Hungarians Aim at State-Guaranteed Projects in the Urals

08.06.2009 — Analysis

Who is Hungarian Export-Import Bank prepared to grant loans to in the Urals and Siberia; in which areas do Hungarians believe Czechs to be their senior partners; and, why do Hungarian diplomatic missions issue visas for third countries? Pál Jenő Fábián, Consul General of the Republic of Hungary in Ekaterinburg, spoke of these and many other things in an exclusive interview to RusBusinessNews.

- Mr. Consul, which of the areas of the General Consulate's work in the 1.5 years it has been operating in Ekaterinburg you would specify as priority ones?

- We actually spent almost the whole first year solving the issues related to the establishment of the Consulate General as such. We had to rebuild the office that you see now. There were many technical issues we spent a lot of our time on.

However, our Trade & Economic Mission has been operating in Ekaterinburg since December 2005; therefore, by the time the Consulate General opened, contacts with the regional business community and officials were already in place. The opening was followed by functions in Ekaterinburg, Chelyabinsk, and Omsk, in order to expand the horizon for Hungarian business operations in the Urals and Siberia.

Formerly, Hungarian business was only present in the European part of Russia. Some of our companies operate in the Perm Krai and Bashkortostan as well as the Khanty-Mansiysk Autonomous Okrug (MOL, Hungary's oil company, and its Russian partners develop small oil fields). We managed to show Hungarian business people the kind of opportunities that are available beyond the Urals.

Hungarian business people participated in the conference dedicated to housing and utilities infrastructure that took place in Chelyabinsk this May. In general, we negotiate with representatives of regional authorities on the opportunities for the implementation of various projects that are financed by the budget of the Federation and its constituent entities. This is e.g. road construction. We try to involve Hungarian companies and loans from Hungarian Export-Import Bank.

- On what terms does the bank finance projects?

- The main condition is for the general contractor in the implementation of the project to be a company registered in Hungary. Loans are granted in Euro.

- Are there any examples of loans that were granted in the Urals region?

- Yes, there are. Hungarian general contractors build a housing estate in Perm and an infectious disease treatment centre in Bashkortostan. These are budget-funded orders. Hungarian Export-Import Bank does not finance private companies' projects.

- What makes budget-funded projects attractive for Hungarians?

- Hungarian Export-Import Bank is not going to conduct the assessment of individual local companies - this is very difficult. Budget-funded projects are a guarantee in their own right, though. However, there are exceptions. E.g. in 2006 OTP Bank (formerly, the National Savings Bank of Hungary) has acquired a controlling interest in Investsberbank - a local bank.

- What are other projects in the Urals and Siberia that Hungarian companies intend to participate in?

- A Hungarian company had a plan to participate in the construction of the Akademicheski residential area.

Another Hungarian company, ING, is negotiating the construction of a shopping and entertainment centre in Ekaterinburg.

Hungarians are also looking for an opportunity to participate in the upgrading of housing and utilities infrastructure in the Urals. In particular, the supply of insulation materials for the reconstruction of old residential houses is in question.

We negotiate with the Sverdlovsk, Chelyabinsk, and Kurgan oblasts in the area of animal breeding - cow and sheep farming. E.g. a Hungarian businessman and his Russian partner have already invested in the upgrading of meat and milk production in the Chesmenski District of the Chelyabinsk Oblast; it's the second year of their operation now. In the Sverdlovsk Oblast, a local businessman started a farm for the production of rabbit meat in cooperation with Hungarian companies. He is about to build another farm now.

The crisis has suspended many a plan, though. We feel that the Urals show a certain moderation, whilst the local companies still expect things to change for the worse. However, the crisis will end in a year or two. Our goal is to keep the Hungarian business interested in the Urals, and tempt its appetite for joint activities.

- Which constituent entities of the Federation in the Urals, in your opinion, maintain a favourable investment climate regardless of the crisis?

- The majority of my contacts was with the Sverdlovsk Oblast authorities. It is in control of the situation; it comforts us by making sure there are no emergencies or panic. This is a position I like.

The Chelyabinsk Oblast authorities take an interesting position. I have recently met its Governor, Mr. Sumin. This is a person who sees the opportunities as they arise, and strives to find and use them right away. By doing so, comfort is achieved, and a platform for active development in the future is created.

I have also visited the Khanty-Mansiysk Autonomous Okrug recently, and met Governor Filipenko. The situation is naturally easier there. Although oil and gas prices are much lower today than they were a year ago, they still guarantee a sustainable financial base for any projects in this region.

The authorities in each of these constituent entities take a practical view of the situation - both the opportunities and the risks that arise. I haven't met other governors yet.

- How active is the Urals business in terms of investing in the Hungarian economy?

- Russian capital is naturally present in Hungary. However, people from the Urals mostly invest in personal demand items - first and foremost, the Hungarian real estate. Organizing a study tour for the Urals business people to Hungary is a good idea; we haven't done an event like that yet.

- Tourism is one of Hungary's important revenue items. What action does Hungary take to attract tourist from the Urals?

