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STRATEGY PAPER
OF THE GOVERNMENT OF HUNGARY ON CIVIL SOCIETY
22, October 2002.

(This is an unofficial working transla tion commissioned by the Nonprofit
Information and Training Centre (NIOK) Foundation)

INTRODUCTION

The Principle of Civil Society

The government of the democratic coalit ion and the national centre adheres to
the idea of civil society without aiming to monopolise it. The government wishes
to serve and not dominate, which may only be achieved with the active
participation of the people and in partnership with the organisations that make up
civil society. Civil society serves as one of the pillars of the government’s activity.

The government is committed to the idea of civil society both on principle and in
practice. It is firmly resolv ed to lead the nation on the path of European social
development as a means by which civil liberties, civil association and self-
organisation can be fully expressed. The government is proud that the liberal
thinkers of the reform period and, later, the key figures of the modern Hungarian
social sciences always promoted this path, and wishes to take over the mantle of
István Széchenyi, Lajos Kossuth, József Eö tvös, István Hajnal, Ferenc Erdei,
István Bibó and Jen ő Szüts.

Civil Society in Hungary

The emergence of Hungarian civil societ y rests upon a series of significant
historic antecedents. The rupture bet ween 1948–1989 did not result in the
disappearance of this tradition. The regime change brought about the rebirth and
strengthening of Hungarian civi l society. However, the rhythm of civil society
development should not depend on electi on cycles: the importance of civil
society lies primarily in its independenc e from the government in power. The
government of the democrati c coalition and the national centre shall strive to
enlarge and strengthen civil soci ety, which is a solid basis for democratic social
organisation.

Democracy and national solidarity do not exist without social dialogue, a well-
functioning system of interest repres entation and strong civil society. The
Hungary of tomorrow shall only be able to provide security and welfare for its

inhabitants if their interests and aspirations are represented in an organised form,
and public life is based on cooperation and solidarity. The Hungarian non-profit
sector embodies human values, such as independence, individual initiative,
pluralism and solidarity.

The operation of non-profit organisations can be assisted by a government policy
that recognises the importance of institutionalised oversight of governmental and
local power by non-governmental organisati ons, sharing the delivery of services
among the public sector, businesse s and non-profit organisations and
cooperation among the three se ctors. In addition, the government shall respect
the independence of non-gover nmental organisations, increase the resources
available to them, prov iding support regardless of political views.

The period since the regime change has been insufficient for civil society to
develop adequately. Therefore, while pr eserving what has been achieved up until
now, as well as maintaining and str engthening existing structures, the
Government aims to support the further dev elopment of civil society. Obviously,
the Government does not wish to interv ene directly or be paternalistic. The
government expects citizens to build and further develop civil society for
themselves and their fellow citizens. Only in this way may Hungary belong to all.

I. THE CHARACTERISTICS OF HUNGARIAN CIVIL SOCIETY

In societies built on a market economy and democratic values the three sectors –
the business sector, the public sector (central and local government) and the
non-profit sector – generally emerge. This has also become an accepted
paradigm in Hungary, and sharing ta sks and developing cooperation among the
three sectors is underway. However, bes ides the achievements, this process
also displays signs of cont ingency, lack of regulation (or in some cases over-
regulation) and uncertainty.

There is a certain lack of clarity: civil so ciety is broader than the total number of
formally constituted non-governmental or ganisations. It also includes informal
communities and individual initiatives. Inte rnational non-profit literature defines
the exact criteria of no n-governmental, non-profit or ganisations as including
institutionalisation, inner organisational structure, independence from
government, own representation, local governance, prohibition of profit
distribution, and finally, voluntarism. Religious or political organisations are not
considered classical non-governmental organisations and are not included in the
above definition. The same criteria are used in Hungarian literature on non-
governmental organisations.

In Hungary about 60,000 non-governmental or ganisations, fulfilling the criteria
mentioned above, have been r egistered at courts in accordance with the
regulations in force. According to the Central Statistical Office, the number of

organisations currently operating is approximately 47,000 showing that after the
regime change the sector has been characterised primarily by quantitative
development, with the largest boost in the first half of the 1990s.

