“Plazastop”: Another unorthodox Hungarian move

Earlier we heard the plan for a pig in every household. Lately a new program is being hatched within the walls of the Ministry of Economics under the watchful eye of György Matolcsy. The new Hungarian government doesn’t like hypermarkets, especially if they are owned by foreigners. Of course, it is a different matter if the owner is a Hungarian, especially a Hungarian who is expanding his business in the “Carpathian Basin.” In that case, he receives a decoration on October 23. Here is the moment when László Baldauf, CEO of the Hungarian-owned supermarket chain CBA, is receiving the high honor from the hands of Pál Schmitt, the President of the Republic:

 

The expansion in the Carpathian Basin may be viewed as a patriotic gesture, but Viktor Orbán is perhaps even more grateful for the financial and moral support Baldauf has given him in the past few years. All the advertisement his party received on the fliers of CBA and those huge roadside billboards in front of Baldauf’s stores saying: ” Day of Reckoning, April 11, 2010.”

 

The “plazastop” movement began fairly innocently more than a year ago when Gábor Scheiring (LMP) during a parliamentary debate about the extra levy on supermarkets mentioned that the government’s ideas about the levies were close to those of LMP but that his party would prefer “a temporary plazastop” instead. Scheiring found it “interesting that the three Hungarian-owned chains, Coop, Reál and CBA,” were exempt from the levy.

A few months later LMP came up with a draft bill that would place a moratorium on building large supermarkets or shopping centers. The moratorium, according to the LMP plan, was supposed to last for six months and would be applicable to establishments larger than 400 m2  (4,300 ft2) in the case of localities with a population of fewer than 100,000 and 800 m2 (8,600 ft2) when the population was over that number. Obviously, Fidesz and the Orbán government liked the idea and the two-thirds majority quickly agreed to discuss the matter at their earliest convenience. By the end of September the Fidesz members began to fiddle with the original LMP proposal in such a manner that within a few days LMP withdrew their bill and refused to support the law that was shaping up under government sponsorship.

While LMP wanted to have a law that would hand over the decision about building a supermarket or a shopping center to the communities, the Fidesz proposal gave that decision-making power to a government agency within a ministry. Moreover, the moratorium would involve all establishments over the size of 300 m2 (3,230 ft2). And the “plazastop” would be in effect from January 1, 2012 until December 31, 2014.

All the business associations and experts on commercial transactions condemned the idea of a “plazastop” from the very moment LMP came up with the idea. Real estate developers were the most vocal. They reminded the politicians that there are even today rules and regulations governing the building of commercial establishments. Given the unemployment figures, the association of real estate developers objected to the very idea of a moratorium. The building industry wasn’t exactly thrilled either.

Because of the sagging economy supermarket expansion has been on hold. For example, Auchan announced that this year they were unable to open new stores.They were, however, planning to open five new stores in 2012. Well, that is taken care of by the new law concocted by the Fidesz government. At present Auchan has 12 stores with 5,600 employees. Another five stores would certainly have helped the Hungarian employment figures.

It was on November 4 that Napi Gazdaság first mentioned the possible connection between the “plazastop” law and the Hungarian-owned CBA’s special interests in the matter. The French-Belgian owned chains Match, Cora, and Profi are apparently for sale and “there are talks that perhaps Hungarian owned chains are interested.” A few days later another article appeared in the same paper about the particulars of a possible deal. According to the newspaper the new law “serves the interests of only CBA and Coop,” another Hungarian-owned chain. The value of these large supermarkets would grow considerably if no similar establishments could be built anywhere in the country for two years. Napi Gazdaság even brought up the possibility that the real purchaser wouldn’t be CBA and Coop but the Hungarian state itself. After all, Viktor Orbán’s draft speech contained a reference to a government-owned supermarket chain which in the last minute he left out from the delivered version. We know all about this because of the photographer who took a picture of Viktor Orbán from the gallery above the podium.

In any case, DK (Demokratikus Koalícó) today announced that the party considers the “plazastop” a move that limits fair competition. The party is asking the Office of Economic Competition (Gazdasági Versenyhivatal) to look into the matter. DK seems to know that the government is helping out CBA and Coop with low-interest lines of credit via the state-owned Magyar Fejlesztési Bank (Hungarian Investment Bank). At the same time Ágnes Vadai (DK) is writing a letter to György Matolcsy inquiring about the legality of the Hungarian state putting certain companies into a favorable position vis-à-vis their competitors. Such a move, in her opinion, is not in sync with the rules and regulations of the European Union.

