Economic subjects | World economics » Orsolya Ágnes Olajos - The economic impacts of the cross-border cooperation between Hungary and Slovakia

http://www.doksihu Budapest Business School FACULTY OF INTERNATIONAL MANAGEMENT AND BUSINESS INTERNATIONAL BUSINESS ECONOMICS COURSE International Business Enterprises specialisation AVANS HOGESCHOOL INTERNATIONAL BUSINESS SCHOOL BREDA BUSINESS ADMINISTRATION COURSE THE ECONOMIC IMPACTS OF THE CROSS-BORDER COOPERATION BETWEEN HUNGARY AND SLOVAKIA Prepared by: Orsolya Ágnes Olajos Budapest, 2010 http://www.doksihu Table of contents 1. Introduction 5 2. The science of cross-border research 7 2.1 The definition of border region 7 2.2 The functions of border – connect or separate? 8 2.3 The effects of borders 8 2.4 Interaction at borderlands 9 2.5 Tools of cross-border cooperation 10 2.6 The acceleration of cross-border cooperation 11 2.61 The role of the Council of Europe 11 2.62 The Association of European Border Regions 12 2.63 The role of the European Union 13 3. Cross-border cooperation in the European Union 13 3.1 Cross-border cooperation and

European integration 14 3.2 Community initiatives 15 3.3 Regional policy 2007-2013 16 4. Cross-border cooperation in Hungary 17 5. Introduction of the two countries 19 5.1 Economy 19 5.2 The administrative division of the countries 20 5.3 The characteristics of the cross-border regions 21 5.31 General situation 21 5.32 Territory 21 5.33 Population 22 5.34 Economy 23 2 http://www.doksihu 5.35 Infrastructure 23 6. The history of cross-border cooperation between the two countries 25 7. The forms of cooperation 27 7.1 Relations between the businesses on the two sides of the border 27 7.2 Twin cities 27 7.3 Euroregions 28 7.4 EGTC, the new tool 33 7.5 Community initiatives 34 7.6 Hungarian-Slovakian Intergovernmental Joint Committee 39 7.7 Cooperation between the Chambers of Commerce 40 8. Analysis of statistics – demonstrable impacts? 42 8.1 The tendency of trade relations 42 8.2 Regional tendencies 43 8.21 GDP per capita 43 8.22

Unemployment rate 46 8.23 Net migration 48 8.3 Summary of the results 50 9. Conclusion and recommendation 51 10. Assignment research: Euroregions and their turning into EGTC 53 11. Annexes 68 12. List of tables and figures 71 13. Bibliography 72 3 http://www.doksihu “Borders must not create the feeling that this is where you come to an end, but rather that this is where you still need to grow.” Emil Gött 1. Introduction Border regions are among the poorest areas of Europe, what can partly be traced back to the World Wars and the resulting tension between the states. These areas slowly developed into peripheral territories due to the lack of capital inflow. The aim of the European Union is to eliminate the borders and create a Europe without frontiers. By the elimination of internal tariffs, the establishment of four freedoms and the coming into force of the Schengen Agreement the situation has become better, although the European integration is still not

completed. The problems of the border regions are not solved despite of the successes of the European Union’s Regional Policy and they are still underdeveloped areas often with the existence of tension at the frontiers. The situation is the same at the Hungarian-Slovakian border region, which belongs to the poorest territories of Hungary. As result of the Treaty of Trianon, in 1920w the official connection at borderlands ceased and it was maintained only by family members and friends who were separated by a border as a result of the Treaty. The opening towards each other took place only after the change of the political situation, or, in other words, after the change of regime. This border region is characterised by high unemployment rate, bad infrastructure and significant Hungarian minority on the Slovakian side of the frontier, which means a problem for both countries and causes tension alongside the border. Despite of this tension, there is strong cooperation between the border

areas of the two countries, which I could experience personally. I performed my 20 weeks internship at the International Department of the Hungarian Ministry of Local Government and I had the possibility to participate at the meeting of the Hungarian-Slovakian Intergovernmental Joint Committee in the city of Svätý Peter (Komáromszentpéter). The Slovakians welcomed us with great kindliness despite of the minority-related political tension that the two countries faced at that time (the Slovak language law according to which Slovak must be used in all official contacts) and I had 4 http://www.doksihu the chance to get a real picture about the problems and difficulties of the area and how cross-border cooperation activities are realized in practice. It drew my attention since it is quite an actual topic today, with the strengthening of the role of regions in the European Union. I selected the Hungarian-Slovakian cross-border cooperation as the topic of my dissertation, which is

carried out on different levels. Firstly, there are the bottom-up or regional initiatives, the twin-settlement structures, Euroregions and the new tool of the European Union, the European Grouping of Territorial Cooperation. Secondly, there is the above-mentioned Joint Committee which represents both the regional and Ministerial levels. Thirdly, we can mention the initiatives of the European Union (Phare CBC and Interreg) which provide financial support for cross-border cooperation. As I have already mentioned, these areas are very underdeveloped areas and their economy is lagging behind. That is why I answered the question: does this cooperation have a demonstrable impact on the economy of the counties? I am going to give an answer to this question at the end of my dissertation. I am going to introduce the different levels of cooperation: Euroregions, EGTCs, the Joint Committee and analyze the Phare CBC and Interreg programmes between the two countries from the aspect of economic

impact. Finally I am going to introduce the general trade relations and regional statistics of the cross-border regions and compare them with the non cross-border regions’ figures. It involves GDP per capita, unemployment and migration figures which, in my opinion can reflect the general economic development tendencies of the area. I am going to use both primary and secondary data. The primary data contains the results of the survey that I carried out among the Hungarian Euroregions about their activity (especially economic activity) and main difficulties they face. The secondary data is originated from publications and books connecting to the topic, while I am also going to use statistical data of the cross-border regions. I hope that I will be able to answer the question at the end of my dissertation: does cross-border cooperation between Hungary and Slovakia has an impact on the economy of the countries? At first, I am going to introduce the most important information about

cross-border research, which has developed into a separate branch of science by now. 5 http://www.doksihu 2. The science of cross-border research 2.1 The definition of border region Europe is characterised not only by its diverse culture and history, but also by its many borders. The state borders, which were created in Europe during the last three centuries and during the wars of the first half of the 20th century, often separate regions and ethnic groups, which actually belong together. For centuries, the regions along the internal and external borders of Europe were not popular with investors. They were considered risky because of the closeness of the “enemy” over the frontier. Economic activity tended to be concentrated in the central parts of countries, in big cities and around the capitals. That is why these regions in many cases are lagging behind in economic development and they are peripheral, structurally weak areas with limited transport links. But what regions can be

considered border region? We can give a definition in many different ways. In practice, they sign a 15-20 km wide geographical area at both sides of the border, while the European Council counts with bigger extension due to administrative reasons. A well-known and generally accepted concept is to consider those statistical, territorial unities or levels (settlements, subregions, NUTS 3 and/or NUTS 2 regions) that graze the border. The drawback of the second definition is that in this case the border region extends on a huge area and it is quite hard to analyze the situation of it. It is without doubt, that we can use any of these approaches to define border region, we can explicitly declare that these are the less-developed areas of Europe. The need to decrease the differences in the level of development, closing up the underdeveloped area, the strengthening of cohesion and European integration is the strongest here. The borders can be categorized according to more perspectives: its

functions, effects and border interactions. 6 http://www.doksihu 2.2 The functions of border – connect or separate? Regarding the functions of borders, there is a very often used word pair according to which the border connects and separates. On the one hand, state borders separate the different structures; on the other hand, they create connection between the areas that have divergent features. Basically, these two functions are present in the case of all state borders. They separate territorial unities, culture nations and economies, while they are able to provide connection and a kind of concentration of forces due to the common interests. As a result of the change of regime and the concept of European integration, the borders the connecting role of borders tends to dominate. (Baranyi, 2007, p35) 2.3 The effects of borders Regarding their effects, we can distinguish three types of borders: closed or barrier, filter and opened (Baranyi, 2007). The following table introduces

the most important characteristics of the mentioned types of border: Table 1: Characteristics of the different types of borders Type of border Characteristics Closed or barrier It is strongly restrictive and usually results in peripheral processes and characteristics. Filter It does not prevent the free movement, however it “filters” or controls the flow of goods and people, basically towards the external side of the border. Opened It makes possible fairly free transit, residential and economic transactions. Source: Own edition, based on Baranyi, 2007 7 http://www.doksihu 2.4 Interaction at borderlands Conditions in borderlands vary considerably because of profound differences in the size of nation-states, their political relationships, their levels of development, and their ethnic, cultural and linguistic configurations. Despite this heterogeneity, it is possible to generalize about features common to all and to posit a classification scheme based on cross-border

contacts. As the world has evolved geopolitically, more and more borderlands have tended to convergence, rather than divergence, but unfavourable conditions in many areas still keep neighbouring borderlands in a state of limited interaction. Thus, in categorizing borderlands it is essential to assess cross-border movement and the forces that produce it. With such consideration in mind, four paradigms of borderlands interaction are proposed: alienated borderlands, co-existent borderlands, interdependent borderlands and integrated borderlands. The model of alienated borderlands refers to borderlands, where day-to-day, routine cross-boundary interchange is practically non-existent resulting in extremely unfavourable conditions. Warfare, political disputes, intense nationalism, ideological animosity, religious enmity, cultural dissimilarity and ethnic rivalry constitute major causes of such alienation. International strife leads to militarization and the establishment of rigid control over

cross-border traffic. International trade and substantive people-to-people contacts are difficult and in many cases, they are forbidden. The continuous tension makes these areas sparsely populated and underdeveloped. In the case of co-existent borderland, the border remains slightly open, allowing for the development of limited binational interactions. The residents of the countries treat each other as casual acquaintances and borderlands develop closer relationships. At interdependent borderlands stability prevails most of the time. The economic and social complementary prompt increased cross-border interaction, leading to the expansion of borderlands. The borderland countries carry on friendly and cooperative relationships. The stability is strong and permanent at integrated borderlands. There is an unrestricted movement of people and goods across the boundary, while the economies of the countries are functionally merged. The citizens of the borderland perceive themselves as members

of one social system. (OJ Martinez, 1994) 8 http://www.doksihu 2.5 Tools of cross-border cooperation The models of interregional cooperation can be classified based on their function, size and territorial location. The categories are the following: I. Long-term strategic cooperation 1. Working community: it has a simple organizational structure and it is less-integrated than a Euroregion. 2. Euroregion: this kind of cooperation has a fifty-year-old tradition Their activity is very important in today’s borderless Europe, because people living in the borderlands might improve their disadvantageous situation with the help of this organisational structure, in which the representatives of local and regional authorities and actors of social and economic life participate. Since local governments participate in these organizations, they are also decision-makers, therefore they can have contact with national and European decision-making organs and they can participate in tenders. The

status of international legal entity of Euroregional cooperation depends on the inter-state treaties of the countries involved. We can distinguish two types of Euroregions: a. Big regional model: it contains the middle-level territorial unities, provinces, regions (NUTS 2) and counties (NUTS 3) of two or more neighbouring or close states. It rather repsents a transborder type of cooperation b. Small regional model: it symbolizes cross-border cooperation between neighbouring counties (NUTS 3), subregions (NUTS 4) and cities (NUTS 5). II. Short-term, project-level cooperation 1. Ad-hoc type of cooperation: cooperation is established for the realization of a given project. 2. Other types of cooperation (twin towns and “in name” Euroregions): they are established for the realization of a concrete conception, usually for a transitional period. Their number is high and changes permanently (Baranyi, 2007 p245) 9 http://www.doksihu 2.6 The acceleration of cross-border cooperation I

would like to state that, at first, European governments feared transborder cooperation in the belief that the sovereignty of the nation-state would be compromised, so the border regions took their own initiatives towards regional transboundary cooperation. Today, more than seventy cross-border regions exist in Europe, operating under names such as ’Euroregions’, ’Euregios’, or ’Working Communities’. Some of these initiatives date back to the 1950s which was the end of World War II. At that time it was realized that they need to transform borders into exchange areas and they also need to change the situation of border regions from a peripheral position at national level to a central position at EU level. In fact, today there are virtually no local or regional authorities in border areas that are not somehow involved in cross-border cooperation. From the 1980s, this bottom-up process was considerably helped by three institutions: the Council of Europe, the Association of

