JOINT COMMITTEE ON ENTERPRISE, TRADE AND EMPLOYMENT díospóireacht -
Thursday, 27 Nov 2008

Visit of Hungarian Parliamentary Delegation.

Vice Chairman (Deputy Cyprian Brady)

I welcome the parliamentary delegation from Hungary. I welcome Mr. Pal Fillo, deputy chairman; Mr. Ferenc Kiss and Mr. Sandor Czomba of the committee on employment and labour in the Hungarian Parliament. I also welcome the Hungarian ambassador to Ireland, Mr. Ferenc Jári, and Ms Aniko Szelle, translator.

As we discussed over lunch, Hungary is a country much like Ireland. Although its population is nearly twice the size, nonetheless it seems to be a small European country. As in Ireland, the agriculture and pharmaceutical sectors are important to the economy which faces many of the challenges Ireland faces in the current economic climate. The delegation wishes to discuss this and other relevant topics.

Mr. Pal Fillo

I thank the committee for giving us this delightful opportunity to meet its members. Although we have not been in Dublin for long, we have had the chance to learn that we probably face very similar problems and challenges in the field of employment. Both countries have experienced the impact of the global economic crisis and we do not even know what to expect. We do not know what will happen to jobs; many will probably disappear. Also, the rate of economic growth is expected to slow down, not to mention the increasing social problems facing families.

Earlier this week in parliament we voted on the main figures in the budget for next year. While we approved the budget, the final vote will take place in December. We can see that there will be a rigid fiscal regime. We also expect the rate of growth of the economy to be moderate. Measures to be introduced next year will certainly be unpopular, especially for those who work in the public sector. For example, there will be no wage increase for them next year. They will also not receive their so-called 13th month salary next year. This will contribute to a general saving in public expenditure. Members of the Parliament also levied a tax on ourselves to contribute to the budget. We hope that these measures will be sufficient for us to manage the consequences of the economic downfall, but we are convinced that this is something we can do together with all the other members of the European Union because we belong to a big family and the problems and challenges are the same for all the members of this big family.

Relations between Hungary and Ireland have been very good. We would like to ensure that the excellent co-operation such as in property investments and tourism will prevail in the long run for the benefit of both countries.

Deputy Dara Calleary

On behalf of the Fianna Fáil group, I welcome the delegation to the committee and to Dublin. Mr. Fillo outlined some of the steps the Hungarian Parliament has taken in recent weeks. What is the relationship of Hungary with the IMF at present and how is that impacting on Hungary's day-to-day governance? How long will that relationship continue? What is Hungary's forecasted growth for next year?

Mr. Pal Fillo

Hungary drew $20 billion from the IMF in the form of a stand-by loan. It is a major amount of a stand-by loan of this kind. The availability period for that is 17 months. This was necessary because there have been serious attacks on the Hungarian forint and on some companies that are owned by Hungarians on the international stock exchanges. That is something that we wanted to prevent from happening. A member of my committee, Mr. Ferenc Kiss, may wish to add something to this.

Mr. Ferenc Kiss

As the committee will probably be aware, Hungary does not belong to the euro zone as yet and we had to protect the Hungarian forint and the Hungarian banks. That is why we needed this stand-by loan from the IMF. As its name states, this is a stand-by loan and it is at stand by. The Hungarian Government has worked out such a package which would help small and medium-sized enterprises to keep jobs, to keep their activities on the current level and to prevent further downfalls in the life of SMEs. On that ground, the Hungarian Government has reorganised the allocations and channelled this money towards agriculture and the construction business to keep jobs there.

Mr. Pal Fillo

In 2008, according to predictions, we anticipate growth of 1.5% to 2%. That remains to be seen because we are still in the middle of the fourth quarter, but that is what we expect. However, next year we anticipate a decrease in growth resulting in a growth rate of minus 1.5%.

Deputy Mary Alexandra White

On behalf of the Green Party, which is in government for the first time in Ireland, I, too, welcome the delegation. I want to ask a couple of questions. How are they attempting to create renewable energy in Hungary? Do they see this as a way of copper-fastening long-term sustainable jobs by getting involved in renewable energy technology and manufacturing? What is the Hungarian Parliament doing to combat climate change, which we, in Ireland, see as one of the greatest imperatives of our time to protect our country, our economy and our people?

We have great sympathy with their tight budget. We are still feeling the effects of our tight budget after a long period of sustained growth and we have sympathy with them in terms of having to tighten our belts and look for added sources of revenue from our budgets.

