A Vision of Budapest

Our capital city is often the subject of  various international comparisons, and its exciting possibilities, along with the image of the city, serve as the basis of serious economic and investment decisions.

The significance of Budapest extends beyond its boundaries and labour catchment area. Being a global gate to the Carpathian Basin, the city significantly influences the development of the whole region.

What roles should the Hungarian capital assume, and what positions should it seek to occupy? What are the social and environmental conditions it is expected to meet in order to manage those concentrated metropolitan tensions seen worldwide (transport, air pollution and social alienation)? How should the “milieu of Budapest” become a medium that attracts innovations and knowledge like a magnet? And what is the shared unique character that is particular to Budapest?
How can the development of the capital and its region contribute to achieving the set of goals targeted by the Hungarian economic policy? For all these, what Budapest needs is a strategic vision that unites not only economic policy, the central government and the local governments of Budapest and other affected areas, but also by the key actors in the market and the economy. It should be a strategy that an overwhelming majority of the citizens can identify with, particularly the most creative and active groups. An expert discussion paper was prepared by PAGEO Foundation, which is intended to contribute to the development of a strategy for Budapest to seek answers to the questions posed above.

The vision, which can be considered a treasury of ideas, lists options for the capital and its region, relying on novelties, as well as earlier and current concepts, strategies and international examples. In the following pages, a few excerpts of these are presented.

It Is Liveable, But What Makes It So?

The success of liveable and competitive cities (which attract talented, open-minded people) is partly determined by the quality of life.
Basic criteria of such a city are that it supports community; it is human-centred, safe and affordable; it pursues sustainable development policies; and it strikes a balance between social, environmental and economic interests systemically and on a regional basis. A successful city, moreover, is smart. It builds a bridge using info-communication tools between economic development and social progress. It communicates with those using the city. Furthermore, it is environmentally aware. It manages its resources and cultural heritage in a fair way, preserves its values, builds a local economy coexisting with its rural surroundings, and creates identity and individuality.

According to Brad Feld, start-up communities are similar to medieval communities of “self-governing” guilds managed in compliance with their own rules. Start-up communities are open to all that wish to join and convey the following key message: “You have to give before receiving from the community.”

For start-ups, social (and network) capital is crucial, and the start-up communities and colonies are groups with strong network effects. What can actually be gained as a result of this network effect (and what concurrently represents exiting proceedings and developments) is for a company to go public or be acquired by a large corporation. These enterprises have extensive information and contacts on a global scale, and they can easily relocate to other global cities for better conditions and circumstances.

Moreover, they exhibit further soft factors, factors that are more difficult to point out in respect to competitiveness, such as creativity, the city users’ high-level capability for innovation, their ability to develop new knowledge, the degree of their ability to cooperate and their confidence in each other.

Powerful Budapest

Budapest fulfils an increasingly significant role in the innovation sector and in the creative industries at both a national level and a European level. It has a growing number of internationally recognised achievements, successful initiatives and start-up businesses, which primarily affect the IT sector, as well as medical and therapeutic technological and biotechnological activities. Approximately two-thirds of research, development and innovation (R, D & I) expenditures are concentrated in the capital region. The phenomenon of concentration seen in the field of research and development is aptly illustrated by the fact that 20.828 of the country’s 36.945 researchers and developers worked in Budapest in 2011. Based on the innovative activities of companies operating in the Central Hungary region, the following segments are currently outstanding: information and communications; pharmaceuticals (on a national level, four-fifths of the companies carrying out innovative activities in the segment are present here); computers; and electronic and optical product manufacturing (four-fifths of the innovative companies operating in the segment are here). Besides a higher level of integration of R,D&I activities, a number of further options are available for Budapest to increase its competitiveness on the basis of its internal properties. An effective step in this respect is when the capital city becomes a more active space of inspiration and community experiences by reshaping its public spaces and extending its events both in a physical and symbolic sense. Increased value in use and frequentation of the recreational areas and promenades connected to the Danube bank, as well as rehabilitation of centrally located brown-field areas on the river bank with good accessibility may be part of this process. It is also recommended that concentration of and close connections through networks between university campus areas, prospering research centres, start-up premises and institutions in charge of technology and knowledge transfer be ensured.

The geographical vicinity and easy transferability among institutions related to research and development and tertiary education would largely facilitate innovative activities, as well as the establishment and maintenance of connections between the institutions.


The economic environment and affordability, in addition to the properties of the region and the city structure, play a considerable role in supporting the course of intervention aimed at boosting the spirit of enterprise and innovation. For Budapest, the key points of economic growth lie in technology-intensive, knowledge-based enterprises, which is why the framework conditions for supporting and regulating enterprises in the knowledge-intensive segments (innovation and start-up ecosystem) must be established.