European Border Regions (AEBR) and the European Union. 2.61 The role of the Council of Europe The Council of Europe has been particularly active in improving the legal background for these types of cooperation. It became evident in the 1960/70s that there is a need for the legal regulation of Euroregional organs and the local structures. To come over this, in 1980, on the initiative of the Council of Europe a set of European countries concluded an international treaty, the so-called Madrid Convention, as a first step towards cross-border cooperation structures based on public law (Edit, Pintér) The general objective of the Madrid Convention is to promote and facilitate the conclusion of agreements between regions and local authorities on the opposite sides of a border. It provides a legal framework for cooperation below national level, for example in activities connected to regional, urban and rural development, environmental protection and infrastructure. The Convention also

contains model agreements and treaties for cross-border cooperation. These range from the loose mutual exchange of information to clearly defined legal obligations.It has been later reinforced by three additional operational protocols. 10 http://www.doksihu The optional protocol of 9 November 1995 was designed to strengthen cross-border cooperation among European countries. Its objective is to give the overall convention backing, expressly acknowledging the rights of territorial authorities in certain circumstances to conclude agreements on cross-border cooperation. The second optional protocol to the Madrid Convention of 5 May 1998 was aimed at promoting cooperation between the authorities of territories that are not directly neighbouring. The third protocol was signed on 16 November 2009 provides for the legal status, establishment and operation of Euroregional Co-operation Groupings, composed of local authorities and other public bodies. 2.62 The Association of European Border

Regions The other institution, the Association of European Border Regions has provided a socalled “networking contribution” for cross-border interactions. The idea of setting up a European association for border regions was first discussed at the "International Conference on Regional Planning" in Basel in 1965, and finally the union was established in 1987 with a seat in Gronau, Germany. This is the only European regional organisation that specifically deals with cross-border issues. The association attempts to represent its members’ interests on European level and also acts as a service organisation with a high level of expertise in regional and urban matters. Consequently, it also acts as information or service provider and programme manager for the Commission, and functions as a network broker providing a forum for members to seek potential partner regions or cities. Besides the Commission, it also cooperates with the European Parliament, the Committee of the Regions

and the European Economic and Social Committee. 11 http://www.doksihu 2.63 The role of the European Union The third and maybe the most important organization that improved the necessary conditions for cross-border cooperation is the European Union with financial contribution. Though, one can discuss whether the EU should be considered as a driving force behind the emergence and proliferation of cross-border cooperation across Europe, since the cross-border cooperation is bottom-up driven. However, the extraordinary growth of cross-border cooperation from 1988 onwards must certainly be related to the launch of EU support schemes dedicated to cross-border initiatives in Western Europe, and, from the early 1990s, increasingly in Eastern and Central Europe. But does the European Union support cross-border cooperation and what are its tools? The next Chapter gives answer to these questions. 12 http://www.doksihu 3. Cross-border cooperation in the European Union 3.1 Cross-border

cooperation, the tool of European integration The Regional policy has a long history: it was laid down even in the Treaty of Rome in 1957 that the harmonious development of Member States is necessary. Since then, Cohesion policy has become one of the most important EU policies. Throughout the years the tools of the policy changed, but the goal was always the same. According to Dirk Ahner, the Directorate-General for Regional policy “Cohesion policy has adapted over time without losing sight of its core orientation, namely to work towards the balanced and sustainable development of Europe’s regions”. Cross-border cooperation is part of the Regional policy of the European Union and has the same main objective: to reduce disparities in the level of development between regions. This means promoting increased competitiveness and employment on a sustainable basis in the less prosperous regions or those that face other particular challenges. Its aim is to reach the integration of the

borderlands, which means the nonexistence of borders and to realize the concept of “Europe without frontiers” The role of cross-border cooperation increased after the two recent enlargements of the European Union (2004 and 2007) since the length of the border regions of the Union increased significantly. Within the EU 15 countries border regions was only 39,1% of the whole territory of the Union, while now, with the EU 27 this number increased to 66,1%. Nowadays, the Commission of the European Union refers to its trans-boundary regions as ‘laboratories of European integration’. According to a report of the European Commission in 1997, the cross-border cooperation has to appear on more levels to be successful. Firstly, it has to involve the factors of everyday life: business life, employment, leisure, culture, the social possibilities, planning, etc. Secondly, it has to be a day-to-day process involving every territory and social group on both sides of the border. Thirdly, it

has to appear at every level of public administration: national, regional and local levels. The European Union has supported cross-border cooperation financially: the candidate gets support from the Phare CBC programme, while the Member States can use up the sources provided by the INTERREG. 13 http://www.doksihu 3.2 Community initiatives 3.21 The Phare CBC It can be considered as the predecessor and the preparation instrument for the INTERREG IIIA cross-border cooperation programme. It aims to support the non-EU members in the development of cross-border connections, dissolution of the comparative development lagging behind of cross-border regions. 3.22 INTERREG The INTERREG European Community Initiative operates since 1990. Its prime objective is to promote the economic and social integration, facilitate the elaboration and implementation of the joint projects at the level of municipalities and organizations of the border regions. It has already finished three programming

periods, in the new programming period (2007-2013) INTERREG IV forms a separate objective. The following table summarizes general information about the INTERREG programmes: Table 2: The periods of INTERREG Period Strands Budget INTERREG I 1990-1993 Only border areas 1,1 billion EUR INTERREG II 1994-1999 A: cross-border co-operation 3,6 billion EUR B: completion of energy networks C: co-operation in the area of regional planning INTERREG III 2000-2006 A: cross-border cooperation 5,8 billion EUR B: transnational cooperation C: interregional cooperation INTERREG IV European Territorial Cooperation Objective 2007-2013 1: cross-border cooperation 6,44 billion EUR 2: transnational cooperation 3: interregional cooperation Source: own edition, based on several sources 14 http://www.doksihu 3.3 Regional policy 2007-2013 The Regional Policy for the period 2007-2013 has the main competence just like the previous periods according to which the policy is the key element in

the harmonious development of Member States, by supporting economic and social cohesion. However, it is more strategic than before and it is strongly linked to the Lisbon Strategy and it is ever more focused, which means that it concentrates on the poorest Member States and regions. It has three pillars: Converge, Regional Competitiveness and Employment and finally the European Territorial Cooperation. The European Territorial Objective is also known as INTERREG IV which is financed by the European Regional Development Fund and it supports 70 cross-border, transnational and interregional cooperation programmes. The next Chapter will focus on the cross-border cooperation in Hungary and show how the European Union’s policy has been realized in the country. 15 http://www.doksihu 4. Cross-border cooperation in Hungary Hungary is often referred as the ”country of borders” which is quite an appropriate remark, since Hungary is surrounded by seven neighbouring countries with 2242 km

long state border. The present borders of Hungary are quite young and were created in 1920 by the Treaty of Trianon. As a result of the Treaty, Hungary lost two third of its territory and 60% of its population. The new borders disintegrated the formally closely related, interdependent economic unities which resulted in the cross border area’s peripheral situation. Between the two World Wars, the separating role of border strengthened. The situation of the border regions became more serious as the political leadership considered the situation transitional and it did not take any steps to close up these territories. The peripheral situation was deepened after the establishment of the Council for Mutual Economic Assistance (1949), since the cooperating partners carried on more intensive commerce with the Soviet Union than among each other, which contributed to the increasing isolation of the borders. Regarding the functions of borders, we can constant that from the Treaty of Trianon

till the change of regime in 1989/90 the barrier type of borders were typical, they served like a real wall. This was the time when hardly any cross-border cooperation was realized between Hungary and the neighbouring countries. The turning point was the political change in the 1990s, what opened favorable conditions for regional and territorial cooperation. As an initial step, Hungary started to regulate and reform its relations with the neighbouring countries by different treaties. In 1991/92 an agreement was reached with Ukraine, Slovenia and Croatia, and later, because of political reasons, in 1995/96 with Romania and Slovakia. All state borders became more opened, the inter-settlement, community and even the economic relations brightened up. In the second half of the 1990s the four associated countries (Hungary, Romania, Slovenia and Slovakia) started the institutionalization of EU-compatible regional development, in which Hungary was the first and most prepared state. The

European Union started the PHARE Cross-BorderCooperation (PHARE CBC) program in Hungary 1994 to close up the territories linked to the external borders of the Union, which resulted in more intensive cross-border cooperation. 16 http://www.doksihu The programme concentrated on the development of five areas, which are the followings: • Regional planning • Development of technological infrastructure • Development of economy and tourism • Development of human labour force • Protection of environment Cross-border cooperation alongside the borders of Hungary became even more intensive after 1st May, 2004, when the country joined the European Union. It provided the following advantages for relationship building: better economic, social and integration relations within the inner borders of the Union, sources for the development of border regions (Interreg, PHARE, etc.) and more favourable political atmosphere Despite of the opening towards the neighbouring countries and the

initiatives of the European Union, border areas are still considered as peripheral areas, characterised by permanent economic recession, high unemployment rate, bad infrastructural conditions, high distance from central settlements, difficult accessibility, migration, depopulation, and concentration of the gipsy population. The situation is the most serious at the Eastern, especially at the North-Eastern parts of Hungary. That is why the motivation to cross-border cooperation for Hungary is the same as for the European Union: common exploitation of resources, obtaining regional supports from the Union, decrease the development differences at border regions, closing up peripheral areas and easing historical-ethnical tensions. In the followings I am going to present how cross-border cooperation works through a concrete example introducing the Hungarian-Slovakian border area., I am going start with the introduction of the two countries from those aspects, that might influence the

cross-border cooperation between them: economy, the administrative division of the countries and the most important features of the cross-border region. 17 http://www.doksihu 5. Introduction of the two countries 5.1 Economy After the change of regime in 1989, Hungary has made the transition from a centrally planned to a market economy. The proportion of private sector is significant; it counts for more than 80% of its GDP. Foreign ownership and investment in Hungarian firms is common, with cumulative foreign direct investment. The budget deficit of the country is significant, although it increased over 9% of GDP in 2006 to 3.3% in 2008 The global financial crisis, declining exports, and low domestic consumption dampened, will result in a negative growth rate of about -1.5% to -25% in 2009 Slovakia has made significant economic reforms since its separation from the Czech Republic in 1993. It reformed the taxation, healthcare, pension, and social welfare systems which helped Slovakia

