Discussion Papers 2001. No. 34.
Rural Development in Hungary
CENTRE FOR REGIONAL STUDIES
OF HUNGARIAN ACADEMY OF SCIENCES
DISCUSSION PAPERS
No. 34
Rural Development in Hungary
by
Teréz KOVÁCS
Series editor
Zoltán GÁL
Pécs
2001
Discussion Papers 2001. No. 34.
Rural Development in Hungary
Publishing of this paper is supported by the
Research and Publishing Fund of the Centre for Regional Studies, Hungary
and
the National Selected Social Sciences Research Fund (OKTK) No. A–1128/97.
ISSN 0238–2008
2000 by Centre for Regional Studies of the Hungarian Acady of Sciences
Technical editor: Ilona Csapó, Zoltán Gál
Typeset by Centre for Regional Studies of HAS Printed in Hungary by Sümegi
Nyomdaipari, Kereskedelmi és Szolgáltató Ltd., Pécs
Discussion Papers 2001. No. 34.
Rural Development in Hungary
CONTENTS
Introduction / 7
1 Historic background / 7
2 The situation of agriculture ten years after the political transformation / 9
3 The problems of rural development / 12
4 The general situation of rural areas after the political transformation / 15
5 The diverse development of rural areas / 18
6 The role of agriculture in rural income / 20
7 Rural development policy in Hungary / 21
8 Integrated rural development / 22
8.1 Interdisciplinary approach / 23
8.2 Integration of economic sectors / 25
8.3 Integration of cities and villages / 27
8.4 Integration of rural society / 28
9 Hungarian rural development objectives / 29
10 The SAPARD Programme in Hungary / 31
11 Rural development in Hungary after the EU accession / 36
12 Summary
/ 39
References / 41
Discussion Papers 2001. No. 34.
Rural Development in Hungary
List of Tables
Table 1 The division of population by dwelling and the rate of agricultural
wage earners / 8
Table 2 The agricultural population of Hungary, the number of farms, the size
of land and animal livestock in year 2000 / 10
Table 3 The distribution of farms by agricultural land size / 11
Table 4 Development categories of the villages / 19
Table 5 The Share of East European Countries from the EU Preaccession
Funds / 31
Table 6 The distribution of SAPARD funds / 32
Table 7 The financial budget of the fifteen member countries for the period
2001–2006 /38
List of Figures
Figure 1 The spatial distribution of the Hungarian agricultural export between
1989 and 1998 / 12
Kovács, Teréz : Rural Development in Hungary.
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Discussion Papers, No. 34.
Introduction
To understand Hungary’s rural development policy at the moment when Hun-
gary is standing at the doorstep of the EU accession it is essential to recall some
important moments in the history of Hungarian agriculture. Rural development
is discussed here mainly from sociological aspects, thus this paper is going to
present only the basic statistical data to reveal the most important interrelations.
1 Historic
background
Between the first and the second world wars Hungary was a country of semi-
feudal big landlords. Although the number of big landowners was below one
per cent of the total population, the land they had was over 40 per cent of the
total land territory. At the same time 28 per cent of rural population had no land
at all and another 24 per cent had a land on a territory below 7 acres. Agricul-
tural reform was the only hope for rural Hungarians, which reform arrived in
1945. About 600 thousand families who had no or small land were given land
property on an average land size of 7 acres. This gave a chance for these people
to start their business on 1.4 million farms in a good atmosphere. However the
happiness of new farmers did not last long. In the summer of 1948 the Commu-
nist Party came on rule and they made a political harassment against kulaks
(wealthy peasants). This prevented the social evolution of peasantry towards a
middle class society. The development of Hungarian rural society was in the
hand of external forces.
In 1949 63 per cent of Hungarian population lived in rural villages and 54
per cent worked in agriculture (Table 1). Fifty years later, in 1999 36.5 per cent
lived in rural villages and 7.1 per cent worked in agriculture. This fifty-year
period is characterised by the collapse of the traditional peasant society, which
was a very fast process in Hungary. While in Britain one hundred years, in
Germany eighty years were needed for this process, in Hungary the rate of agri-
cultural wage earners dropped from fifty per cent to twenty five per cent within
twenty years only (1950–1970). The organisation of Soviet type cooperative
farms was a further assistance to the disintegration of the traditional rural peas-
ant society.1 The organisation of cooperatives took place in two stages.
1 The Soviet type collectivisation differed from the Western European in its
complete elimination of private property. Also the production took place in the
cooperative system.
7
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Discussion Papers, No. 34.
Table 1
The division of population by dwelling and the rate of agricultural wage earners
(thousand)
Year S e t t l e m e n t The rate of ac-
Budapest
Other
cities
Villages Total
tive agricultural
wage earners
People % People % People
% People
% People
%
1949 1590 17.3 1774 19.3 5841 63.4 9205 100.0 3171 53.9
1960 1783 17.9 2633 26.4 5345 65.7 9961 100.0 2227 38.7
1970 2001 19.4 3109 30.1 5212 50.5 10322 100.0 1550 25.7
1980 2060 19.2 3642 34.0 5008 45.8 10710 100.0 943 18.6
1990 2017 19.4 4400 42.4 3958 38.2 10375 100.0 639 14.2
1991 2018 19.5 4418 42.6 3919 37.9 10355 100.0 710 15.2
1992 2016 19.5 4461 43.1 3861 37.4 10337 100.0 460 14.3
1993 2008 19.5 4504 43.7 3790 36.8 10310 100.0 392 10.1
1994 1996 19.3 4562 44.5 3719 36.2 10277 100.0 327 8.7
1995 1930 18.8 4500 43.9 3816 37.3 10246 100.0 295 8.0
1996 1907 18.7 4515 44.2 3790 37.1 10212 100.0 302 8.0
1997 1886 18.5 4539 44.6 3749 36.9 10174 100.0 288 7.9
1998 1863 18.4 4519 44.6 3753 37.0 10135 100.0 278 7.5
1999 1839 18.2 4570 45.3 3682 36.5 10091 100.0 270 7.1
Source: Hungarian Statistical Yearbooks. KSH.
The first phase of collectivisation started in the early 1950s. It was typical in
this process that small landowners, or agricultural workers who had no land or
experience in farming who were forced to join the new cooperatives. Commu-
nist party activists who had no competence in agricultural matters headed these
cooperatives. The cooperatives that were formed at that time were very unsuc-
cessful in business and showed negative example. After the death of Stalin
(1953) these cooperatives ceased.
The second phase of collectivisation started after the breakdown of the 1956
revolution (1959–1961). The communist party (bearing the name of Hungarian
Socialist Workers’ Party) learned from the negative experiences of the first
round of collectivisation. In the second round the best agricultural experts were
appointed as heads of cooperatives. Though it was a hard job but agricultural
workers could be persuaded to join cooperatives. By 1961 only 4 per cent of the
total agricultural land was in private hands, the remaining 96 per cent of land
belonged to cooperatives and state farms.
For all the initial problems and the use of methods being far from a peasant’s
mentality Hungarian agriculture achieved success in the socialist era. The
8
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Discussion Papers, No. 34.
essence of this phenomenon is that the less Hungarian agriculture followed the
Soviet model the more successful it was. However this rapid development of
agriculture was paid at a high price at a later time.
In Hungary (between the late 1960s and the early 1980s) a technological and
biological modernisation took place. This was the industrialisation of agricul-
ture. At that time the generation of old peasants and cooperative founders re-
tired. There were two groups were to follow them; the first, smaller group was
the elite group of qualified agricultural intelligence, expertise and agricultural
workers. The second, large group was the group of less skilled and unskilled
farmers. The first group gained income not only from their full-time job. In
many cases they earned money from special large-scale part time farming ac-
tivities. The second group’s part time farming was only subsistence farming.
The group of subsistence farmers also consisted of villagers commuting to cities
for jobs in the industry. (In the mid 1980s 50 per cent of the total vegetable and
fruit production and animal husbandry was done in private farms. Only cereal
crop production was done in cooperatives and state farms). Both experts and
unskilled farmers specialised their production and were profit oriented. They
had different value preferences from their ancestors who were in love with their
land and who were farming only to provide food for their family.
2
The situation of agriculture ten years after the political
transformation
In Hungary the total size of arable land is 4.7 million hectares, 63 per cent of
the total fertile land. The soil and climatic features are good for crop production.
Although only 260 thousand wage earners work in agriculture (Table 1) the
number of people living on agriculture is far larger. On the basis of the situation
on 21 March 2000 the Hungarian Central Statistical Office made a census. This
census provides statistical data on farmers and the size of their business. The
criteria of the term agricultural farming unit included in the census were as
follows:
1. 1500 square metres of arable land or
2. 500 square metres of orchard or vineyard or
3. Breeding at least one large animal (cow, ship, pig, etc.) or
4. 50 items of poultry or
5. 25 items of rabbit or
6. 5 honeybee families or
7. Rendering agricultural services or dealing with interactive gardening (e.g.
hothouse plantation)
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Discussion Papers, No. 34.
