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U.S. Department of State 
Hungary Country Commercial Guide 
Office of the Coordinator for Business Affairs 



                          COUNTRY COMMERCIAL GUIDE (CCG)
                                       FOR
                                     HUNGARY
                                FISCAL YEAR 1996


PRODUCED BY:
THE COMMERCIAL SECTION, 
THE FOREIGN AGRICULTURAL SERVICE
AND THE ECONOMIC SECTION OF 
THE U.S. EMBASSY, BUDAPEST



This Country Commercial Guide (CCG) presents a comprehensive look at 
Hungary's commercial environment through economic, political and market 
analyses.  

The CCGs were established by recommendation of the Trade Promotion 
Coordinating Committee (TPCC), a multi-agency task force, to consolidate 
various reporting documents prepared for the U.S. business community.  
Country Commercial Guides are prepared annualy at U.S. Embassies through 
the combined efforts of several U.S. governement agencies.  




Table of Contents

I.     Executive Summary

II.    Economic Trends and Outlook
       A.  Major Trends and Outlook
       B.  Principal Growth Sectors
       C.  Government Role in the Economy
       D.  Balance of Payments Situation
       E.  Infrastructure Situation

III.   Political Environment
       A.  Bilateral Relationship with the United States
       B.  Major Political Issues Affecting Business Climate
       C.  Brief Synopsis of Political System

IV.    Marketing U.S. Products and Services
       A.  Distribution and Sales Channels
       B.  Use of Agents and Distributors, Finding a Partner
       C.  Franchising
       D.  Direct Marketing
       F.  Joint Ventures/Licensing
       G.  Steps to Establishing an Office
       H.  Selling Factors/Techniques
       I.  Advertising and Trade Promotion
       J.  Pricing Product
       K.  Sales Service/Customer Support
       L.  Selling to the Government
       M.  Protection Your Product from IPR Infringement
       N.  Need For Local Attorney

V.     Leading Trade Prospects For U.S. Business
       A.  Best Trade Prospects: Industry Sectors
       B.  Best Trade Prospects: Agricultural Sectors

VI.    Trade Regulations and Standards
       A.  Tariffs and Import Taxes
       B.  Customs Valuation
       C.  Import Licenses
       D.  Export Controls
       E.  Import/Export Documentation
       F.  Temporary Entry
       G.  Labeling and Marking Requirements
       H.  Prohibited Imports
       I.  Standards
       J.  Free Trade Zones
       K.  Special Import Provisions
       L.  Membership in Free Trade Arrangements

V.     Leading Sectors for U.S. Exports and Investment
       A.  Best Prospects for Non-Agricultural Goods and Services
       B.  Best Prospects for Agricultural Products
       C.  Significant Investment Opportunities

VI.    Trade Regulations and Standards
       A.  Trade Barriers
       B.  Customs Valuation
       C.  Import Licenses
       D.  Export Controls
       E.  Import/Export Documentation
       F.  Temporary Entry
       G.  Labeling, Marking Requirements
       H.  Prohibited Imports
       I.  Standards
       J.  Free Trade Zones/Warehouses
       K.  Special Import Provisions
       L.  Membership in Free Trade Arrangements

VII.   Investment Climate
       A.  Openness to Foreign Investment
       B.  Conversion and Transfer Policies
       C.  Expropriation and Compensation
       D.  Dispute Settlement
       E.  Political Violence
       F.  Performance Requirements/Incentives
       G.  Right to Private Ownership and Establishment
       H.  Protection of Property Rights
       I.  Regulatory System: Laws and Procedures
       J.  Bilateral Investment Agreements
       K.  OPIC and Other Investment Insurance Programs
       L.  Labor
       M.  Foreign Trade Zones/Free Ports
       N.  Capital Outflow Policy
       O.  Foreign Investment Statistics
       P.  Major Foreign Investors

VIII.  Trade and Project Financing
       A.  Description of Banking System
       B.  Foreign Exchange Controls Affecting Trading
       C.  General Financing Availability
       D.  Export Financing (Methods of Payment)
       E.  Available Export Financing and Insurance
       F.  Available Project Financing
       G.  List of Banks with Correspondent U.S. Bank

IX.    Business Travel
       A.  Business Customs
       B.  Travel Advisory and Visas
       C.  Holidays
       D.  Business Infrastructure

X.     Appendices
       Appendix A: Country Data
       Appendix B: Domestic Economy
       Appendix C: Trade
       Appendix D: Investment Statistics
       Appendix E: U.S. and Country Contacts
       Appendix F: Market Research
       Appendix G: Trade Event Schedule



I.  EXECUTIVE SUMMARY

With over $ 8 billion invested over the past five years, Hungary is 
Central Europe's leader in attracting foreign investment.  This amount 
is nearly double that invested in any other Central European country.  
Moreover, nearly half of all U.S. investment in the region has gone to 
Hungary.  A major reason why Hungary has achieved such a record despite 
being a small land-locked country the size of Indiana and with a 
population close to that of Ohio is that Hungary's economic changeover 
started decades ago, as one of the pathbreakers to market reform under 
the communist system.  While many of her sister COMECON states were 
increasing their integration eastward, Hungary sought and succeeded in 
many respects to open its trade and markets to the West.  General 
Motors, Rockwell, John Deere and others were already doing business in 
Hungary in the mid-seventies.  Hungary was well-positioned to intensify 
its many relationships with Western and American firms as the major 
changes of the late eighties and nineties took place. 

A second aspect in Hungary's favor, one that is applicable to the rest 
of Central Europe, is the region's long-term growth prospects.  While 
some estimates project a tripling of imports by the year 2000, a 
conservative estimate would be a doubling of  import demand over the 
next five years.  Many American firms recognize the strategy of 
establishing presence and being poised to take advantage of this long-
term growth.  Over 400 U.S. firms are actively doing business in Hungary 
and the American Chamber of Commerce in Hungary is one of the largest in 
Europe.  As a Central European base, Hungary's advantages are location 
and skilled labor.  Budapest is two hours away from the Austrian border 
while labor costs in Hungary are one-seventh of that in Austria (this 
figure refers to a sample labor cost provided by one of the U.S.'s Big 
Three automakers).  

For 1995, Hungary has major economic tasks ahead which have significant 
commercial consequences.  First and foremost is the next phase of 
privatizations of the state sector.  Such major industries as oil, gas, 
and energy production are all scheduled to be relinquished from state 
hands.  A second and related task is to address the serious state debt 
levels.  Unpopular but necessary measures are being taken by the 
government to rationalize prices especially in the energy sector, raise 
revenues through an import surcharge, introduce user fees such as 
university tuition as well as confront costs in such sacred areas as 
social services.  The government has taken such difficult steps with the 
understanding that a trim and balanced economy will reap long-term 
benefits toward lowering inflation, keeping unemployment within 
manageable limits, and in strengthening trade and stimulating foreign 
investment.  

Hungary development into a full market economy is fueling industrial 
demand for new technologies as well as releasing pent-up consumer 
appetites.  Sectors such as telecommunications, energy, transport and 
the environment continue to grow.  Over the past five years, Hungary has 
also developed industry strengths in the automotive field (with major 
investments by GM, Ford, Audi, Suzuki) and with an expanding  automotive 
sourcing industry in plastics and electronics.  In other areas, 
chemicals, food processing, construction, and especially services such 
as banking, tourism, franchising, and services related to information 
management hold very attractive business prospects.  

Country Commercial Guides are available on the National Trade Data Bank 
on CD-ROM or through the Internet.  Please contact 1-800-STAT-USA for 
more information.  To locate country commercial guides via the Internet, 
please use the following world wide web address:  WWW.STAT-USA.GOV.  
CCGs can also be order in hard copy or on diskette from the National 
Technical Information Service (NTIS) at 1-800-553-NTIS.  



II.  ECONOMIC TRENDS AND OUTLOOK

A.  Major Trends and Outlook

Hungary's economic reform process received a big boost in March, 1995 
with the announcement of a stabilization program designed to decrease 
the budget deficit by 170 billion Forints (3-4 percent of the GDP) and 
decrease the current account deficit to USD 2.5 billion from 1994's 
record high of about USD 4 billion.  The program cut government 
expenditures; increased revenues; devalued the forint by 9 percent; 
introduced a crawling peg exchange rate policy; added an 8 percent 
surcharge on imports; and called for wage controls at state-owned 
companies.  

As of mid-1995, the Hungarian economy is characterized by the following 
combination of macro and micro indicators: 

  o  Real GDP increased by 2-3 percent in 1994 for the first time in 
four years and is expected to increase by 0-2 percent in 1995.

  o  Hungary continues to have the highest per capita debt burden in 
Europe:  USD 31.6  billion in mid-1995.  Rising interest payments on the 
debt place an extremely heavy burden on the economy.

  o  The current account deficit reached a record high of USD 4.0 
billion in 1994.  If the measures introduced in March, 1995 have the 
desired effect, the current account deficit could decrease to USD 2.5 
billion in 1995.  This figure, however, counts on foreign direct 
investment of approximately USD 1.5 billion in 1995. 

   o  Unemployment has leveled off at about 10 percent in mid 1995, but 
is expected to rise slightly as a result of privatization and 
restructuring at large state-owned companies.  This is a decrease from 
the peak of 13.6 percent reached in March 1993.  It should be noted, 
however, that unemployment is approximately 20 percent in some eastern 
counties and is as high as 75 percent among certain minority groups such 
as gypsies, while in Budapest the unemployment levels are significantly 
lower than the 10 percent average.

  o  As a result of the March 12 program, inflation is expected to peak 
around 30-32 percent in June/July, 1995 but average in the mid-to-high 
twenties for the whole year.  This is up from 18.8 percent average 
annual inflation in 1994.

  o  Trade has been successfully reoriented from East to West.  
Approximately 70 percent of Hungary's total trade is with OECD 
countries; nearly 50 percent is with the EU.  Hungary is also trying to 
stimulate trade with neighboring countries in the region, but with 
limited success so far.

  o  Although there was relatively little privatization in late 1994 and 
early 1995, the government promises that it will be sped up as the 
result of the passage of the privatization law in May 1995.  The new law 
hopes to make the entire process more transparent and allows for 
"simplified" privatization of smaller companies.  Some large utilities 
are expected to be privatized in 1995.  

First quarter 1995 data provides some optimism.  Industrial production 
was higher than in 1994, growing by 11 percent.  Industrial exports grew 
by 34 percent and investment increased by 10-11 percent over 1994 
figures.  The construction industry experienced growth in the first 
quarter of 1995, continuing a trend that started in 1994 after a decade 
of stagnation or decline.

B.  Principal Growth Sectors

Hungary is just beginning to experience economic growth after a five 
year hiatus.  The government believes that Hungary could become a 
regional transportation, infrastructure, informatics, and financial hub 
and sets this out as one of its main goals in early drafts of its 
Modernization Program.

The following sectors are considered to have substantial growth 
prospects in the coming years:  

  o  Telecommunications:  Approximately one third of the Hungarian 
telephone company (MATAV) has been privatized and further privatization 
(up to 51 percent) is expected to begin in 1995.  Ameritech and Deutsche 
Telecom are the major shareholders.  Two competing cellular companies, 
Westel 900 and Pannon GSM, have cellular services in 80 percent of the 
country.  Although the telecom sector in Hungary was long 
underdeveloped, recent privatization efforts and foreign investment will 
significantly improve telecom services.

  o  Services:  Services, including financial services and advertising 
represent a growing industry in Hungary. Since this sector is relatively 
new, it is difficult to collect data on the number of service firms 
entering the economy.  It is clear, however, that this sector is one of 
the primary growth sectors.

  o  Construction:  In 1994, construction has picked up for the first 
time in approximately 10 years.  Observers in Hungary believe this could 
well be a growth sector over the next couple years.  In particular, 
construction is expected to pick up considerably when the war in the 
former Yugoslavia reaches its end.

  o  Food Processing:  Hungary has an outstanding agricultural base but 
significant modernization is required in all fields including the food 
processing sector.  Formerly, food processing was functional and 
minimal, with little value-added.  Today, much state of the art food 
processing technology is available though not widespread.  Tetra paks, 
for example are common for most juices sold.  Given traditional 
strengths of Hungary in this field, an infusion of new technology could 
have very significant results. 

  o  Automotive Industry:  Major companies, including Ford, General 
Motors, Audi, and Suzuki have established multi--million dollar 
investments for auto-assembly and/or engine component manufacture.  
Hungary has targeted increased investment in this sector as a primary 
goal.  While domestic demand for cars is one consideration, the basic 
rationale for automotive production in Hungary continues:  skilled 
workers; a broadening automotive supplier network; a stable economy; and 
a highly advantageous location. 
 
