Guest
Sept 2007
Report on the FEACO meeting in Budapest
Interview : Merényi Miklos
State Secretary for International Economic Relations, Ministry of Economic and Transport
State Secretary Merényi thank you to welcome ConsultingNewsLine in your offices at the Ministry of Economy and Transport of the Republic of Hungary. You have given a keynotes lecture at the FEACO / VTMSZ conference entitled « Smart Hungary ». May we start this interview with a few words on this Smart land ?
Merényi Miklos : Hungary has been one of the earliest reformed east countries, starting its reform process from a centralized economy in 1953. The then Prime Minister became the leader of the economy reform. But with the aborted 1956 revolution the process stopped to restart in 1960. In 1968 started a new mechanism : large state owned companies splitted leading to some competition. In the agriculture sector, private activity was allowed at small scale and cooperatives were allowed to make business deals. In small business as well as small industries private activity was allowed too. So Hungary was some kind of a laboratory for the Soviet Union which allowed some freedom in a controlled way. Even the Chinese came to learn about our reforms on topics such as management of state and economy. Then came the largest chock, the 1973 oil price rise. We had no energy resources. Starting then we set-up nuclear power plants. But the Oil chock showed our inadequacy and lack of competitiveness. So Hungary started to review its industry and services and open it to the best western and European companies, with deals with West Germany, Austria, Italy. They were not investors but dealing on a commercial basis. So we opened to European countries.
When did the first foreign private companies come in?
Merényi Miklos : In1980 many private activities had been allowed and the very first investor to come in was General Electric in 1987. This had been made possible 3 years before by the privatization of the energy and electricity sector. In the late 80’s we started the Tax reform, a renewal of the jurisdiction, with new laws for the private entrepreneurship based on main reasons. But I would not like to give too much of an optimistic picture of this process. For many reasons the state adopted pretty much high living standards, running into debt. We developed the healthcare system and social subsidies. Energy and transport prices were subsidized at that time. And this is very important to understand. So, political and economical changes came in the late 80’s then in 1989 the Wall fall leading to a new Republic. In 1990 we had our first free elections, with József Antall elected, who unfortunately died 3 years later. So I would not like to be too focused on what was done before but it is important to understand that we were basically different from East Germany because of our reformed structures. We had that advantage of being already reformed before the crash of the Berlin wall. We were ready and much more opened by far for market economy. Foreign investment was first in the region and Hungary had become the most attractive country ahead of other eastern countries. For all that reasons Hungary has been a very dynamic country. Business week in 96-97 wrote pages on globalization, very critical but quoting Hungary as one of the places were globalization had led to positive effects.
How is it going today, after the unrests of the fall ?
Merényi Miklos : Today we are very well placed. But Hungary has lost its dynamism 5 to 6 years ago. It has been created some kind of a «frozen system», somehow «locked». This does not mean that business did not advance. The private sector and fully ownership activity has gone quite well and the place remains attractive. Structures and activity shifted to higher standards. So we might say that we have a very flourishing climate on one side. But on the other side is the fact that the State did not change at all. All its structures, all kind of financing procedures, with process identical to what existed at the time of the state subsidies. We still have subsidized gas prices... which means financed by budget. However this is not only the problem of Hungary. It is common to all Europe and it affects competitiveness of all Europe. So we need to subsidize but not everybody. Should we transform or subsidize in a new way or should we continue to waste money? Here are some contradictions: our industrial output is growing over 10% each year, we have a dynamic business sector, we have reached 67% of EU-15 average of GDP per capita (only the Czech Republic do the same) and our structures as well as our industrial structures are quite better. We have also developed the R&D activity, but the other face is a very obsolete state, not very efficient in spending. Today the administration has to face that problem of competitiveness : the efficiency of the state.
Could you outline the main topics that should be addressed first ?
Merényi Miklos : The healthcare reform has been started recently. Nowadays we have amid discussions about the eventual involvement of private insurrance companies in healthcare. Reforms in the public administration, and education as well has been introduced, not to talk about diminishing public transport, and energy-price subsidies.
Where are the consultants in this process ?
Merényi Miklos : In the talks with the Ministry of Economy and Transport of the Republic of Hungary there are many consultants. We have a very large ministry composed by a set of old ministries. We have a pilot project on the infrastructure, on R&D, on ICT, biotechnology as well. This has been set-up 2 years and a half ago. We adopted 2 consultancies, one Hungarian, TELKES, and the other selected amongst the Big 4 : KPMG. They are up to restructuring the activities of the ministry, defining new rules... When a business is running it is impossible to reform. My personal impression is that consultants are the vehicles in a transforming organization : Proacting, supporting, driving the organization of the transformation process. They are a must for moving an organization
What was the most important rôle for the consultants and how did you appraise their compentences?
