Hungary Can Improve its Business Climate by Replicating Local Successes, says World Bank Group Report

June 27, 2017

Szekesfehervar, HUNGARY, June 27, 2017 – Entrepreneurs in Hungary can get a new business license in a week or less, but it takes eight months to get a new electricity connection, a new World Bank Group report finds.

While Hungarian cities outperform the European Union (EU) average in property registration and commercial dispute resolution, they lag behind in other areas, such as starting a business or receiving construction permits, says Doing Business in the European Union 2017: Bulgaria, Hungary and Romania.

The report’s findings on Hungary, released today, show that the ease of doing business varies from city to city. To improve performance, Hungarian cities can look to existing good practices in the country and replicate them in locations that fall short, the report recommends.

“By capturing differences in business regulations and their enforcement across different cities within a country, Subnational Doing Business reports uncover roadblocks as well as good practices in vital areas of business activity. We hope this report will draw the attention of policy makers in Budapest and beyond and serve as a starting point for reforms that can be adopted without major legislative changes,” said Cecile Fruman, Director, World Bank Group Global Practice on Trade and Competitiveness.

In Hungary, the report benchmarks the capital city of Budapest, along with Debrecen, Gyor, Miskolc, Pecs, Szeged, Szekesfehervar on five Doing Business areas: Starting a Business, Dealing with Construction Permits, Getting Electricity, Registering Property, and Enforcing Contracts.

Among its findings:

  • Business start-up costs are high in Hungarian cities, compared with other European Union (EU) locations, although settling a commercial dispute is fast and inexpensive in most cities.
  • Hungarian cities outperform the EU average in the areas of property registration and commercial dispute resolution, and Pecs and Szeged also do so in the area of construction permitting.
  • There is still room to improve for all cities in starting a business, getting electricity, and construction permitting.

No Hungarian city does equally well across the five areas covered by the report. Differences in implementation of national law and efficiency levels of local public agencies contribute to the variations.

For example, it is easier for Hungarian entrepreneurs to start a business in Debrecen, Miskolc and Pecs, to deal with construction permits in Pecs, to get electricity in Szeged, and to register property and enforce contracts in Debrecen.

Pecs also performs well in issuing building permits and occupancy permits that each take 30 and 35 days respectively—more than 20 percent faster than in the other cities on average.

Meanwhile in Budapest, the largest business city in the country, an efficient Land Registry processes more property sale transactions than all the other six Hungarian cities combined. It does so at a faster rate than cities like Pecs, where volumes are considerably lower.

Compared globally, all Hungarian cities do well in enforcing contracts, with Debrecen, Miskolc and Szekesfehervar outperforming the EU’s best performer, Lithuania, thanks to low legal costs and speedy trials of 14 months or less. In Debrecen, a series of court management innovations, informally called the “Debrecen Model,” could be replicated in other Hungarian jurisdictions.

“The unevenness in performance across cities shows that the regulatory reform agenda remains incomplete in Hungary,” said Mierta Capaul, Manager of the Subnational Doing Business program at the World Bank. “The good practices uncovered in this report can serve as a roadmap for reform at the subnational level.”

Doing Business in the European Union 2017 is a series of subnational reports being produced by the World Bank Group at the request of and funded by the European Commission. The first edition also benchmarks six cities in Bulgaria and nine in Romania, besides the seven cities in Hungary. The report will be published in full on July 13. A second edition, covering 25 cities in Croatia, the Czech Republic, Portugal and Slovak Republic, is slated for release in 2018.

Subnational Doing Business reports are produced by the Global Indicators Group of the World Bank Group. The work on Hungary, carried out with the support of the Ministry for National Economy, is based on the same methodology as the global Doing Business report published annually by the World Bank Group. 

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