7days, 2005. május 17

7/28/2019 7Days, 2005. május 17.

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1051 Budapest, Hercegprímás utca 19 Tel: 354 3290 Fax: 354 0130 Mail: [email protected]

09 May 2005Business PM outlines new employment policies

Richter Q1 net rises on East EuropeContintl Teves wins GM/Toyota contractsBorsodChem/Linde Ft 32 bln investmentDémász Q1 profit down on power costs

Gyermely wins lawsuit against Mary-KerHerukon to close, 600 laid off Tatabánya to build Ft 4 bln plazaLe Belier Ft 1.5 bln new plantMÁV may face penaltyAuchan agrees to negotiateFeeble share market creeps 1.2% forward5 hopefuls for BKV chip tenderStrabag to build dorm in GyöngyösDeloitte moves to new HQMatáv changes name to Magyar Telekom

Anomaly in Paks power plantEconomics 40% of waitstaff's tips for gov't Industrial output up adjusted 3.9% yr/yrEIB hesitant to ink Metro loan agreementSzolnok gets Ft 600 mln for E-adminApril public finance deficit Ft 225.1 bln

Politics Fidesz/Christian Democratic win New Generation supports Hempseed Assoc.

Domestic Trade Unions: new airspace control structure unsafe

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10 May 2005

Business PM prescribes health care reformSingle phase M4 could save 15%Pannonplast gets Ft 3 bln orderRichter builds Ft 9.1 bln R+D facilityBridgestone to build plant in Hungary

Egis to get tax break through 2009MKB liquidates Croatian unitPET expands production of foodDrinks manufacturers aim to soften lawCo-ops bail out farmersCsányi deepens dairy interestsDunaferr CEO outlines plans for vertical integrationSecurity firm introduces GPRS-based systemMOL, OMV may bid together for EnergopetrolBudapest Bank opens VIP accounts

Nobilis buys NET MédiaEconomics Rise of monetary base decelerates in AprilHotel industry on the way to recovery

Politics Gödöllö stately home may lack presidentDomestic High school exam leaked to Internet

Army training center moves to SzentendreNATO praises air controllers and fighter jets

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11 May 2005

Business No OMV joint bid for Energopetrol - MOLUnion Q1 revenue from premiums up 72%MFB launches Ft 25 bln credit programHenkel exports up 10% in Q1HVB Bank introduces 4 new credit cards

Herend secures Ft 150 mln grantsSME devp’t agency invests Ft 1.5 bln so farGVH fines paprika co’s Ft 10 mlnMTV lays off 185 staff FHB debt rating may be downgraded - Moody’sBalatontourist stake for saleHungarian foodstuff pricy for restaurantsMÁV tender deadline todayFt 2.3 bln for road reconstruction

Economics Three-month trade deficit down Euro 120 mln

Businesses support gov’t plans to curb illegal work‘Stability concerns’ in Hungary’s economy - MerrillPolitics Exams to change, Ed. Minister stays put

Health reform financing uncertainMPs set up committee to investigate OrbánEthnic Hungarians may get passport

Domestic Regional education center gets EU subsidyLevel 3 flood alert in place along Tisza

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12 May 2005

Business Rába: loss despite rise in revenue Ten preliminary bids made for AntennaSynergon profit rises on cost cutsUnion Ins increases fee revenueEgis fiscal Q2 net rises 56%

Audi turns out 7% more engines in Q1Greek village opens in BalatonfüredLaird to produce in SzombathelyMore MÁV/Bombardier/Stadler talksSale of Sárvár waterMTI revenues decreaseGround broken for Ft 3 bln office park

Economics Importers can't submit own VAT returns Járai blames CPI on seasonal effectsConsumer prices up 3.9% yr/yr in April

Gov't approves commuting pass10,000 communal workers at Lake BalatonProperty barometer shows market contractingGov't may make drugmakers agreement lawHungary exports mainly to EU countries Járai says 2010 euro adoption achievableKSH perplexed by Merrill Lynch criticism

Politics Constitutional change re hate speechDomestic Japanese school opens in Budapest

Maths final exam annulledFighter plane crashed near Kecskemét

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13 May 2005

Business Italian region to fight to keep ‘Tocai’M Telekom Q1 profit rises 28%Bosnia to start talks with MOL- INAGraphisoft Q1 profits up 6.5% yr/yrCIB employee share scheme ends

Antenna Q1 net earnings down a quarterbuw comes to HungaryWarning for VodaphoneBHG expands plant in SzekszárdStill no new MR presidentOrganization to boost investments in AsiaConsortium to help SMEs

Economics Transparency aim of new tip systemSpanish investors to enter real estate market10.4% more guest nights spent in Q1

Rise in advertising expenditureMulling of one tier tax systemEIB grants Euro 77 mln loan for m’wayNew waste management plant openedA look at new healthcare program

Politics ’Gov’t thriftiness jeopardizes final exams’Domestic Balaton water approval not urgent

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09 May 2005Business

PM outlines new employment policies

Prime Minister Ferenc Gyurcsány, speaking at the governing Socialist party MSzP's nationalcongress, outlined two new policies concerning young people needing help to enter the job market

for the first time and measures to combat bogus employment contracts. Under the government'snew Start program, entrants to the labor market should pay just 15 % income tax in the first yearrather than the current 34 %, while in the second year this should rise to 25 %, Gyurcsány said.Gyurcsány noted that while Hungary's level of unemployment is below the EU average, the numberof people getting jobs for the first time was low and the jobless rate for young people worse. (MTI;NG 1, MH 1, Nb 2)

Richter Q1 net rises on East Europe

Gedeon Richter Rt said first-quarter profit rose 13 % as revenue picked up in Eastern Europe. TheHungarian company said U.S. sales declined 40 %, and would probably fall this year. Net incomerose 13 % to Ft 8.61 billion, or Ft 450 a share, from a restated Ft 7.59 billion, or Ft 404, in the year-earlier period, the Budapest- based company said yesterday. Earnings were helped by a 54 %increase in Central and Eastern Europe sales. The company, which expects sales to rise 10 % in

dollars this year, is facing increased competition in the U.S., analysts said. (Bloomberg; NG 7)Contintl Teves wins GM/Toyota contracts

Car parts manufacturer Continental Teves Hungary Kft has won contracts worth billions of Forints toproduce sensor clusters for General Motors and Toyota, Lukács Szalontay said on behalf of Continental. The Veszprém-based company will start the delivery of the three million car parts in afew months, Szalontay said. Continental employs almost 1,000 people in Hungary and the companyprojects a net revenue of Ft 55 billion and a profit of Ft 10 billion for this year, Szalontay said. (Ng4) M.K.

BorsodChem/Linde Ft 32 bln investment

Chemicals company BorsodChem Rt and industrial and medical gas maker Linde Gaz Hungary Rtwill launch a joint Ft 32 billion investment in cooperation with the Economy and Transport Ministry,the minister János Kóka announced. The high-tech investment will result in the creation of 100 new jobs. Test-production of the highly developed industrial equipments may start as early as the end of this year, Kóka added. Additional details of the investment will be published next week. (MH 2, Nv3, Nb 12) P.O.

Démász Q1 profit down on power costs

Electricité de France SA's Démász Rt unit, the biggest power distributor in Hungary, said first-quarter profit fell more than expected as the government limited prices the company could chargeto less than its cost increases. Net income at Szeged, Hungary-based Démász declined to Ft 1.055from Ft 1.118 billion a year earlier, the company said in a statement today. The company wasexpected to earn Ft 1.1 billion, according to the median estimate in a Bloomberg survey of fiveanalysts. Profit margins shrank at Démász after Hungary in February capped the price power

suppliers can charge households. (Bloomberg; NG 7)Gyermely wins lawsuit against Mary-Ker

Budapest Court of Appeal approved the decision of Budapest City Court in the lawsuit of pastaproducer Gyermely Rt against Mary-Ker Kft. Gyermely launched the lawsuit, because Mary-Ker soldits Korona pasta in a package that was almost identical with Gyermely's package. According tocourt decision, Mary-Ker must remove all Korona products from each shop in Hungary. As thelawsuit has been going on since 1998, Gyermely will also demand a huge financial compensationfrom Mary-Ker for dishonest market behavior over the years. (Ng 5) M.K.

Herukon to close, 600 laid off

Garment trade firm Herukon Rt closes its doors in Sátoraljaújhely, north eastern Hungary, laying off 600 people, chairman and CEO Csaba Pétervári announced Saturday. Several customers failed to

pay to Herukon, owing the company some Ft 80 million by the beginning of this year. Meanwhile,Herukon's own debt has run up to Ft 70 million. The company's management is mulling the

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relocation of production to Slovakia or the Ukraine, where circumstances are more favorable for agarment trade firm. (Nb 12) P.O.

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Tatabánya to build Ft 4 bln plaza

The municipality of Tatabánya, west Hungary, has given a green light to a Ft 4 billion investment tobuild a commercial and entertainment center in the city. The investor will be Bischoff Hungary Kft,which will build the 25,000 sq.m. facility near the railway station. Besides shops, the plaza will hosta multiplex movie, several restaurants, a bowling court, an Internet café and a wellness center. Theplaza is expected to be finished by September 2006. (Ng 17) M.K.

