Industrial Restructuring in the Budapest agglomeration

The major 'motor' of the recent Hungarian industrial development has been foreign direct investment, particularly by multinational companies. This has stimulated the development process, as shown by the dynamism of production, exports and profitability of industry in Budapest. On the other hand, this has also led to a split of the industrial sphere into its foreign and domestic sections, or into foreign-owned companies and domestic SMEs. The major question asked in this project is where is Hungarian industry heading and will the gap between the contracting domestic part and the foreign multinationals continue to widen or will they be joined in a much more favourable scenario. Barta sees this as a question of whether Hungary can avoid the 'dead-end street' of South Asian industrialising countries, and instead move towards a new Eastern European or Hungarian model. He concludes that Budapest industry does not follow any given model and indeed its development probably cannot be seen as a 'model' proper in itself, but is, or will be, a mixture of different elements. This would be a welcome fusion of Hungary's rich human resources of accumulated knowledge with foreign direct investment. Budapest would play an exceptional role in such a process, as the gateway for foreign output to the rest of the country. The share of industry in the Budapest economy will continue to decrease, but it will become a more modern and profitable sector. It will also fulfil a technological transfer role between the developed world and the Hungarian countryside (or even a larger region of central and eastern Europe). Barta predicts that Budapest industry will develop a special structure, with a large subcontractor network supporting the large foreign enterprises, and alongside this industrial districts formed by SMEs.

The Redistribution of Property Rights, Corporate Governance and Company Restructuring after Privatisation"

The project covered the main issues of privatisation, corporate governance and company restructuring after privatisation in Hungary and in the Russian Republic, together with a summary of the broader picture of company-level changes in Central and Eastern Europe, discussing the issues of micro-financial restructuring in the Czech Republic, Hungary, Poland and Slovakia. The two countries selected as the focus of research can be regarded as the two most widely differing cases of the economic transformation in Central and Eastern Europe. Hungary began its transition very early in 1989, while Russia was very late in doing so. Hungary first implemented a series of institutional and systemic reforms before stabilising its public finances, while Russia has struggled with financial stabilisation for years without great success. Company restructuring and the introduction of new forms of governance only began in Russia in the mid-1990s. Hungary opted for "traditional" western methods of privatisation and invited a large amount of foreign direct investment (FDI) while in Russia the bulk of state-owned property was privatised either by free distribution or by a strange blend of ESOP-MBO schemes. FDI in Russia remained modest because of the high risk and uncertainty surrounding economic transactions there. Hungary was a forerunner in privatising public utilities, while Russia has moved cautiously in this area. The group's studies show that the Hungarian economy is now over the "transformation recession" and its economic success is largely due to its successful privatisation and to the dominant participation of foreign investors in company take-overs and in the restructuring process. The study of Russia provides a comprehensive account of the main factors in the so-far modest results in Russian privatisation and economic transformation.