Concentration in Budapest:

  • 62% of R&D expenditures;
  • 39% of GDP;
  • 17% of the population

On the one hand, this trend of consumption relying on exchanges, rentals, favours and the access of multiple users was brought about by the economic crisis; on the other hand, it is due to the increasingly urgent handling of environmental problems and declining social relationships. The key driver of the acceleration of this trend is the spread of mobile technologies, online peer-to-peer networks and easier access to them. These facilitate possibilities for temporary or periodic rental services and assets that are not needed on a continuous basis or that are beyond the user’s financial means. At the level of central and local governments, it is necessary to set up the scene, framework, regulation and a culture of cooperation for exploiting development facilities based on sharing and aimed at affordability, not to mention boosting community activity. Such joint intervention to establish the scene involves the elimination of legal and infrastructural obstacles to the sharing of knowledge or property, simplification of procedures and administrative processes, and increased transparency and intelligibility (which leads to a higher level of confidence on the part of citizens and economic actors toward local government).International experience suggests that a competitive start-up and innovation ecosystem is basically built on four elements and their interactions: education and training, access to resources, tax and regulation, and a supportive urban (social and natural) environment. Some of the key elements are now available in Budapest (e.g., venture capital funds or various start-up contests). Some of them are being established; however, some segments are almost completely missing. As a result, it would yield considerable benefits in Budapest if the local governments continuously tracked the regional indicators of economic processes at the district level. Moreover, it is worth consciously encouraging thematic spaces of companies with a shared technological background and sectoral profile (e.g., tourism and catering, etc.) – establishing the territorial conditions (premises) of economic development based on innovation, while considering the factors of selecting premises through knowledge of technology-intensive start-up businesses. This is because the innovation environment must include the quality attributes of the city environment: public services, consumption, and availability and diversity of products and services. It would be an intervention of key importance to regard Budapest as a single business destination at the level of macro-regions and handle it as a single brand through the tools of city marketing. An economy based on sharing and access is gaining ground all over Europe and the USA, and its impact is progressively detectable as it changes opportunities and means of shopping, eating, going to work and travel. The essence of the trend reversal is that community use and rental of services and products prevail, which results in more affordable conditions for many people.

In addition, the creative utilisation of unoccupied properties is important, similar to the framework regulation of property prices, which contributes to the preservation of diversity in services and consumers. An example is the system of capping rents, planned to be adopted in Germany in 2015, which allows no more than 10% higher initial rental fees in comparison with the typical rental fees seen when property managers or tenants change in parts of city (districts, quarters, settlements) that are in high demand. Further interventions to set the scenes may be a re-interpretation and re-establishment of the system of market halls and market culture (as an institutional culture) in order to encourage the consumption of varied, healthy, affordable and good-quality food.

Effectiveness of Urbanisation and Growth at The City Level

The population density (as well as the closely related building density) fundamentally influences the costs of establishing and operating urban services. The population density of Budapest (3,230 people/km2), however, is regarded as low on a global scale and average on the scale of European cities. As a benefit of a reasonably planned city with higher population density and green areas, the use of cars and the CO2 emission may be reduced, and a higher population density coupled with smaller-sized flats on average also results in further energy savings.

Innovative and Family-Friendly Budapest

The development and prosperity of cities primarily depends on the people living there. This, in addition to infrastructural features in the traditional sense, calls for an increased ability for local society to renew itself, which concurrently calls for more openness to novelties, better acceptance capabilities, and a stronger consciousness and retention capability of the local community. This, however, is becoming more difficult, because cities today face a number of social challenges: poverty, unemployment and demographic challenges (migration, population increases or decreases), as well as growing inequalities in income, ethnic and socio-cultural conflicts, unhappiness and loneliness.

In terms of social attributes, Budapest differs from the national average. These differences have a strong influence on the city’s productivity and ability to renew. One of the most important elements of knowledge-based development and social progress is an adequate social environment. The capability of continuous learning and development and the unfolding of talent, creativity and knowledge is only possible in an environment where society is supportive and accepting. A key attribute of such societies is that failure is not necessarily regarded as a shame, and efforts made to perfect or develop a product or thought are recognised, similar to the development and testing of unconventional thinking.

The most critical point, then, is to create a social medium that is supportive of creation. This is often where the differences in the success of emerging start-up ecosystems are rooted.

Multiple contributing factors are needed for cities to become family-friendly. For instance, an adequate choice of values and a change in attitude (firm assumption of a stable local family policy and the related objectives, estimation of people undertaking to raise children, supporting and advertising family-friendly examples, supporting the co-habitation of generations). Accessible transport and environment are also important (e.g., elimination of physical obstacles; clean environment in terms of air, public spaces, streets, playgrounds and community spaces; support of child-friendly alterations to condominiums; adequate organisation of traffic; and protection and expansion of green areas, developing their use and availability).

The employment ratio is 57-58% in Budapest. (In Hungary, the average is 50-53%.)

In the capital, the elderly population is more than double the number of children. (In Hungary, in 2011, the ratio was 117 elderly per 100 children, on average.)

The number of families decreased by 7% in Budapest between 2001 and 2011

The crime rate dropped by 8.1% in Budapest between 2000 and 2010, the figure ofwhich is still above the national average

In order to have a more content, more productive population, it is reasonable to set up a family-friendly system of institutions and services (e.g., child welfare and family-related services of the necessary quality and education; social and healthcare services with adequate capacity and fair access both geographically and in terms of time; sports facilities; and various prevention, screening and inoculation services). Moreover, family-friendly workplaces are worth continuing (flexible working hours, work from home, setting up the conditions of these), as well as helping women to return to work. The above-mentioned objectives call for urban planning, development planning, the establishment of regulations for construction, and a long-term attitude.

Take Action, Budapest!

Closing the gap between vision and reality calls for social changes, which take place at a considerably slower pace in comparison with the shaping of the built environment, so the textbooks say. Budapest, however, has proven a number of times that its population can move milestones and is capable of triggering historic change for common goals. Liveability and competitiveness of the capital city is just such a common goal, and the resources are available. It is time to act, Budapest!

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