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Chief burgomaster Gábor Demszky


A politician who I like as well as I does not.

I like him because…

I like him because it may be him who wants that political success more than anybody else which he is ready to work for even day after day. He does not only expect to be written about but steadily builds his well-known public image. He seems to consciously plan that among his daily programs he shall always have an action salable to the media and plan his public appearance, which two both popularize him. He does all these with those western tools which I think most of his fellow-„politicians” have no idea of.

I also like him because ha has usually perceptible purposes and strikingly huge ability to work. When Gábor Demszky was first elected to the chief burgomaster of Budapest in 1990 I did not really like the „entering” statements of this 38-year-old politician who had already a 10 year experience of politics by then, but no tools of leading. I remember that in his short speech in the Parliament about resigning his post as an MP and debuting as chief burgomaster he laid stress on the message that during his office as chief burgomaster there would be no political favoritism and none of his fellow-deputies should appeal to him if their cars got towed because of parking in a no-parking area. The most known steps of the first year fell under making order and under the resolution based on power, too. Many people called Gábor Demszky „car-stealer” at that time. As chairman of the VOSZ I invited him for a lunch sometime then (perhaps it was the first and the last time we had a talk between the two of us) and remarked that he got an unbelievable chance when he became the elected leader of one of the world’s most beautiful capitols this young. He cannot afford that only the „car-stealer” news shall remain of him to the posterity. He has to make order with determined steps to make everybody feel it but the communiqués have to be published on what he is building, inaugurating, putting into operation. I advised him to invent and carry something out what would surely get in the Budapest guides of the next 100 years, like „… this district of the city was started to shape in 1990 based on the idea of Gábor Demszky, chief burgomaster of that time”. As an example I raised the possibility of the millenarian inner city what could be built in the place of the unused Ganz plants and the ruinous parts of the district VIII. if he was ready to enter into a controversy with his fellow party member, Mihály Ráday.

Gábor Demszky could change and a year later I noticed that while the Antal-government was touching bedrock, meanwhile he surely became the number one person taking part in the television news. Although the scale of the policy he chose was under what I raised, the question of punishing the parking contravention did not come up at all (while – imperceptibly – the parking in all the streets in and around the inner city became paying). The news was always dealing with the city developing and growing wealthy.

I liked him, because in spite of the MSZP-SZDSZ coalition he entered into hard controversy with the government anytime he thought the interest of the capitol required it. He had not disowned his party, the SZDSZ, even after the fiasco on the 1998 elections, although many people could advise him that he could face the chief burgomaster election having the chance of success only if he declared his estrangement from his party which seriously lost from its position on the elections. On the 1994 election he however did not tell the electorate to vote for him and not the candidate of the bourgeois opposition just because of his party-affiliation the capitol directed by him could expect much more pecuniary assistance from the MSZP-SZDSZ government than an opposition-directed Budapest could reach. His today succession should have really learnt this attitude (strong political character) from him.

I do not like him because…

A few months ago, when my friends asked me about the chief burgomaster I usually answered „I do not really like him because his personality is not close enough to me”. I do not really have concrete problems with his actions but among his tools of goals the ratio of interest-motivation (including holding his office, achieving his objects) does not correspond with my own value judgement. In the last few months he was befallen by so unmerited attacks from so contemptible people, so for now I had tended to judge him and his actions on a larger scale. I am doing it in spite of the fact that he is far not so successful and prepared in application of the tactics of „attack is the best defense” (what he attaches great value to) as he was in his usual public actions in the above mentioned years as a politician who is sure of himself and destined for creation. Among the young politicians Gábor Demszky is one of the few to me who (though with many mistakes and often spiced with a lot of naivity) really stood up against the – barely perceptible – totalitarism of the Kádár-regime. Really because of his political opinion was he sent down from the university, where he was admitted before on the basis of his knowledge. Then he was prohibited on publishing and convicted because of his writings! I am certainly watching today’s „loud” bourgeois and national politicians who formed at most the reform wing of the KISZ or the MSZMP (depending on their age). They could publish any of their writings and they did it. This way now I think that his positive public abilities and actions significantly surpass his hardly perceptible minor mistakes coming from human flimsiness.

János Palotás


Let us have a better life! – part one


Optimism or will of action in the economy?

Introductory thoughts for my book:

In 1989 my friends and I came out with a booklet as the economic plan of the VOSZ titled „LET US NOT GET POORER, THERE IS ALSO ANOTHER ALTERNATIVE!”. As I mentioned it in the preface, there was plenty of actuality in this nearly 10 year old study even nowadays. Of course most of it has to be arranged to fit the present. Still, the viewpoint of it is something I would like to keep today. It is an opinion that consists the idea of organizing the 1996 World Fair, having built the National Theatre which would not be so new anymore, on the way of finishing the number four metro line and the M3 and M5 highways would reach our borders by now, etc.

I do not know yet what the title of my coming book will be but its aspect would like to suggest us to lead a better, substantial and more active life. Let us recognize and admit the cares but let them lead not to the arguments of the explanation of our conduct but to finding the solutions!

Here I would like present an example to show that it is possible to think differently! …. Only such kind of proposals had been made to reduce the exaggerated budgetary deficit in which the only ideas were to increase the incomes by increasing the taxation or to abate the deficit by reducing the expenses. I have never read one in which they had looked for such an extra expenditure in the consequence of which the income would significantly increase. An example could be all the countries producing a successful economical change in the twenty-five years past. In case of a hard economical starting position, they increased the expenditure on education (more detailed in the chapter on culture) exceeding the average of the well-developed world to have the economic increase yield an income surplus exceeding it. With the exception of the single ( .. and not even coming from governmental idea … ) significant reduction of the corporate tax there had been no precedent for trying to achieve the increase of the tax or other contribution income by reducing the degree of levy.

But life is much more colorful than this. It is possible even in bad situations to strive after trying to find at least the first good solution instead of looking for the less bad solutions. It is simply impossible to catch up with the one more developed or developing faster if we accept the bad situation, act cautiously because of it, respectively if we go forward slower. Being conscious of it that our real situation is worse than others’ aimed by us we must recognize and take the increased risk. But we also must go forward faster and make bolder decisions.

I am sure that also the coming months will raise numerous quandaries, debates about some new conceptions, investments, notions in economic policy or challenges to be solved. The manuscript of this book will be after explaining the certain economic interrelations considering the daily subjects of conversation the way so that finally the writings will be formed into a systematized book striving for completeness.

The golf!


About golf in general!

The world of golfers means a mystic atmosphere to many people in Hungary even today. Although this sport is played by more ran 60 million people around the world. There are 5600 courts just in Europe and close upon 150 in the neighboring Austria.

The Hungarian golf association records about 1000 golfers (not counting the foreigners). Among them there are about 150 who enter the tournaments from time to time.

Many people of the business world assert that the golf-court is the world’s biggest conference table.

The area of an average good-quality court needs so be 40-50 hectares. The experienced golfers can surmount the 18 obstacles in 4-5 hours. This period of time at one turn in a wonderful natural environment can have just beneficial results on our nervous system and physique impaired by the everyday life.


Most people do not even know that they have already played golf in their lives and it was very pleasant for them. The rules of this specific golf are partly different from the golf as competitive sport, though many people think it is a competition too.

Rules of the bedroom golf

1. Every player has to take care of his own equipment. Usually one club and two balls.

2. The game has to be agreed by the owner of the court.

3. Contrary to the open-air golf the aim is getting the club into the hole and keeping the balls out of the hole.

4. The handle of the club has to be hard for the effective game. The owner of the court has the right to check the hardness of the handle.

5. The owner of the court reserves the right to fix the length of the club for the sake of saving the safety of the hole.

6. The object of the game is making as many hits as the owner of the court needs to admit contentedly that the game is over. The neglect of this might call forth the player not to be allowed to play on this court again.

7. It is considered wrong when somebody goes straight for the hole right after arriving to the court. The experienced players usually take the time to admire the whole court, especially the well-shaped pillboxes.

8. We warn the players not to mention courts they played on before or are playing simultaneously to the owner of the current court. There are desperate court-owners who had damaged the player’s equipment on that account.

9. We encourage the players to be prepared for all contingencies and keep rain-outfit with them.

10. The players have to be sure their play is organized perfectly, especially when they play on a court first time. There are players who became indignant at finding out that they were not the only ones playing on the court they believed was private.

11. The players shall not presume that a court is always open to play on. Some players might suffer humiliation discovering that the court is temporarily under repair. The players are expected to be extremely tactical in case of this. Under such circumstances the advanced players can find alternative ways to play.

12. We suggest the players to ask permission from the owner of the court before going for the rear nine.

13. The slow playing is advisable but the players have to be prepared for speeding up – even temporarily – at the request of the owner of the court.

14. It is considered a wonderful achievement when a player (if he has time for it) can go for a hole more times during a match.

15. Only the owner of the court has the right to judge who the best player is. We suggest the players to think it twice before applying for permanent membership to a court. The owner of the court may come forward with new expectations and the rules may constitute the matter of change. Because of this many player rather like to play on various courts.


Fuel prices running amock!


It is hardly usual that June has only begun and petrol prices already changed 18 times. Naturally it more often means increase of prices, often considerable rises. Hardly had time to adjust to relative prosperity- namely forgetting about daily rises because of previously 20-30% inflation- fuel prices each day remind us about those times.

