Discussion Papers 1992. No. 12.
Restructuring and Regional Policy in Hungary
CENTRE FOR REGIONAL STUDIES
OF HUNGARIAN ACADEMY OF SCIENCES
DISCUSSION PAPERS
No. 12
Restructuring and Regional Policy
in Hungary
by
HORVATH, Gyula and HRUBI, Laszlo
Series editor
HRUBI, Lasz16
Pecs
1992
Discussion Papers 1992. No. 12.
Restructuring and Regional Policy in Hungary
The Discussion Papers series is sponsored by
BAT P6csi Dohanygyar Kft.
a Member of the British-American Tobacco Company Group
ISSN 0238-2008
© 1992 by Centre for Regional Studies, Hungarian Academy of Sciences
Technical editor: Dombi, Peter
Typeset by Centre for Regional Studies, HAS
Printed in Hungary by G—Nyomdasz Ltd., Pecs
Discussion Papers 1992. No. 12.
Restructuring and Regional Policy in Hungary
CONTENTS
Introduction (5)
Signs of depression in the urban area of Pecs (8)
New forces driving the development of the area (23)
The basis for the adjustment strategy of the region:
innovation and the development of professional culture (30)
Change in the role of local developments (34)
A change in the function of the regional development (42)
Bibliography (47)
Horváth, Gyula – Hrubi, László: Restructuring and Regional Policy in Hungary.
Pécs: Centre for Regional Studies, 1992. 47 p.
Discussion Papers, No. 12.
INTRODUCTION
The socio-economic model that prevailed until recently in Hungary and the other
East European countries was characterized by a policy of extensive development
focussing on quantitative growth. The structural concentration and central, state
control of both the society and the economy was very strong. Consequently the
system of political and economic decision-making was also centralized while the
production and redistribution of incomes depended on central (state level)
distribution. The development policy of this concentrated structure and centralized
decision-making system had a unified and strong set of priorities mainly representing
macro-level and sectoral interests and paid very little attention to regional
expectations and characteristics. This kind of policy quite naturally resultdd in a
polarized regional structure with advantages accumulating in some areas (primarily in
the towns, industrial centres and particularly in the capital) and increasing
disadvantages in others (like rural, agrarian areas). It must be pointed out, however,
that most of the accumulating advantages were strongly relative, deriving from and
serving, at the same time, the prevailing structure and mechanism.
As it turned out later, the existence of the more highly developed areas also
depended on a very frail foundation; the key element of our development policy was
industrial growth concentrated in some priority towns or regions which acted as
poles, also determining the development of the third sector. As a result, we have
several regions in the country with significant industrial bases. At the same time,
industrial development in some areas was uneven, one-sided or restricted to a couple
of large companies, in this way making the region and the development of industrial
potentials too strongly dependent on them. Therefore these „poles" of development
are best described by: uneven regional structure, exaggerated concentration of capital
and organizations, lack of market forces and relations, low adaptiveness to and
interest in changes.
There can be no doubt that all this was not only and primarily the result of a
distorted regional policy but the materialization of the general economic mechanism
(model).
The relativity of regional advantages and the seriousness of disadvantages
suddenly came to light in the mid-80s; both external and internal factors played a part
in the revelation of the socio-economic crisis. This new situation was created by
factors like the second wave of the Hungarian economic reform, the enforcement and
real operation of market relation (strict monetary policy, the introduction of the new
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Horváth, Gyula – Hrubi, László: Restructuring and Regional Policy in Hungary.
Pécs: Centre for Regional Studies, 1992. 47 p.
Discussion Papers, No. 12.
tax system, a more active exchange-rate policy and a series of restrictive measures),
as well as the recognition that the change of the economic system was inevitable.
When mining, metallurgy and the heavy industry in general got into a crisis, the
areas previously acting as „poles" of development suddenly became depressed areas.
The decrease of production could not be avoided and opening new jobs for the
unemployed became a dramatic regional and sectoral issue: sectoral, because capital
and labour should be streamed into new or already efficient sectors, industries and
regional, because the elimination of loss-producing activities takes place at different
rate in the various regions and the mobility of the population is very limited (housing
problems, lack of infrastructure in areas that, in principle, could take up more
people).
The economic policy pursued so far, including regional policy — although the
latter never really got integrated into the economic policy which reserved the right to
exclusively determine the socio-economic processes at the macro level with just a
slight distinction among the sectors — got into an openly manifest crisis by our days.
The particular regional manifestation of this crisis — besides the other regional
problems — is the emergence of the depressed and economically backward areas. The
proportion of these areas is quite significant both within the population and the
economic potential. It is very difficult to define their extent, all the more so, that the
interpretation of the related terms is not unambiguous. The interpretation used in
government or parliamentary decisions includes only a minimum of economically
backward areas i.e. 19% of all settlements in the country, the residence of some
450,000 people. Depressed zone problems are more acute in the Northern industrial
region (Miskolc city and surroundings) and in South-East Transdanubia (the urban
area of Pecs city).
Among the economically backward areas we find mostly rural regions where
agricultural production is hardly profitable and there is no or little opportunity for
any other kind of economic activity, the infrastructure is undeveloped or absent, the
erosion of the population (aging, moving away, other structural distortions) is very
strong. These areas are on the periphery of the society and most of the settlements
that belong here have less than 500 inhabitants.
Depressed areas are primarily the centres of heavy industry (mining, metallurgy,
etc.) where recession is expected to last long even in the auxiliary industries. The
economic structure of these areas was developed in terms of the previous model,
therefore adjustment to the new conditions requires a dramatic change in structure,
high but perhaps temporary unemployment and other severe social and economic
hardships.
These crisis regions do not simply mean a regional, social or economic problem,
but also a delicate political issue. As illustrated very clearly by the example of the
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Horváth, Gyula – Hrubi, László: Restructuring and Regional Policy in Hungary.
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Discussion Papers, No. 12.
developed European countries, the term equal opportunity is a category of the human
rights in the emerging young democracies. In Hungary today housing is one factor
that hinders the realization of equal opportunity.
A study analyzing problems related to backward regions was published in No. 7 of
this series in 1988. The present study focusses on structural changes in depressed
areas taking as an example the region around the towns Pecs and Komki. The
problem of depressed areas viewed as an issue of regional policy is relatively new in
Hungary. This is the reason why we extend our analysis well beyond the actual
problems of the Pecs-Komlo region and raise more general questions related to
structural changes at regional level.
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Horváth, Gyula – Hrubi, László: Restructuring and Regional Policy in Hungary.
Pécs: Centre for Regional Studies, 1992. 47 p.
Discussion Papers, No. 12.
SIGNS OF DEPRESSION IN THE URBAN AREA OF PECS
When giving an overall picture of the economy of Baranya three characteristic
sectoral features of the structure can be pointed out:
— the mining industry has a determinant role;
— it is a traditionally agricultural area;
— light industries and food processing are significant beside the mining industry.
With knowledge of the present economic and market conditions these three
characteristics themselves make it evident that the economic potential of the area may
get into a critical position. If to the above mentioned things we add that the
agricultural sector is a dominant economic base in an area where conditions of
productivity are unfavourable on the two third of the county's territory, and industry
is considerably concentrated in the Pecs-Kom16 area, which is the „core area" of the
county, then we get a relatively precise picture of the problem in the county's
economic stucture, and the pressing necessity of the structural change.
As a result of prevailing economic policy priorities, plans for regional and urban
development have so far regarded Pecs and Kom16, as well as the surrounding
settlements, that is the conurbation of Pecs as the engine of the county's
development, because of concentration of economic resources and income deriving
capacity of the productive sectors, and that the diffusion of these productive forces
can kick-start the economies of the county's microregions. Economic policy courses
in the four decades of socialist development encouraged these efforts, even justified
them, insomuch, that the average income of people living here far exceeded the
national average. These facts, as well as other statistical data could cause it to be
forgotten that there was a danger in the foreseeable future of collapse of the regional
development based on the mining industry and declining sectors of world economy
and that a well-considered structural change is necessary. This danger, otherwise,
was pointed out by researchers in the mid-seventies when they saw the social and
economic decline of the depressed areas in Western Europe.
At the beginning of the eighties indications of the regional crisis increased. The
radical fall-off in the dynamics of the productive sectors, and the slowing down of
economic growth became a characteristic trend, particularly in the county of Baranya.
Whereas in the period between 1973-1978 the productivity dynamics in Baranya was
116.3% (lowest among the counties), at the beginning of the eighties between 1979-
1984 a fall-off in production was noticed. The 94.7% index was second in the
counties' league behind the production fall-off in Budapest's industry. The 2.7%
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Pécs: Centre for Regional Studies, 1992. 47 p.
Discussion Papers, No. 12.
uplift in 1987 proved to be only a passing tendency of the decade, in 1988 a 4.3 %
slump took place, and at present the production volume of the industry is by one
sixth less than in 1980.
Different indices of the industrial net output also foreshadowed the unfavourable
positions of the county's industrial potential. These indeces were below the national
average. (2.8% of the national income was produced by Baranya county in that time.)
The index of industrial development (net output value per person) was 69% of the
national average, the index of living labour productivity (net output per industrial
employee) was 66%. Among the 19 counties of Hungary Baranya was fifteenth in the
first index, in the latter one it became last.
Only the level of industrialization (rate of industrial employees within the
population) exceeded the national average. A misconception regarding the condition
of regional development is revealed very clearly in the case of the county, that is the
industrialization (as a quantity index) and the state of industrial development (as an
index representing quality indices as well) run into one another. Industrialization was
generally used as a development indicator, and in using this structural problems for
example were not even revealed.
A claim for reshaping the development track has also been outlined from the
structure of industrial net production in each industrial sector. 29% of industrial
output came from mining and electric energy industry, 14% from raw material
industry (chemical industry and building material industry), also 14% from machine
industry, 43 % from food processing, light and other industries. The cause for the
industrialization index to be the only one above the national average is the mining
orientation of the county. At the same time there was a word of warning, namely that
the rate of net output in the machine industry was just half the national average, and
that the production of food processing and the light industry exceeded the rate of the
sectors in the national economy by two third.
