Fortune favours the brave - It's worth investing even during Covid

English2021. jan. 11.Zsombor Essősy

Some of the business leaders who were the most indignant when the epidemic broke out can now sit back and revel in satisfaction at the end of the year. Developmental resources gave a huge boost to companies that defied the challenges and were brave enough to escape forward.

After the coronavirus epidemic arrived in Hungary in March, many people were grumbling and complaining for weeks and months that their business was going to collapse, they were going bankrupt and so would the whole Hungarian economy.

Quite a few were very pessimistic when facing the difficulties and claimed that the bitter experience of 2020 projected that 2021 was likely to bring further decline, or stagnation, at bestDuring the first wave, there was also considerable debate about whether support should be provided to individuals, or it should rather be given to employers.

Tourism, hospitality and event organization, as they are the biggest losers of the pandemic, are examples to the first strategy. However, many companies involved in the production and service sectors proved that it was worth continuing existing investment projects and launching new ones, as these developments not only create value but also improve competitiveness and efficiency, i.e. they allow escaping forward into the future.

The natural selection in the wake of a pandemic may result in the realization that after all we don’t need as many taxi drivers, masseuses or even personal trainers; or in a larger rural town, for example, we don’t need 50 restaurants, maybe 30 is enough.

Only the strongest can survive, the others unfortunately have to close, a few of them permanently.

However, there are counter-examples. An event management company that I know will end a record year in 2020 by focusing on providing equipment for online events in the new situation, from cameras to microphones to every single technological detail.

But the shortening of the supply chain also highlights the need for much more Hungarian-owned companies that produce high added value and can replace import products.

Fortunately, after the initial pessimism mentioned above it became clear that Hungarian businesses were willing to take up the challenge and the majority not only retained their existing markets, but also found new ones.

It can also be said about most members of the Hungarians in the Market Club-Magyarok a Piacon Klub: not only did they meet the financial indicators of the 2019 base period in terms of sales revenue and profit, but they also grew by 10-20-30 percent.

There is another very important point here: in the meantime in most places there was no need to reduce staff.

And not only companies that are involved in the production and distribution of rubber gloves and / or disinfectants are thriving, but many players from the processing industry to agriculture, from the smallest to the largest, regardless of the size of the company.

What they have in common is that despite facing temporary difficulties in 2020, they were already thinking about investment projects, and they will definitely continue to do so in 2021.  

This is proven by the two very popular schemes of 2020: the Competitiveness Enhancement Support Program (VNT) jointly supervised by the Ministry of Foreign Affairs and Trade and the Hungarian Investment Promotion Agency, and the GINOP-1.2.8 under the auspices of the Ministry of Innovation and Technology and the Ministry of Finance.

The latter encouraged about 4,000 market players to start projects during the pandemic in the average value of 100-200 million forints, while about 1,200 investment projects were launchedwith an average value of half a billion forints in the VNT program. These projects, as it was prescribed in the invitation, will all have to be completed within a year.

These more than five thousand significant new investment projects provide evidence that these companies believe in themselves and in the future. It’s worth noting that the VNT application window was only open twice for a period of 15 minutes each, as it had to be closed down due to the high number of applications.

In addition, the best is yet to come, as tenders worth more than 400 billion forints will be available in January within the new EU budget cycle, and for the whole of the year 2021 we can expect a total of 2,000 billion forints worth of new projects.

In the holiday season there was peace and quiet; all people were relaxing with their family, but most company executives were already speculating about new investment projects they were going to launch in 2021.

And in the meantime, we mustn’t forget that the use of these developmental resources has a multiplier effect on the GDP, i.e. these projects not only increase the economy in a given year, but also in the following period due to the more efficient production they lead toOne thing is for sure: today and in the years to come we will have to ensure that every single project with state or EU funding will improve competitiveness rather than simply serve as spectacular comfort enhancing projects.

The author is the president of the Hungarians in the Market Club