Hungarian Partnership Agreement - Nemzetgazdasági Tervezési Hivatal

Hungarian Partnership Agreement, for the 2014–2020 programme period:

Final Draft

2nd July 2013, Budapest

prepared by the Ministry for National Economy with contributions from the Office for National Economic Planning

1

Table of contents THE PROCESS OF PREPARING THE DRAFT PARTNERSHIP AGREEMENT ...................................................................................... 8 1.

ARRANGEMENTS TO ENSURE ALIGNMENT WITH THE UNION STRATEGY OF SMART, SUSTAINABLE AND INCLUSIVE GROWTH AS WELL AS THE FUND SPECIFIC MISSIONS PURSUANT TO THEIR TREATY-BASED OBJECTIVES, INCLUDING ECONOMIC, SOCIAL AND TERRITORIAL COHESION (ARTICLE 14(1) (A) CPR) ................ 9 1.1. An analysis of disparities, development needs, and growth potentials with reference to the thematic objectives and the territorial challenges and taking account of the national reform programme, where appropriate, and relevant countryspecific recommendations adopted in accordance with Article 121(2) of the Treaty on the Functioning of the European Union and relevant Council recommendations adopted in accordance with Article 148(4) of the Treaty on the Functioning of the European Union ............................................................................................................................................................................ 9 1.1.1.

OVERALL STATE OF PLAY: The economic environment of the EU funded developments of the 2014–2020 planning period ....................................................................................................................................................................... 9

1.1.2.

DEVELOPMENT FOCUS: The national development objectives for the 2014-2020 time period ............................. 11

1.1.3.

SITUATION ANALYSIS: Weaknesses, potentials and development needs by thematic objectives ........................... 13

MAIN NATIONAL DEVELOPMENT PRIORITY 1: Improving competitiveness and global performance of the business sector ................................................................................................................................................................................ 13 THEMATIC OBJECTIVE 1: Strengthening research, technological development and innovation .................................. 13 THEMATIC OBJECTIVE 2: Enhancing access to, and use and quality of, information and communication technologies ..................................................................................................................................................................................... 17 THEMATIC OBJECTIVE 3: Enhancing the competitiveness of small- and medium-sized enterprises, the agricultural sector (for the EAFRD) and the fisheries and aquaculture sector (for the EMFF) ........................................................ 20 MAIN NATIONAL DEVELOPMENT PRIORITY 2: Increasing the level of employment through economic development, employment, education and social inclusion policies, taking account of territorial disparities ........................................ 28 THEMATIC OBJECTIVE 8: Promoting employment and supporting labour mobility ..................................................... 28 MAIN NATIONAL DEVELOPMENT PRIORITY 3: Enhancing energy and resource efficiency ............................................... 35 THEMATIC OBJECTIVE 4: Supporting the shift towards a low-carbon economy in all sectors ...................................... 35 THEMATIC OBJECTIVE 5: Promoting climate change adaptation and risk prevention .................................................. 38 THEMATIC OBJECTIVE 6: Protecting the environment and promoting the sustainable use of resources..................... 40 THEMATIC OBJECTIVE 7: Promoting sustainable transport and removing bottlenecks in key network infrastructures44 MAIN NATIONAL DEVELOPMENT PRIORITY 4: Tackling social and demographic challenges; good governance ............... 48 THEMATIC OBJECTIVE 9: Promoting social inclusion and combating poverty .............................................................. 48 THEMATIC OBJECTIVE 10: Investing in education, skills and lifelong learning .............................................................. 52 THEMATIC OBJECTIVE 11: Enhancing institutional capacity and ensuring an efficient public administration ............. 56 1.1.4. AN ANALYSIS OF THE RELEVANT TERRITORIAL IMBALANCES ................................................................................. 59 1.1.5.

THE NEED TO TRANSFER FUNDS BETWEEN CATEGORIES OF REGIONS .................................................................. 63

1.2. A summary of the ex ante evaluations of the programmes or key findings of the ex-ante evaluations of the PA where undertaken by the Member State at its own initiative ............................................................................................................... 63 1.3. Selected thematic objectives, and for each of the selected thematic objectives a summary of the main results expected for each of the ESI Funds ............................................................................................................................................. 64 1.3.1.

DEVELOPMENT FOCUSES: Compliance between the 11 thematic objectives of the EU and the national development objectives in the 2014-2020 period .................................................................................................. 64

MAIN NATIONAL DEVELOPMENT PRIORITY 1: Improving the competitiveness and global performance of the business sector ................................................................................................................................................................................ 65 MAIN NATIONAL DEVELOPMENT PRIORITY 2: Increasing the level of employment ......................................................... 67 (by economic development, employment, education, social inclusion policies with regard to territorial disparities) ..... 67 MAIN NATIONAL DEVELOPMENT PRIORITY 3: Increasing energy and resource efficiency ............................................... 69 MAIN NATIONAL DEVELOPMENT PRIORITY 4: Tackling social inclusion and demographic challenges; good governance 70 MAIN NATIONAL DEVELOPMENT PRIORITY 5: Local and regional economic development .............................................. 72 1.3.2. Selected thematic objectives, and for each of the selected thematic objectives a summary of the main results expected for each of the ESI Funds ......................................................................................................................... 76 MAIN NATIONAL DEVELOPMENT PRIORITY 1: Improving competitiveness and global performance of the business sector ................................................................................................................................................................................ 76 THEMATIC OBJECTIVE 1: Strengthening research, technological development and innovation .................................. 76 THEMATIC OBJECTIVE 2: Enhancing access to, and use and quality of, information and communication technologies

2

..................................................................................................................................................................................... 77 THEMATIC OBJECTIVE 3: Enhancing the competitiveness of small- and medium-sized enterprises, the agricultural sector (for the EAFRD) and the fisheries and aquaculture sector (for the EMFF) ........................................................ 78 MAIN NATIONAL DEVELOPMENT PRIORITY 2: Increasing the level of employment through economic development, employment, education and social inclusion policies, taking account of territorial disparities ....................................... 79 THEMATIC OBJECTIVE 8: Promoting employment and supporting labour mobility ..................................................... 79 MAIN NATIONAL DEVELOPMENT PRIORITY 3: Enhancing energy and resource efficiency ............................................... 81 THEMATIC OBJECTIVE 4: Supporting the shift towards a low-carbon economy in all sectors ...................................... 81 THEMATIC OBJECTIVE 5: Promoting climate change adaptation and risk prevention .................................................. 82 THEMATIC OBJECTIVE 6: Protecting the environment and promoting the sustainable use of resources..................... 83 THEMATIC OBJECTIVE 7: Promoting sustainable transport and removing bottlenecks in key network infrastructures84 MAIN NATIONAL DEVELOPMENT PRIORITY 4: Tackling social and demographic challenges; good governance .............. 85 THEMATIC OBJECTIVE 9: Promoting social inclusion and combating poverty on the most disadvantaged, mostly rural areas. ............................................................................................................................................................................ 85 THEMATIC OBJECTIVE 10: Investing in education, skills and lifelong learning .............................................................. 87 THEMATIC OBJECTIVE 11: Enhancing institutional capacity and ensuring an efficient public administration ............. 88 1.4. The indicative allocation of support by the Union by thematic objective at national level for each of the ESI Funds, as well as the total indicative amount of support foreseen for climate change objectives ............................................................. 89 1.5.

The application of horizontal principles and policy objectives for the implementation of the ESI Funds ...................... 91

1.5.1.

Arrangements for the partnership principle (with reference to Article 5 of the CPR) (Article 14 (1) (c) CPR), including an indicative list of partners and a summary of the actions taken to involve those partners as referred to in Article 5 CPR and their role in the preparation of the Partnership Agreement and the progress report as defined in Article 46 CPR. ....................................................................................................................................... 91

1.5.2.

Promotion of equality between men and women, non-discrimination and accessibility (with reference to Article 7 of CPR) ................................................................................................................................................................. 93

1.5.3.

Sustainable development (with reference to Article 8 of CPR) ............................................................................... 93

1.5.4.

Further horizontal policy objectives: territorial cohesion ....................................................................................... 94

Accessibility .................................................................................................................................................................. 94 Handling demographic challenges ............................................................................................................................... 94 Prevention of climate change and adaptation ............................................................................................................. 94 Territorial cohesion in order to ensure regional sustainability and local economy ...................................................... 94 1.6. The list of the programmes under the ERDF, the ESF, the Cohesion Fund, except those under the European territorial co-operation goal, and of the programmes of the EAFRD and the EMFF, with the respective indicative allocations by ESI Fund by category of region (where relevant) and by year ................................................................................................................... 95 2.

ARRANGEMENTS TO ENSURE EFFECTIVE IMPLEMENTATION (ARTICLE 14(1) (B) CPR) ...................................... 98 2.1. The arrangements, in line with the institutional framework of the Member States, that ensure coordination between the ESI Funds and other Union and national funding instruments and with the EIB................................................................... 98 2.2...... The information required for ex ante verification of compliance with the rules on additionality (based on Annex xx CPR) .................................................................................................................................................................................................. 101 2.3. A summary of the assessment of the fulfilment of applicable ex ante conditionalities in accordance with Article 17 and Annex (xx) for which national bodies are responsible and of the actions to be taken, and the timetable for their implementation, where ex ante conditionalities are not fulfilled ............................................................................................. 102 2.4. The methodology and mechanism to ensure consistency in the functioning of the performance framework in accordance with Article 19 of the CPR ...................................................................................................................................... 168 2.5. An assessment of whether there is a need to reinforce the administrative capacity of the authorities and, where appropriate, of the beneficiaries, as well as, where necessary, a summary of the actions to be taken for this purpose. ......... 169 2.6. A summary of the actions planned in the programmes, including an indicative timetable, to achieve a reduction in the administrative burden for beneficiaries .............................................................................................................................. 172

3.

DESCRIPTION OF THE INTEGRATED APPROACH TO TERRITORIAL DEVELOPMENT SUPPORTED BY THE ESI FUNDS174 3.1.

Types of integrated developments ............................................................................................................................. 175

3.1.1.

Community-led local development (CLLD) ........................................................................................................... 178

3.1.2.

Integrated territorial investments (ITI) ................................................................................................................. 180

3.1.3.

Sustainable urban region development ................................................................................................................ 182

3.1.4.

Priority areas of international territorial co-operation ......................................................................................... 183

3.1.5.

Integrated development of less favoured areas and disadvantaged groups ......................................................... 184

3

4.

ARRANGEMENTS TO ENSURE EFFICIENT IMPLEMENTATION OF THE PARTNERSHIP AGREEMENT AND PROGRAMMES (ARTICLE 14(2)(B) CPR) ......................................................................................................... 185 4.1. An assessment of the existing systems for electronic data exchange, and a summary of the actions planned to gradually permit all exchanges of information between beneficiaries and authorities responsible for management and control of programmes to be carried out by electronic data exchange ................................................................................................ 185

4

Abbreviations (Abbreviations occur in the text both in Hungarian and in English.) ACEA AEF AMF CAP CCHOP CEF CF CHR CIRIEC CLLD

European Automobile Manufacturers’ Association ACEA Agricultural and Environmental Farming Subsidy AKG Asylum and Migration Fund MMA Common Agricultural Policy KAP Competitive Central-Hungary Operational VEKOP Programme Connecting Europe Facility CEF Cohesion Fund KA Central Hungary Region KMR International Centre of Research and Information CIRIEC on the Collective Economy Community-led Local Development

CLLD

Programme for the Competitiveness of COSME enterprises and SMEs 2014-20 (COM) Common Provisions (CPR) - REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the CPR CPR European Maritime and Fisheries Fund covered by the Common Strategic Framework and laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Council Regulation (EC) No 1083/2006 CT County Towns MJV DGWM Directorate General of Water Management OVF Die Deutsch-Ungarische Industrieund Handelskammer DUIHK DUIHK German-Hungarian Chamber of Industry and Commerce) European Agricultural Fund for Rural EARDF EMVA Development E-CORDA External Common Research Data Warehouse E-CORDA Economic Development and Innovation EDIOP GINOP Operational Programme Európai Környezetvédelmi ÜgynökségEuropean EEA EEA Environmental Agency EEF European Entrepreneurship Foundation EEF Environmental and Energy-Efficiency Operational EEEOP KEHOP Programme EIB European Investment Bank EIB ELI Extreme Light Infrastructure ELI EMFF European Maritime and Fisheries Fund ETHA eNET eNET Internet Research and Consulting Ltd. eNET ENI European Neighbourhood Instrument 2014-20 ENI ERA European Research Area ERA EU programme for education, training, youth and ERASMUS for all ERASMUS for all sport (COM) ERDF European Regional Development Fund ERFA ERTMS European Rail Traffic Management System ERTMS ESF European Social Fund ESZA European Structural and Investment Funds (ERDF, ESI Funds ESB alapok ESF, CF, EARDF, EMFF) ETC European Territorial Co-operation ETE ETC European Travel Commission ETC EU European Union EU EUDRS EU Strategy for the Danube Region EUDRS European groundwater and contaminated land EUGRIS EUGRIS remediation information system Europe2020 Europe2020 a strategy for smart, sustainable and Strategy / EU2020 inclusive growth EU2020 COSME

5

Európai Autógyártók Szövetsége Agrár-környezetgazdálkodási támogatás Menekültügyi és Migrációs Alap Közös Agrárpolitika Versenyképes Közép-Magyarország Operatív Program Európai összekapcsolódási eszköz Kohéziós Alap Közép-magyarországi régió A Közös Gazdaság Nemzetközi Kutató és Információs Központja közösség által irányítottKözösségvezérelt helyi fejlesztések A vállalkozások versenyképességét és a kis- és középvállalkozásokat segítő program (2014–20) AZ EURÓPAI PARLAMENT ÉS A TANÁCS RENDELETE a Közös Stratégiai Kerethez tartozó Európai Regionális Fejlesztési Alapra, Európai Szociális Alapra, Kohéziós Alapra, Európai Mezőgazdasági Vidékfejlesztési Alapra és Európai Tengerügyi és Halászati Alapra vonatkozó közös rendelkezések megállapításáról, az Európai Regionális Fejlesztési Alapra, az Európai Szociális Alapra és a Kohéziós Alapra vonatkozó általános rendelkezések megállapításáról és az 1083/2006/EK tanácsi rendelet hatályon kívül helyezéséről Megyei jogú város Országos Vízügyi Főigazgatóság Német-Magyar Ipari és Kereskedelmi Kamara

Európai Mezőgazdasági Vidékfejlesztési Alap External Common Research Data Warehouse Gazdaságfejlesztési és Innovációs Operatív Program Európai Környezetvédelmi Ügynökség European Environmental Agency Európai Vállakozói Alapítvány Környezeti és Energetikai Hatékonysági Operatív Program Európai Befektetési Bank Extreme Light Infrastructure Európai Tengerügyi és Halászati Alap eNET Internetkutató és Tanácsadó Kft. Eu-i szomszédsági támogatási eszköz (2014-20) Európai Kutatási Térség Erasmus mindenkinek: Az EU oktatási, képzési, ifjúsági és sportprogramja Európai Regionális Fejlesztési Alap Egységes Európai Vasúti Közlekedésirányítási Rendszer Európai Szociális Alap Európai Strukturális és Beruházási alapok (ERFA, ESZA, KA, EMVA, ETHA) Európai Területi Együttműködés Európai Turisztikai Bizottság Európai Unió Európai Unió Duna Régió Stratégiája European groundwater and contaminated land remediation information system Az Európai Unió 10 éves növekedési stratégiája

European Private Equity and Venture Capital EVCA Association FEAD Fund for European Aid to the most Deprived FEAD GDP Gross domestic product GDP GHG Inventory GHG Inventory of Hungary, 1985-2012 ÜHG Leltár GMO Genetically Modified Organism GMO National Institute for Quality- and Organizational GYEMSZI GYEMSZI Development in Healthcare and Medicines HCSO Hungarian Central Statistical Office KSH Human-Resources Development Operational HDOP EFOP Programme Hungarian Fishery and Aquaculture Operational HFAOP MAHOP Programme HNEP Hungarian National Environmental Program NKP Hungarian Research, Development and HRDIS 2020 NKFIS Innovation Strategy 2020 HSR (MÁV) Hungarian State Railways MÁV EVCA

IACS

Integrated Administration and Control System

IB ICSS ICT

Intermediate Body KSZ Integrated Community Service Space IKSZT Information and communications technology IKT International Institute for Management IMD Development Integrated Monitoring Information System IMIR Internal Security Fund (EU Home Affairs) BBA Information technology IT Integrated Territorial Investment ITI Innovation Union Scoreboard IUS Key Enabling Technologies KET Kilonewton kN Local Action Groups HACS Local Development Plan HFS Liaison Entre Actions de Développement de LEADER l`Economie Rurale Least favoured areas, according to 311/2007. (XI.17.) Government Regulation : classification of LHH the beneficiary areas EU’s Financial Instrument for the Environment LIFE+ Long life learning LLL Land-Use, Land-Use Change and Forestry LULUCF Managing authorities IH Ministry of Human Resources EMMI Ministry of Interior BM Ministry of National Development NFM Ministry for National Economy NGM Transport-Mobility Development Operational KOP Programme (2014-2020) Ministry of Public Administration and Justice KIM Ministry of Rural Development VM National Bank of Hungary MNB National River Basin management Plan VGT National Directorate General for Disaster OKF Management National Development and Territorial OFTK Development Concept Young person who is not in education, NEET employment, or training. National Research Infrastructure Survey and NEKIFUT Roadmap National Food Chain Safety Office NÉBIH National Reform Programme NRP National Rural Strategy NVS National Social Inclusion Strategy NTFS National Tax and Customs Administration of NAV Hungary National Transport Strategy NKS

IMD IMIS ISF IT ITI IUS KET kN LAG LDP LEADER LFA LIFE+ LLL LULUCF MA MHR MI MND MNE MOP MPAJ MRD NBH NCMP NDGDM NDTC NEET NEKIFUT NFCSO NRP NRS NSIS NTCA NTS

IIER

6

Európai Magán,- és Kockázati Tőkekezelő Egyesület Fund for European Aid to the most Deprived Bruttó hazai termék Üvegházhatású gázok leltára Mo., 1985-2012 Genetikailag módosított élőlények Gyógyszerészeti és Egészségügyi MinőségSzervezetfejlesztési Intézet Központi Statisztikai Hivatal

és

Emberi-Erőforrás Fejlesztési Operatív Program Magyar Halgazdálkodási Operatív Program Nemzeti Környezetvédelmi Program Nemzeti Kutatás-fejlesztési és Innovációs Stratégia 2020 Magyar Államvasutak Integrált Igazgatási és Ellenőrzési Rendszer (EU mezőgazdasági és vidékfejlesztési támogatások) Közreműködő Szervezet Integrált Közösségi és Szolgáltató Tér Info-kommunikációs technológiák International Institute for Management Development Integrált Monitoring és Információs Rendszer Belső Biztonsági Alap (Belügyi programok) Információtechnológia(i) Integrált területi beruházás Uniós Innovációs Eredménytábla Kulcstechnológiák Kilonewton Helyi Akciócsoport Helyi Fejlesztési Stratégia Közösségi kezdeményezés a vidék gazdasági fejlesztése érdekében Leghátrányosabb helyzetű kistérségek a kedvezményezett térségek besorolásáról szóló 311/2007. (XI.17.) Korm. rendelet alapján Környezetvédelmi célú pénzügyi eszköz (EU) Egész életen át történő tanulás Földhasználat, -megváltoztatás és erdőgazdálkodás Irányító Hatóság Emberi Erőforrások Minisztériuma Belügyminisztérium Nemzeti Fejlesztési Minisztérium Nemzetgazdasági Minisztérium Integrált Közlekedésfejlesztési Operatív Program (2014-2020) Közigazgatási és Igazságügyi Minisztérium Vidékfejlesztési Minisztérium Magyar Nemzeti Bank Országos Vízgyűjtőgazdálkodási Terv Országos Katasztrófavédelmi Főigazgatóság Országos Fejlesztési és Területfejlesztési Koncepció Nem foglalkoztatott, oktatásban vagy képzésben nem részesülő fiatal Nemzeti Kutatási Infrastruktúra Felmérés és Útiterv program Nemzeti élelmiszerlánc-biztonsági Hivatal Nemzeti Reform Program Nemzeti Vidékstratégia Nemzeti Társadalmi Felzárkózási Stratégia Nemzeti Adó- és Vámhivatal Nemzeti Közlekedési Stratégia

NUTS OECD OP PA PISA PJ PM10 PwC R&D R&D&I RP RIAE SA SAO SEZ SLFA SBA SFC

Nomenclature of Territorial Units for Statistics NUTS Organisation for Economic Co-operation and OECD Development Operative Programme OP Partnership Agreement PM Programme for International Student Assessment PISA Petajoule PJ Particulate matter PM10 PricewaterhouseCoopers Auditing Ltd. PwC Research and Development K+F Research, Development and Innovation K+F+I Rural Development Programme VP Research Institute of Agricultural Economics AKI Structural Funds SA State Audit Office of Hungary ÁSZ Special Enterprise Zone SzVZ Subsidization of Less favoured area KAT Small Business Act SBA Structural Funds Common (electronic data SFC interchange)

SILC

Statistics on Income and Living Conditions

SMEs SMR TA 2020 SROP TEN-T THW TI TO

Small and medium enterprises KKV Strategic Monitoring Report SMJ Territorial Agenda of the European Union 2020 TA2020 Social Renewal Operational Programme TÁMOP Trans-European Transport Networks TEN-T Technisches Hilfswerk (German Gov. Agency) THW Transparency International TI Thematic Objectives TC Territorial and Settlement Development TOP Operational Programme Unified Monitoring Information System EMIR Vásárhelyi Plan Improvement Programme( VTT World Health Organization WHO World Travel & Tourism Council WTTC Youth Employment Initiative YEI

TOP UMIS VPIP WHO WTTC YEI

SILC

7

Statisztikai Területi Egységek Nomenklatúrája Gazdasági Együttműködési és Fejlesztési Szervezet Operatív program Partnerségi Megállapodás A nemzetközi tanulói teljesítménymérés programja Petajoule Szálló por tartalom (10 mikronnál kisebb) PricewaterhouseCoopers Könyvvizsgáló Kft Kutatás-fejlesztés Kutatás-fejlesztés és innováció Vidékfejlesztési Program Agrárgazdasági Kutató Intézet Strukturális Alapok Állami Számvevőszék Szabad Vállakozási Zóna Kedvezőtlen adottságú területek támogatása Kisvállalkozói intézkedéscsomag Strukturális Alapok (elektronikus adatcsere) A jövedelemre és az életkörülményekre vonatkozó statisztikák Kis- és középvállalkozás Stratégiai Monitoring Jelentés Az Európai Unió Területi Agendája Társadalmi Megújulás Operatív Program Transzeurópai közlekedési hálózat Német Szöv. Műszaki Segítségnyújtási Ügynökség Transparency International Tematikus célok Terület- és Településfejlesztési Operatív Program Egységes Monitoring és Információs Rendszer Vásárhelyi Terv Továbbfejlesztése Egészségügyi Világszervezet Utazási és Turisztikai Világtanács Ifjúsági foglalkoztatási kezdeményezés

THE PROCESS OF PREPARING THE DRAFT PARTNERSHIP AGREEMENT The Partnership Agreement (PA) relating to the period 1 January 2014 to 31 December 2020 identifies the most important challenges facing Hungary, and defines the country’s main development priorities. The PA describes how EU development resources (the ESI funds) received by Hungary contribute to the fulfilment of the Europe 2020 Strategy (EU2020) and the objectives of EU Cohesion Policy. The PA also incorporates key issues addressed in the National Reform Programme and the Country-specific Recommendations published by the European Council. In addition, the PA outlines the conditions for the successful and efficient use of funds. The European Commission will approve the Partnership Agreement following in-depth consultation with the Hungarian Government. The PA was prepared and coordinated by the Ministry for National Economy, involving all the relevant ministries, based on Governmental Decree 1600/2012. The PA identifies the main Hungarian focal points within the EU2020 objectives of smart, sustainable and inclusive growth based on Hungarian national, sector and territorial planning documents (see Annex 1). The structure and the content of the Partnership Agreement follows the requirements of the Common Provisions (CPR) which are under negotiation, as well as the document issued by the EU Commission titled “Draft Template and Guidelines on the Content of the Partnership Agreement – Version 1 – 21.12.2012”. Detailed development objectives identified in the Partnership Agreement are outlined within each programme, as follows: the sector and territorial operational programmes (OPs) based on resources from the Structural Funds and the Cohesion Fund; the rural development programme which allocates resources from the European Agricultural Fund for Rural Development; the operational programme of the European Maritime and Fisheries Fund; as well as the European (international) territorial cooperation programmes related to Hungary. The planning of the Partnership Agreement and the operational programmes – bearing in mind the principles of multi-level governance and partnership – has taken place in two phases. –

–

In the first phase the planning of the Partnership Agreement has necessarily been a top-down process, based on the development needs defined by the line ministries (included those contained in the national strategies), and on the planning guidelines, templates, and comments of the European Commission. In this phase, the current version of the PA has been subject to expert consultation in reference to the situation analysis, the identification of main development needs, the definition of results to be achieved, the indicative allocation of resources, the list and inner structure of operational programmes and the delivery system. In this phase the involvement of partners took place mainly in the light of their input for key preparatory national planning documents (see Chapter 1.5.1). In the second phase – given recent progress made in planning the OPs – the drafting of the PA and the operational programmes will continue. It will be finalized on the basis of extensive expert consultations, followed by a broad partnership input involving all relevant economic, social, environmental and territorial actors.

The current version of the Partnership Agreement has been accepted by the European Commission as a draft, and the Commission services consultation process has been launched on the 1st of July.

8

Chapter 1A

1. ARRANGEMENTS TO ENSURE ALIGNMENT WITH THE UNION STRATEGY OF SMART, SUSTAINABLE AND INCLUSIVE GROWTH AS WELL AS THE FUND SPECIFIC MISSIONS PURSUANT TO THEIR TREATY-BASED OBJECTIVES, INCLUDING ECONOMIC, SOCIAL AND TERRITORIAL COHESION (ARTICLE 14(1) (A) CPR) 1.1. An analysis of disparities, development needs, and growth potentials with reference to the thematic objectives and the territorial challenges and taking account of the national reform programme, where appropriate, and relevant country-specific recommendations adopted in accordance with Article 121(2) of the Treaty on the Functioning of the European Union and relevant Council recommendations adopted in accordance with Article 148(4) of the Treaty on the Functioning of the European Union 1.1.1. OVERALL STATE OF PLAY: The economic environment of the EU funded developments of the 2014–2020 planning period Small and open economy: challenges and opportunities Hungary is a strongly export-oriented country with a small internal market, extremely open to the global economy, and particularly to the economies of the European Union. In 2011, exports stood at 91.3% of GDP, and imports at 84.6% of GDP (source: EEF, Spring, 20131). This openness is the engine of growth, although it is clear that especially during these times of global crisis, and the shrinking of export markets, it can make the country more vulnerable. The relatively high level of potential socialeconomic development is another specific characteristic of an export-led growth model. However, the convergence of Hungary with the European core requires more: the strengthening of other economic sectors and activities in addition to the export orientation. Permanent convergence and structural reforms A necessary prerequisite for permanent convergence is fiscal stability. At the same time structural reforms which enhance competitiveness are crucial. Therefore, during the past year Hungary has worked toward financial consolidation in parallel with commencing structural reforms. As a result of the fiscal consolidation measures implemented, the state budget deficit can now be kept permanently below 3% of GDP (see EEF Spring, 2013) and the public debt-to-GDP is showing a downward trend. Furthermore, in the spirit of the country-specific recommendations, Hungary has established institutional structures (e.g. debt brakes, Act on Stability, State Budget Council) which ensure long term financial stability. Parallel to the fiscal measures, the different structural reforms – pension reform, territorial public administration reform, labour market reform, tax reform, educational reform, healthcare reform – have together contributed significantly to enhancing the competitiveness of the Hungarian economy. Fiscal stability and structural reforms together are enabling Hungary to bring about economic growth built on a healthy base, not financed by debt. Beneficial macro-economic conditions for the absorption of funds in the 2014–2020 development period As a result of the financial consolidation processes during 2011-2012 the gross public debt rate has decreased from 81.4% (2011) to 79.2% (2012) in Hungary while in the EU as a whole this debt rate has increased from 82.5% to 85.3% during the same period of time (EEF, Spring, 2013). Furthermore, in Hungary the general government deficit has decreased to -1.9% of GDP compared to the average EU rate of -3,7% of GDP, positioning Hungary seventh among the 27 member states (EEF, Spring, 2013). Together 1

EC DG for Economic and Financial Affairs: Commission Staff Working Document – European Economic Forecast, Spring 2013, European Union 2013., pp. 72-73)

9

with fiscal stabilisation, employment levels have improved by +1.7 percentage points in 2012 compared to 2011, and counter to general European employment trends. In Hungary the phase of fiscal consolidation came to an end in 2012. The government took effective structural measures to decrease the state deficit, and it officially emerged from the excessive deficit procedure on 21 st June 2013 (whereby the deficit exceeds 3% of GDP), pursuant to the decision approved by ECOFIN. The EDP2 had been in effect since 5th July 2004, almost from the start of Hungarian EU membership. In the future the government deficit will be maintained at below 3%, thus fulfilling in the long term the most important requirements defined by the EDP. (20 out of 27 member states were under the same process in the first half of 2013.) This means that at the time of launching the 2014-2020 development period Hungary’s macroeconomic environment will provide beneficial conditions for investment and for the absorption of EU funding sources. As such, EU development sources will be able to impact positively on macro-economic trends in Hungary. Based on the Convergence Programme of Hungary 2013-2016, and assuming a moderate global recovery, the Hungarian economy is predicted to grow by 0.7% this year, and by more than 2% annually during 2015 and 2016. Because of increasing demand together with the public works scheme, the employment rate is increasing and unemployment will slowly begin to decrease. Net exports remain the engine of the Hungarian economy, maintaining and slightly expanding the positive forecast for 2013. However, due to an expected boost in internal demand, an increase in import consumption is to be expected, slowing down the net export expansion. From 2013, internal demand is predicted to grow, and an increase in household consumption is projected from 2014. A slow increase in the rate of investment is expected from 2014. The external financing ability of the country will be strengthened during this upcoming period, as a direct result of savings, net exports, and the low level of budget deficit.

Main economic indicators, Hungary, 2012-2016 2012

2012

2013

level 1

GDP (bn HUF ) 1 Consumption expenditures of households (bn HUF ) 2 1 Consumption expenditures of public (bn HUF ) 1 Gross fixed capital formation (bn HUF ) 1 Export (bn HUF ) 1 Import (bn HUF ) Employment increase (15-64 age) Unemployment rate (15-74 age) %

2014

2015

2016

2.3 1.8 -0.1 3.5 6.1 5.7 0.9 10.2

2.5 1.8 0.2 3.5 6.1 5.8 0.9 9.8

76.1 -1.0 -2.2% 3.3 1.3

73.4 -2.7 -1.3 3.2 1.5

% of change

27 404 14 157.9 6 078.4 4 796.1 25 981.9 23 629.5 3 842.8 -

-1.7 -1.4 -2.2 -3.8 2.0 0.1 1.7 10.9

0.7 0.1 -0.8 -0.2 3.3 2.7 0.5 10.7

-

79.2 -1.7 -1.9% 1.6 0.3

78.1 -1.0 -2.7% 3.2 0.9

1.9 1.8 -0.8 1.3 5.8 5.2 0.8 10.5 % of GDP

Gross public debt rate Change in public debt rate General government deficit Balance of the current account Potential GDP increase

77.2 -1.0 -2.7% 3.6 1.1

Source: Convergence Programme of Hungary 2013-2016; Government of Hungary, April 2013 (HCSO, NBH, MNE calculations) 1 at previous year's price 2 Government together with non-government organizations supporting households

Key areas of the Hungarian economy need a breakthrough between 2014 and 2020 The development resources to be received in the framework of EU Cohesion Policy between 2014 and 2020 are important tools for economic growth, especially now that a stable foundation has been put in place. Nevertheless, these funds can only result in additional economic growth in Hungary if they are used in a more targeted and simple manner compared to the previous period. The use of EU funds can only be successful if they lead to real breakthroughs in key areas of the Hungarian economy; in economic growth, in employment and in high added-value production, creating a critical mass for change. 2

2004/918/EK decision

10

1.1.2. DEVELOPMENT FOCUS: The national development objectives for the 2014-2020 time period Overarching National Development Goal Based on commitments defined in the EU 2020 strategy and in the National Reform Programme, as well as on the development needs and growth potentials, the overarching national development goal for the Hungarian 2014–2020 programming period is: sustainable economic growth based on high value added production and increasing employment. Sustainable growth The goal is to achieve sustainable growth, having laid the foundations of financial consolidation which took place in 2011-2012. The relatively high economic growth in the first decade of the second millennia (though still low compared to other Central and Eastern European countries) was coupled with a fast and unsustainable increase in the public debt and a consistently high budget deficit. As a result of financial consolidation implemented in the past years sustainable economic growth based on a balanced budget is expected in the planning period 2014-2020 in Hungary. Growth is as important as sustainability, consequently funding received by Hungary such as the EU development resources for the planning period of 2014-2020, needs to be more directly focused on economic development, in particular when compared to the current period. The development programmes which are not directly of an economic nature must be engineered in a way that they can directly or indirectly contribute to the goal of growth. Hungary’s economic growth can be more stable in the long term if the potential economic resources of environmental and social structures can be better utilized. This ambition will be supported by increasing levels of employment, enhancing social cohesion, reducing environmental risks, and making more efficient and sustainable use of natural, human and cultural resources. As such funds allocated directly to support business and market development, as well as economic infrastructure development, will be supplemented by social and environmental investments. High value added production and increase in employment The overarching national development goal also depends on two fundamental sources of economic growth: the widening of resources, in particular in terms of increasing levels of employment as well as the more efficient use of resources, in particular in terms of technological development. The level of employment in Hungary is extremely low in the European context. While this is a serious economic and social problem, it is also represents a major potential for realising growth. Technological modernisation and high value added production are the most important tools for the enhancement of global competitiveness and economic convergence. The five main national development priorities In order for development actions to achieve a critical mass of change, the overarching national development goal is supported by five main national development priorities: 1. Improving the competitiveness and global performance of the business sector 2. Increasing the level of employment through economic development, employment, education and social inclusion policies, taking account of territorial disparities 3. Enhancing energy and resource efficiency 4. Tackling social inclusion and demographic challenges, good governance 5. Local and regional (territorial) economic development

11

Harmony between EU and national development efforts The overarching national priority focusing on sustainable economic growth, based on high value added production and on the increase of employment, is part of a system of objectives dealing with economic development and the integration of social and environmental factors. This system of objectives is based partly on the midterm national priorities of Hungary’s overall national planning document, the National Development and Territorial Development Concept (NDTC), and partly on the objectives of other national structural strategies. Another factor in its development is the system of objectives underpinning EU development policies (see cohesion and rural development and aquaculture/fisheries policy) for 2014-2020. Since the developments planned in the framework of the Partnership Agreement are funded by the resources of EU development policies, every Hungarian development objective supports the achievement of one or several objectives derived from EU2020. Every main national development priority supports the EU 2020 strategy and together they cover the 11 thematic objectives. However, the 11 objectives - in order to reinforce the principle of concentration have a different weight for each main national development priority. The overarching national development goal can be achieved in the most efficient way, if the EU funds and programmes used in 2014-2020 work together and reinforce one another. In the framework of the EU Partnership Agreement – to the expense of the EU sources (ESI funds) – the following thematic objectives can be supported in the 2014-2020 planning period: (1) strengthening research, technological development and innovation; (2) enhancing access to, and use and quality of, information and communication technologies; (3) enhancing the competitiveness of small and medium-sized enterprises, the agricultural sector (for the EAFRD) and the fisheries and aquaculture sector (for the EMFF); (4) supporting the shift towards a low-carbon economy in all sectors; (5) promoting climate change adaptation, risk prevention and management; (6) protecting the environment and promoting resource efficiency; (7) promoting sustainable transport and removing bottlenecks in key network infrastructures; (8) promoting employment and supporting labour mobility; (9) promoting social inclusion and combating poverty; (10) investing in education, skills and lifelong learning; (11) enhancing institutional capacity and an efficient public administration.

In compliance with the 11 thematic objectives of the EU In the next part of the document, an overview is provided of Hungary’s most important economic, social and environmental challenges, development needs and growth potentials, broken down in accordance with the 11 thematic objectives of EU Cohesion Policy. The situation analysis is based on community efforts, the EU 2020 Strategy, the commitments of the National Reform Programme and the Countryspecific Recommendations, as well as on the overall national strategies, primarily the National Development and Territorial Development Concept (for which public consultation is now closed and final approval is in progress) and the Hungarian Rural Strategy. In addition, Government sectoral strategies which have already been adopted or are being prepared, as well as the findings of the situation analyses, and EU macro-regional strategies impacting on Hungary, namely the Danube Strategy, are incorporated into the analysis.

12

1.1.3. SITUATION ANALYSIS: Weaknesses, potentials and development needs by thematic

objectives MAIN NATIONAL DEVELOPMENT PRIORITY 1: Improving competitiveness and global performance of the business sector THEMATIC OBJECTIVE 1: Strengthening research, technological development and innovation Technology-intensive export In Hungary the export-driven economic development path is strongly based on high added-value production and technology-intensive products, amounting to 22% of exports, a significant percentage in Central and Eastern Europe. However, these products are primarily produced by large global companies, and exports take place mostly within the global company and in the framework of the corporate value chain. Consequently, strengthening the RDI sector is vital not only to sustain the current competitive position; it is even more important to expand added-value production based on new knowledge across the entire business sector. Moderate innovation performance with strong sectoral, entrepreneurial and territorial concentration Hungary belongs to the member states with moderate innovator performance in the EU context according to the country’s 19th place in the EU ranking (IUS, 2013). Although R&D expenditure as a percentage of GDP reached its highest level in 2011 (in the past two decades), amounting to 1.21%, this figure is still well below the European average of 2.03% and the EU 2020 strategic target of 3%. A positive trend is that within total R&D expenditure, business expenditure exceeds public resources (state budget: 38.1%, businesses, non-profit and foreign financing: 61.9% in 2011). R&D expenditure (% of GDP) Year

Hungary

EU average

R&D expenditure

2011

1.21

2.03*

National EU 2020 target

2020

1.8

3.0

2011-2020

0.59

0.97

Increase required to reach the target (Source: EUROSTAT; *EUROSTAT estimation)

The majority of R&D expenditures can be found primarily in the pharmaceutical, automobile and IT industries. Regarding the business sector, R&D activities are most significant in global companies established in Hungary. Regarding territorial aspects, approximately two thirds of RDI expenditures are concentrated in and around Budapest. Furthermore, the research capacities and impacts of university centres outside Budapest are significant, where one pillar of complex economic development of urban regions is RDI activity. The weak innovation activity of the SME sector One of the weak points of Hungary’s innovation system is that only 13% of SMEs carry out innovation activities, compared to the EU average of around 30% (PRO INNO EUROPE, EUROSTAT, 2011). Although promising development has been present in recent years in relation to technological start-ups (for example through EU support programmes such as JEREMIE, among others), a real breakthrough and the establishment of an entire start-up eco-system are still lacking. The low level of innovation activity of the SME sector, and poor performance in connecting with global networks of technology-intensive production, have become significant obstacles to economic growth. An advantageous trend is that in Hungary the share of venture capital investments as a percentage of GDP has grown significantly. In 2012 it was one of the highest among EU member states (0.067%, the EU average is 0.024%, EVCA, 2013), although the presence of early-stage capital investments were insignificant until 2009 in the Hungarian market. The micro-, small- and medium-sized enterprise assistance instruments, such as the JEREMIE programme play a significant role in this positive trend. More than two thirds of the sources deriving from venture capital funds were allocated to four sectors: biotechnology, health industry, information industry and communication (KPMG, 2013).

13

It would be reasonable to expand the use of financial instruments in enterprise development, which have proven successful during the last period. As such, these could cover the RDI sector as well, by applying combined support (mostly combining loans with grant-type support and also market-based capital financing of the development of the start-up ecosystem) primarily in the case of interventions supporting RDI activities of enterprises. At the same time the development of incubation services could also become a focus in the future (e.g. accelerator programmes), and this could strongly contribute to the enhancement of knowledge- and technology-intensive start-ups, and to the establishment of an environment supportive of the full spin-off cycle through initial challenges, as well as to the development of knowledge, a start-up network, and an entrepreneurial structure that promotes business development and creates the possibility of involving venture capital even in the short-term, required for entering the international market. Eliminating bottlenecks Research and infrastructural capacity constraints: In Hungary, the RDI sector’s consolidation faces its greatest obstacle in the form of limited capacity, both in terms of infrastructure and number of researchers (NEKIFUT Programme, 2012). 

In spite of excellent research results in certain disciplines, even at European level, research capacities are low in Hungary; only a total of 37 000 researchers work in the business sector, or in university or academic research institutes; and the number of researchers per 10 000 employees amounts to 56; well below the OECD average (74 researchers/10000 employees).



Low capacities are present in research infrastructure, in the education of the next generation of researchers, in the establishment of corporate research facilities, as well as in knowledge and technology transfer. The relevance of developments is confirmed by the increased infrastructural demand of research activities related to the ELI project.



The number of internationally-renowned research facilities and knowledge centres is low (National RDI Strategy, 2012). The gap between the individual and institutional excellence significantly affects the efficiency of Hungarian researchers in EU excellence programmes.

Growth potentials Co-operation between research institutes and the business sector represents significant potentials: In the European Union context, the connections in Hungary between research institutes, higher education institutions and enterprises are still below average (IUS, 2013). Research co-operation opportunities between SMEs and national and foreign companies and knowledge bases represent significant unexploited development potential. Involvement in European Union and international co-operation programmes: Within the FP7, among the new member states, Hungary was in second place behind Poland in terms of funding awards. Hungary’s fund acquisition intensity reaches the EU27 average (GDP proportionate EU-27 average is 2284 EUR/million EUR GDP, the Hungarian value is 2260 EUR/million EUR GDP, eCORDA database, Eurostat, 2013). However, the success rate of Hungarian applications, as well as the participation rate compared to the EU population percentage, can only be increased if the number of researchers working in Hungary significantly increases at the same time (in 2011 the average number of researchers in new member states was 245, while in the more developed EU countries it was 560 per 100 000 people, Frauenhofer, 2012). The utilisation of opportunities of the European Research Area and of the Danube Region are also important. Bottlenecks can only be eliminated with additional resources In recent years Hungary has introduced significant reforms in the policy governance of the R&D sector in the areas of legal regulation, financing and innovation management (National Innovation Office). Yet the impact will only result in growth if further development funds are directed to the R&D sector in the future. Only additional funding can bring about that critical mass of change in the field of university and academic knowledge bases and in the utilisation of knowledge in the business sector, which can contribute to the strengthening of economic growth through higher value-added production based on more effective R&D.

14

Related objectives of the National Reform Programme and relevant country-specific recommendations The national RDI strategy, targeted to eliminate bottlenecks, is based on both the NRP-defined assumptions and on the country-specific EU recommendations: –

The NRP objective is to increase the level of R&D expenditures to 1.8% of GDP by 2020, and within total expenditure, the proportion of entrepreneurial expenditures is growing faster.

–

The relevant country-specific recommendations (2013): „5. Provide targeted incentives to support innovative enterprises.3”

RDI strategy and smart specialisation In accordance with the country-specific recommendations, the National RDI Strategy was finalised at the end of 2012, and adopted by the Government in June 2013 following an in-depth public consultation. The strategy sets the goal of creating a critical mass of change which would result in a real breakthrough in the R&D sector: the R&D expenditure as a percentage of GDP will increase to 1.8% by the end of the decade, and by strengthening the knowledge base and establishing globally competitive knowledge centres (university, academic and corporate) the number of researchers will grow significantly by 2020 (to 56 000 people). By identifying and focusing efforts on the weak innovation capacity of the SME sector, it aims to strengthen key actors in the national innovation system, including innovative SMEs. The basic preconditions for realising the objectives set up in the National RDI Strategy – reaching international excellence, creating the critical mass – are to ensure RDI infrastructure and human capacity, to create links to international research infrastructures, to improve international R&D connections, to enhance research institutes’ excellence, to participate in the large research infrastructure equipment projects of the European Strategy Forum on Research Infrastructures (ESFRI) (also with the 2nd phase of the ELI-ALPS major project). All these will greatly contribute to Hungary’s future success in Horizon2020. The national smart specialisation strategy (S3), which is currently under preparation, will continue to focus on the overall horizontal development priorities underlined in the National RDI Strategy. It prepares the basic conditions for the given specialisation, international excellence for the specialisation process (the upstream side of the synergy with the Horizon2020, ’stairway to excellence’ process) by identifying the demands for bottom-up entrepreneurial and structural change RDI capacity developments. On the other hand the strategy also pays attention to the smart specialisation that should be entirely built on the business utilisation of globally recognised RDI results (it can be implemented within Horizon2020, for example in the Key Enabling Technologies programme), this is the downstream side of the strategy. The sectoral focuses of the NSZP create a basis for defining the thematic RDI focuses, which is ensured by the preparation of the RDI Sectoral White Papers. The summary for the regions of the white papers’ objectives, which underlie the RDI break-out points and interventions of 9 sectors (Health industry, Mobility, Automotive industry and logistics, ICT, Energy, Environmental protection, Agribusiness and food processing industry) will be incorporated in the national smart specialisation strategy4. The Science Policy Strategy, which is currently under preparation, will define the main goals of basic research and provide the next generation of researchers. Both the RDI Strategy and the Science Policy Strategy define mechanisms for the coordination of resources in order to harmonise the financial assistances of the ESF-based human development OP and the ERDF-based economic development OP, thus linking the developments in the field of RDI and in higher education. Territorial disparities: weaknesses and potentials The output of the Hungarian R&D sector is even more unequally distributed territorially than in the case of economic output: two-thirds of RDI expenditures and of researchers are concentrated in the Central 3

The present version of the country-specific recommendations was approved by the General Affairs Council in 25 June 2013, and forwarded in 27-28 June 2013 to the European council for validation. The recommendations will become effective only after the formal approval of ECOFIN on 9 July. 4

To define the thematic RDI directions is the purpose of these documents. Their planning will reach the point of defining the sectoral focuses until the end of summer and their incorporation into the economical development OP can start then.

15

Hungary region (almost exclusively in Budapest). The R&D performance of the region has vital spill-over effects for the whole country. This situation is a result of long term historic and territorial development and significant change is not expected in the mid-term. Therefore, this level of concentration cannot be ignored by the appropriate absorption of the national RDI resources, and without the R&D development of the region neither can the national RDI performance improve. In addition, the research capacities and results of large regional universities are also significant; one pillar of their complex urban economic development is the R&D activity achieving a critical mass (based on national smart specialisation strategy). Weaknesses and potentials related to agriculture and food industry In 2011 the proportion of agricultural R&D expenditure within the agricultural sector output reached 1.01%. As such it was below the average level of national economic R&D expenditures. The share of expenditures of the sector’s enterprises is also below average. The relations between research centres and enterprises are weak; research departments of large international food business establishments located in Hungary operate exclusively abroad. In the field of fisheries the relations between the research institutes and enterprises are good, but primarily due to the low level of R&D expenditures it not utilised at an adequate level. The infrastructure of food research significantly lags behind the leading European competitors. Only a few research organisations have professional staff experienced and involved in knowledge transfer and utilisation. Between 1999 and 2009 the proportion of R&D expenditures in the food-industry within national R&D expenditures has constantly decreased (1.2%, 2008, OECD). The traditional small farmer direct sales opportunities are limited, their share in added value is low and their access to information and their cooperation is similarly low. Experiences of the 2007-2013 planning period EU funds significantly assisted corporate RDI expenditures growth, the strengthening of public sector (e.g. universities) RDI activities and co-operation between research institutes and companies. In the future, in order to secure the highest possible rate of development, which is actually utilised in business, a greater amount and more focused use of resources are needed. The sources planned in EDIOP for RDI are focusing on 3 main areas: entrepreneurial RDI activity, strategic RDI co-operations and research institutes’ excellence. The interventions will support the needs of target groups in a more tailor-made and more structured manner than before. The greatest interest in the period of 2007-2013 was shown for ’Support for market-oriented R&D’ and ’Complex technological innovation support for enterprises’. The experiences are basically positive, which justifies their further application, however, identical statements from several evaluations suggest amending these interventions by supporting the market entry of these products. In the second half of the current period the grants combined with financial tools have already been utilised in the field of business support. Their success gives ground for launching similar programmes which support entrepreneurial RDI activities as expedient assistance in the period of 2014-2020 (target groups: large enterprises offering R&D-intensive and innovative services; technology-intensive medium-sized enterprises producing for export; suppliers primarily from the automotive industry and electronics connected to RDI sector; knowledge and technology-intensive micro- and small enterprises, start-ups, accelerators, incubators, applied industrial/research centres of enterprises). Planned interventions will support the phase of the innovation chain which is close to market entrance, where, because of the smaller level of risk, it is reasonable to switch from grants to refundable (financial) instruments (R&D capacity improvement for enterprises – FDI R&D of large enterprises; technological start-up ecosystem building– phase before the JEREMIE; support of the RDI activity of enterprises – product/technology/service development projects of SMEs; improvement of innovative business services). Evaluations suggest that the scarcity of R&D resources available in the Central Hungary Region hampered the country's RDI absorption even during the current programming cycle. Further reductions in resources would have negative effects at national level. According to the experiences of evaluations (Kopint-Tárki, 2012) show that due to the spill-over effect the developments supported in the CHR will

16

contribute positively to the development of the less developed regions. Hungary therefore wishes to make use of the compensation possibilities provided by Article 60 of the draft CPR (financing operations located outside the programme area). From the measures of the rural and fisheries development operational programme of 2007-2013 the development of innovative skills has contributed the most to the modernisation and diversification of the rural economy. However, the programme’s innovative effects are only indirect. Although in the case of some interventions (e.g. food processing industry), innovative development was assessed as an advantage during the project selection process, targeted support was lacking. In the future innovation should be applied as a more significant element for motivation in developments. Investments in knowledge transfer or innovation are essential. The cooperation of SMEs in innovation should be also enhanced for example by their participation in the European Innovation Partnership (EIP) operating at the EU level. Development needs  Supporting the corporate R&D activities, particularly to compensate the scarcity of such resources of SMEs, launch of targeted financial tools.  Ensuring of the next generation of researchers both at business and at public research centres.  Strengthening strategic cooperation and initiatives particularly between businesses, R&D centres and higher education institutions (highly important because of the complexity and high risks of R&D activity).  The creation of an environment preparing start-ups for receiving venture capital and to improve the accessibility of enterprises to venture capital.  Promoting the development of international R&D networks, supporting the creation and development of internationally significant research base by research institutes’ excellence programme.  To stimulate economic growth by regionally-specialised multipolar improvements along smart specialisation strategies (e.g. biotechnology, green R&D).  To increase the RDI expenditures in the agriculture and food processing industry in order to support the sustainable agriculture with a multifund-approach.  To support innovation developments of small farmers (e.g. short supply-chain sub-programme). THEMATIC OBJECTIVE 2: Enhancing access to, and use and quality of, information and communication technologies A key sector with infrastructural development challenges Infocommunication technologies (ICT) belong to the sectors creating high value-added and have recently proved to be crisis-proof both internationally and nationally. However, a precondition for further growth is infrastructure development and the improvement of accessibility largely implemented by the market. In Hungary, according to current EU terminology, the basic (at least 144 kbps) broadband infrastructure coverage (97%), as well as the product range and the prices are favourable; however, there is a need to improve quality. Infrastructure that provides greater speed (Next Generation Access – NGA) is not widespread yet; download speeds of over 10 Mbps and 20 Mbps are available only in 53% and 9% of settlements, respectively (MND, 2011). IT infrastructure and services % of total

Year

Hungary

EU average

Households with broadband connection

2012

69

76

Firms with broadband connection

2012

87

92

Use of e-government services (by citizens)

2012

42

44

(Source: Eurostat)

17

Deficiencies and strong disparities in citizens’ digital competence In Hungary, the number of internet and mobile internet subscribers are constantly rising (internet subscribers in 2012: 5.1 million, HCSO), but are still below the EU average. 58% of Hungarians over the age of 15 (about 4.8 million persons) use personal computers. However, this relatively high usage rate is characterised by significant disparities: according to surveys taken in 2012, 44.5% of Hungarians above the age of 15 are digitally illiterate (Bell Research, 2012). If Hungarians could improve their digital literacy rate, it would not only increase their employment opportunities, but estimates show that it would also result in GDP growth of over 1% per year (eNet, 2012). Growth opportunities and bottlenecks in the corporate ICT sector and the e-economy In Hungary 8% of enterprises (with approximately 150 000 employees) operate in the ICT sector (HCSO, MND, 2011) with favourable export opportunities (in 2011 this sector gave 29.3% of the total national service export, World Bank).  The role of the digital economy is continuously growing, at present medium-sized and large enterprises have full internet coverage (95 and 98% in 2012, Eurostat). 22% of micro-enterprises still do not have internet access, and a significant proportion of these companies do not use computers in their daily work (MND, 2011). Hungarian enterprises are also lagging behind in the use of complex, high-level ICT solutions and applications (in Hungary 9% of enterprises have integrated internal processes compared to the EU-27 average amounting to 22%, OECD, Eurostat, 2012).  A bottleneck in the growth potential is that the training of ICT professionals lags behind the demand both in terms of quality (low qualification) and quantity (small number of engineers and IT specialists). In international comparison, the RDI activity of the Hungarian ICT sector is insufficient (in 2010 the total Hungarian RDI expenditure is below 0.1% of the GDP, OECD, 2010) and the unfavourable financial environment also has a negative impact on the sector, because these enterprises have even more difficult access to loans compared to other sectors, due to their low mortgage value. The challenges of the public sector playing a key role in promoting ICT In order to establish a more effective and transparent territorial public administration (government offices, district offices, government service points) and official administration, and also to reduce administrative burden it is inevitable to introduce electronic public services (e-government, e-health and e-education) based on good internet access. The level of complexity of electronic administration and epublic services lags behind international benchmarks (ranking only the 52nd place in government effectiveness, IMD WCY, 2013). In most services there is no possibility for one-stop shop administration, the range of available services is insufficient and their utilisation is low (MPAJ,2013). E-justice also has the above described advantages. (Development needs of e-public administration relating to HR and organisational development, see under thematic objective No.2) Territorial disparities: weaknesses and potentials Although there is almost full internet coverage in larger towns and well-developed regions, the overall quality of internet access does not meet current requirements. In settlements with a population of less than 100 000, the problem in quality of access is coupled with bottlenecks on the users’ side (the share of personal computer and internet users is considerably lower, two thirds of the share of urban users and there are some disadvantaged settlements where the share of ICT users is below 40%, BellResearch, 2012). The mitigation of territorial imbalances in ICT infrastructure is of major importance, because telework systems and the development and spreading of e-public services could enable people living in remote and peripheral regions as well as in large town agglomerations (struggling with traffic bottlenecks) to better exploit employment opportunities. In regions where market-based developments are uneconomic and/or the time required for the return on investment is too long, state interventions are essential for the achievement of full coverage, ensuring equal opportunity and equal access to epublic services. This principle remains valid also in the planning period of 2014-2020; the areas will be defined by the National Strategy for ICT.

