From hungary-report-owner Sun Jul 9 14:22:57 1995 Received: from localhost (daemon@localhost) (fnord) by nando.yak.net (8.6.5/8.6.5) id OAA09505; Sun, 9 Jul 1995 14:22:57 -0700 Received: from localhost (daemon@localhost) (fnord) by nando.yak.net (8.6.5/8.6.5) id OAA09496; Sun, 9 Jul 1995 14:22:37 -0700 Received: from bruner@ind.eunet.hu () via =-=-=-=-=-= for hungary-report@hungary.yak.net (9494) Received: from ind.eunet.hu (root@ind.eunet.hu [192.84.225.42]) (fnord) by nando (8.6.5/8.6.5) with SMTP id OAA09484 for ; Sun, 9 Jul 1995 14:20:53 -0700 Received: from [192.84.226.92] (bruner.dial.eunet.hu) by ind.eunet.hu with SMTP id AA25080 (5.67a8/SZTAKI-4.01 for ); Sun, 9 Jul 1995 23:26:50 +0200 X-Sender: pop029@ind.eunet.hu Message-Id: Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii" Date: Sun, 9 Jul 1995 23:14:51 +0100 To: hungary-report@hungary.yak.net From: bruner@ind.eunet.hu (Rick Bruner) Subject: The Hungary Report No. 1.15 X-Charset: US X-Char-Esc: 0 Sender: owner-hungary-report@hungary.yak.net Precedence: bulk Reply-To: hungary-report@hungary.yak.net ======================== The Hungary Report Direct from Budapest, every week No. 1.15, July 9, 1995 ======================== The Hungary Report is supported in part by: MTI-Econews, a daily English-language financial news service. For online (fee-based) subscription information, contact (not automated -- write a nice note). ======== CONTENTS BRIEFS New austerity package delayed Regional summit for a "golden triangle" Horn criticises IMF and the EU for not being more understanding Electricity privatisation tenders issued 5 August K&H and IBUSZ Bank merge Smallholders' Party preparing for government Minority Office Secretary calls for Gypsy co-ordination council Controversialforeigners' detention camp to close Next round of Hungarian-Romanian basic treaty talks Visa reguirements may be reintroduced for some neighbours Ministry computers linked by E-mail NUMBERS CRUNCHED Customs revenues Tourism revenues Number of foreign companies Drugs haul of the first six months FEATURE STORY It's been a long time since the Danube was blue PARLIAMENT WATCH Constitutional Court vetoes certain paragraphs of "Bokros package" ====== BRIEFS Copyright (c) 1995, Kriszta Fenyo ------------ GENERAL NEWS New austerity package delayed At its Thursday meeting the government decided to postpone concrete steps to make up for the budget losses following the Constitutional Court's ruling which annulled parts of the "Bokros-package". The government will hold a two day meeting 26-27 July to bring new measures to fill the holes in the state and social security budget deficit. After the Court's ruling there is a HUF 12 million "hole" in the central state budget and a HUF 16 million in the social security budget. The government is determined, however, to carry on the state budget reform and the stabilisation programme, Horn said at Thursday's press conference. He stressed that it was not only an international expectation but an internal necessity as well. The government will now decide within its own authority on the possible measures to make up for the loss in budget revenues. A special parliamentary session will not be necessary, at least until 20 August, Horn announced. The reason for the delay was that the cabinet wanted to survey and evaluate the state budget revenues and expenditures of the first six months, Horn said, because "there are signs that in some areas there have been more revenues than expected." Horn was reluctant to detail the various proposals discussed in Thursday's cabinet debate. He added, though, that his "personal opinion" was that "the society cannot be burdened any more." Finance minister, Lajos Bokros, told Hungarian TV News that the cabinet was divided over how to tackle the budget crisis. He added that he personally was convinced that cutting spending was the only real solution. The two day cabinet meeting will also discuss the 1996 budget, the 3 year economic reform programme, the acceleration of privatisation and economic growth, and the fight against the black economy. Regional summit for a "golden triangle" Austrian chancellor Kraus Vranitzky, Vladimir Meciar Slovak and Gyula Horn Hungarian prime ministers signed a joint agreement Friday committing the three states to enhance regional co-operation . "Let us become the zone of stability, let's discuss our matters together and let's act jointly," the Austrian chancellor said at the meeting. Austria also confirmed in the document that it continues to support Hungary and Slovakia in their efforts to join the EU as soon as possible. The co-operation is to be primarily economic in the region of Vienna, Gyor and Bratislava. A French study called the region a "golden triangle" for its excellent qualities and conditions. According to the joint statement, the main areas of co-operation are to be infrastructure, trade, investment, financial