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  ========================
  The Hungary Report

  Direct from Budapest, every week

  Also available on the World Wide Web
  (http://www.isys.hu/hrep/)

  No. 1.28, November 20, 1995
  ========================


  SPONSORED BY: iSYS Kft., providing full Internet solutions for
  companies and individuals in Hungary. For further information, send
  e-mail to <info@isys.hu>, view our World Wide Web home page
  (http://www.isys.hu) or call (+36-1) 266-6090.


  ========
  CONTENTS

      BRIEFS

      Slovak parliament passes controversial language law
      Thousands of teachers demonstrate for pay rise
      France supports Hungary's EU membership
      New customs law irks foreign investors
      Hungarian version of Windows '95 debuts
      Black market's costs measured
      ECU 425 million planned until 1999
      Smallholders unveil economic plan
      Bridge-climbing craze halts city traffic


      NUMBERS CRUNCHED

      Joint ventures in Hungary
      State assets under foreign ownership
      Ten-month privatization revenues
      Illegal border crossings
      Hungarians addicted to nicotine compared to Westerners


      FEATURE STORY

      FBI school teaches new tricks to old enemies


      PARLIAMENT WATCH

      Agreement with labor waged before privatization


      MAGYAR NET WATCH
      Sorry, no Magyar Net Watch this week!


  The Hungary Report is also supported in part by:

  MTI-Econews, a daily English-language financial news service. For
  on-line (fee-based) subscription information, contact the Internet
  address: <madarasz@mti-eco.hu>. (It's not automated -- write a nice
  note.)


  ======
  BRIEFS

  By Kriszta Fenyo and Jennifer C. Brown
  Copyright (c) 1995

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

  Slovak parliament passes controversial language law

  After a debate that lasted well into the night, the Slovak parliament
  passed the Slovak language law last Wednesday. The Hungarian
  government issued a statement expressing its regret and concern over
  the law and plans to take the matter to various European
  organisations. Hungarian prime minister Gyula Horn warned his Slovak
  counterpart in a letter on the eve of the vote, that the law would
  "create tensions in bilateral relations." In reaction to the law,
  Hungarian opposition parties have urged the recall of the Hungarian
  ambassador from Bratislava.

  The controversial law regulates the use of the Slovak language as
  the official state language and does not deal with the usage of the
  minority languages, such as Hungarian. According to the draft text
  published in Nepszabadsag a few weeks earlier, the Slovak language is
  obligatory and minority languages would be dealt with in a separate
  law. However, the Hungarian minority in Slovakia fears that in the
  absence of such a separate law, the use of minority languages would,
  in effect, be rooted out. Hungarian parties in Slovakia say that the
  law in its present form prohibits minority languages from being used
  in public administration and public life to such an extent that even
  marriages of Hungarian couples would have to take place in Slovak.

  The Hungarian government issued a statement on Thursday, saying that
  it received the news of the new law "with sorrow" because it
  "seriously limits the rights of language use of the 600,000 ethnic
  Hungarians in Slovakia," Magyar Hirlap quoted the text. The statement
  also said that the new law breaches the Hungarian-Slovak basic
  treaty, and several international documents such as the European
  Human Rights Agreement and the European Council's Minority Rights
  Framework Agreement. Hungary will take the issue to the European
  Union, the European Council, NATO members countries and other
  organisations, Foreign Minister Laszlo Kovacs announced at a special
  press conference last Thursday. The Slovak government has denied all
  charges, saying that they were one-sided. A European Council
  delegation is to visit Slovakia next week.
  -KF

