last year to well over $8 million in 2004, Rába’s director for sales and marketing Károly Sz?cs said. Moscow’s transport authority plans to buy almost 1,000 buses or trolley buses this year, and Rába has been contracted to supply main components for a large share of these vehicles, he added. (Econews; NG 11, MH 12, Vg 18) Wellness center in western Hungary Vamed AG, the Austrian medical contracting and engineering group, is poised to build a wellness and medical center together with an adjacent four-star hotel in the western Hungarian town of Lenti, unnamed sources said. The investment, valued at Ft 10 billion, is scheduled to start in 2006 and be completed by mid-2007. Since its inception in 1982, Vamed has invested a total Euro 6.5 billion in as many as 250 projects. Today it employs some 2,000 staff in four continents. The company established its first and only Hungarian affiliate, Vamed Hungary Kft, back in 1997, which offers facility management services. (NG 1) S.F. Cetelem Q3 results Magyar Cetelem Bank Rt had nine-month pre-tax profit of Ft 3.7 billion, 22% higher than in the same period of 2003. Leader of the consumer loan market, the bank granted loans of Ft 30 billion between January and October in total, 10% up on the previous year. Personal loans increased by 20%, credit cards by 16%, while commercial loans remained at the same level. (Vg 18) G.R. Suzuki recalls 1.3-litre Wagon R+ models Suzuki’s Hungarian subsidiary Magyar Suzuki Rt has recalled all of its 1.3-litre Wagon R+ models because the vehicle’s gasline blocks up after long-term use. The models are produced only in Hungary. About 24,000 Wagon R+s must be checked in Hungary and another 110,000 in the rest of Europe, a spokesman for the company announced yesterday. Magyar Suzuki is informing all owners of the vehicles and will offer to replace the faulty part free of charge. (Econews; NG 5, Nv 5, Vg 15, MH 12) Plane Station turns airstrip into airport UK-registered Plane Station is to build a Euro 60 million civilian airport on the former military airport near Börgönd (western Hungary) jointly with the Székesfehérvár local council, CEO of the project company Székesfehérvár Airport Developer and Operator Kft Ferenc Tóth announced yesterday. The company has registered capital of Ft 10 million and is owned by the local council and Plane Station in equal share. After all licenses have been obtained, the company will get a capital rise and the local council’s share will be reduced to 10%. (Econews) Malév could end year in black, or red László Sándor, the head of Hungary’s national carrier Malév Rt, outlined cuts the airline had incurred this year at a news conference yesterday, but still vacillated on the question of whether Malév would end the year in the black. Malév should end the year a couple of hundred million forints in the red or in the black, Mr Sándor told reporters. Last year, Malév had losses of Ft 13.5 billion. Cost cuts made this year will save the airline Ft 6.3 billion, but Mr Sándor said, „It is impossible to prosper solely from saving.” Malév expects total costs of Ft 129 billion this year, with variable costs accounting for just Ft 40 billion of this. (Econews; NG 11, MH 12, Vg 15) Retail outlet center opens in Törökbálint Hungary’s second retail outlet center, GL Outlet, is due to officially open its doors to customers in Törökbálint, west of Budapest today. Its Belgian investor, Group GL has spent Euro 25 million on the 16.500 sqm complex, which will accommodate 60 stores selling top brands such as Versace, Calvin Klein and Gucci at cut prices. The project was financed by K&H Bank Rt. The first outlet, Premier Outlets Center in nearby Biatorbágy opened in early November. (NG 4) S.F. Defense Min purchases missiles The American company Raytheon will deliver medium-range air-to-air missiles for the new Gripen airplanes of the Hungarian Army. After months of negotiations government will adopt the draft of the contract today. The company’s AMRAAM missiles were not chosen on a procurement tender because the Gripens were designed to be used with such missiles. If the contract is signed, the Defense Ministry will pay Ft 0.5 billion to Raytheon this year and Ft 2.2 billion in 2005. Raytheon agreed to start an offset program in Hungary. The complete arming of the Gripens will cost a total of Ft 27.3 billion up to 2011. Air-to-ground and short-range air-to-air missiles will be chosen on public procurement tender, to be published in January. (Vg 13) G.R.

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Regulator orders Heineken to correct Brau bid The financial market regulator PSzÁF yesterday ordered the Dutch beverages group Heineken to supply more information on how it arrived at a disputed public buyout bid price it offered to minority shareholders in October this year after buying majority stakes in the brewery Brau Union Hungária Rt. The regulator instructed Brau Immobilien GmbH, a Heineken subsidiary bidding to buy out minority shareholders holding 6.8% of Brau Union Hungária’s voting rights, to change the Euro/Ft cross rate it used to arrive at its bid price of Ft 16,362/share, and ordered the bidder to supply more details on the discounted cash-flow (DCF) method it used in valuing the Hungarian beer producer. (Econews; NG 11, MH 12, Vg 17) Borsodi cuts staff Borsodi Brewery Rt is going to lay off 48 of its 650 workers in a month. The reason for the decision was the increasing inflow of cheap imported canned beers. A few months ago the cheapest beers cost over Ft 100; now a beer can be had for Ft 49, causing the company to lose its market share. Around 12 employees will go into retirement, and the rest will be helped to find another job. (Vg 15) G.R. Dataplex optimistic about year-end IT infrastructure-outsourcing company Dataplex Rt expects to double its turnover this year reaching Ft 700 million, general manager Gábor Szabó said. Next year’s plans include turnover of over Ft 1 billion. In Q1 2004 the company had its first positive EBITDA of Ft 19.7 million, the whole-year figure is expected to be over Ft 100 million. Dataplex offers storage for companies’ mission-critical IT infrastructure, and belongs to the company group of drug maker Béres Rt. (Vg 15) G.R. Styl clothes co’ sheds real estate Beleaguered clothing manufacturer Styl Rt said it has sold 60% of all its real estate assets for a combined Ft 560 million, which it will use entirely to pay up its Ft 600 million debt load. The buildings were sold Ft 140 million above their book value. Styl is due to hold an EGM next week, which will review the company’s year-to-date figures and select new supervisory board members. In its semi-annual report, Styl posted losses in excess of Ft 200 million. (NG 11) S.F. Phylaxia unveils pet plans At its yesterday EGM, veterinary drug maker Phylaxia-Pharma Rt unveiled to shareholders plans for the company’s mid-term strategy. The meeting underlined management’s intent to plug into the more lucrative market of developing pet drugs, primarily through acquisitions. To this end, Phylaxia said it is currently in talks to buy out an as yet unnamed peer, which generates annual revenues of over Ft 1 million. The EGM also stressed that more site development, production concentration and R&D are need to ensure Phylaxia’s future expansion. (NG 11) S.F. Multi-entertainment units made by computer co’ Hungarian computer maker Albacomp Rt will offer two new entertainment PC’s from next year. The „digital home’s central units” are designed to replace computer, television and other home entertainment appliances such as DVD players. The new products will be assembled at the company’s Székesfehérvár plant, vice-CEO Csaba Deme said. Albacomp plans to sell only a few hundred of the new products next year, but expects the market to boom within a few years, based on the expansion of broadband internet usage, he added. Albacomp Rt had turnover of Ft 13.1 billion while the whole company group had turnover of Ft 18 billion in 2003. (Vg 16) G.R. AgMin’s marketing company to get bigger budget Hungary’s Agriculture Marketing Center (AMC), run by the Ministry of Agriculture and Rural Development to promote Hungarian food products in Hungary as well as in Germany, Russia and neighboring countries, will have a budget of about Ft 3 billion next year, almost double its budget in 2004. Because of budget cuts, the company had just Ft 1.6 billion to work with this year, Ft 400 million less than in 2003. AMC was forced to close its regional offices because of the lack of funding this year, Managing director Barnabás Kovács told MTI. (Econews) Investors buy historic Danube building: Ft 4 billion Ökocentrum Rt has sold the „Lánchíd Palace”, a 7,800-sqm building next to Budapest’s chain bridge on the Buda side to investors Ákos Bacsai-Nagy and Zoltán Vincze for Ft 4 billion, business news portal NAPIonline reported yesterday. The two men will soon be joined in the investment with Sirabel, a company registered in Switzerland. The historic building, which was designed by Miklós Ybl, one of Hungary’s most famous architects, will be turned into a luxury office building at a total cost of Ft 4 billion. (Econews)

