HEBC FOR A STRONGER HUNGARY IN A STRONGER EUROPE. ERÔSEBB MAGYARORSZÁGÉRT EGY ERÔSEBB EURÓPÁBAN Az HEBC éves jelentése. The Annual Report of HEBC

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1 17 years HEBC FOR A STRONGER HUNGARY IN A STRONGER EUROPE The Annual Report of HEBC ERÔSEBB MAGYARORSZÁGÉRT EGY ERÔSEBB EURÓPÁBAN Az HEBC éves jelentése 2015 Hungarian European Business Council Magyar Európai Üzleti Tanács

2 H E B C R E P O R T Hungarian European Business Council Since1998 Magyar Európai Üzleti Tanács Alapítva 1998 This paper is made of 100% recycled fibres. A belívek papír-anyaga 100%-ban újrahasznosított rostokból készült. ISBN Years

3 H E B C R E P O R T Contents For a Stronger Hungary in a Stronger Europe

4 F O R A S T R O N G E R H U N G A R Y I N A S T R O N G E R E U R O P E I INTRODUCTION ERT HEBC II THE REPORT 1 For a stronger Hungary in a stronger Europe Tangible country strategy and inclusive growth Employment policy and labour mobility Innovation and digital transformation Financial predictability Epilogue III ANNEXES Company experiences Members of ERT Members of HEBC

5 T H E R E P O R T Introduction

6 F O R A S T R O N G E R H U N G A R Y I N A S T R O N G E R E U R O P E The European Round Table of Industrialists (ERT) ERT is a forum bringing together more than 50 Chief Executives and Chairmen of major multinational companies of European parentage covering a wide range of industrial and technological sectors. Companies of ERT members are widely situated across Europe, with a combined turnover exceeding 1,300 billion sustaining around 6.8 million jobs in the region. They invest more than 51 billion annually in R&D, largely in Europe; which is equivalent to 18% of total EU R&D expenditure. European industry cannot flourish unless it can compete in a global economy. This capacity to compete cannot be determined solely by the efforts of individual companies. The prevailing economic and social policy framework is crucially important and must be flexible enough to adapt swiftly to changes in global conditions. ERT aims to strengthen and support key enabling conditions which trigger innovation and entrepreneurship in the European economy. ERT advocates policies, at both national and European levels, which help create conditions necessary to improve European growth and jobs. Please find more information on the Internet ( The Hungarian European Business Council (HEBC) The Hungarian European Business Council was established 17 years ago at the initiative of the Brussels-based European Round Table of Industrialists (ERT) with the aim of assisting Hungary s accession to the European Union. The work did not end after 2004 because the opinion of foreign investors, the practical experiences of the business world can be of real value in helping Hungary to make better use of the advantages offered by the EU membership and to belong among the developed, successful Member states of the EU. The members of HEBC are the top managers of 13 multinational companies in Hungary: ABB, AkzoNobel, British Telecom, Ericsson, GDF SUEZ, Henkel, Magyar Telekom, Nestlé, OMV, Philips, SAP, Shell and Volvo Group Trucks. 5 Right from the very beginning the activity of HEBC was honoured by the attention of the Hungarian Government, Hungarian and international decision-makers, diplomatic corps, academic world and the media. Over the past 17 years many questions have been put to the Business Council, mainly concerning what the economic players can do for Hungary s development.

7 I N T R O D U C T I O N HEBC s answers are recommendations as well, contained in the annual Reports. HEBC members write the Reports themselves and every sentence is based on consensus. This agreement is of special value since the member companies may be in competition with each other on the market, but they convey unanimous opinion on the issues affecting Hungary s development. HEBC does not carry out lobbying activity, it does not represent either company or sector interests, its sole aim is to contribute to Hungary s development, competitiveness and eco - nomic growth. HEBC examines all issues from a strategic viewpoint because it considers that, while dealing with day-to-day problems, the country s leaders should not renounce such an approach. Members have a definite opinion on market processes that could represent an added value in all areas where reforms are required. They work in industries where there are con sid er - able research and development activities, their companies are leaders in the application of new technologies. This is why their annual Report is so forward looking. It has been drawn up with the aim of summing up members opinion on the imminent, new industrial rev o lu - tion. The topics of the Report, such as country strategy, education, innovation, digital trans - for ma tion, em ploy ment, labour mobility and financial predictability are closely interrelated, following one from the other. Members of HEBC respectfully present their 17 th annual Report to their readers. They gain satisfaction from the positive opinion of their stakeholders that there is one occasion every year in Hungary when the top managers of Hungarian affiliates of 13 global companies, in addition to their responsible work, sacrifice their free time to set out a broad range of rec om - men da tions for the Hungarian economy as a whole. They do so with the aim of supporting Hungary s development. The members of HEBC trust that their rec om men da tions can be put into practice and that in this way they can contribute to Hungary s further development. 6 Budapest, June 2015