Merényi Miklos : Their role was to bring the best practices in from abroad. The Irish model sometimes was really impressive. It added an impact on the organization. In the reform of the administration, the local governments and state sector such as the healthcare system or subsidies... there is no place where you can make an effective reform without consultancies. But you have to get the guaranty that your consultants are serious ones.
Might this imply to ask them to show some labels ?
Merényi Miklos : At least some quality assurance should be there. Consulting is a business activity with the tendency to get easy money : analyzing and doing nothing. Consulting used sometimes to make easy money, which does not mean that the consulting industry itself does not reach high ethical levels, but you must get quality controls. Transparency is mandatory! From the tendering process to the making of the activity. We are looking for serious consultants, so we put high levels in tendering and in the quality assurance of the assignments.
Can you evaluate the real impact of the consultants ?
Merényi Miklos : It is difficult to say because everything is very mixed-up in term of results and cooperative activity between the ministry and the consultants. But they have reached good results. Both consultants and public administration must learn about this [particular] sector. Public administration is not business. This means different roles, different rules, different goals. But the methods and the ways to reorganizing a [public] organization are quite similars than in the business one. And the effectiveness of the process could be adapted to the public administration even if they are showing some differences.
To come to the conclusion of this interview, might you State Secretary Merényi give us your final viewpoint on the role of consultants and maybe unveil what is to come next in your reforms ?
Merényi Miklos : There is no place where consultants could not be needed. Wherever you touch the administration you will see foolish ways of functioning. Already on sight are : railways companies, highways companies, a lot of other still state owned companies. Most of them would remain state owned such as the public transportation. But the rail cargo and the company running the highways are going to be privatized. The Telecom sector has already done it 10 years ago – and the results are speaking for themselves !
Words collected by Bertrand Villeret
Editor in chief, ConsultingNewsLine
To know more :
http://en.gkm.gov.hu/
Whoswoo :
Mr MERÉNYI Miklós is State Secretary for International Economic Relations. In this position he is in charge of EU Relations, International Relations and Trade Policy. State Secretery MERÉNYI Miklós is reporting directly to KÓKA János, Minister of Economy and Transport of the Republic of Hungary.
Bio details : Merény Miklos
Images :
B. Villeret pour ConsultingNewsLine. Copyright B. Villeret / Quantorg 2006
Copyright
RH&M 2006 - 2007Sept 2007
Report on the FEACO meeting in Budapest
Interview : Merényi Miklos
State Secretary for International Economic Relations, Ministry of Economic and Transport
State Secretary Merényi thank you to welcome ConsultingNewsLine in your offices at the Ministry of Economy and Transport of the Republic of Hungary. You have given a keynotes lecture at the FEACO / VTMSZ conference entitled « Smart Hungary ». May we start this interview with a few words on this Smart land ?
Merényi Miklos : Hungary has been one of the earliest reformed east countries, starting its reform process from a centralized economy in 1953. The then Prime Minister became the leader of the economy reform. But with the aborted 1956 revolution the process stopped to restart in 1960. In 1968 started a new mechanism : large state owned companies splitted leading to some competition. In the agriculture sector, private activity was allowed at small scale and cooperatives were allowed to make business deals. In small business as well as small industries private activity was allowed too. So Hungary was some kind of a laboratory for the Soviet Union which allowed some freedom in a controlled way. Even the Chinese came to learn about our reforms on topics such as management of state and economy. Then came the largest chock, the 1973 oil price rise. We had no energy resources. Starting then we set-up nuclear power plants. But the Oil chock showed our inadequacy and lack of competitiveness. So Hungary started to review its industry and services and open it to the best western and European companies, with deals with West Germany, Austria, Italy. They were not investors but dealing on a commercial basis. So we opened to European countries.
When did the first foreign private companies come in?
Merényi Miklos : In1980 many private activities had been allowed and the very first investor to come in was General Electric in 1987. This had been made possible 3 years before by the privatization of the energy and electricity sector. In the late 80’s we started the Tax reform, a renewal of the jurisdiction, with new laws for the private entrepreneurship based on main reasons. But I would not like to give too much of an optimistic picture of this process. For many reasons the state adopted pretty much high living standards, running into debt. We developed the healthcare system and social subsidies. Energy and transport prices were subsidized at that time. And this is very important to understand. So, political and economical changes came in the late 80’s then in 1989 the Wall fall leading to a new Republic. In 1990 we had our first free elections, with József Antall elected, who unfortunately died 3 years later. So I would not like to be too focused on what was done before but it is important to understand that we were basically different from East Germany because of our reformed structures. We had that advantage of being already reformed before the crash of the Berlin wall. We were ready and much more opened by far for market economy. Foreign investment was first in the region and Hungary had become the most attractive country ahead of other eastern countries. For all that reasons Hungary has been a very dynamic country. Business week in 96-97 wrote pages on globalization, very critical but quoting Hungary as one of the places were globalization had led to positive effects.