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Economics
Preliminary November fiscal deficit Ft 106.5 billion Hungary’s fiscal deficit was Ft 106.5 billion in November after hitting Ft 44.4 billion in October, the Finance Ministry announced late yesterday. The GFS-calculated figure, excluding local governments, compares with the ministry’s target of Ft 104.6 billion. The November deficit raises the deficit for the first eleven months of the year to Ft 1,435 billion, compared to the ministry’s full year target of Ft 1,335 billion. (Econews; Nv 5, Vg 5, MH 11, Nb 16) Industrial output up adj. 8.4% yr/yr in October Preliminary industrial output rose by a seasonally- and working day-adjusted 1.8% in October alone, and was up 8.4% from October 2003 according to working-day adjusted figures, the Central Statistics Office (KSH) reported yesterday. November output was up by 5.7% from a year earlier according to unadjusted figures. Hungary’s industrial production rose 8.5% in the first ten months compared to the same period last year. KSH will publish revised and detailed figures for October industrial output on December 15. (Econews; NG 3, Vg 5, MH 11)

Politics
Fraud cases at referendum complaints rebuffed Many cases of fraud were recorded by election commissioners of the World Federation of Hungarians (MVSz) during Sunday’s referendum, the organization’s campaign chief said at an MVSz press briefing in Budapest yesterday. Sándor Herpai said the most blatant case occurred in a Szeged polling station, where the ’yes’ and ’no’ votes in the referendum on whether to grant Hungarian citizenship to ethnic kin under preferential terms were swapped and registered accordingly. The National Election Committee (OVB) yesterday rejected the majority of complaints made in connection with Sunday’s referendum, but determined that the campaign silence had been violated in one instance. OVB stated the commercial Hír TV news station, known to be close to the opposition Fidesz party, had violated the compulsory campaign silence from Friday midnight to the closing of polls. (MTI; MH 6, Nb 6) Ethnic Hungarians may hand back entitlement cards Many ethnic Hungarians in Transylvania, Romania, intend to give back their Hungarian entitlement cards to express their disappointment over the result of a Sunday referendum that denied them Hungarian citizenship under preferential terms, according to rumours spreading there. Dissatisfaction in Székely land, in south-eastern Transylvania, has been heated over the past two days. The local government of Hargita county addressed an open letter to six Hungarian twin-counties, in which it stated they would re-examine these ties over the next months with those Hungarian counties where the ’no’ votes were in majority in the referendum. (MTI)

Domestic
Naturalization process under scrutiny PM Ferenc Gyurcsány has instructed Justice Minister József Petrétei to draw up amendment proposals to the law regulating the naturalization process for ethnic Hungarians to make it easier for them to acquire citizenship. The Prime Minister believes that some elements of the process are humiliating, especially the Hungarian language exam and the test on the Hungarian constitution, for which applicants have to pay Ft 28,000. The Justice Minister might also review regulations specifying a one-year-long stay in Hungary necessary for naturalization. The Minister has to conclude the amendment proposal by mid-January. (Nv 1) R.G. Richest people in Hungary Manager Magazin, owned by the Spiegel group published its ’The first 100 in 2004’ list including the 100 richest people in Hungary. The list is led by Gábor Széles, president of Videoton Rt and Sándor Demján of TriGránit Rt with Ft 50 billion each. Last year’s favorite, Fotex Rt’s Gábor Várszegi is only the 3rd this year, while Tamás Leisztinger takes the 4th place. Sándor Csányi, president CEO of OTP Rt has doubled its fortune in a year to Ft 30 billion. PM Ferenc Gyurcsány is the 70th on the list with Ft 3.8 billion. (MH 3) R.G. Former MTV president to be charged The police have recommended to the Budapest Chief Prosecutor’s Office to charge Imre Ragáts, former president of the Hungarian Television (MTV), with misappropriation, the Budapest Police announced yesterday. Ragáts ordered films for Ft 55 million from a company of one of his relatives in 2003, in violation of the Media Law and of a relevant decision of the board of MTV. Ragáts denied the charges all the way through the investigation. (Nv 4) R.G.

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Serbian Hungarian man flees to Hungary A Serbian Hungarian man apprehended by border guards over the weekend said he wanted to flee to Hungary after being harassed in Serbia, the spokesman of the border guards said yesterday. The 44-year-old man was taken into custody by border guards on Saturday in the vicinity of the Röszke (south-eastern Hungary) border station. He did not have any documents and said he chose to enter Hungary unlawfully because he had suffered repeated harassment in Serbia. He did not, however, elaborate what the incidents were, border guard spokesman Ivan Kovács said. The man subsequently requested refugee status in Hungary. (MTI)

Stocks
BUX Close: at 14,417.01, Change: +18.77 (+0.13%) Stock Closing price Daily change (%) Average price Volume MOL 12,450 0 12,440 134,351 Matáv 826 1.3 820 2,221,420 OTP 5,387 -0.1 5,370 565,158 Richter 22,900 -0.4 22,935 41,542 Egis 11,145 1.5 11,068 83,693 Antenna 3,875 -0.1 3,861 6,231 TVK 5,375 2.4 5,315 17,650 Rába 660 3.9 658 25,757 Budapest Stock Exchange

