From hungary-report-owner Mon Jun 26 03:08:11 1995 Received: from localhost (daemon@localhost) (fnord) by nando.yak.net (8.6.5/8.6.5) id DAA15234; Mon, 26 Jun 1995 03:08:11 -0700 Received: from localhost (daemon@localhost) (fnord) by nando.yak.net (8.6.5/8.6.5) id DAA15208; Mon, 26 Jun 1995 03:07:43 -0700 Received: from bruner@ind.eunet.hu () via =-=-=-=-=-= for hungary-report@hungary.yak.net (15206) Received: from ind.eunet.hu (root@ind.eunet.hu [192.84.225.42]) (fnord) by nando (8.6.5/8.6.5) with SMTP id CAA15105 for ; Mon, 26 Jun 1995 02:58:19 -0700 Received: from [192.84.226.92] (bruner.dial.eunet.hu) by ind.eunet.hu with SMTP id AA21601 (5.67a8/SZTAKI-4.01 for ); Mon, 26 Jun 1995 11:58:05 +0200 X-Sender: pop029@ind.eunet.hu (Unverified) Message-Id: Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii" Date: Mon, 26 Jun 1995 11:52:51 +0100 To: hungary-report@hungary.yak.net From: bruner@ind.eunet.hu (Rick Bruner) Subject: Hungary Report 1.13 X-Charset: US X-Char-Esc: 0 Sender: owner-hungary-report@hungary.yak.net Precedence: bulk Reply-To: hungary-report@hungary.yak.net ======================== The Hungary Report Direct from Budapest, every week No. 1.13, June 26, 1995 ======================== The Hungary Report is supported in part by: MTI-Econews, a daily English-language financial news service. For online (fee-based) subscription information, contact (not automated -- write a nice note). ======== CONTENTS BRIEFS Goncz re-elected president by one vote Trade and Industry Minster Pal fired British power company buys Csepel electric works Devaluation rate lowered Bokros to donate golden parachute to charity Fifth anniversary of stock exchange Agriculture to see $1.5 billion surplus Pal meets with Heseltine DM 80 million invested in aluminum works IMF to declare forint convertible NUMBERS CRUNCHED Matav losses for first five months, 1995 Number of state bonds issued / subscribed Projected current account deficit Projected consumer price inflation / real wage drop FEATURE STORY Film industry in crisis facing cutbacks ====== BRIEFS Copyright (c) 1995, Sarah Roe -------------- GENERAL NEWS Goncz re-elected president by one vote Arpad Goncz has been re-elected by MPs as President of the Republic of Hungary, last Monday. The result was not surprising since Goncz was the joint candidate of coalition partners, the Socialists and the Free Democrats, who hold 72 per cent of parliamentary seats. He received one vote more than the two thirds (258) minimum required and will hold the position for another five year term. There was one other candidate, Ferenc Madl who attracted 76 votes. The incumbent president consistently ranks in the top position in nation-wide popularity polls, born from his status as a freedom fighter in the 1956 revolution (who served a six-year prison term for his role in the uprising) and an acclaimed writer. Madl called his challenge to Goncz a necessary and important affirmation of the multi-party democratic system in Hungary. Madl is a former teacher who, under the previous administration of the Magyar Democratic Forum (MDF) party, helped draft educational reform legislation, and negotiate the Nagymaros Dam project. Educated as a lawyer, Goncz is best known for his literary achievements such as his translations of Hemingway and Faulkner into Hungarian. After being elected President in 1990, Goncz labored to safeguard media freedom in Hungary, especially vis-a-vis the integrity of the nation's influential two-channel public TV network Magyar Televizio (MTV). Goncz used his Presidential veto powers to obstruct attempts by the previous government to place party functionaries within executive positions at the network -- work that drew fierce political criticism and praise from international free press groups. Goncz took the oath of office Monday, and pledged in a speech his determination to continue to protect human rights. Although there had been considerable debate over the indirect method of electing Hungary's president, led by Jozsef Torgyan of the Independent Smallholders' Party (FKGP), Goncz is widely regarded as a suitable candidate for the position. A poll conducted by Telemedia indicated that 57 per cent of the public wanted him to be re-elected, whilst only ten per cent wanted Madl to be elected. During the session prior to the vote, Independent Smallholder MPs walked out in protest of the indirect method of voting. The FKGP has been attracting growing support over the past year. Trade and Industry Minster Pal fired Laszlo Pal, the Minister of Trade