7days, 2004. szeptember 13

7/28/2019 7Days, 2004. szeptember 13.

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06/09/2004

BUSINESS VCP to sell significant part of BorsodChemBAT to cut 90 jobs in HungaryBusiness Toyota to build new base in TörökbálintMOL converts bonds, makes management changesBumper year for corn

Partners in coffee shop chain soughtList of bad debtors increasesViasat 3 ratings upU.S. company invests in Hungarian fitnessTake-up on Bp office space up 55% yr/yr Hunguest to operate Sikonda wellness hotelMobile Phone Use Rises to 81.7%Paks Block II returns to full capacityTelecom authority to cap fee risesLogistics center planned for Nyíregyháza

ECONOMICS Apeh to launch communications strategyEcon Min expects Ft 123 bln for road care

50,000 behind in UtilitiesPOLITICS PM arrives in Brussels

DOMESTIC Shortage leads to freelancing doctorsMothers to protest at metro3,000 missing from armyRomania denies Tisza pollution

07/09/2004

BUSINESS M8 Bridge to be built by DUNAUJ-HIDSufficient Number' of bids for MOL GasUp to Euro 700 mln to be invested in real estateTender out to privatize Malév

GVH to discuss alleged Matáv misconductMTV by the end of the year. (Vg 11) R.G.Mega-Logistic to win hospital tender MKB to sell Ft 100 Bln 5 yr bondsFt 3.3 billion withdrawn from HunsatJob perks on the riseOllier appointed to head Sanofi-AventisErste's financial strength on reviewKaiser opens Ft 1 bln meat processing plantKemira GrowHow buys fertilizer maker

ECONOMICS Simplified tax- discussion postponedHungarian's healthier liquid consumption

Livestock declines further Budget to remain fluid until adoptedGyurcsány to Overhaul Benefits

POLITICS Opposition leader meets with presidentExpelled MDF MPs become independentsParliament remembers Russian hostage victims

DOMESTIC Right-wing demo demands elections2 workers sacked for speaking HungarianNational competition on living English

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08/09/2004

BUSINESS New section of M3 motorway opensMusashi starts production Antenna Hungária to be included in BUXJob agencies reconstructed with PhareNovell gets Ft 1 bln contract

Commercial audience faltersForeign firms under tax scrutinyMajor Bosch investmentJobs slaughtered at PickBig food retailers threat to Hungarian farmersWaste depository in TiszafüredTV channel buds in autumnSopron cleans up its actPower onMÁV streamlines servicesOTP board sells shares

ECONOMICS Fiscal deficit Ft 120 bln, above forecast

Next year deficit under scrutinyExports riseIndustrial output up 7.6%

POLITICS Fidesz wants gov't to suspend privatizationForeign Affairs Cttee reacts to Serbian violence

DOMESTIC EP groups approve bills on Vojvodina attacksRoma life expectancy lower than average

09/09/2004

BUSINESS BorsodChem completes expansion projectsWaberer's sets up subsidiary in SpainLaw change addresses misleading loan ads

Ft 11.8 billion sports center for Győr Nokia's market share unchanged in HungaryHungary reaches for the starsPannon-Flax takes Betonút to arbitrator Government to introduce new plastic bag taxHuge price gap in arable land valueHotel guest nights and occupation rate growsTesco fresh food center opens in GyálSport ads earn MTV an extra Ft 500 mlnT-Mobile keeps sponsoring MOBELTE to face financial crisisCE Oil to buy TVK stake from Borsodchem

ECONOMICS Fiscal deficit could grow - central bankHungary's GDP up 4% in Q2London sees Draskovics leaveMonetary base up 7% in AugustBudget to be kept in balance-Gyurcsány

POLITICS Speaker declines Socialist chair nominationMDF chair asks president to name PM asapSzDSz has no corruption issues-PM letter

DOMESTIC Neo-Nazi demo must be prevented

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10/09/2004

BUSINESS Irish invest Euro 100 mln in wind plantPower supply strike ends in Diosgyor Farmgate prices up 7.7% yr/yr

Ft 93 mln paid to no-show companySofitel plans Euro 10 mln reconstructionFord sales speeding upFt 5 bln brick factory for TiszavasáriDuty-free may make come backVolán to the rescueFt 2.5 bln for MKB new bondFt 65 bln bonds to be sold at auctionProposed overhauling of retailing lawBad creditors' right to be informedMagyar signs Ft 44 bln education p/p partnership

ECONOMICS Jabil takes over Phillips real estatesFinMin wants effective tax collection

IT Businesses propose tax breaks Average income up 11.8% in 2003Budget deficit rate increasedProgram saves 4,197 jobs to dateProductivity level in Hungary - 59%23.4% more pre-tax profit for companiesFinMin opposes Sarkozy's corporate tax proposal

POLITICS Gyurcsány, Draskovics meet on 2005 budgetFidesz criticizes Romanian electoral law

DOMESTIC New police chief appointedLaw should protect against hate politics

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06/09/2004

BUSINESS

VCP to sell significant part of BorsodChemVienna Capital Partners (VCP), which owns a combined direct and indirect stake of 91.17% inchemicals company BorsodChem Rt, plans to sell an unspecified but "probably significant" part of its

holding through a private placement of shares and Global Depository Receipts (GDRs) to Hungarianand international institutional investors to be concluded in Q4 2004, BorsodChem said on Friday.BorsodChem also said that it had agreed to sell its 15.4% direct holding of in chemicals company TVKRt (representing 15.52% of voting rights) to VCP subsidiary CEOG at a price of Ft 5,503 per share, or Ft 100 over the shares' IFRS book value. (Econews; Ng 11, Vg 9)

BAT to cut 90 jobs in HungaryBritish American Tobacco Plc, world's second-biggest cigarette maker, said it lay off 90 employees ata plant in Hungary as the country raises taxes after joining the EU. The staff cuts will be made at afactory in Pécs, Inna Lobanova, director of the factory, said in an e-mailed statement. The companydidn't say how many workers it employs at the plant. Hungary, the third largest of the EU's 10 newmembers, has been obliged to adopt EU laws. During membership talks, it agreed on a transitionalperiod to phase in Western-European level excise taxes on tobacco over several years to protect jobsin the industry. (Bloomberg; Ng 4, Vg 7)

Business Toyota to build new base in TörökbálintToyota Motor Hungary Kft has started the construction of a new base in Törökbálint, near Budapest,with an investment of Ft 1.5 billion, Toyota's investment manager Ferenc Som said. Toyota plans tobuild a 2,500 sq.m. office building on the 2.7 hectare site by the end of this year, Som said. Thecompany will also establish an education center on the site in 2005. Each investment is financed byToyota. The company sold 10,411 vehicles in Hungary last year and 8,005 cars and vans in the firstsix months of this year, Som said. (Ng 5) M.K.

MOL converts bonds, makes management changesThe board of Hungarian oil company MOL Rt decided to raise registered capital and reshuffle senior management at its meeting on Thursday. As part of the senior management incentive program, 220bonds will be converted into shares and registered capital will rise Ft 391.38 million to Ft 106.618

billion. The meeting also put CFO Michel-Marc Delcommune into the position of Chief Strategy Officer.Mr Delcommune will be replaced as CFO by Jozsef MOLnar. Molnár was previously MOL19/64sDirector of Planning and Controlling, CEO of chemicals company TVK Rt and CFO of BorsodChem Rt.Chief Strategy Officer Zoltán Aldott was appointed managing director of the Exploration andProduction Division. Aldott replaces Csaba Bokor, who will leave the company. (Econews; Ng 11, Vg10)

Partners in coffee shop chain sought Austrian commercial firm Wedl is seeking franchise partners for its Testa Rossa coffee shop chain,unnamed sources reported. The ideal partner should invest Euro 80,000-100,000 into setting up a 80sq.m.-100 sq.m. shop, and should spend another Euro 10,000-15,000 on launching the business. Themonthly fee of the franchise will be Euro 200 per shop. Testa Rossa coffee shops, operated byfranchise partners, are expected to open in shopping malls and business districts. Wedl's Hungariansubsidiary operates three Testa Rossa coffee shops in Budapest, two smaller ones in shopping malls

and a flagship on Váci Street. (Vg 1) P.?.List of bad debtors increasesThe number of bad debtors increased by 50% from 120,000 to 180,000 in a year, according to theBAR, the interbank information system on non-paying debtors. The system lists retail clients who arein arrears with more than 3 months' installments of at least an amount equal to the minimum wagebased on data provided by more than 400 local banks. The number of inquires submitted to thesystem grew from 1 million to 2.5 million in one year. The huge increase is due to the fact that OTPBank Rt, the largest local bank started to use the system only last autumn. (MH 1) R.G.