This large civil community has provided an increasingly distinctive framework for
social self-organisation. As a result, clear signs of autonomy, voluntarism,
independent activity and charitable giving have emerged. Hence tens of
thousands of citizens have the opportunitiy to fulfil their potential.

Public services are beginning to be delivered on a multi-sectoral basis. Non-
governmental organisations can offer alternat ives or additional options mainly in
the field of education, cult ure, health and social care. Non-profit organisations
have proved to be creative and have great empathy working with marginali
sed
groups.

Over the past ten years the Hungarian non- profit sector has evolved. It is
extremely diverse. It includes the following:

• service providing non-profit organisations;
• organisations, clubs and groupings carrying out independent activities;
• organisations involved in intere st representation and protection;
• fundraising and grant-m aking organisations;
• alliances and umbrella organisations.

Besides the positive tendencies presented above, the sector is struggling with
several tensions:

• The sector is composed of a wide range of different structures. The largest
part of the sector incl udes organisations such as private foundations,
associations, and social organisations, most of which are economically
weak and fragile. Public foundations, public bodies and public benefit
companies constitute only 5.4% of the sector, yet they had 40% of the
total revenues in 2000, Budapest-based organisations received 63% of
the revenues. A narrow circle of prof essional organisations has formed,
whose main revenues are from stat e budget allocations and are closely
linked to central government or a local government.

• The 2001–2002 Hungarian budget law provides – in 47 articles – nearly
150 billion HUF for non-governmental organ isations without any consistent
operating principles or transparen cy. Because of limited access to
information, a large number of organisations do not even know about the
availability of these funds. Information on the use of these funds is also
lacking.

• In 2000 government allocations constitu ted 28.4% of the total revenues of
the non-profit sector (in 2002 this figure will probably amount to 30%).

Although this shows an increase compared to previous years, it is still
lower than in EU member states (w here it amounts to 40-60%). Clearly,
the Hungarian non-profit sector is under-funded by central and local
governments, and the distribution of government allocations is
unbalanced.

• Over the past four years the princi ple of “state dominance” has played a
role in government relations with the non-profit sector, which has
contributed to division, a lack of solidarity and paternalistic expectations
within the sector. As a result, a se nse of political dependence in the non-
profit sector has grown.

• Current rules mean that an organisation with an income of 100,000 HUF
and one with an income of 100 million HUF have almost the same record
keeping, data provision and tax reporti ng obligations. The time has come
for new organisational management regulations to be introduced that
distinguish between different types of organisations.

• The sector is divided, and dominated by rivalry ra ther than collaboration.
No solid representative models hav e been established, and efforts are
scarce in this respect. A number of um brella organisations exist, some of
which try to present themselves as being the only legitimate
representatives of civil society.

The desire to develop the non-profit sect or, the experience gained so far,
society’s need for deeper democratisation and wish for public good, as well as
the change in the political environm ent provide Hungarian non-governmental
organisations with an opportunity to develop qualitatively over the coming years.
An essential prerequisite is a conscious government civil strategy which is both
tolerant and self-limiting.

II. THE PRINCIPLES OF THE GOV ERNMENT’S CIVIL STRATEGY

The key sentence regarding the principle of the Government’s Civil Strategy is
formulated in the Government Programme (Chapter II, paragraph A, title of point
4) as follows: “The state views an autonomou s civil society as its partner”. On
this basis, the government:

• recognises and acknowledges the importance of non-governmental
organisations in contributing to a more deeply rooted democracy and
as a means of giving full expressi on to individual and civil liberties;

• respects the independence of non-governmental organisations,
accepts as essential the oversight function played by civil society;

• wishes to eradicate the politic al dependence of non-governmental
organisations;

• in the context of European Unio n accession, views non-governmental
organisations as having an important ro le in the integration process of
cultures, peoples and individuals;

