Hungary – the right place for your

investment

14th November 2013

Introduction of HITA

• Governmental agency for investment promotion and trade development

• Main activities: consultancy, mediation, providing information, around 500

programs yearly

• Headquarters in Budapest

• 150 employees

• Supervising body: Prime Minister’s Office

Who we are

Investment PromotionOne-stop services

for foreign investors

Supplier Services

Enhancing business between foreign OEMs and

Hungarian suppliers

Trade Promotion

Export development programs for

Hungarian SMEs

Our services

Domestic network Central office: Budapest

15 regional offices outside Budapest covering the whole country

Foreign network 61 foreign offices in 47 countries all over

the world

74 trade and investment counsellors

Offices in Hungary and abroad

Pre-decision Implementation Operations

Tailored information packages on the economy, industrial sectors, incentives, business environment, supplier network

Assistance in location search and evaluation

Organisation of site visits and partner meetings

Supplier search Providing

information on permitting procedures

Assistance in identifying incentives

Intermediate Body for VIP cash incentive (preliminary information, application)

Expansion assistance

After care services Intermediary body

between the government and the companies

Supplier search

Investment promotion

Business environment

Hungary

Location: EU - a common market of more than 500 million peopleUkraine, Russia and the Balkans - market of 210 million consumers

Land: 93,030 km²Population: ~10 million

GDP/capita, at PPP (2012): EUR 16,800/ USD 22,924

Source: Eurostat, OECD

Macroeconomic overview

• EU-member since 2004

• GDP growth (2012): -1.8%• Forecast (2013): +0.7%

• Export growth (2012): +2.0% • Industrial production (2012): -1.7%

• Average gross wage (2012)*: €770.5• Unemployment rate (2012): 10.9%

• Inflation rate (2012): 5.7%• Forecast (2013): 3.1%

• Government balance (2012): -1.9%• Forecast (2013) : -2.7% (% of GDP)

EU

GDP

External trade and industry

Employment and wages

Inflation

Budget balance

Source: National Bank of Hungary, HCSO, Convergence Programme of Hungary 2013-2016* Exchange rate: 1 EUR = 289,42 HUF

• Financial and fiscal stability

• Reducing public debt

• To raise the growth potential of the Hungarian economy

• To increase the level of labour market participation and

employment

• Enhancing competitiveness

Most important aims of Hungarian economic policy

• New labour code (effective from 1 July 2012 ) 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 – cutting contribution payable by employers for 5 prioritised employee groups

Recent governmental measures for competitiveness

Competitive tax system

• Low corporate income tax: • rate for the first HUF 500 million

(~ USD 2.3 million) of the tax base is 10%;

• beyond HUF 500 million, it is 19%

• Flat personal income tax: 16%

European countries Corporate income tax

France 33.33%

Spain 30.00%

Germany 29.55%

UK 24.00%

Greece 26.00%

Czech Republic 19.00%

Slovakia 23.00%

Poland 19.00%

Hungary 10-19%

FDI in Hungary

Inward FDI stock

Hungary Czech Republic

Slovak Republic

Poland Romania Slovenia0

10

20

30

40

50

60

70

80

90 80.30

67.70

57.40

45.8042.40

34.10

Source: Eurostat, Hungarian National Bank, OECD

Percentage of GDP (2012)

Inflow of foreign direct investment (2012)

Hungary

Czech

Republic

Poland

Slovakia

Romania

Bulgaria

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Source: UNCTAD

(million USD)

1055 BUDAPEST, HONVÉD UTCA 20. TELEFON: (+36) 1 872 6699 FAX: (+36) 1 872 6699 WWW.HITA.HU

Main investment decisions in 2013

• Coloplast, medical devices manufacturing• OPEL, engine manufacturing • ZF Lenksysteme, electric steering systems• Hankook, tyre manufacturing• Hewlett-Packard, IT• Sauflon, contact lens manufacturing• Procter & Gamble, personal care products manufacturing• General Electric, establishment of an oil & gas branch• Greif, shared service center• Bridgestone, tyre manufacturing• Jabil, electronics manufacturing• Thai President Foods, instant noodle manufacturing• Systemax, shared service centre• Bosch, R&D facility

Chinese investments in Hungary: the success story of Huawei

• 2004 - the Hungarian office established

• Employs ca. 200 people

• 2011 - production of telecommunication devices for the EMEA Region (in contract manufacturing with Flextronics and Foxconn - employing indirectly ca. 900 people)

• 2012 - European logistics centre operated by DHL (supplying Europe, North Africa, the Middle East and Russia)

• 2013 - Strategic partnership agreement signed with the Hungarian government

Chinese investments in Hungary: the success story of ZTE

• 2005 – Hungarian office established

• Employs ca. 60 people

• Main activity: maintenance of telecommunication equipment

• 2010 - LTE technology infrastructure development for Telenor

• 2012 - network operation centre set up in Budapest to monitor telecommunication networks in the South-East European region

• 2013 – signing of MOU with government, establishment of European Mobile Phone Repair Centre

Focus sectors in investment promotion

Shared Service Centres

• Booming sector with around 80 SSCs already operating in the country

• More than 30,000 employees involved

Life sciences

• History of over 100 years in pharmaceutical manufacturing

• Approximately 250 research and educational institutes related to biotech

Automotive industry

• One of Hungary's core industries, accounts for 20 per cent of total export

• Over 600 companies are present employing 100 000 people

Focus sectors in investment promotion (cont.)