Fuel prices are getting really expensive! Dissatisfaction arises at the whole society, not especially among low income people. Declarations of famous and financially appreciated people reflect dissatisfaction, regardless that the price increase would not effect their consumption customs. Their conclusion: society’s patience is nearing its end, Generally most people find the price of fuel not payable, considering the present income conditions. That is why they have to think thoroughly over their consumption customs. For these people this situation causes an unnatural feeling, as instead of their increasing possibilities they have to despair of their habits and way of life. High income people first of all blame the proportion of price and value. On their opinion fuel doesn’t worth its price so they feel themselves swindled and used. These people are successful in all territory of life so they can not assimilate to this feeling. Usually they decide whether a product or a service worth it price and whether they are willing to pay it or not. They realised that this situation is incorrect, that they become compulsion buyers where they do net get real service. These effects each day are getting stronger due to exceptionally bad social communication.

That was also recognised by economic experts. The national oil company has tangible responsibility which was published by the media many times. It is certain that this oil company was late to recognise their duty to inform, as they are in connection with more millions of consumers. They should have known, realising the happenings of the manipulated internationals fuel market, that the usual communicational generalisations- like changing of world market price of petroleum and considerable weakening of the HUF compared to the USD- wouldn’t be enough in this case. However we could notice some changes in the last few weeks. Although they still don’t realise that main aim should be the communication of clear information to all people and not answering to political announcements. When I was a student my father told me: those people who can not formulate their deepened scientific conceptions in only a few short sentences understandable by the simple people, then they do not understand their own ideas. I really made note of this idea and it often occurs to me when I lecture at universities and in lot of forums when I noticed the lack of comprehension in the audience’s eyes.

I think MOL is in debt for some answers so far. This company working with 10 days storage so it is quite strange that during 5 months- by the expert management- how can they show the store with different average prime cost 18 times. Company has to announce something about proportion of domestic petroleum exploitation, about it’s cost, about the quantity of fuel, about proportion within all turnover, about price effects, etc..

In spite of many communicational faults I am more disturbed by the political and public candidacy. It disturbed me as a politician an economist and as a businessman. Political announcements sometimes contained open threats. It was obvious that most of the people making declarations, despite their high social positions had no comprehension of the basic principles of the democratic institutional system. I find it completely acceptable that in such a case the Competition Office makes full investigation. However it is unacceptable to make this investigation not by the binding of law but under political pressure. It sometimes misses the basis of law so it might be difficult to interpret. It is also unacceptable that leading politicians turn to the Main Prosecutor. It is surprising that important political persons lack basic legal knowledge and they do not recognise the character of their speeches (threatening, corruption). Most of them are not wicked but their professional knowledge which is essential to their position is missing to an extent which drives them to trying to save their careers in these situations, their own political responsibility with methods which are contrary to the law.

It also difficult to write forbearing professional criticism about the imaginations ‘to calm the public opinion’. MOL is an internationals company with more 10000 shareholders and this company was quoted in the Stock Exchange. Their concept about the functioning of economic companies refer to wrong knowledge as in the opinion that state as a share holder can effect the company’s price policy. Namely if the company raises prices against the law, the state may forbid this action. However in case the company maximises their revenues with this price raises -as the owner – the state could not make a decision which cause revenue losses legally, if the determination of prices has referred to the member of directory of the state. In case of conscious revenue loss to the company the named member caused intentional loss to the company and to the other owners, so he bears material and criminal responsibility and he is responsible with all his private wealth . In that case the other owners of MOL can initiate the exclusion of the state member.

It would be an edifying procedure in the field of our law development if somebody from the MOL ’s shareholders call upon the Hungarian state to pay compensation to the owner partners. It would easily be proved that state caused the fall of share’s value as he was the illegal speaker. Discussion of the financial minister with the leaders of MOL has caused sensible losses of exchange. Financial minister’s notion was: form prices in that way as the state’s representative can modify it. The same losses of exchange were caused by these suppositions: introduce price of the authorities, introduce retardationally the rising prime costs, and introduce untimely conditions which may decrease the costs, and get property to reach significant receipt.

What can we do if MOL ’s decisions are doubtful, but we know there Is something wrong in connection with the fuel? I think we will find the solution after the elimination of political elements. If I remember the so-called taxi demonstration – this was not a simple case. Government parties got angry with me when I examined the facts and published them. These data show: the reason for the rising oil prices is only 50% because the change of oil prices the other 50% is the budget’s tax revenue rising which was drew by the rising prices. We use the facts and that way we find the solution. To what degree to obtain fuel was more expensive in was payable by those people who used it. Budget had to be satisfy by the planned tax revenues.

Today also this solution would be right! With objective analysis of this situation we could find the acceptable proposals and reserves. Fiscal tax is fixed today so it is not the tax category where we may find the tax revenue’s surplus. VAT, customs and dues have percentile degrees for the getting into cost. In this field the level of deprival is above the plan. In some cases it is accumulated as after the higher getting price the payable customs and dues VAT make further increasing to customs and dues. We can clear up the planned decrease of consumption the higher tax revenue’s surplus which belong to unit fuel whether decrease the all tax revenue’s mass if it happens in what quantity. However this is only mathematics where all data is known. If we look at the reality the numbers could be presented. As follows we could see that whether the real reserves are included in the tax revenue’s surplus. In that case we have to avoid all approaches which are tendentiously misleading. Hear the financial minister’s next announcement was very bad: VAT revenue now is more in the case of fuel but people’s buying power is a fixed sum, so if they buy more fuel, they can not spend money on other product groups so there will be the VAT shortage at the same volume.

Also MOL should participate at the same investigation! MOL’s price forming could sign reserve, if regulation of the price gap has percentile form partly or completely, where the surplus causes profit if he had bought it more expensive because in that case the projection base is higher.

Important to mention: both MOL and state realise their more revenue absolutely legally, the losers are the residents. That is why state will not “obliged” to deregulation of tax deprival. If the state resident’s losses makes stronger because of the fuel price rises and the changes of exchange rate, in addition to rising their own sources –make appears policy badly. At the same way MOL can be forced not obtaining profit surplus of the difficult situation of fuel’s users only by the public. This is the plan work not like the state threatening and instead of this is illegal.

Finally solve this problem the comparative analysis is unavoidable, which has to contain the combination of fuel price at internationals respect and this will discover frames of necessary legal changes. In that way we can clear up the real price gaps and also the gap of competitors. If the price margin is lower than competitor’s not worth wait for the decrease to the debit of price gap’s revenues because in that way the company’s sources will be deprived and he will be incompetitive. If the price margin is higher so that is a possible way. We may also examine obtaining of the company: we get to know whether company buy too expensive raw materials or the contrary: they have excellent obtaining policy. In the latter case we can allow him this surplus helping his better than average development. Also worth looking through the proportion and degree of state deprival. If the state used the under averaged deprival, so we can sure that not the tax decrease the necessary step. In the contrary case Is not only illegal, but also immoral to blame others and use the “strength policy”!

The way is long, but we could pass it …………..!

08.06.2000. Budapest … János Palotás


Széchenyi’s message



It is our historians’ decennial debate which of the two notabilities of the 19th century Hungarian nation was the greater. Count István Széchenyi or Lajos Kossuth? I learnt it from my father when I was a child that the result of such a comparison could be just a wrong conclusion, because after the comparison one of them would surely succumb, become a loser. And this is very unjust because we could and should declare it proudly that at this time Hungary had two men whose names could be found in the Hungarian, European and world history.The Hungarian aristocrat, count István Széchenyi had got to know and understand the operation of the well-developed bourgeois states during his travels. His exemplary unselfishness, desire to act followed by real acts was really like a message for centuries and even now. But it is important to understand his thoughts, to learn from them but not to give them contents which were not characteristic of one of the greatest Hungarians.

Széchenyi knew our past but his life, his acts proved that he looked forward by his country-building thoughts and he wanted to do for the future. Although his aristocratic descent would have let him day-dream about the glory of the past of the nobility, he expressed his ideas for the sake of introducing the civil values in his writings (Credit, World, Stadium). The will to build, which is usually uncommon in the nobiliary lifestyle, had results like the Academy of Sciences, the Danubian steamship, the dockyard in Óbuda, the building of the Chain bridge, the control of the Danube, the flood prevention of the Tisza etc. Széchenyi imagined it by the leadership of the Hungarian aristocrats that the country would adopt the civil values indispensable for progress with a peaceful change. In his imagination he saw the first notabilities of the future Hungarian bourgeoisie in the nobility with new way of thinking. Széchenyi felt the contradiction between the ancestral nobiliary and the modern civil values too. but he could imagine the peaceful change, the continuity of power only if the nobility’s way of thinking changed radically. It was just the judgement of this subject what made him turn against Lajos Kossuth whose ideas he deemed revolutionary incitement.

I cannot tell where the present civil democracies will develop in the coming centuries. But to quote Széchenyi’s thoughts I am sure that we shall not fetch our future-building thoughts from the past century.