• considers non-governmental organisati ons’ activities as indispensable
to enhancing voluntarism, independent action, self-help and social
solidarity in Hungary as well as in promoting daily diversity;

• views non-governmental organisations and the representatives
legitimised by these organisations as essential players in social
dialogue and interest conciliation;

• in the spirit of open legislation, wishes to ensure the possibilityof civil
organisations’ participation in legi slative and consultation process;

• guarantees a legal framework for the operation of non-governmental
organisations;

• contributes to non-governmental or ganisations’ activities and assists
them in securing the financial resour ces necessary for their operation;

• is ready – in accordance with the principle of sector neutrality – to
build on non-governmental organisat ions’ role in delivering public
services and to increase the sharing of tasks in areas such as health
care, education, social care, cult ure, environment protection, etc.;

• wishes to build on non-governmental organisations’ participation in
creating a knowledge-based society and information society;

• wishes to establish the legal conditions for non-governmental
organisations’ involvement in regional and local development
processes;

• wishes to build on non-governmental organisations’ efforts in the
consumer protection field;

• is ready to establish an equal par tnership with the representatives
delegated and legitimised by the non-profit sector;

• expects all governmental bodies to identify with the above listed
principles and trusts that the government’s approach and provisions
shall serve as an example for local governments.

III. THE ELEMENTS OF THE GOVERNMENT’S CIVIL STRATEGY

1. The government wishes to make laws and regulations gover ning the operation
and management of non-profit organisations transparent, consistent and less
complex. To this end, t he government shall present the necessary legislative
proposals to Parliament.

• Amending the laws regulating the cr eation and operation of non-profit
organisations(the Act of Associati on and the Civil Code) in line with
changed circumstances.

• Considering a separat e law on foundations either within the ongoing
reform of the Civil Code or anot her closely related framework.

• Analysing and reviewing the past five years’ experience of implementing
the 1997 Act No. CLVI on public benefit organisations.

• Specifying the rules of devolving public tasks to public benefit
organisations formulated in the Ac t on Public Finances and government
ordinances.

• Reviewing the 1% law (1996 Act No. CXXVI) . The following aspects
require special consideration:

– making the circle of beneficiaries “more civil” (currently it includes
funds, budgetary institutions and other organisations);
– creating a new framework so that t he 1% of citizens’ tax liability not
directly donated to a non-profit organisation still serves the sector’s
interests.

• Differentiating between different types of organisations based on the size
of organisations’ income in the laws governing the organisational
operation and management. Nearly half (48.5%) of all Hungarian non-
profit organisations have a yearly income below 500,000 HUF. According
to the Accounting Act, other organisati ons with an income below 50 million
HUF may still choose single-entry bookkeeping.

2. The government wishes to increas e considerably the amount of funds
available to the non-profit organisations. The necessay legislative proposals
shall be presented to Parliament with t he aim of increasing the proportion of
budgetary funds to 40% of t he non-profit sector’s total revenues, which is the
lowest level in EU member states, by t he end of the government’s current term in
office. In addition, the government shall ens ure that public money is accessible,
and allocated and used openly as follows:

• Besides making budgetary funding sources accessible, the amount of
normative support should be increased, and decisions based on individual
considerations decreased. These objectives are based on the principle of
sector neutrality in the de livery of public services.

• Devolving public tasks to non-profit organisations has to be accompanied with
the provision of necessary resources.

• An itemised review of the different ty pes of subsidies formulated in the Budget
Law is required and easy-to-follow oper ating principles established.

• Foundations created by the gover nment (through budgetary endowment) are
to become public foundations to be eligible for further funding.

• The government shall introduce legislat ive proposals regarding the creation of
a National Civil Fund. The Fund shall be financed from the 1% of citizens’
personal income tax not donated directly to non-profit organisations as well as
other revenues. Non-profit se ctor representatives shall constitute the majority
of the committee responsible for allo cating support grants from the National
Civil Fund.

