The event started with a brief ceremony, as this year marks the 10th anniversary of the strategic partnership between AmCham and the Hungarian Investment Promotion Agency. AmCham CEO Írisz Lippai-Nagy and Hipa CEO István Joó signed the document renewing a cooperation that both said had been mutually beneficial and promised to remain so.
In his speech, Szijjártó recalled how the government had followed a strategy based on low taxes and engaging the most people possible in the labor market.
This approach didn’t change during COVID, either, when a record incentive-driven investment program from the state and the assistance of the business community helped the country prevail.
According to Szijjártó, the impact of the war in Ukraine is even more significant than that of the pandemic. He blamed the inflation of the recent past on the side effects of the conflict and the sanctions that followed.
“No one’s ready to be confronted with the fact that the European economy was hurt much worse than that of Russia,” he said.
Szijjártó further stated that it is time to review the answers Europe has given to the war. He said the economic backlash is particularly harsh because the long-term basis of growth, namely the combination of Western technology and easily accessible, relatively cheap energy from the East, is gone.
He emphasized that the conflict must shift away from the battlefield, warning that if it continues to be addressed militarily, it could create conditions where achieving peace becomes nearly impossible.
With that in mind, he described the next two months ahead on the Jan. 20 inauguration of the 47th U.S. President as “the most dangerous” since the conflict erupted. One example he cited was that Ukraine had been authorized to use the longer-range American Atacms missiles inside Russian territory, which, Szijjártó worried, could further escalate the situation.
He sees further threats to the economy in continued sanctions, not least because the EU has started to put together its 15th such package.
This time around, energy companies and the entire energy sector would face sanctions. According to Szijjártó, that would be a “final knock-out” blow to the EU economy. He highlighted that Hungary would oppose any sanctions related to its energy supplies.
The minister imagines a dramatic improvement in U.S.-Hungary relations, predicting they would enter a “Golden Age.” In his opinion, a second Trump presidency would also provide a chance for Europe to elaborate a peace strategy. On the other hand, he is hoping for the reintroduction of the double-taxation agreement that the Biden administration formerly terminated. He hopes that restrictions regarding the Esta [Electronic System for Travel Authorization] visa scheme might also be lifted.
In light of the economic worries, a new FDI strategy is needed to get the economy back on the growth track, Szijjártó said. Since currently 70,000 vacant jobs exist in the country, the government doesn’t need to focus on job creation but rather draw projects that increase innovation, automation, R&D, digitalization and added value in the national economy.
Therefore, BSCs, engineering and design centers, ICT, pharma, and the semiconductor industry will be in the spotlight, along with the full spectrum of the EV segment. The minister added that the incentive scheme (see box) has been designed to reflect those priorities.
In response, AmCham told the BBJ it has advocated transitioning the economy from a quantitative to a qualitative focus, and welcomes the new FDI strategy. It noted that higher-value-added investments are a vital step toward advancing Hungary’s economy and competitiveness.
The chamber stressed that its Recommendation Package emphasizes these priorities and highlights the importance of aligning policy with business needs.
It also welcomes the government’s readiness to negotiate a double taxation Treaty and continues to stress the importance of this agreement, underlining its potential to strengthen bilateral economic ties and deliver significant benefits for businesses in both countries.
Minister of Foreign Affairs and Trade Péter Szijjártó gave AmCham a detailed overview of the government’s new incentive scheme. Projects involving renewables or energy efficiency and R&D will enjoy generous incentives. The scope of companies eligible for R&D-based grants has been widened: now, businesses of as few as 100 staff can apply. The maximum amount has also been increased from EUR 15 million to EUR 25 mln.
Those ready to invest in training can look forward to funds of up to EUR 3 mln. The location of future investments will significantly affect how much companies can expect in government support. Access to cash incentives will be granted in county centers for minimum project values of EUR 5 mln-10 mln, depending on the location. In regions away from the county seats, an investment of EUR 3 mln can get the conversation started for investors seeking government finance.
In the case of projects that aim to achieve Net Zero under the Temporary Crisis and Transition Framework, incentives can go up to EUR 350 mln. The maximum support for training initiatives has been increased to EUR 3 mln. BSCs need to create fewer jobs (25) than before to become eligible. And companies adversely affected by the global minimum tax will be compensated by the new scheme.
This article was first published in the Budapest Business Journal print issue of November 29, 2024.
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