From hungary-report-owner Mon May 29 06:06:38 1995 Received: from localhost (daemon@localhost) (fnord) by nando.yak.net (8.6.5/8.6.5) id GAA11492; Mon, 29 May 1995 06:06:38 -0700 Received: from localhost (daemon@localhost) (fnord) by nando.yak.net (8.6.5/8.6.5) id GAA11472; Mon, 29 May 1995 06:05:59 -0700 Received: from bruner@ind.eunet.hu () via =-=-=-=-=-= for hungary-report@hungary.yak.net (11469) 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 GAA11434 for ; Mon, 29 May 1995 06:04:03 -0700 Received: from [192.84.226.92] (bruner.dial.eunet.hu) by ind.eunet.hu with SMTP id AA09820 (5.67a8/SZTAKI-4.01 for ); Mon, 29 May 1995 15:01:59 +0200 X-Sender: pop029@ind.eunet.hu Message-Id: Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii" Date: Mon, 29 May 1995 14:58:51 +0100 To: hungary-report@hungary.yak.net From: bruner@ind.eunet.hu (Rick Bruner) Subject: Hungary Report 1.09 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. 1.09, May 29, 1995 ======================== The Hungary Report is sponsored in part by: MTI-Econews, a daily English-language news service featuring Hungarian financial and business topics, available online. For subscription information, contact (not automated -- write a nice note). ======== CONTENTS BRIEFS World leaders meet in Hungary, discuss westward integration State doesn't want its MTV(2) CSFB and Deutsche Bank win advisory tender on Matav privatization EBRD chief backs Hungary 100% Canadian trade delegation seeks investments Modanna will film movie in Hungary OTP to lay off 30% of staff DC power-wedding in Buda Szokai appointed head of AVP Rt. Cultural organizations outraged over social security Stock Exchange Commission fines Bokros, Budapest Bank Phillips electronics plans huge expansion Interior Ministry: more illegal ex-pats than reported Women have it tough NUMBERS CRUNCHED New Kft.s Construction increase Bank sector profit Telephones FEATURE STORY Hit film has Hungarians 'Witness' history again PARLIAMENT WATCH MPs draws curtain on 'Black Sunday' ====== BRIEFS Copyright (c) 1995, Rick E. Bruner ------------ GENERAL NEWS World leaders meet in Hungary, discuss westward integration Hungary played host to meetings of seven other nation's presidents and members of parliament from 31 countries in two separate events this weekend focusing on the integration of the former Soviet Bloc countries into western alliances. Parliamentarians from the 16 NATO states, along with representatives from 15 Central and East European associate NATO member states, met in the capital's Parliament building from Friday to Sunday for the first-ever North Atlantic Assembly (NAA -- NATO's political forum) meeting outside a NATO country. Meanwhile, in the Balaton resort town of Keszthely, presidents from Austria, Germany, Italy, Poland, the Czech Republic, Slovakia, Slovenia and Hungary gathered for an annual, informal meeting of the Central European Initiative. Against an ominous back-drop of the fierce renewed fighting and NATO air-strikes in Bosnia, Karsten Voigt, NAA chairman put forward a report proposing a timetable for enlarging the military alliance eastward by 1998 or early 1999 at the latest. US deputy Foreign Secretary Richard Holbrooke, however, objected to setting any deadlines at this stage. Meanwhile, at the presidential summit in the countryside, the mostly figurehead leaders reaffirmed mutual support for the Central European countries' wish to join the European Union at the earliest opportunity and issued a joint statement supporting NATO air-strikes of Bosnian Serb munitions sites over the weekend. Hungary's President Goncz said, "We find the capture of UNPROFOR officers completely unacceptable for a civilized society...and we are appalled by the re-emergence of barbarism," according to Reuters. State doesn't want its MTV(2) Believe it or not, the government is ready to submit a draft of new media legislation to Parliament next week a mere five years after the country's transition to democracy. The new legislation, which government coalition partners the Socialist and Free Democrat parties finally agree upon, calls for the privatization of the semi-national television channel MTV2 and Danubius radio station. The proposed privatization of MTV2 is a reversal for the Socialists, who last year expressed their preference to placate unions by keeping both national public channels in state hands. Two western firms are already hungrily expressing interest in MTV2: Central European Media Enterprises (CME), owned in part by former US ambassador to Hungary Mark Palmer and Hungarian-American cosmetics mogul Ronald Lauder (son of Estee); and the German media group Westdeutsche Allgemeine Zeitung. CME already owns a majority stake in the successful Czech private national broadcast television station Nova. Meanwhile, the Constitutional Court ruled unconstitutional the government degree to dismiss 1,000 state TV employees as part of cost cutting for the state