PRIME Minister Victor Orban's conservative coalition administration is introducing a big, long-term infrastructure building programme intended to accelerate the growth of the Hungarian economy. Similar development master-plans may well be launched by some of Hungary's wealthier neighbours in central and eastern Europe in response to the economic upturn helped by a recovery of key western export markets.
This may be Orban's last big attempt to win re-election for a second term in office through achieving an early Hungarian accession to the European Union (EU). An alternative may be some form of a populist coalition administration including the far-Right Smallholders Party. The proposition has alarm bells ringing in Brussels as well as in Budapest.
Housing and motorway building will consume the lion's share of Orban's new, 434 billion forint (1bn pounds) investment package over the next two years, with more to come later. This is a huge sum for this poor, formerly communist country of just ten million people which has nevertheless emerged as an important regional trendsetter.
Other main items on the modernization agenda are industrial innovation, small business as well as regional development, sub-contracting and tourism. The final version of the scheme should be published shortly. It is called the Szechenyi Plan after a 19th century Hungarian aristocrat responsible for a very ambitious modernization programme along the English model of that time. His name still carries strong patriotic appeal for all segments of society.
Orban's political opponents dismiss the plan as a piece of crude electioneering. Orban hopes that it may be the last big push needed to secure the country's entry into the EU. And in any case, he adds, quoting a long list of favourable, authoritative forecasts and analyses, now that the Hungarian economy has turned the corner, the time has come to step on the accelerator.
Like many successful politicians, Orban at age 38 is a slender man with an enormous sense of self sometimes concealed by his boyish charm. He recently asked journalists and economists to stop describing the country as a post-communist, transition, or emergent, economy. As he put it, 'Permit me to inform you that, a decade after the collapse of communism, Hungary has now completed the transition to a capitalist democracy'. He went on, with some exaggeration and much generosity: 'This entire region from the Baltic to the Adriatic Seas is now ripe for EU membership. Without it, the EU would remain incomplete'.
The transition to capitalism has been tough, brutal and costly, with consumption dipping by as much as 20 per cent at one point during the past decade. It is only now beginning to approach the level where it had been at the implosion of communist power.
However, statistics cannot tell the whole story. Many people are still far worse off than they used to be. For the transition has given rise to a class of first-generation bourgeois entrepreneurs which still owes its educational privileges and basic cultural values to the deeply corrupt and cynical old communist regime and which conspicuously consumes far more, by any standard of common decency, than a fair share of the national cake.
This leaves people embittered and resentful. The disappointment of their material aspirations tends to explain the emergence of a small, well organized and very vocal anti-EU far-Right coalition in Parliament for the first time since the birth of Hungarian democracy. And the voters have been exercising their democratic powers. During the past decade, they have booted out every government they had elected, after just one term in office. The popularity of the present coalition administration is ominously declining in the polls. Orban, the Oxford educated pragmatist lawyer son of an aggressively success-oriented working class family, will have to work very hard if his government is to survive the next elections in about two years' time.
He maintains an uneasy parliamentary majority for the administration through tacit voting alliance with the far-Right. Its formal entry into the coalition government (a formula currently being tried in neighbouring Austria provoking outrage in western Europe) would certainly destroy Hungary's chances of joining the EU.
The first draft of Orban's Szechenyi Plan has been published for discussion by business, trade unions and local governments as well as the higher education establishment. The final version will reflect their response. The scheme has attracted great interest both at home and abroad.
There are indications that countries like nearby Poland and Slovenia may well formulate similar focused development schemes. Both countries are progressing towards EU membership in the favourable preset economic climate holding out the prospect to them of annual national growth rates possibly in excess of 4 or 5 per cent.
Indeed, the Orban package will focus on the remaining major weaknesses of the national infrastructure that must be overhauled if Hungary is to qualify for EU membership. The plan actually states that market liberalization and deregulation, which are at an advanced stage in this country, are not sufficient to tackle such expensive, lingering issues as low labour mobility and insufficient corporate investment in research and development. Investment in infrastructure is intended also to have a self-generating effect as it works its way through the economy.
Orban proposes a construction programme to erect 40,000 homes a year at a cost of 200bn forints until the year 2002. He wants to build 600 km of motorways over five years, at 120bn forints during the initial two-year period, to exploit the highly profitable yet underdeveloped east-west and north-south trade routes that have made this country a traditional middle-man to Europe. Construction at such a rate would alone increase economic growth by 1.5 per cent a year.
The Szechenyi Plan also earmarks 45bn forints for scientific and technological research and development as well as higher education, 25bn for stimulating the small-business sector, 18bn for sub-contracting, 16bn for tourism and 10bn for regional development. All of these would be financed largely by private investors and lenders, with some 28bn forints raised by the government itself. The response of the private sector remains understandably cautious pending the publication of more hard information. The Orban administration has nevertheless expressed confidence both in the availability of sufficient investment funds and its own ability to keep down inflation, despite the substantial projected economic stimulus, while meeting its deficit targets of 3.5 per cent of the gross domestic product in 2000 and 3 per cent in 2001.