18

Weaknesses and potentials related to rural development The basic IT supply of rural areas have been developed, which means that 97 % of the settlements have internet access, however a significant lag is experienced in the use of broadband devices. The number of internet users in rural areas is much lower than the EU average, which is only slightly moderated by the penetration of mobile Internet. Digital illiteracy is particularly characteristic for those living in small settlements (Hungarian Infocommunication Report, 2012). Weaknesses and potentials related to agriculture and food industry The improvement of IT skills and knowledge of farmers and supply of assets are particularly important, thus enabling them to meet the expected challenges (e.g. electronic application submission) on their own. Furthermore, in order to enhance their competitiveness, it is necessary to increase the participation of agribusinesses in the knowledge and information economy by supporting them with upto-date ICT tools and solutions. This will be completed through central ICT developments financed from the ICT priority. The sector administration of agriculture described at thematic objective No. 11 requires continuous and significant expansion of e-public services. Experiences of the 2007-2013 planning period In the programming period 2007-2013, the basic infrastructure was improved and there were advancements in the framework of developments that support the accessibility of public services. In terms of electronic public administration, the basic digitalisation of the 20 (in Hungary 27) most-popular public services in the European electronic space was carried out; the rate of EU 20 procedures available online at the 3rd level was increased. Experience shows that due to their economic multiplication effect, programmes focusing on human IT, on e-public administration, on e-economy, on infrastructure development as well as on development of broadband network (which is the basis of growth) need to be continued. Experiences (especially the findings of the mid-term evaluations) suggest that the level of integration of applications based on ICT must be increased to ensure the efficient operation of electronic public administration. Furthermore, it is also important to amend the back office system of multi-channel onestop shop customer services focusing on real life situations. The continuation of programmes developing infrastructure is also needed. By vertical developments aiming to reach operational efficiency and by the further development of interoperability the interconnection of the different public bodies (databases and informatics systems) can be improved and the range of services can be widened. Furthermore, it is important to develop the deficient competences on the users’ side (citizens and businesses) as well as to prepare them to use it. Attention must be paid to avoid isolated developments. The developments of the current period were mostly priority projects of national range, which were financed according to a certain division of target areas between CHR and the convergence regions. The e-public developments between 2014-2020 shall also be of national range. In order to achieve efficiency and proper use of funds, infocommunication developments should be prepared and implemented in a complex manner and in the framework of a single programme that is centrally planned and implemented, and not in the fragmented way which was typical during the former period. This also applies for the elimination of digital illiteracy, increasing the informatisation of SMEs and the improvements to e-public services, all of which were implemented separately in the framework of different OPs between 2007-2013, and not in a homogenous fashion, often also with large differences in their timing. Therefore EDIOP will include a separate ICT priority axis in the 2014-2020 planning period. The development directions of infocommunication in the period of 2014-2020 will be designated in National Strategy for ICT Policy that is currently under preparation and is based on a thorough assessment and identification of objectives and tools and includes the development plans of all the ICT sub-areas (e-government, e-economy, digital competences and broadband infrastructure). The OP-level description of the priority of the developments concentrated on one area, defines the coordination mechanisms which ensure the policy linkages of the projects that are not exclusively aimed at IT developments (e-public administration and human, environmental, transport, energetic e-public services and digital literacy for employability) to the policy framework. The project management skills of the project owners (primarily from the public sector) and a more-thorough preparation of the procedures for electronification are necessary in the

19

future. The e-government IT developments must be defined by ESF-type pubic administration developments. Despite the development of basic services provided to rural economy and residents (supports financed by EAFRD, including training and supports) ICT developments are lagging behind in rural areas. Therefore, the relevant developments of the rural areas should be implemented together with the ICT developments financed by other funds in the future, in an integrated manner. Development needs  Development of a competitive ICT sector.  Promoting the development of digital economy.  Extension of ICT in the fields of e-government and key e-public services, extension of their infrastructural background (for the development needs of the non-infrastructural e-government which defines the trends, see the thematic objective No. 11).  Improvement of ICT knowledge and skills.  Development of broadband infrastructure and networks.  Improvement of the IT asset supply and knowledge of the agribusinesses and the development of egovernment services of the agricultural and fishery sectoral policy. THEMATIC OBJECTIVE 3: Enhancing the competitiveness of small- and medium-sized enterprises, the agricultural sector (for the EAFRD) and the fisheries and aquaculture sector (for the EMFF) Strongly export-oriented economy together with medium-level competitiveness Hungary has a limited internal market and at the same time a very open, and strongly export-oriented economy. Its openness can be characterised by the latest benchmarks that rank Hungary 9th place on the list of the most globalised countries in the world (Ernst and Young, 2013). Therefore, it is of key importance for Hungary to strengthen the competitiveness of its economy as a whole, and especially of the corporate sector, in which the country currently ranks only in the mid-range of the CEE region. Competitiveness benchmarks, Hungary Global Competitiveness Index, World Economic Forum (WEF), (2012) Hungary’s ranking

48

Institute for Management Development (IMD) (2012) 45

Doing Business, World Bank (2013) 54 (out of 185)

WEF: Global Competitiveness Report, out of 142 countries in 2011, IMD: World Competitiveness Yearbook, out of 59 countries in 2011

Dual economy The contradiction between export-driven growth and medium-level competitiveness is rooted in the fact that export activity is fundamentally associated with large global companies established in Hungary, while the contribution of SMEs – which make up more than 99% of the private sector – to export is less than 10% (Századvég, 2012). After the economic and social transition of 1990, Hungary's economy effectively split into two sectors: 

an export-oriented corporate sector with large enterprises, with high productivity, operating with cutting-edge technology, connected to global product chains and contributing significantly to the country's GDP and exports,



and a sector of micro, small and medium-sized enterprises that produce for small domestic or local markets, that is of low productivity and uses less developed technology.

Since close links between large global companies and the Hungarian SME sector are only partly developed, the domestic value-added of exports produced in Hungary by the export-oriented global companies is relatively low (the foreign value-added share in the gross export is 40,75%, OECD-WTO TIVA database, 2009). For two decades now, it has been a major challenge for Hungarian economic policy to find ways to integrate these two sectors and to create the right conditions for small and medium enterprises to catch up with large companies in terms of technology, business knowledge and productivity (for detailed potentials, see below). 20

Performance of the SME sector in Hungary and the EU

SMEs Large Total

Employment Hungary Figure % 1 788 649 72.7% 671 976 27.3% 2 460 625 100.0%

EU27 % 67.4% 32.6% 100.0%

Value-added Hungary Billion EUR % 25 53.8% 21 46.2% 47 100.0%

EU27 % 58.1% 41.9% 100.0%

(Source: SBA Fact Sheet 2012 – Hungary, EU, 2012f)

General challenges in improving the competitiveness of the SME sector With regard to competitiveness, the SME sector faces three major challenges: (1) Counterbalance economic duality. (2) Companies find it difficult to access development resources, and, moreover, their situation in this respect has deteriorated significantly because of the global financial crisis started in 2008. (3) Organisational size and limited resources mean that the SME sector bears disproportionate administrative burdens. For this reason, the Hungarian Government – concurring with countryspecific recommendations of the EU – introduced several measures to reduce the administrative burden of enterprises by 1.6% of the GDP up to 2014. Potentials of strengthening the competitiveness of SMEs and counterbalance economic duality In order to counterbalance economic duality, the subcontractor connection between global enterprises and small and medium-sized enterprises needs to be much stronger. The experiences show that it not only means the strengthening of business connections, the stability of the SMEs’ financial state, but also results in significant technological and innovation expansion. Beyond direct subcontractor connections, clusters also serve to strengthen the connections between large companies and SMEs. Clusters also support co-operation between SMEs. Based on the networks, a critical mass can be more easily achieved, which – offering standardised market and information-flows – could make business modernisation more cost-effective, could stabilise the supply and demand capacity utilisation, thus could improve employment. Through technological modernisation as well as renewal and expansion of SME sites, the resourcedeficient SMEs can renew their production and service infrastructure and rise to the generally higher standards of large companies. Business processes of SMEs can be supported by counselling and organisational development activities. Bottlenecks in financing SMEs An important challenge for a wide range of Hungarian SMEs today is access to financing (Gap Analysis, Deloitte, 2012). The problems in financing are rooted either in the relatively young ’age’ of SMEs (thus the lack of previous use of loans) or the lack of adequate coverage of loans. From the supply side, the problem is that the credit activity of finance institutions is decreasing. On the demand side, the trend is that demands for investment-type loans are decreasing parallel with a growing demand for short-term credits. Venture capital plays a major role in the early stages of the life cycle of an enterprise, when startup companies cannot obtain access to adequate traditional financing sources, in spite of their promising growth potential. In the 2007-2013 planning cycle Hungary was among the first member states that introduced financial (engineering) instruments. These schemes support competitiveness, innovation and regional economic development. The financial programmes of JEREMIE (loans, venture capital, guarantees) are also part of these schemes, as well as the venture capital programme of the Regional Fund for Capital Investments (it was launched as the Széchenyi Capital Investment Fund in 2011). The Government of Hungary considers that the continuation of these programmes in the period of 2014-2020 is of strategic importance, even with modified content if necessary. Key sectors: globally competitive sectors and services that can be made competitive Due to the specific problems of Hungarian SMEs – mainly the dual economy and limited access to financing – from a policy perspective it makes most sense to complement SME development policy with

21

traditional industrial policy instruments that is to integrate SME development policy into the industrial policy. Therefore, grants that cover the whole range of SMEs should rather focus on priority industries and service sectors with outstanding growing potential. Separate sectoral programmes will be elaborated for the priority sectors (currently these are the prioritised sectoral groups stressed in the first place below), based on impact analyses and widely consulted with wide range of market and public actors. These will harmonise the use of national and EU funds and the special framework conditions as well (e.g. regulations, organisational activity, etc.) In Hungary the SME sectors show outstanding growth potential in four sectors (the list of the sectors is indicative, and will be finalised according to the results of analyses in progress, and will also be modified during the planning period):  SMEs are not exploiting the opportunities within those sectors which are playing an important role in Hungary’s economy and are incorporated into global supply chains (the automotive and vehicle industry, the electronics industry, the pharmaceutical industry and manufacturing of healthcare devices, the global service and excellence centres). Despite the stagnating or even decreasing demand in European markets, the automotive industry has made significant new investments in Hungary; as a result, the role of SMEs as their suppliers could be significantly enhanced. Further potential sector growth is the pharmaceutical industry which is one of the most dynamically developing sector: with 17 000 employees it contributes 6.6% of the production of processing industries. At the same time, this is the most innovative Hungarian sector with a share of 30% of R&D expenditures.  The growth potential of SMEs should be fostered also in sectors where they traditionally have strong positions. Such priority sectors are in this sense the construction and building material industry, transit economy, which can gain growth potential through investments arising from development policy. Agro-economy and fishery are similar sectors, their further potential is increased by targeted funds (EAFRD and EMFF) and programmes.  The tourism sector is in a special situation for several reasons. This sector is dominated by SMEs and it is a priority competitiveness factor in the Hungarian economy (considering the investments, supply chain and income effects, it gave 10.5% of the Hungary’s GDP, WTTC, 2012). It is important to note that tourism in Europe was expanding in 2012, despite the economic crisis, and it is expected to expand further in 2013 (Tourism Economics, 2013). According to European trends closer destinations will gain in popularity, thus the number of incoming guests could increase (ETC, 2013). From this perspective, the outstanding performance of healthcare tourism (with a 20% share of foreign visitors, and approx. 850 billion HUF total spending, giving it a bigger share than the traditional spending for holiday, HCSO, 1011) and growth potential (see OECD’s forecast on the increase in the share of senior citizens, which is an important target group of the sub-sector and which has an impact on the Hungarian market: as the share of spa and wellness hotels is continuously increasing, HCSO). The National Tourism Concept (NTC), which is currently under preparation, will define future development directions (its major message is that tourism interventions should develop the target destination in a complex and comprehensive manner). At the same time, tourism is also strongly labour-intensive and has significant employment multiplication effect (the development needs of tourist developments supporting employment are described under the thematic objective No. 8).  Strategic sectors based on SMEs, including the knowledge economy (see at RDI in thematic objective No.1), the healthcare industry and the food processing industry (see the latter in a separate paragraph below) could be improved to become globally important.  Finally, another hitherto untapped growth potential for small enterprises is the development of local economies (supporting their operating conditions, strengthening the economic fundaments of rural areas and settlements) and the intensification of local co-operations (aligning local production and consumption, the development of local and micro-regional clusters, local product development, and short supply chains). (About the employment situation and needs of local economy, see at thematic objective No. 8 /employment/)

22

Country-specific recommendations of the EU and the improvement of the regulatory environment of SMEs In order to strengthen the competitiveness of Hungarian SMEs, the EU drafted two country-specific recommendations in 2013:  3. Ensure a stable, more balanced and predictable corporate tax system. Streamline corporate taxation and minimise distortions of resource allocation created by sector- specific taxes, so as to foster growth and employment. Continue making taxation of labour more employment-friendly by alleviating the tax burden on low-wage earners, inter alia by refining the eligibility criteria for the Job Protection Act, and by shifting taxation away to environmental taxes. Fully implement and step up the already announced measures to improve tax compliance and reduce the cost of tax compliance.  5. Create a supportive business environment, in particular restore an attractive environment for foreign direct investors, by making the regulatory framework more stable and by fostering market competition5. Based on these recommendations, in the period of 2011 to 2013, the Hungarian government launched a comprehensive programme, aimed at the reduction of the administrative burden of the corporate sector by HUF 500 billion (1.6% of GDP) from 2010 levels. This programme included tax benefits, the Workplace Safety Action Plan, new laws (public procurement, Labour Code), discounted taxes (KATA, KIVA), simplification of licensing and regulatory environments. Continuing these steps, the Government plans to introduce new measures to reduce the administrative burden and to simplify administration in line with the EU’s country-specific recommendation No. 5 for the year 2012. The most important measures in improving the financing of SMEs are the implementation of overdrafts, working capital loans and investment loans of the Széchenyi Card Programme, financing SMEs from the additional funding of the New Széchenyi Plan and JEREMIE, lending programmes of NBH (Growth Lending Programme, refinancing). There are also several new initiatives for the SMEs’s access to markets, for example the development of the negotiator institutional system (Eximbank, MEHIB, commercial houses, Carpathian Region Business Network), strategic co-operation agreements established with global corporate groups (Strategy for Foreign Economic Relations, Wekerle Plan and eastern opening). Territorial disparities: weaknesses and potentials In Hungary, the growth and development potential of the SME sector shows significant territorial disparities. In line with the disparities in regional development, the SMEs of Central Hungary and Central and Western Transdanubia are in the best position. The density of businesses is the highest in these regions (in 2011 in Central Hungary: 90.3; Western Transdanubia: 68.7; Central Transdanubia: 63.5, other regions: 56.1 for 1000 inhabitants). Large enterprises play more significant roles in these regions (in 2010, 70% of large enterprises were registered in these 3 regions; 46% in Central Hungary alone) and their suppliers are also concentrated in these regions. Their accessibility to financing is better than in other regions and the presence of foreign capital is also higher in their ownership structure. In the potential growth areas (agglomeration of larger towns, priority industrial zones) the preconditions for expanding the high value-added production are available, whilst in the less favoured areas the high level of unemployment, the lack of capital and low innovation potential are the greatest challenges for business development. Tourism is a particularly significant competitiveness factor in the tourism regions (e.g. area of the Lake Balaton and the Lake Tisza, in the previous region it has a 20% share in the GDP, BDC estimation, 2006). Weaknesses and potentials related to rural development The number of registered SMEs per 1000 people in rural areas is equal to the national average, but the number of active SMEs is significantly below the average (rural areas: 49.9 SMEs/1000 people, national average: 69.7 SMEs/1000 people). The revenues also show a significant difference between rural and urban areas. While 40.7% of SMEs with an annual income of less than EUR 2 million operate in rural areas, only 29.8% of SMEs with higher revenues (> 10 million EUR) are located in rural areas (HCSO, 5

The present version of the country-specific recommendations was approved by the General Affairs Council in 25 June 2013, and forwarded in 27-28 June 2013 to the European council for validation. The recommendations will become effective only after the formal approval of ECOFIN on 9 July.

23

2010). A significant proportion of rural enterprise is micro business, with 1 to 9 employees. This segment of business has a determining role in rural local economies. Weaknesses and potentials related to agriculture and food industry Hungary has very favourable agro-ecological conditions for agricultural production, which represent a significant growth potential. The share of agriculture in the GDP is 4%, while the overall agricultural industry (agricultural engine and chemical industry, food processing industry, etc.) has a 15% share in the GDP (AKI, 2012). The added value of Hungarian agricultural and food production is low (NRDS, 2012) The diversification of the most dominant arable crop sector (mostly wheat, corn and sunflower the main part of which is sold in foreign markets as raw material) is low, most farms cultivate only a few types of crop cultures. The production of the stock farming sector and the stock decreased significantly (production value: 40%, EU average: 44%; from 1990, a decrease of 42% in volume; MRD, 2009). In some of the sub-sectors (e.g. pig-raising) there is greater concentration, for example as livestock grazing has declined. The share of mixed farms is decreasing (200: 38%; 2010: 29%) also at the expense of stock farming. The production value of horticulture from the agricultural output is also decreasing, although this sub-sector employs the most employees (full or part-time employment of 340-380 000 of families). Growing fruit and vegetables is significant (the horticultural income is 60%), and its potential is remarkable, as is the potential of the declining herb growing and viticulture. 99% of enterprises in the Hungarian agricultural economy are SMEs (NTCA, 2011). Structure of ownership is fractured; the structure of farms is dual. Since 2004 the entrepreneurial activity, the number of individual enterprises in rural areas (according to the 2007-2013 period) has decreased by 20%. The number of horizontal and vertical co-operations in Hungary is low. Therefore, it is important to support the market entrance of farmers. For this purpose, efficient tools include the support and development of farmers’ groups and co-operations and short supply-chains. The problems of the sector primarily arise from the difficulties in financing and out-dated technologies. There are significant reserves also in terms of efficiency in the entire Hungarian agricultural sector. (The value of agricultural production per hectare in average, HU: 1312 EUR/ha, EU15: 2232 EUR/ha). The farmers’ average age is rising rapidly, therefore it is also important to support young farmers and to facilitate the transformation of semi self-subsistence farmers to entrepreneurs. Food processing provides a reliable market for 65-70% of agricultural products. The situation of the sector and its profitability has rapidly deteriorated during recent years (currently its share in GDP is 2% and its share within industrial production is 12%, though it is still the second largest sub-sector within the processing industry behind the engine industry). It has a significant role in employment, (directly approx. 100 000 employees). 70% of its output is sold in the Hungarian market and 30% is sold in foreign markets. Before 2004 the share of Hungarian foods in the commercial chains was above 90%, currently it is around 65%. There are two main development areas arising in this sector: (1) the technological development of micro and small-sized food industry enterprises that are able to adjust to rapidly changing needs with high-quality product development and (2) to keep the positions of the globally competitive enterprises, mainly by the increasing improvements in resource-efficiency by the increase of productivity. The agriculture and food-industry is an important pillar of local economy, particularly in rural areas. Local sales markets, organisation of production co-operations, developing short food chains all mean effective local economic development potentials. Weaknesses and potentials related to aquaculture and fishery sector Hungary plays an important role in European freshwater aquaculture. Fish production provides 2.3% of Hungary's gross output of animal husbandry and has favourable growth potential (NRS, 2012). Hungary started the development of the national aquaculture strategy, which is expected to be completed in 2013. With the expansion of multifunctional fishery the role and integration of the fisheries in local economies increased. There are several economic advantages of diversification based on tourism, catering and environmental protection services, that in line with the EU’s ‘blue growth’6 will be 6

Communication from the Commission on blue growth (COM/2012/494 final)

24

supported by the FAOP harmonised with other sectoral developments (nature conservation, tourism, water management, food processing industry). The consumption of quality fresh fish and fish products could be increased by adequate marketing, technological development and the establishment of its national sales chain. Experiences of the 2007-2013 planning period The direction of the SME developments implemented in the current planning period could still be considered as a guidance. However, in the period of 2014-2020 it is advisable to move the focus from quantitative to qualitative developments. In parallel, a more direct focus on innovative solutions is needed, such as the broader use of financial instruments in addition to non-refundable grants, or priority sectors as well as local economic development.  Most of the financial support allocated to economic development served the purpose of technological development of enterprises, contributing to their competitiveness. Based on the experiences of the 2007-2013 programming period, in the course of planning the interventions it is important to reconsider and to segment the sectoral allocation of funds available for calls for proposals aimed at the technological development of SMEs. Interventions must also be aligned with the life cycle of the enterprises or be combined with other types of support.  The basic quantitative needs are now satisfied in some settlements concerning business infrastructural background (industrial parks, tourism accommodation and business incubators; for example nearly 50% of the industrial parks received support7). As regards to these objectives, instead of quantitative development, the broadening of services and improvement of its quality should be in focus in the future. (The support to opening of new parks is reasonable only in special cases). Territorial synergy should be a stronger aspect in designing the business infrastructure developments, especially the aspects of accessibility and their alignment to urban development directions.  Cooperation of businesses was established, the financial support fostered the forming of clusters; approximately 200 clusters were established and supported. In the next programming period support must be focused on already operating clusters and on the deepening of the cooperations.  The enterprise consultancy programme supported the involvement of external professional assistance necessary for the development of SMEs. The methodology of implementation was of an experimental character, since in all regions so-called Intermediaries of Support were selected, that deal with the applicants (under the IB level). Positive experiences show that small-scale consultancy should be organised centrally, while it is more reasonable to integrate large-scale consultancy into other developments.  JEREMIE financial instruments were launched; their target group is primarily micro-enterprises. According to the Guidance8 they support economically viable activities related to founding enterprises, growth and enhancing the general activities of the enterprises.  Within the JEREMIE financial programmes loan and guarantee programmes were introduced on de minimise claim. Programmes support SMEs without sectoral specification. The highest amount of loan is HUF 200 million, the highest value of guarantee is HUF 500 million.  According to the Community Guidance9 the JEREMIE venture capital programmes are focusing on providing capital to enterprises in seed, initial and growing phase.  According to the evaluations that analysed the subservience of the forms of supports, it would be practical to tie refundable support to complex development objectives of businesses, while nonrefundable support should be given to much more concrete and more focused objectives (

7

In 2011 the total sales returns of the 4028 businesses that seated in 179 industrial parks was more than 9292 billion HUF with an average share of export of 33% and total investments of 3366 billion HUF, employing 187 thousand persons. Logistic or informatics services were available only in 1/3 of the industrial parks, and business incubators were only present in 1/5 of the industrial parks (MNE, 2012). 8

Guidance note on Financial Engineering Instruments under Article 44 of Council Regulation (EC) No 1083/2006

9

Community guidelines on state aid to promote risk capital investments in small and medium-sized enterprises (2006/C 194/02)

25

according to past experience, the widest possible range of tools should support priority sectors and the list of priority sectors should be revised every 2 years)  In order to manage financial insufficiencies, the JEREMIE program, launched in the current period, should be expanded (it reached its objective by offering financing for actors that were unable to receive bank loan: from the beginning of 2013 out of 11 500 beneficiaries 8000 new customers of loans), while more attention should be paid to combine refundable and non-refundable assistance. (Combined micro-loan products became popular with micro-enterprises; combined non-refundable support and micro loan: until the beginning of 2013 this product reached 5800 enterprises with a total loan value of HUF 35.5 billion).  JEREMIE products are very successful in micro financing. This is reinforced by the fact that, until the middle of 2011, intermediaries involved in the programme produced a volume equal to 62% of the stock value of the investment-type loans provided to micro-enterprises. The JEREMIE programme includes schemes supporting investments and financing currents assets. It is generally permitted to support the financing of current assets in order to realise investments by state instruments, but there are limits on the amounts. Due to the current economic environment the SMEs’ demand for loans are primarily focused on short-term financing, therefore, based on past experience, it is reasonable to offer a product structure that aims at financing current assets. Regarding the guarantee products the JEREMIE programme provided low and stable guarantee fees, but these products did not receive a positive market response. The inflexibility of the market concerning the JEREMIE products can mainly be explained by the fact that the operation of long standing processes and systems is always more simple than launching new ones. However, this can be addressed by adequate communication on advantages offered by JEREMIE and by the enhanced support of the implementation of JEREMIE products.  The Széchenyi Fund for Capital Investments was founded in 2010 as a new concept. Its primary objective was to support SMEs with growth potential by providing accessibility to venture capital. As opposed to the JEREMIE programme, in this case capital investments are induced into traditional market sectors that are temporarily facing unfavourable economic situation.  The regionally separated nature of projects implemented in the period of 2007-2013 did not allow tourism development that would focus on several regions (e.g. Balaton region) or networks (thematic routes). The lessons learnt from these developments and the priority health tourism projects (situation analysis and NDA programme evaluation, 2013) show that the focus must be shifted from individual projects to complex interventions, with an increased level of territorial coordination. It is necessary to support complex health tourism and other tourism service packages with national coordination. These are based on local potential and have strong local employment impacts, and also play a significant role in SMEs’ competitiveness; therefore, it is justified to include them in the EDIOP. As for the tourism developments of the market sector, focus must be brought into financial instruments (services, accommodation). (For territorial decentralised tourism developments with the main focus on employment, see thematic objective No. 8). Interventions aimed at business development that are part of the Rural Development Programme and Fisheries Operational Programme will substantially contribute to enhanced competitiveness, the sustainable development of agriculture, and to knowledge transfer and to shift in the age structure. Supports were focused on the modernisation of agricultural and aquaculture enterprises, the training of human resources, the change of the age structure and to bring assets up-to-date. The arable crop sector became a significant beneficiary of investment-related funds. One of the explanations is that crop production is relatively more profitable than other agricultural activities and these farmers have a better access to financing. Consequently, animal husbandry and horticulture will enjoy priority in the future (especially due to their more-positive impact on employment compared to arable farming). The preferential treatment will be realised by providing targeted financial instruments and by creating a simpler economic and administrative environment. The supports provided were only able to serve about 50% of the development needs of the food processing enterprises. 64% of the businesses that received grants were micro and small enterprises, so it was in line with the objectives of agricultural and rural development. A disadvantage for non-agricultural enterprises in small settlements was that NHRDP measures aimed at micro-enterprise support were less entrepreneur-friendly than similar 26

measures of NHDP (for example lack of deposit, 5 years of commitment period instead of 3). Because of the demarcation problems (between EDOP-ROP-NHRDP), microenterprises in some settlements were unable to obtain assistance. The LEADER/CLLD can improve the competitiveness of micro-, small- and medium-sized enterprises and to achieve region-specific economic and social development objectives. The Fishery Operation Programme significantly contributed to the renewal of the fishery infrastructure and assets, to the spread of environment-friendly energy and water-saving technology solutions, to the enhanced market access of new products and to job creation and the development of tourism through diversification. Development needs  To modernise manufacturing and service technology and business environment of SMEs, as well as the services available for them in order to mitigate the dual nature of the economic structure.  To develop entrepreneurial and enterprise resource planning skills for SMEs.  To ensure enhanced access to financing (loans, guarantees, venture capital and possibly leasing and factoring), continuing the JEREMIE programme  Skill development of the financial institutions and financial intermediaries.  To involve SMEs in the supply chain of major Hungarian and also globally active sectors, and to improve their independent RDI capacity and the share of high value-added exports, which could significantly reduce the dual nature of the economy.  To promote local economic relations and networking (e.g. local clusters, aligning local production and consumption, local product developments) (for the employment needs of local economic development, see also thematic objective No.8).  To foster the cooperation among enterprises within clusters.  To improve the investment environment quality (industrial parks, incubators) in order to better utilise the existing business infrastructure (new infrastructure only in exceptional cases)  Coordinated development of complex tourism projects of national priority (healthcare tourism and service packages, tourist attraction developments, networks and regions) and the coordinated development of the TDM network at national level, tourism development financial instruments (for the employment needs of the tourism sector, see thematic objective No.8).  Diversification of the agriculture sector, and within this framework, the support of micro enterprises.  To improve the higher value-added and labour-intensive industries of agriculture, animal husbandry, aquaculture/fisheries, horticulture, environmental management and ecological farming. Capacity building in production of higher value-added products will result in a positive impact on employment in agriculture as well.  Maximisation of the added-value potentials of the food processing industry by creating synergic cooperation between economic and agrarian rural development instruments.  Support of the technological development of the sectors of animal husbandry, fishery and horticulture, ensuring suitable conditions for animal welfare.  To support semi-subsistence farms in promoting entrepreneurship.  Improvement of horizontal and vertical cooperation and producers' groups and local economic relations in order to strengthen the international and national competitiveness and market position of agricultural businesses.  To support the participation of small farmers in short supply-chains (short supply-chain subprogramme)  To support young farmers by providing complex, special tools (young farmers’ sub-programme)

27

MAIN NATIONAL DEVELOPMENT PRIORITY 2: Increasing the level of employment through economic development, employment, education and social inclusion policies, taking account of territorial disparities THEMATIC OBJECTIVE 8: Promoting employment and supporting labour mobility A major challenge and additional growth resource: to expand employment Employment rate is very low in Hungary (and not only if compared to other European countries); therefore, a major economic challenge is to increase employment level. Also, an emerging employment rate is an additional and hitherto untapped source of economic growth. Furthermore, an improved employment rate has a positive effect on the sustainability of the pension and social welfare system, and thus promotes the balance of the central budget. Both demand and supply side arrangements are needed to foster the expansion of employment and also their functional harmonisation must be strengthened. Related objectives of the National Reform Programme In order to utilise the additional resource for growth, Hungary undertook the ambitious commitment to increase the employment rate from the present 61% to 75% by the end of the decade in its National Reform Programme, in line with the EU 2020 Strategy objective on employment and taking relevant EU statistical criteria as a basis.

Employment in Hungary Year Employment rate, ages 20-64 (% of total) 2011 national EU 2020 target 2020 increase required to reach the target (ppts.) 2010-2020 Employment rate by different groups (% of total) youth (15-24) 2011 ages 55-64 2011 low skilled (ISCED 0-2) 2011 women (25-49) with children (under 12) 2010 Unemployment rate 2012 Youth (15-24) unemployment rate 2011 (Source: EUROSTAT; European Commission: Country Fact Sheet, Hungary; July 2012)

Hungary 60.7 75.0 14.3

EU average 68.6 75.0 6.4

18.3 35.8 36.6 49.3 11.1 26.1

33.6 47.4 53.0 64.7 10.7 21.3

State and trends of the labour market The presence of active labour market tools needs to be strengthened in the light of long-term and persistent tensions in employment in Hungary.  Average and stagnant unemployment, unfavourable but advancing employment and inactivity: The unemployment rate stagnated at 11% in 2011 and 2012 slightly above the increasing EU average of 10.5%. The EU employment rate slightly decreased in 2012 (68,5%), while the below-average Hungarian has been increasing since 2010 (2010: 60.4%, 2012: 62.1%) now reaching pre-crisis level. The economic activity of the population aged 20-64 has increased from 68.1% to 69.6% in 2012.  Unfavourable demographic trends: The sustainability of social welfare systems is determined by the proportion of the active aged population as well as the level of employment. The Hungarian total fertility ratio (1.23) was the worst within the EU in 2011 and in addition to that, the low number of people of active age is continuously decreasing.  The employment of people with higher education is near the EU average (HU: 78.4%, EU: 82.1%) but the chances for the low educated are much worse, their employment rate was 36.6% in 2011, by 16.4 %-points lower than the EU average.  In line with European trends, youth unemployment is high: Due to the crisis, youth unemployment (aged 15-24) has increased from 18% (2007) to 28.1% (2012). The period of job seeking after leaving school has increased, however the Hungarian youth employment rate is one of the lowest within the EU (HU: 18.3%, EU: 33.6% in 2012). The main reasons are insufficient labour market demand,

28

qualifications not always meeting market demands, extended school years and low number of students having a job whilst studying.  Low employment and activity levels of the aged: The employment rate of people aged 55-64 was 35.8% in 2012 (EU: 47.4%) despite of the restrictions introduced in connection with early retirement and the increase in the retirement age in the past 10 years.  Contradicting employment characteristics of men and women: The gender differences are typically smaller in Hungary than in the EU, and the employment of men tends to lag further behind the EU average than that of women (the lag was 8.2%-point compared to women’s 7.4%-point in 2011). The difference between the employment rates of women and men aged 20-64 years was 11.9%-point against the EU value of 12.7%-point. Women with small children have low employment (HU: 49.3%, EU: 64.7%) because of the difficulties of harmonising work and child-care (e.g. shortage of childcare services; flexible employment). Structural reforms of the labour market Recently, structural reforms have been launched to promote the enhancement of labour market supply in line with the EU reform efforts. These supply side measures include more flexible labour market regulations, the limitation of the early-retirement opportunities, supervision of health status of persons with reduced working capacity and restructuring of social welfare aids (see the Széll Kálmán Plan). Similarly, the reform of the personal income tax system - due to the decrease of the marginal tax rate has a positive effect on the market supply and employment chances of qualified employees. Restructuring social aids and subsidies connected to public employment has also applied the principle to motivate reintegration into the labour market. The core idea behind the new system of public employment is to offer jobs instead of allowances, which at the same time also serves the development of employability of long-term unemployed people or social groups. Moreover, the temporary increase of the proportion of public employment is a response to the significant decrease in labour force demand caused by the global economic crisis, similarly to other EU member states. The number of participants involved in the public employment scheme were approximately 300 000 in 2011 (MI, 2012) and it largely contributed to the extension of employment and to social integration in less favoured areas. The role of public employment is foreseen to decrease in the long term and the support for entering the primary labour market will come in the forefront along with the remission of the global crisis and the start of economic growth. The regulatory environment of the Hungarian labour market is now one of the most favourable and flexible in Central and Eastern Europe due to the recent reforms, and this has been validated by corporate surveys and stakeholder feedback (DUIHK, 2013). Supply side reforms have a specific collateral effect on unemployment – unemployment levels can temporarily increase because of the growth of activity. This also shows that the positive effects of supply-side reforms can be completed only with direct demand-side interventions. Reinforcing the demand side While the main objective of the reforms was to improve the flexibility of the supply side of the labour market, the measures impacting on the demand side are still not as extensive as they should be, mainly because of the limited financial resources. In 2013 an important measure was introduced in the case of the people most at risk on the labour market (employees under the age of 25 and over 55 years): the social contribution tax related to their employment has been significantly reduced. This measure enhances their employment chances and provides additional employment safety. The Job Protection Plan is estimated to reach approximately one million people in the mid-term. However, limited resources hinder the enlargement of active employment policy tools and its much wider, targeted and tailor-made utilisation. The role of development policy in employment The positive effects of structural reforms have become evident even in the short term. Contrary to general European trends, the number of employed has been steadily growing and has reached its precrisis level. However, these reforms can only be extended if combined with development policy 29

interventions that strengthen economic growth, especially due to the resource-intensive interventions on the demand side. Hence the utilisation of EU funds for 2014-2020 plays a major role in promoting economic development aiming at job creation and employment (SME development, strengthening the R&D&I sector, development of priority industrial sectors and industrial areas), as well as in strengthening active labour market policies, in the development of the social economy and in the support of vocational and adult education satisfying economic needs. General challenges of the labour market In order to achieve significant growth in the Hungarian employment rate, employment policy must respond to further challenges in addition to challenges addressed by introducing general reforms.   

Firstly, certain groups (first and foremost people with a low education level) permanently have a very low level of labour market participation and the labour market is characterised by significant territorial disparities while labour and geographical mobility is also very limited. Secondly, labour force demand has significantly reduced because of the effects of the global financial and economic crisis; the low level of labour demand is the most important barrier to employment growth. Thirdly, a general problem is that the structure and quality of the labour market supply often does not meet the corporate demand. The Hungarian labour market often has shortcomings in labour force supply in certain occupations. The great (and often unsatisfied) demand for highly qualified labour force (e.g. in engineering) constitutes an ever-growing obstacle to high added value production. Participation in LLL is extremely low: 2.8% of the population aged 25-64 took part in training courses in 2012 (EU: 9.1%), which hinders the adaptability of the labour force and the continuous alignment to economic demands, in particular in the case of people with low levels of education.

Resources and role of active labour market measures In order to address the first labour market challenge, there is a need to activate the disadvantaged groups and to strengthen active measures aiming at the employment of the inactive (e.g. education to support employability, supports to become an entrepreneur, reduce employers’ expenses of employment, having work experiences). The improvement of effectiveness and the services and its coverage of the National Employment Service is also a necessity (e.g. extensive introduction of profiling). Moderate spending on active labour market tools and services: because of the limited budgetary opportunities, Hungary spent nearly 0.4% of its GDP for active labour market tools and 0.1% of the GDP for job-seeking services while the EU average is 0.6% and 0.24%, respectively. In a European comparison, the number of employees of the employment services is low. The NES is relatively overloaded with tasks; in 2010, there were 153.7 registered job seekers for every full-time NES employee in Hungary. This figure is between 21.3 and 86.7 in the more developed countries of the EU. In addition to active labour market arrangements, the targeted development of training opportunities as well as facilitating open labour market entry is necessary to improve employability of the participants of the public employment scheme. Therefore, in the next programming period SF resources are planned to support training and services aiming at activating public employment participants. Youth employment will be promoted through the gradual introduction of the Youth Guarantee in Hungary with the application of a complex support and service measure-package. Economic segments with large effect on employment The application of economic development tools is principally required to address the second challenge. First of all, new opportunities will be available to strengthen the employment capacity of SMEs, to develop labour-intensive sectors, and to establish the social economy: 

The role of Hungarian SMEs in employment is significant: 73.5% of the employees of the business sector worked for SMEs in 2011, but the share of SMEs from gross added value is only 55%. The number and the surviving rate of enterprises have significantly decreased after the outbreak of the crisis. The number of closed down enterprises has been constantly higher than newly started ones for years (71 000 and 63 000 in 2009). Among the start-ups only every other

30











enterprise was able to maintain operations for longer than three years. The employment capacities of SMEs have to be strengthened to exploit their hidden potential. In order to achieve this goal, investment supports and financial tools for SMEs as well as the enhancement of SME participation in dual vocational training must be promoted. The improvement of physical labour-intensive sectors can create many new jobs: the development of high labour-intensive sectors could play a major role in improving the employment of job seekers with low level of education, or those in disadvantaged situation. These sectors do not lose jobs in spite of their productivity increase and by improving market opportunities and by inducing new investments a steady growth in labour force demand as well as the decrease of the grey employment rate could be achieved. In the construction industry the investments induced by the development policy can ensure growth. The potential of the agriculture and fishery can be exploited by expedient funds (EARDF and EFF) and their programmes. In terms of employment, the tourism industry plays an outstanding role in Hungary, with 5.6% of full-time employees in 2011, which represents a larger share than agriculture or transport. The employment impact of the sector is particularly large in some tourism areas (e.g. Lake Balaton and Lake Tisza; approximately 20% of employees of the Balaton area work in tourism at multiannual average, HCSO). The role of tourism is also important in areas, small settlements where the most part of the endogenous resources are connected to only one tourism attraction and the connected enterprises are the only significant employers, except for the public sector (e.g. active, rural and heritage tourism). Domestic tourism is gaining in importance (HCSO, 2011) partly as a result of governmental measures (560 000 SZÉP Card users in 2012) and, according to the forecasts, (ETC, 2013) the market positions of domestic tourism areas may become more stable. The objectives of the measures in the field of tourism are defined by the NTC (in progress). (For development needs of tourism in connection with SME competitiveness, please see the chapter discussing thematic objective No. 3.) Employment potential of the social economy: Social economy has been a hitherto unexploited tool for employment expansion. Social economy typically means the support or development of economic activities that are focusing on local demands, mixing financial sustainability with social aspects. In 2010, 6.5% of employees worked in the social economy in the EU, the Hungarian figure was only 4.7% (CIRIEC, 2012). Social economy may have significant employment potential primarily in regions with low labour-demand. (The development of transit employment promotes social inclusion; and another important aspect is the fulfilment of market expectations. In the expedient development of sheltered employment of people living with disabilities or having a reduced working ability, market mechanisms do not have priority, since these explicitly focus on promoting inclusion (for their situation and development needs, see at objective No. 9). Due to the special mission of social enterprises (those are mainly non-profit companies in Hungary), they could also become important employers in Hungary, (as it is generally experienced internationally) but in order to achieve this objective the financial sustainability of these enterprises must be strengthened. Supporting policy tools designed for enterprises could serve as a basis for the development of these enterprises. However, their financing should be targeted and separately managed from SME developments. In Hungary, SMEs provide 72.7% of local employment (EU average 67.4%, EUROSTAT, 2011); the developments of local economies offer a hitherto unexploited employment potential, such as job creation by local SMEs, the establishment of an environment that facilitates entrepreneurship and supports start-ups. (For SME growth situation and needs, see objective No. 3).

Coordination of labour market supply and demand In order to address the third challenge, reforms in the field of public education and higher education – most of all, the stronger cooperation between higher education institutions and companies – may counterbalance the frequent mismatch between labour market supply and demand in the medium- and long-term. However, the current economic and in particular, industry demands call for urgent actions in 31

two areas: vocational training and adult education. Interventions aiming at harmonising supply and demand are also connected to the developments aiming at the achievement of thematic objective No. 10 (education).  A comprehensive vocational training reform has been launched that established the legal, institutional and financial framework of the practice-oriented German-type dual vocational training system with a 200 years-old history, which is the most successful one in Europe. These measures were validated by the feedbacks of the stakeholders (training participants) and the economic actors (DUIHK, 2013). This new model is only a sporadic phenomenon yet, mostly linked to a few large or global companies. Because of the necessary investments, participation by the majority of companies (especially SMEs) in the practical vocational training constitutes a minor proportion. Increased SMEs’ participation can be supported by development policy incentives, related infrastructure investments (for SMEs with permanent participation in dual training) and human resources developments. The dual model needs to be extended to the system of higher vocational training. The dual vocational training is also promoted by EU initiatives, one of the recommendations of the Young Employment Initiative (YEI) suggest practice-oriented training.  Promoting and supporting the participation in LLL is crucial to have a competitive labour force and to the continuous adaptation to social and economic changes. The programmes supported by EU funds play a crucial role in promoting accessibility to education. These programmes provide education for a wide range of people to improve key competences, such as language skills, ICT skills, etc. Also, they provide opportunities for the low educated and for the participants in the public employment scheme to (re)enter education and thus improve their employability. In addition to the enhancement of individual educational possibilities, the participation of enterprises (especially the employees of SMEs and micro-enterprises) in education must be supported.  The number of employed people can be increased by introducing flexible forms of employment, which can release the potential reserves both on the supply- and demand side of the labour market. Flexible employment can increase economic adaptability of enterprises and thus their competitiveness. On the other hand, there are some groups on the labour market that cannot or does not intend to be employed in a traditional way, due to various reasons, such as raising small child(ren); caring for old relatives of the family or studying. The development of their employment can be supported by improving childcare capacities, disseminating flexible forms of employment, as well as targeted supports for the labour-market reintegration of various target groups (e.g. women with small child(ren)). The EU’s country-specific recommendations to enhance employment Employment has an emphasised role in the country-specific recommendations of the EU for Hungary in 2013: 4. „Address youth unemployment, for example through a Youth Guarantee. Strengthen active labour market policy measures and enhance the client profiling system of the Public Employment Service. Reduce the dominance of the public works scheme within employment measures and strengthen its activation elements. Reinforce training programmes to boost participation in lifelong learning. Continue to expand child-care facilities to encourage women's participation.”10 The funding sources of the 2014-2020 programming period can assist Hungary in fulfilling these recommendations. Territorial disparities: weaknesses and potentials Strong territorial disparities in the employment rate: Nearly 20% of the total population lives in counties with poor employment statistics (the respective EU value is around 12%). The eastern and northern parts of the country still lack jobs and the situation of the more developed western regions 10

The present version of the country-specific recommendations was approved by the General Affairs Council in 25 June 2013, and forwarded in 27-28 June 2013 to the European Council for validation. The recommendations will become effective only after the formal approval of ECOFIN on 9 July.

32

strongly depends on the position of companies on the export markets. Problems in connection with long-term unemployment or inactivity are concentrated in certain parts of the country and among territorially segregated social groups (including the Roma). The data for employment (a) and unemployment (b) show even larger disparities at micro-regional level within the population aged 15-74 years; in 2010, values between 31-67% (a) and 6-44% (b) can be traced. Problems with mobility: Half of the unemployed live in small settlements, where local opportunities and the mobility of the local workforce are limited. The important factors of mobility include transport opportunities, affordable and regulated tenement market as well as limited availability of child-care services. Weaknesses and potentials related to rural development The rate of the registered unemployed in rural areas is much higher than the national average (rural areas: 7.3% national average: 5.5%; HCSO, 2011). In addition to unemployment, rural areas (especially villages) are much more heavily affected by migration. The majority of migrants are young graduates, which results in the aging of rural areas, and in shortage of professionals (HCSO, 2011). Social land programmes, self-employment, fostering entrepreneurship can significantly support the employment development of rural areas. ‘Village enterprises’ could play a major role; their formation could be promoted in local development strategies. These enterprises are not primarily profit-oriented and they can secure employment in rural settlements, where market-oriented enterprises have been insufficient temporarily and in the short-term. Weaknesses and potentials related to agriculture and food industry The number of employees in the agro-industry was 128 000 in 2011 compared to the figure of 418 000 individual farmers. The proportion of employees decreased by 1.75 percentage points between 2001 and 2010. The employment role of agriculture and fishery is most significant in the Southern and Northern Great Plain and Southern Transdanubia, but the ratio of the decrease is also the highest in these regions. Growth potentials are limited by the increasing average age of agricultural workers; the proportion of employees under 30 years is only 15% (NRS, 2012). Development focus is shifted to highly labourintensive agricultural sub-sectors, such as animal husbandry and horticulture, serving the purpose of job creation. The food industry and forestry can provide local or regional employment for low-qualified workers through their development activities. Social economy in connection with agriculture and environmental management can contribute to the increase of employment. Shortages and potentials of aquaculture and fish farming sectors Fish farming sector represents only a small portion of employees (approximately 7000-8000 families, HAA) but as a highly labour intensive branch the employment impact of developments are strong, particularly in case of developments integrated into local economies. Indirectly fish farming also contribute to the employment increase of other sectors like tourism or landscape management. Experiences of the 2007-2013 planning period The most successful grant schemes of the TAMOP (Social Renewal OP) programme were the “Improvement of employability of the disadvantaged” (TAMOP 1.1.2. improves the situation of 117 000 persons, directly supporting the employment of 70 000 of them in the open labour market) as well as the programme “Reducing labour force costs of disadvantaged people” (TAMOP 1.2.1 contributed to the employment of 200 000 persons until the end of 2012, MNE). (The experiences of employment and economic development in the most disadvantageous areas can be found at sub-chapter 1.1.4) The utilisation of funds aimed at the promotion of active tools was managed within a standardised financial framework, through the National Employment Fund. In the future EU funded labour market programmes will remain a priority objective, contributing to enhanced active employment policy tools. The effectiveness of programmes implemented by non-governmental actors need to be improved by continuous support in the planning and implementation activities, by the simplification of implementation and by the introduction of global grants, as well as by the increase of the time frame spent on dealing with the most disadvantaged people. A coherent monitoring system based on unified

33

methodology and data collection is needed to measure the results of employment and training programmes. The cooperation of public administrations, labour offices, local enterprises and NGOs with employment related mission (these latter are not present everywhere, although the competences of NGO sector has strengthened in the current period) and also their reinforced institutional framework are needed to solve local labour-market problems. Beside trainings the improvement of labour opportunities has to be established to employ low-educated people, which include the support of high living labour intensive sectors (e.g. building and tourism industries, agriculture, etc.), and also targeted training and mentoring programmes have to be launched for them. In order to improve the competitiveness of enterprises, the focus and effectiveness of trainings must be developed. Creating jobs must be considered as a priority objective when formulating the requirements and objectives of economic development measures. According to various evaluations (NTS situation analysis, NDA programme evaluation, 2013) tourism developments can contribute to eliminate territorial disadvantages and to improve employment. Ability for creating new workplaces was considered significantly in the system of calls of proposals (also in comparison with other SME supports), especially in the calls for service development, although every support construction has the requirement of workplace creation towards the project owners. Employment impact should be forcefully considered also by the developments of the next programming period. Tourism shall continue to be an integral part of the territorially decentralised developments but towards effectiveness there is a need of some changes. Developments need more focus; proper professional grounding, attraction development based on customised ideas and present tourism trendsoriented complex themes are strong requirements. Centralised coordination of rational territorial allocation of attractions with similar profiles shall be arranged. The main objective for tourism accommodation development is the increase of quality, newly developed accommodations can be supported (with centralised coordination) only in case of justified needs and only in the surroundings of attraction concentrations. It was an important progress in the current period that the renewal of the territorial tourism destination management was started, which promote to reach the above presented objectives and fosters the cooperation among the actors in territorial tourism (For results of developments aiming competitiveness see the chapter about the 3rd thematic objective.) Unlike the present programming cycle the programmes of active labour market, the employment policy arrangements for groups with low labour market involvement, the development of social economy as well as the arrangements of vocational and adult education should be handled as a part of economic development under its respective operational programme in 2014-2020. Thus the alignment with the demands of economy, the correspondence among the measures of economic development, employment and education as well as the motivation to step into the open labour market can be strengthened. Supporting measures (using principally social policy tools) of decreasing poverty and of social inclusion should be placed under the human resources development operational programme. These latter measures also have impact on employment and this has been experienced in the current period (TAMOP 5th priority), therefore coordination should not be eliminated. Agriculture and rural development supports have not resulted in significant employment increase along the current period although there are exceptions like farm bus programme which in itself created 600 workplaces directly as well as the complementary employment impact of rural tourism developments. More focus should be placed on employment oriented measures (keeping and creating workplaces) in the future. Future workplace creation is served by the support of agriculture sectors with higher labour intensive demands (see above). Development needs  Continuing and improving the labour market programmes receiving EU funding (which play a major role in enhancing the tools of active employment policy) is a needed. Promoting the integration of disadvantaged job seekers as well as the participants of public employment into the primary labour market is favoured and that is secured by services and supports matching with the needs of these target groups.  Introducing Youth Guarantee to increase youth employment.

34



      

To improve the competitiveness of the labour force it is necessary to promote LLL (including the enhancement of LLL opportunities for the low-educated and employees of the public work scheme), and to develop the system of vocational training and adult education highly considering the arrangements to promote dual training schemes (in strong harmony with the development need that support the achievements of the thematic objective No.10 (education)). To enhance the harmonisation of work and family life, the expansion of child-care capacities. It is necessary to complete the measures to expand and improve the quality of labour-supply with a demand-driven economic policy, to grow the employment potential of the enterprises (especially of the SMEs) Supporting sustainable forms of social economy, assisting self-employment and entrepreneurship, improving geographical mobility (aspect in the identification of transport developments) and strengthening local employment capacities in regions with high unemployment. Local economic development with the focus of securing employment through the establishment of a nationwide management network on micro-regional scale, which supports local economic management. Development of complex small-scale territorially decentralised tourism packages which are territorially coordinated, unique and based on local capabilities. (For the needs of tourism developments related to competitiveness see the chapter about the 3rd thematic objective.) Strengthening the financial sustainability of social enterprises (non-profit companies) with SME support-type measures tailored for the target group to improve their employment impact. Keeping the present and creating new workplaces in the agricultural economy and in rural areas.

