From hungary-report-owner Sun Apr 9 14:16:15 1995 Received: from localhost (daemon@localhost) (fnord) by nando.yak.net (8.6.5/8.6.5) id OAA12577; Sun, 9 Apr 1995 14:16:15 -0700 Received: from localhost (daemon@localhost) (fnord) by nando.yak.net (8.6.5/8.6.5) id OAA12562; Sun, 9 Apr 1995 14:15:55 -0700 Received: from bruner@ind.eunet.hu () via =-=-=-=-=-= for hungary-report@hungary.yak.net (12560) Received: from ind.eunet.hu (root@ind.eunet.hu [192.84.225.42]) (fnord) by nando (8.6.5/8.6.5) with SMTP id OAA12553 for ; Sun, 9 Apr 1995 14:15:25 -0700 Received: from [192.84.226.92] (bruner.dial.eunet.hu) by ind.eunet.hu with SMTP id AA09013 (5.67a8/SZTAKI-4.01 for ); Sun, 9 Apr 1995 23:16:07 +0200 X-Sender: pop029@ind.eunet.hu Message-Id: Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii" Date: Sun, 9 Apr 1995 23:11:18 +0100 To: hungary-report@hungary.yak.net From: bruner@ind.eunet.hu (Rick Bruner) Subject: The Hungary Report 1.02 X-Charset: US X-Char-Esc: 0 Sender: owner-hungary-report@hungary.yak.net Precedence: bulk Reply-To: hungary-report@hungary.yak.net ======================== The Hungary Report Direct from Budapest, every week No. 1.02, April 9, 1995 ======================== ====== BRIEFS Copyright (c) 1995, Rick E. Bruner ------------ GENERAL NEWS: Several unions threaten strikes Hungary's relative freedom from labor unrest over the past five years, nearly unique among the former communist countries of the region, appears to be coming to an end, with at least five unions threatening to strike soon over the government's three-week-old budget reform package. The union for workers of the national railways, MAV, failed to reach an agreement with the government on Friday over collective rights, severance pay and bonuses and will call for a strike on Monday, Nepszabadsag reported over the weekend. MAV employees already staged a strike in December over wages, which ended after a few hours due to last minute negotiating. Meanwhile, unions representing teachers, health-care workers and the army are all pledging a mass action on May 1, the traditional Workers Day. (Part of army budget cuts will see officers dining from now on in the same halls and on the same food as conscripts, the Defense Ministry announced Friday.) State TV employees, facing more than 25% staff cuts, along with other workers may also join the strike. Nearly half of the governing Socialist party's elected representatives are trade unionists, including some of the pending strike's organizers, many of whom are expected to side with the protesting workers against the government in voting. Enacting the government's overall austerity package will still require Parliament to amend some 30 laws. Neighbors niggle over minority rights US Secretary of State Warren Christopher urged Hungary and Romania to sign an agreement on treatment of minorities, speaking at a conference on human rights in Washington, D.C., on Wednesday. Romanian Foreign Ministry officials, meanwhile, downplayed the urgency for such an accord, despite pressure from the European Union and other bodies for the two countries to sign a basic treaty formally agreeing on border and minority questions. The two countries failed to meet a previous deadline of March 19 for the document's signing. Nationalists on both side of the border object to the accord, though the real stumbling block is Hungary's insistence on a degree of autonomy for the 1.7 million ethnic-Magyars living in Romania. The strength of such an agreement is questionable in any event in light of the similar treaty Slovakia and Hungary signed March 19 in Paris, with Slovak leaders now reinterpreting the accord to say minority guarantees don't apply for the 600,000 Magyars living in that country. "It is unacceptable for Slovakia to acknowledge the right of its Hungarian ethnic minority to autonomy, or its collective rights," Slovak Foreign Minister Juraj Schenk said in Vienna on Wednesday, according to Hungary Around the Clock, citing Nepszabadsag. Croatia, on the other hand, eager for some rare good press, appears full of generosity towards its 300,000 Hungarian minorities. The two countries' foreign ministers congratulated each other on Wednesday for a new agreement of cultural autonomy for each other's minorities, including rights for native-language education, religion and local administration. ------------------- BUSINESS & ECONOMICS: National Bank head speaks on reforms "The Kadar era in Hungary is over for good," said Gyorgy Suranyi, newly re-appointed Governor of the National Bank of Hungary (MNB), commenting on the stringent new economic reform policies he and the new Finance Minster Lajos Bokros unveiled in mid-March. In a one-and-a-half-page question and answer in this week's Budapest Business Journal, Suranyi said budget reforms cannot avoid raising inflation, though he is sure is will stay below 30% for the year and discounted rumors of MNB's plans to print money to finance the deficit as "extremely dangerous" nonsense. Suranyi, 40, served in the same position for 16 months under the Antall government until he was fired for signing a liberal