The Korea Trade and Investment Promotion Agency (KOTRA) is both a Trade Promotion Organization (TPO) and an Investment Promotion Agency (IPA) representing the Korean government. The organization opened its Budapest office (Korea Business Center) in 1988, at the start of Hungary’s economic (and political) transformation.
“Because of our early arrival, we have a deep understanding of the country. Hungary has undergone deep political and economic transformation. Being aware that the government focuses on attracting foreign investment enabled us to promote Hungary as a favorable country to Korean investors early on through several methods. By continuously advertising the merits Hungary possesses, it has encouraged many investors to proactively knock on the door of the Hungarian business market,” the Director of the Korea Business Center (KBC) in Budapest, KeeWon Park tells Diplomacy&Trade.
Fulfilling mission goals
KOTRA’s main mission is stated in the CEO’s message as ‘Leading the Way for SMEs to Explore Overseas Markets and to Create Global Jobs’. The Director points out that KOTRA has several programs to fulfill these goals. “In terms of trade, we conduct market & buyer research, organize delegation and trade fairs, offer the Jishawha program (for which the KBC acts as a local branch and supports marketing) and other programs, which help Korean SMEs to export. The Budapest KBC offers most of the mentioned programs and has strength in industries such as cosmetics and pharmaceuticals. For the investment, we provide clients information about the overall business environment, including basic taxation, labor law, local regulation and even government related activities like incentives.”
Seminars are also prepared occasionally so that Korean investors obtain new insights and updated news about Hungary. In the process of helping investors, when they have successfully established a business in Hungary and created global jobs, KBC helps them recruit Korean job seekers, mostly from Korea.
KOTRA mainly helps Korean SMEs to export to Hungary and also provides basic country information which many clients find hard to search by themselves without paying fees to professional firms. Since the annually updated information by KOTRA regarding the overall business environment is provided free of charge, it is used by many investors, some of whom visit the KOTRA office that offers experienced personnel and a detailed database for basic consulting.
The thorough cooperation with HIPA and good relationship between two governments enables KOTRA to stand as a reliable agency. “Therefore, I might say that while it is the investors who have chosen Hungary as an adequate investment target for several reasons, KOTRA has played a lubricant role in helping Korean investors easily and efficiently enter and start their business in Hungary,” KeeWon Park points out.
Before the times of electric battery production, Samsung Electronics and Hankook Tires were the flagships of Korean investments in this country. Today, the largest Korean investors in Hungary are Samsung SDI and SK Innovation. These two electric battery production firms decided to aggressively invest in Hungary and produce the batteries now in demand. As this demand keeps growing, these companies have decided to expand their capacity by investing more and production is expected to explode within a few years. Following this trend, suppliers that produce parts to be included in the battery have also aggressively invested and are continuing to invest in Hungary.
Sang-A Frontec, Dongwha Electrolyte, Doosan Solus and many others are the examples of companies that invested in Hungary with the increasing importance of electric battery production. “With the EU Commission’s 2050 carbon neutral plan and worldwide increase of electric vehicle production, I would say that this industry is the most prominent among the Korean investors in Hungary,” the Director adds. All these companies and others have made the Republic of Korea the largest source country of foreign direct investments in Hungary.
Favorable business environment
He is of the view that the already established and the would-be investors are satisfied overall with the business environment in Hungary. “The government intends to give huge investment incentives and provides full support to the businesses by making a business friendly environment. Regulations regarding business registration is quite convenient and swift, which is one of the major aspects investors consider. Also, the government has lowered the social contribution tax from 27% to 17.5% since 2017 and is expected to lower a bit further. In terms of visa application, the relevant department has been reinforcing their manpower due to the increasing number of foreign investors entering Hungary. This has benefited the would-be Korean investors, as well.”
He adds that some difficulties have also been raised among the investors. Due to the continuing economic prosperity, there has been excess demand of labor with which the supply has not been able to keep up the pace. The recent record breaking low unemployment rate (before the pandemic) has made it hard for investors to recruit in certain areas. Despite the manpower reinforcement in the administration sector, there have been some complaints of lagging permit application procedure, the Director says.
KeeWon Park stresses that in fulfilling its mission, KBC/KOTRA cooperates with several Hungarian partners. “Since we are an export promotion agency, we definitely are in need of Hungarian buyers who are interested in the Korean products and willing to use or sell those products in Hungary. We tend to help both parties by enabling fluent communication between them and eventually making them mutually successful partners. Secondly, we cooperate with the Hungarian Investment Promotion Agency with which we share client inquiries about investment opportunities, incentive strategies and even M&A related issues. Also, HIPA has helped many Korean clients during the COVID-19 pandemic when the borders were closed. They enabled essential business personnel visits to Hungary, which has gained huge trust among the Korean investors. Within the investment portion, we should also mention many law and accounting firms that help Korean investors do business easily in Hungary. Many have gained praise among Korean investors for their in-depth and accurate assistance. Finally, we at Budapest KBC thank all Hungarians that have accepted us as a cooperation partner. Even though, most of them might not be directly involved with our office, these people have greeted not only us but all the Korean investors wherever we go and take care of us when we encounter problems. Without the Hungarians warm-hearted hospitality, I don’t think we might be able to work as smoothly as we are doing currently.”