Speech delivered by Mr Viktor Orbán at AmCham Conference

Dátum: 2005-06-14 13:48:00, eredeti URL: http://archiv.fidesz.hu/index.php?Cikk=39572
KCMDB-be feltöltve: 2024-05-04 21:54:50.499965, Feltöltő: fidesz_hu_scraper_v2

Good afternoon, Dear Chairman, Members of the American Chamber of Commerce, Ladies and Gentlemen,

First of all, I would like to thank you for your invitation and providing me the chance to see you again here as previously agreed. I visited you several times as prime minister just one year before the last elections, which I lost. So I do not know, whether it is a good sign to be invited to share our views with you, but I hope the outcome of the next elections will be far more favourable. But anyway, the reason why I am invited is not to speak about party politics, rather, to address more important issues. I know that probably the majority of you would be interested far more in how we elected a good president for Hungary and if there are any questions directed to this issue I am ready to answer, but if you do not mind, I would like to start my thoughts not exactly with that point.

Ladies and Gentlemen,

There has been a lot of talk about a loosening transatlantic relationship and friction between the two sides of the Atlantic. It is therefore legitimate to comment the relationship between Hungary and the United States, and the European Union and the United States. I would like to concentrate particularly on the second point, i.e. the relationship between the US and the European Union, especially because we have some rather surprising developments recently inside the European Union. So I think the relationship between the US and the EU is in better shape now than it was several months ago and I am convinced that both sides agree that without reforming, reshaping and improving the relationship between the United States and the European Union, neither of them can be competitive in the global rivalry. So I think it is a good sign that NATO is involved in the peacekeeping process in Iraq and, under the aegis of North Atlantic Treaty Organisation, various Western European countries contribute to the stabilizing efforts in Iraq.

Ladies and Gentlemen,

You are well aware that Central Europeans and among them Hungarians always felt a special attachment to the United States. Our Chairman has just recalled memories from Hungarian history, from 1989, referring to the Heroes Square and the transition process, but please do not forget somebody who played an even more important role, behind the screen, than the Hungarians. That was the President of the United States, Mr. Bush who visited us and supported the democratic process and the withdrawal of the Soviet troops from Hungarian soil. So we still remember that without the Unites States, Ronald Reagan and President Bush, it would not have been possible to become an independent and free country again. And just recently we got another important psychological or spiritual signal of the United States or the President of the United States: re-evaluation of the Yalta Agreement which closed the chapter of World War II. An Agreement which is still a very important psychological issue for all Hungarians, because you probably do remember that it was the agreement which pushed Hungary to that area of Europe which was to be controlled, politically controlled by the Soviet Union. So the re-evaluation of Yalta and role of the United States played therein was a very important element of the future and good relationship between the United States and Hungary.

Ladies and Gentlemen,

The European Union faces unexpected challenges. We are just a few days after the Constitution having failed in France and in The Netherlands and a few days after the British successfully ran away from the problem. They are the cleverest nation of Europe, there is no doubt about it. So Ladies and Gentlemen, the international community is full of questions on how to continue the so called European project. And I think we all should understand the message that the citizens of Europe sent all of us. I would like to say that I felt the fall of this Constitution as my own personal defeat as well. I was always very much in favour of the Constitution, I am convinced that Constitution would have been very beneficial for Hungarian interests, regardless of the fact that it was far from being perfect - especially because some values were not referred to in the Preamble. The continent's Judeo-Christian roots were neglected, but God has a good sense of humour this explains why the French and France, was the nation and the country where the Constitution failed.

Anyway, going back to the point, the message is very clear and probably can be summed up as following: what the European peoples need now is not a Constitution, but labour. The European nations are tired to deal with constitutional and political issues. Under circumstances when the unemployment rate is extremely high in the majority of the European Union countries, if the EU will not understand that, instead of political issues, we have to concentrate on economic projects, the whole process of European integration may come to a halt. So, the job to all is to understand that we cannot run, we cannot continue our business the way we have done up till now. The worst would be if the leaders of European Union would say that "business is going on". We have to make it clear that the European Union leadership is not an enlightened group of bureaucrats but real democrats and for them, the decision of the public counts. So we cannot say that we will continue unchanged. We have to change and we have to give priority to economic issues, instead of dealing with endless enlargement processes of the European Union.

