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The end of MALÉV and the government’s investment strategy

February 4th, 2012

A left-wing analyst blames the government for splashing out on huge state-owned enterprises while the country faces grave financial problems.

“We have a rather clear picture of what the costs are, but no idea about the return” –writes veteran columnist Endre Aczél in Népszabadság, in a comment on the government’s intention to set up a new national airline to replace bankrupt MALÉV.

The article appeared a few hours before MALÉV cancelled all its flights, declared bankruptcy and announced massive layoffs, and before Prime Minister Viktor Orbán told national public radio that a new national air company could come into being if enough private investors can be found to keep it afloat.

Aczél points out that the government bought a significant quantity of Mol shares (See BudaPost, June29, 2011) which is effectively “dead capital”, as Mol is famous for not paying dividends. In addition, the share value has substantially dropped since the purchase. Another newly acquired asset is the Raba automotive company (See BudaPost, November 10, 2011), which, Aczél believes, will not by itself be able to resuscitate Hungary’s automotive industry, without hundreds of billions worth of investments, which are utterly out of the reach of the government. The same goes for the new state-owned telecommunication enterprise, which has won a tender to set up Hungary’s fourth nationwide mobile phone network. Aczél just does not see where the government could find the enormous amount of money required. On top of it all, profitability is tough in today’s saturated mobile phone market.

The left-wing columnist reminds the government of its earlier promise to prop up small and medium size enterprises, which would be Hungary’s only chance of promoting growth, but which has been abandoned for the sake of giant public companies. Aczél suspects that these enterprises will be used to find jobs for the scores of Fidesz people who lose their jobs as a result of the reform of the regional and local administration.

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