The Hungarian SME Sector Development in Comparative Perspective

The Hungarian SME Sector Development in Comparative Perspective

As an outcome of broad international cooperation this volume presents an empirical and theoretical analysis of small business development in the first decade of transition. It adddresses the following puzzle. On the one hand economic policy in all transition economies declared the support of small and medium sized business as its top priority. On the other hand, in reality the growth of the SMEs remained sluggish and limited.

The volume is composed of three parts. Part One analyzes empirical and theoretical issues of SME development in Hungary, including such issues as tax evason, the irregular economy, and inadequate payments morale/implications of the „virtual economy"? phenomena/. This part refutes the claim, widespread in economic, policy and sociological literature, about the dual structure of enterpreneurships. It shows on empirical material, that small and large businesses never functioned in separation. It also has shown that non-payments and other forms of lack of financial discipline are more detrimental to small busines than lack of public funding.

Part Two is devoted to interntional experience, with a focus on central Europe, the natural environment. This covers case studies of Italian, east German and Czech policies. This broad analysis allows for the insight, that SME development is not primarily constrained by transition-specific factors of various sorts. Rather such general obstacles, as red tape, overregulation, high inflation and non-cooperative behavior of local municipalities and the tax authority may be the major culprits.

Part Three is devoted to normative and policy suggestions. The most important components, each elaborated in detail, is the improvement of contestability of markets, removal of entry barriers, establishment of special non-bank institutions supportive of small business finance services, the role of venture capital, low inflation and simple, transparent public dues, to be provided by the overall macroeconomic policy framework.

Though based on the emprical investigation of the first 6-8 years of transition, major findings of the volume are still valid.The most important insight, perhaps, is that supporting small business is by no means a matter of ideology, nor of money. It can not be attended by pumping money into small ventures, abolishing taxaton or providing large amounts of soft, state-subsidized loans for dubiuos non-recoverable projects. Rather it is expanding domestic markets, finanial discipline and rule of law that matter, with low inflation. Equally or even more important is a favorable social climate, supportive of individual initiative and self-responsibility/as against excepting everything from Daddy State/. This should translate into an environment, where labor code, tax administration, public regulation and newspaper reporting all avoid scapegoating and criminalizing private activity and „profiteering"?, as was customary under the communist period.

Authors of this book are : Zoltán Bara, Marie Bohatá, Horst Brezinski, Bruno Dallago, Judit Karsai, Júlia Király, Mária Lackó, Silvana Malle, Jan Mládek, András Semjén, János István Tóth and Éva Várhegyi, together with the editor of the volume.

Publisher: Kopint-Datorg Alapítvány

Year: 1998

Number of pages: 267

ISBN: 963 03 6298 8


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The Hungarian SME Sector Development in Comparative Perspective