8 F O R A S T R O N G E R H U N G A R Y I N A S T R O N G E R E U R O P E The Report

9 T H E R E P O R T 1. For a stronger Hungary in a stronger Europe In our annual HEBC Reports we focus on topics that point towards the future and facilitate development. The main topic of our last year s Report, sustainable and inclusive growth, was an ambitious, long-term goal but at the same time an inescapable development di rec - tion. Our Report this year also looks to the future, examining all issues from the angle of the impending new industrial revolution. If Hungary is able to prepare in time for the expected industrial and technological changes, it could be among those who take advantage of the positive impacts. The new industrial revolution becomes easier to grasp if we consider that the amazing speed at which industry and technology are developing will affect every area of our life. We can already feel how these changes are transforming our daily routine and con sump tion. The pace of development is expected to fur ther accelerate. If we do not prepare for it, the pro - Digital does not respect cess es will not stop; they will simply sweep us into a less boundaries, regardless of favourable position. the industry digitization uncovers inefficiencies and We, members of HEBC, represent global companies and creates new values. manage subsidiaries that are taking the lead in shap - Roland Jakab ing the future and applying the achievements of in no va - tion. Our companies research activity is already at the year 2020 or looking even further ahead. The time when the developments appear on the market, come into mass production or become widely accessible services is determined mainly by market mechanisms since in many cases the technologies are already available. 8

10 F O R A S T R O N G E R H U N G A R Y I N A S T R O N G E R E U R O P E We would like to offer Hungary all the exceptional global knowledge and experience ac cu - mu lat ed in our successful large companies in the case of its readiness to receive it. Taking into account its length and its purpose, HEBC s Report is not able to cover all aspects. Our principal aim is to draw attention to the issues that have the greatest influence on development. The vision, the directions that our companies follow can be useful What the players of the economy for a country as well. recommend to the Government may not be accepted in all cases, but it is definitely worth paying It is worth examining the strategic goals of the most attention to their constructive and developed industrial countries, the front runners of the supportive sounds. new industrial revolution. They are sure to include the fol low ing: development of the education systems, ex ploi - Wilfried Gepp ta tion of international innovation potential, long-term cooperation based on education and research with part - ner countries and countries representing a potential market, as well as responsibility in dealing with global challenges. New products and services are creating new jobs that require different skills, capabilities and continuous learning from the individuals. This is especially important in an age when professions and crafts are disappearing faster than ever before. It is essential that the ed u - ca tion systems must be transformed and adapt flexibly so that they are able to ensure for society the knowledge and skills that will be required in the next decades. In the 21 st century it is worth being open and thinking differently about limits and barriers, the Internet in itself ensures a world without borders. The activity of our global companies also spans national borders; the size and revenue of some companies are often greater than those of many countries. It is also part of the development that we are facing global problems that no single country or government can solve alone. The shortage of water, shortage of food, climate change, scantiness of energy resources, demographic changes are all forcing humanity to think responsibly and collectively about how to solve the problems. Every EU country should speak in the first person singular, after all we, the 28 Member states, constitute the European Union. János Takács 9 In this light, the recommendations of our latest HEBC Report are made with the constructive intention of contributing to a stronger and more com - pet i tive Hungary in a stronger and more competitive Europe.

11 T H E R E P O R T 2. Tangible country strategy and inclusive growth Following our basic principle of a non-political approach, we consider that the judgement of Hungary in economic terms is unanimous. The indicators used to assist comparison at in ter - na tion al level, such as GDP, inflation or employment, show development. We, as economic leaders and foreign investors agree that predictability would further improve the situation. Stability and ability It is worth setting the goal of to plan ahead could make the results more sustainable. attracting new investors but Predictability includes stability of the legal environment retaining those already present is as well, so that the legislation and enforcement of law at least as important, the two can become independent and free of political trends. together are always better. Zoltán Tartóczki Acknowledging the value of the GDP growth that Hungary is performing, it is important to analyse the source of this growth to ensure its sustainability over the long term. The special taxes are able to generate substantial short-term revenues, the reduction of utility rates can stimulate consumer spending but it is not clear how all these will be sus - tainable. Transparency is also a key question. If long-term decisions affecting the whole country are made, their details should be available publicly and the strategic direction underpinning the decision should be clear as well. Transparency is an important tool for curbing corruption. The level of corruption in Hungary has been a cause of concern for years. The government measures aimed at reducing corruption are to be welcomed, but they are far from sufficient. In our opinion to make the country s competitiveness sustainable, a tangible country strat - e gy would be needed. It is worth adapting elements from the best practices of successful and similar-sized Eu ro - A vision is not the same as a goal, pean countries such as the taxpaying culture of Sweden but without a vision, the steps or education policy of Finland. leading to the goal are aimless. 10 It can be clearly felt and is to be welcomed that the Hun - Zsolt A. Müller gar ian Government has strategic plans, but they have not yet been made public and tangible. It is a source of risks if the strategy is built on a single industry sen si - tive to business cycles, and its other elements depend on decisions of an ad hoc nature influenced by political interests.