and Industry, was dismissed by Prime Minister Gyula Horn during Thursday's cabinet meeting. Hungary Around the Clock cites Magyar Hirlap, which stated that the minister was opposed to the concept of selling most electricity companies to foreign investors. Other cabinet ministers are reportedly in favor of the privatization plan, and Horn is keen to maintain a uniform government, according to Elemer Kiss the state secretary to the Prime Minister's office. Pal claimed he was not against foreign investors but felt that sale of the electricity companies should be second to sale of the power plants. The firing takes effect July 15. Horn is said to be considering Imre Dunai, currently a state secretary in the ministry, to take over the position. ------------------------ BUSINESS AND ECONOMICS British power company buys Csepel electric works The first privatization in the electricity sector was made last week, with British company PowerGen buying Csepel Electricity Works in south Budapest. PowerGen is a significant British investor in Hungary, and plans to pour up to $250 million into the Csepel plant, which was said to have cost around $13 million. It is hoped that the move will attract more investors to the electricity sector, one of the next "big five" industries to be privatized in the near future, including those within the energy, telecoms and media sectors. According to Econews, the plant was bought from a consortium of companies in Csepel, 80% owned by the State Holding Company (AV Rt) and State Property Agency (AVU). The largest of these is Csepeli Csogyar, which will now be able to settle its debt of over Ft 1 billion to the Hungarian Oil and Gas Company (MOL) Devaluation rate lowered The President of the National Bank (MNB), Gyorgy Suranyi, will reduce the monthly devaluation rate of the forint from 1.9% to 1.3%. Suranyi commented that MNB's exchange rate policy had proved successful, and that the MNB has been buying hard currency on the domestic inter-bank hard currency market, which has not been done for several years. He said that a high demand for securities of 30-31% interest rate indicates economic players expect annual inflation rate will stay below 30%. Bokros to donate golden parachute to charity Finance Minister Lajos Bokros, who was given a controversial HUF 16 million severance pay upon leaving his previous position as CEO of Budapest Bank, will give the sum to charity, according to the prime minister. Bokros has received some bad press over the affair, as critics point to debt problems at Budapest Bank in addition to the Finance Minister's austerity package, which includes substantial welfare cuts. Bokros this week estimated that the budget deficit would reach 6-6.7% of GDP in 1995, a figure he said would have been 10% without his March program. Prime Minister Horn said Bokros had always wanted to give the money to charity but had simply gone on the offensive against politicians and public figures who challenged his honesty. Hungary Around the Clock reported that a poll by Szonda Ipsos found that out of 500 people, 87% find Bokros' severance pay morally unacceptable. ------------ SHORT TAKES THIS WEEK MARKS THE FIFTH ANNIVERSARY of the Budapest Stock Exchange. It is hoped that privatization of the utilities sector, telecoms and media will boost the BSE's mediocre turnover. A $1.5 BILLION TRADE SURPLUS IN AGRICULTURE is expected this year, from $2.6 billion in export revenues. HUF 108 billion ($878,000) will be needed from the budget to reach this figure, a Ministry of Agriculture spokesperson said. TRADE AND INDUSTRY MINISTER LASZLO PAL, before his sudden dismissal Thursday, met his counterpart in the UK, Michael Heseltine, last week, to discuss the opportunities presented by Hungarian privatization, and the country's integration into the EU. A NEW ALUMINUM CASTING FOUNDRY IN GYOR will result from a joint DM 80 million investment by Adam Opel AG and Bonn-based partner VAW Aluminum Works, according to Econews. THE IMF IS LIKELY TO DECLARE THE FORINT FREELY CONVERTIBLE for current account transactions. The Fund left Budapest this week having agreed on all except some technical points. ------------------- NUMBERS CRUNCHED * Hungarian Telecommunications Company (Matav) loss in the first four months of 1995 (Matav): HUF 9 billion ($72 m) * Value of state bonds issued / subscribed in 1995 (Vilaggazdasag): HUF 150 billion / HUF 130 billion * Projected current account deficit for first six months of 1995 (Economic Research Institute, GKI Rt.): $2 billion * Projected 