MAIN NATIONAL DEVELOPMENT PRIORITY 3: Enhancing energy and resource efficiency THEMATIC OBJECTIVE 4: Supporting the shift towards a low-carbon economy in all sectors The main targets of the National Energy Strategy (adopted in 2011) are the increase of supply security and the reduction of energy-dependence. The Strategy promotes the increased use of renewable energy resources, increasing energy efficiency, enhancing energy connections with neighbouring EU Member States and the introduction of new low-carbon technologies. Concerning innovative and R&D actions, the European Strategic Energy Technology Plan also can be used as a guidance (see R&D&I thematic objective). Decreasing CO2 emission, but dependence on fossil energy sources Gradually decreasing greenhouse-gas emission: Greenhouse gas emissions in Hungary decreased by 33% between 1990 and 2011 (GHG Inventory). The national GHG emission was 66.2 million ton in Carbon Equivalent Value (CEV) in 2011, which is the lowest value since 1985 (GHG Inventory, 2013). The energy sector produced 71.6% of the total GHG emission. Challenges of national energy dependence and vulnerability: Hungary is a vulnerable country in terms of energy. Both in electricity production and in heat supply the use of natural gas is significant (37% of primary energy consumption in 2011, Eurostat), while national hydrocarbon supplies are limited. As a result, the external energy import dependence on primary energy sources is high: 52% in total, natural gas: 65.57%, crude oil: 82.88% in 2011 (Eurostat). Energy efficiency is also one of the competitiveness factors of SMEs. Favourable potentials in renewable energy Utilisation of renewable energy resources lags behind the EU average (HU: 8.79% (Report on utilisation of renewable energy resources in Hungary, 2011), EU average is 12.5% in 2010, Eurostat). On the other hand, Hungary has notable potentials for renewable energy resources based on natural sources. Based on the natural conditions, the Renewable Energy Utilisation Plan for Hungary set the objective of increasing the use of renewable from 1344 ktoe/year (in 2010) to 2879 ktoe by 2020. The geothermal gradient is outstanding (5K/100 m), almost one and a half times higher than the world average. In the area of renewable energy resources no major progress can be achieved without the development of new technologies. However, development of new technologies in this area is expensive, slow and requires

35

many pilot projects. Nearly 80% of Hungary’s area is under agricultural cultivation; therefore, the sustainable energy utilisation of biomass is evident. Forestry by-products as well as agricultural waste and by-products could have great significance particularly in satisfying local, small-scale energy demands. The replacement of fossil fuels with renewable energy requires investments in new technologies. An additional development potential is the energetic utilisation of the yet unexploited biogas, derived from sewage sludge management. The key factor of energy saving is the building energy In Hungary 40% of the total energy consumed is used for heating and cooling buildings; this sector is responsible for the largest CO2 emission. Meanwhile, 70% of the building stock does not meet the most recent energy requirements (MND, 2012). Therefore, the most significant potential in terms of energy efficiency is the energy efficient modernisation of buildings. Modernisation of outdated central heating system - which provides heating and hot water for around 2 million inhabitants - is an important potential. Transport produced 18.3 % of GHG emission in 2010 (GHG Inventory), and it is the only area, where the emission has continuously been increasing in the past 20 years, however, some decrease has recently been registered in this field as well. Therefore, in relation with transport, it is of key importance to develop public and rail transport as well as the utilisation of renewable energy resources. By reducing transport demands, development of local economy could also contribute to the reduction of energy consumption. In addition to direct investments, raising energy and environmental awareness also contributes to increasing energy savings. Urban and suburban transport as a factor of low carbon emission and energy Urban and suburban transport development also contributes to thematic objective No. 4. Its energy efficiency can be improved directly, but as an alternative against individual motorised transport (with much worse energy balance), its indirect impacts are also significant. Considering the fact that this topic is strongly connected to the counterbalance of the traffic bottlenecks, its state, needs and expected results are described at thematic objective No. 7 (transport). Due to the standard management of transport policy this issue takes place in MOP. Relevant objectives of the National Reform Programme In line with the commitments specified in the National Reform Programme, Hungary will increase the rate of renewable energy resources to 14.65% within the total gross energy consumption by 2020, achieving a total energy savings of 10%. In addition to the introduction of the EU emission-trading scheme, Hungary has set the objective of keeping the growth of greenhouse gas emission rate at or below 10% (compared to the 2005 rate). Renewable energy, Hungary Year Share of renewable energy in gross final energy 2010 consumption (%) national EU 2020 target 2020 increase required to reach the target 2010-2020 (Source: European Commission: Country Fact Sheet, Hungary, July 1012)

Hungary

EU average

8.79

12.5

14.65 5.86

20.0 7.5

Weaknesses and potentials related to agriculture and food industry Forests, being the most efficient CO2 traps, absorb 12-15% of Hungary’s CO2 emission. Although Hungary’s forest coverage (21%) is significantly lower than the EU average (40%), there is also considerable forest plantation potential in the country (around 650 000 ha, National Forest Strategy), which can be a significant factor with regard to the production of renewable energy, CO2 absorption and the protection of ecological services alike. The quality of wood energy is equivalent of an estimated 36 to 37 terajoules, the forests’ geographical locations throughout the country allows their use with transport for short distances. A vast majority of biomass is originated from forestry raw materials as well as agricultural by-products. A large proportion of by-products originated from crop production (8 tons of biomass in total) is worthless at the present for the processing industry and just a negligible amount is

36

used for energy production. The estimated biogas potential based on agricultural by-products, sewage sludge, organic industrial waste and household waste amounts to 222.84 PJ (AKI 2011, expert estimation). In 2011, the agriculture sector contributed 13.3% of Hungary’s total GHG emissions (excluding LULUCF Land use, land-use change and forestry). In 2011, removals from LULUCF corresponded to 5.6 per cent of total GHG emissions in Hungary (excluding LULUCF) (GHG Inventory). The most significant branch within the food-industry is the medium-sized enterprise sector; the barrier of its competitiveness is the significant use of outdated technologies that lower energy efficiency. Experiences of the 2007-2013 planning period During the planning of the 2007-2013 period a total of HUF 114 billion was allocated in total to increase the utilisation of renewable energy resources and to improve energy efficiency. The published grant schemes attracted huge interest; however, - due to depletion of resources the call for applications was temporarily suspended. Therefore, later 105 billion HUF had been reallocated, however, it still seemed to be insufficient compared with the demands. This huge demand for these calls must be taken into account when defining the subsidy schemes for the 2014-2020 period. In doing so, the application of preferential financial instruments should be focused on. Under the “modernisation of livestock farms” title, projects focusing on the nitrate directive, manure allocation and the related biogas-production, have been received large amount of subsidies. Investments affected the reduction of GHG emission; however, it is difficult to demonstrate their direct impacts. Nevertheless, it would be absolutely necessary to continue these types of projects11. Under future developments in livestock production sites manure storage and handling are not excluded from the scope of eligible costs. The aspect of the increase of energy use efficiency as well as the facilitation of the utilisation of renewable energy sources are practically incorporated into every NHRDP (New Hungary Rural Development Programme) subsidy scheme. In the next rural development programme these aspects must be further emphasised. Biogas utilisation has to be supported in the next programme. Compared to the period before 2007 the pace of afforestation supported by EAFRD has slowed down. The willingness to afforestation is significantly below the reasonable level because in the decisionmaking process of the landowners this type of support competes with annual aid instruments that provide better returns in short term. Nevertheless, the carbon sequestration potential of planted forests that were supported will exceed 200 000 tons by 2015 and will reach 1.4 million tons of CO2 by 2035. Development needs:  Increase the – mainly local and regional - utilisation of renewable energy sources in heating and in electricity production as well as in transport. The national geothermal and biomass potentials should be exploited, as long as it does not jeopardise the security of food supply (support of targeted biomass production on fields is not planned).  In order to utilise renewable energy, there is a need for technological R&D (this could be satisfied under thematic objective No. 1) and pilot projects.  By the improvement of the energy efficiency of the building stock (private and public), energy use can be reduced. Energy efficiency may improve by modernising district heating system, using renewable energy. (It could be part of urban development as well, see thematic objective No. 6.)  Energetic development of SMEs to enhance competitiveness (also contributes to thematic objective No. 3).  To increase the application of renewable energy sources, it is important to promote the development of their connection to the electricity network (storage capacities, smart networks). Widespread adoption of environmentally conscious consumer attitudes have to be increased on as large scale as possible both among households and enterprises.

11

The animal production related greenhouse gas emission figures are currently under recalculation, since the figures provided by JRC in this respect seem to be misleading and not reflecting empirical field experiences.

37



 

Concerning agricultural, forestry and food industrial energy consumption, the share of renewable and the energy efficiency must be increased; furthermore it is necessary to increase energy efficiency of agricultural buildings. Agricultural by-products should be better exploited in energy production both in a targeted manner, and during the improvement of their transport and storage conditions (in cooperation with the farmers, if possible), biogas production of waste and stockfarming sites. In order to enhance the consolidation of GHG gases more extensive reforestation is needed. See urban and suburban needs at thematic objective No. 7.

THEMATIC OBJECTIVE 5: Promoting climate change adaptation and risk prevention Increasing environmental risks Climate change is one of the most severe environmental risks affecting not only the economy but also directly people’s lifestyle and living conditions. Concerning the climate of Hungary, forecasts point to higher average temperature, modestly reducing amounts of precipitation concentrated mainly in Winter and more intense potential evaporation. In addition, extreme weather incidents (rain- and windstorms, heat waves), floods, forest fires are expected to occur more frequently and more intensely and the change of natural ecosystem is projected. Therefore, water management infrastructure will have to face the challenges of both excessive amount of water and drought. Further collection of data and research is required for comprehensive planning of mitigation of risks. As part of the National Climate Change Strategy (adopted in 2008), the National Adaptation Strategy will be adopted in 2013 followed by the Disaster Risk Assessment methodology and Country Report expected to be finalised in 2014. The EU adaptation strategy and the recommendations of the CLIMATE_ADAPT platform contribute to the foundation of national adaptation strategies. Challenges in rearranging water management In the field of adaptation to climate change, flood protection investments are of special importance, as almost 50% of Hungary’s territory is endangered by floods and rising groundwater (HNEP, 2009). 700 settlements are located in protected flood-basins, with a number of inhabitants nearly 2.5 million. National assets protected by the flood protection system produce about one third of the GDP (DGWM, 2013). However, extreme weather conditions make it inevitable to extend the use of national watersaving technologies and the possibilities of water-retention. The flood protection systems to be built and reconstructed: The state of nearly two-thirds (65%) of the municipal flood protection works is inadequate compared to the needs, requiring development and reconsolidation (DGWM, 2013). Flood protection can be realised within the framework of a territorially integrated, unified water management system based on catchment management, by reactivation and involvement of natural (deep) flood basins into water management. This purpose could be served by the ongoing project “Improvement of the Vásárhelyi-plan” which is intended to contribute to the increase of flood protection of the Tisza-valley as well as to territorial and rural development of the affected region. Especially the flood protection security of the Upper-Tisza region has to be developed. While the risk of floods increases, damage caused by groundwater may also increase due to the limited capacity of the drainage system. On hillside areas drainage and storage of precipitation water and the equalisation of the discharge of different flows is still unsolved. The management of precipitation water requires preparing the drainage systems for exceptionally high water flow within and outside of settlement boundaries, which still represents unsolved tasks, particularly in most small settlements. Increased risks to expect The infrastructure and capacities of disaster management do not reach the necessary level in many cases to assess and manage enhanced risk. In the past two years, major steps were taken by reorganising the operation of disaster management, but further improvement could be achieved by modernising the services and by planned, regular assessment that is integrated into operation of disaster management organisational system. The assessment of natural risks as an increasingly important tool for preparation has not become part of general disaster management practice. A majority of the necessary vehicle stock and devices are outdated, there is a need for developing a monitoring system (NDGDM,

38

2013). The IT background and administration databases need to be renewed. The disaster management potentials are supported by the development of infrastructure networks (energy, telecommunication, transport) when these are prepared for extreme situations. The preparedness of inhabitants for extreme weather incidents and floods do not reach the desired level. The number of civil defence volunteers slightly exceeds the number of 1000 (it is 1.3% of the population, while in Germany the number of volunteers is nearly 80 000 (NDGDM, THW, 2013). Due to limited adaptation opportunities, disadvantaged social groups (deprived, children, elderly, diseased people etc.) are more vulnerable to climate change effects. Territorial disparities: weaknesses and potentials Urban areas: in urban areas due to limited possibilities of technical interventions, concentration of population and financial assets, risks are higher and adaptation possibilities are more expensive. These can only be managed by integrated urban development also taking climate protection issues into account (see under thematic objective 6). Rural areas: In small rural settlements the increased health-related vulnerability of the ageing population requires area-specific interventions. People living in segregated, peripheral conditions are more vulnerable to climate change. Weaknesses and potentials related to rural development From the aspect of climate change rural development is inseparable from agriculture and forestry management, and from the state of cultivated and non-cultivated or wooded areas surrounding the villages. Beyond agriculture adapted to the environmental endowments, rural development mainly takes part in awareness raising of inhabitants. Local development can contribute to renewable energy projects as well, as it is discussed in other chapters, which can have a significant impact on climate change as well. The mitigation of the effects of climate change, from the point of view of the population, is primarily a health care issue. In this respect, a high impact can be achieved by providing information and training, so these should be included in the local development strategies. Weaknesses and potentials related to agriculture and food industry As a result of climate change, the security of future agricultural production is declining (wheat: 35%, other products had 50% yield fluctuation in the last 5 years; MRD, 2013), which makes it inevitable the use of financial risk management instruments and risk management technologies. There is a significant interest in retaining surface waters and in their usage for irrigation as well as in the renewal of existing irrigation capacities with water-efficient methods. At present, the amount of irrigated lands in Hungary is relatively low (it has not reached 100 000 hectare/year since 1997, in 2011: 51 568 ha), while it could be increased in a sustainable manner in most parts of the country, (DGWM, HCSO, 2013). The promotion of modern water-efficient technologies may contribute to the growth of agricultural production in spite of climate change (HRDS, 2012). A primal task of agriculture and forestry is to spread the sustainable land use and sustainable forestry solutions with regard to climate change. Diversification of the production structure, spread of environmentally better adaptive industrial crops and livestock, and techniques improving the soil conditions, improve the security of production (and promotes sustainability). These are supported by the significant national genetic reserves and the successful gene preservation programmes. Experiences of the 2007-2013 planning period A significant part of investments of the 2007-2013 planning period has already contributed to the objectives set out in the Water Framework Directive and the catchment-management plan. In the framework of “Good management of our waters” priority axis 161 projects have been accepted and HUF 384 billion in total was allocated to flood-protection and complex planning and management of catchment areas (MI, 2013). In case of calls for applications focusing on regional and inner drainage launched within the regional operational programmes excessive amount of application was submitted, which proves that there are further needs. The developments in the field of water management served as a base for efficient adaptation; however, more emphasis must be placed on the elaboration of up-to-

39

date modelling methods and plans including concrete interventions. The most important technological measure is included in the “Improvement of the Vásárhelyi-plan” which needs to be further strengthened and completed. In its framework, four flood-level reducing emergency storages have been built so far. By the end of the 2007-2013 financial period, an additional two are expected to be completed. Investments to improve the water carriage capacities of basins in case of high water have failed so far; however, their implementation in the future is inevitable to reduce flood risks. Flood-level reducing storages can only achieve the targets if these projects are implemented. The infrastructural development of water management must enhance the management of extreme weather incidents as well as the water storage and water supply. In case of developments within exclusive state competence (plains, hillsides water arrangement and regional water distribution works) the decision making responsibility of the regions must be reconsidered. In spite of the targeted climate adaptation developments, during the developments of 2007-2013 climate change was usually not a crucial issue. There is no sufficiently detailed system available to monitor the adaptation interventions and their impacts. In the period of 2014-2020 these approaches must appear in all relevant development, with appropriate emphasis, in an integrated manner and must be traceable (see chapter 1.5). In the period of 2007-2013, rural development subsidies has been promoting the increase of agricultural biodiversity, irrigation and also the spread of water-efficient technologies; these tools will have particular importance in the next planning period, too. Development needs  Inland water deflectors and flood protection systems must be constructed (also new ones) in a way to make them able to moderate and restrain extremities in water levels, also take the water storage and irrigation potentials as well as the specificities of plains and hillside areas into consideration.  Preparation of disaster management for extreme weather conditions.  It is of key importance for the agricultural sector to expand irrigation systems, diversify production structure and to improve production security through the spread of species of industrial crops and livestock adapted to the environment and local potentials.  Introduction, expansion and extension of risk management instruments in agriculture.  Forecasting of foreseeable changes and the prevention of anticipated damage are also important areas to develop in the future. In addition, the preparation for damage mitigation and the elaboration of methods of reconstruction. There is a need for improving public awareness of natural risks.  See urban adaptation under thematic objective No. 6. THEMATIC OBJECTIVE 6: Protecting the environment and promoting the sustainable use of resources Hungary’s overarching main development directions connected to the thematic objective No. 6 is defined by the National Environmental Protection Programme, related to the 6th Environmental Action Programme of the EU and by the NDTC (further strategies are described below). Endangered biodiversity and natural values of community interest Among the 11 biogeographic regions, Pannon region (which covers the entire territory of Hungary) has the highest rate (87%) of habitat-type of community interest having an unfavourable conservation status (EU-average: 65%; EEA, 2010). The protected natural areas of national importance and Natura 2000 areas together cover 21% of Hungary’s territory, but do not form an ecologically coherent, green infrastructure system. The EU Biodiversity Strategy to 2020 also designates development directions in Hungary: improvement of the natural protection state of species of community importance and of habitat-types, with 50% or 100% respectively; recovery of at least 15% of degraded ecosystems with green infrastructure. Significant steps taken for good water condition The increased protection of the water supply is unavoidable: The groundwater supply of the country has key significance also at European level, though its territorial and depth distribution is changing. Majority of surface water only flows through the country, with significant territorial and temporal

40

disparity. Compliance with the provisions of the 2000/60/EK Water Framework Directive (WFD) is an important task: only 8% of the surface water stock is qualified as good quality, while 32% of the groundwater stock is qualified as poor condition waters (WFD, 2010). Organic matter, nutrient and hazardous material loads (which can also be mitigated by agricultural environment protection) and the previous hidromorphological interventions on water courses also make it difficult to reach good conditions. The systems to monitor the adequate quality of the waters have not been established yet. Approaching comprehensive wastewater management: The 91/271/EEC Wastewater Directive and the Accession Treaty represent obligations to Hungary, which is implemented according to the National Waste Water Treatment Programme. By 2011, the rate of sewage system coverage has reached 72.8% and 97.7% of sewage collected through the sewage pipe system is now discharged after secondary or tertiary level treatment. (By the end of 2015, 89.2% drainage rate must be achieved, with at least biological cleaning of the collected wastewater.) According to the provisions of the Wastewater Directive, cleaned wastewater must be reused, if possible. Regarding wastewater management, small settlements lag significantly behind. Drinking water quality does not always meet European standards: Drinking Water Quality Improvement Programme (according to 98/83/EC Directive) assists the identification of drinking water developments. In Hungary, piped drinking water supply is available for 98% of the population, but their quality often does not meet the EU requirements (MRD, 2013). The protection of drinking water resources contributes to the adequate healthy water supply as well, as 96% of Hungary’s water supply comes from groundwater (MRD, 2013) (the water quality can be improved by the agricultural environment protection as well). This problem must urgently be solved, since the deadline for the implementation of the EU directive to secure the defined quality of drinking water expired at the end of 2012. Comprehensive waste collection, waste management to be developed Waste management, renewed by the new Hungarian Waste Act, will be regulated by the National Waste Management Plan (according to the 2008/98/EK Waste Framework Directive), which will be completed by the end of 2013. The new waste system promotes the reduction of the amount of waste landfilled, the prevention of waste generation and the utilisation of waste. Presently, waste collection takes place in an organised manner in the entire territory of Hungary; the rate of households connected to the system was 92% in 2011. Although more than 4 million people have selective waste collection facilities in the neighbourhood, 75% of municipal solid waste is land filled, and only 13% annually is recycled. Implementing compulsory selective waste collection and utilisation is the next stage of development. The capacities and standards of existing waste processing works are insufficient to process a significantly larger amount of waste. Approximately an additional 1000 landfills must be recultivated. Reuse (e.g. establishment of reuse centres) offers further development opportunities. Air and noise pollution significantly decrease the quality of municipal environment Designation of air- and noise-protection actions are supported by the Cross-Sectoral Program of Particulate Matter’s Mitigation 10 (in line with 2008/50/EC; 49/2002/EC; 2001/81/EC Directives). The main problems from the perspective of air quality in settlements are primarily caused by the particulate matter contamination, and secondly, by the ground-level ozone and nitrogen-oxides. The current air pollution monitoring network (144 stations, mainly manual) do not cover the whole country and their equipment is insufficient to monitor air pollution components. More information is necessary about which source-types cause pollution to what extent. 10-33% of inhabitants of certain large cities live in an environment, where the noise level at night exceeds the 55dB target value recommended by the World Health Organisation (MRD, 2013). Lack of environmental consciousness limits, the environmental technology renewal supports the effects of developments Environmentally-conscious consumer habits are the most effective tools to prevent waste generation, wasteful water- and energy-usage. In social values, the acquisition of material wealth plays a significantly larger role, while the appreciation of environmental quality receives a minor emphasis. According to representative surveys, three thirds of the population carries out environmentally conscious activities in their everyday life, but in spite of this, household consumption keeps growing instead of decreasing

41

(Nagy, 2012). The low level of corporate environment-consciousness is illustrated by the fact that by the end of 2012, only 28 Hungarian enterprises introduced the Eco-Management and Audit Scheme (EMAS), compared to the EU level of 4500 (EU, 2013). For Hungary, the environmental technology renewal is important; therefore, connecting to the EU Ecoinnovation Plan, a National Environmental Technology Innovation Strategy has been drafted. Urban, settlement environment, heritage protection The sustainable development directives of the urban environment, fit to the demographic and climate changes, are designated by the NDTC, in accordance with the Budapest Communiqué of the Directors General responsible for urban development (2011). Towns, as the economic organising forces of their region, play a key role in local economy development, which is resource-efficient and keeps the resources at local level, as well as in securing healthy environment that addresses demographic issues and the demands of families. Climate change challenges concentrate in towns (see energy consumption and the population exposed to extreme weather conditions). Bottlenecks can be identified in public transport and cycling, in the state of public spaces, business and recreation infrastructure, in the lack of green surfaces, social urban rehabilitation and regional markets, in outdated building energetics and central heating systems. There are significant brown-field areas, mainly in towns, waiting for precise measurements (12 000 ha, EUGRIS estimate). Cultural heritage (70% of Hungarian settlements) protection and tourism, creative industrial utilisation also contributes to urban and rural developments. The above-mentioned aspects can only be successfully implemented with a complex approach. Territorial disparities: weaknesses and potentials The improvement of environmental quality in urban areas requires the harmonisation of certain sector developments in an integrated manner because of the significant construction interventions and the complex system of interactions. Integration includes environmental, transport, climate protection developments, as well as family-friendly developments. Therefore, the planning and funding of these developments require special territorial harmonisation and integration. Weaknesses and potentials related to rural development As it has already been pointed out in connection with climate change, environmental protection within rural development can be realised by providing training to and raising awareness of the rural population. Concerning the projects implemented in the framework of local development strategies, environmental aspects could represent a basic eligibility criteria, - or at least preference should be given to environmentally-conscious projects during the project selection. Therefore, training and awareness raising play a central role in the preparation of local development strategies, in preparing local entrepreneurs. Weaknesses and potentials related to agriculture and food industry 90% of Hungary’s protected natural areas and Natura 2000 areas are agricultural areas, fields or areas affected by forest or fishery management. (MRD, 2013) The maintenance of these areas can only be ensured by active environmental protection management. For farmers living in these areas, extensive farming that considers nature conservational aspects could be a possible solution. 85% of Hungary’s territory is covered by soils suitable for agricultural use, which are endangered mostly by erosion, therefore the conservation of soil must be promoted. Hungary has excellent and yet unexploited potentials in organic farming, an area of 124 500 hectares were used for this purpose in 2011 (MRD, 2013). From the environment point of view, agricultural and environmental farming are of key importance. In most parts of the country, the abandonment of arable lands with poor yield potential, shift in land use and implementation of water saving farming practices in accordance with the landscape characteristics are necessary. 40% of the forests in Hungary are subject to nature protection. Forestry management, that ensures continuous forest cover, now amounts to nearly 10% of the forests (NFCSO, 2013). Further support is needed for the successful continuation.

42

Weaknesses and potentials related to aquaculture and fishery sector In addition to economic aspects, pond farm fishery has nature conservation, water management and social functions. Hungarian fish ponds contribute with 35 000 ha to the wetland habitats, mostly Natura 2000 areas. Nearly 80% of the bird species living in Hungary can be observed in these areas. Therefore, a prerequisite for the maintenance of the economic activity is the conservation of ecological conditions, which can be supported by targeted compensational subsidies. Regular data collection concerning aquaculture and natural fishing also serves as a basis for subsidies. The necessary administrational and controlling capacities are available, in line with the implementation mechanism of the present Fishery Operational Programme. Experiences of the 2007-2013 planning period In order to meet EU requirements, supports aiming at maintaining the water’s good state, the water quality, the sewage disposal and cleaning, and waste-disposal have improved significantly in the 20072013 period. Concerning sewage disposal and cleaning, between 2007 and 2013 primarily the overarching integrated systems have been constructed; individual systems only to a lesser extend. It is reasonable to assess and list the forthcoming tasks (2013, NDA assessment). During this process, preference must be given to individual systems and to the co-operation between settlements and districts; minimisation of maintenance costs and residential expenses must be important factors. Regarding drinking water, in addition to the small-scale water cleaning technologies, the more effective regional or micro-regional systems should also be considered. The built waste management infrastructure offer a good basis for a system adapted to the waste hierarchy; future developments should bring the selective collection and reuse into focus. Furthermore, deficiencies identified during the Waste Act legislation process should be completed. The current concurrent source allocation in the recultivation of solid waste landfills must be avoided (both territorial and sector sources were available). The experience of the 2007-2013 period is that more attention should be paid to the establishment and maintenance of appropriate coordination mechanisms, securing the management of integrated developments. Defining the potential beneficiaries and the designation of the project size could have significant influence on the success of a development. The lack of preparation caused serious difficulties in the implementation of large environmental infrastructure development projects; therefore, the preparation and continuous support of beneficiaries must be ensured in the future, as well as the reduction of administrative burdens. Regarding the beneficiaries of the public sphere, especially in derogation issues, a central development implemented by a professional project organisation could be more successful. Furthermore, the calls for applications should be replaced by selection processes imposing less administrative burdens, which can also consider environmental policy aspects, but also keep cost-effective aspects established in the current process of calls for applications (primarily in wastewater management related calls for applications). Another important lesson is that the consistent implementation of the “polluter, or user pays” principle means, in some cases, a disproportionate burden to residents. Habitat-development investments launched in the 2007-2013 period contributed significantly to the improvement of the situation of species of community importance and of natural state of habitat-types (in 2013, several elements’ natural protection state is improving; MRD, 2013). Regarding some natural protection development (e.g. local protection) a smaller project size and less limited circle of beneficiaries could contribute to the conservation of values and to the increase of public engagement. Based on the experiences made in integrated urban development strategies, integrated urban development is justified. It is important, that they must be implemented in programmable development packages with predictable amounts and responsibilities, rather than in hardly predictable application systems. A major shift in focus is required in the development of urban environment; serving the requirements of families and children, preparation for climate change, economic development and employment, integrated management of the requirements of the cities and their regions is essential (instead of main street-type developments). During the 2007-2013 period, several on-farm renewal energy investments were financed by the EAFRD funds, including the new or updated horticultural use of thermal water in 28 cases. The interventions of

43

EAFRD, securing the dissemination of sustainable farming, supported the implementation of a land-use system, which suits to natural resources, landscape (Agri-Environmental Scheme: AES, Natura2000, Less Favoured Areas: LFA), habitats and to their quality improvement. In the future, the establishment of development forms with better adaptation capabilities to the natural characteristics of a given area must be highlighted. Strengthening sustainability approach has further importance: environmental training of farmers will be supported also in the next programming period, application of sustainability and environmental aspects will mean a more pronounced advantage in subsidy application selection. In addition, the presence of professional consultants must be strengthened. In fishpond environmental management programme targeting the sustainable management of ecosystems related to aquaculture activities, 24% of the fishery enterprises took part with 17 700 ha pond-area in total, the majority of which were Natura 2000 areas. In the next programming period, a new programme will be established aiming at the further development of the present programme. Development needs:  Development of a monitoring system, modelling and emission forecast, elaboration of action plans in the field of noise-protection, water protection, waste-management and air-protection.  Habitat-protection green infrastructure and noise-protection infrastructure developments.  In accordance with the EU Water Framework Directive, further improvement of water conditions.  Further improvement of the biological cleaning of waste water, and the quality of drinking water.  The reduction of waste production with utilisation is important.  Awareness raising for residents (environment-consciousness) and enterprises, farmers (green economy), stimulating patterns of pilot projects supporting environment-technology and green (and resource saving) economy.  It is important to apply approaches that retain the resources at local level, satisfies the economic growth, healthy environment, the protection of the built environment, climate adaptation and family-friendly demands in a sustainable and integrated way.  Support of nature-friendly land-use and farming adapted to the landscape characteristics (including flood basins), support of the reserve of genetic resources (also with training) as well as of compensational payments counterbalancing the regulations of agricultural-water-environmental and ecological farming, Natura 2000 and Water Framework Directive, to compensate the sub-sequential loss of income. THEMATIC OBJECTIVE 7: Promoting sustainable transport and removing bottlenecks in key network infrastructures Comprehensive transport development needs The transport sector is an important factor in the Hungarian economy (6.2% of GVA, nearly 260 000 employees, HCSO, 2011); it indirectly influences the operation of all sectors and the living conditions of the entire population. In the transport strategy that is currently being revised, the reduction of environmental loads of the transport system and the improvement of its energy-efficiency and safety have been defined as long-term objectives. Key target of the strategy is to improve the co-operation of sub-sectors, the coordination of the entire travel-transport chain, and to enhance their continuity and reliability. All the planned transport interventions are prepared in accordance with the revised transport strategy (National Transport Strategy). In the strategy, which is still in progress, the main intervention area identified is the efficient contribution to economic growth and the support of the territorial convergence through financially, environmentally and technically sustainable developments. This will be completed by the development of transport safety as well as the establishment of intelligent transport coordination systems and the forming of travel-transport chains, based on combined transport methods. Due to the limited financial sources, it is worthwhile to explore the financing opportunities of transport developments in addition to EU sources; however, this fundraising is complicated for several reasons. The construction of the TEN-T network highways financed by PPP-funds was unsuccessful in the view of the national budget (HUF 100-120 billion annual fixed expenditure in the budget until 2030, MND, 2013).

44

The utilisation of financial instruments is restrained because of the long term return of the transport projects and the high rate of interest surcharge of the beneficiaries belonging to the public sector. Bottlenecks of public transport The development of the transport is not a goal itself, but an instrument serving the mobility needs of economic development plans. This particularly applies for public and intermodal transport, in which it is necessary to implement complex solutions integrating various subsectors, infrastructural and noninfrastructural components. In Hungary, as a natural consequence of economic development, the share of public transport in passenger transport is decreasing (in 2000: 40.2% (EU27: 18.3%), in 2010: 33.2% (EU27: 17.5%, EU, 2012d), but this is still one of the highest values in the European Union. The poor condition of infrastructure and vehicle fleet as well as the low level of smart transport solutions and multimodality all contribute to the decreased popularity of public transport. The public transport vehicle fleet is outdated: most of the vehicles have reached the end of their life cycle, and they cause significant local environmental pollution (e.g. particulate matter). (The average age of vehicles in 2012: multiple unit and railway carriage (3400 pcs): 33 years, local bus (3000 pcs): 15 years, distance bus (5000 pcs): 12 years; MNE, 2013). Low level of multimodality and smart solutions: Travel chains are not multimodal enough, time schedules are not harmonised and utilisation of smart transport solutions (e.g. traffic control, traffic disruption recovery, passenger information, e-ticket system) is still rare (NTS, 2012). The fact that from the 39% of the settlements it takes over an hour to reach the county seats by public transport makes the mobility of employees more difficult. (NDA, 2013). All urban-suburban transport development solutions contribute to the thematic objective No. 4 (low level CO2 emission economy), since they result in better energy efficiency than the individual motorised transport solutions as well as because of the solutions supporting energy efficiency of the urban transport directly; and, at the same time, they participate in eliminating the bottlenecks of transport. Challenges and bottlenecks in rail transport Hungary’s railway network is dense (169% of the EU average; EU, 2012b), but outdated, which increase travel time, energy consumption and environmental loads. (the rate of electrified routes is 69% of the EU average in 2010 EU, 2012; and on more than the half of network (3300 km) speed restrictions are imposed (HSR, 2012)). Three quarters of Hungary’s TEN-T core railway network do not meet the EU two main interoperability requirements (ERTMS, 225 kN axle load; MND, 2013). Challenges and bottlenecks in road transport Outdated, deficient road transport network: Accessibility has definitely improved in the past years as a result of large construction projects focusing on high level (primarily TEN-T) roads; however, 100 km out of the nearly 1200 km Hungarian TEN-T road spine network have not been developed yet, and some existing TEN-T sections have capacity shortages, and problems in transport safety (MND, 2013) (MND, 2013). The poor state of the secondary and lower level road network, connected to TEN-T cannot support the regional economy in connecting to EU markets either (the high proportion of roads in poor condition are unable to take 115kn axle loads; the proportion of public roads in poor condition was 30% in 2000, but over 50% in 2010; SAO, 2012). However, investors consider good road network connections to the development sites an important aspect. A development realised alongside the established public road arteries cannot generate economic development alongside the lower level roads due to the poor accessibility conditions. Furthermore, the development of the access roads to business sites seems to be a constant development need. Partly as a result of this Hungary was the 52th in the rank of the World Bank Logistics Performance Index in 2012 – in spite of the significant road developments in the period of 2007-2013. The accessibility of the majority of the settlements (2879) to the micro-regional centre did not improved between 2005 and 2010. The situation even deteriorated in 72 settlements (Hungarian public road accessibility evaluation, 2012.) because of the need for reconstruction concerning these lower level public roads.

45

Deficiencies in transport safety: in Hungary, in spite of positive trends, the number of road accident fatalities (740 fatal victims/1 million people, HCSO, 2010) was almost twice the EU 2020 target (33.8/1 million). Environmental challenges: in road transport, the share of renewable energies was 4.2% in 2010, corresponding with the European Union average (National Energy Strategy 2030). The average age of Hungarian cars (11.3 years; HCSO, 2010) is significantly higher than the respective values of Western European countries (e.g. in the United Kingdom in 2010: 7.3 years, Austria: 7.5 years, Germany: 8.3 years; ACEA, 2012). The CO2 emission of the transport sector amounted to 11.87 million tons (Eurostat), and this mainly resulted from car utilisation and public road transit traffic. Bottlenecks of TEN-T inland waterways Elimination of navigability bottlenecks on the river Danube represents a complex task, its planning requires a significant preparation phase (e.g. impact assessments), due to the different sectoral considerations, particularly because of the protection of Natura 2000 areas in most parts of the Hungarian Danube section. The shipping interventions cannot be implemented without the relevant environmental permits. The ageing local mobility systems In the past 10-15 years, the importance of public transport has significantly decreased in urban-suburban relation. Due to infrastructural shortages and organisational deficiencies, accessibility of towns (that are becoming suburban) from the neighbouring settlements and from the newly established areas is often insufficient. The public transport fleet of larger towns is old, not energy-efficient and causes environmental pollution. Furthermore, the proportion of track-based transport does not exploit its potentials. Cycling, which is gaining in popularity, requires infrastructural, transport-organisational and safety solutions and intermodality. Relevant objectives of the National Reform Programme In line with commitments set out in the National Reform Programme, Hungary will increase the share of renewable energy resources to 14.6% by 2020 and to achieve a total energy saving of 10%. Furthermore, Hungary set the objective of keeping rate of growth of greenhouse gas emission at a maximum level of 10% outside the scope of the EU emission trading scheme (compared to the rate in 2005). In addition to EU support, mainly the private and the business sectors can make significant contributions to the achievement of these objectives ( e.g. the replacement of private cars and fleets of vans). Furthermore, the performance improvement of the community transport implemented by EU supports can also contribute. Territorial disparities: weaknesses and potentials The mobility possibilities that do not ensure equal opportunity in accessing public services, commuting to work, and enterprises accessing markets violate the principle of equal opportunity, particularly in rural areas with small settlements, less favoured and cross-border regions as well as in agglomerations. In areas that are further away from the capital city, due to the usually lower linear transport quality infrastructure, large areas suffer from difficulties in accessibility. Almost every county has peripheral areas, where accessibility of some county seats (Kecskemét, Miskolc, Nyíregyháza) by road exceeds 100 minutes (NRS, 2012). Experiences of the 2007-2013 planning period From 2007 to 31st of December 2011, EUR 4,525 billion was allocated to transport development. As confirmed by evaluations (National Strategy Report, 2012), as a result of these developments, the connectivity to international road networks and the regional accessibility has improved significantly, and considerable time-savings have been achieved in the road and rail transport network as well. In the future, preference should be given to those projects based on large-scale social-economic needs and those that take energy-efficiency aspects into account. The policy criteria system of the project selection must be defined in the NTS (in progress). According to the surveys that took place in connection with the forming strategy, referring to the use of resources between 2007-2013, the development of the highway and main road network should play a less important role, but the cooperation of transport solutions supporting freight traffic, suburban public transport, and local cycling should gain in importance.

46

Furthermore, as a new topic, the development of transport safety, the implementation of smart coordination systems and the improvement of services of the main railways connected to the TEN-T network (e.g. eliminating the reduced speed sections) should also receive more emphasis. According to the evaluation on the efficiency of the transport investments, the financial sustainability should be more emphasised. (The beneficiaries focus on maximising the amount of the support, and the maintenance obligation of spectacular, high quality infrastructural investments often result in significant additional costs even in short term [up to HUF 10 billion at HSR, BKK - Centre for Budapest Transport, State Motorway Management Co. Ltd., Hungarian Roads Management Company, and local governments, etc.]) Some of the railway, road and urban-suburban development projects for which implementation began in the 2007-2013 period, but will be continued in the next period, contribute to national and EU objectives of 2014-2020, therefore, they could be financed by next periods financial sources. Problems in implementation must be addressed: (1) administrative procedures must be simplified and accelerated (e.g. permitting procedures); (2) potential beneficiaries must prepared with capacities and knowledge for the preparation and implementation of the developments (accurate and realistic feasibility studies, avoiding project-phasing, the time-need of tenders, etc.); (3) it is necessary to ensure the professional and administrative support for the beneficiaries. Cost-optimising must be more emphasised. In line with the completed transport evaluations, in addition to the expensive infrastructural investments, it is expedient to implement service-oriented projects of lower volume (e.g. passenger information, development of the tariff system, transport coordination interventions, etc.), which are mainly low budget projects, but have a significant impact on the transport service quality. In the development of the public transport, the lower concentration of the sources should facilitate more development, avoiding the crowding out effect of large projects (e.g. metro line 4 crowding out minor urban transport developments). Evaluations highlight the importance of awareness raising in the field of cycling and community transport: keeping the number of the passengers at the current level, or to even increasing it does not exclusively depend on the improvement of the service standards (of course, the supply could be further improved, the bicycle path developments of the current planning period are eminent at EU level). Obstacles must be removed in order to ensure accessibility to transport chains to serve the interest of people living with disabilities and other users. Community transport is able to compete with road transport (private and public) mainly in the settlements located alongside the main railways, which can be an important aspect for the suburban developments (NDA evaluation, 2013.). Development needs  To support international economic connections there is a need for: o Establishment of the TEN-T network, taking into account the relevant EU technical issues (e.g. ERTMS, 225kn axle load), with particular regard to the railway;  Reducing the travelling time of the TEN-T network by the elimination of bottlenecks, missing line segments; to support sustainable transport there is a need for: o improving energy efficiency in railway lines by eliminating speed limits (slow signals), and establishing the electrisation in other lines; o improving the standard of the public transport by infrastructural and traffic organisation solutions; o improving the intermodal possibilities in passenger transport by technical, organisational and regulation solutions, or by smaller amounts of investments. o modernising the energy-inefficient, pollutant vehicle fleet; o implementing smart transport systems; o developing environmentally and financially sustainable complex urban and suburban mobility systems (transport infrastructure, multimodal (e.g. P+R) and building infrastructure, cycle connections, fleet, travel organisation, travel information ) o preference to less pollutant modes of transport.  In order to improve transport safety and regional accessibility there is a need for:

47

o

improving railway traffic safety, interventions at the road accidental nodes, with particular regard to traffic control systems, traffic technical elements, pedestrians and cycling persons, or transport safety information; o improving the traffic conditions of the connections to workplace and school by developing second and third level crossings connecting to the TEN-T network.  In the case of all development projects, it is necessary to enforce financial sustainability and safety improvement. (All of the urban-suburban development needs are described here, but their OP priority belongs to thematic objective No.4. There are no development needs in the field of cross-border energy network.) MAIN NATIONAL DEVELOPMENT PRIORITY 4: Tackling social and demographic challenges; good governance THEMATIC OBJECTIVE 9: Promoting social inclusion and combating poverty Challenges in fight against poverty and deep-poverty The National Social Inclusion Strategy (NSIS) sets up the following objectives for the 2011-2020 period in line with objectives of the EU 2020 Strategy: the number of people living in poverty and social exclusion needs to be reduced, the reproduction of poverty must be prevented, equal accessibility to public services and socio-economic goods must be improved and social cohesion must be enhanced. The NSIS objectives related to the EU Framework for National Roma Integration Strategies include combating child and deep poverty, integration of the Roma and other disadvantaged groups into society. This implies a major challenge due to the average value of indicators on material deprivation was 42.2% in 2011 and the proportion of people living in serious material deprivation was 23.1% (NSIS, 2011). Children are the most threatened by poverty: Poverty risk of children amounted to a level 1.67 times higher than the national average in 2011. The worst situation can be traced among households with three or more children and with single parent; their poverty risk is multiply higher than the national average. Addressing demographic challenges is made difficult by the high risk of child poverty of large families. A significant proportion of children live in households without any family members in employment (HU: 16.3%; EU27: 10.7% in 2011; NSIS, 2011). Effective prevention of child poverty can be managed by early and multifold interventions, problems can be mitigated by family-friendly and a community supporting social atmosphere. The unemployed are a significant group of people living in poverty: A survey made by SILC in 2011 determines that 16.4% of the unemployed is among poor people. The proportion of poverty among the unemployed people is 46.6% but this value is three times higher than the national poverty average and seven and a half times higher than that of the employed. Roma drawbacks in housing, incomes and health service The age structure of Roma population is by far younger than that for the total Hungarian population. Many of the Roma live without any stable source of income, their employment rate and the level of education is well under the national average (NSIS, 2011). A great share of the Roma population lives in poor housing conditions, partly due to their low income, the low level of their social inclusion also reduce their opportunities. A significant share of the Roma population has poorer health state than the average (Delphoi Consulting, 2004). The concentration of deep-poverty in neighbourhoods with segregated housing 3% of the total population lives in poor neighbourhoods. The infrastructural supply of these neighbourhoods is very low-standard; 16% lacks piped drinking water and 7% lacks public lighting. The concentrated territorial appearance of these neighbourhoods strengthens segregation, the disadvantages for people accumulates and becomes deeper from generation to generation. The unequal accessibility to public services aggravates the situation of people living there.. One-third of the segregated areas are 1-2 km from the nearest service point of educational, health, child day-care and administrative services which hinders convergence and inclusion interventions (Domokos, 2010).

48

Challenges in the integration of the disabled and handicapped and people with reduced working abilities The proportion of people with reduced working abilities is high within the active aged population: 21.5% of the population aged 15-64 (1,4 million persons) was recorded with permanent health problem lasting at least six months in 2011. 52.1% of those (767 000 persons) were reported unable to work due to bad health. The employment rate of people with reduced working abilities was only 18.1% in the second quarter of 2011 (HCSO, 2012). To improve their status there is a need for a complex system of rehabilitation (medical, social, educational, employment) and targeted support. One of the most important inclusion possibilities is to expand the possibilities of sheltered employment. Gov. Decree of 1257/2011 (VII.21.) draws up the strategy to deinstitutionalise social care for people living with disability (2011-2041). This strategy promotes the shift from institutional care to community care, in parallel with progressive initiatives and international commitments. Provision of care to people living with disabilities takes place in 101 residential care institutions at 163 sites. Many of these institutions could be impacted by the deinstitutionalisation efforts (shift from institutional care to community care) which are in line with EU methodology. Structural challenges of health service The Semmelweis Plan was launched in 2011 to implement complex structural changes in the healthcare system, including the establishment of a state healthcare organisational system built on territorial units (based on the requirement of the accessibility of a medical institution within 20 minutes) and the institutional restructuring of healthcare service provision. Eight healthcare organisation centres were formed approximately at regional level as branches of a national institution (GYEMSZI). Hospital-care and outpatient services integrated to hospitals now belong to the competences of a state-controlled body. Basic health care remained at local level, local authorities can decide whether they delegate their outpatient services to the state. The main objective is to establish transparent, demand-driven, efficient normative resource allocation. Human resource capacities can be strengthened by measures supporting professional and financial acknowledgement and institutional developments (e.g. improvement of training for doctors, supporting medical residents, and salary increase of more than 90,000 persons in the sector). The promotion of equal accessibility to healthy ageing and services is a significant factor in the fight against poverty and exclusion (Social Investment Package, COM SWD (2013) 43). The adequate responses to this issue can be a healthy lifestyle, prevention, proper health care and chronic services as well as the management of demographic challenges within the system of social protection. Poor state of health of the population effecting employability and inclusion: The life expectancy of the Hungarian population is low and has fallen more than five years behind the EU average; in every type of illness the mortality risk is higher than the EU average (WHO, 2011). The physical and mental health situation is equally unfavourable and also corrupts employment opportunities. Indicators of disadvantaged social groups are lagging behind the national average (MHR, 2011). Changing the poor state of health can be supported by the national public health programme which operates beside the health provision system. Structural problems of the health care system: The shortages of the healthcare system should be complemented, its effectiveness needs to be improved; getting past the poor health status that amounts to complex social problems. The discontinuation of funding before 2010 and the lack of patient path management (which resulted in patient-flow to higher progressivity levels) had led to inadequate resource allocation and indebtedness. Monitoring systems that could supervise the functioning of the health-care system and public health situation are out of date or absent. The process of structural change is hindered by the increasing lack of professional medical and nursing staff due to the hardships of professional perspectives and low sectoral wage standards. Related objectives of the National Reform Programme The NRP envisages the decrease of the proportion of people living in poverty or social exclusion that is above EU average at present (see the table below). By 2020, the number of people living in poverty will

49

be reduced by 450,000. The improvement of the health-status of the working-age population appears as an objective to promote employability and to have active and healthy ageing. Social inclusion and poverty in Hungary Year

Hungary

EU average

At risk of poverty or exclusion (% of population)

2011

31.0

24.2

national EU 2020 target

2020

23.5

19.3

Reduction required to reach the target

2011-2020

7.5

4.9

Male life expectancy at birth (years)

2010 (2009)

70.7

76.7

Female life expectancy at birth (years)

2010 (2009)

78.6

82.6

(Source: EUROSTAT, European Commission: Country Fact Sheet, Hungary, July 1012)

Relevant country-specific recommendations 4. „Ensure that the objective of the National Social Inclusion Strategy is mainstreamed in all policy fields in order to reduce poverty, particularly among children and Roma.”12 Territorial disparities: weaknesses and potentials Disadvantages impacting children: Child-poverty is typically above average in the least favoured microregions. In the school year of 2009/2010, 27.9% of pupils suffered from multiple disadvantages in these micro-regions. This is four times higher than the figures in other parts of the country. Unfavourable spatial and settlement patterns of segregation: In the least favoured micro regions of north-eastern and south-western Hungary there are many areas of poor inner settlement neighbourhoods with segregated housing mostly affecting Roma people even in larger territorial scale. Nearly 60% of the Roma live in a rural environment, mostly on the peripheries of settlements. Independent of the regional patterns, there are several urban areas falling behind, where the Roma population often lives on a large scale. Overcoming the obstacles is significantly hampered by the lack of solidarity in local communities and models of social coexistence. Territorial imbalances of state of health: In the least favoured micro regions the population’s state of health is typically worse than average, the life expectancy is 1-2 years lower for women and 3-4 years lower for men (NSIS, 2011). Lack of medical experts in health services in the less developed areas: More than two-thirds of the 214 vacant physician service areas are in less-developed settlements (86 of them in the least- developed micro regions). In hospital-care institutions of the less-developed areas there is an absence of 2000 trained medical employees (GYEMSZI). Weaknesses and potentials related to rural development In rural areas, the income per capita is almost 29% lower than in other regions of the country. The number of recipients of social assistance per 1000 capita is two and a half times higher, the number of people receiving employment assistance is three times higher than in large cities and in the Budapest agglomeration, poverty is notably concentrated in several rural areas. 73% of social assistance and 78.6% of employment supplemental subsidies goes to rural areas. Based on census data, 81% of the Roma population lives in rural areas and a considerable portion of them is segregated (HCSO, 2011). Weaknesses and potentials related to agriculture, forestry and food industry Agriculture and forestry could play an important role in reducing poverty in rural regions, if these industries can provide livelihood for people living in rural areas, for those who cannot find work in towns, or are unable to commute. Promotion of self-sufficiency and self-employment as well as short supply chains, including in particular the use of local food in mass caterers, can also play an important role in addressing poverty. 12

The present version of the country-specific recommendations was approved by the General Affairs Council in 25 June 2013, and forwarded in 27-28 June 2013 to the European council for validation. The recommendations will become effective only after the formal approval of ECOFIN on 9 July

50

Experiences of the 2007-2013 planning period The completed comprehensive evaluation qualified the developments of various disciplines as successful; the continuation of development orientations are justified. There is a need for more intensive coordination of development policy mechanisms and other policies which improve social inclusion. The least favoured micro-regions received targeted resources and procedures (Most-disadvantaged Micro Regions Programme, preference in project selection). This tool is also needed for the implementation of inclusion objectives in the future. Important observation is the importance of the involvement of local communities, civil, cultural organisations and churches. It is demonstrable, that the open system of calls for applications and the system of preferences are not suitable to counterbalance the negative socio-economic processes of disadvantaged areas (see sub-chapter 1.1.4 at territorial evaluations). Many examples during the 2007-2013 period imply that in the case of people living in exclusion the long term developments that can be successful are those which have greater financial support intensity and complex methodology, embedded locally (multiplayer, planned for local needs), operating with diagnosis-based actions and functioning with constant professional attendance (see the programmes aimed at tackling child poverty, people living in deep poverty and segregated neighbourhoods, micro regions lagging behind). The integration of people living in deep poverty (including the Roma) claims focused territorial and financial allocation and the programming has to be established for long term (“from the cradle to the workplace”). Services for youths to combat their social withdrawal, such as social, cultural, early-age development, child welfare and child protection public services and programmes will come to the forefront. Another experience is the need of the joint utilisation of ESF and ERDF funding resources in case of programmes promoting employability, even beyond a single project due to their supplementary manner. Projects of this kind have been implemented in 2007-2013 in various SROP programmes: territorial programmes against deep poverty (SROP 5.1.3) and in complex neighbourhood rehabilitation (SROP 5.3.6); more targeted community programmes for disadvantaged children in the framework of Safe Beginning Children Houses as well as in the complex micro regional Children Chance programmes (SROP 5.2.3). More similar actions are planned for the next programming period within the framework of complex programmes. Deinstitutionalisation to provide community care to people living with disabilities has already started in 4-6 cases in the present programming period. The implementation of the national programmes and territorial developments is planned for the social inclusion of people with reduced working ability and the handicapped in a more focused way. The developments pushed the direction of healthcare provision to lower progressivity levels (mostly through outpatient developments) and supports landed in a higher proportion in micro regions with worse healthcare statistics. Concerning basic healthcare provision the future is in integrated services close to the relevant population. The structural change of the healthcare system has started already with the developments of 2007-2013, which is verified by the significant acceleration of payments and commitments of healthcare-related projects since May 2012. The evolution of the sectoral human resources situation and factors beyond the healthcare system (e.g. health awareness of the population) should be noticed in future infrastructural developments. The following areas will come to the forefront from 2014: the consolidation of change, quality and effectiveness development, qualitative and quantitative improvement of human resources and health prevention as well. In the future the infrastructural developments of healthcare will be concentrated in counties in which the supports of the current period had little impact and partially in the CentralHungary Region. In the future different approaches will be practiced in the fight against discrimination to help disadvantaged groups, especially the Roma people: 

Stereotype-free forms of media representation of issues concerning the disadvantaged, the Roma and those with disabilities are supported, with the tools of public awareness, and we also promote Roma attendance as media-workers. The intercultural discussion with the presentation of Roma culture and the creativity of disadvantaged groups will be strengthened. Furthermore, the joint activities of groups of different culture, nationality and life situations is supported in order to promote better understanding and acceptance. 51

 

The mapping of the mechanisms of structural inequalities (e.g. on labour-market or the accessibility of public services) is highly important as well as the inclusion of guarantees for their abolishment in existing structures and systems. Civil organisations shall be supported to help Roma inclusion, especially the Roma women, the cooperation between organisations and the boost of national minority public administration.

Roma integration was a priority objective of the NHRDP, improvement of the accessibility to public services was supported by two measures: setting up Integrated Service Areas and bus-transport service for people living in villages as well as the ‘library-bus’ service of the TIOP programme (good experiences, actions worthy of continuation). Social integration projects were implemented within the framework of LEADER, the importance of them shall be increased in the LDSs for 2014-2020 with the extension of training for the LAGs in this field. Development needs  Improvement of employability for disadvantaged people by developing of basic competences.  Employment rehabilitation of people with reduced working abilities, development of their competences, securing their employability and employment as well.  Bringing together people living in segregated neighbourhoods or in deep poverty, especially the Roma.  Early interventions are needed to moderate the effects of child poverty and increasing the chances of children and the youth in disadvantaged areas and settlements.  Local communities with great solidarity should be established in disadvantaged micro regions, awareness of social coexistence shall be increased with the involvement of disadvantaged social groups and with anti-discrimination, multicultural and community programmes.  Improving accessibility to public services in the disadvantaged micro regions, particularly the attraction of professional staff to these areas.  An adequate level of provision should be ensured for human-resources-oriented public services (social, child welfare and protection, rehabilitation and health as well as cultural public services which promote social inclusion) public services.  Enlarging the deinstitutionalisation of social-care and promoting the shift to community-care; securing self-sufficient living for those living with disabilities and other people with social-care needs.  Moving towards a cost-effective healthcare system which serves health conversation and healthy ageing.  Creating opportunities for the implementation of integrated solutions initiated by disadvantaged rural communities and for guidance that improves the self-sufficiency capacities of people living in segregated neighbourhoods. THEMATIC OBJECTIVE 10: Investing in education, skills and lifelong learning The development orientation of the thematic objective No.10 is assigned by the Public Education and Early School Leaving Strategy, the Strategy of Lifelong Learning and the Higher Education Strategy. The improvement of education is also supported by recent changes in the legal environment. A highlighted objective of the Act of National Public Education (Act CXC of 2011) is the prevention of social lagging behind with the tools of education and training and talent fostering with a public education system, which educates self-sufficient people and responsible citizens. The Klebelsberg Institution Maintenance Centre (KIMC) was established to ensure standard professional management and levels of public education and it secures the standard policy designation of focus points and locations of developments and effective, high added-value implementation. An important development effort aims at higher education to create as many European-level educational workshops as possible. Complex problems in the present education policy Factors threatening future employability: The quality differences among schools raise a significant problem, which is deepened by the lack of their disadvantage compensation role. The proportion of early school leavers is lower than the EU average (HU: 11.2%, EU: 13.5% in 2011) and it has improved by 2.6 %-points over the past ten years but the trends fluctuate (EU, 2012c). Leaving school without

52

graduation or qualifications greatly contributes to youth unemployment and poverty, moreover, this phenomenon appears in a concentrated form among the poor. Improvement of the education level of uneducated people aged 16-18 and NEET youth is most effective through targeted trainings. The strategic base will be guaranteed by the Public Education and Early-school Leaving Strategies which are in the making. Role of cultural services is significant to combat disadvantages: Appropriate and equal access to knowledge and information play a considerable role in the support of inclusion of the disadvantaged and Roma people, in easing prejudices and in helping to overcome different socio-cultural and territorial drawbacks. Libraries, public museums and other institutions of community culture as well as civil organisations are responsible for a significant share in lessening the phenomenon of leaving school early, in getting over innate familial or territorial or socio-cultural disadvantages with the implementation of non-formal and informal education outside the regular school system. These arrangements are aimed at service- and content-development, training of professionals and the development of infrastructural background. The role of family background in education: According to a PISA and other studies the relation between family/social background and student performance is strong in Hungary. The school in itself cannot promote inclusion; early school leaving can be reduced effectively by the joint effort on combating sociocultural and health handicaps and with the use of non-formal and informal education. Development of education attached to the fight against poverty Starting in 2014, the compulsory pre-school education from the age of 3 will also be a measure against early school leaving, as this can reduce the disadvantages of children having different socio-cultural backgrounds. Catch-up classes can be organised for gaining elementary-school and vocational qualifications and continuing unfinished studies. According to the NSIS, this leads to an improvement of the educational level of the disadvantaged people. In the grip of poverty and low-education spanning generations: 13.8% (in 2011) and 13.3% (in 2012) of elementary school pupils lived in families sunk into poverty and their parents have a low level of education. One third of these pupils (in 2009: 29.1%, in 2012: 33.8%) studies in schools where the majority of the children are also poor and have an uneducated family background (MHR, 2013). Low representation of disadvantaged people in higher education: 6.5% of the total number of higher education students were disadvantaged or multiply disadvantaged in 2012 (MHR, 2012). Participation of the Roma is even lower, only 2% of the Roma youth start their studies and only 0.5% of them graduate (NSIS, 2011). One of the reasons is that only a third of the Roma youth take part in secondary education (Kertesi-Kézdi, 2009). The measures taken so far (e.g. targeted scholarships, inclusion, pre-highereducation services of secondary schools, college supports) have not yet reached the critical mass required to alter this situation. Match between educational supply and labour market demand The Act CLXXXVII of 2011 on vocational training was established to ensure the required qualifications have equal opportunities for everyone and to facilitate the promotion of a vocational training system supporting employability. The State guarantees that students who are trained within the formal vocational education system can obtain their first professional qualification for free. Education for the increase in the highly qualified workforce: The ratio of youths who have graduated from higher education falls behind the EU average (see the table for population aged 30-34). There is also a disadvantaged situation among the population of active age, one-fifth of those aged 25-64 had tertiary graduation, 31% of them had high school degrees and 29% had vocational qualifications. Since 2005 the proportion of people having attended a maximum of 8 years of school has decreased by 5 %points (in 2011: 18%). The proportion of employees with university degrees is near but does not reach the EU27 average (2012: 25.8% vs. 31%) (NDTC, 2012). To have an official graduation is often hindered by weak foreign language skills (ratio of the disqualified for graduation due to lack of language exam reached 22.2% in 2012, MHR, 2013).

