INSTITUTE FOR WORLD ECONOMICS HUNGARIAN ACADEMY OF SCIENCES REPORT ON ACTIVITIES 2006

INSTITUTE FOR WORLD ECONOMICS HUNGARIAN ACADEMY OF SCIENCES REPORT ON ACTIVITIES 2006 Budapest, 2007

INSTITUTE FOR WORLD ECONOMICS of the Hungarian Academy of Sciences REPORT ON ACTIVITIES 2006 Budapest, 2007 Institute for World Economics of the Hungarian Academy of Sciences H-1014 Budapest, Országház u. 30. Hungary P.O.Box 936, H-1535 Budapest, Hungary 224-6760, 224-6765 vki@vki.hu, www.vki.hu

Contents 1. Outline of the Institute... 5 1.1. Objectives... 5 1.2. Structure... 6 1.3. Financing... 7 1.4. Research Priorities... 7 1.5. Library and Scientific Information Service... 9 1.6. Publication and Dissemination Policies... 9 1.7. International Contacts... 10 2. Principal Research Projects in 2006... 12 2.1. Global Issues... 12 2.2. EU Issues... 12 2.3. The CEECs and Hungary... 18 2.4. Selected Topics... 22 3. Major Research Projects Prepared for Hungarian Policy Makers... 25 4. Major Projects in Preparation Financed by Hungarian Research Funds... 27 5. Coordination of and Participation in International Projects... 28 6. Publications... 29 6.1. IWE Publications in 2006... 29 6.1.1. Working Papers... 29 6.1.2. Kihívások ( Challenges in Hungarian)... 30 6.1.3. Műhelytanulmányok ( Workshop Studies in Hungarian)...30 6.1.4. Vélemények, Kommentárok, Információk ( Opinions, Comments, Information in Hungarian)... 31 6.1.5. Technological Development and New Scientific Achievements NKTH (National Office for Research and Technology) Project A Documentary Series... 33 6.1.6. Joint Publications... 34 6.1.7. Occasional Publications... 35 6.2. Publications by IWE Staff Members in 2006... 36 7. Lectures Delivered Abroad or at International Conferences Held in Hungary... 56 8. International Conferences Organized by IWE in 2006... 65 9. Foreign Guests at IWE in 2006... 66 Appendix... 69

Outline of the Institute 5 1. Outline of the Institute 1.1. Objectives The Institute for World Economics (IWE), as part of the Hungarian Academy of Sciences, carries out research and formulates policy recommendations on an objective, non-partisan basis, since its establishment in 1973 on the institutional background of the former Afro-Asian Research Centre founded in 1965, three years before the first wave of economic reform in Hungary. The Institute has become one of the major policy-oriented international research institutes and economic policy think tanks in Central Europe. Its main task is to study the underlying trends and factors behind global and regional economic developments and their present and future impact on the Hungarian economy. In addition, it sets out to contribute to international research through cooperation with top research institutes throughout the world. Because of its location, history and human and material resources, the IWE is particularly well placed to be a leading centre for research on the integration of Central and Eastern Europe into the global market economy. The change of political system in Hungary, the transition to a market economy as well as the coming enlargement of the European Union and new global challenges have greatly enhanced the importance of world economic research and altered the emphasis of it. The IWE sets out to give strategic support during this historic change of course: by drawing on the Institute's long experience and extensive and effective system of international connections to build up a reformulated programme of research, and by using the techniques of comparative economic analysis and interdisciplinary investigations. The Institute's research philosophy is based on the conviction that the transition to a market economy and the accession to the European Union are not an end in themselves but a means of shifting the Hungarian economy from the periphery towards the mainstream of global economic development. Central to this is the need to modernize, in view of Hungary's modest level of economic development by comparison with Western Europe. International comparisons of the path taken to modernization and the blind alleys to be avoided are being made, in order to identify the key areas in which the Hungarian economy has to catch up and the requirements and means for doing so. Moreover the transition to a market economy is taking place in an international, and particularly a European economic environment of unprecedented upheavals and a system of relations in the process of restructuring. Whereas, on the global scale, some of the other attempts to modernize in the more recent past took place within a stable, predictable system of international relations, the forecast in Hungary's case is that the international economic environment will be uncertain, or at least multidimensional. This country has to build up a system of economic relations that takes account of its comparative advantages against a background of a moving Europe itself undergoing adjustment. The criteria for choosing the IWE's research areas have been the medium-term demands of decisive importance in terms of the processes taking place in the world economy and the adjustment that Hungary must take, coupled with the comparative advantages offered by the

