The history of Hungary is closely connected to our own - in IX century Magyar tribes migrated to Dunai lowland through Black Sea plains (current Podolye and Halichyna). There were other two waves of migration of Hungarians through Ukraine: in the second half of XIII century (after Mongolian and Turkish invasion) and in the second half of XVI century. Zakarpattya plains were a part of the Hungarian kingdom in XI-XI centuries. According to the Census of 1910, Hungarians made 30% of the population of modern Zakarpattya. When the area became a part of Czechoslovakia in 1930, this share dropped to 16%, and when it was returned to Ukrainian Soviet Socialist Republic in 1945 the Hungarian population in the region made 13.6%. Nowadays, Hungarians make 12% of the region population.
Presently, Hungary is a significant trade partner of Ukraine; in 2011 the goods turnover made $2668 million. Volumes of export and import are almost the same, $1341 million and $1327 million in 2011 respectively. The principal goods of export and import are electric machines, oil and lubricants, black metals, plastic and polymeric materials.
Budapest and Hungarian resorts are popular visiting places for Ukrainians. Bus tours and low cost flights make this country affordable for our people.
ForUm has had a talk with ambassador extraordinary and plenipotentiary of Hungary Mihaly Bayer about further prospects of economic and political cooperation between Kyiv and Budapest.
- Mr. Bayer, how do you estimate the current economic and political situation in the European Union?
- The EU is undergoing difficult times now. The economic crisis has covered the banking sector and caused regional crisis of sovereign debts almost in all EU countries. South European countries suffer the most, both from sovereign debts and poor pre-crisis managing policy. However, the problem is not only in debts, but also in competitiveness of various EU states. Germany, for example, remains relatively stable and competitive despite the crisis, unlike southern countries, which have difficulties to overcome negative consequences. As a result, Germany gets additional income, while those countries, which need this income more, suffer deficit of means.
Social programs are also of great importance: some economies need serious and sometimes painful measures to reduce budget expenses. Such cuts affect employment level in some countries and living standards in general.
However, the crisis is being eased thanks to taken anti-crisis measures. Now, the leaders of EU countries will have to thoroughly discuss and develop further measures to strengthen the European economy, to make it more competitive and consolidated for less fortunate members to improve economic figures and stabilize their economies.
- What are the forecasts?
- Well, it is difficult to predict what will happen in several months. There are many ideas and initiatives on the table, including creation of a banking union and purchasing of state assets of troubled states by the European central bank. There are ideas how to empower the European parliament more, how to centralize budgets, what to do with the euro zone. All these questions and issues require detailed discussions and agreed decisions. At the same time, the EU must remain a united structure and preserve equality of rights among its members.
The questions are complicated, but I believe Europe will manage to solve them and will preserve its position in the world economy and politics.
- How badly has the crisis hit Hungary, and how does the country meet the challenge?
- Our problems differ a little from the common EU problems. We used to have high budget deficit and big state debts, but we started to reduce debts and growth of deficit in 2008, before the crisis. Back then, Hungary signed an agreement with IMF and EU on urgent loan. It helped, and since then Hungary has been probably the only EU country, where the debt and deficit keep decreasing. Today we have less than 3% of budget deficit, and in 2013 w expect it to drop to 2.5% - I believe it is great result. The state debt has dropped lower than 80%, though it is still high.
Apart from cooperation with IFM, the government has taken measures in the sphere of taxation, especially regarding large corporations and certain spheres of economy. Many companies are not happy with the innovations, but our government tries to spread evenly the financial burden. The total dynamics is positive, but GDP does not grow, and this is our biggest problem. By the end of 2012 the GDP may reduce by 1%, and it is not good, but in the next year we expect growth recovery. Significant improvement is expected in 2014.
- How can Hungarian experience help Ukraine? What does our country need to meet the challenge effectively?
- There is certain resemblance, but it is important to understand that even if the volume of economies of our countries is almost equal, Hungary has 10 million of population, while Ukraine has 45 million. If we compare economic structures, the difference is significant: Hungary has bigger share of industries with high level of processing and with high added value. Such 'old' industries as metallurgy and chemical production do not have big significance for GDP. The development in similar direction is of current interest for your country as well.
