TIONS TO ENHANCE ECONOMIC DEVELOPMENT IN THE VISEGRAD COUNTRIES

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1 Dehi Business Review X Vo. 11, No. 2 (Juy - December 2010) CROSS-BORDER COOPERATIO TIONS TO ENHANCE ECONOMIC DEVELOPMENT IN THE VISEGRAD COUNTRIES J.. Kaposzta* H. Nagy** K. Ritter*** IN this study we have reviewed one of the most significant cooperations in Centra-Eastern- Europe, namey the Visegrad cooperation. It has been a very important economic, socia and poitica coaboration of the four countries (Poand, Sovakia, Czech Repubic and Hungary) for ong. The basic principe in their cooperation has aways been to strengthen the inks among the abovementioned countries and, due to the EU Funds avaiabe, it has received greater importance in the beginning of the 21st century. The objective of this research is to find out how this cooperation has deepened in the past and what new possibe ways are avaiabe to extend this reationship in order to mutuay benefit the economies and societies of the member countries. The Szent Istvan University has aso joined a Visegrad cooperation in the fied of education and research recenty and aims at the deveopment of those fieds in accordance with the economic growth. Keywords: Visegrad Countries, Economic Growth, Cooperation, Transnationa Deveopments. Introduction The Czech Repubic, Hungary, Poand and Sovakia, aso known as the Visegrad Group countries, have ong shared common ground in history, cuture, reigion, and economics. Over the centuries this shared past has been marked by a striving for unity as we as frequent frictions, peacefu times and miitary conficts. The name of the cooperation refers to the historica meeting of 1335 in the roya paace of Visegrad, where Hungarian, Czech and Poish kings took strategic decisions for poitica and commercia purposes in order to strengthen the roe of the region. On 15 February 1991, the renewed Visegrad Cooperation was set up with the aim of supporting the three post-sociaist Centra-Eastern-European countries (Hungary, Czechosovakia and Poand) Euro-Atantic integration. (The V4 configuration was formed in 1993 foowing the dissoution of Czechosovakia and the estabishment of the independent Czech and Sovak Repubics) Visegrad Decaration. The Visegrad Group represents a consistent geographica region on the eastern border of the European Union. This makes the region strategicay important and aso creates opportunities for the group s member states to utiise their partnership at the regiona eve as we as within the European Union, though they often regard each other as competitors rather than friends, even after 20 years of systemic changes (György, 2009). * Associate Professor, Institute of Regiona Economics and Rura Deveopment,Facuty of Economics and Socia Sciences, Szent Istvan University, Godoo, Hungary. ** Assistant Professors, Institute of Regiona Economics and Rura Deveopment, Facuty of Economics and Socia Sciences, Szent Istvan University, Godoo, Hungary. *** Assistant Professors, Institute of Regiona Economics and Rura Deveopment, Facuty of Economics and Socia Sciences, Szent Istvan University, Godoo, Hungary. 11

2 J. Kaposzta, H. Nagy and K. Ritter The ast decade of the 20th century provided venue for a new kind of cooperation, aowing these nations to catch up with economicay more deveoped European countries. This decade aso offered the unprecedented opportunity for cooperation at every eve. The partnership that has deveoped among these nations is the backbone of the region s economic competitiveness in the ong term. It is within the framework of such partnership that we may face probems yet to be resoved, ike environmenta poution, diminishing energy suppies, the deveopment of educationa and research institutions, the effects of cimate change on our region, and our transformation into a migration hub to name ony a few of the chaenges we have yet to meet. In an effort to seize this formidabe opportunity, the Visegrad Group, CEFTA and the Internationa Visegrad Fund were formed to faciitate the poitica, economic and civi cooperation of the four countries. Their membership in NATO and the EU, the genera increase in the exchange of goods and business reations, as we as more than 2,000 projects that have been carried out by these countries Civi organizations are ony a few of the many achievements of the Visegrad region. Major Aims and Achievements of the Cooperation It can be stated that the initia goas of the Visegrad Group have been achieved, namey NATO and afterwards EU accessions. The fact that circumstances changed, poses quaitativey new and advanced expectations to the Four, at the same time reinterpreting their cooperation. It has been justified that the Visegrad Cooperation sti has rea function within the EU as we. Common goas are aid down in the New Visegrad Decaration signed by the Prime Ministers of the four countries on 12 May 2004 in Kromeríž, Czech Repubic. Under the decaration it was undertaken that in the future the V4 endeavour to take advantage of the opportunities opened up by joint actions in a pragmatic way, focusing on the common interests, free of iusions (György, 2009). The document outines the coordinating mechanisms as poitica, sectora and expert meetings, as we as high-eve summits. The cooperation is coordinated by the one-year rotating presidency. The Czech Repubic hed the presidency between the second part of 2007 and the first part of 2008, and between Juy 2008 and June 2009, Poand was presiding the cooperation. It was on , when Hungary hed ast time the presidency. Hungary took over the new presidentia tasks that began in the second part of The Visegrad Cooperation has now evoved and has been triviaised in a good sense. The focus is much more on practica detais instead of monumenta events. Basicay, the intergovernmenta cooperation works on expert eve and in an operative way. In practice, it means that coeagues of the ministries and other institutions keep daiy contact for defining practica tasks of the cooperation and evauating the given opportunities. Therefore, intensive consutations are taking pace