6 Outline of the Institute Institute itself. This is a pioneer undertaking for the future: instead of resting on short-term, ad hoc requirements, it is built on a long-term strategic demand that must be created in part by the Institute itself with the demand-oriented nature of its researches. This we see as the way to ensure that the IWE is a professionally respected, authoritative, influential, opinion-shaping institute. These objectives can be served by the Institute's present research staff as a whole. After the appreciable staff losses of the early nineties, the internationally reputed, competitive and highly experienced research team has been replenished with ambitious and productive young researchers. The funds, however limited, granted by the Hungarian Academy of Sciences guarantee the political independence, so providing one of the fundamental external conditions for scientific activity of a high standard. * In 2006, basic conditions for substantive research at IWE were able to rely on a consolidated financial background due in part to increasing cooperation with different government institutions. * IWE, in cooperation with other research institutes (largely belonging to the Academy of Sciences), undertook a coordinative function in developing a medium-term strategy of research priorities on European integration. * Cooperation with leading international and Western European economic institutions was further strengthened. * Demand for IWE's research output by leading Hungarian banks, companies and multinational firms located in Hungary grew substantially. * A special system of fellowships managed by the Academy of Sciences provided an opportunity to employ some young researchers and cover selected basic areas of research. * Interdisciplinary research network has strengthened as the Social Sciences Research Centre came into being in the framework of the consolidation programme of the Academy of Sciences. In the Centre IWE and several other legally and financially independent institutes cooperate concerning political, social, legal, and economic issues. 1.2. Structure The IWE had a research staff of 31 at the end of 2006, and an auxiliary, service staff of 17. As of January 1996, the executive structure was changed. Based on the experience of previous years and the accomplishment of the substantially enhanced research tasks recently, IWE has eliminated the traditional structure based on research centres. In fact, organization of the research activities has never been carried out in a rigid system. In contrast to many institutes, IWE has always stressed the importance of cross-working, and provided opportunity for its staff to become acquainted with research activities of other centres within the Institute. To a substantial extent, growing domestic and international competitiveness of the research staff can be explained by this flexibility. From the beginning of 1996, IWE's internal structure is based on teams organized for special topics and purposes. As a result a research network was created, in which practically each staff member is both the director of one or more research teams and member of other teams, simultaneously. This approach is expected to make research even more efficient, to use available capacities better and deal with priority tasks from different angles. A Research Council created in 1996 and consisting of 11 staff members, including talented young researchers, directs and supervises research activities. In selected areas of ensuring the infrastructure of efficient research, three commissions, each of which consists of three staff members, have been acting (acquisition of books, journals and documents, computerisation, publishing activities). Since early summer 1999 a managing director has also been acting who is responsible for internal and external contacts, communications and public relations.

Structure of the Institute for World Economics Mihály Simai Research Professor Treasury Head: E. Marosi General Director: András Inotai Scientific Information Service Head: A. Kovács Directorial Secretariat Managing Director Éva Nagy Library Commission Computer Commission Publications' Commission Financial Group Maintenance Service Library Section Section for International Exchange Section of Documentation Section of Publication Head: Gábor Fóti Printing Section of International Cooperation and Marketing Head: Anikó Gyorgyovich Secretariat Head: Andrea Vincze Japan, East and Southeast Asia Research Centre Head: András Staff Members Various Research Teams Headed by Staff Mem-

Outline of the Institute 7 In order to appropriately cope with growing research commitments, to ensure the education and training of young researchers and to use financial resources more efficiently, a special external research work has been extended, as part of the long-term and deliberate strategy of IWE. 1.3. Financing The tasks laid down in its deed of foundation and the new demands made by the changes taking place in the world economic environment make it essential for the dominance of direct state funding in the Institute's finances to remain. This conclusion is also supported by the widespread international practice of financing institutions that conduct strategic research out of central funds as a way of ensuring a high standard of activity. While strategic research institutes are generally financed in 60 to 70% of their annual budget from central funds throughout the world, contrary tendencies prevailed in IWE's financial situation until 2002, as central funds were limited to basic salaries and their non-wage labour costs. In 2006, however, IWE's total income amounted to HUF 293 mn (about USD 1.5 mn), of which slightly less than 77 per cent was provided by the Hungarian Academy of Sciences and Hungarian research funds. Other major items of income included various domestic sources (1 per cent), participation in international cooperation (8 per cent) and an overhang from fiscal year 2005 (15 per cent). Total expenditure reached HUF 293 mn (about USD 1.5 mn), of which wages, income taxes and social security contributions accounted for almost 69 per cent. Additional major items of expenditure were other research supporting expenses (10 per cent) and communal services and maintenance (21 per cent). The stable and relatively favourable financial situation is the result of the high professional level of the Institute, the attractiveness and practical usefulness of its research results as well as the successful search for new resources. As a rare exception among other academic research institutes, IWE possesses a solid financial background for 2006, which enables it to carry out strategic policy-oriented research and cement longer-term development concepts during the coming years. 1.4. Research Priorities Research activities were characterised by 23 major projects during last year. Contrary to the ruling tendency of the 90s, there was a clear shift from shorter-term to longer-term research in the new decade, though it remained highly policy-oriented still. Twelve principal research projects were finished during the year (out of which only three had a duration of less than a year), and six projects were initiated in 2006. Five research projects started earlier and spread beyond 2006. Research is fundamentally carried out on two basic levels: regional (geographic) and functional. Almost all research projects combine these two approaches, while staff members have to specialise themselves on one regional and at least on one functional topic. Priority areas of research in recent years: (a) Global economic development and transformation interrelationship of knowledge, growth and globalization; science and technology as a growth factor in smaller economies; sustainable development amid a system of terms under intensive world-market impacts; fundamental medium-term changes in the world economy and their impact on Hungary;

