Prepared by the students of MFM (Master of Fashion Management), NIFT Delhi, India

1. HUNGARY 10-11-2010 1 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

2. 10-11-2010 2 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

3. FACTS ABOUT HUNGARY Established: 1001 (by King Stephen I.) Country name: Republic of Hungary Local long form: Magyar Koztarsasag Government type: Parliamentary Democracy Location: Central Europe (Hungary occupies the low-lying areas of the Carpathian basin. Two-thirds of the territory consist of plains below 200 metres.) Neighboring countries: Austria, Slovakia, Ukraine, Romania, Serbia, Croatia, Slovenia, Area: 93,030 square km Population: 10million (there are almost 5 million living in other countries who declare themselves as Hungarians) Esztergom – Hometown of King Stephen I. First Capital of Hungary 10-11-2010 3 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

5. Official language: Hungarian “magyar” (a very special language, originating from the Finnougrictribe of languages)

6. Currency: Forint (HUF)

7. Religions: Roman Catholic 51.9%, Calvinist 15.9%, Lutheran 3%, Greek Catholic 2.6%, other Christian 1%, other or unspecified 11.1%, unaffiliated 14.5%

8. Climate: Continental with Mediterranean and Atlantic influences (Average temperatures: January -2C (28F), July 23C (73F) )

9. Main exports: Machinery and transport equipment, foodstuffs, chemicals

10. Internet domain: .hu

11. International dialling code: +36Budapest - Building of the Hungarian Parliament 10-11-2010 4 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

12. FLAG DESCRIPTION Three equal horizontal bands of red (top), white, and green; the flag dates to the national movement of the 18th and 19th centuries, and fuses the medieval colors of the Hungarian coat of arms with the revolutionary tricolor form of the French flag; folklore attributes virtues to the colors: red for strength, white for faithfulness, and green for hope; alternatively, the red is seen as being for the blood spilled in defense of the land 10-11-2010 5 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

13. WHO ARE THE HUNGARIANS? It is not (yet) known quite precisely. It seems certain they arrived somewhere from Asia. With regard to Hungary's location, world languages generally define it as: Eastern/Central Europe. This small country is one of the great survivors of history: states and empires emerged, expanded or disintegrated and disappeared around it. Hungary and the Hungarian nation survived the devastation of the Tartars and Turks, Habsburgs and Russians in the Carpathian Basin; survived the fact that it belonged among the losers of both world wars. The national anthem describes the Hungarians as "people torn by fate". 10-11-2010 6 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

14. BRIEF HISTORICAL OVERVIEW 1 In the time of the Roman Empire, the Romans called the region Pannonia. After Rome fell, the Migration Period continued bringing many invaders. First came the Huns, who built up a powerful empire under Attila. The name "Hungary" may be influenced by the name of the Hun people The Magyars migrated to Hungary in the late 9th century. The Kingdom of Hungary was established in 1000 by King St. Stephen I. Gradually Hungary under the rule of the dynasty of the Árpáds turned into an independent kingdom which formed a distinct Central European culture with ties to greater West European civilizations. Pannonia King St. Stephen I. 10-11-2010 7 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

15. BRIEF HISTORICAL OVERVIEW 2 The non-dynastic king Matthias Corvinus, son of John Hunyadi, ruled the Kingdom of Hungary from 1458 to 1490. He strengthened Hungary and its government. Under his rule, Hungary (notably the northern parts, some of which are in Slovakia today) became an important artistic and cultural centre of Europe during the Renaissance. Hungarian independence ended with the Ottoman conquest at the beginning of the 16th century the parts of Hungary that were not conquered by the Ottomans were annexed by Austria (the rulers of which were Hungarian kings at the same time) in the West, and became the independent Principality of Transylvania in the East. King Matthias Corvinus Turks in Hungary (1526-1686) 10-11-2010 8 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

