A number of villages in one of Hungary's most underdeveloped regions have decided to take control of their destiny - with some financial help from the state. By successfully treating unemployment issues and boosting local economies, some of them have already set good examples to follow. But can they manage in the long run, when state resources dry up?
If you hear on the news that a local enterprise hired 28 people, it might not seem to be a very high number. But if you learn that it is happening in a small village of 400 souls in one of the most underdeveloped regions of the country, you just might say “wow”.
The name of the place where this is happening is Belecska, a remote village situated in Tolna county, where unemployment exceeded 32% in the mid-‘90s. Today, as a result of its agricultural program, the rate is about 6%.
The program was launched 13 years ago, and provides jobs for the unemployed in the village. Belecska has become self-sufficient, and practically no one lives on welfare anymore.
The whole story started with a lucky coincidence: a friend of local mayor Róbert Jakab had several thousand strawberry seedlings which he couldn’t sell. And just about then, the village won HUF 700,000 in a social farming tender. So the village bought the nurslings, distributed them and planted them in community land. After the first year, the strawberry business turned a profit. The village soon realized that the business model could be expanded, and today several types of vegetables and fruits are produced on 25 hectares.
“In a way, Belecska is a success story,” said cultural anthropologist Gergely Kabai, who works as researcher at Pannon Elemző Iroda and Hétfa Research Institution, and is also co-author of the publication “Analyzing locally initiated economic development programs”. “But the recent death of the mayor raises questions about whether the program can be successfully maintained in the future without the commitment of Róbert Jakab.”
This question will only be answered in the future, but the non-profit company overseeing the program aspires to become entirely self-sufficient. For the time being, it is only partially so.
Revenues only cover the wages of six employees, the rest need to be paid from other sources.
The village has made HUF 5–7 million annually from selling its produce over the last few years, but this income is greatly dependent on the weather. Last year’s rains in the spring caused several millions of forints in losses.
As for securing other sources, Belecska decided to take part in a labor market program initiated by the regional employment center dubbed “Sorsfordító – sorsformáló” (Life changing – life forming).
Belecska has served as a role model for other settlements in the area. One of them is Gyulaj, with a population of 1,000 of which a notable proportion is Roma. Over the last decades, the village has seen a massive emigration of those capable and willing to work. As a result, Gyulaj faced nearly unsolvable social and employment issues.
In 2009, mayor Károlyné Dobos and the village assembly decided to join the Life changing – life forming program. Nine-month training for 10 prospective employees kicked off in 2010, and the village closed the first year successfully: farm products were sold to the community kitchen of the local municipality at a value of more than HUF 1 million.
In the meantime, another opportunity knocked: an entrepreneur approached the municipality with an offer to buy herbs from the village. The cooperation proved fruitful, and generated extra income for the local government.
After the training period closed in Gyulaj, the local government hired nine of the 10 trainees, and one was employed by a local entrepreneur. However, the program ends in October, this is when the one-year wage subsidy period ends. (Currently, wages for all those hired at the local government are fully covered by state subsidies). As the program only covers cost for the training period and the following year, the local government, already close to insolvency, will have a hard time in financing future expenses.
“The main problem of the program is sustainability,” Nándor Németh, geographer at Pannon and Hétfa, pointed out. “Due to the one-off nature of the program, it is unable to eliminate permanent unemployment.”
Since nearly all participants of the program had been unemployed for a long period of time before joining, leading them back to the labor market includes tasks such as bringing them to a mental state where they are able to work again.
“One six-month period without employment is enough to destroy all the positive effects of the program,” Németh noted.
That is why it is crucial to maintain production after the program ends.
“The conclusion is that social economies do not work without the support of the state, but at the same time, they cannot be based solely on state resources,” Németh said.
The New Széchenyi Plan earmarks HUF 12.5 billion for locally initiated economic development programs, but without a viable economic model, the outcome of such programs is dubious.
The term social economy refers to a third sector between the private and public sectors, which could play a significant role in boosting local economies and social environment. It is an economic activity which has a social impact, and as such, embodies the principle of placing social viability on a par with economic viability, social sustainability being equal to economic sustainability and the two being interdependent. Its basic principle is that raw material cannot leave the borders of the region, only processed goods can be sold outside. A good social economy model integrates market tools with state resources, creates workplaces, and strengthens areas with good market potential.
The Sorsfordító program, aimed at supporting rural employment and boosting economies in underdeveloped regions, was launched by the Southern Trans-Danubian Regional Employment Center in March 2009 and will expire in 2012. The program has two phases: a training period which is followed by a one-year employment period, mainly based on the production of agricultural products typical in the given area. The cost of the program is about HUF 660 million, the majority of which is spent on wage subsidies.
In a survey conducted last fall, 70% of participants said their social situation had improved since they entered the program, 86% of them would enroll again and nearly all of the respondents expressed a demand for further employment opportunities after the program ends.
Although the program will terminate in 2012, demand for extension is high. But it faces another challenge, namely, how could it be carried further if the regional employment centers were liquidated?
Currently, the program involves some 40 villages in the southern Hungarian region and has about 200 participants.
(The article originally appeared in the June 3rd issue of the Budapest Business Journal)