We are meeting today a delegation from the Economics Committee of the Hungarian Parliament. Unfortunately, the Chairman of the committee, Mr. Laszlo Puch, was due to be with us but has fallen ill. We pass on our best wishes to him and welcome Mr. János Latorcai and Mr. György Podolák, who are members of the committee. They are joined by Ms Edit Beczkay, clerk to the committee, and Mr. Nándor Papp, interpreter. I also welcome the Hungarian ambassador. On behalf of the Joint Committee on Transport, I extend a warm welcome the members of the delegation. We are glad to have them with us. I suggest that the members of the delegation give us some idea of the work they do on the Economics Committee and we can then engage in a general discussion.
Visit of Hungarian Delegation.
Mr. György Podolák
I thank the Chairman for the opportunity to visit the Irish Parliament and meet members of the committee in person. János Latorcai and I are members — and both vice-presidents — of the Economics Committee of the Hungarian Parliament. Our programme for today is to obtain as much information as possible regarding how the committee here does its professional work, particularly in those areas of mutual interest to both sides. We take a deep interest in your experience because we have been a member state of the European Union for almost six months. We now have all the pleasures and difficulties that go with being a member state. We have embarked on a path of trying to bring some dynamism to the Hungarian economy and we are doing our utmost to achieve that end. We want our society to be knowledge based in nature and one of the best countries from which to obtain experience in that regard is Ireland. That is the purpose of our visit and I am sure we are going to learn a great deal from you. I thank the Chairman.
The delegation may already have been given the terms of reference of our committee. Our main purpose is to deal with legislation which may emanate from the Department of Transport and with the Estimates for the public services as far as the Department is concerned. This is a joint committee and is comprised of Members from the Seanad and the Dáil. At various times, the committee also examines topical subjects which may be of interest to the public and then reports back to the groups involved and to the relevant Department and Minister.
The committee has compiled a number of reports, the most recent of which relates to the Dublin metro system to link the city centre with the airport and, for Deputy Glennon's benefit, Swords. We understand that there is quite an efficient metro system, as well as a tram system, in Budapest. We may perhaps be able to learn something from our guests about that matter and, in turn, they may hopefully learn something from us.
I welcome Mr. Podolák to a very wet and windy Ireland. I hope our guests enjoy their stay and I look forward to an interesting discussion on economic and transport matters. This committee deals, as its name suggests, with transport issues. However, transport is considered to be one of the major economic ministries in Ireland because it is one of the highest spending. The latter is due to our large infrastructure development programme.
We would be interested in hearing how Hungary is coping as a new member state of the European Union. Although Ireland has been a member state since 1973, we sometimes feel as if we are relatively new members. In that context, we are still trying to address our transport infrastructure deficit.
I have only one question. How does Hungary propose to deal with the difficulties imposed on it as a result of the Stability and Growth Pact in terms of developing its infrastructure? In other words, will Hungary find it difficult to borrow large amounts of money to develop infrastructure because of the existence of the pact?
Mr. Podolák
To answer the first question regarding how we feel as a new member country, I must say that we are not in a euphoric state of mind. It was a great experience when we had all the celebrations and festivities on 1 May but these are already behind us. We had a different feeling as Members of the Hungarian Parliament because we were aware of the great amount of work necessary to ensure that Hungarian legislation is in conformity with EU legislation. During the past two years we were obliged to rewrite and restructure more than 100 Acts. All in all, however, it is a good feeling to belong to this fantastic team.
Every Hungarian is happy and rejoices in the fact that we have returned to Europe, where we belong and of which we have been a part for the past 1,000 years. Now, however, our membership of Europe is legally and officially acknowledged and we are glad to be back. We are aware of the challenges and expectations that have been defined and communicated to us. We know that this is a competition and we would not like to be on the losing side. We are not in a transcendent state of mind but it is a good feeling to belong to this community of nations.
I will now deal with the Deputy's second group of questions. The Economics Committee is one of the largest in the Hungarian Parliament. One area in respect of which we are in charge is transport, road-building and related procedures. One of the key issues in Hungary is the development of infrastructure. During the past ten years or so, it has been our experience that locations which have been reached by roads and road transportation have enjoyed tremendous development. Unexplored areas became linked to the remainder of the Hungarian national economy. Such a development had not previously been considered.
