Hungary - Foreign investment



Even before the repudiation of communism, Hungary sought to enter joint ventures with Western countries. By the end of 1996, Hungary had attracted $15 billion in foreign direct investment. Since 1989, Hungary has attracted nearly one-third of all foreign direct investment in Central Europe and Eastern Europe. In 1995–96, the government adopted a stringent economic reform program of liberalization and privatization, and by 2002, the private sector, which had been 20% of the economy in 1989, was about 80%. Hungary has five free trade zones in which corporations are treated as foreign and are exempt from custom duties and taxes.

In the period 1988 to 1990, Hungary's share of world FDI inward flows was five and a half times its share in world GDP, the sixth-largest ratio in the world. Annual foreign direct investment (FDI) inflows into Hungary reached a peak in 1995 at about $4.5 billion, from which point they declined steadily until 2001, when there was an upswing to $2.4 billion from $1.6 billion in 2000. In 2002, FDI inflow fell to less than $1.5 billion. The average FDI inflow from 1998 to 2001 was about $2 billion a year. For the period 1998 to 2000, Hungary's share of FDI inflows was about equal to its share of world GDP. Total FDI stock, from 1989 to 2002, is estimated at about $34 billion.

The largest single source of foreign investment has been the United States, followed by Germany, the Netherlands, Austria, the United Kingdom, and France.

Of foreign capital invested in Hungary through 2000, 50% has been in manufacturing, 15% in telecommunications, 13% in energy, 6% in banking and finance, and 10% in other areas.

FDI outflows from Hungary have averaged about $400,000 per year and as of 2001, foreign stock held by Hungarians totaled $2.2 billion.

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