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Viasat 3 ratings upCommercial TV channel Viasat 3 has managed to increase its viewership rate among the age group18-49 during the first six months of the year, Viasat Hungária Rt's CEO Attila Kocsis said last week.4.3% of all viewers in Hungary aged 18-49 watched Viasat 3 on average during H1, but the ratereached 5.6% in July. The company has managed to double its ad revenue every year since 2002,Kocsis added, and during the first six months of this year the company netted Ft 577.2 million. Thechannel decided to pull the plug on the popular talk show with psychiatrist Doctor Csernus becausethe parties could not reach a new agreement. The Swedish Modern Times Group (MTG) owns ViasatHungária Rt. (Vg 8) P.?.

U.S. company invests in Hungarian fitnessU.S. fitness equipment manufacturer Life Fitness Co. signed an exclusive agreement with FitnessTrade Warex Kft, which designs and constructs fitness centers. Companies investing in wellness andfitness centers, which are larger than 1,500 sq.m., can see a refund in 3-4 years, managing director of Fitness Trade Warex Péter Bakos said. Life Fitness and its Hungarian partner Protokon Kft built afitness equipment factory in Kisk?rös, southern Hungary last year, which turned out some 2,000fitness machines in 2003, but the American company plans to increase the production capacity of theplant by next year, the company's sales director Leo Schreuders said. (Vg 7, P. ?.)

Take-up on Bp office space up 55% yr/yr Take-up on Budapest's office space market reached 44,000 square meters in Q2, 21% less than in theprevious quarter, but still 55% more than a year earlier, according to a report by CB Richard Ellis.Total office space rose by a moderate 20,000 square meters, with just two new constructions beingcompleted in Q2, the 14,687-square-metre Science Park 'B' complex in South Buda and the 4,447-square-metre Museum Atrium across from Budapest's Városliget park. As a result of the high level of take-up and low level of completions, the city's office space market saw its lowest vacancy - of 17.7% -in the last three years (Econews; Ng 17)

Hunguest to operate Sikonda wellness hotelInvestor Sikonda Kft is building a new wellness center and hotel in Sikonda, south Hungary for a totalFt 1,366 million, managing director József Völgyesi announced. The 8,600 sq.m. facility wasconstructed with a state subsidy of Ft 630 million, Völgyesi said. After finishing the construction, thehotel will be operated by hotel chain Hunguest Hotel Rt, Völgyesi said. (Ng 17) M.K.

Mobile Phone Use Rises to 81.7%Hungarian mobile-phone use rose to 81.7 % of the population in June, with the local unit of VodafoneGroup Plc continuing to take market share from Telenor ASA's Pannon GSM Rt. The number of Hungarians with cellular phones rose from 81.2 % in June this year and 74.2 % in June last year,Budapest-based regulator NHH said in an e-mailed statement. The new EU member's three wirelesscompanies struggled to add subscribers as 10.1 million Hungarians owned more than 8.2 millioncellular subscriptions or pre-paid cards. T- Mobile Hungary Rt., the mobile-phone unit of DeutscheTelekom AG's Matáv Rt., had the most market share ahead of Pannon GSM and Vodafone.(Bloomberg; Vg 7)

Paks Block II returns to full capacityThe test run of the No.2 reactor at Paks, Hungary's single nuclear power station, has beensuccessfully completed. After the relevant tests, the block was connected to the electricity grid from

Friday, the Paks management informed MTI. After having completed discussions with Hungarianelectricity wholesaler MVM Rt and power systems operator MAVIR, the power station is able toresume providing 40 per cent of Hungary's electricity. The reactor was shut down in April 2003 after fuel rods in a cleaning tank adjacent to the reactor overheated. (Econews; Vg 8)

Telecom authority to cap fee risesHungary's Telecommunications Authority (NHH) has announced that starting next year it will limit risesin fixed line retail subscription fees charged by Hungary's most powerful telcos - which it labelsSignificant Market Powers (SMP) - to the rate of inflation. The NHH's draft resolution will not becomebinding until November, and the companies affected have until 20 days after the ruling is announcedto appeal. On the retail land line subscription market, the NHH has named Matáv Rt , Invitel Rt,Hungarotel Rt, Emitel Rt and Monortel SMPs. (Econews; Vg 7)

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Logistics center planned for Nyíregyháza A consortium of companies based in Nyíregyháza signed a contract with the local council of Nyíregyháza on Friday to build a logistics center in the city's industrial park. The consortium have setup a company, Logistic Centrum, with registered capital of Ft 200 million, to build the center, which willcost more than Ft 1 billion, Logistics Centre CEO Mihaly Szilvasi said on Friday. The logistics center will handle road and rail shipments by Flextronics Kft, which has a factory in the park, and ElectroluxKft, which is building a factory there, as well as other companies in the region, Szilvasi said.(Econews)

ECONOMICS

Apeh to launch communications strategyState Tax Office (Apeh) plans to introduce a new communications strategy to cut the number of taxevasion cases, chairman László György Király said. Apeh wants to communicate more about controltechniques, the discovered tax evasion methods and the success of Apeh's officers to discouragetaxpayers from attempts, Király said. According to Apeh's experiences, tax evasion drasticallydeclines, if people are informed of controls carried out, Király said. (Ng 3) M.K.

Econ Min expects Ft 123 bln for road careThe Economy Ministry believes a minimum of Ft 123 billion is required next year to do the necessary

road maintenance works in Hungary, deputy state secretary Ferenc Kovács announced. However, thissum does not include any new road constructions, it would only be enough to stop the deterioration of current conditions, Kovács said. The proposal will also be discussed by the Finance Ministry and thegovernment. Last year the Economy Ministry asked for Ft 100 billion on this purpose and received Ft70 billion, Kovács said. (Ng 3) M.K.

50,000 behind in UtilitiesMore than 50,000 families are in considerable arrears with their utility costs in Budapest, severalhundreds of them owe more than Ft 1 million to public utility providers. Most of these people areunemployed, living under the poverty line in district-heated blocks of flats. Approximately 10,000 -15,000 families are debtors to Budapest district heating company F?táv Rt having failed to payinvoices worth a total Ft 1.5 billion annually. The situation is the worst in Districts 3., 8 and 10. 20% of all utility debtors are pensioners. (MH 8) R.G.

POLITICSPM arrives in BrusselsOutgoing Prime Minister Péter Medgyessy arrived in Brussels yesterday to bid farewell to leaders of the European Commission, the European Parliament, and NATO. This will be Medgyessy's last visitabroad as prime minister. The names of the officials with whom Medgyessy will meet during the three-day visit have not yet been released. He is scheduled to brief the media on his talks on Wednesday.(MTI; Nb 3, Nv 3)

DOMESTIC

Shortage leads to freelancing doctorsHospitals are forced to contract doctors who are not on the payroll to fill in the gap caused by a 20%-30% shortage of physicians. An EU regulation, which came into effect in Hungary on May 1, is partly

blamed for the shortage. According to the regulation, doctors employed by state hospitals should onlywork 60 hours a week. Hospitals outside of Budapest are especially affected by the shortage, thechairman of the Association of Hungarian Hospitals Iván Golub said. The hourly pay of a "freelancing"doctor usually exceeds that of a physician on the payroll, Golub added. (Vg 1) P.?

Mothers to protest at metroYoung mothers and disabled people are planning to hold a demonstration at the underpass of BlahaLujza tér in the near future because the recently renovated steps are still inaccessible to wheelchairsand prams. The stairs of the underpass were redone by the Budapest Company for the Maintenanceof Public Areas Rt (FKF Rt) in scope of the Ft 40 billion reconstruction of Metro line 2 but no rampswere included in spite of effective regulations. András Ulrich, department head at FKF Rt claimed thatthe Ft 30 million budget allocated for the reconstruction by Budapest transport company BKV Rt couldnot include the building of ramps or lifts. (MH 1) R.G.

