Erawatch Country Report 2009: Hungary

Macroeconomic imbalances have been particularly pressing since 2006 in Hungary. The global economic and financial crisis has further aggravated the prospects for recovery, and access to capital has become even more difficult. Although overall conditions for doing business have improved in recent years, administrative and tax burdens on firms are still high compared to the OECD average. The regulatory environment is characterised by frequent and unpredictable changes. These conditions are not favourable for long-term and high-risk activities, such as RTDI. Only one fifth of firms operating in Hungary are innovative. The majority of companies (59%) do not innovate due to the lack of demand for new products and services. Researchers at universities and PROs are not sufficiently motivated to carry out economically relevant research. This, in turn, hinders exploitability of knowledge, and therefore may not provide sufficient incentives for private co-financing of research performed in the public sector. It seems unlikely that R&D investment targets, especially those of the private sector can be achieved simply by providing more public funding. The impact of strictly defined STI policies with the aim of leveraging R&D investments can only be enhanced if framework conditions for RTDI activities are also significantly improved. Given the economic crisis and lack of meaningful communication – let alone co-operation – among the major political parties, it is uncertain if fundamental reforms, needed to create more favourable conditions, can be implemented. Structural reasons, that are difficult to address even by overall economic policies, let alone STI policies, can also be seen as obstacles to induce R&D investments. The large chunk of BERD (around 70%) is performed by foreign-owned firms, and their RTDI activities are largely determined by their parents’ strategies, while domestic STI policies can only play a relatively minor role.