Area: 93,030 sq km, slightly smaller than Indiana
Population: 10,032,375 (July 2004 est.)
Annual Inflation: 4.7% (2004 est.)
Population Growth Rate: -0.25% (2004 est.)
Gross Domestic Product (GDP): $139.8 billion (purchasing power parity, 2004 est.)
Life Expectancy: Male: 68.07 years; Female: 76.69 years; (2004 est.)
GDP Per Capita: $13,900 (purchasing power parity, 2004 est.)
Infant Mortality: 8.68 deaths/1,000 live births (2004 est.)
Real Annual GDP Growth: 2.9% (2004 est.)
U.S. STRATEGIC INTERESTS
Located in the heart of Central Europe, Hungary is a stable, democratic country that joined the European Union (EU) in May 2004. Hungary's location makes it a linchpin for the stability of Central and Eastern Europe, where it has acted as a mentor to neighboring countries that have made less progress in modernization and integration. U.S. interests are focused on the further increase of Hungary's already active cooperation in the global war on terror and improving its performance in NATO, both on the military and political levels. Hungary remains an important economic partner as it works to improve its investment climate and to tackle domestic economic reform. With the exception of the military component, U.S. assistance to Hungary has been declining for several years and will continue to do so now that Hungary has joined the EU and has itself become a donor nation.
OVERVIEW OF U.S. GOVERNMENT ASSISTANCE
In FY 2004, the U.S. Government (USG) provided an estimated $12.02 million in assistance to Hungary:
Although no new SEED funds were provided in FY 2004, implementers continued using SEED funding remaining from previous fiscal years, as described below.
In FY 2004, more than 230 Hungarians traveled to the U.S. on USG-funded exchange programs, which included 47 participants in International Visitor and Voluntary Visitor programs, 30 Fulbright scholarship winners, and 126 military officers and enlistees.
U.S. ASSISTANCE PRIORITIES
Democratic Reform Programs: In FY 2004, the highest priorities for U.S. democratic reform assistance in Hungary included strengthening non-governmental organizations (NGOs), promoting civic participation and education, minority issues, legal reform, equal opportunity, and the fostering of a healthy political climate. USG-funded exchange programs sought to familiarize Hungarian Government (GOH) officials, politicians, educators, journalists, and researchers with U.S. best practices and resources to assist them in evaluating how to modernize and to meet European standards.
Economic and Social Sector Reform Programs: Reflecting the development of Hungary's economy and financial markets, U.S. assistance in this area has focused on counter-terror finance, anti-money laundering, fostering Hungary's emergence as a donor nation, and the incorporation of marginalized minorities. Future U.S. priorities will remain largely the same, albeit with steadily declining resources.
Security, Regional Stability, and Law Enforcement Programs: The Department of Defense (DoD) provided 95 percent of all U.S. assistance to Hungary in FY 2004. Assistance in the security area focused on improving Hungary's military performance, helping it meet NATO force goals, thwarting trafficking in persons, and enhancing cooperation in combating transnational organized crime, weapons trafficking, and drug trafficking. A number of U.S. agencies - DoD, Department of Justice (DOJ), Department of Homeland Security (DHS), USAID, and Drug Enforcement Administration (DEA) - administer these programs. With Hungary's increasing prosperity and entry into the EU, U.S. assistance efforts will remain focused on these programs in the future.
SECTORAL ASSESSMENTS
Democratic Reform
Hungary has accomplished almost all its needed democratic reforms since the fall of communism in 1989. However, corruption and inter-ministerial cooperation remain problematic. Hungary took part in the European Parliament election in June 2004. In August, Prime Minister P�ter Medgyessy resigned, and the ruling coalition elected Ferenc Gyurcs�ny as the new Prime Minister through the prescribed constitutional process. The Constitution provides for freedom of speech and of the press, and the GOH generally respected these rights. However, both the current and previous governments were criticized for interference in editorial and personnel decisions of state-owned media. Privately owned media, although free, generally continue to report along predictable political lines. Parliament passed a law on electronic communications in 2003. The government has made no progress in FY 2004 in its attempts to amend the media law to comply with EU and technical standards. USG assistance also provided professional media training to senior GOH spokespersons and supported programs that provided opportunities for Roma in the field of journalism.
