Hungary too cozy with German car manufacturers

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In Eastern Hungary, Debrecen, BMW has invested a billion Euro in a new plant. Also Mercedes, Audi and Opel are already long in the country. How makes Hungary so attractive?

Péter Szíjártó was visibly proud when he announced the message. After 17 months of negotiations in Hungary could be on the foreign Minister, now a new billion-investment of a German car manufacturer. “Per year in Debrecen and 150,000 cars to be produced”, said the Minister. “The start will create more than 1,000 jobs.”

Red carpet for the German car maker

In a year of construction for the plant in East-Hungary to begin. BMW is one in a line of tradition. Already for a long time Hungary was a German car maker, the “extended workbench”, which had already started after the turning point, says Sandor Richter of the Vienna Institute for international economic comparisons. “In particular, the car industry has sought and found.” For the investors was important that “Hungary is well-connected to the West”. That there is a well-trained workforce, and Tax reductions. With nine percent, Hungary has the lowest corporate tax in the EU, stresses Dirk Woelfer of the German-Hungarian chamber of Commerce and industry. And the unions are weak. “In 2012, the work was reformed quite radically,” he says. The “overall entrepreneur-friendly”.

Hungary’s foreign Minister Péter Szíjártó at the inauguration of a production site of Audi

In the company itself there is little trade Union Organisation, says the DUIH-speaker Woelfer in the DW-Interview. “The majority of collective agreements are made in the company and not, as in Germany, the area of collective agreements, which should also be more likely for the employer’s advantage.” For BMW, the airport, the skilled workers and the supply industry have played a role.

A balancing act between the interests

About half a Million Jobs have been created in German companies, directly and indirectly, in Hungary, calculates Woelfer. The use of the Hungarian professionals, the higher wages in German companies earn. And it benefits the government, which refers to criticism of the illiberal policy on the economic balance sheet: four percent growth, and a similarly low unemployment rate. “The diligence of the Hungarians, their diligence and their creativity knows no boundaries”, praises appropriate, the competent Minister Szíjártó.

However, the economic policy of the Orbán government also has a downside. Large corporations such as banks and supermarket chains have been left to the vein, large-scale farmers from Austria with areas in Hungary were expropriated in the hand prank. Legal uncertainty was at the beginning of the Orbán-year since 2010, a large Negative topic, Dirk Woelfer. “This has impacted entrepreneurship”. The’ve calmed down, however, “in recent years”.

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Witch hunt against government critics in Hungary

The German car manufacturers are also under special protection, and emphasized Sandor Richter from the Vienna WIIW. They had been excluded from the Propaganda campaigns of the government against foreign investors. The most important criterion: you are not allowed to come to the Hungarian government and the interests of your oligarchs in the way. “Where a Hungarian government competition in question, they are there as an unwanted competitor seen,” stresses Richter. But in the manufacturing industry, especially the automotive industry there is no competition. “You will not make the Hungarian BMW or Mercedes on the legs.”

Potential for more

In the long run German companies, too, but in Hungary the professionals. The Brain Drain is becoming a Problem. In recent years, hundreds of thousands of Hungarians have left their country to seek their fortune elsewhere, especially the well-educated. And the experts hired in the case of German companies, lack in Hungarian companies. Also, the tax system is at second glance not so good, says the judge in the DW-Interview. “Hungary is not a low-tax country”. Although there is a “Flat Tax” of 15 percent on the income. This means that “high earners earn very good money”. But, as the Economist stresses, there is the EU’s highest VAT of 27 percent, “what makes for consumer Goods very expensive.”

The government praises itself for your Four-percent-growth and the low unemployment rate. However, Richter emphasizes it is small and medium-sized enterprises in Hungary…. And the “economic growth is not sustainable”. Many EU funds have been accessed before the election already. In the next few years will flow, therefore less money from Brussels. “I expect only two per cent economic growth,” says Richter. In this case, the potential for more. “With a proper economic policy, with more competition, more transparency, less corruption, it could go to Hungary a lot better than it is today”, says the economic expert.