The agricultural survey covers the data of 2.1 million households (that is
nearly two thirds of the total). 960 thousand met the required criteria. Another
835 thousand were below the criteria set up for land size or livestock. (Table 2)
Besides individual farmers 8000 agricultural companies (agricultural share
companies, ltd-s, and cooperatives) were assessed in the census. From the firms
and entrepreneurs interviewed 300 thousand did not do any agricultural activi-
ties. The results indicate that half of the total households are interested in some
agricultural business.
Table 2
The agricultural population of Hungary, the number of farms,
the size of land and animal livestock in year 2000
Agricultural business indicators
Population (thousand) Agricultural companies
Private farms
Non farms
2035.5
8382
958 534
835 617
Agricultural land use indicators
Total agricultural land
Total
Agricultural companies
Private farms
used by (thousand
6448
3834
2614
hectares)
Stock breeding indicators
Total animal livestock
Farms
Agricultural companies
Private farms
raised in
1 665 181
888 122
777 059
Animal units*
*An average calculated on a variety of animals. One unit equals with 500 kgs (1000 pounds) of
livestock or animal groups e.g. 1 cow = 0.8 animal units, 1 turkey = 0.13 animal units.
Source: Magyarország mezőgazdasága a 2000. évben (Agriculture in Hungary in the year of
2000.) regional date. Budapest, KSH, 2000.
Private farmers cultivate 40 per cent of total agricultural land and 60 per cent
is cultivated by agricultural companies. The size of the majority of private farms
is below 0.5 hectares and only 5 per cent of private farms exceed the size of 10
hectares. (Table 3) Agricultural companies have big lands. From the 8 thousand
firms every fifth own a property of 1000–5000 hectares. Although the total
number of livestock raised by farmers and agricultural companies is almost
equal, the latter concentrates the majority of cow and pig stock. Other domestic
animals are raised in private farms.
Table 3
The distribution of farms by agricultural land size
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Discussion Papers, No. 34.
Private farms
Agricultural companies
Land size
Percentage Land
size Percentage
(hectares)
(hectares)
–
0.15 28.63
–
10.0 12.71
0.15 –
0.50 32.48
10.1 –
50.0 21.13
0.51 –
1.00 1.79
50.1 –
100.0 9.65
1.10 –
5.00 18.52
100.1 –
300.0 19.51
5.10 – 10.00 4.39
300.1 –
500.0 5.32
10.10 – 50.00 4.47
500.1 – 1000.0 9.85
50.10 – 100.00 0.48
1000.1 – 5000.0 20.07
100.10 – 300.00 0.22
5000.1 – 10000.0 0.91
300.10 –
0.03
10000.1 –
0.84
Total
100.00
Total
100.0
Source: Magyarország mezőgazdasága a 2000. évben (Agriculture in Hungary in the year of
2000.) regional date. Budapest, KSH, 2000.
In 1990 15.3 per cent of the GDP came from agriculture. This figure dropped
to 5.5 by the year 1999. Nevertheless, the agricultural sector produced an extra
income of 1.5–2 billion dollars. This money was a significant help to keep
Hungary’s foreign trade deficit on low level. The target areas of Hungarian
agricultural export are the European Union, the countries of East Central
Europe, and the countries of the former Soviet Union (Figure 1). The primary
agricultural products that are exported to the exported to the European Union
are as follows: meat and meat products, vegetables and fruits. The overall pro-
duction volume of Hungarian agricultural products is below 5 per cent of the
production of the 15 EU member states. Only the following products are ex-
ceptions:
− Wheat, apple, cucumber, duck meat with 5–10 per cent
− Corn, sour cherry, plum with 10–20 per cent
− Honey, raspberry, sunflower with over 20 per cent of the total EU pro-
duction.
11
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Discussion Papers, No. 34.
Figure 1
The spatial distribution of Hungarian agricultural export
between 1989 and 1998
100
90
80
70
60
50
40
30
20
10
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
Other
CIS 2
CEEC1
EFTA
EU
1. Central and Eastern European Countries (with the exclusion of the former Soviet Union)
2. The former Soviet Union
Sources: Magyar Mezőgazdaság (Hungarian Agriculture) 2000. 43. 11. p.
3 The problems of rural development
Some problems of Hungarian rural areas date back to the past centuries, decades
and the period after the political transformation. In this chapter I am going to
overview the major problems of the past 70 years emphasizing on the socialist
era and the problems that followed after the political transformation. The
problems presented here stem from Hungary’s overall economic and political
situation.
In Hungary poverty is the deepest problem of rural areas. The peasant soci-
ety tried to ease this problem by various methods: by emigration before the First
World War and by bringing up only one child to avoid the fragmentation of
land properties.
The equalisation of rural and urban incomes in Hungary was the greatest
result in the 1970s, the booming time of socialism. This was a unique phe-
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Discussion Papers, No. 34.
nomenon in East Central Europe. This was not due to the government’s rural
policy but rather the result of the hard work of rural people. They had two
sources of income. The first income came either from urban workplaces or from
local industrial companies or agricultural cooperatives. The majority of rural
people were progressing towards a bourgeois society. Now we are aware that
this process was not completed. Rural workers after finishing their full-time job
started their part-time job, which in most cases was bound to agriculture. They
did it to earn an additional income for building a new house, a holiday cottage
or purchasing furniture, car or other consumer goods. This was a great turn in
the life of rural people, for they had never before spent their work or money for
such purposes.
The malfunctions in the socialist macroeconomic system – the uncompetitive
and expensive production, the scarcity of goods – were improved by rural
population, the millions who worked overtime in their second economy, turning
the incompleteness of the system for their own benefit. Second economies were
not real businesses in the original meaning of the word. There were no capital
investments made, there was no urge for bearing risks in production and selling.
It was cooperatives and state farms that were real investors and integrated pro-
duction and market instead of private farmers. They also undertook the partial
or full risks of production, which made the job of integrated farms simpler,
easier and more comfortable.
After the political transformation the termination of jobs and integrated firms
forced the majority of agricultural farms to minimise their production or to close
down. It became obvious that the majority of those rural farmers who had lost
their job closed their farm as well. They were following the patterns they had
taken up in their full-time job in cities, in their part-time economy. These rural
people were living in a safe atmosphere of their workplace, being dependent
from others. When they lost their job, they lost their confidence, their future
plans and feeling helpless they abandoned their farms as well. This made them
even poorer. This process is a pretty good example how working patterns
influence on people. That is the reason why the rate of the poorest has tripled in
villages compared to cities, and quadrupled compared to Budapest, as it was
indicated in ANDORKA, Rudolf’s survey. However, the rate of the top classes
in handicapped villages is one seventh of those in Budapest. Pauperisation is
much bigger in villages because the chances of social evolution are very small
there.
The second major problem of rural society is its limited chances for social
evolution. This going to be discussed
1. In comparison within rural society and
2. In comparison between villages and cities
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Until the redistribution of land in 1945, good-quality and large lands were in
the hands of semi-feudal landlords. This created a rigid subordination system
between the elite and poor peasant society. In his book ‘Elfelejtett falu’ (Village
Out of Memory) KOPÁTSY Sándor says: ‘the old rural society has been
poisoned by property, nationality and clerical limitations. They all were practi-
cably unbeatable. In this aspect our villages seem to have been left in the middle
ages. The radical collectivisation has beaten down these property, nationality
and clerical limitations.’ (11. p.)
This is the reason why rural social disparities significantly decreased in the
socialist era. Families living on primary and secondary incomes were able to
create normal living conditions for themselves. After the political transforma-
tion this kind of stability ceased. This is the reason why it is the stability of their
existence that rural people feel much more important than free press, free
competition, or decreasing inflation or improving living conditions. In the so-
cialist era the stability these people got used to and feel very important, hin-
dered real social development. That’s why rural people were unable to benefit
from market economy.
ENYEDI, György in his book ‘Falvaink sorsa’ (The Fortune of Our
Villages) published in 1980 says: ‘Urban and rural development in case of cities
proves to be a public but in case of villages seems to be a private affair.’ (54. p.)
This process – in a paradox way – lessened social differences within rural
communities but increased differences between rural and urban settlements.
The smaller a community was the worse position it had within the settlement
system. In the ‘golden age’ of socialism the living conditions of 1.5 million
rural people were worse than those living in more advantageous areas. There
were no infrastructure and service development in about one half of villages.
