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Hungary Private Activity
Perhaps the most significant aspect of the economic
reform
and the leadership's most striking break with
Marxist-Leninist
ideology has been the expansion of the private sector. The
government decided to allow the emergence of private
enterprise
because it believed that private entrepreneurs would
increase
competition in some areas, fill demand for goods and
services
that state-owned enterprises had been unable or unwilling
to
meet, and create work for people who would lose their jobs
as
unprofitable enterprises reorganized to become more
efficient.
Changes in the Domestic Trade Law in 1986 opened new areas
to
private entrepreneurs, especially in services. A year
later, the
government allowed private businesses in a number of
categories
to employ twenty to thirty workers. A law passed in 1988
allowed
the establishment of limited partnerships, which could
include an
unlimited number of partners and employees and operate in
all
fields except finance. However, private businesses
continued to
suffer from restricted access to capital from state-owned
banks
and thus had to depend on private and extralegal loans
that did
not carry full legal protection.
Small family-operated businesses remained the rule in
the
private sector, and in 1987 only about 300 private
businesses
employed more than six people. Most entrepreneurs ran
their
businesses as a part-time activity in order to supplement
their
earnings from a job in the state sector that provided
social
benefits. In addition to the household plots, private
farms,
economic work cooperatives, and independent contract work
associations, private business people were operating
28,965
retail shops, restaurants, and other businesses in 1986,
more
than twice the total in 1980. In addition to private
restaurants
and stores, which accounted for about 7 percent of
domestic trade
in 1985, entrepreneurs had established computer-software
companies, construction firms, service businesses, and a
theater.
Individuals could also contract to operate state- or
cooperative-owned retail stores or restaurants and retain
all
profits over the contract cost. In 1986 contractors
operated
about 12 percent of Hungary's shops and 41 percent of its
food-service establishments.
Data as of September 1989
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