Hungarian National Development Plan Republic of Hungary

Transcription

1 Hungarian National Development Plan Republic of Hungary Approved by the Hungarian Government on 26 th March, 2003 Prime Minister`s Office Office for the National Development Plan and European Funds H-1133 Budapest, Pozsonyi út 56. Signed Etele Baráth Government Commissioner Political State Secretary Tel: March 2003

2 TABLE OF CONTENT CHAPTER 0 CONDITIONS FOR THE ESTABLISHMENT OF THE DEVELOPMENT PLAN General Planning Process NDP Framework Components of the National Development Plan Partnership consultation Principles of partnership Partnership Consultation Brief summary of Partners Opinions Conclusion The Ex Ante Evaluation Introduction Timing Conclusion I. SITUATION ANALYSIS SOCIO-ECONOMIC SITUATION The geography of the country Demographic situation Population density Changing age composition Migration Macro-economic situtation Real GDP growth Trade External, internal balance Capital Employment, wages Inflation On the way to meet the Maastricht criteria Projections until REGIONAL CHARACTERISTICS AND DIFFERENCES Spatial development and regional policy Regional differences of economic and social development THE PRODUCTIVE SECTOR Factors of competitiveness Manufacturing Little capital accumulation in the economy Low productivity in domestically owned companies whereas foreign investors are highly productive Multinational companies still do not organically imbed into the Hungarian economy Small and medium-sized enterprises The existing regulatory environment is still not conducive to SME growth There are market deficiencies in the provision of business development services and finance to SMEs Entrepreneurs lack the knowledge and skills required for the successful management of enterprises Tourism Introduction The main challenges of the Hungarian tourism sector in Resources The weakness of human resource Research & development and innovation The total amount of R&D spending is very low The R&D spending is predominantly state expenditure The R&D infrastructure is outdated and research teams are an ageing population II

3 3.5.4 The link between the R&D sector and the business sector is weak, the spin-off activity is not intense The innovation ability of the private sector is low Information society The spending on IT is lower than the EU average The number of Internet users is low The development level of the telecommunications infrastructure is regionally very different The IT skills of the Hungarian society are poor, the digital content industry is underdeveloped The legal basis of the development of the Information Society is incomplete Differences in economic development INFRASTRUCTURE Transport infrasturucture Hungary a hub of international transport Current modal split Construction of the motorway network Upgrading the existing network Construction and modernisation of the railway network Expanding airport capacity Improvement of the Danube corridors Combined Transport Expected trends Institutional System Differences in the accessibility Energy The Institutional System EMPLOYMENT AND HUMAN RESOURCES DEVELOPMENT General overview of the labour market Low levels of employment and high rate of inactivity Low levels of employment Relatively low unemployment is coupled with high inactivity Regional Disparities Special groups of the labour force Women Young people Older employees People with disability Structure of employment Sectoral structure Role of SMEs in employment Shortage of Labour Investment in and promotion of human resources development Implementation of employment policy Institutional framework Active policies Involvement of social partners Employment prospects Education and vocational training Level of education School attendance Adult training Shortcomings and bottlenecks HEALTHCARE SOCIAL INCLUSION Income, social exclusion Situation of the Roma Minority EQUALITY OF OPPORTUNITY AGRICULTURE AND RURAL DEVELOPMENT Introduction Role of Agriculture and Food Processing Industry in the National Economy Natural endowments Production structure III

