Impact of Enlargement in the Free Intra- community Movement of Goods and Services - Hungary V FORO DE INTERNACIONALIZACIÓN Murcia, 22 de marzo de 2004

Impact of Enlargement in the Free Intra-community Movement of Goods and Services - Hungary Márton Vadász Deputy Director SME Strategy and Support Department Ministry of Economy and Transport Hungary Murcia, March 22, 2004

EU: experience through generations H: mostly new enterprises, many of them „forced” ones, low capital Average size: EU: 6, H: 2-3 High percentage of self employed Share in employment: EU 65%, H: 67% SMEs in Hungary and in the EU

Weaknesses of Hungarian SMEs lack of up-to-date selling, marketing and quality conscious approach low productivity weak inter-enterprise cooperation technology lag lack of capital, difficult access to finance many SMEs feel to be dependent on state aid little information on the EU not enough attention to legal regulations shortages of foreign language skills

Strengths of Hungarian SMEs flexibility, adaptability creativity skilled employees experience in the domestic market can be motivated by state aid some subcontracting chains, franchise networks, clusters already in place

Széchenyi Enterprise Development Programme - tenders, access to finance State support Economic Competitiveness Operational Programme Programme of the MoET of preparing SMEs for the EU accession improving business environment, decreasing administrative burdens, dialogue

Effects of the EU-accession Starting point: 75% of Hungarian exports and 90% of imports already liberalised more than 70% of foreign trade with the EU member states many multinationals are present for about 10 years Hungary - one region under Objective 1 - qualifying for the Structural Funds

Effects of the EU-accession enterprises of other accession countries will also be competitors even bigger problem: part of FDI leaving for neighbouring countries and Far-East due to less incentives and growing wages accession: not a single act but beginning of a longer process, less dramatic than the early 90’s for Hungarian enterprises (shift of markets, end of COMECON)

Macroeconomic effects:  balance of Hungarian contribution and EU support available in : + EUR 1390 million accelerated growth (GDP appr.+ 0,8% p.a.) accelerated growth (GDP appr.+ 0,8% p.a.) growing investments(+ 2,5-3,5% p.a.) growing investments(+ 2,5-3,5% p.a.) technology transfer, know-how inflow technology transfer, know-how inflow growing productivity growing productivity new jobs new jobs new markets, FDI, subcontracting relations new markets, FDI, subcontracting relations Effects of the EU-accession Macroeconomic effects:  balance of Hungarian contribution and EU support available in : + EUR 1390 million accelerated growth (GDP appr.+ 0,8% p.a.) accelerated growth (GDP appr.+ 0,8% p.a.) growing investments(+ 2,5-3,5% p.a.) growing investments(+ 2,5-3,5% p.a.) technology transfer, know-how inflow technology transfer, know-how inflow growing productivity growing productivity new jobs new jobs new markets, FDI, subcontracting relations new markets, FDI, subcontracting relations

Effects of the EU-accession conditions becoming easier environmental aspects health and security requirements reduced transaction costs no border and customs administration on HU- EU borders more stringent conditions regulations on vocational training consumer protection product liability rules

Effects of the EU-accession strongercompetition export oriented medium- sized firms enterprises of the HU-EU border regions micro and small enterprises serving local needs hi-tech SMEs weak effect wide-spread anxiety: thousands of SMEs will go bankrupt 

Effects of the EU-accession biggest threat: losing by being unable to make use of the opportunities offered by the single market (no ability for finding support possibilities and tendering because of small size and lack of language skills - shortages of absorption capacity, institutions, project-generation, etc.)

traditional processing industry Effects of the EU-accession facing challenge telecommunication environmental services financial services potential winners tourism transport construction industry need for investments

Effects of the EU-accession Thank you for your kind attention!