USA

American Foreign Direct Investment (FDI) in Hungary

In the past few decades US companies have invested significantly in the Hungarian economy, making them the largest non-European investor in Hungary in 2019, according to data, published by the National Bank of Hungary. [MNB]

According to the BBJ, citing data from MNB, the US is the second largest investor in Hungary, after Germany, employing over 100 000 people through 1400 companies. US companies are invested in several general and value added segments, and a variety of value-added services. As the US Department of State’s executive summary from 2018 explains, one of the main appeals to invest in the country is the lowered corporate tax and labour tax, which is the lowest in the EU. However, as the report adds, Hungary’s competitiveness rating has declined in recent years, and the main obstacle to investment is the lack of high-skilled labour, specifically technicians and engineers. High levels of corruption and political influence in several key private sectors also contribute to this, the report notes.

Despite these findings, American FDI position has stayed somewhat constant, but it gradually declined between 2008 and 2014. However, the US’s FDI position has significantly decreased in the 2015-2017 period. It is not immediately clear why it happened and what factors lead it to skyrocket in the 2018-2019 years. Using Statista.com statistics, the overall US foreign direct investment in Europe has shown steady growth since 2000, therefore global trends do not seem to provide an answer to this phenomena.

As for the future of US investments in Hungary, there is certainly a strong interest from US companies to invest in the country, considering the strong upward trend in the past 2 years. However, as with everything, Covid-19 can certainly change these trends, but it is almost certain that the US will remain an important investor in the Hungarian economy.

Main US-owned companies in Hungary include: Flex, IBM, GE, Aptiv Group, Jabil, Lear, Adient, Arconic, Borg Warner, National Instruments, Microsoft, Oracle, HP, Itron, ExxonMobile, Ford, Thermo Fisher Scientific, and IFF, Citi, Morgan Stanley, BlackRock

Korea

 Korean Foreign Direct Investment (FDI) in Hungary

South Korea is a late arrival in terms of big investments in Hungary and only showed rapid expansion in recent years. According to the National Bank of Hungary, South Korean FDI has increased rapidly in the past 2-3 years, signalling major expansion from the East-Asian country.

In an interview with the Budapest Business Journal (BBJ), the Hungarian Investment Promotion Agency (HIPA) claimed that most of the new investments, 10 out of 11, were automotive industry and/or electric mobility related projects. According to HIPA, future investments from the Korean side may come from either new Korean companies, but it is more likely that we will witness more reinvestments from the already established companies.

As the Világgazdaság reported, the Korean investors mainly invest here because of the country’s low corporate tax, professional labour force (although there is certainly a shortage of professionals in certain sectors). Additionally, Hungary has a good reach to developed markets and sufficient infrastructure to support these investments.

Main South Korean-owned companies in Hungary include: SK Innovation, Samsung SDI, Doosan Solus, Hankook Tire, Hanon Systems, KDB Bank [1][2]

JAPAN

Japanese Foreign Direct Investment (FDI) in Hungary

Japan has been a consistent investor in Hungary since 2008, making them the 7th largest investing community in Hungary, according to the Hungarian Foreign Minister, Péter Szijjártó. [HungaryToday]. As the minister claimed, around 170 Japanese companies employ around 35 000 people in the country and contribute to Hungary’s R&D capabilities by their cutting-edge technology. However, despite these appealing numbers, Japanese FDI has not shown the same level of growth as its East-Asian competitors like South Korea [LINK OUR ARTICLE] or China [LINK OUR ARTICLE] (although Chinese investment is still far smaller than the Japanese one). 

Source: MNB

Content: Japanese FDI in Hungary since 2008 (excluding special purpose entities)

In 2013, Japan and the V4 countries (Czech Republic, Hungary, Poland, Slovakia) established a loose cooperation framework that aimed to promote investments, trade and scientific research among others. The agreement was signed one year after China’s 17+1 cooperation agreement with Central and Eastern European countries. While the expectations were quite high, as The Diplomat argues, and MNB’s data shows as well, not much substantive result has been reached despite further summits in 2018 and 2019.

The Diplomat also argues that the underdeveloped relationship between the V4s and Japan is partially due to the fact that Japan, first and foremost, wants to deal with the European Union as a whole and the V4 is secondary.