Hungary has an independent judiciary that conforms to democratic norms but is still hampered by communist-era hierarchal attitudes that inhibit inter-departmental and inter-ministerial cooperation. The recently passed "transparency" laws to combat corruption were used in FY 2004 in several notable instances. U.S.-sponsored exchange programs included participants from government ministries, academia, the private sector, the media, and Parliament on a broad range of topics.
Hungary continues to provide matching funds to NGOs based on the amount taxpayers donate, up to 1 percent of their income. U.S. assistance to local NGOs also helped shape other examples of progress, including an initiative to increase private resources for the NGO sector and a law on volunteerism that supports best practices. A U.S.-supported NGO advised the GOH on donor tax incentives, endowments, and other financing mechanisms; hosted university non-profit law clinics; and sponsored internship programs in Hungary and the U.S. Several programs helped create a better-informed NGO community by strengthening Internet networks and newsletters. Several U.S. grants supported projects that sought to integrate underserved populations fully into the democratic process and pass laws to protect their rights.
In FY 2004, U.S. assistance continued to build capacity in the NGO sector. Hungary's EU accession, the phase-out of the Democracy Commission Small Grants (DCSG) program, and transition from being a recipient to a donor country will make working with NGOs to enhance their sustainability crucial for the long-term health of this sector. The U.S. Embassy's DCSG program promoted a competition for NGOs to help create a culture of volunteerism and to host programs in leadership development, grant writing, and fundraising. The implementation of the new National Civil Fund will need to be tracked in 2005, to follow how "institutional support" will be defined. U.S. assistance will also continue to encourage improvement of the climate of political discourse through exchange programs that include both ruling and opposition political parties.
There are six primary vehicles through which Public Diplomacy strengthened democratic reforms in Hungary in FY 2004, including Democracy Commission small grants, Individual/project Grants, International Visitor/Voluntary Visitor Programs and sponsoring U.S. experts as speakers. In FY 2004, total funding for programs in this area was $174,000. Democracy Commission Small Grants projects ($55,000) included those that strengthened the leadership capacity and sustainability of NGOs across a range of sectors, civic movements to strengthen the environment, and skills of Roma media actors in the mainstream. International Visitor Programs ($56,000) included programs that strengthened understanding of legal reform, state and local leadership, minority issues and NGO sector. Voluntary Visitor Programs ($40,000) were targeted at state and local leaders in the area of cooperation and local initiative. Individual/Project Grants ($11,000) included those that strengthened transparency and communication skills of government ministry leaders, speakers on democratic challenges and tolerance of diversity, and combating anti-Semitism. Speakers ($12,000) from the U.S. shared expertise on electoral process, legal reform and minority issues.
Economic and Social-Sector Reform
Hungary has a robust private export sector, solid economic growth rate, and low unemployment. It has had a strong record of structural reform beginning even before the change of regime. Per capita gross national income (GNI) is slightly over $5,000; on a purchasing power parity basis, per capita GDP is about $13,900. Life expectancy, literacy rates, and other indicators, such as access to potable water, reflect Hungary's status as an upper-middle-income country. However, some parts of the population, particularly the Roma, have benefited less than others. Thus, U.S. assistance in this area has focused on grooming Hungary to play a role as a donor, helping to improve prospects for the Roma community and combating money laundering and terror financing.
