The Hungarian. building industry. Country outlook

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Allison Poole
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Country outlook The Hungarian building industry The opening lecture of the conference organised in conjunction with the Interglass exhibition held in Budapest last October highlighted the efforts of

1 Country outlook The Hungarian building industry The opening lecture of the conference organised in conjunction with the Interglass exhibition held in Budapest last October highlighted the efforts of the Hungarian government to end the country s industrial crisis by transforming and developing - in fact, reconstructing - the Hungarian economy. About half the huge government investment was directed towards the building industry. According to the author, the organisational transformation of the economic structure is virtually finished. Dr. József Hegyháti* HUNGARIAN MINISTRY OF INDUSTRY AND TRADE eneral industry Gsituation Hungarian industry went through the most acute crisis between 1989 and 1993, when production decreased by 40 per cent. The decline of Fig. 1 View of Budapest production was especially sharp in 1990 and 1991 followed by a stagnation in A moderate increase started in 1993 when industrial production exceeded that of the previous year. However, export performance still decreased. In 1994, industrial production continued to 68

grow and, comparing the price level, it was 9.2 per cent higher than in 1993. Annual output increased nearly three-quarters compared to 1985 for a total of 74.3 per cent.

2 grow and, comparing the price level, it was 9.2 per cent higher than in Annual output increased nearly three-quarters compared to 1985 for a total of 74.3 per cent. The upswing of domestic investment demand, as well as a favourable change in export possibilities played an important role in the high increase. Some Hft 800 billion were spent on investments in the national economy, which represented 28 per cent more at current price and 10 per cent more at constant price than in the year per cent of the sum invested was spent on building, and another 43 per cent on the purchase of machines. The increase of machinery investment (33 per cent at current prices) was higher than that of building investment (23 per cent at current prices). Exports expanded considerably with every branch of the industry increasing its exports, achieving 25.4 per cent throughout the year, ex- HUNGARIAN GOVERNMENT INJECTS FINANCIAL AID INTO ECONOMY The Hungarian Ministry of Industry and Trade plans to support the development of the economy during the next few years. The main goals of the resources made available for this purpose, and which will increase in value in 1996, are: - stimulation of operating capital investments; - contribution to the development of the economic infrastructure by encouraging the modernisation of manufacturing facilities, and of foreign investment resulting in returns in foreign exchange; - support for setting up industrial parks and improving returns on operating capital investments; - support of developments for establishing internationally competitive commodity supply - technical development; - improvement of conditions of financing current assets of the export business; - support of small and medium-sized enterprises and trade development; - support for development of quality control systems in accordance with European Union regulations; - promotion of background industry to accelerate the change of structure of the industry. Glas Union engraving specialists Glas Union - not to be mistaken with Glasunion- Salgglas - is a small company set up in 1990 by Transylvania Bridge, a holding company which operates in other industrial sectors, as well as the glass sector. Glas Union is based in Székesfehérvár, employs a staff of 20 and is specialised in engraving glass and mirrors. According to Mr. János Uzsák, General Manager, daily production is 120 square metres, processing with a Bavelloni ATON 90 model engraving machine, a Bilux bevelling machine from Gieffe, and a bending furnace and a sandblasting machine, both Hungarian-made. Glass and mirrors are bought from Euratükör and Metalglass. The Glas Union stand at Interglass 95 69

3 ceeding the rate of the previous two years. Almost one-third (31.7 per cent) of the sales of the processing industry was exported in These developments already indicated the strengthening of export orientation of the industry, the notable modification of the sales structure. Hungarian industry was qualified to take advantage of the moderate western European boom in A COMPARISON OF EUROPEAN BUILDING COSTS (all costs are exclusive of VAT) Sand Plaster Carcassing Clay Concrete GLASS (coarse) timber bricks blocks (100 mm) (6 mm) cost/tonne cost/tonne cost/m 3 cost/1,000 cost/m 2 cost/m 2 Czech Republic 138 1,100 4,300 4, (Koruna) (3) (27) (105) (118) (4) (4) Slovakia 138 1,100 3,500 4, (Koruna) (3) (24) (77) (99) (4) (3) Poland 55 2,302 2,657 6, (Zloty) (1) (60) (69) (144) (3) (3) 1,281 22,300 21,000 n/a n/a 2,500 (Forint) (6) (107) (101) (12) France ,500 1, (Franc) (11) (111) (196) (229) (5) (18) Germany n/a (Mark) (14) (133) (389) (8) (30) Ireland n/a (Punt) (98) (207) (361) (4) (22) Italy 31, , , ,000 19,000 49,000 (Lira) (13) (69) (131) (181) (8) (20) Netherlands 34 n/a (Guilder) (14) (230) (106) (9) (19) Portugal 1,250 16,500 n/a 50, (Escudo) (5) (71) (216) (4) (4) Spain 1,500 9,000 65,000 9, ,400 (Peseta) (8) (48) (344) (48) (5) (13) Sweden 70 1,350 3,350 2,300 n/a 160 (Krona) (7) (135) (334) (229) (16) Source: QS Gardiner & Theobald Industrial production is expected to increase by some 4.5 to 5.0 per cent in comparison with that of last year. The development of industrial production is effected to a considerable extent by the measures restricting domestic demand. While export sales are expected to increase by 19.0 to 19.4 per cent, a decrease of 1.0 to 2.0 per cent is expected in domestic sales. On the basis of industrial production and foreign trade turnover data, exports may be forecasted at HFt 12.5 to 13.5 billion and imports at HFt 15.0 to 15.5 billion throughout the year. The foreign trade deficit will total HFt 2.5 to 3.0 billion. [...] The state of the Hungarian building industry Considering the gross production volume, the building industry ranks fourth in the branches of the Hungarian national economy. In order of importance, it comes after industry, agriculture and trade. The Hungarian building industry has extensive connections and is a significant user of the products of industry and of the infrastructural services such as transport. The condition of the building industry is decisively determined by the macroeconomic processes, by the demand for investment and maintenance work. The past decade or so can be characterised as a critical period for the branch from the market standpoint, since the continuous diminishing of the effective demand already started at the beginning of the Eighties and went on until The decline of the demand and the change in composition accelerated the transformation of the or- 70

ganisational and financial structure, strengthening the operation of the building industry as a market. Today, market circumstances dominate in the branch.

