WHY Hungary? WHAT in Hungary? Gergely Mikola Chairman, British Chamber of Commerce in Hungary Director of Corporate and Regulatory Affairs in CEE, BAT

A call for action Two major mistakes in business: –Focusing too much on what we sell instead of focusing on the customer –Keep doing the same thing and expect a different result

Why Hungary?

Main macroeconomic indicators in Central Europe 2011Bulgaria Czech Republic Hungary PolandRomaniaSlovakia Inflation3,4% 2,1% 3,9% 5,8% 4,1% GDP per capita *$ 7.202$ $ $ $ 8.863$ GDP growth **1,6%0,6%1,4%4,3%1,9%3,3% Export statistics (bn) $ 28,1$ 138,5$ 110,1$ 193,9$ 62,7$ 77,4 Import statistics (bn) $ 30,9$ 133,2$ 105,9$ 208,0$ 73,1$ 74,3 Unemployment rate11,2%6,7%10,9%9,7%7,4%13,5% Minimum wages (EUR) , Source: Eurostat, 2011; Economist Intelligence Unit, 2012; IMF, 2011, Trading Economics, 2011 Statistical Office of the Republic of Serbia, 2011 *IMF staff estimates **Trading Economics estimates

Budget deficit as percentage of GDP in 2012

State debts Europa.eu

Lower Labour Costs – Western Europe vs. Hungary Minimum wages (EUR) Bulgaria ,7 Romania ,2 Slovakia 307,7317,0 Hungary ,6 Czech Republic 302,2319,2 Poland 320,9348,7 Hourly labour costs (EUR) 2011 Bulgaria 3,5 Romania 4,2 Slovakia 8,4 Hungary 7,6 Czech Republic 10,5 Poland 7,1 Lembo Tanning, PhD: Labour Costs and Productivity Analysis of East-European Countries Average gross annual earnings in EU states, 2012

High quality labour pool available throughout the country  400,000 students in 70 higher education institutions  100,000 majoring in business administration faculties  90% of students speak English  20% of fresh graduates have international experience  61% of students have professional experience  Seniors and executives with several years of experience readily available

External reality Increasing global competition Troubled Europe Strong regional race for investment Local challenges Internal reality Boardroom and webex fights Internal competition for funds Increasing shareholder demand and costbase vs. stagnating/shrinking disposable funds Reality

Investors’ view Geographical location Labour market, employment quality and cost Political environment Regulatory environment –Complexity –Change frequency Infrastructure Consumer/partner/competition Financial and ITC systems Tax environment Incentives …

Hungary - most active industries/sectors Automotive industry Manufacturing Information and communication technology Chemicals and pharmaceuticals Transportation and logistics Agriculture

Overview of existing service sectors

BAT Central Europe Business Unit Established in April end-markets – (Bulgaria, Serbia, Montenegro, Czech Republic, Slovakia, Albania, Kosovo, Slovenia, Bosnia, Macedonia, Croatia, Hungary) BAT Hungary as cluster leader Number of employees: appr rd biggest volume contributor in Europe

Why BAT HU? years heritage in tobacco production with 20 years presence of BAT 2.Mature organisation with highly skilled employees 3.Central geographical location, good infrastructure

Strategy recommendation The 3 C’s C ompetitiveness –Know what you are –Know what you are not –Know what you do best C onsistency –Keep the storyline C ommunication –Say it –Do not assume I know what you want to say –Do assume I read newspapers –Tell others so that they tell others