Zsolt Páva made quite a splash back in October 2009, right after he became the mayor of Pécs in a by-election. One of his first acts was the forcible takeover of the city’s hydroelectric company with a view to expropriating the 48% of the company’s shares owned by Suez Environment, a French company. At 3:00 a.m. security men occupied the headquarters of the firm on the orders of the mayor, and when the employees arrived, they prevented 13 people belonging to the upper and middle management of the company from entering. Prior to the “lock-out” the city fathers, including the MSZP members of the council, had set up a new company with a modest 5 million forint investment.
The optimistic city fathers were sure that Suez would gladly sell their shares for very little money. Wrong. Two years later Suez filed a claim at the Vienna International Arbitration Court seeking €32.3 million (more than 10 billion forints) in compensation for revenue lost. The parties eventually settled for a payment of 3 billion forints, which the city of Pécs was unable to come up. The bill was eventually paid by the Orbán government. At that time I wrote a post titled “Foreign investors in Hungary beware: Pécs and Suez Environment.” The Pécs incident occurred months before Viktor Orbán became prime minister, but surely Páva acted with the encouragement of if not at the instigation of Fidesz. And the case foreshadowed the kinds of crude attacks on foreign businesses that the Orbán government has pursued since.
Now, Páva and the businessmen behind him are embarking on a similar adventure, but this one is unlikely to have the same sorry end that the Suez escapade did. Because this time, it seems, everything will be done “in house.” The city will simply be an intermediary, eventually passing the Zsolnay Porcelánmanufaktura on to a Fidesz oligarch. The methods being employed are akin to those used in the Suez takeover. Just as then, the city has established a new company. It has enticed the majority of the approximately 150 workers to abandon Zsolnay in favor of the new city-owned company. The aim is a forcible takeover of private property.
Zsolnay became internationally famous in the late nineteenth century thanks to a distinctive style combined with innovative materials. The eosin process was one such innovation, used especially in the art nouveau period. After 1948 the factory was nationalized, and its products bore no resemblance to vintage Zsolnay.
Zsolnay’s exquisite porcelain creations wouldn’t have been enough to keep the factory going. What made it profitable was the invention of pyrogranite, an ornamental ceramic product that is fired at a high temperature. This process makes it acid- and frost-resistant, and thus suitable for use as roof tiles and other outdoor decorative ceramics. Pyrogranite was developed by 1886, just in time for the millennial building frenzy that provided Zsolnay with fantastic business opportunities. Apparently today it is the factory’s tiles that makes the business so attractive as a take-over target.
The current owner of the Zsolnay factory is Bachar Najari, a Syrian-Hungarian-Swiss businessman who arrived in Hungary in 1970 as an exchange student. He is married to a Hungarian and speaks the language fluently. He decided to come to the rescue of Zsolnay for the sake of his wife, who felt very strongly about the survival of this famous porcelain factory.
After 1990 there were many attempts to revive the 150-year-old company, but with no success. The owner just before Najari was so exasperated that he “sold back” the factory to the City of Pécs for one forint.
In 2013 Najari bought 74.5% of the shares from the city for 180 million forints and promised to invest 500 million forints into the enterprise. At the time of the purchase the company had a deficit of 268 million forints, but two years later the loss was only 54.1 million forints. There was also an outstanding loan of 413 million forints taken out by an earlier owner. It is this loan that, in conjunction with the “pillage” of Zsolnay workers, is now being used to wrest Zsolnay from Najari.
The loan was extended by the state-owned Hungarian Development Bank (MFB), whose “core tasks include the provision of funding for growth under favorable terms and conditions to Hungarian enterprises, supporting the long-term development objectives of the state, and obtaining funds from money markets for these purposes.” According to the original agreement with Najari, the city of Pécs was supposed to negotiate with the MFB to convince it to forgive this old loan for the sake of saving the factory. The bank in fact didn’t press Najari to do anything about the loan. But then suddenly, on May 18, MFB informed him that he had 15 days to pay it back in toto.
It is hard to escape the suspicion that the Hungarian government is complicit in this affair. Months ago Zsolnay was declared an “economic organization enjoying strategic priority,” a status that allows the government, if necessary, to take over the liquidation of the company.
The company that the city of Pécs established to squeeze Najari by hiring away his workers will probably become the new owner of record. But the city is unlikely to remain the owner for long. Attila Paár, a Fidesz oligarch, is very interested in buying the factory. In fact, his company has already purchased MFB’s claim against Najari.
Paár is the owner of the West Hungária Bau company, which was in charge of the restoration of the Várkert Bazár. Paár’s name may also be familiar to readers of Hungarian Spectrum because he was the person who “bought” Elios Zrt. when the European Commission’s Anti-Fraud Office started looking into Viktor Orbán’s son-in-law’s company.
Why is Paár so eager to buy Zsolnay at this junction? First of all, in the last two and a half years Najari and his wife have considerably improved the financial situation of the company, which was desperate straits at the time of their purchase. Among other things, they have invested a billion forints in the company. Second, several important buildings in Budapest will be reconstructed in the near future, among them the Museum of Applied Arts, whose whole roof was originally covered with pyrogranite tiles made by Zsolnay. The building where the ministry of economy will move in the Castle District also had a Zsolnay roof. As far as Fidesz is concerned, these projects, financed mostly by the European Union, should benefit those Hungarians who are steadfast supporters of the Orbán regime. Najari, who was born in Syria, doesn’t cut it.