Discussion Papers 2010. No. 78.
Controlled Decentralisation:
Institution-Building and Regional Development in Hungary
CENTRE FOR REGIONAL STUDIES
OF HUNGARIAN ACADEMY OF SCIENCES
DISCUSSION PAPERS
No. 78
Controlled Decentralisation:
Institution-Building and
Regional Development in Hungary
by
Katalin KOVACS — Andrew CARTWRIGHT
Series editor
Gabor LUX
Pecs
2010
Discussion Papers 2010. No. 78.
Controlled Decentralisation:
Institution-Building and Regional Development in Hungary
ISSN 0238-2008
ISBN 978 963 9899 26 1
Katalin Kovacs — Andrew Cartwright
© Centre for Regional Studies of the Hungarian Academy of Sciences
2010 by Centre for Regional Studies of the Hungarian Academy of Sciences.
Technical editor: Ilona Csap6.
Printed in Hungary by Stimegi Nyomdaipari, Kereskedelmi ds Szolgaltato Ltd., Pecs.
Discussion Papers 2010. No. 78.
Controlled Decentralisation:
Institution-Building and Regional Development in Hungary
CONTENTS
1 Regional policy in the making in Hungary
5
1.1 Territorial disparities
5
1.2 Local and regional policies and policy instruments
9
1.3 The pilot area: the Southern Transdanubian Region
17
2 Pre-accession funds and Structural Funds in Hungary
18
2.1 The pre-accession programmes
18
2.1.1 The features and implementation of pre-accession programmes
18
2.1.2 Pre-accession policy and institutions in Southern Transdanubia
22
2.2 The First National Development Plan financed by the European Union
25
2.2.1 Centrally managed sectoral and regional programmes
25
2.2.2 The participation of regions in programming
27
2.2.3 Implementation
29
2.2.4 Evaluation and Monitoring
31
2.3 The 2007-2013 programming period: centrally managed sectoral
programmes and regionally managed ROPs
33
2.3.1 The programming phase
35
2.3.2 Implementation: lessons learnt and used
39
3 The implementation of regional policy in Southern Transdanubia: empirical
evidence
42
4 Consequences — successes and failures in post-accession regional policy-
making
51
5 Conclusion
53
References
55
Annex
57
Discussion Papers 2010. No. 78.
Controlled Decentralisation:
Institution-Building and Regional Development in Hungary
List of figures
Figure 1 Lagging regions in Hungary according to per capita GDP figures 2005
7
Figure 2 Lagging settlements targeted by domestic regional policies
13
Figure 3 Objectives, priorities and Operational Programmes of the NDP
2004-2006
26
Figure 4 Priorities and measures of the Operational Programme for Regional
Development 2004-2006
26
Figure 5 Objectives, priorities and Operational Programmes of the NHDP
2007-2013
36
List of tables
Table 1 Changes in GDP from 1995-2005
6
Table 2 Regional structure of employment and economic activity in 2005
8
Table 3
Financial instruments for regional policy
(in billion HUF, at current prices)
12
Table 4 Absorption capacities by region
24
Table 5 Allocation of public funds in the National Development Plan
2004-2006
25
Table 6 Allocation of funds under the 2004-2006 ROP
28
Table 7
Absorption capacities of post-accession co-financed funds by regions
32
Table 8 Priority axes of the ROP for Southern Transdanubia
35
Table 9 Indicative financial plan of the New Hungary Agricultural and Rural
Development Plan 2007-2013 (HUF)
37
Table 10 Indicative financial plan of the New Hungary Agricultural and Rural
Development Plan 2007-2013 (HUF)
37
Table 11 Indicative financial allocation plan of the regional operational
programmes 2007-2013
39
Table 12 The share of decentralised development instruments in the first and
second national Operational Programmes
40
Table 13 Criticisms of former EU co-financed projects
43
Table 14 The influence of EU co-financed pre and post-accession projects
44
Table 15 Participants in the social consultation of the ROP in Southern
Transdanubia
48
Table 16 Estimated level of influence in regional development
49
Table 17 Correlation between the level of influence and satisfaction (correlation
coefficient)
50
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
This report analyses the changing institutional structures for regional policy in
Hungary from the pre-accession years to the second phase of the post-accession
period. The first part of the paper investigates domestic settings for regional pol-
icy providing detailed information about the chosen case study in Southern
Transdanubia. The second section examines the three major pre-accession funds
and the first National Development Plan, followed by the analysis of the changes
brought in by the New Hungary Development Plan 2007-2013. Institution-build-
ing at the regional level stood in the focus of that international comparative re-
search', and this is the broader theme the present report is also centred around.
When drawing the picture on accomplishments and constraints of decentralisation
in Hungary, document analysis and qualitative research tools were equally used.
1 Regional policy in the making in Hungary
1.1 Territorial disparities
Hungary has seven NUTS II territorial units. All but one are a combination of
three neighbouring NUTS III units, or counties. The one exception is Central
Hungary which includes the capital city, Budapest and Pest county surrounding it.
Since 2007, this region has been a 'phasing out' region, which means that en-
hancing 'competitiveness and employment' is the most important development
goal here. The other six regions belong to the relatively undeveloped group that
seek convergence.
The economic structure inherited from the socialist period has a strong impact
on regional development. With the largest concentration of production factors,
Central Hungary has been able to exploit its favourable starting conditions, as has
the north-western regions of Transdanubia whose development potential has been
increased by the Viennese core area. With the best road network, both regions
capitalised on their neighbouring network relations and their status as gateways to
and from the West. The other four NUTS II regions struggled with structural cri-
sis (the collapse of heavy industry) and their peripheral geographical locations,
whether as inner peripheries or as border areas. Recovery from their collapse has
been slow, and investment rates have remained low. As Table 1 shows, in the
southern and eastern regions of the country, per capita GDP figures have been
relatively declining since the mid 1990s as compared to the country average.
I The research was covered by the "Challenge of Socio-Economic Cohesion in the Enlarged
European Union" (SOCCOH) EU 6 th framework program. Lead partner: London School of
Economics, Robert Leonardi. Hungarian coordinator: Central European University, Andrew
Cartwright. Team members: Endre Sik, Katalin Kovacs. The manuscript was closed in October
2007.
5
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
Table 1
Changes in GDP from 1995-2005
Regions
Per capita GDP as a percentage of
Investments of
economic actors
national average
EU-25 average
Euro/person
1995
2000
2004
2004
2005
Central Hungary
147.5
156.1
158.8
95.6
2168
Central Transdanubia
90.9
97.3
95.6
57.6
1252
Western Transdanubia
102.8
113.8
104.4
62.9
1056
Southern Transdanubia
81.4
74.2
71.3
43.0
630
Northern Hungary
72.4
64.1
66.4
40.0
782
Northern Great Plain
70.9
63.2
65.5
39.4
838
Southern Great Plain
82.6
71.1
69.0
41.6
580
Source: Compiled from National Accounts, CSO, Budapest.
Two thirds of Foreign Direct Investment had been directed to Central Hun-
gary, which helps explain why this NUTS II region contributes 44.6% to the na-
tional GDP. 2 Budapest and its metropolitan zone is the only spatial unit where
GDP per capita has continuously increased since 1995. By 2004, it was close to
the EU-25 average. Almost four times more per capita investment comes to this
region than to the Southern Great Plain, which is the least attractive NUTS II unit
for investors. After some progress, the Central and Western Transdanubian re-
gions experienced a decline in GDP after 2000, while the North and the North
East regions reduced the relative gap after starting from a very low position. The
Southern Transdanubian and the South Great Plain regions have both been unable
to halt their decline. Regarding GDP per capita figures, the north-eastern and
southern regions of Hungary were well below the 75% national average at around
40% of the EU-25 average in 2004 (Figure 1).
In the most successful regions, manufacturing and services have been the most
profitable branches and are found at above-average levels. Western and Central
Transdanubia have more manufacturing industries while the highest number of
service industries can be found in Central Hungary. Annex 3 shows that when
agriculture-related activities and public services make above-average contribu-
tions to GDP, as they do in Southern Transdanubia, they do not generate adequate
levels of value added.
The employment figures for the past fifteen years show an east-west and
south-north divide of Hungary. Table 2 illustrates some of the most important
fault lines.
2 2004 figures, National Accounts, CSO.
6
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
In Central Hungary and the central and western parts of Transdanubia, labour
market participation approached 60% in 2005. This was well below the EU-25
average, but it reflected higher employment capacities than the least developed
northern and north-eastern regions. Southern Transdanubia and the Southern
Great Plain regions were closer to the group of least developed regions with par-
ticipation rates of 51.6%. These figures were more telling about the country's
employment capacities than the unemployment rate, which, at 7.2%, appeared to
be low in comparison with other member states. Unemployment was and re-
mained highest in Northern Hungary and lowest in Central Hungary. The devel-
oped north-west is closer to the centre while the southern regions are similar to
the least developed northern and north-eastern regions.
Figure 1
Lagging regions in Hungary according to per capita GDP figures 2005
Northern Hunan*,
69,4%
Western Transdanubia
99,2%
Central Hungaty
163.2%
Central Transdanubia
94,0%
Southern Great Plain
67.8%
Southern Transdanubia
69,4%
Source: Compiled from National Accounts, CSO, Budapest.
7
•
•
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
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Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
1.2 Local and regional policies and policy instruments
The content and institutional settings for regional policymaking were strongly
connected to the decentralisation of public authority in Hungary. In the early
1990s, local authorities assumed increased powers and competencies over
schools, health clinics and care for the elderly. One recurring theme in the re-
gional development literature has been how this initial surge for local autonomy
was followed by disillusionment, as restrictions caused by low revenues became
more apparent. 3 Difficulties in maintaining public services encouraged some
settlements, small towns and the surrounding villages to operate public services
jointly. From 1997 4, when the relevant legal framework on municipal associa-
tions came into force, the number of formal legal co-operations increased signifi-
cantly (Imre, 2003). Voluntarily run small-scale associations, particularly those
aimed at joint running of kindergartens and elementary schools were and still are
promoted by state subsidies. Act No CVII, 2004 on the Multi-Purpose Micro-
Regional Associations also exploited the 1997 regulation and encouraged larger
scale co-operations in order to guarantee sustainable, cost-effective public ser-
vices and, in practice, fostering the further concentration of rural schools.
The gradually increasing EU pressure to establish administrative capacity at
the NUTS II level combined with endogenous demands for greater devolution.
The Hungarian Act on Regional Development and Physical Planning (ARD)
19965 laid down the groundwork for the establishment of seven new territorial
regions. It established a hierarchy from the statistical micro-regional level via
two meso-tiers of the county and the Regional Development Councils (RDCs) to
the national Regional Development Council at the top. The national and county
development councils were the strongest; the former for its scale and competen-
cies, the latter being made up of locally elected self-governing bodies. The estab-
lishment of the micro-regional association and. RDCs were optional. The fact that
there was little mandate and little financial support meant that the new regional
entities were extremely weak.
With the need to convince the European Commission that there was domestic
institutional and absorption capacity, the central state took increasing interest and
control over the regionally based institutions. A first step was in the Regional
Development Concept from 1998 that fixed the geographical borders of the seven
regions. This was followed by an amendment in 1999 that made the establish-
ment of the RDCs mandatory but placed them under greater state control: certain
social actors, such as the economic chambers and the Hungarian Academy of
Sciences were replaced by central government representatives and the majority
3 For an account of this in relation to the provisions of public education, see Rad6 et al. 2006.
4 Act no CXXXV of 1997 on the Associations and Co-operation of Local Self Governments.
5 Act no XXI of 1996 on Regional Development and Physical Planning.
9
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
votes of the latter was secured (Agh, 2003). The mandatory duties of the RDCs
which were to create regional development strategies on the basis of partnership,
expanded to include development activities. After 2002 half of the Regional De-
velopment Appropriation was decentralised to the regional level.
Regionalisation was a mandatory feature of Europeanisation, managed cen-
trally and encouraged externally. According to most commentators, the new re-
gional institutions were evidently generated by top-down, albeit useful govern-
ment action, which could not be accompanied with any sufficient accumulation of
confidence or trust from below. Farag6 argues that since the regions did not
emerge out of any long process of social reconciliation or consultation, it was
more a course of rationalisation of social control and a new system of monitoring.
(Farago, 2005).
These weaknesses have created problems with administrative capacity. With-
out strong regional identity and effective institutions, there was a fear that the new
regional actors would be unable to assume the functions expected of them. This
eventually resulted in the EC abandoning decentralised management of Structural
Funds in Hungary, despite the fact that it was one of the major goals of the pre-
accession process. On joining the EU in January 2004, the first programmes were
planned and managed centrally because the Commission judged the regional in-
stitutional capacities as inadequate. The Hungarian delegation did not accept this
assessment, but they conceded the point to the EC delegation and developed the
whole process accordingly (Szalo, 2005). The Commission offered the "regional
action plans" as weak substitutes for the lost regional operational programmes,
which in the words of one commentator "were finally compiled in a rather hasty
and improvised fashion" (Somlyoclyne Pfeil, 2005, 117).