Le Belier Ft 1.5 bln new plantBV Hungary Metal Works Kft, majority owned by French aluminum conglomerate Le Belier, isplanning to move production from a downtown location in Szolnok, eastern Hungary, to theindustrial park of the town, Deputy Plant Manager András Dekovics said. The company will invest Ft1.5 billion in a new plant; the general contractor for the construction is N+N Kft. An additional Ft 1.5billion has been earmarked for production lines. If it were not for a 15-year agreement with the localmunicipality in which the French group agreed to employ a staff of 400-450 in the long run, thecompany would probably have chosen to move the plant to another Le Belier subsidiary in Kikinda,Serbia, where labor costs are considerably lower, Dekovics added. (Vg 8) P.P.

MÁV may face penalty

Hungary may risk a full inquiry and a possible penalty of several billion forints because theHungarian State Railways Rt (MÁV) has violated principles of railway liberalization, according to aletter by Arnold Vinois, the EU's transportation commissioner. Vinois pointed out that the localauthorities should guarantee similar conditions for private and state-run railroad companies. Privaterailroad company Floyd Kft has appealed to the commissioner, claiming MÁV prevented Floyd'scontainer train to reach its target in time, which resulted in a hefty loss for the company's Austrianclient. Moreover, the Austrian client plans to make Floyd pay for its losses of around Euro 40,000.According to the Economy and Transport Ministry, Hungary is prepared to give satisfying answersto all questions raised by the commissioner. (Nb 1) P.O.

Auchan agrees to negotiate

French-owned hypermarket operator Auchan Hungary Kft started negotiations with suppliers aboutoverdue liabilities last Friday after six companies initiated the liquidation of the retail giant at theBudapest City Court. The suppliers believe this could mark the beginning of a successful agreement

regarding the disputed payments, which they believe occurred as the result of problems in theinvoicing process, according to István Kovács, top executive of Debreceni Hús Rt and Szole-MeatKft, both owned by meat industry investor Gyula Román. Auchan owes Ft 30 and Ft 17 million tothese, respectively, in addition to a Ft 71 million overdue payment to Immobilia 1904 Kft, anotherRomán interest. (MH 12) P.P.

Feeble share market creeps 1.2% forward

Hungarian shares inched up at the end of a week that saw sideways and lackluster trading and amixed bag of earnings. The bottom fell out of Friday's session, which recorded among the bourse'slowest turnovers. Mortgage bank FHB Rt's first quarter earnings inspired investors in thepenultimate session and proved to be the main out performer during a week that saw major lossesin the tech sector and aimless trade in top caps OTP bank Rt and MOL Rt ahead of their quarterlyreports next week. Plastics firm Pannonplast Rt sharply narrowed its losses and kept its share price

stable, while drugmaker Richter Rt's uneven results failed to produce any notable reaction byinvestors, though the stock had risen substantially in advance of its report out on Friday. (MTI; Nv5)

5 hopefuls for BKV chip tender

By the end of May, only five of the current six companies, including Electronic Data Systems (EDS)Hungary Kft, MÁV Information Technology Kft, Sagem Hungary Kft, the German Scheidt&BachmannGmbH, the Spanish Telvent GIT SA, and the German T-Systems, can hope to win the Ft 20 billiontender for chip cards and e-tickets announced by Budapest Transport Rt (BKV). The winner will bepublished by mid-August, and the test run of the new system may take place on the yellow subwayline from the beginning of next year. (Fri.'s Vg 1) P.O

Strabag to build dorm in Gyöngyös

Construction company Strabag Rt has signed an agreement with Károly Róbert College of Gyöngyös, northeast Hungary, to build a student hostel in the city for 600 people. The constructionof the hostel's first building will start this spring and will cost Ft 1.5 billion to be finished by January

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2006. The average rental fee of the rooms will be Ft 36,000 per month. The rooms of the newhostel will vary from 2-3 bed rooms without bathroom to 1-2 bed rooms with bathroom. (Ng 18)M.K.

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Deloitte moves to new HQ

Consulting firm Deloitte Kft has moved to a new HQ building from today, the company announced. The company's management decided to move from Nádor utca, Dist. 5, to Dózsa György út, Dist. 6,due to the increasing number of staff. Deloitte will rent the 3,300 sq.m. office with a deep garagefor five years. (Ng 17) M.K.

Matáv changes name to Magyar Telekom

Matáv Rt, Hungary's incumbent telco, officially adopted its parent company's moniker on Friday:the company will now be called Magyar Telekom Rt. Matáv's majority owner is Germany's Deutsche Telekom. Matáv Pont shops became T-Pont shops from Friday, and Matáv's subsidiaries alsoadopted new names: Matáv's internet subsidiary Axelero became T-Online Magyarország, and cable TV company MatávkábelTV was renamed T-Kábel Magyarország. (Econews; Budapest Business Journal)

Anomaly in Paks power plant

Hungary's only nuclear power plant said that there had been an anomaly in its block No. 1, shutdown for maintenance operations in April. The block was put offline on April 9 and the anomalyoccurred during the cooling process, the company said in a statement on Friday. An expert team,set up to investigate the affair, concluded that the disparity in water temperatures in two pieces of equipment exceeded the limit specified in the technical rules of operation. The team, composed of company staff and experts of the National Atomic Energy Office, qualified the event as an anomaly,the lowest level on the seven-grade International Nuclear Event Scale (INES), having but aninsignificant impact on safety. (MTI; MH 17)

Economics

40% of waitstaff's tips for gov't

Under a government plan to start requiring catering businesses to add a gratuity to their receipts --compelling them to pay tax on this income as well -- 60% of tips will stay in the apron pockets of waitstaff, and the rest will go to the state. Waitstaff will pay 20% of their tips as VAT and 25% aspersonal income tax, Zoltán Somogyi, who heads the Hungarian Tourism Office, said on Friday.Workplace cafeterias will not have to add tips to their receipts, Somogyi said. But other restaurantsand catering businesses will have to list a 0-15% gratuity. Somogyi said the new rule would notcause a big rise in prices, discouraging people from eating out, lowering restaurants' turnover and,in turn, tax revenue. (Econews; NG 1, Fri Vg 1)

Industrial output up adjusted 3.9% yr/yr

Hungary's industrial output rose by a seasonally- and working day-adjusted 2.1% in March fromFebruary and was up 3.9% from March 2004 according to working-day adjusted preliminary figuresof the Central Statistics Office (KSH) published on Friday. According to unadjusted figures industrialoutput in March 2005 rose 1.4% from a year earlier. In February 2005, industrial output was down0.6% from January according to seasonally- and working-day adjusted figures and rose 1.3% yr/yraccording to working-day-adjusted figures. On an unadjusted basis, February output was up 1.0%yr/yr. (Econews; NG 7)

EIB hesitant to ink Metro loan agreement

The European Investment Bank (EIB) is reluctant to sign the planned financing agreement to extenda loan covering 75% of the Metro 4 project costs until the government and the Budapest citycouncil reach consensus as to how to split the costs of the second phase of the subwayconstruction, broadsheet Népszava reported. A few years back, the state and the city agreed to paya respective 70% and 30% of the costs associated with the first section between the Kelenföldi andKeleti railway stations and not covered by the EIB loan, however the financing of the next sectionfrom Keleti to Bosnyák tér is still unsettled. Without such an agreement, EIB reportedly believesthere is no guarantee that the project will be realized in its entirety, the only way it makes senseaccording to the bank. (Nv 4) P.P.

Szolnok gets Ft 600 mln for E-admin

The municipality of Szolnok, central Hungary, has received around Ft600 million in state subsidy to

set up electronic administration, head of the Organization and Legal Department, Andrea Rácz,said. As part of the project, the municipality will be getting a new computer network, with a directlink to the local land registry, the document office, and governmental portals. Users can log onto

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the network in public institutions with Internet access. Similar development projects will getunderway in 40 cities all over the country during the upcoming months. (Nb 6) P.O.

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April public finance deficit Ft 225.1 bln

Hungary's public sector, excluding local councils, registered a GFS cashflow-based deficit of Ft225.1 billion in April, bringing the four-month deficit to Ft 710 billion, Finance Ministry figurespublished on Wednesday show. The four-month public finance deficit was equal to 69.4% of the full-year target. The central budget deficit was already at 84.2% of the full-year target of Ft 700 billion. The figures are better than the ministry's earlier forecast of a Ft 244.6 billion deficit for April and aFt 729.2 billion four-month deficit. The central budget deficit was Ft 215.9 billion in April, compared

to the ministry's Ft 222.4 billion forecast. (Econews)Politics

Fidesz/Christian Democratic win

Mátyás Firtl, an MP representing main opposition party Fidesz and chief ally the ChristianDemocratic People's party, won by a huge margin the second round of a by-election held yesterdayin the northwest town of Sopron and its outlying areas, an official of the county of Gyor-Moson-Sopron's election office said. Firtl won the election with 72 % of the vote and on a turnout of 27 %. The governing MSzP's candidate came second with 18 %. (MTI; Nb 1, MH 3, Nv 3)

New Generation supports Hempseed Assoc.

