From hungary-report-owner Mon Jun 5 16:11:22 1995 Received: from localhost (daemon@localhost) (fnord) by nando.yak.net (8.6.5/8.6.5) id QAA28841; Mon, 5 Jun 1995 16:11:22 -0700 Received: from localhost (daemon@localhost) (fnord) by nando.yak.net (8.6.5/8.6.5) id QAA28832; Mon, 5 Jun 1995 16:11:03 -0700 Received: from bruner@ind.eunet.hu () via =-=-=-=-=-= for hungary-report@hungary.yak.net (28828) 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 QAA28783 for ; Mon, 5 Jun 1995 16:08:47 -0700 Received: from [199.174.132.25] (ad05-025.compuserve.com) by ind.eunet.hu with SMTP id AA26781 (5.67a8/SZTAKI-4.01 for ); Tue, 6 Jun 1995 01:08:55 +0200 X-Sender: pop029@ind.eunet.hu (Unverified) Message-Id: Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii" Date: Tue, 6 Jun 1995 01:02:17 +0100 To: hungary-report@hungary.yak.net From: bruner@ind.eunet.hu (Rick Bruner) Subject: Hungary Report 1.10 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. 1.10, June 6, 1995 ======================== The Hungary Report is supported 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 PM Horn in US to meet Clinton, investors Two children kidnapped 'Bokros Plan' passes easily Horn knocks Western commitment to East More reforms, long, medium and short-term 16,000 health care workers face layoffs Agriculture exports double imports Matav to borrow $300 million Zwack Unicum sees big profit Richter Gedeon accused of insider trading Forum hotel to be sold alone Duna Elektronika computers liquidated :) FEATURE STORY (Long) It's a Svab world after all PARLIAMENT WATCH Bokros on balance: could be worse ====== BRIEFS By Rick E. Bruner Copyright (c) 1995 ------------ GENERAL NEWS PM Horn in US to meet Clinton, investors Prime Minister Gyula Horn left for a seven-day tour of the United States on Sunday, at the invitation of President Bill Clinton, whom Horn will meet in Washington on Tuesday. The two leaders will discuss Hungary's eagerness to join the NATO security alliance and this government's new economic reforms, among other subjects. While in Washington, Horn will also meet Secretary of State Warren Christopher, House Speaker Newt Gingrich, President of the World Bank James Wolfensohn and Director of the International Monetary Fund Michel Camdessus. (Before leaving Budapest, Horn told Reuters that Hungary had agreed with the IMF "in principle" to a three-year loan, which would be signed before the end of this year, according to a report on Sunday. With a net foreign debt of more than $20 billion, Hungary lost its standby agreement with the IMF in 1992 pending a major reform of the budget, which Horn's new government implemented this March. Meanwhile, Budapest Sun reports the World Bank is close to approving a loan of up to $300 million for Hungary, which could be finalized on this trip.) After visiting Washington, the prime minister will travel to New York City, Detroit, Los Angeles and San Francisco for meetings with business leaders from General Motors, Ford, Guardian Industries (who together have invested more than $800 million in Hungary to date), as well as other potential investors. Hungarian-American billionaire George Soros will host Horn for a high-powered investors' dinner in New York. Horn is accompanied by Finance Minister Lajos Bokros and National Bank President Gyorgy Suranyi. Shortly before the scheduled departure, the entourage switched flight plans from Delta airline to Hungary's national carrier Malev connecting with Lufthansa, according to Budapest Week, after learning that the chain-smoking prime minister had been slated for a non-smoking trans-Atlantic flight. Two children kidnapped In the space of three days, two Hungarian schoolgirls were kidnapped for ransom in presumably unrelated events last week. First on Monday, eight-year-old Timea Horogh, daughter of wealthy entrepreneur Lajos Horogh in the depressed northern city of Ozd, was taken by a band of kidnappers demanding HUF 16 million for her return. Police were able to track down her four kidnappers within two days by tracing their getaway car through eight unregistered owners and free the girl without injuring anyone involved. Among those behind the plot, all four of whom have confessed their guilt, was the former deputy mayor of Ozd. Then on Wednesday night, a 14-year-old girl from Budapest was kidnapped, according to Hungary Around the Clock, citing Magyar Hirlap. By press time, the outcome of that case was unknown. -------------------- BUSINESS & ECONOMICS 'Bokros Plan' passes easily It's official. The government had no trouble using its more than 70% majority in Parliament on Wednesday to pass its dramatic austerity plan, announced last March. The plan, which has drawn enormous protest from social groups opposed to its welfare cuts, passed 231 in favor, 91 against with three abstentions. All members of the coalition partner Free Democrats party supported the bill, while six MPs of the leading Socialist Party voted against the bill and two abstained. No members of the opposition supported