Key facts
- Hungarian firms with ties to former Prime Minister Viktor Orban are shifting strategy to smaller projects.
- The new government under Prime Minister Péter Magyar aims to curb alleged cronyism and improve market competition.
- Companies like Market Epito, linked to Orban ally Istvan Garancsi, are preparing for a higher volume of smaller-scale projects.
- Firms that relied heavily on public infrastructure procurements are seen as most at risk.
- Politically-exposed companies such as Opus Global and MBH Bank have experienced significant share price declines.
- The government has suspended a highway project extension and requested repayment of funds from Duna Aszfalt.
Hungarian companies that flourished under Viktor Orban's 16-year rule are strategically shifting operations as a new government under Prime Minister Péter Magyar seeks to dismantle alleged cronyism and foster a more competitive market. Firms previously reliant on large public infrastructure contracts are now preparing for a higher volume of smaller projects, with some analysts predicting the disappearance of businesses deeply entrenched in the old networks.
Market Epito, a major construction company linked to Orban ally Istvan Garancsi, stated it is adapting to a new landscape, focusing on housing and infrastructure construction. The company, which generated a quarter of its revenue from public contracts, asserts its three decades of operations are not tied to political cycles. However, analysts like Daniel Hegedus of the Institute for European Politics believe construction and road-building firms that were part of Orban's networks will struggle to survive.
During Orban's tenure, allies benefited from preferential access to state spending and favorable regulations. An OECD survey highlighted Hungary's high rate of single-bid public procurement procedures, prompting EU-driven reforms. A think tank survey also found evidence of political favoritism in public tenders.
Magyar's government has initiated anti-corruption measures, including submitting legislation to parliament and approving a constitutional amendment to remove President Tamas Sulyok, whom Magyar described as Orban's 'puppet.' The market has reacted, with shares of companies like Opus Global, Appeninn, 4iG, and MBH Bank falling sharply as investors divest political control premiums. These companies have underperformed a broader market rally driven by optimism for a more market-friendly environment under Magyar.
Duna Aszfalt, a leading road construction firm under Orban's government, stated it would leverage its experience to compete in the new environment. However, Magyar's government has suspended an extension of a highway project and requested Duna Aszfalt repay funds received for it. Companies like 4iG and MBH Bank have denied benefiting from favoritism, asserting compliance with procurement laws. Opus Global and Appeninn did not immediately respond to requests for comment.