The liberal youth organization New Generation yesterday joined a demonstration by the Hempseed

Association, a lobby group for the decriminalization of soft drugs on Margaret island. The youthwing of the governing party SzDSz wants to protect society rather than punish it, New Generation'sleader László Csozik said. It is time to understand that a network of wide-scale preventive,educational and treatment programs are needed to help Hungarian youth rather than strictpunishments, Csozik said. (MTI; MH 6)

Domestic

Trade Unions: new airspace control structure unsafe

The new airspace management structure that will replace the current system at FerihegyInternational Airport on Thursday seriously threatens aviation safety, two control staff trade unionsclaim in a petition submitted to Prime Minister Ferenc Gyurcsány. HungaroControl, the companythat operates the air traffic control system at the airport, have announced measures aimed to allow

aircraft to take off and land more frequently to accommodate fast growing traffic, as Budapest isbecoming an ever more popular travel destination. These include reducing the minimum distancebetween airplanes from 5 miles to 3, new designated routes, and designating a higher waiting areafor aircraft preparing to land to reduce noise on the ground. The trade unions claim thatHungaroControl did not conduct any risk analyses before approving the plan, the control tower isshort-staffed, and the personnel were not trained properly for the new procedure. (Nv 5) P.P.

10 May 2005BusinessPM prescribes health care reformIn a parliamentary speech, Prime Minister Ferenc Gyurcsány announced 21 measures for healthcarereform that the government will take as part of its ‘100 steps’ program. The premier talked about

the current ‘emergency’ situation that forbid any more delay in healthcare reform. The governmentis planning to reform the drug subsidy system, buy more ambulance cars and helicopters, and aimsto establish more emergency care units. Financing for this is still unclear, said business daily NapiGazdaság since a Ft 20 million deficit has accumulated as a result of the drug subsidy, and if spending continues at this rate, it might reach Ft 60 billion by the end of this year. An oncologycenter is planned in Veszprém, and 90% of homes should be reached by an ambulance within 15minutes, as opposed to the current 75%. The health care reform would facilitate the reduction of the Ft 341 billion deficit of the social security system. (NG 3; BBJ online) E.C.

Single phase M4 could save 15% The European Investment Bank (EIB) has finally agreed to finance the project for the construction of Budapest’s fourth metro line (M4) as a two-phase project, according to unnamed sources. However,project manager László Gulyás conceded that the government and the Budapest municipality would

save as much as 15% of the cost by constructing the new line in one phase. Organizing theconstruction of the line in a single stage would allow the city to demand lower prices frombusinesses because of the bigger contracts, saving the city 10-15%, he said. The European

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Investment Bank (EIB) will finance 75% or Ft 225 billion of the budget, and 70% of the remaining Ft75 billion budget will be financed by the Government and 30% by the Budapest municipality. TheEIB is providing the Euro 875 loan for a 20- to 25-year run, with a 7- to 8-year grace period.(Econews; MH 3)

Pannonplast gets Ft 3 bln orderPlastics maker Pannonplast Rt said it received an order for packaging worth almost Ft 3 billion froma leading international dairy company. Budapest-based Pannonplast expects the order, which lasts

until 2009, to add as much as Ft 400 million to sales in the second half of this year, and boostrevenue by Ft 600 million to Ft 1 billion a year through 2008, the company said yesterday in a stockexchange statement. Pannonplast did not identify the dairy company. The plastics maker last yearhad its third consecutive annual loss as slowing economic growth in western Europe cut demand forproducts such as television sets and computer monitors. The company, which has been sellingunits, real estate assets and equipment to stem losses and pay off debt, is trying to expand inBulgaria and Romania, where it plans to focus on the packaging industry. (Bloomberg; NG 12)

Richter builds Ft 9.1 bln R+D facilityDrug maker Richter Gedeon Rt launched construction on a Ft 12 billion research and developmentunit at its factory in Budapest yesterday in the presence of Prime Minister Ferenc Gyurcsány.Richter will spend Ft 3 billion on the facility’s laboratory, to be opened in H1 next year. A year later,Richter will open the facility’s Ft 9.1 billion, 19,000 sqm chemical research centre, Richter CEO ErikBogsch said. Last year Richter spent 8.6% of its sales on R+D, an area in which it employs 700people. Hungary’s biggest patent holder, Richter has registered 1,152 patents in Hungary since1970, and holds nearly 10,000 foreign patents. (Econews; NG 11)

Bridgestone to build plant in Hungary Top Japanese tire maker Bridgestone said it would spend Euro 190 million to build a plant inHungary to meet rising demand, Reuters reported from Tokyo yesterday. With the new plant inHungary, which will produce radial tires for passenger cars and light trucks, Bridgestone will have51 plants in 24 countries. ‘The [Hungary] plant will serve the growing demand for high-performanceand large-rim sized tires for passenger cars in Europe, as well as increasing the group’s overallsupply capacity there,’ the spokesman said. The plant will be the second tire plant in central Europefor the group, which also produces tires in Poznan, Poland. (Econews; NG 5, Nv 5, MH 11)

Egis to get tax break through 2009Egis Rt, Hungary’s second-largest drugmaker, said the country’s government has approved itsrequest for tax breaks after investments through 2009. Egis, which plans to spend Ft 6.1 billion inupgrading and expanding production, will be able to deduct 35-40% of the cost of its investmentfrom its corporate taxes through the end of the 2009 financial year, the company said in a stockexchange statement. Hungary received permission before entering the EU to give tax breaks tocompanies that invest in production. Gedeon Richter Rt, a bigger rival of Egis, already receives thededuction. (Bloomberg)

MKB liquidates Croatian unit The Zagreb Court of Registration struck the former MKB Bank Rt subsidiary Convest Banka from itsregister, after the Croatian bank was wound up, MKB announced yesterday. MKB acquired a 66.7%stake in Convest Banka through a capital injection in 1998. In 2001 MKB raised capital again, andbought out the minority stakeholder, becoming the bank’s sole owner. In January 2002 MKB soldthe Convest Banka loan portfolio, then began winding up the bank at the end of 2003. (Econews;

NG 4)PET expands production of foodPET Hungária Kft is to establish the largest-capacity dry animal food production factory in Hungaryin the Kaposszekcsö Industrial Park (KIP) near Dombóvár. According to Napi Gazdaság information,PET CEO Ferenc Kedves and KIP Kht CEO Nándor Papp have already signed a contract for thepurchase of the land. The investment, of over Ft 600 million, will also consist of a logistics center.As a result of the capacity improvement, PET will be able to increase its overall yearly production to400 thousand tons and is planning on increasing its workforce by another 40 staff. The companystarted operating in 2003, employing only 20 workers in 3 shifts, but the number of employees hasnow risen to 60. (NG 5) E.C.

Drinks manufacturers aim to soften law Two major professional organizations of the fruit juice and mineral water producers of Hungary

have turned to the European Commission (EC). The Hungarian Soft drink, Fruit juice and MineralWater Producers’ Association (MÜSz) that the new law on the product fee is practicallyincomprehensible and ambiguous. According to the European Non-Alcoholic Beverage Production

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Association (UNESDA), the Hungarian product fee law has not been harmonized with the EU law,and furthermore the Hungarian government never fulfilled the notification obligation with the EC. Inaddition, the new law is anti-competitive, say the organizations, and limits the basic principle of free movement of goods and services. UNESDA urges the EC to take all actions necessary to makeHungary harmonize with the EU principles. The Ministry of Environment claims the new law isindeed compliant with the EU law. (NG 5) E.C.

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Co-ops bail out farmersSavings co-operatives helped some 70 thousand agricultural entrepreneurs to maintain theirliquidity by pre-financing their area payment last year - transferring about Ft 14 billion, which isabout 30% of the Ft 46 billion total area payment subsidy. According to Endre Kiss, CEO of theNational Savings Cooperatives Federation (OTSz), the co-operatives want to carve out the sameportion of the EU subsidy this year, which has, meanwhile, swelled to Ft 150 billion-Ft 170 billion. The subsidy required may reach 70-95%, depending on the classification of the source co-

operative. (NG 5) E.C.Csányi deepens dairy interestsOTP Bank Rt head Sándor Csányi is believed to be in talks to buy out Sole Hungária Rt, the secondrank dairy company, business daily Világgazdaság said quoting unnamed sources. Sole is on paper93% owned by the Luxemburg-based Interlab SA, however, it is effectively run by a group of Italianinvestors, who are now said to be mulling a complete exit from what they see as an increasinglytouch-and-go Hungarian dairy market. The alleged takeover bid is widely seen as part of Csányi’sbroader push to gain control of the domestic dairy segment, the first stage of which came when theOTP chief earlier acquired Új-Mizó Rt. Sole had estimated sales of Ft 36 billion last year, which,added to Új-Mizó’s annual revenues Ft 18 billion, would create a company equal to the marketleader Friesland Hungária Rt with its Ft 54 billion. (Mon Vg 1; BBJ ) S.F.

Dunaferr CEO outlines plans for vertical integration

Steelmaker Dunaferr Rt will continue to buy out minority stakeholders in companies in which itowns a majority stake, with the aim of making the company more vertically integrated, Dunaferr’srecently appointed CEO Sushil Trikha said last week. Dunaferr will reduce its costs and increase itsoutput, expanding its product range as well. The company will also start buying steel, in addition tomaking its own. (Econews)

Security firm introduces GPRS-based systemÖrmester Security Kft is launching a new GPRS-based remote management solution which will allowthe company to carry out as many as 228 checkups on a single day at its secured sites, saidmanaging director Zsolt Mészáros. Örmester, the second company to offer this solution in Hungary,will use the technology through its Slovak subsidiary to secure Samsung’s local plant in Galanta.Örmester was set up in 1990 and today employs over 1,000 staff. (Mon Vg 7) S.F.