With the crisis our economy lost a part of competitiveness, which is connected with macro figures, high interest rates, weakening of national currency, etc. At the same time, Hungarian economy is completely open - it is an organic and inseparable part of the global economic area. In this respect, Ukraine lags behind, especially regarding the added value in production. Your economy strongly depends on international prices for metal production, forming the essential part of export income.
To overcome similar economic 'monoculture' Ukraine and Hungary (we have our reasons) need reorganization and diversification. We started reorganization in the beginning of 90ies, when our unemployment rate made 10%. Reorganization requires sacrifices, but the government must provide people, who might lose work due to old age or lack of education, with alternative variants of employment. For this, the government needs to implement programs of re-training and skill upgrade.
As for the interest rates, we have them lower than in Ukraine, but the loan market still remains troubled in Hungary and in other countries of the EU. However, without sufficient crediting economy cannot develop in right direction.
Another important moment is modern legislation. Your country has too many outdated laws; some of them were adopted before 1991. You have problems with the supremacy of law. If you do not solve this problem, it would be difficult to create stable economy and good climate for investors. Hungarian companies in Ukraine suffer from corruption, including VAT return. This sphere requires immediate improvement, because investors fear they won't have guarantees of stable work of capital.
Ukrainian economy needs fresh money and fresh technologies from outside, as well as new market outlets.
- What is the state of relations between Hungary in Ukraine now? What are positive moments and what are directions to work on?
- We have a big positive background: since the collapse of YSSR Hungary has been a good friend, neighbor and partner. In 2011, we celebrated the 20th anniversary of establishment of diplomatic relations. Budapest was the first state, which established diplomatic relations with Kyiv. We were the first, who opened the embassy in Ukraine. Hungry was the first country Ukraine signed its first international agreement, etc.
We keep contacts almost in all spheres. For the past two years we have resumed contacts at the highest level, our political leaders have had several meetings and we keep exchanging expert delegations. Our goods turnover has reached the pre-crisis level and it proves that we have serious economic relations. However, we need to pay more attention to humanitarian sphere, which suffers the first because of cut of expenses and financing.
-What about cross-border cooperation?
- Very good. Our border is not very long - 137 kilometers, and we have five checkpoints. I dare to say that Hungary is one of the most developed transit directions for Ukraine. We have developed net of trunk highways. I know that many tourists and transporters enjoy our highways and routes, including the directions to Western Europe, Slovenia, Croatia.
In this sphere, we have many common tasks: thus, you must build roads, which will 'meet' our highways on another side. For the moment, there are such roads only from Berehove to Mukachevo. Now you need to build a byroad around Berehove, otherwise the road system will not be profitable. Development of international highways will allow people to get faster to Europe, will create new jobs and will attract investments in the nearby territories.
We also have good cooperation between local governments, including economic and cultural sectors. We have twinned cities and villages. We share river Tisa, where we have tasks regarding environment protection and flood threats. We have common early warning system about rising water in the river.
For the past two years, we have resumed work of all bilateral mixed commissions on economic and cross-border cooperation.
- What is the role of "Eastern partnership" initiative in our region and in our relations?
- This is a new tool of the European Union, and not every understands its true nature. It is not a new policy, but a part of European neighboring policy. We have "Southern partnership" (non-European countries of Mediterranean) and "Eastern partnership", which covers Ukraine. The goal of the project is not to invest huge money, as many expected, but to improve political possibilities in the sphere of non-governmental contacts, various programs of cooperation. To enter the EU means to change the lifestyle. And "Eastern partnership" helps to realize what this new lifestyle means and how to come closer to it. However, it is mistaken to expect effect already after 3-4 years. Eastern partners must be patient and hard working.
- What are the real terms of signing the association and FTA agreements between Ukraine and the EU?
- Nobody knows the answer for the moment. For the past years, Ukraine and the EU have accumulated certain problems. Though we have finished negotiations on association and free trade area, there is still a question to what extent Ukraine shares our basic values. I know your government wants to sign this agreement, and I know there is similar will in the EU, but all the questions on the table require answers, and it is the task of Kyiv rather than Brussels to find the answers.