  Thousands of teachers demonstrate for pay rise

  Some 70,000 teachers, lecturers and library staff took part in a
  demonstration last week, according to press reports. Television
  pictures showed a fully crowded Kossuth square in front of
  parliament. Fourteen trade unions also joined the demonstration.
  In a petition handed over to the Speaker of Parliament, the
  demonstrators demanded a 25% pay rise, an increase of funding of
  cultural institutions and security of employment.  Speakers at the
  demonstration criticised the government for spending too little on
  cultural institutions, for, what they called, "launching a frontal
  and brutal attack on culture." The biggest teachers' trade union
  speaker was quoted saying that a country whose government saved money
  on education "had no future." The demonstrators also called for the
  resignation of Gabor Fodor, minister of Education and Culture.
  -KF

  ---------------------
  BUSINESS & ECONOMICS

  New customs law irks foreign investors

  Western businesses in Hungary have long been able to import capital
  goods into Hungary duty free, but following Parliament's recent
  approval to change an amendment to customs legislation, foreign
  companies will begin paying customs duty on imported machinery and
  other capital goods starting Jan. 1, 1996. The new provision is
  designed to protect capital goods-producing companies in Hungary. In
  response, foreign investors have been outright critical of the
  customs amendment, fearing that more capital output required to set
  up shop in Hungary will decrease competitiveness.

  In-kind contributions have made up about 15% of investments in
  Hungary since 1990. The Budapest Sun reports that the new provision
  could cause foreign investors to overlook Hungary for other countries
  such as Romania, where duty-free status for such items is still in
  effect. According to the Budapest Business Journal, government
  officials are defending the new customs law, saying that the
  favorable tax treatment has long been abused by foreign companies.
  However, the government has not demonstrated that it has suffered
  losses due to favorable tax treatment.
  -JCB

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

  FRANCE SUPPORTS HUNGARY'S EU MEMBERSHIP,  French European Affairs
  Minister Michel Barnier assured Hungarian Foreign minister Laszlo
  Kovacs last week in Budapest. Barnier's visit was a part of his trip
  through Central and Eastern Europe to "get to know" each country's
  plans for joining the European Union, Magyar Hirlap reported.  In his
  outline of Hungary's plans on integration, Kovacs told the French
  Euro-minister that Hungary would like to start talks in early 1998,
  after the next EU intergovernmental conference, and hoped to become a
  full member by 2000. Barnier told Kovacs that Paris thought the
  chance for talks starting in 1998 was " very realistic." However, he
  did not venture any prediction as to when Hungary could eventually
  become a full member.
  -KF

  THE SMALLHOLDERS PARTY RELEASED ITS ECONOMIC PLATFORM  last week. The
  260-page document, among other things, calls for more state
  involvement in promoting exports, including export subsidies.
  Smallholders also support a decrease in personal income tax and
  propose a family taxation plan to encourage women to become
  stay-at-home moms. The Smallholders and the ruling Socialists are
  running neck in neck in the popularity polls, both with ratings
  of 25%.
  -JCB

  A RECENT PRODUCTIVITY STUDY REVEALED THAT THE OUTPUT of Western
  companies operating in Hungary falls short of their parent companies
  by 57%. The management consulting company that conducted the study,
  the Austrian Czipin & Partners, calculated output on a hourly bases
  without accounting for differences in labor costs between Hungary and
  the West. As a result, experts are calling the study "misleading",
  reports the Budapest Business Journal. Labor costs are about a fourth
  as much in Hungary than in Western European countries.
  -JCB

  PRIME MINISTER GYULA HORN IS GIVING MINISTRY HEADS and other
  organizations a year to come up with solutions to the black market
  problem, reports Nepszabadsag. The motion follows an assessment of
  damages caused by the black market.In one example, 440 cases of oil
  tampering in the past three years have cost the government HUF 15
  billion (US$ 119 million)in unpaid taxes, according to the Prime
  Minister's Office. Some 100 companies have been investigated for
  illegal banking transactions costing 3,000 people HUF 13 billion
  (US$ 970 million) Some 160,000 investigations by the Tax Office
  have discovered unpaid taxes to the tune of HUF 35 billion
  (US$ 261 million).
  -JCB