The fact that despite all the efforts to create regional governance, the decen-
tralised institutions were unprepared to fulfil the tasks indicates failure, but also
reflects the new waves of re-centralisation tendencies. The first and probably the
most important component is path dependency6: with no (NUTS II) regional tradi-
tion, the heart of "region-building", that is regional identity, was completely
missing. This explains the smooth increase of central government representation
in the RDCs which helped to cool nascent regional enthusiasm.
A second reason for failure was the sheer challenge of the task. In retrospect,
creating a new tier of government from scratch, and making it effectively opera-
tional within a decade proved to be too ambitious. This was despite the fact that
most actors accepted that regions should be operational by 2004. 7 Counties re-
mained politically strong not only because of their deep historical roots and strong
6 The importance of past government structures is emphasized by Paraskevopoulos — Leonardi
(2004) and Paraskevopoulos (2006).
7 Regions' being mandatory condition to join the EU or not has always been blurred by
professionals, even academics as well as by practitioners notwithstanding the media.
10
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
identities, but because elected counties are eminent terrain for party politics (Agh,
2003). None of the political parties could neglect counties and so "they were
preaching regions while keeping counties".
Thirdly, the political strength of counties has not been coupled with strong de-
velopment potential and NUTS IV level micro regions are also weak. While evi-
dence may increasingly show that small local governments with a low co-opera-
tion culture is unsustainable, most except the largest regional centres became
further detached from their neighbours. A majority felt threatened with losing
their small but safe resources accessible at NUTS III level. Their fears relate as
much to their invested social capital in these county networks as towards the fi-
nancial means endangered by re-scaling government intentions. In other words,
each tier is "floating" as Agh remarked, something that is considerably hindering
institution-building (Agh, 2003).
Finally, Fut& Paine Kovacs and Fleischer argued that the central government
has been one of the most important parties resisting changes:
"Government actors, in particular those ministries that are responsi-
ble for national and European resources are not interested in decentrali-
sation and may be an obstacle to change" (Futo — Paine Kovacs —
Fleisher, 2006, 132).
Following the general elections in May 2006, certain institutional changes
were introduced. A government proposal to award the seven regions self-govern-
ing functions was rejected by the opposition and the counties preserved their
elected councils. However, the process of "emptying" out this level and shifting
its tasks towards the regions and the micro-regions continued. From 2007, even
the two small regional development funds that had been solely for the counties
since 19968 were transferred to the regional level. The resources continued to
cover small-scale infrastructural development projects via a longer redistribution
channel which crossed both county councils and the micro-regional councils. 9
(Table 3).
In addition to these instruments, the Regional Development PHARE Pro-
gramme spent 27.83 billion HUF from 1996-2002. Convergence was further
promoted by tax allowances and additional advantages provided for the seven
8 TFC = Direct Instrument for Regional Development and its successors from 2004, TEKI = Sup-
port for Promoting Spatial Balance, CEDE from 1998 = Targeted Decentralised Appropriation,
LEKI in 2006 = Support Targeting the Least Developed Micro-Regions.
9 County councils usually distributed these resources among micro-regions according to their
population number. The micro-regional councils either distributed the allocated fund further to
sub-micro-regions by using the same principle, or selected investments to support yearly from
their members' claims. These grants were always used by local governments exclusively.
11
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
disadvantaged counties 10 and for the most backward micro-regions. The bulk of
instruments with regional development impacts were channelled to infrastructure
and enterprise promotion. 11 (Figure 2).
The importance of the decentralised funds for regional development can be
compared to the EU Structural Funds allocated to the Regional Operational Pro-
gramme (ROP) in the first National Development Plan. ROP support between
2004 and 2006 reached 126.4 Billion HUF, 62% of the decentralised incentives.
The allocations reflect the main convergent goals: 69% of the domestic decen-
tralised funds and 67% of the ROP resources were spent by the lagging four re-
gions. 12
As far as the institutional chain is concerned, some slight and some major
changes were realised in 2006 (see Annex 1 13). At the central level, these changes
relate to the rearranged managing institutions of the EU Structural Funds. The
reorganised National Development Agency is the chief organ responsible for EU-
related programming and programme implementation. Not only co-ordination
responsibilities but all Operational Programme managing authorities are placed
under its umbrella.
Table 3
Financial instruments for regional policy
(in billion HUF, at current prices)
Regions / financial
Total of the decentralised financial instru ments
instruments
1996-2002
2003-2006
1996-2006
Share %
Central Hungary
16,43
11,83
28,26
9
Central Transdanubia
14,58
10,6
25,18
8
Western Transdanubia
12,06
8,6
20,66
7
Southern Transdanubia
20,51
18,03
38,54
13
Northern Hungary
32,35
31,93
64,28
22
Northern Great Plain
36,04
36,8
72,84
24
Southern Great Plain
25,17
23,58
48,75
16
Total
157,14
141,63
298,77
100
Sources: 1996-2002: Community Support Framework, Hungary 2003, 43 p.; 2003-2006: Compiled
from the tablei of Accounts on the De-centralised Territorial and Regional Development Ap-
propriations, Ministry of Interior, Budapest.
1° Counties having less than 70% GDP per capita of the country average.
" Community Support Framework, Hungary 2003, 43 p.
12 Data base brought about by B. Ko6s from TEIR data. Department for Spatial Development
Research, Centre for Regional Studies, 2007.
13 Upgraded from Paine Kovacs — Paraskevopoulos — Horvath , 2005, 438.
12
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
Figure 2
Lagging settlements targeted by domestic regional policies
0 Lagging settlements in terms of infrastructure, economic and social aspects (310)
IN Settlements over the 175 % of the average unemployment rate
(394)
Settlements disadvantaged by both categorisation
(740)
Source: 240/2006. (XI. 30.) Government Decree.
Beyond the Agency's executive director, a government commissioner was at-
tached to the NDA who reports directly to the Government. He is in charge of
coordinating the programming and the implementation of the New Hungary De-
velopment Plan. A Development Policy Steering Committee with seven members
of vice secretary of state rank and belonging to the Prime Ministers' Office has
also been created. This advises the Government in all NHDP-related matters.
Social oversight is applied through the National Development Council (NDC),
which aims to represent broad national interests. The NDC is made up of the
seven chairmen of the RDCs, five representatives of "excellence" (university
professors, members of the Hungarian Academy of Sciences) and seven delegates
from chief social partners."
At the regional level, changes are slight but still important. The chairmen of
the RDC have effectively become government commissioners as they are nomi-
nated by the central government. Their election is secured by the majority votes
14 They are as follows: the chairman of the Alliance of Autonomous Trade Unions, the chairman of
the Alliance of Entrepreneurs and Employers, 2 delegates of the Economic and Social Council, the
chairman and the chairwoman of one of its committees, the chairman of the Association of
Industrial Parks, the chairman of the Hungarian Academy of Sciences.
13
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
of the council members. The appointment of the executive directors of the RDAs
by the RDC is approved by the National Development Agency. These changes re-
flect an increasing government control aimed at balancing the growing regional
competencies brought about by the decentralised operational programmes. It is
worth paying attention to the NGOs in Annex 1 as they "float" at local and re-
gional levels, even though they supposedly constitute missing links in terms of
interest representation.
Shifting our interest to the content of development policies, the Government
Decree 'Contents and Organisational Frames of the Europe Plan 2007-2013' 15
sought to adapt EU cohesion policy and prepare for the absorption of the 2007-
2013 EU funds. It aimed to do so by drawing up an overall, long term country
strategy along EU guidelines. 16 In order to further weaken the sectoral logic of
planning, the Decree created inter-sectoral thematic working groups as important
units in the planning exercise.
As far as these thematic working groups were concerned, the representation of
the horizontal themes of culture, safety, equal opportunities, and public admini-
stration were elaborated as was the mandatory inclusion of regional planners. The
Government established" eight working groups 18 and asked the seven chairmen
of the RDCs to organise parallel thematic working groups at a regional level.
They were encouraged to invite social partners, representatives of the economic
sectors and representatives of the natural and social sciences. One section of the
Prime Minister's Office 19 was ordered to co-ordinate the regional working groups.
Some items within this 'Decree on Europe Plan' were innovations especially
the establishment of interlinked, broad strategic frameworks such as the develop-
ment strategy of the country and a revised regional development concept in line
with EU policy guidelines, and secondly, the mandatory organisation of inter-
sectoral working units at both central and regional levels.
The most important documents of strategic importance, the National Devel-
opment Concept (NDC) and the revised National Spatial Development Concept
(NSDC) were accepted by the Parliament in December 2005. The preparation of
the New Hungary Development Plan (NHDP) speeded up after this point. Ac-
cording to the original government intentions, the NHDP should have been a
15 1076/2004. (VII. 22.) Government Decree.
16 The four broad objectives of the Strategy were also formulated in this decree: social and economic
cohesion, knowledge-driven and renewing society, competitive economy, sustainable develop-
ment.
17 The date of issuing was the July 22' d 2004, the deadline for establishing the WG-s was the 31 5t of
July.
I8 WG-s were titled as follows: „Healthy Society", „Clever and Cultured Society", „Active Soci-
ety", „Information-Based Society", „Competitive Economy", „Catching up Rural Areas", „Live-
able Environment", „Dinamic Settlement System".
19 County Territorial and Regional Development Office.
14
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
strategic document adapting all pillars of the NDC but narrowing their scope
down to EU-financed policies. In the end, this did not work out. The NHDP
absorbed most of the sectoral policies and their instruments, and in terms of co-
financing it was far too demanding. In order to maximize the country's absorp-
tion capacity, as much funds as were available had to be channeled into the
NHDP budget to cover the national contribution.
Regarding the country's huge budget deficit in 2006-2007, it is understandable
that what remained for non-EU-related purposes would be extremely limited. The
example of the regional policy instruments illustrates the "drying out" of these
domestic sources. For a long time it was uncertain whether or not the decentral-
ised regional development appropriations would continue after 2007 at all. Even-
tually, a concentration of decentralised funds at the regional level was agreed at
along with considerable cuts in the already small budget. When demarcation of
the themes of eligible projects to be supported by domestic regional resources
from the ones eligible for EU funding 2° was made, a pattern of small goes to the
"home" funds, large goes to "Europe co-financed" funds appeared evidently.
The NDC, which was approved by the Commission in April 2007, is imple-
mented through eight sectoral operational programmes (Ops), and seven Regional
OPs (out of which six fulfil convergence purposes). OPs are further broken down
into "action plans" which specify the tendering details. Sectoral and regional ac-
tion plans were accepted by the relevant authorities during the Spring of 2007 and
put on the website of the National Development Agency for public discussion.
The unity of the most important planning documents regarding their approach,
philosophy, broad objectives and policy instruments as well as the decentralised
implementation of the ROPs are innovations brought about by EU-accession. On
the whole, they are interpreted as a positive result of joining the EU. However,
there are critics that stress that unity might be threatened if the plans are not bal-
anced. The NDC declared that the primary objective of development policy is
increased competitiveness ("Competitive Hungary") followed by social and ter-
ritorial cohesion as secondary objectives ("Equitable Hungary"). This ranking
appears also in the NHDP and the National Spatial Development Concept. It is
not so much the order which matters, rather the scale of ignoring the needs of the
weak that is a matter of concern. According to a recent qualitative research pro-
ject, the leaders of small villages in Southern Transdanubia felt threatened with
complete exclusion from development chances because of the themes of the eligi-
ble measures and the thresholds of funding. These fears are not denied by the
planners. As the executive manager of the RDA in Southern Transdanubia put it
in an interview:
20 The relevant Parliamentary Decree has not yet been approved.
15
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
"People [in the countryside] talk about it [the ROP of Transdanubia],
and they see that there might be in trouble. 'What will be for us, the
schools and enterprises employing two persons ...'— they ask. Well, the
ROP will not help them."
Safeguarding a balanced territorial development appears in the NDC as a hori-
zontal goal. This means that the reduction of regional disparities has to be con-
sidered for each aspect of the Concept. This is repeated in the NHDP where re-
ducing regional disparities appears as the fifth among the priorities. The National
Spatial Development Concept (NSDC) of 2005 21 was the place for providing a
general framework of Hungarian regional policy.
Beyond favouring competitiveness, and emphasising the importance of spatial
cohesion, 22 the NSDC allocates tasks and responsibilities to the micro-regions,
regions and the counties, usually at the expense of the latter. Regions are inter-
preted here as the future loci of territorial democracy with elected self-govern-
ments and coordinating partners. This is the tier of regional programming, pro-
gramme implementation and monitoring equipped with appropriate capacities
assisted from the lower ranks as well. Micro-regions (NUTS IV) are also envis-
aged as long-term regional policy actors being loci of planning, harmonising and
mediating the interests of local governments (NUTS V), as well as rationally op-
erating public services with assistance from the counties. Beyond assisting the
regions and micro-regions in programming, the responsibility of counties is re-
stricted to public service provision in the middle run, and the smooth integration
into the regional institution system in the longer run.
In line with the aim of strengthening the competencies and responsibilities of
the regions, increased basic and territorial-level financial assistance is promised in
the framework of "contracts" between the government and regional actors of pol-
icy implementation. The target areas of regional policies that will be supported by
decentralised financial instruments are defined as those disadvantaged micro re-
gions where a maximum of 30% of the country's population lives, and within this
group of disadvantaged micro-regions the least developed ones at a maximum of
10% of the population.