12 F O R A S T R O N G E R H U N G A R Y I N A S T R O N G E R E U R O P E What we have named country strategy is the document we have been urging for years to be elaborated. It is not the name but rather the content that is important and determines the directions of the country s development. Here we formulate again what we mean by country strategy in the hope that we can help its realisation. The country strategy we recommend covers the long term, spans political cycles and is based on broad social consensus. It re - quires a vision and a system of goals that the country wishes to achieve over a period of years. It is directed, elaborated and supervised by the highest level of the gov ern - ment. It is concise and comprehensive. Building on Hungary s strengths, it sets ambitious goals, taking into account the development of competing countries that do not stop de vel - op ing either. We recommend a multifocal strategy where the economic potential of the man - u fac tur ing sectors and the service industry is exploited simultaneously. Three years ago Germany announced a programme called Industrie 4.0 that has since become the cornerstone of German economic policy, industrial policy and education policy. Hungary cannot fail to take into account how its most important partner is shaping its future. The fourth industrial revolution after the steam engine, electric power and the digital revolution projects the prospect of billions of devices connected in a network, If insufficient funds are devoted the advance of robot technology, smart production and to education, R&D and health care, a new level of automation. German industrial com pa - the country is consuming its future. nies efficiency comes from higher value-added pro - duc tion using the industrial revolution s technological Péter Csiba achievements as their competitive advantage in order to keep and increase jobs in Germany. They also devote great attention to ensuring that the society understands and perceives that the quality of life in the future is determined by the results of innovation, research and education in the present. It is a strategic question that Hungary should decide whether it wishes to be a country of cheap manufacturing or also to play a part in the fourth industrial revolution with higher value-created production. The latter cannot be achieved simply by providing foreign com pa - nies with a location and infrastructure; well trained manpower and Hungarian suppliers that are adopting the advanced processes and value-added production are pre-requisites as well. Innovation and technological development are the best catalyst of sustainable and inclusive growth; this calls for substantial investments, cooperation with universities and support from economic policy. Hungary faces many opportunities if it introduces the logic of the fourth industrial revolution into other sectors as well. It is an important governmental task to recognise that it is not only worth paying attention to all this but it is an imperative need. 11

13 T H E R E P O R T Just as global companies look many years ahead, politicians should adopt long-term think - ing in certain issues as well to plan beyond elections. Some firms have more than a hun - dred years of history. If a company has survived economic crises, wars, has operated and thrived for decades, it certainly has experiences that can be useful for politicians as well. We would consider consultation, coordination with those directly affected before decisions and an effective social The investors that the country dialogue to be very important. has already won are extremely important, but the ability to attract In some businesses the success of the companies in capital is still a key measure of Hungary is influenced to a much greater extent by the value. If new investments do not regulatory environment in which they operate than by materialise the country s competitiveness will suffer over their own efforts. The government s unpredictable mea - the long term. sures represent the biggest risk for the business world. Miklós Pécsi-Szabó If the unexpected measures cause certain multinational companies to lose almost two-thirds of their cash flow, it not only has an impact on their business performance but also significantly influences the value of their shares. We rarely speak of the enormous amount of work and human performance behind the companies results that can be de - stroyed with a single government decision. At present to make business decisions regarding investments in Hungary, market analyses, business studies or knowledge of the existing regulations are not sufficient. Investors have to be prepared for the unexpected government measures that can influence the future of their investments. The business world is com - mit ted to the laws of the market that ensure level playing fields to all participants. Two separate worlds live side by side. One influences the operation and everyday life of the other by shaping the regulatory frameworks, while the other tries to influence the future with its work and votes. Equilibrium can be achieved if we approach an inclusive economy in which the state, the economy and individuals together actively shape the processes Employment policy and labour mobility We welcome the improvement of the Hungarian labour market situation. The fact that em - ploy ment has expanded in the private sector is an important result and the growing role of both industry and the service sector is encouraging as well.