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09 December 2004 Business
T-Mobile, Telenor win 3G Licenses
Deutsche Telekom AG's T-Mobile unit and Telenor ASA's Pannon GSM Rt won permits to provide high-speed mobile-phone licenses in Hungary as they look to stay ahead in the competition for the new EU nation's customers. T-Mobile and Telenor slightly overpaid for the permits, some of the last in the 25-nation EU, said analysts including Didrik Kjeldahl of Fondsfinans in Oslo. The government is negotiating the sale of a third license to Vodafone Group Plc. Vodafone, T-Mobile and Pannon already have digital phone services in Hungary based on the global system for mobile communications, or GSM. (Bloomberg; Vg 1, Ng 1, Nb 16, Nv 5)

OTP gets Nova Banka stake for Euro 236 mln
OTP Bank Rt said yesterday that it has won a bid for a 95.59% stake in Croatia's Nova Banka. OTP bid Euro 236 million for the stake. OTP signed the contract of sale for the stake on December 7. OTP filed its binding bid for the privately held Nova Banka on November 24. The price -- about 2,71 times more than shareholders equity -- is warranted by the present and potential business value of the bank, and the good prospects of the Croatian financial markets, the announcement said. OTP expects to close the deal by the end of January. (Econews; Nv 1, Ng 1, Nb 15, Vg 17)

BÁV begins listing prices for gold
Pawnshop and auction house BÁV Rt has started listing daily buy/sell prices for gold bullion in order to liquidate its substantial stock of gold. Rates are listed in forints, but calculated in U.S. dollars. BÁV is selling half-ounce and one-ounce bullion, which it is also offering to store for its clients. (Econews; MH 3, Nv 5, Ng 12, Nb 16)

Biggeorge's renamed Eston International
Biggeorge's International Rt, a big real estate company based in Budapest, has been renamed Eston International. Eston chairman-CEO Adorjan Salamon announced the name change in Budapest yesterday. Salamon said a week ago that he had raised his stake in Biggeorge's to 49.9%, buying a stake from the company's founder Tibor Nagygyörgy. The rest of the company is owned by Wallis Ingatlan. Eston International had sales of Ft 400 million last year and dealt with commercial property worth a combined Ft 100 billion in 2003, or about a tenth of the market. Salamon called 2004 an outstanding year, although declining to give a revenue target. (Econews; Ng 5, Vg 13)

Audi to invest Euro 1 bln over 5 yrs
Audi Motor Hungaria Kft intends to invest Euro 1 billion in Hungary in the next 5 years, the company's PR manager Péter Lore announced. In scope of the developments new motor producing equipments will be set up in Gyor and technological modernization will also take place besides investments related to Audi TT's successor make's introduction in 2006. The company also wants to increase its workforce with engineers and skilled labor. (Vg 15) R.G.

Graphisoft buys own shares
Software developer Graphisoft NV bought 33,000 of its own shares at Ft 1,318.75 per share, the company announced on the Bourse's website yesterday. Graphisoft also added that Johannes Reischböck, managing director of Graphisoft's German subsidiary sold his share option at Ft 1.320 per share. (Vg 17) R.G.

New Getronics CEO
Róbert Dobay has been named as system integrator Getronics EMEA Remote Services Rt's CEO recently. Dobay previously worked for Novacom Kft, IBM's ISC-Hungária Kft and was a managing director of IBM Global Services Kft for a while. Getronics opened its European service center in Budapest in October. (Vg 15) R.G.

Tender announced for design center
The Prime Minister's Office (MeH) yesterday announced a tender to turn the former Volán bus station in downtown Budapest into a new national design center. Applicants have until March 1 next year to submit plans for the project slated for completion by spring, 2006. The best designs will be awarded prizes of up to Ft 3 million. The investment is valued at Ft 500 million. (NG 8) S.F.

Walt Disney opens center in Budapest
The European division of Walt Disney Internet Group (WDIG) has opened its New Media Services Center (NMSC) in Budapest, company representatives said yesterday. NMSC, a production and technology center with a staff of 30, will be responsible of developing and maintaining WDIG's full range of products, including web-pages, broadband internet and mobile services. Budapest had been selected due to its good business culture and stability, low wages, highly qualified labor force and communication infrastructure, the company said. (MTI)

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Kafijat sells stake in Antenna
Antenna Hungária Rt (AH), the state-run broadcaster, announced yesterday that its minority shareholder Kafijat Kft sold its 5.01% AH stake. Kafijat is majority-owned by Megdet Rahimkulov, chairman of General Banking and Trust Rt (ÁÉB). The holding was taken over by another Rahimkulov company, the London-based Firthlion Limited, which boosted its AH stake to 11.17 through the deal and has become the only shareholder, apart from the majority owner Hungarian state, that now has a holding in AH of over 10%. (NG 11) S.F.

Economics
Oct. trade deficit est. Euro 390 mln
Hungary's foreign trade deficit was Euro 390 million in October from exports up 9.2% yr/yr at Euro 3.97 billion and imports rose 9.5% to Euro 4.36 billion, according to preliminary figures published by the Central Statistics Office (KSH) yesterday. Exports in October rose 1.1% from September and imports increased 1.7%. The trade deficit was Euro 346.4 million in October 2003. Final figures for the September trade deficit, also published by KSH yesterday, came to Euro 361.7 million, compared to a preliminary Euro 329 million announced on November 8. (Econews; Ng 3, Vg 5, MH 12, Nb 15)

Expansion in auditing market
The Hungarian auditing market expanded by 7.83% last year while the share of the 10 biggest companies increased from 49% to 49.6% in 2003. The top 4 auditing firms, PricewaterhoseCoopers, KPMG, Ernst&Young and Deliotte holds 44.9% of the aggregate turnover of all auditing companies in Hungary. MriAudit Hungary Kft, a corporation formed in April by seven smaller auditing firms and a member of the Moores Rowland International association is 5th on the list with its Ft 549 million in turnover last year. Independent auditors also gained ground in 2003, their market share increased from 12% to 14%. (Vg 1) R.G.

Growth of monetary base accelerates in Nov
The annualized month-on-month growth index of the monetary base, derived from trend data, was 108.6% in November, up 1.6 %age points on October, the National Bank of Hungary (MNB) reported yesterday. The monetary base increased by Ft 32 billion on the month, from Ft 1,886.2 billion in October to Ft 1,918.2 billion in November. Of the components of the monetary base, the monthly average stock of cash in circulation rose by Ft 18.8 billion to Ft 1,453.8 billion, while the monthly average current account balances of monetary financial institutions rose by Ft 2.5 billion to Ft 451.1 billion, and the monthly average stock of their overnight deposits grew by Ft 10.7 billion to Ft 13.2 billion. (Econews; Vg 18)

APEH to get fewer than expected premiums
Employees of the Hungarian tax office (APEH) will only receive premiums equal to their two weeks' wage instead of the usual two months', Finance Minister Tibor Draskovics announced at an APEH's meeting yesterday. Although tax revenues met the Finance Ministry's prognosis in September, they did not reach previous expectations. He also added that the Ministry expects substantially better production from the tax office in the future through its increasing responsibility in fighting back the black and the grey economy and, at the same time simplifying tax administration. (Vg 5) R.G

Gov't grants to aid companies to double
Nearly double of this year's funding will be made available to companies under the government's Economic Competitiveness Operative (GVOP) and Smart Hungary Programs, an Economy and Transport Ministry official said, adding that R&D and knowledge intensive initiatives will be given top priority, while red tape will be noticeably shorter. In the past two years, seven large-scale investment projects of five top companies have been awarded grants through the two programs, which created altogether 5,000 new jobs. Next year will also see the extension of individual government grants to investments worth Euro 10-50 million. (NG 4) S.F.

