HUNGARYAn ideal location

for R & D

Mrs. Ágnes HenterHead of Department

Investment Promotion DirectorateITD Hungary

Hungary in Europe

Land: Land: 93,030 km²93,030 km² Population: 10,1 mn peoplePopulation: 10,1 mn people GDPGDP/capita at PPP (2006 /capita at PPP (2006 estimate): USD 18.210estimate): USD 18.210

Hungary Hungary

Sources: National Bank of Hungary

82,151 million USD

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

50 000

55 000

60 000

65 000

70 000

75 000

80 000

85 000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006Q1/2007

* Including reinvested earnings from 1995

Hungary is Front-Runner as regards FDI Influx

Cumulated FDI in Hungary

9%

10%

11%

16%

10%

24%

9%

11%

Transport equipment

Electrical and opticalequipmentOther manufacturing

Trade, repair ofvehiclesReal estate andbusiness activitiesFinancialintermediationTransport andcommunicationOther

Source: National Bank of Hungary

FDI stock by country of origin and industry

5%8%

8%

79%

Europe

Asia & MiddleEast

The Americas

Africa

Australia andOceania

InternationalOrganizations

Unidentified

Total FDI Stock in Hungary as at end of 2006:

81,718 million USD

Aviation Industry in Hungary

5 arguments that make Hungary an ideal location for aircraft manufacturing

Automotive (engine manufacturing – see Audi, GM Powertrain, Autokut) industry is one of the leading-edge sectors of the country: Good basis of automotive suppliers who could diversify to aerospace

Availability of talented, creative, flexible and qualified labor pool, combined with the highest productivity in CEE: 5 educational Institutions specialized in aviation

Aerospace industry is a start-up industry in Hungary. Major investors are large international companies (spare part production or MRO): GE, Lufthansa, Alcoa

Outstanding business infrastructure: Aerospace companies can settle in industrial parks located at existing airports

Competitive incentive package: innovative industries such as aviation are key priorities of the government

Aviation Industry in Hungary

GEES, Veresegyház Lufthansa Techn., Budapest Elektrometal Paks, Paks Repair activity 15M$ middle size investm. SME/Supplier category Not airport dependent Established in 2000 Employs 150 people Engine component repair FAA/JAA certified

Overhaul activity 15-18M$ middle size investm. Integrator category Airport location Established in 2001 as a JV Employs 350 people Large aircraft overhaul JAR-145 certified

Component manufacture Small size investment <10m$ SME/Supplier category Not airport dependent Established in 2001 Employs 150 people Wire harness manufacture ISO 9100 certified

Hungaerotech, Debrecen Alcoa, Nemesvámos, Székesf.vár

Flame Spray, Gödöllő

Owner: Eldim Component manufacture Small investment <10M$ SME/Supplier category Not airport dependent Established in 2002 Employs 30 people Turbine parts manufacture AS 9100 certified

Component manufacture Middle size investment SME/Supplier category Not airport dependent Established in 1997/2002 Employs 110 people Aerospace fastener manufact. AS 9100 certified

Thermal spray (APS, HVOF), slurry diffusion, honeycomb brazing SME / Supplier category Not airport dependent Established in 2002 Employs 30 people ISO 9000 certified

Companies in the re-emerging Hungarian

Aviation Industry

Aeroplex, Budapest Owner: MALÉV Overhaul activity Airport location (Ferihegy) Established in 1992 as JV with Lockheed 620 employees New hangar in 2007 Turnover: HUF 12 bn FAA/JAA/EASA certified

Aviation Industry in Hungary

5 Educational Institutions specialized in Aviation

Budapest University of Technical and Economics Sciences with 24,383 students in generalDepartment of Aircrafts and Ships provides high level educationThe University together with Hungarian Aviation Industry Foundation and corporations pursue international and domestic research activities

