Publication

One basic decision to be made for the distribution of welfare assistance is how to assign the entitlement criteria. This also determines the number of those concerned and thus the extent of community expenditures. These principles are not only manifold in theory; but Hungarian practice also applies various methods in parallel. This study reviews the most important theoretically possible types of approach applied today, primarily on the basis of data supplied by the Hungarian Statistical Office and Tárki. The main task for the analysis is to determine the benefit requirements of how many people (households) should be taken into account when applying certain criteria, i.e. what multiplication factors can be assigned to the various political decisions regulating the macro-economic expenditures, also taking into consideration the advantages and drawbacks of the different approaches.

Esély (Chance) year 17, volume 4, July 2006 pp. 3-20

The most frequently mentioned element of Union accession, considered by many to be the most important, is the acquisition and distribution of community subsidies. The question is whether the subsidy Hungary receives from the European Union is essentially different from what until now we have called state aid. Will the subsidy received from the Union become a component of domestic redistribution? Initial and as yet incomplete experience suggests that it is a matter of a shift in proportions rather than a sharp turn. Although additional funds flowing into the economy are still slight, the Union subsidy and the co-financing commitment have not replaced the earlier redistribution, but have come along side it to some extent. Redistribution within the economy has therefore probably grown slightly following accession, despite the fact that enterprises only received one third of the structural funds directly, the rest being granted to non-profit organisations and to the state administration in control of distribution. The weight of decisions made by the single state apparatus has not changed, and may even have grown. The system of tenders has not become exclusive at all.

2006. (Éva Voszka)

Privatisation is coming to the end in Hungary. By spring 1998 the bulk of state owned property was in private hands. According to official statistics, private enterprises account for nearly eighty per cent of GDP and almost three quarters of the capital is privately owned. More than one thousand firms were fully privatised during the period 1990-1997.
Considering the recent ownership structure of the Hungarian economy, already fairly similar to that of several West European countries, government can declare at any time the end of privatisation process. Debates on legal and institutional frameworks of controlling the residual state property have started in 1997. Despite of detailed proposals of several governmental apparatuses and consulting firms, no final decision was made before the parliamentary elections in May 1998. The future of state residual property is yet to be seen.
This analysis summarises first the main characteristics and results of Hungarian privatisation process as the precondition of managing the residual state property. The second section gives the inventory of the different controlling institutions and describes the positive and negative features of their activities. The last section presents the alternatives of state asset management considered in Hungary for the post-privatisation period, including the possibilities of further privatisation transactions.

Country paper for C.E.E.P.N. research project on management of residual state property, June 1998

The idea of concluding privatisation in Hungary first arose in 1997. Since then, two governments have considered the proposals and turned them down. In our estimation, the postponement occurred for short-term political-power reasons rather than for well-grounded economic considerations. Even in this case, however, economic rationality remained undamaged, as a fair number of companies could be still sold during recent years, though at varying rates. At the end of 2004 it did not appear impossible that with a few exceptions the state assets in the competitive sector would soon be acquired by new owners. The principle can thus be confirmed that privatisation is worth declaring completed if it has really been concluded, i.e. when the assets to be sold and able to be sold have been acquired by private companies.

In: Állami vagyon ? privatizáció ?gazdasági rendszerváltozás, ÁPV Rt. (State Assets ? privatisation ? economic transition, State Privatisation and State Holding Company) 2005, Számadás a talentumról sorozat ("Giving account of the talent" series) pp. 16-43

Várhegyi, É.: Bank Competition in Hungary. Acta Oeconomica, Vol 54(3) 2004.