16. BRIEF HISTORICAL OVERVIEW 3 After the final retreat of the Turks, struggle began between the Hungarian nation and the Habsburg kings for the protection of noblemen's rights (thus guarding the autonomy of Hungary). The Austrians were finally able to prevail only with Russian help. In 1867, manage to become an autonomous part of the Austro-Hungarian Empire. Having achieved this, the Hungarian government took an effort to nationally unify the kingdom by Magyarisation of the various other nationalities. This lasted until the end of World War I, when the Austro-Hungarian empire collapsed. On November 16, 1918, an independent Hungarian Republic was proclaimed. Ferenc II. Rákóczy Kaiser Franz Joseph I. 10-11-2010 9 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

17. BRIEF HISTORICAL OVERVIEW 4 In March 1919 the communists took power, and in April, Béla Kun proclaimed the Hungarian Soviet Republic. By August more than half of present-day Hungary, including Budapest, was placed under Romanian occupation, which lasted until November. Rightist military forces, led by the former Austro-Hungarian Admiral Miklós Horthy, entered Budapest in the wake of the Romanian army's departure and filled the vacuum of state power. In June 1920, the Treaty of Trianon was signed, fixing Hungary‘s borders. Compared with the pre-war Kingdom, the size and population of this new Hungary were reduced by about two-thirds; about one-third of the Magyar population became minorities in the neighboring countries. Miklós Horthy Treaty of Trianon 10-11-2010 10 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

18. TREATY OF TRIANON 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 11 The Treaty of Trianon was the peace agreement signed in 1920, at the end of World War I, between the Allies of World War I and Hungary. The treaty dramatically redefined and reduced Hungary's borders. From its borders before World War I, it lost 72% of its territory, which was reduced from 325,111 square kilometres (125,526 sq mi) to 93,073 square kilometres (35,936 sq mi). I t also lost 64% of its total population, which was reduced from 20.9 million to 7.6 million, and 31% (3.3 out of 10.7 million) of its ethnic Hungarians, who suddenly found themselves living outside the newly defined borders of Hungary. Hungary lost five of its ten most populous cities and was deprived of direct access to the sea and of some of its most valuable natural resources. The military establishment of the country was reduced to an army of 35,000. The principal beneficiaries of territorial adjustment were Romania, Czechoslovakia, and the Kingdom of Serbs, Croats and Slovenes. Difference between the borders of the Kingdom of Hungary within Austria-Hungary and independent Hungary after the Treaty of Trianon. Based on the 1910 census.

19. BRIEF HISTORICAL OVERVIEW 5 Horthy made an alliance with Nazy Germany in the 1930s, in the hope of revising the territorial losses that had followed World War I. The alliance did lead to some territories being returned to Hungary. Hungary then assisted the German occupation of the Kingdom of Yugoslavia, occupying the Banat right afterwards. Finally entered World War II in 1941, fighting primarily against the Soviet Union. Following the fall of Nazi Germany, Hungary became part of the Soviet area , after a short period of democracy in 1946–1947. In the late 1980s, Hungary led the movement and shifted toward multiparty democracy and a market-oriented economy. Following the collapse of the Soviet Union in 1991, Hungary developed closer ties with Western Europe, Statue of Liberty, Budapest 10-11-2010 12 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

20. DEMOGRAPHICS 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 13 For 95% of the population, the mother language is Hungarian, a Finno-Ugric language unrelated to any neighboring language and distantly related to Finnish and Estonian. The main minority group are the Roma (2.1% - 3.0%). Other groups include: Germans (1.2%), Slovaks (0.4%), Croats and Bunjevcis (0.2%), Romanians (0.1%), Ukrainians (0.1%), and Serbs (0.1%).

