A plea for more predictability

Conferences

The United States is Hungary’s leading trade partner outside the EU. Many American companies have Hungarian subsidies and would like to operate and grow in a peaceful environment, but unpredictability may deter them.

In 2012, the United States was Hungary’s second largest trading partner outside Europe and in terms of exports the country came first, ahead of China. During last year 2.2% of total Hungarian foreign trade turnover was conducted with the United States, making it the 13th largest amongst the country’s trading partners (13th in imports and 12th in exports).

About 600 American companies are present in Hungary, but include the small representation offices with just one or two employees, and the number could reach closer to 1,000, according to data from the Hungarian Investment and Trade Agency (HITA).

Important American investors are present in every major sector in Hungary and one is present in many of them: General Electrics. The company has become a major player in the Hungarian economy over the past 22 years, providing jobs for 12,500 people, about 50% of all GE employees in the region. Through its operations, GE helps improve the competitiveness of Hungary and the whole CEE.

Prerequisites for GE’s continued efficient operations in Hungary include a long-term, transparent and predictable investment environment and encouraging R&D incentives. “We keep emphasizing the need to further improve an investor-friendly environment with efficient tender application system, a stable and predictable political and economical legislation and competitive talent pool,” said Eszter Szabó, GE's corporate communications and public affairs leader for the CEE region. “Therefore, GE believes that collaboration between government and business as stakeholders can reinforce the position of Hungary as part of the CEE in the global competition. To foster this collaboration and exchange of ideas and perspectives is the reason why we established the company’s regional thought leadership blog, GE for CEE, two years ago, Szabó added.

According to a recently revealed competitiveness survey by the World Economic Forum, Hungary is in the 80th-85th position among 144 countries, and unpredictability leads the list of problems in the country. “As an AmCham representative on behalf of the 400 companies, I might say: if taxes are levied in an unpredictable way, not under the laws of economic policies, that might deter companies,” said László György, an AmCham board member and leader of Cisco Systems Hungary, at a roundtable discussion. “Of course we understand the reason: something had to be done with the budget deficit. And AmCham as a free-market organization believes in the principle that it tries to find a designed, prepared, negotiated compromise,” he added.

But György warned that the response to continued uncertainty might be downsizing: companies could reduce the number of employees, rationalize, and restructure their activities. “Foreign companies are particularly interested in what kind of business environment could be expected next year, or three years later,” György pointed out.

But predictability is not enough in itself. As AmCham Vice President David Young, of Amrop Kohlmann and Young, said at a recent press conference: “We believe that there’s a strong relationship between transparency and competitiveness. If a country is corrupt, it may lose its competitiveness and its development deteriorates as well. Businesses need a predictable legal environment that provides equal opportunities, equal access to information and allows government towards those whom it serves.”

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