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Research on Hungary

By Eszter Kósa Ph.D.

1st draft

June, 2006.

Table of Content

I.Allocation system

I.1.Methodology

I.2.Policy Areas

I.3.Conflict of interest regulation

I.4.Survey of transparency (access to information)

II.SF allocation outcomes

II.1. Analyses of supported projects

II.2.Political alliances

II.3.Liabilities of officials

II.4.Success fee –questionnaire

II.5.Outcome of big infrastructure projects’ public procurement

III. Conclusions

IV.Annexes

I.Allocation system

From the 1 May 2004 Hungary has become eligible for support from the EU Structural Funds and Cohesion Fund. The primary objective of these funds is to help reduce the development disparities between Member States and regions in order to strengthen economic and social cohesion.

Pursuant to 1260/1999 EC Council Regulation on the general rules of Structural Funds, in order to be able to use support from the funds, Member States must elaborate and submit to the European Commission their development objectives and priorities in the framework of a National Development Plan (NDP). Therefore the National Development Plan is a national strategic document and the Government of the Republic of Hungary is responsible for its preparation.

This document constitutes the basis for discussions with the Commission, as a result of which the Community Support Framework (CSF), representing the legal framework of support, is completed. The Community Support Framework contains the financial commitments of the EU and the Hungarian government concerning the amounts they spend on jointly financed development areas. At this time (June 2006) the NDP 2004-2006 is under implementation and the NDP 2007-2013 is in the planning phase with little bit different conditions as the legal framework has changed.

In the framework of NDP 2004-2006, approximately 4340 million Euro public expenditure is concerned, two thirds financed by the EU (Structural Funds and Cohesion Fund) and one third by the Hungarian national budget. In the next period (2007-2013), it is expected that Hungary will have access to four times more EU sources per year than in the present period. It means that Structural Funds constitute largest and most important engine of development in Hungary, especially if we consider that the national co-finance part practically uses all Hungarian budget sources for innovations. In other words: new developments and innovations - in the fields of human resources, agriculture, regions, rural areas, infrastructure, environment, economic competitiveness - which will not ie included in the NDP, will not be implemented, due the lack of sources.

In the followingpaper I will focus on the Structural Funds, as these are distributed in most cases via tendering and involve all kinds of actors, including NGOs, local municipalities, and SMEs. Cohesion Fund is spent on infrastructural mega-projects, that agreed between the Government and the Commission.

Taking into account the amount of tax-payers’ money concerned, the societal goals of the NDP (strengthening economic and social cohesion), and the importance of the Funds as „exclusive engines” of development, it is quite obvious that the planning, implementation and evaluation of the National Development Plan (i.e., the use of Structural Funds) has to be public. The entire process has to be transparent, access to information has to be insured, and civil participation at different steps of decision making must be guaranteed. At the same time it is not enough to secure publicness concerning Structural Funds in the country, but it is also necessary to raise awareness among the civil actors, to motivate them to participate in and control the process. This might help to ensure that citizens view EU membership more positively; Structural Funds are seen as relevant to the lives of ordinary citizens and money is used effectively, thereby leading to better EU integration.

The amount of taxpayers’ money also reasons the fact that in this paper I observe the outcomes of SFs allocation is analyzed.

I.1.Methodology

In the first part of the study I have processed public information available on the Hungarian National Development Plan, and conclusions of other studies (from Transparency International for example). Naturally the source will be indexed and named in each case.

In the second part of the study I use statistical methods and I also process the outcomes of a questionnaire-based research.

I.2.Policy Areas

The policy areas defined issued by the Hungarian National Development Plan 2004-2006 are the following:

  • Economic competitiveness
  • Environmental protection
  • Infrastructure development
  • Social and health care
  • Education and training
  • Employment
  • Regional and rural development
  • Agriculture.

The preparation of the Hungarian NDP has been completed through a strategic planning process, setting

  1. Long-term goals
  2. Short term goals
  3. Specific objectives
  4. Priorities
  5. The operationalization of these through Operational Programmes.

Figure 1 below presents the process of strategic planning concerning the Hungarian NDP.

Figure 1: The planning process of NDP (source: Hungarian NDP)

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Hungarian NDP budget 2004-2006

Table 1: NDP budget 2004-2006, source: Hungarian National Development Plan. (Billion HUF, 1 Euro= 250 HUF)

OP / SF EU source (Ops) / SF National source / SF All public expenditure / SF Private source / All investments into OPs / CF EU source / CF National source / All investments in NDP (SF+CF)
Economic Competitiveness / 109,4 / 45,2 / 154,6 / 135,9 / 290,6 / 0 / 0 / 290,6
Human Resource / 143,5 / 47,8 / 191,3 / 0 / 191,4 / 0 / 0 / 191,4
Environment and Infrastructure / 83,42 / 28,9 / 112,4 / 9,7 / 122,1 / 283,7 / 113,5 / 529,3
Agriculture and Rural / 80,8 / 26,9 / 107,8 / 115,4 / 223,2 / 0 / 0 / 223,2
Regions / 91,7 / 29,7 / 121,4 / 19,5 / 140,8 / 0 / 0 / 140,8
Total / 508,82 / 178,5 / 687,5 / 280,5 / 968,1 / 283,7 / 113,5 / 1365,3

