| Foreign Direct Investment |
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| Tuesday,July 15,2008 Posted: 21:55 BJT(55 GMT) |
| From:驻匈经商处 Article type:Redistributed |
Land of welcome for foreign investors
Since the beginning of the transition to democratic market economy at the end of the 1980s, Hungary has attracted a steady stream of foreign capital, well-balanced across the various sectors of the economy. Hungary, a country of 10 million inhabitants, can currently boast of having attracted Foreign Direct Investment (FDI) of more than 60 billion Euros to date which represents the highest per capita rate in the Central-Eastern European region.
FDI stock per capita in the CEE region, 2006
Czech Republic: EUR 5,719
Hungary: EUR 6,170
Poland: EUR 2,361
Slovakia: EUR 3,338
Slovenia*: EUR 3,133
* Estimated on the basis of total stock
In the early 1990s, market-based privatization, a unique phenomenon in the region at that time, was the main incentive for foreign investment - although even then investments in new industrial facilities were becoming increasingly frequent. Foreign direct investment (FDI) has been crucial in boosting economic performance and remains the driving force behind Hungary's economic success, fuelling its strong export growth and significantly increasing productivity.
A new structure for Foreign Direct Investment (FDI)
While privatisation is still in progress in other central European countries, Hungary has been focusing more intensively on the introduction of advanced technologies and innovation into production of goods representing higher added value. Investment in the automotive sector, research and development, ICT, biotechnology, shared services operations and logistics has become especially important. Today, not only have a number of the largest multinational manufacturers and service providers established their facilities in Hungary, their major international suppliers have also come and brought along their subcontractors with them. Currently there are more than 30,000 companies operating with foreign participation in Hungary.
FDI Stock in Hungary by Sectors
Nearly half of foreign investments in Hungary have been cumulated in the manufacturing sector. At the beginning of the 1990's manufacturing was the main target of all investments. Since 1995, however, services have gained grounds as well, partly because privatization in the services sector started later than in the manufacturing sector. Also, in the late 1990s, as other Visegrád countries opened up their markets and started privatisation Hungary had to face more competition in the manufacturing sector. Today FDI spreads more evenly among sectors in Hungary than in other countries in the region.
Trade: 10.1 %
Transport, telecom: 9.9 %
Finance: 10.5 %
Business services: 16.8 %
Food: 5.2 %
Chemical: 5.7 %
Electronics: 8.8 %
Automotive: 10.9 %
FDI Stock by Countries of Origin
Like in other CEE countries, foreign investors from the EU-15 countries have accounted for the majority of investments (79%) in Hungary (Hungarian National Bank, 2006). Geographical proximity and historical links explain the dominance of the European investors.
Germany is by far the most important country of origin with 30% of all FDI, followed by the Netherlands (18%) and Austria (11%). The United States has been the largest non-European investor (5%) and in many cases the investments going through the Netherlands and other European countries also originate from the US. Among the Asian countries Japan and South-Korea have played an increasing role in FDI.
Future prospects
According to the forecast of the Economist Intelligence Unit Hungary will retain its leading role in FDI stock/capita in the coming years.
The EIU estimates Eastern Europe will receive 6-7% of the global FDI between 2007-2011; one third of this amount will come to Central-Eastern Europe. Hungary is likely to be the second largest recipient among its main competitors in the Eastern-European region.
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