in order to undertake new chaenges arising from the new situation given after the Schengen accession of the four countries. The matter of revising jointy the practice of issuing visas deserves specia attention regarding EU aspirant and future aspirant countries in the ong run. Bearing in mind the need to compy with the EU aw, it is prioritised by the Four that the new Schengen borders do not isoate citizens of states being out of the area. In the fied of environmenta protection and energy security as we, the Four shares common interests in many aspects. Besides intergovernmenta cooperation, cutura and civic dimensions represent increasing significance. Since the time the Visegrad Group was formed, cutura reations have graduay grown more active. It is becoming more and more obvious that even organisations set up by citizens of the four countries, namey the representatives of the civi society, are ooking for mutua cooperation as we. We trust that research projects aready in progress wi provide a patform for further schoary cooperation. Today, ceary, within the framework of the EU, Visegrad cooperation is not designed to be against any other country. On the contrary, the improvement of reations with neighbouring countries 12

3 Dehi Business Review X Vo. 11, No. 2 (Juy - December 2010) and regions is a top priority. In this spirit, the Visegrad countries support a number of projects and offer schoarship programs for countries of the Eastern Dimension of the European Neighbourhood Poicy as we as for the western Bakans. Whie the territoria proximity of the V4 countries can be beneficia when pursuing cross-border cooperation, not many issues can be seen as being common to a V4 members. Experience since EU accession ceary proves that the number of issues bearing a centra European identity have been imited or non-existent. The countries from the region sti regard each other as competitors rather than friends and that, after 20 years of systemic changes, is not very promising. In spite of this, the four countries coud certainy find issues of strategic and regiona importance, such as environmenta probems. The benefits of V4 membership within the EU can be viewed in the context of cohesion with regard to the EU budget mosty via Structura Funds interventions and via the Common Agricutura Poicy. That is why it is very important to form a cohesion-friendy coaition among V4 states in the next budgetary negotiations. These negotiations in their eary stages may begin during the Poish presidency of the Counci (in the second haf of 2011), together with the cosure of the budget mid-term review which wi occur under the Hungarian Presidency, preceding the Poish one. These circumstances show how important our common poicy stands may be in the coming years. Cooperation is not imited to V4 member states ony given that psychoogica proximity among traditiona partners promotes contacts of various kinds. According to us, territoria proximity is a good basis for cross-border cooperation which can be beneficia for a V4 members and their many especiay smaer firms. The same hods for oca governments, as known from European cross-border projects in which they activey participate to obtain funding for projects aimed at improving socia and economic conditions as we as cutura reations with neighbouring cross-border regions. The V4 reguary cooperates with other countries in centra Europe with Austria and Sovenia within the so-caed Regiona Partnership and with the V4 s eastern neighbours as part of the so-caed V4+ concept. Moreover, the V4 cosey cooperates aso with various regiona groups of countries in the EU specificay the Beneux countries, the countries of the Nordic Counci of Ministers and countries of the western Bakans. Five years in the EU has shown that the importance of the singe, border-free market for goods, services and capita is huge. The V4 region represents a natura entity from the viewpoint of history and cutura mentaity, and the vaues of the popuation. Large investment projects in the region woud be possibe ony to a very imited extent if the V4 countries were not part of the singe EU market and the market in the region was segmented into sma nationa states. The singe market is of high importance aso for border regions because it enabes access to the markets of neighbouring countries. Bratisava-Gyor-Vienna region is considered to be the one with the biggest deveopment potentia in Europe. But construction of transport infrastructure is crucia for the further deveopment of crossborder cooperation (Liptáková, 2009). At the beginning of 2009, Sovakia became the first V4 country to adopt the European singe currency. Further extension of the eurozone across the other V4 members is unikey in the near feature. Whie at an officia eve adoption of the Euro in Sovakia has hardy had an impact on the operation of the V4, some psychoogica effects can be identified. Between the centra European countries there has been obvious competition for the tite of eading position in the region. Each of the countries payed the roe of pre-eminent for a whie from the economic point of view. The euro has meant that recenty Sovakia occupied the eading position. However the advantage of having the euro now seems to be rather a disadvantage as Sovakia s competitiveness because of exchange rate movements may worsen significanty, hurting economic performance more here than in other V4 countries. 13