The real message of Széchenyi’s life is we have to build and do for the sake of our future! Therefore I believe that our acts based on growth, building and success-orientation are indispensable conditions of our belonging to the well-developed world. I had been criticizing our politicians’ half-heartedness and our restrictive economic policy for decades. I believe that we would have needed the World Fair in 1996. I could not understand it as we could not build our National Theatre for decades which was looked forward by the representatives of culture so much. The complete loss of value of the retiring pensions deprived the economic participants of one of the most important purchasing power, while the state as customer radically reduced its investments too. I took the cancellation of building the theatre and then the retirement from the subway-construction for the failure of this government. But now I am glad that something had changed in the economic conceptions of the government. In spite or maybe just because of the Yugoslavian war, the record damages caused by inland waters and flood in the last two years it had to be recognized that we could afford these expenses ourselves only if, in the meantime, an economy getting stronger produced its sources. Therefore in spite of all its mistakes I received the new home-financing decisions, the announced decision about highway-building and the new-opinioned minimum wages expected from early next year with good feelings. Because economy needs market too. The real economic increase cannot be autotelic. No flats can be built which has no solvent demand.

But it is important that these good basic ideas shall be announced and realized really in the object of the development of the society, on the basis of excellent professional preparedness, included in the social environment and not alienated from it. It is important that following a new home-financing system foreshadowed as grandiose its prescribed expenditure should become available really in keeping with the expected, hereby really establishing the progress of the building companies stirred up by these news. It would be hard to overvalue the danger, damage which a disappointment following an increased expectation can (could) cause if the announced and supported program turned out to be only “political propaganda”. It is not the really big problem if less people meet the expected conditions than expected in advance. But it is important to react fast, to widen the circle of potentialities as long as the increase of mood and possibility to build expected for the program reaches the planned level.

I expect a lot of the economy-increasing effect of building highways, of the general upgrading of the numerous regions of the country. But this program should be relieved of the parts with the suspicion of corruption, of its monopolization by the government etc. They have to make it perceptible for the people that it is us who can build the highways for our money and we will use it and feel its numerous advantages. But now it rather seems that the highways will be built by the government for our money and first of all for the economic participants close to the government. After the official statement about building the highways it was enough to see the soaring of the building companies of the stock exchange, the nearly double value of their papers within a few days. Following the causeless governmental communication – without querying the realization of the program – the objective valuation of the stock exchange reduced the judgement of the profitability of this department with about thirty percents.

I expect a lot of the new minimum wage having effect on the whole Hungarian wage system. It will increase the level of the mandatory minimum wage about one third. Maybe unusually of the president of an alliance of employers but I was trying to convince the actual governments of its necessity for more than ten years. The marketability of economic outputs, namely the realizable being of the products for the solvent customers as final aim, is a natural requirement. It is important to initiate the proportionate reduction of the taxation and social insurance levies connected to the minimum wage simultaneously with the drastic statutory increase of the minimum wage. Because without it the positive effect of the rationalization of wage-proportions would not dominate, but the program would produce an effect resulting in the restriction of economic work coming from the increase of levies.

The program announced by the Ministry of Economic Affairs is based on the following main components:

In 2001-2002 (Billion Ft)

Highway program – 120 (B Ft)

Innovative program – 45 (B Ft)

Housing program – 200 (B Ft)

Tourism-developing program – 16 (B Ft)

Subcontractor program – 18 (B Ft)

Small and middle enterprise development program – 25 (B Ft)

Regional economy building program – 10 (B Ft)

Total amount expended on the program – 434 (B Ft)

Also the he above-written thoughts can show that I agree with the main components of the program. I even find the “yields” written in the plan of the program and expected of building the highways significantly undervalued. And even its numerous probable proceeds are not even mentioned in the plan. I find the judgement of the potentialities of the development of tourism and regional economy mistaken in its proportions, extremely low. And I find the thoughts raised on small and middle enterprises mainly “phrase”-like.

According to the most experts’ concordant opinion the development potentialities already existing in tourism, the payback period of which is only one or two years, can even double their incomes within the same period of time.

I have a feeling of want inside the program, also in respect of the perception and necessity of the economy-energizing effect of education. All the countries (The Netherlands, Finland, Chile, Singapore, Canada etc.) overtaking and claiming economic rise in the past few decades built their overtaking on an announced then consistently executed economic program. In the program they all pointed out those 5-6 fields where they would concentrate their sources, where they would give priority to their competitive edge in innovation, subvention sources and even in the fiscal system. They recognized that it was impossible to make up for backwardness and get in the forefront in all fields. The certain countries pointed out different fields knowing their own traditions and abilities. For example Finland concentrated on the wood industry, glass industry, industrial design, environment protection technologies and equipment. The odd thing about these programs is that there was only one field included in the programs of all the countries executing successful economic change. It was the use of extra sources expended on education. All of these countries were spending half as much again or twice as much as the proportion consequent upon their own economic strength for years.

Also on the basis of the above-written I find it a good and even indispensable thought if the government sums its deeds, aims up in a program which they can mention even with some pride, where the aims can urge all of us achieve them.

Then why do I – together with so many – have a bad feeling when the government describes its own program by Széchenyi’s name, as “Széchenyi plan”, in their speeches? Perhaps because the social communication of nor this program really succeeded when announcing it. Because Széchenyi belongs to among those historical figures who enjoy the respect, esteem of the whole society. But today’s Hungarian political public life – and in the respect of the given judgement it does not matter whose mistake it is – definitely misses common consent, while we can daily see the will to monopolize the certain values. Therefore the opposition does not really want to cede the name Széchenyi looking for social consensus to the government disclaiming any privity with the opposition or to its program. Maybe also because it was not Széchenyi himself who compared himself with the great Hungarians of the past, Reigning Prince Géza, King István or our King Mátyás, but the posterity ranged him and his deeds among the most outstanding Hungarians. Maybe because it is usual to name rather schools, theaters, museums, libraries, maybe place-names after our historical figures. It would sound strange to hear of a space research program named after our King István, would not?

I would not like to deputize for a real marketing expert but it is a part of our view of the future, progress that the politicians make political decisions, the economic experts form the conditions of economy within its scope and the announcement of the programs, including their names too, has to be left to experts qualified for it. Thew names “Hungary of the third millennium” or “Bridge to the third millennium”, “Hungary for the progress of Europe”, “To Europe with a new Hungary” would more suit an economic program building the future.

I can surely assert that I would (will) be happy to be able to tell my grandchildren a few decades later that the years following the change of regime gave such Hungarian people to the country, to our continent like Széchenyi or Kossuth of the 19th century. But I would like it to be then and me or many others calling today’s figures the Széchenyi of the 20th century!

April 18, 2000 János Palotás



The oil scandal being oiled?!


I read, watch and listen to the news reports about the oil scandal every day. Generally while watching those making statements about the issue, I have doubts about whether they know what they are talking about. The articles I read, the interviews I heard encouraged me to comment on it and communicate my thoughts. However, I retreated. I retreated because there are some topics (e.g. drugs, child-abuse, organized crime, war) that I keep away from me and my surroundings to such an extent as it is possible. As a politician, I talked about these matters only when I could not evade it. The first time I met incidents of organized crime in the sphere of legal economy where murder, threat of murder became part of business was in relation to the billion forints in the oil business.In the beginning of the 1990´s I was talking once with one of my friends, György Markos, who is an outspoken opposer of these sins, about this topic in the corridor of the Parliament. The other day, he reminded me of my point of view of that time, that is the party and government programmes should not include fine sentences about the issue but silently but firmly steps must be taken against it and provide the criminal investigation authorities with the appropriate means to take action against it. Talk is harmful even if it is followed by real action because people can be too frightened, can loose their sense of security, while criminals can prepare and become more violent and aggresive. Not to mention the case when real action fails to be taken after terrifying statements, and the police budget falls, more than ten-year-old police-cars have to stand because of lack of petrol, the best trained employees of the police force are constrained to leave their career mostly as a result of financial insecurity, lack of social welfare as well as irresponsible political deals.

In September 1999, on my own web site as an economist I could not help commenting on news articles claiming that, according to calculations of experts (!) the so-called oil-smuggling caused more than ten thousand billion forint deficit in tax revenues……

Where could well-prepared economic journalists at national dailies, experts at ecomic journals, news analysts of national television channels have been at that time? Keeping the sanctity of news in mind nobody realized that the oil the tax of which amounted to ten thousand billion forints is equivalent to Hungary´s oil consumption for 30-50 years. Where are those thousands of people today who started with a wealth of 5-10 billion forints and, I suppose, it has grown significantly since then. Our real losses, which are thought to amount to several hundreds billion forints, were enormous, which would have been enough to cover the expenses of our so much desired sixhundred kilometer long motorway.

In those days, I was also thinking about the question a lot who has an interest in making the public fool, and creating a shocking atmosphere. It is really impossible to calculate how much damage and when was it done to the state budget…… No! It is obviously not true. Applying mathematical, and statistical calculation models at academic level, the real value of the oil fraud and the loss of the state budget could be any time, even today, determined with an accuracy of 5 per cent. The data (indicators of quantity of oil consumption through legal channels today, in 1980 and since then year by year, the population´s calculated need in the same years, etc.) needed for the calculations are still available. After one or two day´s routine work of some people, they would be accessible and we would- at least in this field- see clearly………

If it is true, why do not we calculate? Why do political parties argue and keep pointing to each other? Why do not they step towards revealing obscure situation?

It is not doubted by anyone today that the expansion of oil smuggling to such a degree was made possible by a deficiency of law! So why do not we hear about such economic crimes from the developed countries? The answer is not difficult, and we do not even have an excuse because the answer has no relation to the level of development of Hungary. As an MP, a politician, a specialist in economy I suggested several times that bills concerning economy have an unforgivable lack of background calculations, study of efficiency almost in every case or of conducting them at a low professional level. The essence of the bills forced through by the governments in power were of political nature and getting them through Parliament without any change was a question of prestige.