In sum, the Concept lays down the basics of a domestic regional policy, al-
ready adapted to EU cohesion policy. Therefore, rather than separating EU related
and domestic policy goals and instruments, it integrates them as much as is possi-
ble in the broader CDC and NHDP programming documents delegating funding
to the measures of NHDP.
21 97/2005. (XII. 25.) Parliamentary Resolution on the National Spatial Development Concept.
22 NSDC stipulated the broad goals of territorial development as follows: 1. Regional competitive-
ness, 2. Spatial cohesion, 3. Sustainable spatial development and the preservation of heritage, 4.
Spatial integration into Europe, 4. Decentralisation and regionalism.
16
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Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
1.3 The pilot area: the Southern Transdanubian Region
The South Transdanubian Region has got the smallest population of the regions,
and the third worst figures for natural decrease, out-migration and aging popula-
tion. The micro-census showed that there were 16,553 fewer people living there
in 2005 than there were in 2001. Made up of three counties, Baranya, Somogy
and Tolna, the total population was 975,815 persons. It has the third largest sur-
face area with 1,416,856 hectares area or around 15% of the total country surface.
This combination of abundant land and below average population means that
Southern Transdanubia is the most rural region in Hungary with 68.9 persons per
square kilometre.
The geographical character explains its low population density index: the typi-
cal landscape is hilly with numerous small villages in the valleys. Apart from the
regional 'capital' of Pecs with its population of 150,000, there are few medium-
sized towns in this region. Pecs is the county seat of Baranya County; Kaposvar,
the seat of Somogy county, is the second largest in the region with some 65,000
inhabitants. The third county seat, Szekszard is the smallest urban centre in the
region with 35,000 inhabitants, but the largest in Tolna County. Paks, which is
home to Hungary's only nuclear power plant has 21,000 inhabitants and is also
located in Tolna country. Paks is always in the top few towns in terms of income
per capita. The high production value of the nuclear power station raises the GDP
indices of the county considerably, something that highlights the lack of other
significant economic forces.
There are 654 settlements in Southern Transdanubia out of which 488 are vil-
lages with less than one thousand inhabitants. Whithin this group of localities,
there are 346 tiny villages with less than 500 people, which reflects that not only
is Southern Transdanubia the most rural region, it also has the most fragmented
settlement structure. Both the scattering of settlements and the pronounced ghet-
tiosation processes, especially in the peripheral border areas, create zones of criti-
cal social crisis.
In terms of potentials, projects that enhance the road network are vital for
halting further decline and for increasing its capital-attractiveness of the region.
According to participants in the planning workshops for the New Hungary Devel-
opment Plan, the most important relevant projects are those included in the na-
tionwide Transport Development Operational Programme.
Human resource capacities are as important as physical ones. Southern Trans-
danubia has a relatively low number of professionals in engineering, natural sci-
ences, economics, law and social sciences. This is in spite of the presence of The
University of Pecs and the agricultural university in Kaposvar. There are rela-
tively large numbers of teachers working in the region (10% of all in Hungary);
there are also 5% of employees working in culture, the arts and the religious sec-
17
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Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
tor. Forestry, hunting and fishing sectors are over-represented in Southern Trans-
danubia: 16% of the country's forest workers and professional hunters. As the
region borders Lake Balaton, which is the largest lake in the country, it is not
surprising that there are large numbers in the fisheries sector - 31% of Hungarian
fishermen work here. The employment capacity of agriculture, both crop farming
and animal husbandry, as well as various industrial branches are around average.
The numbers in mining were below average at 7.3%, while the food industry and
construction remained slightly higher than in other parts of the country with
11.3% and 10.4% shares respectively.
This settlement structure has encouraged relatively more co-operation between
villages than elsewhere in Hungary, and the ratio of cooperation actions between
civic associations and local authorities for carrying out educational, cultural,
health-care and social tasks is above the national average. The creation of district
notary offices, for example, is also a feature of this region. Almost one third of
all district notary offices can be found in Southern Transdanubia, although there
are significant differences in scale between the three counties concerned.
2 Pre-accession funds and Structural Funds in Hungary
2.1 The pre-accession programmes
2.1.1 The features and implementation of pre-accession programmes
In the below section we are going to concentrate on two pre-accession pro-
grammes of the European Union, The Special Accession Programme for Agri-
culture and Rural Development (SAPARD) and the Poland and Hungary Assis-
tance and Reconstruction of the Economy programme (PHARE) which was
started in 1992 for their significance in terms of institutional building and
mechanism for europeanisation.
From the Commission's point of view, SAPARD was a central means for in-
stitution-building. There were severe logistical difficulties in channelling the
direct payments to hundreds of thousands of farmers and rural inhabitants. There
was no similar institution in the older EU member states. As the head of the SA-
PARD Office pointed out at a Bulgarian conference in March 2004:
"... when Austria, Finland and Sweden acceded to the EU, they al-
ready had structures in place for co-financed aid to be granted. They
also had a stock of pre-existing commitments to final beneficiaries. ...
Thus those new Member States were able to absorb substantial Commu-
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Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
nity payment appropriations almost immediately post-accession. Will
the members joining in 2004 be able to do likewise?" (Wilkinson, 2004,
2).
SAPARD was designed to give a positive answer to this question. With a
budget of 282.7 million Euro, it was the only pre-accession assistance programme
that was managed by the eligible countries. Unlike PHARE, the new administra-
tive structures operated without the control of the EU Delegations. Both the
Commission and the accession countries took the risk of losing substantial EU
funds if these new institutions failed. To reduce this risk, a Managing Authority,
Monitoring Committee and SAPARD Offices were established with extremely
strict auditing procedures.
Hungary was the first country whose SAPARD Plan was accepted but the last
whose Paying Agency was accredited. The procedural manual for this agency ran
to 2000 pages alone and, in practice, was hopelessly complicated. There were
criticisms that measures for promoting agricultural enterprises favoured the big
and successful. Even so, the strict criteria concerning turnover and net profit
meant that funds were inaccessible even for these actors. In the summer of 2003,
amendments were made by the SAPARD Monitoring Committee and subse-
quently approved by the Commission. Once this was done, the parallel domestic
development funds, which had been much more accessible and much more solic-
ited, were stopped and applicants redirected towards SAPARD.
The management of SAPARD was partially deconcentrated. Programme-level
procedures were controlled by the SAPARD Monitoring Committee and managed
by the Managing Authority. Its regional administrative branches, however, were
authorised to select projects and enter into contracting. When the administration
structures of the Agricultural and Rural Development OP were set up after acces-
sion these crucial functions were re-centralised. For the third generation of rural
programmes coming into force in late 2007, centralised decision-making was
once again restored.
Not only was SAPARD relatively regionalised as compared with subsequent
programmes, rural development policy was also shaped by regional policies when
the preparation process for EU-accession started. In 1999 and 2000, under the
pretext of preparing for SAPARD in a territorially coordinated manner, the Chief
Department of Rural Development launched a programming procedure at micro-
regional and regional levels. Headed by a former regional planner, this chief de-
partment within the Ministry of Agriculture was an institutional innovation
brought about by the new government in 1998. 23
23 Between 1998 and 2002 the regional development portfolio was brought under the umbrella of the
newly titled Ministry of Agriculture and Regional Development.
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Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
The influence of the rural developers was further weakened when mainstream
agricultural policy-makers regained their political strength. A distinct rural devel-
opment policy that was relatively independent of agricultural policies did not fully
develop between 1998 and 2002, as it had done in the Czech Republic (Hudeck-
ova — Lostak, 2003). Nevertheless, there were several important if short lived
measures in terms of planning and institution-building; for instance, the Rural
Development Offices established in the regions to administer domestic rural de-
velopment funds. As agriculturalists favoured neither the concept nor the imple-
mentation rules of these units, new regional branches were brought about in the
SAPARD phase and, after several years of inactivity, the rural development of-
fices were dissolved in 2005.
Post-SAPARD continuity was not secured by the new administrative struc-
tures, at least not directly. In 2004, the SAPARD Agency and the Agricultural
Intervention Centre responsible for the transmission of domestic supports were
unified and a new agency called the Agricultural and Rural Development Agency
(ARDA) was established. Half of the small task force of former Rural Develop-
ment Offices 24 found employment in the LEADER departments of the regional
branches of the ARDA. Although many of the SAPARD staff was employed by
this new agency and few operational mechanisms were taken over as well, it was
more the development priorities and the measures which represented continuity
with SAPARD. Pillars of the new agricultural and rural development programme
common with the SAPARD priorities were as follows:
—technological and infrastructural improvements in the food sector, develop-
ing infrastructure (roads and pipelines),
—promoting the diversification of the rural economy and inspiring the
cooperation of producers,
—agri-environment
—protecting rural heritage
SAPARD was important not only from the administrative lessons learnt. De-
veloping successful project proposals was an enormous task for the applicants.
Complicated forms, the number of certificates required, and even the amended
eligibility criteria were such that only the large and determined players remained
in the competition. In the end, SAPARD was a competition of proposal writers,
and there were many new consultancy companies that grew on its basis. If an
application managed to meet the formal criteria, it was usually supported because
there was a scarcity of competing projects. Therefore till the end of 2003 spend-
ing was well below the expected rate, when emergency measures were taken. In
Spring 2004 following a strong communication campaign and a re-grouped ad-
24 Altogether 21 staff members worked in regional rural development offices, three in each.
20
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Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
ministration capacities, the number of proposals boomed. Many eligible applica-
tions now had to be refused because there were not enough funds allocated, par-
ticularly those related to the village renewal measure.
From the very beginning PHARE had a significant impact on central and re-
gional institution-building. 70% of the 1.477 million Euro grant that Hungary
received between 1990 and 2003 supported small and large investments, while the
remaining funds were used to strengthen the NGO sector and assist the early de-
velopment of institutions, such as the regional or micro-regional development
councils.
The most important measure for assisting the central administration was the
twinning programme that, from 1998, brought short-term and long-term experts
from member states to the central administration of Hungary. Altogether 15 mil-
lion Euro was spent on institution- and capacity-building between 1998 and 2004.
The long-term twinning experts exerted significant influence on the new policy
strategies during the last pre-accession phase, when the chief programme docu-
ments were elaborated. In Hungary it was the French and the Dutch advisers that
were the most prevalent and effective. Beyond twinning experts, the PHARE
offices within the relevant ministries promoted adaptation process with advising
and project managing capacities. From the PHARE Office of the Ministry of
Agriculture and Regional Development, for example, many of the staff members
moved on to the SAPARD Agency in 2002. The deputy chair of the latter was the
former chair of the MARD PHARE Office, thus ensuring some continuity of EU
working culture.
Between 1992 and 1999 there were five regional development projects imple-
mented with a total value of 59 million Euro. Between 1992-1994, pilot pro-
grammes in the least developed eastern counties aimed at developing county de-
velopment councils and micro-regions. These projects fulfilled a missionary role
in an epoch when devolution prevailed, when old mechanisms remained and new
ones had yet to be brought in. The experience gained in these projects was useful
when the Regional Development Act in 1996 was introduced. This Act opened
up a new area for PHARE, that is, strengthening the regional institutions. South-
ern Transdanubia, and the Southern Great Plain were selected as pilot areas, and
funded with 4 million Euro each. The goal was to support planning at the regional
level and to adopt the institutional model that was formerly suited for county
level. Programmes in 1995 and 1997 targeted regional disparities, supported in-
vestment and strengthened the NGO sector. In these projects, decision-making
was decentralised to the new Regional Development Councils while their man-
agement, including processing as part of the project selection exercise, was dele-
gated to the Regional Development Agencies. The low costs projects, up to
100,000 Euro, were handled in the regions entirely, while the projects over
100,000 Euro were managed by the National Regional Development and Town
21
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
Planning Office and approved by the European Delegation in Budapest. After
2000, PHARE projects promoted absorption capacities for Structural and Cohe-
sion Funds via more regional pilot programmes in the eastern regions and fi-
nancing thematic programmes country-wide, such as the Orpheus programme in
2003-2004 which promoted complex human resource and infrastructural devel-
opment projects.
The starting and finishing measures of PHARE such as tourism promotion,
SME development, supporting the NGO sector, improving school infrastructure
and enhancing teaching materials, developing joint projects between village/town
centres such as road networks were all immediate predecessors of the post-acces-
sion operational programmes. The same can be said about the PHARE CBC pro-
gramme which served as much the adoption of EU regional policy as the prepara-
tion for PHARE Interreg. Regarding the preparation for meeting other EU re-
quirements, PHARE also focused on equal opportunities, promoting partnerships
and fostering local democracy.
2.1.2 Pre -accession policy and institutions in Southern Transdanubia
As mentioned earlier, there was some history of inter-county co-operation in
Southern Transdanubia. In the first half of the 1990s, four Transdanubian counties
began to strive for regional cooperation, three from Southern Transdanubia and
Zala, the county adjacent to Somogy. A Regional Development Foundation was
founded in 1994, leading to the establishment of the Regional Development
Council. The Foundation had 15 members: the local governments of the four
counties; the chambers of commerce, the universities and research institutes of the
region, and the representatives of the Foundation for Promoting Enterprises and
the Ministry of Environment. Its successor, the South-Transdanubian Regional
Development Council was founded in February 1997 and headed by the chairman
of the Somogy County Development Council. One year later the Regional Devel-
opment Agency was set up in Pecs. The operation of these units was financed
from the 1997-2000 PHARE regional pilot project. 25 This helped develop the
institutional framework and mechanisms for EU-compliant regional planning. In
addition to the 4.4 million euro from PHARE, the government co-financed the
programme with 285 million HUF divided equally between the two experimental
regions.
