Hungary: Back on Track - your partner for business and investment in Central Europe Zoltan Mester

1. Hungary: Back on Track - your partner for business and investment in Central Europe Zoltan Mester State Secretary for Competitiveness 19thNovember 2009, Triest

2. Land: 93,030 km² Population: 10,1 million people GDP/capita, at PPP (2008 estimate): EUR 15,800 Hungary at a Glance SERBIA

3. Hungarian economy 9 000 7 849 8 000 7 000 6 253 5 683 6 000 4 711 5 000 EUR 4 000 3 004 3 000 2 000 1 000 0 Poland Hungary Slovenia Slovakia Czech Republic *For Hungary, Poland and the Czech Republic end-2008 data, for Slovakia 30 Sept. data and for Slovenia end-2007 data • Open economy - Industrial production is driven by export sales • FDI per capita second largest in region FDI per capita

4. Structural problems High rate of redistribution – 50% of GDP* High foreign indebtness – 72,9% of GDP* Low rate of employment – 57%* Imbalance + Global Crisis *in 2008

5. Tackling the impacts of the global economic crisis • Restoring confidence • Lack of confidence • Communication • Implementation Global economic crisis • Imbalance • State household deficit • Current account deficit • Slow growth • Economic output • Employment • Stimulating economicgrowth • Restoring equilibrium

6. Tackling the impacts of the global economic crisis Stabilization of the financial system Facilitating the financing of SMEs Retaining jobs and helping those who loose their jobs Speeding up the use of EU funds

7. Restoring equilibrium More efficient public sector Strengthening the sustainability of the pension system Developing a more targeted social system Cutting subsidies

8. Stimulatingeconomic growth Strengthening market acquisition Strategies for selected sectors Simplification of administration – 25% reduction of red tape Structural tax reform

9. Tax reform 20 2009 2010 • Cutting employer contributions afterthe entire • income from 32% to 27% • Total grossing-up: Tax base is the gross wage plus social contributions • Rates will reduce: to 17% and to 32% • Lower band limit: 18 727 Euro (grossed up) • Cutting employer contributions by 5% • up to 2× the amount of the minimum wage Raising lower PIT band to 7116 Euro Reducing the burdens on labour • Extending taxes to income and wealth kept in • tax havens • Adjusting the contribution base to the real • value of the activity Fighting tax evasion • Increasing VAT to 25%, • Preferred rate: 18%  milk, dairy products, bread, bakery pr., • district heating • Increase of excise tax by 5-6% onaverage Securing funding and taxes on consumption Introduction of general real property tax, elimination of current taxes • Unified corporate income taxation, elimination of surtax • Limitation of tax allowances and tax exemptions • Simplification of duties etc. Simplification

10. Change of tax wedge average wage half

11. Cushman&Wakefield has published a study on the european industrial and logistic property market: • According to this classification Hungary ranks at the 3th place • CEE is a much sought after logistics and distribution location • Hungary offers high quality industrial locations and plentiful land supply at a competitive price Source: Cushman&Wakefield; European Distribution Report, 2008

12. Hungary - The NaturalRegional Logistic Centre • Central location in Europe • Border with 7 countries: • 4 EU, 3 non-EU member states • Three international major road corridors and the Danube cross Hungary. • Innovation-logistic ring around Budapest • Záhony theReloading centre between European standard and broadgauge railway systemalong the corridor Nr. V. • Easy access to the Balkans and Europe • The 11 logistic districts and the 13 logistic centres are located in the focal points of the international movement of goods.

14. Hungary: junction of main European transport corridors Záhony

15. Changes in freight transportation in Hungary by modality (1980-2007)) in bn. tkm public road**the method was changed in 2002 railway pipeline inland navigation Source: KSH 2008

16. Expanding motorway and highway network

17. Budapest Airport: air cargo traffic centre • Direct cargo flight connections to the Far-East • Excellent Road Feeder Service (RFS) into all European countries • The fist phase of the new cargo terminal will be began in 2009, next to Terminal 2

18. Continuous modernization of the railway system Záhony

19. Regular scheduled block train connections from/to Northern and Adriatic Sea Ports Source: BILK Kombiterminal Zrt.

20. Logistics Centres andLogistics Development Areas in Hungary Slovakia, Poland Ukraine, CIS Záhony Slovakia, Czech Republic UKRAINE Western Europe, ARA – Ports, Hamburg, Bremerhaven SLOVAKIA MEZŐKÖVESD 3x Constanza AUSTRIA Logistics centres Airport with public, international, commercial, permanent border crossing Airport with public, international, commercial, temporary border crossing Airport development opportunities ROMANIA SLOVENIA Ports TASZÁR Railway connection Container terminal Koper, Triest Existing motorway Motorway to be completed until the end of 2007 Constanza Motorway to be completed until the end of 2015 CROATIA SERBIA

21. Modern warehouse facilities and industrial parks • Logistic parks – Warehousing • More than 1,51 million sqm of modern warehousing facilitiesin Budapest and surroundings • Average quoting rents between 3,0–4,5 EUR/sqm/month (in Budapest and surroundings) • Growing interest on developments further away from the capital; (ProLogis Park Hegyeshalom, Szeged Logistics Center, Kühne&Nagel-Polgár, etc.) • Greenfield investments • Well developed industrial parks for greenfield investments countrywide • Installed infrastructure of public utilities • Support of the park owners for building new facilities

22. Cost-efficient and highly qualified labour pool • Productive Hungarian labour force rates highly for innovation and efficiency in international comparisons • Logistics faculties in tertiary education countrywide - specialised knowledge and foreign language skills • Universities cooperate with several companies to establish teaching curricula and provide hands-on experience to students • Competitive wages in the service sector Source: Merces Professional Salary Monitor; 2009. 1 EUR = 268.14 HUF

23. Logistic action plan • 17th June 2009. Government approves Logistics action plan, which contains: • Mid-term road charging strategy • Development of customs services • Transport infrastructure development programmes • Logistics subsidies • Education-training programme • SME logistics programme • Logistic country-marketing • Logistic relations-development

24. 1.) Direct Cash Subsidy • option 1: Cash subsidy based on the decision of the Hungarian Government • option 2: EU co-financed cash grants 2.) Development tax allowance 3.) Tender supporting job creation 4.) Training subsidy The Hungarian Government is ready to provide the following incentives for logistic investment projects

25. Záhony and its region logistics center with growing potential Location: • at Eastern border of the EU • V. Pan-European road and railtransport corridor:Trieste- Koper -Budapest- Kiev- Moscow line • Linking of the European standard and the Eastern broad gaugerailway along the corridor Nr. V.at the North-Eastern border ofHungary to Ukraine • close to the Hungarian – Slovakianborder

26. Thank you for your attention! Zoltan Mester Ministry for National Development and Economy State Secretary for Competitiveness Phone: +36 1 374-2820 E-mail: Zoltan.Mester@nfgm.gov.hu