Identifies common practices to be aware of when selling in this market, e.g., whether all sales material need to be in the local language.
Success in the Hungarian market is difficult without an in-country representative, agent, or distributor. While marketing tools serve to introduce a product or service, personal visits carry much more weight in Hungary. English, German, and French are often spoken by younger business managers and are more prevalent in larger firms. U.S. companies in Hungary are still advised to have their brochures and information professionally translated and to have a translator on the spot during business meetings if needed.
Hungarian companies can access corporate loans at favorable rates and conditions to boost their sales or expand their manufacturing operations and business activities.
These two factors usually benefit foreign firms. However, the Hungarian National Bank’s Funding for Growth Scheme (NHP) with an interest rate capped at a maximum 2.5% has benefited several local firms, despite some of the lending was initially put into bank deposits or was used to purchase government bonds, taking advantage of the arbitrage opportunity.
U.S. companies can mitigate financing risks and better compete with EU firms by directing their Hungarian customers to services like those of the U.S. Export-Import Bank.
Because business in Hungary is often based upon personal relationships and trust, U.S. exporters are encouraged to visit potential Hungarian customers when presenting a proposal and discuss all conditions of future dealings. Face-to-face meetings are essential to successful long-term business cooperation i Hungary. The U.S. Commercial Service Budapest, through its various services, can help U.S. companies determine the export market potential in Hungary.
Hungarian businesses tend to be price sensitive. U.S. exporters are advised to work with Hungarian representatives on a pricing strategy to keep import costs low. With Hungary’s accession to the European Union in 2004, Hungary adopted the EU’s common external tariff (CXT) rates. Tariff assessment and all other customs procedures take place at the first port of entry into the EU.
Hungary’s Value Added Tax (VAT) sharply increases the price of U.S. exports for Hungarian consumers. The Value-Added Tax (consumption tax) is 27% on most products and services.
Foreign companies operating in price-regulated sectors, such as telecom, energy, pharmaceuticals and retail suffered decreased margins due to sector taxes and other austerity measures, as well as government delays over the past few years.
After joining the EU, the numerous EU-oriented reforms have removed price controls on most utilities. By the early 2000s, the Government of Hungary had largely deregulated utilities, and tried to be closer to the EU pricing levels for electricity, gas and wastewater prices, (this was a significant price increase for households and businesses). However, in 2013, the Government of Hungary introduced a 10% decrease in retail utility prices to consumers for electricity and gas heating, and another 10% retail price decrease later that year on water and sewage services as part of the country’s public utility rate cut program and that of protecting arable land in the country. Most utilities were re-nationalized including electricity, gas, water and sewage to provide favorable rates to consumers. In other sectors such as telecommunications, cable or digital TV services, and internet services, stiff competition continues among service providers.
Transparency International (TI) and other anti-corruption watchdogs have highlighted EU-funded development projects as one of the largest sources of corruption in Hungary. A TI study found indices of corruption and overpricing in up to 90% of EU-funded projects. A Corruption Research Center Budapest study based on public procurement data between 2010-2016 revealed that the massive influx of EU funds reduced competition and increased levels of corruption risk and overpricing in public procurements. According to the study, EU-funded tenders perform poorly in regard with corruption risks, competitive intensity, and transparency, compared with Hungarian-funded tenders. Besides their positive impact on GDP growth and development, EU funds in Hungary contribute to the system of political favoritism and fuel crony capitalism, the study concluded. Find more at EU Pricing.