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Welcome to Hungary
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Hungarian Investment Policy and Business
Environment Mrs. Agnes Henter Director,
Investment Projects June 16, 2008
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ITD HUNGARY Your Natural Partner
ITDH YOUR NATURAL PARTNER Founded by the
Hungarian Government to provide its services free
of charge

• promote and facilitate foreign investments
• develop international relations
• promote Hungarian capital investments
• EU integration-oriented SME development

Central Office in Budapest ? 55 Foreign Trade
Offices
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Efficient services by ITD Hungary

• Detailed tailor-made information package about
  economy, politics, financial incentives, business
  environment, tax system, sectors incl.
  electronics, etc.
• Site visits, meeting with local, regional and
  government bodies, experts, service providers,
  consultants, potential suppliers, etc.
• Tailor-made incentive solutions

Decision

• Accelerating permitting procedures, evaluation of
  potential investments.
• Assistance in incentive application
• VIP treatment for expatriates (visa, working
  permits etc.)

Implementation

• Special follow-up contact services
• Assistance in further investments, expansions

Aftercare
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Hungary in Europe
Hungary
Land 93,030 km² Population 10,1
million GDP/capita, at PPP EUR 16,000 (2007
forecast)
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Sustainable economic growth in 2008

• Sustainable macroeconomic growth, EU-member since
  2004
• Average GDP growth in the past 5 years 3.6
• GDP growth of 2.7 is expected this year with a
  3.3 improvement of the manufacturing and
  business services sector
• Industrial production growth is estimated to keep
  its pace at around 6
• Export growth of 10 is forecast
• Unemployment rate is expected at 7.7
• Average gross wage 750
• Average inflation rate will be around 6

Economy
GDP
Output
Employment and wages
Inflation
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Hungary is front-runner as regards FDI Influx
97,396
Cumulated FDI in Hungary in million USD
Source National Bank of Hungary, Ministry of
Economy and Transport
Including reinvested earnings from 1995
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Hungarys position in FDI

• Significant FDI/capita in the region
• Growing proportion of
• reinvestments
• Growing importance of high value
• added investments
• Major investors Germany, the
• Netherlands, Austria, UK
• (Europe 81)

(Poland and Slovenia 2006, Slovakia 2007 Sept.,
Czech Republic and Hungary 2007)
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Large investments announced in 2007
Automotive Denso (2. stage) Automotive
electonics, 110 jobs Székesfehérvár Magyar
Suzuki Automotive manufacturing, 690 jobs,
Esztergom F. Segura Automotive manufacturing,
79 jobs, Szolnok Electronics Samsung
Electronics Elektronics, 1000 jobs,
Jászfényszaru HeliogridSolar panel
manufacturing, 810 jobs Rétság Genesis Energy
Solar panel manufacturing, 190 jobs Tatabánya SSC
Vodafone Financial service centre, 750
jobs Budapest IT Services (Deutsche Telekom)
SSC, 1745 jobs, Budapest Debrecen British
Telecom SSC, 220 jobs, Debrecen
ICT Lufthansa Systems expansion, 150 new
software development positions Neusoft
software development centre of the leading
Chinese software technology company
Biotechnology Beike Biotechnology Chinese stem
cell research project St James hospital project
from Malta AAI Pharma Representative office of
the American pharma company Others AHI
Roofing Construction, 106 jobs, Várpalota DAF
Trucks PACCAR Regional disrtibution centre, 49
jobs, Zsámbék
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Major Chinese Investments in Hungary
Bank of China Unique example of Chinese capital
in the CEE banking sector Hisense LCD
manufacturing Huawei ICT Lenovo Desktop
computer manufacturing ZTE ICT Hainan Airlines
Direct flights between Beijing and
Budapest Shanghai Construction Group
Construction projects Asia Centre China/ Brand
Trade Centre Greatest wholesale trade and
logistics distribution centre in Central
Europe Neusoft Software development Beike Stem
cell research Livan Biodegradable food packaging
production Byd Electronic manufacturing
Budapest/Hungary is the 4th best location for
Chinese Investments according to China
International Institute of Multinational
Corporations. Source International and Chinese
CEOs roundtable in Nov. 2007
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Hungarys position in logistics

• Hungary is situated at the cross roads
• of four main European transportation
• corridors
• The road and railway transportation
• network is extensive and it is under
• continuous development

1. Singapore
2. The Netherlands

6. Japan
.
35. Hungary
...
38. Czech Republic
40. Poland
50. Slovak Republic

• Hungary is ahead in the World Banks Logistics
• Performance Index (2007) considering the speed
  of
• customs clearance, the average timing of export
• and import transactions and the transport costs
  

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Hungary logistics centre

• An EU member country, Hungary has direct access
  to the EU market of nearly 500 million customers
• After the most recent expansion of the EU,
  Hungary became the geographical centre in the
  CEE.