relations, environmental policies and security issues. The three states will also co-operate to fight organised crime and drug-smuggling. -------------------- BUSINESS & ECONOMICS Horn criticises IMF and the EU for not being more understanding Prime minister Gyula Horn voiced strong criticism of the International Monetary Fund for setting "unrealistic financial targets" and "not appreciating the political risks of economic transition". In an interview with Reuters in Budapest Horn said that he wanted to reach an agreement with the IMF "but not at any cost." He said he agreed with setting tough conditions but called the pace dictated by the IMF unrealistic, referring to the IMF's target to cut the 1996 budget by half of this year's. At the government press conference on Thursday he reiterated his points stressing that no government could achieve such a cut in a year and added that society could not possibly tolerate such a pace. The way towards an agreement was to "show the tendencies backed by facts that we are going to the right direction, which could serve as the basis for trust", Horn said. He added that he had voiced these concerns to the IMF in Washington on his visit in June and to other international partner such as the World Bank. In his interview with Reuters, Horn also called on the EU governments to give more assistance for the economic transformation of Hungary and of central Europe. "There are very serious social and political tensions and this has an impact on political stability," he said. At the government press conference on Thursday Horn stressed that the EU countries "should rethink seriously the situation in eastern Europe and Hungary". Electricity privatisation tenders issued 5 August Electricity privatisation tenders will be issued 5 August, the APV Rt announced Thursday. Investors will have three months to hand in applications. The APV Rt will start the evaluations 31 October and by 15 December the first phase of the electricity privatisation could be finished, Bela Kunszler managing director of APV Rt said at an international conference in Budapest. The announcement comes just days after that an electricity workers' strike was averted when the government reached an agreement with the trade union. The 55,000 employees of MVM will be offered a 6-10% stake in the company under preferential terms when the company is sold. The agreement also state that five percent of privatisation revenues will be injected into the non-profit energy sector employment fund to finance expected dismissals. The union had opposed majority foreign ownership of the utility for fears of mass dismissals and loss of collective contracts. It called for gradual privatisation and for a minimum 25% share in all electricity companies. K&H and IBUSZ Bank merge Kereskedelmi Bank (K&H) and IBUSZ Bank will merge by the end of the year, K&H announced Thursday. The new bank will probably be called Kereskelmi Bank. As a result of the merge the new bank will have 135 units and become the second largest bank in the country. The aim of the fusion is to make the bank a significant universal commercial bank with regard to its capital, service volume and innnovation, K&H president Laszlo Lang told Nepszabadsag. ----------- SHORT TAKES THE SMALLHOLDERS' PARTY IS PREPARING FOR GOVERNMENT, party leader Jozsef Torgyan declared Thursday. He yet again called on the government to resign, calling it "a failure", and announced that his party is setting up an "expert cabinet", which is to become a shadow cabinet. They will soon be ready for governing, Torgyan said confidently. The party's popularity has been steadily rising since the last election and it now stands at 15%, more than double of last year's figure. The party now shares the lead with the governing Socialist Party, whose popularity has dropped by 5 points since January. Torgyan also announced that they initiating to set up a "National Alliance" calling under their banner any political force dedicated to the "national thought". MINORITY OFFICE SECRETARY CALLS FOR A GYPSY CO-ORDINATION COUNCIL to work out a crisis management programme and to co-ordinate government measures to improve the condition of the country's largest ethnic minority. The report of state secretary Csaba Tabajdy points out that the situation of the 500,000 Roma community has further deteriorated since 1990. Today unemployment among Gypsies is over 75% while it is 11% among non-Roma Hungarians. Since the 1970s the number of gypsies doubled and by 2015 they will make up at least 8% of the population. The report says that if the present trends continue they will constitute a poorly educated, unhealthy, marginalised section of society and ethnic conflicts will increase. CONTROVERSIAL FOREIGNER'S DETENTION CAMP in Kerepestarcsa is to close down this year, interior minister Gabor Kuncze announced Tuesday following the reports of human rights