8 Outline of the Institute interactions and human dimensions of global demographic, political, economic, technical and social transformation; globalization and regionalization, with special reference to international capital and labour markets; relevant features and development trends of the new regionalism; role of the transnational companies in the shaping of a new global economic system; current issues of international trade and the role of WTO; interrelation between globalization and economic transformation; basic trends of consumption globally and in Central and Eastern Europe. (b) Economic developments in Europe, with special attention paid to the European Union and Eastern enlargement the development paths and modernization of selected European countries; relationship between community policies and different national policies; key integration processes in the European Union (common agricultural policy, economic and monetary union, experience of the Union's periphery with catching up, institutional reform, experience of ex-efta countries in the European Union, regional development, budgetary issues, developments in major EU member countries); the prospects for, conditions and costs of Eastern enlargement, and Hungary's preparation for full membership; main features of developmental integration and Eastern enlargement; interdependence between European integration and subregional cooperation; the major features of Germany's European policy at the beginning of the 21 st century. (c) Economic transformation in Central and Eastern Europe comparative analysis of the CEFTA countries; transformation and external trade relations, including the changing pattern of East-West division of labour; impact of foreign direct investment on the macro- and microeconomic performance of transforming countries; chances of regional cooperation; economic and political development in Southeast Europe; the accession of Hungarian agriculture and rural regions to the EU; Hungary's preparedness for EU accession in the field of infrastructure and services; Hungarian foreign trade structures in comparison with those of the EU; the structural transformation of Hungarian manufacturing industry. (d) New economic developments in the Asia-Pacific Region the lessons drawn from the Far Eastern economic development; Japan's decade-long stagnation or transformation rather than crisis; transformation patterns in China and Southeast Asia; the Chinese Diaspora and the chances of a Chinese Common Market ; constant and changing elements in the Japanese model of development; prospects of Korean Hungarian economic relations. (e) Other key research areas human development in Hungary; impact of socio-economic values on the pattern of development; possible scenarios of economic and social development in Latin America;

Outline of the Institute 9 micro-level adjustment and cooperation; the role of infrastructure and services in the modernization process; the role of clusters in regional development policy; the measuring of the efficiency impacts of foreign direct investment; sectoral studies. 1.5. Library and Scientific Information Service The IWE's library is a specialised scientific library with national scope. It contains one of Hungary's most important and most up-to-date collections of books, periodicals and statistics on international economic affairs. Since 2000 the library constitutes part of the United Library for Social Sciences together with the libraries of the Institute for Political Sciences, the Institute for Sociology, and the Institute for Minority Research. Through consistent and constant expansion of the IWE's international relations, about 70% of the books and periodicals, including most of the foreign books, have been acquired on exchange base. This is already the case with some publications of the World Bank, the IMF, the OECD and the EU. In addition, almost three-quarters of the annual increase in value of the stock is accounted for publications that arrive under exchanges schemes or as gifts. This remarkably high proportion by national standards ties in with the Institute's own publishing activity. The task of the Scientific Information Service is to obtain the information required for research work, examine it comprehensively, store it, make it available, and distribute the Institute's publications through the conduct of international publication exchanges. The enlarged library s stock contains more than 200,000 items (including 30,000 archives and 583 kinds of periodicals). Also, the establishment of a CD ROM databank was started and will be further developed in accordance with the financial possibilities of IWE. Last year the Institute was successful in creating the availability of publication distribution via e-mail among all its exchange partners who apply for it. (This may result in substantial savings of postage.) The library's cumulative catalogue can also be searched by the aid of Internet: www.etk.mtapti.hu On the WIIW's (Wiener Institut für Internationale Wirtschaftsvergleiche The Vienna Institute for Comparative Economic Studies) request IWE has joined the WIIW's "Countdown" project and become its Hungarian coordinator. The project aims at collecting in a joint database the names of Central and East European experts working on the European Union, by indicating their activities and the particulars of published as well as unpublished works on the Union prepared in the Central and East European region, mainly in Hungary and available in the library of the Institute. For information about the library please contact our information service, telephone: (36-1) 224 6759. 1.6. Publication and Dissemination Policies In 2006, the publication policy of the IWE followed in the framework of substantial changes introduced in the early 90s. This publication policy was justified by IWE's growing reputation at home and abroad, its scientific and economy-policy objectives, and not least its aim of influencing public opinion.

