FDI in Hungary

Overview by Globlatrade.net:

FDI in Figures

Hungary has the highest stock of foreign direct investments (FDI) in Central and Eastern Europe. The country was severely hit by the financial crisis and the FDI fluxes, which have very much decreased, have only been recovering slowly.

During the recent years, Hungary benefitted from a change in the direction of the FDIs, which went from low value textile and food industry sectors to the production of luxury vehicles, renewable energy systems, luxury tourism and information technologies.

The country’s strengths include: a tax system favorable to businesses, its geographic location as a bridgehead between Eastern and Western Europe.

Foreign Direct Investment 200720082009
FDI Inward Flow (million USD) 71,48561,993-5,575
FDI Stock (million USD) 198,731251,952248,681
Performance Index*, Ranking on 141 Economies 11141
Potential Index**, Ranking on 141 Economies 4040-
Number of Greenfield Investments*** 218146106
FDI Inwards (in % of GFCF****) 319.4258.932.1
FDI Stock (in % of GDP) 143.6163.8194.3

Source: UNCTAD

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.


FDI Inflows By Countries and Industry

Main Investing Countries 2009, in %
Germany 25.0
The Netherlands 14.0
Austria 13.0
Luxembourg 6.0
USA 5.0
France 5.0
Main Invested Sectors 2009, in %
Financial intermediation 80.7
Real estate, renting, business activities 4.8
Transport, storage, communication 10.5

Source: The Hungarian Agency for Commercial Development and Investment

Form of Company Preferred By Foreign Investors
The most common for foreign investors are the company limited by shares (Rt.), which may be public (Nyrt.) or private (Zrt.), and the limited liability company (Kft.)
Form of Establishment Preferred By Foreign Investors
The most common for foreign investors are the company limited by shares (Rt.), which may be public (Nyrt.) or private (Zrt.), and the limited liability company (Kft.)
Main Foreign Companies
General Electrics, Audi, Nokia, Sanofi-Aventis, Strabag AG, E-ON, Philips, Tesco, T-Com, Suzuki.
Sources of Statistics

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Why You Should Choose to Invest in Hungary

Strong Points
- Hungary is the most advanced country in Central Europe in terms of reforms;
- Its financial system is one of the most well developed in the region;
- Its infrastructures, its work force and the framework of its regulations are of high quality;
- Integration in the EU, reinforces its political and economic stability and the support of large international organisations reduces the effects of the crisis.
Weak Points
- The situation of public finances is still in decline and the state debt is at a high level;
- Foreign accounts are largely and persistently unbalanced;
- If we are to consider its openness, the country is dependent on the economic situation of its main EU trade partners;
- The covering of financing needs depends partly on a volatile capital. Level of currency reserves is relatively low;
- The population has called for loans in foreign currency and the inflation which has followed the crisis has made these loans difficult to repay for the Hungarian borrowers;
- Banks have suffered great losses from the financial crisis due to debt repurchase and speculative investments;
- The currency has lost its value since the financial crisis.
Government Measures to Motivate or Restrict FDI
Attracting foreign investment is a priority for the Hungarian government. The Ministry of Economic Affairs established the Hungarian Investment and Trade Development Agency (ITDH) in 1993, and this agency continues to help companies looking to make major investments in the country. ITDH has set up a “one-stop-shop” service for potential large investors to maintain a competitive environment and attract multinational companies.

In the context of the international crisis, the state has implemented measures to maintain the country's appeal: special loans and guarantees programs to compensate for the difficulties of banks in granting loans, the improvement of the administrative situation and the reduction of formalities and the facititated acquisition of building permits. Additionally, the exchange rate has made Hungary less expensive than before, whereas productivity which was already high, has remained at the same level. Because of this, a number of international companies have maintained their investments in the country and have outsourced entire departments such as accounting or call centres.

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