One of the greatest results of the rural development policy of the post-socialist
era is the enormous effort to bridge development gaps between rural and urban
settlements. In 1993, for example, 47 per cent of development funds were spent
on rural development purposes. This significantly improved water and drainpipe
infrastructure, school gym hall facilities, telephone and gas networks in rural
areas. This is a large improvement, in compared to the 1970s when 7 per cent of
funds were spent for rural development, whereas one half of the total population
lived on rural areas at that time.
The decline of rural communities is the third major problem of Hungarian
rural areas.
The traditional peasant community of the period between the two world wars
was based on the family instead of the individual. Only grown-ups – through
their family – could join various circles, groups and self-organised business
associations. (e.g. pasturing committees, foresters’ companies, wine cellar
cooperatives etc.) These associations worked in the form of a community and
were operated democratically. The leaders were elected on a rotational basis.
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Thus, local communities had an enormous initiative force. Community
membership created a feeling of cohesion and protection, a sense of identity
and confidence. Communities could have been a good starting point for later
civil organisations and private initiatives but the Hungarian Communist Party
banned all communities that were organised on social basis. Thus, individuals
were deprived of self-organised, community activities. The whole society was
atomised. With changes in the job and housing situation the role of family as a
value model significantly decreased. The socialist system by making people
believe in the illusion of a powerful, caring society and creating a sense of fear,
deprived its citizens of self-reliance, self-knowledge and initiations.
Apart from some exceptions, the majority of local civil organisations having
been established since 1989 were too weak to have a major influence on rural
development. Good communities may be the driving force of local development.
The communist type rural development gives no alternative for community
based development. In the old times natural rules were set up by life itself. We
should not bring back these old rules again but a new well-operating system
should be set up on the basis of the present situation. To achieve this objective
chances should be given to handicapped rural residents to find their way out of
their crisis.
4 The general situation of rural areas after the
political transformation
After the political transformation villages had both positive and negative phe-
nomena in the history of their development.
The positive elements are as follows:
1. A local government was set up in every village
2. A significant progress has been made in rural infrastructure
The negative elements are as follows:
1. The growth of unemployment
2. The cutback of agricultural production
Elected local authorities make decisions on local development projects. It
was small villages that were mostly dependant from state assistance having no
incomes from local taxation. In the early 1990s 36-37 per cent of active wage
earners and 48 per cent of the unemployed lived in rural settlements. Unem-
ployment was much higher in rural areas (13.8 per cent) than the national aver-
age. (10.4 per cent in 1998) Villages below the population of 500 had extremely
high unemployment. At the same time agricultural production dropped to 60 per
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cent of the level it had in 1989. It was stock farming that decreased the most
sharply.
The reader may be on the opinion that today, ten years after the political
transformation, the majority of Hungarian rural settlements are the losers of the
political transformation. However, while the number of Hungary’s total popu-
lation is decreasing, the rate of rural population has remained on the same level,
nevertheless, occasionally it has even increased. The year 1994 was the first
year when the number of rural population was on the bottom after the political
transformation (3719 thousand) but a 4-year increase started in the following
year 1995. However, in 1999 only 3682 thousand lived in rural areas. This
number is the largest negative record in the 1990s, being below the first one in
1994 (Table 1). In countries with advanced economy the growth of rural popu-
lation is the result of de-urbanisation, the migration of middle class to rural
settlements. The question here is why the number of rural population increased
if rural areas are regarded to be the losers of political transformation?
There are three reasons for the growth of rural population in Hungary. They
are suburbanisation, migration and handicapped social position.
1. Suburbanisation. In the socialist era council flats were built only in cities.
Rural residents built their house themselves. Since the mid–1980s villagers
were paid state assistance to solve their housing problems. At the same time the
building of council flats dropped in cities. As a result, blue- and white-collar
city workers built their house in the agglomeration area of the cities they
worked in. Living and commuting from within a 50 kilometre (30 mile) radius
of Budapest and from within a 30 kilometre (20 mile) radius of large cities be-
came a popular social phenomenon. However, the increase in purchasing power
resulting from the migration of rich and educated social classes to rural areas
did not generate a booming rural economy. Those wealthy people who live in
villages travel to cities for shopping, because those services they need are
available in cities only. Taking children to city kindergartens and schools is an
example for their attitude to rural services. Thus, suburbanisation increases the
number of rural population but growth is not coupled with local identity. The
migration of blue- and white –collar urban population is still to be regarded as a
positive trend because it accelerates the progress of rural society towards a
middle class society.
2. Migration. In the period after the political transformation 200–220 thou-
sand people change their home every year. More than half are out-migrations to
rural settlements. Rural areas have had a positive migration balance since 1989,
while the balance of Budapest and large cities has been negative. Increasing
urban housing costs are a reason for that. This is especially true in case of urban
housing estates. Between 1995–1997 several old-age pensioners having
purchased the council flat they lived in the socialist era sold it out on a much
higher price. They could spend the profit they gained through this transaction
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for a rural house. They could purchase a house either in the proximity of their
previous flat, or in their home village or somewhere else. Typically the urban
poor and the elderly migrated to rural areas in this way, which further increased
the average age of rural people and their need for the young, educated genera-
tion. This problem is extremely deep because it is only the young generation
that may be expected to find solutions for the problems of rural areas.
3. Handicapped social position. The unskilled rural residents are the greatest
losers of the political transformation. They are mainly gypsies. Their low
education is coupled with low work culture and the absence of venture capital.
Thus, they have no chances on the labour market. In the socialist era nobody
was allowed to make capital investments. Those coming from families that were
poor before the political transformation got into a “no way out” situation after
losing their job having provided them a small but stabile income. This group
lives only on child-care allowance and various social benefits. Houses without
infrastructure are more frequent in rural than urban areas. They have lower
maintenance costs. This is the reason why rural areas are more attractive for the
poor. The rate of gypsies is extremely high in Hungary’s northeastern and
southwestern small village areas. The demographic features of gypsies and
Hungarians of similar social situation (early age maternity, large number of
children) largely contribute to the growth of rural population. Hungarian rural
policy should concentrate on providing extra development funds to these so-
cially disadvantaged areas. These funds should be used for the education of
gypsies and poor Hungarians to improve their labour market chances. The pro-
vision of assistance to subsistence farming is also a very important task. Farm-
ing was natural in the old traditional peasant society, but now it won’t work
without help. In general, it is much easier to apply for grants and benefits than
doing something actively.
In the past few years the number of non-Hungarian residents has signifi-
cantly increased in rural areas. Since 1993, it is county public administration
authorities that have licenses to authorise foreigners for purchasing real estates
in Hungary. Until 1993 the Centre for the Financial Institutions of Hungary,
seated in Budapest, had competence over these matters. With the exception of
agricultural land the purchase of Hungarian real estates by foreigners was a very
easy and simple process. Low prices, quiet and peaceful rural landscape
attracted buyers from the European Union and America. These people spend
only a part of their time in Hungary. Generally they ask a caretaker to look after
their house while they are away. In some instances a whole village is in the
hand of foreign landowners. The surroundings of Lake Balaton, the western and
southwestern rural areas are the most popular among foreigners. The scattered
farms of the Great Hungarian Plain are also very popular. Generally the first
buyer brings additional buyers. The good side of this matter is that foreign citi-
zens generally improve the outlook of the site the bad thing is that no state as-
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Discussion Papers, No. 34.
sistance is received for foreigners because they are not permanent residents. In
villages with natives outweighed by foreigners, it is a real threat that public
services (e.g. schools) will terminate due to financial problems.
5 The diverse development of rural areas
In Hungary there were always large differences among settlement categories.
Budapest the capital changed into a metropolis at the turn of the 19th and 20th
centuries. Hungary lost her major regional centres after the peace treaties that
followed the First World War. Apart from some major cities at the western part
with Debrecen and Szeged in the eastern regions the majority of Hungarian
settlements were small agricultural towns with a small city centre and rural style
buildings. In the socialist era large efforts were made towards the development
of these small agricultural towns. However the number of new jobs created was
more than the number of new flats built. The majority of workers were forced to
daily commuting. In the late 1970s the ‘golden age’ of socialism 1.5 million
people one quarter of total active wage earners were commuting to work in
cities.
No financial resources were available for flat construction and infrastructure
development in rural areas. In the 1980s flat construction started in large vil-
lages because state assistance was given to rural flat construction instead of
urban council flats. Although state assistance was able to initiate the construc-
tion of new homes, no funds were available for infrastructure development
projects. After the political transformation extensive – in some instances irra-
tional – development projects were launched in rural areas. In the early 1990s,
the per head indicators of infrastructure development were higher in rural than
in urban areas. Large progress has been made in the construction of telephone,
public road, water, drainpipe gas systems and schools. For all this progress, due
to heavy unemployment, the absence of foreign venture capital and poor human
resources, the overall development indicators of rural areas were below the
expectations. Today three categories of rural areas exist (Table 4).
