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Hungary - RIO Country Report

RIO Country Report Hungary 2015

The annual RIO Country Report offers an analysis of the R&I system in Hungary, including relevant policies and funding, with particular focus on topics critical for EU policies. The report identifies the main challenges of the Hungarian research and innovation system and assesses the policy response.

R&I Challenges
Stabilising the R&I governance
Challenge description: 

The system of governance of research, development and innovation (RDI) in Hungary has been subjected to constant structural changes since the beginning of the 1990s, which have led to lack of political commitment, instability of the RDI system, shortfalls in the policy implementation, and slow, insufficiently informed policy learning processes. The latest significant governance restructuring entered into force on 1 January 2015 when the new National Research, Development and Innovation Office (NKFIH) was established. It is the legal successor of the National Innovation Office (NIH) and now incorporates also the National Research, Development and Innovation Fund (NKFIA). This fund integrates the previous Hungarian Scientific Research Fund (OTKA) and the Research and Technological Innovation Fund (KTIA). The NKFIH coordinates the RDI strategy-making, including the Operational Programmes supported by the Structural funds and elaborates the RDI funding instruments of the Hungarian government in collaboration with the respective ministries and the Hungarian Academy of Sciences (MTA).

In the past few years, a number of Science, Technology and Innovation (STI) policy advisory bodies have been established, among which the most recent one is the National Science Policy and Innovation Board (NTIT), whose task is to provide advice to the management of the NKFIH and to formulate strategic recommendations regarding the development of the research and innovation system. However, the activity of those advisory bodies is very small.   

A study carried out within the Stairway to Excellence project shows that there are substantial flaws in the management and control of the European Structural and Investment Funds (ESIF), as well as in the Framework Programmes (FP). During the 2007-2013 programming period the unpredictability of publication and closure of calls hindered the implementation of the RDI ESF funds. In April 2015, the European Commission suspended the Economic Development Operational Programme affecting the payment of around €500m. The audits revealed severe deficiencies related to the evaluation of calls for proposals and the Commission asked the authorities to strengthen the project selection system, and to create synergies between the objectives of the operational programme and the conditions of the specific calls for proposals. These measures were necessary to ensure transparency, equal treatment and efficient financial management, as well as to improve the fraud detection mechanisms.

Policy Response: 

The rationale behind the establishment of the new NKFIH is to ensure coordination of research and innovation policies at government level, and to provide stable institutional background of predictable financing as well as efficient and transparent RDI funding. In addition, the NKFIH office and the NKFIA fund support financially the entire innovation chain from basic research to applied and experimental development. The new office also runs the database of RDI projects that are financed by public resources.

Concerning the unpredictability of the governance system, the government offered a solution by publishing a yearly funding plan indicating the timing and eligibility criteria of calls for proposals.

Hungary was one of the first Member States (the other one is Bulgaria) that volunteered to undergo a peer-review of its research and innovation system within the framework of the Horizon 2020 Policy Support Facility. So far a pre-Peer Review was carried out by a panel of three independent experts agreed upon by the European Commission and the Hungarian authorities. The pre-Peer Review panel identified four focus areas to be examined in-depth during the subsequent Peer Review process: 1) R&I governance and policy making; 2) availability of human resources for R&I; 3) university-industry cooperation, technology transfer and entrepreneurship; 4) framework conditions for innovation in the business sector.

Policy assessment: 

The governance of the research and innovation system in Hungary is characterised by constant structural and personnel changes that have often delayed the implementation of policies and have slowed down the system performance. The management and control flaws in the operational and framework programmes have caused delays throughout the whole funding cycle, more specifically in the decision making regarding the funding, payments, signature of contracts, approval of modifications, and communication.

Fostering innovation in domestic enterprises
Challenge description: 

In the context of the governmental policy of fostering the business R&I expenditure and of raising the significance of the business R&I performance, the level of innovation activities is low, especially that of SMEs. Only about one-fifth of enterprises introduce product or process innovations in Hungary, with no major change in the last decade. This ratio is even lower for SMEs and the share of SMEs innovating in-house is only 10.6% - only one-third of the EU-28 average (28.7%). According to the Innovation Union Scoreboard 2015, only 12.8% of Hungarian SMEs introduced product or process innovations, that is, 42% of the EU-28 average (30.6%). This is explained with the fact that R&D activities are highly concentrated in large companies and a mere 8% of all Hungarian research units are responsible for half of the business expenditures on R&D. The small domestic firms lack their own funding for research and innovation and often wait for public support in order to launch new research and innovation projects, therefore they try to avoid taking risk and rarely invest in RDI activities from their own pocket.

