From hungary-report-owner Mon Dec 11 04:38:10 1995 Received: from localhost (daemon@localhost) (fnord) by nando.yak.net (8.6.5/8.6.5) id EAA00407; Mon, 11 Dec 1995 04:38:10 -0800 Received: from localhost (daemon@localhost) (fnord) by nando.yak.net (8.6.5/8.6.5) id EAA00390; Mon, 11 Dec 1995 04:37:45 -0800 Received: from jbrown@isys.hu () via =-=-=-=-=-= for hungary-report@hungary.yak.net (388) Received: from kingzog.isys.hu (KingZog.iSYS.hu [194.24.160.4]) (fnord) by nando (8.6.5/8.6.5) with ESMTP id EAA00362 for ; Mon, 11 Dec 1995 04:36:01 -0800 Received: from [194.24.161.32] (hrep.dial.isys.hu [194.24.161.32]) by kingzog.isys.hu (8.7.Beta.11/8.7.Beta.11) with SMTP id NAA21724 for ; Mon, 11 Dec 1995 13:35:27 +0100 (MET) Date: Mon, 11 Dec 1995 13:35:27 +0100 (MET) X-Sender: jbrown@mail.isys.hu Message-Id: Mime-Version: 1.0 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable To: hungary-report@hungary.yak.net From: jbrown@isys.hu (Jennifer Brown) Subject: Hungary Report 1.31 Sender: owner-hungary-report@hungary.yak.net Precedence: bulk Reply-To: hungary-report@hungary.yak.net =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D The Hungary Report Direct from Budapest, every week Also available on the World Wide Web (http://www.isys.hu/hrep/) No. 1.31, December 11, 1995 =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SPONSORED BY: iSYS Kft., providing full Internet solutions for companies and individuals in Hungary. For further information, send e-mail to , view our World Wide Web home page (http://www.isys.hu) or call (+36-1) 266-6090. =3D=3D=3D=3D=3D=3D=3D=3D CONTENTS BRIEFS Budapest hosts OSCE conference Stakes in eight electricity companies sold Hungary's IFOR participation brings it closer to NATO First U.S. GI's arrive to Kaposvar Foreign land purchases to become easier Bokros optimistic about IMF visit Oilgate plagues Socialists NUMBERS CRUNCHED 1995 Polish-Hungarian trade Fans of the Communist regime Homeless in Hungary's capital Budapest pickpockets November unemployment rates Wired Hungarian homes FEATURE STORY Hitting the black market-Rambo style PARLIAMENT WATCH Still waiting for that Media Bill MAGYAR NET WATCH Sorry, no Magyar Net Watch this week. NOTE TO READERS Hungary Report goes on winter holiday! The Hungary Report is also supported in part by: MTI-, a daily English-language financial news service. For on-line (fee-based) subscription information, contact the Internet address: <->. (It's not automated -- write a nice note.) =3D=3D=3D=3D=3D=3D BRIEFS By Jennifer C. Brown Copyright (c) 1995 ------------ GENERAL NEWS Hungary hosts OSCE conference Budapest hosted foreign ministers from 52 members of the Organization for Security in Cooperation in Europe conference last week to discuss the Bosnian peace agreement. The OSCE will participate by monitoring human rights, including elections in Bosnia. The meeting was considered a test for the future role of the OSCE in European security, the Budapest Sun quoted Istvan Szabo, deputy head of Hungary's OSCE office. This is the second in a row that Hungary has served as a chairman-in-office for the OSCE. Government leaders hope Hungary's leadership role will help the country in its efforts to gain membership in Western institutions. OSCE ethnic minority commissioner Max van der Stoel also visited Budapest last week to investigate issues facing Hungarian minorities in Slovakia, Romania and Serbia. Following talks with Csaba Tabajdi, state secretary at the Prime Minister's Office, van der Stoel announced that he would meet with Slovak government officials in Bratislava to discuss legislation effecting ethnic minorities, including the language law. Tabajdi asked the high commissioner to push for a minority language law that is less discriminatory but could exist side by side with the Slovak language law. --------------------- BUSINESS & ECONOMICS Electricity companies in private hands Electricity privatization deals completed ahead of schedule last week brought US$ 130 billion into state coffers, over half the overall income expected from privatization this year, Nepszabadsag reports. The German consortium RWE and Energie-Versorgung Schwaben purchased 38% of the Matra Heating Power Plant. A 49% share of the Dunamenti power plant was purchased by Powerfin, a subsidiary of Belgiun's Tractebel. A 46% share in Budapest Elmu and a 49% stake in the north Hungarian distributor Emasz Rt were purchased by Germany's RWE-Schwaben. Isar-Amperwerk bought 49% of Eastern Hungary's Titasz and Bayernwerk won 47% of