The objectives were to create an effective regional institution for implement-
ing decentralised programmes, and to establish the necessary professional back-
ground for running them. It helped collect practical experience in regional co-
operation. For Southern Transdanubia, the four development priorities were de-
25 EU Phare HU 9606-02.
22
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
termined by the regional players: the co-ordinated development of rural areas; the
improvement of the competitiveness of small- and medium size enterprises; util-
ising the tourism potential and attracting investors to the region via regional mar-
keting.
Projects were submitted to the Regional Development Agency and selected by
the Regional Development Council. For Southern Transdanubia, there were 72
applications submitted by local and regional organisations, applying for almost
double the amount available. The applications were relatively well spread across
the four development priorities, yet the shortage of own resources meant that
projects were relatively small-scale in financial terms.
The RDC and the RDA were the most important institutional actors in select-
ing, monitoring and assessing PHARE projects. The RDA managed the applica-
tion process and helped prepare for the final selection decisions that were taken
by the Council. The final evaluation of the programme was satisfied with the de-
centralised and professional nature of decision-making, but criticised the actual
implementation of projects for being too centralised and less well prepared. The
use of non-standardised procedures during implementation created a certain de-
gree of mistrust on the part of the EU delegation and led to lengthy approval pro-
cedures in Brussels. One of the main criticisms was that the principle of partner-
ship had not been fully realised. A rather small staff managed a relatively com-
plex system and, especially in the implementation phase, more weight was given
to administration considerations than to efficiency and effectiveness.
At the same time, the final evaluation did concede that the programme intro-
duced concepts of regional cooperation and partnership, and it had encouraged
applicants to turn away from schematic implementation to complex planning. The
rules of implementation did not always help form new partnerships and realise
complex projects. However, the programme was deemed a success in its contri-
bution to the knowledge and practical experience for future EU regional develop-
ment fund management (EU Phare HU 9606-02 Regional Pilot Program Ex post
Evaluation, 2002).
Southern Transdanubia was rather successful in attracting pre-accession funds
as illustrated by the table below. Altogether 17% of the projects and 16% of funds
were absorbed by this region, significantly more than either the population share
of 10% or its contribution to Hungary's GDP at 7%. PHARE was the most suc-
cessful pre-accession programme and despite the fact that pilot programmes
starting in 2000 were restricted to the eastern regions of Hungary, 40% of suc-
cessful projects came from Southern Transdanubia absorbing 26% of the allo-
cated total funding. To a large extent, the regional pilot programme made a sig-
nificant contribution to this success (Table 4).
23
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
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Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
2.2 The First National Development Plan financed by the European
Union
2.2.1 Centrally managed sectoral and regional programmes
Within the first National Development Plan, 3.354 million Euro was targeted for
development purposes co-financed by the EU (75%) and the Hungarian Govern-
ment (25%). In addition, another 98,9 million Euro was allocated from the Euro-
pean Union to cover two community initiatives, Interreg (68.6 million Euro) and
Equal (30.2 million Euro).
The other two Community Initiatives, Urban and LEADER, did not start for
the short period 2004-2006. However, a LEADER+ measure was included in the
Agricultural and Rural Development Operational Programme (ARDOP) with a
budget of 19 million Euro. 26 The breakdown of the budget of the first post-acces-
sion development plan according to the source of financing is shown below (Ta-
ble 5).
Table 5
Allocation of public funds in the National Development Plan 2004-2006
Funds
Total Public Costs
Of which ROP
The share of
The share of ROP
different funds in
within public
Euro, current prices
financing NDP
costs
ERDF related
1,463,500,000
388,660,000
43.6
27
CF related
994,100,000
29.6
ESF related
473,100,000
3,160,000
14.1
Sub-total
2,930,700,000
391,820,000
87.0
13
EAGGF related
417,100,000
12.4
FIFG related
5,900,000
0.2
Total public
3,353,700,000
391,820,000
100.0
13
Source: Hungarian National Development Plan, March, 2003. 164.
26 This was almost redoubled thanks to certain regrouping between sub-measures, and by 2006, 70
Local Action Groups (LAGs) had begun to operate. The objectives of LEADER+ largely overlaps
with micro-scale regional development goals. This is a result of LEADER+ being a territorial
programme. There are a number of direct planning/programming similarities which offer
advantages to the disadvantaged settlements and micro-regions. With regard to LAG institutions
and operational rules, LEADER+ has been ahead of regional development programming and
implementation in such aspects as participative planning, tripartite composition of LAGs decision-
making body, local project selection at LAG level, and programme-based finance.
25
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
The structures and its operational programme aimed at regional development
are illustrated by the following figures (Figures 3-4).
Figure 3
Objectives, priorities and Operational Programmes of the NDP 2004-2006
Long-term
objective
Improving the quality of life
NDP
2004-2006
Reducing income gap relative to EU average
Specific
More competitive
Improved use of
Better environment and more balanced
objective
economy
human resources
regional development
Improving the
Increasing the
Providing better
Strengthening
Priorities
competitiveness of the
development of
infrastructure and
regional and local
productive sector
human resources
cleaner environment
potential
Economic
Agricultural
Development of
Environment
Regional
Competi-
OP-s
and Rural
Human Resources
Protection and
development OP
tiveness
Development
(DHROP)
infrastructure
(ECOP)
(ARDOP)
(EPIOP)
Source: Hungarian National Developmen Plan 2003. March, 143.
Figure 4
Priorities and measures of the Operational Programme for Regional
Development 2004-2006
Developing the tourism
Developing regional
Strengthening the regional
potential of the regions
infrastructure and the
dimension of human
communal environment
resource development
1.1 Developing tourist
2.1 Developing the accessibility of
3.1 Capacity building of local
attractions (ERDF)
the regions and micro-regions
public administration and local
lagging behind (ERDF)
NGO-s (ESF)
1.2 Developing tourism-
2.2 Regeneration of urban areas
3.2 Support for local employment
related services (ERDF)
(ERDF)
initiatives (ESF)
2.3 Infrastructure investment in
3.3 Strengthening co-operation of
pre-school institutions and
higher education institutions
primary schools (ERDF)
with local actors (ESF)
3.4 Support of region-specific
vocational training (ESF)
Source: Operational Programme for Regional Development 2003, 64.
26
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
2.2.2 The participation of regions in programming
As mentioned earlier, the Commission did not believe that the regional bodies had
the capacity to plan and run operational programmes, even though, as we have
seen, both the PHARE and the SAPARD programme had generated significant
practical planning experience. Following initial delays in 2000-2001, central
planning and operational programming speeded up in 2002 with the National
Development Office and the Office of Minister for EU Integration without port-
folio being given the task of creating the first National Development Plan. The
programming tasks for the Regional Development OPs were delegated to an ex-
tension institution of the government, VATI. 27
VATI planners were committed to including their colleagues from the seven
regional agencies and the first version of the Regional OP had strong considera-
tion of regional priorities. After the Commission rejected it, a second version was
organised along subjects of development but sub-divided according to regional
measures. This was also rejected with the same argument, namely, if any of the
regions could not spend the allocated fund, they would lose the money because
approval of fundamental modifications would take too long. A third version with-
out any regional perspective as such was eventually accepted, including the provi-
sion to channel at least 75% to the four disadvantaged regions.
One of the leading planners of this ROP interpreted the process as follows:
"In line with the Commission proposal, we abandoned the minimal
autonomy of the regions within the plan ... therefore the ROP was
elaborated on a sectoral basis (thematic priorities and measures). This
means that regions should come to a consensus concerning development
objectives at the level of the programme. ... What has been left for the
regions is the draw on priorities according to their special needs and to
set up region-specific project selection criteria." (Wachter, 2003, 3).
The technical assistance that was most appreciated by the Hungarian planners
was helping them draw demarcation lines between similar support schemes in the
rest of the OPs.
"Due to the overall reconciliation process with other OPs and the
EC negotiating delegation, tourism, the protection of natural and built
heritage as well as programmes related to public administration reform
became strong pillars of the ROP". (Wachter, 2003, 3).
27 VATI Hungarian Public Nonprofit Company for Regional Development and Town Planning.
VATI worked as managing authorities for Phare programmes aimed at regional development
during the 1990s. This was the basis on which it continued to fulfil the tasks of managing
authority and intermediate body in the post-accession period. For these purposes a separate section
was established within VATI called National Agency for Regional Development.
27
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
In line with the cohesion purposes of the ROP, and despite the centrally or-
ganised management, 82% of the final total was spent on a semi-decentralised
basis. This means that the budget was distributed prior to the start of the imple-
mentation. It was informal in the sense that indicative regional allocations were
neither in the ROP nor in the Programme Complement. They did exist though
and were monitored by the Managing Authority (MA). The following allocation
of resources is based on recalculations from a progress report document produced
by the Managing Authority in Spring 2006 (Table 6).
Table 6
Allocation of funds under the 2004-2006 ROP
Hungarian Regions
Semi-decentralised funds
The distribution of funds among
of the ROP 2004-2006,
the Hungarian regions
Euro
2004-2006, %
Northern Hungary OP
87,821,044
22.4
Northern Great Plain OP
84,313,725
21.5
Southern Great Plain OP
59,490,196
15.2
Southern Transdanubia OP
64,078,431
16.3
Western Transdanubia OP
29,411,765
7.5
Central Transdanubia OP
35,686,275
9.1
Central Hungary OP
31,372,549
8.0
All regions
392,173,985
100.0
Source: A Regionalis Fejlesztes Operativ Program... (2006).
Transdanubian planners as well as high-ranking staff members of the RDA
were unhappy with the long uncertainty concerning their role to be played in pro-
gramming. They were disappointed by the decision that did not allow a decen-
tralised ROP implementation. Nevertheless, they invested a lot in the ROP pro-
gramming, providing VATI planners with regional inputs when the first two
drafts of the programming document were formulated. When the third region-
neutral version was accepted, they felt that their efforts had been wasted. One
leading planner complained that "We worked a lot but in the end almost nothing
was taken into consideration from our inputs." 28 At the same time he did
appreciate the fact that 75% of ROP funds were allocated to the four
disadvantaged regions and that Southern Transdanubia was successfully
"squeezed" into this group of beneficiaries.
From the point of view of programming, the planners in the South Transdanu-
bian RDA saw little sense in the Regional Actions Plans (RAP) proposed as a
28 Development Director of the Regional Development Agency.
28
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
complementary document. According to the RDA development director, "We
had to make the RAP ... It turned into a rather patent absurdity to seek for re-
gional aspects to an intact central plan having no regional dimension." In a later
phase, when project selection was carried out by the RDA, these action plans
were used as means of scaling: premium scores were given to those projects that
were partially developed in the RAP but non-existent in the ROP. Discontent
with the central management was also reflected in the partnership consultations.
Regions "deemed it necessary that they should be integrated into ... implementa-
tion" (...) but "partners missed the involvement of county regional development
councils and local governments and organisations into the process of planning and
consultations ..." (Hungarian National Development Plan, March 2003, 14).
2.2.3 Implementation
Regional Development Agencies were included in the implementation procedure.
They shared the management of project proposals with the VATI National
Agency for Regional Development (VATI NARD) 29 as Intermediate Bodies. The
tasks of the RDAs were as follows (Operational Programme for Regional Devel-
opment 2003, 122-123):
—Publicity and information provision in the application phase;
—Register applications;
—Assess project proposals;
—Advise the beneficiaries in the process of project-development and
implementation;
—Fulfil the obligation of regular reporting to the managing authority;
—Prepare regional analysis;
—Participate in the on-the-spot supervision of projects;
—Carry out information services.
The tasks of the VATI NARD were
—Assisting the MA in preparing the Programme Complement Document;
—Checking the eligibility and quality of project proposals assessed by RDAs;
—Managing grant proposals;
—Monitor the performance of final beneficiaries;
—Operating an internal control unit;
—Recording the relevant implementation-related data ... in the IT system;
—Producing the programme-level draft of semi-annual and annual reports;
29 Within this section of the VATI a sub-unit was established for managing authority and
intermediating body functions within the procedures of programme implementation.
29
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
—Continuous reporting obligation to MA;
—Operation of a system for the management of irregularities;
—Performing information tasks.
From the RDA task list, the Agency valued project assessment most of all. As
mentioned above, Regional Action Plans were important in project selection: 20
points from 100 could be granted to projects that were most wanted by the
evaluators. This was seen as a space for manoeuvring given in exchange for the
loss of the decentralised ROPs; if they wanted, they could use the 20 RAP scores
to over-write centrally compiled selection criteria.
Of course, practice also opened up a space for political clientilism, something
that was judged by key actors in different ways. Two RDA directors thought that
it happened rarely and was kept at a "manageable level". This was echoed by one
member of the RDC; two other council members said that they did not hear about
such cases, while another RDC member responded "I do not want to tell a lie, it is
better to say nothing". The latter respondent would have preferred project man-
agement accomplished at the central level, that, according to him, would prevent
clientilism and corruption more effectively than decentralised selection.