We get a similarly gloomy picture of the industrial structure with regard to the
number of employees (Table 1).
There was hardly any visible change in the industrial structure of the county in the
eighties. Beside the fall-off in mining and the coming up of food industry, there was
not much of a reorganization.The industrial structure has essentially been preserved
in a condition which was different from the national one and in a less developed one
taking the economic and market conditons into account (Table 2).
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Horváth, Gyula – Hrubi, László: Restructuring and Regional Policy in Hungary.
Pécs: Centre for Regional Studies, 1992. 47 p.
Discussion Papers, No. 12.
Table 1
The structure of industry in Baranya county by the
number of employees in 1980 and 1990
1980
1990
Change
Industries
Number of
%
Number of
1990/1980
employees
employees
Mining
21,313
29.7
13,422
25.9
63.0
Electric energy industry
2,418
3.4
2,432
4.7
100.6
Metallurgy
729
1.0
546
1.1
74.9
Machine industry
8,968
12.5
6,518
12.6
72.7
Building material industry
5,463
7.6
3,979
7.7
72.8
Chemical industry
1,437
2.0
1,625
3.1
113.1
Light industry
17,953
25.0
13,606
26.3
75.8
Other industries
3,721
5.2
260
0.5
7.0
Food industry
9,784
13.6
9,399
18.1
96.0
Total
71,786
100.0
51,787
100.0
72.1
Source: Baranya megye statisztikai evkonyve. 1980. 1990.
(Statistical Yearbook of Baranya County.
1980. 1990). Pecs: Kozponti Statisztikai Hivatal
Table 2
The structure of industry in Baranya county and in Hungary by the number of
employees in 1980 and 1990 (%)
Baranya county
Hungary
Industries
1980
1990
1980
1990
Mining
30.9
25.9
7.1
6.1
Electric energy industry
3.3
4.7
2.2
3.4
Metallurgy
1.1
1.1
6.0
4.9
Machine industry
11.5
12.6
32.0
32.9
Building material industry
7.4
7.7
4.9
4.6
Chemical industry
2.2
3.1
6.9
8.6
Light industry
28.3
26.3
25.3
22.1
Other industries
1.4
0.5
3.4
1.9
Food industry
13.9
18.1
12.2
15.5
Total
100.0
100.0
100.0
100.0
Source: Baranya megye statisztikai evkonyve. 1980. 1990.
(Statistical Yearbook of Baranya County.
1980. 1990.) Pecs: KOzponti Statisztikai Hivatal
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Pécs: Centre for Regional Studies, 1992. 47 p.
Discussion Papers, No. 12.
The difference itself does not represent a problem of course, since the
specialization of regional economies, adaptation to local circumstances, is a necessity
and provides a resource for regional economic growth. The structural problem is
characterized by the lack of one or two tracks of adaptation when structures and basic
elements survive, despite the fact that the evoking economic and market conditions
have already changed or become disadvantageous.
With regard to our topic it makes no difference actually whether the cause of it
can be found in the centralized economic policy, the simulated market, distorted
prices, that is in the characteristics of macroeconomy as a whole or in the companies'
organizational, management or local, in some respect subjective elements. The
structural problem, as starting position is a given thing.
The industrial structure of Pecs city, the county centre is not much more
advantageous, however, the trends of structural change characteristic of the whole
county here are more striking (Table 3). The significance of the town in the county's
employment rate has lessened. Decrease in mining is considerable but its counterpoint
is the leap forward of the rate of food processing. Compared on a nation-wide scale,
the town's industry, however, presents quite a gloomy picture in 1990 as well.
Table 3
The structure of industry in Pecs city by the number of employees in 1980 and 1990
Percentage in the
Number of
Industries
same industries of
employees
Baranya county total
1980
1990
1980
1990
1980
1990
Mining
13,133
4,260
34.2
16.9
62.6
31.7
Electric energy industry
1,761
1,849
4.6
7.3
78.2
76.0
Metallurgy
283
191
0.8
0.7
37.0
35.0
Machine industry
4,507
3,637
11.7
14.4
57.5
55.8
Building material industry
2,345
1,795
6.1
7.1
46.5
45.1
Chemical industry
883
1,038
2.3
4.1
61.9
63.9
Light industry
9,340
6,456
24.3
25.6
48.7
47.5
Other industries
739
170
1.9
0.7
73.8
65.4
Food industry
5,433
5,849
14.1
23.2
57.6
62.2
Total
38,424
25,245
100.0
100.0
56.6
48.8
Source: Baranya niegye statisztikai evkanyve. 1980.- 1990. (Statistical Yearbook of Baranya County.
1980. 1990.) Pecs: Kozponti Statisztikai Hivatal
Structural weaknesses of the industry in the county of Baranya are reflected in the
development of income producing capacity as well. The profit of the enterprises in
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Pécs: Centre for Regional Studies, 1992. 47 p.
Discussion Papers, No. 12.
the county rose from 1,850 million Ft in 1986 to 2,619 million Ft in 1987, then in
1988 it went down to 1,797 million Ft and even in 1989 it was only 2,117 million Ft
calculated at current price. The profit per employee in industry in 1989 is 36,500 Ft,
and it is equivalent to 3.4% rate in proportion to net returns. Additional document to
the permanent character of the structural problem and to the fact that it is still not
changing is given by an analysis of the 1986 figures made by Baranya County's
Territorial Organization of the Central Statistics Office. According to it 7% of
industrial employees in Baranya work for an economic organization with low profit-
yielding, 13 % for organizations which are in a bad financial shape, and 23 % work
for organizations which produce low profit and are in a bad financial shape. It is true
that economic problems are cumulatively present in mining and building material
industry (the last group), but these companies employ 23 % of the industrial workers.
The companies which are in a bad economic position employ 41 % in light industry
and 15% in machine industry.
Finally we must point out that among the factors representing the growth
capability of the industry, the background for research and development are rather
weak in the county, though they are essential in the secure market diversification to
come. 0.96% of active wage-earners in Baranya (1,944 persons) worked in jobs
connected with research and development (the national rate is 1.6%). From the
figures of Table 4 a general survey is drawn up which proves the disadvantageous
conditions of research base in the county. According to R+D inputs Baranya is the
twelfth among the 19 counties, whereas it is last according to inputs per researcher
which is only 25.9% of the national average. The fact that only 4 company research
units are registered by research and development statistics from the 81 R+D centres
of the county gives food for thought, and at the same time reveals a whole range of
things to be done. Characteristic additional fact is that only 4 of the 700 development
projects supported by the Central Technical Development Fund and 30 million of the
6 billion Ft financial support were allocated to Baranya in 1991.
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Pécs: Centre for Regional Studies, 1992. 47 p.
Discussion Papers, No. 12.
Table 4
Data for the research-development centres in 1986
Total number
Expenditures
Input by researcher
Counties
of staff
input
order
million Ft
(thousand Ft)
order
Budapest capital
50,839
18,792.8
1
741.4
9
Baranya
1,944
223.0
12
184.6
20
Bacs-Kiskun
678
132.8
13
421.5
11
Bekes
756
245.5
10
1,319.8
4
Borsod-Abatij-Zemplen
2,322
720.1
6
725.2
10
Csongrad
3,656
747.0
5
412.3
13
Fej61.
2,455
1,250.4
2
1,576.5
2
Gyor-Sopron
1,449
578.8
8
808.4
8
Hajdti-Bihar
3,225
630.9
7
361.5
16
Heves
570
72.7
16
225.8
19
Konuirom
624
233.1
11
1,137.1
6
Nograd
241
37.5
19
421.3
12
Pest
4,050
1,225.7
3
899.3
7
Somogy
220
43.8
18
339.5
17
Szabolcs-Szatnuir
745
119.9
14
368.9
15
Szolnok
711
260.2
9
1,227.4
5
Tolna
247
87.7
15
1,654.7
1
Vas
162
19.4
20
242.5
18
Veszpran
2,414
1,150.2
4
1,345.3
3
Zala
355
64.6
17
408.9
14
Source: Tudomcinyos kutatas es fejlesztes. 1986. (Research and Development. 1986.) Budapest: Kozponti
Statisztikai Hivatal
It is difficult to show with synthetic indices the economic potential of Baranya's
industry on the whole. The position according to value added may be the fixed point
to hold on when giving a rough characterization. The appropriate data for statistics
are collated from the companies' balance sheet reports, from the field observed in it,
that is reservations must be pointed out mainly in relation to a given region. It arises
mainly from the fact that performance is sometimes taken into account in another
region or can't be revealed. All this is caused by the organizational system of the
economic units, and it happens more often in the case of significant extraterritorial
dependence. On the whole statistics underestimate the value added in the county's
industry a little, yet it is illuminating to survey these sets of data (Table 5).
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Discussion Papers, No. 12.
Table 5
Distribution of the added value of industry in 1990
Distribution (%)
Added value per employee
Industries
(thousand Ft)
Baranya
Hungary
Baranya
Hungary
county
total
county
total
Mining
27.2
11.9
303
789
Electric energy industry
12.2
11.8
748
1,374
Metallurgy
1.0
6.6
277
533
Machine industry
9.2
24.4
211
298
Building material industry
12.3
4.3
461
373
Chemical industry
7.5
16.6
686
778
Light industry
16.6
13.3
182
242
Other industries
0.3
1.0
154
224
Food industry
13.7
10.1
217
259
Total
100.0
100.0
288
401
Source: Baranya megye statisztikai evkonyve. 1990. (Statistical Yearbook of Baranya County. 1990.)
Ncs: K6zponti Statisztikai Hivatal. (Calculation by authors.)
It turns out from the table that backwardness of the county's industry is
significant even compared to the national average which does not represent a high
standard either. It must be mentioned that the industrial structure of Baranya can be
described by the dominance of mining, light and food industries, and exactly in these
fields the county indices are low or significantly lagged. We firmly believe that — all
possible influences of errors taken into account — the data in their trends give a
realistic evaluation of the relative situation of the county's industry. Experience
proves that the companies which had a characteristic and determinant role in the
county's industry previously are now almost without exception in the state of heavy
recession, not rarely of disintegration.
