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Bank within eight days of receipt unless an exemption has been granted by the MNB. One notable exception allows a company to maintain a foreign currency account to pay for foreign travel, advertising, and related expenses. All companies must obtain permission from the National Bank before taking out a hard currency loan (although this requirement will reportedly be dropped as part of the governments rewrite of the Foreign Exchange Law).

Hungary is not a signatory to the GATT Agreement on Government Procurement. Increasingly, foreign businesses criticize the tendering processes, citing non-transparency and irregularities. The government is likely to promulgate new government procurement guidelines that may address some of these issues, but could, at the same time, establish local content requirements.

All importers and exporters must hle a VAM 91 document which can be obtained from the Hungarian Customs. Essentially, this document serves as a declaration for the type and number of goods being imported or exported. This document must contain the Product Code Number which identifies the classification of the goods. The Product Code Number can be obtained from the Central Statistical Office.

Upon the importation of goods, the importer must present certification documents from the Commercial Quality Control Institute (KERMI); goods cannot be customscleared without the KERMI permits. In certain instances, the KERMI permit may be substituted by documentation from other testing and certification agencies such as the National Institute for Drugs and the Quality Control Office of the Building Industry. All food products must be labelled in Hungarian and must give the following information: net quantity, name/address of producer (or importer), consumption expiration date, recommended storage temperature, listing of ingredients/additives, energy content, and approval symbols from the National Institute of Food Hygiene and Nutrition (OETI) and KERMI. There are also specific marking and labelling requirements for cosmetics as well as human and animal pharmaceuticals.

The Hungarian Standardization Office (MEI) oversees the standards system. There are currently two types of standards: national and sectoral. National standards are issued by the MDI. These standards are binding and supersede sectoral standards. Sectoral standards are issued by individual ministries and other central government agencies. National standards conform to international norms. Hungary is a signatory to the GATT Agreement on Technical Barriers to Trade (Standards Code). Hungary also participates in the International Organization for Standardization (ISO) and the International Electro-technical Commission (IEC).

New consumer goods are subject to an approval process implemented by KERMI. The Hungarian Electro-technical Control Institute (MEEI) controls electronic/technical goods; approval is based on compliance with Hungary's standards on protection against electric shock. In order to import or market these highlighted products, they must be tested and certified by these control institutes. 6. Export Subsidies Policies

There are no subsidies on exports of industrial products. Various agricultural product groups, however, receive a certain percentage subsidy from the state. The general level of agricultural subsidy, however, is_relatively low. Two institutions were established in 1994 to support exports: the Export Import Bank and the Export Credit Guarantee Ltd. The two institutions will provide credit or credit insurance for about 8 to 10 percent of total exports. Upon ratification of the Uruguay Round Agreement, Hungary will become an automatic signatory to the GATT Subsidies Code. 7. Protection of U.S. Intellectual Property

The Hungarian legal system protects and facilitates the acquisition and disposition of property rights. The basic legislation providing protection for inventions is Act II of 1969 (as amended) on the Patent Protection of Inventions. The Patent Act provides twenty years of protection from the date of filing at the National Office of Inventions, as opposed to the American system which extends protection from the date of invention. Licenses may be granted. Compulsory licensing to a Hungarian enterprise may be ordered in certain circumstances when a patent has not been used within four years of the date of application or three years from the date of issue.

Act III of 1969 (as amended) on Copyrights is intended to protect literary, scientific, and artistic creations. “Computer programs and the related documentation” (software) are expressly included in the list of protected works. According to the law, "the consent of the author shall be required for any use of his work" or of the title of the work. "Use” is defined as "the process in the course of which the work or a part thereof is communicated to the public” and pertains to "alterations, adaptations, and translations.” The law includes under communication “posters, newspapers, programs, films, radio, television, etc." relating to the work. There have been numerous complaints that Hungarian enforcement of the Copyrights Act has not been sufficiently vigorous and that significant quantities of pirated and counterfeit software, sound recordings, etc., are marketed in Hungary.

The registration and protection of trademarks is governed by Act IX of 1969 on Trade Marks and related decrees. The application process can take from six months to a year. Foreigners are required to appoint a Hungarian attorney to represent them. Decisions by the National Office of Inventions to deny an application or cancel a registration may be appealed to the Supreme Court. Registrations are valid for ten years and can be renewed. Licensing of trademarks is permitted. The law protects well-known marks, stating that "the existence of a well-known mark (whether registered or unregistered) is a bar to registration of an identical or confusingly similar mark, regardless of the goods concerned.” While there are no statutory use requirements, "failure to use a mark over a five-year period renders the registration open to cancellation.”

Trade secrets are protected by Act LXXXVI of 1990 on the Prohibition of Unfair Market Practices. The law expressly forbids obtaining or using business secrets “in an unethical way" and disclosing them to unauthorized persons or making them public. Business secrets are defined as "every such fact, information, solution, or data related to economic activity that it is in the entitled person's interest to have remain secret."

Two new laws protecting intellectual property entered into force in January of 1992. Act XXXVIII of 1991 protects utility models, and Act XXXIX of 1991 protects the topography (layout design) of semiconductor chips.