Mr. Pal Fillo

Compared to Germany and Austria, energy efficient investments, structures and facilities are still in their infancy. Nevertheless, certain measures have been taken to subsidise, on a state level, investments geared towards renewable energy sources. A HUF1 billion loan is available for the greater public to make energy saving investments such as in the insulation of their flats or the installation of solar panels and modern heating systems using geothermal energy. The state subsidises this investment and people can apply for a loan.

In the long term the European Union must revamp its energy policies but there is still a big question as to the chance we have to reduce our energy dependence on certain supplies from outside Europe. In that sense, EU member states must act together. For example, we must make a severe decision about our nuclear plant. Hungary has one nuclear energy plant which has to be enlarged in order that it will be viable and operational in the longer term. This is a very serious decision which we must make.

We are about to establish some wind parks. It is good news that some Irish investors are helping to make sure such parks can operate in Hungary and generate energy without polluting the environment.

Mr. Sandor Czomba

I would like to get back to the first question and cite some figures which will bring home to the committee the real situation of the Hungarian economy. As my fellow MP said, the expected GDP growth rate for this year is between 1.5% and 2%. Hungary was in a very poor economic position, even before the crisis. Now that it has hit us, it will give way to recession next year. Currently, the employment rate in Hungary is 56.5%, whereas the average rate in the European Union is 66%, a big difference. The Hungarian unemployment rate is 8.5% which is also very high. We understand the rate in Ireland is expected to grow to this level, whereas it will become even worse in Hungary. In this situation it was inevitable that we would take advantage of the IMF stand-by loan. This is something our Government admitted to because if it had not done so, a crisis would have been inevitable in Hungary.

Mr. Ferenc Kiss

Hungary relies for its energy needs on oil, gas and coal supplies from Russia. Its geographical location is also a factor. We have many rivers but are not able to use them for energy production by building water power stations. At the beginning of the 1990s there was a Green Party in Hungary which was very much against building such plants on our rivers.

The use of modern renewable energy sources such as biodiesel, biomass and bioethanol raises questions. We must ask whether the production of energy from these sources will lead to a shortage of food or increased prices for agricultural products. We need to decide how much agricultural land should be devoted to the production of bioenergy plants and how much to food production.

Senator Brendan Ryan

I welcome the delegation. How big is the tourism industry for the Hungarian economy? What are the employment numbers associated with the industry and what is its value to the economy? What is the annual number of visitors to Hungary? Does Hungary have a dedicated ministry for tourism? What are the key elements of the tourism product and the main selling points for Hungary as a tourist destination?

Mr. Pal Fillo

The proportion of GDP attributable to tourism is disputed but I estimate it to be between 15% and 20%. Some 30 million people visit Hungary every year, which is three times the total population of the country. Unfortunately, most visits are made to Budapest and few visit the countryside, even though there are some lovely places to see. The number of guest nights is also very low because many tourists only spend the weekend in Hungary. The industry is concentrated in a few specific areas. It strongly relies on our natural resources, primarily hot water springs that contain medicinal waters. They are excellent for well-being and therapy purposes. People say that wherever one drills in Hungary hot water will come up.

Golf tourism is another option. As we heard, there are many opportunities in this regard. However, there has been a setback because Ryanair has suspended its service to the airport at Sármellék, near Lake Balaton, which serves thermal baths and golf courses in the area. We hope this matter can be resolved and ask for the help of committee members in this regard. Co-operation would be beneficial for both countries. Our weather conditions and soil suit golf. As such, co-operation with companies could be developed further.

Hungarian hospitality is world famous. Hungarian cuisine could also be a good selling point, although it is not as well advertised as French cuisine. We can offer excellent services to those who come to Hungary. This is an attractive point.

Mr. Ferenc Kiss

We could develop village tourism in Hungary, including horse riding, hunting and angling. Conference tourism is also very important and developing. On sports activities, we have held Formula One races for over 20 years and a site is being constructed to hold Moto GP motorcycle races. There could be co-operation in these fields.

Vice Chairman

I am conscious of the time available and ask Deputy Fitzpatrick to be brief.

Deputy Michael Fitzpatrick

Regarding cultural relations, there is no formal agreement between Ireland and Hungary. Is there a reason for this? Would we benefit through a formal agreement? How effective and efficient is the Irish Hungarian Business Circle?

Mr. Ferenc Jári

What does the Deputy mean by a formal agreement and to which field does he refer?

Deputy Michael Fitzpatrick

An agreement to which both parties could sign up or an informal, unwritten agreement.

Mr. Ferenc Jári

We do not see the necessity for a formal agreement. Both countries are members of the European Union and most of our co-operation is under its aegis. Our relations are regularised within the framework of EU co-operation. Any formal agreements we could have are mostly taken care of within the framework of European Union. There have been no moves in this regard by either the Hungarian Government or the Irish Government and neither has come up with a field in which a formal agreement could add to the current level of co-operation. We cannot see areas in which formal agreements are necessary to promote our relationship.