political criticism of that administration. "This change in the value system [from communist central planning and universal social welfare to free market realities]...is much more important than the actual forint sum generated in the initial phase of [the reform package's] implementation," he said. "...It is very important to convince the population that a budget deficit is the greatest burden on a nation's economy.... The government is clearly overspending, not compared to the people's needs but compared to what the economy can afford." He predicted the year's total inflation would be 24-26%, the current account's deficit lowering to $2.5 bn from 1994's $3.9 bn and GDP growth of 4-5% by 1997. Unemployment likely to continue decline Ten thousand of the country's formerly unemployed either found jobs or otherwise dropped off the registers of the jobless last month, the National Labor Center said last week. Labor Minister Magda Kovacs Kosa expects the trend to continue, despite last month's harsh new economic reforms. The current unemployment figure stands at 11.3%, according to the National Labor Center. Canadian firm signs airport contract The Canadian-backed Airport Development Corp. was finally awarded a contract for a $100 million investment to renovate terminal 2 of Budapest's Ferihegy airport. Prime Minister Gyula Horn called for an investigation into the terms of the long-pending deal in January, shortly after his controversial quashing of the high-profile privatization deal of HungarHotels, leaving many analysts to fear the same fate was in store for the airport project. Details of the construction are still to be announced. Suchman stirs up state publishing company In a victory for press freedom, Privatization Minister Tamas Suchman fired Peter Molnar, CEO of Hirlapkiado, the state newspaper publishing company, after Molnar forbade the editorial department of one of the company's national dailies, Esti Hirlap, from publishing a report on why Molnar fired the paper's editor the week before. Meanwhile, Suchman is expected to decide this week on the Canadian publishing company Hebdo's offer to buy the classified ad daily Expressz for HUF 2 bn ($16.6 m). Expressz is Hirlapkiado's only profitable paper. Nepszabadsag was critical of the offer, alleging Hebdo insisted the state prevent any competitor from entering the market for seven years. Sources close to the deal, however, say the paper got it wrong, that Hebdo wanted to prevent only state itself from launching a competitor. ----------- SHORT TAKES: POLAND AND HUNGARY'S AGRICULTURE MINISTERS attacked two-faced EU protectionism at a conference in Warsaw Thursday. While EU association agreements were supposed to aid Central European food exports, EU imports into Hungary have tripled, while exports have fallen by a third in the last four years, Reuters reports. KUWAIT AWARDED CONTRACTS of $80 million to the Hungarian Transelektro firm for the construction of a power plant and repair of another. Transelektro has built 70 electricity plants in Kuwait since 1968, according to Econews. TOP ADVERTISERS IN HUNGARY last year included (in descending order) Unilever, Procter and Gamble, Henkel, Postabank, the State Property Agency, the National Savings Bank (OTP), Mars, Compack-Douwe Egberts, Westel 900, Pannon GSM, and Nestle Hungaria, according to Econews citing the Szignum Hungarian Media Newsletter. THE USA RANKS 6TH among trade partners, with $430.5 million in imports from Hungary last year (15.3% up from 1993) and $451.7 in exports to this country (a 9.7% decline), according to Hungary Around the Clock citing Napi Gazdasag. A PETITION FOR NATIONAL PRESIDENTIAL ELECTIONS and three other questions, organized by the Smallholders Party, seems likely to have enough valid signatures to call a national referendum, but the Constitutional Court may be asked to rule whether a referendum is justified. (Watch The Hungary Report for further developments.) ---------------- NUMBERS CRUNCHED: * State budget deficit realized by first quarter, 1994 (Finance Ministry, Econews): HUF 146.4 bn ($1.2 bn) * Targeted 1994 year-end budget deficit (Fin Min, Econews): HUF 156 bn * Gross cash-based exports/imports, 1994 (Kopint Datorg, Econews): $10.7 bn/$14.5 bn * Growth in trade deficit, 1994 (Kopint Datorg, Econews): $725 m * Public phone cards sold since 1991, making Hungary Europe's third biggest phone card user (Matav, Econews): 17 m ------------- EXCHANGE RATE: April 6, 1995 (National Bank of Hungary): US dollar - 118.40 (buying), 120.54 (selling) Deutschemark - 86.57 (buying), 87.99 (selling) -------------- ARTS & LEISURE: Stones slated for summer tour Budapest summer pop concerts will be topped by the Rolling Stones, reports Magyar Hirlap. Other big names scheduled include Laurie Anderson, Chuck Berry, Bon Jovi, the Cure, Faith No More, and Siouxsie and the Banshees, along with penciled-in visits by Joe Cocker, Julio Iglesias and Elton John. As rereported by Hungary Around the Clock, ticket prices will average HUF 2,500 ($20.80) to HUF 5,000 (for the Stones). Stolen art to be returned International police