In 1993, the United States and Hungary signed a comprehensive Intellectual Property Rights Treaty. Law Number Vil (1994) on the Amendment to Industrial Property and Copyright Legislation was adopted by Parliament and implemented on July 1, 1994. This law amends several existing laws and serves to extend patent protection for pharmaceutical and chemical products (previously, Hungary issued only process protection for products in these categories); addresses who controls the rights of works; extends and unifies the terms of protection; expands protection for the original layout designs incorporated in semiconductor chips; provides the legal means to prevent proprietary information from being disclosed or acquired without the consent of the trade secret owner by other than honest commercial practices;" and ensures enforcement procedures are available under civil, criminal, or adminis. trative law to permit effective action against IPR infringement.

Hungary is a member of the World Intellectual Property Organization and a signatory of important agreements on this issue, such as the Paris Convention for the Protection of Industrial Property, the Nice Agreement on the Classification and Reg: istration of Trademarks, the Madrid Agreement concerning the Registration and Classification of Trademarks, the Patent Cooperation Treaty, the Universal Copy. right Convention, and the Bern Convention for the Protection of Literary and Artistic Works. 8. Worker Rights

a. The Right of Association.-The labor code passed in 1992 recognizes the right of the unions to organize

and bargain collectively and permits trade union plural. ism. Workers have the right to associate freely, choose representatives, publish journals, and openly promote members' interests and views. With the exception of military personnel and the police, they also have the right to go on strike.

b. The Right to Organize and Bargain Collectively.—The 1992 labor code permits collective bargaining at the enterprise and industry level and it is practiced. Minimum wage levels are set by the Interest Reconcilation Council (known by its Hungarian acronym, ET), a forum for tripartite consultation among representatives from the employers, employees, and the government, and higher levels (but not lower ones) may be negotiated at the plant level between individual trade unions and management. By agreement, the legal minimum wage is centrally negotiated at the ET in order to control inflation. The Ministry of labor is responsible for drafting labor-related legislation, while special labor courts enforce labor laws. The decisions of these courts may be appealed to the civil court system. Under the new legislation, employers are prohibited from discriminating against unions and their organizers.

c. Prohibition of Forced or Compulsory Labor.- Forced or compulsory labor is prohibited by law, which is enforced by the Ministry of Labor.

d. Minimum Age of Employment of Children.-Labor courts enforce the minimum age of 16 years, with exceptions for apprentice programs, which may begin at 15. There does not appear to be any significant abuse of this statute.

e. Acceptable Conditions of Work.—The legal minimum wage is established by the ET and subsequently implemented by Ministry of Labor Decree. The 1992 labor code

specifies various conditions of employment, including termination procedures, severance pay, maternity leave, trade union consultation rights in some management decisions, annual and sick leave entitlements, and labor conflict resolution procedures.

f. Rights in Sectors with U.S. Investment.-Conditions in specific goods-producing sectors in which U.S. capital is invested do not differ from those in other sectors of the

economy.

Extent of U.S. Investment in Selected Industries.-U.S. Direct
Investment Position Abroad on an Historical Cost Basis—1993

(Millions of U.S. dollars)

[blocks in formation]

Key Economic Indicators-Continued

(Millions of U.S. dollars unless otherwise noted)

1992

1993

1994:

Money and Prices: (annual percentage growth)
Money Supply (M3) (year-end) (year-to-year
pct. change)

9.0
22.3

8.4

(Aug) Associated Banks' Prime Lending Rate (avg.) ... 19.00 7.19

5.81

(Sept) Commercial Interest Rates Over 1 Year-Up to 3 Years (avg)

15.25 10.25

8.90

(July) Savings Interest Rate

-6.50 -0.75 -0.50 Investment Share Accounts

10.75
4.00

3.00

(July) Investment Rate: 1-Year to Maturity

13.13
5.74

6.16

(July) 10-Year to Maturity

10.12 6.26

8.44

(July) Consumer Price Index (base 1985 as 100) ..... 108.2 109.8 117.1

(2nd qtr) Retail Sales Index (base 1990 Aa 100)

106.2 109.4 116.2

(2nd qtr) Wholesale Price Index (base 1985 as 100)

106.4 N/A N/A Exchange Rate ($/IP)

1.70
1.46

1.53

(3rd qır) Balance of Payments and Trade: Total Exports (FOB)*

27,853 28,378 32,240 Exports to U.S."

2,260 2,500

N/A Total Imports (CIF)*

22,137 21,348 24,156 Imports from U.S. 5

2,860 2,700

NA Aid from the E.U. (000s) 6

19,465 17,520 18,360 Aid from the U.S. (000s)

15,590 19,211 19,600 Gross Public Sector Foreign Debt (external government debt)

18,455 17,922 18,918 Debt Service Payments (paid)

4,004 3,489

N/A Gold and Foreign Exch. Reserves (official external reserves)

5,535 6,246 6,850

(June) Trade Balance

5,716 7,030 8,084 Trade Balance with U.S.