Deputy Michael Fitzpatrick

What does the delegation hope to achieve through this visit?

Mr. Pal Fillo

The Deputy asked one more question. Did he refer to the Irish Hungarian Business Circle or the Irish Hungarian Economic Association?

Deputy Michael Fitzpatrick

The business circle.

Mr. Pal Fillo

Let me start with the easier one. It is always useful if players in the economy can agree on certain things, as this helps results come about quicker than a complicated bureaucracy. That is why it is important that heads of companies nurture relationships and exploit business opportunities for the benefit of both countries. The purpose of this visit is to study the example set by Ireland in its partnerships, agreements and dialogue with various players in the economy, as they helped the country to emerge from difficult times and become a booming society. We believe there is no other option for Hungary but to ensure the government, trade unions and employer associations come together to find a way forward to help it become as dynamic a country as Ireland and as quickly as Ireland. We came here to learn a lesson.

Senator John Paul Phelan

I apologise for missing the start of the meeting, the start and end of the meal. Such is the nature of meetings in the Houses.

When I was in Budapest a few years ago, I was struck by the number of Irish students I met. There seems to be a strong degree of co-operation and a particularly large number of Irish students taking veterinary studies there. This surprised me. The lack of direct flights will have a knock-on effect for the people concerned. Many Irish people travel to Budapest to have minor health treatments done. The field of health tourism has the potential for further growth.

Agriculture was referred to briefly during lunch. What proportion of Hungary's population is directly involved in agriculture? What are the country's other main employment sectors and largest industries?

Mr. Fillo referred to difficulties experienced in the 1990s when the Green Party — Ireland also has some difficulties with its Green Party — opposed the construction of hydroelectric turbines on Hungary's rivers. Have such turbines been built or will they be?

On environmental issues, Ireland has problems with the quality of ground and river water. While I accept that this issue is not directly related to enterprise, what is the position in Hungary on such matters?

Mr. Pal Fillo

If I answered each question, the joint committee would sit into the small hours. In trying to respond briefly to the questions I will focus on issues unrelated to agriculture because I represent Budapest. I will then ask my colleagues to speak on agricultural issues because they represent rural areas.

It is good to note strong co-operation between Irish and Hungarian educational institutions. The training of Irish doctors and veterinarians in Hungary is of mutual benefit and the services provided are of high quality. The relevant professionals do a good job. I understand half of Ireland's veterinary students are trained in Hungary.

The water turbine referred to has not been put into operation. While some turbines have been built, they have not been put into operation owing to political divisions between the two governing parties. One turbine which is half ready is operated in Slovakia, with the result that Hungary does not enjoy its benefits but suffers from the damage it causes.

On the issue of surface and groundwater quality, the largest environmental project in the European Union is being undertaken in Budapest. The city's massive water treatment project aims to clean the waste water produced by its 2 million residents. Two thirds of the Budapest's waste water is discharged without treatment into the River Danube causing considerable pollution. The project will result in significant improvements. Many sewerage and canal projects are also under way in the countryside. I hope these will contribute to reducing river pollution in the next four to five years as waste water will otherwise contaminate wells and the natural water network.

My colleagues will respond to the questions on agriculture.

Mr. Ferenc Kiss

Regarding the water facility or the water turbines the Green Party opposed in 1992 and 1994, that was something by which the Green Party ensured the Government had to fall and another Government was established. Since then no other Government has had the courage to build another major water facility on our rivers. We are focused on the water turbines and agriculture, but it is important to note that out of 10 million Hungarians, 3.9 million are employed and only 10% of those are employed in agriculture. This was the case until some years ago but it is again declining and only 5% or 6% of those employed work in agriculture.

The largest employers are still public companies. These are state-owned companies such as the Hungarian railway company and the public transportation companies which are still owned by the state. There are also some private companies which are mainly owned by foreign companies and are subsidiaries such as automotive companies whose assembly plants provide work for many people and suppliers who supply spare parts and other things to these companies. One company is called Flextronics and is a large employer, and there are also some Swedish companies who are significant employers. Traditional machining industry has ceased to exist in Hungary and does not provide much employment.

Vice Chairman

On behalf of the Chairman and the committee members, I thank the Hungarian delegation for their informative and enlightening contribution. I thank Mr. Fillo, Mr. Jári, Ambassador of the Republic of Hungary to Ireland, Mr. Kiss, Mr. Sandor Czomba, translator Ms Szelle and the councillor from the embassy.

Sitting suspended at 3.56 p.m. and resumed at 3.58 p.m.