Hungary Accelerator_draft v2.1_no Questionnaire

8/7/2019 Hungary Accelerator_draft v2.1_no Questionnaire

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Technical Applications Group LLC | Kr-Tr-Terv Kft | www.techappsgroup.org | [email protected] 1

In the current situation the Hungarian Defence Forces

are not capable of responding to the challenges of the

21st century and they would not be capable of

resisting a contingent military threat. Csaba Hende

Increasing the Defense Industrial Base in Hungary

For generations, Hungary has been regarded as a

nation full of innovation and scientific

development. However, since the 1950s, the

majority of Hungarys famous scientists andinventors have conducted their research outside of Hungary and Hungary has not financially

benefitted from their work.

The defense industrial market is no exception. Hungary has the potential to become a Center of

Excellence within Europe for defense research, development, test, and evaluation (RDT&E).

As Hungary looks for ways to increase defense spending, equip its soldiers to meet the threats

of the 21st century, implement a strong national security policy, and increase its national Gross

Domestic Product (GDP), opportunities exist which allow Hungary to leverage its most

valuable national resource (its intelligence) whilst drawing outside investment.

The following white paper gives an overview of one concept to create a defense-focused center

to promote economic development while positioning Hungary as a center of excellence for the

defense industry and enticing businesses to relocate to Hungary. This is a proven concept that

offers a significant and sustainable return on investment (ROI).

A Hungarian Military and Security Business Accelerator and Laboratory

Fostering the rapid development of defense and security technology solutions to meet military

need and private industry demands.

Background.

In 2007, Technical Applications Group

worked with a U.S. State created a defense

and security technology accelerator as well

as a technology lab, similar to the program

being proposed for Hungary.

In its first 2 years, the non-profit program

received over USD $9M in grants andgovernment funds and generated 157 jobs,

which lead to $36.5M in revenue for the state. This funding was from the U.S. military, the

state, and the federal (national) government. Each job created cost USD $57,325, which is high

by most standards, however, the jobs created were highly technical, attracted very experienced

professionals with unique skillsets, and the average salary paid was over USD $120,000 per

year. The state continued to generate taxable revenue on high salary positions.

Since 2009, an additional 298 jobs have been created at an average cost of USD $14,678; these

jobs are identical in that they are highly technical and well-paying. Also, an additional USD

$137.5M has been created in state revenue. Therefore, in less than four years, 455 highly-

technical, high-paying defense and security-specific jobs have been created and the state has

The key component to this methodology is the business

accelerator whose mission is to assist entrepreneurs and

innovators with developing new business and dual use

technologies, in a rapid 8-18 month timeline, focused on both

military and commercial needs in the areas of defense, security

and intelligence.

The accelerator provides low-cost office space, subject matter

experts, and business guidance to small companies offering

defense and security-related services and/or products. The

accelerator draws businesses from outside of the state and

ensures that revenue generated stays in the state.


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made USD $174M on an investment by the state of only USD $3M. This does not include

indirect job creation, those jobs created by suppliers as a result to demand created by the

program.

Initially, the question was asked, If the state has so many military bases, why is none of the

defense spending staying in the state? A similar situation exists in Hungary. Hungary has itsown military, yet none of the products or services it procures are from Hungarian firms.

Maybe the contract is issued to a Hungarian firm; however, those local firms are then procuring

products from the United States, Germany, France, the UK, etc. The bulk of the value of the

contract is actually leaving Hungary.

Therefore, the potential jobs created (economic development) by Hungarian MoD acquisitions

are going to another country; much of the taxable revenue is going to another country. In fact,

this required action essentially hurts the Hungarian economy and reduces its true GDP. While

it is possible to use defense offsets to reduce the economic damage these types of acquisitions

create, that is an offset on paper - not real - and offers no economic benefit to the country.

Overview.

The purpose of this program is to create an innovative focal point designed to foster

collaboration between the military and intelligence community, universities, entrepreneurs,

and private sector businesses. The program is engineered to develop solutions to problems

and capability gaps identified by the military, as well as to commercialize dual-use

technologies within 8-18 months. These are technologies developed specifically for military

use, military technologies that could be turned into commercial solutions, or commercial

technologies that could be adapted to military use. A company enters the program and within

two years, should be at a mature level.

The program attracts small businesses, as

well as developed businesses, which are

looking to enter the defense market or

turn their innovations into solutions, not

science projects needing millions of dollars

and years of research and development

(R&D). In return for business training,subject matter expertise, sales and

marketing opportunities, and assistance

with defense-specific requirements, these

businesses move their firms to the

required region and promise to create jobs,

all of which promote economic

development.

As a government-funded non-profit organization, this facility is focused solely on promoting

economic development by supporting RDT&E, education, and programs, which haveapplications within the defense and security sectors. More importantly, as a government

funded non-profit, opportunities for corruption are eliminated. This is an open, neutral,

Figure 1 - Example of Similar Program in the U.S.


