Economic Reform And Construction Industry In Hungary

Abstract:

The following article plays up the effect of economic reform and construction industry in Hungary. The predominance of the state owned enterprises was a vital factor, due to which reforms in the country could not be implemented smoothly. The essentials of the construction industry namely, raw materials, building machinery and land were first availed by the state owned enterprises. This created inconvenience for the small scale enterprise. In order to nullify the effects of unequal distribution of building materials and other essentials, several reforms were launched in the country.

Economic reform in Hungary should be such that it should also look into matters related to the construction industry. An efficient construction industry in Hungary would impact the following positively.

It would solve the problem of scarcity of dwelling places thereby enhancing the living standards of many.

Lead to an improvement in the macroeconomic functioning.

A healthy real estate market can bring about improvement in the workforce firstly by engaging them and secondly by developing mobility of labor.

A sound housing market also helps in the growth of the financial sector in Hungary.

In the event when the level of subsidies in the housing sector is lowered. It leads to the reduction of public expenses too thereby reducing the rate of inflation in the country.

Studies reveal that economic reform and construction industry in Hungary evoke structural reforms in the country also. Despite the introduction of economic reform in Hungary, the country encounters several obstacles in reforming the construction industry. Some of the hindrances are as follows:

Hindrances to economic reform and construction industry in Hungary:

In Hungary, the state owned enterprises or the SOEs are prominent in the real estate markets. As such the state owned enterprises are able to avail of the credit facilities, land as well as materials needed for construction. Under such circumstances, the small entrepreneurs are not able to avail of the benefits as much as the SOEs do. The Realtors or developers in the construction industry encounter problem because the demand for housing is not very strong. It is presumed that this is just a temporary phase the house builders are facing. There is marked monopoly prevailing in the construction industry with regard to construction of materials. The raw materials, which are rare are not equally shared and mostly whipped away by the state owned enterprises. Since one type of procedure is being followed in Hungary from time immemorial, the authorities usually resist any change, which asks for the implementation of newer procedures in the construction industry. It was observed that after World War II, rate of inflation in Hungary increased significantly. As such, the cost of houses also went up. Consequently, not many houses were sold in Hungary as a result of inflation.

The scenario of economic reform and the construction industry in Hungary changed after the government embraced few measures. These reforms were more prominent between 1980 to 1989. Approximately thousand construction firms were established in Hungary. As a result of the creation of these small firms, the state owned enterprises took a back seat and gradually reduced in number.

Reforms in the construction industry mainly comprised privatization. The first housing reform in Hungary was embraced in the year 1960. Since then the country has been trying to maintain private housing. Again in the year 1971, more opportunities were given to the private sector, and several firms were created, which delivered multiple houses in one go. Other reforms in the construction industry included measures, which would facilitate the "secondary income" generation. With the amount obtained from "secondary income", one could buy a house,which was produced privately.