organisations. The reports called conditions of human rights and hygiene in the camp "catastrophic". The camp, where illegal foreigners are held in prison-like conditions, has been a matter of controversy for more than four years. NEXT ROUND OF HUNGARIAN-ROMANIAN BASIC TREATY TALKS will take place in Bucharest 19 July on the foreign ministerial level, diplomatic sources in Bucharest told the daily Nepszabadsag. The date was later confirmed by Hungarian Foreign Ministry officials. The meeting of two foreign ministers, Laszlo Kovacs and Teodor Melescanu, was already agreed in Cannes last month at the Horn-Iliescu talks. The negotiations are currently deadlocked due to the solid disagreement over the ominous EC 1201. recommendation, which includes some form of autonomy for national minorities. VISA REQUIREMENTS MAY BE REINTRODUCED for "certain southern/eastern neighbours", Horn announced at Thursday's government press conference. He said the move might be necessary to crack down on the black economy and improve internal security. Press sources say that the countries in question are Yugoslavia, Romania and Ukraine. MINISTRY COMPUTERS LINKED BY E-MAIL from 1 July and can also connect to the Internet. Later the year other government institutions will also be linked to the system. ---------------- NUMBERS CRUNCHED * Customs revenue from the 8% supplementary customs tax effective since 20 May (MH): HUF 24.94 billion * Registered revenues from tourism in the first quarter risen by 22.8% since last year to (MH): US$ 370 million. * The number of foreign companies established last year in Budapest (Business Journal): 2,466 * Drugs, mostly heroin, found and confiscated by custom officials on the borders in the first six months (Customs Office/ Nepszabadsag): 374 kg ------------- EXCHANGE RATE July 7, 1995 (National Bank of Hungary) US dollar - 124.55 (buying), 126.97 (selling) Deutschemark - 90.11 (buying), 102.53 (selling) -------------- WACKY AS USUAL Instead of beating up Gypsies, Blacks or Arabs, skinheads were preparing to beat each other Wednesday night. The notorious skinhead leader Albert Szabo himself phoned the police in desperation as his 30-strong group faced some 60 angry skinheads armed with baseball bats, clubs and other skinhead fighting weapons. The dispute apparently broke out for "ideological differences". One group is said to belong to a "freemason, anarchists" splinter group. The battle was averted when 13 police cars, two action police vans and the special commando unit appeared on the scene. Since no actual fight took place no one was arrested. ============= FEATURE STORY It's been a long time since the Danube was blue By Colin Woodard Copyright (c) 1995 The Danube, Europe's grandest waterway, the 2600-kilometer river and its vast network of tributaries has long served as a convenient sewer for half the continent. Starting at its source in western Germany, fertilizers, pesticides, and manure drain off farmlands and into the river system. Budapest, Bratislava and Belgrade discharge virtually all their sewage directly into the river without treatment, as does virtually every other community in the drainage basin south of the Austrian border. Industrial discharges from smelters, paper mills, chemical plants, and tanneries have devastated dozens of tributaries and contaminated water supplies. It all feeds into the Danube, which empties the pollution into the dying waters of the Black Sea. But a major international effort to address the Danube's environmental problems is finally gaining momentum. After decades of political division, the eight Danubian countries, the EC, UN, and international financing organizations established the Environmental Program for the Danube Basin, a multilateral program to strengthen and coordinate environmental management across the entire basin. It's a huge undertaking. The Danube basin is huge -- 817,000 square kilometers encompassing all of Austria, Hungary, Slovakia, Romania, and Serbia and parts of eleven other countries from Switzerland to Moldova. Relations between many of the countries are strained or poorly developed, and the Yugoslav War has made comprehensive management impossible. Like any large multilateral undertaking, the Danube Basin Program has plodded along, its resources spent hosting meetings and turning out studies rather than supporting needed investments. Some progress has been made. In June 1994, the eight Danubian countries and the European Union signed the Danube River Protection Convention, which obliges members to take measures to reduce pollution and conserve water resources; a second convention will address nature conservation issues. "The task force has brought the [Danubian] countries together in a cooperative environment," says Istvan Tokes, head of the international relations department of the Hungarian Ministry of Environment and Regional Planning. "The conventions