SouthSouth FDI the case of Hungary Katalin Antalczy

South-South FDI: the case of Hungary Katalin Antalóczy, Finance Research Ltd. , Budapest, Hungary Magdolna Sass, Institute of Economics of HAS, Budapest, Hungary 12 th General Conference of EADI, Geneva, 24 -28 June, 2008

Hungary as a leading outward investor among Visegrad countries Graph 1 FDI outward stock (USD millions) Graph 2 FDI outward stock per capita (2006, USD) 12 th General Conference of EADI, Geneva, 24 -28 June, 2008

Host country and sector distribution of Hungarian OFDI Graph 3 FDI outward stock by countries, 2005 (%) Graph 4 FDI outward stock by sector (Millions of Euro) Graph 5 FDI outward stock in manufacturing by sector 12 th General Conference of EADI, Geneva, 24 -28 June, 2008

Analysis of OFDI from Hungary Methodology: because of the concentrated nature: company level investigation, based on detailed company case studies Groups of companies investing abroad: distinctive features – based on these: 4 company groups Group 2 and 1 represent the overwhelming majority of Hungarian OFDI 12 th General Conference of EADI, Geneva, 24 -28 June, 2008

Comparison of the 4 groups of companies investing abroad 1 Group 2 Group 3 Controlling owner Foreign owned Dispersed (stock Hungarian exchange) Size Usually big Big Medium to big Smallmedium Geographical target of FDI Close/neighbouring, in a few cases far away Close/neighbouring Sector Various (product spec. ) Financial services, petrochemicals, pharmaceuticals, hotels dominate Manufacturing and services Mode of entry Greenfield, M&A Privatisationrelated M&A, few greenfield M&A, greenfield, JV 12 th General Conference of EADI, Geneva, 24 -28 June, 2008 Group 4 Hungarian

Comparison of the 4 groups of companies investing abroad 2 Group 1 Group 2 Group 3 Group 4 Stage in corporate life Early Relatively early Technological or organisational innovation? Technological Organisational (few technological) Main motive Market seeking (few efficiency) Market seeking (strengthening of the company’s position) Strategy influenced by home country business environment In some cases Yes (no investment opportunities) Efficiency (few Efficiency and market) market Yes (rising labour costs) 12 th General Conference of EADI, Geneva, 24 -28 June, 2008 Yes (rising labour costs, shortage of labour, tax burden)

Special cases? Outward FDI and relocations from Hungary • • Limited up till now (in OFDI) Share negligible in total OFDI Mainly groups 3 and 4 Relocation of the most labour intensive activities abroad in order to reduce costs and improve competitiveness • Example in the paper’s case studies: Videoton (certain activities to Bulgaria) 12 th General Conference of EADI, Geneva, 24 -28 June, 2008

Thank you for your attention! 12 th General Conference of EADI, Geneva, 24 -28 June, 2008