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From: bruner@ind.eunet.hu (Rick Bruner)
Subject: Hungary Report 1.13
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  ========================
  The Hungary Report

  Direct from Budapest, every week

  No. 1.13, June 26, 1995
  ========================


  The Hungary Report is supported in part by:

  MTI-Econews, a daily English-language financial news service. For
  online (fee-based) subscription information, contact
  <madarasz@mti-eco.hu> (not automated -- write a nice note).


  ========
  CONTENTS

    BRIEFS

    Goncz re-elected president by one vote
    Trade and Industry Minster Pal fired
    British power company buys Csepel electric works
    Devaluation rate lowered
    Bokros to donate golden parachute to charity
    Fifth anniversary of stock exchange
    Agriculture to see $1.5 billion surplus
    Pal meets with Heseltine
    DM 80 million invested in aluminum works
    IMF to declare forint convertible

    NUMBERS CRUNCHED

    Matav losses for first five months, 1995
    Number of state bonds issued / subscribed
    Projected current account deficit
    Projected consumer price inflation / real wage drop

    FEATURE STORY

    Film industry in crisis facing cutbacks


  ======
  BRIEFS
  Copyright (c) 1995, Sarah Roe


  --------------
  GENERAL NEWS

  Goncz re-elected president by one vote

  Arpad Goncz has been re-elected by MPs as President of the Republic
  of Hungary, last Monday. The result was not surprising since Goncz
  was the joint candidate of coalition partners, the Socialists and the
  Free Democrats, who hold 72 per cent of parliamentary seats. He
  received one vote more than the two thirds (258) minimum required and
  will hold the position for another five year term. There was one
  other candidate, Ferenc Madl who attracted 76 votes.

  The incumbent president consistently ranks in the top position in
  nation-wide popularity polls, born from his status as a freedom
  fighter in the 1956 revolution (who served a six-year prison term for
  his role in the uprising) and an acclaimed writer. Madl called his
  challenge to Goncz a necessary and important affirmation of the
  multi-party democratic system in Hungary. Madl is a former teacher
  who, under the previous administration of the Magyar Democratic Forum
  (MDF) party, helped draft educational reform legislation, and
  negotiate the Nagymaros Dam project. Educated as a lawyer, Goncz is
  best known for his literary achievements such as his translations of
  Hemingway and Faulkner into Hungarian. After being elected President
  in 1990, Goncz labored to safeguard media freedom in Hungary,
  especially vis-a-vis the integrity of the nation's influential
  two-channel public TV network Magyar Televizio (MTV). Goncz used his
  Presidential veto powers to obstruct attempts by the previous
  government to place party functionaries within executive positions at
  the network -- work that drew fierce political criticism and praise
  from international free press groups. Goncz took the oath of office
  Monday, and pledged in a speech his determination to continue to
  protect human rights.

  Although there had been considerable debate over the indirect method
  of electing Hungary's president, led by Jozsef Torgyan of the
  Independent Smallholders' Party (FKGP), Goncz is widely regarded as a
  suitable candidate for the position. A poll conducted by Telemedia
  indicated that 57 per cent of the public wanted him to be re-elected,
  whilst only ten per cent wanted Madl to be elected. During the
  session prior to the vote, Independent Smallholder MPs walked out in
  protest of the indirect method of voting. The FKGP has been
  attracting growing support over the past year.


  Trade and Industry Minster Pal fired

  Laszlo Pal, the Minister of Trade and Industry, was dismissed by
  Prime Minister Gyula Horn during Thursday's cabinet meeting. Hungary
  Around the Clock cites Magyar Hirlap, which stated that the minister
  was opposed to the concept of selling most electricity companies to
  foreign investors. Other cabinet ministers are reportedly in favor of
  the privatization plan, and Horn is keen to maintain a uniform
  government, according to Elemer Kiss the state secretary to the Prime
  Minister's office. Pal claimed he was not against foreign investors
  but felt that sale of the electricity companies should be second to
  sale of the power plants. The firing takes effect July 15. Horn is
  said to be considering Imre Dunai, currently a state secretary in the
  ministry, to take over the position.


  ------------------------
  BUSINESS AND ECONOMICS

  British power company buys Csepel electric works

  The first privatization in the electricity sector was made last week,
  with British company PowerGen buying Csepel Electricity Works in
  south Budapest. PowerGen is a significant British investor in
  Hungary, and plans to pour up to $250 million into the Csepel plant,
  which was said to have cost around $13 million. It is hoped that the
  move will attract more investors to the electricity sector, one of
  the next "big five" industries to be privatized in the near future,
  including those within the energy, telecoms and media sectors.
  According to Econews, the plant was bought from a consortium of
  companies in Csepel, 80% owned by the State Holding Company (AV Rt)
  and State Property Agency (AVU). The largest of these is Csepeli
  Csogyar, which will now be able to settle its debt of over Ft 1
  billion to the Hungarian Oil and Gas Company (MOL)


  Devaluation rate lowered

  The President of the National Bank (MNB), Gyorgy Suranyi, will reduce
  the monthly devaluation rate of the forint from 1.9% to 1.3%. Suranyi
  commented that MNB's exchange rate policy had proved successful, and
  that the MNB has been buying hard currency on the domestic inter-bank
  hard currency market, which has not been done for several years. He
  said that a high demand for securities of 30-31% interest rate
  indicates economic players expect annual inflation rate will stay
  below 30%.


