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Factba.se: Australia DFAT Country Briefs - Hungary


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The Republic of Hungary is a landlocked country in Central Europe bordered by Slovakia to the north, Austria and Slovenia to the west, Croatia and Serbia to the south, and Romania and Ukraine to the east and north-east. The population of Hungary is approximately 10 million. The capital is Budapest.

Hungarians celebrate their national or State day on 20 August each year, which is known in Hungary as the Day of the Foundation of the State of Hungary and St Stephen's Day, after Hungary's first King. Hungary also celebrates 23 October as a national day commemorating the outbreak of the 1956 Uprising and the proclamation of the Hungarian Republic in 1989, and 15 March, commemorating the 1848-49 Revolution and War of Independence.

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Hungary has a democratically-elected, unicameral parliament, the National Assembly.

Parliamentary elections, the sixth free elections after the end of communist era, were held in April 2010. The 386 members of parliament are elected under a combined system of party lists and single member electoral constituencies. In the first round of the elections, on 11 April the Fidesz - Christian Democratic People's Party (KDNP) (the major conservative centre-right political party that consists officially of two separate parliamentary parties but which essentially function as one) won an absolute majority of seats, giving it the power to form government on its own. After the second round, on 25 April, the Fidesz - KDNP coalition emerged with an overwhelming two-thirds majority, 263 of the 286 seats, sufficient to allow them to modify major laws and the country's constitution without other parliamentary parties’ support.

The results of the elections were formally announced on 10 May with Viktor Orbán elected Prime Minister, Mr Orbán is a founding member of the Fidesz Party and was Prime Minister between 1998-2002. Local Government elections are scheduled to be held on 3 October 2010.

Dr Pál Schmitt, who served briefly as Speaker of the National Assembly following Fidesz’s election victory, was elected President of the Republic of Hungary on 29 June 2010 and took up office on 6 August 2010. The President, elected by the Parliament every five years, has a largely non-political role. The President does, however, have the right to send proposed legislation back to Parliament for reconsideration, or to the Constitutional Court for a review of its constitutionality. Hungary is a member of the World Trade Organization (one of the founding members), the International Monetary Fund (since 1982), the Organisation for Economic Cooperation and Development (since 1996), NATO (since 1999) and the European Union (since 2004). Hungary is also a member of the EU's visa-free zone, the Schengen Area, which it joined in December 2007.

Hungary is a member of the Visegrad Four, with Poland, Slovakia and the Czech Republic. This is an unofficial grouping of the four Central European countries which aims to promote closer cooperation between the four countries, all relatively new members of the European integration.

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Hungary has been one of the more advanced market economies amongst the new EU member states in Central and Eastern Europe with the private sector accounting for approximately 75 per cent of GDP. The economy has been extensively liberalised through privatisation, foreign investment and the introduction of comprehensive commercial laws. Further reforms are planned. A high degree of integration with the EU market makes Hungary an attractive trade and investment partner. Key reasons why foreign investors choose Hungary are the quality of its workforce, its excellent infrastructure, its central geographic location and relatively low costs. In recent years, Hungary's heavy taxation regime and the absence of essential administrative reforms have significantly impacted on its business environment, although it still remains a major recipient of foreign direct investment. A high level of national debt and doubts about the ability of the new Fidesz Government to reduce further the budget deficit has introduced new elements of uncertainty. Hungary is progressively adopting broader EU policies, for example in its commitment to promote renewable energy sources, and it aims to join the Eurozone when possible.

The Hungarian economy is closely tied to the fortunes of the leading Eurozone economies, especially Germany. About three quarters of Hungary's exports go to EU countries, primarily Germany, Austria, France and Italy. Russia is also an important trading partner, supplying most of Hungary's natural gas needs and other energy and mineral resources.

Currently, Hungary is experiencing extremely difficult economic conditions. An unsustainable budget deficit forced the introduction of severe government spending restrictions in 2006 and this led to a drop in economic growth and consumer and business confidence. The onset of the global economic crisis compounded Hungary’s economic problems. In October 2008 Hungary had to turn to international financial institutions for help to restore investors' confidence in the country's economy. As a result the IMF, the EU and the World Bank concluded a Stand-by Agreement with the country and provided a loan of approximately EUR 20 billion. Hungary’s GDP fell by 6.3% in 2009 and will grow by only about 0.6-in 2010, with better growth predicted for 2011. GDP growth in 2008 was 0.6%. Unemployment in Hungary rose to 11.8 in January 2010 but had decreased to 11.1 by August 2010. Inflation in 2009 was 4.2% and in 2010 it increased to 5.3%, the prognosis for the next two years being around 3%.The Hungarian Forint has seen significant ups and down in the past year or two. In September 2008 the Forint to Euro exchange rate was 238 to one and this plummeted to an historic low of 316 to one in March 2009. By September 2009 it had stabilised around 270 to the Euro and as at August 2010 it is again around this figure, apart further fluctuations. (One Australian Dollar is worth 195.93 Forints as of 16 August 2010).