21. PEOPLE 10-11-2010 14 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

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24. CULTURE & SOCIETY 10-11-2010 17 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI Nation of Horsemen . The Ancient Hungarians lived in the Euro-Asian nomadic pastoral region, where the keeping and use of horses played an important role in their lives. . Therefore it is not surprising that the horse and horse riding has a central place in Hungarian History, leading to Hungarians being regarded as the nation of horsemen.. Invitations to foreigners for horseback riding are not uncommon. Family in Hungary . The family is the centre of the social structure. . Generations of extended family often live together.. The grandparents play an important role in helping raise the grandchildren. . The family provides both emotional and financial support to its members. Get Personal . Hungarians expect friends to share private and intimate details of their personal lives. . If you ever feel you are being asked personal questions, this is simply meant as part of the getting-to-know-you process. . Hungarians will even enjoy sharing details of their romantic life with you!

25. ETIQUETTES & CUSTOMS Meeting Etiquette . Both men and women greet by shaking hands, although a man should usually wait for the women to extend her hand.. The older generation may still bow to woman.. Close friends kiss one another lightly on both cheeks, starting with the left cheek. . In the business context is safest to address people by their titles and surnames. Gift Giving Etiquette . When visiting a company it is not necessary to bring gifts.. If invited to a Hungarian's home for a meal, bring a box of good chocolates, flowers or Western liquor.. Do not bring wine as the Hungarians are proud of the wines they produce. . Flowers should be given in odd numbers, but not 13, which is considered an unlucky number. . Do not give lilies, chrysanthemums or red roses. . Gifts are usually opened when received. 10-11-2010 18 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

26. Dining Etiquette . Arrive on time if invited for dinner, although a 5-minute grace period is granted. . If invited to a party or other large gathering, arrive no more than 30 minutes later than invited. . You may be asked to remove your outdoor shoes before entering the house. . Do not ask for a tour of the house. Table mannersare formal in Hungary. . Table manners are Continental -- the fork is held in the left hand and the knife in the right while eating. . The hostess will wish the guests a hearty appetite at the start of each course. . Do not begin eating until the hostess starts. . Do not rest your elbows on the table, although your hands should be visible at all times. . Hospitality is measured by the amount and variety of food served. Try everything. . If you have not finished eating, cross your knife and fork across your plate. . Indicate you have finished eating by laying your knife and fork parallel across the right side of your plate. . The guest of honour usually proposes the first toast which generally salutes the health of the individuals present. . At the end of the meal, someone toasts the hosts in appreciation of their hospitality. . An empty glass is immediately refilled so if you do not want more to drink, leave your glass ½ full. . Never clink glasses if drinking beer. 10-11-2010 19 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

27. BUSINESS ETIQUETTES Relationships & Communication . Although Hungarians are transactional and do not require long-standing personal relationships in order to conduct business, being introduced by someone they know and trust can often help. Hungarians pride themselves on using proper etiquette in all situations and expect others to do the same. . Socializing is an important part of the relationship building process. . Expect many invitations to dinner or cultural events. If you have the time, reciprocate invitations.. Hungarians prefer face-to-face meetings rather than more impersonal vehicles of communication such as letters. . Hungarians are emotive speakers who say what they think and expect you to do the same. . They do not like euphemisms or vague statements. . Hungarians often use stories, anecdotes, and jokes to prove their points. . Hungarians are suspicious of people who are reticent and not willing to share their innermost thoughts. . Hungarians view eye contact as indicative of sincerity and believe that people who cannot look them in the eye while speaking have something to hide. 10-11-2010 20 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

28. Business Meeting Etiquette . Appointments are necessary and should be made 2 in advance in writing. . Punctuality for all social situations is taken extremely seriously. If you expect to be delayed, telephone immediately and offer an explanation. It is considered extremely rude to cancel a meeting at the last minute and could ruin your business relationship. . Initial meetings are scheduled to get to know each other and for your Hungarian colleagues to determine if you are trustworthy. . Expect some small talk and getting-to-know-you conversation before business is discussed. Do not move the conversation to business yourself. . Do not remove your suit jacket without asking permission. 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 21