to consolidate its budget and get on track to join the EU in 2004 and to adopt the euro in January 2009. Major privatizations are nearly complete, the banking sector is almost entirely in foreign hands, and the government has helped the inflow of foreign investment with business friendly policies such as labour market liberalization and a low business taxes. Slovakias economic growth exceeded expectations between 2001 and 2008 despite the general European slowdown. Unemployment means the most serious problem, which has already dropped from 18% in 2003-04 to around 8% in 2008. Table 3: Selected indicators of the Hungarian and Slovakian economy Indicator Hungary Slovakia GDP (PPP) $196.7 billion $119.8 billion GDP per head $19,800 $22,000 Labour force 4.2 million 2.2 million Unemployment rate 7.8% 7.7% Public debt 67.7% of GDP 28,7% of GDPR Inflation rate 6.1% 4, 6% Exports $106.6 billion $72.57 billion Imports $106.5 billion $65.47 billion Source: Own

edition, based on the statistics of Central Intelligence Agency’s World Factbook 18 http://www.doksihu 5.2 The administrative division of the countries The Nomenclature of Territorial Units for Statistics (NUTS) classification was established in the Community in 1988, but it was only in 2003 that a Regulation of the European Parliament and of the Council on the NUTS was adopted. The idea behind the NUTS is to have a uniform division through which it is possible to compare data among the member countries. The local administrative unit (LAU) is a low level administrative division of a country, ranked below a province, region, or state. The following table contains the comparison of the NUTS regions of the two countries: Table 4: Comparison of the Hungarian and Slovakian NUTS and LAU regions Hungary Slovakia NUTS 1 3 statistical large regions 1 NUTS 2 7 planning and statistical regions 4 oblasts NUTS 3 20 (19 counties and Budapest) 8 regions (kraje) LAU 1 168

statistical sub-regions 79 districts (okresy) LAU 2 3152 settlements 2928 municipalities (obce) Source: Own edition, based on several sources The organization of both the Slovakian and Hungarian districts and counties happened as a result of different historical backgrounds and not as a result of economic considerations. The two countries did not take advantage of the establishment of the NUTS system and left the other party out of consideration searching for mutually advantageous solutions. That is why the harmonization of the Slovakian district and Hungarian county system, moreover the regional NUTS system did not take place. After introducing the two countries, I am going to focus on the cross-border area and present its major characteristics. 19 http://www.doksihu 5.3 The characteristics of the cross-border regions 5.31 General situation The Slovakian-Hungarian border region is situated in an area that belonged to single state formations until the end of World War I: the

Kingdom of Hungary and the AustroHungarian Monarchy. The state border between Czechoslovakia and Hungary was created by the Peace Treaty concluding World War I. The new state border did not follow the ethnic border: significant areas with Hungarian majority were annexed to Czechoslovakia. In the Treaty of Trianon, the border was designated mainly on the basis of economic, military-strategic and transport-geographical considerations, thus the network of personal relations, the aspects of settlement networks and ethnic considerations, all factors that are important for the organisation of everyday life, were not regarded during the decision-making. The present-day Slovakia, which became an independent state on January 1, 1993 after the dissolution of its federation with the Czech Republic, inherited the state borders. As a result of the more hundred years of common history, there are many similarities between the two countries. Moreover, Hungary and Slovakia live in the so-called

“transitional period” as a result of which many economic and social changes took place in these countries. In the followings, I am going to introduce those characteristics of the border regions that might have an influence on the economic cooperation of the given areas. The introduction is partly based on the Programming Document of the Hungary-Slovakia Cross-border Cooperation Programme 2007-2013. 5.32 Territory The Hungarian-Slovakian border includes seven Hungarian counties (Győr-MosonSopron, Komárom-Esztergom, Pest, Nógrád, Heves, Borsod-Abaúj-Zemplén and Szabolcs-Szatmár-Bereg counties), and five Slovakian NUTS III regions (Bratislava, Trnava, Nitra, Banská Bystrica and Košice krajs). The area covers 61509 km2 and has a population of about 8, 7 million people. The length of the Hungarian border with Slovakia is 679 km, which is the longest one for both countries. More agglomerations lay on the territory, which are the followings: the Austria-Hungary-Slovakia

metropolitan region (Bratislava, Győr, Vienna), the agglomeration of Budapest and the Eastern cross-border polycentric settlement system of Miskolc, Kosice and Nyíregyháza. 20 http://www.doksihu Figure 1: The Hungarian-Slovakian border region Source: Edited by István Mezei, drawn by Máté Mády 5.33 Population During the 1990s, the whole cross-border region faced a natural loss of population. The aged population and the decreasing percentage of the younger generation cause serious demographic problems in both countries. Another common feature is the multi-ethic population, although Hungary is more homogenous than Slovakia. Hungarians make up the most important minority in the Slovakian cross-border regions (around 10%). Hungarian minorities live mainly in the regions of Nitra, Trnava and Banská Bystrica. The Roma population forms an important minority in both countries. They live basically in Nógrád, Borsod-Abaúj-Zemplén and Szabolcs-Szatmár-Bereg counties from the

Hungarian part, while in the Slovakian part they can be found in a significant proportion in the regions of Banská Bystrica and Košice. There is a considerable migration taking place towards the more developed poles (Budapest-Bratislava and the Košice-MiskolcNyíregyháza trilateral polycentric settlement system) from the rural areas. Approximately 30 thousand employees from Slovakia work in Hungary, and commuting from Hungary to Slovakia has also appeared by now. 21 http://www.doksihu 5.34 Economy During the last years the border areas went through sectoral changes: the output of both industry and agriculture dropped significantly, while the proportion of services increased dramatically. The reason behind is that as the date of the two countries’ EU accession approached, a number of advanced global service provider enterprises entered the market. These companies brought substantial foreign direct investment and also contributed to the decrease of unemployment rate. Examining

the area’s GDP growth, we can see a West-East development axle with the highest output in Bratislava and Budapest, and the lowest in Nógrád county. In the Hungarian border region, regarding the number of registered enterprises, Pest county is in the best situation, while in the Eastern part, in Nógrád, Borsod-Abaúj-Zemplén and Szabolcs-Szatmár-Bereg counties, the number of enterprises is lower than the national average. On the Slovakian side, in Bratislava a high number of enterprises settled down, while in Trnava, Nitra and Košice this number is low. The symmetry of development is clearly visible: along the Western section of the border the most advanced areas can be found on both sides of the border. In Slovakia the three neighbouring Western districts (Bratislava, Trnava and Nitra), in Hungary Budapest and three counties (Pest, Komárom-Esztergom and Győr-MosonSopron counties) produce half of the GDP of the respective country. On the other hand, the development level of

the Eastern part is below the national average on both sides. 5.35 Infrastructure The accessibility of the border area largely depends on the number and quality of bridges due to the border-river Danube. At the moment, there are four bridges on the Danube between Hungary and Slovakia which are narrow and insufficient. The road connections are rather underdeveloped in terms of quality and also in number. Besides this, the roads are very overladen. The railway transport is relatively extensive on both sides of the border, although in the North-South direction it is poorer, mainly in the middle part. The air transport is based in the international airports of Budapest and in Bratislava. The airport of Budapest plays an important role in international transportation which offers many possibilities. There are domestic airports in Győr, Lucenec,Miskolc, Nitra, Nové Zámky and Nyíregyháza. 22 http://www.doksihu The SWOT analysis of the cross-border region can be found in Annex 1. In

my opinion from the above-introduced data it is visible that this area faces serious problems: its economy is lagging behind, the conditions of its infrastructure are unfavourable which do not attract foreign investment to the territory. The need to join the forces of the countries is extremely necessary. In the next Chapter I am going to present how this cooperation has been realized in the past and in the present. 23 http://www.doksihu 6. The history of cross-border cooperation between the two countries Just like all around Europe, the stormy history of the 20th century of this area has resulted in a significant change in all aspects of its life and had a strong influence on the social and economical life of the region. After the Treaty of Trianon, the small villages that remained in Hungary have left their historical centre towns and cities, and the newly declared centres were not able to take over all the tasks that had been managed by the historically developed centre towns

before the border changes. The villages on the Slovakian side of the border had many difficulties: how to fit themselves to the life of a new country while keeping their national identity, how to keep their connection with those Hungarian villages with which they had day-to-day connections. After 1920, the relations between the two countries were apparently hostile, which resulted in the lack of cross-border relations (alienated borderland). The relations between the two countries were in fact negligible, although cooperation still had been maintained between the Hungarians on both side of the borders since family members, friends, neighbours remained at the other side of the border. To be able to preserve legal relations, the Hungarian party put forward a proposal to open a special border station for those who lived in the borderland in both countries, which was finally introduced in 1927. The relations remained hostile even after the World War II These were the years of deportations

and population exchange, which is suitable for the coexistent borderland of the Martinez model. In the years of détente the strict control over the border was slackened. Local border stations opened again for those living in the borderland and state-organized commercial relations were completed by personal relationships. In Martinez’s model this would be equivalent to the category of cooperating borderland, however, in the decades of communism the occupant Soviet Union regulated the cooperation between the two countries. Moreover, the business relations existed only at a national level, between state-owned companies, since privately-owned enterprises were forbidden to do it by law. It was only after the change of regime in 1898/90, that Martinez’s cooperative type of borderland began to emerge. The relations started to flourish, while the cross-border relations started to be built and institutionalized. The system of twin-settlements and new relations between groups of

settlements began to develop, Euroregions became more and more popular, and beyond 24 http://www.doksihu the existing personal relationships, the organised forms of relations also appeared. This meant that the different forms of exchange of goods (from shopping tourism through commercial relations) started to spread. In 1995 the two countries signed a so-called “Treaty of cooperation” in Paris which basically concentrated on minority issues. In 1998 they tried to remove the deadlocked cross-border connections with the refreshment of the Treaty. Following this, the Treaty signed in 2001 brought the widest possibility of cooperation. It was of great importance that they put down that the two countries provide the same conditions for the state and municipal actors of cooperation what they would have in the case of cooperation within their own country. These agreements can also allow regional authorities to become involved in the cooperation between national authorities. This

solution is used in federal states in particular, where cooperation agreements between various levels of public authorities have made it possible to cooperate. In many cases, regional and local authorities are authorised to directly conclude international agreements for all matters that lie within their own competencies, as long as these agreements are in line with the respective national legislation. To stimulate cooperation, they enlisted in 15 points those areas, where cooperation is the most urgent. It included regional development, the improvement of infrastructure, the promotion of economic cooperation, investment and job creation, the development of agriculture. A separate article laid down that the administrative organs, local governments, civil organizations and foundations can freely contact and cooperate, without the permission of the state. The Treaty also created the Hungarian-Slovakian Intergovernmental Joint Committee for Cross-border cooperation. A new era came after

the accession of the two countries to the European Union in 2004. Nowadays, the border region of the two countries reached the so-called integrated borderland level, when all commercial, economic and social barriers are eliminated and the two parties became completely equal. (Mezei, 2008 p63-64) 25 http://www.doksihu 7. The forms of cooperation 7.1 Relations between the businesses on the two sides of the border It is a general fact that the different taxation systems of the two countries result in economic movements between the countries. The Slovakian taxation system is more comprehensive and simpler, the legal environment is more favourable for the foundation of businesses. That is why entrepreneurs tend to move their businesses form Hungary to Slovakia in order to exploit the better conditions of taxation. The opening towards Slovakia has another reason: the expansion and opening up of the market. Expansion to the border region means that the Hungarian businesses get into a