4 9.2 The main challenges of agriculture, food-processing and rural development Investments, the technical- technological conditions of production Land ownership and the characteristic features of land use The composition of the agricultural population from the aspects of age The composition of the agricultural population from the aspect of qualification Co-operatives, integrating associations Product quality, food safety The characteristic features of silviculture The main challenges in the fishery sector Situation of food processing Present situation of rural areas Institutional System ENVIRONMENTAL PROTECTION General state of the environment in Hungary Air pollution Surface and ground water Protection of soil Natural and landscape assets Environmental burden of economic activities The shortcomings of communal infrastructure Raising environmental awareness Institutional structure of environmental protection and nature conservation Differences in the quality of local life and local public administration EXPERIENCE OF EARLIER PROGRAMMES Széchenyi Plan The PHARE Programmes ISPA Programme SAPARD Programme APPENDIX II. THE STRATEGY AND THE PRIORITIES OF THE NDP SWOT ANALYSIS OBJECTIVES THE STRATEGY PRIORITIES Increasing the competitiveness of the productive sector (Priority 1) Increasing employment and the development of human resources (Priority 2) Better infrastructure and cleaner environment (Priority 3) Strengthening regional and local potential (Priority 4) Technical assistance (priority 5) Expected impacts of the NDP Macroeconomic impact assessment Indicators and quantified targets APPENDIX 1: POLICY FRAME OF REFERENCES IN THE FIELD OF HUMAN RESOURCES III. COHERENCE AND CONSISTENCY OF THE STRATEGY COHERENCE WITH COMMUNITY POLICIES Regional competivieness Increased employment, human resources development Balanced urban and rural development Horizontal principles COHERENCE WITH NATIONAL POLICIES Development fields Horizontal principles COHERENCE AND CONSISTENCY OF THE STRATEGY AND PRIORITIES Prior appraisal of socio-economic problems Relevance and coherence of the strategy and objectives IV. FINANCE IV

5 1 THE FINANCIAL PLAN OF THE NATIONAL DEVELOPMENT PLAN EX-ANTE VERIFICATION OF ADDITIONALITY V. BRIEF DESCRIPTION OF THE OPERATIONAL PROGRAMMES ECONOMIC COMPETITIVENESS OPERATIONAL PROGRAMME Investment promotion SME development Research and development and innovation Information society and economic development HUMAN RESOURCE DEVELOPMENT OPERATIONAL PROGRAMME Support to active labour market policies Fight against social exclusion by assisting entry into the labour market Support for education and training within the framework of lifelong learning policy Improving adaptability and entrepeneurial skills Developing infrastructure supporting education, social inclusion and healthcare ENVIRONMENTAL PROTECTION AND INFRASTRUCTURE DEVELOPMENT OPERATIONAL PROGRAMME Development of environmental protection Development of transport infrastructure AGRICULTURAL AND RURAL OPERATIONAL PROGRAMME Establishment of competitive basic material production in agriculture Modernisation of food processing Development of rural areas OPERATIONAL PROGRAMME OF REGIONAL DEVELOPMENT Development of regional economic environment Development of settlement infrastructure Development of the human resources of the regions VI. IMPLEMENTING PROVISIONS MANEGEMENT Community Support Framework (CSF) managing authoroity CSF Management Committee Composition Operation Managerial tasks Provision on data collection and electronic data exchange Annual and final reports on implementation Information and publicity (CSF Communication Action Plan) General provisions on the management of the Operational Programmes (OP) Intermediate Bodies (IB) MONITORING CSF Monitoring Committee Composition Operation The OP Monitoring Committees Composition Operation EVALUATION FINANCIAL MANAGEMENT AND CONTROL Paying Authority Responsibilities Financial flows Control Internal Audit Units Verification of operations (financial control tasks described under Art. 4. of Regulation 438/2001) V