4 ganisational and financial structure, strengthening the operation of the building industry as a market. Today, market circumstances dominate in the branch. The building industry supply has increased, capable of being flexible and suitable to meet all kinds of building demands with respect to technical standards, and having the ability to realise large-scale residential construction. The ability of companies to undertake projects is, however, still very inequitable because of their varying capital and organisational structures. Orosglas rolled glass plant Orosglas Kft. occupies only part of the glass complex in Oroshaza that was set up by the state from 1963 to The Oroshaza Üveggyár glass complex activity began in 1963 and subsequently added the following production facilities: Production Year of foundation Container glass 1963 Rolled glass 1965 Wired glass 1965 Flat glass processing 1972 Sheet glass 1974 Changing the structure The change in organisational structure started earlier and more intensively in the building industry compared with other industry branches. Today, the organisational transformation is virtually finished and as a result of the significant decrease in centralisation, the number of small and mediumsized companies has increased. At the end of June 1995, there were 78,333 companies including illegal and private operations in this branch of indus- In 1989 the Hungarian State Corporation for the glass industry (Üvegipari Müvek) established Pannonglas Rt., a state-owned subsidiary which was in charge of the Oroshaza glass complex and seven other Hungarian glassworks (see article in issue number ). In 1992 the government launched the Industrial Crisis Management Programme with the goal of turning loss-making industrial plants into profit-making ones. Pannonglas was then placed in liquidation. On 1 March 1995, a consortium purchased three activities from Pannonglas: the container glass plant, the rolled glass line and the flat glass processing plant. After the acquisition, the investors divided the flat glass processing facilities and started another company, Oros-Pack Kft.(see article on Oros-Pack). Therefore, up until November 1995, Orosglas Ipari és Kereskedelmi Kft. owned the container and rolled glass plant, while Oros-Pack Kft. controlled the flat glass factory. Last November, Owens-Illinois announced its purchase of Orosglas Kft. Rolled glass plant production began in 1965 and, in 1972/73, a Bottero rolling machine was acquired, which produces 100 tonnes per day; the furnace is Hungarian. The company also had a wired glass line that was inaugurated in 1965 but is no longer in use. The company is planning to upgrade its furnace in Currently, exports are 60 per cent, and are directed mainly towards Italy, Germany and the Middle East. Quality control at the rolled glass plant 71

5 try. Most of these organisations (94 per cent) and even more than 50 per cent of legally operating companies employ a staff of less than 10 people. The average size of the organisations is 25 people, and the company structure and the dominance of limited companies meet the international scale. As a result of the decentralisation process, companies employing less than 50 people already perform more than one-half of the building activity today, while the performance of the large organisations employing more than 300 people is approximately one-quarter. After closing the organisational transformation, these proportions have not changed considerably. The large organisations generally deal with civil engineering work, particularly where half of the capacity is provided by companies employing more than 300 people. In the field of specialised building and fitting industry and building maintenance, the smaller companies dominate. All company sizes are represented in almost equal proportion in architectural engineering. Performance and future trends The performance of the construction industry stabilised in 1992 and 1993, showing modest increases of 1.9 per cent in 1992 and 3.2 per cent in This branch of industry performed construction and fitting work totalling HFt billion during This performance - mainly as a consequence of the increase in infrastructural investments - resulted in a considerable production increase of 12.1 per cent. From the beginning of the Nineties, the supply palette can be described as complete also in the field of building material products in addition to the construction industry. The quality of the products of the Hungarian building material industry improved significantly during recent years, even according to the Board of Consumer Protection. Hungarian product quality competitively matches that of Western competitors on the quality index. The determinant of the transformation and development of the Hungarian building industry is Fig. 2 View of Parliament buildings the change in ownership during the initial period which ended in 1994; state-ownership decreased to a rate below 20 per cent. In 1992 the state owned 45 per cent, and 30 per cent in Today, the proportion of state-held property is mainly in minority portfolios which will be sold in the future. The injection of foreign investment capital has had a considerable, and in some fields, a determining role in the transformation of ownership so far. Foreign investors have purchased property several times already on the transformation of companies and during the formation of companies. The majority of mainly Western European investors are represented in the form of joint ventures on the domestic market. The number of these organisations amounts to more than 1,300 at present. The average rate of foreign-owned property totals 55 per cent. The value of foreign capital increased from HFt 4 billion in 1991 to HFt 20 billion today. Civil and transport engineering has experienced the most remarkable presence of foreign capital, as well as the specialised building and fitting industry. Large sums of money will have to be invested to develop the infrastructural branches in up to the turn of the millenium, not to mention the needs of the reconstruction of public institutions and buildings owned by local authorities. The former state-owned tenement buildings require considerable reconstruction, something that has not been done so far. The reconstruction of buildings because of physical deterioration, and high energy consumption will be very important for the building industry in the near future. *Deputy Secretary of State, Ministry of Industry and Trade - 72 Entire content 1996 by Artech Publishing S.r.l.

1. Foreign Trade Figures in the Czech Republic in 2010

1. Foreign Trade Figures in the Czech Republic in 2010 Foreign trade in the Czech Republic ended 2010 with a surplus of CZK 121.2 billion. Although this is CZK 28.4 billion less than in 2009, it is still