HUNGARY: Nation's R&D in chaos

In September 2008, the European Institute of Innovation and Technology, the EU's flagship initiative to boost Europe's competitiveness on the highly globalised battlefield of development and innovation, held its first meeting at its new headquarters in Budapest, Hungary. Since then, preparations to host the agency have been far from smooth.

The meeting was addressed by Hungary's then-Prime Minister Ferenc Gyurcsány and then-Minister of Research and Development Károly Molnár, both of whom seemed overjoyed by the EU's nomination of Budapest as the host city for the institute's headquarters.

Molnár said Hungary would contribute HUF100 million (EUR3.7 million or US$5.6 million) from its 2009 budget to cover the costs of the necessary preparations.

A year later, the prime minister and the minister for research and development have gone, as has much of the money. Yet the government claims that what's left of it, a mere 67%, is enough to cover all costs. Its press department repeatedly declined to comment.

The government has vowed, however, that the congress centre for EIT will open this December in Budapest's Infopark quarter, a complex close to the city's biggest universities and IT companies.

Hungary had also undertaken to cover the office costs of the EIT for 20 years (worth about HUF 200 million or EUR7.4 million at current rates), and to pay the salaries of 20 EIT employees for five years. The headcount of the institute will reach 30 by next year and it will start working with its full capacity of 78 employees (including management) from 2011.

Hungary's contribution may not seem large compared with the aggregate EUR309 million provided by the EU but recent months have seen unexpected changes. The Ministry for Research and Development (technically the position of Károly Horváth, a minister without portfolio, responsible for research and development) was abolished in April, and the preparation's budget was slashed from the original HUF100 million to HUF67.1 million.

Tasks and responsibilities also became chaotic. Károly Horváth's role was taken over by the Ministry of National Development and Economy, but while the ministry's press statements claim minister István Varga heads preparations, other sources suggest the ministry's cabinet chief, Gergely Balla, is handling the project. Both declined interview requests from University World News.

Asked how the budget was rearranged after dwindling by 35%, we were told nothing needed changing. "There is no need to rearrange sources, nor have we fallen behind schedule," a statement said.

Industry specialists agree that neither the budget nor the preparation schedule is among the biggest problems. Rather, the government "is sending out the wrong message concerning how important innovation and research is for Hungary", said Zsolt Monszpart, vice chairman of the Hungarian Association for Innovation and deputy CEO of Ericsson Hungary.

Monszpart said the EIT would have little or no market relevance for Hungary, whose unstable administration structure and flawed higher education system were the main obstacles to the country becoming a real centre of innovation in Europe.

"Innovation is a key to survival on the market, and what the industry is most eager to see is stability and predictability in the frameworks of the administration," he said. "An innovation today will result in a product in five or 10 years, and you can't afford an administration that will have completely different priorities by then."

Under the current circumstances, even laws are unable to guarantee predictability. In 2003, the government introduced a compulsory fee for companies to support an R&D fund, saying the state would contribute twice the amount collected from companies each year, to spend on research and development projects.

To date, the government has fallen short of its own undertaking by HUF55 billion, despite the fact that it is against its own legal regulations.

In June, the government apparently earmarked nothing in its 2010 budget for R&D and only the protest of industry NGOs changed this to EUR74 million. It is not the amount ordered by the law but it is at least something, the industry wryly noted.

Experts agree the current structure is completely unstable and changes, too, are entirely ad hoc, without any underlying concept. The National Office for Research and Technology (a government body deciding on subsidies and tenders in innovation) has had four directors in two years. Tenders for 2009 have not yet been put out while conditions, priorities and organisation structures are subject to continuous changes that inevitably result in late payments.

"Treating innovation this way is like throwing the engine out of your car to make it lighter," Monszpart said. "You don't want to do that, because you know it will stop at the bottom of the slope."