"We had to educate Hungarian management about Western standards, philosophies, and techniques . . . straightforward things like loan agreements,' says Mark Manion, Guardian's assistant treasurer.
Resources: The Central and Eastern European Trade and Technical Assistance Center of the U.S. Chamber of Commerce publishes the definitive guide, the two-volume Datafile: Hungary (202-463-5460, 1993, $47.50 for both ).
The Export/Distributor Route
When $58-million Zebra Technologies, in Vernon Hills, Ill., considered marketing its bar-code-labeling systems in Hungary, it interviewed several potential distributors. "In 1990 we made an arrangement with Mag ICS, with offices in Budapest and Sopron,' says Jay Elwood, Zebra's international-sales manager. "At the time Hungarians didn't understand business very well. We even had to tell them how to build in a cost factor. Today they're fairly sophisticated, aggressive businesspeople.'
Resources: The Hungarian-United States Business Council (contact Thaddeus Kopinski, 202-463-5482) has been in the thick of trade and investment between the two countries for 20 years.
Tapping Market Niches
Andrew E. Stevens, president of Euro Enterprises, in Los Angeles, sells expensive medicated toothpaste and other U.S.-made oral-hygiene products. But rather than starting from scratch, Stevens invests in state-run businesses. He recently invested in a Hungarian retailing enterprise and acquired the government's share of a company that produces herbal tea for domestic consumption; he also found an Italian partner who sells the tea in Italy for five times the Hungarian price.
While Stevens has not found the employees of the SPA to be "the easiest people to deal with,' he still advises patience. The SPA plans to privatize by 1997 more than 2,000 state-owned enterprises through majority-foreign-owned joint ventures, public offerings of shares listed on the Budapest Stock Exchange, competitive tenders, employee stock ownership plans, lease transactions, and management contracts.
Resources: Overseas Private Investment Corp. (800-424-6742) insures U.S. businesses against political risks when they invest in emerging market economies.
Currency Exchange
Getting money out isn't always easy. "Wire transfers of money to and from Hungary can take two weeks instead of two hours,' says New England Machinery's David Burton. "Clearing checks can take a long time.'
Payment can also be problematic. "While everybody would like to buy, people don't always have the money to pay,' says Bernie Mantel, managing director of the Swiss subsidiary of $65-million Sulcus Computer, based in Greensburg, Pa. Sulcus insists on 50% up front and the rest on delivery. To overcome banking delays, Sulcus negotiates deals with customers with letters of credit in dollars, which are easily arranged between the National Bank of Hungary and banks in the States.
Resources: The Hungarian-American Enterprise Fund (202-467-5444) promotes private enterprise in Hungary through equity investments, loans, feasibility studies, training, and insurance.
Albert Warson is a Toronto-based writer specializing in international business.
Top 10 Reasons to Invest in Hungary
1. The political process is stable and democratic.
2. Foreign companies have been able to acquire up to 100% of a formerly state-owned business since 1991.
3. There is no double taxation.
4. There is a 100% tax holiday for joint ventures during their first five years.
5. U.S. businesses have invested $1.8 billion in Hungary -- more than half of all the country's foreign direct investment and more than U.S. investment in Poland and in the former Czechoslovakia combined.
6. The Foreign Investment Act protects foreign investors against losses resulting from nationalization, expropriation, and joint-venture liquidation.
7. Since 1990 legislation has allowed, through the National Bank of Hungary, full repatriation of capital invested, capital gains, profits, and dividends, in hard currencies.
8. Hungary is geographically the gateway to Western and Eastern European markets.
9. The labor force is low cost (wages average less than $200 per month) and highly skilled.
10. Foreign companies are eligible for subsidies from the $20.5-million Investment Promotion Fund (36-1-111-5067) if they have equity capital of at least $685,000 and a 30% interest in the project.
Republic of Hungary
Population: 10.4 million, slightly more than half of it female; 59% of it concentrated in the capital, Budapest (population 2.1 million), astride the Danube; and in other cities and towns
Official language: Magyar, or Hungarian, although English and German are widely spoken
Political system: A multiparty parliamentary democracy
Education: Compulsory to age 16; free through university; more than 7% of the population graduated from a university
Unemployment: 11.8% in 1992; 15% to 16% in 1993 (both estimated)
Gross domestic product*: $30.6 billion in 1991; $27.7 billion in 1990; GDP per capita increased from $2,364 in 1990 to $2,976 in 1991
Inflation: More than 39% in mid-1991, down to an estimated 23% at the end of 1992, and expected to decline further
Joint ventures with U.S. and other foreign companies: 13,250 in varying percentages of ownership and 2,252 that began as partnerships and evolved into 100% foreign ownership
Total merchandise imports (U.S. included)*: $11.25 billion in 1992; $12.55 billion in 1993 (both estimated)
Currency: The Hungarian forint (100 fillers) is expected to become fully convertible this year. In the meantime the exchange rate floats against U.S. dollars and European Monetary Units (EMUs), rather than at a fixed rate. Foreigners have the right to exchange forint earnings for hard currency and transfer those funds out of the country without any interference or conditions. Last June $1 U.S. was worth 80 forints. As of April 20, 1993, the dollar was worth 87 forints.
*All figures are estimates, in U.S. dollars.
Hottest U.S. Exports*
U.S. exports to Hungary nearly doubled from 1990 to 1992, when they reached $310 million. They increased 28.8% in 1990 and another 63.8% in 1991.
