Business opportunities for Finnish companies in Hungary Judit Szigeti Embassy of Hungary in Helsinki
Business meets culture Lahti 6th October 2016
Content 1. Who we are
2. Why Hungary is a first class investment and trading destination? 3. State subsidies 4. Business opportunities 5. Business meets culture…
Who we are?
Embassies in business • From 2014: new priority of the Hungarian Ministry of Foreign Affairs and Trade is business and trade promotion. • As part of the economic diplomacy the Hungarian government sent a foreign trade specialist to every diplomatic mission. • The intention in Finland is: – to enhance Hungarian-Finnish business relations; – to support the foreign trading activities of Hungarian SMEs; – to encourage and help Finnish companies invest and expand their business in Hungary.
Background institutions • Hungarian Investment Promotion Agency (HIPA) • Hungarian National Trading House • Hungarian Chamber of Commerce and Industry
Why Hungary is a first class investment and trading destination?
Best to Invest 2015
Hungary Ranked No. 1 in Eastern Europe • Site Selection Magazine’s prestigious award goes to Hungary in 2015
Top 10 eastern European Cities Rank
City
Country
1 2 3 4 5 6 7 8 9
Budapest Wroclaw Katowice Plzen Moscow Brno Poznan Ostrava Bratislava
Hungary Poland Poland Czech Republic Russia Czech Republic Poland Czech Republic Slovakia
10
Prague
Czech Republic
Budapest has been ranked the most attractive city in Eastern Europe in 2014-15. Source: www.fDiIntelligence.com, European Cities and Regions of the Future 2014/15
Competitive labour costs in the Business Economy
Higher education Well trained, creative and flexible human capital Number of institutions in higher education
66
Number of locations
185
•
91.3% of fresh graduates has English language skills
Number of students in higher education
291,334
•
Majoring in:
2nd most popular foreign language: German (67%)
Business and Administration
63,990
Technical education
60,674
Informatics
9,865
Foreign languages
8,083
language certificate and
Number of tertiary level graduates
55,349
computer skills
•
Followed by: French (14%), Russian, Italian, Spanish
•
All degrees include foreign-
. Source: Statistical Yearbook of Education Academic year 2013/2014
Wage adjusted labour productivity
Source: Eurostat
Corporate tax rates in the V4 countries (2015) V4 countries Corporate income tax
Source: KPMG, 2015, Deloitte
Slovakia
22%
Czech Republic
19%
Poland
19%
Hungary
10%/19%
The tax rate for the first HUF 500 million (approximately EUR 1.62 million) of the tax base is 10%; beyond HUF 500 million, it is 19%. In regional comparison the Hungarian tax rate is very favourable.
Personal income tax rates in the V4 countries, (2015) V4 countries Personal income tax Slovakia
19% 25%
Poland
18% 32%
Czech Republic
15%
Hungary
16% → 15% Source: KPMG, 2015; tradingeconomics.com
VAT 27/18/5/0% • The general VAT rate is 27% • reduced rates are – 18% (e.g. bread, milk, accommodation services) and – 5% (e.g. journals, books, medicines and central heating).
• VAT-exempt services are mainly banking services, insurance, investment-related services, sale and rental of real estate.
Number of days to start a business
Source: World Economic Forum: The Global Competitiveness Report 2014-2015
Favorable location NY -6 hrs, Tokyo +7 hrs Location: a market of 507 million EU citizens with access to the market of 205 million people of Russia, Ukraine and the Western Balkan countries
Total length of motorways (km) (2012) 1600 1400 1200 1000 800
1515 1365
600 751
400
419
200 0 Hungary Source: Eurostat
Poland
Czech Republic
Slovakia
Quality of roads in the V4 countries (2014) Question: In your country, how do you assess the quality of the roads? [1 = extremely underdeveloped – among the worst in the world; 7 = extensive and efficient – among the best in the world]
5
4,2 3,7
3,7 3,5
4
3
2
1
0 Hungary
Source: World Economic Forum: The Global Competitiveness Report 2014-2015
Czech Republic
Slovakia
Poland
Results of The Visegrad Group’s investment agencies (2015)
Source: HIPA, PAIiIZ, CzechInvest, SARIO
MAIN INVESTMENT DECISIONS IN THE NEAR PAST • • • • • • • • • • • • • • • • • • • • •
Computacenter: shared service center GE: shared service center Emirates: shared service center Pactera: shared service center Systemax, shared service center Greif, shared service center Coloplast, medical devices manufacturing OPEL, engine manufacturing ZF Lenksysteme, electric steering systems Infineon: semiconductor components producing Hankook, tyre manufacturing Hewlett-Packard, IT Sauflon, contact lens manufacturing Samsung: electronics manufacturing Procter & Gamble, personal care products manufacturing General Electric, establishment of an oil & gas branch Bridgestone, tyre manufacturing Thai President Foods, instant noodle manufacturing Bosch, R&D facility Flextronics: electronics manufacturing DHL: Express logistics
WHOM ARE WE PROUD OF – Major American investors in Hungary
Nokia’s R&D investment in Hungary 2014 • In 2014 Nokia was investing EUR 9.8 million at its research and development centre in Budapest. • Budapest is one of Nokia’s biggest global technology centres, and its role will be strengthened in future. • Nokia decided to expand its business in Hungary because: • the country offers a number of well-trained and creative engineers, • competitive price levels. • As a result of the investment, 150 new jobs were created in Hungary. • The Hungarian Government was supporting the investment with EUR ~700.000 grant.