29. Business Negotiating Etiquette .Business is conducted slowly. .Deals in Hungary cannot be finalized without a lot of eating, drinking and entertaining. .Hungarians are very detail-oriented and want to understand everything before reaching an agreement. .Contracts should be clear and concise. .Contracts function as statements of intent. It is expected that if circumstances change, the contract will accommodate the revised conditions. .Hungarians are skilled negotiators. 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 22

30. Dress Etiquette . Business dress is formal and conservative. . Men should wear dark business suits with a white shirt and tie. . Women should wear either business suits or elegant dresses, complimented with good quality accessories. . Jeans are standard casual wear. 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 23

31. Business Cards . Business cards are exchanged without formal ritual. . Have one side of your card translated into Hungarian. . The Hungarian side should list your surname before your first name, Hungarian style. . Include any advanced university degrees on your business card. . Include the founding date of your company on the card. 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 24

33. WHAT IS HUNGARIAN FASHION? Hungarian Fashion Print - ca 1842 10-11-2010 26 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

34. HUNGARIAN STREET FASHION 10-11-2010 27 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

35. Renaissance inspired Fashion performance 10-11-2010 28 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

36. Parties with fashion-show for the regular customers in restaurants, that’s how some fashion shops introduce their new collection (Fanatiq, Mark & Spencer). Layer clothing 10-11-2010 29 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

37. FASHION BRANDS INTERNATIONAL Christian Dior Marks & Spencer(British) Fanatiq(multibrand) H&M(Swedish) ZARA(Spanish) Stefanel(Italian) Promod(French) Mango(Spanish) Terranova(Italian) Orsay(German) Espirit Jackpot UCB LOCAL Agressor, Devergo, Cassone, Keyo Paris, Saxoo London, Scotch, Thomas Jeans, Sandstone, RP, Sherpa and Fandango A MALL IN BUDAPEST 10-11-2010 30 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

38. FAMOUS FASHION DESIGNERS Lucia S. Hegyi Tamás Náray 10-11-2010 31 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

39. LIFE + STYLE Hungarian innovative eco-car: Antro Solo Prototype Hungarian dance Hungary joins the supercar race with the Brokernet Silver Sting 10-11-2010 32 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

41. May 1 – Labour Day, anniversary of the accession to the EU

42. August 20 – St. Stephen Day, Foundation of State, “The day of the new bread” as well

43. October 23 – 1956 Revolution memorial day (since 1989)

44. February- “Farsang” : Festival Season

45. Easter Monday-“Husvet” : Easter in Hungary

46. December 6- “Mikulas” :The Hungarian Santa

47. December 24- “Karacsony”: Hungarian Christmas10-11-2010 33 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

48. GEOGRAPHY Hills in Baranya county Sunset by Lake Balaton Valley of Zagyva River, Western Mátra Mounts Slightly more than one half of Hungary's landscape consists of flat to rolling plains of the Pannonian Basin The most important plain regions include the Little Hungarian Plain in the west, and the Great Hungarian Plain in the southeast. Hungary is divided in two by its main waterway, the Danube(Duna); other large rivers include the Tisza and Dráva, while Transdanubia contains Lake Balaton, a major body of water. The largest thermal lake in the world, Lake Hévíz (Hévíz Spa), is located in Hungary. 10-11-2010 34 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

49. TRANSPORTATION The Hungarian railway system is centralized around Budapest, the three main railway stations of which are the Eastern, Western and Southern Hungary has a total length of approximately 920 km motorways The most important port is Budapest, the capital. Other important ones include Dunaújváros and Baja. There are 43 airports in Hungary, including smaller, unpaved ones too with five International Airports. The Budapest Metro is the third-oldest underground metro system in the world, and its iconic Line 1 (dating from 1896) was declared a World Heritage Site in 2002. The rush hours are between 6 and 8 a.m. and between 2 and 5 p.m. on workdays, when trains run every two or three minutes. Early morning and night trains run every 10 minutes. Keleti Railway Station, Budapest M3 motorway DELHI-BUDAPEST: 7736KM AIRFARE: INR 44751 DURATION 16h30min 10-11-2010 35 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

