Positive And Negative Effects Of Foreign Direct Investment (Fdi) On Post-Communist Economies—The Case Study Of Hungary

Hungary is in many respects a diligent student of transition, one that has successfully gathered the spoils of transition in spite of initial drawbacks. The article argues that Hungary had a facilitated entry into the wormhole of transition because of pre-democratic initiatives to implement competitive fiscal measures—mainly in the years prior to the fall of the Iron Curtain. However, the gradual transition reached an end by 1995 due to debt accumulations that triggered an internal market reformation. The article further suggests that, in the process, the impact of the FDI has been bittersweet during the transition; on the one hand, foreign capital infusions balanced the state budget, corrected the deficit and transferred know-how. On the other hand, the FDI-based transition produced fragmentation and high dependency of the national economy on unstable foreign capital, rendering a component of unsustainability to the Hungarian economy and the risk of entry into a low added-value chain profile.