Hungary’s Development Policy over the Past Five Years: a European Success Story 8 May 2009
Hungary became a full member of the European Union half a decade ago.
By becoming a member of the European Union five years ago, Hungary was given an opportunity like never before. We are being granted an amount of funding unprecedented in the history of the country to catch up to the level of development of the Western part of the continent. Looking back after 5 years, Hungary can be proud of the results it achieved; Hungary’s EU membership is a real success story.
Several thousands of projects implemented and paid for, developments worth several hundreds of billions of Hungarian Forints, a ratio of requests for funds exceeding the average, a huge amount of experiences gathered, an institutional system capable of learning and over 10,000 applicants approved funding – this is the balance of the country and its development policy after 5 years of EU membership.
The advantages to EU membership are particularly evident in the era of the global economic crisis. Hungary has managed to obtain European Union funding that helps protect the country from the harshest impacts of this crisis.
As regards the use of EU funding, Hungarian development policy was also among the first to respond to the new challenges evoked by the crisis. Re-allocation of funds between operational programmes with the aim of developing the economy, simplified tendering procedures, higher rates of advance payment, new schemes and new solutions – this is what characterises Hungarian development policy co-financed from EU funding and switching over to a crisis management operation mode.
In its 5th year of EU membership, Hungary is making use of EU funding in a way that this funding provides the greatest possible protection for Hungarian jobs against the impacts of the crisis.
The past five years was the most successful and intense period ever experienced by Hungarian development policy. While Hungary is celebrating its 5th anniversary of EU membership, projects launched within the framework of the first National Development Plan are slowly drawing to a close and the implementation of the New Hungary Development Plan for the 2007-2013 period is proceeding at full speed. The anniversary of accession to the EU gives us a reason to review the results we have achieved so far.
Since 1 May 2004, Hungary has been performing extremely well in the context of European development policy. Just to mention a few examples: Hungary ranks fifth among newly acceded countries as regards the ratio of funding used (NDP I); we were the first member state to submit a development plan for the 2007-2013 period, within the framework of which Hungary was the first member state to announce calls for applications in the present budget cycle; Hungary submitted the highest number of major projects from among all member states, of which 5 have already been approved by Brussels; moreover, Hungary is also ranked among leading EU member states as regards payments.
National Development Plan I, which development plan was launched following accession and was almost wound up by December 2008, was a learning period for Hungary. The way in which 42,459 applications were submitted in response to various calls for applications, 19,000 payments (nearly 100%) were made amounting to over a total of 685 billion HUF in value, over 12,000 projects were completed and the ratio of requests for funds was high in European comparison (94% in relation to the EU average of 90.6%, on the basis of which Hungary ranks 5th among newly acceded countries and 10th among all EU member states) demonstrates that not only the institutional system, but applicants also passed the exam with flying colours and managed to surmount obstacles. Beyond providing financial assistance, the National Development Plan also contributed to the development and strengthening of the economy by encouraging a multitude of Hungarian entrepreneurs to operate in a more circumspect and transparent manner and develop long-term plans.
The preparation of the second development cycle, i.e., the elaboration of the New Hungary Development Plan was carried out by evaluating the experiences of the first development period and integrating the observations of social partners. NHDP is geared at implementing the most relevant development objectives, namely, increasing employment and establishing conditions underpinning permanent growth, in the context of a tendering system that is much simpler than the one applied earlier, by speeding up administration and making procedures more transparent. EU funding amounting to 24.9 billion EUR (nearly 9000 billion HUF) has been made available for the 2007-2013-period to develop the country; 55% of this framework (3900 billion HUF) has already been made available to applicants during 2007 and 2008.
Hungary is also among the leaders in this cycle as regards the exploitation of opportunities. We were the first member state to announce calls for applications; moreover, by the end of 2007 we not only requested the transfer of funds from the EU in the form of advance payment, but for financing projects that have effectively been launched. The institutional system approved funding amounting to 2,267 billion HUF to applicants by the end of April 2009. We are also proud to boast nearly 7750 assistance contracts worth over 1810 billion HUF. 313 billion HUF has already been transferred and 1607 projects have been successfully completed.
We were the first member state to launch the Jeremie micro-credit programme in autumn 2007, which programme targets small and medium enterprises and is geared towards stimulating the economy. Nearly 1100 enterprises have now managed to receive credit worth over 5.82 billion HUF in value through this initiative; moreover, micro-credit and guarantee portfolio contracts worth 65 billion HUF have already been concluded with financial mediators taking part in the programme.
Special attention is paid to the development of disadvantaged micro-regions during the course of developments. We have earmarked a total of 100 billion HUF over the 2009-2013-period for these objectives from regional and human resource development resources; one-third of projects granted funding within the framework of enterprise developments are implemented in such regions.
The 650 billion HUF framework allocated for the development of education also targets the elimination of regional disparities and creating equal opportunity. 350 institutions will be renewed within the framework of the National School Renewal Programme by investing 102 billion HUF. This is the most significant school and kindergarten renewal programme launched in the past 50 years and is accompanied by infrastructure developments of a similar volume in higher education (77 billion HUF).
Hungary submitted the highest number of major projects from among EU member states, i.e., investment plans that equally require approval by the Government and Brussels due to their value (13 billion HUF, or 6.5 billion HUF in the case of environmental protection investments). The Government approved 22 major projects by the end of April 2009, of which 20 have been sent to Brussels. The total funding value of these projects exceeds 884 billion HUF, whilst their total investment value amounts to 1,140 billion HUF. The European Commission has already made funding decisions in the case of 5 development plans.
The Government introduced a package of measures known as the “speeding up package” in spring 2008, which is geared towards simplifying bureaucracy and reducing the time needed for administration in order to speed up priority investments of key importance to the national economy. From this point on, specific projects are classified as “priority” projects, which means that they will be implemented more efficiently.
Major projects and priority projects include, among others, huge investments, such as, the development of the tramway networks in Debrecen, Miskolc and Szeged, modernisation of train lines forming a part of international routes, the construction of Metro Line 4 in Budapest, the Mecsek-Dráva Waste Management Project, the development of the sewage network and sewage treatment in Békéscsaba, the development of the Abbey of Pannonhalma and the renewal of Szabadság (Liberty) Bridge.
Hungary also receives EU funding for border protection and cross-border developments. The country was granted 165.8 million EUR for the former, i.e., to facilitate our connection to the Schengen border control system, whilst, from 2004, the country was given the opportunity to invest over 17 billion HUF to promote cross-border business, environmental and nature protection, as well as cultural cooperation and to implement smaller-scale transport investments in the border region within the framework of the Interreg programme in the process of being phased out. Hungarian counties and similar neighbouring regions will be able to spend EU funding amounting to 170 billion HUF up to 2013 on similar types of cross-border developments in the context of a renewed system within the framework of European Territorial Cooperation.
The international economic crisis did not bypass the development policy institutional system either, which plays a pivotal role in this bad economic situation. This is why the Government and NDA decided to reallocate funds and introduce effective measures to cushion the impacts of the crisis, retain jobs and begin to prepare for the period after the crisis. There are two pillars to the development policy programme, the fundamental aim of which is for Hungary to make use of EU funding in a way that enables the protection of the highest possible number of jobs threatened on account of the crisis. One of the pillars is the 1400 billion HUF package, which attempts to strengthen Hungarian small and medium enterprises by directly applying crisis management tools (the reason why these enterprises need to be protected is that they provide over two-thirds of jobs in Hungary). The package includes measures, such as, the New Hungary Micro-Credit, the opportunity to receive a higher rate of advance payment, or the newest scheme, namely, the 4+1-day programme, which may help salvage jobs at risk through the combination of a shorter working week and one training day financed from EU funding. We have also launched an interest funding programme for the SME sector, which sector is particularly exposed to decline in orders and lack of liquidity; moreover, the new refinancing credit and venture capital programme is also already running.
The other pillar is the 1800 billion HUF package, which fundamentally influences the crisis via the building industry employing large numbers of workers. The investment stimulus package includes an itemised list of EU developments broken down according to deadlines, within the framework of which, among others, investments in 267 schools, 23 clinics and 78 urban districts, as well as the development of over 400 km of train lines and 350 km of roads can be implemented. These major investments are not only capable of preserving tens of thousands of jobs, but equally develop and improve our settlements, as well as the country.
Ensuring easier access to EU funding, namely, the simplification of the system is also evident in the context of numerous measures. This implies extending the scope of normative tendering, decreasing the rate of own funds, easing conditions for tendering and introducing penalty interest to be paid by the institutional system. These crisis management measures create the opportunity for Hungary to emerge in a stronger position once these hard times end and step on a sustainable growth path through the cooperation of Hungarian enterprises and a flexible institutional system.