MOL, OMV may bid together for Energopetrol

OMV AG, central Europe’s biggest oil company, may join with MOL Rt and Croatia’s INA IndustrijaNafte to bid for a stake in Energopetrol, Bosnia’s biggest oil and oil-product trader. ‘We took noticeof a possible joint bid with MOL,’ Thomas Huemer, an OMV spokesman, said in telephone interview,adding that they had taken no decisions and were awaiting information from the government. ABosnian government committee found a joint bid by MOL and INA to be the best financially.(Bloomberg; NG 11, MH 13)

Budapest Bank opens VIP accountsBudapest Bank Rt has established a private banking service at its Andrássy út branch. The bankoffers special investment solutions for private persons with savings of at least Ft 20 million. TheseVIP clients can receive special investment solutions and information based on their inclination totake risks, and they help maintain and modify clients’ portfolios in the future. (NG 4) E.C.

Nobilis buys NET Média

Less than a month after acquiring full ownership of news portal Index.hu, top investor Kristóf Nobilishas bought out NET Média Rt, the company which runs business website Portfolio.hu, through hissubsidiary SydInvest Rt. Nobilis took a 49% stake in Index.hu in January for an alleged Ft 1 billionand bought the remaining 51% for Ft 600,000 in April. NET Média Rt is expected to continue as anindependent company in the future. (Mon Vg 5) S.F.

EconomicsRise of monetary base decelerates in AprilIn April the monetary base increased by Ft 57.8 billion, from Ft 1,945.9 billion in March to Ft 2,003.7billion. The annualized month-on-month growth index of the monetary base, derived from trenddata, stood at 125.5% in April, down 4.2 basis points on the preceding month, the National Bank of Hungary reported yesterday. Of the components of the monetary base, the monthly average stockof currency in circulation rose by Ft 31.6 billion to Ft 1,491.5 billion, the monthly average of current

account balances rose by Ft 7.3 billion to Ft 477.6 billion and the monthly average stock of overnight deposits rose by Ft 18.9 billion to Ft 34.6 billion. (Econews; NG 4)

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Hotel industry on the way to recoveryHungarian hotels saw an increase in both revenue per available room and guest nights, accordingto the Central Statistics Office (KSH). The overall occupancy rate was 50%, with four- and five-starhotels in Budapest reporting occupancy rates of 60% and above, which compares with 53-54% ayear earlier. Rooms were booked at an average price of Ft 14,000 including VAT, a significant Ft1,600 increase on the corresponding months of 2004. A room in a four-star typically cost Ft 11,600-13,000, while in a three-star establishment guests paid Ft 4,900-8,600 per room per night. Revenue

per available room averaged Ft 7,000 VAT included, up nearly Ft 900 year-on-year. In total, hotelsregistered 7% more bookings in the first four months than a year earlier. (BBJ online; NG 4)

PoliticsGödöllö stately home may lack president The non-profit organization operating the historic royal stately home in Gödöllo, east of Budapest,may not be able to appoint a new director by May 23, when the mandate of its present topexecutive László Körösvölgyi will expire. The reason for the delay is that last Friday’s AGM of theGödölloi Royal Castle Kht was boycotted by the representatives of the town council, which isregistered as the co-owner of the organization together with the Cultural Heritage Ministry. Not onlywere the personnel issues on the agenda postponed, but the owners were also unable to agree onthe 2004 annual report. The activities and achievements of Körösvölgyi, appointed in the first yearof the Orbán administration seven years ago, have been the main bone of contention between the

ministry and the town’s strongly Fidesz-affiliated local municipality. (Nv 6) P.P.DomesticHigh school exam leaked to Internet The first dual-level high school graduation exams in Hungary took place yesterday with 3,326 highschool graduates going for the advanced level test in Hungarian literature and language and 87,500taking the ordinary level exam. Supposedly highly confidential, the test questions were available fora price of Ft 50,000 on the previous weekend, and were also posted on the Internet, according tobroadsheet Magyar Hírlap. The newspaper claims that although schools are no longer informed of the exam questions via television broadcast, national public channel operator Hungarian TelevisionRt (MTV) got hold of the test sheets early on Monday morning. Although none of the country’s highschools reported irregularities occurring on the premises, the Education Ministry initiated a policeinvestigation of the matter. To make things worse, Tuesday’s math questions were also available on

certain websites by Monday night, the paper added. (MH 1, Nv 1) P.P.Army training center moves to Szentendre The Armed Forces have allegedly decided to close down the military training center of Tapolca,western Hungary, the last such establishment for newly recruited privates, daily newspaperNépszava reported. New personnel will be sent to a school in Szentendre, north of Budapest, whichhas hitherto only trained junior officers. The move will affect several hundred soldiers based in Tapolca, who, according to the paper’s information, will be officially informed of the decision onWednesday. Defense Ministry spokesman István Bocskai denied that a final commitment had beenmade, but he admitted that the ministry was seriously considering such a move and would goahead with it if training capacity in Szentendre proved sufficient to handle all new recruits. (Nv 4)P.P.

NATO praises air controllers and fighter jets

NATO found the cooperation between Hungarian and allied air controllers exemplary on Saturdaywhen Hungarian MiG-29 fighter jets ‘captured’ a light airplane after it had broadcast a wrong set of codes, triggering a NATO defense alarm, a Defense Ministry spokesman said yesterday. The eventwas unprecedented since Hungary joined NATO, and coincidentally preparations are currentlyunderway for a test of the reaction time of Hungary’s air defense system, István Bocskai said. TheNATO air control center evaluates cooperation between air controllers in every such incident andthe chief of the center in Poggio Renatico in Italy found both the cooperation and the execution of the task in Hungary exemplary, he added. The two MiGs took off from Kecskemét after a two-seaterlight plane flying between Jakábszallás and Fertöszentmiklós in the direction of the Austrian borderfailed to send out the correct prescribed codes. (MTI)

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11 May 2005Business

No OMV joint bid for Energopetrol - MOLMOL Rt and its Croatian unit INA will not bid with Austria’s OMV AG for a stake in Bosnia’sEnergopetrol, MOL’s communications director Szabolcs I. Ferencz said to Reuters yesterday,according to business news website portfolio.hu. Bosnia’s Prime Minister said on Monday that the

government would only permit the MOL-INA consortium to bid if it made an offer together withOMV. The move was meant to ease concerns that the Croatian government, which holds a quarterof INA, might use INA’s stake in Energopetrol to exercise political pressure on Bosnia. According toearlier reports, MOL and INA offered the equivalent of Euro 5.1 million for the stake in Energopetrolin the first bid. MOL and INA also promised to invest Euro 76.7 million in the company over the nextthree years and pay off Euro 30.6 million of Energopetrol’s debts. (AFX; NG 11)

Union Q1 revenue from premiums up 72%Union Insurance Rt had revenue from premiums of Ft 3.87 billion in Q1 2005, 72% more than in thesame period a year earlier, the company announced yesterday. The increase was well over theestimated 13% expansion of the whole insurance market during the period. Non-life insurancegenerated the most revenue, accounting for Ft 3 billion of the total. Union Insurance had 230,000policies at the end of Q1, 100,000 more than a year earlier. Non-life insurance policies accounted

for 201,000 of the total. Last year Union Insurance had revenue from premiums of Ft 9.6 billion,77% more than in 2003. (Econews; NG 4)

MFB launches Ft 25 bln credit program The Hungarian Development Bank Rt (MFB) will make Ft 25 billion in low-interest, state-subsidizedcredit available to suppliers to multinationals operating in Hungary, the bank announced togetherwith the Economy and Transport Ministry yesterday. The loans are intended to help small andmedium-sized suppliers to multinationals invest in product development and technologicalupgrades. The loans will carry a rate 4 percentage points over EuroIBOR, and the state willsubsidize 1.5 percentage points of the interest during the grace period, Abel Garamhegyi, deputystate secretary at the ministry, said at the press conference announcing the credit package.(Econews; NG 5, Nv 5, MH 13, Nb 14)

Henkel exports up 10% in Q1

Henkel Hungary Kft increased its export in the first three months of this year by 10% compared tothe same period of 2004, while domestic sales grew by 6%. The company will be able to continuethe trend of the first period in the whole year, CEO Ferenc Deák said. Last year Henkel raised itsturnover by 10% to Ft 62.5 billion. It spent Ft 1.4 billion on investments in Hungary, mostly onimproving technology and extending capacity. The production of Biopon detergent has recentlybeen taken over from Unilever, a deal authorized by the Competition Office. (Nv 5) G.R.