While the government is putting all sorts of restrictions on supermarket chains, it is making it easier for small farmers to sell their produce without any permits or supervision. Small producers of edible goods will only have to announce their plans to market their products. LMP is a willing partner in this scheme. In Szombathely, for example, the local LMP members of the city council managed to convince their colleagues to allow anyone with a vegetable garden or a few chickens to sell their goods right in front of their house. Mind you, only on one square meter.

This government has interesting ideas. They want to stop time. They want to reorganize Kossuth Square to reflect a bygone and not at all happy time, as things were on March 18, 1944. They want to stop the inevitable development of larger business units in favor of small farmers selling their produce in front of their houses. Where will all this lead? Nowhere good.

Sort by:   newest | oldest | most voted
An
Guest
“This government has interesting ideas. They want to stop time. They want to reorganize Kossuth Square to reflect a bygone and not at all happy time, as things were on March 18, 1944. They want to stop the inevitable development of larger business units in favor of small farmers selling their produce in front of their houses. ” If it was only that… but they are selling out Hungary to his buddies, to the business interests of the emerging Hungarian “bourgeoisie”. At least they are Hungarians, right, not those nasty foreign companies. Well, guess what, the average Joe (Jozsi) will still get the shorter end of the stick while the rich Hungarians get richer. Of course, getting rid of the foreign competition is not necessarily the country’s best interest (though it is the interest of some Hungarian businesses). Lack of competition will only make Hungarian businesses worse… less productive, less innovative, and more arrogant with customers and employees. Remember those beautiful times when OTP was practically the only retail bank in Hungary? The running of the country is also becoming more oligarchic, with government and business interests more intertwined. As much as you can hate foreign investors, foreign business did… Read more »
Paul
Guest

Speaking as someone who watched their daughter suffer through salmonella poisoning from eggs supplied by neighbours last summer, I would welcome far MORE restrictions on ‘small farmers’ – licenses and health and hygiene inspections for a start!
It’s become a given these days (as the advances of progressive civilisation are systematically rolled back by ‘market forces’) that regulation is somehow ‘bad’. But this is to entirely ignore why the regulation was needed in the first place.
If you’re OK with buying products that don’t tell you what’s in them, or aren’t the weight claimed, or contain noxious substances (lead for whitening bread, anyone?), or adverts that tell you blatant lies, or children working in factories, no health and safety rules, no restrictions on pollution, and so on -then vote for less regulation.
Free markets are generally good in theory, but note that the only people demanding them are those set to make money out of them.

Paul
Guest

A question for the full-time Hungarians on here:
In Debrecen, at least, the CBA, Coop and Reál supermarkets are all small or medium sized, it’s Tesco, Spar, Match and Cora who have the really big ones. Is this peculiar to Debrecen, or is it true for the rest of the country as well?
At an entirely personal level, our local Héliker supermarket has improved no end since it was taken over by the Coop. OK, so their range and prices can’t compete with the nearby giant Tesco, but have you ever tried Tesco’s kifli?!

Eva S. Balogh
Guest

An: “they are selling out Hungary to his buddies, to the business interests of the emerging Hungarian “bourgeoisie”.
Yes, An. I should have emphasized that more than I did in the article.

Kirsten
Guest

This example of An shows the problems of “regulation” and “state intervention”. There is no easy solution to this market vs. regulation question, in the textbook both can work fine (under adequate assumptions). For regulation to work well, it is assumed that the state is impartial and creates a level playing field. There is nothing wrong in that, only the application in reality (as for instance in the example with the plazas in Hungary, but I am sure one can pick examples from any country) can be equally problematic as the application of “free markets”. Markets can reveal brutally who is stronger and who is weaker, but with regulation that becomes a political issue. The actual preference here is a matter of taste, I think. I do agree with Jano that the fair play in markets occurs mostly where there is some (impartial) regulation. But that has to be provided.