Electronics

• Hungary is the largest electronics producer in Central and Eastern Europe

• Significant footprint of prestigious electronics firms

ICT

• Outstanding cooperation between educational institutions and companies

• Growing number of data centers

Logistics

• Strategic position in the heart of the continent

• Highly developed transport infrastructure

Benefit from a good balance of quality and cost of labour

High quality education

Well trained, creative and flexible human capital

• World-renowned academic and university background with cutting-edge competence

• International experience

• Extended cooperation with business sector

Source: Statistical Yearbook of Education, 2011/2012

Competitive average wages

Slove

nia

Czech

Rep

ublic

Polan

d

Croat

ia

Slova

kia

Eston

ia

Mon

tene

gro

Hunga

ry

Latv

ia

Lith

uani

a

Serbi

a

Roman

ia

Mac

edon

ia

Bulga

ria0

200

400

600

800

1000

1200

1400

1600 1451

1077 1072945 930 928 907 899

748655

547 532423 389

Gross wages, industry (€)2012 December

Source: wiiw, Eurostat, national statistics

Take advantage of high-quality infrastructure

Excellent access to key markets

• At the cross roads of 4 main European transportation corridors

• Extensive road and railway transportation network

• Highly developed logistics and telecommunications infrastructure

Expanding motorway network

Vienna, 1 hrRotterdam, 12 hrs

Prague, 5 hrsMunich, 6 hrsHamburg, 8hrs

Warsaw, 10 hrs

Kyiv 12 hrs

Zagreb, 1 hr Trieste, 6 hrsKoper, 6 hrs

Bucharest, 10 hrsConstanza, 12 hrs

Road density

Nethe

rland

s

Belgi

um

Hunga

ry

Slove

nia

Germ

any

Switzer

land

Unite

d Kin

gdom

Denm

ark

Czech

Rep

ublic

Italy

Sweden

Franc

e

Irela

nd

Spain

Austri

a

Estoni

a

Lith

uani

a

Portu

gal

Greec

e

Slova

k Rep

ublic

Croat

ia

Ukrai

ne

Finla

nd

Bulga

ria0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

km/km2

Source: IMD, World Competitiveness Yearbook, 2012

Ready-made industrial sites

• Green- and brownfield investments• Good access to highways• Excellent infrastructure services• Turnkey solutions• New technology and logistical parks• Warehousing• Customs arrangements• Forwarding• Administration (authority permits)• Financial services• Legal consulting• Extra services

More than 210 industrial parks are available for manufacturing activity

Nyíregyháza, IP

Tatabánya, IP

Available incentives

Available incentives

* Preferred local governments are located in Northern Hungary, Great Hungarian Plain (North and South) and South Transdanubia.** According to preferred and most preferred micro regions.*** Employment of min. 50 new students.

Free Enterprise Zones

903 communities provide several tax allowances for investors

Development tax allowance

Social contribution allowance

Vocational training contribution allowance

Maximum 80% corporate tax relief for 10 years

Only HUF 100 million (EUR 0.33 million)* investment is needed

0% in the first two years of employment instead of 27%.

12.5% in the third year of employment instead of 27%.

0% in the first two years of employment instead of 1.5%.

Note: calculations are based on 300 HUF/EUR rate

HITA Investment sites in Free Enterprise Zones

Szécsény

Tab

Nyírbogdány

Mezőcsát

Mezőtúr

Sarkad

Tiszafüred

Nyírbátor

Mezőberény

Mátészalka

Tiszaföldvár

Létavértes

Mórahalom

Tiszalök

Bátonyterenye

Kunszentmárton

Alsózsolca

Berettyóújfalu

Fehérgyarmat

FelsőzsolcaFényeslitke

Kaposmérő

Kistelek

Kunhegyes

Industrial Park

Industrial Site

Industrial Hall

Csenger

Eligible expenditureAdjusted aid

ceiling

Up to EUR 50M100 % of

regional ceiling

For part between EUR 50-100M

50 % of regional ceiling

For part exceeding EUR 100M

34 % of regional ceiling

Please note that the current incentive system is valid till end of 2013, however it is expected to be effective till 30 June 2014!

Maximum aid intensity

Quality of life

• International schools in BudapestBritish, American, German, French, Chinese, Japanese, Austrian etc.

• Private medical services Well-known across Europe

• Entertainment facilitiesThermal baths, wellness, recreation centres throughout the countryPublic golf coursesRich cultural lifeExcellent food and wine

Expats like Hungary

Thank you for your attention!

Tibor NémethHead of Trade Department

Embassy of HungaryPhone: +359 2 963 1135

E-mail: sofia@hita.hu