Hungarian environment, since the proportion of Hungarian-speaking population is high. Another very attractive factor is the skilled, reliable and the relatively cheap Slovakian labour force. In the Bratislava kraj and in Western Slovakia several multinational corporations (basically automobile companies) appeared where the Hungarian firms intend to become suppliers. The Slovakian companies also try to expand economic activities towards Hungary to acquire new markets. An example is the Slovak-owned businesses operating in the Entrepreneur’s House in Komárom in Hungary, trying to serve the Hungarian market. Another factor why Slovakian firms enter the Hungarian market is that in Hungary the prices are higher, so they can realize a higher profit. To sum it up, we can say that there are rather one-way economic movements to Slovakia due to the favourable economic conditions, but we cannot speak about mass-relocation. 7.2 Twin cities During the communist era, the twin-town relations were

popular forms of maintaining camaraderie between the communist parties of different countries. These relations were developed with the permission of central party organizations, and basically they expanded only to cultural and sport activities. Since the change of regime, this kind of cooperation has been formed with new intensions, on a voluntary basis. Approximately one third of the Slovakian-Hungarian twin-settlement relations are the consequence of the original system of relations between the two countries. 26 http://www.doksihu Many times the cooperation is based on economic interests, when for example a mineral deposit and a processing plant are on the different sides of the border. One of the biggest problems of the settlements close to the border is the vehicular isolation. That is why the interest of these settlements is to repair bridges and roads running across the border. Generally, we can constant that twin-settlement relations provide the basis for the development of

more comprehensive regional cooperation and strengthen the relations that have been maintained by settlements for development purposes. (Mezei, 2008 p.74-78) 7.3 Euroregions The main reason behind the formation of such organs it that the players at the two sides of the border have the identity of interests. The main ambition of Euroregions is to make themselves recognized as international organizations dealing with economic, environmental, social, cultural and other types of problem of the given region. The Euroregions on the Hungarian-Slovakian border were established on the foundation of common historical and geographical traditions. The first reason for their formation was the declaration of the Madrid Convention, secondly, many of them were created for the better exploitation of the supports of the European Union. Nowadays, eight Euroregions can be found in the border area. Their cooperation is widespread, ranging from economic cooperation to sport and healthcare activities. I

wanted to get a picture about their activities and the problems they face, so I carried out a research. I sent them a questionnaire which can be found in Annex 2 Since the topic of my dissertation is economic cooperation, I am going to analyze what are the Euroregion’s activities in this field. 27 http://www.doksihu In the questionnaire, I asked them to sign on a scale, ranging from 1 to 5 to what degree they are engaged in the listed activities. The following graph gives a summary about their answers: Table 5: The main activities of Euroregions at the Hungarian-Slovakian border Source: Own questionnaire We can clearly see that tourism, building economic relations, infrastructure, cultural cooperation and environmental protection dominates, while disaster management, sport and healthcare activities are the last on the list. Now, I am going to introduce these Euroregions from closer, and present their activities one-by-one, the focus will be on economic cooperation. The

introduction is based on the answers given by Euroregions in the questionnaire. Carpathians Euroregion The Carpathian Euroregion was founded in 1993 by the cross-border regions of Hungary, Slovakia, Poland, Romaine and Ukraine. The main activity of the Euroregion is disaster management and cooperation in flood prevention, but it also carries out activities involving the development of economic cooperation, infrastructure, cultural and environmental cooperation. 28 http://www.doksihu Ipoly Euroregion The treaty of cross-border cooperation was signed in 1999. The main activity of the Euroregion is development of the condition of bridges, tourism and environmental protection. Its added-value to economic cross-border cooperation is not significant Vág-Duna-Ipoly Euroregion The document of the Euroregion was signed in July 1999 by Pest and KomáromEsztergom counties (Hungary) and Nitra county (Slovakia). The Regional Development Council of Central Transdanubia and the Regional

Development Council of Fejér and Veszprém counties joined the cooperation later. The aim of the cooperation was to prepare for the adhesion to the European Union through the common development of economy, tourism and culture. One of its main achievements was the organization of the European Citizen Academy financed by the PHARE CBC, which, among others, provided formation for the leaders of small-and middle enterprises. During the consultation with the representative of Komárom-Esztergom county, I got the information that this Euroregion is under liquidation. Miskolc-Kosice Euroregion The twin-settlement relation of the two cities has quite a long history. With the main ambition to prepare for the accession to the Union, the Euroregion was formed in 2000 by Kosice, Miskolc, Borsod-Abaúj-Zemplén county and the region of Kosice. The main activity of the Euroregion was the development of infrastructure and cultural cooperation. The main achievement of the cooperation was the opening

of new frontier crossing points and the modernization of the existing ones. In 2008 Miskolc resigned from the Euroregion as a result of the lack of definitively economy-related results. Neogradiensis Euroregion To be able to seize the support opportunity provided by the PHARE CBC Programme, the Euroregion was established in 2000. From the Hungarian side its members are Nógrád county, the local lovernment and the Chamber of Commerce and Industry of 29 http://www.doksihu Nógrád county, from the Slovakian side the members are the districts of Losonc, Nagykürtős and Poltár, and the Chamber of Industry of Losonc. The main activities of the Euroregion are the development of infrastructure, tourism, but it also deals with economic and cultural cooperation and environment protection. This Euroregion tries to create a division of labour situation, since on the Slovakian area we can find a big amount of mineral quarries (tree, ceramics, etc.), while on the Hungarian side the capacity

of the processing industry offers mutually advantageous conditions to increase the entrepreneur activity. The main emphasis is on enticing European investors and the development of common products on the area of building industry. The exchange of experiences is also an important point of this cooperation, basically the delivery of experiences of the Hungarian industrial parks to the Slovakian partners. Hármas-Duna-vidék Euroregion The Euroregion was founded in 2001 by the General Assembly of Győr-Moson-Sopron county from the Hungarian part and by the Csallóköz-Mátyusföld Regional Association from the Slovakian side. The main activity of the Euroregion is the development of tourism (basically thermal tourism) and infrastructure. The economic activity of the organization is limited due to the straitened financial resources, it functions primarily as an idea giver and mediatory-organizer in activities stimulating economic cooperation. Zemplén Euroregion This Euroregion was

founded in 2004 with the participation of 32 Slovakian and Hungarian small regions, civil organisations and local governments. The organization has four priorities: promotion of economic cooperation, development of agriculture, improvement of technological infrastructure for the protection of environment and finally the development of human labour force. The promotion of economic cooperation aim involves basically the small-and middle enterprises and the service sector. So far, the Euroregion has participated in the development of organizational centres, like the Zemplén Europe House and also in the creation of the Zemplén Supplier Cluster, which is to help the settlement of suppliers and foreign businesses in the region and formulate supplier relations. The Euroregion also gives support to small and middle enterprises 30 http://www.doksihu through giving them information, providing consultation and formation, moreover, it even organizes partnership relations. What is more, it

carries out regional marketing to stimulate investments and foreign capital. Sajó-Rima Euroregion The background of organising Sajó-Rima Euroregion is that the Trianon Peace Treaty had divided Gömör county into two, as a result of which 252 settlements belonged to the Slovakian side and only 22 of them remained in Hungary. With these new circumstances, the establishment of the Euroregion was determined by a geographical unit in 2004. Among the main activities of the cooperation we can find cultural and touristic cooperation, people-to-people activities, economic cooperation and environmental protection. Regarding its economic cooperation activity, its main achievement is the Gömör Expo Slovakian-Hungarian Exhibition and Fair, which was organized at 11th occasion in 2009. The international occasion attracts many visitors and exhibitors to the city of Putnok. The economy incentive programme gives possibility to the Slovakian and Hungarian enterprises to introduce themselves

and one main point of the exhibition is the businessman meeting when invited famous experts give presentation about the possibilities of the businesses and the problems of the given area. In my opinion the main message of the program is that there is a need for the regional economic and business experts for a common platform where they can meet and share their experiences and problems, and in this way they can achieve more success. The research that I carried out among these Euroregions also concerned about their main problems regarding financing, linguistic difficulties and institutional cooperation. They had to sign on a graph to what degree these activities cause problems and difficulties for them, the following graph summarizes the results: 31 http://www.doksihu Table 6: The main difficulties of Euroregions at the Hungarian-Slovakian border Source: Own questionnaire The results prevail that the most important problem of these organizations is to receive financial support for

their functioning, basically from the local governments, but through tenders is also means difficulties. Among the neighbouring countries only Slovakia has separated sources and the amount of support that is obtainable through tenders is too low compared to the represented objectives, territories and population of the Euroregions. The organs do not face linguistic difficulties due to the large proportion of Hungarian minority in Slovakia (many times they are HungarianHungarian collaborations). Institutional cooperation neither means them a challenge, although it is made more problematic by the different competence levels of the people involved: the Hungarian and Slovakian participants have different competencies provided by national law. 7.4 EGTC, the new tool With the increasing importance of territorial cooperation, and to overcome the problems introduced above, the European Union created a new tool in July 2006 to increase the efficiency of the European Territorial Cooperation

programmes, the so-called European Grouping of Territorial Cooperation (EGTC). The EGTC Regulation offers a legal basis for the creation of entities with a legal personality. It means that the EGTCs may acquire or dispose of movable and immovable property, employ staff and may be party to legal proceedings. The instrument aims to simplify administration, cooperation and financial control of territorial cooperation in Europe. The original aim of the European 32 http://www.doksihu Union was that Euroregions should turn into EGTC since they are already existing cooperations, so they have a basis on which EGTCs can be built. Hungary was the first country that enacted the EU Regulation in its domestic law, and the second EGTC was established in Hungary, the Ister-Granum EGTC. Ister-Granum Euroregion EGTC The Ister-Granum EGTC was born as a Euroregion in 2000 and was turned into EGTC in 2008 to achieve higher efficiency. The main activity of the Euroregion is connected to tourism,

infrastructure and economic cooperation. It operates the Ister-Granum Euroregion Economic Portal, with the help of which it wishes to connect the economic actors of the area. It contains a company database in which the potential settling companies may find suppliers. It gives information about the industrial parks, offers of job agencies and call for tenders. In my opinion this is an exemplary and unique homepage in Central Europe. Ung-Tisza-Túr-Sajó This EGTC was established by the Local Governments of Hungary, Slovakia, Ukraine and Romania but it has not reached any results yet due to registration problems in Ukraine and Romania and due to the lack of financial resources. 7.5 Community initiatives 7.51 PHARE CBC The PHARE CBC programme started in 1999 between Hungary and Slovakia. The two parties had to create a Common Programming Document which was accepted by the border committees. The tenders and the realization of the projects followed the European model and happened based