Assessed and ranked projects were checked by VATI NARD and forwarded to
the centrally operating "Project Selection Committee" which advised the
Managing Authority. The head of the MA chaired this selection committee with
members delegated by relevant ministries and by the regions themselves.
"Regional commissioners"3° participated with voting rights, while project
managers of the RDAs provided background assistance. The final decision on
project selection was taken by the head of the MA.
If we consider the absorption capacities of Southern Transdanubia as an index
of success, then in comparison to the pre-accession levels, the results are modest.
At the level of projects, Southern Transdanubia used almost all of the ROP funds
(14%) according to the original design (16.3%). As a reflection of the importance
of agriculture, projects attracted funds in a similarly high proportion (15%).
Otherwise, the region's achievements could be graded as fair in case of the
Human Resource Development OP. The same can be said for its fund absorption
capacities in the Economic Development OP but only if we compare it with
Southern Transdanubia's contribution to the Hungarian GDP (the two figures are
identical, 7%). To put in another way: the weak regional economy was unable to
attract more resources than its potential allowed. Figures of the regional
30 Regional commissioners, seven in number, were appointed by the government, one for each re-
gion. They were members of the regional development councils and represented „their" regions
interests at central level organisations of regional development such as the ROP Project Selection
Committee. Their position was cancelled in 2006 as part of the re-organising public administra-
tion.
30
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
distribution of the Transport and Development OP indicate the disadvantageous
position of Southern Transdanubia as compared with the other lagging regions of
the country: its share was as little as 6% regarding successful projects, and 4%
considering the attracted funds. Table 7 shows the result of the competition
between the regions in attracting EU funds close to the end of the first post-
accession programming period.
2.2.4 Evaluation and Monitoring
The implementation of the ROP was not evaluated by any independent organisa-
tion. Instead, in April 2006 the MA made an intermediate report titled "The pre-
liminary evaluation of projects contracted within the framework of the ROP". 31
Programme monitoring has been safeguarded via the ROP Monitoring Commit-
tee, which was established along the 35(3) of EC Regulation no 1260/1999. The
most important members of the MC were as follows:
—MA (heading the MC);
—Delegates of ten interested ministries (10 persons);
—Representatives of the regions (7 persons);
—Representatives of social partners (the delegates of 6 NGOs);
—CSF managing authority;
—Paying authority (Ministry of Finance, NAO Office Dept.);
—Financial Control Department of the Ministry of Finance;
—Government Control Office;
—European Commission;
—European Investment Bank.
We close this sub-chapter with two remarks: first, the establishment of
regional monitoring committees was not initiated by the delegates of the regions;
second, as was the case with other MC-s from other OPs, the representatives
delegated by government organs were assured of a majority position, which
inhibited any minority opinion from effective opposition to government plans. 32
31 The +two years for project implementation have not yet expired, therefore the ext-post evaluation
is a matter for a future exercise.
32 Analyses about the operation of MC-s were provided by a 6 th framework research called Dioscuri,
coordinated by the CEU (Kovacs
Racz Schwarcz, 2006).
—
—
31
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
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Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
2.3 The 2007--2013 programming period: centrally managed sectoral
programmes and regionally managed ROPs
The preparation for the second budgetary period began in December 2004 as part
of the "Europe Planning" process regulated by Government Decree. 33 As men-
tioned earlier there were several innovations in this round of planning. The Na-
tional Development Concept (NDC) and the National Spatial Development Con-
cept (NSDC) were formulated and thematic working groups were established at
both central and regional level. These working groups were not only frameworks
for planning; they helped process experiences from the first Hungarian National
Development Plan. Within this framework, the New Hungary Development Plan
was developed at more grassroots regional levels. Lower-ranking actors ranging
from NUT II to NUTS IV levels participated and, at the central level, the working
groups offered chances to channel the messages and lessons gathered from the
regional working groups.
In Southern Transdanubia, the RDA elaborated its strategic development goals
which were subsequently approved by the Council in April 2005. The strategic
goals were that:
1. Southern Transdanubia should become a "model region" with a high qual-
ity environment
2. The economy should become competitive on the basis of endogenous
development potentials
3. Strong social solidarity should help halt demographic, erosion.
These goals represent a shift from traditional conceptions of development
based on productive industries and external investment to a paradigm that favours
non-productive industries and internal potentials. The NSDC planners accepted
this approach with only slight modifications 34 fixing them, in the New Hungary
Development Plan. Therefore, in this case, the bottom-up process was clearly
present. (For a diagram of the structure of the planning web, see Annex 2).
A second peculiarity of the South Transdanubian programming phase was the
six sectoral strategic development concepts. These were supposed to embrace the
most important development fields such as tourism, human public services, public
transport. These strategic documents went beyond the scope of the ROP, and also
beyond the EU-financed measures of the sector OPs (Marton, 2005, 62). The
exercise was carried out by six different consultancy agencies who were in con-
tinuously consultation with members of background networks at various work-
33 1076/2004. (VII. 22.) Government Decree on the Elaboration of Frameworks and Contents of
Europe Plan (2007-2013).
34 The strategic goals were broken down to nine „thematic goals".
33
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
shops and regular meetings. The majority of the consulting agencies involved
were from outside the region, the only one to come from the region was Hozam
Ltd., although other local consultants did work as subcontractors. Micro-regional
associations were also part of this network and their most significant contribution
was to collect and prioritise potential projects within their own areas. By Sep-
tember 2006, more than 3000 projects were mediated from the micro regional
level via these thematic units towards the RDA. The RDA selected the 'big pro-
jects' which were subject to different forms of tendering.
When trying to find references to Southern Transdanubia in the New Hungary
Development Plan, an interesting connection can be made. Regional developers
are allowed to implement "post-modern" strategic goals that rely on limited re-
sources allocated from above. By contrast, the Centre follows a modern paradigm
of developing sub-centres or development poles, working on major transport roots
and "the capital attractiveness of Eastern Hungary and Southern Transdanubia"
(New Hungary Development Plan 2007-2013, 83.). Is the strategy of Southern
Transdanubia and the similar strategies of the other three lagging regions the lux-
ury of the poor? At least to a certain extent, this seems to be the case.
One other component that influenced the regional planners' views was the path
dependency that was generated by the last PHARE programme and the first ROP.
In those programmes, tourism and the natural and cultural heritage were the focus
points of development activities. As seen above, the pro tourism measures were
strengthened in the ROP by the reconciliation process with the rest of the OPs.
With significant EC assistance, tourism and heritage preservation were "dele-
gated" to the ROP and the demarcation lines drawn accordingly. Needless to say,
this path dependency shows itself up clearly in the choice of thematic groups.
The thematic lines of the decentralised ROPs were established by the VATI
NARD based on the precedent of the first ROP and level of decentralised funds
foreseen. In a regional scale, the following themes were set out:
—The development of the regional economy and the tourism industry
—Developing infrastructure and the built environment (settlements)
—Thematic development programmes (aimed for example at developing back-
ward rural areas.)
Relying on the sub-measures of the VATI guideline, the South Transdanubian
ROP was approved by the Commission in April 2007 with the following priority
axes (Table 8).
34
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
Table 8
Priority axes of the ROP for Southern Transdanubia
Promotion of economic competitiveness on the basis of development of urban spaces
Strengthening tourism.potential
Development of human public services
Support of integrated urban development actions
Improving accessibility and environment
Technical assistance
Source: Del-dunanttili Opera& Program, 2007.
2.3.1 The programming phase
Programming for the 2007-2013 budgetary period started in mid 2004 and ended
in December 2005 when the National Development Concept (NDC) and the Na-
tional Spatial Development Concept (NSDC) were accepted by Parliament. Pro-
gramming for the New Hungary Development Plan speeded up in 2006 after these
two accepted concepts. At the end of the planning period, the thematic WGs were
dissolved, and operational programming took place in the regions themselves.
For the sectoral Ops, this was handled by the extension ministerial institutions and
the consulting companies, with overall co-ordination coming from the National
Development Agency. At this stage, various ex ante evaluations, conferences, and
ad hoc consultations helped facilitate information exchange between various frac-
tions of planners, co-ordinators and expert groups with social consultation count-
ing as the final step. With seven sectoral, seven regional and one Implementation
OP, the New Hungary Development Plan was approved by the Commission in
May 2007. The content, structures and funding are indicated by Figure 5 and
Table 9.
Table 10 indicates two new European funds for developing the agricultural and
fishery sector and enhancing rural development. This is in spite of the separation
of the cohesion-related funds from the agricultural and fishery related funds. As
elsewhere, these latter funds have to be "programmed"; therefore, two separate
programming documents were developed in 2006-2007. In the first period, these
were developed from the Guidance sections of the European Agriculture Guid-
ance and Guarantee Fund and Financial Instrument for Fisheries Guidance. In the
new programming period, the new European Fishery Fund and the European Ag-
ricultural Fund for Rural Development (EARFD) channel together 3 840 million
Euro to the relevant sectors of the economy and public services. The Fishery
Strategic Plan has a spending target of 34.3 million Euro while the New Hungary
Agricultural and Rural Development Programme have 3,806 million Euro from
35
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
the EARFD. The subdivisions and the finance of the latter are indicated in the ta-
ble below.
The most important points are as follows: 988.5 million Euro, or 19% of the
total budget is for those parts of rural economy and services that are not con-
nected to agriculture. As compared to the 11% rate in the first draft, this signifi-
cant increase is the achievement of the non-agricultural lobby groups and social
partners who jointly expressed their discontent during the social consultations of
the first two drafts of the programme.
Figure 5
Objectives, priorities and Operational Programmes of the NHDP 2007-2013
Broad
Increased employment and promotion of long-term growth
objective
NHDP
Improving employability
Permanent growth
Horizontal policies
2007-2013
and activity
Improving the employability
Improvement of
Ensuring the conditions for
competitiveness
sustainability
Increasing labour force
Broadening the foundation
Strengthening cohesion (in
Specific
demand
of the economy
economic, regional and
objectives
social terms)
Development of labour
Developing the business
market development
environment
Economic development
Social renewal
Priorities
Environment and energy
Transport development
development
Regional development
State reform
Economic Development OP
Transport Development OP
Social Infrastructure OP
Social Renewal OP
Environment and Energy OP
Electronic Public
OP-s
Administration OP
State Reform OP
Regional OP-s of cohesion
regions
Central Hungary OP
Source: Compiled from the New Hungarian Development Plan (2007, 59-74, 135).
36
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
Table 9
Indicative financial allocation of the New Hungary Development Plan 2007-2013
by financing funds
EU funds +
2007-2013
Total
National
2007-2013
Convergence
Out of which ROP
Central
contribution
regions
allocation
Hungary
ERDF
11,106,124,925
4,304,318,100
1,543,618,907
12,649,743,832
ESF
3,141,629,950
487,458,601
3,629,088,551
CF
8,642,316,217
8,642,316,217
Sub-total
22,890,071,092
4,304,318,100
2,031,077,508
24,921,148,600
EAFRD -
3,805,843,392
3,805,843,392
EFF
34,291,356
34,291,356
Total
26,730,205,840
4,304,318,100
2,031,077,508
28,761,283,348
Source: New Hungary Development Plan 2007, 135-136.
Table 10
Indicative financial plan of the New Hungary Agricultural and Rural
Development Plan 2007-2013 (HUF)
Development Themes
Central
Convergence
Total
Hungary
Regions
EAFRD + National Co-fi nance
Axis I: Improving the Competitiveness
313,779,580
2,115,106,801
2,428,886,380
of the Agricultural and Forestry Sector
Axis II: Improving the Environment and the
209,985,419
1,459,690,302
1,669,675,721
Countryside
Axis III: Quality of Life in Rural Areas and
91,584,964
617,350,501
708,935,465
Diversification of the Rural Economy
Axis IV: LEADER
35,157,376
244,392,592
279,549,969
Technical assistance
208,340,005
208,340,005
Total
650,507,339
4,644,880,201
5,295,387,540
Note: Exchange rate of 1 Euro = 265 HUF.
Source: Compiled from the tables of the New Hungary Agricultural and Rural Development Plan
(2007, 259-260).
37
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
The present 19% share of non-agricultural sub-budgets is roughly the same as in
the first post-accession period. 35 Beyond Axis IV, which covers the "main-
streamed" LEADER with a heavy territorial development accent, public service
small-scale investments for those micro-enterprises employing less than 10 em-
ployees with limited turnover, are now covered from this programme. Out of the
Technical Assistance budget, a network of so-called Rural Development Bureaus
will be developed for advising and co-ordinating work.
Surprisingly, the NHARDP completely ignores regionalism. Regions have no
chance to influence either the programming or the implementation. Connections
with spatial policies are restricted to certain advantages offered to project propos-
als coming out of the so-called lagging micro-regions.
Continuing with the Regional OPs, the distribution of the total of 4,304 million
Euro allocated for financing was worked out bearing in mind the following
weighted features of the regions:
—Population number 20%
—The number of settlements 10%
—Unemployment rate 20%
—The number of population living in disadvantages settlements 10%
—The development rate of regions 40%
The distribution of the total sub-budget for implementing the Regional OPs,
then the share of decentralised instruments within the total budget of the first and
second development plans are indicated below (Tables 11 12).