A complex analysis of Hungary's participation in FP7, carried out within the Stairway to Excellence (S2E) project, shows that the policy of funding RDI from the European Structural and Investment Funds does not favour innovation. Calls for proposals in the field of innovation are risk avoiding in a way that they strongly limit the innovativeness of projects or exclude innovative business concepts completely. This is evidenced by the fact that RDI calls evaluate only the previous performance of the applicant but do not evaluate at all the business potential of the proposed idea itself or the innovativeness of the new product, service or process. In addition, the implementation period of the EU funded projects is limited to 24 months, which hinders the innovation processes. Many large and small-and-medium-sized enterprises report that this time period does not allow them to carry out substantial research, because in the second part of the projects they should focus entirely on the delivery of the promised results. Hence less risky projects are implemented in order to deliver "results". In addition there is a lot of administrative work that companies should comply with.

Policy Response: 

The RDI strategy 2013-2020 foresees measures that are dedicated explicitly to innovative SMEs and favours innovative SMEs in certain restricted areas of pre-commercial procurement (PcP). More specifically, the RDI strategy would increase the public demand for innovation through PcP actions. The National Smart Specialisation Strategy foresees a PcP pilot action in order to examine whether the domestic application of PcP will require amendments to the existing regulations or the introduction of new legislation. The pilot action aims to investigate what financial incentives are needed for the domestic expansion of the PcP programme. However, these actions are late, they were already supposed to be introduced in 2015.

According to the National Reform Programme 2015 of Hungary, in 2015-2016, innovation related measures are expected to be launched using EU and domestic resources. Supporting RDI activities carried out individually or in cooperation in the framework of both revolving funds (loans, guarantees and venture capital) and grant type support are envisaged. The aim is that innovative enterprises (including the suppliers) will further develop their existing marketable products, and introduce improved products to the market.

From 2015 innovation support is available from the new National Research, Development and Innovation Fund and the Operational Programmes (mainly the Economic Development and Innovation Operational Programme (GINOP) and Competitive Central Hungary Operational Programme (VEKOP)) co-funded by the Structural Funds.

Policy assessment: 

The risk avoiding attitude of the governmental bodies and the SMEs (especially of the domestically owned ones), as well as the unfavourable framework conditions, are obstacles to accelerating the progress of innovation. In addition, the lack of innovation experience, the insufficient knowledge base and human resources capacity hamper the development of the innovation process. The most recent policy documents propose some measures that could offer solutions for a faster and more effective development of the Hungarian innovation system, but it depends a lot on the quality of the implementation of those measures in order to achieve the expected outcomes. What is more, a systemic development of the entire national innovation system is necessary in order to strengthen and synchronize all the components of the innovation driving mechanisms.

Enhancing the cooperation between science, higher education and business
Challenge description: 

Scopus data show that between 2003 and 2013 the percentage of academia-industry co-publications in Hungary has almost not changed, in 2013 being 1.4%, well below the EU-28 average of 2.2%. Moreover, in 2013 Hungary had only 12.8 public-private co-publications per million of population compared to 29 for the EU-28 (17.5 for the Czech Republic, 9.8 for Poland and 6.8 for the Slovak Republic). The domains with the highest percentage of academia-industry co-publications (excluding the multidisciplinary publications) are energy, immunology and microbiology, the health related professions, pharmacology, toxicology and pharmaceutics.

The exploitation of public research results, including knowledge transfer and spin-off creation, is not yet a well explored area, even if Technology Transfer Offices (TTOs) have been established in all major Higher Education Institutions (HEIs). These intermediary organisations are not yet ready to efficiently mediate between academia and industry and to transfer research results to companies. Apart from the above mentioned Technology Transfer Offices, there are a relatively large number of intermediary organisations (e.g. regional innovation agencies, foundations for enterprise promotion) in the Hungarian national innovation system, but they have no critical mass in size or in responsibilities.

According to Deloitte, even though the government aims to facilitate joint R&D projects through grants and incentives, three quarters of the respondent companies in a survey prefer to carry out R&D activities on their own – that is, they do not wish to involve third parties in R&D projects. Companies that plan to carry out their R&D projects in consortium arrangements mostly say they select universities and academies as partners. Despite that, co-operation with universities and research institutions is less than common as a feature of corporate R&D spending, both in 2013 and 2014.

Policy Response: 

Several new measures within the Economic Development and Innovation Operational Programme (GINOP) and the Competitive Central Hungary Operational Programme (VEKOP) address the issue of collaboration between science and business, e.g., the measure GINOP 2.2.1 has one of the largest budgets for 2015 – around €166.67m are planned to be spent on "Competitiveness and excellence cooperation" between the private and public sector.

