Reform Programmes in Hungary: Lisbon Matters? Innovation expenditure in the business sector is low: innovation capabilities, as well as demand for innovation are limited. R&D expenditure approximates only 1% of GDP(instead of 3% defined among the Lisbon objectives), and there is no clear trend for the increase of this ratio(see Figure 2). The structure of R&D expenditure is also problematic: the share of the business sector is only about 30%. Concerning the information society, despite recent dynamic development, Hungary lags far behind the EU average. Figure 2. Ratio of the Hungarian R&D expenditure to GDP(%) GERD/GDP(%) 1,2 1,08 1 0,8 0,6 0,4 0,2 0 1992 1 0,93 1993 1994 0,75 0,74 0,67 1995 1996 1997 1,01 0,94 0,82 0,7 0,68 1998 1999 2000 2001 2002 0,95 2003 Source: National Reform Programme for Growth and Employment(2005), p. 56. The main objective of the NRP in this field is to improve competitiveness. In order to reach this objective, the NRP emphasises the following priorities:  The spread of new(production) technologies.  The training of flexible and adaptive labour.  The development of intense R&D and innovation activities as well as ope­rations creating ICT assets.  The modern physical infrastructure serving the economy. The measures foreseen include direct market developing steps(in order to extend competitiveness) encouraging the private sector to participate more actively in the R&D activity, and to facilitate the spread and utilisation of ICT. As in Hungary, the quality of physical capital is a crucial problem, the deve­lopment of infrastructure is a basic pre-condition of improving competitiveness. 125