-
What is worth mentioning is that these figures reflect the unchanged policy
goal of decreasing regional disparities. There are only minimal changes regarding
the shares of cohesion regions from the total of ROP funding; in our pilot region,
for instance, the change is +0.1%. Central Hungary, the only phasing out region
receives much more than between 2004-2006 for implementing its OP, but be-
yond the 76.4 million Euro allocation within the Electronic Public Administration
OP, no other ERDF resources will be available for this region.
If we consider the weight of ROP funding within the entire budget of the na-
tional development plans as indicated in Table 12, a slight decrease can be identi-
fied between the two periods (from 25% to 23% including Central Hungary).
Tendencies within the ERDF allocation moved in the opposite direction with the
proportion of decentralised funding grew substantially.
35 Rural infrastructure has been regrouped under Axis I; therefore, axes are not compatible with the
former priority axes of ARDOP. In the latter, rural infrastructure belonged to the group of rural
development measures reaching together 23% from the total ARDOP budget.
38
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
2.3.2. Implementation: lessons learnt and used
At the end of June 2006, 100.92% of the allocated Structural Funds had been
covered by the approved projects, out of which 88.25 % was contracted and
21.37% paid by invoice. The total spending rate was 33.2% in case of Structural
Funds and 19% for Cohesion Funds, illustrating the origin of the short-term net
deficit of incoming EU money and the membership contributions. The wide gap
between accepted and contracted projects was not only attributable to EU finan-
cial rules, but the complicated procedures for applying, processing and evaluating
project proposals. In all, there was a 280-day time span between handing in and
contracting successful applications (Csefalvay, 2006, 293). A considerable simpli-
fication was introduced for low-budget projects for the 2007-2013 period. Some
modifications aimed to speed up and ease processes had already been applied
from 2005-2006 (such as advance payments up to 25%, decreasing the number of
certificates etc.). In case of Cohesion Fund spending the lack of sectoral strategies
and the low preparation level of projects were highlighted in the New Hungary
Development Plan as factors causing delays in implementation.
Table 11
Indicative financial allocation plan of the regional operational programmes
2007-2013
Hungarian Regions
Regional Ops
The distribution of decentralised funds
2007-2013,
among the Hun garian regions
Euro
100% = Conver-
100% =
gence regions
All regions
2007-2013
Northern Hungary OP
903,723,589
21.0
15.7
Northern Great Plain OP
975,070,186
22.7
16.9
Southern Great Plain OP
748,714,608
17.4
13.0
Southern Transdanubia OP
705,136,988
16.4
12.2
Western Transdanubia OP
463,752,893
10.8
8.0
Central Transdanubia OP
507,919,836
11.8
8.8
Central Hungary OP
1,467,196,353
25.4
Convergence regions
4,304,318,100
100.0
74.6
All Hungarian regions
5,771,514,453
100.0
Source: New Hungary Development Plan (2007, 200.).
39
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Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation :
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Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
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Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
The other changes did not relate directly to experience gained from the im-
plementation of the HNDP. Rather they were the result of the much more de-
manding tasks in managing the New Hungary Development Plan. The new "cen-
tral panel" of top management of EU affairs within the National Development
Council (headed by the Prime Minister), the Development Policy Steering Com-
mittee also chaired by the Prime Minister and the commissioner delegated to the
National Development Agency were attacked by the opposition parties as an un-
precedented concentration of power over development resources. Others objected
to the development of parallel structures arguing that it is more expensive, makes
parliamentary control more difficult and slows down the adaptation process of the
central administration to European standards.
The government argued, that the central management of the OPs was chosen
as a way to increase efficiency and transparency. The managing authorities have
been brought under the umbrella of the National Development Agency, although
in practice they operate as independent departments. Also, the "1 OP = 1 MA"
principle was followed. The seven Regional OPs are managed by one Managing
Authority and monitored by two Monitoring Committees, one for the convergence
regions and one for Central Hungary.
As far as the Intermediate Bodies managing Regional OPs are concerned, the
division of tasks between the VATI Public Nonprofit Company and the RDAs, is
also changed. In the new phase, the VATI Operation and Programme Manage-
ment Directorate is responsible for dealing with improving human resource infra-
structure, while the RDAs manage the rest of the measures, from collecting to
contracting applications and verifying their implementation.
Feeling that they were prepared for implementing the task fully, the RDA peo-
ple were disappointed by this division. They viewed the sharing of duties as a
compromise in the struggle between regional actors interested in expanding their
competencies, and central institutions defending their positions. Nevertheless,
these changes do demonstrate a considerable increase in the importance and pres-
tige of RDAs as a natural counterpart of the decentralised implementation of the
regional OPs well illustrated in a remark of the development director of RDA
filled with pride:
"The path the agencies went through is really something! These
agencies came into being out of nothing a few years ago, and now they
are handling 107 billion HUF from the start to the end of the ROP, eve-
rything apart from the human infrastructure projects! It is true that we
have to make cross checking with the Managing Authority, but ... I
cannot really say that they press anything down our throat." (Develop-
ment Director, RDA May 2007).
41
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
Finally, two "complex programmes" represent another important innovation in
the 2007-2013 period. Reflecting the needs of the "subjects" and the complicated
structures of the funding resources (15 OPs within the NFDP plus 4 axes of the
NHARDP) these programmes were aimed at safeguarding programme-
implementation in a co-ordinated manner. Both of them have spatial relevance,
and, paradoxically, they are targeting spatial extremes: one of them is aimed at the
Development Poles (that is, regional centres), whilst the other their spatial oppo-
sites, the least developed 33 micro regions.
3 The implementation of regional policy in Southern
Transdanubia: empirical evidence
This section draws on some of the results of the Social Network Analysis and the
interviews that accompanied the questionnaire. 36 It also includes material gath-
ered from participative observation on some of the planning meetings. Altogether,
twelve interviews were performed with regional actors and with one leading per-
sonality within the National Development Office. 37 It should be noted that local
elections took place in October 2006, greatly changing the composition of re-
gional policy-making. From the original 19 RDC members in South Transdanu-
bia, only five remained "in office". For the first time, however the political
changes did not generate subsequent changes in the leadership of the Regional
Development Agency.
Most of those interviewed were satisfied with the growing influence of the re-
gion. This was especially the case with the chance to plan and implement the
ROP for the first time. The achievements of the pre-accession and post-accession
periods were rated positively and regarded as the result of a relatively smooth
institutional and professional adaptation. Criticisms were limited to the growing
burden of bureaucratisation, which slows down processes and makes access to
funds more difficult. Also, the language used within the EU development process
was deemed inconceivable not only for the general public but also the "ordinary
village mayor".
"Complexity, organisational and language hodgepodge were really
difficult to follow; most of the mayors do not have a clue what the di-
rector of the Agency was talking about" (Chair of the County Develop-
ment Council of Tolna, 2006. August).
36 This part of the research was lead by Endre Sik. The authors are grateful for the access to data
drawn from questionnaires of the Social Network Analysis.
37 Two interviews were conducted by Alexandra SzOke, two were transmitted in a written form by
the respondents who received the interview schedule earlier, and eight were made by Katalin
Kovacs who also observed the council meetings.
42
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
To go more in depth in the subject we start with some of the results from the
SNA and then we concentrate on the material gathered from the interviews (Table
13).
Table 13
Criticisms of former EU co financed projects
Critical remarks
% of agreeing respondents
Excessive administration
68
Funds available only in part or after a delay
53
General approach unfamiliar
32
Conflict of interests
26
Slow pace of programme implementation
26
Not enough local/civil participation
18
Inappropriate political influence
18
Lack of institutions necessary for implementation
13
Insufficient fully qualified or trained staff
11
Mandatory financial reserves set at a too high rate
11
Poor selection of partners
8
Source: Authors' construction based on SNA.
As regards the degree that the ROPs might lead to the longer-term enhance-
ment of bureaucratic capacity, and more effective and efficient partnership, the
majority considered that community-building among the stakeholders and EU-
learning were the two key results of the programme implementation. A senior
member of the RDC, for example, stressed how
"the good results from Tolna are not only thanks to our coordination
work; we regularly met with the supervisors of the micro-regional agen-
sies, the leaders of associations, and, in our case, that bore fruit." (Chair
of Tolna County Council, member of the RDC, 2006 September).
On the other hand, there was a sense that the principle of partnership was not
always appreciated.
"Real partnership is still lacking..., but it is also true that there are
only few actors, and hence, civil control is also weak in such a situation.
Additional support is certainly needed, concentration, for the time being
doesn't work, but it has to be forced by reforms from above." (Member
of the RDC 2006 September) (Table 14).
43
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
Table 14
The influence of EU co financed pre and post accession projects
-
Fields of progress
% of respondents agreeing
Strengthened partnership
76
Assisted the introduction of new norms of spending public funds
68
Assisted access to resources
58
Strengthened civil participation
34
Stimulated institutional adaptation
29
Increased the standards of administration
16
Stimulated legal adaptation
13
Strengthened competition in the spending of public funds
8
Decreased (moderated) political influence
3
Accelerated implementation, increased efficiency
0
Source: Authors' construction based on SNA.
Despite the serious development problems in Southern Transdanubia, the ma-
jority of members in the policy network ranked partnership as paramount, more
important than "securing development funds". The "strengthening of civil soci-
ety" was in fourth place and below that was the view that "EU projects stimulated
and enhanced institutional adaptation and reform".
When self-criticism was formulated, the weak lobbying ability of South
Transdanubian politicians was mentioned. This explained why the most impor-
tant investment of the motorway between Budapest and Pecs was always ranked
low on the priority list of centrally financed projects. Certain internal conflicts
between the players of the three counties belonging to the region can also be
identified. This is illustrated by council members' contributions to a September
2006 general assembly of the RDC. At this meeting, the Commissioner in charge
of the Second National Development Plan attended accompanied by the Minister
of Regional Affairs, the chair of the Parliament and two Secretaries of States. This
was part of the overall consultation process, which became one of the essential
points of the programming process. It was introduced as a strong demonstration
of a new approach towards regional planning, including the participation of inter-
ested parties, and dialogue between planning agencies at different administrative
levels. In this meeting, the aim was to exchange information about the content of
the centrally planned OPs and the regionally planned ROP. There were particular
references to "big projects" which, whether at the national or regional level were
not selected within the normal open tendering process. The Commissioner offered
a Powerpoint presentation on the latest structure of the overall plan, and then lis-
tened to the politicians of the region, most of them also MPs. Two of the three
44
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
county representatives agreed that the motorway was the first priority, while the
third county representative did not mention it at all. Such differences were also
apparent in the interviews. The representation of narrow interests meant that not
only were their own urban/rural problems voiced, but usually the speaker did not
represent his or her role in the RDC but only as the mayor of a particular town or
settlement.
"This region can never develop into a cohesive region if there are no
regional commitments, but instead what everybody wants to do is to
save as much from the regional sources for his own settlement I micro-
region as possible." (Member of the Spatial Planning Web, representing
one of the county seats, April 2007).
A similar complaint was voiced by the Chairman of the Development Council
in August 2006 reflecting the uneven capacities and interests in complying with
regional development planning requirements. Despite the frequency of ties and
the strategic nature that many ascribe to their relations, there were still strong
disconnections in terms of role perception on the side of the planners and the
politicians, the sequencing of actions and the co-ordination of interventions. The
quotation illustrates the paradox by which local representatives of the central gov-
ernment could be advocates of particular local interests on the RDC. In other
words, the local and the central government interests could equally override the
weakest "regional interest" not only one by one but also "one in the other" and at
the same time.
"Regions could plan with the appropriate autonomy; there is no
problem with that. As regards the actual design [of the ROP], the prob-
lem is not with the mechanisms, but with the heads. There is a problem
with the designers; their professional ideas usually don't let social view-
points prevail, they don't take into account that development does not
come about in a sterile laboratory. However, on the other side there is
not enough ability for abstraction, for empathy, and readiness for com-
promise. Politicians, who participate in regional decision-makings, want
to build their own houses. Let's say, for example, if the Home Secretary
is represented by a mayor of X city, that mayor won't talk on behalf of
the Home Secretary, but according to the interests of his/her town."
(RDC chairman, August 2006).
The member quoted earlier blamed the lack of any real regional identity for the
absence of region-conscious decision-making. He also criticised planners from
another angle. He claimed that instead of developing a genuine, regionally tai-
lored development strategy, the South Transdanubian planners brought about
nothing but "a national plan at a regional scale". Some dissatisfaction was re-
45
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
flected in the opinion of those who were in charge of implementation. Being part
of the complex negotiating exercise with many actors, the top managers of the
RDA clearly saw the narrow path of autonomous manoeuvres.
"The ROP is not the development programme of the region. It is
rather a collection of menus offered for selected fields." (Executive
manager, RDA, August 2006).
"At the end, the ROP came into birth within the frame of sectoral
negotiations; so in fact, it is a sectoral programme ... what the rest of
the OPs did not absorb." (Development Director, RDA, May, 2007).