Hotel occupancy up
Hotels' occupancy rate in the year to Nov. jumped 6% to 62% yr/yr, the Central Statistics Office said in the latest report. Higher capacity also brought more revenues to hoteliers as guest night sales grew some 13% in the same period. The average room price per night in Jan-Nov was Ft 13,900, of which hotels netted Ft 8,600, however, per-room revenues for five-star hotels were considerably higher breaking the Ft 20,000 mark, while four-stars charged over Ft 10,000 for a room. (NG 4) S.F.

Gov't to launch agricultural loan program
The government has decided to launch a Ft 40 billion subsidized loan program for small and medium-sized agricultural ventures, Agricultural Minister Imre Németh said yesterday. The loan program, administered by the Hungarian Investment Bank (MFB), is aimed at refurbishing wheat storages facilities and remodeling animal growing farms in line with EU standards, the minister said. Nemeth added that the loans would be available at a 6.2% interest rate for a maximum period of 15 years, with a moratorium of the first two years. (MTI; Ng 3, Vg 5)

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17.9 mln transactions with Mastercard
Mastercard holders in Hungary conducted altogether 17.9 million financial transactions at a total value of Ft 460 billion in the Jan-Sept period, up a respective 19.3% and 15.8%, according to figures released by the leading US credit and debit card company. Meanwhile the number of bank cards issued by Mastercard fell slightly to 40,000 in July-Sept compared to 160,000 in the preceding six months. Q3, on the other hand, saw a record value of transactions worth a total Ft 920 million, a figure up 11.2 over the same period last year. (NG 5) S.F.

Value of homes falling because of glut
Budapest's housing market has still not recovered from the effect of reductions in home loan subsidies; a fall in demand has created an oversupply and prices are stagnating. Still, builders keep building. Demand is declining or stagnating not just on the housing market, but on the commercial property market as well, according to a Q3 report on the capital's real estate market by economic research institute GKI. Prices have remained more or less level in Q3, with just a slight drop in the average price for resale homes. (Econews)

Hungarian banks "still inefficient"
Hungary's banks need to become more efficient in order to compensate for narrowing margins and to meet increasing competition, according to a report on the sector by the National Bank of Hungary. Despite their profitability, Hungary's banks are still far less efficient than their counterparts in other EU states. Banks in Hungary had combined pre-tax profit of Ft 168 billion in H1 2004, up 43.15% yr/yr. Profits rose at about the same rate a year earlier too. Revenue from interest was the main contributor to profits, adding up to a combined Ft 267.28 billion in H1 2004, up 27.5% yr/yr. (Econews)

AgriMin comments on forint rate
Speaking at a briefing following a government meeting, the Agricultural Minister Imre Németh criticized the strength of the forint, "There's a weight bearing down on our food industry that we can't take much longer. Producers are just simply unable to compensate for their increasing export prices by boosting efficiency" he said, adding, "The forint's exchange rate to the euro should be steered back to the center of the trading band." (Bloomberg)

AKK mandates USD 100 mln 2-yr bond issue
The Republic of Hungary has launched a USD 100 million floating-rate 2-year note due on December 15, 2006, the Government Debt Management Agency (AKK) confirmed to Econews yesterday. Issue and re-offer price are 100%, the coupon is 3 basis points over three-month Libor which was 2.46% yesterday on USD denominated issues, the spread is also 3 basis points over the three month Libor. Interest is to be paid quarterly lead-managers Morgan Stanley and Deutsche Bank said yesterday. The current issue precedes a USD 500 million ten-year fixedrate issue, planned to take place in January 2005, and to be lead-managed by the same two banks. (Econews)

Politics
"State security documents should be published"
The Socialist Party (MSZP) is working on a bill that would make it possible to publish state security documents of the Historical Archives without any restrictions, the party's chairman said yesterday, "All state security documents dating from the past communist system, namely from December 21, 1944 to February 14, 1990, should be made public," MSzP Chairman István Hiller told reporters after a session of the party's parliamentary group. The current law only makes it possible to freely research the documents, but limits release of the names of agents and informers. MP Ervin Demeter of the main opposition Fidesz party welcomed that the Socialists "are finally ready to deal with the problem". (MTI; Nb 1, Nv 1, MH 1)

Ethnic Hungarians plan conference
Ethnic Hungarian organizations from all parts of the world and representatives of the Hungarian Permanent Conference will seek a unified position about Hungarian citizenship to be granted to ethnic kin at a meeting in Subotica on January 6-7. An invitation was extended to the organizations, including those from western Europe and overseas, by the Vojvodina Hungarian Alliance (VMSz) council at its session held in Subotica, in the Serbian province of Vojvodina, on Tuesday. In a press statement yesterday, VMSZ President József Kasza criticized the World Federation of Hungarians (MVSZ), for what he called hasty call for a referendum. Kasza played down the result of the referendum and said there is no need to despair, nor should radical steps be taken. He said Hungarian identity cards should not be returned and black flags should not be hoisted as a sign of mourning, as has been the case in Transylvania and Székely land in Romania. (MTI)

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Domestic
Construction of new metro line begins
Budapest Mayor Gábor Demszky announced the kick-off of construction on the city's 4th underground line, a Ft 300 billion initiative, yesterday. The new, 7.3 km line, which should be ready by late 2009, is designed to link up eastern and southwestern Budapest. Work has begun on the first station, and bids to dig the first tunnel section, expected to cost Ft 40 billion, have been invited, the mayor said. Some 70 per cent of the funding will be coming from the central budget and Budapest is covering the rest, he said. (MTI; Nv 4)

Stockwatch
BUX index: BUX Close: 14429.99 Change: +12.98; ( +0.09%)
Stock Closing price Daily change (%) Average price Volume MOL 12,470 0.2 12,453 113,920 Matáv 835 1.1 840 4,259,869 OTP 5,380 -0.1 5,405 471,536 Richter 22,800 -0.4 22,709 45,345 Egis 11,170 0.2 11,190 8,748 Antenna 3,865 -0.3 3,845 26,793 TVK 5,330 -0.8 5,370 38,459 Rába 695 5.3 696 218,180 Budapest Stock Exchange, Dec 9