Pilot and aircraft engineer training in College of Nyíregyháza College of Szolnok provides aircraft engineer education, the institute

is now involved in the Grippen program A total of 300 students study aviation sciences in higher education 4+2 year vocational secondary education in Kossuth Lajos

Vocational School in Budapest with yearly 60 students Additionally numerous technical educational institutes serve the

industry by providing skilled workforce for the 2nd & N-Tier Suppliers

Aviation Industry in Hungary

R & D sector in Hungary

0

10

20

30

40

50

60

billion €

1984-1987

1987-1991

1990-1994

1994-1998

1998-2002

2002-2006

2007-2013

years

Budgets of the EU framework programmes

3.755.39

6.6

13.2214.9

6

19.2

Source: HUNGARIAN SCIENCE AND TECHNOLOGY FUNDATION

50.5

Hungary attracts 15% of all new R&D jobs in Europe!

Source: IBM Plant Location

Hungarian R&D activity in Europe

Destination countries by estimated job creation in R&D projects, H1-2006:

Hungary15%

UK32%

Other4%

France 3%

Romania3%

Ireland5%

Switzerland5%

Germany7%

Czech Republic13%

Poland13%

Employment in high-tech manufacturing and KIS sectors as a percentage of total

employment

Hungary

EU-15

EU-25

Source: Eurostat, High-tech Statistics 2007

Hungary-best performer in CEE

780 m€ R&D expenditure in 2005, 14.4% increase compared to 2004

R&D expenditure : 50% state funding, 40% entreprises

Hungarian R&D represents 23,000 FTE jobs, of which 70% of scientists and

engineers

2,500 R&D units, of which 750 business units

Reference science parks: Infopark, Gaphisoft Park, Talentis Park, Corvin Science

Park, Biopolisz in Szeged, Airport Debrecen

Business Park

47,000 students in engineering, 19,000 students in IT

Chemical engineering, mechanical engineering and informatics subsectors account together for 40% of the total R&D expenditure in 2005

Clinical medicines, health sciences and pharmacology account for 6% of the total R&D expenditure

Increasing R&D expenditure

Source: E&Y EIM, 2006

• Astra-Zeneca• GE Medicor• Novartis-Sandoz• Sanofi-Aventis

(Chinoin)• Servier (Egis)• Teva-Biogal

• Audi• Continental Teves• Denso• Draxlmaier • EDAG• General Motors• Knorr – Bremse• Magna Steyr • Michelin • Remy Automotive• Temic-Telefunken• ThyssenKrupp• Valeo Auto-Electric• Visteon• W.E.T.• Zeuna Stärker• ZF Hungária

• Elcoteq• Electrolux• GE Medical• GE Lighting • Philips• Samsung• Solectron

Automotive

ICT

Electronics Life science

Machinery

• AFT • Bosch Power Tool• Zenon

• Cisco• Ericsson• IBM• Nokia• SAP • Siemens/Sysdata• TATA-Consulting• T-Systems

Attractive R&D in Hungary

GM-Opel

Continental TevesValeo Auto-Electric

Corporate Research Centres:

Increasing R&D expenditure

Elcoteq

Ericsson,Temic-TelefunkenIBM, Simens PSE,

GE Lighting, GE Health-careNokia, Cisco, SAP

TATA Consulting, T-SystemsSanofi-Aventis, Servier, Astra-

ZenecaKnorr-Bremse, Arvin Meritor (Zeuna

Starker)

Bosch Power Tool

AudiMagna Steyr

EDAGMichelin

DensoVisteon

Knorr-Bremse

ZF HungáriaW.E.T.

