International Co-Operative Agreements in Hungary in the Mid-1990s: Evolution, Organisational Forms and Industry Characteristics
MPRA Paper No. 68375
45 Pages Posted: 20 Dec 2015
Date Written: February 1998
As the legislation on foreign direct investment (FDI) in Hungary has been probably the most liberal in Central and Eastern Europe since the mid-1980s, FDI is the primary form chosen by Western firms to enter the Hungarian market. The major channels of FDI include the privatisation of former state-owned enterprises and green-field investment projects. Portfolio investment and non-equity forms of co-operation can also be found in Hungary, yet, their significance is almost negligible compared to FDI.
A number of advantages, most importantly the highly skilled, experienced, yet, extremely cheap labour, and the geographical and cultural proximity to Western Europe give the Central European countries a certain competitive edge compared to other transition economies. On top of this, Hungary has opted for a unique approach to privatisation, i.e. sales of assets rather than voucher schemes, and offered a fairly liberal economic environment. Due to these factors, it has attracted roughly 45-50 per cent of the total amount of foreign capital invested in Central and Eastern Europe. These developments require a more detailed analysis. Major characteristics of the privatisation process, strictly defined, and the expansion of the private sector, including green-field investment projects, are discussed in Section 2. Sections 3-7 present the most important findings of sector studies, and identify major issues for further analysis.
Keywords: Privatisation, Foreign direct investment (FDI), Impacts of FDI, Telecom equipment manufacturing, Automotive industry, Software engineering, Electronics industry, Videoton, Pharmaceuticals, Technological innovations, Organisational and managerial innovations, Export-led growth, Hungary
JEL Classification: F21, F23, F61, F62, F63, L10, L25, L53, L62, L63, L65, L86, O10, O31, O33, O38, O52, P2, P31, Z13
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