Structural Reform In Hungary

Abstract:
In this article we see that as part of the structural reform in Hungary, the government adopted many measures. All areas of the economy were attended to. Simultaneously, many Acts and laws were also passed either to strengthen the existing norms or further working upon it.
Ranging from foreign direct investment or FDI, trade barriers, liberalization, market reforms, privatization, tax system in the country, all have been taken into consideration for giving rise to an efficient economy in the country. The main aim of the government in Hungary is to make the socio economic make up of the country stronger.

Modernization of the economy was also on the cards for the Hungarian government. Gearing up to be at par with the European Union was a big challenge for the government. The different areas, which needed attention were recognized and accordingly various structural reforms were undertaken in Hungary.

Structural reforms in Hungary are characterized by:
Restructuring foreign trade
Liberalization
Deregulation of domestic market
Privatization
Opening up of the markets

Administrative reform:
As part of structural reform in Hungary, the government in the year 2003, propounded the Simplified Enterprise Tax with the aim of reducing the tax burdens as well as administrative burdens pertaining to the small enterprises.
Barriers for investment:
The Incoming foreign direct investment or FDI had kept the Hungarian economy going till the year 2000. The year 2001 also witnessed a considerable amount of FDI in to the country. However, due to certain changes creeping in the structure, marked changes were noticed in the economy.

There were many reasons, which contributed to the downfall of the economy. Some feel that the failure to appeal to foreign investors was one of the main reasons for the backslide. To facilitate foreign investment, the country introduced the “SMART Hungary” program.
Improving the tax system:
Competitiveness Council set up in the year 2003 embarked upon the path of improving the competitive nature of Hungary. Under this system, the tax system prevailing in the country was revamped and its efficiency enhanced.

The electricity market in Hungary was revamped as part of the Structural reform in Hungary. To the effect, the Electricity Act was introduced in the year 2001 to work upon this sector of the economy.

The Act On Natural Gas Supply was embraced by the Hungarian government. This step was taken in order to make the natural gas supply competitive.

It was observed in the year 1997 to 1999, that the country’s state aid expenses pertaining to the tourism industry, coal mining, manufacturing industry, fisheries and the transport industry was approximately 1.18 percent of the gross domestic product or the GDP.

During the period 1999 to 2001, the percentage fell to 0.92 percent. As a structural reform in Hungary, the manufacturing sector in the country has been rejuvenated.
Other areas of reform included changes in:
Corporate income tax
Investment tax allowance
Excise taxation
Ecological tax
VAT or value added tax
Development tax allowance

Other areas of reform include the Public Procurement Act. The Hungarian government embraced the Szechenyi Enterprise Development Programme for the period 2003 to 2006. This program was launched to bring about changes in the policies relating to market reforms.
Important events in structural reform in Hungary:
Adjustment made in the Micro Credit Programme
Introduction of the Szechenyi Card
Financing of Mini Credits
Introduction of the Europa Technological Development Investment Credit Programme
Introduction of the Regional Infrastructure And Enterprise Development Credit Programme.
Introduction of the NDP or National Development Plan
Implementation of Economic Competitiveness Operational Programme

Structural reform in Hungary also included changes in various segments like the airways, railways, energy sector, roadways, postal services, research and development.

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Last Updated on : 26th June 2013

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