10 Outline of the Institute Last year the series Working Papers, Kihívások (Challenges), and Műhelytanulmányok (Workshop Studies) appeared with 9, 1 and 7 issues, respectively. The Working Papers series in English presents the best and internationally competitive products of research by IWE staff, primarily to the professional public abroad. Kihívások, in Hungarian, is designed to inform Hungarian economic policy-makers, members of Parliament, political parties and the broader professional public about current worldeconomic issues, their impact on Hungary and the economic policy measures proposed to be taken. Most of the articles provide clear, readable summaries of significant research work undertaken in the Institute. Műhelytanulmányok, also in Hungarian, presents comprehensive and in-depth analyses, mostly summary reports of major research projects carried out or coordinated by IWE staff members, for the professional community and students of economics in Hungary. Vélemények, Kommentárok, Információk (Opinions, Comments, Information) is a concise series launched late 200l in Hungarian, and meant for the professional public as well as a wider circle interested in domestic and global issues of the day. Nineteen of these short notices appeared in 2006. Our Newsletter (Hírfutár), available only in Hungarian so far, is designed to inform the professional public about the ongoing activities at IWE. The Institute s restructured, new homepage on the Internet offers the possibility of interactive communication in addition to the regularly updated information about IWE (www.vki.hu). The publication activities were complemented by occasional volumes reproducing the proceedings of high-level international conferences or comprehending the findings of major international projects run by the Institute. Last year four such independent books appeared. In 2006, staff members published 50 contributions in foreign languages, including two books and 34 papers contained in books. Eleven contributions appeared in international journals. In order to disseminate IWE's research findings to a broad interested public as well, the Institute regularly organises open conferences on relevant and topical global and European issues. Teaching represents an increasingly important activity of most staff members. Based on the basic research results and the fundamentally policy-oriented approach of IWE, we experience a rapidly growing need for dissemination on various levels. Staff members teach regularly in universities both in Hungary (Budapest and several universities in major towns) and abroad, while its director general is a visiting professor to the College of Europe, Bruges, Belgium and Natolin, Poland. 1.7. International Contacts The IWE's international relations have traditionally been very extensive, active and useful. In recent years, the Institute has taken part on average in ten to fifteen international research programmes a year, and organized about ten bilateral and international conferences annually. There is close cooperation with some 30 research institutes, scientific institutions and universities. Staff members travel abroad frequently, and the Institute receives visiting foreign researchers in considerable numbers. In the same year, IWE was a member of five reputed international scientific bodies (the EADI, the ECSA, the IFIAS, the UNU, and the Centre for Our Common Future). Close collaboration has been built up with the most influential international agencies (the IMF, the World Bank, OECD, WTO, Unctad, Unesco, UNDP, Unido, Uncitral, ELEC, CIPE, ECE, etc.). Similarly to recent years, in 2006 we were coordinators of and participants in several international projects. IWE has built up a special relationship with various

Outline of the Institute 11 EU organisations and the Friedrich Ebert Foundation in launching new projects, and assumes a leading coordinating role both in research and dissemination of the findings. In 2006, staff members delivered lectures in foreign languages about one hundred in different parts of the world and at international seminars held in Hungary. Seven international conferences were organized in the past year. In addition, IWE's international network includes longer-term stays of its researchers abroad, work contracts of its staff in leading foreign institutes and international institutions. The Institute's medium-term research concept envisages further significant development of its international relations with some alterations in their nature. The initiative hitherto was usually taken by the IWE, but the change of political and economic system has greatly increased the number of foreign research institutes and international organizations proposing cooperation to the IWE. In line with the main directions of Hungary's economic relations, IWE aims particularly to expand its relations with European countries, including the EU and CEFTA, the United States, Japan and the East and Southeast Asian area. The Institute has already become the centre in Central and Eastern Europe for studies of Japan and Southeast Asia, and a regular informal platform for Latin American ambassadors on Hungarian, European and Latin American issues. Extra attention is given to developing scientific ties with neighbouring countries, particularly through joint research projects, and by inviting economists from these countries in order to promote mutual understanding and the flow of information, while also reinforcing IWE's relations with leading international and Western institutions.

12 Principal Research Projects 2. Principal Research Projects in 2006 2.1. Global Issues 2.1.1. The United States in the International System of the 21 st Century Project director: Mihály Simai Duration: 2005 2006 Summary: The research has set out in quest for the answers to the following major questions: What particular advantages does the United States gain from its overwhelming power? How bulky are the social costs of maintaining its global economic, political and military positions in the 21 st century? What means does the American leardership apply to prevent other powers or groups of powers to endanger its hegemony? What are the prospects of a new power structure to emerge in the international community? Do the rise of China and the enlargement of the European Union mark the beginning of a new era, which will eventually wind up American hegemony? In what kind of political and economic environment will the transition to a new power structure take place during the course of the 21 st century? Will it be peaceful or stormy? Is American hegemony not more convenient from the point of view of universal peace and stability than a multi-polar, competing world, where different values and conflicting interests inevitably spur violence and may render new gloval disasters probable? The result of this project has already been published in a volume, The United States in the Global System of the 21 st Century. A Lonesome Marshal or the Hegemonic World Power? (in Hungarian).

