Hungary, A New Partner for Canada

Head Table Guests

Ed Badovinac, Professor, Department of Electronics, George Brown College and a Director, The Empire Club of Canada; Father Joseph Mate, Assistant Pastor, St. Elizabeth of Hungary; Gabor Takach, Director, Central Chapter of the Hungarian Canadian Chamber of Commerce and Partner, Tory Tory Deslauriers & Binnington; The Hon. William Saunderson, Minister of Economic Development, Trade and Tourism for the Province of Ontario; Peter White, Chairman, Unimedia and Chairman, Canadian Institute of International Affairs; Alan Sullivan, President and CEO, Canadian Institute of International Affairs; Marcia McLung, President, Applause Communications and a Director, The Empire Club of Canada; Tibor Szandtner, President, Central Chapter of the Hungarian Canadian Chamber of Commerce and Partner, Ernst & Young; His Excellency Karoly Gedaj, Canadian Ambassador of the Republic of Hungary; and Andrew Sarlos, Chairman, Andrew Sarlos & Associates.

Introduction by David Edmison

The national rivalries and conflicting political ideologies that brought war to Europe twice in this century, and threatened war a third time, left a residue of complex problems and unresolved tensions.

The situation is important to Canada for we have twice gone to war in Europe to help restore peace and liberty. Today, though many problems seem distant and remote, we remain deeply involved in Europe's evolution.

One of the first significant steps toward easing the tension between the North Atlantic Treaty Organisation and the Soviet bloc took place in 1975, at a conference in Helsinki. Out of this historic meeting was born an organisation, which provided a playing field for Cold-War diplomacy.

In December this year, the heads of state and government of the countries forming NATO, the European Union and others will meet in Budapest to discuss European security and co-operation. This will continue the work started 20 years ago, through what is now known as the Organisation for Security and Co-operation in Europe, or OSCE.

This important summit meeting will be convened by this year's Chairman in Office of the OSCE, who is the Minister of Foreign Affairs for Hungary, our distinguished guest today, Mr. Laszlo Kovacs.

The OSCE mandate is large and the challenges are great. As U.S. President Woodrow Wilson once said: "Only a peace between equals can last; only a peace the very principle of which is equality, and a common participation in a common benefit." Assuredly this idea will be motivating the participants at this meeting, as they try to find common ground for attaining harmony and security in Europe.

It is not surprising that Hungary and Mr. Kovacs have been chosen to host this event. Hungary with her ancient nomadic Asiatic roots, respect for western ideals, and history as a buffer-state for Europe, is at the hub of change in Central Europe. The country's neighbours are Slovakia, the Ukraine, Austria, Romania and, of course, several portions of the former Yugoslavia. As a result, Hungary has a significant role to play in normalising relations with her neighbours and in improving the stability of this region of the world.

Our guest today is well qualified for the challenging task he faces as Chairman in Office of the Organisation for Security and Cooperation in Europe. He graduated from the University of Budapest in 1969 with a degree in Economics and Political Science. Not surprisingly he chose a career in politics and was elected to the Hungarian National Assembly in 1990, after having served as State Secretary for Foreign Affairs.

Mr. Kovacs was soon elected as spokesman for Security Policy for his party, and in 1993 was made Chairman of the Foreign Affairs Committee of the Hungarian National Assembly. He has served as a member of the Parliamentary Assembly of the Council of Europe, and in 1994 was appointed Minister of Foreign Affairs.

Our guest has been a frequent speaker at international conferences including the UN General Assembly, NATO, The World Affairs Council, as well as many other important world bodies.

Ladies and gentlemen, 1 ask you to warmly welcome our special guest, Mr. Laszlo Kovacs.

Laszlo Kovacs

Ladies and gentlemen, I feel deeply honoured to be addressing the distinguished participants of this luncheon in my double capacity as Minister of Foreign Affairs for my country, Hungary, and also, as has already been mentioned, the Chairman in Office for the Organisation of Security and Co-operation in Europe.

Hungary can be called a new partner for Canada and I hope that after my address you'll come to the conclusion that Hungary is not only a new partner, but a stable and predictable partner for Canada.

The question is why do business with Hungary, why invest in Hungary?