12-month consumer price inflation / drop in real incomes, for 1995 (GKI Rt.): 31-33% / 10%+ ---------------- EXCHANGE RATE June 23, 1995 (National Bank of Hungary) US Dollar (buying) 124.65, (selling) 127.07 Deutschemark (buying) 89.20, (selling) 90.98 --------------------- ============= FEATURE STORY Film industry in crisis facing cutbacks By John Nadler Copyright (c), 1995 The recent announcement by the Hungarian Motion Picture Foundation (HMPF) of film projects selected to receive government support for 1995 has left a residue of disappointment within the Magyar cinema, and doubt as to whether the industry can survive. The HMPF has received public funds to provide partial financing to only 18 feature film projects this year. Given that up to three years ago Hungarian cinema produced more than 30 feature films annually, as much as 50% of the country's film professionals are now unemployed and insiders warn that the industry could collapse within the year. "We've already received a letter from one film studio [MIT production company] that they are unable to operate," admitted Lorant Szanto, HMPF Secretary for Information and Economics. "The founders of the HMPF met [earlier in the spring], discussed the situation, and reported that by autumn the film industry will close down." The crisis gripping Hungarian cinema is the result of drastic cuts in government support. Reeling from a financial crisis of its own, Hungary's socialist-liberal coalition has allocated only HUF 885 million (US $7 m) to the film sector for 1995. Because of mounting budgetary pressures, the HMPF expects lawmakers to reduce this support by an additional US $1.5 m before the end of the year. The government budgeted HUF 1 billion to the industry in 1993, and HUF 665 million in 1994. Figuring in a yearly inflation rate of about 30% and double-digit currency devaluations in 1995, Hungarian cinema -- completely financed by the government in the past -- is now being weaned from the mother's milk of state support. According to local film makers, Magyar cinema, barely five years into the capitalist era, is too young to stand on its own. In order to become a viable business, the industry needs to make commercial films, analysts point out. But commercial film making requires a level of investment the government is not willing to make. "Less films are going to be made now in Hungary," said Hungarian-born director Gabe von Dettre who divides his time between Budapest and New York. "There is no money. Which means they can't make action and entertainment films. They're stuck to making art films. This is a great blow to the artistic community because the films will become less and less acceptable as [quality] art features." For the present, the industry is circling its wagons. During the foundation's most recent grant give-away last month, established directors Ferenc Grunwalsky, Pal Erdoss, Miklos Jansco, Karoly Makk, and Sandor Sara, and young filmmakers Janos Szasz, Arpad Sopsits, and Attila Janisch received funding -- an apparent strategy to channel the industry's scarce resources into the production budgets of Hungary's top talents during difficult times. There are signs that the times will change. TV and film laws soon to reach parliament are expected to contain clauses which will directly boost the industry's fortunes. The TV law will likely require networks to air a certain percentage of Hungarian-made programming each week, and "force [TV] to order Hungarian films," said Szanto. The film law is expected to require distribution and exhibition companies to remit a small portion of their profits back to the industry, and define the percentage of the Ministry of Culture's subsidy budget to be allocated annually to cinema. The industry is lobbying to have tax laws changed so that movie- production investments can be considered tax deductible, and HMPF leaders have already slated a meeting with Prime Minister Gyula Horn in order to lobby the nation's top policy-maker directly. Film-making practices are changing along with the industry's financial souring. Hungarian movie makers are becoming increasingly skilled at seducing investors, sealing joint-venture deals with foreign producers, and securing funds from European agencies such as Eurimage, the European Script Fund, and the European Union MEDIA Program. In 1969 famed Hungarian auteur Peter Bacso produced his classic "The Witness" entirely with state funds. In order to complete the sequel "Another Witness" last year, Bacso teamed up with German producers, and