29 Aug 2017
Hungary: Market Profile
Major Economic Indicators
- Hungary has been a member of the EU since May 2004, and it has adopted the EU’s common external trade policy and measures.
- The EU’s new scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2014. Under the new scheme, tariff preferences are removed for imports into the EU from countries where per-capita income has exceeded US$4,000 for four years in a row. As a result, the number of countries that enjoy preferential access to EU markets was reduced from 176 to less than 80. While the Chinese mainland remains a beneficiary, many of its exports such as toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been “graduated” from the preferential treatment.
- A number of Chinese mainland-origin products are subject to EU’s anti-dumping duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass, which are of interest to Hong Kong exporters.
- Hong Kong’s total exports to Hungary rose by 1% to US$872 million in the first half of 2017, while its imports from Hungary grew by 2% to US$129 million.
- The Hungarian government is strongly committed to increase the competitiveness of businesses in Hungary by streamlining business processes and attracting foreign investment. A range of incentives such as cash subsidies (either from the Hungarian government or from EU Funds), tax allowances, low-interest loans, and free or reduced price lands has therefore been put in place. More information on the investment environment and the relevant regulations can be found at the Hungarian Investment Promotion Agency (HIPA) and HKTDC Research.
- As of the end of 2015, China’s total stock of FDI to Hungary topped US$571 million, up from US$54 million in 2006. Hong Kong, holding an FDI stock of US$455 million as of end-2015, ranked 16th on the list of Hungary’s inbound foreign investors. Among Asian investors, Hong Kong, however, trailed only South Korea and Japan.
- Major priority investment sectors include automotive, electronics, shared service centres, ICT, food, life sciences and renewable energy. As the key instruments of Hungary’s economic policy, the New Széchenyi Plan (launched in 2011) aims at creating one million new jobs within ten years along seven break-out points – healing in Hungary (health industry), renewal of Hungary (green economy development), home project (housing), enterprise promotion (development of the business environment), science, innovation and growth, employment and transport.
- As an important step in accommodating greater synergies, Hong Kong and Hungary signed a Comprehensive Agreement for the Avoidance of Double Taxation (CDTA) on 12 May 2010, which came into force on 23 February 2011.
Current Economic Situation
The Hungarian economy saw a slower growth of 2.0% in 2016, on the back of sluggish sales to Russia amid economic downturn and the jitters arising from the ongoing refugee crisis. Yet on the domestic front, unemployment has come down owing to extensive public works on top of private-sector job creation.
On entering 2017, further absorption of EU funds and the central bank’s funding to SMEs have been conducive to the investment climate, while the cut in the flat personal income tax rate serves to bolster domestic demand. Given a strengthening of domestic and foreign demand, Hungary is forecast to see higher GDP growth of 3.6% in 2017.
Hungary is a member of the EU that comprises 28 member states, and it follows EU’s common external trade policy and measures.
All EU member states adopt common external trade policy and measures. Meanwhile, 19 EU members, including Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain, have adopted the euro as their legal tender.
No quotas are imposed on textiles and clothing exports, as well as non-textile products exports from Hong Kong and the Chinese mainland at present.
Scheme of Generalised Tariff Preferences
The EU’s new scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2014. Under the new scheme, tariff preferences are removed for imports into the EU from countries where per-capita income has exceeded US$4,000 for four years in a row. As a result, the number of the countries that enjoy preferential access to EU markets was reduced from 176 to less than 80. While the Chinese mainland remains a beneficiary, many of its exports such as toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been “graduated” from the preferential treatment. Regarding Hong Kong, the territory has been fully excluded from the EU’s GSP scheme since 1 May 1998.
The EU has initiated anti-dumping (AD) proceedings against certain mainland-origin products. Currently, there are a number of Chinese mainland-origin products are subject to EU’s anti-dumping duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass, which are of interest to Hong Kong exporters. As at end-June 2017, the EU did not apply any AD measures on imports from Hong Kong.
To combat the spread of the Asian longhorn beetle, the EU introduced in July 1999 emergency controls on wooden packaging material originating in the Chinese mainland. Wood covered by the measures must be stripped of its bark and free of insect bore holes greater than 3mm across, or have been kiln-dried to below 20% moisture content.
