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Monday, April 2, 2012

My First Book; Prima Carte 718 pages

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With Gastion

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Copyrighted, 2012 Dr Olga M. Lazin-Andrei

DrOlgaLazin: My Books and Articles Online

DrOlgaLazin: My Books and Articles Online

My Books and Articles Online

Dear book consumers: I have 2 books out in Spanish (hard copies and digitized as well), and one in English

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Hungary: Mercedes plant, yes; foreign partners in Budapest water, no thanks
March 30, 2012 FT by Kester Eddy

Hungary is once again the darling of central Europe among foreign investors. Well, for a day or two at least, while news reverberates of the opening of a Mercedes plant at Kecskemét, bang in the country’s centre.
And reverberate it well might, given that the high-tech plant is an €800m investment, directly creates some 3,000 jobs (and about a further 10,000 indirectly) and its planned output of 100,000 Mercedes A-class and B-class compact cars will generate around 1 per cent of Hungary’s GDP.
“This is not an investment, it’s an alliance,” said Viktor Orbán, Hungary’s prime minister, at Thursday’s opening, according to the Associated Press. “I hope Mercedes in Kecskemet will be a new chapter in the great history of German-Hungarian economic co-operation.”
The Kecskemet development and an expansion by Audi at its plant in Györ in western Hungary have prompted scores of new developments by suppliers, foreign and local, in their respective regions. Car-making accounts for nearly 10 per cent of Hungary’s economy.
All good stuff to boost Hungary’s image as an investment location. By happy coincidence, as Orbán was opening the plant in Kecskemét, PwC, the global corporate services firm, was busy presenting its Investing Guide to Hungary 2012, in Budapest, 55 miles to the north.
“One of Hungary’s most important competitive advantages is the government’s commitment to making it easier to do business, and to help manufacturing companies achieve their best,” the 50-page glossy states on its cover.
But any executive with the odd €100m in his pocket burning to invest in Hungary should note that HITA – the Hungarian Investment and Trade Agency – is a co-publisher of this booklet, making it a less-than-independence slice of advice from PwC.

There’s plenty inside about case studies of investment projects by the likes of Audi, Bosch and Lego, along with glowing texts about Hungary’s transport infrastructure and “highly skilled and talented workforce” – lots that might have an eager investor fingering the chequebook.

But, needless to say, there’s rather less on the downside. For example, is there any mention about the sudden, punitive crisis taxes imposed by the Orbán government in mid-2010 with zero consultation that sent the heads of banks, retailers, telcos and utilities apoplectic ?
Well, yes, there is – on page 43. but there is no reference to the fact that they were applied retroactively – a key complaint of foreign business people.
Tamás Löcsei, tax partner at PwC Budapest, admitted to beyondbrics that the crisis taxes were “partially retroactive,” but stressed that “if you are a production company you don’t have to [reckon] with crisis taxes.”
What’s more, “once the Hungarian government enters into an agreement with you, then they stick to it,” he stressed.

Really? So what about the current row between the Franco-German consortium of Suez Environnement and RWE and Budapest City Council? That is the one in which the consortium is being strong-armed into selling its stake in Budapest Waterworks back to the city some ten years before the formal end of the contract and at Ft 1.4bn (€4.8m) , or 8.5 per cent, discount on the contract price?

Löcsei concedes the point: “Let’s face it, if you are working in the service industry, and you are not a shared service centre [outsourcing], which the government loves, then the picture is getting, let’s say, more shady. There, investors think twice or three times as opposed to an automotive investor, where they are not thinking very hard where to put their new investment.”

So that’s the real bottom line for investing in Hungary from PwC, the “Trusted Business Adviser”. Manufacturing or outsourcing, you’re safe. But if you are in services, particularly in anything linked to the public sector, think twice or thrice. Just a pity Löcsei and colleagues didn’t spell that out in the booklet.
Related reading
OECD to Orban: sort your house out, beyondbrics
Transparency throws light on the darker side of Hungary, beyondbrics
Suez Environnement takes €185m charge, FT

My Second Book Online; Download for free

My second book online, on the lights and shades of Globalization in Mexico, Hungary, Romania, and East-Central Europe; the global fiscal crisis, free trade blocs, civic and civil society, smuggling, technological revolution, social media and academic freedom.



Also on $45 olazin

News about Romania: Romanian rate cuts: running out road

March 29, 2012 Financial Times, by Stefan Wagstyl

Romania’s central bank cut interest rates on Thursday for the fourth time in as many policy meetings, taking rates down to a record low of 5.25 per cent.

The whole 1-percentage-point reduction has been achieved with a barely a twitch in the leu, which has moved little from the 4.35 level against the euro where it when the central bank swung into action in early November.
But this has been achieved against the global rally in emerging market currencies this year.

Life will be much harder for the Romanian National Bank if there’s another sudden sell-off, as there was last spring.

The bank said in a short statement:
The NBR will continue to closely monitor domestic and global economic developments in order to, by accordingly adjusting its available instruments, to ensure the fulfilment of its objectives of achieving price stability, as well as financial stability.

Romania, which saw GDP plunge 7 per cent in 2009, is struggling to recover from that crisis. The central bank faces the challenge of encouraging growth in an economy expected to grow by just 1.5-2 per cent this year without jeopardising the inflation target or the currency.
With consumer prices rising by just 2.6 per cent in February, inflation isn’t a big worry right now. But the currency is. While it’s only fallen by around 1 per cent against the euro since early November, it is at 4.37 close to the top of its post-2008 range.
Mugur Isarescu, central bank governor, told reporters after the policy meeting that the leu was in an “equilibrium zone,” which moved when fundamentals changed.

The centre-right government of new prime minister Mihai Razvan Ungureanu is trying to keep the public finances stable in the hope of an economic recovery that would boost employment, tax revenues, and its own political support.
An International Monetary Fund precautionary programme is in place as a backstop, allowing the central bank to cut rates without scaring investors (in contrast to neighbouring Hungary).
Economists expect perhaps one further cut. But they warn that Romania is getting close to the limit in taking risks with the currency. As Capital Economics said in a report on Thursday:
We expect one further cut this year, but the threat of financial contagion from the euro-crisis is a formidable barrier to more aggressive easing. …With around two-thirds of household debt and one-third of corporate debt denominated in FX, Romania is extremely vulnerable to swings in the leu.
As such, the IMF programme acts as a backstop, shoring up investor
confidence – this allowed Romania to escape last year’s emerging market sell-off relatively unscathed.
programme is still there. But would it pass the test again if it came under pressure from investors in 2012?