The troubled tobacco shop concessions

We haven’t talked about the tobacconist shops lately, although there is quite a bit to be said about them. First and foremost, that as the result of the newly restricted availability and the price hikes black market sales of cigarettes have soared in the last couple of months. Fewer and fewer people are buying cigarettes at the designated stores. The fallout? The loss of 23 billion forints in excise taxes for the treasury. Also, the new owners of these shops, although they turn a 10 percent profit on every pack of cigarettes, are not doing well. One needs to sell an awful lot of cigarettes to make a really good living.  And “only an idiot would buy cigarettes in the tobacconist shop,” reads a headline in today’s Origo. 

The troubles started early, with a spate of tobacconist shop robberies. Petty criminals all over the country, hearing about the fabulous profits that could be made by the owners of these shops, found them irresistible. And since the store fronts must be darkened and the doors kept closed at all times, the robbers could be assured of an easy target.

After a few weeks the black marketeers were in full swing, divvying up territories among themselves. They sell inexpensive cigarettes from Ukraine and Serbia for 500 forints a pack, as opposed to 900 forints in the stores, as well as western brands such as Kent, Marlboro, and Lucky Strike. The supply is plentiful. And it’s a terrific deal for both seller and buyer. The Ukrainian seller turns a 100% profit on each pack of cigarettes and the Hungarian buyer gets the pack for almost half the official price.

A man on Kálmán Széll tér (formerly Moszkva tér) explained how the distribution system works. A “very reliable man” brings him the merchandise from Ukraine. This reliable guy has his “reliable customers,” among them the fellow the Origo reporter talked with. The man admitted that what he does is illegal but, as he said, “the laws are wrong.” The black marketeers divide up the square among themselves, and they “defend their turf as jealously as the prostitutes.” Tobacconist shops nearby are hard hit. There are days when for hours they don’t have a single customer. A fair number of shops have already closed.

Making tobacco a state monopoly was most likely the brainchild of the Hungarian-owned Continental Tobacco Company. The owner of the company is a good friend of János Lázár, who was heavily involved in drafting the law. The Continental Tobacco Company also made sure that its employees and board members received a fair number of concessions through front men (Strohmann/stróman). Of the 4,300 tobacconist shops they got about 500 concessions.

One of the main beneficiaries was András Kulcsár, a top manager at Continental. He got 84 concessions. Now, after a few months, he has already had to close 25. The reason? Most likely a lack of business expertise, bad location, and low sales. The law, by the way, states that stores that close must be reopened within 60 days.

The cronies have all the dough / Photo Index

Today we learned that one of the tobacconist shops that belonged to Tomi Palcsó, a singer discovered on “Megasztár,” has been closed for days. The singer, who is a Fidesz favorite and who often performs at Fidesz events, received five concessions, officially the maximum number. It looks as if business in Csepel didn’t exactly thrive. Mind you, DK demonstrations in front of the Csepel stores over the last couple of weeks probably didn’t help. (László Varju, one of the top DK leaders, has been called into the police station for organizing demonstrations.) Although Palcsó’s store was already defunct, about a dozen DK activists protested in front of it today with signs like “The cronies have all the dough.”

Meanwhile, on popular initiative the National Election Committee gave its blessing to holding a referendum on two questions concerning the tobacconist shops, and the Kúria (formerly the Supreme Court) approved it. If the activists manage to get 200,000 signatures within 45 days the referendum can be held. There will be two questions on the ballot: Do you agree that instead of a 10 percent guaranteed profit, it should be rolled back to the original profit margin of 3.33%? And do you agree that only tobacco products should be sold in the tobacconist shops?

Apparently the Fidesz leadership is furious. As one Fidesz politician told the reporter for Index, “that will not happen again.” At this moment it is not clear whether the government/Fidesz (it really no longer matters what we call it) intends to block such a referendum altogether or whether they only want to prevent its being held before the elections. In either case, I wouldn’t like to be in the shoes of one of the members of the Committee who in the last minute changed his mind on the question of the profit margin and thus made passage of the motion possible.

A day in Hungary: From a small village to the meeting of ambassadors

Today I would like to cover three topics. First, it is D-Day for smokers since as of today only tobacconist shops can sell cigarettes. Second, we have the results of the latest opinion poll on the standing of the parties and politicians. And third, Viktor Orbán gave a speech to Hungary’s ambassadors this morning.

Why do I start with the tobacconist shops? Because I have been convinced for some time that the government’s decision to restrict the number of outlets where tobacco products can be purchased will turn a sizable portion of the population against the government. The adverse effects of the decision will be especially pronounced in those rural areas where Fidesz has traditionally been strong.