53

Targeted career orientation for future generations: The quantitative output and its structure of higher education do not match the demands. The proportion of students educated in the fields of industrial, agricultural, engineering and ICT professions is low which hinders high value-added production (HCSO, 2012b). Establishing European-level higher education centres and trainings: Joining the network of European education centres can be intensified thus enhancing the competitiveness of higher education. Creating a qualified and renewal-capable society and the deficiency of the educational system The overarching objective is to establish a quality-oriented public education system with equal accessibility considering the Act of Public Education and the objectives of EU 2020 and Education and Training 2020. This system educates young people who can participate in labour-market, in higher education and in LLL-processes. The efficiency of primary education: The efficiency of primary education is around the OECD average and is improving, but still has not reached an adequate level. 22.6% (in 2000) and 17.6% (in 2009) of students aged 15 fell short of the minimum skill-level in understanding context, which could help in learning or in community and personal life situations (PISA survey, 2009). Thus professional talent fostering from early childhood and the strengthening of ability-focused education could be real sources of growth potential. Establishing the grounds for LLL: Public education plays a dominant role in grounding future participation of adult education with acquiring the necessary competences. The development of LLL competences and the ability of learning skills increase the role of cultural institutions as it is underpinned by the results of the evaluation made about the developments of the cultural institutions among 20072013. Related objectives of the National Reform Programme Hungary committed itself in its NRP to increase the proportion of people attaining a higher education degree (or similar qualifications) in order to reduce the ratio of early school leavers by 2020. Education in Hungary Year

Hungary

EU average

2011

28.1

34.6

2020

30.3

40.0

2011-2020

2.2

5.4

2011

11.2

13.5

2020

10.0

10.0

2011-2020

1.2

3.5

Population aged 30-34 with higher educational attainment (% of age group) national EU 2020 target increase required to reach the target Early school leavers, aged 18-24 (% of total age group) national EU 2020 target reduction required to reach the target

(Source: European Commission: Country Fact Sheet, Hungary; July 1012)

Relevant country-specific recommendations 6. Implement a national strategy on early school-leaving and ensure that the education system provides all young people with labour-market-relevant skills, competences and qualifications. Improve access to inclusive mainstream education, in particular for Roma. Support the transition between different stages of education and towards the labour market. Implement a higher-education reform that enables greater tertiary attainment, particularly by disadvantaged students. Territorial disparities: weaknesses and potentials There are strong inequalities between the availability of formal school-based education and alternative forms of education. In half of the poor segregated neighbourhoods day nursery and school services are accessible over 1 km, away in one fifth and one-third of them, this distance was over 2 km. In the least-developed micro regions the level of education and entry to higher or higher education is low (NSIS, 2011).

54

In small rural settlements beyond city-agglomerations there is a significant decrease in the population of pre-school and school-aged children. Maintaining the local infrastructure of education presents a notable challenge in these areas. The logic of interventions does not settle territorial categories because neither the EU nor Hungarian policy intentions bring territoriality into focus but rather the stronger integration of disadvantaged students and the prevention of early school leaving. Naturally there will be some territorial aspects of the measures since in disadvantaged areas both phenomena are more frequent. Weaknesses and potentials related to rural development Compared to the urban population, the rate of adults who have graduated is more than 35% lower in rural areas (HCSO, 2011). The delivery of the population to the training centres and encouragement of local training should therefore be part of the local strategies. Weaknesses and potentials related to agriculture, forestry and food industry The qualifications of farmers are largely supported by their technical experience (78.5%), the common proportion of farmers having secondary or higher education reaches 21.5%. (MRD, 2013) The knowledge of self-employed farmers is incomplete, especially concerning EU knowledge (market and production control, payment systems, product quality standards, rules of animal keeping, environmental regulations) and in the field of skills and capabilities regarding farm management, marketing and market issues as well. The situation is complicated by failures of the advisory system and adult education outside the regular school network, on which greater emphasis should be placed in the future as well - as in recent years. The development of modern management skills, systems and knowledge are also very important in case of enterprises operating in the food-industry sector. Experiences of the 2007-2013 planning period At the end of year 2011 the number of educational projects had sizably exceeded the targets set for 2015. Infrastructure developments in public education had reached up to 80 000 children as well as the programmes of cultural institutions supplementing public education involving more than 150 000 children. ESF funded trainings had been accessed by more than 1.7 million people. Case-studies show that public education support can have favourable effects on the results of future competence measurement surveys. Developments in improving pedagogic methodology and training of educators have been implemented nationwide in a standardised manner. KIMC significantly supports launching long term development programmes that change the unreasonably widespread resource allocation of calls for (project) application in the public educational sphere. The unsuccessful spray effect of widespread project calls confirms the need for centralised coordination, investments were not necessarily concentrated in reasonable areas. According to recent experiences, if an institution is not motivated in project implementation the process can slow down or come to a halt. The disadvantage compensation capacity of public education has not been improved by the implemented developments which is a great shortcoming. The services of cultural institutions could be broadened with educational functions which could also contribute to quality education and its accessibility (NDA, 2013) funded both by ESF and ERDF resources. Measures supporting education development should be based better on a comprehensive and standardised strategy. Beside physical infrastructure development supports should be granted for training teachers and instructors, making the teaching profession more attractive, practice-oriented education and the improvement of employee skills and LLL key competences, adjusting formal and nonformal education, tools helping to establish the passage between the world of education and employment, between different education forms and levels. Mentoring services should be brought into focus throughout the complete nursery-care and public education system in the field of competence-based education for disadvantaged people. E.g. selfrecognition, improvement of the culture of co-operation, problem solving, ability to cooperate, creativity, forward thinking. The role of early education in integration and participation in public education is an evidence (see the Safe Beginning programme which was proved to be worthy of

55

continuation because of its role in integration that begins already in crèche, the participants` rate of admission in kindergarten is favourable, see also at thematic objective No.9). The alteration of redundant higher education capacities caused by the decreasing numbered entrant age-groups is inevitable together with the shift towards adult education and LLL-type trainings. It is worthwhile to launch customised measures for internationally competitive research universities and for institutions serving local economic development demands in future developments. The primary focus should be turned to trainings of transversal skills and dual-cooperative trainings. Development needs  Offering inclusive and quality education to children living in disadvantaged situations (including Roma children), reducing the dropout rate, and fostering integration into the labour market.  Broadening the opportunities and types of skill-based learning inside and outside the school system (informal and non-formal), methods that include the possibility of correction; widening co-operation between educational and cultural institutions, and utilising the synergies.  It is necessary to provide training for the non-educated population aged 16-18, and for NEET youth to reduce early school leaving and youth unemployment.  Expanding the fostering of talent from childhood.  Methodological renewal of public education by spreading education in early childhood, by disseminating up-to-date pedagogical methods, by motivated pedagogues, by ability-fostering, by motivating people to continue their education, and by developing the institutions to improve their performance.  It is necessary to strengthen the standards of higher education and the LLL functions of cultural institutions, to widen the services and trainings, the demands concerning qualification and skills of employers needs to strengthen LLL key competencies. It is necessary to form closer cooperation between universities and companies by developing curriculums and making internship programs.  It is necessary to improve professional skills through adult education in the agro-economy and also to improve entrepreneurial skills in finance, marketing, business, and environmental management. Training courses and services for local economic development are highly important in rural areas. 

The needs of human resource and institutional (ESF) as well as infrastructural (ERDF) developments are present jointly in each segment of education. It is a Hungarian particularity that infrastructures need renewal both in quality and capacity. The education programmes cannot be successful without their (at least partial) reconstruction.

THEMATIC OBJECTIVE 11: Enhancing institutional capacity and ensuring an efficient public administration Challenges of the development of public administration In accordance with the country-specific recommendations the Magyary Zoltán Public Administration Development Programme was adopted, which is the comprehensive strategic base for the development of public administration. The programme has the following main pillars: reorganisation of the task system of public administration, establishment of an efficient organisational structure, revision of operational procedures of public administration as well as the increase of skills and commitment of civil servants. Simplification is a priority objective of the Magyary Programme that influences all the fields within the public administration and services operated by the state: the revision and rationalisation of the tasks, the simplification of the institutional system, as well as making the procedures the more transparent and efficient. The government has applied new solutions in order to increase efficiency, which is coordinated by the Magyary Programme. In the implementing phase of the programme close co-operation with the OECD has been established since 2012, with regular meetings and workshops. The focal issues of this cooperation are strategic planning and programming, the simplification of public administration procedures and one stop shops, as well as the fight against corruption. Steps were taken through the

56

anti-corruption programme to amend the efficiency and transparency of the public administration system. Further acts should be continued in the next term. The Hungarian Government is planning to enhance the efficiency of the administration by reforms including organisational development and eadministration. In an e-administration context, Magyary Programme intends to orientate the achievement of digitalisation of processes and services. Simplification and integration of internal processes has begun within the program. Simplification of the role of the middle manager is the goal. Deregulatory action is the part of simplification. In the first phase, 1053 parliamentary decisions and 1971 deregulation of formal government decisions have been made. The technical deregulation of further 468 Laws, and in the case of 12 Laws, deregulation of some implemented provisions has been already made. Technical deregulation of the government's and ministerial decrees and substantive deregulation of some laws will take place during the next period. The strategic planning and monitoring system will be unified. The revision of the current strategies and programs has been carried out, which is expected to induce further deregulations of other strategies. The aim of the Simplification Program, to reduce the administrative burden of households ensures that administration becomes appreciably easier for citizens by keeping the workload within the public administration on the current level, and by ensuring a more comprehensive, understandable composition of laws for individuals. The Simple Government program to reduce the administrative burdens of enterprises integrates 114 actions, and thus the overall administrative burden of companies is decreased by around HUF 500 billion. Simplification is ensured by the new model called decentralised governmental office. Decentralised governmental offices are organisational units of capital and county government offices, where according to the measurements, customer satisfaction is above 95%. The National University of Civil Service established in 2012 January 1, is the government’s personnel supply and training base. With this the administration, the military and law enforcement training will be standardised in the future. A standardised public service career model will be implemented in central administration (some elements have appeared, such as the new examination system; but others – such as performance evaluation, job-based system – are planned to be introduced soon). As a result of these actions the public sector employees' satisfaction increased from 40% in 2008 to 58%; their loyalty raised from 45% in 2008 to 57%. The performance of the public administration: In Hungary efficiency of public administration is growing, (government expenditures in the ratio of GDP have been decreasing since 2009, 2012: 48.64%, IMD). The adaptability of sectoral policies to the changes in the economic environment is weaker (its indicator is 3.16; IMD, 2013). Personal capacities are decisive factors that affect the adaptability of sectoral policies. Slow and insufficient customer-focused operation: The standard of regulations that support the competitiveness of the enterprises is higher than in the most neighbouring countries, but it is lower than, for example, Austrian and German scores (3.14 score on a 10-level scale, IMD WCY survey, 2013). The level of bureaucracy restricting the entrepreneurial activity cannot be unfavourable in international comparison (2013: score 1.85), however progress should be managed in several areas. A growing number of clients require non-judicial dispute resolution, thus further development and evolution of frames of mediation are already targeted goals. The challenges of transparency: the level of transparency and corruption prevention is not satisfying on a regional comparison (transparency: score 2.15 in 2013; IMD WCY, 2013), however compared to previous years, progress is visible. According to the Corruption Perception Index (CPI) is at the margin of the lowest third of EU 27 countries (Transparency International, 2013). The role of public procurements is particularly important in terms of transparency (in 2008, Hungary spent 13% of its GDP on public procurements; OECD, 2011). In the field of corruption prevention – as well as acknowledging the importance of the criminal action – in the future actions will focus on strengthening administrative personnel and organisational integrity. In this context, the construction of an integrated management system across the whole of the public sector will be starting. The main line of these actions is creating training courses dealing with integrity, ethics and the prevention of corruption, the extension of the integrity management system beyond the scope of administrative public bodies (including law

57

enforcement bodies), review, reform and further development of the Code of Ethics on the basis of operating experiences. In favour of the grantable efficiency and effectiveness of corruption prevention, the expansion of the notification control equipment and applications of declarers, and the enhancement of the effectiveness of - non-financial – incentives of the reports are necessary. The e-administration: See current situation in (ICT) thematic objective No. 2 – Improvement of eadministration can be only served by administrative development actions, designated by human and organisational capacity (ESF). The human resources of the public administration should be prepared in order to successfully apply e-administration. The EU's country-specific recommendations in the field of public administration „Ensure the prompt implementation of measures envisaged to reduce the administrative burden, improve competition in public procurement and take adequate measures to tackle corruption. Strengthen further the judiciary.”13 Territorial administration reform Between 2011 and 2013 the overall reform of Hungarian public administration and territorial administration has been carried out, with the main aim of modernising public services, improving the efficiency of territorial administration, reinforcing the advantages of economies of scale and establishing citizen-friendly public services. The central element of the reform is the new system of competences and fund allocation among local governments, districts, counties, and central administration. In this framework, tasks from units of local governments were handed over to the district or county-level governmental offices, which are able to perform administrative tasks in a more cost efficient, more professional manner. The supervision power of the new capital and county government offices is very broad. Territorial integration of the functional tasks is mainly carried out by the government offices, thus the autonomy of professional and administrative organisations is untouched. The districts offices operate as organisational units of Budapest and county government agencies, within which specialised administrative offices have been established. Accordingly, about 40% of notaries’ administrative tasks have been reallocated to the district offices. The activities of the local governments mainly focus on settlement development and operation. Some of the public administration competences of the notaries now belong to the districts; the counties received authority for territorial development. 9 852 statuses were transferred from the municipalities to district level offices, now employing a total of 16 840 officers. By establishing governmental offices at the capital and county level, 14 separately-operating sectoral de-concentrated organs as sectoral administrative bodies were transferred to organisation of capital and county level governmental offices. An effective organisational structure was set up, but resources are required for further development. Weaknesses and potentials related to rural development The professional consultancy support of strengthening the agricultural sector management is discussed in thematic objective Nos. 1, 8 and 10. Weaknesses and potentials related to agriculture and food processing industry The recently combined agricultural sector management (also covering fishery and cultivation of fishes) (which serves 500,000 clients annually as well as the entire consumer base) must handle the continuously-evolving EU legislation (e.g. agricultural material origin register), it should show simplification and cost reductions for the enterprises. Experiences of the 2007-2013 planning period Organisational development programs of central administration in the 2007-13 period established the basis for innovative and effective governance with the implementation of strategic management

13 The current version of the country-specific recommendations were approved by the Council of General Affairs on 25 June 2013 and it was forwarded on approval to the European Council session on 27-28 June 2013. Recommendations will be effective after the ECOFIN`s formal approval on 9 July.

58

systems, a decision-making system, and an impact assessment system. Improvements were implemented for e-government and customer-oriented services (skills and know-how transfer, establishment of the legal environment, process control). In the case of public administration development programmes, several major projects are behind schedule, preparation of the actions and planning is time-consuming, often takes longer than the implementation phase. This is primarily due to the static, slowly adaptive public administration. The innovative- motivating support of interventions such as organisational development, process control, training and human resource management is therefore particularly important. During the planning phase of SROP, no strategic rationale to ensure coherent implementation of projects was available. Since the start of SROP, there have been several public administrative reforms, which changed the criteria of the projects. The scope of SROP was too broad, did not only focus on administrative development. The evaluation and fulfilment of program objectives is difficult; measurement of public administration performance is too complex. The strategic base for the 2014-2020's period is provided by Magyary Programme 2014-2020. In scheduling, the peculiarly long planning phase of these projects must be considered. Resources should be focused on key areas. In the future, more emphasis will be put on evolving public policy thinking, and on actions aiming at integrated management of policy tools, cost-effective operation of public administrative bodies, and at the restructuring of the work and management of ministries. Improved customers service will be ensured. The different characteristics of public administration bodies and technical authority organisations as well as the heterogeneous local councils require differentiated treatment, More attention will be given to developments of less favoured areas. A targeted, measurable indicator system is needed. Development needs  Administrative burdens should be further reduced and transparency should be increased.  In the case of public procurement, it is particularly important to increase transparency.  Rationalisation and simplification of the judicial procedures, jurisdiction and planning system  Service-oriented public administration offering tailor-made services according to the needs of the different social groups.  Development of the administrative infrastructure of customer service, judicial procedures, jurisdiction.  Organisational and human resource development to define and exploit the potentials of egovernment (for the e-government development needs, see thematic objective No.2)  Capacity-strengthening is required, both on the technical and on employees’ side.   

Strengthening the transparency and self-management of the judicature. An increase in the effectiveness of civil procedure, extension of the possibilities of mediation and other dispute resolution procedures Development of agro-government services (also covering the public administration services of fishery and cultivation of fishes) to ensure compliance with the EU in order to enhance cheaper services and a food chain safety impacting the entire population.

1.1.4. AN ANALYSIS OF THE RELEVANT TERRITORIAL IMBALANCES Persistent territorial disparities Hungary is characterized by sharp territorial disparities that are partly extremely persistent, dating back several decades or even centuries. On the other hand, there are to be observed also relatively new disparities in the country that evolved as the consequences of the changing of the Hungarian political and economic system and introducing market economy in 1990. A traditional territorial disparity is the extreme developmental difference between the metropolitan area around the capital and the rest of the country. Another traditional territorial disparity, though somewhat smaller, is the difference between the Western and Eastern part of the country; the areas with micro-villages are also lagging behind. A new

59

phenomenon appearing after the change of regime in 1990, the extended structural crisis of the former socialist industrial areas, the fast catch-up of the Western border regions, the lagging behind of the Eastern and Southern border regions, the convergence of the key touristic destinations, the fast development of the target areas of foreign direct investments and the stagnation of the regions not involved in the investments of global companies. A new phenomenon that has been observed since the term of the millennium is that the suburbanisation process taking place in Budapest and other large cities started or accelerated, but at the same time the territorial segregation of the Roma population has further strengthened.

Regional indicators, Hungary Average total population

GDP per head (PPS)

Unemployment rate

Productivity in industry and services

Employment in knowledgeintensive services

1000 inhabitants (2009)

Index EU27=100 (2009)

% of active population (2011)

Index EU27=100 (2008)

% of total employment (2010)

EU27

500.335

100.0

9.6

100.0

38.5

Hungary

10.023

64.7

10.9

66.9

35.0

Central Hungary

2.938

108.6

8.8

91.1

42.0

Central Transdanubia

1.101

53.8

9.3

55.3

26.5

Western Transdanubia

997

60.3

7.4

61.0

27.3

Southern Transdanubia

950

44.6

12.7

52.2

33.6

Northern Hungary

1.216

39.5

16.7

52.9

34.0

Northern Great Plain

1.497

42.0

14.5

48.4

35.2

Southern Great Plain

1.322

42.8

10.6

47.3

33.2

(Source: European Commission: Country Fact Sheet, Hungary; July 1012)

Regional indicators related to EU 2020 strategy Employment rate, ages 20-64

R&D expenditure

Early school leavers, aged 1824

Population aged 30-34 with high education attainment

% of population aged 20-64 (2011)

% of GDP (2009)

% of population, aged 18-24 (2009-2011)

% of population, aged 30-34 (2009-2011)

68.6

2.0

14

33

75.0

3.0

10

40

60.7

1.2

11

26

75.0

1.8

10

30

Central Hungary

64.8

1.5

9

37

Central Transdanubia

65.1

0.7

12

20

Western Transdanubia

65.3

0.6

8

20

Southern Transdanubia

56.5

0.4

12

19

Northern Hungary

53.6

0.6

15

19

Northern Great Plain

55.4

1.2

14

20

Southern Great Plain

59.5

1.0

9

23

EU27 EU 2020 target Hungary national EU 2020 target

(Source: European Commission: Country Fact Sheet, Hungary; July 1012)

60

Budapest

county average (without Bp.)

counties above EU27 average

Hungarian counties in the lowest third of EU NUTS 3 units

12 260

34 500

11 089

none (except Bp)

every county (except Bp.)

6 207

17 536

5 611

none

EU average

Hungary average

GDP per capita (PPP, 2009)

23 500

Gross Value Added per capita (euro, 2009)

21 089

Hungarian counties in the lowest 10 % of EU NUTS 3 units

13 counties (Nógrád, SzSzB, Békés, BAZ, Somogy, Bács-K., JNSZ, Baranya, Veszprém, Heves, Hajdú-B., Csongrád, Tolna)

(Source: EUROSTAT)

Development policy shall respond to the micro-regional territorial disparities The scale is one of the most important characteristics of the new types of territorial disparities emerging after the change of regime in 1990. The crucial disparities can be traced on a lower level than the NUTS2: they are present mostly at the level of the counties and the micro-regions. It means at the same time that the developmental and inclusion interventions need to be implemented at a lower territorial level than NUTS2. The recent Hungarian public administration reforms, with the restructuring of the competence and resource allocation between local municipalities, districts, counties and the central state, is in compliance with the changed character of the territorial disparities. The framework of the Hungarian local and territorial development policy was reorganised in line with the reforms on the territorial administration: the most important change is that the counties received a strong planning and territorial development mandate. GDP per capita (PPP, 2009)

Difference between the highest and lowest Hungarian values (without Bp) Highest negative difference from EU average, (%) Highest negative difference from national average, (%)

GVA per capita (EUR, 2009)

unemployment rate (%, 2011)

county (NUTS3)

region (NUTS2)

county (NUTS3)

region (NUTS2)

county (NUTS3)

region (NUTS2)

least developed micro-regions

9300

4900

4726

2497

13

9.4

-

-70.2

-60.4

-83.2

-77.8

-9.4

-7.2

-34.3

-42.9

-24.1

-54.1

-39.2

-8.1

-5.9

-33

(Source: EUROSTAT, HCSO)

Complex territorial programmes to utilise the local and regional comparative advantages The emerging new type of fragmented territorial disparities means that there shall be more room for bottom up local and regional initiatives. Thus, development policy does not only focus on territorial reallocation but rather on the exploration and mobilisation of local and regional comparative advantages. In Hungary, the commitments in connection with the EU 2020 strategic objectives and the related commitments formulated in the National Reform Programme can only be achieved if the development opportunities resulted from the local and regional comparative advantages are supported by complex programmes at a lower territorial level than NUTS2. One of the most important challenges of Hungary is the strengthening of local and regional economic systems, building local level connection between business actors, strengthening of local markets, sales and consumption chains, local level utilization of economic resources (incomes, labor force, products). These cannot be done without the resolving of economic duality, and the strengthening of the SMEs, and has significant effects on employment as well (see in details the needs and expected results of thematic objectives 3 and 8).

61

Agglomeration of Budapest The Budapest agglomeration area covers 2.7% of the country’s territory, but a quarter of the Hungarian population lives there and nearly 50% of the gross national income is produced there. Budapest has a region (catchment area) that goes beyond even the country borders, and plays a significant role internationally with the concentration of high quality cultural and scientific life, and the concentration of higher education and natural scientific research and development. The urban growth goes together with suburbanisation, which practically makes the surrounding settlements part of the city, and it increases the daily commuting distance to 60-70 km. Urban areas Regional centres are not able to balance of the dominant position of the capital city, but large cities are gaining in importance. The regional development centres also play a significant role in the dissemination of economic and technological innovation results. The development potential of cities attractive to investors and to employees could be further exploited by establishing region specific economic profiles. The increasingly important role played by cities with county rights is demonstrated by the fact that they exceed the national average in terms of number of business entities and profit. (For further details about analyses of targeted development of urban areas see thematic objective no.6). Rural areas According to the methodology applied by OECD, 95% of Hungary’s settlements can be considered as rural, nearly half of the population lives there (source: RIAE, 2012). The majority of the settlements that have lost their economic significance and population retention power are villages, especially microvillages. The majority of villages are characterized by outward migration, which results in social problems and endangers the survival of these settlements. In these areas the accessibility of public services and commuting conditions are disadvantageous. A low level of environmental load could represent a positive developmental potential, especially in the vicinity of larger towns. The agriculture still plays an important role in the economy of the rural regions (agriculture delivers the 7.2% (RIAE, 2011) of the gross value added in rural regions, far more than the 4% national average). About the experiences of rural development see the analyses of thematic objective no.6). Least developed micro-regions Governmental decree 311/2007 defines the classification of the less developed micro-regions and identifies the least developed micro-regions (LDM) (based on a complex indicator including economic infrastructural social and employment indexes). The total territory of the least developed micro-regions covers 28.3% of Hungary’s territory, amounting to 1.4 million inhabitants in 2011. The unemployment rate (17.2%) is more than double the average of the rest of the country, and the number of people receiving social benefits per thousand residents (12.2) was almost three times the national average in 2011. The proportion of the Roma population is typically high in the most disadvantageous microregions. In certain rural settlements and regions positive demographic trends can be observed, parallel with an extremely high unemployment rate. The implementation experiences and the evaluations show that as a result of the many intervention already implemented in the least developed micro-regions (preference and targeted programmes), these areas received relatively more amount of sources, but these have not reached the critical mass, concerning the development needs and efficiency. In the least developed micro-regions the share of market investments is negligible, therefore the EU resources are crucial for their development. To the targeted development of these regions, the methodology developed in the present period serves as a proper basis. In the future there is a need for nationally co-ordinated integrated actions, involving local actors, and recquiring their professional support, utilizing sector resources as well (besides the developments of territorial actors). In the least developed micro-regions, there is a need for job creation developments, concerning the local potentials (settling of new market actors, maintenance of existing enterprises, initiation of new ones), as well as supporting the establishment of social economy, and the promotion of return to the labour market (connected to public works programme). In order to enhance employability and entrepreneurial activity, human capital has to be developed (through development of skills and trainings). The problem of least developed micro-regions strongly bound to the people living in

62

extreme poverty, therefore it is not only economic, but also social challenge. Therefore, in the programmes, there have to appear elements improving the situation of disadvantaged social groups, particularly the Roma population. The standards of health care, early childhood intervention, education and social care have to be improved, and there is a need for community development, increasing trust funds and the resolving of housing segregation. Regions determined by environmental factors and facing challenges of climate change adaptation Lake Balaton is the largest fresh water lake in Central-Europe and is a national natural treasure. The area around the lake is a natural and economic unit. The special landscape assets and the tourism and landscape management built upon these values make this region a highly characteristic area requiring separate development objectives. Furthermore, territorially integrated interventions are required in regions representing a landscape management unit in connection with rivers basins (Danube, Tisza area, especially Lake Tisza region) and the vulnerable water management regions (area of Homokhátság between the Danube and Tisza rivers). Within the recent development projects the concentrated and integrated development of these regions has been subordinated, reducing the effectiveness of interventions.

1.1.5. THE NEED TO TRANSFER FUNDS BETWEEN CATEGORIES OF REGIONS Funding rearrangement between categories of regions will not be used by Hungary in the current phase of planning. At the same time Hungary wishes to make use of the compensation possibilities provided by Article 60 of draft CPR (financing operations located outside the programme area) in most topics (priority axes of Operational Programmes) by maximum 15% of the allocation.

1.2.

A summary of the ex ante evaluations of the programmes or key findings of the exante evaluations of the PA where undertaken by the Member State at its own initiative

The ex ante evaluations of the programmes have already started; the joint work of evaluators and programmers has been able to be ensured. This makes possible to canalise the outcomes of the ex ante evaluations into an early stage of programming. The responsible party of the ex ante evaluations is the National Development Agency (NDA). Starting early provides a sufficient time for the evaluations; makes the evaluations possible to proceed interactively along the majority of the programming process; and provides a reasonably wide room for integrating the results of evaluations into the programming. In this manner, final versions of OPs can be a common result of planning and evaluation as a results of a mutually supportive (not in a consecutive) process. The ex ante evaluations highly support the following aspects of programming: (1) integrating the experiences of the current (2007-13) programme period; defining indicators and targets, and building systems of indicators; (3) methodological compliance and coherence of programming. The following steps have been taken so far:  Contracts have been concluded for all OPs of 2014-2020 period with independent (from planning) ex-ante evaluators in a public procurement process.  Clarification of detailed requirements is under way right now, as well as the finalization of the schedule for the evaluation process. Elaboration of ex-ante evaluation work plans for OPs has begun in compliance with methodological guidelines of COM. These work plans are also in line with programming schedules given by planners. (However, several preparation and evaluation activities had already begun with the involvement of OP planners before completing every single detail concerning the evaluation process see below.)  The connections and communication between planners and ex-ante evaluators have been settled down and they are persistent. Many personal consultations have been already organized with the result of identification of other organizations and units that are concerned within OP planning processes.

63





The evaluators have engaged in identifying and processing the needed background documents beside the actual versions of planning documents. Due to the parallel elaboration of OPs and PA the responsible ex-ante evaluator groups (being responsible for a single OP) follow the evolution of both OPs and PA within their own relevant areas at the same time. Initial reports of ex-ante evaluations have been finished in case of all OPs (zero version) after the kick-off consultations of early May (this year) and these have made proposals to improve the inner coherence of operational programmes. (These were also useful in the discussions with COM representatives at the end of May and early June this year.)

Further steps of the process:  The work plans have to be discussed by a wider range of professional stakeholders, involving the related planners, in order to make the ex ante evaluations be able to support the planning tasks more efficiently, tailoring the involvement to the planning requirements and milestones.  The group of partners, responsible for ex ante evaluations of certain OPs, will be completed with a methodological co-ordination ex ante team (the public procurement process is in progress). The responsibility of these newly selected evaluators will be to ensure a methodological compliance and methodological co-ordination as planning processes progressing further, as well to prepare a synthesis of ex ante conclusions for PA.  Further steps of the evaluation process (preliminary, can be changed later when the work planes will be completed): (1) in July 2013, preparation of an OP version, validating the draft ex ante evaluation observations; (2) in August, the next evaluation report will be prepared; (3) in September, there will be another round of the consultations on ex ante evaluations involving a wider range of professional stakeholders; (4) in October, the next version of the draft OPs will be prepared, validating the results of ex ante evaluations and integrating also the observations of the methodological ex ante evaluations; (5) in October, a PA-level synthesis of the conclusions of ex ante evaluations of all the OPs will be produced. Synergies with other preliminary evaluation processes:  The strategic environmental assessment (SEA) of OPs of 2014-2020 and PA was also launched in parallel with the ex ante evaluations. The two processes (ex ante evaluation and SEA) have a harmonized schedule and they are mutually built strongly upon each other’s results and being elaborated in synergy; the planners’ negotiations are harmonized with ex ante evaluations, in most cases their negotiations are held together. SEA’s work plan will be completed in detail in July 2013. (The responsible party is also the NDA.)  Relations have also been built between the ex ante evaluations of the mainstream OPs and ex ante evaluation of programming for EARDF and EMMF. Contacts have been established with the participants and responsible actors of those processes.

1.3.

Selected thematic objectives, and for each of the selected thematic objectives a summary of the main results expected for each of the ESI Funds

1.3.1. DEVELOPMENT FOCUSES: Compliance between the 11 thematic objectives of the EU and the national development objectives in the 2014-2020 period Thematic concentration – investment priorities One of the most important elements of efficient use of EU funds is thematic concentration, in particular in order to prove the compliance of effects of actions implemented in the framework of different operational programmes and priority axes and to reach a critical mass. – Having different weight all the 11 thematic objectives (TC) defined by the EU supports achieving the overarching national development goal, sustainable economic growth based on high value added production and increasing employment.

64

– The thematic concentration is even higher in case of the five national development priorities, each of them is based on only 3-5 thematic objectives of EU. MAIN NATIONAL DEVELOPMENT PRIORITY 1: Improving the competitiveness and global performance of the business sector The goal is to establish the SME sector that is competitive at the European level. The sector can be characterised as having the potential for growing employment opportunities and for innovation. In order to capitalise on these strengths, the complex development of Hungarian SMEs is prioritised where a wide range of development tools are relevant to the specific business needs of SMEs. These include financing, business-site infrastructure development, support of domestic and export marketing, purchase of assets and technology change, support in financing, advisory services and training, as well as the support of RDI activities and increasing their innovation activity. The focus is to create SME networks (clusters) which can become significant at the level of the European market, and to involve Hungarian SMEs in European level clusters. Furthermore, it is important to strengthen the relationships between SMEs and large companies so that more SMEs can become suppliers. Within these activities, innovation and product development will be a priority. The development of the business sector is oriented by strong sector and territorial factors primarily the sectors operating with global supply chains (automotive and vehicle industry, electronics industry, pharmaceutical industry) as well as the sectors of national strategic importance such as knowledge economy, health economy, agri-food sector and local alternative community economies. The agro-economy in Hungary also has significant growth potential. The main objective of the sector is to increase the value added of agricultural-, food- and forestry market products which leads to the increase of employment in rural regions. To the increased exploitation the renewable energy potentials of agricultural sectors significantly improves Hungary’s competitiveness as well. Further engine of Hungarian economic growth is the promotion of RDI activities beyond the SME sector. The funding of RDI activities supports the generation of knowledge, the use of knowledge and the transfer of knowledge in a coherent and comprehensive manner. The strengthening of research and infrastructural capacities, inspiring the co-operation between research institutes and the corporate sector, and deeper involvement to the European Union and international co-operation programmes identified as bottlenecks is a key objective. Economic growth has to be supported with multipolar specialised developments, alongside smart specialisation strategies, both in urban areas and in the specific regional economy of the Lake Balaton area with its unique tourist profile. ICT sector has outstanding growth potential, therefore its development generates significant positive spill-over effects to the competitiveness of the whole country. Improvement of digital literacy among population is of key importance, not just to improve employment opportunities but to increase GDP. The achievement of the national priority is supported by the following programmes: OPs RELATED TO MAIN RELATED THEMATIC OBJECTIVES NATIONAL DEVELOPMENT PRIORITY 1. Improving the competitiveness and global performance of the business sector EDIOP Thematic objective 1. (RDI)(ERDF):  enhance the knowledge economy and corporate RDI;  support the co-operation between research institutions and business sector by enhancing research institutes’ excellence;  support the RDI infrastructure of healthcare and higher education;  support the RDI of rural development and fisheries aiming at public investment;  subsidies, provision of next generation of researchers, particularly in the business sector (ESF type). Thematic objective 2. (ICT) Development of infrastructure and

65

OPs RELATED TO MAIN RELATED THEMATIC OBJECTIVES NATIONAL DEVELOPMENT PRIORITY 1. Improving the competitiveness and global performance of the business sector technology (ERDF)  development of ICT and digital economy (direct development of corporate ICT) (ERDF);  development of broadband infrastructure, public access points, (access of rural areas as well);  digital literacy and experience beyond public education, including population of rural areas (ESF type);  infrastructure of e-administration and human e-public public services (ERDF); IT infrastructure of transport, environment, energetics, public administration and public services (ERDF)(NOT INCLUDED: information developments of transport projects are in transport OP, IT of energetics are in the EEEOP, the noninfrastructural e-administration and public services is in the HDOP under thematic objective 11.; the non-direct ICT developments of human sectors which are affecting ICT developments are in the given OP of the sector). Thematic objective 3.(competitiveness)(ERDF):  significant development projects of SMEs over local economic scale: business site and technology development tools and financial instruments; support the access to markets and networking activity of SMEs, business infrastructure developments (based on intervention logic of priority sectors, the support of priority and non-priority economic sectors by different sets of instruments), business skills development and counselling (ESF-type);  significant developments of food industry sector (exceeding local economic scale) financial instruments of agriculture and fishery;  development of competitive personal services and of tourist attractions of national importance (partly related to Thematic objective 8 (employment) as well (ERDF);  thematic objective 3 partly supported by TO1 (RDI) (ERDF): priority economic and innovation growth zones (see also in Chapter 3 on ITIs);  specialised economic development programmes of priority growth areas (related to TO1 as well) and the area of Lake Balaton (related to TO8 as well) (see also at Chapter 3);  thematic objective 3 partly supported by TO4 (energy) (ERDF):financial instruments supporting corporate energy efficiency, energy efficiency developments of healthcare industry and tourism attraction facilities.. HDOP TC10 (education), also related to Thematic objective1 (RDI) (ESF): developments which improve effectiveness of institutional organisation supporting research of institutions of higher education and research centres,; Thematic objective 10 (education), also related to Thematic objective 2 (ICT) (ESF): IT knowledge of students in public education; Thematic objective 11 (public administration), also related to Thematic objective 2 (ICT) (ESF): training of employees in public services. RP and HFAOP Thematic objective 1. (RDI): supporting the RDI activities of enterprises of agricultural and fisheries sectors. Thematic Objective 2. (ICT): ICT support aiming at agricultural enterprises; Thematic objective 3. (competitiveness): diversification of agricultural

66

OPs RELATED TO MAIN RELATED THEMATIC OBJECTIVES NATIONAL DEVELOPMENT PRIORITY 1. Improving the competitiveness and global performance of the business sector micro-enterprises, agricultural and fisheries enterprises and their cooperation.(see also under National Development Priority 5 and at Chapter 2.1) RP and HFAOP Economic developments of regional and local importance of RP and HFAOP see at national development priority 5! TOP and CCHOP Economic developments of regional and local importance of TOP and CCHOP see at national development priority 5! Mirror programmes of some sector developments appear in CCHOP, too.

MAIN NATIONAL DEVELOPMENT PRIORITY 2: Increasing the level of employment (by economic development, employment, education, social inclusion policies with regard to territorial disparities) Economic growth must be accompanied by fast and significant increases in employment. In the long term, high employment rates, low welfare dependency rates and high level of income are necessary in order to support economic growth. Interventions are needed in the short to medium term if Hungary is to improve its economic outlook in the long term. Economic growth and increasing employment require the increase of demand on labour force by changing the general economic political environment as well as by using economic development supports for job creation. On the supply side of labour market increase of supply is needed both in terms of numbers and qualifications. The first step to achieving this is increasing activity levels, primarily by introducing incentives for people who are otherwise disadvantaged from an employment perspective, and also for those who are characterised by low labour market participation (among others: people with low levels of education, young and older workers, the Roma population, parents with young children). The main tools applied during this first step are the following: motivating these groups to enter the labour market; increasing their employability; improving their skills and abilities; supporting their employment with personalized labour market services. The opportunities for disabled workers to access employment can be improved in the long term by creating health retention and by offering opportunities for the effective and efficient recondition of the deteriorated health status. Therefore, developments are needed in the healthcare service system in the fields of healthcare infrastructure and human resources as well. It is important to pay special attention to young people who are significantly affected by the employment challenges that member states are facing all over Europe as a result of the current economic crises. For the improvement of labour competitiveness it is vital to develop a vocational training system that meets labour market expectations; especially important is the development of dual vocational training. A vocational and adult education system adjusted to economic needs is necessary for the knowledge and competence development of future generations and to enhance the opportunities for an active older population to adapt to economic and social changes. For improving the employability of workers participating in public works scheme the strengthening of supplementary activation elements of public work scheme (training and labour market assistance) is needed. Mobility between professions is ensured by training and retraining courses and the geographical mobility can be supported by the expansion of housing and transport infrastructure. The educational system plays a crucial role in supplying the new generation of a highly skilled productive and creative labour force able to produce high value added. The healthcare system acts the same way ensuring the constant availability of the sufficient labour force (and also a healthier lifestyle with e.g. more active leisure activities). The infrastructure and human resource development of the educational system serves the purpose of educating employees who are able to meet labour market expectations and who have the necessary skills.

67

The achievement of the national priority is supported by the following programmes: OPs RELATED TO NATIONAL DEVELOPMENT PRIORITY 2.

RELATED THEMATIC OBJECTIVES

Increasing the level of employment (by economic development, employment, education, social inclusion policies with regard to territorial disparities) EDIOP Thematic objective 8 (employment) :  promote employment and development of adaptability of enterprises (ESF);  manage the inactive people back into the labour-market (ESF);  improve the employment situation of youth(ESF);  create family friendly employment environment by the enhancement of workplace flexibility and the improvement of childcare services availability (ESF);  development of the adult education and practice oriented dual vocational training system that meets labour market needs (ESF);  development of supply and demand side of employment primarily based on active instruments and high quality, personalized labour market services (ESF);  social economy, community-based economic and national management network of local economic development (ERDF and ESF type);  supporting social (non-profit) enterprises (financial sustainability and employment) (ERDF)  tourism development (see at national development priorities 1 and 5) (ERDF);  thematic objective 8, but partly related to Thematic objective 3 (competitiveness of SMEs):supporting employment of enterprises (especially in less favoured area, in special economic zones) (ERDF);  thematic objective 8 but partly related to Thematic objective 3 (competitiveness of SMEs): centres of dual vocational training at SMEs (ERDF);  thematic objective 8 but partly related to Thematic objective 10 (education): investing in education, skills and lifelong learning (after graduation, vocational training);  thematic objective 8 but partly related to Thematic objective 9 (inclusion): support of ERDF developments of defended enterprises which promote the social integration of disabled people and of people with reduced working abilities. HDOP Thematic objective 9. (social inclusion) but partly related to Thematic objective 8 (employment) as well (ESF):support of developments of defended enterprise which promote the social integration of disabled people and of people with reduced working abilities (in order to improve their employability). RDOP and FAOP Thematic objective 10. (education): knowledge transfer, consulting, and technical assistance for agriculture and fisheries enterprises, partly related to Thematic Objectives 3 (competitiveness) as well: support the economic sectors with high labour intensity including agricultural and fisheries enterprises. EEEOP Energy and water developments of EEEOP related to energy and resource efficiency see as reference here: related to Thematic Objective 3. (competitiveness) to also support the economic sectors with high labour intensity including construction (energy efficiency retrofitting, water-construction). RDOP and FAOP Economic developments of regional and local importance of RP and FAOP see at national development priority 5!

68

OPs RELATED TO NATIONAL DEVELOPMENT PRIORITY 2.

RELATED THEMATIC OBJECTIVES

Increasing the level of employment (by economic development, employment, education, social inclusion policies with regard to territorial disparities) TOP and CCHOP Economic developments of regional and local importance of TOP and CCHOP see at national development priority 5! Mirror programmes of some sector developments appear in CCHOP, too.

MAIN NATIONAL DEVELOPMENT PRIORITY 3: Increasing energy and resource efficiency Energy efficiency and energy saving are key factors for implementation of objectives targeting supply security and climate change, given the significance of energy imports and the low level of energy efficiency of aged buildings. The energy efficiencies of the public sector, the business sector and residential sector must be improved, which in turn will significantly benefit on environmental and sustainability. Retrofitting will increase the capacity utilisation of the construction industry and thus boost the economy. Increasing energy efficiency and use renewable energy are the most important areas of the green economy as well. In addition to promoting the low-carbon economy, the utilisation of technology intensive renewable energy, the effective use of natural and other resources and the application of other environmental protection technologies also support innovation. It is also important to introduce a new approach in order to reduce and mitigate the impact of climate change. Climate change increases environmental risks for which water management, the agriculture sector, and disaster management and rescue services have to be prepared. Infrastructure investments in the fields of environmental protection, wastewater treatment and water quality improvement that have already started must be continued in order to comply with EU regulations together with creating a more effective and resource efficient economy and encouraging recycling and reuse. In addition to infrastructural investments, it is required to carry on the implementation of measures that are required in order to improve water status. The focus of the priority includes the establishment of energy-efficient and sustainable infrastructural networks, especially the sustainable transport systems. Support business access to wider markets, creating successful investment incentives and increasing transit incomes, the transport network has to be further developed. More specifically bottlenecks in the European networks across Hungary have to be eliminated. This could be achieved by the minimisation of the transport-caused environmental loads and energy together with the enhanced distribution of efficient and environment-friendly transport modes. An additional important function of public transport development is to support workers in getting to work and in their geographical mobility. This is especially supported by the development of urban and suburban public transport, railway transport corridors and minor roads. As a prerequisite of increasing the utilization of renewable energy resources the development of energy networks also adds to the establishment of a resource-efficient economy and it increases the security against environmental risks. The achievement of the national priority is supported by the following programmes: OPs RELATED TO NATIONAL DEVELOPMENT PRIORITY 3. EEEOP

RELATED THEMATIC OBJECTIVES Increasing energy and resource efficiency Thematic objective 4 (energy) (CF): developments focusing on energy efficiency, production of renewable energy. network development; Thematic objective 5 (climate) (CF):territorial water management, environmental safety, climate modelling and adaptation planning. Thematic objective 6 (environment) (CF):waste management, waste water management, drinking water quality improvement, environment protection and nature conservation developments, improvement of water condition, monitoring systems, energy consciousness. Thematic objective 4, but partly related to Thematic objective 1 (R&D&I)

69

OPs RELATED TO NATIONAL DEVELOPMENT PRIORITY 3.

RELATED THEMATIC OBJECTIVES

Increasing energy and resource efficiency (ERDF/CF): priority demonstration projects on renewable energy and energy efficiency, energy consciousness. ITOP Thematic objective 7. (transport) (CF): Promoting sustainable transport systems and removing bottlenecks in key network infrastructures. Thematic objective 4 (energy) (CF): development of urban and suburban transport. RP and HFAOP Thematic objective 4. (energy): increase energy efficiency of agricultural and food processing industry, afforestation, carbon sequestration, "onfarm" renewable energy, energy efficiency of agricultural buildings. Thematic objective 5. (climate): adaptive and risk management agricultural production, increase the efficiency of waterworks and irrigation systems of farmers. Thematic objective 6. (environment): support the sustainable forestry, agriculture and fisheries; landscape conservation, resource conservation, resource efficient agricultural production and fisheries. EDIOP Energy developments of EDIOP supports primarily the economic growth; (see also under National see as reference only. Development Priority1. [economic Thematic objective 4. (energy): financial instruments supporting growth]) corporate energy efficiency, energy efficiency developments of healthcare industry and tourism attraction facilities. TOP and CCHOP Energy and resource efficiency improvements of TOP and CCHOP support (see also under National primarily the local economy, see as reference only. Development Priority 5. Thematic objective 3/8/6 but related to Thematic objective 4 (energy) and [regional– local economy]) Thematic objective 7 (transport) as well: small-scale development of transport (development of urban and regional transport organization in road, public and alternative, cycling transport) based on needs of territorial stakeholders and as part of their development packages (not as a single TOP priority, separate resources are not allocated on that). Thematic objective 6. (environment): integrated development of urban (municipal) environment as part of their development packages. Thematic objective 4. (energy): due to local needs predefined renewable energy and energy efficiency improvement projects of local municipal buildings are needed for the decentralized territorial development packages (county and city),urban transport. Mirror programmes of some sector developments appear in CCHOP, too.

MAIN NATIONAL DEVELOPMENT PRIORITY 4: Tackling social inclusion and demographic challenges; good governance Poverty, the number of social integration challenges and economic growth are in close interaction at the present time, therefore social integration is key development priority of the 2014-2020 period. An important tool for integration is to support disadvantaged groups returning to the labour market, and to enhance their income generation capability. In order to respond to these challenges, capable public and community-based services that support social inclusion must be further developed, including the accessibility of health care services. Helping the catching-up process of people living in segregated places is a must. The equal accessibility of quality services have to be secured for all. The development of the cultural and sport-leisure industry also exploits the social integration potential of sport activities (leisure and grassroots sports). Social mobility is also supported by planned infrastructure and human resource related developments within the education and child-protection system that also can prevent from the inheritableness of poverty through generations. One of the most important instrument and basic condition for social disadvantage-compensation is the equal opportunity to participate in education. Prevention of early

70

school leaving reduces the number of later unemployment. Public education and non-formal education types play a key role in the prevention of early school leaving. Participating in lifelong learning is of key importance in terms of employment status and social catch-up process. Development of higher education, the enhancement of accessibility and the improvement of quality not only conditions of social integration but also of economic growth and the foundation of international competitiveness. Family has crucial role in inheriting poverty and in the creation of conscious community space, furthermore family models essentially affects demographic challenges. To strengthen family life development policy can contribute with the establishment of child and family friendly human service and environment. Reduce of child poverty and risk of poverty for big families gives advantageous respond to demographic challenges. The other phenomenon of the demographic crisis is the growing share of the elderly generations. Their development needs are supported by the family friendly development approaches as well. Developing public administration serves the central national and local level interventions reducing disadvantage and their monitoring, furthermore it supports economic growth. Infrastructure and human resource development will support the achievement of a “good state and governance” by enhancing efficiency and improving accessibility to services, reducing the administrative burdens of SMEs and citizens, and delivering greater impact through service- and assistance-oriented solutions. The achievement of the national priority is supported by the following programmes: OPs RELATED TONATIONAL RELATED THEMATIC OBJECTIVES DEVELOPMENT PRIORITY 4. Tackling social inclusion and demographic challenges; good governance HDOP Thematic objective 9. (Social inclusion)(ERDF and ESF):promoting social inclusion and combating poverty by improving the accessibility of healthcare, education and child welfare services by improving the mobility public service providers in the frame of complex social inclusion development programmes, by the elimination of slum-like living conditions (including place-based programmes). Thematic objective 10 (education) (ERDF and ESF): development of the structure and human resources of public and tertiary education, investing in lifelong learning (until graduation, basic competences), the support of equal opportunities and talent fostering in the entire educational and training system, development of infrastructure of state and non-state operated public and higher education institutions. Thematic objective 11 (public administration) (ESF):public administration, public service, agricultural and fisheries management, ICT training for employees in public administration. EDIOP Thematic objective 2 (ICT) (ERDF): e-government (also agricultural public administration) and e-administration (non ESF). TOP and CCHOP Developments on demography and integration of TOP and CCHOP (see also under National primarily supports the local economy (see as reference only). Development Priority 5. Thematic objective 6. (environment): child and family friendly aspects of [regional– local economy]) settlement development. Thematic objective 9. (social inclusion): rehabilitation of segregated urban areas in the framework of complex urban developments, infrastructural development of health- and social (basic) services of governments (ERDF). Thematic objective 11. (administration): public infrastructure based on the needs of decentralized territorial stakeholders (ERDF) (It is not a single TOP priority, separate resources are not allocated on that). EDIOP Developments on demography and integration and “good governance” of (see also under National EDIOP primarily support the local economy (see as reference only). Development Priority2. Thematic objective 8. (employment): [employment])  support the social economy, community-based economic development, and the national network of local economic development (ERDF and ESF);

71

OPs RELATED TONATIONAL RELATED THEMATIC OBJECTIVES DEVELOPMENT PRIORITY 4. Tackling social inclusion and demographic challenges; good governance  support elements of business development in least developed micro-regions (special economic zones) (ERDF and ESF);  create family friendly employment environment by the enhancement of workplace flexibility and the improvement of childcare services availability (ESF). Thematic Objective 2 (ICT) but partly related to Thematic Objective 10 (education) as well (ERDF): increasing the digital literacy and ICT skills of adults. RDOP and FAOP inclusion (Thematic objective 9) through LEADER (CLLD) initiatives.

MAIN NATIONAL DEVELOPMENT PRIORITY 5: Local and regional economic development International competitiveness is one dimension of economic development; the other is strengthening local and regional economic systems. This can be assisted by several local and regional level initiatives in the following fields: enhancing local economic governance; supporting co-operation between local business actors; reorganising local and regional markets (taking account of urban and rural relations); strengthening the relations between producers and consumers in regions. Local resources should be used locally and wealth generated should be kept in the regions as much as possible in order to increase local employment. The local economy also provides work opportunities for those excluded from the labour markets. The regions should better explore their internal growth potential. Local products will contribute to stronger local markets, and networks of regional businesses can strengthen local participants competitiveness. According to the principles of local economy development, the use of biomass as renewable energy should be realised in a small scale community-based way and should be organised locally. In the local economy, development of rural areas and fishery sources play a crucial role. The cities should be empowered to become facilitators of regional economies. Urban development solutions serving economic development and employment must be implemented. Settlement development serves the purpose of improving the attractiveness of cities, enhancing investment opportunities, supporting commuting, and increasing the performance of local tourism, promoting the social, economic and physical renewal of deteriorated settlement areas. The achievement of the national priority is supported by the following programmes: OPs RELATED TO NATIONAL RELATED THEMATIC OBJECTIVES DEVELOPMENT PRIORITY 5. Related OP Local and regional economic development TOP Predefined small projects or base of projects on the following subjects as part of an integrated package of development of territorial decentralized stakeholders (counties and urban areas): Thematic objective 3 (competitiveness) and partly related to thematic objective 8 (employment) as well (ERDF):  development of local economic infrastructure and environment for the investment incentives;  local economic development, economic organization, local markets, distribution channels, development of local products and local clusters, marketing;  supporting SMEs related to local economy and small scale supports (complex tools like EDIOP, different target group);  Tourism (based on endogenous potentials): - supporting tourism attractions and SMEs (apart from the national priority actions of EDIOP); - tourism developments of higher value in rural areas

72

OPs RELATED TO NATIONAL RELATED THEMATIC OBJECTIVES DEVELOPMENT PRIORITY 5. Related OP Local and regional economic development (developments of lower value financed by EARDF, in RP). Thematic Objective 7 (transport): small-scale development of transport (urban transport and development of transport organization in road, public and alternative, cycling transport) based on needs of territorial stakeholders and as part of their development packages (not as a separate TOP priority!). Thematic Objective 8 (employment): (ERDF and ESF, see its delineation (synergy) from decentralised and sector elements of ESF in chapter 3.1) predefined actions on promoting employment organised by the decentralised stakeholders and community-led actions for local employment (ESF), supporting labour mobility primarily (ERDF/ESF), development of nursery and kindergarten services and capacity). Thematic objective 9 (inclusion):  community development actions of local importance on promoting inclusion (especially related to social rehabilitation) and awareness of local communities (ESF, see its delineation (synergy) from regional decentralised and sectoral elements of ESF in chapter 3.1);  infrastructural development of health- and social services of local governments (ERDF);  rehabilitation of segregated urban areas in the framework of complex developments. Thematic objective 6 (environment): integrated and sustainable urban development, family-, child- and climate friendly urban development. Thematic objective 4 (energy): actions for renewable energy and energy efficiency and building energetics for local governments. Thematic objectives 11 (public administration): public administration infrastructure as a part of decentralised territorial development packages actions (not a single TOP priority on Thematic objective 11, but as part of Thematic objective 9). RP and HFAOP Thematic objective 3 (competitiveness) –Thematic objective8 (see also at Chapter 2.1) (employment) –Thematic objective9 (inclusion): Development of viable rural settlements and local communities through complex programmes (CLLD). Thematic objective 3 (competitiveness): support small-scale developments of rural tourism and food industry, development of agricultural roads, short supply chains, young farmers. EDIOP Territorial developments of EDIOP primarily support the national (see also under National economic growth and economic convergence (beyond the local economy) Development Priority1. [economic (see as reference only.) growth] and National Thematic objective 1. (RDI): the development of specialized priority RDI Development Priority 2. zones in large town agglomerations. [employment]) Thematic objective 3. (competitiveness): specialised economic development programmes of the urban growth areas, priority industrial zones and the area of Lake Balaton (support for business infrastructure and enterprises). Thematic objective 8. (employment):  support elements of business development in least developed micro-regions (special economic zones) (ERDF and ESF);  support the social economy, community-based economic, national management network of local economic development (ERDF and ESF type). HDOP Territorial developments of HDOP primarily support the national social (see also under National inclusion (see as reference only.)

