Hungary is once again the darling of central Europe among foreign investors. Well, for a day or two at least, while news reverberates of the opening of a Mercedes plant at Kecskemét, bang in the country's centre. And reverberate it well might, given that the high-tech plant is an €800m investment, directly creates some 3,000 jobs (and about a further 10,000 indirectly and its planned output of 100,000 Mercedes A-class and B-class compact cars will generate around 1 per cent of Hungary's GDP.
"This is not an investment, it's an alliance," said Viktor Orbán, Hungary's prime minister, at Thursday's opening, according to the Associated Press. "I hope Mercedes in Kecskemet will be a new chapter in the great history of German-Hungarian economic co-operation. "
The Kecskemet development and an expansion by Audi at its plant in Györ in western Hungary have prompted scores of new developments by suppliers, foreign and local, in their respective regions. Car-making accounts for nearly 10 per cent of Hungary's economy.
All good stuff to boost Hungary's image as an investment location. By happy coincidence, as Orbán was opening the plant in Kecskemét, PwC, the global corporate services firm, was busy presenting its Investing Guide to Hungary 2012, in Budapest, 55 miles to the north.
"One of Hungary's most important competitive advantages is the government's commitment to making it easier to do business, and to help manufacturing companies achieve their best," the 50-page glossy states on its cover.
But any executive with the odd €100m in his pocket burning to invest in Hungary should note that HITA – the Hungarian Investment and Trade Agency – is a co-publisher of this booklet, making it a less-than-independence slice of advice from PwC.
There's plenty inside about case studies of investment projects by the likes of Audi, Bosch and Lego, along with glowing texts about Hungary's transport infrastructure and "highly skilled and talented workforce" – lots that might have an eager investor fingering the chequebook.
But, needless to say, there's rather less on the downside. For example, is there any mention about the sudden, punitive crisis taxes imposed by the Orbán government in mid-2010 with zero consultation that sent the heads of banks, retailers, telcos and utilities apoplectic ?
Well, yes, there is – on page 43. but there is no reference to the fact that they were applied retroactively – a key complaint of foreign business people.
Tamás Löcsei, tax partner at PwC Budapest, admitted to beyondbrics that the crisis taxes were "partially retroactive," but stressed that "if you are a production company you don't have to [reckon] with crisis taxes."
What's more, "once the Hungarian government enters into an agreement with you, then they stick to it," he stressed.
Löcsei concedes the point: "Let's face it, if you are working in the service industry, and you are not a shared service centre [outsourcing], which the government loves, then the picture is getting, let's say, more shady. There, investors think twice or three times as opposed to an automotive investor, where they are not thinking very hard where to put their new investment."
So that's the real bottom line for investing in Hungary from PwC, the "Trusted Business Adviser". Manufacturing or outsourcing, you're safe. But if you are in services, particularly in anything linked to the public sector, think twice or thrice. Just a pity Löcsei and colleagues didn't spell that out in the booklet.
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