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Hungary is a central European economy with a strong industry sector in which foreign investment and technology play a significant role. It has a longstanding tradition in scientific research. In June 2013 the government adopted the Investment in the Future: National Research and Development and Innovation Strategy (2013-20), which focuses on key strategic issues.
Hot Issues are major national STI policy priorities, as self-reported by countries in their responses to the OECD STIO 2014 policy questionnaire.
Strengthening public R&D capacity and infrastructures
Given Hungary’s very low public R&D expenditure by OECD standards, its research sector’s publication performance is quite strong (Panel 1a, c). However, research infrastructures have become increasingly obsolete owing to a lack of investment in maintenance and modernisation in the recent past.The National Research Infrastructure Survey and Roadmap (NEKIFUT), undertaken as a part of the government’s mid-term STI strategy for 2007-13, identified measures to be taken and highlighted the importance of accessing international research infrastructure networks. The Extreme Light Infrastructure (ELI) programme to develop a super-laser is supported by both the European Union and the Hungarian government. Now in a preliminary phase, the aim is to have it operational by the end of 2015. The need for public investment in research infrastructure is recognised in the new Economic Development and Innovation Operative Programme (GINOP), which defines development priorities for 2014-20.
Supporting business innovation and SMEs has always been a focus of Hungarian development policy. The government aims to boost business investment in R&D and innovation (Panel 1d); it currently emphasises start-ups, young entrepreneurs and incubation processes. Major support measures for business innovation and SMEs include EU co-financed initiatives under the Economic Development and Innovation Operative Programme (GINOP), with a budget of USD 21.1 billion (HUF 2 700 billion) for the next seven years, and the national R&D programmes financed by the Research and Technological Innovation Fund (KTIA) with USD 195 million (HUF 25 billion) a year. Other measures include the tax incentive that allows a deduction of 200% of the amount of R&D expenditures from the income of the company’s pre-tax profit statement. Measures taken in this regard include innovation and technology parks along with the Mentor Programme and InnoPoint, which provide integrated information services, both of which are run by the National Innovation Office and the Open Laboratory programme. The government also supports business innovation through innovation and technology parks, innovative clusters, and improvements in the business infrastructure and investment climate. In the context of Horizon 2020, Hungary plans to launch the Precompetitive Procurement Programme as a new funding instrument to support business innovation in all industries in 2014.
Improving the education system (in general or focusing on tertiary education)
Hungary’s public expenditure on higher education as a share of GDP is among the lowest of OECD countries, although it is home to two (to four, depending on the ranking exercise) of the world’s top 500 universities (Panel 1s, b). Reform of the education system has long been an issue for the government. Based on the government resolution, the “university of national excellence” classification can be awarded to higher education institutions with strong educational and research capacities and outstanding scientific results in more than one discipline that allow them to contribute significantly to the attainment of national strategic objectives. The transition to tertiary education with a labour-market orientation and the introduction of tuition fees have been the key steps in the reform process. Companies are involved in the design of curricula and establish faculties at universities to teach students with up-to-date knowledge and to facilitate recruitment.<br />
Other important initiatives for the education system and human resources include: the Momentum programme, which aims to foster excellence and reduce brain drain by supporting talented young researchers; the National seeks to attract Hungarian researchers and lecturers working abroad to work in Hungary.
While strong in academic publications, the Hungarian public research sector has weak patenting performance (Panel 1p), even though business-funded public R&D is at the OECD median (Panel 1o). To strengthen linkages among key players in the national innovation system, the government has made enhancing knowledge flows a key policy objective. In addition, the Research, Development and Innovation Strategy supports knowledge utilisation through accredited technological incubators and the development of a technological start-up ecosystem with an estimated USD 1.1 billion (HUF 140 billion) over 2014-20. It focuses on small innovative firms, medium-sized firms with strong export potential and large firms to capitalise on the innovation potential of public research.
The fragmentation of society and of the political system and a weak collaboration culture are considered the main barriers to better co-ordination of national innovation policy. However, the government is remodelling these structures to obtain a better-focused STI system of ministries, institutions and business actors. The Ministry for National Economy has established a working group (Budapest HUB) composed of different stakeholders in Hungarian start-ups, in recognition of the joint responsibility of the government and stakeholders to create a favourable ecosystem for start-ups.
Hungary has a strong public research sector, notably under the Hungarian Academy of Sciences (MTA). Owing to changes in the governance structure of the Academy, government funding of research institutions has stagnated. The 2011 Act on Higher Education aims to increase the role of universities in public research by granting five universities a research-intensive university status. The new law on higher education adopted in 2012 sets natural sciences and technologies as priorities of public research and education and concentrates public funding of university research in research-intensive universities.
The EU JEREMIE Programme has had a strong positive influence on the development of Hungarian entrepreneurship and the emergence of Hungarian venture capital funds, and Hungary’s position in the EU has risen relatively quickly. According to the European Private Equity and Venture Capital Association, Hungary had the highest venture capital investments as a percentage of GDP among EU member states in 2012. In 2013, the National Development Agency (NFÜ) selected eight market intermediaries, each of which was granted USD 23.5 million (HUF 3 billion) to work with Venture Finance Hungary Plc. to strengthen the JEREMIE Fund (also known as the Joint Growth Fund).
The Hungarian National Strategic Reference Framework (i.e. New Széchenyi Plan) emphasises enterprise networks and cluster development. Hungary is designing its national Smart Specialisation Strategy to promote the development and implementation of regional innovation systems in accordance with the government’s decision and the agreement with the EU Commission.
In response to signs of skills shortages and needs, the education component of the national R&D and Innovation Strategy focuses on vocational training, interdisciplinary education, business management, fostering entrepreneurial and risk taking attitudes among youth through scholarship programmes and talent identification. To promote employment of researchers and S&E graduates, tax allowances are available for employers hiring doctorate holders, while the Be Entrepreneur in Hungary programme supports technology start-ups.
In 2013 the Innovation Strategy set a target for GERD of 1.8% of GDP by 2020, with two-thirds of it performed by the business sector. Public budgets for R&D and innovation are expected to increase in the coming years.