Agriculture reveals a more favourable position regarding the county's economic
potential. The previously used index of value added per employee was 379,000 Ft in
Baranya in 1990, compared to 311,000 Ft of national average.
The average estate value, which reveals the quality of all the large farms'
agricultural areas in Baranya is virtually identical with the national figure'(18.8, 18.9
respectively), but within it cropland has a county average of 16.4, and the national
average is 17.4. There are significant local differences within the county average. For
example the productivity of the eastern and the south-eastern parts is distinctly
favourable with large farms working efficiently, but the other parts are more or less
disadvantageous. The greater part of the Pe,cs-Komlo region belongs to the
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Discussion Papers, No. 12.
disadvantageous zone. For example the average index of productivity in the landscape
of Hegyhat, a large part of Pecs-Kom16 region, is around 10 —12.
Natural resources of this region don't encourage agricultural production in large
farm, form especially in a production structure, which until recently because of
economic and financial conditions was generally favourable (profitable in sectoral
respect) for large farms in Hungary. Despite this fact, or perhaps that is why the
regional plant concentration of the agricultural co-operatives here exceeds the county
average. Though it cannot be proved directly — with data —, the accompanying
over-employment within agricultural plants is likely to be significant.
It is very difficult to render anything probable in its future, however, agriculture
may play only a partial role in the transformation of Baranya's economic structure, in
its revitalization through food processing. If we consider its role restricted to the
Pecs-Kom16 region then we should suppose that it worsens the critical regional
situation caused by the industrial structural change and the reduction of mining;
because the change in the agricultural organization and ownership system, the
selection made by the market, and the ceasing of forced over-employment all make
the region's agricultural supporting base weaker, free labour force, and in the case of
certain towns, villages and small zones the lack of attached economic base may occur.
Summing up, the economic structure of Baranya is characterized by an industry
which is organically and locally concentrated, obsolete in its sectoral structure,
regressive in its activity and profitability and by an agriculture which is still
developed and yielding above the average, with relatively favourable resources.
However, in the case of the agriculture one the possibility of development — which
promotes regional economic stabilization is — differentiated in regions and exactly
the Pecs-Komi() zone is one of those where this chance is considerably less.
High-grade polarization in its rural and urban structure has always been a feature
of Baranya's regional development: lots of small villages at one end, and Pecs, which
has the function of the regional centre at the other, and between the two the interim
levels which are generally underdeveloped and can fulfil their functions in the rural-
urban network system only partially. This is the reason why processes in this region
have been concentrated even more than necessary in territorial sense: the theoritically
possible regional system and proportions for fulfilling different management-
production-supply functions were replaced by a more concentrated regional system
virtually, where the fulfilment of functions was by turns shifted upwards. The
process, of course, was sustained and not in a small extent by concentration and
centralization of economic and regional policy. At present we are witnessing a virtual
local „Budapest-syndrome", with the difference that the centre which is much more
developed than its region also got into a critical situation, because its economic
structure has stiffened and become obsolete. The Pecs-centred feature of the county
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Discussion Papers, No. 12.
hasbeen given, it cannot be ignored, and the fact that its whole region has got into an
„operating dependence" of it cannot be ignored either.
The region which is directly threatened by depression has approximately 250,000
inhabitants, as we suppose it, and this is more than half of the county's population. In
this region — Pecs, Komlo and about 50 connected villages — 80% of the county's
industrial employees and of gross value of fixed assets, 79% of net value of the
industrial machines and equipment are concentrated here, so as to mention only some
features. Internal concentration within this core area is of similar extent: 81 % of the
population, 92% of the industrial employees, 95% of the industrial gross value of
fixed assets, 96% of net value of the machines and equipment can be found in Pecs
and Kom16 towns.
Apart from this region, the territory of the county, with the exception of the
north-east and eastern parts, is practically covered by underdeveloped rural areas
(reaching into the supposed area of depressed zone at some places). A further one
seventh of the population (approximately 60,000 people) live here. In order to make
the difference clear: only 5% of the industrial employees of Baranya live in these
rural zones and 11-12% of the whole gross value of fixed assets can be found here.
Underdeveloped rural and depressed areas jointly mean that the regional economy
of the county struggles with severe development problems, and is characterized by
structural crisis. Despite the internal differences and basically different internal
relations the whole of the county's economy needs an overall treatment. Though the
development of economically underdeveloped rural areas and the restructuring of the
depressed zone as programs should be placed in the centre of a county strategy as
equal tasks, key position is taken by Pecs and partially Kom16.
The size, structure, efficiency and dynamics of the economy in the Pecs and
Kom16 region cannot fulfil the role of the engine, which it has played in development
so far. The majority of reasons causing the economic development to stop short and
decline does not differ from the factors which caused the emergence of the depressed
areas in the developed countries. It also shows great similarity how general economic
policy exerts its effect.
The critical situation of the Pecs-Kom16 industrial zone and its becoming a
depressed area can be explained mainly by sectoral recession. The heavy reduction in
the dominant coal and uranium mining cannot be counterbalanced by other structural
elements or resources of the region. Moreover, the change of the economic regulatory
system, the operativeness of normative regulators — first of all the reduction of
export subsidies — as well as — and primarily — the dramatic change of market
conditions shake the position of the light industry which is the other pillar of the
economic base. Food processing, the third pillar also joins them, there are also
negative signs are gathering at present.
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This economically declining region — if factors bringing about economic crisis
are jointly present already — is less and less capable of the economic restructuring or
of lessening the local social and political tension. Economic reduction influences the
psychological state of the local communities increasingly, a demographic erosion can
be brought about, highly qualified people may transmigrate (it can be detected from
certain signs that the rate of professionals among active wage-earners is continuously
decreasing), the state of the service sector may get worse. That is, the conditions for
introducing modern economy are becoming more and more unfavourable.
The present socio-economic state of the Pecs-Kom16 region indicates a deepening
depression. The income yielding capacity and development hopelessness of the
economy marks the beginning stage of the region's decline. However, the classical
features of the depression cannot yet be found in the sociological structure of the so-
ciety or in the infrastructural sectors. That is the very reason why there is a chance in
mid-terms to prevent deepening of the crisis and high-grade growth of social costs of
revitalization. It can be done by working out an regional adaptation and development
strategy as soon as possible and by creating a system of means combined with it.
Unemployment more and more serves as some synthetic indicator of regional
crises, which are more and more common and wide— spread, and as a counterpoint
of it: the spreading of new-type organisations, the intensity of enterprises being
established can be an index number of positive reaction to the crisis. These two
indicators — not by chance — denote a certain discriminant in the government policy
as well, they give criteria according to which areas which are in the worst state and
are in need of central intervention most, can be pointed out.
Unemployment is present in Baranya appearing in absolute numbers as well from
1989. However, the presence of a considerable, yet in-doors unemployment was
foreshadowed previously by the county's economic structure, and by the signs of
employers' financial position, liquidity, significant narrowing down of the market.
The number of open and registered unemployed people was 960 in the first month of
1990 and it rose to 5,780 by the beginning of 1991. Within it the rate of unskilled
and commuting unemployed people was dominant. Redundancy mainly hit the
unskilled workers whom the companies had to reimburse travel expenses, so it was a
money saving action.
At the same time on the demand side the 2,045 vacancies registered in January
1990 went down to 893 by the first month of 1991. Moreover, demand and supply
sides showed great structural differences, as the above mentioned supply of mainly
unskilled workers did not suit the companies seeking skilled workers first of all.
Tension accumulated in the production structure and in the employment structure
of the county as well. While the number of employees in the production (the 1st and
2nd sectors) decreased and increased in the non-material services, processes leading
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to the constraint of structural change intensified. These processes were embodied in
staff cuts in the first stage.
The fact that the industry of the county has been concentrated in the very region
that has become a critical area makes it more difficult to ease the tension, and
economic and infrastructural conditions for diversification are insufficient in other
zones of the county.
As a consequent upon all these facts the number of employees in the county
decreased by 17% in 1991, mainly in industry and building industry, but other
sectors have made considerable staff cuts too.
The heavy predominance of supply in the labour force market has also been and
being effected negatively by the demographic growth of the labour force, until 1994
about 5,000-6,000 young people will seek for their first job. During the year a
rapidly growing unemployment which increases by 1,000-1,500 persons every
month was registered. By the end of 1991 the number of out-of-employment job-
seekers multiplied by 3.5 that is 18,003 persons (Table 6); among them 15,031
received unemployment benefit or allowance.
Table 6
The number of the out-of-employment job-seekers in 1991
Districts
January 1991
June 1991
December 1991
P6cs
1,737
2,358
5,478
Kom16
1,301
2,002
3,602
Mollies
1,167
1,752
3,310
Sellye
518
1,023
905
SiklOs
995
2,161
SzentlOrinc
369
613
670
Szigetvar
725
1,816
Total
5,780
8,719
18,003
Source: Data by the Job Centre of Baranya County
The rate of unemployment from 2.7% in January rose to 9.1 % by the end of the
year, which average covers considerable territorial spreading. While it implies 5.3%
in Pecs, it implies 12-19% in the towns Kondo, Mohacs, Szigetvar and in their
districts. The unemployment rate in Hungary at the end of 1991 is 8.5%, within this
2.6% in Budapest, the capital, while 10.3% on the average in the provinces.
The labour force market was burdened with contradictions, which meant regional
on one hand and structural troubles on the other hand. Great majority of jobs was
offered by employers in Pecs (80-90%), at the same time only 20-40% of job-seekers
were inhabitants of Pecs. As recently as January 16 jobs fell to 100 job-seekers, but
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Discussion Papers, No. 12.
only 9 in June, and only 2 in December (skilled manual workers were in the most ad-
vantageous position, 15 jobs fell to 100 persons in June, while only 5 in December).
