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4.2.5 Dichotomy of Industry in Hungary
The analysis of the economic results of the FDI-led development regime shows that
the large levels of FDI inflows into the Hungarian economy supported the structural
transformation of the previous socialist economy. The large inflows into the manufacturing sector of the country allowed the reorientation of the economy towards
exports for EU markets. The success of the attraction policies is visible in the high
levels of TNC penetration and illustrates the large capacity of the state to attract
export-oriented FDI.
However, this capacity is only partial, as the analysis of the indigenous sector
shows. The industrial policy instruments are biased towards larger foreign-owned
firms. State capacity is too low to either tackle the distortions to the productive
structure or cater for an increased incorporation of TNCs into the Hungarian economy. Largely unable to benefit from industrial aid, Hungarian firms show distinct
performance gaps in comparison to foreign-owned firms.
They are concentrated in low technology sectors and their production is labourintensive. Their primary orientation towards the internal market and poor capital
endowment act as a growth constraint, resulting in low profitability. They remain
small in size and are, therefore, unable to develop scale economies. Under-funding
also results in their inability to develop new technologies and products, which could
enable them to access profitable markets. Furthermore, they are faced with product
and factor market competition stemming from imports and TNCs. Their resulting
underperformance contributes to their unattractiveness as potential co-operation
partners to TNCs.
The lack of co-operation is also the result of the quasi-oligopolistic firm-specific
competitive advantages of TNC affiliates. The defence of these competitive advantages keeps local cooperation to a minimum. Consequently, the level of spillovers
from investing TNCs to Hungarian firms is low. Hence, two distinctly different
sectors have evolved creating a dualistic industrial structure, whereby the modern
foreign-dominated export sectors vastly outperforms the indigenously dominated
sector. As result, the foreign-owned sector dominates the Hungarian economy.
Hence, the role of the TNC in Hungary as a harbinger of international competitiveness to the host economy and acting as a transfer agent for technological progress is questionable. Moreover, due to the export-oriented nature of the foreigndominated sector of the economy, economic growth and Hungarian development is
dependent upon the impulses stemming from the TNC export markets, illustrating
the continued peripheral nature of FDI-led growth in Hungary.
4.3 Hidden Inequality in Hungary
Whilst not singularly responsible for the rise in income inequalities during the transition process, the inflows of capital-intensive FDI into Hungary since 1990 have
been the drivers of structural change within the economy. As a result of the high
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Zusammenfassung
Irland und Ungarn verfolgen eine Entwicklungsstrategie, die in bewusster Abhängigkeit von Globalisierungsprozessen in Form von ausländischen Direktinvestitionen steht und sich als Paradigma in der Peripherie durchgesetzt hat. Doch dieser Entwicklungspfad hat zu einer ungleichen und abhängigen Entwicklung geführt. Dies ist laut dem Autor das Resultat des mangelnden Gestaltungswillens beider Staaten, für einen gleichgewichtigen Wachstumsprozess zu sorgen. Die historische Analyse zeigt, dass eine auf ausländische Firmen fußende Entwicklungsstrategie nicht ausreicht, um traditionelle Peripheralität zu überwinden. Der Autor fordert eine Reform des Entwicklungsparadigmas, um eine gleichgewichtige Entwicklung zu ermöglichen.