Now, if you don't mind, I would like to turn your attention to the issue of the Hungarian economy. You are good experts on economic issues not just at the micro- but probably at the macroeconomic level as well, and you know that the secret of having a good macroeconomy is to find the delicate balance between dynamism and stability, meaning the robust GDP growth on one hand and low inflation and balanced budget on the other. This is the secret of a good macroeconomic politics. Those periods are unique when a country shows dynamism and stability at the same time - like the US in 1995, or Hungary between 1999 and 2001.

For right now, the Hungarian economy is in the rare and sad situation of being neither dynamic nor stable. The consensus market estimate for this year's budget deficit is above 7 percent, I think it will be rather 7.5 - althoughh the standards of statistics change day by day now in Hungary, so it is difficult to say what would be the final figure, but I suppose, if we want to use a reliable figure, it will be 7 to 7.5 percent.

At the same time, our country registered the lowest GDP growth rate among the new EU members in 2004 and is expected to be the last this year, as well. In fact, not since 1990 has Hungary's economy produced so dubious results, meaning a lack of dynamism and balance. In addition to this, the government increased significantly the country's foreign debt in just two years, eliminating all achievements of seven-year repayment efforts made by the Hungarian nation. The budget's financing needs have created an enormous current account deficit, which is now at the level of where Mexico was right before the so-called Tequila crisis. Needless to say, this fuels continuous uncertainty about the stability of the Forint.

In this respect, what has just happened in France and The Netherlands is important, because it may have some effect on the perspectives of the Hungarian economy joining the Euro-zone which in turn may have a direct influence on how to finance the huge Hungarian budget deficit.

Ladies and Gentlemen,

Of course, I try to describe some macroeconomic figures, but we all know and our meeting with your board exemplifies equally that on the micro-economic level there are even more difficulties now. To sum it up in one sentence, we could say that the competitiveness of the Hungarian economy has been declining seriously in the recent years. I would like to highlight some issues to make clear how we see the situation.

- The first problem is probably the massive tax burden on the economy. Reversing the previous goverment's efforts, the current policy has put significant extra tax- and tax-like burden on companies. I have made a list of these: tax-increases happened on 34 occasions in Hungary in the last three years, and 4 new taxes were introduced. Please do not forget that we have a liberal government, not a socialist one. That helps us to understand why the Hungarian language is so complicated: so it is the liberal policy what we call socialist.

- The second problem I would like to identify on the macroeconomic level is the unreformed public sector. While there was regime change in Hungarian politics and in several walks of life, regime change did not occur in the public sector. Currently, we roughly have 800 thousand employees on the state's payroll. In my understanding, this is about 20 percent of the Hungarian work force. While the Hungarian GDP grew only by 3 percent last year, wages of public sector employees grew by 10 percent, without any reform of the structure. So we could say that the Hungarian bureaucracy is expensive, slow, and non-efficient.

- The third point I would like to identify is education. Hungary was proud of our nation's intellectual talent. But if you look at the Hungarian education system now, we have some doubts concerning the future. I would not like to speak about higher education at this moment, but what I want to make clear is that it is not the universities which are in the most difficult situation - although we have many problems over there as well. The major field of challenge is vocational training, because there is no relationship between vocational training around the business sector and the one provided by the Hungarian government. So what we have to do probably is adjusting the German system to the Hungarian circumstances, to reform the vocational training system dramatically.

- And finally, one of the major points is the lack of transparency now in the Hungarian economy. You know that if foreign investors are not discouraged by the fact that they do not understand a single word of our language, they soon will be when trying to get things done through the Hungarian bureaucracy. Paper work, obtaining a license, acquiring information in Hungary is a complicated and long process. It is almost impossible for an outsider to find his way around. So it is obvious that we have to change soon this characteristic of the Hungarian public and business life, as well.