6 4.2.3 Authorities of Bodies performing on-the-spot Checks (Financial control tasks described under Art. 10 of Regulation 438/2001) Declaration at winding-up of Assistance (Financial control tasks described under Art 15. of regulation 438/2001) External Audit COMPLIANCE WITH COMMUNITY POLICIES Public procurement Equal Opportunities Sustainable Development Competition policy De Minimis Block Exemptions Guidelines and Frameworks Large Investment Projects Monitoring of State Aids APPEDIX 1: FLOW OF FUNDS AND RELATED DOCUMENTS: DECENTRALISED FINANCIAL FLOWS MEASURE LEVEL PRO-RATA FINANCING APPENDIX APPENDIX: PARTNERSHIP PREPARATION OF THE CONSULTATION ON THE NATIONAL DEVELOPMENT PLAN Objective and Principles of the Consultation Process Co-ordination and Scenario of Consultation Process CONSULTATION ON THE NATIONAL DEVLOPMENT PLAN Preliminary consultation Broad consultation The Partner organisations Methodology and Tools of Consultation Events Results of Consultation on the National Development Plan Distribution of Responding Partners Grouping of Partners Opinion Third phase of consultation CONSLUTATION ON THE OPERATIONAL PROGRAMMES Consultation on the Human Resources Development Operational Programme Consultation on Agricultural and Rural Development Operational Programme Consultation on the Economic Competitiveness Operational Programme Consultation on Environmental Protection and Infrastructure Operational Programme Consultation of Regional Operational Programme APPENDIX APPENDIX APPENDIX VI

7 CHAPTER 0 CONDITIONS FOR THE ESTABLISHMENT OF THE DEVELOPMENT PLAN 0.1 GENERAL Hungary will join the European Union on 1 May 2004 and subsequently will become eligible for support from the EU Structural Funds and Cohesion Fund. The primary objective of these funds to help reduce the development disparities between Member States and regions in order to strengthen economic and social cohesion. Pursuant to 1260/1999 EC Council Regulation on the general rules of Structural Funds in order to be able to use support from the funds Member States falling under the scope of objective 1 and having underdeveloped regions 1 must elaborate and submit to the European Commission their development objectives and priorities in the framework of a National Development Plan (NDP). Therefore the National Development Plan is a national strategic document and the Government of the Republic of Hungary is responsible for its preparation. This document will constitute the basis for the discussions with the Commission, as a result of which the Community Support Framework (CSF), representing the legal framework of support, is completed. The Community Support Framework contains the financial commitments of the EU and the Hungarian party concerning the amounts they will spend on individual jointly financed development areas between 2004 and Planning Process The elaboration of the Hungarian NDP began in February Until the change of government in May 2002 the Situation Analysis Chapter of the NDP was completed. With this the plan was in 18 months delay compared to the original time schedule. Despite this delay on 30 July 2002, when the No.21. Regional Policy accession chapter was closed, the new government entering into office confirmed the obligation undertaken by its predecessor to approve the National Development Plan by the end of In the summer of 2002 the Situation Analysis, which had been written in the first half of 2001, was revised mainly relying on the comments from the European Commission. Parallel with that the elaboration of the NDP Strategy also began. The Government accepted its first version submitted in September and made it available for discussions in the society. In the middle of October the Government approved the first draft of the Operational Programmes (OP) and social consultations began with regard to the OP-s. The Strategy and 1 Where the per capita GDP figure is below 75% of the Community average. 7

