SCENE-SETTER FOR VISIT OF DAS MANISHA SINGH

C O N F I D E N T I A L BUDAPEST 000992

SIPDIS

EEB/TPP FOR DAS SINGH, JURBAN, CLACROSSE, JSHANNON; EUR/CE
JLAMORE; COMMERCE FOR SSAVICH

E.O. 12958: DECL: 10/07/2013
TAGS: ECON PGOV PREL HU
SUBJECT: SCENE-SETTER FOR VISIT OF DAS MANISHA SINGH

REF: BUDAPEST 964

Classified By: P/E COUNSELOR ERIC V. GAUDIOSI; REASONS 1.4 (B) AND (D)


1. (SBU) Welcome to Budapest. Your visit comes as the
minority government's attention is largely focused on the
passage of its 2009 budget and tax bill in Parliament.
Hungary's economic problems, reform fatigue and sharp
partisan divisions have resulted in considerable political
gridlock. Embattled Prime Minister Gyurcsany is on the
defensive personally and politically as the opposition
(Fidesz) continues to press him on all fronts. With the
dissolution of the coalition between Gyurcsany's Socialist
Party (MSzP) and the Free Democrats (SzDSz) this past spring,
the Government is now feeling its way forward without a
Parliamentary majority and faces its most important test with
the tax and budget bills. As a minority Government, its
major preoccupation will be remaining in power until the 2010
elections. Moreover, a domestic espionage scandal has caught
the attention of the media, and daily reports of new facts
and accusations draw attention away from the issues of the
day and further undermines the public's faith in the nation's
institutions (reftel).


2. (C) Hungary's economic performance continues to trail that
of its Central European neighbors, due largely to its low
labor participation rate, overly complicated and high
taxation and regulatory structure, and failure to enact
urgently needed economic reforms. High levels of tax evasion
erode the tax base and make it difficult for the government
to fund its enormous social assistance programs. Moreover,
the government's weak political position and the public's
"reform-fatigue" have prevented the government from enacting
reforms to the pension, healthcare, and social benefits
systems which would help revive Hungary's anemic growth rate
and restore its economic competitiveness. Additionally,
businesses complain that corruption and a lack of
transparency throughout the government prevent Hungary from
achieving its full economic potential.


3. (SBU) Although the government and the public are
preoccupied with domestic issues, the bilateral relationship
remains strong. Your visit follows a number of recent
noteworthy successes, including the approval of the last in a
series of agreements needed to join our visa-waiver program
and final steps toward Hungary's agreement to host strategic
airlift assets for a NATO consortium. Hungary remains a
committed partner in the trans-Atlantic relationship -
providing forces in Afghanistan, Iraq, and Kosovo. But
Russia casts a giant shadow. Dependent on Russia for the
vast majority of its energy resources, the Gyurcsany
government has attempted to advance its "Eastern interests"
while maintaining its commitment to "Western values." Your
visit presents an excellent opportunity to engage in
bilateral economic issues, including transparency in
procurement and IPR, as well as to discuss GOH views on trade
liberalization and the WTO.


4. (C) Your schedule begins with Laszlo Varkonyi, Director of
Trade at the Ministry of National Development and Economy,
and will provide an opportunity to discuss both bilateral and
multilateral trade issues. In general, the bilateral
economic relationship is excellent, but we do hear frequent
and growing complaints from U.S. and other foreign companies
about the lack of transparency in the government procurement
market in Hungary. The media also reports allegations of
kick-backs being demanded in exchange for contract awards.
Frustration with the business climate is on the rise, and one
corporate representative here tells us that "thousands of
negative decisions are being made about Hungary every day."
The meeting will also provide a chance to ask Varkonyi about
Hungary's views on the WTO, given Hungary's hard-line
position within the EU against liberalization of its
agriculture sector during the WTO talks in August in Geneva.
Finally, Varkonyi may want to discuss Minister Bajnai's
tentative trip to Washington in mid-January, and may seek
your advice on whether meetings would be possible so close to
the Presidential inauguration.


5. (SBU) You are then scheduled to meet with Mihaly Ficsor,
Vice President of the Patent Office. Mr. Ficsor understands
that the purpose of this meeting is to discuss broad IPR
policy issues, given his involvement in policy coordination
within the GOH rather than specific patent law issues. The
meeting presents an opportunity to ask Mr. Ficsor about the
problem of internet piracy in Hungary, and whether he
believes Hungary has the legal tools necessary to address the
growing problem of internet infringement. Mr. Ficsor is well
aware of the Special 301 process, and may ask you your views
regarding the 2009 NTE and Special 301 reports.


6. (SBU) Your meeting with Ferenc Kondorosi, Ministry of
Justice State Secretary and coordinator of the Hungarian
National Anti-Counterfeiting Body (HENT),will provide a good
opportunity to learn about the activities of this
government/private sector entity established in early 2008 to
coordinate anti-counterfeiting efforts. Mr. Kondorosi will
be interested in hearing your views on IPR enforcement in
Hungary, and you might use this opportunity to discuss the
extent to which resource constraints may be limiting the
level of law enforcement and prosecutorial resources devoted
to the investigation and prosecution of criminal IPR cases in
Hungary.


7. (SBU) Following your address to the EEB EUR IPR Training
Conference on October 15, you are scheduled to meet with
Ambassador Foley.


8. (U) We look forward to welcoming you in person.
Foley