Hungary to enhance cooperation with Huawei despite US concerns

Hungary to enhance cooperation with Huawei despite US concerns
By bne IntelliNews April 10, 2019

Hungarian Finance Minister Mihaly Varga met with leaders of the Export-Import Bank of China and executives of Huawei during his trip to Beijing on April 9 and assured them of the government's commitment to future cooperation despite warnings from the US. 

Hungary is committed to the development of the ICT sector, as digital transformation is key to scaling up economic growth, Varga said after the meeting with Huawei Technologies regional president James Li in Beijing.

Since taking office in 2010, the Orban government has made its “Eastern Opening” policy aimed at strengthening ties to the fast-growing region in the Far East a priority, and shifted Hungary’s economic and political focus from Western Europe to Asia and specifically to China.

Huawei is a strategic partner of the government, employs more than 2,000 people. It is the second-biggest Chinese investor after Wanhua, which acquired local chemical company BorsodChem in 2011 for $1.6bn. Huawei operates the biggest supply centre outside of China in Budapest.

Huawei’s expansion in Europe has led to diplomatic and business conflicts between European Union member states and the US. During his visit to Hungary in February, US Secretary of State Mike Pompeo warned Hungarian officials of the possible IT and privacy risks associated with doing business with Huawei.

The Chinese IT company is developing 5G network technology in many states with the local telecom service provider. In July, Magyar Telekom demonstrated the test first 5G connection test under real circumstances using Huawei Technologies’ 5G network devices. The Chinese company will supply network to the race track for autonomous vehicles in western Hungary.

Varga talked about the importance of digital transformation and praised Huawei, as one "of the leading global suppliers of IT and telecommunications technology, to support the development of financial knowledge and the spread of ICT in Hungary".

James Li thanked the Hungarian government for its “rational, matter-of-fact dealings" with the company in Hungary while ensuring a balanced and fair environment for doing business.

Varga discusses Budapest-Belgrade railway

During the day, Varga met with leaders of the Export-Import Bank of China in Beijing to discuss an upgrade of the Budapest-Belgrade rail line said on April 9.

The planned 350 km high-speed Chinese-funded railway connecting Budapest to Belgrade has the potential to become the main transport route for Chinese and Asian goods that arrive by sea at the Chinese-owned Greek port of Piraeus, through Serbia and Hungary into Central Europe.

The start of construction is already one year behind schedule and the project could be completed in 2024, according to earlier reports. 

The government called for a new tender to select the general contractor in December due to the cost overshoot. The cost of the upgrade of the 152km railway line on Hungarian territory was put at HUF578bn (€1.8bn) in May, but the most favourable bid made since then has been HUF693bn. China is financing 85% of the project,

Critics of the investment say it lacks economic sense and the costs outweigh the benefits. They say Hungary will never be able to recoup the costs of the investment.

Pompeo hinted at this toowhen he said during his visit to Hungary that “Beijing's handshake sometimes comes with strings that leave Hungary indebted politically and economically.”

Varga said preparation of the general contractor contracts is moving forward at a good pace. A decision on the Chinese-Hungarian consortium for the project could be taken by the end of April, he added. 

To achieve the goal of finishing the upgrade of the rail line by 2023, the government wants to expedite hiring and licensing procedures.