C.  Government Role in the Economy

Since 1989, the private sector in Hungary has grown from approximately 
20 percent to over 60 percent of GDP.  The socialist-led government 
elected in 1994 stated its commitment to accelerate the privatization 
program, but to date the process has been slow.  Since the collapse of 
communism, the state has liquidated or privatized 50 percent of its 
holdings and aims to increase this figure to 75 percent.  Government 
spending in 1994 equaled 59.5 percent of gross domestic product, with 
cash social benefits accounting for the largest segment.  This 
percentage puts Hungary behind the Czech Republic and Poland in reducing 
the role of government in the economy.

D.  Balance of Payments Situation

Hungary continues to face a very serious balance of payments situation.  
The current account deficit in 1994 reached $3.8 billion and without 
corrective measures could have reached  $4 billion by year-end 1995.  As 
a result of the belt-tightening fiscal and restrictive monetary policies 
announced in March, the government originally estimated that the current 
account deficit would be under $3 billion in 1995; however reliable 
sources have become less optimistic, forecasting a current account 
deficit exceeding $3 billion.  Exports increased in the first quarter of 
1995 and are expected to continue to do so in the rest of the year.  The 
combination of the 9 percent March devaluation, the move to a pre-
announced crawling peg exchange rate regime, and the introduction of an 
8 percent surcharge on imports are expected to help decrease the current 
account deficit.    

E.  Infrastructure Situation

Motorways:  Hungary's transportation infrastructure is good compared to 
other countries in the region.  While Hungary is just now expanding to 
multi-lane limited access highways, the country does have a good network 
of high grade two-lane highways.  Paved roads connect all major cities 
and most rural towns, although one may encounter dirt roads in smaller 
villages in eastern Hungary. 

Railways:   Hungary has an extensive railway system which links large 
and medium size cities.  Approximately 158 million passengers and 43 
million tons of goods are transported annually across 7,600 kilometers 
of tracks (of this 2,184 kilometers is electrified). 

Air:  Hungary's major airport, Ferihegy, is located in Budapest.  The 
airport operates from two terminal; a brand new terminal was completed 
in 1993.  Further expansions and additions are underway.  There is 
virtually no domestic air service in Hungary except a few services 
during the summer months. Some larger cities maintain airports for 
private aircraft and there are plans to transform former Soviet air-
bases into domestic passenger and cargo airfields.

Telecom:  Hungary had one of Europe's least developed telecommunications 
systems with an installed base of 1.5 million lines (about 39 percent 
accounted for by Budapest) and with a penetration rate of 15 lines per 
100 persons resulting in a call completion rate of only 40 percent.  
Major investments by the Hungarian Telephone Company's two foreign 
minority owners  (Ameritech and Deutsche Telecom) has resulted in 
substantial improvements.  Moreover, recent new technologies such as 
Motorola's Wireless Local Loop, are expected to rapidly bring phone 
service to many parts of Hungary within a matter of months.

Utilities:  Nearly 50 percent of Hungary's electricity is generated by 
the Paks nuclear facility; the remainder is generated by coal-, lignite- 
or petroleum-fired power plants.  Gas usage is growing and will likely 
expand as this sector comes under privatization.  The privatization of 
the power generating system in Hungary is also expected to boost 
efficiencies as well as inject modern technology into the system, both 
for production as well as address environmental concerns.   


CHAPTER III.  POLITICAL ENVIRONMENT

A.  Bilateral Relationship with the United States

Bilateral relations between the United States and Hungary continue to 
expand and strengthen.  As early as 1989, the U.S. Government designated 
Hungary as eligible for various economic assistance programs as well as 
a recipient of trade preferences.  The United States supports Hungary's 
desire to integrate itself into Western political, economic and security 
institutions.  For example, the United States strongly encourages 
Hungary's entry into the OECD, and into the European Union.  The United 
States has been a major proponent of Partnership For Peace (PFP) which 
establishes a relationship between countries in the region and NATO.  
Hungary in turn has endorsed PFP. 


B.  Major Political Issues Affecting the Business Climate

Average Hungarians, who in general are internationally-minded and well- 
educated, are ambivalent at best to the role of foreign business in 
their country.  Political concerns do arise over bread-and-butter issues 
such as  unemployment, inflation, crime, or declines in living 
standards.  There is also a related debate over what is perceived as the 
sell-off of national treasures into foreign hands.  Often such arguments 
are used as political footballs against the opposition group.  

The current leadership has been supportive of foreign and U.S. trade 
interests.  Prime Minister Horn has made privatization, particularly in 
the energy sector, one of his top priorities.  The recent dismissal of a 
cabinet member was due reportedly to foot-dragging on privatization.  
The U.S. business community continues to enjoy access to decision-makers 
in the Hungarian Government and in general, U.S. business 
representatives consider their concerns to be largely taken into 
account.  The recent five city visit to the United States by Prime 
Minister Horn (June 1995) further enhanced commercial contacts and 
provided the Prime Minister with an even broader understanding of the 
U.S. free enterprise system.   


C.  Brief Synopsis of the Political System

Hungary is a parliamentary democracy with a freely elected legislative 
assembly.  Prime Minister Gyula Horn, the leader of the Hungarian 
Socialist Party, heads a coalition Government which was formed after the 
1994 national elections.  The Socialist Party won with a plurality of 
54% of the votes, based on an election campaign focused largely on 
economic issues and the substantial decline in living standards since 
1990.  A heavy turnout of voters swept away the right-of-center 
coalition but soundly rejected the extremists on the right and left side 
of the political spectrum.  The new Socialist-led Government remains 
committed to a market economy, to preserve political rights, and to seek 
a historical reconciliation with Hungary's neighbors.  


CHAPTER IV.  MARKETING U.S. PRODUCTS AND SERVICES

o  Distribution and Sales Channels

Hungary's distribution system is slowly being overhauled.  
Traditionally, the service-oriented supply chain had been rigidly 
segmented:  production; intermediate services (i.e., transport, finance, 
insurance); wholesaling; and retailing.  In changing to a new market 
environment, the lines of demarcation between these sectors is blurring.  
This is especially true in the food and non-food (consumer goods) market 
segments.  For industrial products and raw material markets, progress 
toward a Western-style distribution system is moving at a slower pace.  

Hungary's wholesale consumer products sector was controlled by several 
state-owned companies which operated regionally across Hungary with 
marginal consideration for consumer needs.  In a reversal of those 
times, private competition has intensified with many smaller/medium 
sized companies filling market niches and offering integrated services.    

Hungary's retail sector now consist of largely privately-owned 
corporations in contrast to the smaller-family-run stores of earlier 
times.  In general, department stores, supermarkets and larger specialty 
stores are also much more prominent than a few years ago.  Examples 
include Metro (Germany), Michelfeit (Austria), Ikea (Sweden), Baumax 
(Germany), Humanic (Austria) and Julius Meinl (Austria).  Moreover, many 
Hungarian firms such as the Fotex Holding Co., are well diversified and 
integrated.  Fotex is involved in such diversified market segments as 
optical/film developing, records/CDs/tapes), household appliances/
consumer electronics, cosmetics/household cleaning products and 
furniture.   Another trend in Hungarian marketing is a new-found 
responsiveness to consumer demands in such areas as quality, price 
consciousness, as well as environmentally-safe products.  Consumer-
campaigns, special offers, discounts are becoming more common marketing 
practices in Hungary today. 

A major drawback to doing business in Hungary for local entrepreneurs is 
the difficulty of obtaining business loans.   Interest rates are 
approaching 40% and collateral requirements are onerous.  As a result, 
smaller start-up businesses are capitalized by family savings.  Another 
issue for local entrepreneurs is the lack of reasonably-priced 
commercial space.  Much commercial real estate is still owned by 
municipal district councils, with renters taking full advantage to 
sublet at exorbitant rates.  
 
On March 12th, the Hungarian Government introduced measures to curb the 
growing state budget deficit.  Among the measures taken were curtailing 
maternity support, instituting a token tuition system for universities, 
and an import surcharge.  The net effect may mean a dampening of 
consumer spending in some segments of the population.  Consumer spending 
is also being pinched by price rationalizations in electricity (up 71%), 
natural gas (up 56%), gasoline (up 30%), as well as higher telephone 
rates (increased 10.2%).   

o  Use of Agents and Distributors; Finding a Partner

The use of agents and distributors is a basic method of market entry for 
foreign firms.  In some instances, American or West European managers 
spearhead the entry and later turn management over to local staff.  In 
other instances, operations may not require the transplanting of foreign 
managers and instead hire the initial management team locally.  On the 
latter, common wisdom prescribes that despite a Hungarian workforce that 
is on the whole quite competent and skilled, the greater the training 
invested in staff, the greater the chances for successful operations.   

The Commercial Service of the U.S. Embassy can provide a head-start to 
firms seeking an agent or distributor in Hungary through the ADS service 
or Gold Key program.  Further information can be obtained by contacting 
the local ITA District Office or CS/Budapest (see contact numbers at 
end).  Hungary has benefitted from a steady stream of newly trained 
business graduates, taught at schools modeled on U.S. MBA programs.  In 
addition, Hungary has drawn many Americans with MBA backgrounds seeking 
challenging positions; some are coming to Hungary with substantial work 
experience.  The supply of top-quality managerial talent is still 
modest, but in comparison to the rest of Central Europe, Hungary has 
more than its share of successful business talent.    

o  Franchising

Franchising has been very popular and successful in Hungary though 
concentrated in the food service sector.  Budapest, for that matter, 
exhibits a more American appearance than most Central European capitals 
with the prevalence of "fast-food" restaurants such as Burger King, 
McDonalds, Wendy's, Pizza Hut, Kentucky Fried Chicken etc.  Outside of 
this market segment, franchising for other services such as dry cleaning 
and car washing has been limited.  One prime exception is the Fotex 
photo/optics chain noted earlier.  Franchising is still under-utilized, 
when one considers such needs as automotive parts/repair, hardware 
stores, fabric shops, children's toys etc.  Further opportunities are 
noted in the best prospects section of this report.   

o  Direct Marketing

Direct marketing is still in its initial stages.  Telephone and direct 
mail solicitation are only now being exploited, due in part to past poor 
telephone access (including frequently changing numbers) and in part 
because of the lack of familiarity with such marketing techniques.  
Alternate forms of marketing such as personal presentation marketing 
have been successfully employed by such firms as Avon, Amway, Oriflame 
(Sweden) and Tupperware.  With the increasing penetration of cable TV, 
home shopping channels are available to a growing number of the 
population.

o  Joint Ventures/Licensing

The term "joint venture" is used in Hungary to refer to any venture 
which involves foreign participation.   In the broadest sense, American 
business strengths combined with Hungarian assets (not the least of 
which is a reputation for ingenuity) can create a powerful business 
operation.  However, U.S. partners need to gauge all aspects of such a 
business relationship such as a lingering legacy of inefficiencies.  
Some ventures can become mired in the partner's old-style management or 
in a passive resignation to bureaucracy.  Where the operation is still 
in state hands, a forthcoming privatization may pose concerns or 
disruptions for the JV.  Promoting an efficient workforce, or taking 
hard decisions on employment levels requires continuity and shared goals 
on behalf of all parties in management.  The time and effort in 
achieving these goals can be substantial and should be weighed against 
such alternative business options as a contractual relationship, the 
privatization of the target partner, or a greenfield operation.  
Needless to say a good working relationship with the local partner prior 
to moving into a joint-venture, along with a strong local legal counsel 
(representing  the U.S. partner), are keys to a successful joint-
venture.     

In establishing a joint venture, the following information must be 
submitted to the local Court of Registration:  name, headquarters, 
initial capitalization, members and shares, and the articles of 
association (deed of foundation for single person companies).  The 
articles of association must be countersigned by a Hungarian attorney.  
The founding of the company must be reported to the court within 30 
days.  Following submission of the information, the court will act on 
the submission within 60 days.  If this period has expired without the 
foundation being challenged by the court, registration of the company is 
assumed approved.  The registration fee charged is 2 percent of initial 
capital or a maximum HuF 90,000.  Pursuant to the law, the company is 
required to announce its creation in an official gazette. 

o  Steps to Establishing an Office

A commercial office must be registered with the local Court of 
Registration (see previous section) and with the Ministry of Industry & 
Trade prior to the start-up of activities.  There are two basic forms 
that a commercial office can assume in Hungary: 1) a representative 
office or, 2) an information and service office.  Based on the form 
chosen, there are certain restrictions.