The change in the unemployment structure is marked by continuous growth of
skilled unemployed people, and simultaneously the number of unemployed people
with higher education has also increased during the year. 60% of out-of-employment
job-seekers are men, which is more than their share within active wage-earners, 75%
belong to the 25-55 age group, the rate under the age of 25 is 22%.
Surveys and prognostics project a much darker picture for the end of 1992: on the
whole, the position of the county's labour force market is expected to have 35,000 —
40,000 registered unemployed people beside 150,000 employed. A further differen-
tiation of regional and structural differences can be expected within these indices.
Despite the increasing tension of the labour force market, employment
opportunities are „the most favourable" in Pecs. The relatively favourable position
may originate in the Pecs-centredness, however there is also a dynamic
unemployment growth in the background. The large companies concentrated in the
town struggle with severe problems, majority of them have lost their markets, their
liquidity is weak. Negotiations with foreign partners are drawn out or do not realize.
Privatization is slow and difficult.
The unemployment rate is 5.3% in Pecs in December 1991. The number of
unemployed people 18 continuously growing. There were 1,737 job-seekers in Pecs in
January and 5,478 in December. One third of the unemployed are skilled workers and
one third are professionals. 65% of the reported vacancies are in Pecs. 61% of the
jobs in Pecs offer employment to skilled workers, 14% to professionals. However,
this means only 200-300 jobs. The efforts of the employers to cut staff have
intensified, the number of reported organised staff cuts for the first quarter of 1992 is
close to 1000 men.
Depression effects concerning the county are concentrated in the Kom16 region.
Employment opportunities for those who have become unemployed because of staff
cuts have narrowed down, the period of time when they wait for employment has
increased. Employment of unskilled women implies a special problem here.
The unemployment rate of Kom16 is 5.9% in January 1991, number of
unemployed people is 1,301; 16.3% in December, 3,602 men; which shows a 2.8
fold growth. 27% of the reported vacancies in the county is in Komlo and its district.
But this means so few in absolute numbers that we cannot speak about job supply.
Only 18 jobs can be offered to 3,602 unemployed people.
To sum it up, we can state that the heavy unemployment which is already pressing
at the moment — and is bearing social tension — is growing on in Baranya too. The
established low wage-level makes it often impossible for the employers of the region
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— because of the relatively high wage-level of the mining workers — to employ
people who have already become unemployed.
Resulting from the regionally different effects of the processes which foster the
growth of unemployment (industrial bankruptcies, restructuring of agriculture, etc.),
the prognostic concerning the county in 1992 shows hardly any modification in the
structure. The nearly 30% share of Pecs in the number of unemployed will remain,
the 20% share of Kom16 and its district will increase a bit, but supposedly in a way
that the unemployment in the district increases more than in Kom16 town.
So the closing of the mines not taken into account, there is likely to be 9,000-
12,000 unemployed in Pecs and its district, and 6,000 —9,000 unemployed in Kom16
and its district. However, in the previous case the share of town-dwellers of Pecs will
be at approximately 80% in Pecs and its region, while in the latter case the presently
40% share of Kom16 may decrease a little.
If this extremely pressed oversupply market is even swelled by ranks of
unemployed laid off from mining then this makes it impossible to cope with
unemployment. The labour force absorbing capacity of the region is practically zero,
it can anage natural labour force change at best. The retraining of the peculiar labour
force employed in mining — even if the trend of retraining could be predicted
because of quick upswing of the economic basis — is very difficult because of the
state of health and attitudes of these people.
The reduction of labour force supply, its tolerable extent can be achieved only by
job creation based on well-considered conception. Only in this case the means of
employment can help this process to be implemented and realized. The county's
Employment Fund is not capable of doing this properly. The claims for the
deconcentrated fund in 1991 — especially in job creating investments, retraining and
retirements with waiving of the age-limit — far exceeded the possibilities.
Significant worsening in the condition of the labour force market can be revealed
in other indices as well. Another index of the social situation is the income positions
of the population. It is a well-known fact that with regard to property and income
Baranya — due mainly to the mining industry — was one of the regions in the
country where people were better off reaching back for several decades. This better
position seems to disappear according to income and tax statistics for 1990. The
revealed taxable income per person is 156,000 Ft in Baranya, and the national
average is 165,000 Ft in 1990.
With regard to the size of the specific income tax this means the following:
compared to the national average of 12,000 Ft of income tax per person, and to the
provincial average of 9,600 Ft, Baranya's index is 11,000 Ft. Average specific tax
bases of Pecs and Kom16 are better (181,000, 158,000 Ft respectively) than the
county average.
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According to the formation of new businesses and the spreading of enterprises, the
county of Baranya is around the national average, or a bit above the provincial
average. Of course Pecs plays a determinant role in this respect: according to the data
given in the firm bulletin one (0.94) person from about a hundred founds a new
enterprise. The town average in Baranya is 86 persons from 10,000, though Mohacs,
the next town, has less than half of it compared to Pecs. Moreover, if we do not take
Mohacs into account, the villages belonging to the district of Pecs have an average
enterprise-frequency index which exceeds the index of other towns of Baranya. This
means that Pecs and its district — following a model of concentrated and hierarchical
spreading (diffusion) — produce the position of Baranya in the spreading of
enterprises. The counterpoint is, unfortunately, Komlo. According to the situation at
the end of 1991, Kom16 is the 39th among the 176 Hungarian towns in its
population, whereas,
it is the 70th according to the number of new enterprises,
— within this it is the 81st according to the number of limited liability companies,
it is the 122nd according to the frequency of new enterprises (number of new
enterprises per 10,000 inhabitants),
it is the 140th according to the frequency of limited liability companies,
it is the 122nd according to its growth rate of new enterprises in 1991.
Almost each of the data proves the very disadvantageous position of Kom16 when
compared to both the national and the county state, especially to Pecs in the field of
economic revival and transformation of organization. Characteristically enough, the
indeces of Sasd and Pecsvarad, two previous, historically established microcentres of
the region, are better. The frequency index of the new enterprises in these villages to-
gether with some other villages of the district is nearly equal with the index of Kom16
town (27 people found a new enterprise from 10,000 in Kom16, and 24 in its dist-
rict). The number of new businesses more than doubled in each town of the county in
1991, in Komlo this index was only 78%, so the pace compared to 1990 slowed
down.
If we consider the reaction to crisis according to the spreading and frequency of
new organisations, then we must state that Pecs and its district are in an advantagous,
the town of Komlo and its district are in quite a disadvantageous position. Because of
the economic structure and the development of the economic base, the whole of the
Pecs-Komlo region suffers from depression crisis, which would need regional policy
intervention. This region is surrounded by a large underdeveloped rural zone, which
together with the depressed core implies the very imminent chance of turning into a
socially and economically critical region if it does not get support. It would be much
more difficult and the costs would be much higher if it was handled later.
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NEW FORCES DRIVING THE DEVELOPMENT OF THE AREA
In order to decide on a new course of development we have to reassess the
resources and characteristics of the Pecs-Komlo urban areas. The defining role of the
mineral resources, i.e. the predominance of mining will be considerably reduced.
Instead of the extraction of these natural resources the new economic activities will
primarily rely on the existing infrastructure, human resources, the mobilization of
capital goods, the exploration of interior resources and an organization structure
capable of attracting operating capital from abroad. The main elements of this
economic transition will be intellectual work, technical development and the
appreciation of management activities. As a new resource for growth we can count on
the geopolitical situation of the region, its participation in a international division of
labour. The changes in the political and economic relations with the countries of
Central Europe will also significantly influence regional development here. A
promising idea on the part of Hungarian foreign policy is to consider Central Europe
as a unified, independent region of civilization instead of a set of separate countries,
regions. This means that a field of action for Baranya county in international relations
could be the Alpine-Adriatic Regional Association, this highly developed region in
Central Europe, mainly because of the geographical proximity that is so important in
the international regional division of labour. Another component of development will
be the transformation of economic organizations. The structure of business companies
will become more differentiated, due to the new, venture-friendly environment. New
company forms will appear: partnerships, corporations, joint ventures etc. that will
make efforts to improve the technical culture of production and improve also services
required by production. In contrast with the traditional attitude to production, more
intellectual and material resources will have to be devoted to the creation of the
market and the establishment of the company's presence at the market. The small
companies established with state support and a special credit system will adopt new
forms of co-operation in manufacturing. The interaction of local communities will
strengthen the local-regional relations of market co-operation because economic
adjustment does not depend on the individual performance of isolated businessmen,
but rather on the partner relationships and the mutual transfer of innovations. This
requires a special atmosphere of economic psychology in which people can be united
not only for the achievement of economic targets but also for the advance of their
environment, settlement and local society. Besides the market forces these
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professional, cultural and political norms of the local community will act as a driving
force of economic rationalism.
All things considered we can say that the county's strategy for regional
development must be based on a new combination of the internal economic resources.
External — national and foreign — means of economic development should be used
exclusively with regard to preferences of local requirements, in order to make better
use of the local resources or increase efficiency. Only this kind of local policy can
prevent the recurrence of the development policy which prevailed in the 1960s and
which, in order to solve problems of unemployment, might lead to the emergence of
a vulnerable economy with unintegratable components, based on external regional
dependence. It is self-evident, however, that the solution of the increasingly high
unemployment will require, in certain cases, the so-called „blitz" programmes of the
traditional regional policy of industrial development. The main driving force of the
processes, however, will not be the unilateral involvement of the extra-regional
factors, but an innovative regional policy, serving the purposes of socio-economic
modernization. Parallel with the development of such a programme the local
organizations will have to expedite legal guarantees for regional participation in the
decision-making process and decentralization in politics, government and planning,
which is a prerequisite for the full evolution of regional skills of innovation and
adjustment.
The main trend in the development of the economic structure in the Pecs-Kom16
region is diversification, the introduction of potential flexibility into the economy.