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transparent program, designed to create jobs and generate revenue for the companies involved

and for the state. It is run by a third party - not party affiliated - in order to have credibility and

legitimacy.

The organization also collaborates with educational institutions, other non-profit

organizations, NGOs, and multi-national organizations by encouraging the development oftechnology. This promotes opportunities for university involvement, peer review, and

publication, as well.

This type of program lessens the burden of the government, but most importantly

exponentially increases economic development by attracting not only local, SME businesses,

but also SMEs from other states, as well as larger firms looking to enter the defense and

security market.

In Hungary.

Hungary is perfectly suited for a program similar to the one described above. The intent would

be twofold: (1) create an MoD/government-funded non-profit organization focused on

economic development via a business accelerator and (2) create a government-funded test

facility to focus on military RDT&E (this could be a test facility leveraged by Hungary, its

partners, NATO, and the EDA).

While this type of program is atypical for Hungary - and the MoD has not invested in programs

like this in the past - the small investment required assists MoD leadership, as well as the new

government, meet their collective requirements: increase GDP, increase defense spending,

save money, create jobs, focus on national development, provide a national security strategy,regain credibility within the region (and with its allies), strengthen its regional influence,

rebuild its national pride, and remove corruption.

There are many small firms in Hungary who have valuable

ideas, products, and services that cannot be brought to

market purely due to economic reasons and because the

previous military regime had no interest in innovation outside of their sphere of corruption.

Furthermore, these firms have no idea how to get their products and services to key decision

makers within the government and military because the tender process is so complicated and

corrupt. The most likely culprit though, is that these business owners, inventors, scientists,

and entrepreneurs do not understand how business really works or how to generate

sustainable, long-term revenue.

This project would create an entry point, providing access to funding, contacts within the

military in Hungary, contacts outside of Hungary, all while being located in a professional

business environment. In the past, the Hungarian government and organizations like ITD-H

have spent billions of Forints in an attempt to entice large factories to relocate or expand to

Hungary. Common economic principles, history, and the current global economic climate show

that this is the wrong process. Not only is this a very expensive process, but it is shortsightedand offers no long-term ROI. Success comes from initially linking local entrepreneurs,

inventors, nonprofits, communities and existing businesses with helpful expertise and financial

Inadequate equipment and training, but

most importantly, a moral crisis shook the

army and the ministry. Csaba Hende


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resources. Most jobs are created from the SME sector, not the Global 500. And reports also

show that larger, successful firms made great strides in the beginning, when classified as an

SME, because they had business guidance in addition to financial support.

As a simple example, if you ask ten different Hungarian business owners for a business plan or

strategy, statistically, five of these owners will have no idea what you are talking about. Theother five will present random documents that have no similarity and most likely fail to answer

the basic questions business plans address. Conversely, if you ask ten Germans for business

plans, while the content will be different, each document will give specific answers to specific

questions and will be in the same format. This simple fundamental difference demonstrates

how Hungarian small businesses have potential, but need business guidance and expertise,

especially when dealing with military and security technologies and products.

The funding for this program would initially come from the Hungarian MoD, the local

government, or potentially from the national government however, future and additional funds

could come from the European Union, EDA, NATO, and even other countries. This would drive

business to Hungary, creating a defense industrial base and increasing GDP.

From inception, this project could be up-and-running in as little as 12 months. Within another

12 months, the program will have created jobs for Hungarians and helped grow Hungarian

business. Initial costs are low and, most importantly, this is a program that has worked with

success in other places. Due to the current economic climate in Hungary, finding companies to

enter the program would be no challenge. In the last 18 months, we have been introduced to

over 20 Hungarian firms who have innovative technology that would like nothing more than

involvement in a program like this.

Because the program has two components (an accelerator for businesses and a lab/test facility

for technologies), you have two potential revenue sources from one program. While the

accelerator is developing opportunities for local businesses, the military can leverage the lab

for testing. The lab can also be used by other businesses and other government agencies, not

just inside Hungary, but from other nations, to include NATO and the EDA.

Technical Applications Group and its sister company, Kr-Tr-Terv Kft, have experience in

setting up and running a program like this, as well as the necessary contacts within the US

government and military, NATO, and European Union to see that the program is supported, notjust financially, but politically.

If the Hungarian government wants to help

its SME businesses, a program like this is an

ideal way to do that. For a thorough plan of

action and further detailed information,

please contact us.

For Further Information:

Technical Applications Group LLCKr-Tr-Terv [email protected]
mailto:[email protected]:[email protected]://www.techappsgroup.org/http://www.techappsgroup.org/http://www.techappsgroup.org/mailto:[email protected]

Hungary Accelerator_draft v2.1_no Questionnaire

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