Representative offices do not provide legal protection to foreign 
companies.  Activities may include: negotiation of commercial contracts; 
maintenance of consignment stocks and customer service related to these 
products; informational and promotional activities.

An information and service office is not permitted to engage in trade, 
but is allowed to disseminate information about the firm's products and 
service, provide technical support and advertise.  The words "trade" or 
"trading" cannot appear in the company's name.  

All businesses in Hungary must obtain a tax number from the National 
Bank.  

Foreign business representatives in Hungary should be advised that 
establishing personal residency is becoming increasingly onerous as the 
government attempts to crack down on illegal residents.  

o  Selling Factors/Techniques

Brand awareness is not equal to Western European levels, though 
purchasing decisions are increasingly subject to sophisticated print and 
electronic media techniques.  Billboards and kiosks are layered with the 
latest ads, skewed to young people and the rising middle class, with 
promotions of "trendy" Western life-styles.  For the majority of 
Hungarian consumers, price and traditional habits (i.e. frequenting the 
local shopkeeper) still largely govern purchasing habits.   

o  Advertising and Trade Promotion

Most Hungarian firms engage in some form of advertising.  The leading 
users of advertisements are subsidiaries of international corporations, 
especially in the consumer product sector.  The most popular media (in 
order of preference) are television, radio, press, and outdoor 
billboards/signs.   

The Domestic Trade Law prohibits all forms of advertisement (except 
point-of-sale) for tobacco products, alcoholic beverages and 
pharmaceuticals.  The Competition Law prohibits advertisements which 
mislead consumers or endanger the reputation of competitors.

LIST OF NEWSPAPERS, PERIODICALS

Major dailies:

Napi Gazdasag (Daily Economics)
1135 Budapest
Csata u. 32.
Tel: 270-4349, 149-0305
Fax: 140-8111
Mr. Adam Danko - chief editor

Vilaggazdasag (World Economics)
1016 Budapest
Naphegy ter 8.
Tel: 175-6722/1130, 202-4962
Fax: 175-4191
Mr. Andras Varga - chief editor

Nepszabadsag (People's Freedom)
1034 Budapest
Becsi Ut 122-124
Tel: 250-1680
Fax: 168-9098
Mr. Pal Eotvos - chief editor

Major Weeklies and Periodicals:

Budapest Business Journal (English language)
1053 Budapest
Ferenciek tere 7-8.
Tel: 261-6088
Fax: 118-0215

Budapest Week (English language)
1067 Budapest
Eotvos u. 12.
Tel: 268-1450
Mr. Tibor Szendr_ - chief editor

Figyel_ (Observer)
1054 Budapest
Alkotmany u. 10.
Tel: 112-7664
Fax: 111-7891
Dr. Gyorgy Varga - chief editor

Heti Privinfo (Weekly Privatization Information Bulletin)
1016 Budapest
Naphegy ter 8.
Tel: 175-6722/1798, 2050 Extension.
Fax: 155-5451
Mrs. Gizella Mez_ - chief editor

Heti Vilaggazdasag (Weekly Economics)
1124 Budapest
Nemetvolgyi u. 64.
Tel: 155-5411
Fax: 155-5693
Mr. Ivan Lipovecz - chief editor

Privat Profit
1051 Budapest
Nador u. 32.
Tel: 111-2895
Fax: 112-0829
Mr. Tamas Forro - chief editor

The Budapest Sun (English Language)
1068 Budapest
Dozsa Gyorgy u. 84/a.
Tel: 268-1101
Fax: 268-1103
Mr. Jim Michaels - chief editor

o  Pricing Product

For the large part, state subsidies and price supports for consumable 
products have been eliminated; the state does support basic services 
such as utilities however, recent price increases are bringing rates in 
line with costs; subsidies do still exist in a few other areas such as 
pharmaceuticals.  Otherwise, prices are determined by market forces.  
Other factors affecting pricing are duty surcharges for imported 
products (the March 12th decree increased tariffs by 8%) and 
inflationary pressures.  Finally, increases in petroleum may also be 
felt as increased transport charges ripple through the economy.       

o  Sales Service/Customer Support

In general, sales service and customer support is not a strong suite of 
the consumer trades.  However, with increasing penetration by Western 
firms and stiffer competition for value-added services, responsiveness 
to customer needs and demands is growing.  Operations that deal with the 
professional business public are forging ahead with many new customer-
oriented techniques.  

o  Selling to the Government

Pursuant to Hungarian law, government procurements must be competitively 
bid upon.  A new procurement law was recently passed which should 
introduce more transparency and reduce inequities in government 
purchasing.  

o  Protecting Your Product from IPR Infringement

In September 1993, Hungary signed a comprehensive intellectual property 
rights agreement with the United States.  The agreement addresses such 
issues as copyright, trademarks and patent protection.  The U.S. 
Government tracks the Hungarian government's enforcement on a regular 
basis to ensure compliance with the agreement.   

Hungarian legislation provides protection for a twenty year period under 
condition that the patent be used within four years of the date of 
application or three years from the date of issue.
Regarding copyrights, protection is extended to literary, scientific, 
and artistic creations.  "Computer programs and the related 
documentation" (software) are expressly included in the list of 
protected works.  A major complaint over copyrights in Hungary has been 
the lack of vigorous enforcement especially in the area of pirated and 
counterfeit software, sound recordings, etc.  

Trademarks can be registered in Hungary; however, the process can take 
from six months to a year.  Foreigners are required to appoint a local 
attorney to represent them.  Registrations are valid for ten years and 
can be renewed.  

o  Need For a Local Attorney

As a standard practice, local legal counsel should be retained when 
firms are contemplating an investment, joint-venture or other complex 
business arrangement.  Other forms of business may not expressly require 
local counsel, but such services are in general always advisable.  All 
legal work in Hungary must be conducted by an attorney accredited to 
work as a lawyer in Hungary.  Many contracts require notarization as 
well.  Several leading U.S. and international law firms maintain 
representational offices in Hungary and provide a wide range of services 
for their clients.


CHAPTER V.  Leading Sectors for U.S. Exports and Investment

o  Best Prospects for Non-Agricultural Goods and Services

  
1 - TELECOMMUNICATIONS EQUIPMENT. (TEL) 

Bringing Hungary's telecommunications into the 21st century is the 
government's number one investment priority.  During 1995-96, MATAV, the 
Hungarian Telecommunications Co., which is 1/3 owned by a consortium of 
Ameritech and Deutsche Telecom, will invest about $250 million annually 
to upgrade services and reduce the waiting time for new telephone 
service.  This will lead to many opportunities for telecommunications 
equipment exports, including Integrated Services Digital Networks (ISDN) 
and Synchronous Digital Hierarchy (SDH) systems.  In addition to MATAV, 
several local telephone operators, which won concessions in early 1994, 
are expected to make procurement decisions as they upgrade their 
operations.   

Hungary has the highest proportion of cellular telephone users in 
Central/Eastern Europe.  The two digital cellular operators, Westel 900 
(a MATAV-U.S. West joint venture) and Pannon GSM (a Scandinavian 
consortium), will likely purchase equipment as they expand their 
service.  

Figures are in U.S.$ millions.  Exchange rate: $1=HUF105.

                              1994  1995    1996

TOTAL MARKET SIZE              290   322     358
TOTAL LOCAL PRODUCTION         120   138     159
TOTAL EXPORTS                   60    69      79
TOTAL IMPORTS                  230   253     278
IMPORTS FROM THE U.S.           80    88      97

The above statistics are unofficial estimates. 

2 - ELECTRIC POWER GENERATION EQUIPMENT (ELP)

The Hungarian electric system is an aging system consisting of eight 
independent power plants and six regional electric utility companies.  
Total capacity of the system is 7200 MW.  Much of the outdated 
equipment, including electrical power generation and power transmission 
equipment will need to be replaced or upgraded by the year 2000.  Major 
investments and expansions to the system can be expected as significant 
portions of the Hungarian electric system become privatized.  Official 
announcements for opening privatization are expected in the Fall of 
1995.  Foreign competition in this sector comes from Germany, Italy, 
Great Britain and France.  Major U.S. firms are present on the market.

(in millions of $)
                               1994      1995    1996

A. TOTAL MARKET SIZE:          234.5    231.3   288.2     
B. TOTAL LOCAL PRODUCTION:     137.6    133.3   159.1     
C. TOTAL EXPORT:                 N/A      N/A     N/A
D. TOTAL IMPORTS:               96.9     97.9   129.1    
E. IMPORTS FROM THE U.S.         N/A     N/A      N/A


The above statistics are unofficial estimates.

3 - COMPUTERS & PERIPHERALS (CPT)

In 1994 sales of PCs increased in quantity as well as value by 10%.  In 
1994, 116,860 PCs were sold, with sales totalling $218 million.  For 
1995, sales of PCS are expected to surpass 120,000 units.  Intel-based 
486X/DX PCs are the most popular versions.  Although PCs constitute the 
majority of computer hardware sold in 1994, other types of equipment 
included main frame systems ($23.32 million); mid-range systems ($29.49 
million); micro-systems ($34.03 million); and workstations ($12.25).  

Albacomp (a Hungarian computer assembler) is the largest PC supplier, 
with a 14.2% market share in 1994, followed by Compaq, IBM, Apple, 
Packard Bull and NEC.  Mainframe systems are increasingly being replaced 
by UNIX-based open systems.  Leading suppliers are IBM, HP, Sun, and 
DEC.  The systems & server market is a dynamic growth sector; Hungarian 
banks are expected to be major customers.  Peripheral equipment 
including printers, generated $69 million in sales in 1994, with HP 
leading the market, followed by Epson. 
     
Major market sectors for computer hardware include banking/financial 
services, government, telecommunications and industry.

Figures are in U.S.$ millions.  Exchange rate: $1=HUF105.
                           1994         1995         1996
TOTAL MARKET SIZE         317.0         350.8       386.6
TOTAL LOCAL PRODUCTION     34.0          37.0        41.0
TOTAL EXPORTS               2.0           2.2         2.4 
TOTAL IMPORTS             287.0         316.0       348.0
IMPORTS FROM THE U.S.      46.0          51.0        56.0

The above statistics are unofficial estimates.


4 - OIL/GAS FIELD MACHINERY (OGM)

Hungary is diversifying its gas and oil pipeline network in order to 
integrate with West European distribution systems.  The construction of 
a gas pipeline between Gyor (West Hungary) and Baumgarten (Austria) has 
already started and will be completed in 1996.  The country's largest 
energy company, the Hungarian Oil and Gas Company Ltd. (MOL Rt.) as well 
as major regional gas distribution companies are slated for 
privatization as well in 1995.  These energy sectors are expected to 
draw significant international oil & gas interest and in turn stimulate 
foreign investment and exploration, thereby triggering significant 
growth in this industry.  Finally, exploration is on-going for new oil 
fields led by international and American interests.  

The market's receptivity towards U.S. products is good, although tough 
competition can be expected from German, French and Italian companies.

                                  (in millions)
                                1994    1995    1996

A. TOTAL MARKET SIZE:           31.1    33.1    25.7
B. TOTAL LOCAL PRODUCTION        8.5     8.9     6.8
C. TOTAL EXPORT:                 N/A     N/A     N/A
D. TOTAL IMPORTS:               22.6    24.2    18.9
E. IMPORTS FROM THE U.S.         N/A     N/A     N/A

Figures are in U.S.$ millions.  Exchange rate: $1=HUF105.

 
5 - POLLUTION CONTROL EQUIPMENT (POL)

As do many Central/Eastern Europe countries, Hungary has needs in 
virtually all areas of the environment.  New technologies and 
environmental controls are in high demand, however as is frequently the 
case, the cost burden often falls on the local municipalities, who are 
in a poor financial position to adequately respond.  Creative venturing 
and/or concessions are paving the way in selected areas for 
municipalities to work with the private sector to jointly solve 
environmental challenges.  In other projects, the World Bank and EBRD 
have been involved in such projects as wastewater treatment plants.  
With the planned privatizations in the energy sector, new technologies 
can be brought to bear on some of the primary sources of air pollution.

Figures are in U.S.$ millions.  Exchange rate: $1=HUF105
                              1994    1995    1996
A. TOTAL MARKET SIZE          68.5    70.2    73.0
B. TOTAL LOCAL PRODUCTION     26.2    27.9    29.3
C. TOTAL EXPORTS              23.6    24.5    26.1
D. TOTAL IMPORTS              44.9    45.7    46.9
E. IMPORTS FROM THE U.S.       2.5     2.8     2.9

The above statistics are unofficial estimates.