  HUNGARY WILL RECEIVE ECU 425 MILLION ($554.4 MILLION) from the Phare
  aid program until the year 1999 in preparation for integration into
  the European Union. The agreement for the funding was signed Friday
  by Foreign Ministry state secretary Istvan Szent-Ivanyi, state
  secretary of the Ministry of Industry and Trade Karoly Attila Soos,
  the Foreign Ministry's state secretary and Hans Beck, head of
  Hungary's EU office. The aid is designated to support economic
  growth. Funding has been allotted for infrastructural investments,
  environmental protection, energy sector development, agriculture,
  regional development, privatization and education.
  -JCB

  THE HUNGARIAN VERSION OF MICROSOFT WINDOWS '95 MADE ITS DEBUT last
  week, three months after the release of the much hyped software.
  Microsoft's Hungarian subsidiary launched a heavy promotion campaign,
  offering the software for HUF 20,000 ($146), about two-thirds of the
  retail price. Despite reported glitches in the software, the Budapest
  Sun reports that the local language version is preferred four to one
  over the English-language version.
  -JCB


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

  *  Number of joint ventures operating in Hungary
     (Nepszabadsag):  25,000

  *  State assets transferred to foreign ownership
     (Nepszabadsag):  15% to 20%

  *  Revenues from privatization in the first 10 months of the
     year (APV Rt's Information and Property Directorate):
     HUF 58.8 billion (US$ 438.8 million)

  *  Instances of illegal border crossings in the first 10 months
     of 1995, down 7% from the same time last year (Magyar
     Hirlap):  20,000

  *  Percentage of Hungarian men over the age of 15 addicted
     to nicotine compared to between 24% and 34% in Western
     countries (Szonda Ipsos): 45%

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

  Monday, November 20, 1995 (National Bank of Hungary)

  US dollar -134.10 (buying),137.(selling)
  Deutschemark - 95.46(buying), 96.3 (selling)

  ---------------
  WACKY AS USUAL

  Bridge-climbing craze halts city traffic

  Traffic in central Budapest came to a hysteric halt for several hours
  last Thursday and Friday afternoon. No, it wasn't just the usual
  rush-hour or the first drops of rain. The complete halt around the
  city was due to the latest wave of bridge-climbing. On Thursday
  afternoon, a middle-age man holding his little daughter climbed up to
  the top of Szabadsag bridge and threatened to throw his daughter in
  the Danube unless he could talk to the Budapest police chief. After
  two hours, police and firearms officers managed to get the man on the
  ground, and the police chief, who had meanwhile arrived on the scene,
  also promised that he would talk to him. According to press reports,
  it was not clear what exactly the man wanted from the police chief.

  Friday afternoon, it was the next bridge up that attracted a
  bridge-climber. This time, the man was a "regular". The 41 year old
  father of four had already climbed the Szabadsag bridge seven
  times,usually to protest against high prices and unemployment. This
  time it was against the high interest rates on a loan he took out
  from his workplace. After some time spent walking on top of the
  bridge, he eventually agreed to climb down.
  -KF

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

  FBI school teaches new tricks to old enemies

  By Susan Milligan
  Copyright (c) 1995

  In matching navy blue polo shirts, the students sat transfixed as
  they watched slides showing the destruction of the Oklahoma City and
  World Trade Center bombings.

  "God forbid you should ever have anything like this happen over
  here," American instructor Ed Burwitz told his Central European
  class, outfitted with headphones for simultaneous translation of the
  lecture. "It is a tough task for any
  freedom-loving country to prevent terrorism," he added.

  The class on forensics is typical of what goes on in law enforcement
  academies across America. But in this classroom, the instructors are
  teaching crime-fighting tactics to students from onetime enemy
  nations.

  "This could not have happened five years ago," said Laszlo Simon, the
  Hungarian director of the International Law Enforcement Academy here.
  "We don't preach or teach," said Leslie Kaciban, the American
  director of the newly-opened facility. Instead, the American
  instructors - culled from the FBI and other law enforcement agencies
  - share information and experiences with the students for them to
  adapt to their systems.