During FY 2004, the Hungarian-American Partnership Initiative (HAPI) continued to provide opportunities for other countries to learn from Hungary's successful transition to a market economy and democratic society. Since it began to implement HAPI in 2000, the Foundation for Development of Democratic Rights (FDDR) has delivered 52 short-term training programs in Hungary to 600 participants from 14 countries throughout Central and Southeast Europe and Eurasia. Topics have spanned virtually all sectors, including local economic development, NGO advocacy and development, small and medium enterprise (SME) development, anti-corruption, and education of minorities. FDDR also supported the GOH's nascent international development assistance program by conducting mapping missions to Bosnia and Herzegovina, Serbia and Montenegro, and Macedonia. The goal was to assess the specific needs of NGOs and to identify potential partners for projects to be funded through the Ministry of Foreign Affairs' development assistance program, required for EU entry. Representatives from the Hungarian Ministry of Foreign Affairs welcomed and participated in the missions. FDDR will dedicate its final training programs in early 2005 to sharing its experiences of successfully transitioning from USAID funding to EU and Hungarian funding with NGOs in these three countries.
The Roma Integration Program, a four-year initiative implemented by Partners for Democratic Change and its centers in the Czech Republic, Hungary, and Slovakia, is now in its second year. In FY 2004, Partners-Hungary spent $108,244 implementing the program in Hungary and three target communities of Ozd, P�cs, and Hatvan. During this period, Partners trained about 100 Roma and non-Roma community members, including NGO leaders, elected officials, teachers, and social service workers in conflict resolution, coalition building, negotiation, and good governance. The training set the stage for cooperative planning processes, which are under way in each of the target communities to develop solutions to problems affecting Roma and majority relations. Partners-Hungary also began recruiting a core group of committed Roma and non-Roma leaders in each community to be trained to form Conciliation Commissions, which will provide a community forum for addressing inter-ethnic disputes and promoting tolerance and understanding. At the national level, Partners-Hungary was successful in getting the Roma Minority Self-Government to co-fund a media grants program, which will support small grants to media projects to improve the perception of Roma in the media.
The GOH has worked with the U.S. to counter terrorist financing and money laundering. With additional legislation passed in 2003, Hungary now has the legal infrastructure in place to combat financial crimes and money laundering. DOJ conducts a two-pronged program that counters money laundering and government corruption. In May 2004, DOJ held a week-long conference to train prosecutors, law enforcement agents, judges, and government officials in money laundering prosecution. In FY 2004, the U.S. donated about $90,000 worth of investigative and surveillance equipment to the Prosecutor General's Office, the Hungarian National Police, and the Hungarian Inspector General's office. The equipment included digital body wire recorders, signal repeaters and receivers, digital cameras, and two-way radios. The Treasury Department, Office of Technical Assistance, also provides anti-money laundering technical assistance.
Public Diplomacy has three main sources from which to administer programs to strengthen economic and social reform in Hungary: Democracy Commission Small Grants; Speakers Programs; and the International Visitor/Voluntary Visitor Programs. In FY 2004, total funding for programs in these areas was $248,000. Democracy Commission Small Grants projects ($145,000) included those that strengthened the volunteer sector in Hungary, including projects to support the disabled, families, and the environment; university reform and education of Roma youth; capacity-building for small/medium non-profit enterprises; integration of migrants into Hungarian mainstream society; and gender equality and domestic violence. International Visitor Programs individual and group projects ($80,000) included those that strengthened understanding of public-private support for education, healthcare reform, and economic development (including biotechnology and protection of intellectual property). A Voluntary Visitor Program ($9,000) was targeted at minority education and alternative education). Speakers ($14,000) from the United States shared expertise on education (American Studies and reform of higher education), and U.S. models and international standards for corporate governance.
Security, Regional Stability, and Law Enforcement
Hungary is a NATO member, but the legacy of its Warsaw Pact participation still shadows its military, which is currently involved in a fourth try at restructuring. If successful, this attempt will result in a much-downsized military with a radically different mission. U.S. military-military assistance has been designed to improve Hungary's performance in NATO and, by extension, in the war on terror. The GOH is strongly committed to non-proliferation and export-control regimes and often passes on U.S. technical assistance in these areas to neighboring countries through mentoring and training.
