Hungary to move billions worth of public funds into foundations
Foundations to control universities, public funds
Orbán’s Fidesz-led coalition enjoys legislative majority in Parliament but with a Fidesz MP out sick with COVID-19 it needed votes by ‘independent’ MPs to pass this law. This support was provided by two former members of far-right extremist parties Jobbik (János Volner) and Mi Hazánk (Erik Fülöp), and also by Imre Ritter, German nationality member of Parliament.
The decision created 16 ‘new quasi-private foundations’, 11 of which will control universities, leaving only five in public domain: Eötvös Loránd University (ELTE), Budapest University of Technology and Economics (BME), the National University of Public Service (NKE), The Hungarian University of Fine Arts (MKE), and The Liszt Ferenc Academy of Music.
Minister of National Innovation and Technology, László Palkovics, said the new system would “make Hungarian young people the winners of the future by giving them modern training”.
The text of the bill says the “diversity and dynamic change of public responsibilities warrant a rethinking of the state’s role.”
While Orbán said in parliament on Monday that the foundations “can only spend the endowment for public good, on education,” opposition leaders decried the new legislation for posing a corruption risk, saying that by the foundations the PM and his allies will continue to push the nationalist, anti-immigrant, anti-gay political message that has steered Hungary away from the European mainstream.
Orbán’s government, promoting what it calls Christian, conservative values, has strongly opposed immigration and limited gay adoption and legal recognition of transgender people.
Power grab
Critics say the new legislation is a government power grab aimed at extending its ideological influence.
Attila Chikán, a professor at the Corvinus economics university in Budapest and a former minister in Orbán's first government in 1998, said the move was part of an "ideological war" declared by the prime minister.
"They make it no secret: they want to assume intellectual power after political and economic power," Reuters cited him as saying.
Previously, the cabinet stepped up its control over academic research and created legislation that forced Central European University (CEU), one of the best-rated institutions in the region founded by Orbán’s ‘arch enemy’ George Soros, to move to Vienna.
The law lists a total of 32 foundations that received massive state assets, 21 of which control higher education institutions. Their endowments include high-value real estate, a palace, a harbour, shares in blue-chip companies such as state-owned oil and gas group Mol, and the country’s leading pharmaceutical producer Gedeon Richter, as well as a steel mill and a football stadium.
The assets are worth billions of dollars in total, according to Bloomberg calculations which estimate the worth of the Mol and Richter packages alone at about USD 2.5 billion. The foundations are subject to less financial scrutiny than public bodies. They are essentially free to do anything with their endowments and even sell them if they feel like it, but the state may require right of first refusal on the assets. Land managed by the National Land Fund may also be transferred free of charge to the foundations for an indefinite period.
The government will appoint boards of trustees to run the foundations, which will be led by Orbán’s closest allies, in some cases ministers in his cabinet. Appointed by Fidesz loyalists they will have the power to continue reappointing themselves in perpetuity, not to mention that a clause added to the constitution last year stipulates that the composition of these governing boards may be changed exclusively with a two-thirds majority in parliament.
An omnibus law was also adopted that allows mayors to receive pay checks from foundations ruling over universities (as members of their supervisory boards or board of trustees, for example). Therefore critics say the move broadens the government’s ideological and financial grip on Hungary’s cultural and intellectual life in a way that would persist even if it is turfed out in next year’s general elections, The Financial Times reported.
A group of MEPs is protesting (what’s known about) Hungary’s national recovery plan — warning the money could end up strengthening government proposals which the EU has serious issues with. “20% of the funding will go to the modernisation of universities component,” the MEPs wrote in a letter to von der Leyen, dated Monday and obtained by Politico Playbook.
“With this letter, we would like to express our strong concern that this would result in
20% of the funding to disappear in opaque funding structures which are exempt from budgetary control standards and which have the purpose of further destroying academic freedom and institutional autonomy in Hungary
The Greens’ Gwendoline Delbos-Corfield, Daniel Freund and Terry Reintke gathered the group.