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10 December 2004 Business
K&H Bank's 9-month net profit up 31% K&H Bank Rt's net profit in the first nine months of the year increased 31% over the same period in 2003 to Ft 16.6 billion. The bank's subsidiaries contributed less than Ft 1 billion to the figure. Shareholders are happy with the bank's performance, and in some areas the bank performed better than planned, CEO John Hollows said yesterday. K&H's nine-month consolidated pre-tax profit rose 29% yr/yr to Ft 19.9 billion, according to the bank's Q3 report, prepared according to international financial reporting standards (IFRS). K&H's total assets rose 12% in the twelve months to September to Ft 1,604 billion. (Econews; Ng 5, Vg 19) Keravill goes into liquidation Fotex Rt's electronics retailer Keravill Rt decided in favor of liquidation without legal successor at the company's board meeting yesterday. The company accumulated considerable losses in recent years due to increased competition and the closure of smaller outlets did not help. According to the company's announcement numerous new entries on the market by chains like Media Markt, Elektro World and Saturn in recent years generated a price war which turned electronic retail loss-making. Liquidation proceedings are to start on Dec. 10. (NG 11) R.G. Euro 13.5 mln plant addition completed Robert Bosch Elektronikai Kft, one of German engineering giant Bosch's Hungarian subsidiaries, has completed a Euro 13.5 million addition onto its plant in Hatvan, 60km NE of Budapest. The 20,000sqm addition, which will accommodate production equipment worth Euro 20 million, brings the factory's total area to 70,000sqm. The plant currently employs 900 people, but will hire another 1,100 workers by 2006. The plant, which was set up in 1998, makes dashboards, cruise control instruments, gearbox and break system instruments, air bag systems and fuel injection guidance systems. The plant addition was built as part of Euro 150m worth of developments Bosch is making in North Hungary. (Econews; Nv 14) Forlev increases stake in Konzum The public purchase order of Forlev Kft for holding company Konzum Rt's ordinary shares was closed on Dec. 8, the company announced yesterday. About 2.4 million shares were bought by Forlev Kft for Ft 90 per apiece for an aggregate Ft 216 million. The company increased its stake in Konzum Rt from 18.02% to 64.08% though the transaction, which is conditional upon the Competition Office's approval. (NG 11) R.G. Real estate fund goes public The State Financial Institution Supervision (PSzÁF) has given its consent to exclusive open-ended real estate fund Access to become public from the beginning of January. Besides E. I. S. East Investment Rt the units of the fund will also be available through financial trading house Buda-Cash Rt. Assets of Access Real Estate Fund are valued at Ft 896 million. (NG 11) R.G. SW Umwelttechnik to double production Austrian company SW Umwelttechnik is to double its production capacity in Hungary. The sewage purification and drainage equipment production company is to construct a new pipe manufacturing hall south of Budapest, the company said yesterday. SWU's turnover was Euro 51 million in the first 9 months, and it made an operating profit of Euro 800 million. The company's total investment was Euro 5.2 million, three quarters of which has already been spent on the construction of the Budapest base. (Vg 13) E.C. BKV to increase tariffs The Assembly of the Municipality of Budapest will decide next week on the tariff hikes BKV Rt will effect during 2005. The current plan calls for a 15% increase in January followed by a 5% increase in July. This in itself will not help the troubled public transportation company as state intervention is needed to avoid bankruptcy said István Atkári vice-mayor. Botond Aba BKV CEO hopes that the central budget will relieve the company of its Ft 60 billion debt, otherwise a price hike of more than 30% will become necessary to keep the company afloat. (Nv 1) A.K.

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MVM sells excess capacity at auction The Hungarian Electricity Works (MVM) Rt sold all of its excess capacity on offer at an auction yesterday. MVM sold 679.4GWh of electricity to be used during the first six months of 2005. The auction was MVM's fourth since the partial deregulation of the market has allowed it to sell excess capacity to Hungary's biggest consumers of electricity. MVM has excess off-peak capacity of 180MW and excess daytime capacity of 60MW. Off-peak electricity was sold in two phases for Ft 4.54 per kWh, and daytime electricity was also sold in two phases for Ft 8.32 per kWh. Ten Hungarian electricity distributors participated at the auction, and five purchased electricity. (Econews; Vg 13) Discount airline carry tourism boom Discount airlines have brought altogether 338 thousand visitors to Hungary in the first 10 months of 2004. It means that every 8th tourist had been flown by one of the discount companies, which has resulted in an over Ft 22.5 billion direct income for the Hungarian tourism industry. Attributed to the cheaper flights, the number of guests has gone up by 20% in Budapest by the end of October. This year, state subsidization surpassed Ft 1 billion. (Vg 13) E.C. Széles re-elected The general meeting of the Confederation of Hungarian Employers and Industrialists (MGYOSZ) reelected incumbent president Gábor Széles, with a vote of 96:77. The vote was quite close as challenger Péter Székely, CEO of Transelektro Group had won the support of Sándor Demján head of "rival" association, National Association of Employers and Entrepreneurs (VOSZ), who would have liked to merge the two groups. (MH 3, Ng 3) A.K. New ÁPV head to be appointed According to broadsheet Magyar Hírlap's information, Márton Vági will be appointed CEO of the State Privatization and Holding Rt (ÁPV) within a few days by FM Tibor Draskovics. Vági currently holds the position of deputy director responsible for transactions at ÁPV. Other candidates for the post were Pál Szabó, CEO of postal services provider Magyar Posta Rt and István Vásárhelyi, ÁPV deputy director. (MH 3) A.K. New logistics center for Kecskemét Bertrans Freight, Storage and Commercial Rt is to open a new logistics center at the Kecskemét Industrial Park. The new center, built on a 9.1-acre land, consists of office buildings, customs inspection halls, and a reception desk and aims at providing service for Hungary based multinational subsidiaries as well as small and mid size firms of the region. The Ft 553 million investment has been partly sponsored by EU funds. (Vg 13) E.C. Balaton Airport license awarded Irish-Hungarian consortium Cape Clear Aviation was awarded the license for the operation of Balaton Airport in Sármellék, Western Hungary. Cape Clear will invest heavily in developing Balaton Airport to reach the standard required for the handling of scheduled passenger flights by the EU. Balaton Airport expects to be fully operational by next summer, in time for high season at Lake Balaton. (Nv 14) A.K.