on the INTERREG procedures. The Common Programming Document was valid for the period between 2000 and 2006 and it contained the SWOT analysis of the border region. 33 http://www.doksihu In the years of 1995 and 1996 the trilateral PHARE CBC Programme was launched at the Hungarian-Slovakian border jointly with Austria. Although this cooperation did not have continuation in this form, from the year of 1999 2-2 million euro support framework helped the realization of bilateral cooperation projects at this border. This amount of support is relatively low, considering that this is the longest frontier of Hungary. Unfortunately, the European Union did not give the possibility to enlarge the amount of the allocated founds. The main aims of the programme were the improvement of accessibility, development of labour force, better economic cooperation, improvement of underdeveloped cross-border regions, and the protection of environment. The main requirement of the calls for tender was that

the local and regional authorities had to realize common projects at the border regions. The expected success of this programme did not come about. The tenders required only smaller amount of financial contribution, they represented only a kind of learning process rather than bringing visible successes. The realization of the projects was also difficult, because the European Union urged the so-called “mirror projects”, when the applicants living at the separate sides of the border hand in their common application. In many cased it happened that only one applicant won, the other party was left out from the common project. I would like to mention another problem that appeared in connection with these tenders: there were significant differences in the amount of support at the different borders. The biggest available fund was available at the Hungarian-Austrian border, while the Hungarian-Slovakian border received only a smaller amount of support which is shown well by some numbers:

between 1995 and 2001 the Hungarian-Austrian border (356 km) got 62 million euro, while the Hungarian-Slovakian border (669 km) got only 9 million euro support in the frame of the PHARE programme. As a result of this, very small scale developments were realized at the Slovakian border, the effect which is not demonstrable. The PHARE programmes lasted till 2006, meanwhile, from 2004 the INTERREG programmes replaced it gradually. 34 http://www.doksihu 7.52 INTERREG 7.521 Hungary-Slovakia-Ukraine Neighbourhood Programme 2004-2006 In the period of 2004-2006 (after the access of Slovakia and Hungary to the EU), the cross-border cooperation between the two countries formed a trilateral cooperation completed with Ukraine. The budget of the programme was 23,8 million euro, financed by the European Regional Development Fund in Hungary and Slovakia, in addition, it was also funded by the TACIS in the Ukraine (4,5 million euro). The main development areas of the programme were: economic

cooperation, institutional cooperation, environment protection, smaller road construction and development of telecommunication infrastructure. Based on the sources of VÁTI Hungarian Non-profit Ltd., I prepared a graph in which the supported projects are categorized according to the activity they were aimed at. Table 7: The supported projects of the Hungary-Slovakia-Ukraine Neighbourhood Programme 2004-2006 Source: Own edition, based on the data of VÁTI Hungarian Non-profit Ltd. The table shows that the most important initiatives were connected to environment protection, people to people activities (sport and culture), tourism, studies and plans. Only 10 projects aimed at economic cooperation, which is quite a low number compared to the total number of projects. By the realization of the projects, information networks for enterprises were established and common business development projects were realized. The majority of the projects supported the small-and middle

enterprises, 35 http://www.doksihu which is quite advantageous, since this kind of business cooperation dominates on the area. There were some problems related to this programme. The first problem was the too high number of applications because the definitions of eligible activities, as well as the selection criteria were not so specific. Secondly, the projects had limited added value with regard to cross-border cooperation, which means that many times it happened that only the Hungarian or Slovakian project was supported, not the joint project itself. 7.522 Hungary-Slovakia Cross-border Cooperation Programme 2007-2013 In the European Territorial Cooperation programme (often referred as INTERREG IV) the budget increased significantly compared to the previous programming period: the amount available is 176 million euro. The overall strategy goal of the programme explicitly responds to the Community Strategic Guidelines: increased level of economic and social integration of the

border area. The overall strategic goal of the programme can be broken into more practical specific objectives, which are the following: • Strengthened economic competitiveness of the border area • Increased social and cultural coherence among people and communities • Improved accessibility and communication of the border area • Natural values protected. The program contains three priority axes: • Priority 1: Economy and society • Priority 2: Environment, nature protection and accessibility • Priority 3: Technical assistance 36 http://www.doksihu Within Priority 1 only two interventions (1.1 and 12) are connected to cross-border economic cooperation. In contrast with the previous (Hungary-Slovakia-Ukraine Neighbourhood Programme) this new programming period only joint projects are supported. The Monitoring Committee of the programme published the winning projects of the first call for proposals on 2-3 May, 2009. Based on the sources of the National Development

Agency, I prepared a table in which the winning projects are categorized according to their activity: Table 8: The supported projects of the Hungary-Slovakia Cross-border Cooperation Programme 20072013, first call for proposal Source: Own edition, based on the sources of the National Development Agency. As it turns out from the table, the most popular actions were people-to-people activities, involving sport and culture, tourism and environmental protection. I would like to introduce some concrete examples about how the winning projects could contribute to the economic cooperation of the border area. Firstly, the Foundation for the development of private entrepreneurship of Nógrád country got support to extend its e-Incubator in the interest of Hungarian-Slovakian cross-border cooperation. They will be able to form offices for Slovakian-Hungarian cooperating enterprises and help them by proving more favourable, artificial environment than the market conditions through 37

http://www.doksihu consultations, favourable rent, interpreting, etc. Two other Incubator houses will be realized in Balassagyarmat and Abaúj with the co-financing of the programme, which would support the cross-border small-and middle enterprises, increase their competitiveness and also increase the entrepreneurship mood in the area. Besides this, common businesses development projects will be realized. I also would like to emphasize the importance of smaller road constructions due to the generally bad conditions of infrastructure of the area. By improving the conditions of roads, the territory might attract foreign investments. The standpoint of the European Commission is that the level of winning projects is not too high since it contains a low amount of economic development programmes. The reason behind is that the projects have to correspond to the competition rules. On many fields the regulation of the European Union is not clear (system of state aid, claiming back). In many

cases, the use of the common language (English) was difficult to tolerate, but the biggest problem is due to the of international character of the decision making and procedures the time for getting through the whole process is quite long (sometimes there is 10 months between the handing of the proposal and the contract of support) which may find the applicant in a new situation. Moreover, the pre-financing of the projects is not solved due to the international nature and many times the winning projects cannot be realized because: the applicants are lack of the necessary financial sources 7.6 Hungarian-Slovakian Intergovernmental Joint Committee The Hungarian-Slovakian Intergovernmental Joint Committee was established in 2001. The Committee consists of the Hungarian and Slovakian sections based on the equal representation. The President of the Hungarian section is Local Government State Officer (from the Ministry of Local Government), while the State Officer of the Ministry of

Internal Affairs stands for the Slovak side. There are also representatives from other Ministries according to the actual topics of the meeting. The Joint Committee holds a sitting every half year, it puts great emphasis on crossborder cooperation, its aim is to strengthen the relations between the local governments and organs, representing good practices and serving as a platform for the actors of the border region. One main aim of the cooperation is the stimulation of tourism, as well as 38 http://www.doksihu that the parties could contribute to the development of cross-border area with common effort. The range of topics is wide: European Territorial Cooperation Programmes, infrastructure, environmental protection, Roma integration, healthcare, labour market, etc. The Committee meetings always represent good practices about cooperation between Local Governments or the successes of Euroregions. The economic activity of the Committee is not significant, although it have already

promoted the creation of economic databases, but I would say that it rather offers a platform where the concerned can meet each other, share experiences and ideas. I would like to emphasize that this is not a decision-making organ, which means that people introduce their ideas, problems, and the representatives of the Ministries “take” these and the decision is made at the upper level. 7.7 Cooperation between the Chambers of Commerce The Hungarian-Slovakian Chamber of Commerce was established in 1998 to develop the economic relations between the two countries and to expand trade ties along the border. The main function of the Chamber is the mediation of business partners, giving help at contacting business partners, providing business database, organizing exhibitions and businessman meetings. The cross-border, regional Hungarian Chambers of Commerce also maintain relation with their regional partners. Their relations cover searching for business partners, organizing businessman

meetings, provide information, help capital export and they also carry out different projects together. I would like to introduce two projects of the Chamber of Commerce of Szabolcs-Szatmár-Bereg county, which maintains relation with the Chambers of Košice and Prešov. They organize businessman meeting periodically, from which real business relations are born, moreover they have already participated in two common projects: Leonardo and ePLATfOrm. The Leonardo Mobility Project mapped the cross-border mobility characteristics, tools and practises, 39 http://www.doksihu while the ePLATfOrm created a portal, where the participating businesses are presented in English language, by this way promoting the expansion of business relations. However, this kind of cooperation is made difficult by the fact that Slovakian regional Chambers of Commerce do not possess legal personality and during the planning of joint programmes all necessary documents have to be handled to the Central Chamber

of Commerce in Bratislava, apart from the fact that they realize the projects with the regional partners. 40 http://www.doksihu 8. Analysis of the statistics – demonstrable impacts? In this chapter I am going to examine whether this cooperation has provable impacts on the economy of the two countries and I will support it by numbers. Firstly, I am going to analyze the tendency of trade between the two countries through the change of imports and exports; moreover, I am going to study the regional GDP, unemployment and net migration data of the cross-border counties and comparing them with those that do not lie at the Hungarian-Slovakian frontier. We have to keep in mind that the other regions might also carry out cross-border cooperation at their borders, but during the induction we cannot abstract from the effects of these cross-border cooperations. 8.1 The tendency of trade relations between the countries Since the accession to the European Union, commodity trade has increased

year by year between the two countries, the capital relations strengthened the service and labour flow has become more intensive. Slovakia is the sixth most important trading partner of Hungary, the export increased with a higher amount than the import and as a result, the formal trade relation with Hungarian deficit turned into surplus. Table 9: The tendency of trade relations between Hungary and Slovakia Source: Own edition based on the data of the Hungarian Ministry for National Development and Economy 41 http://www.doksihu Within the last years the expansion of Hungarian export was the result of the Slovakian vehicle industry investments (they imported engineering industry products from Hungary) and also the result of the active presence of the small-and middle enterprises. The import of Hungary consists of processing industry products, machinery, energy sources, food, tobacco and raw materials. The capital relations are also determinative in the Hungarian-Slovakian

relations, although the Hungarian capital export dominates. Besides the dominant regional investments of our large enterprises, the neighbouring Slovakia is the primary investment target of the Hungarian small-and middle enterprises (approximately 8000 enterprises have some kind of interest in the country). Hungary is the fifth important investor of Slovakia. From the side of the Slovak entrepreneurs there is also an increasing interest towards the Hungarian investment possibilities. The Slovakian Foreign Direct investment is around 300 million euro, and nearly 400 neighbouring businesses operate in Hungary, basically on the field of services and trade. 8.2 Regional tendencies 8.21 GDP per capita The following tables contain the GDP per capita data of the cross-border and non crossborder regions of Slovakia, while the table below compares the percentage change of them. All of them contain the national average statistics which makes comparison more perspicuous. 42