Member

Maybe I am alone, but I do not see the problem with “őstermelők” (farmers) selling their own produce. I seen that in Switzerland, Italy, France. As far as eggs go, as far as I know selling eggs or raw milk needs some form of permit even in Hungary. Farmer markets are open for farmers in any case, so I am not sure why would it be different of they start in front of their house or farm. Any time I drive to the Niagara (wine region), I drive through the “fruit-land”, and always buy some fresh produce from farmers. I do not think that having small stands set up would threaten the big chains. It is not so convenient at small stalls.
I thin the real issue has nothing to do with people selling what they produce. If they can make a living or some extra income form it, then all power to them.
THe problem here that the real money maker operations and Fidesz are in deep conflict of interest when they try to shut out the real competitors form the game.

peter litvanyi
Guest
All right. Others convinced me not to shut up. Eva, what the hell is this slant again? Maybe you guys on the East Coast don’t have Farmer’s Markets. Only Milton Friedman packaged at King Stupid. “easier for small farmers to sell their produce without any permits or supervision. Small producers of edible goods will only have to announce their plans to market their products. LMP is a willing partner in this scheme.” – If you mean that that the Health Dept. doesn’t have the authority to supervise the say milk or meat sold by these fellows: well, that’s wrong. Radishes and so on: why would you supervise that? OK, wash it first. Why shouldn’t anyone sell anything safely edible especially in front of their front yard? Well, if you have more than ten acres and you turn a professional: it’s an IRS matter and you probably should list it as personal income. The Law is supposed to draw that line. Like what the hell are you talking about, Eva? If you rent a stand somewhere, you pay for it. If you have more than ten acres then you probably pay personal income tax on what you sold. If you sell… Read more »
Lutra lutra
Guest

As I understand it, the problem is that the big nasty foreign retailers don’t pay much tax because they exploit the grants given if you invest in building new stores, refurbishment, training, etc. Take away tax breaks for training, block the opportunity to build new and expand existing stores and hey-hup, more tax for the State.
Never mind – Tesco (which has done far more for ordinary Hungarians than Orbán will ever do) can just switch to rolling out its small-footprint Express instead. What little tricks will FIDESZ do to give CBA, Coop and Reál a helping hand against that?

peter litvanyi
Guest

Here are the rules for the Boulder County Farmer’s Markets:
http://www.boulderfarmers.org/goopages/…/downloadget.php?...
Would these so very strict rules /a joke here/ satisfy you, Eva?
Boulder is the second or say third in the state when it comes to culinary arts /Fort Collins may beat us, Denver certainly does/. It ranks very very high on the US list. Many of our top restaurants deal only with local small farmers to provide for their daily menues. They adjust according to the season. The Black Cat or The Kitchen /Zagat rated four stars/…hey I did the interior trim there.
Buy local, eat local. Act local, think global.
Sincerely:
Peter Litvanyi

Ron
Guest

When I came to Hungary in 1995, there where no hypermarkets. You only had Hungarian and Spar (Kaiser) operated supermarkets with no real assortment, small ABC’s, some butchers, some grocery wooden sheds and to do shopping would take you at least 4 hours per week.
Furthermore, each city, district and large village have every Saturday a so-called MDF markets (which still exists today). This is where farmers can sell their local produce.
In 1996 the first hypermarket was opened in Budakalasz, and shopping time reduced to 30 min. Btw I was alone, no wife and kids.
In that time the Cora was always full of clients, and not just Hungarians, also Romanians and Ukrainians came there by the bus loads.
Nowadays, the MDF markets, Lidl, Aldi and other cheap supermarkets are full, Auchon, Cora, Spar, CBA are half of what it use to be.
So to come back on the plazastop, this will not work. Companies do not make money on shop space, but on cheap/good logistics, service, quality and low purchase prices.

flogger
Guest

seems to me they are doing everything to stop employment! just don’t know how can they screw up simple econs.

flogger
Guest

if the salary you received could afford 100% HU products or buying from HU chains, go ahead but what about the mid. and low income ?

Eva S. Balogh
Guest

Some1: “Maybe I am alone, but I do not see the problem with “őstermelők” (farmers) selling their own produce.”
No, there’s nothing wrong with farmers’ markets. But they shouldn’t be preferred over well regulated, large, inexpensive supermarkets. It is not the question of either/or but offer both and please not on one square meters in front of houses.

