HUPX Performance in August

49,342 MWh electricity was traded in August in the Hungarian Power Exchange. The average daily trade is 1,592 MWh, the standard deviation is 992 MWh. The average price for the month is 80.8 EUR/MWh. The exceptionally high average price was caused by August 16 on which the daily base price was 1,148 EUR/MWh and daily peak price was 2,260 EUR/MWh. That was due to the fact that between 9 am and 6 pm 879 MWh electricity was traded near the maximum price the system would allow (3,000 EUR/MWh).

Slovakia Rejects Participation in Greece Bail Out

Slovak Spectator reports that Iveta Radičová’s new Slovak government proposed the Parliament to reject participation in the eurozone's loan programme to hard pressed Greece. Of the 79 MPs from the ruling coalition parties, only two deputies voted in favour of the bilateral loan that may reach €816 million over the next three years, and one of them says she pressed the wrong button. The largest opposition party, whose previous government approved the deal on the EU summit, did not attend the vote.

After Hungary keeps signalling that it wants to choose a different path recommended by the EU and the IMF outside the eurozone, Slovakia shows that you can dissent within the euroclub, too. Time will tell if the new-found financial sovereignity of the two countries that adds to the traditional EU-scepticism of the Czech politics, will be sustainable.

Logistics Performance Index

The World Bank Logistics Performance Index benchmarks each countries logistics competitiveness based on a global survey of freight forwarders, logistics providers and professionals. The landlocked Visegrad countries (with the exception of Poland, which has big ports) have a roughly similar profile, ranking well above the world average, but below logistics champions such as the Netherlands, Germany or Denmark.



Currently we are working on a similar survey to understand better the global connections, bottlenecks, strength and weaknesses of the Hungary-based transport, freight forwarding and logistics business.

Hungarian Power Exchange Went Live

The new Hungarian power exchange, HUPX went live on 20 July. As the transaction clearing have not went under a serious stress test yet, the volumes and liquidity is modest. However, it is likely that HUPX will draw volumes from the Prague-based PXE, whose small Hungary section is competing for the same traffic.



The Hungarian power market, like many European markets, is still largely an OTC market. Since demand for power dropped sharply in 2008-2009, the prices follow the EEX prices, which becomes more and more a benchmark for all Central European power markets.

2008 Investment Returns in the EU

Gross return on capital employed, before taxes, in the non-financial sector. The data are for 2008 when the Big Crisis began. The best investment returns were offered by Lithuania, Latvia and Slovakia. Hungarian returns were rather poor in 2008 as the country were almost in recession since 2006.

District Heat Map for Hungary

District heating is one of the utilities in Hungary that may undergo the deepest technological and regulatory changes in the next decade. A scattered, locally regulated industry that started to gain new sources of investment and revenue through electricity co-generation to the newly liberalized market and the biogas-biomass renewable bonanza offers a wide variety of business models from heavy loss-making municipal companies to highly profitable private ones.

View Távhőszolgáltatás - disctring heating in a larger map. Colours: Geothermic, Up to 700 units, 700 to 3,000 units, 3,000 to 10,000 units, 10,000 to 250,000 units

We have placed all licensed district heating system operators on Hungary’s map. The different colors refer to the size of the business.

Mining map of Hungary May 2010

Here is the latest mining map from Hungary, including different types of mining plots and explorations. Although the information is freely available from the mining authority, it may be rather cumbersome to correctly view it with labels, especially in English.

Foreign Investments In Europe Before the World Crisis

Although each investor is looking for the best investment, the decisions of the others reveal important characteristics of the investment destinations. The last reliable data internationally is available for 2008, the start of the world economic crisis. In the business cycle before the big criris the Visegrad Countries, especially Hungary and Slovakia has been very attractive investment targets.

