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Development Hampered by Labor Crisis but Growing

Logistics sector development is hampered by labor shortages, but most segments are growing in an increasingly legal market Zsolt Fülöp, president of the Association of Hungarian Logistics Service Centers (MLSZKSZ) tells the Budapest Business Journal. His association represents nearly 90% of the Hungarian logistic centers, covering the entire area of services. It has 74 members, whose total revenues in 2016 were some HUF 410 billion (EUR 1.3 bln).

Zsolt Fülöp, president of MLSZKSZ.

BBJ: How is the logistics sector performing to date?

Zsolt Fülöp: Nearly all the logistic sub-sectors grew in 2017: rail was up 5.5%, water by 2.6%, air 12.6% and combined transport 3.8%. At the same time, road freight volumes were down by 5.3%, which meant domestic goods delivered by road shrank by 10 million tons. In international road transport there were no substantial changes in volumes.

By comparing figures of the last two years, we can see that the long-distance freight is tending to slowly shift from road to the more efficient modes of rail and water.

We cannot speak of a permanent tendency as yet, but we hope that cooperation between transport modes will become even stronger, making better use of each other’s synergies.

Another characteristic here is that logistic centers are highly utilized, at an unprecedented scale; the vacancy rate is below 4%.

And around Budapest you cannot find property of more than 5,000 square meters in a good location for logistics purposes, so developers need to site new logistics parks in the provinces, where there is still free land.

BBJ: How would your members like to develop the sector?

ZF: There are good opportunities in the Hungarian logistics market, however, the companies involved are not always able to exploit them. The sector still needs some more years of growth, as well as a support system tailored for its needs to catch up [with the best in the EU].

BBJ: What challenges do your members face in realizing these developments?

ZF: Practically, there are three main pillars for determining development. We need: a) the industrial partners and customers; b) for logistics, the commodities [to be transported]; and c) the workforce, area and infrastructure.

If one of these factors is missing or is not of the right quality, there is little chance of development. And there are various obstacles. As mentioned, it’s difficult to find suitable plots around Budapest. In the provinces, land is available, but there is a shortage of suitable labor.

BBJ: I presume the issues vary with the form of transport used within the sector?

ZF: The situation of road hauliers is aggravated by the growing number of abuses related to transport authorization, i.e. CEMT licenses [permits needed for international loads].

On rail, the main concern is to reduce the effects of the extensive railway modernization – track works – in the coming years. We face diversions, and this means longer delivery times.

A continuous problem with water transport is the unpredictable fluctuation of the water level in the Hungarian section of the Danube [which severely hampers navigation].

But logistics companies everywhere suffer from a labor shortage, and that is restricting growth. As a result, in order to recruit and retain their workforce, more and more companies are offering fringe benefits. For example, by taking over a share of their mortgage loans, or supporting their children’s private tuition.

BBJ: So how can your association help solve these problems?

ZF: The MLSZKSZ, together with several other professional organizations, has submitted a joint set of proposals to the government. We are continually working on possible solutions.

In addition, our association knows this sector. We have market intelligence, a strong communication background and we offer support to our members in all sorts of ways, e.g. by offering information and practical solutions, providing professional expertise and professional forums.

On top of this, we have arranged joint procurement of energy for our members.

BBJ: You mean diesel, or electricity and gas? What sort of discounts?

ZF: Electricity and gas, at a discount of between 20-30%.

And we are also lobbying so that up to 50% of the TAO support (Company Tax Support) can be used by the companies themselves to protect their employees’ health.

BBJ: What about government regulations, for example the EKÁER customs reporting system? And EU regulations?

ZF: Government regulations like EKÁER, the usage-based [road] tolls and the introduction of online cash-registers have all proved successful. These all resulted in substantial tax revenues, the economy has become whiter and the conditions for fair competition have significantly improved.

With the introduction of the electronic e-CMR [waybill], e-invoice and the e-delivery note, the financial aspects of logistics will become even whiter in the near future. Therefore, the competitiveness of companies working legally and above board will be further improved.