73

OPs RELATED TO NATIONAL RELATED THEMATIC OBJECTIVES DEVELOPMENT PRIORITY 5. Related OP Local and regional economic development Development Priority 4. Thematic objective 9. (social inclusion):promoting social inclusion and [demography]) combating poverty by improving the accessibility of healthcare, education and child welfare services, by improving the mobility public service providers, by complex social inclusion development programmes, by the elimination of camp living conditions, community development through complex territorial programmes based on poverty map.

74

System of objectives for the use of EU funds in Hungary in the period of 2014-2020: the relationship between national and community objectives, the structure of the operational programmes

75

1.3.2. Selected thematic objectives, and for each of the selected thematic objectives a summary of the main results expected for each of the ESI Funds This chapter provides an overview of the preliminary list of expected results of the developments identified in the current planning phase and which planned for implementation through available EU Funds between 2014-2020. The results are consistent with the situation analysis and development needs described in Chapter 1.1. and with the national mid-term system of objectives described in Chapter 1.2. The achievement of each result contributes to the implementation of the EU2020 targets and its national commitments, also the relevant country-specific recommendations along with all the thematic objectives of the ESI Funds. The presentation of the results therefore follows the structure of the eleven thematic objectives. From the perspective of Hungarian mid-term development needs, all thematic objectives of the ESI Funds are highly relevant. Therefore the priorities of the development policy cannot be either coherent or comprehensive by selecting from among the 11 thematic objectives (despite the differing emphasis on different objectives in the Hungarian development policy). Considering the above we present the expected results for the development period 2014-2020 along all of the eleven thematic objectives. We also demonstrate how the proposed development focus will be achieved through the thematic objectives. MAIN NATIONAL DEVELOPMENT PRIORITY 1: Improving competitiveness and global performance of the business sector THEMATIC OBJECTIVE 1: Strengthening research, technological development and innovation Objectives: The main objective is the dissemination of RDI cooperation and the promotion of excellence (by strengthening knowledge transfer, knowledge utilisation and the operation of knowledge bases). In agricultural rural development the aim is to disseminate innovation among the businesses of the sector. The fulfilment of this thematic objective is primarily supported by sectoral developments. Coordination is needed with developments connected to thematic objective no. 10. (research ESF, scholarships, higher education). The main areas covered by the developments:      

Promoting the unexploited R&D&I opportunities of the SME sector; Strengthening the identified bottlenecks in R&D research and infrastructure capacity; Connecting the Hungarian enterprises and research institutions to the EU and international co-operation programmes as quickly and intensely as possible; Enhancing the balanced development of regional R&D&I activities, co-operation and networking; The development of Budapest and its agglomeration as the country's only internationallysignificant innovation region; Closing the R&D&I gap in the agricultural sector by targeted R&D&I support.

Synergies with other thematic objectives: Currently the decisive part of R&D activity is based on ICT, thus the development of ICT (thematic objective No. 2) will unambiguously contribute to the enhancement of R&D&I potential. There is a mutual support with the efforts in higher education within thematic objective No. 10 (education). By supporting the entrepreneurial R&D&I activity, the enhancement of the SMEs’ innovation activity will contribute to the complex development of the SME sector (thematic objective No. 3).

76

NRP commitments: The fulfilment of the NRP commitment to increase the level of R&D expenditures to 1.8% of the national GDP (see chapter 1.1.) will be partially supported by using the EU funding of the 2014-2020 programming period. Within the thematic objective, the results expected to be achieved through the interventions of the 2014-2020 EU development period are as follows: Funds:

ERDF

ESF

EARDF

Expected results (indicative list):  An innovative business environment that supports small and micro enterprises in obtaining long-term development and business incubation activities related to knowledge centres (significantly increasing the value of seed capital transactions)  A significantly growing number of strong, technologically competent innovative SMEs, able to supply large companies.  R&D expenditure of the research and development institutes and higher education research and development centres’ financed by businesses will grow (from 11.4% in 2011 year to exceeding 13%).  A significant renewal of the research infrastructure (at least one large research facility and related infrastructure established – ELI project).  The number of research centres that actively participate in world-class and international co-operation in the 6 convergence regions is growing (at least 20% increase).  Success rate of Hungarian enterprises and research organisations on the EU R&D&I programmes show a significant growth.  Strengthened entrepreneurial R&D&I activity as a result of the separate financial fund (particularly R&D-intensive SMEs and large enterprises, innovative start-ups)  Renewed system of research programmes is able to provide sufficient R&D staff (e.g. PhD, researchers) the most decisive programmes will be launched, both in the public and business sector.  Higher level of the agricultural R&D&I expenditure-to-GDP ratio, approaching national average.  Increasing number of new innovative co-operations (EIP operative groups and clusters) among SMEs in the agribusiness.  Increase in the number of farmers and rural population reached by training and consultancy in order to put the R&D&I results into working practise.

THEMATIC OBJECTIVE 2: Enhancing access to, and use and quality of, information and communication technologies Objectives: The main objective is to disseminate ICT services in all areas and in agricultural rural development to strengthen the informatisation of agribusinesses. The fulfilment of this thematic objective is primarily supported by sectoral developments. The implementation of its developments requires strong coordination with the development of thematic objectives No. 8-11, which will be defined in details in EDOP. The main areas covered by the developments:      

Development of infrastructure and networks which provides adequate ICT accessibility, Srengthening of communal accessibility and development of digital literacy and skills, Rhe availability of human resources required by the ICT sector together with wide dissemination of ICT knowledge, Exploitation of growth potentials of SMEs in the ICT sector, Facilitation of the development of e-economy, Improvement of the infrastructure of electronic public administration and e-public services.

Synergies with other thematic objectives: It is important to emphasise that the developments of ICT not only have economic effects but they also contribute to the fulfilment of all thematic objectives. The objectives of EU Digital Agenda relate to the whole vertex of the sector and the Hungarian strategic ideas for 2014-2020 in ICT are connected to these objectives. Within the thematic objective, the results expected to be achieved through the interventions of the 2014-2020 EU development period are as follows:

77

Funds:

ERDF

ESF

EARDD

Expected results (indicative list):  Growth of economic role of internationally competitive companies in the fields of high-tech and ICT industry, software and service development (the export performance of the sector will have expanded by at least 50% by 2020).  International level digital economy, is manifested in the fields of human/management knowledge and skills, use of electronic services, computerised processes, corporate governance, e-commerce and IT security (to reach at least the EU27 average in most of the indicators).  The widest possible range and expansion of remote public administration and e-public administration, in health care (e-health care), in cultural public services (e-culture), in higher education and in agricultural public administration (including the public administration services of fishery and cultivation of fishes) (to reach at least the EU27 average in most of the indicators).  Broadband infrastructure (over 30 MBPS) is fully developed throughout the country (available in every settlement), half of the household will have a 100 MBPS bandwidth internet connection.  Hungary is an ICT knowledge centre, with a high level of concentration of ICT experts (significantly increase the share of IT specialist educated students in higher education).  Increase in the level of digital competence for age groups over 18 years (decrease the level of digital illiteracy to 20%).  Increase in the computerised level of agricultural enterprises (the reach of EU 27 average in the most indicators).

THEMATIC OBJECTIVE 3: Enhancing the competitiveness of small- and medium-sized enterprises, the agricultural sector (for the EAFRD) and the fisheries and aquaculture sector (for the EMFF) Objectives: The main objective is to establish an environment of loans that ensures the competitiveness of the SMEs, to increase the investments in priority sectors. In agricultural rural development the aim is to diversify the activity of agribusinesses and to increase the added value of their products. The fulfilment of this thematic objective is also outstandingly supported by the territorially decentralised developments (TOP, the development of local economies, tourism). Strong coordination is needed with EARDF (rural and food processing businesses). The main areas covered by the developments:       

Technological development of SMEs; The improvement of the quality and accessibility of business infrastructures which support the activities of SMEs; Qualitative intensification of networking of the businesses and the expansion of supplier connections and cooperation with large enterprises, especially in priority sectors (see 1.1.3.); Improving entrepreneurial skills, the dissemination of up-to-date business control and management skills in order to ensure the long-term competitiveness and development of the SMEs; The enhancement of local economic co-operations and systems. It is of primary importance to improve the conditions of the accessibility to financing resources. Diversification and increasing the added value of the production of agriculture, fisheries and the food processing industry.

Synergies with other thematic objectives: It is important to stress that the enhancement of the competitiveness of SMEs might contribute to the support of the objectives set for the R&D, ICT, energy efficiency and employment sectors and vice versa. Within the thematic objective, the results expected to be achieved through the interventions of the 2014-2020 EU development period are as follows: Funds ERDF

Expected results (indicative list):  Increasing Gross Value Added generated by the SME sector approaches the level of EU average  A wide range of SMEs receive support of financial instruments  More SMEs use the business infrastructure (business infrastructure provides a higher level of

78

Funds          

ESF EARDF

    

EMFF

      

Expected results (indicative list): accessibility and service quality) More SMEs are involved in business co-operation and networks The national (regional and local) institutional system, which will operate the local economic development, is established throughout the whole country Integrated local economic development programmes start in every disadvantaged region Rural areas with diversified economies based on local economies are driven by internal resources • The competitiveness, manufacturing and service, technology development of SMEs, the reduction of their lagging behind the large enterprises in this area (decreasing the duality of the economy). • The gross value added by small and medium-sized enterprises approaches the EU27 average, thus reducing the level of economic duality. • The number of SMEs involved in international production chains is increasing (decreasing the duality of the economy). • The wider range of SMEs have access to external resources (financial assistance, the continuation of JEREMIE programme), thus reducing their lagging behind the large enterprises in this area. • Increase the number of SMEs using business infrastructure (infrastructure provide high quality and wide range of services). • Increased presence of SMEs in enterprise collaborations, networks, clusters (at least half of the SMEs employing more than 10 employees) contributing to the easing of economic duality.  Integrated local economic development interventions are launched on the level of counties and city-agglomerations, in each county and major city-agglomeration. (financed by TOP).  Increased the number of visitors and growing incomes of the priority tourism developments in national level, financial instruments will be available for the market actors of tourism (see the expected results of touristic employment under thematic objective No. 8.) Developed, marketable entrepreneurial skills, deepening financial and management knowledge. Increase in the number of diversified agricultural and food-processing businesses with increased competitiveness, that have successfully implemented structural change Increase in added value of agricultural products (%) Increase in the proportion of participants in both vertical and horizontal enterprise cooperation in agriculture (%) Improvement of business skills and professional knowledge of the rural population, especially of the agricultural business. Increase in the proportion of young farmers among the agricultural businesses (%). Increase in the number of short supply chains and the number of their participants. Increase in the growth of the rate of micro-enterprises participating in local programmes (CLLD) Share of high added-value products is increasing in the fishery sector. Increase of the fish production and consumption in food processing and food consumption. Expansion of competitive, innovative, diverse and multifunctional fisheries Increase in the number of operations based on innovation in order to ensure the competitiveness of fishery

MAIN NATIONAL DEVELOPMENT PRIORITY 2: Increasing the level of employment through economic development, employment, education and social inclusion policies, taking account of territorial disparities THEMATIC OBJECTIVE 8: Promoting employment and supporting labour mobility Objectives: The main objectives to fostering employment primarily by applying active labour market tools. With regard to agricultural and rural development, the main objective is the creation of rural jobs, primarily by diversification and by strengthening the labour-intensive agricultural subsectors. The achievement of this thematic objective is significantly supported by regionally decentralised developments (TOP: strengthening local employment) as well, besides sectoral developments (in details see chapter 3). The implementation of its developments requires strong co-ordination also with the developments of thematic objective 9 and 10, in details it is explained in the relevant Ops (HDOP, EDOP). EAFRD is important as well. Developments focus on the following areas: 79

         

The development of the labour market supply and the support for job seekers on the open labour market by active tools; Organisational development of the nes; Improvement of professional and key competences in the framework of formal vocational training system and lll (connected to thematic objective 10 [employment]); supporting the adaptability of enterprises, disseminating flexible and family-friendly employment practices and services; Development of childcare capacities for utilisation by parents; Increasing employment in social economy, supporting social enterprises; Improvement of the presence of disadvantaged groups on the labour market; Economic development promoting job creation and employment (business development), particularly concerning local economy and tourism; Reduction of the territorial differences in employment and promoting mobility; Job creation in rural areas (social economy, labour intensive agricultural sectors)

Synergies with other thematic objectives: Beside the connections mentioned in the NRP commitments below, the investment projects of the 4th, 5th, 6th and 7th thematic objectives can contribute to an increase in employment for disadvantaged people. As stimulating activity and employment the arrangements for active ageing needs to be accompanied by health-preservation and rehabilitation developments as well as supporting measures for the employability of people with reduced working abilities (see the 9th thematic objective). Active tools, serving the labour market supply are mutually supportive, with developments serving the achievement of educational (thematic objective 10) targets. Employment objectives should be vindicated at creation of arrangements focusing on the development of the economy, where the job-creation effect is relevant (e.g. intensity of support, applied mechanism for the selection of recipients). Employability supporting child care opportunities (kindergarten and crèche), endorsing proper social integration and education policy aspects, also strengthening the social inclusion and the disadvantage- compensation manner of public education. NRP commitments: The activities beyond the development policy will play a crucial role in the achievement of the NRP commitments set out by the employment objective of the EU2020 Strategy, a comprehensive domestic economic policy and measures stimulating employment are necessary. Improving employment should be carried out with the joint intervention of several (namely the 3rd, 7th, 8th, 9th and 10th) thematic objectives. Within the thematic objective, the results expected to be achieved through the interventions of the 2014-2020 EU development period are as follows: Funds

ERDF

ESF

Expected results (indicative list):  Broadening of child-care service (public, municipal, company, community provided alike) capacities according to the local needs (from TOP, in these developments the social integration and inclusion aspects also predominate, these can be found under thematic objective 9 and 10).  Infrastructure is supported, related to dual vocational training, primarily within the scope of SMEs  Successful, targeted job creation arrangements are implemented, especially in the SME sector, the number of jobs and the labour demand increases in the private sector as a result of growing investments  The role of SMEs grows in local employment, the national network of micro-regional institutional structures are set up for organising local economic development  Implementation of complex regional tourism development packages with large local employment impact; in the regions the tourism destination managements organise the operation and development of the sector (for SME competitiveness results of tourism developments, see thematic objective 3).  As a result of targeted economic development and employment actions in all most disadvantaged micro-regions (special economic zones), number of created jobs increase.  Financial sustainability and employment of social (non-profit) enterprises grows.  Growth in the proportion of those job-seekers (especially young people) who receive personalised services or targeted support in finding employment.  The lagging of proportion of participation in LLL decreases (behind EU average)

80

Funds

EARDF

EMFF

Expected results (indicative list):  The development of supporting and motivating frameworks for LLL and labour adaptability considers the labour demands of the economy (also related to the thematic objective 10 [education]).  Company participation in on-the-job training is on the increase  The number of employees in social economy rises  The employment rate of women with small children is increasing as well as the proportion of atypical employment forms and family-friendly workplaces  The measures aimed at the development of start-up enterprises, self-employment and entrepreneurship widen the employment of disadvantaged people, including the youth  Decrease of youth unemployment.  The capacity of NES expands, the range of people who have received services is growing  The accessibility of labour-market services improves for public employees  Employment improves due to the diversified agricultural production methods – with new job creation surplus  In the framework of CLLDs, employment improves in rural areas due to economic diversification and local economic development  An increasing portion of the population partakes in adult education and receives guidance services  Development of labour-intensive agricultural subsectors moderates the job loss in agricultural sector.  There is an increase in the proportion of people participating in vocational/professional trainings and counselling services.

MAIN NATIONAL DEVELOPMENT PRIORITY 3: Enhancing energy and resource efficiency THEMATIC OBJECTIVE 4: Supporting the shift towards a low-carbon economy in all sectors The main objective is to significantly increase the national building energetic standards (primarily through energy efficiency, with application of renewable energy in the second place). It is also a main objective to significantly increase the energetic utilisation of agricultural by-products in agricultural and rural development. The achievement of this thematic objective is non-negligible supported by regionally decentralised developments (TOP) as well, besides sectoral developments (for details see chapter 3). Developments focus on the following areas:         

Energetic development of private and public buildings (efficiency and renewable energy); Significant spreading the use of renewable resources; Promoting network developments for increasing energy utilisation; Awareness raising and demonstration of new low-carbon technologies; Energetic utilisation of agricultural by-products; Extended application of financial instruments (credits) in energetic development incentives; Exploiting and strengthening the carbon capture potentials of agriculture Energetic development of smes (efficiency and renewable energy), see economic development OP. Urban-suburban transport development (see at thematic objective 7, transport OP).

Synergies with other thematic objectives: Increasing energy efficiency contributes to the improvement of the environment and to air quality protection, supporting the 6th thematic objective. In addition, it contributes also to the decrease of expenditures of the business sector and households, thus expenditures on consumption and investments may grow, so that the competitiveness of the economy will increase. Energetic development of SMEs serves both thematic objectives 3 and 4. Urban-suburban transport developments contribute both to the reduction of emissions (directly through energy-efficiency, as well as indirectly through the decrease of individual motorised transport demands) and to the elimination of bottlenecks in transport (also contributing to the improvement of the state of the environmental, see thematic objective 6). NRP commitments: The EU Funds of 2014-2020 are essential to reach the targeted Hungarian objectives in the field of climate and energy, defined by the Europe 2020 Strategy. 81

Within the thematic objective the results expected to be achieved through the interventions of the 2014-2020 EU development period are as follows: Funds

CF

ERDF

EAFRD

Expected results (indicative list):  Increase of utilisation of renewable energy resources (ktoe) and the establishment of those energynetwork elements that expand their applicability.  Increase of energy savings by reducing energy consumption (ktoe).  As a result of an increase in energy efficiency and the utilisation of renewable energy sources, reduction of CO2 emission (million tons/year) (especially building energetics: private and public).  Reach of majority of energy consumers (residents, decision-makers of business sector, employees) through awareness-raising programmes for energy conscious society (%).  Initiation of a financial fund that serves the application of energy efficiency and renewable energies.  As a result of increasing urban-suburban transport development performance, the CO2 emission reduces (for the transport results see thematic objective 7 [transport OP]).  Regional and local level investments facilitate the community-based utilisation of renewable energy and the increase of energy efficiency (as part of TOP urban regional economic development packages).  Energy-efficiency of enterprises improves (from SME priority, supporting thematic objective 3 in economic OP)  Energy efficiency improves in agricultural, food industrial and forestry production (ktoe)  Forest areas, consisting of adaptable species of woods are increasing, supporting the prevention of climate change.  Energy efficiency of agricultural infrastructure (buildings) improves  Significant increase of local level energy production, using biomass-based by-products, at facilities possibly owned by several farmers, especially at livestock sites. Expected results of urban-suburban transport developments will amend the results of thematic objective No. 7, these developments are parts of the MOP due to the requirements of standard policy management, under a single priority axis related to thematic objective No. 4..

THEMATIC OBJECTIVE 5: Promoting climate change adaptation and risk prevention Objectives: prevention is in the focus of developments, the main objective is the improvement of flood protection security. Concerning agri-rural developments, the main objective is the development of adaptability of agriculture. The achievement of this thematic objective is basically supported by sectoral developments. It requires strong co-ordination, with EAFRD implementation (irrigation, drainage). Developments focus on the following areas:     

Regional water management and flood protection, that is able to manage and moderate extreme intensive precipitation, and to supply water if necessary; Preparation of disaster management for the increasing number and intensity of extreme weather events; Development of a planning, modelling system, as a foundation for adaptation developments; Improvement of residential preparedness; Development of agricultural adaptability, spreading water saving and adaptable technologies, farming methods, and risk reduction tools.

Synergies with other thematic objectives: The labour-intensive water management priority investments have significant employment effects, too (related to 8th thematic objective). Improvement of irrigation opportunities will strengthen the security of agricultural income and competitiveness (related to 3rd thematic objective). (Description of interrelations between thematic objective 6 and 5 is explained at thematic objective 6.) Within the thematic objective, the results expected to be achieved through the interventions of the 2014-2020 EU development period, are as follows: Funds:

Expected results (indicative list)

CF

 Publicly owned water management and flood protection facilities (existing and new ones) are prepared with regard to increasingly extreme water regime caused by climate change based on expected risks by 2050.

82

Funds:

Expected results (indicative list)

ERDF

 Further improvement of the Vásárhelyi Plan and starting its planned operation.  Residents are prepared for climate change, more conscious water usage and knowledge concerning crisis management  A planning system operates to model climate change and its impacts  The irrigation possibilities and the territory of irrigable areas increase through the water management interventions  The infrastructure of public sector and disaster management is prepared to forecast climate change trends and extraordinary weather events, to perform risk assessment as well as to plan the management of extraordinary situations.  The amount of civil defence stocks and the number of volunteers trained for civil defence increase.  Increase the extent of areas and forests which have been environmentally conditioned with climate adaptive forestry methods.  Increase in the number of risk reduction sector-specific investments (%)  Restoration of field and forest areas damaged by harmful management  More intensive spread of species and farming methods, adapted to climate change  The irrigated areas will significantly grow due to water management interventions.

EAFRD

THEMATIC OBJECTIVE 6: Protecting the environment and promoting the sustainable use of resources Objectives: At the centre of developments, there is the compliance with Water Framework Directive (water utility development and the achievement of good water quality), as well as development of urban environment. With regard to agri- and rural development, the strengthening of agrienvironmental protection is crucial. The achievement of this thematic objective is significantly supported by regionally decentralised developments (TOP) as well, besides sectoral developments (for details see chapter 3). It requires strong co-ordination with EAFRD (environmental farming). Developments focus on the following areas:       

Further development of environmental infrastructures, particularly in terms of water quality protection, drinking water supply, waste water and waste management and further improvement of water quality; Implementation of proper monitoring of noise, air pollution and water conditions; Focused, pilot action-like development of noise protection and habitat protective green infrastructures; Enhancement of the environmental consciousness of the society as well as the support of environmental technology green economic pilot developments; Climate-friendly family-friendly and economic developing settlement environment and infrastructure; Soil protection, spread of agri-environmental farming, gene preservation; Utilisation of agricultural waste, prevention of their further production.

Synergies with other thematic objectives: developments of waste utilisation support the improvement in employment contributing also to the results of the 8th thematic objective. Environmental protection is supported by environmental security and water management, while the developments in nature and agricultural environment have targets on climate adaptation: the interventions of the 5th and 6th thematic objectives mutually support each other. The conservation of natural base of agriculture effectively serves the competitiveness of agriculture (3rd thematic objective). The tourism impacts of natural protection and urban environmental development are also important (concerning thematic objective 3 and 8). The agri-environmental developments (EAFRD) strengthen the internal coherence to achieve good conditions of drinking water and other waters (CF developments). 83

Within the thematic objective the results expected to be achieved through the interventions of the 2014-2020 EU development period are as follows: Funds:

Expected results (indicative list)    

CF

 ERDF

   

EAFRD    EMFF



Initiation of good practices to disseminate information about selective collection systems at home Building a proper monitoring system to measure water conditions and air quality. Increase drainage rate to 89.2% by the end of 2015. Reduction of the population living in areas where noise pollution is above the target value recommended by WHO. Raising awareness and environmental consciousness of public and private sphere by new pilot actions that can be disseminated Implementation of environment technological and green growth, green economy pilot actions Development of green infrastructure on at least 5% of the national Natura 2000 network area. Implementation of integrated and sustainable urban development actions in every urban region serving the aspects of healthy environment, economy, families and climate adaptation. Agriculture, securing the maintenance of Natura 2000 areas, agricultural and forestry environmental farming, increase the territorial share of ecological farming in accordance with the Water-catchment management plans. Conservation of environmental and estimated heritage of rural areas is secured Conservation of plant and animal genetic resources. Maintenance and spread of aquaculture-securing environment protection services in the framework of a new environmental management programme (pcs) Increase the number of those investments and innovations that improve energy efficiency, and facilitate water-saving technologies related to aquacultures.

 Increase the number of investments with ecological approach in relation with natural waters. THEMATIC OBJECTIVE 7: Promoting sustainable transport and removing bottlenecks in key network infrastructures Objectives: main target is to expand the improved-quality railway Mainly sectoral developments are supporting to reach this thematic objective (small supplement of TOP is possible, there is no separated priority in TOP). Main topics of the developments:        

Keeping the share of less-polluting transport modes (railway, waterway, pipelines) above the EU27 average, Improvement of the quality of railway public transport in terms of infrastructure, vehicles and related services, Establishment of missing internationally significant railway and road network elements, Increasing the share of renewable energy resources in road transport, Further improvement of road transport safety, through developments of secondary networks and settlements, As a horizontal aspect of the developments: every transport sector has to improve the safety and the financial sustainability, Implementation of smart transport solutions, The development areas of urban-suburban transport support the 4th thematic objective, but as these are transport development areas, they exist here: o some railway suburban projects (eliminating bottlenecks in the fields of railway tracks, buildings, intermodal infrastructure (e.g. P+R), vehicles and travelling services) o different transport development projects of several cities: focusing on the main problematic issues of urban public transport (rail-guided, bus, waterway)(e.g.: vehicles, fleet, infrastructure, travelling services, coordination). Where necessary, the elimination of the bottlenecks of cycling, pedestrian or road traffic (e.g.: bridges).

Synergies with other thematic objectives: by improving the state of transport network and service standards the possibilities of enterprises on market accessibility will be better (3rd thematic 84

objective), as well as the opportunities of employees on mobility are extended (8 th and 9th thematic objective). Development of railway network and the urban-suburban developments reduce the GHG emissions (4th thematic objective). Large-scale transport investments contribute to the increase of employment (8th thematic objective). The urban-suburban developments of the 4th thematic objective contribute to the elimination of transport bottlenecks and to the improvement of the environmental conditions (6th thematic objective). NRP commitments: Use of the 2014-2020 EU funds in 7th thematic objective will also contribute to meet the NRP commitments on energy. In this regard, the most important expected result is the increase in the share of renewable energy in road transport to 10% by 2020, which also affects the modernisation of public transport. Increasing the electrification level of the railway network and keeping the share of public transport above EU average contribute to the NRP commitment, because the reduction of GHG emission is expected. Within the thematic objective the results expected to be achieved through the interventions of the 2014-2020 EU development period are as follows: Funds:

Expected results (indicative list):

CF

 In the railway TEN-T network the length of railway sections equipped with ERTMS signalling system and 225kN axle load increases;  The length of railway sections with speed limits will reduce, level of electrification increases  The per-unit energy consumption of the railway carriage will reduce;  Sample value smart transport solutions will be implemented,  The cumulated travelling time of the TEN-T road network will reduce (cars, trucks)

ERDF

The travelling time will reduce on the suburban rail-guided developed sectors and in cities, in which there was any urban transport development. Convenience will be enhanced, the number of the th passengers will not reduce. (this transport result will accompany the realisation of the 4 thematic th objective, and features in the Transport OP, where it is referred to in the 4 thematic objective)  The number of fatalities in traffic accidents significantly reduces by 2020;  The number of the working age population which can access the county towns on road in 30 minutes will grow; As a part of the urban/county economic development (TOP) small-scale public transport, road and cycling developments will improve the access to workplaces, business centres (belonging to the rd th th developments under the 3 , 4 , and 8 thematic objectives) Expected results of urban-suburban transport developments will amend the results of thematic objective No. 7, these developments are parts of the MOP due to the requirements of standard policy management, under a single priority axis related to thematic objective No. 4.

MAIN NATIONAL DEVELOPMENT PRIORITY 4: Tackling social and demographic challenges; good governance THEMATIC OBJECTIVE 9: Promoting social inclusion and combating poverty on the most disadvantaged, mostly rural areas. The thematic objective is basically supported by sectoral developments. Its local actions could appear regionally decentralised (TOP: health care and basic social care infrastructure, social urban rehabilitation). The implementation of its developments require strong co-ordination with the joint developments of thematic objectives 8 and 10: in details explained in HDOP and EDOP. EAFRD coordination is important (CLLD). Developments focus on the following areas:   

Reducing and prevention of child-poverty improvement of standards of living for people living in segregated neighbourhoods Improvement of employability of disadvantaged people, rehabilitation and employment of people with reduced capacity to work (saved enterprises). Improvements in access to good quality public services (social services, child care), with special regard to the human capacity 85

 



of public services. Offering quality public services; conversion of social institutes for community supply, and replacement of residential institutions. Conversion of social institutions to community supply, and replacement of residential institutions. Promotion of social inclusion by the intensification of social activity, strengthening communities, anti-discrimination and awareness-raising programmes, strengthening the role of family inside society, and rehabilitation The targeted management of the situation of the Roma people living in poverty can be assured in different ways: (1) The focus of developments can concentrate on the elimination of obstacles afflicting Roma people in great numbers (e.g. low-education or unemployment spanning generations). The majority of these developments join the main current of social inclusion measures; they are not a part of a targeted Roma programme. (2) Incentives for the inclusion of Roma people in case their involvement is significant (e.g. supporting further education, reducing early school-leaving). (3) Targeted Roma programmes for education and employment of Roma women, familiarisation with Roma culture. Health conservation and healthy ageing by securing the accessibility to public health care services: (1) solving the lack of human resources in health care (higher educational capacity expansion, restructuring of vocational trainings, widening opportunities to gain work experience, re-educational and preparation programmes to make health care more attractive as a workplace in disadvantaged regions, mobility programme to attract workforce in disadvantaged regions). (2) replacement of active hospital beds with aging supporting complex public health programmes and development of outpatient-clinics. (3) Improvement of equal accessibility to services. (4) In the border area of social and health care, further decrease of active inpatient capacity.

Synergies with other thematic objectives: The fulfilment of the EU2020 commitments against poverty can only be served jointly by the coordinated inclusion activities of several other (particularly the 8th and 10th) thematic objectives. It particularly concerns disadvantage compensation education, and the improvement of employment with regards to social aspects as well. Employment supporting child care opportunities (crèche), predominating proper social integration policy aspects, also strengthen inclusion. NRP commitments: Hungary will reduce the number of people living in poverty by 450 thousand by 2020. Measures aimed at social inclusion will be accessible for a more extensive population, within the framework of the HDOP the value of this objective will be supported to the extent of around 10%. Within the thematic objective the results expected to be achieved through the interventions of the 2014-2020 EU development period are as follows: Funds

ERDF

ESF

EARDF

Expected results (indicative list):  Healthy housing and living conditions at least in every seventh segregated housing environment  Increase the number of inhabitants involved in social urban rehabilitation (TOP)  Sufficient accessibility to high quality social, cultural and healthcare public services, also in those areas tackling with lack of capacity (primarily lagging behind) (basic services: TOP; other: sectoral OPs).  Deinstitutionalisation of the social care services for handicapped people is continuing, including those suffering from dementia (crèche capacities increase (TOP), see supporting thematic objective 8 (employment), but also confirming the aspects of social integration policy, its coordination is designated in TOP).  Social inclusion and employment of excluded groups and Roma population improves.  Through the increasing employment of disabled people, their social inclusion strengthens.  Decrease in the number of people living in extreme poverty.  Increase in the number of children reached by child poverty community programmes.  In the action area, public trust and responsibility grows.  Improvement of accessibility of human public services (human resources capacity and training) in areas struggling with lack of capacity (basically disadvantaged micro-regions).  practical agricultural knowledge transfer in the most disadvantaged rural micro-regions with the inclusion of local community (in the framework of CLLD) for their social integration, resulting in the

86

Funds

Expected results (indicative list): improvement of ability to be self-sufficient and improvement of knowledge level for those who live in segregated areas.

 Implementation of locally initiated solutions (community infrastructure and services). THEMATIC OBJECTIVE 10: Investing in education, skills and lifelong learning Objectives: The most important objective is the improvement of disadvantage-compensating ability of public education and strengthening of excellence. The thematic objective is basically supported by sectoral developments. Its developments require strong co-ordination together with developments of thematic objectives 8 and 9, in details designated by HDOP and EDOP. Developments focus on the following areas:  

 

Broadening the educational emergence (including informal and non-formal education) of the disadvantaged, the Roma and people with disabilities, developing educational partnerships, availability and talent fostering programs overarching the complete educational system; Methodological renewal of public education in order to implement disadvantagecompensation and reduce early school leaving, through educational programmes serving early and inclusive education, desegregation and labour market connections, and by human resource development; Strongly focused public educational infrastructural developments (focusing on replacement of existing lack of capacity, institutions with higher occupancy, as well as institutions with higher share of disadvantaged students in order to serve desegregation); Preparation of higher educational infrastructural and educational capacities to the sustainable growth of the number of people with higher education degrees, (based on disadvantagecompensation, excellence and labour market aspects).

Synergies with other thematic objectives: The developments of the 8th thematic objective promote the effective participating of inactive and disadvantaged people and those who live in lagging-behind regions in adult education and informal and non-formal education forms. The latter two educational forms can compensate the missing catching-up processes which cannot be fulfilled by the formal education system in itself. In a catching-up process the educational tools have limited effects; there is a strong need to practise the full range of methods and tools of social inclusion as well. Therefore, the activities under the 9th thematic objective contribute for example to the decrease of early school leaving. Furthermore ICT competences are backed by the activities of the 2nd thematic objective. The connections to the 1st thematic objective serve the reinforcement of research, technological development and innovation in the higher education system. Active tools, strengthening labourmarket supply, and the dual vocational training system, with educational developments can mutually strengthen each other, achieving thematic objective 8 (employment). Employment serving child care opportunities (kindergarten) also support disadvantage-compensating education targets, through the predominance of proper public education aspects. NRP commitments: The activities beyond the development policy will play a crucial role in the achievement of the NRP commitments aimed at the improvement of the educational, qualification and dropout levels. Nevertheless, these commitments will be significantly supported with the use of 2014-2020 funding resources by the outcomes fostering the 10th thematic objective.

87

Within the thematic objective the results expected to be achieved through the interventions of the 2014-2020 EU development period are as follows: Funds

ERDF

ESF

EARDF

Expected results (indicative list):  Demonstrable disadvantage-compensation in the developed public educational institutions (and cultural institutions providing training functions) where the number of students is not decreasing, the share of disadvantaged students is high;  Improvement of standards of higher education infrastructure, serving the increase of the share of people with higher education degrees;  Broadening of the infrastructure made for educational objectives implemented outside the formal school-system (e.g. integration of the disadvantaged) (Kindergarten capacities are expanding (TOP), see the support of thematic objective 8 (employment), but also endorsing the disadvantage-compensational public educational policy aspects, its coordination is designated by TOP.)  The share of students over 15 years, achieving at least degree 3 at the reading-comprehension scale of PISA survey, grows;  Decrease in the difference between schools concerning the comprehension results of students;  Decrease in the dispersion of the student’s individual mathematics test results due to the education of their parents  Decrease in the share of early school leavers  Efficient and widespread talent fostering  The proportion of multiply-disadvantaged students entering secondary or higher education increases  The number of higher education institutions which gain international classification increases  The increase of tertiary graduation within certain target groups with the improvement of higher education level  Broadening availability of informal and formal education and LLL, securing equal opportunities  The number of disadvantage compensational pedagogical programmes and the share of further trained pedagogues increase (For employment serving related vocational training and LLL result, see thematic objective 8.)

 Increasing up-to-date knowledge of agricultural actors – number of recipients on further professional training courses and in consulting services

THEMATIC OBJECTIVE 11: Enhancing institutional capacity and ensuring an efficient public administration Objectives: The primary aim is the creature of public administration and jurisdiction with good responsiveness. This thematic objective is basically supported by sector developments. The main areas covered by the developments:      

Organisational development programmes Rationalisation of processes and optimisation of procedures, increase of transparency Strategic merit of task management and improvement of the coherence, Capacity development within public administration for skilled and motivated public servants; Modernisation of Justice and Jurisdiction infrastructure and task management; Small- scale renewal of the infrastructure of regional administration (for the needs of local stakeholders)

Synergies with other thematic objectives: This thematic objective supports the fulfilment of all other thematic objectives because of the comprehensive character of the public and professional administration. It particularly supports the economic development aims of the 3rd thematic objective, as well as the 2nd thematic objective with financing arrangements of e-government development. Within the thematic objective the results expected to be achieved through the interventions of the 2014-2020 EU development period are as follows: Funds ERFA

Expected results (indicative list):  renewal of territorial administration (based on regional needs, as supplementary elements of TOP development packages)

88

     ESZA

See the ERDF results of e-government developments in thematic objective no. 2 Reduction of average handling time in public administration Reducing administration costs spent by citizens and businesses (%) Increase in the ratio of mediation and other dispute resolution treatments in civil cases (% Increase in the satisfaction level of citizens and entrepreneurs regarding national public administration  Increase in the number of electronically transformed governmental and public services  human capacity of the public sector prepares for the needs of e-government and e-public service  The usage of e-government services by citizens and businesses reaches the EU average.

 Agricultural and fishery sector management with decreasing administrative burdens operates according to the EU expectations (network research is the basis for the developments).

1.4.

The indicative allocation of support by the Union by thematic objective at national level for each of the ESI Funds, as well as the total indicative amount of support foreseen for climate change objectives

The table attached to this sub-chapter aims to demonstrate and summarize the indicative allocation between thematic objectives and the different ESI Funds as well as the allocation for technical assistance and the table will be complemented by the final versions of financial plans of operative programmes. The total indicative allocation for climate-change related measures in Hungary shall be indicated also in this section. Hungary calls for spending nearly 60% of EU development funding (without the resources of rural development and fishery) on direct economic development in the 2014-2020 period. This ambition is decisively served by resources expended on the first (R&D&I), the third (SMEs and competitiveness), the eighth (employment) and the fourth (low-carbon economy) thematic objectives. ERDF

ESF

CF

EARDF

EMFF

TOTAL

1.Strengthening research, technological development and innovation

7.77%

0.58%

0.00%

0.37%

0.00%

8.73%

2. Enhancing access to, and use and quality of, information and communication technologies

3.74%

0.00%

0.00%

0.62%

0.00%

4.36%

3. Enhancing the competitiveness of small and medium-sized enterprises, the agricultural sector (for the EAFRD) and the fisheries and aquaculture sector (for the EMFF)

13.61%

0.00%

0.00%

4.86%

0.12%

18.59%

4. Supporting the shift towards a low-carbon economy in all sectors

3.40%

0.00%

6.54%

0.31%

0.00%

10.25%

5. Promoting climate change adaptation, risk prevention and management

0.00%

0.00%

3.93%

1.25%

0.00%

5.17%

6. Protecting the environment and promoting resource efficiency

4.56%

0.00%

2.75%

2.30%

0.09%

9.70%

7. Promoting sustainable transport and removing bottlenecks in key network infrastructures

0.97%

0.00%

9.61%

0.00%

0.00%

10.58%

8. Promoting employment and supporting labour mobility

7.50%

6.47%

0.00%

1.00%

0.01%

14.98%

9. Promoting social inclusion and combating poverty

3.79%

3.85%

0.00%

0.87%

0.00%

8.52%

10. Investing in education, skills and lifelong learning

1.96%

3.28%

0.00%

0.37%

0.00%

5.61%

11. Enhancing institutional capacity and an efficient public administration

0.00%

0.39%

0.00%

0.00%

0.00%

0.39%

Technical assistance*

0.24%

0.67%

1.71%

0.50%

0.01%

3.13%

TOTAL

47.53%

15.24%

24.53%

12.46%

0.24%

100%

89

Comments: Percentages of the table are indicative. The percentages above only contain planned support from the EU without Hungarian co-financing. The indicative amount of the Youth Employment Initiative is not a part of this table. Application of performance reserve framework has been without a member state decision yet due to the finalization of EU level regulation of this issue. *Financing technical assistance allocation of a given operative programme is made by the main ESI Fund in general. There is one exception in terms of EDIOP where TA is financed by ESF (however, the main ESI Fund is ERDF) due to the large TA need of EDIOP’s ESF based developments. (Draft CPR regulation allows financing TA from either Fund, CPR Article 109 (2.)) Concerning the significant uncertainties of the total Hungarian allocation of EARDF and EMMF a table containing only the SF and CF allocation is also provided below: ERDF

ESF

CF

TOTAL

1.Strengthening research, technological development and innovation

8.90%

0.67%

0.00%

9.57%

2. Enhancing access to, and use and quality of, information and communication technologies

4.28%

0.00%

0.00%

4.28%

3. Enhancing the competitiveness of small and medium-sized enterprises, the agricultural sector (for the EAFRD) and the fisheries and aquaculture sector (for the EMFF)

15.59%

0.00%

0.00%

15.59%

4. Supporting the shift towards a low-carbon economy in all sectors

3.89%

0.00%

7.49%

11.38%

5. Promoting climate change adaptation, risk prevention and management

0.00%

0.00%

4.50%

4.50%

6. Protecting the environment and promoting resource efficiency

5.22%

0.00%

3.15%

8.37%

7. Promoting sustainable transport and removing bottlenecks in key network infrastructures

1.11%

0.00%

11.00%

12.12%

8. Promoting employment and supporting labour mobility

8.59%

7.41%

0.00%

16.00%

9. Promoting social inclusion and combating poverty

4.35%

4.41%

0.00%

8.76%

10. Investing in education, skills and lifelong learning

2.24%

3.76%

0.00%

6.00%

11. Enhancing institutional capacity and an efficient public administration

0.00%

0.44%

0.00%

0.44%

Technical assistance*

0.28%

0.77%

1.96%

3.00%

TOTAL See the same comment notes as it is stated at the above table

54.45%

17.46%

28.10%

100%

Total indicative amount of EU support for climate change objectives (EUR) Total indicative amount of EU support for climate change objectives measures up to 22.72% (approximately 4.74 billion EUR) of the estimated total Hungarian SF and CF support by the Union (excluding TA allocation) according to the currently known state of operational programmes. This figure could be increased due to it does not include the climate relations of ESF priorities (because of the lack of ‘ESF secondary theme’ methodology) as well as the full range of measures of potential priority axes of EDIOP/HDOP. The indicative figure above is determined by the definitely identifiable measures with climate change relations like for example OP priority axes of environmental protection and transport or the priorities of the TOP with similar objectives.

Operational Programme

Share from the respective OP (without including TA)

Share from total allocation (without including TA)

HDOP

without proper data

without proper data

EDIOP

4,69%

1,90%

MOP

24,89%

3,51%

EEEOP

85,99%

13,09%

COP

non relevant

non relevant

TOP

22,88%

3,81%

CCHOP

26,60%

0,57%

1.4.2.

TOTAL

-

22,89%

It is important that the planned amount of EU support for climate change objectives cannot have been assigned precisely yet without the officially accepted full methodology. Another limitation is the lack of final categorization of detailed allocations by measures of the operational programmes. This could influence largely the final mix of intervention fields of single priority axes. 90

Chapter 1B 1.5.

The application of horizontal principles and policy objectives for the implementation of the ESI Funds

General aspects and mechanisms of the application of horizontal principles and objectives:  Horizontal principles and objectives must be applied during the preparation and implementation of the developments and during the maintenance of the results.  In the course of the decision-making process concerning the relevant developments, these principles must be applied and priority must be given to developments contributing more to the application of these principles, and those resulting in contradictory results and impacts must be rejected/modified.  The results of the application must be monitored both at project and programme levels and must be evaluated regularly.  As a result of the application of these principles and objectives, a higher added value is achieved, in such a way that other professional aspects of project development and project selection must not be distorted.  The principles and objectives must also be observed in the course of establishing the institutional system for implementation.  The institutional system for implementation as well as the beneficiaries must be prepared for the expectations and best practices of the application of these principles and objectives. Specific application tailored to the various types of developments is of high importance. A plan must be drafted before the start of the implementation period, based on which, training and guidelines must be made available during implementation.  Horizontal principles and objectives must be tailored to the country’s characteristics. Some of the horizontal principles and objectives must be applied for each programme and are included in the PA. Others are programme-specific, and are only defined in the relevant programme.  The main mechanisms of application (the relevance of each type will be defined by the detailed implementation rules): o In the course of selecting and preparing priority developments (due to their size or significance) ex-ante impact analysis on territorial and/or social integration must be carried out. As a service provided by the implementation system, in order to increase the positive impacts and to decrease the negative impacts, consultations with the beneficiaries may shape the development. o Services provided by the implementation system to the beneficiaries in the form of consultation and training on the project-level application of the principles. o In the case of relevant development themes, horizontal entry criteria and significant projectlevel horizontal preconditions (entry threshold) must be established. o In the case of relevant competition-based project selection solutions (call for proposals), application of horizontal principles and objectives represent a competitive advantage. o Cooperation through partnership during programme monitoring. 1.5.1. Arrangements for the partnership principle (with reference to Article 5 of the CPR)

(Article 14 (1) (c) CPR), including an indicative list of partners and a summary of the actions taken to involve those partners as referred to in Article 5 CPR and their role in the preparation of the Partnership Agreement and the progress report as defined in Article 46 CPR. Partnership in planning: from the partnership aspect, the planning process can be divided into two phases. In the first phase, which has already taken place, the planning documents for the utilisation of EU funds were based on development efforts defined by the sector line ministries (see underlying 91

overall development planning, the planning of the NDTDC (National Development and Territorial Development Concept); strategy building of sectors, counties and cities), as well as on the planning directives, guidelines and findings of the European Commission. The draft documents of the PA and the OP’s submitted for expert consultation were elaborated accordingly. The partners were primarily involved in the drafting of the national strategies that served as a basis for the planning. In the past two years, the public consultation of 27 sector strategies have taken place (or will be completed in the coming months) taking the form of electronic forums and events, ensuring publicity. 5300 people and organisations were reached directly, and nearly 6400 comments were submitted. The public consultations on altogether 43 county-level or urban strategies that have already taken place or will be launched in the near future will further enhance partnership. The partner consultations of the second phase, taking place at the moment, are directly connected to the EU planning documents. (1) In the first step the planning experts of the PA and the OP’s carry out consultations with the key partners identified during the drafting of the underlying strategy during the first phase (3200 people and organisations were involved in 70 national and county-level events) (from the Summer of 2013, the current Managing Authorities (MA) will also support the work of the experts of the ministries responsible for drafting the PA and the OP’s; see further details in Chapter 2). According to the partnership plan (2), in the second step, from summer 2013, a centrally coordinated, wide public consultation will be launched, which will be supported by systematic tools: series of events, electronic forum, which is appropriate to register and handle comments (responsible: Prime Minister’s Office, Ministry of National Development, Ministry for National Economy and the National Development Agency in strong co-operation, with the support of the 2014-20 planning working groups to be set up within managing authorities of the present period, see chapter 2.5). In the third step (3) from autumn 2013, the partnership dialogue will be complemented by organised information provision to the beneficiaries and other stakeholders of the developments. The past and the planned partnership processes include governmental (all of the ministries are represented in the planning coordination body and in its task force) and non-governmental organisations, as well as representatives of the business sector. The partnership also covers central and territorial stakeholders and actors interested in and affected by a wide range of social, economic and environmental structural developments. Therefore key partners are county and major city public administrations, regional development agencies, councils and forums of conciliation beside government, several authorities and professional civil organizations (particularly environmental, equal opportunities, social and economic development organisations), chambers and other organisations of economic actors (e.g. regular investor forums), universities and research institutions, churches (for details about the partners so far please see the partnership document delivered for COM on 28th May 2013 ). Counties play a crucial role in the publicity of the planning process and in the involvement of local and county-level civil and special interest groups. The involvement of sensitive target groups from the point of view of access (see chapter 1.5.4) will be ensured by targeted support. The added value of the partnership process so far can be demonstrated by the identification of the development themes and in particular, in the identification of EU funded themes for the 2014-2020 period. The partnership feedback is especially strong in the definition of themes of the territorially decentralised developments (see Chapter 3). The partners clearly confirmed the plan to address economic development as the main focus.



Partnership in the implementation: The key partners of the planning process will be invited to be involved in the partnership of the OP implementation. The partners can also be involved in the monitoring and reporting activities focusing on the OP implementation and the fulfilment of the performance framework. As members of the Monitoring Committees, they will have the opportunity to express their views.

92

1.5.2. Promotion of equality between men and women, non-discrimination and accessibility (with reference to Article 7 of CPR) In Hungary, in line with European horizontal policies, the equal opportunities and integration and/or inclusion of the following disadvantaged groups require interventions partly through the developments in 2014-2020: In order to promote equal opportunities, the following aspects must be ensured during the developments:  Equality between men and women in employment, social, health care, transport, education and training services, in the access to public domain, public goods, and public services; special attention must be given to parents raising young children as well as to single parents;  Ensuring equal opportunities to people living with disabilities in accessing the built environment, information and communication and to the services impacted by the developments;  Equal opportunities for people living with disabilities in employment. In order to ensure anti-discrimination, the following aspects must be ensured:  Equal opportunities for Roma communities and people of Roma origin in employment, social, health care, education and training services and housing (special attention must be given to Roma women in the course of the developments and in the case of each indicator);  Equal opportunities for women in employment, especially in terms of equal remuneration. Data must be collected, both at project and programme-level, concerning the measures introduced to improve the situation of the above-mentioned target groups of the developments, broken down according to gender. As part of the programme-level evaluation, the extent to which the developments contributed to the improvement of the standard of living of these target groups must be analysed. Non-governmental organisations representing the interests of these target groups must be represented in every Monitoring Committee.

1.5.3. Sustainable development (with reference to Article 8 of CPR) In Hungary, the environment acquis must be considered very strictly; the commitments made in connection with some special areas require additional efforts. Environmental requirements, efficient use of resources, the protection of biodiversity must be integrated into the programme planning and implementation, especially in the fields of transport, energy, competitiveness and industry support:    

Protection of the built environment, cultural heritage, natural assets and biodiversity; Giving preference to low-waste developments based on recycling and reuse; Reduction of energy, resource and land use needs; Establishment of a healthy and safe environment, reduction of environmental hazards, and support of efficient disaster management;  The project selection and support criteria must contribute to the application of the “polluter pays” principle, the identification of polluters, and the reimbursement of costs of the environmental load; the reimbursement must be incorporated into the definition of the return on investment, considering geographical characteristics and the excessive household costs;  For climate protection and adaptation considerations, see horizontal objectives. Data must be collected, both at project and programme-level, concerning the measures introduced to apply these principles. As part of the programme-level evaluation, the extent to which the developments have contributed to these principles must be analysed. Governmental and nongovernmental organisations focusing on these principles must be represented in every Monitoring Committee.

93

1.5.4. Further horizontal policy objectives: territorial cohesion Accessibility Access to information on the developments of the implementation system must be provided (see support opportunities, impact by a development) including the period of setting up the institutional system. Electronic administration must play an important role in this field. The principle of universal design must be applied during infrastructural, information and communication service developments. In projects, where design and development of buildings, equipments, technologies and services is carried out, physical and infocommunication accessibility must be considered. Regarding accessibility, service organisation must be given importance, since it often proves to be more efficient than technical solutions and it naturally complements them. From the point of view accessibility, people living with disabilities, children, pregnant women, families with small children, the elderly and the low skilled must be considered as priority target groups. Handling demographic challenges In the course of the preparation and implementation of these programmes, in order to prepare for the demographic changes, family-friendly aspects promoting child-raising and demographic increase are required, but also, solutions considering the needs of the ageing population. Equal opportunities of families raising children, in particular larger families, as well as young couples intending to have children must be ensured in employment, social, health care, education and training and housing developments, and in the access to public domain, public goods, public services and recreational activities. Prevention of climate change and adaptation In connection with climate change, interventions promoting both prevention and adaptation must be integrated into the developments. In order to prevent further climate change, the reduction of the utilisation of fossil energy, as well as low-carbon technologies and methodologies must be promoted. Furthermore, programmes and projects must be planned and implemented in such a way that they will be able to withstand the expected impacts of climate change or contribute to the adaptation to climate change. Territorial cohesion in order to ensure regional sustainability and local economy Territorial cohesion is a horizontal objective initiated by Hungary, fully in line with the European Union’s Territorial Agenda (TA2020). Its most important message is that territorial aspects must be applied not only in programmes with a territorial focus, but also in other developments: (1) projects must be adjusted to local characteristics, (2) and must be implemented in a territorially integrated manner.  Ensuring a harmonious connection between various regional developments, in order to achieve territorial synergies of the projects.  The total impact of the developments on the economy, employment, quality of life and environment, accessibility and on infrastructure must be positive at territorial level.  All of the projects must contribute to the developmental directions of its implementation region as set out in national documents (see NDTC). The measures should not increase territorial imbalances, if possible, projects implemented in the least favoured micro-regions must be provided easier access to support, financing and technical assistance.  Developments must consider the principles of resource-saving and efficient land use, the utilisation of resources within the region, and the principles of efficient spatial use promoting intra-regional flow of materials, energy and income (see details in NDTC). Project and programme-level data must be collected on the territorial aspects of the developments. Territorial evaluation of the developments must be part of the programme-level evaluations. Sector 94

and territorial developments must be monitored and evaluated at county-level. Counties or their representatives must be delegated as members to the programmes’ Monitoring Committees.

1.6.