4 J. Kaposzta, H. Nagy and K. Ritter The adoption of the euro has certainy increased the attractiveness of Sovak firms for foreign partners. But the adoption of the euro in itsef cannot serve to attract foreign investors or partners as a substitute for we-performing firms with high-quaity and innovative products. The European currency can ony ease business by reducing transaction costs and making intra-eu price competition more transparent (Novák, 2009). Some negative aspects to the adoption of the euro in Sovakia can aso be seen, for exampe the consumer spending drain to cheaper neighbouring countries ike Poand and Hungary, but these effects are ony margina. Twenty years after the fa of the Iron Curtain and the coapse of economic cooperation within the Counci for Mutua Economic Assistance, aso known as Comecon, there remains the question of whether former members of the counci and now custered in the V4 can utiise some advantages when doing business with former Soviet Repubics. Whie 15 years ago one woud have immediatey responded that such advantages were knowedge of anguage or traditiona ong-term business reations, the situation has substantiay changed. Nowadays the situation is more structured. Some firms have been active in continuay deveoping existing reations with those countries since 1989, whie other firms have graduay reoriented their operations towards Western markets. In any case, there is a huge opportunity to benefit from doing business with many post-soviet Repubics, or, if the Soviet boc is more broady conceived, with other post-communist countries of Centra and Eastern Europe. Internationa economic reations between countries in Centra Europe underwent radica change between 2004 and 2007 on account of the two waves of European Union enargement, which created new conditions for economic deveopment and convergence. Economic Situation of the V4 Countries since their EU Accession EU accession ent new momentum to the economic growth and therefore convergence of a the new member states, incuding the V4 countries with the exception of Hungary, where the initiay higher rate of growth had sowed substantiay by 2007 and iving standards, measured in terms of per capita GDP, have merey stagnated since joining the EU in contrast to the dynamic growth recorded in the other new member states. Hungary s per capita GDP figure stagnated between 2004 and 2008 at a time when the other members of the V4 converged by more than 8 percent, on average, towards the iving standards of the more deveoped EU countries. 14 Tabe 1: GDP per Capita in PPS in the Visegrad Countries, Per GDP Capita, %, in PPS (EU27=100%) Czech Repubic Hungary Sovakia Poand EU Source: Eurostat, European Commission. In Tabe 1 it can be seen that Hungary was the ony V4 country which coud not take advantage of the EU accession. It was one of the most-deveoped countries among the new member states in 2004 and it has become one of the east-deveoped ones by We can see in the tabe that Hungary was the ony country with decreasing Per Capita GDP compared to the EU average in the given period. It is worth mentioning that it was not surprising that Sovakia coud adopt the euro in 2009, since it has reached the highest Per Capita GDP Growth since the accession. Due to their economic poicies, Sovakia and the Czech Repubic coud enhance their economies by creating favourabe conditions for businesses and citizens as we.

5 Dehi Business Review X Vo. 11, No. 2 (Juy - December 2010) Tabe 2: GDP Growth in the Visegrad Countries, GDP rea growth rate %, on previous year Czech Repubic Czech Repubic Hungary Sovakia Poand EU Source: Eurostat, European Commission. In the Tabe 2 the abovementioned statement is justified that Hungary has ost importance in Centra- Eastern-Europe since joining the EU, compared to the neighbouring countries. The GDP growth compared to the previous year showed that it is ony Hungary which coud hardy achieve growth in the past few years. Sovakia has again remarkabe figure, e.g. in 2007 it coud increase the economy by more than 10%. On the whoe, the region deveoped at a pace rarey seen before in its economic history and acceerated the rate of convergence, though it wi be practicay impossibe to repeat this in the near future. The economies in the Centra European region are supposed to formuate radicay different economic strategies under the new domestic and internationa conditions. Tabe 3: Empoyment Rate in the Visegrad Countries, Empoyment Rate, % Czech Repubic Hungary Sovakia Poand EU Source: Eurostat, European Commission. If one ooks at the abour market conditions of these countries, it can be seen that the rate of empoyment is far behind the expected. According to the Lisbon goas, a the regions of the EU have to reach 70% of empoyment by Tabe 3 ceary shows that a the Visegrad countries are far away from that rate and they do not have much time eft to meet this goa. The highest increase in that regard was achieved by Sovakia and Poand by 2008, whie Hungary coud not create jobs in great amount in the given period. There are sti many peope working in the back economy due to the unfavourabe taxation on abour costs. As for the unempoyment rate, even biggest differences can be observed among the countries. A of them coud sharpy decrease this rate, except Hungary. Three countries coud amost have their unempoyment rate by 2008, whie Hungary increased it. Anaysing the figures and comparing them to the EU27 average, we can see that three countries out of the four have been trying to catch up with the economies of the oder EU member states, but Hungary coud not manage to define a good strategy for the economic deveopment of the country. The onger it takes to find the right path, the more difficut wi be to catch up with even the neighbouring countries. It wi mean a serious probem when we get to tak about the euro adoption. It wi be very difficut to manage the tradings in Centra Europe when there wi be euro in a the countries except Hungary. It wi make a the accounts reay difficut and it wi not hep the economic deveopment either. 15