  Bokros to donate golden parachute to charity

  Finance Minister Lajos Bokros, who was given a controversial HUF 16
  million severance pay upon leaving his previous position as CEO of
  Budapest Bank, will give the sum to charity, according to the prime
  minister. Bokros has received some bad press over the affair, as
  critics point to debt problems at Budapest Bank in addition to the
  Finance Minister's austerity package, which includes substantial
  welfare cuts. Bokros this week estimated that the budget deficit
  would reach 6-6.7% of GDP in 1995, a figure he said would have been
  10% without his March program. Prime Minister Horn said Bokros had
  always wanted to give the money to charity but had simply gone on the
  offensive against politicians and public figures who challenged his
  honesty. Hungary Around the Clock reported that a poll by Szonda
  Ipsos found that out of 500 people, 87% find Bokros' severance pay
  morally unacceptable.

  ------------
  SHORT TAKES

  THIS WEEK MARKS THE FIFTH ANNIVERSARY of the Budapest Stock Exchange.
  It is hoped that privatization of the utilities sector, telecoms and
  media will boost the BSE's mediocre turnover.

  A $1.5 BILLION TRADE SURPLUS IN AGRICULTURE is expected this year,
  from $2.6 billion in export revenues. HUF 108 billion ($878,000) will
  be needed from the budget to reach this figure, a Ministry of
  Agriculture spokesperson said.

  TRADE AND INDUSTRY MINISTER LASZLO PAL, before his sudden dismissal
  Thursday, met his counterpart in the UK, Michael Heseltine, last
  week, to discuss the opportunities presented by Hungarian
  privatization, and the country's integration into the EU.

  A NEW ALUMINUM CASTING FOUNDRY IN GYOR will result from a joint DM 80
  million investment by Adam Opel AG and Bonn-based partner VAW
  Aluminum Works, according to Econews.

  THE IMF IS LIKELY TO DECLARE THE FORINT FREELY CONVERTIBLE for
  current account transactions. The Fund left Budapest this week having
  agreed on all except some technical points.


  -------------------
  NUMBERS CRUNCHED

  * Hungarian Telecommunications Company (Matav) loss in the first four
    months of 1995 (Matav): HUF 9 billion ($72 m)

  * Value of state bonds issued / subscribed in 1995 (Vilaggazdasag):
    HUF 150 billion / HUF 130 billion

  * Projected current account deficit for first six months of 1995
  (Economic Research Institute, GKI Rt.): $2 billion

  * Projected 12-month consumer price inflation / drop in real incomes,
  for 1995 (GKI Rt.): 31-33% / 10%+

  ----------------
  EXCHANGE RATE

  June 23, 1995 (National Bank of Hungary)

  US Dollar (buying) 124.65, (selling) 127.07
  Deutschemark  (buying) 89.20,  (selling) 90.98
  ---------------------


  =============
  FEATURE STORY

  Film industry in crisis facing cutbacks

  By John Nadler
  Copyright (c), 1995

  The recent announcement by the Hungarian Motion Picture Foundation
  (HMPF) of film projects selected to receive government support for
  1995 has left a residue of disappointment within the Magyar cinema,
  and doubt as to whether the industry can survive.

  The HMPF has received public funds to provide partial financing to
  only 18 feature film projects this year. Given that up to three years
  ago Hungarian cinema produced more than 30 feature films annually, as
  much as 50% of the country's film professionals are now unemployed
  and insiders warn that the industry could collapse within the year.

  "We've already received a letter from one film studio [MIT production
  company] that they are unable to operate," admitted Lorant Szanto,
  HMPF Secretary for Information and Economics. "The founders of the
  HMPF met [earlier in the spring], discussed the situation, and
  reported that by autumn the film industry will close down."

  The crisis gripping Hungarian cinema is the result of drastic cuts in
  government support. Reeling from a financial crisis of its own,
  Hungary's socialist-liberal coalition has allocated only HUF 885
  million (US $7 m) to the film sector for 1995. Because of mounting
  budgetary pressures, the HMPF expects lawmakers to reduce this
  support by an additional US $1.5 m before the end of the year.

  The government budgeted HUF 1 billion to the industry in 1993, and
  HUF 665 million in 1994. Figuring in a yearly inflation rate of about
  30% and double-digit currency devaluations in 1995, Hungarian cinema
  -- completely financed by the government in the past -- is now being
  weaned from the mother's milk of state support.

  According to local film makers, Magyar cinema, barely five years into
  the capitalist era, is too young to stand on its own. In order to
  become a viable business, the industry needs to make commercial
  films, analysts point out. But commercial film making requires a
  level of investment the government is not willing to make.