Nevertheless, the same respondent judged the position of regional planning
"incomparably better" than ever before. He regarded bottlenecks as natural con-
sequences of the uneven progress regionalism had achieved in the country: "...
the wagon cannot go faster than the horse" — he said — "it will be different once
we will have elected regions".
People did not complain about the limited autonomy of the planning proce-
dure. With some exceptions, they by and large agreed with the control from cen-
tral government and the European Commission on programming and implemen-
tation. The chairman of the RDC being in office since December 2006 raised the
issue of shared control between government and the regions over processes, oth-
ers pointed to the determining force of the procedures themselves:
"The ROP as well as the Action Plan were under strong central coor-
dination ... The National Development Agency ... put forward its pri-
orities and required adherence to the frames set. In the case of certain
measures, due to the division of labour with the sectoral Ops, it became
necessary to comply with the OPs. This kind of planning mechanism
can narrow regional competencies." (Chairman of the Somogy County
Council, member of the RDC, April 2007).
The development director of the Agency in charge of programming reacted
similarly when he was asked about the role of the EU in influencing the content of
the ROP. He said:
"The EU insists that we should spend as much on the economy as
possible, but how, if SMEs are under the Economic Development OP? It
was with tourism, where they suggested that we should allocate less
there ... but it stayed almost at the same level. ... Regions saw the pos-
sibility of breaking out on the basis of tourism..."
The ambiguity of the presence of central—local influence in the ROP process is
reflected in the table below, ranking the participants in the social consultation
process according to the status of the actors. The figures could be interpreted as
46
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
indicators of the actors' keenness to use all possible opportunities to express their
consent or opposition. For example the lack of any remark from the side of
Chambers of Commerce does not mean that they did not participate in other fo-
rums of social consultation, let alone that they were members of the planning
web. However, the Somogy actors' intensive participation is indicative as is the
influence of the central agents and agencies. The weak position of the local NGO
sector also tellingly comes through from the prevalence of remarks coming from
central NGOs (Table 15).
The majority of respondents thought that the ROP would eventually lead to
better future relations amongst the different partners. There was no expectation
that it would transform the importance of politics within regional development, as
regards the local actors, but also between the central state and the regional bodies.
Almost none of the participants believed that the ROP and attendant reforms
would diminish the importance of politics in the distribution of funds and influ-
ence. A mayor from one of the larger towns in the region declared that
"Regarding the re-politicisation of this Regional Development Coun-
cil, there is a fear of corruption. Those times, enterprises had much more
opportunities, I know it personally, that the second proposal was denied
due to political reasons. However, it would be better if decisions were
made on a professional basis. This division of resources doesn't work,
although, dividing the resources justly is virtually impossible" (Member
of the RDC, September 2006).
This council member would have favoured a centrally operating Intermediate
Body for the forthcoming ROP. 38 Other regional actors expressed fears and
frustrations in relation to the influence of the central state over regional matters.
Perhaps in reflection of the developmental importance of improving the road net-
work in this region, re-centralisation tendencies were criticised heavily:
"... Regional concentration is developing, on the other hand, but so is
a remarkable re-centralisation. ... I think that this kind of centralisation
is an absolute insanity which happened to the concentration of public
road maintenance last year, which degraded county transport corpo-
rations into work units, and all substantive decisions and preparations
were concentrated at the Ministry of Economy and Transport. It's a
nightmare for me — due to my motorcycle craze, knowing all roads,
with and without potholes — to imagine that the decision about the
reparation of roads would be made in Budapest. This is a typical
regional issue. ... To my mind, we are in an important moment, regions
38 As it was mentioned earlier, the task was finally shared between the local (regional) and central
actors.
47
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
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Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
will be developed in terms of legal rights, as well. However, this makes
sense only if regions are given responsibilities and sources..." (The
chairman of the RDC, August 2006).
In terms of the influence of different parties, among the network members
there seemed to be relatively equal weighting of the power of the region and the
power of the central state in terms of planning the ROP. According to the respon-
dents, regional actors were ranked as having the highest influence in regional
development (more than 60% of the respondents gave 8 or higher scores on a
scale of 10), followed by the central government and then the European Union.
With 1 being weak and 10 being strong, the average level of influence of the re-
gion and the government was 7.73 and 7.16 respectively, whereas the EU was
assessed as at 5.71. Relations and influence is seen in a bifurcated way. While
there is no correlation between the estimated level of influence of the region and
the other two actors, there is a strong positive correlation (0.73) between the level
of estimated influence of the government and that of the EU. In sum, in the stake-
holders' view the region is always influential, with the government and the EU
much less so. At the same time, if any of them is influential the other one is in-
fluential as well and vice versa.
If we widen the discussion of relative influence to non-state actors, then it ap-
pears that the various business actors in the region are considered more important
than the European Commission. At the same time, in most participants' eyes, the
Commission ranks above local civil society organisations (Table 16).
Table 16
Estimated level of influence in regional development
Actors
Influence
Government
7.97
South Transdanubian Regional Development Council
7.18
South Transdanubian Regional Development Agency
7.18
Business actors in the region
6.50
European Commission
5.45
Civil organisations
5.06
Source: Authors' construction based on SNA.
An analysis of the correlation between the estimated influence of various
stakeholders showed a positive inter-correlation (between 0.40 and 0.52) among
the two regional development organisations' business and NGO actors.
The respondents were asked how they would rate the overall ROP process.
With 1 point for being very unsatisfied to 10 for being very satisfied, the level of
49
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
success of the ROP planning and the implementation was rather high (6.81 and
6.44 respectively). An analysis of the correlation between the levels of estimated
influence and the satisfaction with the final ROP is rather telling. Those who
tended to identify the government as the most influential partner in the ROP were
more satisfied than the average, while those who viewed the EU, or the two non-
state sectors as being the most influential tend to be less satisfied with the final
outcome than the average (Table 17).
Table 17
Correlation between the level of influence and satisfaction
(correlation coefficient
Actors
Planning
Implementation
EU Commission
—0.20
Government
0.20
0.19
South Transdanubian Regional Development Council
0.18
South Transdanubian Regional Development Agency
Business actors of the region
—0.18
— 0.24
Civil organisations
—0.28
— 0.31
Correlation coefficient is less than 0.15.
Source: Authors' construction based on SNA.
Interviews reflected a similar level of satisfaction with the programming proc-
ess as completed by the Regional Development Agency. Respondents appreciated
the efforts made to mobilise as many actors as possible, and thus suit the pro-
gramme elements as much as possible to the regional needs and absorption ca-
pacities.
"I think that the Agency has ... lived up to the role that was required,
and mastered well the organisational and mediatory tasks ..." (Coun-
cil member representing the micro-regions of Somogy, 2006 Septem-
ber).
".... The ROP of Southern Transdanubia is indeed a programme that
was developed from below, what we only talked about before, material-
ised here ..." (Chairman of the Tolna County Council, member of the
RDC, April 2007).
When critical remarks emerged, they related to the extent that economic actors
were mobilised. The weak results were explained differently, one respondent
blamed the Agency and its weak links to the economic sector, another considered
that it was due to the moderate activity of the county chambers of commerce, with
the exception of Baranya County. We also have to add that the ROPs were not
50
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
that important as far as the economic sector was concerned; due to the demarca-
tions, the entrepreneurial sector would be supported principally within the frame-
work of other OPs.
4 Consequences — successes and failures in post-accession
regional policy-making
The first post-accession experiences on regional policy implementation have been
mixed. The country's deep financial crisis and the mounting budgetary deficit in
2006-2007 39 show that the incoming EU funds were not sufficient to counterbal-
ance the negative processes prevailing in the wider economic and social environ-
ment, in contrast, they could even worsen the situation in the short run. Analysts
call attention to the fact that in the first post-accession years, the balance of the
membership payment (1% of the GDP) and the channelled grants is inevitably
negative. The EU practice of supporting projects is to advance very little money
and then offer reimbursement to an extent determined by the support intensity
rate. High administration costs have been critically mentioned as has the manner
of creating the chief institutions dealing with EU issues. Some argue that institu-
tional adaptation has been slowed down because of the concepts that institutions
dealing with EU issues have followed. In other words, rather than organise from
or within existing administrative units thereby acting to "Europeanise" the chief
organisations of public administration, new institutions were created beyond these
units (Csefalvai, 2006). The same author warns that since 2003, Hungary dropped
from the 33"1 position on the "competitiveness list" of the Swiss Institute of Man-
agement Development to the 41 st. This does not seem to be in line either with the
objectives of the first NDP nor with that of the second.
Adam argues that the unprecedented budgetary deficit is a consequence of the
weak social embeddedness of institutions. The lack of effective control by social
actors over government spending is a direct legacy of socialism (Adam, 2006).
Following Broadbent, social embeddedness is seen here as "institutionalised so-
cial capital" (Broadbent, 2000). The "embedded autonomy" of the developing
state is determined by the dense social linkages that serve as bases for defining
development objectives (Evens, 1995). Although the examples are from the Far
East, according to the author, "embedded autonomy" is a key concept of active
developing state that could be extended to the corporatist European tradition of
social control over the state (Adam, 2006).
39 The budgetary deficit was around 10% in 2006 that has been dropped to 7% within one year due
to the severe measures of the so-called Convergence Programme of the Hungarian Government.
51
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
As a consequence of macro-economic processes and weak policy instruments,
regional disparities have grown sharply in the last decade. Despite the unparal-
leled financial assistance coming from the EU, researchers (Fazekas, 2005) as
well as the authors of the Horizontal Ex Ante Evaluation of the New Hungary
Development Plan have predicted that this will continue. This is very little to do
with the actual — centralised, decentralised or combined — manner of program-
ming and implementing of the first Hungarian Development Plan. What deserves
attention is the set of mechanisms through which the European Commission ef-
fectively influences institution-building and operation. After channelling vast pre-
accession funds to lay down EU-related institutions and procedures and making
further steps following the considerations of the evaluation results, Hungary failed
to demonstrate that it had installed an effective and transparent decentralised in-
stitution system that was able to channel EU funds. As a consequence, for the
short post-accession period of 2004-2006, the Commission decided not to support
decentralised programming and programme implementation. The example clearly
shows that the space for manoeuvring is extremely narrow if it is against the firm
intention of the Commission.
The centralised manner of programming and programme implementation of
the first ROP have had an influence over later developments, at least indirectly,
through the strengthening of re-centralising tendencies. In Autumn 2006, the
establishment of new self governing regions suggested by the re-elected govern-
ment was abandoned. This shows that the price of safer programme
implementation can be rather high in a country where path dependency is already
in support of the political centre.
As far as the present programming period is concerned, we can say that com-
pared to the previous period, there have been significant changes. Decentralisa-
tion appears to be a tendency that is increasingly breaking through, albeit with
limitations and in a somewhat paradoxical manner. For the first time, sound
funding is available to support the implementation of development goals at re-
gional level. This and the parallel tendencies in domestic policies inevitably imply
that regional-level institutions have become much stronger than before. This is
evident so far in case of the RDAs, that have become even "too strong" as com-
pared to the regional development councils.
"Regional Development Agencies grew too fast, grasped too many
roles and the politicians at the regional development councils started to
worry. Politicians have realised that they shouldn't let agencies be self-
controlled. Therefore, there are power struggles." (Development Direc-
tor, RDA, Southern Transdanubia)
These struggles are brought about by information-monopolies and the fact that
the regional development agencies are occupying key posts within the develop-
52
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
ment process. They are also caused by some recentralising measures in the man-
agement structure (such as the dual reporting responsibility of the RDA managing
directors, to the regional development council on one hand, and to the National
Development Office on the other). Beyond the re-strengthening of central control
over regional organisations, the following constraints limit their autonomy:
—the centrally organised Managing Authority and Monitoring Committee;
—the shared, managing of the processing of the applications between RDAs
and the VATI (a government extention service, central organ).
Such limitations have been interpreted differently from various sides. One of
the manager directors of the South Transdanubian RDA, for example, was happy
and worried at the same time:
"Now the NDA can also appoint the head of the RDA, or rather, his
(the commissioner's) consent is needed for the nomination. ... This
condition reflects well the Hungarian situation. The wagon cannot go
faster than the horse ... "(Development Director, RDA, Southern Trans-
danubia).
The unprecedented concentration of political power and control over EU re-
sources brought about under the pretext of enhanced efficiency can also be identi-
fied at the central level. As an impact of this concentration, at least two unfavour-
able consequences can be identified: (i.) an increased risk of political hijacking of
the development process, on the one hand and (ii.) a decreasing influence of the
ministries with their professional concerns, on the other.
5 Conclusion
EU funds had an extraordinary impact on institution-building and transformation
in Hungary. The pre-accession funds played an essential role in shaping an EU-
compliant institutional system assisting new institutions into being. Their role
was enormous in transmitting certain norms and influencing a broader set of in-
stitutions, thereby infiltrating deeper into the "texture" of social, economic and
policy fields. The road of transmission was paved by conditions set by the Com-
mission and led to a certain adaptation that is still in the making. Stepping on this
road, each actor had to prove that the conditions had been met and then the sup-
port could have been claimed and received.
