HIPA CEO: Investors should take Hungary into account when looking for a competitive business location

Hungary was one of the EU’s economic champions and has a very good chance to come out of this crisis stronger than ever.


Róbert Ésik, Chief Executive Officer at the Hungarian Investment Promotion Agency (HIPA), has told Newsweek that before COVID-19, Hungary was one of the EU’s economic champions and has a very good chance to come out of this crisis stronger than ever.

"I think investors should continue to take Hungary into account when they are looking for a competitive business location in Europe. From our side, we can offer our full support to guarantee that investors find the best possible solution for them in our country," he said.

In the first quarter of 2020, Hungary had GDP growth of 2.3 percent, which is significantly higher than the European average. Ésik believes that we entered this crisis in a much stronger position than we were in the previous 2009-2010 financial crisis. Our expectation is that the Hungarian economy will be much more resilient this time and we will come out of this crisis even stronger than we were before.

The factors that have made Hungary attractive from an investment perspective are multiple. The first one is the stability that the country has shown, both from an economical and political perspective. Second, Hungary has put a strong focus on foreign trade and foreign direct investment (FDI), which has proved to be a very successful approach. Aside from these factors, the Hungarian economy has some fundamental attributes that make us attractive, such as our well-educated labor force that is available at a competitive price and which matches the needs of the labor market, thanks to the dual educational system that we implemented a few years ago.

Ésik said we also have one of the most competitive taxation systems in Europe, with two key pillars. For corporations, we offer a single-digit flat tax on corporate income of 9 percent—one of the lowest in the whole European Union (EU). For individuals, our approach is that people should not be taxed too much on their salaries. We try to limit the tax burden on labor and cut certain taxes each and every year. In fact, we have a six-year program to reduce the social contribution tax, which is payable by employers on top of gross salaries. In 2016, the level of this tax was 27 percent. To make it simple, if you had an employee earning a gross €1,000, the employer had to pay €270 on top for social charges. Despite the COVID-19 crisis, the government decided to continue its policy of cutting taxes and, since 1 July this year, this tax level has been decreased to 15.5 percent or €155 in the case of a gross salary of €1,000. These are just those two examples that testify to the competitiveness of Hungary’s taxation system, which has been recognized and is highly appreciated by entrant investors.

A third element we can emphasize is the highly developed infrastructure that Hungary offers. We have the third-highest road density in Europe and one of the most developed highway networks. Budapest as the capital city is connected via highway to all the major cities in Hungary and, in the near future, we will complete the missing segments that are between those major cities and the borders of the country. This is very important as, from a logistics perspective, there are three international rail and road transport corridors crossing the country. A fourth corridor is the Danube River. These infrastructural developments will help us to further capitalize on our strategic geographical location.

When it comes to infrastructure, it is not just transport infrastructure that is important, but also mobile broadband coverage. Hungary has one of the best mobile data coverages in the world. Not many people know this, but we are in the top-five countries worldwide for mobile coverage, which is very important from a business point of view.

Last but not least, the Hungarian Investment Promotion Agency (HIPA) is very active in channeling discussions with investors. We offer a one-stop-shop service, trying to address all the needs of investors, answering all their questions and providing them with site-selection advisory services to make sure that they find the most suitable locations within the country for their operations. We support them both administratively and financially, since we offer a wide range of incentives as well. The Hungarian government has a very strong policy of incentivizing investments, which has become one of the key pillars of our economic policies.

Read the full interview here.