6 J. Kaposzta, H. Nagy and K. Ritter Deveopment Potentias of Each Country Surprisingy for many, new euro area members Sovakia and Sovenia are heading towards an increasingy severe downturn in growth in comparison to what was previousy expected. Sovakia s opportunities for growth are very much imited in the current situation by the country s vunerabiity inked to its one-sided economic structure. The automobie industry is very sensitive to cycica trends, and the crisis has hit this sector extremey hard, even inspite of the measures taken by government to stimuate demand in the sector. In the ong run it may even be questionabe just how much an economic structure based on the car industry wi be capabe if at a of reaching previous eves of growth. The Czech Repubic and Poand have reativey stabe fundamentas. In Poand, management of the crisis has not taken the form of bank baiout packages or internationa oans inked to economic conditions but in a continuation of the structura reforms that had aready been aunched. However, this ony party expains the endurance of the country vis-a-vis the crisis: what is even more important is that it has a very arge domestic economy by Centra European standards and, reativey speaking, is ess open, which means changes in internationa demand do not affect it as much; additionay, domestic demand together with the domestic market are abe to reduce the pace of the economic sowdown. Nonetheess, the fact that the IMF provided Poand with a fexibe credit faciity in spring 2009 to overcome any unexpected financia difficuties just demonstrates the unpredictabe and increasingy severe consequences of the crisis. It is important to note that this credit faciity can be used at any time and is not tied to any conditions, i.e. it is ony there as a safety net. The Czech Repubic enjoys reativey stabe macroeconomic conditions, but externa demand is much more important than for Poand which is why the Czech economy is set for much more chaenging times over the coming period than Poand s; however, given its features, the economy it is now ikened more to heathier Poand than to other economies in the region. Hungary does not reay stand out from the other economies in Centra Europe in terms of expected growth. Yet because of the country s vunerabiity and its eve of debt it is more often than not grouped with the Batic states. For this reason there are no reserves which coud provide more budgetary options, as is the case in more stabe countries (such as the Czech Repubic and Poand), nor are there any toos avaiabe to stabiise the situation, such as the euro in Sovakia, whie the domestic market is too sma on its own to stabiise demand. What shoud not be forgotten is that thanks to the stabiisation measures taken, demand had narrowed significanty and the economy had sowed down in Hungary even before the crisis erupted. From the perspective of growth and convergence based on both interna (investments, consumption) and externa (capita fows, trade) factors, it is evident that the new member states which have coped better with the crisis so far are those which have produced high but not overheated growth since accession, couped with an appropriate eve of externa and interna financia stabiity, a ow budget deficit and a heathy pubic debt indicator. Hungary is in the fourth worst position (after the Batic states) having ost its growth momentum three years ago (when the externa environment was much more benign) (Koár and Goda, 2009). Sovakia is in a dubious position as regards growth trends because whie its equiibrium is stabiised by the euro, the economy is structuray one-sided which represents a major risk for the coming period. There are aready signs that the economic downturn in Sovakia coud be such that it nuifies the majority of the economic successes achieved in previous years. The Czech Repubic and Poand are in a reativey heathy position, but a significant and engthy economic downturn cannot be rued out, particuary for the Czech Repubic, given that it is very open to the externa economy and dependent on exports. With its arger domestic market, Poand may we be abe to ride out the next phase of the crisis with a minor downturn. 16

7 Dehi Business Review X Vo. 11, No. 2 (Juy - December 2010) The Visegrad countries have been quite attractive for foreign capita recenty (Ministry for Nationa Deveopment and Economy, 2009). Due to the quaity production as emerging markets, they were preferred by foreign investors. Since 20 years after the change of regime is quite a ong period, most of the foreign companies have aready penetrated into this market. The major task of the governments in the ast 20 years was to attract foreign investments into the countries, but nowadays there are severa other markets with much more favourabe business conditions, therefore such business conditions have to be created which keep the investors in Centra Europe and not encourage them to move to the east. This is both economic and poitica decision, so sometimes the governments do not choose the right and most appropriate way to make it. Figure 1: FDI infow to the Visegrad countries, Source: Ministry for Nationa Deveopment and Economy. In Figure 1 it can be ceary seen that before the 2004 enargement the mosty preferred countries were the Czech Repubic and Poand, the atter one keeping and even increasing its good position after However, the foreign direct investment per capita in 2008 was the highest in the Czech Repubic (about EUR 7.500) and the second country was Hungary with amost reaching EUR Based on the abovementioned facts, it can be stated that there are big economic differences between the Visegrad countries, which makes it reay difficut to cooperate with each other and regarding each other as aies instead of competitors. However, the Visegrad countries beieve that there are certain fieds where they can cooperate to achieve mutua benefits. In order to faciitate such cooperations there are severa funds avaiabe in the European Union, so hopefuy the countries take it into more consideration whie defining their strategies for the future. The core eement of the cooperation strategy has not changed: the aim is to strengthen the economic and socia integration of the border areas. Due to Hungary s and Sovakia s EU accession, the border between these countries has become one of the interna borders of the EU. However, its aboition did not happen from one to another. As a resut of the accession, severa potentias of the area can be utiized, aowing the free movement of the peope and goods. The disappearance of the state borders resuts aso in the disappearance of the obstaces in front of the economic, socia and cutura cooperations between the two countries, enabing a mutuay more efficient use of the capacities and infrastructures of the border areas, therefore their competitiveness may improve due to such cooperations. 17

