Government-MNCs relations and their influence on competitiveness and inward FDI in Hungary: An analysis of the effects on the banking sector

The results of the research showed how the political and administrative aspects of the governmental activity have influenced negatively Hungarian competitiveness due to policy instability and poor institutional quality. From the economic point of view, however, the improving macroeconomic results, the low direct taxation and business legislation are positively influencing the location advantage of the country. The stunning results in the attraction of FDI, however, proved to be related to data distortion due to the consistent presence of capital in transit and capital injections in the banking sector.
Government-MNCs relations in the country turned out to be less conflicting than what has been publicly advertised by the cabinet and the media. They can be rather described as selective on the basis of the activities carried out by MNCs, their dimensions and the sectors involved. Nonetheless, this is not the case of the banking sector, which levels of profitability have been consistently affected by the unfavourable taxation and the punitive measures implemented in relation to the issue of the repayment of foreign currency loans.

Acknowledgements
Introduction
Chapter 1. The influence of the government on the international competitiveness of Nations
   1.1. The International Competitiveness of Nations
      1.1.1. Definition of the concept
      1.1.2. Determinants of a country’s location attractiveness
   1.2. How political institutions attract FDI
      1.2.1. Government related factors of attractiveness
      1.2.2. Investment promotion policies
   1.3. Multinational Banking and government regulation
Chapter 2. The Hungarian international competitiveness and economic performances
   2.1 Macroeconomic outlook
      2.1.1. GDP growth
      2.1.2. The current account
      2.1.3 MNB’s monetary policy
      2.1.4. The labour market
   2.2. An analysis of Hungarian competitiveness: points of strength and weaknesses
   2.3. The Hungarian “original sin”: the high reliance on external sources of financing
      2.3.1. General outlook of the Hungarian external debt conditions
      2.3.2. Hungarian reliance on external funding from the 70s until today
      2.3.3. Hungarian macroeconomic capital structure: foreign indebtedness and inward FDI flows as two sides of the same coin
   2.4. Inward FDI in Hungary: key facts
      2.4.1. Developments in FDI inflows
      2.4.2. FDI breakdown by sector and country of origin
Chapter 3. Business-government relations: Viktor Orbán’s economic policies towards foreign investors
   3.1 Introduction: the rhetoric against multinationals
   3.2. Orbán’s business legislation and fiscal policy
      3.2.1. The case of the windfall taxes
   3.3. Investment promotion policies: nature and effectiveness
      3.3.1. Historical changes in investment promotion strategies
      3.3.2. Investment promotion policies nowadays
   3.4. The Funding for Growth Scheme (FGS)
   3.5 Strategic cooperation agreements
      3.5.1. The strong commitment to supporting the automotive industry
      3.5.2 The Eastern Opening
Chapter 4. Orbán vs banks: an analysis of the Hungarian banking sector’s performances and causes of distress
   4.1. Banking sector outlook since the outbreak of the crisis
      4.1.1. The market structure
      4.1.2. The worrying comparison between Hungarian and peer economies’ banking systems
   4.2. Orbán vs banks: fiscal measures and public debate
      4.2.1. Fiscal measures against financial institutions
      4.2.2. The current political discussion on banks
   4.3. The dominance of foreign currencies on banks’ funding and lending activities
      4.3.1. Government FX loans’ repayment schemes and programs since 2011
   4.4. Was it really worth it?
Conclusions
Bibliography
List of useful websites