English collection of articles from Innotéka magazine appearing monthly in Hungary.

English collection of articles from Innotéka magazine appearing monthly in Hungary.

September 10, 2012

Áron Bencze

Across the Border into Hungary

With global competition intensifying, getting investors to vote in favour of Hungary requires more and more efforts, said Erzsébet Dobos, president of the Hungarian Investment and Trade Agency (HITA) in an interview with Innotéka magazin analysing the operations of the institution in the past 18 months.

Erzsébet Dobos

What are the goals HITA set for itself upon being established under the auspices of the Ministry of National Economy in January last year?
– Called into existence by the Government of Hungary, HITA commenced operations on 1 January 2011. On the one hand, it is responsible for encouraging foreign companies to invest in Hungary and, on the other hand, for supporting the foreign trading activities of Hungarian small and medium-sized enterprises. HITA is a central agency operated under the direction of the Minister for National Economy as an independent budgetary institution with proprietary financial management.

The Agency aims to enhance investors’ confidence and to promote investments primarily in the economically disadvantaged areas. One of the highest priorities of the Agency is to contribute to increase employment, which is one of the key priorities of the new government programme, by strengthening small and medium-sized enterprises.
Six regional branch offices and an international network of foreign diplomats complement the operations of HITA’s central Budapest office, providing local knowledge and network of contacts to support the Agency’s investment and export promotion activities.

What do you think, how successful your first year was?
– We think the first year of the Agency was spent effectively: HITA performs governmental tasks concerning investment promotion and business development in a new form of organisation – at higher efficiency and lower costs.
If you take a look at the projects by sector, you can see that prime movers, such as the automotive sector, electronics and SSC are complemented by emerging sectors, including food processing and logistics. Most of these projects originate from the United States, Germany and the Far East.
I can quote two figures to describe the impact of these projects on the national economy: the budgeted amount of investment and the number of direct jobs created by an investment. The total value of the investment portfolio HITA has been managing since 2011 may top EUR 5 billion and may create as many as 18,000 new jobs if decisions are favourable.
Attributable to the resilient efforts of HITA’s project managers, the managed portfolio brought 24 positive decisions in 2011, which will be instrumental in creating 5,736 new jobs in the near future. All in all, that corresponds to EUR 924.3 million of invested equity. As global competition has been intensifying, getting investors to vote in favour of Hungary requires more and more efforts. That is why we need to be proactive. Being aware of that, HITA’s Investment Promotion Division has launched its programme for Investor-friendly Location seeking to prepare Hungarian local governments for receiving investors. The program will help the participating settlements render themselves attractive for investors.

The development of the automotive sector has been a high priority since the very beginning. Can you mention any success stories in this area?
– In the eyes of the automotive manufacturers seeking a site for cost-efficient production or for setting up a logistics or R&D hub, Hungary is indeed the right place to look at. The geopolitical situation of the country is excellent, with four Trans-European routes leading across Hungary. Indeed, several states of the Balkans are only accessible via Hungary.
This country offers highly skilled and flexible human resources at 30-50% of the cost of comparable labour in Western Europe or the US. In terms of creativity and innovativeness, Hungarian labour occupies prestigious positions in international rankings. The efforts of recent years have culminated in launching what is known as Dual Vocational Training in both secondary and higher education in Hungary. 15 of the TOP 20 TIER 1 suppliers are already present in Hungary. Renault-Nissan, General Motors, Porsche and DAF/PACCAR have not only selected Hungary as the hub of their parts operations in Central and Eastern Europe, but also they distribute parts in Ukraine, Russia and the Balkans via Hungary. This country has become a regional leader of manufacturing internal combustion engines in recent decades.
The country has done a lot in recent years to enable the local sector of supply chain SMEs to meet the challenge of processes triggered by globalisation as manufacturing companies and TIER 1 suppliers intend to outsource an increasing portion of their operations to rationalise costs. That involves, first of all, conscious efforts to develop Hungarian-owned automotive supplier operations by increasing their innovation and R&D potential, recruiting highly skilled labour and deepening relations with universities and colleges.

What will attract foreign investors to Hungary?
– We provide customised information to companies, organise programs and site visits, and we support investment decisions by ensuring the possibility of one-stop shopping. In addition, we organise supplier training courses.
The staff of our Investment Promotion Division is basically responsible for attracting foreign working capital to Hungary, presenting the country as a lucrative destination for investments and conducting targeted investor searches, collecting and managing projects. The staff use foreign and domestic trade events to promote the Hungarian investment environment and engage in market acquisition. They strengthen their activities by cooperating with our network of diplomats specialised in foreign trade and international consulting firms. They respond to the inquiries received by the Agency by sending information brochures, organising site visits and negotiations for potential investors with the participation of local governments, industrial parks and regulators, as well as by informing clients about qualifying for co-financing support available from the Hungarian government and the EU.

BIO International 2012 (Boston, USA)

What results have you achieved with the Reinvest Program launched this year to survey the experiences of companies that have already settled in Hungary?
– As processing the first part of the program is still in progress, we cannot yet give account of any specific outcomes. Anyway, we have got useful experiences as businesses have responded positively to the initiative and have become aware of their views through useful and multifarious discussions.

There could be quite a few potential exporters among Hungarian SMEs. How can the Agency approach them?
– HITA recruits most of its new clientele by providing a wide variety of services and by engaging in marketing, PR and communications. It is also common practice that HITA-supported businesses which have turned profitable by participating in our professional programs share the key to success with their partners and the companies they know. It is a recent development that we are often asked to give presentations at regular business club meetings (held by companies of various size, active in different lines), which is also a channel for getting into contact with potential exporters. Naturally, we conduct proactive searches for eligible exporters and our associates visit them personally to give them tailor made counselling.

What should companies intending to be future exporters be prepared for? What mistakes do they usually make? What are their weaknesses?
– To successfully enter foreign markets, enterprises need to invest time, money and energy. It is important to assess how stable a business is, what position it occupies in the domestic market, to what degree is their product or service eligible for export. Next, the potential foreign target markets need to be examined to evaluate existing demand, potential competitors and partners. After information is summarised, a proper strategy needs to be devised before commencing the implementation.
HITA has useful information about sectors and relations for businesses intending to export. Moreover, Enterprise Europe Network, the EU’s single and the world’s largest business development network uses EU support to help companies from the very early stage by providing advice, training, free database searches for business and innovation partners, and many other services in order to help them become fit for export. It also operates a new incubation program for businesses.

A ranking published in the May 2012 issue of the Site Selection magazine identifies Hungary as the most popular investment target in Central Europe. Do you have any tangible results in the first six months of this year?
– Interpreted as a clear sign of investors’ confidence, this achievement justifies governmental and investment efforts, as overseas investors are sensitive to the situation and circumstances in Europe. I would like to emphasize the fact that Hungarian investors will continue to receive all forms of assistance and support from the Hungar­ian Investment and Trade Agency, the one-stop shop governmental organization set up for investment promotion.•