budget. MTV president Adam Horvath halted the staff cut proceedings. -------------------- BUSINESS & ECONOMICS CSFB and Deutsche Bank win advisory tender on Matav privatization Credit Suisse First Boston and Deutsche Bank were awarded the hot tender to act as privatization advisor for the Hungarian Telecommunications Company (Matav), worth up to $30 million in consulting fees for preparing the sale of $1 billion in equity. The group was chosen over two other consortiums, Salomon Brothers with the Hungarian Concorede Securities, and N.M. Rothschild & Sons, Goldman, Sachs & Co. And Creditanstalt Securities. The CSFB-Deutsche Bank team was chosen because it aims to privatize the phone monopoly by the end of this year, according to State Holding Company (AV Rt.) managing director Attila Laszik, quoted in Econews. The government favors a quick sale to help meet its privatization revenue goals for this year and to beat competition with several other countries slated to sell stakes in their telcos next year. Critics, however, are already assailing the winning strategy as hasty and ill-advised. Budapest Business Journal quotes Matav CFO Ray Stewart saying mid-1996 would fetch a higher price for the shares, as current restructuring and investment plans would add significant value to the company's shares by then. The state already sold 30.3% of Matav to Ameritech and Deutsche Telekom for $875 million in December 1993. The next offering would be for 40%, probably via stock market floatation, with the state planning to retain 25%. The Ameritech-Deutsche Telekom joint venture has announced its aim to secure a total of 50% plus one share in the next offering. Matav made after-tax profits last year of HUF 195 million ($1.5 million) and installed 284,000 new lines. EBRD chief backs Hungary 100% Jacques de Larosiere, president of the European Bank for Reconstruction and Development (EBRD), was bullish on Hungary's prospects in a two-day visit here early last week, expressing full support for the government's recent economic restructuring plans and enthusiasm for the new privatization law. The fact that the EBRD, the lending and investment institution set up by countries of the west to build the post-socialist economies of Central and Eastern Europe, has already invested more than $900 million in Hungary -- 12% of its total spending to date -- is "a sign of confidence in the country," Larosiere said. He also announced the formation of the Hungarian Capital Fund, aimed at restructuring struggling Hungarian companies. The EBRD started the fund with $30 milllion but may invest up to $60 million, he said. While visiting Monday and Tuesday, Larosiere met with Prime Minister Gyula Horn and President Arpad Goncz, as well as President of the National Bank Gyorgy Suranyi and all the cabinet members working in the economic sphere. Canadian trade delegation seeks investments Led by Trade Minister Roy MacLaren, a group of 40 Canadian officials and businessmen toured Hungary last week to discuss trade relations and attend an investment conference. The group discussed solid opportunities in metallurgy, nuclear energy, electronics and auto parts production, according to Hungary Around the Clock. To date, Canada has invested an estimated US$150 million in Hungarian business. Another US$150 million is already committed in various future projects, including the Airport Development Corp.'s US$100 million expansion project of Ferihegy 2 airport. Hungarian-Canadian financier Andrew Sarlos has been a leading figure in Canadian investment into Hungary. Bilateral trade between the two countries last year totaled US$69 million, with Hungary experiencing the surplus of US$1.1 million, dominated by exports of agricultural machinery, according to Econews. ----------- SHORT TAKES MODONNA WILL FILM A MOVIE IN HUNGARY, according to an announcement at the Cannes Film Festival. Hungarian-born Andy Vajna will direct the film, Andrew Lloyd Webber's "Evita." Magyar Hirlap expects the filming to start in May, 1996. OTP WILL LAY OFF 30% OF ITS STAFF this year according a Budapest Business Journal report. The National Savings Bank (OTP) is the most profitable of Hungary's lenders, but at 15,000 employees it is grossly over-staffed, say analysts. Computers will take many redundant jobs. A WASHINGTON POWER WEDDING TOOK PLACE IN BUDA this weekend. US deputy Foreign Secretary Richard Holbrooke and prominent journalist Kati Marton were married at the residence of the US ambassador here, according to a report in the Budapest Sun. Marton was born in Hungary and left in 1957 after her parents, journalists for US news services, were imprisoned for two years as accused CIA spies. Halbrooke mixed business and pleasure, squeezing the ceremony into his busy schedule here participating in the weekend's North Atlantic Assembly meeting. IMRE SZOKAI WAS APPOINTED PRESIDENT OF PRIVATIZATION BODIES the State Holding Company (AV Rt.) and the State Privatization