serve as an excellent reference point to establish better bilateral relations between countries that, historically, have not always had the best relationships." But more concrete results may be in the offing. Last fall, the members of the Danube Basin Program adopted a comprehensive action plan which identified the most pressing pollution "hot spots" in the basin and recommends measures to improve the situation. Just one problem: nobody's quite sure where the necessary funds are going to come from. "It's been clear for some time that 95-95% of all environmental investments will have to be supported from local resources," Tokes says. "Whenever a list of hot spots is drafted, the banks offer loan financing, but the former-socialist countries often aren't in a position to take on more loans." Hungary is actually in better shape than many other Danubian countries. Revenues from the recently established Central Environmental Fund will be made available to support prescribed investments. The Fund, in which are deposited all environmental packaging fees, pollution fines, and the proceeds of the petrol tax, has already accumulated some HUF 3 billion ($24 million) from petrol fees alone, according to Tokes. But the Ministry of Environment will have its work cut out for it. The Strategic Action Plan identifies 29 "hot- spots" in Hungary, and the suggested direct investments total to nearly $1 billion. The vast majority of the investments are for the construction, completion, or upgrading of municipal waste water treatment plants for virtually every sizable town in the country. Other "hot-spots" include the Hungarian Oil and Gas company's oil refinery at Szazhalombata, the tailing dump at Pecs' Mecsek Uranium Mines, contaminated groundwater at the Lehel factory in Jaszbereny, several power plants, and the reconstruction of critical wetlands on Lake Balaton. Budapest has by far the largest single Hungarian investment proposed in the Action Plan: a $540 million upgrade of the city's sewage treatment system, expanding treatment capacity by almost four times. The costs do not include necessary expansion of the sewer network. Currently only 25% of Budapest's sewage receives biological treatment; the remainder is screened for large particles and released into the river. High fecal matter content in the river is the main reason that health authorities ban swimming in its main branch. "The section of the river from Vienna to Budapest is one of the most critical sections of the Danube. This is the most populated section of the river and, as a consequence, the pollution inputs are the highest and the water quality requirements are the strictest," says Peter Literathy, director of the VITUKI Institute for Water Pollution Control near Csepel Island. "People here depend on the quality of water from the Danube." Budapest, for instance, receives the vast majority of its drinking water from deep "bank-filtered" wells north and south of the city, the largest such scheme in Europe. The deep gravel beds of the Danube are an invaluable resource, as they act as a natural filter protecting the subsurface aquifers under the riverbed. From these wells, Budapest and other communities can draw drinking water without treatment. This supply is supplemented by direct intake from the Danube (which does require treatment), which is particularly vulnerable to pollution discharges. Protecting these water resources, and reducing the pollution load in the Black Sea are the underlying goals of the Strategic Action Plan. The Plan has been criticized, however, for its overwhelming emphasis on treatment plants and other "end- of-the-pipe" solutions. "Based on the studies, many people felt that a greater pollution decrease could be achieved by addressing agricultural pollution," says Dalibor Kysela of the Regional Environmental Center for Central and Eastern Europe, who serves on the Danube Basin Program's coordinating task force. "The financing institutions want to have a clear contract with somebody, however, and thus the interest in waste water treatment plants. These plants allow the World Bank to draw up a business contract with some company to build a specified structure. Other types of investments wouldn't be nearly as straightforward, or there would be no bank involvement at all.... There's a general feeling that the funders are the ones who've set the priorities." "We need waste water treatment, but this is only part of the whole picture," says Gyorgy Droppa, director of the environmental group Danube Circle. "There are a number of other important elements that haven't been given proper attention -- the effects of shipping, of dams, damage to wildlife. I'm very disappointed with the way it has been handled." True, perhaps, but responsibility lies with the Danubian governments themselves. "The hot spots were chosen by the respective ministries of environment in each country," says