How is it going today, after the unrests of the fall ?
Merényi Miklos : Today we are very well placed. But Hungary has lost its dynamism 5 to 6 years ago. It has been created some kind of a «frozen system», somehow «locked». This does not mean that business did not advance. The private sector and fully ownership activity has gone quite well and the place remains attractive. Structures and activity shifted to higher standards. So we might say that we have a very flourishing climate on one side. But on the other side is the fact that the State did not change at all. All its structures, all kind of financing procedures, with process identical to what existed at the time of the state subsidies. We still have subsidized gas prices... which means financed by budget. However this is not only the problem of Hungary. It is common to all Europe and it affects competitiveness of all Europe. So we need to subsidize but not everybody. Should we transform or subsidize in a new way or should we continue to waste money? Here are some contradictions: our industrial output is growing over 10% each year, we have a dynamic business sector, we have reached 67% of EU-15 average of GDP per capita (only the Czech Republic do the same) and our structures as well as our industrial structures are quite better. We have also developed the R&D activity, but the other face is a very obsolete state, not very efficient in spending. Today the administration has to face that problem of competitiveness : the efficiency of the state.
Could you outline the main topics that should be addressed first ?
Merényi Miklos : The healthcare reform has been started recently. Nowadays we have amid discussions about the eventual involvement of private insurrance companies in healthcare. Reforms in the public administration, and education as well has been introduced, not to talk about diminishing public transport, and energy-price subsidies.
Where are the consultants in this process ?
Merényi Miklos : In the talks with the Ministry of Economy and Transport of the Republic of Hungary there are many consultants. We have a very large ministry composed by a set of old ministries. We have a pilot project on the infrastructure, on R&D, on ICT, biotechnology as well. This has been set-up 2 years and a half ago. We adopted 2 consultancies, one Hungarian, TELKES, and the other selected amongst the Big 4 : KPMG. They are up to restructuring the activities of the ministry, defining new rules... When a business is running it is impossible to reform. My personal impression is that consultants are the vehicles in a transforming organization : Proacting, supporting, driving the organization of the transformation process. They are a must for moving an organization
What was the most important rôle for the consultants and how did you appraise their compentences?
Merényi Miklos : Their role was to bring the best practices in from abroad. The Irish model sometimes was really impressive. It added an impact on the organization. In the reform of the administration, the local governments and state sector such as the healthcare system or subsidies... there is no place where you can make an effective reform without consultancies. But you have to get the guaranty that your consultants are serious ones.
Might this imply to ask them to show some labels ?
Merényi Miklos : At least some quality assurance should be there. Consulting is a business activity with the tendency to get easy money : analyzing and doing nothing. Consulting used sometimes to make easy money, which does not mean that the consulting industry itself does not reach high ethical levels, but you must get quality controls. Transparency is mandatory! From the tendering process to the making of the activity. We are looking for serious consultants, so we put high levels in tendering and in the quality assurance of the assignments.
Can you evaluate the real impact of the consultants ?
Merényi Miklos : It is difficult to say because everything is very mixed-up in term of results and cooperative activity between the ministry and the consultants. But they have reached good results. Both consultants and public administration must learn about this [particular] sector. Public administration is not business. This means different roles, different rules, different goals. But the methods and the ways to reorganizing a [public] organization are quite similars than in the business one. And the effectiveness of the process could be adapted to the public administration even if they are showing some differences.
To come to the conclusion of this interview, might you State Secretary Merényi give us your final viewpoint on the role of consultants and maybe unveil what is to come next in your reforms ?
Merényi Miklos : There is no place where consultants could not be needed. Wherever you touch the administration you will see foolish ways of functioning. Already on sight are : railways companies, highways companies, a lot of other still state owned companies. Most of them would remain state owned such as the public transportation. But the rail cargo and the company running the highways are going to be privatized. The Telecom sector has already done it 10 years ago – and the results are speaking for themselves !
Words collected by Bertrand Villeret
Editor in chief, ConsultingNewsLine
To know more :
http://en.gkm.gov.hu/
Whoswoo :
Mr MERÉNYI Miklós is State Secretary for International Economic Relations. In this position he is in charge of EU Relations, International Relations and Trade Policy. State Secretery MERÉNYI Miklós is reporting directly to KÓKA János, Minister of Economy and Transport of the Republic of Hungary.
Bio details : Merény Miklos
Images :
B. Villeret pour ConsultingNewsLine. Copyright B. Villeret / Quantorg 2006
pour ConsultingNewsLine
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