Making a Lonely Case for Hungary's Natural Strengths

An American expat businessman says Hungary is missing out on a golden opportunity to develop an industry of the future (and a future-proof industry) built on its natural strengths.

Eric Sievers is the investments director at ClonBio Group Ltd., the Irish family-owned holding company that is the parent of Pannonia Bio Zrt., which operates Europe's largest biorefinery at Dunaföldvár.
Pannonia Bio was a principal sponsor at the Budapest Climate Summit at the end of 2022. Is there a perceived need to talk publicly about the story of the business and what it does? I wonder.

“We're just talking to the strengths that Hungary has. And we are finding ways to bring those to regional and global markets," says Sievers.

He says the business “is not in any way" connected to the idea of producing in Hungary for Hungarian consumption. “The size of our operations is disproportionate to the size of the Hungarian market. There's no argument that the Hungarian market itself is important; it's [just] not important for our business," the investment director explains.

“We could, and we did for years, not sell anything in Hungary. We are an EU asset; we only exist in Hungary because of what is supposed to be the common market."
In that sense, he says Pannonia Bio is similar to the car manufacturers and EV battery plants that have become mainstays of the Hungarian economy.

“Where we're different is there's no argument that the particular climate or people or natural resources of Hungary lead to the conclusion that this is where batteries or cars should be produced. That came about only because of a result of history, which is that Hungary for decades had extremely talented, productive workers whose salaries didn't need to be very high. But according to the very development of that logic, that should go away. And it has gone away."

Critical Thinkers
Sievers argues that critical thinkers in Hungary should ask themselves why cars and batteries are so essential to the country's future. Going forward, he believes issues like the price of energy will be much more important for those industries than labor costs.

“If you turn to our industry, which, in the big picture, is an agricultural processing industry, our argument for why we have a competitive advantage in Hungary, and why Hungary has a competitive advantage in the EU markets, is because Hungary has very productive farmland," Sievers says.

“It produces a lot of stuff; it can produce a lot more stuff. Converting those raw agricultural products into food, feed, biomaterials, energy, and other things is something that Hungary can do so much better than Finland, or the Netherlands, or Germany. This is the competitive advantage of Hungary."

Sievers contends that Hungary's economic policies don't reflect the country's competitive advantage.
“It's not in solar power production; it's not in assembling cars. We would have expected a lot more industry in Hungary to develop along the lines of what we're doing. And already Hungary is the superpower in, for example, ethanol. It produces much more ethanol per capita than any other country in Europe. In fact, it's the third largest producer per capita in the world behind only the United States and Brazil."
It is, in other words, one of the very few areas in the world where Hungary can say it is undisputedly a global leader.

While Sievers accepts that “it's good for our business that we're the people who figured this out," he is puzzled that others, apparently, have not.

Knowledge Economy
“Hungary no longer has a large pool of unemployed skilled workers just to be had for the taking. Going forward the next 10 years or 20 years and 30 years, what will make the Hungarian economy competitive at the EU level and ensure that people have an increasing standard of living?" he asks. That said, he does acknowledge that the knowledge economy is a strength.

“Budapest, in some ways, is a better place than Madrid; the average 20-year-old here actually speaks English better than the average 20-year-old in Madrid. The pure knowledge economy, service sector stuff, Hungary can do. But 50 kilometers outside of Budapest or 300 kilometers outside of Budapest, what will people be doing that's relevant to the EU economy or the global economy?"

Sievers argues that Hungarian society and business should have a much better understanding of how Fit for 55 impacts the country and how that can connect to a discussion about what Hungary's inherent strengths are, its comparative advantage.

He claims that the only area where something close to that has happened in Hungary is around solar.
“We invest in solar; we have 43 solar plants. And they're great investments. But an individual investment isn't the same as a sectoral focus. Hungary can't argue that it's a uniquely good place to produce solar power." He thinks it is “remarkable" there isn't a more nuanced conversation going on.

He makes the analogy that it is like a parent asking their kids what they want to do. When they say they want to be a fashion model, the response is, “Great, go be a fashion model," instead of asking them what they think they are actually good at.
“That's bizarre. We're here because Hungary is the best place in the EU to produce ethanol. It's the most cost-competitive place. We know why we're here. And we were correct."

Editor's note: This article is taken from a wide-ranging interview conducted with Eric Sievers at Pannonia Bio's headquarters. Much of the ground we covered concerned energy issues. That much larger section of the discussion will be included in our Forthcoming Top 50 Executives in the Energy Sector publication, due out at the end of February.