Serving the Demanding Dutch Investors in and from Hungary

It takes a significant pro-active and promotional effort to get Dutch companies to paz proper attention for Hungarian market opportunities.

"Since the EU membership of Hungary and other countries of the region, ministries and business support services in Holland have reduced their departments dealing with these states, having the impression that bilateral issues would be tackled in Brussels. Now, five years later, both ministries and business support services in the Netherlands are re-thinking this strategy." That is how Elzo Molenberg, First Secretary and the head of the Economic Section at the Royal Netherlands Embassy in Budapest, explained to Diplomacy and Trade magazine why it takes a significant pro-active and promotional effort to get proper attention for Hungarian market opportunities.

In 2007, before he left Holland to take up this position here at the embassy, he visited a few key Dutch ministries, chambers of commerce and some companies regarding business opportunities and contacts in Hungary. The approach was welcome when he offered to deliver concrete market opportunities and the state of current economic conditions in Hungary month by month. "Dutch companies have high expectations and requirements, they want tailor-made match-making provided, and only willing to come over if the deal is almost in the contracting phase," he points out.
Based on information provided by the Dutch side, Molenberg, heading a unit of four people at the Embassy, looks for potential Hungarian partners in corporation with the Hungarian trade development agency ITDH. The first such fields of partner identification included high-tech and metallurgy, to be followed by waste-water treatment, then aeronautics and bio-energy.

"We are now focusing on the Dutch SMEs. We think there are numerous opportunities and that?s why we send out every month a newsletter. Demand for such information is increasing as the number of recipients grew from 200-250 to over 800 in the past year, more and more companies become interested, including even Dutch companies already established in Hungary," Molenberg states.
Dutch companies are expanding into Hungary to find alternatives to the Dutch cost structure. They opt for outsourcing, that is, operating in Hungary rather than in Holland to cut costs if careful calculations show it is worth doing. 75% of Dutch trade is carried out no further than within a circle of a 400-kilometer radius - an area covering mainly Germany, Belgium, France, UK and Scandinavia. However, the EU single market area - and help from the Embassy and the chamber of commerce - allows this circle to be expanded.

Dutch companies have invested in Hungary a total of EUR 8-9 billion since 1990. Therefore, the Netherlands is the second biggest foreign investor in this country, behind the Germans, although, not all the firms concerned are actually Dutch owned businesses but rather multinationals headquartered in the Netherlands.
The volume of bilateral trade since 1990 has grown 20 times and it is now worth close to four billion euros, which is still less than one 1% of the total foreign trade of the Netherlands. Trade covers all sectors with quite an equal spread: automotive and transportation goods, machinery, chemicals and others. According to the Hungarian Court of Registration, there are close to 1,600 companies in Hungary with Dutch interest. 20 years ago, the business formula for getting started on the new Hungarian market was the joint venture. By now, most of these have been fully taken over by the Dutch partner.

Molenberg and his team at the Embassy are also involved in economic diplomacy; reporting to headquarters the position of the Hungarian government to be represented in Brussels and the economic situation in Hungary (including broader issues like the security of energy supply from Russia through the Ukraine); and looking for cooperation opportunities between Dutch and Hungarian state administrations. "A good example for the latter is bringing together the Hungarian Audit Office and its Dutch counterpart for identifying corruption moments / corruption risk assessment in work processes within the state administration.
Hungary is also interested in the Dutch method of state budget planning," he says.

In November 2009, the two countries celebrated the 25th anniversary of the memorandum of understanding on water issues. The Netherlands has water protection systems, dykes and delta planning. Hungarian engineers developed a technique for giving temporary space to rivers in flooding situations, river water can spread to a limited area of land and afterwards, it can be pumped back to the river. This helps tackling several problems that the Dutch face but have not developed solution for. The Hungarian technique is combined with the Dutch dyke system and water specialists from the two countries now work together and prepare to conquer third markets, mainly in Central and Eastern Europe and Asia.

A political scientist by trade, Molenberg finalized his studies in international relations and also conducted economic studies and international law. He first traveled to Hungary with his parents in 1979, and in 1989-90 studied in thiscountry. He met a Hungarian girl, now his wife, and found a job with the newly established EU delegation in Budapest. Then, he started working for the Dutch foreign ministry and eventually was sent to Hungary to take up this position two years ago. Over these years, he "got to know Hungary inside out".
He says that although, this country is a small market of ten million inhabitants, it is known in the Netherlands for its strong points like good labor force, an excellent production country - still, it is quite inexpensive compared to Western Europe. "Slovenia and Slovakia adopted the euro but that also means losing some advantages attracting investors. If you look at reports analyzing the future of Hungary, the picture is not that gloomy. That is also proven by our experience: recently, more and more requests are coming," the First Secretary concludes.