For health reasons, the EU has adopted a Directive on the control of the use of nickel in objects intended to be in contact with the skin, such as watches and jewellery. Following the emergency ban adopted in December 1999, the EU has adopted a Directive to ban the use of some phthalates in certain PVC toys and childcare articles on a permanent basis, which came into effect from 16 January 2007. In addition, the EU has adopted a Directive to prohibit from September 2003 the trading of clothing, footwear and other textile and leather articles which contain azo-dyes, from which aromatic amines may be derived.
On the other hand, the EU has adopted a number of Directives for environmental protection, which may have an impact on the sales of a wide range of consumer goods and consumer electronics. Notable examples include the Directive on Waste Electrical and Electronic Equipment (WEEE) implemented in August 2005, and the Directive on Restriction of Hazardous Substances (RoHS) implemented in July 2006. On 3 December 2008, the European Commission (EC) presented two proposals: one for a recast RoHS Directive and the other for a recast WEEE Directive.
The recast RoHS Directive was published on 1 July 2011 and entered into force on 2 January 2013. The new Directive continues to prohibit EEE that contains the same six dangerous substances as the old RoHS Directive. Nonetheless, the new Directive will widen, as from 22 July 2019, the current scope of the previous RoHS Directive, by including any EEE that will have fallen out of the old RoHS Directive’s scope, with only limited exceptions.
Another important law for Hong Kong companies to grapple with concerns waste EEE, i.e., the WEEE Directive. With the formal approval on 7 June 2012, the recast WEEE Directive entered into force on 13 August 2012, while Member States have until 14 February 2014 to transpose the new directive into national law. In brief, the recast WEEE Directive will see Member States subject to higher collection/recycling targets (i.e. 45% collection rate as of 2016 and 65% as of 2019) and a wider scope of measure covering essentially all electric and electronic equipment, while establishing producer responsibility as a means of encouraging greener product designs.
On the heels of the recast RoHS and WEEE Directives, the EU’s new framework Directive for setting eco-design requirements for energy-related product (ErP) is now in place. The ErP Directive is no longer limited to only EEE (as it was under its predecessor, the energy-using product, or EuP, Directive), but potentially covers any product that is related to the use of energy, including shower heads and other bathroom fittings, as well as insulation and construction materials.
Moreover, REACH, an EU Regulation which stands for Registration, Evaluation, Authorisation and Restriction of Chemicals, entered into force in June 2007. Among others, it requires EU manufacturers and importers of chemical substances (whether on their own, in preparations or in certain articles) to gather comprehensive information on properties of their substances produced or imported in volumes of 1 tonne or more per year, and to register such substances prior to manufacturing in or import into the EU.
Following the entry into force of the new Toy Safety Directive (Directive 2009/48/EC) on 20 July 2011, the Official Journal of the EU published on 11 August 2011 references to two important safety standards concerning electric toys (EN 62115:2005 and its amendment EN 62115:2005/A2:2011) and two previous standards on the mechanical and physical properties of toys and a standard on the flammability of toys.
Hong Kong’s Trade with Hungary 
Hong Kong’s total exports to Hungary grew by 1% to US$872 million in the first half of 2017, following a 9% increase to US$1.7 billion in 2016. Major export items in January-June 2017 included telecommunications equipment & parts (shared 58% of the total), electrical apparatus for electrical circuits (12%), computers (8%), electric power machinery & parts (5%), parts and accessories of office machines/computers (4%), semi-conductors, electronic valves & tubes (3%) and optical goods (2%).
On the other hand, Hong Kong’s imports from Hungary rose by 2% to US$129 million in the first half of 2017, after a 22% growth to US$275 million in 2016. Leading import items in January-June 2017 included telecommunications equipment & parts (shared 32% of the total), electric power machinery & parts (19%), semi-conductors, electronic valves & tubes (13%), computers (8%), electrical machinery & apparatus (5%) and electrical apparatus for electrical circuits (3%).
Related information: Hungary infographics
 Since offshore trade has not been recorded by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.