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Fidesz-KDNP members of the National Assembly, with the help of three independent MPs, voted in the law that transfers various state assets to “public interest asset management foundations,” removing the state’s oversight of hundreds of billions in public funds. The government’s official reasoning is to raise competitiveness and efficiency. However, the move raises a great deal of concerns as many fear Fidesz and Orbán want to put hands on state assets and build a deep state in an aim to keep wealth and influence for a long time, in addition to extending their ideological influence.

What is this about?

A number of public assets, ranging from state companies’ stakes through worthy properties (castles, resorts, parks, a theater) to higher education institutions, will be brought under the oversight of private foundations. According to the bill itself, “…the fundamental expectation is that the foundations actively defend the survival and well-being of the nation and the interests of enriching its intellectual treasures.”

Over HUF 1,000 billion (EUR 2.75 billion) worth of public assets will be transferred, which is still far from the full amount, as it doesn’t include the properties and other valuables these institutions have. Each relevant foundation will begin operation with (at least) HUF 600 million (EUR 1.7 million) of public funds by law. While some of them will still be financed by the government, others received ample stakes in companies previously owned by the Hungarian state.

More importantly, these transferable valuables and properties now legally cease to be public funds, according to a recent change in the constitution voted in by the ruling parties. By the government’s reasoning, this will allow a more efficient and independent way of operation, making for example, public procurements (involving usually long administrative procedure) needless. It is, however, easy to see that this would reduce transparency, can increase corruption risks, and makes intervention harder if not impossible in case of improper management, while the public will also lose oversight of these assets and (future) ruling parties lose room for maneuver. The latter is actually one of the goals of the government as well, as the law’s wording makes it clear that it wants to make these foundations “independent from those in power.”

Although appointed by the current government, the foundations’ overseeing board of trustees (the members’ term of office is still to be decided) will also receive the founding rights later on (meaning, for example, that they would be in charge to appoint further members onto the board of trustees). In addition, those wanting to change the system would need a constitutional majority to do that, meaning modifications or a potential return to the old system would be even harder later. 

According to the Prime minister’s chief of staff, Gergely Gulyás, the reorganization of universities is vital to ensure the country’s competitiveness while expanding “academic freedom,” as the state will no longer have direct influence over their operation. The assets of these foundations can only be used for public purposes, and not as private fortunes, he said. Gulyás also said that any future government can buy back these assets now transferred to the foundations for free, in case the boards of trustees decide to sell it.

Tamás Schanda, a state secretary at the ITM, said in the general debate of the bill that a strategy already drafted in 2016 was being implemented. He said that a more independent and autonomous form of organisation would help universities integrate into the economy better, and, he added, their financial autonomy would be guaranteed.

That the case perhaps isn’t completely independent of ideological considerations, Viktor Orbán himself confirmed when he argued that the foundation-based model just takes back what the left-side had privatized before (referring to the period after the regime change). György Hubay’s statement, made right after the vote, points in this direction too. The Fidesz lawmaker said “…in many cases, national assets, reclaimed [earlier] by the Fidesz – KDNP government, were transferred to the foundations, so that outsiders can never have them again.”

The cornerstone and most symbolic part of the move is the higher education institutions’ outsourcing, which, as a matter of fact, was kick-started earlier. You can find previous coverage on the scheme, arguments, pros and cons here, here, and here.

Foundations under Fidesz influence?

The final list of members of the board of trustees of these overseeing foundations will be made public at a later time.

However, learning from the experiences of the higher education transformations carried out so far, those future members who come from politics would be more than likely pro-government politicians. While the other ‘half’ of the members are usually made up of businessmen linked to the field or geographical area (many of them close to the government’s circles too).

Former PMO Head and Fidesz strongman, János Lázár, Justice Minister Judit Varga, former Deputy PM, Justice Minister, and Foreign Minister, Tibor Navracsics, Foreign Minister Péter Szijjártó, Győr’s Fidesz mayor, and the agricultural minister are all involved in one of those foundations already in operation. The only one exception “coming from the other side” is Miskolc’s opposition-backed mayor, invited by the Justice Minister to the local university’s board of trustees.

And a list about the future, potential board of trustee members of the universities now being restructured, released on Tuesday evening, seems to further confirm this. According to pro-government Mandiner, Finance Minister Mihály Varga, Paks upgrade Minister János Süli, Székesfehérvár’s Fidesz mayor, and several other government politicians (state secretaries, for instance) will get a role in the universities’ overseeing foundations.

32 foundations to be established (for now)

So, after the Tuesday vote 32 such foundations would operate in Hungary, of which 21 will be in charge of running higher education institutions. This means that 70% of students would pursue their studies under the new model from this autumn.

