Financing and Management

Cost advantages in Hungary

• Cost advantages in Hungary
• Project costs and financing
  
• Operational costs
  
• Co-operation and legal framework
  
• Procedure and project organisation

If the facility is built in Debrecen, the cost of the enterprise at the same technical contents and quality standards will be 250 - 300 M€ less than if it is built in a country of the original EU-15 group. 

The savings in operational costs will initially be in the range of 10 percent, but this difference is expected to gradually decrease over the 4 decades of expected operation as wages and living costs become more uniform throughout the entire EU.
Hungary provides the necessary plot of land for the implementation of ESS for free. The Hungarian government and the Municipality of Debrecen intend to foster the successful fulfillment of the project by securing wide-scale tax allowances and other administrative advantages.

One of the greatest advantages for the European research community of building the ESS in Hungary is represented by savings on construction costs in the range of 250-300 M€ compared to a site in an older member country of the EU. The savings in operational costs will initially be in the range of 10 percent, but this difference is expected to gradually reduce over the 4 decades of expected operation as wages and living costs become more uniform throughout the EU. The origin of these savings is the unavoidable fact that salaries and consequently services of local providers are considerably lower in Hungary, a new member of the EU, than in the older member countries. The EUSTAT Price Level Index for construction works (an average value over a spectrum including office and laboratory buildings, industrial buildings and civil engineering) is currently 69 in Hungary, with respect to the EU average defined as 100. This cost advantage is expected to remain largely valid for the 8-year period of construction, considering that the difference in inflation in terms of prices in € between Hungary and Eurozone was <3% on average over the past years. The expected real growth of wages in Hungary will be about 2 percent per year above that of the Western part of the EU, showing that it will take several decades to fill the wage gap between older and new EU member countries, in view of the large differences today.

The low wage environment (20-25 percent of Western Europe) also can be turned in a major advantage in the staffing conditions and operation of ESS in Hungary. Building on the general practice of international companies in the region, ESS Hungary will offer more than competitive salaries compared to anywhere in Europe for ESS employed staff, in order to internationally attract “the best and the brightest” at all job levels. At the same time, maximum use will be made of outsourcing supporting services on competitive market basis, envisaged to the extent of the equivalent to 200 staff members in the conventional staffing policy. The very substantial savings on outsourced services will help ESS in Debrecen to assure the availability of manpower between own staff and local contractors amounting to 600 full-time equivalent, which implies a sizeable increase compared to the original ESS reference plan elaborated under the assumption of a high wage environment. This will help to considerably enhance the efficiency of utilization of the large capital investment of ESS.