The list of the programmes under the ERDF, the ESF, the Cohesion Fund, except those under the European territorial co-operation goal, and of the programmes of the EAFRD and the EMFF, with the respective indicative allocations by ESI Fund by category of region (where relevant) and by year

In accordance with the extensive integration requirements of the next period, Hungary would like to use the option of multi-fund operational programmes, taking increased emphasis on the coordination between Funds and OPs. Indicative list and priority axes of the operational programmes Economic Development and Innovation Operational Programme (EDIOP):  Improving competitiveness and growth potential of the small- and medium-sized enterprises sector  Development of the knowledge economy  Development of infocommunication technology  Targeted job creation, maintenance, priority service and social economy development  Promoting employment and improving business adaptability  Development of financial instruments and services (general SME orientation; targeted RDIpurposed instruments (fund))  (The OP is planning the financing of ITIs, see in chapter 3.) Territorial and settlement development Operational Programme (TOP):  Place-based priority development of infrastructure related to economic development, improvement of business environment  Place-based promotion of employment and mobility of labour force  Integrated development of cities and their surroundings  Transition to a low carbon economy, in urban areas in particular  Infrastructural and institutional development of local public service and public administration  Community led local development programmes of towns and their surroundings (community led local developments, CLLD)  County-level and local development of human resources, promotion of social inclusion and employment (The OP is planning the financing of ITIs and CLLDs, see in chapter 3.) Competitive Central-Hungary Operational Programme (CCHOP):  Improvement of competitiveness and growth potential of small- and medium-sized enterprises, creative and alternative economic development  Creating an infrastructural basis for intelligent and knowledge-based growth  Integrated infrastructural development of settlements  Integrated and community led developments in towns and their surroundings in Pest County (CLLD)  Energy-efficient development and renewal of infrastructure related to communal services  Programmes enhancing social inclusion  Programmes supporting knowledge economy and employability (The OP is planning the financing of ITIs and CLLDs, see in chapter 3.) Human Resources Development Operational Programme (HDOP):  Infrastructural investments in the field of social inclusion  Inclusive society  Infrastructural investments in order to increase knowledge capital  Increasing knowledge capital 95

 Good governance (The OP is planning the financing of ITIs, see in chapter 3.) Environmental and Energy Efficiency Operational Programme (EEEOP):  Climate change adaptation  Development of water public utility service  Developments in the fields of water protection, waste management, air quality and noise protection  Nature and wildlife conservation developments  Application of renewable energy sources, energetics and energy efficiency developments  RDI in the field of raising environmental awareness  Financial instruments focusing on the improvement of energy efficiency Transport-Mobility Development Operational Programme (MOP):  Improving international (TEN-T) railway and waterway accessibility  Improving international (TEN-T) road accessibility  Sustainable urban transport development  Improving regional railway accessibility and energy efficiency  Improving regional road accessibility and transport safety Coordination Operational Programme (COP):  Operation and development of central and horizontal institutions responsible for using funds  Instruments needed for using funds in a qualitative way Rural Development Operational Programme (RP):  Promotion of knowledge transfer and innovation in agriculture, forestry and rural areas  Increasing competitiveness in all types of agricultural production, improving the viability of agricultural firms  Promoting the development of chain organisation and risk management in agriculture, both in connection with the food chain and in connection with non-food type product chains.  Restoration, conservation and improvement of ecosystems dependent on agricultural and forestry activity  Promotion of resource-efficiency and the support of the shift towards low-carbon economy with adaptability to climate change in the sectors of agriculture, food industry and forestry  Promotion of social inclusion, mitigating poverty and supporting economic development in rural areas (In the programme, the CLLD is an obligatory instrument, which can cover all 6 of the activities of the priority.) Hungarian Fishery and Aquaculture Operational Programme (HFAOP):  Promotion of sustainable and resource-efficient fisheries and aquaculture including connected processing  Promotion of Innovative, competitive and knowledge-based fisheries and aquaculture including connected processing  Promotion of the implementation of the Common Fisheries Policy  Improving employment and territorial cohesion (The OP is planning the financing of CLLDs, see in chapter 3.) Cumulative financial table of the OP’s The following table includes the indicative allocation of funds according to the current phase of planning (100%= the EU funds available for Hungary in the planning period 2014-2020 included the amount of national co-financing).

96

Operational programmes

ESI Funds (ERDF, ESF, CF, EAFRD or EMFF)

Total

2014

2015

2016

2017

2018

2019

2020

EDIOP

ERDF

27.5%

20.2%

26.8%

28.3%

30.2%

30.1%

26.4%

27.3%

EDIOP

ESF

6.7%

4.9%

6.5%

6.9%

7.3%

7.3%

6.4%

6.6%

TOP

ERDF

12.5%

9.2%

12.1%

12.8%

13.7%

13.6%

12.0%

12.4%

TOP

ESF

1.5%

1.1%

1.5%

1.6%

1.7%

1.7%

1.5%

1.5%

CCHOP

ERDF

2.1%

1.6%

2.1%

2.2%

2.3%

2.3%

2.0%

2.1%

CCHOP

ESF

1.0%

0.7%

1.0%

1.0%

1.1%

1.1%

0.9%

1.0%

HDOP

ERDF

3.4%

2.5%

3.3%

3.4%

3.7%

3.7%

3.2%

3.3%

HDOP

ESF

6.1%

4.5%

6.0%

6.3%

6.7%

6.7%

5.9%

6.1%

COP

CA

10.8%

15.8%

11.9%

11.1%

9.5%

9.2%

10.3%

8.6%

COP

ERDF

1.1%

1.6%

1.2%

1.1%

1.0%

0.9%

1.1%

0.9%

EEEOP

CA

12.0%

17.6%

13.2%

12.3%

10.5%

10.2%

11.5%

9.5%

EEEOP

ERDF

0.9%

1.3%

1.0%

0.9%

0.8%

0.7%

0.8%

0.7%

KOOP

CA

1.3%

0.5%

0.8%

1.1%

1.2%

1.4%

2.1%

2.5%

RP

EARDF

13.0%

18.1%

12.5%

10.8%

10.2%

11.0%

15.5%

17.2%

FAOP

EMFF

0.3%

0.4%

0.3%

0.2%

0.2%

0.2%

0.3%

0.4%

Total

100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Concerning the significant uncertainties of the total Hungarian allocation of EARDF and EMMF a table containing only the SF and CF allocation is also provided below: ESI Funds Operational (ERDF, ESF, CF, Total 2014 2015 2016 2017 2018 2019 2020 programmes EAFRD or EMFF)

EDIOP

ERDF

31.71%

24.8%

30.7%

31.8%

33.7%

33.9%

31.4%

33.1%

EDIOP

ESF

7.69%

6.0%

7.5%

7.7%

8.2%

8.2%

7.6%

8.0%

TOP

ERDF

14.36%

11.2%

13.9%

14.4%

15.3%

15.3%

14.2%

15.0%

TOP

ESF

1.78%

1.4%

1.7%

1.8%

1.9%

1.9%

1.8%

1.9%

CCHOP

ERDF

2.43%

1.9%

2.4%

2.4%

2.6%

2.6%

2.4%

2.5%

CCHOP

ESF

1.13%

0.9%

1.1%

1.1%

1.2%

1.2%

1.1%

1.2%

HDOP

ERDF

3.86%

3.0%

3.7%

3.9%

4.1%

4.1%

3.8%

4.0%

HDOP

ESF

7.08%

5.5%

6.9%

7.1%

7.5%

7.6%

7.0%

7.4%

COP

CA

12.60%

19.7%

13.8%

12.6%

10.7%

10.5%

12.5%

10.5%

COP

ERDF

1.09%

1.7%

1.2%

1.1%

0.9%

0.9%

1.1%

0.9%

EEEOP

CA

13.59%

21.3%

14.9%

13.6%

11.6%

11.3%

13.5%

11.4%

EEEOP

ERDF

1.18%

1.8%

1.3%

1.2%

1.0%

1.0%

1.2%

1.0%

KOOP

CA

1.50%

0.6%

0.9%

1.2%

1.4%

1.6%

2.5%

3.0%

Total

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

See the same disclaimer notes as it is stated at the above table Note: The rates of the table are indicative. The figures of the table include the planned EU co-financing and the connected national support. The budget of the so-called Youth Employment Initiative is not included in the table. No Member State decision could be made concerning the utilisation of the performance framework of the ESI Funds, since the EU regulations are also being shaped.

97

2. 2.1.

ARRANGEMENTS TO ENSURE EFFECTIVE IMPLEMENTATION (ARTICLE 14(1) (B) CPR) The arrangements, in line with the institutional framework of the Member States, that ensure coordination between the ESI Funds and other Union and national funding instruments and with the EIB

Improved integration is needed in order to ensure effective interventions during the development period 2014-2020 according to the recommendations at the European level (e.g. 5th Cohesion Report, EU2020, TA2020). In line with this, the opportunities and obligations related to integration were expanded in the proposals for this next period. There are 3 specific dimensions which are particularly important to Hungary: (1) Most of the OPs connected to the PA will be financed by funds from more than a single source. As such, the objectives and expected result of the programmes will be fulfilled by a wide range of tools and actions all of which are thematically focused. (2) Hungary would also like to use innovative territorial integration solutions (ITI, CLLD). (3) Enhanced integration is needed among actions funded by SF and CF, and EARDF and EMFF, and additionally should consider other EU initiatives. In order to fulfil its strong integration ambitions, enhanced thematic harmony should be established between programmes and funds during the planning. On the other hand integration should also concern the institutions and procedural regulations relating to implementation, and for this reason effective central coordination is critical. Ensuring strong central coordination In the 2014-2020 period, central coordination functions will be established which cover all the ESI funds and programmes. The Prime Minister’s Office will accommodate the organisation performing this function. The central coordination will include the following tasks:  legal oversight, complaint handling, operation of the appeal system applying the same principles as those in the first instance decisions;  monitoring of public procurement procedures, standardised criteria;  elaborating and operating a set of unified rules on procedures and methodology;  unified, coordinated central communication;  development and operation of a single IT system (monitoring-, indicator-, and management information system);  follow-up of the Performance Framework;  implementation of the Coordination Operational Programme;  maintaining contact with the European Commission;  maintaining contact with EIB (European Investment Bank. The central coordination organisation is supported by a central monitoring committee covering all of the programmes. The standardised decision-making process is facilitated by the present National Development Governmental Committee (NDGC) or its legal successor which will perform the functions of the NDGC. Compliance with the EU rural development and fisheries development policy funds The planning of rural development (EAFRD) and aquaculture and fisheries (EMFF) programmes is within the competence of the Ministry of Rural Development (MRD), however, Central Coordination also covers the planning and implementation of these programmes: o The planning coordination mechanisms ensure programmatic compliance. The co-ordination of the Partnership Agreement and of the planning of the operational programmes (Ministry for National Economy – MNE) also includes the EAFRD and EMFF programmes. The Ministry of Rural Development, responsible for these latter programmes, involves Ministries responsible for the other OP’s in the task forces for planning the EAFRD and EMFF programmes. The territorial harmonisation of planning is ensured at the county level. The joint planning is also supported by a methodological guideline published jointly by the MNE and MRD. 98

o

The EU’s rural development policy contributes to the achievement of 10 out of 11 thematic objectives. (Therefore, a situation assessment of agriculture and rural development was added in chapter 1.1.2 for 10 thematic objectives). Furthermore, the fishery development programme plans interventions in the framework of 3 thematic objectives (in No. 3, 6 and 8 14) out of 11. Therefore, thematic consistency between the Hungarian SF, CF, EAFRD and EMFF support systems must be ensured. The principles include: o in order to develop rural areas, all of the ESI Funds have to be utilised, all programmes support them. SF and CF operational programmes equally deal with some agricultural and food industry developments, as well as with projects with a direct rural development impact. These areas mean the complementary application of the SF and CF, as well as the EAFRD and EMFF programmes.  In rural areas and in the agricultural sector, the fundamental subsidies of entrepreneurial (also financial instruments), RDI, ICT, transportation, energy, and agricultural public administrative developments are secured from SF. Water management will be financed from CF.  EAFRD focuses its resources on those thematic fields that have priority importance concerning the development of rural areas and agriculture. Priority areas of the integration of Funds: 



Tackling with rural deprivation: inclusion and social integration in rural areas. The most underdeveloped micro-regions (almost exclusively rural micro-regions); an ITI, supported by several SF-based OP, will serve the inclusive, employment and economic developmental extra sources and actions of the areas (see in chapter 3.1.5). EAFRD developments contribute to this goal, especially the developments of the locally initiated, EAFRD-financed CLLD communities (these can receive complementary sources from SF by involving urban (it is usually a small town) centres, see chapter 3.1.1.). Depending on the decisions of the persons responsible for decentralized economic planning, the micro-regions can receive further sources, in the area of transport development, settlement development and employment as well. Climate change preparation and water management: to the large-scale water management projects of the CF, the farmers can join with their own water infrastructure developmental, and adaptive farming and compensation serving subsidies. EAFRD development focuses in the 2014 to 2020 period beyond SF and CF subsidies:



      



agricultural entrepreneurial subsidy: production of agricultural products; marketing of agricultural products (SF subsidy is possible as well); agricultural product processing into agricultural products, small-scale projects (priority projects from SF); agricultural product processing into non-agricultural products; increase the effectiveness of energy consumption, carbon restriction; developments related to irrigation; support of sustainable forestry, agricultural and fishery solutions; landscape protection, resource conservation, resource-efficient agricultural production and fishery; young farmers. support of non-agricultural enterprises: production of agricultural products, marketing of agricultural products (SF subsidy is possible as well); agricultural enterprises’ co-operation with R&D capacities the related ICT developments of agricultural enterprises and ICSS (Integrated Community Service Space) agricultural roads, roads with no micro-region importance, connecting villages on-farm energetics (minimum 50% of the beneficiaries’ income comes from agricultural activity) (from CF the 2 nd and 3rd generation bio-fuel producing technologies) small-scale developments of rural and agricultural tourism in rural areas development of short, regional food-chains (SF subsidy is possible as well) development of viable rural settlements and local communities with supporting complex programmes (in the framework of CLLD)

o

Under certain circumstances, common funding from EAFRD and SF concerning community-led local developments (CLLD) is feasible. (see chapter 3.1.1) o The implementation system of rural development and fishery programmes will be part of the transformed, centrally coordinated, and (at ministry-level) decentralised institutional system, with the necessary independence but enabling the following integration directions: o The organisation of the territorially decentralised institutions of the various funds (presently the functions of the intermediary bodies) must ensure one-stop shop administration (especially in the case of multi-fund financing, and CLLD). o The rules on procedures of the second pillar will be harmonised by central coordination. 14

The thematic orientation of the integration and coordination among EMFF and other funds will be supported by implementation of the relevant messages of the Commission`s statement on Blue growth (COM/2012/494 final).

99

o

The monitoring systems of programmes must also be harmonized through the use of common key indicators and by systematic data interchange among the monitoring information systems in order to support multi-fund financing and to filter double financing of projects. This would make the monitoring of the overall progress of all ESI Funds possible. o Rearrangement between the two pillars of CAP is not planned. On the other hand, the connection between the pillar 1 and 2 are secured with regard to the greening and agriculture investments. In terms of investments, the income-stabilizing impact of direct payments allows for enough liquidity and guarantee toward the banking sector. (The co-operation opportunities for territorially integrated tools and the common principles of the reinforcement and simplification of implementation, as well as the electronic data interchange are dealt with in other chapters.) Coordination of implementing the EU Strategy for the Danube Region (EUDRS) The central coordination organisation is responsible for the national coordination of the EU Strategy for the Danube Region (EUDRS) and for Hungary’s cooperation with the international coordination. There is a special planning mechanism established for implementing the EUDRS in the course of planning the allocation of EU funds dedicated to Hungary as well as other EU funding programmes. Preparation and implementation of member state and ETC programmes which are supported by ESI Funds is carried out following decisions made by the responsible bodies of the EUDRS. The process is also backed by consultations with the partner EUDRS countries and different bodies overseeing aspects of the Strategy (e.g. Steering Groups or the Danube Contact Point Budapest), if necessary. The thematic coordination of planning is grounded by the EUDRS’ Action Plan and the roadmaps. In order to establish multilevel coordination of proposals and the EUDRS-aspect monitoring, the government commissioner and the workgroup responsible for EUDRS coordination take part directly in the interministerial working group for planning 2014-2020 and also in the meetings associated with the OP’s. In addition, there are meetings of EUDRS Interministerial Sub-Workgroups for each operational programme, with the participation of planners from different sector state secretariats. Effective coordination should be secured during the implementation phase, and is one element in building up the institutional system. The coordination of the EURDS affects also the planning of the EARDF and EMFF in Hungary. Compliance with other EU funds The compliance of ESI funds in Hungary and other EU policies has to be ensured during programming and implementation. Important connections at the present stage of the planning process can be identified: o Due to the innovative economic growth focus of Hungarian developments, the HORIZON 2020related links are the most important issues. The economic development OP supports the preparation of potential Hungarian participants of HORIZON2020. Synergy is directly ensured by significant RDI capacity building on the basis of institutional excellence. Planned interventions will appear as dominant instruments of the to-be-prepared ERA strategy. o The SF, CF, EAFRD and EMFF funds and co-financing of the EU LIFE programme implemented integrated interventions along with the development concept of Natura 2000 Priority Action Plan. In order to do that, there needs to be a coordination mechanism for the EEEOP and EAFRD and EMFF programmes. o The allocated CEF funds serve the development of the TEN-T network. These funds play an important role in further development of sustainable transport modes (e.g. railway) (complementing those domestic CF funded developments which are committed to develop this area). o The Fund for European Aid to the most Deprived (FEAD) represents an important complementary instrument for the diversification of interventions aimed at combating poverty among disadvantaged groups. 100

o

In connection with the Youth Employment Initiative (YEI), the primary task is to create a high level of synergies with the connected ESF funds also addressing the challenges faced by the inactive population and the young unemployed, between the various OP interventions and the YEI support. o Coordination is needed also for Marie Curie, ERASMUS for all, Creative Europe (with actions in education), the COSME (with actions in SME competitiveness networking), the Social Change for innovation (with actions in inclusion and employment), the ENI, and the Interior programmes (AMF and ISF) (especially in ETC programmes), and implementation of ESI Fund programmes require further co-ordination. Similarly to previous programming periods, during 2014-2020 EIB financing instruments will be necessary. The coordination with the above-mentioned funds and sources is an implementation task of the affected OP and the central coordination.

2.2.

The information required for ex ante verification of compliance with the rules on additionality (based on Annex xx CPR)

Expenditure of the General Government as a share of GDP P51

2014 4.8

2015

2016

4.8

2017 1.8

1.9

2018

2019 2.2

2.2

2020 2.3

The table contains only preliminary data. We reserve the possibility to modify the data during the negotiations of the Partnership Agreement and also to differ from the convergence programme at a later stage before finalizing the PA, if in our view there is a need to update the data concerning 20142016. The considerably lower amount of the projected gross fixed capital formation for 2016 (1.8%), and the average of 2.5% for the entire period can be explained by the following data: 

According to the n+2 rule, a large amount of the payments of the 2007-2013 period will be performed by 2016;  In the period of 2014-2020, the n+2 rule will be replaced by the n+3 rule; therefore, the timeframe of the payment is expanded. Consequently, the amount of payment will decrease in the 2014-2020 period;  The total Hungarian budget for cohesion will be reduced by approx. 20%, compared to the 2007-2013 period;  Between 2014 and 2020, a much higher proportion of the Hungarian cohesion budget will be allocated to direct economic development, compared to the previous period (20%→60%), where the beneficiaries are not governmental bodies;  Independently from the different review methodologies applied to the two programming periods, the average of the gross fixed capital formation for 2007-2013 is expected to be more accurate (which would serve as a reference value for 2014-2020). The reason for this is the economic crisis taking place in Hungary and throughout Europe (which was already present at the time of the mid-term evaluations), which naturally has an influence on the figures for 2014-2020. The financial allocation among the OP’s and their priorities, their annual break down and the definition of the types of the final beneficiaries have not been finalised yet; therefore currently an indicative estimation can be provided concerning the value of the gross fixed capital formation.

101

2.3.

A summary of the assessment of the fulfilment of applicable ex ante conditionalities in accordance with Article 17 and Annex (xx) for which national bodies are responsible and of the actions to be taken, and the timetable for their implementation, where ex ante conditionalities are not fulfilled

According to regulations on the structural and cohesion policy for the 2014-2020 period, the Member States have to fulfil conditions which are predefined for each thematic objective and for the horizontal results (ex-ante conditionality), in order to have the programmes adopted and to have these funds transferred by the Commission. According to the position of the Commission, this is required in order to create the preliminary conditions for the efficient use of funds. The 26 ex-ante tasks in connection with the thematic objectives can be divided into three categories:   

The 3 conditions which have been fulfilled so far (climate policy). The 20 conditions which will be fulfilled by the end of 2013. The 3 conditions which cannot be met by the end of 2013, according to the schedule of ministries. This latter category (ex-ante conditionalities fulfilled between 31 December 2013 and 31 December 2016) may represent significant budgetary and policy risks, besides the additional administrative obligations toward the EU.

Out of the general (horizontal) conditions focusing on all programmes and priorities, the regulations concerning public procurement and state subsidies have been adopted. However the establishment of mechanisms ensuring the successful application of EU regulations concerning environmental impact assessments requires a significant amount of time and financial resources. The overview table broken down according to the PA template structure is included below which provides information on ex-ante conditionalities, the requirements set out in the draft regulation, complemented by the aspects described in the Commission’s Position Paper. (Information on the current state of rural development ex-ante conditionalities received from the MRD are summarised in a separate table below.)

102

(I.) Thematic objectives

1. Strengtheni ng research, technologic al developme nt and innovation (R&D target) (referred to in Article 9(1))

Table: A summary of the assessment of the fulfilment of applicable ex ante conditionalities at national level.

Applicable Ex-ante conditionality for which national bodies are responsible

Applicabl e ex-ante condition ality fulfilled: Yes/No/P artially

Criteria

1.1. Research and innovation: The existence of a national or regional research and innovation strategic policy framework for smart specialisation, where appropriate, in line with the National Reform Programme, to leverage private research and innovation expenditure.

To be fulfilled by October, 2013

A national or regional research and innovation strategic policy framework for smart specialisation is in place that: – is based on a SWOT or similar analysis to concentrate resources on a limited set of research and innovation priorities; – outlines measures to stimulate private RTD investment; – contains a monitoring mechanism.

Criteria fulfilled

Reference (if fulfilled)

To be fulfilled by October 2013

3 strategic documents fulfil the policy framework:  National RDI 2020 Strategy  smart specialization strategy  science policy strategy

Explanation (where appropriate)

(reference to the strategies, legal acts or other relevant documents incl. references to relevant sections, articles or paragraphs, accompanied by a hyperlink or other access to the full text) The strategies are being developed in a coordinated way and they include the three required elements.

The National RDI 2020 Strategy has been adopted th by the government on 13 June, 2013 (Gov.Decree will be published in July): http://www.kormany.hu/hu/nemzetgazdasagiminiszterium/parlamenti-es-gazdasagstrategiaertfelelos-allamtitkarsag/hirek/befektetes-a-jovobe A related smart specialization strategy is under partnership consultation. The initial individual regional strategies have been completed. http://www.nih.gov.hu/sajtoszoba/tarsadalmiegyeztetesen

For the related S3 Strategy the synthesis of regional strategies is being prepared currently, taking into account. the recent conference is held (with participation of COM experts). Adoption of the final S3 strategy is expected by the end of October 2013, but the results of every stage inform the planning of the related OP priority.

The science policy strategy is being prepared in parallel and in cooperation with the abovementioned strategic documents.

A framework outlining available budgetary resources for research and innovation has been adopted.

A science policy strategy is being prepared by MHR in coordination with the Hungarian Academy of Science, expected to be adopted in October of 2013.

The mentioned 3 strategies include the necessary framework outlining available budgetary resources. All three strategies expected to be done by October, 2013. Responsible body: MNE, MHR OP: EDIOP

1.2 The existence of a multi-annual plan for budgeting and prioritization of investments.

To be fulfilled by October, 2013

An indicative multi-annual plan for budgeting and prioritization of investments linked to EU priorities, and, where appropriate, the European Strategy Forum on Research Infrastructures - ESFRI has been adopted.

To be fulfilled by October, 2013

The planning of research infrastructure to be established during the 2014-2020 period is under development. According to the Gov. Decree 1121/2013 (III.11.) (Page 4270) multi-annual plan for budgeting and prioritization of investments will be finished no later than the formal submission of the operative programmes to the European Commission. Please find a non-official English translation of the Gov. Decree 1121/2013 (III.11) attached here:

Microsoft Word Document

2. Enhancing access to and use and quality of information

2.1. Digital growth: A strategic policy framework for digital growth to stimulate demand for affordable, good quality and

To be fulfilled before the end of 2013

A strategic policy framework for digital growth, for instance, within the national or regional innovation strategic policy framework for smart specialisation is in place that contains:

To be fulfilled

The development of the new strategy is carried out along four pillars: digital literacy, education, broadband infrastructure and networks, Digital Economy and IT sector, government information technology- e-government, e-public services. In accordance with the Digital Agenda for Europe, Hungary plans a single National Infocommunication Strategy , included with a detailed NGA plan (not as

A register of the domestic, national infrastructure has already been prepared and currently the needs for international, EU wide infrastructure is being evaluated (both in terms of ELI, and in terms of access to other research infrastructure located in the EU). A comprehensive plan is being prepared in accordance with the S3 strategy and is expected to be adopted before the end of October 2013. Responsible body: MNE OP: EDIOP The National Info-communication Policy Strategy - including broadband access and an NGA plan- is currently under finalization. On the basis of the initial version of the strategy, interministerial consultations are expected to start by the first weeks of July. Following public

and communica tion technologie s (Broadband target) (referred to in Article 9(2))

interoperable ICTenabled private and public services and increase uptake by citizens, including vulnerable groups, businesses and public administrations including cross border initiatives.

part of the R&D&I strategy, but in line with the new National Research and Innovation Strategy).

consultations, the governmental adoption is expected by September. Responsible body: MND – OP: EDIOP

–

budgeting and prioritisation of actions through a SWOT or similar analysis consistent with the Scoreboard of the Digital Agenda for Europe;

The National Infocommunication Strategy will include a detailed SWOT analysis consistent with the Scoreboard of the Digital Agenda for Europe, the Strategy will be made available after finalization.

–

an analysis of balancing support for demand and supply of information and communication technologies (ICT) should have been conducted;

An in-depth analysis of the demand and supply of ICT was elaborated and carried out in detail. A Summary of the results will be included in the Strategy.

–

indicators to measure progress of interventions in areas such as digital literacy, e-inclusion, e-accessibility, and of ehealth within the limits of Article 168 TFEU which are aligned with existing relevant sectoral national or regional strategies;

–

assessment of needs to reinforce ICT capacity-building.

The development of the new strategy is carried out along four pillars: digital literacy, education, broadband infrastructure and networks, Digital Economy and IT sector, government information technologyegovernment, e-public services and will contain indicators to measure the progresses in areas such as digital literacy, e-inclusion, e-accessibility, and of e-health. (As soon as the Strategy is finalised, a version will be made available. Responsible body: MND – OP: EDIOP

2.2. Next Generation Access (NGA) Infrastructure: The existence of national or regional NGA Plans which take account of regional actions in order to reach the EU high-speed

To be fulfilled before the end of 2013

A national and/or regional NGA Plan is in place that contains: –

To be fulfilled

The NGA Plan is being prepared as part of the National Infocommunication Policy Strategy. According to the Ministry of National Development, the priorities concerning Info-communication Technology are to be presented separately (not as part of the RDI strategy). For expected approval the same timing applies as above. Responsible body: MND – OP: EDIOP

Internet access targets, focusing on areas where the market fails to provide an open infrastructure at an affordable cost and to a quality in line with the EU competition and state aid rules, and provide accessible services to vulnerable groups.

–

a plan of infrastructure investments based on an economic analysis taking account of existing infrastructure and published private investment plans;

– An analysis regarding existing infrastructure and published private investment plans is under elaboration, planned infrastructure investments will be based on the analysis.

–

sustainable investment models that enhance competition and provide access to open, affordable, quality and future proof infrastructure and services;

There will be a description of the prioritisation process regarding investment priorities and the “Guide to broadband investment” recommendation will be taken into account. This will be elaborated and included in the NIS by the end of 2013.

–

measures to stimulate private investment.

Private investment incentives will be elaborated. Schedule for the authorisation of EU harmonised bands in line with the Radio Spectrum Policy Programme will be consulted with the National Media and Infocommunications Authority. Will be elaborated and included in the NIS by the end of 2013.

Responsible body: MND – OP: EDIOP

3. Enhancing the competitive ness of small and mediumsized enterprises (SMEs) (referred to in Article 9(3))

3.1. Specific actions have been carried out to underpin the promotion of entrepreneurship taking into account the Small Business Act (SBA).

Fulfilled

The specific actions are: – measures to reduce the cost and time to set-up businesses; –

measures to reduce the time needed to get licenses and permits to take up and perform the specific activity of an enterprise.

Fulfilled

Several specific measures have been made to reduce the cost of administrative requirements of businesses. (These were mostly fulfilled with the implementation of the Governmental Program for Reduction of Administrative Burden of Businesses (Cutting red tape), and the Magyary Simplification Programme aimed at citizens) From February 1, 2012 the Administrative Procedures Act (Act CXL of 2004) was changed significantly. -

starting from 2014, administrative procedures in general cannot exceed 21 days

-

a modification made it possible for clients to have the possibility to request an official inspection (the publication of the plans of an authority has become obligatory)

-

making joint controlling among authorities possible

-

the duration of an official procedure has been reduced by integrating the procedures of different authorities

In November 2011 the government launched its “Cutting Red Tape” (in Hungarian Egyszerű Állam Program) initiative by Government Decision 1405/2011 (XI. 25.) http://www.kozlonyok.hu/nkonline/mkpdf/hiteles/ mk11139.pdf The medium term programme contains 114 measures across 10 policy fields which reduce significantly the administrative burden of businesses. The time horizon of the programme lasts until 2014 but the implementation deadlines

Responsible body: MNE, MPAJ – OP: EDIOP

for the majority of measures are in 2012 and 2013. According to ex-post estimations the measures already implemented reduce the administrative burden of enterprises by approximately 175 billion HUF, and all together the government measures executed by mid-February are estimated to reduce the administrative burden of enterprises by approximately 315 billion HUF. The implementing decree of the Magyary Simplification Programme Act LXXXV (http://magyaryprogram.kormany.hu/admin/downl oad/a/15/50000/Magyary_kozig_fejlesztesi_progra m_2012_A4_eng_%283%29.pdf)of 2012 Further removed administrative burdens related to the identification of companies and their representatives. An IT development has been made in 2012; therefore it is possible to link the available certificate of incorporation with the authentic statement of signature by an attached document. In administrative proceedings opened upon request companies are no longer required to provide the certificate of incorporation and a document containing certified signature, since the authority procures these documents electronically by direct query. – Other modifications: Companies Registration Act amended by Act CIV of 2012 : (http://www.complex.hu/kzldat/t1200104 .htm/t1200104.htm) – allowed the company information service to conduct not only an

-

-

-

IT control but also a formal check of the documents provided in company registration proceedings and in proceedings for registration of changes. Owing to this progress it is easy to filter the erratum, failures, even the incorrect data in the submission stage of the company registration proceeding. The court clerks’ authorities has been extended with Act CXVII of 2012 Therefore the administration time of these proceedings has been reduced and the workload has been distributed more reasonably. (http://www.complex.hu/kzldat/t1200117 .htm/t1200117.htm) In the field of construction the time frame for various procedures were significantly reduced. Moreover, in specified procedures the authorities have the possibility to decide in some professional issues without getting the expert authorities involved. Significant progress has been made on the field of taxation too. From 1 July, 2013 a simplified electronic payment system will be introduced which enables taxpayers to pay their various taxes in one single payment instead of paying them to several tax bills separately.

-

Regarding these measures a summary was handed over to the DG Enterprise at the end of February. For more information on the programmes please see the National Reform Programme of Hungary (Chapter IV.5 on measures already taken, and Chapter II.3 on measures planned):

http://ec.europa.eu/europe2020/pdf/nd/nrp2013_ hungary_en.pdf –

4. Supporting the shift towards a low-carbon economy in all sectors (referred to in Article 9(4))

4.1. Actions have been carried out to promote costeffective improvements of energy end use efficiency and costeffective investment in Energy efficiency when constructing or renovating buildings.

Fulfilled

The actions are: – Measures to ensure minimum requirements are in place related to the energy performance of buildings consistent with Article 3, Article 4 and Article 5 of Directive 2010/31/EU. –

Fulfilled

2010/31/EU directive (further: d.) d 3..4. Articles have been implemented in the 7/2006. (V.24.) TNM regulation 3§ (3) and annex 2(applicable from 09 01 2013) The d 4 (1) is implemented with the National Energy-efficiency Action Plan according to the Gov. Decree 1374/2011. (XI.8.) (Page 32211) and available: http://www.nih.gov.hu/strategiaalkotas/agazatistrategiai-feher/energetika d. 5. Article: the cost optimal level has been analysed and declared, the report has been sent to the Commission (21/03/2013)

Adobe Acrobat Document

Furthermore the Hungarian government accepted the cost optimal level as the new level of building energetic regulations. Hungary has a plan to reach the cost optimal level according to 2010/31/EU directive Article 5 in the demanded 5 years. The plan is accepted in the 1246/2013. (IV. 30.) Gov. Decree (Page 50821), according to the following:  The Hungarian building energetic strategy is

Responsible body: MI, MND OP: EEEOP

going to be adjusted to the declared cost optimal level. The demand level is going to be modified in the 7/2006. (V.24.) TNM regulation to fit the declared cost-optimal level: for public buildings from 01/01/2015 for other buildings from 01/01/2018 The new public tenders have to be on costoptimal level from 01/01/2015 –





–

Measures necessary to establish a system of certification of the energy performance of buildings consistent with Article 11 of Directive 2010/31/EU.

d. 11. article has been implemented by the 176/2008. (VI. 30.) Gov. regulation (Page 5908). and 105/2012. (V. 30) Gov. Decree (Page 10078). The d 11 (5) is implemented by the National Energyefficiency Action Plan according to the Gov. Decree 1374/2011. (XI.8.) and available: http://www.nih.gov.hu/strategiaalkotas/agazatistrategiai-feher/energetika

–

Measures consistent with art. 13 of Directive 2006/32/EC on energy enduse efficiency and energy services to ensure the provision to final customers of individual meters in so far as it is technically possible, financially reasonable and proportionate in relation to the potential energy savings.

The art. 13 of Directive 2006/32/EC has been implemented and the notification submitted to the COM according to the following: -

Law LXXXVI (2007) (Ref. Nr.: MNE(2007)55743-02); 2008. XL. törvény a földgázellátásról (MNE(2008)54139-02); Gov. Decree 273/2007. (X. 19.) (Ref. Nr. MNE(2008)55338); Gov. Decree 19/2009. (I. 30.) (Ref. Nr. MNE(2009)51096-01); Gov. Decree 157/2005. (VIII. 15.) (Ref. Nr.MNE(2009)52418).

Although the 2006/32/EC Directive remains fully applicable until it shall be repealed by Directive 2012/27/EU on 5 June 2014, except for Annexes I, II and IV to Directive 2006/32/EC, which shall be repealed with effect from 1 January 2017. The implementation of the new directive after 5 June 2014 is under elaboration.

4.2. Actions have been carried out to promote highefficiency cogeneration of heat and power.

Fulfilled

4.3. Actions have been carried out to promote the production and distribution of renewable energy 15 sources.

To be fulfilled by Septembe r, 2013

15

OJ L 140, 5.6.2009, p. 16.

The actions are: – Support for co-generation is based on useful heat demand and primary energy savings consistent with Article 7.1 and 9.1. (a) and (b) of Directive 2004/8/EC), Member States or their competent bodies have evaluated the existing legislative and regulatory framework with regard to authorisation procedures or other procedures in order to: – a) encourage the design of co-generation units to match economically justifiable demands for useful heat output and avoid production of more heat than useful heat; and – b) reduce the regulatory and non-regulatory barriers to an increase in co-generation.

Fulfilled

– Transparent support schemes, priority in grid access or guaranteed access and priority in dispatching, as well as standard rules relating to the bearing and sharing of costs of technical adaptations which have been made public are in place consistent with Article 14 (1) Article 16 (2) and 16 (3) of Directive 2009/28/EC.

To be fulfilled by Septemb er, 2013

The conditionality is under examination, as regards its applicability.

Responsible body: MND OP: EEEOP

The conditionalities are fulfilled according to the following report and tables, that were sent to the COM:  Report to the directive 2004/8/EC Article 6 (1) and 10 (1): http://ec.europa.eu/energy/efficiency/co generation/doc/ms_reports_original.zip  HU Spreadsheet HU: http://ec.europa.eu/energy/efficiency/co generation/cogeneration_en.htm  Report to the directive 2004/8/EC Article 6 (3) and 10 (2):  http://ec.europa.eu/energy/efficiency/cog eneration/cogeneration_en.htm  Report to the directive 2004/8/EC Article 5 (3) and 10 (1):  http://ec.europa.eu/energy/efficiency/cog eneration/doc/ms_reports_original.zip  Report to the directive 2004/8/EC Article 9 (1) –(2) and 10 (1):  http://ec.europa.eu/energy/efficiency/cog eneration/doc/ms_reports_original.zip Article 14 (1) Article 16 (2) and 16 (3) of Directive 2009/28/EC are adopted in the following legislation:

Responsible body: MND OP: EEEOP

Relating to Art. 14 (1) of RED:  Hungary has adopted a national renewable energy action plan that consistent with Article 14 (1) of Directive 2009/28/EC with Chapter 4.2.4. Related documents: Government Decree 1002/2011 (I.14.) (Page 576) (Hungary’s Renewable Energy Action Plan for 2010-

To meet the condition relating to Art. 14 (1) of RED the further legislative steps are necessary (the ministerial decree is under elaboration):  Adoption of a Ministerial Decree to designate a body responsible for the information serviceNational Environmental and

2020). Relating to Art. 16 (2), (3) of the Directive:  The relevant provisions to the conditions . could be found in: 25. § (3), 35 § and 36. § of the Electricity Act and 6. § of the Decree 76/2011 of the Minister of National Development on the financial and technical conditions of connection to the public electricity grid.  Operational code of the TSO is available: – http://mavir.hu/web/mavir/uze mi-szabalyzat http://mavir.hu/documents/10258/18359 6540/MAVIR+UzSZ_torzsszoveg_2012120 1_v2.pdf/15b91509-389b-4fbc-9e9a9f6757dc42eb  Study of the Hungarian Regulatory Authority (MEKH) is available: http://www.eh.gov.hu/gcpdocs/201108/ mecs_infrapont_egi_vegleges_20110720. pdf

– A Member State has adopted a national renewable energy action plan consistent with Article 4 of Directive 2009/28/EC.

Fulfilled

Hungary has adopted a national renewable energy action plan consistent with Article 4 of Directive 2009/28/EC with Government Decree 1002/2011 (I.14.) (Page 576) (Hungary’s Renewable Energy Action Plan for 2010-2020).

Energy Center Non-profit Ltd.(hereinafter referred to as NKEK), and determines what information must be covered. The NKEK will carry out its task by making and operating a public web site and deliver information on it electronically.  The Decree determines technical requirements of the equipment of renewable energy sources also, therefore it must be sent in advance to the European Commission under Directive 98/34/EC on procedure on the field of technical standards and regulations. The Decree may be adopted by the Minister in September.  However, in order to issue the above mentioned Decree, it is necessary to amend the Act LXXXVI. of 2007 on Electricity Act (hereinafter: Electricity Act). The amendment was adopted by the Government on 8th of May in 2013, the Parliament will vote about it in the summer. The draft amendment is available: http://www.parlament.hu/irom39/1 1101/11101.pdf

5. Promoting climate change adaptation and risk prevention (Climate change target) (referred to in Article 9(5)

5.1. Risk prevention and risk management: The existence of national or regional risk assessments for disaster management taking into account climate change adaptation

To be fulfilled by July, 2014

A national or regional risk assessment with the following elements shall be in place: – A description of the process, methodology, methods and non-sensitive data used for risk assessment as well as of the risk-based criteria for the prioritisation of investment; – A description of single-risk and multi-risk scenarios;

– Taking into account, where appropriate, national climate change adaptation strategies.

To be fulfilled by July, 2014

Expecte d date of fulfilmen t might will be the submissi on of OP

The national requirements of risk assessment and classification of settlements according to disaster management are regulated by Government Decree 243/2011. (XI. 10.) (Page 32252) in general and by its Annex II in details.

Improvement of the national risk assessment report sent to the Commission at the end of 2011 consistent with Council conclusion 8068/11 on Further Developing Risk Assessment for Disaster Management within the European Union, the adoption of detailed and complex national and regional risk assessments and scenarios. Measures to adopt comprehensive risk assessments and disaster management involving critical infrastructure and concerned providers of public services. Expected date of fulfilment might will be the submission of OP (Please find the details in the table for action plan.) Responsible body: MI (National Directorate General for Disaster Management), MND OP: EEEOP A national climate change adaptation framework is in preparation according to point 3 (2) (c) of Act LX/2007., which has special attention on reducing risks and mitigate impacts connected to climate change and climate security. It is necessary to take into account the national climate change adaptation framework in the above mentioned risk assessments and the risk assessment report. Expected date of fulfilment might will be the submission of OP Responsible body: MI (National Directorate General for Disaster

6. Protecting the environmen t and promoting the sustainable use of resources (referred to in Article 9(6))

6.1. Water sector: The existence of a) a water pricing policy which provides adequate incentives for users to use water resources efficiently and b) an adequate contribution of the different water uses to the recovery of the costs of water services at a rate determined in the approved river basin management plan for investment supported by the programmes.

To be fulfilled by 2016

– A Member State has ensured a contribution of the different water uses to the recovery of the costs of water services by sector consistent with Article 9, paragraph 1, first indent of Directive 2000/60/EC having regard, where appropriate, to the social, environmental and economic effects of the recovery as well as the geographic and climatic conditions of the region or regions affected.

To be fulfilled by January 2015

The recovery of the costs of water services principle is included in Act CCIX. (2011): http://jab.complex.hu/doc.php?docid=WKHU-QJXML-000000A1100209TV In the Gov. Decree 1287/2013. (V. 28.) can be found the schedule of implementation of 6.1 ex-ante conditionality:

Adobe Acrobat Document

The two criteria will be elaborated in a harmonised framework. Please find the detailed information in the thematic table for action plan.

– The adoption of a river basin management plan for the river basin district with a justified

To be fulfilled

The first river basin management plan (RBMP) is available: http://www.euvki.hu/index.html

Management), MND OP: EEEOP Background note about the infringement procedure: According to the WFD the criterion should have been introduced by 2010 which currently has not been fully accomplished in Hungary.  The Commission had a bilateral consultation with Hungary in. June 2013 concerning the adaptation of the recommendations. It belongs to the fulfilment of the criterion that against Hungary, together with other member states, an infringement procedure is in progress concerning the narrow interpretation of the concept of WFD water services and the inadequate implementation of Article 9.  The first river basin management plan (RBMP) containing the detailed economic analyses of water uses was evaluated by the Commission in its working document {COM(2012) 670 final} in which recommendations for correcting the deficiencies were formulated. Responsible body: MRD, National Institute for Environment OP: EEEOP Background note about the infringement procedure:

concentration of investments consistent with Article 16 13 of Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing a framework for Community action in the field of water policy.

by 2016

according to the Governmental Decision No. 1042/2012 (II. 23). In the Gov. Decree 1287/2013. (V. 28.) can be found the schedule of implementation of 6.1 ex-ante conditionality:

Adobe Acrobat Document

The two criteria will be elaborated in a harmonised framework. Please find the detailed information in thematic table for action plan.

6.2. Waste sector:

16

To be fulfilled

OJ L 327, 22.12.2000, p. 1.

– A report has been submitted to the Commission on progress towards targets of Article 11

To be fulfilled

For the implementation of the Directive on waste and repealing certain Directives (Waste Framework

 According to the European Commission Hungary does not apply the concept of water services and the regulations of Article 9 of the WFD properly and thus and infringement procedure is currently in progress.  The first RBMP and its background documents contain the prognoses of water uses separately for public, agricultural and industrial sectors. The economic analyses of water uses concerning public and agricultural sectors together with the long term prognoses is included in the plan, but the provided information is no longer fully applicable in the frame of current legislation.  Regarding the adequacy of the first RBMP the Commission is still assessing the plan, bilateral consultation will take place in June 2013, where the recommendations of the Commission and the level of their fulfilment will be discussed.  Meanwhile the scheduled revision of the plan is needed for the deadline 22 December 2015. (Please find the details in the table for action plan.) – Responsible body: MRD, National Institute for Environment OP: EEEOP Responsible ministry: MRD OP: EEEOP

Promoting by December, 2014. economically and environmentally sustainable investments in the waste sector particularly by the development of waste management plans consistent with Directive 2008/98/EC on waste, and with the waste hierarchy.

of Directive 2008/98/EC and intended actions to meet the targets.

– The existence of one or more waste management plans as required by Article 28 of Directive 2008/98/EC.

– A Member State has established, consistent with Articles 1 and 4 of Directive 2008/98/EC, waste prevention programmes, as required by Article 29 of the Directive.

in Septemb er, 2013

To be fulfilled by Decemb er, 2013 To be fulfilled by Decemb er, 2013

Directive, hereinafter: WFD) the former Act XLIII. of 2000 on Waste Management wasrevised and the Act CLXXXV. of 2012 has been adopted by the Parliament. The Act entered into force on the 1st of January 2013. The waste management system of Hungary complies with the waste hierarchy, the polluter pays and the extended producer responsibility principles. The report is due in September 2013 in accordance with the Directive. According to the Act CLXXXV. of 2012. the waste management system of Hungary complies with the waste hierarchy, the polluter pays and the extended producer responsibility principles. The Act entered into force on the 1st of January 2013. The schedule of implementation can be found in the Gov. Decree 1211/2013. (IV. 15.):

Adobe Acrobat Document

– Necessary measures to achieve the target on re-use and recycling by 2020 consistent with Article 11.2 of Directive 2008/98/EC have been adopted.

To be fulfilled by Decemb er, 2014

Please find the details in the thematic table for action plan. For the implementation of the Directive on waste and repealing certain Directives (Waste Framework Directive, hereinafter: WFD) the former Act XLIII. of 2000 on Waste Management wasrevised and the Act CLXXXV. of 2012 has been adopted by the Parliament.. The Act entered into force on the 1st of January 2013. Article 11.2 of Directive 2008/98/EC (a) st A landfill tax was introduced from the 1 of January 2013. In order to divert the waste form landfill as well as to achieve the specified recovery targets, the operator of the landfill site and the one who carries

out the disposal operations pays the landfill tax depending on the amount and type, the nature and the variety of the waste. The incineration policy is also included in the Hungarian Act on Waste. Waste incineration and co-incineration is permitted in waste incineration and co-incineration plants only if the goal of the incineration or coincineration is to generate electric or thermal energy or to produce cement, bricks, tiles – used in the building industry – and ceramic products. The only waste can be incinerated or co-incinerated in incineration and co-incineration plants which cannot be recovered in material and does not contain heavy metals and PVC-based materials. Hazardous waste can be incinerated only in hazardous waste incineration plant. Article 11.2 of Directive 2008/98/EC (b) Elaboration of measures to achieve the target on re-use and recycling by 2020 is to be achieved by December, 2014. The schedule of implementation can be found in the Gov. Decree 1211/2013. (IV. 15.):

Adobe Acrobat Document

Please find the details in the thematic table for action plan.

7. Promoting sustainable transport and removing bottlenecks in key network infrastructu res (referred to in Article 9(7))

7.1. Road: The existence of a comprehensive plan(s) or framework(s) for transport investment in accordance with the Member States’ institutional set-up (including public transport at regional and local level) which supports infrastructure development and improves connectivity to the TEN-T comprehensive and core networks.

To be fulfilled, by April 2014

The existence of a comprehensive transport plan(s) or framework(s) for transport investment which fulfills legal requirements for strategic environmental assessment and sets out:

To be fulfilled by April 30, 2014

The very complex NTS (comprehensive traffic model, national railway conception, pre-feasibility studies, strategic environmental impact assessment) and the discussion about NTS will completed only by that deadline. This deadline is set in the government proposal of the Ministry of Public Administration and Justice about tasks in relation to the review of governmental strategic documents. Planned deadline for preparing National Transport Strategy (NTS): April 2014 (See a separate background note and draft action plan attached.)

his deadline is set in the government proposal of the Ministry of Public Administration and Justice about tasks in relation to the review of governmental strategic documents. Hungary has an accepted comprehensive transport plan (Unified transport development strategy - UTDS), which covers the period between 2007 and 2020. UTDS is considered as the strategic basis of the 2007-2013 Transport operational programme (TOP). UTDS is now under substantial revision due to the EU-2020, EU 2011 transport policy white paper (COM(2011) 144 final), TEN-T guidelines (COM(2011)650/2 – still a proposal) and EU 2014-2020 regulationpackage (i.e. ex-ante conditionalities) drafts. The up-to-date strategy will be the National Transport Strategy (NTS). Elaboration of NTS started a year ago with the elaboration of analyses, SWOTs, theses, preconceptions of different transport modes on voluntary basis with the management of Ministry of National Development and Coordination Centre for Transport Development. The complex NTS (comprehensive traffic model, national railway conception, pre-feasibility studies, strategic environmental impact assessment) and the discussion about NTS will completed only by April 2014. Main elements of NTS, main steps of elaboration are the following:

-

-

the contribution to the single European Transport Area consistent with Article 10 of Regulation No. [TEN-T], including priorities for investments in: -

the core TEN-T network and the comprehensive network where investment from the ERDF and CF is envisaged; and

-

secondary connectivity.

a realistic and mature pipeline for projects envisaged for support from the ERDF and CF.

Revision and supplement of situation analyses (e.g. rail, main and secondary roads, inland waterway, cycling, energy-efficiency, financing of Hungarian transport system, horizontal issues, economic environment), configuring traffic models covering all transport modes. Fulfilled. Elaboration

of long-term NTS concepts, analysis of different variants, finalizing an optimal model. Determination of priorities, projects for the optimal National Rail Concept variant, and finalization of prefeasibility rail development studies (e.g. electrification of railway lines, elimination of speed restrictions).

Elaboration of transport strategy for the NTS optimal variant, determination of priorities and transport development projects (including TEN-T core and comprehensive network and secondary connectivity and realistic and mature project pipeline) for 2014-2020, realization and preparation for the period of 2021-2027.

Finalization of Environmental Impact Assessment and action plans. NTS

“final” conciliation with stakeholders and society. Finalization of the NTS Government proposal.

NTS conciliations with European Commission, finalization of NTS. Ministry of National Development and NTS consortium involve JASPERS as often as possible into the elaboration of the comprehensive transport plan and follows JASPERS transport strategy guidance note/methodology. We have held meeting regularly with their experts to get advices and opinions for NTS and 2014-2020 Integrated Transport OP (TOP). We also involve domestic stakeholders, especially counties and Budapest, key transport companies (e.g. MAV, BKK, GYSEV), transport and other non-governmental organizations (e.g. Clean Air Action Group, Urban and Suburban Transit Association, Hungarian Society for Transport Sciences, Hungarian Chamber of Engineers, Research Centre for Economic and Regional Studies of the Hungarian Academy of Science).

(Responsible Ministry: MND; OP: TDOP)

-

Measures to ensure the capacity of intermediary bodies and beneficiaries to deliver the project pipeline.

To be fulfilled by April 30, 2014

Under

elaboration in close cooperation with the planning of the cohesion and Development Funds.

(Responsible ministry: MND; OP: TDOP) To beThe fulfilled, by 7.2. Railway: existence within the April 2014 comprehensive transport plan(s) or framework(s)of an explicit section on railway development in accordance with the Member States’ institutional set-up (including public transport at regional and local level) which supports infrastructure development and improves

-

-

The existence of a section on railway development within the transport plan(s) or framework(s) as set out above which fulfills legal requirements for strategic environmental assessment and sets out a realistic and mature project pipeline (including a timetable, budgetary framework);

Measures to ensure the capacity of intermediary bodies and beneficiaries to deliver the project pipeline.

To be fulfilled by April 30, 2014

This deadline is set in the government proposal of the Ministry of Public Administration and Justice about tasks in relation to the review of governmental strategic documents. NTS under elaboration covers traffic and railway conception and fulfills legal requirements for strategic environmental assessment and sets out a realistic and mature project pipeline.

Under elaboration in close cooperation with the planning of the cohesion and Development Funds.

connectivity to the TEN-T comprehensive and core networks. The investments cover mobile assets, interoperability and capacity building. 8. Promoting employmen t and supporting labour mobility (Employme nt target) (referred to in Article 9(8))

8.1. Active labour market policies are designed and delivered in the light of the Employment guidelines.

(Responsible ministry: MND; OP: TDOP)

Fulfilled

Employment services have the capacity to and do deliver:

–

personalised services and active and preventive labour market measures at an early stage, which prioritise the most vulnerable while being open for all jobseekers;

–

information on new job vacancies.

Employment services have set up formal or informal cooperation arrangements with relevant stakeholders.

Fulfilled

This is fulfilled through the operation and services of the National Employment Service (NES), and through the labor-market programs financed from National Employment Fund. The position and possibilities of a jobseeker is mapped precisely, then individualized services are provided, The capacities of NES devoted to implementing these programmes are also being strengthened. For more information please see the National Reform Programme of Hungary (especially Chapters II.4, III.1, IV.4.): http://ec.europa.eu/europe2020/pdf/nd/nrp2013_h ungary_en.pdf Monitoring and evaluation of active labour market policies implemented by the PES is continuous (reports are available at http://www.afsz.hu/engine.aspx?page=full_AFSZ_A_ foglalkoztataspolitikai_eszkozok_mukod , http://econ.core.hu/kiadvany/mt.html) Compulsory task of NES is to continuously provide detailed information on job vacancies and openings. As a member of the EURES network, advisors also provide information on jobs available on EU level. A network of guidance counsellors available in educational institutions is improved continuously. In addition, there is an on-going development of the database regarding the workforce in the health sector. The demand side of the labour market is surveyed and questioned regularly (regarding skill needs, trainings etc.). In addition, NES continuously receives notifications from employers regarding labour

Responsible body: MNE – OP: EDIOP

8.2. Selfemployment, entrepreneurship and business creation: the existence of a strategic policy framework for inclusive start-up.

8.3. - Labour market institutions are modernised and strengthened in the light of the Employment Guidelines; - Reforms of labour market institutions will be preceded by a clear strategic policy framework and ex ante assessment including the gender dimension

Fulfilled

Fulfilled

A strategic policy framework for inclusive Fulfilled start-up support is in place with the following elements:

–

measures to reduce the cost and time to set up businesses;

–

measures to reduce the time needed to get licenses and permits to take up and perform the specific activity of an enterprise business;

–

actions linking suitable business development services and financial services (access to capital), including the outreach to disadvantaged groups and/or areas where needed.

Fulfilled Actions to reform employment services, aiming at providing them with the capacity to deliver:

needs, and provides services on finding eligible employees and available employment support schemes. NES will also further strengthen and broaden international cooperation and will focus more on adopting and sharing best practices. Please find the relevant information at point A3.1 thematic ex ante conditionality.