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I.3.Conflict of interest regulation

There is a common decree of five concerned Ministries on basic rules in connection with the use of Structural and Cohesion Funds 14/2004 (VIII.13.). Among others, this decree sets up the basic rules on conflict of interests. These are the following:

  • Those parties cannot participate in decision-making and in preparation of decisions on supports financed from the Funds, who are
  • Beneficiaries of the supports
  • Employed by beneficiaries
  • Office-holders or board members of beneficiaries
  • Members or (joint) owners of beneficiaries
  • Anyone who participated in preparation of documents on evaluation, quality control or tendering
  • Close relatives (defined by Hungarian law) of all above
  • Everyone participating in decision making on supports, has to declare in an official record his/her position free from conflicts of interest.

The decree described above seems to be correct, but in practice this is not sufficient enough.

Transparency International has concluded a very detailed analysis of the Hungarian conflict of interest regulation on Structural Funds procedures. This study[1] draws the following conclusions:

Conflict of interest is widely regulated in the Hungarian procedure, officials and experts participating in it (preparation, selection, monitoring and evaluation phase) have to sign statement of impartiality and confidentiality. Still, (because of the complexity and the number of people involved in the process) some rules are missing:

a)Concerning the members of the Monitoring Committee (responsible for the acceptance or the correction of the Program Complementary Documentation) there is a lack of rules on:

They can not submit PC Documents to the Monitoring Committee, and can not participate in project proposal development related to the PC Documents’s measures.

b)The conflict of interest is not ruled in the case of consultants[2] and the official submitter of the proposal.

c)The conflict of interest is not ruled in the case of members of Evaluation Committees and consultants.

d)Although the monitoring experts’ conflict of interest is widely regulated, there are still some lacking rules: on Monitoring Committee participation and proposal consultancy.

Other anti-corruption measures:

The so-called “window pocket” Act (2003. XXIV.) rules in details the transparency of use of all public sources in Hungary. It has consequences on the SFs, of course. For example, based on the act, all persons who take part in decisions concerning more, than 1 million HUF (4000 EUR) public money, should make a statement regarding their personal assets and liabilities. In practice it means that all members in all Evaluation Committees deciding on tenders related to the National Development Plan, should do so. The problem is, that this statement is so detailed, complicated and includes all family members, that it is at least one week of work to do. There are ate least 60 Evaluation Committees set up during 2004-2006. In each committee, 7-15 people play some kind of role. It is simply impossible to collect statements from each person, and especially impossible to administrate them. Based on my knowledge, no Evaluation Committee member submitted such statement ever (except for cases where high officers of ministries’ are concerned, who have to do so each year, based on the Act, anyway). However, no one has complained about this, as it would totally disorganize the everyday operation of the relevant bodies – which cannot keep deadlines even now.

I.4.Survey of transparency (access to information)

All information and publicity measures related to the Community Support Framework of 2004-2006 are being implemented in accordance with the requirements set down in Commission Regulation No. 1159/2000 (EC). Each Managing Authority is responsible for compliance with these requirements.

The objectives of information and publicity measures are as follows:

  • To ensure transparency through the provision of information on the Structural Funds regime, the availability of funds and application procedures for potential and final beneficiaries, regional and local authorities, the economic and social partners as well as the Non-Governmental Organisations.
  • To improve understanding of Community measures through raising awareness of the role played by the Structural Funds and the European Union in regional development as well as in the support of economic and social cohesion in Hungary.

The implementation of information and publicity measures conform with the Communication Plans prepared for the Community Support Framework and the Operational Programmes by the CSF and OP Managing Authorities. The Communication Plan sets out the objectives, strategy, content, target groups, budget allocation, responsible department or body for each publicity and information measure as well as a set of criteria to be used for evaluating the effectiveness of the measure. The Programme Complement includes measures intended to publicise the operational programme.

The means for providing information, including newsletters, leaflets, posters, Internet websites and video programmes, need to be further developed in order to improve knowledge and awareness of Structural Funds in Hungary. In accordance with Commission Regulation No.1159/2000 (EC) the Community emblem is to be clearly displayed on all communication materials, application forms, letters of grants, etc.

The information and publicity strategy and measures related to the Community Support Framework are co-ordinated by the Department for Partnership and Information of the Office of the National Development Plan.

Under the supervision of the Department for Partnership and Information, an EU Funds Information Centre has been established. The main task of this Information Centre is to provide wide-ranging and understandable, plain information on the availability of funds to potential beneficiaries (representatives of regional and local authorities, economic and social partners and non-governmental organisations), and the general public. It is the responsibility of the Centre to:

  • Establish and maintain a database of available funds;
  • Create and maintain a dedicated website;
  • Establish a central Information Unit in Budapest and units in the regions, in close cooperation with the existing European Information Centres in Hungary and other relevant organisations;
  • Operate a Call Centre.

A publicity and information officer is appointed within each OP Managing Authority.