• Supporting the operation of small organisations benefiting mainly small
communities is recognised as a special problem. Such organisations lack the
capacity or know-how to undertake delegated government tasks yet, play a

very useful role in civil life. Su ch organisations have no real chance of
securing funding for their programmes via applications. The National Civil
Fund (and similar local funds) shall offer a solution to this problem
as well.

• The possibility of non-profit organisati ons with an income resulting from
entrepreneurial activity becoming exempt from paying corporation tax on the
rate of income re-direc ted to their core activity needs consideration.

3. Non-profit organisations shall partici pate in and actively contribute to decision-
making in strategic questions affecting Hungary’s future. Hungary’s accession to
the European Union is a question of ut most importance in the current
government’s term in office. The country’s accession also implies the integration
of the Hungarian non-profit sector , through which every citizen and non-
governmental organisation can adjust to European dimensions. The non-profit
sector has a major role to play in the success of the referendum and in informing
the population about European Union issues. T he most important aspects in this
area include the following:

– the impact on the Hungarian ec onomy of European Union policy
integration;

– free movement of goods, services, persons and capital from the point of
view of the non-profit sector;

– networking with international development and charity organisations,
diverse European Union funds accessi ble by non-profit organisations;

– government assistance provided to NGOs to access European Union
funding sources effectively;

– incorporating Europe an Union principles and adopting these into
Hungarian laws and regulations;

– matching national interests wit h wider European interests.

Ensuring the non-profit sector’s independence, making funding sources and
support grants for non-profit organisati ons transparent, and the professional
delivery of services by NGOs are a ll important European Union requirements.
The government wishes to validate t hese norms through legislation and
collaboration with the non-profit sector.

4. A single record keeping system is needed for the non-profit organisations
benefiting from budgetary grants. This may provide a possible way to eliminate
parallel funding and develop a co-financing s ystem as well as keeping track of its
evolution. A long-term goal of the government is to make record keeping of public
dues easier and to reduce the bureaucracy invo lved in obtaining funding eligibility
certificates.

5. Individual donations and vo luntarism are important resources in the non-profit
sector. According to the current Act on Personal Income Tax, individuals can
deduce 30% of their donations from their tax, but only for donations of a
maximum value of 50,000 HUF to public benefit organisations, and a maximum
of 100,000 HUF to prominently public benef it organisations, figures which do not
encourage giving. Individuals do not re ceive any benefits from donating or
volunteering. The government’s strategic goal is to increase the contribution of
individuals to non-profit organisations’s resources, hence the following need to
be considered:

– allowing individuals who offer donati ons to non-profit organisations to
make tax deductions in proportion to the amount of their donations;

– promoting wider public rec ognition of voluntary work.

6. The government’s civil strategy seeks to provide non-profit organisations with
the possibility of involvement in elaborat ing laws and regulations establishing the
framework for the sector and serving the interests of the sector. This is an
important element of t he strategy. Active communication, collaboration

mechanisms and communication channels need to be established at both
governmental and ministerial levels. T he diverse, often contradictory and
opposing views characteristic of the sector will require tolerant and sensitive
handling on the side of government. E qually, government representatives and
governmental bodies need to adopt an understanding attitude towards non-
governmental representatives often inexperienced in public administration. Non-
profit issues will be incorporated into public administration examinations and
training programmes to help facilitat e better understanding by government
officials on these questions.

7. Non-profit organisations are present – albeit in varying degrees – in all areas
of life (education, culture, health and soci al care, environment protection, public
safety, sports, regional development, custom er protection, human rights, etc.). In
addition to laws affecting the sector, t hey are naturally connected to the whole
legislative process. The role of non-pr oft organisations in the context of the
planned Lobby Act and Interest Represent ation Act shall be discussed in a
separate chapter.

8. In 2000 62,500 people were employed in the Hungarian non-profit sector, and
the number of volunteers exceeded 400,000. The number of both employees and
volunteers will further increase in the future, partly as a result of the conscious
devolution of public tasks. Thus the se ctor may become a new player in job
creation.