Until now one could buy cigarettes in 40,000 shops, from department stores to corner groceries. As of today there are a mere 5,000 outlets. This “downsizing” will create dislocations and inconvenience for smokers. Then, just think of the 4,000 small boroughs where no cigarettes at all will be available.

Until today Hungary’s smokers didn’t feel the brunt of the new system of tobacco distribution because the old outlets were given a two-week grace period during which they could sell down their inventory. But all this ended at midnight. From here on there is no mercy. And for many no cigarettes either.

The first report on the mood of the villagers who have to go as far as twelve kilometers for cigarettes came from Zsolt Kácsor, the Debrecen stringer for Népszabadság. He visited three villages in the County of Bihar where passions are running high against the government. In one of these places the owner of the pub (kocsma) described her customers’s reaction as one of “rage.” The mayor of another village (population 600) delivered the following little speech: “No one ever f..cked the poor people over as much as Orbán and his friends are doing. Write it down word for word. I don’t even care if they hang me. Write it down that I haven’t witnessed such f…ing screwing of the people in 78 years. He even prescribes from which angle I should watch the stork’s nest.” And the public workers around him were nodding in agreement. So, it is not only the lack of cigarettes that bothers the old gentleman but also, or perhaps even more, the government regulations that intrude into his personal sphere. He feels that his personal freedom is being violated.

The mayor doesn’t want to watch the stork’s nest from the same angle as Viktor Orbán

The reporter visited two other villages in the area that have no cigarette shop. In one of them he talked to guests at the local pub. They are all outraged. It turns out that the closest shop is only three kilometers away, but there the local Fidesz mayor got the concession to run the tobacconist shop. One of the customers swears that he will not buy cigarettes from him. He may not need to since he easily manages to find smuggled Ukrainian cigarettes, which are cheap. He pays 450 forints for a pack; the Hungarian price is about double that.

I think that the Orbán government’s decision to make 5,000 party faithful rich will cost a lot in votes next year. And that takes me to the latest poll by Ipsos, although the numbers are not at all interesting. They are practically the same as last month and the month before. There is, however, a handy Ipsos graph that gives figures for both party preferences and politicians for the past few years that readers of Hungarian Spectrum might find informative.

These latest results certainly don’t deserve the ovation with which Magyar Nemzet greeted them. Their headline reads: “Fidesz devastates its opponents, Bajnai is nowhere.” There is no reason for such exuberance, especially since still only 28% of the adult population want this government to continue in office. But the opposition cannot rejoice either since 62% are dissatisfied with the opposition. So, unless there is some dramatic change in the strategy of Együtt 2014 and MSZP it could easily happen that although the majority of the people wish Viktor Orbán and his government straight to hell, Fidesz-KDNP will still win the elections. Although the Bajnai and Mesterházy teams met today, they seem to be in no hurry to create a viable opposition.

And finally, I would like to focus on a couple of sentences that Viktor Orbán uttered today. He gave a speech to the Hungarian ambassadors who once a year gather in Budapest to hear the prime minister’s words of wisdom on foreign policy. I assume that the complete text of the speech will be available on the prime minister’s website soon enough; a shorter version is already available on orbanviktor.hu. The sentences I’m interested in were not part of the speech itself, which Orbán always reads word for word. Instead, they came as an answer to a question from the audience.

According to Orbán, for the European Union to remain competitive it must find an accommodation with Russia. This is a difficult proposition because Russia is not a democratic country. “However, we must understand that for Russia it is not democracy that is the most important consideration but rather how the country can be kept intact.” Moreover, an alliance between the European Union and Russia is not an easy proposition for the countries of Central Europe because “if one reads about a rapprochement between the European Union led by Germany and Russia then one will go to the window to see whether the children are still playing in the backyard.”  I don’t think I need to add anything here, except to ask why this constant needling of Germany is necessary. Sooner or later German patience will run out.

Odds and ends from Hungary: A court case, a new poll, and a successful country

Again, there are too many interesting topics and I don’t know which one to pick. So I decided to cover as many as I have space for without making the post too long.

First, I received a short note from András Arató, CEO of Klubrádió, announcing the Kúria’s landmark decision with regard to one of the controversial writings of Zsolt Bayer. The decision was rendered in a case that involved Klubrádió.

