Palkovics Hails Continuity in Policy Amidst new Energy Challenges

Palkovics began by highlighting the performance of the Ministry of Innovation and Technology (ITM), the predecessor of MTI, which he had also headed.

“What is the strategic vision? What is a technology industry? And how can you, as a minister, support that? I think it’s easier to identify and explain what we have done so far. The ITM was the largest ministry of Hungary and the government, and we had four very good years before the crisis hit us only at the end,” he noted.,

Palkovics added that cooperation between the Hungarian government and industry players is “outstanding” and functions at a high level, noting forums such as the Artificial Intelligence Coalition, the Hungarian Hydrogen Association, and the Circular Economy Technology Platform provides the opportunity for effective consultation.

One of the cornerstones of ITM’s work in the previous cycle was the reorganization of the university ownership structure.

“The experiences so far are good,” the minister argued, noting that the financing universities receive the equivalent of about 2% of GDP, which, Palkovics claimed, is “outstanding in the European Union.”

He also referred to Hungary as a high-tech country, noting that industrial production in the field stands at around 70%, “the same as in Germany or Denmark.”

Reflecting on the importance of the transportation industry, he said, “The bus strategy we generated seems to work; we have four bus manufacturers producing in Hungary, they are able to produce different kinds of buses.” He added that Hungary would continue with its rolling stock development program.

Motorway Network

In connection with transportation, the minister also highlighted that, between 2010 and 2020, Hungary built the third-longest new motorway network, behind only Luxembourg and the Czech Republic.

Another critical aspect of the Hungarian economy is the defense industry.

“We had it [the industry] before the political changes in ’89, then it went in a totally wrong direction,” Palkovics argued, noting that crucial developments such as the Rheinmetall factory and the Airbus helicopter plant were handed over recently.

“With the right technology partners, if you have a willingness, you will be able to do so [carry out developments], and this is just an example of what we have done, and we are going to continue doing,” Palkovics told the AmCham delegates.

Foreign Direct Investment has long been an essential aspect of the domestic economy, and, according to Palkovics, Hungary is now among the top countries in the EU.

“Last year, FDI was 29% in Hungary, so the FDI is actually the highest, or second-highest after Ireland in the European Union. But, of course, it also means that we need to provide the necessary labor force,” he said, telling his audience that this means about 40,000 additional employees.

Energy security has become one of the most burning issues on the continent after the Russian invasion of Ukraine earlier this year, and the minister also recognized that the situation poses new challenges.

“So far, we talked about affordable, accessible, and green energy; we’ll be talking about energy security as well,” he acknowledged.

Sacrificing Climate Goals?

Regarding sacrificing climate goals for energy independence, he admitted that doing so might be a possibility, but only temporarily, as Hungary has to harness the potential of green energy, especially solar, “Because we don’t have anything else,” he said, referring to the lack of natural resources in the country.

Palkovics reaffirmed the government’s commitment to sustainability. “The circular economy is not just a thing we should think about, but one we have to realize.”

Citing research by Big Four firm KPMG, he also praised the country’s progress towards achieving carbon neutrality, as Hungary ranked 13th in KPMG’s Net-Zero Readiness ranking.

“Sometimes, we are asked why we don’t have a climate and environmental ministry, but if you look at the tasks, these are all leading to some technological solutions and to some industrial solutions, and I say it’s better to keep them in one hand,” the minister explained.

He told AmCham that the government is continuing the technology and industry policy reforms started in the past four years to improve productivity and competitiveness, support high value-added developments, ensure stable, affordable and sustainable energy supply, and promote economic growth while maintaining full employment.

The minister also shared a message in which Prime Minister Viktor Orbán explained why he had tapped Palkovics to lead MTI in the current government cycle.

“In the next period, the industry and energy sectors are facing a major transformation. I solicited László Palkovics to continue with the technological and industrial policy reforms that we started in the previous four years,” the PM’s message read.

“There is no doubt that the minister has been given the most complicated government task: adapt the Hungarian energy system to the challenges of the new age, manage the dangers arising from uncertain energy supply chains, manage the growing consumption needs, manage the situation caused by the soaring global energy prices, while reducing emissions in the economy and harmonize the aspects of economic growth and environmental protection. And all that at once! I don’t know if this can be solved, but if there is someone who can do it, it is Minister Palkovics, winner of the Széchenyi Price,” Orbán said.

This article was first published in the Budapest Business Journal print issue of July 15, 2022.