14 F O R A S T R O N G E R H U N G A R Y I N A S T R O N G E R E U R O P E However, it is worth taking into account that employment outside the country, the growth of the public sphere and the public work programme that is part of the sphere contributed sig - nif i cant ly to the indicators. The growth of the public sphere does not help to reduce bu reau - cra cy and the efficiency of the expanding public work programme is also an open question. In our view the public work programme carries a risk, it distorts the functioning of the labour market and it does not help the shift towards an inclusive economy that we consider to be of key importance. Although it is directed primarily at the long-term unemployed and those with a low level of qualifications, it is worth noting that a large proportion of the participants are now people with secondary or higher qualifications. It would be more useful for the development of the Hungarian economy to use the funds spent on the programme amounting to 0.8% of GDP on training and on support for active participation in the open labour market. The level of social exclusion in Hungary is alarmingly high, one third of the population live in poverty while the poverty rate for Europe as a whole is declining. It is regrettable that the present education system is not able to adequately counterbalance the educational and cultural disadvantages of students from a low status social and economic background. It is a shocking fact that 43% of those living in poverty and social exclusion are children, the pro - por tions have not declined in recent years, and in fact they have had the tendency to increase. It is our unanimous opinion that a substantial shift towards higher value-added production and the creation of new jobs based on research, development and innovation would serve the country s competitiveness. The fourth industrial revolution will transform traditional manufacturing processes and the jobs associated with them. Due to automation and smart production technologies, in the future workers in production are more likely to control the machines and supervise the processes than to perform physical work. This is true es pe - cial ly in areas affected by the increasing standards for occupational health and safety, hygiene and precise quality. Although decline is not expected in the number of workplaces regarding the economy as a whole, knowledge of a different kind and higher level will be needed. The prereq ui site for being able to provide workers with the right We should aim to create favourable knowledge also in the future is that the education sys - conditions for the young generations tems must be properly prepared to provide it. The in dus - to consider Hungary as an attractive alternative when planning tri al revolution brings a different kind of employers their future. Education plays an approach. The welfare society creates employment that important role in achieving that. shares the result of the higher value-added production with individuals, purchasing power is high and so the Andor Faragó society lives a better life. 13

15 T H E R E P O R T Hungary should make efforts to channel the processes and development in this direction through innovation and be a participating player in creating the new solutions. It rep re - sents a real strength if knowledge centres and communities can be created that keep peo - ple here and enables mobility within the country. We consider it important for individuals to increase their knowledge abroad but Hungary should be the centre of their life to which they return. Innovative, creative work is an excellent possibility for this and at the same time it ensures a higher income, standard of living and self-esteem for individuals and the community alike. If young people begin their careers abroad and set up a family there, it reduces the chance that they will ever return. It is encouraging that the government has recognised the need to deal with the problem of people s emigration. However the rate of emigration is now of greater concern than the speed and effectiveness of actions taken to reduce it. Un for tu nate ly the process is now rather retrospective than preventive. Financial advantages are not the major factor influencing young people s decision but rather the lack of vision and perspectives. Young talents Young people are full of energy, would have ideas for their own future but they do not curiosity and the desire to learn. see how they can fit into the development directions of The more we help them in their the country. A country strategy would enable individuals ambitions, the more valuable the as well to plan their future in Hungary. society will be. Jean Grunenwald Youth unemployment is one of the most important is - sues of our time, we dealt in detail with it in our Report last year. Steps have been taken since then both by the government and the companies but it remains a problem to be solved. There are big re - gion al differences and in many cases even if first-time job-seekers find employment it does not correspond to their qualifications. The solution must be part of a collective process of value creation achieved inclusively with the cooperation of government, economy and so ci - e ty. Job creation, regulations, financial support and education can help a lot, but the ex am - ple set by the families and the social environment plays a major role as well. 14 One of the driving forces of GDP growth could be increasing the involvement of women in employment, supporting and ensuring their return to the labour market after maternity leave. Although the female employment rate has risen in Hungary, it is still low compared to the EU average offering a major opportunity for Hungary. Our companies are com mit - ted and invest in diversity, including gender diversity in multiple ways. Diversity impacts and improves business results and is one of the key enablers for innovation. Helping women to reconcile family and employment is a key issue too, especially in view of the unfavourable demographic trends.

16 F O R A S T R O N G E R H U N G A R Y I N A S T R O N G E R E U R O P E Cooperation between the government and the economy, the elaboration of joint programmes and the further expansion of part-time employment is important. At the same time the unexploited potential related to employment of educated women needs further government attention. Reforms affecting the education system are under way, but the results will only be seen over the longer term. We consider it important that it should be possible to follow the results of the restructuring processes and their evaluation. It is regrettable that the proportion of the budget devoted to higher education is continuously declining. The total budget is almost equivalent to the budget of a single university in a similar-sized, developed country. Ed u ca - tion and innovation are the guarantees of the future. In our opinion the government should consider doubling the budget allocation for education, at the same time setting appropriate targets and performance indicators. As the results will not appear in the short term, an approach spanning political cycles is needed. The advantages and the positive impact on sustainable competitiveness and inclusive growth are extremely important for the future of individuals, the companies and the country. In today s world knowledge and experience are necessary but Presumably, if the education budget were to be doubled, not sufficient, we also need the ability to express ourselves the all-important language skills that are so often men - in foreign languages. tioned would be given proper emphasis. Education, es - pe cially higher education, will reach a really high stan - Tanja Vainio dard if it provides the most up-to-date knowledge and skills. Familiarity with the international literature, par - tic i pa tion in international research groups and cooperation with international companies leading the field in research and development are indispensable for this. If education were to be given impetus, an effective answer could also be given to the most pressing questions for the country s future: economic development, competitiveness, emigration, language skills and youth employment. 15 We would like to raise our voice again for the greater recognition of the teachers. There will only be quality education if we ensure the greatest prestige for those to whom we entrust the future generations. We cannot rely only on their dedication; we must give them suitable financial and moral recognition as well. As employers, we would like to encourage the education institutions to take the expectations of the labour market into account in developing their curriculum. This is particularly true in higher education, where it is first and foremost the graduating students who feel the re sult - ing disadvantage. It would significantly improve young Hungarians chances in the labour market if they were to leave the higher education institutions with the expected knowledge.