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3,000 missing from army Almost 3,000 soldiers are missing from the ranks of the Hungarian army, Defense Minister FerencJuhász said, but it does not a pose a threat to the planned switch from compulsory service into aprofessional one. Some tasks currently conducted by conscripted soldiers will be outsourced to privatecompanies, but the Ministry still calculates with a 11,000-strong army, yet currently, there are only8,300 contracted soldiers. The last conscripted soldier will be discharged by the end of 2004. (Nb 1)

Romania denies Tisza pollutionThe Romanian water and environmental authorities issued a denial on Saturday, saying that the TiszaRiver had not been exposed to heavy metal pollution in the wake of what they qualified as aninsignificant technical "event" at the gold mine near Borsa. An official of Romania's Somes-Tisa Water Management Directorate confirmed that an underground sludge pipe had broken at 11 a.m. on Friday. About 80 cubic metres of slurry escaped to the nearby Cisla stream in the next hour, from where itflowed into the Viso, a tributary of the Tisza. (MTI; Nv 2, MH 9, Nb 21)

07/09/2004

BUSINESS

M8 Bridge to be built by DUNAUJ-HIDThe Danube bridge at Dunaújváros (C-Hungary) on the M8 motorway, complete with a 3 km motorwaystretch, is to be built by DUNAUJ-HID, a consortium of Vegyepszer Rt. and Hidepito Rt., nationalmotorway construction company Nemzeti Autopalya said yesterday. The consortium has won the Ft53.63 billion contract at an open, pre-qualified public procurement tender. Another valid bid was madeby the STRABAG M8 DUNAH3D Konzorcium of Betonut Rt and Strabag AG.-Strabag Epito Rt.(Econews; Ng 4, MH 11)

Sufficient Number' of bids for MOL GasHungary's MOL Rt said it received a "sufficient number" of bids for all the natural-gas units it had putup for sale. The company is selling 75% minus one vote in its natural-gas storage and wholesalesubsidiaries and 25% plus one vote in its gas-transmission business, Chairman and co-Chief Executive Zsolt Hernádi said. "If we get offers that value the units higher than we do, then we will beable to sell," Hernádi said. (Bloomberg; Ng 11, MH 12)

Up to Euro 700 mln to be invested in real estateReal estate funds will invest approximately Euro 650 million - 700 million in Hungary this year,according to experts. Although yields on real estate investments decreased somewhat in H1, they arestill higher in Hungary than in most of Western Europe, experts say. Chris Bennett, chairman of realestate firm DTZ forecast 8% yield on the average for 2004, while real estate agency CB Richard Ellispredicts 8-8.5% for office buildings, 8.5% for shopping malls and 9.75%-10% for industrial facilities.(Vg 1) R.G.

Tender out to privatize MalévState Privatization and Holding (APV) Rt is calling for a tender to privatize Malév Rt. The deadline toturn the offers in is October 20, results are to be announced at the end of this year. APV Rt intends tosell 99.95% of its stocks. At least 90% of the price is to be payed in cash, but up to 10%, the offer incompensation coupons may be accepted. Compensation coupons will be calculated as 174.2% of thedenomination value. The party offering a bid has to take over Malév's Ft 36.2 billion debt, Ft 33 billion

of which is guaranteed by the state. (Ng 4) E.C.

GVH to discuss alleged Matáv misconductThe Competition Office (GVH) will discuss today whether Matáv misused its market advantage in theretail sector in the months following the opening of the telecom market by applying price squeeze toimpede other service providers' entry to the market. According to claims, Matáv set the gap betweenwholesaling prices offered to competitors and retail prices so little that it is impossible to enter themarket successfully. GVH already fined the telecom giant for Ft 70 million in January for applying pricesqueeze in the corporate market in 2002. (Vg 5) R.G.

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MTV by the end of the year. (Vg 11) R.G.Wind-powered sewage treatment plant opensHungarian environmental company Korte-Organica will soon start operations at a wind-poweredsewage treatment plant in Barzkowice, Poland, the company announced yesterday. Chairman IstvánKenyeres said that the company had spent Ft 200 million to create the environmentally friendlysolution at their Polish subsidiary Organica Polska Spzoo. The company also worked closely withPolish construction company Ekowark. With a 180kW capacity, the wind-powered turbine at the sitewill be able to supply between 2,000 and 3,000 households in addition to the sewage treatment plant.(Econews; Vg 9)

Mega-Logistic to win hospital tender Budapest based company Mega-Logistic Rt has is most likely to operate the hospital in debt in Siklos.Ft 16 million was offered to the Kht currently operating the hospital, which is owned by the localgovernment, and they are planning to invest Ft 200 million into the hosptal this year. There were 7applicants for the tender. After the pre-evaluation, Mega-Logistic was found to have the best bid, thusofficials are soon to vote in favor of the company. (NG 4)E.C.

MKB to sell Ft 100 Bln 5 yr bondsHungarian Foreign Trade Bank (MKB) Rt., the third-biggest bank in Hungary by assets, plans to sell Ft100 billion of five-year bonds. The floating-rate bonds, which will go on sale to individual andinstitutional investors at an auction on Wednesday afternoon, will pay interest of 0.25 basis pointsmore than the three-month Budapest interbank offered rate, or Bubor, the bank said in an e- mailedstatement. (Bloomberg; MH 13)

Ft 3.3 billion withdrawn from HunsatMatáv Rt and Antenna Hungária Rt have withdrawn Ft 3.3 billion from their jointly-owned subsidiaryHunsat Rt cutting down its registered capital to Ft 100 million. Hunsat, which currently acts as adistributor to Eutelsat and Intelsat, was set up to invest in satellite telecom companies, such asIntelsat, Eutelsat, Inmarsat and offers satellite capacity to service providers. The move came one year after the company's investment activities were discontinued by the owners, which freed upunnecessary cash, Hunsat head Tibor Székelyhídi said. (Vg 12) S.F.

Job perks on the rise

Although most companies in Hungary offer food coupons only as a form benefit, more and moreemployers are offering complex packages. According to a survey conducted by Fact Institute, 94% of the 500 firms said that they offer benefits in addition to the monthly salary, and 91% give out foodcoupons. Other popular benefits include: pension fund contribution, cell phone usage, health carecontribution, clothes coupons, and life insurance. For top managers, companies offer a specialcompensation package that may include stock option programs and free use of a company vehicle.80.1% of the top leaders of large companies drive a company car. (NG 4) E.C.

Ollier appointed to head Sanofi-AventisFrederic Ollier has been named to head the Hungarian subsidiaries of Sanofi-Aventis, the companysaid yesterday. Ollier's title was not disclosed, but is part of the appointment of 100 managers in morethan 70 countries as part of the integration of the recently merged Sanofi-Synthelabo and Aventis.Sanofi-Aventis's Hungarian subsidiaries include Sanofi-Synthelabo Rt (trade and marketing), ChinoinRt (production and R+D) and Aventis Pharma Kft(trade).(Econews)

Erste's financial strength on reviewFollowing the merger of Postabank es Takarekpenztar Rt (Postabank, rated A2/P-1/E plus) into ErsteBank Hungary Rt, which used to be unrated, Moody's withdrew all ratings of Postabank, as the legalentity no longer exists and assigned them to Erste Bank Hungary Rt. The "E plus" financial strengthrating was placed on review for possible upgrade. Moody's said that the A2/P-1 ratings are based onexpected support from the majority owner of Erste Bank Hungary, Austria's Erste Bank der oesterreichischen Sparkassen AG. (Econews)

Kaiser opens Ft 1 bln meat processing plantKaiser Food opened a new Ft 1 billion meat processing plant outside of Györ, W Hungary, at theweekend. Kaiser Food used Ft 263 million in Sapard funds to finance part of the project. The rest wasfinanced with the company and bank loans. The renovation added another 1,200 square meters of production space at the sites and included work on refrigeration systems and wastewater

management systems. Kaiser Food had revenue of Ft 4.4 billion in 2003 and, due to the ongoingrenovation, expects to boost turnover by a modest Ft 80 million this year. (Econews)

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Kemira GrowHow buys fertilizer maker Finnish artificial fertilizer maker Kemira GrowHow Kft said yesterday that it had purchased peer company Transcenter Mutragyagyar, located near Veszprem (NW Hungary). Kemira did not disclosethe price of the purchase. The announcement did note, however, that Kemira planned to boostproduction significantly at the plant, which employs 140 workers. István Zajacz, a division manager atKemira's Hungarian subsidiary, also called Kemira GrowHow, said that Transcenter sells around

80,000 tons of fertiliser a year, while Kemira GrowHow sells around 70,000 tons, compared to the1.2m-tonne market in Hungary. (Econews)

ECONOMICS

Simplified tax- discussion postponedThe European Union's VAT committee postponed discussing Hungary's simplified business tax (EVA)until October 14 although it was expected to do so at the end of September. The committee, set of representatives of member states will examine EVA if documentation on the issue will be ready atleast three weeks before discussion. Frits Bolkestein, European Commissioner for Internal Market,Taxation and Customs Union issues pointed out in May that EVA generates less tax revenue than thetwo taxes, VAT and corporate tax it replaces. (Vg 3) R.G.

Hungarian's healthier liquid consumptionDespite this year's cool summer, the quantity of mineral water consumption has gone up by 16%.Customers spent Ft 20 billion this year, which is an 8% increase in value compared to last year. Thereason is that 60% of the procurement happens in discounts (33%) and in hypermarkets (27%).Households, at the same time, bought 6% less soft drinks, however, the amount spent remained thesame. Nevertheless, fruit juice consumption has increased, which means customers are getting morehealth conscious. Yet milk consumption has not gone up. (Ng 5) E.C.