Orban has chosen his time well. The government reckoned that both Hungary's exports and imports were likely to expand by more than 10 per cent during the year 2000, due mainly to prospects of accelerating growth in western Europe as well as recovery in Russia. Hungary's exports increased by 8.8 per cent during the first two months of 2000, 85 per cent of them directed towards the lucrative markets of the industrialized countries, 78 per cent to the EU alone. During the same period, Hungarian exports to Russia increased by 41 per cent over their level a year ago -- with lots more room for growth since this performance still amounts to less than half the value they had reached before the onset of the last great Russian economic meltdown.
Business has got the message. Ford has announced a plan to move its southeast Europe vehicle sales unit to Budapest from Warley in England. BMW is considering several Hungarian sites for the production of a small, newly designed passenger vehicle. During the first quarter of 2000, new-car sales in Hungary increased by 11.2 per cent on a year ago (excluding the performance of the top-selling domestic company Magyar Suzuki).
This is in line with growth throughout central and eastern Europe predicted for 2000/2001 by the Vienna Institute for International Economic Studies, which advises the EU on the relative preparedness of these countries queuing for membership.
Hungary, Poland and Slovenia may well lead an accelerating regional recovery process. The Viennese economists expect Hungary to retain its position as the region's star performer and the most favoured option for export-oriented direct investment while cutting unemployment from 9.6 per cent in 1999 to 9 per cent in 2000.
These favourable economic indicators reinforced by the appeal and effect of the Szechenyi Plan could consolidate Orban's grip on power - provided that the cooperative Parliamentary voting strategy of the far-Right allows him time to reap the dividends. But if he grows dependent on the far-Right for the survival of his administration, Orban may feel obliged to admit it formally into the coalition at the price of sacrificing Hungary's future in the EU - and much else besides.
All Hungarian governments since the collapse of communist rule more than a decade ago have consistently sought membership of the EU, with the approval of a big and significantly growing majority of the electorate. The economic and political transition essential to meeting the EU's membership criteria has been a common cornerstone of their policies despite their very different ideologies.
Yet the ignominious recent collapse of the Kohl administration in Germany, a powerful champion of eastward EU expansion, has significantly slowed down the process. There are now suggestions of perhaps another five years' wait even in the case of Hungary, the most successful east European membership applicant.
This would be too late for Orban, who should have liked to reverse his coalition's political fortunes by going to the polls as the national leader who has at last secured for Hungary its rightful place at Europe's top table. He recently declared: 'Our region has become economically the most dynamic in the world. Hungary no longer requests - it offers opportunities for collaboration with the EU. And if the EU chooses to ignore that and fails to integrate us, then other economic powers will reap the dividends'.
Orban was among the first to end Austria's diplomatic isolation within the EU and the applicant countries when he received the Austrian Chancellor Wolfgang Schussel on an official visit here. He used the opportunity to declare publicly his personal pleasure over the prospect of friendship between the two governments.
Earlier, he pointedly expressed surprise at the fuss, made by Brussels over the success of the far-Right in Vienna, ignoring the dreadful experience of many EU member countries within living memory of the Nazi yoke during the Second World War. (The question whether or to what extent the parliamentary leaders of the European far-Right movement can be accurately described as 'nec-Nazi' is beyond the scope of this article; I recommend on this topic an excellent new book, Guilty Victim: Austria from the Holocaust to Haider, by Hella Pick, I. B. Tauris, London, [pound]24.50.)
The Orban government rewards the Hungarian far-Right for its sustained parliamentary support by granting it considerable administrative as well as editorial control over state-owned organs of the mass communication media. The far-Right leaders recently organized an anti-EU youth rally in support of their Austrian allies.
Nepszabadsag, the independent and very sober Hungarian daily newspaper, comparable perhaps with The Times, has sounded alarm at the prospect of a forced marriage between the Orban coalition and the far-Right. So has Heti Vilaggazdasag, which is comparable with Britain's Economist. Franz Fischler, the EU's Agriculture Commissioner, has emphasized Brussels' resolve to end membership talks with any government that includes extremist political parties. (Ironically Fischler himself is an Austrian.)
Orban is a founder member of Fidesz, the dominant party of the coalition. It originated as a democratic youth movement with forceful liberal leanings; he has led it well to the right of the political spectrum. But the prospect of Orban forging a coalition government including the far-Right holds greater danger for Fidesz than for the country. For Hungary's voters, with their own painful experience of nazism as well as communism over much of their lives, probably loathe extremist politics even more than do most of their neighbours within the EU.
Thomas Orszag-Land is a Hungarian-born British author and foreign correspondent who writes on global affairs.…