German firms deeply unhappy with Hungary policy drift, says survey
BUDAPEST, April 16 — Two thirds of German and Austrian companies in Hungary are “strongly dissatisfied” with government economic policy and its rating as a destination for investment has slumped, a survey showed today.
The poll by the German Chamber of Commerce in Hungary showed that overall 87 per cent of investors were discontented with two years of aggressive government policymaking which has slapped huge windfall taxes on several sectors.
Germany has been the biggest source of foreign investment in Hungary's export-driven economy, now on the brink of recession, and the country is striving to keep money flowing in as a legal row with Brussels blocks the start of talks on financing from the IMF and European Union.
The survey showed that Hungary has slipped back to 10th place on the regional list of German companies' favourite investment destinations, from a ranking of fourth only a year ago.
“Practically, none of the (200) participants expressed satisfaction,” the Chamber said in its report. “All business branches share this view, with minor deviations.”
Prime Minister Viktor Orban's conservative government has implemented the EU's biggest bank levy, windfall crisis taxes on the telecoms, retail and energy sectors, and a $13 billion (RM39 billion) nationalisation of private pension assets.
A scheme which allowed foreign currency borrowers to repay their mortgages at exchange rates well below market rates has also caused huge losses to banks, stifling lending.
The sectors most hit are dominantly foreign-owned.
The German Chamber said about a quarter of the participants in its survey were from European countries other than Germany, mostly Austria, and they shared the opinion of German firms.
The Chamber added that the crisis taxes contributed to a 14 per cent fall in investments in the telecoms sector, and an 18 percent drop in investments in the financial sectors last year.
The automotive industry has not been hit by windfall taxes, and a new 800 million euro factory by Daimler may even help Hungary avoid recession this year. That came on top of a plant expansion by Audi.
In the survey 71 per cent of companies said they would again choose Hungary's as an investment target, down from 83 per cent in 2011, but a record high 29 per cent said they would go to a different country. In the previous survey only 17 per cent said they would go elsewhere.
This does not mean that these firms plan to leave the country in the short term but “is a warning sign ... showing that new and new efforts are needed to keep the country attractive,” the Chamber said.
68 per cent of participants said Hungary's economic situation was “bad”, compared with 44 per cent in 2011. — Reuters