Dale A. Martin, President of the German-Hungarian Chamber of Industry and Commerce (known as DUIHK or AHK Ungarn), talks to the Budapest Business Journal about the work of the chamber and the bilateral trade relationship.
Over the last 20 years, trade between the two countries rose by 800%. In the past five-six years, German-Hungarian trade has been growing faster than the overall Hungarian foreign trade – hence the share of Germany in the Hungarian exports and imports has been rising again. The turnover between the two countries was more than EUR 47 billion in 2016; as a comparison, Hungarian GDP was EUR 112 bln.
As a major industrial country, Germany has traditionally had a good relationship with Hungary. In the ’90s, Hungary saw very significant German investments which have been growing ever since. The fact that companies that have established a foothold then have been expanding shows that investors appreciate the quality Hungarian colleagues can provide.
The industrial sector is one main driver, but it is not the only one. One reason why German-Hungarian trade is growing faster than the overall Hungarian economy is that the German economy overcame the recession earlier, and is growing at a faster pace than many other large European economies. This has provided additional demand from the German market and vice versa. Although Germany is the global export champion, Hungary is one of the few countries of the world that has a substantial trade surplus with Germany. This is, in part, due to the German export companies that are present in Hungary.
Strategic investment decisions are based on a very complex mix of evaluation criteria. It has a lot to do with history, geopolitical proximity, and infrastructure. There is a special relationship due to the opening of the borders in 1989, which is a positive memory. Due to all of this, German companies invested in here relatively early and created success stories.
More than half of German investments in Hungary are in the manufacturing sector; this ratio is far higher than that of other countries – which also explains the trade surplus. More than one-third of the total German investment in Hungary relates to the automotive industry, another 15% to other manufacturing sectors. But German companies are also present in telecommunications, business services, retail and wholesale trade, the energy sector. There are around 3,500 German companies here, most of them are small- or medium-sized. Their investments may often be less spectacular, but they also add up to a significant size.
One role of the chamber is to be here for the companies that are already in Hungary. The second focus area of our activities is to support companies that show an interest in entering the Hungarian market. This is an important segment, where we – along with the Hungarian Investment Promotion Agency (HIPA) – can provide qualified assistance. But one should bear in mind that an ever increasing part of German investments here stems from the expansion of existing operations.
Of course, governmental activities have an influence. On the one hand, HIPA is offering a good bundle of services for newcomers and expansions. Other measures may raise eyebrows in the investment community, e.g. if they put an additional administrative burden on the companies.
There are partners in government who listen to the business community actively and take steps to improve the business climate. Two years ago, the new electronic road transport control system, EKÁER, was nearly impossible to fulfill within the given timeframe in the beginning. Yet at the end, with the relevant ministry, we were able to find a better way whilst achieving the aim, which was the clear-cut aim of the government – to make transport system more transparent and whitening the economy.
Definitely there has been an improvement in communication. In 2013, we started a series of regular meetings between the representatives of the chamber and the Ministry of National Economy. Furthermore, we provide the government with suggestions from and about the German business community, and we notice that there is demand for this input, and it is being used for their evaluations.
I believe so. The global trend of digitalization will sooner or later appear in the bilateral trade and investment relationship. We are supporting this so that it happens sooner rather than later. Major companies in Hungary are very active in these fields – just look at autonomous driving – and many of them are German companies. And if one sector steps ahead, this has a ‘pull-effect’ on related sectors. The automotive industry is traditionally very sophisticated, being highly automated with a complex supply chain. Having this industry in Hungary has brought advantages to the country’s economy. This is a driving force which will continue to take the Hungarian economy forward.