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More than chocolate – Swiss-Hungarian bilateral business relations

Aside from the top quality Swiss products available on Hungarian shelves, the little Alpine country plays a sizable role in Hungary’s economy. How does Hungary benefit from Switzerland, and how much of the stereotype of Swiss thoroughness is true?

Considering that the Hungarian government’s election promises included not only maintaining the number of workplaces but also increasing employment by one million jobs in ten years’ time, Hungary can have no complaints about Swiss contributions. There are 300 companies with Swiss interests operating in Hungary, employing a combined 35,078 people at the end of 2010. According to the Swiss National Bank, this number could increase slightly by 1,590 from a year earlier, an achievement that seems remarkable in the light of global economic circumstances that have only been growing worse for years.

Hungary has 1.3% of all the jobs that Swiss companies have created in foreign countries worldwide, and although wood industry company Interspan, owned by the Swiss Krono Group, has closed down production in Hungary, the list of leading Swiss-owned businesses operating in Hungary remains impressive and still includes publishing giant Ringier, food companies Kündig, Delimpex and Nestlé, pharmaceutical groups Roche and Novartis, cement and aggregates supplier Holcim, automation and energetic solution provider ABB, train manufacturer StadlerRail, and logistics company Gondrand.

Strong and patient

When it comes to friendly stereotypes, reliability is probably the first thing that comes to mind about anything Swiss-made. When it comes to trust in Swiss companies, this is more than just a stereotype as the reasons for it are laid down in the balance sheets. Moreover, the strong Swiss currency – still 30% firmer than in 2008, despite the Swiss central bank having imposed a cap of CHF 1.2 per euro in September 2011 to halt the threat of the soaring currency hurting exports and tipping the country into recession – could enhance the acquisitions made by several major Swiss players. Roche, Novartis, Nestlé and ABB have all made remarkable purchases in the past years.

Mirroring the solid footing of their parent companies, the subsidies run in Hungary surveyed by the Budapest Business Journal reported strong confidence from both business partners and customers. The key to the former was, in most cases, attributed to transparency that materializes in a sound financial basis, clear and simple rules, and famously high business ethics standards. Additionally, the typically low degree of centralization among Swiss companies provides opportunities for local management to act according to local needs.

When asked about their satisfaction with the Hungarian economic and regulatory environment, businesses, unsurprisingly, were more muted in their praise. It is widely accepted that the Hungarian government – like all its European counterparts – has a difficult task in tackling the combined aims of deficit reduction while also boosting the economy, which can sometimes result in ad-hoc regulations and budget cuts that have, for example, hit pharmaceuticals particularly hard.

Still, Swiss-owned companies tend to remain patient and non-committal. “As always, the glass is either half full or half empty: a lot has been done, a lot still remains to be done,” Richard Skene, president and director of Holcim Hungária, told the BBJ. “In times such as these, what companies typically need most is transparency, a reliable basis for planning, and unbureaucratic processes in public administration,” he added referring to the challenges inherent in the European, and thus also the Hungarian, crisis.

Healthy environment

On the Hungarian side, the most significant investment in Switzerland so far has been Hungarian pharmaceutical Richter Gedeon’s acquisition of Swiss-based PregLem Holding to the value of CHF 445 million.

According to Swisscham Hungary, Hungarian companies operating in the construction, food, agriculture, and service sectors are the most keen to secure Swiss orders or find Swiss partners, which might not be surprising considering that both the construction and the food industries have had to battle declines in Hungary recently.

Simultaneously, Hungary can benefit from Swiss health tourism, especially in the field of dentistry and wellness. As dental services are not included in state social insurance in Switzerland, Swiss people are coming to Hungary in increasing numbers as they find quality service for a reasonable price here, Swisscham said.

Conditional openness – work restrictions in Switzerland

Although citizens from EU countries, as well as from Norway, Iceland and Lichtenstein, have the right to entry, residence and employment in the Schengen area-member Switzerland, nationals from EU member states such as Hungary, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Slovakia and Slovenia seeking work in the Alpine country will meet certain restrictions.

It is not only that there is an annual quota of 2,000 for residence permits for people coming from the above countries, but also that those who want to work in the construction, hospitality, household and maintenance, security service sectors or enter Switzerland for trading purposes have to pre-register their activity eight days in advance. To somewhat ease the restrictions, those who work for more than one employer at the same time have to register themselves only once. However, those employed in the specific sectors are allowed to work only a total of 90 days per year.

As several Hungarian companies aim to extend their activity into Switzerland or look for business partners in the above industries, the restrictions are not particularly popular in Hungary. Several EU-member states and regional cooperatives have raised the matter with the European Union, but without any positive results thus far.

The Visegrád Group (V4), including Poland, the Czech Republic, Slovakia and Hungary, labeled the restrictions as “discriminative”, while Catherine Ashton, vice-president of the European Commission also warned that laying such conditions for a labor market does not comply with agreements between the European Union and Switzerland.

Swisscham Hungary adds that high initial costs makes it unviable for most Hungarian companies to relocate in Switzerland to benefit from lower taxes and the more predictable economic circumstances the country can otherwise offer.