1. The document discusses secondary education and skilled labor in Hungary and whether it serves the needs of foreign investors. Case studies and feedback from Finnish businessmen are presented. 2. The case studies find that skills availability, quantity of labor within 50-60 km, and presence of other foreign companies are critical factors for investors. Universities are also important for ICT companies. 3. Feedback from Finnish businessmen showed that Poland had the most attractive labor conditions, followed by Hungary and Slovakia. Key factors included skills, language ability, costs and location. Future GDP and unemployment forecasts for Hungary and the region were also presented.

1. Secondary education – Economy – Regional
Development
Does the secondary education (with skilled
labour) serve the needs of Foreign Investors?
Attila, Debreczeni Senior Consultant
Finpro CSE – March 17, 2009

2. Topics
Are the labour
availability &
skills the critical
factors?
Future outlook
Case & feedbacks
studies &
feedbacks
Finnish Foreign Direct
Investments –
Developments &
Presence in Hungary
Foreign Direct
investments –
academic &
Finnish way
© Finpro ry

3. FDI – academic approach & Finnish way in the CSE Region
Product life cycle Finnish way
Neoclassical – Int.
(Vernon)
Trade Theory
(Smith, Ricardo)
Industrial
Approach/ Market- Resource Efficiency- Strategy
organisation
seeking -seeking seeking assets-
Region
(Mason)
seeking
Scandinavia X X X
Baltic X X X X
Russia X X
Germany X X
Resource-seeking
Western EU X X
Market-seeking
Eastern EU X X X
Efficiency-seeking
China X X
Strategy assets-seeking
India X X
USA X X
Source: Finpro analyses, 2008
© Finpro ry

4. Development of Finnish FDI
• Total stock of Finnish FDI: € 60.2 bn.
• Quadrupled in 10 years
• Major sectors (2007): Manufacturing (~36%), Financials
& insurance (~33%) & other services (~31%),
• Manufacturing share decreasing
• FDI destinations: majority in Sweden (~23-25%),
Netherlands (~20-22%), Belgium (~23-25%),, Germany &
USA

5. Development of Finnish Trade & FDI in CSE
FDI Hot spots

6. Presence of Finnish FDI and companies in Hungary
FDI History  350 Exporters
 Almost 200 companies with Finnish capital
1990  Appr. 20 manufacturing companies
 Finnish-Hungarian trade exceeds 1 bn. euro
 Total Finnish investments ca. 1,200 -1,300 million euros
 Finnish companies employ close to 20,000 persons in Hungary
Sales offices R&D / Planning
Productional
1999
Nokia Mobile Phones Nokia R & D
UPM
Elcoteq 3C Hungary (CCC)
M-Real
Sanoma Budapest ICM
Stora Enso
Perlos Martela
Savcor Tikkurila
M-Real Kone
Stora Enso Packaging Kone Cranes
2008 Kemira GrowHow Fiskars
Rautaruukki Wärtsilä
Scanfil Ensto
Lindström Etc.
Helkama Forste
Clairia
Hansa Print
~ € 1.2 – 1.3 bn. Raflatac
Huurre

7. Does the secondary education (with skilled labour)
serve the needs of Foreign Investors?
1. Main findings of some 1. Future outlooks
case studies
2. Feedback from some
businessmen
Suggestions

8. Case 1
A Finnish software company
Evaluator: City
Factor weight sub-weight score
1. COSTS 50 % 100 %
Cost development (#1 criterion) 70 % 65
Current costs: total cost, personnel costs as key component, travel costs from Oslo
and Hki, investment incentives (#2 criterion) 30 % 70
weighted score 66,5
2. COMPETENCIES 30 % 100 %
Skill availability (11 person) 70 % 80
Availability of English language and technical skills (from universities) 30 % 90
weighted score 83
3. INDUSTRY 10 % 100 %
Existing industry (SW industry, telecom sector (network vendors, operators, billing
system vendors –both large and SME’s), also examples for acquisition targets/
partner model 30 % 80
University co-operaration 20 % 75
Outsourcing availability/ culture (less important) 20 % 80
Employee turnover (qualitative estimate), too much competition? 30 % 60
weighted score 73
4. OTHER 10 % 100 %
Flight connections/ travel logistics (to Oslo & HKI, EU, CSEE, MENA) (3) 40 % 75
Attractiveness to expatriates (2) 30 % 80
Level of business culture (experiences from working with western companies) and
development trend (3) 30 % 80
weighted score 78
TOTAL SCORE/400 100 % 300,5
Factor weighted score/100 100 73

9. Case 2
A Finnish electronics
company
Costs 30%
Cost of Labour
Basic structure of labour costs
Statutory minimum wages
Annual development of average gross wages (region & local/blue collar, white collar, management)
Annual development of average net wages (region & local/blue collar, white collar, management)
Employers contributions 2006
Employees contributions 2006
Development of employee contributions 2000-2005
Development of employers contributions 2000-2005
Typical benefits on top of base salary for blue collar workers
Typical benefits on top of base salary for managers
Typical benefits on top of base salary for white collar workers
Market movement 2000-2005 on base pay and total
compensation
Government and EU employment support availability?

