Róbert Ésik, president of the Hungarian Investment Promotion Agency (HIPA), talks to the Budapest Business Journal about how his agency helps pull in investment and its highly successful 2015. He also discusses plans for 2016, which include pushing more investments to the countryside and creating even more high-value jobs.
Established by the government to provide professional assistance to foreign companies looking to invest in the country, the Hungarian Investment Promotion Agency (HIPA) works with a broad range of firms. Last year the agency set records as it worked to build up foreign direct investment. HIPA President Róbert Ésik shares details.
HIPA had a record year in 2015. What were the key figures?
We closed 67 projects, creating 12,995 jobs and with a combined value of €1.4 billion. That’s a 20% increase in terms of new jobs on the previous year, and a record in terms of the number of projects.
When we look at where companies come from, Germany was number one, the United States was number two and, for the first time, Hungary was in the top three. The three after that were India, China and Japan, which shows the potential in Asia, and that the “Opening to the East” policy makes sense, from an investment point of view.
Automotive continues to be the number one sector, with more than a 50% share of the total investment value and creating one-third of the jobs. In terms of the sectoral distribution of the new jobs, the shared service center (SSC) sector is number two, and the food industry number three.
Of the deals done last year, which are particularly noteworthy?
We will have our own annual Investor of the Year event on March 29, but two that do stand out are a greenfield investment by SMR [Samvardhana Motherson Reflectec] from India in Kecskemét, creating 450 jobs and worth about €100 million, and Germany’s Continental, which – across several projects – has created close to 900 jobs in Makó (southeast Hungary) and Nyíregyháza (northeast Hungary). In both these cases, Hungary was competing with other locations, but we were able to close the deals successfully.
It is clearly early days, but how does 2016 look in comparison?
We see that interest toward Hungary as a destination is increasing and higher than a year ago. One year ago we were working on 96 projects, now it is 169. These are generated by investor requests, but before the stage where a decision has been taken. They are, however, active, defined projects with detailed plans, not idle interest.
We see a greater proportion of projects with higher value add, or jobs with a higher value add. The share of ICT and SSC jobs has increased by roughly 20%, and we would like to enhance this, as those are jobs where the salaries are higher.
There is a 43% ratio of projects going into developing regions of Hungary. This is a strategic target for us, as Budapest and northwest Hungary are already quite developed. We would like to see the other regions grow closer to that.
HIPA was set up to attract foreign direct investment/reinvestment to Hungary. What is the importance of FDI to the country’s economy?
Investments and export capability are vital for the economic development of the country since we have a very open economy where the value of exports exceeds the value of GDP. So if we would like sustainable economic growth we need to be successful in at least two things: Attracting investment and we need companies that are export capable.
We have an FDI stock of more than €81 bln, and an FDI/GDP ratio of 78%; that places us in the number one position in Central and Eastern Europe. We are trying to further strengthen the position in that regard, and continue attracting investment and promoting reinvestment. It is generally more difficult to convince a new company to come to a given country than to get an existing company to reinvest, provided they are satisfied, of course. It is important they are happy!
A key part of HIPA’s work is selling the destination. What are the attractions of Hungary as an FDI destination, and what are the hurdles you have to overcome?
We have a clear focus on FDI. We have a very stable country from a political and economic point of view, and that is important for any investor, from any industry.
That we have a pool of office space in the capital is an advantage. The quality of life in Budapest is among the best in Europe, and that is a strong selling point when it comes to SSCs. That we will have highway connections to all the borders by 2018, and have the number three road density in Europe is a strong selling point. That we are a project-specific organization that will help with tailoring the curriculum of the nearest vocational school is something that clients appreciate.
Labor we understand is a very critical element, and the government is taking steps to make sure we will continue to be able to meet the highly qualified labor needs. That is why we have introduced dual training based on the German model. The number of spaces funded by the state in universities now features a lot more engineers, IT type professionals, and natural sciences, to make sure we can secure labor supply.
There are also measures when it comes to job mobility. It is true Hungarians have been reluctant to move regions to find work, but you can incentivize that better, by offering financial support for commuting, or greater help in finding accommodation.
And having sold the destination, how can HIPA help companies get started and grow in Hungary?
Conceptually, what we try to do is have a model based on three principals: 1) we want to be a one-stop shop, whether you are a new player or an existing one; 2) we offer end-to-end support, meaning our advisory services cover all three phases of a project’s lifecycle – decision making, realization, and operational; and 3) our services are free-of-charge, so clients can ask as many questions as they want, and we will try to give satisfactory and good answers!
There are also a number of technical changes to the subsidy system this year, and we hope to leverage these to enhance the attractiveness of second tier cities and push more development towards the regions. Looking at the project pipeline, the chances are not bad that we can do that.
HIPA has partnered with the BBJ for the past two years in launching the Expat CEO of the Year awards. Why are they so important to you?
As I think I said at the event, it is important to recognize the individuals behind the decisions and the numbers, and to pay tribute to people who have come to Hungary as expats but do a lot for the country by helping promote investment and by giving business opportunities to Hungarian suppliers. The awards are very much in line with HIPA’s targets and so it is a natural partnership and cooperation for us.