Keynote Speech by Chief Guest H. E. Mr. Peter Medgyessy, Prime Minister of the Republic of Hungary

Dear Presidents, 
Dear Participants, 
Ladies and Gentlemen,

If someone in the streets of Budapest is asked about India, the first idea to come up is Tagore; the second is Maruti; the third one, after a bit of thinking, is something in line with the interests or the job of the interviewee, such as movies, tea, or the Taj Mahal. Unfortunately, however, hardly any mention is made of exports, production cooperation. and close economic relations between Hungary and India. 

It is a wonderful thing that Rabindranath Tagore is well-known and popular in Hungary. In the course of his trip to Europe in 1926, the Indian prince of poets received medicinal treatment in Balatonfured, one of Hungary's most beautiful bathing resorts. Memories of his visit are preserved by a lake-side promenade bearing his name and a statue of Tagore there in Balatonfured, on the Northern side of Lake Balaton. Here and now, however, my main objective is to encourage both Hungarian and Indian people to conjure up great common economic events - at least as a third idea - when they are asked about each other's countries. 

There are favourable basic conditions to achieve this. Hungarian-Indian economic relations date back to several decades. India, having gained independence, and Hungary, just recovering from the world war, were among the first to establish diplomatic relations, representing an overture to economic and commercial cooperation between the two countries. Relations have been traditionally harmonious ever since. 

Hungarian-Indian economic relations had developed seamlessly by the early 90s; this was the peak period of bilateral commercial turnover between the two countries. Cooperation was also realised in remarkable projects which still provide excellent examples of two economies - located geographically remote from each other -to be able to cooperate successfully on the basis of mutual benefits. 

• The Neyvel Thermal Power Plant started to operate more than twenty years ago; this investment was realised with several Hungarian companies involved and the boiler plants, products of Hungary, still operate perfectly.
• Another prominent example of cooperation in power engineering is the hydroelectric power plant investment known as Shannon Project; Hungarian companies supply spare parts thereto on an on-going basis. 
• The city metro in Kolkata has operated for about two decades; it was constructed by Hungarian companies. 
• Ganz portal cranes still operate in the ports of Mumbai, Chenna, and other cities in India . 
• There are several hundreds of trains running on Indian rail tracks whose rolling stock has been supplied by Hungarian companies; Hungarian companies also continue to supply spare parts for locomotives, such as power current switching equipment. 
• The Indian army uses an electronic system developed in Hungary and installed by Hungarian companies; they are ready to provide spare part supply in the future and continue cooperation in this area. 

Unfortunately, our trade volume has decreased considerably since the early 90s, falling down to a fraction of the level of earlier years.

One of the factors playing a considerable part in these events was that the economies of both countries were undergoing such major structural transformations that completely rearranged the entire earlier cooperation, which was based on comparative benefits and possible to be exploited relatively easily by former techniques.

The majority of these changes are probably well-known to those present here, therefore I will mention headlines only. As a result of the political changeover in 1990, market economy has been completely developed in Hungary. A new ownership structure has been established where the proportion of state ownership has been minimised. Although the period of mass privatisation is over, there are still some public properties to be privatised, including the areas of iron and steel production, which India is also interested in. Hungary's economy is stable with a steady rate of development, in which foreign capital influx has been playing a significant role. Inflation has decreased considerably, with expected rates of 4.8 to 5% this year; unemployment rates are manageable (5.8 to 6%). This year's GDP is expected to grow by 3 to 3.5%, which may seem to be low here in Asia; however, this rate of growth is considered to be high in Europe, exceeding the EU average by 2 per cent. Finally, as it is publicly known, Hungary will become a full-fledged member of the EU from May 2004.

The objectives of Hungarian economic policy are defined by the 2008 target date of joining the Eurozone. Important components of this process include stabilisation, sustainable growth exceeding that of EU countries, preservation of Hungary's capital attraction capabilities, and foreign trade diversification. The budget deficit will continue to decrease in 2003 and in later years as well, providing opportunities for entrepreneurial investments. In spite of the still unfavourable external boom, industrial production is expected to grow more than 4%, exceeding the previous year's rate. Volumes of foreign trade with developing countries is to increase considerably, over 14%. Although foreign capital influx has been somewhat reduced as compared to previous years, changes are envisaged in both the micro and macro environment which are to boost the enterprising spirit. Foreign investors are offered to benefit from rapid administration, a calculable economic environment, low corporate tax rates, tax allowances to encourage investments, and above all, a highly qualified workforce. Hungary's ability to develop is illustrated by the rapid growth of productivity at rates exceeding those of developed countries.

We are aware of the fact that high-priority foreign policy objectives in both countries include the attraction of foreign direct capital and encouragement of its settlement. Therefore it is expedient to mutually motivate Indian-Hungarian and Hungarian-Indian capital flux, for which there are several examples even today. Hungarian capital, for instance, is present in the Indian pharmaceutical industry through a company named Themis Medicare Ltd. based in Bombay; we could also make mention of the joint stock company Technip Ganz Machinery, which is engaged in the design and supply of turbines and hydraulic power machinery in India.

We would be very glad -and this is what I am encouraging you for- if Hungary could be an emerging target of foreign investment by Indian companies. We are happy to see that Tata Consultancy Services has been running its Budapest branch office successfully for two years now. It is considered to be promising that steel industry investment opportunities in Hungary have also aroused the interest of a consortium involving an Indian company as well, which has submitted a bid for the tender invited for the ongoing privatisation of Dunaferr, the largest metallurgical plant in Hungary. Hungary's favourable geographic location may provide a basis for establishing logistics centres to cater for Central, Eastern, and South Europe as well by Indian production and trading companies.