The importance of the extracting industry in the region will be reduced and the
positions of the processing industries will become stronger. The organizational
structure of industrial production will also be modified, with a decrease in the
concentration of large companies and the viable machine industrial plants becoming
independent of their external headquarters, thanks to the new legislation on
transformation and economic associations. The extensive development of the third
sector will create new jobs, the range of quaternary functions will extend and in this
way Pecs may become a regional centre for services.
The main purpose of the structural transformation in the region's industry is to cut
down loss-producing activities, to increase the share of modern manufacturing
industry and to reduce the concentration of the industry into the two towns. Because
of changes in the regulations of the processing industrial exports to East Europe, a
transformation can be expected in capacities, product and market structure. The
expansion of the manufacturing industry will primarily be influenced by the social
conditions in which it will have to operate in the future. The transformation of
industrial sturcture will depend partly on the new, increased elbow room of the
factories and partly on the economic policy that will enforce an efficiency-oriented
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Discussion Papers, No. 12.
attitude. Flexibility in co-operation, finances and organization, as an element in
increasing the company's elbow room, has so far failed to get integrated into the
system of economic policy.
The trend in the demand for labour is expected to be the following: there will be
excess labour in fields that are doomed to be cut down. The companies that are
quicker to react to market demand, or more flexible in the adjustment process, may
require additional labour in the running-in period. In spite of this the most serious
issue in the near future will be the tension caused by employment problems. The
modernization of the production structure presupposes a significant redeployment of
labour. Many workers of the loss-producing companies that are to be wound up will
have difficulty in finding employment or certain groups may become unemployed for
a longer time. The more severe conditions at the labour market will reduce the
employment of women and the unskilled groups of the population who are at a
disadvantage already. We shall have to analyse thoroughly the consequences of the
forecast saying that the selective-intensive development of the industry, the increase
in labour productivity and efficiency will lead to a steady decrease in the number of
industrial workers until the turn of the millenary.
Most probably this forecast and the low share of material and non-material
services will make it imperative for us to perform a deeper analysis of these
industries during the structural transformation of the economy.
The service sector should be made an important component in the development of
this region. This key sector of modernization, especially education and tourist trade
are more profitable than other industries and offer equally good opportunities for
joining in the international division of labour. The comparative advantages of the
region make it positively suited for the development of a complex strategy for tourist
trade. Besides the two high quality and marketable forms of tourism — professional
and medicinal — we could offer different components of recreational and hobby
tourism. This trade might yield hard currency and become an integral part of a
national strategy for tourism. The development of the cultural institutions,
intellectual workshops in Pecs with the help of a co-ordinated programme, might take
a course that allows the integration of these cultural activities into the international
exchange of services. The county seat has good potential to become an important
Central European centre in the foreign trade of services, and the creation of an
international scientific-educational basis is also worth considering. The position Pecs
has already attained in the international division of labour in the field of scientific and
cultural activities, the appearance of the town at the international market may attract
capital and inspire international economic relations as well.
The development of the regional infrastructure can be a purpose but also a means
of creating a diversified economic structure and relieving social tension. Bearing in
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mind that the infastructure will play a decisive role in the modernization of the
economy in the future, the state will concentrate its economic efforts on this field.
The modest goal we can set by the turn of the millenary is to slow down the rate of
deterioration and to speed up development in some prioritized fields. Infrastructure
directly related to production should be considered an item of top priority.
The development of manufacturing, the transformation into an innovative, flexible
economy, the increase of local decision-making and direct participation in the
international markets may lead to the emergence of a new resource, the complex
system of informatics. The modernization of the main roads and the reconstruction of
the airport of Pecs must be given infrastructural priority in the service of economic
development. A complex infrastructural development will be required in the regional
sub-centres, like Szentlorinc, Pecswirad and Mcizasztiszvcir, in order to provide the
local infrastructure needed by new businesses.
The system of the economy can only be transformed if the present rigid economic
organizations are changed first. Competitiveness can be improved only through
services like councelling, marketing, financial transactions. The social mechanisms of
fast capital movement, risk-taking and good management require new types of
organizations. The operation of the consulting, educational, management, sales and
foreign trade networks established with the support of programmes aimed at the
development of the marketability of small and medium-size business will provide
useful experiences. This kind of infrastructure can be created with capital from
banks, firms, the self-government and private entrepreneurs.
The accumulation of commercial capital would be greatly promoted by the
establishment of a regional commercial firm, whose activities would range from
foreign trade services, project financing through research and development (R+D)
promotion to enterprise engineering management. It would be worthwhile
considering the foundation of a regional body of foreign trade to be operated in some
form of partnership or association.
The Industrial Fair of Pecs could also serve product and technology renewal after
a radical change in the basic concept and with good management. An expert
organization will have to be set up for the development of foreign trade in services.
The role of crediting and banking is expected to grow in the reshaping of the
economic structure and the acceleration of capital flow. Because of interest in short-
term crediting, banks are not yet able to explore business opportunities, co-ordinate
capital flow, investments or manage different businesses. The hierarchic banking
systems of the highly developed countries have created various forms of financing
regional development.
The rapid increase in the number of financial, banking actors is justified by the
recognition that the integration of central and local resources can most efficiently be
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Discussion Papers, No. 12.
performed locally. (The reason why even the innovative small banks prefer to get
integrated into the public sector than into the business sphere is found in the
deficiencies of the Hungarian economic policy.) Besides the branch offices of
international banks, or of central business institutions, we shall have to establish the
network of local-regional little banks. Their task would be to perform the financial
transactions related to regional development. A special regional bank (with a scope of
activities over Baranya county or South Trans-Danubia) could finance and manage
regional development and the transformation of the economic structure. It would also
have a major role in the crediting operations related to the implementation of regional
development projects, in the promotion of new businesses, the rational investment of
local resources, the acquirement of credits, state subsidies, normative allowances and
the orientation of foreign working capital.
Considering that the general economic backwardness of the South Trans-Danubian
region has produced a whole set of problem areas, there will be a need for long-term
socio-economic programmes and it would also be worth considering the establishment
of a South-Trans-Danubian association for regional development to make use, in
international co-operation, of the comparative advantages offered by the geographical
location of the region near the border of Hungary.
The complex economic structure and the differentiated organization needed to
operate it will set new requirements for the development of human resources in the
region (professional training and cultural level of labour). Preparation for innovative
activities will call for reforms in every component of the educational system. A
revision of the present secondary and special training as well as the establishment of
the regional retraining centre would be an important field in the improvement of the
professional skills. Another field would be the increase in the number of highly
qualified people. Demand is expected to grow mainly for professionals in engineering
and the various economic disciplines. The local university could undertake the
training of specialists in tourism, finances, marketing and management. Engineering
specialists, however, can only be attracted from outside of the county. Perhaps the
training of engineers at the technical College of Pecs also needs some reforms.
The transformation of the economic structure in the Pecs-Kom16 area requires
complex means. The specific means to be used in structural and regional development
will depend on the role that the state, the government is willing to take, on the
division of labour between the counties and settlements as well as on the mechanisms
used for allocation.
The registration of the potentially depressive economic processes means that new
jobs can be opened parallel with the structural transformation only with the help of
special regional allowances. This area — after being declared to be a depressed area
— and the other backward areas of Baranya county, as well as other regions of
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Hungary struggling with structural tensions should be given a special treatment to
alleviate the situation, which, besides measures like abatement of profit tax,
entrepreneurial loan for those who start a new business, the employment fund, the
regional development and management fund, could include the following:
— a regional system of business insurance,
— accelerated amortization,
— reduction of VAT for small and medium-size business ventures,
— reduction of the social security fee to be paid after employees in case of new jobs,
for a definite time,
— better loan and interest conditions,
— special regulation for co-operation among borderline regions.
It should also be examined how it would be possible to regroup the present forms
of support and loss-financing according to the new tasks and principles (for efficient
job creation, the development of the infrastructure).
It is of vital importance that parliament should make the state responsible for the
regional policy means to be used in areas with structural troubles, through
legislation. This is the only way for these means to become a good, reliable basis for
long-term business ventures.
With regard to the geopolitical characteristics that make this region patticularly
suited to participate in the international division of labour, it would be useful to
examine the advantages and disadvantages of a special economic zone that could be
created around Pecs. This goal is in good agreement with the concept that Pecs
should become a centre for commercial-economic-scientific relations in Central-East
Europe. The advantages of the free-trade zone for regional development are the
following:
a) the productive factors can be acquired without additional costs,
b) manufacturing has high priority here,
c) it contributes to the decentralization of the economy,
d) export possibilities increase significantly,
e) it creates new jobs,
0 it introduces new types of co-operation.
Considering that the development of economic attitudes conform to the world
market will take a very long time in Hungary, it is important to point out that the
adjustment of the Pecs region could be accelerated by the free-trade zone and the
effects of the capital inflow on structure, technology and competitiveness could be
felt all over the South Transdanubian region.
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THE BASIS FOR THE ADJUSTMENT STRATEGY OF THE REGION:
INNOVATION AND THE DEVELOPMENT OF PROFESSIONAL CULTURE
The purpose of the transformation of the economic structure in the region is to
reduce the share of the material- and energy-intensive, often polluting industries, to
minimize or perhaps eliminate loss production and, at the same time, to increase the
profitability of the economy by introducing efficient economic activities. The change
in product structure is motivated by the requirement of flexible adjustment to the
needs of the internal and external market. The failure to achieve all this may result in
the loss of the existing market positions for the companies in the region.
Structural transformation will inevitable entail the modification of the
employment structure as well. A more efficient production structure will require
different quality and quantity of labour, i. e. presupposes a more extended mobility
and mobilization of labour than before. Since structural transformation unavoidably
goes together with a certain degree of unemployment, the rationalization of the
economy has to cope with a significant social opposition in every system.
Adjustment has been defined as a continuous accomodation to the changing
market requirements. If this endeavour proves to be successful, the competitiveness
of the region or the companies will improve. It means that the continuous monitoring
of the changing needs, the production of good that can meet these needs at a high
level, the supply of proper services and permanent adjustment are all indispensable
components of market competitiveness. Certain interest groups have expressed views
that refuse to adjust their business to the demands of the market and prefer to shift
responsibility for the solution on others. This attitude is not only naive, but will
certainly lead to further weakening in their positions which will entail grave
consequences.
