Hungary Has East Bloc's First Association for Entrepreneurs
Mar. 25, 1988
BUDAPEST, Hungary (AP) _ Peter Simsa is the very model of a modern East bloc businessman.
He has his own company, a carpeted office where he serves guests brandy in snifters and a telephone in his car.
Now he has his own lobbying group, the first of its kind in the East bloc, the National Association of Hungarian Entrepreneurs.
The organization, of which Simsa is president, is dedicated to promoting small businesses in Hungary and representing their interests to the government.
Under the leadership of Communist Party chief Janos Kadar, Hungary in the early 1960s adopted economic policies that encouraged some private ownership and enterprise.
The so-called ''goulash communism'' gave Hungary one of the highest standards of living in the Soviet-led East bloc, although mounting foreign debt and big money-losing state enterprises recently have bleakened economic prospects.
Hungarians were allowed to take second or third jobs, such as providing services or operating small private shops.
In the late 1970s, the government began to allow private partnerships and ''small cooperatives'' operating as small private companies.
What distinguishes them from state cooperatives is that they spring from private initiative and are established with private capital.
Simsa's Vertikum enterprise was the first such small cooperative to come into being in 1979. Today, he said, Hungary has 40,000 private businesses, which account for more than 15 percent of the gross national product.
Some 60,000 of the 10.6 million Hungarians are engaged in private business as their main job, and 540,000 others work part time in the private sector.
Originally, a department specializing in private entrepreneurs was set up in the Hungarian Chamber of Commerce, a governmental agency.
But increasing private enterprise and a desire for greater independence led Simsa to seek permission for a separate association.
''Our two basic criteria were that ... it should be a nationwide union and ... that it should fulfill the aim of representing our interests,'' he said.
The government agreed last year to recognize the association, with the proviso that it be supervised by the Chamber of Commerce.
Simsa stressed that the relationship with the chamber ''does not mean a subordination.''
On Feb. 20, the association held its first general congress and in less than a week signed up 1,500 members, half its pre-congress goal of 3,000 members this year.
''It was really difficult to foresee how many people had any sense of community or entrepreneurial identity,'' Simsa said.
The association has attracted interest from other East bloc countries. Izvestia, the Soviet government newspaper, and Radio Prague in Czechoslavkia asked for interviews. Simsa also had talks with the U.S. Chambers of Commerce.
''The chief problem is the economic regulation,'' said Simsa. ''Regulators do not take into consideration the specific characteristics of our group. While officially they say that they would like to inspire people, to give incentives (but) in reality they are very rigid.''
An example, he said, is the rule that one person can make and sell bread, but a group of people cannot do the same thing.
''There are plans to change this,'' he added. In addition to fighting regulations, the association will strive to make private business accepted as partners with the government, he said.
Now, he complained, private enterprises often are at the bottom of the list when it comes to allocating scarce resources.
Private companies are permitted only 30 employees, and the average size is eight people, Simsa said.
For a small cooperative, the law mandates 15 to 100 cooperative members, who in turn can hire as many workers as they want. A typical work force is 100 to 200.
Simsa said when it allowed more business, the original aim of the government was to improve the availability of small service, such as small shoemakers and shopkeepers.
''However, in reality these private entrepreneurs don't go into this direction where the government wants them to but where there is money,'' he said. ''The best market for them is the state companies and cooperatives.''
So entrepreneurs perform specialized services for the big state factories or provide raw or intermediate materials.
Simsa's Vertikum, for instance, maintains cooling systems and strengthens concrete cooling towers and grain elevators. He started the business with nine workers and $21. Today there are 115 co-op members and employees, and the business has $543,000 in property.
Other entrepreneurs have opened marriage mediation bureaus or factories to make medical protheses.
Last year, Hungary's biggest small cooperative had revenues of $32 million. In 1988, it might exceed $43 million.
End Adv Friday PMs March 25