8 J. Kaposzta, H. Nagy and K. Ritter Unfortunatey, one of the major obstaces of the coser reationship between Sovakia and Hungary is the imited accessibiity. Thus, transnationa programs aim to support the deveopment of the existing transportation and communication infrastructure. Apart from the modernization of the existing networks, there are opportunities to expand the range of infrastructura eements, especiay in those areas where there is a river in between. Deveopment programs greaty support the integrated deveopment of the economies of border areas to improve their competitiveness and to contribute to the job creation. Therefore, they focus on the improvement of the conditions of business cooperations and on the encouragement of efficient and coordinated use of the existing R&D potentias. Tourism is one of the major income sources of the region. In order to deveop this potentia mutuay, it is necessary to jointy deveop the touristic attractions and to encourage the regions. The key eement in the improvement of the competitiveness is the deveopment and efficient use of human resources. Therefore, buiding the reations between the educationa institutions and the deveopment of such institutions are aso supported. In addition, there is a great emphasis on encouraging the cooperations in the abour market as we as in their integrated deveopment. The greatest vaue of the border areas ies in their nature. The protection of nature requires efforts from both countries. Since environmenta poution incuding the poution of air and rivers does not stop at the border, the protection against environmenta risks can ony be efficient if it is done jointy. The most important aspect of successfu cross-border cooperation is if peope accept and understand one another and are ready to cooperate. Therefore, the cooperation between communities has to be urged, thus bringing the peope coser to each other. EU Programs Avaiabe for Cross-border Cooperations The Programming Period In the structura poicy framework of the EU, four Community Initiatives existed between the years 2000 and 2006, namey INTERREG (interregiona cooperation), URBAN (sustainabe deveopment of urban areas), LEADER (deveopment of rura areas) and EQUAL (fight against the abour market inequaities). INTERREG program was aunched in the year 1989 by the European Commission to urge the cooperation between regions aong the interna borders of the Union. The main objective was to jointy find soutions for the probems of the areas of the same geographica character, but which are divided by the borders. In the foowing phases of the program specia attention was paid on the cooperation between the bordering European countries of the Community and the regions of the EU with simiar conditions. INTERREG has three basic forms of cooperation which differ from each other on the basis of the area of cooperation: 1. Cross border cooperation INTERREG IIIA Participating areas: bordering counties of two (or three) countries (NUTS III eve); Overa objectives: deveopment of economic and socia cross-border reations; Major areas of support: cooperations between SMEs, oca economic deveopment, deveopment of urban and rura areas, human resource deveopment (R&D, cuture, heath care, education), environment protection, renewabe energy, transportation, information and water management cooperation, ega and pubic administration cooperation etc. (investments, studies etc.). 2. Transnationa cooperation INTERREG IIIB Participating areas: Europe has been divided into 13 macro-regions. Hungary (with its tota area) takes part in the cooperation for Centra-Europe and the Bakans (CADSES program); Overa objectives: transnationa cooperation to faciitate the territoria integration of Europe; Major areas of support: joint eaboration of transnationa deveopment strategies, estabishment 18

9 Dehi Business Review X Vo. 11, No. 2 (Juy - December 2010) of an efficient and sustainabe European transportation network, promotion of the accession to the information society, environmenta cooperation, protection of cutura and natura resources with great emphasis on the water management etc. (especiay studies, concepts, pans, softwares etc., and smaer infrastructura investments). 3. Interregiona cooperation INTERREG IIIC Participating areas: organizations from a over the country with partners from anywhere from Europe; Overa objectives: the deveopment of the strategy and the instruments of the regiona deveopment and cohesion in a cooperation for the whoe Europe. The Present Programming Period ( ) In the current financia period the abovementioned initiatives do not exist anymore in their traditiona form. They have been transformed as foows: INTERREG has become one part of the objective named European Territoria Cooperation; Member states can submit mode URBAN projects (the initiative does not exist anymore, but there is support avaiabe within the European Regiona Deveopment Fund); LEADER continues its operation but not in the framework of the cohesion poicy. It has become the part of the new European Fund for Agricuture and Rura Deveopment; EQUAL does not exist anymore, but its principes remain among the main guideines (support is avaiabe within the European Socia Fund). Based on the abovementioned, INTERREG has become one of the three objectives of the Structura Funds. According to the proposa of the Commission, new ega entities, so-caed European Territoria Cooperation Groups (incuding regiona and oca authorities) are responsibe for the impementation of the cross-border programs and the handing of the funds on the border areas. The new cooperationa objective (the third objective of the three new ones) aims at faciitating a much coser territoria integration of the Union in a dimensions. Whie doing so, the cohesion poicy supports the baanced and sustainabe deveopment of the territories of the Union at macro-regiona eve, and due to the cross-border cooperations and the share of best practices reduces the effects due to the existing borders. The priorities and funds of the European Territoria Cooperation: Compared to the INTERREG III programs, the foowing changes have been made to the priorities: 1. Cross-border cooperation There are biatera programs existing, except for the Ukrainian border. European Regiona Deveopment Fund EU s interna borders: Austria Hungary; Sovenia Hungary; Sovakia Hungary; Romania Hungary Instrument for Pre-accession Assistance on externa borders (candidate and potentia candidate countries): Croatia - Hungary; Serbia and Montenegro - Hungary European Neighbourhood and Partnership Instrument on externa borders: Ukraine Sovakia Romania Hungary. 