Economy Europe Featured Hungary News

Government Ousts Foreign Companies in This Sector in Hungary

G7, a Hungarian economy news website, said the Hungarian government found its autumn enemy in the business world. From September, the Orbán administration will take further steps against foreign building material manufacturing companies.

The aim is to force them to leave Hungary. According to G7, that is why the Orbán administration introduced two years ago the so-called mining royalty and extended it this year. In May, they gave the state pre-emption rights for several building materials. Finally, in July, they fined several foreign players in the sector with a carbon-dioxide quota tax. wrote that a new bill is in the pipeline, which would give pre-emption rights to the state for not only some building materials but also the companies producing them. Based on the legislation plan of the construction and transport ministry, they will start negotiations about the draft in October. However, the parliament will probably not accept the bill this year.

The draft does not contain it but the government expressed multiple times that they aim to make dominant German and Austrian companies in the construction material production sector leave Hungary. The long-term goal is to carry out construction projects with Hungarian building materials, with the contribution of Hungarian companies. Thus, the profit would be generated for Hungarians. But even János Lázár, the minister responsible for the area, did not mention the Hungarian workforce.

We wrote HERE about the government’s ambitious plans to ease employing hundreds of thousands of guest workers because too many Hungarians work in Austria, Germany, or the United Kingdom and with such low salaries, there is no chance to convince them to come home. Probably that is why Wizz Air is expanding Eastwards and launches regular flight to e.g. Central Asian metropolises. Foreign companies are already making losses Mr Lázár said they would like to help Hungarian companies gain market advantage and buy up their foreign competitors. German press also wrote about the Hungarian government’s intentions.

In April, Der Spiegel wrote the era of cooperation between the Orbán government and the German companies was over (you can read about it HERE). They quoted a Christian democratic politician, Günther Krichbaum, as saying that the Orbán government tries to reach its goals using mafia methods. First, the administration introduces rules making losses for foreign companies. Then government-close oligarchs appear and make an offer you cannot resist. The paper mentioned two examples.

One is the Duna-Dráva Cement Ltd (owners: Heidelberg Materials and Schwenk Zement), and the other is the E.ON. The owners of the former said they were ready for the fight in a hostile environment. However, the Hungarian government has strong cards in the game, and they utilised some already: From July 2021, companies purchasing for higher prices than the government determined must pay a so-called extra mining royalty taking away 90 percent of their “extra” profit.

In February, they extended that scheme to brick, ceramics and tile manufacturers. In May, the Orbán cabinet introduced pre-emption rights for the state concerning 15 products. Thus, foreign companies cannot export them and can get the price difference in court. In July, the government introduced a retroactive CO2 quota tax most foreign companies must pay. As a result, the profit of the foreign companies began to fall quickly, most companies made even losses. G7 even shared a telling chart about that process. For example, Zalakerámia (in Austrian ownership) already talks about sending away some of its employees. Interestingly, one of the results is that production has been falling since January. But the government is committed to winning the so-called “cement war”, and expects fierce attacks from Austria and Germany.

Source : Daily News Hungary