1. Hungary: The Ideal Location for Investors Miklós Merényi State Secretary for International Economic Relations April 2007

2. Agenda Hungary in Europe Factors of the favorable business climate Incentives Bilateral economic relations Opportunities for Canadian companies

3. Hungary in Europe

4. Dynamic macroeconomic growth, favorable real exchange rate Highest FDI stock per capita in the region Hungary: a bridge between East and West, 4 Pan-European Corridors Well developed telecommunication and highway infrastructure The highest labor productivity in the region, motivated and qualified workforce is available Productive, qualified, available workforce Location Infrastructure Factors of the Favorable Business Climate Capital attraction Economy

5. Economic policy 1.Austerity package Tight fiscal policy Convergence plan  € introduction 2010-2014 2.Deep structural reforms Healthcare, public administration, education, public transport 3.Effective use of EU funds

6. New Hungary Development Plan € 23 BILLION EUROPEAN UNION DEVELOPMENT FUNDS FOR 2007-2013 MAIN OBJECTIVESPRIORITIES  Sustained growth:  Increasing competitiveness  Extending economic base  Developing business environment  Expanding employment  With the incentives of creating more and better workplaces  Economic development  Infrastructure development  Social reform  Environment and energy development  Regional development  State reform

7. Av. growth rate over 4.0% in the last 10 years Industrial boom: 10% y/y growth by 2006 Export growth reached 16.6% in 2006 Unemployment rate : 7.5% in 2006 Unit labor cost decreased over 10% in 2006 Stock of FDI grew by 19% in 2006 GDP Output Employment and wages Hungarian Macroeconomy Investments

8. 62 236 FDI Inflows to Hungary Source: National Bank of Hungary Stock of FDI in Hungary

9. Hungary - The Natural Regional Logistic Centre Central location in Europe Border with 7 countries and 4 EU, 3 non-EU member states Three international major road corridors and the Danube cross Hungary Innovation-logistic ring around Budapest Zahony the Reloading centre between narrow and wide railway system Easy access to the Balkans and Europe 13 logistic centres are located in the focal points of the international movement of goods.

11. High Labor Productivity GDP per person employed (in purchasing power standards) Productivity

12. Number of higher education institutions: 69 Number of students in higher education: 424160 – Faculty of Natural Sciences: 21 524 – Faculty of Medicine: 9 836 – Faculty of Pharmacy 1 436 – Faculty of Health Care 12 085 Number of graduates in 2006: 57 162 High Quality Labor Pool University Towns Budapest 164,105 Szeged 30,942 Pécs 31,705 Veszprém 9,680 Miskolc 14,130 Debrecen 23,403 90% of the students speak English All diploma with foreign language certificate and computer skills! Source: Ministry of Education and Culture, 2005/ 2006

13. Source: Calculation of Ministry of Economy and Transport Czech Republic GermanyHungary Austria Poland Slovenia 0,50 0,54 0,45 0,61 0,50 0,56 Labor costs of the production of one unit of GDP, 2005* * Approximate values, in case of Austria indicator is originated from 2004 figure Competitive Labor Costs The labor costs of the output lags behind that of other CEE countries

14. 1. Tender applications in the framework of the New Hungary Development Plan ( II. National Development Plan) co-financed by the EU VII. Framework Program 2007-2013 2. Special incentive package for strategic investors The Hungarian Government prepares a tailor-made incentive package 3. Development Tax Benefit 4. R&D expenditures deductible from solidarity tax base 5.Subsidy for employment creation and training 6. Special support programs for R&D activity: National Office for Research and Technology Incentives

15. Hungarian-Canadian Bilateral Trade Million USD.

16. Canadian Investors in Hungary

17. Priority Sectors of Our Investment Policy Biotechnology ICT sector Automotive industry Shared service centers Logistics Specialized tourism R&D Innovation High added value Knowledge based economy

18. Main sectors for investments »Automotive »Electronics »ICT »Service sector (SSC, call center) »Biotechnology, life sciences »Logistics »Construction sector (PPP) »Real estate development Opportunities for Canadian Companies

19. HUNGARY’S NO1. FREIGHT FORWARDING PARTNER MÁV Cargo is a modern company with a decisive role in Hungary, providing the basic rail transport services flavoured with variety of value-added services and operating in a strategic network in Central Eastern Europe. modern services

20. 13,000 wagons 46.8 million tonnage 3,170 employees Revenue: HUF 93 billion EBIDTA: HUF 6.1 billion Pre-taxation profit: HUF 2.8 billion

21. The MÁV Cargo group  assets owned by MÁV Cargo  subsidiaries of MÁV Cargo  business opportunity Buying MÁV Cargo, the investor obtains the dominant market share, client relationships and the know-how of the company –approximately 90% market share in the Hungarian rail freight business –approximately 700 clients –access to the broad-gauge network of the CIS countries –qualified professionals Subject of the privatisation

22. MÁV Cargo’s development and ability to provide high- level transportation services in Hungary are key factors for the current shareholders There are no investor preferences by the seller, all kinds of investors are invited to the bidding: –both financial and professional investors –both rail and road haulage companies –both Hungarian and international investors –both EU and non-EU investors

23. Two round process Consortiums are accepted The owner wants to take both professional and financial considerations in to account The winner will be the applicant giving the best proposal over all conditions The transaction should be closed by the end of 2007

24. Thank you for your kind attention! Miklós Merényi State Secretary for International Economic Relations H-1055 Budapest, Szemere utca 6. Phone: (36 1) 374-2824 Fax: (36 1) 312-3268 E-mail: merenyim@gkm.gov.hu Internet: www.gkm.gov.hu