Thursday, November 7, 2019

On Monday, Hungarian daily newspaper Magyar Nemzet revealed a deal whereby, on October 29, Hungarian state-owned enterprise HDT Védelmi Ipari Kft. (HDT Limited) acquired Austrian mortar and shell manufacturer Hirtenberger Defence Group. Hirtenberger Defence Group also acknowledged the deal.

In the deal, Austrian, United Kingdom and New Zealand production sites are to be kept, with market sales expected to cover for the price in the long run. A government-guaranteed loan covered the costs, but the exact figure was kept secret.

The November 4 issue of Magyar Nemzet published an interview with Gáspár Maróth, the Hungarian Government commissioner responsible for defence, defence industries and coordinating defence modernization, in which the deal was announced. On the same day, the Hirtenberger Defence Group issued a corresponding press release.

While not naming any other bidders, Maróth said the Hungarian bid won after lengthy negotiations, out of mulitple competing offers. He said he expects no political turmoil between the neighboring Austria and Hungary over the sale. He also noted the acquisition fits into the Hungarian “outward investment” ^{((hu))Hungarian language: ?t?kekihelyezési} strategy of Prime Minister Viktor Orbán.

The Austrian partner asked for the price to be kept secret, but the commissioner stated the purchase was financed by a loan, so it is not a burden on the state budget. With government resolution No. 1430/2019, the state issued an indemnity bond to cover for HDT’s 38.8 million euro loan, and daily Népszava covered the story with a headline pointing out that amount as the presumed price. The creditor Hungarian Development Bank is state-owned as well. Already-queued orders won’t leave idle capacity for some years, Maróth said, and paying back this loan seems realistic; unnamed industry experts called this dubious to Népszava, as the market is saturated and margins are thin, while noting this kind of equipment is needed by the Defence Forces.

The company structure remains unchanged and all sites continue to operate, but Hungarian engineers are to join the research and development team. Maróth pointed out it would have been much more costly and time-consuming to research mortar technology than to acquire it this way. He noted, “the army modernization does not just cover buying ‘hardware’ but technology transfer as well.” ^{((hu))Hungarian language: ?a hader? modernizációja a „vas” megvétele mellett a tudástranszferre is kiterjed.}

Népszava noted the purchase appeared to circumvent the Ministry of Defence. HDT Limited was registered on August 6, 2019 and is under the aegis of Hungarian National Asset Management, Inc.

To modernize its military, in 2018, Hungary licensed Czech firearm technology and started assembling firearms in Kiskunfélegyháza, then agreed with Airbus to open a helicopter parts factory as a joint venture in Gyula.

US President Trump has called for NATO members to increase military spending. According to a March 14, 2019 NATO press release, Hungary spent an estimated 1.15% of its GDP on military expenditures in 2018; NATO guidelines call for 2%. Maróth noted the military had been “effectively disarmed” ^{((hu))Hungarian language: ?gyakorlatilag lefegyverzett} by 2010, when Viktor Orbán regained the prime ministry of Hungary for his second term. Hungary launched a military development program dubbed “Zrínyi 2026” in 2017 to address structural and financial challenges faced by the Defence Force and to renew its equipment.