and Holding Company (when the latter soon replaces the former). Appointed by Prime Minister Horn, Szokai, 45, served as a foreign affairs expert for the Communist Central Committee from 1985 to 1989. CULTURAL ORGANIZATIONS ARE OUTRAGED over the recent state decision to apply 44% social security tax on artistic products. Literally dozens of organizations raised protests to the move over the last week. "You can economize on [political] parties, protocol, or the Parliament, but only a country determined to commit suicide tries to save money on schools, universities, scholarly activities, sciences, artists and arts," said film director Miklos Jancso, reading from a manifesto at the opening of the East Central European Film Festival on Friday, according to Hungary Around the Clock. THE STOCK EXCHANGE COMMISSION FINED THE FINANCE MINISTER, Lajos Bokros, and the Budapest Bank for not informing the public and stock holders when the state made a Controversial, secret cash injection into the bank this February (see H-Report 1.06 for background). The bank was fined HUF 1 million ($8,130) and Bokros, who was president of the bank at the time, will have to pay a HUF 20,000 ($160) fine. PHILLIPS ELECTRONICS PLANS HUGE EXPANSION, raising revenues from HUF 40 million ($325,200) to HUF 680 in the next three years, which will require doubling its current $40 million investment in production. In several factories around the country, the company produces VCRs, plastic and audio equipment and monitors, largely for export. THE INTERIOR MINISTRY SAYS EVEN FEWER WESTERNS ARE LEGAL than were reported in recent in press accounts. A ministry official said only 1,300 German, US and British citizens are legally registered as living in Hungary, as opposed to more than 21,000 registered here with their embassies. The official somehow saw signs of an international conspiracy to discredit Hungary, according to Hungary Around the Clock, in the fact that the German daily Die Welt reported the figure 4,184 as being legally registered. The Die Welt story received big play in local media, including being picked up as a brief in Budapest Week, despite going little noticed originally as a front page investigative feature in the Budapest Sun the week earlier (see H-Report 1.08, Numbers Crunched). ---------------- NUMBERS CRUNCHED * Number of limited liability (Kft.) companies registered as of April (Central Statistical Office, CSO): 93,205 * Increase in real value of construction work for first quarter of this year compared to last (CSO): 11.9% * Overall banking sector after-tax profit last year (National Bank of Hungary): HUF 23.6 billion ($191 million) * Number of telephones per 100 residents in Hungary and Budapest, respectively (Matav, Econews): 17.7 and 33.2 ------------- EXCHANGE RATE May 26, 1995 (National Bank of Hungary): US dollar - 122.33 (buying), 124.75 (selling) Deutschemark - 88.12 (buying), 89.90 (selling) ------------- SOCIAL ISSUES Magyar women have it rough Judging by two articles in this week's Budapest Week and Budapest Sun, Hungary is not a great place to be female. In a front-page feature article certain to draw lots of furious mail, the Week had a male British reporter advance the theories that most Hungarian men are bad in bed and that the country's high divorce rate is due to Hungarian women being "orgasmocentric." The long article quotes only one source, "the nation's number-one sexologist" (according to whom, one wonders) Elvira Lux, described as a dowdy woman in her 60s, who believes "the heart of the problem" (which problem?) is young people are "loose" and lack morals, that the former communist central committe actively prevented men from cheating on their wives and that "people who display [affection] on the street can't have a healthy sexual life." Hmmm. In a vastly more intelligent article in the Sun, writer Susan Ladika analyzes the affects the government's new economic austerity measures will have on women. Arguing that women as family care-takers will bear the brunt of cuts in social benefits, sources say the number of abortions has risen noticeably since the March 12 announcement of the budget reform package and that unemployment will be exacerbated by mothers forced to seek employment to meet family needs. The women's rights movement is still barely developed and badly organized, say sources, who claim sexual harassment at the work place is rampant, that women professionals earn on average half of male counterparts and that domestic abuse is on the rise. ---- OOPS Benefits less than reported Last week I reported that state child benefit payments equal approximately $60 a month. Not quite. The support payments newly adopted by the government range between $10 and $26 (in forints, of course), depending on perceived need. Privatization balance not zero -- rather, negative figures Also last week, in the feature story on the new privatization law, I said that revenue from privatization