Livestock declines further Hungary's cattle stocks declined 38,000 to 728,000 from a year earlier to August 1, 2004, the CentralStatistics Office (KSH) reported yesterday. The number of cows was 342,000, 17,000 lower than on August 1, 2003. The number of pigs decreased 756,000 in twelve months to 4,382,000, and thenumber of breeding sows fell 49,000 to 304,000 on August 1, 2004. There were 1,374,000 sheep on August 1 this year, 148,000 more than a year earlier, KSH reported. (Econews; Nv 5)

Budget to remain fluid until adoptedThe budget bill will continue to evolve dynamically, in keeping with real economic flows, up until thetime the final draft is submitted to parliament probably late this month, said a finance ministry pressrelease issued yesterday. The statement follows a Sunday meeting between Prime Minister-designateFerenc Gyurcsány and Finance Minister Tibor Gyurcsány on overall budget issues and next year'sbudget. Latest data shows that economic growth exceeded expectations in the first half of 2004, withGDP growth at 4.1% for January-June. (MTI)

Gyurcsány to Overhaul BenefitsFerenc Gyurcsány, the nominee to become the next prime minister, said he plans to overhaul housingand child-care benefits to make it more equitable, business daily Világgazdaság reported. Economicpolicy should support fast-paced economic growth, while changes must also be made to reduce thebudget and current- account deficits, said Gyurcsány, according to the newspaper. Gyurcsány startedtalks with Finance Minister Tibor Draskovics and Péter Kiss, who runs the prime minister's office,

about the 2005 budget and tax rules yesterday, the paper said. (Bloomberg)POLITICS

Opposition leader meets with president"I hope that the government coalition parties have the ability to form a cabinet with the determinationand skills to do the job it undertook in 2002", the head of senior opposition party Fidesz said followingtalks with President Ferenc Madl. Viktor Orbán was meeting with the president to review the situationfollowing the resignation of Prime Minister Péter Medgyessy. "Hungary today lacks a government, aprime minister, and a reliable constitution enabling it to resolve its problems on long term," Orbánadded. (MTI; MH 1, Nv 1)

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Expelled MDF MPs become independentsThe five MPs from the smaller opposition Democratic Forum (MDF), expelled by parliamentary leader Károly Herényi last Thursday, will become independents, Deputy House Speaker László Mandur toldParliament yesterday. Under parliamentary rules, István Balsai, Sándor Font, Balázs Horvath, AndrásKelemen and László Szaszfalvi may not join another party group for the next six months. All aremembers of a rebel group called the Lakitelek Group, set up in June by 13 MPs who vowed topromote closer cooperation with the main opposition Fidesz party. (MTI; MH 4, Nv 3)

Parliament remembers Russian hostage victimsHouse Speaker Katalin Szili paid tribute to the victims of the Beslan hostage crisis in Parliamentyesterday, on the first day of the autumn session. "What happened in Northern Ossetia has shakenour faith in humanity," Szili said, adding that there was absolutely no justification whatsoever for thehumiliation, torture and massacre of children, parents and teachers. The MPs paid tribute to thevictims with a minute of silence. (MTI)

DOMESTIC

Right-wing demo demands electionsSeveral hundred demonstrators from two right-wing organizations gathered in front of Parliament lastnight, demanding early elections. Approximately 300 demonstrators from the Conscience '88 Group

and 500 members of the youth section of the Hungarian Justice and Life Party (MIEP) heldconsecutive protests, demanding the ousting of the current government and early elections. WavingHungarian flags and banners symbolizing the WWII Hungarian fascist Arrow Cross Party, the crowdlistened to successive speakers, who blamed the center-right Fidesz party for not taking the initiativeto oust the current administration. (MTI)

2 workers sacked for speaking HungarianSlovak Deputy Prime Minister Pál Csaky confirmed on Monday that two women had been dismissedfrom a BASF plant in Slovakia because they had conversed in Hungarian while on the job. After questioning the women, Csaky became convinced this really was the reason they had been sacked,and he followed up by sending a letter of protest to BASF Managing Director Christopher R. Dale. Inhis reply, Dale argued that the two employees had been dismissed because of professionaldeficiencies, an argument Csaky rejected. (MTI)

National competition on living English A national competition on using English as a living language opens on Monday, Education Minister Balint Magyar said at a news conference held together with organizers. The initiative, focused onactual use of the language as a means of communication, was launched by entertainment channelBBC Prime and supported by the Hungarian Education Ministry and the British Council and is targetedat students in secondary schools. Magyar noted that the low level of language skills among Hungarianresidents became acutely clear when the country joined the EU. Teams of six 14-18-year-olds canenter the competition together until the September 21 cut-off date. (MTI)

08/09/2004

BUSINESS

New section of M3 motorway opens

A new, 13-kilometre section of motorway M3, connecting Polgar and Gorbehaza, was opened ineastern Hungary yesterday. The Ft 21.2 billion project, containing three flyovers and a bridge acrossthe main Western Canal, was inaugurated by Minister of Economic Affairs and Transport IstvánCsillag. Hungary's longest motorway will connect Budapest with the Ukrainian border. To date, a 187-kilometre section has been built. The next, 39-kilometre section between Gorbehaza and Nyiregyhazawill be completed by late 2006. (MTI; MH 1, Nb 14, Nv 5, Vg 4)

Musashi starts production Auto parts maker Musashi Hungary Ipari Rt has started operating with Euro 15 million worth of newproduction equipment at its plant in Ercsi (30km south of Budapest), the company said. The firm alsoannounced it would start production of aluminum ball joints for Audi models. Musashi had turnover of Euro 12 million in 2003 and targets revenue of Euro 30 million this year. (Econews; NG 5)

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Antenna Hungária to be included in BUXIn their biannual review of the Budapest Stock Exchange's (BSE) BUX and BUMIX indexes, acommittee has included shares of broadcaster Antenna Hungária Rt in the bourse's main BUX index,and shares of IT company econet along with shares of electricity distributor ELMÜ Rt in the mid-capBUMIX index, effective October 1. Antenna Hungária was dropped from the BUX basket in April of thisyear. BorsodChem Rt and Danubius Rt failed to meet the criteria for inclusion as well this time around,but they will only be dropped from the basket if they fail to meet the mark again in April 2005.(Econews; NG 11, Vg 14)

Job agencies reconstructed with PhareTwenty labor employment agencies were reconstructed and another 20 were equipped with state-of-the-art computers in Hungary, Minister of Employment and Labor Sándor Burány said. The Ft 1.25billion project, part-financed from the Phare funds of the EU, implied the reconstruction of an agency ineach of the 19 counties and in Budapest. Modernized under Danish and Swedish patterns, theagencies offer the jobless free Internet access to find a vacancy or apply to employers. According tothe minister's estimate, about half of the unemployed are able to use a computer for this purpose.(MTI; MH 10)

Novell gets Ft 1 bln contractNovell Hungary Rt has signed a three-year contract worth around Ft 1 billion to supply the NationalOffice of Judicial Services (OITH) with a computer network and administration system, managingdirector of Novell Tamás Szittya said. The system, to be installed at 158 OITH offices, will be Novell'sbiggest yet in Hungary. The project, which Phare funds will pay for, will connect 7,350 work stations,OITH IT department head János Horvath said. (Econews; Vg 9)

Commercial audience faltersThe number of people between age 18 and 49, listening to commercial radios decreased by 111,000in July. Sláger Radio lost 108,000 listeners as opposed to Radio Danubius, which gained 174,000listeners. The number of listeners of public radio stations also tumbled by 96,000, although usuallymore people listen to the radio in summer than in other seasons. On the other hand the number of radio listeners in Budapest increased in July, Roxy Radio remained the market leader in Budapestbefore Radio 1. (Vg 10) G.B.

Foreign firms under tax scrutinyExamination of international transactions of foreign trade companies based on data from other EUcountries' tax offices will start mid-September. These will facilitate uncovering companies' attempts toavoid paying VAT on imported products. The cooperation between national tax offices enablesdetailed inspection, Apeh chairman László György Király said. Customs and Excise Office (VPOP)also provides information on companies making larger trade, so these firms may expect more probingexaminations. (NG 3) G.R.

Major Bosch investmentGerman machine manufacturer Robert Bosch GmbH plans to inaugurate two new factories in Miskolcon Sept 20. The new factories will produce household DIY machines and car electronics units. Boschhas invested Ft 15.5 billion in the developments in Miskolc since 1999. Bosch plans to increase thenumber of workers in the Miskolc factories from 350 to 800 by 2006. Bosch also announced that itsHungarian subsidiaries recorded a total turnover of Euro 265 million in 2003. (Vg 12) G.B.

Jobs slaughtered at PickMeat processor Pick Szeged Rt is expected to lay off between 300 and 350 employees as a result of closing its pig slaughtering operations, chairman of Pick's trade union committee Gábor Golhovics saidon Monday. The Pick management has notified the trade union about the planned staff cuts andexplained that now that Hungary is part of the EU's internal market, it can import meat cheaper fromabroad, Golhovics said. The local daily Délmagyarország reported yesterday that Pick would give 450people notice, but Golhovics said that this number would probably fall as negotiations continue. Hesaid between 100 and 150 people could be moved to other positions within the company. (Econews;NG 5, Vg 9, Nb 15)

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Big food retailers threat to Hungarian farmersHungary's small, non-specialized farmers must face an increasingly concentrated market, asHungary's food sector begins to look more like those in older EU member states, Agriculture Minister Imre Németh said after a meeting of EU agriculture ministers in the Netherlands. By 2010 anestimated 11 million farmers in the EU will be competing with just ten large food companies. Already,in thirteen of the EU fifteen, just three retail chains share more than 50% of the market. (Econews)

Waste depository in TiszafüredBuilding of a new waste depository has started in Tiszafüred. It will be the central facility of a regionalwaste management project covering 42 towns and villages. When finished it will serve 112,000people. The local governments of the region won subsidies from the EU's ISPA fund in 2001. Theinvestment includes the introduction of selective waste collection. The works are being supervised byUtiber Kft, and the main contractor is the consortium of Vegyépszer Rt and Keviép Kft. (Vg 6) G.R.

