by Károly Gergely
A country most frequently discussed in Western media in relation to its politics, Hungary’s information technology scene is in itself one of noteworthy vibrancy.
Discussing Budapest, one often talks about its historical buildings, its cultural buzz, its attraction to tourists of all kinds, or even the Budapest Convention, the only binding international instrument on cybercrime. However, the capital is also ripe with IT start-ups, to the extent that some named it as the top European city for up-and-coming businesses. According to the European Digital City Index, the city’s start-up ecosystem is the first in the region and 33rd on the continent. The report notes that the number of tech start-ups has skyrocketed between 2010 and 2016. There are more than 28 private funds and VC funds in town, as well as a number of government-owned venture funds. In recent years, the number of incubators, accelerators, and co-working spaces has also risen, as well as competitions aiming to select viable start-ups for funding. A large number of these enterprises are tech-focused, including AImotive, Bitrise, Scipher Medicine, Shapr3D, Recard, PublishDrive, Banzai Clou, or Turbine AI. The city’s educational institutions – especially when it comes to computer science – provide an ever expanding and highly educated talent pool. The cost of living and workforce is also relatively cheap, while the city’s central location at the heart of East-Central European means that it serves as a natural bridge between Eastern and Western member states of the EU. Add to this the proclaimed goal of the government to make Budapest the “start-up capital” of the region and the low (9%) corporate tax rate as well as a number of financial incentives for up-and-coming businesses, and you get why the city seems like an attractive alternative to its competitors. Hungary is also an EU member and a founding member of the Global Forum on Cyber Expertise, as well as a co-initiator of the initiative on Coordinated Vulnerability Disclosure, indicating the country’s dedication to an international approach to tackling issues on the global cyber agenda.
Of course, as usually, the devil is in the details. The country’s IT ecosystem still leaves a lot to be desired. First, as in nearly all regards, the country is massively divided between the capital and the countryside, with the overwhelming majority of IT activity (and the funding necessary for it) is concentrated in the capital. Additionally, cyber-skills are still not constituting a big enough part of the compulsory curricula, meaning that a large majority of employers constituting a (larger) supply chain will be unaware of even basic cyber hygienic practices. This makes scaling up difficult for successful businesses as well as posing a constant threat to established companies.
When it comes to Budapest, the city appears to be catching up in terms of living costs to its more expensive counterparts, essentially losing one of its most attractive qualities for foreign investment. Additionally, while the government’s vocal dedication to developing a vibrant IT sector is commendable, critics argued that legislation favours larger companies, essentially nipping start-ups at the bud. The increasing state activity in the private sphere as well as the often-quoted existence of “government friendly” companies further impact the state of competition which might dissuade the entrepreneurial spirit necessary for a truly thriving IT sector. While the country’s political stability means that long-term planning is possible, the government’s rather flexible interpretation of the rule of law might constitute a negative factor. Overall, as always, the whole picture is a mixture of positive and negative features.
In the last two weeks, the Hungarian foreign minister held discussions with his counterparts from nearly all of Hungary’s neighbours. The countries of the V4 alliance (Hungary, Poland, Slovakia, Czechia) are growing ever closer through their joint negotiation tactics in EU discussions. Additionally, it appears that Hungarian diplomacy set out to become a leader of the idea of closer cooperation between Central and Eastern European states. No doubt, dedicated discussions on the technology sector are inevitable. Since the countries of the larger region have vastly different comparative advantages it seems likely that closer cooperation in the ICT sector would be mutually beneficial. Considering the current state of Hungarian diplomacy and the larger geopoliticaltendencies it seems likely that Hungary can be one of the leaders of such an effort, especially given the history of Budapest as a centre of ground-breaking cyber-negotiations. The country’s regional and international integration, as well as geopolitical currents and the government’s efforts appear to propel Hungary to a favourable position to act as an integrative regional force in the cyber realm.
Károly Gergely is a Hungarian freelance journalist at Magyar Hang and a reporter for The International Cybersecurity Dialogue. He completed a Russian and East European Studies master’s degree at the University of Oxford.