to date totaled zero. In fact, the AV Rt. Has earned HUF 6 million ($48,700) so far this year. At the same time, it has had expenditures of HUF 187 million ($1.5 million), so the net privatization revenue balance is negative HUF 181 million (not counting expenditures at the State Property Agency, which had no revenue). ============= FEATURE STORY Hit film has Hungarians 'Witness' history again By John Nadler Copyright (c) 1995 Few movies have influenced the social and political climate of a nation like the 1969 political satire "The Witness" (A Tanu) in Hungary. The story of a banal middle-aged man, a 'dike keeper' by trade, forced by circumstances to testify in a Stalinist-era show trial, "The Witness" became a banner around which thousands (perhaps millions) rallied in Hungary's struggle against Soviet rule. "It is a very popular movie," mused its director Peter Basco. "Every day its slogans and characters are repeated from the markets to Parliament." According to analysts, the movie's bold satire helped mobilize Hungary's youth in the 1980s. The "Magyar Narancs" (Hungarian Orange) weekly newspaper, Budapest's premier alternative magazine of culture and politics for the hip and the young, derived its from a hilarious scene in "The Witness." "The Witness" came to symbolize the demise of communism. Now director Basco has made "Another Witness" (Megint a Tanu), a sequel to the original recently released in Budapest by Focusfilm Studio, which its producers hope will capture the imagination of a new generation of Hungarian movie goers in this era of freedom. One question, however, stands out: Compared to the setting of the original film -- Hungary's harsh Stalinist period in the 1950s -- can wishy-washy democracy in the 1990s provide a compelling backdrop for "Another" installment? "This [democratic] era is very new and dynamic and different from Hungary in the 1950s," director Basco told the Hungary Report. "But there is an interesting paradox: That period of our lives gave us more hope than today. Back then we believed that when [communism] ended all would be good. We would be free and happy. "Now we are here in the new world, and everything is mixed up. We don't know any longer where the end of the tunnel is for us... So I've shown this new world and its strange circumstances through the eyes of a little man." In the first installment, "little man" Jozsef Pelikan (actor Ferenc Kallai) is forced to bear witness against an old friend and party functionary who has been charged with treason. Pelikan -- a simpleton more confused than intimidated -- cooperates, and his good-heartedness undermines the system and makes him a hero. In "Another Witness," the winds of history again blow against Pelikan (also played by Kallai) almost 30 years later as he runs for mayor in modern-day Hungary. According to Basco, Pelikan's role as a pawn, manipulated by awesome forces, is the secret of the character's appeal in both movies and eras. "When I made the first 'Witness' I was also simple and naive," Basco explained. "Mr. Pelikan was me. He never understood politics. He couldn't understand the mysteries of history. The world now in Hungary is similar. The common man doesn't understand politics, parties, and power." The public agrees. In its first three weeks of play, "Another Witness" has sold a record-breaking 50,000 tickets across Hungary. (Last year the highest grossing Hungarian-made movie boasted an audience of only 13,000.) Critics have been less enthused with the film. But even the sequel's fiercest opponents admit that it suffers mainly from a comparison with the 1969 original, now a cultural icon. Admittedly, censorship in the last regime did much to foster the original's legend. Lamented "Another Witness" producer Denes Szekeres: "We could never come up with a publicity gimmick as good as banning the film for 10 years." The original "Witness" was suppressed until 1979. But according to Basco, Hungary's communist dictatorship was a willing accomplice in the making of it and other anti-communist films. Sometimes the system was too sluggish to keep track of its auteurs. (Hungarian director Miklos Jansco, when asked how he made political satires with funding from the very dictatorship he was lampooning, once responded: "Very quickly.") More often, the state benefited from the glory of dissident artists. "These films had a special charm for the rest of the world," said Basco. "The dictatorship knew these films [created] a good image of the dictatorship abroad. These films said: 'Here in Hungary there is liberalism, here there is criticism.'" Now with freedom Hungarian directors are on their own. It took Basco five years and the help of foreign partners to raise the $750,000 needed to make "Another Witness." Free of the cloak of communism, "Another Witness" is now being judged solely on its entertainment value. Which is somewhat disconcerting for some. "We are a little afraid," explained