One of the crucial issues for Hungarian economic policy is the extent to which we can be involved in further upgrading and developing the entire network of roads in the country. The total territory of Hungary is 93,000 sq. km. From an infrastructure point of view, the territory is not developed in the same way. The level of the infrastructure development of a particular region determines the industrial development that will take place there. As a result of its geographical location, Hungary will be obliged to play a much more important role in terms of transit transport and transit traffic. It is not a revolutionary idea that communication and transport from countries such as Russia, the Ukraine and Turkey must somehow be channelled into the rest of Europe. As far as that is concerned, Hungary is located at a strategically important crossroads.
Hungary, however, is not as lucky as Ireland. We heard this morning that, in terms of the construction of road infrastructure, Ireland received something of the order of 75% or 85% of its funding from the EU. We have not been that lucky. We must ensure that we can pay for such developments in our country out of our own resources and our own budget. We have taken a special step in that regard. Some people say that this was a good way to proceed, while others do not believe that to be the case. What we want to do is use public private partnerships, PPPs, to build new roads. This is already happening in practice. However, the political discussions and disputes are not yet over.
I welcome Mr. Podolák and the rest of the delegation. I hope our guests enjoy their stay and that they will benefit from it.
It is clear that Hungary has a major infrastructure development programme. I have two questions, the first of which relates to public private partnerships. What has been the experience in Hungary as regards such partnerships? Are taxpayers obliged to pay for everything or is there a tolling system in place to pay for part of the private investment? Have any projects been completed under the public private partnership process? In the past, were roads, sewerage systems, etc., put in place, as was the case in Ireland, by means of a conventional system involving local authorities?
I join colleagues in welcoming the delegation from Hungary. One of the great things about the expansion of the European Union is that we are in a position to become more familiar with other cultures and with the new nations of Europe. Many Irish people's previous knowledge of Hungary would have been limited to an awareness of the achievements of Ferenc Puskas. The expansion of the European Union obliges and challenges us to learn more about each other in order that we can work together in the future.
I have two questions, the first of which relates to air transport. Does Hungary have a national airline or an indigenous local airline or is it reliant on non-national airlines for flights in and out of the country? My second question is not strictly a matter for either of our committees but I would be interested in obtaining an answer. In the context of Hungary now providing a portion of the eastern border of the European Union, are any problems with immigration anticipated?
I also welcome Mr. Podolák and the rest of the delegation. I hope they enjoy their stay. We have plenty of good Guinness and Irish coffees in Dublin if our guests wish to partake.
As regards the development of infrastructure, particularly as it relates to motorways and rail, what form of consultation takes place in Hungary in respect of such projects? Is compensation paid to property owners if there is a need for roads or rail lines to traverse their lands or properties?
Mr. Podolák
I would like to share the responsibility for answering some of the questions with my fellow Member of the Hungarian Parliament. I suppose he will provide a more colourful picture because I represent the Government coalition, while he represents the Opposition.
I will begin by stating that there is a basic difference between the two parties concerning the involvement of private money in building the roads. I will outline the position of the Government party concerning the construction of roads and I will then invite my colleague to outline that of the Opposition. No Government would consider the involvement of private capital if it had enough money in its budget. As with a family, if one wants to buy a house or a car, why should one ask for credit or a loan from a bank if one has enough cash?
We need to build roads immediately and that is why the business transaction must take place now. In that context, we must find a suitable arrangement and the nature of this is that in 25 years the right of ownership will be returned to the state. This means that if we take the current value as a point of departure, it will cost us something of the order of 20% more in 20 or 25 years. The question is that if we build the roads now, how much profit will be realised by the decision to proceed as opposed to postponing construction and commencing it later? It is both necessary and inevitable to take this decision now. The question of compensation for those whose land is acquired for road construction has been raised. This problem did not arise until the change of regime in 1990. Prior to that, the situation was simple: the state decided where roads would be built and confiscated any private property it required to do so.
Fair enough.
Mr. Podolák
Technical and legal arrangements sometimes take much longer than the actual road building. The level of democracy required when handling the situation demands a lot of effort on the part of both local and central government. Before going into the details, I wish to ask my colleague, Mr. Latorcai, to contribute.
Mr János Latorcai
Let me start with a cliché: exercising democracy is a time consuming practice and not very easy——
We know.