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Table 4
Development categories of the villages
Category of village
Village
Population
P e r c e n t a g e
1. Viable
20
40 – 50
2. Underdeveloped
30
20
3. In transition
50
30 – 40
Source: The author’s assessment.
1. Viable villages. 20 per cent of villages and almost half of the total rural
population belong to this category. These villages are scattered around the
country but mostly in the proximity of major roads and cities offering good job
opportunities. The popular hillside recreational villages offering facilities for
rural tourism also belong to this category. The majority is situated along the
Vienna–Budapest route. This area and the agglomeration of Budapest are the
most advanced Hungarian regions. In viable villages the representation of blue
and white-collar population is starting to outweigh the native locals. The white
and blue-collar population who had run away from cities largely contributed to
giving a middle-class feature to the traditional rural class society. Here the
number of SME-s also shows an increasing tendency.
2. Underdeveloped villages. 30 per cent of villages and 20 per cent of the
total rural population belong to this category. These villages are located in un-
derdeveloped areas far from cities. They are also available along county or
eastern country borders and have poor transport connections. These areas have
poor quality arable land or bumpy land surface. These villages are scattered
around the country but most frequently occur in northeastern and southwestern
Hungary. The majority are small villages with a population below 500. Public
facilities were closed in the socialist era. The establishment of local authorities
after the political transformation did not improve their overall situation. These
villages have low educated, poor Hungarian and gypsy population. Here the
majority of families live on child care allowance, some benefits and odd jobs.
The rate of the poor is quadruple the rate of the wealthy class is one seventh of
Budapest the capital. Pauperisation is looking forward to be a durable tendency
in these areas.
3. Villages in transition. They are neither in top nor in bottom situation. One
half of villages and 30-40 per cent of the total population belong to this cate-
gory. The majority of the local population are lower middle class or poor peo-
ple. They do nothing but wait. They have a house, furniture, the husband or the
wife or both have a job. They do some part-time farming but it provides low
income for them. Even the education of children is a problem for these families.
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Due to the drastic increase of urban housing costs several old-age pensioners
were forced to move from cities to rural areas where living costs are smaller. A
gas heated urban flat’s maintenance costs are much higher than the costs of a
rural house with a garden. A rural house may be heated traditionally (by wood
or coal) and by heating only some rooms instead of the full house a lot of
money may be saved in winter. Rural houses have a separate water meter,
which measure individual water consumption. Urban blocks of flats have only
one common water-meter. In this system total water consumption is divided on
a per head basis according to the number of families.
In my opinion Hungarian rural policy should support transitional villages so
that they would not turn backward. At the same time rural policymakers should
prepare various strategies for the most handicapped rural areas. Here the im-
provement of human resources is the most important. Now the real threat is that
if Hungary joins the European Union, a large number of people living now in
backward areas, will emigrate into countries that are more advanced than Hun-
gary. The Hungarians are well aware that these people should remain and be
supported where they live now. Unfortunately no funds are available for this
purpose yet.
6 The role of agriculture in rural income
Fertile land is the most important – in some instances the only – natural re-
source of rural areas. For several centuries it was the only source of rural in-
come. Apart from Budapest and some major cities the whole Hungarian society
was bound to land, it was their only income source. Agriculture was not only
the business of agricultural farmers. It gave jobs for rural artisans – through
agricultural tools and machinery repair service – and for lawyers who were
administering the farmers’ estates and inheritance matters. In the early 20th
century various agricultural businesses from milling industry through meat
processing to various services that rural society was in need of started in Hun-
gary. After the extinction of the traditional peasant society these activities either
survived in a new form or were terminated. In the socialist era villages had
some industry. If rural industrial firms were selling their products to east Euro-
pean markets – and the majority did so – they went bankrupt after the political
transformation. Rural services were very poor until the end of socialism. These
facts mentioned clearly show that rural economy was in critical situation at the
beginning of the political transformation and apart from some areas it is still in
crisis. The question ‘How to make rural society viable?’ is still very topical.
The privatisation of agriculture brought land for 2 million people. However
only the minority of landowners deal with farming. Some have sold others have
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leased their land. I estimate the number of active farmers to be the least within
this group.
There are four groups of active rural population on the basis of income:
Group 1: The primary income of group members comes from non-agricul-
tural sector. Agriculture in case of this group means subsistence farming in
vegetable garden or on small land below the size of 1500 square meters. The
lease of a maximum 3-hectare land also might occur here. The majority of citi-
zens belong to this category. I estimate this group to 40-50 per cent of the active
rural population. They either can afford to give up farming or unable to do it
and for this reason they lease their land. Agriculture is not really important for
them.
Group 2: Group members have their own farm and they do farming as man-
agers or members of private or agricultural companies. 10–15 per cent of the
active rural population belong to this category. This group has maintained the
original function of villages by continuous agricultural farming. The territory of
their farms varies between 30 and 1000 hectares per family. Their employees
have no private land they get monthly salary only.
Group 3: Group members are part-time farmers only or lease their land if
they have big land. Part time farming is typical in the EU and in Hungary it is
also desirable to have more than one job. 10–15 per cent of active rural belong
to this category. The typical farm size is between 5 and 50 hectares per family.
Group 4: Group members have neither land no jobs, because they are either
too young and the farm belongs to their parents or find no job on the job mar-
ket. 30–35 per cent of the active rural population belong to this category. They
should get a job outside the agricultural sector.
Due to the reasons mentioned, it seems that farms still have some role in ru-
ral income but this role is only a partial one giving potential life support and a
sense of security for farmers.
7 Rural development policy in Hungary
Hungary’s EU accession and the gradual introduction of the EU acquis com-
munautaire system increased the role of rural development policy and its termi-
nology in Hungary’s scientific and political areas and press language. Our EU
accession may end up in failure if EU patterns are disregarded by Hungarian
rural development policy.
It is very important that both in the European Union and Hungary rural de-
velopment policy is to treat rural employment problems and the excess of agri-
cultural population. For all these similarities rural development policy follows
different patterns in the European Union and in Hungary.
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In the EU the revolution of the information technology – the second indus-
trial revolution – made possible to avoid considering rural development bring-
ing changes only for a minority of local communities. This has put an end to the
illusion of the continuous growth theory. The problems of agricultural surplus
show that the one-side profit orientation of production will generate waste,
environmental pollution and will lead to deadlock in the evolution process. The
concept of sustainable development was born as a response to this phenomenon.
Sustainability demands putting the quality of life above the quantity aspects of
consumption. In this respect sustainable development is closely related to rural
areas. In the European Union rural development policy derives from a new
philosophy of sustainable development and the opposition of globalisation.
In Hungary rural development policy is associated with the backwardness of
rural economy. The 1996. XXI. Act on Regional Development and Physical
Planning with the 1997. CXIV. Act on the Development of Agricultural Econ-
omy serve as legal standpoints for Hungarian rural development. The govern-
ment elected in 1998 put rural development under the competence of the Min-
istry of Agriculture. Then the name of the Ministry was changed to Ministry of
Agriculture and Rural Development. In January 1999 a Department of Rural
Development Programmes was organised within the Ministry.
8 Integrated rural development
Article 2 of the 1996 Cork Declaration is about the integrated aspect of rural
areas. The Declaration starts from the point that rural development policy must
be multi-disciplinary in concept and multi-sectoral in application. These two
principles are the most important in rural development but integration should
cover a wider sphere. In Hungary rural development should cover the following
areas:
− Interdisciplinary approach;
− Cross-sectoral integration;
− The integration of cities with villages;
− The integration of rural society;
Integration should cover all areas mentioned here. Details will follow in the
next chapters.
8.1 Interdisciplinary
approach
In Hungary rural development concepts are integrated from multiple disciplines.
This does not mean that all sciences that have something to do with rural
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development really do that. Compared to the rural disciplines of the European
Union with the Hungarian the shortage of Hungarian macroeconomic experts
seems to be a large gap. Hungarian rural development experts should express
their opinion on rural policy to the public but so far they have not done it. In
Hungary three research groups study rural development. These three are soci-
ologists, agricultural researchers and the experts of SAPARD (Special Acces-
sion Program for Agricultural Rural Development) Programme. They study
different aspects pf rural development.