8 the OP-s were revised on the basis of such consultations and the informal comments sent by the Brussels Commission. In the middle of December 2002 the Government approved the second draft of the entire NDP document and Operational Programmes with the condition that the NDP had to be submitted to the European Commission by the end of March 2003 following the integration of the results of discussions with competent members of the Commission and the first three activities of the ex-ante evaluation. With regard to the Operational Programmes, as a result of the discussions with competent members of the Commission held in March 2003 the Government agreed to submit those to the Commission after the integration of the results of the first phase of ex-ante evaluation by the end of April. Before the Government approval both the NDP and OP-s were discussed in partnership fora at national level (National Interest Conciliation Council, National Regional Development Council, National Environmental Protection Council), and by regional partners. After the submission of the NDP and OP-s their ex-ante evaluation will take place parallel with the discussions with the Commission. In accordance with the undertaken obligation, the Programme Complements will be submitted to the European Commission at the end of September NDP Framework The National Development Plan has been elaborated taking into account Council Regulation /EC/ No 1260/1999 laying down general provisions on the Structural Funds, as well as the Vademecum regulating plans and programming documents related to the Structural Funds. The Plan is in line with the programming guidelines of the European Commission for the period (The Structural Funds and their co-ordination with the Cohesion Fund. Guidelines for programmes in the period ), which provide guidance for development policies that promote best improvement of economic competitiveness and increase of employment. In addition, it also takes into account the relevant community and national policies and strategies. In addition to all this, the National Development Plan also relied on Hungary s Medium-Term Economic Programme, which is a document for the period involving longer impacts. This document outlines the macro-economic framework and economic policy in which the National Development Plan has its effects and of which it is one of the implementation instruments. The objective of the medium-term economic policy is modernisation, realignment with European standards, which is reflected in stronger competitiveness, striving for financial and price stability and effective cohesion between the economy and society. The Hungarian National Development Plan relies on the resources of all Structural Funds. Consequently, its objectives and priorities must be in line with the Regulations of the European Parliament and Council governing the Structural Funds, i.e. in respect of the European Regional Development Fund (ERDF) with Regulation /EC/ No 1783/1999, in respect of the European Social Fund (ESF) with Regulation /EC/ No 1784/1999), in respect of the European Agricultural Guidance and Guarantee Fund (EAGGF) with Regulation /EC/ No 8

9 1257/1999, and in respect of the Financial Instrument for Fisheries Guidance (FIFG) with Regulation /EC/ No 1263/1999. The interventions financed by the Structural Funds are closely connected with the measures financed from the Cohesion Fund at the same time. The development objectives of the Cohesion Fund are reflected in the National Development Plan and are in line with Council Regulations /EC/ No 1264/1999 and 1265/1999 on the Cohesion Fund Components of the National Development Plan The Situation Analysis of the Development Plan describes the conditions of the Hungarian economy and society, points out the key issues and examines the causes of problems. The SWOT analysis highlights Hungary s strengths and weaknesses, opportunities and threats. The long-term objective of the Hungarian National Development Plan, i.e. improvement of the quality of life and its general objective for the given period, i.e. reduction of the significant lag in the per capita income compared to the EU average are defined on the basis of the analysis. There are three specific objectives s supporting this main objective: more competitive economy, improved use of human resources and promotion of a better quality environment and regional development. The National Development Plan intends to achieve the specific goals through four development priorities: improving the competitiveness of productive sector, increasing employment and the development of human resources, providing better infrastructure and cleaner environment, strengthening regional and local potential. These are supplemented with the Technical Assistance priority assisting the implementation of CSF. The measures defined in order to achieve the above goals are implemented in the framework of 5 Operational Programmes. It is necessary for implementing the objectives of the NDP that the individual development projects of the OP-s should supplement each other and that they are implemented in an integrated fashion, using the synergy effects. This way we can prevent the fragmentation of development and a considerable effect may be achieved in the target area to be supported. The Economic Competitiveness Operational Programme (ECOP) intends to improve the general competitiveness of the economy by supporting investments aimed at modernisation in the manufacturing sector, and will increase social cohesion and employment through technical modernisation of small and medium-sized enterprises and support to their innovation networking activities, as well as passing on up-to-date management skills. It will promote economic innovation by supporting competitive research in the Hungarian R+D sector financed publicly and privately, as well as strengthening relations between the R+D sector and the economy. Another objective of the Operational Programme is to support the development of an electronic economy concerning infrastructure and digital content, as well as electronic administration. The objective of the Human Resource Development Operational Programme (HRDOP) is to increase the rate of employment and improve the competitiveness of the workforce by providing qualifications in line with the demand of the labour market and promoting social 9