Principal Research Projects 13 2.2. EU Issues 2.2.1. Debate Europe (Beszélgessünk Európáról) Project director: András Inotai Project coordinators: Sándor Meisel, Margit Rácz, Tamás Szigetvári Participants: Kálmán Dezséri, Klára Fóti, András Hernádi, Judit Kiss, István Kőrösi, Gábor Lakatos, Zsuzsa Ludvig, Klára Mészáros, Tamás Novák, Gábor Róbel, Miklós Somai, Tamás Szemlér, András Székely-Doby, Judit Szilágyi, Krisztina Vida Duration: 2006 Summary: In the framework of the project Beszélgessünk Európáról ( Debate Europe ) sponsored by the Ministry of Foreign Affairs 25 papers were written. These papers are grouped into three clusters of issues: * Further enlargement of the EU * EU in the world * Further deepening of the EU We analyzed the current situation regarding these three clusters of issues. We dealt with the future challenges and in connection with them we looked at the Hungarian interests. 2.2.2. Economic Relations between Russia and the Enlarged European Union with Special Regard to Central and Eastern European Countries Project director: Zsuzsa Ludvig Duration: Summary: Continuous The project aims at analysing EU Russian relations from a multidisciplinary view with special emphasis on economic aspects. Both general historical trends and some most important thematic issues (such as the common economic space, the energy dialogue and the impacts of the enlargement) have been studied through the analysis of official documents and statistics on mutual trade, investment and energy relations.

14 Principal Research Projects 2.2.3. Ukrainian Economy in Europe Project director: Zsuzsa Ludvig Participants: Sándor Meisel, Valery Heyets (ext., Ukraine), Volodymyr Sidenko (ext., Ukraine), Vasiliy Astrov (ext., Austria) Duration: 2006 Summary: The primary aim of the project was to organise an international workshop on the Ukrainian economy based on the background research of the participants from Ukraine (the Institute for Economy and Forecasting of the Ukrainian National Academy of Sciences), Austria (the Vienna Institute for International Economic Studies) and the Institute for World Economics of the Hungarian Academy of Sciences. The studies were focusing on the general economic issues of Ukraine, the WTO accession process, the trends in FDI flows and relations between the European Union and Ukraine with special regard to Ukraine s membership aspirations. Our thematic choices have been approved by a rather wide audience of experts, students, officials and researchers from different kinds of institutions. 2.2.4. The Internal Development of EMU and the Issues of Hungarian Accession Project director: Margit Rácz Participants: András Bakács, Kálmán Dezséri, Anna Wisniewski Duration: 2002 2006 Summary: Our team working for the Prime Minister s Office and dealing with the Economic and Monetary Union completed studies in the following subjects: * Fiscal-policy features of Ireland, Finland, Greece and Portugal between 1999 and 2004 * French economy under the pressure of the Stability and Growth Pact * The Stability and Growth Pact in 2005 * The economic performance of Germany and its steps towards financial stability * The economic growth prospects of the European Union and the challenges it has to face * The preparedness of the Visegrád countries for joining the Economic and Monetary Union

Principal Research Projects 15 2.2.5. The European Union and Its Direct Neighbourhood beyond Enlargement Project director: Tamás Szemlér Participants: Tamás Novák, Tamás Szigetvári Duration: 2000 2006 Summary: The research focuses on three major topics: * The strategic choices of the European Union (EU) to formulate its future system of international political and economic relations. * Economic and political relations, traditions, present and future priorities of the EU with Central and Eastern Europe. * Economic and political relations, traditions, present and future priorities of the EU in the Mediterranean area. The objective of the research is to formulate a strategy on the basis of the ideas of the EU concerning its future economic and political role for the desirable development of the common future of the Union and its direct neighbourhood (the countries of Central and Eastern Europe and of the southern and eastern coasts of the Mediterranean Sea). 2.2.6. EU 25 Watch Project directors: Barbara Lippert (ext.), Krisztina Vida Hungarian participant: Krisztina Vida Duration: Summary: Continuous The EU 25 Watch is a regularly (biannually) appearing comparative summary and analysis of national positions of the EU member states on topical issues. The issues are defined by the project director and sent out in the form of an extensive questionnaire. The outcome of the research is published every semester in electronic form. The aim of these publications is not only to present for the decision-makers, researchers and the wider public the member states' positions but also to display the underlying motivations and special interests of the countries forming the European Union. Since 2005 EU 25 Watch is financed by the CONSENT project of the European Union's 6 th Framework Programme.

16 Principal Research Projects 2.2.7. NEWGOV New Modes of Governance in the European Union Project directors: Kálmán Dezséri, Krisztina Vida Participants: Annamária Artner, Zoltán Bassa, Kálmán Dezséri, Gábor Lakatos, Krisztina Vida, Anna Wisniewski Duration: 2004 2008 Summary: The NEWGOV multiannual interdisciplinary project is financed by the EU's 6 th Framework Programme/Priority 7, under the heading of Citizens and Governance in the Knowledge-based Society. The aim of the project is to identify new or alternative modes of EU governance as opposed to the old or traditional modes (whereby upon Commission proposal the Council and the European Parliament decide on legally binding EU rules). New modes of governance are represented, for example, by a strong involvement of subnational (regional, local) or civil actors at the input side and nonbinding (voluntary) agreements or guidelines at the output side. The task of the Hungarian team was to find evidence and identify the potential new modes of governance under structural and cohesion policy at the level of both the EU and selected new member states (namely the Baltic States and the Visegrád countries). The papers had to detect the three E-s : the Emergence, Evolution and Evaluation of the phenomenon of new modes of governance and attempted to draw theoretical conclusions leading to a new approach in understanding European governance. The main conclusion of the findings is that new modes of governance under cohesion policy become overwhelmingly important when the EU as well as the beneficiary parties are searching for increased efficiency and subsidiarity. At the same time, the identified new modes of governance at both EU and member-states level only complement and do not substitute for the traditional or old modes of European governance.

