The complexity of the Hungarian institutional and regulatory environment affects SMEs and has been a major target for reform. Also, Hungary ranks poorly for digital public services. The Public Administration and Public Service Development Strategy (2014-20) aims to reform administrative procedures. Initiatives include the expansion of online cash registers connected to tax authorities for services and business activities mainly provided by SMEs. The government is planning to create an Enterprise Web Portal as a single entry point to all public support programmes to SMEs. In 2018, a digital post service for businesses was introduced to facilitate the dialogue between government and businesses.
OECD SME and Entrepreneurship Outlook 2019
OECD SME and Entrepreneurship Outlook
Chapter 21. Hungary
Figure 21.1. Structure and performance of the SME sector in Hungary
Sources: Charts A, C, D: OECD Structural and Demographic Business Statistics Database 2018, http://dx.doi.org/10.1787/sdbs-data-en; Chart B: For creations, OECD Timely Indicators of Entrepreneurship Database 2018; for bankruptcies, Financing SMEs and Entrepreneurs 2018: An OECD Scoreboard; Chart E: OECD Structural and Demographic Business Statistics Database 2018, Employer Business Demography dataset.
SME business conditions and access to strategic resources
Institutional and regulatory framework
Market conditions
While backward participation in GVCs by Hungarian firms is well developed, with the electronics and automotive sectors attracting substantial FDIs, forward participation is relatively low. The Supplier Development Programme supports consortiums where larger companies facilitate SMEs for developing high value-added products, increasing productivity and using Industry 4.0 technologies. Also, the share of domestic value-added in exports has been falling over time. A National Info-Communication Strategy and the Digital Success Programme aim to promote digital export development. Since 2016 incentives are in place for SMEs to hire or buy expertise through mentor networks. To foster SME participation in public markets, since 2016, the Public Procurement Authority cooperates with FIVOSZ (Young Entrepreneurs Association Hungary) on raising awareness, training and consulting services.
Infrastructure
ICT investments and mobile broadband penetration are low in Hungary, compared to OECD levels. In 2017, the 5G Coalition was formed to incentivise the spread of 5G technologies, while the Superfast Internet Programme (2016) aims to provide high-speed network connection to the entire country. Measures to improve the energy performance of SMEs have also been implemented, with tax incentives for electric car purchases by SMEs introduced in 2016.
Access to finance
Since the 2008 recession, the volume of SME loans dropped in Hungary from the peak of 24.3% of GDP (2009) to 19.5% (2016). Data on new SME lending point to strong volatility and weakened confidence in the credit market. And about two-thirds of new SME loans are short-term which is high by international standards. The Central Bank has played a pivotal role in supporting SME access to finance, notably through the Funding for Growth Scheme (FGS, 2013-17) and the Market-based Lending Scheme (2016-19). A new version of the FGS, the FGS-Fix, will favour long-term lending by replicating the conditions of the previous versions (i.e. zero interest rate of refinancing funds for banks that lend to SMEs at a capped interest rate of 2.5%), but for long-term loans. The venture capital market is also improving, notably with the JEREMIE programme since 2008 and several new funds and the recapitalisation of the Széchenyi Capital Fund since 2017.
Access to skills
Adult literacy and workforce training are low by OECD standards. 23% of the adult population had attained tertiary education, below the OECD average of 34% (2016). And only 15% of SME workers participate in continuous vocational training (2015, Eurostat). With a more technology-driven economy, the government has stepped up efforts to upgrade the workforce skills and foster entrepreneurship through innovation in the education sector. In 2016, vocational high schools launched the European Money Week and established courses on entrepreneurship and financial literacy, while higher education institutions started providing practice-oriented courses and mentoring for start-ups.
Access to innovation assets
Hungarian SME participation in R&D and networks is on par with the OECD median but few of them actually innovate. A specified Programme identifies the fast growing innovative companies and offers them mentoring and training. The government has also launched the funding Prototype, Product, Technology and Service Development programme and a programme for Enhancing the competitiveness of SMEs through adaptive technological innovation. The Competitiveness and Excellence Cooperation Programme supports research consortiums on digital production technology, agricultural innovation and biotech development.
The full country profile is available at https://doi.org/10.1787/34907e9c-en
References
European Commission (2018), 2018 SBA Fact Sheet, Hungary, https://ec.europa.eu/docsroom/documents/32581/attachments/14/translations/en/renditions/native.
European Commission (2018), DESI Report 2018 - Telecoms Chapters: Hungary, https://ec.europa.eu/digital-single-market/en/news/desi-report-2018-telecoms-chapters.
European Commission (2018), Digital Economy and Society Index (DESI) 2018 Country Report Hungary, http://ec.europa.eu/information_society/newsroom/image/document/2018-20/hu-desi_2018-country-profile_eng_B4406CA5-96ED-7301-4ADE21CA97CA133A_52227.pdf (accessed on 15 November 2018).
European Commission (2017), 2017 SBA Fact Sheet, Hungary, http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=2ahUKEwjAqL-m9dPeAhVLWxoKHZWHAhwQFjAAegQICRAC&url=http%3A%2F%2Fec.europa.eu%2FDocsRoom%2Fdocuments%2F26562%2Fattachments%2F14%2Ftranslations%2Fen%2Frenditions%2Fnative&usg=A (accessed on 15 November 2018).
European Commission (2017), Europe's Digital Progress Report (EDPR) 2017 Country Profile Hungary, https://ec.europa.eu/digital-single-market/en/news/europes-digital-progress-report-2017 (accessed on 15 November 2018).
OECD (2017), Hungary: Public Administration and Public Service Development Strategy, 2014-2020, OECD Public Governance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264286535-en.
OECD (2016), OECD Economic Surveys: Hungary 2016, OECD Publishing, Paris, http://dx.doi.org/10.1787/eco_surveys-hun-2016-en.