http://www.doksihu Table10: GDP per capita in the Slovak border Table11: GDP per capita in the Slovak non-border regions, in EUR regions,in EUR Source: Own edition, based on the statistics of the Slovakian Statistical Office These data clearly reveal that the average percentage increase in the cross-border areas was higher than in the non cross-border regions between 2000 and 2006. In general, we can constant that these numbers almost doubled within this six year period, which fact clearly demonstrates the general development of the economy of the Slovakian Republic. Average percentage change in the GDP per capita between 2000 and 2006 In the cross-border regions: 104,37 In the non cross-border regions: 94,11 Slovak Republic total: 102,57 Table 12: Comparison of GDP per capita increase The highest increase was reached by Trnava (134%), while the lowest increase was realized in Banská Bystrica (79,87%). This result is a bit contradictory, since both of them are cross-border

regions and it shows me that we cannot state for sure that his increase in the GDP per capita is the result of the cross-border cooperation. The table below illustrates the Hungarian GDP per capita data of the Hungarian crossborder and non-cross border regions: 43 http://www.doksihu Table 13: GDP per capita in the Hungarian border Table 14: GDP per capita in the Hungarian non-border regions, in thousand HUF regions, in thousand HUF Source: Own edition, based on the statistics of the Hungarian Statistical Office Table 15: Comparison of GDP per capita increase in Hungarian regions Average percentage change in the GDP per capita between 2000 and 2007 In the cross-border regions: 99,63 In the non cross-border regions: 76,64 Hungary total: 93,34 Source: Own calculations In general, the non-cross border regions produce higher GPD per capita than the frontier regions (except for Pest county due to the presence of the capital city). Between 2000 and 2007 the GDP per capita

increased by 99,63% in the cross-border regions, while this number was only 76,64% in the other regions. The amount of GDP per capita increased by the highest degree in Komárom-Esztergom, Pest, Borsod-Abaúj-Zemplén and Heves counties, it was higher than the national average increase. In Vas, Nógrád and Győr-Moson-Sopron counties the increase was the lowest, around 60%. 44 http://www.doksihu 8.22 Unemployment rate The following tables give us information about the level of unemployment rate in the Slovakian Republic. The table on the left contains data of cross-border regions, while the table on the right provides the numbers of the non cross-border areas between 2001 and 2008. Table 16:Rate of unemployment in the Slovak border regions, in % Table 17: Rate of unemployment in the Slovak non-border regions, in % Source: Own edition, based on the statistics of the Slovakian Statistical Office Table 18: Comparison of rate of unemployment change in Slovakian regions Average

percentage change in the unemployment rate between 2001 and 2008: In the cross-border regions: -55,33 In the non cross-border regions: -54,73 Slovak Republic total: -54,97 Source: Own calculations If we look at the tables, we can see that the unemployment rate decreased within this period, this fall in the percentage of unemployment was higher in the cross-border regions. The highest decrease was realized in Trnava (-72, 34%), while the lowest increase occurred in Banská Bystrica (39, 59%). 45 http://www.doksihu The tables below provide information about the unemployment rates of the Hungarian counties between 2001 and 2008. Table 19: Rate of unemployment in the Hungarian border regions, in % Table 20: Rate of unemployment in Hungarian non-border regions, in % Source: Own edition, based on the statistics of the Hungarian Statistical Office Table 21: Comparison of rate of unemployment change in Hungarian regions Average percentage change in the unemployment rate between

2001 and 2008: In the cross-border regions: 47,15 In the non cross-border regions: 41,86 Hungary total: 44,25 Source: Own calculations Compared to Slovakia, in Hungary the rate of unemployment increased in almost all regions within this period, except for a cross-border region, Győr-Moson-Sopron county where there the rate of unemployment decreased by 14,63%. The unemployment rates are higher in the cross-border regions, however, the decrease of this rate was also higher here. 46 http://www.doksihu 8.23 Net migration The tables below demonstrate the net migration data of the Slovakian regions in 2001 and 2008, comparing cross-border and non-cross border regions: Table 22: Net migration in the Slovak border regions, in no. of person Table 23: Net migration in the Slovak non-border regions, in no. of person Source: Own edition, based on the statistics of the Slovakian Statistical Office Table 24: Comparison of the change in net migration change in Slovakian regions, no.

people Change of net migration between 2001 and 2008: In the cross-border regions: 1082 In the non cross-border regions: -96 Slovak Republic total: 6048 Source: Own calculations We can clearly see that between these two years, 2001 and 2008, the net migration in Slovakia increased, which means that the number of immigrants was higher than the number of emigrants. In general, the net migration is higher in the cross-border regions which can be explained by the attractiveness of the area. This number increased by the highest degree in the regions of Bratislava (3480), Trnava (2128) and Nitra (715), while in the regions of Prešov, Košice and Banská Bystrica net migration decreased. 47 http://www.doksihu The same type of data is represented about the Hungarian regions: Table 25: Net migration in the Hungarian border regions, Table 28: Net migration in the Hungarian non-border regions, in no. of person in no. of person Source: Own edition, based on the statistics of the

Hungarian Statistical Office Table 28: Comparison of the change in net migration in Hungarian regions, no. of people Change of net migration between 2001 and 2008 In the cross-border regions: 2192,57 In the non cross-border regions: -747,75 Hungary total: 6375 Source: Own calculations The situation is very similar in Hungary: the net migration in the country increased almost by the same amount like in Slovakia. In the cross-border regions net migration increased, while in the others it decreased. Naturally, the highest increase took place in Pest county due to the attractiveness of the capital city, Csongárd and Győr-MosonSopron counties, while in Borsod-Abaúj-Zemplén, Szabolcs-Szatmár-Bereg and JászNagykun-Szolnok counties net migration decreased by the largest amount. 48 http://www.doksihu 8.3 Summary of the results The above-introduced statistics demonstrate that trade, both export and import show an increasing economic connection between the two countries.

Concerning about the regional statistics, we can say that there are different tendencies. Although GDP per capita increased in both countries, the unemployment showed differences: while in Slovakia the rate of unemployment fell, Hungary did not manage to decrease it. Net migration did not show big differences between the two countries. But what is the situation in the border regions? Regarding the Gross Domestic Product statistics, we can constant that cross-border regions managed to increase a higher amount than the noncross border regions and it is also higher than the national average. The unemployment rate in the Slovakian cross-border areas decreased by a higher amount than in the others, while in the Hungarian cross-border territories it increased by a higher percentage than in the other parts of the country. Net migration was positive on the two sides of the border, while it was negative in the other parts, so cross-border areas attracted more citizens. In my opinion these facts

are a bit contradictory: despite of the high percentage increase of GDP per capita in Hungary, the unemployment rate increased by almost 50%. Another contradiction is that for example in the case of the Slovak GDP per capita one cross-border and one non-cross border region produced the biggest increase. 49 http://www.doksihu 9. Conclusion and recommendation In my dissertation I was searching for the answer to the question whether cross-border cooperation between Hungary and Slovakia has demonstrable economic impacts on the economies of the countries. The dissertation revealed that cross-border cooperation is an outstanding topic both for the European Union and Hungary. This is important for the European Union, since the need for cohesion is the biggest within these regions, moreover, through the policy of cross-border cooperation the concept of “Europe without frontiers” can be realized. From Hungary’s point of view the topic has significant importance because its

cross-border regions are in peripheral situation with high unemployment, underdeveloped infrastructure and low level of technology what decrease the foreign capital inflow. This is also true at the Hungarian-Slovakian border, which is one of the poorest areas of the country. I started my thesis with the introduction of the theoretical background of cross-border cooperation, the tools and importance of it. Secondly, I tried to present why crossborder cooperation is important from the point of view of the European Union and how it tries to stimulate this kind of collaboration. After it, I concentrated on the cross-border cooperation between Hungary and Slovakia by introducing the two countries from some aspects that might influence the cooperation and by introducing the cross-border regions which pointed out the necessity of the common developments. I introduced how crossborder cooperation is realized on the different levels of cooperation Firstly, I introduced the “natural” trade

relations of businesses at the border regions. It showed that the cooperation between the businesses is increasing which are result of the Slovakian business-friendly taxation system and the generally higher prices in Hungary, while another motivation is the common, Hungarian language what makes business transactions easier. The “organized” cross-border cooperation is carried out on more levels, from which I selected twin cities, Euroregions, EGTCs, the Community initiatives, the HungarianSlovakian Joint Committee and the cooperation between the Chambers of Commerce analyzing their activities influencing economic cooperation. I came to the conclusion, that the cooperation between the Chambers of Commerce and some of the Euroregions has the highest added-value to cross-border cooperation. 50 http://www.doksihu They carry out the most considerable activities from which real business relations were born. Among others, they organize businessman meetings, maintain online business

databases and business incubators and many other economic cooperation stimulating activities. Some of the Euroregions face financial problems as a result of which they are not able to realize their conceptions. The success of Phare CBC and INTERREG programs in Hungary regarding economic activity is limited, since the majority of the projects concentrate people-to-people programmes, tourism and environment protection. In my opinion the main problem with these programmes is that a high amount of projects receive a small amount of money which is not enough for serious and visible results. Although, we can constant that in many cases the co-financed projects contributed to the better conditions of infrastructure which is one of the biggest problems of the territory and can result in capital inflow. The economic impact of the Hungarian-Slovakian Joint Committee and twin cities is not considerable and demonstrable, they serve as platforms of exchanging good practices. During the analysis of

the statistical data of the cross-border and non-cross border regions, in some cases (GDP per capita and migration) the higher level of economic development of cross-border regions was provable, although in connection with employment the results were contradictory. As far as I see, the biggest problem is the lack of available financial resources. In my opinion the National Plans should pay attention to this possibility to exploit the possibilities of cooperation. Another solution could be to give more power to local governments, since they know the real roots of their problems and they could solve them more efficiently. I guess that the new tool of the Union, the EGTC involves many possibilities and if the two countries take this chance, it will be fruitful for both countries. Chapter 10 contains the result of the research that I carried out among the Euroregions and their intentions in connection with the formation of EGTC. 51 http://www.doksihu To sum it up, there are many

significant initiatives at the border areas on both sides of the border, but we will have to wait for the clearly demonstrable results. Cross-border cooperation between the two countries does not have a long history: after the stormy history of the World Wars, the opening towards each other happened after the change of regime and it is only since 2004 when we became the members of one Community. In my opinion the economic effects of the cooperation will be demonstrable only in the long run. 52 http://www.doksihu 10. Assignment research: Hungarian Euroregions and their turning into EGTC 10.1 Executive summary The EGTC, the European Grouping of Territorial Cooperation (EGTC) is a new instrument of the European Union, which provides a legal basis for territorial cooperation through giving these organizations legal personality. It means that EGTCs may acquire or dispose of movable and immovable property, employ staff and may be party to legal proceedings. The original aim of the