Rigó Jancsi
Guest
Building a new Tesco or Auchan is not a big deal for the building industry in general, I cannot imagine that it makes any difference whether five new market are build or not. Regarding the number of employees of the hypermarkets: They will rather destroy work places than create new ones. Tesco and Auchan live from their size. They purchase cheap, and they have relatively few employees in relation to their turnover. You need some unskilled workers to fill the boards, and a row of cashiers does the rest. And Tesco even introduced now the self-check-out in certain markets, some more unemployed there. The demand for food and other goods will not increase just because there are new hypermarkets. So their customers have to come from somewhere. They come from the smaller chains (yes, CBA as well) and from the ABCs. Instead of buying the bread and vegetables at the ABC around the corner, people take the free Tesco- or Auchan-bus and safe some money. If you’re unemployed, not time is the problem but money. In the long run, this leads to empty inner cities, all the markets – hypermarkets – will be on the outskirts of the cities and… Read more »
Member

Eva: “nothing wrong with farmers’ markets. But they shouldn’t be preferred over well regulated, large, inexpensive supermarkets.”
I agree wit that. I think both should be offered. Small markets thrive, because they are able to offer something that the large supermarkets cannot, and vica versa. I do my everyday shopping at the large chains too.
Hungary supposed to operate as free market economy, and it should not use favoritism by shutting out one business model over the other. THis is especially through when the perception (or fact) is that the favoured business model offers direct financial benefits, not to the country but to the governing party or the members of the governing party.

An
Guest
A lot of people noted here that a plaza stop is not necessarily a bad idea, as the growth of these hypermarkets kills already existing small business. That’s a valid point, and I believe it was exactly this concern that led LMP to bring up the idea in the first place. But note the difference between LMP’s plan and the final Fidesz-accepted version: LMP wanted a temporary (6 month) moratorium and wanted to give local communities the decision whether they allow such hypermarkets to be opened, probably based on the principle that let the people who are most affected make the decision. A noble plan, which has its shortcomings too… but that’s not I want to discuss here. Fidesz, on the other hand, for now, banned new plaza buildings for two years and handed the decision to a government agency. The problem is not that whatever Fidesz is does is bad. Sometimes they may come up with measures that may seem to serve some kind of a greater good..…the problem is that it is not creating greater good that moves Fidesz’s decision-making. If the government was seriously concerned about the speared of plazas and its impact on small businesses and… Read more »
Ron
Guest

peter litvanyi: Would these so very strict rules /a joke here/ satisfy you, Eva?
Did you read the rules and understand them?
If you want to sell organic you need to have an organic certificate. Failure result in USD 10,000 penalty.
Have you read about the farm inspections? Why do you think they do this?
I believe there are many rules these sellers need to obey. Such as HACCP.
Here is a link regarding HACCP and small farmers in the USA.
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2599784/
Here another article about HACCP regarding dairy farms in Hungary: http://ageconsearch.umn.edu/bitstream/25001/1/sp04va01.pdf
Btw HACCP became obligatory in Hungary as of January 1, 2002. Killing off many small farmers and restaurants. VO did this.
The funny or not so funny thing about is, that in the EU till January 1, 2006 it was only optional and not an obligation.
http://www.hygienicstainless.org/index.cfm/ci_id/14832.htm

Ron
Guest

About the MDF markets. Here is a wiki article.
http://hu.wikipedia.org/wiki/MDF-piac
The article is not really correct. The markets still exist and going strong.

Ron
Guest

An, the last two years CBA cleaned up considerable and they are just as nice as Spar. However, they are overpriced in and around Budapest by 20%.

An
Guest

@Ron: Well, possibly. The one I used to shop at is still as it was. I did notice though that the ones around tourists frequented areas have become nicer.
I’ll do a CBA tour next time I’m in Budapest 🙂

Member
Let me join the food fight … In the 80s in Hungary, the ancient regime was the best barrack in the socialist camp because we didn’t have food shortages. Kadar let the farmers sell their produce freely to the little retail shops (Zoldseges). So those farmers, who really wanted, and were able to work, they made a lot of money on produce. The owners of the retail shops, the “Zoldseges”, were the richest people. We were soo jealous of stuff of the “Zoldseges” kids in school. The farmers drove their “paprika” and watermelon up to the big cities, to the “overnight” markets, because the “Zoldseges” paid better prices in the cities. The farmers were sitting their, selling produce in big sacks, bargaining with the “Zoldseges” all night. I was there with my mother-in-law a few times. It was actually pretty cool. Like a subculture. In the wee hours came the gipsies and bought up the produce at ridiculously prices that the unlucky didn’t manage to sell. This made many of the farmers very rich, even by western-european standards. The shock came when the produce from southern-europe was cheaper. Oh, well, people make less in agriculture in other countries. Now what?… Read more »
Pete H.
Guest

As a Massachusetts resident I frequently buy produce and eggs from farm stands. I am all for laws that allow small volume producers to market their product and compete with the corporate outlets. However, not at the expense of safety. In Massachusetts these stands are licensed and inspected.
I am also all for limiting big box construction. I have seen too many vital downtowns collapse to the competition and connivence of big boxes. But, the choice should be the local communities, as it is in Massachusetts.
OV’s approach might meet both of these broad goals, but the approach is wrong. That’s too bad that even when they get it right, they get it wrong.