I wrote about the article,”The Same Stench,” which was the subject of the case, at the time of its publication. In it Bayer called Daniel Cohn-Bendit, a member of the European Parliament, and András Schiff, the internationally acclaimed Hungarian pianist, “stinking excrement” and lamented the incompleteness of the massacre in the forest of Orgovány where many Hungarian Jews were murdered in 1920.

In “Let’s Talk It Over,” the most popular program on Klubrádió, its host György Bolgár talked to Péter Feldmájer,  the chairman of MAZSIHISZ. In the course of their conversation they labeled the Bayer article anti-Semitic. Bayer sued for infringement of his personality rights and also for damages, claiming that because of the interview he ceased to receive commissions for articles from the French daily, Le Monde. The case eventually ended up in the Kúria, which is the highest court of the land. No further appeal is possible.

In its  June 26 ruling, the Kúria found that a reading of Bayer’s article could logically and lawfully lead to the finding that the contents of the article were anti-Semitic. Bayer’s attempts to frame the reference to Orgovány as a mere metaphor failed. According to the ruling, he must endure the criticism that his article deserves and must allow others to form an honest opinion of the article without using the legal institution of personality rights to shield himself from public criticism.

This ruling of the Kúria is of landmark importance, as it finally shows that neo-Nazi, racist, and hate speech cannot be published with impunity in Hungary. Freedom of expression and its manifestation in the form of criticism stand as potential means for anyone seeking to take action against extremist statements.

All in all, Klubrádió is proud that it had a role to play in this very important decision.

I might add that it would be nice if the Media Authority actually allowed Klubrádió to broadcast on a frequency which can be used free of charge and which the station is entitled to use. Although at least a month has gone by since the court decision in Klubrádió’s favor, nothing has happened yet although the Media Authority has no right to appeal.

* * *

You may recall that a couple of weeks ago I spent a whole post on an interview with the CEO of Medián about the intricacies of poll taking in Hungary.  Medián just came out with a poll that probed public reaction to the tobacconist shop affair. Their first attempt at gauging public reaction was three weeks ago when 56% were against making tobacco products a monopoly and disapproved of the way it was done. By now that number is 73%. Moreover, the percentage of those who heard about the affair is exceptionally high: 94%.

What is especially interesting is the breakdown by voting groups.  There were basically three main questions asked. The first was whether it is appropriate for a government to decide who can and who cannot sell tobacco products. The second concerned the appropriateness of a government party favoring its own adherents in allotting the concessions. And finally the respondents were asked what would they do now if they were in the position to do something about the situation that was created by the government.

To the question about the appropriateness of the government deciding who can and who cannot sell tobacco products, the overwhelming majority (73%) were against it and only 19% were for it. Not even Fidesz voters are crazy about the idea. As for the idea of a tobacco monopoly, 43% disapprove while 10% have no opinion; 47% support the government on this issue. Supporters of MSZP, E14 and other smaller parties on the left overwhelmingly, and predictably, oppose the nationalization of tobacconist shops (85-90%). What is much more interesting is the reaction of those people who are undecided. Among them 76% are against the government scheme. Medián differentiated another category whom they call “active undecided” voters. Those are the ones who say that they definitely will vote but that they still don’t know for whom. Among them 74% opposed the monopolization of tobacco products.

To the question of whether it is appropriate for a party in power to favor its own, half of the Fidesz voters answered in the negative. All others, including the undecided and the actively undecided, were overwhelmingly (80-93%) opposed. Let’s not forget that Viktor Orbán announced that he saw nothing wrong with favoring Fidesz supporters over others.

Finally there was the question of what to do with the state of affairs that was created as a result of the tobacco monopoly and the way the concessions were granted. 51% of those asked would undo everything and would allow anyone who wants to sell cigarettes to be able to do so. 26% would start anew by scrapping the results and announcing a new competition for the available stores. Only 14% wouldn’t change anything.

What do these figures tell us, especially in light of other polls on party preferences? All three of the most recent polls show Fidesz leading by a large margin over MSZP and by 6-8% over a united democratic opposition. But the percentage of undecided voters is still very large. According to Tárki, it is 49%. If the population’s dislike of the monopolization of tobacco products and their disgust with the concessions is any indication, the undecided and especially the actively undecided voters may offer up some surprises.

* * *

And, finally, here is a priceless Orbán quotation. He was in Brussels today at a meeting of the prime ministers of the member states. He told reporters afterwards that he looked around the table and there was not one prime minister whose country was successful. It was a strange feeling to represent the only economically successful country in this company. And here are these unsuccessful losers who give advice to him, the only successful one. But he took no offense!