the measure. The vote amended 21 laws. After minor compromises the government made since announcing the plan, the state aims to save HUF 160 billion ($1.3 bn) from this year's budget deficit. Horn knocks Western commitment to East On the same day as Parliament's vote, Prime Minister Horn addressed world business leaders at a conference organized in Budapest by England's prestigious Economist magazine, strongly criticizing western governments and lending institutions for their record in aiding reform in the former Soviet Bloc. "In my view the international financial institutions do not pay proper attention to the predicament of the central and east European region," Reuters quoted him saying. "[Western] governments lack special programs for stimulating investments with government guarantees in the region," he said, according to Econews. Horn also told conference delegates that Hungary's privatization process would conclude by the end of 1997. More reforms, long, medium and short-term The government announced new medium and long-term plans for economic reform, including the so-called "modernization plan" produced by the Modernization Department of the Prime Minister's Office. Due for final release by the end of the year, the modernization plan would set goals for the country's economic development extending well beyond the three years of the current government's term. Econews quotes Modernization Department head Imre Forgacs saying the pillars for future development depend on Hungary's intellectual resources, its agriculture and its position as a transit country. In the medium-term, the Finance Ministry announced a three-year economic program seeking to stimulate GDP growth to 4.2% by 1998, to reduce state debt servicing from the current 8.7% of GDP to 4.4% by '98 and bring down the current account deficit from 1994's $3.9 billion to $1.5 billion by '98. The dollar-forint exchange rate, predicted at HUF 125.2 on average for this year, should be HUF 179 to the dollar in '98, while annual consumer price inflation should fall from 28% to 15.5% in the same period, according to Econew's account of the report. The next year holds further belt-tightening, according to guidelines for the 1996 budget bill. The preliminary report proposes 15% reduction in academic employees, a raising of social security contributions by employees from 10% to 12% of gross wages (against a lowering for companies' contributions for workers, from 44% to 40%), and a raising of the retirement age for women from 55 to 60. The women's chapter of the National Federation of Hungarian Trade Unions (MSZOSZ) said nationwide strikes will ensue if the government indeed carries out the retirement age hike. ----------- SHORT TAKES 16,000 HEALTH WORKERS FACE LAYOFFS due to state budget cuts, including more than half of the country's 3,700 publicly financed dentists. AGRICULTURE EXPORTS MORE THAN DOUBLED IMPORTS IN 1994, $2.3 billion to $1.1 billion, according to the Agricultural Supervision Office. MATAV IS TO BORROW $300 MILLION. The board of state telecommunications company authorized its minority US partner Ameritech to arrange the financing. The European Bank for Reconstruction and Development (EBRD) already agreed to chip in $100 million of the loan. Meanwhile, Matav is doing all in its power to steal away IBM Hungary's general manager Elek Straub to take up the same position at the telephone company. Magyar Hirlap quotes the annual salary on offer as HUF 66 million ($53,600). ZWACK UNICUM, Hungary's distinctive herbal bitter liqueur maker, saw a HUF 522 million ($4.2 m) profit last year, paying a 15% dividend to shareholders. THE BSE IS INVESTIGATING CALLS OF INSIDER TRADING against pharmaceutical giant Richter Gedeon, according to the Budapest Business Journal. The Budapest Stock Exchange (BSE) has heard claims that 1st quarter 1995 profit reports were released to selected traders before to the exchange itself, as required. THE SPA WILL SELL THE FORUM HOTEL separately from the rest of the properties of the HungarHotels chain, against the wishes of the chain's management. The city-center Forum accounts for some 40% of the chain's profits. This will mark the fourth attempt in five years to sell the chain, notably following last December's aborted sale to American General Hospitality when Prime Minister Horn personally intervened to object to the $57.5 million offered as being too low. THE DUNA ELEKTRONIKA COMPUTER COMPANY HAS BEEN LIQUIDATED at the behest of the minority shareholding partner, the US government-backed Hungarian-American Enterprise Fund (HAEF). The distribution company's failure follows similar collapses of high-tech dealerships Kontrax, Controll and Microsystem (the latter also a HAEF investment). Duna's majority owner Peter Freed blamed the aggregate 23% devaluation of the forint since last August and a general decline in the local computer market. (Dear Reader, I must admit it is with no small amount of personal pleasure that I report this item, since I acquired a deep dislike