Guest
I’m not a scientist in this field of change but it was a really interesting experience for me to see how Hungary has “developed” in the almost 15 years that I’ve been living here part time. The changes remind me of my regular visits to the USA after which I usually thought: Wow, if things in Germany (and Europe generally) will follow these trends – and they did, most of the time. In some respects Hungary has developed faster – in Germany all supermarkets have to close down at night and stay closed all Sunday (only a few exceptions, like 4 open Sundays a year). And also in some places and for many things you have to search long and far to find a shop/store in the town center – they’re just sold in the big supermarkets/malls that you can reach only by car or bus. I think this development is irreversible – whether you like it or not. Even around Héviz (where enough money is available)every day smaller stores close – just today we read the sign at our favourite butcher and it looks as if our local baker will also close … It doesn’t really matter what kind… Read more »
Eva S. Balogh
Guest

Wolfi: “I think this development is irreversible – whether you like it or not.”
I agree fully with Wolfi. It’s no use to fight it. It may actually harm the interest of the majority.

Paul
Guest
Completely off-topic (sorry), but have you checked the forint against the Euro today? It’s in free-fall! It hit a new low of 314 Ft to the Euro today. But it’s not the rate in itself that’s so bad, it’s the facts that: a) this is the worst the forint has ever been against the Euro, even in 2009 it didn’t get this bad, and b) this isn’t just a blip, the forint has lost 50 Ft since July in a steady plunge (that’s a loss of just under 20% in value in just just over 4 months!) And before JB jumps in and tries to justify this as some world-wide effect – check out other currencies against the Euro. The others are holding pretty steady, the forint is the only one in free-fall. The forint is doing equally badly against the Pound and US Dollar, but with those currencies at least it’s been this bad or worse in the past. The pattern against the Euro is very different – steady and rapid decline from a historically strong base. Worryingly, the only other currency that shows this pattern against the forint is the Swiss Franc. Until 2008 the forint was pretty… Read more »
Member

Is this the time to move your money to abroad? Or let’s give it a year until the inflation speeds up ..

Paul
Guest

Hmmm. That made me think. Up until now I’ve been worrying about the value of our flat, but I’ve just realised we stuck the best part of half a million into a forint ‘savings’ account in August.
So far that money (in GB pound terms) has lost 17% in value!
I am mentally kicking myself – especially as our savings used to be in a Euro account…
This business with Orbán just got VERY personal.

Törpefejű
Guest

The real question is whether some few Hungarians remain as smallholders and shopkeepers – or everyone is proletarianised into a Tesco slave.

peter litvanyi
Guest

I understand that to have a successful blog that at times you must stir things up, make some ridiculous comments otherwise if we all agreed with you there would be nothing to argue about.
I have a band saw to fix.
Garden boxes to make so I can grow my own food. Pickle some excess vegetables. I still have tomatoes ripening on the counter for god’s sake. I’d be happy to trade you some cukes for beets.
I like to shop quickly myself. But how quick is it to buy a red pepper in Longmont Colorado that was grown in Holland? And I don’t think they mean Holland, MI. I mean that pisses me off. I would be happy to have things fom Longmont in my local supermarket but I can’t find it there. Who buys it? Where does it go?
I might find it at the farmers market. Maybe not. In any case, it is grown all around me.
I’m not Peter, I’m Peter’s woman.

Eva S. Balogh
Guest
Some people are prone to jumping to conclusions. I actually happen to be very aware of the environment. I’m one of the very few people on our road who sorts brown bottles, green bottles, white bottles, cardboards, mixed papers, metals separately and dutifully take them to the site where our town collects these items. I am also one of the two people on the road who has a vegetable garden. I love fresh vegetables and fruits and when they are in season they sure taste better than the ones that came from Mexico, California, or Florida. However, not everybody can have a garden. Either because they live in cities or simply because they are too old to work in their gardens. Or, because they don’t want to bother with it. One cannot foist one’s own ideas or practices on all others. And it is especially objectionable that the present Hungarian government practically makes foreign chains outcasts. It discriminates against them while putting even greater financial burden on the poorer strata of society by forcing them buying more expensive Hungarian products. And by the way, I also make my own bread with a wonderful bread machine. Yesterday I made raisin bread… Read more »
wpDiscuz