Post on 12-Jan-2016
21 April 2023
Panel Presentation
for Industrial Manufacturing Panel
Prof. Dr. Gusztáv Báger
Budapest International Business Center Conference 2013
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Main subjects
1. Two main macroeconomic challenges
2. General features of subcontracting
3. Some aspects of corporate citizenship
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1.1. Seek for break-out opportunities for economic growth
● Weak potential growth: GDP -1,7% in 2012; 0,3% in 2013 (EU); 0,9% in 2013 (Government)
● Industrial production -2,7% in 2012 From among 13 subsectors of
manufacturing: production• increased in 4 subsectors• stagnated in 5 subsectors• decreased in 4 subsectors(in electronics sector by 18%)
1. Two main macroeconomic challenges
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1.1. Seek for break-out opportunities for economic growth (cont’ed) Employment decreased by 2%
Weak financial position of firms
Slow industrial growth recovery (0,5-1,0 % in 2013)
● Consequently, need for further integration of foreign companies to Hungarian economy.
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1.2. Other important aims of Hungarian economic policy
● Financial and fiscal stability● Reducing public debt● To increase the level of labour market
participation and employment● Structural reforms (pension system, public
transport, higher education, state and municipal financing etc)
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1.3. Enhancing competitiveness(2nd major challenge)
●Recent governmental measures for competitiveness
New labour code (effective from 1 July) in favour of employers
New act on vocational training in favour of business needs
Strategic agreements between the government and top investors
Job Protection Action Plan
Site Selection Magazine Ranking, 2012
Top countries in Eastern Europe:
1.Hungary
2.Poland
3.Slovakia
4.Estonia
5.Czech Republic
The magazine of corporate real estate strategy & area of economic development
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Main arguments for Hungary as an investment destination
• Open economy with a high ratio of FDI stock• Attractive business environment• Investment friendly policy environment • Competitive tax system• High productivity and skilled, flexible labour at
competitive price level• High level of educational system• Availability of language skills, including exotic
languages• Close cooperation between education institutions
and companies• Governmental incentives
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Competitive tax system
• Low corporate income tax: • rate for the first HUF 500
million of the tax base is 10%; • beyond HUF 500 million, it is
19%.• Tax incentives and
allowances (development tax allowance, training subsidies, cash grants etc.)
• Flat personal income tax: 16%
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High average yearly working hours, 2011
Source: IMD, World Competitiveness Online 2012
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2.1. Top reasons for contracting with Hungarian companies
● Central locationAt the cross roads of 4 main European
transportation corridors - I deal logistical center for the automotive industry (More than 90% of Hungary’s automotive production goes for exports)
● Cost efficiencyCompetitive wages and labor cost/value ratio in
European comparison in the CEE region.
2. General features of subcontracting
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2.1. Top reasons for contracting with Hungarian companies (cont’ed)
● Tradition of innovationLong and successful tradition of cooperation
between the universities and the producers in R&D.
● Long-term planningAccording to the sectorial estimations from 2013
400 000 passenger cars will be manufactured in Hungary.
Competitive earnings and long working hours of professions from the automotive sector
Source: UBS, Wealth Management Research, Prices and Earnings, 2009
CityGross income
per year in USDWeekly working
hoursTokyo 40,900 44
New York 40,700 40
London 31,200 39
Vienna 31,100 40
Berlin 30,200 39
Ljubljana 17,800 42
Prague 12,700 42
Bratislava 10,700 40
Warsaw 9,700 35
Bucharest 8,400 40
Budapest 8,400 43
Income and working hours of car mechanics
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Top reasons for strong supplier base in Hungary: the case of automotive sector• Over 600 companies in the automotive sector• 14 of the 20 leading Tier 1 company settled
down in Hungary• Hungarian automotive suppliers have several
years of experience supplying OEMs & Tier 1s
• Strong governmental supplier development activity
• Extended vertical and horizontal supplier connections
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2.2. Weaknesses, threads●Weaknesses
Blue collar efficiency increase was lower than expected
Praxis oriented education is on low level, does not cope with the requirements of the industry
Low level mobility for blue collar workers Suppliers have low level IP contribution to
products, R&D capability is missing Low level of networking on supplier level Other means of transport (waterway, air)
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2.2. Weaknesses, threads
●Threads Entrepreneurial culture of Hungarian owned
companies (mostly SMEs) will not change as requested
Old hierarchies and traditions in education system will not be overcome
Co-operation among companies and institutions will not develop as required
Source: Prof. Dr. László Palkovics: Hungarian example: Challenges in the subcontracting industry (transport) with special attention to the human relation issues
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Main actions for enhancing subcontracting●To promote better harmony between education and needs of business●To increase R&D expenditure of SMEs●To elaborate financial schemes for supporting better collaboration between the SMEs and their foreign partners●To develop the competencies of local universities needed for their more efficient participation in co-operation networks●To develop entrepreneurial culture●To implement the tasks of strategic co-operation agreements
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● The definition of Corporate Social Responsibility is globally discussed
Limited view: philanthropy Extended view: having political connotations Suggested: to have sustainable development
connotations● New EU definition: „responsibility of enterprises
for their impacts on society”● It is on way in Hungary: to become more and
more a public concern
3. Some aspects of corporate citizenship
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