- And finally, may I have a comment on FDI. Foreign Direct Investment is very important for this country. You know the size of the country, you know the internal market of this country, you know how difficult it is to build up a market economy after the socialist state-commanded system. So, without a continued inflow of FDI we cannot be successful in the future, either. Several years ago, Hungary was a pioneer on attracting Foreign Direct Investment in Central Europe. But now, this is not the case, we are now the weakest among the so-called Visegrad countries in terms of ability attracting Foreign Direct Investment.

What should be done, Ladies and Gentlemen?

- That would be my final point: how I see the future, and what we could do and what should be done in order to bring back competitiveness to the Hungarian economy. First of all, we are not just speaking about the difficulties. Taking into consideration that there will be elections one year from now, we are preparing ourselves and try to prepare the country for the elections and for the radical change which will be necessary after the elections. In my mind, radical change means first a tax reform, a radical tax reform. It is not anymore a question of intentions: look around in the region, there is a tax race, but Hungary does not attend this race. If we do not attend, we cannot do it. Look what is going on in Romania or Slovakia and it is obvious that if Hungary wants to be competitive in Forint Direct Investment or generating other investments, we need a massive tax reform, a massive reduction of the Hungarian tax level. That could help restoring Hungary's competitiveness. I am speaking not just about a massive tax cut, but a simultaneous simplification of the various type of taxes. At the same time, I have to touch upon a rather sensitive issue: the local governments must be involved in this massive tax reduction. It needs a two-thirds majority - I cannot say constantly at the Parliament, that would be nice, but we need a two-thirds majority and support in Parliament at least for this single issue. I hope that after the next election the Hungarian MPs will be wise enough to unify their efforts and put a two-thirds majority to reform the local government system and, as a consequence of that, to reform the local government taxation system, as well. The tax reduction could be useful if we take into consideration that - by our estimation - in Hungary the so-called grey area is between 16 and 32 percent of the total economy. So that could be a major source for financing a massive tax reduction.

- The second point I consider important is public sector reform. But you cannot reform the public sector without reforming the local governments - especially if you think about the education system, for instance, which in fact currently belongs to the responsibility of the local governments. So if you want to change as we would like, we need a two-thirds majority for this issue, as well.

- The third point what we should do after the next election is to continue the reform of the education system just as I have mentioned. It is obvious that the business community should be involved especially in the field of vocational training.

- Fourth point: I think we should dramatically increase the transparency of the Hungarian tax system and public services. I have some doubts in my mind whether it is possible to make the Hungarian bureaucracy more transparent without involving know-how and knowledge from the business community, i. e. how they did it in the case of their companies. At the meeting prior to this lunch we received promises from the board of AmCham that you are ready to cooperate with us to find the proper ways to integrate the business community in know-how and knowledge into reforming and making the public sector transparent.

- And finally, my point is that we should focus on again the so-called Széchenyi Plan. I know that we have basically a financial crisis in Hungary at the moment, but I also doubt whether it is possible to escape this financial crisis by exclusively concentrating on financial instruments and financial-type decisions. I think it is not possible. So we have to make the Hungarian central budget more rational and, at the same time, we also have to run a growth-oriented economic policy. If we are to get out of this financial trap, we need a new economic policy which is growth-oriented. And I am convinced that a growth-oriented reform is necessary not just in Hungary, but it is important and unavoidable to have one in the whole European Union, as well.

I would like to close my remarks with good news: we have a good chance that within a year it will probably be Central Europe inside the EU which will launch the renewal process of the whole European Union. Please do not forget that in one year, there will probably be a centre-right government in Germany, we hope that the Austrians will able to hold on, there are very good chances for a centre-right government in Poland, the same in the Czech Republic, the Slovakians are right in this respect, and we have some chances in Hungary, as well. So that will create an area inside the European Union which is led by those political forces which are - as the empiria shows - very much business-oriented, parties that understand that radical reforms are necessary for the national interest and for the interest of the European Union, as well. So probably in that one year time Central Europe will be back again and Hungary will back again as one of the most competitive regions in the world, and probably the new engine in the renewal of EU-economy as well.

Thank you very much.