Mr. Latorcai
——but afterwards we feel much better. On a professional note, as far as PPPs are concerned, we do not have too much experience of them as yet, although we do have experience in the field of building what we call concession roads. That is why there is a difference of view between the opposition and government parties. During the past 15 years we have built, maintained and operated roads under concession arrangements, which practice has raised a number of issues.
Part of the arrangement was that a guarantee of payment was necessary in order to operate the road on a concessionary basis as a supplement to tolls. To put it bluntly, as regards the owner or whoever operated a particular road on this basis, the interest of the company was to make sure the least number of cars used the road. This was because it was compensated by the state for whatever losses were incurred. Therefore, if fewer cars used the road, lower maintenance and reconstruction costs were incurred. That is why, in order to avoid such difficulties in the coming 25 or 30 years, we think it would be better if roads were state-owned or subsidised, perhaps with the involvement of private investors.
While there may be a theoretical dispute between both parties, as a member of the opposition party, I have to acknowledge the limits imposed by the government's budgetary constraints. However, if one uses the road network, one must pay for it. This applies to every single road. We have high speed highways for which special stickers are issued, entitling drivers to use these roads. The cost is €120 per year. Car owners also have to pay a car weight tax. The original idea of the legislation was to ensure car owners paid for using the road network but it was called a weight tax. Later it turned out to be a source of additional revenue or local tax for local authorities.
At what rate is the tax pegged?
Mr. Latorcai
For an average car, it is something like €40 to €50 per year.
I take it there are also taxes on fuel.
Mr. Latorcai
The larger amount represents tax.
Excise.
Mr. Podolák
One third is the actual cost of fuel while two thirds is tax.
Is there any public private partnership in operation?
Mr. Podolák
There are two establishments that were created, built and operated under the PPP arrangement. One is a sports hall which was built with the French. The other which will be completed shortly will be called the Palace of Culture. The third project involes a highway, the construction of which we have just started. The dispute is ongoing but we are continuing with the project.
I still have two other questions to answer. We fully accept the criticism that apart from Puskás, there is very little else that people in Ireland know about Hungary.
It was not intended as a criticism of Hungary; it was more a criticism of us.
Mr. Podolák
I am sure. Looking at his ears, I know the Deputy has been actively involved in sport. I am the chairman of one of the best wrestling clubs.
Deputy Glennon is a former international rugby player.
Mr. Podolák
It has the same effect. I am aware that we still have much to do in that field. In reciprocation, the average Hungarian knows about Irish whiskey and beer, as well as Riverdance, a new image coming from Ireland. It probably means that we still have a lot to do on both sides. We can promise that we will do our utmost in that respect.
As far as air transport is concerned, the Hungarian national airline, Malev, is still state-owned, unfortunately. We took a Malev flight from Budapest to Dublin. There is a daily flight between both capitals. As Malev is a success story in a way, we do not depend on foreign airlines but we would love to have the company privatised. Therefore, applications are most welcome.
We are in a similar position in that we have a State airline, Aer Lingus. However, there is a major debate about its possible privatisation because of its need for funding to update its fleet of aircraft. Given that Malev is also state-owned, how does it intend to update its fleet?
Mr. Podolák
I suppose Malev is suffering from exactly the same disease as the airline of any other small country. It is unable to be competitive because there is no appropriate amount of capital available, which would represent a sensible and reasonable business risk. During the lunch break some of the Deputy's colleagues expressed an interest in that matter. We told them that up to a certain point it was thought the Chinese would privatise the airline but at the last minute they backed out. The philosophy behind purchasing the Hungarian airline was a good one. The idea of the Chinese was to make the Hungarian capital, Budapest, a regional hub. From Budapest there would have been transit connections, both for passenger and cargo traffic, to the rest of Europe. It would have been a very good idea. The problem is that if we cannot privatise the airline in a reasonable way, unfortunately, sooner or later, it will have to be done away with.
As regards the question of migration and the country's eastern borders, let me reflect on one of the fears that I seemed to hear expressed not only from Ireland but also from other EU member states. The question was what would happen after 1 May 2004 when cheap, east European labour would flood the European Union's labour markets. The various pessimistic forecasts did not turn out to be true, however. Interestingly enough, even when there were legal possibilities, quotas and contingencies, Hungarian workers were reluctant to fill those vacancies. I do not think there will be a dynamic movement of Hungarian labour within the foreseeable future, despite the fact that the Germans would like to have access to Hungarian labour.