TV channel buds in autumnOwner of TV2, Dutch SBS Broadcasting S.A. is going to start a new TV channel called EriszTelevision Sept 13. The channel's target audience is women between age of 18 and 49, generalmanager Markus Tellenbach said. First the program will be broadcast between 6 pm and 11 pm onanother channel called Club. After start it will be available in 680,000 households through the networkof UPC Hungary Rt and other local cable TV networks. The program will be framed according to Dutchlicense. (NG 4) G.R.

Sopron cleans up its actDezso Walter, mayor of Sopron, northwestern Hungary, and Béla Donáth of the Environment andWater Ministry laid the foundation stone of a new sewage treatment plant in the Sopron region lastThursday, thus launching the Ft 4.9 billion investment program. The project will be completed by theend of 2006 and as a result the region will have a full sewage system network and there will be nomore sewage outflow into Lake Ferto. (Vg 6) G.B.

Power onGerman E.ON and Russian Gazprom are considering building gas-heated power plants in Hungaryand other European countries, according to a presentation by E.ON CEO Wulf Bernotat, held for investors. E.ON AG did not want to comment on the information, nor whether the Euro 250 million

capital raise of E.ON Hungary Rt few months ago has anything to do with the possible investment. By2020 there will be an extra 6,000 MgW demand on power plants, according to a plan of HungarianElectricity System Operator (Mavir) Rt, published beginning of this year. (NG 5) G.R.

MÁV streamlines servicesMÁV Rt will discontinue as many as 3,000, or 10% of its services on altogether 119 lines, theembattled state railway operator decided yesterday. The closures will only affect minor lines which areutilized only 3%-20%. MÁV said its Ft 150 billion debt burden and disappointing state financial backingwould have necessitated a much more drastic cut but it hoped a long-term financing agreement withthe state would soon be sealed. (Nv 4) S.F.

OTP board sells sharesSeveral members of OTP Bank Rt's top management sold OTP shares on Monday. Mihály Baumstark,member of the board of directors, sold 10,000 shares at Ft 4,539 a share, Antal Pongrácz, member of

the board of directors, sold 10,000 shares at Ft 4,549, Klára Vécsei, member of the supervisory board,sold 1,000 shares at Ft 4,500 and Antal Kovács, member of the supervisory board, sold 5,000 sharesat Ft 4,544. (Vg 13) G.B.

ECONOMICS

Fiscal deficit Ft 120 bln, above forecastHungary's fiscal deficit was Ft 120 billion in August to bring the eight-month deficit to Ft 1192.3 billion,according to the preliminary FinMin report yesterday. The August GSF deficit is well above theministry's forecast of Ft 93.6 billion. The deficit was Ft 32.1 billion in July and 1,072.3 billion in the firstseven months as compared to the Ft 1,184.6 billion full year target. The general government positionwas somewhat weaker than projected for the first eight months due to the revenue side lagging slightlybehind expectations. The cash-based deficit made up 5.86 per cent of GDP, the ministry said.(Econews; MH 1, Nb 1, NG 1, Nv 1, Vg 1)

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Next year deficit under scrutinyHungary's government deficit target for the next year should now come under scrutiny after thesignificantly worse-than-expected August figures all but dashed hopes of keeping this year's 4.6%target within reach, London-based emerging markets analysts said yesterday. Reinhard Cluse at UBSsaid he expects a full-year deficit of around 5.4% of GDP for 2004, "pretty much in line with what thecentral bank says". (Econews; NG 1)

Exports riseIn July, Hungary's exports grew 13.9% while its imports rose 9.8% yr/yr. The trade deficit gap,however, continued to widen in the first 7 months of the year by Euro 800 million nearing Euro 3 billioncompared to the same period a year ago. Exports in Jan-July were up 14% and imports increased13.8%. In forint terms, the corresponding figures were 21% and 17%. (MH 9) S.F.

Industrial output up 7.6%Hungary's industrial output increased by 7.6% year on year in July, according to working day adjustedpreliminary data issued by the Central Statistics Office yesterday. In July 2003 industrial productiongrew by 4.7% from a year before, the office said. (MTI; Vg 5, MH 9, Ng 3, Nb 13)

POLITICS

Fidesz wants gov't to suspend privatization An MP of the main opposition Fidesz party said he would present a motion to Parliament, forcing thegovernment to suspend the privatization of state-owned companies. Ferenc Parcsak also announcedthe withdrawal of a similar motion submitted in tandem with Fidesz MP Antal Rogan to the August 27special session of Parliament. The original motion was found unsuitable for a plenary debate by theparliamentary committees concerned. (MTI)

Foreign Affairs Cttee reacts to Serbian violenceParliament's Foreign Affairs Committee has called on the cabinet to submit the Hungarian-Serbianagreement on minority protection to Parliament for early ratification. "The Foreign Affairs Committee isconcerned about news of incidents against ethnic Hungarians and other minorities in Serbia'sVojvodina province. These events, often involving violence, are upsetting to minority groups living inSerbia and to the portion of both Hungarian and Serbian public opinion committed to ethnic tolerance,"the committee said. It expressed its hope that mainstream Serbian society would condemn these acts

and prevent future occurrences. (MTI)DOMESTIC

EP groups approve bills on Vojvodina attacksThe European Peoples' Party (EPP) and the Party of European Socialists (PEP), both groups withinthe European Parliament, approved bills on Tuesday concerning violence against minorities, includingHungarians, in Serbia's Vojvodina province. Kinga Gal, an MEP from center-right Fidesz, whosubmitted an EPP-approved bill, said that the parliamentary group would table a proposal at theStrasbourg plenary session next week calling on the Serbian authorities to investigate the cases andtake the measures needed to prevent similar incidents. (MTI; Nv 2, Nb 3)

Roma life expectancy lower than averageThe life expectancy of Hungary's Roma population is 10 years lower than the Hungarian average

because of poverty-spawned poor living conditions and higher rates of disease, the head of a researchproject targeting Roma health and welfare said. The survey was funded by the Health Ministry and theinterviewing was done last December. Members of the 1,200 Roma households were interviewed ontheir economic and health status, their educational levels, jobs, family sizes, and their access tofinancial assistance. The survey found that two-thirds of Roma residents suffer from chronic disorders.(MTI)Hungary A.M. compiles information from dailies Magyar Hírlap (MH), Napi gazdaság (NG),Népszabadság (Nb), Népszava (Nv) and Világgazdaság (Vg), the weekly Budapest Business Journal(BBJ) and wire services MTI, Bloomberg and Econews.

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09/09/2004

BUSINESS

BorsodChem completes expansion projectsChemicals company BorsodChem Rt has completed a Ft 8 billion project, boosting its PVC productioncapacity from an annual 300,000 tons to 330,000 tons, BorsodChem CEO László F. Kovacsannounced after the company's EGM yesterday. BorsodChem has also expanded its TDI productioncapacity and, within two or three weeks, will be able to turn out 80,000 tons a year, 20,000 tons morethan earlier. In H1 BorsodChem, which is the region's largest PVC-maker, had consolidated net profitof Ft 10.25 billion on revenue of Ft 72.57 billion. (Econews; Vg 8, Ng 11)

Waberer's sets up subsidiary in SpainHungarian road haulage company Waberer's has set up a subsidiary, Waberer's Espana SA, inBarcelona, the group said yesterday. In response to this year's sharp increase in cargo transport in theEU, Waberer's will set up subsidiaries in France, the UK, Belgium and Germany as well over thecoming months. Waberer's is also continuing to expand eastwards making preparations to set up inPoland and outside the EU, in Ukraine. The group has increased the registered capital of its Romaniansubsidiary more than tenfold, and has begun a Euro 2.5 million vehicle purchase program. (Econews;Ng 5, Vg 13)

Law change addresses misleading loan adsThe Ethics Committee of the Hungarian Banking Association is soon to discuss the cases of false loanmarketing. Some banks are misleading customers by only presenting the lowest, often temporary,interest rates of foreign currency based bank loans. These are, under no circumstances, comparableto the conditions of any other forint or foreign currency based credits. Some banks even go as far asoffering their loans by advertising their service fees, meanwhile, their interest rates are high. To avoidmisinformation, the Ministry of Finance is to introduce a law modification including the definition of theaccurate calculation of the total interest rate, as of January 1, 2005. (Ng 1) E.C.

