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8. Economic Trends, Development Concepts, Projects

8.1. Structural and Organisational Changes

In the past five years an irreversible process completed in which the industrial branch-company structure which used to play a dominant role in the county's industry for decades disappeared. The majority of the structure controlled by the extraction industry and the processing industry, mainly based on raw materials of agricultural origin has crumpled. The most visible evidence of this is the liquidation or transformation of former large state companies to smaller units.

Neither a structural vacuum occurred formally after the disappearance of these large companies, nor an immediate and efficient structure was generated. The number of newly established enterprises -both with and without legal entity- takes the form of a leap, more joint ventures were established with foreign participation, a significant part of the formerly active workers has become retired, and one-tenth of them unemployed.

As a result of these changes the former economic structure with the dominance of large companies was changed into an SME majority structure. The company employment structure became more tense, industrial branch ratios have been shifted to the tertiary sector. In spite of apparently satisfactory restructuring doubts still exist; no one can think that the new structure established in the past five years will be solid enough to provide a balanced business operation in the long run.

Business operations in the past years have shown that private capital by itself cannot make characteristic changes within the mezzo and microstructure of the county. The inner power of the economic processes is limited, beside municipalities there is no other potential social-political-business formation which will take care of the economic development of the county.

Under "economic health" -as referred to it before- the area adaptiveness of the regional unit (town or town and its agglomeration) is meant, i.e. available and summarised quantitative factors of those processes which, according to our opinion, can demonstrate the conversion of economy to a new development path. These are the following:

spread and density of enterprises,

increase of proportion of joint ventures with foreign participation,

improvement of income of the population, furthermore

reduction in unemployment.

Distribution of economic association with legal entity by 1995

8.1. Structural and Organisational Changes

Distribution of operating enterprises within Baranya county, 2001

Source: Baranya County Statistical Yearbook, 2001

Source: Baranya County Directorate of the Central Statistical Office

During the past years of the 90's all forms of enterprises were moving. Several new organisations were set up, and parallel lot of them became liquidated. Certain parts of the former large companies were transformed into independent units and faced the similar type of problems like before. After realising that they are unable to adapt new requirements liquidation was the final resolution again.

Beside private enterprises and associations without legal entity, among associations with legal entity the majority employed only a few workers thus the number of big ones determining the changes in economic output was significantly reduced.

Neither in Baranya nor in Pécs, instead of the disarranged large and medium size companies, the entrepreneurial circle has not been generated yet which is capable for a better economic output however quantitative changes are significant. There are only a few wealthy private investors. Enterprises were set up mostly in those branches where no significant capital is required. This way the risk is smaller, the mobility of the capital is higher if compared to areas requiring more equipment and special techniques where a change cannot be made without great losses. The low level economic output of the area, as demonstrated by the structure of organisations, can be improved only by having capital investments.

8.2. Weak and Strong Factors of Inner Resources

8.2.1. Weak Points of the Economy

The county can be characterised with a unilateral industrial and organisational structure which has to be eliminated by the economic transformation. Mining companies and large state companies used to belong to this sphere. This way the company lost its economic power, market opportunities, export and employment was greatly reduced.

Former advantages of economic geography playing dominant role in the area (extraction industry, agriculture) have became dispreferred, positions greatly weakened.

Lost markets in the East could not be won back or converted to the same volume. Baranya has got an extremely poor export output today.

The present geopolitical situation is another major disadvantage due to the adjacent border and the Serbian war. This way not only the sound Southern markets are blocked but potential Western investors and visitors are discouraged.

Pécs is not easy to be accessed, the motorway network is rather poor, air and water transport is missing. From East the Duna, from South the border practically closes the town from outer economic processes; from investment viewpoints the existing opportunities are degraded this way.

8.2.2. The Potential, Opportunities and Sources of the County

The county has got beyond the most drastic steps of restructuring with negative impacts (setback of coal and uranium mining); no other severe measures are expected in the near future.

Certain companies are "revitalised" from the "ruins" or at last they have good chances for this. Remaining parts of the former company structures provide good opportunities for utilisation (unused assets, available expertise, production experience). The nucleus organisations of innovative development started to work again.

Several organisations and institutes established a branch within the county - especially in the economic-financial services sector- providing good supply for the local economy.

Pécs is the intellectual, educational (especially of higher education) and cultural centre of the region, the available workforce is well trained. The dominant role of the town in establishing a new structure is sensible again.

The historic centre of the town is a real part of the European history and culture. It has got a unique atmosphere and style. The town and its environment is a gem within a large nature preservation area attracting several domestic and foreign visitors every year.