Dear Ladies and Gentlemen,

We fully appreciate the fact that South Asia will be the area most dynamically developing in the world in the course of the quarter of a century ahead of us, and that India will playa prominent part therein. India is an attractive exports market; besides, it is an attractive partner for cooperation due to its outstanding research and development capabilities. We are aware of the efforts and successes resulting from India's attempts to implement economic reforms initiated in the early 90s. Neither economic liberalisation, nor the enormous projects aimed at restructuring have been fruitless. We admire the macroeconomic indicators on the basis of which India has been one of the most dynamically developing countries in the world for nearly ten years and has preserved its impetus in spite of the unfavourable external impact of the world economy, which has been slowing down for about two years.

Therefore it can be stated that the 90s represented a period of transformation, liberalisation, and the establishment of new priorities for both countries, in the course of which Hungarian-Indian relations may have declined, but the two countries never turned away from each other-neither at the governmental nor at the business sphere levels. I myself can testify this: as Minister of Finance in 1997, I had the opportunity to visit to India, heading a large business delegation, to participate at the 10th Session of the Joint Economic Committee to be held in Delhi.

The processes of transformation completed in our countries in the recent period only confirm my opinion that it is in the interest of both countries to revive the successful cooperation of earlier years. I am strongly convinced that our companies can cooperate even more effectively in the framework of democracy and market economy in both former and new areas. 

What and how to do about this, and which are these areas?

Government responsibilities primarily lie in improving conditions. One of the main objectives of my visit to India has been to exchange views and coordinate with Indian officials on how, in which areas, and by what means it is possible to repeatedly dynamise economic relations between the two countries, and what governmental measures can be introduced to this end. In the course of our negotiations, we have reviewed this issue and stated that we fully agree, at political level, as regards the necessity of activating economic and commercial relations.

In line with altered conditions, several new or amended agreements have been signed in the course of my visit. Among them, the contracts on the avoidance of double taxation and the mutual protection of investments, as well as the declaration of agreement to assist IT cooperation are considered to be highly important advances from the economic point of view. 

The inter-governmental session of the Joint Economic Committee held in Budapest in early October is also deemed to be a significant event, where many new opportunities of cooperation were explored by business experts and prominent business representatives of both countries.

The activity of governmental bodies is highly important, but it is worth little without the active involvement of the corporate and business spheres. Therefore I personally deem the role of the Joint Business Council to be highly prioritised. One of the important objectives of my visit to India has been to encourage personal business relationships. Chambers as well as industrial and commercial associations -the most influential organisations in the business life of the two countries -have played an outstanding role in the intensification of cooperation for years. Another important point of contact is provided by cooperation between the trade development organisations of the two countries, including their latest joint project: organising a road show in order to publicise investment opportunities in Hungary.

Our aim is to enable the two Eximbanks to assume prominent roles. Their cooperation with each other and with other organisations may provide valuable assistance to both project financing and information flow. In the course of my visit, an agreement was signed on extendable mutual credit lines of 10 M USD, respectively, which represents an encouraging 
step along this route. Contracting conditions will be improved by the agreement of cooperation to be concluded between the Hungarian and Indian export credit insurers (in Bombay).

Dear Friends,

Now we have arrived at the most important issue of "what?; that is, what can be and what is intended to be done by companies and businessmen in each other's countries, and what is necessary and possible.

Hungarian-Indian cooperation opportunities are favoured by two factors:

India's attractive economic development and its ever more comprehensive integration into the world economy enables exports of an increasing range of goods, services, and technologies. Just to mention a single specific area: we highly appreciate the international-level developments of India's IT industry in the areas of software development and Internet-
supported services. Consequently, there is a wide range of areas for cooperation opening up before us, in line with the demands of this modern age. 

Another positive factor is that Hungary is to become a full-fledged member of the EU, which produces a much more favourable situation as regards market launch opportunities for Indian products. Presence in the Hungarian market will also represent a position in a market of 450 million in the future. Hungary will adopt all the trade policy requirements, regulations, and conventions of the EU; this means that India will benefit from the same allowances when trading with Hungary as now with the EU. When expressed in numbers, this change will mean that the Indian products received by Hungary today would be subject to one third less of customs duty (3.7% instead of 5.5%) when calculating with EU tariffs. This situation may turn even more favourable if the composition of goods is changed. Just to mention some of the products presently supplied: electric and electronic components, fine chemicals, cars, coffee, and tobacco, for instance, will be subject to much more favourable customs positions.

The intentions of Hungarian companies as regards India are also affected by current conditions and characteristics. I have already provided a list of the former core activities of Hungarian companies in India. It is just natural that the refurbishment of earlier establishments and the launch of new investments is or will be included in the agenda of each of these areas. India can continue to count on Hungary's expertise and readiness to supply:

• in the energy sector;
• in the modernisation of the public transport of Indian cities and of railway transport;
• in the modernisation of port machinery and equipment;
• in the establishment of slaughterhouses.

• the ICT sector;
• electronics;
• software industry;
• biotechnology;
• environmental protection and water management;
• building material industry;
• chemical and pharmaceutical industries.

Dear Ladies and Gentlemen,

Finally, let me touch upon one of the most important economic assets of Hungary, its offer for tourism. In my introduction, I made mention of Rabindranath Tagore, who can be considered as the first publicly known Indian tourist to Hungary. We would be glad if we could welcome an increasing number of Indian guests in Budapest, in the variegated Hungarian countryside, at Lake Balaton, so highly praised by Tagore, and in Hungarian spas in the future.

Thank you for your attention.