A the event held in Budapest and organized by Hungary’s Ministry for National Economy and the Organization for Economic Co-operation and Development (OECD), Minister of State for Economic Strategy Zoltán Cséfalvay emphasised in his speech that in today’s globalized world international value-chains are competing with each other, and the competition between countries is increasingly becoming a battle over how and at which section states can join the value chains created by enterprises.

Hungary has succeeded in joining global manufacturing-industry value chains, as the country has been sufficiently open and flexible, and the requirement of financial stability is also fulfilled, he said adding that the Government is eager to encourage enterprises to establish -- in addition to production capacities -- facilities for research and development in Hungary. 
Referring to data compiled by the Hungarian Central Statistical Office (KSH), Zoltán Cséfalvay underlined that in Hungary 363 billion forints, 1.29 percent of GDP, were spent on research and development, which figure is the highest in a decade.

At the forum, the OECD presented a study on global value chains which also includes Hungary among the countries analysed.

As Zoltán Cséfalvay said, Hungary has a small and open economy, the share of exports within the GDP exceeds 90 percent and 60 percent of these are products made in Hungary. He drew attention to a finding of the study which concludes that the services sector is based mainly on domestic added value, but in traditional industrial sectors – such as vehicle manufacturing – the respective indicator is also high; furthermore, in 2005-2009 the proportion of domestic added value was steadily increasing (the OECD evaluated data up to 2009).

In the opinion of the Minister of State, one key conclusion of the survey is that integration into global chains is easier than creating them and that output and production are crucial factors: these are the elements with which to “capture” global value chains. However, quality services and knowledge capital are also required as these can constantly generate high added value in a global value chain which has already settled, Zoltán Cséfalvay said.

The Minister of State stressed that although production continues to an essential element of global value chains, without which others cannot be attracted, but establishing partnerships with enterprises which already have a presence in Hungary is of equal importance. Accordingly, the Government has been keen on concluding Partnership Agreements with large companies operating in Hungary, and already 30 such documents have been signed by the Cabinet. These agreements also aim to “cement” enterprises in Hungary and thus assist the country to advance as far as it possibly can within the global value chains established by these companies.

Zoltán Cséfalvay also emphasised that openness, flexibility and financial stability are all required for a country to effectively combat the crisis, and Hungary has been one the countries where necessary changes have indeed been implemented. He added that in Hungary the share of working capital as percentage of GDP is 80.3 percent, the highest figure among Central Eastern European countries. Speaking about flexibility, the Minister of State called attention to labour market reforms aimed at easing regulations. The Minister of state stressed that knowledge capital must be further stimulated, more must be spent on R&D&I and administrative costs must be reduced.

He reiterated that in the upcoming EU fiscal period in 2014-2020 Hungary intends to spend 60 percent of resources directly on economic development, while 10 percent of funding – 2.5 billion euros -- will be devoted to research and development.

(Ministry for National Economy)