OECD Product Market Regulation (PMR) Indicators: How does Hungary compare? ___________________________________________________________________________________ Competitive product markets foster economic growth and can improve the living standards of citizens. OECD’s Product Market Regulation Indicators assess the alignment of a country’s regulatory framework with internationally accepted best practices. The Economywide Indicator measures the distortions to competition that can be induced through the involvement of the State in the economy, as well as the barriers to entry and expansion faced by domestic and foreign firms in different sectors of the economy. This indicator is complemented by a set of Sector Indicators that measures regulatory barriers to competition at the level of specific network and service sectors.
Overall PMR Indicator Index scale 0 to 6
Hungary
1.32
OECD average
1.38
5 Most competitionfriendly countries 5 Least competitionfriendly countries
1.00 1.82 0.0
2.0
4.0
Economy-wide PMR Indicators: a breakdown by major components Index scale 0 to 6 from most to least competition-friendly regulation
6
Hungary 5 Most competition-friendly countries
OECD average 5 Least competition-friendly countries
5 4 3 2 1 0 Public Ownership
Involvement in Business Operations
Simplification and Evaluation of Regulations
Admin. Burden on Start-ups
Barriers in Service Barriers to Trade & Network sectors and Investment
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. Source: OECD 2018 PMR database.
6.0
ECONOMY-WIDE HIGHLIGHTS
Overall, regulatory barriers to competition in Hungary are low when compared with many other OECD countries. The licensing regime is less strict than in many other countries and the complexity of regulatory procedures is low, because laws and regulations are easy to access and understand. However, public ownership is extensive and the governance of state-owned enterprises, though in line with some of the key OECD best practices, could be further improved. There is also scope for reducing regulatory barriers to competition in service and networks sectors. In addition, there are no clear rules regulating the interactions between interest groups and public officials.
Economy-wide PMR indicators: a breakdown by sub-components Index scale 0 to 6 from most to least competition-friendly regulation Distortions Induced by State Involvement Simplification and Evaluation of Regulations
Complexity of Regulatory Procedures
6 5 4 3 2 1 0
Interaction with Interest Groups
Involvement in Business Operations
5 Least competition-friendly countries
Assessment of Impact on Competition
6 5 4 3 2 1 0
Price controls
Governance of SOEs
Direct Control
Scope of SOEs
Gov’t Involv. in Network Sectors
Public Ownership
6 5 4 3 2 1 0
5 Most competition-friendly countries
Public procurement
OECD average
Command & control regulation
Hungary
Barriers to Domestic and Foreign Entry
Barriers to Trade Facilitation
Barriers to Trade and Investment
Treatment of Foreign Suppliers
6 5 4 3 2 1 0
Tariff Barriers
Barriers in Service & Network sectors
5 Least competition-friendly countries
Barriers to FDI
6 5 4 3 2 1 0
5 Most competition-friendly countries
Barriers in Network sectors
Licenses and Permits
Admin. Burden on Start-ups
Admin. Requirements for Lim. Liab. Companies and Pers.Owned Enterp.
6 5 4 3 2 1 0
OECD average
Barriers in Services sectors
Hungary
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. If the blue bar does not appear on the chart for a specific indicator, it means that its value is 0. Source: OECD 2018 PMR database.
SECTOR-SPECIFIC HIGHLIGHTS The regulatory set-up in the fixed and mobile e-communication sectors is in line with international best practice. In contrast, transport sectors and some professions, in particular lawyers and notaries, are more regulated than in most OECD countries. There is also scope for improving the regulation of the retail sale of medicines.
Regulation in network and service sectors PMR Indicators for network sectors Index scale 0 to 6 from most to least competition-friendly regulation Hungary 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4 3 2 1 0 Electricity
Gas
Rail
Air
Energy
Road
Water
Fixed
Transport
Mobile
E-Communications
PMR Indicators for professional services* and retail distribution Index scale 0 to 6 from most to least competition-friendly regulation Hungary 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4
3 2 1
0 Lawyers
Notaries
Accountants
Architects
Professional services
Civil engineers
Real estate agents
Retail distribution
Retail sale of Medicines
Retail trade
* When comparing the indicators across countries, it should be kept in mind that the activities undertaken by specific professions may vary between countries. Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. If the blue bar does not appear on the chart for a specific indicator, it means that its value is 0. Source: OECD 2018 PMR database.
OVERALL ASSESSMENT
Regulatory barriers to competition in Hungary are limited, but there is scope for improving product market regulation in some sectors and domains.
Strengths
Challenges
The administrative burden on new firms is low due to the existence of a ‘one-stop-shop’ for informing businesses about their licensing requirements and for issuing all licences and permits. There is also a ‘silence is consent’ rule, which reduces approval times. In addition, there are ongoing programmes to review and reduce the number of licenses.
Regulation in the e-communications sector is close to international best practice. However, the government owns a share, albeit a small one, in the largest operator in the sector.
An online searchable database of all laws and a general policy to use plain language in the drafting of regulations make access to laws and regulations simple. In addition, there are explicit programmes to reduce compliance costs and the administrative burden imposed by the national government on enterprises, through the deployment of strategies such as e-government.
Public ownership is extensive. Corporate governance rules are in line with some of the key OECD best practices, but there is scope for further improving them. For example, private company law does not yet apply to all state-owned enterprises, in only some of them the board has power to nominate their CEO, and any merger or equity issuance has to be cleared by the government.
There is no explicit regulation of the interactions between interest groups and public officials, in particular no transparency requirements. In addition, there is no conflict of interest regulation for senior civil servants, and public officials are not required to respect a compulsory cooling-off period when they leave their post.
Notaries and lawyers face entry requirements and conduct restrictions that are stricter than in most other OECD countries.
Further information
“What are the 2018 OECD PMR indicators?” PowerPoint presentation on OECD PMR website
Vitale, C., et al. (2020), " The 2018 Edition of the OECD PMR Indicators and Database – Methodological Improvements and Policy Insights", OECD Economics Department Working Papers
Please visit our website : http://oe.cd/pmr Contact us at: PMR2018@oecd.org