The National Smart Specialisation Strategy mentions two specific pilot measures addressing this challenge. The first one is “Open laboratories” aiming to facilitate networking among public research centres, technology centres, large companies and SMEs, and to provide support, research capacities and equipment to those actors of the system that still lack them. (It should be noted that probably this measure will be implemented as part of the second measure mentioned below, that is, the “Higher Education and Industrial Cooperation Centres”.) The second measure is “Higher Education and Industrial Cooperation Centres” (FIEK) aiming to develop sectorial training and RDI activities better aligned with industry needs. In the new programming period 2014-2020, measure GINOP 2.3.4 will allocate €83.3m to the development of a small number of FIEKs in 2015.

Several measures have been launched in the last five years to support R&I cooperation and knowledge transfer (KT) between the public and the private sector: “Start-up_13” aiming to support the development of young technology start-ups with high growth potential; "Support to market-oriented R&D activities" scheme targeted at R&D projects expected to develop prototypes of marketable products, services or processes with high added value through stimulating business demand for R&D activities and fostering the public-private technology transfer; "Strengthening Co-operative Research Centres (KKK) and Regional Knowledge Centres at Universities (RET)" scheme.

Policy assessment: 

Although there are programmes launched to support the cooperation between science, higher education and business, they can foster the achievement of good results only if they exist for longer periods of time. New programmes are constantly launched and the key players have difficulties in perceiving them and integrating them in their own business plans. It would be better if this type of measures are organised in two phases, for example, 3+3 years, so that the key players are given the possibility to really work together and achieve results.

Sustaining the supply of human resources for the R&I system
Challenge description: 

Both the share of science and engineering (S&E) graduates and the rate of participation in life-long learning are rather low in international comparison and a significant gap might be opening between the supply and demand for qualified S&E personnel in the near future. The "stock" of S&E graduates is 5% in Hungary, which is lower than in the Czech Republic (5.5%), Poland (6.3%) or the EU average (6.4%). Likewise in the case of new doctorate graduates (i.e. potential supply to the RDI system) the numbers are as follows: Hungary 0.9 doctorate graduates per 1,000 people, compared to the Czech Republic (1.7), Slovakia (2.4), Poland (0.6) and the EU average (1.8). It is a positive trend, however, that the share of the population aged 30-34 having completed tertiary education increased slightly to 31.9% closing the gap with the EU average (36.9%). The share of persons with tertiary education in Hungary in the total active population shows an increasing decennial trend: from 16% in 2000 it grew to 24.8% in 2013, still lower than the EU average (30.3%). The share of persons with tertiary education employed in science and technology shows a similar trend, moreover, by 2013 Hungary had practically caught up with the EU (17.9% vs. 19.1% - EU average). The share of persons with tertiary education employed in high and medium high-tech manufacturing in the total employment reached 6.4% in 2014 outpacing the EU average (5.3%), but it is only the second best after the Czech Republic (7.1%). The situation is similar for the knowledge-intensive high-tech services: Hungary (6.1%), Czech Republic (7.7%), Slovakia (7.2%), and EU average (5.7%). Brain-drain primarily affects the highly qualified young people, especially those with S&E degrees that are overrepresented within the group of Hungarians working abroad. The main barrier for pursuing a career in research is the low salaries, especially in the early years of researchers, even within the national context.

According to the National Smart Specialisation Strategy, the quality of the human resources needs development and should be aligned with the needs of the market.

Policy Response: 

The higher education strategy (“Changing gear in higher education”, 2014) foresees major changes in the way the HEIs are financed. Performance based financing will be introduced in Hungarian HEIs from 2016 that will be based on various performance indicators. The strategy also foresees the introduction of fixed-term post-doctorate positions that are currently lacking from the higher education system. These positions aim to allow early career researchers to find job opportunities at HEIs so as to prevent “brain-drain” from Hungary and to ensure the supply of researchers at the same time. The higher education strategy seeks to develop career paths for researchers. The strategy also created the basis of the dual education system, which was launched in February 2015.

The strategic R&D workshop excellence programme, with a budget of €141.9m (HUF44b), aims to establish and renew higher education research groups by taking the burden of lectures off the researchers with outstanding performance and by supporting young talents.

In 2014, the government took a decision to allocate €38.7m (HUF12b) from the Research, Technology and Innovation Fund (KTIA) to support the National Programme in Brain Sciences. The strategic objective of the “A” sub-programme managing €20.6m (HUF6.4b) is to strengthen the research centres and institutes belonging to the international front line by introducing new topics and technologies. The objective of the “B” sub-programme with a total budget of €18.1 (HUF5.6b) is to turn back brain-drain by inviting and employing researchers working abroad.