Finnish business presence in Hungary • More than 30 companies with Finnish capital • Finnish FDI ca. EUR 60 million in Hungary. • Finnish-Hungarian trade exceeds EUR 0.5 bn in total • There is room to expand!
Business opportunities
Recent and possible future areas of Finnish-Hungarian cooperation Manufacturing Industries and Energy: • Agriculture and Food Industry • Automotive industry and Electronics • Renewable Energy: environment and forest industry • Chemical industry
Knowledge-based Industries and Services: • Medical, Recreational and Wellness Tourism • Software and digital media • R&D and Innovation
R&D: Strong scientific capacity Country
The quality of scientific research institutions The World Economic Forum ranks Hungary Nr. 23 within 144 countries
Ranking
Switzerland
1
United Kingdom
2
Israel
3
United States
4
Belgium
5
Hungary
23
Austria
24
Slovenia
33
Czech Republic
36
Croatia
53
Romania
55
Poland
63
Slovak Republic
65
Serbia
69
Source: WEF Global Competitiveness Report, 2014-2015
Prestigious international awards received lately by Hungarian scientists •
The first ever Brain Prize in 2011 was jointly awarded to three Hungarian neuroscientists, Péter Somogyi, Tamás Freund and György Buzsáki
•
Endre Szemerédi has received the 2012 Abel Prize for mathematics („Nobel prize” for maths) for his fundamental contributions to discrete mathematics and theoretical computer science
•
Network scientist Albert-László Barabási received the Lagrange-CRT Foundation Prize in 2011 for his research on complex networks in natural, technological and social systems
•
In 2011, the Innovact Campus Awards grand prize was awarded to the STERY-HAND project, presented by Tamas Haidegger from the Budapest University of Technology and Economics
National R&D&I Strategy 2020 •
Active support from governmental R&D&I policy
•
Renewing and strengthening the innovation system as a whole
•
Transforming Hungary to a sustainable knowledge economy
•
Key participants of the national innovation system will be significantly reinforced
•
Increasing gross domestic expenditure on R&D by 0.6% (to 1.8%) by 2020
ICT- A booming sector •
About 13.7% of the Total Value Added comes from ICT companies (20% with multiplier effects)
•
ICT sector has shown a constant growth even during the economic downturn
•
Around 311,000 employees work directly in the sector (400,000 people with indirect employees)
•
Hungary ranks third place in the EU according to the rate of ICT employees within the population
•
There are more than 10 Science Parks in Hungary
Source: ICT Association of Hungary
Centers of IT knowledge Eger IT Students:340 freshmen: 84
Győr IT Students:885 freshmen: 265
Sopron IT Students:108 freshmen: 23
Veszprém IT Students: 463 freshmen: 159 Zalaegerszeg IT Students:75 freshmen: 28
Miskolc IT Students: 714 freshmen: 154
Budapest IT Students:8,527 freshmen: 2,598
Székesfehérvár IT Students: 192 freshmen: 192
Dunaújváros IT Students:607 freshmen: 134
Gyöngyös IT Students:121 freshmen: 16
Kecskemét IT Students:548 freshmen: 118
Szeged IT Students: 1,253 Nagykanizsa IT Students:52 freshmen: 9
Nyíregyháza IT Students: 233 freshmen: 55
freshmen: 206 Pécs IT Students: 788 freshmen: 180
Debrecen IT Students: 1,677 freshmen: 438
Innovative Hungarians in ICT • LogMeIn - The application allows the more than 125 million users worldwide to control their computer remotely via a client program, a browser and a mobile device. • Prezi – online presentation tool with a special set of graphic and functional tools. In 2010 the company was awarded with the European Seal of eExcellence Platinum Award. • Ustream – provides video streaming services to more than 80 million viewers and broadcasters. Over 180 employees in San Francisco, Los Angeles, and Budapest. Source: IDC Hungary, 2012
Digital Hungary program – Why? • dominant ICT sector in international comparison (appr. 12% of Hungary’s GDP) • but limited use of info-communication tools, especially among citizens and SMEs • restricts the full utilization of growth potentials
Solution: in 2014 the Hungarian Government launched a 7year program aimed at the comprehensive development of digital administration and digital economy (National InfoCommunication Strategy 2014-2020).