50. MILITARY Hungarian Armed forces" currently has two branches: Hungarian Ground Force (Corps of Homeland Defenders). Hungarian Air Force 10-11-2010 36 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

51. CULTURE Architecture Etnographical museum, Budapest. Lánchíd bridge in Budapest. Museum of Applied Art: Wine & Dine A nicely prepared Hortobágyi palacsinta served in Sopron Dobos Cake Tokaji & Unicum 10-11-2010 37 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

52. Spa culture Rudas Baths is a thermal and medicinal bath that was first built in 1550. Lake Hévíz, It is the largest thermal lake in Europe. Herend Porcelain's "kinai" pattern Herend Porcelain Woman's folk Costume 10-11-2010 38 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

54. Hungarians are also known for their prowess at water sports, mainly swimming, water polo (in which they have defeated the Soviet team in 1956) and canoeing (they have won multiple medals). Two major rivers (the Danube and the Tisza) and Lake Balaton give excellent opportunities to practice these sports. Some of the world's best sabre fencing athletes have historically hailed from Hungary.10-11-2010 39 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

56. Public radio services operated by Hungarian Radio compete with many private national and local stations.

57. Hungary's national and local newspapers are privately-owned, some of them by foreign groups and investors.

58. There were 5.2 million internet users by December 2009 (Internetworldstats). 10-11-2010 40 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

60. Magyar Hirlap - daily

61. Magyar Nemzet - daily

62. Nepszava- daily

63. The Budapest Sun - English-language

64. The Budapest Times - English-language

66. Duna TV - public, satellite channel geared to Hungarian minorities in neighbouring states

67. TV2 - private, terrestrial

68. RTL Klub - private, terrestrial

69. Hir TV (News TV) - private, news News agencies MTI - state-owned, English-language pages Havaria Press- private 41

70. LEGAL SYSTEM The Hungarian companies have made steady progress in the implementation of corporate governance codes. Hungary adopted the Act CXX of 2001 on the Capital Market, to ensure transparency, to improve regulations related to various participants in the capital markets, and to safeguard the investors and improve the efficiency of market supervision. • Hungary has a comprehensive legal framework that ensures ease in doing business. The judicial system has also been transformed into a four level system, with the introduction of the high courts of appeal in 2003 to its existing local courts, regional courts and Supreme Court. 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 42

72. He is to be elected by a majority of the votes of the Members of Parliament, based on the recommendation made by the President of the Republic.

73. The unicameral, 386-member National Assembly (Országgyűlés) is the highest organ of state authorityPOLITICAL PARTIES IN POWER Hungarian Civic Alliance or Fidesz Hungarian Socialist Party or MSzP Movement for a Better Hungary or Jobbik Politics Can Be Different or LMP [13-member leadership] 10-11-2010 43 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

75. 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 45 Hungarian Civic Alliance or Fidesz Hungarian Socialist Party or MSzP Movement for a Better Hungary or Jobbik Politics Can Be Different or LMP [13-member leadership

76. POLITICAL PRESSURE GROUPS & LEADERS 10-11-2010 46 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

78. It enjoys strong trade, fiscal, monetary, investment, business, and labor freedoms. Inflation is low, it was on the rise in the past few years, but it is now starting to regulate.