Principal Research Projects 17 2.2.8. Perspectives of Employment Expansion amidst Globalization and Technological Changes Experiences within the European Union and Opportunities in Hungary Project director: Klára Fóti Participants: Annamária Artner, Péter Farkas, István Kőrösi, Margit Rácz, Miklós Somai, Miklós Szanyi Duration: 2006 2007 Summary: The project attempts to elaborate experiences of the EU-15. The research is concerned with opportunities for employment expansion and it examines this issue within the framework of case studies of some firms. The main objective of the project is to analyse if there is any chance for employment expansion within the context of challenges posed by technological development, and if there are some opportunities, what are the prerequisites for job creation (for example, which sectors are most promising in this respect in Hungary and more developed countries of the European Union). 2.2.9. The General Reform of the EU Budget Economic Foundations, Political Conditions, Member State Interests, with Special Regard to the Point of View of Hungary Project director: András Inotai Participants: Miklós Somai, Tamás Szemlér Duration: 2006 2007 Summary: The aim of the project is to identify the reform needs of the EU budget, and evaluate the possible reform options from the point of view of economic and political feasibility. The project provides a critical analysis of the actual system, it tackles the main reform ideas on the own resources side, and describes potential shifts on the expenditure side, with special regard to the two actually biggest expenditure items, the Common Agricultural Policy and structural operations. Finally, it provides an analysis of political feasibility, taking into account among other factors the interests and positions of the EU member states.

18 Principal Research Projects 2.3. The CEECs and Hungary 2.3.1. Changes in the Quality of Infrastructure and Services in Hungarian Regions and Major Cities in the Decade of Transition, 1990 2000 Project director: Éva Ehrlich Participants: Ferenc Erdősi (ext.), Albert Faluvégi (ext.), Imre Lengyel (ext.), Iván Schmideg (ext.), Tamás Szigetvári Duration: 2001 2006 Summary: The first phase of the research included the surveying and demonstrating of models and methods for measuring competitiveness. We have elaborated a system of indices for gauging the development level of infrastructure in the regions and major settlements. The examination embraces the 19 counties of Hungary and the 9 cities with inhabitants more than 100,000. Data gained on the county and city levels were aggregated on the level of the country's seven planning and statistical regions each. Besides some 50 macroeconomic indicators, in the field of infrastructure and services (transport, informatics and telecommunications, health care and medical equipment, housing, environmental features, education and culture, trade and tourism) approximately 120 data were collected and processed for two years (1990 and 2000) so as to unveil changes in regional development level. By applying this great number of indicators, most of them natural (and with the help of a tried and tested method of synthesis), a multi-segmented regional investigation can also be carried out. This examination will involve such a new approach in revealing regional differences which investigates the causes of disparities and their change over time in groupings, according to the technological or social features of infrastructure. Furthermore, the indicators used in examining the counties and the major cities will render it possible to expose the differences within the regions, and between Budapest and the bigger settlements as well. Determining the changes that took place in the last decade may immediately be utilized in mitigating Hungarian regional disparities of infrastructural development level and in obtaining EU funds already accessible for this purpose.

Principal Research Projects 19 2.3.2. Domestic and International Trends in Consumption Project director: András Hernádi Duration: Summary: Continuous On the basis of the concept that consumption precedes and practically determines production, research was focused on whether Central East European economies and societies, and especially Hungary, can have an identity and follow a model different from that of international trends. 2.3.3. Policy Relevant Aspects of Hungarian Competitiveness Project director: András Inotai Participants: Annamária Artner, András Bakács, Péter Farkas, Tamás Fleischer, Andrea Szalavetz, Miklós Szanyi Duration: 2006 Summary: The project examined and analyzed various policy relevant aspects of Hungary s competitiveness, including issues such as: (i) Changing National Innovation Systems in advanced economies lessons for catching-up follower countries; (ii) the relation between human capital accumulation, employment and competitiveness in Hungary, (iii) developing the services sector in order to improve competitiveness and (iv) accessibility and competitiveness (from infrastructure development point of view). 2.3.4. Perspectives of the Ukrainian Economy Project director: Zsuzsa Ludvig Duration: 2005 2006 Summary: The project focuses on the growth prospects of the Ukrainian economy in the light of its opportunities after the 'orange revolution'. Special emphasis is given to the consequences of the so-called double-orientation of Ukraine, i.e. its deep energy and industrial dependence on Russia on the one hand, and the Ukrainian wish to be a more integrated part of Europe with the final aim of EU membership on the other. While analysing growth prospects both internal and external factors are taken into consideration.