In this particular case, it would have happened in a Western-European country in the following way: on the income side of budget law, the data about the realization of oil products and about tax-revenues calculated from economic figures with 2-3 per cent accuracy from month to month are associated with planned income and they constantly follow its actual changes. According to this, the first month would become visible when instead of statistically reasonable some per cent income deficiency, they would observe at least 10 per cent difference. After percieveing it, the reason of the difference could be found within a few days. It can be some acceptible explanation such as longer or colder winter than expected or significant change of prices in one of the significant purchase markets, etc. However, it can be immediately noticed that, unexpectedly, with the change of law it became possible to commit economic offences, to which they must react by issuing an immediate, temporary decree and with the modification of the law precluding the possibility of economic abuses.

The following deduction sounds fine but it is not correct: if it is so simple, the absence of immediate perception and then measures could have only happened in such a way…… ½the criminals in the oil business were looking for contacts with important people of political parties, ten-twenty per cent of MPs, then they bribed them to leave some back doors for them? Thus sixty per cent of the oil smuggling profit was pocketed not by criminals but by politicians!½ …The answer would be too simple and too obvious!

The real answer is not less sad, but not less frightening: this is not the way how the public administration and political decisions work. Real calculations with the intention of such comparison and in such devision at that time were not, and are not even today made for the Hungarian budget. The existing calculations are (were) continually rewritten for some political reasons. Let´s remember when the draft of the budget had too much deficiency in some fields, in the government proposition the expected tax and contribution revenues were increased by ten billion forints in such a way that the necessary sums were added to successful surplus collection of tax authorities (APEH and TB) arrears, to the instructions of decreasing of arrears. Monitoring the changes of the expected income from month to month, even in case of known calculations, then when finding differences over a permissible limit immediately reporting it, then administratively interfering in it with the requirement of revealing the reason still does not work. In connection with the oil scandal, we have every reason to think of corruption owing to the exceptionally high profit if during the last years the state´s usual quick and proper reaction had failed only in the oil case when a law contradiction became noticeable. In the reality of the last ten years, politics did not reacted this way. The government in power never took responsibility for significant budget deficiency gained as a consequency of their faulty and unprofessional proposition. We should remember when some companies used television and radio adverts to draw public attention to the legal possibility for investors of claiming tax back without investing any money with their help. The expert answer would have been to modify the law immediately after the first advertisement even if the proper interpretation of the law was a controversial issue among those concerned. Unfortunately the usual reaction in Hungary was the following: the head of the Hungarian tax authority (APEH) ½threatened½ the population in the media with serious supervision and fine if they do not accept the APEH interpretation. Perceived later that people are not so easily frightened and investment companies faced APEH troubling and kept offering their services to tax-payers, APEH sent an ½invitation½ to everybody asserting tax allowance in their tax returns. During these interviews, the tax authority offered and threatened tax-payers to ½correct½ their tax returns ½voluntarily½ without any sanctions withdrawing the claim for tax-allowance otherwise they can expect the obligation to pay the maximum fine and default interest. Even under these circumstances tens of thousands of people dared to start the lawsuit with the state and its institutions.

In the democratic legal system, it is unprecedented that the state carries on a lawsiut with thousands of its citizens and at the end it loses! Because of tax allowances against the original intention of the law and claimed without actual investments, the budget suffered a loss of more than ten billion forints while being engaged in legal proceedings for years with thousands of citizens. In fact, the state ignored all democratic legal principles thus ½encouraging½ other thousands not to dare to make use of their rights! Also in this case, the one sentence modification of the law was accomplished – instead of the necessary two weeks – in more than a year! One could hardly think of thousands of citizens´ bribing 20-30 per cent of MPs in order to be slow and to make unjustified tax allowance possible.

Consequently, I am convinced that 10-20 per cent of the Hungarian political élite was not ½bought½. The missing measures, the opportunity of long-lasting economic offences causing hundred billion forint damage were the consequence of the functional error of our new democratic state which still exists. This is, of course, not an excuse for neither the Antall nor the Boross and/or Horn Cabinet and their ministers.

After all, it is not all the same, if we talk about the ministers lack of professional and political preparedness, lack of maturity of leadership, sometimes unsuitability or about the conscious and large-scale cooperation and liaison between responsible political élite and organised crime!

What shall we do then with Zsolt Nógrádi, the crown witness´s testimony, with László Pallag´s evidence? ….In my view, we have to deal with them because while Zsolt Nógrádi´s testimony collected rumours during the last eight years concerning the issue, we can have a better understanding of the every-day operation of today´s criminal groups.

Thus, for example it is almost certain that it is a usual paractice of some members of criminal groups to rearrange the profit for themselves in such a way that they decrease the divisible profit reasoning ½we had to give it to some influential politicians, police superintendents½, etc. so that they could continue their activity without any problems. The better the name sounds, the bigger sum they can retain with this. For ½broaching½ the profit from billions of forints from the oil business, they needed rather well-known names. Although Sándor Pintér is not a plain personality, I am sure that this part of Zsolt Nógrádi´s testimony has nothing to do with truth. Iván Szabó and Iván Petõ´s personality is incompatible with corruption by organized crime. Iván Szabó, as Minister of Finince has surely responsibility due to his not recognized obligation to take steps but Nógrádi´s statement is obviously false and manipulated.

Certainly, I cannot claim that no one of the politicians was directly involved in the oil – smuggling case. But I argue that the part of the crown witness´s testimony which tries to seem authentic by mentioning particular names is unsuitable for being an accurate source of information.

The further part of the testimony deserving attention is about gaining market. As a former MP, politician, head of the National Association of Entrpreneurs, economist, and top businessman knowing well the characteristic features and famous political figures of the period, I can even state that it was common to gain market under pressure of the government. In practice it means that to state companies – under control of the state implying the state´s right to appoint the executive of the firm – a source of purchase, a subcontractor is offered on the phone and perhaps a suggestion is made where, when and mainly for how much the given company should advertise and what they should sponsore. I still not accept the court´s proof of the contrary that is Péter Boross would have obtained market for the smuggled oil and mainly the statement that he did it consciously and as a member of an organized gang of criminals.Therefore, according to my values and notion of constitutionality, mentioning his name, on the basis of a testimony obviously created to mislead the public is unacceptible even if Péter Boross´s personality is foreign to my nature.

It is not difficult to recognise the inappropriateness of Nógrádi´s testimony as an evidence if the reader really wants to and does not suffer from amnesia, as well as the fact that the parts of the evidence was put together consciously by several people giving ideas. A little textual analysis reveals that the group preparing the witness giving evidence consisted of professionally untrained amateurs as well as him. Besides these contradictions, further ones also refer to this. Those living through the given period must know that in the preparation of a bill, besides the government and the proposer ministry neither the MPs of the governing party nor the opposition could take part. In the Parliament, the MPs of the governing party and those of the opposition received the bill proposed by the government at the same time and they did not have any influence on it, and nor do they now. I think, the Hungarian Parliament´s operation is faulty as the MPs of government coalition are only expected to support the cabinet propositions while the MPs of the oppositon are obliged to vote against them even if they agree. Thus, there would have been no point in bribing 20 per cent of MPs.

In the testimony, it is not difficult to see occasionally the conscious distortion of the true and known facts and another time the confusion as a result of ignorance. The witness´s words reveal that neither him nor his companions ½giving ideas½ see the difference between the illegal activity of oil smugglers and for example the scandalous KORDAX case. The previous set up a firm with fictitious identity then collected several hundred million or occasionally one or two billion forints at extremely high interest from the underworld. From this they imported oil, usually as fuel, and during the postponed duty payment period they ½processed½ it, sold it and immediately liquidated themselves. So when customs officials wanted to take measures after the deadline of tax payment, there was no firm, no bank account, no oil, etc any more. Of course, neither the taxes were paid. On the other hand, KORDAX directed by István Kelemen was a registered enterprise which operated for several years, consisted of well-known people, supported culture and sport and it owned a significant property and real estate of great value. The company employing well-trained specialists was convinced that they found a legal method in the sea of law, where part of extremely high tax on the import of oil products does not have to be paid by them thus making it possible for them to give significant discount to their consumers and also to gain high extra-profit. Respecting the court´s final judgement, my interpretation of law is closer to the viewpoint of the company.

The state´s reaction, described in the paragraph about the investment tax-allowance, worked in the same way. The legal way found by the firm became known for the authorities, as the rival companies, which started to lose their markets rapidly, instantly protested against KORDAX which supplied at a lower price and was known to the public. The modification of the law was one or two sentences but it was carried out in more than two years after the revealed discrepancy. At the time of the disclosed controversial law, the debate about customs duty and tax between the company and the state would have cost some ten million forints. The administration failed to modify the law, thus the company trusting in his own truth boldly became involved in legal proceedings and continued its activity. In consequence of this, the budget deficiency during these years added up to more than ten billion forints while the mere activity caused great tensions on the market. As the customs authorities could not modify the law, they only had the opportunity to ½extinguish the fire½ that is they tried to defend their own truth at court.