In fact, everything can be done faster, but the economy will hardly survive the speed-up integration. That's why you need to work on reorganization and improvement of competitive ability of the country. Your economists are well aware of this. Thus, this agreement provide for gradual integration and adaptation. During the transition period the EU will gradually remove customs duties for all Ukrainian export. In its turn, Kyiv will have 10 years to remove customs duties and open the market for European import. This is good because the European market is very demanding and only competitive goods can enter it.
Look at China: it has effective competitive production, good prices and as a result dynamic trade balance, which already causes certain problems - what to do with the money coming from export. Ukraine also has very good potential. Despite uneasy financial and economic situation, the GDP growth for the past years has made 4-5%. I wish Hungary had at least 2% (smiling). It proves that your economy is potentially strong if everything is developed and implemented properly. However, your country does not have another formula of healthy and fast development but integration with the EU. I think the majority of Ukrainians are glad to follow this way.
- What will Europe get from integration with Ukraine?
- A market for our production - equipment, technologies. And, probably, in return we will get good Ukrainian goods at good price. I want to point something we do not talk loud about: China and Association of SouthEast Asian Nations keep growing, the US remain strong political, economic and military state. There is certain potential in Russia and Latin America. There are various forms of growth of economy and influence, and the EU cannot keep its positions on the world arena if it does not have dynamic competitive economy and if its market does not grow. Thus, it is our mutual interest, even if Ukraine is not an EU member yet.
- We've talked about negative side of doing business in Ukraine. How about positive side?
- Hungarian business has a strong will to expand its presence in Ukraine. Unfortunately, the debt crisis is not the best moment, as all sectors suffer from reduction of demand and fear risks at new markets. That's why the majority of enterprises prefer to keep what they have.
Hungarian investors have already invested $800 million in Ukraine. I know many companies, which consider Ukrainian market very promising for investing and realization of goods and technologies, for creation of joint ventures and other forms of cooperation. When you have 5% growth of economy, it means that our producers can have market outlet in your country, which grows faster than our own market. In this respect, Ukraine will help Hungary to catch more developed EU countries.
Moreover, among new EU members Hungary is the second biggest investor in Ukrainian markets after Poland. At the same time, polish economy is 3-3.5 times bigger than Hungarian, thus it means that Hungarian enterprises invest more in Ukraine.
- How is it to live and work in Ukraine for you?
Before coming here, I worked in a number of African and Asia countries. I needed 2-3 months to adapt there. But when we came to Ukraine, the second day we felt like home. It speaks a lot about how it is to live and work here. I realized Ukrainians know Hungary, appreciate our friendship and cooperation. Such friendly attitude helps in our work.
You country is big, and I am sorry I cannot travel all over around it. However, I am fond of Kyiv. It is such a live place - something always happen here. Sometimes it is difficult to leave it.
- How did you come to diplomatic activity? What is so interesting about it?
- You know, I always wanted to study languages and to study abroad. Thus, I thought it would be interesting to be a diplomat. I got scholarship in Moscow institute of international relations. However, I had many challenges to face. The fact is that our Foreign Ministry decides what foreign language to study. Thus I was given Arabic and English. An though the first one is extremely difficult, thanks to this choice I have a possibility learn and meet Middle East region and Asia.
The life of a diplomat is complicated. The knowledge of language is only a tool of communication. Apart from the language, a diplomat must know to communicate, understand, analyze and put all these things in writing. Sometimes the two-week work covers only two pages. Moreover, my work requires constant readiness. The working day is not limited by 8 hours, and weekends are not really days off. Besides, it is not easy to travel from one country to another, and continuous travelling is a challenge for the family.
However, it is very interesting lifestyle. Having tried once, people rarely change it for something more 'civilian'. I know people who used to work as diplomats, but then changed the career for economy sector. They admit something is missing in their lives. I do not regret about my choice of profession and I respect all those to choose this kind of life. I feel blessed with my career.
Andriy Boyarunets, photos by Viktor Kovalchuk
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