20 Principal Research Projects 2.3.5. Agricultural Market Options after EU Accession Project director: Judit Kiss Participants: Sándor Réthi (ext.), Miklós Somai Duration: 2004 2006 Summary: One of the main aims of the research is to reveal whether after EU accession Hungary succeeds in sustaining (maintaining) her net agricultural-export position in the markets of the EU 15 and that of the EU 25. The other aim of the research derives from the fact that after EU accession Hungarian agricultural production and agricultural-export potential is expected to grow while the EU provides only moderately expanding markets for Hungarian agricultural products despite enlargement. So, there will be a high need for alternative markets. Consequently, the other aim of the research is to reveal the kind of alternative market possibilities that are provided for Hungarian agricultural products in the coming years (till the period of 2010) outside the EU, namely in Russia, China and the developing countries. The other issue is how the emerging market possibilities can be utilised by Hungarian agricultural exporters. The research, which is mainly future-oriented and has a strategic nature, is divided in the following way: first, it analyses the situation of Hungarian agriculture and trade in agricultural products after EU accession; secondly, it makes medium-term forecast on the EU s agricultural markets and on the Hungarian agricultural-export possibilities in the enlarged EU; thirdly, it reveals the alternative agricultural-market possibilities in the light of the changing agricultural situation of certain countries (China, Russia) and country groups (developing countries); and lastly, it examines how the emerging market possibilities can be utilised by Hungarian agriculture.

Principal Research Projects 21 2.3.6. Monitoring Report on the Performance of the New Member States in the European Union Project director: Krisztina Vida Participants: Duration: Summary: András Bakács, Gábor Lakatos, Sándor Meisel, Tamás Szemlér, András Székely-Doby, Judit Szilágyi, Gábor Túry, Krisztina Vida, Anna Wisniewski Continuous The aim of the project is to compare along a set of political, legal, economic and social aspects the performance of the eight Central and Eastern European new member states in the European integration. Based on the country analyses and a uniform set of statistical data the authors developed a complex indicator, the index of performance as a member state (PMS Index). Thanks to this index the competing new member states can be ranged according to their performance, and as time passes by, major trends in these countries can be better detected. 2.3.7. The Possibilities of Employment Policy in the Age of Globalization Project director: Annamária Artner Duration: 2006 2007 Summary: The research project examines Hungarian labour-market developments and the likely employment and social policy in the mirror of international trends and demands, with special regard to the imperatives generated by the demand of world-market competitiveness. As a result of the project the state of affairs and the policy recommendations can help governance and can also be used in third-level education.

22 Principal Research Projects 2.4. Selected Topics 2.4.1. Comparative Study and Analysis of EU and Japanese Affiliated Companies in Hungary and Other CEEs Project director: András Hernádi Participants: Zoltán Bassa, Andrea Éltető, Miklós Szanyi Duration: 2004 2006 Summary: The project deals with Japanese companies direct investments in Hungary, the Czech Republic, Poland and Slovakia. A literature review of the topic is followed by an analysis of investments by Japanese, other Asian, American and European companies in the Hungarian electronics and car industries. 2.4.2. The State Aids under CAP s Rules and the Hungarian Agricultural Accession Project director: Miklós Somai Duration: 2004 2006 Summary: As a member of the European Union, Hungary lost most of its means to support its agriculture directly. Consequently, it is of the highest importance to realize the remaining possibilities offered by CAP s state aids rules and take whole advantage of them. 2.4.3. Emerging Value Clusters in the New Member States: The Role of Networks for Collaborative Innovation Hungarian director: Andrea Szalavetz Duration: 2004 2006 Summary: The COMIST project aims to increase the participation of NMAS organisations in IST activities according to a systemic innovation approach. COMIST supports and implements a general collaboration and interaction environment through the instrument of virtual or networked communities.

Principal Research Projects 23 2.4.4. Technology Development and Structural Change Project director: Andrea Szalavetz Duration: 2006 2007 Summary: What is the impact of technological progress on factor intensities? Our research incorporates the concept of factor intensity in the theory on the interplay between technological progress and structural change. The capital intensity of which industries (emerging/mature/traditional) is most affected by technological progress? The answer is not self-evident, since emerging industries do not feature higher than the average capital intensity, rather higher than the average market to book value ratio. We examine the relation of changes in factor intensities with structural change on industry level. The relation between technological progress, capital intensity increase and GDP share increase is not self-evident, it differs across sectors and industries. In agriculture, for example, capital intensity increase was accompanied by a rapid reduction of the sector s GDP share. 2.4.5. The Political and Economical Relationship s between Taiwan and Mainland China from the Song Dynasty to the Present Project director: Klára Mészáros Participant: Gergely Salát (ext.) Duration: 2004 2006 Summary: The present and future of the Chinese question fundamentally influence the future of Taiwan while even China with world power ambitions cannot exlude itself from the effects of the process going on in the region and the world. Globalisation, liberalisation, modernisation have a great and inevitable influence on the country. This motivates Chine to have a balanced relationship with its environment. Taiwan today is one of the most important economic powers of the East and Southeast Asian region. The tension between the People s Republic of China and Taiwan is such a barrier between the two countries that the cooperation between them is impossible without solving the core problem. Both governments have to face the economic situation that gives favourable opportunities to China and holds dangers for Taiwan. Taiwan wants to isolate economic affairs from cooperation. Political and economic affairs, however, cannot always be separated and business relations are rapidly developing.