Generally, at court only one side can be right, moreover it is not certain that at the end the absolute truth will be pronounced. In a constitutional state, the characters of a civil procedure are not criminals even if the court does not agree with their point of view. Therefore, in Nógrádi´s testimony, treating the KORDAX case and fictitious firms´ tax and duty fraud alike would deserve attention, showing that the ½composers½of the testimony were not prepared to distinguish totally different cases from each other.

It was interesting and worth listening to the claims of the head of the Customs and Excise Tax Agency (VPOP), Mihály Arnold whom I respect for his personality and professional knowledge. He really lived through these years and fought for state income. In the KORDAX case, he also saw that the company chose an interpretation of law on the basis of which tax was not paid in a significant tax category which could not be the aim of legislation. When I was the head of the National Union of Entrepreneurs (VOSZ) and I was talking to him about this matter, he did not talk about criminals, although both of us considered oil smugglers to be among them.

Steps were taken by the head of VPOP against the deferred duty payment on his own authority, while I as the head of VOSZ criticized the general prohibition because it affected entrepreneurs and groups of products which operated for years as registered firms and were functioning practically. To moderate the loss, Mihály Arnold could only prohibit certain steps and start legal proceedings. Thus he said that the budget would have had much less loss if he and his warnings had been supported by politics, which in the present case would have meant a quick legal reaction. Instead of political help, thoroughly considered legislation, and if it is necessary modification of the law, he had to face constant public criticism ½why dos not he take measures against those evading the law more effectively½.

Intertwined interests within the police, abuses of authority unrevealed for a long time today rather refer to some policemen´s involvement in the oil case. I agree and I also think that there were customs officers and other officials involved, as at all bodies which have occasionally tens of thousands of members, so the existence of people liable to commit crime can never be excluded. However, it is not all the same, whether we present the occasionally revealed relationships with their real content or we adjust them to a fiction to back them up. I learnt the following from my father: if you really want to understand the events of a past period, ½you have to wear glasses of the given age½.

Through these glasses the police, when it had to be careful about his actions so that it could evade being thought as serving the defeated dictatorship, can be better seen. When the state provided them with less ever financial sources and also emphasized wrongly that the police force should look for supporters from well-to-do citizens and entrepreneurs. This financial assistance was not only needed for the accelerated developing of the police but for maintaining the essential operation (keeping or may be extending the staff, purchasing cars, buying fuel, computers, means of communication, establishing and maintaining police stations, etc). So the police had to look for successful enterprises which were able to support it. However, successful enterprises were not all booming because they excelled in benefiting from economic opportunities. The success of most of them can be explained by tax-evasion, corrupt state orders, privatization offences. The aspect of time should not be forgotten. An enterprise working legally in the surroundings of the police is successful and lawful until organs (e.g. tax authority) whose duty is to supervise participants of the economy finds something illegal. It would not be, or would not have been, a serious expectation to examine companies intending to support police foundations previuosly and in full scale in order to prove their ½innocence½. It would also have seemed strange, or would seem even today if the police had investigated its supporters openly or with secret means before accepting their contributions.

Without this it can never be excluded that it sometimes turns out about one or two previous patrons that they had an interest in a closer relationship with the police. The risk of the latter can b lessen if the police establishes closer contacts than usual with companies which have been known and acknowledged characters for decades in the given region but in the beginning of the 1990s enterprises like this could not exist. It is a human and not faulty consequence that they visit those from whom they accepted indispensable help for their work only in a very justified case on the basis of some suspicion. The difficult situation of the police, being in need of support undeservedly, and the fact that every flourishing enterprise appeared as new in these years multiplied the risk that many of the supporters hoped to buy their own protection for illegal activity with the assistance of the police. Today, it seems easy to ask former chiefs of police how later collapsed entrepreneurs could maintain such a good relationship with the police. It is easy to ask this question and it can even be effective and delusive in the media but it is also both demagogic and unjust.

With this reasoning I only aimed at seeing clearly and at what we should pay attention to in the future. Since it is not good if we swing to the other extreme. Now, an honest cheif of police does not dare to accept support with a good feeling which was offered with good intention and which was so important for him. It is also true on the contrary. I have also been hindered from supporting the police by the possibility of my intention´s being misunderstood. Moerover, finally I can be an innocent tool of a skirmish for positions within the police.

The above mentioned, of course, does not give us exemption in evey case. Every event in doubt must be examined objectively and the emphasis here is on objectivity. It is important though whether tardiness of police action came to light when the procedure against a formerly generous entrepreneur started with difficulty or the already obvious crime was not disclosed due to supports. Possibly, some chief of police ordered to stop the investigation because of the misunderstood obligation. Not to mention the cases when one or more policemen or chiefs were actively involved in some criminal act then they became beneficiaries of it.

I am convinced that conscious police presence in the oil smuggling scandal was at much lower level than it is in the present atmosphere of public life. Nevertheless, the previous statements of police chiefs and employees of the Ministry of the Interior arose antipathy in me. They claimed that all oil matters were looked over again and found that no organ of the police or policemen helped oil criminals in any of the cases and none can be accused for examination carried out not careful enough or without their knowledge. Owing to the great number, the great volume of oil smuggling lasting for years one can be sure that several policemen, customs officers, politicians, officials of the state, tax controllers, bribable large-scale consumers, hundreds of consumers (buyers) took part in the oil fraud in such a way that they knew or suspected the illegality of actions around them. It is in society´s interest to get to know mainly the conscious perpetrators of crime and/or those helping them and to specify their identity among the chiefs of state authority.

Although my article became rather lengthy, it can strike the eye of a careful reader that I did not touch upon an important question or just indirectly. I am also aware of it. I am aware of it because for me it is proved that a significant part of the events of oil case is already controlled and manipulated. I am convinced that the appearance of the case, the media coverage of excesses committed by some police chiefs happened spontaneously. Several characters of the issue, including some of the determining persons – here I think of Independent Small holders László Pallag -, are not active participants of the manipulated happenings lately.

In my opinion, however, Zsolt Nógrádi is an interested participant of the manipulation but I do not know who does it and for what reason. I do not even want to guess about many of the possible versions (political aims, personal ambitions in state bureaus, excitation of news in the media, hampering finding out the truth in an organized way, etc) because it would be unworthy of my writings. So I decided not to go further to the heart of the matter.

However, I am sure that the happenings of the previous years can also be cleared of unreliable details as the current events. If we do it, both past and present can be revealed. If it fails, the only reason for this will be the following: those making decisions, for some reason, do not have an interest in seeing the situation clearly and too many people and in a foolish way shuffle the question of oil-smuggling as a trump card in their own presumed interest in order to achieve their own aims.

Finally, I heard an interesting reasoning in one of the most popular TV channels the other day. The presenter, highly appreciated by me for his well-preparedness, argued in his question to one of the accused and prominent politicians whether there is any sense in dealing with the oil scandal when the participants cannot be punished any more as their criminal acts have lapsed. According to the politician, it can not be an obstacle for us if we want to learn who we are surrounded by in our social surroundings. Lapse of crime precludes only the possibility of punishment. This sentence attracted my attention only because it seems to me that there is a conscious influence on public opinion in this field, as well. It would not be good if authoritative people assisted it without their intentions. Usually, lapse of crime is five years and it is less only in the case of the slightest criminal acts. We could determine the time of lapse only if we knew the committed crimes as the time of lapse depends on the nature of the crime. In fact, the time of lapse starts from the date of the last criminal act and the last consignment of smuggled oil is not five years old!

Accordingly, one can still investigate, find out the truth, everything one needs is will! ……is there will?

2 August, 2000 János Palotás

Five years, six hundred kilometer new highways!


It has become a first-page piece of news that, according to the past week decision of the government, six hundred kilometers of new highways should be built in Hungary within five years. The first critical remarks could be heard almost at the same time as this piece of news too. They drew up mainly the way of the decision of the government, the misgivings deduced from the way of the decision. What was really important to me was that the criticisms did not touch upon that governmental will according to which the government wanted to build more highways in Hungary within the next five years than ever made till now.

I expatiated the next thought first in my general writings on economic policy published in the early nineties then before the 1994 parliamentary elections. The economic policy environment did not mean it to the state (government) that they did not have means to further the increase of the economical processes. I mentioned the necessity of making the flat-building more lively by indirect means, or else that, as a direct system of means, significantly speeding up the building of highways could cause such an economical increase where the state contribution was definitely desirable. Also the economical steps of the present coalition have been criticized in many of my publications. But in consideration of the whole I must say that the level of the economical decision-making inside the governmental work is essentially acceptable than the manifestations of the coalition government in social policy. I consider the real decrease of the level of the social insurance rate, the ideas of privatizing the significant areas of the health service, the new financing program of flat-building and finally the presently announced highway-building program as significant decisions of right direction. I do not think that it is only accidental. It is rather the consequence of that the “politician” people of the government coalition parties were pretty far from the economical professions in the respects of both their special qualifications and earlier paths of life. This way they did not expect to be and were not commissioned in these fields in the state administration. This way at the economic portfolios assignments could be given to people though undertaking political loyalty but having professional paths of life. For example, in the respect of professional preparedness, it would be really hard to compare the Minister of Youth and Sports striving for the late remedy of diploma with Minister of Finances, Zsigmond Járai. Or as well with the former and present Ministers of Economic Affairs, Attila Csikán and György Matolcsi.