6 - FRANCHISING (FRA)

Compared with Western Europe and the U.S., franchising is a new form of 
doing business in Hungary.  Although fast-food franchises are well-
represented, there is great potential for service franchises of all 
types, particularly those which might appeal to the rising middle class.  
Difficulty with obtaining business start-up capital could affect 
franchise development in the short-run.  However, given the increasing 
popularity of current franchises, this sector has strong potential for 
further growth.   

Figures are in U.S.$ millions.  Exchange rate: $1=HUF105.
                          1994      1995      1996 
TOTAL MARKET SIZE:         505       550       600
TOTAL LOCAL PRODUCTION:    298       330      350
TOTAL EXPORTS:             298       330      350
TOTAL IMPORTS:             207       220       250         
IMPORTS FROM THE U.S.:     103*      110*      120*      

*represents estimated capital investments
The above statistics are unofficial estimates.

7 - TRAVEL/TOURISM SERVICES (TRA)

Tourism is Hungary's second-largest industry, after agriculture.  After 
a few years of stagnation in the Hungarian tourist trade, the first 
quarter of 1995 showed a 4.8% increase in the number of visitors.  This 
translated to a 17-22% increase in the number of guests at four and 
five-star hotels.  To accommodate expected growth, related 
infrastructure will be developed:  Budapest's Ferihegy International 
Airport is being expanded to handle increased passenger loads.  Further 
motorway construction (M1 Budapest-Vienna, M3 Budapest-North-East 
Hungary, M5 Budapest-South Hungary) and modernization of railways and 
railway services are underway to facilitate travel around the country.  
Major hotel privatization programs are anticipated during 1995-96.  The 
above investments should provide opportunities for travel/tourism 
services of all types, including hotel management, food service and tour 
operation.  

Figures are in U.S.$ millions.  Exchange rate: $1=HUF105.
                            1994       1995       1996
TOTAL SALES:                1428       1600       1800
TOTAL LOCAL PRODUCTION:     1100       1200       1300 
TOTAL EXPORTS:              1100       1200       1300
TOTAL IMPORTS:               328        400        500 
IMPORTS FROM THE U.S.:        28         33         38

The above statistics are unofficial estimates.

8 - FILMS/VIDEOS/OTHER REC (FLM)

Imports of audio-visual products continue to increase.  American-made 
films, videos have wide popularity especially among the younger 
generation in Hungary.  Liberalization of the market enabled companies 
to undermine the monopoly position of a few Hungarian companies.  
Increasing attention is being devoted to solving video piracy, which 
according to some estimates is creating an annual loss of $22 million.  

Figures are in U.S. millions/dollars.  Exchange rate: $1=HUF105.
                          1994    1995    1996
TOTAL MARKET SIZE:        42.8    41.0    43.2
TOTAL LOCAL PRODUCTION:    9.2     6.9     7.5
TOTAL EXPORTS:             2.9     1.9     2.1
TOTAL IMPORTS:            34.5    36.0    37.8
IMPORTS FROM THE U.S.     31.5    33.6    34.6

The above statistics are unofficial estimates. 


Best Prospects for Agricultural Products


1.  SEED

Planting seed:  Hungary imports high quality planting seed for 
prorogation and production.  Moreover, U.S. exports of vegetable, grass, 
forage and, in particular, field corn seed have been traditionally 
strong in this market.  New products of higher quality or better price 
will have opportunities in Hungary.  

1,000 metric tons
                           1994        1995      1996
TOTAL MARKET SIZE           290         270       280
TOTAL LOCAL PRODUCTION      380         400       400
TOTAL EXPORTS               100         105       105
TOTAL IMPORTS                11          11        11
IMPORTS FROM THE U.S.         1           1         2

The above statistics include unofficial estimates. 

2.  SOYBEAN MEAL

Soybean meal:  Hungary is a large producer and exporter of
livestock and products and therefore has significant needs for soybean 
meal (approx. 440,000 metric tons per annum).  The Hungarian soy bean 
market is price sensitive and will purchase U.S. products if 
competitive. 

1,000 metric tons
                             1994       1995      1996
TOTAL MARKET SIZE             358        442       450
TOTAL LOCAL PRODUCTION          8         12        10
TOTAL EXPORTS                   0          0         0
TOTAL IMPORTS                 350        430       440
IMPORTS FROM THE U.S.          10         15        25

The above statistics include unofficial estimates. 

3.  BOVINE SEMEN

Bovine semen:  Hungary's dairy industry is based on U.S.
breeds.  Demand for high quality bovine semen for dairy cows
is strong and U.S. exports in this area are significant. 

U.S.$ millions.  Exchange rate: $1=HUF 105.
                          1994      1995      1996
TOTAL MARKET SIZE        10.00     10.00     10.00
TOTAL LOCAL PRODUCTION    8.80      8.80      8.80
TOTAL EXPORTS             0.45      0.50      0.50
TOTAL IMPORTS             1.20      1.20      1.20
IMPORTS FROM THE U.S.     0.88      0.88      0.88

The above statistics include unofficial estimates.

4.  POULTRY BREEDING STOCK

Hungary is a major producer and exporter of poultry breeding stock and 
poultry.  U.S. exports of poultry breeding stock, particularly baby 
chicks for chicken broiler and layer production, are strong and expect 
to remain in that position for the foreseeable future. 

U.S.$ millions.  Exchange rate: $1=HUF 105.          
                             1994      1995      1996
TOTAL MARKET SIZE           79.06     79.80     80.20
TOTAL LOCAL PRODUCTION      78.54     79.00     79.50
TOTAL EXPORTS               10.33     10.45     10.70
TOTAL IMPORTS               10.85     11.25     11.40
IMPORTS FROM THE U.S.        2.55      2.70      2.90

The above statistics include unofficial estimates.

o  SIGNIFICANT INVESTMENT OPPORTUNITIES

Privatization in the energy sector offers the most significant 
investment opportunities for 1995.  Hungary's major oil company, MOL, 
will be open for financial and strategic investors.  Among its assets 
are significant oil reserves, pipeline facilities, a major oil refinery 
(one of the largest in Central Europe), and a downstream service 
network.

A second major energy sector open for privatization is in gas 
distribution.  Hungary is divided into six gas networks, of which five 
will be privatized.  The distribution assets are lines leading from the 
main high pressure line into and throughout the designated territory, 
including direct service to customers.  The last energy privatization 
sector is in the power generation and power distribution sectors, with 
5-6 plants in each field up for privatization.  In some instances, local 
soft-coal mines are the primary fuel suppliers and can be negotiated in 
a combined package.  

In greenfield or other privatization strategies, investment in Hungary's 
hotel-tourism sector has high prospects.  Food processing is another key 
area of interest - ranging from juice production to pastas.  Selected 
Hungarian chemical and pharmaceutical operations have strong reputations 
and provide investors with existing assets and local skills.  Finally in 
the high technology field, Hungarian electronics and software 
capabilities are internationally known.  

The government of the United States acknowledges the contribution that 
outward foreign direct investment makes to the economy.  U.S. Foreign 
direct investment is increasingly viewed as a complement or even a 
necessary component of trade.  For example, roughly 60 percent of U.S. 
exports are sold by American firms that have operations abroad.  
Recognizing the benefits that U.S. outward investment brings to the U.S. 
economy, the government of the United States undertakes initiatives, 
such as the Overseas Private Investment Corporation (OPIC) programs, 
investment treaty negotiations and business facilitation programs, that 
support U.S. investors.

CHAPTER VI.  TRADE REGULATIONS AND STANDARDS

o  Trade Barriers

- Tariffs

In general, Hungarian import policies have progressively liberalized in 
an effort to encourage competition and to allow imports of materials 
necessary for Hungary's economic transformation.   As part of its 
Uruguay Round implementation on January 1, 1995, Hungary raised tariffs 
on other agricultural products to WTO levels.  Many of the increases 
affect U.S. exporters and investors on such products as sugar, rice, 
peanuts, confectionery products, chocolate, and soft drink concentrates.  
At the same time, the Hungarian Government established minimum access 
quotas which allow certain volumes of goods to enter the country at a 
lower tariff rate.
  
In an effort to fight a high and growing current account deficit, the 
Government of Hungary introduced an 8 percent import surcharge in March 
of 1995 on all imports except energy and inputs for investments.  This 
surcharge is expected to stay in place until mid-1997, with the rate 
being gradually decreased beginning in early 1997.  While Hungary's 
average tariff rates are decreasing, there are particular peak rates 
which are unduly high (e.g., coffee).  

As part of Hungary's Association Agreement with the EU, import duties on 
EU products are being phased out.  The USTR as well as other USG 
agencies are continuing to review the impact of these actions on U.S. 
exports with respect to a reverse preference for EU products.  If an 
adverse impact is found, USTR will seek to eliminate such preferences 
through bilateral negotiations.

- Non-Tariff Barriers

Hungary imposes a $750 million global quota on imports of consumer 
goods.  American companies have complained that they have been unable to 
obtain sufficient quotas to properly supply the market.  Additionally, 
by the terms of its Association Agreement with the EU, Hungary has 
reserved quota allotments for imports from the European Union.

Foreign companies complain that the implementation of new regulations 
with no advance notice disrupts trade.  For example, in October 1993 the 
Government passed new regulations mandating that quality control 
certificates were required for consumer goods imports to be custom-
cleared.  There was no advance notice of the implementation of the new 
regulation.  Consequently, neither the importers nor the 
testing/certification agencies were prepared for the regulatory change.

To protect domestic car makers, the Hungarian government granted import 
licenses for 68,000 new cars and 60,000 used cars in 1994.  Half of each 
category was reserved for imports from the EU.  As of January 1, 1995, 
Hungary banned imports of used cars (over four years old) for commercial 
use.  Specialized older vehicles may still be imported after passing 
special technical tests.  

- Import Taxes

Hungary charges a 5% ad valorem fee, comprised of a 3% statistical fee 
and a 2% customs clearance fee.  This is incompatible with WTO/GATT 
requirements, which call for administrative fees to be based on the 
actual cost of customs services, not the value of the imported goods.

o  Customs Valuation

Customs Valuation is on an ad valorem basis.    

o  Import Licenses

An estimated 90% of imported products no longer require an import 
license, however licenses are still required for some consumer goods 
(those subject to quota) and products which are typically controlled in 
the United States and other Western countries such as arms/ammunition, 
military equipment, hazardous materials, materials for biological 
weapons, psychotropic products, nuclear products and uranium ore are 
similarly controlled in Hungary.

o  Export Controls

In May 1992, Hungary was removed from COCOM's list of proscribed 
countries.  Most technology can flow to Hungary without export licenses.  
However, some equipment (e.g., dual-use technology) still requires 
export licenses from the Bureau of Export Administration (U.S. 
Department of Commerce) and Department of State.

o  Import/Export Documentation

All importers and exporters must file a VAM 91 document which can be 
obtained from Hungarian Customs.  Essentially, this document serves as a 
declaration for the type and number of goods being imported or exported.  
This document must contain the Product Code Number which identifies the 
classification of the goods.  The Product Code Number can be obtained 
from the Central Statistical Office.

For consumer distribution goods, the importer must have a certification 
document from the Commercial Quality Control Institute (KERMI); goods 
cannot be custom-cleared without the KERMI permits.  Other products 
destined for industrial production, such as raw materials, will need a 
waiver of certification.  With reference to certain consumer products, 
KERMI may permit documentation from other testing and certification 
agencies such as the National Institute for Drugs and the Quality 
Control Office of the Building Industry. 

Finally, those products whose trade is still controlled by the 
government (see above) require the appropriate license from the Ministry 
of Industry & Trade.

o  Temporary Entry

Products may be brought into Hungary on a temporary basis for exhibition 
in trade fairs or as samples.  U.S. exporters can obtain a carnet from 
their local Chamber of Commerce (the carnet is good for 1 year).  The 
carnet lists the products and provides duty-free entry.  An alternative 
method is to post a bond with Hungarian Customs equivalent to the duties 
to be paid on the product.  The amount is then refunded once the product 
has been validated as having left the country.

