Social partners uneasy over government deals with multi-nationals

Social partners in Hungary are questioning the way the government negotiates strategic agreements with multi-national companies without due consultation. Unions and employer groups want more involvement in bargaining before agreements are finalised. The government has already signed deals with at least 20 companies including Coca Cola, Tesco and Microsoft, and would like to negotiate at least 30 more. The aim of these so-called ‘strategic agreements’ is to encourage cooperation and mutual support between the government and the multi-nationals.

Background

The Government of Hungary has been negotiating deals with large multinational companies in the manufacturing sectors. These ‘strategic agreements’ are intended to guarantee cooperation and mutual support between the Hungarian authorities and the companies involved. However, both trade unions and employer organisations have questioned the methods of consultation and bargaining employed.

Among the 40 or 50 companies targeted in the first round of agreements in 2012 were drinks giant Coca-Cola, pharmaceutical company Richter Gedeon, aluminium producer Aloca Kőfém, luxury car maker Daimler AG, software company Microsoft Hungary, retailer Tesco Global Hungary, and technology giant IBM. This was followed in 2013 by agreements with, among others, communications company Nokia Siemens, Tata Consultancy Services, consumer product manufacturer Procter & Gamble, and home appliance firm Bosch.

Strategic agreements

Hungary’s government announced in 2012 that it intended to sign strategic agreements with 40 of the country’s biggest investors, mainly those in manufacturing and knowledge-based enterprises. By the middle of 2013 it had concluded at least 20 strategic agreements, and ministers said they intended to increase that number to more than 50.

Hungarian Prime Minister Victor Orbán said the investors targeted had recognised the importance of sound bargaining with the government.

The main points of the agreements focus on:

  • the national growth plan;
  • the need for sound dialogue and bargaining between government and the company;
  • the potential expansion of the company in Hungary;
  • giving priority to orders from Hungarian suppliers;
  • cooperation in the country’s higher education system;
  • applications for research, development and innovation programmes;
  • support of the local environment as well as cultural and sporting activities;
  • the promotion of Hungary as a destination for international investment;
  • the establishment of working committees and an evaluation of cooperation between government and the companies.

Specific demands

The wording of the first agreements were very similar and general. However, during bilateral negotiations an increasing number of specific points found their way into several of the agreements.

Vehicle manufacturer Suzuki, for example, signed an agreement after receiving a guarantee of government investment in local infrastructure. The government agreed to Tesco’s demands for an end to extra taxes on hypermarkets. Energy supplier Dalkia committed itself to order only from local biomass suppliers. Car maker Audi offered traineeship programmes at its sites in return for flexibility and support when applying for EU investment resources.

When deals were first being signed by the government, all the details were made public. However, the details of some of more recent agreements have not been released, and social partners fear that this is leading to a lack of public control and accountability.

Impact of the agreements

So far, there is no way of making an exact measurement of the agreements’ impact because they have only outlined intentions and long-term plans.

The agreements have usually been signed at factory opening ceremonies, or after a company has started up a new production line or educational unit. By this stage, decisions on particular investments had already been made and were not affected by these strategic agreements. The explicit impact of the agreements on job creation appears to be low, or at least open to question.

Reaction of trade unions

The National Association of Hungarian Trade Unions (MSZOSZ) is unhappy with the government’s involvement in this type of social dialogue. The collective bargaining system in Hungary operates at company level, and these agreements appear to be circumventing that system. Unions fear that the government is disregarding the collective bargaining and negotiations systems currently in place.

Unions want a representative to be involved before the strategic agreements are signed because they fear employees’ interests are rarely represented or even mentioned in negotiations.

There are also worries that the government is signing agreements with companies which have a history of treating employees unfairly and obstructing union activities. For instance, Hankook Tire was fined in 2010 for obstructing the activities of the local trade union (HU1009011I), yet is allowed to use public resources for its investments in Hungary. Unions also say Coca-Cola Hungary has a long history of disputes with employee organisations, and runs one of the largest plants in Europe without regular consultation with unions.

Reaction of employer organisations

Employer organisations have been quicker to welcome the government’s strategic agreements. They feel the deals are likely to lead to a more investment-friendly environment. They also say companies can hugely benefit from the specific settlements of the agreements.

However, the employer organisation, the Confederation of Hungarian Employers and Industrialists (MGYOSZ), is similarly unhappy about not being involved in in negotiations and has concerns about the government liaising directly with the company management, which risks undermining the current bargaining system.

Commentary

The processing industry's contribution to Hungary's GDP lags far behind the services sector. This is partly because the processing industry is still subsidised by the state. While this remains the case, and the services sector continues to be slightly more heavily taxed than the processing sector, a balanced and quantifiable economic environment cannot be achieved.

Source: Index.hu, HVG

Zsuzsa Rindt, Solution4.org

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