Bo Wingard of the Danube Basin Program's Project implementation unit in Vienna. "The criticism that the availability of project financing may have influenced governments to concentrate on waste water treatment may well be valid." Wingard says that there is a great deal of confusion about how the loosely structured program functions, and who makes the decisions. In most cases, international financing institutions hired western consultants to go to a specific country or region and prepare a pre-investment study. This study identified and commented on area hot spots based on information gathered from local sources and institutions. "The respective national governments received these studies as a resource for identifying priority investments." The Hungarian section of the Danube suffers from a wide range of pollution discharges, but the natural cleansing properties of the river have been able to keep pace. "If you look at most major categories of pollution, the pollution levels in the main river are about the same at Rajka [where the river enters Hungary from Austria] and Mohacs [where the river enters Serbia.]," Literathy says. "If we proceed with environmental investments now, while the industrial sector is still dormant, than Hungary may even become a net "cleaner" of the main river. The big problems lie with the tributaries." Fouled with Bratislava's untreated sewage, the river is diverted to Slovakia's Gabcikovo dam, returning to its original bed in time to receive the poisoned flow of the Vah River, which collects most of Slovakia's industrial discharges. The waters are cleaned as they pass through the vegetation of the Danube Bend and Szentenrei sziget, but receive enormous pollution discharges from Budapest's sewers and industries. South of Budapest settlements are few and far apart, and the natural vegetation along the river returns it to a similar condition as when it entered Hungarian territory -- dirty, but still suitable for industry and bank-filtered water supplies. What about that Dam? The Gabcikovo hydroelectric project is conspicuously absent from the Action Plan, despite allegations that the Slovak project will threaten groundwater, local ecology, and the very bank-filtered water reserves upon which Budapest, Bratislava, Gyor and other cities rely. The massive communist-era project began as a joint Hungarian-Slovak project, but Hungary abandoned the scheme along with one-party rule. Relations between the countries soured when Slovakia went ahead with their side of the project, then diverted the Danube into Slovak territory to power the system (the river forms the boundary between the two states as far as Esztergom). Environmentalists and Hungarian authorities claimed that the 1992 diversion would increase contamination of groundwater, as the 25 km long concrete diversion channel has none of the self-cleaning properties of the natural riverbed and the Szigetkoz wetlands region, through which the river once passed. "It's amazing that Gabcikovo isn't included in the documents, given its enormous potential impact," says Gyorgy Droppa of the environmental group Danube Circle, who has served on the Danube Basin Environment program task force. "I think certain political interests must have been at work to keep the dam from being identified as a priority issue." "The Slovakians themselves chose Slovakia's hot-spot list. For Hungary or the Project Coordination Unit to have interfered with the drafting of a given country's hot spot list it would have caused enormous problems," responds Bo Wingrad of the Danube Basin Program's Vienna-based Project Coordination Unit. "The Gabcikovo issue is currently under arbitration at the International Court of Justice, so its not surprising that it is being left out of the priority lists. It's too controversial." Since the diversion, no conclusive evidence has emerged showing significant damage to water quality or supply, although the Szigetkoz wetlands region has clearly suffered from reduced river flow through the area. Water authorities on both sides of the border say that it will be another couple of years before the long-term effects of the diversion will be seen. In the meantime, the case is before the International Court of Justice, which will decide if Slovakia violated international law by diverting the river or if Hungary owes Bratislava compensation for pulling out of the bilateral project, leaving a second dam at Nagymaros uncompleted. At present, researchers are concentrating on the effects of the new reservoir at Cunovo, Slovakia, just north of the Hungarian border. "The effect of a reservoir can be both positive and negative for water quality," says Peter Literathy, director of the VITUKI Institute for Water Pollution Control, a branch of the Hungarian state water research center. "The most critical contaminates like oil and heavy metals will settle out into the sediment in a