79. Investment in Hungary is easy, although it is subject to government licensing in security-sensitive areas

80. Foreign capital enjoys virtually the same protections and privileges as domestic capital. The rule of law is strong, a professional judiciary protects property rights10-11-2010 47 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

81. With about $200 billion in foreign direct investment (FDI) since 1989, Hungary has attracted over one-third of all FDI in central and eastern Europe, including the former Soviet Union. Of this, about $6 billion came from American companies. Foreign capital is attracted by skilled and relatively inexpensive labor, tax incentives, modern infrastructure, and a good telecommunications system. By 2006 Hungary’s economic outlook had deteriorated. Wage growth had kept up with other nations in the region; however, this growth has largely been driven by increased government spending. 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 48

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84. Credit rating In June 2008, Standard & Poor’s assigned a ‘BBB-’ unsecured debt rating due to Hungary's proposed benchmark size euro bond due in 2018. The ratings remain constrained by high fiscal deficits, high and rising government debt levels, and a large external debt burden. The outlook remains stable. Monetary situation The primary objective of the central bank of Hungary is to encourage the stability of the financial system and conduct policies related to the supervision of that system. Hungary's central bank cut its main interest rate by a quarter point to a new all-time low of 5.25% in April 2010. The central bank has been continuing with the policy of monetary easing as inflation appears under control and financial investors are more confident in the country's stability. 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 51

85. INFLATION A fall in agricultural and industrial output, along with cutbacks in Subsidies, resulted in high inflation in the early 1990s. However, the stabilization of the economy after 1997 helped to bring Inflation down from 14% in 1998 to 3.9% in 2006. The introduction of higher-education fees and hospital charges, deregulation of prices, an increase in value-added-tax, and new cutbacks on subsidies has caused CPI inflation to spike up to 8% in 2007, before dropping to 6.3% in 2008. Falling commodity prices along with demand weakness is likely to maintain downward pressure on prices in the coming months. Inflation averaged 4.2% in 2009, however, inflation is expected to rise marginally to 4.4% by the end of 2010 due to increase in taxes. 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 52

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87. HISTORY OF HUNGARIAN ECONOMY The Hungarian economy prior to World War II was primarily oriented toward agriculture and small-scale manufacturing In the early 1950s, the communist government forced rapid industrialization in an effort to encourage a more self-sufficient economy. In 1968, by the "New Economic Mechanism", reopened Hungary to foreign trade, gave limited freedom to the workings of the market, and allowed a limited number of small businesses to operate in the services sector. both agriculture and industry began to suffer from a lack of investment in the 1970s, and Hungary's net foreign debt rose significantly—from $1 billion in 1973 to $15 billion in 1993—due largely to consumer subsidies and unprofitable state enterprises. In the face of economic stagnation, Hungary opted to try further liberalization by passing a joint venture law, instating an income tax, and joining the (IMF) and the World Bank 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 54

88. TRANSITION TO MARKET ECONOMY After the fall of communism in Eastern Europe, the former Soviet satellites had to transition from a one-party, centrally planned economy to a market economy with a multi-party political system. Hungary, for example, "lost nearly 70% of its export markets in Eastern and Central Europe." The loss of external markets in Hungary coupled with the loss of Soviet subsidies left "800,000 unemployed people because all the unprofitable and unsalvageable factories had been closed. Because of the lack of subsidies and a need to reduce expenditures, many social programs in Hungary had to be cut in an attempt to lower spending. As a result, many people in Hungary suffered incredible hardships during the transition to a market economy. 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 55

90. The 2008 financial crisis hit Hungary mainly in October 2008. When the Forint declined quickly against the euro, the Hungarian National Bank raised interest rates from 3.0% to 11.5% on 22 October.

91. The global economic downturn, declining exports, and low domestic consumption and fixed asset accumulation, dampened by government austerity measures, resulted in an economic contraction of 6.7% in 2009.

92. As the Hungarian Government asked financial rescue package worth $25.1 billion from the International Monetary Fund, the European Union, and the World Bank, promising to IMF that recalculate the 2009 budget, as Hungary's GDP declines 1.0%, and slow down government spending10-11-2010 56 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

93. 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 57

95. In foreign investments, Hungary has seen a shift from lower-value textile and food industry to investment in luxury vehicle production, renewable energy systems, high-end tourism, and information technology.