HVB Bank introduces 4 new credit cardsHVB Bank Rt yesterday announced the introduction of four new credit cards: HVB Orange, HVBBlue, HVB Gold and HVB Platinum. The bank expects to issue 10,000 of the cards this year. Themarket for debit cards in Hungary is near saturation, but there is still plenty of room for growth onthe market for credit cards, according to Oliver Gienow of MasterCard Europe, whose brand thecards will bear. HVB Bank handles a combined Ft 72 billion on the accounts of its 2,000 richest

clients, and it is at such clients the new HVB Platinum credit card, with its Ft 1 million credit limit,will be targeted. The HVB Gold, Blue and Orange cards have credit limits of Ft 500,000, Ft 200,000and Ft 100,000 respectively, while all come with travel and life insurance, said HVB Bank CEO TiborRácz said at the press conference to introduce the cards. (Econews; NG 5)

Herend secures Ft 150 mln grantsHerend Porcelain Rt has won Ft 150 million in state grants for technology upgrades under thegovernment’s GVOP business competitiveness program. The prominent porcelain maker will usethe money in a Ft 323.4 million investment to upgrade its production line and expand outputcapacity. The project is scheduled for completion by the fall and is expected to boost thecompany’s sales by some 12% next year. Herend also undertook to create 20 new jobs as part of the investment. In the mid term, the porcelain maker is hoping to double its revenue margin by2010. (Tue Vg 1) S.F.

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SME devp’t agency invests Ft 1.5 bln so farState-owned SME development agency KVFP has invested Ft 1.527 billion into 24 businesses sinceits inception at the end of 2001, a little less than half of its Ft 3.42 billion in investment capital. Bythe end of this year KVFP aims to invest a total of Ft 2.5 billion in companies. KVFP invests up to Ft100 million in companies operating in any industry but the farming and financial sectors for 3 to 5years, gaining a minority stake in it. The agency then pulls out of the business by selling the staketo the majority owners at a predetermined price. KVFP does not take dividends and limits accrued

interest on the financing. Unlike a venture capital company, KVFP’s aim is not to make the mostprofit, but it at least tries to recoup its operating costs. KVFP closed last year with a better-than-expected Ft 57 million loss. (Econews)

GVH fines paprika co’s Ft 10 mln The Competition Office (GVH) fined three paprika producers a total of Ft 10 million in total formisleading consumers. Házi Piros Paprika Kft, Szeged Paprika Rt and Kalocsa Füszerpaprika Rt didnot record on the packages of their products that they contain imported paprika as well as theHungarian base material. Házi Piros Paprika’s persisting in the irregularity for two years has earnt ita fine of Ft 6 million, while the two other companies were fined Ft 3 million and Ft 1 million. Twoother firms were not fined because they only sold their products to industrial users. (Nv 12, MH 11)G.R.

MTV lays off 185 staff

The Hungarian Television Rt (MTV) will cut 185 jobs in the coming months, but more lay-offs areplanned for the long term, MTV CEO Zoltán Rudi told business daily Világgazdaság. The movecomes as part of MTV’s renewed push to slim down its bloated workforce and reduce its heavy debtload. Apart from the rank-and-file, the downsizing will also affect some 63 middle managementpositions. The troubled state television operator said it would set up a separate committee to helpredundant staff find new jobs. MTV currently employs a total 1,600. (Tue Vg 9) S.F.

FHB debt rating may be downgraded - Moody’sMoody’s Investors Service announced it is placing the debt rating of Land Credit and Mortgage BankRt (FHB) under revision, with a probable downgrading effect. The approaching privatization of the51% state stake of the bank caused the ranking company to initiate supervision. Caution is justifiedby the Ft 400 billion worth mortgage bonds which are on the market at present. Moody’s says thatafter privatization the deposit and debt rating will be adjusted to match he new owners’ debt rating. The ‘D’ grade for FHB’s financial strength is left untouched. The tender on the privatization modelwill close on 6 June, and during the following weeks State Privatization and Holding Rt (ÁPV) willdefine the privatization principles. (NG 11, 12) K.H.

Balatontourist stake for sale Three bids have been made to purchase from Veszprém County Assembly its 96% stake inBalatontourist Rt. One of the bidders is SCD Group, who purchased the biggest south-Balatonaccommodation company, Siotour Rt, last year. The county assembly will make the decision in June,allowing the new owner to assume control in the summer. CEO Árpád Csákvári said the company ispreparing for the summer regardless of the owner. Balatontourist still has over 10,000accommodation places but since 2002 the profit and revenue has been decreasing, partly due todeclining Balaton tourism. (NG 1, 5) K.H.

Hungarian foodstuff pricy for restaurantsA growing number of Hungarian restaurateurs are teaming up to buy their food supplies outside thecountry due to high domestic producer prices, daily Népszabadság reported quoting marketinsiders. Restaurants can save up to 30% on supply costs if they buy their foodstuff in other EUmembers states such as Italy and Austria, as Hungarian producers are finding it increasinglydifficult to keep competitive with their foreign peers, the paper said. In fact, so popular has bulkbuying abroad become among market players that 20 leading restaurants have recently agreed toretain a price monitoring agency and a supplier for the job. (Nb 1) S.F.

MÁV tender deadline today Today is the deadline for the current round of the train tender of Hungarian State Railways (MÁV)Rt. After the Public Procurement Arbitration Committee canceled the results of the first tender,Stadler Rt and Bormbardier Kft decided to make another price bid. Bombardier will also include aletter concerning the verdict of the Committee and their objection against the details of the tenderprocess, which they want to be discussed before the final decision. Results are expected after

personal price talks by June 1. (Nv 4) G.R.Ft 2.3 bln for road reconstruction

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The Development Council of the central Hungarian region has voted Ft 2.3 billion for roadreconstructions in Budapest yesterday, mayor Gábor Demszky announced. Thanks to this, workscan be started in June. Plans include 14 road sections in 12 districts, including Szentedrei út, Bajcsy-Zsilinszky út, Király út, Ülloi út and Budafoki út. The reconstructions are planned to be finished byOct-Nov. (MH 6, Nv 4) G.R.

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EconomicsThree-month trade deficit down Euro 120 mlnHungary’s trade deficit was Euro 598.4 millino in the first three months of 2005, down Euro 120million from the same period one year earlier, according to preliminary figures announced by theCentral Statistics Office (KSH) yesterday. Exports rose 9.7% year on year to Euro 11.134 billion,while imports increased 8.0% to Euro 11.732 billion. In March alone exports rose 8.6% yr/yr to Euro4.096 billion and imports increased 2.6% to Euro 4.227 billion, resulting a deficit of Euro 130.8

million, according to the first KSH estimate. (Econews; NG 3, Nb 12)Businesses support gov’t plans to curb illegal work At a meeting between Prime Minister Ferenc Gyurcsány and employers’ representatives yesterday,employers voiced support for government efforts to combat illegal employment outlined in the newHundred Steps program. But they said more needs to be done to lower payroll taxes, and warnedthat some parts of the program create further bureaucratic problems for businesses. Labor MinisterGábor Csizmár said after the meeting that the government and employers agreed that vocationaleducation needs to be better tailored to the needs of the labor market. Gábor Horvath, who headedthe delegation of employers’ representatives, said that if the government’s program containedamendments which reduced payroll taxes, they would find a partner in employers. (Econews)

‘Stability concerns’ in Hungary’s economy - MerrillHungary’s economic position gives rise to stability concerns, exacerbated by a lack of fiscal

credibility, Merrill Lynch said in its monthly European emerging markets overview. In the May issue,the investment group said that the economic growth was weaker in the second half of last yearthan headline numbers had suggested and the activity ‘apparently lost further steam’ in early2005. Merrill said it expects economic growth to slow close to 3% this year, with the exactperformance heavily dependent on fiscal stimulus. Additional uncertainty has been created by‘allegations that the [Central] Statistics Office [KSH] has been using controversial methodologicalchanges that reportedly were increasing the reported GDP data in 2004’. (Econews; MH 3)

PoliticsExams to change, Ed. Minister stays putAfter confirming that copies of secondary school final exams set for Monday, Tuesday, andWednesday of this week were all leaked onto the Internet enabling students to prep their answersin advance, the education ministry has decided to change all remaining exams, it announcedyesterday. Today’s history exam is the first to be changed, and will be followed by changed examsin English and German. Education Minister Bálint Magyar said yesterday he would not resignbecause of the leaks. ‘I will not resign. My present task is to ensure that the final exams shouldpass off smoothly,’ he told the commercial channel TV2. The minister called the leak an act of terrorism, adding that ‘those who published them are toying with the effort exerted by tens of thousands of pupils’. The fact that the questions had been sent to the media unambiguouslyreflects the perpetrator’s political motives, Magyar said. József Pálinkás, minister of education inViktor Orbán’s centre-right government until 2002, branded the leak as a heinous crime. (MTI; MH1, Nb 1, Nv 1, NG 3)

Health reform financing uncertainHealth Minister Jeno Rácz announced yesterday that the ministry will sell health care buildings tohelp cover the expenses of the 21 steps, and expects a Ft 10 billion income. The ministry asked the

Treasury Property Directorate (KVI) to sell three of its large properties very soon, possibly invite thebids in May, said KVI sales manager Árpád Bardóczy to daily Napi Gazdaság. The agency wasunable to sell properties in question last year when the 50-hectare holiday resort Club Aliga wasoffered for Ft 8 billion, the district 12 building of Svábhegyi State Children Health Institute for Ft 4billion, and district 2 building of the National Psychiatry and Neurology Institute for Ft 1 billion. (NG1, 3) K.H.

