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Table of Contents

General Info Location and Size Government
Legal System Interesting Facts Economy
Comparative Indicators Credit and Collections Risk Assessment
Business Climate Business Protocol Other Sources of Info

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General Information

Official Name: Hungary
National Symbol: The Turul, a giant mythical falcon, is one of the most important symbols of the Hungarian people. Since 1990, the historical crowned small coat of arms has served as the official symbol of the country.
Internet Domain: .hu
International Dialing Code: +36

Location and Size

Hungary is located in Central Europe, northwest of Romania and southeast of Austria. Its territory covers a total of 93,028 sq. km., making it slightly smaller than the U.S. state of Indiana. Its capital, Budapest, is in north central Hungary and is divided into two sections by the Danube River.

Government

Hungary is a parliamentary democracy comprised of 19 counties.

Executive Branch: Chief of State – President JANOS ADER (since 10 May 2012); Head of Government - Prime Minister VIKTOR ORBAN (since 29 May 2010); Cabinet of Ministers – proposed by the prime minister and appointed and relieved of their duties by the president.

President elected by the National Assembly; prime minister elected by the National Assembly on the recommendation of the president.

Legislative Branch: 386 seat unicameral National Assembly elected by popular vote under a system of proportional and direct representation

Judicial Branch: Constitutional Court; Curia (highest court - head of Curia elected by National Assembly)

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Legal System

Hungary has a civil legal system influenced by the German model.

Hungary has accepted compulsory International Court of Justice (ICJ) jurisdiction with reservations. Hungary also accepts International Criminal Court (ICC) jurisdiction.

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Interesting Facts About Hungary

  • Hungary has one of the most important thermal spa cultures in Europe, featuring no less than 1,500 spas.
  • Classical composers Bela Bartok, Zoltan Kodaly and Franz Liszt were Hungarian.
  • Thirteen Hungarians have been awarded the Nobel Peace Prize.
  • The Hungarian language, known as Magyar, is the direct descendent of the language spoken by the Huns. The British Foreign Office has named it among the most difficult languages to learn.
  • As per EU statistics, Hungary has the highest death rate by cancer in Europe and also the highest female suicide rate.
  • Hungarian inventors and scientists have given us the Rubik's cube, ballpoint pen, holography, the noiseless match, and the theory for the hydrogen bomb.
  • Famous celebrities of Hungarian descent include Drew Barrymore, Adrien Brody, Jamie Lee Curtis, Mariska Hargitay, Goldie Hawn, Kate Hudson, Paul Newman, Calvin Klein, Harry Houdini, John Kerry and Gene Simmons.

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Economy

Hungary’s successful transition from a centrally planned to a market economy is evidenced by a private sector which accounts for more than 80% of its GDP. In addition, foreign ownership of and investment in Hungarian firms is widespread.

Hungary has a diversified economy with efficient infrastructures and regulatory framework. However, its strong dependence on the fluctuating financial environment in the EU, lack of domestic investment and high unemployment has slowed growth, and put it in the position of being the most indebted country in Central Europe. 

Leading Markets (2012): Germany 25.3%, Romania 6.4%, Slovakia 5.9%, Austria 5.8%, Italy 4.6%, France 4.6%, UK 4.1% 

Leading Exports-commodities (2012): machinery and equipment 53.5%, other manufactures 31.2%, food products 8.7%, raw materials 3.4%, fuels and electricity 3.9%

Leading Suppliers (2012): Germany 24.87%, China 14.6%, Russia 8.5%, Austria 6.9%, Slovakia 5.6%, Italy 5.2%, Poland 4.7%, Netherlands 4.1%

Leading Imports-commodities (2012): machinery and equipment 45.4%, other manufactures 34.3%, fuels and electricity 12.6%, food products 5.3%, raw materials 2.5% 

Top Industries: mining, metallurgy, construction materials, processed foods, textiles, chemicals (especially pharmaceuticals), motor vehicles

Top Agricultural Products: wheat, corn, sunflower seed, potatoes, sugar beets; pigs, cattle, poultry, dairy products

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Comparative Economic Indicators – 2012 (estimated)

Hungary Austria Croatia Romania Serbia Slovakia
Population (millions)* 9.9 8.2 4.5 21.8 7.2 5.5
Population growth rate* (%) -0.2 0.0 -0.1 -0.3 -0.5 0.1
Age Structure (%)
(15 to 64 years old)
67.8 69.1 68.0 70.2 68.3 71.0
Age Structure (%)
(65+ years old)
17.5 17.0 17.4 15.1 16.9 13.4
Literacy (%) 99.0 98.0 98.8 97.7 97.9 99.6
Unemployment rate (%)

