INVESTrategy A külföldi működőtőke-beruházások vonzásának stratégiája megyében Sector analysis of (Summary)

INVESTrategy/ZMKIK/1/2013

A Zala Megyei Kereskedelmi és Iparkamara megrendelésére készítette a Budapesti Gazdasági Főiskola Gazdálkodási Kar, kutatócsoportja:

Dr. Solt Katalin főiskolai tanár, dékán Dr. Losoncz Miklós egyetemi tanár Zsupanekné Dr. Palányi Ildikó, BGF GKZ, főiskolai docens Dr. Antal Anita, BGF GKZ, főiskolai docens, Lambertné Katona Mónika, BGF GKZ, egyetemi adjunktus Deákné Gál Anikó, BGF GKZ, főiskolai adjunktus

Zalaegerszeg, 2013. szeptember

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Sector analysis of Zala County / Summary /

3.6.1. Vehicle manufacturing and mechanical engineering

Engineering industry

In 2010, the total number of enterprises was 2720 in the engineering industry with a seat of Zala County. The dominant legal form was Limited Liability Company (59 percent of the total), and few were sole proprietors (15 percent).

99 percent of the enterprises were Small and Medium Sized Enterprises in the engineering industry. 81 percent of them are micro, 13 percent are small, and 5 percent are medium-sized enterprises, while the proportion of large companies doesn’t reach 1 percent.

In 2009, 272 enterprises operated with foreign capital, of which 65 percent were 100 % foreign-owned enterprises. The following year, as for the number of enterprises, foreign investment decreased, but the number of 100% foreign owned enterprises increased. From 2009 to 2010 foreigners invested 16 percent more capital (28.1 billion HUF) into the engineering industry.

The distribution of enterprises by size-class in the engineering industry in Zala County, 2010

Source: Yearbook of Zala County, National Bureau of Statistics, 2011

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Some characteristic features of foreign owned engineering enterprises, 2009-2010 From From Foreign Foreign which: which: Number of Direct Number of Direct Name 100% 100% organizations Investment, organizations Investment, foreign foreign- billion HUF billion HUF owned owned Year 2009 2010

Data 272 178 179,2 267 181 207,3 Source: Yearbook of Zala County, National Bureau of Statistics, 2011

From the foreign owned enterprises of Zala County the engineering sector represents only 1 percent in 2010, and 8 percent of the industry as a whole.

In 2011, the number of employees were 4762 in Zala County, 97 percent of them were full-time. Nearly three-quarters of full-time employees (74 percent) have manual work because of the nature of the sector. The engineering industry gave work to almost the quarter of people in manufacturing.

The revenue production capacity of the enterprises of the sector in Zala County was in a progress, the revenue of the sector doubled between 2009 and 2011. Engineering enterprises mainly and in a growing extent sale for export. Engineering is the fifth biggest revenue production branch (from the 13 branches) in the manufacturing industry.

The development of sales revenue of engineering enterprises of Zala County, 2009-2011 (million HUF)

Source: Yearbook of Zala County, National Bureau of Statistics, 2011

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Manufacture of motor vehicles

In the vehicle manufacturing, the number of enterprises was 712 in 2010. The legal form of the enterprises was mainly Limited Liability Company.

The distribution of vehicle enterprises in Zala County by legal form 2010, (%)

Source: Yearbook of Zala County, National Bureau of Statistics, 2011

90 percent of the enterprises were Small and Medium Sized Enterprises in the sector of manufacturing of motor vehicle. 64 percent of them are micro, 13 percent are small, and 14 percent are medium-sized enterprises, while the proportion of large companies reaches 10 percent.

The distribution of enterprises by size-class in vehicle manufacturing in Zala County, 2010

Source: Yearbook of Zala County, National Bureau of Statistics, 2011

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In 2009, 167 enterprises operated with foreign capital, of which 65 percent were 100 % foreign-owned enterprises. The following year, both the number of enterprises with foreign investment and the number of 100% foreign owned enterprises increased. From 2009 to 2010 foreigners invested 4 percent more capital (88.8 billion HUF) into the engineering industry.

Some characteristic features of foreign owned vehicle enterprises, 2009-2010 From which: Foreign From which: Foreign Number of 100% direct Number of 100% direct Name organizations foreign- investment, organizations foreign investment, owned billion HUF owned billion HUF Year 2009 2010 Data 167 109 2 099,2 179 121 2 181,0 Source: Yearbook of Zala County, National Bureau of Statistics, 2011

From the foreign owned enterprises of Zala County vehicle manufacturing sector represented 13 percent both in 2009 and 2010. This amounts to 32 percent of total investment arriving to the industry.

