Hungary
by: Zola Szerencses
Hungary is located in Central Europe. Some people refer to it as “the gate between the East and West”. Hungary has seven neighboring countries which open up great opportunities to work and network with surrounding countries. Hungary is landlocked country and the north-south flowing Duna (Danube) and Tisza Rivers divide the country into three large regions. The following features are mainly work related in the Hungarian culture:
- A unique, person-oriented individualism
- The relationship drives the business in Hungary
- They prefer to avoid risk and change
- Meaning of working hard is a value and an inner urge and they are creative problem solvers
Hungary’s population is 9,905,596 and 69.3% of that are between the ages of 15-64 years. Population growth is in decline in the past several years. In Hungary 99.4% of total population is literate.
After 20 years of harsh communist rule and state planning, in the 1960s Hungary embarked on a series of economic reforms aimed at developing a market-based system, but there was little political liberalisation, and reforms flagged. Janos Kadar’s government fell in May 1988, and free elections were held in March and April 1990. Reform-minded governments have been in power since then, taking Hungary into the EU in May 2004.
Hungary GDP purchasing power is $205.7 billion (2008 est.). Labor force is 4.2 Million and by occupation is 5% agriculture, 32.4% industrial, and 62.6% services (2005). The rate of corporate tax on reinvested profits fell to 16% in 2004. The top rate of marginal income tax is 36%, and the rates of value-added tax (VAT) and compulsory social security contributions, including mandatory payments to private pension funds, are also high.
The total tax rate for businesses, at 55% of total profits, is one of the highest in Europe. After the fall of communism, trade flows were reoriented towards the West, and around 80% of Hungarian exports are now directed to the EU. The current-account deficit has generally been large. The deficit widened substantially after the Russian financial crisis in 1998 and it has remained large ever since, reflecting strong import demand. The country had easy access to foreign capital during the boom years on emerging markets, but its recourse to financial assistance from multilateral lenders in late 2008 underlined that access to private capital is more difficult to secure in turbulent times. After the fall of communism, trade flows were reoriented towards the West, and around 80% of Hungarian exports are now directed to the EU. The current-account deficit has generally been large. The deficit widened substantially after the Russian financial crisis in 1998 and it has remained large ever since, reflecting strong import demand. The country had easy access to foreign capital during the boom years on emerging markets, but its recourse to financial assistance from multilateral lenders in late 2008 underlined that access to private capital is more difficult to secure in turbulent times.
Hungary has made the transition from a centrally planned to a market economy, with a per capita income nearly two-thirds that of the EU-25 average. The private sector accounts for more than 80% of GDP. Foreign ownership of and investment in Hungarian firms is widespread, with cumulative foreign direct investment totaling more than $60 billion since 1989. The government’s IMF-mandated austerity measures, imposed since late 2006, have reduced the budget deficit from over 9% of GDP in 2006 to 3.3% in 2008. Hungary’s impending inability to service its short-term debt – brought on by the global credit crunch in late 2008 – led Budapest to seek and receive an IMF-arranged financial assistance package worth over $25 billion. The global financial crisis, declining exports, and low domestic consumption and fixed asset accumulation, dampened by government austerity measures, will result in a negative growth rate of about -1.5% to -2.5% in 2009
Financial turmoil in late 2008 put the need to achieve sustainable fiscal consolidation at the top of the government’s policy priorities. Preparations for joining European economic and monetary union (EMU), and attempts to regain and sustain catch-up growth rates above the EU average will pose tough policy challenges in the coming years. The National Bank of Hungary (NBH, the central bank) tightened monetary policy sharply in 2008 to bring inflation within its 2-4% medium-term target and to support the forint against speculation, but at end-2008 it cut rates to support the economy.