Pécs is still the regional centre which status provides functions and elements which attracts not only citizens within the region but their organisations as well. There is way to strengthen the regional role based on supply and demand type interest.

Due to ethnic and institutional (municipal) links both home and abroad, there is investing and economic interest for the town which have achieved actual results as well.

On the economic, geographic and intellectual basis of the region there are good chances to attract both domestic and foreign investors utilising unused capacities.

Entrepreneurial feeling and ability is rather developed, there is local capital accumulation, the local market together with the agglomeration area is stimulative, new companies are set up every day, the volume of produced income is significant.

The tension between the county and Pécs is over which means not only a hindering factor is eliminated but joint sources can be much better coordinated.

8.3. Basic Elements of the Economic Development Strategy

The achievable objective is the renewal of the Pécs-Baranya economic structure the majority of which is almost liquidated through the devaluation of economic transformation processes. The structure can be characterised with high level of technology, orientation toward innovation and quality. This is attractive to the foreign capital, output production capacity is higher, it improves export balance of the county, on the basis of geographic location products can be sold in Eastern, Western (later on Southern) markets and supports the new image of the county as well.

Strategic means

• setting up business parks,
• favourable reception of companies providing high tech transfer,
• available R and D background at universities,
• establishing technological centres.

The idea to set up business parks is supported by Pécs and Komló as well. The implementation can be accelerated by the fact that this can be linked to similar efforts of the Mine Property Utilisation Co. Ltd. and this way the adjacent areas can be jointly handled. Development can be started so that green field is available however the existing buildings can also be utilised to establish

• an enterprise centre,
• or premises for a multinational company or for several medium size enterprise within a wide range of industrial or commercial activity profile,
• an incubation centre for setting up new ventures,

and all the above can be related to a technological-innovation centre generated in the appropriate environment on the basis of the research and development basis.

The incubation centre could provide favourable conditions especially for small enterprises during the setting up and initial operation process in the first 2-3 years.

The technological centre would accommodate enterprises using sophisticated equipments and techniques by supporting the product and technology development, providing the required experimental, training and administration background; and if foreign investors can be attracted, to provide capital investment for these enterprises.

The professional research and development background should be based on the universities, the profile of the centre will be defined by this accumulated knowledge and expertise.

The local financing institutions can support the spread of sophisticated technique, new products and technologies. For example the South Pannonian Venture Capital Inc. was especially established for this purpose however other investors or funds are also required.

The basic economic-political objective is the mobilisation of the county economy by promoting the setting up of new enterprises and supporting the existing ones. It is necessary for the county to increase the output production capacity and employment which can be basically achieved by supporting the entrepreneurial sector i.e. the establishment of SMEs.

In general this is a task for the county, municipal and economic municipalities (chambers of commerce). This also means that reasonably efforts and sources are required to be coordinated and arbitrated continuously.

Promotion of settling down enterprises

The above mentioned multi-functioned business park itself means land for premises (prepared with infrastructure). Support can be in the form of

• saving time for the enterprise by providing "production-ready" premises at a normal market price,
• where the municipality provides the land with infrastructure, semi-finished or complete workshop at a reduced price,
• more direct support ("social" viewpoint for setting up own existence in the incubation house) by providing favourable rent and other services.

Beside this the municipality, independently from contribution purposes, can directly manage and orient the settlement of enterprises, decision making of investors by the fact that according to the general city plan, beside the industrial zone further land can be used for industrial or servicing purposes which are conform to environmental regulations, access and infrastructure are available. Based on existing premises, unused buildings and assets, districts and bases for SMEs can be marked separately.

• Development of business services and infrastructure
• Compiling investment information materials
• Setting up "commission" and "shelter" enterprises for foreign investors which provide services for company registration, planning, licensing, foreign trading and customs etc.
• Simplification and acceleration of bureaucratic procedures,
• Maintenance and mediation of regional and foreign trade relationships,
• Local taxes supporting local development

8.4. Possible Clusters of Economic Development

Centres of work distribution and relationship structure of the local economy can be called development clusters which provide basic elements of the economic development strategy.

These clusters are nodes in the economy which

• on the one hand mean a chain of business and non-business units having branch and functional links with each other, by producing competitive end product or services, based on optimally used inner sources,
• on the other hand a relationship network between business and servicing units which immediates direct influence of the market, flow of information based on mutual interest and reaction to market motives.

The possible clusters can be the following:

8.4.1. Technology-intense Processing Industry Cluster

Concerning all possible clusters this is the least developed and most promising one. The elements of it could be the potentially developing parts of processing industry bases with the relevant intellectual, R and D background.