In 2011, the number of employees were 1400 in Zala County, 98 percent of them were full-time. More than three-quarters of full-time employees (78 percent) have manual work because of the nature of the sector. Vehicle manufacturing industry gave work to 7 percent of the people employed in manufacturing sector.

The revenue production capacity of the enterprises of the sector in Zala County was in a progress, the revenue of the sector increased one third between 2009 and 2011. Vehicle manufacturing enterprises mainly and in a growing extent sale for export (nearly 90 percent). In the mentioned period the increase in revenue sales was owing to increased export sales as a whole.

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The development of sales revenue of vehicle manufacturing enterprises of Zala County, 2009-2011 (million HUF)

Source: Yearbook of Zala County, National Bureau of Statistics, 2011

3.6.2. Logistic services1

In the database of the National Bureau of Statistics the Sector of Transport and Storage is not devided into subsectors, so we can describe only the entire economic sector. This makes more difficult to analyse the current situation, as this sector contains all transport activitity (road, rail, air, water transport, passenger and freight transport, as well as pipeline transport), and only a small part represents the support activities for transportation. Transportation is a part of logistics, but it can be estimated that private entrepreneurs belonging to the sector principally deal with transportation and only a splinter group of them deals with other fields of logistics.

For a better summary lets specialize the main components of logistic services:  carriage  transportation  storing/warehousing  packaging

1 Külföldi tőke a régiókban. KSH 2012. december, Jelentés a szállítási ágazat helyzetéről, 2011. KSH 2012. november, Zala Megye statisztikai évkönyve 2011., Statisztikai tájékoztató. Zala megye 2013/1. KSH 2013. június

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 customs administration  postal services  inventory management  call center management etc.

The service level of Zala County can be characterized by the fact that only one certified logistic center operates in Zala County (Sprintcamion Zrt. -Sormás).

In Zala County 931 enterprises operated in the Sector of Transportation and Storage in March, 2013. More than half of them were private entrepreneurs (54 percent) and three of them were Public Limited Companies. The number of entrepreneurship increased by almost 20 percent in 2011 (at that time 785 entrepreneurship operated in this sector). This indicates that the performance of the sector has increased. (The Hungarian National Bureau of Statistics doesn’t publish regional data concerning this sector’s value added.)

Economic organizations functioning in the Sector of Transport and Carriage represented 2 percent of the total economic organizations of the County. At national level the sector contributes appr. 5 percent to national GDP, while 4,3% of the functioning enterprises run such activities. This way it is presumably valid also for Zala County that the contribution to value added slightly exceeds the proportion of enterprises.

At national level, 10 percent of full-time private sector employees work in the Sector of Transportation and Storage. In Zala County the proportion of the workers in the sector is just 7 percent which is nearly the same ratio as their share in enterprises.

However, it is remarkable that these enterprises made almost 8 percent of all investments of Zala County in the first quarter of 2013. More than half of the investments were spent on machines and vehicles (the county average is 25%).

The average gross and net earnings in the sector were constantly lower than the county average. The net earnings of manual workers in the first quarter of 2013 constituted 92 percent of the county average. During this period, it was also typical that the growth rate of the average gross and net earnings was lower relative to the average growth rate measured in the other sectors of the county.

The sizes of enterprises dealing with transporting and storage in Zala is well characterised by the number of economic organizations by size-class.

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The distribution of economic organizations by size-class in the sector of transportation and storage in Zala County, 2010

Source: Yearbook of Zala County, National Bureau of Statistics, 2011

In 2010, four enterprises of the sector had foreign interest which represents 5 percent of active enterprises. The share of foreign investment in these enterprises had reached 95% of the equity which shows that most of the enterprises were in 100 % foreign ownership. The enterprises with foreign ownership operating in the sector represents 2 % of the total enterprises with foreign ownership in Zala County. So the sector has the similar share in foreign capital and in total enterprises as well.

3.6.3. Furniture and wood works

Wood-industry

In 2011, 54 enterprises operated in wood industry in Zala County. Nearly 63 percent of the enterprises worked in the 6 branches of wood processing industry. The remaining part (37%) worked in the 4 branches of furniture industry. Analysing the production value of the sector we can state that the furniture industry provided nearly 53% of the production value in 2011, while wood processing industry provided the remaining 47% of the production value. Exports accounted for 81,3% of the total sales of wood industry companies. The proportion of export in sales exceeds 90 percent in furniture industry, while in wood processing industry it doesn’t reach 70 percent.