Goods -- typically materials or parts/accessories -- which are brought 
into Hungary for re-export after additional processing may enter duty-
free.  The Hungarian company must demonstrate that it has a contract 
with a foreign company that commissions the work.  Customs will issue a 
temporary import permit.  In some cases, Customs may request a deposit 
for customs duties.  There are procedures for duty refunds on re-exports 
but these can be complicated.   

o  Labeling, Marking Requirements

Strict rules apply to labeling and marking of food, cosmetic and 
household products.  The rules apply to both domestic and imported 
products.  The primary requirement for food is that labelling 
information must be in Hungarian.  The label must give the following 
information: net quantity, name/address of producer (or importer), 
consumption expiration date, recommended storage temperature, listing of 
ingredients/additives, energy content and approval symbols from the 
National Institute of Food Hygiene and Nutrition (OETI) and the 
Commercial Quality Testing Institute (KERMI).

Cosmetics, which are regulated by OETI, should indicate: product 
denomination, function, handling (precautionary) instructions, 
production date, utilization expiration date, quantity of product, 
producer/importer information.  There are specific marking and labelling 
requirements for human and animal pharmaceuticals.

Some American firms have complained about high fees and slow processing 
to obtain approvals from OETI and KERMI.    

o  Prohibited Imports

According to section 186/a 1994 of the Hungarian Gazette, Hungary does 
not prohibit the importation of any products, however special permits 
are required for the importation of such items as endangered species, 
plants, environmentally hazardous products, and certain drugs.

o  Standards

There are currently two types of standards: national and sectoral.  
National standards are issued by the HSO and conform to international 
norms.  Hungary is a signatory to the GATT Agreement on Technical 
Barriers to Trade (Standards Code). Hungary is also a participant in the 
International Standardization Organization (ISO) and the International 
Electro-technical Commission (IEC).  Sectoral standards are issued by 
individual ministries and other central government agencies.  

As noted above, goods for consumer distribution are subject to an 
approval process by the Commercial Quality Control Institute (KERMI) 
and/or the Hungarian Electro-technical Control Institute (MEEI) which is 
responsible for electronic/technical goods.  In order to import or 
market such electronic consumer products, samples must be submitted to 
these control institutes for testing and certification.  Without 
appropriate certification, imported products will not be custom cleared.
 
o  Free Trade Zones/Warehouses

Companies operating in one of Hungary's free trade zones are exempt from 
customs and foreign-exchange requirements of the country as well as from 
indirect taxation tied to the turnover of goods.  With respect to direct 
taxes (profit taxes, company taxes, etc.,) the companies enjoy 
transitory preferences.

Customs-free zones may be established anywhere in the country provided 
requirements of the Customs authorities are met (e.g. perimeter 
control.)

o  Special Import Provisions

Equipment and other goods which are deemed capital in kind for joint 
ventures may enter duty-free.

o  Membership in Free Trade Arrangements

In December 1991, Hungary signed an Association Agreement with the 
European Union which will phase out tariffs over an extended period of 
time.  The agreement immediately removed EU duties on 70 percent of 
Hungary's industrial exports to the EU, and lifted quotas on 60 percent 
of its total exports.  Trade in textiles, steel, coal and farm products 
will be eased over several years.  In June 1993, the EU agreed to 
accelerate the agreement's provisions and reaffirmed its commitment to 
Hungary's full-membership, which is expected by the year 2000.

In December 1992, the Czech Republic, Hungary and Poland negotiated a 
Central European Free Trade Area.  Modeled after the structure of the EU 
association accords, this agreement reduces trade barriers over an 8 
year period; duties on 15-30 percent of mutual trade were eliminated 
immediately upon implementation of the Agreement in March 1993.  A 
supplementary agreement, signed on June 18, 1994, accelerates the 
agreement's provisions.

Finally, Hungary concluded a free trade agreement with the European Free 
Trade Association (EFTA) countries in July 1993.  Again, this agreement 
was modelled after the EU accords and will eliminate trade barriers for 
Hungarian goods entering the EFTA countries by 1997 and for EFTA imports 
by 2001.  EFTA accounts for nearly 15 percent of Hungary's total trade.  
Hungary is negotiating with the EU to ensure that Hungary does not lose 
any benefits as a result of EFTA countries joining the EU.

In April 1994, Hungary and Slovenia signed a Free Trade Agreement which 
calls for a phased elimination of duty on industrial goods by 2001 and 
an immediate 50 percent reduction of duty on certain categories of 
agricultural products.  


VII.  INVESTMENT CLIMATE

A.   Openness to Foreign Investment

Hungary has attracted over $8 billion in foreign direct investment, 
which is more than half of all foreign investment in Central and Eastern 
Europe.  American investment leads the way in Hungary with nearly $4 
billion.  The current environment in Hungary encourages foreign 
investment and participation in virtually all aspects of the Hungarian 
economy.  

Foreign investment may take any one of four forms:  setting up a joint 
venture in existing businesses, obtaining equity in a state enterprise 
through privatization, establishing a new (greenfield) business venture, 
and making a portfolio investment.  Parliament has passed a number of 
laws intended to facilitate foreign investment.  Four laws are of 
particular importance: the Companies Act, the Investment Act, the 1995 
Law on Privatization, and the Concessions Act.

Foreign investment in Hungary most often takes the form of a limited 
liability company.  Other commonly used forms are companies limited by 
shares (joint stock companies), joint enterprises, business 
associations, general partnerships, limited partnerships, and sole 
proprietorships.  Current Hungarian legislation makes no provision for 
branch operations.  However, Hungary's agreement with the EU calls for 
legal regulations permitting such operations to be in place in five 
years. 

Act XXIV of 1988 (as amended) on Investments of Foreigners in Hungary 
(the "Investment Act"), which sets forth the rules on the establishment 
and operations of companies with foreign participation, grants 
significant rights and benefits to foreign investors.  It guarantees 
national treatment for foreign investments and abolishes the old 
requirement for government approval of majority or 100 percent foreign-
owned investments as well as providing protection against losses 
resulting from nationalization, expropriation, or similar measures.  The 
Investment Act guarantees free repatriation of invested capital and 
dividends.

The new Privatization law (June 1995) is designed to make the 
privatization process more transparent.  In addition, the State Asset 
Management Company and the State Property Agency are merged to become 
the State Privatization and Asset Management Company.   Under the new 
law, the state will retain partial ownership in 156 companies, farms, 
and research institutes, including complete ownership of about 36 others 
(primarily defense-related industries or those connected with 
correctional institutions).  The new State Privatization and Asset 
Management Company (APV Rt) is responsible for the management and sale 
of all of these assets.  

Act XVI of 1991 on Concessions authorizes the state to provide investors 
with concessions in return for their investment in  infrastructure 
development and certain other sectors.  Under the provisions of this 
act, private investors may have a partial monopoly in activities 
normally reserved for the central and/or local governments such as the 
construction of roads, railways and airports, power generation and 
transmission, mining, and operating games of chance.  Concessions are 
normally awarded on the basis of a tender and include a time limit and a 
renewal limit (generally, 50 percent of the original period).  

100 percent foreign ownership is permitted in sectors open to private 
investment.  The exceptions to foreign investment are in defense-related 
industries, the media, and on foreigners' acquisition of land.  Under 
the Land Law (Act I of 1989) and related regulations, foreigners may 
acquire agricultural land in some instances, such as in compensation for 
a prior expropriation.  Foreign owned companies that are Hungarian legal 
entities may acquire real estate (with the exception of agricultural 
land) without restrictions.  Foreigners must make payments in hard 
currency, however.  Under the Investment Act, these requirements do not 
apply to companies incorporated in Hungary, even if 100 percent foreign-
owned.  Such companies, however, may only acquire real estate "required 
for its economic activities."  The new Land Law (Act LV of 1994) deals 
primarily with agricultural land, restricting the purchase of land by 
foreigners to 6,000 square meters, but allows for leases up to ten years 
for up to 300 hectares.  Act LV prohibits businesses from purchasing 
arable land, though they may lease specified amounts.  The land-
ownership prohibitions on foreigners and businesses are seen as 
temporary and may be lifted when the real estate market reflects 
accurate land values.

As noted earlier, the Investment Act abolished the old requirement for 
government approval of majority foreign-owned investments.  There remain 
two instances where screening is required:  investments in financial 
institutions and insurance.  Acts LXIX of 1991 and CXII of 1993 on 
Financial Institutions stipulate that government approval must be 
obtained for "the establishment of a financial institution owned fully 
or partly by foreigners as well as for participation by foreigners in a 
financial institution registered in Hungary."  Such approval is not 
needed if total foreign participation in an institution will be less 
than ten percent of its registered capital.  The law sets out the 
necessary criteria, which include whether the applicant has the 
necessary capital, its business reputation and five-year track record, 
plans for training employees, and contribution to competition among 
similar institutions.  Similarly, government approval is also required 
for foreign investments in insurance companies if the foreign share 
exceeds ten percent of the company's capital.  

The Corporate Tax Act was amended by Act IC of 1993 which withdrew 
automatic tax holidays for new investments as of January 1, 1994.  
However, companies that qualified for tax abatements prior to the 
deadline retain some of these benefits.  In place of the tax holidays, 
Parliament introduced a discretionary new general tax reduction, 
effective January 1, 1994.  The new incentive is available in the form 
of a tax reduction based on a percentage of future taxes to be paid.  
Other conditions which determine eligibility are the amount of share 
capital, production if any, of environmentally-friendly products, 
anticipated exports etc.  

The Act on Separate State Funds (Act LXXXIII of 1992) established an 
Investment Promotion Fund to encourage foreign investment in 
infrastructure, new technologies and public utilities.  To qualify for 
subsidies from this fund, a company must have more than HUF 50 million 
($500,000) in registered capital or capital stock, not less than 30 
percent foreign ownership, and the foreign contribution must be in 
convertible currency and not less than 50 percent of the foreign 
partner's share.  The third criterion may be waived if the technology is 
considered "environmentally superior" or "of technical excellence."  
This Act was modified on March 1995 at which time its name was changed 
to Economic Development Fund.  It is now available for all investors, 
foreign or Hungarian.  

Two import policies/practices that affect foreign investors exclusively 
are the Investment Law's provision for the duty-free import of capital 
goods by joint ventures.  The second policy is the establishment of 
semiannual quotas for automobile imports.  For 1994, the number of 
automobile import licenses was limited to 96,000 (51,000 new, 30,000 
used; with 53 percent of each category imported from the EU and the 
remainder from outside the EU).  

These quotas are meant to protect the markets of domestic automobile 
manufacturers, all of which are foreign-owned companies.  Imports used 
for investment purposes are not subject to the 8 percent import 
surcharge introduced in March 1995.

B.  Conversion and Transfer Policies

The Investment Act guarantees foreigners the right to repatriate "in the 
currency of the investment" any dividends, after-tax profits, royalties, 
fees, or other income deriving from the operation or sale of the 
investment.  The Act also grants foreign employees of a foreign 
investment the right to transfer abroad fifty percent of their after-tax 
salaries.  There is no queuing for foreign exchange, and there are no 
known instances of delay in repatriations.  

Foreign investors are allowed to keep any cash contributions made in a 
convertible currency to a foreign exchange account.  The company may use 
these funds to import, duty-free, goods considered as part of the 
investment.  Alternatively, it may import goods using foreign exchange 
bought for forints.  In April 1995, the Government of Hungary eliminated 
the requirement that all companies registered in Hungary, including 
those with foreign participation, sell foreign exchange receipts from 
exports to the National Bank within eight days of receipt unless an 
exemption had been granted by the National Bank.  Companies are now 
allowed to maintain foreign currency accounts at Hungarian banks where 
they can keep their export receipts.  Companies must receive permission 
from the National Bank before taking out a hard currency loan.  

C.  Expropriation and Compensation

There have been no cases of expropriation of foreign-owned assets since 
the early 1950's.  Foreign investors are afforded protection under 
Article 13(2) of Hungary's constitution, (as amended until December 
1994) that in cases, "Expropriation of property shall be allowed only 
exceptionally and for public interests, in cases and ways determined by 
law and with full, unconditional and immediate indemnification."  The 
Investment Act further states that the foreign investor shall be 
promptly indemnified for any damage arising from any possible measure 
affecting his property.

Following the change of regime in 1990, the government began a program, 
now approaching conclusion, intended to compensate those who lost 
property under the communist and fascist regimes. Hungarians and foreign 
citizens are equally eligible to receive compensation.  Victims or their 
heirs receive compensation vouchers, which may be sold or exchanged for 
stocks, real estate or annuities.  There will be no "reprivatization" or 
restitution of lost properties.

D.  Dispute Settlement

If efforts at conciliation and negotiation fail to resolve an investment 
dispute between foreign investors and the state, Hungary will accept 
binding international arbitration.  Hungary is a member of the 
International Center for the Settlement of Investment Disputes (ICSID), 
also known as the Washington Convention, and a signatory of the 1958 New 
York Convention on the Recognition and Enforcement of Foreign Arbitral 
Awards.