The World Bank data are partly misleading, as they comprise equity FDI into the financial sector, which will partly be used elsewhere, where loans or insurance claims are made - this makes the Benelux area and the UK slightly incompatible with the rest of Europe. However, in Central Europe most of the direct investment went into manufacturing and services. The big question is if the Visegrad Countries will remain competitive after the crisis. The answer is most probably yes: Poland has conducted a large-scale privatization program during the world economic crisis and maintained growth even in 2009. The currency devaluation in Poland, the Czech Republic and Hungary will help export greatly in 2010.

Surprise Surge in Hungarian Net Wages

As more and more endebted governments find out that most of their expenses are wages paid to civil servants, public employees and a wage cost base for state owned enterprises, it is rather surprising to see that Hungarian net wages have grown in these sectors dramatically. Net wages are up by 4.2% in the private sector and 8.9% in the public sector after netting for some one-off payments.

Most of the net wage surge is do to a personal income tax reduction by the outgoing government, which was performed despite the dire state of the national budget in order to improve tax paying discipline. The public worker pay is up by 11.9 on a year-on-year basis but only because the government rescheduled some items from 2009.

If the government was right and the surge would be due to an increased tax base (i.e. non-tax paying illegal work shifted towards legalized income) the statistics would be most welcome. However, as such effects are unlikely to happen within the public institutions (well, who knows?) it is more likely that the wage increase will bite into the competitiveness of the national economy.

Energy Security 2011 – Challenges of the Hungarian EU Presidency

I was invited to speak in the Energy Security 2011 – Challenges of the Hungarian EU Presidency conference organized by International Centre for Democratic Transition on 7 May 2010. Although I had been involved in the international affairs of railways, I am an economist and talked in the second panel about the price of energy security.

The opening speeches and the first panel gave me a lot of new information and thoughts (scribbled down 12 pages of notes). I cannot speak for the Polish presidency, but it looks that Hungary needs to catch up very quickly in order to achieve anything at all in the energy field. There was a strong consensus to de-securitise energy security (not as financial economist would mean it but to detach it from national defense).

I have a background in economic regulation and more quantitative stuff - actuary science and operational research - so I just wanted to focus the attention of the foreign policy experts to the price of energy security with an analogy from car insurance.

Energy security in Hungary on Prezi Wait until animation is loaded and press play button. You can navigate with the arrows back and forth.

Although the prezi in itself is not so meaningful, I can tell you that there was a much bigger consensus than I expected on the price of energy security. Probably everybody agreed that energy security was given too much of a weight against competitiveness and sustainability and a rational debate should start about the different levels and prices attached to a higher level of security in terms of fuel and energy availability and price predictability.

I believe that there are a lot of instruments already available that could easily manage a large part of Central Europe's energy risk, either in the public institutions and national budgets or in private or state-owned enterprises.

Freight Transport Market in Hungary - Consequences and Indicators of Recession

The following chart will accompany my short analysis that will appear in the Railway Market magazine. Two ideas make this chart very interesting for investors. Firstly, the transport sector swallows up a great part of equity and debt available in Hungary, so the performance of the sector is also interesting. Secondly, as Hungary as an important manufacturing country, the transport figures are also important in the evaluation of the business cycle.

The upper charts who the weight lifted (tonnage put on vechicles) in Hungary (domestic and international relations). The lower charts (not so reliable because of the shortcomings of statistical data gathering) show the transport performance in Hungarian territory, also in domestic and international ordering.

The decline in transport lifted in Hungary shows decrease of Hungarian manufacturing, and also the decrease in fuel use accompanied it. Domestic recovery has not started yet in 2009Q4. However, most of the international transport performance is only transit, mainly from East (raw materials and fuels) and to West (finished goods from Balkans and beyond). The recovery in international trade and manufacturing is visible in that chart.

Poland recorded the best real GDP growth performance

The OECD Economic Survey of Poland 2010 was presented at the Ministry of Economy of Poland. The main massage of the report is the fact that Poland was the best from OECD countries tackling the economic crisis thus Poland is the only country in the European Union which produced a positive real GDP growth in 2009.
The OECD experts provision a further growth of 2.5% and 3% in 2010 and 2011 respectively. The Head of the OECD Economics Department highlighted the stable domestic demand and the solid foundations of the financial system as the best features of the Polish economy.