Unemployment rate is at 8% (2008), Inflation rate 6.1% (2008)
Export partners are Germany 28.1%, Italy 5.6%, France 4.7%, Austria 4.6%, Romania 4.5%, UK 4.5%, Slovakia 4.2%, Poland 4.2% (2007)
Import partners Germany 26.6%, China 7.8%, Russia 6.9%, Austria 6.1%, Italy 4.5%, France 4.3%, Netherlands 4.3% (2007)
Exchange rates are forints (HUF) per US dollar – 171.8 (2008), 183.83 (2007), 210.39 (2006), 199.58 (2005), 202.75 (2004)
Telephones – main lines in use:
3.251 million (2007)
Telephones – mobile cellular:
11.03 million (2007)
General assessment: the telephone system has been modernized and is capable of satisfying all requests for telecommunication service
domestic: the system is digitalized and highly automated; trunk services are carried by fiber-optic cable and digital microwave radio relay; a program for fiber-optic subscriber connections was initiated in 1996; competition among mobile-cellular service providers has led to a sharp increase in the use of mobile cellular phones since 2000 and a decrease in the number of fixed-line connections
international: country code – 36; Hungary has fiber-optic cable connections with all neighboring countries; the international switch is in Budapest; satellite earth stations – 2 Intelsat (Atlantic Ocean and Indian Ocean regions), 1 Inmarsat, 1 very small aperture terminal (VSAT) system of ground terminals
Internet users:
4.2 million (2007)
Airports – with paved runways:
total: 20
over 3,047 m: 2
2,438 to 3,047 m: 8
1,524 to 2,437 m: 4
914 to 1,523 m: 4
under 914 m: 2 (2008)
Airports – with unpaved runways:
total: 26
2,438 to 3,047 m: 2
1,524 to 2,437 m: 3
914 to 1,523 m: 11
under 914 m: 10 (2008)
Heliports:
5 (2007)
Pipelines:
gas 4,407 km; oil 987 km; refined products 335 km (2008)
Railways:
total: 8,057 km
country comparison to the world: 27
broad gauge: 36 km 1.524-m gauge
standard gauge: 7,802 km 1.435-m gauge (2,628 km electrified)
narrow gauge: 219 km 0.760-m gauge (2006)
Roadways:
total: 159,568 km
country comparison to the world: 33
paved: 70,050 km (30,874 km of interurban roads including 626 km of expressways)
unpaved: 89,518 km (2005)
Waterways:
1,622 km (most on Danube River) (2008)
country comparison to the world: 50
Ports and terminals:
Budapest, Dunaujvaros, Gyor-Gonyu, Csepel, Baja, Mohacs (2003)
Licensing Requirements:
According to Act CXXXII of 2005 on the Amendment of Act LXXVIII of 1993 on the Rules Applicable to the Tenement and Alienation of Housing Units and other Premises the activities in connection with real estate agency may be pursued exclusively by business organizations in the frame of their for-profit activities, which has at least one member or one employee engaged personally in that activity, who has the requisite qualifications prescribed in statutory regulations. In case of individual entrepreneur he/she must have the requisite qualifications prescribed in statutory regulations. Meantime it means that the person is required to take a course of 450 hours and to pass written, oral and practical exams.
There is no mandatory continuing education in Hungary.
A practitioner can market properties anywhere in the country and there are no regional or local restrictions.
The industry is regulated by the Ministry of National Development and Economy through decrees.
Land registration system:
According to the provisions of the Act on Real Estate Registration and the principle of freedom of information, the real estate registers are public record. A real estate registration title deed may be reviewed without restriction by any person, notes may be made and certified or non-certified copies may be requested thereof. The real estate register is computerized and run by the state.
Practitioner Dispute Resolution Systems:
MAISZ (Hungarian Real Estate Association) has a Committee of legal matters and Ethics Committee which adjudicate disputes between agents, in case there are the members of the association. Their decisions are recommendations of solving the disagreements.
Referral Systems:
There is no national referral system in Hungary, but referrals sometimes are used between real estate agents/agencies. There is no law or decree regulating the extent of the fee, but usually it is 50%.
Other Industry Professionals:
Hungarian law requires that real estate purchases shall be concluded through private contract (purchase agreement) countersigned by a lawyer/notary. Lawyers are allowed to act like an agent on the basis of their individual rights.
Hungary: The Logical Choice
Since the beginning of the transition to democratic market economy at the end of the 1980s, Hungary has attracted a steady stream of foreign capital, well-balanced across the various sectors of the economy. Hungary, a country of 10 million inhabitants, can currently boast of having attracted Foreign Direct Investment (FDI) of more than 60 billion Euros to date which represents the highest per capita rate in the Central-Eastern European region. FDI nflow data in 2008 do not show the effect of the global economic crisis yet.
Distribution of FDI by the most important sectors was the real estate and business services with the highest of 20%.
The amount of office space per tenant is decreasing throughout Europe, except in Hungary, according to a survey conducted by GVA Robertson.
Average office space per tenant rose in Hungary to reach about 1,000 square metres during Q1. The rise was due to a few large new transactions, as there were seven instances in which space of over 3,500 square metres was rented and eight instances in which space over 1,000 square metres was rented in the country during the period.
The survey was conducted in 12 countries. It shows that developers are delaying construction, but not leaving the market.
At the end of 2008, about 13pc of the offices in Budapest were unoccupied, compared to a vacancy rate of 4.6pc in Copenhagen and 2pc in Bucharest.
SOME RELATIONSHIP-RELATED FEATURES of the Hungarian Culture
• Relatively low power-distance
• Relatively reserved in expressing positive feelings in relationships (verbally and in touching)
• High-context communication
• Preference of stability, desire for long-term planning
SOME GENERAL FEATURES of the Hungarian Culture
• Traditionally conservative morality: Keeping one’s given word. Respect for women, elders and ancestors. The pre – Christian religion of the Magyars was a monotheistic, monogamous, family-centered, ancestor-worshipping creed.
• Christian tradition is centered on the human side:
• Death holds little terror: It is nature’s destiny; the crop dies when ripe.
• No mysticism: secrets of the afterlife do not interest the typical Hungarian.
• Freedom-loving individualism, love of independence, values being different
• Bright minds: Artistic talent – music, poetry; Intellectual interests, such as literature,
art, music, chess, mathematics, science and discussion; Inventors, Nobel-prize winners
• Appreciation of humor, talent, sensitivity and knowledge
• Humanistic social attitudes