Transparency, co-operation and decentralisation were probably the most im-
portant norms transmitted as by-products of the first generation of EU grants, at
least as far as their impacts on the spatial policies are concerned. Within a vast
learning procedure, SAPARD, being the only programme managed by the acces-
53
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
sion states, introduced the full range of institutions related to the management and
control of the EU Funds. With regards to decentralisation, it was the PHARE
programme that did the most. It linked these three principles to one another when
it targeted various meso-tiers of administration and promoted micro-regional and
county level decision-making in the beginning (associations, county councils),
then regional development councils and agencies at the end. Transparency and in-
sured procedures were essential conditions when grants were allocated to the new
institutions either in the case of SAPARD or the smaller PHARE funds spent by
the experimental regional councils/agencies of the PHARE pilot regions.
What was tried on the small-scale via pilot projects with relatively little money
was mainstreamed to large-scale later on, in the post-accession phase. Main-
streaming seems to go together with simplifying, less NGO participation and
growing central control. The latter is aimed at either balancing the increased
autonomy of the decentralised institutions, or simply being part of the measures
taken by the central administration when re-constituting central governance
structures. This is what happened with regional project selection under SAPARD
(i.e. it was centralised) and, with the decentralised decision-taking authority of the
PHARE-supported regional development councils. PHARE pilot regional devel-
opment councils comprised a wide range of civic and public organisations with
voting capacities, compared to which civic influence was narrowed down already
in 1996 by the Regional Development Act and further shrunken in 1999 by the
amendment of the Act.
Despite the efforts and experiments done in the 1990s, the regional institutions
did not prove to be strong enough to channel post-accession funds. Subsequently,
a central management prevailed in the first post-accession period which was fol-
lowed by a considerable "controlled decentralisation" in the next period starting
in 2007. The third generation of EU-related regional policies and their imple-
mentation structures is thus representing half way on the twisting road of decen-
tralisation of public policies in Hungary that, hopefully, will not repeat the turns
of the past.
54
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
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2010. 58 p. Discussion Papers, No. 78.
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Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
Annex 2
Vertically and horizontally organised thematic groups
in Southern Transdanubia, 2006
REGIONAL DEVELOPMENT AGENCY
Spatial planning web — Vertical linkages
Sectoral Planning web — Horizontal
— County development councils
linkages
—County towns
— Transport
—Micro regional associations
— Nature and Environment
— Tourism
— Health and Social Affairs
— Education and Research
— Economic development and
Permanent contact persons at county
employment
and micro-regional levels
—Agricultural and Rural
Development
Consulting Companie
Source: Marton, 2005, 63.
58
Kovács, Katalin - Cartwright, Andrew: Controlled Decentralisation : Institution-Building and Regional
Development in Hungary. Pécs: Centre for Regional Studies of Hungarian Academy of Sciences,
2010. 58 p. Discussion Papers, No. 78.
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Discussion Papers 2010. No. 78.
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Discussion Papers / Specials
BENKONE LODNER, Dorottya (ed.) (1988): Environmental Control and Policy: Proceedings of
the Hungarian—Polish Seminar in the Theoretical Problems of Environmental Control
and Policy
OROSZ, Eva (ed.) (1988): Spatial Organisation and Regional Development Papers of the 6 th Polish—
Hungarian geographical Seminar
DURO, Annamaria (ed.) (1993): Spatial Research and the Social—Political Changes: Papers of the
7th Polish—Hungarian Seminar
DURO, Annamaria (ed.) (1999): Spatial Research in Support of the European Integration.
Proceedings of the 1 1 th Polish—Hungarian Geographical Seminar (Matrahaza, Hungary
17-22 September, 1998)
GAL, Zoltan (ed.) (2001): Role of the Regions in the Enlarging European Union
HORVATH, Gyula (ed.) (2002): Regional Challenges of the Transition in Bulgaria and Hungary
KOVACS, Andras Donat (ed.) (2004): New Aspects of Regional Transformation and the Urban-
Rural Relationship
BARANYI, Bela (ed.) (2005): Hungarian—Romanian and Hungarian—Ukrainian border regions as
areas of co-operation along the external borders of Europe
ENYEDI, Gyorgy — KOVACS, Zoltan (eds.) (2006): Social Changes and Social Sustainability in
Historical Urban Centres. The Case of Central Europe
KOVACS, Andras Dona (ed.) (2007): Regionality and/or locality
SZIRMAI, Viktoria (ed.) (2007): Social Inequalities in Urban Areas and Globalization. The Case of
Central Europe
ILLES, Ivan (2008): Visions and Strategies in the Carpathian Area (VASICA)
GAL, Zoltan — RACZ, Szilard (eds.) (2008): Socio-Economic Analysis of the Carpathian Area
KOVACS, Andras Donk (ed.) (2009): Old and new borderlines/frontiers/nmargins
Discussion Papers
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
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SIKOS T., Tam& (1987): Investigations of Social Infrastructure in Rural Settlements of
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HORVATH, Gyula (1987): Development of the Regional Management of the Economy in
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PALNE KOVACS, Ilona (1988): Chance of Local Independence in Hungary
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Functioning of Settlements
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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., Tamas (1992): Types of Social Infrastructure in Hungary (to be not published)
No. 12 HORVATH, Gyula — HRUBI, Laszlo (1992): Restructuring and Regional Policy in
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No. 13 ERDOSI, Ferenc (1992): Transportation Effects on Spatial Structure of Hungary
No. 14 PALNE KOVACS, Ilona (1992): The Basic Political and Structural Problems in the
Workings of Local Governments in Hungary
No. 15 PFEIL, Edit (1992): Local Governments and System Change. The Case of a Regional
Centre
No. 16 HORVATH, Gyula (1992): Culture and Urban Development (The Case of Pecs)
No. 17 HAJDO, Zoltan (1993): Settlement Network Development Policy in Hungary in the
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No. 18 KOVACS, Ter& (1993): Borderland Situation as It Is Seen by a Sociologist
No. 19 HRUBI, L. — KRAFTNE SOMOGYI, Gabriella (eds.) (1994): Small and medium-sized
firms and the role of private industry in Hungary
No. 20 BENKONE Lodner, Dorottya (1995): The Legal-Administrative Questions of
Environmental Protection in the Republic of Hungary
No. 21 ENYEDI, GyOrgy (1998): Transformation in Central European Postsocialist Cities
No. 22 HAJDU, Zoltan (1998): Changes in the Politico-Geographical Position of Hungary in the
20th Century
No. 23 HORVATH, Gyula (1998): Regional and Cohesion Policy in Hungary
No. 24 BUDAY-SANTHA, Attila (1998): Sustainable Agricultural Development in the Region
of the Lake Balaton
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No. 28 RACZ, Lajos (1999): Climate History of Hungary Since the 16 th Century: Past, Present
and Future
No. 29 RAVE, Simone (1999): Regional Development in Hungary and Its Preparation for the
Structural Funds
No. 30 BARTA, Gyorgyi (1999): Industrial Restructuring in the Budapest Agglomeration
No. 31 BARANYI, Bela—BALCSOK, Istvan—DANCS, Laszlo—MEZO, Bama (1999):
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No. 32 RECHNITZER, Janos (2000): The Features of the Transition of Hungary's Regional
System
No. 33 MURANYI, Istvan—PETER, Judit—SZARVAK, Tibor—SZOBOSZLAI, Zsolt (2000):
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No. 34 KOVACS, Ter& (2001): Rural Development in Hungary
No. 35 PALNE, Kovacs Ilona (2001): Regional Development and Governance in Hungary
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No. 36 NAGY, Imre (2001): Cross-Border Co-operation in the Border Region of the Southern
Great Plain of Hungary
No. 37 BELUSZKY, Pal (2002): The Spatial Differences of Modernisation in Hungary at the
Beginning of the 20th Century
No. 38 BARANYI, Bela (2002): Before Schengen — Ready for Schengen. Euroregional
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No. 39 KERESZTELY, Krisztina (2002): The Role of the State in the Urban Development of
Budapest
No. 40 HORVATH, Gyula (2002): Report on the Research Results of the Centre for Regional
Studies of the Hungarian Academy of Sciences
No. 41 SZIRMAI, Viktoria — A. GERGELY, Andras — BARATH, Gabriella—MOLNAR, Balks
— SZEPVOLGYI, Akos (2003): The City and its Environment: Competition and/or Co-
operation? (A Hungarian Case Study)
No. 42 CSATARI, Balint—ICANALAS, Imre—NAGY, Gabor —SZARVAK, Tibor (2004): Regions
in Information Society — a Hungarian Case-Study
No. 43 FARAGO, Laszlo (2004): The General Theory of Public (Spatial) Planning (The Social
Technique for Creating the Future)
No. 44 HAJDU, Zoltan (2004): Carpathian Basin and the Development of the Hungarian
Landscape Theory Until 1948
No. 45 GAL, Zoltan (2004): Spatial Development and the Expanding European Integration of the
Hungarian Banking System
No. 46 BELUSZKY, Pal — GYORI, Robert (2005): The Hungarian Urban Network in the
Beginning of the 20 th Century
No. 47 G. FEKETE, Eva (2005): Long-term Unemployment and Its Alleviation in Rural Areas
No. 48 SOMLYODYNE PFEIL, Edit (2006): Changes in The Organisational Framework of
Cooperation Within Urban Areas in Hungary
No. 49 MEZEI, Istvan (2006): Chances of Hungarian—Slovak Cross-Border Relations
No. 50 RECHNITZER, Janos — SMAHO, Melinda (2006): Regional Characteristics of Human
Resources in Hungary During the Transition
No. 51 BARTA, Gyorgyi — BELUSZKY, Pal — CZIRFUSZ, Marton — GYORI, R6bert —
KUKELY, GyOrgy (2006): Rehabilitating the Brownfield Zones of Budapest
No. 52 GROSZ, Andras (2006): Clusterisation Processes in the Hungarian Automotive Industry
No. 53 FEKETE, G. Eva — HARGITAI, Judit — JASZ, Krisztina — SZARVAK, Tibor —
SZOBOSZLAI, Zsolt (2006): Idealistic Vision or Reality? Life-long learning among
Romany ethnic groups
No. 54 BARTA, Gyorgyi (ed.) (2006): Hungary — the New Border of the European Union
No. 55 GAL, Zoltan (2006): Banking Functions of the Hungarian Urban Network in the Early
20th Century.
No. 56 SZORENYINE, Kukorelli ben (2006): Relation Analysis in Rural Space — A Research
Method for Exploring the Spatial Structure in Hungary
No. 57 MAUREL, Marie-Claude — POLA, Peter (2007): Local System and Spatial Change — The
Case of B6ly in South Transdanubia
No. 58 SZIRMAI, Viktoria (2007): The Social Characteristics of Hungarian Historic City Centres
No. 59 ERDOSI, Ferenc — GAL, Zoltan — GIPP, Christoph — VARJU, Viktor (2007): Path
Dependency or Route Flexibility in Demand Responsive Transport? The Case Study of
TWIST project
Discussion Papers 2010. No. 78.
Controlled Decentralisation:
Institution-Building and Regional Development in Hungary
No. 60 POLA, Peter (2007): The Economic Chambers and the Enforcement of Local Economic
Interests
No. 61 BUDAY-SANTHA, Attila (2007): Development Issues of the Balaton Region
No. 62 LUX, Gabor (2008): Industrial Development, Public Policy and Spatial Differentiation in
Central Europe: Continuities and Change
No. 63 MEZEI, Cecilia (2008): The Role of Hungarian Local Governments in Local Economic
Development
No. 64 NAGY, Gabor (2008): The State of the Info-communication Markets in Del-Altbld
Region — Hungary
No. 65 HORVATH, Gyula (2008): Regional Transformation in Russia
No. 66 BELUSZKY, Pal — SIKOS T., 'camas (2008): Changing Village-Typology of Rural
Settlements in Hungary at the Beginning of the Third Millennium
No. 67 CSIZMADIA, Zoltan — GROSZ, Andras (2008): Regional Innovation System in West
Transdanubia
No. 68 HARM, Minas (ed.) (2008): Transborder Movements and Relations in the Slovakian—
Hungarian Border Regions
No. 69 ERDOSI, Ferenc (2008): Global and Regional Roles of the Russian Transport
Infrastructures
No. 70 CSIZMADIA, Zoltan (2009): Cooperation and Innovativity: the Network Foundations of
the Regional System of Innovation
No. 71 HAJDU, Zoltan — LUX, Gabor — PALNE KOVACS, Ilona — SOMLYODYNE PFEIL,
Edit (2009): Local Dimensions of a Wider European Neighbourhood: Crossborder
Relations and Civil Society in the Hungarian—Ukrainian Border Arean
No. 72 HORVATH, Gyula (2009): Cohesion deficiencies in Eastern and Central Europe.
Inequalities of regional research area
No. 73 PALNE KOVACS, Ilona —VARJU, Viktor (eds.) (2009): Governance for Sustainability —
Two Case Studies from Hungary
No. 74 SZEPVOLGYI, Akos (2009): The Effects of the Information Society on Spatial
Development — Hungarian Case Study
No. 75 BARATH, Gabriella (2009): The Relation Systems of Metropolitan Areas
No. 76 MEZEI, Istvan (2009): The Development of the Urban Network in Slovakia
No. 77 CARDOSO, Ana Margarida Martins (2009): Territorial Planning, its Actors and
Instruments. The Portuguese & Hungarian Planning System