96. The austerity measures introduced by the government are in part an attempt to fulfill the Maastricht-criteria.

97. Hungary's low employment rate remains a key structural handicap to achieving higher living standards. The government introduced useful measures in the key areas, namely early retirement, disability and old pensions.10-11-2010 58 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

99. The private sector accounts for more than 80% of GDP. Foreign ownership of and investment in Hungarian firms is widespread, with cumulative foreign direct investment totaling more than $200 billion since 1989.

100. The government's austerity measures, imposed since late 2006, have reduced the budget deficit from over 9% of GDP in 2006 to 3.3% in 2008. 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 59

101. AGRICULTURE PRODUCTS: wheat, corn, sunflower seed, potatoes, sugar beets; pigs, cattle, poultry, dairy products INDUSTRIES: mining, metallurgy, construction materials, processed foods, textiles, chemicals (especially pharmaceuticals), motor vehicles 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 60

102. GDP (purchasing power parity) $186 billion (2009) country comparison to the world: 54 $198.5 billion (2008) $197.3 billion (2007) GDP - composition by sector: agriculture: 2.8% industry: 34.7% services: 62.5% GDP - per capita (PPP): $18,800 (2009) country comparison to the world: 62 $20,000 (2008) $19,800 (2007) 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 61

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105. EXPORT-IMPORT 10-11-2010 64 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI Exports: $82.49 billion(2009) country comparison to the world: 36 $107.2 billion(2008) Exports - commodities: machinery and equipment 61.1%, other manufactures 28.7%, food products 6.5%, raw materials 2%, fuels and electricity 1.6% Exports - partners: Germany 25.54%, Italy 5.67%, UK 5.41%, France 5.37%, Romania 5.28%, Slovakia 4.97%, Austria 4.52% Imports: $75.93 billion(2009) country comparison to the world: 34 $107.3 billion(2008) Imports - commodities: machinery and equipment 50%, fuels and electricity 11%, food products, raw materials Imports - partners: Germany 25.05%, China 8.56%, Russia 7.3%, Austria 6.08%, Netherlands 4.73%, France 4.51%, Slovakia 4.14%, Italy 4.13%, Poland 4.07%

106. EXPORT-IMPORT 10-11-2010 65 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

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108. EXPORT-IMPORT Natural gas - exports: 85 million cu m (2009) country comparison to the world: 42 Natural gas - imports: 9.708 billion cu m (2009) country comparison to the world: 22 Electricity - exports: 9.446 billion kWh Electricity - imports: 13.35 billion kWh 10-11-2010 67 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI

109. Reserves of foreign exchange and gold: $44.18 billion (31 December 2009) country comparison to the world: 36 $33.87 billion (31 December 2008 ) Debt - external: $116.8 billion (31 December 2009) country comparison to the world: 31 $212.1 billion (31 December 2008) Stock of direct foreign investment - at home: $238.5 billion (31 December 2009) country comparison to the world: 20 $237.1 billion (31 December 2008 Stock of direct foreign investment - abroad: $19.38 billion (31 December 2009) country comparison to the world: 37 $17.64 billion (31 December 2008) Exchange rates: forints (HUF) per US dollar - 200.64 (2009), 171.8 (2008), 183.83 (2007), 210.39 (2006), 199.58 (2005) 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 68

110. EXCHANGE RATE 1 USD = 195.236236 Hungarian forints 1 Euro = 274.18977 Hungarian forints 1 INR = 4.44923858 Hungarian forints 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 69 The graph below shows historical exchange rates between the Hungarian Forint (HUF) and the US Dollar (USD) between 5/11/2010 and 11/6/2010

