DESI 2021: Accelerating the digitalisation of Hungary imposes additional task on all concerned

This year, the European Commission’s regular annual report on the digital readiness of EU countries was published on 12 November, much later than usual. Based on the data in the DESI 2021 report,

Hungary’s ranking has dropped by two places overall (from 21st to 23rd) compared to the 2020 results.

In three of the four dimensions included in this year’s analysis (internet access, human capital, digital public services) Hungary’s ranking has declined, and in one (the integration of digital technologies, which is among the last ones anyway) it has not changed.

It is important to point out that the setback is not primarily caused by the decline in Hungarian performance but by the development of EU competitors manifesting in certain indicators and thus in the EU average.

The authors have made several modifications in the methodology (e.g., instead of the previous 5 dimensions, only 4 dimensions, and instead of last year’s 37 indicators, 33 indicators are now included in the report; the weighing of some subdimensions and the normalization value of some indicators have been modified), mainly to make DESI suitable for monitoring the ambitious goals set out in the Digital Decade for Europe initiative.

Key summary findings of the DESI 2021 report for Hungary

• There is only one area in the DESI 2021 report where the Hungarian data is better than the EU average: the 12^th place achieved in the “Internet access” dimension that measures the availability and use of modern digital infrastructure. Although it is five places worse in the rankings than las year, the overall score in this dimension is slightly better than the EU average (but much worse than last year’s score).
• In the “human capital” dimension measuring the digital and IT readiness of the population and employees, Hungary has dropped by 3 places compared to last year, which is even worse than the EU average and ranks 22^nd in this dimension.
• Hungary’s ranking in the “integration of digital technologies” dimension monitoring the digital readiness of small enterprises has not changed (the 26^th among the 27 Member States). Hungary is still one of the worst performing countries in this dimension.
• In the “digital public service” dimension, which reflects the availability and use of digital public services, the Hungarian ranking has worsened by one place compared to the previous year. Here, the score was only enough for the 25^th place compared to the 24^th place last year.
• Among the neighbouring countries, Hungary has achieved a better ranking than Poland, Romania, or Bulgaria. However, among the V4 countries, the Czech Republic and Slovakia is also slightly ahead of us in the overall ranking.

The rankings associated with each dimension are summarised chronologically in the table below. This data series clearly shows that Hungary has not been able to move from the 20^th place in the past 7 years, having the worst ranking this year regarding the past 4 years. The relentless development of digital infrastructure so far seems to be stuck (this is reflected in a massive decline in our ranking), and there is stagnation or a slight decline in the other three dimensions.

Hungary’s overall ranking and its ranking by pillars between 2014 and 2021 in DESI

Source: DESI

Key findings of the DESI 2021 report for Hungary by pillars

Human capital

• In the human capital dimension, Hungary ranks 3 places lower (from 19^th to 22^nd) compared to last year.
• Hungary lags significantly behind the EU average in the only new component, the proportion of enterprises providing ICT training, as is the case with all but one of the other indicators (ICT graduates).
• The table below clearly shows that in 4 of the 7 indicators here, the domestic data have stagnated, and in three cases there has been a decrease compared to last year (the total score is slightly lower than last year)

Source: DESI (the new indicators included in 2021 are marked in italics in the table)

• The textual evaluation of DG-CNECT highlights that “only about half of the population has at least basic digital skills (49% compared to the EU average of 56%) and the proportion of Hungarians with at least basic software skills is also low.”

Main proposals of Századvég Konjunktúrakutató for the development of the human capital pillar

• Launching mass basic and above-basic digital competency development programs.
• Improving the quantity and quality of advanced IT trainings that respond flexibly to the needs of the labour market.
• Based on the findings of DESI, fine-tuning the programs planned in the development policy toolkit (especially EDIOP, DROP Plus and RRF), which aim at the development of digital competencies and IT skills.