Throughout this study we have pointed out several times that the purpose of the
adjustment strategy is to increase value added that is realized in this region. This
requirement can only be fulfilled by a structural concept that will reduce dependence
on factor conversion based on the conventional supply of factors. Such a concept
must necessarily contain infrastructural supply representing the comparative
potentials, a system of regional management and other factors that can have an impact
on the adaptiveness of the region.
Giving top priority to the development of the manufacturing industry within the
county's industrial strategy will require a kind of county policy and, in particular,
R+D policy that are quite different from what we have had so far. New, value-
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increasing industrial cultures can only be adopted if technological development is
accelerated, and the environment here in the county becomes more innovation
friendly. (We do not and will not mention here those well-known tasks of the macro-
economy and economic policy which are prerequisits for the development of the
national industry to the international standards.
Technological development, in the broad sense, must be considered as an
independent, complex element of county policy in the structural transformation of the
Pecs-Komlo area. In this area, for reasons we have previously reviewed, innovation,
the technical-technological characteristics, management activities are still backward.
Financial input into R +D activities is very low, the number of R+D centres is
negligible, there are no signs in the economy of the appearance of the innovation
chain (research — development — production — sales). New products are very slow
to appear in the industrial production of the county.
As an additional remark it must be mentioned that this technical-technological
development which has to be accelerated, will, in itself, induce a rearrangement in
the economy. These changes in the economic structure will result in changes also in
the role certain productive organizations have played in the county, namely they will
lose their strong influence and function in the enforcement of interests. The place of
the previous relative stability and slow technical development will be taken by rapid
changes, a rearrangement in the present positions of individuals and communities,
which, in the long run, should be considered so much as part of normal development,
as the previous slow, safe development meaning, for the most part, a qualitative
growth in the production of goods and services. The organs of the county-level
government that were established under completely different conditions of
development, can, of course, not cope with the social conflicts that have already
broken out. The publicity given to the central, local governmental, and company-
level economic decisions and the establishment of bodies and mechanisms for the
reconciliation and representation of interests will become more and more important.
Some fundamental tasks related to the technological renewal, and the complex
economic and social requirements of adopting new skills and forms of activity are the
following:
— a rational modification of proportions within the factors of production so that
the new technology should prevail over labour that has so far substituted for
technology;
— the exploration of the new resources is not conceivable without the elimination
of the loss-producing activities, and the freeing of the productive factors that have
been engaged in an unfavourable way;
— an acceleration of the circulation of productive factors, the strengthening of
relations for the market of certain factors, the increase in flexibility, the
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establishment of the capital market, an increase in the influence of the centres of
innovation and the elimination of rigidity at the labour market.
The requirement that technical-technological innovation should be made an
element of the county government, raises the question of the division of labour
among the actors of the economy and government, all the more so that this task has
not been included so far among the traditional functions of either the self-
governments or county administration.
It has already been mentioned that the right and duty of decision-making on
strategical priorities should be given to the companies. Structural transformation, on
the other hand, i. e. the definition of development trends should not be left
exclusively to the companies, especially if the economic and social environment is
burdened with elements of depression. Company sensors used to follow technical
development are mainly based on economic regulations and not on the international
conditions of competition. International experiences have shown that the changing
philosophy of industrial policy — coupling technological development with
management skills, entrepreneurial spirit and marketing — may also extend the
channels through which innovation can he promoted and creates a wide range of
supports offered by the local-regional government. Besides the traditional
participation in the central-governmental, mainly high priority projects of
development involving financial allotments as well, many countries offer non-project
type support to regions. In addition to the government subsidies given to individual
companies or R+D co-operations, the funds provided for the development of
consulting, counseling and information services are also considerable. (In Great-
Britain, for example, a quarter of the funds provided by the Ministry of Trade and
Industry for innovation, was not used for technological development in 1987-88.)
In Hungary the need for the establishment of a decentralized, regional financing
system of innovation is justified by the transformation of the economic structure and
company organization. The small and medium-size companies (assuming that their
appearance and spread is considered the organizational driving force of structural
changes) will have serious difficulties obtaining the information, knowledge they
need in order to solve the special technical problems and finding markets or partners.
A growth-oriented company attitude, coupled with dynamic exports requires an
efficiently operating market organization, regardless of the company size. Strongly
cost-sensitive small companies cannot even dream of maintaining their own, efficient
organizations for marketing, designing, quality control and regulation, business
planning, finances and information. Organizations offering services in the above
fields will become indispensehle in the 1 36cs region too, but the utilization of these
services will have to he promoted with subsidies provided according to strict criteria.
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Regional and local governments must play an important role in the creation of the
physical, economic and intellectual environment required by technical advance and
competitiveness, and in the establishment of a modern infrastructure.
Priorities accelerating technological development in the region could be the
following:
— the qualitative and quantitative development of the R +D centres, the
establishment of an entrepreneurial-innovative (industrial) pool;
— the development of the innovation chain in the priority areas;
— the organization or extension of post-gradual training in order to have the neces-
sary number of highly qualified specialists in the new structure (e.g. the training
of engineers, experts of tourist trade, specialists in the complex socio-economic
issues of development, managers, the development of foreign trade culture);
— retraining of skilled workers.
Personal qualities in company management should also be considered as a factor
in the innovative processes leading to technical-technological development, since they
are at least as important as the technical-economic conditions. It would be interesting
to study the role managers of companies in the county play in the processes of
technical-technological renewal. Without such a study we cannot prove the
conclusions of a national empirical survey: the activities of the managers slow down
innovation. Investigations made among technically qualified intellectuals in the
county can provide some basis for such a study: we still have a high number of
medium and top level manager whose appointment was not motivated by their
professional qualities and initiative, therefore many of them do not come up to the
requirements of structural transformation. It is therefore justified to expect a rapid
change in the company management.
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CHANGE IN THE ROLE OF LOCAL DEVELOPMENTS
The development of the economic agglomeration of Pecs-Komlo is affected by
extra- and intra-regional factors. In the short run the trends of restructuring will
certainly be greatly influenced by the decisions of the central government under the
economic pressure and hopefully on the basis of rationality affecting the extractive
industrial bases in the near future. At the same time the predictable future of the
reform of the Hungarian economic policy and of socio-economic modernization, as
well as the possibilities of the unfolding of a consistent regional policy will ensure in
the long run for the regional development to rest upon an adjustment strategy based
on the concensus of the local business, governmental and civil autonomies.
The elaboration of such an innovative regional development strategy should be
aimed at, the main endeavour of which is to consistently create a diversified
economic structure built upon the endowments of a particular area, in this way the
region becomes suitable for fulfilling a driving role which is required by the
neighbouring backward regions. In the forefront of the innovation-oriented regional
development policy is the development of marketable products, industrial processes
and services, followed by their systematic, programme-like renewal. That is to say,
regional policy should serve the development of the adaptibility of this area.
Therefore, in a mixed economy functioning under market conditions the regional
policy does not influence the local economic and communal decisions according to
the central norms as in the past but rather on the basis of the signals of the market
tendencies it will mobilize performances required for the changes by means of
adequate local regional-economic decisions.
Local development is a relatively new concept in the international special
literature. Among the users of the concept there is no concensus on how to interpret it
or how an economically well-founded policy should make use of the possibilities of
local development. The diverse standpoints can be summarized by two conflicting
systems of views. One of them is characterized by conceptions within the framework
of the present economic system, while the other outlines a significantly restructured
system of the capitalistic mixed economy.
What is implied by the mysterious concept of local development? The word local
means an event or activity, the replacement or maintenance of which starts from the
regional or lower levels. By the word development the interrelation of economic
growth with structural changes in an irreversible way is meant. It can be measured
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the best by the change in the relative productivity standard of a region and the size of
the incomes projected in relation to the population.
Thus local development is such a locally induced economic growth which takes
place with taking into account the framework of the market system. In order to
remain local it has to undergo a four-stage change:
a/ the appearance of local businesses,
b/ growth and expansion of local enterprises,
c/ keeping the local enterprises under local control,
d/ realization of an autonomous local structure of control and local business service
sector.
It is clear then that the local development refers to a process in which the
endogeneous, local factors play a decisive role. In this way the concept of the local
development policy also rests upon the assumption that the individual regions may
relatively get an edge over the others by means of internal ventures. Therefore, it is
not true that their fates are completely determined by the locational, structural and
resource endowments as well as by the limitations of the external relations. There has
been much evidence to show that individual areas were able to create something
outstanding at the national level even under adverse circumstances when the people
living there had the adequate know-how and entrepreneurial spirit coupled with
initiative skills.
By virtue of their nature regions are open systems in the economic sense. We
must not forget about the significance of the external factors. Thus the local
development policy is not a replacement but a supplement to regional policy.
1. First approach to local development: the role of capital
In spite of the fact that the specialists of regional development have stressed for a
long time that development does not have merely an economic character, very few of
them have gone beyond that point in reality. The governmental policy and the
scientific theories wish to take the decisive steps of regional development by means of
developing the industrial activities. The formula is simple: to make an area more
attractive the capital possessed by it should be increased in some way. Either the
investments of the community should be enhanced or private capital be supported.
The government officials break down expenditures into two categories: the
„normal" category includes the buildings, industrial plants and the infrastructure,
while training and services are referred to as an „inferior" category. This is so in
spite of the fact that Kuznets outlined the grave consequences of such a narrow
interpretation of investments already in 1965. The present paper was not written with
the purpose of giving a survey of the activity of the „human capital" school, yet it
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should be mentioned that some endeavours relating to regional problems can be also
found within this topic. Several essays point out, for example, that the improvement
of the infrastructure of a region in the interest of the encouragement of economic
relocation has hardly any effect on the economic welfare and long-term productivity
of the local population, if it is not accompanied by activities relating to the
population itself enhancing the entrepreneurial spirit, or professional flexibility.
