Hungary is becoming widely recognized as an ideal investment location in Europe: Budapest (the capital) is ranked among the top 10 most attractive cities for foreign direct investment (FDI) in Eastern Europe in the 2016-2017 ranking of fDi Magazine, a Financial Times Group publication, and is also ranked among the top 10 most important European cities.
Out of 35 cities across Europe Budapest is ranked 7th among Europe’s major tech hubs according to the Understanding European Technology Clusters report published by CBRE in December 2016. The report identifies Budapest as the fastest-growing, emerging tech city in Central-Eastern Europe.
Companies themselves claim that, when making their investment decisions in favour of Hungary, great importance has been attached to the country’s strategic geographic location, the qualification and diligence of the human resources available in Hungary, the competitive wages, the country’s logistics conditions as well as the quality of institutions in the secondary and higher vocational education.
Foreign investors can make the most of the country’s strategic location and telecoms infrastructure. The 6 hour time difference from New York and the 8 hour time difference from Tokyo enables to provide services to the East and West simultaneously. Budapest has the second largest office market in Europe. There is over 3.28 million square meters of modern office space in the Hungarian capital.
Hungary is an open economy and particular emphasis is placed on encouraging foreign investment. Partnership with potential investors is considered a national priority; special attention is paid to the needs of companies already settled in Hungary and to the further improvement of the business climate.
Key investment sectors: ICT, Shared service centres
Shared Service Centres & IT Outsourcing
The Hungarian IT outsourcing market is by far the most advanced in the Central European region. Since the appearance of the first SSCs in Hungary during the 1990s, the sector has witnessed dynamic growth. Tasks outsourced to the first Hungarian SSCs were mainly simple transactional activities (customer service, HR, standardised financial functions), but early positive experiences have led to the emergence of centres of excellence and a wide range of more complex tasks is now carried out. Currently there are more than 100 SSCs/ITOs/BPOs in Hungary employing 42,000 FTEs. The IT outsourcing sector comprises more than 40 companies employing around 24,000 FTEs. According to HIPA’s SSC/ITO/BPO database the annual growth rate was around 8% from 2015 to 2016, while based on the new projects in the pipeline HIPA predicts a 10% annual growth for this year.
Hungary as a data centre location could be attractive for many data centre services vendors and many end users alike because of its excellent location and competitive prices. Increasing numbers of companies are taking advantage of the developed ICT infrastructure and well-trained IT personnel in Hungary and have decided to develop data centre hubs in the country to serve their regional/European operations.
LABOUR FORCE – EDUCATION
Hungary's system of higher education provides top-quality ICT professionals. A large number of multinational and local IT companies actively cooperate with universities to ensure that new generations of Hungarian IT engineers enter the labour market with the latest knowledge and the relevant practical skills to immediately start work in the private sector.
HIGHLY DEVELOPED TELECOMS INFRASTRUCTURE
Hungary has a highly developed telecommunications system – GSM 900/1,800 MHz mobile frequencies providing 100% physical coverage, and widespread 3G/LTE mobile coverage. The telecoms market is fully liberalised: there are numerous internet service providers and mobile network providers in Hungary. The telecoms market, particularly the mobile and broadband sectors, became more dynamic after Hungary’s 2004 EU accession: membership saw an injection of funding as well as increased regulatory oversight.
INNOVATIVE HUNGARIAN ICT COMPANIES
The innovative capabilities of the Hungarian ICT sector are best illustrated by the high number of local innovative companies that have emerged in recent years. Many of them operate on international markets and are regarded as leading innovators in their respective fields worldwide. Some of the most innovative companies are listed here:
CLOUD SERVICES: LogMeIn, Prezi, Ustream, Neostratus
BIG DATA: Gravity, Radoop/RapidMiner Hungary, Starschema
MOBILITY: InfomatiX, MobileEngine, Cellum, IND Group/Misys, NNG
SECURITY: Balabit, Kürt, Navayo Technologies, CrySys Lab, TresorIT
3D ANIMATION AND VIRTUAL REALITY: Digic Pictures, Dolphio Technologies, Leonar3do
TEXT AND SPEECH RECOGNITION: AITIA, Nextent
WEB DEVELOPMENT: CarnationGroup/PossibleCEE, Isobar Budapest, Mito
State aid opportunities
The subsidy scheme based on individual government decisions, offers simple and flexible conditions and lays greater emphasis than before on the stimulation of projects implemented at locations in the countryside or high added-value projects.
Regional grants are the most typical forms of incentives for greenfield/brownfield investments or reinvestments. The maximum amount of regional incentive is shown on the regional aid intensity map.
Favourable changes in the non-refundable cash incentive system
In line with the transformation of the Hungarian economy from a „manufacturing hub" to a remarkable „advanced manufacturing & innovation centre" of Europe, new forms of cash incentive measures were introduced from January 1, 2017 to enhance corporate R&D activities and the realization of technology-intensive investments. The incentives are based on individual government decision and managed by the Hungarian Investment Promotion Agency (HIPA).
R&D Cash Subsidy
A new incentive measure has been introduced to support the R&D activities (industrial research and experimental development) of large enterprises throughout Hungary, including Budapest. The aim of the new R&D cash subsidy is to promote the establishment of new R&D centres besides the support of companies already performing R&D activities in Hungary.
The criteria of eligibility shall be to reach EUR 3 million of R&D project related expenditure during a minimum one and maximum three-year-long period and the increase of R&D headcount by 25 employees. The maximum aid intensity will be 25%.
Hungarian Investment Promotion Agency (HIPA) is a national investment promotion organisation governed by the Ministry of Foreign Affairs and Trade. It provides professional consulting services to interested companies free of charge in a one-stop-shop service model, supporting them in selecting a business location, providing tailor-made incentive offers and information on state aid issues, identifying investment possibilities and dealing with public authorities.
Hungarian Investment Promotion Agency
Address: 1055 Budapest, Honvéd utca 20.
Customer service: firstname.lastname@example.org
Telephone: +36 1 872 6520