A foreign investment victim of Hungarian political strife

The Hungarian Ministry of Economic Development has been making strenuous efforts to solicit as much foreign investment as possible. The rate of employment is very low: 57%. That is perhaps the lowest in Europe, and the Hungarian government hasn't been able to increase the number of gainfully employed. Oh, yes, there have been irresponsible promises from the other side of the aisle of 1 million new jobs in ten years, but, let's face it, that is no more than a pipe dream. Some of the people who appear in the unemployment statistics are actually employed but not legally. Others are unemployable due to their lack of skills. But there are many who are employable but simply cannot find jobs, especially in the eastern part of the country. That's why it was encouraging that an Indian tire company, Apollo Tyres, planned to build a factory in Gyöngyös where unemployment is quite high and 1,200 men and women manage to find jobs only outside of the city–in Hatvan, Gödöllő, and Budapest. Apollo Tyres would have employed 900 people by 2010 and in the following five years they were planning to expand and hire an extra 600 workers. However, all this is now down the drain.

Hungary seems to be a favorite country for tire companies. The first was Michelin (French); it purchased an old Hungarian state-owned company, Taurus, in 1996 and subsequently opened two factories, one in Budapest and another in Nyíregyháza. Michelin has been in full operation since 2005 and employs 2,000 people. The next tire company to settle in Hungary was Bridgestone (Japanese). Bridgestone began production last April in Tatabánya where the local government is in Fidesz hands; it employs 200 people. The third tire factory opened near Dunaújváros, formerly known as Sztálinváros, the socialist city that was established during the Rákosi period when Hungary was supposed to be the country of iron and steel but became yet another rust belt. The city badly needed a factory. In Dunaújváros it was very difficult to get things going. Civil organizations and trade unions backed by Fidesz tried everything to stop production, but at last the factory employing 1,200 began production not long ago.

Now let's return to Gyöngyös. The Indian Apollo Tyres is not a well-known name in Europe or in North America because until now outside of India they have opened factories only in South Africa and Zimbabwe. However, the Indian and African factories are quite large: they employ over 10,000 people and conduct a billion dollars worth of business a year. To the whole of Europe Apollo sells only 1.5 million tires a year, and they wanted to establish the Hungarian factory in order to increase their market share.

But as soon as the news reached Gyöngyös (where MSZP has a majority in the city council) that the deal was signed and Ferenc Gyurcsány shook hands on it during his trip to India, the attack began.  First it looked as if a genuine green organization raised objections because of the alleged negative effects of a tire factory on the environment. I can't pass judgment on whether this is so, but experts claim that the modern way of making tires is not harmful to the environment. According to people from Gyöngyös who are MSZP sympathizers the first leaflets that appeared portrayed the proposed site as a place where old tires would be burned, not where new tires would be manufactured. No wonder that people were not too keen on such a factory. Then came all sorts of horror stories about the harmful effects of such a factory on Gyöngyös and by that time the local Fidesz also got into the fray and actively opposed the establishment of the factory. When it looked as if they would be in the minority and couldn't stop the arrival of Apollo, they suggested holding a referendum to settle the issue. The first judge who heard the case decided that that no referendum could be held because it would touch on the city's budget and no referendum can be held on budgetary matters. However, on appeal, another judge gave his blessing. So Fidesz activists began collecting signatures. At this point Apollo Tyres had enough and announced that they are abandoning the idea of establishing their factory in Gyöngyös because they don't want to be in a place where they are not welcome. Also because the whole process is dragging on and on without any end in sight.

The country is stunned. Or at least the government is and about half of the population. They simply can't understand how it is possible that a political party for its own narrow political gain is capable of going against the interest of the country. A thousand familes would have benefited directly from employment at the factory while the whole city of Gyöngyös would have reaped the benefit of a higher tax base. They keep repeating that if the foreign investment happens to be in Fidesz-held cities (like Tatabánya and the Japanese tire factory) there are no environmental concerns. Also no one complained when Mercedes Benz decided to establish a factory in Kecskemét. The Fidesz mayor cooperated wholeheartedly with the central government to push the deal through. I heard an interview with the undersecretary of the ministry who was in charge of negotiations with the Indian firm, and he was near tears. I don't blame him.

Perhaps not all is lost because Apollo mentioned that perhaps they could relocate to another Hungarian town and several towns have eagerly offered land to the Indians: Polgár, Kazincbarcika, Nyírbogdány, and Miskolc, just to mention the first few. Moreover, one has the feeling that Fidesz itself is not entirely happy with this outcome. They seem to realize that it may reflect badly on their patriotism. Put it this way, László Mádi, the Fidesz parliamentary member who usually handles economic matters, said:  "It is difficult to know what goes on behind the scenes in investor circles. However, one has to learn from this decision without overdramatizing the case. We are not happy that a foreign investor leaves us, although I'm not at all sure whether Hungary must become the tire power of Europe." I read this as a very muted reaction to what was supposed to be a local Fidesz victory. As the analysts at Political Capital said yesterday: now MSZP must take political advantage of this situation.

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The Apollo fiasco sums up much of the ambivilance Hungarians seems to have towards work. It is beyond me how a local government in a relatively under developed area would make such a “ham” out of an opportunity, and that the local residents are not totally up in arms. But the truth about the locals in this case and otherwise, is that many deep down prefer the excuse of having no job opportunities and being on the dole than actually taking the responsibility for working.
Finally, it is really amusing to an outside and shocking that a politician would say, “…although I’m not at all sure whether Hungary must become the tire power of Europe”. What does he or FIDESZ propose Hungary become a “power” in? What is a suitable industry for this country? I would be interested to know. I don’t think too many mouths will be fed being a world power in the manufacture of “Hungaricum” and Turul statues.


About the FDI in Hungary… i´m so sorry but Hungary has to do it much better than till now. In a world competitive environment the choices for an international brand can be any country in easter europe… and you can be sure they are really welcome in any of the other countries. We have to remember that a poll a few months ago showed that most hungarians thinks that there are already “too many multinationals” in Hungary. If you don´t feel welcome, you just don´t go (and i say this because i work on this field). And i´m so sorry for thoso hungarians that really want to develop their country in a XXI century way.


Re ‘too many multinationals’: it’s always something, isn’t it? But if there were less multinationals there would be even fewer decent jobs, then THAT would be the problem. The point is: many Hungarians simply do not want to work, whether it’s in a good paying job or not. More of the ‘blame someone else’ syndrome…