Newly created agency blocks contract with cronies of Hungary's Fidesz-led government

Newly created agency blocks contract with cronies of Hungary's Fidesz-led government
Hungarian PM has become weary of overpricing in state investments
By bne IntelliNews January 16, 2019

A state-run agency overseeing state-funded infrastructural investments (BMSK) has blocked a public procurement won by cronies of the Fidesz-led government to build a new hospital, local media reported on January 15. 

Companies owned by the sons of Lorinc Meszaros, who many see as the proxy of Prime Minister Viktor Orban, won a HUF18.2bn (€56.7mn) contract to build a hospital in Szekeshervar, 50km south of Budapest, but the BMSK torpedoed the project “in view of the rising costs of the investment”. It was the first such decision by the agency, which began its operation on January 1.

The government approved a spate of decrees just days before the end of the year, which have not received much media scrutiny. One of the key decisions taken at the last cabinet meeting of the year was the creation of agencies to oversee state investments to rein in surging costs and ensure that investments are completed in time and within budget. 

Orban has reportedly become wary of seeing large projects overshoot cost targets by a mile and he wants to curb overpriced procurements, seen as the prime source of corruption. 

The main example of budget overshooting in state-financed projects was the organisation of the FINA 2017 World Aquatics Championship. Initially, organisers put the cost of holding the multi-sport aquatic event at HUF14bn, excluding a new swimming arena. 

Investment costs kept climbing as time passed and the final price tag of the largest sporting event held in Hungary came close to HUF130bn, nearly ten times the original estimate. Construction of the Duna Arena, the main site for the event, cost taxpayers some HUF50bn. Organisers collected HUF0.8bn in ticket revenues but marketing costs were more than ten times that figure.

The new state agency will have the power to oversee each step of the investment process from planning to completion in projects worth less than HUF700mn. The same will apply to all investments carried out by local governments from next year. 

MPs from the ruling party told business weekly HVG that BMSK will ensure that projects are completed in a cost-effective and transparent way to end the waste of money, a synonym for corruption, a word banned from the dictionaries of Fidesz MPs.

The government has also approved the establishment of a similar agency for holding sporting events. Hungary will host a number of major sporting events this year. Previously, the sport federation was in charge of organisation.

In order to do their job effectively, these new agencies will require hundreds of staff and a big budget. The government has already earmarked HUF5bn in financing.

The prime minister has declared zero tolerance for corruption, but studies show Hungary slipping in world rankings. Corruption has become a fundamental trait of the system, according to Amnesty International. A handful of oligarchs with close ties to Orban have dominated state tenders and even in smaller contracts, critics of the government stand zero chance of winning. 

Meszaros, a former gas fitter and a childhood friend of Orban had become the richest person in Hungary by 2018, with an estimated wealth of HUF381bn.