Dedasz in southern Hungary. The Budapest Business Journal reports that the sales weren't without glitches. A sole bid for 24% of the Hungarian Electricity Works (MVM) by EDF, Bayernwerk and AeroTessin was rejected by the government because the portfolio contained the Paks Nuclear Power Plant. Investors are reportedly waiting to purchase Paks separately. Out of 14 companies, six did not sell assets worth an additional US$ 425 million. Due to the hurried process, in which APV Rt evaluators had five days to evaluate 25 bids, there were doubts that the sale would take place last week. ------------ SHORT TAKES HUNGARY STEPPED CLOSER TO NATO last week after signing an agreement that grants Nato troops permission to use Hungary as a transit country and as a site of a logistics and supply base, the Budapest Sun reports. The agreement was signed between Foreign Minister Laszlo Kovacs and Nato acting secretary-general Sergio Balanzino in Brussels. The agreement also covers Hungary's contribution of 500 Hungarian technical troops to the implementation force (IFOR). Nato also wants Hungary to send troops to participate in the peacekeeping forces but government leaders say if Hungarian troops take a combative role, the safety of 300,000 ethnic Hungarians in Serbia's Voivodina region could be endangered. KAPOSVAR HAS RECEIVED THE FIRST WAVE OF U.S.SOLDIERS, reports the Budapest Week. Some 25 logistics crew arrived last Monday and some 100 reporters were at Tazar air base Saturday to greet 115 soldiers arriving by plane. The soldiers will remain to staff the logistics base, while the 3,000 troops continuing on to Bosnia are expected to arrive by mid-December. Present at the airbase were ambassador Donald M. Blinken and Col. Gen. Janos Deak, commander of the Hungarian Armed Forces. JANUARY WILL BRING NEW RULES ON FOREIGN-OWNED PROPERTY with the new foreign currency code. Any foreigner wishing to purchase real estate may do so as long as the property isn't farmland. Exceptions can be made in case of inherited property. The biggest change is that foreigners will have to go through the local administrative office to purchase land. Previously, foreign property transactions were handled by the Finance Ministry and the Finance Center. A DELEGATION FROM THE IMF VISITED BUDAPEST last week to discuss a long-awaited standby credit agreement. Even though the IMF has not granted a $300 million standby credit this year after months of talks, Finance Minister Lajos Bokros expressed confidence that Hungary's economic improvements would help speed along the negations. Meanwhile, Bokros said last week that the budget deficit for 1996 will stay within 4% of the Gross Domestic Product in order to meet the IMF's prerequisite for the standby loan, reports the Budapest Week. The agreement is considered to be important for Hungary's international credibility. MINISTRY OF INDUSTRY AND TRADE IMRE DUNAI AND HIS PREDECESSOR Laszlo Pal denied allegations by opposition MP's that they helped family and affiliated party members win oil trade deals with the Russians, the Budapest Business Journal reports. Opposition MP's brought up examples of favoritism last week in Parliament, calling them "Oilgate". Following the allegations, Dunai fired chair of the Socialist's entrepreneurial group Otto Hujber. He partially owns an oil import company and also belongs to a committee that helps companies regain lost markets in Russia. ---------------- NUMBERS CRUNCHED Value of bilateral trade between Hungary and Poland this year, up from US$ 145 million in 1994. (Polish Ministry of Industry and Trade): US$ 500 million Percentage of Hungarians who believe life was better under the Communist system. (The Budapest Week): 51% Number of homeless people estimated to be living in Budapest (Menhely Alapitvany): 12,000 Pickpockets known to be operating in the capital (Nepszabadsag): 2,200 Unemployed registered in November, up 5,500 from October. (Magyar Hirlap): 485,000 Percentage of homes that have telephones in Hungary, up from 10% in 1990. (Matav): 25% -------------- EXCHANGE RATE December 8, 1995 (National Bank of Hungary) US dollar - 138.32 (buying), 139.76 (selling) Deutschemark - 96.04 (buying), 96.78(selling) --------------- WACKY AS USUAL Tourists, watch your organs! Urban mythologists take note: Ever heard those weird stories about organ stealing in places like India and Guatemala? The latest tale from the sinister world of the lucrative organ trade comes from the Hungarian tabloid Blikk. The story, published last week, claimed