2. Transnationa cooperation Since the current 18 participating countries of the CADSES area differ from each other very much concerning their economic-socia situation, as we as geographica endowments, keeping them together woud have decreased the efficiency of the transnationa projects. It woud have hated the deveopment of the deveoped areas and the catching up of those agging behind. 19

10 J. Kaposzta, H. Nagy and K. Ritter Therefore, the European Commission favoured the division of the macro-region into two, which was supported by Hungary as we. Thus, the CADSES area has been separated into two parts for the period , namey the Southern-Eastern Europe and Centra-Europe. 3. Interregiona cooperation The aim of the interregiona program continues to be the increase of efficiency of the regiona poicy as foows: innovation and knowedge-based economy, environment protection and risk-prevention; exchange of experience, share and spread of best practices incuding sustainabe urban deveopment as we; studies, data coection and anaysis on the Community s deveopment; new European Neighbourhood Poicy for those who permanenty remain outside the EU. The aim of this new strategic cooperation is not to aow sharp differences to appear aong the new externa borders of the Union. It is not a key eement of the enargement process (former Soviet states and the Mediterranean areas,- separated from Ukraine (excuding Croatia, Serbia- Montenegro potentia members). Detaied priorities of the European Territoria Cooperation objective: 1. Joint and sustainabe deveopment of cross-border economic-socia and environmenta activities, especiay through the strengthening of entrepreneurship; the promotion and deveopment of common environmenta management and protection; the support of the reationship between urban and rura areas; the reduction of isoation, better accessibiity to transportation, information, communication networks and services, as we as to energy systems; the deveopment of infrastructure to enhance the cooperation and common use, especiay in the fied of heath care. Apart from a this, the European Regiona Deveopment Fund contributes to the administrative cooperation, the cross-border abour market initiatives, the gender equaity and the more efficient deveopment of human resources and R&D potentias. 2. Transnationa cooperation aims at the financing of the estabishment of spatia deveopment networks at the borders on the seashores, focusing on the fieds isted beow: water management; improving accessibiity, incuding the investments over the borders of the trans-european networks, faciitating the interoperabiity of the oca, nationa and cross-border networks; risk prevention, incuding the deveopment of marine security and the prevention of environmenta risks; scientific and technoogica network deaing with the baanced deveopment of the transnationa area. 3. The increase of the efficiency of the regiona poicy through interregiona cooperations: programs reated to innovation and knowedge-based society, environment protection and risk prevention, exchange of experience to identify, share and transfer the best practices. In order to finance the INTERREG initiatives, the Structura Funds (especiay the European Regiona Deveopment Fund) have been avaiabe both in the former and the present programming period. Between , EUR 7,4 biion (2,4% of the structura budget) has been aocated for this purpose (Nagy, Tóth, Káposzta, Kesztheyi and Pesti, 2007). According to the Act 1083/2006/EC (artice 3, paragraph 2, point c) the European cooperation aims at 20

11 Dehi Business Review X Vo. 11, No. 2 (Juy - December 2010) strengthening the cross-border cooperation through joint oca and regiona initiatives, and urging the transnationa cooperation with the appication of instruments eading to integrated territoria deveopment in accordance with the community priorities. According to the Artice 7 of 1083/2006/EC resoution, the eigibe areas are a the NUTS III eve territories of the EU on the interna and certain externa continenta borders, as we as NUTS III regions on marine borders within maximum 150 kms distance, considering the harmony and the necessary adjustments during the cooperations. European Territoria Cooperation Centra-European Transnationa Cooperation Program (Centra European Space CES): The key of the transnationa cooperation programs is to ook for soutions for areas of severa countries facing the same probems. Transnationa projects are usuay carried out with partners from 5-7 countries. The projects are especiay of scientific, panning and professiona character. They do not incude investment or purchase eements. Priorities panned: Supporting innovation in Centra-Europe Improving the interna and externa accessibiity of Centra-Europe Responsibe use of the environment Improving the competitiveness and attractiveness of cities and regions. Participating countries: EU member states: Austria, Czech Repubic, Germany (not the tota area), Hungary, Itay (not the tota area), Poand, Sovakia, Sovenia Non-EU states: Ukraine (not the tota area) Hungary - Sovakia Cross-border Cooperation Operationa Program : This program is being impemented in the programming period within the European Territoria Cooperation objective and it aims at the strengthening of economic and socia integration of the border regions in ong terms. Areas of support: cross-border business cooperations, R&D&I cooperations, joint touristic projects, heath care, network/partnership programs and project management capacities, joint use and deveopment of human resources, buiding reationship between peope, cross-border environment protection, cooperation to protect the nature, sma-scae deveopment of the transportation infrastructure (roads, bicyce routes, pubic transport), better faciities for border crossing over the rivers aong the borders, deveopment of communication channes over the borders. Hungarian side: Gyor Moson Sopron, Komárom Esztergom counties, Budapest, Pest, Nógrád, Heves, Borsod Abaúj Zempén and Szabocs Szatmár Bereg counties. 21

