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Welcome to Hungary

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

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Welcome to Hungary

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  1. Welcome to Hungary

  2. Hungarian Investment Policy and Business Environment Mrs. Agnes Henter Director, Investment Projects June 16, 2008

  3. ITD HUNGARY: Your Natural Partner ITDH: YOUR NATURAL PARTNER Founded by the Hungarian Governmentto 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

  4. Efficient servicesby ITD Hungary Decision • 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 • 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

  5. Hungary in Europe Hungary Land: 93,030 km² Population: 10,1 million GDP/capita, at PPP: EUR 16,000 (2007 forecast)

  6. 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

  7. Hungary is front-runner as regards FDI Influx Cumulated FDI* in Hungary in million USD 97,396 Source: National Bank of Hungary, Ministry of Economy and Transport * Including reinvested earnings from 1995

  8. Hungary’s position in FDI • SignificantFDI/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)

  9. 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 Heliogrid:Solar 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 Large investments announced in 2007

  10. Major Chinese Investments in Hungary Value of total Chinese investments: approx. USD 250 million 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

  11. Hungary’s 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 • 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

  12. NIS and Asia Scandinavia/Nordic UK/Ireland Central Eastern Europe North West Europe Central Southern Europe Iberia Eastern Mediterranean Hungary: logistics centre • An EU member country, Hungary has direct accessto the EU market of nearly 500 million customers; • After the most recent expansion of the EU,Hungary became the geographical centre in the CEE.

  13. Well trained, creative and flexible human capital Budapest 161,300 Debrecen 25,200 Miskolc 13,600 Pécs 33,100 Pécs Veszprém 10,600 Szeged 30,00 University Towns • Number of institutions in highereducation: 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 languagecertificate and computer skills!

  14. Prioritysectors in Hungary Hungarian performance Very strong Strong Medium Low Very low Dynamics of the sector • Recycling • Biotechnology • ICT, SSC Growth • Renewable energy • Automotive • Electronics • Digital media and creative industries • Aviation and Aerospace Stability Decline Low Average Strong Existing presence Source: Deloitte, Project Astra

  15. High-performing sectors: strong position in Central-Eastern-Europe • Hungary is • the largest electronics producer in CEE providing 40% of theregional output and nearly 50% of the exports • major hardware producer in the region, representing 5.5% of Europe’s 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 (Ernst&Young, 2007)) • strong R&D in the automotive sector

  16. Strong innovation capacity • 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

  17. High Performing Sectors Automotive The sector’s 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 pcsplanned 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 World’s 3rd largest powertrain plant in Hungary by Audi!

  18. Miskolc Győr Pilisszentiván Budapest Érd Veszprém Székesfehérvár Major companies conducting R&D, centres of excellence Automotive engineering • 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 R&D research include highly complicated, high-quality vehicle parts and components, advanced vehicle control, laser machining, metal foams, nano-composites

  19. Electronics High Performing Sectors Hungary is the largest electronics producer andexporter in the CEE region byproviding 40% of theregional output andnearly 50% of theexports. 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% .

  20. Debrecen Szombathely Szeged High Performing Sectors ICT • Hungary has the second highest share of ICT goods in the country’s 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 R&D, like Nokia, • Ericsson, IBM, CISCO, SAP, Oracle, SUN

  21. High Performing Sectors Life sciences • Hungary is the fifth largest medicine • producer in Europe • Largest biotechnology innovation • and spin-off sector in CEE • Extensive R+D cooperation • University biotechnology centres • clusteredin four academic towns

  22. Cell Communication Knowledge Centre Infobionics Knowledge Centre Budapest Debrecen Genomnanotech Knowledge Centre Szeged Medipolis Knowledge Centre Neurobiological Knowledge Centre Pécs Four life science clusters • Budapest, Szeged, • Debrecen, Pécs: • strong presence of • large international • pharmaceutical • and biotechnology • companies • clustered around • universities.

  23. 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

  24. Increasing activity in solar paneltechnology 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

  25. 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

  26. 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 • ahigher education and research centre • A large number of local experts • experienced inair traffic control and in the • operation of airports

  27. 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

  28. Szabolcs-Szatmár-Bereg Nógrád Heves Győr-Moson-Sopron Komárom-Esztergom Hajdú- Bihar Budapest Pest Jász-Nagykun-Szolnok Vas Fejér Veszprém Bács- Kiskun Békés Zala Somogy Tolna Csongrád Baranya InvestmentIncentive 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 *from 2011: 10%

  29. Unique benefits • Open atmosphere, advanced business administrative system • Harmonious relationship with China’s central government • Largest Chinese community in Central and Eastern Europe • Chinese schools, newspapers and restaurants • Rich entertainmentfacilities

  30. 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: (36 1) 472-8181, Fax: (36 1) 472-8180 agnes.henter@itd.hu www.itdh.com

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