10. Case 3
A Finnish manufacturing company
Factor weight sub-weight
1. SUPPLIER BASE 20 %
Within ~400 km radius / 8-9 hours
truck drive 100 %
2. RESOURCES 35 % 100 %
Management & other white collars 40 %
Blue collars 40 %
Corporate support, `easy access` 20 %
3. OPERATIONAL SCALABILITY 15 % 100 %
Factory in 6,000 sqm; 10,000 sqm;
20,000 sqm (in 2011) 80 %
Outside storage space: ~ 20,000 sqm 20 %
4. POLITICAL INVESTMENT
MANAGEMENT 10 % 100 %
Enforceability of local contracts 50 %
Possibility for investment incentives 50 %
5. COST COMPETITIVENESS 20 %
Labour 80 %
Facility 20 %
100 %

11. Table 1: Decisionattractiveness on labour issues
2: Country factors
Feedbacks from Finnish Businessman
5 Finnish businessmen were interviewed;
Sectors: ICT & Manufacturing
Special note: Not representative research
Decision factors Country attractiveness on labour issues
Factors Weights, % Poland Slovakia Hungary Romania Bulgaria
Country macro-stability Skill availability 3 1 2 4 4
10
Labour costs 25 Technical skills 3 1 2 4 3
Labour skills 10 Availability of
Location 30 English language 4 3 4 1 2
Incentive system 5 Motivation &
Infrastructure, commitment 3 3 2 3 4
education system Innovative skills 3 2 2 4 4
20
Supportive
Total: 100 %
educational system 3 3 3 3 4
Total 16 13 15 19 21
Ranking III. I. II. IV. V.
1 - the
Scales: best
7 - the
worst

12. - Main findigns
Hungary vs. CSE Region
New comers
Labour issues as Critical factors:
1. Skills;
2. Available quantity in 50-60 km radius;
3. Other foreign companies in the neighbourhood - negative
4. Near by universities (mainly at ICT);

13. Future outlook: GDP – forecast for 2009
?
-1,2
USA -09 EU -09 ?
-1,6 JPN -09
-1,8
-1,4 -2,4
-4,7
USA 2010 EU 2010
JPN 2010
~ 10 -
+1,7 +0.5 -1,0 -6,9 +2,0 -0,5
12%
-5,0
-2,8
-4,0
-2,0
n.a.
+2,0
-1,9 -2,3
-0,9
+1,7 -4,0
India
+2,7
& China
-1,8 -1,2
-1,6
+0,6
+1,8
-2,0 +1,0
-1,6 -2,0
+7,0
+1,8
+1,0
+0,2
UAE
+1,5%
+0,7
+1,1
SA
+2,5%
Source: EU Commission
© Finpro ry

14. Future outlook: Unemployment and forecast > or <
?
7,8>
EU -09 ?
8,7
7,9>
8,8>
EU 2010 10<
~8-
+9,5 4,5> 10,4>
14%
9,7>
8,2<
8,8>
4,1>
n.a.
8,4>
8,0> 7,7>
4,9>
5,7> 2,2>
India
10,6<
& China
9,8-> 5,1>
8,8>
5,2<
7,0<
12<
8,2>
8,8> 16,1>
20
6,3>
11
9,0>
UAE
n.a.
7,4>
5,1>
SA
n.a.
Source: EU Commission
© Finpro ry

15. Suggestions
Updated Cooperation Promotion
database on Improve
available
English English
With ITD
resources
webpage
language skills Hungary &
-Alumni- &
of students relevant Trade
& Success stories
promotion
agencies
50-60 km radius
© Finpro ry

16. Introduction of Finrpo CSE & ME
Matrix organisation
Industries
Region
Construction
5
Logistics
RITs
Machinery
ICT
Energy
Environment
Black See Hqr: Vienna
Forestry
Prague
Regions
Power Triangle Life Science
Budapest
Bucharest
Sofia
Istanbul
Riyadh
Dubai
More information: www.finpro.fi
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