1. The most comprehensive researches in rural development issues are car-
ried out by sociologists, namely by rural sociologists (together with some geog-
raphers of similar interest). Sociologists restarted their village sociology re-
searches in the 1980s. They were to revive and continue the old traditions of the
rural sociology of the past. The majority who participated on village research
group meetings (or discussions in rural research camps) in the 1980s are now
publishing papers on various rural development issues and firmly state that
there is an relationship between rural and regional policy. Although rural de-
velopment is an integral part of regional development they uses different poli-
cies through the realisation of their objectives. The elimination of regional dis-
parities is the fundamental objective of regional development. Regional devel-
opment is going to achieve this target through effective economic development.
According to theory of regional development the extension of markets is an-
other reason why the situation of backward areas should be improved. Rural
development is also targeted to the elimination of regional disparities but it is
going to achieve that through the improvement of peripheral areas.
To sum it up, to achieve the same result
− Regional development is targeted for effective economic development;
− Rural development is targeted for the improvement of peripheral areas
Obviously, effective economic development is an integral part of rural de-
velopment but rural development comprises the improvement of human re-
sources and the maintenance of local communities as well.
2. Agricultural experts are the second group of rural development research-
ers. In the EU the institutional system of rural development has very close rela-
tionship with the agricultural sector because the EU is going to terminate its
assistance to farmers within the system of Common Agricultural Policy, which
was established in the Rome Treaty. The assistance Hungarian farmers receive
now from the government is far less than the EU level. Today the direct assis-
tance the EU would provide to Hungarian farmers would be twenty times higher
than the present level of state assistance. Among countries that have market
economy and agricultural surplus only rich countries have modern agriculture.
Very large sums were spent there for the modernisation of agriculture in the
past years. Nearly all governments in rich countries protect and give support to
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agriculture. New Zealand is the only exception because in New Zealand
agriculture was modernised instead of industry and the country turned to be
prosperous in that way. Agriculture receives only 5 per cent support there.
Although in Hungary only 7 per cent of the total population is a full-time
farmer, agriculture is still a national identity symbol. This may be explained by
the fact that in 1949 one half of the total active wage earners were living on
agriculture and today still one half of the total families deals with part-time
farming to save on food costs.
The success of agriculture in the socialist era created the image of Hungary
as “food pantry for Eastern Europe”.
The emotional attitude towards agriculture is not only a Hungarian feature.
European countries with modern agriculture (France, Finland, Austria) are also
agriculture-minded and this is the reason for the survival of the assistance phi-
losophy of Common Agricultural Policy.
Not only positive images are associated with agriculture. In Hungary a lot of
experts worry about agriculture, saying, that this sector will be the loser of
Hungary’s EU accession. To avoid this the term ‘profit-making agriculture’,
regarded as the best alternative of rural policy, has been introduced. Those who
are on this opinion think that agricultural grants should be given only to com-
petitive farms. This view suggests that rural development is only the result of
agricultural development.
3. Within the framework of the Hungarian programme of SAPARD, together
with regional and county level programmes, various inter-settlement coopera-
tion projects were born, which served as a basis for micro-regional projects. As
a result of cooperation, small workgroups are formed. Group members by
writing their own SAPARD programme, may turn themselves into rural devel-
opment experts. These experts have various professional backgrounds. They
consider rural development as an instrument of stopping the disorders of a
classical market economy. These people represent the official part and may give
a new approach to rural development. They may establish strong relationship
and this may increase the social basis of rural development with the size of
expert groups. Hungarian SAPARD experts hold the opinion that human re-
sources, various adult education programmes, environmental and educational
objectives should receive priorities in rural development. They completely dis-
regard the aspects of competitive agriculture. It depends only themselves
whether they remain rural experts or not in the future. This new expertise
should tackle two problems. First, they are to write some articles into journals
because their views on rural development issues have not been published in any
papers. Second, their potential candidates to whom they write their proposals
have no financial resources. If calls for tender are published for SAPARD proj-
ects, only those who can submit their tender will receive resources. I must tell,
am afraid that development projects will proceed not in the same way that
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SAPARD programmers desired. It might turn out that all was nothing but illu-
sion and Hungarian SAPARD programmes will have to stop.
A broader interdisciplinary approach to rural development requires two
things: The first is that all rural scientist should publish their opinion in scien-
tific journals and the ministry of Agriculture and Rural Development should be
responsible for the practical realisation of concepts. The second is a close co-
operation among different sciences serving as a basis for a sound rural devel-
opment policy. Rural development experts need various forums to express and
discuss their views and opinions on meetings.
8.2 Integration of economic sectors
The rural economy of the socialist era was unable to survive the political trans-
formation. Due to the decrease of state assistance and the loss of European
markets the overall volume of agricultural production dropped by 40 per cent.
Rural industry was in an initial phase only and was unable to compete with the
emerging products imported from West European countries. Rural services were
very poor until the end of socialism. These are the reasons why rural economy
was and apart from some instances it is still in crisis. Rural development may be
achieved by an integrated development of various economic sectors.
Concerning living and employment conditions, 10–15 per cent of rural
population are full-time farmers another 10–15 per cent are part-time farmers.
The rest work in cities or local industry or unemployed.
Unemployment is the deepest problem of today’s rural society. The socialist
era had full employment coupled with large-scale hidden unemployment. After
the political transformation “phantom jobs” gradually ceased. In year 2000 the
number of jobs were 25 per cent less than ten years before. Ordinary rural peo-
ple were unable to gain benefits from privatisation. This is particularly true in
case of the uneducated rural. Some of them retired and live as old age or dis-
ability pensioners. These tricks of “pensioning off” were used to avoid unem-
ployment. The scarcity of jobs is the largest obstacle of rural development. The
diversification of rural economy may be a solution for this problem.
Hungary’s accession to the EU may accelerate rural development in two ar-
eas. The first is local resource based agricultural and non-agricultural activities
– including food processing – because assistance will be given to these invest-
ments. The other area is local services that will be rendered for local residents
and visitors.
Agricultural support may have special role in rural development. Nobody
knows yet the volume of the normative assistance Hungarian agriculture will
receive from EU funds but it surely will be higher than the present sum of 22–
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24 billion HUF Hungarian farmers receive from the budget now. This is espe-
cially true considering price changes. The question is that what purposes will
this sum be spent for. Production costs the largest item in farmers’ budget will
not increase only taxation will be heavier. The income farmers will gain from
the increased assistance may either be spent on the modernisation of production
or for the improvement of personal living conditions. After Greece’s EU acces-
sion in 1981 Greek farmers used the agricultural support they gained from the
EU for the improvement of their personal living conditions. Although a part of
this sum was really earmarked for these purposes, but actually it should have
been spent for technical investments, and this did not happen. This is the reason
of the low productivity of Greek agriculture coupled with low food consump-
tion. While in 1989 dairy production was 760 kg (1520 pounds) per head in the
Netherlands, it was only 71 kg (142 pounds) per head in Greece. Even if Greece
had a very low dairy consumption, it covered only 84 per cent.
Hungary has a real threat to have the same tendency. The lack of small
farming or multi-generation farming strategies may result in this. The increase
in normative agricultural support after Hungary’s EU accession will increase
differences between small and large farms, favouring for the latter. Agricultural
support will not cover the costs of technical modernisation for small farmers.
They may either spend the grants for other purposes or may cooperate through
the realisation of common development projects. If they are unable to cooperate
they could do the best by spending their money for the education or training of
their children. In this way the young generation would not work in agriculture
but could keep staying in villages. Their job qualifications in the service sector
would provide good full-time jobs in small farms. Later on small farmer fami-
lies may terminate their agricultural activities and through the union of their
lands they may grow the agricultural land of other families. This can result in a
trend in which local money is spent locally.
Although the level of food consumption cannot exceed a certain limit, its
structure may undergo some transformation. The largest demand will be for
various local services. Educating young people to be able to render services
meeting local demands is our great task. Otherwise rural people will travel to
cities and they will spend their money there. Local incomes should be spent
locally and the income, circulating round the community, will serve for the
overall benefit of local residents.
In the EU the welfare of rural people is based on two policies.
One is that the taxpayers’ money is redirected to rural areas to contribute to
the income of rural farmers who are to sell their products on low prices of the
global market. The other policy is also funded from the taxpayers’ money. It
provides financial assistance to rural areas for rural regeneration, environment
and landscape economy projects. This is a feasible practice because, on the one
hand the European Union is a welfare society, on the other hand the sight of
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nice rural landscape gives a good image and atmosphere not only for the local
people but for tourists and holiday visitors as well. The same reasons motivate
environmental and landscape economy support projects. These projects serve
for the overall benefit of the whole society.