Business opportunities in the program • ensuring that every Hungarian household has access to high-speed internet by the end of 2018 (at least 30 Mb/sec in roughly 3.5 million households – estimated total investment over EUR 320 million) • developing smart cities • increased use of IT by enterprises (e.g. management support software, websites, e-Commerce, etc.) • developing IT competencies all across the various age and social groups of population • widening the scope of e-Government services (e.g. full digitization of business-related administration by 2020) • investing in hardware manufacturing and software developing enterprises
Tax incentives for digital network development • Service providers are exempt from the utility tax for 5 years for network extension as well as for network upgrading providing at least 100 Mb/sec internet • Subsidies available from August 2015 in less developed regions under the EU structural and cohesion funds program GINOP: – available in areas where network developments are otherwise not commercially viable – HUF 68 billion non-refundable grant (EUR 218.0 million or USD 245.5 million) – HUF 10 billion refundable subsidy (EUR 32.1 million or USD 36.1 million)
State subsidies
STATE SUBSIDY Centralized
Decentralized Local municipalities
Tax allowances
Cash grants
Development tax allowance Social tax allowance
State subsidy
EU co-financed tenders
Subsidy Based on Individual
Regional
Government Decision (EKD)
Environmental protection
Job creation subsidy
SME development
Training subsidy
R&D&I
Workshop establishment aid
Training
Free Enterprise Zones
Employment of disadvantaged workers
EUR 25 billion
1080 communities
EKD Subsidy (Individual Government Decision ) Type of subsidy, volume
Application, legal background
- Non refundable
- Managing Authority: KKM/HIPA
- Post financed cash grant
- Submission of Request List (RL)
- Based on the decision of the Government
- Gov. Decree No. 210/2014 (VIII.27.)
Eligibility criteria, undertakings Region
Asset
>=EUR 10 m >= 50 fte
Preferred Developed
Job creation
>= EUR 20 m >= 100 fte
>=EUR 10 m >= 100 fte
Training subsidy • minimum 50 new positions • aid amount: – max. EUR 0,5 M (HUF 155 M) if job creation is between 50-250
– max. EUR 1 M (HUF 310 M) if job creation is between 251-500 – max. EUR 1,5 M (HUF 465 M) if job creation is between 501-750 – max. EUR 2 M (HUF 620 M) if job creation is >750 • maximum aid intensity: 50% (of the eligible costs) • granted in all regions of Hungary and it is above the maximum intensity ratio fixed by the European Union • letter of intent or application form shall be submitted to Ministry for National Economy
Development Tax Allowance Type of subsidy, volume
Application, legal background
- Post financed
- Managing Authority: NGM/NAV
- Corporate tax allowance
- Submission of notification/application
- Up to 80% of corporate tax, for 10 years
- Gov. Decree No. 165/2014 (VII.17.)
Eligibility criteria, undertakings Region
Asset
Preferred
>= HUF 1 billion >= 75 fte
Developed
>= HUF 3 billion >= 150 fte
Job creation
>= 1 fte
Social Tax Allowance Type of employees Below the age of 25 years* Above the age of 55 years Unskilled Long-term unemployed Mothers with small children Researcher or developer employee with PhD or higher academic degree PhD students
Contribution payable (up to gross wage of HUF 100 000) The contribution payable will be halved (27% → 14%) *entrants are exempted for two years (27% → 0%) Initial two years - no contribution payment will be required (27% → 0%) Third year - half of the contributions is to pay (27% → 14%) up to gross wage of HUF 500 000 27% → 0% up to gross wage of HUF 200 000 27% → 12,5%
Business meets culture…
Beautiful places in BUDAPEST
House of Parliament
Fisherman’s Bastion
Matthias Church
Royal Palace
City Park
Margaret Island
Chain Bridge
Heroes’ Square
Széchenyi thermal bath
Citadella
Culture • Culture – Events - Festivals • A country of music: Liszt, Bartók, Kodály • Concert halls, Opera, Ballet • Festivals: Sziget, Volt, Balaton Sound, Hegyalja • Formula-1 Hungarian Grand Prix
Spas and baths • • • • • • •
Budapest Hajdúszoboszló Hévíz Sárvár Bük Gyula Harkány ...and many more...
Wine tours in Hungary
Wine festivals Hungary • Annual wine festivals celebrate viticulture and usually occur after the harvest of the grapes which, in the northern hemisphere, generally falls at the end of September and runs until well into October or later. • For example: Balatonfüred Wine Weeks, Wine Festival of Balaton's wines, Pannonhalma Wine Region Cellar Festival, Eger Star Wine Festival, Szekszárd Grape harvest Festival, Grape harvest Festival of Tokaj-Hegyalja etc. • St. Martin’s Day, or Martinmas (11 November): sampling of young wines and goose feasts. “He who eats not goose on Martin’s Day will starve, and who drinks not new wine will thirst.”
Thank you for your attention! For further information, please contact: Judit Szigeti Embassy of Hungary Kuusisaarenkuja 6, 00340 Helsinki Tel: +358 40 820 6530, +358 436 60 706 E-mail:
[email protected]