found the last 32 relicts remaining from the more than 175 gold and silver ceremonial objects stolen from the Budapest Jewish Museum in December, 1993. Interpol, working together with Hungarian, Romanian and Israeli police, have been secretive as to the success of their remarkable detective work tracking all the stolen objects to Romania. At least three suspects are in custody after apparently exploiting the cloak of scaffolding and poor security measures at Budapest's famous Great Synagogue to commit what was then thought to have been a tragic loss to Jewish heritage in the region. Meanwhile, Education Minister Gabor Fodor signed an agreement with Kiev last week for the Ukraine to return several paintings stolen by marauding Soviet soldiers in WWII. Hungarians are hoping from the same cooperation from Russia. ---- OOPS: We regret a few typos in last week's issue that could have caused confusion. * German investment in Hungary is 24% of the foreign investment total, not 34% as reported. * The correct dollar value the state airline Malev's losses last year was $4.1 m * The issue date of last week's Hungary report should have been April 2, not April 5! ============ NEWS FEATURE Hungarian TV frequency give-away opens door to foreign investment By John Nadler Copyright (c) 1995 Hungary's Ministry of Culture and Education has announced it is issuing a new round of TV broadcast licenses and in the process is providing a beachhead in this market for one of eastern Europe's most ambitious US-owned media investment funds, Central European Media Enterprises Ltd. (CME), chaired by American media and cosmetic mogul Ronald S. Lauder. 2002 Ltd., a Hungarian broadcast company majority-owned by CME, is one of six recipients of terrestrial and AM microwave TV licenses, a representative of the cultural ministry announced this week. (CME is the owner of the Czech Republic's commercial network Nova TV, a national broadcaster that reportedly controls up to 70 percent of the Czech market.) According to the ministry, all licenses will be for regional and local transmissions only. Other winners include Obuda TV Ltd. and the cable network TV4 Ltd. which will each receive a terrestrial television frequency. MI TV and Nap TV are slated to receive licenses to broadcast by AM microwave. Budapest Communications Ltd. (the owner of the highly rated channel TV 3 Budapest) will have its existing AM-micro license renewed. This frequency give-away comes none too soon for Hungary's beleaguered private broadcast sector. The temporary license granted last year to TV 3, a commercial channel owned by Canadian and Hungarian interests serving the Budapest market since November 1994, was slated to expire April 13, and doubt over the government's willingness to re-new TV 3's mandate had hampered the network's quest for investment capital. TV 3 news director Mihaly Mueller now reports negotiations with both foreign and Hungarian investors have resumed, and agreements could be sealed in the coming days or weeks. According to Mueller, TV 3's new license does not require it to encrypt its signal. Previously, TV 3's legal obligation to code its programming -- a nonsensical regulation left over from Hungary's communist past, say analysts -- meant that only cable outlets equipped with decoding equipment could receive, and re-transmit this station's signal. Now that encryption is no longer mandated by law, TV 3 can be picked up by private individuals with AM micro dishes, and as a result the network's audience will immediately grow by as many as 200,000 homes, says Mueller. The license give-away is also good news for national cabler TV 4, owned by Vico Corp., the prominent Hungarian video distributor and magazine publisher. Stymied by Hungary's limited cable audience of about 800,000 homes out of total market of 3.7 million TV households, TV 4 now has the green light to go to air. Since existing Hungarian law does not regulate the cable industry, TV 4 is in a position to re-transmit its local broadcasts via its existing cable system and control a significant share of the national market. A license may be a mixed blessing for NAP TV. Analysts and ministry officials are already debating whether NAP's confirmed status as a private and independent network will nullify its long-standing production contract with Hungary's public television network Magyar Televizio (MTV). NAP TV currently produces MTV's highly rated weekday morning news and current affairs show, a job it may soon lose if its private and state partnerships are deemed a conflict of interest. But if NAP is fired by public TV, the tradeoff may be worth it. Many of the new licensees consider this "regional" entry into the Magyar market a vital first step. "This is -- in our context -- a beginning not an end," said Mark Palmer, representative of CME's parent company Central European Development Corp. (CEDC). "... We're still trying to develop the exact approach [for 2002 Ltd.]