During FY 2004, Hungary received $2.04 million under the International Military Education and Training (IMET) program. The FY 2004 IMET program was extremely successful in exposing Hungarian military and civilian leaders to U.S. military training and in assisting Hungary in determining its future defense structure. Hungary sent 126 officers and enlisted students to the U.S. for various military courses, with primary emphasis on infantry, Special Operations Forces (SOF), medical, and NCO leader development. IMET funding also was used for other major activities, including: 1) a U.S. Requirement Survey Team visit to Hungary to discuss Mobile Training Team (MTT) events for FY 2005 in support of SOF and Light Infantry development; 2) a Mobile Education Team (MET) visit to Hungary to discuss defense restructuring with senior Ministry of Defense (MOD) civilian experts and military instructors at the National Defense University (50 experts); and 3) a trip by a senior Hungarian delegation to the U.S. under the Distinguished Visitor Orientation Tour (DVOT) regime to discuss SOF development. IMET funds also were used to support a seminar on HIV/AIDS prevention in the U.S.
During FY 2004, Hungary received $135,000 in DoD Counterterrorism (CT) programs. CT funds were used to send Hungarian military and civilian experts to a regional MET event in Romania on civil-military response to terrorism, attendance at a CT course at the U.S. National Defense University, and funding for four Hungarian parliamentarians from the Defense Committee (one from each party represented in Parliament) as part of the DVOT on SOF development that was primarily funded under IMET (see IMET section above).
In FY 2004, Hungary received $6.94 million in Foreign Military Financing (FMF). The Hungarian MOD's obligation of FMF funds was slowed somewhat in FY 2004 due to internal debate over the size, composition and missions of the Hungarian Defense Force (HDF) and a continuing shift in focus toward using FMF primarily for developing military capabilities, increasing interoperability, and meeting NATO Force Goals. Major ongoing security assistance programs include: 1) air-to-air missiles to arm the Gripen fighter aircraft using Hungarian national funds under Foreign Military Sales (FMS); 2) Link 16 command and control data linkage in preparation for the Gripen; 3) Multiple Integrated Laser Evaluation Systems (MILES) for use at the Varpalota Training Facility; 4) continuation of the Air Sovereignty Operations Center program; 5) continuation of the Identification Friend or Foe (IFF) Mode 4 program for Hungary's military aircraft; 6) tactical communications equipment; and 7) continuation of the CUBIC contract, which provides defense advice to the Hungarian MOD. FMF Letters of Request now in progress are focused toward infantry/SOF weapons and equipment and nuclear, biological, and chemical detection and identification equipment.
Joint Contact Team Program (JCTP) and State Partnership Program (SPP) activities in FY 2004 continued to be limited due to U.S. operations in Iraq and Afghanistan. Nevertheless, Hungary participated in six U.S.-funded SPP events with its partner state of Ohio: 1) a military family support exchange in the U.S.; 2) two separate visits to Hungary by officials from the Ohio Department of Education on a DoD-funded pilot program involving civil-civil teacher exchanges; and 3) three separate planning visits to Hungary to discuss future training/exercise possibilities, one involving a visit by the Adjutant General of Ohio. Hungary also participated in four JCTP events: 1) a familiarization visit to a U.S. training facility in Grafenwoehr, Germany, to observe a MILES training exercise (see FMF notation that Hungary is purchasing the MILES system under FMF); 2) Hungarian participation in an International Defense Acquisition Conference in Luxembourg; 3) a Coalition Staff Ride to the WWII Normandy battlefields in France; and 4) a non-lethal weapons conference in Germany. FY 2005 JCTP and SPP scheduled events better reflect the focus on assisting in major objectives of development of military capabilities, non-commissioned officer development, and the Hungarian military transition from a conscript to a professional force.
Hungary expanded its participation in the George C. Marshall Center (GCMC) in Garmisch, Germany, by sending 18 military and civilian leaders to various conferences and seminars. The Hungarian GCMC Alumni Association hosted a major conference on counter-terrorism, which was attended by over 300 personnel from national security agencies, Parliament, educational institutions, and GOH ministries. The GCMC now offers a program on terrorism and security studies, which has proven extremely popular and useful to Hungarian national security agencies. GCMC activities are supported by joint U.S. and German funding.