24 Principal Research Projects 2.4.6. The Reserve Army of the Third Millennium Problems and Social Effects of Labour Market in Globalization Project director: Annamária Artner Duration: 2006 2008 Summary: The three-year research is financed by the János Bolyai Research Fellowship program. It is dealing with the increasing amount of unemployed and atypically employed people. This phenomenon reflects, on the one hand, that the need for live labour is decreasing in production due to information technologies. On the other hand, the sharpening market competition demands more weekly working hours and more intensive work from those who are employed. It leads to increasing social tensions being reflected in the activity of civil organizations and spontaneous protest movements.

Projects for Hungarian Policy Makers 25 3. Major Research Projects Prepared for Hungarian Policy Makers Prepared for the MINISTRY OF FOREIGN AFFAIRS Debate Europe Project director: András Inotai Project coordinators: Sándor Meisel, Margit Rácz, Tamás Szigetvári Prepared for the HUNGARIAN ACADEMY OF SCIENCES and the PRIME MINISTER S OFFICE Policy Relevant Aspects of Hungarian Competitiveness Project director: András Inotai Prepared for the NATIONAL OFFICE FOR REGIONAL DEVELOPMENT Possible Role of Hungary in Central, Eastern and Southeast European Co-operation for Regional Development Project coordinator: Centre of Regional Studies for the Hungarian Academy of Sciences West Hungarian Research Institute Project participant: Csaba Weiner Prepared for the MINISTRY OF ECONOMY AND TRANSPORT Investment Needs of Southeast European Countries as a Result of Stabilisation and Association Process Project participant: Tamás Novák Prospects of Hungarian Capital Exports Project coordinator: Annamária Artner

26 Projects for Hungarian Policy Makers Prepared for the NATIONAL EMPLOYMENT FOUNDATION Prospects of Employment Expansion amidst Globalization and Technological Changes Experiences within the European Union and Opportunities in Hungary Project coordinator: Klára Fóti Prepared for the NATIONAL DEVELOPMENT OFFICE Changes in the Quality of Infrastructure and Services in Hungarian Regions and Major Cities in the Decade of Transition, 1990 2000 Project director: Éva Ehrlich

Projects Financed by Hungarian Research Funds 27 4. Major Projects in Preparation Financed by Hungarian Research Funds OTKA * Research topic Coordinator Period Agricultural Market Options after EU Accession Judit Kiss 2004 2006 The Political and Economical Relationship between Taiwan and Mainland China from the Song Dynasty to the Present Klára Mészáros 2004 2006 Technology Development and Structural Change Andrea Szalavetz 2006 2007 The European Union and Its Direct Neighbourhood beyond Enlargement Tamás Szemlér 2002 2006 The Possibilities of Employment in the Age of Globalization Annamária Artner 2006 2007 NKFP ** Technological Development and New Scientific Achievements Andrea Szalavetz 2006 János Bolyai Research Fellowship The Reserve Army of the Third Millennium Problems and Social Effects of Labour Market in Globalization Annamária Artner 2006 2008 * OTKA = National Research Fund for Social Sciences ** NKFP = National Research and Development Programme

28 Participation in International Projects 5. Coordination of and Participation in International Projects New Modes of Governance Coordinator: NEWGOV European University Institute, Florence Hungarian coordinator: Kálmán Dezséri EU25 Watch IEP TEPSA Project Coordinator: Institut für Europaische Politik, Berlin Hungarian coordinators: Krisztina Vida, Gábor Lakatos Emerging Value Clusters in the New Member States: The Role of Networks for Collaborative Innovation EU 6th FrameworkProgramme, European Commission (COMIST) Coordinator: Roberto Santoro, ESoCE Net, Rome, Italy Participants: CEIA Central and Southeast European Innovation Area, Institute of Communication and Information Technologies, Poland; Researchers Association of Slovenia; Helsinki School of Economics Hungarian coordinator: Andrea Szalavetz Ukrainian Economy in Europe Coordinator: Austrian Science and Research Liaison Office (ASO) in Budapest Hungarian participant: Zsuzsa Ludvig The Global Social Situation in the Early 21st Century Coordinator: United Nations, Social Division, New York Hungarian participant: Mihály Simai Eurointegration Challenges in Hungarian Ukrainian Economic Relations Coordinator: Institute for Economic Forecasting, Ukrainian National Academy of Sciences Hungarian participant: Zsuzsa Ludvig EU CONSENT, Constructing Europe Network EU s 6th Framework Programme Hungarian coordinator: Kálmán Dezséri