However, the list of the transformed institutes and assets might be unlikely to be a complete one at this point, as several more are supposed to follow suit, according to speculations.

Some examples:

  • the 10 universities are: the Budapest Business School, the University of Debrecen, the University of Dunaújváros, the Hungarian Dance Academy, the University of Nyíregyháza, Óbuda University, the University of Pécs, Semmelweis University (SOTE), the University of Szeged, and the University of Physical Education
  • +1: the church will take over Eger’s Eszterházy Károly University
  • these universities’ other valuables, such as surrounding land and buildings are also included in the transfer
  • an agricultural-focused foundation with links to Fidesz strongman, János Lázár, will have the freshly-renovated Mezőhegyes stud farm, among other assets
  • the Pázmány University’s former campus in Piliscsaba will also be brought under a foundation led by PMO Head Gergely Gulyás
  • The ‘Foundation for Hungarian Culture’ linked to controversial pro-Fidesz culture politician Szilárd Demeter, will finance cultural activities and will take on several properties across the country, including the complex at the southern tip of the Hajógyári Island, Zichy Castle, and the Andrássy Palace in Budapest
  • The Hauszmann Foundation is set to care for the life’s work of famed architect, Lajos Hauszmann, besides other cultural activities. For that purpose, it received some ten properties in Szentendre
  • the MOL New Europe Foundation will receive the remaining stakes of state oil company MOL (this means that the entirety of MOL’s stakes, bought back from Russia in 2011 thanks to an IMF loan, got out from under the state’s and taxpayers’ control).

Additional authority to outsource state duties and oversight

Moreover, one of the Tuesday votes also established a separate authority called the Supervising Authority of Regulated Activities. This body will be in charge of the trade of tobacco products, judicial execution, the gambling industry (it would decide on concession rights too), the regulation of absolvent companies, and other areas traditionally under the purview of the relevant ministries.

This new body’s leader will be appointed by PM Orbán for nine years (hardly replaceable by a future government), while deputies would be appointed by the leader. This new body’s establishment is a debated one too, as it would operate independently from the government, it would further limit its room to maneuver while having to renounce oversight of important and profitable sectors.

Uproar and criticism: “deep state,” “robbery,” “dark day”

Somewhat less surprisingly then, the government’s move has generated loud uproar and criticism. Concerns center around the outsourcing of public money while critics also say that Orbán wants to build an alternative state, so that he won’t lose influence and oversight of a great deal of money and assets even if Fidesz happens to lose power. One year before the next general elections, many suppose Orbán intends to make a future, opposing government’s life harder. Some also point out the ideological and cultural influence that Fidesz wants to extend with the changes.

Fact

The actual vote in the National Assembly had its ‘curiosities’ too. Since Fidesz MP Gábor Bányai is still fighting for his life after a coronavirus infection, the ruling parties had to ‘convince’ other lawmakers to garner the two-thirds majority. Ethnic German lawmaker (and former Fidesz MP) Imre Ritter’s support wasn’t something surprising, unlike that of independents János Volner and Erik Fülöp (both formerly Jobbik, then Mi Hazánk).

One of the opposers is former LMP co-leader, now lawyer and law expert, András Schiffer, who published multiple analyses on the matter. He argues that just as the socialist elites built and operated a shadow state after the regime change, now Fidesz aims to implement a similar one. Former education minister of liberal SZDSZ, Bálint Magyar, went a step further and said that instead of a government, Hungary has a “criminal organization,” led by Viktor Orbán, which, in the midst of the pandemic, found another opportunity to implement new techniques in stealing public funds.

Parliamentary criticism hasn’t been any less low-key either. Green-centrist LMP MP László Lóránt Keresztes labeled the day of the vote a “dark day” in Hungary’s post-regime-change history, arguing that Europe’s best universities are generally controlled by the state. Former Jobbik, now independent MP János Bencsik used the word “robbery” to describe the overtake. Jobbik MP György Szilágyi warned the board members of the foundations in question to take due care of the properties put under their control as “those causing damage to the nation and stealing our money” will be prosecuted after 2022.

DK deputy group leader, Gergely Arató, said universities would be privatized in order to give the private foundations access to the huge EU funds earmarked for developing higher education, and then enabling them to “distribute the money among <their> cronies,” Momentum board member, Miklós Hajnal, commented that “Orbán is preparing for a defeat but is a bad loser, because he would like to finance his defeat from taxpayer money.”

Later, opposition parties pledged unanimously that once in power after the 2022 elections, they would put Hungary’s universities under state control again and return the “stolen assets” to the nation.

featured image: PM Orbán (l) and PMO Head Gulyás in the Parliament on Tuesday, via Zoltán Balogh/MTI