17 T H E R E P O R T We, economic leaders, are able to formulate our expectations and medium-term labour force demand that can help education to determine better its directions. Our global companies can form a bridge between local and global demands and experiences. They can offer not only financial resources but also present best practices and models which already exist else - where in the world. The cooperation of the media would have an outstanding role in high light - ing the good initiatives and the already existing models of the companies. General knowledge is no longer sufficient in the 21 st century. Specialised training and prac ti - cal knowledge are also needed, that are important in all career and life stages. The skills and capabilities that we, successful large companies expect of our employees, such as language skills, innovative, creative and problem-solving thinking, cooperation, tolerant attitude, flex i - bil i ty, as well as adaptability do not yet appear on the top list of the education systems. In fact, in many cases the There is no compromise end result points in the opposite direction. To ac quire in quality, no matter whether it is these skills and capabilities, quality education is needed about a man or woman. that is open to the world, keeps pace with the latest de - A successful company needs vel op ments or is even one step ahead. Small and me - diversity, which is the driver of di um-sized companies also encounter similar demands development. Who recognizes and implements this, wins the race. when they attempt to expand and grow. Dr Ágnes Fábián We, global companies are able to offer our employees sta bil i ty, a vision, the chance to develop, international ca - reers, good salaries, cutting edge technologies, to men - tion only the most important. This represents significant security and value for individuals. We are committed and ready to strengthen our already existing cooperation with the education institutions and we feel openness on the part of the institutions themselves. Suc cess - fully implemented programmes result in good development outcomes, internationally com - pet i tive knowledge and higher standard diplomas. It would also be desirable for more of the small and medium-sized companies to develop their own cooperation with education in sti - tu tions based on mutual advantages. We consider it important for the cooperation between companies and education to receive further encouragement and support from the governmental side as well, and for the participants to find together the best solutions that make all levels of education more sustainable and effective. 16

18 F O R A S T R O N G E R H U N G A R Y I N A S T R O N G E R E U R O P E 4. Innovation and digital transformation The fourth industrial revolution that was on the horizon in our last year s Report is now surg - ing ahead with great force. New technologies are capable of changing old processes thought to be unchangeable. The digital transformation makes many business models obsolete, at the same time dig i - tal ization opens up completely new business op por tu - It does not help efficiency ni ties in all industries. Mobility, broadband and cloudbased solutions enable a higher-level and more efficient existing processes. Real innovation if we place new IT solutions behind and digital transformation change operation, launching digital industrialisation worldwide. the entire process, with the help of the new technologies it becomes A common feature of the companies connected to the faster, simpler and in real time. industrial revolution, shaping and following trends is that they think in terms of the global market. They are Balázs Ablonczy present not only on a local market, they span national borders and with the help of the Internet, information and communication technologies (ICT) are bringing global change. There are major global companies that did not even exist a decade ago. They still have no tangible products, they can be found exclusively on servers, in the form of bits and bytes, but they are among the world s most valuable companies. Reaching the global market is no longer a question of geography. Users also have higher expectations than ever before. They look for simple, flexible, secure, immediate access to the best quality contents accessible from anywhere. Consumers em - brace the introduction of new technology and services when there is an added value offered to them. They are not only well connected to the internet, but compare different offerings and share their experience with each other. The new trends are also rapidly expanding via the Internet; the only limit is set by differences in the purchasing power of the society. Services as well as software and infrastructure must adapt to these expectations. 17 This year world mobile broadband coverage will pass the 70% mark. It is predicted that 50 billion devices will be connected in a network by The networks are getting better and a larger share of the world s population is gaining access to communications services. In 2020 there will be some 7.7 billion mobile broadband subscriptions compare that to today s 3 billion internet users and when we get here, 70% of the world s population will have a smartphone. Connecting societies in a network makes it possible to bring qualitative development to people s lives as well as to the whole world around them.