for Peter Freed after he effectively stole the ownership of Budapest Week from myself and my fellow founding partners -- at least in our common opinion...but that's another story. :) ---------------- NUMBERS CRUNCHED * Latest political approval ratings respectively for President Arpad Goncz (ranked number one, as usual), Prime Minister Gyula Horn and Finance Minister Lajos Bokros (Sonda Ipsos): 77%; 44%; 29% * Price per liter (0.2 US gallon) of 95-octane unleaded gasoline (Hungarian Oil Co., MOL): HUF 96.6 ($0.78) * Price rise in the last year of potatoes (Magyar Hirlap): 160% * Fall in real wages in the last year (Economic Research Institute, GKI): 7-8% ------------- EXCHANGE RATE June 1, 1995 (National Bank of Hungary): US dollar - 124.10 (buying), 126.52 (selling) Deutschemark - 87.57 (buying), 89.35 (selling) -------------- WACKY AS USUAL Lo siento, mi amigo, es la verdad Independent Smallholder MP Ferenc Morvai challenged Finance Minister Lajos Bokros' integrity in Parliament on Tuesday, suggesting that the economist had faked a point on his resume where he claimed to have spent an academic year during the late '70s at a university in Panama. Bokros rejected the accusation as ridiculous, emphasizing his point by answering the question in "flawless" Spanish, according Hungary Around the Clock. ---- OOPS We very much regret having misspelled film director Peter Bacso's name throughout the feature story last week about his film "The Witness." Also, due to a copy editing oversight, a word was missing, where a sentence should have read as follows: The "Magyar Narancs"...derived its *name* from a hilarious scene in "The Witness." Thanks to Tom Sulyok of Los Angeles for pointing out those errors. ============= FEATURE STORY (Long) It's a Svab's life: German traditions revive By John Nadler Copyright (c) 1995 On a spring evening outside the Herold Pension in the Hungarian village of Dunabogdany, Marton Herold, the inn's apron-clad and barrel-chested 63-year-old master, fuels an outdoor stove. Herold is Hungarian born. Around him are guests from across Germany. They sip white wine squeezed from Herold's nearby vineyard, gossip, and await the oven-baked bread that has become a Saturday-evening fixture at the pension. The fresh bread and the pension -- built in the 1980s -- are new traditions. But scores of other habits that Herold performs daily, such as the rare German dialect he speaks, represent a way of life in Hungary that dates back centuries, and until recently was thought to be almost extinct. Herold and his family are 'Svab,' the name of Hungary's indigenous ethnic German population consisting of about 200,000 to 250,000 people nation-wide. The family's home of Dunabogdany, situated north of Budapest along the Danube, was a thriving Svab community before WWII. After the war, speaking German on its streets became as verboten as the swastika. Thousands of Svabs were deported. The ones who remained hid and repressed their Germanness. Forty years later with communism dead, Svab culture, fanned by families like the Herolds, is rekindling in Dunabogdany and communities like it across Hungary, and signs of a German revival are everywhere. This year the 'Pesten Lloyd', an eastern European German-language newspaper first founded in Hungary in 1854, resumed publication after a four-decade hiatus. A year ago, the German Chamber of Commerce in Hungary was established. An estimated 20,000 German citizens are estimated to live in Hungary, attending to businesses here. Some 2,000 students study here. Most importantly, economic and political reform in Hungary has re-affirmed Germany as a major -- if not Hungary's most important -- trading partner. Throughout Hungary, Svabs are employing industry and entrepreneurship -- traits that helped them excel in the past -- to profit from re-newed business links with their German ancestors. At the 17-room Herold Pension, 95 percent of the summer clientele is German. German tourists stumbled upon the pension in the 1980s. Impressed by the Herolds' hospitality and their outgoing German-speaking neighbors, these tourists returned home and told friends of this German island abroad. Each year, the Herold's business grew. As did others. Over half of the diners who frequent Dunabogdany's Forgo restaurant in the summer are German and Austrian travelers. Germans "drive our business," said owner Lajos Jakob, a Hungarian married to a Svab. In return, Jakob's establishment caters to German tastes. In its dishes, and its night-time entertainment which regularly features an oom-pa-pa band from the densely Svabian village of Pillisvorosvar that produces polkas so pristine you might confuse the Danube for the Rhine. Or could you? A Schnapps may compel one to contemplate the Germanness of Dunabogdany when the Forgo's orchestra is blasting at its best. But this is an illusion. Swabian culture is distinct. Hungarian Svabs speak of the narrow but deep divide in temperament that separates them from their cousins in Germany. The Svabs who settled