  "Less films are going to be made now in Hungary," said Hungarian-born
  director Gabe von Dettre who divides his time between Budapest and
  New York. "There is no money. Which means they can't make action and
  entertainment films. They're stuck to making art films. This is a
  great blow to the artistic community because the films will become
  less and less acceptable as [quality] art features."

  For the present, the industry is circling its wagons. During the
  foundation's most recent grant give-away last month, established
  directors Ferenc Grunwalsky, Pal Erdoss, Miklos Jansco, Karoly Makk,
  and Sandor Sara, and young filmmakers Janos Szasz, Arpad Sopsits, and
  Attila Janisch received funding -- an apparent strategy to channel
  the industry's scarce resources into the production budgets of
  Hungary's top talents during difficult times.

  There are signs that the times will change. TV and film laws soon to
  reach parliament are expected to contain clauses which will directly
  boost the industry's fortunes. The TV law will likely require
  networks to air a certain percentage of Hungarian-made programming
  each week, and "force [TV] to order Hungarian films," said Szanto.
  The film law is expected to require distribution and exhibition
  companies to remit a small portion of their profits back to the
  industry, and define the percentage of the Ministry of Culture's
  subsidy budget to be allocated annually to cinema.

  The industry is lobbying to have tax laws changed so that movie-
  production investments can be considered tax deductible, and HMPF
  leaders have already slated a meeting with Prime Minister Gyula Horn
  in order to lobby the nation's top policy-maker directly.

  Film-making practices are changing along with the industry's
  financial souring. Hungarian movie makers are becoming increasingly
  skilled at seducing investors, sealing joint-venture deals with
  foreign producers, and securing funds from European agencies such as
  Eurimage, the European Script Fund, and the European Union MEDIA
  Program.

  In 1969 famed Hungarian auteur Peter Bacso produced his classic "The
  Witness" entirely with state funds. In order to complete the sequel
  "Another Witness" last year, Bacso teamed up with German producers,
  and collected funding from a plethora of European sources. What
  lesson did capitalism teach him? "To make a good film, you have to
  make money," answered Bacso. "Success is a very secret thing."

  The industry is rapidly realizing that discovering this secret may
  its only hope for survival.


  ===================
  NO PARLIAMENT WATCH

  Tibor Vidos is traveling this week, so we don't have his column for
  you this week. :(  He will be back online next week.


  =====================================
  VARIOUS EXPLANATIONS, APOLOGIES, ETC.

  I (Rick) have also been traveling a lot recently, and I just returned
  the other day to find all had not gone as smoothly as hoped with the
  Hungary Report last week. My beloved wife Adrienne and colleague John
  kindly agreed to produce the thing in my absence. After various delays
  and technical problems, they had last week's issue, 1.12, ready by
  midweek, but unfortunately Adrienne appears to have made an addressing
  error and after all that work, the issue was never distributed to
  subscribers, which she failed to notice. Oh well. Sorry. This is
  basically my personal volunteer project still and I can't demand
  perfection from other volunteers. Sad part is John did all the work of
  writing the briefs and no one ever saw them. (Lucky part is he rarely
  reads the finished product all the way through, so I doubt he'll see
  this note and will probably never be the wiser -- I'm not about to
  tell him ;)

  If, however, any of you die-hard fans would like to read the unsent,
  out-of-date briefs and Parliament Watch from last week, please send a
  note in the next few days directly to my address <bruner@ind.eunet.hu>
  with a message title "Send H-Report 1.12", and I'll forward you the
  text. It's minus the feature story, which I recycled this week.

  For better or worse, I am about to embark of further travels again next
  week for another two weeks or so, so please bear with us.

  Also, regarding the double messaging problem. I think we have it sorted
  out. The reason you got two copies of a message from Adrienne last week
  explaining the delays is because she accidentally posted it twice.
  Regarding earlier double postings of the full Hungary Report, my
  sys-admin at yak.net ably explained, "mail doubling happens from time
  to time." Shouldn't be a problem again, soon, though. But if it is,
  I'll know it, as I'm a subscriber, too, so please, don't all 700+ of
  you call it to my attention. :)

  --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


  Please note: all mailing list suffer from frequent "error" addresses.
  If we have problems with sending to your address more than one week
  in a row, we will remove you from the list. If you haven't received
  the report for more than one week, feel free to enquire directly to
  Rick Bruner <bruner@ind.eunet.hu> (but please wait for at least a
  week, as we're also just famously late in getting the thing out
  sometimes :)

                                   * * *

  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 by email.

  Feedback is welcome.

  Rick E. Bruner <bruner@ind.eunet.hu>
  John Nadler <jnadler@magnet.hu>
  Tibor Vidos <vidos@ind.eunet.hu> or <CompuServe: 76702,2227>

                                   * * *

  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 making us 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)
  <cet-info@eunet.cz>.

  ================
  END TRANSMISSION


