Hungary FDI and how it affects employment 23rd May 2014
Business environment
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
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; $1031.1 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 = 296.92 HUF, 1 $=223.70 HUF Source: HCSO, Convergence Programme 2014
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
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
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
FDI in Hungary
Inward FDI stock Percentage of GDP (2013) 90 82.2 80 70 66.0 59.3 60 50 46.3 43.1 40 31.3 30 20 10 0 Hungary Source: wiiw, 2014 Czech Republic Slovak Republic Poland Romania Slovenia
Inflow of foreign direct investment (2013) (million EUR) 4000 3500 3000 2500 2000 1500 1000 500 0 Czech Republic Romania Hungary Bulgaria Poland Slovakia Source: wiiw, 2014
Factors that influence FDI
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
Competitive Labour Costs 60 Total hourly labour costs ( ) 2013 50 40 EU 28 23.7 30 20 Hungary 7.4 10 7.4 0 Source: EUROSTAT 1055 BUDAPEST, HONVÉD UTCA 20. TELEFON: (+36) 1 872 6699 FAX: (+36) 1 872 6699 WWW.HITA.HU
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
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
Available incentives
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.
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
Maximum aid intensity Eligible expenditure Adjusted aid ceiling Up to EUR 50M 100 % of regional ceiling For part between EUR 50-100M 50 % of regional ceiling For part exceeding EUR 100M 34 % of regional ceiling The current incentive system is valid till 30 June 2014.
Measures that influence employment
Unemployment rate 2010 Q1 2014 Q1(%) 14 12 Unemployment rate (%) ages 15-74 11.8 11.6 11.7 11.8 10 8 8.3 6 4 2 0 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 Source: HCSO
Regional unemployment in Hungary
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
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
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
Other factors that influence FDI
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
Competitive Labour Costs 60 Total hourly labour costs ( ) 2013 50 40 EU 28 23.7 30 20 Hungary 7.4 10 7.4 0 Source: EUROSTAT 1055 BUDAPEST, HONVÉD UTCA 20. TELEFON: (+36) 1 872 6699 FAX: (+36) 1 872 6699 WWW.HITA.HU
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
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
THANK YOU FOR YOUR ATTENTION! For further information please contact: Mrs. Dora Dweik Senior Consultant E-mail: dora.dweik@hita.hu