Hungary FDI and how it affects employment. 23rd May 2014

Transcription

1 Hungary FDI and how it affects employment 23rd May 2014

2 Business environment

3 Location: a market of 507 million EU citizens with access to the market of 205 million people of Russia, Ukraine and the Western Balkan countries Hungary Land: 93,030 km² Population: ~10 million GDP/capita, at PPP (2012): EUR 17,000/ USD 19,445 Source: Eurostat, IMF

4 Overview EU EU member since 2004 GDP Export of goods Employment and wages GDP growth (2013): 1.1% Forecast (2014): 2.3% Export volume growth (2013): 5.3% Forecast (2014): 5.8% Average gross wage (2013)*: 776.9; $ Unemployment rate (2014Q1): 8.3% Inflation Inflation rate (2013): 1.7% Budget balance Government balance (2013): -2.2% Forecast (2014) : -2.9% (% of GDP) *Exchange rate: 1 = HUF, 1 $= HUF Source: HCSO, Convergence Programme 2014

5 Most important aims of Hungarian economic policy Financial and fiscal stability Reducing public debt To raise the growth potential of the Hungarian economy To increase the level of labour market participation and employment Enhancing competitiveness

6 Recent governmental measures for competitiveness New labour code (effective from 1 July 2012 ) in favour of employers New act on vocational training in favour of business needs Strategic agreements between the government and top investors Job Protection Action Plan cutting contribution payable by employers for 5 prioritised employee groups

7 Competitive tax system Low corporate income tax: rate for the first HUF 500 million (EUR 1.69 million, USD 2.22 million) of the tax base is 10%; beyond HUF 500 million, it is 19%. Tax incentives and allowances (development tax allowance, R+D tax incentives) Flat personal income tax: 16% CEE countries Corporate income tax Slovakia 22% Czech Republic 19% Poland 19% Slovenia 17% Romania 16% Hungary 10% or 19% Source: Deloitte, KPMG 7

8 FDI in Hungary

9 Inward FDI stock Percentage of GDP (2013) Hungary Source: wiiw, 2014 Czech Republic Slovak Republic Poland Romania Slovenia

10 Inflow of foreign direct investment (2013) (million EUR) Czech Republic Romania Hungary Bulgaria Poland Slovakia Source: wiiw, 2014

11 Factors that influence FDI

12 High quality education Well trained, creative and flexible human capital World-renowned academic and university background with cutting-edge competence International experience Extended cooperation with business sector Source: Statistical Yearbook of Education, 2011/2012

13 Competitive Labour Costs 60 Total hourly labour costs ( ) EU Hungary Source: EUROSTAT 1055 BUDAPEST, HONVÉD UTCA 20. TELEFON: (+36) FAX: (+36)

14 Excellent access to key markets At the cross roads of 4 main European transportation corridors Extensive road and railway transportation network Highly developed logistics and telecommunications infrastructure

15 Expanding motorway network Vienna, 1 hr Rotterdam, 12 hrs Prague, 5 hrs Munich, 6 hrs Hamburg, 8hrs Warsaw, 10 hrs Kyiv 12 hrs Bucharest, 10 hrs Constanza, 12 hrs Zagreb, 1 hr Trieste, 6 hrs Koper, 6 hrs

16 Available incentives

17 Available incentives * Preferred local governments are located in Northern Hungary, Great Hungarian Plain (North and South) and South Transdanubia. ** According to preferred and most preferred micro regions. *** Employment of min. 50 new students.

18 Free Enterprise Zones 903 communities provide several tax allowances for investors Development tax allowance Maximum 80% corporate tax relief for 10 years Only HUF 100 million (EUR 0.33 million)* investment is needed Social contribution allowance 0% in the first two years of employment instead of 27%. 12.5% in the third year of employment instead of 27%. Vocational training contribution allowance 0% in the first two years of employment instead of 1.5%. Note: calculations are based on 300 HUF/EUR rate

19 Maximum aid intensity Eligible expenditure Adjusted aid ceiling Up to EUR 50M 100 % of regional ceiling For part between EUR M 50 % of regional ceiling For part exceeding EUR 100M 34 % of regional ceiling The current incentive system is valid till 30 June 2014.

20 Measures that influence employment

21 Unemployment rate 2010 Q Q1(%) Unemployment rate (%) ages Q Q Q Q Q1 Source: HCSO

22 Regional unemployment in Hungary

23 The New Labor Code Main purpose: to create a labor law system which is in line with new market conditions More flexibility: parties have more freedom to negotiate Atypical forms of employment

24 Job protection action plan The government has launched a new action plan to improve the situation of disadvantaged employees Jobseekers Main measure: cutting employer s contributions enterprises

25 Job protection action plan Contribution allowances up to 338 EUR (443 USD) Type of disadvantaged employees Instead of 28.5% employer s contribution, the rate is: below the age of 25 years above the age of 55 years unskilled entrants below the age of 25 years long-term unemployed 14%. 0% in the initial two years, 14% from the third year mothers with small children

26 Other factors that influence FDI

27 High quality education Well trained, creative and flexible human capital World-renowned academic and university background with cutting-edge competence International experience Extended cooperation with business sector Source: Statistical Yearbook of Education, 2011/2012

28 Competitive Labour Costs 60 Total hourly labour costs ( ) EU Hungary Source: EUROSTAT 1055 BUDAPEST, HONVÉD UTCA 20. TELEFON: (+36) FAX: (+36)

29 Excellent access to key markets At the cross roads of 4 main European transportation corridors Extensive road and railway transportation network Highly developed logistics and telecommunications infrastructure

30 Expanding motorway network Vienna, 1 hr Rotterdam, 12 hrs Prague, 5 hrs Munich, 6 hrs Hamburg, 8hrs Warsaw, 10 hrs Kyiv 12 hrs Bucharest, 10 hrs Constanza, 12 hrs Zagreb, 1 hr Trieste, 6 hrs Koper, 6 hrs

31 THANK YOU FOR YOUR ATTENTION! For further information please contact: Mrs. Dora Dweik Senior Consultant