For a long time the European Union’s Common Agricultural Policy concen-
trated only on farmers’ assistance. It was only during the last ten years that its
strategy moved towards rural development. Beyond economic reasons, the
heritage of peaceful rural landscape is such a great value for the Europeans that
they are ready to do their best to preserve it. If Hungary also turns into a welfare
society, Hungarians will surely follow this model. Several problems should be
tackled to achieve this. Here I would shortly define the tasks of local citizens,
politicians and politics. Local citizens should learn or educate their children.
Local politicians should make local citizens understand their tasks and convince
them to keep staying in their home village. They should convince them that it is
not good for a person or a family but it is good for the whole community. If a
group is motivated by a good target staying in home village will be a natural,
self sustaining process. Politics should make local politicians understand their
mission. Their mission may be described as the enlightening of local residents.
Politics should provide the necessary background of these enlightening
functions.
8.3 Integration of cities with villages
Cities and their surrounding villages should be understood as an organic unit.
Rural and urban settlements may not exist without each other. The integration
of cities with surrounding villages, and locality are emphasized in this chapter.
In 1990 the establishment of the local government system enabled villages to
bring decisions by themselves on their future. However there are several matters
that cannot be decided locally. The recognition of the need for inter-settlement
cooperation and thinking in settlement groups instead of thinking locally is the
next step from here. The development of services and other activities mentioned
in the earlier chapter is feasible only within a micro regional system. The
European Union’s policies are based on the coexistence of cities and their
surroundings. In the European Union the relationship of cities and their
surroundings is based on partnership and cooperation. If cooperation is set up
between institutions only this will have a formal character only and won’t work.
Following the rules of formal procedures – determined by bureaucracy and
institutional capital – it is the leaders of cities and villages who should initiate
cooperation. They should establish partnership with the majors of another
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settlements. They should convince the other partners that it is their programmes
and ideas that are viable and worth for following.
Micro regional cooperation should cover the following areas:
− Industrial and other economic policies
− Agricultural policy
− Environmental issues
− Regional development
− Employment policy
− Social policy
8.4 Integration of rural society
In 1887 Ferdinand Tönnies formulated his famous ‘Gemeinshaft-Gesselschaft’
theory. This theory says that villages are typical Gemeinshafts (communities)
while cities are Gesselhafts (societies). In a community people are in a sound
relationship. A community is an organisation based on face-to-face relations. In
a society the situation is different: although people set up their everyday com-
municational relations they live separately, everybody is left alone and there is a
constant tension between the individual and the others. Tönnies’ theory was
working for a long time in the Hungarian society until the 1960s. Up to this date
rural communities strongly depended on agriculture and wealthy farmers were
put as examples for the others who were followed by the majority of rural
farmers. After the collectivisation this system did not survive.
In his survey in the early 1990s Andorka Rudolf came to the conclusion that
occurrence of permanent poverty – the lowest level of subsistence – is almost
seven times larger in villages than in Budapest. He also pointed out that rural
population is in much lower mood than the urban.
Thus, the mood indicator of rural population is than the Hungarian average
being also low. Pessimism and loneliness are the most dominant form of feeling
in villages.
Today rural development is doomed to failure without the involvement and
active cooperation of local residents but how can local society be more active
without self-orientation, self-reliance, self-conscience and a strategy to tackle
problems?
If someone has no job, no money and is defenceless, he or she cannot be ac-
tivated until being given some opportunity to do something to live better. Even
then, it is not sure he will really do something to turn better. Animation is in-
vented to help people who are unable to help themselves. The meaning of ani-
mation here is community reactivation, in other words, giving life to something.
The animator here is a group helper activating a group to find their identity.
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With the animator’s help group members can find their place within the com-
munity and society. The cooperation and common activity of group members
will initiate changes in the group members’ mind urging them to take the first
steps to turn their life better.
Community development may take place on two levels. The first is the level
of agitation. Here the means of propaganda may be used. The target group may
listen carefully and agree with the speaker, the agitator. Then the personal in-
volvement of local group members is required. Personal contacts should be
established among group members.
The role of personal character has greatly increased in our world of hidden
values. If someone wants to help the community from outside, he or she should
have a strong personal character. He should believe in his programme making
others feel that they will get real help to find their way out of crisis. He should
create a group from local people who are popular and respected among the oth-
ers. Through these group members positive live contacts may be established
with the rest of community.
Thus, local community members should be the animator’s closest assistants.
9 Hungarian rural development objectives
Hungarian rural development is targeted for rural economic development and
the cutback of social disparities. To achieve these objectives rural development
should carry out infrastructure development and human resource improvement
projects.
1. The consequences of agricultural modernisation on rural economy should
be assessed by a survey. In places where the survey shows adequate conditions
agriculture should either be extensive or intensive (bio-gardening). They need
capital and cognitive management. Financial assistance should be based on
programmes and projects associated with programmes should be funded. The
manufacturing of products looking back to long-time traditions should have
priorities in funding on micro regional level. Investments of strategic impor-
tance, such as freshwater fishing, irrigation or forest planting projects should
have priorities on regional level.
2. The diverse development of rural economy. The future of rural areas
should not solely depend on agriculture. New sectors, new activities should be
established in rural areas. The support of rural small enterprises, such as small-
scale food processing, rural industry, basic services, commerce, rural tourism,
investment and manufacture consulting, public information services should
have priorities in development.
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3. Infrastructure development. Although this is the area in which the greatest
progress has been made since the political transformation the situation is still far
from being appropriate. The development of public road and drainpipe systems
will be an acute problem in rural areas for many years. The development of
services strongly depends on infrastructure development. There is a large
difference between the service need of native and middle class residents having
recently moved to rural areas. This created a difficult situation for service
industry investors.
4. Human resource improvement has strong relations with the three above-
mentioned objectives. This includes the preparation of rural population for
changes in their trading and enterprise activities and the risks they should bear
in their business. People living in poor conditions have a feeling of inferiority.
Gaining self-confidence should change this attitude. Responsibilities are shared
in this field. Those having contacts with a large number of people (such as mass
media institutions) have extremely high responsibility. It is a great threat that a
large mass of communities are excluded from the European Union’s economic
policy if rural areas remain unfit for integration after Hungary’s EU accession.
Finally, it should be emphasized that rural development in Hungary is lag-
ging behind the transformation of the country’s central and other advanced
regions. It also seems sure that rural transformation will coincide with Hun-
gary’s EU accession. This is another potential source of conflict for rural
population who have still not recovered from the shock of political transforma-
tion.
In the European Union the volume of rural development grants has a grow-
ing tendency. It is expected that the contribution Hungary will pay into the EU
budget will be smaller than the grants Hungary will receive. A significant part
of these EU grants will be allocated for regional and rural development pur-
poses. However grants are not transferred automatically, they should be won by
projects in a very bureaucratic system. It is also expected that the overall vol-
ume of grants will be lower at the time of Hungary’s EU accession than now, so
the competition for funds will be greater. Within this competition system Hun-
gary should elaborate the most effective model of rural development.
10 The SAPARD Programme in Hungary
In 1997 the EU – regarding the enlargement with East European countries –
made a decision on the establishment of preaccession funds. These funds are the
PHARE, (Poland-Hungary Assistance for Restructuring the Economy) the ISPA
(The Instrument for Structural Policies for Pre-Accession) and the SAPARD.
The SAPARD on the one hand assists to the execution of programmes within
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the framework of Common Agricultural Policy and its relevant tasks, on the
other hand it is targeted towards tackling the primary and special problems of
sustainable agricultural and rural development within the accession countries.
The share of the East European countries from the EU preaccession grants
varies from country to country (Table 5).
Table 5
The Share of East European Countries from the EU Preaccession Funds
Country %
Bulgaria
8.0
–
12.0
Czech Republic
5.5 – 8.0
Estonia
2.0
–
3.5
Poland
30.0
–
37.0
Latvia
3.5
–
5.5
Lithuania
4.0
–
6.0
Hungary
7,0
–
10.0
Romania
20.0
–
26.0
Slovakia
3.5
–
5.5
Slovenia
1.0
–
2.0
Total
84.5
–
115.5
Source: Magyar Mezőgazdaság (Hungarian Agriculture) 1999. 32. p. 8.
The annual budget of SAPARD for the EU candidates is 520 million euros,
which is funded from the EAGGF Guarantee fund (Table 6).
Hungary may expect 38 million euros between 2000–2006. This sum is
given only in case Hungary has adequately prepared for the reception. (This
sum may even double if Hungary is better prepared for the reception and utili-
sation of these funds than the other candidates.) The criteria of the distribution
of funds among candidates is as follows:
− The share of agricultural population from the total
− The share of agricultural land from the total
− The GDP per head on calculated purchasing power parity
− The situation in the given country
Table 6
The distribution of SAPARD funds
Country
Value in 1999
(euro)
Bulgaria
52 124 000
31
Kovács, Teréz : Rural Development in Hungary.
