Special Issue of Külgazdaság Vol. 1, No. 1/2015

Through a Glass Darkly The Content of Statistical Data on Foreign Direct Investment


 With the advancement of globalization, the role of foreign direct investment has grown rapidly both in the global economy and in individual national economies. As such, their analysis is unavoidable when examining practically any economic phenomenon. The main data source used for this purpose is that on foreign direct investment found in the balance of payments. However, the purpose of a balance of payments is to record how and in what form a country executes various financial transactions with the rest of the world. Thus, such data on direct investment does not necessarily correspond fully to the direct investment content of economic analysis. During the crisis, the increase in the use of transactions aimed at loss reduction and tax optimization by multinational companies has resulted in an even greater gap between the data and the phenomenon being analysed. Therefore the authors would like to emphasize that one needs to be very circumspect when analysing such data.*

Journal of Economic Literature (JEL) code: F21, C80.

Squaring the Circle? Government as Venture Capital Investor


 The government participates in the venture capital market in many different ways. This paper examines the role of the state as an investor and gives a thorough review of international trends through examples. It outlines, that contrary to direct participation that could result in the distortion of market processes, the government is increasingly contributing to the growth of venture capital market funds while including the private sector in the process. The inclusion of the private sector is important primarily because this solution ensures the selection of projects that are economically viable, promising and free from political influence, the selection of financing periods independent from election times, and the adequate expertise and  incentives of  managers  entrusted  with  the  investment’s management.  The main conclusion of the study is that only privately managed venture capital funds financed only to a lesser extent by the state allow for the adequate utilization of state resources, and thus they contribute to the achievement of economic policy objectives and improve the capital supply of young, promising companies.*

Journal of Economic Literature (JEL) code: G23, G24, G28, M13, O31.

Macroprudential Paradigm Shift in Hungarian Bank Regulation


 Within the framework of the global macroprudential paradigm shift, which directs regulators’ attention on systemic risks, governments that had to intervene during the financial crisis to maintain financial stability now require banks to comply with more and stricter rules. The new paradigm significantly increases the powers of state institutions over the banking industry. This article analyses the distinctive aspects of the international paradigm shift in bank regulation as observed in Hungary in light of the changes in bank regulation and the institutional framework of bank supervision between 2008 and 2013. Its main findings are as follows: (1) the 2008 agreement between the Hungarian government and the IMF played an important role in the paradigm shift, (2) regulations enacted within the framework of the new paradigm strengthened Hungarian state institutions vis-à-vis the banking sector, (3) the opposition of the banks to the changes in Hungary is attributable to the inherent quality of the new paradigm: it raises the cost of banking. The analysis does not provide a conclusive answer to the theoretical question of whether the banking sector gains in stability with the implementation of the macroprudential paradigm.*

Journal of Economic Literature (JEL) code: G 280, G 010, F 590.

Competitiveness and Internationalisation in the Hungarian Small Business Sector in the 2010s


 Many see the resurrection of the Hungarian economy, torn by the world economic crisis, in the acceleration of exports and, more generally, in the increasing internationalisation of domestic businesses. The government’s new foreign economic policy strategy, still only released in draft form, expresses ambitious goals; among others a six-fold expansion of businesses capable of export. This article uses data from a survey concluded in 2013 assessing 799 small businesses to analyse the tendencies towards internationalisation of Hungarian small businesses in the context of competitiveness. According to our observations, the ten pillars of competitiveness are closely connected to one another; the consonance of pillars is more important than achieving outstanding results in the case of any single one. Therefore we examine internationalisation not merely on its own but in conjunction with the nine other pillars constituting competitiveness. We evaluate the internationalisation and export potential of Hungarian small businesses through the comparative analysis of eight groups we created using cluster analysis. As expected, the most internationally active businesses also proved to be the most competitive. However, we found numerous businesses with low levels of competitiveness that – in contrast to the convictions of any internationalisation theory – were engaging in tangible export activities. Despite the presence today of several thousand exporting and export- capable small businesses in the Hungarian economy, we do not believe it likely that this number could grow drastically in a short period of time.*

Journal of Economic Literature (JEL) code: F 23, L 25.

Legal supplement

Decline of the Principle of Equal Treatment in the Global Economy


 The framework of international trade that regulates towards multilateral agreements and universality, as created by the GATT and the WTO, was based upon the principle of equal treatment. The technique for the legal implementation of this principle is the most favored nation treatment (invented a long time ago), was not only made multilateral, but also elevated – albeit with some exceptions – to be a general rule of GATT. Over the decades the regulation has been continually expanding and gaining depth and has become increasingly free as a part of the globalization process. However, about fifteen years ago this development came to a standstill becoming a victim of its own success. Besides numerous economic and political factors one reason for this slowing down was that the principle of equal treatment and the technique for its legal implementation became increasingly subordinate. Since one of the main pillars of the system was weakened, the whole system was put at risk. At first the most favored nation treatment became an exception instead of a fundamental principle. Then the exception was applied in an ever-widening scope, which created a new system based upon a wide network of bilateral and regional free trade and preferential agreements. This caused the deterioration of the originally intended universalism and the very fragmentation of the global regulatory framework. The achievements of the multilateral regulation of world trade must be preserved, while recognizing the fact that the global system is far less uniform and homogenous than is frequently believed and that the economic, political, cultural and civilizational differences demonstrate even in the field of legal rules and regulations that the world is not as flat as it may appear.*

Journal of Economic Literature (JEL) code: F13 – Trade Policy; International Trade Organizations.

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