Due to the loans, guarantees, and venture capital programs within JEREMIE, and due to microcreditprograms funded by the National Microcredit Fund and programs offered within the New Hungary Development Plan enterprises have several possibilities to gain access to financial services, business development services. According to the country-specific recommendation (2012) the modernization of the NES-() is continuous, the improvement of its organization and service is funded through more EU-projects in co-finance. The operation of the NES is in line with unified, annually supervised guidelines, which are set based on the Guidelines, and country specific recommendations. The NES supports the improvement of the employment of handicapped, the informing and advising of clients and employers, career-orientation services through dedicated programmes (TÁMOP 1.1.2 and 1.1.4, TÁMOP 1.3.1 and TÁMOP 2.2.2). For more information please see the National Reform Programme of Hungary (especially Chapters II.4, III.1, IV.4.): http://ec.europa.eu/europe2020/pdf/nd/nrp2013_h ungary_en.pdf

Responsible body: MNE OP: EDIOP

Responsible body: MNE OP: EDIOP

–

personalised services and active and preventive labour market measures at an early stage, which prioritise the most vulnerable jobseekers;

–

information on new job openings.

Reform of employment services will include the creation of formal or informal cooperation arrangements with relevant stakeholders. 8.4. Active and healthy ageing: Active ageing policies are designed in the light of the Employment Guidelines.

Fulfilled

Actions to deliver on active and healthy ageing challenges:

Fulfilled

In the period between May 2011 and April 2015, decentralized labour market programmes are being implemented at the National Employment Service, with a frame amount of HUF 113 billion (increased several times) to promote the employment of disadvantaged persons. Within the framework of the measures, people with low qualification or nonmarketable qualification, career starters, people above 50 years of age, people returning to the labour market after a period of receiving child care fee, child care benefit or care allowance, people receiving unemployment benefits or threatened by permanent unemployment (a total of 116 000 job seekers) receive complex, tailor-made support and service package to gain or regain competitiveness in the labour market. Compulsory task of NES is to continuously provide detailed information on job vacancies and openings. As a member of the EURES network, advisors also provide information on jobs available on EU level. A network of guidance counsellors available in educational institutions has been set up. In addition, there will be a database (under finalization) regarding the workforce in the health sector enables. The demand side of the labour market is surveyed and questioned regularly (regarding skill needs, trainings etc.), NES continuously consults with employers and educational institution. There are many programmes at the National Reform Programme supporting this goal: 1. implementation of early retirement policies 2. rise of age limit for pension 3. active labour-market programs to improve the employment opportunities of older people 4. tax allowances for the employment of older people 5. treatment of health problems of older (Semmelweis plan)

Responsible body: MNE OP: EDIOP

–

8.5. Adaptation of workers, enterprises and entrepreneurs to change: The existence of policies aimed at favouring anticipation and good management of change and restructuring.

9. Investing in skills, education and lifelong learning (Education target) (referred to in Article 9(10))

9.1. Early school leaving: The existence of a strategic policy framework to reduce early school leaving (ESL) within the limits of Article 165 TFEU.

Fulfilled

A limited number of basic instruments are in place to support social partners and public authorities to develop proactive approaches towards change and restructuring, in particular the existence of policies aimed at favouring anticipation and good management of change and restructuring.

To be fulfilled

Fulfilled A system for collecting and analysing data and information on ESL at relevant levels is in place that:

by March 2014

To be fulfilled by March

–

To increase the success of these programs an advisory board (Board of Elderly) continuously consults with the government

Relevant stakeholders are involved in the design and follow-up of active ageing policies with a view to retaining elderly workers on the labour market and promote their employment. Fulfilled

Within the framework of TÁMOP 2. priorities there are many actions under implementation related to employers, employees, supporting the adaptations kills of the active population (flexible employment, trainings at workplace, trainee-programs, improvement of information systems and language skills, modernization of vocational and adult learning). A separate project was set up for a system of labourmarket forecasts, and its restructuring processes (modelling tools, database). The results are built in the procedures of the NES, monitoring the forecasts, and using it in reconfiguration the supply of labourmarket trainings for unemployed The NES supports the improvement of the employment of handicapped unemployed, the informing and advising of clients and employers, career-orientation services through the dedicated programs (TÁMOP 1.1.2 and 1.1.4, TÁMOP 1.3.1 and TÁMOP 2.2.2). The data collection system and information on ESL is in place. Government Decree No. 229/2012. (VIII. 28.) on the implementation of the Act on Public education defines statistical reporting obligations of the educational institutions. http://net.jogtar.hu/jr/gen/hjegy_doc.cgi?docid=A1 200229.KOR Further Hungarian Central Statistics Office’s labour market surveys serve as database.

Responsible body: MNE OP: EDIOP

Will be fulfilled latest by

Government decree 1600/2012. (XII. 17.) defines the deadline of the preparation of the ESL strategy as Dec 2013

Government decree 1600/2012. (XII. 17.) defines the deadline of the

provides a sufficient evidencebase to develop targeted policies and monitors developments.

A strategic policy framework on ESL is in place that: is based on evidence;

2014

-

–

covers relevant educational sectors, including early childhood development, and addresses prevention, intervention and compensation measures;

March, 2014.

preparation of the ESL strategy as December 2013 Adobe Acrobat Document

involves all policy sectors and stakeholders that are relevant to address ESL.

Two strategies under elaboration will contribute to the fulfilment of the criteria a comprehensive national strategy aimed at reducing the number of early school leavers and the new public education strategy. Both comprehensive strategies contain measures that fulfill the criteria set. The new public education strategy is planned to be adopted by December, 2013. The detailed study on reducing the number of early school leavers will be elaborated latest by December, 2013. The national strategy aimed at reducing the number of early school leavers will be elaborated latest by March, 2014. (Responsible ministry: MHR; OP: HDOP)

9.2. Higher education: The existence of a national or regional strategic policy framework for increasing tertiary education attainment, quality and efficiency within the limits of Article 165 TFEU.

To be fulfilled

To be fulfilled by 31st October, 2013

by the end of 2013 A national or regional strategic policy framework for tertiary education is in place with the following elements:

The national policy strategy for tertiary education (the preparation phases are on-going) will be finalised by 31st October, 2013. The middle-term strategy of higher education is under development, it will be finished in 2013. The strategy takes conditionalities into account, and sets aims in accordance with EU requirements. The 1657/2012 (XII. 20.) Governmental Decree on the duties related to the revision of

governmental strategical documents set the deadline for the completion of the strategy: 31.10.2013 The strategy under elaboration will include: • creating situation analysis for the middle-term strategy of higher education - II. quarter of 2013 • creating the strategy for partnership negotiation – II. quarter of 2013 • impact study of the middleterm strategy of higher education: finance, management and institutional administration – III. quarter of 2013 • Setting the strategy before the government – IV. quarter of 2013. A national or regional strategy for tertiary education is under elaboration that includes: -

-

where necessary, measures to increase participation and attainment that: -

increase higher education participation among low income groups and other under-represented groups;

-

reduce drop-out rates/improve completion

measures to increase participation and attainment that:

– improve guidance provided to prospective students; – increase higher education participation among low income groups and other under-represented groups – increase participation by adult learners; – (where necessary) reduce drop-out

rates.

rates/improve completion rates; -

measures to increase quality that:

– encourage innovative content and programme design; – promotes high standards of quality in teaching; -

measures to increase employability and entrepreneurship that: -

-

encourage the development of "transversal skills", including entrepreneurship in relevant higher education programmes; reduce gender differences in terms of academic and vocational choices.

-

measures to increase employability and entrepreneurship that:

– encourage the development of "transversal skills", including entrepreneurship in all higher education programmes – reduce gender differences in terms of academic and vocational choices andencouraging students to choose careers in sectors were they are under represented in order to reduce the gender segregation of the labour market – ensure informed teaching using knowledge from research and developments in business practices Responsible ministry: MHR; OP: HDOP)

9.3. Lifelong learning: The existence of a national and/or regional strategic policy framework for lifelong learning within the limits of Article 165, TFEU.

To be fulfilled before the end of 2013

A national or regional strategic policy framework for lifelong learning is in place that contains:

–

measures to support lifelong learning (LLL) implementation and skills upgrading and providing for the involvement of, and partnership with relevant stakeholders;

–

measures for the provision of skills development corresponding to the needs of various target groups where these are identified as priorities in national or regional strategic policy frameworks (for example young people in vocational training, adults, parents returning in the labour market, low skilled and older workers, migrants and other disadvantaged groups);

–

measures to widen access to LLL including through efforts to effectively implement transparency tools (for example the European Qualifications Framework, National Qualifications Framework, European Credit system for Vocational Education and Training, European Quality Assurance in Vocational Education and Training).

To be fulfilled The comprehensive strategy (Government Decree Nr. 2212/2005. (X.13)) covers the time period until 2013, the development of the new strategy has begun and will be finalised by the end of August, 2013. The broad consultation with partners will thus begin in September and continue through October. The finalisation of the Strategy will be at the end of 2013. At the beginning of autumn a version - close to being finalized will be made available. A government statement adopted in 2012 emphasises the importance of supporting and setting measures for LLL. Apart from the strategy mentioned above, the New Széchenyi Plan’s employment programs and incentives are based on LLL. The strategy will focus on the measures set in the criteria – as soon the finalisation is done it will be made available. The strategy will focus on the measures set in the criteria – as soon the finalisation is done it will be made available.

Responsible bodies: MHR, MNE OP: HDOP

10. Promoting social inclusion and combating poverty (poverty target) (referred to in Article 9(9))

10.1. The existence and the implementation of a national strategic policy framework for poverty reduction aiming at the active inclusion of people excluded from the labour market in the light of the Employment guidelines.

To be fulfilled

A national strategic policy framework for poverty reduction, aiming at active inclusion, is in place that:

before the end of 2013

To be fulfilled

The National Social Inclusion Strategy (NSIS) has been adopted (Government Decree Nr. 1430/2011 (XII.13.) and accompanied by a Government Action Plan for the years 2012-2014. By the end of September 2013, the interim evaluation of NSIS will be finalised, which serve as a basis for framing the action plan for the period after 2014. The development of the monitoring system is in progress, the system of the required level will be working from the September, 2013. The Government approved the Strategy along with its governmental action plan for the period of 20122014. The document specifies governmental actions along the directions of interventions related to children’ welfare, education, employment, healthcare, housing, the involvement of those affected and antidiscrimination measures, and determines those in charge, the related deadlines and funds.

–

provides a sufficient evidence base to develop policies for poverty reduction and monitor developments;

The monitoring system of the NSIS is already in place, there is strong focus on improving the current data service. The operational working group, which coordinates the monitoring of the measures, started its work in the autumn of 2012.

–

is in accordance with the national poverty and social exclusion target (as defined in the National Reform Programme), which includes the extension of employment opportunities for disadvantaged groups;

The NSIS builds on the national poverty and social exclusion target set in line with the Europe 2020 targets. The National Social Inclusion Strategy also integrates the target numbers included in the agreement made by the Government and the National Roma Self Government in May 2011. (http://romagov.kormany.hu/)

–

involves relevant stakeholders in combating poverty;

To ensure the involvement of stakeholders, the Government not only consultates with representatives in relevant matters, but also established committees to ensure continuous cooperation, such as:

Responsible body: MHR OP: HDOP

The Government established the Roma Coordination Council, a plenum of 27 people with representatives from different areas of public life, which participates and consultates in all relevant matters. This committee supervises and coordinates the convergence by consulting on and reviewing projects, international reports and by providing suggestions. The committee also prepares impact studies for action plans regarding the improvement of the social conditions of the Roma people.

Upon request and where necessary relevant stakeholders can be provided with support for submitting project applications and for implementing and managing the selected projects.

10.2. A national Roma inclusion strategic policy framework is in

To be fulfilled before

A national Roma inclusion strategy is in place that:

To be fulfilled

The Government also established a committee for the evaluation of the National Strategy regarding the “Improvement of the living conditions of children”, which consists of different members and representatives from public life, professional organizations, civilians and churches. The committee has to systematically monitor the execution of the National Strategy, to give suggestions and improve processes, to compile an indice system in order to indicate and measure the poverty of children and to publish the results. These convey to the improvement of the efficiency of convergence, to the annual review and their triannual revision of the execution of the national strategy. The National Reform Programme contains local programmes as a support for implementing and managing selected projects. Within the framework of this measure, three EU-financed programmes will be launched and executed in 2013 and 2014. For more information please see the National Reform Programme of Hungary (p.33.: “Implementing local programmes for equal opportunities and establishing regional cooperation (57)” http://ec.europa.eu/europe2020/pdf/nd/nrp2013_h ungary_en.pdf ) The Government elaborated and accepted the Roma inclusion Strategy at the end of 2011. The renewal and analysis of the actions taken, the efficiency of the instruments, the results achieved has started,

Responsible body: MHR OP: HDOP

place.

the end of 2013

and a new version will be finalised by the end of 2013. The Strategy will strongly focus on analysing the success of instruments, the coordination mechanism, the efficiency and actions taken during this time period – based on these results new targets and instruments will be set.

–

sets achievable national goals for Roma integration to bridge the gap with the general population. These targets should address the four EU Roma integration goals relating to access to education, employment, healthcare and housing;

The National Social Inclusion Strategy integrates the target numbers included in the agreement concluded by the Government and the National Roma Self Government in May 2011. (http://romagov.kormany.hu/)

-

identifies where relevant those disadvantaged micro-regions or segregated neighbourhoods, where communities are most deprived, using already available socio-economic and territorial indicators (i.e. very low educational level, long-term unemployment, etc);

National Social Inclusion Strategy analysed and identified the disadvantaged micro-regions/ segregated neighbourhoods, where communities are most deprived.

-

includes strong monitoring methods to evaluate the impact of Roma integration actions and a review mechanism for the adaptation of the strategy.

For the strong monitoring of the Strategy, the Government established a Social Inclusion and the Inter-ministerial Committee for Roma Affairs. The Committee oversees the execution of the convergence strategy and the action plan. In order to efficiently control it can establish professional working groups for the professional support of monitoring and revision. Apart from the above mentioned Committee, the Roma Coordination Council also analysis and prepares impact studies for past interventions and action plans.

–

The Government established the Roma Coordination Council, a plenum of 27 people with representatives from different areas of public life, which participates in discussions regarding all relevant matters. This committee supervises and coordinates the convergence by consulting on and reviewing projects, international reports and by providing suggestions. The committee also prepares impact studies for action plans regarding the improvement of the social conditions of the Roma people. The National Reform Programme contains local programmes as a support for implementing and managing selected projects. Within the framework of this measure, three EU-financed programmes will be launched and executed in 2013 and 2014. For more information please see the National Reform Programme of Hungary (p.33.: “Implementing local programmes for equal opportunities and establishing regional cooperation (57)” http://ec.europa.eu/europe2020/pdf/nd/nrp2013_h ungary_en.pdf )

is designed, implemented and monitored in close cooperation and continuous dialogue with Roma civil society, regional and local authorities.

Upon request and where necessary relevant stakeholders can be provided with support for submitting project applications and for implementing and managing the selected projects.

10.3. Health: The existence of a national or regional strategic policy framework for health within the limits of Article 168 TFEU ensuring economic sustainability.

To be fulfilled before the end of 2013

A national or regional strategic policy framework for health is in place that:

To be fulfilled

The Semmelweis Plan adopted in 2011 was implementation in the Government Decree Nr. 1208/2011. (VI. 28.).( http://www.kozlonyok.hu/nkonline/ MKPDF/hiteles/mk11071.pdf) The revision of the former Strategy and the goals for the Programming Period 2014-2020 of the European Union is currently still under development, it will be finalised by 31st August, 2013. Consultations with partners will be held during the following months, in September and October. The Strategy will also contain a detailed plan and strategy for medical staff: in order to continuously ensure an adequate

level of human resources within the health sector and a constant, appropriate quality of health services. (The previous version is available at: http://www.kormany.hu/download/ 3/c4/40000/Semmelweis%20Terv%2 0szakmai%20koncepci%C3%B3%2020 11.%20j%C3%BAnius%2027..pdf) Responsible body: MHR OP: HDOP

–

contains coordinated measures to improve access to health services;

Based on the results and experiences from 2007-2013, the Semmelweis Plan will strongly focus on improving access to health services. As soon as it is finalised it will be made available.

–

contains measures to stimulate efficiency in the health sector through deployment of service delivery models and infrastructure;

The Strategy will contain measures needed, after finalisation (end of August) a detailed presentation along with the Strategy will be made available.

–

contains a monitoring and review system.

Further improving the monitoring system is one of the main focuses. As soon as the Strategy is finalised it will be made available. (The previous version is available at: http://www.kormany.hu/download/ 3/c4/40000/Semmelweis%20Terv%2 0szakmai%20koncepci%C3%B3%2020 11.%20j%C3%BAnius%2027..pdf)

A Member State or region has adopted a framework outlining available budgetary resources on an indicative basis and a cost-effective concentration of resources on prioritised needs for health care.

The Strategy will fullfill the criteria mentioned and after finalisation (end of August) will be made available. (The previous version is available at: http://www.kormany.hu/download/ 3/c4/40000/Semmelweis%20Terv%2 0szakmai%20koncepci%C3%B3%2020

11.%20j%C3%BAnius%2027..pdf)

11. Enhancing institutional capacity and efficient public administrati on (referred to in Article 9(11))

Member States administrative efficiency: - The existence of a strategic policy framework for reinforcing the Member State's administrative efficiency including public administration reform

To be fulfilled by end of 2013

A strategic policy framework for reinforcing a Member State’s administrative efficiency with the following elements are in place and in the process of being implemented:

The goals and the fields and measures of the administration reforms are defined by the Magyary Zoltán Administration Development Program. The government has launched 3 significant public administration programmes in 2011 in line with the Hungarian constitutional framework to create a “Good State”: the justice and the municipality reform and the Magyary Program. Strategic documents: Magyary Program 11.0, Magyary Program 12.0, Magyary Program 13.0 (under preparation, finalised by 31st October, 2013) Besides, a National Infocommunications Policy Strategy is under elaboration and adoptation, which contains the e-government and the development of public services. For more detailed information please see the National Reform Programme of Hungary: http://ec.europa.eu/europe2020/pdf /nd/nrp2013_hungary_en.pdf

Actions which have been taken in the first half of 2013: 2014-2020 OP structure has been elaborated, Magyary Programme 2014-2020 had several working

group meetings and a 2 days workshop; Magyary Programme 2014-2020 – public administration development programme skeleton and chapters were drawn; tasks have been defined by policy areas and tasks; analysis chapter has been prepared; Magyary Programme 2014-2020 interventions first draft has, analysis and possible interventions, intervention list and strategic alternatives been drawnActions which have to be taken in the second half of 2013:

-

an analysis and strategic planning of legal, organisational and/or procedural reform actions;

Magyary Programme 20142020 indicators and possible financing framework; first draft; first ex-ante coherence and consistency check with the 201420 planning and Ops; ex-ante impact assessment document; finalization of the document; public consultation, finalization after public consultation by October 31, 2013. The Magyary Programme 11.0 incorporates a core commitment to strategic planning in order to set a coherent framework and direction for the work of the public administration. The Government Strategic Management System (GSMS) initiative aims to harmonise the government‘s strategic documents and provide a framework for strategy implementation and monitoring. The objective is to improve the ability of ministries and agencies to carry out the government‘s agenda, to link policy with institutional and staffobjectives, better prioritise in the short and medium term, improve

resource allocation, and monitor, evaluate and adjust as the need arises. Assessment of Magyary Programme undertaken by OECD is available:

Adobe Acrobat Document

-

the development of quality management systems;

-

integrated actions for simplification and rationalisation of administrative procedures;

An ongoing project under the SROP (SROP 1.2.18) ensures the development of quality management systems. http://magyaryprogram.kormany.hu/ szervezetfejlesztesi-program

The Hungarian Government has implemented a a Simplification Programme (Reducing administrative burdens on citizens) and a “Cutting Red Tape” Programme (Hungary’s administrative burdens reduction programme). As part of the Zoltán Magyary Public Administration Development Programme, the Simplification Programme aiming at the reduction of administrative burdens on citizens was adopted by the Hungarian Government in August 2011. The Simplification Programme was implemented in three stages (the first one closing at the end of March 2012), and until the end of 2012 altogether 228 procedures were to be simplified. The range of procedures designated for simplification covered all the important areas (for example, family benefits, taxation, unemployment benefits as well as matters related to real properties, vehicles, pensions, health insurance and documents) where citizens encounter official procedures in their day-to-day lives. As a result of the Simplification Programme,

• According to the modification of the Administrative Procedures Act which has become effective on 1 February, 2012, the time frame for administrative procedures was reduced from 30 to 21 days and clients have the possibility to request official control. Moreover, the public release of the official control plans has become obligatory. • In the field of construction the time frame for various procedures were significantly reduced. Moreover, in specified procedures the authorities have the possibility to decide in some professional issues without getting the expert authorities involved. • Significant progress has been made on the field of taxation too. From 1 July, 2013 a simplified electronic payment system will be introduced which enables taxpayers to pay their various taxes in one single payment instead of paying them to several tax bills separately. Measures implemented in other strategic programmes also help the fulfilment of the administrative burden reduction commitments. • The new Labour Code has modernized the regulatory framework of employment and it has created a more flexible legal environment. Simplified employment has been introduced instead of casual employment. • The government has implemented several policy actions which have reduced the tax burden and simplified the legal environment of businesses. The administrative simplification programme based on a Gov. decision No. 1304/2011. (IX. 2.) has succesfully finished. http://magyaryprogram.kormany.hu/egyszerusitesip rogram

An

adopted

Governmental

Human

Resource

–

the development and implementation of human resources strategies and policies covering identified main gaps in this field;

–

the development of skills;

Strategy ensures the fulfilment. The Government has adopted Government Decree No. 1336/2011. (X. 14.)) on public human resource strategy. http://www.kozlonyok.hu/nkonline/index.php?men uindex=200&pageindex=kozltart&ev=2011&szam=1 19

There are several ongoing and finished projects under the SROP implemented by the National University of Public Service. -

the development of procedures and tools for monitoring and evaluation.

Development of procedures and tools for monitoring and evaluation are under elaboration in the frame of Magyary Program 13.0 (under preparation, finalised by 31st October, 2013).

General ex-ante conditionalities 17 General exante conditionaliti es

1. Antidiscriminatio n 2. Gender equality

Applicable Ex-ante conditionality for which national bodies are responsible

Reference (if fulfilled)

Applicabl e ex-ante conditio nality fulfilled: Yes/No/ Partially

Criteria

Criteria fulfilled

(reference to the strategies, legal acts or other relevant documents incl. references to relevant sections, articles or paragraphs, accompanied by a hyperlink or other access to the full text)

Explanation (where appropriate) Action to be taken (per criteria), deadline

The compromise adopted by the Council text does not contain these conditionalities. Upon the conclusion of currently ongoing trialogue negotitaions the information provided will be amended if necessary.

3. Disability 4. Public procurement

The existence of arrangements for the effective application of EU public procurement law in the field of the CSF Funds.

–

The harmonization of the Hungarian law with the EU public procurement directives has already been concluded. Therefore this conditionality is not applicable.

Arrangements for the effective application of EU public procurement rules through appropriate mechanisms; –

Fulfilled

Fulfilled

Rules of Directives 2004/17/EC and 2004/18/EC have already been completely implemented into the Hungarian legislation. The most significant of the implementing regulations is Act CVIII of 2011 on Public Procurement (hereinafter referred to as PPA). The existing domestic legislation is generally compliant with EU rules on public procurement. (Responsible ministry: MNE)

17

The assessment is based on the Danish presidency compromise text adopted by the General Affairs Council on 24.04.2012. ( Article 17 and Annex IV).

–

-

Arrangements transparent procedures;

which contract

ensure award

– Fulfilled

Third chapter of PPA ensures the transparent contract awarding procedure in procurement procedures under EU thresholds. Relevant rules of PPA’s third chapter are based on the Commission’s Interpretative Communication on the Community law applicable to contract awards not or not fully subject to the provisions of the Public Procurement Directives (2006/C 179/02). (Responsible ministry: MNE)

-

Arrangements to ensure administrative capacity for implementation and application of EU public procurement rules. –

Fulfilled

In the field of EU funded public procurements monitoring organizations play a decisive role. Public Procurement Supervisory Department (hereinafter referred to as PPSD) of the National Development Agency (hereinafter referred to as NDA) is responsible for ex-ante monitoring of public procurement procedure above and below EU thresholds. Employees of PPSD regularly participate in domestic trainings or training sessions organized by other Member States in order to share experiences and to gain knowledge. Furthermore NDA publishes guidelines and studies in order to create and maintain a unified monitoring system. The number of employees of the PPSD has been continuously increasing since 2010. The necessary capacity to ensure

thorough monitoring is provided by external experts.

also

The Public Procurement Authority in cooperation with the Public Procurement Arbitration Board and the Ministry of National Development regularly publishes guidelines to facilitate the application of rules and regulations related to public procurement. These guidelines are available publicly and for free on the website of the Public Procurement Authority (www.kozbeszerzes.hu) in Hungarian, English and German too. The website provides information on the Public Procurement Authority, its duties, contacts, Public Procurement (complaints and remedies), Hungarian Act on Public Procurement (New Public Procurement Act: PPA from 1st January 2013), related Decrees (Gov. Decree 310/2011 (23 December) from 1st January 2013 (Download); Gov. Decree 306/2011 (23 December) from 1st July 2012; Gov. Decree 305/2011 (23 December) from 14th August 2012; Gov. Decree 288/2011 (22 December); Gov. Decree 289/2011 (22 December)), Guide to interpretation (President’s Briefings, Authority’s guidelines), Conferences (Lecture materials). Public Procurement Authority operates a call center as well in order to ensure immediate support. (Responsible ministry: MNE)

-

5. State aid

The existence of arrangements for the effective application of EU state aid law in the field of the CSF Funds.

Fulfilled

Since the foundation of the State Aid Monitoring Office in 1999 the Arrangements for the effective application of EU State aid rules are continuously fulfilled. The arrangement is currently regulated by the 37/2011. Government edict.

Arrangements for the effective application of EU State aid rules;

Fulfilled

The State Aid Monitoring Office (SAMO) was established in 1999 with the objective to ensure the compliance with EU state aid rules before Hungary’s accession to the EU (tvi.kormany.hu). The present activity of the State Aid Monitoring Office is regulated by Government Decree 37/2011 (III. 22) on procedures relating to State aid measures pursuant to the competition related regulations of the EU and to the regional aid map. The procedural rules of the Decree oblige all aid grantors to notify their aid plans a priori to SAMO, which then assesses each proposal for compatibility with EU State Aid rules and initiates EU notification if necessary. Art. 5 of Gov. Decree 37/2011 Included in the detailed rules of the schemes (Decrees, call for proposals) Art 2. point 10. and Art. 7. of Gov. Decree 37/2011. Included in COM decisions and the obligatory opinion of SAMO Art 24 of Gov. Decree 37/2011. Gov. Decree 37/2011. and the rules of the schemes Art. 7 of Gov. Decree 37/2011. and

the rules of the schemes

–

(Responsible ministry: MNE) In the Implementation Operative Program (Technical assistance) a special project is devoted to the human resource development of SAMO. This project also allows the State aid training (basic and OP focused) of Managing authorities organized by SAMO. Due to the fact that the State aid rules are to be modified as of 1 January 2014, it is necessary to continue this special project in the next programming period.

Arrangements for training and dissemination of information for staff involved in the implementation of the funds; –

Fulfilled

SAMO submits the relevant State aid guidance via its homepage (www.tvi.kormany.hu) and issues a journal specified for State aid law (called ‘Állami Támogatások Joga’). The electronic version of the journals are available at atj.versenyjog.com. (the paper version of the journal is sent to the aid grantors) Gov. Decree 37/2011. The SAMO regularly consults with the aid grantors regarding the compatibility of the plans with the State aid rules. The SAMO also gives advice on possible ways of compliance. SAMO – Gov. Decree 37/2011.

–

Arrangements to ensure administrative capacity for implementation and application of EU State aid rules.

Fulfilled

The SAMO regularly consults with the aid grantors regarding the compatibility of the plans with the State aid rules. The SAMO also gives

advice on possible ways of compliance. Moreover, there are two web pages in Hungarian dealing with State aid issues: www.tvi.kormany.hu www.atj.versenyjog.hu The latter one is the electronic version of the journal called ‘Állami Támogatások Joga’ (State Aid Law),the paper version of the journal is sent to the aid grantors. (Responsible ministry: MNE) Arrangements for the effective application of EIA and SEA Directives;

6. Environment al legislation relating to Environment al Impact Assessment (EIA) and, Strategic Environment al Assessment (SEA)

The existence of arrangements for the effective application of Union environmental legislation related to EIA and SEA.

Expected to be fulfilled by 2013

SEA: the directive 2001/42/EC of the European Parliament and of the Council of 27 June 2001 on the assessment of the effects of certain plans and programmes on the environment has been fully transposed. In relation to the adequacy the Commission raised no objection. Expected to be fulfilled by 2013

EIA: In 2009 an infringement procedure started against Hungary about Council Directive 85/337/EEC of (27 June 1985) on the assessment of the effects of certain public and private projects on the environment. In order to ensure that the Hungarian legislation fully meets the requirements of the Directive, radical changes took place in the impact assessment system in the:  Gov. Decree 82/2011 (V.18.). (Page 11687)  Gov. Decree 308/2011 (XII. 23.) (Page 38775)

In the mid-term review of the 6th Environment Action Programme the Commission stressed the necessity of the development of the Environmental Impact Assessment on national level. The Commission announced the review of the Environmental Impact Assessment Directive (EIA) Directive. The Commission proposal for the modification of the 2011/92/EU directive on the assessment of the effects of certain public and private projects on the environment has been adopted on 26 October, 2012. The proposals are already under discussion in the WPE. Meanwhile Hungary is working on the fulfilment of the directives there are consultations with the Commission about the implementations.

  

modification of Gov. Decree 267/2006 (XII.20.) (Page 12529) modification of Gov. Decree 263/2006 (XII.20.) (Page 12514) modification of Gov. Decree 312/2012 (XI.8.) (Page 24878)

– Arrangements for training and dissemination of information for staff involved in the implementation of EIA and SEA Directives;

Expected to be fulfilled by 2013

Fulfilment is under elaboration. The recruitment of experts and the trainings and disseminations are expected to be finished in 2013.

– Arrangements to ensure sufficient administrative capacity.

Fulfilled

SEA: The directives have been implemented in the following legislation:  Gov. Decree 2/2005 (I.11.)  Act LIII. (1995)  Act CXL. (2004) EIA: The directives have been implemented in several legislations:  Gov. Decree 314/2005 (XII.25) (Page 11089)  Act LIII. (1995)  Act CXL. (2004)  Gov. Decree 347/2006. (XII. 23.) (Page 13434)  Gov. Decree 72/1996. (V. 22.)  Gov. Decree 40/2002. (III. 21). (Page 2258)  Gov. Decree 157/2005. (VIII. 15.) (Page 6050)  Gov. Decree 263/2006 (XII.20.) (Page 12514)  Gov. Decree 267/2006 (XII.20.) (Page 12529)  Gov. Decree 382/2007. (XII. 23.) (Page 14463)  Gov. Decree 159/2010. (V. 6.) (Page 14523)

   

Gov. Decree 320/2010. (XII. 27.) (Pgae 30563) Gov. Decree 327/2010. (XII. 27.) (Page 30652) Gov. Decree 328/2010. (XII. 27.) (Page 30666) Gov. Decree 312/2012 (XI.8.) (Page 24878)

The efficiency of implementation is improved by electronic procedures. Arrangements for timely collection and aggregation of data with the following elements is in place:

7. Statistical systems and result indicators

The existence of a statistical basis necessary to undertake evaluations to assess the effectiveness and impact of the programmes.

The existence of a system of result indicators necessary to select actions, which most effectively contribute to desired results, to monitor progress towards results and to undertake impact evaluation.

– the identification of sources and mechanisms to ensure statistical validation; – arrangements for publication and public availability. – an effective system of results indicators including: – the selection of result indicators for each programme providing information on what motivates the selection of policy actions financed by the programme; – the establishment of targets for these indicators; – the respect for each indicator of the following requisites: robustness and statistical validation, clarity of normative interpretation, responsiveness to policy, timely collection of data; – procedures in place to ensure that all operations financed by the programme adopt an effective system of indicators.

According to the information from MND, the criteria of the condition will be fulfilled by the end of 2013. During the finalization of the result indicators of the Partnership Agreement and the Ops we use official sources and ensure statistical validation. Managing Authorities report on indicators in their annual reports, public availability is ensured (mainly on following homepage: www.nfu.hu). Indicator catalogues are also available.

(i)

Ex ante conditionality for the European Agricultural Fund for Rural Development (EAFRD)

Thematic objectives

Applicable Ex-ante conditionality for which national bodies are responsible

RD priority 1: fostering knowledge transfer and innovation in agriculture, forestry, and rural areas TO 1: strengthening research, technological development and innovation

1.1. Research and innovation: The existence of a national and/or regional innovation strategy for smart specialisation in line with the National Reform Program, to leverage private R&I expenditure, which complies with the features of wellperforming national or regional research and innovation systems. 1.2. Advisory capacity: sufficient advisory capacity to ensure advice on the regulatory requirements and all aspects linked with sustainable management and climate action in agriculture and forestry

RD priority 2: enhancing competitiveness of all types of agriculture and enhancing farm viability TO 3: enhancing the competitiveness of small and medium-sized enterprises RD priority 3: promoting food chain organisation and risk management in agriculture TO 3: enhancing the competitiveness of small and medium-sized enterprises

2-3.1. Business set-up: Specific actions have been carried out for the effective implementation of the Small Business Act (SBA) and its Review of 23 February 201136 including the "Think Small First" principle

Applicabl Reference (if fulfilled) e ex-ante (reference to the strategies, legal acts or other condition Criteria relevant documents incl. references to ality Criteria fulfilled relevant sections, articles or paragraphs, fulfilled: Yes/no accompanied by a hyperlink or other access to Yes/No/P the full text) artially Please find the relevant information at point A1 thematic ex ante conditionality.

Fulfilled

Advisory system is available at all relevant sector and territorial level: Farm Advisory System. The description of the system: 80 Territorial Advisory Centres and 600 registered advisors with compulsory trainings annually. Professional Advisory Centres (research institutions), Regional Advisory Centres, National Advisory Centre are also available. The system is supported by the farm information service by the Hungarian Chamber of Agriculture Responsible body: MRD Please find the relevant information at point A3 thematic ex ante conditionality.

Fulfilled

– A description of the structure of extension/advisory systems at the relevant geographical scale (national/regional) - including their intended role under the scope of RD priority – which demonstrates the fulfilment of ex-ante conditionality 1.2 is included in the programme,

Fulfilled

The fulfilment of the criteria is under elaboration. References will be provided later. Responsible body: MRD

Expl.

RD priority 4: restoring, preserving and enhancing ecosystems dependant on agriculture and forestry TO 5: promoting climate change adaptation, risk prevention and management TO 6: protecting the environment and promoting the resource efficiency

RD priority 5: promoting resource efficiency and supporting the shift towards a low carbon and climate resilient economy in the agriculture and food sectors and the forestry sector TO 4: supporting the shift towards a low-carbon economy in all sectors TO 5: promoting climate change adaptation, risk prevention and management

4.1 Good Agricultural and Environmental Conditions (GAEC): standards for good agricultural and environmental condition of land referred to in Chapter I of Title VI of Regulation (EU) HR/xxxx are established at national level 4.2 Minimum requirements for fertilisers and plant protection products: minimum requirements for fertilisers and plant protection products referred to in article 29 Chapter I of Title III of this Regulation are defined at national level 4.3 other relevant national standards: relevant mandatory national standards are defined for the purpose of article 29 Chapter I of Title III of this Regulation 4.4. Risk prevention: the existence of national risk assessments for disaster management. taking into account climate change adaptation 5.1 GHG emissions: compliance with Article 6(1) of Decision No 406/2009/EC of the European Parliament and of the Council of 23 April 2009 on the effort of Member States to reduce their greenhouse gas emissions to meet the Community’s greenhouse gas emission reduction commitments up to 2020 5.2 Energy efficiency: transposition into national law of Directive 2006/32/EC of the European Parliament and of the Council of 5 April 2006 on energy end-use efficiency and energy services38 5.3 Water pricing: the existence of a water pricing policy which ensures an adequate contribution of the different water uses to the recovery of the costs of water services, in accordance with Article 9 of Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing a framework for Community action in the field of water policy39. 5.4. Waste management plans: transposition into national law of Directive 2008/98/EC of the European Parliament and of the Council of 19 November 2008 on waste and repealing certain Directives40, in particular the development of waste management plans in accordance with the Directive. 5.5 Renewable energy: Transposition into national law of

Fulfilled

– GAEC standards are defined in national law and specified in the programmes;

Fulfilled

Fulfilled

– minimum requirements for fertilisers and plant protection products referred to in Chapter I of Title III of this Regulation are specified in the programmes; – relevant mandatory national standards are specified in the programmes;

Fulfilled

Fulfilled

It is fulfilled according to the Min. (FVM) Decree 50/2008. (IV. 24.) http://www.kolcsonosmegfeleltetes.hu Responsible body: MRD It is fulfilled according to the Min. (FVM) Decree 61/2009. (V. 14.) Annex 16 and Annex 17. http://www.kolcsonosmegfeleltetes.hu Responsible body: MRD

Fulfilled

It is fulfilled according to the Min. (FVM) Decree 61/2009. (V. 14.) http://www.kolcsonosmegfeleltetes.hu Responsible body: MRD Please find the relevant information at point A5 thematic ex ante conditionality.

Please find the relevant information at point A4 thematic ex ante conditionality.

Please find the relevant information at point A4 thematic ex ante conditionality.

Please find the relevant information at point A6 thematic ex ante conditionality

Please find the relevant information at point A6 thematic ex ante conditionality

Please find the relevant information at point A4 thematic ex ante conditionality.

RD priority 6: promoting social inclusion poverty reduction and economic development in rural areas TO 8: promoting employment and supporting labour mobility TO 9: promoting social inclusion and combating poverty

Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC 6.1 Access to EAFRD: The provision of support for relevant stakeholders in accessing the EAFRD

6.2 Self-employment, entrepreneurship and business creation: the existence of a comprehensive and inclusive strategy for inclusive start-up support in accordance with the Small Business Act42 and in coherence with employment guideline 7, regarding the enabling conditions for job creation 6.3 NGA Infrastructure (Next Generation Access Networks): The existence of national NGA Plans which take account of regional actions in order to reach the EU high-speed Internet access targets43, focusing on areas where the market fails to provide an open infrastructure at an affordable cost and to an adequate quality HC.1 Member States administrative efficiency: the existence of a strategy for reinforcing the country's administrative efficiency including public administration reform HC.2 Human resources allocation: sufficient capacity in

Fulfilled

– Relevant stakeholders are provided support for submitting project applications and for implementing and managing the selected projects

Fulfilled

It is fulfilled in current programming period as well: The paying agency (Agricultural and Rural Development Agency), the management authority (MRD), the Hungarian Chamber of Agriculture and the Local Action Groups (according to Gov. Decree 1105/2007 or www.epir.hu ) are available for the candidates/applicants. The granted advisory system will be supported with trainings from 2014. The availability will be widen with communication equipment like e-mail, enewsletter, e-portal) From 2014 is planned to start accredited, examined tender writing networks with guaranties. Gov. Decree 1105/2007. (XII.27) Responsible body: MRD Please find the relevant information at point A8 thematic ex ante conditionality.

Please find the relevant information at point A2 thematic ex ante conditionality.

Please find the relevant information at point A11 thematic ex ante conditionality.

Fulfilled

– A description of human resources

Fulfilled

The Agricultural and Rural Development

human resources allocation, training management and IT systems is available within the bodies responsible for the management and implementation of rural development programmes

HC. 3 Selection criteria: an appropriate approach laying down principles with regard to the setting of selection criteria for projects and local development is defined

Fulfilled

allocation, training management and IT systems within the Managing Authorities of the programme, which demonstrates the fulfilment of ex – ante conditionality HC.2 is included in the programme – A description of the chosen approach to the setting of selection criteria for projects and local development, which demonstrates the fulfilment of ex–ante conditionality HC.3 is included in the programme

Agency and the managing authority have the sufficient capacity in the current and the next programming period Responsible body: MRD

Fulfilled

Leader Local Action Groups are responsible for selection according to Min. (FVM) Decree 122/2009 (XI. 17.) and Min. (VM) Decree 76/2011. (VI.29): Local Evaluation Committee has selection competences based on Local Rural Development Strategies. The Agricultural and Rural Development Agency is responsible for formal criteria. This system is planned to be migrated and developed in next programming period Responsible body: MRD

Ex ante conditionality for the European Maritime and Fisheries Fund (EMFF) Thematic objectives

Applicable Ex-ante conditionality for which national bodies are responsible

Please find above the relevant general ex-ante conditionalities. EMFF priority: Business set-up: Specific actions have been carried out for 2. Fostering innovative, the effective implementation of the Small Business Act competitive and knowledge (SBA) and its Review of 23 February 2011 including the based fisheries "Think Small First" principle 3. Fostering innovative, competitive and knowledge based aquaculture TO 3: enhancing the competitiveness of small and medium-sized enterprises EMFF priority: The establishment of a multiannual national strategic plan 3. Fostering innovative, on aquaculture as referred in Article 43 of the [Regulation competitive and knowledge on the Common Fisheries Policy] by 2014; based aquaculture 5. Promoting a sustainable and resource efficient aquaculture TO 6: protecting the environment and promoting resource efficiency EMFF Priority: Proven administrative capacity to comply with the data 6 Fostering the requirements for fisheries management set out in Article implementation of the CFP 37 of the [Regulation on the CFP] TO 6: protecting the environment and promoting resource efficiency

Applica ble exante conditio nality fulfilled: Yes/No/ Partially

Criteria for fulfilment

Criteria fulfilled Yes/no

Reference (if fulfilled) (reference to the strategies, legal acts or other relevant documents incl. references to relevant sections, articles or paragraphs, accompanied by a hyperlink or other access to the full text)

Please find the relevant information at point A3 thematic ex ante conditionality.

To be fulfilled by the submiss ion of OP

– A multiannual national strategic plan on aquaculture is transmitted to the Commission at the latest by the day of transmission of the OP – The OP includes information on the complementarities with the multiannual national strategic plan on aquaculture

To be fulfilled by the submissio n of OP

The multiannual national strategic plan on aquaculture will be submitted to the COM parallel with the relevant OP. Responsible body: MRD

Fulfilled

– Proven administrative capacity to prepare and apply a multiannual programme for data collection, to be reviewed by STECF and accepted by the Commission – Proven administrative capacity to prepare and implement an annual work plan for data collection, to be reviewed by STECF and accepted by the Commission – Sufficient capacity in human

Fulfilled

The data requirements are according to FAO and EUROSTAT databases. The database is summarised annually. The Research Institute of Agricultural Economics, the Hungarian Central Statistical Office and the Agricultural and Rural Development Agency participate in the collection The summarise is done and sent to EUROSTAT and FAO by the Ministry for Rural Development Responsible body: MRD and Institute of Agricultural Economics

Ex pl.

EMFF Priority: 6 Fostering the implementation of the CFP TO 6: protecting the environment and promoting resource efficiency

Proven administrative capacity to comply with the implementation of a Union control inspection and enforcement system as stipulated in Article 46 of the [Regulation on the CFP] and further specified in Council Regulation (EC) No 1224/2009.

Fulfilled

resources allocation to undertake bilateral or multilateral agreements with other MS if work to implement the data collection obligations is shared The specific actions include: – Proven administrative capacity to prepare and implement the 20142020 national control program as referred to in Article 19(l) – Proven administrative capacity to prepare and implement the national control action programme for multiannual plans (Art 46 Control Regulation) – Proven administrative capacity to prepare and implement a common control program that may be developed with other Member States (art 94 CR) – Proven administrative capacity to prepare and implement the Specific Control and Inspection Programmes (art 95 CR). – Proven administrative capacity to apply a system of effective, proportionate and dissuasive sanctions for serious infringements (art 90 CR) – Proven administrative capacity to apply the point system for serious infringements (art 92 CR) Sufficient capacity in human resources allocation to implement the Control regulation

Fulfilled

The current capacity for the OP is available for the next period regarding to the implementation of 2014-2020 national control program, the national control action programme for multiannual plans, common control program, implementation the Specific Control and Inspection Programmes, applying a system of effective, proportionate and dissuasive sanctions for serious infringements, applying the point system for serious infringements and implementation of the Control regulation. The data collection and audit capacity that is needed for the next period will be financed from TA. Responsible body: MRD

(II.) For the applicable general and thematic/fund specific ex ante conditionalities for which national bodies are responsible and which are completely or partially unfulfilled, indication of the bodies responsible for their fulfilment, the actions to be taken at national level to fulfil these ex-ante conditionalities, and the timeframe for the implementation of such actions (tables).

Thematic objective

Applicable ex-ante conditionalities for which national bodies are responsible and which are unfulfilled or partially fulfilled

Criteria not fulfilled

Action to be taken

Deadline (date)

Bodies responsible for fulfilment

5. Promoting climate change adaptation and risk prevention (Climate change target) (referred to in Article 9(5)

5.1. Risk prevention and risk management: The existence of national or regional risk assessments for disaster management taking into account climate change adaptation

A national or regional risk assessment is in

The requirement based on RA country report and methodology can be completed by submission of OP as

July, 2014

place

it is stated in Gov. Decree (Page 4270).

MI (National Directorate General for Disaster Management)

18

1121/2013 (III.11.)

MND

Please find an English translation of the Gov. Decree 1121/2013 (III.11) attached here:

Microsoft Word Document

-- A description of the process, methodology, methods and nonsensitive data used for risk assessment as well as of the risk-based criteria for the prioritisation of investment;

It will be mainly fulfilled by working out a comprehensive methodology for the new RA country report incorporating all the details stated in the criteria. This will be done by hiring preofessional risk assessment experts. The methodology will be applied for each of all the relevant risk types (the chapters of the report) in order to have a consistent structure throughout the document. 



18

The RA methodology framework and the RA decision supporting tools which will be developed with the assistance of the risk assessment experts will rely on the guidelines of the ISO 31010 risk management standard. There is a long history of cross-border cooperation in the field of disaster management in Hungary. There has been an active and mutual flood assistance collaboration with the neighbouring country.

For some projects, the existence of a regional risk assessment is more appropriate than national risk assessment

February 2014

Thus where cross-border issues are already in place for some risk types it will be addressed in the RA country report.  After the first draft of the risk assessment country report is being finalized the a wide consultation with stakeholders will be initiated. Interested parties will have the chance to recommend amendments which will be evaluated by the interdepartmental working group.  After setting up the methodology framwork and impleted it to each of the specific risks, as part of the risk analysis the impacts on the human, economic and environmental and political and social factors will be investigated. This implies a scoring system (national impact scores) which will be based on the conclusions of the risk matrices developed for each risk types. The prioritisation scheme of the EU funded investments will take into consideration the Hungarian major risks that need to be treated. The scheme will be based on the risk levels defined by the risk matrices and on the results of the impact scoring system. -- A description of single risk and multi-risk scenarios

Single-risk and multi-risk scneraios will be elaborated for each risk types by using a scenario methodology guideline developed by risk assessment experts.

July, 2014

The description of the elaborated scenarios will be available after fulfilling the ex-ante conditionality on risk assessment (i.e. publishing the RA country report and methodology). -- Taking into account, where appropriate, national climate change adaption strategies

The national climate change adaptation strategy (Nemzeti Alkalmazkodási Stratégia) as part of the National Climate Change Strategy will be adopted this year. The draft version will be published in September. The responsible organisation for its development is the Ministry of National Development. The strategy will likely to address the impacts of climate change on health, agriculture and forest, biodiversity and

July, 2014

ecosystems, water, infrastructures and constructions. The investment priorisation scheme will not just take into account the risk levels derived from risk matrices but will also look at the effects of climate change in case of natural hazards. The adaptation strategy will likely to investigate the, mid-term and long-term effects of climate change. These assumptions will be incorporated into the report and will be also integrated into the disaster management practice in the long run. 6. Protecting the environment and promoting the sustainable use of resources (referred to in Article 9(6))

6.1. Water sector: The existence of a) a water pricing policy which provides adequate incentives for users to use water resources efficiently and b) an adequate contribution of the different water uses to the recovery of the costs of water services at a rate determined in the approved river basin management plan for investment supported by the programmes.

– A Member State has ensured a contribution of the different water uses to the recovery of the costs of water services by sector consistent with Article 9, paragraph 1, first indent of Directive 2000/60/EC having regard, where appropriate, to the social, environmental and economic effects of the recovery as well as the geographic and climatic conditions of the region or regions affected. – The adoption of a river basin management plan for the river basin district with a justified concentration of investments consistent

The two criteria will be elaborated in a harmonised framework according to the following: Opening report

October, 2013

RBMP revision – first section

June December, 2013

Review and characterization of appointment of river basins and bodies

June – December, 2013 and JuneSeptember, 2013

Review of human loads and effects on condition

June, 2013 December, 2014

–

Economic analyses of water use

June December, 2013

–

Register of protected areas

June – October, 2013 and SepNov, 2015

Qualification of water bodies shortages identification of the risky water bodies

and

June December, 2013

–

–

MRD, National Institution for Environment MND

with

Article

13

of

19

Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing a framework for Community action in the field of water policy.

19

OJ L 327, 22.12.2000, p. 1.

Review report according to WFD Article 5

December, 2013

Detection of significant water management problems on the sub-basins

June December, 2013

Publication of the detected water management problems on sub-basins

December, 2013

Advanced report 1

December, 2013

RBMP revision – second section

JanuaryDecember, 2014

Partnership: consultation on the significant water management problems

January2014

Advanced report 2

June, 2014

Assessment and introduction of the condition of water bodies és protected areas

JanuaryDecember, 2014

Review of environmental objectives

May December, 2014

-

Review of exceptions according to WFD Article 4. (4), (5), (6), (7)

May December, 2014

-

Analyses on the effectiveness and feasibility of measures

JanuaryDecember, 2014

–

June,

Preparation of a register about programs and plans

Database development for implementation of measures

monitoring

JanuaryDecember, 2014 the

AprilSeptember, 2014

Review of action plan and progress

May December, 2014

-

Explanation of measures set aside, summary of interim measures

May December, 2014

-

Publish the draft review of RBMP

December, 2014

Advanced report 3

December, 2014

RBMP revision – third section

January-June, 2015

Partnership: consultation on action plan/program

January-June, 2015

Finalise the action plan/program

January-June, 2015

Summary and evaluation of the results of public consultation

May-June, 2015

Preparations for finalise the reviewed RBMP

May, 2014June, 2015

SEA

May, 2014June, 2015

Preparation of „ex-ante” evaluation

May, 2014June, 2015

6.2. Waste sector: Promoting economically and environmentally sustainable investments in the waste sector particularly by the development of waste management plans consistent with Directive 2008/98/EC on waste, and with the waste hierarchy.

7. Promoting sustainable transport and removing bottlenecks in key network infrastructures (referred to in Article 9(7))

7.1. Road: The existence of a comprehensive plan(s) or framework(s) for transport investment in accordance with the Member States’ institutional set-up (including public transport at regional and local level) which supports infrastructure development and improves connectivity to the TEN-T comprehensive and core networks.

– Necessary measures to achieve the target on re-use and recycling by 2020 consistent with Article 11.2 of Directive 2008/98/EC have been adopted.

The existence of a comprehensive transport plan(s) or framework(s) for transport investment which fulfills legal requirements for strategic environmental assessment and sets out:

Closing report, technical summary and evaluation reports

June, 2015

Elaboration of measures to achieve the target on reuse and recycling by 2020 consistent with Article 11.2 of Directive 2008/98/EC

31 December, 2014

–

For the improvement of recovery rate the territorial concentration of installations and capacities of processing industry

–

Elaboration of standards

–

Elaboration of institutional background

Hungary has an accepted comprehensive transport plan (Unified transport development strategy - UTDS), which covers the period between 2007 and 2020. UTDS is considered as the strategic basis of the 20072013 Transport operational programme (TOP). UTDS is now under substantial revision due to the EU-2020, EU 2011 transport policy white paper (COM(2011) 144 final), TEN-T guidelines (COM(2011)650/2 – still a proposal) and EU 2014-2020 regulation-package (i.e. ex-ante conditionalities) drafts. The up-to-date strategy will be the National Transport Strategy (NTS). Elaboration of NTS started a year ago with the elaboration of analyses, SWOTs, theses, preconceptions of different transport modes on voluntary basis with the management of Ministry of National Development and Coordination Centre for Transport Development. The complex NTS (comprehensive traffic model, national railway conception, pre-feasibility studies, strategic environmental impact assessment) and the discussion about NTS will completed only by April 2014. According to our plans NTS will be a long term comprehensive transport plan, which will contribute to single European transport area. It is going to be elaborated according to the following schedule: –

1st milestone (31st March 2013.): revision

MRD

MND

and supplement of situation analyses (e.g. rail, main and secondary roads, inland waterway, cycling, energyefficiency, financing of Hungarian transport system, horizontal issues, economic environment), configuring traffic models covering all transport modes. Fulfilled.

-

-

-

the contribution to the single European Transport Area consistent with Article 10 of Regulation No. [TEN-T], including priorities for investments in: the core TEN-T network and the comprehensiv e network where investment from the ERDF and CF is envisaged; and secondary connectivity. a realistic and mature pipeline for projects envisaged for support from the ERDF and

– 2nd milestone (31st May 2013.): Elaboration of long-term NTS concepts, analysis of different variants, finalizing an optimal model. Determination of priorities, projects for the optimal National Rail Concept variant, and finalization of pre-feasibility rail development studies (e.g. electrification of railway lines, elimination of speed restrictions). – 3rd milestone (31st August 2013): Elaboration of transport strategy for the NTS optimal variant, determination of priorities and transport development projects (including TEN-T core and comprehensive network and secondary connectivity and realistic and mature project pipeline) for 20142020, realization and preparation for the period of 2021-2027. Finalization of Environmental Impact Assessment and action plans.

31 March 2013

31 May 2013

– 4th milestone (31st October 2013.): NTS “final” conciliation with stakeholders and society. Finalization of the NTS Government proposal. – 5th milestone (30th April 2014.): NTS conciliations with European Commission, finalization of NTS. Ministry of National Development and NTS consortium involve JASPERS as often as possible into the elaboration of the comprehensive transport plan and follows JASPERS transport strategy guidance note/methodology. We have held meeting regularly with their experts to get advices and opinions for NTS and 2014-2020 Integrated Transport OP (TOP). We also involve domestic stakeholders, especially counties and Budapest, key transport companies (e.g. MAV, BKK, GYSEV), transport and other non-governmental organizations (e.g. Clean Air Action Group, Urban and

31 August 2013

CF.

Suburban Transit Association, Hungarian Society for Transport Sciences, Hungarian Chamber of Engineers, Research Centre for Economic and Regional Studies of the Hungarian Academy of Science).

31 2013

October

30 April 2013

-

7.2. Railway: The existence within the comprehensive transport plan(s) or framework(s)of an explicit section on railway development in accordance with the Member States’ institutional set-up (including public transport at regional and local level) which supports infrastructure development and improves connectivity to the TEN-T comprehensive and core networks. The investments cover mobile assets, interoperability and capacity building.

