Creating a two-way street

Q: As was said at a recent business forum organized by the Swisscham, Switzerland increased its investments in Hungary last year. Does this mean that, unlike those from many other countries, Swiss investors still look at Hungary as an attractive target country?

A: Yes, they do, but it is mostly true for companies that have been in Hungary for several years, and these are typically active in the manufacturing sector. Several such firms have extended, or are about to extend, their activities in the country. To mention just two examples: last year, Nestlé invested HUF 10 billion in a new unit at its Bük factory where it produces pet food, while the Phoenix Mecano group opened a 6,000sqm production hall at its Kecskemét base in 2011.

But things are different for those who do not yet have personal experience in the country. When it comes to new investors contemplating entry to the Hungarian market, I do sense a sort of wait-and-see attitude.

Q: What are the reasons you hear most often?

A: Of course, while I do know the reasons behind the decisions of companies that have already decided to settle in Hungary, I’m not informed about the reasons for staying away from the country by those deciding to postpone or delay their market entries. These preventative forces, however, are most likely focused around two things: unpredictable economic and legal environment, and the fact that companies are unable to plan ahead under such circumstances. If, say, the legal environment changes during the decision process, which is usually quite lengthy, a company will probably wait and see, and might even give up on its investment plans in Hungary.

The other thing that makes planning ahead quite impossible is the volatile movement of the Hungarian forint-Swiss franc exchange rate. A strong or weak forint in itself would not be a problem, but the fact that there are such big swings in the exchange rate is very challenging.

The third reason I think several companies have been moderate on investing in Hungary is the bad reputation Hungary has in the Western media.

Regardless of whether these articles are well established or not, they have already done the damage, I think.

Q: These are valid reasons for investors and companies not entering the country, but what about those who, in spite of these factors, stay here and carry out further expansion? What is their reasoning?

A: Companies that have been present in Hungary for 10 or 15 years or maybe even longer tend to listen to feedback from their local management teams and can hardly be influenced by biased newspaper reports. Also, when a company is making a decision on expansion, the numbers speak for themselves. If the Hungarian subsidiary or affiliate of a Swiss firm performs well even under the current circumstances, that is usually reason enough for a parent company to carry out further investments.

Q: What can the chamber do in order to provide an objective picture and thus help the decisions of potential investors or those already present in Hungary?

A: Our role is to put potential foreign investors in touch with those who have been here for a while. In my opinion, the personal experience of companies already operating in Hungary is a more authentic source for new investors than anything else. In fact, it is a hundred times more effective than anything the chamber could say.

Switzerland is a small country where the business elite has close ties with one another, and therefore they listen to each other. What’s more, they look for opportunities to share business experiences with each other. So our practice of organizing joint meetings for investors and potential investors fits perfectly with their routine.

Q: How would you describe the past few years of Swiss-Hungarian business and economic relations?

A: Looking at it from a Swiss perspective, Hungary is not among major investment targets. Hungary’s share in Switzerland’s foreign investments was only 0.2% at the end of 2010. However, even with this marginal status, Hungary takes third place in the region in terms of Swiss FDI inflow jointly with Romania, after Poland and Czech Republic.

However, a new tendency has emerged. Up until now, Swiss-Hungarian business relations were like a one-way street, with mostly Swiss companies investing in, and coming to, Hungary. But this street is slowly becoming two-way: Hungary’s Richter has acquired PregLem, a Swiss biopharmaceutical company that focuses on the development and commercialization of women’s reproductive medicine.

This is due to the narrowing possibilities in the Hungarian domestic market, and to the fact that several Hungarian small- and medium-sized companies have now reached a level when they can start thinking about exploring other markets, and I have also seen increased interest from them in possible expansion in Switzerland over the last couple of years.

Q: How can the chamber accelerate this tendency?

A: As I mentioned earlier, our main role is to make it possible for new foreign investors and those who have been in Hungary for some time to meet up. Being a non-profit organization without state support, the sole revenue of the chamber comes from membership fees. Therefore we need to operate cost-effectively and transparently, and we can’t and don’t want to offer services like other chambers with larger budgets do. However, we have a network both in Hungary and in Switzerland that makes it possible for us to connect interested investors with the relevant state organization or companies. The same applies for Hungarian firms inquiring about business opportunities in Switzerland: we maintain good relationships with several chambers of industry and commerce, law offices, and tax consultants in Switzerland. Just most recently we have rebuilt our website (www.swisscham.hu), making it more informative for our members and potential members alike. We also publish our newsletter regularly.

One of our future goals is to further improve communication between the chamber and its members, and also among chamber members. We are working on a platform where companies will be able to directly get in touch with each other or with the institution or organization they are looking for.

In spite of our relatively restrained budget, we keep focusing on organizing conferences, professional forums, roundtable discussions, and business lunches, to which we invite well-known professionals and decision-makers from a given area.

Q: Does the chamber do any lobbying?

A: No, we don’t do classic lobbying, as we have member companies from various industries, and their interests might be different in some cases. However, if you mean representing the general interest of our members regarding, say, taxation or legal issues, we occasionally do cooperate with other chambers in lobbying for such interests. But to be honest, I’m not sure if lobbying makes much sense now when the government is into law making at full speed. I hope that once it slows down and fine-tuning can begin, the government will be open to the suggestions of market players – at least, we are open to cooperate.