Flextronics

Samsung SDIDraixlmaierElectrolux

Teva-Biogal

Zenon

General Electric

Teva-Biogal

Infopark, BudapestBudapest University of Technology and Economics, ELTE University of Natural Sciences, IBM, Hewlett Packard, Panasonic

Innovation and Knowledge Centre, BudapestBudapest University of Technology and Economics, and 9 important IT companies

Digital Community Centre, Miskolc Miskolc University, Hewlett Packard

Research and Training Program, SzegedSzeged University, Tata Consultancy

eScience Knowledge Centre, BudapestELTE University of Natural Sciences, Delta Eletronik, Econet, ESRI, MiltuRáció

Oracle Competency Center, Budapest Budapest Technical College CISCO Networking Academy Program, Budapest

Budapest Technical College, Universiy of Szeged, Pécs, Veszprém

SAP Competency CentreBudapest Technical College

SUN Java and Solaris Certificates

Strong co-operation between industry and academia

ICT

Established in 2005

Budapest

Financial, Mathematical Modelling Centre

Number of employees: 25 top PhD mathematicians

Established in 2006

Budapest

Provide support for the US and UK units of the investment bank, especially in the areas of mortgage finance, information technology and financial control

Number of employees: 450 people by 2009

„The choice of Hungary was due to positive experiences with the quality of its labor force and the country's political and economic stability”

President of Morgan Stanley International Jonathan Chenevix-Trench and head of Morgan Stanley Global Operations and Technology Eileen Murray

Business, service and technology centre

Case Study - MorganStanley

Fixed income division

Source: Audi

Audi: FDI Brings High Technology to Hungary

History Engine plant officially opened in 1994 to produce 1.8L engines. Received ISO 9002 certificate in 1995 4.2 and 3.7L 8 cylinder engine production began in 1997 Beginning of Audi TT Coupé and Roadster Assembly in 1998 In 2001 an Engine Development Center was set up

now employing 100 people (~40% engineers) A total of EUR 33,480 million was invested in this project.

5 millionth engine in November, 2001 Since 2002 FSi (direct injenction petrol engine)

Facts and plans In 2006 1.89 million engines 23,675 cars have been assembled, new TT model was introduced in

2006 (50,000 in 2007) and engine for the Q7 Turnover in 2006 over EUR 5 billion Hungary’s largest exporter today Employs 5,022 people 24 different engines in 379 variants of four-, six- and eight-cylindeer

engines for the VW concern in a 375 th. sq meter area Since 2003 Audi invested a total EUR 3 billion in Hungary (360 million

in 2006) In 2005 Audi Hungary was awarded for its R&D activities by the Prime

Minister

„We consider it our duty to support the development of

Hungarian universities with our knowledge and experience.

We also closely cooperate with university students and

professors in the field of research and development,.”

Thomas Faustmann, Managing Director, Audi Motor Hungaria Ltd.

Audi Testimonial

Services of ITD Hungary

Hungarian Government's Investment and Trade Development Agency

ITDH – Your Password to Hungary

Non-profit organizationInformation and consultation centre for foreign investors in Hungary, providing:

General and comprehensive information about the Hungarian economy

Tailor-made site proposals

Detailed programs

Network:

Central Office in Budapest6 Regional Offices56 Foreign Trade Offices8 Representative Offices in the border regions of neighbouring countries

DebrecenEger

Szeged

Pécs

Veszprém

Győr Budapest

Detailed tailor-made information package about economy, politics, financial incentives, business environment, tax system, sectors incl. electronics, etc…

Site visits, meeting with local, regional and government bodies, experts, service providers, consultants, potential suppliers, etc….

Accelerating permitting procedures, evaluation of potential investments.

Assistance in incentive application VIP treatment for expatriates (visa,

working permits etc.) Press conferences, ground-breaking

ceremonies

Special follow-up contact services Assistance in further investments,

expansions.

Decision

Implementation

After-Care

First-class support by ITD Hungary

Thank you for your attention!

Hungarian Investment and Trade Development Agency (ITDH)H-1061 Budapest, 12 Andrassy ut, Hungary

Phone: (36 1) 472-8178, Fax: (36 1) 472-8180E-mail: investment@itd.hu Internet: www.itd.hu

Mrs. Ágnes HenterHead of Department

Investment Promotion DirectorateITD Hungary