10 integration. The priorities of the OP include support to active labour market policies, development of training and education in the framework of the life-long learning policy, improvement of adjusting capabilities and entrepreneurial skills, as well as development of health, educational and social infrastructure related to human resource development. In line with the development financed from the Cohesion Fund, the Environmental Protection and Infrastructure Operational Programme (EPIOP) has set an objective to improve the environmental conditions of the country by establishing environmental infrastructure, increasing environmental safety, and investing into nature conservation. It also aims at investing into the improvement of transport infrastructure by building motorways and bypasses around large cities. As its title also indicates, the Agricultural and Rural Development Operational Programme (ARDOP) has identified the objectives of modernisation of, and more efficient, agricultural production by developing production technologies and processing of products (especially food processing). The other aspect of the programme includes realignment of rural areas and finding alternative sources of income for the rural population, development of rural infrastructure and services, protection of rural cultural heritage. Part of the rural development measures will be financed from the national budget. The Regional Development Operational Programme (RDOP) aims at the development of economically and socially underdeveloped areas and parts of settlements within regions. The Operational Programme intends to promote this development by improving the economic environment, supporting educational infrastructure that assist tourism and economic development, developing regional infrastructure, rehabilitating settlements and improving their environment management activities, increasing human resources and the knowledge base of regions and modernising public administration. 10

11 0.2 PARTNERSHIP CONSULTATION Principles of partnership Partnership is a principle enshrined in the EC Regulations for the Structural Funds. The enforcement of the principle of partnership extends also to the preparation, financing, monitoring and evaluation of community grants. The principle of partnership includes as well the co-operation between the European Commission and the Hungarian Government, the Hungarian central and regional units of public administration, and the co-operation between administration and social, economic, non-governmental, etc. partner organisations. This document focuses attention on the latter process in the course of the preparation of the Hungarian National Development Plan. In the meantime, the process of consultation plays an important role also in information activity and publicity relating to Structural Funds. For social partners, who are at the same time potential beneficiaries and recipients of subsidies, participation in preparing the NDP is the first phase of preparation for receiving Structural Funds Partnership Consultation The Office for National Development Plan and EU Support (hereinafter referred to as the Office) involved, together with Ministries co-ordinating Operational Programmes and regional development institution social partners, economic, professional, regional non-governmental, minority and woman organisations and also local governments associate in the process of consultation. In the course of consultation the scope of social partners, trade unions and employer s associations, professional organisations and economic lobbies traditionally participating in community consultation of interests at sectoral and macro level, were directly contacted. In the process the national and regional, the economic, social, non-governmental, minority and woman organisations all played a key role. Due to the high number of potential partners, more than three thousand settlements and local county governments in Hungary were directly contacted through their associations. Organisations working on a national level, registered on the official lobby list of the Parliament, recommended by professional and sectoral organisations and representing non-governmental and horizontal interests, respectively also expressed an opinion on the strategy. For the purpose of documenting the consultation process and maintaining effective contacts, the Office has established a partner database that is suitable for recording data on partners and partnership events and also for processing the substance of partnership, i.e. partners opinion. 11