reservoir, which acts as a sort of sink for most pollution. This means the waters released downstream are relatively free of contaminants." Litheraty says that the danger in all of this is that the relatively stagnant reservoir will facilitate algae blooms leading to eutrophication of the reservoir. If this process goes on, the natural chemistry of the photosynthetic plants and decay- causing bacteria can result in sudden remobilization of settled toxins and contaminants in the reservoir floor. The Cousteau Society's 1993 report on the Danube describes this as a "chemical time bomb; beyond a certain concentration threshold or if reducing conditions develop on the bottom, massive release of pollutants may take place with serious consequences for the environment." Much concern in Hungary surrounded the possible contamination of Budapest's drinking water supply, which is located downstream of the dam system. Ironically, the pollution concentrated in the reservoir may contaminate groundwater reserves of the Slovak capital, Bratislava, located nearly adjacent to the reservoir. * * * Colin Woodard writes for the Christian Science Monitor and is an expert on regional environmental issues and, luckily, is a friend of the Hungary Report. ================ PARLIAMENT WATCH Constitutional Court vetoes certain paragraphs of "Bokros package" By Tibor Vidos Copyright (c) 1995 On the last working day of Parliament before the summer recess and on the last day before coming into force the Constitutional Court abolished some paragraphs of the 'Bokros austerity package' and delayed the institution of some others. The Constitutional Court ruling means that around HUF 25 to 40 billion will have to be spent of the 170 billion earmarked to be cut by the Bokros package. The austerity program announced on March 12 was aimed at cutting the budget deficit and at stimulating exports in order to improve the current account balance. The Constitutional Court delayed the introduction of a new, less generous child benefit system on grounds that the government did not give adequate time for parents to adjust to the new regulations. With other words parents have the right to the child benefits they were counting on when the baby was conceived. The intellectual community has also received some blessings from the Constitutional Court. Honoraria will remain free of social security contributions despite the government's intention to put all employees on equal playing ground. According to the chief judges a social security contribution that does not result in any social security service is unconstitutional. The Constitutional Court decisions were warmly welcomed by the opposition - interestingly enough they seemed to be less enthusiastic about this very institution when they were in power- and by the social groups positively affected by the rulings. The government is currently contemplating on the measures not requiring a parliamentary decision that could either increase government income or decrease public spending by the amounts scraped by the court. One of the alternatives is to introduce an 8 percent duty on fuels - a group of products that were exempt of the new special 8 percent duty introduced on all other imports on March 12. Another alternative is to automatically cut all government spending by three percent. The introduction of new taxes or the temporary raising of others, like VAT are also talked about. One thing is certain, this summer will be very hot for the Government indeed. Unlike tourists this is not something the ministers were hoping for. * * * Tibor Vidos is a lobbyist and political consultant in charge of the Budapest office of GJW Government Relations. or A version of this article appeared in the Budapest Business Journal. * * * ATTENTION TO ALL READERS! * * *. We had serious technical problems in distributing The Hungary Report No. 1.14. If you have not received that issue and you would like to have it now, please send us a message and we will send you immediately. * * * ATTENTION TO ALL READERS! * * *. =========== FINAL BLURB The Hungary Report is free to readers. 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Please contact the authors directy by email to enquire about resale rights. * * * For information on becoming a corporate sponsor of The Hungary Report, contact Rick E. Bruner by email. Feedback is welcome. Rick E. Bruner John Nadler Tibor Vidos or * * * For its briefs, The Hungary Report regularly consults the news sources listed below -- for information about subsriptions, contact them by email: The Budapest Business Journal <100263.213@compuserve.com> (and tell them what dwads they are for making us pay for issues at the newsstand); Budapest Sun <100275.456@compuserve.com>; Budapest Week and Hungary Around the Clock (same email address) <100324.141@compuserve.com>, and Central Europe Today (free online) . ================ END TRANSMISSION