It might be an acceptable thought that the government led by the FIDESZ tries to achieve a more significant, more perceptible economical development by bolder steps. It could offset the very unstable being of their social acceptance. Beside a controlled inflation, an economical increase stronger than expected and the citizens’ enrichment might make it possible for the criticisms of the policy of the government (made for the sake of keeping power and leaving the democratic principles and often also laws out of consideration) to get less stress.

In the case of this gigantic state investment I consider the probable increase of corruption as a real danger too. But I do not think it is the right argument against the investment. It was just the FIDESZ I criticized in connection with the 1996 world fair. Because they stressed “the possibility of botching, the corruption risks, the never recovering expenses (which endangered the balance of the budget) of this gigantic investment which was beyond the power of the country” as main argument against the world fair. True that such an economical program includes all these dangers. But on the other hand, only such programs can cause such perceptible economic increase, which is able to make the competitive edge of the Hungarian economy, and the living standards of the population overtake the well-developed European region. So the task is not keeping these programs back referring to the risks of failure but striving for becoming richer of successes and not losses in the course of realization. It must be pointed to during the project that in its realization corruption strengthened, perhaps the building of the highways was realized more expensively and/or in weaker quality than it would be possible, reasonable. This control is definitely the duty of the public and the opposition.

But in the course of the critical arguments the professional authenticity and the establishment of the used arguments are very important. I am convinced that those statements were not apt which stressed it as the mistake of the announced program that the investment costs of the construction planned within five years instead of ten years would grow because of the shorter-time making. Or which qualified the five-year period unrealizable deduced from the presently available capacity of building highways. The volume of the intended investment makes the accomplishment, development of the necessary and perhaps still missing technological chains recoverable. There are no instruments, basic materials etc. in connection with building highways, the obtaining of which would mean any difficulty. But the duplication of the volume of the yearly investment makes the participation in making more attractive. This way the significant decrease of the offer price is definitely to be expected and expectable. The better employment, shorter payback period of the technology needed for the execution, its expenses, which can be spread more widely, all have an effect of cost reduction. The above-listed things result in the deducible restraint of the direct costs of the investment. It is strengthened also by the fact that in consequence of the faster take over of the infrastructure developments giving point to the investment also its effect of generating general and positive economic increase arises years earlier.

This place I would like just to refer to it that significant revaluation of lands in the 20-30 km are by the built highways can be expected. At the same time the chance of regions approachable on highways for so-called “crop” industrial and commercial investments is multiplied. Meanwhile the volume of the investment itself causes increase in economy expressible by percentage points for five years. And as far the Hungarian macroeconomic indexes heeded so much by the foreigners, they can, by being better than average, cause a very significant improvement in the judgement of the whole Hungarian economy. They can make the Hungarian investments more attractive also generally. The lasting job creating being of the investment is not negligible, which can mean even several ten thousand jobs in the very wide range of professions and definitely in Hungary.

Nor at settling the real costs of the investment we can count with only its expenses which is some six hundred billion forints according to the plans. A very significant part – it can be even 30-50 percents – of the six hundred billion investment cost appears as state income almost at the same time the expenses incur. Just as an example let us think of the income taxes, social insurance and health contribution following the monthly wages of the employees working on the constructions, the customs revenues if import materials, etc.

In my opinion there was not a professional preparatory work easy to survey and showing ordinary care before the decision of the government. Or if there was then concealing it till now could hardly be reasoned by professional arguments. It is remarkable too that the way of announcement offers a larger scope for possible corruption than reasonable. The possibly not happening open tender significantly restricts the foreign financial resources and can give more chance for economic abuses than the tender systems.

But all these show the necessity and reasonableness of attention and increased control, while must not be an argument for political action hindering the realization in effect!

March 8, 2000

János Palotás


Suzuki executives handcuffed!



Three executives of Suzuki Magyarország were handcuffed then marched off in their subordinates’ presence. This piece of news reverted to by all Hungarian media several times produced bad feeling in me and perceptible obtuseness in my acquaintances for days. Almost everybody feels, felt that something was wrong in the way of the denunciation, in the police action. It could be felt even on the faces and in the sentences of the announcers of the media news.

Several previous writings of mine have already been about that conviction of mine that something is wrong about the statutory interpretation, the way of thinking, perhaps the qualification, practice of the police and the state attorney’s office proceeding in economic cases, perhaps about the respective statutes!

In connection with the given case I have no information about what the affected ones are accused of, and this way nor about whether they had done irregularities at Suzuki. But I still do not think that many ones would find me a “gambler” if I bet it today that the three directors would never be condemned. Never, because it is simply not lifelike and this way also improbable that the executives having a several million monthly wage would commit a willful serial crime in conspiracy throughout years, the “outcome” of which would be seven million forints per head. I would not bet whether a possible tax audit would find the accounting of Suzuki faultless in all taxation and accountancy rules. Actually a comprehensive inquiry would possibly find parts where the statutory interpretation of the company and the tax authority differ. … But it is not a crime!

It is unseemly in a constitutional state to make a distinction according to who the affected ones are neither in view of the criminal proceedings nor in the view of jurisdiction nor in the view of the perpetrators. But it does not mean that the proceeding authority does not have discretionary powers for the way of the proceedings during the jurisdiction, during the investigation. But this is not only a right but also a duty usually worded in the laws. For example in course of the coercive measures, even in case of prevailing conditions of employment it is a statutory obligation to pay regard to the affected ones’ rights for human dignity. The means of coercion can be used just in the necessary degree. It is a frequent answer from the criticized authorities that the law allows them to consider and they deemed the given case right this way, so the procedure was lawful. But these statements show that they do not understand and do not know the statutory limitation of their discretionary powers, namely that these powers are not unlimited and not without criticism. They must explain the decision made by deliberation just as any other proceedings of them. Therefore if the reasons are not proper then their decision was wrong and they had to take responsibility for its legal consequences. That is where it has and mainly will be great importance that the proceeding authorities will have to give answer about the reasonableness of their decisions after an already “predictable” verdict of acquittal following a possible formal accusation. To answer whether it was really to be feared that, knowing the presumed amount of commission, the involved ones would escape while their private property in Hungary was large multiple of this amount. Would it not have been enough to impound the passports (especially in the Japanese director’s case) etc? Why did the executives’ arrest happen in their workplace?

The Hungarian police and state attorney’s office do not really have unpleasant experiences of it yet that the involved ones can demand legal reparation following their proceeding if it proves to be unfounded later. Because in the last decades the involved ones were rather glad that the nightmare was over and they wanted to escape from the authorities, from their molestation. But this way of thinking is perceptibly changing. Sooner or later we will follow the practice of the countries having democratic experiences, where neither the involved ones nor the media nor the political participants fearing the democratic state do not let any enroachment of the state as powers remain without consequences. Because just the democratic institutes can mean the biggest danger for democracy if these powers begin to fix their own rules of operation themselves for the “good of the community”. In the present case the later action is rendered probable also by the fact that one of the involved executives is that Japanese director whom the Japanese owner, according to Japanese customs, chose with special care and found suitable to represent Suzuki. I do not envy our President who has to answer pretty uncomfortable questions of the journalists during his visit in Japan in these days. He may be excused from this burden in respect of his hosts because the Japanese customs demand very strict courtesy from them.

I am convinced that the indemnity proceedings following the involved ones’ acquittal will be where it is going to be the authority to have to prove that during the proceedings all their steps were within legal limits and they supported their decisions made by deliberation properly. And that is when it is going to be uncomfortable to answer whether it enjoined precaution on them that usually it was the involved (damaged) one and not a “denunciator” who made charges about the suspicion of embezzlement, because the damage was in his property. Did they not find the amount defalcated by the culprits continuously – supposedly in years – and in conspiracy “too little”, which was equal only to the involved ones’ one month legal wage? By what will they reason it that after a several month secret investigation they had to march the culprits off with means of coercion, handcuffed, on so-called leash, in working time, from their office, in the presence of the press and the several hundreds of their subordinates. Which interest of the investigation made the police inform the press about their secret action? … The questions will probably remain unanswered by the responsible ones, but it will mean a burden of hundred millions from the taxpayers’ money, while the damage to the judgement of the Hungarian economy cannot be said in terms of forints. I do not know whether Mr. Suzuki and his colleagues were thinking about the development of the investment in Hungary but I could surely assert it that this possibility would not even arise during the present proceedings and in the following few years!

It is too bad that we will have to feels ashamed both for ourselves and our foreign judgement when years later the Hungarian authorities will be condemned because of their present behavior. It is good that we already perceive it and sometimes even give voice to criticism if the powers misuse its rights for any reason. Nowadays the reporters of the commercial televisions ask uncomfortable questions of the national superintendent of police prying into his colleagues’ procedure. They publish the statement of the suspicion of the police among pretty doubtful sentences. And I can only hope that in this case there is only wrong interpretation behind the almost surely wrong police action and these is no reason or personal interest of anybody what or who is able to use unlawful police steps for his aims.

Budapest, April 10, 2000 János Palotás


Smallholder shades above the ÁPV Co.!


The Kisgazdapárt (Independent Smallholders Party, FKgP) will submit its proposal about the liquidation of the ÁPV Co. (State Privatization and Holding Co.) to its coalition partner within weeks. Hearing the smallholders’ statements there is no doubt about the content of their proposal. In the opinion of the FKgP the essential privatization of the state property had been ended already. The institute which was intended to be temporary even at its constitution had fulfilled its mission, so it was time to liquidate it. The remaining state property should be directed by the portfolios or maybe a trust holding to be constituted for this purpose as owner in the future. The FIDESZ, though it makes statements cautiously, is opposed to the raising of its coalition partner so far.