European Union was that Euroregions should turn into EGTC since they are already existing cooperations, so they have a basis on which they can build. On the other hand, there are some challenges regarding the establishment of the EGTC: it is a new legal instrument, so it is not yet well-known and it contains some legal loopholes what might make difficult and longer the process of the creation of EGTCs. To come over the appearing problems and difficulties, and to make the tool more efficient, the European Union is going to carry out a legal supervision in August 2011. In my report I am going to give an advice to the Hungarian Euroregions: should they establish EGTCs in the near future or should they wait until the supervision of the Regulation? What would be the use of waiting? 53 http://www.doksihu 10.2 Introduction The European Territorial Cooperation became the third priority of the European Union’s Regional policy in the 2007-2013 programming period, what takes over the role

of the INTERREG Community. Until the end of the programming period 20002006, very few INTERREG programmes were directly managed by a joint integrated management body (like Euroregion) due to the lack of an appropriate legal framework for the setting-up of joint management structures. As a result of this problem, and with the increasing role and budget of Cohesion Policy, the attention turned towards these cross-border organizations. As a result, the European Parliament and the Council created a new instrument in July 2006, the so-called European Grouping of Territorial Cooperation (EGTC). The aim is to provide a legal framework for territorial cooperation involving interregional, cross-border and transnational collaborations. To be honest, I did not hear about the EGTC before my internship that I performed at the International Department of the Hungarian Ministry of Local Government. The EGTC belongs under the competence of this Ministry, which created the Hungarian domestic law that

made possible the creation of such organs. As I have already mentioned, the supervision of the Regulation is going to took place in August 2009. In the first half of 2011 Hungary will be the President of the Union, and it wishes to have the question of EGTC on the table during its presidency and to participate in the supervision of the Regulation. That is why the International Department would like to organize a conference in January 2010 on EGTC which requires a lot of preparation and organization work. At the International Department I was involved in the preparation works of this conference, in the establishment of the EGTC Working group, in the creation of an EGTC webpage and I also had the chance to participate at five conferences and round table meetings where I could meet the representatives of the Hungarian EGTCs and the local governments who are willing to establish an EGTC. I suppose that these possibilities and the tasks I carried out during the 20 weeks provided me with

many useful information, but their biggest added-value is that I was able to see and get a picture not only about the theoretical background, but also about the practical side of EGTCs concerning about their foundation and functioning. I also became familiar with their problems, not only during the establishment, but also their present problems. 54 http://www.doksihu As I have already mentioned, basically Euroregions are expected to develop into EGTC. Euroregions are important tools of cross-border cooperation, which instrument is rather underdeveloped since these organizations do not have clearly defined legal status and in most cases they do not possess legal personality. I carried out a research about the existing problems and the objectives of the Euroregions. At the end of my dissertation I am going to give them a piece of advice what should they do: wait for the supervision of the Regulation or no and what would be the use of waiting? I am going to answer this question based

on my personal experiences (what I obtained during the conferences and meetings of the people involved in EGTCs), the official documents of the Ministry and the research that I carried out through an online questionnaire among the Hungarian Euroregions. In the next chapter I am going to introduce the EGTC from closer, give a short introduction about this new tool. After it, I am going to analyse the results of the survey that I completed among the Euroregions and introduce their aims in connection with the establishment of an EGTC. Thirdly, I am going to introduce some reasons why they should create an EGTC which is based on the experiences of the already existing EGTCs and future expectations. Thirdly, I will introduce the possible problems they might face during the establishment process and even after it. At the end, I am going to give a summary of the research and answer the main questions of my report. This research is going to be useful for the Hungarian Euroregions, I hope it is

going to serve them with new information. Secondly, this is going to be helpful for the International Department, since they would like to help the establishment of EGTCs and they are willing to know about the aims of Euroregions. 55 http://www.doksihu 10.3 The EGTC from closer The EGTC, as I have already mentioned provides a legal personality for territorial cooperation. The instrument aims to simplify administration, cooperation and financial control of this kind of cooperation in Europe. The EGTC has to be registered in one of the participating countries and the domestic laws of the given country will apply to it. The Hungarian domestic law that provided a legal basis for the creation of such organs, was created by the Hungarian Ministry of Local Government and it entered into force in on the 1st August, 2007 (Hungary was the first country which created the national law). The approving and registrative authority in Hungary is the Budapest Metropolitan Court. The Hungarian

national law provides a high degree of flexibility which is based on the legal rules concerning foundations and civil organs (not publicly financed institutions) since it can be established for the realization of non-profit activities by members falling under the competence of public law. Till now, 8 EGTCs were born in Europe, two of them with Hungarian participation (Ister-Granum and Karszt-Bodva EGTC). 10.4 The results of the survey I prepared a questionnaire in which I was curious about the main difficulties of Hungarian Euroregions and what their plans are about the creation of EGTC. I forwarded it by e-mail to 14 Euroregions, although two of them reported back that they were not willing to answer and two of them informed me that they ceased (this information was also new for the International Department). Altogether, I had 9 respondents. (The questionnaire can be found in the Annex 1 It contains two parts, the first part was needed for my Hungarian dissertation. Annex 2 contains

the list of Euroregions with Hungarian participation and the countries involved.) The results about their plans of the establishment of EGTC are represented in the following table: 56 http://www.doksihu Table 28: Hungarian Euroregion’s answers to the question: Are you planning to develop into EGTC?, in the number of respondents Source: Own questionnaire The results prevail that from the 9 Euroregions only 1 answered that they are on the way to establish an EGTC (Sajó-Rima Euroregions). 3 of them answered that this is among their plans, 1 Euroregion face a problem, 2-2 Euroregions answered that the creation of the EGTC is not yet or not at all among their plans. I also wanted to know what their motivation is behind the formation of EGTC. The table below summarizes the results: Table 29: Hungarian Euroregion’s answers to the question: What kind of advantages do you see in this kind of cooperation?, in the number of respondents Source: Own questionnaire 57

http://www.doksihu The main motivation behind the formation of such institution is that it increases the possibility to receive financial support through tenders. Two of them answered that the constant contact is another advantage of the tool. They also mentioned that EGTC makes possible the realization of more constructive activity and better coordination of development programmes and it also helps the establishment of a joint work organ. 10.5 The added-value of EGTC compared to the Euroregion In this point I am going to summarize why EGTC can be a more useful tool for crossborder cooperation. The listed advantages are based on my researches and the experiences of the already functioning Hungarian EGTCs. Tenders As a result of the reform of the INTERREG Community initiative, the amount of financial sources increased significantly. The EGTC basically was created for the better exploitation of this money. The EGTC can submit its own tender for the call for proposals, what means that

there is no need for the involvement of further partners and to formulate the “Lead Partner principle”. That is why it cannot happen that for example a Hungarian and Slovakian partner submits a joint tender and only one of them gains support. In this case the joint project will receive the support which helps the common realization of the given project. A good example is that at the first call for proposal of the Hungarian-Slovakian Cross-border Cooperation Programme, the Ister-Granum EGTC submitted three winning tenders. There are European Territorial Cooperation programs at all borders of Hungary in the period 2007-2013: • Austria-Hungary Cooperation Programme • Hungary-Slovakia Cross-border Cooperation Programme • Hungary-Romania Cross-border Cooperation Programme • Operational Programme Hungary-Slovenia • Hungary-Slovakia-Romania-Ukraine ENPI Cross-border Cooperation Programme 58 http://www.doksihu • Hungary-Croatia IPA Cross-border Co-operation

programme • Hungary-Serbia IPA Cross-border Co-operation programme The EGTC provide the possibility for the better utilization of the available financial sources of these programs. No need for international contracts One of the aims of the European Union with the creation of EGTC was to eliminate that every improvement, contacting the national borders needed inter-governmental contacts what takes a lot of time. Unfortunately, this is not yet realized in Hungary, since this law concerning about the state borders still exist today. The Ministry of Local Government initiated to repeal this law at the Hungarian Ministry of Justice and Security one and a half year ago, till now they did not manage to agree. This basically concerns about development activities of cross-border roads and railway, but other types of cooperation, for example tourism and environment protection can function well. Institutionalized cooperation The founder of the first EGTC in Hungary spoke about Euroregions

like ad-hoc type of cooperation created for the realization of given projects. He said that Euroregions did not provide the possibility for a long term cooperation, which problem is solved by the creation of this tool. (The Regulation makes obligatory only one organ, the General Assembly). Higher level of lobbying activity The above-introduced institutionalization provides an appropriate institutional form for the common representation of the common interests of the border region and for the common lobbying activities at the different levels of political decision-makers (involving the local, national and EU levels). 59 http://www.doksihu Long-term and continuous cooperation The creation of EGTC gives the possibility for the Mayors and regional development experts to meet regularly and exchange their experiences. In this way the unnecessary parallelism can be avoided and the own investments can be coordinated (they can be connected and be built on each other): there could be a

division of labour between the institutions serving similar functions close to each other on the two sides of the border. I would like to mention the example of the Catalunia (Cerdanya) EGTC which will own and run a future hospital shared by local residents from both France and Spain. The advantage of this is that this high-technology hospital will be available for the local residents form both countries, instead of two superlatively and simultaneously functioning hospitals. Moreover, the common events may provide a possibility for the local businesses, civil organizations and population to establish and deepen relations. Who can give help? In Hungary, many Ministries believe that this new tool for cooperation offers many possibilities so they completely support the formation of such institutions. The aboveintroduced actions of the Ministry of Local Government (webpage, Working group), the Prime Minister’s Office, the Ministry of Agriculture and Rural Development, Ministry for

National Development and Economy support the creation of EGTCs. Besides this, I would like to introduce the Central European Service for Cross-Border Initiatives (CESCI). It is a Hungarian organization founded in 2009 with the aim to provide professional support for the institutional and project development plans of cross border cooperation. CESCI provides professional help primarily for EGTCs to be formed along the Hungarian borders. It gives consultation on institutional development, project management, mediates partners for tenders, etc. Its Director is the founder of the Ister-Granum EGTC. In my opinion he has the biggest practical knowledge in connection with EGTC, so this organization can really help the formation and functioning of EGTCs. What is more, the Regional policy is a key priority during the Hungarian EU presidency in the second half of 2011, in which cross-border cooperation has significant 60 http://www.doksihu importance. In my opinion this can help the creation

of the Hungarian EGTCs if we turn the attention to this question. 10.6 The possible problems and difficulties I also collected some problems or difficulties that may arose during the establishment of the EGTC. The list is based on practical examples, but also on future expectations Approval and registration – risk of failure? After the preparation of the Agreement and Constitution, these documents have to be handled to all participating country’s approval institution and it has to be registered in one of the states (this is based on the decision of the members). Till now, some initiatives faced serious problems during the approving process. In theory, the approving organ has 3 months to give its approval, but in reality it takes more time. In many cases, the approving authority is not willing to give it at all. This was the situation in the case of the Karst-Bodva EGTC which was originally a Euroregion with Hungarian, Slovakian and Romanian members. The Romanian approving