The first reason I would like to offer you is the political stability of my country. Hungary was the country where the transition from the one-party system and Communism to a multi-party parliamentary democracy, to the rule of law and to a market economy of free enterprise occurred most smoothly in 1989 and 1990. One of the reasons was that this transition was negotiated. It was a negotiated process with the participation of the reform-oriented group of the former single party in Hungary and the opposition forces. Hungary was the only country where the first democratically elected government remained in office during the whole tenure of four years.

In all the neighbouring countries, governments fell and new governments came in, but in Hungary, as a sign of political stability, the government served the whole tenure.

After four years we had our second parliamentary elections in 1994 and I think it shows the political stability of the country that the very same six parties were elected to the Parliament as in 1990. To our great pleasure and satisfaction, no extremist parties nor politicians have been re-elected or elected to the Parliament in 1994.

We have now a two-party coalition consisting of the Socialist Party, to which I belong, and the Liberal Party called the Alliance of Free Democrats. The Socialist-Liberal coalition has 72 per cent of the seats which might not please the Opposition, but which gives stability to the country and to the legislature. This coalition government represents a hasty compromise between the reform group of the former single party and the former opposition. We are very proud that the negotiated coalition agreement of 150 pages gave stability to the country and to the coalition and probably due to this carefully negotiated coalition agreement the coalition survived its first year in office without any major problems or crises. Of course we have had difficulties as most governments do. Now five years after the process of transition started, multi-party democracy, multi-party system and the rule of law in Hungary are well established as is the market economy and the process is irreversible.

The second reason why I suggest you do business with Hungary and invest in Hungary is the resolute effort of the Hungarian government, the coalition government, to stabilise the economy in the short run and to modernise it in the long run. Unfortunately, we lost nine months after the elections when we came to power, because we did not recognise how serious the situation was and we wanted to avoid social tensions. Finally we had to face reality and we found that the budget deficit could exceed 10 per cent of the GDP in Hungary, which was unacceptably high.

On March 12, this year, we had to introduce some austerity measures. We had to introduce some serious cuts in government spending; we had to streamline the state administration; and we had to cut social benefits which was a very painful decision for a socialist-dominated government. We had no other options and now we hope that in the revised budget for 1995 we can reduce the deficit to 6.5 per cent of the GDP We have started to work on the 1996 budget and we expect a deficit as low as three or four per cent of the GDP which would meet the requirements from the I.M.E We also want to lower the rate of redistribution in the budget to 65 per cent of the GDP in comparison to the now more than 80 per cent.

In the long run we want to speed up the privatisation process. Today, the private sector provides approximately 60 per cent of our GDP, but by the end of 1997 we expect this ratio to be over 80 per cent. To reach 85 per cent of GDP provided by the private sector would mean that the private sector would be absolutely dominant in the Hungarian economy. We need the participation of foreign capital and we invite and encourage foreigner investors to come and invest in Hungary. We will soon start a new wave of privatisation which will cover the oil, natural gas and electricity industries. It will also cover telecommunications and banking. Strategically important branches of the Hungarian economy will be privatised in the coming months.

The third reason why I would advise you to do business with Hungary and to invest in our country is the predictability of Hungarian foreign policy. When the new government took over, it set three main priorities for foreign policy.

First is the new Atlantic integration of Hungary, which means, in practical terms, accession to NATO and accession to the European Union, because we are absolutely certain that neither the security and stability of the country nor the economic and social modernisation of Hungary can be achieved without being integrated into the Euro-Atlantic family.

The second priority of our foreign policy is to have good relations with the neighbouring countries and not just because NATO and the European Union made it explicitly clear that we cannot expect to be integrated and neither can our neighbours without settling our differences beforehand. We are absolutely certain that settling differences through negotiations, finding the compromises, which we might even call historic compromises between Hungary and Slovakia and Hungary and Romania, is very much in our own interest, regardless of integration. Having good relations with a neighbouring country is a primary issue from the point of view of security of the country concerned and also from the point of view of stability in the region.

A second reason is our economic interest because no large-scale economic relations and no large-scale economic co-operation can be expected, if we do not have the necessary level of confidence between the two countries concerned.