“What we see here is practically a sort of dispossession of public wealth in Hungary by the governing party,” the FT cited Dániel Hegedüs, a fellow at the German Marshall Fund in Berlin.
Hegedüs said the creation of the foundation system showed “it is obvious that [Fidesz] are really concerned that they can lose elections in 2022 . . . and they would like to create for themselves a new launch pad back into power”.
When a government-appointed board was imposed on the University for Theatre and Film Arts (SZFE) in Budapest last July, months of protest ensued.
The government, however, denies that public assets are endangered by their transfer to the foundations, and says the universities were given the choice of whether to be included in the reforms.
“We are talking here about public interest foundations ... so all the assets that these foundations have can only be used for public purposes, for the activities of higher education, and they do not become private property in any form,” the government’s international communications office told The Associated Press in an email.
More than 15 institutions have since opted for the new foundation model but critics say they did not have much of a choice. The universities were given no guarantees ensuring their academic autonomy, they won’t have a say either in how they are managed or in the composition of the boards of trustees.
“Universities were forced into the decision with financial promises: they were promised a wage increase, development money from the EU recovery fund if they changed models,” said Bernadett Szél, an opposition MP.
“Basically a parallel state is being composed, a state within a state, where the next government has very little room to implement its election program. Because until then, the state is simply outsourced,” Szél said following the vote.
“This is the organized theft of the assets of the Hungarian people,” Gergely Arató, a member of the opposition party Demokratikus Koalício, said during the parliamentary debate.
“On one hand this is an attempt to move public assets into the private dominion of the ruling party and their cronies, but it’s also an attempt to maintain control over social sectors even if the ruling party is voted out of office,” abcnews cited Dr. Zsolt Enyedi, a professor at CEU, as saying.
Enyedi said the reforms have “nothing to do with higher education,” and that the restructuring was a further attempt by Orbán's government to achieve greater sway over the country's institutions.
“Ideological and political control of education is just part and parcel of the grander scheme where all these spheres of life, sectors of industry, commerce and research, religious life and sport, are all subsumed under the overall Orbán leadership,” Enyedi said.
China's Fudan University to have a campus in Budapest
Orbán has also invited Fudan University to open the first campus of a Chinese university in continental Europe. The government plans to contract a Chinese construction giant to build the new campus, utilising largely Chinese building materials and Chinese labour, and finance the mammoth project through a HUF 450 billion Chinese loan, on top of which it would grant a state aid of HUF 100 billion.
A draft proposal states that “the construction can only be carried out as a Chinese only project” and, through legislative instruments,
it is necessary to reach the point where the investment process can no longer be stopped
, whistle blower site direkt36 reported.
On Tuesday, Hungary’s Ministry of Innovation and Technology has already signed a strategic cooperation agreement with Fudan University, according to which it will be built on the Eastern banks of Danube River on plot of at least 26 hectares and sprawl on about 520,000 square meters. Full-scale operation is planned with 6,000 students and 500-600 faculty and staff members.
The government has also created the Supervisory Authority of Regulated Activities, and although this particular law does not seek to transfer state assets to a foundation, the regulations clearly show how the appointees of Orbán’s government can continue to oversee certain public tasks for many years even after a potential change in power.
As of October, this watchdog will be tasked with:
- the authorisation, regulatory control, supervision and regulation of tobacco retailing;
- the supervision and regulation of the private bailiff system and the Hungarian Chamber Of Court Bailiffs;
- authorisation, regulatory control and regulation of gambling organisation;
- supervision, regulatory control and regulation of liquidators; and
- it will also sign concession contracts on behalf of the state.
Not even a tender will need to be invited for the posts of the Chair or Deputy Chairs. It will be a central budgetary organisation and its head will be appointed by Viktor Orbán for nine years, with an option for reappointment for anther nine years at the end of the term. The four Deputy Chairs are to be appointed by the Chairperson for nine years.
Cover photo: Getty Images