Ft 11.8 billion sports center for Győr Questor Rt, owner of Győr sports club ETO plans to construct a new sports center with an investmentof Ft 11.8 billion. Questor Rt will realize the project in two phases, in the first run the company wants toreconstruct the old sports field and nearby facilities from Ft 3.4 billion, Ft 900 million of which is

financed by the Sports Ministry's non-refundable subsidy. In the second phase by 2006 a wellness andfitness center; a 100-room hotel, two ice-rinks, a shopping center and restaurants will be constructedon a 17-hectare lot surrounding the club's stadium. The Gyor municipality is also backing the projectwith Rába shares worth Ft 500 million. (Nv 13) R.G

Nokia's market share unchanged in HungaryNokia 's share of the Hungarian mobile phone market did not shrink, as it did elsewhere, CEO of Nokia's Hungarian subsidiary Imfred de Jong said yesterday. De Jong said if all went according toplans, Nokia's share of the Hungarian market would increase in 2004. De Jong declined to offer specific figures, but noted that the market slowed down in Q2, then livened up again following EUaccession. De Jong said he trusted Nokia would maintain and even strengthen its position on themarket in Hungary, and that the company would launch ten new mobile phones on the Hungarianmarket before the end of the year. Market observers say between 1.5 million and 2 million mobile

phones are sold in Hungary every year. (Econews; Vg 16)Hungary reaches for the starsHungary is expected to have a full partnership in the European Space Administration (ESA) startingfrom 2008. It will enhance a significant increase in the money spent on space research. This year,Hungary is spending Euro 1 million on the partnerhip program, 90% of which may be recuperatedthrough succesful tenders. The contribution will reach Euro 10 million by 2008. The cooperation is tobe beneficial in the mid-term: according to space research experts, Hungarian enterprises may receivepromising orders from giant European space conglomerates. The results of space research are notonly scientifically significant but can well be applied in the economic field. (Ng 4) E.C.

Pannon-Flax takes Betonút to arbitrator Textile company Pannon-Flax, which is listed on the Budapest Stock Exchange, announced onWednesday that its subsidiary Konflax was taking a case against Betonút Rt seeking Ft 11.5 billion

and interest before the International Commercial and Industrial Arbitration Association in Geneva,Pannon-Flax announced on the website of the Budapest Stock Exchange yesterday. The parties arebound by confidentiality until a decision is taken. (Econews; Ng 11)

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Government to introduce new plastic bag taxThe Ministry of Environment Protection and Water Management (KVM) plans to introduce a piece-based plastic bag tax for retail companies in 2005, the ministry said. Currently retailers must pay a taxof Ft 30 after one kilogram of plastic bags, which is normally 50-100 pieces. According to the plans,retailers would have to pay Ft 3-25 per piece depending on bag size. Paper bag production costs fiveor six times more than plastic bags, therefore retailers will not give up distributing plastic bags, general

secretary of the National Trade Association György Vámos said. (Vg 13) M.K.Huge price gap in arable land valueThe average price of arable land in Hungary is Ft 585,000 per hectare, according to a recent surveymade by economic research company GKI Rt and Wallis Real Estate Rt. However, the price gapbetween the cheapest and the most expensive can be quite wide, prices range from Ft 10,000 toseveral millions per hectare. While only 10% of all arable land could be sold for the average price 70%is lower quality. Experts expect EU subsidies to equalize the huge price gap as they are not allocatedby land quality. (Nv 13) R.G.

Hotel guest nights and occupation rate growsThe number of guest nights in hotels, their gross room revenue and hotel's occupation ratio have eachgrown in the first eight months of this year compared to the same period of last year, the CentralStatistics Office (KSH) reported. However, the positive figures are due to Budapest hotels, while the

situation got worse in the countryside, KSH said. The gross average price of a hotel room was Ft13,600 in the first eight months of this year, this is Ft 300 more than last year. Budapest four-star hotels topped the occupation rate list with 68.4% in this period, but four and five star hotels in eastHungary reached only 42.1%. (Vg 13) M.K.

Tesco fresh food center opens in GyálTesco-Globál Department Stores Rt opened its 21,000 sq.m. fresh food distribution center in Gyál,near Budapest yesterday, spokesperson Emese Danks announced. Tesco spent almost Ft 9 billion onthe construction of the new facility, where 500 employees will receive and distribute 3,000 products of 150 companies, Danks said. Currently 30% of Tesco's net revenue originates from fresh food sales,Danks said. Tesco also operates a fleet of 12 trucks to carry products from Gyál to its departmentstores, Danks said. (Vg 13) M.K.

Sport ads earn MTV an extra Ft 500 mln

Hungarian Television (MTV) Rt earned an extra Ft 500 million from commercials during the Europeanfootball championship in June and the Olympic Games in August, commercial director Izabella Bertasaid. MTV has already reached Ft 2 billion advertising revenue this year, the same sum as in thewhole of last year, Berta said. At the same time, MTV paid Ft 1.7 billion for its Olympic broadcasts as aresult of local program making's high costs. MTV now expects commercial revenue of Ft 3.7 billion thisyear, Berta said. (Vg 14) M.K.

T-Mobile keeps sponsoring MOBT-Mobile Hungary Rt will continue supporting the Hungarian Olympic Committee (MOB) in the nextfour years, T-Mobile general manager András Sugár announced. Professional sportsmen and womendeserve T-Mobile's support and this is the best country image, Sugár said. The concrete amount of subsidies was not revealed, but in recent years MOB received at least a total Ft 50 million from eachthree diamond level sponsors. As of the others, Adidas Budapest Kft has already signed its

sponsorship agreement with MOB, while Szerencsejáték Rt has not yet decided if they want tocontinue. (Vg 14) M.K.

ELTE to face financial crisisHungary's oldest university, Loránd Eötvös University (ELTE) will either not pay salaries next month or can't pay its bills, rector István Klinghammer said. Klinghammer wants to ask teachers at the nextuniversity council meeting to work one month free, because ELTE's budget lacks Ft 600 million. If ELTE failed to pay its bills, a commissioner would be sent there and the university would lose its rightto apply for funds. ELTE received Ft 13 billion from this year's government budget and plans to spendFt 24 billion. (Nb 8) M.K.

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CE Oil to buy TVK stake from BorsodchemCE Oil & Gas AG, an Austrian investment company owned by Vienna Capital Partners, agreed to buya stake in TVK Rt, Hungary's largest chemicals company, from BorsodChem Rt, a smaller chemicalcompany. Kazincbarcika, Hungary-based BorsodChem, in which Vienna Capital Partners holds a69.46 % stake, will sell 3,760,979 shares, or a 15.52 % holding in TVK, for ft 20.7 billion, to its biggestshareholders, TVK said. BorsodChem relies on Tiszaújváros, Hungary-based TVK for supplies of ethylene, a raw material in the making of PVC plastic. TVK, majority-owned by MOL Rt, is the onlyethylene supplier in the region with direct pipeline connection to BorsodChem. (Bloomberg)New weight-based tax to curb cheap beer The planned introduction of a higher weight-based environmental tax on canned beer from the start of next year should stem the flow of cheap, mostly German, canned beer into Hungary, Head of the Alliance of Hungarian Breweries Elemer Kiss said yesterday. According to plans, the tax for every canof beer would rise from half a forint to 30 forints from January 1, 2005. The introduction of a 25eurocent tax on canned beer in Germany has driven producers to dumping their stocks abroad andcould double the amount of canned beer sold in Hungary to 80 million liters this year, outgoingpresident of the Alliance of Hungarian Breweries Attila László told reporters at the end of June, 2004(Bloomburg)

ECONOMICS

Fiscal deficit could grow - central bankNext year's fiscal deficit could reach 6.4 % of GDP unless the government takes measures to rein it in,central bank president Zsigmond Jarai told the media after a meeting of parliament's budgetcommittee. He added that the 11% central bank key interest rate currently in effect reflected thebudget risks. He then warned that the 2005 budget deficit could see a huge overshoot. The Ministry of Finance had targeted a 4.6% deficit for 2004, a rate that was exceeded by the end of August. Thedeficit target for 2005 is 4.1 % of GDP. (Econews; MH 1, Nv 5)

Hungary's GDP up 4% in Q2Hungary's GDP rose by 4% yr/yr in the second quarter and 4.1% in H1, the Central Statistics Office(KSH) said yesterday. According to seasonally-adjusted figures, GDP rose 0.9% in Q2 alone,compared to a 1.1% increase in Q1. The figures are unchanged compared to the figures in thepreliminary report published on September 1. Hungary's GDP growth rate of 2.5% yr/yr in Q2 2003

was the lowest since the first quarter of 1997. In the first half of 2003 GDP grew by 2.6%. (Econews;Vg 4)