Economics
PM takes stance against strong forint The Prime Minister has said the strong forint is bad for Hungarian businesses and suggested slow and steady reductions in the base rate could correct the situation. A key issue of competitiveness is the exchange rate policy, and the current firm forint boosts imports while hurting Hungarian business, Prime Minister Ferenc Gyurcsány told a meeting of the National Association of Employers and Industrialists (MGyOSz) yesterday. Gyurcsány said that "with continuous, slow base rate cuts, a more favorable situation and a weaker forint can be achieved." (Econews; MH 1)

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EU tender process moving slowly In the frameworks of the National Development Plan, only Ft 2 billion of the Ft 120 billion has been handed over to successful applicants. 15 606 applications have been submitted, 3 403 of which have been successful, and only 645 winners have signed the subsidization contract so far. To the applicants' surprise, the transfer of monies is slower than expected. Experts, however, are being optimistic: 3540% of the total budget of Ft 750 billion reserved for the period of 2004-2006 may be engaged by the end of this year. In 2005, the application procedure is promised to be simpler and more user-friendly. (Vg 1) E.C. APEH introduces new service The Tax Office (APEH) announced the introduction of a new service to taxpayers. Taxpayers, who only have one source of income, may opt to have their tax returns prepared by the Tax Office automatically using data available from their employers. Those wishing to take advantage of the new service, dubbed ADAM for the Hungarian acronym for tax office tax determination, have until Jan. 15 to submit their requests to APEH. (Nv1) A.K. Auth warns of banks' risk on forex The deputy-governor of Hungary's central bank has said the high rate of foreign currency-denominated loans being granted by Hungarian banks poses serious risk. About 60-62% of corporate loans and 10% of retail loans are denominated in foreign currency. A significant amount of businesses' loans are denominated in Swiss francs while that currency has only a slight share in companies' revenues. National Bank of Hungary deputy-governor Henrik Auth told the Central European Business Center conference yesterday that banks have to monitor these loans more carefully than before. A weakening forint and rising interest rates could increase installments by 15-20%. (Econews; Ng 5) Alliance of CE bourses planned A regional alliance of Central-Eastern-European bourses will come into existence by 2010 as the latest, Attila Szalay-Berzeviczy, president of the Budapest bourse announced at a conference in New York city yesterday. The first step in forming the alliance would be closer cooperation between the Budapest and the Vienna bourses, which after some delay caused by the EU's investigation into the HVB Bank-led consortium's acquiring a majority stake in the Budapest Bourse this May might start next year. Besides the Warsaw stock exchange, the alliance would also count on the Czech, the Slovak and the Slovene bourses. (NG 11) R.G. Public procurement at record high A record high in public procurement is expected to be reported for 2004, said László Tunyogi, CEO of Hungarian Public Procurement News Bulletin Kft. After last year's figure of Ft 558.4 billion, the amount is to be over Ft 1000 billion this year, 40% of which is spent on highway construction. The all time high until now was in 2002 with Ft 804.6 billion, this year the amount spent is to be 30% higher. The large amount of public procurement represents the economy as dynamic, because infrastructure development attracts investors to underdeveloped areas thus providing jobs for tens of thousands of people for years. (Vg 4) E.C. Agri producer prices down 9.9% in Oct. Agricultural producer prices fell 9.9% yr/yr in October, the Central Statistics Office (KSH) reported yesterday. Due to extremely good yields, agricultural prices have been declining since July, as a consequence of which the average price index for Jan-Oct also showed a 0.5% decline. Crop and horticultural prices declined by 4.4%, while live animal and animal product prices were down 4% as compared to the first ten months of 2003. (MTI; Ng 3)

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Q3 growth driven by agriculture Added value in the farming sector and more investments spurred Hungary's economic growth in the third quarter. Hungary's GDP rose 3.7% yr/yr in Q3, with farming sector production up 38.1% and fixed capital formation up 12.7%. The Central Statistics Office (KSH) published a breakdown of GDP figures for Q3 yesterday. The figures show Hungary's GDP growth rate was 4.1% yr/yr in the first nine months of the year. The value of Hungary's industrial sector increased 3.2% yr/yr in Q3 and the value of its service sector rose 2.4%. The production sector grew 7.1% yr/yr in Q3, and rose 8.2% yr/yr in the first nine months of the year. (Econews; Ng 3)

Politics
Monetary policy fight weakens forint The forint was trading at 247.50 to the euro on the interbank forex market yesterday afternoon, as against 245.60/70 on Wednesday, weakening 65bp in its band to 12.35% on the strong side of its +/15% trading band. The forint weakened during the morning session, then hovered around that level but did not surpass 247.50 in slow afternoon trading. Traders said the forint weakened because of the stronger U.S. dollar and because of the continuing dispute between government and central bank over a desirable exchange rate. (Econews; MH 1, Ng 3, Vg 5, Nb 15) Draskovics Says He Won't Be Fired Hungarian Finance Minister Tibor Draskovics said he won't be dismissed, countering speculation about his exit that led to a decline in the country's currency. "There were so many personnel changes in the ministry this year that I'm not planning any more," Draskovics said yesterday. "Nobody else has such plans either, for that matter." Daily newspaper Magyar Nemzet on Dec. 7 reported Draskovics will be fired next year as he may fail to meet the government's budget deficit target. The gap more than doubled in November from the previous month. (Bloomberg; Vg 5)

Domestic
400 yrs of French painting on show in Bp A large-scale exhibition covering 400 years of French painting opens at the Budapest Art Gallery on December 17, the organizer said yesterday. The 120 paintings on show will include masterpieces by Delacroix, Cezanne, Degas, Gauguin, Van Gogh, Matisse, Monet, Picasso, Renoir and ToulouseLautrec, on loan from the Louvre, the Musee d'Orsay, the Paris Picasso Museum and other eminent French museums. The exhibition will run until February 27. The Hungarian government has assumed a nearly Ft 75 billion guarantee for the exhibition, the largest guarantee it has ever undertaken for an art show. (MTI; Vg 6, Nv 8)

Stockwatch
BUX index: BUX Close: 14345.36 Change: -84.63; (-0.59%) Stock Closing price Daily change (%) Average price Volume MOL 12,335 -1.1 12,411 338,495 Matáv 837 0.2 840 1,846,916 OTP 5,370 -0.2 5,386 575,373 Richter 22,400 -1.8 22,583 76,881 Egis 11,200 0.3 11,198 6,351 Antenna 3,880 0.4 3,861 208,146 TVK 5,295 -0.7 5,282 6,458 Rába 680 -2.2 686 48,934 Budapest Stock Exchange, Dec 10