11.2

4.3 20.4 6.5 22.4 12.8
Inflation (%) 5.7 2.6 4.7 5.0 6.2 3.6
Population below poverty line (%) 14.0 6.2 21.1 22.2 9.2
2010
21.0
GDP** (USD billions) 195.4 357.8 79.1 274.1 78.4 132.4
GDP real growth rate (%) -1.7 0.6 -1.8 0.9 -2.0 2.6
GDP per capita** (USD) 19,800.0 42,500.0 18,100.0 12,800.0 10,500.0 24,300.0
Public debt (% of GDP)78.6 78.6 74.6 52.1 37.2 61.5 48.6
Industrial production growth rate (%) 1.7 7.5 -5.3 0.1 -2.9 6.9
Exports (USD billions) 105.1 163.1 12.34 67.7 11.4 77.8
Imports (USD billions) 98.2 170.5 20.76 78.3 19.0 74.3
Reserves of foreign exchange and gold (USD billions) 67.0 26.5 14.9 46.8 15.6 2.7
Currency Forint
HUF
Euro
EUR
Kuna
HRK
New LEI
RON
Dinar
RSD
Euro
EUR
Exchange rates (per USD) 07/24/2012 224.9 0.8 5.8 3.3 84.7 0.8
Exchange rates (per EUR) 07/24/2012 294.5 n/a 7.6 4.4 111.0 n/a
Rating in 2012 Corruption Perceptions Index*** 55 69 46 44 39 46
Rating in 2013 Index of Economic Freedom*** 67.3 71.8 61.3 65.1 58.6 68.7

* July 2013 est.
** PPP – Purchasing Power Parity
*** 2012 Corruption Index: 80-100=Clean; 0-39=Corrupt
**** 2013 Index of Economic Freedom: 100-80 = Free; 49.9-0 = Repressed

Economic Data from CIA World Factbook

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Credit and Collections

Hungarian Statutes of Limitations:

  • Open Account: 5 years
  • Promissory Notes: 5 years
  • Written Contracts: 5 years
  • Oral Agreements: 5 years

Bankruptcy

The Act on Bankruptcy Procedures, Liquidation Procedures and Final Settlement of 1991 was enacted to bring Hungarian legislation in line with EU regulations. The Act covers all commercial entities except banks (which have their own regulatory statutes), trusts, and state-owned enterprises.

Debtors can only initiate bankruptcy proceedings if they have not sought bankruptcy protection within the previous three years. Within 90 days of seeking bankruptcy protection, the debtor must call a settlement conference to which all creditors are invited. Majority consent of the creditors present is required for all settlement plans. If agreement is not reached, the court can order liquidation.

Liquidation procedures may be filed with the court by the debtor, the creditors, the administrator, or the Criminal Court. There have been some concerns raised about the transparency of the liquidation process, in light of the fact that a company may not know that a creditor is filing a liquidation petition until after the fact.

Dispute Resolution

Hungary has accepted binding international arbitration in cases where the resolution of disputes between foreign investors and the state is unsuccessful. It is a member of the International Center for the Settlement of Investment Disputes (ICSID) and a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

In the last few years mediation has become a tool of increasing importance for dispute settlement to avoid lengthy court procedures.

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Risk Assessment

Coface Country Rating: B -- Political and economic uncertainties and an occasionally difficult business environment can affect corporate payment behavior. Corporate default probability is appreciable.

Coface Business Climate Rating: A2 -- The political and economic situation is good. A basically stable and efficient business environment nonetheless leaves room for improvement. Corporate default probability is low on average.

Note: The two Coface descriptions of the Country and Business Climate ratings seem to be opposite. However, they were rechecked and this is what the Coface website states in relation to Hungary. Therefore, we suggest you pay more attention to the Coface Country Rating, the Ducroire Delcredere Commercial Risk Rating and the ONDD Commercial Risk Rating.

Ducroire Delcredere Political Risk Rating: 2 -- Fairly Low
Ducroire Delcredere Commercial Risk Rating: C -- High

The Belgian Export Credit Agency (ONDD): Risks on Export Transactions

  • Political Risk - Short Term <2 years: 2 -- Fairly Low
  • Political Risk - Medium-Long Term >2 years: 2 -- Fairly Low
  • Commercial Risk: C -- High

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Business Climate

Hungary maintains an open economy and attracting foreign investment remains a priority for the Hungarian government. Hungary aggressively seeks foreign investment. It encourages investors both to purchase privatized firms and to implement “greenfield” investment, giving them full rein to manage the companies.

Leading foreign investors include Germany, Austria, the Netherlands, and the United States. Forty of the 50 largest U.S. multinationals are present in Hungary.