19 T H E R E P O R T But the Networked Society is only the beginning, the digital transformation will continue. In order to capture the benefits from this development, we all have to dare to change. The most important question is how Hungary can take part in these transformative pro - cess es, so that the new jobs connected to the IT centres and process management are created here. This way the spending of the newly established companies appears here, they pay taxes here and play a part in generating GDP in Hungary. The ICT sector already con - tri butes 12 14% of GDP. It is in the country s interest for this share to approach as much as 16 20%. It is an enormous opportunity for Hungary for new ideas to be born here, for companies that can become global success stories to be set up here. The innovation lies in the transformation of entire processes and with the help of technology they become faster, simpler and real time. But for this the education system must train creative, innovative thinkers and researchers, otherwise Hungary will not be able to par tic i - pate in the processes taking place in the world. Placing new IT solutions behind already existing processes only Innovation requires open-minded, partly helps to improve efficiency. self-confident people seeking new paths, who look ahead even if We welcome the government s Digital Hungary programme that has set the aim of broadband access avail - they make mistakes. Dávid Illés abil i ty for all households by The programme cre - ates a good basis on which Hungary will be able to share in all the benefits of the digital transformation taking place in the world. The governmental incentives, funds and regulations linked to the programme will help the successful realisation of de vel op - ments and speed up the process of digital transformation. We would encourage the gov ern - ment to implement the whole programme and besides the infrastructural developments, attain the goals set also in the area of the digital community and economy, the digital state and digital skills. 18 The more users have access and user skills, the more IT can give support in reaching both individual goals and employment. Unfortunately the level of digital literacy in Hungary is extremely low, although bringing the digital literacy of the Hungarian population up to the EU average would help the country s competitiveness and would have a significant impact on its economic growth. To achieve this we consider it important to have far more IT lessons, right from primary school. The training of engineers and IT specialists must also be further strengthened if Hungary wishes to attract investors in higher value-added production and service industries. There are still thousands of vacancies for engineers and IT specialists that represent a serious loss of GDP.

20 F O R A S T R O N G E R H U N G A R Y I N A S T R O N G E R E U R O P E There is no manpower surplus for engineers, rather the demand is expected to further in - crease because in practice every new technical achievement is linked to some field of en gi - nee ring knowledge. Regrettably despite this the proportion of students showing interest in an engineering career is decreasing. It would also be desirable to change the gender ratios so that more women choose careers in engineering and IT. It would be worth launching gov - ern ment programmes to help shape pub lic thinking, so that people see the creativity in these im por tant pro fes - sions, the everyday approach to creating something new Raising the level of the and solving new problems with results that are in cor - population s digital literacy is of po rat ed in the digital world. key importance if Hungary is to share in the benefits of the digital transformation. Training IT specialists is not enough for innovation. The goal should be to give all students competitive knowl - Christopher Mattheisen edge, including familiarity with IT trends and tech nolo - gies. This way innovative young people leave the uni ver - si ties; not only with user skills but also with the ability to think creatively and make tra di - tion al processes in their own fields more efficient with new solutions. In our opinion it is not sufficient to acquire the knowledge needed for this at the universities, it is worth be gin - ning the training in the secondary school. The countries of Europe face an enormous opportunity, following the example of the US cloud sales are increasing with great speed. Growing numbers at individual, company and gov ern - men tal levels are beginning to use their everyday IT systems from the cloud. They are turn - ing to cloud technology not only because of the cheaper operating cost but also to keep pace with the world and to be able to manage their tasks with immediately available, flexible solutions. As a consequence cloud centres are now being formed in Europe. According to the European Union s cloud strategy, between 2015 and 2020 the technology will contribute 950 billion euros to the community s GDP and could create 3.8 million jobs by The supportive and regulatory environment is also just taking shape, as well as global stan - dards and methodologies. There is still no established practice of how countries should compete for this type of investments. The stakes are high, Hungary must act to be among the participants. The cloud is safe, it simplifies the processes and makes IT more efficient, ensures im me di - ate access to the latest developments and to all networks, and it concentrates the systems in one place. The transformation is taking place with the creation of new jobs supporting the IT systems and handling their operation. Several hundred thousand jobs are being created, contributing to economic growth. It is a key question for Hungary that as many new jobs as pos si ble should be created here.

21 T H E R E P O R T It is to be welcomed that Hungary is striving to ensure funds for the development of the sector, but they are still far from sufficient. An incentive system is needed for Hungarian companies to set up cloud service centres here, raising the IT export revenue. There is a base to build on; the country has already gained substantial experiences with the appearance of support centres from the 2000s. Wherever cloud centres are based they will attract people, innovation and create a community life. 5. Financial predictability Although the Hungarian public debt is below the EU average, it is much higher than that of its competitors in the region. The fiscal policy of past decades also played a role in causing the present high level that has been further aggravated by the impacts of the global financial and economic crisis. If we examine the question from the viewpoint of sustainable and inclusive growth, In a profit-oriented world the country s low growth potential cannot help to bring the players of the value-creation about a significant reduction of the public debt over the process can best solve problems long term. Its high level remains a factor for concerns by thinking and acting together. and one of the causes of the economy s vulnerability. Gergely Szûcs The price of the short-term, extraordinary tax revenues has been the missed opportunities for long-term in vest - ments and developments. In judging the country s abil - i ty to attract capital, it is worth looking beyond the official information that refers to investments already made. Our companies are in a position to form a picture of the investments that have failed to be realised, where the decision made by the parent company was not in favour of Hungary. One of the primary causes in all cases is the lack of predictability that also appears in the lack of financial predictability. 20 Contrary to promises made earlier, the special taxes have not been phased out and new ones have been introduced. It would increase credibility if society could see what these were spent for and what result they have brought for the country. This year Parliament approved the bill for the 2016 budget already in June. The new date is definitely to be welcomed and represents new opportunities. However, it is important to point out that when the economy complains of the lack of predictability, it is not referring prin - ci pal ly to the time the budget is presented.