  Students from Hungary, Russia, Poland, the Czech Republic and other
  Central and Eastern European nations attend ILEA's 8-week sessions,
  the first of which began in April.

  The United States fronted $2.5 million to renovate the campus, which
  includes a brand-new gym, classrooms, dormitories and one of
  Hungary's few indoor tennis courts. The Hungarian government
  contributed $500,000 to renovate the facility,
  but the U.S. will pay the $3.5 million yearly cost to operate the
  center, which is modeled after the law enforcement training center in
  Quantico, Va.

  The facility looks like any other college campus - students go on
  field trips together, take "wellness" physical fitness class
  together, and will have a yearbook and alumni newsletter.
  The idea is to help the Eastern Europeans with their burgeoning
  crimes problems, as well as to foster cooperation on international
  crime problems.

  "I'm amazed at the freedom of travel that is possible" after the
  opening up of the Eastern nations, Burwitz said. But "that means
  criminals can travel as well," he said, allowing them to traffic
  drugs and contraband. "The more interaction we have with these
  countries in law enforcement, the better it will be for emerging
  democracies," Kaciban said.

  Class topics range from "human dignity" - how to treat a crime
  suspect - to undercover operations and fraud. April's bombing of the
  federal building in Oklahoma City is being used as an example in
  several classes.

  In "crisis management," students will learn "how to contain it (a
  crisis) and keep it from erupting," said instructor Stephen Brooks,
  who helped handle the Oklahoma City bombing. Big-scale bombings are
  not common to this part of the world, students said. But they said
  they learned a lot about how to fight organized crime, which is
  mushrooming in the aftermath of the fall of communism. "They told
  they have a lot of problems (with organized crime), and that it's
  better if we learn from their mistakes," said Hungarian student
  Vilmos Szeplaki.

  Organized crime is doubly damaging to the emerging nations, because
  it undermines their economies, Kaciban said. Investors are naturally
  reluctant to dump money into a nation if they believe there is
  rampant corruption. Some teachings do not translate for the European
  students. For example, there is no Russian RICO - the Racketeer
  Influenced and Corrupt Organizations Act that is one of the strongest
  American legal tools against organized crime.

  Eastern European crime syndicates tend not to be based in crime
  families, instructors said. And organized crime in Russia and Ukraine
  is so much a part of the society, that it's hard to stop it, said Amy
  O'Neil, a State Department official not involved in the ILEA. "Under
  the communist system, you basically did what you could get away with.
  Everyone broke laws," O'Neil said. "That's how you survived."

  Both students and teachers said there was a remarkable similarity,
  however, in the use of evidence and investigatory tools among the
  countries. Eastern Europeans are very familiar with the use of DNA
  testing, for example, to identify suspects, although they don't
  always have the money to do it, Burwitzsaid."There are different
  orders of laws between the U.S. and here," said a Czech student who
  would identify himself only as Milan. "But essentially, we have the
  same methods of investigation."

                                                * * *
  Susan Milligan <susan.milligan@magnet.hu> is a free-lance writer and
  stringer for the Boston Globe, the San Francisco Examiner, Business
  Central Europe and Hollywood Reporter.


  ===============
  PARLIAMENT WATCH

  Agreement with labor waged before privatization

  By Tibor Vidos
  Copyright (c) 1995

  The government  has approved the draft agreement between the social
  partners about 1996 incomes and taxation. Moreover, the government
  made commitments that real income will not decrease in 1997 and 1998.
  The social- economic agreement promised by the government for
  October, well ... um...1995 is thus finally shaping up.

  As a consequence of the 11% drop in real income, not only
  railway unions but basically all professions of the state sector took
  or threatened to take labor action this year. The hope is that once
  the major labor federations accept the recent agreement, social peace
   and stability will return to the streets and workplaces.