E.  Political Violence

Violence is not part of the traditional political landscape in Hungary.  
There were, however, in 1994 three bombings directed at sites of 
cultural value (including the Parliament building) resulting in minor 
damage to property and only one personal injury.  No group claimed 
responsibility nor have the police identified potential perpetrators.  
There has been no violence directed at foreign-owned companies.  
Disturbances in the former Yugoslavia have not spilled into Hungary.

F.  Performance Requirements/Incentives

Hungary does not impose performance requirements as a condition for 
establishing, maintaining, or expanding an investment.  In the case of 
foreign investments, there is no requirement that nationals own shares, 
that the share of foreign equity be reduced over time, or that 
technology be transferred on given terms.

G.  Right to Private Ownership and Establishment

Foreign and domestic private entities may establish and own business 
enterprises and engage in all forms of remunerative activity, save for 
those prohibited by law.  The Companies Act guarantees the right of 
private entities to freely establish, acquire, and dispose of interests 
in business enterprises.  

H.  Protection of Property Rights

The Hungarian legal system protects and facilitates the acquisition and 
disposition of property rights.

I.  Regulatory System: Laws and Procedures

The Hungarian Competition Office administers controlled prices which are 
set by government decree.  The Economic Competition Office investigates 
unfair market practices.  The ECO also reviews cases where an 
acquisition will result in a single entity having more than 30 percent 
market share.  Finally, the Competition Act forbids consumer fraud, 
restriction of competition, abuse of a dominant market position, and 
unfair competition.  

Hungary overhauled its tax system in the late 1980s, instituting a 
western-style system.  The most important taxes for a foreign investor 
are:  company tax (18% of corporate profits and a 23% supplementary tax 
- if dividends are paid); a general turnover tax (VAT, which varies from 
12-25%); and personal income tax (progressive tax assessed on total 
income).  In addition, the employer is responsible for contributions to 
Social Security and Solidarity (unemployment) funds.  The avoidance of 
double taxation treaty with the U.S. minimizes some of the above tax 
obligations. 

J.  Bilateral Investment Agreements

Hungary and the United States have been in negotiations for a business 
and economic treaty but have not yet concluded one.

Hungary has concluded a treaty for the avoidance of double taxation with 
the United States.

K.  OPIC and Other Investment Insurance Programs

The U.S. Overseas Private Investment Corporation (OPIC) has been 
operational in Hungary since October 1989.  OPIC offers American 
investors insurance against political risk, expropriation of assets, 
damages due to political violence, and currency inconvertibility.  OPIC 
can also provide specialized insurance coverage for certain contracting, 
exporting, licensing, and leasing transactions undertaken by U.S. 
investors in Hungary.  Political risk insurance is also available for 
foreign-owned companies in Hungary from several private carriers in the 
United States and Western Europe, and from the Multilateral Investment 
Guarantee Agency (MIGA), which is a World Bank affiliate.  In addition, 
the National Bank of Hungary, for a fee, will issue to a foreign-owned 
company its guaranty of the Investment Act's commitments regarding 
expropriation and profit repatriation.

In January, 1995, President Clinton announced U.S. Government support 
for two private equity funds set up by OPIC that could leverage a 
significant amount of capital investment for business ventures in 
Central Europe.  OPIC signed commitment letters to provide loan 
guaranties to the $100 million Bancroft Eastern Europe Fund and to the 
$240 million Auburndale Central and Eastern European Property Fund.  The 
Bancroft Fund will make direct equity investments in private or 
privatizing companies in Central Europe, including Hungary.  The 
Auburndale Fund will develop industrial parks, particularly sites for 
light manufacturing, warehouses, and distribution centers.  

L.  Labor

Hungary's civilian labor force of 4.5 million women and men is highly 
educated and highly skilled.  The literacy rate in Hungary tops 98 
percent.  About two-thirds of the workforce has completed some form of 
secondary, technical, or vocational education.  Hungary is particularly 
strong in engineering, medicine, economics, and the sciences.  Many 
foreign investors have praised the productivity, motivation and 
adaptability of Hungarian workers, however there are some chronic issues 
having to do with a liberal view on sick leave and absenteeism, in 
general.  Another remnant of past practices is overstaffing.  New 
management can overcome these problems through worker retraining 
programs or early retirement.  New management also has discouraged the 
Hungarian practice of holding down two or three jobs simultaneously and 
by paying higher wages. 

The recent boom in foreign investment in Hungary has resulted in 
shortages of employees with western-style management skills.  The lack 
of foreign language skills, formerly a major problem, is becoming less 
so, especially among younger Hungarians.  Labor factors have not 
significantly affected investors' choice of technology.

Unemployment now stands at around 10 percent, however there are wide 
regional discrepancies.  In the Northeastern counties unemployment 
exceeds 20 percent, while in Budapest and the western portion of the 
country, unemployment is closer to 6 percent.  Unions in Hungary are 
relatively weak and divided, however.  Less than half the workforce is 
unionized (down from 90 percent under communism).  Labor-management 
relations tend to be collegial, with both sides negotiating labor issues 
at the company level, as well as the national level (within the sphere 
of the Interest Reconciliation Council, made up of government, employer, 
and organized labor representatives). 

The Hungarian Labor Code guarantees employees the right to form or join 
trade unions and gives unions the right to operate inside a company.  
Unions are entitled to conclude collective bargains.  Employees may 
elect factory councils, which the employer is obliged to consult on a 
number of questions, such as the privatization of the company or plans 
for worker retraining.  The 
Labor Code limits the work day (to 12 hours) and overtime, guaranteed 
maternity leave, at least 20 days of annual leave, at least 30 days 
notice, and severance pay for those employed at least three years.  The 
law also forbids discrimination based on sex, age, or nationality.  The 
minimum employment age is 16 years, except that apprentice programs may 
begin at 15. 

Hungary adheres to the ILO Convention Protecting Worker Rights.  The ILO 
opened an Eastern European Office in Budapest in 1992.  

M.  Foreign Trade Zones/Free Ports

Foreign investors may set up operations or acquire interest in companies 
within a duty-free zone.  The FTZ is considered  foreign territory from 
the aspect of the customs, foreign exchange, and foreign trade 
regulations and companies within are legally considered to be foreign 
companies.  They are required to keep their accounts and make most of 
their transactions in hard currency and establish a forint account at a 
Hungarian bank to meet any expenses (such as taxes and wages) that the 
Act specifies must be paid in local currency.  

N.  Capital Outflow Policy

Capital export and outward direct investment has been allowed since 
1974, but requires the prior permission of the Hungarian government.  
The Ministry of Finance, and the Ministry of Industry and Trade (MIT) 
review license applications.  According to government statistics, 
Hungarian entrepreneurs invested abroad HUF 11.4 billion ($95 million) 
in 1,298 joint ventures by the end of 1993.  In 1995, the Hungarian 
National Bank recorded $44 million of capital outflow, an average of 
less than $4 million a month.  The total stock is over $250 million.

Two-thirds of the registered new joint ventures are located in 
neighboring countries.  However, Hungarian ventures may be found in 
Western Europe (mainly Germany and Austria), the United States and in 
countries with favorable taxation laws such as Cyprus and Liechtenstein.  
The sectors targeted for investment abroad are trade, tourism, and 
service sectors. 

O.    Major Foreign Investors

Foreign concerns have invested over $8 billion in Hungary, more than 
half of all foreign investment in Central and Eastern Europe.  The 
United States is the largest investor, with about $4 billion invested by 
mid-1995.  The list below details major investments in Hungary, to the 
present. 

COMPANY                INDUSTRY           INVESTOR
($ mil)                                   (Country)
--------               --------           --------- 
  
MATAV    
($875)                telecom            Ameritech (US)  
                                         Deutsche Telecom (GER)  
Tungsram      
($550)                light bulb         General Electric (US)

Audi Hungary    
($420)                car engines        Volkswagen/Audi (GER)

Westel  
($330)                telecom            US West Int'l (US)

Opel Hungary    
($300)                autos, parts       General Motors (US)

Magyar Suzuki    
($250)                finished autos     Suzuki (JPN)

Pannon GSM    
($250)                telecom            Scandinavian PTTs

Hungaria Biztosito
($220)                insurance          Allianz (GER)

Hungarian Euro-Expwy.
($200)                construction       Various (FR - AUS)

KOFEM  
($165)                aluminum           Alcoa (US)

NMV      
($160)                food/soap          Feruzzi (IT)

Dunapack/Halaspack  
($160)                paper              Prinzhorn (Aus)

Ford Hungaria  
($120)                automotive parts   Ford (US)

Chinoin  
($120)                pharmaceuticals    Sanofi (FRA)

Fovarosi        
Asvanyviz
($115)               soft drinks/snacks  Pepsi International (US)

Hunguard  
($110)                glass              Guardian Glass (US)

Compack    
($100)                food processing    Sara Lee/Douwe Egbert        
      (US/NETH)
Unilever  
($100)                food/soap          (HOL/UK)
  
NIKEX  
($100)                investment         Hungarian Inv. (UK)

MALEV  
($100)                airline             Alitalia/Simest (IT)

Coca-Cola  
($100)                beverages           Amatil (AUSTRL)

First Hungary Fund
($80)                 diverse investments  First Hungary


VIII.  TRADE AND PROJECT FINANCE


A.  Description of Banking System

The Hungarian banking system has developed rapidly and currently 
consists of: the National Bank of Hungary (HNB); 37 commercial banks (17 
are fully or partially foreign-owned); 6 specialized financial 
institutions; 1 off-shore bank; 260 saving cooperatives.

Comprehensive banking reform removed credit and service functions from 
the MNB.  Enterprises can maintain commercial accounts with more than 
one bank.  Except for the ceilings on household deposits, commercial 
banks are free to set terms for deposits and loans.

Hungary's banking system is not considered nearly as "user-friendly" as 
American or for that matter West European banks.  Hungarian banks have 
failed to develop and to promote retail instruments to service the 
client base.  Checking accounts number less than 50,000.  For example, 
many branches are not electronically interconnected, though recent 
efforts are being directed to bring contemporary technology into the 
banking system.  As a consequence, it is not possible to cash checks 
other than in the branch in which the account was opened.  Bank 
transfers are time-consuming, with transfers lost in processing for 
extended periods of time.  Depositors are often skeptical of new 
instruments and the introduction of direct-deposit and debit cards may 
require time and confidence.  Hungary is still largely a cash-based 
economy. 

In terms of corporate services, banks are not eager to lend on a long-
term basis.  Moreover, the cost of borrowing is prohibitively high for 
companies.  The current nominal interest rate is nearly 40 percent.

Bank privatization is proceeding slowly given the bad loan portfolios of 
the banks.  The government has developed a "credit consolidation" scheme 
to clean the banks' credit portfolios.  
In July 1994, the first Hungarian bank was privatized.  Shares of the 
Foreign Trade Bank (MKB) were sold-off to the German bank Bayerische 
Landesbank.  The European Bank for Reconstruction & Development also 
took a stake in MKB.  While Budapest Bank was slated for privatization, 
prospective buyers chose at the last minute to decline the opportunity.  
The privatization of Hungary's largest savings bank, OTP (The National 
Savings Bank) is scheduled for privatization by the end of 1995.  The 
share issue will be offered to both institutional and small investors.

B.  Foreign Exchange Controls Affecting Trading

The Hungarian forint is almost fully convertible for current account 
transactions, but not for capital account movements.  Currently, the 
forint is pegged to a currency basket consisting of the U.S. dollar (30 
percent) and the ECU (70 percent).  The worsening current account 
fuelled anticipation that a sizeable devaluation would take place to 
correct the situation.  In August 1994, the government devalued the 
forint by 8 percent -- the largest devaluation since 1991.  In 
conjunction with the austerity measures introduced in March 1995, the 
government of Hungary devalued the forint by 9% and moved to a crawling 
peg exchange rate policy.

Although the forint continues to be a managed currency, it is in essence 
fully convertible for business purposes.  Foreigners may freely 
repatriate profits and dividends in hard currency (note: MNB requires 
that an equivalent amount in forints be on deposit with a Hungarian 
bank).  Steady progress has been achieved in the liberalization of 
foreign exchange controls.  Foreigners are now permitted to maintain 
forint accounts which can be used to purchase goods domestically.  
Parliament is expected to pass a new foreign exchange law, drafted in 
conformity with IMF requirements, sometime in the fall of 1995.  