12 The consultation on NDP strategy is closely linked to a wide-ranging general information campaign to introduce the NDP and the potential EU Funds. For this purpose the Office has entered into co-operation agreements with different institutions. By signing up to these agreements the Parties agreed to co-operate in the preparation of the NDP, in the coordination of wide-ranged information activity connected to social consultation and, in the long term, in the process of implementation and evaluation. The other form of consultation was personal contact within the framework of which the Office has contacted directly more than 600 partner organisations. More than 350 responses were received from these organisations. Three quarters of active partners is non-governmental, professional and budgetary entity expressed an opinion on the strategy in nearly equal proportion. The Office also organised own events and arranged for its staff to be able to participate in the conferences and seminars organised by social partners. The representatives of the Office and those of the Ministries responsible for OPs introduced the strategy, and operational programmes of the NDP at more than 100 events across the country. At the national level key forum on the macro level also discussed the National Development Plan: the National Council for Interest Reconciliation, the National Regional Development Council, the National Environment Protection Council and Regional Development Councils. In addition to the above, full text and background documents of the NDP were made available on line ( where comments on the strategy were invited through thematic interactive forum. Consultations on the National Development Plan were divided in three phases. Situation analysis and strategy were discussed during the period of October and November 2002, Operational Programmes were subject to public debate in October November 2002, and the debate on the final form of the whole documenting were held from December 2002 to March Consultation, especially on the participation of partners in the monitoring committees, on the finalisation of programming complement documents, and on issues about calling for application, will also continue following to the closure of planning Brief summary of Partners Opinions Employers primarily stressed the importance of SME sector and powerfully highlighted the role of SMEs in economic development. They urged measures to be included that provided venture capital and more favourable taxation conditions for R+D. The employers consider necessary to involve private financing in public services (Public Private Partnership). The comments by trade unions focused on the need for the modernisation of education and health care and the integration of regions into the Hungarian administrative system. Trade unions regarded development of the public sphere to be an absolute necessity and also that the role of social partners in Regional Development Councils will have to be re-established. Non-governmental organisations (NGO) felt that the role of the non-governmental sphere in the decision-making processes should be regarded as important. to improve NGO inputs further development of the non-governmental infrastructure networks would be necessary. 12

13 They also highlighted the importance of promoting environmental awareness, the necessity to improve equal opportunities for disadvantaged groups, including equal rights for men and women, as well as social integration of people with special needs. Regional and local partners supported the strategy as a whole and were of the opinion that the long-term vision and the knowledge- and innovation oriented development strategy provided a suitable framework for regional development. In addition to numerous comments on methodology of planning, the most concrete proposals were expressed on the topic of regional development. They emphasised the importance of building up a decentralised regional institutional system and the modernisation of the education system. They also thought it is important to encourage regional innovation, to support enterprise zones and to especially support regional environmental protection, transport infrastructure and regional economic development. Experts analysed the above mentioned opinions in the course of the planning, and built them into the final version of NDP in case that these opinions were in line with general regulations on EU Structural Funds. Thus, the final version of the document reflects both the opinion of the Hungarian Government and the different social and economic groups Conclusion During nearly two months of consultation our partners have made almost 3,000 complex, substantial and important comments often of strategic significance. Interest and active participation on an unprecedented level characterised the consultation on the NDP. The Office made contact with several hundred organisations and through them involved several thousand potential partners. This proves a truly effective consultation and resulted in better governmental work, and administration. It has been recognised that wide and active dialogue assist strategic planning and bring practical ideas, decisions and ways to implement new policies. The comments frequently brought wider-scaled issues to the surface than those contained in the frames of the original EU document. The Hungarian Government has reviewed the proposals and comments that were raised in the debate but some issues could not be included in the NDP as they have separated or wider, socio-economic development affecting areas such as housing policy, which fall outside the parameters of the Structural Funds. Therefore, the Government intends to start a much wider and comprehensive development plan and the partners will be given a chance to actively participate in that process similarly to that on the NDP. Proposals not included in the NDP will be considered when the Comprehensive Development Plan (CDP) is prepared during CDP therefore complements developments outlined in the NDP to be completed by , and also creates the institutional and regulatory framework guaranteeing the effective implementation of developments set forth there. Similarly the preparation of the NDP is the first phase and the beginning of a process. Dialogue on the merits of major national strategic issues and the necessary developments will continue with the participation of partners. 13

14 (The statements of the national level partnership fora on the NDP can be found in Appendix 2-4.) 14