-

Measures to ensure the capacity of intermediary bodies and beneficiaries to deliver the project pipeline.

Under elaboration in close cooperation with the planning of the cohesion and Development Funds.

The existence of a section on railway development within the transport plan(s) or framework(s) as set out above which fulfills legal requirements for strategic environmental assessment and sets out a realistic and mature project pipeline (including a

Hungary has an accepted comprehensive transport plan (Unified transport development strategy - UTDS), which covers the period between 2007 and 2020. UTDS is considered as the strategic basis of the 20072013 Transport operational programme (TOP). UTDS is now under substantial revision due to the EU-2020, EU 2011 transport policy white paper (COM(2011) 144 final), TEN-T guidelines (COM(2011)650/2 – still a proposal) and EU 2014-2020 regulation-package (i.e. ex-ante conditionalities) drafts. The up-to-date strategy will be the National Transport Strategy (NTS). Elaboration of NTS started a year ago with the elaboration of analyses, SWOTs, theses, preconceptions of different transport modes on voluntary basis with the management of Ministry of National Development and Coordination Centre for Transport Development. The complex NTS (comprehensive traffic model, national railway conception, pre-feasibility studies, strategic environmental impact assessment) and the

MND 30 April 2013

MND

timetable, budgetary framework);

discussion about NTS will completed only by April 2014. According to our plans NTS will be a long term comprehensive transport plan, which will contribute to single European transport area. It is going to be elaborated according to the following schedule: – 1st milestone (31st March 2013.): revision and supplement of situation analyses (e.g. rail, main and secondary roads, inland waterway, cycling, energyefficiency, financing of Hungarian transport system, horizontal issues, economic environment), configuring traffic models covering all transport modes. Fulfilled. – 2nd milestone (31st May 2013.): Elaboration of long-term NTS concepts, analysis of different variants, finalizing an optimal model. Determination of priorities, projects for the optimal National Rail Concept variant, and finalization of pre-feasibility rail development studies (e.g. electrification of railway lines, elimination of speed restrictions). – 3rd milestone (31st August 2013): Elaboration of transport strategy for the NTS optimal variant, determination of priorities and transport development projects (including TEN-T core and comprehensive network and secondary connectivity and realistic and mature project pipeline) for 20142020, realization and preparation for the period of 2021-2027. Finalization of Environmental Impact Assessment and action plans.

31 March 2013

31 May 2013

– 4th milestone (31st October 2013.): NTS “final” conciliation with stakeholders and society. Finalization of the NTS Government proposal. – 5th milestone (30th April 2014.): NTS conciliations with European Commission, finalization of NTS. Ministry of National Development and NTS consortium involve JASPERS as often as possible into the elaboration of the comprehensive transport plan and follows JASPERS transport strategy guidance

31 August 2013

note/methodology. We have held meeting regularly with their experts to get advices and opinions for NTS and 2014-2020 Integrated Transport OP (TOP). We also involve domestic stakeholders, especially counties and Budapest, key transport companies (e.g. MAV, BKK, GYSEV), transport and other non-governmental organizations (e.g. Clean Air Action Group, Urban and Suburban Transit Association, Hungarian Society for Transport Sciences, Hungarian Chamber of Engineers, Research Centre for Economic and Regional Studies of the Hungarian Academy of Science).

31 2013

October

30 April 2014

Measures to ensure the capacity of intermediary bodies and beneficiaries to deliver the project pipeline.

Under elaboration in close cooperation with the planning of the cohesion and Development Funds.

- A strategic policy framework on ESL is in place that: is based on evidence; c overs relevant educational sectors, including early

Government decree 1600/2012. (XII. 17.) defines the deadline of the preparation of the ESL strategy as December 2013

-

9. Investing in skills, education and lifelong learning (Education target) (referred to in Article 9(10))

9.1. Early school leaving: The existence of a strategic policy framework to reduce early school leaving (ESL) within the limits of Article 165 TFEU

Two strategies under elaboration will contribute to the fulfilment of the criteria a comprehensive national strategy aimed at reducing the number of early school leavers and the new public education strategy. Both comprehensive strategies contain measures that fulfill the criteria set. The new public education strategy is planned to be adopted by December, 2013.

MND 30 April 2014

MHR

31 December 2013

-

childhood development, and addresses prevention, intervention and compensation measures; i nvolves all policy sectors and stakeholders that are relevant to address ESL.

The detailed study on reducing the number of early school leavers will be elaborated latest by December, 2013.

31 December 2013

MHR

The national strategy aimed at reducing the number of early school leavers will be elaborated latest by March, 2014.

30 April 2014

MHR

Thematic objective

Applicable general ex-ante conditionalities for which national bodies are responsible and which are unfulfilled or partially fulfilled

RD priority 4: restoring, preserving and enhancing ecosystems dependant on agriculture and forestry TO 5: promoting climate change adaptation, risk prevention and management TO 6: protecting the environment and promoting the resource efficiency RD priority 5: promoting resource efficiency and supporting the shift towards a low carbon and climate resilient economy in the agriculture and food sectors and the forestry sector TO 4: supporting the shift towards a lowcarbon economy in all sectors TO 5: promoting climate change

4.4. Risk prevention: the existence of national risk assessments for disaster management. taking into account climate change adaptation

5.3 Water pricing: the existence of a water pricing policy which ensures an adequate contribution of the different water uses to the recovery of the costs of water services, in accordance with Article 9 of Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing a framework for Community action in the field of

Criteria not fulfilled

Action to be taken

Deadline (date)

Bodies responsible for fulfilment Please find the appropriate action at point A5 thematic ex ante conditionality table for action plan. Responsible body: MI, MND

Please find the appropriate action at point A6 thematic ex ante conditionality table for action plan. Responsible body: MRD

adaptation, management

risk

prevention

and

EMFF priority: 3. Fostering innovative, competitive and knowledge based aquaculture 5. Promoting a sustainable and resource efficient aquaculture TO 6: protecting the environment and promoting resource efficiency

water policy39. 5.4. Waste management plans: transposition into national law of Directive 2008/98/EC of the European Parliament and of the Council of 19 November 2008 on waste and repealing certain Directives40, in particular the development of waste management plans in accordance with the Directive. The establishment of a multiannual national strategic plan on aquaculture as referred in Article 43 of the [Regulation on the Common Fisheries Policy] by 2014;

List of abbreviations MI

Ministry of Interior

MHR

Ministry of Human Resources

MPAJ

Ministry of Public Administration and Justice

MND

Ministry of National Development

MNE

Ministry for National Economy

MRD

Ministry of Rural Development

HDOP

Human Development OP

EDIOP

Economic Development and Innovation OP

TDOP

Infrastructure and Transport OP

EEEOP

Environment and Energy OP

*

These are not yet the official translation of the OPs.

*

*

*

*

Please find the appropriate action at point A6 thematic ex ante conditionality table for action plan. Responsible body: MRD

– A multiannual national strategic plan on aquaculture is transmitted to the Commission at the latest by the day of transmission of the OP – The OP includes information on the complementarities with the multiannual national strategic plan on aquaculture

The national strategic plan for aquaculture is under elaboration. Action plan will be provided later. Responsible body: MRD

2.4.

The methodology and mechanism to ensure consistency in the functioning of the performance framework in accordance with Article 19 of the CPR

The development of the Performance Framework is strongly connected to the development of the implementation system. The development of the implementation system and the delivery of the connected evaluations are still in progress, the first informal results are expected to be available at the end of summer 2013. The preliminary results are presented below, based on the results available. The starting situation of the Performance Framework: A basic precondition for performance monitoring is credible and appropriate data delivery. In order to ensure this, the technical progress data delivery of the monitoring activity in the coming period must be improved (indicators). The monitoring procedures and the connected IT system are now focused on financial and procedural aspects. Steps and responsibility for the development of the Performance Framework:  The operation of the mechanisms connected to the performance framework is a task of the central coordination body (central coordination will be provided by the Prime Minister`s Office (PMO) in the next period).  In the course of programme planning, the planning coordination must develop a system of key indicators covering all programmes and which are included in the performance framework. In the autumn of 2013 guidelines must be published addressing programme planners, with strict monitoring of compliance. (The PMO which provide the central coordination of the next period will collaborate with the MNE coordinating programming of OPs and the task will be supported by ex ante evaluations of the OPs`).  During 2013/2014 the capacities of the implementation institutional system must be improved through training and regulations in order to ensure programme-level and projectlevel systematic collection and input of data.  Furthermore, the beneficiaries must be prepared for data delivery, (according to the needs of the various groups of beneficiaries, this means providing guidelines and training).  Data collection, input, and aggregation must be supported by IT projects as well as through the further development of the existing electronic data interchange systems (see monitoring information systems in Chapter 4). Mechanisms of the Performance Framework    

Progress evaluation concerning the performance framework will be one of the ongoing major tasks of the central and the programme Monitoring Committees. The central coordination body must elaborate separate rules on procedures in order to be able to regularly demonstrate progress and to introduce appropriate measures if problems arise with implementation. In line with EU regulations, rules on the utilisation of the performance reserve must also be regulated in separate procedural rules, in accordance with the national legal framework. The main milestones in the fulfilment of the Performance Framework for the period 20142020: (1) in 2016 and 2017 Hungary prepares self assessment of progress with the purpose of early warning; (2) in 2018 an annual report is produced outlining progress in the fulfilment of the performance framework.

168

2.5.

An assessment of whether there is a need to reinforce the administrative capacity of the authorities and, where appropriate, of the beneficiaries, as well as, where necessary, a summary of the actions to be taken for this purpose.

To improve the efficiency and added value growth of developments, a renewed institutional background will support implementation during the coming programming period. In line with the aforementioned, the preparation of beneficiaries will ensure that they are capable of resource absorption and effective utilization. Several government decisions were made about the directions and steps of this institutional change (the last one on 25 July 2013). Tasks associated with capacity enlargement are under way, and assessment of the current system is also being carried out now. Main institutional and procedural questions will be elaborated by the results derived from this assessment, which will take place from the end of summer 2013 to the end of the year (see for details below). An account of government decisions so far and the tasks identified from current assessment results is as follows: Stable and planned transition to the new institutional system - principles and steps The institutional renewal is based on the following principles:  Planning and management responsibilities of the ministries responsible for policy-making must be reinforced in the new institutional system: o the MA of the EDIOP, CCHOP and TOP will be located at the Ministry for National Economy, o the MA of the EEEOP and MOP will be located at the Ministry for National Development, o the MA of the HDOP will be located at the Ministry of Human Resources.  At the same time efficient central coordination functions are needed through which the well-coordinated operation of the institutional system can be established (The MA of the COP will be placed in the PMO).  It is based on the principle of continuity and does not threaten the implementation and results of the current programming period 2007-2013, but it builds upon experience. For this purpose, concrete steps will be taken: in order to retain the current human capacities and competences within the institutions, a Career Programme will be prepared for the employees of the institutions (responsible: PMO with the involvement of the ministries governing MAs.) Renewal of the central coordinative functions and the coordination of the total renewal:  From 1 January 2014, the NDA will operate under the directions of PMO.  The institutions that are providing the central coordination of the current period should be developed within the PMO.  A change management project will manage the transition (the building of the central coordination functions and organization; issues related to institutions and rules on procedures) until 1 January 2014 with the involvement of MNE, MRD, NDA and MND. The renewal of the functions of Managing Authorities Based on the above-mentioned principles the decision was made that from 1st January 2014, the new Managing Authorities (MA) for the programming period 2014-2020 will be established based on the current Managing Authorities and will be managed by the sectoral ministries responsible for the policies (see above). In order to ensure their professional independence, they will directly report to the line minister, with the aim of establishing unified institution organisation solutions for each ministry. From this point on, the MA’s are responsible for the

169

implementation and closure of the current period and for the planning and implementation of the next period, as well as for the establishment of the new institutional system. The necessary system descriptions and accreditations must be completed this year.  During the summer of 2013, within the current MA’s, divisions will be established with the exclusive focus on preparation and planning for 2014-2020, in line with the expert and human resource guidance of the host line ministries (responsible: MND, according to the guidelines of PMO with the involvement of the ministries governing MAs.)  Within the ministries where MAs will be placed working groups will be established for preparing the takeover on 1 January 2014 (responsible: ministries governing MAs with the guidelines of PMO). Development of the functions of Managing Authorities:  From 1 January 2014 Managing Authorities implementing EU programmes of 2014-2020 will be placed at the ministries that governs MAs.  From 1 January 2014 regional development agencies will be placed under the direction of county governments that are competent in their territory. Strengthening capacities – establishing examinations: Activities concerning the renewal of the institutional system are currently underway. The capacity building of the current system of institutions is underlined by a detailed evaluation which is currently in progress. Evaluations and the ideas based on them and related to the regulation of procedures and the system of institutions will be finished by the end of the summer 2013. The evaluation covers the professional, personal and institutional competences of the current system of institutions and will measure and assess their operational efficiency. It will also include the presentation of the capacity and resources of the current system of institutions and will analyze their level of utilization. It will present what is good and efficient as well as what is bad and not operating adequately in terms of institutional co-operation with the current system. And it will assess the current image of the institutions, and aspects which influence opinions and their analysis. The evaluation will produce proposals for ensuring a smooth transition and will recommend how to strengthen the most important competences for ensuring the efficient operation of the new institutional system, and for developing new capacities. The results identified now and the principles that can be defined according to them, are presented as follows. Situation of the current capacities  Favourable starting situations: o favourable compliance with the regulations; o in the case of SF and CF favourable, uniform monitoring experience in total, o high level of digitalization; o relevant evaluations on progress.  To be improved: o uniform interpretation of law, treatment of regulations and rules on procedures, more coordinated public procurement; o reducing administrative burden; o harmony in policies, competences of ministries; o follow-up of the professional progress (indicators); o support to the implementation of integrated initiatives;

170

o preparation of the beneficiaries, professional and administrative support, service approach. Principles for the development of the institutional system and rules on procedures  The new structures also build on existing professional capacities, and they do not divert resources from the smooth closing of existing programmes or from the absorption of payments;  Parallel functions should be avoided within the entire institutional systems, synergies of the 2007-2013 and renewed institutional system have to be exploited;  The institutional system will manage new types of integration and financial instruments, as well as key projects from preparation to implementation.  Service and solution-oriented incentives for administration will be established.  The implementing institutional capacities will be prepared to professionally support, as well as monitor and evaluate, the performance of developments.  The elaboration of rules on procedures will ensure the harmonisation of the different rules on the procedures of the various funds (taking their unique features into consideration), including the objectives and contents of rural development support. Multilevel decisionmaking will be introduced which gives more opportunities for feedback, in order to facilitate project quality improvement and professional considerations.  During the seven year period of 2014-2020 the refundable subsidies and the application of supporting financial instruments (e.g. credit funds, risk capital funds) will gradually increase in proportion. The results from the existing systems will remain, but the institutional system and the beneficiaries will be prepared to make use of a wide range of financial instruments. Principles of the preparation of beneficiaries  Project generation will take into account local market needs and capacities, alongside encouraging and supporting participation in calls for proposals, the provision of services by the implementing institutional system, and organised project preparation initiatives (based on previous experience);  Reinforcing the professional and administrative support provided for project implementation (e.g. project doctor service) in order to avoid early exit;  Prioritising target groups and activities within the broader objective of preparing beneficiaries: o Territorial stakeholders (counties, larger cities, smaller towns, current LEADER communities) need to be prepared for designing their own programmes, and for planning and implementing new territorial integration tools (ITI, CLLD) and multi-funding through capacity building, methodological support and coordination of their planning; o Project owners of major development projects implemented in the public sector are to be prepared for the reception and utilisation of EU assistance through training courses, certification and institutional development. o The preparation of economic actors to use the available funding is essential given that the main focus is on economic development for the 2014-2020 funding period. Main steps of the strengthening of capacity 

By June 2014: ensuring the preparation of new territorial actors (see in chapter 3) (planning, project development, functions in implementation) – the process has already started (counties: June 2012; big cities: April 2013);

171

 



The Széchenyi Programme Office was appointed as a support organisation for local/territorial development actors (especially for counties) and for beneficiaries (getting eligible resources, writing or guidance of applications). By the end of summer 2014: main steps related to the institutions and rules on procedures, among them the elaboration and action planning for the further preparation of the beneficiaries (the preliminary steps of this: see above) within the frame of the change management project (see: at the steps for renewal of the institution system); From 2014: implementation of the action plan.

2.6.

A summary of the actions planned in the programmes, including an indicative timetable, to achieve a reduction in the administrative burden for beneficiaries

The simplification and the reduction of the administrative burden of the beneficiaries should be implemented in the following phases, and according to the following principles. The measures that were taken based on the principles below were underlined by the results of the assessments in progress on administrative burden. Measures that should be taken during the establishment of the system of implementation: during the set up of the institutional system and the system of tools, and in the development of the procedural regulations and the regulatory environment. The MAs of certain programmes are responsible for the development and implementation of the measures, under the direction of the central coordination body. In the project selection phase:  Selection based on a call for applications should be focused on areas where competition based selection is reasonable, as it is a very cost and time-consuming procedure (e.g. in some RDI areas, managing of talents` and competitive sector).  In the selection of public sector developments, priority should be given to well-justified policy decisions and not on selection based on a call for applications which has significant administrative burden and does not necessarily reflect needs. (These selected projects based on well-based policy decisions are then would be registered by the institutions of implementation after the expedient check of the feasibility of the proposed projects.) (In innovative issues call for applications may be reasonable in the future.)  Programme-based assistance (e.g. competitiveness and planning contracts) and the connected negotiated procedures should be introduced, especially in territorial and priority sector developments.  Project selection, development and implementation procedures which require less financial input from the beneficiaries should be applied more expansively (e.g. call for applications with multiple rounds, normative assistance, global grant, fund of funds, refundable assistance with simplified conditions).  Before making funding decisions the administrative obligations related to the potential beneficiaries should be reduced to a minimum. (e.g. fewer proofs, beneficiary data available in public databases should be checked by the institutions instead of provided by the beneficiaries, the administrative burden of preparing the applications (or applying for assistance) should be covered by the implementing institutions).  For potential beneficiaries, predictable “windows of assistance” should be offered and the allocation of resources and its schedule should be made public and divided across time allowing applications for assistance to be continuously submitted.

172

 The further development of guidelines and samples serves to reduce the administrative obligations of the beneficiaries related to project preparation. In the project implementation phase:  Financial easing to reduce the administrative burden of beneficiaries and speed-up the application procedure: ensuring self-contribution, pre-financing, simplified cost accounting and payments, lighter crediting by state guarantee.  Administrative easing to reduce the administrative burden of beneficiaries and speed-up the application procedure: rationalization of long public procurement procedures, reduction in the number of proofs of fulfilment (technical controllers appointed by beneficiaries or institutions and involvement of chambers), simplification of progress reporting (e.g. revision of the system of semi-annual reports and the temporary report connected to payment claims).  Options to account for volunteering and tasks made by the beneficiaries (self-performed work) will be expanded.  Involvement of EIB products.  The assessment of providing a one-window service, especially from territorial institutions covering the whole system of implementation (also assessing the connections to the rural development).  Simplification of procedural regulations and revision of administrative rules that do not arise directly from EU regulations.  Administrative borders should not limit the development and implementation of projects, and the projects which are implemented in several administrative units should not be burdened by excessive administrative obligations.  Simplified cost-accounting for organisations that participate in the division of assistance (MAs, LEADER local action groups).  Ensuring the stability of the accounting regulations as far as possible.  Implementation should be supported by direct and easily available contacts and customer service systems which support beneficiaries as far as possible. Simplification and rationalisation within the system of institutions:  The same rules and procedural regulations should apply to the same types of beneficiary, and there should be uniform interpretation of the law at each MA and other organization  During the implementation of projects and programmes stable rules of arrangements should be ensured as far as possible.  The extension of the electronic and online services and the further development of the applicants` project administration  Procedures supporting the preparation and development of projects should be introduced. Follow-up and consultancy phases supporting the increase of professional added value should be built into the procedures.  The sector-thematic divisions that were utilized until now, should be developed by allowing the possibility of integration. Within the divisions of the programmes, funds and assistance constructions the project-based division should be allowed. Schedule for reducing administrative burdens:  During the summer of 2013 the extent of the administrative burden will be examined (with the responsibility of the PMO where the central coordination of the next period will be placed).

173



By the end of the summer, the list of the most important interventions aiming to reduce administrative burdens will be prepared, in line with planning institutional rules and procedures, developing performance framework mechanisms, and promoting e-data exchange.  By the end of 2013, in the framework of the so-called change management project (see chapter 2.5 the framework of the renewal of institutional system), the procedural rules to reduce administrative burdens will be elaborated and for some themes the framework that MAs should develop further.  In 2013/14 the e-data exchange developments that support the reduction of administrative burdens will be implemented (see in chapter 4).

3. DESCRIPTION OF THE INTEGRATED APPROACH TO TERRITORIAL DEVELOPMENT SUPPORTED BY THE ESI FUNDS The situation analyses pointed out that Hungary has a diverse territorial structure and that the social-economic territorial disparities are significant within the broader European context (the deviation in GDP per capita values at NUTS3 level in Hungary is the second highest within the EU). Based on experience gained in the current development cycle, the integration of development could be improved. At the same time, it is also clear that the progress of territorially decentralised developments involving local stakeholders and giving them responsibility, are highly beneficial (compared to other developments, see progress of the regional operational programmes for the period 2007-2013). Therefore, in the next programming period, the application of the integrated territorial approach remains necessary, in accordance with the principles defined by the EU Territorial Agenda. Institutional and instrument structure of the developments should serve the territorial decentralization as well. The Hungarian NUTS3 level counties represent the main platform for territorially decentralised developments of the next programming period, in line with recent decisions on restructuring the territorial administration. Based on evaluations of the current period, instead of allocating resources among territorial actors through competition based application procedures, in the 2014-2020 period, territorial actors should be allocated predetermined resources, in order to implement strategic, territorially and temporally integrated developments. Place--based developments will be implemented on the one hand through integrated operational programmes set up along territorial logics, and on the other hand through sector operational programmes. The former will deal with decentralised territorial developments (TOP, CCHOP, see chapter 1.6). The latter are within a framework of central implementation and/or coordination as territorial developments of national importance, financed by either one or several of the OPs. Preliminary ideas concerning the identification of decentralised and centralised territorial developments, as well as the demarcation between territorial and sector developments are summarised in the introduction to chapter 3.1. The new tools of territorial integration proposed for the 2014–2020 programming period provide an advantageous opportunity to apply an integrated approach to territorial development. The application of these new instruments are under assessment, the preliminary results are described in the subchapters of chapter 3.1.

174

3.1. Types of integrated developments Aims of decentralised territorial developments Decentralised territorial developments aim to support economic development in line with the overall development focus of Hungary. The territorially decentralised actions contribute to economic progress by supporting the restoration of local economic systems and local employment capabilities adapted to the local characteristics. (see chapter 1.1.4 for a more detailed description of territorial disparities, the diverse territorial characteristics and local development needs). Demarcation of sector and territorial development Following preliminary considerations during the current phase of planning, the following aspects determine the range of developments to be handled in a territorially-decentralised manner:  Small-scale interventions of local and regional importance.  Developments that can be managed optimally at county or local level, according to the subsidiarity principle.  Developments addressing specific local social needs.  Developments related to the tasks and assets of local governments and county councils.  Sectoral developments which can be efficiently implemented by local communities or which depend on local characteristics.  Integrated developments within a single OP. (Taking into account the avoidance of double financing, and the principle that similar projects with similar beneficiaries should be tendered through only one programme). The indicative list of topics to be handled in a territorially-decentralised manner are as follows:  support of local and alternative community-based economic development initiatives and cooperations on county-level: support of local product development and marketing of local products, establishment of local product clusters, reorganisation of local markets, development of related institutional environment;  integrated sustainable urban and environmental quality developments creating an attractive environment for the business sector, as well as enhancing climate change adaptation and tackling demographic challenges at the local level (climate-friendly economic developments, rehabilitation of brownfield sites and deteriorated neighbourhoods, urban environment developments and small-scale alternative community and sustainable transport improvement);  development of local and county level public services and community infrastructure development;  supporting integrated county-level tourist destinations and small-scale thematic developments based on endogenous resources (in case of appropriate demand and existing co-operation);  community-based, small-scale utilisation of renewable energy in certain settlements and areas;  small-scale initiatives, ESF-based developments of local-regional importance, initiated from within the local public sphere or the local community, supporting primarily employment (thematic objective 8) and also inclusion (thematic objective 9). These are predetermined projects in the decentralized development packages, related to their ERDF-financed elements. Their implementation is harmonized with similar interventions in other sector OPs, to be defined by the managing authorities. As a principle, it is important that these projects are

175

independent local or regional initiatives which avoid overlap with initiatives targeting similar topics and target groups. The exception is when the territorial action clearly strengthens the impact of related sector development. The subjects can be: training and organisation serving the development of local economy, local employment programmes and pacts, social inclusion programmes (especially in the framework of social urban rehabilitation), training, scholarship programmes20;  territorially decentralized management covering the scope of community-led local developments (CLLD). In addition to these demarcations, sector and territorial synergies should be reinforced. This is supported on the one hand by the horizontal management of territoriality and on the other hand, by the coordination of tasks defined in TOP. Along with these, the coordination mechanisms ensuring synergy are established by the TOP managing authority, especially for development topics contained in thematic objectives 3., 8., 9., and 4. The territorial content of the sectoral OPs has to be ensured during the co-ordination of the OP programming and the coordination of the implementation. Territorial development topics of national importance are handled by sectoral operational programmes. The jointly managed areas are considered indicatively as the following territorial development initiatives of national importance:  restoring the economic competitiveness of the Lake Balaton area (and further areas based on later decisions);  enhancing employment in the least developed micro-regions and strengthening their local economies;  specialised development of the urban regions of certain economic growth zones designated by the National Development and Territorial Development Concept, NDTC. Units of decentralised territorial development and its place in the programme structure and implementation Decentralised territorial developments will be implemented at county level, in the cities with county rights and their surroundings (city regions) and in smaller towns and their surrounding areas. The decision-making bodies of counties, city regions and small town areas (to be defined and delineated more precisely at a later phase) will elaborate programmes based on a dedicated indicative budget and scope (see above, the sector-territorial demarcations). Development sources from the TOP will be allocated among counties by taking into account both the population and the level of development, prioritising convergence. The Government will provide consultancy, methodological assistance and capacity building for this programming activity. The financing of the programmes will be approved by the managing authority following negotiations on the programmes. For the planning and executive capacity building of the integrated development packages of counties and cities with county rights, resources have already been allocated by the Government. The reorganization of CLLDs is supported as well (see in details the CLLD subchapter). (Supporting the management of Lake Balaton area is in progress). In the next development period, the planning and development 20

In the regional partnership process so far the need for decentralized ESF funds and activities has been uniformly expressed. Hungary realized a good practice of it in the 2004-2006 programming period. The experiences acquired since the start of the current period has shown that the lack of these decentralized ESF resources made it rather difficult to realize real integrated territorial developments. The favourable changes in the EU regional development policy are in favour of these professionally justifiable integration opportunities (e.g. increasing requirements for territorial integration, multi-fund OPs etc.).

176

capacities of all decentralized regional development packages (including the county level and the city region ITIs, CLLDs and the non ITI/CLLD-based small town areas developments) have to be secured. This is particularly important during the planning and the application of the technical assistance budget of the TOP. County level municipalities and city regions will also be involved in the implementation of their programmes primarily as the beneficiaries of the projects identified in the programmes (see the implementation table at the end of this subchapter for more information on possible roles). The decentralised territorial programmes are included in the territorial operational programmes. The Territorial and Settlement Development OP (TOP) and the Competitive Central-Hungary OP (CCHOP) create a framework for the ESF/ERDF financed development packages of the counties (+capital city) and city regions. TOP interventions contribute primarily to thematic objectives 3., 6., and 8, as well as 4., 7., 9., and 11. Development actions of the CCHOP contribute to thematic objectives 1., 3., 4., 9., and 10 as well as thematic objective 8. Further tasks of the counties are to co-ordinate all developments located within their territory and to strengthen the compliance of the planned developments of the sectoral programmes impacting their territory through consultation. There is a need for national coordination of the large number of territorial actors and this can be secured primarily by the TOP managing authority and its supporting organizations. Priority tasks for national coordination are (1) assigning indicators with target values serving the successful implementation of the TOP to the development of each county and city region (achievement of target values has to be monitored); (2) fostering initiatives starting from a certain county or city region but covering more areas; (3) ensuring synergy with territorial developments of sectoral OPs or sectoral developments consistent with the themes of the TOP. Average funding of the territorial and urban development packages financed by TOP broken down by territorial units (INDICATIVE!) Main objective County level (18 county level ITI) 3, 8 (4, 9) Cities with county rights (CCR) and their surroundings (22 CCR ITI) 6, 4, 9 (3, 8) Territorial level

Small towns and their surroundings (FUA)

6, 4, 9 (3, 8)

CLLD for the local communities of towns, small towns (as an 9 (technically) option, combined with rural CLLD’s)

thematic Indicative fund allocation (2014-2020) / territorial unit 86.2 million € (25 Bn HUF)/ county 34.48 million € (10 Bn HUF)/CCR 4.14 - 8,. million € (1.2 – 2.35 Bn HUF)/small town and its surrounding 2.7 million € (0.783 Bn HUF)/CLLD

In the case of decentralised regional development packages, the planning and implementation functions of the territorial actors will be shaped as shown in the table below (INDICATIVE!): Function

County municipality

Municipality of towns with county rights

- territorial development concept territorial development concept - County-level integrated development - Urban and urban area integrated Role in programming package (ITI) development package (ITI) (including projects and opportunities (including projects and opportunities of the of the Small project Fund) Small project Fund) approval decision)

(support

Beneficiary status

Managing Authority, as a result of a negotiation process with the county relevant for the ITI Yes, if relevant for the project

Other towns and their surroundings (urban area unit: planningstatistical micro-region defined in the act on territorial development)

Integrated project package

Managing Authority, as a result of Managing Authority, as a result of a a negotiation process with the negotiation process with the CCR relevant to town municipalities relevant for the ITI the ITI Yes, the beneficiary is typically the Yes, typically beneficiary municipality of the CCR

177

Function

County municipality

Municipality of towns with county rights

Codecision in project Yes Yes, if relevant for the project selection Yes, in connection with all countylevel developments implemented in Monitoring TOP (but also monitors the projects of the sectoral OP’s implemented in the region) Supported by territorially decentralized intermediate bodies on Intermediate bodies the basis of current regional development agencies)

Other towns and their surroundings (urban area unit: planningstatistical micro-region defined in the act on territorial development) -

-

3.1.1. Community-led local development (CLLD) The CLLD tool helps to tackle territorial problems optimally and to exploit territorial development potentials locally, using a community-led approach. Making use of the CLLD tool can help to achieve economic and society development goals as listed below:  In the case of certain priority area developments: - Development of rural areas: development of rural areas on the basis of LEADER experiences and results from 2007-2013.  In disadvantaged areas: strengthening local social work; development of curricular and extracurricular education, life-long learning; social employment (serving the purpose of labour market reintegration); development of settlement services; developments aimed at retaining young people in the settlements; developments promoting settling in; community development, development of national and international relationships; development of community spaces; conservation and utilisation of cultural heritage; improvement of the health of the population living in regions lagging behind;  In the field of strengthening local rural economies: business development (facilitating the establishment of micro and small enterprises – incubation and similar services); development of local product infrastructure; promoting local innovation at SME level (innovation “broker” activity, pilot projects, etc.); establishment and strengthening of local production- and consumption systems; promotion of co-operation and networking (clusters); tourism development; exploitation of the potentials of local agro-biodiversity, farm-rearing integration systems;  In the field of sustainability and climate adaptation: local energy strategies (mapping of utilisation opportunities of energy saving potentials and renewable energy sources); energy usage rationalisation in households and companies; renewable energy production (primarily biomass-based); water retention farming; anti-erosion forms of cultivation and landscape utilisation; rehabilitation, establishment and development of habitats; - Integrated and sustainable development of urban areas and urban districts: For urban development and community building based on integrated development packages (see chapter 3.1.3) of certain urban areas.  Covering the whole territory of the country:

178

-

Integrated development of urban and rural communities, development of urban-rural economic, recreational and public service relations. Supporting local economic development at the micro-territorial level: applying the CLLD approach in order to explore and exploit local resources. Local community building is a society development goal throughout the whole country: the CLLD tools strengthen responsible and solidary local communities and increase their capacity for consciously shaping their own future.

The principles of the adoption of CLLD in Hungary:  Adoption of EAFRD financed CLLDs: - Are included in Priority 6 of RDOP. - According to present plans, it will not cover towns where the number of inhabitants exceeds 15 000.  Adoption CLLDs (partly) financed by SA : - The territorial OP’s (TOP, CCHOP) will handle CLLD-based developments as a separate ERDF priority. TOP financed CLLD’s could receive financing from TOP ESF priority as well. - The CLLD’s of the Territorial and Settlement Development Operational Programme can implement co-operation and developments based on urban-rural partnerships, depending on the intentions of local action groups (local strategy) and on key sectoral objectives, or they can form CLLD action groups in exclusively urban areas. - Thematic objectives: in the framework of the CLLD instrument diverse interventions can be implemented in connection with almost all thematic objectives. The main direction is the development of the local economy and employment (similarly to other place-based developments), in particular their community relevance, community building methodologies and impacts (local community awareness in the field of self-organisation and self-reliance). All this ultimately contributes to social cohesion and integration as well, therefore, technically, the priority axis of the SF financed CLLD’s is allocated to thematic objective 9 (inclusion) (in TOP). The CLLD methodology is appropriate to involve vulnerable communities at risk of poverty, however, in Hungary, the significance of the CLLD-based community building goes beyond disadvantaged groups. - In the case of CLLD’s that are financed jointly by SF and EAFRD:  CLLD representing urban-rural connections can be subject to multi-funding. In this case, there is no size limit for the settlement involved.  The LEADER communities set up in the current programming period could play a crucial role in the establishment of CLLD communities, through their reorganisation.  Multi-funded CLLD’s can decide on the lead fund. EMFF funds in CLLDs:  EAFRD or EAFRD/SF-based CLLDs can be financed by EMFF as well, primarily in those areas where fishery is present due to their specific natural conditions.  Fund allocation of the CLLD instrument: - TOP (ERDF+ESF): 7-13 % (ERDF: 87.24%+ ESF: 12.76%) - RDP (EAFRD): 5-17% - HFAOP (EMFF): 3% (no decision has been made yet concerning the available funds for Hungary within EMFF in 2014-2020) - Concerning SF CLLD funds, see table in chapter 3.1.  Coordination tasks: The tasks of the counties in the community led integrated developments: -

179

–

With their comments on the planned developments to be implemented in their respective county, they strengthen the harmonisation of the planned developments within the sector programmes; – They assist in the harmonisation of the geographic demarcations among CLLD groups; – If there is a need to establish a LAG, they support the drafting and implementation of the local strategy; – They harmonise the strategies implemented in their territory in order to achieve the highest possible synergies among developments implemented in the county. – They coordinate and harmonize community-led development programmes in small urban and rural areas, and ensure the implementation of related administrative tasks. Applying CLLD’s is an important part in establishing the institutional system and in preparing potential beneficiaries (see chapters 3.1. and 2.5.).  Preparation for the application of the CLLD approach – In the case of developments focusing on urban regions new local action groups need to be established. – Preparation of the local action groups (LAG) established in the framework of the LEADER programme, and where relevant, their reorganisation has already started. The elaboration of the processes in connection with the territorial reorganisation ought to be completed in the second half of 2013. – The demarcations will be completed in summer 2013, therefore, the LAG’s can start drafting their Local Development Strategy (LDS) from the beginning of 2014; they will be eligible for preparatory grants. – The appropriate preparation of LAG’s is ensured by the provision of study materials and methodology support materials. Due to the multi-funding aspect, the main focus is to transfer knowledge of a much wider range and of a more serious nature, necessary for drafting and implementing local strategies. The LDS’s will be completed by the third quarter of 2014; according to past experience, approximately a period of six months is required to elaborate a high quality LDS. – According to the schedule, the selection procedure should be completed by the end of 2014, thus ensuring sufficient amount of time for the elaboration of the LDS’s. – The organisation and planning of communities is supported by the MNE with methodology and capacities, involving the MRD and other ministries. – For the elaboration of their strategy, the LAG’s are legally eligible for preparatory grants the details of which are to be specified later, though most probably flat rate support would be awarded. The application of the LEADER start up support seems unlikely at the moment, however, if the need arises, this will be made available.

3.1.2. Integrated territorial investments (ITI) ITI instruments can play a significant role in helping to address Hungary’s territorial problems and fulfilling its development potentials. The use of ITI instruments enables the integrated territorial intervention packages to be served by multiple funds, or even multiple operative programs. The ITI instruments can support both decentralized territorial developments (counties, cities) and centrally planned, implemented or coordinated territorial development interventions at the country level. The use of ITI-s supports the economic growth focus of the developments stated by Hungary. However, the presentation of the social, environmental or infrastructural supplementary development elements (forming the basis of a given region’s economic growth) – derived from one or more OP-s – would be easier with the instrument. The

180

use of ITI-s is an important factor in the development of the implementation system (for example the relocation of some implementing functions to the regional level, see the preliminary principles in chapter 3.1.), and in the preparation of the beneficiaries (about this see chapters 3.1. and 2.5.). In the programming period 2014-2020 ITIs will be implemented in each county and in each of the cities with county rights and their surroundings. The vast majority of the intervention areas and budget of these decentralized development packages is included in the Territorial and Settlement Development Operational Programme (TOP), while in case of Pest county in the Competitive Central Hungary Operational Programme (CCHOP). The development packages integrate both ERDF and ESF funds. See tables in chapter 3.1 for delegated competencies and funds. The counties represent a unique Hungarian application opportunity for ITI’s The county governments are elaborating a development package with predetermined budget that will be implemented in the framework of ITIs. These county-level integrated development packages are placed as a separate part with predetermined budget in the Territorial and Settlement Development Operational Programme (TOP), while Pest county is placed in the Competitive Central Hungary Operational Programme (CCHOP). In the summer of 2013 the Government and the county governments will sign a strategic agreement on the implementation of county development programmes as part of the EUfinanced development programme in the 2014-2020 planning period. County governments will have a role in the implementation of their development packages. In particular cases the execution of these tasks may require sectoral financing and coordination, and these may therefore also appear in sectoral operational programmes. Other application areas of integrated territorial investments (ITI) With regard to priority areas of national importance, other centrally initiated ITIs are also to be established in connection with one or several OPs. In the current phase of planning, three territorial development issues of national importance have been considered (see above in the introduction of chapter 3.1 discussing sectoral-territorial demarcation). Further issues can be identified at a later stage. The ITIs that have been considered so far would be funded by ERDF and ESF sources as part of the economic development OP (EDIOP). The programme within HDOP aiming at catch-up and inclusion of disadvantaged and vulnerable social groups can be considered as a special, sector initiated and primarily ESF-funded ITI (see chapter 3.1.5 for more details). (chapter 3.1.5 deals with ITIs of sustainable urban development.) Applying the ITI tool is planned within the frame of ETC programmes if the EU Member States and counties concerned can come to an agreement on the integrated development of crossborder areas (with special regard to cross-border agglomerating urban areas). (for more details see chapter 3.1.3 for city region ITIs and chapter 3.1.5 for “catch-up” type of ITIs)

181

ITI type

county (decentralized!) city regions (cities with county rights and their surroundings) (1) (decentralized!) urban areas of economic growth zones (2) priority sector developments (3S)

Funding OP and priority axis

Number of ITIs Thematic Level of delegating within the certain objective delivery tasks type

Partly overlap with other ITI

18

county government

yes

 City regions (Cities with county rights and their surroundings)  Lake Balaton area

6., 4. (3., 8., 9.)

22

Body of local governments of cities with county rights and their surroundings

no

 county  economic growth zones

3., 1.

min. 5-7 (identification in progress)

(identification in progress)

no

 county ITIs  some of the cities with county rights and their surroundings

3., 8.

1 (in case of assignment other tourist areas or other areas of special character)

Lake Balaton Development Council and its operational body

no

3 county ITIs concerned

particular TOP ERDF and ESF priority axes

3., 8. (9., 4.)

particular TOP ERDF and ESF priority axes

EDIOP:  SME prior. (ERDF)  RDI prior. (ERDF)

Does the ITI type cover the whole country?

economic competitiveness of Lake Balaton area (3) (tourism and diversification)

EDIOP:  SME prior. (ERDF)  economic development prior. aiming at employment promotion (ERDF)

economic catchup of least developed microregions (LDM) by supporting employment 4)

EDIOP:  SME prior. (ERDF)  economic development prior. aiming at employment promotion (ERDF) (special enterprise zones)  employment prior. (ESF) ESF priority axes of HDOP

8., 9., 3.

1 ITI covering all the target areas: LDM (FEZ) and in case of HDOP further focus by using poverty maps

(identification in progress)

no

most of the countylevel ITIs

Budapest and its agglomeration /Pest county

(identification in progress)

(identification (identification in progress) in progress)

(identification in progress)

(identification in progress)

(identification in progress)

(1) It is identical with the micro-region around the city with county rights in scale (see chapter 3.1.3 for the delimitation principles); (2) Identified so far: Kecskemét and its surroundings; the area of Szombathely-Szentgotthárd-Zalaegerszeg, Győr and its surroundings; Miskolc and its surroundings; (3) Lake Balaton Resort Area, the operational area of Lake Balaton Development Council; (4) EDIOP funds will flow into the Special Enterprise Zones (identical with LDM), within LDM HDOP will focus on areas identified on poverty maps.

3.1.3.

Sustainable urban region development

The development packages of the towns with county rights (see above), possibly including the development of Budapest and its agglomeration or Budapest and Pest county, will primarily be implemented in the framework of ITI’s. The main objective of these “urban” ITI’s is to strengthen the economic functions of cities, to promote the shift towards the green economy, to develop sustainable transport and the urban environment, and to provide complex reconstruction of neglected urban areas alongside the enhancement of social inclusion. The revision of the integrated urban development strategy of the towns with county rights and their agglomerations (urban regions) as well as that of Budapest and its agglomeration is in progress, in line with the Europe 2020 strategy and the targets of the new cohesion policy, which serves as a basis for the sustainable urban development ITI project packages. The guiding 182

principles concerning the demarcation of the planning regions for the urban region integrated programmes are set out in the Government decree 1081/2013. (IV. 5). The ITI’s aimed at sustainable urban development are primarily included in the Territorial and Settlement Development Operational Programme (TOP) and in the case of Budapest, the Competitive Central Hungary Operational Programme (CCHOP). The programmes are integrated by the OP’s priority axes with their predefined amount of ERDF and ESF funding. County municipalities are responsible for the coordination of the developments taking place in their territory, including the territory-scale coordination of urban development measures.

Fund ERDF ESF

Indicative fund allocation to sustainable urban Proportion of the allocation in the total development (EUR) budget, according to funds (%) (no final Member State allocation yet) 6.45% (no final Member State allocation yet) 1.67 %

For the delegated competences see table in chapter 3.1., further information in chapter 3.1.3.

3.1.4. Priority areas of international territorial co-operation In line with the strategic priorities of NDTC (National Development and Territorial Development Concept, NDTC) the following main co-operation areas need to be supported from the Hungarian point of view:  enhancing competitiveness and employment based on cross-border co-operation;  promoting territorial integration in the border areas by strengthening environmental, transport, water management and energy networks;  promoting institutional integration and improving relationships between communities in the border region. Regarding cross-border and transnational programmes, thematic objectives and investment priorities are identified jointly with neighbouring countries. In the definition of the objectives of the cross-border programmes, a key role is given to the county level development concepts elaborated in connection with the NDTC. According to Hungary’s position, the application of integrated territorial investment (ITI) instruments should be possible in the cross-border programmes of ETC. In the ETC programmes the integrated territorial investments are implemented by the European Grouping of Territorial Co-operation. In the case of transnational programmes, the establishment of a direct link to the Danube macroregional strategy could fundamentally define programme level objectives. Hungary supports that the ETC programme concerned provide the framework for coordinating the implementation of EUDRS. Hungary is in favour of having smaller scale, non-investment type EUDRS developments in the transnational programmes whereas more significant developments are to be financed from “mainstream” programmes. Besides the SF and CF funded OPs the task of securing coherence and the contribution to the strategy is also present in the system of interventions of EMFF (HFAOP) and EARDF (RP). Securing national level coordination is a task of the Hungarian delivery system. Hungary puts serious emphasis on the transnational programmes making the institutional system of EUDRS implementation and also inter-institutional co-operations more effective. Building up environmental and flood monitoring and forecasting systems (taking into account the fishery and aquaculture aspects), as well as appropriate measures for protection, are important issues within

183

the Danube Region. Hungary plans many interventions together with partner countries in this macro-region to protect and use the common (and cross-border) natural and cultural heritage in sustainable ways. The Danube Transnational Programme has an important role in developing RDI capacities to support SMEs. There are also major opportunities within the Danube Region to cooperate both in the development of sustainable transportation and in the elimination of sustainable energy shortcomings. The EUDRS affects not only the forming of Hungarian ideas to be implemented within the macroregional strategy, but also the areas action plans and different interventions within the Danube Region Strategy. Significant added value should become a part of other member states’ programmes supported by ESI Funds. In the interest of a successful planning and implementation process, Hungary aspires to establish coordination between the content of its and other member states’ development programmes involved in this macro region. A typical example for this is the arrangement for water management which could be implemented successfully in Hungary through coordination actions with neighbouring member states. Hungary will restructure these development issues as a result of future international agreements. In addition domestic planning policy will be adjusted to the objectives of the EUDRS taking better account of macro-regional interests.

3.1.5. Integrated development of less favoured areas and disadvantaged groups The aspect of convergence of the less favoured regions must be applied in every operational programme and must be considered during the OP planning. (see chapter 1.5.4, under the horizontal objectives of territorial cohesion). In the course of allocating funds among the regions implementing territorially decentralised developments, an important aspect is the convergence need and social-economic handicap. Counties in this situation can receive proportionally higher amounts. The economic development of the least favoured regions as well as the mitigation of their labour market challenges and their social integration is supported by targeted central initiatives. These developments are included in the relevant sector OP’s. Important elements of the implementation include the establishment of a standardised planning, methodology and coordination background and monitoring, training of experts and ensuring a continuous expert support. The appointment of the organisation responsible for the ITI strategy planning and for performing the delegated tasks of implementation is in progress. Integrated territorial investments address social integration and housing disadvantages in the least favoured regions and strengthen their labour market and their economy Geographic demarcation: In geographic terms, the programme covers the least favoured regions (LAU1). Some thematic areas have different geographic focal areas. For the accurate geographic demarcation of the social integration interventions, the poverty maps will give guidance, and for the economic, employment development interventions the legal

Needs: The basic aim of ITI’s is to prevent social exclusion resulted by income poverty and other social-economic disadvantages and to avoid the passing on these disadvantages, thus to strengthen social cohesion. An important objective is social cohesion, enhanced opportunities for children, as well as promoting social and labour market integration. For long-term convergence, a wellfunctioning local economy and jobs are needed. (for the situation

184

Funds ERDF

ESF ESF

Planned actions Economic development through free business zones (ERDF): SME job creation, investment incentives, economic infrastructure development, regional economy management, Employment measures (ESF), Raising the level of education of people in disadvantaged situation on the labour market, including the Roma, tailored assistance, skill development, training, non-formal and informal learning complementing education, developments to prevent school drop out, (ESF), Implementation of local development strategies, programmes aimed at social co-existence, community building and social inclusion, local equal opportunities programmes, strengthening intersectoral and interdisciplinary cooperation among local /regional actors,

Programme EDIOP

EDIOP HDOP

demarcation of the free business zones.

Elimination of segregates

analysis of the least developed micro-regions see chapter 1.1).

ERDF

HDOP Elimination of segregates

ERDF

Support outside the scope of ITI => EAFRD

The county- and urban region-level, decentralised development packages of TOP and its CLLD initiatives can also be linked to the initiative, depending on the decision and real needs of the region’s actors (ERDF), The RDOP CLLD initiatives can also be linked to the initiative, depending on the decision and real needs of the region’s actors (e.g. company housing) (EAFRD)

TOP

RDOP

4. ARRANGEMENTS TO ENSURE EFFICIENT IMPLEMENTATION OF THE PARTNERSHIP AGREEMENT AND PROGRAMMES (ARTICLE 14(2)(B) CPR) 4.1.

An assessment of the existing systems for electronic data exchange, and a summary of the actions planned to gradually permit all exchanges of information between beneficiaries and authorities responsible for management and control of programmes to be carried out by electronic data exchange

Configuring the systems for electronic data exchange is a part of the transformation process of the implementation of the 2014-2020 period. Assessment was launched to reveal how the existing systems meet the requirements of the next programming period. Current state of electronic data exchange Currently the following information systems for programme monitoring serve electronic data exchange (with different preparedness): SF and CF – UMIS; EARDF and EMFF – IACS; ETC programmes – IMIS. Preparedness of currently operating systems for electronic data exchange is diverse. We should emphasize that the on-line platform of the UMIS which manages SF and CF resources is exemplary among member states according to evaluation of the European Commission. This UMIS platform is a major tool for reducing the administrative burdens of beneficiaries. The Hungarian monitoring system is outstanding in terms of interoperability at the European level. The monitoring system for EU development policy funding has already developed on-line connections with:  the monitoring system of Hungarian State Treasury for national funding resources, where o output data are the project and payment data, o input data are related to Community funding of project owners.  the datasets of National Tax and Customs Administration of Hungary where o output data are identification codes, o input data are public dues and liabilities.  the system for management of accounts and invoices of Hungarian State Treasury where o output data are payment claims, o input data are bank statements (under development).  the system of public information of Hungarian State Treasury where o output data are identification codes,

185

o

  

input data are the most important items of government bodies and state organizations. the system of business register where o output data are identification codes, o input data are the most important items of Hungarian enterprises. the system for land register (under development) the system for mortgage register (under development).

The registers outlined above and the monitoring system for funding are connected through an interface. When the forms for calls for proposals have been completed, some of the most important applicant data, such as form of business or state/public organisation, can be completed automatically through the on-line accessibility of treasury and business registers. These inputs do not require typing or research for the applicants which saves time for them. It also reduces the possibility of wrong data entry, furthermore the data is also valid for the implementation institutional framework. Observations as a result of available assessment outcomes: Experiences so far:  Computerization of tendering processes was emphasized during the current implementation period, where the agreed IT objectives were consistent with the principles set out by the Commission.  A number of developments have been initiated during the current period which partly or entirely provide electronic data exchange for beneficiaries throughout the different tender processes.  The use of electronic data exchange systems has been a part of ongoing processes during the current implementation period in terms of SF and CF resources. This is clearly apparent in the related regulations.  Application of electronic solutions results in a significant decrease in administration. Action areas of the full configuration of electronic data exchange systems:  Elaboration of the regulation background which supports efficient implementation.  Planning the information technology projects required to achieve the defined objectives.  Pipelining the experiences of currently initiated solutions.  Targeted communication towards beneficiaries about electronic data exchange issues.  Implementation of developments that are needed to set up electronic data exchange systems.  Configuring an adequate infrastructure for the management of increasing amount of data, provide the required hardware units and tools.  Elaboration of user-friendly online and offline system platforms which support efficient electronic data exchange. Principles of electronic data exchange for 2014-2020 (the ongoing assessment will be finalized as stated above):  Good experiences should be considered and developments will be based on existing systems in terms of efficiency.  Improvements must cover those action areas which were identified by initial assessment results.  The elaborated new system shall be implemented by standard principles in terms of various funds, requirements cover the management of all ESB Funds.

186

  



 

  

 

The central coordination institution has the task and responsibility for securig electronic data exchange (see more in chapter 2.5). The monitoring information systems of operational programmes shall provide the basis for executing electronic data exchange. Genuine and relevant data should be available both for central coordination and for the managing authorities. MAs should be informed by each other’s processes. (Cumulative statements could be improved, particularly in the case of indicators for technical advance.) In the current period, the architecture of the monitoring information systems brings into focus only financial and project advances. As such it cannot adequately serve the monitoring of technical advances (indicator values), the localisation of outcomes. We need further development which comply with the establishment of the system of indicators regarding the key importance of this field in the next implementing period. Well-designed and well-prepared systems for technical monitoring, complete with high quality architecture (e.g. EMIR), nevertheless often do not provide up-to-date and accurate information about technical or financial advances due to poorly input data. During the current period some improvements were made, but generally this meant adding supplementary data which was a very time-consuming procedure both for the beneficiaries and for implementing institutions. The training of operators to ensure proper inputting of data should be arranged for both programme management and beneficiaries. Data systems should be prepared to monitor the tasks of complex integrated interventions with overlapping priorities and programmes (especially ITIs, multifund CLLDs). These functions are not supported by current systems. Standardized planning and implementation of the ESB Funds requires configuring interfaces to establish the connections among the single support schemes or funds (this function is missing from the current systems). Double funding can be avoided in this way and will also enable the monitoring and evaluation of the cumulative performance of programmes. SFC outputs of the systems should be covered, the present practice of the IMIS is currently an example of best practice in this field. Electronic data exchange supports the strategic monitoring of programmes, their publicity, transparency, the communication of their outcomes and performance. (UMIS has already provided exemplary solutions in the current period, especially in the case of the ROPs.) Electronic data exchange should be present throughout the whole process of acquiring funding, from the phase of electronic tender submissions to creating reports. In this way the administration can be reduced for beneficiaries. (The advanced electronic tendering systems of UMIS and IMIS imply sufficient grounds for improvement.) It will certainly help potential beneficiaries and implementing organisations if the data required for funding applications is available from certified public databases and from their own information systems. The systems should support the internal processes of the implementation institutions.

According to the principles above the following steps can be identified (elaboration is in progress) 1. Completing the ongoing assessments of monitoring information systems, recommendations (summer 2013) 2. Elaboration of system concepts relating to electronic data exchange (central and by ESB Funds/ by programmes) which extends all the action areas identified by the outcomes so far (see above) and which enforces the principles (see above) (Autumn 2013). 3. Establishing the interfaces to ensure a relationship between the current and future monitoring information systems of various support schemes and funding (EMFF, EARDF, SF,

187

CF, ETC): Database and Information System of Development Policy (DISDP). This is done with EPAOP (Electronic Public Administration OP of 2007-2013) support, one part of which is the elaboration of the National Tender Management System and the establishment of its connections. (2013/2014) 4. Performing system improvements suited to the requirements of the next implementation period based on current monitoring information systems (4th quarter 2013-1st quarter 2014): 4.1 In the cases of EARDF and EMFF (IACS) the development is under way with the support of EPAOP. 4.2 In the case of SF the improvement of UMIS will be realized according to current concepts. 4.3 A new system should be developed for the monitoring of ETC programmes. 5. Preparation of human resources required by the institutional background (2nd quarter 2014)

188