authority did not give its agreement. The other parties tired of this situation and created the EGTC without the Romanian party. In my opinion this difficulty is originated from the fact that this is quite a new tool and this is the result of the lack of practice and unpreparedness. Another example is the Ung-Tisza-Túr initiation where the Ukrainian party is not willing to give its agreement since one and a half year ago. Unfortunately, many initiatives result in failure because of problems of approval. The situation with non-EU members Third countries can be the members of the EGTC, in case that at least two Member States participate in the groupment provided by the fact that it has domestic laws or intergovernmental agreements making participation possible. This problem affects two Euroregions, the Mura-Dráva and Duna-Dráva, where the foreign members (Croatia, Bosnia-Herczegovina and Serbia) are not Member States. In the case of these Euroregions the Foreign Ministries of the

participating countries have to contact each other and search for domestic laws or bilateral contacts that make participation possible. 61 http://www.doksihu Unfortunately, this process is quite slow. According to my information, the Serbians have already found a domestic regulation which makes possible the participation of the Serbian parties. The question of Ukraine and Romania There is a significant problem with Ukraine which may cause difficulties for the Kárpátok Euroregion (it has Ukrainian participants). The trouble is that there is a domestic law in the country, according to which Ukrainian local governments cannot participate in organizations where they have to pay membership fee. The other serious problem with the neighbouring countries that affects three Euroregions (Kárpátok, Bihar-Bihor and Duna-Körös-Maros-Tisza Euroregion) is the government crisis in Romania. New Ministries were born in the near past, which means that it is difficult to find the parties to

which EGTC belongs. The Ministry of Local Government had already contacted the Romanian part, but it did not have any result yet. Financial problems One main problem of the existing Hungarian EGTCs is the financing. They have already experienced that although it is easier to be successful at the calls for proposal, this amount of financial support is not enough for serious activities and the realization of efficient projects. Political risk Next year Parliamentary (April) and Local Government elections (in autumn) will be held in Hungary. Since basically towns and counties take part in these Euroregions, the elections can slow down the process and it also involves the risk that if another Mayor wins, he or she will not support the creation of such organ in which case the whole process of turning into EGTC might fail. Moreover, there is a kind of political debate about which Ministry the EGTC belongs. As I have already mentioned, it was the Ministry of Local Government that created

the domestic EGTC Regulation, which was at that time the Ministry of Local Government 62 http://www.doksihu and Regional Development. Since then, the Regional Development part was transposed to the Ministry of Economy. Besides these two Ministries, the Prime Minister’s Office also supports the creation of EGTCs. 10.7 Conclusions Based on my personal experiences, I think that this tool of cooperation was really needed for the better utilization of the support of the Union under the Regional policy. As far as I see, Euroregions could be very useful tools of cross-border cooperation. I say that because this kind of cooperation is a bottom-up initiation that is born in the affected towns and regions which really know the problems of the given area. This is in contrast with the top-down initiation which comes from the Ministries. In my opinion Ministries can see general problems since they know statistical data, the results of the reports of the towns and counties, but they do not see

the concrete problems, the roots of them. I suppose that the Ministerial level did not realize the importance and the potentials in them. However, it was realized by the European Union and it wanted to give more power to them by the creation of this new tool. Its advantages are evident: it can employ its own workers, it provides a longer-term cooperation, higher lobbying power, but what is its biggest advantage is that it makes possible the better utilization of EU support through tenders. Nevertheless, it is a new tool and we do not have too many practical examples. It is still unsettled and not perfect yet There are many problems due to the different national laws, and there are specific problems in Hungary, like the issues related to the superstructures to be established on the frontiers (road, railway, etc.) and the question of Romania and Ukraine, moreover the political risk. After studying the possible difficulties Euroregions might face during and after the establishment, I came

to the conclusion that only one part of these problems could be solved by the supervision: the participation of third countries, the approving process and the financing, while the other difficulties need further legal harmonization of Member States. 63 http://www.doksihu 10.8 Recommendations We could see both the advantages and the drawbacks of this new instrument. In my opinion the Euroregions that are aiming at the formation of EGTC should not wait until the supervision. I have already mentioned that the possible problems they might face can only be partly solved by the supervision in 2011. They have to be opened and start the preparation now. The road to the creation of the EGTC is long and sometimes difficult, but they can get support from the above-introduced Ministries and the CESCI. And what would be the use of waiting? I think that I have to list four things here. Firstly, I would like to mention the money. From the idea of creating an EGTC till the creation, a legal

advisor is necessary which cost a lot of money. It is the biggest threat for these organizations which already face financial problems. Secondly, they could save time and effort that they invested. Finally, we would have more practical examples which could serve as examples and counterexamples about the establishment of the EGTC. In my opinion the progress always involves some risk, but we have to be opened towards the new things and possibilities. This is extremely true about Euroregions, which organizations have the chance to make better the life conditions of people living in the border regions. 64 http://www.doksihu 11. Annexes Annex 1: SWOT analysis of the Hungarian-Slovakian border area Strengths Weaknesses • Dynamically growing economic urban centres with international, national and regional roles • Migration flows to the core agglomerations and centres • Ageing society • A high share of Hungarian minority in the Slovakian border area • High share of Roma

population • Developed tertiary sector • Low level of economic performance in the Eastern parts • High economic performance in the Western part • Underdeveloped business infrastructure • High number of available labour force and relatively low labour costs • Low number and level of business services • Rising share of people with university degrees • Poor cross-border cooperation between businesses of the two countries • Danube, as the most important fluvial route • High unemployment rate in the Eastern part • Trans-European corridors No. IV, V, VII • The number of bridges crossing the Danube is low, their conditions are insufficient • Poor transport accessibility in some areas (road, railway) Opportunities Threats • Further development of cross-border cooperation by common planning and institutional building • Further economic drop back of areas lagging behind • Integrated labour market • Further immigration from peripheral areas •

Decline of foreign investments • Cooperation in the field of trainings and education • Increase of unemployment • Development of Trans-European • Migration of qualified labour force abroad transport corridors 65 http://www.doksihu Annex 2: Euroregion questionnaire QUESTIONNAIRE 1. General information The name of the Euroregion: Date of foundation: Seat: Members: 2. Please, indicate on the following scale ranging from 1 to 5 in what degree your Euroregion deals with the activities hereinafter! 1: Not at all, 5: Our main activity Economic relations 1 2 3 4 5 Infrastructure 1 2 3 4 5 Culture 1 2 3 4 5 Tourism 1 2 3 4 5 Environment protection 1 2 3 4 5 Disaster recovery 1 2 3 4 5 Sport 1 2 3 4 5 Healthcare 1 2 3 4 5 Other: 1 2 3 4 5 Other: 1 2 3 4 5 66 http://www.doksihu 3. Please, indicate on the following scale ranging from 1 to 5 in what degree the listed actions cause difficulties for your Euroregion!

1: It does not cause any problem, 5: It causes serious problems Obtain financial resources through tenders 1 2 3 4 5 Obtain financial resources from the Local Governments 1 2 3 4 5 Linguistic difficulties 1 2 3 4 5 Institutional cooperation 1 2 3 4 5 4. In case you deal with activities stimulating economic cooperation, please name your most important projects (realized and planned) of that kind, and introduce them in a few words! 67 http://www.doksihu 12. List of tables and figures Table 1: Characteristics of the different types of borders 8 Table 2: The periods of INTERREG 15 Table 3: Selected indicators of the Hungarian and Slovakian economy 19 Table 4: Comparison of the Hungarian and Slovakian NUTS and LAU regions 20 Table 5: The main activities of Euroregions at the Hungarian-Slovakian border 29 Table 6: The main difficulties of Euroregions at the Hungarian-Slovakian border 33 Table 7: Supported projects of the Hungary-Slovakia-Ukraine

Neighbourhood Programme 36 Table 8: Supported projects of the Hungary-Slovakia Cross-border Cooperation Programme 38 Table 9: The tendency of trade relations between Hungary and Slovakia 42 Table10: GDP per capita in the Slovak border regions, in EUR 44 Table12: GDP per capita in the Slovak non-border regions, in EUR 44 Table 13: Comparison of GDP per capita increase in Slovakian regions 44 Table 14: GDP per capita in the Hungarian border regions, in HUF 45 Table 15: GDP per capita in the Hungarian non-border regions, in HUF 45 Table 17: Rate of unemployment in the Slovak border regions, in % 46 Table 18: Rate of unemployment in the Slovak non-border regions, in % 46 Table 19: Comparison of rate of unemployment change in Slovakian regions 46 Table 20: Rate of unemployment in the Hungarian border regions, in % 47 Table 21: Rate of unemployment in Hungarian non-border regions, in % 47 Table 22: Comparison of rate of unemployment change in Hungarian regions 47

Table 23: Net migration in the Slovak border regions, in no. of person 48 Table 24: Net migration in the Slovak non-border regions, in no. of person 48 Table 25: Comparison of rate of net migration change in Slovakian regions 48 Table 26: Net migration in the Hungarian border regions, in no. of person 49 Table 27: Net migration in the Hungarian non-border regions, in no. of person 49 Table 28: Comparison of net migration change in Hungarian regions 49 Table 28: Euroregion’s answers: Are you planning to develop into EGTC? 58 Table 29: Euroregion’s answers: What kind of advantages do you .? 58 Figure 1: The Hungarian-Slovakian border region 22 68 http://www.doksihu 13. Bibliography Books Béla, Baranyi. A határmentiség dimenziói Magyarországon (The dimensions of crossborderness in Hungary) Budapest-Pécs: Dialóg Campus, 2007 István, Mezei. A magyar-szlovák határ menti kapcsolatok esélyei (The chances of Hungarian-Slovakian cross-border relations).

Budapest-Pécs: Dialóg Campus, 2008 Vera, Pavlakovich-Kochi, Barbara J. Morehouse and Doris Wastl-Walter Challenged Borderlands: Transcending Political and Cultural Boundaries. Burlington: Ashgate, 2004. Edit Soós and Zsuzsanna Fejes. Határon átnyúló együttműködések Magyarországon (Cross-border cooperation in Hungary). Budapest: Pólyai Elemér Alapítvány, 2009 Study István, Mezei. Városok Szlovákiában és a magyar határ mentén Pécs: MTA RKK, 2008 Websites Edit, Pintér. ” A régiók megjelenése a nemzetközi kapcsolatokban – avagy az állam és régió kapcsolatának új dimenziói.” 2 November 2009 <www.szehu/etk/ konferencia/publikacio//eloadas pinter editdoc> 29 September 2009 <http://www.huskcbceu/hu/letoltes/az operativ program dokumentum > 6 October 2009 < http://ec.europaeu/regional policy/policy/history/index enhtm> 8 October 2009 < http://px-web.statisticssk/PXWebSlovak/index enhtm> 8 October 2009

<http://portal.kshhu/portal/page? pageid=37,598959& dad=portal& schema=PORTAL> 69 http://www.doksihu 10 October 2009 <http://www.nfuhu/magyarorszag szlovakia hataron atnyulo egyuttmukodes operati v program 2007 2013>. 11 October 2009 <http://www.interreghsucom/huskua/mainjsp?lang=HU&url=newsjsp&rectype=PROJECTS> 11 October 2009 < http://www.vatihu/mainphp?folderID=2064 > 11 October 2009 <http://www.vatihu/mainphp?folderID=2273> 12 October 2009 <https://www.ciagov/library/publications/the-world-factbook/indexhtml> 70