The point at issue is not simply the appearance of the human capital, but rather a
theory of evolution built upon a strongly anthropologizing system of premisses. In
our opinion the beliefs, systems of values and abilities of the people also play a great
role in the development of a region.
Thus, while the relevance of the system of views based upon the traditional
investments cannot be neglected in the least, we should also realize that the paradigm
of human development must also appear in the improvement of the regional
development policy. With the services, research and development, as well as
education coming to the forefront their role will increase.
In summary, local (or maybe regional and national) development may not
disregard the fact that the capital is not exclusively of physical character, on the
contrary, its human character can be revealed to a greater and greater extent.
2. Second approach to local development: the role of migration
According to the traditional concept of regional development policy the
population is to be regarded as labour input which has to be allocated or reallocated
in accordance with the varying conditions of demand. It is also assumed that the
interregional differences in employment and wage rates can be minimized by the
reallocation of the labour force and the interregional movement of the population.
For this very reason in the backward regions the impeding of the creation of the
equilibrium by means of outmigration will give rise to higher relative unemployment
or lower wages. Consequently, a governmental or regional policy controlling
migration from such areas (transfer payments, unemployment benefits etc.) will
actually promote the maintenance of disparities. This kind of argumentation can often
be encountered.
No doubt, such effects can be reckoned with, but we must not forget either that
the traditional conceptions on regional development policy contain also implicit
assumptions which do not stand up in each case. Therefore, the general assumption
which considers the demand for labour to be exogeneous, would disregard the effects
of the behaviour, composition and size of the local labour force. Since in the static
model the production procedures and economic structures are given, the internal
labour has no other choice but to migrate, or to make do with decreasing wages at the
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time of a possible decrease in demand. That is to say, the local labour is passive
without innovative solutions of its own to surmount the difficulties.
With changing the time horizon a different picture may be outlined. The long-
term economic growth — also accompanied by lasting increase in the per capita
incomes and large-scale structural, sociological, demographic and cultural changes —
will result in more complex changes than the conclusions of the static conceptions. It
is a widely known fact supported by empirical evidence that the phenomenon of
migration is not evenly distributed in the case of the individual social strata, or
groups. Among the migrators the number of qualified experts has a weight which is
higher than proportional, and there are also the ones who have some important
quality from the aspect of economic development. In this group it is not simply the
labour that migrates, but also some kind of source of growth: capital, qualification,
initiative, innovativeness and entrepreneurial spirit, too.
This argumentation, which seems to be lying far away from the local development
policy, has an obvious objective: a regional and local policy which aims at tying
people and, through them, expertise and knowledge by supporting local
entrepreneurship can be a valuable alternative of possibilities to the same extent, as
the conceptions trying to create equilibrium by means of encouraging migration.
Consequently, outmigration does not necessarily have a positive impact on solving
the problems of a region which struggles with crises.
3. Third approach to local development: the role of growth centres
In our days the conception built upon growth centres enjoys great popularity
among the decision-makers because the possibility of the state to intervene arises as
opposed to the pure market mechanisms. The basic approach of the models of this
type is that the stimuli of growth should be created selectively in the regions, which
will be gradually shifted or spread downwards to the spheres lying far from the
growth centres. (This can be evaluated not only as a geographical but also as an
economic distance.) The model itself seems to be an attractive alternative, since it
gets a foothold on a no man's land which is situated on the boundary of state
intervention and market mechanisms. Namely, having assigned the centres of
geographical and sectoral growth, the state will give only an initiative push to the
processes and then these will have their impact through the channels of the
functioning of the market. Thus the model would be able to serve both social equity
and economic efficiency. The conception is greatly attractive, unfortunately not all its
conclusions are supported by empirical reality in each case.
On the side of the local development policy the ideas built upon the growth
centres are weakened by the fact that with the exaggerated stressing of the importance
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of joining it obscures the role of the local investments. It also disregards the fact that
the territories integrated through the subcontractors' relationships, being able to join
only at the second stage, can often carry on only activities of a much lower level than
before. In a number of cases regular „colonization" (the shifting of production
representing a low technological level, prevention of the possible penetration of
innovative processes, an increased demand for unskilled labour etc.) is taking place.
Several studies have pointed out so far the significant distortion of the intra-regional
terms of trade. Consequently, none of the development conceptions can lead to
success, unless they are accompanied by perceptible local initiative and involvement
which may prevent the appearing of a distorted structure.
4. Encouragement of local businesses
The entrepreneur and entrepreneurship are treated in a very simplistic way in the
interpretation of today's conceptions according to which business ventures are
motivated by advantages and possibilities which can be expressed exclusively in
terms of money. Reality, however, is much more varied than that. The complex
phenomenon of business ventures has also sociological, psychological and cultural
linkage points.
Why does not the entrepreneur type turn up in a particular context? The
explanatory force of limited capital supply and access to information is significant.
Outstanding importance may be owed to information on account of the fact that
joining the information stream of the world or a country has become a decisive factor
of development. The pressure of accelerated decision-making may condemn to
backwardness regions which are unable to get reliable information quickly enough.
We can say that the costs of obtaining information are infinitely much higher in the
regions driven to the periphery or being in a state of crisis than those in the centres.
Therefore, it is impossible to interpret their competitive situation as a rule. The task
facing the local governments is obvious. They should function as local development
organizations in the capacity of a peculiar catalyzer enabling the population to
become familiar with the economic and social processes of the world, that is, they
should create the essential conditions by spreading innovation, since the building out
of information systems is hardly conceivable on an individual basis. Inasmuch as it is
conceivable, then the use of the obtained information will be individual as well. This,
however, cannot bring about a solution either on the local or regional level.
The other limit is represented by the supply with capital. At this point, however,
we have to give a more differentiated wording. We do not have the human capital but
rather other factors in mind. It is undeniable that in launching or continuing
businesses the majority of the capital injections are utilized with low efficiency. This
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applies to nearly all the countries. The fault generally lies with the exaggerated extent
of the physical capital investments of the small businesses. That is to say, in the
beginning the majority of the small businessmen come up with a relatively low
demand for capital, mainly in the form of working capital. Money or buildings are
not a great help to them by all means. In addition to the working capital, however,
assistance in the administration of the business and consultation would also be
required. Similar is the case with obtaining the necessary management practice and
marketing knowledge. Apparently, besides the small venture capital the local power
or the local government is able to carry on an effective development policy if the
providing of the indirectly indispensable business background (infrastructure) is
recognized and ensured.
In our days the encouragement of businesses cannot be confined to the traditional
form of capital aid any more. A local government aiming at achieving success regards
as its task also the creation of institutions which are related to the business
infrastructure in the widest sense. This does not imply merely some kind of physical
background, but also human and informational conditions.
5. Initiation of local development
Since local development regards chiefly the population as the final resource of
economic development and growth, this policy should rely on internal persons,
groups and activities. This also results in the shifting of the main points of this policy
as compared to the traditional regional policy. While the latter is mainly directed at
large organizations and physical capital, the former should target the businessmen of
small organizations and the human factor. It is inevitable that the system of means of
the policy should be changed.
The solution of this issue is not so simple as it might appear at first sight because
the changes are directed emphatically at the spheres of social existence outside the
economy. That is, they affect an area in the influencing of which our experience is
insufficient. It is not enough to ensure the conditions of development (access to
information, promoting the qualifications of people) if the motivation required for the
launching of businesses does not appear in the population. On the other hand,
motivation may emerge as a result of the transformation of the skills, values and way
of thinking.
A perceptable contradiction emerges if we examine this from the side of the state.
The state grants may rarely aim at changing the behaviour of the population, at
creating entrepreneurial spirit. This is so because it might have an impact only on the
long term and through the formation of complicated relations. Consequently, the
regional aid programmes which take into consideration quickly tangible results, may
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assign only the role of transmission, „distribution" to the organizations of local
development. The short-term interestedness may bring about only short-term
resolutions to the problems. The errors of the conception supporting the up-bottom
approach may be eliminated by the local development activity feeding on local roots.
We must not conceal, however, that the advantages of the conception based upon
local development are its disadvantages at once. The long term means uncertainty, it
can be measured less satisfactorily by the traditional economic indicators than the
short term.
The objectives, instruments and evaluation possibilities of the local development
policy are summarized in a comprehensive table (Table 7).
The three columns of Table 7 set increasingly complex aims for local development
that are far away from immediate profitability. The relations in Column 1 are
definitely close to the logic of the systems generally functioning at present. Column 2
already represents components of a new approach. It does not set the granting of
financial aids as an objective, but aims at establishing a contact with the whole
population by means of which entrepreneurial motivation may be created in the most
suitable persons. In nearly all the countries this group is characterized as a rule by the
fact that it has suitable organizations, but only at the national level, while the
regional or local dimension rarely appears in their functioning. Column 3 sets the
most abstract and ambitious goals. At the same time its system of means and
feedback mechanism cannot be considered to be elaborated in the least.
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Table 7
Tasks and spheres of activities of local development policy
1. Foundation
2. Information
3. Stimulation
TARGET GROUP
Small business
Population
Social groups
(Direct beneficiary)
in the wide sense
MAIN OBSTACLE
Scarcity of capital
Lack of information,
Inability of region
difficult access
to organize itself,
generating entrepreneurs
PRIORITIES
1. Financing
1. Information, training
1. Organizing
2. Information, training 2. Organizing
and organization
3. Organizing
and organization
2. Information
and organization
3. Financing
and training
MEANS OF
Quasi-banks
Professional training,
Local development
IMPLEMENTATION Loans
grants,
organizations
Aids
modern technologies
in information transfer
EVALUATION
Planned profitability
Internal criterion of
Heterogeneous criteria
CRITERION
the supply with services for generating long-term
growth potential
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A CHANGE IN THE FUNCTION OF THE REGIONAL DEVELOPMENT
In relation to the development of depressed zones the most uncertain point of
regional /county/ policy, or rather strategy is in a paradoxic way just the county
level, the role and possibilities, system of instruments of the counties. This
uncertainty emerges not so much in formulating the tasks and the requirements of the
responsibility, but when in connection with certain groups of questions the issues of
the theoretical degree of freedom of regional decision-making come up and the extent
to which it may be reduced by the available system of instruments. The other side of
the question is the nature of the division of labour between the national, local /urban/
and county levels of the regional policy and strategy.