C.  General Financing Availability

The cost of borrowing locally is prohibitively high.  The current 
average nominal interest rate is nearly 40 percent.  Local banks are 
often resistant to lending on a long-term basis.  Close ties to old 
(usually state-owned) clients, the larger and safer profits available 
from investing in state securities, unfamiliarity with loan application 
evaluations, and inadequate bank reserves have acted to constrain 
commercial bank credit to the private sector.

D.  Export Financing (Method of Payment)

All import contracts exceeding 2 million forints must be secured by a 
letter of credit (LC) bank guarantee or by advance payments/deposits 
with commercial banks.  The advanced payments/deposits must be put on 
deposit with the Hungarian National Bank.  Importers are restricted from 
making foreign currency cash payments abroad exceeding a quarter million 
forints.  Enterprises are permitted to enter into deferred payment 
arrangements for imports, with the LC and advance payment/deposit 
requirement for contracts exceeding 10 million forints waived if the 
deferred payment is for a period exceeding 60 days. 

E.  Available Export Financing and Insurance

The U.S. Export-Import Bank has provided financing and insurance for 
transactions in Hungary.  The largest deal to date involved the 
Hungarian Airlines (MALEV) procurement of two Boeing 767s.  Currently, 
only the Foreign Trade Bank is approved by EXIM in Hungary, however 
ExImBank is exploring correspondent relationships with other Hungarian 
banks.

F.  Available Project Financing

Many U.S. commercial banks will provide financial services in Hungary, 
however the cost of financing tends to be high.  Among the major 
international financial institutions, the European Bank for 
Reconstruction and Development (EBRD), the International Finance 
Corporation (IFC), and the European Investment Bank (EIB) have various 
project financing programs.  Other sources of credit for private 
investors include Citibank, Bankers Trust, the Hungarian-American 
Enterprise Fund, and the First Hungary Fund.  Among the European banks, 
the following banks do business in Hungary:  Giro Bank (Austria), 
Creditanstalt (Austria), ING (The Netherlands), ABN Amro and several of 
the major German banks.  

G.  List of Banks with Correspondent U.S. Bank

All major Hungarian banks -- Budapest Bank, Hungarian Foreign Trade Bank 
(MKB), Hungarian Credit Bank (MHB), K&H (Trade and Credit Bank), Posta 
Bank (Post Bank), OTP (National Savings Bank) -- have correspondent 
banks in the United States.  Additionally, there are a number of 
international banks that maintain representational offices in Budapest 
(most with offices in the United States): ABN Amro, Creditanstalt, 
Credit Lyonnais, and Giro Bank.  For contact information, see Appendix B 
(section D).


IX.  BUSINESS TRAVEL

A.  Business Customs

Business customs are similar to those in the United States and Western 
Europe.  Typically, Hungarian business people prefer to develop a 
relationship on which to base a business connection.  Some day-long 
meetings may involve extended luncheons sponsored with reputed Hungarian 
hospitality.  Hungary's working hours are 8am to 4pm.  During the summer 
months, business typically stops by mid-afternoon, and even earlier on 
Fridays.

B.  Travel Advisory and Visas

There are no travel advisories issued for Hungary.  American citizens 
travelling to Hungary do not require visas.  Those intending to stay for 
longer than 90 days, will require residency permits.  Americans must 
obtain work permits if they are employed in Hungary.  To obtain a work 
permit, a visa for work purposes must be obtained from the Hungarian 
Embassy in the United States prior to arrival in Hungary.  Recent 
crackdowns on work visa abuses has caught legitimate requests in 
frequently time consuming and sometimes onerous application procedures.  

C.  Holidays

Hungary recognizes the following holidays:  New Year's (January 2); 
Revolution Day (March 15);  Easter Monday; Labor Day (May 1); Whit 
Monday  (May 27th); National Day (August 20); Republic Day (October 23); 
Christmas (December 25); and Boxing Day (December 26).  

D.  Business Infrastructure

Hungary is serviced by most of the major international airlines: Delta, 
KLM, Lufthansa, British Airways, SAS, Air France, Sabena, Swiss Air.  
United Airlines and American Airlines have travel agent offices in 
Budapest, as well.  The Hungarian Airlines (MALEV) provides direct non-
stop service between New York and Budapest as well as services all the 
major European cities.  Travel into the countryside will require either 
a rental car or a railroad trip.  Hungary is crisscrossed by railway 
lines which connect most cities.  A hydrofoil can be taken to Vienna.

In Budapest, there is a well-planned underground metro (3 lines) which 
is supplemented by a comprehensive bus, tram and trolley system.  Taxis 
are also available; however, drivers often take advantage of foreign 
guests arriving at the airport or at major hotels by charging 2 to 3 
times the normal rate.  It is wise to ask the price in advance to a 
destination (airport to downtown is approx. $20); or seek the advice of 
a local attendant.

Budapest has three 5-star (Hilton, Marriott, Kempinsky) and 3 4-star 
(Forum, Hyatt, Korona) hotels located in the center of town.  Other 
comfortable but lower-priced accommodations can be obtained at the 
Aquincum, Hotel Helia, Thermal Hotel, and the Ramada (downtown and 
Margaret Island locations).  Hotel facilities vary in quality outside of 
Budapest. 

Telephone service is steadily improving in Hungary.  Long distance 
calling is fairly reliable, however, calls to the countryside or within 
certain locales in Budapest can be poor in quality or be disconnected.  
Budapest is serviced by two GSM cellular phone systems as well as by 
several paging services.  

The cellular systems cover the primary corridors across Hungary 
permitting travelers to maintain phone contact.  Calling card services 
such as AT&T's "USA Direct" and Sprint can be accessed within Hungary by 
dialling special access code numbers. 

English is regularly used in business contexts, with German coming in a 
close second.  There are of course many firms, especially smaller, new 
firms whose principals do not speak English.  In these instances, a 
translator is normally available.  It is nonetheless prudent to ask in 
advance what translation provisions have been made for a meeting.

Hungarians address each other by their family names first, followed by 
their first names (e.g., Smith John).  Business cards are presented in 
this manner unless printed in English.  It is always advantageous to 
learn basic greetings in Hungarian.  Even the most minimal efforts will 
impress Hungarian business partners.

CHAPTER X.  APPENDICES

    APPENDIX A

  COUNTRY DATA
1.  Profile
Population:  10.3 million
Population Growth Rate:  -0.1
Religions:  Catholic - 69 percent
            Calvinist - 20 percent
            Lutheran - 5 percent
            Other - 8 percent
Government System:  Multi-parti Parliamentary Democracy
Languages:  Hungarian, German/English 
      for business
Work Weeks:  40 hours, Monday-Friday


  APPENDIX B

2.  Domestic Economy

(Current $ million)                   1994(a)     1995(b)   1996(c)
GDP (nominal)                       41,000      42,000(a)       n/a
GDP growth rate (percent)                2(a)      3-5(b)       n/a
Nominal GDP per capita (USD)*        4,000       4,000          n/a
GOH spending as % of GDP                59         n/a          n/a
Rate of Inflation (percent)           18.5          28(a)      24(c)
Rate of Unemployment (percent)        10.9          12         10
Foreign Exchange Reserves            6,800       7,200      7,200
Average Exchange Rate                  105         130        n/a
Foreign Debt                        28,500      31,600        n/a
Debt Service Ratio (d)                48.7         n/a        n/a
US Economic and Military               950       3,100      9,000
Assistance (obligated) (e)            36.1        19.0      15.0 

-----------------------------
(a) Official government data, unless otherwise noted
(b) Government estimate, before July 7, unless otherwise noted
(c) private research institute estimate, unless otherwise noted
(d) medium term credit amortization and gross interest payments, as a 
percentage of export of goods and services
(e) 1995 and 1996 figures are estimates, budget is under review



  APPENDIX C

                 TRADE
                           1994          1995       1996
                                  (in Million USD)
Total Country Exports     8,100      9,450     11,500
Total Country Imports    11,600     14,560     15,500
U.S. Exports to Hungary     309        340        490
U.S. Imports from Hungary   470        490        590


   APPENDIX D

                       INVESTMENT STATISTICS

Foreign Direct Investment Statistics

Hungary has attracted over $8 billion in foreign direct investment since 
1989.  There are over 30,000 joint ventures registered in Hungary, up 
from 13,000 two years ago.

Investment began pouring into Hungary with the liberalization of the 
investment regime, even before the transition to democratic rule.  The 
dollar amounts represent actual inflows and do not include investment 
commitments.

            FDI in Hungary
               ($ mil)
  Year                  Value
  ----                  -----
  1972-88                  250
  1989                     300
  1990                     900
  1991                   1,700
  1992                   1,471
  1993                   2,328
  1994                   1,887
  -------                -----
  Total                  8,736

More than one-third of the joint ventures operating at the end of 1991 
were established with one million forints (the minimum required to 
establish a limited liability company), while the founding capital of 
543 (6 percent) exceeded 100 million forints.  Of the companies with 
foreign participation set up in the first half of 1992, however, 
approximately two-thirds were established with the minimum one million 
forints capital.  Only 45 companies (2.2 percent) had founding capital 
greater than 100 million forints -- though their founding capital 
represented 82.5 percent of the total for the JV's set up in the first 
half of 1992.  For investments made though 1991, 57 percent of foreign 
capital was invested in industry, 16 percent in trade, 16 percent in 
services, and 6 percent in construction.  For investments made in the 
first half of 1992, 60.6 percent of foreign capital was invested in 
industry, 10.4 percent in trade, and 8.7 percent in services.

According to the Ministry of Industry & Trade, as of January 1995, the 
leading foreign investors are:

  United States    $3.8-4.0 billion
  Germany          $2.5-3.0 billion
  Austria          $1.3 billion
  France           $0.8 billion

Other major investors are Great Britain, Japan, Switzerland, Sweden, 
Canada, and Italy.


  Appendix E

  U.S. AND COUNTRY CONTACTS

A.  U.S. Embassy Trade Personnel

American Embassy Budapest
  Ambassador: Donald M. Blinken
  Deputy Chief of Mission: James I. Gadsden
  Economics Counselor: John Moran
  Commercial Attache: John Fogarasi (see below)
  Szabadsag ter 12
  H-1055 Budapest
  Tel: (36)(1) 267-4400
  Fax: (36)(1) 132-8934

U.S. Agency For International Development (USAID)
  USAID Representative:  Thomas Cornell
  Europa Centre
  Karoly Korut 11
  H-1075 Budapest
  Tel: (36)(1) 269-7860
  Fax: (36)(1) 251-1981

U.S. Commercial Service
  Senior Commercial Officer:  Mr. John J. Fogarasi
  Assistant Commercial Attache: Mr. Jonathan L. Marks
  Bajza utca 31
  H-1062 Budapest
  Tel: (36)(1) 322-1217
  Fax: (36)(13 342-2529
  
U.S. Information Service
  Public Affairs Officer: Ms. Donna Culpepper
  Bajza utca 31
  H-1062 Budapest
  Tel: (36)(1) 342-4122
  Fax: (36)(1) 153-4274


B.  AmCham and Bilateral Business Councils

American Chamber of Commerce in Hungary
  Executive Director: Peter Fath
  Dozsa Gyorgy ut 84/A, Room 405
  H-1068 Budapest
  Tel: 269-6016
  Fax: 122-8890

Chamber of Commerce of the United States
  International Division --
  Hungarian-U.S. Business Council
  Chamber of Commerce of the United States
  Michaela D. Platzer - Director
  P.O. Box 1200
  Washington, D.C. 20013-1200  
       Tel: 202 463-5480
       Fax: 202 463-3114


C.  Trade and Industry Associations

Hungarian Chamber of Commerce
  U.S. Desk Officer: Helembaine Remenyi Zsuzsanna
  Kossuth Lajos ter 6-8
  H-1055 Budapest
  Tel: 153-0835, 153-3333
  Fax: 153-1285

National Association of Entrepreneurs (VOSZ)
  President: Janos Palotas
  Konyves Kalman krt. 44.
  H-1087 Budapest
  Tel: 269-9224
  Fax: 269-9226

Hungarian Banking Association
  Secretary General: Miklos Pulay
  Roosevelt ter 7-8
  Budapest
  Tel: (36 1) 112 5826  
  Fax: (36 1) 111 6037
  
Association of Computer Software and Organizational Enterprises
  President: Mr. Tibor Gyuros
  Vaci ut 168/A
  H-1138 Budapest
  Tel: (36 1) 270 5120    
  Fax: (36 1) 270 5132
  