Internet access

• In the Internet access dimension, Hungary ranks 5 places lower compared to 2020 (the overall score was significantly lower than last year). Hungary’s result is mostly improved by the “use of systems with a speed of” at least above 100 Mbps, and “at least 1 Gbps”, which was included as a new component, and by 5G readiness (albeit to a lesser extent compared to last year), but it is weakened by the coverage of fixed high-capacity networks and 5G.

Source: DESI (the new indicators included in 2021 are marked in italics in the table)

• In this dimension, Hungary’s decline in rankings is not primarily due to the decline in the indicators already measured, but to the fact that Member States have made significant progress since the previous report, especially in 5G readiness and coverage, which represent an important share in this dimension.

Main proposals of Századvég Konjunktúrakutató for the development of the Internet access pillar

• Supporting the development of fixed high-capacity telecommunications networks by development policy (and, where appropriate, regulatory) instruments.
• Selling the spectrum necessary for building 5G networks in its entirety and encouraging market actors to increase 5G coverage.
• Based on the findings of DESI, fine-tuning the programs planned in the development policy toolkit (especially EDIOP, DROP Plus and RRF), which aim at the development of fixed and mobile broadband networks.

Integration of digital technologies

• In the integration of digital technology dimension, which shows some aspects of the digital readiness of SMEs, Hungary has failed to move from the last place (26^th). In this dimension, there is no indicator in which the Hungarian data do not lag behind the average of EU countries (the total score was slightly lower than last year). Moreover, this is the case in the segment (3b) that has the biggest share in this dimension when calculating the results.

Source: DESI (the new indicators included in 2021 are marked in italics in the table)

• Among the indicators measured in previous years, Hungary is the last among the EU countries in terms of the proportion of enterprises supporting their internal operation by electronic information exchange (using ERP), as the proportion of big data (7% vs 14%), cloud-based services (17% vs 26%), and online sale by businesses (12% vs 18%) is also well below the EU average.
• Of the newly introduced indicators, the proportion of “SMEs with at least basic digital intensity” is significantly lagging behind (46% vs 60%). This indicator examines the use of 12 selected technologies and requires at least four of them to be used by an enterprise to have basic digital intensity.
• Domestic and EU data are almost the same regarding the “ICT serving environmental sustainability” indicator, which measures the positive environmental impact of ICT solutions used by businesses. The “e-invoices” indicator measures the proportion of businesses sending electronic invoices for automatic processing (in this case, the low number can certainly be explained primarily by the dates of the data collection, as also according to the survey conducted by Századvég, for example, more than 60% of Hungarian micro-enterprises already used software suitable for issuing e-invoices in 2021. The popularity of this digital solution is mainly due to the fact that it is now practically impossible, or at least extremely cumbersome, to fulfil the obligation to provide information for the tax office with a manual invoice).

Main proposals of Századvég Konjunktúrakutató for the development of the integration of digital technologies pillar

• Launching experience-based motivational programs to improve the perceptions of and attitudes to digitalisation.
• Creating a digital advisory system for businesses.
• Significantly increasing the proportion of the resources available to micro, small and medium-sized enterprises for digitalisation provided by the development policy toolkit (especially EDIOP, DROP Plus and RRF) and increasing the awareness of the applications concerned.
• Providing tax relief for businesses to support high-tech developments.

Digital public services

• Regarding digital public services, Hungary has declined in rankings compared to last year (from 24^th to 25^th). The domestic results are mainly explained by the significantly lower share of the indicators of open access data and the newly included digital public services provided for citizens compared to the EU average. In this dimension, the only indicator above the EU average is the indicator of the proportion of eGovernment users (the overall score was significantly lower than last year).

Source: DESI (the new indicators included in 2021 are marked in italics in the table)

Main proposals of Századvég Konjunktúrakutató for the development of the digital public services pillar

• Implementing the developments enabling the full online administration of eGovernment services (especially with regard to cross-border developments).
• Optimising eGovernment services for mobile devices.
• Based on the findings of DESI, fine-tuning the programs planned in the development policy toolkit (especially EDIOP, DROP Plus and RRF), which aim at the development of public and corporate eGovernment services and the strengthening of their user-friendly nature.