Pécs : Centre for Regional Studies, 2001. 43. p.
Discussion Papers, No. 34.
Czech Republic
22 063 000
Estonia
12 137 000
Poland
168 683 000
Latvia
21 848 000
Lithuania
29 829 000
Hungary
38 054 000
Romania
150 636 000
Slovakia
18 289 000
Slovenia
6 338 000
Total
520 000 000
Source: Newsletter, 14 August 1999 EC DG VI
The planning and tendering system of SAPARD follows the system of
Structural Funds. Payments, monitoring and evaluations follow the rules of
EAGGF.
− To win the grants national plans of agriculture and rural development
should be prepared and approved by the European Committee
− The preparation, execution and monitoring of programmes should meet
the concrete requirements of the Structural Funds and should contribute to
the transfer of the legal regulations of EU (acquis communautaire) with
special regard to the Common Agricultural Policy.
− Co-finance is a must. The Hungarian government allocates a separate fund
for financial assistance to national SAPARD programmes from the
Hungarian side
− The approval and coordination system match with the regional pro-
gramme of EU member countries
− The utilisation of grants should undergo a preliminary and interim analy-
sis, a continuous monitoring and a subsequent evaluation process for the
efficiency assessment of programmes and to see how the programmes
have been realised.
− EU conform payment agencies should be established in candidate coun-
tries
− Candidate countries should submit an annual report to the European
Commission until the end of the sixth month of the following year
The county level (NUTS III) and the regional level (NUTS II) sub-pro-
grammes of the Hungarian National Plan for the SAPARD programme were
prepared by the middle of 1999 and they were followed by the preparation of
the National Plan for SAPARD programme. Hungary’s National Plan for
SAPARD was submitted to the EU Brussels Office on 29 December 1999. The
32
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Discussion Papers, No. 34.
Programme was proposed for approval by the STAR Committee, a committee
for the evaluation of SAPARD proposals, on 13 September 2000.
With Hungary’s SAPARD programme the proposals of five other countries
(Bulgaria, the Czech Republic, Poland, Latvia and Slovenia) were approved.
Although in Hungary the institutional system of SAPARD has already been
established no agreements have been made on its accreditation and seven-year
financial settlement. The agreements are scheduled for the first months of year
2001.
As only short time was available for the preparation of the national Plan for
the SAPARD programme there was no time for building a bottom to top scheme
starting from micro regional (NUTS IV) level ending with national level. Micro
regional plans for the SAPARD programmes were prepared at a later time than
the national one. The call for the preparation of micro regional projects was
announced in April 1999. 192 local government associations or micro regions
submitted their proposals. Because of the large number of applicants the
Ministry of Agriculture and Rural Development approved all proposals. The
proposals were categorised into ‘A’ ‘B’ or ‘C’ groups depending on their
quality. The timing of their analytical, strategic and operative programmes was
different.
Hungary’s SAPARD Programme was prepared on the basis of tasks included
in the SAPARD Decree (1268/99/EC). The tasks proposed by the Brussels
administration were as follows:
1. Investments into agricultural holdings
2. Improving the processing and selling of agricultural and fishery
products
3. Quality check, improving the conditions of animal and plant health
checking system to increase food quality and to protect the consumer
4. Environment and landscape friendly agricultural production
5. Development and diversification of alternative business economies
6. Launching a temporary retirement programme for agricultural farmers
and providing farm management services for them
7. Establishment of farmers’ groups
8. Village modernisation and regeneration, the preservation of the material
and intellectual heritage of rural areas
9. Land value increase and the modernisation of the agricultural land
system (land property resizing)
10. The establishment and modernisation of the land property
administration system
11. Improvement of professional training
12. Modernisation of rural infrastructure
13. Modernisation of the agricultural water management system
33
Kovács, Teréz : Rural Development in Hungary.
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Discussion Papers, No. 34.
14. Forestry, including forest planting, investment into private forest farms,
the processing of forestry products
15. Consulting, information on tasks included in this decree, preparation of
studies concerning the preparation and monitoring of this programme,
informing the public on events
On the basis of this list the 2349/1999 (XII.21.) Government Decree
approved the following list of tasks to be supported by the SAPARD
Programme in Hungary.
Hungary’s Rural Development Programme SAPARD
(The share of financial assistance to be given at the beginning
and at the end of programme)
Agricultural tasks
1. Investments into agricultural holdings
2. Improvement of the processing and marketing of agricultural and fish-
ery products (26–7.4%)
3. Improvement of vocational training (1.8–2.7%)
4. Agri-environment measures (3.7–7.4%)
5. Setting up producer groups (7.3–7.3%)
Rural development tasks
6. Renovation of villages (7.5–12%)
7. . Economic activities providing alternative income (15–17%)
8. Improvement of rural infrastructure (11–15.5%)
9. Assistance to projects contributing to the operation of this programme
(2–2%)
According to this concept, the development of agriculture will have a prior-
ity in the first few years of the seven-year programming period but in the sec-
ond half rural development projects will receive higher grants.
Agricultural project proposals should be submitted to the county offices of
the Ministry of Agriculture and Rural Development while rural development
proposals should be submitted to the regional offices of SAPARD.
No geographical limits are to be set up against agricultural project proposals
if the criteria of tender invitation are met but rural development proposals are
accepted only from typically rural areas. They are in our case settlements with a
population density below 120 per square kilometres.
The community support of SAPARD may not exceed 50 per cent in case of
profit-oriented investments and may not exceed 75 per cent in case of non-profit
projects. In both cases 75 per cent of grants is funded from the EU and 25 per
34
Kovács, Teréz : Rural Development in Hungary.
Pécs : Centre for Regional Studies, 2001. 43. p.
Discussion Papers, No. 34.
cent is funded from the Hungarian budget. The Ministry of Agriculture and
Rural Development allocated 3.5 billion HUF for the funding of SAPARD
projects from the Hungarian side. Although the call for SAPARD Programme
was not announced by the European Union at that time, this 3.5 billion HUF
was available through a tendering system for rural development investment
projects (until 15 September 2000).
As SAPARD is a decentralised fund, the EU authorises candidate countries
to use it by their own request but requires their supervision over the utilisation
of grants. Brussels does only a final supervision. If it comes out that the
evaluation of project proposals was not satisfactory the money received should
be sent back to Brussels. If significant disorders are detected Brussels may stop
funding the whole project.
Through SAPARD Brussels is going to prepare the ten preaccession coun-
tries for the adaptation of the Community’s legal and funding system. This will
enable them for integration after accession. However, there are four problems
that may hinder the realisation of the objectives of SAPARD programme. They
are as follows:
1. The annual sum of 520 million euros (38 million for Hungary) is very
low. To illustrate this, in 2000 40920 million euros was given to 8 million
farmers in the 15 EU member states (Table 7)
2. Due to the lack of own resources, SAPARD assistance will be given to
wealthy farmers instead of the handicapped. It is the poorest that this
money should be given to use for education, community development
and some small-scale investment to start their own business.
3. SAPARD is mostly characterised by those things that have been ex-
cluded. They are those three tasks that are included in the rural develop-
ment chapter of Common Agricultural Policy, such as:
– Quality product marketing
– Services for rural economy and society
– Assistance to rural tourism and handicraft activities
These tasks may trigger endogenous local development. They are essen-
tial for the establishment and development of agriculture based rural
economy.
4. SAPARD gives financial assistance to projects instead of programmes.
Small independent projects will not generate overall development
through a whole region. It would have been more reasonable if the Euro-
pean Union’s Council had stipulated in the 1268/1999 EK SAPARD De-
cree that it is projects that should be funded. They should be such projects
that ignite overall regional development.
35
Kovács, Teréz : Rural Development in Hungary.
Pécs : Centre for Regional Studies, 2001. 43. p.
Discussion Papers, No. 34.
11 Rural development in Hungary after the EU
accession
In 1999 on the Berlin Summit of EC it seemed that Hungary would join the EU
in 2002. Now it is obvious that this will not happen and even the exact date of
the accession of the first Central European countries is still unknown. There are
greater uncertainties about the European union’s intention with the agricultural
farmers of the new countries. Can they expect the same grants with those who
are in countries joined to the EU at an earlier time? Or should they do with
lower grants? The second question is so important that may almost decide the
first one. The European Union seems to be uncertain to decide the exact date of
the next enlargement because they do not intend to give the same grants to the
farmers of the new countries with those being in the fifteen member states.