22 F O R A S T R O N G E R H U N G A R Y I N A S T R O N G E R E U R O P E Although the six months now available will greatly help in preparing for the changes, it does not make either the business or the financial environment significantly more predictable. In our opinion predictability means: stability, strategic thinking pointing beyond the short term, factors that can be quantified and are able to in flu - ence confidence and investors decisions. But without a country strategy it is difficult to achieve sustainable, We should build the future rather long-term financial stability and predictability. than rebuild the past. Peter A. Hegedus In many cases public administration has not been made ready to implement premature measures that have not been properly considered; as a result it is difficult to obtain answers to questions that arise during their practical realisation. Compliance with ad hoc measures imposes heavy burdens on companies, involves a great deal of additional administration and costs, as well as more human resources to perform the tasks. We are convinced that the difficulties could be avoided by prior consultations with those directly affected, giving more careful consideration to the planned measures and taking into account time as a necessary factor. The measures taken to reduce tax fraud and evasion are to be welcomed. Although the number of taxpayers has increased, many people abuse the possibilities offered by de moc - ra cy. If they emphasise only their rights and ignore their obligations, the equilibrium is in danger. This is true for all communities, whether the member is an individual, a company or an institution. Naturally, those who meet their social obligations should also be able to obtain transparent information on how their taxes are being spent. Non-discrimination is our basic principle in all respects. Our expectation regarding taxation policy too is that it should be free of discrimination and ensure a level playing field for all market players. Only competition can create competitive companies. To be successful in an in ter na tion al context, Hungarian companies have to be able to perform in the global market too, where competition is much stronger. 21 In the opinion of the economic players, the current preparedness of public administration is not adequate for we lose sight of the present. While we obsess over the past, the state to be a good owner of the companies it has ac - Zoltán Mészáros quired. A healthy competitive environment creates much better conditions for business efficiency than a mon op - o ly does. If there is no external constraint, the internal motivation to improve the given service or production weakens. In the absence of com pe - ti tion the monopoly withers.

23 T H E R E P O R T The increasing role of the state is present not only in the competitive sphere. It arouses con - cerns on the level of individuals too. We would welcome it if the government were to use the means available to encourage people s self-provision so that they themselves can deal with important questions Without a dialogue society cannot affecting their own future. have the feeling that they are being heard and their opinion taken In an inclusive economy, the role and responsibility of into consideration. the individual are equal to those of the state and the László Kerekes econ o my. Many expectations can be made of the gov ern - ment and the economy, but the individual too must live as a responsible citizen, pay taxes and share in the com - mon burdens. The state needs to set an example, to en - cour age the individual in this direction. If the state is the biggest debtor, if it has the biggest account receivables and the spending of public funds is not transparent, the individual feels encouraged to behave less as a responsible citizen. The global corporations are continuously changing. In the future the traditional approaches are likely to be replaced by other measuring and criteria systems. Increased value will be attached to the companies social role, responsible behaviour, sustainability, inclusivity, so - cial usefulness, fair trade, all areas that are already important today. It is encouraging that consumers are becoming increasingly aware, they no longer look only at the price, quality or the brand but also at the environmental impacts, the effects on their health and the influence on society. Ways are being developed to measure these impacts, but it is certain that GDP and stock exchange indicators will not be sufficient to describe them. It will redraw the map of the most liveable countries, the countries that give the most added values to the global society. 22

24 F O R A S T R O N G E R H U N G A R Y I N A S T R O N G E R E U R O P E 6. Epilogue If we ask what is more important, Hungary s com pet - itive ness or a more competitive Europe, there can be no doubt about the answer. Hungary can only further in - crease its competitiveness if Europe is stronger and more competitive. It is of vital importance for a small coun try that directs 75% of its exports to European mar - kets, to contribute to the creation of a stronger and more competitive Europe. If Europe develops and its po si tions are stronger in the world, Hungary will enjoy the ben e - fits as well. The European Union is a peace project formed by 28 Member states, based on free trade and democratic principles. Rikard Jonsson The idea of the fourth industrial revolution is an overarching theme in our Report. Higher value-added production and service industry could be the direction of development in Hungary too, in a business environment that is stable and predictable. Such a historical opportunity as that offered by the new industrial revolution rarely arises. If anyone is uncertain about More and more of us see, understand and experience what values the European Union the new processes. We hope that the political decisionmakers will be open to these recommendations and offers, he has only to ask a country wishing to join. the economic policy will take them into account in the Balázs Erényi near fu ture, before it is too late. Like all revolutions, the fourth industrial revolution will have its frontrunners. They will show the way and make the future visible. The image of the future lives in us, as we have described it in our new HEBC Report. 23 Dear Readers, Our annual Reports give a comprehensive picture of development over the past 17 years, almost amounting to a history and economic history of the path that Hungary is taking. If you feel that a theme is missing from this year s Report, we would like to ask you to read our earlier ones on our website ( you are certain to find our recommendations on the subject. Should you have any questions or you need further information concerning the data used in the text of the Report, please contact our HEBC secretariat Thank you.