Success by Kevin Houle / flkckr

In line with his allegedly conciliatory attitude to the West European losers, Orbán decided to give in on the issue of political advertisement. As things stand now, no party can advertise on any  commercial television or radio station during the campaign season. He announced that this restrictive law will be changed to allow parties to advertise on commercial stations. But the stations must provide the service free of charge. I’ll bet they will be thrilled. On the other hand, given the financial state of the opposition parties, getting some free advertising might help restore the balance between Fidesz with its practically unlimited resources and opportunities and the poverty-stricken opposition parties. Of course, in the “devil in the details” department, we don’t know how much time the commercial stations will set aside for “upaid” political advertisements and whether these ads will be permitted during prime time or only when the vast majority of people are either at work or asleep.

Hungarian physicians will also own tobacconist shops

Can you imagine C. Everett Koop, surgeon general of the United States between 1982 and 1989, refusing to take a stand on the question of smoking? Something like that happened in Hungary the other day when István Éger, president of the Hungarian Medical Association, refused to take sides on the question of whether it is ethical for a physician to own a tobacconist shop or shops. He claimed that “the question is too controversial.” He explained that, after all, owning a tobacconist shop “doesn’t mean that the physician will be sitting at the cash register.”  So, according to the author of the article that appeared in Index, “the Hungarian Medical Association doesn’t consider it inappropriate for a physician to profit from selling a product that can have devastating effects on his patients’ health.” By way of explanation Éger said the following, which the reporter found incomprehensible. “A healthy lifestyle is an important part of everybody’s life and Hungary is a pioneer in limiting tobacco use. It would be best for everybody if there were no tobacconist shops at all, but since that is not the case, we don’t want to take sides.”

I will try to shed some light on what might be behind the very cautious, perhaps even cowardly stance of the Hungarian Medical Association. First of all, quite a few physicians and their relatives won twenty-year concessions for tobacconist shops. By now it is an open secret that local Fidesz politicians decided who would have the opportunity  to operate a National Tobacconist Shop. The decision was based primarily on whether the applicant was a Fidesz supporter. And the percentage of Fidesz supporters within the medical community is extraordinary high. I might point out that traditionally the medical profession has been attracted to the political right. One mustn’t forget that the idea of the notorious numerus clausus was hatched at the medical school of Budapest in 1920.

Some of the doctors who received permission to operate tobacconist shops are rather important political actors within the medical profession. Most likely they would have raised hell with Éger had he taken a stronger stand. As it is, Éger’s position at the moment is rather shaky.

And finally, my hunch is that far too many physicians still smoke. The huge debate about smoking that occurred in the U.S.  in the 1970s has not yet been settled in Hungary.

It is true that smoking has decreased somewhat among men in the last ten years or so, but the number of women smokers has risen by 1% every year. I might add here that getting reliable and detailed data on smoking in Hungary is rather difficult. One problem when it comes to comparing data, let’s say, between Hungary and the United States is that while the U.S. numbers refer to the population of 18 years and over, most Hungarian data I found talked about smokers age 15 and over! According to a fairly recent summary published by the National Public Health and Medical Officer Service (ÁNTSZ), since 2009 the number of male smokers under 65 decreased by 2% but among those over 65 it grew by 2%. In any case, the percentage of smokers in the 15+ population is very high. It is noteworthy that Hungary has the highest death rate due to lung cancer of any country in the world.

swayzesghost.wordpress.com

I tried to find data on the percentage of smokers among Hungarian physicians, to no avail. In fact, no such data exist according to The Tobacco Atlas. But here are a few European statistics that are available. In France 34.6% of physicians smoke,  in Poland 76.8%, in Ukraine 33.1%, in Germany 27.5%. The number in the United States is 3.3% and in Canada  6.0%. Let’s assume, extrapolating from these figures, that perhaps a third of all Hungarian doctors smoke. This figure would match the smoking habits of Americans who didn’t even finish high school. And we know that normally there is a high correlation between educational attainment and smoking.

Naturally I find it appalling that Hungarian doctors can have a handsome second income stream selling tobacco products. One might counter that Hungarian doctors are very poorly paid and therefore one mustn’t be very surprised that they grabbed at this business opportunity. But I found at least two obstetricians among the recipients. Obstetrics is the most lucrative medical specialty in Hungary. A childbirth, theoretically free, usually costs $400-500. This money goes straight into the doctor’s pocket, hidden from the prying eyes of the tax man. If estimates are correct, the tobacco shops (which seem to be expanding in the direction of convenience stores) will be equally profitable if not more so. And, after all, business is business.