“I am sure that Hungary’s foreign policy strategy will not change greatly,” Economy Minister István Varga said last Tuesday ahead of the parliamentary elections. Varga was guest speaker at the Joint Venture Association’s “Hungary’s Foreign Economic Relations 2010” event.
Hungary’s foreign economic relations will remain largely unchanged, Varga added. He emphasised the role that the Hungarian government can “and given the effects of the crisis, must” play in shaping such relations. An important task is to open up countries and regions less affected by the crisis to Hungarian exports, he said. Varga anticipates average growth of 0.5% among Hungary’s current main foreign trade partners this year, after Hungarian exports fell by 18.7% in 2009. Imports dropped by 25.2% last year.
FDI down
The state must also play an active role in foreign direct investments, Varga said. While these totalled EUR 3.4 billion in 2008, according to current estimates they did not even reach EUR 2.5 billion last year, Varga said. An opportunity of “near-shoring” presents itself here, Varga said, referring to the relocation of previously outsourced production particularly in the Far East to a closer country, for reasons of quality, lead times and management. There continues to be strong interest in shared service centres in Hungary, which also remains attractive to investors considering the establishment or expansion of R&D departments, Varga said.
ITD Hungary says competitiveness the issue among SMEs
SMEs’ 28% share of Hungarian exports last year was inadequate, Varga said, adding that he sees the need for action on the part of the state and its relevant organisations, such as investment agency ITD Hungary. Other institutions such as mixed committees should also pay greater attention to the affairs of SMEs, Varga asserted.
Acting CEO of ITD Hungary Csaba Kilián addressed a possible cause of the low proportion of Hungarian exports produced by SMEs.
Just 51 % of Hungarian SMEs are internationally competitive, he said. However, 26% of the remaining companies could join that group following only minor developments, Kilián added.
The organisation tries to help through measures such as making precise demand analyses, regional company visits, drawing up supplier programmes and organising meetings between potential suppliers and major investors, Kilián underlined. He referred to a supplier conference concerning the Mercedes investment in Kecskemét with an impressive 800 participants as a successful recent example. Another conference will take place on 9 March, this time specifically for service companies interested in cooperation with Mercedes.
More than an educated guess...
In his speech Joint Venture Association president István Fekete discussed a further problem of Hungarian export companies: a lack of expertise. While Fekete was a student, long before the change of regime, at the Budapest University of Economic Sciences (today Corvinus University), there was a degree in foreign trade, while today there is not, he noted. The specialist knowledge needed for foreign trade today is only taught – if at all – within the framework of other degree courses, he said. Fekete observed that younger employees can have glaring gaps in their knowledge of the subject.
He noted that representatives of Hungarian SMEs in particular are not savvy as regards potential foreign markets: “they are informed to a certain extent about our immediate neighbours, but their knowledge of further markets is lacking.” That is particularly problematic because more and more Hungarian SMEs are coming up against the limits of the Hungarian domestic market and if they want to grow further they need to look beyond the country’s borders, Fekete said. The state needs to support such companies with its institutions created for this and other purposes, he added.