15 0.3 THE EX ANTE EVALUATION Introduction The ex ante evaluation of the National Development Plan (NDP) was requested by the Office of the National Development Plan and EU Support of Hungary. The terms of reference for the evaluation are as follows: Assessing the rationale of the development strategy underpinning the NDP and the proposed allocation of resources Assessing the internal coherence and complementarity of the NDP Commenting on the degree of consistency between Community and National policies, in particular in the areas of equal opportunity, the environment and employment Reviewing the quantification of objectives in the NDP and assessing the NDP s likely impact on socio-economic situation, employment and the labour market taking into account the European Employment Strategy, the environment and equality of opportunities Commenting on the adequacy of the proposed implementation, delivery and monitoring (including proposed indicators) arrangements The terms of reference for this work are rather broad requirements and are set out in the terms of reference and in relevant Working Papers of EC. Evaluation depends on the specific circumstances involved, and the point in the programme cycle at which the evaluation occurs. Hungary is challenged by three aspects: To establish a National development strategy with long-term development objectives and strategy as well as shorter-term objectives and operational interventions for the period 2004 to The evaluation also has to comment on the Operational Programmes and Cohesion Fund Strategy. To build up the institutional capacities to manage the Structural Funds and Cohesion Funds and within the NDP embraces the complex coordination necessary to ensure the operational programmes deliver the programme effectively To prepare for an extremely short implementation period These demanding tasks have been and are currently being undertaken, based on the concentrated considerable efforts on the parts of the Hungarian administration. Given these challenges it is understandable that the evaluation work has been a dynamic preparation process and has reflected the continual evolvment of the NDP. Thus our approach could not be limited to a mere consideration of the document itself but is strongly oriented towards a dialogue with two key partners, i.e. the Hungarian Office for the National Development Plan and the European Commission, in particular DG Regio. 15

16 The Evaluation team had been contracted by the end of January During February 2003 the situation analysis, SWOT and strategy of the NDP has been revisited by the team. A series of workshops were held in the ONDP, including representatives of the relevant line ministries and Pre-Accession Advisors. The key objective was to add the evaluators perspective and thus contribute to the finalisation process of the plan. The ex ante evaluation team has contributed one section (Chapter 3.3) to the NDP. This section summarises the main findings on the coherence and relevance of the strategy. The complete report of the ex ante evaluation will form an annex to the NDP Timing The ex-ante evaluation was scheduled in two stages. The main parts of the first stage of the ex ante have been completed with the exception of the analysis of previous evaluation results. The second stage of the evaluation was started by the end of March The table below outlines the main steps included in each of the stages. Stage Steps Comment First Stage Analysis of previous evaluation results Will be included in the full version as an annex to the NDP Analysis of strengths, weaknesses and potential Two workshops were held Assessment of the rationale for the strategy and its overall consistency See chapter 3.3 Second Stage Will be included in the full version as an annex to the NDP Quantification of Objectives Evaluation of the expected impacts and justification of the policy mix Quality of the implementation and monitoring mechanism Employment strategy and equal opportunities Conclusion Starting from the findings set out in Chapter 3.3 the second stage of the evaluation will be carried out in the coming months. It was agreed that given the tight time frame the work might run partly in parallel with early phases of the negotiation procedures. In particular the section concerning the quantification of objectives depends also on the finalisation of the Operational Programmes which is expected to happen in the short term. 16

17 At the end of this interactive process, the ex-ante evaluation must provide a key element in the understanding of the strategy and the allocation of financial resources (which will be the subject of negotiations between the Government of Hungary and the European Commission), stating clearly the rationale and the scope of the choices made. The evaluation is, therefore, an integral part of the NDP even if, for reasons of transparency, the output of the Evaluation Team s work will be a separate consolidated document. 17