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Sales of enterprises operating in wood industry in Zala County, 2011

Source: National Bureau of Statistics

The graph shows that 3 branches of wood industry (sawn timber industry, wood panel industry and the manufacture of other furniture) give the main part of the sectors’ sales in the County. The production value of these 3 branches is 89 percent. 53.7 percent of the enterprises operates in these branches mainly in a legal form of Limited Liability Company.

Wood processing industry

34 enterprises operated in the County in 2011. According to the number of enterprises, nearly half of the enterprises worked in sawn timber industry. The manufacture of builders’ carpentry and joinery branch is also significant, as it contains one third of the enterprises.

As for the production value, sawn timber industry and wood panel industry are important in the wood processing sector, their production value exceeds 88 percent altogether.

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The distribution of production value in wood processing industry in Zala County, 2011

Source: National Bureau of Statistics

In 2011, exports accounted for 70 percent of the total sales in the wood processing industry of the County. As for the production value, 93 percent of export sales was achieved by two main branches (sawn timber industry and wood panel industry). In the case of 30 percent domestic sales as well, these two branches are important with a share of 74 percent. In domestic sales, a further two branches (manufacture of builders’ carpentry and joinery and manufacture of wooden containers) reached a slightly more than 10 percent share.

Furniture industry

In Zala County there were 20 enterprises in furniture industry in 2011. The biggest branch is the manufacture of other furniture which share exceeds 50 percent in the subsector. In the share ranking, enterprises in the branch of manufacturing of office furniture represents 30 percent.

As for the production value, the main branch of furniture industry is the manufacture of other furniture with a proportion of 90 percent.

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The distribution of production value in the furniture industry in Zala County, 2011

Source: National Bureau of Statistics

In 2011, the branch of manufacture of other furniture has reached a prominent share in all index numbers that characterises the sector. This branch gives 47 percent of the whole wood processing sectors’ annual sales value, gives 70 percent of the domestic sales, and its share in export sales reached 92 percent.

The National Bureau of Statistics publish only aggregate data for wood industry with specifying the sectors of wood processing industry, manufacture of articles of paper and paperboard, and printing.

For this sector we can state the followings: - The number of employees increased by nearly 7 percent between 2009 and 2011. The number of people employed in the sector was 1776 in 2011. - As for the structure of employment we can state that 89 percent were full-time employees. - The proportion of male employees was 67 percent in the sector’s full time workers. - The gross average earnings of the sector was 163 288 HUF in 2011, gaining the fourth place in manufacturing production with this figure. Gross wages in the sector were 13 000 HUF lower than the average wage in manufacturing production. - There was a 1.6 percent decrease in net average earnings in the sector since the previous year.

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3.6.4. Manufacture of building materials

In Zala County, 39 enterprises operated in the building materials industry in 2011. The number of enterprises was nearly the same both in the manufacture of rubber and plastic products (49 percent) and in the manufacture of non-metallic mineral products (51 percent). As for the aggregate number of the enterprises operating in these two subsectors (not just in building materials industry), 95 percent of them work in building materials industry.

The distribution of the number of building materials enterprises of Zala County, 2011

Source: National Bureau of Statistics, Directorship of Győr, Department of Zalaegerszeg

Most of the enterprises in building materials industry deal with manufacturing of other plastic products (nearly a quarter), while one fifth of them manufacture builders’ ware of plastic. All the other subsectors contain around 10 percent of the enterprises.

Examining the production value of the building materials industry, we found that the non-metallic mineral products subsector gives 61 percent of the production value of the sector, while manufacture of rubber and plastic products gives 39 percent. More than half of building materials production value comes from enterprises manufacturing ceramic and clay building materials.

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The sales of enterprises operating in building materials industry in Zala County, 2011

Source: National Bureau of Statistics, Directorship of Győr, Department of Zalaegerszeg

The target market of enterprises of the sector is mainly domestic: domestic sales accounted for 56 percent of total sales and 44 percent comes from export.

3.6.5. Manufacture of computers, electronic and optical products

The electronic sector is considered a leading branch of industry in Zala County. The enterprises operating in the subsector are mainly the affiliates of larger multinational companies, this way a summary statistic from their production or any other figures in the County is not available. We can have a look over the existing data, than we can describe the situation in Zala by performing national economic progresses of the subsector.

We could make detailed examination of the county from corporate analyses or interviews, but companies don’t provide opportunity for that.

In Zala County, 26 enterprises operated in the computer and electronic sector in 2011. The total number of employed persons of enterprises exceeded 4000, with which it stands in the second place among industrial branches. A larger number of employed persons worked only in the machinery industry. The number of employed persons in the

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The size of enterprises is relative small regarding the number of employees, half of the enterprises employ 1-9 full-time workers. One enterprise belongs to the medium- sized category (50-249 employees), and also one enterprise employs more than 250 persons in 2010. So it is obvious that the performance of the industry derives from the two large companies.