Developing human resources is also a r equirement in the non-profit sector.
Within the framework of accredit ed programmes and training programmes
included in the National Trai ning List higher education and vocational training on
civil society and non-profit issues is possible and necessary. It would be
expedient to broaden scholarship and forei gn study trip opportunities for future
graduates interested in the non-profit sector. However, establishing independent
non-profit departments in educat ional institutes should not be a strategic goal.

9. As substantial and versatile users of the government’s information technology
systems, non-profit organisations may be st rong partners of the government in its
effort to establish an information societ y. Telehouses and Non-profit Service
Centres constitute the most important information base for the local communities,
and as such could establish and maintain t he interactive exchange of information
and electronic administration. Public cu ltural institutions as well as the
information technology bases operating as entreprises may be used for this
activity. A strategic goal and a key interest of the government is to pr
ovide such
organisations with the means to become competent as well as to contribute to
creating fair conditions in this area.

10. With NGO service centres now operat ing in county seats, the government
considers that the creation of an NGO Service Centre for Budapest Region is

both opportune and essential. The government is ready to provide financial
support, while respecting the principle of autonomy.

11. For the sound evaluation of social trends, including developments within the
non-profit sector, the gover nment requires statistical data and research. In
addition to general trends within the sect or, it is particularly important to
encourage and support specific research that analyses the impact of public
service delivery by NGOs, the cons equences of accession to the European
Union, voluntarism, and democratisati on of the Hungarian society, focusing on
the non-profit sector’s role and involvement.

12. Partnership between t he government and the non-prof it sector supposes the
existence of a legitimate civil partner representing the sector. A basic strategic
goal of the government is to provide the necessary support for the autonomous
formation of such a representative body. Earlier unsuccessful attempts and the
ardent ongoing debates in this direction r equire significant tact and restraint.
Nevertheless, neither the unsolved question of represent ation nor an exceedingly
protracted debate to resolve this question serve the sector’s interests. This civil
representative body shall:

• take part in framing sect oral laws and regulations;

• delegate representatives to act as the civil side of the National Civil
Fund;

• be consulted on the chapters of year ly budget laws regarding the non-
profit sector;

• elaborate an Ethical Code for the non- profit sector and monitor how it
is respected.

13. The government and the future civil representative body shall study the need
and legal framework for establishing a civi l public body. This public body shall:

• keep records on non-profit organisations;

• publish a newspaper for the sector;

• bring together non-profit experts;

• provide services for non-profit or ganisations (information, legal and
financial consulting, training, etc.).

14. The body responsible for and co-ord inator of establishing a single
governmental civil strategy shall be the NGO Relations Department of the
Information Technology and P ublic Relations Office within the Prime Minister’s

Office. It shall also carry out the secretarial activities for the Interministerial
Committee for Civil Coordination. The NGO Relations Department shall maintain
permanent contact with organisational units in ministries responsible for NGO
relations. It shall also represent the gov ernment at the meetings with the actors
of the non-profit sector and at non-profit events.

IV. SCHEDULE OF PUBLIC AND INTERNAL CONSULTATIONS
ON THE GOVERNMENT’S CIVIL STRATEGY

• Prime Minister Péter Medgyessy’s speec h on the Government’s Civil Strategy
in the Parliament
• 26 September, 2002

• Session of the Interministerial Committee for Civil Coordination
• 14 October, 2002

• Consultative forums with non-profit organisations and experts
• 25 October–15 November, 2002

• Session of the Interministerial Committee for Civil Coordination
• Until 20 November, 2002

• Debate on the strategy at the meeting of administrative state secretaries
• Until 30 November, 2002

• Presentation of the Civil Stra tegy to the Government
• 6 December, 2002

V. WITH A VIEW TO ACHIEVI NG THE GOALS EXPRESSED IN
THIS STRATEGY PAPE R, THE GOVERNMENT ON THE BASIS OF
PARTNERSHIP IS READY TO AG REE A COMPACT WITH CIVIL
SOCIETY

Budapest, 22 October, 2002