BMI's Executive Summary

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MOL, Hungary's oil and gas company, said at the beginning of August that it had acquired Italiana Energia e Servizi (IES), a company which owns and operates a 2.6mn ton per year refinery in Mantova in Italy, as well as a 124km pipeline that feeds it with heavy crude oil imported through the port of Marghera. MOL said the purchase was designed to give it a strong presence in northern Italy and lay the foundations for ‘further expansion in the Mediterranean and South Europe'. MOL officials also said that press reports that the takeover had cost it EUR800mn (US$1.1bn) were ‘overstated'. The takeover is the latest in a series of moves designed to make Hungary a key European gas pipeline hub. The country is committed to building a new 1.2bn m³ natural gas-storage facility, designed as a strategic gas reserve, and expected to cost between US$600mn and US$800mn; it has also opened discussions with Ukraine on a second major gas storage facility. Further pipeline plans are set to cross Hungary and the government is now looking to implement EU calls for improved energy security through additional reserve supplies of natural gas. In 2006 Russia's Gazprom and MOL signed a deal to study the proposed extension of the Blue Stream gas pipeline. Hungary is also supporting the Nabucco pipeline project, which would transport Turkish gas to Austria. It still remains somewhat unclear whether the EU-backed Nabucco and Russia's Blue Stream are alternatives or whether the country could participate viably in both. Hungarian Economy Minister Janos Koka said that Hungary would act as a distribution centre for the Balkans in the southern expansion project, which has an estimated cost of around US$6.3bn. In our newly-released Hungary Freight Transport Report, BMI concludes that pipeline throughput will grow by an average of 4.5% per annum in 2007-2011. Many of these projects have long lead times, and would further boost throughput in the years after 2011.

Our forecast is based on a number of factors. Despite Hungary's current fiscal difficulties, which will lead to lower economic growth in 2007, we still see GDP rising by an annual average of 3.9% in 2007-2011. Hungarian and European gas demand will be growing strongly. Following the disruption of Russian gas supplies to Europe at the beginning of 2006, as a result of Moscow's dispute with Ukraine, and again on a smaller scale at the beginning of 2007 as a result of the dispute with Belarus, Brussels will be eager to support pipeline and storage projects which boost resilience and diversify supply sources. Hungary will also see an important opportunity to boost its strategic role and cash in on transit fees.

Growth in the pipeline business will come against the background of a reasonably healthy freight industry. As the central road-building policy is implemented, albeit at a reduced pace because of the fiscal crunch, and vehicle ownership continues to spread, road freight will see strong growth. We expect average annual growth for 2007-2011 to reach 5.8%. Boosted by the boom in budget airlines, but with restructuring in prospect as the privatisation of national flag carrier Malév has finally been concluded, airfreight will experience an average annual increase of 9.2% during 2007-2011. Inland waterway and rail freight will grow at the slowest average annual rates, 1.9% and 2.9%, respectively. We now expect the total freight carried across all modes, measured in million tonne-km (mntkm), to grow by an annual average of 4.9% across the 2007-2011 forecast period. Hungary scores a composite freight transport business environment ranking of 39 (out of a theoretical maximum of 70), which places it under the European average (41.4). An area where it could score better is the somewhat restricted competitive environment, as state-owned companies (some of which are loss-making) still dominate the transport sector.

The total value of Hungarian transport and communications GDP will rise to US$14.2bn in nominal terms by 2011, representing 8.6% of Hungary's GDP. The transport and communications sector employed 302,000 people, or 7.7% of the labour force, in 2006. We see the number of people employed in the sector falling marginally to 299,900 by 2011, although it will remain constant in relative terms at 7.7% of the total labour force.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - SWOT Analysis

Hungarian Freight Transport SWOT

Hungary Political SWOT

Hungary Economic SWOT

Hungary Business Environment SWOT

Chapter 3 - Business Environment Overview

Europe Business Environment Ranking

Business Environment Ranking

Economics – Long-Term Risk

Politics – Long-Term Risk

Freight Transport Growth

Transport Infrastructure Growth

Regulatory Environment

Competitive Environment

Transport Intensity Index

Political Risk Summary

Economic Risk Summary

Business Environment Risk Summary

Red Tape

Labour Force

Chapter 4 - Industry Trends And Developments

Road

Air

Sea

Chapter 5 - Industry Forecast Scenario

Macroeconomic Outlook

Table: Nominal And Real GDP

Transport Outlook

Table: Transport And Communications Sector Data and Forecasts

Freight carried (domestic and international):

Chapter 6 - Country Snapshot: Hungary Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Table: Wages per year

Chapter 7 - Trade Environment

Table: Value of Imports by Category

Table: Value of Exports by Category (US$mn)

Table: Top Export Destinations

Table: Export Trade, % y-o-y

Table: Top Import Sources

Table: Import Trade, % y-o-y

Chapter 8 - Market Overview

Multi-modal

Competitive Landscape: Multimodal

Infrastructure

Road

Competitive Landscape: Road

Company Profiles

Rail

Competitive Landscape: Rail

Company Profiles

Air

Competitive Landscape: Aviation

Company Profiles

Water

Competitive Landscape: Inland Waterways

Pipelines

Competitive Landscape: Pipelines

Chapter 9 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

Transport Industry

Sources

Chapter 10 - Appendix: Regional Demographic Data

Wages (ave labour force per annum), US$ PPP

Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn

Competitive Landscape for Europe Freight Transport Reports: Sample of Companies Ranked

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Analysis of latest projects across the freight transport sector – road, rail, air, sea, logistics – including market overview which provides an outline of the key elements driving development. SWOT analysis of the state’s business environment, transport sector, politics and economics, which carefully evaluates the short- and medium-term issues facing the industry.

Network of European Freight Sources

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BMI's European Freight Transport Reports are based on an extensive network of multilateral organisations, government departments, freight transport industry associations, chambers of commerce and company reports. Information sources include: