Hungary - getting back to growth 4 International Grass roots Rabobank ISSUE 30/27 JUNE 1994 The former eastern-bloc countries have found switching to a market economy a slow and painful business, but, as Henk Leliveld, Rabobank's man in Budapest, explains, the Hungarians are gradually getting their house in order. How did you go about that? By gathering information, partly through as- sisting clients interested in the country. How did you find them? Some of them come to you, and some you find through your own network - I'd been regional manager for Eastern Europe, so I knew quite a few people. And then you start building a net work within the country itself. The third element was trying to generate some income. Making costs is easy, but I wanted to balance that out with some income. Aft er a year, the report was completed and its message was: let's be careful, let's keep the office as a rep and slowly extend it, first with one extra person. I think we should also be thinking about setting up a limited com- pany so we can get consultancy work, invoice for it and earn some money. Dominic Terberg hos recently been appointed to Budapest, so you have your extra person and a Hungarian assistant. Wnat will that mean for the office? I think it means we can do some good business. Since Dominic arrived on May 1, we've already had our first credit application approved. So things are moving fast. And on an organiz- ational level, when you're such a small oper- ation it is really important to have a good PA. Eszter Hatfaludy is much more than a secretary, she's also a sometime interpretor and com puter specialist as well as being a very good as sistant. Hungary has had a number of difficult years, what is the situation now? There are real economie problems, although the situation is improving. Industrial produc tion had been on a downward curve -5,10 and even 20 percent annually - for some years, but this was halted last year and we saw the first growth in production. Agri-production still lag- ged last year so in all it has been reduced by more than 40 percent compared with 1989. In fact, What has been done to reverse this trend? Perhaps the most important move was the in- troduction of a bankruptcy law in 1992 and that has done a lot to weed out the better companies. How useful is this for the bank? Very helpful, although it can also be a hindrance in that it makes the business environment very unstable, so it's hard to advise clients who may want to do business here. You see, there's no long-term perspective. On the other hand, all of these liquidations mean there are real oppor- tunities for M&A activities. Of the former Comecon countries, Hungary seems to be one of the most viable as an investment proposition. That's right. Altogether some 50 percent of all di rect foreign investment in Central and Eastern Europe has gone into this country, that's around $4.5 billion. The result is that all the world's mul tinationals are here, and all the large and a lot of small and medium-sized Dutch companies have a presence. So that's good news. What about the future? From now on we want to show we can earn money for the bank. Many of our clients are in the country, not only Dutch but also from our other offices, so there's work here for us. Al though we are just a rep office, we can still be of great assistance to clients. The other area is the food and agribusiness, which is a dominate ele ment in the Hungarian economy. Although, it's in crisis at present, I'm certain this sector will be revived, because it's Hungary's main asset. They've got good soil, good climate and these people really have green fingers. So these are our two focuses. I think there is ample work for us in cooperation with the agri-project finance team for investment credits to Hungarian agribusiness, and we'11 be looking to develop trade finance, al though Hungary is not a major exporter or im- porter of bulk products. But we will try to find some trade finance - the Hungarian way. 'Well, I only understood three words', ad- mits Popular Rabobank's Alfredo Jimenez- Millas, 'flexibiliteit, kwaliteit and coöperatie, but I wouldn't have missed it for the world.' It is hardly surprising that coöperatie was re- cognizable during this meeting, because that is what Rabobank is all about. And the Gen eral Annual Meeting is a time to reflect on how the cooperative concept that underpins the bank's every activity is standing up to the test of time, increased customer require- ments and the need to make money. Unlike other banks, Rabobank has no share- holders as such, although its member banks and even some of its clients have avested fi- nancial interest. Rabobank has cooperative members working on a cross-guarantee structure which means what concerns one, concerns all. And just about all of them turn- ed up, or sent a representative to the meeting held in a vast hall opposite Utrecht's head of fice. Massive drapes in Rabo-blue gave the utili- tarian hall a more upmarket ambience for an audience of almost 3,000 from all over the country, and some from all over the world. The international division contingent, in- cluding the general managers, had only had a short walk. But many of the member banks' representatives had come from the farthest corners of the country and had been on the road since early morning. These are the grass roots Rabobank. They are the people who form the basis of one of the world's few Triple-A rated banks, and their presence there is no mere lip-service to consultation. In the Rabobank organization, the boards are not appointed, but elected by the members, and this was part of the formal business of the morning okay, it's unlikely that someone who has got this far in the nomination stakes will be rejected, but it's certainly not open and shut. Both supervisory board chairman Wim Meijer and management chairman Herman Wijffels addressed the meeting and they pulled no punches. This is no time for complacency was the message from both. 'Working to- gether for renewal' is no empty slogan. All the individual members and head office have been faced with a need for increased ef ficiency and a reduction in costs. It is a test ing time for all Rabobankers and people who work in related organizations. But the com- mitment is there. It was almost tangible as delegates listened carefully to what has to be done, why and when. Part of this process is the introduction of a new house-style in January next year. The afternoon session was more light-hearted and was dominated by the presentation (for Rabobankers only) of the new logo. The bank also opted for a more popular approach to the presentation. In the past, a financial or political heavy-weight (premier Ruud Lubbers has been a speaker in his time) rounded off the day. This time it was Dutch diva Margriet Eshuis singing us out with 'You'll never walk alone'. A bit of a cliché perhaps, but it gave me - and I suspect everyone else - goose bumps. And, like Alfredo, I wouldn't have missed it for the world. GDP feil by about 10 percent in the space of a few years. These are real shocks. Why did this happen? 1 It happened for a lot of reasons. First, a large part of their market disappeared when Comecon collapsed almost over night. That was a catastrophe for some sectors. Then there was a major recession on the domestic mar ket. People were earning less and less real money because of high inflation. A lot of compa nies were loss-making, but sur- vived through government subsidies. When the subsidies dried up production stopped. >- You've been in Budapest for two-and-a-half years now, can you say sometning about what has happened during that period? When I started, we had little more than an office with a desk and a chair. My wife and I, our two daughters and ten suitcases arrived there and we had to start from scratch. So how did you approach the market? My first task was to discover what would be a good posi- tion for the bank in the coming years. Essen- tially, I carried out a kind of feasibility study.

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blad 'Raboband International' (EN) | 1994 | | pagina 4