Várhegyi, É. (co-authors: Majnoni, G. and Shankar, R.): The Dynamics of Foreign Bank Ownership: Evidence from Hungary. World Bank Policy Research Working Paper 3114, August 2003

State redistribution maintaining a soft budget constraint and a centralised organisational system for companies were some of the essential characteristics of the centrally planned economy. Transition may have been expected to strengthen competition alongside private ownership. The large companies, created artificially at an earlier period, should have split up and redistribution diminished as a distortion of competition. In contrast to this, everyday life at the turn of the millennium in this country echoes with the news of monopolistic tricks and large mergers. We are also informed of redistribution plans and schemes outbidding each other, not to mention the promises of European Union subsidies.
Have the structural foundations for competition really remained weak in Hungary? What kind of economic and social interests are preserving subsidies as a narcotic, and what sort of forces are causing the cyclical nature of redistribution? Can competitiveness be strengthened in the long run at the expense of competition? Besides the theoretical framework and analyses of socio-economic dilemmas, this book offers the Reader a colourful palette of government decisions and actual company cases. It assembles the mosaics of successes and encoded failures by using personal conversations and articles from the daily press, considered to be an archive of contemporary history.

Akadémia Publishing House 2003

(Experiments, results and drawbacks)

Public transport in large cities is a problem all over the world, for passengers, politicians running the city, and experts organising the network. What kind of structural features cause these difficulties? Where did the service provider and the company owner seek a way out? What results have there these steps achieved and what drawbacks have they faced? As well as information available to the public, the answers are based on an analysis of company documents and the experience gained as a participating observer or in some cases as a participant in decision making. Having analysed the attempts at transformation, the stabilisation and reorganisation schemes over the last ten years, the study has drawn the conclusion that the attempts have not resulted in long-term solutions. The most important result is that the attempt itself was made, partly because various representatives of the owner and the company management have thoroughly considered the reasons for the difficulties and their direct and long-term consequences. On the other hand, even the restricted result of the attempts is a result. It has become clear that no breakthrough can be expected from the changes implemented so far. If the owner and the company wish to provide a permanent, long-term solution to the now chronic problems, they must take more decisive action than they have so far.

In: A Budapest-modell, Egy liberális várospolitikai kísérlet, Szerk. Pallai Katalin, Nyílt Társadalom Intézet Alapítvány (The Budapest model. A liberal urban policy experiment. Ed. Katalin Pallai, Foundation of Open Society Institute) 2003, pp. 257-282

A new wave of redistribution at the turn of the millennium

Redistribution within the economy and state aid for companies have recently become an important field of economic policy once again. The lens of the daily press is deceptive, however: we are not facing a brand new issue. Redistribution has been a constant companion of economic transition. This article examines the phenomenon of focusing on Hungarian private enterprises as a distinctive feature of the new wave beginning at the turn of the millennium. It presents the varied methods and the ideologies and driving forces behind them. According to the final conclusion, the best subsidy would be to decrease subsidies, and instead to modify general economic conditions in a way favourable to business players.

Competitio 2003, volume 2, pp. 83-104

Privatization of the post-socialist economies, including the transfer of state assets to other proprietors, new start ups and green field investments has produced a wide variety of ownership structures in Central and Eastern Europe. One of the main question discussed in recent years concerns the basic characteristics of the post-socialist ownership. Are the new structures peculiar as compared to recent Western market economies, as several researchers argue (Stark 1996, Earle and Estrin 1997, Andreff 1998)? Is the dominant form some kind of recombinant property, i.e. a mixture of state and private ownership, dominated by inter-organizational (corporate) shareholders (Stark 1996, Stark and Kemény 1997)? Or we face a model of managerial capitalism, as Szelényi-Eyal-Townsley (1996) suggest?
This paper analyses the Hungarian case that seems to be rather special in comparison to other post-socialist countries - but not peculiar in comparison to some other market economies. We will argue that the basic features of the ownership structure in big enterprise sector are not dominated by specific institutional solutions. If there are some specific features, they include mainly quantitative aspects (like the concentration of assets, outputs and ownership positions, the predominance of foreign investors) instead of qualitative ones.

In: Corporate Governance in a Changing Economic and Political Environment: Trajectories of Institutional Change, Michal Federowicz, Ruth V. Aguilera eds., Palgrave MacMillan, New York, 2003. 170-194.