Mr. Waldemar Pawlak - the Deputy Prime Minister of Poland - emphasized that the country counts on the foreign investors in developing the whole country. "Polish special economic zones will be operating till 2020 - he remainded. - The SEZs offer great opportunities for the development of direct investments." (Source: Ministry of Economy of Poland)

Additional fund to the Czech Republic, Poland and Slovakia

Poland, The Czech Republic and Slovakia will share extra EUR 1 billion from Structural Funds in 2011-2013. Poland will receive an extra EUR 633 million, the Czech Republic EUR 237 million and Slovakia EUR 138 million in structural funds. The top-up is a direct consequence of stronger economic growth than forecast in these countries. The Interinstitutional Agreement on the 2007-2013 financial framework between Parliament, Council and Commission foresaw automatic adjustments for countries whose GDP had varied by more than 5% cumulatively over 2007-2009 compared to the forecasts when drawing up the framework. Economic growth in Poland during this period reached 10.8% more than expected in the EC prognosis. Slovakia and the Czech Republic experienced respectively a growth higher by 10.8 % and 7.5% than expected. (Excerpt from the European Commission’s communiqué from April 19th, 2010.)

Vth Széchenyi Race - Competition of Alternatively Driven Vehicles in Images

In the heart of Central Europe's new automotive hub, Győr, the Alliance of Alternatively Driven Vehicles and the INNO-MOBIL Sport Club with the contribution of the Széchenyi István University has presented the 5th Széchenyi Race - Competition of Alternatively Driven Vehicles. The competition not only selects the best innovators, scientists and sportsmen, but also the possible start-ups of the new electric, fuel-cell or hydrogen propelled industry. Before a more detailed analysis here are the images.



It was a great team building exercise for the Visegrad Investments team and we hope to team up with winners from both the electric and the fuel cell categories.

Polish privatization: Fabryka Łączników Radom S.A.

The Ministry of Treasury in Poland invites to participate in the negotiations to purchase the shares of Fabryka Łączników Radom S.A.The principal object of Company’s activity is cast iron founding, manufacture of cast iron tubes, manufacture of other metal products, metal processing and coating. It encompasses more than 200 assortments of fittings, heater couplings and castings made of blackhearth malleable cast iron in grade W400-5, sized from 3/8 - 4 inches, manufactured according to PN-EN 10142, ISO 49, DIN 2950 with the use of clay-bonded sands, and thermosetting core compounds and phenol-formaldehyde resin-bonded sand cores.

Fittings Factory Radom S.A. is the largest producer of cast iron fittings in the domestic market. It’s market share is estimated at the level of 4-5 thousand tonnes, which constitutes approx. 40% of the overall demand for fittings.

The deadline for submitting written Responses by the Potential Investors who have received the Memorandum shall expire 30.04.2010 at 14.00 Warsaw time.

Hungary is the biggest capital investor in Montenegro

The Hungarian Foreign Minister Mr. Péter Balázs paid an official visit to Montenegro and met his counterpart Mr. Milan Rocen. They welcomed the flourishing of economic ties between the two countries: Hungary, to date, has been the biggest foreign direct investor in Montenegro. Large Hungarian companies are present in the banking sector, telecommunications and the hotel industry. Mr Balázs emphasized that Hungary is seeking new areas of mutually advantageous cooperation, and urges Montenegro to have its legislation even more investment friendly so that it could not only attract new investors but make life easier for the ones already settled. (Source: Ministry of Foreign Affairs of the Republic of Hungary)
Examining the report of the World Bank Group about Doing Business in the different countries we can see that Hungary occupies the 47th place while Montenegro is the 71st in the ranking. In the case of some factors i.e. enforcing contracts Montenegro could really improve its capability. To enforce a contract in Montenegro costs 25.7% of the claim (it is 13% in Hungary), 49 procedures have to be completed (in the case of Hungary is 33) and it takes 545 days (395 days in Hungary). On the other hand the strength of the investor protection index is 6.3 in Montenegro and 4.3 in Hungary so Hungary could also improve its performance in creating an investor friendly environment.

