Hungary - getting back
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
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
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
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
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
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
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
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.