12 J. Kaposzta, H. Nagy and K. Ritter Sovakian side: Pozsony, Nagyszombat, Nyitra, Besztercebánya and Kassa counties. The tota budget of the program is EUR 207 miion, of which 176 miion (85%) is the contribution of the European Regiona Deveopment Fund. The minimum required own contribution of the appicants is 5%. INTERREG IVC Program Authorities and stakehoders at oca and regiona eve have a vita roe to pay in the achievement of the EU s strategies for growth, jobs and sustainabe deveopment. The exchange, sharing and transfer of poicy experience, knowedge and good practices wi contribute to the success of this objective. The INTERREG IVC Program is part of the European Territoria Cooperation Objective of the Structura Fund poicies for the period It aims, by means of interregiona cooperation, to improve the effectiveness of regiona deveopment poicies and contribute to economic modernisation and increased competitiveness of Europe, by: Enabing oca and regiona actors across the EU to exchange their experiences and knowedge; Matching regions ess experienced in a certain poicy fied with more advanced regions; Ensuring the transfer of good practices into Structura Funds mainstream programs. There is another instrument for V4 cooperation in addition to the abovementioned EU funds, which is the own endeavour of the Visegrad countries, caed the Internationa Visegrad Fund. The Internationa Visegrad Fund was estabished in 2000 to encourage coser cooperation among the V4 countries through the support of common projects in the fieds of cuture, science and research, education, youth exchange, cross-border cooperation and promotion of tourism ( As a region, Centra Europe - incuding the Visegrad countries - has aways been at the crossroads between West and East and has therefore often been hoty contested. The main aim is to deveop and promote cutura cohesion of the region, mediate understanding of one another and buid on the common grounds of the region within the broader European integration. To date, the Fund has supported more than 1,700 projects and awarded neary 400 schoarships and 40 artist residencies. The current annua budget of the Internationa Visegrad Fund is 5 miion and is created by equa contributions from the member states. As a rue, funds are distributed to the member countries proportionay. This of course does not invove third countries as recipients, however, in 2007, amost 15 percent of the budget went to neighbouring countries such as Ukraine, Bearus and so on. Presenty we are experiencing sort of a renaissance of Visegrad refected in a continuous rise in appicant interest, the increasing quaity of projects and aso in the fact that the Fund s budget has been increased severa times since the fund s inception, comparing the Fund s 1 miion budget in 2000 to its 5 miion budget today. The Prime Ministers decided in June 2009 on a further increase of nationa contribution to the IVF (EUR 1,500,000 per states up to EUR 6,000,000 totay) to be impemented from 2010 onwards. The four countries adopted common positions on a number of issues and succeeded in harmonising their interests. European and other partners are keen on making contact with the Four, whie meetings and diaogues in V4+ formats have became reguar. Other groups of regiona cooperation (Beneux, Batic3 countries, Nordic Counci of Ministers) ook to the Visegrad Group as a potentia partner. Today, the renewed Visegrad Cooperation covers three major dimensions: cooperation on foreign and European poicies, sectora cooperation and the civic dimension. Concusions Based on our study it is obvious that the Visegrad countries need to cooperate with each other to achieve mutuay beneficia resuts. It is true that it is not easy to persuade the citizens and the poiticians of these countries to cooperate, but in ong term it is the ony way to improve competitiveness. Unfortunatey, nowadays the poitica forces do not faciitate such cooperations, but due to EU 22

13 Dehi Business Review X Vo. 11, No. 2 (Juy - December 2010) funds we hope that deveopments can be separated from poitica issues and we can work for a common goa in the region. There are many possibe ways for joint deveopments, since a the four countries are among the essdeveoped regions of the European Union based on the GDP per capita. There is room for deveopment in order to catch up with the Western-European countries. The EU accession of the Centra-Eastern- European region has resuted various consequences in the 12 new member states. Some of them coud reach higher economic growth, whie others decined. There are two countries, namey Sovania and Sovakia, who managed to get into even the euro-zone in the past few years. The goba economic crisis had struck these countries very hard, so the current economic situation is even worse than before. Under such circumstances it might be even more important to cooperate and to ook for soutions for the structura difficuties with joint efforts. Since these regions are not among the most deveoped ones of the EU, there are many funds avaiabe for their economic and socia deveopment and cohesion from the EU budget. There are many fieds of the economy where deveopments woud be necessary in these countries, because there are rura areas where even the basic infrastructura services are not provided. 