The previous Hungarian Government had delayed setting a date for the adoption of the Euro until reforms were completed but most observers do not expect Hungary to enter the Eurozone before 2013-2014 and the current Government has not set any new date.

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Hungary and Australia enjoy friendly, co-operative relations with strong people to people links flowing from the large numbers of Hungarians who migrated to Australia in the twentieth century, especially following the 1956 Uprising against the Soviet occupation of Hungary. At the time of the 2006 Census, there were 67,625 people in Australia of Hungarian ancestry. Hungarian-Australians have been active in the fields of business, academia, politics and the arts and count amongst their number well-known Australians such as the former NSW Premier, Mr Nick Greiner AC, businessman Mr Frank Lowy AC, Executive Chairman and co-founder of the Westfield Group, artist Ms Judy Cassab CBE AO, and SBS sports commentator, Mr Les Murray AM.

Australia established full diplomatic relations with Hungary in 1972 and both countries have resident diplomatic representation.

Although not frequent, high level visits between Australia and Hungary have served to develop bilateral relations. The former Minister for Foreign Affairs, the Hon Stephen Smith MP, visited Hungary in July 2009. Australia's former Minister for Veterans' Affairs, the Hon Bruce Billson MP, represented Australia at the official commemorations of the fiftieth anniversary of the 1956 Uprising in October 2006. The Hon Alexander Downer MP, then Minister for Foreign Affairs, visited Hungary in September 2005. In March 2003, the then Minister for Communications, Information Technology and the Arts, Senator the Hon Richard Alston also visited Hungary.

The former President of Hungary, Dr László Sólyom, visited Australia in September-October 2009 and parliamentary visits have taken place regularly. The First Deputy Speaker of the Hungarian Parliament, Mr László Mandur, visited Australia in November 2009. The parliamentary floor leader of the opposition Fidesz Party, Dr Tibor Navracsics, visited in August 2009. Dr Ibolya Dávid, leader of the minor opposition party, the Hungarian Democratic Forum, visited Australia in November 2004. The Speaker of the Hungarian Parliament, Dr Katalin Szili, visited Australia in November 2002. From Australia, a study group of the Trade Sub-committee of the Joint Standing Committee on Foreign Affairs, Defence and Trade visited Budapest in April 2003 as part of its inquiry into Australia's trade and investment relations with Central European countries. In May 2007, a delegation of the Queensland State Parliament visited Budapest. The State Secretary in the Hungarian Ministry for Foreign Affairs, Mr László Várkonyi, visited Australia in July 2009 for high-level consultations.

Bilateral agreements between Australia and Hungary include treaties on Mutual Assistance in Criminal Matters and Extradition (1997) and an agreement on Cooperation in the Peaceful Uses of Nuclear Energy and the Transfer of Nuclear Material (2002). Negotiations towards a bilateral Social Security Agreement commenced in July 2009.

Bilateral economic and trade relationship

Hungary’s position in Europe as a landlocked country and its relative lack of natural resources has necessitated a traditional reliance on foreign trade.

Since Hungary's EU accession in 2004, increasing numbers of Australian businesses have been exploring Hungary's potential as a base for operations in the EU, and especially in the Central/Eastern European region. The total volume of merchandise trade remains modest. Total two-way merchandise trade in 2009 was valued at $445 million, with Australia an importer of Hungarian telecom equipment and parts ($185 million), computers ($33 million), electrical circuit equipment ($29 million) and motor vehicles ($21 million). Major Australian exports to Hungary include optical fibres and fibre bundles ($4 million), measuring & analysing instruments ($1 million), electrical machinery and parts ($1 million) and plastic containers, stoppers & lids ($1 million).

Both countries have an interest in cooperation in the education sector. There were 1,148 enrolments by Hungarian nationals in Australian education institutions in 2008, with vocational education one of the most attractive choices. Increased interest in higher and post-graduate education is expected. Opportunities exist for increased collaboration in research and institutional linkages.

Several Australian companies are active in the energy sector in Hungary (see below), including uranium prospecting, clean energy technologies and renewable energy production. Infrastructure (transport and public works) and services, including franchising, continue to offer attractive opportunities.

The two countries' respective positions in international commercial supply chains, especially in sectors such as motor vehicle manufacturing, energy and resources exploitation and general engineering, present opportunities for further growth in trade and investment.

Australia's economic relations with Hungary are facilitated by a bilateral Double Taxation Agreement and an Investment Promotion and Protection Agreement.

Trade Successes

Australian companies with investment interests in Hungary include the Macquarie Group, AMP Capital Investors, QBE-Atlasz Insurance, Goodman Logistics, Adina Apartment Hotels, WildHorse Energy, Green Rock Energy and others. Cochlear Limited is active in Hungary and other countries in the Central European region, providing hearing implants. Future opportunities to develop trade and investment have been identified in infrastructure, government-related services (particularly health and e-government), consumer goods, food and beverages, computer and telecommunications software and services, building and construction technologies and education services. Hungary's EU membership also offers opportunities for Australian business in areas such as environmental technologies and solutions.

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Last Updated: September 2010

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