Fifth Race of Zero Emission Vechicles in Győr

In one of the Central-European automotive hubs, almost equidistant from Budapest, Wien and Bratislava takes place the 5th Széchenyi Race^®, the race of alternative vehicles. The race is named after Earl Széchenyi, considered the greatest Hungarian philantropist who lay down the foundations of Hungary's scientific academy and introduced the country to steam-powered ships, horse-racing and casinos. The name of Győr's university with the most advanced automotive design faculty also bears his name.

The schedule is based on the inventions of the young designers. The best ideas share in innovation prizes that serve the basis of the further development works. The race is an acknowledged forum of the young engineers. On Saturday you can enjoy the parade of more than 60 concept vechicles in ten categories: (Motorbikes, Hobby vehicles, Solar powered vehicles, Study-vehicles, Prototype vehicles, Racing vehicles, Modified series production vehicles, Series production motorbikes, Series production vehicles, Electro-Karts).

Sunday dawn is practice time for the teams, the first speed races start on Sunday at 8:30 am, the long distance races start at 12.30.

Although most of the innovations are in an early phase, they will shape Central Europe's automotive industry very soon, so not only family-friends and fools are expected.

Different Business Headaches in V4 Countries

The World Economic Forum’s Executive Opinion Survey asked executives to name problem-areas in doing business for each country in the world. Business leaders in the Visegrad countries, residents and foreigners, selected the five biggest headaches from an 15-item list. Results were published in the Global Competitiveness Report 2009-2010.

The problems of the V4 countries are look rather different. Tax administration is on the top of the problem list in Poland and Hungary, inefficient government bureaucracy is the biggest headache in the Slovak and the Czech Republic. Infrastructure bottlenecks are seen as a problem in Poland and Slovakia, two countries that are making enormous efforts to build up a new transport and utility network.

Condolences for Poland

Condolences for the citizens of Poland and the families of the deceased.

Poland, the biggest Visegrad country has lost her had of state, army chief and central bank governor, with a number of parliamentary deputies, historians and other citizens. Poland's President Lech Kaczynski, army chief of staff General Franciszek Gagor, central bank governor Slawomir Skrzypek and deputy Foreign Minister Andrzej Kremer with more than 80 other citizens were killed as their plane crashed in Russia after hitting trees in foggy weather. The Polish delegation was flying in from Warsaw to mark the 70th anniversary of the Katyn massacre of thousands of Poles, including most of the officers of the country's army by Soviet forces during WWII.

Prime Minister Donald Tusk declared a week of national mourning with two minutes of silence on Sunday at midday.

ICT Prices in V4 countries

The International Telecommunication Union (ITU) has published the latest edition of it’s Measuring the Information Society Report, in which the newest ICT Price Basket Data were presented. ICT Price Basket is a composite index calculated by the relative price of fixed line telephone services, mobile phone services and fixed broaband services (the so-called sub-baskets). The value of the ICT Price Basket shows the percentage of the ICT costs in the average monthly GNI per capita. The ICT Price Basket shows the available revenue cap if you are in the telecom industry or your telecom costs, one factor of your company's competitiveness, if you are buying this services.

In 2009 numbers V4 countries are among the top one third in the ICT Price Basket rank of 161 countries. Hungary, the Czech Republic and Slovakia are very close to each other (places 58, 59 and 55 respectively), while in Poland ICT prices seems somewhat favourable (ranks 41st).

The value of the index has decreased in all V4 countries compared to 2008, mostly because of a significant drop in fixed line costs. In Poland however, mobile costs and internet costs have also decerased a great deal from 2008 to 2009.

All in all, the V4 offers a relatively lucrative market for telecom investors (relatively high penetration and use) with relatively high prices. For other industries, telecom prices may be a concern, although not so significantly as electricity prices.