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Well trained, creative and flexible human capital
University Towns

• Number of institutions in higher education 71
• Number of students in higher
• education 416.4 thousand
• Majoring in
• Business and Administration 105 th
• Informatics 17.7 th
• Number of graduates in 2007 57.7 th

90 of students speak English 2nd most popular
foreign language German Followed by French,
Italian, Spanish
All diploma with foreign language certificate and
computer skills!
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Priority sectors in Hungary
Dynamics of the sector

• Recycling

• Biotechnology

• ICT, SSC

Growth

• Renewable energy

• Automotive
• Electronics

• Aviation and Aerospace

• Digital media and creative industries

Stability
Decline
Low
Average
Existing presence
Strong
Source Deloitte, Project Astra
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High-performing sectors strong position in
Central-Eastern-Europe

• Hungary is
• the largest electronics producer in CEE providing
  40 of the regional output and nearly 50 of the
  exports
• major hardware producer in the region,
  representing 5.5 of Europes output
• Hungary has
• a high proportion (5.4) of the labour force in
  high tech manufacturing, ranking 6th in the EU
  (Eurostat, 2007)
• the strongest pharmaceutical and biotechnology
  sector in CEE
• the highest number of shared service investments
  between 2002-2006 in Europe (ErnstYoung, 2007))
• strong RD in the automotive sector

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Strong innovation capacity
Ranking Country
Switzerland 1
USA 2
Germany 5
France 19
Norway 21
Hungary 24
Czech Republic 30
Slovenia 33
Spain 49
China 56
Poland 64
Greece 76

• The World Economic Forum ranks Hungary 24 among
  131 countries in terms of the quality of
  scientific research institutions
• Hungary is ahead of its regional competitors, and
  the Mediterranean countries

Source Global Competitiveness Report, World
Economic Forum, 2006/2007
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High Performing Sectors
Automotive

• The sectors share in the national economy
• 19.4 of total industrial production
• 20 of total exports
• Total number of companies 630
• Total number of employees 110,000
• Export ratio 90
• Car manufacturing, assembly
• Suzuki 300,000 pcs planned for 2008
• Audi Motor TT coupés and roadsters, A3
  cabriolet,
• 379 variants of 24
  different types of
• powertrain
• Engine manufacturing
• Audi Hungary 1.913 million engines in 2007
• GM Opel 434 thousand engines

Worlds 3rd largest powertrain plant in Hungary
by Audi!
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Automotive engineering
Major companies conducting RD, centres of
excellence

• In the past couple of
• years 15 automotive
• manufacturers started
• research and
• development
• including Audi, Knorr-
• Bremse, Continental, ZF
• Friedrichshafen,
• Schefenacker, Bosch, Denso and Hankook.

• Major RD research include highly complicated,
  high-quality vehicle parts and components,
  advanced vehicle control, laser machining, metal
  foams, nano-composites

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High Performing Sectors
Hungary is the largest electronics producer and
exporter in the CEE region by providing 40 of
the regional output and nearly 50 of the
exports.

• Production Value USD 19 billion
• 29 of total manufacturing production
• 29.4 of total exports
• Total number of companies 9,000
• Total number of employees 135,000
• Export ratio 87
• .

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High Performing Sectors

ICT

• Hungary has the second highest share of ICT goods
  in the countrys export in the OECD
• Hungary has the highest per capita ICT
  expenditure in the CEE region

• All major well known software developers are all
  present in the country
• including IBM, HP, Siemens, SAP, Oracle,
  Getronics, EDS, CISCO,
• TATA, Microsoft, Sun.
• Several IT companies such as British Telecom, EDS
  and Getronics
• opened their technology service centres in
  Hungary.
• Strong cooperation between business and academia
  in RD, like Nokia,
• Ericsson, IBM, CISCO, SAP, Oracle, SUN

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High Performing Sectors
Life sciences

• Hungary is the fifth largest medicine
• producer in Europe
• Largest biotechnology innovation
• and spin-off sector in CEE
• Extensive RD cooperation
• University biotechnology centres
• clustered in four academic towns

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Four life science clusters

• Budapest, Szeged,
• Debrecen, Pécs
• strong presence of
• large international
• pharmaceutical
• and biotechnology
• companies
• clustered around
• universities.