London sees Draskovics leave A potentially significant fiscal deficit overshoot, risking the full-year government deficit ballooning tonearly 6% of the GDP, may well see finance minister Tibor Draskovics leave before the end of thisyear, London-based emerging markets analysts said yesterday. JP Morgan, the international financialservices provider, said in its daily emerging markets update released in London that it has now liftedits deficit forecast to 5.8% of GDP based on ESA95 for 2004 versus the still intact 4.6% official targetand its own previous forecast of 5.5%. (Econews; MH 9)

Monetary base up 7% in AugustHungary's monetary base increased by Ft 25.5 billion in August to Ft 1,882 billion, the National Bankof Hungary said in its preliminary statistical balance sheet report yesterday. The annualized month-on-

month growth index of the monetary base, derived from trend data, stood at 7% in August, up 3.7%age points on July. (Econews; Vg 18)

Budget to be kept in balance-GyurcsányPrime minister-to-be Ferenc Gyurcsány confirmed yesterday that the government would do whatever was necessary for fiscal balance. "If the economy strays off the set course of balanced growth, thegovernment will do what it takes to get it back in line," Gyurcsány said. In another development,Finance Ministry State Secretary János Veres said that between now and September 15 the ministrywould issue a forecast of the fiscal flows it expects to see to year-end. The new government will enter office during the week of September 27 at the earliest. (MTI)

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POLITICS

Speaker declines Socialist chair nominationSpeaker of Parliament Katalin Szili has declined a nomination to run for chairperson of the senior government coalition party MSzP. Szili, who had initially accepted the nomination, now said that giventhe current political situation she could do more to promote political dialogue, stabile government and

unity within the socialist MSzP in her current post as house speaker. With Szili's withdrawal from therace, the Socialists have five contenders for the post: Culture Minister István Hiller, former SportsMinister György Janosi, Interior Minister Monika Lamperth, state secretary at the Prime Minister'sOffice Imre Szekeres, and the Mayor of Pecs, László Tol. (MTI; MH 1, Nb 1,Nv 3 Vg 5)

MDF chair asks president to name PM asapThe leader of Hungary's smaller opposition party asked President Ferenc Madl to help stabilize thecountry by naming his choice for prime minister as soon as legally possible. "Hungary's best interestsrequire having an accountable prime minister and a responsible government as soon as possible,"MDF chair Ibolya David told reporters after meeting Madl in Budapest yesterday. "We are notsupporting any particular candidate but are acting in accordance with the interests of the nation," shesaid. (MTI; Nv 3, MH 4)

SzDSz has no corruption issues-PM letter

Outgoing Prime Minister Peter Medgyessy's statement yesterday suggests that the Free Democrats(SzDSZ) do not have any corruption issue, Chairman Gábor Kuncze said yesterday. "The letter saysnothing that we did not know already," he said. Although Medgyessy had told the daily Népszabadságon August 19 that the liberal party "was full of corruption," in a statement issued today, he explainedthat charge by citing media rumours about Free Democrat officials. In yesterday's statement, the PMcalled on the persons concerned to clarify their roles, saying he was pleased that "they already haddone so, in part." (MTI; Nv 3, MH 4)

DOMESTIC

Neo-Nazi demo must be preventedThe chiefs of the government's national security services have called for employment of all lawfulmeans to prevent the neo-Nazi group "Hungarian Future" "from taking any action that violates people'ssense of justice and damages Hungary's international reputation," an official placed close to the

government said yesterday evening. The neo-Nazi group has asked for and received permission fromthe police to stage a demonstration in front of Budapest's House of Terror museum on October 15, the60th anniversary of a fascist takeover of Hungary during WWII. Arrow Cross rule, which lasted for about half a year, claimed over 100,000 lives. (MTI; MH 1, Nv 8)

10/09/2004

BUSINESS

Irish invest Euro 100 mln in wind plantIrish SWS group and Fleming Construction Ltd are about to build a wind power plant in Zirc (WesternHungary). The investment will take Euro 100 million making it the second largest Irish venture inHungary after Gresham Palace. Preparations of the project are made by Euro Green Energy Kftsubsidiary of the two companies. The power plant consisting of 38 wind towers is planned to be

finished by 2005 and to produce 250 gigawatt-hours of electric energy yearly; this is enough for about50,000 households. (Vg 11) G.R.

Power supply strike ends in Diosgyor Some 200 workers of DAM Energy, the power company connected to steel maker Dam Steel Rt.,ended an 8-hour strike in Diosgyor that began on Thursday morning to demand payment of backwages, DAM Energy's manager said. DAM Energy's staff of over 200 chose the work stoppagebecause they have not been paid in nearly three months, with majority owner Matraholding Rt owingthem Ft 57 million in back wages, manager János Takács said. Matraholding had no choice but toapprove the strike, since negotiations proved fruitless, he added. Trade union official József Kiss saidthat the power was back on now, however, negotiations with the owner are still underway, and if noagreement is reached by Monday, workers will again walk off the job. (MTI; Nv 5, MH 11, Vg 11, Nb15)

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Farmgate prices up 7.7% yr/yr Hungary's farmgate prices rose 7.7% year on year in July, the Central Statistics Office (KSH) saidyesterday. In the first seven months of this year, agricultural producer prices were 7.6% higher than inthe corresponding period of 2003, resulting from a 12.4% increase in crop prices and a 2.4% growth inlivestock prices. In January-July 2004 grain prices showed the sharpest, 32% rise, while potato pricesincreased by 15%, vegetable prices remained flat and fruit prices declined by 18%. (MTI; Ng 4, Vg 4,MH 11)

Ft 93 mln paid to no-show company Austrian construction company Swietelsky Kft paid Ft 93 million to a subcontractor, Budapest-basedBHD Kft for some earthwork during the construction of a 5.4 km section of Road 89 betweenSzombathely and Bucsu, western Hungary, in May although BHD never actually appeared at theconstruction site and performed no work there, according to Magyar Hírlap information. The projectmanagement of Swietelsky and the employer for the construction Vas County State RoadManagement Kht have never heard of BHD, Vas County State Road Managing director Jeno Kovácssaid. In fact the real earthwork was done by Holdép Kft. (MH 1) G.B.

Sofitel plans Euro 10 mln reconstructionSofitel Atrium Budapest Hotel will launch a 3-year, Euro 10 million reconstruction program next year,Sofitel CEO István Kovács announced. The primary aim of the program is to improve thecompetitiveness of the hotel, said Kovács. Sofitel has increased its occupancy rate by 14% yr/yr in2004 mainly due to Hungary's accession to the EU and the appearance of discount airlines inHungary. (Nv 5) G.B.

Ford sales speeding upFord Motor Hungary Kft's sales in the first 8 months of the year increased by 40% compared to thesame period last year, György Madarász, Ford's communications and PR director announcedyesterday. The company sold 9,800 new cars and 1,700 vans during that period, with the later stillholding its market leading position. Despite the exceptionally good figures in the first 8 months FordMotor Hungary Kft still upkeeps its previous plan to increase sales by 10% in 2004, Madarász alsoadded. (NG 4) R.G.

Ft 5 bln brick factory for Tiszavasári

Nyíregyháza Mayor Mrs László Csabai, Wienerberger Brickmaker Rt CEO Norbert Schwarzmüller andTiszavasvári Mayor József Sulyok yesterday laid the foundation stone of a new Wienerberger brickfactory in Tiszavasvári, northeastern Hungary. Wienerberger invests Ft 5 billion to construct the hi-techfactory by the end of the year. (Nv 5) G.B.

Duty-free may make come backTravel Value (TV), an association of airport duty-free shops, plans to open a shop at Ferihegy Airport.TV operates shops at 300 airports in the world, and the members of the association always take VATupon themselves from the customers. Since Hungary's accession to the EU the oportunity to purchaseduty-free goods in the shops of Ferihegy Airport have ceased for Hungarian shoppers. (MH 12) G.B.

Volán to the rescueBus company Volán Association yesterday offered to launch bus lines to those villages, which will bevictims of Hungarian Railways (MÁV) Rt's elimination of its railway lines producing a deficit. By

optimizing the existing bus lines the Volán companies could solve this problem without any specialinvestment, Volán CEO Elemér Saslics said. (MH 9) G.B.

Ft 2.5 bln for MKB new bondFirst issue of Hungarian Foreign Trade Bank's (MKB) new bond resulted in over Ft 2.5 billion quotationon Wednesday, money and capital market branch director Zsuzsa Bereczki said. The second series of the banks bonds called MKB II have 5-year duration and interest rate 0.25% higher than 3-monthsBubor-rate. The bank will offer bonds of this series in total value of Ft 100 billion. (Vg 15) G.R.