MPs set up committee to investigate OrbánParliament has approved a motion for setting up a committee to find out if opposition leader ViktorOrbán, prime minister from 1998 to 2002, abused his position to assist his wife’s business inprivatizing state-owned assets. The political and literary weekly Élet és Irodalom said that Orbán,while prime minister, had helped his wife’s business to a large state subsidy from the centralbudget. MSzP proposed a parliamentary investigation to clarify whether Orbán actually carried out

the alleged deeds. Orbán denied his wife’s company received subsidies unlawfully. (MTI)Ethnic Hungarians may get passport

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Ethnic Hungarians outside Hungary would get a limited citizenship according to a governmentproposal. The citizenship would guarantee a passport and perhaps a work permit but no rights tohealthcare or other public services, pensions or suffrage. Another idea is a national visa, whichwould let the holders stay in Hungary for 5 years, but not work. Government commissioner DezsöAvarkeszi has to work out the final proposal by Sept 30. (Nv 1) G.R.

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DomesticRegional education center gets EU subsidy Three local councils in Szabolcs-Szatmar-Bereg county (eastern Hungary) signed a contractyesterday on the construction of a regional education center in the town of Nyíregyháza. The EUwill provide Ft 1.145 billion for the project. Speaking after signing the Ft 1.2 billion contract, themayor of Nyíregyháza said that in the modern facility highly qualified teachers would educateyoung people in professions needed by the current labor-market. The three councils have won Ft

785 million for the construction of the facility in a bid to the EU development fund and an additionalFt 360 million for the training of teachers of the center. The three councils will contribute Ft 70million to the project. (MTI)

Level 3 flood alert in place along Tisza The middle section of the River Tisza and some of its tributaries in eastern Hungary continue toslowly flood, the water management authority said yesterday. Level three flood alert, the highestone under emergency level, is imposed along the central and lower reaches of the river and thelower reach of its tributary Zagyva, Attila Lovas, a coordinator of flood control operations, said. The Tisza is peak near Tiszafüred. The flood is expected to peak at Szolnok in four to five days. (MTI)

12 May 2005Business

Rába: loss despite rise in revenue

Rába Rt boosted its revenue by 44.3% year-on-year to Ft 10.6% billion in Q1, however the companynevertheless made a Ft 1.5 loss. Operating profit came to Ft 983 million, which compares with Ft1.8 billion a year earlier, and the negative balance of financial transactions totaled Ft 631 million. The management approved a mid-term strategy, submitted by CEO István Pintér, who was recentlyappointed to head the company for the second time. (Bloomberg; BBJ Online, NG 1,11,12)

Ten preliminary bids made for Antenna

Ten of the fifteen companies who purchased the tender documentation submitted bids for amajority stake in state-owned broadcaster Antenna Hungária Rt, the State Privatization and HoldingCompany (ÁPV) said yesterday. The Government decided to sell a majority stake in Antenna

Hungária in October 2004. ÁPV invited bids for a 75%-plus-one-vote stake in the broadcaster amonth ago. The procedure is a two-round public tender. The invitation for bids was published onApril 11 in two national dailies and the Financial Times. (Econews; NG 11, Nv 5)

Synergon profit rises on cost cuts

Synergon Rt, a Hungarian computer services company, said first-quarter profit rose 3% as lowercosts offset a drop in sales after governments in the region cut back technology spending. Theshares dropped. Net income rose to Ft 81.2 million in the first three months from Ft78.8 million inthe year-earlier period, the company said yesterday. Sales fell 14 % to Ft 4.3 billion forint.(Bloomberg; NG 11, Wed Vg 11)

Union Ins increases fee revenue

Union Insurance Rt increased its fee revenue by 72% in the first three months of this year,

compared to the same period of last year, the company announced. The total insurance marketgrew by 13% in the same period. Union reported a fee revenue of Ft 3.87 billion, in which non-lifeinsurances were represented by more than Ft 3 billion. Union's Austrian mother company, WienerStadtische plans to enter the stock exchange in Vienna, the company announced. (Wed. Vg 12)M.K.

Egis fiscal Q2 net rises 56%

Egis Rt, Hungary's second-largest drug maker, said its fiscal second-quarter profit rose 56 % onrising sales in Russia and Eastern Europe. Consolidated net income in the three months endedMarch 31 rose Ft to 2.67 billion, from Ft 1.71 billion in the same period last year, Budapest-basedEgis said today in a stock exchange statement. Egis, majority-owned by France's LaboratoiresServier SA, benefited from surging sales in Eastern Europe and in the former Soviet Union, makingup for slower growth in Hungary where pharmacists and consumers stocked up on medicines before

smaller government subsidies and higher taxes boosted prices in January. (Bloomberg; NG 11,12)

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Audi turns out 7% more engines in Q1

Audi Hungária Motor Rt manufactured 397,228 engines in the first quarter of 2005, 7% more thanduring the same period in 2004, the company said yesterday. Audi Hungária produced 335,842four-cylinder engines in Q1 2005, about 46,000 more than in Q1 2004. These included 140,924petrol engines and 194,918 diesel engines. In the first three months of this year, the plant produced53,203 6-cylinder engines and 8,182 8-cylinder engines. The engines made by the Gyor plant arebuilt into Audi, Volkswagen, Skoda and Seat models. (Econews; NG 4)

Greek village opens in Balatonfüred

A new entertainment and shopping center will open in Balatonfüred this weekend, manging directorof investor Masped Annagora Kft Tamás Gáspár said. Balatonfüred has been known for its Greekvillage just outside the city since 1994, when construction of the entertainment center started andstopped due to lack of finances. Masped Annagora bought the site in 2003 and spent Ft 1.1 billionon it, Gáspár said. The center hosts more than 300 commercial units including a supermarket, acasino and five restaurants, Gáspár said. Several dozens of shops will open this weekend, but thecenter will work with full capacity from this summer, Gáspár said. Masped Annagora also plans toadd an aqua park to the Greek village by 2006 for Ft 2 billion, Gáspár said. (Nb 7) M.K.

Laird to produce in Szombathely

Swedish firm Laird Technologies will establish a plant in Szombathely, west Hungary, to produceantannae for mobile phones, Laird's consultant Endre Joó said. The company will employ 50 peopleand will rent a real estate from clothing company Styl Clothing Factory Rt. Laird's production isexpected to start in the second half of this year, Joó said. (Nb 6) M.K.

More MÁV/Bombardier/Stadler talks

Delegates from the national railway company, MÁV Rt and Stadler Rt met again in to negotiate onprice regarding the engine tender. By yesterday's deadline both Bombardier and the previouslyannounced winner, Stadler had handed in their bid. Stadler feels that their bid was fair and shallbring win again, while they feel that Bombardier is not interested in co-operation, rather inhindering the public procurement procedure. Bombardier, on the other hand, have also raised theirobjections against Stadler's previously exhibited financial reference, which was the balance of theirparent company Stadler Rail Baussnag AG, not their own. Bombardier has requested a meeting with

MÁV for Monday. Should the objections not be resolved satisfactorily, Bombardier might decide tosue MÁV. (Ng 5, Nv. 4) M. A.

Sale of Sárvár water

Some Ft 84 million is now being sought for the assets of Sárvár Water factory, which is currentlyunder liquidation. Buildings, thermal-, and drinking water-wells, equipment and the right of operation of the evaporator plant are the listed assets on offer. For the first tender the price was Ft151 million and on the second, Ft 100 million. Response has been slow due to the expense involvedin necessary renovations of the plant (NG 9) É.V

MTI revenues decrease

The revenues of the national news agency, MTI, have decreased because of changes in the mediamarket, the agency said. The scale of the corporation was also reduced by the selling the former

photo lab. MTI downsized 27% in terms of employees by last January. This year the company had aFt 2 billion revenue and the same amount for budget in the business plan according to VinceMátyás, president of the corporation. (NG 5) É.V.

Ground broken for Ft 3 bln office park

Wallis Real Estate Rt broke ground yesterday for the construction of a Ft 3 billion office complex inthe capital's old calf market in District IX. Wallis Real Estate CEO Noah M Steinberg and District IXmayor Ferenc Gegesy were present at the ceremony. Wallis Real Estate will convert the old marketinto a 3,170 sqm loft office complex, then build a new five-storey, 5,866sqm office building at thesite. (Econews)

Economics

Importers can't submit own VAT returns

Under a law in effect from July 1, Hungarian companies which import products from countriesoutside the EU will no longer be allowed to submit their own VAT returns. Rather, customs offices

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will be required to process their VAT declarations. The recently approved law is intended to preventtax fraud. "Importers from countries outside of the EU have so far had an advantage over domesticimporters, not to mention that VAT on imported products sometimes was forgotten," FinanceMinistry undersecretary Tamás Katona said yesterday (Econews; NG 8)

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Járai blames CPI on seasonal effects

Central bank president Zsigmond Járai blamed higher-than-expected April inflation figurespublished yesterday on seasonal effects. He added that the slowing inflationary trend was theresult of more competition because of Hungary's entry into the EU and the firm forint. Consumerprices rose 3.9 % yr/yr in April and were up 0.8 % from March, the Central Statistics office reportedyesterday. Járai said the forint would remain stable and would not raise inflation. He added thatthere was no reason to think this year's and next year's inflation targets could not be met.