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High Performing Sectors
Renewable energy

• Kyoto protocol reduce CO2 emission with 6
  betw. 2008-2012 compared to reference period
  1985-1987
• EU target 20 share of RES in total energy
  production compared to 4.2 at present
• Hungary plans to reach 15 by 2020,
• Major areas of growth biomass, biogas, wind
• Investments into biofuel and biomass production
  has already increased
• The Energetics and Environment Operative Program
  earmarked USD 500 million to support renewable
  energy related investments
• Compulsory feed-in tariff (between 5-13 cents) is
  differentiated by the size of the plant

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Increasing activity in solar panel technology
Renewable energy

• SANYO
• Production of 50 MW capacity started in 2005
• Expanding solar panel manufacturing factory
  to 150 MW
• HelioGrid
• 50 MW planned capacity of thin film solar cell
  manufacturing in Rétság. Operation started in
  2007 Q3
• Cooperation with the Research Institute for
  Technical Physics and Materials Science in solar
  cell technology
• Genesis
• Announced to start large scale thin film cell
  manufacturing in Tatabánya with an investment
  value of EUR 100 M
• Semilab
• Leading supplier of state-of-the-art metrology
  systems for the semiconductor and photovoltaic
  industry as well as for scientific investigation
  
• Energosolar
• Develops and manufactures complete, turn-key
  production lines for thin film micromorph PV
  modules in Budapest
• Products solar electric power systems,
  photovoltaic cell manufacturing equipment,
  photovoltaic module manufacturing equipment,
  photovoltaic systems

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Záhony Logistics Centre
Complex development program of the Záhony Area
in the 2nd National
Development Plan (2007-2013) app.150 million USD

• Modernization of the Rail Infrastructure (15
  billion HUF)
• Reconstruction of the existing road
  infrastructure (4 billion HUF)
• Development of an Industrial and Logistics Park
  in Fényeslitke 120-150 ha (5 billion HUF)
• Building of the container transshipment station
  and Ro-La terminal on 100 km2 (2 billion HUF)
• Development of the secondary and higher education
  in the region
• Promotion of the cluster of the logistics service
  providers
• Marketing
• Construction planning of the Debrecen-Záhony
  Railway line and of the M300
• Highway between Motorway M3 (Vásárosnamény) and
  Záhony

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Taszár airport development

• Former US military base under
• development
• Favourable location in South-Western
• Hungary
• Can become a connecting link between
• the Far East and the European Union
• Auxiliary and warehouse buildings
• Fuel filling and repair facilities
• Public road and railway links
• Separate civil aviation sector and
• passenger terminal
• Suitable for the establishment of a
• logistical centre and merchandise
• distribution base
• The proximity of an industrial park and of
• a higher education and research centre
• A large number of local experts
• experienced in air traffic control and in the
• operation of airports

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Project Rudabánya
The mine(s) and its reserve are ready to be
introduced to the Chicago and London Commodity
Exchange.

• POLUS KINCS ZRT. offers to investors
• The ownership of mining properties at Rudabánya
  and its surroundings
• The sole rights to the mining of Barite
• The sole right to sell, the Mining rights of the
  reserve, of the Iron-ore, Copper-ore and the
  Poly-metallic metals

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Investment Incentive system
Intensity ratios

• Tax-related benefits
• Tax deductible items
• Development tax benefit
• Direct Incentives
• Special Incentive Package for
• large investments
• EU co-financed grants
• Incentives above intensity
• ratio

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30
40
50
from 2011 10
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Unique benefits

• Open atmosphere, advanced business administrative
  system
• Harmonious relationship with Chinas central
  government
• Largest Chinese community in Central and Eastern
  Europe
• Chinese schools, newspapers and restaurants
• Rich entertainment facilities

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Thank you for your kind attention!
Mrs. Agnes Henter, Director, Investment
Projects ITD Hungary Hungarian Investment and
Trade Development Agency H-1061 Budapest, 12
Andrassy ut, Hungary Phone [phone], Fax
(36 1) 472-8180 agnes.henter_at_itd.hu www.itdh.com