25 A Z H E B C É V E S J E L E N T É S E Tartalom Erôsebb Magyarországért egy erôsebb Európában

26 ERÔSEBB MAGYARORSZÁGÉRT EGY ERÔSEBB EURÓPÁBAN I. BEVEZETÉS ERT HEBC II. A JELENTÉS 1. Erôsebb Magyarországért egy erôsebb Európában Kézzelfogható országstratégia és inkluzív növekedés Foglalkoztatáspolitika és a munkaerô mozgása Innováció és digitális transzformáció Pénzügyi kiszámíthatóság Epilógus III. MELLÉKLET Vállalati tapasztalatok Az ERT tagjai Az HEBC tagjai

27 A J E L E N T É S Bevezetés

28 ERÔSEBB MAGYARORSZÁGÉRT EGY ERÔSEBB EURÓPÁBAN Az Európai Gyáriparosok Kerekasztala (ERT) Az ERT a legnagyobb európai multinacionális vállalatok több mint 50 elnököt és vezérigazgatót tömörítô fóruma, számos ipari és technológiai ágazatot képviselve. Az ERT tagvállalatai Európa-szerte jelen vannak, összesített forgalmuk meghaladja az 1300 milliárd eurót, a régióban közel 6,8 millió munkahelyet biztosítva. Évente több mint 51 milliárd eurót fektetnek K+F tevékenységbe elsôsorban Európában, ami az Európai Unió teljes K+F ráfordított kiadásainak 18 százalékával egyenlô. Európa ipara csak akkor tud sikeres lenni, ha képes versenyben maradni a világ gazdaságában. Ehhez a versenyképességhez azonban az egyes vállalatok erôfeszítései önmagukban nem elegendôk. Az aktuális gazdasági és társadalompolitikai kereteknek meghatározó jelentôségük van, rugalmasnak kell lenniük, hogy kellô gyorsasággal tudjanak alkalmazkodni a változó világ feltételeihez. Az ERT célja, hogy erôsítse és támogassa azokat a kulcsfontosságú feltételeket, amelyek az innovációt és a vállalkozást ösztönzik az európai gazdaságban. Az ERT mind nem ze ti, mind eu ró pai szin ten ki áll az olyan meg ol dá sok mel lett, ame lyek se gít - ségével megteremthetôk az európai növekedés és munkahelyteremtés feltételei. További információk az interneten találhatók ( ). A Magyar Európai Üzleti Tanács (HEBC) A Magyar Európai Üzleti Tanács 17 évvel ezelôtt a brüsszeli Európai Gyáriparosok Kerekasztalának kezdeményezésére alakult azzal a céllal, hogy segítse Magyarország EU-csatlakozását. A mun ka 2004 után sem ért vé get, mert a kül föl di be fek te tôk vé le mé nye, az üz le ti vi lág gya - korlati tapasztalatai komoly segítséget jelentenek, hogy Magyarország jobban kiaknázza az EU-tagság elônyeit és az Unió fejlett, sikeres tagállamai közé tartozzon. 27 Az HEBC tagjai 13 multinacionális vállalat magyarországi legfelsô vezetôi: ABB, AkzoNobel, Bri tish Te le com, Ericsson, GDF SUEZ, Hen kel, Ma gyar Telekom, Nest lé, OMV, Phi lips, SAP, Shell és Vol vo Group Trucks. A Magyar Kormány, a hazai és nemzetközi döntéshozók, a diplomáciai testületek, a tudományos élet és a média megtisztelô figyelme az alapítás óta ráirányul az HEBC tevékenységére. Az elmúlt tizenhét év alatt számos kérdést kapott az Üzleti Tanács, elsôsorban arra vonatkozóan, mit tehetnek a gazdaság szereplôi Magyarország fejlôdéséért. Az HEBC válaszai egyúttal ajánlások is, melyeket az éves jelentések tartalmaznak. A jelentéseket az HEBC tag jai ír ják és min den mon dat kon szen zu son ala pul. Ez az egyet ér tés kü lön ér ték, mi vel a tag - vállalatok a piacon akár versenyhelyzetben is lehetnek egymással, ám az ország fejlôdését érintô kérdésekben egységes véleményt közvetítenek.