Concerning branch structure the range can be variable as follows:

• mechanical engineering (instrument industry, material handling equipment),
• production of tools and equipment for the environmental industry (where technological development is important from other municipal development viewpoints as well); the implementation can also be used for reference purposes,
• glass and ceramic industry (both industrial and artistic),
• light industry (textile, confectionery, gloves, leather processing completed by industrial design),
• handicraft industry.

8.4.2. Tertiary Sector - Tourism Cluster

Development of economic-business infrastructure and services form one line, while conventional consumer services the other line combined with tourism. Since several sorts of tourism can be programmed this cluster can follow a rather diversified organisational-functional model.

Elements can be the following:

• tourist establishments,
• trading - services,
• communication, media,
• culture, art and education,
• environment protection
• economic activities etc.

8.4.3. Food Processing Industry Cluster

However food processing industry cannot be regarded a promising sector in general, it is worth taking into account due to the area capabilities and the relatively favourable market and export opportunities. Since R and D background is mainly available for this branch this industry can possibly play an initiative role of economic development.

This cluster, based on its partially available vertical structure, can comprehend the whole process including the sale of the end product.

Elements are the following:

• food processing R and D, consulting
• agricultural production (small and medium scale, individuals and enterprises)
• food processing
• buy-up and supply system (integration organisation which can be the producer of the end product)
• sales and procurement organisation with special stress on export however no independent organisation is required for this.

The cluster basically can be established in five fields:

• milk production and processing,
• meat industry,
• wine production,
• brewery and tobacco industry,
• cannery for fruit and vegetable.

All possible clusters are hypothetical: both for having only the basis for the formation and outlined only on the basis of preliminary market conditions. Each cluster requires to initiate an independent program package by including all interested and potential parties an detailed further market analysis mainly based on primary information.

8.5. Development Concepts

8.5.1. Traffic Infrastructure

The development is based upon the assumption that it is necessary to establish traffic and telecommunication infrastructure jointly with the neighbouring countries to all directions for servicing EU needs.

This primarily means to develop the public road network according to growing traffic. It can be expected in the long run that only a part of public road transport can be converted to rail or water transport.

Concerning railway development, capacity increase and quality improvement can only be expected.

Within reasonable time the improvement of public road access to Baranya -including Pécs - is hoped by the widening of No. 6 main road furthermore linking and perhaps improving the Pécs- Dombóvár- Nagykónyi- Iregszemcse- Siófok route to M7 motorway toward Budapest.

The public road network development proposal of the Ministry of Economy and Transport aims at transforming the country's radial road structure into a radial-circular system. The first phase of the development programme includes the following main construction elements to be completed until 2015:

• ring road M0 around Budapest according to traffic needs of specific sectors;
• Motorway M1 from Budapest to Hegyeshalom (Austrian border)
• Motorway M2 from Budapest to Vác; clearwayM2 from Vác to the Slovakian border (2×2 lanes), convertible to motorway in the future;
• Motorway M3 from Budapest to Nyíregyháza, clearwayM3 from Nyíregyháza to the Ukrainian border;
• Motorway M5 from Budapest to the Yugoslavian border;
• Motorway M6 from Budapest to Dunaújváros; clearwayM6 from Dunaújváros to Pécs, convertible to motorway in the future;
• Motorway M7 from Budapest to the Croatian border;
• clearwayM8 from the Austrian border to Dunaújváros and from Dunavecse to Szolnok (M4), both convertible to motorway in the future, and the Danube-bridge of Motorway M8 near Dunaújváros together with its connecting roads;
• clearwayM9 between Sopron-Szombathely-Nagykanizsa and Kaposvár-Szekszárd-Hajós-Road Nr. 53.

The second phase of the development program include the following construction elements:

• development of clearwayM15 into a motorway from Mosonmagyaróvár to the Slovakian border;
• clearwayM25 between Motorway M3 and Eger
• Motorway M30 from Emőd (M3) to Miskolc, clearwayM30 from Miskolc to the Slovakian border, convertible to motorway in the future;
• Motorway M35 from Görbeháza (M3) to Road Nr. 47, ringing Debrecen;
• clearwayM43 from Szeged (M5) to the Romanian border, convertible to motorway in the future;
• clearwayM44 from Kecskemét (M5) to the Romanian border;
• clearwayM56 from Bóly (M6) to the Croatian border;
• clearwayM70 between Letenye and Tornyiszentmiklós;
• clearwayM86 between Levél (M1, M15) and Hegyfalu (M9).