Availability of the most important information related to transparency:

Implementation / selection criteria

The selection criteria are clearly defined in the call for proposals that contain a detailed evaluation sheet. This sheet describes all aspects of the selection and the maximum scores might be achieved at each aspect.

Otherwise the entire selection process is secret and confidential (the names of assessors, the members of the evaluation committee, the memos of the evaluation committee’s meetings, the opinions on the proposals). All persons participating in the selection process have to sign a statement on keeping these rules.

Monitoring

The minutes of the Monitoring Committee’s meetings are available on the Internet. It means that civil partners may get information on the progress of the entire CSF and OPs, but can not get information on individual projects.

National Development Plan

All OPs (summaries) of the first NDP (2004-2006) are available on the internet.

On bids/calls for proposals

Calls for proposals at least 60 days before the deadline (in cases of infrastructure development projects where time consuming permissions have to be attached, 90 days before the deadline) are published on the central web-site of the NDP and on the website of the responsible Ministry. In some cases (when it is reasonable because of the target group) calls are also published in daily newspapers.

To get information on actual calls applicants have to be active (check relevant info sources frequently), but this is probably an acceptable expectation from the authorities’ side. In all aspects it seems that without Internet access it is impossible to join the circle of SFs (except for the agricultural supports). However, (1) in or nearby all Hungarian settlements free internet points are available (schools, libraries, e-points), and (2) it can be considered as a tool for motivation to join the information society.

Final beneficiaries and recipients

At the end of selection, the names of beneficiary organizations, the contracted amount of support from public sources and a short description of the projects are published on the Internet (the website of the Managing Authority) in all cases.

The circle of recipients is not public, which is right, concerning that we talk about private persons here (for example long-term unemployed, who receive training through an ESF financed project). It would violate the law on protection of personal data.

Based on detailed webpage analysis of TI[3] the following statements can be made on information available via internet related to SFs:

General information related to the EU:

  • There is enough information available related to the topic in
  • It is difficult to find concrete information
  • A small part of materials from the official webpage of the EU is available in Hungarian
  • The governmental websites together serve enough information on the topic (although some of them are not user-friendly enough)
  • Some information are not up-to-date on the official websites

Information on the NDP

  • There is enough and well organized information concerning SFs and regional policy
  • The construction, goals and related documents of the NDP I. is transparent.
  • Documents of the NDP I. are available
  • The planning agenda, organization and participating institutions of the NDP II. are not transparent
  • Most planning documents of NDP II. Are available, but not commonly understandable
  • The relation between the different strategic documents is not understandable
  • The naming of NDP II. Is not obvious, it is called by different titles (Strategic Reference Framework, New Hungary Program)
  • The actual planning working documents and working group meetings’ memos are not public
  • The government uses the opportunities given by internet for social debate and public reconciliation

Information on tendering

  • The background of the tenders (Operative Programs) are available in a commonly understandable form
  • Because of abbreviations, for less experienced applicants it is difficult to understand some texts
  • The institutional system and procedures of tendering is not transparent in all cases
  • The tender searching system is unified, well established, user friendly and all related tender documents are available through it
  • The quality of specialized tender documents (advices, best practice) is alternate
  • Dates and documents of information days are available
  • Accessibility of responsible employees at the agencies is available

Information related to implementation

  • Official forms and guides are available
  • List of winning projects is available
  • Up-to-date statistics are available
  • Public procurement guide is available
  • The website are informative, but not interactive, no forums, feed-back opportunities

As a summary, we may say that although a lot of information connected to Structural Funds are available, these pieces of information are often not understandable, plain enough, and not well structured and targeted. Even beneficiaries often do not have enough information on the process they participate in. Probably because of this, people working at the media cannot transfer important messages on the topic, either.

II.SF allocation outcomes

II.1. Analyses of supported projects

To get some general picture of the Hungarian SFs allocation, let us see first the division of sources among OPs, profile, and regions.

To be able to interpret data below, I would like to shortly describe the action field of the OPs.

Economic Competitiveness OP (ECOP)

Objectives:

  • Development of a knowledge-based economy and innovation capacities
  • Development of an economy based on technology-intensive industries and services
  • Developing small and medium-sized enterprises.

These objectives are supplemented with horizontal objectives, such as improvement of the quality of environment, sustainable resource management and balanced regional development.

On the basis of the strategy, the objectives of the ECOP are implemented through the four priorities:

  • Investmentpromotion
  • SME development
  • Research and development, and innovation
  • Development of information society and economy.

Human Resource Development OP (HRDOP)

Objectives:

  • To increase the rate of employment.
  • To improve the competitiveness of workforce.
  • To promote social inclusion.

These objectives are also supplemented with certain horizontal objectives, such as equal opportunities for men and women, and the application of the principle of equal opportunity for the Roma population.

On the basis of the strategy, the objectives of the OP are implemented through five priorities:

  • Supporting active labour market policies
  • Fighting social exclusion by promoting access to the labour market
  • Supporting education and training within the framework of a lifelong learning

policy

  • Improving adaptability and entrepreneurial skills
  • Developing infrastructure by supporting education, social inclusion and healthcare.

Environmental Protection and Infrastructure Development OP (EPIDOP)