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13 December 2004 Business
BAT lowers Pall Mall price British American Tobacco Hungary Kft, Hungary's largest local tobacco company, recently decreased the price of its Pall Mall cigarettes by 12% from Ft 500 to Ft 440 per pack, setting off a possible price war of tobacco firms. Unnamed sources reported that rival Philip Morris Hungary Kft is mulling a similar move, and other market players are also considering the price decrease of their Ft 500 price-range products. According to the communications director of BAT Hungary, Rita Bede, the price decrease is not a one-off marketing move, but the result of the repositioning of the Pall Mall brand. The central budget may suffer from the price war, as it can expect Ft 1.5 billion-Ft 4 billion less income from excise tax in the future. (NG 1) P.O. Brau board hands in resignation Members of Brau Union Hungária Rt's board of directors, namely Irma Kelemen, Attila László, and Árpád Németh, have handed in their resignation as of Dec. 31 of this year, the company announced in a press release. The company's BoD now has only one member, Alle Yppma, who represents the Dutch beverages group Heineken, which purchased a majority stake in the rival brewery this October. The resigning members gave no reason for their move. The president of Brau Union's board of directors, Edmund Ranftl, resigned from his post from Sept. 15. (NG 7) P.O. Ice rink goes to Publika The Prime Minister's Office commissioned Publika Cultural and Event Organizer Kft to build the third annual ice rink in front of Parliament this year, according to the Public Procurement Gazette. Two companies submitted a bid for the tender, but the bid of Austrian Peter Jöbst Sport Managemant KEG was declared invalid. Publika will build the 1,500-sqm ice rink for gross Ft 58 million. The rink will be open from Dec. 20. to Jan. 3, and admission will be free. Gambling monopoly Szerencsejáték Rt provides financial assistance for the project, just as on the previous two occasions. (NG 3) P.O. MTV welcomes Fischer for sales The sales activity of state television MTV Rt may significantly increase as the sales department is to be taken over by András Fischer, former CEO of Radio Danubius, according to daily Világgazdaság information. The new leadership promises to exceed this year's income by Ft 1 billion in 2005. In 2003, the income from advertisements totaled Ft 2.4 billion, while the plan for 2004 is Ft 3.7 billion. MTV's situation is not going to be easy at all as RTL Klub and Tv2 had 40% of the advertisement market, estimated Ft 135 billion last year. (Vg 5) E.C. Tatabánya opens gas-fuelled station Hungarian Electricity Works (MVM) Rt opened a Ft 6-billion gas-fuelled power station in Tatabánya (north-western Hungary) on Friday, at the site of the city's old power station. The station has three turbines which have a combined capacity of 18 MW. The power station will generate 16.5MW of heat, providing district heating for 22,000 households in the city. The old coal-fuelled plant had increasing difficulty meeting environmental regulations, so the decision was made to switch to natural gas and oil. The new gas turbines conform to the latest environmental regulations. Fuel for the plant will be supplied by Hungarian oil and gas company MOL Rt's facility in Szentgyörgypuszta, through a 13-km gas pipe laid by pipeline construction company Koolajvezetéképíto Rt. (Econews; NG 5, Vg 5) EBRD sells stake in Matáv, says Portfolio The European Bank for Reconstruction and Development has sold its 1.3% stake in Hungarian phone company Matáv Rt, majority-owned by Deutsche Telekom AG, the news Web site Portfolio.hu said, citing unidentified people. The 13.5 million Matáv shares were sold for Ft 11 billion ($58.6 million), or Ft 815 a share, according to Portfolio. Deutsche Telekom has a 59.2% stake in Matáv, while JPMorgan Chase & Co. has an 11.7 % stake, according to Bloomberg data. (Bloomberg; NG 7, Vg 9)

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The consortium Aviation Solution International said on Friday it will once more submit a bid for the purchase of Hungarian national airlines Malév Rt if a tender is called. The consortium, reported to have been set up by former Malév CEO Ferenc Kovács, was the only bidder in the recent tender, which was declared unsuccessful by the State Privatisation and Holding (ÁPV) Rt on November 18, 2004. The announcement came after ÁPV chairman Tamás Mészáros said earlier on Friday that a new tender will be invited for state-owned airline Malév in the near future. (Econews; Vg 5) MOL transfers 8.02% stake in TVK Oil and gas company MOL Rt has transferred an 8.02% stake in chemicals company TVK Rt from its subsidiary Hermesz Kft to another subsidiary, Slovnaft. Hermesz now no longer holds any TVK shares. MOL announced the announced the sale on the website of the Budapest Stock Exchange. MOL is Hermesz's only owner. MOL owns 98.4% of Slovnaft, which is based in Slovakia. MOL owns 52.69% of TVK through direct and indirect stakes. Hermesz and Slovnaft signed the contract of sale on December 8 and will take effect on December 15, after Slovnaft pays for the shares. (Econews; NG 7, Vg 9) Greenhouse gas quota for 2005-2007 set The government has set the quota for greenhouse gas emissions at 93.7 million tons for the period 2005-2007. The figure is contained in Hungary's National Allocation Plan, which outlines for the EU how Hungary will distribute the quota among businesses. The government will distribute the carbon credits to businesses free of charge in February of next year, with the exception of 2.5% of the credits, which the state will auction off. The sale of these credits should generate Ft 1.7-3.4 billion. Half of the revenue from the sale will go toward renewable energy projects, and the rest will be spent on environmental projects. (Econews; NG 1, Nb 8) Wayfinder Systems offers mobile navigation Wayfinder Systems, a Swedish provider of mobile navigation systems, has started offering its services in Hungary. The services allow customers with global positioning system (GPS) enabled mobile devices to pinpoint their exact location and navigate to their destination using a digital map. The system will be available for all of Hungary from the start of next year. Wayfinder Systems expects to sell a few thousand of its systems in Hungary next year. Wayfinder Systems has 30,000 users in West Europe and has recently entered the U.S. market. (Econews; Vg 5) Autoker increases its Depo stake Israeli-owned property developer Autóker Holding Rt has increased its stake in logistics firm Depo Kft, following the purchase of Skála Real Estate Management Kft's 9.09% share for an undisclosed sum. Autóker now has a 32.5% share in the Törökbálint-based Depo. The property developer firm has a 40,000-sqm warehouse on the premises of Depo. The logistics firm made a profit of Ft 213 million on revenues of Ft 411 million last year. (NG 5) P.O. Homeless CEOs The budget is loosing billions due to the activity of white-collar criminals who use homeless people's IDs to found companies and commit fraud. The agents offer Ft 5-10 thousand to the homeless in return for their IDs, which are abused and often forged. According to National Police Headquarters official László Vankó, one of the homeless shelters in Budapest houses the headquarters of 72 firms. This suspicious technique is mainly used to charm away companies that have committed fraud and accrued arrears. These firms, with dues often in excess of Ft 100 million, are then sold to the homeless, who have no idea about the contracts they sign. As the leverage is often multiple, investigators find these cases difficult to track down. (Vg 4) E.C.