producer Szekeres. "We know there are high expectations for the sequel.... But if people go to this movie simply to have a good time, they will be very happy when they leave the theater." ================ PARLIAMENT WATCH MPs draws curtain on 'Black Sunday' By Tibor Vidos Copyright (c) 1995 Following more than 21 hours of debate, Parliament is scheduled to take a final vote this week on Finance Minister Lajos Bokros' austerity package, which he announced on March 12, now known as "Black Sunday." The opposition fiercely attacked the package on grounds that it was unconstitutional to amend several laws by one piece of legislation and that the Bokros package is aimed only at cutting the budget deficit, not at stimulating the economy at the same time. The proposed measures will not result in the desired goal, opponents argue: namely, cutting the deficit by Ft 170 billion. The wave of unpopularity increased the pressure inside the parliamentary caucuses of the coalition parties. Ultimately, the government agreed to support 130 amendments. These amendments, mainly targeting social spending cuts, will put back into the budget Ft 3 billion previously taken out and can therefore be considered only cosmetic. Politically, the most significant unresolved dispute inside the Socialist Party is the introduction of social security payments on honoraria paid to some contracted workers. Up to now, royalties were exempt from social security payments; i.e., the money given to writers, computer software producers, conference guest speakers, etc., was not subject to the universal 44% social security contribution all (other) employees have to pay. The Bokros package attacked this privilege on the grounds that it is unfair for one group of people and their employers to be excluded from contributing to the social security system. While the equal distribution of burdens seems to be an acceptable concept, the government's line of reasoning has a major flaw: it proves that the social security contribution is actually a social security tax and has nothing to do with the services provided by the health care system. A university professor will not receive more in sickness allowance or better hospital treatment if he or she suddenly pays a social security contribution out of the fees received for a guest lecture, or some other service. Indeed, as royalties are also due after the author of, say, a book, has passed away, the author's heirs will have to pay social security contributions that would, I'm afraid, not really benefit the deceased. The finance minister was supremely confident when the issue of social security payments was raised after his speech earlier this month before the American Chamber of Commerce. When member David Young rose to complain that his employer is forced to pay social security contributions on freelancers, in addition to full-time employees, Bokros stood firmly by his insistence on equal burden-sharing. "That's competition," he said. He agreed only to the greater point that the 44% itself is too high; he insisted that the burden, however great, be shared equally now. But the finance minister may not be that self-assured, after all. Shortly before the vote on amendments was taken last week, during a meeting of the Socialist parliamentary caucus, Prime Minster Gyula Horn tried to persuade his fellow socialists not to accept amendments that would threaten the income of the Social Security Fund. Imre Szekeres, parliamentary leader of the Socialist Party, on the other hand, said: "Members are free to vote. We did not call for a compulsory vote." Very wise indeed. The social security raise was, in the end, accepted by Parliament. * * * Tibor Vidos is a lobbyist and political consultant in charge of the Budapest office of GJW Government Relations. or A version of this article appeared in the Budapest Business Journal. ====== THANKS Many thanks to all of you readers who responded to my appeal last week for help increasing circulation of the Hungary Report. Various promotional efforts saw a near 30% growth in subscriptions in one week! Rick =========== 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 * * * Back issues of The Hungary Report are available on the World-Wide Web http://www.yak.net/hungary-report/ and via FTP host: ftp.yak.net directory: /pub/hungary-report/ login name: "ftp" password: your email address) * * * 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 or John Nadler Tibor Vidos or * * * For its briefs, The Hungary Report regularly consults the news sources listed below -- for information about subsriptions, contact them by email: The Budapest Business Journal <100263.213@compuserve.com> (and tell them what dwads they are for me pay for issues at the newsstand); Budapest Sun <100275.456@compuserve.com>; Budapest Week and Hungary Around the Clock (same email address) <100324.141@compuserve.com>, and Central Europe Today (free online) . ================ END TRANSMISSION