that an Austrian tourist discovered that his kidney was missing eight days after he was abducted by two men. Allegedly, the surgery was performed by a professional and the man was found to be quite healthy after the operation. Magyar Hirlap reported that National Police Headquarters has issued a statement that the story was entirely false. Rather than run a correction, Blikk's editor Peter Toke said the paper would investigate the story further. =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D FEATURE STORY Hitting the black market-Rambo style By Emmanuelle Richard It's 5:30 on Friday morning in front of the Customs & Excise Budapest headquarters. Zolt=E0n Bencs puts on his "U.S Army" aviator sunglasses, checks the gun on his combat belt and shoots down deserted Jozsef Avenue in his 24-year-old blue Volkswagen Beetle. A few minutes later, he screetches to a halt on the other side of town, outside the Investigation Division. Bencs springs out of his car with a broad smile on his lips and greets the group of young, clean-cut officers: "Ready, guys?" Just another day of Rambo-style raids for the chief of the Customs & Excise's Action Group. Another day of fighting the black economy. Packed into civilian vehicles, the group's officers drive flat out through District XIII in the direction of a Chinese market, where merchants are allegedly selling illegally imported products. The 13 male and the two female agents on the squad are aged 23-36. They all wear the same green combat uniform, each packs a gun, a mobile phone and an ingenious electric torch/club. "Nice toy, isn't?," jokes Bencs. This first mobile Action group, Bencs says, was set up in December 1994 by the Budapest division of Customs & Excise to put some muscle against illegal trading activities in Hungary. The members train intensively and constantly. "We have to be strong physically and mentally," says Bencs. Officers are also required to have the legislation that backs their activity memorized. "Now we must park near the market and wait for information," says Bencs, lighting up another cigarette. Two "plants" in civilian clothes are wandering in the market's delivery area and radio the details of several vans suspected to be crammed with contraband cigarettes. In their cars, the other Action Group members chew gum and chain-smoke, taking notes. After two hours of waiting, it's time to strike. The group's cars race to the market and discharge the running agents. Within seconds, a gruop of despairing Vietnamese is surrounded. Women among them burst into tears and protest. The group's officers frisk all the suspects. They find mobile phones and bundles of forint bills. And in the vans, a total of 16, 257 packets of Western cigarettes worth nearly HUF1.5 million, all without excise labels. The Vietnamese will have to pay an estimated HUF 1-1.5 million fine, Bencs says. The cigarettes will be confiscated for destruction. Carrying out an average seven raids a week, the Action Group earns the Ministry of Finance a tidy sum of money. "In only three days of raids in June, we brought 129 actions, confiscated goods worth nearly HUF 4 million and handed out HUF 5 million in fines", says Bencs. He says raids in bars and shops, such as small ABCs, are the most dangerous. As they check licenses and excise labels (they can't arrest), officers are often threatened and sometimes assaulted. "We are psychologically tested and trained for keeping our self-control", says Bencs. For particularly dangerous jobs ,the group's members don helmets and bulletproof vests. They are trained to draw their weapons in 1.3 second.Although group's methods appear effective, it has many critics. "All of this is very nice but it's still the tip of the iceberg," says Laszlo Gyory, general manager of Seagram Hungary and president of the Association of Spirit Importers, a group of 11 companies that has declared war on the black market. With oil and tobacco, spirits are one of the most frequently smuggled goods into Hungary. "As soon as the contraband bottles are in the country, it's too late", states Gy=F6ry. He would rather see more controls at the border. "But as long as border guards are paid HUF 23, 000 a month, they remain an easy target for corruption. For a bribe that will feed a guard's family for months, Gyory says, a truck full of spirits can be recorded at the border as carrying mineral water. Gyory is also in favor of giving a bonuses to guards responsible for each seizure. For Bencs, however, reinforced controls are just impossible: "Checking a single truck in every detail at the border requires six to 10 hours", he says. He also appeared insulted by the mere mention of potential corruption. The Action Group's officers are not better paid than border guards, he notes, "and nevertheless, they are not in the least corruptable. We are fanatics, we hate crime above all." Fanatics indeed. On the wall of Bencs's office is his credo, a quote by American techno-thriller author Tom Clancy: "We are professional officers... We make less money than similarly talented people in civilian life, but we are rewarded by the fact that, occasionally, we can risk our lives."It all seems a bit overly dramatic, but Bencs insists his group holds the only effective answer to illegal trading. As the head of the Action Group, he belongs to a special operative commission set up in April. Under the supervision of Jozsef Bencze of the Prime minister's Office, the commission coordinates work with several authorities, including the National Police, the tax officials, Customs and Excise, border guards offciers and the Office for National Security. "The commission investigates concrete cases and makes recommendations to the governement on the basis of what it sees in the field," says Bencs. The commission has already seen to it that an additional 250 agents are investigating white-collar crime. But; Bencs adds, the commission must still find new ways to fight the black market. Separate from the Action Group, the National Police's Economic Protection Department, set in 1993, also runs license checks in markets and shops. But unlike the Action Group, this police unit is allowed to check companies' accounts, tap their phones and even pay to get information. "We don't lack information," says Erno Kiss, head of the Economic Protection Department. "Tax-cheaters are often denounced by their neighbours", adds Kiss, who counts this as a positive sign of trust in the police, rather than note its ironic harking to Stalinist days past. Bencs's officers, on the other hand, tend to rely on personal networks for information. Bencs is not looking for new statutory powers, but more personnel. "If we could set up a three-shift system, we would earn the Ministry of Finance a minimum of HUF 500,000 a day", he says enthusistically. Additional staff, he adds, would not be excessive, and would take a great burden off Bencs and his officers. They happen to be on raid day and night, and at the week-ends too. "My young daughters don't understand why I am never at home," he says. "Thanks God, 'black economy' doesn't mean anything to them yet," he adds, removing his U.S Army" sunglasses. Black Economy Facts According to various estimates, the black economy equals 30% of Hungary's GDP (Gross Domestic Product) far above the average 3-5% in Western European countries. "Hungary is particularly affected because of its its geographical position," says Erno Kiss, head of the Economic Protection department of the National Police. A gateway between East and West, Hungary welcomes West European as well as citizens of former communist countries, without visas, making it susceptible to smuggling. Moreover, Hungary's common border with the rump Yugoslavia, with its recently lifted economic embargo, also encouraged smugglers. Economic researchers estimate 37% of black market activity is illegal trade. Economic monthly Cash Flow reported that one out of every five packets of cigarettes sold in Hungary is contraband, while 65% of chickens are slaughtered in illegal slaughterhouses. The same article estimates 13% of goods sold in grocery shops is "black". According to Kiss, since the beginning of 1993, illegally imported diesel oil should have generated HUF 50-100 billion in taxes. "The black economy also infects sectors such as the processing industry, education and health care, the building industry, as well as hauling and catering", says Jozsef Bencze, head of a special commission established to battle the black economy. He doesn't want to differentiate black economy from the so-called "grey economy" or "white-collar crime". "It's all crime," he says. He mentions fraudulent accounting practices, illegal employment, false contracts signed by fictious firms, underreporting taxable income in legal businesses and other illegal practices. In 1994, police investigators uncovered HUF 40.5 billion in "white -collar" crime, up to HUF 35 billion in 1993. For Bencs, however, reinforced controls and raids are short-term solutions. For him, the best way to fight black ecnomy would be