Atlatszo.hu investigates constructing industry

Atlatszo.hu investigated the systemlike manners of the construction industry in Hungary, which is characterized by thousands of bankruptcies, bad debts to the amount of ten billions of HUF, and a strong suspicion of political corruption.
János Kárász, CEO of the medium-sized construction company Baranya Aszfalt Kft. told atlatszo.hu a typical story. His firm was partner in a consortium hired to build motorways in Hungary in 2009, partly from European Union funding. The leader of the consortium, EuroAszfalt Kft. is still in their debt with some 300 million HUF and now the smaller company is struggling to survive, while Kárász feels he has got no help from Hungarian authorities. Kárász claims that Hungarian SME-s in the trade are doomed to be defenceless subcontractors, because they lack the references to win a tender, though the bulk of the work is done by them – in this case, 90 percent of the implementation was done by his firm, Kárász said. He believes larger firms don’t even have the manpower sufficient to implement a large construction project on their own.

Atlatszo.hu investigated how this supposedly larger companies file for bankruptcy and turn out to be empty shells when creditors come to collect the debts. Only in 2011 the largest bankruptcy cases in the building industry have left ten billions of HUF unpaid debt behind. Insider gossip has that debt-free newborn companies are often built upon the resources that the owners have illegally extracted from their former, now-bankrupt firms. There are signs of the judicial system involved in the corrupt dealings. One liquidator, Marjasné Endrédi Zsuzsanna – through her employer, Cash & Limes Zrt. – has been court-appointed to oversee the liquidation of three seemingly notorious companies, Vegyépszer Zrt., Gropius Zrt. and Szeviép Zrt. Vegyépszer is in fourty billion HUF in debt, and Marjasné has been one of the leaders of the company three years ago. The bankruptcy of Gropius has caused an estimated three thousand people – mainly workers of unpaid subcontractors – losing their jobs.

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An industry insider, requesting anonimity upon the dangerous nature of the subject has told atlatszo.hu that since Hungary’s EU accession the construction industry have been so boosted by the structural funds and the cohesive fund that political parties rely on the trade as the No. 1 source of their illegal funding. In general, the subcontractors doing the actual work are left with sixty percent of the total payment, the main contractor earns ten percent for its work and another ten as unearned profit, while the remaining twenty percent is channeled to political circles overseeing the tender decision process. The insider source estimated that now about seventy percent of all large construction projects is won by companies favoured by the current government.