(Econews; Nv 5, MH 11)Consumer prices up 3.9% yr/yr in April

Consumer prices rose 3.9% yr/yr in April, the Central Statistics Office (KSH) said yesterday. Pricesrose 0.8% from March to April. The figures exceed the 3.77% year-on-year projection and the 0.58%monthly rise predicted by a poll of analysts conducted by business daily Napi Gazdaság. Coreinflation remained far below the headline figure, increasing 2.6% yr/yr and 0.2% from March. InMarch, consumer prices rose 3.5% yr/yr, and in February, CPI was 3.2% yr/yr -- the lowest twelve-month rise in more than twenty years. (Econews; NG 1,3)

Gov't approves commuting pass

The government decided yesterday to introduce a joint monthly pass valid for all publictransportation companies serving Budapest and its outskirts. The monthly pass can be used onservice by Budapest Transportation (BKV) Rt, Hungarian Railways (MÁV) Rt, and Volánbusz Rt in185 towns and villages near Budapest. The pass will cost 10% more than the normal BKV monthlyticket, that is currently Ft5,950. The new pass will be available from September making the life of commuters and those living in the suburbs easier. (Nb 5) M.K.

10,000 communal workers at Lake Balaton

The Ministry of Employment and Labor with the Hungarian railway company, MÁV Rt started a largecommunal work program costing Ft 400 million for the clean-up of the railway lines around LakeBalaton. This pilot program will provide work for some 10,000 long term unemployed, mainly fromsmall towns with very little schooling- who tend to live off benefit or work on the black market. Theprogram will involve tasks such as garbage disposal and demolition of derelict buildings by therailway lines. (Nv. 3) M. A.

Property barometer shows market contracting

Economic research institute Ecostat's real estate index fell 2.8 percentage points to 48% in the firstquarter of 2005, signaling the market is contracting. An oversupply of new flats has created abuyers' market, and threatens to put many construction companies out of business, according toEcsotat. Banks, too, may have to change their lending practices because of the glut. Real estatedevelopers polled to compile the index, which was published yesterday, said home prices wouldrise at most 6.4%-9.2% in 2005. In Ecostat's last quarterly survey they said prices would rise atmost 6%-15%. With the exception of small flats in the center of the capital, Ecost said prices couldeven fall. (Econews)

Gov't may make drugmakers agreement law

Hungary's drug makers and drug distributors may soon be compelled by law to pay part of the cost

of any overshoot of the state's drug subsidy budget. The government is drafting a bill which wouldmake law an agreement reached between the state and drug companies in June 2004. Under theagreement, drug companies agreed to cover half of the cost of any overshoot of the state's drugsubsidy budget up to Ft30 billion, and the entire cost of any amount over Ft 30 billion. The lawcould come into force as early as October. (Econews)

Hungary exports mainly to EU countries

77% of Hungary's export goes to an EU country, and most of the import trade coming to Hungary isfrom one of the 24 member states too, with 69% of the import coming from the EU in March. Theexport trade balance's deficit for Q1 was 598 million euro, which is 120 million euro less than in thesame period last year. The value of export in Q1's was at 11.13 bln euro, while import was worth11.79 bln euro, meaning that export has increased by 9.7%, while import has grown by 8%compared to Q1 of 2004. The deficit of export turnover closed at 130.8 million euro this March,which was a remarkably distinct improvement compared to 349.9 million euro last March. (Nv 12)M. A.

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Járai says 2010 euro adoption achievable

Hungarian central bank Governor Zsigmond Járai said the country's goal of adopting the euro by2010 remains achievable. The country must overhaul its public finances and will probably be one of the last new EU members to adopt Europe's common currency, Járai, 54, said to reporters today inthe town of Békéscsaba, southeast Hungary. Járai said he expects Hungary's budget deficit toexceed the government's 2005 forecast and sees narrowing room for rate reductions by the bank.(Bloomberg)

KSH perplexed by Merrill Lynch criticism

The Central Statistics Office, KSH, was puzzled when London investor house Merrill Lynch blamedlow GDP growth in Hungary on the methodology used in calculating GDP figures, KSH saidyesterday. In its May issue of a monthly European emerging markets overview, Merrill Lynch saiduncertainty over economic growth in Hungary was aggravated by the fact that KSH had changed itsmethodology of calculating GDP data during 2004 in a way that reportedly increased GDP growthdata. Hungary's statistical office rejected the remarks and said KSH calculated GDP figures basedon a methodology approved by Eurostat and had not made any changes to 2004 GDP figures. (MTI)

Politics

Constitutional change re hate speech

The Justice Ministry has proposed amending the constitution to create the legislative soil for a lawbanning hate speech, a government spokesman said after yesterday's cabinet meeting. TheConstitutional Court nullified a law against hate speech adopted by Parliament in May of last year,finding it unconstitutional. However, the EU has recently approved a directive against hate speechand Hungary will have to bring its own laws in line with the EU directive, spokesman András Batizsaid. The law rejected as unconstitutional would have expanded the scope of punishable acts, byinserting the phrase "incitement to hatred" to replace "instigation" in the Penal Code. (MTI)

Domestic

Maths final exam annulled

The results of the secondary school final exams in mathematics taken on Tuesday will be annulled,Education Minister Bálint Magyar announced. The 30,000 pupils who want to study maths or whose

university career requires maths will have to sit for the exam again on May 28, Magyar said. Thosehundreds of thousands who needed the maths exam for their high school certificate only, can eithersit for the exam again or can request the mark they got in their final secondary school year, Magyarsaid. As reported earlier, the test questions of the exams in Hungarian literature and maths wereavailable on the Internet a few days before the exam and thus familiar to many pupils. (Nb 1) M.K.

Fighter plane crashed near Kecskemét

A MiG-29 fighter plane crashed near the airport in Kecskemét but the pilot managed to catapult andsuffered no major injuries. The cause of the crash that happened during practice was the failure of one of the engines, confirmed the Ministry of Defense. Although a committee will be set up toinvestigate the circumstances of the accident, it is most likely that both engines caught fire due toa technical failure. This is the second MiG-29 that crashed, the previous accident in the summer of 1998 claimed the life of the pilot preparing for the air show. This latest crash leaves only 26 out of

the 28 MiG-29 planes given by Russia for their national debt in 1993. (Nv 20) Japanese school opens in Budapest

A Japanese school was opened in Budapest's 12th district, where some fifty Japanese studentsstarted their studies. Addressing the opening ceremony yesterday, the Japanese Ambassador toHungary, Teruyoshi Iangawa mentioned that one hundred Japanese companies operate in Hungaryat present and that a school with a Japanese curriculum was a strong incentive to attract more Japanese investors to the country. (MTI)

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13 May 2005BusinessItalian region to fight to keep ‘Tocai’ The Italian region of Friuli-Venezia Giulia vowed yesterday to take the next step in its legal battle toretain use of the term ‘Tocai’ for its wines. Despite a European Court decision granting one specificregion of Hungary/Slovakia exclusive right to the term, under the spelling ‘Tokaji’ .Speaking for the

Italian region, counsellor Enzo Marsilio said ‘it is ridiculous to apply strict norms like that inside theEU while allowing the Tocai name to be used for Australian, Chilean, and California wines.’ (MTI; NG1, Nb 1, MH 12,13 Nv 5)

M Telekom Q1 profit rises 28%Deutsche Telekom AG’s Magyar Telekom Rt unit said first-quarter net income rose 28 %, beatinganalysts’ expectations, as it cut costs. Net income rose to Ft 17.9 billion from Ft 14.1 billion forint ayear earlier, the Budapest-based company said. The median profit estimate of seven analystssurveyed by Bloomberg News was Ft 17 billion. Sales fell 1.7 % to Ft 143.6 billion from Ft 146.1billion a year earlier. Magyar Telekom, Eastern Europe’s second-largest phone company, hasstruggled to boost sales and profit as the wireless market nears saturation amid competition fromlocal units of Vodafone Group Plc, Telenor ASA and American International Group. (Bloomberg; NG1, 11)

Bosnia to start talks with MOL- INABosnia’s Industry and Energy Minister said the country will start talks with a consortium of Hungarian oil and gas company MOL Rt and its Croatian unit INA on the purchase of a 67% stake inEnergopetrol, a big fuel retailer in Bosnia. The statement comes just a few days after Bosnia’sPrime Minister said the government would allow the MOL-INA consortium to bid only if they made a joint offer with OMV. The move was meant to ease concerns that the Croatian government, whichowns 75% of INA, could use INA’s stake in Energopetrol to exert political pressure on Bosnia.(Econews; NG 11, MH 2, Nv 5)

Graphisoft Q1 profits up 6.5% yr/yrSoftware maker Graphisoft Rt had consolidated net profit of Euro 1.14 million in the first quarter of 2005, 6.5% more than in the same period a year earlier, according to the company’s preliminaryreport published yesterday. Profits were slightly less than a Euro 1.19 million projection by analysts

polled by online business news portal portfolio.hu. Graphisoft reported earnings per share of Euro0.11 in Q1 2005, up from Euro 0.10 in the same period last year. Graphisoft reported EBITDA of Euro 1.19 million, up 31.4%. Graphisoft changed its accountancy policy as of January 1, switchingfrom Generally Accepted Accounting Principles (GAAP) to International Financial ReportingStandards (IFRS). (Econews; NG 12, MH 13)

CIB employee share scheme endsState Financial Institution Supervision (PSzÁF) approved CIB Bank Rt’s request to lower itsregistered capital to the original level of Ft 23.5 billion, which marks the end of the bank’semployee share scheme. CIB distributed shares worth Ft 466.7 million among employees in thepast 6 months, whose shares qualified for a dividend of 20.9%. The recently resigned co-chairmenÁdám Farkas and Ferenc Karvalits received shares worth Ft 60 million each with dividends totalingFt 12.5 million. (NG 5) A.K.