Hungary is considered a Tier II country in terms of trafficking in persons (TIP), as the GOH does not fully comply with the minimum standards for eliminating trafficking. Hungary is primarily a transit and secondarily a source and destination country. Reflecting Hungary's increased concern over TIP, the GOH established both an inter-ministerial working group and a bilateral working group with the U.S. to combat trafficking. In FY 2004, Hungary also formed a dedicated anti-TIP investigative office within the National Police, which conducts international and regional investigations of trafficking rings in conjunction with other nations. The Budapest office of the International Organization for Migration (IOM) continues to conduct police and judiciary training on TIP, with funding assistance from the State Department's Office to Monitor and Combat Trafficking in Persons. However, IOM's highly visible "Don't Fall In" prevention campaign will come to an end in December 2005 due to a lack of funding. Hungary has plans to fund a dedicated TIP victim shelter in FY 2005. Additionally, Hungary is a member of all non-proliferation regimes and has become a mentor to regional neighbors in border control issues, and it actively participates in the Southeast European Cooperative Initiative (SECI), as well as in the GUUAM (Georgia, Ukraine, Uzbekistan, Azerbaijan and Moldova) Group.
Hungary's cooperation with U.S. agencies on law enforcement issues has generally been excellent. The DOJ and its Hungarian counterparts have worked productively via a task force on transnational organized crime. The Drug Enforcement Administration (DEA) has begun promising cooperation with the Hungarian National Drug Police. The Department of Homeland Security works with Hungarian Customs to track and interdict illegal weapons procurement. The Department of State, Bureau of International Narcotics and Law Enforcement Affairs (INL), administers SEED and FREEDOM Support Act funding to support the Budapest-based International Law Enforcement Academy. It indirectly enhances regional stability and contributes to law enforcement efforts by offering police and law enforcement courses to officials from Central and Eastern Europe, the Trans Caucasus, and Central Asia. INL also works with the DOJ Office of Prosecutorial Development, Assistance and Training (OPDAT), to provide training and assistance on money laundering and combating public corruption.
Public Diplomacy has three main sources from which to administer programs to strengthen security, regional stability, and law enforcement in Hungary: Individual/project grants, regional tours for media representatives, and the International Visitor/Voluntary Visitor programs. In FY 2004, total funding for programs in this area was $100,000. Individual/project grants ($6,500) focused on strengthening understanding of the Muslim, Christian, and Jewish faiths; networks of young political leaders for transatlantic security issues; and NATO. Regional tours for media representatives ($2,000) focused on NATO's role in Europe, Iraq, and Afghanistan. International Visitor Program individual and group projects ($65,000) included those that strengthened understanding of: international crime, group and individual programs on regional stability, and counter-terrorism. Voluntary Visitor programs ($24,000) addressed the issue of aircraft disaster management. Speakers ($2,500) from the United States shared expertise on disaster management and trafficking in persons.
Humanitarian Assistance
In FY 2004, the U.S. provided DoD-managed humanitarian assistance donations valued at $1,084,568 under the U.S. European Command Humanitarian Assistance Program (HAP). These included $250,000 funding for renovation of a children's hospital in Budapest, as well as over $750,000 worth of excess property donations. Those donations included furniture, vehicles, fire-fighting equipment, office equipment, and disaster management and relief supplies. Primary beneficiaries of these property donations were the Hungarian Red Cross and various social services institutions in Somogy County.
COUNTRY PERFORMANCE MEASURES
ECONOMIC & DEMOCRATIC REFORMS, 1991-2004
Data are drawn from EBRD, Transition Report (November 2004) & Freedom House, Nations in Transit 2004 & Freedom in the World 2004. Ratings are based on a 1 to 5 scale with 5 representing the most advanced.
Latest year observation refers to 2004 economic reform data and 2003 democratic reform data; i.e., 2004 data for democratic reforms are not yet available.
ECONOMIC STRUCTURE AND HUMAN DEVELOPMENT, 1990-2004
World Bank, World Development Indicators 2004 (2004); UNICEF, Social Monitor 2004 (2004); EBRD, Transition Report (November 2004); and UNDP, Human Development Report (2004).
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