The crisis of the economic political and regional political mechanisms has created
a rather absurd and ambiguous situation in the management of the crisis phenomena
in Hungary.
The regional processes have been determined predominantly by a sector-based
central economic policy in which the regional principle and interest were hardly taken
into account. Within the regional policy the regional administration of the economic
sphere and urban development were separated, too. The regional policy and scope of
movement were practically restricted to settlement (urban) development.
In the emergence of the regional crises — that is, of the problem of the
economically underdeveloped areas and the depressed zones — the macroeconomic
processes and the central decisions played a decisive role to such an extent that the
accumulation of the regional tensions have grown beyond the present framework of
the regional administration by far by today.
The consequence of the absurdity and confusion of the existing situation is that in
the solution of these territorial problems it is precisely the local and county levels
which have the narrowest autonomy of movement and decision-making within the
present institutional and regulating framework. Today it is simply impossible to
develop specific areas and remove them from the deadlock without the decisions
taken at the central government level. It is obvious that the phenomenon well-known
from the past (namely the dependence of local action on central decisions) may recall
echoes of past solutions in a lot of people, strengthening further the myth of the
omnipotence of central intervention and injections. At the same time it can be seen
that today the central administration, the „state" may undertake only to moderate the
regional crises which are mainly of social character, it can manage crises only on the
short term.
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The tasks of developing and restructuring the depression zones will be faced
decisively by the local and county level administration (the local governments) on the
long term. The central state subsidies may be directed at achieving the socio-political
moderation of the short-term tensions and indirectly at creating the framework and
system of instruments in which the scope of movement of the local and county levels
required for solving the tasks comes into being. Central government investments will
not get a role in the structural changes of the depressed zones because there will be
hardly any. But the local and county administration has to dispose of the incentive,
supporting and regulative (in a word influencing) possibilites of the economic sphere,
that is competence based on actual economic bases — according to the division of
labour formed in the process of development — by means of which the restructuring
of a region becomes possible on the regional level. There is no time and sufficient
resources to leave everything to the economic automatisms nowadays, on the one
hand, because these automatisms first should become comprehensive and consistent,
on the other hand, because the existing critical situation would lead to losses
aggravated by the regional differences, which would be inequitable and unfair with
respect to the citizens of the adversely affected zones as well.
The transformation of the institutional framework, the system of tasks and
instruments of the local and county administration is most likely underway owing to
the reforms ripening these days, although in a form which can be predicted with
difficulty for the time being.
From the aspect of active local (self-government) influencing the local-regional
economy the basic elements of a regional „self-government-friendly" future concept
might be outlined by way of a model as follows:
— property of communities (local governments), interestedness in the management
of resources and property at the same time;
real managing-enterprising possibility and ability for the local government
(„economic local government");
— independent regional economic regulation which is in accordance with the
responsibility of the local-regional policy (e.g. within limits possibilities to reduce
or increase all kinds of taxes which bring in revenues;
— a regional system of banks and financial institutions (which greatly differs from
the current system of commercial banks) including the varied system of funds and
foundations, associations, partnertships etc.;
regional business and information infrastructure with the complete abolishing of
state monopoly.
Economic development, the appearance of new structural units would be greatly
promoted by business infrastructure providing services (at the start on a non-profit
but later inevitably on a business venture basis). This palette might be further
41
Horváth, Gyula – Hrubi, László: Restructuring and Regional Policy in Hungary.
Pécs: Centre for Regional Studies, 1992. 47 p.
Discussion Papers, No. 12.
coloured by various social-civil organizations, development societies, foundations
and funds (private or communal, domestic as well as foreign), associations,
confederations etc., that is everything which has proved useful elsewhere in the world
in the recovery of regions having faced a similar situation. Furthermore, the
international relationships or informal links of the county and its settlements might
also become a useful means, whether by resorting to exchange of experience or
cooperation in specific fields.
A separate issue is represented by the regional system of banks and financial
institutions. The currently existing commercial bank branches are not able to finance
the local-regional business ventures because they are not interested in doing so and
this is a grave obstacle. The establishment of a regional development-investment bank
in the field of financing regional business ventures seems to be expedient in the long
run. The demand for business venture funds having been created within the
framework of the regional administration shows that there is a significant gap in the
field of financing. Another argument for the establishment of an independent
development-investment bank is the fact that the system of the necessary preferences
and subsidies would function within a clear, inspectable but normal banking
framework, with guarantees of return which are not provided by the institutional
framework of administration and management despite the best of intentions.
The different formations of subsidies and subventions should not be concentrated
by all means, but rather they should be transformed into transactions resting on
uniform economic-financial bases in their functioning, the requirements and
guarantees of utilization, or be diverted in this direction. In all probability calling
for tenders, awarding and rational utilization would work more efficiently in such a
system. In an optimal case a regional bank should be comprised of a great number of
independent joint ventures and major responsible organizations or institutions
directly interested in the territorial-regional development becoming be participants as
part-owners depending on their financial possibilities.
Restructuring, business and entrepreneurial actions having become necessary in
the depression zones can be implemented by providing peculiar regional subsidies and
preferences as mentioned above. This is a sphere which can take shape within the
existing system only and exclusively through central state decisions, albeit the
available information and interestedness at the regional-local level are greater. Most
of these decisions are related to regulation and are, therefore, elements suitable for
becoming objects of decentralization in the field of the formerly mentioned regional
competence and regulation.
Concerning the instruments, functions of the restructuring and development of the
depression zones, so far we have spoken mostly about the possible forms without
taking into account the addressees, although the division of labour between the
42
Horváth, Gyula – Hrubi, László: Restructuring and Regional Policy in Hungary.
Pécs: Centre for Regional Studies, 1992. 47 p.
Discussion Papers, No. 12.
concerned levels of administration is of great importance. The typically
disproportionate role of the central (state) level obviously has to be reduced today. At
the same time it should be considered, under what conditions of labour division
between the regional and local (settlement) levels should decentralization and the
development of the depression zones take place in the course of restructuring and
crisis management.
Two factors have to be mentioned here because of their possible importance:
— in the foreseeable future rapid progress towards a regional and local
government is highly probable owing to the trend of the self-governing character of
the local-regional administration: interestedness, information, decision-making ability
and competence are shifted to the level of settlements, being concentrated there with
the necessary instruments;
— in the developing-restructuring process of the depression zone, the core region
of Baranya county — as we have repeatedly referred to it — Pecs and Kom16, but
Pecs in particular, will play a key role.
Unlike in the case of the economically backward areas, where weaker structuring,
the atomization of the natural, artificial and development endowments do not allow
for radical decentralization and the role of the county (regional) administration will
continue to be of primary importance, in the management of the depression zones the
majority of the development tasks and means should be gradually taken over by the
local governments of the settlements concerned. The point at issue is not the
withdrawal of the regional level because it would be impossible on account of the
impacts and relationships of the regions, but it is the reduction of its role in the form
of such an efficient cooperation between the towns and the county where the
development programmes affecting the towns — and presumably the majority of the
programmes will be like that — will become the task, responsibility and possibility of
the local (town) governments. The existing and new competences, decision-making
licences, material-financial means which have been or will be decentralized should be
assigned accordingly. We are convinced that concerning the possible ways of the
development of the depression zones as well as the methods and tasks of
restructuring, a division of labour in this manner might release further energies for
organization, development and management. It would harmonize better with the
nature of the expectable processes, creating more direct relations of interestedness, in
brief, it would create a complex, more favourable situation and mainly a fair chance
to recover from the crises.
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Horváth, Gyula – Hrubi, László: Restructuring and Regional Policy in Hungary.
Pécs: Centre for Regional Studies, 1992. 47 p.
Discussion Papers, No. 12.
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Discussion Papers 1992. No. 12.
Restructuring and Regional Policy in Hungary
The Discussion Papers series of the Centre for Regional Studies of the Hungarian
Academy of Sciences was launched in 1986 to publish summaries of research findings
on regional and urban development.
The series has 3 or 4 issues a year. It will be of interest to geographers, economists,
sociologists, experts of law and political sciences, historians and everybody else who
is, in one way or another, engaged in the research of spatial aspects of socio-
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Forthcoming in the Discussion Papers series:
Transportation Effects on Spatial Structure of Hungary
by
Ferenc ERDOSI
Discussion Papers 1992. No. 12.
Restructuring and Regional Policy in Hungary
Papers published in the Discussion Papers series
No. 1 OROSZ, Eva (1986): Critical Issues in the Development of Hungarian
Public Health with Special Regard to Spatial Differences
No. 2 ENYEDI, Gyorgy — ZENTAI, Viola (1986): Environmental Policy in
Hungary
No. 3 HAJDU, Zoltan (1987): Administrative Division and Administrative
Geography in Hungary
No. 4 SIKOS T., Minas (1987): Investigations of Social Infrastructure in Rural
Settlements of Borsod County
No. 5 HORVATH, Gyula (1987): Development of the Regional Management of
the Economy in East-Central Europe
No. 6 PALNE KOVACS, Ilona (1988): Chance of Local Independence in Hungary
No. 7 FARAGO, Laszlo — HRUBI, Laszlo (1988): Development Possibilities of
Backward Areas in Hungary
No. 8 SZORENYINE KUKORELLI, ken (1990): Role of the Accessibility in
Development and Functioning of Settlements
No. 9 ENYEDI, Gyorgy (1990): New Basis for Regional and Urban Policies in
East-Central Europe
No. 10 RECHNITZER, Janos (1990): Regional Spread of Computer Technology in
Hungary
No. 11. SIKOS T., Minas (1992): Types of Social Infrastructure in Hungary