As far as migration is concerned and Hungary's changed role and position in the EU context, once more the predicted fears turned out to be false. We are surprised to see that never before have we found so few illegal immigrants being hosted in the reception centres, having crossed the Hungarian border illegally. Right now I do not see any grave danger in that area.
Mr. Latorcai
Let me add a few ideas to the interesting questions discussed by my colleague, the vice-president. It is not widely known in the European Union that it will require a tremendous financial contribution from Hungary to comply with all the arrangements under the Schengen agreement. Hungary's eastern frontier is exactly the same length as Poland's, which has a population of 40 million, whereas we have a population of ten million. There are two border sections that require special attention from a strategic viewpoint. One section of our border is directly adjacent to the Balkans — Serbia and Montenegro, in particular. The other is the border with the Ukraine. These two sections pose a higher risk in terms of illegal immigration. It is a major task for the Hungarian authorities to control the border area, including reconnaissance and other special techniques to prevent illegal immigration.
To illustrate how little we know about each other's technical history, if one examines the late 19th and early 20th century brewing equipment displayed in the Guinness museum, a small plaque explains that it was manufactured at the Lange foundry in Budapest.
I join my colleagues in wishing the delegation well. In the south we have a product called Bulmer's cider that rivals Deputy Brady's. I advise the delegation's members to consume a pint or two before they leave for home.
Most of our discussion has been about Hungary's road infrastructure. How does the delegation view the development of rail services? Some years ago we closed down many of our railway lines but if we had a second chance, we would certainly not do so today. I wonder whether the delegation views rail transport as a viable alternative to road infrastructure. What priority would it give to railways?
Mr. Podolák
I do not think there is a single European Union country that would be completely happy with its rail network. The railway companies are loss-making and could not survive without state subsidies. In practice, we must set things in order with the national railway company, which means that we have to cancel its debts and give it a fresh start. Every year we suffer heartache when we have to close down a few branch lines. We are not happy to do so but somehow try to turn a blind eye to it.
I am aware that when we launch projects to build new motorways, it is an expression of our priorities. We tend to shift transport services from rail to road and in Europe everybody is aware of this. We are now trying to harmonise the suburban and intercity railways. To answer the question in brief, we are suffering but I hope we are not completely alone in that respect.
I think the delegation has got a lot of friends. At this stage we have probably asked all the questions we wanted. Are there any specific questions the delegation would like to put to the committee?
Mr. Podolák
We have posed quite a few questions to other committees but there is one question I would like to ask, if I may. I am asking because it is relevant and there is much political debate and controversy about it among the political parties in parliament. I am also aware that it is not really within this committee's competence but since it is an outsider its response will probably be more objective and authentic. It concerns the relationship between the Irish Central Bank and the Government. Is it regulated by legislation? How are monetary decisions made? Is it possible for Government policy to influence the Central Bank's policy on inflation? I am asking these questions in the knowledge that Ireland's currency is the euro.
I think we can answer that question very quickly. The Central Bank is semi-autonomous. Sometimes it criticises Government policy because it may add to inflation or lead to inflationary pressures. On the euro, we see the European Central Bank as our Central Bank now. However, we do maintain a rather tight fiscal policy — a case of "McCreevyism". We thank Mr. Podolák for visiting us and hope he will have learned something from today's meeting. I hope we can forge better relations between our two countries and that we will have a broader knowledge the next time we meet, either in Budapest or Dublin.
Mr. Podolák
We look forward to that. I thank the committee and invite members to let us know when they are ready to visit Budapest.
Mr. Podolák might just be taken up on that offer. If he wishes, we can get a video of today's proceedings and give it to the ambassador.
Mr. Podolák
I thank the Chairman.
The transcript of proceedings of this meeting will be available on the Oireachtas website.
Mr. Podolák
As a memento of our visit to Ireland, I would like to give the Chairman a book on the Hungarian Parliament to bring our country closer to the committee.
I thank Mr. Podolák. If he wishes, we have some explanatory memos on the Houses of the Oireachtas we can give him, although he may have received them already. I thank him for his kindness.
The joint committee adjourned at 3.45 p.m. until 2.30 p.m. on Wednesday, 3 November 2004.