We know the role of foreign direct investment only on a regional level from the statistics. It is revealed that 0.5 percent of foreign-owned enterprises belong to this sector in Western .

The distribution of employees in manufacturing in Zala County, 2011

Source: Yearbook of Zala County, National Bureau of Statistics, 2011

The position of the industry is particular on national level as well. This branch of industry is considered the most important in the industry. As for the value of production, it stood on the second place year by year after car manufacturing. However it’s share in the last two years decreased.

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Source: Report on the performance of industry, 2012 National Bureau of Statistics, July 2013

The primary reason for the shrinking share was the decrease in production. The output dropped by 5.2 percent in 2011, and by 17.9 percent in 2012. The production of the subsector is influenced by some multinational companies mainly producing for export. A multinational company employing more than 250 persons gives 95 percent of the production. The subsector has a 20 percent share in export sales of the manufacturing industry. The reason for the decline was mainly due to the loss of market of domestic enterprises. Larger companies transfered their production to Asia, thus the number of people employed also decreased.

These processes had their effect also in Zala County, but the numerical value of it is not known. However from different press releases, it is revealed that Flextronics in Zalaegerszeg implemented a major staff reduction2.

3.6.6. Tourism and catering

Tourism

In Zala County, 229 commercial accomodation existed in 2011, with a number of 12 573 rooms and 32 531 bed places.

2 Flextronics lays off 1100 people. http://vallalkozoi.negyed.hu/vnegyed/20121130-ezeregyszaz-embert-bocsat-el-a- flextronics-zalaegerszegen.html 15

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The distribution of commercial accomodation in Zala County, 2011

Source: National Bureau of Statistics

The capacity utilization of commercial accomodation rooms was 42.8 percent, while the capacity utilization of bed places was 26.2 percent in 2011. As for the capacity utilization of each accomodation types, the average value was significantly reduced by the 10 percent utility of the community hostels. The room capacity of commercial accomodation grew till 227 percent in the county from base year 2000, which caused a 142 rise in the number of places. Due to investments, the number of guests also arised by 52 percent from base year 2000. As for the number of guest nights, the share of foreign visitors dropped from 50 percent to 31 percent during that period. Analyzing average lenght of stay, we found a decline both in the number of domestic guests and foreign visitors (25 and 20 percent each).

Analyzing the structure of the number of guest nights, the share of Hévíz and is 60-70 percent both in the number of guests and the number of tourism nights. The number of guest nights of European visitors represented 95 percent in the County. The share of Germany and Austria is significant with 26 and 24 percent, but Russia (8.3 percent), Ukraine (7.6 percent) and Czech Republic (6.7 percent) is also considerable. As for the number of guest nights, two countries (Germany and Russia) were the most active in 2011, they represented 55 percent of the total number of guest nights in the County. Tourists arriving from these countries have the longest average lenght of stay at commercial accomodation, which was an average 9 nights at hotels and 8 nights at other accomodation establishments.

The commercial accomodation gross revenues in 2011 consisted of the following items: 48 percent came from accomodation fee, 31 percent from other revenues and 21 percent from Food and Beverage. The total annual gross revenues of the sector was produced by hotels in the County.

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Catering In Zala County, 1999 catering units existed in 2011. Compared to the previous year, the number of enterprises dropped by 2.1 percent in the subsector.

The number of catering units by type in Zala County, 2011

Source: National Bureau of Statistics

Two types of catering units are significant in the sector. The share of restaurants, snack bars, taverns and music clubs reached 86 percent in 2011. These catering units were managed by sole proprietors with 43 percent in the studied period. In case of taverns, music clubs and confectioneries the share of sole proprietors exceeds the average value by nearly 10 percent. Concerning employment and income level, the database of National Bureau of Statistics presents data only on accomodation and catering economic branch collectively. Regarding the sequence of the data we can state the followings:  In 2011 enterprises employed 5076 persons in the economic branch. In 2009 the employment was really low with 4408 persons employed, while the growth rate of employment was an average 5 percent in 2010 and 9 percent in 2011.  In 2011 full-time employees gave 76 percent of total employed in the branch, with a higher rate of women (60 percent).  Micro-enterprises (1-9 persons) gave work to 40 percent of the employees, while large companies (more than 250 persons) employed 25 percent.  The gross average earnings of employees were 128 798 HUF in 2011, which is the lowest value in economic branches. It falls behind the county average by 31 000 HUF.  The net average earnings of employees were 1.4 percent higher in 2011 as compared to the previous year.

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