Interview

Selling Hungary
INTERVIEW WITH ITDH CEO ÁDÁM TERTÁK
WRITTEN BY Edith Balázs

A former Managing Partner at Ernst & Young Hungary, Ádám Terták was nominated CEO of the Hungarian Investment and Trade Development Agency (ITDH) in November last year. Bringing with him a strong corporate background, Terták is intent on putting his business experience into practice at ITDH and making the agency more efficient and proactive, with a clear vision of where Hungary’s competitive advantages lie. As part of an official investment promotion road show in the US in December 2004, Terták met with representatives of Dell, EDS, Exxon Mobil, Lynxs Group, National Instruments and Sematech.

BH You have built a successful career in the corporate sector. How are you going to utilize past experiences in your new position at ITDH?

Ádám Terták I would like to change the company culture to a certain extent. Quite a lot of people at ITDH have previously worked in the business sector so I don’t think we will have an endless debate in this respect. I would also like to introduce a basic principle: don’t tell me the reasons why a certain issue can’t be solved, rather tell me how it is going to be dealt with. I have already started laying the groundwork for implementing certain changes.

BH Do you intend to carry out structural changes within the company?

Ádám Terták I don’t wish to shake up the organization too much in this sense, but I would definitely like to increase the level of efficiency. We will also take a closer look at how effective the 16 offices within the country and the offices outside of Hungary are. ITDH is present in 32 countries with one or more offices. I have already received feed back from the private sector regarding the activities of our various representations abroad. We are going to come up with a set assessment criteria that will allow us to measure the efficiency of these offices. One of the key issues on my agenda is to change the content and operation of our web page in order to make it visually more appealing and contain a large array of services. Not all the offices are operating within the same network and this will also have to be changed if we want to have an efficient Customer Relation Management (CRM) system in place soon.

The lack of a reliable investor database in Hungary will also have to be remedied. Once we have that available we can launch a more efficient communication campaign with investors, be that industry-based or general. We must not forget about the investors who are already here and pay huge amounts of taxes and expand their existing investments. Over the last two years, 70% of the total foreign direct investment (FDI) flowing into the country came from investors who had already set up shop in Hungary. We need to be pro-active toward this group of investors not only newcomers.

BH Is it a priority to focus on specific groups of investors, coming from a particular economic sector, or a certain country, for instance?

Ádám Terták We are definitely going to deal with targeting investors. Times have changed tremendously since the mid-1990s. We are not only competing with countries that joined the European Union together with us, but also with some neighboring countries that are not yet EU members and consequently do not have to abide to the union’s competition regulations, which seriously limits state aid and tax concessions. And here I’d like to mention that the government should reconsider the issue of local tax. The 16% corporate tax rate is good in my opinion, but we can still get better: the same tax is 12% in Ireland and Austria has just recently decreased its corporate tax rate to 20% from 25%, probably compelled by much lower rates in two of its neighboring countries, namely Slovakia and Hungary. These issues show clearly that Hungary is in an international arena now and not competing on a local or regional level.

At the same time our strategy is to target investors who are thinking in terms of a region and not just a single country. Hungary is a relatively small market and the retail sector, for instance, has pretty much reached saturation. There are other areas, however, where we can excel and still attract a large number of investors, such as shared services, call centers, etc. Hungarian is not a widely spoken language, therefore there is a pressure on the population to learn other languages, which is a critical factor in this line of business.

Logistics is another area Hungary could exploit if infrastructure were properly developed. There are four EU transportation corridors that cross the country but we have to make sure that these are serviced by highways. Infrastructure development, however, is not only about building roads there is also the issue of the information highway. Software development is an area where we are highly competitive.

BH Are you confident Hungary can regain its competitive edge?

Ádám Terták We definitely can if we are fast enough in providing information and all other kinds of incentives and services to potential investors. And we need to target investors who come from a sector where our labor cost is still competitive. We must focus ourselves, set up a list of priority areas together with the government and target investors in those areas. This also brings up the one-stop shop issue, which has been over-talked. Economics Minister János Kóka is a staunch advocate of this issue and he has pledged to have it carried out as soon as possible. ITDH could serve as the super agent of such an institution, without of course making the decisions ourselves.

BH Do you intend to increase the number of ITDH offices abroad? For instance, in the US, there are three representative units. Do you feel that is enough to service the entire American market?

Ádám Terták Indeed, we have three offices inn the US but one of them (Chicago) is currently vacant. The two operating in New York and Los Angeles form a sort of an axis across the country. As for the third office, it is a matter of consideration whether we need it at all. We could use its funds to strengthen the operations of our New York or LA office.

Ádám Terták
Ádám Terták, 51, is an economist specialized in the field of planning and operating information systems and in the development of organizational structures to meet new and changing market environments and is an expert in privatization. In 1991, he became the Managing Partner of at Ernst & Young Hungary – named to the post after the company merged with Arthur Andersen in 2002. From March 2003 through February 2004 he was chairman of Ernst & Young’s Hungarian business. In November 2004, he took over as CEO of ITDH. Terták previously worked at SZKI Computer Software Development and Maintenance Co., at ÉGSZI and SZÁMREND. In 1987 he was advisor to the General Venture and Trust Company and in 1988 he joined Bonitas, a predecessor of Ernst and Whinney Bonitas, which later became Ernst & Young. Terták graduated from the College of Finances and Accountancy in 1976 and later obtained a degree at the University of Economics. He also attended the Advance Management Program at Harvard Business School in Boston, US. He speaks fluent English and has good knowledge of German.