Hungarian government backs out of Mini-Dubai development

Early Thursday afternoon, a resolution of the Hungarian government, authorizing the city-owned BKM Zrt. to buy Rákosrendező, was published. This is the area where a Dubai investment firm was planning to develop a whole new neighborhood, complete with Europe’s tallest building – much to the disapproval of locals, the city’s leadership, and its chief architect too. But then it turned out that a company (BKM Zrt – Budapest Public Utilities) owned by the Budapest Local Authority has pre-emption rights to the area and was ready to exercise it.

According to the just published decision, the government has:

• established that there are government measures necessary to enable BKM Zrt. to exercise its right of pre-emption;
• established that under the National Property Act, BKM Zrt. is classified as a transparent organisation;
• and, invoking the Economic Stability Act, has permitted BKM to proceed with the conclusion of the contract.

In other words, the decision does not specify the exact procedure of the sale, but only provides BKM with the legal possibility to purchase the land.

Previously on Thursday, Minister of the Prime Minister's Office, Gergely Gulyás announced that the government had recognised the pre-emption right of the capital's company for purchasing the plot. Gulyás later explained in detail that if BKM complies with the conditions that Eagle Hills had agreed to when signing the contract, it could then claim the plot.

He also added that the capital had not committed itself to a €5 billion investment, but to cleaning up the area, i.e. they do not have to build what the Arab investor had planned for the site.

The minister also said he was unsure whether what happened with Rákosrendező was a good thing, but added that he trusted that the capital would be able to make good use of the property. "It's not that we gave up on it, this is simply how the rule of law works," he said. The minister said that the investment would have contributed to the strengthening of the economy, which the country has now missed out on, and that is regrettable. "The city has an assembly and a mayor, and that's what they decided. There's a price to pay for democracy."

In response to a journalist's question, Gulyás said that the Arab investor was informed last night that the government would let go of the previously envisaged investment in Rákosrendező, "because they didn't want them to be surprised when they heard that the government had taken a resolution". According to the minister, giving up on the Rákosrendező investment was not easy for them, but "it is what it is". "We did not fall into a trap and we did not set a trap," he said.

There were several things the Arab investor had committed to in the contract, which was thus "inherited" by the firm of the Budapest Public Utilities, but only the general provisions are binding, so is up to the capital to decide which of the options from the contract it will pursue. For the time being, the government does not know whether the failure of the Rákosrendező project will affect the rest of the interstate contract with the United Arab Emirates.

Budapest Mayor Gergely Karácsony welcomed the news by saying: "What should have been acknowledged years ago has finally been conceded today: instead of a mini-Dubai, it's the interests of the city of Budapest that have won." Karácsony added that the capital would fulfil everything the Dubai investor had committed to in the sales contract, so he said there was no obstacle to the city acquiring the site.