But what is behind the news? The ÁPV Co. and its legal predecessors have never belonged to among the smallholders’ favorites. It had both political and „financial” reasons. Political, because the so-called complete reprivatization included in the change of regime platform of the Kisgazdapárt had never been done after all. In spite of the fact that it was a coalition partner with its indispensable votes both in the first government after the change of regime and in the FIDESZ-cabinet succeeding the MSZP-SZDSZ coalition. The institutes responsible for the privatization and implementing the execution, the ÁPV Co. and its predecessors have never helped on this. And what is more it was the leaders of this organization who presented the unenforceability of the professional proposals of the smallholders, who were advocating this reprivatization, in the media more than anybody. It was partly logical because this organization had the actual details about the volume of the state property. And also about that during the last centuries, and even in the twentieth century, the one and the same land, real estate, firm were confiscated from their rightful owners even several times. Then they were distributed among the new landowners, converted into cooperative societies and/or nationalized. But the one and the same property can be hardly given back several times, to several owners. And for their financial aversion, it was produced mainly by that the adherents of the Kisgazdapárt, according to their judgement, have never had a share according to their deserts and proportion in the fortune of the „party-men” having good political relations following the change of regime. They were coalition partners twice vainly, both the MDF and the FIDESZ, giving the governments, managed and are managing the „rewarding purse” of the power pretty intensively. It is hard to estimate the amount of that corruption money which had got to party-men through the privatization organization by political pressure. I am convinced that the scale of this amount significantly exceeds the hundred billion. It means not only ceding the state property to so-called „designated” people for a fraction of the real value. It includes the own income of the party-nominees assigned to direct the firms which remained state property with assets of several billions. Then their gratitude which had brought ten-billions – hidden behind the certain economical contracts – to where it helped the parties and their influential leaders to establish their financial and economical welfare.

Perhaps it was what annoyed the smallholders most. Its latest example is the bygones in the still most significant agricultural venture, the Bábolna joint stock company. Where the nominee of the FIDESZ took the lead of the company instead of the nominee back by the smallholders. It was the new failure at the most known, mainly for its past, company of the countryside that strengthened the smallholders’ aversion.

Because the proposal of the FKgP could hardly be called professional. The idea to take the direction of the still state property firms, the proprietary rights to the portfolios would not mean anything else but the restitution of the situation before the change of regime. Where the ministerial trust bodies would mean numerous parallelisms in the case of a significantly decreased state property. And the professional knowledge paid separately by the ministries would probably recede or cost many times more. The only benefit of this proposal would appear at the Kisgazdapárt. Because this way in the case of the portfolios directed by the party the property, commissions, leading positions would unquestionably get under the direct influence of the party. Nor the other alternative is less „hollow”. According to this, a new trust holding should be constituted particularly for managing the remaining state property. Then the name of the new holding can be even ÁPV Co.! Perhaps there is nothing implied in the smallholders’ proposal in this case again but that at the constitution of a new organization the coalition partners should discuss the direction of this organization again. Also the leaders’ persons and the decision-making inside the organization should be renegotiated. And the Kisgazdapárt places trust in it that being more prepared now they will be able to obtain better positions in course of these negotiations.

This time the purpose of this writing was raising the few subsidiary thoughts that occured to me in connection with the smallholders’ proposals. In my opinion, with simultaneously minimizing the state property a professional trust body could have a role in the state direction. It could be even the present ÁPV Co. Could be, but the ÁPV Co. fulfilled this role neither in the past and fulfils it nor now. Its operation is very expensive actually. Its leaders are definitely committed politically and, what is even worst, party-politically, they are not worthy of professional credit.

But the real problem is not with the existence of this organization but with the tasks set to the organization, therefore what should be changed is probably the latter. The change could still improve the economical positions of the country by a scale of hundred billions. But at the same time it would decrease the fortune-making of the parties and their influential people!

…………… but of course most of us would scarcely care about this latter, but now it is not the most of us but just the concerned ones who are entitled to decide about this!

János Palotás January 18, 2000


Colorful news from the economy


In this column I would like to comment upon so-called „little news” from my point of view shortly and a bit differently. I publish my writings separated from each other, with title and date, and the newest writings always will be put on the top under this introductory sentence. This way by reading the first writing the dear readers had seen before, they would know that all the following lines had been read by them before. But the possibility of reading my earlier writings again anytime will remain henceforward for my dear readers, if they would like so.

December 22, 1999 — Deadlock in the mutual agreement negotiations of the railways

The yearly recurring MÁV versus railway labor unions controversy about the salary and the collective labor agreement is now a returning conflict of the employees’ mutual agreement negotiations on interests. And the aggrieved parties of this controversy are the people and the economy of the country who can be only the impotent spectators of this. Commenting upon this piece of news I would not like to economically analyze the conflict in its entirety now because it could be really expounded only in course of a lengthy writing. And it is not really the time for this. Today’s question is whether it is possible to move from the stiffen standpoints without the significant loss of prestige or economical paralysis of any of the parties?!

Of course it does not mean that following an agreement the government, the MÁV and the involved labor unions should not solve the inside differencets of the system in the long run finally, and probably after a several month work during next year. And they would not come to a many year agreement in the strained atmosphere of the salary negotiations at the end of the year. Because both parties have numerous veracities in the debate and these can be revealed and the possible solutions can be found only in a calm atmosphere and without the intention of defeating each other. I am going to mention it without expounding the discussed thoughts and without the demand on completeness that they should show the actual contents to see whether the loss of several billions referred to by the MÁV can really give reason for that the MÁV cannot expend more money for wage increase. I.e. is it really a capital loss because if it is then even the inflation following salary offer of the management of the MÁV can be hardly justified, while an offer which exceeds the inflation is definitely an injury of the shippers. It should be revealed by comparative particulars, which are real in the world of work, what kind of relation the average salary, qualification, welfare benefits of the employees of the MÁV maintain to the comparable averages of Hungary and this way how well-established the demands can be. What compatibility is there in it if the labor unions conclude a solidarity agreement with such „joint organizations” where the employer has fulfilled the obligations towards the employees and can be only the powerless spectator of a situation which had originated from the labor dispute of another company but had resulted in its own workers’ walkout. It would be hopeless for these thoughts to be successful in the strained atmosphere of the present negotiations but it would be a mistake if, following a possible agreement, the next time they were raised would be the time of the new wage disputes at the end of the next year!

Perhaps it could be an offer of promotion from the MÁV to propose an offer that approached the labor unions but it still did not obligate to reconsider the estimate on the cost. Because the offer of the MÁV means an increase of the real income even itself if the inflation will really stay within six percents in the next year. The offer of 8.5 % can cause a relatively significant increase of the real income, taking it into consideration that, within the bounds of the estimated 4-5 %, some resources have to be assured as cover for the hardly disputably needed stopping of the economical backwardness and developments too. But for the labor unions the inflation data prognosticated by the state can hardly mean – partially by right – a proper guarantee. This way that solution raised at the next year regulation of the degree of the rise of pensions could be adapted also in this case according to which the MÁV would continue to rise the wages if the inflation would be higher then the planned six percents. I.e. the MÁV could promise to fully compensate the loss of the wages caused by that part of the inflation which was above the planned degree, in other words they would guarantee the two and a half percent increase of the real income.

This might be the base to restart from and the rest is up to the negotiating parties! …………………. Perhaps I will continue this too!

November 18, 1999 —- VAT fraud and the ignorant actor!

The court in session of that case was declared today in which the indictment was that actor Péter Benkõ, his wife (common-law wife) Ildikó Magyar and several family members of his had committed tax fraud of nearly a billion forints and other ancillary felonies. I would like to mention it in advance that I think highly Péter Benkõ as an actor and I will surely not take a stand on the object of the tax fraud itself until the final judicial decision – perhaps neither after it. On the basis of my practical experience I rightly have doubts about both the statements of the Tax Authority and the skill of the police and state attorney work done in this matter. Biz listening to the news two things are raised in me again, which might be worth thinking of.

It is more important to expound that in that case if there was a tax fraud then the dock for prisoners seemed scantily full to me. Do the Inland Revenue Office (APEH), the police and the state attorney’s office make bold to state that under the present rules of the taxation system and without interested state administrative connection a dramatic artist married couple and their family members starting their enterprise off can successfully „deceive” the computerized control mechanism developed for billions and the employers specialized in this field of the APEH by the most primitive accountancy abuses? There are no small scale enterprises in Hungary now which would not know that, according to the – formally unlawful, I think – own internal direction of the APEH, in case of re-claiming of VAT of more than a hundred thousand forints the tax authority will make a tax audit at the company before the tax refund. The definite aim of this audit is to survey the calculations and the book-keeping of the re-claiming of VAT and the contracts establishing the invoices of the re-claiming, the verity of the performances. It is professionally unimaginable for an audit like this not to take note of bogus invoices of even a few million forint VAT because in this case the contractual value is more than ten million forints. In case of an enterprise having a few ten million forint annual income in its real and visible economic work the audit does not reveal the bogus contracted background twenty-fifty times greater than the objects only if it is its explicit will. In case of such a big deviation even that cannot be supposed in good faith that the abuses were rendered possible by the lack of expertness or the negligence of the ones bound to the audit. I really consider the above-written as a very important question. Unfortunately it is rarely thought over that the degree of the Hungarian economic criminality could be repressed significantly if the repression of the „supply of corruption” was begun in the civil servant society which is always indispensable to corruption. Because the private sector does not entrust a more expensive executor with the execution of his investment of own capital just because the corrupting investor gives some of the overcharge back. It is possible to bribe, to get unjustified payments fraudulently only when the constituent, the one deciding about the payment does not pay from his own money but will get some back into his own pocket.