The “Momentum” programme of the Hungarian Academy of Sciences (MTA) aims at the renewal of its research teams and those of collaborating universities via attracting outstanding young researchers back to Hungary by paying them competitive salaries. Every year 8-12 new research groups are supported with a competitive grant for maximum five years. Since 2009 more than 100 groups have been supported and several of them became part of the research network of MTA after termination of the grant period.

It should also be mentioned that the RDI strategy 2013-2020 addressed the issue of sustainable supply of researchers and intends to double the number of researchers from 38,000 to 50,000.

Policy assessment: 

Several programmes have been launched aiming to increase the attractiveness of the research career and to improve the higher education quality, but the efforts are fragmented and do not really impact the sustainibility of the human resources in the R&I system. The Momemtum programme of the Hungarian Academy of Sciences could be seen as a good practice, however its scale is rather limited in comparison to the objectives of the RDI strategy 2013-2020.

There is insufficient supply of researchers, which is due to the very low salaries and the more attractive career opportunities in the business sector and abroad. Meeting the challenge of increasing shortage of qualified human resources goes together with strengthening the entire R&I and higher education system.

Chapters
1. Overview of the R&I system

The Hungarian R&I system is characterised by relatively low R&D intensity in both the public and private sectors. In 2013, gross R&D expenditure (GERD) was €1,415.1m (1.41% of GDP) and business R&D expenditure (BERD) stood at €982.5m (0.98% of GDP). The share of R&D funding from abroad continues to be significant (16.6% of the GERD in 2013). The share of EU funding is still only around 4% of GERD.

Compared to the business sector, universities and public research organisations (PROs) play a minor role in research. The network of the Hungarian Academy of Sciences (MTA) is the most significant actor and represents 71.2% of the R&D expenditures of the PRO sector. While the research centres and institutes of the MTA are engaged mainly in basic or discovery research, the research units at higher education organisations are smaller and focus more on applied research.

2. Recent developments in research and innovation policy and systems

Key developments in the R&I system in 2015 included:

• Establishment of the National Research, Development and Innovation Office (NKFIH) that integrates the activities of the previous National Innovation Office and ministry departments responsible for innovation policy (January 2015).
• Establishment of the National Research, Development and Innovation Fund that integrates the Hungarian Scientific Research Fund (OTKA) and the former Research and Technological Innovation Fund (KTIA) programmes (January 2015).
• Establishment of the Innovation Body that consists of nine distinguished members representing both the economic and scientific spheres. The main goal of this body is to ensure the effective use of financial instruments available for research and innovation (March 2015).
• Launch of new research measures funded by the Operational Programmes (i.e. GINOP, VEKOP, EFOP) co-funded by the Structural Funds.

3. Public and private funding of R&I and expenditure

According to Eurostat data, R&D expenditures increased every year from 2010 to 2014 and reached a peak of 1.41% of GDP in 2013 due to increases in BERD. In 2014 GERD decreased slightly to 1.38% of  GDP. GERD per capita increased by 19.9% in the period 2011-2014, still it reached only one-quarter of that of the EU-28 average (25.9%). Nevertheless, it is a positive development that companies located in Hungary invest steadily increasing amounts in research and development. The R&D funded by the business enterprise sector grew from 0.57% of GDP in 2011 to 0.67% in 2014 which is 59% of the EU-28 average. The government sector funding also increased from 0.46% of GDP in 2011 to 0.51% in 2013, then decreased to 0.46% in 2014. R&D funding provided by private non-profit organisations is rather limited, it only reached 0.01% of the GDP in the investigated period.

Structural Funds also play a prominent role in total national R&D funding.

4. Quality of the science base and priorities of the European Research Area

The scientific outcome of Hungarian researchers corresponds to 60-80% of the respective bibliometric indicators of the EU-28 average. This has to do with the insufficient public research funding, and the low number of dedicated researchers in the higher education organisations where staff members mainly focus on education activities. The performance is much better in the largest PRO network, the Hungarian Academy of Sciences (MTA), where the aggregated impact factor of the researchers grew by 24% in 2014.

5. Framework conditions for R&I and science-business cooperation

The exploitation of public research results, including knowledge transfer and spin-off creation, is not yet a well explored area, even if Technology Transfer Offices have been established in all major Higher Education Institutions. Although there are programmes launched to support the cooperation between science, higher education and business, they can foster the achievement of good results only if they exist for longer periods of time.

6. Conclusions

The main weaknesses, as well as the major opportunities of the Hungarian research and innovation system are summarised here. 

Geo coverage
Report year
2015
Country Report file
Official publication date
Tuesday, 3 May, 2016
Last update: 30/04/2017 | Top | Legal notice | Contact | Search