In a document ironically entitled “Hungary’s most dynamically developing SMEs,” Zoltán Dercze of credit reporting and debt collector Coface Hungary Kft painted a bleak picture of the economic outlook for small and mid-sized enterprises in Hungary, while another survey found the prospect of EU funding to be the only bright spot for such businesses.
As Dercze sees it, the most immediate threats to SMEs are the effects of government austerity measures, particularly the effective jump in taxes on wages, regular and unpredictable legal changes and the bureaucracy involved in applying for bank loans, as well as the global turmoil sparked by the US sub-prime crisis.
As in 2007, when Coface published its SME survey for the first time, this year’s report found very few top companies in the sector built on an original idea or innovation, with the majority based on outsourcing or privatization. SMEs are also afraid to venture abroad and take advantage of the larger EU market, with only three of the 100 top SMEs engaged in some form of activity outside Hungary with the help of investment and trade development agency ITD Hungary Zrt.
But while the Coface survey found that companies were reluctant to bid on EU tenders – mainly due to a lack of available advice – a parallel K&H Bank and GfK Hungária survey found that most companies were confident of cashing in on EU money, writes business daily napi.hu. This was the only area that saw smaller firms recording a positive figure in their “confidence index” for 2007.
Around half of companies polled believe the process of applying for EU support to be reasonable, while 41% find it too complicated. Grants are seen to favor agriculture, with an overwhelming 87% of bosses in the ag sector expecting to win EU grants.
Meanwhile, government support for SMEs appears to be gaining steam. As part of the “New Hungary Microloan Program” launched by the government in late January, almost 250 small businesses have taken up loans totaling more than Ft 1 billion (€4 million), with contracts for a further Ft 500 million currently under review, Gergely Antal, CEO of state-owned micro-finance company MiFiN told a press conference last week.
A total of Ft 80 billion will be made available to SMEs under the subsidy program during the 2007-2013 EU budgetary period, reports mfor.hu. The two- and five-year loans of Ft 500,000 to Ft 6 million are restricted to those companies with annual turnover of less than Ft 200 million. Only around 30% of applications are turned down.