Preface
For Hungary and the European Union, the 01. May 2004 is one of the most important dates of the history of Hungary, because they and 9 other countries joined the EU. Finally now the very long time of the separation between Eastern and Western Europe is over. It is now the first time in Europe that all countries of this big continent could life together in peace and can create an economical and political union.
For Hungary it was like for the other new members a very long and hard way to transform the economy to the rules of the market economic system, but they have some advantages because they have started the reform process already before the political change. So as a reason now Hungary has received 31 billion euros as foreign direct investment until 2003. This means they have about 3.100 Euro FDI per inhabitant, only the Czech Republic has received more FDI per inhabitant.
In the assay the authors want to concentrate to the historical background, the business law, the motivation for invest in Hungary and give some data about the FDI in Hungary.
Table of Contents
1. Preface
2. Overview of the Hungarian Economy
2.1 Historical Background of Hungary
2.2. Important business law in Hungary
Branches of foreign companies
Commercial representations
3. Theoretical considerations and evidence form the EU
3.1. Motivation for going international
3.2. Mode of FDI
3.3. Investment in the EU since 1992
4. FDI in Hungary
4.1. Reasons for investing in Hungary:
4.4. The Repartition of FDI between the different industry’s sectors and countries
5. Conclusion
Objectives and Topics
This work examines the development of the Hungarian economy following its transition to a market system, focusing on its integration into the European Union and the role of Foreign Direct Investment (FDI) as a primary driver of growth and modernization.
- Historical transformation of the Hungarian economic system since the 1960s.
- Comprehensive analysis of the legal framework for business, including corporate, labor, and tax law.
- Theoretical motivations for companies to pursue international expansion and FDI.
- Evaluation of Hungary as an attractive investment destination regarding infrastructure and labor force.
- Sector-specific analysis of FDI distribution, particularly in telecommunications, biotechnology, and automotive industries.
Excerpt from the Book
3.1. Motivation for going international
Foreign direct investment (FDI) reflects the firm decision to spend resources in the expectation of generating future profit. In economic words, the present discounted value of the future stream of revenues will be greater than the present discounted value of costs. FDI comes within the frameworks of long-term and future prospects for companies.
We can separate four main motivations for going international: Market seeking investment; resource seeking investment, efficiency seeking investment and some other reasons more general for investment. The main decision for FDI is whether it is more profitable to set up production in one form or another with a foreign subsidiary or to increase production at home and expand exports of the good.
The aim of the market seeking investment is the establishment of physical presence in foreign countries with a view to supply more easily products and services in the new offered markets and adjacent ones. For the companies, it’s a question of horizontal expansion.
There are two types of market-seeking investment. The first one is used because trade barriers and tariffs make it difficult to enter a foreign market if you want to export your products there. As a good example it is difficult and expensive to export cars from Germany to Japan or other Asian countries. Therefore many companies use the foreign direct investment and produce their good directly in the markets where they are sold later. So the main advantage is the absence of tariffs and other trade barriers.
Summary of Chapters
Preface: Introduces Hungary's accession to the EU in 2004 and the long transition process toward a market economy supported by significant foreign investment.
Overview of the Hungarian Economy: Details the historical evolution of the economy from the Kadar era through the transition period, including the development of legislative frameworks and the rise of the service sector.
Theoretical considerations and evidence form the EU: Discusses the strategic motivations behind FDI, such as market seeking, efficiency, and resource acquisition, while analyzing intra-European investment patterns.
FDI in Hungary: Analyzes the specific factors that make Hungary a prime destination for foreign investors, such as tax incentives, strategic geography, and a skilled workforce, supported by data across various industries.
Conclusion: Summarizes the success of Hungary's development strategy and poses the question of future competitiveness as the economy matures and costs increase.
Keywords
Foreign Direct Investment, Hungary, European Union, Economic Transition, Market Seeking Investment, Corporate Law, Labour Law, Tax System, Telecommunications, Biotechnology, Automotive Industry, Privatisation, Macroeconomics, Infrastructure, Capital Investment.
Frequently Asked Questions
What is the primary focus of this document?
The document focuses on the economic transformation of Hungary and the significant influx of Foreign Direct Investment (FDI) that has helped reshape its industrial and social structure since the fall of communism.
What are the central themes covered in the text?
Key themes include the historical background of Hungary's economic reforms, the legislative framework for foreign companies, the strategic motivations for FDI, and detailed sector-based analyses of foreign investment.
What is the main research objective?
The objective is to explain how Hungary successfully integrated into the European market, the legal conditions for investors, and the reasons why it became a favorite target for international capital.
Which scientific method is utilized for the analysis?
The study utilizes a descriptive and analytical approach, combining historical overview, economic policy analysis, legal examination, and empirical data representation via illustrations.
What does the main body primarily address?
The main body addresses the theoretical aspects of international investment, the specific business laws (corporate, labor, and tax) in Hungary, and an in-depth evaluation of key sectors like automotive and telecommunications.
Which keywords best characterize this work?
The most relevant keywords include Foreign Direct Investment (FDI), Hungary, European Union, Economic Transition, Corporate Law, and Market-seeking investment.
How does the Hungarian corporate tax system compare to other countries?
The text highlights that Hungary maintains a competitive corporate tax rate of 16%, which is significantly lower than in many other countries, such as the United States (39%), acting as an incentive for foreign investors.
Why did the authors choose Hungary as their case study?
The authors chose Hungary because it was one of the first Central and Eastern European countries to apply for EU membership and has consistently served as an attractive gateway for foreign capital due to its central location and proactive reforms.
What impact did the transition to the market economy have on the labor market?
The transition shifted the focus toward a well-educated, skilled workforce. While the labor force is highly efficient and capable, the document notes that rising wages have recently placed Hungary in competition with other reformed economies.
- Quote paper
- Mathias Urbaczek (Author), Sven Waltert (Author), 2005, Foreign Direct Investment in Hungary, Munich, GRIN Verlag, https://www.grin.com/document/42105