Hungary’s present agricultural policy is very liberal compared to the policy
of the EU. Foreign citizens are not allowed to purchase agricultural land but
there are no restrictions for them to leasing, farming or working on Hungarian
land. Several German, Austrian and other citizens of the European Union oper-
ate and manage farms on several thousand hectares in Hungary. On the EU side
a new regulation came into force on 1st July 2000 on the operation of private
business in the EU for citizens of associated countries. This regulation had the
same text for all associated members recorded in the agreement of associated
membership in 1991.
The agreement stipulates that from the middle of 2000 citizens coming from
associated countries have unlimited rights to establish a private business
through the European Union. Three businesses are excluded from this right. No
citizens from the countries of associated membership may work as lawyers,
bankers or farmers. They have no right either for land purchasing or leasing.
(The reason is obvious: as farming in the European Union automatically re-
ceives serious grants, citizens from other countries are not welcome to receive
such grants.) In these circumstances the European Union’s demand against
Hungary and other East European countries for the liberalisation of land pur-
chase seems at least to be hypocritical. If someone says you may buy land but
first you must live here but if you want to live here you must have a business
license and if no business license is given for farming, this is practically a land
purchase and land lease ban.
After Hungary’s EU accession rural development in Hungary will primarily
depend on agricultural development.
The EU budget for 2000–2006 offers limited opportunities for the integra-
tion of Hungarian rural development into the funding system of the EU (Table
7). The reason for that is that in the budget approved in Berlin in March 1999
two items were separated:
36
Kovács, Teréz : Rural Development in Hungary.
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Discussion Papers, No. 34.
− Support for the fifteen members
− Support for the preparation of accession countries and for the Union’s
enlargement
In year 2000 45.6 per cent of the total budget will be spent on agriculture. In
the following six years of the programming period this will increase to 49.1 per
cent (Table 7).
Article 7 of the Berlin budget is about preaccession funds. These funds go up
to 3.4 per cent of the total EU budget covering three areas:
1. Agriculture (520 million euro annually)
2. Structural funds of preaccession (1040 million euros annually)
3. PHARE (candidate countries) (1560 million euros annually)
These sums will be the same during the seven-year programming period.
How much really is the annual sum of 520 million euros (38 million for Hun-
gary)?
The total grant that all the candidates receive annually for the modernisation
of their rural and agricultural system is only a little more than half of the grants
Austria receives alone from the rural development funds of Common Agricul-
tural Policy. Beyond these grants Austria receives direct payments and other
agricultural grants from the EU.
From 2002 the EU budget will be extended by a separate fund under the title
of preaccession funds to cover the enlargement costs. It is a sum of 45 billion
euros (for the period between 2002–2006). It is not clear yet how many coun-
tries this budget will refer to. Three countries will surely be in the first round
but also may be that all the six countries of the Luxembourg group (the Czech
Republic, Poland, Hungary, Estonia, Slovenia and Cyprus) will receive this
fund. Hungary is obviously in the first group of accession candidates. The en-
largement funds include two headings:
− Agriculture
− ther expenses.
37
Kovács, Teréz : Rural Development in Hungary.
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Discussion Papers, No. 34.
Table 7
The financial budget of the fifteen member countries for the period 2001–2006
(Million Euro on year 1999 value, financial commitments)
2000 2001 2002 2003 2004 2005 2006
1. AGRICULTURE
40 920 42 800 43 900
43 770
42 760
41 930
41 660
Common Agricultural Policy 36 620 38 480 39 570
39 430
38 410
37 570
37 290
(without rural development)
Rural development with
4 300
4 320
4 330
4 340
4 350
4 360
4 370
relevant tasks
2. STRUCTURAL POLICY
32 045 31 455 30865
30 285
29 595
29 595
29 170
Structural Funds
29430 28 840 28 250
27 670
27 080
27 080
26 660
Cohesion Fund
2615
2 615
2 615
2 615
2 515
2 515
2 510
3. INTERNAL POLICIES
5 900
5 950
6 000
6 050
6 100
6 150
6 200
4. EXTERNAL ACTIONS
4 550
4 560
4 570
4 580
4 590
4 600
4 610
5. ADMINISTRATION
4 560
4 600
4 700
4 800
4 900
5 000
5 100
6. RESERVES
900 900 650
400
400
400
400
Monetary
reserves
500 500 250
0
0
0
0
Emergency
reserves
200 200 200
200
200
200
200
Guarantee
reserves
200 200 200
200
200
200
200
7. PREACCESSION FUNDS
3120
3 120
3 120
3120
3 120
3 120
3 120
Agriculture
520 520 520
520
520
520
520
Preaccession structural funds
1040
1 040
1 040
1 040
1 040
1 040
1 040
PHARE (candidate countries)
1560
1 560
1 560
1 560
0 560
1 560
1 560
TOTAL COMMITMENT
91 995 93 385 93 805
93 005
91 465
90 795
90 260
TOTAL PAYMENT
85 590 91 070 94 130
94 740
91 720
89 910
89 310
Total payment in the
1.13 1.12 1.13
1.11
1.05
1.00
0.97
percentage of the GNP of the
15 members
ENLARGEMENT SUMS
4 140
6 710
8 890
11 440
14 220
(payments)
Agriculture
1600
2 030
2 450
2 930
3 400
Other expenses
2 540
4 680
6 640
8 510
10 820
TOTAL PAYMENT
89 590 91 070 98 270 101 450 100 610 101 350 103 530
MAXIMUM
Total payment maximum in
1.13 1.12 1.18
1.19
1.15
1.13
1.13
the percentage of the GNP of
the 15 members
Available sum after payments
0.14 0.15 0.09
0.08
0.12
0.14
0.14
in the percentage of the GNP
of the 15 members
Own resource maximum in
1.27 1.27 1.27
1.27
1.27
1.27
1.27
the percentage of the GNP of
the 15 members
Source: Presidency Conclusions, Berlin, European Council, 24–25 March 1999, Table A, p. 26.
38
Kovács, Teréz : Rural Development in Hungary.
Pécs : Centre for Regional Studies, 2001. 43. p.
Discussion Papers, No. 34.
1.6 billion euros are allocated for agricultural and 2.5 billion euros are allo-
cated to cover other expenses in year 2002 (This is 6.6 per cent of the EU
budget in year 2002). These sums gradually increase in the next four years. 12
million euro will be spent for agriculture and 33 billion Euro for other costs in
the next five years. From the enlargement funds the share of agriculture is 27
per cent while other costs take 73 per cent of the budget. At the same time
Common Agricultural Policy (without rural development) will receive 40.1 per
cent of payments within the 15 member states. This means that at the present
situation – from the point of agricultural grants – the EU is not going to treat
associated countries as equal partners. It would be reasonable to change this
situation – for example by the Hungarian delegation during the EU accession
talks – otherwise the European Union will have two categories of farmers: first
class and second class. This does not fit into the European Union’s basic prin-
ciples.
12 Summary
In Hungary the disintegration of the traditional peasant society took place in a
very short time. Within twenty years (1950–1970) the rate of agricultural farm-
ers decreased from 50 per cent to 25 per cent. This process was accelerated by
the Soviet type collectivisation. Nevertheless, Hungarian agriculture was suc-
cessful in the socialist era. The country’s geographic soil and climatic condi-
tions turned Hungary a major agricultural producer among CMEA countries.
Letting farmers maintain their private farms if wanted was the greatest merit of
Hungarian socialist agricultural policy. Several farmers used this opportunity.
Part-time farming needed no (or very small) investment but heavy work. Farm-
ers were told what and how should be produced and the goods the made were
purchased. The income they earned created a feeling of social security, which
was lost after the political transformation. With the loss of income farmers
completely lost their self-reliance. They could do nothing but sell or lease their
land. Only a small group having qualifications, good contacts and some venture
capital enabling them to start their own business could turn to be the winners of
privatisation. The rate of agricultural farmers has dropped by fifty per cent,
which increased unemployment because the majority of rural workers were
employed and had no private business. Rural development should have the
objective of teaching villagers to be and think as a businessman.
In the last ten years a large migration started to rural areas. Both the urban
middle class and the urban poor escaped to villages. At the same time a large
number of village cottages was purchased by foreigners in recreational areas,
and in quiet out of world places.
39
Kovács, Teréz : Rural Development in Hungary.
Pécs : Centre for Regional Studies, 2001. 43. p.
Discussion Papers, No. 34.
The efforts Hungarian governments have done so far for rural development
since the political transformation were insufficient for triggering economic
development. The growth of disparities made the majority of Hungarian villages
feel as losers. The improvement of this situation is the major task of Hungarian
agricultural and rural policy. It is very important that Hungarian villages were
able to join the European Union as winners in a situation when the shocks of
political transformation are still alive.
40
Kovács, Teréz : Rural Development in Hungary.
Pécs : Centre for Regional Studies, 2001. 43. p.
Discussion Papers, No. 34.
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