1 U.S. Department of State FY 2001 Country Commercial Guide: Hungary The Country Commercial Guide for Hungary was prepared by U.S. Embassy Budapest and released by the Bureau of Economic and Business in July 2000 for Fiscal Year 2001. International Copyright, U.S. & Foreign Commercial Service and the U.S. Department of State, 2000. All rights reserved outside the United States. TABLE OF CONTENTS I. EXECUTIVE SUMMARY ......................................................................................................... 1 II. ECONOMIC TRENDS AND OUTLOOK................................................................................ 6 A. Major Trends and Outlook......................................................................................................... 6 B. Principal Growth Sectors ........................................................................................................... 8 C. Government Role in the Economy............................................................................................. 8 D. Balance of Payments Situation ................................................................................................10 E. Adequacy of Infrastructure....................................................................................................... 10 III. POLITICAL ENVIRONMENT ............................................................................................. 11 A. Nature of Political Relationship with the United States .......................................................... 11 B. Major Political Issues Affecting the Business Climate ........................................................... 12 C. Brief Synopsis of the Political System .................................................................................... 12 IV. MARKETING U.S. PRODUCTS AND SERVICES ............................................................ 13 A. Distribution and Sales Channels ..............................................................................................13 B. Use of Agents and Distributors................................................................................................ 14 C. Franchising............................................................................................................................... 15 D. Direct Marketing...................................................................................................................... 15 E. Forms of Business .................................................................................................................... 16 F. Joint Ventures/Licensing .......................................................................................................... 17 G. Steps to Establishing an Office................................................................................................ 17 H. Selling Factors/Techniques...................................................................................................... 18 I. Advertising and Trade Promotion ............................................................................................. 19 J. Pricing Issues ............................................................................................................................ 22 K. Sales Service/Customer Support.............................................................................................. 22 2 L. Selling to the Government ....................................................................................................... 22 M. Need for a Local Attorney/Accountant ................................................................................... 23 N. Performing Due Diligence/Checking Bona Fides of Banks/Agents/Customers ..................... 24 V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT ..................................... 24 A. Best Prospects for Non-Agricultural Goods and Services....................................................... 24 1 - COMPUTERS AND PERIPHERALS (CPT).................................................................... 24 2 - INTERNET SERVICES ..................................................................................................... 25 3 - TRAVEL/TOURISM SERVICES (TRA) ......................................................................... 26 4 - FRANCHISING (FRA)....................................................................................................... 28 5 - COMBINED HEAT AND POWER GENERATION (CHP) AND OTHER DISTRICT-HEAT- ING EQUIPMENT AND SERVICES (ELP, GSV)................................................................. 29 B. Best Prospects for Agricultural Products ................................................................................. 31 1. SEED ................................................................................................................................... 31 2. SOYBEAN MEAL .............................................................................................................. 31 3. BOVINE SEMEN................................................................................................................32 4. POULTRY BREEDING STOCK ....................................................................................... 32 5. DRIED FRUITS & NUTS (INC. PEANUTS) .................................................................... 32 6. BEEF .................................................................................................................................... 33 C. Significant Investment Opportunities ...................................................................................... 33 VI. TRADE REGULATIONS AND STANDARDS ................................................................... 34 A. Trade Policies and Barriers...................................................................................................... 34 B. Customs Valuation................................................................................................................... 35 C. Import Licenses........................................................................................................................ 36 D. Export Controls........................................................................................................................ 36 E. Import/Export Documentation Requirements .......................................................................... 36 F. Temporary Entry ...................................................................................................................... 37 G. Labeling, Marking Requirements ............................................................................................ 37 H. Prohibited Imports ................................................................................................................... 38 I. Standards ................................................................................................................................... 38 J. Free Trade Zones/Warehouses ..................................................................................................39 K. Membership in Free Trade Arrangements ............................................................................... 39 VII. INVESTMENT CLIMATE .................................................................................................. 40 A1. Openness to Foreign Investment ....................................................................................... 40 A2. Conversion and Transfer Policies ...................................................................................... 42 A3. Expropriation and Compensation ...................................................................................... 42 A4. Dispute Settlement............................................................................................................. 43 A5. Performance Requirements/Incentives .............................................................................. 43 A6. Right to Private Ownership and Establishment ................................................................. 44 A7. Protection of Property Rights ............................................................................................ 45 A8. Transparency of the Regulatory System ............................................................................ 46 A9. Efficient Capital Markets and Portfolio Investment .......................................................... 47 A10. Political Violence............................................................................................................. 48 A11. Corruption........................................................................................................................ 49 B. Bilateral Investment Agreements......................................................................................... 49 3 C. OPIC and Other Investment Insurance Programs ................................................................ 49 D. Labor .................................................................................................................................... 50 E. Foreign Trade Zones/Free Ports ........................................................................................... 50 F. Foreign Direct Investment Statistics .................................................................................... 51 VIII. TRADE AND PROJECT FINANCING ............................................................................. 51 A. Description of the Banking System