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Raiffeisen Property Fund's assets increase in Nov Assets of the Raiffeisen Property Fund Rt increased Ft 1 billion in November to Ft 23.6 billion, Raiffeisen Investment Fund Management announced on Friday. The share of real estate within the fund rose to 71% after Raiffeisen purchased a big retail facility in Szolnok (central Hungary). Raiffeisen is leasing the store to OBI Rt, a DIY chain, for 15 years. The value of property in the portfolio increased to Ft 15.9 billion. The fund's yield in the month of November was 1.23%, and the annualized yield since the fund started was 13.15%. (Econews) BSE week: BUX drops 1.07% to 14,161.57 The BUX dropped 1.07% to 14,161.57 on the week. It rose to an all-time high of 14,429.99 on Wednesday, but as share prices dropped on Thursday and Friday, the BUX followed suit. Overall share turnover was Ft 45.9 billion, down from Ft 64.97 billion a week before. OTP Rt accounted for 26.21% of the turnover, MOL Rt for 22.28%, Matáv Rt for 20.75% and Richter Gedeon Rt accounted for 17.49%. Market observers said the Euro 236 million purchase price - equivalent to 270% of net assets - OTP paid for Nova Banka was excessive. (Econews)

Economics
Business confidence index pessimistic Continuing a trend that started several months ago, the monthly business confidence index of market research company GKI Rt declined from October's -11.7 to -16.4 in November, while negative consumer expectations linger on as manifested by an average score of -26.1, the company said. Industrial companies reported growing uncertainty, with both domestic and export orders diminishing and unsold stocks of manufacturers' own products gradually accumulating. A negative outlook prevailed among retailers and wholesalers as well as construction companies. This highly pessimistic overall business attitude, which came as a surprise even to the researchers, may be due to the fact that SME's were over-represented in last month's sample at the expense of some of the fastest developing corporate sectors, according to GKI. (MH 5, Nv 2) P.P. Gov't plans to raise Ft 300 bln from asset sales Hungary's government said it plans to raise about Ft 300 billion ($1.6 billion) by selling state assets including stakes in MOL Rt, FHB Rt and Antenna Hungária Rt next year. The government is expecting less revenue than this year's Ft 400 billion, as there are fewer state assets available, said Tamás Mészáros, chairman of the government's asset sales agency, at a press conference in Budapest. Hungary is selling state-owned companies to help pay for financing the budget deficit as the nation spends money to bring its road network and health system up to EU standards. "We can't keep dumping taxpayer money into unprofitable companies," Finance Minister Tibor Draskovics said at the press conference. (Bloomberg)

Politics
EU concern over tension in Hungary The confidence ratio in the EU of the Hungarian citizens has gone up from 45% this spring to 49%, according to the latest Eurobarometer report published last Friday. The confidence of EU investors planning to invest in Hungary, however, has decreased significantly as a result of the political split present in the country, said Frans Paul Robert van Nouhuys, Ambassador of the Netherlands in Hungary. He emphasized the importance of political stability and the urgency of national consensus, and expressed his confidence that EU membership will contribute to the realization of the national goals, which are equally important to both the government and the opposition. (Vg 3) E.C.

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World Federation demands recount of votes Some 400 people demonstrated in front of Parliament yesterday demanding a recount of votes in the electoral districts where a suspicion of fraud arose after the referendum on granting citizenship to ethnic Hungarians. The December 5 referendum, initiated by the World Federation of Hungarians (MVSz), proved inconclusive because of low voter participation. Addressing the rally, MVSz President Miklós Patrubány demanded that votes should be recounted in all electoral districts "where the 'yes' and 'no' votes are suspected to have been interchanged". In his view, the National Election Committee (OVB) should not have released the official final result of the referendum before resolving the complaints presented to it. He said that the OVB failed to deal with over 1,000 complaints. (MTI; MH 2, Nv 4, Nb 7) Gyurcsány in Iraq Prime Minister Ferenc Gyurcsány paid a brief visit to the Hungarian military base in Hillah, Iraq, last weekend, accompanied by Defense Minister Ferenc Juhász and Chief of Staff Zoltán Szenes. On the way to his destination, which he reached after a three-hour delay owing to a desert storm, the premier met with the American commander of the NATO peacekeeping forces in Baghdad and announced Hungarian plans to contribute 77 T-72 tanks to Iraq's efforts towards a democratic state and armed forces. With its mandate expiring at the end of the year and not extended by Parliament, the Hungarian contingent currently serving in Hillah will return home before the festive season, Gyurcsány said. (Nv 2, MH 6) P.P. Greens and farmers want stricter GM maize rule Greenpeace and four associations of Hungarian farmers have called for Hungary to ban strains of geneticallymodified (GM) maize until stricter legislation can be drawn up to prevent GM crops from mixing with conventional crops. The groups made their demand in a letter sent to several of Hungary's government ministries on Friday. Péter Boszik, who heads the Biokultúra Association, one of the groups which sent the letter, said legislation has to be made which specifies a minimum safe planting distance between GM maize and conventional maize to prevent contamination. (Econews)

Domestic
No Chernobyl threat to village, MÁV says Hungarian railways MÁV Rt denied rumors that high levels of radioactivity had been measured in the village of Hegyeshalom on the Hungarian-Austrian border, linked with the 1986 nuclear disaster in Chernobyl, said a statement issued on Friday. MÁV referred to tests done by the national health authorities, which verified that radioactivity in the soil at a railway depot, where Austria-bound railway wagons coming from the then Soviet Union, were cleaned right after the nuclear spill, did not now exceed permitted maximum values. (MTI) Elmu builds transformer in Budapest's district 14 Budapest electricity distributor Elmu has installed a new Ft 2.5 billion underground transformer station in the city's District 14. The station serves 30,000 homes and consists of three 31.5 MW transformers. The substation uses the more environmentally friendly gas sulfur hexaflouride as an insulator. In addition, the station makes less noise and emits less electrical radiation. Elmu has spent Ft 16 billion on developments this year, and expects to spend a similar amount in 2005. (Econews) Tab tourist development goes ahead The municipality of Tab, a small town close to the southern shore of Lake Balaton, gave the green light to a real estate development project whose preliminary costs were set at around Ft 1 billion. The construction of a resort village, including a thermal spa, a camping site, and an eco-village, is scheduled to begin next year. The local government would finance the project from its own resources, from state subsidies, and from entrepreneurial investments. (NG 17) P.O.

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NGOs activists petition to curb domestic violence Three NGOs presented over 6,000 signed postcards to parliament on Friday, demanding urgent legislation and firm government action to curb domestic violence. The collection of signatures was initiated by Amnesty International and two NGOs two weeks ago. Violence against women and children in the family "is a problem which simply does not get enough attention in Hungary," AI Hungary Director Mark Fodor said. Although the Justice Ministry drafted a bill to keep violent offenders out of the home under an anti-stalking provision, women's organizations have challenged it because of the low reporting rate. (MTI)

Stockwatch
BUX index: BUX Close: 14,161.57 Change: -183.79 (-1.28%) Stock Closing price Daily change (%) Average price Volume MOL 12,245 -0.7 12,273 160,010 Matáv 822 -1.8 835 1,193,451 OTP 5,330 -0.7 5,359 138,416 Richter 21,860 -2.4 22,076 144,047 Egis 10,750 -4 11,076 12,707 Antenna 3,850 -0.8 3,875 4,451

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