Gordon Bajnai, minister of economy for Hungary during his interview with fDi, was in store for a job promotion shortly after returning home from Mipim.

In the wake of prime minister Ferenc Gyurcsány’s resignation in early April, Mr Bajnai was tapped to replace him and is due to take over the Hungarian government on April 14. It will not be an easy job. Hungary has been in the economic news in recent months for all the wrong reasons, such as its very high level of public indebtedness.

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However, Mr Bajnai is happy to talk about the issue, and even happier to chat about the country’s FDI prospects.

Economic anchor

“To talk about FDI we have to mention that Hungary has been particularly successful in FDI over the past 18 years. The total amount of FDI in Hungary comes to about €70bn, which is often forgotten by today’s negative press coverage. This €70bn-worth of FDI is also an anchor to Hungary in an economic sense,” he says.

However, there is much that Mr Bajnai will need to address as prime minister to improve the country’s competitiveness. “First of all, the most important thing is for Hungary to reduce its competitive disadvantage in labour costs compared with the [wider] region – which is a very relative disadvantage,” he says.

Tax adjustment

 

Depreciation of the forint has helped and tinkering with the tax regime should do the same.

Mr Bajnai says: “We will restructure our tax system so that from January 1, 2010, there will be a reduction in the tax wedge of seven percentage points. This is a very significant cutback and will bring Hungary to a much more competitive level.

“We intend to go further in the coming years, but as a first step, seven percentage points is a significant cut,” he adds.