600

200 N/A NIA—Not available. 1 Forecasts. 2 GDP at factor cost 3 Annual averages 4 Merchandise trade. GU.S. Department of Commerce figures.

Aid from the European Union for the years 1995 through 1997 will be increased to USD 24 million per year following the ceasefires in Northern Ireland.

Sources: Central Bank of Ireland (CBD); Central Statistics Office (CSO); Economic and Social Research Institute (ESRD; Irish Trade Board (ITB); Department of Enterprise and Employment (DEE). 1. General Policy Framework

Ireland has a small open economy which is very dependent on trade. Exports of goods and services in 1993 were equivalent to 77 percent of GNP, while imports were equivalent to 61 percent of GNP. Government policies are generally formulated to facilitate trade and inward direct investment. Ireland has a market economy, which is based primarily on private ownership. Government ownership and contri of companies generally occurs in those sectors which are considered by the govern. ment to be natural monopolies, those in which the state has stepped in to assist failing firms, or those of special importance to the economy. In the majority of cases, government owned firms are operated on a commercial basis, and may be in competition with privately owned firms in the same sector. In recent years the govern. ment has reduced its share holding in a number of companies which are considered viable. Government policy is heavily influenced by sustained high unemployment, 15 percent seasonally adjusted in September 1994. A young and growing work force will continue to put pressure on the labor market in Ireland through the end of the century and emigration will likely continue at a significant scale.

Fiscal Policy: In 1993, Ireland's government debt was approximately IP 30 billion, of which about IP 12 billion was denominated in foreign currencies. The debt has generally been financed by the sale of government securities. The vast majority of the debt was accumulated in the 1970's and early 1980's, partly as a result of oil price shocks, but more generally as a result of expanding social welfare programs and government employment. The debt grew rapidly in the late 1970's and early 1980's due to increased interest rates and large government deficits. However, successive governments have made considerable progress during the past seven years in reducing budget deficits and containing the growth of total debt.

Ireland ratified the Uruguay Round agreement and is a founding member of the World Trade Organization.

In recent years, most collective bargaining in Ireland has taken place in the context of a national economic program. A new program, the Program for Competitiveness and Work (PCW) was agreed to by representatives of government, unions, employers and farmers in February 1994 and was a major element of the government's success in fostering economic growth. The PCW is Ireland's third centralized pay agreement and replaces the Program for Economic and Social Progress (PESP) which expired in December 1993. These programs are credited with providing a favorable economic climate for strong growth in Irish GNP since 1987. The PCW contains similar provisions to the previous programs for moderate wage increases and improvements in government finances. Government budget deficits fell dramatically while exports, investment and consumer spending showed strong growth. Unemployment has begun to decline, but, the expanding Irish economy is unlikely to make a significant impact on Ireland's high unemployment rate. The Irish labor economic environment is remarkably open. With over a half-million Irish working outside Ireland, particularly in the U.K., the robust economy usually attracts home many emigres offsetting any temporary reduction in unemployment due to emigration. Projections for 1994 indicate that government borrowing will be about 2.7 percent of GNP.

Irish tax policies have a major effect on personal consumption and demand for imported goods. Personal income tax rates are high in Ireland. Over the last few years, in conjunction with the massive reduction in public borrowing which was achieved, the government made substantial progress in reducing the standard and higher income tax rates by six points. Income tax rates did not change in the 1994 budget, however, and remain at 27 and 48 percent. Approximately 62 percent of Irish tax payers are in the 27 percent standard rate bracket. The controversial one percent income levy which was introduced in the 1993 budget was abolished in 1994. Irish value added tax (VAT) rates are among the highest in the European Union (EU) and were streamlined in the 1993 budget, and remain unchanged. The standard corporate income tax rate in Ireland is 40 percent. Manufacturing firms and many exporting firms pay only 10 percent on corporate income under special arrangements designed to boost industrial development.

Monetary Policy: Ireland's monetary policies are aimed primarily at maintaining exchange rate stability within the European Monetary System (EMS), which Ireland joined in 1979. Interest rates are the predominate tool used by the Central Bank to affect monetary variables. 2. Exchange Rate Policies

Until 1979, the Irish pound was pegged to the pound sterling. In March 1979, Ireland joined the Exchange Rate Mechanism (ERM) of the EMS and broke its' link to the British currency. It has, however, endeavored to maintain a stable competitive exchange rate against sterling due to the large amount of trade between Ireland and the U.K. Following changes to the ERM in August, 1993, membership in the ERM now involves a commitment to maintain the Irish currency within a 15 percent band against other ERM currencies. The Irish pound has been adjusted downward three times since Ireland joined the EMS. Adjustments were 3.5 percent in 1983, 8.0 percent in 1986 and 10 percent in 1993. As part of the Common Agricultural Policy (CAP) of the EU, Ireland has maintained multiple exchange rates (known as green currency exchange rates) on agricultural goods subject to the CAP. Devaluation of these rates usually mirror those of the Irish currency.

In accordance with Ireland's EU obligations the removal of all remaining existing exchange controls took place in December 1992, bringing to an end the Irish Ex

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