- Tourism is more than just an important sphere of Hungarian economy. It encourages the development of relations between our countries, and helps people learn each other better. This February, during the Hungarian Week in Ekaterinburg, representatives of Hungarian travel agencies visited the Urals. They met the management of local travel agencies. We believe that tourism must be mutual. The development of joint programs in this area has already started. Therefore we believe that the flow of tourists will not only run from the Urals to Hungary but in the opposite direction as well. We have accredited about 30 travel agencies in the Urals and Siberia; they sell tours to Hungary as well as Latvia and Finland (visas for visiting these countries can be obtained from our Consulate General).

- How to achieve a growing flow of tourists without a direct flight connection?

- Unfortunately, Malev has terminated the Budapest-Ekaterinburg flight. 49% of Malev shares are currently held to Vnesheconombank, which assigned Aeroflot to manage the airline. Aeroflot has modified the schedule of Russian flights. Malev has a daily flight to Moscow; however, if you fly from Budapest to Ekaterinburg it is not easy to make a connection in Moscow - you need to find your own way between Sheremetyevo 2 (international) and Sheremetyevo 1 (domestic) airports.

Aeroflot has a plan to open a new airport - Sheremetyevo 3 - in which international and domestic flights will connect. In particular, the Malev flight from Budapest to Moscow will connect with Aeroflot flights from Moscow to Ekaterinburg, Perm, Ufa, and Omsk. You end up with rather taking one flight than two different ones; the effect of this on the flight price and time is positive.

The Urals travel agencies have in their turn developed programs that combine tours to Hungary and its neighbour Austria. The distance to Lake Balaton, which is located in the western part of Hungary, from Schwechat, Austria's largest international airport, is actually the same as from Budapest airport. Therefore, some of the tourists travel from Ekaterinburg to Vienna by the Austrian Airlines' regular flight.

There are ways to travel to Hungary from the Urals via Prague and Helsinki; they are good, although a connection is involved.

- Is the Czech Republic not your direct competitor in the struggle for the flow of tourists?

- Not exactly. We have to be frank and admit that the tourist business in the Czech Republic is better developed than in Hungary. Czechs have been doing this for a long time, ever since the times of socialism. They have achieved many good results. We try to follow in their tracks, and adopt their experience. In this sense, the Czech Republic is our senior partner, not a competitor.

In addition to that, Czech mineral waters are mostly intended for the treatment of gastrointestinal tract. The locomotor system treatment is offered at Hungarian resorts. That means there is no direct competition in this area either.

The Czech Republic has traditionally close relations with the Urals and Siberia. Unlike Hungary, they were very diverse back in the times of the USSR. Czechs' contacts and knowledge is a huge capital. If you ask any Russian what he knows about the Czech Republic, everyone will be able to answer something. They will at least know Karlovy Vary, the Czech spa city. They - especially the younger generation - know much less about Hungary. We naturally must work on painting a realistic picture of our country. Therefore it is very important to develop the tourism sector.

Language plays a major role here. Czech and Russian are kindred languages. The meaning of key words is clear without any translation. Hungarian belongs to a completely different language group Therefore most tourists have to travel to Hungary in groups, to be sure they will have an interpreter, rather than travel individually like to the Czech Republic.

- The Consulate General of the Republic of Hungary in Ekaterinburg now turns into a kind of European multi-visa centre where you can obtain a visa for travelling to Hungary as well as Latvia, Finland, and soon to Austria, too. Is it only related to the connection between joint tourist routes? Do Hungarian diplomatic missions play a similar role in other cities and countries?

- The Schengen rules allow for so-called representation - one country assigning a representative mission of another country to issue its visas. This is usual practice. Representation is based on mutuality. E.g. we issue Latvian visas in Ekaterinburg, whilst the Consulate General of Latvia in Kaliningrad and Latvian Embassies in Baku and Tbilisi issue Hungarian visas. We issue travel visas to Finland in Ekaterinburg, while Finns issue visas to Hungary in Bosnia and Macedonia.

In order to issue visas, a special visa service with a tight security system must be established, so as to prevent undesirable persons from entering the country. Everything is very tight; our partners visit Ekaterinburg and check our security system regularly. The establishment of a visa service is a costly exercise; therefore it is sometimes easier to assign diplomatic missions of other EU countries to issue visas.

We haven't signed the representation agreement with Austria yet. The discussion is about the countries in which they will be able to issue Hungarian visas.

We were the only diplomatic mission of a Schengen Agreement member country in Ekaterinburg that had spare capacities in terms of visa issuance. We are capable of issuing up to 10,000 visas every year; we issued 5,500 visas in 2008. This is why Hungary offered its services to other countries. I believe that the agreements with Latvia and Finland, and the future agreement with Austria, will use up our capacity. Therefore we do not negotiate representation of other countries. Our visa section will be really busy in November and December - this is the rush time for issuing visas to Austria, Latvia, and Finland, as the alpine ski season and Christmas holidays begin.

The interview has been prepared by Pavel Kober