20 years after the change of regime and in the transition to market economy, neither the economic nor the socia situation is at the expected eve. Finay, et us ist up a few potentia fieds of deveopments which require more attention from the Visegrad countries. Energy security is the most often mentioned chaenge now facing the Visegrad Group (V4), whie others incude the further enargement of the EU and handing the impacts of the goba economic crisis. When ooking more cosey at economic aspects, experts cite the need to keep the Visegrad region competitive and secure a successfu transition from traditiona industries to knowedge-based ones. The gas crisis in January 2009 showed that energy security is of key importance for the economic deveopment of the region, Aexander Dueba, the director of the Research Centre of the Sovak Foreign Poicy Association (SFPA), tod The Sovak Spectator ( There are no regiona interconnections of infrastructure for transit of natura gas and crude oi within the V4. If the V4 arrangement is not used to bring about a change, this wi cast doubt on the pure essence of regiona cooperation within the V4. ( A successfu transition from traditiona industries to knowedge-based ones seems crucia for the region to remain competitive. Under some pessimistic scenarios one coud aso expect some worsening of the situation in regiona competitiveness. Fortunatey, despite some negative signs - ike the increasing unempoyment rate in Sovakia, and probems in Hungary- so far we have evidence of a rather good position across the region as a whoe. Unfortunatey, education, R&D and innovation did not have determining roes in the communist-era, therefore it is very difficut to consciousy aocate sources for such purposes from the budget nowadays. Based on former experiences, the quaification of the graduates and experts of these countries has been of very high quaity, but most of them decided to move abroad to get the desired saary for their expertise. The research institutes and educationa institutions used to be state-owned/financed, so their management did not need to think about their competitiveness and quaity eve. But due to the recent changes and the Lisbon strategy of the EU, a the member states have to pay more attention to knowedge and innovation. According to the EU s resoution, every region has to increase the R&D spending to 3% of their GDP by Based on the current figures, most of the EU states do not even reach 0.5%, not to mention the desired 3%. The other probem with the spending on research and deveopment is that such sources do not come from the private sphere (enterprises) which coud use and transfer the scientific resuts directy to the economy, but most of these sources sti originate from the state. The state does not reay pay attention 23

14 J. Kaposzta, H. Nagy and K. Ritter what scientific resuts, what innovations, what new products/technoogies/services woud be necessary in the economy, so the scientific researches cannot be adjusted to the rea demand. The Visegrad countries had a cose reationship with the EU in the past, since the most important trade partner was the Union itsef. These countries have very important export goods, which are easiy tradabe in Western-Europe. Therefore, the major force behind the economic deveopment of the V4 countries wi remain their export orientation and foreign direct investment. However, in order to be abe to enhance the exports, products with higher added vaue have to be produced in these countries, meeting the quaity standards of Western-Europe and meeting the quaity-management requirements. But the V4 countries, except for Poand, ack domestic sources for sustainabe and ong-term growth. Due to this fact the economic deveopment path of the countries is expected to be quite simiar over the next few years. These characteristics reinforce the competing nature of their economies. Ony argescae, region-wide investment project can be important for a the affected countries, in order to unite their forces, but it requires strong poitica wi and a cooperative approach. The atter is obviousy acking due mosty to poitica probems between Hungary and Sovakia. It is very sad though, that the Hungarian economic poicy does not urge the incoming of foreign direct investment due to the changes in the taxation system and the administration in the business sphere. Whie taking the austerity measures, the government does not have a wiingness to reduce the taxes, therefore a ot of companies choose Sovakia to be the venue of their head office/operation. The favourabe taxation conditions in Sovakia and in Romania increase the tension further among these countries, so the cooperation is becoming more difficut. According to other figures and researches, the argest potentia for cooperation within the V4 is in tourism, services, manufacturing, chemica production or agricuture. On the other hand, agricuture in particuar is a sector where traditiona nationa protectionism is fuy supported by many poiticians and, due to EU poicy, competition is undermined, resuting in probems with competitiveness (Tóth, Goda and Urbánné, 2009). As a fina concusion we can state that cooperation must be vountary to achieve good resuts both in the business and in the pubic sphere. References December December December Jana, Liptáková (2009), Business Prospects in V4, Visegrad Countries Specia, The Sovak Spectator, Issue of 31 August 2009, p.3. Koár, K. and Goda, P. (2009), The Assessments of Economica Subsystems for Improving the Potentia of the Hungary s Economica Competitiveness, In: Káposzta, J.: New Eements and Research in Spatia Economy, Scientific Book, Research Institute of J. Seye University, Komarno, p.181. Ministry for Nationa Deveopment and Economy (2009), Overview of Foreign Direct Investments in Hungary, Budapest. Nagy, H., Tóth, T., Káposzta, J., Kesztheyi, K. and Pesti, Cs. (2007), The Eements of the European Territoria Cooperation, in Engish Preparation for receiving the funds from the European Union, ed: Bujáki Gábor, Gödöo. Rácz, György ed. (2009), Visegrád 1335., Internationa Visegrad Fund, Bratisava. Tamás, Novák (2009), Macroeconomic Outook and Chaenges in the V4, Visegrad Countries Specia, The Sovak Spectator, issue of 31 August 2009, p.3. Tóth, T., Goda, P., Urbánné M.M. (2009), The Eements of Sustainabiity in the Spatia and Rura Deveopment, p