in Hungary were indeed German. But most were not real 'Schwaben.' This region in south-west Bavaria was the origin of some of central Europe's earliest German settlers, and the presumed reason why the ethnicity bears this name. But only a small percentage of the Germans who came to Hungary hailed from Schwabia. Saxons went to Transylvania. But the Germans who settled in present day Hungary came from Bavaria, Hesse, and Alsace. In the late 17th Century, some arrived to escape the poverty and ruin brought by the Thirty Years' War. Others came later at the behest of the nervous Hapsburgs to "calm the Hungarian rebellion here," explained Karoly Manherz, a German specialist and faculty member at Budapest's ELTE university. They settled in the northern Balaton, the southern Barany province, and along the Austrian border. Many Svab communities were part of Budapest and its environs. Local districts such as Budaors, O'buda and Budakeszi were once German villages. A hill in the Buda mountains still bears the name Svab Hill. These settlers were farmers. Peasants. Devote Roman Catholics (although a minority are Protestants), they brought with them basic German values -- diligence, a stoic work ethic, thriftiness. This contrasted with the "Mediterranean" and passionate temperament of the native Magyars. And German discipline brought rewards. Adhering to an ethic that Marton Herold still repeats -- "Land is always bought, never sold" -- many Hungarian Germans became prosperous property owners. In the late 19th industry, others went into industry and excelled. Differences in language and outlook prompted Svabs and Hungarians to live apart, just as Slovaks and Gypsies often resided in their own communities. But a subtle fusion still occurred that brought out the best in both cultures, say observers. Although such an idea may be heresy to some, the modern Hungarian mentality is, in the opinion of former-journalist Bela Kuzmann, a long-time Dunabogdany resident, a hybrid of the best talents of this nation's three most influential ethnicities -- Jews, Magyars, and Germans. As for the latter two, the Germans supposedly taught the Magyars a work ethic and sense of discipline. The Hungarians imparted their passion and zest for life. "This symbiosis -- the crossing of these two cultures was very beneficial for Hungary," said Pesten Lloyd's deputy editor Andras Heltai. According to some, the Svabs got the better of the bargain. "The Svabs needed the Hungarians," explained Kuzmann. "They needed this [passionate] mentality." It fostered ingenuity and creativity. Added Kuzmann: "The Svab Germans are much more talented than the original Germans." Disputable, of course. Safer to say that Hungary's Svabs know how to have fun. "Svabs are more jolly than Germans," said Kuzmann. "I think a real Hungarian-born Svab cannot live in Germany. For a Svab, living like a German in Germany is like eating food without salt." WWII caused hundred of thousands of Svabs to test this axiom. By the 1930s, as many as 1 million ethnic Germans may have resided within lesser Hungary, said ELTE's professor Manherz. But war, Nazi atrocities, and vengeance destroyed the "homogenous German culture" that had bloomed here until 1939. Partly by edict of the victorious Allied Powers, ethnic Germans throughout central and eastern Europe were repatriated to West Germany (and later East Germany) beginning in 1946. During this period, about half of Hungary's Svab population was uprooted and deported. "This was a serious blow to the German minority," said Hungarian journalist Michael Mueller. Just as serious was the suppression of German culture that followed. During the hard-line 1950s, speaking German on the street often brought derision from passers by, or official punishment. Scores of Svabs wary of prejudice Hungarianized their names. (The original name of Pesten Lloyd's deputy editor Heltai was Hopp.) Parents refused to teach their children the Svab dialect, and a process of assimilation began that is only now slowing. Today in post-communist Hungary, economic rewards -- namely, doing business deals with Germans -- are encouraging Svabs like the Herolds to re-embrace their legacy. The Svabs are also receiving official help. The German government is financially supporting German schools, language programs, cultural exchanges, and so on. "In the cultural scene you can observe a certain Svab revival in recent years," said MTI's Mueller. "The question is: Will it be enough to maintain the minority here? Maintaining the language is the main factor. And I don't see enough development. "Germans here lived in villages. They were closed communities. Today these communities have opened up. There are more and more mixed marriages." According to Mueller, more and more Svabs will abandon their language -- an archaic form of German similar to the dialect spoken near Munich and Ulm -- because it has no value in the broader world. Can Hungary's German culture then thrive even if the original dialect does not? According to