Hungarian Chamber of Database Suppliers
  Secretary: Mr. Andras Felegyhazi
  Kuny Domokos u. 13-15.
  H-1012 Budapest
  Tel: (36 1) 202 2998 and 175 9722 
  Fax: 202 2894
  
Association of Hungarian Building Materials Industry
  President: Dr Miklos Szabo
  F_ utca 68.  
  H-1027 Budapest
  Tel:  (36) (1) 201-2011/Ext. 479 or 201-6682
    Fax:  (36) (1) 156-1215 

Association of the Hungarian Chemical Industries
  Secretary General: Dr. Lajos Csurgai
  Hungaria krt 178. 
  H-1146 Budapest
  Tel:(36 1) 343 8920 
  Fax:(36 1) 343 0980  

Association of the Hungarian Electronic and Informatics Industries
  Secretary General: Mr. Istvan Basa
  Szemere u. 17.
  H-1054 Budapest
  Postal address: POB 33, 
  1525 Budapest
  Tel: (36 1) 131 8986 and 111 6271  
  Fax: (36 1) 131 6320
  
National Professional Association of the Environment
Protection Industry
  Secretary General: Ms. Anna Szekely
  Angol u. 12.
  H-1149 Budapest
  Tel: (36 1) 164 0026  
  Fax: (36 1) 163 2874
  
National Association of Trading Companies
  Secretary General: Mr. Gyorgy Vamos
  Kuny D. u. 13-15. 
  1012 Budapest
  Tel: (36 1) 155 9689 and 202 6574 
  Fax: (36 1) 155 9689  
  
Hungarian Franchise Association
  President: Ms. Gabriella Szemere
  Margit krt. 15-17.
  H-1024 Budapest
  Tel: (36 1) 212 4124  
  Fax: (36 1) 212 5712
  
Association of Hungarian Insurance Companies
  President: Mr. Gabor Kepes
  Deak F. u. 10. 
  H-1052 Budapest
  Tel: (36 1) 118 3473  
  Fax: (36 1) 137 5394
  
Association of the Hungarian Light Industries
  Secretary General: Dr. Jozsef Cseh
  Address: Rozsa Ferenc u. 55 
  H-1064 Budapest
  P O B 329 
  H-1390 Budapest
  Tel: (36 1) 341 4793  
  Fax: (36 1) 341 4790

Association of the Hungarian Pharmaceutical Industries
  Secretary General: Dr. Laszlo Buzas
  Amerikai ut 96. 
  H-1145 Budapest
  Tel: (36 1) 251 3677  
  Fax: (36 1) 251 3337


Chamber of Public Road Transport Companies
  Secretary General: Mr. Andras Denes
  Terez krt. 38., II. 228. 
  H-1066 Budapest
  Tel: (36 1) 132 9939  
  Fax: (36 1) 132 9939

Hungarian Chamber of Customs Agents
  President: Mr. Gyorgy Lerant
  Hermina ?t 17.
  1146 Budapest
  Tel: (36 1) 343 8306  
  Fax: (36 1) 343 8908

Hungarian Chamber of Real-Estate Dealers
  President: Mr. Lajos Szabo
  Deak Ferenc u. 10. III.305.
  H-1052 Budapest   
  H-1365 Budapest, POB 688.  
  Tel/Fax:  (36) (1) 118-9857  
  Tel: (36 1) 266 2076

Joint Venture Association
  Secretary General: Dr. Ivan Toldy-Osz
  Kuny D. u. 13-15. 
  H-1012 Budapest
  Tel: (36 1) 156 0040   
  Fax:  (36 1) 156 0728

National Association of Building Contractors
  Secretary General: Mr. Laszlo Koji
  Dobrentei ter 1. 
  H-1013 Budapest
  Tel: (36 1) 201 3850
  Fax: (36 1) 201 3840

National Association of Food Processing Companies 
  Secretary General: Dr. Laszlo Piros 
  Kuny Domokos u. 13-15.
  H-1012 Budapest
  Tel: (36 1) 202 5586  
  Fax: (36 1) 155 5057

National Association of Packaging and Material Handling
  Secretary General: Mr. Gyorgy Viszkei
  Rigo u. 3. 1st floor 
  H-1085 Budapest
  Tel: (36 1) 210 0101  
  Fax: (36 1) 133 8170

Association of the Plastics Industry
  Director: Dr. Andras Muzsay
  Erzsebet kiralyne u. 1/c.
  1146 Budapest
  Tel: (36 1) 343 0759  
  Fax: (36 1) 343 0980

D.  Government Offices

Ministry of Industry & Trade
  International Relations/USA Desk: Mr. Erik Szarvas
  Honved u. 13-15.
  H-1055 Budapest
  Tel: 156-5566
  Fax: 175-0219

Ministry of Finance
  Jozsef Nador ter 2/4.
  H-1051 Budapest
  Tel: 118-2066
  Fax: 118-2570

Ministry of Environment and Regional Policy
  International Relations: Ms. Eszter Szovenyi
  Fo u. 44-50.
  H-1011 Budapest
  Tel: 201-4133
  Fax: 201-2846

National Bank of Hungary
  President: Dr. Gyorgy Suranyi
  Szabadsag ter 8-9
  H-1054 Budapest
  Tel: (36 1) 153 2600
  Fax: 132 3913

State Privatization and Holding Co. (APV Rt.)
  Managing Director: Mr. Janos Hatvani-Szabo
  Chaiman: Mr. Imre Szokai
  Pozsonyi utca 56
  H-1133 Budapest
  Tel: 269-8600
  Fax: 149-5745


E.  Market Research Firms

Arthur Andersen & Co.
  Managing Director: Hans Jurgen Fortsch
  East West Business Center
  Rakoczi ut 1-3. Hungary
  H-1088 Budapest
  Tel:  (36) (1) 266-9744   
  Fax:  (36) (1) 266-9661

Price Waterhouse
  Managing Director: Mr. Gusztav Bienerth
  Rumbach S. u. 21.
  H-1075 Budapest  
  Tel: (36) (1) 269-6910  
  Fax: 269-6936
  
Coopers & Lybrand Consulting Group
  Managing Director: Bernard Delomenie
  Lov_haz u 30. 
  H-1024 Budapest     
  Tel: (36) (1) 212 4720
  Fax: 156 4895

Deloitte and Touche
  Managing Director: Mr. Didier Taupin
  Varmegye u. 3-5.
   1052 Budapest
  Tel:  (36) (1) 267-2062   
  Fax:  267-4182

Ernst & Young Ltd
  Director: Mr. Adam Tertak
  Hermina ut 17. 
  H-1146 Budapest
  Tel: (36) (1) 252 8333  or  252 8231  
  Fax: 251 8778


F.  Commercial Banks 

Budapest Bank
  CEO: Mr. Bela Singlovics
  Honved utca 10
  H-1054  Budapest, Hungary
  Tel: (36 1) 269 2397 and 269 2358  
  Fax: (36 1) 269 2400  

Commercial and Credit (K&H) Bank  
  President & General Manager: Mr. Janos Eros
  Arany Janos u. 24.
  H-1051 Budapest
  Tel: (36 1) 112 5200   
  Fax: 111 1825 

Hungarian Credit Bank   (Magyar Hitel Bank)
  General Manager: Mr. Zsigmond Jarai
  Szabadsag ter 5-6
  H-1054 Budapest
  Tel: (36 1) 269 2122   
  Fax: 269 2245 and 252 1220   

Hungarian Foreign Trade Bank (MKB)
  CEO:  Mr. Gabor Erdei
  Szent Istvan ter 11
  H-1051 Budapest
  Tel:  (36 1) 269 0922 and 153 4211
  Fax: 269 0959 

Citibank Budapest
  General Manager: Mr. John McGloughlin
  Vaci utca 19-21
  1052 Budapest
  Tel: (36 1) 138 2666    
  Fax: 118 9694  

Central European International Bank (CIB)
  President & CEO: Mr. Gyorgy Zdeborszky 
  Intl'l Banking Rel.: Gyorgy Szekely Director  
  Vaci u 16/B 
  H-1052 Budapest
  Tel: (36 1) 212 1330   
  Fax: 212 4200
    
ABN Amro Bank Magyaroszag Rt.
  Chairman & Managing Director: Mr. Peter Bakos
  Nagy Jeno u. 12.
  H-1126 Budapest
  Tel: (36 1) 202 2722    
  Fax: 201 3685
  
Creditanstalt
  General Director: Dr. Matthias Kunsch
  Akademia utca 17
  H-1054 Budapest
  Tel: (36 1) 269 0812   
  Fax: 153 4959
  
Credit Lyonnais
  Managing Director: Mr. Michel Canny
  Jozsef nador ter 7
  H-1051 Budapest
  Tel: (36 1) 266 1578, 266 9000   
  Fax: 266 9950

Internationale Nederlanden (ING) Bank
  General Manager: Mr. Tibor Rejto
  Andrassy u 9.  
  H-1061 Budapest
  Tel: (36 1) 268 0140
  Fax: 322 2288
   
G.  Multilateral Development Banks


Washington-based USG Country Contacts

The Multilateral Development Bank Office
  Mrs. Brenda Ebeling, director
  14th and Constitution Ave.
  NW, Washington, DC 20007
  Tel: (202) 482-3399
  Fax: (202) 482-5179

Office of the U.S. Trade Representative
  Deputy U.S. Trade Representative: Cathy Novelli
  Executive Office of the President
  Washington, DC 20506

Overseas Private Investment Corporation (OPIC)
  Insurance: Ms. Meryl Burpoe
  Finance: Mr. Brian W. Treadwell
  Investment Promotion: Ms. Barbara Brereton
  1100 New York Avenue, NW
  Washington, DC  20572

U.S. Department of Commerce
  14th & Constitution Ave, NW
  Washington, DC 20230

    Hungary Desk Officer: Mr. Brian Toohey
    Tel: (202) 482-4915
    Fax: (202) 482-4505

    USCS Regional Director: Mr. George Knowles
    Tel: (202) 482-1599
    Fax: (202) 482-3159

    Central European Business Information Center
                    Mr. Jay Burgess, Director
    Tel: (202) 482-2645
    Fax: (202) 482-4473

U.S. Department of State
  Regional Economic Officer: Mr. Richard Driscoll
  Hungary Desk Officer: Bob Norman
  EUR/EE 5220
  2201 C Street, NW
  Washington, DC 20520
  Tel: (202) 647-3191

U.S. Trade & Development Agency
  Hungary Project Manager: Ms. Ann Lien
  Room 309 SA-16
  Washington, DC 20523-1602
  Tel: (703) 875-4357
  Fax: (703) 875-4009  

TPCC Trade Information Center in Washington:
  Tel: 1-800-USA-Trade

U.S. Department of Agriculture,
  Foreign Agricultural Service
  Trade Assistance and Promotion Office
  Tel: (202) 720-7420


  APPENDIX F

  MARKET RESEARCH

List of Available ISAs/IMIs

Pharmaceutical Industry                       ISA   Jan 1995
Cosmetics                                     ISA   Dec 1994

New Cellular Phone Frequency                  IMI     Jun 1995
Privatization of Antenna Hungaria             IMI     Jun 1995
Budapest International Motor Show             IMI     May 1995
Coke, Pepsi fight for Key Market              IMI     May 1995
Enterprise equity in Bekot Knitwear           IMI     Apr 1995
Franchise Market in Hungary                   IMI     Apr 1995
Top Advertisers in Hungary in 1994            IMI     Apr 1995
Privatization of Energy Sector                IMI     Mar 1995
Regulation of Import duty surcharge           IMI     Mar 1995
Citibanks eyes retail customers               IMI     Feb 1995
New Regulations on car imports                IMI     Feb 1995
Pioneer in Industrial Parks                   IMI     Jan 1995
Life Insurance Policies Boom                  IMI     Jan 1995
East Europe Drug Market for Hungary           IMI     Dec 1994


List of Upcoming ISAs/IMIs

Financial Services                            ISA     in process
Transport Sector                              ISA     in process
Textiles/Apparel                              ISA     in process
Processed Food                                ISA     in process


  APPENDIX G

                       Trade Event Schedule

Oct 1995  Compass Executive Delegation

Oct 1995  Council of American States Trade Mission

Oct 1995  Consumer Goods Matchmaker (USDOC Approved) 

Nov/Dec 1995  U.S. Ambassadors' Trade/Investment Tour of
    Western Europe

Jan/Feb 1995  Environment Matchmaker

March 1995  Utazas(Travel) '96

Because trade event schedules may change, firms should consult the 
export promotion calendar on the NTDB or contact CS Budapest for the 
latest information.
```

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