In order to make use of opportunities provided by the Duna-Main-Rhine transcontinental water course, appropriate public roads and port facility is required with sophisticated and efficient material handling equipment and managed by a logistic centre. The huge and unused transport capacity of river Danube necessitated the development of Ro-Ro shipment facilities. 

The first and so far the only Ro-Ro terminal within the region was built in 1999 near the town of Baja. One ship is able to transport 60 lorries or 240 passanger cars.

Mohács, another small town along river Danube, also has good chances to build a Ro-Ro terminal in the near future as the Danube Shipping, Trading and Service Co intends to carry out a development project there, worth of 10 Billion HUF.

The lack of a public airport has also been hindering the competitiveness of the region. Nevertheless, there is good chance now that the Pécs-Pogány airport will be developed into a Level 3 regional airport. The aerodrome can be found on the way from Pécs towards Harkány on road no. 58. In the first phase, 30 to 50 thousand passengers and 25-30 thousand tons of cargo planned for air shipment.

The main technical features of the airfield are as follows:

• Name of aerodrome: Pécs-Pogány (LHPP)
• Distance and direction from Pécs: 7 Km 180¤
• Voice call sign: Pogány INFO
• Frequency: 126,900 MHz
• Height above sea-level: 659 feet ( 201 m )
• Path: 16/34, grassy
• Path sizes: 1530 x 50 m
• Threshold coordinates:
  34 N 45 59.03
  E 018 14.40
  16 N 45 59.50
  E 018 14.12
• Coordinate of the reference point: :
  N 45 59.27
  E 018 14.00
• Place of NDB: 800 metres from threshold 16 in path line
• Frequency of NDB: 412 KHz
• NDB Morse : PP
• Conditions of temporary border opening: 72 hours before the planned arrival érkezés előtt
• AFIS (aerodrome flight information service) must be informed about the following:
  date of flight
  aerodrome/airport of departure
  exact time of arrival
  type, nationality and registration mark, operator
• Fuel: RB 100 LL
• Air-shed storage: yes, if required in advance

Source: Pécs-Pogány Airport

8.5.2. Tourism

Until December 2000, 690 natural and cultural heritage sites have been granted the honourable "World Heritage Site" title in the world: 529 cultural heritage sites, 138 sites of outstanding natural value and 23 sites belonging to both categories.
 

8.5.3. Major Environment Protection Objectives

• to prevent the hazard of erosion prone to arable land, to prevent soil acidity.
• Promotion of biofarming on poor quality arable lands.
• Selective handling, processing, deposition and incineration of communal waste.
• To establish communal waste disposal facilities on the microregional level.
• Neutralisation of the halogenous waste disposed near Garé.
• Reclamation of waste stockpiles remained from coal and uranium mining.
• Regional sewerage management facilities for smaller settlements.
• To reduce environmental burden caused by heavy traffic (reduction of air pollution, traffic free zones in town centre, prohibition of use of two stroke engines).
• Biking route development on a regional level.
• To establish the Duna- Dráva National Park area.

8.6. Approval on Investments

Official approvals on investments are issued by the administrative department of the respective municipality.

To initiate an official approval and to submit the required documentation is an obligation of the investor or its agent.

The following licences are required for an investment:

• area use licence for the location;
• construction licence for the execution:
• take-over licence for the operation.

For an investment requiring construction it is necessary to know the major figures for the respective real estate.

Important data including location, basic area, lot number, way of cultivation, quality furthermore related rights can be found in the real estate registration.

The registration is made on the basis of public and authenticated base maps managed by the land office.

The recording of changes in rights and facts related to a piece of land can be initiated by submitting an official document within 30 days after the change.

Licensing procedures are administered by respective departments of the municipalities, requirements are recorded by authority regulations with general validity which should be enforced through the licensing procedure.

To contact the respective authorities is an obligation of the investor or it can be delegated to the designer.

The designer is in charge of keeping authority regulations and is obliged to make a declaration about it.

Public utility companies do not have a licensing authority for an investment. They have to issue a written declaration to the designer about the compliance of the service and conditions.

The take-over licence can be issued only if respective authorities gave their approval on the basis of a joint account inspection.

The following authorities are involved in licensing:

The following authorities should be contacted in relation to company registration and operation:

• County Registry Court
• Office for Tax and Financial Control (tax office)
• County Directorate of the Central Statistical Office
• County Headquarters of the National Customs Office
• County Labour Centre
• County Directorate of Social Security
• County Directorate