Pioneers, go east!

Int’l Relations

To dodge the potential risks of sluggish domestic and European markets, ever more Hungarian SMEs are turning further east to find new partners and markets. The idea is widely supported by the government, but the streets aren’t all paved with gold in the oriental markets.

According to Hungarian statistics, 76% of the country’s exports go to the European Union, 12.1% to non-EU European markets and only 11.9% make it directly to other continents, most of those ending up in the United States.

“Our strategic goal is to improve this rate in new markets and to make Hungarian direct exports appear in third countries, not just through European intermediates, as part of the supply chain. We’d like to see the share of EU and non-EU exports 2/3 to 1/3 in five years through the dynamic expansion of the non-EU exports,” said Róbert Bödőcs, head of division at the Hungarian Investment and Trade Agency (HITA). Nothing better proves the government’s intentions to find new markets outside the EU than that Péter Szijjártó, state secretary responsible for foreign trade, had bilateral negotiations with seven nations in May alone.

Wide range of tools

Last year HITA spent HUF 1.18 billion financing its activities, with a total of 567 programs realized at home and abroad. “According to our expectations, HITA helped Hungarian companies to exports worth € 63.7 million,” Erzsébet Dobos, chairwoman of HITA said earlier in May at a press conference. The clientele of HITA consisted about 1,500 domestic SMEs last year. “Our goal is to increase this base to 2,000 partners, i.e. reaching more than 500 new clients. The agency helps its export-oriented clients through personal company visits and consulting,” Bödőcs added. HITA has a wide range of tools to promote and help Hungarian companies, offering training, targeted trade development support, appearances at industrial or sectoral trade shows and encouraging corporate collaborations.

In addition, the state can contribute directly or indirectly to export incentives for Hungarian companies – primarily SMEs – through European Union funding. One of the direct resources is the support for market access in the Economic Development Operative Program (GOP to use its Hungarian initials), while sources for innovation indirectly help to enter foreign markets.

The Export Cooperation organization helps on one hand by providing customized information or involving experienced local experts through its international network; on the other hand, it puts education in the forefront. “I think, the combined efforts of these actors in the last two to three years made it possible for aiming at foreign markets to became a primary business priority for those companies that are mature enough,” said Iván Gyurácz Németh, partner at consulting company M27 Absolvo and founder of Export Cooperation.

Traps and pitfalls

Hungarian exports to China, Japan, Russia and Vietnam are expanding smoothly and constantly. On the top of that, Dubai and its region has always provides opportunities, as high interest in the latest HITA exhibitions on the fields of IT, healthcare and food industry showed.

However, one must not forget that in leaving the EU’s inner market, many new difficulties can arise, such as taxes, customs, foreign currencies, different quality standards and expectations, etc. Unprepared companies could fall into many pitfalls due to inadequate market research, lack of export strategy or cultural differences. 

“Unlike friendly European markets, far-eastern markets are only advised for experienced, big companies, with large capacities, stable profit and a revenue of several billion forints. According to the experiences of the Export Cooperation, establishing a reliable distribution network might require two or three years, with small backlogs and roundabouts, all expending money and time,” Gyurácz Németh added.

 

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