AmCham Offers Strategic View on Improving Hungary’s Competitiveness

BBJ: Congratulations on publishing the 2024-25 recommendation package. What’s new this year?

Zoltán Szabó: In recent years, our recommendation packages have primarily focused on practical aspects across different sectors, while the new publication presents aspects and considerations that affect Hungary’s competitiveness and global economic integration at a strategic level. It addresses key factors that our members consider vital for the sustainability and long-term development of the Hungarian economy and provides insights crucial for strategic planning and decision-making.

Írisz Lippai-Nagy: Our concrete recommendations for practical implementation in each of the main areas outlined in the recommendation package will be presented to stakeholders in subsequent papers, depending on their relevance, and in cooperation with government policy officials.

BBJ: You make suggestions in four crucial areas: General Business and Investment Environment; Taxation and Competitiveness; Human Capital; and Smart Growth. What are your critical findings? What are the changes that need to be implemented?

ZSz: Regarding the General Business and Investment Environment, we find that due to heavy international competition, it is imperative for Hungary to develop its investment and industrial strategies with a regional perspective. Our chamber has consistently emphasized that maintaining Hungary’s long-term competitiveness requires a significant increase in productivity and a shift in economic policy from the quantitative to the qualitative. These changes can only be realized with a firm government intent and effective measures. Without urgent intervention, we risk falling behind our regional competitors in attracting and securing capital investments, possibly even in the medium term.

We also underline the need to simplify and stabilize the current regulatory and tax system. There are currently 61 different taxes, contributions, and special taxes, while 91% of the central budget’s tax revenue is generated by only seven tax types. Reducing the number of taxes is, therefore, indispensable. It is also an EU commitment we should comply with, and it could also lead to a more attractive investment environment. Quasi-retroactive legislation that is common in the imposition of special taxes is also identified as a country risk.

ÍL-N: On Human Capital, we look at competitiveness through the lens of labor, education, and health. The Hungarian labor market is characterized by both persistent labor shortages and a certain degree of unemployment due to a mismatch between the needs of employers and the qualifications, skills and even intentions of jobseekers. In our recommendations, we highlight that meeting labor demand requires opening up the country’s internal reserves through targeted programs and budgetary resources and promoting the employment of foreign workers. Furthermore, we believe the government needs to support policy measures to prepare students and today’s employees for future challenges through appropriate education, retraining, and upskilling programs.

Health is another key contributing factor to competitiveness; more healthy citizens mean less burden on the healthcare system, and good public health indicators directly and positively impact productivity. Consequently, our view is that government spending on healthcare should not be regarded as a mandatory expenditure but rather as an investment into the country’s human capital, involving a value-added-centric approach to the system’s financing and creating a stable and predictable regulatory environment for healthcare stakeholders. Improvements in the system’s digital infrastructure are also crucial to make processes more efficient and create a more welcoming environment for further research and investment.

The available human capital fundamentally determines the country’s future competitiveness; it is, therefore, critical that the two areas that are fundamental components of economic performance, education and healthcare, are given adequate strategic weight in stakeholders’ visions for Hungary’s future.

ZSz: Lastly, in the Smart Growth section, we focus on the key questions of innovation and sustainability. A vital element of the innovation ecosystem is the collaborative framework between companies and universities, which should be elaborated and enhanced. We address digitalization, as the development of a modern data economy has significant economic and R&D&I potential, which is essential to strengthening our position on the regional and global landscape. Additionally, we stress that a gradual green transition of the economy, and industry in particular, is necessary, although it is only possible if these changes do not impose a disproportionate burden on society and do not undermine the competitiveness of EU businesses.

ÍL-N: These findings are only a brief outline of our recommendations, which we set out in detail in nearly 50 pages.

Írisz Lippai-Nagy, AmCham Hungary’s CEO.

BBJ: Perhaps the most significant word in the title is the first one: “Cooperation.” How willing a partner do you find the Hungarian Government?

ZSz: AmCham’s advocacy activity is based on an annual cycle of consultations, meetings and formulation of policy publications by our members, such as this recommendation package, which are discussed and further developed at our regularly organized Business Forums with ministers and Policy Forums at State Secretary level.

We are delighted and proud to have already received the opportunity to consult on the recommendation package with the Hungarian Investment Promotion Agency during our recent Business Forum, where he expressed Hipa and the government’s support in enhancing the investment environment and keeping an open dialogue with our business community. In recent years, the most influential decision-makers in Hungary have all accepted our invitations to similar Business and Policy Forums, and we hope that this will be the case again this year, as it is in our common interest to increase Hungary’s competitiveness. Our joint Business Meets Government Summit with Hipa, a leading advocacy forum celebrating its 10th anniversary this year, will also provide an excellent opportunity for further consultations in the fall. 

BBJ: When preparing the package, you rely on input from your member companies. How supportive of the process are they?

ÍL-N: They have been extremely supportive in preparing the document, primarily through their involvement in our committees. They have played a key role in identifying the critical questions we want to address collectively, even though we at the chamber are also closely monitoring the business landscape. Our members’ contributions are invaluable in developing recommendations, providing both expert and practical insights. Their close connection to the topic ensures a deep understanding, which enhances the document’s professionalism. In this respect, we would like to express our appreciation to our DEI&B (diversity, equity, inclusion and belonging), Healthcare, HR, Government & Transparency, Tax, Regulatory, and Sustainable Growth committees for their contributions. Furthermore, we would like to thank the members of our board of directors for their insights and support, which were also key in bringing the recommendation package to life.

This article was first published in the Budapest Business Journal print issue of May 31, 2024.