111. INTERNATIONAL INVESTMENT POSITION Hungary has managed to attract large FDI inflows due to several factors, including its central location, the availability of cheap and skilled labor, modern infrastructure, tax incentives, relatively transparent investment environment, and favorable living conditions. The per capita capital inflow is the highest in the central and eastern European regions. several multi-national companies have played an important role in the modernization of the economy, contributing to the addition of jobs and GDP growth. Automobiles, high-tech electronics, light manufacturing, chemicals and, more recently, the service sector, have attracted most of the FDI. Foreign investments have played a dominant role in Hungary’s rapid expansion and have been a driving force of its economic growth engine. The stock of FDI reached $239 billion as of December 31, 2009 from around $237 billion as of December 31, 2008. A major part of the FDI came from Austria, Germany, the US, the UK, France, China, Japan, the Netherlands, Sweden, Finland, Norway, Hong Kong, Italy, Switzerland, Canada and Belgium. 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 70

112. POLITICAL ANALYSIS 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 71 The country’s foreign policy focuses on strengthening its integration into the EU and various Euro-Atlantic institutions, and it has maintained strong relations with its neighbors over the years. Nevertheless, corruption at the institutional level has traditionally hindered prospective investments.

113. ECONOMICAL ANALYSIS 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 72 Hungary had been experiencing serious structural problems for several years before the global economic crisis in 2008. Short-sighted economic policies (e.g. government overspending and real wage growth exceeding productivity growth), followed since 2001, have led to ever increasing macroeconomic pressures. Hungary is a strongly export-oriented economy. The drastically declining demand in the most important export markets, most notably Germany, therefore, clearly inhibits a quick recovery

114. SOCIAL ANALYSIS 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 73 Hungary’s literacy rate is one of the highest in the world. The government has also taken several initiatives to improve education in the country, thereby enhancing productivity and the employment prospects of its citizens. However, Hungary’s ageing population presents a significant challenge to the government as it could curb economic development and increase social security expenditure.

115. TECHNOLOGICAL ANALYSIS 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 74 Hungary’s ICT market has witnessed significant improvement and growth over the years. The Hungarian internet access market grew by 8.3% in 2007 to reach a value of $459 million. The total size of the IT market increased from $2.7 billion in 2006, to $3 billion in 2007 and is expected to stabilize to around $4 billion by 2010. Nevertheless, in terms of innovation, Hungary lagged considerably behind the EU25 average and is also far behind the developed EU nations in terms of the number of patents per million people. Furthermore, the country faces significant risk due to the lack of ICT skills, which remains a considerable roadblock to growth.

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117. LEGAL ANALYSIS 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 76 Hungary has a comprehensive legal and regulatory framework, with a Constitutional Court for ensuring the constitutionality of laws, and a regular judicial system headed by the Supreme Court for adjudicating on civil, criminal and administrative cases. The independence of the judiciary was strengthened by the establishment of the National Council for Justice in 1997. Intermediate courts of appeal were established in 2003 to speed up the system but it is still overburdened. There are also significant problems related to loopholes, which are exploited by people aiming to evade the system.

118. ENVIORNMENTAL ANALYSIS 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 77 Hungary has been largely successful in managing its environmental concerns and has a strong environmental record among the industrialized countries. It has a strong environmental policy framework in place, and focuses on implementing environmental policies so as to address environmental and energy concerns. Furthermore, as a member of the EU, Hungary also has to meet the specifications with respect to GHG emissions, particularly those regarding the reduction of pollutants causing climate change. However, the country's environmental record is under constant scrutiny due to the amount of hazardous waste that it generates.

119. KEY FINDINGS Hungary has strong relations with its neighboring countries but internal corruption is a problem Structural reforms but the economy is expected to take time to recover The healthcare system has enjoyed significant reform yet unemployment is high, particularly in the public sector Hungary is a strong player in international space research but lags behind in innovation and patents Hungary has a strong judicial system; however, there are loopholes in the taxation system Hungary has a rich natural resource base but has not tackled some environmental problems sufficiently 10-11-2010 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI 78

122. KÖSZÖNÖM! 10-11-2010 80 ADITI KALA & ANURADHA SAJWAN, MFM-III, NIFT DELHI