Countries of the World/COUNTRYS.BIN/dp/0162/01624.txt

Text File | 1991-06-25 | 23KB | 461 lines

$Unique_ID{COW01624}
$Pretitle{365}
$Title{Hungary
Working Together}
$Subtitle{}
$Author{Hezsef Rotyis}
$Affiliation{Embassy of Hungary, Washington DC}
$Subject{hungary
business
hungarian
companies
consulting
foreign
ibm
company
new
small}
$Date{1990}
$Log{Table 1.*0162401.tab
}
Country:     Hungary
Book:        Foreign Policy Basics
Author:      Hezsef Rotyis
Affiliation: Embassy of Hungary, Washington DC
Date:        1990

Working Together

JOINT VENTURES IN HUNGARY

     In 1968 a "new economic management system" was introduced in Hungary,
representing so to say the first step towards a market economy. But not much
was achieved at that time. Four or five years later the then Soviet leadership
under Brezhnev curbed the process, even if it could not entirely be brought to
a halt. A private sector was beginning to take shape, in the form of economic
working associations of private people and of joint ventures. People began to
show signs of an entrepreneurial spirit.

     The foundation of joint ventures was first made possible by a Finance
Minister decree issued late in 1972, with conditions appearing not too
favourable. Every two or three years improvements were made in the conditions,
and from January 1, 1989, they can definitely be considered as attractive.

     Until December 31, 1987, 130 joint ventures had been established, in 1988
140 more and in 1989 700 more were set up. In September, 1990, over 2500 joint
ventures and fully foreign-owned companies were on record.

     The major increase of recent years can be attributed to the favourable
terms and conditions, of which just a few will be mentioned here: highly
favourable profit taxation, full guarantee (including an American OPIC
guarantee) on foreign partner's property in Hungary; exemption from duty for
physical contributions; possibility for the firms to acquire real estate;
existence of a stock exchange in Budapest; arrangements for the transfer of
profits without limitation; activity of the Joint Venture Club aimed at the
representation of interests; and last but not least the fact that since 1968
there have been many people with entrepreneurial spirit in Hungary.

     The number of companies including US partners has increased at a similar
rate to that referred to above. The figures given in the Table refer to the
610 companies which were already actually operating late in 1989 and of which
detailed particulars are available. At end-1987 there were five, at end-1988
there were ten, and at end-1989 there were 49 companies (out of 610,
corresponding to 8 per cent) which included US partners. The Table shows the
number of companies by sectors in which US firms hold interests and the
capital share they represent. Just a few comments on this:

[See Table 1.: Companies Founded with the Participation of US Firms and
Operatice as of December 31, 1989]

     There are many more joint ventures in the field of services than in
industry. The total and foreign capital by company in the field of industry is
made to appear high by Tungsram Rt's total capital of USD 88.9 million, of
which 44.5 million (slightly more than 50 per cent) is US capital.

     -In the field of services, total and US capital by company is made to
appear high by the total capital of USD 3.5 million of Intercooperation Rt, a
company concerned with foreign trading activity, whose capital is fully owned
by the foreign partner (i.e. this is a fully US-owned company).

     -The foreign share approximates 50 per cent as regards total and
industrial activity, and almost 60 per cent in the field of services, just due
to Intercooperation.

     - Among service activities a great variety are represented. Here are the
names of some of the major US partners:

     = Consulting company: Arthur Young, NY,

     = McDonald's Restaurant Operation Inc., Delaware,

     = Publishing, publicity: IDG Communications Inc., Framingham; McCann
Erickson Worldwide, NY; Ogilvy and Mather Worldwide, NY;

     = Trade: Dupont de Nemours and Co. Inc., Delaware; Getz Ltd. Partnership,
Delaware; and Getz International Inc., San Francisco (owners of
Intercooperation mentioned above).

     - Lack of space only permits the mention here that the service field
includes firms concerned with trading in securities, software, tourism,
education, and film making and distribution.

     - Industrial activities cover the manufacture of, among others, rubber,
car components, hydraulics pipes, screws, intraocular lenses, plastic basic
materials, and naturally of various illuminants by Tungsram Rt.

     - The figures in the Table do not cover the 80 per cent bank interest in
Hungary of Citicorp Overseas Investment Corp., Delaware, represented by
Citibank Budapest Rt.

I. Toldi-Osz

How far is Hungary?

     Looking at a map it can be seen that the USA and Hungary are not so far
away from each other. How can it be, then, that Americans and Hungarians know
almost nothing about each other. They only have stereotyped ideas in their
mind when the other country is mentioned. This fact points to a distance of
light years, not to some thousands of miles.

     In the modern history of the two nations it was not always so. From the
birth of the American nation to the 1990s the historic and economic relations
between the USA and Hungary showed signs of improvement. This improvement was
also supported by almost 2 million Hungarian immigrants. These people, trying
their hand in the land of freedom, were emerging from the melting pot as
Americans, while remaining somewhat Hungarian their in own minds.

     Unfortunately, the political events of the 20th century increased the gap
between the USA and Hungary. The increasing German orientation of Hungary did
not allow for an improvement.

     The process of separation was heightened even further after the end of
the World War II by Hungary becoming a Soviet-controlled communist country.
After the nadir of the relationship in 1956, the weakening of the communist
dictatorship opened new horizons for restoring links between the USA and
Hungary.

     The return of the Holy Crown by President Carter and the first
presidental visit to Hungary by President Bush in 1989 were considered as
signs of a renaissance in the relationship.

     New developments in politics and economics can offer promising challenges
to American investors. Some of the investors have already been active in
business, for example in industry (GM, Ford, Schwimm), in investing in the
Hungarian infrastructure (US West), and in show business (Walt Disney,
Time-Warner).

     Without underestimating the importance of these investments, we would
propose that there is another very important area in which Hungary is in need
of help from American firms. This is in the field of management consulting and
auditing activity.

     In readjusting to a market economy, Hungary has had to face up to several
unforeseen problems. One of them has been the lack of economic know-how
offered by management consulting firms. These firms did not exist in Hungary
until 1989 when Ernst & Whinney and Arthur Young set up their own offices in
Budapest. They have since merged worldwide, and are known as Ernst & Young Rt
in Hungary.

     Ernst & Young Rt is able to provide both Hungarian and international
investors with professional services ranging from advice on doing business in
Hungary, right through to business valuations and audits.

     Our objective is to provide an excellent service to our clients. In so
doing, we promote international co-operation, which thereby contributes to a
reduction in the distance between our countries.

Janos Meszaros
Ernst & Young

For a Cleaner Environment

     ICF/Chem-Consult, American-Hungarian Consulting and Service Ltd has been
recently established. The company is a joint venture between Chemolimpex and
ICF Consulting Associates, a US management-consulting firm. ICF/Chem-Consult
has been created primarily to provide management and environmental consulting
services