. I continue to follow the strategy that Hungary should have a national private station. That is our ultimate goal." Going national will mean taking on the vested interests that has foiled media reform here since 1989. Post-communist media legislation still has not been passed in Hungary, a pre-condition for opening the national TV market to private investment. Predictions vary as to when a law will pass. "I'm not sure that the law will come in the next few months," said Adam Levendel, director of the Budapest-based media research institute Szonda Ipsos. "It is a political decision. If [the government] wanted to they could pass it in six weeks." The problem is they don't appear to want to. According to CEDC's Palmer, for today Hungary lacks the "political will" to pass this law, and open the national market to commercial interests. 2002 Ltd.'s entry into local TV is insurance for tomorrow that CME will be ready and operating when Hungary finally decides it wants to move forward with media reform. ================ PARLIAMENT WATCH Unions have the answer: to Hell with the economy By Tibor Vidos Copyright (c) 1995 Finance Minister Lajos Bokros is rapidly learning the difference between politics and economics. Two weeks ago he said, "As long as I'm the Minister of Finance, the Social Security Fund will not receive any assets." Now he has said, "The debate lacks economic rationale, it has become totally political" -- i.e. the Social Security Fund will receive assets from the government amounting to HUF 65 billion ($540 million). Compared to the HUF 300 billion the government has owed to the Social Security since 1992, the 65 billion seems to be a meager compromise. But compared to the Finance Minister's earlier statement, it is a lot. Lessons learned, Mr. Bokros has not made any statements threatening his resignation since his change of heart. Hopefully, among his lessons was that it is unwise for a minister to declare that he will boycott the execution of a law enacted by Parliament. Let's also hope that citizens will not take this as an excuse to boycott, say, the tax laws. Following the establishment of the Social Security and the Pension Fund in 1991, the biggest trade union federation, the post-communist National Federation of Hungarian Trade Unions (MSZOSZ), took control of the boards that govern these funds. Since then, all finance ministers delayed the execution of the law that ordered the transfer of state owned assets to the Social Security Fund. But at least they did not talk openly about it. The tug of war over the transfer of assets to the Social Security Fund is only one of the major elements of the dispute between MSZOSZ and the government. As a reaction to the government's new austerity measures, MSZOSZ has published its own alternative proposal. While accepting the need for budget cuts, including social benefits and increase in government revenues, MSZOSZ would prefer a largely differently approach. MSZOSZ suggests the re-introduction of the minimum corporate tax (loss making companies would have to pay a profit tax based on their turnover) and the withholding tax on private savings, plus the introduction of a 10% withholding tax on privately owned state securities. Gambling tax would be doubled, foreign corporations could only enjoy a tax holiday where at least half of their profits would be reinvested in Hungary, and interest rates on government bonds would be decreased below that of corporate securities. Every citizen would be obliged to declare his or her personal assets to aid the fight against the black economy, and MSZOSZ would limit "unjustified" high incomes -- without defining who would determine what is justified and what or not and what is high and low. MSZOSZ's major concern about austerity measures of the government is that it concentrates only on budget income and expenditure and not on stimulating the economy. The measures suggested by MSZOSZ would radically solve the problem. They would wipe out the economy as such. * * * Tibor Vidos is a lobbyist and political consultant in charge of the Budapest office of GJW Government Relations. A version of this article appeared in the Budapest Business Journal. =========== FINAL BLURB The Hungary Report is free to readers. To subscribe, send an email message to the following Internet address: hungary-report-Request@hungary.yak.net containing (in the body of the message, not in the headers) the single word subscribe Conversely, to stop receiving Hungary Report, simply send to the same address (in the body of the message) the single word unsubscribe The entire contents of The Hungary Report is copyrighted by the authors. Permission is granted for not-for-profit, electronic redistribution and storage of the material. If readers redistribute any part of The Hungary Report by itself, PLEASE RESPECT AUTHORS' BY-LINES and copyright notices. Reprinting and resale of the material is strictly prohibited without explicit prior consent by the authors. Please contact the authors directy by email to enquire about resale rights. For information on becoming a corporate sponsor of The Hungary Report, contact Rick E. Bruner or John Nadler by email. Feedback is welcome. Rick E. Bruner John Nadler Tibor Vidos ================ END TRANSMISSION