18 I. SITUATION ANALYSIS 1 SOCIO-ECONOMIC SITUATION 1.1 THE GEOGRAPHY OF THE COUNTRY Hungary is a moderately developed country in Central-Europe. The annual GDP per capita calculated on the basis of purchasing-power parity was in 2000, i.e. 49,7% of the EU average. The territory of the country is 93 thousand km 2, i.e. about 1% of the area of Europe. In accordance with the Territorial Statistical System of the EU, Hungary is divided into 7 NUTS 2 level regions - each of them falling under the scope of Objective 1. These planningstatistical regions do not perform administrative functions. The second tier is made up of 19 NUTS 3 level regions and Budapest. These form the country s administrative system. Below these levels 150 NUTS 4 level sub-regions and 3135 settlements define the NUTS 5 level. In total there are 252 cities and towns and 2,883 villages. Hungary shares borders with seven neighbouring countries (Austria, an EU Member State, Slovenia, Slovakia and Romania, i.e. three candidate countries), the Ukraine, Yugoslavia and Croatia. The borders are to 2,242 km in total. Due to its central location it has become a transport hub. Its road, railway, inland navigation and air transport systems, air traffic management and telecommunications constitute an important part of the European networks. Its geographical location and its advantageous conditions make Hungary (and its capital, Budapest) a strong candidate to become a regional financial-economic centre in Southern- Eastern and Central-Eastern-Europe in the near future, and to function as a bridge between West and East in the flow of resources. 18

19 1.2 DEMOGRAPHIC SITUATION Key issues: Adverse changes in age composition strongly affect rural areas Internal migration mainly involves population movement and it does not counterbalance regional labour market problems Population density The population of the country was 10.2 million at the beginning of Population density is 110 inhabitants/km 2, slightly lower than the EU average. At a regional level, excluding Central-Hungary, it is relatively balanced, so in general one cannot expect large labour movements due to population pressure % of the population live in the capital, a further 47% in other cities and 35.6% in villages. Around one-fifth of the village population live in small villages of less than 1,000 inhabitants Changing age composition The age composition of the country follows the EU trends. Nevertheless, both the ratio of those under 15 and those over 64 is slightly below the EU average (see table 1.1). Table 1.1 The age-composition of the population in 2001 Hungary EU-15 Under 15 16,6 % 17,2 % Between ,2 % 66,4 % Over 64 15,2 % 16,4 % Source: Central Statistical Office (KSH), EUROSTAT Labour Force Survey For the last twenty years the population of Hungary has decreased by 500,000. The main reasons for the decline includes the low and decreasing birth rate and the high mortality-rate. Life expectancy at birth is low compared to Europe primarily due to the strikingly high death rate among the active male population. This situation puts larger and larger pressure on the health care system and on the generations who work. 19

20 Table 1.2 Major demographic indicators in 2001 Hungary EU Birth rate ( ) Mortality-rate ( ) Life expectancy at birth, male Life expectancy at birth, female Source: Central Statistical Office (KSH) The number of births is lower than average in the capital, major cities and the more developed Central and Western Transdanubian parts of the regions. The territorial differences in mortality correlate with the regional socio-economic inequalities, and they also correlate with the size of the settlements and the level of development of their healthcare institutions. The mortality-rate is the highest in North-Hungary and in the small settlements. According to demographic trends the natural decrease of population, which started in 1980, will continue in subsequent decades, projecting the decrease of population by 30,000-40,000 per annum. Table 1.3 Forecast of the age-composition of population Population (thousand people) 10, , , , years of age (%) years of age (%) Over 64 years of age (%) Source: Central Statistical Office (KSH) The major demographic challenges beside the decrease in the population and low life expectancy are the ageing population and changes in the country s age-composition. Most of EU member states as well as Hungary is facing the problem of an ageing population. The younger age groups entering the labour market decrease and in the meantime the ratio in the age-group of is significantly increasing. Simultaneously to the ageing of the active population the ratio of those over 64 compared to the working population is also slowly but steadily increasing. This percentage of the dependent elderly population was 22.2% in 2001 against the 24% EU average, and will not increase significantly until However, the ageing of the population will steeply accelerate after There will be a fall in the number of the population of working age, and the rate of the elderly dependent population could even reach 31% by As a result of population ageing, not only the costs of pensions but also those of healthcare will increase rapidly. This trend places pressure on the healthcare system and social services. 20