Also the repression of economic criminality is much more doubtful if we draw a bead on the circle of several hundred thousand entrepreneurs. Though a part of them is game for the violation of the law immediately but the majority of them can experience it day by day that their better offers succumb by turns in the tenders of the biggest principals (state, municipalities, state offices etc.) of the economy. He is a honor indeed if he does not break even after the fifth failure beside his constant economical difficulties and he does not join the more and more numerous group of the ones „obligatorily” returning some back. I acquit nor these people (ventures) but I am sure that it is not them who should bear the honoring title of principal defendant in a courtroom.

I have never heard of such an examination in the proceedings of the judicature that how earlier a „caught” lawbreaker would have got the collar for the so often hollow manipulations concocted by him in a less corrupt state administration. In this case the loss of the state could have been fractional too and also the defendants could expect a significantly lighter penalty. In the concrete case, if the judge finds against the accused ones then the actor’s wife can expect even an eight year imprisonment. The family members’ probable sentence is measurable in years too. While if the Tax Authority had revealed the unjustified being of the re-claiming of a few hundred thousand forint VAT connected to the first bogus invoice then by frustrating the satisfaction and without an actual loss the well-founded charge could be an attempted deceit and the forging of documents. There would be probable only one defendant instead of four and nor she would have to reckon with imprisonment. I am convinced that there had to be some official „instrumentality” to have a loss of about a billion, to have the number of defendants increase to four and to have the gravity of the crime be inflicted of eight year imprisonment and total forfeiture of property. But if it is this way then why are the officials not sitting among the defendants, and on the front seats? Why does that body of the Tax Authority, which was constituted for this, „forget” to search also in this field? But if they do not then do the investigating authority or the prosecuting state attorney’s office not have a feeling of want?

Now these are still questions remaining unanswered by turns. It is my definite will to collect the „one-sidedly” exposed economic crimes of the years past into a separate writing in the immediate future. Although having a corrupt tax controller collared would impede the tax fraud of fifty-one hundred ventures. The dismissal of a corrupt official decision-maker can result in legality and the preclusion of corruption for the mass of following commissions. It assures the possibility of the really best implementation which is surely cheaper with the not small corruption cost. I am sure that it would be worth to turn the – at least one – bead of the economic prosecution to the right direction!

I was thinking a lot of the next sentence. Though I consider its content as very important but I would have not really liked to connect it with a concrete case. But listening to and reading the artist’s statements I cannot leave my conviction undisputed. The ones passing judgement in the Hungarian legal practice should more safely make damning decisions against such defense where the basis of the defense is the extremely hollow declining of the responsibility. It is bad even to hear it when though the concerned one enjoyed the wealth surrounding him but he did not discover that its origin could not be their own success. He did not even think that they could hardly produce the cover of their lavish spending which outdid the scale of their enterprise even fifty times. He overestimated the incomes so twenty times, while he thought the expenditure ten-twenty times lower. It might – but not probably – be this way but then he has to answer for this „mistake”.

November 11, 1999 —- The WESTEND CITY CENTER opened today in Budapest!

The ceremonial opening of the Westend City Center will begin at 5 PM today at the Nyugati square. This entertainment center is now the biggest group of buildings of this kind in Europe. One year (let me add: even a few days) ago only a few people believed that such a monumental Investment can be realized successfully in such a short time in Hungary. Almost only Hungarian – mainly small- and medium scale – enterprises participated in the implementation.

Sándor Demján and his team have managed to do it now again.

October 27, 1999 —- The oil-mafia can be billionaire again!

At the modification of the tax laws the Parliament had adopted two motions for amendment of the representatives. They decided that from the 1st of January 2000 the 98 octane numbered gasoline could be put in circulation with two different taxes but they would have the same use value. At the same time they will initiate the product-idea of the so called „bio-diesel” which can be purchased and sold out of the circle of regies!

I have thought it many times that no real surprises can be given to me in the economy, in the corruption of the economy and politics any more. It is an old truth that who is conceited that will learn it soon that he has made a big mistake.

Those laws, which had essentially put an end to the profitability of the many billion business of the oil black market, were born after the loss of the oil-billions (acquisition for others!) with a many year delay. As a result of this the level of abuses of this field did not exceed the economical average in the few years past. So the „war” broke out in the underworld used to the significant income. But now we can calm down because our elected representatives have recognized the dangers implied in the straitened years and turned on the taps of wealth (of money).

If we preclude the stupidity as possibility in case of our representatives then we can find no other intelligible explanation nor for their proposals neither for the passed amendments. They explained the different tax contents of the gasoline 98 by that the lower taxed gasoline contained less polluting substances. It probably will not be the real star for the organized crime because the price difference between the two kinds of gasoline is so little that it would not mean a big sharing. But we can put a big bet on the constant injury of the consumers what will cause a deficiency of income for the state even where the respects of environmental protection do not state grounds for it. The loss of the state will surely be of several billions yearly. We can give a tip for the probable international disapprobation in advance about that the state grants privilege to a home company, the MOL, on the pretext of environmental protection. Because only the refineries of the MOL produce this reduced priced gasoline now.

The real star will be the bio-diesel which is not even really defined (definable) in the act. It is a foregone vision as the so-called oil-trains enter the country by hundreds. Since the law took the bio-diesel oil out of among the excise taxed products, therefore if the customs declarations would be about bio-diesel then the customs clearance could be done anywhere. And all of the tank-wagons seemingly filled with bio-diesel will contain gas oil. We will be „surprised” that the demand of gas oil of the country will drastically decrease in spite of the increasing economy, while Hungary will outstrip the United States in the consumption of bio-diesel.

I do not understand the bygones! Because I do not want to believe that the participants of the oil business are misleading already the third government so primitively! And it is even harder to believe that all of our three governments after the change of regime would be corruptible so easily! If I were the underworld I would have been afraid to come forward with this idea now, when all the country cares for the so-called oil-cases of Békés county. When almost everybody is searching for the connection of interestedness of the underworld, the police and the „tarrying politicians”. It seems that none but the brave deserve the oil(-money).

( It is a piece of news from the 29th of October that the FIDESZ has initiated to withdraw the bio-diesel amendment! It might be the publicity or something else that had led to the perception but it was a good sign to me anyway. I hope that at the voting also the MSZP and the Kisgazdapárt will persuade their dew „erred” representatives to a better comprehension!)

September 22, 1999 —- The ten-thousand billions of the oil-mafia

Last evening all of the television channels published it as a leading piece of news that, according to experts’ opinion, in the last years the members of the so-called oil-mafia had gained a profit of more then ten-thousand billion forints by the oil-acidifying, i.e. they had inflicted a damage of this much to the budget.

I myself disapprove the oil-acidifying too, just like the contemplated tax evasion and particularly the crimes of violence connected to the monopolization of the profitable market of the oil-acidifying. The media has published several thousand writings in this subject in the years past. Therefore here I pick only the latest sensation of the leading news services from among the colorful news. I am doing it also because it certainly bothers me day by day that the most important media channels publish only those facts in which the truth does not reach even the minimum level. I certainly consider it as a grave responsibility that the ones playing an important part in forming the opinion of the society sometimes keep the professional control of their announcements on an unjustly low level. I do not accept it that only the origin of the news is responsible for their contents. Also the responsibility of the publisher, the spreader is indispensable. The certain national television channels significantly corroborate a fact by publishing it. The „managing editors” certainly have to doubt sometimes too. Their task cannot be only properly visualizing the news, their limited professional control is indispensable too.

They should not enrage millions of people by such a fact, the volume of which is about fifty times the probable one, multiple of the total oil-demand of the Hungarian economy in the given period. This way such a loss could not have occured even if not even one drop of fuel had been put in circulation legally in Hungary in those years. We would become aware of it if there were ten-thousand so-called billionaires in Hungary or if there were more than a thousand people having a wealth of several ten-thousand billions. Though I would like it if many people had such a wealth in Hungary but unfortunately it is not this way! Many sport-clubs, foundations, artists, athletes etc. could experience how easy it became to find excellent sponsors. Of course it would also give a fantastic chance to the tax-police that they would meet riches possible to make them account for at every step in course of their work. It would not be hard to produce the actual facts subsequently. The demanded quantity of the certain energy sources in Hungary did not change significantly in the years past. Since the so-called oil-acidifying is presumptive only in insignificant quantities, therefore the yearly sum of the facts of the legal channels probably gives a pretty exact data about what quantity had gone through the black market in the given period. I do not know the concrete details. The probable volume of losses can reach even three-hundred billion! This loss would be just enough to try to find the participants and their helpers with real will, whether in the economy or in the state administration or in the politics. But the bombastic news hardly help this, they much rather serve as the mystical, thus impossible to reveal, appearances of the whole thing!