Ft 65 bln bonds to be sold at auctionHungary plans to sell 50 billion forint of notes maturing in October 2007 and Ft 15 billion of bondsmaturing in December 2020 at an auction next Thursday. The three-year notes will have an annualcoupon of 9.25 %, and the 15-year bonds will pay an 7.5 % annual interest, the Debt Management Agency said in an e-mail. The agency last sold the same three-year bonds at an average yield of

10.11 % on Aug. 19 and the same 15-year bonds at a yield of 8.28 % on July 22. Three- year yieldswere at 10.49 % and 15-year yields were at 8.32 % on the secondary market today. (Bloomberg)

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Proposed overhauling of retailing lawThe Ministry of Economic Affairs and Transport has drawn up changes to law governing retailers andwill submit them to the government, deputy state secretary at the ministry Marianna Csakvari saidyesterday. The changes will include new rules for new types of retail sales, as well as for sales outsideof retail outlets and opening hours. Retail turnover amounted to Ft 2,375.4 billion in the first half of theyear and rose 7.4% in volume term, according to latest report by the Central Statistics Office (KSH).

(Econews)Bad creditors' right to be informed An amendment before parliament would force credit institutions that submit retail clients' names andcredit information to the Interbank Debtor- and Credit-information System (BAR), a blacklist for debtors, to inform these clients immediately as well as present them with any credit details which weresubmitted. The new bill would also start the five-year period after which debtors' names must beremoved from the list from the time they have paid all of their penalties and debts, rather than just fromthe time they have paid off all of their debts. Currently, financial institutions are under no obligation toinform their clients that they have been placed on a blacklist, meaning that many find out only after they have been turned down for a loan. (Econews)

Magyar signs Ft 44 bln education p/p partnershipEducation Minister Bálint Magyar signed agreements with representatives of 9 institutions in higher

education in Corvinus University yesterday for public private partnership investments worth Ft 44billion. The Education Ministry has agreed to guarantee rents in 50% in case of PPP investments. TheMinistry and the institutions also undertook to repurchase newly built or reconstructed buildings frominvestors in 20 years. Planned PPP investments in education between 2005 and 2008 are worth Ft165 billion. (NG 4) R.G.

ECONOMICS

Jabil takes over Phillips real estatesJabil Circuit Szombathely Electronics Kft, subsidiary of American electronics company Jabil Circuit Incplans to lease all real estates previously used by Phillips in Szombathely, announced AndrásCsermely, the city's vice mayor. Jabil Circuit Kft will move printed circuit manufacturing capacity to theSzombathely plants. The company also wants to build a new logistics center and a plant in the localClaudius Industrial park by investing several billions of Forints. The decision is in line with Jabil Circuit

Inc' recent purchase of Phillips' printed circuit manufacturing branch. (NG 1) R.G.FinMin wants effective tax collectionThe finance minister has asked the heads of the tax and customs offices what measures they have inmind to collect taxes more effectively and to prevent goods subject to excise tax from illegally enteringHungary from outside the EU, the ministry reported to MTI yesterday. Minister Tibor Draskovics metwith the chiefs of both authorities and called on them to tighten up controls and pursue tax evadersmore firmly. The customs office is planning a series of measures to block the illegal import of productssubject to excise taxes from countries outside the EU, but is not yet ready to release details. (MTI; MH1, Nv 1, Vg 4)

IT Businesses propose tax breaksHungarian software developers could be exporting five times the USD 150 million worth of productsthey currently export if the government were to accept a proposal by the Association of IT Businesses

(IVSz) creating more tax breaks and making more grants available to the industry, in 2004, IVSzchairman János Koka said yesterday. The association has proposed the introduction of tax breaks for exporting software developers generating added value off more than Euro 15,000 per employee per year. (Econews; Vg 1, Ng 5, MH 10)

Average income up 11.8% in 2003 According to the 4.5 million personal income tax return sheets submitted last year, private individualshad Ft 5,560 billion income in 2003, which is 10.9% more than in 2002, according to Hungarian taxoffice APEH. The average income per person in 2003 increased by 11.8% to Ft 1.312 millioncompared to 2002. From all incomes listed on tax return sheets, 91% is payment-related. 25% of individual taxpayers had gained exemption from paying taxes. The actual budget revenues frompersonal income taxes reached Ft 1,192 billion in 2003. (NG 3) R.G.

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Budget deficit rate increasedFinance Ministry increased the rate of budget deficit to 6.1% of GDP from previously counted 5.9%,according to the bill of annual accounts. The deficit calculated according to EU's methodology mayhave an effect on this year's deficit, too. Namely, Finance Minister Tibor Draskovics said onWednesday, that the deficit could be decreased by 1.3 percentage points this year. Latest forecast of the Ministry for 2004 budget deficit took 4.6% but this may be hard to fulfill after the change of lastyear's figure. (Vg 4) G.R.

Program saves 4,197 jobs to date A crisis management program of the Labor Ministry initiated in February has granted Ft 758 million to53 applicants so far, saving 4,197 jobs, Labor Minister Sándor Burány announced. The program isaimed at preventing major job cuts by subsidizing workforce at companies who should layoff at least20% of their stuff. The maximum subsidy can be Ft 71,550 per employee and can be granted for amaximum period of 4 months. (NG 4) R.G.

Productivity level in Hungary - 59%Big companies in Hungary have a productivity level of around just 59%, which corresponds to 104 lost-time days per employee each year, according to a report by Czipin and Proudfoot Consulting.International optimum is 85%, whereas the hypothetic 100% would be if every single second of working time were spent with effective work. According to the report, Hungary loses 8% of its GDP, or over Ft 2 trillion a year, because of low productivity. (MTI; MH 11)

23.4% more pre-tax profit for companiesHungarian companies which showed a profit last year had a combined Ft 3,357 billion pre-tax profit,23.4% more than in 2002, a survey of the Hungarian tax authority (APEH) shows. Results of plc-s (Rt.)were in line with those of 2002 while ltd-s (kft) taxable income grew by 8%. Loss-making companieshad pre-tax loss of Ft 880 billion last year, 5.6% less than in 2002. Loss at ltd-s, Ft 471 billion, wasless than a third of that of 2002, while the loss at the plc-s grew by 62% to Ft 303billion last year.(Econews; Vg 4, Nb 16)

FinMin opposes Sarkozy's corporate tax proposalThe finance minister sees no legal ground for realizing his French counterpart's concept to stop newEU member states which have corporate taxes below the EU average benefiting from the cohesion

fund, an economic daily said yesterday. "The EU regulations rule out any link between corporate taxrates and access to EU funds," Minister Tibor Draskovics told Világgazdaság. His comment came inthe wake of Nicholas Sarkozy's Sunday remarks that he would propose introducing this sanction at anEU finance ministers' meeting this weekend. This proposal would run contrary to the EU cohesionpolicy, which the French also consider as important, Draskovics said. (MTI)

POLITICS

Gyurcsány, Draskovics meet on 2005 budgetFerenc Gyurcsány, the Hungarian governing coalition's nominee to become the country's next primeminister, and Finance Minister Tibor Draskovics will hold talks with ministers on next year's draftbudget this Sunday. The meeting will be held during the weekend because the government is runningagainst deadlines to hand next year's tax law proposals to lawmakers next week and the budget draftby Sept. 30., said Ferenc Pichler, spokesman for the Finance Ministry. This year's budget won't be

discussed, he said. (Bloomberg; Nv 1, MH 9, Vg 4, Nb 1)Fidesz criticizes Romanian electoral lawThe leader of Fidesz's team of foreign affairs experts expressed criticism over Romania's electoral lawyesterday. Zsolt Németh told a press conference that the law made it "extremely difficult" for Romania's Hungarian Civic Alliance (MPSz) to enter general elections in November. He was speakingafter meeting with an MPSz delegation headed by chairman Jeno Szász and Zsolt Szilágyi, an MP inthe Bucharest parliament. Németh said the recent law might impact Romania's EU admission andcalled it "rather sad" that the law had been passed with support from the Hungarian Democratic Unionof Romania (RMDSZ). (MTI)

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DOMESTIC

New police chief appointedThe prime minister designate appointed Brigadier General László Bene to the helm of the nationalpolice force yesterday, effective on September 16. The brigadier general spent 12 years in senior positions on the police force and served as a law enforcement and division chief within the Interior

Ministry between 2002 and 2004. He is a graduate of the police academy and holds a doctorate in law.(MTI; MH 1, Nv 1, Nb 1, Vg 4)

Law should protect against hate politicsHungary's effective laws fall short of protecting society adequately from propagandists of fascist views,the justice minister said yesterday. Péter Bárándy recalled that the Justice Ministry proposed imposingstrict constitutional sanctions on those inciting hate, last spring but the Constitutional Court ruled outthe relevant amendments to the Penal Code. "The court's ruling blocked all attempts to this effectunless the Constitution is amended or the EU passes regulations that are binding on Hungary," theminister said. The neo-Nazi group "Hungarian Future" has asked for and received a police permit tostage a demonstration in front of Budapest's House of Terror museum on October 15, the 60thanniversary of a fascist takeover of Hungary. (MTI; MH 1, Nv 1)

7days, 2004. szeptember 13

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