Kuzmann, what is most important to Hungary is retaining the best qualities of 'Germanness' that reside in the Magyar national character -- traits partly responsible for some of this country's greatest successes in the 19th and early 20th Centuries. Said Kuzmann: "It is not just a matter of people it is a matter of mentality. To be a Hungarian, a German, or a Jew can be a matter of attitude. Even if the language is lost, the German mentality lingers." ================ PARLIAMENT WATCH Bokros on balance: could be unsung hero yet By Tibor Vidos Copyright (c) 1995 It has been three months since Finance Minister Lajos Bokros took office. What has he achieved? What are the strengths and weaknesses of his first 90 days? Bokros' main achievement so far has been persuading Prime Minister Gyula Horn to abandon his hopes of an easy solution to the country's macroeconomic crisis. Horn, who, during the 1994 election campaign outlined how the Socialists would improve the living standards of everyone -- and restructure public spending at the same time -- seems to have realized that without unpopular budget cuts in 1995 he may be left with no budget to cut over the following years. The austerity measures Parliament accepted in the last two weeks were the first steps in the direction of dismantling a budget structure inherited from the communist era. Bokros fought hard for these changes and succeeded to secure enough support for the austerity package to pass in Parliament without major concessions to trade unions and other pressure groups represented in the caucus of Bokros' socialist party. The only issue in which he was clearly defeated, by union federation chief and MP Sandor Nagy, was on the introduction of social security contributions to be paid on catering or food vouchers provided by employers. With massive socialist support, Parliament approved Nagy's amendment to scrap the social security raise, thus trimming about Ft 4 billion from Bokros' planned increase in budget income. Another amendment aimed at eliminating Bokros' other unpopular suggestion, the introduction of social security payments on intellectual and copyrighted activity, was only narrowly defeated. His weaknesses? His main weakness is that as a former president and CEO of Budapest Bank -- a successful (by local standards) commercial bank managed by Bokros for the four years before his appointment to his current job -- he made statements or was involved in deals that contradict his current position. One good example of this was a secret Ft 12 billion government subsidy to Budapest Bank to improve its balance sheet before an expected privatization deal and statements later by Minister Bokros about the need for an immediate halt to "bank consolidation." His drive to separate the two positions of president and CEO of the National Savings Bank (OTP) seems also to conflict with his past behavior, too. Bokros himself held the same positions at Budapest Bank. Now, Minister Bokros claims the two jobs should be separated in order to give greater control over the state-owned banks to the owner, who is, in this case, himself as finance minister. The HUF 16 million of severance payment Mr. Bokros, lawfully pocketed when switching from Budapest Bank to the Ministry of Finance, is not going to increase his popularity either. Being the least popular minister in the cabinet already he will at least not have to worry for someone wanting his job. The overall balance is still positive. What Bokros ought to learn for the future is that words may haunt for a long period of time. Or they may not. That's politics. * * * 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. =========== PLEASE NOTE Some readers may have noticed a discrepancy between the originally publicized publication date of Sunday for the Hungary Report and the time at which it actually ends up appearing in your email box on average. Right. Well, real soon now I plan to change all of those publicly posted messages to say something along the lines of, "The Hungary Report is published weekly on Sundays...or there abouts." As a professional freelance journalist, I've never specialized in deadlines, particularly not self-imposed ones. More to the point, as long as the Hungary Report continues to be a non-paying labor of love, I've decided to love it at my own pace, which should occur somewhere in the near vicinity of Sundays, but no firm promises. Also, like most mailing list owners, I'm becoming acquainted with the joy of subscription errors. Every week I get about 20 messages regarding delivery problems for various email addresses. Hence forth, I'm going to do what most list owners do and delete problem accounts from the subscription list. If you notice your subscription disappearing, please write me at my personal address to inquire about the problem (but not before Tuesday or so, as I might just not have gotten around to writing the thing yet. :) --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 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