Ten years after the launch of the previous Széchenyi Plan, the government has set ambitious goals for its successor. By helping to reduce the budget deficit and promoting employment and competitiveness, the plan is expected to lift the country out of its economic slump.
Any EU member state would be happy to accept 5% GDP growth these days, including Germany, and that is the target that the Hungarian economy is expected to achieve within three years. The government also forecasts 300,000 new jobs created and a 25% investment rate by 2014. In order to meet these targets and put the economy back on track, the government will rely heavily on the New Széchenyi Plan (NSzP), launched last week.
Under the NSzP, an overall HUF 2,000 billion will be available between 2011 and 2013, out of which HUF 1,100 billion of new funding is to be allocated this year. The NSzP allows for the integrated handling and use of state and EU funding. Besides EU and state subsidies, bank credit will also be available and can be combined with the above sources.
Out of the seven key areas of the NSzP (see table), business development is going to receive the most generous support. Calls for technological and infrastructure development have long been the most popular and thanks to the revised requirements, they will be available to a much wider group of applicants.
“Under the New Hungary Development Plan (NHDP) [the previous government’s EU funding program], a company’s revenues couldn’t show a decrease of 5%–15% in two consecutive years. This term excluded many applicants in 2010 who suffered losses as a result of the financial crisis,” explained Tamás Badacsonyi, the director of NLC Consulting Group, a consultancy with thorough experience in tender applications. In the NSzP, both the amount and the intensity of funding are higher. In a regional comparison, central Hungary still lags behind (as a result of an earlier EU decision saying less developed regions should receive more funding), but even in this region there is progress. For example, the funding intensity of technological development for SMEs in Budapest has increased to 30%.
With some exaggeration, the NSzP has been tailored to SMEs’ needs. The government expects this group to revive economic growth; the NSzP will give them a chance to prove themselves. Through the elimination of massive bureaucracy, excessive fees and unfair market monopolies, healthy companies are promised a more favorable business environment. Less competitive firms with insufficient funds can apply for pre-financing and can also combine non-refundable grants and credits. The government hopes that the foreign trade opportunities of SMEs – which currently account for 8–10% of all exports – will rise to 20%.
“In the past eight years, the Hungarian economy was mainly export-driven, which was beneficial mostly for medium-sized and large corporations,” said György Szűcs, director of the Hungarian Association of Craftsmen’s Corporations (IPOSz). Szűcs believes that the tenders and projects of the NSzP will support the government’s goal of creating one million new jobs by encouraging firms to expand.
However, even though the NSzP promotes training and retraining due to their impact on employment, from now on funding for such aims will be linked to a successful business development project. “In the past, there have been several examples of the misuse of funds: many companies used the money to finance operating costs,” NLC’s Badacsonyi explained. For similar reasons, funding for e-commerce has been slashed as well. Increased scrutiny may be justified; however, withdrawing support from e-commerce at a time when online shopping is booming is questionable.
The knowledge-based economy is one field that will benefit from the NSzP. The policymakers behind the plan have correctly recognized the business potential that lies both in small and larger-scale innovation projects. “It is a great opportunity for example, for smaller firms to finance patents or a less costly prototype,” Badacsonyi noted. Tourism is among the winners as well. Yet unlike the NHDP, which supported large-scale spa developments in the Great Plains region, the NSzP will give preference to smaller-scale projects even in the Transdanubia region.
Western Transdanubia will benefit greatly as well: compared to 3–4 projects and about HUF 2.5 billion in annual subsidies, the region will receive double the amount. Businesses such as inns, restaurants or complementary service providers can expect to get funds. Rural tourism, however, is excluded from the beneficiaries: they can apply for support to the New Hungary Rural Development Plan. Green business is another highlighted area of the NSzP, though many are not satisfied with the funds this field will receive. “Although the NSzP contains some useful changes we welcome, it hasn’t done a good job in achieving a green paradigm shift,” said Márta Vetier of Greenpeace. “Just compare the amount of funds available for green development with those for transport.”
In terms of technical details, the government promised a simpler and more efficient system, complete with faster decision-making and payments. It seems, however, that tender writing will not be easier. “True, the information and documentation required to apply to a certain project has been reduced to a 10-page booklet, but in order to understand the whole procedure, one has to read the 70-page general information brochure as well,” said Badacsonyi. He believes that – contrary to what the government said – tender writers will still be needed, as “the NSzP may have become more straightforward, but EU regulations haven’t.” (Zsófia Végh)