  Experts say that cutting real income in 1996 by only 2%, as
  opposed to 4% initially suggested by the Finance Minister, will not
  endanger the economic stabilization program. As the prime minister
  and Ministry of Finance officials said, "It will only slow down
  stabilization."

  How much slowing can be endured and where the billions will come from
  to compensate for the wage increases is another question. Finance
  Minister Lajos Bokros would like to raid the social security and
  pension funds; other experts say that keeping inflation below the
  1996 forecasts will free up funds for that purpose.

  One of the toughest and bravest measures introduced as part of the
  March austerity package was the limitation of wage increases in
  state-owned industry to 8% for 1995 in loss-making companies, and 15%
  in the profitable ones. In previous years state owned companies
  always achieved wage increases equal or above the level of those in
  the
  private economy irrespective of their level of profitability, thus
  further increasing the budget deficit. In the current agreement, the
  government has promised that after 1996 no such wage control will be
  implemented.

  Since many major state-owned companies are planned to be partially
  privatized by next year, the government seems to hope that the new
  owners, mainly big international companies, will have more stamina to
  withstand unjustified wage demands.

  There is a major problem with this speculation: Until now none of the
  major privatization projects have succeeded. The privatization of
  Antenna Hungaria, the national broadcasting company, fell through
  just recently because of an unrealistic and rigid tender procedure.
  There is no guarantee that the gas and electricity privatization will
  be conducted in a more professional and fruitful manner.

  If the state owned economy and the public sector will not be
  significantly downsized over the next years, the current agreement
  will be an important though well-intended episode in Hungary's
  decline. If privatization and rationalization of public spending goes
  ahead as planned, the agreement will be an important milestone in
  Hungary's development.

                                                * * *
  Tibor Vidos is a lobbyist and political consultant in charge of the
  Budapest office of GJW Government Relations. <vidos@ind.eunet.hu> or
  <CompuServe: 76702,2227> 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
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  Conversely, to stop receiving Hungary Report, simply send to the same
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  Please note: all mailing lists 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 inquire
  directly to Steven Carlson <steve@isys.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.isys.hu/hrep/

  and via FTP
       ftp://ftp.isys.hu/pub/hrep/


                                                * * *

  ABOUT THE CO-EDITORS

  Angels' Land, Budapest native Kriszta Fenyo <fenyo@isys.hu> is a
  researcher for the BBC World Service and BBC Television, (also
  fledgling freelance TV producer for Reuters). She is also completing
  her PhD in 19th century Scottish history. She has lived in Hungary on
  and off since birth.

  Whitefish, Montana native Jennifer C. Brown <jbrown@isys.hu> reported
  for the Budapest Business Journal for a year before joining the
  Hungary Report. She also works as a freelance journalist for regional
  and international business and foreign affairs publications. She has
  lived in Hungary on and off since 1991.

                                                * * *

  The entire contents of The Hungary Report are 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
  directly by email to inquire about resale rights.

  * * *

  For information on becoming a corporate sponsor of The Hungary
  Report, contact Steve Carlson by email.

  Feedback is welcome.

  Rick E. Bruner, Creator <74774.2442@compuserve.com>
  Steven Carlson, Publisher <steve@isys.hu>
  Jennifer C. Brown, Co-editor <jbrown@isys.hu>
  Kriszta Fenyo, Co-editor <fenyo@isys.hu>
  Tibor Vidos, Parliament Watch <vidos@ind.eunet.hu>
  Attila Beno, Magyar Net Watch <attila@isys.hu>

                                                * * *

  For its briefs, The Hungary Report regularly consults the news
  sources listed below -- for information about subscriptions, contact
  them by email: The Budapest Business Journal
  <100263.213@compuserve.com> &
  <http://www.eps.hu/bbj.html>
  Budapest Sun <100275.456@compuserve.com>
  Budapest Week <100324.141@compuserve.com>
  Central Europe Today (free online) <cet-info@eunet.cz>, as well as
  most Hungarian-language media (e-mail addresses to come).

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