to "make the legal economy attractive". * * * Emannuelle Richard works for French Radio and regularly contributes to the Budapest Week =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Parliament Watch Still waiting for that Media Bill By Tibor Vidos Once I promised myself that I would never write about the Media Bill again. Now that Dec. 28 has been set as the date for the bill to be passed, I may have to break my promise. The story started more than five years ago when, in the wake of the first free elections, the victorious Hungarian Democratic Forum (now one of the four opposition parties in Parliament) and the Alliance of Free Democrats (then one of the three opposition parties in Parliament) agreed on major changes to the Constitution. Since the two organizations commanded more than a two-thirds majority in Parliament, the others were not invited to the party. The goal then was to tailor the communist constitution to the needs of a functioning democracy. Both parties were aware that control of the electronic media -in more polite terms, the state-owned media's independence from the government of the day- was going to be crucial in shaping public opinion. Therefore a section in the paragraph 62 of the new-old Constitution declared that supervision of state-owned media (including the appointment of leaders, licensing of commercial media and prevention of media monopolies) should be regulated by a bill requiring a two-thirds majority to pass. This bill -called the Media bill, in short- almost passed Parliament a few years later. In late 1992, lawmakers spent hours voting on amendments to the Media Bill, and by the time all of the changes were added, Parliament rejected the bill almost unanimously. All-party agreements, negotiated over the prior several months, broke down in the final hour, resulting in both government and opposition voting against the bill. The chances are good that things will work out differently in 1995, though I would still be hesitant to bet large sums of money that 1996 will be the year when no Media Bill is debated in Parliament. The current six-party negotiations are proceeding with remarkable speed-meetings run over weekends and often last until the early morning hours -but Parliamentary procedure will still have to be suspended in order to reach the Dec. 28 target. According to the current bill draft, Hungarian Television (owned by a public trust fund and financed through subscription fees and state subsidies) will have one terrestrial and one satellite channel. The current second TV channel will be privatized, and a third terrestrial private channel will be established as well. All this is supposed to happen within a year of the law's passage. Antenna Hungaria, the state-owned broadcast monopoly, will maintain its exclusive contracts with public media until 2002. MPs and party specialists have spent most of their time debating the financial and legal structure of Hungarian Television and Radio. Commercial broadcasting and cable television were again neglected until the very last minute. Because the Media Bill limits one of the most basic constitutional rights, freedom of speech, it will certainly end up in the Constitutional Court if passed. And then we may witness the concept of "da capo al fine." * * * 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. =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D MAGYAR NET WATCH Sorry, no Magyar Net Watch this week. =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D NOTE TO READERS What, no Hungary Report until January 8th? Yes, we are officially on holiday until 1996! (Some of us are visiting exotic locals such as Whitefish, Montana). In the meanwhile, we would like to wish all of our readers holiday cheer and thank you for all of your the feedback and support. Boldog Karacsonyt es boldog Uj Evet! =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D 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 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 (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/ * * * 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 Jennifer C. Brown, Editor Tibor Vidos, Parliament Watch Attila Beno, Magyar Net Watch * * * 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> & Budapest Sun <100275.456@compuserve.com> Budapest Week <100324.141@compuserve.com> Central Europe Today (free online) , as well as most Hungarian-language media (e-mail addresses to come). =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D END TRANSMISSION