Antenna Q1 net earnings down a quarterBroadcaster Antenna Hungária Rt (AH) said its Q1 net income dropped 26% yr/yr to Ft 973 millionfrom Ft 1.31 billion a year before. AH said its 2004 profit had been boosted by a one-off financialrevenue through the sale of its Eutelsat S.A. stake. The group’s net sales were up 9% at Ft 6.5billion in the first three months, according to consolidated unaudited IFRS figures. The company’soperating profit nearly tripled to Ft 1 billion as operating charges dwindled. AH had registeredcapital of Ft 11.875 billion at the end of March, while its shareholders’ equity jumped 33% to 23billion. (BBJ Online; NG 11, MH 13)

buw comes to HungaryGerman call center operator buw AG will establish its first call center in Hungary in Pécs. The centerwill gradually increase its payroll from the current 40 employees to over 200 by the end of the year.Hungarian operators will initially take the calls of German customers, but buw plans to enter the

Hungarian market for customer carelines as well, establishing further call centers in otherHungarian cities. buw’s major customers include auto maker BMW AG and power company RWE AG.(NG 5) A.K.

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Warning for Vodaphone The Competition Office (GVH) reprehended Vodafone Rt yesterday for abusing its dominant marketposition. The company forces the use of its voicemail service in a case of an unsuccessful call. Thecallers only find out that the dialed number is unavailable after that mailbox has begun, so theyhave to pay regardless of whether they want to leave a message or not. The Office gave thecompany 90 days to change this practice and did not impose a fine. A few days ago the samedecision was made about T-Mobile Hungary Rt. (NG 4, Nb 13) G.R.

BHG expands plant in SzekszárdBHG Component Manufacturer Kft, making air conditioners for cars, finished the expansion of itsproduction facility in Szekszárd, Central Hungary. An additional 2400 sqm was added to thecompany’s current 16,000 sqm production hall, to accomodate the on-site production of previouslyexternally sourced ducts said, Gábor Jobbágy, CEO. The new production line will employ 50 peoplein addition to the 420 current employees. BHG had turnover of Ft 2.1 billion in 2004 with Ft 2.6billion expected this year. (NG 4) A.K.

Still no new MR presidentSince the board of trustees was unable to elect the successor of Katalin Kondor, a newannouncement had to be published to fill the position of President of Hungarian Radio (MR) Rt. Thenew application package is available from May 17-24, and the application deadline is June 14. The8-member board has recommended the election of György Such, however, in the extended board,

Such did not receive a 2/3 majority. The mandate of the current president Katalin Kondor expiresthe end of July. (NV 3) E.C.

Organization to boost investments in Asia Thirteen companies have set up a not-for-profit organization, called Ahead, to aid Hungariancompanies in participating in European development projects in Asia, business weekly HVGreported in its latest issue. The founding members include state-owned broadcaster AntennaHungária Rt and its subsidiary Eduweb Rt, as well as Elender Rt, Eurohand Rt, Medicor Rt, MeditcomKft, Muszertechnika Rendszerhaz Kft and IC Bank Rt. (Econews)

Consortium to help SMEsA consortium of Microsoft, HP and Intel will expand their service of helping SMEs with IT-development subsidy applications to Hungary, general manager of Microsoft Hungary Kft, PéterVityi said. As Hungarian partners, T-Online and HVB Bank Rt are included in EU Grants Advisor

program. The consortium takes over the preparation of subsidy application documents and the pre-financing. The companies only have to pay a fee, if they succeed. HVB Bank helps in providing theshare the firms should have, vice-CEO Ágnes Doffek added. Participating companies are not obligedto take IT services from the members of the consortium. (Thurs Vg 16) G.R.

EconomicsTransparency aim of new tip systemRegional Development Minister István Kolber said yesterday that the aim of a plan requiringcatering businesses to record waitstaff tips is greater transparency. Under the plan, restaurants willrequire customers to pay a gratuity of 0-15%, which must be clearly displayed on both the menuand the bill. The money will go to waitstaff, minus 25% VAT and a 15% pension contribution on theremainder of the tip, effectively reducing the amount they pocketed before the change by a littlemore than 34%. The plan does not create any additional expenses for employers, it discourages the

illegal hiring of waitstaff and it will generate more central budget income. (Econews; NG 3, Nb 1, Nv4)

Spanish investors to enter real estate marketA significant amount of Spanish capital is expected to flow into the Budapest real estate marketaccording to market analyst József Sztranyák of Hispamerinvest Kft. Spanish investorspredominantly seek to purchase old, classicist style apartments located in the city center.According to Ilona Czibere CEO of Mitropa Kft a number of Spanish real estate developers arelooking to enter the Hungarian market as well, expecting a rise in real estate prices similar to thatin Spain after the country’s EU accession. (NG 4) A.K

10.4% more guest nights spent in Q1About 1.06 million Hungarian and foreign travelers on holiday stayed at hotels in Hungary in thefirst quarter of 2005, 13.3% more than in the same period a year earlier, the Central Statistics

Office (KSH) said yesterday. The tourists spent 2.7 million guest nights at hotels during the period,10.4% more than the year before. In March alone, the number of tourists rose 15% yr/yr to 448,000and the number of guest nights rose 13.1% to 1.17m. Foreign travelers made up 46.5% of the total

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number of tourists in Q1 2005, but accounted for 53% of guest nights. The number of foreigntravelers rose 18.4% yr/yr in Q1 2005, and the number of guest nights they spent at hotelsincreased by 10.7%. (Econews; NG 4)

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Rise in advertising expenditureSome Ft 154.7 billion was spent on advertising in Hungary last year, according to the estimation of Hungarian Advertising Association. That is by 14.6% higher than in 2003, vice-chairwoman JuditSkriba said. Television increased it’s market share at the expense of printed media; television had41% the press 39%. Radios raised it’s ad income by 39% reaching market share of 8%. Internetspending grew by 60% but the share still remained 2%. (Nb 12) G.R.

Mulling of one tier tax system

The government is considering the introduction of a one-tier tax system, however, it does not meanthat it will actually be introduced, János Veres told Magyar Hírlap. There is a strong urge to respondto the Slovakian and Romanian one-tier tax system, and Poland and the Czech Republic are alsomulling the idea of its introduction. The one-tier system, however, isn’t compatible with thegovernment’s aim to help those in need, thus it raises a dilemma on how to proceed with the taxreform planned in the 100 Steps program. According to Veres, the decision on which direction tomove forward will be made by June. (MH 11) E.C.

EIB grants Euro 77 mln loan for m’way The European Investment Bank (EIB) will provide a Euro 77 million loan to Hungary to financemotorway construction and railway development, EIB vice president Wolfgang Roth and FinanceMinister János Veres said yesterday. Hungary will use Euro 50 million of the money to finance workon a 40km section of the M0 motorway and Euro 27 millin for railway developments. Roth also said

the EIB is ready to provide a Euro 500 million credit line, together with the Hungarian DevelopmentBank (MFB), to be used by Hungarian municipalities as a guarantee for loans used to cover the co-financing requirement of subsidized development projects. (Econews; MH 3, Nv 5)

New waste management plant opened The sorting hall and the transposing-compressing station of the Sopron Waste Management Plantwas officially put into operation by Economic Minister Miklós Persányi yesterday. As a result of theover Ft 3.5 billion investment - 70% of which is covered by EU subsidy - the waste plant willprofessionally handle the waste management needs of 200 thousand people in 24 cities and towns,who are accumulating 75 thousand tons of trash a year. The transposing-compressing station isbased on the principle of selective waste collection, along with the Kétpó based central rubbishcollection facility and 5 other garbage-dump. (NV 12) E.C.

A look at new healthcare program

A senior health ministry official focused on the legislative aspects of the government’s 21-stephealthcare program at news conference yesterday. Ministry state secretary Maria Vojnik saidcertain measures would need parliamentary approval, while others could be handled by health andfinance ministry decrees. Since plans included changing rules on providing free medications toindigent residents, she said, the Welfare Act would also have to be amended. More people will haveto pay contributions to the system to finance the program, she said. The upgrades in emergencycare would get underway as of July 1, Vojnik said, and will be completed by December 2006. (MTI)

Politics’Gov’t thriftiness jeopardizes final exams’Centre-right opposition party Fidesz accused the government of having jeopardized graduationexams for the sake of saving a few million forints for the budget, a Fidesz education expert told aforum yesterday. The exams have fallen victim to the government’s tight-fisted budget, László Sió

said. The scandal broke out after test questions of secondary-school final exams in Hungarian,history and mathematics, had been leaked to the Internet prior to the exams this week. László Siósaid that in its saving efforts the government cut the original Ft 2.2 billion final-exam budget to 1.8billion, which did not allow for giving all of the test-sheets special packaging. (MTI; Nv 1)

DomesticBalaton water approval not urgent The new EU directive on public waters, which has been established to regulate the quality of thewater in which one is allowed to bathe, would strongly influence tourism around Lake Balaton is aquestion which often arises. The new directive, however, needs to be revised first by the ministersof environment of each member state before it gets passed. The European Parliament, however,has approved of keeping the water cleanliness category ‘satisfactory’ for an additional 8 years,which Balaton can easily keep. (NV 5) E.C.



7days, 2005. május 17

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