collected funding from a plethora of European sources. What lesson did capitalism teach him? "To make a good film, you have to make money," answered Bacso. "Success is a very secret thing." The industry is rapidly realizing that discovering this secret may its only hope for survival. =================== NO PARLIAMENT WATCH Tibor Vidos is traveling this week, so we don't have his column for you this week. :( He will be back online next week. ===================================== VARIOUS EXPLANATIONS, APOLOGIES, ETC. I (Rick) have also been traveling a lot recently, and I just returned the other day to find all had not gone as smoothly as hoped with the Hungary Report last week. My beloved wife Adrienne and colleague John kindly agreed to produce the thing in my absence. After various delays and technical problems, they had last week's issue, 1.12, ready by midweek, but unfortunately Adrienne appears to have made an addressing error and after all that work, the issue was never distributed to subscribers, which she failed to notice. Oh well. Sorry. This is basically my personal volunteer project still and I can't demand perfection from other volunteers. Sad part is John did all the work of writing the briefs and no one ever saw them. (Lucky part is he rarely reads the finished product all the way through, so I doubt he'll see this note and will probably never be the wiser -- I'm not about to tell him ;) If, however, any of you die-hard fans would like to read the unsent, out-of-date briefs and Parliament Watch from last week, please send a note in the next few days directly to my address with a message title "Send H-Report 1.12", and I'll forward you the text. It's minus the feature story, which I recycled this week. For better or worse, I am about to embark of further travels again next week for another two weeks or so, so please bear with us. Also, regarding the double messaging problem. I think we have it sorted out. The reason you got two copies of a message from Adrienne last week explaining the delays is because she accidentally posted it twice. Regarding earlier double postings of the full Hungary Report, my sys-admin at yak.net ably explained, "mail doubling happens from time to time." Shouldn't be a problem again, soon, though. But if it is, I'll know it, as I'm a subscriber, too, so please, don't all 700+ of you call it to my attention. :) --Rick =========== FINAL BLURB The Hungary Report is free to readers. To subscribe, send an email message to the following Internet address: hungary-report-request@hungary.yak.net containing (in the body of the message, not in the headers) the single word subscribe Conversely, to stop receiving Hungary Report, simply send to the same address (in the body of the message) the single word unsubscribe Please note: all mailing list suffer from frequent "error" addresses. If we have problems with sending to your address more than one week in a row, we will remove you from the list. If you haven't received the report for more than one week, feel free to enquire directly to Rick Bruner (but please wait for at least a week, as we're also just famously late in getting the thing out sometimes :) * * * Back issues of The Hungary Report are available on the World-Wide Web http://www.yak.net/hungary-report/ and via FTP host: ftp.yak.net directory: /pub/hungary-report/ login name: "ftp" password: your email address) * * * The entire contents of The Hungary Report is copyrighted by the authors. Permission is granted for not-for-profit, electronic redistribution and storage of the material. If readers redistribute any part of The Hungary Report by itself, PLEASE RESPECT AUTHORS' BY-LINES and copyright notices. Reprinting and resale of the material is strictly prohibited without explicit prior consent by the authors. Please contact the authors directy by email to enquire about resale rights. * * * For information on becoming a corporate sponsor of The Hungary Report, contact Rick E. Bruner by email. Feedback is welcome. Rick E. Bruner John Nadler Tibor Vidos or * * * For its briefs, The Hungary Report regularly consults the news sources listed below -- for information about subsriptions, contact them by email: The Budapest Business Journal <100263.213@compuserve.com> (and tell them what dwads they are for making us pay for issues at the newsstand); Budapest Sun <100275.456@compuserve.com>; Budapest Week and Hungary Around the Clock (same email address) <100324.141@compuserve.com>, and Central Europe Today (free online) . ================ END TRANSMISSION