As the result of considerable privatization of former state-owned enterprises (SOE), few SOEs remain. These operate primarily in strategic sectors such as national security, energy and transportation. Up to 100 percent foreign ownership is permitted with the exception of designated holdings in some defense-related industries. Currently, foreign firms control 66% of manufacturing, 90% of telecommunications and 60% of the energy sector.

Commercial law in Hungary is relatively well developed. However, there remains a need to continue to revise the corporate legal code, improve the judicial and administrative capacity for enforcing it and speed up the judicial process for foreign investors.

Economic Freedom: Hungary’s economic freedom score is 67.3, making its economy the 48th freest in the 2013 Index. Hungary is ranked 24th out of 43 countries in the Europe region, and its overall score is well above the world average.

Market Access: As a member, Hungary applies rules which reflect the EU’s rather liberal foreign trade policy. There are no currently operating custom free zones in Hungary. Although the Ministry of National Economy is open to nominating areas for such zones, there currently seems to be little demand for this service.

Although improvements have been made, obstacles and disincentives to investment remain, including a lack of transparency and predictability. Reports of corruption, particularly in the government procurement sector and barriers related to excessive red tape have also been cited. 

Regulatory System: The regulatory process in Hungary is relatively open and transparent. Tax, labor, environment, health and safety laws are generally consistent with EU regulations. Some companies operating in Hungary, however, cite the recent “crisis taxes” as being inconsistent with EU regulations. These taxes target certain industries and sectors while exempting others.

Intellectual Property Rights: As a result of its agreement in 2003 with the European Patent Convention, Hungary has accordingly amended the Hungarian Patent Act. It is also a party to the WTO Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement and most other major international IPR agreements.

Exchange Control: Hungary provides free conversion of currencies. The Hungarian Forint (HUF) is freely convertible for foreign investors. Profit and capital transfers are authorized at the central Bank, provided that involved sums are deposited in a bank account in convertible Forints. The Hungarian National Bank is working to slowly devalue the forint to make a gradual transition to the euro.

Corruption: Hungary has adopted a national strategy for combating corruption which includes a growing legal framework designed to support the efforts of its Ministry of Justice in this regard. As a party to the OECD Anti-Bribery Convention, Hungary has incorporated convention provisions, as well as OECD and EU requirements on the prevention of bribery, into its penal code. 

Political Violence: Political violence has not been a characteristic of the political landscape in Hungary. There is little cause to expect insurrections, political terrorism, or interstate war. There has been no violence directed against foreign-owned companies, although Hungary's economic troubles have contributed to an increase in political extremism.

For more detailed information on these topics, visit the 2013 Investment Climate Statement - Hungary, U.S. Department of State

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Business Protocol in Hungary

  • Although Hungarians are transactional and do not require long-standing personal relationships in order to conduct business, being introduced by someone they know and trust can often help.
  • Hungarians are emotive speakers who say what they think and expect you to do the same. They do not like euphemisms or vague statements and view eye contact as indicative of sincerity.
  • Appointments are necessary and should be made 2 days in advance and in writing.
  • Punctuality for all social situations is taken extremely seriously. If you expect to be delayed, telephone immediately and offer an explanation. It is considered extremely rude to cancel a meeting at the last minute and could ruin your business relationship.
  • Business is conducted slowly. Deals in Hungary cannot be finalized without a lot of eating, drinking and entertaining.
  • Hungarians are skilled negotiators. Avoid confrontational behavior or high-pressure sales tactics.
  • Contracts function as statements of intent. It is expected that if circumstances change, the contract will accommodate the revised conditions.
  • Business dress is formal and conservative. Men should wear dark business suits with a white shirt and tie. Women should wear either business suits or elegant dresses, complimented with good quality accessories.
  • Business cards are exchanged without formal ritual. Have one side of your card translated into Hungarian. The Hungarian side should list your surname before your first name, Hungarian style.  Include any advanced university degrees and the founding date of your company on the card.

More information on Business Protocol: Kwintessential

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Sources for further information on doing business in Hungary

American Chamber of Commerce in Hungary

Doing Business in Hungary, Baker Tilly International

Doing Business in Hungary, Hungarian Investment and Trade Agency

Embassy of Hungary in Washington, DC

Embassy of the United States, Budapest, Hungary

Hungarian-American Chamber of Commerce

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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Hungary. For further information, contact info@abc-amega.com.

This report represents a compilation of information from a variety of reputable sources.

Comparative Economic Indicators: CIA World Factbook

Risk Assessment information: Coface Country Rating, Ducroire/Delcredere, Political Risk Insurance Center and The Belgian Export Credit Agency (ONDD)

Exchange Rates: OANDA.com The Currency Site.