And the third reason. We have hundreds of thousands of Hungarians in the neighbouring countries. In Romania we have two million. In Slovakia, 600,000. I'm absolutely certain that we cannot support them if we do not have normal good relations with the host countries. While we want to help and support Hungarian minorities, there are Slovak, Romanian and other minority groups in Hungary. We have some hundreds of thousands of minorities and they should be able to maintain their ethnic, linguistic, cultural or even religious identities.

The three priorities of Hungarian foreign policy are very closely interlinked. If we don't settle the differences with the neighbours, we cannot expect to be integrated into NATO and the European Union. On the other hand, I'm convinced that if we want to get integrated, together with our neighbours, it will certainly help to settle the differences; it will certainly enhance good neighbourly relations with the neighbouring countries.

We are also certain that one day, if Hungary is a member of NATO and a member of the European Union it will be a much more attractive partner for any country in the world including Canada. It will be more attractive for foreign entrepreneurs to come and invest in our country.

To conclude, ladies and gentlemen, as Chairman in Office of the OSCE, I would like to share with you my vision of an all-European security architecture. Today the enlargement of NATO is being advocated by a large number of politicians in the West and in Central Europe particularly. In some other countries like the Russian Federation politicians are very much opposed to the enlargement of NATO. I think that we cannot examine the problems of European security only from the point of enlargement of the Alliance but we should have a vision of an all-European security architecture.

The security architecture which I envisage would be based on five pillars.

The first would be the enlarged NATO-European Union, Western European Union which is the security dimension of the European Union and the Council of Europe. I want to emphasise that for the enlarged institutions, NATO for example, there are two possible options. The first is to preserve and maintain the present scope of activities, the present scope of operations and in that case NATO would be forced to continue crisis management out of area as it is trying to do now in Bosnia with no major success. I would prefer the second option--the enlarged NATO which would welcome the applicant countries of Central Europe and would be able to get involved in crisis prevention which is obviously much cheaper and much more effective with much less cost in lives and financial resources than crisis management. The enlarged institutions would serve as a first pillar of an all-European security architecture.

The second pillar could be the OSCE (the Organisation of Security and Co-operation in Europe) itself, which was born last December at the Budapest summit of the Conference of the Security and Co-operation in Europe, CSCE, which is sometimes called the Helsinki Process. I would say OSCE is the institutionalised version of the former CSCE.

The third pillar of the envisaged security architecture could be the special arrangements between NATO and those states or those countries that would not be involved in the first wave of enlargement and some of them who would never join the Alliance, like the Russian Federation or the Ukraine. Special arrangements are needed because, as it is very wisely said by NATO politicians, NATO cannot ignore the legitimate security interests of Russia and the other countries that would not be involved in the first wave of enlargement. One of the special arrangements is obviously the PFP, the Partnership for Peace, which does not only help the applicant countries to prepare for membership in NATO, which does not only get the former Warsaw Pact countries closer to NATO, but which also provides a framework for building confidence between NATO and non-NATO member countries.

The fourth pillar of this envisaged security architecture in Europe could be regional arrangements like the Central European initiative with the participation of 10 Central European states including even NATO- and EU-member Italy or neutral Austria and some other countries. We emphasise that these regional security structures should not be considered as an alternative to the enlargement of the Euro-Atlantic institutions, but should have a role to promote Euro-conformity or Euro-Atlantic conformity of the participating states.

Last but not least the fifth pillar of this envisaged European security architecture could be the bi-lateral agreements between states in Central Europe like the bilateral treaty we concluded recently with Slovakia or the one that we are working on with Romania.

The all-European security architecture which I envisage would be based on the principles of the indivisibility of security and on the co-operation of the existing institutions, because it would function properly only if we eliminate any rivalry between the different security structures.

Ladies and gentlemen these are the views I wanted to share with you and I do hope that with your support, with the support of Canada, Hungary will find its way to the Euro-Atlantic integration. Yesterday, when I had the honour and the privilege of meeting your prime minister, he assured me that Canada would support Hungary's way into NATO and I do hope that one day it will not only be a reliable, predictable, and stable partner for Canada but also an ally.

Thank you very much for your attention.

The appreciation of the meeting was expressed by Alan Sullivan, President and CEO, Canadian Institute of International Affairs.